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18603	----	* * * * * +------------------------------------------------------------+ | Transcriber's Note: | | | | The original from which this text is transcribed uses an | | unusual capitalization style which has been faithfully | | reproduced. | | | | Obvious typographical errors have been corrected in this | | text. For a complete list, please see the bottom of this | | document. | | | | With no copyright notice, the 1951 intro falls under Rule | | 5, and is therefore public domain. | | | +------------------------------------------------------------+ * * * * * WHAT SOCIAL CLASSES OWE TO EACH OTHER By WILLIAM GRAHAM SUMNER First published by Harper & Brothers, 1883 CONTENTS CHAPTER PAGE FOREWORD 5 INTRODUCTION 7 I. ON A NEW PHILOSOPHY: THAT POVERTY IS THE BEST POLICY 13 II. THAT A FREE MAN IS A SOVEREIGN, BUT THAT A SOVEREIGN CANNOT TAKE "TIPS" 25 III. THAT IT IS NOT WICKED TO BE RICH: NAY, EVEN, THAT IT IS NOT WICKED TO BE RICHER THAN ONE'S NEIGHBOR 38 IV. ON THE REASONS WHY MAN IS NOT ALTOGETHER A BRUTE 51 V. THAT WE MUST HAVE FEW MEN, IF WE WANT STRONG MEN 63 VI. THAT HE WHO WOULD BE WELL TAKEN CARE OF MUST TAKE CARE OF HIMSELF 71 VII. CONCERNING SOME OLD FOES UNDER NEW FACES 88 VIII. ON THE VALUE, AS A SOCIOLOGICAL PRINCIPLE, OF THE RULE TO MIND ONE'S OWN BUSINESS 97 IX. ON THE CASE OF A CERTAIN MAN WHO IS NEVER THOUGHT OF 107 X. THE CASE OF THE FORGOTTEN MAN FARTHER CONSIDERED 116 XI. WHEREFORE WE SHOULD LOVE ONE ANOTHER 132 FOREWORD Written more than fifty years ago--in 1883--WHAT SOCIAL CLASSES OWE TO EACH OTHER is even more pertinent today than at the time of its first publication. Then the arguments and "movements" for penalizing the thrifty, energetic, and competent by placing upon them more and more of the burdens of the thriftless, lazy and incompetent, were just beginning to make headway in our country, wherein these "social reforms" now all but dominate political and so-called "social" thinking. Among the great nations of the world today, only the United States of America champions the rights of the individual as against the state and organized pressure groups, and our faith has been dangerously weakened--watered down by a blind and essentially false and cruel sentimentalism. In "Social Classes" Sumner defined and emphasized the basically important role in our social and economic development played by "The Forgotten Man." The misappropriation of this title and its application to a character the exact opposite of the one for whom Sumner invented the phrase is, unfortunately, but typical of the perversion of words and phrases indulged in by our present-day "liberals" in their attempt to further their revolution by diverting the loyalties of individualists to collectivist theories and beliefs. How often have you said: "If only someone had the vision to see and the courage and ability to state the truth about these false theories which today are attracting our youth and confusing well-meaning people everywhere!" Well, here is the answer to your prayer--the everlasting truth upon the greatest of issues in social science stated for you by the master of them all in this field. If this edition calls this great work to the attention of any of you for the first time, that alone will amply justify its republication. To those of you who have read it before, we commend it anew as the most up-to-date and best discussion you can find anywhere of the most important questions of these critical days. --WILLIAM C. MULLENDORE Los Angeles, California November 15, 1951 WHAT SOCIAL CLASSES OWE TO EACH OTHER INTRODUCTION We are told every day that great social problems stand before us and demand a solution, and we are assailed by oracles, threats, and warnings in reference to those problems. There is a school of writers who are playing quite a _rôle_ as the heralds of the coming duty and the coming woe. They assume to speak for a large, but vague and undefined, constituency, who set the task, exact a fulfillment, and threaten punishment for default. The task or problem is not specifically defined. Part of the task which devolves on those who are subject to the duty is to define the problem. They are told only that something is the matter: that it behooves them to find out what it is, and how to correct it, and then to work out the cure. All this is more or less truculently set forth. After reading and listening to a great deal of this sort of assertion I find that the question forms itself with more and more distinctness in my mind: Who are those who assume to put hard questions to other people and to demand a solution of them? How did they acquire the right to demand that others should solve their world-problems for them? Who are they who are held to consider and solve all questions, and how did they fall under this duty? So far as I can find out what the classes are who are respectively endowed with the rights and duties of posing and solving social problems, they are as follows: Those who are bound to solve the problems are the rich, comfortable, prosperous, virtuous, respectable, educated, and healthy; those whose right it is to set the problems are those who have been less fortunate or less successful in the struggle for existence. The problem itself seems to be, How shall the latter be made as comfortable as the former? To solve this problem, and make us all equally well off, is assumed to be the duty of the former class; the penalty, if they fail of this, is to be bloodshed and destruction. If they cannot make everybody else as well off as themselves, they are to be brought down to the same misery as others. During the last ten years I have read a great many books and articles, especially by German writers, in which an attempt has been made to set up "the State" as an entity having conscience, power, and will sublimated above human limitations, and as constituting a tutelary genius over us all. I have never been able to find in history or experience anything to fit this concept. I once lived in Germany for two years, but I certainly saw nothing of it there then. Whether the State which Bismarck is moulding will fit the notion is at best a matter of faith and hope. My notion of the State has dwindled with growing experience of life. As an abstraction, the State is to me only All-of-us. In practice--that is, when it exercises will or adopts a line of action--it is only a little group of men chosen in a very haphazard way by the majority of us to perform certain services for all of us. The majority do not go about their selection very rationally, and they are almost always disappointed by the results of their own operation. Hence "the State," instead of offering resources of wisdom, right reason, and pure moral sense beyond what the average of us possess, generally offers much less of all those things. Furthermore, it often turns out in practice that "the State" is not even the known and accredited servants of the State, but, as has been well said, is only some obscure clerk, hidden in the recesses of a Government bureau, into whose power the chance has fallen for the moment to pull one of the stops which control the Government machine. In former days it often happened that "The State" was a barber, a fiddler, or a bad woman. In our day it often happens that "the State" is a little functionary on whom a big functionary is forced to depend. I cannot see the sense of spending time to read and write observations, such as I find in the writings of many men of great attainments and of great influence, of which the following might be a general type: If the statesmen could attain to the requisite knowledge and wisdom, it is conceivable that the State might perform important regulative functions in the production and distribution of wealth, against which no positive and sweeping theoretical objection could be made from the side of economic science; but statesmen never can acquire the requisite knowledge and wisdom.--To me this seems a mere waste of words. The inadequacy of the State to regulative tasks is agreed upon, as a matter of fact, by all. Why, then, bring State regulation into the discussion simply in order to throw it out again? The whole subject ought to be discussed and settled aside from the hypothesis of State regulation. The little group of public servants who, as I have said, constitute the State, when the State determines on anything, could not do much for themselves or anybody else by their own force. If they do anything, they must dispose of men, as in an army, or of capital, as in a treasury. But the army, or police, or _posse comitatus_, is more or less All-of-us, and the capital in the treasury is the product of the labor and saving of All-of-us. Therefore, when the State means power-to-do it means All-of-us, as brute force or as industrial force. If anybody is to benefit from the action of the State it must be Some-of-us. If, then, the question is raised, What ought the State to do for labor, for trade, for manufactures, for the poor, for the learned professions? etc., etc.--that is, for a class or an interest--it is really the question, What ought All-of-us to do for Some-of-us? But Some-of-us are included in All-of-us, and, so far as they get the benefit of their own efforts, it is the same as if they worked for themselves, and they may be cancelled out of All-of-us. Then the question which remains is, What ought Some-of-us to do for Others-of-us? or, What do social classes owe to each other? I now propose to try to find out whether there is any class in society which lies under the duty and burden of fighting the battles of life for any other class, or of solving social problems for the satisfaction of any other class; also, whether there is any class which has the right to formulate demands on "society"--that is, on other classes; also, whether there is anything but a fallacy and a superstition in the notion that "the State" owes anything to anybody except peace, order, and the guarantees of rights. I have in view, throughout the discussion, the economic, social, and political circumstances which exist in the United States. I. _ON A NEW PHILOSOPHY: THAT POVERTY IS THE BEST POLICY._ It is commonly asserted that there are in the United States no classes, and any allusion to classes is resented. On the other hand, we constantly read and hear discussions of social topics in which the existence of social classes is assumed as a simple fact. "The poor," "the weak," "the laborers," are expressions which are used as if they had exact and well-understood definition. Discussions are made to bear upon the assumed rights, wrongs, and misfortunes of certain social classes; and all public speaking and writing consists, in a large measure, of the discussion of general plans for meeting the wishes of classes of people who have not been able to satisfy their own desires. These classes are sometimes discontented, and sometimes not. Sometimes they do not know that anything is amiss with them until the "friends of humanity" come to them with offers of aid. Sometimes they are discontented and envious. They do not take their achievements as a fair measure of their rights. They do not blame themselves or their parents for their lot, as compared with that of other people. Sometimes they claim that they have a right to everything of which they feel the need for their happiness on earth. To make such a claim against God and Nature would, of course, be only to say that we claim a right to live on earth if we can. But God and Nature have ordained the chances and conditions of life on earth once for all. The case cannot be reopened. We cannot get a revision of the laws of human life. We are absolutely shut up to the need and duty, if we would learn how to live happily, of investigating the laws of Nature, and deducing the rules of right living in the world as it is. These are very wearisome and commonplace tasks. They consist in labor and self-denial repeated over and over again in learning and doing. When the people whose claims we are considering are told to apply themselves to these tasks they become irritated and feel almost insulted. They formulate their claims as rights against society--that is, against some other men. In their view they have a right, not only to _pursue_ happiness, but to _get_ it; and if they fail to get it, they think they have a claim to the aid of other men--that is, to the labor and self-denial of other men--to get it for them. They find orators and poets who tell them that they have grievances, so long as they have unsatisfied desires. Now, if there are groups of people who have a claim to other people's labor and self-denial, and if there are other people whose labor and self-denial are liable to be claimed by the first groups, then there certainly are "classes," and classes of the oldest and most vicious type. For a man who can command another man's labor and self-denial for the support of his own existence is a privileged person of the highest species conceivable on earth. Princes and paupers meet on this plane, and no other men are on it all. On the other hand, a man whose labor and self-denial may be diverted from his maintenance to that of some other man is not a free man, and approaches more or less toward the position of a slave. Therefore we shall find that, in all the notions which we are to discuss, this elementary contradiction, that there are classes and that there are not classes, will produce repeated confusion and absurdity. We shall find that, in our efforts to eliminate the old vices of class government, we are impeded and defeated by new products of the worst class theory. We shall find that all the schemes for producing equality and obliterating the organization of society produce a new differentiation based on the worst possible distinction--the right to claim and the duty to give one man's effort for another man's satisfaction. We shall find that every effort to realize equality necessitates a sacrifice of liberty. It is very popular to pose as a "friend of humanity," or a "friend of the working classes." The character, however, is quite exotic in the United States. It is borrowed from England, where some men, otherwise of small account, have assumed it with great success and advantage. Anything which has a charitable sound and a kind-hearted tone generally passes without investigation, because it is disagreeable to assail it. Sermons, essays, and orations assume a conventional standpoint with regard to the poor, the weak, etc.; and it is allowed to pass as an unquestioned doctrine in regard to social classes that "the rich" ought to "care for the poor"; that Churches especially ought to collect capital from the rich and spend it for the poor; that parishes ought to be clusters of institutions by means of which one social class should perform its duties to another; and that clergymen, economists, and social philosophers have a technical and professional duty to devise schemes for "helping the poor." The preaching in England used all to be done to the poor--that they ought to be contented with their lot and respectful to their betters. Now, the greatest part of the preaching in America consists in injunctions to those who have taken care of themselves to perform their assumed duty to take care of others. Whatever may be one's private sentiments, the fear of appearing cold and hard-hearted causes these conventional theories of social duty and these assumptions of social fact to pass unchallenged. Let us notice some distinctions which are of prime importance to a correct consideration of the subject which we intend to treat. Certain ills belong to the hardships of human life. They are natural. They are part of the struggle with Nature for existence. We cannot blame our fellow-men for our share of these. My neighbor and I are both struggling to free ourselves from these ills. The fact that my neighbor has succeeded in this struggle better than I constitutes no grievance for me. Certain other ills are due to the malice of men, and to the imperfections or errors of civil institutions. These ills are an object of agitation, and a subject for discussion. The former class of ills is to be met only by manly effort and energy; the latter may be corrected by associated effort. The former class of ills is constantly grouped and generalized, and made the object of social schemes. We shall see, as we go on, what that means. The second class of ills may fall on certain social classes, and reform will take the form of interference by other classes in favor of that one. The last fact is, no doubt, the reason why people have been led, not noticing distinctions, to believe that the same method was applicable to the other class of ills. The distinction here made between the ills which belong to the struggle for existence and those which are due to the faults of human institutions is of prime importance. It will also be important, in order to clear up our ideas about the notions which are in fashion, to note the relation of the economic to the political significance of assumed duties of one class to another. That is to say, we may discuss the question whether one class owes duties to another by reference to the economic effects which will be produced on the classes and society; or we may discuss the political expediency of formulating and enforcing rights and duties respectively between the parties. In the former case we might assume that the givers of aid were willing to give it, and we might discuss the benefit or mischief of their activity. In the other case we must assume that some at least of those who were forced to give aid did so unwillingly. Here, then, there would be a question of rights. The question whether voluntary charity is mischievous or not is one thing; the question whether legislation which forces one man to aid another is right and wise, as well as economically beneficial, is quite another question. Great confusion and consequent error is produced by allowing these two questions to become entangled in the discussion. Especially we shall need to notice the attempts to apply legislative methods of reform to the ills which belong to the order of Nature. There is no possible definition of "a poor man." A pauper is a person who cannot earn his living; whose producing powers have fallen positively below his necessary consumption; who cannot, therefore, pay his way. A human society needs the active co-operation and productive energy of every person in it. A man who is present as a consumer, yet who does not contribute either by land, labor, or capital to the work of society, is a burden. On no sound political theory ought such a person to share in the political power of the State. He drops out of the ranks of workers and producers. Society must support him. It accepts the burden, but he must be cancelled from the ranks of the rulers likewise. So much for the pauper. About him no more need be said. But he is not the "poor man." The "poor man" is an elastic term, under which any number of social fallacies may be hidden. Neither is there any possible definition of "the weak." Some are weak in one way, and some in another; and those who are weak in one sense are strong in another. In general, however, it may be said that those whom humanitarians and philanthropists call the weak are the ones through whom the productive and conservative forces of society are wasted. They constantly neutralize and destroy the finest efforts of the wise and industrious, and are a dead-weight on the society in all its struggles to realize any better things. Whether the people who mean no harm, but are weak in the essential powers necessary to the performance of one's duties in life, or those who are malicious and vicious, do the more mischief, is a question not easy to answer. Under the names of the poor and the weak, the negligent, shiftless, inefficient, silly, and imprudent are fastened upon the industrious and prudent as a responsibility and a duty. On the one side, the terms are extended to cover the idle, intemperate, and vicious, who, by the combination, gain credit which they do not deserve, and which they could not get if they stood alone. On the other hand, the terms are extended to include wage-receivers of the humblest rank, who are degraded by the combination. The reader who desires to guard himself against fallacies should always scrutinize the terms "poor" and "weak" as used, so as to see which or how many of these classes they are made to cover. The humanitarians, philanthropists, and reformers, looking at the facts of life as they present themselves, find enough which is sad and unpromising in the condition of many members of society. They see wealth and poverty side by side. They note great inequality of social position and social chances. They eagerly set about the attempt to account for what they see, and to devise schemes for remedying what they do not like. In their eagerness to recommend the less fortunate classes to pity and consideration they forget all about the rights of other classes; they gloss over all the faults of the classes in question, and they exaggerate their misfortunes and their virtues. They invent new theories of property, distorting rights and perpetuating injustice, as anyone is sure to do who sets about the readjustment of social relations with the interests of one group distinctly before his mind, and the interests of all other groups thrown into the background. When I have read certain of these discussions I have thought that it must be quite disreputable to be respectable, quite dishonest to own property, quite unjust to go one's own way and earn one's own living, and that the only really admirable person was the good-for-nothing. The man who by his own effort raises himself above poverty appears, in these discussions, to be of no account. The man who has done nothing to raise himself above poverty finds that the social doctors flock about him, bringing the capital which they have collected from the other class, and promising him the aid of the State to give him what the other had to work for. In all these schemes and projects the organized intervention of society through the State is either planned or hoped for, and the State is thus made to become the protector and guardian of certain classes. The agents who are to direct the State action are, of course, the reformers and philanthropists. Their schemes, therefore, may always be reduced to this type--that A and B decide what C shall do for D. It will be interesting to inquire, at a later period of our discussion, who C is, and what the effect is upon him of all these arrangements. In all the discussions attention is concentrated on A and B, the noble social reformers, and on D, the "poor man." I call C the Forgotten Man, because I have never seen that any notice was taken of him in any of the discussions. When we have disposed of A, B, and D we can better appreciate the case of C, and I think that we shall find that he deserves our attention, for the worth of his character and the magnitude of his unmerited burdens. Here it may suffice to observe that, on the theories of the social philosophers to whom I have referred, we should get a new maxim of judicious living: Poverty is the best policy. If you get wealth, you will have to support other people; if you do not get wealth, it will be the duty of other people to support you. No doubt one chief reason for the unclear and contradictory theories of class relations lies in the fact that our society, largely controlled in all its organization by one set of doctrines, still contains survivals of old social theories which are totally inconsistent with the former. In the Middle Ages men were united by custom and prescription into associations, ranks, guilds, and communities of various kinds. These ties endured as long as life lasted. Consequently society was dependent, throughout all its details, on status, and the tie, or bond, was sentimental. In our modern state, and in the United States more than anywhere else, the social structure is based on contract, and status is of the least importance. Contract, however, is rational--even rationalistic. It is also realistic, cold, and matter-of-fact. A contract relation is based on a sufficient reason, not on custom or prescription. It is not permanent. It endures only so long as the reason for it endures. In a state based on contract sentiment is out of place in any public or common affairs. It is relegated to the sphere of private and personal relations, where it depends not at all on class types, but on personal acquaintance and personal estimates. The sentimentalists among us always seize upon the survivals of the old order. They want to save them and restore them. Much of the loose thinking also which troubles us in our social discussions arises from the fact that men do not distinguish the elements of status and of contract which may be found in our society. Whether social philosophers think it desirable or not, it is out of the question to go back to status or to the sentimental relations which once united baron and retainer, master and servant, teacher and pupil, comrade and comrade. That we have lost some grace and elegance is undeniable. That life once held more poetry and romance is true enough. But it seems impossible that any one who has studied the matter should doubt that we have gained immeasurably, and that our farther gains lie in going forward, not in going backward. The feudal ties can never be restored. If they could be restored they would bring back personal caprice, favoritism, sycophancy, and intrigue. A society based on contract is a society of free and independent men, who form ties without favor or obligation, and co-operate without cringing or intrigue. A society based on contract, therefore, gives the utmost room and chance for individual development, and for all the self-reliance and dignity of a free man. That a society of free men, co-operating under contract, is by far the strongest society which has ever yet existed; that no such society has ever yet developed the full measure of strength of which it is capable; and that the only social improvements which are now conceivable lie in the direction of more complete realization of a society of free men united by contract, are points which cannot be controverted. It follows, however, that one man, in a free state, cannot claim help from, and cannot be charged to give help to, another. To understand the full meaning of this assertion it will be worth while to see what a free democracy is. II. _THAT A FREE MAN IS A SOVEREIGN, BUT THAT A SOVEREIGN CANNOT TAKE "TIPS."_ A free man, a free country, liberty, and equality are terms of constant use among us. They are employed as watchwords as soon as any social questions come into discussion. It is right that they should be so used. They ought to contain the broadest convictions and most positive faiths of the nation, and so they ought to be available for the decision of questions of detail. In order, however, that they may be so employed successfully and correctly it is essential that the terms should be correctly defined, and that their popular use should conform to correct definitions. No doubt it is generally believed that the terms are easily understood, and present no difficulty. Probably the popular notion is, that liberty means doing as one has a mind to, and that it is a metaphysical or sentimental good. A little observation shows that there is no such thing in this world as doing as one has a mind to. There is no man, from the tramp up to the President, the Pope, or the Czar, who can do as he has a mind to. There never has been any man, from the primitive barbarian up to a Humboldt or a Darwin, who could do as he had a mind to. The "Bohemian" who determines to realize some sort of liberty of this kind accomplishes his purpose only by sacrificing most of the rights and turning his back on most of the duties of a civilized man, while filching as much as he can of the advantages of living in a civilized state. Moreover, liberty is not a metaphysical or sentimental thing at all. It is positive, practical, and actual. It is produced and maintained by law and institutions, and is, therefore, concrete and historical. Sometimes we speak distinctively of civil liberty; but if there be any liberty other than civil liberty--that is, liberty under law--it is a mere fiction of the schoolmen, which they may be left to discuss. Even as I write, however, I find in a leading review the following definition of liberty: Civil liberty is "the result of the restraint exercised by the sovereign people on the more powerful individuals and classes of the community, preventing them from availing themselves of the excess of their power to the detriment of the other classes." This definition lays the foundation for the result which it is apparently desired to reach, that "a government by the people can in no case become a paternal government, since its law-makers are its mandatories and servants carrying out its will, and not its fathers or its masters." Here we have the most mischievous fallacy under the general topic which I am discussing distinctly formulated. In the definition of liberty it will be noticed that liberty is construed as the act of the sovereign people against somebody who must, of course, be differentiated from the sovereign people. Whenever "people" is used in this sense for anything less than the total population, man, woman, child, and baby, and whenever the great dogmas which contain the word "people" are construed under the limited definition of "people," there is always fallacy. History is only a tiresome repetition of one story. Persons and classes have sought to win possession of the power of the State in order to live luxuriously out of the earnings of others. Autocracies, aristocracies, theocracies, and all other organizations for holding political power, have exhibited only the same line of action. It is the extreme of political error to say that if political power is only taken away from generals, nobles, priests, millionaires, and scholars, and given to artisans and peasants, these latter may be trusted to do only right and justice, and never to abuse the power; that they will repress all excess in others, and commit none themselves. They will commit abuse, if they can and dare, just as others have done. The reason for the excesses of the old governing classes lies in the vices and passions of human nature--cupidity, lust, vindictiveness, ambition, and vanity. These vices are confined to no nation, class, or age. They appear in the church, the academy, the workshop, and the hovel, as well as in the army or the palace. They have appeared in autocracies, aristocracies, theocracies, democracies, and ochlocracies, all alike. The only thing which has ever restrained these vices of human nature in those who had political power is law sustained by impersonal institutions. If political power be given to the masses who have not hitherto had it, nothing will stop them from abusing it but laws and institutions. To say that a popular government cannot be paternal is to give it a charter that it can do no wrong. The trouble is that a democratic government is in greater danger than any other of becoming paternal, for it is sure of itself, and ready to undertake anything, and its power is excessive and pitiless against dissentients. What history shows is, that rights are safe only when guaranteed against all arbitrary power, and all class and personal interest. Around an autocrat there has grown up an oligarchy of priests and soldiers. In time a class of nobles has been developed, who have broken into the oligarchy and made an aristocracy. Later the _demos_, rising into an independent development, has assumed power and made a democracy. Then the mob of a capital city has overwhelmed the democracy in an ochlocracy. Then the "idol of the people," or the military "savior of society," or both in one, has made himself autocrat, and the same old vicious round has recommenced. Where in all this is liberty? There has been no liberty at all, save where a state has known how to break out, once for all, from this delusive round; to set barriers to selfishness, cupidity, envy, and lust, in _all_ classes, from highest to lowest, by laws and institutions; and to create great organs of civil life which can eliminate, as far as possible, arbitrary and personal elements from the adjustment of interests and the definition of rights. Liberty is an affair of laws and institutions which bring rights and duties into equilibrium. It is not at all an affair of selecting the proper class to rule. The notion of a free state is entirely modern. It has been developed with the development of the middle class, and with the growth of a commercial and industrial civilization. Horror at human slavery is not a century old as a common sentiment in a civilized state. The idea of the "free man," as we understand it, is the product of a revolt against mediaeval and feudal ideas; and our notion of equality, when it is true and practical, can be explained only by that revolt. It was in England that the modern idea found birth. It has been strengthened by the industrial and commercial development of that country. It has been inherited by all the English-speaking nations, who have made liberty real because they have inherited it, not as a notion, but as a body of institutions. It has been borrowed and imitated by the military and police state of the European continent so fast as they have felt the influence of the expanding industrial civilization; but they have realized it only imperfectly, because they have no body of local institutions or traditions, and it remains for them as yet too much a matter of "declarations" and pronunciamentos. The notion of civil liberty which we have inherited is that of _a status created for the individual by laws and institutions, the effect of which is that each man is guaranteed the use of all his own powers exclusively for his own welfare_. It is not at all a matter of elections, or universal suffrage, or democracy. All institutions are to be tested by the degree to which they guarantee liberty. It is not to be admitted for a moment that liberty is a means to social ends, and that it may be impaired for major considerations. Any one who so argues has lost the bearing and relation of all the facts and factors in a free state. A human being has a life to live, a career to run. He is a centre of powers to work, and of capacities to suffer. What his powers may be--whether they can carry him far or not; what his chances may be, whether wide or restricted; what his fortune may be, whether to suffer much or little--are questions of his personal destiny which he must work out and endure as he can; but for all that concerns the bearing of the society and its institutions upon that man, and upon the sum of happiness to which he can attain during his life on earth, the product of all history and all philosophy up to this time is summed up in the doctrine, that he should be left free to do the most for himself that he can, and should be guaranteed the exclusive enjoyment of all that he does. If the society--that is to say, in plain terms, if his fellow-men, either individually, by groups, or in a mass--impinge upon him otherwise than to surround him with neutral conditions of security, they must do so under the strictest responsibility to justify themselves. Jealousy and prejudice against all such interferences are high political virtues in a free man. It is not at all the function of the State to make men happy. They must make themselves happy in their own way, and at their own risk. The functions of the State lie entirely in the conditions or chances under which the pursuit of happiness is carried on, so far as those conditions or chances can be affected by civil organization. Hence, liberty for labor and security for earnings are the ends for which civil institutions exist, not means which may be employed for ulterior ends. Now, the cardinal doctrine of any sound political system is, that rights and duties should be in equilibrium. A monarchical or aristocratic system is not immoral, if the rights and duties of persons and classes are in equilibrium, although the rights and duties of different persons and classes are unequal. An immoral political system is created whenever there are privileged classes--that is, classes who have arrogated to themselves rights while throwing the duties upon others. In a democracy all have equal political rights. That is the fundamental political principle. A democracy, then, becomes immoral, if all have not equal political duties. This is unquestionably the doctrine which needs to be reiterated and inculcated beyond all others, if the democracy is to be made sound and permanent. Our orators and writers never speak of it, and do not seem often to know anything about it; but the real danger of democracy is, that the classes which have the power under it will assume all the rights and reject all the duties--that is, that they will use the political power to plunder those-who-have. Democracy, in order to be true to itself, and to develop into a sound working system, must oppose the same cold resistance to any claims for favor on the ground of poverty, as on the ground of birth and rank. It can no more admit to public discussion, as within the range of possible action, any schemes for coddling and helping wage-receivers than it could entertain schemes for restricting political power to wage-payers. It must put down schemes for making "the rich" pay for whatever "the poor" want, just as it tramples on the old theories that only the rich are fit to regulate society. One needs but to watch our periodical literature to see the danger that democracy will be construed as a system of favoring a new privileged class of the many and the poor. Holding in mind, now, the notions of liberty and democracy as we have defined them, we see that it is not altogether a matter of fanfaronade when the American citizen calls himself a "sovereign." A member of a free democracy is, in a sense, a sovereign. He has no superior. He has reached his sovereignty, however, by a process of reduction and division of power which leaves him no inferior. It is very grand to call one's self a sovereign, but it is greatly to the purpose to notice that the political responsibilities of the free man have been intensified and aggregated just in proportion as political rights have been reduced and divided. Many monarchs have been incapable of sovereignty and unfit for it. Placed in exalted situations, and inheritors of grand opportunities they have exhibited only their own imbecility and vice. The reason was, because they thought only of the gratification of their own vanity, and not at all of their duty. The free man who steps forward to claim his inheritance and endowment as a free and equal member of a great civil body must understand that his duties and responsibilities are measured to him by the same scale as his rights and his powers. He wants to be subject to no man. He wants to be equal to his fellows, as all sovereigns are equal. So be it; but he cannot escape the deduction that he can call no man to his aid. The other sovereigns will not respect his independence if he becomes dependent, and they cannot respect his equality if he sues for favors. The free man in a free democracy, when he cut off all the ties which might pull him down, severed also all the ties by which he might have made others pull him up. He must take all the consequences of his new status. He is, in a certain sense, an isolated man. The family tie does not bring to him disgrace for the misdeeds of his relatives, as it once would have done, but neither does it furnish him with the support which it once would have given. The relations of men are open and free, but they are also loose. A free man in a free democracy derogates from his rank if he takes a favor for which he does not render an equivalent. A free man in a free democracy has no duty whatever toward other men of the same rank and standing, except respect, courtesy, and good-will. We cannot say that there are no classes, when we are speaking politically, and then say that there are classes, when we are telling A what it is his duty to do for B. In a free state every man is held and expected to take care of himself and his family, to make no trouble for his neighbor, and to contribute his full share to public interests and common necessities. If he fails in this he throws burdens on others. He does not thereby acquire rights against the others. On the contrary, he only accumulates obligations toward them; and if he is allowed to make his deficiencies a ground of new claims, he passes over into the position of a privileged or petted person-emancipated from duties, endowed with claims. This is the inevitable result of combining democratic political theories with humanitarian social theories. It would be aside from my present purpose to show, but it is worth noticing in passing, that one result of such inconsistency must surely be to undermine democracy, to increase the power of wealth in the democracy, and to hasten the subjection of democracy to plutocracy; for a man who accepts any share which he has not earned in another man's capital cannot be an independent citizen. It is often affirmed that the educated and wealthy have an obligation to those who have less education and property, just because the latter have political equality with the former, and oracles and warnings are uttered about what will happen if the uneducated classes who have the suffrage are not instructed at the care and expense of the other classes. In this view of the matter universal suffrage is not a measure for _strengthening_ the State by bringing to its support the aid and affection of all classes, but it is a new burden, and, in fact, a peril. Those who favor it represent it as a peril. This doctrine is politically immoral and vicious. When a community establishes universal suffrage, it is as if it said to each new-comer, or to each young man: "We give you every chance that any one else has. Now come along with us; take care of yourself, and contribute your share to the burdens which we all have to bear in order to support social institutions." Certainly, liberty, and universal suffrage, and democracy are not pledges of care and protection, but they carry with them the exaction of individual responsibility. The State gives equal rights and equal chances just because it does not mean to give anything else. It sets each man on his feet, and gives him leave to run, just because it does not mean to carry him. Having obtained his chances, he must take upon himself the responsibility for his own success or failure. It is a pure misfortune to the community, and one which will redound to its injury, if any man has been endowed with political power who is a heavier burden then than he was before; but it cannot be said that there is any new _duty_ created for the good citizens toward the bad by the fact that the bad citizens are a harm to the State. III. _THAT IT IS NOT WICKED TO BE RICH; NAY, EVEN, THAT IT IS NOT WICKED TO BE RICHER THAN ONE'S NEIGHBOR_ I have before me a newspaper slip on which a writer expresses the opinion that no one should be allowed to possess more than one million dollars' worth of property. Alongside of it is another slip, on which another writer expresses the opinion that the limit should be five millions. I do not know what the comparative wealth of the two writers is, but it is interesting to notice that there is a wide margin between their ideas of how rich they would allow their fellow-citizens to become, and of the point at which they ("the State," of course) would step in to rob a man of his earnings. These two writers only represent a great deal of crude thinking and declaiming which is in fashion. I never have known a man of ordinary common-sense who did not urge upon his sons, from earliest childhood, doctrines of economy and the practice of accumulation. A good father believes that he does wisely to encourage enterprise, productive skill, prudent self-denial, and judicious expenditure on the part of his son. The object is to teach the boy to accumulate capital. If, however, the boy should read many of the diatribes against "the rich" which are afloat in our literature; if he should read or hear some of the current discussion about "capital"; and if, with the ingenuousness of youth, he should take these productions at their literal sense, instead of discounting them, as his father does, he would be forced to believe that he was on the path of infamy when he was earning and saving capital. It is worth while to consider which we mean or what we mean. Is it wicked to be rich? Is it mean to be a capitalist? If the question is one of degree only, and it is right to be rich up to a certain point and wrong to be richer, how shall we find the point? Certainly, for practical purposes, we ought to define the point nearer than between one and five millions of dollars. There is an old ecclesiastical prejudice in favor of the poor and against the rich. In days when men acted by ecclesiastical rules these prejudices produced waste of capital, and helped mightily to replunge Europe into barbarism. The prejudices are not yet dead, but they survive in our society as ludicrous contradictions and inconsistencies. One thing must be granted to the rich: they are good-natured. Perhaps they do not recognize themselves, for a rich man is even harder to define than a poor one. It is not uncommon to hear a clergyman utter from the pulpit all the old prejudice in favor of the poor and against the rich, while asking the rich to do something for the poor; and the rich comply, without apparently having their feelings hurt at all by the invidious comparison. We all agree that he is a good member of society who works his way up from poverty to wealth, but as soon as he has worked his way up we begin to regard him with suspicion, as a dangerous member of society. A newspaper starts the silly fallacy that "the rich are rich because the poor are industrious," and it is copied from one end of the country to the other as if it were a brilliant apothegm. "Capital" is denounced by writers and speakers who have never taken the trouble to find out what capital is, and who use the word in two or three different senses in as many pages. Labor organizations are formed, not to employ combined effort for a common object, but to indulge in declamation and denunciation, and especially to furnish an easy living to some officers who do not want to work. People who have rejected dogmatic religion, and retained only a residuum of religious sentimentalism, find a special field in the discussion of the rights of the poor and the duties of the rich. We have denunciations of banks, corporations, and monopolies, which denunciations encourage only helpless rage and animosity, because they are not controlled by any definitions or limitations, or by any distinctions between what is indispensably necessary and what is abuse, between what is established in the order of nature and what is legislative error. Think, for instance, of a journal which makes it its special business to denounce monopolies, yet favors a protective tariff, and has not a word to say against trades-unions or patents! Think of public teachers who say that the farmer is ruined by the cost of transportation, when they mean that he cannot make any profits because his farm is too far from the market, and who denounce the railroad because it does not correct for the farmer, at the expense of its stockholders, the disadvantage which lies in the physical situation of the farm! Think of that construction of this situation which attributes all the trouble to the greed of "moneyed corporations!" Think of the piles of rubbish that one has read about corners, and watering stocks, and selling futures! Undoubtedly there are, in connection with each of these things, cases of fraud, swindling, and other financial crimes; that is to say, the greed and selfishness of men are perpetual. They put on new phases, they adjust themselves to new forms of business, and constantly devise new methods of fraud and robbery, just as burglars devise new artifices to circumvent every new precaution of the lock-makers. The criminal law needs to be improved to meet new forms of crime, but to denounce financial devices which are useful and legitimate because use is made of them for fraud, is ridiculous and unworthy of the age in which we live. Fifty years ago good old English Tories used to denounce all joint-stock companies in the same way, and for similar reasons. All the denunciations and declamations which have been referred to are made in the interest of "the poor man." His name never ceases to echo in the halls of legislation, and he is the excuse and reason for all the acts which are passed. He is never forgotten in poetry, sermon, or essay. His interest is invoked to defend every doubtful procedure and every questionable institution. Yet where is he? Who is he? Who ever saw him? When did he ever get the benefit of any of the numberless efforts in his behalf? When, rather, were his name and interest ever invoked, when, upon examination, it did not plainly appear that somebody else was to win--somebody who was far too "smart" ever to be poor, far too lazy ever to be rich by industry and economy? A great deal is said about the unearned increment from land, especially with a view to the large gains of landlords in old countries. The unearned increment from land has indeed made the position of an English land-owner, for the last two hundred years, the most fortunate that any class of mortals ever has enjoyed; but the present moment, when the rent of agricultural land in England is declining under the competition of American land, is not well chosen for attacking the old advantage. Furthermore, the unearned increment from land appears in the United States as a gain to the first comers, who have here laid the foundations of a new State. Since the land is a monopoly, the unearned increment lies in the laws of Nature. Then the only question is, Who shall have it?--the man who has the ownership by prescription, or some or all others? It is a beneficent incident of the ownership of land that a pioneer who reduces it to use, and helps to lay the foundations of a new State, finds a profit in the increasing value of land as the new State grows up. It would be unjust to take that profit away from him, or from any successor to whom he has sold it. Moreover, there is an unearned increment on capital and on labor, due to the presence, around the capitalist and the laborer, of a great, industrious, and prosperous society. A tax on land and a succession or probate duty on capital might be perfectly justified by these facts. Unquestionably capital accumulates with a rapidity which follows in some high series the security, good government, peaceful order of the State in which it is employed; and if the State steps in, on the death of the holder, to claim a share of the inheritance, such a claim may be fully justified. The laborer likewise gains by carrying on his labor in a strong, highly civilized, and well-governed State far more than he could gain with equal industry on the frontier or in the midst of anarchy. He gains greater remuneration for his services, and he also shares in the enjoyment of all that accumulated capital of a wealthy community which is public or semi-public in its nature. It is often said that the earth belongs to the race, as if raw land was a boon, or gift. Raw land is only a _chance_ to prosecute the struggle for existence, and the man who tries to earn a living by the subjugation of raw land makes that attempt under the most unfavorable conditions, for land can be brought into use only by great hardship and exertion. The boon, or gift, would be to get some land after somebody else had made it fit for use. Any one in the world today can have raw land by going to it; but there are millions who would regard it simply as "transportation for life," if they were forced to go and live on new land and get their living out of it. Private ownership of land is only division of labor. If it is true in any sense that we all own the soil in common, the best use we can make of our undivided interests is to vest them all gratuitously (just as we now do) in any who will assume the function of directly treating the soil, while the rest of us take other shares in the social organization. The reason is, because in this way we all get more than we would if each one owned some land and used it directly. Supply and demand now determine the distribution of population between the direct use of land and other pursuits; and if the total profits and chances of land-culture were reduced by taking all the "unearned increment" in taxes, there would simply be a redistribution of industry until the profits of land-culture, less taxes and without chances from increasing value, were equal to the profits of other pursuits under exemption from taxation. It is remarkable that jealousy of individual property in land often goes along with very exaggerated doctrines of tribal or national property in land. We are told that John, James, and William ought not to possess part of the earth's surface because it belongs to all men; but it is held that Egyptians, Nicaraguans, or Indians have such right to the territory which they occupy, that they may bar the avenues of commerce and civilization if they choose, and that it is wrong to override their prejudices or expropriate their land. The truth is, that the notion that the race own the earth has practical meaning only for the latter class of cases. The great gains of a great capitalist in a modern state must be put under the head of wages of superintendence. Anyone who believes that any great enterprise of an industrial character can be started without labor must have little experience of life. Let anyone try to get a railroad built, or to start a factory and win reputation for its products, or to start a school and win a reputation for it, or to found a newspaper and make it a success, or to start any other enterprise, and he will find what obstacles must be overcome, what risks must be taken, what perseverance and courage are required, what foresight and sagacity are necessary. Especially in a new country, where many tasks are waiting, where resources are strained to the utmost all the time, the judgment, courage, and perseverance required to organize new enterprizes and carry them to success are sometimes heroic. Persons who possess the necessary qualifications obtain great rewards. They ought to do so. It is foolish to rail at them. Then, again, the ability to organize and conduct industrial, commercial, or financial enterprises is rare; the great captains of industry are as rare as great generals. The great weakness of all co-operative enterprises is in the matter of supervision. Men of routine or men who can do what they are told are not hard to find; but men who can think and plan and tell the routine men what to do are very rare. They are paid in proportion to the supply and demand of them. If Mr. A.T. Stewart made a great fortune by collecting and bringing dry-goods to the people of the United States, he did so because he understood how to do that thing better than any other man of his generation. He proved it, because he carried the business through commercial crises and war, and kept increasing its dimensions. If, when he died, he left no competent successor, the business must break up, and pass into new organization in the hands of other men. Some have said that Mr. Stewart made his fortune out of those who worked for him or with him. But would those persons have been able to come together, organize themselves, and earn what they did earn without him? Not at all. They would have been comparatively helpless. He and they together formed a great system of factories, stores, transportation, under his guidance and judgment. It was for the benefit of all; but he contributed to it what no one else was able to contribute--the one guiding mind which made the whole thing possible. In no sense whatever does a man who accumulates a fortune by legitimate industry exploit his employés, or make his capital "out of" anybody else. The wealth which he wins would not be but for him. The aggregation of large fortunes is not at all a thing to be regretted. On the contrary, it is a necessary condition of many forms of social advance. If we should set a limit to the accumulation of wealth, we should say to our most valuable producers, "We do not want you to do us the services which you best understand how to perform, beyond a certain point." It would be like killing off our generals in war. A great deal is said, in the cant of a certain school about "ethical views of wealth," and we are told that some day men will be found of such public spirit that, after they have accumulated a few millions, they will be willing to go on and labor simply for the pleasure of paying the taxes of their fellow-citizens. Possibly this is true. It is a prophecy. It is as impossible to deny it as it is silly to affirm it. For if a time ever comes when there are men of this kind, the men of that age will arrange their affairs accordingly. There are no such men now, and those of us who live now cannot arrange our affairs by what men will be a hundred generations hence. There is every indication that we are to see new developments of the power of aggregated capital to serve civilization, and that the new developments will be made right here in America. Joint-stock companies are yet in their infancy, and incorporated capital, instead of being a thing which can be overturned, is a thing which is becoming more and more indispensable. I shall have something to say in another chapter about the necessary checks and guarantees, in a political point of view, which must be established. Economically speaking, aggregated capital will be more and more essential to the performance of our social tasks. Furthermore, it seems to me certain that all aggregated capital will fall more and more under personal control. Each great company will be known as controlled by one master mind. The reason for this lies in the great superiority of personal management over management by boards and committees. This tendency is in the public interest, for it is in the direction of more satisfactory responsibility. The great hindrance to the development of this continent has lain in the lack of capital. The capital which we have had has been wasted by division and dissipation, and by injudicious applications. The waste of capital, in proportion to the total capital, in this country between 1800 and 1850, in the attempts which were made to establish means of communication and transportation, was enormous. The waste was chiefly due to ignorance and bad management, especially to State control of public works. We are to see the development of the country pushed forward at an unprecedented rate by an aggregation of capital, and a systematic application of it under the direction of competent men. This development will be for the benefit of all, and it will enable each one of us, in his measure and way, to increase his wealth. We may each of us go ahead to do so, and we have every reason to rejoice in each other's prosperity. There ought to be no laws to guarantee property against the folly of its possessors. In the absence of such laws, capital inherited by a spendthrift will be squandered and re-accumulated in the hands of men who are fit and competent to hold it. So it should be, and under such a state of things there is no reason to desire to limit the property which any man may acquire. IV. _ON THE REASONS WHY MAN IS NOT ALTOGETHER A BRUTE._ The Arabs have a story of a man who desired to test which of his three sons loved him most. He sent them out to see which of the three would bring him the most valuable present. The three sons met in a distant city, and compared the gifts they had found. The first had a carpet on which he could transport himself and others whithersoever he would. The second had a medicine which would cure any disease. The third had a glass in which he could see what was going on at any place he might name. The third used his glass to see what was going on at home: he saw his father ill in bed. The first transported all three to their home on his carpet. The second administered the medicine and saved the father's life. The perplexity of the father when he had to decide which son's gift had been of the most value to him illustrates very fairly the difficulty of saying whether land, labor, or capital is most essential to production. No production is possible without the co-operation of all three. We know that men once lived on the spontaneous fruits of the earth, just as other animals do. In that stage of existence a man was just like the brutes. His existence was at the sport of Nature. He got what he could by way of food, and ate what he could get, but he depended on finding what Nature gave. He could wrest nothing from Nature; he could make her produce nothing; and he had only his limbs with which to appropriate what she offered. His existence was almost entirely controlled by accident; he possessed no capital; he lived out of his product, and production had only the two elements of land and labor of appropriation. At the present time man is an intelligent animal. He knows something of the laws of Nature; he can avail himself of what is favorable, and avert what is unfavorable, in nature, to a certain extent; he has narrowed the sphere of accident, and in some respects reduced it to computations which lessen its importance; he can bring the productive forces of Nature into service, and make them produce food, clothing, and shelter. How has the change been brought about? The answer is, By capital. If we can come to an understanding of what capital is, and what a place it occupies in civilization, it will clear up our ideas about a great many of these schemes and philosophies which are put forward to criticise social arrangements, or as a basis of proposed reforms. The first beginnings of capital are lost in the obscurity which covers all the germs of civilization. The more one comes to understand the case of the primitive man, the more wonderful it seems that man ever started on the road to civilization. Among the lower animals we find some inchoate forms of capital, but from them to the lowest forms of real capital there is a great stride. It does not seem possible that man could have taken that stride without intelligent reflection, and everything we know about the primitive man shows us that he did not reflect. No doubt accident controlled the first steps. They may have been won and lost again many times. There was one natural element which man learned to use so early that we cannot find any trace of him when he had it not--fire. There was one tool-weapon in nature--the flint. Beyond the man who was so far superior to the brutes that he knew how to use fire and had the use of flints we cannot go. A man of lower civilization than that was so like the brutes that, like them, he could leave no sign of his presence on the earth save his bones. The man who had a flint no longer need be a prey to a wild animal, but could make a prey of it. He could get meat food. He who had meat food could provide his food in such time as to get leisure to improve his flint tools. He could get skins for clothing, bones for needles, tendons for thread. He next devised traps and snares by which to take animals alive. He domesticated them, and lived on their increase. He made them beasts of draught and burden, and so got the use of a natural force. He who had beasts of draught and burden could make a road and trade, and so get the advantage of all soils and all climates. He could make a boat, and use the winds as force. He now had such tools, science, and skill that he could till the ground, and make it give him more food. So from the first step that man made above the brute the thing which made his civilization possible was capital. Every step of capital won made the next step possible, up to the present hour. Not a step has been or can be made without capital. It is labor accumulated, multiplied into itself--raised to a higher power, as the mathematicians say. The locomotive is only possible today because, from the flint-knife up, one achievement has been multiplied into another through thousands of generations. We cannot now stir a step in our life without capital. We cannot build a school, a hospital, a church, or employ a missionary society, without capital, any more than we could build a palace or a factory without capital. We have ourselves, and we have the earth; the thing which limits what we can do is the third requisite--capital. Capital is force, human energy stored or accumulated, and very few people ever come to appreciate its importance to civilized life. We get so used to it that we do not see its use. The industrial organization of society has undergone a development with the development of capital. Nothing has ever made men spread over the earth and develop the arts but necessity--that is, the need of getting a living, and the hardships endured in trying to meet that need. The human race has had to pay with its blood at every step. It has had to buy its experience. The thing which has kept up the necessity of more migration or more power over Nature has been increase of population. Where population has become chronically excessive, and where the population has succumbed and sunk, instead of developing energy enough for a new advance, there races have degenerated and settled into permanent barbarism. They have lost the power to rise again, and have made no inventions. Where life has been so easy and ample that it cost no effort, few improvements have been made. It is in the middle range, with enough social pressure to make energy needful, and not enough social pressure to produce despair, that the most progress has been made. At first all labor was forced. Men forced it on women, who were drudges and slaves. Men reserved for themselves only the work of hunting or war. Strange and often horrible shadows of all the old primitive barbarism are now to be found in the slums of great cities, and in the lowest groups of men, in the midst of civilized nations. Men impose labor on women in some such groups today. Through various grades of slavery, serfdom, villeinage, and through various organizations of castes and guilds, the industrial organization has been modified and developed up to the modern system. Some men have been found to denounce and deride the modern system--what they call the capitalist system. The modern system is based on liberty, on contract, and on private property. It has been reached through a gradual emancipation of the mass of mankind from old bonds both to Nature and to their fellow-men. Village communities, which excite the romantic admiration of some writers, were fit only for a most elementary and unorganized society. They were fit neither to cope with the natural difficulties of winning much food from little land, nor to cope with the malice of men. Hence they perished. In the modern society the organization of labor is high. Some are land-owners and agriculturists, some are transporters, bankers, merchants, teachers; some advance the product by manufacture. It is a system of division of functions, which is being refined all the time by subdivision of trade and occupation, and by the differentiation of new trades. The ties by which all are held together are those of free co-operation and contract. If we look back for comparison to anything of which human history gives us a type or experiment, we see that the modern free system of industry offers to every living human being chances of happiness indescribably in excess of what former generations have possessed. It offers no such guarantees as were once possessed by some, that they should in no case suffer. We have an instance right at hand. The Negroes, once slaves in the United States, used to be assured care, medicine, and support; but they spent their efforts, and other men took the products. They have been set free. That means only just this: they now work and hold their own products, and are assured of nothing but what they earn. In escaping from subjection they have lost claims. Care, medicine, and support they get, if they earn it. Will any one say that the black men have not gained? Will any one deny that individual black men may seem worse off? Will any one allow such observations to blind them to the true significance of the change? If any one thinks that there are or ought to be somewhere in society guarantees that no man shall suffer hardship, let him understand that there can be no such guarantees, unless other men give them--that is, unless we go back to slavery, and make one man's effort conduce to another man's welfare. Of course, if a speculator breaks loose from science and history, and plans out an ideal society in which all the conditions are to be different, he is a law-giver or prophet, and those may listen to him who have leisure. The modern industrial system is a great social co-operation. It is automatic and instinctive in its operation. The adjustments of the organs take place naturally. The parties are held together by impersonal force--supply and demand. They may never see each other; they may be separated by half the circumference of the globe. Their co-operation in the social effort is combined and distributed again by financial machinery, and the rights and interests are measured and satisfied without any special treaty or convention at all. All this goes on so smoothly and naturally that we forget to notice it. We think that it costs nothing--does itself, as it were. The truth is, that this great co-operative effort is one of the great products of civilization--one of its costliest products and highest refinements, because here, more than anywhere else, intelligence comes in, but intelligence so clear and correct that it does not need expression. Now, by the great social organization the whole civilized body (and soon we shall say the whole human race) keeps up a combined assault on Nature for the means of subsistence. Civilized society may be said to be maintained in an unnatural position, at an elevation above the earth, or above the natural state of human society. It can be maintained there only by an efficient organization of the social effort and by capital. At its elevation it supports far greater numbers than it could support on any lower stage. Members of society who come into it as it is today can live only by entering into the organization. If numbers increase, the organization must be perfected, and capital must increase--_i.e._, power over Nature. If the society does not keep up its power, if it lowers its organization or wastes its capital, it falls back toward the natural state of barbarism from which it rose, and in so doing it must sacrifice thousands of its weakest members. Hence human society lives at a constant strain forward and upward, and those who have most interest that this strain be successfully kept up, that the social organization be perfected, and that capital be increased, are those at the bottom. The notion of property which prevails among us today is, that a man has a right to the thing which he has made by his labor. This is a very modern and highly civilized conception. Singularly enough, it has been brought forward dogmatically to prove that property in land is not reasonable, because man did not make land. A man cannot "make" a chattel or product of any kind whatever without first appropriating land, so as to get the ore, wood, wool, cotton, fur, or other raw material. All that men ever appropriate land for is to get out of it the natural materials on which they exercise their industry. Appropriation, therefore, precedes labor-production, both historically and logically. Primitive races regarded, and often now regard, appropriation as the best title to property. As usual, they are logical. It is the simplest and most natural mode of thinking to regard a thing as belonging to that man who has, by carrying, wearing, or handling it, associated it for a certain time with his person. I once heard a little boy of four years say to his mother, "Why is not this pencil mine now? It used to be my brother's, but I have been using it all day." He was reasoning with the logic of his barbarian ancestors. The reason for allowing private property in land is, that two men cannot eat the same loaf of bread. If A has taken a piece of land, and is at work getting his loaf out of it, B cannot use the same land at the same time for the same purpose. Priority of appropriation is the only title of right which can supersede the title of greater force. The reason why man is not altogether a brute is, because he has learned to accumulate capital, to use capital, to advance to a higher organization of society, to develop a completer co-operation, and so to win greater and greater control over Nature. It is a great delusion to look about us and select those men who occupy the most advanced position in respect to worldly circumstances as the standard to which we think that all might be and ought to be brought. All the complaints and criticisms about the inequality of men apply to inequalities in property, luxury, and creature comforts, not to knowledge, virtue, or even physical beauty and strength. But it is plainly impossible that we should all attain to equality on the level of the best of us. The history of civilization shows us that the human race has by no means marched on in a solid and even phalanx. It has had its advance-guard, its rear-guard, and its stragglers. It presents us the same picture today; for it embraces every grade, from the most civilized nations down to the lowest surviving types of barbarians. Furthermore, if we analyze the society of the most civilized state, especially in one of the great cities where the highest triumphs of culture are presented, we find survivals of every form of barbarism and lower civilization. Hence, those who today enjoy the most complete emancipation from the hardships of human life, and the greatest command over the conditions of existence, simply show us the best that man has yet been able to do. Can we all reach that standard by wishing for it? Can we all vote it to each other? If we pull down those who are most fortunate and successful, shall we not by that very act defeat our own object? Those who are trying to reason out any issue from this tangle of false notions of society and of history are only involving themselves in hopeless absurdities and contradictions. If any man is not in the first rank who might get there, let him put forth new energy and take his place. If any man is not in the front rank, although he has done his best, how can he be advanced at all? Certainly in no way save by pushing down any one else who is forced to contribute to his advancement. It is often said that the mass of mankind are yet buried in poverty, ignorance, and brutishness. It would be a correct statement of the facts intended, from an historical and sociological point of view, to say, Only a small fraction of the human race have as yet, by thousands of years of struggle, been partially emancipated from poverty, ignorance, and brutishness. When once this simple correction is made in the general point of view, we gain most important corollaries for all the subordinate questions about the relations of races, nations, and classes. V. _THAT WE MUST HAVE FEW MEN, IF WE WANT STRONG MEN._ In our modern revolt against the mediaeval notions of hereditary honor and hereditary shame we have gone too far, for we have lost the appreciation of the true dependence of children on parents. We have a glib phrase about "the accident of birth," but it would puzzle anybody to tell what it means. If A takes B to wife, it is not an accident that he took B rather than C, D, or any other woman; and if A and B have a child, X, that child's ties to ancestry and posterity, and his relations to the human race, into which he has been born through A and B, are in no sense accidental. The child's interest in the question whether A should have married B or C is as material as anything one can conceive of, and the fortune which made X the son of A, and not of another man, is the most material fact in his destiny. If those things were better understood public opinion about the ethics of marriage and parentage would undergo a most salutary change. In following the modern tendency of opinion we have lost sight of the due responsibility of parents, and our legislation has thrown upon some parents the responsibility, not only of their own children, but of those of others. The relation of parents and children is the only case of sacrifice in Nature. Elsewhere equivalence of exchange prevails rigorously. The parents, however, hand down to their children the return for all which they had themselves inherited from their ancestors. They ought to hand down the inheritance with increase. It is by this relation that the human race keeps up a constantly advancing contest with Nature. The penalty of ceasing an aggressive behavior toward the hardships of life on the part of mankind is, that we go backward. We cannot stand still. Now, parental affection constitutes the personal motive which drives every man in his place to an aggressive and conquering policy toward the limiting conditions of human life. Affection for wife and children is also the greatest motive to social ambition and personal self-respect--that is, to what is technically called a "high standard of living." Some people are greatly shocked to read of what is called Malthusianism, when they read it in a book, who would be greatly ashamed of themselves if they did not practise Malthusianism in their own affairs. Among respectable people a man who took upon himself the cares and expenses of a family before he had secured a regular trade or profession, or had accumulated some capital, and who allowed his wife to lose caste, and his children to be dirty, ragged, and neglected, would be severely blamed by the public opinion of the community. The standard of living which a man makes for himself and his family, if he means to earn it, and does not formulate it as a demand which he means to make on his fellow-men, is a gauge of his self-respect; and a high standard of living is the moral limit which an intelligent body of men sets for itself far inside of the natural limits of the sustaining power of the land, which latter limit is set by starvation, pestilence, and war. But a high standard of living restrains population; that is, if we hold up to the higher standard of men, we must have fewer of them. Taking men as they have been and are, they are subjects of passion, emotion, and instinct. Only the _élite_ of the race has yet been raised to the point where reason and conscience can even curb the lower motive forces. For the mass of mankind, therefore, the price of better things is too severe, for that price can be summed up in one word--self-control. The consequence is, that for all but a few of us the limit of attainment in life in the best case is to live out our term, to pay our debts, to place three or four children in a position to support themselves in a position as good as the father's was, and there to make the account balance. Since we must all live, in the civilized organization of society, on the existing capital; and since those who have only come out even have not accumulated any of the capital, have no claim to own it, and cannot leave it to their children; and since those who own land have parted with their capital for it, which capital has passed back through other hands into industrial employment, how is a man who has inherited neither land nor capital to secure a living? He must give his productive energy to apply capital to land for the further production of wealth, and he must secure a share in the existing capital by a contract relation to those who own it. Undoubtedly the man who possesses capital has a great advantage over the man who has no capital, in all the struggle for existence. Think of two men who want to lift a weight, one of whom has a lever, and the other must apply his hands directly; think of two men tilling the soil, one of whom uses his hands or a stick, while the other has a horse and a plough; think of two men in conflict with a wild animal, one of whom has only a stick or a stone, while the other has a repeating rifle; think of two men who are sick, one of whom can travel, command medical skill, get space, light, air, and water, while the other lacks all these things. This does not mean that one man has an advantage _against_ the other, but that, when they are rivals in the effort to get the means of subsistence from Nature, the one who has capital has immeasurable advantages over the other. If it were not so capital would not be formed. Capital is only formed by self-denial, and if the possession of it did not secure advantages and superiorities of a high order men would never submit to what is necessary to get it. The first accumulation costs by far the most, and the rate of increase by profits at first seems pitiful. Among the metaphors which partially illustrate capital--all of which, however, are imperfect and inadequate--the snow-ball is useful to show some facts about capital. Its first accumulation is slow, but as it proceeds the accumulation becomes rapid in a high ratio, and the element of self-denial declines. This fact, also, is favorable to the accumulation of capital, for if the self-denial continued to be as great per unit when the accumulation had become great, there would speedily come a point at which further accumulation would not pay. The man who has capital has secured his future, won leisure which he can employ in winning secondary objects of necessity and advantage, and emancipated himself from those things in life which are gross and belittling. The possession of capital is, therefore, an indispensable prerequisite of educational, scientific, and moral goods. This is not saying that a man in the narrowest circumstances may not be a good man. It is saying that the extension and elevation of all the moral and metaphysical interests of the race are conditioned on that extension of civilization of which capital is the prerequisite, and that he who has capital can participate in and move along with the highest developments of his time. Hence it appears that the man who has his self-denial before him, however good may be his intention, cannot be as the man who has his self-denial behind him. Some seem to think that this is very unjust, but they get their notions of justice from some occult source of inspiration, not from observing the facts of this world as it has been made and exists. The maxim, or injunction, to which a study of capital leads us is, Get capital. In a community where the standard of living is high, and the conditions of production are favorable, there is a wide margin within which an individual may practise self-denial and win capital without suffering, if he has not the charge of a family. That it requires energy, courage, perseverance, and prudence is not to be denied. Any one who believes that any good thing on this earth can be got without those virtues may believe in the philosopher's stone or the fountain of youth. If there were any Utopia its inhabitants would certainly be very insipid and characterless. Those who have neither capital nor land unquestionably have a closer class interest than landlords or capitalists. If one of those who are in either of the latter classes is a spendthrift he loses his advantage. If the non-capitalists increase their numbers, they surrender themselves into the hands of the landlords and capitalists. They compete with each other for food until they run up the rent of land, and they compete with each other for wages until they give the capitalist a great amount of productive energy for a given amount of capital. If some of them are economical and prudent in the midst of a class which saves nothing and marries early, the few prudent suffer for the folly of the rest, since they can only get current rates of wages; and if these are low the margin out of which to make savings by special personal effort is narrow. No instance has yet been seen of a society composed of a class of great capitalists and a class of laborers who had fallen into a caste of permanent drudges. Probably no such thing is possible so long as landlords especially remain as a third class, and so long as society continues to develop strong classes of merchants, financiers, professional men, and other classes. If it were conceivable that non-capitalist laborers should give up struggling to become capitalists, should give way to vulgar enjoyments and passions, should recklessly increase their numbers, and should become a permanent caste, they might with some justice be called proletarians. The name has been adopted by some professed labor leaders, but it really should be considered insulting. If there were such a proletariat it would be hopelessly in the hands of a body of plutocratic capitalists, and a society so organized would, no doubt, be far worse than a society composed only of nobles and serfs, which is the worst society the world has seen in modern times. At every turn, therefore, it appears that the number of men and the quality of men limit each other, and that the question whether we shall have more men or better men is of most importance to the class which has neither land nor capital. VI. _THAT HE WHO WOULD BE WELL TAKEN CARE OF MUST TAKE CARE OF HIMSELF._ The discussion of "the relations of labor and capital" has not hitherto been very fruitful. It has been confused by ambiguous definitions, and it has been based upon assumptions about the rights and duties of social classes which are, to say the least, open to serious question as regards their truth and justice. If, then, we correct and limit the definitions, and if we test the assumptions, we shall find out whether there is anything to discuss about the relations of "labor and capital," and, if anything, what it is. Let us first examine the terms. 1. Labor means properly _toil_, irksome exertion, expenditure of productive energy. 2. The term is used, secondly, by a figure of speech, and in a collective sense, to designate the body of _persons_ who, having neither capital nor land, come into the industrial organization offering productive services in exchange for means of subsistence. These persons are united by community of interest into a group, or class, or interest, and, when interests come to be adjusted, the interests of this group will undoubtedly be limited by those of other groups. 3. The term labor is used, thirdly, in a more restricted, very popular and current, but very ill-defined way, to designate a limited sub-group among those who live by contributing productive efforts to the work of society. Every one is a laborer who is not a person of leisure. Public men, or other workers, if any, who labor but receive no pay, might be excluded from the category, and we should immediately pass, by such a restriction, from a broad and philosophical to a technical definition of the labor class. But merchants, bankers, professional men, and all whose labor is, to an important degree, mental as well as manual, are excluded from this third use of the term labor. The result is, that the word is used, in a sense at once loosely popular and strictly technical, to designate a group of laborers who separate their interests from those of other laborers. Whether farmers are included under "labor" in this third sense or not I have not been able to determine. It seems that they are or are not, as the interest of the disputants may require. 1. Capital is any _product_ of labor which is used to assist production. 2. This term also is used, by a figure of speech, and in a collective sense, for the _persons_ who possess capital, and who come into the industrial organization to get their living by using capital for profit. To do this they need to exchange capital for productive services. These persons constitute an interest, group, or class, although they are not united by any such community of interest as laborers, and, in the adjustment of interests, the interests of the owners of capital must be limited by the interests of other groups. 3. Capital, however, is also used in a vague and popular sense which it is hard to define. In general it is used, and in this sense, to mean employers of laborers, but it seems to be restricted to those who are employers on a large scale. It does not seem to include those who employ only domestic servants. Those also are excluded who own capital and lend it, but do not directly employ people to use it. It is evident that if we take for discussion "capital and labor," if each of the terms has three definitions, and if one definition of each is loose and doubtful, we have everything prepared for a discussion which shall be interminable and fruitless, which shall offer every attraction to undisciplined thinkers, and repel everybody else. The real collision of interest, which is the centre of the dispute, is that of employers and employed; and the first condition of successful study of the question, or of successful investigation to see if there is any question, is to throw aside the technical economic terms, and to look at the subject in its true meaning, expressed in untechnical language. We will use the terms "capital" and "labor" only in their strict economic significance, viz., the first definition given above under each term, and we will use the terms "laborers" and "capitalists" when we mean the persons described in the second definition under each term. It is a common assertion that the interests of employers and employed are identical, that they are partners in an enterprise, etc. These sayings spring from a disposition, which may often be noticed, to find consoling and encouraging observations in the facts of sociology, and to refute, if possible, any unpleasant observations. If we try to learn what is true, we shall both do what is alone right, and we shall do the best for ourselves in the end. The interests of employers and employed as parties to a contract are antagonistic in certain respects and united in others, as in the case wherever supply and demand operate. If John gives cloth to James in exchange for wheat, John's interest is that cloth be good and attractive but not plentiful, but that wheat be good and plentiful; James' interest is that wheat be good and attractive but not plentiful, but that cloth be good and plentiful. All men have a common interest that all things be good, and that all things but the one which each produces be plentiful. The employer is interested that capital be good but rare, and productive energy good and plentiful; the employé is interested that capital be good and plentiful, but that productive energy be good and rare. When one man alone can do a service, and he can do it very well, he represents the laborer's ideal. To say that employers and employed are partners in an enterprise is only a delusive figure of speech. It is plainly based on no facts in the industrial system. Employers and employed make contracts on the best terms which they can agree upon, like buyers and sellers, renters and hirers, borrowers and lenders. Their relations are, therefore, controlled by the universal law of supply and demand. The employer assumes the direction of the business, and takes all the risk, for the capital must be consumed in the industrial process, and whether it will be found again in the product or not depends upon the good judgment and foresight with which the capital and labor have been applied. Under the wages system the employer and the employé contract for time. The employé fulfils the contract if he obeys orders during the time, and treats the capital as he is told to treat it. Hence he is free from all responsibility, risk, and speculation. That this is the most advantageous arrangement for him, on the whole and in the great majority of cases, is very certain. Salaried men and wage-receivers are in precisely the same circumstances, except that the former, by custom and usage, are those who have special skill or training, which is almost always an investment of capital, and which narrows the range of competition in their case. Physicians, lawyers, and others paid by fees are workers by the piece. To the capital in existence all must come for their subsistence and their tools. Association is the lowest and simplest mode of attaining accord and concord between men. It is now the mode best suited to the condition and chances of employés. Employers formerly made use of guilds to secure common action for a common interest. They have given up this mode of union because it has been superseded by a better one. Correspondence, travel, newspapers, circulars, and telegrams bring to employers and capitalists the information which they need for the defense of their interests. The combination between them is automatic and instinctive. It is not formal and regulated by rule. It is all the stronger on that account, because intelligent men, holding the same general maxims of policy, and obtaining the same information, pursue similar lines of action, while retaining all the ease, freedom, and elasticity of personal independence. At present employés have not the leisure necessary for the higher modes of communication. Capital is also necessary to establish the ties of common action under the higher forms. Moreover, there is, no doubt, an incidental disadvantage connected with the release which the employé gets under the wages system from all responsibility for the conduct of the business. That is, that employés do not learn to watch or study the course of industry, and do not plan for their own advantage, as other classes do. There is an especial field for combined action in the case of employés. Employers are generally separated by jealousy and pride in regard to all but the most universal class interests. Employés have a much closer interest in each other's wisdom. Competition of capitalists for profits redounds to the benefit of laborers. Competition of laborers for subsistence redounds to the benefit of capitalists. It is utterly futile to plan and scheme so that either party can make a "corner" on the other. If employers withdraw capital from employment in an attempt to lower wages, they lose profits. If employés withdraw from competition in order to raise wages, they starve to death. Capital and labor are the two things which least admit of monopoly. Employers can, however, if they have foresight of the movements of industry and commerce, and if they make skillful use of credit, win exceptional profits for a limited period. One great means of exceptional profit lies in the very fact that the employés have not exercised the same foresight, but have plodded along and waited for the slow and successive action of the industrial system through successive periods of production, while the employer has anticipated and synchronized several successive steps. No bargain is fairly made if one of the parties to it fails to maintain his interest. If one party to a contract is well informed and the other ill informed, the former is sure to win an advantage. No doctrine that a true adjustment of interest follows from the free play of interests can be construed to mean that an interest which is neglected will get its rights. The employés have no means of information which is as good and legitimate as association, and it is fair and necessary that their action should be united in behalf of their interests. They are not in a position for the unrestricted development of individualism in regard to many of their interests. Unquestionably the better ones lose by this, and the development of individualism is to be looked forward to and hoped for as a great gain. In the meantime the labor market, in which wages are fixed, cannot reach fair adjustments unless the interest of the laborers is fairly defended, and that cannot, perhaps, yet be done without associations of laborers. No newspapers yet report the labor market. If they give any notices of it--of its rise and fall, of its variations in different districts and in different trades--such notices are always made for the interest of the employers. Re-distribution of employés, both locally and trade-wise (so far as the latter is possible), is a legitimate and useful mode of raising wages. The illegitimate attempt to raise wages by limiting the number of apprentices is the great abuse of trades-unions. I shall discuss that in the ninth chapter. It appears that the English trades were forced to contend, during the first half of this century, for the wages which the market really would give them, but which, under the old traditions and restrictions which remained, they could not get without a positive struggle. They formed the opinion that a strike could raise wages. They were educated so to think by the success which they had won in certain attempts. It appears to have become a traditional opinion, in which no account is taken of the state of the labor market. It would be hard to find a case of any strike within thirty or forty years, either in England or the United States, which has paid. If a strike occurs, it certainly wastes capital and hinders production. It must, therefore, lower wages subsequently below what they would have been if there had been no strike. If a strike succeeds, the question arises whether an advance of wages as great or greater would not have occurred within a limited period without a strike. Nevertheless, a strike is a legitimate resort at last. It is like war, for it is war. All that can be said is that those who have recourse to it at last ought to understand that they assume a great responsibility, and that they can only be justified by the circumstances of the case. I cannot believe that a strike for wages ever is expedient. There are other purposes, to be mentioned in a moment, for which a strike may be expedient; but a strike for wages is a clear case of a strife in which ultimate success is a complete test of the justifiability of the course of those who made the strife. If the men win an advance, it proves that they ought to have made it. If they do not win, it proves that they were wrong to strike. If they strike with the market in their favor, they win. If they strike with the market against them, they fail. It is in human nature that a man whose income is increased is happy and satisfied, although, if he demanded it, he might perhaps at that very moment get more. A man whose income is lessened is displeased and irritated, and he is more likely to strike then, when it may be in vain. Strikes in industry are not nearly so peculiar a phenomenon as they are often thought to be. Buyers strike when they refuse to buy commodities of which the price has risen. Either the price remains high, and they permanently learn to do without the commodity, or the price is lowered, and they buy again. Tenants strike when house rents rise too high for them. They seek smaller houses or parts of houses until there is a complete readjustment. Borrowers strike when the rates for capital are so high that they cannot employ it to advantage and pay those rates. Laborers may strike and emigrate, or, in this country, take to the land. This kind of strike is a regular application of legitimate means, and is sure to succeed. Of course, strikes with violence against employers or other employés are not to be discussed at all. Trades-unions, then, are right and useful, and it may be that they are necessary. They may do much by way of true economic means to raise wages. They are useful to spread information, to maintain _esprit de corps_, to elevate the public opinion of the class. They have been greatly abused in the past. In this country they are in constant danger of being used by political schemers--a fact which does more than anything else to disparage them in the eyes of the best workmen. The economic notions most in favor in the trades-unions are erroneous, although not more so than those which find favor in the counting-room. A man who believes that he can raise wages by doing bad work, wasting time, allowing material to be wasted, and giving generally the least possible service in the allotted time, is not to be distinguished from the man who says that wages can be raised by putting protective taxes on all clothing, furniture, crockery, bedding, books, fuel, utensils, and tools. One lowers the services given for the capital, and the other lowers the capital given for the services. Trades-unionism in the higher classes consists in jobbery. There is a great deal of it in the professions. I once heard a group of lawyers of high standing sneer at an executor who hoped to get a large estate through probate without allowing any lawyers to get big fees out of it. They all approved of steps which had been taken to force a contest, which steps had forced the executor to retain two or three lawyers. No one of the speakers had been retained. Trades-unions need development, correction, and perfection. They ought, however, to get this from the men themselves. If the men do not feel any need of such institutions, the patronage of other persons who come to them and give them these institutions will do harm and not good. Especially trades-unions ought to be perfected so as to undertake a great range of improvement duties for which we now rely on Government inspection, which never gives what we need. The safety of workmen from machinery, the ventilation and sanitary arrangements required by factories, the special precautions of certain processes, the hours of labor of women and children, the schooling of children, the limits of age for employed children, Sunday work, hours of labor--these and other like matters ought to be controlled by the men themselves through their organizations. The laborers about whom we are talking are free men in a free state. If they want to be protected they must protect themselves. They ought to protect their own women and children. Their own class opinion ought to secure the education of the children of their class. If an individual workman is not bold enough to protest against a wrong to laborers, the agent of a trades-union might with propriety do it on behalf of the body of workmen. Here is a great and important need, and, instead of applying suitable and adequate means to supply it, we have demagogues declaiming, trades-union officers resolving, and Government inspectors drawing salaries, while little or nothing is done. I have said that trades-unions are right and useful, and perhaps, necessary; but trades-unions are, in fact, in this country, an exotic and imported institution, and a great many of their rules and modes of procedure, having been developed in England to meet English circumstances, are out of place here. The institution itself does not flourish here as it would if it were in a thoroughly congenial environment. It needs to be supported by special exertion and care. Two things here work against it. First, the great mobility of our population. A trades-union, to be strong, needs to be composed of men who have grown up together, who have close personal acquaintance and mutual confidence, who have been trained to the same code, and who expect to live on together in the same circumstances and interests. In this country, where workmen move about frequently and with facility, the unions suffer in their harmony and stability. It was a significant fact that the unions declined during the hard times. It was only when the men were prosperous that they could afford to keep up the unions, as a kind of social luxury. When the time came to use the union it ceased to be. Secondly, the American workman really has such personal independence, and such an independent and strong position in the labor market, that he does not need the union. He is farther on the road toward the point where personal liberty supplants the associative principle than any other workman. Hence the association is likely to be a clog to him, especially if he is a good laborer, rather than an assistance. If it were not for the notion brought from England, that trades-unions are, in some mysterious way, beneficial to the workmen--which notion has now become an article of faith--it is very doubtful whether American workmen would find that the unions were of any use, unless they were converted into organizations for accomplishing the purposes enumerated in the last paragraph. The fashion of the time is to run to Government boards, commissions, and inspectors to set right everything which is wrong. No experience seems to damp the faith of our public in these instrumentalities. The English Liberals in the middle of this century seemed to have full grasp of the principle of liberty, and to be fixed and established in favor of non-interference. Since they have come to power, however, they have adopted the old instrumentalities, and have greatly multiplied them since they have had a great number of reforms to carry out. They seem to think that interference is good if only they interfere. In this country the party which is "in" always interferes, and the party which is "out" favors non-interference. The system of interference is a complete failure to the ends it aims at, and sooner or later it will fall of its own expense and be swept away. The two notions--one to regulate things by a committee of control, and the other to let things regulate themselves by the conflict of interests between free men--are diametrically opposed; and the former is corrupting to free institutions, because men who are taught to expect Government inspectors to come and take care of them lose all true education in liberty. If we have been all wrong for the last three hundred years in aiming at a fuller realization of individual liberty, as a condition of general and widely-diffused happiness, then we must turn back to paternalism, discipline, and authority; but to have a combination of liberty and dependence is impossible. I have read a great many diatribes within the last ten years against employers, and a great many declamations about the wrongs of employés. I have never seen a defense of the employer. Who dares say that he is not the friend of the poor man? Who dares say that he is the friend of the employer? I will try to say what I think is true. There are bad, harsh, cross employers; there are slovenly, negligent workmen; there are just about as many proportionately of one of these classes as of the other. The employers of the United States--as a class, proper exceptions being understood--have no advantage over their workmen. They could not oppress them if they wanted to do so. The advantage, taking good and bad times together, is with the workmen. The employers wish the welfare of the workmen in all respects, and would give redress for any grievance which was brought to their attention. They are considerate of the circumstances and interests of the laborers. They remember the interests of the workmen when driven to consider the necessity of closing or reducing hours. They go on, and take risk and trouble on themselves in working through bad times, rather than close their works. The whole class of those-who-have are quick in their sympathy for any form of distress or suffering. They are too quick. Their sympathies need regulating, not stimulating. They are more likely to give away capital recklessly than to withhold it stingily when any alleged case of misfortune is before them. They rejoice to see any man succeed in improving his position. They will aid him with counsel and information if he desires it, and any man who needs and deserves help because he is trying to help himself will be sure to meet with sympathy, encouragement, and assistance from those who are better off. If those who are in that position are related to him as employers to employé, that tie will be recognized as giving him an especial claim. VII. _CONCERNING SOME OLD FOES UNDER NEW FACES._ The history of the human race is one long story of attempts by certain persons and classes to obtain control of the power of the State, so as to win earthly gratifications at the expense of others. People constantly assume that there is something metaphysical and sentimental about government. At bottom there are two chief things with which government has to deal. They are, the property of men and the honor of women. These it has to defend against crime. The capital which, as we have seen, is the condition of all welfare on earth, the fortification of existence, and the means of growth, is an object of cupidity. Some want to get it without paying the price of industry and economy. In ancient times they made use of force. They organized bands of robbers. They plundered laborers and merchants. Chief of all, however, they found that means of robbery which consisted in gaining control of the civil organization--the State--and using its poetry and romance as a glamour under cover of which they made robbery lawful. They developed high-spun theories of nationality, patriotism, and loyalty. They took all the rank, glory, power, and prestige of the great civil organization, and they took all the rights. They threw on others the burdens and the duties. At one time, no doubt, feudalism was an organization which drew together again the fragments of a dissolved society; but when the lawyers had applied the Roman law to modern kings, and feudal nobles had been converted into an aristocracy of court nobles, the feudal nobility no longer served any purpose. In modern times the great phenomenon has been the growth of the middle class out of the mediaeval cities, the accumulation of wealth, and the encroachment of wealth, as a social power, on the ground formerly occupied by rank and birth. The middle class has been obliged to fight for its rights against the feudal class, and it has, during three or four centuries, gradually invented and established institutions to guarantee personal and property rights against the arbitrary will of kings and nobles. In its turn wealth is now becoming a power in three or four centuries, gradually invented and the State, and, like every other power, it is liable to abuse unless restrained by checks and guarantees. There is an insolence of wealth, as there is an insolence of rank. A plutocracy might be even far worse than an aristocracy. Aristocrats have always had their class vices and their class virtues. They have always been, as a class, chargeable with licentiousness and gambling. They have, however, as a class, despised lying and stealing. They have always pretended to maintain a standard of honor, although the definition and the code of honor have suffered many changes and shocking deterioration. The middle class has always abhorred gambling and licentiousness, but it has not always been strict about truth and pecuniary fidelity. That there is a code and standard of mercantile honor which is quite as pure and grand as any military code, is beyond question, but it has never yet been established and defined by long usage and the concurrent support of a large and influential society. The feudal code has, through centuries, bred a high type of men, and constituted a caste. The mercantile code has not yet done so, but the wealthy class has attempted to merge itself in or to imitate the feudal class. The consequence is, that the wealth-power has been developed, while the moral and social sanctions by which that power ought to be controlled have not yet been developed. A plutocracy would be a civil organization in which the power resides in wealth, in which a man might have whatever he could buy, in which the rights, interests, and feelings of those who could not pay would be overridden. There is a plain tendency of all civilized governments toward plutocracy. The power of wealth in the English House of Commons has steadily increased for fifty years. The history of the present French Republic has shown an extraordinary development of plutocratic spirit and measures. In the United States many plutocratic doctrines have a currency which is not granted them anywhere else; that is, a man's right to have almost anything which he can pay for is more popularly recognized here than elsewhere. So far the most successful limitation on plutocracy has come from aristocracy, for the prestige of rank is still great wherever it exists. The social sanctions of aristocracy tell with great force on the plutocrats, more especially on their wives and daughters. It has already resulted that a class of wealthy men is growing up in regard to whom the old sarcasms of the novels and the stage about _parvenus_ are entirely thrown away. They are men who have no superiors, by whatever standard one chooses to measure them. Such an interplay of social forces would, indeed, be a great and happy solution of a new social problem, if the aristocratic forces were strong enough for the magnitude of the task. If the feudal aristocracy, or its modern representative--which is, in reality, not at all feudal--could carry down into the new era and transmit to the new masters of society the grace, elegance, breeding, and culture of the past, society would certainly gain by that course of things, as compared with any such rupture between past and present as occurred in the French Revolution. The dogmatic radicals who assail "on principle" the inherited social notions and distinctions are not serving civilization. Society can do without patricians, but it cannot do without patrician virtues. In the United States the opponent of plutocracy is democracy. Nowhere else in the world has the power of wealth come to be discussed in its political aspects as it is here. Nowhere else does the question arise as it does here. I have given some reasons for this in former chapters. Nowhere in the world is the danger of plutocracy as formidable as it is here. To it we oppose the power of numbers as it is presented by democracy. Democracy itself, however, is new and experimental. It has not yet existed long enough to find its appropriate forms. It has no prestige from antiquity such as aristocracy possesses. It has, indeed, none of the surroundings which appeal to the imagination. On the other hand, democracy is rooted in the physical, economic, and social circumstances of the United States. This country cannot be other than democratic for an indefinite period in the future. Its political processes will also be republican. The affection of the people for democracy makes them blind and uncritical in regard to it, and they are as fond of the political fallacies to which democracy lends itself as they are of its sound and correct interpretation, or fonder. Can democracy develop itself and at the same time curb plutocracy? Already the question presents itself as one of life or death to democracy. Legislative and judicial scandals show us that the conflict is already opened, and that it is serious. The lobby is the army of the plutocracy. An elective judiciary is a device so much in the interest of plutocracy, that it must be regarded as a striking proof of the toughness of the judicial institution that it has resisted the corruption so much as it has. The caucus, convention, and committee lend themselves most readily to the purposes of interested speculators and jobbers. It is just such machinery as they might have invented if they had been trying to make political devices to serve their purpose, and their processes call in question nothing less than the possibility of free self-government under the forms of a democratic republic. For now I come to the particular point which I desire to bring forward against all the denunciations and complainings about the power of chartered corporations and aggregated capital. If charters have been given which confer undue powers, who gave them? Our legislators did. Who elected these legislators. We did. If we are a free, self-governing people, we must understand that it costs vigilance and exertion to be self-governing. It costs far more vigilance and exertion to be so under the democratic form, where we have no aids from tradition or prestige, than under other forms. If we are a free, self-governing people, we can blame nobody but ourselves for our misfortunes. No one will come to help us out of them. It will do no good to heap law upon law, or to try by constitutional provisions simply to abstain from the use of powers which we find we always abuse. How can we get bad legislators to pass a law which shall hinder bad legislators from passing a bad law? That is what we are trying to do by many of our proposed remedies. The task before us, however, is one which calls for fresh reserves of moral force and political virtue from the very foundations of the social body. Surely it is not a new thing to us to learn that men are greedy and covetous, and that they will be selfish and tyrannical if they dare. The plutocrats are simply trying to do what the generals, nobles, and priests have done in the past--get the power of the State into their hands, so as to bend the rights of others to their own advantage; and what we need to do is to recognize the fact that we are face to face with the same old foes--the vices and passions of human nature. One of the oldest and most mischievous fallacies in this country has been the notion that we are better than other nations, and that Government has a smaller and easier task here than elsewhere. This fallacy has hindered us from recognizing our old foes as soon as we should have done. Then, again, these vices and passions take good care here to deck themselves out in the trappings of democratic watchwords and phrases, so that they are more often greeted with cheers than with opposition when they first appear. The plan of electing men to represent us who systematically surrender public to private interests, and then trying to cure the mischief by newspaper and platform declamation against capital and corporations, is an entire failure. The new foes must be met, as the old ones were met--by institutions and guarantees. The problem of civil liberty is constantly renewed. Solved once, it re-appears in a new form. The old constitutional guarantees were all aimed against king and nobles. New ones must be invented to hold the power of wealth to that responsibility without which no power whatever is consistent with liberty. The judiciary has given the most satisfactory evidence that it is competent to the new duty which devolves upon it. The courts have proved, in every case in which they have been called upon, that there are remedies, that they are adequate, and that they can be brought to bear upon the cases. The chief need seems to be more power of voluntary combination and co-operation among those who are aggrieved. Such co-operation is a constant necessity under free self-government; and when, in any community, men lose the power of voluntary co-operation in furtherance or defense of their own interests, they deserve to suffer, with no other remedy than newspaper denunciations and platform declamations. Of course, in such a state of things, political mountebanks come forward and propose fierce measures which can be paraded for political effect. Such measures would be hostile to all our institutions, would destroy capital, overthrow credit, and impair the most essential interests of society. On the side of political machinery there is no ground for hope, but only for fear. On the side of constitutional guarantees and the independent action of self-governing freemen there is every ground for hope. VIII. _ON THE VALUE, AS A SOCIOLOGICAL PRINCIPLE, OF THE RULE TO MIND ONE'S OWN BUSINESS._ The passion for dealing with social questions is one of the marks of our time. Every man gets some experience of, and makes some observations on social affairs. Except matters of health, probably none have such general interest as matters of society. Except matters of health, none are so much afflicted by dogmatism and crude speculation as those which appertain to society. The amateurs in social science always ask: What shall we do? What shall we do with Neighbor A? What shall we do for Neighbor B? What shall we make Neighbor A do for Neighbor B? It is a fine thing to be planning and discussing broad and general theories of wide application. The amateurs always plan to use the individual for some constructive and inferential social purpose, or to use the society for some constructive and inferential individual purpose. For A to sit down and think, What shall I do? is commonplace; but to think what B ought to do is interesting, romantic, moral, self-flattering, and public-spirited all at once. It satisfies a great number of human weaknesses at once. To go on and plan what a whole class of people ought to do is to feel one's self a power on earth, to win a public position, to clothe one's self in dignity. Hence we have an unlimited supply of reformers, philanthropists, humanitarians, and would-be managers-in-general of society. Every man and woman in society has one big duty. That is, to take care of his or her own self. This is a social duty. For, fortunately, the matter stands so that the duty of making the best of one's self individually is not a separate thing from the duty of filling one's place in society, but the two are one, and the latter is accomplished when the former is done. The common notion, however, seems to be that one has a duty to society, as a special and separate thing, and that this duty consists in considering and deciding what other people ought to do. Now, the man who can do anything for or about anybody else than himself is fit to be head of a family; and when he becomes head of a family he has duties to his wife and his children, in addition to the former big duty. Then, again, any man who can take care of himself and his family is in a very exceptional position, if he does not find in his immediate surroundings people who need his care and have some sort of a personal claim upon him. If, now, he is able to fulfill all this, and to take care of anybody outside his family and his dependents, he must have a surplus of energy, wisdom, and moral virtue beyond what he needs for his own business. No man has this; for a family is a charge which is capable of infinite development, and no man could suffice to the full measure of duty for which a family may draw upon him. Neither can a man give to society so advantageous an employment of his services, whatever they are, in any other way as by spending them on his family. Upon this, however, I will not insist. I recur to the observation that a man who proposes to take care of other people must have himself and his family taken care of, after some sort of a fashion, and must have an as yet unexhausted store of energy. The danger of minding other people's business is twofold. First, there is the danger that a man may leave his own business unattended to; and, second, there is the danger of an impertinent interference with another's affairs. The "friends of humanity" almost always run into both dangers. I am one of humanity, and I do not want any volunteer friends. I regard friendship as mutual, and I want to have my say about it. I suppose that other components of humanity feel in the same way about it. If so, they must regard any one who assumes the _rôle_ of a friend of humanity as impertinent. The reference to the friend of humanity back to his own business is obviously the next step. Yet we are constantly annoyed, and the legislatures are kept constantly busy, by the people who have made up their minds that it is wise and conducive to happiness to live in a certain way, and who want to compel everybody else to live in their way. Some people have decided to spend Sunday in a certain way, and they want laws passed to make other people spend Sunday in the same way. Some people have resolved to be teetotalers, and they want a law passed to make everybody else a teetotaler. Some people have resolved to eschew luxury, and they want taxes laid to make others eschew luxury. The taxing power is especially something after which the reformer's finger always itches. Sometimes there is an element of self-interest in the proposed reformation, as when a publisher wanted a duty imposed on books, to keep Americans from reading books which would unsettle their Americanisms; and when artists wanted a tax laid on pictures, to save Americans from buying bad paintings. I make no reference here to the giving and taking of counsel and aid between man and man: of that I shall say something in the last chapter. The very sacredness of the relation in which two men stand to one another when one of them rescues the other from vice separates that relation from any connection with the work of the social busybody, the professional philanthropist, and the empirical legislator. The amateur social doctors are like the amateur physicians--they always begin with the question of _remedies_, and they go at this without any diagnosis or any knowledge of the anatomy or physiology of society. They never have any doubt of the efficacy of their remedies. They never take account of any ulterior effects which may be apprehended from the remedy itself. It generally troubles them not a whit that their remedy implies a complete reconstruction of society, or even a reconstitution of human nature. Against all such social quackery the obvious injunction to the quacks is, to mind their own business. The social doctors enjoy the satisfaction of feeling themselves to be more moral or more enlightened than their fellow-men. They are able to see what other men ought to do when the other men do not see it. An examination of the work of the social doctors, however, shows that they are only more ignorant and more presumptuous than other people. We have a great many social difficulties and hardships to contend with. Poverty, pain, disease, and misfortune surround our existence. We fight against them all the time. The individual is a centre of hopes, affections, desires, and sufferings. When he dies, life changes its form, but does not cease. That means that the person--the centre of all the hopes, affections, etc.--after struggling as long as he can, is sure to succumb at last. We would, therefore, as far as the hardships of the human lot are concerned, go on struggling to the best of our ability against them but for the social doctors, and we would endure what we could not cure. But we have inherited a vast number of social ills which never came from Nature. They are the complicated products of all the tinkering, muddling, and blundering of social doctors in the past. These products of social quackery are now buttressed by habit, fashion, prejudice, platitudinarian thinking, and new quackery in political economy and social science. It is a fact worth noticing, just when there seems to be a revival of faith in legislative agencies, that our States are generally providing against the experienced evils of over-legislation by ordering that the Legislature shall sit only every other year. During the hard times, when Congress had a real chance to make or mar the public welfare, the final adjournment of that body was hailed year after year with cries of relief from a great anxiety. The greatest reforms which could now be accomplished would consist in undoing the work of statesmen in the past, and the greatest difficulty in the way of reform is to find out how to undo their work without injury to what is natural and sound. All this mischief has been done by men who sat down to consider the problem (as I heard an apprentice of theirs once express it), What kind of a society do we want to make? When they had settled this question _a priori_ to their satisfaction, they set to work to make their ideal society, and today we suffer the consequences. Human society tries hard to adapt itself to any conditions in which it finds itself, and we have been warped and distorted until we have got used to it, as the foot adapts itself to an ill-made boot. Next, we have come to think that that is the right way for things to be; and it is true that a change to a sound and normal condition would for a time hurt us, as a man whose foot has been distorted would suffer if he tried to wear a well-shaped boot. Finally, we have produced a lot of economists and social philosophers who have invented sophisms for fitting our thinking to the distorted facts. Society, therefore, does not need any care or supervision. If we can acquire a science of society, based on observation of phenomena and study of forces, we may hope to gain some ground slowly toward the elimination of old errors and the re-establishment of a sound and natural social order. Whatever we gain that way will be by growth, never in the world by any reconstruction of society on the plan of some enthusiastic social architect. The latter is only repeating the old error over again, and postponing all our chances of real improvement. Society needs first of all to be freed from these meddlers--that is, to be let alone. Here we are, then, once more back at the old doctrine--_Laissez faire_. Let us translate it into blunt English, and it will read, Mind your own business. It is nothing but the doctrine of liberty. Let every man be happy in his own way. If his sphere of action and interest impinges on that of any other man, there will have to be compromise and adjustment. Wait for the occasion. Do not attempt to generalize those interferences or to plan for them _a priori_. We have a body of laws and institutions which have grown up as occasion has occurred for adjusting rights. Let the same process go on. Practise the utmost reserve possible in your interferences even of this kind, and by no means seize occasion for interfering with natural adjustments. Try first long and patiently whether the natural adjustment will not come about through the play of interests and the voluntary concessions of the parties. I have said that we have an empirical political economy and social science to fit the distortions of our society. The test of empiricism in this matter is the attitude which one takes up toward _laissez faire_. It no doubt wounds the vanity of a philosopher who is just ready with a new solution of the universe to be told to mind his own business. So he goes on to tell us that if we think that we shall, by being let alone, attain a perfect happiness on earth, we are mistaken. The half-way men--the professional socialists--join him. They solemnly shake their heads, and tell us that he is right--that letting us alone will never secure us perfect happiness. Under all this lies the familiar logical fallacy, never expressed, but really the point of the whole, that we _shall_ get perfect happiness if we put ourselves in the hands of the world-reformer. We never supposed that _laissez faire_ would give us perfect happiness. We have left perfect happiness entirely out of our account. If the social doctors will mind their own business, we shall have no troubles but what belong to Nature. Those we will endure or combat as we can. What we desire is, that the friends of humanity should cease to add to them. Our disposition toward the ills which our fellow-man inflicts on us through malice or meddling is quite different from our disposition toward the ills which are inherent in the conditions of human life. To mind one's own business is a purely negative and unproductive injunction, but, taking social matters as they are just now, it is a sociological principle of the first importance. There might be developed a grand philosophy on the basis of minding one's own business. IX. _ON THE CASE OF A CERTAIN MAN WHO IS NEVER THOUGHT OF._ The type and formula of most schemes of philanthropy or humanitarianism is this: A and B put their heads together to decide what C shall be made to do for D. The radical vice of all these schemes, from a sociological point of view, is that C is not allowed a voice in the matter, and his position, character, and interests, as well as the ultimate effects on society through C's interests, are entirely overlooked. I call C the Forgotten Man. For once let us look him up and consider his case, for the characteristic of all social doctors is, that they fix their minds on some man or group of men whose case appeals to the sympathies and the imagination, and they plan remedies addressed to the particular trouble; they do not understand that all the parts of society hold together, and that forces which are set in action act and react throughout the whole organism, until an equilibrium is produced by a readjustment of all interests and rights. They therefore ignore entirely the source from which they must draw all the energy which they employ in their remedies, and they ignore all the effects on other members of society than the ones they have in view. They are always under the dominion of the superstition of government, and, forgetting that a government produces nothing at all, they leave out of sight the first fact to be remembered in all social discussion--that the State cannot get a cent for any man without taking it from some other man, and this latter must be a man who has produced and saved it. This latter is the Forgotten Man. The friends of humanity start out with certain benevolent feelings toward "the poor," "the weak," "the laborers," and others of whom they make pets. They generalize these classes, and render them impersonal, and so constitute the classes into social pets. They turn to other classes and appeal to sympathy and generosity, and to all the other noble sentiments of the human heart. Action in the line proposed consists in a transfer of capital from the better off to the worse off. Capital, however, as we have seen, is the force by which civilization is maintained and carried on. The same piece of capital cannot be used in two ways. Every bit of capital, therefore, which is given to a shiftless and inefficient member of society, who makes no return for it, is diverted from a reproductive use; but if it was put to reproductive use, it would have to be granted in wages to an efficient and productive laborer. Hence the real sufferer by that kind of benevolence which consists in an expenditure of capital to protect the good-for-nothing is the industrious laborer. The latter, however, is never thought of in this connection. It is assumed that he is provided for and out of the account. Such a notion only shows how little true notions of political economy have as yet become popularized. There is an almost invincible prejudice that a man who gives a dollar to a beggar is generous and kind-hearted, but that a man who refuses the beggar and puts the dollar in a savings-bank is stingy and mean. The former is putting capital where it is very sure to be wasted, and where it will be a kind of seed for a long succession of future dollars, which must be wasted to ward off a greater strain on the sympathies than would have been occasioned by a refusal in the first place. Inasmuch as the dollar might have been turned into capital and given to a laborer who, while earning it, would have reproduced it, it must be regarded as taken from the latter. When a millionaire gives a dollar to a beggar the gain of utility to the beggar is enormous, and the loss of utility to the millionaire is insignificant. Generally the discussion is allowed to rest there. But if the millionaire makes capital of the dollar, it must go upon the labor market, as a demand for productive services. Hence there is another party in interest--the person who supplies productive services. There always are two parties. The second one is always the Forgotten Man, and any one who wants to truly understand the matter in question must go and search for the Forgotten Man. He will be found to be worthy, industrious, independent, and self-supporting. He is not, technically, "poor" or "weak"; he minds his own business, and makes no complaint. Consequently the philanthropists never think of him, and trample on him. We hear a great deal of schemes for "improving the condition of the working-man." In the United States the farther down we go in the grade of labor, the greater is the advantage which the laborer has over the higher classes. A hod-carrier or digger here can, by one day's labor, command many times more days' labor of a carpenter, surveyor, bookkeeper, or doctor than an unskilled laborer in Europe could command by one day's labor. The same is true, in a less degree, of the carpenter, as compared with the bookkeeper, surveyor, and doctor. This is why the United States is the great country for the unskilled laborer. The economic conditions all favor that class. There is a great continent to be subdued, and there is a fertile soil available to labor, with scarcely any need of capital. Hence the people who have the strong arms have what is most needed, and, if it were not for social consideration, higher education would not pay. Such being the case, the working-man needs no improvement in his condition except to be freed from the parasites who are living on him. All schemes for patronizing "the working classes" savor of condescension. They are impertinent and out of place in this free democracy. There is not, in fact, any such state of things or any such relation as would make projects of this kind appropriate. Such projects demoralize both parties, flattering the vanity of one and undermining the self-respect of the other. For our present purpose it is most important to notice that if we lift any man up we must have a fulcrum, or point of reaction. In society that means that to lift one man up we push another down. The schemes for improving the condition of the working classes interfere in the competition of workmen with each other. The beneficiaries are selected by favoritism, and are apt to be those who have recommended themselves to the friends of humanity by language or conduct which does not betoken independence and energy. Those who suffer a corresponding depression by the interference are the independent and self-reliant, who once more are forgotten or passed over; and the friends of humanity once more appear, in their zeal to help somebody, to be trampling on those who are trying to help themselves. Trades-unions adopt various devices for raising wages, and those who give their time to philanthropy are interested in these devices, and wish them success. They fix their minds entirely on the workmen for the time being _in_ the trade, and do not take note of any other _workmen_ as interested in the matter. It is supposed that the fight is between the workmen and their employers, and it is believed that one can give sympathy in that contest to the workmen without feeling responsibility for anything farther. It is soon seen, however, that the employer adds the trades-union and strike risk to the other risks of his business, and settles down to it philosophically. If, now, we go farther, we see that he takes it philosophically because he has passed the loss along on the public. It then appears that the public wealth has been diminished, and that the danger of a trade war, like the danger of a revolution, is a constant reduction of the well-being of all. So far, however, we have seen only things which could _lower_ wages--nothing which could raise them. The employer is worried, but that does not raise wages. The public loses, but the loss goes to cover extra risk, and that does not raise wages. A trades-union raises wages (aside from the legitimate and economic means noticed in Chapter VI.) by restricting the number of apprentices who may be taken into the trade. This device acts directly on the supply of laborers, and that produces effects on wages. If, however, the number of apprentices is limited, some are kept out who want to get in. Those who are in have, therefore, made a monopoly, and constituted themselves a privileged class on a basis exactly analogous to that of the old privileged aristocracies. But whatever is gained by this arrangement for those who are in is won at a greater loss to those who are kept out. Hence it is not upon the masters nor upon the public that trades-unions exert the pressure by which they raise wages; it is upon other persons of the labor class who want to get into the trades, but, not being able to do so, are pushed down into the unskilled labor class. These persons, however, are passed by entirely without notice in all the discussions about trades-unions. They are the Forgotten Men. But, since they want to get into the trade and win their living in it, it is fair to suppose that they are fit for it, would succeed at it, would do well for themselves and society in it; that is to say, that, of all persons interested or concerned, they most deserve our sympathy and attention. The cases already mentioned involve no legislation. Society, however, maintains police, sheriffs, and various institutions, the object of which is to protect people against themselves--that is, against their own vices. Almost all legislative effort to prevent vice is really protective of vice, because all such legislation saves the vicious man from the penalty of his vice. Nature's remedies against vice are terrible. She removes the victims without pity. A drunkard in the gutter is just where he ought to be, according to the fitness and tendency of things. Nature has set up on him the process of decline and dissolution by which she removes things which have survived their usefulness. Gambling and other less mentionable vices carry their own penalties with them. Now, we never can annihilate a penalty. We can only divert it from the head of the man who has incurred it to the heads of others who have not incurred it. A vast amount of "social reform" consists in just this operation. The consequence is that those who have gone astray, being relieved from Nature's fierce discipline, go on to worse, and that there is a constantly heavier burden for the others to bear. Who are the others? When we see a drunkard in the gutter we pity him. If a policeman picks him up, we say that society has interfered to save him from perishing. "Society" is a fine word, and it saves us the trouble of thinking. The industrious and sober workman, who is mulcted of a percentage of his day's wages to pay the policeman, is the one who bears the penalty. But he is the Forgotten Man. He passes by and is never noticed, because he has behaved himself, fulfilled his contracts, and asked for nothing. The fallacy of all prohibitory, sumptuary, and moral legislation is the same. A and B determine to be teetotalers, which is often a wise determination, and sometimes a necessary one. If A and B are moved by considerations which seem to them good, that is enough. But A and B put their heads together to get a law passed which shall force C to be a teetotaler for the sake of D, who is in danger of drinking too much. There is no pressure on A and B. They are having their own way, and they like it. There is rarely any pressure on D. He does not like it, and evades it. The pressure all comes on C. The question then arises, Who is C? He is the man who wants alcoholic liquors for any honest purpose whatsoever, who would use his liberty without abusing it, who would occasion no public question, and trouble nobody at all. He is the Forgotten Man again, and as soon as he is drawn from his obscurity we see that he is just what each one of us ought to be. X. _THE CASE OF THE FORGOTTEN MAN FARTHER CONSIDERED._ There is a beautiful notion afloat in our literature and in the minds of our people that men are born to certain "natural rights." If that were true, there would be something on earth which was got for nothing, and this world would not be the place it is at all. The fact is, that there is no right whatever inherited by man which has not an equivalent and corresponding duty by the side of it, as the price of it. The rights, advantages, capital, knowledge, and all other goods which we inherit from past generations have been won by the struggles and sufferings of past generations; and the fact that the race lives, though men die, and that the race can by heredity accumulate within some cycle its victories over Nature, is one of the facts which make civilization possible. The struggles of the race as a whole produce the possessions of the race as a whole. Something for nothing is not to be found on earth. If there were such things as natural rights, the question would arise, Against whom are they good? Who has the corresponding obligation to satisfy these rights? There can be no rights against Nature, except to get out of her whatever we can, which is only the fact of the struggle for existence stated over again. The common assertion is, that the rights are good against society; that is, that society is bound to obtain and secure them for the persons interested. Society, however, is only the persons interested plus some other persons; and as the persons interested have by the hypothesis failed to win the rights, we come to this, that natural rights are the claims which certain persons have by prerogative against some other persons. Such is the actual interpretation in practice of natural rights--claims which some people have by prerogative on other people. This theory is a very far-reaching one, and of course it is adequate to furnish a foundation for a whole social philosophy. In its widest extension it comes to mean that if any man finds himself uncomfortable in this world, it must be somebody else's fault, and that somebody is bound to come and make him comfortable. Now, the people who are most uncomfortable in this world (for if we should tell all our troubles it would not be found to be a very comfortable world for anybody) are those who have neglected their duties, and consequently have failed to get their rights. The people who can be called upon to serve the uncomfortable must be those who have done their duty, as the world goes, tolerably well. Consequently the doctrine which we are discussing turns out to be in practice only a scheme for making injustice prevail in human society by reversing the distribution of rewards and punishments between those who have done their duty and those who have not. We are constantly preached at by our public teachers, as if respectable people were to blame because some people are not respectable--as if the man who has done his duty in his own sphere was responsible in some way for another man who has not done his duty in his sphere. There are relations of employer and employé which need to be regulated by compromise and treaty. There are sanitary precautions which need to be taken in factories and houses. There are precautions against fire which are necessary. There is care needed that children be not employed too young, and that they have an education. There is care needed that banks, insurance companies, and railroads be well managed, and that officers do not abuse their trusts. There is a duty in each case on the interested parties to defend their own interest. The penalty of neglect is suffering. The system of providing for these things by boards and inspectors throws the cost of it, not on the interested parties, but on the tax-payers. Some of them, no doubt, are the interested parties, and they may consider that they are exercising the proper care by paying taxes to support an inspector. If so, they only get their fair deserts when the railroad inspector finds out that a bridge is not safe after it is broken down, or when the bank examiner comes in to find out why a bank failed after the cashier has stolen all the funds. The real victim is the Forgotten Man again--the man who has watched his own investments, made his own machinery safe, attended to his own plumbing, and educated his own children, and who, just when he wants to enjoy the fruits of his care, is told that it is his duty to go and take care of some of his negligent neighbors, or, if he does not go, to pay an inspector to go. No doubt it is often in his interest to go or to send, rather than to have the matter neglected, on account of his own connection with the thing neglected, and his own secondary peril; but the point now is, that if preaching and philosophizing can do any good in the premises, it is all wrong to preach to the Forgotten Man that it is his duty to go and remedy other people's neglect. It is not his duty. It is a harsh and unjust burden which is laid upon him, and it is only the more unjust because no one thinks of him when laying the burden so that it falls on him. The exhortations ought to be expended on the negligent--that they take care of themselves. It is an especially vicious extension of the false doctrine above mentioned that criminals have some sort of a right against or claim on society. Many reformatory plans are based on a doctrine of this kind when they are urged upon the public conscience. A criminal is a man who, instead of working with and for the society, has turned against it, and become destructive and injurious. His punishment means that society rules him out of its membership, and separates him from its association, by execution or imprisonment, according to the gravity of his offense. He has no claims against society at all. What shall be done with him is a question of expediency to be settled in view of the interests of society--that is, of the non-criminals. The French writers of the school of '48 used to represent the badness of the bad men as the fault of "society." As the object of this statement was to show that the badness of the bad men was not the fault of the bad men, and as society contains only good men and bad men, it followed that the badness of the bad men was the fault of the good men. On that theory, of course the good men owed a great deal to the bad men who were in prison and at the galleys on their account. If we do not admit that theory, it behooves us to remember that any claim which we allow to the criminal against the "State" is only so much burden laid upon those who have never cost the State anything for discipline or correction. The punishments of society are just like those of God and Nature--they are warnings to the wrong-doer to reform himself. When public offices are to be filled numerous candidates at once appear. Some are urged on the ground that they are poor, or cannot earn a living, or want support while getting an education, or have female relatives dependent on them, or are in poor health, or belong in a particular district, or are related to certain persons, or have done meritorious service in some other line of work than that which they apply to do. The abuses of the public service are to be condemned on account of the harm to the public interest, but there is an incidental injustice of the same general character with that which we are discussing. If an office is granted by favoritism or for any personal reason to A, it cannot be given to B. If an office is filled by a person who is unfit for it, he always keeps out somebody somewhere who is fit for it; that is, the social injustice has a victim in an unknown person--the Forgotten Man--and he is some person who has no political influence, and who has known no way in which to secure the chances of life except to deserve them. He is passed by for the noisy, pushing, importunate, and incompetent. I have said something disparagingly in a previous chapter about the popular rage against combined capital, corporations, corners, selling futures, etc., etc. The popular rage is not without reason, but it is sadly misdirected and the real things which deserve attack are thriving all the time. The greatest social evil with which we have to contend is jobbery. Whatever there is in legislative charters, watering stocks, etc., etc., which is objectionable, comes under the head of jobbery. Jobbery is any scheme which aims to gain, not by the legitimate fruits of industry and enterprise, but by extorting from somebody a part of his product under guise of some pretended industrial undertaking. Of course it is only a modification when the undertaking in question has some legitimate character, but the occasion is used to graft upon it devices for obtaining what has not been earned. Jobbery is the vice of plutocracy, and it is the especial form under which plutocracy corrupts a democratic and republican form of government. The United States is deeply afflicted with it, and the problem of civil liberty here is to conquer it. It affects everything which we really need to have done to such an extent that we have to do without public objects which we need through fear of jobbery. Our public buildings are jobs--not always, but often. They are not needed, or are costly beyond all necessity or even decent luxury. Internal improvements are jobs. They are not made because they are needed to meet needs which have been experienced. They are made to serve private ends, often incidentally the political interests of the persons who vote the appropriations. Pensions have become jobs. In England pensions used to be given to aristocrats, because aristocrats had political influence, in order to corrupt them. Here pensions are given to the great democratic mass, because they have political power, to corrupt them. Instead of going out where there is plenty of land and making a farm there, some people go down under the Mississippi River to make a farm, and then they want to tax all the people in the United States to make dikes to keep the river off their farms. The California gold-miners have washed out gold, and have washed the dirt down into the rivers and on the farms below. They want the Federal Government to now clean out the rivers and restore the farms. The silver-miners found their product declining in value, and they got the Federal Government to go into the market and buy what the public did not want, in order to sustain (as they hoped) the price of silver. The Federal Government is called upon to buy or hire unsalable ships, to build canals which will not pay, to furnish capital for all sorts of experiments, and to provide capital for enterprises of which private individuals will win the profits. All this is called "developing our resources," but it is, in truth, the great plan of all living on each other. The greatest job of all is a protective tariff. It includes the biggest log-rolling and the widest corruption of economic and political ideas. It was said that there would be a rebellion if the taxes were not taken off whiskey and tobacco, which taxes were paid into the public Treasury. Just then the importations of Sumatra tobacco became important enough to affect the market. The Connecticut tobacco-growers at once called for an import duty on tobacco which would keep up the price of their product. So it appears that if the tax on tobacco is paid to the Federal Treasury there will be a rebellion, but if it is paid to the Connecticut tobacco-raisers there will be no rebellion at all. The farmers have long paid tribute to the manufacturers; now the manufacturing and other laborers are to pay tribute to the farmers. The system is made more comprehensive and complete, and we all are living on each other more than ever. Now, the plan of plundering each other produces nothing. It only wastes. All the material over which the protected interests wrangle and grab must be got from somebody outside of their circle. The talk is all about the American laborer and American industry, but in every case in which there is not an actual production of wealth by industry there are two laborers and two industries to be considered--the one who gets and the one who gives. Every protected industry has to plead, as the major premise of its argument, that any industry which does not pay _ought_ to be carried on at the expense of the consumers of the product, and, as its minor premise, that the industry in question does not pay; that is, that it cannot reproduce a capital equal in value to that which it consumes plus the current rate of profit. Hence every such industry must be a parasite on some other industry. What is the other industry? Who is the other man? This, the real question, is always overlooked. In all jobbery the case is the same. There is a victim somewhere who is paying for it all. The doors of waste and extravagance stand open, and there seems to be a general agreement to squander and spend. It all belongs to somebody. There is somebody who had to contribute it, and who will have to find more. Nothing is ever said about him. Attention is all absorbed by the clamorous interests, the importunate petitioners, the plausible schemers, the pitiless bores. Now, who is the victim? He is the Forgotten Man. If we go to find him, we shall find him hard at work tilling the soil to get out of it the fund for all the jobbery, the object of all the plunder, the cost of all the economic quackery, and the pay of all the politicians and statesmen who have sacrificed his interests to his enemies. We shall find him an honest, sober, industrious citizen, unknown outside his little circle, paying his debts and his taxes, supporting the church and the school, reading his party newspaper, and cheering for his pet politician. We must not overlook the fact that the Forgotten Man is not infrequently a woman. I have before me a newspaper which contains five letters from corset-stitchers who complain that they cannot earn more than seventy-five cents a day with a machine, and that they have to provide the thread. The tax on the grade of thread used by them is prohibitory as to all importation, and it is the corset-stitchers who have to pay day by day out of their time and labor the total enhancement of price due to the tax. Women who earn their own living probably earn on an average seventy-five cents per day of ten hours. Twenty-four minutes' work ought to buy a spool of thread at the retail price, if the American work-woman were allowed to exchange her labor for thread on the best terms that the art and commerce of today would allow; but after she has done twenty-four minutes' work for the thread she is forced by the laws of her country to go back and work sixteen minutes longer to pay the tax--that is, to support the thread-mill. The thread-mill, therefore, is not an institution for getting thread for the American people, but for making thread harder to get than it would be if there were no such institution. In justification, now, of an arrangement so monstrously unjust and out of place in a free country, it is said that the employés in the thread-mill get high wages, and that, but for the tax, American laborers must come down to the low wages of foreign thread-makers. It is not true that American thread-makers get any more than the market rate of wages, and they would not get less if the tax were entirely removed, because the market rate of wages in the United States would be controlled then, as it is now, by the supply and demand of laborers under the natural advantages and opportunities of industry in this country. It makes a great impression on the imagination, however, to go to a manufacturing town and see great mills and a crowd of operatives; and such a sight is put forward, _under the special allegation that it would not exist but for a protective tax_, as a proof that protective taxes are wise. But if it be true that the thread-mill would not exist but for the tax, or that the operatives would not get such good wages but for the tax, then how can we form a judgment as to whether the protective system is wise or not unless we call to mind all the seamstresses, washer-women, servants, factory-hands, saleswomen, teachers, and laborers' wives and daughters, scattered in the garrets and tenements of great cities and in cottages all over the country, who are paying the tax which keeps the mill going and pays the extra wages? If the sewing-women, teachers, servants, and washer-women could once be collected over against the thread-mill, then some inferences could be drawn which would be worth something. Then some light might be thrown upon the obstinate fallacy of "creating an industry," and we might begin to understand the difference between wanting thread and wanting a thread-mill. Some nations spend capital on great palaces, others on standing armies, others on iron-clad ships of war. Those things are all glorious, and strike the imagination with great force when they are seen; but no one doubts that they make life harder for the scattered insignificant peasants and laborers who have to pay for them all. They "support a great many people," they "make work," they "give employment to other industries." We Americans have no palaces, armies, or iron-clads, but we spend our earnings on protected industries. A big protected factory, if it really needs the protection for its support, is a heavier load for the Forgotten Men and Women than an iron-clad ship of war in time of peace. It is plain that the Forgotten Man and the Forgotten Woman are the real productive strength of the country. The Forgotten Man works and votes--generally he prays--but his chief business in life is to pay. His name never gets into the newspapers except when he marries or dies. He is an obscure man. He may grumble sometimes to his wife, but he does not frequent the grocery, and he does not talk politics at the tavern. So he is forgotten. Yet who is there whom the statesman, economist, and social philosopher ought to think of before this man? If any student of social science comes to appreciate the case of the Forgotten Man, he will become an unflinching advocate of strict scientific thinking in sociology, and a hard-hearted skeptic as regards any scheme of social amelioration. He will always want to know, Who and where is the Forgotten Man in this case, who will have to pay for it all? The Forgotten Man is not a pauper. It belongs to his character to save something. Hence he is a capitalist, though never a great one. He is a "poor" man in the popular sense of the word, but not in a correct sense. In fact, one of the most constant and trustworthy signs that the Forgotten Man is in danger of a new assault is, that "the poor man" is brought into the discussion. Since the Forgotten Man has some capital, any one who cares for his interest will try to make capital secure by securing the inviolability of contracts, the stability of currency, and the firmness of credit. Any one, therefore, who cares for the Forgotten Man will be sure to be considered a friend of the capitalist and an enemy of the poor man. It is the Forgotten Man who is threatened by every extension of the paternal theory of government. It is he who must work and pay. When, therefore, the statesmen and social philosophers sit down to think what the State can do or ought to do, they really mean to decide what the Forgotten Man shall do. What the Forgotten Man wants, therefore, is a fuller realization of constitutional liberty. He is suffering from the fact that there are yet mixed in our institutions mediaeval theories of protection, regulation, and authority, and modern theories of independence and individual liberty and responsibility. The consequence of this mixed state of things is, that those who are clever enough to get into control use the paternal theory by which to measure their own rights--that is, they assume privileges; and they use the theory of liberty to measure their own duties--that is, when it comes to the duties, they want to be "let alone." The Forgotten Man never gets into control. He has to pay both ways. His rights are measured to him by the theory of liberty--that is, he has only such as he can conquer; his duties are measured to him on the paternal theory--that is, he must discharge all which are laid upon him, as is the fortune of parents. In a paternal relation there are always two parties, a father and a child; and when we use the paternal relation metaphorically, it is of the first importance to know who is to be father and who is to be child. The _rôle_ of parent falls always to the Forgotten Man. What he wants, therefore, is that ambiguities in our institutions be cleared up, and that liberty be more fully realized. It behooves any economist or social philosopher, whatever be the grade of his orthodoxy, who proposes to enlarge the sphere of the "State," or to take any steps whatever having in view the welfare of any class whatever, to pursue the analysis of the social effects of his proposition until he finds that other group whose interests must be curtailed or whose energies must be placed under contribution by the course of action which he proposes; and he cannot maintain his proposition until he has demonstrated that it will be more advantageous, _both quantitatively and qualitatively_, to those who must bear the weight of it than complete non-interference by the State with the relations of the parties in question. XI. _WHEREFORE WE SHOULD LOVE ONE ANOTHER._ Suppose that a man, going through a wood, should be struck by a falling tree and pinned down beneath it. Suppose that another man, coming that way and finding him there, should, instead of hastening to give or to bring aid, begin to lecture on the law of gravitation, taking the tree as an illustration. Suppose, again, that a person lecturing on the law of gravitation should state the law of falling bodies, and suppose that an objector should say: You state your law as a cold, mathematical fact and you declare that all bodies will fall conformably to it. How heartless! You do not reflect that it may be a beautiful little child falling from a window. These two suppositions may be of some use to us as illustrations. Let us take the second first. It is the objection of the sentimentalist; and, ridiculous as the mode of discussion appears when applied to the laws of natural philosophy, the sociologist is constantly met by objections of just that character. Especially when the subject under discussion is charity in any of its public forms, the attempt to bring method and clearness into the discussion is sure to be crossed by suggestions which are as far from the point and as foreign to any really intelligent point of view as the supposed speech in the illustration. In the first place, a child would fall just as a stone would fall. Nature's forces know no pity. Just so in sociology. The forces know no pity. In the second place, if a natural philosopher should discuss all the bodies which may fall, he would go entirely astray, and would certainly do no good. The same is true of the sociologist. He must concentrate, not scatter, and study laws, not all conceivable combinations of force which may occur in practice. In the third place, nobody ever saw a body fall as the philosophers say it will fall, because they can accomplish nothing unless they study forces separately, and allow for their combined action in all concrete and actual phenomena. The same is true in sociology, with the additional fact that the forces and their combinations in sociology are far the most complex which we have to deal with. In the fourth place, any natural philosopher who should stop, after stating the law of falling bodies, to warn mothers not to let their children fall out of the window, would make himself ridiculous. Just so a sociologist who should attach moral applications and practical maxims to his investigations would entirely miss his proper business. There is the force of gravity as a fact in the world. If we understand this, the necessity of care to conform to the action of gravity meets us at every step in our private life and personal experience. The fact in sociology is in no wise different. If, for instance, we take political economy, that science does not teach an individual how to get rich. It is a social science. It treats of the laws of the material welfare of human societies. It is, therefore, only one science among all the sciences which inform us about the laws and conditions of our life on earth. Education has for its object to give a man knowledge of the conditions and laws of living, so that, in any case in which the individual stands face to face with the necessity of deciding what to do, if he is an educated man, he may know how to make a wise and intelligent decision. If he knows chemistry, physics, geology, and other sciences, he will know what he must encounter of obstacle or help in Nature in what he proposes to do. If he knows physiology and hygiene, he will know what effects on health he must expect in one course or another. If he knows political economy, he will know what effect on wealth and on the welfare of society one course or another will produce. There is no injunction, no "ought" in political economy at all. It does not assume to tell man what he ought to do, any more than chemistry tells us that we ought to mix things, or mathematics that we ought to solve equations. It only gives one element necessary to an intelligent decision, and in every practical and concrete case the responsibility of deciding what to do rests on the man who has to act. The economist, therefore, does not say to any one, You ought never to give money to charity. He contradicts anybody who says, You ought to give money to charity; and, in opposition to any such person, he says, Let me show you what difference it makes to you, to others, to society, whether you give money to charity or not, so that you can make a wise and intelligent decision. Certainly there is no harder thing to do than to employ capital charitably. It would be extreme folly to say that nothing of that sort ought to be done, but I fully believe that today the next pernicious thing to vice is charity in its broad and popular sense. In the preceding chapters I have discussed the public and social relations of classes, and those social topics in which groups of persons are considered as groups or classes, without regard to personal merits or demerits. I have relegated all charitable work to the domain of private relations, where personal acquaintance and personal estimates may furnish the proper limitations and guarantees. A man who had no sympathies and no sentiments would be a very poor creature; but the public charities, more especially the legislative charities, nourish no man's sympathies and sentiments. Furthermore, it ought to be distinctly perceived that any charitable and benevolent effort which any man desires to make voluntarily, to see if he can do any good, lies entirely beyond the field of discussion. It would be as impertinent to prevent his effort as it is to force co-operation in an effort on some one who does not want to participate in it. What I choose to do by way of exercising my own sympathies under my own reason and conscience is one thing; what another man forces me to do of a sympathetic character, because his reason and conscience approve of it, is quite another thing. What, now, is the reason why we should help each other? This carries us back to the other illustration with which we started. We may philosophize as coolly and correctly as we choose about our duties and about the laws of right living; no one of us lives up to what he knows. The man struck by the falling tree has, perhaps, been careless. We are all careless. Environed as we are by risks and perils, which befall us as misfortunes, no man of us is in a position to say, "I know all the laws, and am sure to obey them all; therefore I shall never need aid and sympathy." At the very best, one of us fails in one way and another in another, if we do not fail altogether. Therefore the man under the tree is the one of us who for the moment is smitten. It may be you to-morrow, and I next day. It is the common frailty in the midst of a common peril which gives us a kind of solidarity of interest to rescue the one for whom the chances of life have turned out badly just now. Probably the victim is to blame. He almost always is so. A lecture to that effect in the crisis of his peril would be out of place, because it would not fit the need of the moment; but it would be very much in place at another time, when the need was to avert the repetition of such an accident to somebody else. Men, therefore, owe to men, in the chances and perils of this life, aid and sympathy, on account of the common participation in human frailty and folly. This observation, however, puts aid and sympathy in the field of private and personal relations, under the regulation of reason and conscience, and gives no ground for mechanical and impersonal schemes. We may, then, distinguish four things: 1. The function of science is to investigate truth. Science is colorless and impersonal. It investigates the force of gravity, and finds out the laws of that force, and has nothing to do with the weal or woe of men under the operation of the law. 2. The moral deductions as to what one ought to do are to be drawn by the reason and conscience of the individual man who is instructed by science. Let him take note of the force of gravity, and see to it that he does not walk off a precipice or get in the way of a falling body. 3. On account of the number and variety of perils of all kinds by which our lives are environed, and on account of ignorance, carelessness, and folly, we all neglect to obey the moral deductions which we have learned, so that, in fact, the wisest and the best of us act foolishly and suffer. 4. The law of sympathy, by which we share each others' burdens, is to do as we would be done by. It is not a scientific principle, and does not admit of such generalization or interpretation that A can tell B what this law enjoins on B to do. Hence the relations of sympathy and sentiment are essentially limited to two persons only, and they cannot be made a basis for the relations of groups of persons, or for discussion by any third party. Social improvement is not to be won by direct effort. It is secondary, and results from physical or economic improvements. That is the reason why schemes of direct social amelioration always have an arbitrary, sentimental, and artificial character, while true social advance must be a product and a growth. The efforts which are being put forth for every kind of progress in the arts and sciences are, therefore, contributing to true social progress. Let any one learn what hardship was involved, even for a wealthy person, a century ago, in crossing the Atlantic, and then let him compare that hardship even with a steerage passage at the present time, considering time and money cost. This improvement in transportation by which "the poor and weak" can be carried from the crowded centres of population to the new land is worth more to them than all the schemes of all the social reformers. An improvement in surgical instruments or in anaesthetics really does more for those who are not well off than all the declamations of the orators and pious wishes of the reformers. Civil service reform would be a greater gain to the laborers than innumerable factory acts and eight-hour laws. Free trade would be a greater blessing to "the poor man" than all the devices of all the friends of humanity if they could be realized. If the economists could satisfactorily solve the problem of the regulation of paper currency, they would do more for the wages class than could be accomplished by all the artificial doctrines about wages which they seem to feel bound to encourage. If we could get firm and good laws passed for the management of savings-banks, and then refrain from the amendments by which those laws are gradually broken down, we should do more for the non-capitalist class than by volumes of laws against "corporations" and the "excessive power of capital." We each owe to the other mutual redress of grievances. It has been said, in answer to my argument in the last chapter about the Forgotten Women and thread, that the tax on thread is "only a little thing," and that it cannot hurt the women much, and also that, if the women do not want to pay two cents a spool tax, there is thread of an inferior quality, which they can buy cheaper. These answers represent the bitterest and basest social injustice. Every honest citizen of a free state owes it to himself, to the community, and especially to those who are at once weak and wronged, to go to their assistance and to help redress their wrongs. Whenever a law or social arrangement acts so as to injure any one, and that one the humblest, then there is a duty on those who are stronger, or who know better, to demand and fight for redress and correction. When generalized this means that it is the duty of All-of-us (that is, the State) to establish justice for all, from the least to the greatest, and in all matters. This, however, is no new doctrine. It is only the old, true, and indisputable function of the State; and in working for a redress of wrongs and a correction of legislative abuses, we are only struggling to a fuller realization of it--that is, working to improve civil government. We each owe it to the other to guarantee rights. Rights do not pertain to _results_, but only to _chances_. They pertain to the _conditions_ of the struggle for existence, not to any of the results of it; to the _pursuit_ of happiness, not to the possession of happiness. It cannot be said that each one has a right to have some property, because if one man had such a right some other man or men would be under a corresponding obligation to provide him with some property. Each has a right to acquire and possess property if he can. It is plain what fallacies are developed when we overlook this distinction. Those fallacies run through _all_ socialistic schemes and theories. If we take rights to pertain to results, and then say that rights must be equal, we come to say that men have a right to be equally happy, and so on in all the details. Rights should be equal, because they pertain to chances, and all ought to have equal chances so far as chances are provided or limited by the action of society. This, however, will not produce equal results, but it is right just because it will produce unequal results--that is, results which shall be proportioned to the merits of individuals. We each owe it to the other to guarantee mutually the chance to earn, to possess, to learn, to marry, etc., etc., against any interference which would prevent the exercise of those rights by a person who wishes to prosecute and enjoy them in peace for the pursuit of happiness. If we generalize this, it means that All-of-us ought to guarantee rights to each of us. But our modern free, constitutional States are constructed entirely on the notion of rights, and we regard them as performing their functions more and more perfectly according as they guarantee rights in consonance with the constantly corrected and expanded notions of rights from one generation to another. Therefore, when we say that we owe it to each other to guarantee rights we only say that we ought to prosecute and improve our political science. If we have in mind the value of chances to earn, learn, possess, etc., for a man of independent energy, we can go on one step farther in our deductions about help. The only help which is generally expedient, even within the limits of the private and personal relations of two persons to each other, is that which consists in helping a man to help himself. This always consists in opening the chances. A man of assured position can by an effort which is of no appreciable importance to him, give aid which is of incalculable value to a man who is all ready to make his own career if he can only get a chance. The truest and deepest pathos in this world is not that of suffering but that of brave struggling. The truest sympathy is not compassion, but a fellow-feeling with courage and fortitude in the midst of noble effort. Now, the aid which helps a man to help himself is not in the least akin to the aid which is given in charity. If alms are given, or if we "make work" for a man, or "give him employment," or "protect" him, we simply take a product from one and give it to another. If we help a man to help himself, by opening the chances around him, we put him in a position to add to the wealth of the community by putting new powers in operation to produce. It would seem that the difference between getting something already in existence from the one who has it, and producing a new thing by applying new labor to natural materials, would be so plain as never to be forgotten; but the fallacy of confusing the two is one of the commonest in all social discussions. We have now seen that the current discussions about the claims and rights of social classes on each other are radically erroneous and fallacious, and we have seen that an analysis of the general obligations which we all have to each other leads us to nothing but an emphatic repetition of old but well acknowledged obligations to perfect our political institutions. We have been led to restriction, not extension, of the functions of the State, but we have also been led to see the necessity of purifying and perfecting the operation of the State in the functions which properly belong to it. If we refuse to recognize any classes as existing in society when, perhaps, a claim might be set up that the wealthy, educated, and virtuous have acquired special rights and precedence, we certainly cannot recognize any classes when it is attempted to establish such distinctions for the sake of imposing burdens and duties on one group for the benefit of others. The men who have not done their duty in this world never can be equal to those who have done their duty more or less well. If words like wise and foolish, thrifty and extravagant, prudent and negligent, have any meaning in language, then it must make some difference how people behave in this world, and the difference will appear in the position they acquire in the body of society, and in relation to the chances of life. They may, then, be classified in reference to these facts. Such classes always will exist; no other social distinctions can endure. If, then, we look to the origin and definition of these classes, we shall find it impossible to deduce any obligations which one of them bears to the other. The class distinctions simply result from the different degrees of success with which men have availed themselves of the chances which were presented to them. Instead of endeavoring to redistribute the acquisitions which have been made between the existing classes, our aim should be to _increase, multiply, and extend the chances_. Such is the work of civilization. Every old error or abuse which is removed opens new chances of development to all the new energy of society. Every improvement in education, science, art, or government expands the chances of man on earth. Such expansion is no guarantee of equality. On the contrary, if there be liberty, some will profit by the chances eagerly and some will neglect them altogether. Therefore, the greater the chances the more unequal will be the fortune of these two sets of men. So it ought to be, in all justice and right reason. The yearning after equality is the offspring of envy and covetousness, and there is no possible plan for satisfying that yearning which can do aught else than rob A to give to B; consequently all such plans nourish some of the meanest vices of human nature, waste capital, and overthrow civilization. But if we can expand the chances we can count on a general and steady growth of civilization and advancement of society by and through its best members. In the prosecution of these chances we all owe to each other good-will, mutual respect, and mutual guarantees of liberty and security. Beyond this nothing can be affirmed as a duty of one group to another in a free state. * * * * * +--------------------------------------------------------------+ | Typographical errors corrected in text: | | | | Page 27: millionnaires replaced by millionaires | | | +--------------------------------------------------------------+ * * * * * 
12004	----	ESSAYS ON SOME UNSETTLED QUESTIONS OF POLITICAL ECONOMY by JOHN STUART MILL 1844 PREFACE. Of these Essays, which were written in 1829 and 1830, the fifth alone has been previously printed. The other four have hitherto remained in manuscript, because, during the temporary suspension of public interest in the species of discussion to which they belong, there was no inducement to their publication. They are now published (with a few merely verbal alterations) under the impression, that the controversies excited by Colonel Torrens' _Budget_ have again called the attention of political economists to the discussions of the abstract science: and from the additional consideration, that the first paper relates expressly to the point upon which the question at issue between Colonel Torrens and his antagonists has principally turned. From that paper it will be seen that opinions identical in principle with those promulgated by Colonel Torrens (there would probably be considerable difference as to the extent of their practical application) have been held by the writer for more than fifteen years: although he cannot claim to himself the original conception, but only the elaboration, of the fundamental doctrine of the Essay. A prejudice appears to exist in many quarters against the theory in question, on the supposition of its being opposed to one of the most valuable results of modern political philosophy, the doctrine of Freedom of Trade between nation and nation. The opinions now laid before the reader are presented as corollaries necessarily following from the principles upon which Free Trade itself rests. The writer has also been careful to point out, that from these opinions no justification can be derived for any _protecting_ duty, or other preference given to domestic over foreign industry. But in regard to those duties on foreign commodities which do not operate as protection, but are maintained solely for revenue, and which do not touch either the necessaries of life or the materials and instruments of production, it is his opinion that any relaxation of such duties, beyond what may be required by the interest of the revenue itself, should in general be made contingent upon the adoption of some corresponding degree of freedom of trade with this country, by the nation from which the commodities are imported. CONTENTS. ESSAY I. Of the Laws of Interchange between Nations; and the Distribution of the Gains of Commerce among the Countries of the Commercial World ESSAY II. Of the Influence of Consumption upon Production ESSAY III. On the Words Productive and Unproductive ESSAY IV. On Profits, and Interest ESSAY V. On the Definition of Political Economy; and on the Method of Investigation proper to it ESSAY I. OF THE LAWS OF INTERCHANGE BETWEEN NATIONS; AND THE DISTRIBUTION OF THE GAINS OF COMMERCE AMONG THE COUNTRIES OF THE COMMERCIAL WORLD. Of the truths with which political economy has been enriched by Mr. Ricardo, none has contributed more to give to that branch of knowledge the comparatively precise and scientific character which it at present bears, than the more accurate analysis which he performed of the nature of the advantage which nations derive from a mutual interchange of their productions. Previously to his time, the benefits of foreign trade were deemed, even by the most philosophical enquirers, to consist in affording a vent for surplus produce, or in enabling a portion of the national capital to replace itself with a profit. The futility of the theory implied in these and similar phrases, was an obvious consequence from the speculations of writers even anterior to Mr. Ricardo. But it was he who first, in the chapter on Foreign Trade, of his immortal _Principles of Political Economy and Taxation_, substituted for the former vague and unscientific, if not positively false, conceptions with regard to the advantage of trade, a philosophical exposition which explains, with strict precision, the nature of that advantage, and affords an accurate measure of its amount. He shewed, that the advantage of an interchange of commodities between nations consists simply and solely in this, that it enables each to obtain, with a given amount of labour and capital, a greater quantity of all commodities taken together. This it accomplishes by enabling each, with a quantity of one commodity which has cost it so much labour and capital, to purchase a quantity of another commodity which, if produced at home, would have required labour and capital to a greater amount. To render the importation of an article more advantageous than its production, it is not necessary that the foreign country should be able to produce it with less labour and capital than ourselves. We may even have a positive advantage in its production: but, if we are so far favoured by circumstances as to have a still greater positive advantage in the production of some other article which is in demand in the foreign country, we may be able to obtain a greater return to our labour and capital by employing none of it in producing the article in which our advantage is least, but devoting it all to the production of that in which our advantage is greatest, and giving this to the foreign country in exchange for the other. It is not a difference in the _absolute_ cost of production, which determines the interchange, but a difference in the _comparative_ cost. It may be to our advantage to procure iron from Sweden in exchange for cottons, even although the mines of England as well as her manufactories should be more productive than those of Sweden; for if we have an advantage of one-half in cottons, and only an advantage of a quarter in iron, and could sell our cottons to Sweden at the price which Sweden must pay for them if she produced them herself, we should obtain our iron with an advantage of one-half, as well as our cottons. We may often, by trading with foreigners, obtain their commodities at a smaller expense of labour and capital than they cost to the foreigners themselves. The bargain is still advantageous to the foreigner, because the commodity which he receives in exchange, though it has cost us less, would have cost him more. As often as a country possesses two commodities, one of which it can produce with less labour, comparatively to what it would cost in a foreign country, than the other; so often it is the interest of the country to export the first mentioned commodity and to import the second; even though it might be able to produce both the one and the other at a less expense of labour than the foreign country can produce them, but not less in the same degree; or might be unable to produce either except at a greater expense, but not greater in the same degree. On the contrary, if it produces both commodities with greater facility, or both with greater difficulty, and greater in exactly the same degree, there will be no motive to interchange. "If the cloth and the corn, each of which required 100 days' labour in Poland, required each 150 days' labour in England; it would follow, that the cloth of 150 days' labour in England, if sent to Poland, would be equal to the cloth of 100 days' labour in Poland: if exchanged for corn, therefore, it would exchange for the corn of only 100 days' labour. But the corn of 100 days' labour in Poland, was supposed to be the same quantity with that of 150 days' labour in England. With 150 days' labour in cloth, therefore, England would only get as much corn in Poland as she could raise with 150 days' labour at home; and she would, in importing it, have the cost of carriage besides. In these circumstances no exchange would take place. "If, on the other hand, while the cloth produced with 100 days' labour in Poland was produced with 150 days' labour in England, the corn which was produced in Poland with 100 days' labour could not be produced in England with less than 200 days' labour; an adequate motive to exchange would immediately arise. With a quantity of cloth which England produced with 150 days' labour, she would be able to purchase as much corn in Poland as was there produced with 100 days' labour; but the quantity, which was there produced with 100 days' labour, would be as great as the quantity produced in England with 200 days' labour. "The power of Poland would be reciprocal. With a quantity of corn which cost her 100 days' labour, equal to the quantity produced in England by 200 days' labour, she could in the supposed case purchase in England the produce of 200 days' labour in cloth." But "the produce of 150 days' labour in England in the article of cloth would be equal to the produce of 100 days' labour in Poland [1]." The remainder of what Mr. Ricardo has done for the philosophical exposition of the principles of foreign trade, is to shew, that the truth of the propositions now recapitulated is not affected by the introduction of money as a medium of exchange; the precious metals always tending to distribute themselves in such a manner throughout the commercial world, that every country shall import all that it would have imported, and export all that it would have exported, if exchanges had taken place, as in the example above supposed, by barter. To this branch of the subject we shall, in the sequel of this essay, return. At present it will be more convenient that we should continue to suppose, that exchanges take place by the direct trucking of one commodity against another. It is established, that the advantage which two countries derive from trading with each other, results from the more advantageous employment which thence arises, of the labour and capital--for shortness let us say the labour--of both jointly. The circumstances are such, that if each country confines itself to the production of one commodity, there is a greater total return to the labour of both together; and this increase of produce forms the whole of what the two countries taken together gain by the trade. It is the purpose of the present essay to inquire, in what proportion the increase of produce, arising from the saving of labour, is divided between the two countries. This question was not entered into by Mr. Ricardo, whose attention was engrossed by far more important questions, and who, having a science to create, had not time, or room, to occupy himself with much more than the leading principles. When he had done enough to enable any one who came after him, and who took the necessary pains, to do all the rest, he was satisfied. He very rarely followed out the principles of the science into the ramifications of their consequences. But we believe that to no one, who has thoroughly entered into the spirit of his discoveries, will even the minutiae of the science offer any difficulty but that which is constituted by the necessity of patience and circumspection in tracing principles to their results. Mr. Ricardo, while intending to go no further into the question of the advantage of foreign trade than to show what it consisted of, and under what circumstances it arose, unguardedly expressed himself as if each of the two countries making the exchange separately gained the whole of the difference between the comparative costs of the two commodities in one country and in the other. But, the whole gain of both countries together, consisting in the saving of labour; and the saving of labour being exactly equal to the difference between the costs, in the two countries, of the one commodity as compared with the other; the two countries taken together gain no more than this difference: and if either country gains the whole of it, the other country derives no advantage from the trade. Suppose, for example, that 10 yards of broad cloth cost in England as much labour as 15 yards of linen, and in Germany as much as 20. If England sends 10 yards of broad cloth to Germany, and is able to exchange them for linen according to the German cost of production, she will get 20 yards of linen, with a quantity of labour with which she could not have produced more than 15; and will gain, therefore, 5 yards on every 15, or 33-1/3 per cent. But in this case Germany would obtain only 10 yards of cloth for 20 of linen. Now, 10 yards of cloth cost exactly the same quantity of labour in Germany as 20 of linen; Germany, therefore, derives no advantage from the trade, more than she would possess if it did not exist. So, on the other hand, if Germany sends 15 yards of linen to England, and finding the relative value of the two articles in that country determined by the English costs of production, is enabled to purchase with 35 yards of linen 10 yards of cloth; Germany now gains 5 yards, just as England did before,--for with 15 yards of linen she purchases 10 yards of cloth, when to produce these 10 yards she must have employed as much labour as would have enabled her to produce 20 yards of linen. But in this case England would gain nothing: she would only obtain, for her 10 yards of cloth, 15 yards of linen, which is exactly the comparative cost at which she could have produced them. This, which was not an error, but a mere oversight of Mr. Ricardo, arising from his having left the question of the division of the advantage entirely unnoticed, was first corrected in the third edition of Mr. Mill's _Elements of Political Economy_. It can hardly, however, be said that Mr. Mill has prosecuted the inquiry any further; which, indeed, would have been quite as inconsistent with the nature of his plan as of Mr. Ricardo's. 1. When the trade is established between the two countries, the two commodities will exchange for each other at the same rate of interchange in both countries--bating the cost of carriage, of which, for the present, it will be more convenient to omit the consideration. Supposing, therefore, for the sake of argument, that the carriage of the commodities from one country to another could be effected without labour and without cost, no sooner would the trade be opened than, it is self-evident, the value of the two commodities, estimated in each other, would come to a level in both countries. If we knew what this level would be, we should know in what proportion the two countries would share the advantage of the trade. When each country produced both commodities for itself, 10 yards of broad cloth exchanged for 15 yards of linen in England, and for 20 in Germany. They will now exchange for the same number of yards of linen in both. For what number? If for 15 yards, England will be just as she was, and Germany will gain all. If for 20 yards, Germany will be as before, and England will derive the whole of the benefit. If for any number intermediate between 15 and 20, the advantage will be shared between the two countries. If, for example, 10 yards of cloth exchange for 18 of linen, England will gain an advantage of 3 yards on every 15, Germany will save 2 out of every 20. The problem is, what are the causes which determine the proportion in which the cloth of England and the linen of Germany will exchange for each other? This, therefore, is a question concerning exchangeable value. There must be something which determines how much of one commodity another commodity will purchase; and there is no reason to suppose that the law of exchangeable value is more difficult of ascertainment in this case than in other cases. The law, however, cannot be precisely the same as in the common cases. When two articles are produced in the immediate vicinity of one another, so that, without expatriating himself, or moving to a distance, a capitalist has the choice of producing one or the other, the quantities of the two articles which will exchange for each other will be, on the average, those which are produced by equal quantities of labour. But this cannot be applied to the case where the two articles are produced in two different countries; because men do not usually leave their country, or even send their capital abroad, for the sake of those small differences of profit which are sufficient to determine their choice of a business, or of an investment, in their own country and neighbourhood. The principle, that value is proportional to cost of production, being consequently inapplicable, we must revert to a principle anterior to that of cost of production, and from which this last flows as a consequence,--namely, the principle of demand and supply. In order to apply this principle, with any advantage, to the solution of the question which now occupies us, the principle itself, and the idea attached to the term demand, must be conceived with a precision, which the loose manner in which the words are used generally prevents. It is well known that the quantity of any commodity which can be disposed of, varies with the price. The higher the price, the fewer will be the purchasers, and the smaller the quantity sold. The lower the price, the greater will in general be the number of purchasers, and the greater the quantity disposed of. This is true of almost all commodities whatever: though of some commodities, to diminish the consumption in any given degree would require a much greater rise of price than of others. Whatever be the commodity--the supply in any market being given, there is some price at which the whole of the supply exactly will find purchasers, and no more. That, whatever it be, is the price at which, by the effect of competition, the commodity will be sold. If the price be higher, the whole of the supply will not be disposed of, and the sellers, by their competition, will bring down the price. If the price be lower, there will be found purchasers for a larger supply, and the competition of these purchasers will raise the price. This, then, is what we mean, when we say that price, or exchangeable value, depends on demand and supply. We should express the principle more accurately, if we were to say, the price so regulates itself that the demand shall be exactly sufficient to carry off the supply. Let us now apply the principle of demand and supply, thus understood, to the interchange of broadcloth and linen between England and Germany. As exchangeable value in this case, as in every other, is proverbially fluctuating, it does not matter what we suppose it to be when we begin; we shall soon see whether there be any fixed point about which it oscillates--which it has a tendency always to approach to, and to remain at. Let us suppose, then, that by the effect of what Adam Smith calls the higgling of the market, 10 yards of cloth, in both countries, exchange for 17 yards of linen. The demand for a commodity, that is, the quantity of it which can find a purchaser, varies, as we have before remarked, according to the price. In Germany, the price of 10 yards of cloth is now 17 yards of linen; or whatever quantity of money is equivalent in Germany to 17 yards of linen. Now, that being the price, there is some particular number of yards of cloth, which will be in demand, or will find purchasers, at that price. There is some given quantity of cloth, more than which could not be disposed of at that price,--less than which, at that price, would not fully satisfy the demand. Let us suppose this quantity to be, 1000 times 10 yards. Let us now turn our attention to England. There, the price of 17 yards of linen is 10 yards of cloth, or whatever quantity of money is equivalent in England to 10 yards of cloth. There is some particular number of yards of linen, which, at that price, will exactly satisfy the demand, and no more. Let us suppose that this number is 1000 times 17 yards. As 17 yards of linen are to 30 yards of cloth, so are 1000 times 17 yards to 1000 times 10 yards. At the existing exchangeable value, the linen which England requires, will exactly pay for the quantity of cloth which, on the same terms of interchange, Germany requires. The demand on each side is precisely sufficient to carry off the supply on the other. The conditions required by the principle of demand and supply are fulfilled, and the two commodities will continue to be interchanged, as we supposed them to be, in the ratio of 17 yards of linen for 10 yards of cloth. But our supposition might have been different. Suppose that, at the assumed rate of interchange, England had been disposed to consume no greater quantity of linen than 800 times 17 yards; it is evident that, at the rate supposed, this would not have sufficed to pay for the 1000 times 10 yards of cloth, which we have supposed Germany to require at the assumed value. Germany would be able to procure no more than 800 times 10 yards, at that price. To procure the remaining 200, which she would have no means of doing but by bidding higher for them, she would offer more than 17 yards of linen in exchange for 10 yards of cloth; let us suppose her to offer 18. At that price, perhaps, England would be inclined to purchase a greater quantity of linen. She could consume, possibly, at that price, 900 times 18 yards. On the other hand, cloth having risen in price, the demand of Germany for it would, probably, have diminished. If, instead of 1000 times 10 yards, she is now contented with 900 times ten yards, these will exactly pay for the 900 times 18 yards of linen which England is willing to take at the altered price: the demand on each side will again exactly suffice to take off the corresponding supply; and 10 yards for 18 will be the rate at which, in both countries, cloth will exchange for linen. The converse of all this would have happened if instead of 800 times 17 yards, we had supposed that England, at the rate of 10 for 17, would have taken 1200 times 17 yards of linen. In this case, it is England whose demand is not fully supplied; it is England who, by bidding for more linen, will alter the rate of interchange to her own disadvantage; and 10 yards of cloth will fall, in both countries, below the value of 17 yards of linen. By this fall of cloth, or what is the same thing, this rise of linen, the demand of Germany for cloth will increase, and the demand of England for linen will diminish, till the rate of interchange has so adjusted itself that the cloth and the linen will exactly pay for another; and when once this point is attained, values will remain as they are. It may be considered, therefore, as established, that when two countries trade together in two commodities, the exchangeable value of these commodities relatively to each other will adjust itself to the inclinations and circumstances of the consumers on both sides, in such manner that the quantities required by each country, of the article which it imports from its neighbour, shall be exactly sufficient to pay for one another. As the inclinations and circumstances of consumers cannot be reduced to any rule, so neither can the proportions in which the two commodities will be interchanged. We know that the limits within which the variation is confined are the ratio between their costs of production in the one country, and the ratio between their costs of production in the other. Ten yards of cloth cannot exchange for more than 20 yards of linen, nor for less than 15. But they may exchange for any intermediate number. The ratios, therefore, in which the advantage of the trade may be divided between the two nations, are various. The circumstances on which the proportionate share of each country more remotely depends, admit only of a very general indication. It is even possible to conceive an extreme case, in which the whole of the advantage resulting from the interchange would be reaped by one party, the other country gaining nothing at all. There is no absurdity in the hypothesis, that of some given commodity a certain quantity is all that is wanted at any price, and that when that quantity is obtained, no fall in the exchangeable value would induce other consumers to come forward, or those who are already supplied to take more. Let us suppose that this is the case in Germany with cloth. Before her trade with England commenced, when 10 yards of cloth cost her as much labour as 20 yards of linen, she nevertheless consumed as much cloth as she wanted under any circumstances, and if she could obtain it at the rate of 10 yards of cloth for 15 of linen, she would not consume more. Let this fixed quantity be 1000 times 10 yards. At the rate, however, of 10 for 20, England would want more linen than would be equivalent to this quantity of cloth. She would consequently offer a higher value for linen; or, what is the same thing, she would offer her cloth at a cheaper rate. But as by no lowering of the value could she prevail on Germany to take a greater quantity of cloth, there would be no limit to the rise of linen, or fall of cloth, until the demand of England for linen was reduced by the rise of its value, to the quantity which one thousand times ten yards of cloth would purchase. It might be, that to produce this diminution of the demand, a less fall would not suffice, than one which would make 10 yards of cloth exchange for 15 of linen. Germany would then gain the whole of the advantage, and England would be exactly as she was before the trade commenced. It would be for the interest, however, of Germany herself, to keep her linen a little below the value at which it could be produced in England, in order to keep herself from being supplanted by the home producer. England, therefore, would always benefit in some degree by the existence of the trade, though it might be in a very trifling one. But in general there will not be this extreme inequality in the degree in which the demand in the two countries varies with variations in the price. The advantage will probably be divided equally, oftener than in any one unequal ratio that can be named; though the division will be much oftener, on the whole, unequal than equal. 2. We shall now examine whether the same law of interchange, which we have shown to apply upon the supposition of barter, holds good after the introduction of money. Mr. Ricardo found that his more general proposition stood this test; and as the proposition which we have just demonstrated is only a further developement of his principle, we shall probably find that it suffers a little, by a mere change in the mode (for it is no more) in which one commodity is exchanged against another. We may at first make whatever supposition we will with respect to the value of money. Let us suppose, therefore, that before the opening of the trade, the price of cloth is the same in both countries, namely, six shillings per yard [2]. As 10 yards of cloth were supposed to exchange in England for 5 yards of linen, in Germany for 20, we must suppose that linen is sold in England at four shillings per yard, in Germany at three. Cost of carriage and importer's profit are left as before, out of consideration. In this state of prices, cloth, it is evident, cannot yet be exported from England into Germany. But linen can be imported from Germany into England. It will be so, and, in the first instance, the linen will be paid for in money. The efflux of money from England, and its influx into Germany, will raise money prices in the latter country, and lower them in the former. Linen will rise in Germany above three shillings per yard, and cloth above six shillings. Linen in England being imported from Germany, will (since cost of carriage is not reckoned) sink to the same price as in that country, while cloth will fall below six shillings. As soon as the price of cloth is lower in England than in Germany, it will begin to be exported, and the price of cloth in Germany will fall to what it is in England. As long As the cloth exported does not suffice to pay for the linen imported, money will continue to flow from England into Germany, and prices generally will continue to fall in England, and rise in Germany. By the fall, however, of cloth in England, cloth will fall in Germany also, and the demand for it will increase. By the rise of linen in Germany, linen must rise in England also, and the demand for it will diminish. Although the increased exportation of cloth takes place at a lower price, and the diminished importation of linen at a higher, yet the total money value of the exportation would probably increase, that of the importation diminish. As cloth fell in price and linen rose, there would be some particular price of both articles at-which the cloth exported, and the linen imported, would exactly pay for each other. At this point prices would remain, because money would then cease to move out of England into Germany. What this point might be, would entirely depend upon the circumstances and inclinations of the purchasers on both sides. If the fall of cloth did not much increase the demand for it in Germany, and the rise of linen did not diminish very rapidly the demand for it in England, much money must pass before the equilibrium is restored; cloth would fall very much, and linen would rise, until England, perhaps, had to pay nearly as much for it as when she produced it for herself. But if, on the contrary, the fall of cloth caused a very rapid increase of the demand for it in Germany, and the rise of linen in Germany reduced very rapidly the demand in England from what it was under the influence of the first cheapness produced by the opening of the trade; the cloth would very soon suffice to pay for the linen, little money would pass between the two countries, and England would derive a large portion of the benefit of the trade. We have thus arrived at precisely the same conclusion, in supposing the employment of money, which we found to hold under the supposition of barter. In what shape the benefit accrues to the two nations from the trade, is clear enough. Germany, before the commencement of the trade, paid six shillings per yard for broad-cloth. She now obtains it at a lower price. This, however, is not the whole of her advantage. As the money prices of all her other commodities have risen, the money incomes of all her producers have increased. This is no advantage to them in buying from each other; because the price of what they buy has risen in the same ratio with their means of paying for it: but it is an advantage to them in buying any thing which has not risen; and still more, any thing which has fallen. They therefore benefit as consumers of cloth, not merely to the extent to which cloth has fallen, but also to the extent to which other prices have risen. Suppose that this is one-tenth. The same proportion of their money incomes as before, will suffice to supply their other wants, and the remainder, being increased one-tenth in amount, will enable them to purchase one-tenth more cloth than before, even though cloth had not fallen. But it has fallen: so that they are doubly gainers. If they do not choose to increase their consumption of cloth, this does not prevent them from being gainers. They purchase the same quantity with less money, and have more to expend upon their other wants. In England, on the contrary, general money-prices have fallen. Linen, however, has fallen more than the rest; having been lowered in price, by importation from a country where it was cheaper, whereas the others have fallen only from the consequent efflux of money. Notwithstanding, therefore, the general fall of money-prices, the English producers will be exactly as they were in all other respects, while they will gain as purchasers of linen. The greater the efflux of money required to restore the equilibrium, the greater will be the gain of Germany; both by the fall of cloth, and by the rise of her general prices. The less the efflux of money requisite, the greater will be the gain of England; because the price of linen will continue lower, and her general prices will not be reduced so much. It must not, however, be imagined that high money-prices are a good, and low money-prices an evil, in themselves. But the higher the general money-prices in any country, the greater will be that country's means of purchasing those commodities which, being imported from abroad, are independent of the causes which keep prices high at home. 3. We have hitherto supposed the carriage to be performed without labour or expense. If we abandon this supposition, we must correct the statement of the case in a slight degree. The prices of the two articles will no longer, when the trade is opened, be the same in both countries, nor will the articles exchange for one another at the same rate in both. Ten yards of cloth will purchase in Germany a quantity of linen greater than in England by a per-centage equal to the entire cost of conveyance both of the cloth to Germany and of the linen to England. The money-price of linen will be higher in England than in Germany, by the cost of carriage of the linen. The money-price of cloth will be higher in Germany than in England, by the cost of carriage of the cloth. The expense of the carriage is evidently a deduction _pro tanto_ from the saving of labour produced by the establishment of the trade. The two countries together, therefore, have their gains by the trade diminished, by the amount of the cost of carriage of both commodities. But here the question arises, which of the two countries bears this deduction, or in what proportion it is divided between them. At the first inspection it would appear that each country bears its own cost of carriage, that is, that each country pays the carriage of the commodity which it imports. Upon this supposition, each country would gain whatever share of the joint saving of labour would otherwise fall to its lot, _minus_ the cost of bringing from the other country the commodity which it imports. This solution is rendered plausible by the circumstance just now mentioned, that the price of the commodity will be higher in the country which imports it, than in the country which exports it, by the amount of the cost of carriage. If linen is sold in England at a higher price than in Germany, by a per-centage equal to the cost of carriage of the linen, it appears obvious that England pays for the carriage of the linen, and Germany, by parity of reason, for that of the cloth. But if we apply to these questions the principles already explained, we shall see that this is not by any means a universal law: the fact may correspond with it, or it may not. For suppose that the prices have adjusted themselves, no matter how, and that the imports and exports balance one another, each commodity, of course, being dearer by the cost of carriage, in the country which imports than in that which exports it: and suppose now that the cost of carriage, both of the one and of the other, were suddenly and miraculously annihilated, and that the commodities could pass from country to country without expense. If each country bore its own cost of carriage before, each country will save its own cost of carriage now. Cloth, in Germany, will in that case fall exactly to what it is in England; linen in England, to what it is in Germany. Now this fall of price, supposing it to happen, will probably affect the demand on both sides; and it will either affect it alike in both countries, or it will affect it unequally. It will affect it alike, if the fall of price does not affect the demand at all, or if it affects it equally in both countries. If either of these results should take place, the cloth and the linen would continue to balance each other as before: no money would pass from one country to the other; prices in both would continue at the point to which they had fallen, and each country would exactly save the cost of carriage on the commodity which it imports from the other. But the result might be, that the fall of price might not have an effect exactly equal, on the demand in the two countries. Suppose, for instance, that the fall of cloth in Germany owing to the saving of the cost of carriage, did not increase the demand for cloth in Germany; but that the fall of linen in England from a like cause, did increase the demand for linen in England. The linen imported would be more than could be paid for by the cloth exported: the difference must be paid in money: the change in the distribution of the precious metals between the two countries would lower the price of cloth in England, (and consequently in Germany), while it would raise the price of linen in Germany, (and consequently in England). Germany, therefore, by the annihilation of cost of carriage, would save in price more than the cost of carriage of the cloth; England would save less in price than the cost of carriage of the linen. But if by the miraculous annihilation of cost of carriage, England would not _save_ the whole of the carriage of her imports, it follows that England did not previously _pay_ the whole of that cost of carriage. Thus, the division of the cost of trade, and the division of the advantage of trade, are governed by precisely the same principles; and the only general proposition which can be affirmed respecting the cost is, that it is _pro tanto_ a deduction from the advantage. It cannot even be maintained that the cost is shared in the same proportion as the advantage is; because the increase of the demand for a commodity as its price falls, is not governed by any fixed law. Suppose, for instance, that the advantage happened to be divided equally: this must be because the greater cheapness arising from the establishment of the trade, either did not affect the demand at all, or affected it in an equal proportion on both sides. Now, because such is the effect of the degree of increased cheapness resulting from importation burthened with cost of carriage, it would not follow that the still greater degree of cheapness, produced by the additional saving of the cost of carriage itself, would also affect the demand of both countries in precisely an equal degree. But we cannot be said to bear an expense, which, if saved, would be saved to somebody else, and not to us. Two countries may have equal shares of the clear benefit of the trade, while, if the cost of carriage were saved, they would divide that saving unequally. If so, they divide the gross gain in one unequal ratio, the cost in another unequal ratio, though their shares of the cost being deducted from their shares of the gain leave equal remainders. 4. The question naturally suggests itself, whether any country, by its own legislative policy, can engross to itself a larger share of the benefits of foreign commerce, than would fall to it in the natural or spontaneous course of trade. The answer is, it can. By taxing exports, for instance, we may, under certain circumstances, produce a division of the advantage of the trade more favourable to ourselves. In some cases, we may draw into our coffers, at the expense of foreigners, not only the whole tax, but more than the tax: in other cases, we should gain exactly the tax,--in others, less than the tax. In this last case, a part of the tax is borne by ourselves: possibly the whole, possibly even, as we shall show, more than the whole. Suppose that England taxes her export of cloth: the tax not being supposed high enough to induce Germany to produce cloth for herself. The price at which cloth can be sold in Germany is augmented by the tax. This will probably diminish the quantity consumed. It may diminish it so much, that even at the increased price, there will not be required so great a money value as before. It may diminish it in such a ratio, that the money value of the quantity consumed will be exactly the same as before. Or it may not diminish it at all, or so little, that, in consequence of the higher price, a greater money value will be purchased than before. In this last case, England will gain, at the expense of Germany, not only the whole amount of the duty, but more. For the money value of her exports to Germany being increased, while her imports remain the same, money will flow into England from Germany. The price of cloth will rise in England, and consequently in Germany; but the price of linen will fall in Germany, and consequently in England, We shall export less cloth, and import more linen, till the equilibrium is restored. It thus appears, what is at first sight somewhat remarkable, that, by taxing her exports, England would, under some conceivable circumstances, not only gain from her foreign customers the whole amount of the tax, but would also get her imports cheaper. She would get them cheaper in two ways,--for she would obtain them for less money, and would have more money to purchase them with. Germany, on the other hand, would suffer doubly: she would have to pay for her cloth a price increased not only by the duty, but by the influx of money into England, while the same change in the distribution of the circulating medium would leave her less money to purchase it with. This, however, is only one of three possible cases. If, after the imposition of the duty, Germany requires so diminished a quantity of cloth, that its total money value is exactly the same as before, the balance of trade will be undisturbed; England will gain the duty, Germany will lose it, and nothing more. If, again, the imposition of the duty occasions such a falling off in the demand, that Germany requires a less pecuniary value than before, our exports will no longer pay for our imports, money must pass from England into Germany, and Germany's share of the advantage of the trade will be increased. By the change in the distribution of money, cloth will fall in England; and therefore it will, of course, fall in Germany. Thus Germany will not pay the whole of the tax. From the same cause, linen will rise in Germany, and consequently in England. When this alteration of prices has so adjusted the demand, that the cloth and the linen again pay for one another, the result is, that Germany has paid only a part of the tax, and the remainder of what has been received into our treasury has come indirectly out of the pockets of our own consumers of linen, who pay a higher price for that imported commodity, in consequence of the tax on our exports, which at the same time they, in consequence of the efflux of money and consequent fall of prices, have smaller money incomes wherewith to pay for the linen at that advanced price. It is not an impossible supposition that, by taxing our exports, we might not only gain nothing from the foreigner, the tax being paid out of our own pockets, but might even compel our own people to pay a second tax to the foreigner. Suppose, as before, that the demand of Germany for cloth falls off so much on the imposition of the duty, that she requires a smaller money value than before, but that the case is so different with linen in England, that when the price rises the demand either does not fall off at all, or so little that the money value required is greater than before. The first effect of laying on the duty is, as before, that the cloth exported will no longer pay for the linen imported. Money will, therefore, flow out of England into Germany. One effect is to raise the price of linen in Germany, and, consequently, in England. But this, by the supposition, instead of stopping the efflux of money, only makes it greater, because the higher the price, the greater the money value of the linen consumed. The balance, therefore, can only be restored by the other effect, which is going on at the same time, namely, the fall of cloth in the English, and, consequently, in the German market. Even when cloth has fallen so low that its price with the duty is only equal to what its price without the duty was at first, it is not a necessary consequence that the fall will stop; for the same amount of exportation as before will not now suffice to pay the increased money value of the imports; and although the German consumers have now not only cloth at the old price, but likewise increased money incomes, it is not certain that they will be inclined to employ the increase of their incomes in increasing their purchases of cloth. The price of cloth, therefore, must perhaps fall, to restore the equilibrium, more than the whole amount of the duty; Germany may be enabled to import cloth at a lower price when it is taxed, than when it was untaxed: and this gain she will acquire at the expense of the English consumers of linen, who, in addition, will be the real payers of the whole of what is received at their own custom-house under the name of duties on the export of cloth. Such are the extremely various effects which may result to ourselves, and to our customers, from the imposition of taxes on our exports [3]: and the determining circumstances are of a nature so imperfectly ascertainable, that it must be almost impossible to decide with any certainty, even after the tax has been imposed, whether we have been gainers by it or losers. It is certain, however, that whatever we gain, is lost by somebody else, and there is the expense of the collection besides: if international morality, therefore, were rightly understood and acted upon, such taxes, as being contrary to the universal weal, would not exist. Moreover, the imposition of such a tax frequently will, and always may, expose a country to lose this branch of its trade altogether, or to carry it on with diminished advantage, in consequence of the competition of untaxed exporters from other countries, or of the domestic producers in the country to which it exports. Even on the most selfish principles, therefore, the benefit of such a tax is always extremely precarious. 5. We have had an example of a tax on exports, that is, on foreigners, falling in part on ourselves. We shall, therefore, not be surprised if we find a tax on imports, that is, on ourselves, partly falling upon foreigners. Instead of taxing the cloth which we export, suppose that we tax the linen which we import. The duty which we are now supposing must not be what is termed a protecting duty, that is, a duty sufficiently high to induce us to produce the article at home. If it had this effect, it would destroy entirely the trade both in cloth and in linen, and both countries would lose the whole of the advantage which they previously gained by exchanging those commodities with one another. We suppose a duty which might diminish the consumption of the article, but which would not prevent us from continuing to import, as before, whatever linen we did consume. The equilibrium of trade would be disturbed if the imposition of the tax diminished in the slightest degree the quantity of linen consumed. For, as the tax is levied at our own custom-house, the German exporter only receives the same price as formerly, though the English consumer pays a higher one. If, therefore, there be any diminution of the quantity bought, although a larger sum of money may be actually laid out in the article, a smaller one will be due from England to Germany: this sum will no longer be an equivalent for the sum due from Germany to England for cloth, the balance therefore must be paid in money. Prices will fall in Germany, and rise in England; linen will fall in the German market; cloth will rise in the English. The Germans will pay higher price for cloth, and will have smaller money incomes to buy it with; while the English will obtain linen cheaper, that is, its price will exceed what it previously was by less than the amount of the duty, while their means of purchasing it will be increased by the increase of their money incomes. If the imposition of the tax does not diminish the demand, it will leave the trade exactly as it was before. We shall import as much, and export as much; the whole of the tax will be paid out of our own pockets. But the imposition of a tax on a commodity, almost always diminishes the demand more or less; and it can never, or scarcely ever increase the demand. It may, therefore, be laid down as a principle, that a tax on imported commodities, when it really operates as a tax, and not as a prohibition, either total or partial, almost always falls in part upon the foreigners who consume our goods: and that this is a mode in which a nation may be almost sure of appropriating to itself, at the expense of foreigners, a larger share than would otherwise belong to it of the increase in the general productiveness of the labour and capital of the world, which results from the interchange of commodities among nations. It is scarcely necessary to observe, that no such advantage can result from the duty, if it operate as a protecting duty; if it induce the country which imposes it, to produce for herself that which she would otherwise have imported. The saving of labour--the increase in the general productiveness of the capital of the world--which is the effect of commerce, and which a non-protecting duty would enable the country imposing it to engross, could not be engrossed by a protecting duty, because such a duty prevents any such increased production from existing. With a view to practical legislation, therefore, duties on importation may be divided into two classes: those which have the effect of encouraging some particular branch of domestic industry, and those which have not. The former are purely mischievous, both to the country imposing them, and to those with whom it trades. They prevent a saving of labour and capital, which, if permitted to be made, would be divided in some proportion or other between the importing country and the countries which buy what that country does or might export. The other class of duties are those which do not encourage one mode of procuring an article at the expense of another, but allow interchange to take place just as if the duty did not exist--and to produce the saving of labour which constitutes the motive to international as to all other commerce. Of this kind, are duties on the importation of any commodity which could not by any possibility be produced at home; and duties not sufficiently high to counterbalance the difference of expense between the production of the article at home, and its importation. Of the money which is brought into the treasury of any country by taxes of this last description, a part only is paid by the people of that country; the remainder by the foreign consumers of their goods. Nevertheless, this latter kind of taxes are in principle as ineligible as the former, although not precisely on the same ground. A protecting duty can never be a cause of gain, but always and necessarily of loss, to the country imposing it, just so far as it is efficacious to its end. A non-protecting duty on the contrary would, in most cases, be a source of gain to the country imposing it, in so far as throwing part of the weight of its taxes upon other people is a gain; but it would be a means of gain which it could seldom be advisable to adopt, being so easily counteracted by a precisely similar proceeding on the other side. If England, in the case already supposed, sought to obtain for herself more than her natural share of the advantage of the trade with Germany, by imposing a duty upon cloth, Germany would only have to impose a duty upon linen, sufficient to diminish the demand for that article about as much as the demand for cloth had been diminished in England by the tax. Things would then be as before, and each country would pay its own tax. Unless, indeed, the sum of the two duties exceeded the entire advantage of the trade; for in that case the trade, and its advantage, would cease entirely. There would be no advantage, therefore, in imposing duties of this kind, with a view to gain by them, in the manner which has been pointed out. But so long as any other kind of taxes on commodities are retained, as a source of revenue, these may often be as unobjectionable as the rest. It is evident, moreover, that considerations of reciprocity, which are quite unessential when the matter in debate is a protecting duty, are of material importance when the repeal of duties of this other description is discussed. A country cannot be expected to renounce the power of taxing foreigners, unless foreigners will in return practise towards itself the same forbearance. The only mode in which a country can save itself from being a loser by the duties imposed by other countries on its commodities, is to impose corresponding duties on theirs. Only it must take care that these duties be not so high as to exceed all that remains of the advantage of the trade, and put an end to importation altogether; causing the article to be either produced at home, or imported from another and a dearer market. It is not necessary to apply the principles which we have stated to the case of bounties on exportation or importation. The application is easy, and the conclusions present nothing of particular interest or importance. 6. Any cause which alters the exports or imports from one country into another, alters the division of the advantage of interchange between those two countries. Suppose the discovery of a new process, by which some article of export, or some article not previously exported, can be produced so cheap as to occasion a great demand for it in other countries. This of course produces a great influx of money from other countries, and lowers the prices of all articles imported from them, until the increase of importation produced by this cause has restored the equilibrium. Thus, the country which acquires a new article of export gets its imports cheaper. This is not a case of mere alteration in the division of the advantage; it is a new advantage created by the discovery. But suppose that the invention, to which the nation is indebted for this increase of the return to its industry, comes into use also in the other country, and that the process is one which can be as perfectly and as cheaply performed in the one country as in the other. The new exportation will cease; trade will revert to its old channels, the money which flowed in will again flow out, and the country which invented the process will lose that increase of its gain by trade, which it had derived from the discovery. Now the exportation of machinery comes within the case which we have just described. If the fact be, that by allowing to foreigners a participation in our machinery, we enable them to produce any of our leading articles of export, at a lower money price than we can sell those articles, it is certain that unless we possess as great an advantage in the production of the machinery itself as we have in the production of other articles by means of machinery, the permitting of its exportation would alter to our disadvantage the division of the benefit of trade. Our exports being diminished, we should have to pay a balance in money. This would raise, in foreign countries, the price of everything which we import from thence: while our incomes, being reduced in money value, would render us less able to buy those articles even if they had not risen. The equilibrium of exports and imports would only be restored, when either some of the latter became so dear that we could produce them cheaper at home, or some articles not previously exported became exportable from the fall of prices. In the one case, we lose the benefit of importation altogether, and are obliged to produce at home, at a greater cost. In the other case, we continue to import, but pay dearer for our imports. Notwithstanding what has now been observed, restrictions on the exportation of machinery are not, in our opinion, justifiable, either on the score of international morality or of sound policy. It is evidently the common interest of all nations that each of them should abstain from every measure by which the aggregate wealth of the commercial world would be diminished, although of this smaller sum total it might thereby be enabled to attract to itself a larger share. And the time will certainly come when nations in general will feel the importance of this rule, and will so direct their approbation and disapprobation as to enforce observance of it. Moreover, a country possessing machines should consider that if a similar advantage were extended to other countries, they would employ it above all in the production of those articles, in which they had already the greatest natural advantages; and if the former country would be a loser by their improvements in the production of articles which it sells, it would gain by their improvements in those which it buys. The exportation of machinery may, however, be a proper subject for adjustment with other nations, on the principle of reciprocity. Until, by the common consent of nations, all restrictions upon trade are done away, a nation cannot be required to abolish those from which she derives a real advantage, without stipulating for an equivalent. 7. The case which we have just examined, is an example in how remarkable a manner every cause which materially influences exports, operates upon the prices of imports. According to the ancient theory of the balance of trade, and to the associations of the generality of what are termed practical men to this day, the sole benefit derived from commerce consists in the exports, and imports are rather an evil than otherwise. Political economists, seeing the folly of these views, and clearly perceiving that the advantage of commerce consists and must consist solely of the imports, have occasionally suffered themselves to employ language evincing inattention to the fact, that exports, though unimportant in themselves, are important by their influence on imports. So real and extensive is this influence, that every new market which is opened for any of our goods, and every increase in the demand for our commodities in foreign countries, enables us to supply ourselves with foreign commodities at a smaller cost. Let us revert to our earliest and simplest example, but which displays the real law of interchange more luminously than any formula into which money enters; the case of simple barter. We showed, that if at the rate of 10 yards of cloth for 17 of linen, the demand of Germany amounted to 1000 times 10 yards of cloth, the two nations will trade together at that rate of interchange, provided that the linen required in England be exactly 1000 times 17 yards, neither more nor less. For the cloth and the linen will then exactly pay for one another, and nobody on either side will be obliged to offer what he has to sell at a lower rate, in order to procure what he wants to buy. Now if the increase of wealth and population in Germany should greatly increase the demand in that country for cloth, the demand for linen in England not increasing in the same ratio,--if, for instance, Germany became willing, at the above rate, to take 1500 times 10 yards; is it not evident, that to induce England to take in exchange for this the only article which Germany by supposition has to give, the latter must offer it at a rate more advantageous to England--at 18, or perhaps 19 yards, for 10 of cloth? So that the division of the advantage becomes more and more favourable to a country, in proportion as the demand for its commodities increases in foreign countries. It is not even necessary that the country which takes its goods, should supply it with any commodity whatever. Suppose that a country should be opened to our merchants, disposed to buy from us in abundance, but which can sell to us scarcely anything, as every commodity which it affords could be got cheaper by us from some other quarter. Nevertheless, our trade with this country will enable us to obtain from all other countries their commodities at a lower price. At the first opening of this commerce of mere exportation, we must have received in payment a large quantity of money; for which our customer will have been indemnified by other countries, in exchange for her commodities. Prices must consequently be lower in all other countries, and higher with us, than before the opening of the new branch of trade; and we therefore obtain the commodities of other countries at a less cost, both as we pay less money for them, and as that money is lower in value. 8. Another obvious application of the same principle will enable us to explain, and to bring within the dominion of strict science, the rivality of one exporting nation and another, or what is called, in the language of the mercantile system, _underselling_: a subject which political economists have taken little trouble to elucidate, from the habit before alluded to of disregarding almost entirely, in their purely scientific inquiries, those circumstances which affect the trade of a country by operating immediately upon the exports. Let us revert to our old example, and to our old figures. Suppose that the trade between England and Germany in cloth and linen is established, and that the rate of interchange is 10 yards of cloth for 17 of linen. Now suppose that there arises in another country, in Flanders, for example, a linen manufacture; and that the same causes, the working of which in England and Germany has made 10 yards exchange for 17, would in England and Flanders, putting Germany out of the question, have made the rate of interchange 10 for 18. It is evident that Germany also must give 18 yards of linen for 10 of cloth, and so carry on the trade with a diminished share of the advantage, or lose it altogether. If the play of demand in England and Flanders had made the rate of interchange not 10 for 18 but 10 for 21, (10 to 20 being in Germany the comparative cost of production,) it is evident that Germany could not have maintained the competition, and would have lost, not part of her share of the advantage, but all advantage, and the trade itself. It would be no answer to say, that Germany could probably still have found the means of importing cloth from England, by exporting something else. If she had purchased cloth with anything else, she would have purchased it dearer: as is proved by the fact, that having free choice, she found it most advantageous to purchase it with linen. When she could get 10 yards of cloth for 17 of linen, that was the mode in which she could get it with least labour. Being pressed by competition, she gave successively 17, 18, 18; but rather than give 19 yards of linen, she perhaps would prefer to give, as costing her rather less labour, 10 yards of silk, (which we will suppose to be the quantity which in England will purchase 10 yards of cloth.) It is obvious that, although Germany has found the means of supplying herself with cloth, by exporting a different article from that in which she was undersold, yet the advantage of the trade between her and England is now shared in a proportion much less favourable to Germany. There is no difficulty in showing that the same series of consequences takes place in exactly the same manner through the agency of money. The trade in cloth and linen between England and Germany being supposed to exist as before, Flanders produces linen at a lower price than that at which Germany has hitherto afforded it. The exportation from Germany is suspended; and Germany, continuing to import cloth, pays for it in money. By so doing she lowers her own prices, and raises those in England: she has to pay more money for cloth, and to pay it in a currency of higher value. She thus suffers more and more as a consumer of cloth, until by the fall of her prices she can either afford to sell linen as cheap as Flanders, or to export some other commodity which she could not export before. In either case, her trade resumes its course, but with diminished advantage on her side. [4] It is in the mode just described, that those countries which formerly supplied Europe with manufactures, but which owed their power of doing so not to any natural and permanent advantages, but to their more advanced state of civilization as compared with other countries, have lost their pre-eminence as other countries successively attained an equal degree of civilization. Lombardy and Flanders, in the middle ages, produced some descriptions of clothing and ornament for all Europe: Holland, at a much later period, supplied ships, and almost all articles which came in ships, to most other parts of the world. All these countries have probably at this moment a much larger amount of capital than ever they had, but having been undersold by other countries, they have lost by far the greater part of the share which they had engrossed to themselves of the benefit which the world derives from commerce; and their capital yields to them in consequence a smaller proportional return. We are aware that other causes have contributed to the same effect, but we cannot doubt that this is a principal one. As much as is really true of the great returns alleged to have been made to capital during the last war, must have arisen from a similar cause. Our exclusive command of the sea excluded from the market all by whom we should have been undersold. The adoption by France, Russia, the Netherlands, and the United States, of a more severely restrictive commercial policy, subsequently to 1815, has done great injury undoubtedly to those countries; for the duties which they have established are intended to be, and really are, of the class termed _protecting_; that is to say, such as force the production of commodities by more costly processes at home, instead of suffering them to be imported from abroad. But these duties, though chiefly injurious to the countries imposing them, have also been highly injurious to England. By diminishing her exportation, or preventing it from increasing as it would otherwise have done, they have kept up the prices of all imported commodities in England, above what those prices would have fallen to if trade had been left free. By another obvious application of the same reasoning, it will be seen, that there is a real foundation for the notion, that a country may be benefited by receiving from another country the concession of what used to be termed commercial advantages, or by restraining its colonies from purchasing goods of any country except itself. In the figured illustration last used (p. 34) [not available, M.D.], it is evident, that if England had been bound by a treaty with Germany to buy linen exclusively from her, Germany would have retained the trade which we supposed her to lose, and would have continued to purchase cloth at a comparatively cheap rate from England, instead of producing it by a more costly process at home. Suppose that England had been a colony of Germany, and we see that by compelling colonies to deal at her shop, she may obtain a real advantage, though of a nature which we may hazard the assertion that the founders of our colonial policy little dreamt of. Such an advantage, however, being gained at the expense of another country, is, at the least, simply equivalent to a tax, or tribute. Now, if a country has just grounds, or deems superiority of power a sufficient ground, for exacting a tribute from another country, the most direct mode is the best. First, because it is the most intelligible, and has least of trick or disguise. Secondly, because it allows the people of the country paying the tribute, to raise the money in whatever way they consider least oppressive to themselves. Thirdly, because the indirect mode of taxing a country, by restrictions on its commerce, disturbs the distribution of industry most advantageous to the world at large, and occasions a greater loss to the restricted country, and to the other countries with which that country would have traded, than gain to the country in whose favour the restrictions are imposed. And lastly, because a country never could obtain such privileges from an independent nation, and has seldom been so undisguised an oppressor as to demand them even from its colonies, without subjecting itself to restrictions in some degree equivalent, for the benefit of those whom it has thus taxed. Each country, therefore, usually pays tribute to the other; and to produce this fruitless reciprocity of exaction, the industry and trade of both countries are diverted from the most advantageous channels, and the return to the labour and capital of both is diminished, in pure loss. 9. The same principles which have led to the above conclusions, also suggest a remark of some importance with respect to the probable effect of a change from a restricted to a comparatively free trade. There is no doubt that our prohibiting the importation of a particular article, which, but for the prohibition, would have been imported, enables us to obtain our other imports at smaller cost. The article for which we have the greatest demand, and for which our demand is most increased by cheapness, is that which we should naturally import preferably to any other; now of this article we should import the quantity necessary to pay for our exports, on terms of interchange less advantageous to us than in the case of any other commodity. If our legislature prohibits this commodity, the other country will be obliged to offer any other article on easier terms, in order to force a sufficient demand for it to be an equivalent to what she purchases from us. The steps of the process, money being used, would be these:--We prohibit the importation of linen. The exportation of cloth continues, but is paid for in money. Our prices rise, those in Germany fall, until silk, or some other article, can be imported from Germany cheaper than it can be produced at home, and in sufficient abundance to balance the export of cloth. Thus by sacrificing the cheapness of one commodity, we gain the cheapness of another: but we sacrifice a greater cheapness to gain a less, and we sacrifice cheapness in the article which we most want, and would import by preference, while our compensation is cheapness in an article which we either could produce more advantageously at home, or which we have so little desire for, that it requires a species of bounty on the article to create a demand. Restrictions on importation do, however, tend to keep down the value and price of our remaining imports, and to keep up the nominal or money prices of all our other commodities, by retaining a greater quantity of money in the country than would otherwise be there. From this it obviously follows, that if the restrictions were removed, we should have to pay rather more for some of the articles which we now import, while those which we are now prevented from importing would cost us more than might be inferred from their _present_ price in the foreign market. And general prices would fall; to the benefit of those who have fixed sums to receive; to the disadvantage of those who have fixed sums to pay; and giving rise, as a general fall of prices always does, to an appearance, though a temporary and fallacious one, of general distress. [5] It is right to observe that the measures of the British Legislature which have been falsely characterised as measures of free trade, must, from their extremely insignificant extent, have produced far too little effect in increasing our importation, to have actually led, in any degree worth mentioning, to the results specified above. It is of greater importance to take notice, that these effects may be entirely obviated, if foreign countries can be prevailed upon simultaneously to relax their restrictive systems, so as to create an immediate increase of demand for our exports at the present prices. It is true that exports and imports must, in the end, balance one another, and if we increase our imports, our exports will of necessity increase too. But it is a forced increase, produced by an efflux of money and fall of prices; and this fall of prices being permanent, although it would be no evil at all in a country where credit is unknown, it may be a very serious one where large classes of persons, and the nation itself, are under engagements to pay fixed sums of money of large amount. 10. The only remaining application of the principle set forth in this essay, which we think it of importance to notice specially, is the effect produced upon a country by the annual payment of a tribute or subsidy to a foreign power, or by the annual remittance of rents to absentee landlords, or of any other kind of income to its absent owners. Remittances to absentees are often very incorrectly likened in their general character to the payment of a tribute; from which they differ in this very material circumstance, that tribute, if not paid to a foreign country, is not paid at all, whereas rents are paid to the landlord, and consumed by him, even if he resides at home. The two kinds of payment, however, have a perfect resemblance to each other in such parts of their effects as we are about to point out. The tribute, subsidy, or remittance, is always in goods; for, unless the country possesses mines of the precious metals, and numbers those metals among its regular articles of export, it cannot go on, year after year, parting with them, and never receiving them back. When a nation has regular payments to make in a foreign country, for which it is not to receive any return, its exports must annually exceed its imports by the amount of the payments which it is bound so to make. In order to force a demand for its exports greater than its imports will suffice to pay for, it must offer them at a rate of interchange more favourable to the foreign country, and less so to itself, than if it had no payments to make beyond the value of its imports. It therefore carries on the trade with less advantage, in consequence of the obligations to which it is subject towards persons resident in foreign countries. The steps of the process are these. The exports and imports being in equilibrium, suppose a treaty to be concluded, by which the country binds itself to pay in tribute to another country, a certain sum annually. It makes, perhaps, the first payment by a remittance of money. This lowers prices in the paying country, and raises them in the receiving one: the exports of the tributary country increase, its imports diminish. When the efflux of money has altered prices in the requisite degree, the exports exceed the imports annually, by the amount of the tribute; and the latter, being added to the sum of the payments due, restores the balance of payments between the two countries. The result to the tributary country is a diminution of her share in the advantage of foreign trade. She pays dearer for her imports, in two ways, because she pays more money, and because that money is of higher value, the money incomes of her inhabitants being of smaller amount. Thus the imposition of a tribute is a double burthen to the country paying it, and a double gain to that which receives it. The tributary country pays to the other, first, the tax, whatever be its amount, and next, something more, which the one country loses in the increased cost of its imports, the other gains in the diminished cost of its own. Absenteeism, moreover, though not burthensome in the former of these ways, since the money is paid whether the receiver be an absentee or not, is yet disadvantageous in the second of the two modes which have been mentioned. Ireland pays dearer for her imports in consequence of her absentees; a circumstance which the assailants of Mr. M'Culloch, whether political economists or not, have not, we believe, hitherto thought of producing against him. 11. If the question be now asked, which of the countries of the world gains most by foreign commerce, the following will be the answer. If by gain be meant advantage, in the most enlarged sense, that country will generally gain the most, which stands most in need of foreign commodities. But if by gain be meant saving of labour and capital in obtaining the commodities which the country desires to have, whatever they may be; the country will gain, not in proportion to its own need of foreign articles, but to the need which foreigners have of the articles which itself produces. Let us take, as an illustration of our meaning, the case of France and England. Those two nations, in consequence of the restrictions with which they have loaded their commercial intercourse, carry on so little trade with each other, as may almost, regard being had to the wealth and population of the two countries, be called none at all. If these fetters were at once taken off, which of the two countries would be the greatest gainer? England without doubt. There would instantly arise in France an immense demand for the cottons, woollens, and iron of England; while wines, brandies, and silks, the staple articles of France, are less likely to come into general demand here, nor would the consumption of such productions, it is probable, be so rapidly increased by the fall of price. The fall would probably be very great before France could obtain a vent in England for so much of her exports as would suffice to pay for the probable amount of her imports. There would be a considerable flow of the precious metals out of France into England. The English consumer of French wine would not merely save the amount of the duty which that wine now pays, but would find the wine itself falling-in prime cost, while his means of purchasing it would be increased by the augmentation of his own money income. The French consumer of English cottons, on the contrary, would not long continue to be able to purchase them at the price they now sell for in England. He would gain less, as the English would gain more, than might appear from a mere comparison between the present prices of commodities in the two countries. Various consequences would flow from opening the trade between France and England, which are not expected, either by the friends or by the opponents of the present restrictive system. The wine-growers of France, who imagine that free trade would relieve their distress by raising the price of their wine, might not improbably find that price actually lowered. On the other hand, our silk manufacturers would be surprised if they were told that the free admission of our cottons and hardware into the French market, would endanger _their_ branch of manufacture: yet such might very possibly be the effect. France, it is likely, could most advantageously pay us in silks for a portion of the large amount of cottons and hardware which we should sell to her; and though our silk manufacturers may now be able to compete advantageously, in some branches of the manufacture, with their French rivals, it by no means follows that they could do so when the efflux of money from France, and its influx into England, had lowered the price of silk goods in the French market, and increased all the expenses of production here. On the whole, England probably, of all the countries of Europe, draws to herself the largest share of the gains of international commerce: because her exportable articles are in universal demand, and are of such a kind that the demand increases rapidly as the price falls. Countries which export food, have the former advantage, but not the latter. But our own colonies, and the countries which supply us with the materials of our manufactures, maintain a hard struggle with us for an equal share of the advantages of their trade; for _their_ exports are also of a kind for which there exists a most extensive demand here, and a demand capable of almost indefinite extension by a fall of price. Contrary, therefore, to common opinion, it is probable that our trade with the colonies, and with the countries which send us the raw materials of our national industry, is not more but less advantageous to us, in proportion to its extent, than our trade with the continent of Europe. We mean in respect to the mere amount of the return to the labour and capital of the country; considered abstractedly from the usefulness or agreeableness of the particular articles on which the receivers may choose to expend it. NOTES: [1] _Elements of Political Economy_, by James Mill, Esq., 3rd edit., pp. 120-1. [2] The figures used are of course arbitrary, having no reference to any existing prices. [3] We have not deemed it necessary to enter minutely into all the circumstances which might modify the results mentioned in the text. For example, let us revert to the first case, that in which the demand for cloth in Germany is so little affected by the rise of price in consequence of the tax, that the quantity bought exceeds in pecuniary value what it was before. As the German consumers lay out more money in cloth, they have less to lay out in other things; other money prices will fall; among the rest that of linen; and this may so increase the demand for linen in England as to restore the equilibrium of exports and imports without any passage of money. But England's treasury will still gain from Germany the whole of the tax, and the English people will buy their linen cheaper besides. Again, in the opposite case, where the tax so diminishes the demand, that a smaller pecuniary value is required than before. The German consumers have, therefore, more to expend in other things; these, and among the rest linen, will rise; and this may so diminish the demand for linen in England, as to restore the equilibrium without the transmission of money. But the effect, as respects the division of the advantage, is still as stated in the text. [4] The world at large, sellers and buyers taken together, is always a gainer by underselling. If, in the case supposed, England were compelled by a commercial treaty to exclude the linen of Flanders from her market, the total wealth of the world, if affected at all, would be diminished. For, what is the cause which enables Flanders to undersell Germany? That Flanders, if she had the trade, would exchange linen for cloth at a rate of interchange more advantageous to England. And why can Flanders do so? It must be either because Flanders can produce the article with a less comparative quantity of labour than Germany, and therefore the total advantage to be divided between the two countries is greater in the case of Flanders than of Germany; or else because, though the total advantage is not greater, Flanders obtains a less share of it, her demand for cloth being greater, at the same rate of interchange, than that of Germany. In the former case, to exclude Flemish linen from England would be to prevent the world at large from making a greater saving of labour instead of a less. In the latter, the exclusion would be inefficacious for the only end it could be intended for, viz., the benefit of Germany, unless Flemish money were excluded from England as well as Flemish linen. For Flanders would buy English cloth, paying for it in money, until the fall of her prices enabled her to pay for it with something else: and the ultimate result would be that, by the rise of prices in England, Germany must pay a higher price for her cloth, and so lose a part of the advantage in spite of the treaty; while England would pay for German linen the same price indeed, but as the money incomes of her own people would be increased, the same money price would imply a smaller sacrifice. [5] This last possible effect of a sudden introduction of free trade, was pointed out in an able article on the Silk question, in a work of too short duration, the _Parliamentary Review_. ESSAY II. OF THE INFLUENCE OF CONSUMPTION ON PRODUCTION. Before the appearance of those great writers whose discoveries have given to political economy its present comparatively scientific character, the ideas universally entertained both by theorists and by practical men, on the causes of national wealth, were grounded upon certain general views, which almost all who have given any considerable attention to the subject now justly hold to be completely erroneous. Among the mistakes which were most pernicious in their direct consequences, and tended in the greatest degree to prevent a just conception of the objects of the science, or of the test to be applied to the solution of the questions which it presents, was the immense importance attached to consumption. The great end of legislation in matters of national wealth, according to the prevalent opinion, was to create consumers. A great and rapid consumption was what the producers, of all classes and denominations, wanted, to enrich themselves and the country. This object, under the varying names of an extensive demand, a brisk circulation, a great expenditure of money, and sometimes _totidem verbis_ a large consumption, was conceived to be the great condition of prosperity. It is not necessary, in the present state of the science, to contest this doctrine in the most flagrantly absurd of its forms or of its applications. The utility of a large government expenditure, for the purpose of encouraging industry, is no longer maintained. Taxes are not now esteemed to be "like the dews of heaven, which return again in prolific showers." It is no longer supposed that you benefit the producer by taking his money, provided you give it to him again in exchange for his goods. There is nothing which impresses a person of reflection with a stronger sense of the shallowness of the political reasonings of the last two centuries, than the general reception so long given to a doctrine which, if it proves anything, proves that the more you take from the pockets of the people to spend on your own pleasures, the richer they grow; that the man who steals money out of a shop, provided he expends it all again at the same shop, is a benefactor to the tradesman whom he robs, and that the same operation, repeated sufficiently often, would make the tradesman's fortune. In opposition to these palpable absurdities, it was triumphantly established by political economists, that consumption never needs encouragement. All which is produced is already consumed, either for the purpose of reproduction or of enjoyment. The person who saves his income is no less a consumer than he who spends it: he consumes it in a different way; it supplies food and clothing to be consumed, tools and materials to be used, by productive labourers. Consumption, therefore, already takes place to the greatest extent which the amount of production admits of; but, of the two kinds of consumption, reproductive and unproductive, the former alone adds to the national wealth, the latter impairs it. What is consumed for mere enjoyment, is gone; what is consumed for reproduction, leaves commodities of equal value, commonly with the addition of a profit. The usual effect of the attempts of government to encourage consumption, is merely to prevent saving; that is, to promote unproductive consumption at the expense of reproductive, and diminish the national wealth by the very means which were intended to increase it. What a country wants to make it richer, is never consumption, but production. Where there is the latter, we may be sure that there is no want of the former. To produce, implies that the producer desires to consume; why else should he give himself useless labour? He may not wish to consume what he himself produces, but his motive for producing and selling is the desire to buy. Therefore, if the producers generally produce and sell more and more, they certainly also buy more and more. Each may not want more of what he himself produces, but each wants more of what some other produces; and, by producing what the other wants, hopes to obtain what the other produces. There will never, therefore, be a greater quantity produced, of commodities in general, than there are consumers for. But there may be, and always are, abundance of persons who have the inclination to become consumers of some commodity, but are unable to satisfy their wish, because they have not the means of producing either that, or anything to give in exchange for it. The legislator, therefore, needs not give himself any concern about consumption. There will always be consumption for everything which can be produced, until the wants of all who possess the means of producing are completely satisfied, and then production will not increase any farther. The legislator has to look solely to two points: that no obstacle shall exist to prevent those who have the means of producing, from employing those means as they find most for their interest; and that those who have not at present the means of producing, to the extent of their desire to consume, shall have every facility afforded to their acquiring the means, that, becoming producers, they may be enabled to consume. These general principles are now well understood by almost all who profess to have studied the subject, and are disputed by few except those who ostentatiously proclaim their contempt for such studies. We touch upon the question, not in the hope of rendering these fundamental truths clearer than they already are, but to perform a task, so useful and needful, that it is to be wished it were oftener deemed part of the business of those who direct their assaults against ancient prejudices, --that of seeing that no scattered particles of important truth are buried and lost in the ruins of exploded error. Every prejudice, which has long and extensively prevailed among the educated and intelligent, must certainly be borne out by some strong appearance of evidence; and when it is found that the evidence does not prove the received conclusion, it is of the highest importance to see what it does prove. If this be thought not worth inquiring into, an error conformable to appearances is often merely exchanged for an error contrary to appearances; while, even if the result be truth, it is paradoxical truth, and will have difficulty in obtaining credence while the false appearances remain. Let us therefore inquire into the nature of the appearances, which gave rise to the belief that a great demand, a brisk circulation, a rapid consumption (three equivalent expressions), are a cause of national prosperity. If every man produced for himself, or with his capital employed others to produce, everything which he required, customers and their wants would be a matter of profound indifference to him. He would be rich, if he had produced and stored up a large supply of the articles which he was likely to require; and poor, if he had stored up none at all, or not enough to last until he could produce more. The case, however, is different after the separation of employments. In civilized society, a single producer confines himself to the production of one commodity, or a small number of commodities; and his affluence depends, not solely upon the quantity of his commodity which he has produced and laid in store, but upon his success in finding purchasers for that commodity. It is true, therefore, of every particular producer or dealer, that a great demand, a brisk circulation, a rapid consumption, of the commodities which he sells at his shop or produces in his manufactory, is important to him. The dealer whose shop is crowded with customers, who can dispose of a product almost the very moment it is completed, makes large profits, while his next neighbour, with an equal capital but fewer customers, gains comparatively little. It was natural that, in this case, as in a hundred others, the analogy of an individual should be unduly applied to a nation: as it has been concluded that a nation generally gains in wealth by the conquest of a province, because an individual frequently does so by the acquisition of an estate; and as, because an individual estimates his riches by the quantity of money which he can command, it was long deemed an excellent contrivance for enriching a country, to heap up artificially the greatest possible quantity of the precious metals within it. Let us examine, then, more closely than has usually been done, the case from which the misleading analogy is drawn. Let us ascertain to what extent the two cases actually resemble; what is the explanation of the false appearance, and the real nature of the phenomenon which, being seen indistinctly, has led to a false conclusion. * * * * * We shall propose for examination a very simple case, but the explanation of which will suffice to clear up all other cases which fall within the same principle. Suppose that a number of foreigners with large incomes arrive in a country, and there expend those incomes: will this operation be beneficial, as respects the national wealth, to the country which receives these immigrants? Yes, say many political economists, if they save any part of their incomes, and employ them reproductively; because then an addition is made to the national capital, and the produce is a clear increase of the national wealth. But if the foreigner expends all his income unproductively, it is no benefit to the country, say they, and for the following reason. If the foreigner had his income remitted to him in bread and beef, coats and shoes, and all the other articles which he was desirous to consume, it would not be pretended that his eating, drinking, and wearing them, on our shores rather than on his own, could be of any advantage to us in point of wealth. Now, the case is not different if his income is remitted to him in some one commodity, as, for instance, in money. For whatever takes place afterwards, with a view to the supply of his wants, is a mere exchange of equivalents; and it is impossible that a person should ever be enriched by merely receiving an equal value in exchange for an equal value. When it is said that the purchases of the foreign consumer give employment to capital which would otherwise yield no profit to its owner, the same political economists reject this proposition as involving the fallacy of what has been called a "general glut." They say, that the capital, which any person has chosen to produce and to accumulate, can always find employment, since the fact that he has accumulated it proves that he had an unsatisfied desire; and if he cannot find anything to produce for the wants of other consumers, he can for his own. It is impossible to contest these propositions as thus stated. But there is one consideration which clearly shews, that there is something more in the matter than is here taken into the account; and this is, that the above reasoning tends distinctly to prove, that it does a tradesman no good to go into his shop and buy his goods. How can he be enriched? it might be asked. He merely receives a certain value in money, for an equivalent value in goods. Neither does this give employment to his capital; for there never exists more capital than can find employment, and if one person does not buy his goods another will; or if nobody does, there is over-production in that business, he can remove his capital, and find employment for it in another trade. Every one sees the fallacy of this reasoning as applied to individual producers. Every one knows that as applied to them it has not even the semblance of plausibility; that the wealth of a producer does in a great measure depend upon the number of his customers, and that in general every additional purchaser does really add to his profits. If the reasoning, which would be so absurd if applied to individuals, be applicable to nations, the principle on which it rests must require much explanation and elucidation. Let us endeavour to analyse with precision the real nature of the advantage which a producer derives from an addition to the number of his customers. For this purpose, it is necessary that we should premise a single observation on the meaning of the word capital. It is usually defined, the food, clothing, and other articles set aside for the consumption of the labourer, together with the materials and instruments of production. This definition appears to us peculiarly liable to misapprehension; and much vagueness and some narrow views have, we conceive, occasionally resulted from its being interpreted with too mechanical an adherence to the literal meaning of the words. The capital, whether of an individual or of a nation, consists, we apprehend, of all matters possessing exchangeable value, which the individual or the nation has in his or in its possession for the purpose of reproduction, and not for the purpose of the owner's unproductive enjoyment. All unsold goods, therefore, constitute a part of the national capital, and of the capital of the producer or dealer to whom they belong. It is true that tools, materials, and the articles on which the labourer is supported, are the only articles which are directly subservient to production: and if I have a capital consisting of money, or of goods in a warehouse, I can only employ them as means of production in so far as they are capable of being exchanged for the articles which conduce directly to that end. But the food, machinery, &c, which will ultimately be purchased with the goods in my warehouse, may at this moment not be in the country, may not be even in existence. If, after having sold the goods, I hire labourers with the money, and set them to work, I am surely employing capital, though the corn, which in the form of bread those labourers may buy with the money, may be now in warehouse at Dantzic, or perhaps not yet above ground. Whatever, therefore, is destined to be employed reproductively, either in its existing shape, or indirectly by a previous (or even subsequent) exchange, is capital. Suppose that I have laid out all the money I possess in wages and tools, and that the article I produce is just completed: in the interval which elapses before I can sell the article, realize the proceeds, and lay them out again in wages and tools, will it be said that I have no capital? Certainly not: I have the same capital as before, perhaps a greater, but it is locked up, as the expression is, and not disposable. When we have thus seen accurately what really constitutes capital, it becomes obvious, that of the capital of a country, there is at all times a very large proportion lying idle. The annual produce of a country is never any thing approaching in magnitude to what it might be if all the resources devoted to reproduction, if all the capital, in short, of the country, were in full employment. If every commodity on an average remained unsold for a length of time equal to that required for its production, it is obvious that, at any one time, no more than half the productive capital of the country would be really performing the functions of capital. The two halves would relieve one another, like the semichori in a Greek tragedy; or rather the half which was in employment would be a fluctuating portion, composed of varying parts; but the result would be, that each producer would be able to produce every year only half as large a supply of commodities, as he could produce if he were sure of selling them the moment the production was completed. This, or something like it, is however the habitual state, at every instant, of a very large proportion of all the capitalists in the world. The number of producers, or dealers, who turn over their capital, as the expression is, in the shortest possible time, is very small. There are few who have so rapid a sale for their wares, that all the goods which their own capital, or the capital which they can borrow, enables them to supply, are carried off as fast as they can be supplied. The majority have not an _extent of business_, at all adequate to the amount of the capital they dispose of. It is true that, in the communities in which industry and commerce are practised with greatest success, the contrivances of banking enable the possessor of a larger capital than he can employ in his own business, to employ it productively and derive a revenue from it notwithstanding. Yet even then, there is, of necessity, a great quantity of capital which remains fixed in the shape of implements, machinery, buildings, &c, whether it is only half employed, or in complete employment: and every dealer keeps a stock in trade, to be ready for a possible sudden demand, though he probably may not be able to dispose of it for an indefinite period. This perpetual non-employment of a large proportion of capital, is the price we pay for the division of labour. The purchase is worth what it costs; but the price is considerable. Of the importance of the fact which has just been noticed there are three signal proofs. One is, the large sum often given for the goodwill of a particular business. Another is, the large rent which is paid for shops in certain situations, near a great thoroughfare for example, which have no advantage except that the occupier may expect a larger body of customers, and be enabled to turn over his capital more quickly. Another is, that in many trades, there are some dealers who sell articles of an equal quality at a lower price than other dealers. Of course, this is not a voluntary sacrifice of profits: they expect by the consequent overflow of customers to turn over their capital more quickly, and to be gainers by keeping the whole of their capital in more constant employment, though on any given operation their gains are less. The reasoning cited in the earlier part of this paper, to show the uselessness of a mere purchaser or customer, for enriching a nation or an individual, applies only to the case of dealers who have already as much business as their capital admits of, and as rapid a sale for their commodities as is possible. To such dealers an additional purchaser is really of no use; for, if they are sure of selling all their commodities the moment those commodities are on sale, it is of no consequence whether they sell them to one person or to another. But it is questionable whether there be any dealers in whose case this hypothesis is exactly verified; and to the great majority it is not applicable at all. An additional customer, to most dealers, is equivalent to an increase of their productive capital. He enables them to convert a portion of their capital which was lying idle (and which could never have become productive in their hands until a customer was found) into wages and instruments of production; and if we suppose that the commodity, unless bought by him, would not have found a purchaser for a year after, then all which a capital of that value can enable men to produce during a year, is clear gain--gain to the dealer, or producer, and to the labourers whom he will employ, and thus (if no one sustains any corresponding loss) gain to the nation. The aggregate produce of the country for the succeeding year is, therefore, increased; not by the mere exchange, but by calling into activity a portion of the national capital, which, had it not been for the exchange, would have remained for some time longer unemployed. Thus there are actually at all times producers and dealers, of all, or nearly all classes, whose capital is lying partially idle, because they have not found the means of fulfilling the condition which the division of labour renders indispensable to the full employment of capital,--viz., that of exchanging their products with each other. If these persons could find one another out, they could mutually relieve each other from this disadvantage. Any two shopkeepers, in insufficient employment, who agreed to deal at each other's shops so long as they could there purchase articles of as good a quality as elsewhere, and at as low a price, would render the nation a service. It may be said that they must previously have dealt, to the same amount, with some other dealers; but this is erroneous, since they could only have obtained the means of purchasing by being previously enabled to sell. By their compact, each would gain a customer, who would call his capital into fuller employment; each therefore would obtain an increased produce; and they would thus be enabled to become better customers to each other than they could be to third parties. It is obvious that every dealer who has not business sufficient fully to employ his capital (which is the case with all dealers when they commence business, and with many to the end of their lives), is in this predicament simply for want of some one with whom to exchange his commodities; and as there are such persons to about the same degree probably in all trades, it is evident that if these persons sought one another out, they have their remedy in their own hands, and by each other's assistance might bring their capital into more full employment. We are now qualified to define the exact nature of the benefit which a producer or dealer derives from the acquisition of a new customer. It is as follows:-- 1. If any part of his own capital was locked up in the form of unsold goods, producing (for a longer period or a shorter) nothing at all; a portion of this is called into greater activity, and becomes more constantly productive. But to this we must add some further advantages. 2. If the additional demand exceeds what can be supplied by setting at liberty the capital which exists in the state of unsold goods; and if the dealer has additional resources, which were productively invested (in the public funds, for instance), but not in his own trade; he is enabled to obtain, on a portion of these, not mere interest, but profit, and so to gain that difference between the rate of profit and the rate of interest, which may be considered as "wages of superintendance." 3. If all the dealer's capital is employed in his own trade, and no part of it locked up as unsold goods, the new demand affords him additional encouragement to save, by enabling his savings to yield him not merely interest, but profit; and if he does not choose to save (or until he shall have saved), it enables him to carry on an additional business with borrowed capital, and so gain the difference between interest and profit, or, in other words, to receive wages of superintendance on a larger amount of capital. This, it will be found, is a complete account of all the gains which a dealer in any commodity can derive from an accession to the number of those who deal with him: and it is evident to every one, that these advantages are real and important, and that they are the cause which induces a dealer of any kind to desire an increase of his business. It follows from these premises, that the arrival of a new unproductive consumer (living on his own means) in any place, be that place a village, a town, or an entire country, is beneficial to that place, if it causes to any of the dealers of the place any of the advantages above enumerated, without withdrawing an equal advantage of the same kind from any other dealer of the same place. This accordingly is the test by which we must try all such questions, and by which the propriety of the analogical argument, from dealing with a tradesman to dealing with a nation, must be decided. Let us take, for instance, as our example, Paris, which is much frequented by strangers from various parts of the world, who, as sojourners there, live unproductively upon their means. Let us consider whether the presence of these persons is beneficial, in an _industrial_ point of view, to Paris. We exclude from the consideration that portion of the strangers' incomes which they pay to natives as direct remuneration for service, or labour of any description. This is obviously beneficial to the country. An increase in the funds expended in employing labour, whether that labour be productive or unproductive, tends equally to raise wages. The condition of the whole labouring class is, so far, benefited. It is true that the labourers thus employed by sojourners are probably, in part or altogether, withdrawn from productive employment. But this is far from being an evil; for either the situation of the labouring classes is improved, which is far more than an equivalent for a diminution in mere production, or the rise of wages acts as a stimulus to population, and then the number of productive labourers becomes as great as before. To this we may add, that what the sojourners pay as wages of labour or service (whether constant or casual), though expended unproductively by the first possessor, may, when it passes into the hands of the receivers, be by them saved, and invested in a productive employment. If so, a direct addition is made to the national capital. All this is obvious, and is sufficiently allowed by political economists; who have invariably set apart the gains of all persons coming under the class of domestic servants, as real advantages arising to a place from the residence there of an increased number of unproductive consumers. We have only to examine whether the purchases of commodities by these unproductive consumers, confer the same kind of benefit upon the village, town, or nation, which is bestowed upon a particular tradesman by dealing at his shop. Now it is obvious that the sojourners, on their arrival, confer the benefit in question upon some dealers, who did not enjoy it before. They purchase their food, and many other articles, from the dealers in the place. They, therefore, call the capital of some dealers, which was locked up in unsold goods, into more active employment. They encourage them to save, and enable them to receive wages of superintendance upon a larger amount of capital. These effects being undeniable, the question is, whether the presence of the sojourners deprives any others of the Paris dealers of a similar advantage. It will be seen that it does; and nothing will then remain but a comparison of the amounts. It is obvious to all who reflect (and was shown in the paper which precedes this) that the remittances to persons who expend their incomes in foreign countries are, after a slight passage of the precious metals, defrayed in commodities: and that the result commonly is, an increase of exports and a diminution of imports, until the latter fall short of the former by the amount of the remittances. The arrival, therefore, of the strangers (say from England), while it creates at Paris a market for commodities equivalent in value to their funds, displaces in the market other commodities to an equal value. To the extent of the increase of exports from England into France in the way of remittance, it introduces additional commodities which, by their cheapness, displace others formerly produced in that country. To the extent of the diminution of imports into England from France, commodities which existed or which were habitually produced in that country are deprived of a market, or can only find one at a price not sufficient to defray the cost. It must, therefore, be a matter of mere accident, if by arriving in a place, the new unproductive consumer causes any net advantage to its industry, of the kind which we are now examining. Not to mention that this, like any other change in the channels of trade, may render useless a portion of fixed capital, and so far injure the national wealth. A distinction, however, must here be made. The place to which the new unproductive consumers have come, may be a town or village, as well as a country. If a town or village, it may either be or not be a place having an export trade. If the place had no previous trade except with the immediate neighbourhood, there are no exports and imports, by the new arrangement of which, the remittance can be made. There is no capital, formerly employed in manufacturing for the foreign market, which is now brought into less full employment. Yet the remittance evidently is still made in commodities, but in this case without displacing any which were produced before. To shew this, it is necessary to make the following remarks. The reason why towns exist, is that _ceteris paribus_ it is convenient, in order to save cost of carriage, that the production of commodities should take place as far as practicable in the immediate vicinity of the consumer. Capital finds its way so easily from town to country and from country to town, that the amount of capital in the town will be regulated wholly by the amount which can be employed there more conveniently than elsewhere. Consequently the capital of a place will be such as is sufficient 1st. To produce all commodities which from local circumstances can be produced there at less cost than elsewhere: and if this be the case to any great extent, it will be an exporting town. When we say _produced_, we may add, or _stored_. 2nd. To produce and retail the commodities which are consumed by the inhabitants of the town, and the place of whose production is in other respects a matter of indifference. To the inhabitants of the town must be added such dwellers in the adjoining country, as are nearer to that place than to any other equally well furnished market. Now, if new unproductive consumers resort to the place, it is clear that for the latter of these two purposes, more capital will be required than before. Consequently, if less is not required for the former purpose, more capital will establish itself at the place. Until this additional capital has arrived, the producers and dealers already on the spot will enjoy great advantages. Every particle of their own capital will be called into the most active employment. What their capital does not enable them to supply, will be got from others at a distance, who cannot supply it on such favourable terms; consequently they will be in the predicament of possessing a partial monopoly --receiving for every thing a price regulated by a higher cost of production than they are compelled to pay. They also, being in possession of the market, will be enabled to make a large portion of the new capital pass through their hands, and thus to earn wages of superintendance upon it. If, indeed, the place from whence the strangers came, previously traded with that where they have taken up their abode, the effect of their arrival is, that the exports of the town will diminish, and that it will be supplied from abroad with something which it previously produced at home. In this way an amount of capital will be set free equal to that required, and there will be no increase on the whole. The removal of the court from London to Birmingham would not necessarily, though it would probably [6], increase the amount of capital in the latter place. The afflux of money to Birmingham, and its efflux from London, would render it cheaper to make some articles in London for Birmingham consumption; and to make others in London for home consumption, which were formerly brought from Birmingham. But instead of Birmingham, an exporting town, suppose a village, or a town which only produced and retailed for itself and its immediate vicinity. The remittances must come thither in the shape of money; and though the money would not remain, but would be sent away in exchange for commodities, it would, however, first pass through the hands of the producers and dealers in the place, and would by them be exported in exchange for the articles which they require--viz. the materials, tools, and subsistence necessary for the increased production now required of them, and articles of foreign luxury for their own increased unproductive consumption. These articles would not displace any formerly made in the place, but on the contrary, would forward the production of more. Hence we may consider the following propositions as established: 1. The expenditure of absentees (the case of domestic servants excepted,) is not necessarily any loss to the _country_ which they leave, or gain to the _country_ which they resort to (save in the manner shown in Essay I.): for almost every _country_ habitually exports and imports to a much greater value than the incomes of its absentees, or of the foreign sojourners within it. 2. But sojourners often do much good to the _town_ or village which they resort to, and absentees harm to that which they leave. The capital of the petty tradesman in a small town near an absentee's estate, is deprived of the market for which it is conveniently situated, and must resort to another to which other capitals lie nearer, and where it is consequently outbid, and gains less; obtaining only the same price, with greater expenses. But this evil would be equally occasioned, if, instead of going abroad, the absentee had removed to his own capital city. If the tradesman could, in the latter case, remove to the metropolis, or in the former, employ himself in producing increased exports, or in producing for home consumption articles now no longer imported, each in the place most convenient for that operation; he would not be a loser, though the place which he was obliged to leave might be said to lose. Paris undoubtedly gains much by the sojourn of foreigners, while the counteracting loss by diminution of exports from France is suffered by the great trading and manufacturing towns, Rouen, Bordeaux, Lyons, &c, which also suffer the principal part of the loss by importation of articles previously produced at home. The capital thus set free, finds its most convenient seat to be Paris, since the business to which it must turn is the production of articles to be unproductively consumed by the sojourners. The great trading towns of France would undoubtedly be more flourishing, if France were not frequented by foreigners. Rome and Naples are perhaps purely benefited by the foreigners sojourning there: for they have so little external trade, that their case may resemble that of the village in our hypothesis. Absenteeism, therefore, (except as shown in the first Essay,) is a local, not a national evil; and the resort of foreigners, in so far as they purchase for unproductive consumption, is not, in any commercial country, a national, though it may be a local good. From the considerations which we have now adduced, it is obvious what is meant by such phrases as a _brisk demand_, and a rapid circulation. There is a brisk demand and a rapid circulation, when goods, generally speaking, are sold as fast as they can be produced. There is slackness, on the contrary, and stagnation, when goods, which have been produced, remain for a long time unsold. In the former case, the capital which has been locked up in production is disengaged as soon as the production is completed; and can be immediately employed in further production. In the latter case, a large portion of the productive capital of the country is lying in temporary inactivity. From what has been already said, it is obvious that periods of "brisk demand" are also the periods of greatest production: the national capital is never called into full employment but at those periods. This, however, is no reason for desiring such times; it is not desirable that the whole capital of the country should be in full employment. For, the calculations of producers and traders being of necessity imperfect, there are always some commodities which are more or less in excess, as there are always some which are in deficiency. If, therefore, the whole truth were known, there would always be some classes of producers contracting, not extending, their operations. If _all_ are endeavouring to extend them, it is a certain proof that some general delusion is afloat. The commonest cause of such delusion is some general, or very extensive, rise of prices (whether caused by speculation or by the currency) which persuades all dealers that they are growing rich. And hence, an increase of production really takes place during the progress of depreciation, as long as the existence of depreciation is not suspected; and it is this which gives to the fallacies of the currency school, principally represented by Mr. Attwood, all the little plausibility they possess. But when the delusion vanishes and the truth is disclosed, those whose commodities are relatively in excess must diminish their production or be ruined: and if during the high prices they have built mills and erected machinery, they will be likely to repent at leisure. In the present state of the commercial world, mercantile transactions being carried on upon an immense scale, but the remote causes of fluctuations in prices being very little understood, so that unreasonable hopes and unreasonable fears alternately rule with tyrannical sway over the minds of a majority of the mercantile public; general eagerness to buy and general reluctance to buy, succeed one another in a manner more or less marked, at brief intervals. Except during short periods of transition, there is almost always either great briskness of business or great stagnation; either the principal producers of almost all the leading articles of industry have as many orders as they can possibly execute, or the dealers in almost all commodities have their warehouses full of unsold goods. In this last ease, it is commonly said that there is a general superabundance; and as those economists who have contested the possibility of general superabundance, would none of them deny the possibility or even the frequent occurrence of the phenomenon which we have just noticed, it would seem incumbent on them to show, that the expression to which they object is not applicable to a state of things in which all or most commodities remain unsold, in the same sense in which there is said to be a superabundance of any one commodity when it remains in the warehouses of dealers for want of a market. This is merely a question of naming, but an important one, as it seems to us that much apparent difference of opinion has been produced by a mere difference in the mode of describing the same facts, and that persons who at bottom were perfectly agreed, have considered each other as guilty of gross error, and sometimes oven misrepresentation, on this subject. In order to afford the explanations, with which it is necessary to take the doctrine of the impossibility of an excess of all commodities, we must advert for a moment to the argument by which this impossibility is commonly maintained. There can never, it is said, be a want of buyers for all commodities; because whoever offers a commodity for sale, desires to obtain a commodity in exchange for it, and is therefore a buyer by the mere fact of his being a seller. The sellers and the buyers, for all commodities taken together, must, by the metaphysical necessity of the case, be an exact equipoise to each other; and if there be more sellers than buyers of one thing, there must be more buyers than sellers for another. This argument is evidently founded on the supposition of a state of barter; and, on that supposition, it is perfectly incontestable. When two persons perform an act of barter, each of them is at once a seller and a buyer. He cannot sell without buying. Unless he chooses to buy some other person's commodity, he does not sell his own. If, however, we suppose that money is used, these propositions cease to be exactly true. It must be admitted that no person desires money for its own sake, (unless some very rare cases of misers be an exception,) and that he who sells his commodity, receiving money in exchange, does so with the intention of buying with that same money some other commodity. Interchange by means of money is therefore, as has been often observed, ultimately nothing but barter. But there is this difference--that in the case of barter, the selling and the buying are simultaneously confounded in one operation; you sell what you have, and buy what you want, by one indivisible act, and you cannot do the one without doing the other. Now the effect of the employment of money, and even the utility of it, is, that it enables this one act of interchange to be divided into two separate acts or operations; one of which may be performed now, and the other a year hence, or whenever it shall be most convenient. Although he who sells, really sells only to buy, he needs not buy at the same moment when he sells; and he does not therefore necessarily add to the _immediate_ demand for one commodity when he adds to the supply of another. The buying and selling being now separated, it may very well occur, that there may be, at some given time, a very general inclination to sell with as little delay as possible, accompanied with an equally general inclination to defer all purchases as long as possible. This is always actually the case, in those periods which are described as periods of general excess. And no one, after sufficient explanation, will contest the possibility of general excess, in this sense of the word. The state of things which we have just described, and which is of no uncommon occurrence, amounts to it. For when there is a general anxiety to sell, and a general disinclination to buy, commodities of all kinds remain for a long time unsold, and those which find an immediate market, do so at a very low price. If it be said that when all commodities fall in price, the fall is of no consequence, since mere money price is not material while the relative value of all commodities remains the same, we answer that this would be true if the low prices were to last for ever. But as it is certain that prices will rise again sooner or later, the person who is obliged by necessity to sell his commodity at a low money price is really a sufferer, the money he receives sinking shortly to its ordinary value. Every person, therefore, delays selling if he can, keeping his capital unproductive in the mean time, and sustaining the consequent loss of interest. There is stagnation to those who are not obliged to sell, and distress to those who are. It is true that this state can be only temporary, and must even be succeeded by a reaction of corresponding violence, since those who have sold without buying will certainly buy at last, and there will then be more buyers than sellers. But although the general over-supply is of necessity only temporary, this is no more than may be said of every partial over-supply. An overstocked state of the market is always temporary, and is generally followed by a more than common briskness of demand. In order to render the argument for the impossibility of an excess of all commodities applicable to the case in which a circulating medium is employed, money must itself be considered as a commodity. It must, undoubtedly, be admitted that there cannot be an excess of all other commodities, and an excess of money at the same time. But those who have, at periods such as we have described, affirmed that there was an excess of all commodities, never pretended that money was one of these commodities; they held that there was not an excess, but a deficiency of the circulating medium. What they called a general superabundance, was not a superabundance of commodities relatively to commodities, but a superabundance of all commodities relatively to money. What it amounted to was, that persons in general, at that particular time, from a general expectation of being called upon to meet sudden demands, liked better to possess money than any other commodity. Money, consequently, was in request, and all other commodities were in comparative disrepute. In extreme cases, money is collected in masses, and hoarded; in the milder cases, people merely defer parting with their money, or coming under any new engagements to part with it. But the result is, that all commodities fall in price, or become unsaleable. When this happens to one single commodity, there is said to be a superabundance of that commodity; and if that be a proper expression, there would seem to be in the nature of the case no particular impropriety in saying that there is a superabundance of all or most commodities, when all or most of them are in this same predicament. It is, however, of the utmost importance to observe that excess of all commodities, in the only sense in which it is possible, means only a temporary fall in their value relatively to money. To suppose that the markets for all commodities could, in any other sense than this, be overstocked, involves the absurdity that commodities may fall in value relatively to themselves; or that, of two commodities, each can fall relatively to the other, A becoming equivalent to B-_x_, and B to A-_x_, at the same time. And it is, perhaps, a sufficient reason for not using phrases of this description, that they suggest the idea of excessive production. A want of market for one article may arise from excessive production of that article; but when commodities in general become unsaleable, it is from a very different cause; there cannot be excessive production of commodities in general. The argument against the possibility of general over-production is quite conclusive, so far as it applies to the doctrine that a country may accumulate capital too fast; that produce in general may, by increasing faster than the demand for it, reduce all producers to distress. This proposition, strange to say, was almost a received doctrine as lately as thirty years ago; and the merit of those who have exploded it is much greater than might be inferred from the extreme obviousness of its absurdity when it is stated in its native simplicity. It is true that if all the wants of all the inhabitants of a country were fully satisfied, no further capital could find useful employment; but, in that case, none would be accumulated. So long as there remain any persons not possessed, we do not say of subsistence, but of the most refined luxuries, and who would work to possess them, there is employment for capital; and if the commodities which these persons want are not produced and placed at their disposal, it can only be because capital does not exist, disposable for the purpose of employing, if not any other labourers, those very labourers themselves, in producing the articles for their own consumption. Nothing can be more chimerical than the fear that the accumulation of capital should produce poverty and not wealth, or that it will ever take place too fast for its own end. Nothing is more true than that it is produce which constitutes the market for produce, and that every increase of production, if distributed without miscalculation among all kinds of produce in the proportion which private interest would dictate, creates, or rather constitutes, its own demand. This is the truth which the deniers of general over-production have seized and enforced; nor is it pretended that anything has been added to it, or subtracted from it, in the present disquisition. But it is thought that those who receive the doctrine accompanied with the explanations which we have given, will understand, more clearly than before, what is, and what is not, implied in it; and will see that, when properly understood, it in no way contradicts those obvious facts which are universally known and admitted to be not only of possible, but of actual and even frequent occurrence. The doctrine in question only appears a paradox, because it has usually been so expressed as apparently to contradict these well-known facts; which, however, were equally well known to the authors of the doctrine, who, therefore, can only have adopted from inadvertence any form of expression which could to a candid person appear inconsistent with it. The essentials of the doctrine are preserved when it is allowed that there cannot be permanent excess of production, or of accumulation; though it be at the same time admitted, that as there may be a temporary excess of any one article considered separately, so may there of commodities generally, not in consequence of over-production, but of a want of commercial confidence. NOTE: [6] Probably; because most articles of an ornamental description being still required from the same makers, these makers, with their capital, would probably follow their customers, Besides, from place to place within the same country, most persons will lather change their habitation than their employment. But the moving on this score would be reciprocal. ESSAY III. ON THE WORDS PRODUCTIVE AND UNPRODUCTIVE. It would probably be difficult to point out any two words, respecting the proper use of which political economists have been more divided, than they have been concerning the two words _productive_ and _unproductive_; whether considered as applied to _labour_, to _consumption_, or to _expenditure_. Although this is a question solely of nomenclature, it is one of sufficient importance to be worth another attempt to settle it satisfactorily. For, although writers on political economy have not agreed in the ideas which they were accustomed to annex to these terms, the terms have generally been employed to denote ideas of very great importance, and it is impossible that some vagueness should not have been thrown upon the ideas themselves by looseness in the use of the words by which they are habitually designated. Further, so long as the pedantic objection to the introduction of new technical terms continues, accurate thinkers on moral and political subjects are limited to a very scanty vocabulary for the expression of their ideas. It therefore is of great importance that the words with which mankind are familiar, should be turned to the greatest possible advantage as instruments of thought; that one word should not be used as the sign of an idea which is already sufficiently expressed by another word; and that words which are required to denote ideas of great importance, should not be usurped for the expression of such as are comparatively insignificant. The phrases _productive labour_, and _productive consumption_, have been employed by some writers on political economy with very great latitude. They have considered, and classed, as productive labour and productive consumption, all labour which serves any _useful_ purpose--all consumption which is not _waste_. Mr. M'Culloch has asserted, _totidem verbis_, that the labour of Madame Pasta was as well entitled to be called productive labour as that of a cotton spinner. Employed in this sense, the words _productive_ and _unproductive_ are superfluous, since the words _useful_ and _agreeable_ on the one hand, _useless_ and _worthless_ on the other, are quite sufficient to express all the ideas to which the words _productive_ and _unproductive_ are here applied. This use of the terms, therefore, is subversive of the ends of language. Those writers who have employed the words in a more limited sense, have usually understood by productive or unproductive labour, labour which is productive of wealth, or unproductive of wealth. But what is wealth? And here the words productive and unproductive have been affected with additional ambiguities, corresponding to the different extension which different writers have given to the term wealth. Some have given the name of wealth to _all things_ which tend to the use or enjoyment of mankind, and which possess exchangeable value. This last clause is added to exclude air, the light of the sun, and any other things which can be obtained in unlimited quantity without labour or sacrifice; together with all such things as, though produced by labour, are not held in sufficient general estimation to command any price in the market. But when this definition came to be explained, many persons were disposed to interpret "_all things_ which tend to the use or enjoyment of man," as implying only all _material_ things. _Immaterial_ products they refused to consider as wealth; and labour or expenditure which yielded nothing but immaterial products, they characterised as unproductive labour and unproductive expenditure. To this it was, or might have been, answered, that according to this classification, a carpenter's labour at his trade is productive labour, but the same individual's labour in learning his trade was unproductive labour. Yet it is obvious that, on both occasions, his labour tended exclusively to what is allowed to be production: the one was equally indispensable with the other, to the ultimate result. Further, if we adopted the above definition, we should be obliged to say that a nation whose artisans were twice as skilful as those of another nation, was not, _ceteris paribus_, more wealthy; although it is evident that every one of the results of wealth, and everything for the sake of which wealth is desired, would be possessed by the former country in a higher degree than by the latter. Every classification according to which a basket of cherries, gathered and eaten the next minute, are called wealth, while that title is denied to the acquired skill of those who are acknowledged to be productive labourers, is a purely arbitrary division, and does not conduce to the ends for which classification and nomenclature are designed. In order to get over all difficulties, some political economists seem disposed to make the terms express a distinction sufficiently definite indeed, but more completely arbitrary, and having less foundation in nature, than any of the former. They will not allow to any labour or to any expenditure the name of productive, unless the produce which it yields returns into the hands of the very person who made the outlay. Hedging and ditching they term productive labour, though those operations conduce to production only indirectly, by protecting the produce from destruction; but the necessary expenses incurred by a government for the protection of property are, they insist upon it, consumed unproductively: though, as has been well pointed out by Mr. M'Culloch, these expenses, in their relation to the national wealth, are exactly analogous to the wages of a hedger or a ditcher. The only difference is, that the farmer, who pays for the hedging and ditching, is the person to whom the consequent increase of production accrues, while the government, which is at the expense of police officers and courts of justice, does not, as a necessary consequence, get back into its own coffers the increase of the national wealth resulting from the security of property. It would be endless to point out the oddities and incongruities which result from this classification. Whether we take the words wealth and production in the largest, or in the most restricted sense in which they have ever yet been employed, nobody will dispute that roads, bridges, and canals, contribute in an eminent degree, and in a very direct manner, to the increase of production and wealth. The labour and pecuniary resources employed in their construction would, according to the above theory, be considered productive, if every occupier of land were compelled by law to construct so much of the road, or canal, as passes through his own farm. If, instead of this, the government makes the road, and throws it open to the public toll-free, the labour and expenditure would be, on the above system, clearly unproductive. But if the government, or an association of individuals, made the road, and imposed a toll to defray the expense, we do not see how these writers could refuse to the outlay the title of productive expenditure. It would follow, that the very same labour and expense, if given gratuitously, must be called unproductive, which, if a charge had been made for it, would have been called productive. When these consequences of the purely arbitrary classification to which we allude have been pointed out and complained of, the only answer which we have ever seen made to the objection is, that the line of demarcation must be drawn somewhere, and that in every classification there are intermediate cases, which might have been included, with almost equal propriety, either in the one class or in the other. This answer appears to us to indicate the want of a sufficiently accurate and discriminating perception, what is the kind of inaccuracy which generally cannot be avoided in a classification, and what is that other kind of inaccuracy, from which it always may be, and should be, exempt. The classes themselves may be, mentally speaking, perfectly definite, though it may not always be easy to say to which of them a particular object belongs. When it is uncertain in which of two classes an object should be placed, if the classification be properly made, and properly expressed, the uncertainty can turn only upon a matter of fact. It is uncertain to which class the object belongs, because it is doubtful whether it possesses in a greater degree the characteristics of the one class or those of the other. But the characteristics themselves may be defined and distinguished with the nicest exactness, and always ought to be so. Especially ought they in a case like the present, because here it is only the distinction between the ideas which is of any importance. That we should be able with ease to portion out all employments between the two classes, does not happen to be of any particular consequence. It is frequently said that classification is a mere affair of convenience. This assertion is true in one sense, but not if its meaning be, that the most proper classification is that in which it is easiest to say whether an object belongs to one class or to the other. The use of classification is, to fix attention upon the distinctions which exist among things; and that is the best classification, which is founded upon the most important distinctions, whatever be the facilities which it may afford of ticketing and arranging the different objects which exist in nature. In fixing, therefore, the meaning of the words productive and unproductive, we ought to endeavour to render them significative of the most important distinctions which, without too glaring a violation of received usage, they can be made to express. We ought further, when we are restricted to the employment of old words, to endeavour as far as possible that it shall not be necessary to struggle against the old associations with those words. We should, if possible, give the words such a meaning, that the propositions in which people are accustomed to use them, shall as far as possible still be true; and that the feelings habitually excited by them, shall be such as the things to which we mean to appropriate them ought to excite. We shall endeavour to unite these conditions in the result of the following enquiry. In whatever manner political economists may have settled the definition of productive and unproductive labour or consumption, the consequences which they have drawn from the definition are nearly the same. In proportion to the amount of the productive labour and consumption of a country, the country, they all allow, is enriched: in proportion to the amount of the unproductive labour and consumption, the country is impoverished. Productive expenditure they are accustomed to view as a gain; unproductive expenditure, however useful, as a sacrifice. Unproductive expenditure of what was destined to be expended productively, they always characterise as a squandering of resources, and call it profusion and prodigality. The productive expenditure of that which might, without encroaching upon capital, be expended unproductively, is called saving, economy, frugality. Want, misery, and starvation, are described as the lot of a nation which annually employs less and less of its labour and resources in production; growing comfort and opulence as the result of an annual increase in the quantity of wealth so employed. Let us then examine what qualities in expenditure, and in the employment of labour, are those from which all the consequences above mentioned really flow. The end to which all labour and all expenditure are directed, is twofold. Sometimes it is _enjoyment_ immediately; the fulfilment of those desires, the gratification of which is wished for on its own account. Whenever labour or expense is not incurred _immediately_ for the sake of enjoyment, and is yet not absolutely wasted, it must be incurred for the purpose of enjoyment _indirectly_ or mediately; by either repairing and perpetuating, or adding, to the _permanent sources_ of enjoyment. Sources of enjoyment may be accumulated and stored up; enjoyment itself cannot. The wealth of a country consists of the sum total of the permanent sources of enjoyment, whether material or immaterial, contained in it: and labour or expenditure which tends to augment or to keep up these permanent sources, should, we conceive, be termed productive. Labour which is employed for the purpose of directly affording enjoyment, such as the labour of a performer on a musical instrument, we term unproductive labour. Whatever is consumed by such a performer, we consider as unproductively consumed: the accumulated total of the sources of enjoyment which the nation possesses, is diminished by the amount of what he has consumed: whereas, if it had been given to him in exchange for his services in producing food or clothing, the total of the permanent sources of enjoyment in the country might have been not diminished but increased. The performer on the musical instrument then is, so far as respects that act, not a productive, but an unproductive labourer. But what shall we say of the workman who made the musical instrument? He, most persons would say, is a productive labourer; and with reason; because the musical instrument is a permanent source of enjoyment, which does not begin and end with the enjoying, and therefore admits of being accumulated. But the _skill_ of the musician is a permanent source of enjoyment, as well as the instrument which he plays upon: and although skill is not a material object, but a quality of an object, viz., of the hands and mind of the performer; nevertheless skill possesses exchangeable value, is acquired by labour and capital, and is capable of being stored and accumulated. Skill, therefore, must be considered as wealth; and the labour and funds employed in acquiring skill in anything tending to the advantage or pleasure of mankind, must be considered to be productively employed and expended. The skill of a productive labourer is analogous to the machinery he works with: neither of them is enjoyment, nor conduces directly to it, but both conduce indirectly to it, and both in the same way. If a spinning-jenny be wealth, the spinner's skill is also wealth. If the mechanic who made the spinning-jenny laboured productively, the spinner also laboured productively when he was learning his trade: and what they both consumed was consumed productively, that is to say, its consumption did not tend to diminish, but to increase the sum of the permanent sources of enjoyment in the country, by effecting a new creation of those sources, more than equal to the amount of the consumption. The skill of a tailor, and the implements he employs, contribute in the same way to the convenience of him who wears the coat, namely, a remote way: it is the coat itself which contributes immediately. The skill of Madame Pasta, and the building and decorations which aid the effect of her performance, contribute in the same way to the enjoyment of the audience, namely, an immediate way, without any intermediate instrumentality. The building and decorations are consumed unproductively, and Madame Pasta labours and consumes unproductively; for the building is used and worn out, and Madame Pasta performs, immediately for the spectators' enjoyment, and without leaving, as a consequence of the performance, any permanent result possessing exchangeable value: consequently the epithet unproductive must be equally applied to the gradual wearing out of the bricks and mortar, the nightly consumption of the more perishable "properties" of the theatre, the labour of Madame Pasta in acting, and of the orchestra in playing. But notwithstanding this, the architect who built the theatre was a productive labourer; so were the producers of the perishable articles; so were those who constructed the musical instruments; and so, we must be permitted to add, were those who instructed the musicians, and all persons who, by the instructions which they may have given to Madame Pasta, contributed to the formation of her talent. All these persons contributed to the enjoyment of the audience in the same way, and that a remote way, viz., by the production of a _permanent source of enjoyment_. The difference between this case, and the case of the cotton spinner already adverted to, is this. The spinning-jenny, and the skill of the cotton spinner, are not only the result of productive labour, but are themselves productively consumed. The musical instrument and the skill of the musician are equally the result of productive labour, but are themselves unproductively consumed. Let us now consider what kinds of labour, and of consumption or expenditure, will be classed as productive, and what as unproductive, according to this rule. The following are always productive: Labour and expenditure, of which the direct object or effect is the creation of some material product useful or agreeable to mankind. Labour and expenditure, of which the direct effect and object are, to endow human or other animated beings with faculties or qualities useful or agreeable to mankind, and possessing exchangeable value. Labour and expenditure, which without having for their direct object the creation of any useful material product or bodily or mental faculty or quality, yet tend indirectly to promote one or other of those ends, and are exerted or incurred solely for that purpose. The following are partly productive and partly unproductive, and cannot with propriety be ranged decidedly with either class: Labour or expenditure which does indeed create, or promote the creation of, some useful material product or bodily or mental faculty or quality, but which is not incurred or exerted for that sole end; having also for another, and perhaps its principal end, enjoyment, or the promotion of enjoyment. Such are the labour of the judge, the legislator, the police-officer, the soldier; and the expenditure incurred for their support. These functionaries protect and secure mankind in the exclusive possession of such material products or acquired faculties as belong to them; and by the security which they so confer, they indirectly increase production in a degree far more than equivalent to the expense which is necessary for their maintenance. But this is not the only purpose for which they exist; they protect mankind, not merely in the possession of their permanent resources, but also in their actual enjoyments; and so far, although highly useful, they cannot, conformably to the distinction which we have attempted to lay down, be considered productive labourers. Such, also, are the labour and the wages of domestic servants. Such persons are entertained mainly as subservient to mere enjoyment; but most of them occasionally, and some habitually, render services which must be considered as of a productive nature; such as that of cookery, the last stage in the manufacture of food; or gardening, a branch of agriculture. The following are wholly unproductive: Labour exerted, and expenditure incurred, directly and exclusively for the purpose of enjoyment, and not calling into existence anything, whether substance or quality, but such as begins and perishes in the enjoyment. Labour exerted and expenditure incurred uselessly, or in pure waste, and yielding neither direct enjoyment nor permanent sources of enjoyment. It may be objected, that expenditure incurred even for pure enjoyment promotes production indirectly, by inciting to exertion. Thus the view of the splendour of a rich establishment is supposed by some writers to produce upon the mind of an indigent spectator an earnest desire of enjoying the same luxuries, and a consequent purpose of working with vigour and diligence, and saving from his earnings, thus increasing the productive capital of the country. It is true that mankind are, for the most part, excited to productive industry solely by the desire of subsequently consuming the result of their labour and accumulation. The consumption called unproductive, viz., that of which the direct result is enjoyment, is in reality the end, to which production is only the means; and a desire for the end, is what alone impels any one to have recourse to the means. But, notwithstanding this, it is of the greatest importance to mark the distinction between the labour and the consumption which have enjoyment for their immediate end, and the labour and the consumption of which the immediate end is reproduction. Though the sight of the former may still further stimulate that desire for the enjoyments afforded by wealth, which the mere knowledge, without the immediate view, would suffice to excite (and without dwelling on the consideration that if the example of a large expenditure excites one individual to accumulation, it encourages two to prodigal expense); still, if we look only to the effects which are intended, or to those which immediately follow from the consumption, and whose connexion with it can be distinctly traced, it evidently renders a country poorer in the permanent sources of enjoyment; while reproductive consumption leaves the country richer in these same sources. Besides, if what is spent for mere pleasure promotes indirectly the increase of wealth, it can only be by inducing others _not_ to expend on mere pleasure. Before quitting the subject, one more observation should be added. It must not be supposed that what is expended upon unproductive labourers is necessarily, the whole of it, unproductively consumed. The unproductive labourers may save part of their wages, and invest them in a productive employment. It is not unusual to speak of what is paid in wages to a labourer as being thereby _consumed_, as if all profit and loss to the nation were to be seen in the capitalist's account-book. What is paid for productive labour is said to be productively consumed; what is paid for unproductive labour is said to be consumed unproductively. It would be proper to say, not that it is productively or unproductively _consumed_, but productively or unproductively _expended_; otherwise, we shall be obliged to say that it is consumed twice over; the first time unproductively, perhaps, and the second, it may be, productively. To pronounce in which way the wages of the labourer are consumed, we must follow them into the labourer's own hands. As much as is necessary to keep the productive labourer in perfect health and fitness for his employment, may be said to be consumed productively. To this should be added what he expends in rearing children to the age at which they become capable of productive industry. If the state of the market for labour be such as to afford him more, this he may either save, or, as the common expression is, he may spend it. If he saves any portion, this (unless it be merely hoarded) he intends to employ productively, and it will be productively consumed. If he spends it, the consumption is for enjoyment immediately, and is therefore unproductive. This suggests another correction in the established language. Political economists generally define the "net produce" to be that portion of the gross annual produce of a country which remains after replacing the capital annually consumed. This, as they proceed to explain, consists of profits and rent; wages being included in the other portion of the gross produce, that which goes to replace capital. After this definition, they usually proceed to tell us that the net produce, and that alone, constitutes the fund from which a nation can accumulate, and add to its capital, as also that which it can, without retrograding in wealth, expend unproductively, or for enjoyment. Now, it is impossible that both the above propositions can be true. If the net produce is that which remains after replacing capital, then net produce is not the only fund out of which accumulation may be made: for accumulation may be made from wages; this is in all countries one of the great sources, and in countries like America perhaps the greatest source of accumulation. If, on the other hand, it is desirable to reserve the name of net produce to denote the fund available for accumulation or for unproductive consumption, we must define net produce differently. The definition which appears the best adapted to render the ordinary doctrines relating to net produce true, would be this: The net produce of a country is whatever is annually produced beyond what is necessary for maintaining the stock of materials and implements unimpaired, for keeping all productive labourers alive and in condition for work, and for just keeping up their numbers without increase. What is required for these purposes, or, in other words, for keeping up the productive resources of the country, cannot be diverted from its destination without rendering the nation as a whole poorer. But all which is produced beyond this, whether it be in the hands of the labourer, of the capitalist, or of any of the numerous varieties of rent-owners, may be taken for immediate enjoyment, without prejudice to the productive resources of the community; and whatever part of it is not so taken, constitutes a clear addition to the national capital, or to the permanent sources of enjoyment. ESSAY IV. ON PROFITS, AND INTEREST. The profits of stock are the surplus which remains to the capitalist after replacing his capital: and the ratio which that surplus bears to the capital itself, is the _rate_ of profit. This being the definition of profits, it might seem natural to adopt, as a sufficient theory in regard to the rate of profit, that it depends upon the productive power of capital. Some countries are favoured beyond others, either by nature or art, in the means of production. If the powers of the soil, or of machinery, enable capital to produce what is necessary for replacing itself, and twenty per cent more, profits will be twenty per cent; and so on. This, accordingly, is a popular mode of speaking on the subject of profits; but it has only the semblance, not the reality, of an explanation. The "productive power of capital," though a common, and, for some purposes, a convenient expression, is a delusive one. Capital, strictly speaking, has no productive power. The only productive power is that of labour; assisted, no doubt, by tools, and acting upon materials. That portion of capital which consists of tools and materials, may be said, perhaps, without any great impropriety, to have a productive power, because they contribute, along with labour, to the accomplishment of production. But that portion of capital which consists of wages, has no productive power of its own. Wages have no productive power; they are the price of a productive power. Wages do not contribute, along with labour, to the production of commodities, no more than the price of tools contributes along with the tools themselves. If labour could be had without purchase, wages might be dispensed with. That portion of capital which is expended in the wages of labour, is only the means by which the capitalist procures to himself, in the way of purchase, the use of that labour in which the power of production really resides. The proper view of capital is, that anything whatever, which a person possesses, constitutes his capital, provided he is able, and intends, to employ it, not in consumption for the purpose of enjoyment, but in possessing himself of the means of production, with the intention of employing those means productively. Now the means of production are labour, implements, and materials. The only productive power which anywhere exists, is the productive power of labour, implements, and materials. We need not, on this account, altogether proscribe the expression, "productive power of capital;" but we should carefully note, that it can only mean the quantity of real productive power which the capitalist, by means of his capital, can command. This may change, though the productive power of labour remains the same. Wages, for example, may rise; and then, although all the circumstances of production remain exactly as they were before, the same capital will yield a less return, because it will set in motion a less quantity of productive labour. We may, therefore, consider the capital of a producer as measured by the means which he has of possessing himself of the different essentials of production: namely, labour, and the various articles which labour requires as materials, or of which it avails itself as aids. The ratio between the price which he has to pay for these means of production, and the produce which they enable him to raise, is the _rate_ of his _profit_. If he must give for labour and tools four-fifths of what they will produce, the remaining fifth will constitute his profit, and will give him a rate of one in four, or twenty-five per cent, on his outlay. It is necessary here to remark, what cannot indeed by any possibility be misunderstood, but might possibly be overlooked in cases where attention to it is indispensable, viz., that we are speaking now of the _rate_ of profit, not the gross profit. If the capital of the country is very great, a profit of only five per cent upon it may be much more ample, may support a much larger number of capitalists and their families in much greater affluence, than a profit of twenty-five per cent on the comparatively small capital of a poor country. The _gross_ profit of a country is the actual amount of necessaries, conveniences, and luxuries, which are divided among its capitalists: but whether this be large or small, the rate of profit may be just the same. The rate of profit is the proportion which the profit bears to the capital; which the surplus produce after replacing the outlay, bears to the outlay. In short, if we compare the _price paid_ for labour and tools with what that labour and those tools will _produce_, from this ratio we may calculate the rate of profit. As the gross profit may be very different though the rate of profit be the same; so also may the absolute price paid for labour and tools be very different, and yet the proportion between the price paid and the produce obtained may be just the same. For greater clearness, let us omit, for the present, the consideration of tools, materials, &c, and conceive production as the result solely of labour. In a certain country, let us suppose, the wages of each labourer are one quarter of wheat per year, and 100 men can produce, in one year, 120 quarters. Here the price paid for labour is to the produce of that labour as 100 to 120, and profits are 20 per cent. Suppose now that, in another country, wages are just double what they are in the country before supposed; namely, two quarters of wheat per year, for each labourer. But suppose, likewise, that the productive power of labour is double what it is in the first country; that by the greater fertility of the soil, 100 men can produce 240 quarters, instead of 120 as before. Here it is obvious, that the real price paid for labour is twice as great in the one country as in the other; but the produce being also twice as great, the ratio between the price of labour and the produce of labour is still exactly the same: an outlay of 200 quarters gives a return of 240 quarters, and profits, as before, are 20 per cent. Profits, then (meaning not gross profits, but the rate of profit), depend (not upon the price of labour, tools, and materials--but) upon the ratio between the price of labour, tools, and materials, and the produce of them: upon the proportionate share of the produce of industry which it is necessary to offer, in order to purchase that industry and the means of setting it in motion. * * * * * We have hitherto spoken of tools, buildings, and materials, as essentials of production, co-ordinate with labour, and equally indispensable with it. This is true; but it is also true that tools, buildings, and materials, are themselves the produce of labour; and that the only cause (cases of monopoly excepted) of their having any value, is the labour which is required for their production. If tools, buildings, and materials were the spontaneous gifts of nature, requiring no labour either in order to produce or to appropriate them; and if they were thus bestowed upon mankind in indefinite quantity, and without the possibility of being monopolized; they would still be as useful, as indispensable as they now are; but since they could, like air and the light of the sun, be obtained without cost or sacrifice, they would form no part of the expenses of production, and no portion of the produce would be required to be set aside in order to replace the outlay made for these purposes. The whole produce, therefore, after replacing the wages of labour, would be clear profit to the capitalist. Labour alone is the primary means of production; "the original purchase-money which has been paid for everything." Tools and materials, like other things, have originally cost nothing but labour; and have a value in the market only because wages have been paid for them. The labour employed in making the tools and materials being added to the labour afterwards employed in working up the materials by aid of the tools, the sum total gives the whole of the labour employed in the production of the completed commodity. In the ultimate analysis, therefore, labour appears to be the only essential of production. To replace capital, is to replace nothing but the wages of the labour employed. Consequently, the whole of the surplus, after replacing wages, is profits. From this it seems to follow, that the ratio between the wages of labour and the produce of that labour gives the rate of profit. And thus we arrive at Mr. Ricardo's principle, that profits depend upon wages; rising as wages fall, and falling as wages rise. To protect this proposition (the most perfect form in which the law of profits seems to have been yet exhibited) against misapprehension, one or two explanatory remarks are required. If by wages, be meant what constitutes the real affluence of the labourer, the _quantity_ of produce which he receives in exchange for his labour; the proposition that profits vary inversely as wages, will be obviously false. The rate of profit (as has been already observed and exemplified) does not depend upon the price of labour, but upon the proportion between the price of labour and the produce of it. If the produce of labour is large, the price of labour may also be large without any diminution of the rate of profit: and, in fact, the rate of profit is highest in those countries (as, for instance, North America) where the labourer is most largely remunerated. For the wages of labour, though so large, bear a less proportion to the abundant _produce_ of labour, there than elsewhere. But this does not affect the truth of Mr. Ricardo's principle as he himself understood it; because an increase of the labourer's real comforts was not considered by him as a rise of wages. In his language wages were only said to rise, when they rose not in mere quantity but in _value_. To the labourer himself (he would have said) the _quantity_ of his remuneration is the important circumstance: but its _value_ is the only thing of importance to the person who purchases his labour. The rate of profits depends not upon absolute or real wages, but upon the _value_ of wages. If, however, by value, Mr. Ricardo had meant _exchangeable_ value, his proposition would still have been remote from the truth. Profits depend no more upon the exchangeable value of the labourer's remuneration, than upon its quantity. The truth is, that by the exchangeable value is meant the quantity of commodities which the labourer can purchase with his wages; so that when we say the exchangeable value of wages, we say their quantity, under another name. Mr. Ricardo, however, did not use the word value in the sense of exchangeable value. Occasionally, in his writings, he could not avoid using the word as other people use it, to denote value in exchange. But he more frequently employed it in a sense peculiar to himself, to denote cost of production; in other words, the _quantity of labour_ required to produce the article; that being his criterion of cost of production. Thus, if a hat could be made with ten days' labour in France and with five days' labour in England, he said that the value of a hat was double in France of what it was in England. If a quarter of corn could be produced a century ago with half as much labour as is necessary at present, Mr. Ricardo said that the value of a quarter of corn had doubled. Mr. Ricardo, therefore, would not have said that wages had risen, because a labourer could obtain two pecks of flour instead of one, for a day's labour; but if last year he received, for a day's labour, something which required eight hours' labour to produce it, and this year something which requires nine hours, then Mr. Ricardo would say that wages had risen. A rise of wages, with Mr. Ricardo, meant an increase in the cost of production of wages; an increase in the number of hours' labour which go to produce the wages of a day's labour; an increase in the _proportion_ of the fruits of labour which the labourer receives for his own share; an increase in the ratio between the wages of his labour and the produce of it. This is the theory: the reasoning, of which it is the result, has been given in the preceding paragraphs. Some of Mr. Ricardo's followers, or more properly, of those who have adopted in most particulars the views of political economy which his genius was the first to open up, have given explanations of Mr. Ricardo's doctrine to nearly the same effect as the above, but in rather different terms. They have said that profits depend not on _absolute_, but on _proportional_ wages: which they expounded to mean the proportion which the labourers _en masse_ receive of the total produce of the country. It seems, however, to be rather an unusual and inconvenient use of language to speak of anything as depending upon the wages of labour, and then to explain that by wages of labour you do not mean the wages of an individual labourer, but of all the labourers in the country collectively. Mankind will never agree to call anything a rise of wages, except a rise of the wages of individual labourers, and it is therefore preferable to employ language tending to fix attention upon the wages of the individual. The wages, however, on which profits are said to depend, are undoubtedly _proportional_ wages, namely, the proportional wages of one labourer: that is, the ratio between the wages of one labourer, and (not the whole produce of the country, but) the amount of what one labourer can produce; the amount of that portion of the collective produce of the industry of the country, which may be considered as corresponding to the labour of one single labourer. Proportional wages, thus understood, may be concisely termed the cost of production of wages; or, more concisely still, the cost of wages, meaning their cost in the "original purchase money," labour. We have now arrived at a distinct conception of Mr. Ricardo's theory of profits in its most perfect state. And this theory we conceive to be the basis of the true theory of profits. All that remains to do is to clear it from certain difficulties which still surround it, and which, though in a greater degree apparent than real, are not to be put aside as wholly imaginary. Though it is true that tools, materials, and buildings (it is to be wished that there were some compact designation for all these essentials of production taken together,) are themselves the produce of labour, and are only on that account to be ranked among the expenses of production; yet the _whole_ of their value is not resolvable into the wages of the labourers by whom they were produced. The wages of those labourers were paid by a capitalist, and that capitalist must have the same profit upon his advances as any other capitalist; when, therefore, he sells the tools or materials, he must receive from the purchaser not only the reimbursement of the wages he has paid, but also as much more as will afford him the ordinary rate of profit. And when the producer, after buying the tools and employing them in his own occupation, comes to estimate his gains, he must set aside a portion of the produce to replace not only the wages paid both by himself and by the tool-maker, but also the profits of the tool-maker, advanced by himself out of his own capital. It is not correct, therefore, to state that all which the capitalist retains after replacing wages forms his profit. It is true the whole return to capital is either wages or profits; but profits do not compose merely the surplus after replacing the outlay; they also enter into the outlay itself. Capital is expended partly in paying or reimbursing wages, and partly in paying the profits of other capitalists, whose concurrence was necessary in order to bring together the means of production. If any contrivance, therefore, were devised by which that part of the outlay which consists of previous profits could be either wholly or partially dispensed with, it is evident that more would remain as the profit of the immediate producer; while, as the quantity of _labour_ necessary to produce a given quantity of the commodity would be unaltered, as well as the quantity of produce paid for that labour, it seems that the ratio between the price of labour and its produce would be the same as before; that the cost of production of wages would be the same, proportional wages the same, and yet profits different. To illustrate this by a simple instance, let it be supposed that one-third of the produce is sufficient to replace the wages of the labourers who have been immediately instrumental in the production; that another third is necessary to replace the materials used and the fixed capital worn out in the process; while the remaining third is clear gain, being a profit of 50 per cent. Suppose, for example, that 60 agricultural labourers, receiving 60 quarters of corn for their wages, consume fixed capital and seed amounting to the value of 60 quarters more, and that the result of their operations is a produce of 180 quarters. When we analyse the price of the seed and tools into its elements, we find that they must have been the produce of the labour of 40 men: for the wages of those 40, together with profit at the rate previously supposed (50 per cent) make up 60 quarters. The produce, therefore, consisting of 180 quarters is the result of the labour altogether of 100 men: namely, the 60 first mentioned, and the 40 by whose labour the fixed capital and the seed were produced. Let us now suppose, by way of an extreme case, that some contrivance is discovered, whereby the purposes to which the second third of the produce had been devoted, may be dispensed with altogether: that some means are invented by which the same amount of produce may be procured without the assistance of any fixed capital, or the consumption of any seed or material sufficiently valuable to be worth calculating. Let us, however, suppose that this cannot be done without taking on a number of additional labourers, equal to those required for producing the seed and fixed capital; so that the saving shall be only in the profits of the previous capitalists. Let us, in conformity with this supposition, assume that in dispensing with the fixed capital and seed, value 60 quarters, it is necessary to take on 40 additional labourers, receiving a quarter of corn each, as before. The rate of profit has evidently risen. It has increased from 50 per cent to 60 per cent. A return of 180 quarters could not before be obtained but by an outlay of 120 quarters; it can now be obtained by an outlay of no more than 100. Here, therefore, is an undeniable rise of profits. Have wages, in the sense above attached to them, fallen or not? It would seem not. The produce (180 quarters) is still the result of the same quantity of labour as before, namely, the labour of 100 men. A quarter of corn, therefore, is still, as before, the produce of 10/18 of a man's labour for a year. Each labourer receives, as before, one quarter of corn; each, therefore, receives the produce of 10\18 of a year's labour of one man, that is, the same cost of production; each receives 10/18 of the produce of his own labour, that is, the same proportional wages; and the labourers collectively still receive the same proportion, namely 10/18, of the whole produce. The conclusion, then, cannot be resisted, that Mr. Ricardo's theory is defective: that the rate of profits does _not_ exclusively depend upon the value of wages, in his sense, namely, the quantity of labour of which the wages of a labourer are the produce; that it does _not_ exclusively depend upon proportional wages, that is, upon the proportion which the labourers collectively receive of the whole produce, or the ratio which the wages of an individual labourer bear to the produce of his individual labour. Those political economists, therefore, who have always dissented from Mr. Ricardo's doctrine, or who, having at first admitted, ended by discarding it, were so far in the right; but they committed a serious error in this, that, with the usual one-sidedness of disputants, they knew no medium between admitting absolutely and dismissing entirely; and saw no other course than utterly to reject what it would have been sufficient to modify. It is remarkable how very slight a modification will suffice to render Mr. Ricardo's doctrine completely true. It is even doubtful whether he himself, if called upon to adapt his expressions to this peculiar case, would not have so explained his doctrine as to render it entirely unobjectionable. It is perfectly true, that, in the example already made use of, a rise of profits takes place, while wages, considered in respect to the quantity of labour of which they are the produce, have not varied at all. But though wages are still the produce of the same _quantity of labour_ as before, the _cost of production_ of wages has nevertheless fallen; for into cost of production there enters another element besides labour. We have already remarked (and the very example out of which the difficulty arose presupposes it) that the cost of production of an article consists generally of two parts,--the _wages_ of the labour employed, and the _profits_ of those who, in any antecedent stage of the production, have advanced any portion of those wages. An article, therefore, may be the produce of the same quantity of labour as before, and yet, if any portion of the profits which the last producer has to make good to previous producers can be economized, the cost of production of the article is diminished. Now, in our example, a diminution of this sort is supposed to have taken place in the cost of production of corn. The production of that article has become less costly, in the ratio of six to five. A quantity of corn, the means of producing which could not previously have been secured but at an expense of 120 quarters, can now be produced by means which 100 quarters are sufficient to purchase. But the labourer is supposed to receive the same quantity of corn as before. He receives one quarter. The cost of production of wages has, therefore, fallen one-sixth. A quarter of corn, which is the remuneration of a single labourer, is indeed the produce of the same quantity of labour as before; but its cost of production is nevertheless diminished. It is now the produce of 10/18 of a man's labour, and nothing else; whereas formerly it required for its production the conjunction of that quantity of labour with an expenditure, in the form of reimbursement of profit, amounting to one-fifth more. If the cost of production of wages had remained the same as before, profits could not have risen. Each labourer received one quarter of corn; but one quarter of corn at that time was the result of the same cost of production, as 1 1/5 quarter now. In order, therefore, that each labourer should receive the same cost of production, each must now receive one quarter of corn, _plus_ one-fifth. The labour of 100 men could not be purchased at this price for less than 120 quarters; and the produce, 180 quarters, would yield only 50 per cent, as first supposed [7]. It is, therefore, strictly true, that the rate of profits varies inversely as the cost of production of wages. Profits cannot rise, unless the cost of production of wages falls exactly as much; nor fall, unless it rises. The proof of this position has been stated in figures, and in a particular case: we shall now state it in general terms, and for all cases. We have supposed, for simplicity, that wages are paid in the finished commodity. The agricultural labourers, in our example, were paid in corn, and if we had called them weavers, we should have supposed them to be paid in cloth. This supposition is allowable, for it is obviously of no consequence, in a question of value, or cost of production, what precise article we assume as the medium of exchange. The supposition has, besides, the recommendation of being conformable to the most ordinary state of the facts; for it is by the sale of his own finished article that each capitalist obtains the means of hiring labourers to renew the production; which is virtually the same thing as if, instead of selling the article for money and giving the money to his labourers, he gave the article itself to the labourers, and they sold it for their daily bread. Assuming, therefore, that the labourer is paid in the very article he produces, it is evident that, when any saving of expense takes place in the production of that article, if the labourer still receives the same cost of production as before, he must receive an increased quantity, in the very same ratio in which the productive power of capital has been increased. But, if so, the outlay of the capitalist will bear exactly the same proportion to the return as it did before; and profits will not rise. The variations, therefore, in the rate of profits, and those in the cost of production of wages, go hand in hand, and are inseparable. Mr. Ricardo's principle, that profits cannot rise unless wages fall, is strictly true, if by low wages be meant not merely wages which are the produce of a smaller quantity of labour, but wages which are produced at less cost, reckoning labour and previous profits together. But the interpretation which some economists have put upon Mr. Ricardo's doctrine, when they explain it to mean that profits depend upon the proportion which the labourers collectively receive of the aggregate produce, will not hold at all; for that, in our first example, remained the same, and yet profits rose. The only expression of the law of profits, which seems to be correct, is, that they depend upon the cost of production of wages. This must be received as the ultimate principle. From this may be deduced all the corollaries which Mr. Ricardo and others have drawn from his theory of profits as expounded by himself. The cost of production of the wages of one labourer for a year, is the result of two concurrent elements or factors,--viz., 1st, the quantity of commodities which the state of the labour market affords to him; 2ndly, the cost of production of each of those commodities. It follows, that the rate of profits can never rise but in conjunction with one or other of two changes,--1st, a diminished remuneration of the labourer; or, 2ndly, an improvement in production, or an extension of commerce, by which any of the articles habitually consumed by the labourer may be obtained at smaller cost. (If the improvement be in any article which is not consumed by the labourer, it merely lowers the price of that article, and thereby benefits capitalists and all other people so far as they are consumers of that particular article, and may be said to increase gross profit, but not the rate of profit.) So, on the other hand, the rate of profit cannot fall, unless concurrently with one of two events: 1st, an improvement in the labourer's condition; or, 2ndly, an increased difficulty of producing or importing some article which the labourer habitually consumes. The progress of population and cultivation has a tendency to lower profits through the latter of these two channels, owing to the well known law of the application of capital to land, that a double capital does not _caeteris paribus_ yield a double produce. There is, therefore, a tendency in the rate of profits to fall with the progress of society. But there is also an antagonist tendency of profits to rise, by the successive introduction of improvements in agriculture, and in the production of those manufactured articles which the labourers consume. Supposing, therefore, that the actual comforts of the labourer remain the same, profits will fall or rise, according as population, or improvements in the production of food and other necessaries, advance fastest. The rate of profits, therefore, tends to _fall_ from the following causes:--1. An increase of capital beyond population, producing increased competition for labour; 2. An increase of population, occasioning a demand for an increased quantity of food, which must be produced at a greater cost. The rate of profits tends to _rise_ from the following causes:--1. An increase of population beyond capital, producing increased competition for employment; 2. Improvements producing increased cheapness of necessaries, and other articles habitually consumed by the labourer. * * * * * The circumstances which regulate the rate of interest have usually been treated, even by professed writers on political economy, in a vague, loose, and unscientific manner. It has, however, been felt that there is some connexion between the rate of interest and the rate of profit; that (to use the words of Adam Smith) much will be given for money, when much can be made of it. It has been felt, also, that the fluctuations in the market-rate of interest from day to day, are determined, like other matters of bargain and sale, by demand and supply. It has, therefore, been considered as an established principle, that the rate of interest varies from day to day according to the quantity of capital offered or called for on loan; but conforms on the average of years to a standard determined by the rate of profits, and bearing some proportion to that rate--but a proportion which few attempts have been made to define. In consequence of these views, it has been customary to judge of the general rate of profits at any time or place, by the rate of interest at that time and place: it being supposed that the rate of interest, though liable to temporary fluctuations, can never vary for any long period of time unless profits vary; a notion which appears to us to be erroneous. It was observed by Adam Smith, that profits may be considered as divided into two parts, of which one may properly be considered as the remuneration for the use of the capital itself, the other as the reward of the labour of superintending its employment; and that the former of these will correspond with the rate of interest. The producer who borrows capital to employ it in his business, will consent to pay, for the use of it, all that remains of the profits he can make by it, after reserving what he considers reasonable remuneration for the trouble and risk which he incurs by borrowing and employing it. This remark is just; but it seems necessary to give greater precision to the ideas which it involves. The difference between the profit which can be made by the use of capital, and the interest which will be paid for it, is rightly characterized as wages of superintendance. But to infer from this that it is regulated by entirely the same principles as other wages, would be to push the analogy too far. It is wages, but wages paid by a commission upon the capital employed. If the general rate of profit is 10 per cent, and the rate of interest 5 per cent, the wages of superintendance will be 5 per cent; and though one borrower employ a capital of 100,000_l_., another no more than 100_l_., the labour of both will be rewarded with the same per centage, though, in the one ease, this symbol will represent an income of 5_l_., in the other case, of 5000_l_. Yet it cannot be pretended that the labour of the two borrowers differs in this proportion. The rule, therefore, that equal quantities of labour of equal hardness and skill are equally remunerated, does not hold of this kind of labour. The wages of any other labour are here an inapplicable criterion. The wages of superintendance are distinguished from ordinary wages by another peculiarity, that they are not paid in advance out of capital, like the wages of all other labourers, but merge in the profit, and are not realized until the production is completed. This takes them entirely out of the ordinary law of wages. The wages of labourers who are paid in advance, are regulated by the number of competitors compared with the amount of capital; the labourers can consume no more than what has been previously accumulated. But there is no such limit to the remuneration of a kind of labour which is not paid for out of wealth previously accumulated, but out of that produce which it is itself employed in calling into existence. When these circumstances are duly weighed, it will be perceived, that although profit may be correctly analyzed into interest and wages of superintendance, we ought not to lay it down as the law of interest, that it is profits _minus_ the wages of superintendance. Of the two expressions, it would be decidedly the more correct, that the wages of superintendance are regulated by the rate of interest, or are equal to profits _minus_ interest. In strict, propriety, neither expression would be allowable. Interest, and the wages of superintendance, can scarcely be said to depend upon one another. They are to one another in the same relation as wages and profits are. They are like two buckets in a well: when one rises, the other descends, but neither of the two motions is the cause of the other; both are simultaneous effects of the same cause, the turning of the windlass. * * * * * There are among the capitalists of every country a considerable number who are habitually, and almost necessarily, lenders; to whom scarcely any difference between what they could receive for their money and what could be made by it, would be an equivalent for incurring the risk and labour of carrying on business. In this predicament is the property of widows and orphans; of many public bodies; of charitable institutions; most property which is vested in trustees; and the property of a great number of persons unused to business, and who have a distaste for it, or whose other occupations prevent their engaging in it. How large a proportion of the property lent to the nation comes under this description, has been pointed out in Mr. Tooke's _Considerations on the State of the Currency._ There is another large class, consisting of bankers, bill-brokers, and others, who are money-lenders by profession; who enter into that profession with the intention of making such gains as it will yield them, and who would not be induced to change their business by any but a very strong pecuniary inducement. There is, therefore, a large class of persons who are habitually lenders. On the other hand, all persons in business may be considered as habitually borrowers. Except in times of stagnation, they are all desirous of extending their business beyond their own capital, and are never desirous of lending any portion of their capital except for very short periods, during which they cannot advantageously invest it in their own trade. There is, in short, a productive class, and there is, besides, a class technically styled the monied class, who live upon the interest of their capital, without engaging personally in the work of production. The class of borrowers may be considered as unlimited. There is no quantity of capital that could be offered to be lent, which the productive classes would not be willing to borrow, at any rate of interest which would afford them the slightest excess of profit above a bare equivalent for the additional risk, incurred by that transaction, of the evils attendant on insolvency. The only assignable limit to the inclination to borrow, is the power of giving security: the producers would find it difficult to borrow more than an amount equal to their own capital. If more than half the capital of the country were in the hands of persons who preferred lending it to engaging personally in business, and if the surplus were greater than could be invested in loans to Government, or in mortgages upon the property of unproductive consumers; the competition of lenders would force down the rate of interest very low. A certain portion of the monied class would be obliged either to sacrifice their predilections by engaging in business, or to lend on inferior security; and they would accordingly accept, where they could obtain good security, an abatement of interest equivalent to the difference of risk. This is an extreme case. Let us put an extreme case of a contrary kind. Suppose that the wealthy people of any country, not relishing an idle life, and having a strong taste for gainful labour, were generally indisposed to accept of a smaller income in order to be relieved from the labour and anxiety of business. Every producer in flourishing circumstances would be eager to borrow, and few willing to lend. Under these circumstances the rate of interest would differ very little from the rate of profit. The trouble of managing a business is not proportionally increased by an increase of the magnitude of the business; and a very small surplus profit above the rate of interest, would therefore be a sufficient inducement to capitalists to borrow. We may even conceive a people whose habits were such, that in order to induce them to lend, it might be necessary to offer them a rate of interest fully equal to the ordinary rate of profit. In that case, of course, the productive classes would scarcely ever borrow. But government, and the unproductive classes, who do not borrow in order to make a profit by the loan, but from the pressure of a real or supposed necessity, might still be ready to borrow at this high rate. Although the inclination to borrow has no _fixed_ or _necessary_ limit except the power of giving security, yet it always, in point of fact, stops short of this; from the uncertainty of the prospects of any individual producer, which generally indisposes him to involve himself to the full extent of his means of payment. There is never any permanent want of market for things in general; but there may be so for the commodity which any one individual is producing; and even if there is a demand for the commodity, people may not buy it of him but of some other. There are, consequently, never more than a portion of the producers, the state of whose business encourages them to add to their capital by borrowing; and even these are disposed to borrow only as much as they see an _immediate_ prospect of profitably employing. There is, therefore, a practical limit to the demands of borrowers at any given instant; and when these demands are all satisfied, any additional capital offered on loan can find an investment only by a reduction of the rate of interest. The amount of borrowers being given, (and by the amount of borrowers is here meant the aggregate sum which people are willing to borrow at some given rate,) the rate of interest will depend upon the quantity of capital owned by people who are unwilling or unable to engage in trade. The circumstances which determine this, are, on the one hand, the degree in which a taste for business, or an aversion to it, happens to be prevalent among the classes possessed of property; and on the other hand, the amount of the annual accumulation from the earnings of labour. Those who accumulate from their wages, fees, or salaries, have, of course, (speaking generally) no means of investing their savings except by lending them to others: their occupations prevent them from personally superintending any employment. Upon these circumstances, then, the rate of interest depends, the amount of borrowers being given. And the counter-proposition equally holds, that, the above circumstances being given, the rate of interest depends upon the amount of borrowers. Suppose, for example, that when the rate of interest has adjusted itself to the existing state of the circumstances which affect the disposition to borrow and to lend, a war breaks out, which induces government, for a series of years, to borrow annually a large sum of money. During the whole of this period, the rate of interest will remain considerably above what it was before, and what it will be afterwards. Before the commencement of the supposed war, all persons who were disposed to lend at the then rate of interest, had found borrowers, and their capital was invested. This may be assumed; for if any capital had been seeking for a borrower at the existing rate of interest, and unable to find one, its owner would have offered it at a rate slightly below the existing rate. He would, for instance, have bought into the funds, at a slight advance of price; and thus set at liberty the capital of some fundholder, who, the funds yielding a lower interest, would have been obliged to accept a lower interest from individuals. Since, then, all who were willing to lend their capital at the market rate, have already lent it, Government will not be able to borrow unless by offering higher interest. Though, with the existing habits of the possessors of disposable capital, an increased number cannot be found who are willing to lend at the existing rate, there are doubtless some who will be induced to lend by the temptation of a higher rate. The same temptation will also induce some persons to invest, in the purchase of the new stock, what they would otherwise have expended unproductively in increasing their establishments, or productively, in improving their estates. The rate of interest will rise just sufficiently to call forth an increase of lenders to the amount required. This we apprehend to be the cause why the rate of interest in this country was so high as it is well known to have been during the last war. It is, therefore, by no means to be inferred, as some have done, that the general rate of profits was unusually high during the same period, because interest was so. Supposing the rate of profits to have been precisely the same during the war, as before or after it, the rate of interest would nevertheless have risen, from the causes and in the manner above described. The practical use of the preceding investigation is, to moderate the confidence with which inferences are frequently drawn with respect to the rate of profit from evidence regarding the rate of interest; and to shew that although the rate of profit is one of the elements which combine to determine the rate of interest, the latter is also acted upon by causes peculiar to itself, and may either rise or fall, both temporarily and permanently, while the general rate of profits remains unchanged. * * * * * The introduction of banks, which perform the function of lenders and loan-brokers, with or without that of issuers of paper-money, produces some further anomalies in the rate of interest, which have not, so far as we are aware, been hitherto brought within the pale of exact science. If bankers were merely a class of middlemen between the lender and the borrower; if they merely received deposits of capital from those who had it lying unemployed in their hands, and lent this, together with their own capital, to the productive classes, receiving interest for it, and paying interest in their turn to those who had placed capital in their hands; the effect of the operations of banking on the rate of interest would be to lower it in some slight degree. The banker receives and collects together sums of money much too small, when taken individually, to render it worth while for the owners to look out for an investment, but which in the aggregate form a considerable amount. This amount may be considered a clear addition to the productive capital of the country; at least, to the capital in activity at any moment. And as this addition to the capital accrues wholly to that part of it which is not employed by the owners, but lent to other producers, the natural effect is a diminution of the rate of interest. The banker, to the extent of his own private capital, (the expenses of his business being first paid,) is a lender at interest. But, being subject to risk and trouble fully equal to that which belongs to most other employments, he cannot be satisfied with the mere interest even of his whole capital: he must have the ordinary profits of stock, or he will not engage in the business: the state of banking must be such as to hold out to him the prospect of adding, to the interest of what remains of his own capital after paying the expenses of his business, interest upon capital deposited with him, in sufficient amount to make up, after paying the expenses, the ordinary profit which could be derived from his own capital in any productive employment. This will be accomplished in one of two ways. 1. If the circumstances of society are such as to furnish a ready investment of disposable capital; (as for instance in London, where the public funds and other securities, of undoubted stability, and affording great advantages for receiving the interest without trouble and realizing the principal without difficulty when required, tempt all persons who have sums of importance lying idle, to invest them on their own account without the intervention of any middleman;) the deposits with bankers consist chiefly of small sums likely to be wanted in a very short period for current expenses, and the interest on which would seldom be worth the trouble of calculating it. Bankers, therefore, do not allow any interest on their deposits. After paying the expenses of their business, all the rest of the interest they receive is clear gain. But as the circumstances of banking, as of all other modes of employing capital, will on the average be such as to afford to a person entering into the business a prospect of realizing the ordinary, and no more than the ordinary, profits upon his own capital; the gains of each banker by the investment of his deposits, will not on the average exceed what is necessary to make up his gains on his own capital to the ordinary rate. It is, of course, competition, which brings about this limitation. Whether competition operates by lowering the rate of interest, or by dividing the business among a larger number, it is difficult to decide. Probably it operates in both ways; but it is by no means impossible that it may operate in the latter way alone: just as an increase in the number of physicians does not lower the fees, though it diminishes an average competitor's chance of obtaining them. It is not impossible that the disposition of the lenders might be such, that they would cease to lend rather than acquiesce in any reduction of the rate of interest. If so, the arrival of a new lender, in the person of a banker of deposit, would not lower the rate of interest in any considerable degree. A slight fall would take place, and with that exception things would be as before, except that the capital in the hands of the banker would have put itself into the place of an equal portion of capital belonging to other lenders, who would themselves have engaged in business (e.g., by subscribing to some joint-stock company, or entering into commandite). Bankers' profits would then be limited to the ordinary rate chiefly by the division of the business among many banks, so that each on the average would receive no more interest on his deposits than would suffice to make up the interest on his own capital to the ordinary rate of profit after paying all expenses. 2. But if the circumstances of society render it difficult and inconvenient for persons who wish to live upon the interest of their money, to seek an investment for themselves, the bankers become agents for this specific purpose: large as well as small sums are deposited with them, and they allow interest to their customers. Such is the practice of the Scotch banks, and of most of the country banks in England. Their customers, not living at any of the great seats of money transactions, prefer entrusting their capital to somebody on the spot, whom they know, and in whom they confide. He invests their money on the best terms he can, and pays to them such interest as he can afford to give; retaining a compensation for his own risk and trouble. This compensation is fixed by the competition of the market. The rate of interest is no further lowered by this operation, than inasmuch as it brings together the lender and the borrower in a safe and expeditious manner. The lender incurs less risk, and a larger proportion, therefore, of the holders of capital are willing to be lenders. When a banker, in addition to his other functions, is also an issuer of paper money, he gains an advantage similar to that which the London bankers derive from their deposits. To the extent to which he can put forth his notes, he has so much the more to lend, without himself having to pay any interest for it. If the paper is convertible, it cannot get into circulation permanently without displacing specie, which goes abroad and brings back an equivalent value. To the extent of this value, there is an increase of the capital of the country; and the increase accrues solely to that part of the capital which is employed in loans. If the paper is inconvertible, and instead of displacing specie depreciates the currency, the banker by issuing it levies a tax on every person who has money in his hands or due to him. He thus appropriates to himself a portion of the capital of other people, and a portion of their revenue. The capital might have been intended to be lent, or it might have been intended to be employed by the owner: such part of it as was intended to be employed by the owner now changes its destination, and is lent. The revenue was either intended to be accumulated, in which case it had already become capital, or it was intended to be spent: in this last case, revenue is converted into capital: and thus, strange as it may appear, the depreciation of the currency, when effected in this way, operates to a certain extent as a forced accumulation. This, indeed, is no palliation of its iniquity. Though A might have spent his property unproductively, B ought not to be permitted to rob him of it because B will expend it on productive labour. In any supposable case, however, the issue of paper money by bankers increases the proportion of the whole capital of the country which is destined to be lent. The rate of interest must therefore fall, until some of the lenders give over lending, or until the increase of borrowers absorbs the whole. But a fall of the rate of interest, sufficient to enable the money market to absorb the whole of the paper-loans, may not be sufficient to reduce the profits of a lender who lends what costs him nothing, to the ordinary rate of profit upon his capital. Here, therefore, competition will operate chiefly by dividing the business. The notes of each bank will be confined within so narrow a district, or will divide the supply of a district with so many other banks, that on the average each will receive no larger amount of interest on his notes than will make up the interest on his own capital to the ordinary rate of profit. Even in this way, however, the competition has the effect, to a certain limited extent, of lowering the rate of interest; for the power of bankers to receive interest on more than their capital attracts a greater amount of capital into the banking business than would otherwise flow into it; and this greater capital being all lent, interest will fall in consequence. NOTE: [7] It would be easy to go over in the same manner any other case. For instance, we may suppose, that, instead of dispensing with the _whole_ of the fixed capital, material, &c, and taking on labourers in equal number to those by whom these were produced, _half_ only of the fixed capital and material is dispensed with; so that, instead of 60 labourers and a fixed capital worth 6O quarters of corn, we have 80 labourers and a fixed capital worth 30. The numerical statement of this case is more intricate than that in the text, but the result is not different. ESSAY V. ON THE DEFINITION OF POLITICAL ECONOMY; AND ON THE METHOD OF INVESTIGATION PROPER TO IT. It might be imagined, on a superficial view of the nature and objects of definition, that the definition of a science would occupy the same place in the chronological which it commonly does in the didactic order. As a treatise on any science usually commences with an attempt to express, in a brief formula, what the science is, and wherein it differs from other sciences, so, it might be supposed, did the framing of such a formula naturally precede the successful cultivation of the science. This, however, is far from having been the case. The definition of a science has almost invariably not preceded, but followed, the creation of the science itself. Like the wall of a city, it has usually been erected, not to be a receptacle for such edifices as might afterwards spring up, but to circumscribe an aggregation already in existence. Mankind did not measure out the ground for intellectual cultivation before they began to plant it; they did not divide the field of human investigation into regular compartments first, and then begin to collect truths for the purpose of being therein deposited; they proceeded in a less systematic manner. As discoveries were gathered in, either one by one, or in groups resulting from the continued prosecution of some uniform course of inquiry, the truths which were successively brought into store cohered and became agglomerated according to their individual affinities. Without any intentional classification, the facts classed themselves. They became associated in the mind, according to their general and obvious resemblances; and the aggregates thus formed, having to be frequently spoken of as aggregates, came to be denoted by a common name. Any body of truths which had thus acquired a collective denomination, was called a _science_. It was long before this fortuitous classification was felt not to be sufficiently precise. It was in a more advanced stage of the progress of knowledge that mankind became sensible of the advantage of ascertaining whether the facts which they had thus grouped together were distinguished from all other facts by any common properties, and what these were. The first attempts to answer this question were commonly very unskilful, and the consequent definitions extremely imperfect. And, in truth, there is scarcely any investigation in the whole body of a science requiring so high a degree of analysis and abstraction, as the inquiry, what the science itself is; in other words, what are the properties common to all the truths composing it, and distinguishing them from all other truths. Many persons, accordingly, who are profoundly conversant with the details of a science, would be very much at a loss to supply such a definition of the science itself as should not be liable to well-grounded logical objections. From this remark, we cannot except the authors of elementary scientific treatises. The definitions which those works furnish of the sciences, for the most part either do not fit them--some being too wide, some too narrow--or do not go deep enough into them, but define a science by its accidents, not its essentials; by some one of its properties which may, indeed, serve the purpose of a distinguishing mark, but which is of too little importance to have ever of itself led mankind to give the science a name and rank as a separate object of study. The definition of a science must, indeed, be placed among that class of truths which Dugald Stewart had in view, when he observed that the first principles of all sciences belong to the philosophy of the human mind. The observation is just; and the first principles of all sciences, including the definitions of them, have consequently participated hitherto in the vagueness and uncertainty which has pervaded that most difficult and unsettled of all branches of knowledge. If we open any book, even of mathematics or natural philosophy, it is impossible not to be struck with the mistiness of what we find represented as preliminary and fundamental notions, and the very insufficient manner in which the propositions which are palmed upon us as first principles seem to be made out, contrasted with the lucidity of the explanations and the conclusiveness of the proofs as soon as the writer enters upon the details of his subject. Whence comes this anomaly? Why is the admitted certainty of the results of those sciences in no way prejudiced by the want of solidity in their premises? How happens it that a firm superstructure has been erected upon an unstable foundation? The solution of the paradox _is_, that what are called first principles, are, in truth, _last_ principles. Instead of being the fixed point from whence the chain of proof which supports all the rest of the science hangs suspended, they are themselves the remotest link of the chain. Though presented as if all other truths were to be deduced from them, they are the truths which are last arrived at; the result of the last stage of generalization, or of the last and subtlest process of analysis, to which the particular truths of the science can be subjected; those particular truths having previously been ascertained by the evidence proper to their own nature. Like other sciences, Political Economy has remained destitute of a definition framed on strictly logical principles, or even of, what is more easily to be had, a definition exactly co-extensive with the thing defined. This has not, perhaps, caused the real bounds of the science to be, in this country at least, practically mistaken or overpassed; but it has occasioned--perhaps we should rather say it is connected with --indefinite, and often erroneous, conceptions of the mode in which the science should be studied. We proceed to verify these assertions by an examination of the most generally received definitions of the science. 1. First, as to the vulgar notion of the nature and object of Political Economy, we shall not be wide of the mark if we state it to be something to this effect:--That Political Economy is a science which teaches, or professes to teach, in what manner a nation may be made rich. This notion of what constitutes the science, is in some degree countenanced by the title and arrangement which Adam Smith gave to his invaluable work. A systematic treatise on Political Economy, he chose to call an _Inquiry into the Nature and Causes of the Wealth of Nations_; and the topics are introduced in an order suitable to that view of the purpose of his book. With respect to the definition in question, if definition it can be called which is not found in any set form of words, but left to be arrived at by a process of abstraction from a hundred current modes of speaking on the subject; it seems liable to the conclusive objection, that it confounds the essentially distinct, though closely connected, ideas of _science_ and _art_. These two ideas differ from one another as the understanding differs from the will, or as the indicative mood in grammar differs from the imperative. The one deals in facts, the other in precepts. Science is a collection of _truths_; art, a body of _rules_, or directions for conduct. The language of science is, This is, or, This is not; This does, or does not, happen. The language of art is, Do this; Avoid that. Science takes cognizance of a _phenomenon_, and endeavours to discover its _law_; art proposes to itself an _end_, and looks out for _means_ to effect it. If, therefore, Political Economy be a science, it cannot be a collection of practical rules; though, unless it be altogether a useless science, practical rules must be capable of being founded upon it. The science of mechanics, a branch of natural philosophy, lays down the laws of motion, and the properties of what are called the mechanical powers. The art of practical mechanics teaches how we may avail ourselves of those laws and properties, to increase our command over external nature. An art would not be an art, unless it were founded upon a scientific knowledge of the properties of the subject-matter: without this, it would not be philosophy, but empiricism; [Greek: empeiria,] not [Greek: technae,] in Plato's sense. Rules, therefore, for making a nation increase in wealth, are not a science, but they are the results of science. Political Economy does not of itself instruct how to make a nation rich; but whoever would be qualified to judge of the means of making a nation rich, must first be a political economist. 2. The definition most generally received among instructed persons, and laid down in the commencement of most of the professed treatises on the subject, is to the following effect:--That Political Economy informs us of the laws which regulate the production, distribution, and consumption of wealth. To this definition is frequently appended a familiar illustration. Political Economy, it is said, is to the state, what domestic economy is to the family. This definition is free from the fault which we pointed out in the former one. It distinctly takes notice that Political Economy is a science and not an art; that it is conversant with laws of nature, not with maxims of conduct, and teaches us how things take place of themselves, not in what manner it is advisable for us to shape them, in order to attain some particular end. But though the definition is, with regard to this particular point, unobjectionable, so much can scarcely be said for the accompanying illustration; which rather sends back the mind to the current loose notion of Political Economy already disposed of. Political Economy is really, and is stated in the definition to be, a science: but domestic economy, so far as it is capable of being reduced to principles, is an art. It consists of rules, or maxims of prudence, for keeping the family regularly supplied with what its wants require, and securing, with any given amount of means, the greatest possible quantity of physical comfort and enjoyment. Undoubtedly the beneficial _result_, the great practical _application_ of Political Economy, would be to accomplish for a nation something like what the most perfect domestic economy accomplishes for a single household: but supposing this purpose realised, there would be the same difference between the rules by which it might be effected, and Political Economy, which there is between the art of gunnery and the theory of projectiles, or between the rules of mathematical land-surveying and the science of trigonometry. The definition, though not liable to the same objection as the illustration which is annexed to it, is itself far from unexceptionable. To neither of them, considered as standing at the head of a treatise, have we much to object. At a very early stage in the study of the science, anything more accurate would be useless, and therefore pedantic. In a merely initiatory definition, scientific precision is not required: the object is, to insinuate into the learner's mind, it is scarcely material by what means, some general preconception of what are the uses of the pursuit, and what the series of topics through which he is about to travel. As a mere anticipation or _ébauche_ of a definition, intended to indicate to a learner as much as he is able to understand before he begins, of the nature of what is about to be taught to him, we do not quarrel with the received formula. But if it claims to be admitted as that complete _definitio_ or boundary-line, which results from a thorough exploring of the whole extent of the subject, and is intended to mark the exact place of Political Economy among the sciences, its pretension cannot be allowed. "The science of the laws which regulate the production, distribution, and consumption of wealth." The term wealth is surrounded by a haze of floating and vapoury associations, which will let nothing that is seen through them be shewn distinctly. Let us supply its place by a periphrasis. Wealth is defined, all objects useful or agreeable to mankind, except such as can be obtained in indefinite quantity without labour. Instead of all objects, some authorities say, all material objects: the distinction is of no moment for the present purpose. To confine ourselves to production: If the laws of the production of all objects, or even of all material objects, which are useful or agreeable to mankind, were comprised in Political Economy, it would be difficult to say where the science would end: at the least, all or nearly all physical knowledge would be included in it. Corn and cattle are material objects, in a high degree useful to mankind. The laws of the production of the one include the principles of agriculture; the production of the other is the subject of the art of cattle-breeding, which, in so far as really an art, must be built upon the science of physiology. The laws of the production of manufactured articles involve the whole of chemistry and the whole of mechanics. The laws of the production of the wealth which is extracted from the bowels of the earth, cannot be set forth without taking in a large part of geology. When a definition so manifestly surpasses in extent what it professes to define, we must suppose that it is not meant to be interpreted literally, though the limitations with which it is to be understood are not stated. Perhaps it will be said, that Political Economy is conversant with such only of the laws of the production of wealth as are applicable to _all_ kinds of wealth: those which relate to the details of particular trades or employments forming the subject of other and totally distinct sciences. If, however, there were no more in the distinction between Political Economy and physical science than this, the distinction, we may venture to affirm, would never have been made. No similar division exists in any other department of knowledge. We do not break up zoology or mineralogy into two parts; one treating of the properties common to all animals, or to all minerals; another conversant with the properties peculiar to each particular species of animals or minerals. The reason is obvious; there is no distinction _in kind_ between the general laws of animal or of mineral nature and the peculiar properties of particular species. There is as close an analogy between the general laws and the particular ones, as there is between one of the general laws and another: most commonly, indeed, the particular laws are but the complex result of a plurality of general laws modifying each other. A separation, therefore, between the general laws and the particular ones, merely because the former are general and the latter particular, would run counter both to the strongest motives of convenience and to the natural tendencies of the mind. If the case is different with the laws of the production of wealth, it must be because, in this case, the general laws differ in kind from the particular ones. But if so, the difference in kind is the radical distinction, and we should find out what that is, and found our definition upon it. But, further, the recognised boundaries which separate the field of Political Economy from that of physical science, by no means correspond with the distinction between the truths which concern all kinds of wealth and those which relate only to some kinds. The three laws of motion, and the law of gravitation, are common, as far as human observation has yet extended, to all matter; and these, therefore, as being among the laws of the production of all wealth, should form part of Political Economy. There are hardly any of the processes of industry which do not partly depend upon the properties of the lever; but it would be a strange classification which included those properties among the truths of Political Economy. Again, the latter science has many inquiries altogether as special, and relating as exclusively to particular sorts of material objects, as any of the branches of physical science. The investigation of some of the circumstances which regulate the price of corn, has as little to do with the laws common to the production of all wealth, as any part of the knowledge of the agriculturist. The inquiry into the rent of mines or fisheries, or into the value of the precious metals, elicits truths which have immediate reference to the production solely of a peculiar kind of wealth; yet these are admitted to be correctly placed in the science of Political Economy. The real distinction between Political Economy and physical science must be sought in something deeper than the nature of the subject-matter; which, indeed, is for the most part common to both. Political Economy, and the scientific grounds of all the useful arts, have in truth one and the same subject-matter; namely, the objects which conduce to man's convenience and enjoyment: but they are, nevertheless, perfectly distinct branches of knowledge. 3. If we contemplate the whole field of human knowledge, attained or attainable, we find that it separates itself obviously, and as it were spontaneously, into two divisions, which stand so strikingly in opposition and contradistinction to one another, that in all classifications of our knowledge they have been kept apart. These are, _physical_ science, and _moral_ or psychological science. The difference between these two departments of our knowledge does not reside in the subject-matter with which they are conversant: for although, of the simplest and most elementary parts of each, it may be said, with an approach to truth, that they are concerned with different subject- matters--namely, the one with the human mind, the other with all things whatever except the mind; this distinction does not hold between the higher regions of the two. Take the science of politics, for instance, or that of law: who will say that these are physical sciences? and yet is it not obvious that they are conversant fully as much with matter as with mind? Take, again, the theory of music, of painting, of any other of the fine arts, and who will venture to pronounce that the facts they are conversant with belong either wholly to the class of matter, or wholly to that of mind? The following seems to be the _rationale_ of the distinction between physical and moral science. In all the intercourse of man with nature, whether we consider him as acting upon it, or as receiving impressions from it, the effect or phenomenon depends upon causes of two kinds: the properties of the object acting, and those of the object acted upon. Everything which can possibly happen in which man and external things, are jointly concerned, results from the joint operation of a law or laws of matter, and a law or laws of the human mind. Thus the production of corn by human labour is the result of a law of mind, and many laws of matter. The laws of matter are those properties of the soil and of vegetable life which cause the seed to germinate in the ground, and those properties of the human body which render food necessary to its support. The law of mind is, that man desires to possess subsistence, and consequently wills the necessary means of procuring it. Laws of mind and laws of matter are so dissimilar in their nature, that it would be contrary to all principles of rational arrangement to mix them up as part of the same study. In all scientific methods, therefore, they are placed apart. Any compound effect or phenomenon which depends both on the properties of matter and on those of mind, may thus become the subject of two completely distinct sciences, or branches of science; one, treating of the phenomenon in so far as it depends upon the laws of matter only; the other treating of it in so far as it depends upon the laws of mind. The physical sciences are those which treat of the laws of matter, and of all complex phenomena in so far as dependent upon the laws of matter. The mental or moral sciences are those which treat of the laws of mind, and of all complex phenomena in so far as dependent upon the laws of mind. Most of the moral sciences presuppose physical science; but few of the physical sciences presuppose moral science. The reason is obvious. There are many phenomena (an earthquake, for example, or the motions of the planets) which depend upon the laws of matter exclusively; and have nothing whatever to do with the laws of mind. Many, therefore, of the physical sciences may be treated of without any reference to mind, and as if the mind existed as a recipient of knowledge only, not as a cause producing effects. But there are no phenomena which depend exclusively upon the laws of mind; even the phenomena of the mind itself being partially dependent upon the physiological laws of the body. All the mental sciences, therefore, not excepting the pure science of mind, must take account of a great variety of physical truths; and (as physical science is commonly and very properly studied first) may be said to presuppose them, taking up the complex phenomena where physical science leaves them. Now this, it will be found, is a precise statement of the relation in which Political Economy stands to the various sciences which are tributary to the arts of production. The laws of the production of the objects which constitute wealth, are the subject-matter both of Political Economy and of almost all the physical sciences. Such, however, of those laws as are purely laws of matter, belong to physical science, and to that exclusively. Such of them as are laws of the human mind, and no others, belong to Political Economy, which finally sums up the result of both combined. Political Economy, therefore, presupposes all the physical sciences; it takes for granted all such of the truths of those sciences as are concerned in the production of the objects demanded by the wants of mankind; or at least it takes for granted that the physical part of the process takes place somehow. It then inquires what are the phenomena of _mind_ which are concerned in the production and distribution [8] of those same objects; it borrows from the pure science of mind the laws of those phenomena, and inquires what effects follow from these mental laws, acting in concurrence with those physical one. [9] From the above considerations the following seems to come out as the correct and complete definition of Political Economy:--"The science which treats of the production and distribution of wealth, so far as they depend upon the laws of human nature." Or thus--science relating to the moral or psychological laws of the production and distribution of wealth." For popular use this definition is amply sufficient, but it still falls short of the complete accuracy required for the purposes of the philosopher. Political Economy does not treat of the production and distribution of wealth in all states of mankind, but only in what is termed the social state; nor so far as they depend upon the laws of human nature, but only so far as they depend upon a certain portion of those laws. This, at least, is the view which must be taken of Political Economy, if we mean it to find any place in an encyclopedical division of the field of science. On any other view, it either is not science at all, or it is several sciences. This will appear clearly, if, on the one hand, we take a general survey of the moral sciences, with a view to assign the exact place of Political Economy among them; while, on the other, we consider attentively the nature of the methods or processes by which the truths which are the object of those sciences are arrived at. Man, who, considered as a being having a moral or mental nature, is the subject-matter of all the moral sciences, may, with reference to that part of his nature, form the subject of philosophical inquiry under several distinct hypotheses. We may inquire what belongs to man considered individually, and as if no human being existed besides himself; we may next consider him as coming into contact with other individuals; and finally, as living in a state of _society_, that is, forming part of a body or aggregation of human beings, systematically co-operating for common purposes. Of this last state, political government, or subjection to a common superior, is an ordinary ingredient, but forms no necessary part of the conception, and, with respect to our present purpose, needs not be further adverted to. Those laws or properties of human nature which appertain to man as a mere individual, and do not presuppose, as a necessary condition, the existence of other individuals (except, perhaps, as mere instruments or means), form a part of the subject of pure mental philosophy. They comprise all the laws of the mere intellect, and those of the purely self-regarding desires. Those laws of human nature which relate to the feelings called forth in a human being by other individual human or intelligent beings, as such; namely, the _affections_, the _conscience_, or feeling of duty, and the love of _approbation_; and to the conduct of man, so far as it depends upon, or has relation to, these parts of his nature--form the subject of another portion of pure mental philosophy, namely, that portion of it on which _morals_, or _ethics_, are founded. For morality itself is not a science, but an art; not truths, but rules. The truths on which the rules are founded are drawn (as is the case in all arts) from a variety of sciences; but the principal of them, and those which are most nearly peculiar to this particular art, belong to a branch of the science of mind. Finally, there are certain principles of human nature which are peculiarly connected with the ideas and feelings generated in man by living in a state of _society_, that is, by forming part of a union or aggregation of human beings for a common purpose or purposes. Few, indeed, of the elementary laws of the human mind are peculiar to this state, almost all being called into action in the two other states. But those simple laws of human nature, operating in that wider field, give rise to results of a sufficiently universal character, and even (when compared with the still more complex phenomena of which they are the determining causes) sufficiently simple, to admit of being called, though in a somewhat looser sense, _laws_ of society, or laws of human nature in the social state. These laws, or general truths, form the subject of a branch of science which may be aptly designated from the title of _social economy_; somewhat less happily by that of _speculative politics_, or the _science_ of politics, as contradistinguished from the art. This science stands in the same relation to the social, as anatomy and physiology to the physical body. It shows by what principles of his nature man is induced to enter into a state of society; how this feature in his position acts upon his interests and feelings, and through them upon his conduct; how the association tends progressively to become closer, and the co-operation extends itself to more and more purposes; what those purposes are, and what the varieties of means most generally adopted for furthering them; what are the various relations which establish themselves among human beings as the ordinary consequence of the social union; what those which are different in different states of society; in what historical order those states tend to succeed one another; and what are the effects of each upon the conduct and character of man. This branch of science, whether we prefer to call it social economy, speculative politics, or the natural history of society, presupposes the whole science of the nature of the individual mind; since all the laws of which the latter science takes cognizance are brought into play in a state of society, and the truths of the social science are but statements of the manner in which those simple laws take effect in complicated circumstances. Pure mental philosophy, therefore, is an essential part, or preliminary, of political philosophy. The science of social economy embraces every part of man's nature, in so far as influencing the conduct or condition of man in society; and therefore may it be termed speculative politics, as being the scientific foundation of practical politics, or the art of government, of which the art of legislation is a part. [10] It is to _this_ important division of the field of science that one of the writers who have most correctly conceived and copiously illustrated its nature and limits,--we mean M. Say,--has chosen to give the name Political Economy. And, indeed, this large extension of the signification of that term is countenanced by its etymology. But the words "political economy" have long ceased to have so large a meaning. Every writer is entitled to use the words which are his tools in the manner which he judges most conducive to the general purposes of the exposition of truth; but he exercises this discretion under liability to criticism: and M. Say seems to have done in this instance, what should never be done without strong reasons; to have altered the meaning of a name which was appropriated to a particular purpose (and for which, therefore, a substitute must be provided), in order to transfer it to an object for which it was easy to find a more characteristic denomination. What is now commonly understood by the term "Political Economy" is not the science of speculative politics, but a branch of that science. It does not treat of the whole of man's nature as modified by the social state, nor of the whole conduct of man in society. It is concerned with him solely as a being who desires to possess wealth, and who is capable of judging of the comparative efficacy of means for obtaining that end. It predicts only such of the phenomena of the social state as take place in consequence of the pursuit of wealth. It makes entire abstraction of every other human passion or motive; except those which may be regarded as perpetually antagonizing principles to the desire of wealth, namely, aversion to labour, and desire of the present enjoyment of costly indulgences. These it takes, to a certain extent, into its calculations, because these do not merely, like other desires, occasionally conflict with the pursuit of wealth, but accompany it always as a drag, or impediment, and are therefore inseparably mixed up in the consideration of it. Political Economy considers mankind as occupied solely in acquiring and consuming wealth; and aims at showing what is the course of action into which mankind, living in a state of society, would be impelled, if that motive, except in the degree in which it is checked by the two perpetual counter-motives above adverted to, were absolute ruler of all their actions. Under the influence of this desire, it shows mankind accumulating wealth, and employing that wealth in the production of other wealth; sanctioning by mutual agreement the institution of property; establishing laws to prevent individuals from encroaching upon the property of others by force or fraud; adopting various contrivances for increasing the productiveness of their labour; settling the division of the produce by agreement, under the influence of competition (competition itself being governed by certain laws, which laws are therefore the ultimate regulators of the division of the produce); and employing certain expedients (as money, credit, &c.) to facilitate the distribution. All these operations, though many of them are really the result of a plurality of motives, are considered by Political Economy as flowing solely from the desire of wealth. The science then proceeds to investigate the laws which govern these several operations, under the supposition that man is a being who is determined, by the necessity of his nature, to prefer a greater portion of wealth to a smaller in all cases, without any other exception than that constituted by the two counter-motives already specified. Not that any political economist was ever so absurd as to suppose that mankind are really thus constituted, but because this is the mode in which science must necessarily proceed. When an effect depends upon a concurrence of causes, those causes must be studied one at a time, and their laws separately investigated, if we wish, through the causes, to obtain the power of either predicting or controlling the effect; since the law of the effect is compounded of the laws of all the causes which determine it. The law of the centripetal and that of the tangential force must have been known before the motions of the earth and planets could be explained, or many of them predicted. The same is the case with the conduct of man in society. In order to judge how he will act under the variety of desires and aversions which are concurrently operating upon him, we must know how he would act under the exclusive influence of each one in particular. There is, perhaps, no action of a man's life in which he is neither under the immediate nor under the remote influence of any impulse but the mere desire of wealth. With respect to those parts of human conduct of which wealth is not even the principal object, to these Political Economy does not pretend that its conclusions are applicable. But there are also certain departments of human affairs, in which the acquisition of wealth is the main and acknowledged end. It is only of these that Political Economy takes notice. The manner in which it necessarily proceeds is that of treating the main and acknowledged end as if it were the sole end; which, of all hypotheses equally simple, is the nearest to the truth. The political economist inquires, what are the actions which would be produced by this desire, if, within the departments in question, it were unimpeded by any other. In this way a nearer approximation is obtained than would otherwise be practicable, to the real order of human affairs in those departments. This approximation is then to be corrected by making proper allowance for the effects of any impulses of a different description, which can be shown to interfere with the result in any particular case. Only in a few of the most striking cases (such as the important one of the principle of population) are these corrections interpolated into the expositions of Political Economy itself; the strictness of purely scientific arrangement being thereby somewhat departed from, for the sake of practical utility. So far as it is known, or may be presumed, that the conduct of mankind in the pursuit of wealth is under the collateral influence of any other of the properties of our nature than the desire of obtaining the greatest quantity of wealth with the least labour and self-denial, the conclusions of Political Economy will so far fail of being applicable to the explanation or prediction of real events, until they are modified by a correct allowance for the degree of influence exercised by the other cause. Political Economy, then, may be defined as follows; and the definition seems to be complete:-- "The science which traces the laws of such of the phenomena of society as arise from the combined operations of mankind for the production of wealth, in so far as those phenomena are not modified by the pursuit of any other object." But while this is a correct definition of Political Economy as a portion of the field of science, the didactic writer on the subject will naturally combine in his exposition, with the truths of the pure science, as many of the practical modifications as will, in his estimation, be most conducive to the usefulness of his work. * * * * * The above attempt to frame a stricter definition of the science than what are commonly received as such, may be thought to be of little use; or, at best, to be chiefly useful in a general survey and classification of the sciences, rather than as conducing to the more successful pursuit of the particular science in question. We think otherwise, and for this reason; that, with the consideration of the definition of a science, is inseparably connected that of the _philosophic method_ of the science; the nature of the process by which its investigations are to be carried on, its truths to be arrived at. Now, in whatever science there are systematic differences of opinion --which is as much as to say, in all the moral or mental sciences, and in Political Economy among the rest; in whatever science there exist, among those who have attended to the subject, what are commonly called differences of principle, as distinguished from differences of matter-of-fact or detail,--the cause will be found to be, a difference in their conceptions of the philosophic method of the science. The parties who differ are guided, either knowingly or unconsciously, by different views concerning the nature of the evidence appropriate to the subject. They differ not solely in what they believe themselves to see, but in the quarter whence they obtained the light by which they think they see it. The most universal of the forms in which this difference of method is accustomed to present itself, is the ancient feud between what is called theory, and what is called practice or experience. There are, on social and political questions, two kinds of reasoners: there is one portion who term themselves practical men, and call the others theorists; a title which the latter do not reject, though they by no means recognise it as peculiar to them. The distinction between the two is a very broad one, though it is one of which the language employed is a most incorrect exponent. It has been again and again demonstrated, that those who are accused of despising facts and disregarding experience build and profess to build wholly upon facts and experience; while those who disavow theory cannot make one step without theorizing. But, although both classes of inquirers do nothing but theorize, and both of them consult no other guide than experience, there is this difference between them, and a most important difference it is: that those who are called practical men require _specific_ experience, and argue wholly _upwards_ from particular facts to a general conclusion; while those who are called theorists aim at embracing a wider field of experience, and, having argued upwards from particular facts to a general principle including a much wider range than that of the question under discussion, then argue _downwards_ from that general principle to a variety of specific conclusions. Suppose, for example, that the question were, whether absolute kings were likely to employ the powers of government for the welfare or for the oppression of their subjects. The practicals would endeavour to determine this question by a direct induction from the conduct of particular despotic monarchs, as testified by history. The theorists would refer the question to be decided by the test not solely of our experience of kings, but of our experience of men. They would contend that an observation of the tendencies which human nature has manifested in the variety of situations in which human beings have been placed, and especially observation of what passes in our own minds, warrants us in inferring that a human being in the situation of a despotic king will make a bad use of power; and that this conclusion would lose nothing of its certainty even if absolute kings had never existed, or if history furnished us with no information of the manner in which they had conducted themselves. The first of these methods is a method of induction, merely; the last a mixed method of induction and ratiocination. The first may be called the method _à posteriori;_ the latter, the method _à priori_. We are aware that this last expression is sometimes used to characterize a supposed mode of philosophizing, which does not profess to be founded upon experience at all. But we are not acquainted with any mode of philosophizing, on political subjects at least, to which such a description is fairly applicable. By the method _à posteriori_ we mean that which requires, as the basis of its conclusions, not experience merely, but specific experience. By the method _à priori_ we mean (what has commonly been meant) reasoning from an assumed hypothesis; which is not a practice confined to mathematics, but is of the essence of all science which admits of general reasoning at all. To verify the hypothesis itself _à posteriori_, that is, to examine whether the facts of any actual case are in accordance with it, is no part of the business of science at all, but of the _application_ of science. In the definition which we have attempted to frame of the science of Political Economy, we have characterized it as essentially an _abstract_ science, and its method as the method _à priori_. Such is undoubtedly its character as it has been understood and taught by all its most distinguished teachers. It reasons, and, as we contend, must necessarily reason, from assumptions, not from facts. It is built upon hypotheses, strictly analogous to those which, under the name of definitions, are the foundation of the other abstract sciences. Geometry presupposes an arbitrary definition of a line, "that which has length but not breadth." Just in the same manner does Political Economy presuppose an arbitrary definition of man, as a being who invariably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labour and physical self-denial with which they can be obtained in the existing state of knowledge. It is true that this definition of man is not formally prefixed to any work on Political Economy, as the definition of a line is prefixed to Euclid's Elements; and in proportion as by being so prefixed it would be less in danger of being forgotten, we may see ground for regret that this is not done. It is proper that what is assumed in every particular case, should once for all be brought before the mind in its full extent, by being somewhere formally stated as a general maxim. Now, no one who is conversant with systematic treatises on Political Economy will question, that whenever a political economist has shown that, by acting in a particular manner, a labourer may obviously obtain higher wages, a capitalist larger profits, or a landlord higher rent, he concludes, as a matter of course, that they will certainly act in that manner. Political Economy, therefore, reasons from _assumed_ premises--from premises which might be totally without foundation in fact, and which are not pretended to be universally in accordance with it. The conclusions of Political Economy, consequently, like those of geometry, are only true, as the common phrase is, _in the abstract_; that is, they are only true under certain suppositions, in which none but general causes--causes common to the _whole class_ of cases under consideration--are taken into the account. This ought not to be denied by the political economist. If he deny it, then, and then only, he places himself in the wrong. The _à priori_ method which is laid to his charge, as if his employment of it proved his whole science to be worthless, is, as we shall presently show, the only method by which truth can possibly be attained in any department of the social science. All that is requisite is, that he be on his guard not to ascribe to conclusions which are grounded upon an hypothesis a different kind of certainty from that which really belongs to them. They would be true without qualification, only in a case which is purely imaginary. In proportion as the actual facts recede from the hypothesis, he must allow a corresponding deviation from the strict letter of his conclusion; otherwise it will be true only of things such as he has arbitrarily supposed, not of such things as really exist. That which is true in the abstract, is always true in the concrete with proper _allowances_. When a certain cause really exists, and if left to itself would infallibly produce a certain effect, that same effect, _modified_ by all the other concurrent causes, will correctly correspond to the result really produced. The conclusions of geometry are not strictly true of such lines, angles, and figures, as human hands can construct. But no one, therefore, contends that the conclusions of geometry are of no utility, or that it would be better to shut up Euclid's Elements, and content ourselves with "practice" and "experience." No mathematician ever thought that his definition of a line corresponded to an actual line. As little did any political economist ever imagine that real men had no object of desire but wealth, or none which would not give way to the slightest motive of a pecuniary kind. But they were justified in assuming this, for the purposes of their argument; because they had to do only with those parts of human conduct which have pecuniary advantage for their direct and principal object; and because, as no two individual cases are exactly alike, no _general_ maxims could ever be laid down unless _some_ of the circumstances of the particular case were left out of consideration. But we go farther than to affirm that the method _à priori_ is a legitimate mode of philosophical investigation in the moral sciences: we contend that it is the only mode. We affirm that the method _à posteriori_, or that of specific experience, is altogether inefficacious in those sciences, as a means of arriving at any considerable body of valuable truth; though it admits of being usefully applied in aid of the method _à priori_, and even forms an indispensable supplement to it. There is a property common to almost all the moral sciences, and by which they are distinguished from many of the physical; this is, that it is seldom in our power to make experiments in them. In chemistry and natural philosophy, we can not only observe what happens under all the combinations of circumstances which nature brings together, but we may also try an indefinite number of new combinations. This we can seldom do in ethical, and scarcely ever in political science. We cannot try forms of government and systems of national policy on a diminutive scale in our laboratories, shaping our experiments as we think they may most conduce to the advancement of knowledge. We therefore study nature under circumstances of great disadvantage in these sciences; being confined to the limited number of experiments which take place (if we may so speak) of their own accord, without any preparation or management of ours; in circumstances, moreover, of great complexity, and never perfectly known to us; and with the far greater part of the processes concealed from our observation. The consequence of this unavoidable defect in the materials of the induction is, that we can rarely obtain what Bacon has quaintly, but not unaptly, termed an _experimentum crucis_. In any science which admits of an unlimited range of arbitrary experiments, an _experimentum crucis_ may always be obtained. Being able to vary all the circumstances, we can always take effectual means of ascertaining which of them are, and which are not, material. Call the effect B, and let the question be whether the cause A in any way contributes to it. We try an experiment in which all the surrounding circumstances are altered, except A alone: if the effect B is nevertheless produced, A is the cause of it. Or, instead of leaving A, and changing the other circumstances, we leave all the other circumstances and change A: if the effect B in that case does _not_ take place, then again A is a necessary condition of its existence. Either of these experiments, if accurately performed, is an _experimentum crucis_; it converts the presumption we had before of the existence of a connection between A and B into proof, by negativing every other hypothesis which would account for the appearances. But this can seldom be done in the moral sciences, owing to the immense multitude of the influencing circumstances, and our very scanty means of varying the experiment. Even in operating upon an individual mind, which is the case affording greatest room for experimenting, we cannot often obtain a _crucial_ experiment. The effect, for example, of a particular circumstance in education, upon the formation of character, may be tried in a variety of cases, but we can hardly ever be certain that any two of those cases differ in all their circumstances except the solitary one of which we wish to estimate the influence. In how much greater a degree must this difficulty exist in the affairs of states, where even the _number_ of recorded experiments is so scanty in comparison with the variety and multitude of the circumstances concerned in each. How, for example, can we obtain a crucial experiment on the effect of a restrictive commercial policy upon national wealth? We must find two nations alike in every other respect, or at least possessed, in a degree exactly equal, of everything which conduces to national opulence, and adopting exactly the same policy in all their other affairs, but differing in this only, that one of them adopts a system of commercial restrictions, and the other adopts free trade. This would be a decisive experiment, similar to those which we can almost always obtain in experimental physics. Doubtless this would be the most conclusive evidence of all if we could get it. But let any one consider how infinitely numerous and various are the circumstances which either directly or indirectly do or may influence the amount of the national wealth, and then ask himself what are the probabilities that in the longest revolution of ages two nations will be found, which agree, and can be shown to agree, in all those circumstances except one? Since, therefore, it is vain to hope that truth can be arrived at, either in Political Economy or in any other department of the social science, while we look at the facts in the concrete, clothed in all the complexity with which nature has surrounded them, and endeavour to elicit a general law by a process of induction from a comparison of details; there remains no other method than the _à priori_ one, or that of "abstract speculation." Although sufficiently ample grounds are not afforded in the field of politics, for a satisfactory induction by a comparison of the effects, the causes may, in all cases, be made the subject of specific experiment. These causes are, laws of human nature, and external circumstances capable of exciting the human will to action. The desires of man, and the nature of the conduct to which they prompt him, are within the reach of our observation. We can also observe what are the objects which excite those desires. The materials of this knowledge every one can principally collect within himself; with reasonable consideration of the differences, of which experience discloses to him the existence, between himself and other people. Knowing therefore accurately the properties of the substances concerned, we may reason with as much certainty as in the most demonstrative parts of physics from any assumed set of circumstances. This will be mere trifling if the assumed circumstances bear no sort of resemblance to any real ones; but if the assumption is correct as far as it goes, and differs from the truth no otherwise than as a part differs from the whole, then the conclusions which are correctly deduced from the assumption constitute _abstract_ truth; and when completed by adding or subtracting the effect of the non-calculated circumstances, they are true in the concrete, and may be applied to practice. Of this character is the science of Political Economy in the writings of its best teachers. To render it perfect as an abstract science, the combinations of circumstances which it assumes, in order to trace their effects, should embody all the circumstances that are common to all cases whatever, and likewise all the circumstances that are common to any important class of cases. The conclusions correctly deduced from these assumptions, would be as true in the abstract as those of mathematics; and would be as near an approximation as abstract truth can ever be, to truth in the concrete. When the principles of Political Economy are to be applied to a particular ease, then it is necessary to take into account all the individual circumstances of that case; not only examining to which of the sets of circumstances contemplated by the abstract science the circumstances of the case in question correspond, but likewise what other circumstances may exist in that case, which not being common to it with any large and strongly-marked class of cases, have not fallen under the cognizance of the science. These circumstances have been called _disturbing causes_. And here only it is that an element of uncertainty enters into the process--an uncertainty inherent in the nature of these complex phenomena, and arising from the impossibility of being quite sure that all the circumstances of the particular case are known to us sufficiently in detail, and that our attention is not unduly diverted from any of them. This constitutes the only uncertainty of Political Economy; and not of it alone, but of the moral sciences in general. When the disturbing causes are known, the allowance necessary to be made for them detracts in no way from scientific precision, nor constitutes any deviation from the _à priori_ method. The disturbing causes are not handed over to be dealt with by mere conjecture. Like _friction_ in mechanics, to which they have been often compared, they may at first have been considered merely as a non-assignable deduction to be made by guess from the result given by the general principles of science; but in time many of them are brought within the pale of the abstract science itself, and their effect is found to admit of as accurate an estimation as those more striking effects which they modify. The disturbing causes have their laws, as the causes which are thereby disturbed have theirs; and from the laws of the disturbing causes, the nature and amount of the disturbance may be predicted _à priori_, like the operation of the more general laws which they are said to modify or disturb, but with which they might more properly be said to be concurrent. The effect of the special causes is then to be added to, or subtracted from, the effect of the general ones. These disturbing causes are sometimes circumstances which operate upon human conduct through the same principle of human nature with which Political Economy is conversant, namely, the desire of wealth, but which are not general enough to be taken into account in the abstract science. Of disturbances of this description every political economist can produce many examples. In other instances the disturbing cause is some other law of human nature. In the latter case it never can fall within the province of Political Economy; it belongs to some other science; and here the mere political economist, he who has studied no science but Political Economy, if he attempt to apply his science to practice, will fail. [11] As for the other kind of disturbing causes, namely those which operate through the same law of human nature out of which the general principles of the science arise, these might always be brought within the pale of the abstract science if it were worth while; and when we make the necessary allowances for them in practice, if we are doing anything but guess, we are following out the method of the abstract science into minuter details; inserting among its hypotheses a fresh and still more complex combination of circumstances, and so adding _pro hác vice_ a supplementary chapter or appendix, or at least a supplementary theorem, to the abstract science. Having now shown that the method _à priori_ in Political Economy, and in all the other branches of moral science, is the only certain or scientific mode of investigation, and that the _à posteriori_ method, or that of specific experience, as a means of arriving at truth, is inapplicable to these subjects, we shall be able to show that the latter method is notwithstanding of great value in the moral sciences; namely, not as a means of discovering truth, but of verifying it, and reducing to the lowest point that uncertainty before alluded to as arising from the complexity of every particular case, and from the difficulty (not to say impossibility) of our being assured _à priori_ that we have taken into account all the material circumstances. If we could be quite certain that we knew all the facts of the particular case, we could derive little additional advantage from specific experience. The causes being given, we may know what will be their effect, without an actual trial of every possible combination; since the causes are human feelings, and outward circumstances fitted to excite them: and, as these for the most part are, or at least might be, familiar to us, we can more surely judge of their combined effect from that familiarity, than from any evidence which can be elicited from the complicated and entangled circumstances of an actual experiment. If the knowledge what are the particular causes operating in any given instance were revealed to us by infallible authority, then, if our abstract science were perfect, we should become prophets. But the causes are not so revealed: they are to be collected by observation; and observation in circumstances of complexity is apt to be imperfect. Some of the causes may lie beyond observation; many are apt to escape it, unless we are on the look-out for them; and it is only the habit of long and accurate observation which can give us so correct a preconception what causes we are likely to find, as shall induce us to look for them in the right quarter. But such is the nature of the human understanding, that the very fact of attending with intensity to one part of a thing, has a tendency to withdraw the attention from the other parts. We are consequently in great danger of adverting to a portion only of the causes which are actually at work. And if we are in this predicament, the more accurate our deductions and the more certain our conclusions in the abstract, (that is, making abstraction of all circumstances except those which form part of the hypothesis,) the less we are likely to suspect that we are in error: for no one can have looked closely into the sources of fallacious thinking without being deeply conscious that the coherence, and neat concatenation of our philosophical systems, is more apt than we are commonly aware to pass with us as evidence of their truth. We cannot, therefore, too carefully endeavour to verify our theory, by comparing, in the particular cases to which we have access, the results which it would have led us to predict, with the most trustworthy accounts we can obtain of those which have been actually realized. The discrepancy between our anticipations and the actual fact is often the only circumstance which would have drawn our attention to some important disturbing cause which we had overlooked. Nay, it often discloses to us errors in thought, still more serious than the omission of what can with any propriety be termed a disturbing cause. It often reveals to us that the basis itself of our whole argument is insufficient; that the data, from which we had reasoned, comprise only a part, and not always the most important part, of the circumstances by which the result is really determined. Such oversights are committed by very good reasoners, and even by a still rarer class, that of good observers. It is a kind of error to which those are peculiarly liable whose views are the largest and most philosophical: for exactly in that ratio are their minds more accustomed to dwell upon those laws, qualities, and tendencies, which are common to large classes of cases, and which belong to all place and all time; while it often happens that circumstances almost peculiar to the particular case or era have a far greater share in governing that one case. Although, therefore, a philosopher be convinced that no general truths can be attained in the affairs of nations by the _à posteriori_ road, it does not the less behove him, according to the measure of his opportunities, to sift and scrutinize the details of every specific experiment. Without this, he may be an excellent professor of abstract science; for a person may be of great use who points out correctly what effects will follow from certain combinations of possible circumstances, in whatever tract of the extensive region of hypothetical cases those combinations may be found. He stands in the same relation to the legislator, as the mere geographer to the practical navigator; telling him the latitude and longitude of all sorts of places, but not how to find whereabouts he himself is sailing. If, however, he does no more than this, he must rest contented to take no share in practical politics; to have no opinion, or to hold it with extreme modesty, on the applications which should be made of his doctrines to existing circumstances. No one who attempts to lay down propositions for the guidance of mankind, however perfect his scientific acquirements, can dispense with a practical knowledge of the actual modes in which the affairs of the world are carried on, and an extensive personal experience of the actual ideas, feelings, and intellectual and moral tendencies of his own country and of his own age. The true practical statesman is he who combines this experience with a profound knowledge of abstract political philosophy. Either acquirement, without the other, leaves him lame and impotent if he is sensible of the deficiency; renders him obstinate and presumptuous if, as is more probable, he is entirely unconscious of it. Such, then, are the respective offices and uses of the _à priori_ and the _à posteriori_ methods--the method of abstract science, and that of specific experiment--as well in Political Economy, as in all the other branches of social philosophy. Truth compels us to express our conviction that whether among those who have written on, these subjects, or among those for whose use they wrote, few can be pointed out who have allowed to each of these methods its just value, and systematically kept each to its proper objects and functions. One of the peculiarities of modern times, the separation of theory from practice--of the studies of the closet, from the outward business of the world--has given a wrong bias to the ideas and feelings both of the student and of the man of business. Each undervalues that part of the materials of thought with which he is not familiar. The one despises all comprehensive views, the other neglects details. The one draws his notion of the universe from the few objects with which his course of life has happened to render him familiar; the other having got demonstration on his side, and forgetting that it is only a demonstration _nisi_--a proof at all times liable to be set aside by the addition of a single new fact to the hypothesis --denies, instead of examining and sifting, the allegations which are opposed to him. For this he has considerable excuse in the worthlessness of the testimony on which the facts brought forward to invalidate the conclusions of theory usually rest. In these complex matters, men see with their preconceived opinions, not with their eyes: an interested or a passionate man's statistics are of little worth; and a year seldom passes without examples of the astounding falsehoods which large bodies of respectable men will back each other in publishing to the world as facts within their personal knowledge. It is not because a thing is _asserted_ to be true, but because in its nature it _may_ be true, that a sincere and patient inquirer will feel himself called upon to investigate it. He will use the assertions of opponents not as evidence, but indications leading to evidence; suggestions of the most proper course for his own inquiries. But while the philosopher and the practical man bandy half-truths with one another, we may seek far without finding one who, placed on a higher eminence of thought, comprehends as a whole what they see only in separate parts; who can make the anticipations of the philosopher guide the observation of the practical man, and the specific experience of the practical man warn the philosopher where something is to be added to his theory. The most memorable example in modern times of a man who united the spirit of philosophy with the pursuits of active life, and kept wholly clear from the partialities and prejudices both of the student and of the practical statesman, was Turgot; the wonder not only of his age, but of history, for his astonishing combination of the most opposite, and, judging from common experience, almost incompatible excellences. Though it is impossible to furnish any test by which a speculative thinker, either in Political Economy or in any other branch of social philosophy, may know that he is competent to judge of the application of his principles to the existing condition of his own or any other country, indications may be suggested by the absence of which he may well and surely know that he is not competent. His knowledge must at least enable him to explain and account for what _is_, or he is an insufficient judge of what ought to be. If a political economist, for instance, finds himself puzzled by any recent or present commercial phenomena; if there is any mystery to him in the late or present state of the productive industry of the country, which his knowledge of principle does not enable him to unriddle; he may be sure that something is wanting to render his system of opinions a safe guide in existing circumstances. Either some of the facts which influence the situation of the country and the course of events are not known to him; or, knowing them, he knows not what ought to be their effects. In the latter case his system is imperfect even as an abstract system; it does not enable him to trace correctly all the consequences even of assumed premises. Though he succeed in throwing doubts upon the reality of some of the phenomena which he is required to explain, his task is not yet completed; even then he is called upon to show how the belief, which he deems unfounded, arose; and what is the real nature of the appearances which gave a colour of probability to allegations which examination proves to be untrue. When the speculative politician has gone through this labour--has gone through it conscientiously, not with the desire of finding his system complete, but of making it so--he may deem himself qualified to apply his principles to the guidance of practice: but he must still continue to exercise the same discipline upon every new combination of facts as it arises; he must make a large allowance for the disturbing influence of unforeseen causes, and must carefully watch the result of every experiment, in order that any residuum of facts which his principles did not lead him to expect, and do not enable him to explain, may become the subject of a fresh analysis, and furnish the occasion for a consequent enlargement or correction of his general views. The method of the practical philosopher consists, therefore, of two processes; the one analytical, the other synthetical. He must _analyze_ the existing state of society into its elements, not dropping and losing any of them by the way. After referring to the experience of individual man to learn the _law_ of each of these elements, that is, to learn what are its natural effects, and how much of the effect follows from so much of the cause when not counteracted by any other cause, there remains an operation of _synthesis_; to put all these effects together, and, from what they are separately, to collect what would be the effect of all the causes acting at once. If these various operations could be correctly performed, the result would be prophecy; but, as they can be performed only with a certain approximation to correctness, mankind can never predict with absolute certainty, but only with a less or greater degree of probability; according as they are better or worse apprised what the causes are,--have learnt with more or less accuracy from experience the law to which each of those causes, when acting separately, conforms, --and have summed up the aggregate effect more or less carefully. With all the precautions which have been indicated there will still be some danger of falling into partial views; but we shall at least have taken the best securities against it. All that we can do more, is to endeavour to be impartial critics of our own theories, and to free ourselves, as far as we are able, from that reluctance from which few inquirers are altogether him to expect, and do not enable him to explain, may become the subject of a fresh analysis, and furnish the occasion for a consequent enlargement or correction of his general views. The method of the practical philosopher consists, therefore, of two processes; the one analytical, the other synthetical. He must _analyze_ the existing state of society into its elements, not dropping and losing any of them by the way. After referring to the experience of individual man to learn the _law_ of each of these elements, that is, to learn what are its natural effects, and how much of the effect follows from so much of the cause when not counteracted by any other cause, there remains an operation of _synthesis_; to put all these effects together, and, from what they are separately, to collect what would be the effect of all the causes acting at once. If these various operations could be correctly performed, the result would be prophecy; but, as they can be performed only with a certain approximation to correctness, mankind can never predict with absolute certainty, but only with a less or greater degree of probability; according as they are better or worse apprised what the causes are,--have learnt with more or less accuracy from experience the law to which each of those causes, when acting separately, conforms,--and have summed up the aggregate effect more or less carefully. With all the precautions which have been indicated there will still be some danger of falling into partial views; but we shall at least have taken the best securities against it. All that we can do more, is to endeavour to be impartial critics of our own theories, and to free ourselves, as far as we are able, from that reluctance from which few inquirers are altogether exempt, to admit the reality or relevancy of any facts which they have not previously either taken into, or left a place open for in, their systems. If indeed every phenomenon was generally the effect of no more than one cause, a knowledge of the law of that cause would, unless there was a logical error in our reasoning, enable us confidently to predict all the circumstances of the phenomenon. We might then, if we had carefully examined our premises and our reasoning, and found no flaw, venture to disbelieve the testimony which might be brought to show that matters had turned out differently from what we should have predicted. If the causes of erroneous conclusions were always patent on the face of the reasonings which lead to them, the human understanding would be a far more trustworthy instrument than it is. But the narrowest examination of the process itself will help us little towards discovering that we have omitted part of the premises which we ought to have taken into our reasoning. Effects are commonly determined by a _concurrence_ of causes. If we have overlooked any one cause, we may reason justly from all the others, and only be the further wrong. Our premises will be true, and our reasoning correct, and yet the result of no value in the particular case. There is, therefore, almost always room for a modest doubt as to our practical conclusions. Against false premises and unsound reasoning, a good mental discipline may effectually secure us; but against the danger of _overlooking_ something, neither strength of understanding nor intellectual cultivation can be more than a very imperfect protection. A person may be warranted in feeling confident, that whatever he has carefully contemplated with his mind's eye he has seen correctly; but no one can be sure that there is not something in existence which he has not seen at all. He can do no more than satisfy himself that he has seen all that is visible to any other persons who have concerned themselves with the subject. For this purpose he must endeavour to place himself at their point of view, and strive earnestly to see the object as they see it; nor give up the attempt until he has either added the appearance which is floating before them to his own stock of realities, or made out clearly that it is an optical deception. * * * * * The principles which we have now stated are by no means alien to common apprehension: they are not absolutely hidden, perhaps, from any one, but are commonly seen through a mist. We might have presented the latter part of them in a phraseology in which they would have seemed the most familiar of truisms: we might have cautioned inquirers against too extensive _generalization_, and reminded them that there are _exceptions_ to all rules. Such is the current language of those who distrust comprehensive thinking, without having any clear notion why or where it ought to be distrusted. We have avoided the use of these expressions purposely, because we deem them superficial and inaccurate. The error, when there is error, does _not_ arise from generalizing too extensively; that is, from including too wide a range of particular cases in a single proposition. Doubtless, a man often asserts of an entire class what is only true of a part of it; but his error generally consists not in making too wide an assertion, but in making the wrong _kind_ of assertion: he predicated an actual result, when he should only have predicated a _tendency_ to that result--a power acting with a certain intensity in that direction. With regard to _exceptions_; in any tolerably ably advanced science there is properly no such thing as an exception. What is thought to be an exception to a principle is always some other and distinct principle cutting into the former: some other force which impinges against the first force, and deflects it from its direction. There are not a _law_ and an _exception_ to that law--the law acting in ninety-nine cases, and the exception in one. There are two laws, each possibly acting in the whole hundred cases, and bringing about a common effect by their conjunct operation. If the force which, being the less conspicuous of the two, is called the disturbing force, prevails sufficiently over the other force in some one case, to constitute that case what is commonly called an exception, the same disturbing force probably acts as a modifying cause in many other cases which no one will call exceptions. Thus if it were stated to be a law of nature, that all heavy bodies fall to the ground, it would probably be said that the resistance of the atmosphere, which prevents a balloon from falling, constitutes the balloon an exception to that pretended law of nature. But the real law is, that all heavy bodies _tend_ to fall; and to this there is no exception, not even the sun and moon; for even they, as every astronomer knows, tend towards the earth, with a force exactly equal to that with which the earth tends towards them. The resistance of the atmosphere might, in the particular case of the balloon, from a misapprehension of what the law of gravitation is, be said to _prevail_ over the law; but its disturbing effect is quite as real in every other case, since though it does not prevent, it retards the fall of all bodies whatever. The rule, and the so-called exception, do not divide the cases between them; each of them is a comprehensive rule extending to all cases. To call one of these concurrent principles an exception to the other, is superficial, and contrary to the correct principles of nomenclature and arrangement. An effect of precisely the same kind, and arising from the same cause, ought not to be placed in two different categories, merely as there does or does not exist another cause preponderating over it. It is only in art, as distinguished from science, that we can with propriety speak of exceptions. Art, the immediate end of which is practice, has nothing to do with causes, except as the means of bringing about effects. However heterogeneous the causes, it carries the effects of them all into one single reckoning, and according as the sum-total is _plus_ or _minus_, according as it falls above or below a certain line, Art says, Do this, or Abstain from doing it. The exception does not run by insensible degrees into the rule, like what are called exceptions in science. In a question of practice it frequently happens that a certain thing is either fit to be done, or fit to be altogether abstained from, there being no medium. If, in the majority of cases, it is fit to be done, that is made the rule. When a case subsequently occurs in which the thing ought not to be done, an entirely new leaf is turned over; the rule is now done with, and dismissed: a new train of ideas is introduced, between which and those involved in the rule there is a broad line of demarcation; as broad and _tranchant_ as the difference between Ay and No. Very possibly, between the last case which comes within the rule and the first of the exception, there is only the difference of a shade: but that shade probably makes the whole interval between acting in one way and in a totally different one. We may, therefore, in talking of art, unobjectionably speak of the _rule_ and the _exception_; meaning by the rule, the cases in which there exists a preponderance, however slight, of inducements for acting in a particular way; and by the exception, the cases in which the preponderance is on the contrary side. THE END. NOTES: [8] We say, the _production_ and _distribution_, not, as is usual with writers on this science, the production, distribution, and _consumption_. For we contend that Political Economy, as conceived by those very writers, has nothing to do with the consumption of wealth, further than as the consideration of it is inseparable from that of production, or from that of distribution. We know not of any _laws_ of the _consumption_ of wealth as the subject of a distinct science: they can be no other than the laws of human enjoyment. Political economists have never treated of consumption on its own account, but always for the purpose of the inquiry in what manner different kinds of consumption affect the production and distribution of wealth. Under the head of Consumption, in professed treatises on the science, the following are the subjects treated of: 1st, The distinction between _productive_ and _unproductive_ consumption; 2nd, The inquiry whether it is possible for _too much_ wealth to be _produced_, and for too great a portion of what has been produced to be applied to the purpose of further _production_; 3rd, The theory of taxation, that is to say, the following two questions--by whom each particular tax is paid (a question of _distribution_), and in what manner particular taxes affect _production_. [9] The physical laws of the production of useful objects are all equally presupposed by the science of Political Economy: most of them, however, it presupposes in the gross, seeming to say nothing about them. A few (such, for instance, as the decreasing ratio in which the produce of the soil is increased by an increased application of labour) it is obliged particularly to specify, and thus seems to borrow those truths from the physical sciences to which they properly belong, and include them among its own. [10] The _science_ of legislation is an incorrect and misleading expression. Legislation is _making laws_. We do not talk of the _science_ of _making_ anything. Even the _science of government_ would be an objectionable expression, were it not that _government_ is often loosely taken to signify, not the act of governing, but the state or condition of _being governed_, or of living under a government. A preferable expression would be, the science of _political society_; a principal branch of the more extensive science of society, characterized in the text. [11] One of the strongest reasons for drawing the line of separation clearly and broadly between science and art is the following:--That the principle of classification in science most conveniently follows the classification of _causes_, while arts must necessarily be classified according to the classification of the _effects_, the production of which is their appropriate end. Now an effect, whether in physics or morals, commonly depends upon a concurrence of causes, and it frequently happens that several of these causes belong to different sciences. Thus in the construction of engines upon the principles of the science of _mechanics_, it is necessary to bear in mind the _chemical_ properties of the material, such as its liability to oxydize; its electrical and magnetic properties, and so forth. From this it follows that although the necessary foundation of all art is science, that is, the knowledge of the properties or laws of the objects upon which, and with which, the art dons its work; it is not equally true that every art corresponds to one particular science. Each art presupposes, not one science, but science in general; or, at least, many distinct sciences. (Editor's note:) Essays on some Unsettled Questions of Political Economy These five essays represent Mill's earliest thoughts on economic matters and were first composed in 1829 and 1830 before his reputation had been established by the publication of _Logic_ in 1843. Their successful reception no doubt hastened the composition of his comprehensive work the _Principles of Political Economy_ (1848). 
22651	----	at http://www.eBookForge.net THE UNSOLVED RIDDLE OF SOCIAL JUSTICE BY STEPHEN LEACOCK =B. A., Ph. D., Litt. D., F. R. S. C.= _Professor of Political Economy at McGill University, Montreal_ Author of "Essays and Literary Studies," Etc. NEW YORK: JOHN LANE COMPANY LONDON: JOHN LANE, THE BODLEY HEAD TORONTO: S. B. GUNDY: MCMXX BY STEPHEN LEACOCK FRENZIED FICTION FURTHER FOOLISHNESS BEHIND THE BEYOND NONSENSE NOVELS LITERARY LAPSES SUNSHINE SKETCHES ARCADIAN ADVENTURES WITH THE IDLE RICH ESSAYS AND LITERARY STUDIES MOONBEAMS FROM THE LARGER LUNACY THE HOHENZOLLERNS IN AMERICA Copyright, 1920, By John Lane Company _CONTENTS_ CHAPTER PAGE I. The Troubled Outlook of the Present Hour 9 II. Life, Liberty and the Pursuit of Happiness 33 III. The Failures and Fallacies of Natural Liberty 48 IV. Work and Wages 66 V. The Land of Dreams: The Utopia of the Socialist 88 VI. How Mr. Bellamy Looked Backward 103 VII. What Is Possible and What Is Not 124 THE UNSOLVED RIDDLEOF SOCIAL JUSTICE _I.--The Troubled Outlook of the Present Hour_ THESE are troubled times. As the echoes of the war die away the sound of a new conflict rises on our ears. All the world is filled with industrial unrest. Strike follows upon strike. A world that has known five years of fighting has lost its taste for the honest drudgery of work. Cincinnatus will not back to his plow, or, at the best, stands sullenly between his plow-handles arguing for a higher wage. The wheels of industry are threatening to stop. The laborer will not work because the pay is too low and the hours are too long. The producer cannot employ him because the wage is too high, and the hours are too short. If the high wage is paid and the short hours are granted, then the price of the thing made, so it seems, rises higher still. Even the high wages will not buy it. The process apparently moves in a circle with no cessation to it. The increased wages seem only to aggravate the increasing prices. Wages and prices, rising together, call perpetually for more money, or at least more tokens and symbols, more paper credit in the form of checks and deposits, with a value that is no longer based on the rock-bottom of redemption into hard coin, but that floats upon the mere atmosphere of expectation. But the sheer quantity of the inflated currency and false money forces prices higher still. The familiar landmarks of wages, salaries and prices are being obliterated. The "scrap of paper" with which the war began stays with us as its legacy. It lies upon the industrial landscape like snow, covering up, as best it may, the bare poverty of a world desolated by war. Under such circumstances national finance seems turned into a delirium. Billions are voted where once a few poor millions were thought extravagant. The war debts of the Allied Nations, not yet fully computed, will run from twenty-five to forty billion dollars apiece. But the debts of the governments appear on the other side of the ledger as the assets of the citizens. What is the meaning of it? Is it wealth or is it poverty? The world seems filled with money and short of goods, while even in this very scarcity a new luxury has broken out. The capitalist rides in his ten thousand dollar motor car. The seven-dollar-a-day artisan plays merrily on his gramophone in the broad daylight of his afternoon that is saved, like all else, by being "borrowed" from the morning. He calls the capitalist a "profiteer." The capitalist retorts with calling him a "Bolshevik." Worse portents appear. Over the rim of the Russian horizon are seen the fierce eyes and the unshorn face of the real and undoubted Bolshevik, waving his red flag. Vast areas of what was a fertile populated world are overwhelmed in chaos. Over Russia there lies a great darkness, spreading ominously westward into Central Europe. The criminal sits among his corpses. He feeds upon the wreck of a civilization that was. The infection spreads. All over the world the just claims of organized labor are intermingled with the underground conspiracy of social revolution. The public mind is confused. Something approaching to a social panic appears. To some minds the demand for law and order overwhelms all other thoughts. To others the fierce desire for social justice obliterates all fear of a general catastrophe. They push nearer and nearer to the brink of the abyss. The warning cry of "back" is challenged by the eager shout of "forward!" The older methods of social progress are abandoned as too slow. The older weapons of social defense are thrown aside as too blunt. Parliamentary discussion is powerless. It limps in the wake of the popular movement. The "state", as we knew it, threatens to dissolve into labor unions, conventions, boards of conciliation, and conferences. Society shaken to its base, hurls itself into the industrial suicide of the general strike, refusing to feed itself, denying its own wants. This is a time such as there never was before. It represents a vast social transformation in which there is at stake, and may be lost, all that has been gained in the slow centuries of material progress and in which there may be achieved some part of all that has been dreamed in the age-long passion for social justice. For the time being, the constituted governments of the world survive as best they may and accomplish such things as they can, planless, or planning at best only for the day. Sufficient, and more than sufficient, for the day is the evil thereof. Never then was there a moment in which there was greater need for sane and serious thought. It is necessary to consider from the ground up the social organization in which we live and the means whereby it may be altered and expanded to meet the needs of the time to come. We must do this or perish. If we do not mend the machine, there are forces moving in the world that will break it. The blind Samson of labor will seize upon the pillars of society and bring them down in a common destruction. * * * * * Few persons can attain to adult life without being profoundly impressed by the appalling inequalities of our human lot. Riches and poverty jostle one another upon our streets. The tattered outcast dozes on his bench while the chariot of the wealthy is drawn by. The palace is the neighbor of the slum. We are, in modern life, so used to this that we no longer see it. Inequality begins from the very cradle. Some are born into an easy and sheltered affluence. Others are the children of mean and sordid want. For some the long toil of life begins in the very bloom time of childhood and ends only when the broken and exhausted body sinks into a penurious old age. For others life is but a foolish leisure with mock activities and mimic avocations to mask its uselessness. And as the circumstances vary so too does the native endowment of the body and the mind. Some born in poverty rise to wealth. An inborn energy and capacity bid defiance to the ill-will of fate. Others sink. The careless hand lets fall the cradle gift of wealth. Thus all about us is the moving and shifting spectacle of riches and poverty, side by side, inextricable. The human mind, lost in a maze of inequalities that it cannot explain and evils that it cannot, singly, remedy, must adapt itself as best it can. An acquired indifference to the ills of others is the price at which we live. A certain dole of sympathy, a casual mite of personal relief is the mere drop that any one of us alone can cast into the vast ocean of human misery. Beyond that we must harden ourselves lest we too perish. We feed well while others starve. We make fast the doors of our lighted houses against the indigent and the hungry. What else can we do? If we shelter _one_ what is that? And if we try to shelter all, we are ourselves shelterless. But the contrast thus presented is one that has acquired a new meaning in the age in which we live. The poverty of earlier days was the outcome of the insufficiency of human labor to meet the primal needs of human kind. It is not so now. We live in an age that is at best about a century and a half old--the age of machinery and power. Our common reading of history has obscured this fact. Its pages are filled with the purple gowns of kings and the scarlet trappings of the warrior. Its record is largely that of battles and sieges, of the brave adventure of discovery and the vexed slaughter of the nations. It has long since dismissed as too short and simple for its pages, the short and simple annals of the poor. And the record is right enough. Of the poor what is there to say? They were born; they lived; they died. They followed their leaders, and their names are forgotten. But written thus our history has obscured the greatest fact that ever came into it--the colossal change that separates our little era of a century and a half from all the preceding history of mankind--separates it so completely that a great gulf lies between, across which comparison can scarcely pass, and on the other side of which a new world begins. It has been the custom of our history to use the phrase the "new world" to mark the discoveries of Columbus and the treasure-hunt of a Cortes or a Pizarro. But what of that? The America that they annexed to Europe was merely a new domain added to a world already old. The "new world" was really found in the wonder-years of the eighteenth and early nineteenth centuries. Mankind really entered upon it when the sudden progress of liberated science bound the fierce energy of expanding stream and drew the eager lightning from the cloud. Here began indeed, in the drab surroundings of the workshop, in the silent mystery of the laboratory, the magic of the new age. But we do not commonly realize the vastness of the change. Much of our life and much of our thought still belongs to the old world. Our education is still largely framed on the old pattern. And our views of poverty and social betterment, or what is possible and what is not, are still largely conditioned by it. In the old world, poverty seemed, and poverty was, the natural and inevitable lot of the greater portion of mankind. It was difficult, with the mean appliances of the time, to wring subsistence from the reluctant earth. For the simplest necessaries and comforts of life all, or nearly all, must work hard. Many must perish for want of them. Poverty was inevitable and perpetual. The poor must look to the brightness of a future world for the consolation that they were denied in this. Seen thus poverty became rather a blessing than a curse, or at least a dispensation prescribing the proper lot of man. Life itself was but a preparation and a trial--a threshing floor where, under the "tribulation" of want, the wheat was beaten from the straw. Of this older view much still survives, and much that is ennobling. Nor is there any need to say goodby to it. Even if poverty were gone, the flail could still beat hard enough upon the grain and chaff of humanity. But turn to consider the magnitude of the change that has come about with the era of machinery and the indescribable increase which it has brought to man's power over his environment. There is no need to recite here in detail the marvelous record of mechanical progress that constituted the "industrial revolution" of the eighteenth century. The utilization of coal for the smelting of iron ore; the invention of machinery that could spin and weave; the application of the undreamed energy of steam as a motive force, the building of canals and the making of stone roads--these proved but the beginnings. Each stage of invention called for a further advance. The quickening of one part of the process necessitated the "speeding up" of all the others. It placed a premium--a reward already in sight--upon the next advance. Mechanical spinning called forth the power loom. The increase in production called for new means of transport. The improvement of transport still further swelled the volume of production. The steamboat of 1809 and the steam locomotive of 1830 were the direct result of what had gone before. Most important of all, the movement had become a conscious one. Invention was no longer the fortuitous result of a happy chance. Mechanical progress, the continual increase of power and the continual surplus of product became an essential part of the environment, and an unconscious element in the thought and outlook of the civilized world. No wonder that the first aspect of the age of machinery was one of triumph. Man had vanquished nature. The elemental forces of wind and fire, of rushing water and driving storm before which the savage had cowered low for shelter, these had become his servants. The forest that had blocked his path became his field. The desert blossomed as his garden. The aspect of industrial life altered. The domestic industry of the cottage and the individual labor of the artisan gave place to the factory with its regiment of workers and its steam-driven machinery. The economic isolation of the single worker, of the village, even of the district and the nation, was lost in the general cohesion in which the whole industrial world merged into one. The life of the individual changed accordingly. In the old world his little sphere was allotted to him and there he stayed. His village was his horizon. The son of the weaver wove and the smith reared his children to his trade. Each did his duty, or was adjured to do it, in the "state of life to which it had pleased God to call him." Migration to distant occupations or to foreign lands was but for the adventurous few. The ne'er-do-well blew, like seed before the wind, to distant places, but mankind at large stayed at home. Here and there exceptional industry or extraordinary capacity raised the artisan to wealth and turned the "man" into the "master." But for the most part even industry and endowment were powerless against the inertia of custom and the dead-weight of environment. The universal ignorance of the working class broke down the aspiring force of genius. Mute inglorious Miltons were buried in country churchyards. In the new world all this changed. The individual became but a shifting atom in the vast complex, moving from place to place, from occupation to occupation and from gradation to gradation of material fortune. The process went further and further. The machine penetrated everywhere, thrusting aside with its gigantic arm the feeble efforts of handicraft. It laid its hold upon agriculture, sowing and reaping the grain and transporting it to the ends of the earth. Then as the nineteenth century drew towards its close, even the age of steam power was made commonplace by achievements of the era of electricity. All this is familiar enough. The record of the age of machinery is known to all. But the strange mystery, the secret that lies concealed within its organization, is realized by but few. It offers, to those who see it aright, the most perplexing industrial paradox ever presented in the history of mankind. With all our wealth, we are still poor. After a century and a half of labor-saving machinery, we work about as hard as ever. With a power over nature multiplied a hundred fold, nature still conquers us. And more than this. There are many senses in which the machine age seems to leave the great bulk of civilized humanity, the working part of it, worse off instead of better. The nature of our work has changed. No man now makes anything. He makes only a part of something, feeding and tending a machine that moves with relentless monotony in the routine of which both the machine and its tender are only a fractional part. For the great majority of the workers, the interest of work as such is gone. It is a task done consciously for a wage, one eye upon the clock. The brave independence of the keeper of the little shop contrasts favorably with the mock dignity of a floor walker in an "establishment." The varied craftsmanship of the artisan had in it something of the creative element that was the parent motive of sustained industry. The dull routine of the factory hand in a cotton mill has gone. The life of a pioneer settler in America two hundred years ago, penurious and dangerous as it was, stands out brightly beside the dull and meaningless toil of his descendant. The picture must not be drawn in colors too sinister. In the dullest work and in the meanest lives in the new world to-day there are elements that were lacking in the work of the old world. The universal spread of elementary education, the universal access to the printed page, and the universal hope of better things, if not for oneself, at least for one's children, and even the universal restlessness that the industrialism of to-day have brought are better things than the dull plodding passivity of the older world. Only a false mediævalism can paint the past in colors superior to the present. The haze of distance that dims the mountains with purple, shifts also the crude colors of the past into the soft glory of retrospect. Misled by these, the sentimentalist may often sigh for an age that in a nearer view would be seen filled with cruelty and suffering. But even when we have made every allowance for the all too human tendency to soften down the past, it remains true that in many senses the processes of industry for the worker have lost in attractiveness and power of absorption of the mind during the very period when they have gained so enormously in effectiveness and in power of production. The essential contrast lies between the vastly increased power of production and its apparent inability to satisfy for all humanity the most elementary human wants; between the immeasurable saving of labor effected by machinery and the brute fact of the continuance of hard-driven, unceasing toil. Of the extent of this increased power of production we can only speak in general terms. No one, as far as I am aware, has yet essayed to measure it. Nor have we any form of calculus or computation that can easily be applied. If we wish to compare the gross total of production effected to-day with that accomplished a hundred and fifty years ago, the means, the basis of calculation, is lacking. Vast numbers of the things produced now were not then in existence. A great part of our production of to-day culminates not in productive goods, but in services, as in forms of motion, or in ability to talk across a distance. It is true that statistics that deal with the world's production of cotton, or of oil, or of iron and steel present stupendous results. But even these do not go far enough. For the basic raw materials are worked into finer and finer forms to supply new "wants" as they are called, and to represent a vast quantity of "satisfactions" not existing before. Nor is the money calculus of any avail. Comparison by prices breaks down entirely. A bushel of wheat stands about where it stood before and could be calculated. But the computation, let us say, in price-values of the Sunday newspapers produced in one week in New York or the annual output of photographic apparatus, would defy comparison. Of the enormous increase in the gross total of human goods there is no doubt. We have only to look about us to see it. The endless miles of railways, the vast apparatus of the factories, the soaring structures of the cities bear easy witness to it. Yet it would be difficult indeed to compute by what factor the effectiveness of human labor working with machinery has been increased. But suppose we say, since one figure is as good as another, that it has been increased a hundred times. This calculation must be well within the facts and can be used as merely a more concrete way of saying that the power of production has been vastly increased. During the period of this increase, the numbers of mankind in the industrial countries have perhaps been multiplied by three to one. This again is inexact, since there are no precise figures of population that cover the period. But all that is meant is that the increase in one case is, quite obviously, colossal, and in the other case is evidently not very much. Here then is the paradox. If the ability to produce goods to meet human wants has multiplied so that each man accomplishes almost thirty or forty times what he did before, then the world at large ought to be about thirty or fifty times better off. But it is not. Or else, as the other possible alternative, the working hours of the world should have been cut down to about one in thirty of what they were before. But they are not. How, then, are we to explain this extraordinary discrepancy between human power and resulting human happiness? The more we look at our mechanism of production the more perplexing it seems. Suppose an observer were to look down from the cold distance of the moon upon the seething ant-hill of human labor presented on the surface of our globe; and suppose that such an observer knew nothing of our system of individual property, of money payments and wages and contracts, but viewed our labor as merely that of a mass of animated beings trying to supply their wants. The spectacle to his eyes would be strange indeed. Mankind viewed in the mass would be seen to produce a certain amount of absolutely necessary things, such as food, and then to stop. In spite of the fact that there was not food enough to go round, and that large numbers must die of starvation or perish slowly from under-nutrition, the production of food would stop at some point a good deal short of universal satisfaction. So, too, with the production of clothing, shelter and other necessary things; never enough would seem to be produced, and this apparently not by accident or miscalculation, but as if some peculiar social law were at work adjusting production to the point where there is just not enough, and leaving it there. The countless millions of workers would be seen to turn their untired energies and their all-powerful machinery away from the production of necessary things to the making of mere comforts; and from these, again, while still stopping short of a general satisfaction, to the making of luxuries and superfluities. The wheels would never stop. The activity would never tire. Mankind, mad with the energy of activity, would be seen to pursue the fleeing phantom of insatiable desire. Thus among the huge mass of accumulated commodities the simplest wants would go unsatisfied. Half-fed men would dig for diamonds, and men sheltered by a crazy roof erect the marble walls of palaces. The observer might well remain perplexed at the pathetic discord between human work and human wants. Something, he would feel assured, must be at fault either with the social instincts of man or with the social order under which he lives. And herein lies the supreme problem that faces us in this opening century. The period of five years of war has shown it to us in a clearer light than fifty years of peace. War is destruction--the annihilation of human life, the destruction of things made with generations of labor, the misdirection of productive power from making what is useful to making what is useless. In the great war just over, some seven million lives were sacrificed; eight million tons of shipping were sunk beneath the sea; some fifty million adult males were drawn from productive labor to the lines of battle; behind them uncounted millions labored day and night at making the weapons of destruction. One might well have thought that such a gigantic misdirection of human energy would have brought the industrial world to a standstill within a year. So people did think. So thought a great number, perhaps the greater number, of the financiers and economists and industrial leaders trained in the world in which we used to live. The expectation was unfounded. Great as is the destruction of war, not even five years of it have broken the productive machine. And the reason is now plain enough. Peace, also--or peace under the old conditions of industry--is infinitely wasteful of human energy. Not more than one adult worker in ten--so at least it might with confidence be estimated--is employed on necessary things. The other nine perform superfluous services. War turns them from making the glittering superfluities of peace to making its grim engines of destruction. But while the tenth man still labors, the machine, though creaking with its dislocation, can still go on. The economics of war, therefore, has thrown its lurid light upon the economics of peace. These I propose in the succeeding chapters to examine. But it might be well before doing so to lay stress upon the fact that while admitting all the shortcomings and the injustices of the régime under which we have lived, I am not one of those who are able to see a short and single remedy. Many people when presented with the argument above, would settle it at once with the word "socialism." Here, they say, is the immediate and natural remedy. I confess at the outset, and shall develop later, that I cannot view it so. Socialism is a mere beautiful dream, possible only for the angels. The attempt to establish it would hurl us over the abyss. Our present lot is sad, but the frying pan is at least better than the fire. _II.--Life, Liberty and the Pursuit of Happiness_ "ALL men," wrote Thomas Jefferson in framing the Declaration of Independence, "have an inalienable right to life, liberty and the pursuit of happiness." The words are more than a felicitous phrase. They express even more than the creed of a nation. They embody in themselves the uppermost thought of the era that was dawning when they were written. They stand for the same view of society which, in that very year of 1776, Adam Smith put before the world in his immortal "Wealth of Nations" as the "System of Natural Liberty." In this system mankind placed its hopes for over half a century and under it the industrial civilization of the age of machinery rose to the plenitude of its power. In the preceding chapter an examination has been made of the purely mechanical side of the era of machine production. It has been shown that the age of machinery has been in a certain sense one of triumph, of the triumphant conquest of nature, but in another sense one of perplexing failure. The new forces controlled by mankind have been powerless as yet to remove want and destitution, hard work and social discontent. In the midst of accumulated wealth social justice seems as far away as ever. It remains now to discuss the intellectual development of the modern age of machinery and the way in which it has moulded the thoughts and the outlook of mankind. Few men think for themselves. The thoughts of most of us are little more than imitations and adaptations of the ideas of stronger minds. The influence of environment conditions, if it does not control, the mind of man. So it comes about that every age or generation has its dominant and uppermost thoughts, its peculiar way of looking at things and its peculiar basis of opinion on which its collective action and its social regulations rest. All this is largely unconscious. The average citizen of three generations ago was probably not aware that he was an extreme individualist. The average citizen of to-day is not conscious of the fact that he has ceased to be one. The man of three generations ago had certain ideas which he held to be axiomatic, such as that his house was his castle, and that property was property and that what was his was his. But these were to him things so obvious that he could not conceive any reasonable person doubting them. So, too, with the man of to-day. He has come to believe in such things as old age pensions and national insurance. He submits to bachelor taxes and he pays for the education of other people's children; he speculates much on the limits of inheritance, and he even meditates profound alterations in the right of property in land. His house is no longer his castle. He has taken down its fences, and "boulevarded" its grounds till it merges into those of his neighbors. Indeed he probably does not live in a house at all, but in a mere "apartment" or subdivision of a house which he shares with a multiplicity of people. Nor does he any longer draw water from his own well or go to bed by the light of his own candle: for such services as these his life is so mixed up with "franchises" and "public utilities" and other things unheard of by his own great-grandfather, that it is hopelessly intertangled with that of his fellow citizens. In fine, there is little left but his own conscience into which he can withdraw. Such a man is well aware that times have changed since his great-grandfather's day. But he is not aware of the profound extent to which his own opinions have been affected by the changing times. He is no longer an individualist. He has become by brute force of circumstances a sort of collectivist, puzzled only as to how much of a collectivist to be. Individualism of the extreme type is, therefore, long since out of date. To attack it is merely to kick a dead dog. But the essential problem of to-day is to know how far we are to depart from its principles. There are those who tell us--and they number many millions--that we must abandon them entirely. Industrial society, they say, must be reorganized from top to bottom; private industry must cease. All must work for the state; only in a socialist commonwealth can social justice be found. There are others, of whom the present writer is one, who see in such a programme nothing but disaster: yet who consider that the individualist principle of "every man for himself" while it makes for national wealth and accumulated power, favors overmuch the few at the expense of the many, puts an over-great premium upon capacity, assigns too harsh a punishment for easy indolence, and, what is worse, exposes the individual human being too cruelly to the mere accidents of birth and fortune. Under such a system, in short, to those who have is given and from those who have not is taken away even that which they have. There are others again who still view individualism just as the vast majority of our great-grandfathers viewed it, as a system hard but just: as awarding to every man the fruit of his own labor and the punishment of his own idleness, and as visiting, in accordance with the stern but necessary ordination of our existence, the sins of the father upon the child. The proper starting point, then, for all discussion of the social problem is the consideration of the individualist theory of industrial society. This grew up, as all the world knows, along with the era of machinery itself. It had its counterpart on the political side in the rise of representative democratic government. Machinery, industrial liberty, political democracy--these three things represent the basis of the progress of the nineteenth century. The chief exposition of the system is found in the work of the classical economists--Adam Smith and his followers of half a century--who created the modern science of political economy. Beginning as controversialists anxious to overset a particular system of trade regulation, they ended by becoming the exponents of a new social order. Modified and amended as their system is in its practical application, it still largely conditions our outlook to-day. It is to this system that we must turn. The general outline of the classical theory of political economy is so clear and so simple that it can be presented within the briefest compass. It began with certain postulates, or assumptions, to a great extent unconscious, of the conditions to which it applied. It assumed the existence of the state and of contract. It took for granted the existence of individual property, in consumption goods, in capital goods, and, with a certain hesitation, in land. The last assumption was not perhaps without misgivings: Adam Smith was disposed to look askance at landlords as men who gathered where they had not sown. John Stuart Mill, as is well known, was more and more inclined, with advancing reflection, to question the sanctity of landed property as the basis of social institutions. But for the most part property, contract and the coercive state were fundamental assumptions with the classicists. With this there went, on the psychological side, the further assumption of a general selfishness or self-seeking as the principal motive of the individual in the economic sphere. Oddly enough this assumption--the most warrantable of the lot--was the earliest to fall under disrepute. The plain assertion that every man looks out for himself (or at best for himself and his immediate family) touches the tender conscience of humanity. It is an unpalatable truth. None the less it is the most nearly true of all the broad generalizations that can be attempted in regard to mankind. The essential problem then of the classicists was to ask what would happen if an industrial community, possessed of the modern control over machinery and power, were allowed to follow the promptings of "enlightened selfishness" in an environment based upon free contract and the right of property in land and goods. The answer was of the most cheering description. The result would be a progressive amelioration of society, increasing in proportion to the completeness with which the fundamental principles involved were allowed to act, and tending ultimately towards something like a social millennium or perfection of human society. One easily recalls the almost reverent attitude of Adam Smith towards this system of industrial liberty which he exalted into a kind of natural theology: and the way in which Mill, a deist but not a Christian, was able to fit the whole apparatus of individual liberty into its place in an ordered universe. The world "runs of itself," said the economist. We have only to leave it alone. And the maxim of _laissez faire_ became the last word of social wisdom. The argument of the classicists ran thus. If there is everywhere complete economic freedom, then there will ensue in consequence a régime of social justice. If every man is allowed to buy and sell goods, labor and property, just as suits his own interest, then the prices and wages that result are either in the exact measure of social justice or, at least, are perpetually moving towards it. The price of any commodity at any moment is, it is true, a "market price," the resultant of the demand and the supply; but behind this operates continually the inexorable law of the cost of production. Sooner or later every price must represent the actual cost of producing the commodity concerned, or, at least, must oscillate now above and now below that point which it is always endeavoring to meet. For if temporary circumstances force the price well above the cost of producing the article in question, then the large profits to be made induce a greater and greater production. The increased volume of the supply thus produced inevitably forces down the price till it sinks to the point of cost. If circumstances (such, for example, as miscalculation and an over-great supply) depress the price below the point of cost, then the discouragement of further production presently shortens the supply and brings the price up again. Price is thus like an oscillating pendulum seeking its point of rest, or like the waves of the sea rising and falling about its level. By this same mechanism the quantity and direction of production, argued the economists, respond automatically to the needs of humanity, or, at least, to the "effective demand," which the classicist mistook for the same thing. Just as much wheat or bricks or diamonds would be produced as the world called for; to produce too much of any one thing was to violate a natural law; the falling price and the resulting temporary loss sternly rebuked the producer. In the same way the technical form and mechanism of production were presumed to respond to an automatic stimulus. Inventions and improved processes met their own reward. Labor, so it was argued, was perpetually being saved by the constant introduction of new uses of machinery. By a parity of reasoning, the shares received by all the participants and claimants in the general process of production were seen to be regulated in accordance with natural law. Interest on capital was treated merely as a particular case under the general theory of price. It was the purchase price needed to call forth the "saving" (a form, so to speak, of production) which brought the capital into the market. The "profits" of the employer represented the necessary price paid by society for his services, just enough and not more than enough to keep him and his fellows in operative activity, and always tending under the happy operation of competition to fall to the minimum consistent with social progress. Rent, the share of the land-owner, offered to the classicist a rather peculiar case. There was here a physical basis of surplus over cost. But, granted the operation of the factors and forces concerned, rent emerged as a differential payment to the fortunate owner of the soil. It did not in any way affect prices or wages, which were rendered neither greater nor less thereby. The full implication of the rent doctrine and its relation to social justice remained obscured to the eye of the classical economist; the fixed conviction that what a man owns is his own created a mist through which the light could not pass. Wages, finally, were but a further case of value. There was a demand for labor, represented by the capital waiting to remunerate it, and a supply of labor represented by the existing and increasing working class. Hence wages, like all other shares and factors, corresponded, so it was argued, to social justice. Whether wages were high or low, whether hours were long or short, at least the laborer like everybody else "got what was coming to him." All possibility of a general increase of wages depended on the relation of available capital to the numbers of the working men. Thus the system as applied to society at large could be summed up in the consoling doctrine that every man got what he was worth, and was worth what he got; that industry and energy brought their own reward; that national wealth and individual welfare were one and the same; that all that was needed for social progress was hard work, more machinery, more saving of labor and a prudent limitation of the numbers of the population. The application of such a system to legislation and public policy was obvious. It carried with it the principle of _laissez-faire_. The doctrine of international free trade, albeit the most conspicuous of its applications, was but one case under the general law. It taught that the mere organization of labor was powerless to raise wages; that strikes were of no avail, or could at best put a shilling into the pocket of one artisan by taking it out of that of another; that wages and prices could not be regulated by law; that poverty was to a large extent a biological phenomenon representing the fierce struggle of germinating life against the environment that throttles part of it. The poor were like the fringe of grass that fades or dies where it meets the sand of the desert. There could be no social remedy for poverty except the almost impossible remedy of the limitation of life itself. Failing this the economist could wash his hands of the poor. These are the days of relative judgments and the classical economy, like all else, must be viewed in the light of time and circumstance. With all its fallacies, or rather its shortcomings, it served a magnificent purpose. It opened a road never before trodden from social slavery towards social freedom, from the mediæval autocratic régime of fixed caste and hereditary status towards a régime of equal social justice. In this sense the classical economy was but the fruition, or rather represented the final consciousness of a process that had been going on for centuries, since the breakdown of feudalism and the emancipation of the serf. True, the goal has not been reached. The vision of the universal happiness seen by the economists has proved a mirage. The end of the road is not in sight. But it cannot be doubted that in the long pilgrimage of mankind towards social betterment the economists guided us in the right turning. If we turn again in a new direction, it will at any rate not be in the direction of a return to autocratic mediævalism. But when all is said in favor of its historic usefulness, the failures and the fallacies of natural liberty have now become so manifest that the system is destined in the coming era to be revised from top to bottom. It is to these failures and fallacies that attention will be drawn in the next chapter. _III.--The Failures and Fallacies of Natural Liberty_ THE rewards and punishments of the economic world are singularly unequal. One man earns as much in a week or even in a day as another does in a year. This man by hard, manual labor makes only enough to pay for humble shelter and plain food. This other by what seems a congenial activity, fascinating as a game of chess, acquires uncounted millions. A third stands idle in the market place asking in vain for work. A fourth lives upon rent, dozing in his chair, and neither toils nor spins. A fifth by the sheer hazard of a lucky "deal" acquires a fortune without work at all. A sixth, scorning to work, earns nothing and gets nothing; in him survives a primitive dislike of labor not yet fully "evoluted out;" he slips through the meshes of civilization to become a "tramp," cadges his food where he can, suns his tattered rags when it is warm and shivers when it is cold, migrating with the birds and reappearing with the flowers of spring. Yet all are free. This is the distinguishing mark of them as children of our era. They may work or stop. There is no compulsion from without. No man is a slave. Each has his "natural liberty," and each in his degree, great or small, receives his allotted reward. But is the allotment correct and the reward proportioned by his efforts? Is it fair or unfair, and does it stand for the true measure of social justice? This is the profound problem of the twentieth century. The economists and the leading thinkers of the nineteenth century were in no doubt about this question. It was their firm conviction that the system under which we live was, in its broad outline, a system of even justice. They held it true that every man under free competition and individual liberty is awarded just what he is worth and is worth exactly what he gets: that the reason why a plain laborer is paid only two or three dollars a day is because he only "produces" two or three dollars a day: and that why a skilled engineer is paid ten times as much is because he "produces" ten times as much. His work is "worth" ten times that of the plain laborer. By the same reasoning the salary of a corporation president who receives fifty thousand dollars a year merely reflects the fact that the man produces--earns--brings in to the corporation that amount or even more. The big salary corresponds to the big efficiency. And there is much in the common experience of life and the common conduct of business that seems to support this view. It is undoubtedly true if we look at any little portion of business activity taken as a fragment by itself. On the most purely selfish grounds I may find that it "pays" to hire an expert at a hundred dollars a day, and might find that it spelled ruin to attempt to raise the wages of my workingmen beyond four dollars a day. Everybody knows that in any particular business at any particular place and time with prices at any particular point, there is a wage that can be paid and a wage that can not. And everybody, or nearly everybody, bases on these obvious facts a series of entirely erroneous conclusions. Because we cannot change the part we are apt to think we cannot change the whole. Because one brick in the wall is immovable, we forget that the wall itself might be rebuilt. The single employer rightly knows that there is a wage higher than he can pay and hours shorter than he can grant. But are the limits that frame him in, real and necessary limits, resulting from the very nature of things, or are they mere products of particular circumstances? This, as a piece of pure economics, does not interest the individual employer a particle. It belongs in the same category as the question of the immortality of the soul and other profundities that have nothing to do with business. But to society at large the question is of an infinite importance. Now the older economists taught, and the educated world for about a century believed, that these limitations which hedged the particular employer about were fixed and assigned by natural economic law. They represented, as has been explained, the operation of the system of natural liberty by which every man got what he is worth. And it is quite true that the particular employer can no more break away from these limits than he can jump out of his own skin. He can only violate them at the expense of ceasing to be an economic being at all and degenerating into a philanthropist. But consider for a moment the peculiar nature of the limitations themselves. Every man's limit of what he can pay and what he can take, of how much he can offer and how much he will receive, is based on the similar limitations of other people. They are reciprocal to one another. Why should one factory owner not pay ten dollars a day to his hands? Because the others don't. But suppose they all do? Then the output could not be sold at the present price. But why not sell the produce at a higher price? Because at a higher price the consumer can't afford to buy it. But suppose that the consumer, for the things which he himself makes and sells, or for the work which he performs, receives more? What then? The whole thing begins to have a jigsaw look, like a child's toy rack with wooden soldiers on it, expanding and contracting. One searches in vain for the basis on which the relationship rests. And at the end of the analysis one finds nothing but a mere anarchical play of forces, nothing but a give-and-take resting on relative bargaining strength. Every man gets what he can and gives what he has to. Observe that this is not in the slightest the conclusion of the orthodox economists. Every man, they said, gets what he actually makes, or, by exchange, those things which exactly correspond to it as regards the cost of making them--which have, to use the key-word of the theory, the same value. Let us take a very simple example. If I go fishing with a net which I have myself constructed out of fibers and sticks, and if I catch a fish and if I then roast the fish over a fire which I have made without so much as the intervention of a lucifer match, then it is I and I alone who have "produced" the roast fish. That is plain enough. But what if I catch the fish by using a hired boat and a hired net, or by buying worms as bait from some one who has dug them? Or what if I do not fish at all, but get my roast fish by paying for it a part of the wages I receive for working in a saw mill? Here are a new set of relationships. How much of the fish is "produced" by each of the people concerned? And what part of my wages ought I to pay in return for the part of the fish that I buy? Here opens up, very evidently, a perfect labyrinth of complexity. But it was the labyrinth for which the earlier economist held, so he thought, the thread. No matter how dark the passage, he still clung tight to it. And his thread was his "fundamental equation of value" whereby each thing and everything is sold (or tends to be sold) under free competition for exactly its cost of production. There it was; as simple as A. B. C.; making the cost of everything proportional to the cost of everything else, and in itself natural and just; explaining and justifying the variations of wages and salaries on what seems a stern basis of fact. Here is your selling price as a starting point. Given that, you can see at once the reason for the wages paid and the full measure of the payment. To pay more is impossible. To pay less is to invite a competition that will force the payment of more. Or take, if you like, the wages as the starting point: there you are again,--simplicity itself: the selling price will exactly and nicely correspond to cost. True, a part of the cost concerned will be represented not by wages, but by cost of materials; but these, on analysis, dissolve into past wages. Hence the whole process and its explanation revolves around this simple fundamental equation that selling value equals the cost of production. This was the central part of the economic structure. It was the keystone of the arch. If it holds, all holds. Knock it out and the whole edifice falls into fragments. A technical student of the schools would digress here, to the great confusion of the reader, into a discussion of the controversy in the economic cloister between the rival schools of economists as to whether cost governs value or value governs cost. The point needs no discussion here, but just such fleeting passing mention as may indicate that the writer is well and wearily conversant with it. The fundamental equation of the economist, then, is that the value of everything is proportionate to its cost. It requires no little hardihood to say that this proposition is a fallacy. It lays one open at once, most illogically, to the charge of being a socialist. In sober truth it might as well lay one open to the charge of being an ornithologist. I will not, therefore, say that the proposition that the value of everything equals the cost of production is false. I will say that it is _true_; in fact, that is just as true as that two and two make four: exactly as true as that, but let it be noted most profoundly, _only as true as that_. In other words, it is a truism, mere equation in terms, telling nothing whatever. When I say that two and two make four I find, after deep thought, that I have really said _nothing_, or nothing that was not already said at the moment I defined two and defined four. The new statement that two and two make four adds nothing. So with the majestic equation of the cost of production. It means, as far as social application goes, as far as any moral significance or bearing on social reform and the social outlook goes, _absolutely nothing_. It is not in itself fallacious; how could it be? But all the social inferences drawn from it are absolute, complete and malicious fallacies. Any socialist who says this, is quite right. Where he goes wrong is when he tries to build up as truth a set of inferences more fallacious and more malicious still. But the central economic doctrine of cost can not be shaken by mere denunciation. Let us examine it and see what is the matter with it. We restate the equation. _Under perfectly free competition the value or selling price of everything equals, or is perpetually tending to equal, the cost of its production._ This is the proposition itself, and the inferences derived from it are that there is a "natural price" of everything, and that all "natural prices" are proportionate to cost and to one another; that all wages, apart from temporary fluctuations, are derived from, and limited by, the natural prices paid for the things made: that all payments for the use of capital (interest) are similarly derived and similarly limited; and that consequently the whole economic arrangement, by giving to each person exactly and precisely the fruit of his own labor, conforms exactly to social justice. Now the trouble with the main proposition just quoted is that each side of the equation is used as the measure of the other. In order to show what natural price is, we add up all the wages that have been paid, and declare that to be the cost and then say that the cost governs the price. Then if we are asked why are wages what they are, we turn the argument backward and say that since the selling price is so and so the wages that can be paid out of it only amount to such and such. This explains nothing. It is a mere argument in a circle. It is as if one tried to explain why one blade of a pair of scissors is four inches long by saying that it has to be the same length as the other. This is quite true of either blade if one takes the length of the other for granted, but as applied to the explanation of the length of the scissors it is worse than meaningless. This reasoning may seem to many persons mere casuistry, mere sophistical juggling with words. After all, they say, there is such a thing as relative cost, relative difficulty of making things, a difference which rests upon a physical basis. To make one thing requires a lot of labor and trouble and much skill: to make another thing requires very little labor and no skill out of the common. Here then is your basis of value, obvious and beyond argument. A primitive savage makes a bow and arrow in a day: it takes him a fortnight to make a bark canoe. On that fact rests the exchange value between the two. The relative quantity of labor embodied in each object is the basis of its value. This line of reasoning has a very convincing sound. It appears in nearly every book on economic theory from Adam Smith and Ricardo till to-day. "Labor alone," wrote Smith, "never varying in its own value is above the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared." But the idea that _quantity of labor governs_ value will not stand examination for a moment. What is _quantity_ of labor and how is it measured? As long as we draw our illustrations from primitive life where one man's work is much the same as another's and where all operations are simple, we seem easily able to measure and compare. One day is the same as another and one man about as capable as his fellow. But in the complexity of modern industrial life such a calculation no longer applies: the differences of skill, of native ingenuity, and technical preparation become enormous. The hour's work of a common laborer is not the same thing as the hour's work of a watchmaker mending a watch, or of an engineer directing the building of a bridge, or of an architect drawing a plan. There is no way of reducing these hours to a common basis. We may think, if we like, that the quantity of labor _ought_ to be the basis of value and exchange. Such is always the dream of the socialist. But on a closer view it is shattered like any other dream. For we have, alas, no means of finding out what the quantity of labor is and how it can be measured. We cannot measure it in terms of time. We have no calculus for comparing relative amounts of skill and energy. We can not measure it by the amount of its contribution to the product, for that is the very matter that we want to discover. What the economist does is to slip out of the difficulty altogether by begging the whole question. He deliberately measures the quantity of labor _by what is paid for it_. Skilled labor is worth, let us say, three times as much as common labor; and brain work, speaking broadly, is worth several times as much again. Hence by adding up all the wages and salaries paid we get something that seems to indicate the total quantity of labor, measured not simply in time, but with an allowance for skill and technical competency. By describing this allowance as a coefficient we can give our statement a false air of mathematical certainty and so muddle up the essential question that the truth is lost from sight like a pea under a thimble. Now you see it and now you don't. The thing is, in fact, a mere piece of intellectual conjuring. The conjurer has slipped the phrase, "quantity of labor," up his sleeve, and when it reappears it has turned into "the expense of hiring labor." This is a quite different thing. But as both conceptions are related somehow to the idea of cost, the substitution is never discovered. On this false basis a vast structure is erected. All prices, provided that competition is free, are made to appear as the necessary result of natural forces. They are "natural" or "normal" prices. All wages are explained, and low wages are exonerated, on what seems to be an undeniable ground of fact. They are what they are. You may wish them otherwise, but they are not. As a philanthropist, you may feel sorry that a humble laborer should work through a long day to receive two dollars, but as an economist you console yourself with the reflection that that is all he produces. You may at times, as a sentimentalist, wonder whether the vast sums drawn as interest on capital are consistent with social fairness; but if it is shown that interest is simply the "natural price" of capital representing the actual "productive power" of the capital, there is nothing further to say. You may have similar qualms over rent and the rightness and wrongness of it. The enormous "unearned increment" that accrues for the fortunate owner of land who toils not neither spins to obtain it, may seem difficult of justification. But after all, land is only one particular case of ownership under the one and the same system. The rent for which the owner can lease it, emerges simply as a consequence of the existing state of wages and prices. High rent, says the economist, does not make big prices: it merely follows as a consequence or result of them. Dear bread is not caused by the high rents paid by tenant farmers for the land: the train of cause and effect runs in the contrary direction. And the selling price of land is merely a consequence of its rental value, a simple case of capitalization of annual return into a present sum. City land, though it looks different from farm land, is seen in the light of this same analysis, to earn its rent in just the same way. The high rent of a Broadway store, says the economist, does not add a single cent to the price of the things sold in it. It is because prices are what they are that the rent is and can be paid. Hence on examination the same canon of social justice that covers and explains prices, wages, and interest applies with perfect propriety to rent. Or finally, to take the strongest case of all, one may, as a citizen, feel apprehension at times at the colossal fortune of a Carnegie or a Rockefeller. For it does seem passing strange that one human being should control as property the mass of coin, goods, houses, factories, land and mines, represented by a billion dollars; stranger still that at his death he should write upon a piece of paper his commands as to what his surviving fellow creatures are to do with it. But if it can be shown to be true that Mr. Rockefeller "made" his fortune in the same sense that a man makes a log house by felling trees and putting them one upon another, then the fortune belongs to Mr. Rockefeller in the same way as the log house belongs to the pioneer. And if the social inferences that are drawn from the theory of natural liberty and natural value are correct, the millionaire and the landlord, the plutocrat and the pioneer, the wage earner and the capitalist, have each all the right to do what he will with his own. For every man in this just world gets what is coming to him. He gets what he is worth, and he is worth what he gets. But if one knocks out the keystone of the arch in the form of a proposition that natural value conforms to the cost of production, then the whole edifice collapses and must be set up again, upon another plan and on another foundation, stone by stone. _IV.--Work and Wages_ WAGES and prices, then, if the argument recited in the preceding chapter of this series holds good, do not under free competition tend towards social justice. It is not true that every man gets what he produces. It is not true that enormous salaries represent enormous productive services and that humble wages correspond to a humble contribution to the welfare of society. Prices, wages, salaries, interest, rent and profits do not, if left to themselves, follow the simple law of natural justice. To think so is an idle dream, the dream of the quietist who may slumber too long and be roused to a rude awakening or perish, perhaps, in his sleep. His dream is not so dangerous as the contrasted dream of the socialist, now threatening to walk abroad in his sleep, but both in their degree are dreams and nothing more. The real truth is that prices and wages and all the various payments from hand to hand in industrial society, are the outcome of a complex of competing forces that are not based upon justice but upon "economic strength." To elucidate this it is necessary to plunge into the jungle of pure economic theory. The way is arduous. There are no flowers upon the path. And out of this thicket, alas, no two people ever emerge hand in hand in concord. Yet it is a path that must be traversed. Let us take, then, as a beginning the very simplest case of the making of a price. It is the one which is sometimes called in books on economics the case of an unique monopoly. Suppose that I offer for sale the manuscript of the Pickwick Papers, or Shakespere's skull, or, for the matter of that, the skull of John Smith, what is the sum that I shall receive for it? It is the utmost that any one is willing to give for it. That is all one can say about it. There is no question here of cost or what I paid for the article or of anything else except the amount of the willingness to pay on the part of the highest bidder. It would be possible, indeed, for a bidder to take the article from me by force. But this we presume to be prevented by the law, and for this reason we referred above not to the physical strength, but to the "economic strength" of the parties to a bargain. By this is meant the relation that arises out of the condition of the supply and the demand, the willingness or eagerness, or the sheer necessity, of the buyers and the sellers. People may offer much because the thing to be acquired is an absolute necessity without which they perish; a drowning man would sell all that he had for a life belt. Or they may offer much through the sheer abundance of their other possessions. A millionaire might offer more for a life belt as a souvenir than a drowning man could pay for it to save his life. Yet out of any particular conjunction between desires on the one hand and goods or services on the other arises a particular equation of demand and supply, represented by a particular price. All of this, of course, is A. B. C., and I am not aware that anybody doubts it. Now let us make the example a little more elaborate. Suppose that one single person owned all the food supply of a community isolated from the outside world. The price which he could exact would be the full measure of all the possessions of his neighbors up to the point at least where they would commit suicide rather than pay. True, in such a case as this, "economic strength" would probably be broken down by the intrusion of physical violence. But in so far as it held good the price of food would be based upon it. Prices such as are indicated here were dismissed by the earlier economist as mere economic curiosities. John Stuart Mill has something to say about the price of a "music box in the wilds of Lake Superior," which, as he perceived, would not be connected with the expense of producing it, but might be vastly more or perhaps decidedly less. But Mill might have said the same thing about the price of a music box, provided it was properly patented, anywhere at all. For the music box and Shakespere's skull and the corner in wheat are all merely different kinds of examples of the things called a monopoly sale. Now let us change the example a little further. Suppose that the monopolist has for sale not simply a fixed and definite quantity of a certain article, but something which he can produce in larger quantities as desired. At what price will he now sell? If he offers the article at a very high price only a few people will take it: if he lowers the price there will be more and more purchasers. His interest seems divided. He will want to put the price as high as possible so that the profit on each single article (over what it costs him to produce it) will be as great as possible. But he will also want to make as many sales as he possibly can, which will induce him to set the price low enough to bring in new buyers. But, of course, if he puts the price so low that it only covers the cost of making the goods his profit is all gone and the mere multiplicity of sales is no good to him. He must try therefore to find a point of maximum profit where, having in view both the number of sales and the profit over cost on each sale the net profit is at its greatest. This gives us the fundamental law of monopoly price. It is to be noted that under modern conditions of production the cost of manufacture per article decreases to a great extent in proportion as a larger and larger number is produced and thus the widening of the sale lowers the proportionate cost. In any particular case, therefore, it may turn out that the price that suits the monopolist's own interest is quite a low price, one such as to allow for an enormous quantity of sales and a very low cost of manufacture. This, we say, _may_ be the case. But it is not so of necessity. In and of itself the monopoly price corresponds to the monopolist's profit and not to cheapness of sale. The price _may_ be set far above the cost. And now notice the peculiar relation that is set up between the monopolist's production and the satisfaction of human wants. In proportion as the quantity produced is increased the lower must the price be set in order to sell the whole output. If the monopolist insisted on turning out more and more of his goods, the price that people would give would fall until it barely covered the cost, then till it was less than cost, then to a mere fraction of the cost and finally to nothing at all. In other words, if one produces a large enough quantity of anything it becomes worthless. It loses all its value just as soon as there is enough of it to satisfy, and over-satisfy the wants of humanity. Thus if the world produces three and a half billion bushels of wheat it can be sold, let us say, at two dollars a bushel; but if it produced twice as much it might well be found that it would only sell for fifty cents a bushel. The value of the bigger supply as a total would actually be less than that of the smaller. And if the supply were big enough it would be worth, in the economic sense, just nothing at all. This peculiarity is spoken of in economic theory as the paradox of value. It is referred to in the older books either as an economic curiosity or as a mere illustration in extreme terms of the relation of supply to price. Thus in many books the story is related of how the East India Companies used at times deliberately to destroy a large quantity of tea in order that by selling a lesser amount they might reap a larger profit than by selling a greater. But in reality this paradox of value is the most fundamental proposition in economic science. Precisely here is found the key to the operation of the economic society in which we live. The world's production is aimed at producing "values," not in producing plenty. If by some mad access of misdirected industry we produced enough and too much of everything, our whole machinery of buying and selling would break down. This indeed does happen constantly on a small scale in the familiar phenomenon of over-production. But in the organization in which we live over-production tends to check itself at once. If the world's machinery threatens to produce a too great plenty of any particular thing, then it turns itself towards producing something else of which there is not yet enough. This is done quite unconsciously without any philanthropic intent on the part of the individual producer and without any general direction in the way of a social command. The machine does it of itself. When there is _enough_ the wheels slacken and stop. This sounds at first hearing most admirable. But let it be noted that the "_enough_" here in question does not mean enough to satisfy human wants. In fact it means precisely the converse. It means enough _not_ to satisfy them, and to leave the selling price of the things made at the point of profit. Let it be observed also that we have hitherto been speaking as if all things were produced under a monopoly. The objection might at once be raised that with competitive producers the price will also keep falling down towards cost and will not be based upon the point of maximum profit. We shall turn to this objection in a moment. But one or two other points must be considered before doing so. In the first place in following out such an argument as the present in regard to the peculiar shortcomings of the system under which we live, it is necessary again and again to warn the reader against a hasty conclusion to the possibilities of altering and amending it. The socialist reads such criticism as the above with impatient approval. "Very well," he says, "the whole organization is wrong and works badly. Now let us abolish it altogether and make a better one." But in doing so he begs the whole question at issue. The point is, _can_ we make a better one or must we be content with patching up the old one? Take an illustration. Scientists tell us that from the point of view of optics the human eye is a clumsy instrument poorly contrived for its work. A certain great authority once said that if he had made it he would have been ashamed of it. This may be true. But the eye unfortunately is all we have to see by. If we destroy our eyes in the hope of making better ones we may go blind. The best that we can do is to improve our sight by adding a pair of spectacles. So it is with the organization of society. Faulty though it is, it does the work after a certain fashion. We may apply to it with advantage the spectacles of social reform, but what the socialist offers us is total blindness. But of this presently. To return to the argument. Let us consider next what wages the monopolist in the cases described above will have to pay. We take for granted that he will only pay as much as he has to. How much will this be? Clearly enough it will depend altogether on the number of available working men capable of doing the work in question and the situation in which they find themselves. It is again a case of relative "economic strength." The situation may be altogether in favor of the employer or altogether in favor of the men, or may occupy a middle ground. If the men are so numerous that there are more of them than are needed for the work, and if there is no other occupation for them they must accept a starvation wage. If they are so few in number that they can _all_ be employed, and if they are so well organized as to act together, they can in their turn exact any wage up to the point that leaves no profit for the employer himself at all. Indeed for a short time wages might even pass this point, the monopolist employer being willing (for various reasons, all quite obvious) actually to pay more as wages than he gets as return and to carry on business at a loss for the sake of carrying it on at all. Clearly, then, wages, as Adam Smith said, "are the result of a dispute" in which either party must be pushed to the wall. The employer may have to pay so much that there is nothing or practically nothing left for himself, or so little that his workmen can just exist and no more. These are the upward and downward limits of the wages in the cases described. It is therefore obvious that if all the industries in the world were carried on as a series of separate monopolies, there would be exactly the kind of rivalry or competition of forces represented by the consumer insisting on paying as little as possible, the producer charging the most profitable price and paying the lowest wage that he could, and the wage earner demanding the highest wage that he could get. The equilibrium would be an unstable one. It would be constantly displaced and shifted by the movement of all sorts of social forces--by changes of fashion, by abundance or scarcity of crops, by alterations in the technique of industry and by the cohesion or the slackening of the organization of any group of workers. But the balanced forces once displaced would be seen constantly to come to an equilibrium at a new point. All this has been said of industry under monopoly. But it will be seen to apply in its essentials to what we call competitive industry. Here indeed certain new features come in. Not one employer but many produce each kind of article. And, as far as each employer can see by looking at his own horizon, what he does is merely to produce as much as he can sell at a price that pays him. Since all the other employers are doing this, there will be, under competition, a constant tendency to cut the prices down to the lowest that is consistent with what the employer has to pay as wages and interest. This point, which was called by the orthodox economists the "cost," is not in any true and fundamental sense of the words the "cost" at all. It is merely a limit represented by what the other parties to the bargain are able to exact. The whole situation is in a condition of unstable equilibrium in which the conflicting forces represented by the interests of the various parties pull in different directions. The employers in any one line of industry and all their wage earners and salaried assistants have one and the same interest as against the consumer. They want the selling price to be as high as possible. But the employers are against one another as wanting, each of them, to make as many sales as possible, and each and all the employers are against the wage earners in wanting to pay as low wages as possible. If all the employers unite, the situation turns to a monopoly, and the price paid by the consumer is settled on the monopoly basis already described. The employers can then dispute it out with their working men as to how much wages shall be. If the employers are not united, then at each and every moment they are in conflict both with the consumer and with their wage earners. Thus the whole scene of industry represents a vast and unending conflict, a fermentation in which the moving bubbles crowd for space, expanding and breaking one against the other. There is no point of rest. There is no real fixed "cost" acting as a basis. Anything that any one person or group of persons--worker or master, landlord or capitalist--is able to exact owing to the existing conditions of demand or supply, becomes a "cost" from the point of view of all the others. There is nothing in this "cost" which proportions to it the quantity of labor, or of time, or of skill or of any other measure physical or psychological of the effort involved. And there is nothing whatever in it which proportions to it social justice. It is the war of each against all. Its only mitigation is that it is carried on under the set of rules represented by the state and the law. The tendencies involved may be best illustrated by taking one or two extreme or exaggerated examples, not meant as facts but only to make clear the nature of social and industrial forces among which we live. What, for example, will be the absolute maximum to which wages in general could be forced? Conceivably and in the purest and thinnest of theory, they could include the whole product of the labor of society with just such a small fraction left over for the employers, the owners of capital and the owners of land to induce them to continue acting as part of the machine. That is to say, if all the laborers all over the world, to the last one, were united under a single control they could force the other economic classes of society to something approaching a starvation living. In practice this is nonsense. In theory it is an excellent starting point for thought. And how short could the hours of the universal united workers be made? As short as ever they liked: An hour a day: ten minutes, anything they like; but of course with the proviso that the shorter the hours the less the total of things produced to be divided. It is true that up to a certain point shortening the hours of labor actually increases the total product. A ten-hour day, speaking in general terms and leaving out individual exceptions, is probably more productive than a day of twelve. It may very well be that an eight-hour day will prove, presently if not immediately, to be more productive than one of ten. But somewhere the limit is reached and gross production falls. The supply of things in general gets shorter. But note that this itself would not matter much, if somehow and in some way not yet found, the shortening of the production of goods cut out the luxuries and superfluities first. Mankind at large might well trade leisure for luxuries. The shortening of hours with the corresponding changes in the direction of production is really the central problem in social reform. I propose to return to it in the concluding chapter of these papers, but for the present it is only noted in connection with the general scheme of industrial relations. Now let us ask to what extent any particular section or part of industrial society can succeed in forcing up wages or prices as against the others. In pure theory they may do this almost to any extent, provided that the thing concerned is a necessity and is without a substitute and provided that their organization is complete and unbreakable. If all the people concerned in producing coal, masters and men, owners of mines and operators of machinery, could stand out for their price, there is no limit, short of putting all the rest of the world on starvation rations, to what they might get. In practice and in reality a thousand things intervene--the impossibility of such complete unity, the organization of the other parties, the existing of national divisions among industrial society, sentiment, decency, fear. The proposition is only "pure theory." But its use as such is to dispose of any such idea as that there is a natural price of coal or of anything else. The above is true of any article of necessity. It is true though in a less degree of things of luxury. If all the makers of instruments of music, masters and men, capitalists and workers, were banded together in a tight and unbreakable union, then the other economic classes must either face the horrors of a world without pianolas and trombones, or hand over the price demanded. And what is true of coal and music is true all through the whole mechanism of industry. Or take the supreme case of the owners of land. If all of them acted together, with their legal rights added into one, they could order the rest of the world either to get off it or to work at starvation wages. Industrial society is therefore mobile, elastic, standing at any moment in a temporary and unstable equilibrium. But at any particular moment the possibility of a huge and catastrophic shift such as those described is out of the question except at the price of a general collapse. Even a minor dislocation breaks down a certain part of the machinery of society. Particular groups of workers are thrown out of place. There is no other place where they can fit in, or at any rate not immediately. The machine labors heavily. Ominous mutterings are heard. The legal framework of the State and of obedience to the law in which industrial society is set threatens to break asunder. The attempt at social change threatens a social revolution in which the whole elaborate mechanism would burst into fragments. In any social movement, then, change and alteration in a new direction must be balanced against the demands of social stability. Some things are possible and some are not; some are impossible to-day, and possible or easy to-morrow. Others are forever out of the question. But this much at least ought to appear clear if the line of argument indicated above is accepted, namely, that there is no great hope for universal betterment of society by the mere advance of technical industrial progress and by the unaided play of the motive of every man for himself. The enormous increase in the productivity of industrial effort would never of itself have elevated by one inch the lot of the working class. The rise of wages in the nineteenth century and the shortening of hours that went with it was due neither to the advance in mechanical power nor to the advance in diligence and industriousness, nor to the advance, if there was any, in general kindliness. It was due to the organization of labor. Mechanical progress makes higher wages possible. It does not, of itself, advance them by a single farthing. Labor saving machinery does not of itself save the working world a single hour of toil: it only shifts it from one task to another. Against a system of unrestrained individualism, energy, industriousness and honesty might shatter itself in vain. The thing is merely a race in which only one can be first no matter how great the speed of all; a struggle in which one, and not all, can stand upon the shoulders of the others. It is the restriction of individualism by the force of organization and by legislation that has brought to the world whatever social advance has been achieved by the great mass of the people. The present moment is in a sense the wrong time to say this. We no longer live in an age when down-trodden laborers meet by candlelight with the ban of the law upon their meeting. These are the days when "labor" is triumphant, and when it ever threatens in the overweening strength of its own power to break industrial society in pieces in the fierce attempt to do in a day what can only be done in a generation. But truth is truth. And any one who writes of the history of the progress of industrial society owes it to the truth to acknowledge the vast social achievement of organized labor in the past. And what of the future? By what means and in what stages can social progress be further accelerated? This I propose to treat in the succeeding chapters, dealing first with the proposals of the socialists and the revolutionaries, and finally with the prospect for a sane, orderly and continuous social reform. _V.--The Land of Dreams: The Utopia of the Socialist_ WHO is there that has not turned at times from the fever and fret of the world we live in, from the spectacle of its wasted energy, its wild frenzy of work and its bitter inequality, to the land of dreams, to the pictured vision of the world as it might be? Such a vision has haunted in all ages the brooding mind of mankind; and every age has fashioned for itself the image of a "somewhere" or "nowhere"--a Utopia in which there should be equality and justice for all. The vision itself is an outcome of that divine discontent which raises man above his environment. Every age has had its socialism, its communism, its dream of bread and work for all. But the dream has varied always in the likeness of the thought of the time. In earlier days the dream was not one of social wealth. It was rather a vision of the abnegation of riches, of humble possessions shared in common after the manner of the unrealized ideal of the Christian faith. It remained for the age of machinery and power to bring forth another and a vastly more potent socialism. This was no longer a plan whereby all might be poor together, but a proposal that all should be rich together. The collectivist state advocated by the socialist of to-day has scarcely anything in common with the communism of the middle ages. Modern socialism is the direct outcome of the age of machine production. It takes its first inspiration from glaring contrasts between riches and poverty presented by the modern era, from the strange paradox that has been described above between human power and its failure to satisfy human want. The nineteenth century brought with it the factory and the factory slavery of the Lancashire children, the modern city and city slum, the plutocracy and the proletariat, and all the strange discrepancy between wealth and want that has disfigured the material progress of the last hundred years. The rising splendor of capitalism concealed from the dazzled eye the melancholy spectacle of the new industrial poverty that lay in the shadow behind it. The years that followed the close of the Napoleonic wars in 1815 were in many senses years of unexampled misery. The accumulated burden of the war lay heavy upon Europe. The rise of the new machine power had dislocated the older system. A multitude of landless men clamored for bread and work. Pauperism spread like a plague. Each new invention threw thousands of hand-workers out of employment. The law still branded as conspiracy any united attempt of workingmen to raise wages or to shorten the hours of work. At the very moment when the coming of steam power and the use of modern machinery were piling up industrial fortunes undreamed of before, destitution, pauperism and unemployment seemed more widespread and more ominous than ever. In this rank atmosphere germinated modern socialism. The writings of Marx and Engels and Louis Blanc were inspired by what they saw about them. From its very cradle socialism showed the double aspect which has distinguished it ever since. To the minds of some it was the faith of the insurrectionist, something to be achieved by force; "bourgeois" society must be overthrown by force of arms; if open and fair fighting was not possible against such great odds, it must be blown skyhigh with gunpowder. Dynamite, by the good fortune of invention, came to the revolutionary at the very moment when it was most wanted. To the men of violence, socialism was the twin brother of anarchism, born at the same time, advocating the same means and differing only as to the final end. But to others, socialism was from the beginning, as it is to-day, a creed of peace. It advocated the betterment of society not by violence but by persuasion, by peaceful argument and the recognized rule of the majority. It is true that the earlier socialists almost to a man included, in the first passion of their denunciation, things not necessarily within the compass of purely economic reform. As children of misery they cried out against all human institutions. The bond of marriage seemed an accursed thing, the mere slavery of women. The family--the one institution in which the better side of human nature shines with an undimmed light--was to them but an engine of class oppression; the Christian churches merely the parasitic servants of the tyrannous power of a plutocratic state. The whole history of human civilization was denounced as an unredeemed record of the spoliation of the weak by the strong. Even the domain of the philosopher was needlessly invaded and all forms of speculative belief were rudely thrown aside in favor of a wooden materialism as dogmatic as any of the creeds or theories which it proposed to replace. Thus seen, socialism appeared as the very antithesis of law and order, of love and chastity, and of religion itself. It was a tainted creed. There was blood upon its hands and bloody menace in its thoughts. It was a thing to be stamped out, to be torn up by the roots. The very soil in which it grew must be burned out with the flame of avenging justice. Such it still appears to many people to-day. The unspeakable savagery of bolshevism has made good the wildest threats of the partisans of violence and fulfilled the sternest warnings of the conservative. To-day more than ever socialism is in danger of becoming a proscribed creed, its very name under the ban of the law, its literature burned by the hangman and a gag placed upon its mouth. But this is neither right nor wise. Socialism, like every other impassioned human effort, will flourish best under martyrdom. It will languish and perish in the dry sunlight of open discussion. For it must always be remembered in fairness that the creed of violence has no necessary connection with socialism. In its essential nature socialism is nothing but a proposal for certain kinds of economic reform. A man has just as much right to declare himself a socialist as he has to call himself a Seventh Day Adventist or a Prohibitionist, or a Perpetual Motionist. It is, or should be, open to him to convert others to his way of thinking. It is only time to restrain him when he proposes to convert others by means of a shotgun or by dynamite, and by forcible interference with their own rights. When he does this he ceases to be a socialist pure and simple and becomes a criminal as well. The law can deal with him as such. But with socialism itself the law, in a free country, should have no kind of quarrel. For in the whole program of peaceful socialism there is nothing wrong at all except one thing. Apart from this it is a high and ennobling ideal truly fitted for a community of saints. And the one thing that is wrong with socialism is that it won't work. That is all. It is, as it were, a beautiful machine of which the wheels, dependent upon some unknown and uninvented motive power, refuse to turn. The unknown motive force in this case means a power of altruism, of unselfishness, of willingness to labor for the good of others, such as the human race has never known, nor is ever likely to know. But the worst public policy to pursue in reference to such a machine is to lock it up, to prohibit all examination of it and to allow it to become a hidden mystery, the whispered hope of its martyred advocates. Better far to stand it out into the open daylight, to let all who will inspect it, and to prove even to the simplest that such a contrivance once and for all and for ever cannot be made to run. Let us turn to examine the machine. We may omit here all discussion of the historical progress of socialism and the stages whereby it changed from the creed of a few theorists and revolutionists to being the accepted platform of great political parties, counting its adherents by the million. All of this belongs elsewhere. It suffices here to note that in the process of its rise it has chafed away much of the superfluous growth that clung to it and has become a purely economic doctrine. There is no longer any need to discuss in connection with it the justification of marriage and the family, and the rightness or wrongness of Christianity: no need to decide whether the materialistic theory of history is true or false, since nine socialists out of ten to-day have forgotten, or have never heard, what the materialistic theory of history is: no need to examine whether human history is, or is not, a mere record of class exploitation, since the controversy has long shifted to other grounds. The essential thing to-day is not the past, but the future. The question is, what does the socialist have to say about the conditions under which we live and the means that he advocates for the betterment of them? His case stands thus. He begins his discussion with an indictment of the manifold weaknesses and the obvious injustices of the system under which we live. And in this the socialist is very largely right. He shows that under free individual competition there is a perpetual waste of energy. Competing rivals cover the same field. Even the simplest services are performed with an almost ludicrous waste of energy. In every modern city the milk supply is distributed by erratic milkmen who skip from door to door and from street to street, covering the same ground, each leaving his cans of milk here and there in a sporadic fashion as haphazard as a bee among the flowers. Contrast, says the socialist, the wasted labors of the milkman with the orderly and systematic performance of the postman, himself a little fragment of socialism. And the milkman, they tell us, is typical of modern industrial society. Competing railways run trains on parallel tracks, with empty cars that might be filled and with vast executive organizations which do ten times over the work that might be done by one. Competing stores needlessly occupy the time of hundreds of thousands of employees in a mixture of idleness and industry. An inconceivable quantity of human effort is spent on advertising, mere shouting and display, as unproductive in the social sense as the beating of a drum. Competition breaks into a dozen inefficient parts the process that might conceivably be carried out, with an infinite saving of effort, by a single guiding hand. The socialist looking thus at the world we live in sees in it nothing but waste and selfishness and inefficiency. He looks so long that a mist comes before his eyes. He loses sight of the supreme fact that after all, in its own poor, clumsy fashion, the machine does work. He loses sight of the possibility of our falling into social chaos. He sees no longer the brink of the abyss beside which the path of progress picks its painful way. He leaps with a shout of exultation over the cliff. And he lands, at least in imagination, in his ideal state, his Utopia. Here the noise and clamor of competitive industry is stilled. We look about us at a peaceful landscape where men and women brightly clothed and abundantly fed and warmed, sing at their easy task. There is enough for all and more than enough. Poverty has vanished. Want is unknown. The children play among the flowers. The youths and maidens are at school. There are no figures here bent with premature toil, no faces dulled and furrowed with a life of hardship. The light of education and culture has shone full on every face and illuminated it into all that it might be. The cheerful hours of easy labor vary but do not destroy the pursuit of pleasure and of recreation. Youth in such a Utopia is a very springtime of hope: adult life a busy and cheery activity: and age itself, watching from its shady bench beneath a spreading tree the labors of its children, is but a gentle retrospect from which material care has passed away. It is a picture beautiful as the opalescent colors of a soap bubble. It is the vision of a garden of Eden from which the demon has been banished. And the Demon in question is the Private Ownership of the Means of Production. His name is less romantic than those of the wonted demons of legend and folklore. But it is at least suitable for the matter-of-fact age of machinery which he is supposed to haunt and on which he casts his evil spell. Let him be once exorcised and the ills of humanity are gone. And the exorcism, it appears, is of the simplest. Let this demon once feel the contact of state ownership of the means of production and his baneful influence will vanish into thin air as his mediæval predecessors did at the touch of a thimbleful of holy water. This, then, is the socialist's program. Let "the state" take over all the means of production--all the farms, the mines, the factories, the workshops, the ships, the railroads. Let it direct the workers towards their task in accordance with the needs of society. Let each labor for all in the measure of his strength and talent. Let each receive from all in the measure of his proper needs. No work is to be wasted: nothing is to be done twice that need only be done once. All must work and none must be idle: but the amount of work needed under these conditions will be so small, the hours so short, and the effort so slight, that work itself will no longer be the grinding monotonous toil that we know to-day, but a congenial activity pleasant in itself. A thousand times this picture has been presented. The visionary with uplifted eyes, his gaze bent on the bright colors of the floating bubble, has voiced it from a thousand platforms. The earnest youth grinding at the academic mill has dreamed it in the pauses of his studious labor. The impassioned pedant has written it in heavy prose smothering its brightness in the dull web of his own thought. The brilliant imaginative mind has woven it into romance, making its colors brighter still with the sunlight of inspired phantasy. But never, I think, has the picture of socialism at work been so ably and so dexterously presented as in a book that begins to be forgotten now, but which some thirty years ago took the continent by storm. This was the volume in which Mr. Edward Bellamy "looked backward" from his supposed point of vantage in the year 2000 A. D. and saw us as we are and as we shall be. No two plans of a socialist state are ever quite alike. But the scheme of society outlined in "Looking Backward" may be examined as the most attractive and the most consistent outline of a socialist state that has, within the knowledge of the present writer, ever been put forward. It is worth while, in the succeeding chapter to examine it in detail. No better starting point for the criticism of collectivist theories can be found than in a view of the basis on which is supposed to rest the halcyon life of Mr. Bellamy's charming commonwealth. _VI.--How Mr. Bellamy Looked Backward_ THE reading public is as wayward and as fickle as a bee among the flowers. It will not long pause anywhere, and it easily leaves each blossom for a better. But like the bee, while impelled by an instinct that makes it search for sugar, it sucks in therewith its solid sustenance. I am not quite certain that the bee does exactly do this; but it is just the kind of thing that the bee is likely to do. And in any case it is precisely the thing which the reading public does. It will not read unless it is tempted by the sugary sweetness of the romantic interest. It must have its hero and its heroine and its course of love that never will run smooth. For information the reader cares nothing. If he absorbs it, it must be by accident, and unawares. He passes over the heavy tomes filled with valuable fact, and settles like the random bee upon the bright flowers of contemporary romance. Hence if the reader is to be ensnared into absorbing something useful, it must be hidden somehow among the flowers. A treatise on religion must be disguised as a love story in which a young clergyman, sworn into holy orders, falls in love with an actress. The facts of history are imparted by a love story centering around the adventures of a hitherto unknown son of Louis the Fourteenth. And a discussion of the relations of labor and capital takes the form of a romance in which the daughter of a multi-millionaire steps voluntarily out of her Fifth Avenue home to work in a steam laundry. Such is the recognized method by which the great unthinking public is taught to think. Slavery was not fully known till Mrs. Stowe wrote "Uncle Tom's Cabin," and the slow tyranny of the law's delay was taught to the world for ever in the pages of "Bleak House." So it has been with socialism. No single influence ever brought its ideas and its propaganda so forcibly and clearly before the public mind as Mr. Edward Bellamy's brilliant novel, "Looking Backward," published some thirty years ago. The task was arduous. Social and economic theory is heavy to the verge of being indigestible. There is no such thing as a gay book on political economy for reading in a hammock. Yet Mr. Bellamy succeeded. His book is in cold reality nothing but a series of conversations explaining how a socialist commonwealth is supposed to work. Yet he contrives to bring into it a hero and a heroine, and somehow the warm beating of their hearts and the stolen glances in their eyes breathe into the dry dust of economic argument the breath of life. Nor was ever a better presentation made of the essential program of socialism. It is worth while then, as was said in the preceding chapter, to consider Mr. Bellamy's commonwealth as the most typical and the most carefully constructed of all the ready-made socialisms that have been put forward. The mere machinery of the story can be lightly passed over. It is intended simply as the sugar that lures the random bee. The hero, living in Boston in 1887, is supposed to fall asleep in a deep, underground chamber which he has made for himself as a remedy against a harassing insomnia. Unknown to the sleeper the house above his retreat is burned down. He remains in a trance for a hundred and thirteen years and awakes to find himself in the Boston of the year 2000 A. D. Kind hands remove him from his sepulcher. He is revived. He finds himself under the care of a certain learned and genial Dr. Leete, whose house stands on the very site where once the sleeper lived. The beautiful daughter of Dr. Leete looks upon the newcomer from the lost world with eyes in which, to the mind of the sagacious reader, love is seen at once to dawn. In reality she is the great-granddaughter of the fiancée whom the sleeper was to have married in his former life; thus a faint suggestion of the transmigration of souls illuminates their intercourse. Beyond that there is no story and at the end of the book the sleeper, in another dream, is conveniently transported back to 1887 which he can now contrast, in horror, with the ideal world of 2000 A. D. And what was this world? The sleeper's first vision of it was given him by Dr. Leete, who took him to the house top and let him see the Boston of the future. Wide avenues replace the crowded, noisy streets. There are no shops but only here and there among the trees great marble buildings, the emporiums from which the goods are delivered to the purple public. And the goods are delivered indeed! Dr. Leete explains it all with intervals of grateful cigar smoking and of music and promenades with the beautiful Edith, and meals in wonderful communistic restaurants with romantic waiters, who feel themselves, _mirabile dictu_, quite independent. And this is how the commonwealth operates. Everybody works or at least works until the age of forty, so that it may be truly said in these halcyon days everybody works but father. But the work of life does not begin till education ends at the age of twenty-one. After that all the young men and women pass for three years into the general "Industrial Army," much as the young men used to pass into the ranks of conscription. Afterwards each person may select any trade that he likes. But the hours are made longer or shorter according to whether too many or too few young people apply to come in. A gardener works for more hours than a scavenger. Yet all occupations are equally honorable. The wages of all the people are equal; or rather there are no wages at all, as the workers merely receive cards, which entitle them to goods of such and such a quantity at any of the emporiums. The cards are punched out as the goods are used. The goods are all valued according to the amount of time used in their making and each citizen draws out the same total amount. But he may take it out in installments just as he likes, drawing many things one month and few the next. He may even get goods in advance if he has any special need. He may, within a certain time limit, save up his cards, but it must be remembered that the one thing which no card can buy and which no citizens can own is the "means of production." These belong collectively to all. Land, mines, machinery, factories and the whole mechanism of transport, these things are public property managed by the State. Its workers in their use of them are all directed by public authority as to what they shall make and when they shall make it, and how much shall be made. On these terms all share alike; the cripple receives as much as the giant; the worker of exceptional dexterity and energy the same as his slower and less gifted fellow. All the management, the control--and let this be noted, for there is no escape from it either by Mr. Bellamy or by anybody else--is exercised by boards of officials elected by the people. All the complex organization by which production goes on by which the workers are supervised and shifted from trade to trade, by which their requests for a change of work or an extension of credit are heard and judged--all of this is done by the elected "bosses." One lays stress on this not because it is Mr. Bellamy's plan, but because it is, and it _has to be_, the plan of anybody who constructs a socialist commonwealth. Mr. Bellamy has many ingenious arrangements to meet the needs of people who want to be singers or actors or writers,--in other words, who do not want to work. They may sing or act as much as they like, provided that enough other people will hand over enough of their food cards to keep them going. But if no one wants to hear them sing or see them act they may starve,--just as they do now. Here the author harks back unconsciously to his nineteenth century individualism; he need not have done so; other socialist writers would have it that one of the everlasting boards would "sit on" every aspiring actor or author before he was allowed to begin. But we may take it either way. It is not the major point. There is no need to discuss the question of how to deal with the artist under socialism. If the rest of it were all right, no one need worry about the artist. Perhaps he would do better without being remunerated at all. It is doubtful whether the huge commercial premium that greets success to-day does good or harm. But let it pass. It is immaterial to the present matter. One comes back to the essential question of the structure of the commonwealth. Can such a thing, or anything conceived in its likeness, possibly work? The answer is, and must be, absolutely and emphatically no. Let anyone conversant with modern democracy as it is,--not as its founders dreamed of it,--picture to himself the operation of a system whereby anything and everything is controlled by elected officials, from whom there is no escape, outside of whom is no livelihood and to whom all men must bow! Democracy, let us grant it, is the best system of government as yet operative in this world of sin. Beside autocratic kingship it shines with a white light; it is obviously the portal of the future. But we know it now too well to idealize its merits. A century and a half ago when the world was painfully struggling out of the tyranny of autocratic kingship, when English liberalism was in its cradle, when Thomas Jefferson was composing the immortal phrases of the Declaration of Independence and unknown patriots dreamed of freedom in France,--at such an epoch it was but natural that the principle of popular election should be idealized as the sovereign remedy for the political evils of mankind. It was natural and salutary that it should be so. The force of such idealization helped to carry forward the human race to a new milestone on the path of progress. But when it is proposed to entrust to the method of elective control not a part but the whole of the fortunes of humanity, to commit to it not merely the form of government and the necessary maintenance of law, order and public safety, but the whole operation of the production and distribution of the world's goods, the case is altered. The time is ripe then for retrospect over the experience of the nineteenth century and for a realization of what has proved in that experience the peculiar defects of elective democracy. Mr. Bellamy pictures his elected managers,--as every socialist has to do,--as a sagacious and paternal group, free from the interest of self and the play of the baser passions and animated only by the thought of the public good. Gravely they deliberate; wisely and justly they decide. Their gray heads--for Bellamy prefers them old--are bowed in quiet confabulation over the nice adjustment of the national production, over the petition of this or that citizen. The public care sits heavily on their breast. Their own peculiar fortune they have lightly passed by. They do not favor their relations or their friends. They do not count their hours of toil. They do not enumerate their gain. They work, in short, as work the angels. Now let me ask in the name of sanity where are such officials to be found? Here and there, perhaps, one sees in the world of to-day in the stern virtue of an honorable public servant some approximation to such a civic ideal. But how much, too, has been seen of the rule of "cliques" and "interests" and "bosses;" of the election of genial incompetents popular as spendthrifts; of crooked partisans warm to their friends and bitter to their enemies; of administration by a party for a party; and of the insidious poison of commercial greed defiling the wells of public honesty. The unending conflict between business and politics, between the private gain and the public good, has been for two generations the despair of modern democracy. It turns this way and that in its vain effort to escape corruption. It puts its faith now in representative legislatures, and now in appointed boards and commissions; it appeals to the vote of the whole people or it places an almost autocratic power and a supreme responsibility in the hands of a single man. And nowhere has the escape been found. The melancholy lesson is being learned that the path of human progress is arduous and its forward movement slow and that no mere form of government can aid unless it is inspired by a higher public spirit of the individual citizen than we have yet managed to achieve. And of the world of to-day, be it remembered, elective democratic control covers only a part of the field. Under socialism it covers it all. To-day in our haphazard world a man is his own master; often indeed the mastership is but a pitiful thing, little more than being master of his own failure and starvation; often indeed the dead weight of circumstance, the accident of birth, the want of education, may so press him down that his freedom is only a mockery. Let us grant all that. But under socialism freedom is gone. There is nothing but the rule of the elected boss. The worker is commanded to his task and obey he must. If he will not, there is, there can only be, the prison and the scourge, or to be cast out in the wilderness to starve. Consider what it would mean to be under a socialist state. Here for example is a worker who is, who says he is, too ill to work. He begs that he may be set free. The grave official, as Mr. Bellamy sees him, looks at the worker's tongue. "My poor fellow," says he, "you are indeed ill. Go and rest yourself under a shady tree while the others are busy with the harvest." So speaks the ideal official dealing with the ideal citizen in the dream life among the angels. But suppose that the worker, being not an angel but a human being, is but a mere hulking, lazy brute who prefers to sham sick rather than endure the tedium of toil. Or suppose that the grave official is not an angel, but a man of hateful heart or one with a personal spite to vent upon his victim. What then? How could one face a régime in which the everlasting taskmaster held control? There is nothing like it among us at the present day except within the melancholy precincts of the penitentiary. There and there only, the socialist system is in operation. Who can deny that under such a system the man with the glib tongue and the persuasive manner, the babbling talker and the scheming organizer, would secure all the places of power and profit, while patient merit went to the wall? Or turn from the gray officials to the purple citizens of the soap bubble commonwealth of socialism. All work, we are told, and all receive their remuneration. We must not think of it as money-wages, but, all said and done, an allotted share of goods, marked out upon a card, comes pretty much to the same thing. The wages that the citizens receive must either be equal or not equal. That at least is plain logic. Either everybody gets exactly the same wages irrespective of capability and diligence, or else the wages or salaries or whatever one calls them, are graded, so that one receives much and the other little. Now either of these alternatives spells disaster. If the wages are graded according to capacity, then the grading is done by the everlasting elective officials. They can, and they will, vote themselves and their friends or adherents into the good jobs and the high places. The advancement of a bright and capable young man will depend, not upon what he does, but upon what the elected bosses are pleased to do with him; not upon the strength of his own hands, but upon the strength of the "pull" that he has with the bosses who run the part of the industry that he is in. Unequal wages under socialism would mean a fierce and corrupt scramble for power, office and emolument, beside which the utmost aberrations of Tammany Hall would seem as innocuous as a Sunday School picnic. "But," objects Mr. Bellamy or any other socialist, "you forget. Please remember that under socialism the scramble for wealth is limited; no man can own capital, but only consumption goods. The most that any man may acquire is merely the articles that he wants to consume, not the engines and machinery of production itself. Hence even avarice dwindles and dies, when its wonted food of 'capitalism' is withdrawn." But surely this point of view is the very converse of the teachings of common sense. "Consumption goods" are the very things that we _do_ want. All else is but a means to them. One admits, as per exception, the queer acquisitiveness of the miser-millionaire, playing the game for his own sake. Undoubtedly he exists. Undoubtedly his existence is a product of the system, a pathological product, a kind of elephantiasis of individualism. But speaking broadly, consumption goods, present or future, are the end in sight of the industrial struggle. Give me the houses and the gardens, the yachts, the motor cars and the champagne and I do not care who owns the gravel crusher and the steam plow. And if under a socialist commonwealth a man can vote to himself or gain by the votes of his adherents, a vast income of consumption goods and leave to his unhappy fellow a narrow minimum of subsistence, then the resulting evil of inequality is worse, far worse than it could even be to-day. Or try, if one will, the other horn of the dilemma. That, too, one will find as ill a resting place as an upright thistle. Let the wages,--as with Mr. Bellamy,--all be equal. The managers then cannot vote themselves large emoluments if they try. But what about the purple citizens? Will they work, or will they lie round in their purple garments and loaf? Work? Why should they work, their pay is there "fresh and fresh"? Why should they turn up on time for their task? Why should they not dawdle at their labor sitting upon the fence in endless colloquy while the harvest rots upon the stalk? If among them is one who cares to work with a fever of industry that even socialism cannot calm, let him do it. We, his fellows, will take our time. Our pay is there as certain and as sound as his. Not for us the eager industry and the fond plans for the future,--for the home and competence--that spurred on the strenuous youth of old days,--not for us the earnest planning of the husband and wife thoughtful and anxious for the future of their little ones. Not for us the honest penny saved for a rainy day. Here in the dreamland of socialism there are no rainy days. It is sunshine all the time in this lotus land of the loafer. And for the future, let the "State" provide; for the children's welfare let the "State" take thought; while we live it shall feed us, when we fall ill it shall tend us and when we die it shall bury us. Meantime let us eat, drink and be merry and work as little as we may. Let us sit among the flowers. It is too hot to labor. Let us warm ourselves beside the public stove. It is too cold to work. But what? Such conduct, you say, will not be allowed in the commonwealth. Idleness and slovenly, careless work will be forbidden? Ah! then you must mean that beside the worker will be the overseer with the whip; the time-clock will mark his energy upon its dial; the machine will register his effort; and if he will not work there is lurking for him in the background the shadowed door of the prison. Exactly and logically so. Socialism, in other words, is slavery. But here the socialist and his school interpose at once with an objection. Under the socialist commonwealth, they say, the people will want to work; they will have acquired a new civic spirit; they will work eagerly and cheerfully for the sake of the public good and from their love of the system under which they live. The loafer will be extinct. The sponge and the parasite will have perished. Even crime itself, so the socialist tells us, will diminish to the vanishing point, till there is nothing of it except here and there a sort of pathological survival, an atavism, or a "throwing back" to the forgotten sins of the grandfathers. Here and there, some poor fellow afflicted with this disease may break into my socialistic house and steal my pictures and my wine. Poor chap! Deal with him very gently. He is not wicked. He is ill. This last argument, in a word, begs the whole question. With perfect citizens any government is good. In a population of angels a socialistic commonwealth would work to perfection. But until we have the angels we must keep the commonwealth waiting. Nor is it necessary here to discuss the hundred and one modifications of the socialistic plan. Each and all fail for one and the same reason. The municipal socialist, despairing of the huge collective state, dreams of his little town as an organic unit in which all share alike; the syndicalist in his fancy sees his trade united into a co-operative body in which all are equal; the gradualist, in whose mind lingers the leaven of doubt, frames for himself a hazy vision of a prolonged preparation for the future, of socialism achieved little by little, the citizens being trained as it goes on till they are to reach somehow or somewhere in cloud land the nirvana of the elimination of self; like indeed, they are, to the horse in the ancient fable that was being trained to live without food but died, alas, just as the experiment was succeeding. There is no way out. Socialism is but a dream, a bubble floating in the air. In the light of its opalescent colors we may see many visions of what we might be if we were better than we are, we may learn much that is useful as to what we can be even as we are; but if we mistake the floating bubble for the marble palaces of the city of desire, it will lead us forward in our pursuit till we fall over the edge of the abyss beyond which is chaos. _VII.--What Is Possible and What Is Not_ SOCIALISM, then, will not work, and neither will individualism, or at least the older individualism that we have hitherto made the basis of the social order. Here, therefore, stands humanity, in the middle of its narrow path in sheer perplexity, not knowing which way to turn. On either side is the brink of an abyss. On one hand is the yawning gulf of social catastrophe represented by socialism. On the other, the slower, but no less inevitable disaster that would attend the continuation in its present form of the system under which we have lived. Either way lies destruction; the one swift and immediate as a fall from a great height; the other gradual, but equally dreadful, as the slow strangulation in a morass. Somewhere between the two lies such narrow safety as may be found. The Ancients were fond of the metaphor, taken from the vexed Sicilian Seas, of Scylla and Charybdis. The twin whirlpools threatened the affrightened mariner on either side. To avoid one he too hastily cast the ship to destruction in the other. Such is precisely the position that has been reached at the present crisis in the course of human progress. When we view the shortcomings of the present individualism, its waste of energy, its fretful overwork, its cruel inequality and the bitter lot that it brings to the uncounted millions of the submerged, we are inclined to cry out against it, and to listen with a ready ear to the easy promises of the idealist. But when we turn to the contrasted fallacies of socialism, its obvious impracticality and the dark gulf of social chaos that yawns behind it, we are driven back shuddering to cherish rather the ills we have than fly to others we know not of. Yet out of the whole discussion of the matter some few things begin to merge into the clearness of certain day. It is clear enough on the one hand that we can expect no sudden and complete transformation of the world in which we live. Such a process is impossible. The industrial system is too complex, its roots are too deeply struck and its whole organism of too delicate a growth to permit us to tear it from the soil. Nor is humanity itself fitted for the kind of transformation which fills the dreams of the perfectionist. The principle of selfishness that has been the survival instinct of existence since life first crawled from the slime of a world in evolution, is as yet but little mitigated. In the long process of time some higher cosmic sense may take its place. It has not done so yet. If the kingdom of socialism were opened to-morrow, there are but few fitted to enter. But on the other hand it is equally clear that the doctrine of "every man for himself," as it used to be applied, is done with forever. The time has gone by when a man shall starve asking in vain for work; when the listless outcast shall draw his rags shivering about him unheeded of his fellows; when children shall be born in hunger and bred in want and broken in toil with never a chance in life. If nothing else will end these things, fear will do it. The hardest capitalist that ever gripped his property with the iron clasp of legal right relaxes his grasp a little when he thinks of the possibilities of a social conflagration. In this respect five years of war have taught us more than a century of peace. It has set in a clear light new forms of social obligation. The war brought with it conscription--not as we used to see it, as the last horror of military tyranny, but as the crowning pride of democracy. An inconceivable revolution in the thought of the English speaking peoples has taken place in respect to it. The obligation of every man, according to his age and circumstance, to take up arms for his country and, if need be, to die for it, is henceforth the recognized basis of progressive democracy. But conscription has its other side. The obligation to die must carry with it the right to live. If every citizen owes it to society that he must fight for it in case of need, then society owes to every citizen the opportunity of a livelihood. "Unemployment," in the case of the willing and able becomes henceforth a social crime. Every democratic Government must henceforth take as the starting point of its industrial policy, that there shall be no such thing as able bodied men and women "out of work," looking for occupation and unable to find it. Work must either be found or must be provided by the State itself. Yet it is clear that a policy of state work and state pay for all who are otherwise unable to find occupation involves appalling difficulties. The opportunity will loom large for the prodigal waste of money, for the undertaking of public works of no real utility and for the subsidizing of an army of loafers. But the difficulties, great though they are, are not insuperable. The payment for state labor of this kind can be kept low enough to make it the last resort rather than the ultimate ambition of the worker. Nor need the work be useless. In new countries, especially such as Canada and the United States and Australia, the development of latent natural assets could absorb the labor of generations. There are still unredeemed empires in the west. Clearly enough a certain modicum of public honesty and integrity is essential for such a task; more, undoubtedly, than we have hitherto been able to enlist in the service of the commonwealth. But without it we perish. Social betterment must depend at every stage on the force of public spirit and public morality that inspires it. So much for the case of those who are able and willing to work. There remain still the uncounted thousands who by accident or illness, age or infirmity, are unable to maintain themselves. For these people, under the older dispensation, there was nothing but the poorhouse, the jail or starvation by the roadside. The narrow individualism of the nineteenth century refused to recognize the social duty of supporting somebody else's grandmother. Such charity began, and ended, at home. But even with the passing of the nineteenth century an awakened sense of the collective responsibility of society towards its weaker members began to impress itself upon public policy. Old age pension laws and national insurance against illness and accident were already being built into the legislative codes of the democratic countries. The experience of the war has enormously increased this sense of social solidarity. It is clear now that our fortunes are not in our individual keeping. We stand or fall as a nation. And the nation which neglects the aged and infirm, or which leaves a family to be shipwrecked as the result of a single accident to a breadwinner, cannot survive as against a nation in which the welfare of each is regarded as contributory to the safety of all. Even the purest selfishness would dictate a policy of social insurance. There is no need to discuss the particular way in which this policy can best be carried out. It will vary with the circumstances of each community. The action of the municipality, or of the state or province, or of the central government itself may be called into play. But in one form or another, the economic loss involved in illness and infirmity must be shifted from the shoulders of the individual to those of society at large. There was but little realization of this obligation in the nineteenth century. Only in the sensational moments of famine, flood or pestilence was a general social effort called forth. But in the clearer view of the social bond which the war has given us we can see that famine and pestilence are merely exaggerated forms of what is happening every day in our midst. We spoke much during the war of "man power." We suddenly realized that after all the greatness and strength of a nation is made up of the men and women who compose it. Its money, in the narrow sense, is nothing; a set of meaningless chips and counters piled upon a banker's table ready to fall at a touch. Even before the war we had begun to talk eagerly and anxiously of the conservation of national resources, of the need of safeguarding the forests and fisheries and the mines. These are important things. But the war has shown that the most important thing of all is the conservation of men and women. The attitude of the nineteenth century upon this point was little short of insane. The melancholy doctrine of Malthus had perverted the public mind. Because it was difficult for a poor man to bring up a family, the hasty conclusion was reached that a family ought not to be brought up. But the war has entirely inverted and corrected this point of view. The father and mother who were able to send six sturdy, native-born sons to the conflict were regarded as benefactors of the nation. But these six sturdy sons had been, some twenty years before, six "puling infants," viewed with gloomy disapproval by the Malthusian bachelor. If the strength of the nation lies in its men and women there is only one way to increase it. Before the war it was thought that a simpler and easier method of increase could be found in the wholesale import of Austrians, Bulgarians and Czecho-Slovaks. The newer nations boasted proudly of their immigration tables. The fallacy is apparent now. Those who really count in a nation and those who govern its destinies for good or ill are those who are born in it. It is difficult to over-estimate the harm that has been done to public policy by this same Malthusian theory. It has opposed to every proposal of social reform an obstacle that seemed insuperable,--the danger of a rapid overincrease of population that would pauperize the community. Population, it was said, tends always to press upon the heels of subsistence. If the poor are pampered, they will breed fast: the time will come when there will not be food for all and we shall perish in a common destruction. Seen in this light, infant mortality and the cruel wastage of disease were viewed with complacence. It was "Nature's" own process at work. The "unfit," so called, were being winnowed out that only the best might survive. The biological doctrine of evolution was misinterpreted and misapplied to social policy. But in the organic world there is no such thing as the "fit" or the "unfit," in any higher or moral sense. The most hideous forms of life may "survive" and thrust aside the most beautiful. It is only by a confusion of thought that the processes of organic nature which render every foot of fertile ground the scene of unending conflict can be used to explain away the death of children of the slums. The whole theory of survival is only a statement of what is, not of what ought to be. The moment that we introduce the operation of human volition and activity, that, too, becomes one of the factors of "survival." The dog, the cat, and the cow live by man's will, where the wolf and the hyena have perished. But it is time that the Malthusian doctrine,--the fear of over-population as a hindrance to social reform,--was dismissed from consideration. It is at best but a worn-out scarecrow shaking its vain rags in the wind. Population, it is true, increases in a geometrical ratio. The human race, if favored by environment, can easily double itself every twenty-five years. If it did this, the time must come, through sheer power of multiplication, when there would not be standing room for it on the globe. All of this is undeniable, but it is quite wide of the mark. It is time enough to cross a bridge when we come to it. The "standing room" problem is still removed from us by such uncounted generations that we need give no thought to it. The physical resources of the globe are as yet only tapped, and not exhausted. We have done little more than scratch the surface. Because we are crowded here and there in the ant-hills of our cities, we dream that the world is full. Because, under our present system, we do not raise enough food for all, we fear that the food supply is running short. All this is pure fancy. Let any one consider in his mind's eye the enormous untouched assets still remaining for mankind in the vast spaces filled with the tangled forests of South America, or the exuberant fertility of equatorial Africa or the huge plains of Canada, Australia, Southern Siberia and the United States, as yet only thinly dotted with human settlement. There is no need to draw up an anxious balance sheet of our assets. There is still an uncounted plenty. And every human being born upon the world represents a power of work that, rightly directed, more than supplies his wants. The fact that as an infant he does not maintain himself has nothing to do with the case. This was true even in the Garden of Eden. The fundamental error of the Malthusian theory of population and poverty is to confound the difficulties of human organization with the question of physical production. Our existing poverty is purely a problem in the direction and distribution of human effort. It has no connection as yet with the question of the total available means of subsistence. Some day, in a remote future, in which under an improved social system the numbers of mankind might increase to the full power of the natural capacity of multiplication, such a question might conceivably disturb the equanimity of mankind. But it need not now. It is only one of many disasters that must sooner or later overtake mankind. The sun, so the astronomer tells us, is cooling down; the night is coming; an all-pervading cold will some day chill into rigid death the last vestige of organic life. Our poor planet will be but a silent ghost whirling on its dark path in the starlight. This ultimate disaster is, as far as our vision goes, inevitable. Yet no one concerns himself with it. So should it be with the danger of the ultimate overcrowding of the globe. I lay stress upon this problem of the increase of population because, to my thinking, it is in this connection that the main work and the best hope of social reform can be found. The children of the race should be the very blossom of its fondest hopes. Under the present order and with the present gloomy preconceptions they have been the least of its collective cares. Yet here--and here more than anywhere--is the point towards which social effort and social legislation may be directed immediately and successfully. The moment that we get away from the idea that the child is a mere appendage of the parent, bound to share good fortune and ill, wealth and starvation, according to the parent's lot, the moment we regard the child as itself a member of society--clothed in social rights--a burden for the moment but an asset for the future--we turn over a new leaf in the book of human development, we pass a new milestone on the upward path of progress. It should be recognized in the coming order of society, that every child of the nation has the right to be clothed and fed and trained irrespective of its parents' lot. Our feeble beginnings in the direction of housing, sanitation, child welfare and education, should be expanded at whatever cost into something truly national and all embracing. The ancient grudging selfishness that would not feed other people's children should be cast out. In the war time the wealthy bachelor and the spinster of advancing years took it for granted that other people's children should fight for them. The obligation must apply both ways. No society is properly organized until every child that is born into it shall have an opportunity in life. Success in life and capacity to live we cannot give. But opportunity we can. We can at least see that the gifts that are laid in the child's cradle by nature are not obliterated by the cruel fortune of the accident of birth: that its brain and body are not stunted by lack of food and air and by the heavy burden of premature toil. The playtime of childhood should be held sacred by the nation. This, as I see it, should be the first and the greatest effort of social reform. For the adult generation of to-day many things are no longer possible. The time has passed. We are, as viewed with a comprehensive eye, a damaged race. Few of us in mind or body are what we might be; and millions of us, the vast majority of industrial mankind known as the working class, are distorted beyond repair from what they might have been. In older societies this was taken for granted: the poor and the humble and the lowly reproduced from generation to generation, as they grew to adult life, the starved brains and stunted outlook of their forbears,--starved and stunted only by lack of opportunity. For nature knows of no such differences in original capacity between the children of the fortunate and the unfortunate. Yet on this inequality, made by circumstance, was based the whole system of caste, the stratification of the gentle and the simple on which society rested. In the past it may have been necessary. It is not so now. If, with all our vast apparatus of machinery and power, we cannot so arrange society that each child has an opportunity in life, it would be better to break the machinery in pieces and return to the woods from which we came. Put into the plainest of prose, then, we are saying that the government of every country ought to supply work and pay for the unemployed, maintenance for the infirm and aged, and education and opportunity for the children. These are vast tasks. And they involve, of course, a financial burden not dreamed of before the war. But here again the war has taught us many things. It would have seemed inconceivable before, that a man of great wealth should give one-half of his income to the state. The financial burden of the war, as the full measure of it dawned upon our minds, seemed to betoken a universal bankruptcy. But the sequel is going to show that the finance of the war will prove to be a lesson in the finance of peace. The new burden has come to stay. No modern state can hope to survive unless it meets the kind of social claims on the part of the unemployed, the destitute and the children that have been described above. And it cannot do this unless it continues to use the terrific engine of taxation already fashioned in the war. Undoubtedly the progressive income tax and the tax on profits and taxation of inheritance must be maintained to an extent never dreamed of before. But the peace finance and the war finance will differ in one most important respect. The war finance was purely destructive. From it came national security and the triumph of right over wrong. No one would belittle the worth of the sacrifice. But in the narrower sense of production, of bread winning, there came nothing; or nothing except a new power of organization, a new technical skill and a new aspiration towards better things. But the burden of peace finance directed towards social efforts will bring a direct return. Every cent that is spent upon the betterment of the population will come back, sooner or later, as two. But all of this deals as yet only with the field of industry and conduct in which the state rules supreme. Governmental care of the unemployed, the infant and the infirm, sounds like a chapter in socialism. If the same régime were extended over the whole area of production, we should have socialism itself and a mere soap-bubble bursting into fragments. There is no need, however, to extend the régime of compulsion over the whole field. The vast mass of human industrial effort must still lie outside of the immediate control of the government. Every man will still earn his own living and that of his family as best he can, relying first and foremost upon his own efforts. One naturally asks, then, To what extent can social reform penetrate into the ordinary operation of industry itself? Granted that it is impossible for the state to take over the whole industry of the nation, does that mean that the present inequalities must continue? The framework in which our industrial life is set cannot be readily broken asunder. But we can to a great extent ease the rigidity of its outlines. A legislative code that starts from sounder principles than those which have obtained hitherto can do a great deal towards progressive betterment. Each decade can be an improvement upon the last. Hitherto we have been hampered at every turn by the supposed obstacle of immutable economic laws. The theory of "natural" wages and prices of a supposed economic order that could not be disturbed, set up a sort of legislative paralysis. The first thing needed is to get away entirely from all such preconceptions, to recognize that the "natural" order of society, based on the "natural" liberty, does not correspond with real justice and real liberty at all, but works injustice at every turn. And at every turn intrusive social legislation must seek to prevent such injustice. It is no part of the present essay to attempt to detail the particulars of a code of social legislation. That must depend in every case upon the particular circumstances of the community concerned. But some indication may be given here of the kind of legislation that may serve to render the conditions of industry more in conformity with social justice. Let us take, as a conspicuous example, the case of the Minimum wage law. Here is a thing sternly condemned in the older thought as an economic impossibility. It was claimed, as we have seen, that under free contract a man was paid what he earned and no law could make it more. But the older theory was wrong. The minimum wage law ought to form, in one fashion or another, a part of the code of every community. It may be applied by specific legislation from a central power, or it may be applied by the discretionary authority of district boards, or it may be regulated,--as it has been in some of the beginnings already made,--within the compass of each industry or trade. But the principle involved is sound. The wage as paid becomes a part of the conditions of industry. Interest, profits and, later, the direction of consumption and then of production, conform themselves to it. True it is, that in this as in all cases of social legislation, no application of the law can be made so sweeping and so immediate as to dislocate the machine and bring industry to a stop. It is probable that at any particular time and place the legislative minimum wage cannot be very much in advance of the ordinary or average wage of the people in employment. But its virtue lies in its progression. The modest increase of to-day leads to the fuller increase of to-morrow. Properly applied, the capitalist and the employer of labor need have nothing to fear from it. Its ultimate effect will not fall upon them, but will serve merely to alter the direction of human effort. Precisely the same reasoning holds good of the shortening of the hours of labor both by legislative enactment and by collective organization. Here again the first thing necessary is a clear vision of the goal towards which we are to strive. The hours of labor are too long. The world has been caught in the wheels of its own machinery which will not stop. With each advance in invention and mechanical power it works harder still. New and feverish desires for luxuries replace each older want as satisfied. The nerves of our industrial civilization are worn thin with the rattle of its own machinery. The industrial world is restless, over-strained and quarrelsome. It seethes with furious discontent, and looks about it eagerly for a fight. It needs a rest. It should be sent, as nerve patients are, to the seaside or the quiet of the hills. Failing this, it should at least slacken the pace of its work and shorten its working day. And for this the thing needed is an altered public opinion on the subject of work in relation to human character and development. The nineteenth century glorified work. The poet, sitting beneath a shady tree, sang of its glories. The working man was incited to contemplate the beauty of the night's rest that followed on the exhaustion of the day. It was proved to him that if his day was dull at least his sleep was sound. The ideal of society was the cheery artisan and the honest blacksmith, awake and singing with the lark and busy all day long at the loom and the anvil, till the grateful night soothed them into well-earned slumber. This, they were told, was better than the distracted sleep of princes. The educated world repeated to itself these grotesque fallacies till it lost sight of plain and simple truths. Seven o'clock in the morning is too early for any rational human being to be herded into a factory at the call of a steam whistle. Ten hours a day of mechanical task is too long: nine hours is too long: eight hours is too long. I am not raising here the question as to how and to what extent the eight hours can be shortened, but only urging the primary need of recognizing that a working day of eight hours is too long for the full and proper development of human capacity and for the rational enjoyment of life. There is no need to quote here to the contrary the long and sustained toil of the pioneer, the eager labor of the student, unmindful of the silent hours, or the fierce acquisitive activity of the money-maker that knows no pause. Activities such as these differ with a whole sky from the wage-work of the modern industrial worker. The task in one case is done for its own sake. It is life itself. The other is done only for the sake of the wage it brings. It is, or should be, a mere preliminary to living. Let it be granted, of course, that a certain amount of work is an absolute necessity for human character. There is no more pathetic spectacle on our human stage than the figure of poor puppy in his beach suit and his tuxedo jacket seeking in vain to amuse himself for ever. A leisure class no sooner arises than the melancholy monotony of amusement forces it into mimic work and make-believe activities. It dare not face the empty day. But when all is said about the horror of idleness the broad fact remains that the hours of work are too long. If we could in imagination disregard for a moment all question of how the hours of work are to be shortened and how production is to be maintained and ask only what would be the ideal number of the daily hours of compulsory work, for character's sake, few of us would put them at more than four or five. Many of us, as applied to ourselves, at least, would take a chance on character at two. The shortening of the general hours of work, then, should be among the primary aims of social reform. There need be no fear that with shortened hours of labor the sum total of production would fall short of human needs. This, as has been shown from beginning to end of this essay, is out of the question. Human _desires_ would eat up the result of ten times the work we now accomplish. Human _needs_ would be satisfied with a fraction of it. But the real difficulty in the shortening of hours lies elsewhere. Here, as in the parallel case of the minimum wage, the danger is that the attempt to alter things too rapidly may dislocate the industrial machine. We ought to attempt such a shortening as will strain the machine to a breaking point, but never break it. This can be done, as with the minimum wage, partly by positive legislation and partly collective action. Not much can be done at once. But the process can be continuous. The short hours achieved with acclamation to-day will later be denounced as the long hours of to-morrow. The essential point to grasp, however, is that society at large has nothing to lose by the process. The shortened hours become a part of the framework of production. It adapts itself to it. Hitherto we have been caught in the running of our own machine: it is time that we altered the gearing of it. The two cases selected,--the minimum wage and the legislative shortening of hours,--have been chosen merely as illustrations and are not exhaustive of the things that can be done in the field of possible and practical reform. It is plain enough that in many other directions the same principles may be applied. The rectification of the ownership of land so as to eliminate the haphazard gains of the speculator and the unearned increment of wealth created by the efforts of others, is an obvious case in point. The "single taxer" sees in this a cure-all for the ills of society. But his vision is distorted. The private ownership of land is one of the greatest incentives to human effort that the world has ever known. It would be folly to abolish it, even if we could. But here as elsewhere we can seek to re-define and regulate the conditions of ownership so as to bring them more into keeping with a common sense view of social justice. But the inordinate and fortuitous gains from land are really only one example from a general class. The war discovered the "profiteer." The law-makers of the world are busy now with smoking him out from his lair. But he was there all the time. Inordinate and fortuitous gain, resting on such things as monopoly, or trickery, or the mere hazards of abundance and scarcity, complying with the letter of the law but violating its spirit, are fit objects for appropriate taxation. The ways and means are difficult, but the social principle involved is clear. We may thus form some sort of vision of the social future into which we are passing. The details are indistinct. But the outline at least in which it is framed is clear enough. The safety of the future lies in a progressive movement of social control alleviating the misery which it cannot obliterate and based upon the broad general principle of equality of opportunity. The chief immediate direction of social effort should be towards the attempt to give to every human being in childhood adequate food, clothing, education and an opportunity in life. This will prove to be the beginning of many things. THE END * * * * * Transcriber's Note: Page 67, "are" changed to "and" (wages and all) 
13488	----	AN ESSAY ON MEDIÆVAL ECONOMIC TEACHING by GEORGE O'BRIEN, LITT.D., M.R.I.A. Author of 'The Economic History of Ireland in the Seventeenth Century,' and 'The Economic History of Ireland in the Eighteenth Century' 1920 TO THE REV. MICHAEL CRONIN, M.A., D.D. UNIVERSITY COLLEGE, DUBLIN AUTHOR'S NOTE I wish to express my gratitude to the Rev. Dr. Cronin for his kindness in reading the manuscript, and for many valuable suggestions which he made; also to Father T.A. Finlay, S.J., and Mr. Arthur Cox for having given me much assistance in the reading and revision of the proofs. CONTENTS CHAPTER I INTRODUCTORY SECTION 1. AIM AND SCOPE OF THE ESSAY SECTION 2. EXPLANATION OF THE TITLE § 1. Mediæval § 2. Economic § 3. Teaching SECTION 3. VALUE OF THE STUDY OF THE SUBJECT SECTION 4. DIVISION OF THE SUBJECT CHAPTER II PROPERTY SECTION 1. THE RIGHT TO PRODUCE AND DISPENSE PROPERTY SECTION 2. DUTIES REGARDING THE ACQUISITION AND USE OF PROPERTY SECTION 3. PROPERTY IN HUMAN BEINGS CHAPTER III DUTIES REGARDING THE EXCHANGE OF PROPERTY SECTION 1. THE SALE OF GOODS § 1. The Just Price § 2. The Just Price when Price fixed by Law § 3. The Just Price when Price not fixed by Law § 4. The Just Price of Labour § 5. Value of the Conception of the Just Price § 6. Was the Just Price Subjective or Objective? § 7. The Mediæval Attitude towards Commerce § 8. _Cambium_ SECTION 2. THE SALE OF THE USE OF MONEY § 1. Usury in Greece and Rome § 2. Usury in the Old Testament § 3. Usury in the First Twelve Centuries of Christianity § 4. The Mediæval Prohibition of Usury § 5. Extrinsic Titles § 6. Other Cases in which more than the Loan could be repaid § 7. The Justice of Unearned Income § 8. Rent Charges § 9. Partnership § 10. Concluding Remarks on Usury SECTION 3. THE MACHINERY OF EXCHANGE CHAPTER IV CONCLUSION INDEX CHAPTER I INTRODUCTORY SECTION 1.--AIM AND SCOPE OF THE ESSAY It is the aim of this essay to examine and present in as concise a form as possible the principles and rules which guided and regulated men in their economic and social relations during the period known as the Middle Ages. The failure of the teaching of the so-called orthodox or classical political economists to bring peace and security to society has caused those interested in social and economic problems to inquire with ever-increasing anxiety into the economic teaching which the orthodox economy replaced; and this inquiry has revealed that each system of economic thought that has from time to time been accepted can be properly understood only by a knowledge of the earlier system out of which it grew. A process of historical inquiry of this kind leads one ultimately to the Middle Ages, and it is certainly not too much to say that no study of modern European economic thought can be complete or satisfactory unless it is based upon a knowledge of the economic teaching which was accepted in mediæval Europe. Therefore, while many will deny that the economic teaching of that period is deserving of approval, or that it is capable of being applied to the conditions of the present day, none will deny that it is worthy of careful and impartial investigation. There is thus a demand for information upon the subject dealt with in this essay. On the other hand, the supply of such information in the English language is extremely limited. The books, such as Ingram's _History of Political Economy_ and Haney's _History of Economic Thought_, which deal with the whole of economic history, necessarily devote but a few pages to the Middle Ages. Ashley's _Economic History_ contains two excellent chapters dealing with the Canonist teaching; but, while these chapters contain a mass of most valuable information on particular branches of the mediæval doctrines, they do not perhaps sufficiently indicate the relation between them, nor do they lay sufficient emphasis upon the fundamental philosophical principles out of which the whole system sprang. One cannot sufficiently acknowledge the debt which English students are under to Sir William Ashley for his examination of mediæval opinion on economic matters; his book is frequently and gratefully cited as an authority in the following pages; but it is undeniable that his treatment of the subject suffers somewhat on account of its being introduced but incidentally into a work dealing mainly with English economic practice. Dr. Cunningham has also made many valuable contributions to particular aspects of the subject; and there have also been published, principally in Catholic periodicals, many important monographs on special points; but so far there has not appeared in English any treatise, which is devoted exclusively to mediæval economic opinion and attempts to treat the whole subject completely. It is this want in our economic literature that has tempted the author to publish the present essay, although he is fully aware of its many defects. It is necessary, in the first place, to indicate precisely the extent of the subject with which we propose to deal; and with this end in view to give a definition of the three words, '_mediæval, economic, teaching_.' SECTION 2.--EXPLANATION OF THE TITLE § 1. _Mediæval_. Ingram, in his well-known book on economic history, following the opinion of Comte, refuses to consider the fourteenth and fifteenth centuries as part of the Middle Ages.[1] We intend, however, to treat of economic teaching up to the end of the fifteenth century. The best modern judges are agreed that the term Middle Ages must not be given a hard-and-fast meaning, but that it is capable of bearing a very elastic interpretation. The definition given in the _Catholic Encyclopædia_ is: 'a term commonly used to designate that period of European history between the Fall of the Roman Empire and about the middle of the fifteenth century. The precise dates of the beginning, culmination, and end of the Middle Ages are more or less arbitrarily assumed according to the point of view adopted.' The eleventh edition of the _Encyclopædia Britannica_ contains a similar opinion: 'This name is commonly given to that period of European history which lies between what are known as ancient and modern times, and which has generally been considered as extending from about the middle of the fifth to about the middle of the fifteenth centuries. The two dates adopted in old text-books were 476 and 1453, from the setting aside of the last emperor of the west until the fall of Constantinople. In reality it is impossible to fix any exact dates for the opening and close of such a period.' [Footnote 1: _History of Political Economy_, p. 35.] We are therefore justified in considering the fifteenth century as comprised hi the Middle Ages. This is especially so in the domain of economic theory. In actual practice the fourteenth and fifteenth centuries may have presented the appearance rather of the first stage of a new than of the last stage of an old era. This is Ingram's view. However true this may be of practice, it is not at all true of theory, which, as we shall see, continued to be entirely based on the writings of an author of the thirteenth century. Ingram admits this incidentally: 'During the fourteenth and fifteenth centuries the Catholic-feudal system was breaking down by the mutual conflicts of its own official members, while the constituent elements of a new order were rising beneath it. The movements of this phase can scarcely be said to find an echo in any contemporary economic literature.'[1] We need not therefore apologise further for including a consideration of the fourteenth and fifteenth centuries in our investigations as to the economic teaching of the Middle Ages. We are supported in doing so by such excellent authorities as Jourdain,[2] Roscher,[3] and Cossa.[4] Haney, in his _History of Economic Thought_,[5] says: 'It seems more nearly true to regard the years about 1500 as marking the end of mediæval times.... On large lines, and from the viewpoint of systems of thought rather than systems of industry, the Middle Ages may with profit be divided into two periods. From 400 down to 1200, or shortly thereafter, constitutes the first. During these years Christian theology opposed Roman institutions, and Germanic customs were superposed, until through action and reaction all were blended. This was the reconstruction; it was the "stormy struggle" to found a new ecclesiastical and civil system. From 1200 on to 1500 the world of thought settled to its level. Feudalism and scholasticism, the corner-stones of mediævalism, emerged and were dominant.' [Footnote 1: _Op. cit._, p. 35.] [Footnote 2: _Mémoires sur les commencements de l'économie politique dans les écoles du moyen âge_, Académie des Inscriptions et Belles-Lettres, vol. 28.] [Footnote 3: _Geschichte zur National-Ökonomik in Deutschland_.] [Footnote 4: _Introduction to the Study of Political Economy_.] [Footnote 5: P. 70.] We shall not continue the study further than the beginning of the sixteenth century. It is true that, if we were to refer to several sixteenth-century authors, we should be in possession of a very highly developed and detailed mass of teaching on many points which earlier authors left to some extent obscure. We deliberately refrain nevertheless from doing so, because the whole nature of the sixteenth-century literature was different from that of the fourteenth and fifteenth; the early years of the sixteenth century witnessed the abrogation of the central authority which was a basic condition of the success of the mediæval system; and the same period also witnessed 'radical economic changes, reacting more and more on the scholastic doctrines, which found fewer and fewer defenders in their original form.'[1] [Footnote 1: Cossa, _op. cit._, p. 151. Ashley warns us that 'we must be careful not to interpret the writers of the fifteenth century by the writers of the seventeenth' (_Economic History_, vol. i. pt. ii. p. 387). These later writers sometimes contain historical accounts of controversies in previous centuries, and are relevant on this account.] § 2. _Economic_. It must be clearly understood that the political economy of the mediævals was not a science, like modern political economy, but an art. 'It is a branch of the virtue of prudence; it is half-way between morality, which regulates the conduct of the individual, and politics, which regulates the conduct of the sovereign. It is the morality of the family or of the head of the family, from the point of view of the good administration of the patrimony, just as politics is the morality of the sovereign, from the point of view of the good government of the State. There is as yet no question of economic laws in the sense of historical and descriptive laws; and political economy, not yet existing in the form of a science, is not more than a branch of that great tree which is called ethics, or the art of living well.'[1] 'The doctrine of the canon law,' says Sir William Ashley, 'differed from modern economics in being an art rather than a science. It was a body of rules and prescriptions as to conduct, rather than of conclusions as to fact. All art indeed in this sense rests on science; but the science on which the canonist doctrine rested was theology. Theology, or rather that branch of it which we may call Christian ethics, laid down certain principles of right and wrong in the economic sphere; and it was the work of the canonists to apply them to specific transactions and to pronounce judgment as to their permissibility.'[2] The conception of economic laws, in the modern sense, was quite foreign to the mediæval treatment of the subject. It was only in the middle of the fourteenth century that anything approaching a scientific examination of the phenomena of economic life appeared, and that was only in relation to a particular subject, namely, the doctrine of money.[3] [Footnote 1: Rambaud, _Histoire des Doctrines Économiques_, p. 39. 'It is evident that a household is a mean between the individual and the city or Kingdom, since just as the individual is part of the household, so is the household part of the city or Kingdom, and therefore, just as prudence commonly so called which governs the individual is distinct from political prudence, so must domestic prudence (oeconomica) be distinct from both. Riches are related to domestic prudence, not as its last end, but as its instrument. On the other hand, the end of political prudence is a good life in general as regards the conduct of the household. In _Ethics_ i. the philosopher speaks of riches as the end of political prudence, by way of example, and in accordance with the opinion of many.' Aquinas, _Summa II_. ii. 50. 3, and see _Sent. III_. xxxiii. 3 and 4. 'Practica quidem scientia est, quae recte vivendi modum ac disciplinae formam secundum virtutum institutionem disponit. Et haec dividitur in tres, scilicet: primo ethicam, id est moralem; et secundo oeconomicam, id est dispensativam; et tertio politicam, id est civilem' (Vincent de Beauvais, _Speculum_, VII. i. 2).] [Footnote 2: _Op. cit._, vol. i. part. ii. p. 379.] [Footnote 3: Rambaud, _op. cit._, p. 83; Ingram, _op. cit._, p. 36. So marked was the contrast between the mediæval and modern conceptions of economics that the appearance of this one treatise has been said by one high authority to have been the signal of the dawn of the Renaissance (Espinas, _Histoire des Doctrines Économiques_, p. 110).] To say that the mediæval method of approaching economic problems was fundamentally different from the modern, is not in any sense to be taken as indicating disapproval of the former. On the contrary, it is the general opinion to-day that the so-called classical treatment of economics has proved disastrous in its application to real life, and that future generations will witness a retreat to the earlier position. The classical economists committed the cardinal error of subordinating man to wealth, and consumption to production. In their attempt to preserve symmetry and order in their generalisations they constructed a weird creature, the economic man, who never existed, and never could exist. The mediævals made no such mistake. They insisted that all production and gain which did not lead to the good of man was not alone wasteful, but positively evil; and that man was infinitely more important than wealth. When he exclaims that 'Production is on account of man, not man of production,' Antoninus of Florence sums up in a few words the whole view-point of his age.[1] 'Consumption,' according to Dr. Cunningham, 'was the aspect of human nature which attracted most attention.... Regulating consumption wisely was the chief practical problem in mediæval economics.'[2] The great practical benefits of such a treatment of the problems relating to the acquisition and enjoyment of material wealth must be obvious to every one who is familiar with the condition of the world after a century of classical political economy. 'To subordinate the economic order to the social order, to submit the industrial activity of man to the consideration of the final and general end of his whole being, is a principle which must exert on every department of the science of wealth, an influence easy to understand. Economic laws are the codification of the material activity of a sort of _homo economicus_; of a being, who, having no end in view but wealth, produces all he can, distributes his produce in the way that suits him best, and consumes as much as he can. Self interest alone dictates his conduct.'[3] Economics, far from being a science whose highest aim was to evolve a series of abstractions, was a practical guide to the conduct of everyday affairs.[4] 'The pre-eminence of morality in the domain of economics constitutes at the same time the distinctive feature, the particular merit, and the great teaching of the economic lessons of this period.'[5] [Footnote 1: _Irish Theological Quarterly_, vol. vii. p. 151.] [Footnote 2: _Christianity and Economic Science_, p. 10.] [Footnote 3: Brants, _Les Théories économiques aux xiii^{e} et xii^{e} siècles, p_. 34.] [Footnote 4: Gide and Rist, _History of Economic Doctrines_, Eng. trans., p. 110.] [Footnote 5: Brants, _op. cit._, p. 9.] Dr. Cunningham draws attention to the fact that the existence of such a universally received code of economic morality was largely due to the comparative simplicity of the mediæval social structure, where the _relations of persons_ were all important, in comparison with the modern order, where the _exchange of things_ is the dominant factor. He further draws attention to the changes which affected the whole constitution of society in the sixteenth and seventeenth centuries, and proceeds: 'These changes had a very important bearing on all questions of commercial morality; so long as economic dealings were based on a system of personal relationships they all bore an implied moral character. To supply a bad article was morally wrong, to demand excessive payment for goods or for labour was extortion, and the right or wrong of every transaction was easily understood.'[1] The application of ethics to economic transactions was rendered possible by the existence of one universally recognised code of morality, and the presence of one universally accepted moral teacher. 'In the thirteenth century, the ecclesiastical organisation gave a unity to the social structure throughout the whole of Western Europe; over the area in which the Pope was recognised as the spiritual and the Emperor as the temporal vicar of God, political and racial differences were relatively unimportant. For economic purposes it is scarcely necessary to distinguish different countries from one another in the thirteenth century, for there were fewer barriers to social intercourse within the limits of Christendom than there are to-day.... Similar ecclesiastical canons, and similar laws prevailed over large areas, where very different admixtures of civil and barbaric laws were in vogue. Christendom, though broken into so many fragments politically, was one organised society for all the purposes of economic life, because there was such free intercommunication between its parts.'[2] 'There were three great threads,' we read later in the same book, 'which ran through the whole social system of Christendom. First of all there was a common religious life, with the powerful weapons of spiritual censure and excommunication which it placed in the hands of the clergy, so that they were able to enforce the line of policy which Rome approved. Then there was the great judicial system of canon law, a common code with similar tribunals for the whole of Western Christendom, dealing not merely with strictly ecclesiastical affairs, but with many matters that we should regard as economic, such as questions of commercial morality, and also with social welfare as affected by the law of marriage and the disposition of property by will....'[3] 'To the influence of Christianity as a moral doctrine,' says Dr. Ingram, 'was added that of the Church as an organisation, charged with the application of the doctrine to men's daily transactions. Besides the teaching of the sacred books there was a mass of ecclesiastical legislation providing specific prescriptions for the conduct of the faithful. And this legislation dealt with the economic as well as with other provinces of social activity.'[4] [Footnote 1: _Growth of English Industry and Commerce_, vol. i. p. 465.] [Footnote 2: Cunningham, _Western Civilisation_, vol. ii. pp. 2-3.] [Footnote 3: _Ibid._, p. 67.] [Footnote 4: _Op. cit._, p. 27.] The teaching of the mediæval Church, therefore, on economic affairs was but the application to particular facts and cases of its general moral teaching. The suggestion, so often put forward by so-called Christian socialists, that Christianity was the exponent of a special social theory of its own, is unfounded. The direct opposite would be nearer the truth. Far from concerning itself with the outward forms of the political or economic structure, Christianity concentrated its attention on the conduct of the individual. If Christianity can be said to have possessed any distinctive social theory, it was intense individualism. 'Christianity brought, from the point of view of morals, an altogether new force by the distinctly individual and personal character of its precepts. Duty, vice or virtue, eternal punishment--all are marked with the most individualist imprint that can be imagined. No social or political theory appeared, because it was through the individual that society was to be regenerated.... We can say with truth that there is not any Christian political economy--in the sense in which there is a Christian morality or a Christian dogma--any more than there is a Christian physic or a Christian medicine.'[1] In seeking to learn Christian teaching of the Middle Ages on economic matters, we must therefore not look for special economic treatises in the modern sense, but seek our principles in the works dealing with general morality, in the Canon Law, and in the commentaries on the Civil Law. 'We find the first worked out economic theory for the whole Catholic world in the _Corpus Juris Canonici_, that product of mediæval science in which for so many centuries theology, jurisprudence, philosophy, and politics were treated....'[2] [Footnote 1: Rambaud, _op. cit._, pp. 34-5; Cunningham, _Western Civilisation_, vol. ii. p. 8.] [Footnote 2: Roscher, _op. cit._, p. 5. It must not be concluded that all the opinions expressed by the theologians and lawyers were necessarily the official teaching of the Church. Brants says: 'It is not our intention to attribute to the Church all the opinions of this period; certainly the spirit of the Church dominated the great majority of the writers, but one must not conclude from this that all their writings are entitled to rank as doctrinal teaching' (_Op. cit._, p. 6).] There is not to be found in the writers of the early Middle Ages, that is to say from the eighth to the thirteenth centuries, a trace of any attention given to what we at the present day would designate economic questions. Usury was condemned by the decrees of several councils, but the reasons of this prohibition were not given, nor was the question made the subject of any dialectical controversy; commerce was so undeveloped as to escape the attention of those who sought to guide the people in their daily life; and money was accepted as the inevitable instrument of exchange, without any discussion of its origin or the laws which regulated it. The writings of this period therefore betray no sign of any interest in economic affairs. Jourdain says that he carefully examined the works of Alcuin, Rabanas Mauras, Scotus Erigenus, Hincmar, Gerbert, St. Anselm, and Abelard--the greatest lights of theology and philosophy in the early Middle Ages--without finding a single passage to suggest that any of these authors suspected that the pursuit of riches, which they despised, occupied a sufficiently large place in national as well as in individual life, to offer to the philosopher a subject fruitful in reflections and results. The only work which might be adduced as a partial exception to this rule is the _Polycraticus_ of John of Salisbury; but even this treatise contained only some scattered moral reflections on luxury and on zeal for the interest of the public treasury.[1] [Footnote 1: Jourdain, _op. cit._, p. 4.] Two causes contributed to produce this almost total lack of interest in economic subjects. One was the miserable condition of society, still only partially rescued from the ravages of the barbarians, and half organised, almost without industry and commerce; the other was the absence of all economic tradition. The existence of the _Categories_ and _Hermenia_ of Aristotle ensured that the chain of logical study was not broken; the works of Donatus and Priscian sustained some glimmer of interest in grammatical theory; certain rude notions of physics and astronomy were kept alive by the preservation of such ancient elementary treatises as those of Marcian Capella; but economics had no share in the heritage of the past. Not only had the writings of the ancients, who dealt to some extent with the theory of wealth, been destroyed, but the very traces of their teaching had been long forgotten. A good example of the state of thought in economic matters is furnished by the treatment which money receives in the _Etymologies_ of Isidore of Seville, which was regarded in the early Middle Ages as a reliable encyclopædia. 'Money,' according to Isidore, 'is so called because it warns, _monet_, lest any fraud should enter into its composition or its weight. The piece of money is the coin of gold, silver, or bronze, which is called _nomisma_, because it bears the imprint of the name and likeness of the prince.... The pieces of money _nummi_ have been so called from the King of Rome, Numa, who was the first among the Latins to mark them with the imprint of his image and name.'[1] Is it any wonder that the early Middle Ages were barren of economic doctrines, when this was the best instruction to which they had access? [Footnote 1: _Etymol_. xvi. 17.] In the course of the thirteenth century a great change occurred. The advance of civilisation, the increased organisation of feudalism, the development of industry, and the extension of commerce, largely under the influence of the Crusades, all created a condition of affairs in which economic questions could no longer be overlooked or neglected. At the same time the renewed study of the writings of Aristotle served to throw a flood of new light on the nature of wealth. The _Ethics_ and _Politics_ of Aristotle, although they are not principally devoted to a treatment of the theory of wealth, do in fact deal with that subject incidentally. Two points in particular are touched on, the utility of money and the injustice of usury. The passages of the philosopher dealing with these subjects are of particular interest, as they may be said, with a good deal of truth, to be the true starting point of mediæval economics.[1] The writings of Aristotle arrested the attention, and aroused the admiration of the theologians of the thirteenth century; and it would be quite impossible to exaggerate the influence which they exercised on the later development of mediæval thought. Albertus Magnus digested, interpreted, and systematised the whole of the works of the Stagyrite; and was so steeped in the lessons of his philosophic master as to be dubbed by some 'the ape of Aristotle.' Aquinas, who was a pupil of Albertus, also studied and commented on Aristotle, whose aid he was always ready to invoke in the solution of all his difficulties. With the single and strange exception of Vincent de Beauvais, Aristotle's teaching on money was accepted by all the writers of the thirteenth century, and was followed by later generations.[2] The influence of Aristotle is apparent in every article of the _Summa_, which was itself the starting point from which all discussion sprang for the following two centuries; and it is not too much to say that the Stagyrite had a decisive influence on the introduction of economic notions into the controversies of the Schools. 'We find in the writings of St. Thomas Aquinas,' says Ingram, 'the economic doctrines of Aristotle reproduced with a partial infusion of Christian elements.'[3] [Footnote 1: Jourdain, _op. cit._, p. 7.] [Footnote 2: _Ibid._, p. 12.] [Footnote 3: _Op. cit._, p. 27. Espinas thinks that the influence of Aristotle in this respect has been exaggerated. (_Histoire des Doctrines Économiques_, p. 80.)] In support of the account we have given of the development of economic thought in the thirteenth century, we may quote Cossa: 'The revival of economic studies in the Middle Ages only dates from the thirteenth century. It was due in a great measure to a study of the _Ethics_ and _Politics_ of Aristotle, whose theories on wealth were paraphrased by a considerable number of commentators. Before that period we can only find moral and religious dissertations on such topics as the proper use of material goods, the dangers of luxury, and undue desire for wealth. This is easily explained when we take into consideration (1) the prevalent influence of religious ideas at the time, (2) the strong reaction against the materialism of pagan antiquity, (3) the predominance of natural economy, (4) the small importance of international trade, and (5) the decay of the profane sciences, and the metaphysical tendencies of the more solid thinkers of the Middle Ages.'[1] [Footnote 1: _Op. cit._, p. 14; Espinas, _op. cit._, p. 80.] The teaching of Aquinas upon economic affairs remained the groundwork of all the later writers until the end of the fifteenth century. His opinions on various points were amplified and explained by later authors in more detail than he himself employed; monographs of considerable length were devoted to the treatment of questions which he dismissed in a single article; but the development which took place was essentially one of amplification rather than opposition. The monographists of the later fifteenth century treat usury and sale in considerable detail; many refinements are indicated which are not to be found in the _Summa_; but it is quite safe to say that none of these later writers ever pretended to supersede the teaching of Aquinas, who was always admitted to be the ultimate authority. 'During the fourteenth and fifteenth centuries, the general political doctrine of Aquinas was maintained with merely subordinate modifications.'[1] 'The canonist doctrine of the fifteenth century,' according to Sir William Ashley, 'was but a development of the principles to which the Church had already given its sanction in earlier centuries. It was the outcome of these same principles working in a modified environment. But it may more fairly be said to present a _system_ of economic thought, because it was no longer a collection of unrelated opinions, but a connected whole. The tendency towards a separate department of study is shown by the ever-increasing space devoted to the discussion of general economic topics in general theological treatises, and more notably still in the manuals of casuistry for the use of the confessional, and handbooks of canon law for the use of ecclesiastical lawyers. It was shown even more distinctly by the appearance of a shoal of special treatises on such subjects as contracts, exchange, and money, not to mention those on usury.'[2] In all this development, however, the principles enunciated by Aquinas, and through him, by Aristotle, though they may have been illustrated and applied to new instances, were never rejected. The study of the writers of this period is therefore the study of an organic whole, the germ of which is to be found in the writings of Aquinas.[3] [Footnote 1: Ingram, _op. cit._, p. 35.] [Footnote 2: _Op. cit._, vol. i. pt. ii. p. 382.] [Footnote 3: The volume of literature which bears more or less on economic matters dating from the fourteenth and fifteenth centuries is colossal. By far the best account of it is to be found in Endemann's _Studien in der Romanisch-canonistischen Wirthschafts- und Rechtslehre_, vol. i. pp. 25 _et seq_. Many of the more important works written during the period are reprinted in the _Tractatus Universi Juris_, vols. vi. and vii. The appendix to the first chapter of Reseller's _Geschichte_ also contains a valuable account of certain typical writers, especially of Langenstein and Henricus de Hoyta. Brants gives a useful bibliographical list of both mediæval and modern authorities in the second chapter of his _Théories économiques aux xiii^{e} et xiv^{e} siècles_. Those who desire further information about any particular writer of the period will find it in Stintzing, _Literaturgeschichte des röm. Rechts_, or in Chevallier's _Répertoire historique des Sources du moyen âge; Bio-bibliographie_. The authorship of the treatise _De Regimine Principum_, from which we shall frequently quote, often attributed to Aquinas, is very doubtful. The most probable opinion is that the first book and the first three chapters of the second are by Aquinas, and the remainder by another writer. (See Franck, _Réformateurs et Publicistes_, vol. i. p. 83.)] § 3. _Teaching_. We shall confine our attention in this essay to the economic teaching of the Middle Ages, and shall not deal with the actual practice of the period. It may be objected that a study of the former without a study of the latter is futile and useless; that the economic teaching of a period can only be satisfactorily learnt from a study of its actual economic institutions and customs; and that the scholastic teaching was nothing but a casuistical attempt to reconcile the early Christian dogmas with the ever-widening exigencies of real life. Endemann, for instance, devotes a great part of his invaluable books on the subject to demonstrating how impracticable the canonist teaching was when it was applied to real life, and recounting the casuistical devices that were resorted to in order to reconcile the teaching of the Church with the accepted mercantile customs of the time. Endemann, however, in spite of his colossal research and unrivalled acquaintance with original authorities, was essentially hostile to the system which he undertook to explain, and thus lacked the most essential quality of a satisfactory expositor, namely, sympathy with his subject. He does not appear to have realised that development and adaptability to new situations, far from being marks of impracticability, are rather the signs of vitality and of elasticity. This is not the place to discuss how far the doctrine of the late fifteenth differed from that of the early thirteenth century; that is a matter which will appear below when each of the leading principles of scholastic economic teaching is separately considered; it is sufficient to say here that we agree entirely with Brants, in opposition to Endemann, that the change which took place in the interval was one of development, and not of opposition. 'The law,' says Brants, 'remained identical and unchanged; justice and charity--nobody can justly enrich himself at the expense of his neighbour or of the State, but the reasons justifying gain are multiplied according as riches are developed.'[1] 'The canonist doctrine of the fifteenth century was but a development of the principles to which the Church had already given its sanction in earlier centuries. It was the outcome of these same principles working in a modified environment.'[2] With these conclusions of Brants and Ashley we are in entire agreement. [Footnote 1: Brants, _op. cit._, p. 9.] [Footnote 2: Ashley, _op. cit._, p. 381.] Let us say in passing that the assumption that the mediæval teaching grew out of contemporary practice, rather than that the latter grew out of the former, is one which does not find acceptance among the majority of the students of the subject. The problem whether a correct understanding of mediæval economic life can be best attained by first studying the teaching or the practice is possibly no more soluble than the old riddle of the hen and the egg; but it may at least be argued that there is a good deal to be said on both sides. The supporters of the view that practice moulded theory are by no means unopposed. There is no doubt that in many respects the exigencies of everyday commercial concerns came into conflict with the tenets of canon law and scholastic opinion; but the admission of this fact does not at all prove that the former was the element which modified the latter, rather than the latter the former. In so far as the expansion of commerce and the increasing complexity of intercourse raised questions which seemed to indicate that mercantile convenience conflicted with received teaching, it is probable that the difficulty was not so much caused by a contradiction between the former and the latter, as by the fact that an interpretation of the doctrine as applied to the facts of the new situation was not available before the new situation had actually arisen. This is a phenomenon frequently met with at the present day in legal practice; but no lawyer would dream of asserting that, because there had arisen an unprecedented state of facts, to which the application of the law was a matter of doubt or difficulty, therefore the law itself was obsolete or incomplete. Examples of such a conflict are familiar to any one who has ever studied the case law on any particular subject, either in a country such as England, where the law is unwritten, or in continental countries, where the most exhaustive and complete codes have been framed. Nevertheless, in spite of the occurrence of such difficulties, it would be foolish to contend that the laws in force for the time being have not a greater influence on the practice of mercantile transactions than the convenience of merchants has upon the law. How much more potent must this influence have been when the law did not apply simply to outward observances, but to the inmost recesses of the consciences of believing Christians! The opinion that mediæval teaching exercised a profound effect on mediæval practice is supported by authorities of the weight of Ashley, Ingram, and Cunningham,[1] the last of whom was in some respects unsympathetic to the teaching the influence of which he rates so highly. 'It has indeed,' writes Sir William Ashley, 'not infrequently been hinted that all the elaborate argumentation of canonists and theologians was "a cobweb of the brain," with no vital relation to real life. Certain German writers have, for instance, maintained that, alongside of the canonist doctrine with regard to trade, there existed in mediæval Europe a commercial law, recognised in the secular courts, and altogether opposed to the peculiar doctrines of the canonists. It is true that parts of mercantile jurisprudence, such as the law of partnership, had to a large extent originated in the social conditions of the time, and would have probably made their appearance even if there had been no canon law or theology. But though there were branches of commercial law which were, in the main, independent of the canonist doctrine, there were none that were opposed to it. On the fundamental points of usury and just price, commercial law in the later Middle Ages adopted completely the principles of the canonists. How entirely these principles were recognised in the practice of the courts which had most to do with commercial suits, viz. those of the towns, is sufficiently shown by the frequent enactments as to usury and as to reasonable price which are found in the town ordinances of the Middle Ages; in England as well as in the rest of Western Europe.... Whatever may have been the effect, direct or indirect, of the canonist doctrine on legislation, it is certain that on its other side, as entering into the moral teaching of the Church through the pulpit and the confessional, its influence was general and persistent, even if it were not always completely successful.'[2] 'Every great change of opinion on the destinies of man,' says Ingram, 'and the guiding principles of conduct must react in the sphere of material interests; and the Catholic religion had a profound influence on the economic life of the Middle Ages.... The constant presentations to the general mind and conscience of Christian ideas, the dogmatic bases of which were as yet scarcely assailed by scepticism, must have had a powerful effect in moralising life.'[3] According to Dr. Cunningham: 'The mediæval doctrine of price was not a theory intended to explain the phenomena of society, but it was laid down as the basis of rules which should control the conduct of society and of individuals. At the same time current opinion seems to have been so fully formed in accordance with it that a brief enumeration of the doctrine of a just price will serve to set the practice of the day in clearer light. In regard to other matters, it is difficult to determine how far public opinion was swayed by practical experience, and how far it was really moulded by Christian teaching--this is the case in regard to usury. But there can be little doubt about the doctrine of price--which really underlies a great deal of commercial and gild regulations, and is constantly implied in the early legislation on mercantile affairs.'[4] The same author expresses the same opinion in another work: 'The Christian doctrine of price, and Christian condemnation of gain at the expense of another man, affected all the mediæval organisation of municipal life and regulation of inter-municipal commerce, and introduced marked contrasts to the conditions of business in ancient cities. The Christian appreciation of the duty of work rendered the lot of the mediæval villain a very different thing from that of the slave of the ancient empire. The responsibility of proprietors, like the responsibility of prices, was so far insisted on as to place substantial checks on tyranny of every kind. For these principles were not mere pious opinions, but effective maxims in practical life. Owing to the circumstances in which the vestiges of Roman civilisation were locally maintained, and the foundations of the new society were laid, there was ample opportunity for Christian teaching and example to have a marked influence on its development.'[5] In Dr. Cunningham's book entitled _Politics and Economics_ the same opinion is expressed:[6] 'Religious and industrial life were closely interconnected, and there were countless points at which the principles of divine law must have been brought to bear on the transaction of business, altogether apart from any formal tribunal. Nor must we forget the opportunities which directors had for influencing the conduct of penitents.... Partly through the operation of the royal power, partly through the decisions of ecclesiastical authorities, but more generally through the influence of a Christian public opinion which had been gradually created, the whole industrial organism took its shape, and the acknowledged economic principles were framed.' We have quoted these passages from Dr. Cunningham's works at length because they are of great value in helping us to estimate the rival parts played by theory and practice in mediæval economic teaching; in the first place, because the author was by no means prepossessed in favour of the teaching of the canonists, but rather unsympathetic to it; in the second place, because, although his work was concerned primarily with practice, he found himself obliged to make a study of theory before he could properly understand the practice; and lastly, because they point particularly to the effect of the teaching on just price. When we come to speak of this part of the subject we shall find that Dr. Cunningham failed to appreciate the true significance of the canonist doctrine. If an eminent author, who does not quite appreciate the full import of this doctrine, and who is to some extent contemptuous of its practical value, nevertheless asserts that it exercised an all-powerful influence on the practice of the age in which it was preached, we are surely justified in asserting that the study of theory may be profitably pursued without a preliminary history of the contemporary practice. [Footnote 1: Even Endemann warns his readers against assuming that the canonist teaching had no influence on everyday life. (_Studien_, vol. ii. p. 404.)] [Footnote 2: Ashley, _op. cit._, vol. i. pt. ii. pp. 383-85. Again: 'The later canonist dialectic was the midwife of modern economics' (_ibid._, p. 397).] [Footnote 3: _History of Political Economy_, p. 26.] [Footnote 4: Cunningham, _Growth of English Industry and Commerce_, vol. i. p. 252.] [Footnote 5: Cunningham, _Western Civilisation_, vol. ii. pp. 9-10.] [Footnote 6: P. 25.] But we must not be taken to suggest that there were no conflicts between the teaching and the practice of the Middle Ages. As we have seen, the economic teaching of that period was ethical, and it would be absurd to assert that every man who lived in the Middle Ages lived up to the high standard of ethical conduct which was proposed by the Church.[1] One might as well say that stealing was an unknown crime in England since the passing of the Larceny Act. All we do suggest is that the theory had such an important and incalculable influence upon practice that the study of it is not rendered futile or useless because of occasional or even frequent departures from it in real life. Even Endemann says: 'The teaching of the canon law presents a noble edifice not less splendid in its methods than in its results. It embraces the whole material and spiritual natures of human society with such power and completeness that verily no room is left for any other life than that decreed by its dogmas.'[2] 'The aim of the Church,' says Janssen, 'in view of the tremendous agencies through which it worked, in view of the dominion which it really exercised, cannot have the impression of its greatness effaced by the unfortunate fact that all was not accomplished that had been planned.'[3] The fact that tyranny may have been exercised by some provincial governor in an outlying island of the Roman Empire cannot close our eyes to the benefits to be derived from a study of the code of Justinian; nor can a remembrance of the manner in which English law is administered in Ireland in times of excitement, blind us to the political lessons to be learned from an examination of the British constitution. [Footnote 1: The many devices which were resorted to in order to evade the prohibition of usury are explained in Dr. Cunningham's _Growth of English Industry and Commerce_, vol. i. p. 255. See also Delisle, _L'Administration financière des Templiers_, Académie des Inscriptions et Belles-Lettres, 1889, vol. xxxiii. pt. ii., and Ashley, _Economic History_, vol. i. pt. ii. p. 426. The _Summa Pastoralis_ of Raymond de Pennafort analyses and demolishes many of the commoner devices which were employed to evade the usury laws. On the part played by the Jews, see Brants, _op. cit._, Appendix I.] [Footnote 2: _Die Nationalökonomischen Grundsätze der canonistischen Lehre_, p. 192.] [Footnote 3: _History of the German People_ (Eng. trans.), vol. ii. p. 99.] SECTION 3.--VALUE OF THE STUDY OF THE SUBJECT The question may be asked whether the study of a system of economic teaching, which, even if it ever did receive anything approaching universal assent, has long since ceased to do so, is not a waste of labour. We can answer that question in the negative, for two reasons. In the first place, as we said above, a proper understanding of the earlier periods of the development of a body of knowledge is indispensable for a full appreciation of the later. Even if the canonist system were not worth studying for its own sake, it would be deserving of attention on account of the light it throws on the development of later economic doctrine. 'However the canonist theory may contrast with or resemble modern economics, it is too important a part of the history of human thought to be disregarded,' says Sir William Ashley. 'As we cannot fully understand the work of Adam Smith without giving some attention to the physiocrats, nor the physiocrats without looking at the mercantilists: so the beginnings of mercantile theory are hardly intelligible without a knowledge of the canonist doctrine towards which that theory stands in the relation partly of a continuation, partly of a protest.'[1] [Footnote 1: _Op. cit._, vol. i. pt. ii. p. 381.] But we venture to assert that the study of canonist economics, far from being useful simply as an introduction to later theories, is of great value in furnishing us with assistance in the solution of the economic and social problems of the present day. The last fifty years have witnessed a reaction against the scientific abstractions of the classical economists, and modern thinkers are growing more and more dissatisfied with an economic science which leaves ethics out of account.[1] Professor Sidgwick, in his _Principles_ _of Political Economy_, published in 1883, devotes a separate section to 'The Art of Political Economy,' in which he remarks that 'The principles of Political Economy are still most commonly understood even in England, and in spite of many protests to the contrary, to be practical principles--rules of conduct, public or private.'[2] The many indications in recent literature and practice that the regulation of prices should be controlled by principles of 'fairness' would take too long to recite. It is sufficient to refer to the conclusion of Devas on this point: 'The notion of just price, worked out in detail by the theologians, and in later days rejected as absurd by the classical economists, has been rightly revived by modern economists.'[3] Not alone in the sphere of price, but in that of every other department of economics, the impossibility of treating the subject as an abstract science without regard to ethics is being rapidly abandoned. 'The best usage of the present time,' according to the _Catholic Encyclopædia_, 'is to make political economy an ethical science--that is, to make it include a discussion of what ought to be in the economic world as well as what is.'[4] We read in the 1917 edition of Palgrave's _Dictionary of Political Economy_, that 'The growing importance of distribution as a practical problem has led to an increasing mutual interpenetration of economic and ethical ideas, which in the development of economic doctrine during the last century and a half has taken various forms.' [5] The need for some principle by which just distribution can be attained has been rendered pressing by the terrible effects of a period of unrestricted competition. 'It has been widely maintained that a strictly competitive exchange does not tend to be really fair--some say cannot be really fair--when one of the parties is under pressure of urgent need; and further, that the inequality of opportunity which private property involves cannot be fully justified on the principle of maintaining equal freedom, and leads, in fact, to grave social injustice.'[5] In other words, the present condition of affairs is admitted to be intolerable, and the task before the world is to discover some alternative. The day when economics can be divorced from ethics has passed away; there is a world-wide endeavour to establish in the place of the old, a new society founded on an ethical basis.[7] There are two, and only two, possible ways to the attainment of this ideal--the way of socialism and the way of Christianity. There can be no doubt the socialist movement derives a great part of its popularity from its promise of a new order, based, not on the unregulated pursuit of selfish desires, but on justice. 'To this view of justice or equity,' writes Dr. Sidgwick, 'the socialistic contention that labour can only receive its due reward if land and other instruments of production are taken into public ownership, and education of all kinds gratuitously provided by Government--has powerfully appealed; and many who are not socialists, nor ignorant of economic science, have been led by it to give welcome to the notion that the ideally "fair" price of a productive service is a price at least rendering possible the maintenance of the producers and their families in a condition of health and industrial efficiency.' This is not the place to enter into a discussion as to the merits or practicability of any of the numerous schemes put forward by socialists; it is sufficient to say that socialism is essentially unhistorical, and that in our opinion any practical benefits which it might bestow on society would be more than counterbalanced by the innumerable evils which would be certain to emerge in a system based on unsatisfactory foundations. [Footnote 1: We must guard against the error, which is frequently made, that, because the classical economists assumed self-interest as the sole motive of economic action, they therefore approved of and inculcated it.] [Footnote 2: P. 401, and see Marshall's Preface to Price's _Industrial Peace_, and Ashley, _op. cit._, vol. i. pt. i. p. 137.] [Footnote 3: _Political Economy_, p. 268.] [Footnote 4: Tit., 'Political Economy.'] [Footnote 5: Vol. iii. p. 138.] [Footnote 6: _Ibid._] [Footnote 7: See Laveleye, _Elements of Political Economy_ (Eng. trans.), pp. 7-8. On the general conflict between the ethical and the non-ethical schools of economists see Keynes, _Scope and Method_, pp. 20 _et seq_.] The other road to the establishment of a society based on justice is the way of Christianity, and, if we wish to attempt this path, it becomes vitally important to understand what was the economic teaching of the Church in the period when the Christian ethic was universally recognised. During the whole Middle Ages, as we have said above, the Canon Law was the test of right and wrong in the domain of economic activity; production, consumption, distribution, and exchange were all regulated by the universal system of law; once before economic life was considered within the scope of moral regulation. It cannot be denied that a study of the principles which were accepted during that period may be of great value to a generation which is striving to place its economic life once more upon an ethical foundation. One error in particular we must be on our guard to avoid. We said above that both the socialists and the Christian economists are agreed in their desire to reintroduce justice into economic life. We must not conclude, however, that the aims of these two schools are identical. One very frequently meets with the statement that the teachings of socialism are nothing more or less than the teachings of Christianity. This contention is discussed in the following pages, where the conclusion will be reached that, far from being in agreement, socialism and Christian economics contradict each other on many fundamental points. It is, however, not the aim of the discussion to appraise the relative merits of either system, or to applaud one and disparage the other. All that it is sought to do is to distinguish between them; and to demonstrate that, whatever be the merits or demerits of the two philosophies, they are two, and not one. SECTION 4.--DIVISION OF THE SUBJECT The opinion is general that the distinctive doctrine of the mediæval Church which permeated the whole of its economic thought was the doctrine of usury. The holders of this view may lay claim to very influential supporters among the students of the subject. Ashley says that 'the prohibition of usury was clearly the centre of the canonist doctrine.'[1] Roscher expresses the same opinion in practically the same words;[2] and Endemann sees the whole economic development of the Middle Ages and the Renaissance as the victorious destruction of the usury law by the exigencies of real life.[3] However impressed we may be by the opinions of such eminent authorities, we, nevertheless, cannot help feeling that on this point they are under a misconception. There is no doubt that the doctrine of the canonists which impresses the modern mind most deeply is the usury prohibition, partly because it is not generally realised that the usury doctrine would not have forbidden the receipt of any of the commonest kinds of unearned revenue of the present day, and partly because the discussion of usury occupies such a very large part of the writings of the canonists. It may be quite true to say that the doctrine of usury was that which gave the greatest trouble to the mediæval writers, on account of the nicety of the distinctions with which it abounded, and on account of the ingenuity of avaricious merchants, who continually sought to evade the usury laws by disguising illegal under the guise of legal transactions. In practice, therefore, the usury doctrine was undoubtedly the most prominent part of the canonist teaching, because it was the part which most tempted evasion; but to admit that is not to agree with the proposition that it was the centre of the canonist doctrine. [Footnote: 1 _Op. cit._, vol. i. pt. ii. p. 399.] [Footnote: 2 'Bekanntlich war das Wucherverbot der praktische Mittelpunkt der ganzen kanonischen Wirthschaftspolitik,' _Op. cit._, p. 8.] [Footnote: 3 _Studien_, vol. i. p. 2 and _passim_. At vol. ii. p. 31 it is stated that the teaching on just price is a corollary of the usury teaching. But Aquinas treats of usury in the article _following_ his treatment of just price.] Our view is that the teaching on usury was simply one of the applications of the doctrine that all voluntary exchanges of property must be regulated by the precepts of commutative justice. In one sense it might be said to be a corollary of the doctrine of just price. This is apparently the suggestion of Dr. Cleary in his excellent book on usury: 'It seems to me that the so-called loan of money is really a sale, and that a loan of meal, wine, oil, gunpowder, and similar commodities--that is to say, commodities which are consumed in use--is also a sale. If this is so, as I believe it is, then loans of all these consumptible goods should be regulated by the principles which regulate sale contracts. A just price only may be taken, and the return must be truly equivalent.'[1] This statement of Dr. Cleary's seems well warranted, and finds support in the analogy which was drawn between the legitimacy of interest--in the technical sense--and the legitimacy of a vendor's increasing the price of an article by reason of some special inconvenience which he would suffer by parting with it. Both these titles were justified on the same ground, namely, that they were in the nature of compensations, and arose independently of the main contract of loan or sale as the case might be. 'Le vendeur est en présence de l'acheteur. L'objet a pour lui une valeur particulière: c'est un souvenir, par exemple. A-t-il le droit de majorer le prix de vente? de dépasser le juste prix convenu? ... Avec l'unanimité des docteurs on peut trouver légitime la majoration du prix. L'évaluation commune distingue un double élément dans l'objet: sa valeur ordinaire à laquelle répond le juste prix, et cette valeur extraordinaire qui appartient au vendeur, dont il se prive et qui mérite une compensation: il le fait pour ainsi dire l'objet d'un second contrat qui se superpose au premier. Cela est si vrai que le supplément de prix n'est pas dû au même titre que le juste prix.'[2] The importance of this analogy will appear when we come to treat just price and usury in detail; it is simply referred to here in support of the proposition that, far from being a special doctrine _sui generis_, the usury doctrine of the Church was simply an application to the sale of consumptible things of the universal rules which applied to all sales. In other words, the doctrines of the just price and of usury were founded on the same fundamental precept of justice in exchange. If we indicate what this precept was, we can claim to have indicated what was the true centre of the canonist doctrine. [Footnote 1: _The Church and Usury_, p. 186.] [Footnote 1: Desbuquois, 'La Justice dans l'Echange,' _Semaine Sociale de France_, 1911, p. 174.] The scholastic teaching on the subject of the rules of justice in exchange was founded on the famous fifth book of Aristotle's _Ethics_, and is very clearly set forth by Aquinas. In the article of the _Summa_, where the question is discussed, 'Whether the mean is to be observed in the same way in distributive as in commutative justice?' we find a clear exposition: 'In commutations something is delivered to an individual on account of something of his that has been received, as may be seen chiefly in selling and buying, where the notion of commutation is found primarily. Hence it is necessary to equalise thing with thing, so that the one person should pay back to the other just so much as he has become richer out of that which belonged to the other. The result of this will be equality according to the _arithmetical_ mean, which is gauged according to equal excess in quantity. Thus 5 is the mean between 6 and 4, since it exceeds the latter, and is exceeded by the former by 1. Accordingly, if at the start both persons have 5, and one of them receives 1 out of the other's belongings, the one that is the receiver will have 6, and the other will be left with 4: and so there will be justice if both are brought back to the mean, I being taken from him that has 6 and given to him that has 4, for then both will have 5, which is the mean.'[1] In the following article the matter of each kind of justice is discussed. We are told that: 'Justice is about certain external operations, namely, distribution and commutation. These consist in the use of certain externals, whether things, persons, or even works: of things as when one man takes from or restores to another that which is his: of persons as when a man does an injury to the very person of another...: and of works as when a man justly enacts a work of another or does a work for him.... Commutative justice directs commutations that can take place between two persons. Of these some are involuntary, some voluntary.... Voluntary commutations are when a man voluntarily transfers his chattel to another person. And if he transfer it simply so that the recipient incurs no debt, as in the case of gifts, it is an act not of justice, but of liberality. A voluntary transfer belongs to justice in so far as it includes the notion of debt.' Aquinas then goes on to distinguish between the different kinds of contract, sale, usufruct, loan, letting and hiring, and deposit, and concludes, 'In all these actions the mean is taken in the same way according to the equality of repayment. Hence all these actions belong to the one species of justice, namely, commutative justice.'[2] [Footnote 1: ii. ii. 61, 2.] [Footnote 2: ii. ii. 61, 3. The reasoning of Aristotle is characteristically reinforced by the quotation of Matt. vii. 12; ii. ii. 77,1.] This is not the place to discuss the precise meaning of the equality upon which Aquinas insists, which will be more properly considered when we come to deal with the just price. What is to be noticed at present is that all the transactions which are properly comprised in a discussion of economic theory--sales, loans, etc.--are grouped together as being subject to the same regulative principle. It therefore appears more correct to approach the subject which we are attempting to treat by following that principle into its various applications, than by making one particular application of the principle the starting-point of the discussion. It will be noticed, however, that the principles of commutative justice all treat of the commutations of external goods--in other words, they assume the existence of property of external goods in individuals. Commutations are but a result of private property; in a state of communism there could be no commutation. This is well pointed out by Gerson[1] and by Nider.[2] It consequently is important, before discussing exchange of ownership, to discuss the principle of ownership itself; or, in other words, to study the static before the dynamic state.[3] [Footnote 1: _De Contractibus_, i. 4 'Inventa est autem commutatio civilis post peccatum quoniam status innocentias habuit omnia communia.'] [Footnote 2: _De Contractibus_, v. 1: 'Nunc videndum est breviter unde originaliter proveniat quod rerum dominia sunt distincta, sic quod hoc dicatur meum et illud tuum; quia illud est fundamentum omnis injustitiae in contractando rem alienam, et post omnis injustitia reddendo eam.'] [Footnote 3: See l'Abbé Desbuquois, _op. cit._, p. 168.] We shall therefore deal in the first place with the right of private property, which we shall show to have been fully recognised by the mediæval writers. We shall then point out the duties which this right entailed, and shall establish the position that the scholastic teaching was directed equally against modern socialistic principles and modern unregulated individualism. The next point with which we shall deal is the exchange of property between individuals, which is a necessary corollary of the right of property. We shall show that such exchanges were regulated by well-defined principles of commutative justice, which applied equally in the case of the sale of goods and in the case of the sale of the use of money. The last matter with which we shall deal is the machinery by which exchanges are conducted, namely, money. Many other subjects, such as slavery and the legitimacy of commerce, will be treated as they arise in the course of our treatment of these principal divisions. In its ultimate analysis, the whole subject may be reduced to a classification of the various duties which attached to the right of private property. The owner of property, as we shall see, was bound to observe certain duties in respect of its acquisition and its consumption, and certain other duties in respect of its exchange, whether it consisted of goods or of money. The whole fabric of mediæval economics was based on the foundation of private property; and the elaborate and logical system of regulations to ensure justice in economic life would have had no purpose or no use if the subject matter of that justice were abolished. It must not be understood that the mediæval writers treated economic subjects in this order, or in any order at all. As we have already said, economic matters are simply referred to in connection with ethics, and were not detached and treated as making up a distinct body of teaching. Ashley says: 'The reader will guard himself against supposing that any mediæval writer ever detached these ideas from the body of his teaching, and put them together as a modern text-book writer might do; or that they were ever presented in this particular order, and with the connecting argument definitely stated.'[1] [Footnote 1: _Op. cit._, vol. i. pt. ii. p. 387.] CHAPTER II PROPERTY SECTION 1.--THE RIGHT TO PROCURE AND DISPENSE PROPERTY The teaching of the mediæval Church on the subject of property was perfectly simple and clear. Aquinas devoted a section of the _Summa_ to it, and his opinion was accepted as final by all the later writers of the period, who usually repeat his very words. However, before coming to quote and explain Aquinas, it is necessary to deal with a difficulty that has occurred to several students of Christian economics, namely, that the teaching of the scholastics on the subject of property was in some way opposed to the teaching of the early Church and of Christ Himself. Thus Haney says: 'It is necessary to keep the ideas of Christianity and the Church separate, for few will deny that Christianity as a religion is quite distinct from the various institutions or Churches which profess it....' And he goes on to point out that, whereas Christianity recommended community of property, the Church permitted private property and inequality.[1] Strictly speaking, the reconciliation of the mediæval teaching with that of the primitive Church might be said to be outside the scope of the present essay. In our opinion, however, it is important to insist upon the fundamental harmony of the teaching of the Church in the two periods, in the first place, because it is impossible to understand the later without an understanding of the earlier doctrine from which it developed, and secondly, because of the widespread prevalence, even among Catholics, of the erroneous idea that the scholastic teaching was opposed to the ethical principle laid down by the Founder of Christianity. [Footnote 1: _Op. cit._, p. 73.] Amongst the arguments which are advanced by socialists none is more often met than the alleged socialist teaching and practice of the early Christians. For instance, Cabet's _Voyage en Icarie_ contains the following passage: 'Mais quand on s'enfonce sérieusement et ardemment dans la question de savoir comment la société pourrait être organisée en Démocratie, c'est-à-dire sur les bases de l'Égalité et de la Fraternité, on arrive à reconnaître que cette organisation exige et entraîne nécessairement la communauté de biens. Et nous hâtons d'ajouter que cette communauté était également proclamée par Jésus-Christ, par tous ses apôtres et ses disciples, par tous les pères de l'Église et tous les Chrétiens des premiers siècles.' The fact that St. Thomas Aquinas, the great exponent of Catholic teaching in the Middle Ages, defends in unambiguous language the institution of private property offers no difficulties to the socialist historian of Christianity. He replies simply that St. Thomas wrote in an age when the Church was the Church of the rich as well as of the poor; that it had to modify its doctrines to ease the consciences of its rich members; and that, ever since the conversion of Constantine, the primitive Christian teaching on property had been progressively corrupted by motives of expediency, until the time of the _Summa_, when it had ceased to resemble in any way the teaching of the Apostles.[1] We must therefore first of all demonstrate that there is no such contradiction between the teaching of the Apostles and that of the mediæval Church on the subject of private property, but that, on the contrary, the necessity of private property was at all times recognised and insisted on by the Catholic Church. As it is put in an anonymous article in the _Dublin Review_: 'Among Christian nations we discover at a very early period a strong tendency towards a general and equitable distribution of wealth and property among the whole body politic. Grounded on an ever-increasing historical evidence, we might possibly affirm that the mediæval Church brought her whole weight to bear incessantly upon this one singular and single point.'[2] [Footnote 1: See, _e.g._, Nitti, _Catholic Socialism_, p. 71. 'Thus, then, according to Nitti, the Christian Church has been guilty of the meanest, most selfish, and most corrupt utilitarianism in her attitude towards the question of wealth and property. She was communistic when she had nothing. She blessed poverty in order to fill her own coffers. And when the coffers were full she took rank among the owners of land and houses, she became zealous in the interests of property, and proclaimed that its origin was divine' ('The Fathers of the Church and Socialism,' by Dr. Hogan, _Irish Ecclesiastical Record_, vol. xxv. p. 226).] [Footnote 2: 'Christian Political Economy,' _Dublin Review_, N.S., vol. vi. p. 356] The alleged communism of the first Christians is based on a few verses of the Acts of the Apostles describing the condition of the Church of Jerusalem. 'And they that believed were together and had all things common; And sold their possessions and goods, and parted them to all men, as every man had need.'[1] 'And the multitude of them that believed were of one heart and of one soul: neither said any of them that aught of the things which he possessed was his own; but they had all things common. Neither was there any amongst them that lacked: for as many as were possessors of land or houses sold them, and brought the price of the things that were sold, And laid them down at the apostles' feet: and distribution was made unto every man according as he had need.'[2] [Footnote 1: ii. 44-45.] [Footnote 2: iv. 32, 34, 35.] It is by no means clear whether the state of things here depicted really amounted to communism in the strict sense. Several of the most enlightened students of the Bible have come to the conclusion that the verses quoted simply express in a striking way the great liberality and benevolence which prevailed among the Christian fraternity at Jerusalem. This view was strongly asserted by Mosheim,[1] and is held by Dr. Carlyle. 'A more careful examination of the passages in the Acts,' says the latter,[2] 'show clearly enough that this was no systematic division of property, but that the charitable instinct of the infant Church was so great that those who were in want were completely supported by those who were more prosperous.... Still there was no systematic communism, no theory of the necessity of it.' Colour is lent to this interpretation by the fact that similar words and phrases were used to emphasise the prevalence of charity and benevolence in later communities of Christians, amongst whom, as we know from other sources, the right of private property was fully admitted. Thus Tertullian wrote:[3] 'One in mind and soul, we do not hesitate to share our earthly goods with one another. All things are common among us but our wives.' This passage, if it were taken alone, would be quite as strong and unambiguous as those from the Acts; but fortunately, a few lines higher up, Tertullian had described how the Church was supported, wherein he showed most clearly that private property was still recognised and practised: 'Though we have our treasure-chest, it is not made up of purchase-money, as of a religion that has its price. On the monthly collection day, if he likes, each puts in a small donation; but only if he has pleasure, and only if he be able; all is voluntary.' This point is well put by Bergier:[4] 'Towards the end of the first century St. Barnabas; in the second, St. Justin and St. Lucian; in the third, St. Clement of Alexandria, Tertullian, Origen, St. Cyprian; in the fourth, Arnobius and Lactantius, say that among the Christians all goods are common; there was then certainly no question of a communism of goods taken in the strict sense.' [Footnote 1: _Dissert. ad Hist. Eccles._, vol. ii. p. 1.] [Footnote 2: 'The Political Theory of the Ante-Nicene Fathers,' _Economic Review_, vol. ix.] [Footnote 3: _Apol._ 39.] [Footnote 4: _Dictionnaire de Théologie_, Paris, 1829, tit. 'Communauté.'] It is therefore doubtful if the Church at Jerusalem, as described in the Acts, practised communism at all, as apart from great liberality and benevolence. Assuming, however, that the Acts should be interpreted in their strict literal sense, let us see to what the so-called communism amounted. In the first place, it is plain from Acts iv. 32 that the communism was one of use, not of ownership. It was not until the individual owner had sold his goods and placed the proceeds in the common fund that any question of communism arose. 'Whiles it remained was it not thine own,' said St. Peter, rebuking Ananias, 'and after it was sold was it not in thine own power?'[1] This distinction is particularly important in view of the fact that it is precisely that insisted on by St. Thomas Aquinas. There is no reason to suppose that the community of use practised at Jerusalem was in any way different from that advocated by Aquinas--namely, 'the possession by a man of external things, not as his own, but in common, so that, to wit, he is ready to communicate them to others in their need.' [Footnote 1: Roscher, _Political Economy_ (Eng. trans.), vol. i. p. 246; _Catholic Encyclopædia_, tit. 'Communism.'] In the next place, we must observe that the communism described in the Acts was purely voluntary. This is quite obvious from the relation in the fifth chapter of the incident of Ananias and Sapphira. There is no indication that the abandonment of one's possessory rights was preached by the Apostles. Indeed, it would be difficult to understand why they should have done so, when Christ Himself had remained silent on the subject. Far from advocating communism, the Founder of Christianity had urged the practice of many virtues for which the possession of private property was essential. 'What Christ recommended,' says Sudre,[1] 'was voluntary abnegation or almsgiving. But the giving of goods without any hope of compensation, the spontaneous deprivation of oneself, could not exist except under a system of private property ... they were one of the ways of exercising such rights.' Moreover, as the same author points out, private property was fully recognised under the Jewish dispensation, and Christ would therefore have made use of explicit language if he had intended to alter the old law in this fundamental respect. 'Think not that I am come to destroy the law or the prophets: I am not come to destroy, but to fulfil.'[2] At the time of Christ's preaching, a Jewish sect, the Essenes, were endeavouring to put into practice the ideals of communism, but there is not a word in the Gospels to suggest that He ever held them up as an example to His followers. 'Communism was never preached by Christ, although it was practised under His very eyes by the Essenes. This absolute silence is equivalent to an implicit condemnation.'[3] [Footnote 1: _Histoire du Communisme_, p. 39.] [Footnote 2: Matt. v. 17.] [Footnote 3: Sudre, _op. cit._, p. 44. On the Essenes see 'Historic Phases of Socialism,' by Dr. Hogan, _Irish Ecclesiastical Record_, vol. xxv. p. 334. Even Huet discounts the importance of this instance of communism, _Le Règne social du Christianisme_, p. 38.] Nor was communism preached as part of Christ's doctrine as taught by the Apostles. In Paul's epistles there is no direction to the congregations addressed that they should abandon their private property; on the contrary, the continued existence of such rights is expressly recognised and approved in his appeals for funds for the Church at Jerusalem.[1] Can it be that, as Roscher says,[2] the experiment in communism had produced a chronic state of poverty in the Church at Jerusalem? Certain it is the experiment was never repeated in any of the other apostolic congregations. The communism at Jerusalem, if it ever existed at all, not only failed to spread to other Churches, but failed to continue at Jerusalem itself. It is universally admitted by competent students of the question that the phenomenon was but temporary and transitory.[3] [Footnote 1: _e.g._ Rom. xv. 26, 1 Cor. xvi. 1.] [Footnote 2: _Political Economy_, vol. i. p. 246.] [Footnote 3: Sudre, _op. cit._; Salvador, _Jésus-Christ et sa Doctrine_, vol. ii. p. 221. See More's _Utopia_.] The utterances of the Fathers of the Church on property are scattered and disconnected. Nevertheless, there is sufficient cohesion in them to enable us to form an opinion of their teaching on the subject. It has, as we have said, frequently been asserted that they favoured a system of communism, and disapproved of private ownership. The supporters of this view base their arguments on a number of isolated texts, taken out of their context, and not interpreted with any regard to the circumstances in which they were written. 'The mistake,' as Devas says,[1] 'of representing the early Christian Fathers of the Church as rank socialists is frequently made by those who are friendly to modern socialism; the reason for it is that either they have taken passages of orthodox writers apart from their context, and without due regard to the circumstances in which they were written, and the meaning they would have conveyed to their hearers; or else, by a grosser blunder, the perversions of heretics are set forth as the doctrine of the Church, and a sad case arises of mistaken identity.' A careful study of the patristic texts bearing on the subject leads one to the conclusion that Mr. Devas's view is without doubt the correct one.[2] [Footnote 1: _Dublin Review_, Jan. 1898.] [Footnote 2: Dr. Hogan, in an article entitled 'The Fathers of the Church and Socialism,' in the _Irish Ecclesiastical Record_, vol. xxv. p. 226, has examined all the texts relative to property in the writings of Tertullian, St. Justin Martyn, St. Clement of Rome, St. Clement of Alexandria, St. Basil, St. Ambrose, St. John Chrysostom, St. Augustine, and St. Gregory the Great; and the utterances of St. Basil, St. Ambrose, and St. Jerome are similarly examined in 'The Alleged Socialism of the Church Fathers,' by Dr. John A. Ryan. The patristic texts are also fully examined by Abbé Calippe in 'Le Caractère sociale de la Propriété' in _La Semaine Sociale de France_, 1909, p. 111. The conclusion come to after thorough examinations such as these is always the same. For a good analysis of the patristic texts from the communistic standpoint, see Conrad Noel, _Socialism in Church History_.] The passages from the writings of the Fathers which are cited by socialists who are anxious to support the proposition that socialism formed part of the early Christian teaching may be roughly divided into four groups: first, passages where the abandonment of earthly possessions is held up as a work of more than ordinary devotion--in other words, a counsel of perfection; second, those where the practice of almsgiving is recommended in the rhetorical and persuasive language of the missioner--where the faithful are exhorted to exercise their charity to such a degree that it may be said that the rich and the poor have all things in common; third, passages directed against avarice and the wrongful acquisition or abuse of riches; and fourth, passages where the distinction between the natural and positive law on the matter is explained. The following passage from Cyprian is a good example of an utterance which was clearly meant as a counsel of perfection. Isolated sentences from this passage have frequently been quoted to prove that Cyprian was an advocate of communism; but there can be no doubt from the passage as a whole, that all that he was aiming at was to cultivate in his followers a high detachment from earthly wealth, and that, in so far as complete abandonment of one's property is recommended, it is simply indicated as a work of quite unusual devotion. It is noteworthy that this passage occurs in a treatise on almsgiving, a practice which presupposes a system of individual ownership:[1] 'Let us consider what the congregation of believers did in the time of the Apostles, when at the first beginnings the mind flourished with greater virtues, when the faith of believers burned with a warmth of faith yet new. Thus they sold houses and farms, and gladly and liberally presented to the Apostles the proceeds to be dispersed to the poor; selling and alienating their earthly estate, they transferred their lands thither where they might receive the fruits of an eternal possession, and there prepared houses where they might begin an eternal habitation. Such, then, was the abundance in labours as was the agreement in love, as we read in the Acts--"Neither said any of them that aught of the things which he possessed was his own; but they had all things common." This is truly to become son of God by spiritual birth; this is to imitate by the heavenly law the equity of God the Father. For whatever is of God is common in our use; nor is any one excluded from His benefits and His gifts so as to prevent the whole human race from enjoying equally the divine goodness and liberality. Thus the day equally enlightens, the sun gives radiance, the rain moistens, the wind blows, and the sleep is one to those who sleep, and the splendour of Stars and of the Moon is common. In which examples of equality he who as a possessor in the earth shares his returns and his fruits with the fraternity, while he is common and just in his gratuitous bounties, is an imitator of God the Father.' [Footnote 1: _De Opere et Eleemosynis_, 25.] There is a much-quoted passage of St. John Chrysostom which is capable of the same interpretation. In his commentary on the alleged communistic existence of the Apostles at Jerusalem the Saint emphasises the fact that their communism was voluntary: 'That this was in consequence not merely of the miraculous signs, but of their own purpose, is manifest from the case of Ananias and Sapphira.' He further insists on the fact that the members of this community were animated by unusual fervour: 'From the exceeding ardour of the givers none was in want.' Further down, in the same homily, St. John Chrysostom urges the adoption of a communistic system of housekeeping, but purely on the grounds of domestic economy and saving of labour. There is not a word to suggest that a communistic system was morally preferable to a proprietary one.[1] [Footnote 1: _Hom, on Acts xi_. That voluntary poverty was regarded as a counsel of perfection by Aquinas is abundantly clear from many passages in his works, _e.g. Summa_, I. ii. 108, 4; II. ii. 185, 6; II. ii. 186, 3; _Summa cont. Gent_., iii. 133. On this, as on every other point, the teaching of Aquinas is in line with that of the Fathers.] The second class of patristic texts which are relied on by socialists are, as we have said, those 'where the practice of almsgiving is recommended in the rhetorical and persuasive language of the missioner--where the faithful are exhorted to exercise their charity to such a degree that it may be said that the rich and poor have all things in common.' Such passages are very frequent throughout the writings of the Fathers, but we may give as examples two, which are most frequently relied on by socialists. One of these is from St. Ambrose:[1] 'Mercy is a part of justice; and if you wish to give to the poor, this mercy is justice. "He hath dispersed, he hath given to the poor; his righteousness endureth for ever."[2] It is therefore unjust that one should not be helped by his neighbour; when God hath wished the possession of the earth to be common to all men, and its fruits to minister to all; but avarice established possessory rights. It is therefore just that if you lay claim to anything as your private property, which is really conferred in common to the whole human race, that you should dispense something to the poor, so that you may not deny nourishment to those who have the right to share with you.' The following passage from Gregory the Great[3] is another example of this kind of passage: 'Those who rather desire what is another's, nor bestow that is their own, are to be admonished to consider carefully that the earth out of which they are taken is common to all men, and therefore brings forth nourishment for all in common. Vainly, then, do they suppose themselves innocent who claim to their own private use the common gift of God; those who in not imparting what they have received walk in the midst of the slaughter of their neighbours; since they almost daily slay so many persons as there are dying poor whose subsidies they keep close in their own possession.' [Footnote 1: _Comm. on Ps. cxviii._, viii. 22.] [Footnote 2: Ps. cxii. 9.] [Footnote 3: _Lib. Reg. Past._, iii. 21.] The third class of passages to which reference must be made is composed of the numerous attacks which the Fathers levelled against the abuse or wrongful acquisition of riches. These passages do not indicate that the Fathers favoured a system of communism, but point in precisely the contrary direction. If property were an evil thing in itself, they would not have wasted so much time in emphasising the evil uses to which it was sometimes put. The insistence on the abuses of an institution is an implicit admission that it has its uses. Thus Clement of Alexandria devotes a whole treatise to answering the question 'Who is the rich man who can be saved?' in which it appears quite plainly that it is the possible abuse of wealth, and the possible too great attachment to worldly goods, that are the principal dangers in the way of a rich man's salvation. The suggestion that in order to be saved a man must abandon all his property is strongly controverted. The following passage from St. Gregory Nazianzen[1] breathes the same spirit: 'One of us has oppressed the poor, and wrested from him his portion of land, and wrongly encroached upon his landmarks by fraud or violence, and joined house to house, and field to field, to rob his neighbour of something, and has been eager to have no neighbour, so as to dwell alone on the earth. Another has defiled the land with usury and interest, both gathering where he has not sowed and reaping where he has not strewn, farming not the land but the necessity of the needy.... Another has had no pity on the widow and orphans, and not imparted his bread and meagre nourishment to the needy; ... a man perhaps of much property unexpectedly gained, for this is the most unjust of all, who finds his very barns too narrow for him, fining some and emptying others to build greater ones for future crops.' Similarly Clement of Rome advocates _frugality_ in the enjoyment of wealth;[2] and Salvian has a long passage on the dangers of the abuse of riches.[3] [Footnote 1: _Orat_., xvi. 18.] [Footnote 2: _The Instructor_, iii. 7.] [Footnote 3: _Ad Eccles._, i. 7.] The fourth group of passages is that in which the distinction between the natural and positive law on the matter is explained. It is here that the greatest confusion has been created by socialist writers, who conclude, because they read in the works of some of the Fathers that private property did not exist by natural law, that it was therefore condemned by them as an illegitimate institution. Nothing could be more erroneous. All that the Fathers meant in these passages was that in the state of nature--the idealised Golden Age of the pagans, or the Garden of Eden of the Christians--there was no individual ownership of goods. The very moment, however, that man fell from that ideal state, communism became impossible, simply on account of the change that had taken place in man's own nature. To this extent it is true to say that the Fathers regarded property with disapproval; it was one of the institutions rendered necessary by the fall of man. Of course it would have been preferable that man should not have fallen from his natural innocence, in which case he could have lived a life of communism; but, as he had fallen, and communism had from that moment become impossible, property must be respected as the one institution which could put a curb on his avarice, and preserve a society of fallen men from chaos and general rapine. That this is the correct interpretation of the patristic utterances regarding property and natural law appears from the following passage of _The Divine Institution_ of Lactantius--'the most explicit statement bearing on the Christian idea of property in the first four centuries':[1] '"They preferred to live content with a simple mode of life," as Cicero relates in his poems; and this is peculiar to our religion. "It was not even allowed to mark out or to divide the plain with a boundary: men sought all things in common,"[2] since God had given the earth in common to all, that they might pass their life in common, not that mad and raging avarice might claim all things for itself, and that riches produced for all might not be wanting to any. And this saying of the poet ought so to be taken, not as suggesting the idea that individuals at that time had no private property, but it must be regarded as a poetical figure, that we may understand that men were so liberal, that they did not shut up the fruits of the earth produced for them, nor did they in solitude brood over the things stored up, but admitted the poor to share the fruits of their labour: "Now streams of milk, now streams of nectar flowed."[3] And no wonder, since the storehouses of the good literally lay open to all. Nor did avarice intercept the divine bounty, and thus cause hunger and thirst in common; but all alike had abundance, since they who had possessions gave liberally and bountifully to those who had not. But after Saturnus had been banished from heaven, and had arrived in Latium ... not only did the people who had a superfluity fail to bestow a share upon others, but they even seized the property of others, drawing everything to their private gain; and the things which formerly even individuals laboured to obtain for the common use of all were now conveyed to the powers of a few. For that they might subdue others by slavery, they began to withdraw and collect together the necessaries of life, and to keep them firmly shut up, that they might make the bounties of heaven their own; not on account of kindness (_humanitas_), a feeling which had no existence for them, but that they might sweep together all the instruments of lust and avarice.'[4] [Footnote 1: 'The Biblical and Early Christian Idea of Property,' by Dr. V. Bartlett, in _Property, its Duties and Rights_ (London, 1913).] [Footnote 2: _Georg._, i. 126.] [Footnote 3: Ovid, _Met._, I. iii.] [Footnote 4: Lactantius, _Div. Inst._, v. 5-6.] It appears from the above passage that Lactantius regarded the era in which a system of communism existed as long since vanished, if indeed it ever had existed. The same idea emerges from the writings of St. Augustine, who drew a distinction between divine and human right. 'By what right does every man possess what he possesses?' he asks.[1] 'Is it not by human right? For by divine right "the earth is the Lord's, and the fullness thereof." The poor and the rich God made of one clay; the same earth supports alike the poor and the rich. By human right, however, one says, This estate is mine, this servant is mine, this house is mine. By human right, therefore, is by right of the Emperor. Why so? Because God has distributed to mankind these very human rights through the emperors and kings of the world.' [Footnote 1: _Tract in Joh. Ev._, vi. 25.] The socialist commentators of St. Augustine have strained this, and similar passages, to mean that because property rests on human, and not on divine, right, therefore it should not exist at all. It is, of course true that what human right has created human right can repeal; and it is therefore quite fair to argue that all the citizens of a community might agree to live a life of communism. That is simply an argument to prove that there is nothing immoral in communism, and does not prove in the very slightest degree that there is anything immoral in property. On the contrary, so long as 'the emperors and kings of the world' ordain that private property shall continue, it would be, according to St. Augustine, immoral for any individual to maintain that such ordinances were wrongful. The correct meaning of the patristic distinction between natural and positive law with regard to property is excellently summarised in Dr. Carlyle's essay on _Property in Mediæval Theology_:[1] 'What do the expressions of the Fathers mean? At first sight they might seem to be an assertion of communism, or denunciation of private property as a thing which is sinful or unlawful. But this is not what the Fathers mean. There can be little doubt that we find the sources of these words in such a phrase as that of Cicero--"Sunt autem privata nulla natura"[2]--and in the Stoic tradition which is represented in one of Seneca's letters, when he describes the primitive life in which men lived together in peace and happiness, when there was no system of coercive government and no private property, and says that man passed out of this primitive condition as their first innocence disappeared, as they became avaricious and dissatisfied with the common enjoyment of the good things of the world, and desired to hold them as their private possession.[3] Here we have the quasi-philosophical theory, from which the patristic conception is derived. When men were innocent there was no need for private property, or the other great conventional institutions of society, but as this innocence passed away, they found themselves compelled to organise society and to devise institutions which should regulate the ownership and use of the good things which men had once held in common. The institution of property thus represents the fall of man from his primitive innocence, through greed and avarice, which refused to recognise the common ownership of things, and also the method by which the blind greed of human nature might be controlled and regulated. It is this ambiguous origin of the institution which explains how the Fathers could hold that private property was not natural, that it grew out of men's vicious and sinful desires, and at the same time that it was a legitimate institution.' Janet takes the same view of the patristic utterances on this subject:[4] 'What do the Fathers say? It is that in Jesus Christ there is no mine and thine. Nothing is more true, without doubt; in the divine order, in the order of absolute charity, where men are wholly wrapt up in God, distinction and inequality of goods would be impossible. But the Fathers saw clearly that such a state of things was not realisable here below. What did they do? They established property on human law, positive law, imperial law. Communism is either a Utopia or a barbarism; a Utopia if one imagine it founded on universal devotion; a barbarism if one imposes it by force.'[5] [Footnote 1: _Property, Its Duties and Rights_ (London, 1913).] [Footnote 2: _De Off._, i. 7.] [Footnote 3: Seneca, _Ep._, xiv. 2.] [Footnote 4: _Histoire de la Science politique_, vol. i. p. 330.] [Footnote 5: See also Jarrett, _Mediæval Socialism_.] It must not be concluded that the evidence of the approbation by the Fathers of private property is purely negative or solely derived from the interpretation of possibly ambiguous texts. On the contrary, the lawfulness of property is emphatically asserted on more than one occasion. 'To possess riches,' says Hilary of Poictiers,[1] 'is not wrongful, but rather the manner in which possession is used.... It is a crime to possess wrongfully rather than simply to possess.' 'Who does not understand,' asks St. Augustine,[2] 'that it is not sinful to possess riches, but to love and place hope in them, and to prefer them to truth or justice?' Again, 'Why do you reproach us by saying that men renewed in baptism ought no longer to beget children or to possess fields and houses and money? Paul allows it.'[3] According to Ambrose,[4] 'Riches themselves are not wrongful. Indeed, "redemptio animae* viri divitiae* ejus," because he who gives to the poor saves his soul. There is therefore a place for goodness in these material riches. You are as steersmen in a great sea. He who steers his ship well, quickly crosses the waves, and comes to port; but he who does not know how to control his ship is sunk by his own weight. Wherefore it is written, "Possessio divitum civitas firmissima."' A Council in A.D. 415 condemned the proposition held by Pelagius that 'the rich cannot be saved unless they renounced their goods.'[5] [Footnote 1: _Comm. on Matt. xix._ 9.] [Footnote 2: _Contra Ad._, xx. 2.] [Footnote 3: _De Mor. Eccl. Cath._, i. 35.] [Footnote 4: _Epist._, lxiii. 92.] [Footnote 5: _Revue Archéologique_, 1880, p. 321.] The more one studies the Fathers the more one becomes convinced that property was regarded by them as one of the normal and legitimate institutions of human society. Benigni's conclusion, as the result of his exceptionally thorough researches, is that according to the early Fathers, 'property is lawful and ought scrupulously to be respected. But property is subject to the high duties of human fellowship which sprang from the equality and brotherhood of man. Collectivism is absurd and immoral.'[1] Janet arrived at the same conclusion: 'In spite of the words of the Fathers, in spite of the advice given by Christ to the rich man to sell all his goods and give to the poor, in spite of the communism of the Apostles, can one say that Christianity condemned property? Certainly not. Christianity considered it a counsel of perfection for a man to deprive himself of his goods; it did not abrogate the right of anybody.'[2] The same conclusion is reached by the Abbé Calippe in an excellent article published in _La Semaine Sociale de France_, 1909. 'The right of property and of the property owner are assumed.'[3] 'It is only prejudiced or superficial minds which could make the writers of the fourth century the precursors of modern communists or collectivists.'[4] [Footnote 1: _L'Economia Sociale Christiana avanti Costantino_ (Genoa, 1897).] [Footnote 2: _Histoire de la Science politique_, vol. i. p. 319.] [Footnote 3: P. 114.] [Footnote 4: P. 121.] When we turn to St. Thomas Aquinas, we find that his teaching on the subject of property is not at all out of harmony with that of the earlier Fathers of the Church, but, on the contrary, summarises and consolidates it. 'It remained to elaborate, to constitute a definite theory of the right of property. It sufficed to harmonise, to collaborate, and to relate one to the other these elements furnished by the Christian doctors of the first four or five centuries; and this was precisely the work of the great theologians of the Middle Ages, especially of St. Thomas Aquinas.... In establishing his thesis St. Thomas did not borrow from the Roman jurisconsults through the medium of St. Isidore more than their vocabulary, their formulas, their juridical distinctions; he also borrowed from Aristotle the arguments upon which the philosopher based his right of property. But the ground of his doctrine is undoubtedly of Christian origin. There is, between the Fathers and him, a perfect continuity.'[1] 'Community of goods,' he writes, 'is ascribed to the natural law, not that the natural law dictates that all things should be possessed in common, and that nothing should be possessed as one's own; but because the division of possession is not according to the natural law, but rather arose from human agreement, which belongs to positive law. Hence the ownership of possessions is not contrary to the natural law, but an addition thereto devised by human reason.' This is simply another way of stating St. Augustine's distinction between natural and positive law. If it speaks with more respect of positive law than St. Augustine had done, it is because Aquinas was influenced by the Aristotelian conception of the State being itself a natural institution, owing to man being a social animal.[2] [Footnote 1: Abbé Calippe, _op. cit._, 1909, p. 124.] [Footnote 2: See Carlyle, _Property in Mediæval Theology_. Community of goods is said to be according to natural law in the canon law, but certain titles of acquiring private property are also said to be natural, so that the passage does not help the discussion very much (_Corp, Jur. Can._, Dec. 1. Dist. i. c. 7.)] The explanation which St. Thomas gives of the necessity for property also shows how clearly he agreed with the Fathers' teaching on natural communism: 'Two things are competent to man in respect of external things. One is the power to procure and dispense them, and in this regard it is lawful for a man to possess property. Moreover, this is necessary to human life for three reasons. First, because every man is more careful to procure what is for himself alone than that which is common to many or to all: since each one would shirk the labour, and would leave to another that which concerns the community, as happens when there is a great number of servants. Secondly, because human affairs are conducted in more orderly fashion if each man is charged with taking care of some particular thing himself, whereas there would be confusion if everybody had to look after any one thing indeterminately. Thirdly, because a more peaceful state is ensured to man if each one is contented with his own. Hence it is to be observed that quarrels more frequently occur when there is no division of the things possessed.[1] It is quite clear from this passage that Aquinas regarded property as something essential to the existence of society in the natural condition of human nature--that is to say, the condition that it had acquired at the fall. It is precisely the greed and avarice of fallen man that renders property an indispensable institution. [Footnote 1: II. ii. 66, 2.] There was another sense in which property was said to be according to human law, in distinction to the natural law, namely, in the sense that, whereas the general principle that men should own things might be said to be natural, the particular proprietary rights of each individual were determined by positive law. In other words, the _fundamentum_ of property rights was natural, whereas the _titulus_ of particular property rights was according to positive law. This distinction is stated clearly by Aquinas:[1] 'The natural right or just is that which by its very nature is adjusted to or commensurate with another person. Now this may happen in two ways; first, according as it is considered absolutely; thus the male by its very nature is commensurate with the female to beget offspring by her, and a parent is commensurate with the offspring to nourish it. Secondly, a thing is naturally commensurate with another person, not according as it is considered absolutely, but according to something resultant from it--for instance, the possession of property. For if a particular piece of land be considered absolutely, it contains no reason why it should belong to one man more than to another, but if it be considered in respect of its adaptability to cultivation, and the unmolested use of the land, it has a certain commensuration to be the property of one and not of another man, as the Philosopher shows.' Cajetan's commentary on this article clearly emphasises the distinction between _fundamentum_ and _titulus_: 'In the ownership of goods two things are to be discussed. The first is why one thing should belong to one man and another thing to another. The second is why this particular field should belong to this man, that field to that man. With regard to the former inquiry, it may be said that the ownership of things is according to the law of nations, but with regard to the second, it may be said to result from the positive law, because in former times one thing was appropriated by one man and another thing by another.' It must not be supposed, however, from what we have just said, that there are no natural titles to property. Labour, for instance, is a title flowing from the natural law, as also is occupancy, and in certain circumstances, prescription. All that is meant by the distinction between _fundamentum_ and _titulus_ is that, whereas it can be clearly demonstrated by natural law that the goods of the earth, which are given by God for the benefit of the whole of mankind, cannot be made use of to their full advantage unless they are made the subject of private ownership, particular goods cannot be demonstrated to be the lawful property of this or that person unless some human act has intervened. This human act need not necessarily be an act of agreement; it may equally be an act of some other kind--for instance, a decree of the law-giver, or the exercise of labour upon one's own goods. In the latter case, the additional value of the goods becomes the lawful property of the person who has exerted the labour. Aquinas therefore pronounced unmistakably in favour of the legitimacy of private property, and in doing so was in full agreement with the Fathers of the Church. He was followed without hesitation by all the later theologians, and it is abundantly evident from their writings that the right of private property was the keystone of their whole economic system.[2] [Footnote 1: II. ii. 57, 3.] [Footnote 2: A community of goods, more or less complete, and a denial of the rights of private property was part of the teaching of many sects which were condemned as heretical--for instance, the Albigenses, the Vaudois, the Bégards, the Apostoli, and the Fratricelli. (See Brants, _Op. cit._, Appendix II.)] Communism therefore was no part of the scholastic teaching, but it must not be concluded from this that the mediævals approved of the unregulated individualism which modern opinion allows to the owners of property. The very strength of the right to own property entailed as a consequence the duty of making good use of it; and a clear distinction was drawn between the power 'of procuring and dispensing' property and the power of using it. We have dealt with the former power in the present section, and we shall pass to the consideration of the latter in the next. In a later chapter we shall proceed to discuss the duties which attached to the owners of property in regard to its exchange. SECTION 2.--DUTIES REGARDING THE ACQUISITION AND USE OF PROPERTY We referred at the end of the last section to the very important distinction which Aquinas draws between the power of procuring and dispensing[1] exterior things and the power of using them. 'The second thing that is competent to man with regard to external things is their use. In this respect man ought to possess external things, not as his own, but as common, so that, to wit, he is ready to communicate them to others in their need.'[2] These words wherein St. Thomas lays down the doctrine of community of user of property were considered as authoritative by all later writers on the subject, and were universally quoted with approval by them,[3] and may therefore be taken as expressing the generally held view of the Middle Ages. They require careful explanation in order that their meaning be accurately understood.[4] Cajetan's gloss on this section of the _Summa_ enables us to understand its significance in a broad sense, but fuller information must be derived from a study of other parts of the _Summa_ itself. 'Note,' says Cajetan, 'that the words that community of goods in respect of use arises from the law of nature may be understood in two ways, one positively, the other negatively. And if they are understood in their positive sense they mean that the law of nature dictates that all things are common to all men; if in their negative sense, that the law of nature did not establish private ownership of possessions. And in either sense the proposition is true if correctly understood. In the first place, if they are taken in their positive sense, a man who is in a position of extreme necessity may take whatever he can find to succour himself or another in the same condition, nor is he bound in such a case to restitution, because by natural law he has but made use of his own. And in the negative sense they are equally true, because the law of nature did not institute one thing the property of one person, and another thing of another person.' The principle of community of user flows logically from the very nature of property itself as defined by Aquinas, who taught that the supreme justification of private property was that it was the most advantageous method of securing for the community the benefits of material riches. While the owner of property has therefore an absolute right to the goods he possesses, he must at the same time remember that this right is established primarily on his power to benefit his neighbour by his proper use of it. The best evidence of the correctness of this statement is the fact that the scholastics admitted that, if the owner of property was withholding it from the community, or from any member of the community who had a real need of it, he could be forced to apply it to its proper end. If the community could pay for it, it was bound to do so; but if the necessitous person could not pay for it, he was none the less entitled to take it. The former of these cases was illustrated by the principle of the _dominium eminens_ of the State; and the latter by the principle that the giving of alms to a person in real need was a duty not of charity, but of justice.[5] We shall see in a moment that the most usual application of the principle enunciated by Aquinas was in the case of one person's extreme necessity which required almsgiving from another's superfluity, but, even short of such cases, there were rules of conduct in respect of the user of property on all occasions which were of extreme importance in the economic life of the time. [Footnote 1: Goyau insists on the importance of the words 'procure' and 'dispense.' 'Dont le premier éveille l'idée d'une constante sollicitude, et dont le second évoque l'image d'une générosité sympathetique' (_Autaur du Catholicisme Sociale_, vol. ii. p. 93).] [Footnote 2: II. ii. 66, 2. In another part of the _Summa_ the same distinction is clearly laid down. 'Bona temporalia quae* homini divinitus conferuntur, ejus quidem sunt quantum ad proprietatem; sed quantum ad usum non solum desent esse ejus, sed aliorum qui en eis sustentari possunt en eo quod ei superfluit,' II. ii. 32, 6, ad 2.] [Footnote 3: Janssen, _op. cit._, vol. ii. p. 91.] [Footnote 4: The Abbé Calippe summarises St. Thomas's doctrine as follows: 'Le droit de propriété est un droit réel; mais ce n'est pas un droit illimité, les propriétaires ont des devoirs; ils ont des devoirs parce que Dieu qui a créé la terre ne l'a pas créée pour eux seuls, mais pour tous' (_Semaine Sociale de France_, 1909, p. 123). According to Antoninus of Florence, goods could be evilly acquired, evilly distributed, or evilly consumed (_Irish Theological Quarterly_, vol. vii. p. 146).] [Footnote 5: On the application of this principle by the popes in the thirteenth and fifteenth centuries in the case of their own estates, see Ardant, _Papes et Paysans_, a work which must be read with a certain degree of caution (Nitti, _Catholic Socialism_, p. 290).] These principles for the guidance of the owner of property are not collected under any single heading in the _Summa_, but must be gathered from the various sections dealing with man's duty to his fellow-men and to himself. One leading virtue which was inculcated with great emphasis by Aquinas was that of temperance. 'All pleasurable things which come within the use of man,' we read in the section dealing with this subject, 'are ordered to some necessity of this life as an end. And therefore temperance accepts the necessity of this life as a rule or measure of the things one uses, so that, to wit, they should be used according as the necessity of this life requires.'[1] St. Thomas explains, moreover, that 'necessary' must be taken in the broad sense of suitable to one's condition of life, and not merely necessary to maintain existence.[2] The principles of temperance did not apply in any special way to the user of property more than to the enjoyment of any other good;[3] but they are relevant as laying down the broad test of right and wrong in the user of one's goods. [Footnote 1: II. ii. 141, 5.] [Footnote 2: _Ibid._, ad. 2. As Buridan puts it (_Eth._, iv. 4), 'If any man has more than is necessary for his own requirements, and does not give away anything to the poor, and to his relations and neighbours, he is acting against right reason.'] [Footnote 1: 'Rationalis creaturae* vera perfectio est unamquamque rem tanti habere quanti habenda est, sicut pluris est anima quam esca; fides et aequitas* quam pecunia' (Gerson, _De. Cont._).] More particularly relevant to the subject before us is the teaching of Aquinas on liberality, which is a virtue directly connected with the user of property. Aquinas defines liberality as 'a virtue by which men use well all those exterior things which are given to us for sustenance.'[1] The limitations within which liberality should be practised are stated in the same article: 'As St. Basil and St. Ambrose say, God has given to many a superabundance of riches, in order that they might gain merit by their dispensing them well. Few things, however, suffice for one man; and therefore the liberal man will advantageously expend more on others than on himself. In the spiritual sphere a man must always care for himself before his neighbours; and also in temporal things liberality does not demand that a man should think of others to the exclusion of himself and those dependent on him.'[2] [Footnote 1: II. ii. 117, 1.] [Footnote 2: _Ibid._, ad. 1.] 'It is not necessary for liberality that one should give away so much of one's riches that not enough remains to sustain himself and to enable him to perform works of virtue. This complete giving away without reserve belongs to the state of the perfection of spiritual life, of which we shall treat lower down; but it must be known that to give one's goods liberally is an act of virtue which itself produces happiness.'[1] The author proceeds to discuss whether making use of money might be an act of liberality, and replies that 'as money is by its very nature to be classed among useful goods, because all exterior things are destined for the use of man, therefore the proper act of liberality is the good use of money and other riches.'[2] Moreover, 'it belongs to a virtuous man not simply to use well the goods which form the matter of his actions, but also to prepare the means and the occasions to use them well; thus the brave soldier sharpens his blade and keeps it in the scabbard, as well as exercising it on the enemy; in like manner, the liberal man should prepare and reserve his riches for a suitable use.'[3] It appears from this that to save part of one's annual income to provide against emergencies in the future, either by means of insurance or by investing in productive enterprises, is an act of liberality. [Footnote 1: II. ii. 117, ad. 2.] [Footnote 2: _Ibid._, ad. 3.] [Footnote 3: _Ibid._, ad. 2. 'Potest concludi quod accipere et custodire modificata sunt acta liberalitatis.... Major per hoc probatur quod dantem multotiens et consumentem, nihil autem accipientem et custodientem cito derelinqueret substantia temporalis; et ita perirent omnis ejus actus quia non habent amplius quid dare et consumere.... Hic autem acceptio et custodia sic modificari debet. Primo quidem oportet ut non sit injusta; secundo quod non sit de cupiditate vel avaritia suspecta propter excessum; tertio quod non permittat labi substantiam propter defectum ... Dare quando oportet et custodire quando oportet dare contrariantur; sed dare quando oportet et custodire quando oportet non contrariantur' (Buridan, _Eth._, iv. 2).] The question is then discussed whether liberality is a part of justice. Aquinas concludes 'that liberality is not a species of justice, because justice renders to another what is his, but liberality gives him what is the giver's own. Still, it has a certain agreement with justice in two points; first that it is to another, as justice also is; secondly, that it is about exterior things like justice, though in another way. And therefore liberality is laid down by some to be a part of justice as a virtue annexed to justice as an accessory to a principal.'[1] Again, 'although liberality supposes not any legal debt as justice does, still it supposes a certain moral debt considering what is becoming in the person himself who practises the virtue, not as though he had any obligation to the other party; and therefore there is about it very little of the character of a debt.'[2] [Footnote 1: II. ii. 117, art. 5.] [Footnote 2: _Ibid._, ad. 1.] It is important to draw attention to the fact that _liberalitas_ consists in making a good use of property, and not merely in distributing it to others, as a confusion with the English word 'liberality' might lead us to believe. It is, as we said above, therefore certain that a wise and prudent saving of money for investment would be considered a course of conduct within the meaning of the word _liberalitas_, especially if the enterprise in which the money were invested were one which would benefit the community as a whole. 'Modern industrial conditions demand that a man of wealth should distribute a part of his goods indirectly--that is, by investing them in productive and labour-employing enterprises.'[1] [Footnote 1: Ryan, _The Alleged Socialism of the Church Fathers_, p. 20, and see Goyau, _Le Pape et la Question Sociale_, p. 79.] The nature of the virtue of _liberalitas_ may be more clearly understood by an explanation of the vices which stand opposed to it. The first of these treated by Aquinas is avarice, which he defines as 'superfluus amor habendi divitias.' Avarice might be committed in two ways--by harbouring an undue desire of acquiring wealth, or by an undue reluctance to part with it--'primo autem superabundant in retinendo ... secundo ad avaritiam pertinet superabundare in accipiendo.'[1] These definitions are amplified in another part of the same section. 'For in every action that is directed to the attainment of some end goodness consists in the observance of a certain measure. The means to the end must be commensurate with the end, as medicine with health. But exterior goods have the character of things needful to an end. Hence human goodness in the matter of these goods must consist in the observance of a certain measure, as is done by a man seeking to have exterior riches in so far as they are necessary to his life according to his rank and condition. And therefore sin consists in exceeding this measure and trying to acquire or retain riches beyond the due limit; and this is the proper nature of avarice, which is defined to be an immoderate love of having.'[2] 'Avarice may involve immoderation regarding exterior things in two ways; in one way immediately as to the receiving or keeping of them when one acquires or keeps beyond the due amount; and in this respect it is directly a sin against one's neighbour, because in exterior things one man cannot have superabundance without another being in want, since temporal goods cannot be simultaneously possessed by many. The other way in which avarice may involve immoderation is in interior affection....' These words must not be taken to condemn the acquisition of large fortunes by capitalists, which is very often necessary in order that the natural resources of a country may be properly exploited. One man's possession of great wealth is at the present day frequently the means of opening up new sources of wealth and revenue to the entire community. In other words, superabundance is a relative term. This, like many other passages of St. Thomas, must be given a _contemporanea expositio_. 'There were no capitalists in the thirteenth century, but only hoarders.'[3] [Footnote 1: II. ii. 118, 4.] [Footnote 2: _Ibid._, ad. 1.] [Footnote 3: Rickaby, _Aquinas Ethicus_, vol. ii. p. 234.] It must also be remembered that what would be considered avarice in a man in one station of life would not be considered such in a man in another. So long as one did not attempt to acquire an amount of wealth disproportionate to the needs of one's station of life, one could not be considered avaricious. Thus a common soldier would be avaricious if he strove to obtain a uniform of the quality worn by an officer, and a simple cleric if he attempted to clothe himself in a style only befitting a bishop.[1] [Footnote 1: Aquinas, _In Orat. Dom. Expos_., iv. Ashley gives many quotations from early English literature to show how fully the idea of _status_ was accepted (_Economic History_, vol. i. pt. ii. p. 389). On the warfare waged by the Church on luxury in the Middle Ages, see Baudrillard, _Histoire du Luxe privé et publique_, vol. iii. pp. 630 _et seq._] The avaricious man offended against liberality by caring too much about riches; the prodigal, on the other hand, cared too little about them, and did not attach to them their proper value. 'In affection while the prodigal falls short, not taking due care of them, in exterior behaviour it belongs to the prodigal to exceed in giving, but to fail in keeping or acquiring, while it belongs to the miser to come short in giving, but to superabound in getting and in keeping. Therefore it is clear that prodigality is the opposite of covetousness.'[1] A man, however, might commit both sins at the same time, by being unduly anxious to acquire wealth which he distributed prodigally.[2] Prodigality could always be distinguished from extreme liberality by a consideration of the circumstances of the particular case; a truly liberal man might give away more than a prodigal in case of necessity.[3] Prodigality, though a sin, was a sin of a less grievous kind than avarice.[4] [Footnote 1: II. ii. 119, 1.] [Footnote 2: _Ibid._, ad. 1.] [Footnote 3: _Ibid._, ad. 3.] [Footnote 4: _Ibid._, art. 3. 'Per prodigalitatem intelligimus habitum quo quis præter vel contra dictamen rectae rationis circa pecunias excedit in datione vel consumptione vel custodia; et per illiberalitatem intelligimus habitum quo quis contra dietamen rectae rationis deficit circa pecunias in datione vel consumptione, vel superabundat in acceptione vel custodia ipsarum' (Buridan, _Eth._, iv. 3).] In addition to the duties which were imposed on the owners of property in all circumstances there was a further duty which only arose on special occasions, namely, _magnificentia_, or munificence. This virtue is discussed by Aquinas[1], but we shall quote the passages of Buridan which explain it, not because they depart in any way from the teaching of Aquinas, but because they are clearer and more scientific. 'By munificence, we understand a habit inclining one to the performance of great works, or to the incurring of great expenses, when, where, and in the manner in which they are called for (_fuerit opportunum_), for example, building a church, assembling great armies for a threatened war, and giving splendid marriage feasts.' He explains that 'munificence stands in the same relation to liberality as bravery acquired by its exercise in danger of death in battle does to bravery simply and commonly understood.' Two vices stand opposed to munificentia: (1) _parvificentia_, 'a habit inclining one not to undertake great works, when circumstances call for them, or to undertaking less, or at less expense, than the needs of the situation demand,' and (2) (_[Greek: banousia]_,) 'a habit inclining one to undertaking great works, which are not called for by circumstances, or undertaking them on a greater scale or at a greater expense than is necessary[2].' [Footnote 1: II. ii. 134.] [Footnote 2: _Eth._, iv. 7.] Both in the case of avarice and prodigality the offending state of mind consisted in attaching a wrong value to wealth, and the inculcation of the virtue of liberality must have been attended with good results not alone to the souls of individuals, but to the economic condition of the community. The avaricious man not only imperilled his own soul by attaching too much importance to temporal gain, but he also injured the community by monopolising too large a share of its wealth; the prodigal man, in addition to incurring the occasion of various sins of intemperance, also impoverished the community by wasting in reckless consumption wealth which might have been devoted to productive or charitable purposes. He who neglected the duty of munificence, either by refusing to make a great expenditure when it was called for (_parvificentia_) or by making one when it was unnecessary (_[Greek: banousia]_) was also deemed to have done wrong, because in the one case he valued his money too highly, and in the other not highly enough. In other words, he attached a wrong value to wealth. Nothing could be further from the truth than the suggestion that the schoolmen despised or belittled temporal riches. Quite on the contrary, they esteemed it a sin to conduct oneself in a manner which showed a defective appreciation of their value[1]. Riches may have been the occasion of sin; but so was poverty. 'The occasions of sin are to be avoided,' says Aquinas, 'but poverty is an occasion of evil, because theft, perjury, and flattery are frequently brought about by it. [Footnote 1: 'Non videtur secundum humanam rationem esse boni et perfecti divitias abjicere totaliter, sed eis uti bene et reficiendo superfluas pauperibus subvenire et amicis' (Buridan, _Eth._, iv. 3).] Therefore poverty should not be voluntarily undertaken, but rather avoided.'[1] Buridan says: 'There is no doubt that it is much more difficult to be virtuous in a state of poverty than in one of moderate affluence;'[2] and Antoninus of Florence expresses the opinion that poverty is in itself an evil thing, although out of it good may come.[3] Even the ambition to rise in the world was laudable, because every one may rightfully desire to place himself and his dependants in a participation of the fullest human felicity of which man is capable, and to rid himself of the necessity of corporal labour.[4] Avarice and prodigality alike offended against liberality, because they tended to deprive the community of the maximum benefit which it should derive from the wealth with which it was endowed. Dr. Cunningham may be quoted in support of this view. 'One of the gravest defects of the Roman Empire lay in the fact that its system left little scope for individual aims, and tended to check the energy of capitalists and labourers alike. But Christian teaching opened up an unending prospect before the individual personally, and encouraged him to activity and diligence by an eternal hope. Nor did such concentration of thought on a life beyond the grave necessarily divert attention from secular duties; Christianity did not disparage them, but set them in a new light, and brought out new motives for taking them seriously.... The acceptance of this higher view of the dignity of human life as immortal was followed by a fuller recognition of personal responsibility. Ancient philosophy had seen that man is the master of material things; but Christianity introduced a new sense of duty in regard to the manner of using them.... Christian teachers were forced to protest against any employment of wealth that disregarded the glory of God and the good of man.'[5] It was the opinion of Knies that the peculiarly Christian virtues were of profound economic value. 'Temperance, thrift, and industry--that is to say, the sun and rain of economic activity---were recommended by the Church and inculcated as Christian virtues; idleness as the mother of theft, gambling as the occasion of fraud, were forbidden; and gain for its own sake was classed as a kind of robbery[6].' [Footnote 1: _Summa cont. Gent._, iii. 131.] [Footnote 2: _Eth._, iv. 3.] [Footnote 3: _Summa_, iv. 12, 3.] [Footnote 4: Cajetan, _Comm._ on II. ii. 118, 1.] [Footnote 5: _Western Civilisation_, vol. ii. pp. 8-9.] [Footnote 6: _Politische Oekonomie vom Standpuncte der geschichtlichen Methode_, p. 116, and see Rambaud, _Histoire_, p. 759; Champagny, _La Bible et l'Economie politique_; Thomas Aquinas, _Summa_, II. ii. 50, 3; Sertillanges, _Socialisme et Christianisme_, p. 53. It was nevertheless recognised and insisted on that wealth was not an end in itself, but merely a means to an end (Aquinas, _Summa_, I. ii. 2, 1).] The great rule, then, with regard to the user of property was liberality. Closely allied with the duty of liberality was the duty of almsgiving--'an act of charity through the medium of money.'[1] Almsgiving is not itself a part of liberality except in so far as liberality removes an obstacle to such acts, which may arise from excessive love of riches, the result of which is that one clings to them more than one ought[2]. Aquinas divides alms-deeds into two kinds, spiritual and corporal, the latter alone of which concern us here. 'Corporal need arises either during this life or afterwards. If it occurs during this life, it is either a common need in respect of things needed by all, or is a special need occurring through some accident supervening. In the first case the need is either internal or external. Internal need is twofold: one which is relieved by solid food, viz. hunger, in respect of which we have to _feed the hungry_; while the other is relieved by liquid food, viz. thirst, in respect of which we have to _give drink to the thirsty_. The common need with regard to external help is twofold: one in respect of clothing, and as to this we have to _clothe the naked_; while the other is in respect of a dwelling-place, and as to this we have to _harbour the harbourless_. Again, if the need be special, it is either the result of an internal cause like sickness, and then we have to _visit the sick_, or it results from an external cause, and then we have to _ransom the captive_. After this life we _give burial to the dead_.[3] Aquinas then proceeds to explain in what circumstances the duty of almsgiving arises. 'Almsgiving is a matter of precept. Since, however, precepts are about acts of virtue, it follows that all almsgiving must be a matter of precept in so far as it is necessary to virtue, namely, in so far as it is demanded by right reason. Now right reason demands that we should take into consideration something on the part of the giver, and something on the part of the recipient. On the part of the giver it must be noted that he must give of his surplus according to Luke xi. 4, "That which remaineth give alms." This surplus is to be taken in reference not only to the giver, but also in reference to those of whom he has charge (in which case we have the expression _necessary to the person_, taking the word _person_ as expressive of dignity).... On the part of the recipient it is necessary that he should be in need, else there would be no reason for giving him alms; yet since it is not possible for one individual to relieve the needs of all, we are not bound to relieve all who are in need, but only those who could not be succoured if we did not succour them. For in such cases the words of Ambrose apply, "Feed him that is dying of hunger; if thou hast not fed him thou hast slain him." Accordingly we are bound to give alms of our surplus, as also to give alms to one whose need is extreme; otherwise almsgiving, like any other greater good, is a matter of counsel.'[4] In replying to the objection that it is lawful for every one to keep what is his own, St. Thomas restates with emphasis the principle of community of user: 'The temporal goods which are given us by God are ours as to the ownership, but as to the use of them they belong not to us alone, but also to such others as we are able to succour out of what we have over and above our needs.'[5] Albertus Magnus states this in very strong words: 'For a man to give out of his superfluities is a mere act of justice, because he is rather then steward of them for the poor than the owner;'[6] and at an earlier date St. Peter Damian had affirmed that 'he who gives to the poor returns what he does not himself own, and does not dispose of his own goods.' He insists in the same passage that almsgiving is not an act of mercy, but of strict justice.[7] In the reply to another objection the duty of almsgiving is stated by Aquinas with additional vigour. 'There is a time when we sin mortally if we omit to give alms--on the part of the recipient when we see that his need is evident and urgent, and that he is not likely to be succoured otherwise--on the part of the giver when he has superfluous goods, which he does not need for the time being, so far as he can judge with probability.'[8] [Footnote 1: II. ii. 32, 1.] [Footnote 2: _Ibid._, ad. 4.] [Footnote 3: II. ii. 32, art. 2.] [Footnote 4: II. ii. 32, art. 5.] [Footnote 5: _Ibid._, ad. 2.] [Footnote 6: Jarrett, _Mediæval Socialism_, p. 87.] [Footnote 7: _De Eleemosynis_, cap. 1.] [Footnote 8: II. ii. 32, 5, ad. 3.] The next question which St. Thomas discusses is whether one ought to give alms out of what one needs. He distinguishes between two kinds of 'necessaries.' The first is that without which existence is impossible, out of which kind of necessary things one is not bound to give alms save in exceptional cases, when, by doing so, one would be helping a great personage or supporting the Church or the State, since 'the common good is to be preferred to one's own.' The second kind of necessaries are those things without which a man cannot live in keeping with his social station. St. Thomas recommends the giving of alms out of this part of one's estate, but points out that it is only a matter of counsel, and not of precept, and one must not give alms to such an extent as to impoverish oneself permanently. To this last provision, however, there are three exceptions: one, when a man is entering religion and giving away all his goods; two, when he can easily replace what he gives away; and, three, when he is in presence of great indigence on the part of an individual, or great need on the part of the common weal. In these three cases it is praiseworthy for a man to forgo the requisites of his station in order to provide for a greater need.[1] [Footnote 1: II. ii. 32, 6.] The mediæval teaching on almsgiving is very well summarised by Fr. Jarrett,[1] as follows: '(1) A man is obliged to help another in his extreme need even at the risk of grave inconvenience to himself; (2) a man is obliged to help another who, though not in extreme need, is yet in considerable distress, but not at the risk of grave inconvenience to himself; (3) a man is not obliged to help another when necessity is slight, even though the risk to himself should be quite trifling.' [Footnote 1: _Mediæval Socialism_, p. 90.] The importance of the duty of almsgiving further appears from the section where Aquinas lays down that the person to whom alms should have been given may, if the owner of the goods neglects his duty, repair the omission himself. 'All things are common property in a case of extreme necessity. Hence one who is in dire straits may take another's goods in order to succour himself if he can find no one who is willing to give him something.'[1] The duty of using one's goods for the benefit of one's neighbours was a fit matter for enforcement by the State, provided that the burdens imposed by legislation were equitable. 'Laws are said to be just, both from the end, when, to wit, they are ordained to the common good--and from their author, that is to say, when the law that is made does not exceed the power of the law-giver--and from their form, when, to wit, burdens are laid on the subjects according to an equality of proportion and with a view to the common good. For, since every man is part of the community, each man in all that he is and has belongs to the community: just as a part in all that it is belongs to the whole; wherefore nature inflicts a loss on the part in order to save the whole; so that on this account such laws, which impose proportionate burdens, are just and binding in conscience.'[2] [Footnote 1: _Ibid._, art. 7 ad. 3.] [Footnote 2: I. ii. 96,4.] There can be no doubt that the practice of the scholastic teaching of community of user, in its proper sense, made for social stability. The following passage from Trithemius, written at the end of the fifteenth century, is interesting as showing how consistently the doctrine of St. Thomas was adhered to two hundred years after his death, and also that the failure of the rich to put into practice the moderate communism of St. Thomas was the cause of the rise of the heretical communists, who attacked the very foundations of property itself: 'Let the rich remember that their possessions have not been entrusted to them in order that they may have the sole enjoyment of them, but that they may use and manage them as property belonging to mankind at large. Let them remember that when they give to the needy they only give them what belongs to them. If the duty of right use and management of property, whether worldly or spiritual, is neglected, if the rich think that they are the sole lords and masters of that which they possess, and do not treat the needy as their brethren, there must of necessity arise an inner shattering of the commonwealth. False teachers and deceivers of the people will then gain influence, as has happened in Bohemia, by preaching to the people that earthly property should be equally distributed among all, and that the rich must be forcibly condemned to the division of their wealth. Then follow lamentable conditions and civil wars; no property is spared; no right of ownership is any longer recognised; and the wealthy may then with justice complain of the loss of possessions which have been unrighteously taken from them; but they should also seriously ask themselves the question whether in the days of peace and order they recognised in the administration of these goods the right of their superior lord and owner, namely, the God of all the earth.'[1] [Footnote 1: Quoted in Janssen, _op. cit._, vol. ii. p. 91.] It must not, however, be imagined for a moment that the community of user advocated by the scholastics had anything in common with the communism recommended by modern Socialists. As we have seen above, the scholastic communism did not at all apply to the procuring and dispensing of material things, but only to the mode of using them. It is not even correct to say that the property of an individual was _limited_ by the duty of using it for the common good. As Rambaud puts it: 'Les devoirs de charité, d'équité naturelle, et de simple convenance sociale peuvent affecter, ou mieux encore, commander un certain usage de la richesse; mais ce n'est pas le même chose que limiter la propriété.'[1] The community of user of the scholastics was distinguished from that of modern Socialists not less strongly by the motives which inspired it than by the effect it produced. The former was dictated by high spiritual aims, and the contempt of material goods; the latter is the fruit of over-attachment to material goods, and the envy of their possessors.[2] [Footnote 1: _Op. cit._, p. 43. The same writer shows that there is no authority in Christian teaching for the proposition, advanced by many Christian Socialists, that property is a 'social function' (_ibid._, p. 774). The right of property even carried with it the _jus abutendi_, which, however, did not mean the right to _abuse_, but the right to destroy by consumption (see Antoine, _Cours d'Economie sociale_, p. 526).] [Footnote 2: Roscher, _op. cit._, p. 5: 'Vom neuern Socialismus freilich unterscheidet sich diese Auffassung nicht blosz durch ihre religiöse Grundlage, sondern auch durch ihre, jedem Mammonsdienst entgegengesetze, Verachtung der materiellen Güter.'] The large estates which the Church itself owned have frequently been pointed to as evidence of hypocrisy in its attitude towards the common user of property. This is not the place to inquire into the condition of ecclesiastical estates in the Middle Ages, but it is sufficient to say that they were usually the centres of charity, and that in the opinion of so impartial a writer as Roscher, they rather tended to make the rules of using goods for the common use practicable than the contrary.[1] [Footnote 1: Roscher, _op. cit._, p. 6.] SECTION 3.--PROPERTY IN HUMAN BEINGS Before we pass from the subject of property, we must deal with a particular kind of property right, namely, that of one human being over another. At the present day the idea of one man being owned by another is repugnant to all enlightened public opinion, but this general repugnance is of very recent growth, and did not exist in mediæval Europe. In dealing with the scholastic attitude towards slavery, we shall indicate, as we did with regard to its attitude towards property in general, the fundamental harmony between the teaching of the primitive and the mediæval Church on the subject. No apology is needed for this apparent digression, as a comparison of the teaching of the Church at the two periods of its development helps us to understand precisely what the later doctrine was; and, moreover, the close analogy which, as we shall see, existed between the Church's view of property and slavery, throws much light on the true nature of both institutions. Although in practice Christianity had done a very great deal to mitigate the hardships of the slavery of ancient times, and had in a large degree abolished slavery by its encouragement of emancipation,[1] it did not, in theory, object to the institution itself. There is no necessity to labour a point so universally admitted by all students of the Gospels as that Christ and His Apostles did not set out to abolish the slavery which they found everywhere around them, but rather aimed, by preaching charity to the master and patience to the slave, at the same time to lighten the burden of servitude, and to render its acceptance a merit rather than a disgrace. 'What, in fact,' says Janet, 'is the teaching of St. Peter, St. Paul, and the Apostles in general? It is, in the first place, that in Christ there are no slaves, and that all men are free and equal; and, in the second place, that the slave must obey his master, and the master must be gentle to his slave.[2] Thus, although there are no slaves in Christ, St. Paul and the Apostles do not deny that there may be on earth. I am far from reproaching the Apostles for not having proclaimed the immediate necessity of the emancipation of slaves. But I say that the question was discussed in precisely the same terms by the ancient philosophers of the same period. Seneca, it is true, proclaimed not the civil, but the moral equality of men; but St. Paul does not speak of anything more than their equality in Christ. Seneca instructs the master to treat the slave as he would like to be treated himself.[3] Is not this what St. Peter and St. Paul say when they recommended the master to be gentle and good? The superiority of Christianity over Stoicism in this question arises altogether from the very superiority of the Christian spirit....'[4] The article on 'Slavery' in the _Catholic Encyclopædia_ expresses the same opinion: 'Christian teachers, following the example of St. Paul, implicitly accept slavery as not in itself incompatible with the Christian law. The Apostle counsels slaves to obey their masters, and to bear with their condition patiently. This estimate of slavery continued to prevail until it became fixed in the systematised ethical teaching of the schools; and so it remained without any conspicuous modification until the end of the eighteenth century.' The same interpretation of early Christian teaching is accepted by the Protestant scholar, Dr. Bartlett: 'The practical attitude of Seneca and the early Christians to slavery was much the same. They bade the individual rise to a sense of spiritual freedom in spite of outward bondage, rather than denounce the institution as an altogether illegitimate form of property.'[5] [Footnote 1: See Roscher, _Political Economy_, s. 73.] [Footnote 2: _Eph._, vi. 5, 6, 9.] [Footnote 3: _Ep. ad Luc._, 73.] [Footnote 4: Janet, _op. cit._, p. 317.] [Footnote 5: 'Biblical and Early Christian Idea of Property,' _Property, Its Duties and Rights_ (London, 1915), p. 110; Franck, _Réformateurs et Publicistes de l'Europe: Moyen âge_--Renaissance, p. 87. On the whole question by far the best authority is volume iii. of Wallon's _Histoire de l'Esclavage dans l'Antiquité_.] Several texts might be collected from the writings of the Fathers which would seem to show that according to patristic teaching the institution of slavery was unjustifiable. We do not propose to cite or to explain these texts one by one, in view of the quite clear and unambiguous exposition of the subject given by St. Thomas Aquinas, whose teaching is the more immediate subject of this essay; we shall content ourselves by reminding the reader of the precisely similar texts relating to the institution of property which we have examined above, and by stating that the corresponding texts on the subject of slavery are capable of an exactly similar interpretation. 'The teaching of the Apostle,' says Janet, 'and of the Fathers on slavery is the same as their teaching on property.'[1] The author from whom we are quoting, and on whose judgment too much reliance cannot be placed, then proceeds to cite many of the patristic texts on property, which we quoted in the section dealing with that subject, and asks: 'What conclusion should one draw from these different passages? It is that in Christ there are no rich and no poor, no mine and no thine; that in Christian perfection all things are common to all men, but that nevertheless property is legitimate and derived from human law. Is it not in the same sense that the Fathers condemned slavery as contrary to divine law, while respecting it as comformable to human law? The Fathers abound in texts contrary to slavery, but have we not seen a great number of texts contrary to property?'[2] The closeness of the analogy between the patristic treatment of slavery and of property appears forcibly in the following passage of Lactantius: 'God who created man willed that all should be equal. He has imposed on all the same condition of living; He has produced all in wisdom; He has promised immortality to all; no one is cut off from His heavenly benefits. In His sight no one is a slave, no one a master; for if we have all the same Father, by an equal right we are all His children; no one is poor in the sight of God but he who is without justice, no one rich but he who is full of virtue.... Some one will say, Are there not among you some poor and others rich; some servants and others masters? Is there not some difference between individuals? There is none, nor is there any other cause why we mutually bestow on each other the name of brethren except that we believe ourselves to be equal. For since we measure all human things not by the body but by the spirit, although the condition of bodies is different, yet we have no servants, but we both regard them, and speak of them as brothers in spirit, in religion as fellow-servants.'[3] Slavery was declared to be a blessing, because, like poverty, it afforded the opportunity of practising the virtues of humility and patience.[4] The treatment of the institution of slavery underwent a striking and important development in the hands of St. Augustine, who justified it as one of the penalties incurred by man as a result of the sin of Adam and Eve. 'The first holy men,' writes the Saint, 'were rather shepherds than kings, God showing herein what both the order of the creation desired, and what the deserts of sin exacted. For justly was the burden of servitude laid upon the back of transgression. And therefore in all the Scriptures we never read the word _servus_ until Noah laid it as a curse upon his offending son. So that it was guilt, and not nature, that gave origin to that name.... Sin is the mother of servitude and the first cause of man's subjection to man.'[5] St. Augustine also justifies the enslavement of those conquered in war--'It is God's decree to humble the conquered, either reforming their sins herein or punishing them.'[6] [Footnote 1: _Op. cit._, p. 318.] [Footnote 2: _Ibid._, p. 321.] [Footnote 3: _Div. Inst_., v. 15-16.] [Footnote 4: Chryst., _Genes._, serm. v. i.; _Ep. ad Cor._, hom. xix. 4.] [Footnote 5: _De Civ. Dei_, xix. 14-15.] [Footnote 6: _Ibid._] Janet ably analyses and expounds the advance which St. Augustine made in the treatment of slavery: 'In this theory we must note the following points: (1) Slavery is unjust according to the law of nature. This is what is contrary to the teaching of Aristotle, but conformable to that of the Stoics. (2) Slavery is just as a consequence of sin. This is the new principle peculiar to St. Augustine. He has found a principle of slavery, which is neither natural inequality, nor war, nor agreement, but sin. Slavery is no more a transitory fact which we accept provisionally, so as not to precipitate a social revolution: it is an institution which has become natural as a result of the corruption of our nature. (3) It must not be said that slavery, resulting from sin, is destroyed by Christ who destroyed sin.... Slavery, according to St. Augustine, must last as long as society.'[1] [Footnote 1: Janet, _op. cit._, p. 302.] Nowhere does St. Thomas Aquinas appear as clearly as the medium of contact and reconciliation between the Fathers of the Church and the ancient philosophers as in his treatment of the question of slavery. His utterances upon this subject are scattered through many portions of his work, but, taken together, they show that he was quite prepared to admit the legitimacy of the institution, not alone on the grounds put forward by St. Augustine, but also on those suggested by Aristotle and the Roman jurists. He fully adopts the Augustinian argument in the _Summa_, where, in answer to the query, whether in the state of innocence all men were equal, he states that even in that state there would still have been inequalities of sex, knowledge, justice, etc. The only inequalities which would not have been present were those arising from sin; but the only inequality arising from sin was slavery.[1] 'By the words "So long as we are without sin we are equal," Gregory means to exclude such inequality as exists between virtue and vice; the result of which is that some are placed in subjection to others as a penalty.'[2] In the following article St. Thomas distinguishes between political and despotic subordination, and shows that the former might have existed in a state of innocence. 'Mastership has a twofold meaning; first as opposed to servitude, in which case a master means one to whom another is subject as a slave. In another sense mastership is commonly referred to any kind of subject; and in that sense even he who has the office of governing and directing free men can be called a master. In the first meaning of mastership man would not have been ruled by man in the state of innocence; but in the latter sense man would be ruled over by man in that state.'[3] In _De Regimine Principum_ Aquinas also accepts what we may call the Augustinian view of slavery. 'But whether the dominion of man over man is according to the law of nature, or is permitted or provided by God may be certainly resolved. If we speak of dominion by means of servile subjection, this was introduced because of sin. But if we speak of dominion in so far as it relates to the function of advising and directing, it may in this sense be said to be natural.'[4] [Footnote 1: i. 96, 3.] [Footnote 2: _Ibid._, ad. 1.] [Footnote 3: i. 96, 4.] [Footnote 4: _De Reg. Prin._, iii. 9. This is one of the chapters the authorship of which is disputed.] St. Thomas was therefore willing to endorse the argument of St. Augustine that slavery was a result of sin; but he also admits the justice of Aristotle's reasoning on the subject. In the section of the _Summa_ where the question is discussed, whether the law of nations is the same as the natural law, one of the objections to be met is that 'Slavery among men is natural, for some are naturally slaves according to the philosopher. Now "slavery belongs to the law of nations," as Isidore states. Therefore the right of nations is a natural right.'[1] In answer to this objection St. Thomas draws the distinction between what is natural absolutely, and what is natural _secundum quid_, the passage which we have quoted in treating of property rights.[2] He then goes on to apply this distinction to the case of slavery. 'Considered absolutely, the fact that this particular man should be a slave rather than another man, is based, not on natural reason, but on some resultant utility, in that it is useful to this man to be ruled by a wise man, and to the latter to be helped by the former, as the philosopher states. Wherefore slavery which belongs to the law of nations is natural in the second way, but not in the first.'[3] It will be noted from this passage that St. Thomas partly admits, though not entirely, the opinion of Aristotle. In the _De Regimine Principum_ he goes much further in the direction of adopting the full Aristotelian theory: 'Nature decrees that there should be grades in men as in other things. We see this in the elements, a superior and an inferior; we see in every mixture that some one element predominates.... For we see this also in the relation of the body and the mind, and in the powers of the mind compared with one another; because some are ordained towards ordering and moving, such as the understanding and the will; others to serving. So should it be among men; and thus it is proved that some are slaves according to nature. Some lack reason through some defect of nature; and such ought to be subjected to servile works because they cannot use their reason, and this is called the natural law.'[4] In the same chapter the right of conquerors to enslave their conquered is referred to without comment, and therefore implicitly approved by the author. [Footnote 1: II. ii. 57, 3.] [Footnote 2: _Supra_, p. 64.] [Footnote 3: II. ii 57, ad. 2.] [Footnote 4: _De Reg. Prin._, ii. 10.] 'Thus,' according to Janet, 'St. Thomas admits slavery as far as one can admit it, and for all the reasons for which one can admit it. He admits with Aristotle that there is a natural slavery; with St. Augustine that slavery is the result of sin; with the jurisconsult that slavery is the result of war and convention.'[1] 'The author justifies slavery,' says Franck, 'in the name of St. Augustine, and in that of Aristotle; in the name of the latter by showing that there are two races of men, one born to command, and the other to obey; in the name of the former in affirming that slavery had its origin in original sin; that by sin man has forfeited his right to liberty. Further, we must admit slavery as an institution not only of nature and one of the consequences of the fall, we must admit a third principle of slavery which appears to St. Thomas as legitimate as the other two. War is necessary; therefore it is just; and if it is just we must accept its consequences. One of these consequences is the absolute right of the conqueror over the life, person, and goods of the conquered.'[2] [Footnote 1: _Op. cit._, vol. i. p. 431.] [Footnote 2: Franck, _op cit_., p. 69.] Aquinas returns to the question of slavery in another passage, which is interesting as showing that he continued to make use of the analogy between slavery and property which we have seen in the Fathers. 'A thing is said to belong to the natural law in two ways. First, because nature inclines thereto, _e.g._ that one should not do harm to another. Secondly, because nature did not bring in the contrary; thus we might say that for man to be naked is of the natural law because nature did not give him clothes, but art invented them. In this sense the possession of all things in common and universal freedom is said to be of the natural law, because, to wit, the distinction of possession and slavery were not brought in by nature, but devised by human reason for the benefit of human life. Accordingly, the law of nature was not changed in this respect, but by addition.'[1] [Footnote 1: I. ii. 94, 5, ad. 3.] Ægidius Romanus closely follows the teaching of his master on the subject of slavery. 'What does Ægidius do? He unites Aristotle and St. Augustine against human liberty. He declares with the latter that man has lost the right of belonging to himself, since he has fallen from the primitive order established by God Himself in nature. He admits with Aristotle the existence of two races of men, the one designed for liberty, the other for servitude.... This is not all--to this servitude which he calls natural, the author joins another, purely legal, but which does not seem to him less just, namely, that which is founded on the right of war, and which obliges the conquered to become the slaves of the conquerors--to give up their liberty in exchange for their lives. Our author admits it is just in itself, because in his opinion it is useful to the defence of one's country; it excites warriors to courage by placing before their eyes the terrible consequences of cowardice.'[1] The teachings of St. Thomas and Ægidius were accepted by all the later scholastics.[2] Biel, whose opinion is always very valuable as being that of the last of a long line, says that there are three kinds of slaves--slaves of God, of sin, and of man. The first kind of slavery is wholly good, the second wholly bad, while the third, though not instituted by, is approved by the _jus gentium_. He proceeds to state the four ways in which a man may become enslaved: namely, _ex necessitate_, or by being born of a slave mother; _ex bello_, by being captured in war; _ex delicto_, or by sentence of the law in the case of certain crimes committed by freedmen; and _ex propria voluntate_, or by the sale of a man of himself into slavery.[3] [Footnote 1: Franck, _op. cit._, p. 90.] [Footnote 2: Franck, _op. cit._, p. 91.] [Footnote 3: Biel, _Inventarium seu Repertorium generale super qualuor libros Sententiarum_, iv. xv. I; and see Carletus, _Summa Angelica_, q. ccxii.] It must not be forgotten that we are dealing purely with theory. In fact the Church did an inestimable amount of good to the servile classes, and, at the time that Aquinas wrote, thanks to the operation of Christianity in this respect, the old Roman slavery had completely disappeared. The nearest approach to ancient slavery in the Middle Ages was serfdom, which was simply a step in the transition from slavery to free labour.[1] Moreover, the rights of the master over the slave were strictly confined to the disposal of his services; the ancient absolute right over his body had completely disappeared. 'In those things,' says St. Thomas, 'which appertain to the disposition of human acts and things, the subject is bound to obey his superior according to the reason of the superiority; thus a soldier must obey his officer in those things which appertain to war; a slave his master in those things which appertain to the carrying out of his servile works.'[2] 'Slavery does not abolish the natural equality of man,' says a writer who is quoted by the _Catholic Encyclopædia_ as correctly stating the Catholic doctrine on the subject prior to the eighteenth century, 'hence by slavery one man is understood to become subject to the dominion of another to the extent that the master has a perfect right to the services which one man may justly perform for another.'[3] Biel, who lays down the justice of slavery so unambiguously, is no less clear in his statement of the limitations of the right. 'The body of the slave is not simply in the power of the master as the body of an ox is; nor can the master kill or mutilate the slave, nor abuse him contrary to the law of God. The temporal gains derived from the labour of the slave belong to the master; but the master is bound to provide the slave with the necessaries of life.'[4] Rambaud very properly points out that the reason that the scholastic writers did not fulminate in as strong and as frequent language against the tyranny of masters, was not that they felt less strongly on the subject, but that the abuses of the ancient slave system had almost entirely disappeared under the influence of Christian teaching.[5] [Footnote 1: Wallon, _op. cit._, vol. iii. p. 93; Brants, _op. cit._, p. 87.] [Footnote 2: II. ii. 104, 5.] [Footnote 3: Gerdil., _Comp. Inst. Civ. I._, vii.] [Footnote 4: Biel, _op. cit._, iv. xv. 5.] [Footnote 5: _Op. cit._, p. 83.] On the other hand, it must not be imagined, as has sometimes been suggested, that the slavery defended by Aquinas was not real slavery, but rather the ordinary modern relation between employer and employed. Such an interpretation is definitely disproved by a passage of the article on justice where Aquinas says that 'inducing a slave to leave his master is properly an injury against the person ... and, since the slave is his master's chattel, it is referred to theft.'[1] [Footnote 1: II. ii. 61,3. Brants, _op. cit._, pp. 87 _et seq_., is inclined to take a more liberal view of the scholastic doctrine on slavery, but we cannot agree with him in view of the contemporary texts.] CHAPTER III DUTIES REGARDING THE EXCHANGE OF PROPERTY SECTION 1.--THE SALE OF GOODS § 1. _The Just Price_. We dealt in the last chapter with the duties which attached to property in respect of its acquisition and use, and we now pass to the duties which attached to it in respect of its exchange. As we indicated above, the right to exchange one's goods for the goods or the money of another person was, according to the scholastics, one of the necessary corollaries of the right of private property. In order that such exchange might be justifiable, it must be conducted on a. basis of commutative justice, which, as we have seen, consisted in the observance of equality according to the arithmetical mean. We further drew attention to the fact that exchanges might be divided into sales of goods and sales of the use of money. In the former case the regulating principle of the equality of justice was given effect to by the observance of the _just price_; in the latter by that of the _prohibition of usury_. We shall deal with the former in the present and with the latter in the following section. The mediæval teaching on the just price, about which there has been so much discussion and disagreement among modern writers, was simply the application to the particular contract of sale of the principles which regulated contracts in general. Exchange originally took the form of barter; but, as it was found impossible accurately to measure the values of the objects exchanged without the intervention of some common measure of value, money was invented to serve as such a measure. We need not further refer to barter in this section, as the principles which applied to it were those that applied to sale. Indeed all sales when analysed are really barter through the medium of money. That Aquinas simply regarded his article on just price[1] as an explanation of the application of his general teaching on justice to the particular case of the contract of sale is quite clear from the article itself. 'Apart from fraud, we may speak of buying and selling in two ways. First, as considered in themselves; and from this point of view buying and selling seem to be established for the common advantage of both parties, one of whom requires that which belongs to the other, and _vice versa_. Now whatever is established for the common advantage should not be more of a burden to one part than to the other, and consequently all contracts between them should observe equality of thing and thing. Again, the quality of a thing that comes into human use is measured by the price given for it, for which purpose money was invented. Therefore, if either the price exceed the quantity of the thing's worth, or conversely the worth of the thing exceed the price, there is no longer the equality of justice; and consequently to sell a thing for more than its worth, or to buy it for less than its worth, is in itself unjust and unlawful.'[2] When two contracting parties make an exchange through the medium of money, the price is the expression of the exchange value in money. 'The just price expresses the equivalence, which is the foundation of contractual justice.'[3] [Footnote 1: II. ii. 77, 1.] [Footnote 2: This opinion was accepted by all the later writers, _e.g._ Gerson, _De Cont._, ii. 5; Biel, _op. cit._, IV. xv. 10: 'Si pretium excedit quantitatem valoris rei, vel e converso tolleretur equalitas, erit contractus iniquus.'] [Footnote 3: Desbuquois, 'La Justice dans l'Echange,' _Semaine Sociale de France_, 1911, p. 167. Gerson says: 'Contractus species est justitiae commutativae quae respicit aequalitatem rei quae venditur ad rem quae emitur, ut servetur aequalitas justi pretii; propter quam aequalitatem facilius observandum inventa est moneta, vel numisma, vel pecunia,' _De Cont._, ii. 5.] The conception of the just price, though based on Aristotelian conceptions of justice, is essentially Christian. The Roman law had allowed the utmost freedom of contract in sales; apart from fraud, the two contracting parties were at complete liberty to fix a price at their own risk; and selfishness was assumed and allowed to be the animating motive of every contracting party. The one limitation to this sweeping rule was in favour of the seller. By a rescript of Diocletian and Maximian it was enacted that, if a thing were sold for less than half its value, the seller could recover the property, unless the buyer chose to make up the price to the full amount. Although this rescript was perfectly general in its terms, some authors contended that it applied only to sales of land, because the example given was the sale of a farm.[1] However, the rescript was quoted by the Fathers as showing that even the Roman law considered that contracts might be questioned on equitable grounds in certain cases.[2] The distinctively Christian notion of just price seems to have its origin in a passage of St. Augustine;[3] but the notion was not placed on a philosophical foundation until the thirteenth century. Even Aquinas, however, although he treats of the just price at some length, and expresses clear and categorical opinions upon many points connected with it, does not state the principles on which the just price itself should be arrived at. This omission is due, not to the fact that Aquinas was unfamiliar with these principles, but to the fact that he took them for granted as they were not disputed or doubted.[4] We have consequently to look for enlightenment upon this point in writings other than those of Aquinas. The subject can be most satisfactorily understood if we divide its treatment into two parts: first, a consideration of what constituted the just price in the sale of an article, the price of which was fixed by law; and second, a consideration of what constituted the just price of an article, the price of which was not so fixed. [Footnote 1: Hunter, _Roman Law_, p. 492.] [Footnote 2: Ashley, _op. cit._, p. 133.] [Footnote 3: 'Scio ipse hominem quum venalis codex ei fuisset oblatus, pretiique ejus ignarum ideo quiddam exiguum poscentem cerneret venditorem, justum pretium, quod multo amplius erat nec opinanti dedisse' (_De Trin._, xiii. 3).] [Footnote 4: Palgrave, _Dictionary of Political Economy_, tit. 'Justum Pretium.'] § 2. _The Just Price when Price fixed by Law_. Regarding the power of the State to fix prices, the theologians and jurists were in complete agreement. According to Gerson: 'The law may justly fix the price of things which are sold, both movable and immovable, in the nature of rents and not in the nature of rents, and feudal and non-feudal, below which price the seller must not give, or above which the buyer must not demand, however they may desire to do so. As therefore the price is a kind of measure of the equality to be observed in contracts, and as it is sometimes difficult to find that measure with exactitude, on account of the varied and corrupt desires of man, it becomes expedient that the medium should be fixed according to the judgment of some wise man.... In the civil state, however, nobody is to be decreed wiser than the lawgiving authority. Therefore it behoves the latter, whenever it is possible to do so, to fix the just price, which may not be exceeded by private consent, and which must be enforced.'...[1] Biel practically paraphrases this passage of Gerson, and contends that it is the duty of the prince to fix prices, mainly on account of the difficulty which private contractors find in doing so.[2] [Footnote 1: _De Cont._, i. 19.] [Footnote 2: _Op. cit._, IV. xv. 11.] The rules which we find laid down for the guidance of the prince in fixing prices are very interesting, as they show that the mediæval writers had a clear idea of the constituent elements of value. Langenstein, whose famous work on contracts was considered of high authority by later writers, says that the prince should take account of the condition of the place for which the price was to be fixed, the circumstances of the time, the condition of the mass of the people. The different kinds of need which may be felt for goods must also be considered, _indigentice naturæ_, _status_, _voluptatis_, and _cupiditatis_; and a distinction drawn between extensive and intensive need--the former is greater 'quanto plures re aliqua indigent,' the latter 'quanto minus de illa re habetur.' The general rule is that the prince must seek to find a medium between a price so low as to render labourers, artisans, and merchants unable to maintain themselves suitably, and one so high as to disable the poor from obtaining the necessaries of life. When in doubt, Langenstein concludes, the price should err on the low rather than the high side.[1] Biel gives similar rules: The legislator must regard the needs of man, the abundance or scarcity of things, the difficulty, labour, and risks of production. When all these things are carefully considered the legislator is in a position to fix a just price.[2] According to Endemann, the labour of production, the cost and risk of transport, and the condition of the markets had all to be kept in mind when a fair price was being fixed.[3] We may mention in passing that the power of fixing the just price might be delegated; prices were frequently fixed by the town authorities, the guilds, and the Church.[4] [Footnote 1: Roscher, _Geschichte_, p. 19.] [Footnote 2: _Op. cit._, IV. xv. 10.] [Footnote 3: _Studien_, vol. ii. p. 43.] [Footnote 4: Endemann, _Studien_, vol. i. p. 40; Roscher, _Political Economy_, s. 114.] The passage from Gerson which we quoted above shows that, when a just price had been fixed by the competent authority, the parties to a contract were bound to keep to it. In other words, the _pretium legitimum_ was _ipso facto_ the _justum pretium_. On this point there is complete agreement among the writers of the period. Caepolla says, 'When the price is fixed by law or statute, that is the just price, and nobody can receive anything, however small, in excess of it, because the law must be observed';[1] and Biel, 'When a price has been fixed, the contracting parties have sufficient certainty about the equality of value and the justice of the price.'[2] Cossa draws attention to the necessity of the fixed price corresponding with the real price in order that it should maintain its validity. 'The schoolmen talk of the legitimate and irreducible price of a thing which was fixed by authority, and was for obvious reasons of special importance in the case of the necessaries of life.... The legitimate price of a thing as fixed by authority had to be based upon the natural price, and therefore lost its validity and became a dead letter the moment any change of circumstances made it unfair.'[3] [Footnote 1: _De Contractibus Simulatis_, 69.] [Footnote 2: _Op. cit._, IV. xv. 10.] [Footnote 3: _Op. cit._, p. 143.] § 3. _The Just Price when Price not fixed by Law_. When the just price was not fixed by any outside authority, the buyer and seller had to arrive at it themselves. The problem before them was to equalise their respective burdens, so that there would be equality of burden between them, or, in other words, to reduce the value of the article sold to terms of money. In order that we may understand how this equality was arrived at, it is important to know the factors which were held to enter into the determination of value. The first thing upon which the mediæval teachers insist is that value is not determined by the intrinsic excellence of the thing itself, because, if it were, a fly would be more valuable than a pearl, as being intrinsically more excellent.[1] Nor is the value to be measured by the mere utility of the object for satisfying the material needs of man, for in that case, corn should be worth more than precious stones.[2] The value of an object is to be measured by its capacity for satisfying men's wants. 'Valor rerum aestimatur secundum humanam indigentiam.... Dicendum est quod indigentia humana est mensura naturalis commutabilium; quod probatur sic: bonitas sive valor rei attenditur ex fine propter quem exhibetur: unde commentator secundo Metaphysicae _nihil est bonum nisi propter causas finales_; sed finis naturalis ad quem justitia commutativa ordinet exteriora commutabilia est supplementum indigentiae humanae...; igitur supplementum indigentiae humanae est vera mensura commutabilium. Sed supplementum videtur mensurari per indigentiam; majoris enim valoris est supplementum quod majorem supplet indigentiam.... Item hoc probatur signo, quia videmus quod illo tempore quo vina deficiunt quia magis indigeremus eis ipsa fiunt cariora....[3] [Footnote 1: 'In justitia commutativa non estimatur pretium commutabilium secundum naturalem valorem ipsorum, sic enim musca plus valeret quam totus aurum mundi' (Buridan, _op. cit._, v. 14).] [Footnote 2: Slater, 'Value in Theology and Political Economy,' _Irish Ecclesiastical Record_, Sept. 1901.] [Footnote 3: Buridan, _op. cit._, v. 14 and 16. Antoninus of Florence says that value is determined by three factors, _virtuositas_, _raritas_, and _placibilitas_ (_Summa_, ii. 1, 16.)] The capacity of an object for satisfying man's needs could not be measured by its capacity for satisfying the needs of this or that individual, but by its capacity for satisfying the needs of the average member of the community.[1] The Abbé Desbuquois, in the article from which we have already quoted, finds in this elevation of the common estimation an illustration of the general principle of the mediævals, which we have seen at work in their teaching on the use of property, that the individual benefit must always be subordinated to the general welfare. According to him, it is but one application of the duty of using one's goods for the common good. 'In the same way, in allowing the right of exchange--a right, let us remark in passing, which is but an application of the right of property--and in allowing it as a means of life necessary to everybody, nature does not lose sight of the universal destination of economic goods. One conceives then that the variations of exchange are not permitted to be left to the arbitrary judgment of a single man, nor to be affected by the whims and abuses of individuals; that value is defined in view of the general good. The exchange value, as it is in the general or social order, proceeds from the judgment of the social environment (_milieu social_).'[2] [Footnote 1: 'Indigentia istius hominis vel illius non mensurat valorem commutabilium; sed indigentia communis eorum qui inter se commutare possunt,' Buridan, _op. cit._, v. 16. 'Prout communiter venditur in foro,' Henri de Gand, _Quod Lib._, xiv. 14; Nider, _De Cont. Merc._, ii. 1.] [Footnote 2: 'La Justice dans l'Echange,' _Semaine Sociale de France_, 1911, p. 168.] The writers of the Middle Ages show a very keen perception of the elements which invest an object with the value which is accorded to it by the general estimation. In Aquinas we find certain elements recognised--'diversitas loci vel temporis, labor, raritas'--but it is not until the authors of the fourteenth and fifteenth centuries that we find a systematic treatment of value.[1] First and foremost there is the cost of production of the article, especially the wages of all those who helped to produce it. Langenstein lays down that every one can determine for himself the just price of the wares he has to sell by reckoning what he needs to support himself in the status which he occupies.[2] According to the _Catholic Encyclopædia_,[3] the just price of an article included enough to pay fair wages to the worker--that is, enough to enable him to maintain the standard of living of his class. This, though not stated in so many words by Aquinas, was probably assumed by him as too obvious to need repetition.[4] 'The cost of production of manufactured products,' says Brants, 'is a legitimate constituent element of value; it is according to the cost that the producer can properly fix the value of his product and of his work.'[5] [Footnote 1: Brants, _op. cit._, p. 69.] [Footnote 2: _De Cont._, quoted by Roscher, _Geschichte_, p. 20.] [Footnote 3: Tit. 'Political Economy.'] [Footnote 4: Palgrave, _Dictionary_, tit. 'Justum Pretium.'] [Footnote 5: Brants, _op. cit._, p. 202.] The cost of the labour of production was, however, by no means the only factor which was admitted to enter into the determination of value. The passage from Gerson dealing with the circumstances to which the prince must have regard in fixing a price, which we quoted above, shows quite clearly that many other factors were recognised as no less important. This appears with special clearness in the treatise of Langenstein, whose authority on this subject was always ranked very high. Bernardine of Siena is careful to point out that the expense of production is only one of the factors which influence the value of an object.[1] Biel explains that, when no price has been fixed by law, the just price may be arrived at by a reference to the cost of the labour of production, and to the state of the market, and the other circumstances which we have seen above the prince was bound to have regard to in fixing a price. He also allows the price to be raised on account of any anxiety which the production of the goods occasioned him, or any danger he incurred.[2] [Footnote 1: 'Res potest plus vel minus valere tribus modis; primo secundum suam virtutem; secondo modo secundum suam caritatem; tertio modo secundum suam placibilitatem et affectionem.... Primo observat quemdam naturalem ordinem utilium rerum, secundo observat quemdam communem cursum copiae et inopiae, tertio observat periculum et industriam rerum seu obsequiorum' (Funk, _Zins und Wucher_, p. 153).] [Footnote 1: 'Sollicitudo et periculum,' _Op. cit._, IV. xv. 10.] It will be apparent from the whole trend of the above that, whereas the remuneration of the labour of all those who were engaged in the production of an article, was one of the elements to be taken into account in reckoning its value, and consequently its just price, it was by no means the only element. Certain so-called Christian socialists have endeavoured to find in the writings of the scholastics support for the Marxian position that all value arises from labour.[1] This endeavour is, however, destined to failure; we shall see in a later chapter that many forms of unearned income were tolerated and approved by the scholastics; but all that is necessary here is to draw the attention of the reader to the passages on value to which we have referred. One of the most prominent exponents of the untenable view that the mediævals traced all value to labour is the Abbé Hohoff, whose argument that there was a divorce between value and just price in the scholastic writings, is ably controverted by Rambaud, who remarks that nobody would have been more surprised than Aquinas himself at the suggestion that he was the forerunner of Karl Marx.[2] [Footnote 1: Even Ashley states that 'the doctrine had thus a close resemblance to that of modern Socialists; labour it regarded both as the sole (human) cause of wealth, and also as the only just claim to the possession of wealth' (_Op. cit._, vol. i. part ii. p. 393).] [Footnote 2: _Op. cit._, p. 50.] The idea that the scholastics traced all value to the labour expended on production is rejected by many of the most prominent writers on mediæval economic theory. Roscher draws particular attention to the fact that the canonist teaching assigned the correct proportions in production to land, capital, and labour, in contrast to all the later schools of economists, who have exaggerated the importance of one or the other of these factors.[1] Even Knies, who was the first modern writer to insist on the importance of the cost of production as an element of value, states that the Church sought to fix the price of goods in accordance with the cost of production (_Herstellungskosten_) _and_ the consumption value (_Gebrauchswerte_).[2] Brants takes the same view. 'The expenses of production are in practice the norm of the fixing of the sale price in the great majority of cases, above all in a very narrow market, where competition is limited; moreover, they can, for reasons of public order, form the basis of a fixing that will protect the producer and the consumer against the disastrous consequences of constant oscillations. The vendor can in principle be remunerated for his trouble. It is well that he should be so remunerated; it is socially useful, and is used as a basis for fixing price; but it cannot in any way be said that this forms the _objective measure of value_, but that the work and expense are a sufficient title of remuneration for the fixing of the just price of the sale of a thing. Some writers have tried to conclude from this that the authors of the Middle Ages saw in labour the measure of value. This conclusion is exaggerated. We may fully admit that this element enters into the sale price; but it is in no way the general measure of value.... The expenses of production constitute, then, _one_ of the legitimate elements of just price; they are not the _measure_ of value, but a factor often influencing its determination.'[3] 'Labour,' according to Dr. Cronin, 'is one of the most important of all the determinants of value, for labour is the chief element in cost of production, and cost of production is one of the chief elements in determining the level at which it is useful to buy or sell. But labour is not the only determinant of value; there is, _e.g._, the price of the raw materials, a price that is not wholly determined by the labour of producing those materials.'[4] [Footnote 1: _Political Economy_, s. 48.] [Footnote 2: _Politische Oekonomie vom Standpuncte der geschichtlichen Methode_, p. 116.] [Footnote 3: _Op. cit._, p. 112.] [Footnote 4: _Ethics_, vol. ii. p. 181.] The just price, then, in the absence of a legal fixing, was held to be the price that was in accordance with the _communis estimatio_. Of course, this did not mean that a plebiscite had to be taken before every sale, but that any price that was in accordance with the general course of dealing at the time and place of the sale was considered substantially fair. 'A thing is worth what it can generally be sold for--at the time of the contract; this means what it can be sold for generally either on that day or the preceding or following day. One must look to the price at which similar things are generally sold in the open market.'[1] 'We must state precisely,' says the Abbé Desbuquois, 'the character of this common estimation; it did not mean the universal suffrage; although it expresses the universal interest, it proceeds in practice from the evaluation of competent men, taken in the social environment where the exchange value operates. If one supposes a sovereign tribunal of arbitration where all the rights of all the weak and all the strong economic factors are taken into account, the just price appears as the sentence or decision of this court.'[2] 'For the scholastics, the common estimation meant an ethical judgment of at least the most influential members of the community, anticipating the markets and fixing the rate of exchange.'[3] [Footnote 1: Caepolla, _De Cont. Sim._, 72.] [Footnote 2: _Op. cit._, pp. 169-70.] [Footnote 3: Fr. Kelleher in the _Irish Theological Quarterly_, vol. xi. p. 133.] It is quite incorrect to say, as has been sometimes said, that the mediæval just price was in no way different from the competition price of to-day which is arrived at by the higgling of the market. Dr. Cunningham is very explicit and clear on this point. 'Common estimation is thus the exponent of the natural or normal or just price according to either the mediæval or modern view; but, whereas we rely on the higgling of the market as the means of bringing out what is the common estimate of any object, mediæval economists believed that it was possible to bring common estimation into operation beforehand, and by the consultation of experts to calculate out what was the just price. If common estimation was thus organised, either by the town authorities or guilds or parliament, it was possible to determine beforehand what the price should be and to lay down a rule to this effect; in modern times we can only look back on the competition prices and say by reflection what the common estimation has been.'[1] 'The common estimation of which the Canonists spoke,' says Dr. Ryan, 'was conscious social judgment that fixed price beforehand, and was expressed chiefly in custom, while the social estimate of to-day is in reality an unconscious resultant of the higgling of the market, and finds its expression only in market price.'[2] The phrase 'res tanti valet quanti vendi potest,' which is so often used to prove that the mediæval doctors permitted full competitive prices in the modern sense, must be understood to mean that a thing could be sold at any figure which was within the limits of the minimum and maximum just price.[3] [Footnote 1: _Growth of English Industry and Commerce_, vol. i. p. 353.] [Footnote 2: _Living Wage_, p. 28.] [Footnote 3: Lessius, _De Justitia et Jure_, xxi. 19.] The last sentence suggests that the just price was not a fixed and unalterable standard, but was somewhat wide and elastic. On this all writers are agreed. 'The just price of things,' says Aquinas, 'is not fixed with mathematical precision, but depends on a kind of estimate, so that a slight addition or subtraction would not seem to destroy the equality of justice,'[1] Caepolla repeats this dictum, with the reservation that, when the just price is fixed by law, it must be rigorously observed.[2] 'Note,' says Gerson, 'that the equality of commutative justice is not exact or unchangeable, but has a good deal of latitude, within the bounds of which a greater or less price may be given without justice being infringed;'[3] and Biel insists on the same latitude, from which he draws the conclusion that the just price is constantly varying from day to day and from place to place.[4] Generally it was said that there was a maximum, medium, and minimum just price; and that any price between the maximum and minimum was valid, although the medium was to be aimed at as far as possible. [Footnote 1: II. ii. 77, 1, ad. 1.] [Footnote 2: _De Cont. Sim._, 58.] [Footnote 3: _De Cont._, ii. 11.] [Footnote 4: _Op. cit._, IV. xv. 10.] The price fixed by common estimation was therefore the one to be observed in most cases, and it was at all times a safe guide to follow. If, however, the parties either knew or had good reason to believe that the common estimation had fixed the price wrongly, they were not bound to follow it, but should arrive at a just price themselves, having regard to the various considerations given above.[1] [Footnote 1: Nider, _De Cont. Merc._ ii.: 'Si vero scit vel credit communitatem errare in estimatione pretii rei; tunc nullo modo debet eam sequi; quia etiam si reciperet verum et justum pretium, tamen faceret contra conscientiam.'] It did not make any difference whether the price was paid immediately or at some future date. To increase the price in return for the giving of credit was not allowed, as it was deemed usurious--as indeed it was. It was held that the seller, in not taking his money immediately, was simply making a loan of that amount to the buyer, and that to receive anything more than the sum lent would be usury. Aquinas is quite clear on this point. 'If a man wish to sell his goods at a higher price than that which is just, so that he may wait for the buyer to pay, it is manifestly a case of usury; because this waiting for the payment of the price has the character of a loan, so that whatever he demands beyond the just price in consideration of this delay, is like a price for a loan, which pertains to usury. In like manner, if a buyer wishes to buy goods at a lower price than what is just, for the reason that he pays for the goods before they can be delivered, it is likewise a sin of usury; because again this anticipated payment of money has the character of a loan, the price of which is the rebate on the just price of the goods sold. On the other hand, if a man wishes to allow a rebate on the just price in order that he may have his money sooner, he is not guilty of the sin of usury.'[1] If, however, the seller, by giving credit, suffered any damage, he was entitled to be recompensed; this, as we shall see, was an ordinary feature of usury law. It could not be said that the price was raised. The price remained the same; but the seller was entitled to something further than the price by way of damages.[2] It was by the application of this principle that a seller was justified in demanding more than the current price for an article which possessed some individual or sentimental value for him. 'In such a case the just price will depend not only on the thing sold, but on the loss which the sale brings on the seller.... No man should sell what is not his, though he may charge for the loss he suffers.'[3] On the other hand, it was strictly forbidden to raise the price on account of the individual need of the buyer.[4] [Footnote 1: II. ii. 78, 2, ad. 7. See _Decret. Greg._, v. 19, _de usuris_, cc. 6 and 10.] [Footnote 2: Endemann, _Studien_, vol. ii. pp. 49; Desbuquois, _op. cit._, p. 174.] [Footnote 3: II. ii. 77, 1.] [Footnote 4: _Ibid._] § 4. _The Just Price of Labour_. Particular rules were laid down for determining the just price of certain classes of goods. These need not be treated in detail, as they were merely applications of the general principle to particular cases, and whatever interest they possess is in the domain of practice rather than of theory. In the sale of immovable property the rule was that the value should be arrived at by a consideration of the annual fruits of the property.[1] The only one of the particular contracts which need detain us here is that of a contract of service for wages (_locatio operarum_). Wages were considered as ruled by the laws relating to just price. 'That is called a wage (_merces_) which is paid to any one as a recompense for his work and labour. Therefore, as it is an act of justice to give a just price for a thing taken from another person, so also to pay the wages of work and labour is an act of justice.'[2] Again, 'Remuneration of service or work ... can be priced at a money value, as may be seen in the case of those who offer for hire the labour which they exercise by work or by tongue.'[3] Biel insists that the value of labour is subject to the same influences as the value of any other commodity which is offered for sale, and that therefore a just price must be observed in buying it.[4] [Footnote 1: Caepolla, _de Cont. Sim._, 78; Carletus, _Summa Angelica_, lxv.] [Footnote 2: Aquinas, _Summa_, II. ii. 114, 1.] [Footnote 3: II. ii. 78, 2, ad. 3.] [Footnote 4: _Op. cit._, IV. xv. 10. Modern Socialists caricature the correct principle 'that labour is a commodity' into 'the labourer is a commodity'--a great difference, which is not sufficiently understood by many present-day writers. (See Roscher, _Political Economy_, s. 160.)] This, according to Brants,[1] is essentially a matter upon which more enlightenment will be found in histories of the working classes[2] than in books dealing with the enunciation of abstract theories; nevertheless, it is possible to state generally that it was regarded as the duty of employers to give such a wage as would support the worker in accordance with the requirements of his class. In the great majority of cases the rate of wages was fixed by some public--municipal or corporative--authority, but Langenstein enunciates a rule which seems to approach the statement of a general theory. According to him, when a man has something to sell, and has no indication of the just price from its being fixed by any outside authority, he must endeavour to get such a price as will _reasonably_ recompense him for any outlay he may have incurred, and will enable him to provide for his needs, spiritual and temporal.[3] It was not until the sixteenth century that the fixing of the just price of wages was submitted to scientific discussion;[4] in the fourteenth and fifteenth centuries there is little to be found bearing on this subject except the passage of Langenstein which we have quoted, and some strong exhortations by Antoninus of Florence to masters to pay good wages.[5] The reason for this paucity of authority upon a subject of so much importance is that in practice the machinery provided by the guilds had the effect of preserving a substantially just remuneration to the artisan. When a man is in perfect health he does not bother to read medical books. In the same way, the proper remuneration of labour was so universally recognised as a duty, and so satisfactorily enforced, that it seems to have been taken for granted, and therefore passed over, by the writers of the period. One may agree with Brants in concluding that, 'the principle of just price in sales was applied to wages; fluctuations in wages were not allowed; the just price, as in sales, rested on the approximate equality of the services rendered; and that this equality was estimated by common opinion.'[6] Of course, in the case of slave labour it could not be said that any wage was paid. The master was entitled to the services of the slave, and in return was bound to furnish him with the necessaries of life.[7] [Footnote 1: _Op. cit._, p. 103.] [Footnote 2: An excellent bibliography of books dealing with the history of the working classes in the Middle Ages is to be found in Brants, _op. cit._, p. 105. The need for examining concrete economic phenomena is insisted on in Ryan's _Living Wage_, p. 28.] [Footnote 3: _De Cont._ We have here a recognition of the principle that the value of labour is not to be measured by anything extrinsic to itself, _e.g._ by the value of the product, but by its own natural function and end, and this function and end is the supplying of the requirements of human life. The wage must, therefore, be capable of supplying the same needs that the expenditure of a labourer's energy is meant to supply. (See Cronin, _Ethics_, vol. ii. p. 390.)] [Footnote 4: Brants, _op. cit._, p. 118.] [Footnote 5: The passages from the _Summa_ of Antoninus bearing on the subject are reprinted in Brants, _op. cit._, p. 120.] [Footnote 6: _Op. cit._, p. 125.] [Footnote 7: Brants, _op. cit._, p. 116, quoting _Le Lime du Trésor_ of Brunetto Latini.] § 5. _Value of the Conception of the Just Price_. It is probably correct to say that the canonical teaching on just price was negative rather than positive; in other words, that it did not so much aim at positively fixing the price at which goods should be sold, as negatively at indicating the practices in buying and selling which were unjust. 'The doctrine of just price,' according to Dr. Ryan, 'may sometimes have been associated with incorrect views of industrial life, but all competent authorities agree that it was a fairly sound attempt to define the equities of mediæval exchanges, and that it was tolerably successful in practice.'[1] The condition of mediæval markets was frequently such that the competition was not really fair competition, and consequently the price arrived at by competition would be unfair either to buyer or seller. 'This,' according to Dr. Cunningham, 'was the very thing which mediæval regulation had been intended to prevent, as any attempt to make gain out of the necessities of others, or to reap profit from unlooked-for occurrences would have been condemned as extortion. It is by taking advantage of such fluctuations that money is most frequently made in modern times; but the whole scheme of commercial life in the Middle Ages was supposed to allow of a regular profit on each transaction.'[2] There might be some doubt as to the positive justice of this or that price; but there could be no doubt as to the injustice of a price which was enhanced by the necessities of the poor, or the engrossing of a vital commodity.[3] Merely to buy up the whole supply of a certain commodity, even if it were bought up by a 'ring' of merchants, provided that the commodity was resold within the limits of the just price, was not a sin against justice, though it might be a sin against charity.[4] If the authorities granted a monopoly, they must at the same time fix a just price.[5] A monopoly which was not privileged by the State, and which had for its aim the raising of the price of goods above the just price was regarded with universal reprobation.[6] 'Whoever buys up corn, meat, and wine,' says Trithemius, 'in order to drive up their price and to amass money at the cost of others is, according to the laws of the Church, no better than a common criminal. In a well-governed community all arbitrary raising of prices in the case of articles of food and clothing is peremptorily stopped; in times of scarcity merchants who have supplies of such commodities can be compelled to sell them at fair prices; for in every community care should be taken that all the members should be provided for, and not only a small number be allowed to grow rich, and revel in luxury to the hurt and prejudice of the many.[7] Thus the doctrine of the just price was a deadly weapon with which to fight the 'profiteer.' The engrosser was looked upon as the natural enemy of the poor; and the power of the trading class was justly reckoned so great, that in cases of doubt prices were always fixed low rather than high. In other words, the buyer--that is to say, the community--was the subject of protection rather than the seller.[8] [Footnote 1: _The Living Wage_, p. 27.] [Footnote 2: _Growth of English Industry and Commerce_, vol. i. p. 460.] [Footnote 3: Endemann, _Studien_, vol. ii. p. 60.] [Footnote 4: Lessius, _De Justitia et Jure_, II. xx. 1, 21.] [Footnote 5: _Ibid._] [Footnote 6: Langenstein, _De Cont._; Biel, _op. cit._, iv. xv. 11.] [Footnote 7: Quoted in Janssen, _op. cit._, vol. ii. p. 102.] [Footnote 8: Roscher, _Geschichte_, p. 12.] It must at the same time be clearly kept in mind that the seller was also protected. All the authorities are unanimous that it was as sinful for the buyer to give too little as for the seller to demand too much, and it is this aspect of the just price which appears most favourable in comparison with the theory of price of the classical economists. In the former case prices were fixed having regard to the wages necessary for the producer; in the latter the wages of the producer are determined by the price at which he can sell his goods, exposed to the competition of machinery or foreign--possibly slave--labour.[1] According to the _Catholic Encyclopædia_: 'To the mediæval theologian the just price of an article included enough to pay fair wages to the worker--that is, enough to enable him to maintain the standard of living of his class.'[2] 'The difference,' says Dr. Cunningham, 'which emerges according as we start from one principle or the other comes out most distinctly with reference to wages. In the Middle Ages wages were taken as a first charge; in modern times the reward of the labourer cannot but fluctuate in connection with fluctuations in the utility and market price of the things. There must always be a connection between wages and prices, but in the olden times wages were the first charge, and prices on the whole depended on them, while in modern times wages are, on the other hand, directly affected by prices.'[3] Dr. Cunningham draws attention to the fact that the labouring classes rejected the idea of the fixing of a just price for their services when, from a variety of causes, a situation arose when they were able to earn by open competition a reward higher than what was necessary to support them according to their state in life.[4] Nowadays the reverse has taken place; unrestricted competition has in many cases resulted in the reduction of wages to a level below the margin of subsistence; and the general cry of the working classes is for the compulsory fixing of minimum rates of wages which will ensure that their subsistence will not be liable to be impaired by the fluctuations of the markets. What the workers of the present day look to as a desirable, but almost unattainable, ideal, was the universal practice in the ages when economic relations were controlled by Christian principles. [Footnote 1: Ashley, _op. cit._, vol. i. pt. i. p. 129.] [Footnote 2: Art. 'Political Economy.'] [Footnote 3: _Growth of English Industry and Commerce_, vol. i. p. 461.] [Footnote 4: _Christianity and Economic Science_, p. 29.] § 6. _Was the Just Price Subjective or Objective_? The question whether the just price was essentially subjective or objective has recently formed the subject matter of an interesting and ably conducted discussion, provoked by certain remarks in Dr. Cunningham's _Western Civilisation_.[1] Dr. Cunningham, although admiring the ethical spirit which animated the conception of the just price, thought at the same time that the economic ideas underlying the conception were so undeveloped and unsound that the theory could not be applied in practice at the present day. 'Their economic analysis was very defective, and the theory of price which they put forward was untenable; but the ethical standpoint which they took is well worth examination, and the practical measures which they recommended appear to have been highly beneficial in the circumstances in which they had to deal. Their actions were not unwise; their common-sense morality was sound; but the economic theories by which they tried to give an intellectual justification for their rules and their practice were quite erroneous.... The attempt to determine an ideal price implies that there can and ought to be stability in relative values and stability in the measure of values--which is absurd. The mediæval doctrine and its application rested upon another assumption which we have outlived. Value is not a quality which inheres in an object so that it can have the same worth for everybody; it arises from the personal preference and needs of different people, some of whom desire a thing more and some less, some of whom want to use it in one way and some in another. Value is not objective--intrinsic in the object--but subjective, varying with the desire and intentions of the possessors or would-be possessors; and, because it is thus subjective, there cannot be a definite ideal value which every article ought to possess, and still more a just price as the measure of that ideal value.' In these and similar observations to be found in the _Growth of English History and Commerce_, Dr. Cunningham showed that he profoundly misunderstood the doctrine of the just price; the objectivity which he attributed to it was not the objectivity ascribed to it by the scholastics. It was to correct this misunderstanding that Father Slater contributed an article to the _Irish Theological Quarterly_[2] pointing out that the just price was subjective rather than objective. This article, which was afterwards reprinted in _Some Aspects of Moral Theology_, and the conclusions of which were embodied in the same writer's work on Moral Theology, was controverted in a series of articles by Father Kelleher in the _Irish Theological Quarterly_.[3] [Footnote 1: Pp. 77-9.] [Footnote 2: Vol. iv. p. 146.] [Footnote 1: 'Market Prices,' vol. ix. p. 398 and vol. x. p. 163; and 'Father Slater on Just Price and Value,' vol. xi. p. 159.] Father Slater draws attention to the fact that Dr. Cunningham overlooked to some extent the importance of common estimation in arriving at the just price. He points out that, far from objects being invested with some immutable objective value, their value was in fact determined by the price which the community as a whole was willing to pay for them: 'As the value in exchange will be determined by what the members of the community at the time are prepared to give, ... it will be determined by the social estimation of its utility for the support of life and its scarcity. It will depend upon its capacity to satisfy the wants and desires of the people with whom commercial transactions are possible and practicable. Father Slater then goes on categorically to refute Dr. Cunningham's presentation of the objectivity of price: 'All that that doctrine asserts is that there should be, and that there is, an equivalent in social value between the commodity and its price at a certain time and in a certain place; it says nothing whatever about the stability or permanence of prices at different times and at different places. By maintaining that the just price did not depend upon the valuation of the individual buyer or seller the mediæval doctors did not dream of making it intrinsic to the object.' In the work on Moral Theology, to which we have referred, expressions occur which lead one to believe that Father Slater did not see any great difference between the mediæval just price arrived at by common estimation and the modern normal or market price arrived at by open competition. Thus, in endeavouring to correct Dr. Cunningham's misunderstanding, Father Slater seems to have gone too far in the other direction, and his position has been ably and, in our judgment, successfully, controverted by Father Kelleher. The point at issue between the upholders of the two opposing views on just price is well stated by Father Kelleher in the first of his articles on the subject: 'We must try to find out whether the just and fair price determined the rate of exchange, or whether the rate of exchange, being determined without an objective standard and merely according to the play of human motives, determines what we call the just and fair price.'[1] We have already demonstrated that the common estimation referred to by the mediæval doctors was something quite apart from the modern higgling in the market; and that, far from being merely the result of unbridled competition on both sides, it was rather the considered judgment of the best-informed members of the community. As we have seen, even Dr. Cunningham admits that there was a fundamental difference between the common estimation of the scholastics and the modern competitive price. This is clearly demonstrated by Father Kelleher, who further establishes the proposition that the modern price is purely subjective, and that no subjective price can rest on an ethical basis. The question at issue therefore between what we may call the subjective and objective schools is not whether the sale price was determined by competition in the modern sense, but whether the common estimation of those best qualified to form an opinion on the subject in itself determined the just price, or whether it was merely the most reliable evidence of what the just price in fact was at a particular moment. [Footnote 1: _Irish Theological Quarterly_, vol. ix. p. 41.] Father Kelleher draws attention to the fact that Aquinas in his article on price did not specifically affirm that the just price was objective, but he explains this omission by saying that the objectivity of the price was so well and universally understood that it was unnecessary expressly to restate it. Indeed, as we saw above, the teaching of Aquinas on price left a great deal to be supplied by later writers, not because he was in any doubt about the subject, but because the theory was so well understood. 'Not even in St. Thomas can we find a formal discussion of the moral obligation of observing an objective equivalence in contracts of buying and selling. He simply took it for granted, as, indeed, was inevitable, seeing that, up to his time and for long after, all Catholic thought and legislation proceeded on that hypothesis. But that he actually did take it for granted, he has given many clear indications in his article on Justice which leave us no room for reasonable doubt.'[1] As Father Kelleher very cogently points out, the discussion in Aquinas's article on commerce, whether it was lawful to buy cheap and sell dear, very clearly indicates that the author maintained the objective theory, because if the just price were simply determined by what people were willing to give, this question could not have arisen. [Footnote 1: _Irish Theological Quarterly_, vol. x. p. 165.] Nor is the fact that the just price admitted of a certain elasticity an argument in favour of its being subjective. Father Kelleher fully admits that the common estimation was the general criterion of just price, and, of course, the common estimation could not, of its very nature, be rigid and immutable. Commodities should, indeed, exchange according to their objective value, but, even so, commodities could not carry their value stamped on their faces. Even if we assume that the standard of exchange was the cost of production, there would still remain room for a certain amount of difference of opinion as to what exactly their value would be in particular instances. Suppose that the commodity offered for sale was a suit of clothes, in estimating its value on the basis of the cost of production, opinions might differ as to the precise amount of time required for making it, or as to the cost of the cloth out of which it was made. Unless recourse was to be had to an almost interminable process of calculations, nobody could say authoritatively what precisely the value was, and in practice the determination of value had perforce to be left to the ordinary human estimate of what it was, which of its very nature was bound to admit a certain margin of fluctuation. Thus we can easily understand how, even with an objective standard of value, the just price might be admitted to vary within the limits of the maximum as it might be expected to be estimated by sellers and the minimum as it would appear just to buyers. The sort of estimation of which St. Thomas speaks is therefore nothing else than a judgment, which, being human, is liable to be slightly in excess or defect of the objective value about which it is formed.'[1] As Father Kelleher puts it on a later page, 'There is a sense certainly in which, with a solitary exception in the case of wages, it may be said with perfect truth that the common estimation determines the just price. That is, the common estimation is the proximate practical criterion.'[2] [Footnote 1: _Irish Theological Quarterly_, vol. x. p. 166.] [Footnote 2: P. 173.] Father Kelleher uses in support of his contention a very ingenious argument drawn from the doctrine of usury. As we said in the first chapter, and as we shall prove in detail in the next section, the prohibition of usury was simply one of the applications of the theory of equivalence in contracts--in other words, it was the determination of the just price to be paid in an exchange of money for money. If, asks Father Kelleher, the common estimation was the final test of just price, why was not moderate usury allowed? That the general opinion of the community in the Middle Ages was undoubtedly in favour of allowing a reasonable percentage on loans is shown by the constant striving of the Church to prevent such a practice. Nevertheless the Church did not for a moment relax its teaching on usury in spite of the almost universal judgment of the people. Here, therefore, is a clear example of one contract in which the standard of value is clearly objective, and it is only reasonable to draw the conclusion that the same standard which applied in contracts of the exchange of money should apply in contracts of the sale of other articles. Father Kelleher's contention seems to be completely supported by the passage from Nider which we have cited above, to the effect that the common estimation ceases to be the final test of the just price when the contracting parties know or believe that the common estimation has erred.[1] This seems to us clearly to show that the common estimation was but the most generally received test of what the just price in fact was, but that it was in no sense a final or irrefutable criterion.[2] [Footnote 1: _De Cont. Merc._, ii. xv. Nider was regarded as a very weighty authority on the subject of contracts (Endemann, _Studien_, vol. ii. p. 8).] [Footnote 2: The argument in favour of what we have called the 'objective' theory of the just price is strengthened by the consideration that goods do not satisfy mere subjective whims, but supply real wants. For example, food supplies a real need of the human being, as also does clothing; in the one case hunger is appeased, and in the other cold is warded off, just as drugs used in medical practice produce real objective effects on the person taking them.] The theory that the just price was objective seems to be accepted by the majority of the best modern students of the subject. Sir William Ashley says: 'The fundamental difference between the mediæval and modern point of view is... that with us value is something entirely subjective; it is what each individual cares to give for a thing. With Aquinas it was entirely objective; something outside the will of the individual purchaser or seller; something attached to the thing itself, existing whether he liked it or not, and that he ought to recognise.'[1] Palgrave's _Dictionary of Political Economy_, following the authority of Knies, expresses the same opinion: 'Perhaps the contrast between mediæval and modern ideas of value is best expressed by saying that with us value is usually something subjective, consisting of the mental determination of buyer and seller, while to the schoolmen it was in a sense objective, something intrinsically bound up with the commodity itself.'[2] Dr. Ryan agrees with this view: 'The theologians of the sixteenth and seventeenth centuries assumed that the objective price would be fair, since it was determined by the social estimate. In their opinion the social estimate would embody the requirements of objective justice as fully as any device or institution that was practically available. For the condition of the Middle Ages and the centuries immediately following, this reasoning was undoubtedly correct. The agencies which created the social estimate and determined prices--namely the civil law, the guilds, and custom--succeeded fairly in establishing a price that was equitable to all concerned.'[3] Dr. Cleary says: 'True, the _pretium legale_ is regarded as being a just price, but in order that it may be just, it supposes some objective basis--in other words, it rather declares than constitutes the just price.'[4] Haney is also strongly of opinion that the just price was objective. 'Briefly stated, the doctrine was that every commodity had some one true value which was objective and absolute.'[5] The greater number of modern students therefore who have given most care and attention to the question are inclined to the opinion that the just price was not subjective, but objective, and we see no valid reason for disagreeing with this view, which seems to be fully warranted by the original authorities. [Footnote 1: _Op. cit._, vol. i. pt. i. p. 140.] [Footnote 2: Art. 'Justum Pretium.'] [Footnote 3: 'The Moral Aspect of Monopoly,' by J.A. Ryan, D.D., _Irish Theological Quarterly_, in. p. 275; and see _Distributive Justice_, pp. 332-4.] [Footnote 4: _Op. cit._, p. 193.] [Footnote 5: _History of Economic Thought_, p. 75.] §7. _The Mediæval Attitude towards Commerce_. Before passing from the question of price, we must discuss the legitimacy of the various occupations which were concerned with buying and selling. The principal matter which arises for consideration in this regard is the attitude of the mediæval theologians towards commerce. Aquinas discusses the legitimacy of commerce in the same question in which he discusses just price, and indeed the two subjects are closely allied, because the importance of the observance of justice in buying and selling grew urgent as commerce extended and advanced. In order to understand the disapprobation with which commerce was on the whole regarded in the Middle Ages, it is necessary to appreciate the importance of the Christian teaching on the dignity of labour. The principle that, far from being a degrading or humiliating occupation, as it had been regarded in Greece and Rome, manual labour was, on the contrary, one of the most noble ways of serving God, effected a revolution in the economic sphere analogous to that which the Christian sanctification of marriage effected in the domestic sphere. The Christian teaching on labour was grounded on the Divine precepts contained in both the Old and New Testaments,[1] and upon the example of Christ, who was Himself a working man. The Gospel was preached amongst the poor, and St. Paul continued his humble labours during his apostolate.[2] A life of idleness was considered something to be avoided, instead of something to be desired, as it had been in the ancient civilisations. Gerson says it is against the nature of man to wish to live without labour as usurers do,[3] and Langenstein inveighs against usurers and all who live without work.[4] 'We read in Sebastian Brant that the idlers are the most foolish amongst fools, they are to every people like smoke to the eyes or vinegar to the teeth. Only by labour is God truly praised and honoured; and Trithemius says "Man is born to labour as the bird to fly, and hence it is contrary to the nature of man when he thinks to live without work."'[5] The example of the monasteries, where the performance of all sorts of manual labour was not thought inconsistent with the administration of the sacred offices and the pursuit of the highest intellectual exercises, acted as a powerful assertion to the laity of the dignity of labour in the scheme of things.[6] The value of the monastic example in this respect cannot be too highly estimated. 'When we consider the results of the founding of monasteries,' says Dr. Cunningham, 'we find influences at work that were plainly economic. These communities can be best understood when we think of them as Christian industrial colonies, and remember that they moulded society rather by example than by precept. We are so familiar with the attacks and satires on monastic life that were current at the Reformation period, that it may seem almost a paradox to say that the chief claim of the monks to our gratitude lies in this, that they helped to diffuse a better appreciation of the duty and dignity of labour.'[7] [Footnote 1: Gen. iii. 19; Ps. cxxvii. 2; 2 Thess. iii. 10. The last-mentioned text is explained, in opposition to certain Socialist interpretations which have been put on it, by Dr. Hogan in the _Irish Ecclesiastical Record_, vol. xxv. p. 45.] [Footnote 2: Wallon, _op. cit._, vol. iii. p. 401.] [Footnote 3: _De Cont._, i. 13.] [Footnote 4: _De Cont._] [Footnote 5: Janssen, _op. cit._, vol. ii. pp. 93-4.] [Footnote 6: Levasseur, _Histoire des Classes ouvrières en France_, vol. i. pp. 182 _et seq_.] [Footnote 7: _Western Civilisation_, vol. ii. p. 35.] The result of this teaching and example was that, in the Middle Ages, labour had been raised to a position of unquestioned dignity. The economic benefit of this attitude towards labour must be obvious. It made the working classes take a direct pride and interest in their work, which was represented to be a means of sanctification. 'Labour,' according to Dr. Cunningham, 'was said to be pregnant with a double advantage--the privilege of sharing with God in His work of carrying out His purpose, and the opportunity of self-discipline and the helping of one's fellow-men.'[1] 'Industrial work,' says Levasseur, 'in the times of antiquity had always had, in spite of the institutions of certain Emperors, a degrading character, because it had its roots in slavery; after the invasion, the grossness of the barbarians and the levelling of towns did not help to rehabilitate it. It was the Church which, in proclaiming that Christ was the son of a carpenter, and the Apostles were simple workmen, made known to the world that work is honourable as well as necessary. The monks proved this by their example, and thus helped to give to the working classes a certain consideration which ancient society had denied them. Manual labour became a source of sanctification.'[2] The high esteem in which labour was held appears from the whole artistic output of the Middle Ages. 'Many of the simple artists of the time represented the saints holding some instrument of work or engaged in some industrial pursuit; as, for instance, the Blessed Virgin spinning as she sat by the cradle of the divine Infant, and St. Joseph using a saw or carpenter's tools. "Since the Saints," says the _Christian Monitor_, "have laboured, so shall the Christian learn that by honourable labour he can glorify God, do good, and save his own soul."'[3] Work was, alongside of prayer and inseparable from it, the perfection of Christian life.[4] [Footnote 1: _Christianity and Economic Science_, pp. 26-7.] [Footnote 2: _Op. cit._, vol. i. p. 187.] [Footnote 3: Janssen, _op. cit._, vol. ii. p. 9.] [Footnote 4: Wallon, _op. cit._, vol. i. p. 410.] It must not be supposed, however, that manual labour alone was thought worthy of praise. On the contrary, the necessity for mental and spiritual workers was fully appreciated, and all kinds of labour were thought equally worthy of honour. 'Heavy labourer's work is the inevitable yoke of punishment, which, according to God's righteous verdict, has been laid upon all the sons of Adam. But many of Adam's descendants seek in all sorts of cunning ways to escape from the yoke and to live in idleness without labour, and at the same time to have a superfluity of useful and necessary things; some by robbery and plunder, some by usurious dealings, others by lying, deceit, and all the countless, forms of dishonest and fraudulent gain, by which men are for ever seeking to get riches and abundance without toil. But while such men are striving to throw off the yoke righteously imposed on them by God, they are heaping on their shoulders a heavy burden of sin. Not so, however, do the reasonable sons of Adam proceed; but, recognising in sorrow that for the sins of their first father God has righteously ordained that only through the toil of labour shall they obtain what is necessary to life, they take the yoke patiently on them.... Some of them, like the peasants, the handicraftsmen, and the tradespeople, procure for themselves and others, in the sweat of their brows and by physical work, the necessary sustenance of life. Others, who labour in more honourable ways, earn the right to be maintained by the sweat of others' brows--for instance, those who stand at the head of the commonwealth; for by their laborious exertion the former are enabled to enjoy the peace, the security, without which they could not exist. The same holds good of those who have the charge of spiritual matters....'[1] 'Because,' says Aquinas, 'many things are necessary to human life, with which one man cannot provide himself, it is necessary that different things should be done by different people; therefore some are tillers of the soil, some are raisers of cattle, some are builders, and so on; and, because human life does not simply mean corporal things, but still more spiritual things, therefore it is necessary that some people should be released from the care of attending to temporal matters. This distribution of different offices amongst different people is in accordance with Divine providence.'[2] [Footnote 1: Langenstein, quoted in Janssen, _op. cit._, p. 95.] [Footnote 2: _Summa Cont. Gent_., iii. 134.] All forms of labour being therefore admitted to be honourable and necessary, there was no difficulty felt about justifying their reward. It was always common ground that services of all kinds were entitled to be properly remunerated, and questions of difficulty only arose when a claim was made for payment in a transaction where the element of service was not apparent.[1] The different occupations in which men were engaged were therefore ranked in a well-recognised hierarchy of dignity according to the estimate to which they were held to be entitled. The Aristotelean division of industry into _artes possessivae_ and _artes pecuniativae_ was generally followed, the former being ranked higher than the latter. 'The industries called _possessivae_, which are immediately useful to the individual, to the family, and to society, producing natural wealth, are also the most natural as well as the most estimable. But all the others should not be despised. The natural arts are the true economic arts, but the arts which produce artificial riches are also estimable in so far as they serve the true national economy; the commutation of the exchanges and the _cambium_ being necessary to the general good, are good in so far as they are subordinate to the end of true economy. One may say the same thing about commerce. In order, then, to estimate the value of an industrial art, one must examine its relation to the general good.'[2] Even the _artes possessivae_ were not all considered equally worthy of praise, but were ranked in a curious order of professional hierarchy. Agriculture was considered the highest, next manufacture, and lastly commerce. Roscher says that, whereas all the scholastics were agreed on the excellence of agriculture as an occupation, the best they could say of manufacture was _Deo non displicet_, whereas of commerce they said _Deo placere non potest_; and draws attention to the interesting consequence of this, namely, that the various classes of goods that took part in the different occupations were also ranked in a certain order of sacredness. Immovables were thought more worthy of protection against execution and distress than movables, and movables than money.[3] Aquinas advises the rulers of States to encourage the _artes possessivae_, especially agriculture.[4] The fullest analysis of the order in which the different _artes possessivae_ should be ranked is to be found in Buridan's _Commentaries on Aristotle's Politics_. He places first agriculture, which comprises cattle-breeding, tillage, and hunting; secondly, manufacture, which helps to supply man's corporal needs, such as building and architecture; thirdly, administrative occupations; and lastly, commerce. The Christian Exhortation, quoted by Janssen,[5] says, 'The farmer must in all things be protected and encouraged, for all depend on his labour, from the monarch to the humblest of mankind, and his handiwork is in particular honourable and well pleasing to God.' [Footnote 1: Aquinas, _Summa_, II. ii. 77, 4; Nider, _op. cit._, II. x.] [Footnote 2: Brants, _op. cit._, p. 82.] [Footnote 3: _Geschichte_, p. 7.] [Footnote 4: _De Regimine Principum_, vol. ii. chaps, v. and vi.] [Footnote 5: _Op. cit._, vol. i. p. 297.] The division of occupations according to their dignity adopted by Nicholas Oresme is somewhat unusual. He divides professions into (1) honourable, or those which increase the actual quantity of goods in the community or help its development, such as ecclesiastical offices, the law, the soldiery, the peasantry, artisans, and merchants, and (2) degrading--such as _campsores, mercatores monetae sen billonatores.'_[1] No occupation, therefore, which involved labour, whether manual or mental, gave any ground for difficulty with regard to its remuneration. The business of the trader or merchant, on the other hand, was one which called for some explanation. It is important to understand what commerce was taken to mean. The definition which Aquinas gives was accepted by all later writers: 'A tradesman is one whose business consists in the exchange of things. According to the philosopher, exchange of things is twofold; one natural, as it were, and necessary, whereby one commodity is exchanged for another, or money taken in exchange for a commodity in order to satisfy the needs of life. Such trading, properly speaking, does not belong to traders, but rather to housekeepers or civil servants, who have to provide the household or the State with the necessaries of life. The other kind of exchange is either that of money for money, or of any commodity for money, not on account of the necessities of life, but for profit; and this kind of trade, properly speaking, regards traders.' It is to be remarked in this definition, that it is essential, to constitute trade, that the exchange or sale should be for the sake of profit, and this point is further emphasised in a later passage of the same article: 'Not every one that sells at a higher price than he bought is a trader, but only he who buys that he may sell at a profit. If, on the contrary, he buys, not for sale, but for possession, and afterwards for some reason wishes to sell, it is not a trade transaction, even if he sell at a profit. For he may lawfully do this, either because he has bettered the thing, or because the value of the thing has changed with the change of place or time, or on account of the danger he incurs in transferring the thing from one place to another, or again in having it carried by hand. In this sense neither buying nor selling is unjust.'[2] The importance of this definition is that it rules out of the discussion all cases where the goods have been in any way improved or rendered more valuable by the services of the seller. Such improvement was always reckoned as the result of labour of one kind or another, and therefore entitled to remuneration. The essence of trade in the scholastic sense was selling the thing unchanged at a higher price than that at which it had been bought, for the sake of gain.[3] [Footnote 1: _Tractatus de Origine, etc., Monetarum_.] [Footnote 2: _Tractatus de Origine, etc., Monetarum_, ad. 2.] [Footnote 3: 'Fit autem mercatio cum non ut emptor ea utatur sed ut earn carius vendat etiam non mutatam suo artificio; illa mercatio dicitur proprie negotiatio' (Biel, _op. cit._, IV. xv. 10.)] The legitimacy of trade in this sense was only gradually admitted. The Fathers of the Church had with one voice condemned trade as being an occupation fraught with danger to the soul. Tertullian argued that there would be no need of trade if there were no desire for gain, and that there would be no desire for gain if man were not avaricious. Therefore avarice was the necessary basis of all trade.[1] St. Jerome thought that one man's gain in trading must always be another's loss; and that, in any event, trade was a dangerous occupation since it offered so many temptations to fraud to the merchant.[2] St. Augustine proclaimed all trade evil because it turns men's minds away from seeking true rest, which is only to be found in God, and this opinion was embodied in the _Corpus Juris Canonici_.[3] This early view that all trade was to be indiscriminately condemned could not in the nature of things survive experience, and a great step forward was taken when Leo the Great pronounced that trade was neither good nor bad in itself, but was rendered good or bad according as it was honestly or dishonestly carried on.[4] [Footnote 1: _De Idol_., xi.] [Footnote 2: Ashley, _op. cit._, vol. i. pt. i. p. 129.] [Footnote 3: See _Corpus Juris Canonici_, Deer. I.D. 88 c. 12.] [Footnote 4: _Epist. ad Rusticum_, c. ix.] The scholastics, in addition to condemning commerce on the authority of the patristic texts, condemned it also on the Aristotelean ground that it was a chrematistic art, and this consideration, as we have seen above, enters into Aquinas's article on the subject.[1] [Footnote 1: Rambaud, _op. cit._, p. 52.] The extension of commercial life which took place about the beginning of the thirteenth century, raised acute controversies about the legitimacy of commerce. Probably nothing did more to broaden the teaching on this subject than the necessity of justifying trade which became more and more insistent after the Crusades.[1] [Footnote 1: On the economic influence of the Crusades the following works may be consulted: Blanqui, _Histoire de l'Economie politique_; Heeren, _Essai sur l'Influence politique et sociale des Croisades_; Scherer, _Histoire du Commerce_; Prutz, _Culturgeschichte der Kreuzzüge_; Pigonneau, _Histoire du Commerce de la France_; List, _Die Lehren der Handelspolitischen Geschichte_.] By the time of Aquinas the necessity of commerce had come to be fully realised, as appears from the passage in the _De Regimine Principum_: 'There are two ways in which it is possible to increase the affluence of any State. One, which is the more worthy way, is on account of the fertility of the country producing an abundance of all things which are necessary for human life, the other is through the employment of commerce, through which the necessaries of life are brought from different places. The former method can be clearly shown to be the more desirable.... It is more admirable that a State should possess an abundance of riches from its own soil than through commerce. For the State which needs a number of merchants to maintain its subsistence is liable to be injured in war through a shortage of food if communications are in any way impeded. Moreover, the influx of strangers corrupts the morals of many of the citizens... whereas, if the citizens themselves devote themselves to commerce, a door is opened to many vices. For when the desire of merchants is inclined greatly to gain, cupidity is aroused in the hearts of many citizens.... For the pursuit of a merchant is as contrary as possible to military exertion. For merchants abstain from labours, and while they enjoy the good things of life, they become soft in mind and their bodies are rendered weak and unsuitable for military exercises.... It therefore behoves the perfect State to make a moderate use of commerce.'[1] [Footnote 1: ii. 3.] Aquinas, who, as we have seen, recognised the necessity of commerce, did not condemn all trade indiscriminately, as the Fathers had done, but made the motive with which commerce was carried on the test of its legitimacy: 'Trade is justly deserving of blame, because, considered in itself, it satisfies the greed for gain, which knows no limit, and tends to infinity. Hence trading, considered in itself, has a certain debasement attaching thereto, in so far as, by its very nature, it does not imply a virtuous or necessary end. Nevertheless gain, which is the end of trading, though not implying, by its nature, anything virtuous or necessary, does not, in itself, connote anything sinful or contrary to virtue; wherefore nothing prevents gain from being directed to some necessary or even virtuous end, and thus trading becomes lawful. Thus, for instance, a man may intend the moderate gain which he seeks to acquire by trading for the upkeep of his household, or for the assistance of the needy; or again, a man may take to trade for some public advantage--for instance, lest his country lack the necessaries of life--and seek gain, not as an end, but as payment for his labour.'[1] This is important in connection with what we have said above as to property, as it shows that the trader was quite justified in seeking to obtain more profits, provided that they accrued for the benefit of the community. This justification of trade according to the end for which it was carried on, was not laid down for the first time by Aquinas, but may be found stated in an English treatise of the tenth century entitled _The Colloquy of Archbishop Alfric_, where, when a doctor asks a merchant if he wishes to sell his goods for the same price for which he has bought them, the merchant replies: 'I do not wish to do so, because if I do so, how would I be recompensed for my trouble? but I wish to sell them for more than I paid for them so that I might secure some gain wherewith to support myself, my wife, and family.'[2] [Footnote 1: II. ii. 77, 4.] [Footnote 2: Loria, _Analysi de la proprietà, capitalista_, ii. 168.] In spite of the fact that the earlier theory that no commercial gain which did not represent payment for labour could be justified was still maintained by some writers--for instance, Raymond de Pennafort[1]--the teaching of St. Thomas Aquinas was generally accepted throughout the later Middle Ages. Canonists and theologians accepted without hesitation the justification of trade formulated by Aquinas.[2] Henri de Gand,[3] Duns Scotus,[4] and François de Mayronis [5] unhesitatingly accepted the view of Aquinas, and incorporated it in their works.[6] 'An honourable merchant,' says Trithemius, 'who does not only think of large profits, and who is guided in all his dealings by the laws of God and man, and who gladly gives to the needy of his wealth and earnings, deserves the same esteem as any other worker. But it is no easy matter to be always honourable in all mercantile dealings and not to become usurious. Without commerce no community can of course exist, but immoderate commerce is rather hurtful than beneficial, because it fosters greed of gain and gold, and enervates and emasculates the nation through love of pleasure and luxury.'[7] Nider says that to buy not for use but for sale at a higher price is called trade. Two special rules apply to this: first, that it should be useful to the State, and second, that the price should correspond to the diligence, prudence, and risk undertaken in the transaction.[8] [Footnote 1: _Summa Theologica_, II. vii. 5.] [Footnote 2: Ashley, _op. cit._, p. 55.] [Footnote 3: _Quodlib_., i. 40.] [Footnote 4: _Lib. Quat. Sent._, xv. 2.] [Footnote 5: iv. 16, 4.] [Footnote 6: See Jourdain, _op. cit._, p. 20 _et seq_.] [Footnote 7: Quoted in Janssen, _op. cit._, vol. ii. p. 97.] [Footnote 8: _Op. cit._, iv. 10.] The later writers hi the fifteenth century seem to have regarded trade more liberally even than Aquinas, although they quote his dictum on the subject as the basis of their teaching. Instead of condemning all commerce as wrong unless it was justified by good motives, they were rather inclined to treat commerce as being in itself colourless, but capable of becoming evil by bad motives. Carletus says: 'Commerce in itself is neither bad nor illegal, but it may become bad on account of the circumstances and the motive with which it is undertaken, the persons who undertake it, or the manner in which it is conducted. For instance, commerce undertaken through avarice or a desire for sloth is bad; so also is commerce which is injurious to the republic, such as engrossing.'[1] [Footnote 1: _Summa Angelica_, 169: 'Mercatio non est mala ex genere, sed bona, humano convictui necessaria dum fuerit justa. Mercatio simpliciter non est peccatum sed ejus abusus.' Biel, _op. cit._, iv. xv. 10.] Endemann, having thoroughly studied all the fifteenth-century writers on the subject, says that commerce might be rendered unjustifiable either by subjective or objective reasons. Subjective illegality would arise from the person trading--for instance, the clergy--or the motive with which trade was undertaken; objective illegality on account of the object traded in, such as weapons in war-time, or the bodies of free men.[1] Speculative trading, and what we to-day call profiteering, were forbidden in all circumstances.[2] [Footnote 1: _Studien_, vol. ii. p. 18.] [Footnote 2: _The Ayenbite of Inwit_, a thirteenth-century confessor's manual, lays it down that speculation is a kind of usury. (Rambaud, _Histoire_, p. 56.)] We need not dwell upon the prohibition of trading by the clergy, because it was simply a rule of discipline which has not any bearing upon general economic teaching, except in so far as it shows that commerce was considered an occupation dangerous to virtue. Aquinas puts it as follows: 'Clerics should abstain not only from things that are evil in themselves, but even from those that have an appearance of evil. This happens in trading, both because it is directed to worldly gain, which clerics should despise, and because trading is open to so many vices, since "a merchant is hardly free from sins of the lips." [1] There is also another reason, because trading engages the mind too much with worldly cares, and consequently withdraws it from spiritual cares; wherefore the Apostle says:[2] "No man being a soldier to God entangleth himself with secular business." Nevertheless it is lawful for clerics to engage in the first-mentioned kind of exchange, which is directed to supply the necessaries of life, either by buying or by selling.'[3] The rule of St. Benedict contains a strong admonition to those who may be entrusted with the sale of any of the products of the monastery, to avoid all fraud and avarice.[4] [Footnote 1: Eccles. xxvi. 28.] [Footnote 2: 2 Tim. ii. 4.] [Footnote 3: _Summa_, II. ii. 77, 4, ad. 3.] [Footnote 4: _Beg. St. Ben._, 57.] On the whole, the attitude towards commerce seems to have grown more liberal in the course of the Middle Ages. At first all commerce was condemned as sinful; at a later period it was said to be justifiable provided it was influenced by good motives; while at a still later date the method of treatment was rather to regard it as a colourless act in itself which might be rendered harmful by the presence of bad motives. This gradual broadening of the justification of commerce is probably a reflection of the necessities of the age, which witnessed a very great expansion of commerce, especially of foreign trade. In the earlier centuries remuneration for undertaking risk was prohibited on the authority of a passage in the Gregorian Decretals, but the later writers refused to disallow it.[1] The following passage from Dr. Cunningham's _Growth of English Industry and Commerce_ correctly represents the attitude of the Church towards commerce at the end of the Middle Ages: 'The ecclesiastic who regarded the merchant as exposed to temptations in all his dealings would not condemn him as sinful unless it were clear that a transaction were entered on solely for greed, and hence it was the tendency for moralists to draw additional distinctions, and refuse to pronounce against business practices where common sense did not give the benefit of the doubt.'[2] We have seen that one motive which would justify the carrying on of trade was the desire to support one's self and one's family. Of course this motive was capable of bearing a very extended and elastic interpretation, and would justify increased commercial profits according as the standard of life improved. The other motive given by the theologians, namely, the benefit of the State, was also one which was capable of a very wide construction. One must remember that even the manual labourer was bound not to labour solely for avaricious gain, but also for the benefit of his fellow-men. 'It is not only to chastise our bodies,' says Basil, 'it is also by the love of our neighbour that the labourer's life is useful so that God may furnish through us our weaker brethren';[3] and a fifteenth-century book on morality says: 'Man should labour for the honour of God. He should labour in order to gain for himself and his family the necessaries of life and what will contribute to Christian joy, and moreover to assist the poor and the sick by his labours. He who acting otherwise seeks only the pecuniary recompense of his work does ill, and his labours are but usury. In the words of St. Augustine, "thou shalt not commit usury with the work of thy hands, for thus wilt thou lose thy soul,"'[4] The necessity for altruism and regard for the needs of one's neighbour as well as of one's self were therefore motives necessary to justify labour as well as commerce; and it would be wrong to conclude that the teaching of the scholastics on the necessity for a good motive to justify trade operated to damp individual enterprise, or to discourage those who were inclined to launch commercial undertakings, any more than the insistence on the need for a similar motive in labourers was productive of idleness. What the mediæval teaching on commerce really amounted to was that, while commerce was as legitimate as any other occupation, owing to the numerous temptations to avarice and dishonesty which it involved, it must be carefully scrutinised and kept within due bounds. It was more difficult to insure the observance of the just price in the case of a sale by a merchant than in one by an artificer; and the power which the merchant possessed of raising the price of the necessaries of life on the poor by engrossing and speculation rendered him a person whose operations should be carefully controlled. [Footnote 1: Cunningham, _Growth of English Industry and Commerce_, vol. i. p. 255.] [Footnote 2: P. 255.] [Footnote 3: _Reg. Fus. Tract._, XXXVII. i.] [Footnote 4: Quoted in Janssen, _op. cit._, vol. ii. p. 9.] Finally, it must be clearly understood that the attempt of some modern writers to base the mediæval justification of commerce on an analysis of all commercial gains as the payment for labour rests on a profound misunderstanding. As we have already pointed out, Aquinas distinctly rules out of consideration in his treatment of commerce the case where the goods have been improved in value by the exertions of the merchant. When the element of labour entered into the transaction the matter was clearly beyond doubt, and the lengthy discussion devoted to the question of commerce by Aquinas and his followers shows that in justifying commercial gains they were justifying a gain resting not on the remuneration for the labour, but on an independent title. § 8. _Cambium_. There was one department of commerce, namely, _cambium_, or money-changing, which, while it did not give any difficulty in theory, involved certain difficulties in practice, owing to the fact that it was liable to be used to disguise usurious transactions. Although _cambium_ was, strictly speaking, a special branch of commerce, it was nevertheless usually treated in the works on usury, the reason being that many apparent contracts of _cambium_ were in fact veiled loans, and that it was therefore a matter of importance in discussing usury to explain the tests by which genuine and usurious exchanges could be distinguished. Endemann treats this subject very fully and ably;[1] but for the purpose of the present essay it is not necessary to do more than to state the main conclusions at which he arrives. [Footnote 1: _Studien_, vol. i. p. 75.] Although the practice of exchange grew up slowly and gradually during the later Middle Ages, and, consequently, the amount of space devoted to the discussion of the theory of exchange became larger as time went on, nevertheless there is no serious difference of opinion between the writers of the thirteenth century, who treat the subject in a fragmentary way, and those of the fifteenth, who deal with it exhaustively and systematically. Aquinas does not mention _cambium_ in the _Summa_, but he recognises the necessity for some system of exchange in the _De Eegimine Principum_.[1] All the later writers who mention _cambium_ are agreed in regarding it as a species of commerce to which the ordinary rules regulating all commerce apply. Francis de Mayronis says that the art of _cambium_ is as natural as any other kind of commerce, because of the diversity of the currencies in different kingdoms, and approves of the campsor receiving some remuneration for his labour and trouble.[2] Nicholas de Ausmo, in his commentary on the _Summa Pisana_, written in the beginning of the fifteenth century, says that the campsor may receive a gain from his transactions, provided that they are not conducted with the sole object of making a profit, and that the gain he may receive must be limited by the common estimation of the place and time. This is practically saying that _cambium_ may be carried on under the same conditions as any other species of commerce. Biel says that _cambium_ is only legitimate if the campsor has the motive of keeping up a family or benefiting the State, and that the contract may become usurious if the gain is not fair and moderate.[3] The right of the campsor to some remuneration for risk was only gradually admitted, and forms the subject of much discussion amongst the jurists.[4] This hesitation in allowing remuneration for risk was not peculiar to _cambium_, but, as we have seen above, was common to all commerce. Endemann points out how the theologians and jurists unanimously insisted that _cambium_ could not be justified except when the just price was observed, and that, when the doctrine attained its full development, the element of labour was but one of the constituents in the estimation of that price.[5] [Footnote 1: 'Cum enim extraneae monetae communicantur in permutationibus oportet recurrere ad artem campsoriam, cum talia numismata non tantum valeant in regionibus extraneis quantum in propriis (_De Reg. Prin._, ii. 13).] [Footnote 2: In _Quot. Lib. Sent._, iv. 16, 4.] [Footnote 3: _Op. oil_., IV. xv. 11.] [Footnote 4: Endemann, _Studien_, vol. i. pp. 123-36.] [Footnote 5: _Ibid._, p. 213.] All the writers who treated of exchange divided it into three kinds; ordinary exchange of the moneys of different currencies (_cambium minutum_), exchange of moneys of different currencies between different places, the justification for which rested on remuneration for an imaginary transport (_cambium per litteras_), and usurious exchange of moneys of the same currency (_cambium siccum_). The former two species of cambium were justifiable, whereas the last was condemned.[1] [Footnote 1: Laurentius de Rodulfis, _De Usuris_, pt. iii. Nos. 1 to 5.] The most complete treatise on the subject of money exchange is that of Thomas da Vio, written in 1499. The author of this treatise divides money-changing into three kinds, just, unjust, and doubtful. There were three kinds of just change; _cambium minutum_, in which the campsor was entitled to a reasonable remuneration for his labour; _cambium per litteras_, in which the campsor was held entitled to a wage (_merces_) for an imaginary transportation; and thirdly, when the campsor carried money from one place to another, where it was of higher value. The unjust change was when the contract was a usurious transaction veiled in the guise of a genuine exchange. Under the doubtful changes, the author discusses various special points which need not detain us here. Thomas da Vio then goes on to discuss whether the justifiable exchange can be said to be a species of loan, and concludes that it can not, because all that the campsor receives is an indemnity against loss and a remuneration for his labour, trouble, outlay, and risk, which is always justifiable. He then goes on to state the very important principle, that in _cambium_ money is not to be considered a measure of value, but a vendible commodity,[1] a distinction which Endemann thinks was productive of very important results in the later teaching on the subject.[2] The last question treated in the treatise is the measure of the campsor's profit, and here the contract of exchange is shown to be on all fours with every other contract, because the essential principle laid down for determining its justice is the observance of the equivalence between both parties.[1] [Footnote 1: 'Numisma quamvis sit mensura et instrumentum in permutationibus; tamen per se aliquid esse potest.' It is this principle that justifies the treatment of _cambium_ in this section rather than the next.] [Footnote 2: _Studien_, vol. ii. p. 212.] SECTION 2.--THE SALE OF THE USE OF MONEY § 1. _Usury in Greece and Rome_. The prohibition of usury has always occupied such a large place in histories of the Middle Ages, and particularly in discussions relating to the attitude of the Church towards economic questions, that it is important that its precise foundation and extent should be carefully studied. The usury prohibition has been the centre of so many bitter controversies, that it has almost become part of the stock-in-trade of the theological mob orators. The attitude of the Church towards usury only takes a slightly less prominent place than its attitude towards Galileo in the utterances of those who are anxious to convict it of error. We have referred to this current controversy, not in order that we might take a part in it, but that, on the contrary, we might avoid it. It is no part of our purpose in our treatment of this subject to discuss whether the usury prohibition was or was not suitable to the conditions of the Middle Ages; whether it did or did not impede industrial enterprise and commercial expansion; or whether it was or was not universally disregarded and evaded in real life. These are inquiries which, though full of interest, would not be in place in a discussion of theory. All we are concerned to do in the following pages is to indicate the grounds on which the prohibition of usury rested, the precise extent of its application, and the conceptions of economic theory which it indicated and involved. [Footnote 1: Brants has a very luminous and interesting section on _Cambium, Op. cit._, p. 214 _et seq_.] We must remark in the first place that the prohibition of usury was in no sense peculiar to the Catholic Church in the Middle Ages, but, on the contrary, was to be found in many other religious and legal systems--for instance, in the writings of the Greek and Roman philosophers, amongst the Jews, and the followers of Mohammed. We shall give a very brief account of the other prohibitions of usury before coming to deal with the scholastic teaching on the subject. We can find no trace of any legal prohibition of usury in ancient Greece. Although Solon's laws contained many provisions for the relief of poor debtors, they did not forbid the taking of interest, nor did they limit the rate of interest that might be taken.[1] In Rome the Twelve Tables fixed a maximum rate of interest, which was probably ten or twelve per cent, per annum, but which cannot be determined with certainty owing to the doubtful signification of the expression '_unciarum foenus_.' The legal rate of interest was gradually reduced until the year 347 B.C., when five per cent, was fixed as a maximum. In 342 B.C. interest was forbidden altogether by the Genucian Law; but this law, though never repealed, was in practice quite inoperative owing to the facility with which it could be evaded; and consequently the oppression of borrowers was prevented by the enactment, or perhaps it would be more correct to say the general recognition, of a maximum rate of interest of twelve per cent. per annum. This maximum rate--the _Centesima_--remained in operation until the time of Justinian.[2] Justinian, who was under the influence of Christian teaching, and who might therefore be expected to have regarded usury with unfavourable eyes, fixed the following maximum rates of interest--maritime loans twelve per cent.; loans to ordinary persons, not in business, six per cent.; loans to high personages (_illustres_) and agriculturists, four per cent.[3] [Footnote 1: Cleary, _The Church and Usury_, p. 21.] [Footnote 2: Hunter, _Roman Law_, pp. 652-53; Cleary, _op. cit._, pp. 22-6; Roscher, _Political Economy_, s. 90.] [Footnote 3: _Code_ 4, 32, 26, 1.] While the taking of interest was thus approved or tolerated by Greek and Roman law, it was at the same time reprobated by the philosophers of both countries. Plato objects to usury because it tends to set one class, the poor or the borrowers, against another, the rich or the lenders; and goes so far as to make it wrong for the borrower to repay either the principal or interest of his debt. He further considers that the profession of the usurer is to be despised, as it is an illiberal and debasing way of making money.[1] While Plato therefore disapproves in no ambiguous words of usury, he does not develop the philosophical bases of his objection, but is content to condemn it rather for its probable ill effects than on account of its inherent injustice. [Footnote 1: _Laws_, v. ch. 11-13.] Aristotle condemns usury because it is the most extreme and dangerous form of chrematistic acquisition, or the art of making money for its own sake. As we have seen above, in discussing the legitimacy of commerce, buying cheap and selling dear was one form of chrematistic acquisition, which could only be justified by the presence of certain motives; and usury, according to the philosopher, was a still more striking example of the same kind of acquisition, because it consisted in making money from money, which was thus employed for a function different from that for which it had been originally invented. 'Usury is most reasonably detested, as the increase of our fortune arises from the money itself, and not by employing it for the purpose for which it was intended. For it was devised for the sake of exchange, but usury multiplies it. And hence usury has received the name of [Greek: tokos], or produce; for whatever is produced is itself like its parents; and usury is merely money born of money; so that of all means of money-making it is the most contrary to nature.'[1] We need not pause here to discuss the precise significance of Aristotle's conceptions on this subject, as they are to us not so much of importance in themselves, as because they suggested a basis for the treatment of usury to Aquinas and his followers.[2] [Footnote 1: Aristotle, _Politics_, i. 10.] [Footnote 2: Cleary, _op. cit._, p. 29.] In Rome, as in Greece, the philosophers and moralists were unanimous in their condemnation of the practice of usury. Cicero condemns usury as being hateful to mankind, and makes Cato say that it is on the same level of moral obliquity as murder; and Seneca makes a point that became of some importance in the Middle Ages, namely, that usury is wrongful because it involves the selling of time.[1] Plutarch develops the argument that money is sterile, and condemns the practices of contemporary money-lenders as unjust.[2] The teaching of the philosophers as to the unlawfulness of usury was reflected in the popular feeling of the time.[3] [Footnote 1: Cleary, _op. cit._, p. 29.] [Footnote 2: _De Vitando Aere Alieno_.] [Footnote 3: Espinas, _op. cit._, pp. 81-2; Roscher, _Political Economy_, s. 90.] § 2. _Usury in the Old Testament_. The question of usury therefore attracted considerable attention in the teaching and practice of pagan antiquity. It occupied an equally important place in the Old Testament. In Exodus we find the first prohibition of usury: 'If thou lend money to any of my people being poor, thou shalt not be to him as a creditor, neither shall ye lay upon him usury.'[1] In Leviticus we read: 'And if thy brother be waxen poor, and his hand fail with thee; then, thou must uphold him; as a stranger and a sojourner shall he live with thee. Take thou no money of him or increase, but fear thy God that thy brother may live with thee. Thou shalt not give him thy money upon usury, nor give him victuals for increase.'[2] Deuteronomy lays down a wider prohibition: 'Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of anything that is lent upon usury; unto a foreigner thou mayest lend upon usury, but unto thy brother thou mayest not lend upon usury.'[3] It will be noticed that the first and second of these texts do not forbid usury except in the case of loans to the poor, and, if we had them alone to consider, we could conclude that loans to the rich or to business men were allowed. The last text, however, extends the prohibition to all loans to one's brother--an expression which was of importance in Christian times, as Christian writers maintained the universal brotherhood of man. [Footnote 1: Exod. xxii. 25.] [Footnote 2: Lev. xxv. 35.] [Footnote 3: Deut. xxiii. 19.] It is unnecessary for us to discuss the underlying considerations which prompted these ordinances. Dr. Cleary, who has studied the matter with great care, concludes that: 'The legislator was urged mostly by economic considerations.... The permission to extract usury from strangers--a permission which later writers, such as Maimonides, regarded as a command--clearly favours the view that the legislator was guided by economic principles. It is more difficult to say whether he based his legislation on the principle that usury is intrinsically unjust--that is to say, unjust even when taken in moderation. There is really nothing in the texts quoted to enable us to decide. The universality of the prohibition when there is question solely of Jews goes to show that usury as such was regarded as unjust; whilst its permission as between Jew and Gentile favours the contradictory hypothesis.'[1] Modern Jewish thought is inclined to hold the view that these prohibitions were based upon the assumption that usury was intrinsically unjust, but that the taking of usury from the Gentiles was justified on the principle of compensation; in other words, that Jews might exact usury from those who might exact it from them.[2] It is at least certain that usury was regarded by the writers of the Old Testament as amongst the most terrible of sins.[3] [Footnote 1: _Op. cit._, pp. 5-6.] [Footnote 2: _Jewish Encyclopaedia_, art. 'Usury.'] [Footnote 3: Ezek. xviii. 13; Jer. xv. 10; Ps. xiv. 5, cix. 11, cxii. 5; Prov. xxviii. 8; Hes. xviii. 8; 2 Esd. v. I _et seq._] The general attitude of the Jews towards usury cannot be better explained than by quoting Dr. Cleary's final conclusion on the subject: 'It appears therefore that in the Old Testament usury was universally prohibited between Israelite and Israelite, whilst it was permitted between Israelite and Gentile. Furthermore, it seems impossible to decide what was the nature of the obligations imposed--whether the prohibition supposed and ratified an already existing universal obligation, in charity or justice, or merely imposed a new obligation in obedience, binding the consciences of men for economic or political reasons. So, too, it seems impossible to decide absolutely whether the decrees were intended to possess eternal validity; the probabilities, however, seem to favour very strongly the view that they were intended as mere economic regulations suited to the circumstances of the time. This does not, of course, decide the other question, whether, apart from such positive regulations, there already existed an obligation arising from the natural law; nor would the passing of the positive law into desuetude affect the existence of the other obligation.'[1] [Footnote 1: _Op. cit._, pp. 17-18.] Before we pass from the consideration of the Old Testament to that of the New, we may mention that the taking of interest by Mohammedans is forbidden in the Koran.[2] [Footnote 2: ii. 30. This prohibition is universally evaded. (Roscher, _Political Economy_, s. 90.)] § 3. _Usury in the First Twelve Centuries of Christianity_. The only passage in the Gospels which bears directly on the question of usury is a verse of St. Luke, the correct reading of which is a matter of considerable difference of opinion.[1] The Revised Version reads: 'But love your enemies, and do them good, and lend, never despairing (_nihil desperantes_); and your reward shall be great.' If this be the true reading of the verse, it does not touch the question of usury at all, as it is simply an exhortation to lend without worrying whether the debtor fail or not.[2] The more generally received reading of this verse, however, is that adopted by the Vulgate, 'mutuum date, nihil inde sperantes'--'lend hoping for nothing thereby.' If this be the correct reading, the verse raises considerable difficulties of interpretation. It may simply mean, as Mastrofini interprets it, that all human actions should be performed, not in the hope of obtaining any material reward, but for the love of God and our neighbour; or it may contain an actual precept or counsel relating to the particular subject of loans. If the latter be the correct interpretation, the further question arises whether the recommendation is to renounce merely the interest of a loan or the principal as well. We need not here engage on the details of the controversy thus aroused; it is sufficient to say that it is the almost unanimous opinion of modern authorities that the verse recommends the renunciation of the principal as well as the interest; and that, if this interpretation is correct, the recommendation is not a precept, but a counsel.[3] Aquinas thought that the verse was a counsel as to the repayment of the principal, but a precept as to the payment of interest, and this opinion is probably correct.[4] With the exception of this verse, there is not a single passage in the Gospels which prohibits the taking of usury. [Footnote 1: Luke vi. 35.] [Footnote 2: Cleary, _op. cit._, p. 33, following Knabenbaur.] [Footnote 3: Cleary, _op. cit._, p. 34.] [Footnote 4: _Ibid._, p. 35.] We must now give some account of the teaching on usury which was laid down by the Fathers and early councils of the Church; but at the same time we shall not attempt to treat this in an exhaustive way, because, although the early Christian teaching is of interest in itself, it exercised little or no influence upon the great philosophical treatment of the same subject by Aquinas and his followers, which is the principal subject to be discussed in these pages. The first thing we must remark is that the prohibition of usury was not included by the Council of Jerusalem amongst the 'necessary things' imposed upon converts from the Gentiles.[1] This would seem to show that the taking of usury was not regarded as unlawful by the Apostles, who were at pains expressly to forbid the commission of offences, the evil of which must have appeared plainly from the natural law--for instance, fornication. The _Didache_, which was used as a book of catechetical instruction for catechumens, does not specifically mention usury; the forcing of the repayment of loans from the poor who are unable to pay is strongly reprobated; but this is not so in the case of the rich.[2] Clement of Alexandria expressly limits his disapprobation of usury to the case of loans between brothers, whom he defines as 'participators in the same word,' _i.e._ fellow-Christians; and in any event it is clear that he regards it as sin against charity, but not against justice.[3] [Footnote 1: Acts xv. 29.] [Footnote 2: _Didache_, ch. i.; Cleary, _op. cit._, p. 39.] [Footnote 3: _Stromata_, ii. 18.] Tertullian is one of the first of the Fathers to lay down positively that the taking of usury is sinful. He regards it as obviously wrong for Christians to exact usury on their loans, and interprets the passage of St. Luke, to which we have referred, as a precept against looking for even the repayment of the principal.[1] On the other hand, Cyprian, writing in the same century, although he declaims eloquently and vigorously against the usurious practices of the clergy, does not specifically express the opinion that the taking of usury is wrong in itself.[2] [Footnote 1: _Ad Marcion_, iv. 17.] [Footnote 2: _Le Lapsis_, ch. 5-6; Cleary, _op. cit._, pp. 42-3.] Thus, during the first three centuries of Christianity, there does not seem to have been, as far as we can now ascertain, any definite and general doctrine laid down on the subject of usury. In the year 305 or 306 a very important step forward was taken, when the Council of Elvira passed a decree against usury. This decree, as given by Ivo and Gratian, seems only to have applied to usury on the part of the clergy, but as given by Mansi it affected the clergy and laity alike. 'Should any cleric be found to have taken usury,' the latter version runs, 'let him be degraded and excommunicated. Moreover, if any layman shall be proved a usurer, and shall have promised, when corrected, to abstain from the practice, let him be pardoned. If, on the contrary, he perseveres in his evil-doing, he is to be excommunicated.'[1] Although the Council of Elvira was but a provincial Council, its decrees are important, as they provided a model for later legislation. Dr. Cleary thinks that Mansi's version of this decree is probably incorrect, and that, therefore, the Council only forbade usury on the part of the clergy. In any event, with this one possible and extremely doubtful exception, there was no conciliar legislation affecting the practice of usury on the part of the laity until the eighth century. Certain individual popes censured the taking of usury by laymen, and the Council of Nice expressed the opinion that such a practice was contrary to Christ's teaching, but there is nowhere to be found an imperative and definite prohibition of the taking of usury except by the clergy.[2] [Footnote 1: Cleary, _op. cit._, p. 43.] [Footnote 2: Cleary, _op. cit._, pp. 44-8.] The inconclusive result of the Christian teaching up to the middle of the fourth century is well summarised by Dr. Cleary: 'Hitherto we have encountered mere prohibitions of usury with little or no attempt to assign a reason for them other than that of positive legislation. Most of the statements of these early patristic writers, as well as possibly all of the early Christian legislative enactments, deal solely with the practice of usury by the clergy; still, there is sufficient evidence to show that in those days it was reprobated even for the Christian laity, for the _Didache_ and Tertullian clearly teach or presuppose its prohibition, while the oecumenical Council of Nice certainly presupposed its illegality for the laity, though it failed to sustain its doctrinal presuppositions with corresponding ecclesiastical penalties. With the exception of some very vague statements by Cyprian and Clement of Alexandria, we find no attempt to state the nature of the resulting obligation--that is to say, we are not told whether there is an obligation of obedience, of justice, or of charity. The prohibition indeed seems to be regarded as universal; and it may very well be contended that for the cases the Fathers consider it was in fact universal--for the loans with which they are concerned, being necessitous, should be, in accordance with Christian charity, gratuitous--even if speculatively usurious loans in general were not unjust.'[1] [Footnote 1: _Op. cit._, pp. 48-9.] The middle of the fourth century marked the opening of a new period--'a period when oratorical denunciations are profuse, and when consequently philosophical speculation, though fairly active, is of too imaginative a character to be sufficiently definite.'[1] St. Basil's _Homilies on the Fourteenth Psalm_ contain a violent denunciation of usury, the reasoning of which was repeated by St. Gregory of Nyssa[2] and St. Ambrose.[3] These three Fathers draw a terrible picture of the state of the poor debtor, who, harassed by his creditors, falls deeper and deeper into despair, until he finally commits suicide, or has to sell his children into slavery. Usury was therefore condemned by these Fathers as a sin against charity; the passage from St. Luke was looked on merely as a counsel in so far as it related to the repayment of the principal, but as a precept so far as it related to usury; but the notion that usury was in its very essence a sin against justice does not appear to have arisen. The natural sterility of money is referred to, but not developed; and it is suggested, though not categorically stated, that usury may be taken from wealthy debtors.[4] [Footnote 1: Cleary, _op. cit._, p. 49.] [Footnote 2: _Contra Usurarios_.] [Footnote 3: _De Tobia_.] [Footnote 4: Cleary, _op. cit._, p. 52.] The other Fathers of the later period do not throw very much light on the question of how usury was regarded by the early Church. St. Hilary[1] and Jerome[2] still base their objection on the ground of its being an offence against charity; and St. Augustine, though he would like to make restitution of usury a duty, treats the matter from the same point of view.[3] On the other hand, there are to be found patristic utterances in favour of the legality of usury, and episcopal approbations of civil codes which permitted it.[4] The civil law did not attempt to suppress usury, but simply to keep it within due bounds.[5] The result of the patristic teaching therefore was on the whole unsatisfactory and inconclusive. 'Whilst patristic opinion,' says Dr. Cleary, 'is very pronounced in condemning usury, the condemnation is launched against it more because of its oppressiveness than for its intrinsic injustice. As Dr. Funk has pointed out, one can scarcely cite a single patristic opinion which can be said clearly to hold that usury is against justice, whilst there are, on the contrary, certain undercurrents of thought in many writers, and certain explicit statements in others, which tend to show that the Fathers would not have been prepared to deal so harshly with usurers, did usurers not treat their debtors so cruelly.... Of keen philosophical analysis there is none.... On the whole, we find the teachings of the Fathers crude and undeveloped.'[6] [Footnote 1: In Ps. xiv.] [Footnote 2: _Ad Ezech._] [Footnote 3: Cleary, _op. cit._, p. 56.] [Footnote 4: _Ibid._ pp. 56-7.] [Footnote 5: _Justinian Code_, iv. 32.] [Footnote 6: _Op. cit._, pp. 57-9. On the patristic teaching on usury, see Espinas, _Op. cit._, pp. 82-4; Roscher, _Political Economy_, s. 90; Antoine, _Cours d'Economie sociale_, pp. 588 _et seq_.] The practical teaching with regard to the taking of usury made an important advance in the eighth and ninth centuries, although the philosophical analysis of the subject did not develop any more fully. A capitulary canon made in 789 decreed 'that each and all are forbidden to give anything on usury'; and a capitulary of 813 states that 'not only should the Christian clergy not demand usury, laymen should not.' In 825 it was decreed that the counts were to assist the bishops in their suppression of usury; and in 850 the Synod of Ticinum bound usurers to restitution.[1] The underlying principles of these enactments is as obscure as their meaning is plain and definite. There is not a single trace of the keen analysis with which Aquinas was later to illuminate and adorn the subject. [Footnote 1: These are but a few of the enactments of the period directed against usury (Cleary, _op. cit._, p. 61; Favre, _Le prêt à intérêt dans l'ancienne France_).] § 4. _The Mediæval Prohibition of Usury_. The tenth and eleventh centuries saw no advance in the teaching on usury. The twelfth century, however, ushered in a new era. 'Before that century controversy had been mostly confined to theologians, and treated theologically, with reference to God and the Bible, and only rarely with regard to economic considerations. After the twelfth century the discussion was conducted on a gradually broadening economic basis--appeals to the Fathers, canonists, philosophers, the _jus divinum_, the _jus naturale_, the _jus humanum_, became the order of the day.'[1] Before we proceed to discuss the new philosophical or scholastic treatment of usury which was inaugurated for all practical purposes by Aquinas, we must briefly refer to the ecclesiastical legislation on the subject. [Footnote 1: Böhm-Bawerk, _Capital and Interest_, p. 19.] In 1139 the second Lateran Council issued a very strong declaration against usurers. 'We condemn that disgraceful and detestable rapacity, condemned alike by human and divine law, by the Old and the New Testaments, that insatiable rapacity of usurers, whom we hereby cut off from all ecclesiastical consolation; and we order that no archbishop, bishop, abbot, or cleric shall receive back usurers except with the very greatest caution, but that, on the contrary, usurers are to be regarded as infamous, and shall, if they do not repent, be deprived of Christian burial.'[1] It might be argued that this decree was aimed against immoderate or habitual usury, and not against usury in general, but all doubt as regards the attitude of the Church was set at rest by a decree of the Lateran Council of 1179. This decree runs: 'Since almost in every place the crime of usury has become so prevalent that many people give up all other business and become usurers, as if it were lawful, regarding not its prohibition in both Testaments, we ordain that manifest usurers shall not be admitted to communion, nor, if they die in their sins, be admitted to Christian burial, and that no priest shall accept their alms.'[2] Meanwhile, Alexander III., having given much attention to the subject of usury, had come to the conclusion that it was a sin against justice. This recognition of the essential injustice of usury marked a turning-point in the history of the treatment of the subject; and Alexander III. seems entitled to be designated the 'pioneer of its scientific study.'[3] Innocent III. followed Alexander in the opinion that usury was unjust in itself, and from his time forward there was but little further disagreement upon the matter amongst the theologians.[4] [Footnote 1: Cleary, _op. cit._, p. 64.] [Footnote 2: _Ibid._] [Footnote 3: Cleary, _op. cit._, p. 65.] [Footnote 4: _Ibid._, p. 68.] In 1274 Gregory X., in the Council of Lyons, ordained that no community, corporation, or individual should permit foreign usurers to hire houses, but that they should expel them from their territory; and the disobedient, if prelates, were to have their lands put under interdict, and, if laymen, to be visited by their ordinary with ecclesiastical censures.[1] By a further canon he ordained that the wills of usurers who did not make restitution should be invalid.[2] This brought usury definitely within the jurisdiction of the ecclesiastical courts.[3] In 1311 the Council of Vienne declared all secular legislation in favour of usury null and void, and branded as heresy the belief that usury was not sinful.[4] The precise extent and interpretation of this decree have given rise to a considerable amount of discussion,[5] which need not detain us here, because by that time the whole question of usury had come under the treatment of the great scholastic writers, whose teaching is more particularly the subject matter of the present essay. [Footnote 1: _Liber Sextus_, v. 5, 1.] [Footnote 2: _Ibid._, c. 2.] [Footnote 3: Ashley, _op. cit._, vol. i. pt. i. p. 150.] [Footnote 4: _Clementinarum_, v. 5, 1.] [Footnote 5: Cleary, _op. cit._, pp. 74-8.] Even as late as the first half of the thirteenth century there was no serious discussion of usury by the theologians. William of Paris, Alexander of Hales, and Albertus Magnus simply pronounced it sinful on account of the texts in the Old and New Testaments, which we have quoted above.[1] It was Aquinas who really put the teaching on usury upon the new foundation, which was destined to support it for so many hundred years, and which even at the present day appeals to many sympathetic and impartial inquirers. Mr. Lecky apologises for the obscurity of his account of the argument of Aquinas, but adds that the confusion is chiefly the fault of the latter;[2] but the fact that Mr. Lecky failed to grasp the meaning of the argument should not lead one to conclude that the argument itself was either confused or illogical. The fact that it for centuries remained the basis of the Catholic teaching on the subject is a sufficient proof that its inherent absurdity did not appear apparent to many students at least as gifted as Mr. Lecky. We shall quote the article of Aquinas at some length, because it was universally accepted by all the theologians of the fourteenth and fifteenth centuries, with whose opinions we are concerned in this essay. To quote later writings is simply to repeat in different words the conclusions at which Aquinas arrived.[3] [Footnote 1: Jourdain, _op. cit._, p. 15.] [Footnote 2: _Rise and Influence, of Rationalism in Europe_, vol. ii. p. 261.] [Footnote 3: Endemann, _Studien_, vol. i. p. 17.] In answer to the question 'whether it is a sin to take usury for money lent,' Aquinas replies: 'To take usury for money lent is unjust in itself, because this is to sell what does not exist, and this evidently leads to inequality, which is contrary to justice. 'In order to make this evident, we must observe that there are certain things the use of which consists in their consumption; thus we consume wine when we use it for drink, and we consume wheat when we use it for food. Wherefore in such-like things the use of the thing must not be reckoned apart from the thing itself, and whoever is granted the use of the thing is granted the thing itself; and for this reason to lend things of this kind is to transfer the ownership. Accordingly, if a man wanted to sell wine separately from the use of the wine, he would be selling the same thing twice, or he would be selling what does not exist, wherefore he would evidently commit a sin of injustice. In like manner he commits an injustice who lends wine or wheat, and asks for double payment, viz. one, the return of the thing in equal measure, the other, the price of the use, which is called usury. 'On the other hand, there are other things the use of which does not consist in their consumption; thus to use a house is to dwell in it, not to destroy it. Wherefore in such things both may be granted; for instance, one man may hand over to another the ownership of his house, while reserving to himself the use of it for a time, or, _vice versa_, he may grant the use of a house while retaining the ownership. For this reason a man may lawfully make a charge for the use of his house, and, besides this, revendicate the house from the person to whom he has granted its use, as happens in renting and letting a house. 'But money, according to the philosopher,[1] was invented chiefly for the purpose of exchange; and consequently the proper and principal use of money is its consumption or alienation, whereby it is sunk in exchange. Hence it is by its very nature unlawful to take payment for the use of money lent, which payment is known as usury; and, just as a man is bound to restore other ill-gotten goods, so he is bound to restore the money which he has taken in usury.'[2] [Footnote 1: _Eth._ v. _Pol_. 1.] [Footnote 2: II. ii. 78, 1.] The essential thing to notice in this explanation is that the contract of _mutuum_ is shown to be a sale. The distinction between things which are consumed in use (_res fungibiles_), and which are not consumed in use (_res non fungibiles_) was familiar to the civil lawyers; but what they had never perceived was precisely what Aquinas perceived, namely, that the loan of a fungible thing was in fact not a loan at all, but a sale, for the simple reason that the ownership in the thing passed. Once the transaction had been shown to be a sale, the principle of justice to be applied to it became obvious. As we have seen above, in treating of sales, the essential basis of justice in exchange was the observance of _aequalitas_ between buyer and seller--in other words, the fixing of a just price. The contract of _mutuum_, however, was nothing else than a sale of fungibles, and therefore the just price in such a contract was the return of fungibles of the same value as those lent. If the particular fungible sold happened to be money, the estimation of the just price was a simple matter--it was the return of an amount of money of equal value. As money happened to be the universal measure of value, this simply meant the return of the same amount of money. Those who maintained that something additional might be claimed for the use of the money lost sight of the fact that the money was incapable of being used apart from its being consumed.[1] To ask for payment for the sale of a thing which not only did not exist, but which was quite incapable of existence, was clearly to ask for something for nothing--which obviously offended against the first principles of commutative justice. 'He that is not bound to lend,' says Aquinas in another part of the same article, 'may accept repayment for what he has done, but he must not exact more. Now he is repaid according to equality of justice if he is repaid as much as he lent, wherefore, if he exacts more for the usufruct of a thing which has no other use but the consumption of its substance, he exacts a price of something non-existent, and so his exaction is unjust.'[2] And in the next article the principle that _mutuum_ is a sale appears equally clearly: 'Money cannot be sold for a greater sum than the amount lent, which has to be paid back.'[3] [Footnote 1: Aquinas did not lose sight of the fact that money might, in certain cases, be used apart from being consumed--for instance, when it was not used as a means of exchange, but as an ornament. He gives the example of money being sewn up and sealed in a bag to prevent its being spent, and in this condition lent for any purpose. In this case, of course, the transaction would not be a _mutuum_, but a _locatio et conductio_, and therefore a price could be charged for the use of the money (_Quaestiones Disputatae de Malo_, Q. xiii. art. iv. ad. 15, quoted in Cronin's _Ethics_, vol. ii. p. 332).] [Footnote 2: II. ii. 78, 1, ad. 5.] [Footnote 3: II. ii. 78, 2, ad. 4. Biel distinguishes three kinds of exchange: of goods for goods, or barter; of goods for money, or sale; and of money for money; and adds, 'In his contractibus ... generaliter justitia in hoc consistit quod fiant sine fraude, et servetur aequalitas substantiae, qualitatis, quantitatis in commutatis (_Op. cit._, IV. xv. 1). Buridan says that usury is contrary to natural law 'ex conditione justitiae quae in aequalitate damni et lucri consistit; quoniam injustum est pro re semel commutata pluries pretium recipere' (In _Lib. Pol._, iv. 6).] The difficulty which moderns find in understanding this teaching, is that it is said to be based on the sterility of money. A moment's thought, however, will convince us that money is in fact sterile until labour has been applied to it. In this sense money differs in its essence from a cow or a tree. A cow will produce calves, or a tree will produce fruit without the application of any exertion by its owner; but, whatever profit is derived from money, is derived from the use to which it is put by the person who owns it. This is all that the scholastics meant by the sterility of money. They never thought of denying that money, when properly used, was capable of bringing its employer a profit; but they emphatically asserted that the profit was due to the labour, and not to the money. Antoninus of Florence clearly realised this: 'Money is not profitable of itself alone, nor can it multiply itself, but it may become profitable through its employment by merchants';[1] and Bernardine of Sienna says: 'Money has not simply the character of money, but it has beyond this a productive character, which we commonly call capital.'[2] 'What is money,' says Brants, 'if it is not a means of exchange, of which the employment and preservation will give a profit, if he who possesses it is prudent, active, and intelligent? If this money is well employed, it will become a capital, and one may derive a profit from it; but this profit arises from the activity of him who uses it, and consequently this profit belongs to him--it is the fruit, the remuneration of his labour.... Did they (the scholastics) say that it was impossible to draw a profit from a sum of money? No; they admitted fully that one might _de pecunia lucrari_; but this _lucrum_ does not come from the _pecunia_, but from the application of labour to the sum.'[3] [Footnote 1: Quoted in Brants, _op. cit._, p. 134.] [Footnote 2: _Ibid._] [Footnote 3: Brants, _op. cit._, pp. 133-5; Nider, _De Cont. Merc._ iii. 15.] Therefore, if the borrower did not derive any profit from the loan, the sum lent had in fact been sterile, and obviously the just price of the loan was the return of the amount lent; if, on the contrary, the borrower had made a profit from it, it was the reward of his labour, and not the fruit of the loan itself. To repay more than the sum lent would therefore be to make a payment to one person for the labour of another.[1] The exaction of usury was therefore the exploitation of another man's exertion.[2] [Footnote 1: Gerson, _De Cont._, iv. 15.] [Footnote 2: Neumann, when he says that 'it was sinful to recompense the use of capital belonging to another' (_Geschichte des Wuchers in Deutschland_, p. 25), seems to miss the whole point of the discussion. The teaching of the canonists on rents and partnership shows clearly that the owner of capital might draw a profit from another's labour, and the central point of the usury teaching was that money which has been lent, and employed so as to produce a profit by the borrower, belongs not 'to another,' but to the very man who employed it, namely, the borrower.] It is interesting to notice how closely the rules applying in the case of sales were applied to usury. The raising of the price of a loan on account of some special benefit derived from it by the borrower is precisely analogous to raising the sale price of an object because it is of some special individual utility to the buyer. On the other hand, as we shall see further down, any special damage suffered by the lender was a sufficient reason for exacting something over and above the amount lent; this was precisely the rule that applied in the case of sales, when the seller suffered any special damage from parting with the object sold. Thus the analogy between sales and loans was complete at every point. In both, equality of sacrifice was the test of justice. Nor could it be suggested that the delay in the repayment of the loan was a reason for increasing the amount to be repaid, because this really amounted to a sale of time, which, of its nature, could not be owned.[1] [Footnote 1: Rambaud, _op. cit._, p. 63; Aquinas(?), _De Usuris_, i. 4.] The scholastic teaching, then, on the subject was quite plain and unambiguous. Usury, or the payment of a price for the use of a sum lent in addition to the repayment of the sum itself, was in all cases prohibited. The fact that the payment demanded was moderate was irrelevant; there could be no question of the reasonableness of the amount of an essentially unjust payment.[1] Nor was the payment of usury rendered just because the loan was for a productive purpose--in other words, a commercial loan. Certain writers have maintained that in this case usury was tolerated;[2] but they can easily be refuted. As we have seen above, _mutuum_ was essentially a sale, and, therefore, no additional price could be charged because of some special individual advantage enjoyed by the buyer (or borrower). It was quite impossible to distinguish, according to the scholastic teaching, between taking an additional payment because the lender made a profit by using the loan wisely, and taking it because the borrower was in great distress, and therefore derived a greater advantage from the loan than a person in easier circumstances. The erroneous notion that loans for productive purposes were entitled to any special treatment was finally dispelled in 1745 by an encyclical of Benedict XIV.[3] [Footnote 1: Jourdain, _op. cit._, p. 35.] [Footnote 2: _E.g._ Périn, _Premiers Principes d'Économie politique_, p. 305; Claudio Jannet, _Capital Spéculation et Finance_, p. 83; De Metz-Noblat, _Lois économiques_, p. 293.] [Footnote 3: Rambaud, _op. cit._, p. 69.] § 5. _Extrinsic Titles_. Usury, therefore, was prohibited in all cases. Many people at the present day think that the prohibition of usury was the same thing as the prohibition of interest. There could not be a greater mistake. While usury was in all circumstances condemned, interest was in every case allowed. The justification of interest rested on precisely the same ground as the prohibition of usury, namely, the observance of the equality of commutative justice. It was unjust that a greater price should be paid for the loan of a sum of money than the amount lent; but it was no less unjust that the lender should find himself in a worse position because of his having made the loan. In other words, the consideration for the loan could not be increased because of any special benefit which it conferred on the borrower, but it could be increased on account of any special damage suffered by the lender--precisely the same rule as we have seen applied in the case of sales. The borrower must, in addition to the repayment of the loan, indemnify the lender for any damage he had suffered. The measure of the damage was the difference between the lender's condition before the loan was made and after it had been repaid--in other words, he was entitled to compensation for the difference in his condition occasioned by the transaction--_id quod interest_. Before we discuss interest properly so called, we must say a word about another analogous but not identical title of compensation, namely, the _poena conventionalis_. It was a very general practice, about the legitimacy of which the scholastics do not seem to have had any doubt, to attach to the original contract of loan an agreement that a penalty should be paid in case of default in the repayment of the loan at the stipulated time.[1] The justice of the _poena conventionalis_ was recognised by Alexander of Hales,[2] and by Duns Scotus, who gives a typical form of the stipulation as follows: 'I have need of my money for commerce, but shall lend it to you till a certain day on the condition that, if you do not repay it on that day, you shall pay me afterwards a certain sum in addition, since I shall suffer much injury through your delay.'[3] The _poena conventionalis_ must not be confused with either of the titles _damnum emergens_ or _lucrum cessans_, which we are about to discuss; it was distinguished from the former by being based upon a presumed injury, whereas the injury in _damnum emergens_ must be proved; and for the latter because the damage must be presumed to have occurred after the expiration of the loan period, whereas in _lucrum cessans_ the damage was presumed to have occurred during the currency of the loan period. The important thing to remember is that these titles were really distinct.[4] The essentials of a _poena conventionalis_ were, stipulation from the first day of the loan, presumption of damage, and attachment to a loan which was itself gratuitous.[5] The _Summa Astesana_ clearly maintained the distinction between the two titles of compensation,[6] as also did the _Summa Angelica_.[7] [Footnote 1: Ashley, _op. cit._, vol. i. pt. i. p. 399.] [Footnote 2: Biel, _op. cit._, iv. 15, 11.] [Footnote 3: Cleary, _op. cit._, p. 93.] [Footnote 4: _Ibid._, p. 95.] [Footnote 5: Cleary, _op. cit._, p. 94.] [Footnote 6: Endemann, _Studien_, vol. i. p. 20.] [Footnote 7: ccxl.] The first thing to be noted on passing from the _poena conventionalis_ to interest proper is that the latter ground of compensation was generally divided into two kinds, _damnum emergens_ and _lucrum cessans_. The former included all cases where the lender had incurred an actual loss by reason of his having made the loan; whereas the latter included all cases where the lender, by parting with his money, had lost the opportunity of making a profit. This distinction was made at least as early as the middle of the thirteenth century, and was always adopted by later writers.[1] [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 399.] The title _damnum emergens_ never presented any serious difficulty. It was recognised by Albertus Magnus,[1] and laid down so clearly by Aquinas that it was not afterwards questioned: 'A lender may without sin enter an agreement with the borrower for compensation for the loss he incurs of something he ought to have, for this is not to sell the use of money, but to avoid a loss. It may also happen that the borrower avoids a greater loss than the lender incurs, wherefore the borrower may repay the lender with what he has gained.'[2] The usual example given to illustrate how _damnum emergens_ might arise, was the case of the lender being obliged, on account of the failure of the borrower, to borrow money himself at usury.[3] [Footnote 1: Roscher, _Geschichte_, p. 27.] [Footnote 2: II. ii. 78, 2, ad. 1.] [Footnote 3: Ashley, _op. cit._, vol. i. pt. i. p. 400.] Closely allied to the title of _damnum emergens_ was that of _lucrum cessans_. According to some writers, the latter was the only true interest. Dr. Cleary quotes some thirteenth-century documents in which a clear distinction is made between _damnum_ and _interesse_;[1] and it seems to have been the common custom in Germany at a later date to distinguish between _interesse_ and _schaden_.[2] Although the division between these two titles was very indefinite, they did not meet recognition with equal readiness; the title _damnum emergens_ was universally admitted by all authorities; while that of _lucrum cessans_ was but gradually admitted, and hedged round with many limitations.[3] [Footnote 1: _Op. cit._, p. 95.] [Footnote 2: Ashley, _op. cit._, vol. i. pt. ii. p. 401.] [Footnote 3: Cleary, _op. cit._, p. 98; Endemann, _Studien_, vol. ii. p. 279; Bartolus and Baldus said that _damnum emergens_ and _lucrum cessans_ were divided by a very narrow line, and that it was often difficult to distinguish between them. They suggested that the terms _interesse proximum_ and _interesse remotum_ would be more satisfactory, but they were not followed by other writers (Endemann, _Studien_, vol. ii, pp. 269-70).] The first clear recognition of the title _lucrum cessans_ occurs in a letter from Alexander III., written in 1176, and addressed to the Archbishop of Genoa: 'You tell us that it often happens in your city that people buy pepper and cinnamon and other wares, at the time worth not more than five pounds, promising those from whom they received them six pounds at an appointed time. Though contracts of this kind and under such a form cannot strictly be called usurious, yet, nevertheless, the vendors incur guilt, unless they are really doubtful whether the wares might be worth more or less at the time of payment. Your citizens will do well for their own salvation to cease from such contracts.'[1] As Dr. Cleary points out, the trader is held by this decision to be entitled to a recompense on account of a probable loss of profit, and the decision consequently amounts to a recognition of the title _lucrum cessans_.[2] The title is also recognised by Scotus and Hostiensis.[3] [Footnote 1: _Decr. Greg._ v. 5, 6.] [Footnote 2: _Op. cit._, p. 67.] [Footnote 3: _Ibid._, p. 99.] The attitude of Aquinas to the admission of _lucrum cessans_ is obscure. In the article on usury he expressly states that 'the lender cannot enter an agreement for compensation through the fact that he makes no profit out of his money, because he must not sell that which he has not yet, and may be prevented in many ways from having.'[1] Two comments must be made on this passage; first, that it only refers to making a stipulation in advance for compensation for profit lost, and does not condemn the actual payment of compensation;[2] second, that the point is made that the probability of gaining a profit on money is so problematical as to make it unsaleable. As Ashley points out, the latter consideration was peculiarly important at the time when the _Summa_ was composed; and, when in the course of the following two centuries the opportunities for reasonably safe and profitable business investments increased, the great theologians conceived that they were following the real thought of Aquinas by giving to this explanation a pure _contemporanea expositio_. The argument in favour of this construction is strengthened by a reference to the article of the _Summa_ dealing with restitution,[3] where it is pointed out that a man may suffer in two ways--first, by being deprived of what he actually has, and, second, by being prevented from obtaining what he was on his way to obtain. In the former case an equivalent must always be restored, but in the latter it is not necessary to make good an equivalent, 'because to have a thing virtually is less than to have it actually, and to be on the way to obtain a thing is to have it merely virtually or potentially, and so, were he to be indemnified by receiving the thing actually, he would be paid, not the exact value taken from him, but more, and this is not necessary for salvation. However, he is bound to make some compensation according to the condition of persons and things.' Later in the same article we are told that 'he that has money has the profit not actually, but only virtually; and it may be hindered in many ways.'[4] It seems quite clear from these passages that Aquinas admitted the right to compensation for a profit which the lender was hindered from making on account of the loan; but that, in the circumstances of the time, the probability of making such a profit was so remote that it could not be made the basis of pecuniary compensation. The probability of there being a _lucrum cessans_ was thought small, but the justice of its reward, if it did in fact exist, was admitted. [Footnote 1: II. ii. 78, 2, ad. 1.] [Footnote 2: Rambaud, _op. cit._, p. 67.] [Footnote 3: II. ii. 62, 4.] [Footnote 4: _Ibid._, ad. 1 and 2.] This interpretation steadily gained ground amongst succeeding writers; so that, in spite of some lingering opposition, the justice of the title _lucrum cessans_ was practically universally admitted by the theologians of the fifteenth century.[1] [Footnote 1: Ashley, _op. cit._, p. 99. _Lucrum cessans_ was defined by Navarrus as 'amissio facta a creditore per pecuniam sibi non redditam' (Endemann, _Studien_, vol. ii. p. 279).] Of course the burden of proving that an opportunity for profitable investment had been really lost was on the lender, but this onus was sufficiently discharged if the probability of such a loss were established. In the fifteenth century, with the expansion of commerce, it came to be generally recognised that such a probability could be presumed in the case of the merchant or trader.[1] The final condition of this development of the teaching on _lucrum cessans_ is thus stated by Ashley:[2] 'Any merchant, or indeed any person in a trading centre where there were opportunities of business investment (outside money-lending itself) could, with a perfectly clear conscience, and without any fear of molestation, contract to receive periodical interest from the person to whom he lent money; _provided only_ that he first lent it to him gratuitously, for a period that might be made very short, so that technically the payment would not be reward for the use, but compensation for the non-return of the money.' At a later period than that of which we are treating in the present essay the short gratuitous period could be dispensed with, but until the end of the fifteenth century it seems to have been considered essential.[3] [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 402.] [Footnote 2: _Ibid._] [Footnote 3: Ashley, _op. cit._ vol. i. pt. ii. p. 402; Endemann, _Studien_, vol. ii. pp. 253-4; Cleary, _op. cit._, p. 100.] Of course the amount paid in respect of _lucrum cessans_ must be reasonable in regard to the loss of opportunity actually experienced; 'Lenders,' says Buridan, 'must not take by way of _lucrum cessans_ more than they would have actually made by commerce or in exchange';[1] and Ambrosius de Vignate explains that compensation must only be made for 'the time and just _interesse_ of the lost gain, which must be certain and proximate.'[2] [Footnote 1: _Eth._, iv. 6.] [Footnote 2: _De Usuris_, c. 10.] There was another title on account of which more than the amount of the loan could be recovered, namely, _periculum sortis_. In one sense it was a contradiction in terms to speak of the element of risk in connection with usury, because from its very definition usury was gain without risk as opposed to profit from a trading partnership, which, as we shall see presently, consisted of gain coupled with the risk of loss. It could not be lost sight of, however, that in fact there might be a risk of the loan not being repaid through the insolvency of the borrower, or some other cause, and the question arose whether the lender could justly claim any compensation for the undertaking of this risk. 'Regarded as an extrinsic title, risk of losing the principal is connected with the contract of _mutuum_, and entitles the lender to some compensation for running the risk of losing his capital in order to oblige a possibly insolvent debtor. The greater the danger of insolvency, the greater naturally would be the charge. The contract was indifferent to the object of the loan; it mattered not whether it was intended for commerce or consumption; it was no less indifferent to profit on the part of the borrower; it took account simply of the latter's ability to pay, and made its charge accordingly. It resembled consequently the contracts made by insurance companies, wherein there is a readiness to risk the capital sum for a certain rate of payment; the only difference was that the probabilities charged for were not so much the likelihood of having to pay, as the likelihood of not receiving back.'[1] [Footnote 1: Cleary, _op. cit._, p. 115.] We have referred above, when dealing with the legitimacy of commercial profits, to the difficulty which was felt in admitting the justice of compensation for risk, on account of the Gregorian Decretal on the subject. The same decree gave rise to the same difficulty in connection with the justification of a recompense for _periculum sortis_. There was a serious dispute about the actual wording of the decree, and even those who agreed as to its wording differed as to its interpretation.[1] The justice of the title was, however, admitted by Scotus, who said that it was lawful to stipulate for recompense when both the principal and surplus were in danger of being lost[2]; by Carletus;[3] and by Nider.[4] The question, however, was still hotly disputed at the end of the fifteenth century, and was finally settled in favour of the admission of the title as late as 1645.[5] [Footnote 1: _Ibid._] [Footnote 2: Cleary, _op. cit._, p. 117.] [Footnote 3: _Summa Angelica Usura_, i. 38.] [Footnote 4: _De Cont. Merc._, iii. 15.] [Footnote 5: Cleary, _op. cit._, p. 117.] § 6. _Other Cases in which more than the Loan could be repaid_. We have now discussed the extrinsic titles--_poena conventionalis, damnum emergens, lucrum cessans_, and _periculum sortis_. There were other grounds also, which cannot be reduced to the classification of extrinsic titles, on which more than the amount of the loan might be justly returned to the lender. In the first place, the lender might justly receive anything that the borrower chose to pay over and above the loan, voluntarily as a token of gratitude. 'Repayment for a favour may be done in two ways,' says Aquinas. 'In one way, as a debt of justice; and to such a debt a man may be bound by a fixed contract; and its amount is measured according to the favour received. Wherefore the borrower of money, or any such thing the use of which is its consumption, is not bound to repay more than he received in loan; and consequently it is against justice if he is obliged to pay back more. In another way a man's obligation to repayment for favour received is based on a debt of friendship, and the nature of this debt depends more on the feeling with which the favour was conferred than on the question of the favour itself. This debt does not carry with it a civil obligation, involving a kind of necessity that would exclude the spontaneous nature of such a repayment.'[1] [Footnote 1: II. ii. 78, 2, ad. 2.] It was also clearly understood that it was not wrongful to borrow at usury under certain conditions. In such cases the lender might commit usury in receiving, but the borrower would not commit usury in paying an amount greater than the sum lent. It was necessary, however, in order that borrowing at usury might be justified, that the borrower should be animated by some good motive, such as the relief of his own or another's need. The whole question was settled once and for all by Aquinas: 'It is by no means lawful to induce a man to sin, yet it is lawful to make use of another's sin for a good end, since even God uses all sin for some good, since He draws some good from every evil.... Accordingly it is by no means lawful to induce a man to lend under a condition of usury; yet it is lawful to borrow for usury from a man who is ready to do so, and is a usurer by profession, provided that the borrower have a good end in view, such as the relief of his own or another's need.... He who borrows for usury does not consent to the usurer's sin, but makes use of it. Nor is it the usurer's acceptance of usury that pleases him, but his lending, which is good.'[1] [Footnote 1: II. ii. 78, 4.] We should mention here the _montes pietatis_, which occupied a prominent place among the credit-giving agencies of the later Middle Ages, although it is difficult to say whether their methods were examples of or exceptions to the doctrines forbidding usury. These institutions were formed on the model of the _montes profani_, the system of public debt resorted to by many Italian States. Starting in the middle of the twelfth century,[1] the Italian States had recourse to forced loans in order to raise reserves for extraordinary necessities, and, in order to prevent the growth of disaffection among the citizens, an annual percentage on such loans was paid. A fund raised by such means was generally called a _mons_ or heap. The propriety of the payment of this percentage was warmly contested during the fourteenth and fifteenth centuries--the Dominicans and Franciscans defending it, and the Augustinians attacking it. But its justification was not difficult. In the first place, the loans were generally, if not universally, forced, and therefore the payment of interest on them was purely voluntary. As we have seen, Aquinas was quite clear as to the lawfulness of such a voluntary payment. In the second place, the lenders were almost invariably members of the trading community, who were the very people in whose favour a recompense for _lucrum cessans_ would be allowed.[2] Laurentius de Rodulphis argued in favour of the justice of these State loans, and contended that the bondholders were entitled to sell their rights, but advised good Christians to abstain from the practice of a right about the justice of which theologians were in such disagreement[3]; and Antoninus of Florence, who was in general so strict on the subject of usury, took the same view.[4] [Footnote 1: Endemann, _Studien_, vol. i. p. 433.] [Footnote 2: Ashley, _op. cit._, vol. i. pt. i. p. 448.] [Footnote 3: _De Usuris_.] [Footnote 4: Ashley, _op. cit._, p. 449.] It was probably the example of these State loans, or _montes profani_, that suggested to the Franciscans the possibility of creating an organisation to provide credit facilities for poor borrowers, which was in many ways analogous to the modern co-operative credit banks. Prior to the middle of the fifteenth century, when this experiment was initiated, there had been various attempts by the State to provide credit facilities for the poor, but these need not detain us here, as they did not come to anything.[1] The first of the _montes pietatis_ was founded at Orvieto by the Franciscans in 1462, and after that year they spread rapidly.[2] The _montes_, although their aim was exclusively philanthropic, found themselves obliged to make a small charge to defray their working expenses, and, although one would think that this could be amply justified by the title of _damnum emergens_, it provoked a violent attack by the Dominicans. The principal antagonist of the _montes pietatis_ was Thomas da Vio, who wrote a special treatise on the subject, in which he made the point that the _montes_ charged interest from the very beginning of the loan, which was a contradiction of all the previous teaching on interest.[3] [Footnote 1: Cleary, _op. cit._, p. 108; Brants, _op. cit._, p. 159.] [Footnote 2: Perugia, 1467; Viterbo, 1472; Sevona, 1472; Assisi, 1485; Mantua, 1486; Cesana and Parma, 1488; Interamna and Lucca, 1489; Verona, 1490; Padua, 1491, etc. (Endemann, _Studien_, vol. i. p. 463).] [Footnote 3: _De Monte Pietatis_.] The general feeling of the Church, however, was in favour of the _montes_. It was felt that, if the poor must borrow, it was better that they should borrow at a low rate of interest from philanthropic institutions than at an extortionate rate from usurers; several _montes_ were established under the direct protection of the Popes;[1] and finally, in 1515, the Lateran Council gave an authoritative judgment in favour of the _montes_. This decree contains an excellent definition of usury as it had come to be accepted at that date: 'Usury is when gain is sought to be acquired from the use of a thing, not fruitful in itself, without labour, expense, or risk on the part of the lender.'[2] [Footnote 1: Cleary, _op. cit._, p. 111.] [Footnote 2: Ashley, _op. cit._, vol. i. pt. ii. p. 451.] It was generally admitted by the theologians that the taking of usury might be permitted by the civil authorities, although it was insisted that acting in accordance with this permission did not absolve the conscience of the usurer. Albertus Magnus conceded that 'although usury is contrary to the perfection of Christian laws, it is at least not contrary to civil interests';[1] and Aquinas also justified the toleration of usury by the State: 'Human laws leave certain things unpunished, on account of the condition of those who are imperfect, and who would be deprived of many advantages if all sins were strictly forbidden and punishments appointed for them. Wherefore human law has permitted usury, not that it looks upon usury as harmonising with justice, but lest the advantage of many should be hindered.'[2] Although this opinion was controverted by Ægidius Romanus,[3] it was generally accepted by later writers. Thus Gerson says that 'the civil law, when it tolerates usury in some cases, must not be said to be always contrary to the law of God or the Church. The civil legislator, acting in the manner of a wise doctor, tolerates lesser evils that greater ones may be avoided. It is obviously less of an evil that slight usury should be permitted for the relief of want, than that men should be driven by their want to rob or steal, or to sell their goods at an unfairly low price.'[4] Buridan explains that the attitude of the State towards usury must never be more than one of toleration; it must not actively approve of usury, but it may tacitly refuse to punish it.[5] [Footnote 1: Rambaud, _op. cit._, p. 65; Espinas, _op. cit._, p. 103.] [Footnote 2: II. ii. 78, 1, ad. 3.] [Footnote 3: _De Reg. Prin._, ii. 3, 11.] [Footnote 4: _De Cont._, ii. 17.] [Footnote 5: _Quaest. super. Lib. Eth._, iv. 6.] § 7. _The Justice of Unearned Income_. Many modern socialists--'Christian' and otherwise--have asserted that the teaching of the Church on usury was a pronouncement in favour of the unproductivity of capital.[1] Thus Rudolf Meyer, one of the most distinguished of 'Christian socialists,' has argued that if one recognises the productivity of land or stock, one must also recognise the productivity of money, and that therefore the Church, in denying the productivity of the latter, would be logically driven to deny the productivity of the former.[2] Anton Menger expresses the same opinion: 'There is not the least reason for attacking from the moral and religious standpoints loans at interest and usury more than any other form of unearned income. If one questions the legitimacy of loans at interest, one must equally condemn as inadmissible the other forms of profit from capital and lands, and particularly the feudal institutions of the Middle Ages.... It would have been but a logical consequence for the Church to have condemned all forms of unearned revenue.'[3] [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 427.] [Footnote 2: _Der Kapitalismus fin de siècle_, p. 29.] [Footnote 3: _Das Recht auf den Arbeiterstrag_. See the Abbé Hohoff in _Démocratie Chrétienne_, Sept. 1898, p. 284.] No such conclusion, however, can be properly drawn from the mediæval teaching. The whole discussion on usury turned on the distinction which was drawn between things of which the use could be transferred without the ownership, and things of which the use could not be so transferred. In the former category were placed all things which could be used, either by way of enjoyment or employment for productive purposes, without being destroyed in the process; and in the latter all things of which the use or employment involved the destruction. With regard to income derived from the former, no difficulty was ever felt; a farm or a house might be let at a rent without any question, the return received being universally regarded as one of the legitimate fruits of the ownership of the thing. With regard to the latter, however, a difficulty did arise, because it was felt that a so-called loan of such goods was, when analysed, in reality a sale, and that therefore any increase which the goods produced was in reality the property, not of the lender, but of the borrower. That money was in all cases sterile was never suggested; on the contrary, it was admitted that it might produce a profit if wisely and prudently employed in industry or commerce; but it was felt that such an increase, when it took place, was the rightful property of the owner of the money. But when money was lent, the owner of this money was the borrower, and therefore, when money which was lent was employed in such a way as to produce a profit, that profit belonged to the borrower, not the lender. In this way the schoolmen were strictly logical; they fully admitted that wealth could produce wealth; but they insisted that that additional wealth should accrue to the owner of the wealth that produced it. The fact is, as Böhm-Bawerk has pointed out, that the question of the productivity of capital was never discussed by the mediæval schoolmen, for the simple reason that it was so obvious. The justice of receiving an income from an infungible thing which was temporarily lent by its owner, was discussed and supported; but the justice of the owner of such a thing receiving an income from the thing so long as it remained in his own possession was never discussed, because it was universally admitted.[1] It is perfectly correct to say that the problems which have perplexed modern writers as to the justice of receiving an unearned income from one's property never occurred to the scholastics; such problems can only arise when the institution of private property comes to be questioned; and private property was the keystone of the whole scholastic economic conception. In other words, the justice of a reward for capital was admitted because it was unquestioned. [Footnote 1: _Capital and Interest_, p. 39.] The question that caused difficulty was whether money could be considered a form of capital. At the present day, when the opportunities of industrial investment are wider than they ever were before, the principal use to which money is put is the financing of industrial enterprises; but in the Middle Ages this was not the case, precisely because the opportunities of profitable investment were so few. This is the reason why the mediæval writers did not find it necessary to discuss in detail the rights of the owner of money who used it for productive purposes. But of the justice of a profit being reaped when money was actually so employed there was no doubt at all. As we have seen, the borrower of a sum of money might reap a profit from its wise employment; there was no question about the justice of taking such a profit; and the only matter in dispute was whether that profit should belong to the borrower or the lender of the money. This dispute was decided in favour of the borrower on the ground that, according to the true nature of the contract of _mutuum_, the money was his property. It was, therefore, never doubted that even money might produce a profit for its owner. The only difference between infungible goods and money was that, in the case of the former, the use might be transferred apart from the property, whereas, in the case of the latter, it could not be so transferred. The recognition of the title _lucrum cessans_ as a ground for remuneration clearly implies the recognition of the legitimacy of the owner of money deriving a profit from its use; and the slowness of the scholastics to admit this title was precisely because of the rarity of opportunities for so employing money in the earlier Middle Ages. The nature of capital was clearly understood; but the possibility of money constituting capital arose only with the extension of commerce and the growth of profitable investments. Those scholastics who strove to abolish or to limit the recognition of _lucrum cessans_ as a ground for remuneration did not deny the productivity of capital, but simply thought the money had not at that time acquired the characteristics of capital.[1] [Footnote 1: See Ashley, _op. cit._, vol. i. pt. ii. pp. 434-9.] If there were any doubt about the fact that the scholastics recognised the legitimacy of unearned income, it would be dispelled by an understanding of their teaching on rents and partnership, in the former of which they distinctly acknowledged the right to draw an unearned income from one's land, and in the latter of which they acknowledged the same right in regard to one's money.[1] [Footnote 1: On this discussion see Ashley, _Economic History_, vol. i. pt. ii. pp. 427 _et seq._; Rambaud, _Histoire_, pp. 57 _et seq._; Funk, _Zins und Wucher_; Arnold, _Zur Geschichte des Eigenthums_, pp. 92 _et seq._; Böhm-Bawerk, _Capital and Interest_ (Eng. trans.), pp. 1-39.] § 8. _Rent Charges_. There was never any difficulty about admitting the justice of receiving a rent from a tenant in occupation of one's lands, because land was understood to be essentially a thing of which the use could be sold apart from the ownership; and it was also recognised that the recipient of such a rent might sell his right to a third party, who could then demand the rent from the tenant. When this was admitted it was but a small step to admit the right of the owner of land to create a rent in favour of another person in consideration for some payment. The distinctions between a _census reservativus_, or a rent established when the possession of land was actually transferred to a tenant, and a _census constitutivus_, or a rent created upon property remaining in the possession of the payer, did not become the subject of discussion or difficulty until the sixteenth century.[1] The legitimacy of rent charges does not seem to have been questioned by the theologians; the best proof of this being the absence of controversy about them in a period when they were undoubtedly very common, especially in Germany.[2] Langenstein, whose opinion on the subject was followed by many later writers,[3] thought that the receipt of income from rent charges was perfectly justifiable, when the object was to secure a provision for old age, or to provide an income for persons engaged in the services of Church or State, but that it was unjustifiable if it was intended to enable nobles to live in luxurious idleness, or plebeians to desert honest toil. It is obvious that Langenstein did not regard rent charges as wrongful in themselves, but simply as being the possible occasions of wrong.[4] [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 409.] [Footnote 2: Endemann, _Studien_, vol. ii. p. 104.] [Footnote 3: Endemann, _Studien_, vol. ii. p. 109.] [Footnote 4: Roscher, _Geschichte_, p. 20.] In the fifteenth century definite pronouncements on rent charges were made by the Popes. A large part of the revenue of ecclesiastical bodies consisted of rent charges, and in 1425 several persons in the diocese of Breslau refused to pay the rents they owed to their clergy on the ground that they were usurious. The question was referred to Pope Martin V., whose bull deciding the matter was generally followed by all subsequent authorities. The bull decides in favour of the lawfulness of rent charges, provided certain conditions were observed. They must be charged on fixed property ('super bonis suis, dominiis, oppidis, terris, agris, praediis, domibus et hereditatibus') and determined beforehand; they must be moderate, not exceeding seven or ten per cent.; and they must be capable of being repurchased at any moment in whole or in part, by the repayment of the same sum for which they were originally created. On the other hand, the payer of the rent must never be forced to repay the purchase money, even if the goods on which the rent was charged had perished--in other words, the contract creating the rent charge was one of sale, and not of loan. The bull recites that such conditions had been observed in contracts of this nature from time immemorial.[1] A precisely similar decree was issued by Calixtus III. in 1455.[2] [Footnote 1: _Extrav. Commun._, iii. 5, i.] [Footnote 2: _Ibid._, c. 2.] These decisions were universally followed in the fifteenth century.[1] It was always insisted that a rent could only be charged upon something of which the use could be separated from the ownership, as otherwise it would savour of usury.[2] In the sixteenth century interesting discussions arose about the possibility of creating a personal rent charge, not secured on any specific property, but such discussions did not trouble the writers of the period which we are treating. The only instance of such a contract being considered is found in a bull of Nicholas V. in 1452, permitting such personal rent charges in the kingdoms of Aragon and Sicily, but this permission was purely local, and, as the bull itself shows, was designed to meet the exigencies of a special situation.[3] [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 410.] [Footnote 2: Biel, _op. cit._, Sent. IV. xv. 12.] [Footnote 3: Cleary, _op. cit._, p. 124.] § 9. _Partnership_. The teaching on partnership contains such a complete disproof of the contention that the mediæval teaching on usury was based on the unproductivity of capital, that certain writers have endeavoured to prove that the permission of partnership was but a subterfuge, consciously designed to justify evasions of the usury law. Further historical knowledge, however, has dispelled this misconception; and it is now certain that the contract of partnership was widely practised and tolerated long before the Church attempted to insist on the observance of its usury laws in everyday commercial life.[1] However interesting an investigation into the commercial and industrial partnerships of the Middle Ages might be, we must not attempt to pursue it here, as we have rigidly limited ourselves to a consideration of teaching. We must refer, however, to the _commenda_, which was the contract from which the later mediæval partnership (_societas_) is generally admitted to have developed, because the _commenda_ was extensively practised as early as the tenth century, and, as far as we know, never provoked any expression of disapproval from the Church. This silence amounts to a justification; and we may therefore say that, even before Aquinas devoted his attention to the subject, the Church fully approved of an institution which provided the owner of money with the means of procuring an unearned income. [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 411; Weber, _Handelsgesellschaften_, pp. 111-14.] The _commenda_ was originally a contract by which merchants who wished to engage in foreign trade, but who did not wish to travel themselves, entrusted their wares to agents or representatives. The merchant was known as the _commendator_ or _socius stans_, and the agent as the _commendatarius_ or _tractator_. The most usual arrangement for the division of the profits of the adventure was that the _commendatarius_ should receive one-fourth and the _commendator_ three-fourths. At a slightly later date contracts came to be common in which the _commendatarius_ contributed a share of capital, in which case he would receive one-fourth of the whole profit as _commendatarius_, and a proportionate share of the remainder as capitalist. This contract came to be generally known as _collegantia_ or _societas_. Contracts of this kind, though originally chiefly employed in overseas enterprise, afterwards came to be utilised in internal trade and manufacturing industry.[1] [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. pp. 412-14.] The legitimacy of the profits of the _commendator_ never seems to have caused the slightest difficulty to the canonists. In 1206 Innocent III. advised the Archbishop of Genoa that a widow's dowry should be entrusted to some merchant so that an income might be obtained by means of honest gain.[1] Aquinas expressly distinguishes between profit made from entrusting one's money to a merchant to be employed by him in trade, and profit arising from a loan, on the ground that in the former case the ownership of the money does not pass, and that therefore the person who derives the profit also risks the loan. 'He who lends money transfers the ownership of the money to the borrower. Hence the borrower holds the money at his own risk, and is bound to pay it all back: wherefore the lender must not exact more. On the other hand, he that entrusts his money to a merchant or craftsman so as to form a kind of society does not transfer the ownership of the money to them, for it remains his, so that at his risk the merchant speculates with it, or the craftsman uses it for his craft, and consequently he may lawfully demand, as something belonging to him, part of the profits derived from his money.'[2] This dictum of Aquinas was the foundation of all the later teaching on partnership, and the importance of the element of risk was insisted on in strong terms by the later writers. According to Baldus, 'when there is no sharing of risk there is no partnership';[3] and Paul de Castro says, 'A partnership when the gain is shared, but not the loss, is not to be permitted.'[4] 'The legitimacy,' says Brants, 'of the contract of _commenda_ always rested upon the same principle; capital could not be productive except for him who worked it himself, or who caused it to be worked on his own responsibility. This latter condition was realised in _commenda_.'[5] [Footnote 1: _Greg. Decr._, iv. 19, 7.] [Footnote 2: II. ii. 78, 2, ad. 5.] [Footnote 3: Brants, _op. cit._, p. 167.] [Footnote 4: _Consilia_, ii. 55; also Ambrosius de Vignate, _De Usuris_, i. 62; Biel, _Op. cit._, IV. xv. 11.] [Footnote 5: _Op. cit._, p. 172.] Although the contract of partnership was fully recognised by the scholastics, it was not very scientifically treated, nor were the different species of the contract systematically classified. The only classification adopted was to divide contracts of partnership into two kinds--those where both parties contributed labour to a joint enterprise, and those where one party contributed labour and the other party money. The former gave no difficulty, because the justice of the remuneration of labour was admitted; but, while the latter was no less fully recognised, cases of it were subjected to careful scrutiny, because it was feared that usurious contracts might be concealed under the appearance of a partnership.[1] The question which occupied the greatest space in the treatises on the subject was the share in which the profits should be divided between the parties. The only rule which could be laid down, in the absence of an express contract, was that the parties should be remunerated in proportion to the services which they contributed--a rule the application of which must have been attended with enormous difficulties. Laurentius de Rodulphis insists that equality must be observed;[2] and Angelus de Periglis de Perusio, the first monographist on the subject, does not throw much more light on the question. The rule as stated by this last writer is that in the first place the person contributing money must be repaid a sum equal to what he put in, and the person contributing labour must be paid a sum equal to the value of his labour, and that whatever surplus remains must be divided between the two parties equally.[3] The question of the shares in which the profits should be distributed was not one, however, that frequently arose in practice, because it was the almost universal custom for the partners to make this a term of their original contract. Within fairly wide limits it was possible to arrange for the division of the profits in unequal shares--say two-thirds and one-third. The shares of gain and loss must, however, be the same; one party could not reap two-thirds of the profit and bear only one-third of the loss; but it might be contracted that, when the loss was deducted from the gain, one party might have two-thirds of the balance, and the other one-third.[4] In no case, of course, could the party contributing the money stipulate that his principal should in all cases be returned, because that was a _mutuum_. The party contributing the labour might validly contract that he should be paid for his labour in any case, but, if this was so, the contract ceased to be a _societas_ and became a _locatio operarum_, or ordinary contract of work for wages. In all cases, common participation in the gains and losses of the enterprise was an essential feature of the contract of partnership.[5] [Footnote 1: _Summa Astesana_, iii. 12.] [Footnote 2: _De Usuris_, i. 19.] [Footnote 3: _De Societatibus_, i. 130.] [Footnote 4: _De Societatibus_, i. 130.] [Footnote 5: _Ibid._] Before concluding the subject of partnership, we must make reference to the _trinus contractus_, which caused much discussion and great difficulty. As we have seen, a contract of partnership was good so long as the person contributing money did not contract that he should receive his original money back in all circumstances. A contract of insurance was equally justifiable. There was no doubt that A might enter into partnership with B; he could further insure himself with C against the loss of his capital, and with D against damage caused by fluctuations in the rate of profits. Why, then, should he not simultaneously enter into all three contracts with B? If he did so, he was still B's partner, but at the same time he was protected against the loss of his principal and a fair return upon it--in other words, he was a partner, protected against the risks of the enterprise. The legitimacy of such a contract--the _trinus contractus_, as it was called--was maintained by Carletus in the _Summa Angelica_, which was published about 1476, and by Biel.[1] Early in the sixteenth century Eck, a young professor at Ingolstadt, brought the question of the legitimacy of this contract before the University of Bologna, but no formal decision was pronounced, and, had it not been for the reaction following the Reformation, the _trinus contractus_ would probably have gained general acceptance. As it was, it was condemned by a provincial synod at Milan in 1565, and by Sixtus V. in 1585.[2] [Footnote 1: _Op. cit._, IV. xv. 11. Lecky attributed the invention of the _trinus contractus_ to the Jesuits--who were only founded in 1534 (_History of Rationalism_, vol. ii. p. 267).] [Footnote 2: Ashley, _op. cit._, vol. i. pt. ii. pp. 439 _et seqq._; Cleary, _op. cit._, pp. 126 _et seqq._] We should also refer to the contract of bottomry, which consisted of a loan made to the owner--or in some cases the master--of a ship, on the security of the ship, to be repaid with interest upon the safe conclusion of a voyage. This contract could not be considered a partnership, inasmuch as the property in the money passed to the borrower; but it probably escaped condemnation as usurious on the ground that the lender shared in the risk of the enterprise. The payment of some additional sum over and above the money lent might thus be justified on the ground of _periculum sortis_. The contract, moreover, was really one of insurance for the shipowner, and contracts of insurance were clearly legitimate. In any event the legitimacy of loans on bottomry was not questioned before the sixteenth century.[1] [Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. pp. 421-3; Palgrave, _Dictionary of Political Economy_, art. 'Bottomry'; Cunningham, _Growth of English Industry and Commerce_, vol i. p. 257.] § 10. _Concluding Remarks on Usury_. It is to be hoped that the above exposition of the mediæval doctrine on usury will dispel the idea that the doctrine was founded upon the injustice of unearned income. Far from the receipt of an unearned income from money or other capital being in all cases condemned, it was unanimously recognised, provided that the income accrued to the owner of the capital, and not to somebody else, and that the rate of remuneration was just. The teaching on partnership rested on the fundamental assumption that a man might trade with his money, either by using it himself, or by allowing other people to use it on his behalf. In the latter case, the person making use of the money might be either assured of being paid a fixed remuneration for his services, in which case the contract was one of _locatio operarum_, or he might be willing to let his remuneration depend upon the result of the enterprise, in which case the contract was one of _societas_. In either case the right of the owner of the money to reap a profit from the operation was unquestioned, provided only that he was willing to share the risks of loss. But if, instead of making use of his money for trading either by his own exertions or by those of his partner or agent, he chose to sell his money, he was not permitted to receive more for it than its just price--which was, in fact, the repayment of the same amount. This was what happened in the case of a _mutuum_. In that case the ownership of the money was transferred to the borrower, who was perfectly at liberty to trade with it, if he so desired, and to reap whatever gain that trade produced. The prohibition of usury, far from being proof of the injustice of an income from capital, is proof of quite the contrary, because it was designed to insure that the income from capital should belong to the owner of that capital and to no other person.[1] Although, therefore, no price could be paid for a loan, the lender must be prevented from suffering any damage from making the loan, and he might make good his loss by virtue of the implied collateral contract of indemnity, which we discussed above when treating of extrinsic titles. If the lender, through making the loan, had been prevented from making a profit in trade, he might be indemnified for that loss. All through the discussions on usury we find express recognition of the justice of the owner of money deriving an income from its employment; all that the teaching of usury was at pains to define was who the person was to whom money, which was the subject matter of a _mutuum_, belonged. It is quite impossible to comprehend how modern writers can see in the usury teaching of the scholastics a fatal discouragement to the enterprise of traders and capitalists; and it is equally impossible to understand how socialists can find in that doctrine any suggestion of support for the proposition that all unearned income is immoral and unjust. [Footnote 1: See Rambaud, _op. cit._, p. 59.] SECTION 3.--THE MACHINERY OF EXCHANGE We have already drawn attention to the fact that there was no branch of economics about which such profound ignorance ruled in the earlier Middle Ages as that of money. As we stated above, even as late as the twelfth century, the theologians were quite content to quote the ill-founded and erroneous opinions of Isidore of Seville as final on the subject. It will be remembered that we also remarked that the question of money was the first economic question to receive systematic scientific treatment from the writers of the later Middle Ages. This remarkable development of opinion on this subject is practically the work of one man, Nicholas Oresme, Bishop of Lisieux, whose treatise, _De Origine, Natura, Jure et Mutationibus Monetarum_, is the earliest example of a pure economic monograph in the modern sense. 'The scholastics,' says Roscher, 'extended their inquiries from the economic point of view further than one is generally disposed to believe; although it is true that they often did so under a singular form.... We can, however, single out Oresme as the greatest scholastic economist for two reasons: on account of the exactitude and clarity of his ideas, and because he succeeded in freeing himself from the pseudo-theological systematisation of things in general, and from the pseudo-philosophical deduction in details.'[1] [Footnote 1: Quoted in the Introduction to Wolowski's edition of Oresme's _Tractatus_ (Paris, 1864).] Even in the thirteenth century natural economy had not been replaced to any large extent by money economy. The great majority of transactions between man and man were carried on without the intervention of money payments; and the amount of coin in circulation was consequently small.[1] The question of currency was not therefore one to engage the serious attention of the writers of the time. Aquinas does not deal with money in the _Summa_, except incidentally, and his references to the subject in the _De Regimine Principum_--which occur in the chapters of that work of which the authorship is disputed--simply go to the length of approving Aristotle's opinions on money, and advising the prince to exercise moderation in the exercise of his power of coining _sive in mutando sive in diminuendo pondus_.[2] [Footnote 1: Brants, _op. cit._, p. 179; Rambaud, _op. cit._, p. 73.] [Footnote 2: _De Reg. Prin._, ii. 13.] As is often the case, the discussion of the rights and duties of the sovereign in connection with the currency only arose when it became necessary for the public to protest against abuses. Philip the Fair of France made it part of his policy to increase the revenue by tampering with the coinage, a policy which was continued by his successors, until it became an intolerable grievance to his subjects. In vain did the Pope thunder against Philip;[1] in vain did the greatest poet of the age denounce 'him that doth work With his adulterate money on the Seine.'[2] [Footnote 1: Le Blant, _Traité historique des Monnaies de France_, p. 184.] [Footnote 2: Dante, _Paradiso_, xix.] Matters continued to grow steadily worse until the middle of the fourteenth century. During the year 1348 there were no less than eleven variations in the value of money in France; in 1349 there were nine, in 1351 eighteen, in 1353 thirteen, and in 1355 eighteen again. In the course of a single year the value of the silver mark sprang from four to seventeen livres, and fell back again to four.[1] The practice of fixing the price of many necessary commodities must have aggravated the natural evil consequences of such fluctuations.[2] [Footnote 1: Wolowski's Introduction to Oresme's _Tractatus_, p. xxvii.] [Footnote 2: See Endemann, _Studien_, vol. ii. p. 34.] This grievance had the good result of fixing the attention of scholars on the money question. 'Under the stress of facts and of necessity,' says Brants, 'thinkers applied their minds to the details of the theory of money, which was the department of economics which, thanks to events, received the earliest illumination. Lawyers, bankers, money-changers, doctors of theology, and publicists of every kind, attached a thoroughly justifiable importance to the question of money. We are no doubt far from knowing all the treatises which saw the light in the fourteenth century upon this weighty question; but we know enough to affirm that the monetary doctrine was very developed and very far-seeing.'[1] Buridan analysed the different functions and utilities of money, and explained the different ways in which its value might be changed.[2] He did not, however, proceed to discuss the much more important question as to when the sovereign was entitled to make these alterations. This was reserved for Nicholas Oresme, who published his famous treatise about the year 1373. The merits of this work have excited the unanimous admiration of all who have studied it. Roscher says that it contains 'a theory of money, elaborated in the fourteenth century, which remains perfectly correct to-day, under the test of the principles applied in the nineteenth century, and that with a brevity, a precision, a clarity, and a simplicity of language which is a striking proof of the superior genius of its author.'[3] According to Brants, 'the treatise of Oresme is one of the first to be devoted _ex professo_ to an economic subject, and it expresses many ideas which are very just, more just than those which held the field for a long period after him, under the name of mercantilism, and more just than those which allowed of the reduction of money as if it were nothing more than a counter of exchange.'[4] 'Oresme's treatise on money,' says Macleod, 'may be justly said to stand at the head of modern economic literature. This treatise laid the foundations of monetary science, which are now accepted by all sound economists.'[5] 'Oresme's completely secular and naturalistic method of treating one of the most important problems of political economy,' says Espinas, 'is a signal of the approaching end of the Middle Ages and the dawn of the Renaissance.'[6] Dr. Cunningham adds his tribute of praise: 'The conceptions of national wealth and national power were ruling ideas in economic matters for several centuries, and Oresme appears to be the earliest of the economic writers by whom they were explicitly adopted as the very basis of his argument.... A large number of points of economic doctrine in regard to coinage are discussed with much judgment and clearness.'[7] Endemann alone is[8] inclined to quarrel with the pre-eminence of Oresme; but on this question, he is in a minority of one.[9] [Footnote 1: _Op. cit._, p. 186.] [Footnote 2: _Quaest. super Lib. Eth._, v. 17; _Quaest. super Lib. Pol._, i. 11.] [Footnote 3: Quoted in Wolowski, _op. cit._, and see Roscher, _Geschichte_, p. 25.] [Footnote 4: _Op. cit._, p. 190.] [Footnote 5: _History of Economics_, p. 37.] [Footnote 6: _Op. cit._, p. 110.] [Footnote 7: _Growth of English Industry and Commerce_, vol. i. p. 359.] [Footnote 8: _Grundsätze_, p. 75.] [Footnote 9: See an interesting note in Brants, _op. cit._, p. 187.] The principal question which Oresme sets out to answer, according to the first chapter of this treatise, is whether the sovereign has the right to alter the value of the money in circulation at his pleasure, and for his own benefit. He begins the discussion by going over the same ground as Aristotle in demonstrating the origin and utility of money, and then proceeds to discuss the most suitable materials which can be made to serve as money. He decides in favour of gold and silver, and shows himself an unquestioning bimetallist. He further admits the necessity of some token money of small denominations, to be composed of the baser metals. Having drawn attention to the transition from the circulation of money, the value of which is recognised solely by weight, to the circulation of that which is accepted for its imprint or superscription, the author insists that the production of such an imprinted coinage is essentially a matter for the sovereign authority in the State. Oresme now comes to the central point of his thesis. Although, he says, the prince has undoubtedly the power to manufacture and control the coinage, he is by no means the owner of it after it has passed into circulation, because money is a thing which in its essence was invented and introduced in the interests of society as a whole. Oresme then proceeds to apply this central principle to the solution of the question which he sets himself to answer, and concludes that, as money is essentially a thing which exists for the public benefit, it must not be tampered with, nor varied in value, except in cases of absolute necessity, and in the presence of an uncontroverted general utility. He bases his opposition to unnecessary monetary variation on the perfectly sound ground that such variation is productive of loss either to those who are bound to make or bound to receive fixed sums in payment of obligations. The author then goes on to analyse the various kinds of variation, which he says are five--_figurae_, _proportionis_, _appellationis_, _ponderis_, and _materiae_. Changes of form (_figurae_) are only justified when it is found that the existing form is liable to increase the damage which the coins suffer from the wear and tear of usage, or when the existing currency has been degraded by widespread illegal coining; changes _proportionis_ are only allowable when the relative value of the different metals constituting the coinage have themselves changed; simple changes of name (_appellationis_), such as calling a mark a pound, are never allowed. Changes of the weight of the coins (_ponderis_) are pronounced by Oresme to be just as gross a fraud as the arbitrary alteration of the weights or measures by which corn or wine are sold; and changes of matter (_materiae_) are only to be tolerated when the supply of the old metal has become insufficient. The debasement of the coinage by the introduction of a cheaper alloy is condemned. In conclusion, Oresme insists that no alteration of any of the above kinds can be justified at the mere injunction of the prince; it must be accomplished _per ipsam communitatem_. The prince exercises the functions of the community in the matter of coinage not as _principalis actor_, but as _ordinationis publicae executor_. It is pointed out that arbitrary changes in the value of money are really equivalent to a particularly noxious form of taxation; that they seriously disorganise commerce and impoverish many merchants; and that the bad coinage drives the good out of circulation. This last observation is of special interest in a fourteenth-century writer, as it shows that Gresham's Law, which is usually credited to a sixteenth-century English economist, was perfectly well understood in the Middle Ages.[1] [Footnote 1: The best edition of Oresme's _Tractatus_ is that by Wolowski, published at Paris in 1864, which includes both the Latin and French texts.] This brief account of the ground which Oresme covered, and the conclusions at which he arrived, will enable us to appreciate his importance. Although his clear elucidation of the principles which govern the questions of money was not powerful enough to check the financial abuses of the sovereigns of the later Middle Ages, they exercised a profound influence on the thought of the period, and were accepted by all the theologians of the fifteenth century.[2] [Footnote 2: Biel, _op. cit._, IV. xv. 11; _De Monetarum Potestate et Utilitate_, referred to in Jourdain, _op. cit._, p. 34.] CHAPTER IV CONCLUSION We have now passed in review the principal economic doctrines of the mediæval schoolmen. We do not propose to attempt here any detailed criticism of the merits or demerits of the system which we have but briefly sketched. All that we have attempted to do is to present the doctrines in such a way that the reader may be in a position to pass judgment on them. There is one aspect of the subject, however, to which we may be allowed to direct attention before concluding this essay. It is the fashion of many modern writers, especially those hostile to the Catholic Church, to represent the Middle Ages as a period when all scientific advance and economic progress were impeded, if not entirely prevented, by the action of the Church. It would be out of place to inquire into the advances which civilisation achieved in the Middle Ages, as this would lead us into an examination of the whole history of the period; but we think it well to inquire briefly how far the teaching of the Church on economic matters was calculated to interfere with material progress. This is the lowest standard by which we can judge the mediæval economic teaching, which was essentially aimed at the moral and spiritual elevation of mankind; but it is a standard which it is worth while to apply, as it is that by which the doctrines of the scholastics have been most generally condemned by modern critics. To test the mediæval economic doctrine by this, the lowest standard, it may be said that it made for the establishment and development of a rich and prosperous community. We may summarise the aim of the mediæval teaching by saying that, in the material sphere, it aimed at extended production, wise consumption, and just distribution, which are the chief ends of all economic activity. It aimed at extended production through its insistence on the importance and dignity of manual labour.[1] As we showed above, one of the principal achievements of Christianity in the social sphere was to elevate labour from a degrading to an honourable occupation. The example of Christ Himself and the Apostles must have made a deep impression on the early Christians; but no less important was the living example to be seen in the monasteries. The part played by the great religious orders in the propagation of this dignified conception cannot be exaggerated. St. Anthony had advised his imitators to busy themselves with meditation, prayer, and the labour of their hands, and had promised that the fear of God would reside in those who laboured at corporal works; and similar exhortations were to be found in the rules of Saints Macarius, Pachomius, and Basil.[2] St. Augustine and St. Jerome recommended that all religious should work for some hours each day with their hands, and a regulation to this effect was embodied in the Rule of St. Benedict.[3] The example of educated and holy men voluntarily taking upon themselves the most menial and tedious employments must have acted as an inspiration to the laity. The mere economic value of the monastic institutions themselves must have been very great; agriculture was improved owing to the assiduity and experiments of the monks;[4] the monasteries were the nurseries of all industrial and artistic progress;[5] and the example of communities which consumed but a small proportion of what they produced was a striking example to the world of the wisdom and virtue of saving.[6] Not the least of the services which Christian teaching rendered in the domain of production was its insistence upon the dominical repose.[7] [Footnote 1: See Sabatier, _L'Eglise et le Travail manuel_, and Antoine, _Cours d'Economie sociale_, p. 159.] [Footnote 2: Levasseur, _Histoire des Classes ouvrières en France_, vol. i. pp. 182-3.] [Footnote 3: _Reg. St. Ben._, c. 48.] [Footnote 4: List, _National System of Political Economy_, ch. 6.] [Footnote 5: Janssen, _History of the German People_, vol. ii. p. 2.] [Footnote 6: _Dublin Review_, N.S., vol. vi. p. 365; see Goyau, _Autour du Catholicisme sociale_, vol. ii. pp. 79-118; Gasquet, _Henry VIII. and the English Monasteries_, vol. ii. p. 495.] [Footnote 7: _Dublin Review_, vol. xxxiii. p. 305. See Goyau, _Autour du Catholicisme sociale_, vol. ii. pp. 93 _et seq._] The importance which the scholastics attached to an extended and widespread production is evidenced by their attitude towards the growth of the population. The fear of over-population does not appear to have occurred to the writers of the Middle Ages;[1] on the contrary, a rapidly increasing population was considered a great blessing for a country.[2] This attitude towards the question of population did not arise merely from the fact that Europe was very sparsely populated in the Middle Ages, as modern research has proved that the density of population was much greater than is generally supposed.[3] [Footnote 1: Brants, _op. cit._, p. 235, quoting Sinigaglia, _La Teoria Economica della Populazione in Italia_, Archivio Giuridico, Bologna, 1881.] [Footnote 2: _Catholic Encyclopædia_, art. 'Population.' Brants draws attention to the interesting fact that a germ of Malthusianism is to be found in the much-discussed _Songe du Vergier_, book ii. chaps. 297-98, and Franciscus Patricius de Senis, writing at the end of the fifteenth century, recommends emigration as the remedy against over-population (_De Institutione Reipublicae_, ix.).] [Footnote 3: Dureau de la Malle, 'Mémoire sur la Population de la France au xiv^e Siècle,' _Mémoires de l'Académie des Inscriptions et Belles-Lettres_, vol. xiv. p. 36.] The mediæval attitude towards population was founded upon the sanctity of marriage and the respect for human life. The utterances of Aquinas on the subject of matrimony show his keen appreciation of the natural social utility of marriage from the point of view of increasing the population of the world, and of securing that the new generation shall be brought up as good and valuable citizens.[1] While voluntary virginity is recommended as a virtue, it is nevertheless distinctly recognised that the precept of virginity is one which by its very nature can be practised by only a small proportion of the human race, and that it should only be practised by those who seek by detachment from earthly pleasures to regard divine things.[2] Aquinas further says that large families help to increase the power of the State, and deserve well of the commonwealth,[3] and quotes with approbation the Biblical injunction to 'increase and multiply.'[4] Ægidius Romanus demonstrates at length the advantages of large families in the interests of the family and the future of the nation.[5] [Footnote 1: _Summa Cont. Gent._, iii. 123, 136.] [Footnote 2: _Summa_, II. ii. 151 and 152.] [Footnote 3: _De Reg. Prin._, iv. 9.] [Footnote 4: Gen. i. 28.] [Footnote 5: _De Reg. Prin._, ii. 1, 6.] The growth of a healthy population was made possible by the reformation of family life, which was one of the greatest achievements of Christianity in the social sphere. In the early days of the Church the institution of the family had been reconstituted by moderating the harshness of the Roman domestic rule (_patria potestas_), by raising the moral and social position of women, and by reforming the system of testamentary and intestate successions; and the great importance which the early Church attached to the family as the basic unit of social life remained unaltered throughout the Middle Ages.[5] [Footnote 5: Troplong, _De l'Influence du Christianisme sur le Droit civil des Romains_; Cossa, _Guide_, p. 99; Devas, _Political Economy_, p. 168; Périn, _La Richesse dans les Sociétés chrétiennes_, i. 541 _et seq._; Hettinger, _Apologie du Christianisme_, v. 230 _et seq._] The Middle Ages were therefore a period when the production of wealth was looked upon as a salutary and honourable vocation. The wonderful artistic monuments of that era, which have survived the intervening centuries of decay and vandalism, are a striking testimony to the perfection of production in a civilisation in which work was considered to be but a form of prayer, and the manufacturer was prompted to be, not a drudge, but an artist. In the Middle Ages, however, as we have said before, man did not exist for the sake of production, but production for the sake of man; and wise consumption was regarded as at least as important as extended production. The high estimation in which wealth was held resulted in the elaboration of a highly developed code of regulation as to the manner in which it should be enjoyed. We do not wish to weary the reader with a repetition of that which we have already fully discussed; it is enough to call attention to the fact that the golden mean of conduct was the observance of liberality, as distinguished, on the one hand, from avarice, or a too high estimation of material goods, and, on the other hand, from prodigality, or an undue disregard for their value. Social virtue consisted in attaching to wealth its proper value. Far more important than its teaching either on production or consumption was the teaching of the mediæval Church on distribution, which it insisted must be regulated on a basis of strict justice. It is in this department of economic study that the teaching of the mediævals appears in most marked contrast to the teaching of the present day, and it is therefore in this department that the study of its doctrines is most valuable. As we said above, the modern world has become convinced by bitter experience of the impracticability of mere selfishness as the governing factor in distribution; and the economic thought of the time is concentrated upon devising some new system of society which shall be ruled by justice. On the one hand, we see socialists of various schools attempting to construct a Utopia in which each man shall be rewarded, not in accordance with his opportunities of growing rich at the expense of his fellow-man, but according to the services he performs; while, on the other hand, we find the Christian economists striving to induce a harassed and bewildered world to revert to an older and nobler social ethic. It is no part of our present purpose to estimate the relative merits of these two solutions for our admittedly diseased society. Nor is it our purpose to attempt to demonstrate how far the system of economic teaching which we have sketched in the foregoing pages is applicable at the present day. We must, however, in this connection draw attention to one important consideration, namely, that the mediæval economic teaching was expressly designed to influence the only constant element in human society at every stage of economic development. Methods of production may improve, hand may give place to machine industry, and mechanical inventions may revolutionise all our conceptions of transport and communication; but there is one element in economic activity that remains a fixed and immutable factor throughout the ages, and that element is man. The desires and the conscience of man remain the same, whatever the mechanical environment with which he is encompassed. One reason which suggests the view that the mediæval teaching is still perfectly applicable to economic life is that it was designed to operate upon the only factor of economic activity that has not changed since the Middle Ages--namely, the desires and conscience of man. It is important also to draw attention to the fact that the acceptance of the economic teaching of the mediæval theologians does not necessarily imply acceptance of their teaching on other matters. There is at the present day a growing body of thinking men in every country who are full of admiration for the ethical teaching of Christianity, but are unable or unwilling to believe in the Christian religion. The fact of such unbelief or doubt is no reason for refusing to adopt the Christian code of social justice, which is founded upon reason rather than upon revelation, and which has its roots in Greek philosophy and Roman law rather than in the Bible and the writings of the Fathers. It has been said that Christianity is the only religion which combines religion and ethics in one system of teaching; but although Christian religious and ethical teaching are combined in the teaching of the Catholic Church, they are not inseparable. Those who are willing to discuss the adoption of the Socialist ethic, which is not combined with any spiritual dogmas, should not refuse to consider the Christian ethic, which might equally be adopted without subscribing to the Christian dogma. As we said above, it is no part of our intention to estimate the relative merits of the solutions of our social evils proposed by socialists and by Catholic economists. One thing, however, we feel bound to emphasise, and that is that these two solutions are not identical. It is a favourite device of socialists, especially in Catholic countries, to contend that their programme is nothing more than a restatement of the economic ideals of the Catholic Church as exhibited in the writings of the mediæval scholastics. We hope that the foregoing pages are sufficient to demonstrate the incorrectness of this assertion. Three main principles appear more or less clearly in all modern socialistic thought: first, that private ownership of the means of production is unjustifiable; second, that all value comes from labour; and, third, that all unearned income is unjust. These three great principles may or may not be sound; but it is quite certain that not one of them was held by the mediæval theologians. In the section on property we have shown that Aquinas, following the Fathers and the tradition of the early Church, was an uncompromising advocate of private property, and that he drew no distinction between the means of production and any other kind of wealth; in the section on just price we have shown that labour was regarded by the mediævals as but a single one of the elements which entered into the determination of value; and in the section on usury we have shown that many forms of unearned income were not only tolerated, but approved by the scholastics. We do not lose sight of the fact that socialism is not a mere economic system, but a philosophy, and that it is founded on a philosophical basis which conflicts with the very foundations of Christianity. We are only concerned with it here in its character of an economic system, and all we have attempted to show is that, as an economic system, it finds no support in the teaching of the scholastic writers. We do not pretend to suggest which of these two systems is more likely to bring salvation to the modern world; we simply wish to emphasise that they are two systems, and not one. One's inability to distinguish between Christ and Barabbas should not lead one to conclude that they are really the same person. INDEX Abelard, 14. _Acts of the Apostles_, 168. communism in, 44, 46. Adam, 140. and Eve, slavery the result of their sin, 92. Administrative occupations, position in _artes possessivae_, 143. Ægidius Romanus, 98, 197, 225. Agriculture, position in _artes possessivae_, 142, 143. its encouragement recommended, 143. Albertus Magnus, 16, 82, 176, 186, 197. Albigenses, the, belief in communism, 66. Alcuin, 14. Alexander of Hales, 176, 185. Alexander III., Pope, 187. attitude to usury, 174. Alfric, see _Colloquy of Archbishop, The_. Almsgiving, as justice, not charity, 69. duty of, 80. enforcement by the State, 85. summary of mediæval teaching on, 84. the early Church on, 52. Ambition, a virtue, 79. Ambrosius de Vignate, 191, 208. Ananias, 46, 52. Ancients, loss of economic teaching of, 15. Angelus de Periglis de Perusio, 209, 210. Antoine, 87, 172, 223. Antoninus of Florence, 9, 68, 79, 110, 122, 181, 196. Ape of Aristotle, the, _see_ Albertus Magnus. Apostles, the, attitude to manual labour, 223. attitude to private property and communism, 48. attitude to usury, 168. Apostles, the, fornication expressly forbidden by, 168. teaching regarding slavery, 89. Apostoli, the, belief in communism, 66. Aquinas, _see_ Thomas Aquinas. Aragon, personal rent charges permitted in, 205. Architecture, _see_ Manufacture. Archivio Giuridico, 225. Ardant, 69. Aristotle, 14, 16, 36, 97, 98, 142, 146, 169, 215, 219. as source for Thomas Aquinas, 62. attitude of Thomas Aquinas to his opinion, 94 _et seq._ Cossa on his influence, 17. his principles maintained through Thomas Aquinas, 19. his theory of slavery opposed to that of St. Augustine, 93. influence on controversies of the schools, 17. influence on mediæval thought, 16. renewed study of, 16. Arnold, 203. _Artes pecuniativae_, 142. _Artes possessivae_, 142. encouragement recommended by Aquinas, 143. Arnobius, 45. Ashley, Sir W.H., 3, 6, 7, 18, 21, 23, 27, 29, 30, 33, 40, 76, 105, 113, 126, 134, 146, 149, 175, 185, 186, 187, 188, 190, 191, 195, 196, 197, 198, 202, 203, 205, 206, 207, 211, 212. Augustinians, the, 195. Ausmo, Nicholas de, 156. Avarice, an offence against liberality, 79. a sin towards the individual himself and the community, 78. relativity of, 75. Avarice, the necessary basis of trade, 145. _Ayenbite of Inwit, The_, 151. Baldus, 187, 208. [Greek: banousia], a sin, 77, 78. Barabbas, 231. Bartlett, Dr. V., 56, 90. Bartolus, 187. Baudrillard, 76. Beauvais, Vincent de, 7, 16. Bégards, the, belief in communism, 66. Benedict XIV., Pope, an encyclical of, 183. Benigni, 61. Bergier, 45. Bernardine of Siena, 112, 181. Biel, 99, 100, 104, 106, 107, 108, 112, 118, 121, 124, 145, 150, 156, 180, 185, 205, 208, 211, 221. Bimetallism, Oresme's support of, 219. Blanqui, 146. Bohemia, communistic teaching in, 86. Böhm-Bawerk, 174, 200, 203, 211. Bottomry, contract of, 211. Brant, Sebastian, 137. Brants, V.L.J.L., 9, 10, 13, 19, 21, 66, 101, 111, 112, 114, 121, 122, 123, 142, 159, 181, 208, 215, 216, 217, 218, 225. Breslau, refusal to pay rent in, 204. Brunetto Latini, 123. Building, _see_ Manufacture. Buridan, 70, 72, 76, 77, 78, 109, 110, 143, 180, 191, 198, 217. Cabet, 42. Caepolla, 108, 118, 120. Cajetan, 65, 79. on the _Summa_, 68. Calippe, Abbé, 49, 62. on Thomas Aquinas, 68. Calixtus III., Pope, decree regarding rent, 205. _Cambium_, 155. conditions justifying, 157. dealt with by Brants, 159. _minutum_, 157, 158. motives justifying, 157. _per litteras_, 157, 158. _siccum_, 157. the three kinds of, 157, 158. when justifiable, not a loan, 158. Campsor, the, his remuneration approved, 156. Canon law the source of knowledge of Christian economic teaching, 13. Canonist doctrine, dealt with by Sir W. Ashley, 2. Dr. Cunningham's estimate of its importance, 27. its impracticability demonstrated by Endemann, 20. value of the study of, 29. Canonists, the, 117. Capital, question of the productivity of, 198 _et seq._ Carletus, 120, 150, 193, 211. Carlyle, Dr., 44, 58, 63. Castro, Paul, 208. _Catholic Encyclopaedia, The_, definition of 'Middle Ages,' 3. on Communism, 46. on Just Price, 112, 126. on Political Economy, 30. on Population, 225. on Slavery, 90, 100. Cato, 162. Cattle-breeding, _see_ Agriculture. _Census constitutivus_, 203. _reservativus_, 203. _Centesima_, the maximum rate of interest in Borne, 161. Cesana, _montes pietatis_ at, 196. Champagny, 80. Change, see _Cambium_. Chevallier, 20. Christ, 42, 231. a working man, 137. attitude to manual labour, 223. attitude to private property and communism, 47. teaching regarding slavery, 89. Christendom, economic unity of, 11. Christian economic teaching, 13. economists, their attempts to reinstitute mediæval economics, 228. _Christian Monitor, The_, 139. Christian Exhortation, The, on the protection of the farmer, 143. Christianity, as providing an ethical basis of society, 31. attitude to manual labour, 137, 223. attitude to slavery, 88. foundations and origin of its code of social justice, 229. Christianity, influence in abolition of Roman slavery, 99 _et seq._ possibility of adopting ethics without dogmas of, 229. reformation of family life by, 226. relation of economic teaching of, to socialism, 33. social theory of, 12. Church, economic teaching of the mediæval, 12. the, attitude to commerce at end of the Middle Ages, 152. the, attitude to _monies pietatis_, 197. the, effect of economic teaching of, on material progress, 223. the, necessity for understanding economic teaching of, 32. the, principles followed by, in fixing price, 114. the, prohibition of usury not peculiar to, 160. the, socialist view of its teaching on usury, 198. the early, 230. the early teaching on usury, 167 _et seq._ Cicero, 56, 58, 162. Civil Law, Commentaries on, a source of knowledge of Christian economic teaching, 13. Civilisation, result of its advance in the thirteenth century, 15. Classical economists, recent reaction against, 29. Cleary, Dr., 35, 135, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172, 173, 174, 175, 185, 186, 187, 188, 191, 192, 193, 196, 197, 205. Clement of Alexandria, _see_ St. Clement. of Rome, _see_ St. Clement. Clergy, the, and usury, 169. the, prohibition of trading by, 151. Coinage, _see_ Money. _Collegantia_, 207. _Colloquy of Archbishop Alfric, The_, 149. _Commenda_, the, 206. _Commendatarius_, the, 207. _Commendator_, the, 207. Common estimation, of just price not the final criterion, 134. Commerce, attitude of later fifteenth century to, 150. attitude of mediæval theologians to, 136. attitude of the Church at end of Middle Ages, 152. condemnation of, by early Christians, 145. condemnation of, by scholastics, 146. dangerous to virtue, 145, 151. definition of, 144. extension of, in thirteenth century, 15. factors making for its illegality, 151. gradual change of mediæval attitude to, 152. justification of, not based on payment for labour, 154. legitimacy dependent on methods, 146. legitimacy dependent on motives, 148. motives regarded as justifying, 153. necessity for, realised, 147. necessity of controlling its operations, 154. not dealt with by early writers, 13. position in the _artes possessivae_, 143. prohibition of speculative, 151. rules applying to, defined by Nider, 150. Communism, alleged, of early Christians, 43. not part of scholastic teaching, 66. Community of user, doctrine of, 85. no relation to modern socialistic communism, 86. Commutations, _see_ Exchange. Compensation, for failure to repay loans by date stipulated, 185. for profit hindered, 189. Competition, effect of unrestricted, 31. Comte, his definition of 'Middle Ages' followed by Dr. Ingram, 3. Conquerors, their right to enslavement of the conquered adopted by Aquinas, 96. Constantine, 43. Constantinople, fall of, regarded as end of the Middle Ages, 4. Consumption, regulation of, 32. wise, importance of, 227. wise, the aim of mediæval teaching, 223. Contract, Thomas Aquinas on, 38. _Corinthians, Epistle to the_, 48. Corpus Juris Canonici, 13, 146. Cossa, L.,5, 6, 17, 108, 220. Credit, 119. Crusades, the, influence of, 15. the, influence on trade, 146. Cunningham, Dr. W., 2, 9, 10, 11, 13, 23, 24, 26, 27, 79, 116, 122, 124, 126, 127, 128, 129, 130, 138, 139, 152, 212, 218. Currency, _see_ Money. Cyprian, 168, 170. attitude to property, 50. Damnum emergens, 185, 196. nature of, 186. universal admission of, 187. Dante, 216. _De Regimine Principum_, doubtful authorship of, 20. Delisle, 27. _Démocratie Chrétienne_, 199. Deposit, Thomas Aquinas on, 38. Desbuquois, Abbé, 36, 39, 104, 110, 116, 120. _Deuteronomy_, 163. Devas, 30, 49, 226. _Dictionary of Political Economy_, 30, 105, 112, 135, 212. _Dictionnaire de Théologie_, 45. _Didache_, the, attitude to usury, 168, 170. Diocletian rescript, regarding sales, 104. Distribution, just, the aim of mediæval teaching, 223. need for just, 31, 227. regulation of, 32. Dominicans, the, 195, 196. _Dominium eminens_ of the State, 69. Donatus, 14. _Dublin Review, The_, 43. Duns Scotus, 149, 185, 188, 192. Dureau de la Malle, 225. _Ecclesiastes_, 151. Eck, 211. 'Economic,' interpretation of, 3, 6 _et seq._ 'Economic Man,' imaginary figure conceived by classical economists, 8. _Economic Review, The_, 44. Economics, causes of lack of interest in, 14. Elvira, the Council of, decree against usury, 169. Emperor, the, temporal vicar of God, 11. _Encyclopaedia Britannica, The_, definition of 'Middle Ages,' 4. Endemann, 19, 20, 23, 27, 34, 108, 120, 124, 134, 151, 155, 157, 158, 177, 186, 187, 190, 191, 195, 196, 203, 204, 216, 218. _Ephesians, Epistle to the_, 89. Equality, of men, 94. _Esdras_, 165. Espinas, A., 8, 17, 163, 197, 218. Essenes, the, and communism, 47. Ethics, error of disregarding in economics, 29. Eve, _see_ Adam and. Exchange, regulation of, 32. justice in, 36 _et seq._ theory of, see _Cambium_. _Exodus_, 163. _Ezekiel_, 165. Fathers, the, _see_ Church, the early. Favre, 173. Feudalism, increased organisation of, in thirteenth century, 15. Fornication, expressly forbidden by the Apostles, 168. Franciscans, the, 195, 196. Franciscus Patricius de Senlis, 225. Franck, A., 20, 90, 97. Fratricelli, the, belief in communism, 66. _Fundamentum_, distinction from _titulus_, 64 _et seq._ Funk, Dr., 113, 172, 203. Galileo, 159. Gand, Henri de, 110, 149. Garden of Eden, private property in, 55. Gasquet, 224. _Genesis_, 137, 226. Genoa, the Archbishop of, 207. letter from Alexander III. to, 187. Gentile, prohibition of usury between Jew and, 164. Gentiles, prohibition of usury not imposed on converts from, 168. taking of usury from, justified, 165. Genucian Law, the, interest prohibited by, 160. Gerbert, 14. Gerdilius, 100. Gerson, 39, 71, 104, 106, 108, 112, 118, 137, 182, 197. Gide and Rist, 9. Golden Age, the, private property in, 55. Gospel, the, preached to the poor, 137. Gospels, the, on usury, 166. Goyau, G., 67, 224. Haney, L.H., 2, 5, 41, 136. Heeren, A.H.L., 146. Hettinger, 226. Hilary of Poictiers, 60. Hincmar, 14. Hiring, Thomas Aquinas on, 38. Hogan, Dr., 43, 47, 49, 137. Hohoff, Abbé, 114, 199. Hostiensis, 188. Hoyta, Henricus de, 19. Huet, 47. Hunter, W.A., 105, 161. Hunting, _see_ Agriculture. Idleness, contrasted attitudes of ancient and Christian civilisations to, 137. Income, unearned, approved by scholastics, 113. justice of, 198 _et seq._ socialist theory of its injustice not supported by scholastics, 214. recognition of, 212. Individualism, of Christianity, 12. Industry, development of, in thirteenth century, 15. Ingolstadt, 211. Ingram, Dr. J.K., 2, 3, 4, 12, 17, 18, 23, 24. Innocent III., Pope, attitude to usury, 175. in favour of unearned income, 207. Insurance, a contract of, 210. Interamna, _montes pietatis_ at, 196. _Interesse proximum_, suggested alternative term to _damnum emergens_, 187. _Interesse remotum_, suggested alternative term to _lucrum cessans_, 187. Interest, justification of, 184. Interest, laws regarding, in Rome, 160. taking of, disapproved by Greek and Roman philosophers, 161. _see_ also Usury. _Irish Ecclesiastical Record, The_, 43, 47, 49, 109, 137. _Irish Theological Quarterly, The_, 9, 68, 128, 129, 130, 132, 135. Isidore, 95. Isidore of Seville, 15. his opinions on money regarded as final, 214. Italian States, forced loans in the, 195. Ivo, 169. Janet, P.A.R., 59, 61, 89, 91, 93, 97. Jannet, Claudio, 183. Janssen, J., 28, 68, 86, 125, 138, 139, 141, 143, 150, 154, 224. Jarrett, Fr., 83, 84. _Jeremiah_, 165. Jerusalem, the Church of, social system in, 44 _et seq._ St. Paul's appeal for funds, 48. the Council of, prohibition of usury not imposed on converts by, 168. Jesuits, the, invention of _trinus contractus_ attributed to, 211. _Jewish Encyclopaedia, The_, on usury, 165. Jews, attitude to usury, 160, 165. prohibition of usury between, 164. John of Salisbury, 14. Jourdain, 5, 14, 16, 149, 176, 183, 221. _Jus abutendi_, 87. _divinum_, 173. _humanum_, 174. _naturale_, 173. Just price, a Christian conception, 104. authorities empowered to fix, 108. comparison of mediæval theory with that of classical economists, 125. difference from modern competition price, 116. elasticity of, 117. factors determining, 109 _et seq._ Just price, fixed by common estimation, 115 _et seq._ fixing of, by law, 106. in money-lending, 179. mediæval teaching on, 103. necessity for adhering to, 108. of wages, _see_ Wages. rules for guidance in fixing by law, 107. nature of, 127 _et seq._ value of canonical doctrine, 123. Justinian, rates of interest fixed by, 161. Justinian Code, 28, 172. Kelleher, Father, 129, 130, 131, 132, 133, 134. Knabenbaur, 166. Knies, 80, 114, 135. Koran, the, the taking of interest forbidden in, 166. Labour, as title to property, 65. Christian teaching on its dignity, 137. division into honourable and degrading, 141. necessity and honourableness of all forms of, 140. only one constituent in the estimation of just price, 157. relative importance of, in determining value, 113. the motives which should actuate, 153. Lactantius, 45, 56 _et seq._, 91. Langenstein, 19, 107, 111, 112, 121, 122, 124, 137, 141, 203. Larceny Act, the, 27. Lateran Council, the, judgment in favour of _montes pietatis_, 197. Councils, the, of 1139 and 1179, declaration against usurers by, 174. Laurentius de Rodulphis, 157, 195, 209. Law, natural and positive, in relation to property, 64. Le Blant, 216. Lecky, 176, 211. Leo the Great, 146. Lessius, 117, 124. Letting, Thomas Aquinas on, 38. Levasseur, 138, 139, 224. Leviticus, 163. _Liberalitas_, its opposing vices, 74. meaning of, 73. Liberality, relation to justice, 73. Lisieux, Bishop of, _see_ Oresme, Nicholas. List, 146, 224. Loan, Thomas Aquinas on, 38. Loans, analogy between sales and, 182. forced, in the Italian States, 195. the real nature of, 178. _Locatio operarum_, 210, 213. Logic, mediæval study of, 14. Loria, 149. Lucca, _montes pietatis_ at, 196. _Lucrum cessans_, 185, 186, 195, 202. recognition of, 187 _et seq._ Lyons, Council of, ordinances against usurers, 175. Macleod, 218. _Magnificentia_, duty of, 77. Maimonides, 164. Malthusianism, 225. Mansi, 169. Mantua, _montes pietatis_ at, 196. Manufacture, position in the _artes possessivae_, 142 _et seq._ Marcian Capella, 15. Marriage, attitude of Thomas Aquinas towards, 225. Marshall, 30. Martin V., Pope, his bull on rent, 204. Marx, Karl, theory of value not supported by scholastics, 113, 114. Mastrofini, his interpretation of a verse of St. Luke, 166. Maximian, rescript regarding sales, 105. Mayronis, François de, 149, 156. Mediæval, interpretation of, 3 _et seq._ Menger, Anton, 199. Merchant, the, necessity for control of, _see_ Commerce. Metz-Noblat, de, 183. Meyer, Rudolph, 198. Middle Ages, definition of the term by various authorities, 3 _et seq._ early writers of, no reference to economic questions, 13. Milan, 211. Mohammed, prohibition of usury by his followers, 160. Mohammedans, taking of interest by, forbidden, 166. Monasteries, the, their example in manual labour, 138, 223. Money, as a form of capital, 201. a vendible commodity, 158. changing, see _Cambium_. different kinds of variation of, 219 _et seq._ ignorance of early Middle Ages regarding, 214 _et seq._ invention of, 103. most suitable metals for, 219. not discussed by early mediæval writers, 14. sterility of, 180. the sovereign's power in relation to, 219. treatment of, by Isidore of Seville, 15. utility of, as treated by Aristotle, 16. variations in value of, 216 _et seq._ value of, not to be changed unnecessarily, 219. Monopolies, mediæval views on, 124. _Montes pietatis_, 194. attitude of the Church to, 197. controversy over interest charged by, 196. _Montes profani_, 195 _et seq._ Moral theology, 130. Morality, economic, in the Middle Ages, 10. More, Sir Thomas, 48. Mosheim, 44. Munificence, duty of, 77. _Mutuum_, 202, 210, 213, 214. nature of, 178, 183. risk involved in, 192. Natural rights, distinction between absolute and commensurate in slavery, 95. Navarrus, 190. Necessaries, two kinds distinguished by Thomas Aquinas, 83. Neumann, 182. New Testament, the, 176. cited in support of prohibition of usury, 174. Nice, Council of, on usury, 169, 170. Nicholas v., Pope, bull on personal rent charges, 205. Nider, 39, 110, 118, 134, 150, 181, 193. Nitti, F.S., 43, 69. Noel, Conrad, 49. Numa, as origin of 'nummi,' 15. Occupancy, as title to property, 65. Old Testament, the, 176. attitude to usury, 163, 165. cited in support of prohibition of usury, 174. Oresme, Nicholas, 143, 215, 216, 219. his influence, 221. his work on money, 214, 217 _et seq._ Origen, 45. Orvieto, first _montes pietatis_ started at, 196. Ownership, _see_ Property. Padua, _montes pietatis_ at, 196. Palgrave, 30, 105, 112, 135, 212. Parma, _montes pietatis_ at, 196. Partnership, division of remuneration, 209. scholastic teaching on, 202, 205 _et seq._ the two kinds of, 209. _Parvificentia_, a sin, 77, 78. _Patria, potestas_, 226. Pelagius, views condemned by Council, A.D. 415, 61. Pennafort, Raymond de, 27, 149. _Periculum sortis_, 191, 192, 212. Périn, 183, 226. Perugia, _montes pietatis_ at, 196. Philip the Fair, his method of increasing the revenue, 216. Philosophers, the, their condemnation of usury, 161. Pigonneau, 146. Plato, his objection to usury, 161. Plutarch, attitude to usury, 163. _Poena conventionalis_, 185. difference from interest, 186. Political economy, errors of classical school, 8. difference between mediæval and modern methods, 6. Pope, the, his denunciation of Philip the Fair, 216. the spiritual vicar of God, 10. Popes, the, and almsgiving, 69. pronouncements by, on rent, 204. their protection of _montes pietatis_, 197. Population, mediæval attitude to, 224. Poverty, as the cause of sin, 78. Prescription, as title to property, 65. Price, just, _see_ Just price. Priscian, 14. Prodigality, an offence against liberality, 79. a sin towards the individual and the community, 78. distinction from liberality, 76. Production, an honourable vocation, 226. cost of, as a factor in determining value, 111 _et seq._ extended, the aim of mediæval teaching, 223. regulation of, 32. Professions, _see_ Labour. Profit, of the campsor to be determined by just price, 158. 'Profiteer,' the, doctrine of just price a weapon against, 125. Profiteering, prohibition of, 151. Property, duties attaching to, 69. duties in respect of exchange of, 102. immovable, rule for determining value, 120. in human beings, 88. private, duties attaching to, 40. right of, 39. teaching of mediæval Church, 41 _et seq._ the foundation of mediæval economics, 40. the keystone of economic system of later theologians, 66. _Proverbs_, 165. Prutz, 146. _Psalms_, 137, 165, 171. Rabanas Mauras, 14. Rambaud, 7, 8, 13, 80, 87, 100, 114, 146, 151, 182, 183, 188, 197, 203, 213, 215. Reformation, the, 211. attacks on monastic life during, 138. Renaissance, the, 218. Rent, pronouncements on, by the Popes, 204. refusal to pay, in Breslau, 204. scholastic teaching on, 202 _et seq._ _Revue Archéologique, La_, 61. Riches, the early Church on their abuse, 53. Rickaby, 75. Risk, remuneration for, 152, 157, 191. Rist, _see_ Gide. Roman Empire, the, fall of, regarded as beginning of Middle Ages, 3. jurists, their views on slavery accepted by Thomas Aquinas, 94. _Romans, Epistle to the_, 48. Rome, condemnation of usury by the philosophers of, 162. laws regarding interest in, 160. Numa, King of, 15. policy of, enforced by clergy, 11. the attitude to manual labour in, 137. Roscher, W.G.F., 5, 13, 19, 34, 46, 48, 87, 88, 107, 108, 112, 114, 121, 125, 142, 163, 166, 172, 186, 204, 215, 217. Ryan, Dr. J.A., 49, 74, 117, 123, 135. Sabatier, 223. St. Ambrose, 49, 52, 60, 82, 171. quoted by Aquinas, 71. St. Anselm, 14. St. Anthony, advice to his followers, 223. St. Augustine, 49, 57, 60, 63, 92, 93, 97, 98, 105, 146, 154, 172, 224. theory of slavery analysed by Janet, 93. views on slavery accepted by Aquinas, 94 _et seq._ St. Barnabas, 45. St. Basil, 49, 153, 171, 224. quoted by Aquinas, 71. St. Benedict, 152. Rule of, 224. St. Clement of Alexandria, 45, 49, 54, 168, 170. St. Clement of Rome, 49, 54. St. Cyprian, 45, 50, 168, 170. St. Gregory Nazianzen, 54. St. Gregory of Nyssa, 171. St. Gregory the Great, 49. St. Hilary, 171. St. Isidore, 62. St. Jerome, 49, 145, 171, 224. St. John Chrysostom, 49, 51, 52. St. Joseph, represented as a carpenter, 139. St. Justin, 45. St. Justin Martyn, 49. St. Lucian, 45. St. Luke, 82. St. Luke, doubtful meaning of a verse in, 168. interpretation of a doubtful verse in, 168, 171. St. Macharius, 223. St. Matthew, 38, 47. St. Pachomius, 223. St. Paul, 137. attitude to private property and communism, 48. on possession, cited by St. Augustine, 60. teaching on slavery, 89. followed by Christian teachers, 90. St. Peter, 46. teaching on slavery, 89. St. Peter Damian, 83. St. Thomas, _see_ Thomas Aquinas. Sale, Roman law as applied to, 104. Thomas Aquinas on, 38. treatment by fifteenth-century writers, 18. Sales, analogy between loans and, 182. Salvador, 48. Salvian, 55. Sapphira, 46, 52. Saturnus, result of banishment from heaven, 56. Saving, an act of liberality, 72 _et seq._ Scherer, 146. Scotus, Duns, _see_ Duns. Scotus Erigenus, 14. _Semaine Sociale de France, La_, 49, 62, 68, 104, 111. Seneca, 59, 89, 90. view of usury, 163. Serfdom, 99. Sertillanges, 80. _Servus_, St. Augustine's theory of origin, 93. Sevona, _montes pietatis_ at, 196. Sicily, personal rent charges permitted in, 205. Sidgwick, Professor Henry, 29, 31. Sinigaglia, 225. Sixtus V., Pope, condemnation of _trinus contractus_, 211. Slater, Father, 109, 128, 129, 130. Slavery, analogy with property, 97. attitude of Christianity to, 88. limits of master's rights, 100. three kinds of, 99. views of Christian Church and philosophers reconciled by Aquinas, 93 _et seq._ Smith, Adam, 29. _Societas_, 206, 207, 210, 213. Socialism, as providing an ethical basis of society, 31. danger of, 32. relation of its economic teaching to Christianity, 33. Socialists, claim to authority of the early Christians, 49 _et seq._ attempts to construct Utopia, 228. their communism not the 'community of user' advocated by scholastics, 86. their interpretations of St. Augustine, 58. their main principles, 230. their philosophy at variance with Christianity, 231. their principles not derived from mediæval teaching, 230. their view of the Church's teaching on usury, 198. _Socius stans_, 207. Solon, laws of, as affecting usury, 160. _Songe du Vergier_, 225. Stagyrite, the, _see_ Aristotle. Stoic tradition, the, 58. Stoicism, inferiority to Christian teaching on slavery, 89. Stoics, the, 93. Stintzing, 20. Sudre, 47, 48. _Summa Angelica_, 186. _Astesana_, 186. _Pisana_, 156. Superabundance, relativity of, 75. 'Teaching,' interpretation of, 3, 19 _et seq._ mediæval, its relation to practice, 21. ethical nature of, 27. Temperance, in the use of goods, 70. Tertullian, 45, 49, 145, 168, 170. _Thessalonians, Epistle to the_, 137. Thirteenth century, progress made in the, 15. Thomas Aquinas, 7, 16, 17, 18, 19, 20, 36, 41, 42, 46, 52, 62 _et seq._, 67, 69, 70, 71 _et seq._, 74 _et seq._, 77, 78, 80, 81, 82, 83, 84, 85, 91, 93, 94, 95, 96, 97, 99, 101, 105, 111, 112, 114, 117, 119, 121, 131, 132, 133, 135, 136, 141, 143, 144, 146, 147, 148, 149, 150, 151, 154, 156, 162, 167, 173, 174, 176, 182, 186, 188, 189, 193, 194, 195, 197, 206, 207, 208, 215, 230. Ticinum, Synod of, decree on usury, 173. Tillage, _see_ Agriculture. Time, the sale of, 182. _Timothy_, 151. _Titulus_, distinction from _fundamentum_, 64. _Tractatus Universi Juris_, 19. Tradesman, _see_ Commerce. Trade, _see_ Commerce. Troplong, 226. _Trinus contractus_, 210, 211. Trithemius, 85, 124, 137, 149. Twelve Tables, the, maximum rate of interest fixed by, 160. _Unciarum foenus_, doubtful meaning of, 160. Usufruct, Aquinas on, 38. Usurers, _see_ Usury. Usury and the clergy, 169. a sin against justice, 175. attitude of the Apostles, 168. attitude of various religious and legal systems, 160. borrowing at, circumstances justifying, 194. broader basis of discussion after twelfth century, 173. dealt with by ecclesiastical courts, 175. condemned by Councils, 13. by philosophers, 161, 162. as a sin against charity, 168, 171. controversies over prohibition, 159. definition of, by Lateran Council, 197. doubt as to Gospel teaching on, 167. Usury, ecclesiastical legislation on, 174. inconclusive teaching of the early Church, 172. increased payment for credit regarded as, 119. injustice of, according to Aristotle, 16. in the Old Testament, 163. not suppressed by civil law, 172. patristic and episcopal utterances in favour of, 172. not permitted by civil authorities, 197 _et seq._ popular attitude to, 163. prohibition of, 133, 173, 183, 184. proof of justice of unearned income, 213. position in canonist doctrine, 33. not imposed on converts from Gentiles, 168. secular legislation in favour of, declared void, 175. teaching of the early Church, 167 _et seq._ treatment by fifteenth-century writers, 18. Value, factors determining, 129. not systematically treated till fourteenth and fifteenth centuries, 111. _See_ also Price. Vaudois, the, belief in communism, 66. Verona, _montes pietatis_ at, 196. Vienne, Council of, 175. Vio, Thomas da, 196. Virgin, the Blessed, represented spinning, 139. Virginity, recommended for the few, 225. Viterbo, _montes pietatis_ at, 196. Wages, rules determining, 120. as factor in cost of production, 111. attitude of mediæval and modern working classes towards fixing, 126 _et seq._ fixed by a public authority, 121. Wages, paucity of authority on, before sixteenth century, 121. Wallon, 90, 137, 140. Wealth, theory of, according to Aristotle, 16. Wealth, not an end in itself, 80. Weber, 206. William of Paris, 176. Wolowski, 216, 217, 221. 
27647	----	Transcriber's Note The punctuation and spelling from the original text have been faithfully preserved. Only obvious typographical errors have been corrected. The Economist: OR THE POLITICAL, COMMERCIAL, AGRICULTURAL, AND FREE-TRADE JOURNAL. "If we make ourselves too little for the sphere of our duty; if, on the contrary, we do not stretch and expand our minds to the compass of their object; be well assured that everything about us will dwindle by degrees, until at length our concerns are shrunk to the dimensions of our minds. _It is not a predilection to mean, sordid, home-bred cares that will avert the consequences of a false estimation of our interest, or prevent the shameful dilapidation into which a great empire must fall by mean reparation upon mighty ruins._"--BURKE. No. 3. SATURDAY, SEPTEMBER 16, 1843. PRICE 6_d._ CONTENTS. Our Brazilian Trade and the Anti-Slavery Party 33 The Fallacy of Protection 34 Agriculture (No. 2.) 35 Court and Aristocracy 36 Music and Musicales 36 The Metropolis 37 The Provinces 37 Ireland 37 Scotland 38 Wales 38 Foreign: France 38 Spain 38 Austria and Italy 38 Turkey 38 Egypt 39 United States 39 Canada 39 Colonies and Emigration: Emigration during the last Seventeen Years 39 New South Wales 39 Australia 39 Cape of Good Hope 39 New Zealand 39 Political 39 Correspondence and Answers to Inquiries 40 Postscript 41 Free Trade Movements: Messrs Cobden and Bright at Oxford 42 Public Dinner to R. Walker, Esq. 42 Dr Bowring's Visit to his Constituents 42 Anti-Corn-law Meeting at Hampstead 43 Mr Ewart and his Constituents 43 Miscellanies of Trade 43 Police 43 Accidents, Offences, and Occurrences 43 Sporting Intelligence 43 Agricultural Varieties: The best Home Markets 44 Curious Agricultural Experiment 44 Cultivation of Waste Lands 44 Our Library Table 44 Miscellanea 45 Commerce and Commercial Markets 46 Prices Current 46 Corn Markets 46 Smithfield Markets 46 Borough Hop Market 47 Liverpool Cotton Market 47 The Gazette 47 Births, Marriages, and Deaths 47 Advertisements 47 "If a writer be conscious that to gain a reception for his favourite doctrine he must combat with certain elements of opposition, in the taste, or the pride, or the indolence of those whom he is addressing, this will only serve to make him the more importunate. _There is a difference between such truths as are merely of a speculative nature and such as are allied with practice and moral feeling. With the former all repetition may be often superfluous; with the latter it may just be by earnest repetition, that their influence comes to be thoroughly established over the mind of an inquirer._"--CHALMERS. OUR BRAZILIAN TRADE AND THE ANTI-SLAVERY PARTY. Since the publication of our article on the Brazilian Treaty, we have received several letters from individuals who, agreeing with us entirely in the free-trade view of the question, nevertheless are at variance with us as to the commercial policy which we should pursue towards that country, in order to coerce them into our views regarding slavery. We are glad to feel called upon to express our views on this subject, to which we think full justice has not yet been done. We must, however, in doing so, make a great distinction between the two classes of persons who are now found to be joined in an alliance against this application of free-trade principles; two classes who have always hitherto been so much opposed to each other, that it would have been very difficult ten years since to have conceived any possible combinations of circumstances that could have brought them to act in concert: we mean the West India interest, who so violently opposed every step of amelioration to the slave from first to last; and that body of _truly great philanthropists_ who have been unceasing in their efforts to abolish slavery wherever and in whatever form it was to be found. To the latter alone we shall address our remarks. As far as it can be collected, the argument relied upon by this party appears to be, that having once abolished slavery in our own dominions we ought to interdict the importation of articles produced by slave labour in other countries, in order to coerce them, for the sake of their trade with us, to follow our example. We trust we shall be among the last who will ever be found advocating the continuance of slavery, or opposing any _legitimate_ means for its extinction; but we feel well assured that those who have adopted the opinion quoted above, have little considered either the consequences or the tendencies of the policy they support. The first consideration is, that if this policy is to be acted upon, on principle, it must extend to the exclusion of _all_ articles produced in whatever country by slaves. It must apply with equal force to the _gold_, _silver_, and _copper_ of Brazil, as it does to the _sugar_ and _coffee_ produced in that country;--it must apply with equal force to the _cotton_, the _rice_, the _indigo_, the _cochineal_, and the _tobacco_ of the Southern States of America, and Mexico, as it does to the _sugar_ and _coffee_ of Cuba. To be in any way consistent in carrying out this principle, we must exclude the great material on which the millions of Lancashire, the West of Yorkshire, and Lanarkshire depend for their daily subsistence; we must equally exclude tobacco, which gives revenue to the extent of 3,500,000_l._ annually; we must refuse any use of the precious metals, whether for coin, ornament, or other purposes. But even these form only one class of the obligations which the affirming of this principle would impose upon us. If we would coerce the Brazilians by not buying from them, it necessarily involves the duty of not selling to them; for if we sell, we supply them with all the means of conducting their slave labour; we supply the implements of labour, or the materials from which they are made; we supply clothing for themselves and their slaves; we supply part of their foods and most of their luxuries; the wines and the spirits in which the slave-owner indulges; and we even supply the very materials of which the implements of slave punishment or coercion are made;--and thus participate much more directly in the profits of slavery than by admitting their produce into this country. But if we supply them with all these articles, which we do to the extent of nearly 3,000,000_l._ a year, and are not to receive some of their slave-tainted produce, it must follow that we are to give them without an equivalent, than which no greater encouragement could be given for a perseverance in slave-holding. But the truth is--whatever pretensions we make on this subject--we do, in exchange for our goods, buy their polluted produce; we employ our ships to convey it from their shores, and ourselves find a market for it among other countries already well supplied with cheap sugar, where it is not required, and where it only tends the more to depress the price in markets already abundantly supplied. Nay, we do more; we admit it into our ports, we land it on our shores, we place it in our bonded warehouses, and our busy merchants and brokers deal as freely on our exchanges in this slave produce as in any other, only with this difference--that this cheap sugar is not permitted to be consumed by our own starving population, but can only be sold to be refined in bond for the consumption of the free labourers in our West India colonies and others, or to be re-exported, as it is, for the use of "our less scrupulous but more consistent" neighbours on the continent. Consistency, therefore, requires equally the abandonment of all export trade to slave-producing countries, as it does of the import of their produce; and the effect will carry us even further. We know it is a favourite feeling with Mr Joseph Sturge and others of that truly benevolent class, that in eschewing any connexion with slave-producing countries, we have the better reason to urge free-trading intercourse with such countries as use only free labour,--with the Northern States of America, with Java, and other countries similarly circumstanced. Now of what does our trade to these countries, in common with others, chiefly consist? Of the 51,400,000_l._ of British manufactures and produce which we exported in 1840, upwards of 24,500,000_l._ consisted of cotton goods, nearly the whole of which were manufactured from slave-grown cotton, and partly dyed and printed with the cochineal and indigo of Guatamala and Mexico. Consistency would therefore further require that we abandon at least one-half of our present foreign trade even with free-labour countries, instead of opening any opportunity for its increase. When men are prepared and conceive it a duty to urge the accomplishment of all these results, they may then consistently oppose the introduction of Brazilian sugar and coffee, and support the present West India monopoly; but not till then. But now, what effect must this argument have upon slave-producing states, in inducing them to abandon slavery? Has it not long been one of the chief arguments of the anti-slavery party everywhere, that free labour is actually cheaper than slave labour? Now, will the Brazilians give credit to this proposition, so strongly insisted upon, when they see that the anti-slavery party conceive it needful to give support to a system which affirms the necessity of protecting free labour against slave labour, by imposing a prohibitory duty of upwards of 100 per cent. on the produce of the latter? Will their opinion of the relative cheapness of the two kinds of labour not rather be determined by our actions than our professions? We firmly believe that free labour, properly exercised, is cheaper than slave labour; but there is no pretence to say that it is so at this moment in our West India colonies; and we undertake to show, in an early number, in connexion with this fact, that _the existence of the high protecting duties on our West India produce has done more than anything else to endanger the whole experiment of emancipation_. But, moreover, our West India monopoly,--the existence of the high prohibitory differential duty on sugar, is the greatest, strongest, and least answerable argument at present used by slave-holding countries against emancipation. The following was put strongly to ourselves in Amsterdam a short time since by a large slave owner in Dutch Guiana:--"We should be glad," said he, "to follow your example, and emancipate our slaves, if it were possible; but as long as your differential duties on sugar are maintained, it will be impossible. Here is an account sale of sugar produced in our colony, netting a return of 11_l._ per hogshead to the planter in Surinam; and here is an account sale of similar sugar sold in London, netting a return of 33_l._ to the planter in Demerara: the difference ascribable only to your differential duty. The fields of these two classes of planters are separated only by a few ditches. Now such is the effort made by the planter in Demerara to extend his cultivation to secure the high price of 33_l._, that he is importing free labourers from the hills of Hindostan, and from the coast of Africa, at great cost, and is willing to pay higher wages than labour will command even in Europe. Let us, then, emancipate our slaves, which, if it had any effect, would confer the privilege of a choice of employer, and Dutch Guiana would be depopulated in a day,--an easy means of increasing the supply of labour to the planters of Demerara, at the cost of entire annihilation of the cultivation of the estates in Surinam. But abandon your differential duties, give us the same price for our produce, and thus enable us to pay the same rate of wages, and I, for one, will not object to liberate my slaves to-morrow." Whatever amount of credence people may be disposed to place in this willingness to abandon slavery, nothing can be more clear than that the higher rate of wages paid in our colonies, attributable solely to the high and extravagant price which, by our differential duties, their produce commands, must ever form a strong and conclusive reason with these slave-holding countries against their entertaining the question of emancipation. We believe most sincerely that an equalization of these duties--that an entire free trade would do more than any other act to encourage an adoption of our example everywhere: while the maintenance of monopoly and high prices _as an essential to the carrying out of the experiment of free labour successfully_--must be the strongest reason against its adoption with all those countries who have no means of commanding this accompanying confessed essential. But now were it otherwise:--have the professors of these opinions ever considered the huge responsibility which they arrogate to themselves by such a course? Let these men remember that, by seeking to coerce the _slave-labour producer_ in distant countries, they inflict a severe punishment on the millions of hard-working, ill-fed _consumers_ among their fellow countrymen; but they seem always to overlook the fact, that there is a _consumer_ to consider as well as a _producer_;--and that this consumer is their own countryman, their own neighbour, whose condition it is their _first_ duty to consult and watch;--duty as well as charity ought to be first exercised at home. That is a very doubtful humanity which exercises itself on the uncertain result of influence indirectly produced upon governments in the other hemisphere of the globe, and neglects, nay sacrifices, the interests of the poor and helpless around our own doors,--not only by placing the necessaries of life beyond their reach, but at the same time destroying the demand for their labour by which alone they can obtain them. If _individuals_ entertain conscientious scruples against the use of slave produce--let them, if they please, act upon them themselves, but do not let them seek to inflict _certain_ punishment, and the whole train of vice and misery consequent on starvation and want of employment, upon their poorer neighbours, for the purpose of conferring some _speculative_ advantage on the slaves of the Brazils or elsewhere: no man can be called upon as a duty to do so great a present evil, in order to accomplish some distant good, however great--or however certain. THE FALLACY OF PROTECTION. All laws made for the purpose of protecting the interests of individuals or classes must mean, if they mean anything, to render the articles which such classes deal in or produce dearer than they would otherwise be if the public was left at liberty to supply itself with such commodities in the manner which their own interests and choice would dictate. In order to make them dearer it is absolutely necessary to make them scarcer; for quantity being large or small in proportion to demand, alone can regulate the price;--protection, therefore, to any commodity simply means that the quantity supplied to the community shall be less than circumstances would naturally provide, but that for the smaller quantity supplied under the restriction of law the same sum shall be paid as the larger quantity would command without such restriction. Time was when the Sovereigns of England relied chiefly on the granting of patents to individuals for the exclusive exercise of certain trades or occupations in particular places, as the means of rewarding the services of some, and as a provision for others of their adherents, followers, and favourites, who either held the exclusive supply in their own hands on their own terms, or who again granted to others under them that privilege, receiving from them a portion of the gains. In the course of time, however, the public began to discover that these monopolies acted upon them directly as a tax of a most odious description; that the privileged person found it needful always to keep the supply short to obtain his high price (for as soon as he admitted plenty he had no command of price)--that, in short, the sovereign, in conferring a mark of regard on a favourite, gave not that which he himself possessed, but only invested him with the power of imposing a contribution on the public. The public once awake to the true operation of such privileges, and severely suffering under the injuries which they inflicted, perseveringly struggled against these odious monopolies, until the system was entirely abandoned, and the crown was deprived of the power of granting patents of this class. But though the public saw clearly enough that these privileges granted by the sovereign to individuals operated thus prejudicially on the community, they did not see with equal clearness that the same power transferred to, and exercised by, Parliament, to confer similar privileges on classes; to do for a number of men what the sovereign had before done for single men, would, to the remaining portion of the community, be just as prejudicial as the abuses against which they had struggled. That like the sovereign, the Parliament, in protecting or giving privileges to a class, gave nothing which they possessed themselves, but granted only the power to such classes of raising a contribution from the remaining portion of the community, by levying a higher price for their commodity than it would otherwise command. As with individuals, it was equally necessary to make scarcity to secure price, and that could only be done by restricting the sources of supply by prohibiting, or by imposing high duties on, foreign importations. Many circumstances, however, combined to render the use of this power by Parliament less obvious than it had been when exercised by the sovereign, but chiefly the fact that protection was usually granted by imposing high duties, often in their effect quite prohibitory, under the plea of providing revenue for the state. Many other more modern excuses have been urged, such as those of encouraging native industry, and countervailing peculiar burthens, in order to reconcile public opinion to the exactions arising out of the system, all of which we shall, on future occasions, carefully consider separately. But, above all, the great reason why these evils have been so long endured has been, that the public have believed that all classes and interests, though perhaps not exactly to the same extent, have shared in protection. We propose at present to confine our consideration to the effects of protection,--first, on the community generally; and secondly, on the individual classes protected. As it is admitted that protection ought, if granted at all, to be given to all alike, it would follow that the whole produce of the country would be raised to an artificial price; and if this were the case, as far as regarded the exchange or transactions among members of the same community, the effect would be merely nominal, of no advantage to any one, and of little disadvantage beyond the enormous public expense needed to prevent people cheating each other by smuggling and bringing in the cheaper foreign article;--but such a community must forego all notion or idea of a foreign trade;--they must have no desires to be gratified beyond themselves, and they must have within themselves the independent means of supplying every want. For even if the law be strong enough to maintain an artificial high price at home, it has no power of making other countries pay that price; and if everything we possessed commanded a higher price at home than other countries could supply the same for, we should have nothing which we could exchange for the produce of other countries, and thus no more foreign trade could exist, than in a poor country which had no surplus produce. It is therefore essential that every country should bear in mind, in adopting a system of protection to manufactures or other produce, that they thereby effectually debar themselves from all foreign trade to neutral countries in such articles; for if they require high duties at home to protect them from the produce of other countries, which could only come at considerable expense to compete with them at home, how can they withstand that competition when they meet on the same terms in every respect in a neutral market? How effectually has France stayed her export linen trade by raising the duties and the price of linen yarn, and by that act, intended as a blow to English trade, given the linen manufacturers of this country a greater advantage over France in the markets of the world than ever. How idle are the efforts of the Belgian government to establish depôts and factories for the sale of their manufactures in St Thomas add other places, while the manufacturers in Ghent are only able to maintain their home trade, by high protective duties, against English, French, and German goods, and still cry out for greater protection! It is, however, abundantly plain, that the state of a country above described could not long exist, when industry and intelligence were in the course of producing wealth; for if there be one law in nature more distinct than another, it is, that while the productions of every country are less or more limited to particular things, the wants of man extend to every possible variety of products over the whole world, as soon as his means can command them. As a country advances in wealth, it will have more and more surplus produce, which under wise laws would always consist of such things as it could produce with greatest facility and profit, whether from the loom or the soil. This surplus produce would be exchanged for the productions of other climates, but it must be quite clear, as soon as we arrive at this stage, that the power of the law to protect price altogether ceases. The surplus exported must sell in the markets of the world, in competition with the same article produced under the cheapest circumstances, and that article in the home market can command only the same price. Thus the whole attempt to protect all interests equally would immediately fail; every article produced in excess, and exported, would command only the lowest prices of open markets, and the fancied protection of the law would be void; while everything produced in deficiency, and of which we required to import a portion to make up the needful supply, would continue to be protected above the natural price of the world to any extent of import duty that the law imposed upon the quantity required to make up the deficiency. Thus, for example, we export a large portion of the woollen, and the largest portion of the cotton goods which we manufacture, to all parts of the world, which we must sell at least as cheap as they can be bought in any other country. The same articles can only command the same price in the home market, and though the law imposed an import duty, by way of pretended protection, to any extent, upon similar foreign goods, it would not have the effect of raising the price one fraction. On the other hand, we do not produce as much wool or food as we consume, and have every year to import large quantities of each to make up the deficiency. Whatever duty, therefore, is put on the import of the quantity thus required, will enable the producers at home to maintain their price so much above the natural level of the world. By this state of things the country at large is injured in two distinct and prominent ways:--first,--those articles which we can make in excess, and export, must ever be the chief means of absorbing the increasing capital and labour of the country; and the impediment thrown in our way, of importing those things which we have in deficiency, must necessarily check our power of extending the demand for the produce of such increasing labour and capital; and, secondly,--the price of such articles as we produce in deficiency, will always be maintained much above the level of the world, to the great disadvantage of the other great class of producers, the price of whose labour, and whose profits, will be regulated by competition with those who have food, &c., at the lowest price. So much as to the effect on the community at large. We will now shortly consider the effect on individual interests, which are thought to enjoy protection, and we believe we can show that there never was a condition so fraught with mischief and disappointment, with such unmitigated delusion, deception, and exposure to ruin, than is to be found in every case where protection operates. We think it can be clearly shown _that such occupations can never be more profitable; that they must usually be less profitable; and that they are always more exposed to vicissitudes than any other class_. They never can be more profitable, because capital and enterprise will always be attracted to any occupation which offers a larger profit than the usual rate, till it is reduced to a level with others; they will usually be less profitable, indeed always in a community of increasing numbers, because the price being maintained by restriction above the price of the world, prevents an extension of such trades in the same proportion as those who naturally belong to them, and look to them for occupation, increase in numbers: they will be exposed to greater vicissitudes, because, being confined to the supply of only one market, any accidental circumstance, which either increases the usual supply, or diminishes the usual demand, will cause an infinitely greater depression than if they were in a condition to avail themselves of the markets of the whole world, over which they could spread an accidental and unusual surplus. Thus, previous to 1824, the silk manufacturers of this country were protected to a greater extent than any other trade, and the price of silk goods was maintained much above the rate of other countries; our silk trade was therefore necessarily confined almost exclusively to the home market and our colonies, and though they had a monopoly of those markets, it was at the cost of exclusion (on account of higher price) from all other markets. Notwithstanding this monopoly, the silk manufacturers could never command at any time larger _profits_ than other trades; for had they done so, competition would have increased until the rate was reduced to the common level of the country: on the contrary, the tendency was for profits and rates of wages to be smaller than in other great manufacturing branches, requiring equal capital and skill; because, with the increasing numbers who belonged to the silk trade,--the sons of manufacturers and of weavers, who naturally, in the first instance, look to the trade of their parents for their occupation,--the trade did not proportionably increase, from the fact of our being unable to extend our exports; and, lastly, it was exposed to much greater vicissitudes than other trades; for when, either from a temporary change of fashion or taste, or from a temporary stagnation of trade in this country, the accustomed demand was lessened, the silk manufacturers were unable to obtain any relief by extending their trade in the great neutral markets of the world, being excluded by price, and the whole surplus quantity remained a dead weight on this market only; whereas other branches of manufactures, practically enjoying no protection, in the case of depressed trade at home, had an opportunity of immediate relief, by spreading the surplus thereby created, at a very trifling sacrifice, over the wide markets which they supplied. In this way the extent and duration of the vicissitudes and depressions in the silk trade were without parallel in any other; but since 1824, since this trade has been placed in a natural position by the removal of monopoly, the whole aspect of it has changed, and these peculiar evils have all disappeared. Then again with regard to the products of land, which the law attempts to protect more highly than any other. Here again, though the price to the community is maintained much above the prices of other countries, no one person connected with raising the produce can command a higher rate of profit, or higher wages for labour, than other trades having no protection whatever; for if they did, competition would soon reduce them to the same level; but, on the contrary, the wages, of agricultural labourers, and the profits of farmers, are always rather below than above the common rate, and simply from this fact, that the children of farm labourers, and of farmers, who first naturally look to the pursuits of their parents for a trade or occupation, increase in numbers without any corresponding extension of the means of employment, and the competition among them is therefore always greater than in other trades which have the power of extension; and the vicissitudes to which the farmer is exposed are notoriously greater than any other trade. His rent and expenses throughout are fixed by an artificial price of produce, which price can only be maintained as long as a certain scarcity exists; but the moment the markets are plentifully supplied, either from a want of demand owing to a depression of trade, or from the result of a good harvest, he finds that plenty takes out of his hand all control of price, which quickly sinks to the natural rate. With a free trade the farmer would never be exposed to such reverses. In that state, if the demand and price increased, it would be checked by an increase of imports from other countries; if the demand and price diminished, that would also be checked by a reduction or cessation of the usual imports, and, if necessary, by an export of any surplus which pressed upon the market;--and, if our space allowed, it would not be difficult to show that, with prices at the natural rate, all parties connected with land would not only be in a safer but a much better condition. No cautious man who well understands the subject will ever hazard his capital in any trade exposed to so many evils and to so much uncertainty as restriction and protection infallibly introduce into it:--but the great error which misleads all men in cherishing such trades is, that they mistake _high prices_ for _high profits_, which usually, instead of being synonymous terms, are quite the reverse. AGRICULTURE. No. II. ON THE INDICATIONS WHICH ARE GUIDES IN JUDGING OF THE FERTILITY OR BARRENNESS OF THE SOIL. BY THE REV. WILLIAM THORP. (_Continued from No. 2._) These three signs, viz., colour, consistence, and vegetation, are named by the Royal Agricultural Society as being pre-eminently indications of the value of lands; yet there are others of equal if not of greater consequence. For example:-- _A knowledge of the geology of the land_ is of the first importance; that is, not only a knowledge of the range and extent of each formation and its subdivisions, which may be called geographical geology, but also how far and to what extent the various lands do depend upon the substratum for their soil, and the local variations in the chemical or mineralogical character of the substrata themselves, and which may be called the differential geology of soils. For not only do the qualities of land vary from one formation to another, but upon the same formation there is frequently considerable difference in the quality of land depending upon chemical difference in the substratum, or upon an intermixture of foreign debris derived from other strata. _A chemical investigation_ of the soil and subsoil will frequently afford most useful indications respecting the value of land. It may be laid down as an axiom that a soil to be fertile must contain all the chemical ingredients which a plant can only obtain from the soil, and chemistry ought to be able to inform us in unproductive soils what ingredients are wanting. It also is able to inform us if any poisonous substance exists in the soil, and how it may be neutralized; when lime, marl, and chalk are to be used, &c.[1] The Royal Agricultural Society say that chemistry is unable to explain the productiveness of soils. But why is it unable? One reason is, that supposing everything required by the plant to be present in the soil, yet if the soil be either too wet, or too dry, too cohesive, or loose, the plant will not flourish; and chemical analysis does not declare this, for it affords no information respecting the mechanical division in which substances exist in the soil. Again, the chemical analysis of soils, to be worth anything, must be conducted with more rigid accuracy than those published by English writers. To detect one cwt. of gypsum in an acre there would be only one quarter of a grain in a pound of soil, or in 100 grains only three and a half thousandth of a grain (35/10000 or,00035 grs.), or to discover if sufficient alumina existed in a field for the production of red clover there must be ascertained if it contained (one hundred thousandth),00001 per cent. The analyses even by Sprengel do not afford us the quantity of nitrogen in each soil, or the capacity of the soil for this substance; while it is well known that most manures, as well as the different kinds of food, are valuable in proportion to the quantity contained by them, and it is highly probable, _ceteris paribus_, that the quantity of nitrogen found existing in soil, and the soil's capacity for containing that substance, would afford an easy indication of its immediate fertility, and also of its requiring great or small quantities of nitrogenous manures in its future cultivation.[2] Chemistry, however, outsteps her province when it is attempted to explain how vegetable productions are formed in the plants by chemical forces; for the recent discoveries of Schwann, Henle, and Schleiden, prove that all the functions of the plant are performed by the means of simple vesicles and cells--that absorption, assimilation, fixation of carbon from the atmosphere, respiration, exhalation, secretion, and reproduction are all effected by single cells, of which the lower plants almost entirely consist--that the cell absorbs alimentary matters through the spongioles of the root, and that the fluid received thus undergoes the first steps of the organizing process--that the inorganic elements are changed into the simplest proximate principles by cells--so also are the further changes into the regular secretions of the plant, the result of cell-life--that gum and sugar are converted into the organizable portion of the nutritious sap by the cells of the leaves. The starchy fluid in the grains of corn is rendered capable of nutrition to the embryo by the development of successive generations of cells, which exert upon it their peculiar vitalizing influence. Albumen is converted into fibrine by the vital agency of cell life--_i.e._, cells are produced which do not form an integral part of any permanent structure in the plant, but which, after attaining a certain maturity, reproduce themselves and disappear; hence it may be stated that all the vegetable productions which are formed in the plant are effected by a series of vital actions through the agency of cells. From the different transformations which these undergo all the different tissues in vegetables are formed; for instance, the spiral and dotted ducts, woody fibre, and so on. Schwann showed that the formation of tissues in animals went through exactly the same progress, a fact which has been confirmed by the microscopic observations of Valentin and Barry. Thus vessels, glands, the brain, nerves, muscles, and even bones and teeth are all formed from metamorphosed cells. Dr Bennett says--"If this be true, and there can be little doubt, it obliges us to modify our notions of organization and life. It compels us to confess that vegetables and animals are not simple beings, but composed of a greater or less number of individuals, of which thousands may exist in a mass not larger than a grain of sand, each having a vital centre and separate life, independent of those around it. Each of these individuals, or organized cells, should be regarded as a living being, which has its particular vital centre of absorption, assimilation, and growth, and which continues to vegetate, to increase, and undergo transformations as if it were an isolated individual. At all events, a knowledge of the existence of the cell-life of plants will explain several phenomena respecting the vegetation, growth, and ripening of corn, and may hereafter lead to some valuable practical results." _The climate, elevation, and exposure_ are not to be neglected. Upon the higher portions of the Wolds crops suffer, much from elevation and exposure, while in the western portion of Yorkshire, upon the moor edges, the harvest is usually a month later than in the central parts of the island. _A moderate depth_ of soil in general is a favourable sign, although some of shallow soils on the new red sandstone and on the Wolds are very good; to these signs are to be added locality, as respects markets, facilities of obtaining a supply of lime, or other tillage, the rates and outpayments peculiar to the district, &c. &c., all of which are to be taken into account when considering the value of any particular farm. I shall now briefly apply these indications of fertility over the different geological formations of Yorkshire, and it will be found that each lends aid to the other, and that a person will be able to ascertain the value of land in proportion as he is able to appreciate the collective evidence afforded by them. (_To be continued._) [1] Mr Brakenridge, of Bretton Lodge, who has extensive practice in land valuing, informs me that a mechanical analysis of the soil affords him much assistance; and he has found that in soils, whenever free from stagnant water, that in a mechanical analysis the larger the proportion which remains suspended in the water, the greater its powers of production will be found, and the less manure it will require. That the best soils are those which, when diffused and well stirred in water and allowed to stand for three minutes, from 20 to 30, say 25, per cent. is carried off with the water of decantation. When 30 per cent. and upwards is decanted off, the soil becomes retentive of water and consequently wet. When less than 20 per cent., say only 16 per cent. and under, is carried off, it becomes too porous; water passes through it too rapidly; its soluble matter is washed off into the substratum, and it has a strong tendency to become thin and sterile. [2] The celebrated black earth of Russia contains 2,45 per cent. of nitrogen. COURT AND ARISTOCRACY. The Queen and Prince Albert, on their return on Thursday week from the Chateau d'Eu, were accompanied by the Prince de Joinville, who remained to dine with the Royal party, and then returned in the evening on board his yacht, for the coast of France. After a few days' repose, her Majesty and the Prince started on another marine excursion. They sailed from Brighton on Tuesday morning, passed Dover, and arrived off Deal about three o'clock, where the Royal yacht anchored, in order to receive the Duke of Wellington, who came from Walmer Castle, and dined with her Majesty on board, a large number of vessels, gaily decked with flags, as well as crowds on shore, giving animation to the scene. The Duke remained with her Majesty and Prince Albert upwards of two hours, and during the time he was on board, the wind, which throughout the day had been blowing rather fresh from the northward and eastward, had considerably increased, and her Majesty, upon the Duke's taking his leave, evinced very great anxiety respecting the safe landing of his Grace. Everybody who knows this coast is aware that when the wind is blowing at all from the eastward that there is a very heavy surf on the beach, and consequently great difficulty in landing. His Grace, however, on thanking her Majesty for the concern she evinced on his account, made light of the matter, and returned on board the _Ariel_, which brought him as near the shore as possible; here he got into the barge and rowed towards the beach. The swell was too great to admit of his landing at the pier, from which he had started, and the boat was pulled towards the naval yard, where the surf was not so great as at any other part of the shore. Here the Duke landed, but not without a thorough drenching, for no sooner had the bows of the boat touched the shore than a heavy sea broke right over her stern, and completely saturated his Grace's apparel. The Duke, upon landing, all wet as he was, immediately mounted his horse, and rode off to Walmer Castle. A numerous assemblage of persons had congregated on the beach when the Duke came on shore, and loudly and enthusiastically cheered him. At an early hour on Wednesday morning the squadron got their steam up, and made preparations for taking their departure. The weather had moderated, and the day was fine. About seven o'clock the Royal yacht got under way, and stood out to sea, and was followed by the other steamers, and also by the _Penelope_, which had been ordered to form one of the Royal squadron. About two o'clock on Wednesday the Royal yacht entered the port of Ostend, taking the authorities somewhat by surprise, who did not expect it quite so soon. The King and Queen of Belgium, and the official personages of Ostend, were, however, on the pier to await the landing; and the populace displayed the most lively enthusiasm. In the evening there was a grand banquet at the Hotel de Ville, and Ostend was brilliantly illuminated, in a style far surpassing ordinary occasions. THE KING OF HANOVER.--A correspondent writes that his Majesty, while in conversation with a noble friend, expressed the determination, should Divine Providence spare him health, to visit this country again next summer, and he purposed then to come earlier in the season. VISIT OF THE REGENT OF SPAIN TO GREENWICH HOSPITAL.--On Wednesday, about twelve o'clock, General Espartero paid a visit to the Royal Hospital at Greenwich. Sir Robert Peel arrived in town by the London and Birmingham Railway on Saturday afternoon, from his seat, Drayton Manor, Staffordshire, and immediately proceeded from the Euston-square terminus to the residence of the Earl of Aberdeen, in Argyll street, to pay a visit to his lordship. Soon, after the arrival of the Right Hon. Baronet, Sir James Graham arrived in Argyll street from the Home office, and had an interview with Sir Robert Peel. Sir R. Peel left his colleagues at a quarter-past four o'clock for the terminus at London bridge, and travelled by the London and Brighton Railway to Brighton, to dine with her Majesty and Prince Albert, remaining at the Pavilion, on a visit to her Majesty. MUSIC AND MUSICALES. MANCHESTER MUSICAL FESTIVAL.--This great festival--one of the greatest and finest musical events that ever occurred in Manchester--was held in the magnificent hall of the Anti-Corn-law League, the length of which is 135 feet, the breadth 102 feet, inclosing an area of about 14,000 square feet. The services of all our principal vocal artists were secured. The _soprani_ were Miss Clara Novello and Miss Rainforth; the _alto_ or _mezzo soprano_, Mrs Alfred Shaw; the _tenori_, Mr Braham and Mr James Bennett; and the _basso_, Mr Henry Phillips. The choir was the most complete and efficient one ever collected in Manchester, and consisted of nearly the whole of the vocal members of the Manchester Choral Society and the Hargreaves Choral Society, with some valuable additions from the choirs of Bury and other neighbouring towns, and from gentlemen amateurs, conversant with Handel. The _Messiah_ was the performance of Monday night; and, on the whole, was executed in a style worthy of that great work of art, the conductor being Sir Henry Bishop, who wore his robes as a musical bachelor of the University of Oxford. On Tuesday there was a grand miscellaneous concert, the hall being even more numerously attended than on the preceding evening, there not being fewer than 3,500 persons present. This went off with very great satisfaction to the very numerous auditory; and the _Manchester Guardian_ says, "As to the general impression produced by this festival, we believe we do not err in saying that there is but one opinion,--that it has been throughout an eminently successful experiment. Sir Henry Bishop, we understand, said that he never heard choruses sung with better effect in his life; and that he considered the festival, as a musical performance, most creditable to every one connected with it. As to the capabilities of the hall for singing, we are informed that Miss Clara Novello has declared that she never sang with more ease in any place in her life; and we think the ease with which she did sing was obvious to all who could see her countenance. We have asked many persons who sat in different parts of the hall, especially in distant corners, and all concur in saying that they heard most distinctly Miss Novello's softest and faintest notes." MUSICAL INTELLIGENCE.--Rubini is about to establish an opera at St Petersburg, and has engaged his old colleague, Tamburini, to assist him in the enterprize. He has also engaged Signor Pisani, a young tenor of great promise. Lablache will not appear at the opening of the Italian Opera in Paris. He has gone to Naples, where he will remain for two months, and where he is to be joined by his son-in-law, Thalberg. A grand musical festival, which was to have taken place in Paris on Thursday next, has been postponed till the beginning of October. It is said that this festival will rival those of Germany in splendour. The Hereford Musical Festival, which was held on Tuesday, Wednesday, and Thursday, in All Saints Church, in consequence of the repairs going on at the cathedral, was on a much smaller scale than of late years has been usual with the three choirs, and the attendances at the various performances were by no means so numerous as had been generally expected; still, as the expenses had been studiously kept down, it is to be hoped the receipts may cover them, or nearly so. The collections after the three services amounted to 865_l._, being 200_l._ less than in 1840, but 50_l._ more than in 1837.--_Cheltenham Looker-on._ Rossini has just left Paris without its having been possible to procure a note from him. Every effort has been fruitless. Unwilling to hear one word said of music, Rossini has not even been to the Opera. He is returning to Bologna, cured of a painful disease by Doctor Civiale, who, with reason, seemed to him a far more important personage than Duprez. It is said that Rossini replied to the great tenor, who asked him for a part, "I have come too early, and you too late."--_French print._ THE METROPOLIS. THE ALDERMANIC GOWN OF BREAD-STREET WARD.--It is supposed that there will be a hard contest for the Aldermanic Gown of Bread street, vacant by the resignation of Alderman Lainson, who on Thursday last addressed a letter to the Lord Mayor, announcing his determination to retire, in consequence of ill health. METROPOLITAN IMPROVEMENTS.--The works are now about to commence in good earnest for forming Victoria Park. Great progress is being made by the Commissioners of the Metropolis Improvements in the formation of the new street at the West-end. The new street leading from Oxford street to Holborn has been marked out by the erection of poles along the line. Last week several houses were disposed of by auction, for the purpose of being taken down. Some delay has arisen in respect to the purchase of the houses which have formed the locality known as Little Ireland. Among the buildings to be removed is the chapel situated at the top of Plumtree street. In this street the whole of the houses on the west side will be shortly removed, for the new street which will lead from Waterloo bridge. In Belton street, in the line for this intended street, the inmates of several houses received notice to quit yesterday. The occupiers of the several houses forming the clump at the end of Monmouth street, in Holborn, have also received similar notices. Similar progress has been made with the new street communicating between Coventry street and Long acre. The line has been cleared from Castle street to Long Acre on the east. On the west side the inmates of the houses, it is expected, will in a few days have notice to quit. Improvements will also be made between Long acre and St Giles's; and in Upper St Martin's lane the whole of the houses on the west side will be removed, the greater part of which are already taken down. REPORT ON THE MODEL PRISON.--The commissioners appointed to superintend the management of the Pentonville Prison have just presented their report for the approval of the Secretary of State. The report states, that it is the intention of the Secretary of State to appropriate the prison to the reception of convicts between eighteen and thirty-five years, under sentence of transportation not exceeding fifteen years; and that the convicts so selected shall undergo a term of probationary discipline for eighteen months in the prison, when they will be removed to Van Diemen's land under their original sentences. RETURNS OF THE ROYAL MINT.--The Master of the Mint has issued his annual return of the work done in the refinery of the Mint, and of the assays made during the past year on other accounts than those of Government, and of public and private bodies, in conformity with an order of the house on a motion made by Mr Hume. The return estimates the amount of bullion refined in the year 1842, under this head, at 940 lbs 0 oz. 19 dwts. of gold, and 24,376 lbs. 11 oz. of silver, the amount received by the refiner being about 600_l._ The number of assays made in the same period is put down at 2,158, at a rate of charge of 2s. for each assay. POST-OFFICE LAW.--It may be interesting at this season, when so many persons who are out of town have their letters forwarded to them in the country, to see the answer to an inquiry whether a letter forwarded after delivery at one address to another in the country is liable to second postage:--"General Post office, Sept. 7, 1843.--Sir,--I am commanded by the Postmaster-General to inform you, in reply to your communication of the 29th ultimo, that a letter re-directed from one place to another is legally liable to additional postage for the further service. I am, Sir, &c. &c." SINGULAR EMPLOYMENT OF THE POLICE.--Under an order recently issued by the commissioners of the metropolitan police, a number of the officers of each division have been actively engaged in collecting information and making out a return of all new houses completed since the year 1830, in which year the police force was established; all new houses commenced but not finished; all new churches, new chapels, new schools, and other public buildings; all new streets and squares formed since that period, with their names and the name of the neighbourhood. THE PROVINCES. SANITARY STATE OF LIVERPOOL.--A Mr Henry Laxton has published a very thin pamphlet, in the shape of a letter to Dr Lyon Playfair, who has been appointed, under the commission of inquiry, to examine and report upon the unhealthy state of Liverpool. But though Mr Laxton's pamphlet is very small, it exposes evils too complicated and large to be remedied without vigorous, continuous, steadily-applied exertion. Groups of houses packed together, with scarcely room for the inhabitants to stir; open cesspools continually sending up their poisonous exhalations, and in hot or wet weather so infesting the air as to render it almost insupportable; smoke from the factories and steam-vessels, which, when the wind is westerly, covers the town, blackening the buildings, soiling goods, and, mixing with the other gases already generated, forming one general conglomeration of deleterious vapours; the state of the inhabited cellars; the neighbourhood of which exhibits scenes of barbarism disgraceful for any civilised state to allow; an inefficient supply of that great necessity of life--water; inefficient drainage, which is only adapted to carry off the surface water;--these are but a sample of the general state of Liverpool, and at the same time very distinct and efficient causes of its excessive mortality. SHEFFIELD.--It is now understood that there will be no immediate vacancy for Sheffield, and that both Mr Ward and Mr Parker will retain their seats. HENRY DAMAR, ESQ.--The _Dorset Chronicle_ publishes a long account of the festivities which took place at Milton Abbey, in Dorsetshire, on the 5th instant, on the occasion of the coming of age of the proprietor, Henry Damar, Esq. PROPOSED PUBLIC MEETING IN BIRMINGHAM.--On Monday a deputation waited on the Mayor of Birmingham, with the requisition requesting him to call a public meeting to petition the Queen to dismiss her present ministers. The requisition was signed by nearly one thousand merchants, manufacturers, and shopkeepers of the town. There was not the name of a working man attached to it. The mayor, however, declined calling the meeting, observing, that although he might not act in accordance with the wishes of many most respectable individuals in the town, he had made up his mind not to call the meeting. ATTENDANCE OF THE LANCASHIRE MEMBERS OF THE HOUSE OF COMMONS IN THE SESSION OF 1843.--The total number of divisions in the House of Commons, during the session of 1843, was 220, in which there voted-- Times. 1. Joseph Brotherton Salford 191 2. Dr Bowring Bolton 153 3. Lord Stanley N. Lancashire 129 4. William Sharman Crawford Rochdale 120 5. Thomas Greene Lancaster 102 6. Charles Hindley Ashton 92 7. Sir Howard Douglas Liverpool 88 8. John Wilson Patten N. Lancashire 82 9. John Ireland Blackburne Warrington 75 10. Viscount Sandon Liverpool 69 11. John Fielden Oldham 61 12. John Hornby Blackburn 61 13. Peter Greenal Wigan 60 14. Thomas Milner Gibson Manchester 56 15. Sir George Strickland Preston 53 16. Hon. Richard Bootle Wilbraham S. Lancashire 50 17. Edward Cardwell Clitheroe 47 18. William Fielden Blackburn 47 19. Peter Ainsworth Bolton 34 20. General Johnson Oldham 32 21. George Marton Lancaster 31 22. Mark Philips Manchester 26 23. Sir Peter Hesketh Fleetwood Preston 19 24. Richard Walker Bury 16 25. Lord Francis Egerton S. Lancashire 9 26. Charles Standish Wigan 9 DESTRUCTIVE FIRE AT HALIFAX.--We regret to learn that a fire broke out early on Saturday morning, in the warehouse of Messrs James Acroyd and Son, worsted manufacturers, Bowling Dyke, near Halifax, when the building, together with a large quantity of goods, was entirely destroyed. We understand that Messrs Acroyd were insured to the extent of six or seven thousand pounds, but that the loss considerably exceeds that amount. CHESTER CHEESE FAIR.--At this fair on Wednesday last, the first of the season for this year's make, about 200 tons of new cheese were piled for sale. Early in the morning several dairies went off briskly, but as the day advanced sales became heavy. Prices ranged from 40s. to 50s. per cwt., according to quality. We hear that the make this season has been above an average one. NEW COLLEGE, NEAR OXFORD.--A correspondent states that it is intended to establish at Littlemore, near Oxford, a college, in which young men holding Tractarian views may be trained for missionary labour in connexion with the established church. The Right Rev. Dr Coleridge, formerly Bishop of Barbadoes, will be the principal of the institution. CHATHAM.--A general Court-martial was held on Wednesday, the 6th inst., in the General Court-martial-room, Chatham Barracks, for the purpose of trying Lieutenant J. Piper, of the 26th Cameronian Regiment. The trial lasted four days, terminating on Saturday, the 9th inst. The charges alleged ungentlemanly and improper conduct. The prisoner's defence being closed, the Court broke up. The sentence of the Court will not be known until the evidence has been laid before the Commander-in-Chief at the Horse Guards. The prisoner is about 26 years of age. The trial excited the greatest interest throughout the garrison. It is said that there are at present upwards of 2,000 visitors congregated at Harrogate; and all the other watering places in the north of England, Scarborough, Seaton, Carew, Redcar, Tynemouth, Shotley bridge, Gilsland, as well as the lakes, are teeming with gay and respectable company. IRELAND. REPEAL ASSOCIATION.--On Monday the usual weekly meeting of the Repeal Association was held at the Corn Exchange, Dublin. The week's "rent" amounted to 735_l._, of which 1_l._ was from Mr Baldwin, a paper manufacturer of Birmingham, who is of opinion that Ireland would be of greater benefit to England with a domestic legislature than she was at present. REPEAL MEETINGS.--A repeal meeting was held on Sunday last at Loughrea, a town in the county of Galway, about ninety miles from Dublin. It was attended by Mr O'Connell, who as it was raining in torrents, addressed the people from under the shelter of an umbrella. Amongst other things in his speech, he said,--"Believe me, my friends, that if you follow my advice, the day is not far distant when you shall have your Parliament restored in Ireland. I am working the plan out. I have it in detail. I will have this protective society of 300 sitting before Christmas, and I hope to be able to give you, as a new year's gift, a Parliament in College green. (Cheers.) People of Ireland, you deserve it. Brave, noble-minded people of Ireland, you deserve it. Faithful, religious, moral, temperate people of Ireland, you deserve to be a nation, and you shall be a nation. (Much cheering.) The Saxon stranger shall not rule you. Ireland shall belong to the Irish, and the Irish shall have Ireland." (Hurrah.) There was a dinner in the evening, at which about 400 persons were present. BRANDING OF ARMS IN IRELAND.--Government has entered into a contract with Mr Grubb, the scientific and very able mechanist of the Bank of Ireland, for the construction of the machine intended to be used in marking the arms under the new law--they are not to be subjected to the operation of punching, still less, as some strangely supposed, to the notion of fire. The letters, or figures, will be marked by cutting; and, so simple and ingenious is the method employed, that the most unskilful workman, even an ordinary person unpractised in any trade, can effect the process with the most perfect ease. Four figures and two letters are expected to suffice for designating the county or riding of a county, and the number of the piece; the time occupied in the engraving will be one minute. The expense will be extremely moderate; the cost of each machine being, we understand, only twenty-five guineas, one-half of which, by law, will be defrayed out of the consolidated fund, the other half by the county.--_Evening Mail._ SCENE AT THE PHOENIX PARK.--An extraordinary scene took place on Saturday, at the Viceregal Lodge, between the military on duty and a person named Thomas Campbell, who is, it would appear, insane. Thomas Campbell, it appears, is a very powerful young man, about thirty years of age, and a native of the North road, Drogheda. At the lodge, in the Phoenix Park, he asked to see the Lord Lieutenant; but, being armed with a pitchfork and a hammer, he was not considered an eligible visitor, and after a desperate struggle with the guard, whom he kept at bay, he was knocked down and secured by a police constable. The meeting of Tuesday of the Repeal Association, adjourned over from Monday, was enlivened by the presence of Mr O'Connell, without whom all its proceedings would be "stale, flat, and unprofitable." It again adjourned till Wednesday; and, on that day, Mr O'Connell read an address to the people of Great Britain, setting forth the grievances of the people of Ireland. After the reading of this document, which is long, and certainly ably drawn up, the association adjourned till Monday. MILITARY DEFENCES.--Before the winter sets in every barrack in Ireland will be in a state of defence, fit to hold out against an insurgent assault. In fact, everything will be prepared, excepting the insurrectionary force; and certainly there does not at present appear to be much chance that the strength of the fortifications will be tested. * * * * * REPEAL DEMONSTRATION IN LIVERPOOL.--Some days ago public announcements were made that two days' "demonstration" would be made in this town, in favour of the repeal of the union, and that Mr Daniel O'Connell, jun., youngest son of the Liberator, and one or two others of inferior note would attend. The meeting took place on Tuesday night last, in the Amphitheatre, which was crowded, by not less than between 3,000 and 4,000 persons. Shortly after the doors were opened it appeared evident that a considerable body of Orangemen were dispersed in different parts, from partial sounds of the "Kentish fire," and other circumstances. Mr O'Connell, and the gentlemen accompanying him, arrived about half-past seven, and the chair was taken by Mr James Lennon, who was described as an "Inspector of Repeal Wardens in Liverpool." He delivered a short speech in favour of repeal, during which he was repeatedly interrupted by the Orangemen, and some confusion followed.--Mr Fitzgerald moved the first resolution, which was supported by Mr Daniel O'Connell, jun. His retirement was the signal for the commencement of an uproar which almost defies description. There appeared an evident determination that the proceedings should be stopped; for fights commenced in different parts, many of the benches were torn up, and a sort of attack was made upon the stage by a few Orangemen who were in the pit. The police were very active in endeavouring to secure the assailants, several of whom were seriously hurt; and a few of them having been removed from the building, order was eventually restored, and, with a few trifling exceptions, it was preserved to the end of the proceedings. SCOTLAND. The working of the measure of the past session, denominated the Church of Scotland Benefices Act, will soon be tested, and is now undergoing the ordeal of proof, in consequence of objections lodged by the parishioners of Banff, with the presbytery of Fordyce, against the presentation, induction, and translation of the Rev. George Henderson, now incumbent of the church and parish of Cullen, to the cure and pastoral charge of the church and parish of Banff. The Rev. Mr Grant, formerly parochial minister of Banff, ceased to hold his _status_ in the Established Church of Scotland, having signed the famous deed of secession, and voluntarily resigned his living with his brethren of the non-intrusion clergy. A large portion of his congregation left the establishment along with him, and a free church is now in course of being built for their accommodation. The patronage of the vacant benefice is in the gift of the Earl of Seafield. The Rev. Mr Henderson, of Cullen, has accepted the presentation to the parish church of Banff. On the day appointed for "moderating on the call," very few names were given in, in favour of the presentee, and the presbytery having fixed a day for receiving objections, a series of reasons and objections was lodged in the hands of that reverend body, and published at length in the _Aberdeen Herald_, against proceeding with the collation of Mr Henderson. The objections are set forth under no less than fourteen different heads. "The approaches and manners" of the reverend gentleman are not considered such "as to attach and endear his congregation to him." He is reported to be subject "to an occasional exuberance of animal spirits, and at times to display a liveliness of manner and conversation which would be repugnant to the feelings of a large portion of the congregation of Banff." Others of the objections assert, that his illustrations in the pulpit do not bear upon his text--that his subjects are incoherent and ill deduced; and the reverend gentleman is also charged with being subject to a natural defect of utterance--a defect which it is said increases as he "extends his voice," which is of a "very harsh and grating description," and renders it difficult to hear or follow what he says in the church of Banff, which we are informed "is very large, and peculiarly constructed, with an unusually high pulpit, to suit the high galleries;" and moreover, "the said Rev. George Henderson is considered to be destitute of a musical ear, which prevents the correct modulation of his voice!" ARGYLLSHIRE ELECTION.--- The election of a member of Parliament for the county of Argyll, in the room of Alexander Campbell, Esq., of Monzie, who has accepted the Chiltern Hundreds, took place at Inverary on Friday week. The Lord Advocate (Mr Duncan M'Neill), the only candidate in the field, was accompanied to the hustings by a great number of the county gentlemen; and no other candidate having been brought forward, a show of hands was consequently taken, which being perfectly unanimous, he was, of course, declared duly elected.--_Glasgow Saturday Post._ The Speaker of the House of Commons, Mr Shaw Lefevre, has been on a visit at Glenquoich, the shooting quarters of Edward Ellice, Esq., M.P., in this county. The Right Hon. Edward Ellice, M.P. for Coventry, the Baron James de Rothschild, and other members of the Rothschild family, were also at Glenquoich.--_Inverness Courrier._ WALES. The disturbances in Wales still continue, though the apprehension of some of the rioters who destroyed the Pontardulais gate has had some effect. The following distressing scene is reported in the _Times_:-- "OUTRAGE IN SOUTH WALES.--On the road from Llanelly to Pontardulais, and within five hundred yards of the latter place, is a turnpike-gate called Hendy gate. This gate was kept by an old woman upwards of seventy years of age, who has received frequent notices that if she did not leave the gate, her house should be burnt down. About three o'clock on Sunday morning, a party of ruffians set fire to the thatch of the toll-house. The old woman, on being awakened, ran into the road and to a neighbouring cottage within twenty yards of the toll-house, shouting to the people who lived in it, 'For God's sake to come out and help her to put out the fire; there was not much.' The occupier of this cottage, a stout able man, was afraid to go out, and begged the old woman to come into his cottage, which she refused, and went back to try and save some of her furniture. It appears her exclamation had been overheard, for the villains returned and set fire to the thatch again. The old woman then ran across the road, and shouted out, 'She knew them;' when the brutes fired at her, and shot her dead." An inquest was held on the body of the unfortunate woman, and the jury returned the following astounding verdict:--"That the deceased died from the effusion of blood into the chest, which occasioned suffocation, but from what cause is to this jury unknown." Meetings of the magistrates, in relation to the turnpike trusts, have been held, and measures taken to mitigate the heaviest tolls. FOREIGN. FRANCE. Louis Philippe has had a remarkable history; but it has been distinguished to an extraordinary degree by its vicissitudes, amongst which we must not forget his involuntary exile, and his residence in this country, where he lived for many years as Duke of Orleans. A worse man than his father it would be difficult to imagine. He was a vain, ambitious, and cowardly voluptuary, who gratified his personal passions at the expense of his sovereign and his country; but his son was reared in a different school, and to that accident, conjoined with a better nature, he probably owes the high position which he now occupies as a European monarch. Misfortune is a stern teacher, and its effects on Louis Philippe may be exemplified by a little story that was told of him and Lord Brougham some years ago:--"I am the most independent crowned head in Europe," said he, "and the best fitted for my office of all my brethren." The praise might be deserved, but it seemed strange to the _ex_-Chancellor that it should come from his own mouth--he, therefore, bowed assent, and muttered some complimentary phrases about his Majesty's judgment, firmness, and the like. "Pooh, pooh, my lord," he observed, laughing heartily, "I do not mean that--I do not mean that, but that I can--brush my own boots!" This was practical philosophy, and indicated a clear perception of the constitution of modern society, particularly on the part of one who is known to be by no means indifferent to the fortunes of his race. We believe, also, that Louis Philippe has been happy beyond most men of regal rank in the possession of an admirable woman for a wife, the present Queen of the French being, in all respects, a lady of superior intelligence and virtue; properties which are luckily confined to no condition of life, and to no country or creed. She has shared in all her husband's troubles during the last eventful forty years, and now adorns that throne which the exigencies of the times demanded that he should fill if the French monarchy was to be preserved. Her attention to her children has been unremitting, and the result is, that high though their position be, a more united household nowhere exists. SPAIN. The Ministry has been on the point of dissolution. General Serrano, angered at the contempt shown to his denunciations and lists of conspirators, by the Home Minister, Caballero, gave in his resignation. General Serrano demanded the dismissal from Madrid of more suspected persons. Senors Olozaga and Cortina intervened, however, and made up the quarrel, ordering the _Gazette_ to declare that the most perfect harmony reigned in the Cabinet. This the _Gazette_ did. Mr Aston has demanded his audience of leave, and quits Madrid on the 15th. Grenada has blotted the name of Martinez de la Rosa from its lists of candidates, though he had formerly been elected for that place. M. Toreno is expected at Madrid. Senor Olozaga sets out for Paris, to try and persuade Christina to be patient, for that her presence previous to the elections would rather militate against her party. At Madrid the anniversary of the revolution of 1840, which drove Queen Christina from the Regency, was celebrated by a _Te Deum_, chanted in the church of San Isidro, on the 1st, and at which assisted the Ayuntamiento and provincial deputation. Barcelona has been in open insurrection, and a sanguinary conflict commenced on the evening of the 3rd, which continued with intermissions till the 6th. Later intelligence stated that the town still held out. On the 8th the state of things at Barcelona was nearly the same. One of the great accusations of MM. Prim, Olozaga, and the French party, against the Regent was, that instead of carrying Barcelona and other towns by storm, he fired upon them with muskets and with cannon. Generals Arbuthnot and Prim have pursued precisely the same course, and we see Montjuich again throwing bullets upon Barcelona, and with all this making no progress in its reduction. Accounts from Barcelona of the 8th, mention that several mansions were damaged. Three cannon shots had traversed the apartments of the British Consul. Prim's own Volunteers of Reus had taken part against him, and many of the towns had declared for the Central Junta. A rural Junta of Prim's had been surprised at Sarria, and several of its members slain. A Central Junta had been formed at Girona. Madrid letters of the 5th state that Government were about to dismiss a great many superior officers and functionaries opposed to them. The partisans of Don Francisco have decidedly joined the Esparterists. AUSTRIA AND ITALY. The _Siècle_ says that Austria was much alarmed at the state of Italy. "The necessity which Austria finds to defend her Italian possessions by arms is highly favourable to the projects of Russia against the Danubian Provinces of the Ottoman empire." The _National German Gazette_ of the 8th instant states, that the fortifications of Verona are being considerably strengthened. The heights surrounding the town are to be crowned with towers _à la Montalembert_, so that the city will become one of the strongest fortresses in Italy. The Hungarian infantry, of which the greater part are cantoned in Upper Italy, are actively employed in the construction of the fortifications. TURKEY. CONSTANTINOPLE, August 23.--Petroniewitch and Wulchitch have at length consented to leave Servia, and are probably at this time in Widin, on their way, it is said, to Constantinople. The province has been confided to the care of Baron Lieven and M. Vashenko, who are the actual governors. But the most important feature in the question is a note which the ex-Prince Michael has addressed to the Porte. He declares that the election of Alexander Kara Georgewitch was brought about by violence and intimidation, and that he and his ministers are the only faithful servants of the Porte, and, consequently, the only persons fit to govern Servia. It is generally believed that the Russians have been privy to this step, and that it is their intention to put forward Michael a second time in opposition to Alexander. A daughter was born to the Sultan on the 17th. She has been named _Jamileh_, or the Beautiful. The event has been celebrated by the usual illuminations and rejoicings. The Sultan has been the father of nine children, seven of whom, two sons and five daughters, are now living. EGYPT. It is said that a misunderstanding exists between Mehemet Pacha and his son Ibrahim, relative to the succession to the throne of Egypt; Mehemet proposing that Abbas Pacha, his grandson, should succeed after the death of Ibrahim, whilst the latter would wish his own son to succeed him. UNITED STATES. ARRIVAL OF THE "HIBERNIA" AT LIVERPOOL, ON WEDNESDAY.--Great interest has been excited here for some days past respecting the voyage of the _Great Western_ and the _Hibernia_, the former leaving New York on the 31st ult., and the latter, Boston on the 1st. The betting has been in favour of the _Hibernia_, and she has again beaten her great rival. On Tuesday, at midnight, her lights were seen off the port, and at one o'clock she entered the river, after another rapid passage of nine days from Halifax, and eleven from Boston. The news by this arrival is from New York to the 31st, Boston to the 1st, and Halifax to the 3rd; sixteen days later than previously received by the New York packet ship, _Liverpool_. The _New York American_, in its summary for the packet, says:--Our commercial and money markets continue without sensible change, both abounding in supply without any corresponding demand. The trade of the interior is prosecuted cautiously, and for money in hand. Political affairs are exceedingly dull and uninteresting; even the Irish repeal speakers are quiet. The progress of the pacification between Mexico and Texas, and Mexico and Yucatan, is slow and somewhat uncertain. The president of Texas, General Houston, has dismissed Commodore Moore and Captain Sothorp from the naval service for disobedience of orders. Indeed, the Texan navy may be said to have been disbanded. The people of Galveston thereupon gave Moore a public dinner, and burnt their president in effigy! The Mexican government has formally complained to the United States minister at Mexico, of the inroads of certain citizens of Illinois, Missouri, and Arkansas, into the Mexican territory. Advices from Buenos Ayres to the end of June, describe Monte Video as still holding out; and it was reported in Buenos Ayres that the British commodore would at length allow Commodore Brown, the Buenos Ayrean commander, to prosecute the siege of Monte Video by sea, in conjunction with Oribe by land. A new constitution has been agreed upon by the republic of Ecuador, establishing the Roman Catholic religion as the state religion, "to the _exclusion_ of all other worship," and the Bishop of Quito, in an address to which the people responded favourably, proposed that "ecclesiastics should be henceforth made sole judges in all questions of faith; and be invested with all the powers of the extinct tribunal of the Inquisition!" The bishop then published a "Pastoral Lecter," to "make known the glad tidings." And yet the people of Ecuador, without religious freedom, call their country a free republic! PHILADELPHIA.--The President has returned from his country seat to Washington, and although some alterations in the cabinet are spoken of, still the results of the August elections, showing that a majority in the United States Senate will be Whig, have produced a pause in the contemplated changes. Indeed, people are beginning to complain, and not without reason, of such frequent changes in important offices. For example, within three years there have been three Secretaries of State, three of War, three of the Treasury, three of the Navy, three Attorneys-General, and three Postmasters-General. Some of them have really not had time to learn their duties, and they have been succeeded by others who knew still less of the duties and responsibilities of office. CANADA. Sir C. Metcalfe has returned to the seat of his government at Montreal. The emigrants from Great Britain arrived this season at Quebec, up to the 19th ult., were 18,131; same time last year, 38,159. A few days ago, a party of Irish labourers, who had received, as they supposed, some offence from a few Canadians, at Beauharnois, attacked and nearly killed two respectable old inhabitants, who had nothing to do with the affair. Another great fire at Toronto has burnt about twenty houses; and the Methodist meeting at Waterloo has been burnt down by some incendiary. The crops in both the Canadas are abundant. American coarse cottons are sold there in great quantities, at a lower price than European goods of the same class. * * * * * ARRIVAL OF THE EMPEROR OF RUSSIA AT BERLIN.--The Emperor of Russia arrived on the 6th instant at Berlin. THE DISTURBANCES AT BOLOGNA.--A letter from Bologna, September 2, in the _Debats_, says:--"Notwithstanding the nomination of a military commission, and the display of numerous forces, some armed bands have again appeared, as is reported, in our province. One was commanded by a priest at Castel-Bolognese (district of Ravenna). This state of things does injury to trade and business of every description. The greatest number of depositors have withdrawn their funds from the savings' banks. A circular has been sent round to all the mayors of the province, giving a description of eight persons, for the arrest of each of whom a sum of 300 crowns (1,700f.) is offered." COLONIES AND EMIGRATION. EMIGRATION DURING THE LAST SEVENTEEN YEARS.--From a return furnished by the Emigration Board, it appears that the number of emigrants from England and Wales, in the seven years from 1825 to 1831, were 103,218, or an average of 14,745 yearly; in the ten years from 1832 to 1841, 429,775, or 42,977 per annum. Total number in the last seventeen years, 532,993; or an average for that period of 31,352. But the rate of emigration has greatly increased of late years, as is shown by the fact, that while the emigration of the seven years ending 1831 averaged only 14,745 per annum, that of the last ten years (ending 1841) averaged nearly 43,000 per annum. NEW SOUTH WALES.--The monetary and commercial disasters which have afflicted this important colony are most serious, and they are thus alluded to by the colonial press:--"Our next mail to England will carry home the tidings of fresh disasters to this once flourishing colony. The fast growing embarrassments of 1841, and the 600 insolvencies of 1842, have been crowned in the first third of the year 1843, by the explosion of the Bank of Australia, then by the minor explosion of the Sydney Bank, and, last of all, by the run on the Savings Bank. These three latter calamities have come in such rapid succession, that before men's minds recovered from the stunning effect of one shock, they were astounded by the sudden burst of another; and we are convinced that at the present moment there is a deeper despondency and a more harrowing anticipation of ruin to the colony than ever existed before since the landing of Governor Philip, in 1788."--The run upon the Savings Bank at Sydney originated, it is said, from malice against Mr George Miller, the accountant, whose exertions had been very useful in exposing the mismanagement of the Bank of Australasia. Reports were circulated that the Governor had gone suddenly down to the Savings Bank and demanded a sight of all the bills under discount and mortgages, and that his Excellency declared that he would not give three straws for all the securities put together; but this statement regarding his Excellency is flatly contradicted. Many of the largest holders of land and stock in the colony are said to be so irretrievably embarrassed, by reason chiefly of the high prices at which their investments were made, that their property must go to the hammer without reserve. The present time is, therefore, held out as a favourable opportunity for emigrants, with moderate capital, to make their purchases. It is broadly declared that 500_l._ would go as far now in New South Wales, in the purchase of land and live stock, as would 5,000_l._ four or five years ago. Australia has been, in some respects, unlucky in its colonization. New South Wales has hitherto flourished from its abundant supply of convict labour, at the expense of those higher interests which constitute the true strength and security of a state. Western Australia was planted with a sound of trumpets and drums, as if another _El Dorado_ were expected. But the sudden disaster and discredit into which it fell, linked the name of Swan River with associations as obnoxious as those which were once inspired by the South Sea or Missisippi. South Australia, again, planned on principles which are universally recognised as containing the elements of sound and successful colonization, has also proved a failure. One of the newest and most enterprising of our Australian settlements, that of Port Philip has been sharing with Sydney in the recent commercial distress and calamity; and though it is already getting over its troubles, it must undergo a painful process before it can lay an unquestioned claim to its title--Australia Felix. Land jobbing; banking facilities at one time freely afforded, and at another suddenly withdrawn; ventures beyond the means of those engaged in them; imprudent speculations, in which useful capital was either rashly risked or hopelessly sunk--these unquestionably have been amongst the causes which have brought on the commercial disasters of New South Wales. It is seldom advantageous for an emigrant, newly arrived, to become a proprietor of land in any part of Australia, unless his capital be considerable; but the eager desire to become possessed of the soil overcame all prudential considerations; land at Port Philip was eagerly bought, at prices varying from 12_s._ to 500_l._ In 1840 the influx of moneyed immigrants from England and Van Diemen's Land, to a newly-discovered and extensive territory, produced a land fund exceeding the sum of 300,000_l._, and engagements were entered into by the colonial Government, on the faith that the land fund would produce annually a large amount, but in 1841 it fell down to 81,000_l._; and though in 1842 as much as 343_l._ 10_s._ per acre was given for building ground in the town of Brisbane, district of Moreton Bay, it was impossible for this to continue; and even for valuable lands in the neighbourhood of Sydney, in the very same year, wholly inadequate prices were obtained. The colonial Government became embarrassed by the expenditure exceeding the revenue; and in 1842, Sir George Gipps, in an official despatch, says, "Pecuniary distress, I regret to state, still exists to a very great, and even perhaps an increased, degree in the colony, though it at present shows itself more among the settlers (agriculturists or graziers) than the merchants of Sydney. When, however, I consider the vast extent to which persons of the former class are paying interest, at the rate of from 10 to 15 per cent., on borrowed money, I can neither wonder at their embarrassments, nor hope to see an end to them, except by the transfer of a large portion of the property in the colony from the present nominal holders of it to other hands, that is to say, into the hands of their mortgagees or creditors, who, in great part, are resident in England." This official prophecy is now in the act of fulfilment; and when the storm has spent itself, the colony may be prosperous again. CAPE OF GOOD HOPE.--The want of Government protection which is felt by the British resident at the Cape of Good Hope is well illustrated by the following extract from a letter addressed by the writer to his family at home:--"I am sure I shall be able to get on well in this country if the Caffres are only prevented from doing mischief, but if they go on in the present way, I shall not be able to keep a horse or an ox, both of which are indispensable to a farmer. Now I can never assure myself that when I let my horses go I shall see them again. It is a disgrace to our Government that we are not protected. As it is, all our profits may be swept away in one night by the marauders." NEW ZEALAND.--We understand a box of specie was placed on board the _Thomas Sparkes_, in charge of the captain, for Mr Chetham. On the owner opening the box, he discovered to his great surprise that, by some unaccountable process on the voyage, the money--gold, had been turned into one of the baser metals--iron. It is stated that the steward left at Plymouth, and the first and second mates whilst the vessel was detained at the Cape, but whether they had any agency in the transmogrification of gold into iron remains to be proved.--_New Zealand Gazette_, Feb. 4, 1843. POLITICAL. THE ABORTIVE COMMERCIAL NEGOTIATIONS WITH SPAIN.--Senor Sanchez Silva, known for his speeches in the Cortes, as deputy for Cadiz, has published, in an address to his constituents, an account of the negotiations between the Spanish and British Governments relative to a treaty of commerce. The effect of this publication will be to undeceive the minds of Spaniards from the idea that the Regent's Government was about to sacrifice the interests of Spain, or even of Catalonia, to England. The terms proposed by the Spanish commissioner were, indeed, those rather of hard bargainers than of men eager and anxious for a commercial arrangement. Senor Silva says that England, in its first proposals, demanded that its cottons should be admitted into Spain on paying a duty of 20 per cent., England offering in return to diminish its duties on Spanish wines, brandies, and dried fruits. But England, which offered in 1838 to reduce by one-third its duty on French wines, did not make such advantageous offers to Spain; and the Spanish negotiators demanded that 20 per cent. _ad valorem_ should be the limit of the import duty of Spanish wines and brandies into England, as it was to be the limit of the duty on English cottons into Spain. This demand nearly broke off the negotiation, when Spain made new proposals; these were to admit English cottons at from 20 to 25 per cent. _ad valorem_ duty, if England would admit Spanish brandies at 50 per cent. _ad valorem_ duty, sherry wines at 40 per cent., and other wines at 30 per cent., exclusive of the excise. Moreover, that tobacco should be prohibited from coming to Gibraltar, except what was necessary for the wants of the garrison. The English Government, in a note dated last month, declared the Spanish proposals inadmissible. If the Spanish Government did not admit the other articles of English produce, the duty on Spanish wines could not be reduced. English cottons were an object of necessity for the Spanish people, and came in by contraband; whereas Spanish wines were but an article of luxury for the English. Senor Sanchez Silva concludes, that it is quite useless to renew the negotiations, the English note being couched in the terms of an _ultimatum_. CORRESPONDENCE AND ANSWERS TO INQUIRIES. London, September 13, 1843. Sir,--I have read your preliminary number and prospectus, and the first number of your new periodical, the ECONOMIST, and it gives me pleasure to see the appearance of so able an advocate of free trade, the carrying out the principles of which is so necessary for the future welfare and prosperity of the country, and the relief of the distress which is more or less felt in all the different departments of industry. I belong to the class who have their sole dependence in the land, and have no direct interest in trade or manufactures; and feel as strong a wish for the prosperity of agriculture as the Duke of Buckingham, or any other of the farmer's friends; but I consider the interests of all classes of the community so intimately connected, and so mutually dependent on one another, that no one can rise or prosper upon the ruins of the others. Like your Northumberland correspondent I am fully convinced of the impolicy and inefficiency of "restrictive corn laws," and of the benefit of "the free-trade system" for the relief of the agricultural, as well as of the manufacturing, the shipping, or any other interest in the country; and I should also be glad if I could in any way assist "in dispelling the errors respecting the corn trade that have done so much harm for the last twenty (eight) years." The intention of the corn law of 1815 was to prevent the price of wheat from falling below 80s. per quarter; and it was the opinion of farmers who were examined on the subject, that less than 80s. or 90s. would not remunerate the grower, and that if the price fell under these rates, the wheat soils would be thrown out of cultivation. Prices, however, fell, and though they have fallen to one half, land has not been thrown out of cultivation. Various modifications have since been made in the scale of duties, but always with a view to arrest the falling prices in their downward course; but all these legislative attempts have been in vain; and so far as the farmer trusted to them, they have only misled him by holding out expectations that have not been realized. But though the corn laws failed in keeping up the price of corn as high as their framers and supporters wished, they succeeded so far as to enhance the price of this first necessary of life, and make it perhaps 20 or 30 per cent. dearer than it otherwise would have been to all the consumers, even the poorest tradesman or labourer in the country. If the difference which the agriculturists were enabled, by this monopoly, to obtain at the expense of the other classes, had all been pure gain, without any drawback, they must have been in a comparatively flourishing condition; but we find this is not the case, and what is the reason? Let us hear Sir Robert Peel's answer to the question. In his speech in parliament on Mr Villiers's motion, when replying to the accusations that had been made by Mr Blackstone and other members on his own side of the house, that he had deceived the agriculturists, as the Government measures, instead of affording them the protection that was promised, had brought down prices and rendered their situation worse than before, Sir Robert says, it was not the Government measures that had brought down prices and occasioned the agricultural distress, but that this arose from the _condition of the manufacturing districts, and the general distress from bad trade and want of employment, which rendered the people unable to consume_. If this, then, is the true cause of the agricultural distress,--if the corn, sugar, and other monopolies are so injurious to the manufacturing and commercial classes, who are the agriculturists' best, and, indeed, their only customers, as to render them unable to consume, it is not to class legislation that we can look for relief. In order to relieve the agricultural distress there is no other way than to relieve the distress of those on whom they depend for a market for their productions. Were the farmer (or rather the landed proprietor) to gain all that the consumer loses by the corn monopoly,--if it were only taking from one, and giving to another--without any national loss; though this of itself would be bad enough,--it is perhaps the smallest part of the loss which the manufacturer sustains; for the same law which hinders him from going to the best and cheapest market to purchase his food, at the same time necessarily excludes him from a market for the produce of his industry; and by diminishing the demand for his labour, lowers his wages or throws him out of employment. But one abuse leads to another. Those who are interested in the corn monopoly, or think themselves so, cannot well oppose the sugar monopoly while they require the aid of the West India planters to enable them to obtain this advantage at their country's expense; and so it is with all the other monopolists, they naturally unite together, and it requires their mutual aid and all their combined power and influence to preserve a system which they know stands upon rather an insecure foundation, and if once broken in upon would soon fall to pieces; and thus it is that we are subjected to the sugar monopoly, and though it is manifestly our interest to buy this important necessary of life (as well as every other) in any quarter of the globe where we can find it best and cheapest, we are restricted to a small portion of the earth's surface, and have to pay a third part more than we might obtain the article for without any loss to the revenue. By this narrow-minded system of buying, we deprive ourselves of valuable markets for our manufactures, as you have shown is likely to be the case with the Brazils on the expiry of the commercial treaty with that country if the matter is left in the hands of Ministers, "and no effort made to avert so great an evil." The agriculturists have to pay directly for this monopoly in common with all the other classes in the addition to the price of the sugar they consume; but the manufacturers suffer the still greater disadvantage of having the market for the produce of their labour narrowed, and thus the agriculturist will also suffer indirectly by their customers being thereby still farther disabled to consume. But these and all other monopolies and restrictions in trade not only lessen the demand for our manufactures abroad, but they diminish the consumption at home, to an extent greater perhaps than we are aware of; for there can be no doubt that the more the consumer has to pay for his bread, sugar, and other articles of food, the less he will have to spare for cottons, woollens, and other manufactured commodities. The demand for his labour is thus lessened both at home and abroad. The weaver of cloth may be unable to obtain a coat even of his own manufacture, however necessary it may be for his health and comfort; he must have food, in the first place, being more indispensibly necessary to his existence,--no doubt he may have to content himself with a less quantity than he could have wished, and have to substitute oatmeal and potatoes, or some other inferior food for wheaten bread and butchers meat; still, it is less in his power to curtail the consumption of agricultural produce than of manufactures, so that the manufacturing classes suffer from the general distress which renders the people unable to consume in a greater degree than the agriculturist. R.T.F. * * * * * TO THE EDITOR OF THE ECONOMIST. Darlaston, September 8, 1843. Sir,--Twelve months ago the editor of the _Morning Chronicle_ allowed a letter of mine, referring to the distress then prevailing in this town, to appear in that journal; in it I stated that for our annual wake only twenty-four cows had been killed, when but a few years previously ninety-four had been slaughtered on a similar occasion. Perhaps you will permit me to state in your columns that this year the festival, in this particular, has afforded as melancholy and unquestionable proof of distress as the last, while it bore other evidence, which though trivial in itself, is not unworthy of notice. Last year two theatrical shows visited us, displaying their "Red Barn" tragedies, and illuminated ghosts, at threepence per head, at which they did well; as also did a tremendous giantess, a monstrously fat boy, and several other "wonderful works of nature:" this year only one show of any description attended, and that, with kings and queens, and clowns, as well dressed and efficient, and ghosts, as white and awe-inspiring as ever paraded before an audience, has reaped but an indifferent harvest at the "low charge of one penny each;" while the swing boats and wood horses, patronized with such glee by the miniature men and women attending and enjoying wakes and fairs, only worked half time. The physical-force majority in the House, and their aiders and abettors, were they to see this, would perhaps laugh at the petty details, but their doing so would not in the least detract from their truth, or render questionable for a moment the deductions I make from them,--that poverty is so wide spread and bitter that the poor are compelled to make a stern sacrifice of innocent amusements; that the parent cannot exercise the holiest affections of his nature, by adding to the pleasures of his lisping little ones; that the landowners' corn law, by its paralyzing influence, is rapidly withering the great mass of the industry of the country into idle, dispiriting pauperism. From inquiries I have made I learn that through the country generally the wakes, and fairs, and races, have presented similar features to those I have described above, so far as money goes. And in face of the distress, of which these things bear glaring witness, the Prime Minister says "that the distress has been produced by over-production." Can Sir Robert be serious when he talks of "over-production?" If he be, and will condescend to honour me with a visit during his stay at Drayton Manor, which is only a short drive of sixteen miles from here, I will show him that the opinion is fallacious. He shall dispense with his carriage for a short time, and I will walk him through all the streets of Darlaston, Wednesbury, Willenhall, Bilstow, &c., and, forsaking the thoroughfares frequented by the gay and well-to-do, he shall visit the back streets--in which carriage passengers never deign to go--of Birmingham, Wolverhampton, and Walsall, and what he will witness in the course of the short ramble will "change the spirit of his dream." In Darlaston, as a sample of what he would see, there are hundreds of men and women whose clothes, made of the coarsest materials, are patched, and threadbare, and valueless; hundreds of houses without anything in them deserving the name of furniture; hundreds of beds without clothing, and hundreds of children whose excuses for clothes are barely sufficient, with every contrivance decent poverty can suggest, to cover the body as civilized society demands. In the towns I have enumerated, in fact, if the least reliance may be placed in newspaper reports, in every town and village in the country the same want prevails to a much greater extent than can be conceived by such as Sir Robert, "who fare sumptuously every day,"--aye, even to a much greater extent than is generally supposed by the above-want dwellers in large towns whom business may frequently bring in contact with those who toil. With the millions, then, who in this country must be next to naked, without furniture in their houses, without clothes to cover their straw beds, is it not the nonsense of nonsense to talk of "over-production." Enable these men to satisfy the wants of themselves and families, enable them to make their homes comfortable, and that alone would find employment for a goodly number, while those so employed would also be enabled to purchase the articles others are engaged in manufacturing. To produce so desirable a result, nothing is wanted but FREE TRADE repeal the corn and provision laws, and the shadow of "over production" could not exist: in three months there is not a man in the kingdom who would not have full work. And when we had supplied the physical wants of our population (a greater task than it appears at the first view), we should have introduced from every corner of the world the luxuries which refine civilization; the artisan building himself a house would then make it more comfortable and healthy, with wood floors, carpets, better furniture, &c.; and the master manufacturer erecting a house would have marble stairs and floor in his entrance hall, doors, &c. of mahogany, furniture, of rarer woods, and ornaments of marble, paintings, plate glass, &c.; and when all these things were procured, "over-production" would be still as far behind us as during their acquisition, as we would then work but three days a week instead of six, as with so much labour we should be able to procure the necessaries and luxuries of life. And all nations would be compelled to minister to our real and created wants, for England is the only nation in the world incapable of internally supplying its inhabitants with food, and therefore, under Free Trade, has the command of the markets of the whole world. Then the English merchant going to, say America, to dispose of manufactures need not fear the merchant of France, Belgium, Germany, &c., he may meet there with similar goods; for the American asking each what he requires for the articles offered, is told by the former, "I will take your surplus corn in exchange, we want every year from six to ten millions of quarters;" and this latter answers, "We have more corn at home of our own growth than we can consume, I must have cash;" the American, preferring barter, will turn on his heel and trade with the Englishman; the unsuccessful applicant takes back his goods, or visits the market no more, and confines his future operations to the home supply of his own country, which in a short time, from competition and want of a foreign outlet, fail to realise a remunerating profit; trade is gradually relinquished; the people turn again to the more extensive cultivation of the land, and England obtains another customer. This is no "castle building," if there be the least affinity between the results of great things and small ones. If a grocer want a coat he will have it from the tailor who will take sugar and tea in payment, in preference to patronising one who requires pounds shillings and pence, and the owners of land in all countries will take right good care that they derive some sort of revenue from their possessions. I say, I think my premises are no "castle buildings;" neither do I think I am indulging in aerial erections when I predict that, under Free Trade, England, with her capital, and energy, and enterprise, would shortly become the world's granary, profitably supplying from her accumulated stores the deficiencies resulting from bad harvests, or other casualties of her continental neighbours. Your obedient Servant, G.W.G. * * * * * _We are much obliged to J. Livesay, of Preston, for his suggestion, which, however, if he compare the_ ECONOMIST _with other weekly papers he will perceive to be unnecessary. We presume we are indebted to Mr Livesay for copies forwarded of his excellent little paper the_ Struggle. * * * * * R.B., Bristol.--_From the great press of room last week we were obliged to omit everything that did not appear of very pressing haste. In the Preliminary Number we have used no statistics but such as we have derived from official sources, and we shall always be glad to give the authority on which any statistical statement is made. The statement of the quantity of sugar exported from Java and Madeira, page 10 of the Preliminary Number, will be found in Part VIII, 1838, page 408, of the_ Tables of Population, Revenue, Commerce, &c., _presented by the Board of Trade to both Houses of Parliament, from 1826 to 1837;--and the quantities, from 1837 to 1841, are derived from the Dutch official accounts._ H.H., S---- court, London.--_The returns showing the quantity of flax imported up to the 5th of August, viz., 774,659 cwts., are official, but do not distinguish the ports from which it was shipped. The latest year for which such distinction has been made to this time is for the year 1841; for which, or any preceding year back to 1832, we shall be glad to furnish the particulars: for example, in 1840 the imports of flax and tow were--from_ Cwts. Russia 870,401 Denmark 1,094 Prussia 135,590 Germany 8,105 Holland 113,108 Belgium 80,748 France 43,295 Gibraltar 19 Italy and the Italian Islands 746 The Morea 3 Turkey 107 Egypt 12 United States 1 Guernsey, &c. 11 --------- Total - 1,253,240 C.D.F.----, near Rochdale.--_The question connected with the New Customs Amendment Bill has engaged our best attention, but its investigation has raised two or three very nice points of international law, on which we are now taking the best opinion which can be obtained, and before our next number we shall be able to give a reply as satisfactory as can possibly be obtained from any quarter on this important but very nice question. We have now before us the whole of the particulars of the treaties in question, but we wish to make our reply valuable by giving the best legal construction on some disputable points. This, however, is only another of those daily evidences which we have of the absurdity and inconvenience of a great commercial country like this attempting to regulate its laws and transactions by treaties, which, however convenient they may be when made, may, by the ordinary course of events, be rapidly changed._ POSTSCRIPT. LONDON, _Saturday Morning, September 16, 1843_. STOCK EXCHANGE, HALF-PAST ELEVEN O'CLOCK. There is little or no variation in English Stock: Mexican, which left off yesterday at 35-5/8 to 7/8, is now 33-3/4 to 34. Brazilian, which left at 73 to 75, is now 74 to 76. In other Foreign Stocks there is no alteration worth notice. LIVERPOOL, FRIDAY EVENING, SEPTEMBER 15, 1843. An active demand has been constantly kept up all the week, and a large business has been done daily. So far, however, it has been freely met by the holders; and the speculators and spinners have had an abundant choice of all qualities. In American descriptions there is but little change in prices; the tendency, has been and still is in favour of holders; and it has been thought necessary to raise the quotations of "fair" Uplands and Mobile to 4-7/8d.; but there is so little actual change, that for the most part, the quotations remain as before. Brazils, Egyptian, and long stapled generally, have been more in demand, and may be considered 1/8d. higher. Sea Islands also within the fortnight are 1/2d. higher, making an advance in the ordinary to fair qualities from the very lowest point of 1-1/2d. to 2d. per lb. A considerable part of the speculative business of this week has been prompted by the accounts from the United States, brought by the _Hibernia_ and _Great Western_, the tenor of which is to confirm the previous impression as to short crops. 19,800 American, 100 Egyptian, and 300 Surat have been taken on speculation; and 1,000 American, 300 Pernam, and 200 Surat for export. The following is the Statistical Review of our Cotton Market:-- Taken for Consumption: for Export: from 1st Jan. to 15th Sept. 1842. 1843. 1842. 1843. 794,500 bales. 946,500 bls. 66,500 bls. 65,900 bls. whole Import: 1842. 1843. 1,024,141 bls. 1,401,278 bls. Computed Stock. Average weekly consumption. 15th Sept. 1st Jan. to 15th Sept. 1842. 1843. 1842. 1843. 593,000 bls. 834,000 bls. 21,556 bls. 25,689 bls. For SUGAR there is rather more inquiry, at steady prices.--COFFEE; the sales of plantation trivial without change of price.--INDIGO, price firm at the advance of 3d. to 4d., established at public sale yesterday.--TEA; the market remains rather firm, and a moderate business has been done at previous rates. In other articles of produce a fair amount of business has been done, without any particular features to remark. GRAIN.--There has been rather more demand for old WHEAT, and prices for this and all other articles in the trade are supported. Duty has been paid on nearly the whole of the bonded stock, and the rate is now on the advance. * * * * * The papers of this morning do not contain any intelligence of the slightest novelty or interest. Her Majesty and Prince Albert are enjoying themselves at Ostend in the society of their august relatives, the King and Queen of the Belgians. To-day (Saturday) the Royal party go to Bruges; on Monday to Brussels; on Tuesday to Antwerp; and on Wednesday return to England. Barcelona is still in a state of insurrection; and though Madrid is tranquil, the state of Spain, as the _Times_ remarks, is one of "simple confusion." The Malta correspondent of the _Morning Chronicle_ says that a report had been current at Bombay that it was the intention to order the next steamer for the overland mail to keep her direct course, in spite of the monsoon. The monsoon had, no doubt, driven her back. Wales continues in a distracted state, and acts of incendiarism are common. The extraordinary verdict given by the inquest jury on the body of the unfortunate old woman who was shot, is the subject of general remark, as strikingly evincing the terrorism which prevails. There is even talk of the necessity of putting the country under martial law! The very remarkable meeting held by Messrs Cobden and Bright, at Oxford, on Wednesday last, is the theme of general conversation in society. It is, indeed, a very striking evidence of the progress of free-trade principles amongst the agriculturists. The _Leeds Mercury_ of this morning, and other provincial organs of public opinion, in the great seats of our commerce and manufactures, all speak in cheerful terms of the decidly-improving prospects of trade. THE LATEST FROM THE AMERICAN PRESS ON FREE TRADE--AUG. 24TH. THE CORN-LAW CONTROVERSY.--A friend has placed in our hands numbers of the tracts which the corn-law reformers of England circulate among the people. They are about the size and length of the religious tracts of this country, and are put up in an envelope, which is stamped with neat and appropriate devices. These little publications comprise essays on all the topics involved in the corn-law controversy, sometimes in the form of dialogues, sometimes of tales, and sometimes of extracts from famous books and speeches. The arguments are arranged so as to be easily comprehended by the meanest capacities. The friend to whom we are indebted for these is well informed on the subject, and says that a more advanced state of opinion prevails among the people of England, in relation to the operation of tariffs, than in this nation generally so much more enlightened. It is a singular spectacle which is thus presented to the eyes of the civilized world. While the tendency of opinion, under an aristocratic monarchy, is towards the loosening of the restraints under which the labour of the people has long suffered, a large and powerful party in a nation, whose theory of government is nearly a century in advance of the world, is clamouring for their continuance and confirmation. Monarchical England is struggling to break the chains that an unwise legislation has forged for the limbs of its trade; but democratic America is urged to put on the fetters which older but less liberal nations are throwing off. The nations of Europe are seeking to extend their commercial relations, to expand the sphere of their mutual intercourse, to rivet the market for the various products of their soil and skill, while the "model republic" of the new world is urged to stick to the silly and odious policy of a semi-barbarous age. We look upon the attempt which is making in Great Britain to procure a revision of the tariff laws, as one of the most important political movements of the age. It is a reform that contemplates benefits, whose effects would not be confined to any single nation, or any period of time. Should it be successful, it would be the beginning of a grand and universal scheme of commercial emancipation. Let England--that nation so extensive in her relations, and so powerful in her influences--let England adopt a more liberal policy, and it would remove the only obstacles now in the way of a complete freedom of industry throughout the globe. It is the apparent unwillingness of nations to reciprocate the advantages of mutual trade, that has kept back this desirable reform so long. The standing argument of the friends of exclusiveness--their defence under all assaults, their shelter in every emergency--has been that one nation cannot pursue a free system until all others do, or, in other words, that restriction is to be met by restriction. It is a flimsy pretence, but such as it is, has answered the purposes of those who have used it, for many centuries. The practice of confining trade by the invisible, but potent chains of law, has been a curse wherever it has prevailed. In England, more dependent than other nations on the extent of its commercial intercourse, it may be said to have operated as a scourge. The most terrible inflictions of natural evil, storms, famine, and pestilence, have not produced an equal amount of suffering. Indeed, it has combined the characteristics of the worst of those evils. It has devastated, like the storm, the busy hives of industry; it has exhausted, like famine, the life and vital principle of trade; and, like the pestilence, it has "walked in the darkness and wasted at noon-day." When we read of thousands of miserable wretches, in all the cities and towns of a great nation, huddled together like so many swine in a pen; in rags, squalor, and want; without work, bread, or hope; dragging out from day to day, by begging, or the petty artifices of theft, an existence which is worthless and a burden; and when, at the same time, we see a system of laws, that has carefully drawn a band of iron around every mode of human exertion; which with lynx-eyed and omniscient vigilance, has dragged every product of industry from its retreat to become the subject of a tax, can we fail in ascribing the effect to its cause, or suppress the utterance of our indignation at a policy so heartless and destructive? Yet, this is the very policy that a certain class of politicians in this country would have us imitate. Misled by the selfish and paltry arguments of British statesmen, but unawed by the terrible experience of the British people, they would fasten upon us a system whose only recommendation, in its best form, is that it enriches a few, at the cost of the lives and happiness of many. They would assist a constrictor in wrapping his folds around us, until our industry shall be completely crushed. * * * * * ST OLAVE'S CHURCH.--The rebuilding of this church in the early part of the last century cost the parishioners a less sum than the organ. The old church having fallen down, the new one (that recently destroyed by fire) was erected by raising an annuity of 700_l_., and the granter died after receiving the first half year's payment of 350_l_. The organ was the most ancient instrument in the metropolis. FREE-TRADE MOVEMENTS. MESSRS COBDEN AND BRIGHT AT OXFORD.--IMPORTANT MEETING OF FREEHOLDERS AND FARMERS OF THAT COUNTY. As we stated last week, announcing the intention, Mr Cobden and Mr Bright visited Oxford on Wednesday, for the purpose of addressing the freeholders and farmers of the county on the subject of the corn laws. Very considerable excitement had prevailed in the city and the surrounding districts in consequence of the proposed visit of Mr Cobden, but it does not appear that the landowners on the present occasion, through the medium of the farmers' clubs and agricultural associations, thought fit to get up an organised opposition, similar to that at Colchester, or interfere to prevent their tenants from attending, as at Reading. The consequence was a very large number of farmers were present at the meeting, although it is well known that the harvest is not in such a state of forwardness as to allow them to absent themselves from their ordinary occupations without considerable inconvenience. It is a circumstance worthy of notice, and strongly indicative of the present state of public feeling upon the subject, that in a purely agricultural district, at a county meeting regularly convened by the High Sheriff, the whole of the county members being present, two of whom spoke in favour of protection, supported by many influential men of their own party, no person ventured to propose a resolution in favour of the present corn law, and that even the resolution for a low fixed duty made by two of the most popular men and largest landed proprietors in Oxfordshire, Lord Camoys and Mr Langston, was supported by only three or four individuals out of a meeting of nearly 3,000 persons. Early in the morning, a protectionist champion presented himself, not in the guise either of a freeholder or farmer of the county, but in the person of a good-humoured, though somewhat eccentric printer, named Sparkhall, who had come from the celebrated _locale_ of John Gilpin--Cheapside, and who having armed himself with a large blue bag fitted with elaborate treatises upon the corn laws, and among other pamphlets a recent number of _Punch_, forthwith travelled to Oxford, and by the kind permission of the meeting was permitted to essay a speech, about what nobody could divine, and in a manner truly original. It is, however, due to the monopolists of Oxfordshire to state that they did not accredit their volunteer champion, and even went so far as to request that he would "bottle up" his eloquence for some future opportunity. At two o'clock, the hour appointed for the proceedings to commence, the County hall, which is capable of containing 1,800 persons, was nearly filled. Mr Cobden and Mr Bright, who had been dining at the farmers' ordinary, held at the Roebuck hotel, arrived shortly after two, and were accompanied to the place of meeting by a large number of influential farmers and leading agriculturists, who had met the honourable members at the market table. They at once proceeded to the gallery, where, among others at this time, were Lord Camoys, of Stonor hall, Oxon; the three members for the county, Lord Norreys, Mr Harcourt, and Mr Henley; Mr Langston, M.P. for the city of Oxford; Mr Thomas Robinson, banker; Mr Charles Cottrell Dormer, Mr J.S. Browning, Mr W. Dry, Mr W. Parker, Captain Matcham, Rev. Dr Godwin, Rev. W. Slatter, Mr Richard Goddard, Mr H. Venables, Messrs Grubb, Sadler, Towle, Weaving, Harvey, &c. On the motion of Lord Cambys, seconded by Mr Langston, M.P., Mr Samuel Cooper, of Henley-on-Thames, under-sheriff for the county, was, in the absence of the high sheriff, called to the chair. The Chairman said he regretted very much that the high sheriff was prevented from attending the meeting, which had been convened in consequence of a requisition presented to the sheriff by several freeholders of the county. Having read the requisition, he introduced Mr Cobden, who proceeded for some time to address the meeting on the fallacy of the present corn law as a protection to the farmer, amid frequent cries for adjournment, in consequence of the crowded state of the hall, and Mr Sadler having intimated that several hundred persons were waiting at the Castle green, at which place it had been generally expected the meeting would ultimately be held, moved its adjournment to that spot, which was immediately agreed to. Several waggons had been brought to the green, for the purpose of forming a temporary platform, and the meeting being again formed, Mr Cobden resumed, and, in his usual powerful manner, explained the influence of the corn law upon the tenant, farmer, and farm-labourer, urging the necessity of free trade as the only remedy for agricultural as well as manufacturing distress. The honourable member was loudly cheered during the delivery of his address, which evidently made a deep impression on the large proportion of his auditory. Mr Sparkhall then came forward. Mr Cobden having kindly interceded to obtain him a hearing, and having duly arranged his books and papers, he at once commanded the serious attention of the meeting, by stating broadly as the proposition he was about to prove--that the repeal of the corn laws would plunge the nation into such a state of depression as must ultimately terminate in a national bankruptcy. After quoting from the Honourable and Reverend Baptist Noel, Mr Gregg, and other passages, the relevancy of which to his proposition no one could discover, he bewildered himself in a calculation, and gladly availed himself of a slight interruption to make his bow and retire. Lord Camoys next addressed the meeting. He said Mr Cobden came among them either as a friend or an enemy. If he came as a friend, it was the duty of all to receive him as such; but if as an enemy, then it behoved the farmers of Oxfordshire to meet him boldly, and expose the fallacy of his arguments. For himself he (Lord Camoys) believed Mr Cobden came as a friend. He was not one of those who were afraid of the Anti-Corn-law League; but he was afraid of that class who designated themselves the farmers' friends. He thought if they were to give the Anti-Corn-law League 50,000_l_. a year for fifty years, it would never do half the mischief to agriculture that the farmers' friends themselves had done. (Hear, hear.) It was this impression that had induced him to sign the requisition that had been laid before him, for he was anxious that the farmers of Oxfordshire should have the benefit of any information that could be given to them on the subject. There were three courses open for discussion. The first was the sliding scale (cries of "no, no"); the second a low fixed duty; and the third, a total and immediate repeal of the corn law. (Hear, hear.) He believed the sliding scale was already on its last legs; indeed, it was only defended by a few country gentlemen and fortunate speculators, who had by a lucky chance contrived to realise large fortunes. He was himself for a low fixed duty, and Mr Cobden advocated free trade. There was not so much difference, after all, between them; but he considered that to apply the principles of free trade to England, would be to apply the principles of common sense to a deranged country, suffering under the pressure of an enormous debt. He thought the English farmer should be placed on a level with the continental corn-grower; but he did not think the mere expense of transit would have the effect of securing this as argued by Mr. Cobden. With this view he should propose to the meeting the following resolution:--"That the agricultural interest being the paramount interest in this country, to depress that interest would be injurious to the entire community; that suddenly to adopt free trade in corn must produce that effect, and that, therefore, it is the opinion of this meeting that a moderate fixed duty upon the importation of foreign grain is the one best adapted to the present position of the agricultural interest and the welfare of the country." This resolution was seconded by Mr Langston, M.P., but this gentleman gave way for Mr Bright, who, upon presenting himself, was received with load cheering. In an eloquent address he clearly demonstrated that the only way in which the corn laws could benefit the farmer was by making food dearer, which could only be done by making it more scarce. That the advantage of such high prices invariably went to the landlord in the shape of rent, in consequence of the immense competition for farms, arising from the increase in the agricultural population, and the difficulty of providing for them in commerce and manufactures, owing to the depressed condition to which they had been reduced by the operation of the corn laws. High prices could only be obtained by the farmer from the prosperity of his customers. In reply to the resolution of Lord Camoys, the honourable gentleman stated, that with regard to agriculture being the paramount interest of the country, there could be no doubt in every country there must be land for the people to live on, and so far it was the paramount interest; but he denied that anything like half the population of England were engaged in agricultural pursuits. The agricultural interest would not be depressed, nor would the community be injured by free trade. He would put it to the meeting whether they would have a low duty or no duty at all. (Loud cries of "no duty.") A fixed duty of 6s. would raise the price that amount, and the whole would go into the pockets of the landlord. The honourable gentleman concluded his address amid loud cheers. Lord Norreys next spoke in favour of the existing corn laws, attributing the distress under which all classes at present laboured to the over-production of the manufacturers. Mr Langston, M.P., having replied to his lordship, Mr Henley, M.P., addressed the meeting at some length, in favour of the present restrictive duties on the importation corn. The honourable member concluded by observing that he had attended the meeting because it had been convened by the high sheriff; and he thanked them for the patience with which they had listened to his observations, though neither he nor his colleagues considered it to be properly designated as a farmers' meeting, the majority present being composed of other classes. Mr Cobden briefly replied; and Mr Towle (a tenant farmer) moved the following amendment, "That in the opinion of this meeting the principles of free trade are in accordance with the laws of nature and conducive to the welfare of mankind, and that all laws which interfere with the free intercourse of nations, under the pretence of protection to the agricultural, colonial, or manufacturing interests, ought to be forthwith abolished." The motion having been seconded, was put, and declared to be carried, with only three dissentients. Mr Henley then proposed, and Mr Cobden seconded, a vote of thanks to the chairman, who briefly acknowledged the compliment, and three cheers having been given for free trade the meeting separated, having lasted nearly five hours. * * * * * PUBLIC DINNER TO R. WALKER, ESQ., M.P., BURY.--On Wednesday week a public dinner was given, in the Free-Trade Pavilion, Paradise street, Bury, by the electors of Bury, to the above-named gentleman, for his constant advocacy of Liberal principles in the House of Commons. The meeting, though called to do honour to the worthy representative of Bury, was emphatically a gathering of the friends of free trade, Mr Bright, Dr Bowring, Mr Brotherton, &c., being present. DR BOWRING'S VISIT TO HIS CONSTITUENTS.--Dr Bowring arrived in Bolton, on his annual visit, on Thursday week. In the course of the afternoon he called upon several of the leading reformers and free-traders of the borough; and in the evening, according to public announcement, he attended at the Temperance hall, Little Bolton, to address the inhabitants generally. The doors of the hall were opened at seven o'clock, and hundreds immediately flocked in. At half-past seven, the hall was crowded to excess in every part. On Dr Bowring's entrance, he was greeted with loud cheers. The chief portion of the proceedings consisted in the speech of the learned and honourable member, who, as might be expected, dwelt with great power on the question of questions--free trade. We have only room for the following eloquent passage: "The more I see of England, the prouder I am to recognise her superiority--not alone in arms--about that I care little, but in manufacturing arts, the peaceful arts, which really reflect glory on her people. (Cheers.) Give us fair play and no favour, and we need not fear the strength of the whole world. (Hear.) Let us start in an honest rivalry--let us get rid of the drawbacks and impediments which are in the way of our progress, and sure I am that the virtues, the energies, the industry, the adventurous spirit of the manufacturers and merchants of England, which have planted their language in every climate and in every region, would make them known as benefactors through the wide world. They are recognised by the black man as giving him many sources of enjoyment which he had not before; by the red man as having reached his fields and forests, and brought to him in his daily life enjoyments of which his ancestors had no notion; by all tribes and tongues throughout the wide expanse of the earth, as the allies of improvement, and the promoters of happiness. Sure I am that England--emancipated England--the labourers--the artisans of England, may do more for the honour and reputation of our country than was ever done by all the Nelsons and Wellingtons of the day. (Loud cheers.) I was struck very much, the other day, by the remark of one of the wisest and best men of our times, from the other side of the Atlantic, who said, 'I am not dazzled by the great names which I see recorded in high places; I am not attracted by the statues which are raised to the men whom you call illustrious, but what _does_ strike me, what _does_ delight me, what _does_ fascinate me, is to trace the working man of England to his home; to see him there labouring at his loom unnoticed and unknown, toiling before the sun rises, nor ceasing to toil when the sun has descended beneath the mountain. It is _that_ man, the missionary of peace, who forms the true link of alliance between nation and nation, making all men of one kindred and of one blood,--that man upon whose brow the sweat is falling,--that man whose hands are hardened by labour,--that is the man of whom England has a right to be proud--(hear)--that is the man whom the world ought to recognise as its benefactor.' (Cheers.) And, gentlemen, in such sentiments I cordially agree, and the time will come when the names of men who are called illustrious, at whose feet we have been rolling out torrents of wealth, whom we have been crowning with dazzling honours--those men will pass away into the realms of forgetfulness, while the poor and industrious labourer, who has been through the world a herald and apostle of good, will be respected and honoured, and upon him future times will look as the real patriot, the real philanthropist, the real honour of his country and of his countrymen." The proceedings were closed by the unanimous thanks of the meeting being given to Dr Bowring. FREE TRADE.--We are glad to learn, from a correspondence in the _Liverpool Albion_, that W. Brown, Esq., the head of the eminent house of Brown, Shipley, and Co., of Liverpool, has declared his adherence to the cause of perfect freedom of trade, contributing, at the same time, 50_l._ to the funds of the Liverpool Anti-Monopoly Association. CORN TRADE OF FRANCE.--The _Moniteur_ publishes the return of the corn trade in France during the month of July, from which it appears that the imports were--wheat, 45,896 metrical quintels; other grain, 23,389; and flour, 613. The exports--wheat, 14,318; other grain, 11,506; and flour, 2,435. The quantities lying in the government bonding stores on the first of August were--wheat, 28,405 metrical quintals; other grain, 9,378; and flour, 11,051. ANTI-CORN-LAW MEETING AT HAMPSTEAD.--The opponents of the corn laws resident at Hampstead assembled on Tuesday night, in crowded meeting, at the Temperance hall of that locality, to hear Mr Sidney Smith deliver an address on the evils of the corn laws. The meeting was the first of the kind since the formation of the new association, and there were several of the respectable inhabitants of the neighbourhood present. Mr Smith entered at length into the whole question of the monopolies from which the people of this country suffer. He showed, conclusively, and by a reference to facts and comparisons with other countries, that "protective" duties were injurious to the best interests of the community, as they were productive of abridgment of the people's comfort, and of taxation on everything that they could see or touch. He illustrated the advantages that would arise from free trade, by a reference to the great increase of consumption of the article of coffee since the reduction of the duty of half a crown on the pound weight to ninepence; the consumption at that period (1824) having been but eight millions of pounds weight, while at present, it was twenty-eight millions. The learned gentleman, who spoke for upwards of two hours, concluded amid loud cheers. Three cheers which were proposed for the Charter proved a decided failure; while, on the other hand, three were proposed for a repeal of the corn laws, which were responded to by nearly the whole of the crowded meeting. MR EWART AND HIS CONSTITUENTS.--William Ewart, Esq., the indefatigable member for the Dumfries District of Burghs, is at present paying his respects to his constituents, after the recess of what has been to him a laborious session of parliament, however little may have been effected during its course by the government and the legislature. On Thursday evening he addressed a large meeting in this town. On Friday he visited Lochmaben, and on Saturday Sanquhar, and addressed the inhabitants of both these burghs.--_Dumfries Courier_. MISCELLANIES OF TRADE. STATE OF TRADE.--Owing to the continued absence of the Overland Mail, the demand for manufactured goods, and especially for shirtings, has been limited; but, as stocks are low, prices remain tolerably steady. For yarn the demand continues good, and prices very firm, but the spinners are so generally engaged, that no great amount of business has been done.--_Manchester Guardian_ of Wednesday. COMMERCIAL INTERCOURSE BETWEEN ENGLAND AND THE UNITED STATES.--The circumstances of America are such as to require, for the furtherance of its own interests, a large and extended commercial relationship with England. There is nothing wanting but a movement on our part for the speedy establishment of an unbounded trade. Both countries are so situated that they need never become rivals, provided they consent to co-operate with each other. It is because they have not been permitted hitherto so to do that we now hear of an embryo manufacturing system in America. We have already built Lowell in New England, and Pittsburg in Western Pennsylvania; and will yet, unless we change our system, drive the enterprising republican to efforts which may be more generally and more permanently successful.--_Morning Chronicle_. TRAVELLING BETWEEN ENGLAND AND FRANCE.--The number of persons who passed from England to France, by Boulogne, in the week from 1st to 7th September inclusive, was 2,409, and by Calais, 838. It appears that the opening of the Southern and Eastern Railway as far as Folkestone has increased the number of travellers between England and France by nearly one-half. The number in August, 1842, was 7,436, while during the past month it has been no less than 10,579, showing an increase of 3,143. STEAM V. WATER.--Owing to the Birmingham and Gloucester Railway Company having reduced their charge for all kinds of goods to 6s. per ton between Gloucester and Cheltenham; most of the carriers in this city will be compelled to avail themselves of this mode of conveyance, it being impossible for them to compete with the Railway Company. The consequence will be that some thirty or forty boats will speedily be "laid up in ordinary," to the sorrow of three or four times the number of boatmen, who will of course be thrown out of employ.--_Worcester Chronicle_. THE NEW TARIFF.--"The imports of foreign beasts since Monday last (one week) have been confined to twenty-five into London by the _Batavier_ steamer from Rotterdam." (London Markets Report, September 11.) Can any clever master of fractions calculate the effect of this importation on the Smithfield market, and the benefit thence accruing to the citizens of London as a set-off to the payment of their income-tax? IMPROVEMENT OF TRADE--ROCHDALE.--The piece market has been uncommonly brisk to-day, and all the goods on hand have been cleared off. At present all the workmen are in full employment, though at very low wages; but a few markets of this kind will have a tendency to get up wages. The ready sale of goods has given a buoyancy to the wool market, and the dealers in the raw material have not been so eager to sell at former prices. STATE OF TRADE--PAISLEY.--So far as ample employment to all engaged in the staple manufactures of the town is concerned, trade still continues favourable for the workman, but the manufacturers generally complain that, for the season, sales are late of commencing, and many of them are already rather slackening their operations to keep their stocks down. The unexpected procrastination in the commencement of the fall trade is reasonably accounted for by the fineness of the weather. "A Merchant of twenty-five years' standing, and an Old Subscriber," calls attention to the unusual state of things now so long existing in the Money Market, by the fall in the rate of interest to 1-3/4 and 2 per cent. upon the first class commercial bills. He states that a friend of his has lately lent 100,000_l._ at 1-1/2 to 2 per cent., being the highest rate he could obtain. This condition of the Money Market he attributes to the large amount of paper money in circulation, compared with the demands of commerce. Our correspondent favours us with some figures, illustrative of his views, from November, 1841, to the present month, taken from the _Gazette_ returns, and observing that there has been a serious fall in the value of merchandise equal to one-fifth or one-sixth, with some exceptions during the last year and a half, he accounts by the juxtaposition of his figures, denoting the amount of paper in circulation, and this assumed fall in the price of merchandise for the present anomalous condition of the Money Market, and for the apparent worthlessness of capital. We cannot agree, however, with our correspondent to the full extent, because the very low prices of commodities, with a _minimum_ rate of interest for money, proves that there is no fictitious or inflated excess of paper money. The anomalous state of the Money Market proceeds, we believe, from a redundancy, not of mere paper, but of capital which cannot find investment, superinduced by stagnation of trade, and the want of commercial enterprise, occasioned by the restrictive nature of our duties on imports.--_Morning Chronicle._ The accounts from the United States mention that the greatest activity prevails among the manufacturers in their purchases of the raw material for the year's consumption. POLICE. EXTRAORDINARY CHARGE.--_Captain, William Tune_, the Commander of a steam packet called the _City of Boulogne_, the property of the New Commercial Steam-Packet Company, on Monday appeared at the Mansion House to answer the complaint of the directors of that company, by whom he was charged with being privy to the abstraction of four packages, each containing gold, checks on bankers, bank-notes, and bills of exchange, which had been previously booked at the company's office in Boulogne, and paid for according to the rates agreed upon by the company, and which, with others, had been entrusted to his care. After evidence had been adduced, Mr Wire requested that Captain Tune should be remanded for a week, and stated that the directors being anxious that he should receive as much accommodation as might be consistent with the respectability of his character and the nature of the difficulty in which he was at present involved, were desirous that bail should be taken for his appearance on the next day of investigation.--Alderman Gibbs: I shall require two respectable securities for 500_l._ each, and Captain Tune to be bound himself in the sum of 1,000_l._--The captain was then remanded for a week. A curious fact came out on the inquiry as to the value of each package. They were all, it appeared, entered and paid for as containing a sum of money much inferior to what each package really contained. MATRIMONIAL ADVERTISEMENTS.--An unlucky man, who, in order to get a family by a deceased wife taken care of, had been induced to marry a worthless drunken woman, through the medium of a matrimonial advertisement, applied at Union Hall for advice, but, of course, nothing could be done for him. AWKWARD PREDICAMENT.--A man advanced in years, named _David Simms_, who was claimed by two wives, and nearly torn in pieces by them, was committed from Union Hall, on a charge of bigamy. * * * * * SINGULAR DETECTION OF AN EXTENSIVE SWINDLER.--A man named _William Cairnes_, alias _Thomas Sissons_, with a host of other _aliases_, was placed before the magistrates at the Borough Court, Manchester, charged with one of the most singular attempts at fraud we ever remember to have heard. The prisoner, who was a respectable-looking old man, gave his name _William Carnes_. Under the pretence of giving employment to a labouring man, on getting specimens of his handwriting, he got him to write his name across two blank bills, in the form of acceptance. He has been remanded for further inquiry. EMBEZZLEMENT.--_Theodore Grumbrecht_, a confidential clerk in the extensive India house of Messrs Huth and Co., was arrested on board the _Bucephalus_, bound for New Zealand, whither he was going. The charge against him is extensive embezzlement. ACCIDENTS, OCCURRENCES, AND OFFENCES. SINGULAR ACCIDENT.--An accident occurred at Outwell on the 29th ult. A child, three years old, went to play in a donkey cart, in which a rope coiled and knotted had been placed to dry. The rope was doubled the greater part of the way; and, being knotted, was full of steps or meshes; in one of these the child got his head and unfortunately falling at the same time from the cart, which was propped up as if the donkey were between the shafts, the rope caught on the hook in front of the cart, and held the child suspended a short distance from the ground. He was found quite dead. An inquest was held on the body of the child, and the jury returned a verdict of accidental death.--_Bury Post._ AFFRAY WITH SOLDIERS.--On Tuesday the greatest excitement prevailed throughout Westminster in consequence of repeated outbreaks between the military and the lower, or perhaps we might with propriety say the lowest order of inhabitants of this populous district. The tumult having continued during the whole of the day it was anticipated, and justly, that when night came on, it would increase rather than diminish, although during the whole of the afternoon various parties of the military were seen searching for and escorting to the barracks, the delinquent and disorderly soldiers engaged in the affray. FIRES IN THE METROPOLIS.--On Saturday night the greater portion of the extensive premises of Messrs Cleaseley, floor-cloth manufacturers, Grove street, Walworth common, were destroyed by fire.--On Monday morning the shop of Mr Crawcour, a tobacconist, Surrey place, Old Kent road, was burnt to the ground.--On Tuesday morning, about a quarter to four o'clock, a city police constable discovered fire in the lower part of the extensive premises, nearly rebuilt, of the Religious Tract Society, Paternoster row, through some unslacked lime having been left by the workmen among some timber the previous night. To the vigilance of the officer may justly be attributed the saving of much valuable property from destruction. FIRE AT BRISTOL.--The old Castle Tavern, Bristol, was burned on Thursday, the 7th inst., and the landlord, who was an invalid, perished in the flames. The fire was caused by the carelessness of a niece, in attendance on the invalid, who set fire to the bed furniture accidentally with a candle. The little girl Lydia Groves, who so courageously attempted to extinguish the bed curtains, has sunk under the shock she then experienced. SPORTING INTELLIGENCE. DONCASTER MEETING.--This much-talked-of meeting commenced on Monday, Sept. 11, at two o'clock precisely. The regulations, in every minor detail, answered the purposes for which they were respectively intended; particularly the one affecting those persons who have proved themselves "defaulters," as such were refused admission to the stands, the ring, the betting-rooms, and every other place under the jurisdiction of of the stewards. Many improvements and alterations have been made, and no expense spared towards securing the comfort of all. The different stands have undergone a complete renovation, and present a very striking and handsome appearance, very unlike their neglected condition in former years. On Sunday evening a tremendous storm came on, accompanied with hail and extraordinarily vivid lightning; in fact, it was truly awful to witness--the rain literally pouring down in torrents, and the flashes of lightning following each other in rapid succession. Happily the storm was not of very long continuance, commencing about half-past six, and terminating about seven o'clock; but, during that short period, it was sufficient nearly to drown the "unfortunates," who were travelling outside per coach from Sheffield, York, Leeds, &c., and who, on alighting, presented a most wretched appearance. The morning of Monday was dark and lowering, but towards eleven or twelve o'clock the weather cleared up and remained very fine. The course, notwithstanding the rain, was in the very best possible order, the attendance large, beyond any former example on the first day, punctuality as to the time of starting was very strictly observed, and the sport was first rate. The great event of these races is the St Leger stakes, which on this occasion were run for in three minutes and twenty seconds. Mr Bowes's "Cotherstone," the winner of the Derby, was the favourite, and was confidently expected to gain the St Leger. But it only came in second, being beaten by Mr Wrather's Nutwith, and only gained by a neck on Lord Chesterfield's Prizefighter, which was third. WOOLWICH GARRISON RACES.--The officers of the garrison at Woolwich having resolved on testing the value and quality of their horses by races, the first day's sport came off on Wednesday; and owing to the great number of spectators, of whom there were upwards of 10,000, on the ground, and the fineness of the weather, the scene was more animated than on any former occasion. A spacious booth was erected on the ground and was well filled throughout the day. Upwards of 100 carriages, containing families, were drawn up along both sides of the course, and hundreds of gentlemen on horseback occupied various parts of the Common where the races took place; presenting altogether an enlivening and interesting spectacle. The band of the Royal Artillery attended in front of the booth, and played, with very little intermission, some of the finest airs from one o'clock to seven o'clock, p.m. On Thursday, the second day, a slight shower of rain, about one o'clock, p.m. prevented the races from being so well attended by spectators as they were yesterdy, yet the attendance was numerous in the afternoon, and great interest existed amongst the officers of the garrison, and many sporting gentlemen, to witness the result. AGRICULTURAL VARIETIES. THE BEST HOME MARKET.--The _Norwich Mercury_ of last Saturday contains no less than seventy advertisements relating to the sale of farming stock; and a majority of these are cases in which the tenant of the farm on which a sale is announced is described as one "quitting the occupation," or "retiring from business." We should like to know how many of those parties have managed to amass a fortune, or even to acquire a moderate competency, under that protective system which, as they have always been taught to believe, was devised for their especial benefit. From the ominous newspaper paragraphs, announcing the liberality of landlords to their tenants, which have lately become so numerous, we rather suspect that most of those farmers who are retiring from business do so to avoid greater evils. It is worthy of remark, however, that, amidst all this agricultural depression, which has now lasted some twelve months at least, the "home trade"--which the advocates of the corn law always describe as entirely dependent on the farmers obtaining high prices for their grain--is in a healthier state than it has been for several years past. The _Standard_ lately stated, on the authority of a Mr Spackman, that the United Kingdom contained 20,500,000 individuals dependent on agriculture, and only 6,500,000 individuals dependent on manufactures; and, as we have frequently seen the same absurd statement brought forward at farmers' clubs as "agricultural statistics," it is possible enough that many persons may have been led to believe it. Those who do so, however, would find it rather difficult to explain, under such a division of the population, the fact, that during four or five years of high prices, which the Duke of Buckingham designated "agricultural prosperity," the 20,500,000 souls should have been unable to create a brisk demand for manufactures; while a single year of cheap provisions has done so much to improve trade, and relieve the pressure from the shoulders of the labouring classes. Who that looks at these two facts can have the slightest doubt in his mind as to what it is that makes the best home market?--_Manchester Guardian._ CURIOUS AGRICULTURAL EXPERIMENT.--The following novel and interesting experiment has lately been successfully made by Mr A. Palmer, of Cheam, Surrey:--In July, 1842, he put one grain of wheat in a common garden-pot. In August the same was divided into four plants, which in three weeks were again divided into twelve plants. In September these twelve plants were divided into thirty-two, which in November were divided into fifty plants, and then placed in open ground. In July, 1843, twelve of the plants failed, but the remaining thirty-eight were healthy. On the 19th August they were cut down, and counted 1,972 stems, with an average of fifty grains to a stem, giving an increase of 98,600. Now, if this be a practicable measure of planting wheat, it follows that most of the grain now used for seed may be saved, and will infinitely more than cover the extra expense of sowing, as the wheat plants can be raised by the labourer in his garden, his wife and children being employed in dividing and transplanting them. One of the stems was rather more than six feet long, and stout in proportion. CULTIVATION OF WASTE LANDS.--EMPLOYMENT OF LABOURERS.--A paper was recently laid before the Council of the Royal Agricultural Society of England, by Lord Portman, which we think deserves a much greater degree of attention than we believe it has yet received, in that it shows to what a considerable extent waste lands may, without any very heavy expenditure of money, be brought into profitable cultivation, and at the same time, under a well-regulated system of spade husbandry, yield abundant employment to agricultural labourers and their families. The following is the substance of the document referred to:--His lordship, who has large estates in Dorsetshire, found that a tract of land, called Shepherd's Corner, about 200 acres in extent, was wholly unproductive, yielding a nominal rent of 2s. 6d. per acre. About fifteen years ago his lordship resolved to make an experiment with this land. He accordingly gave directions to his steward that it should be laid out in six divisions, representing so many small farms, in the cultivation of which such of the labourers as could not obtain full work from the neighbouring farmers were occasionally employed. For the three first years there were no returns, the ground having been merely broken up with the spade, and the surface soil exposed. In subsequent years this land was sown chiefly with turnips, fed off by sheep, until it was found in sufficient heart for the reception of grass and corn seeds, the crops from which were at first scanty and indifferent, but sufficient, however, to pay for cultivation. At the expiration of fifteen years the expenditure upon the whole, inclusive of allowance for rent, at the original rate of 2s. 6d. per acre, together with all charges on account of tithes and taxes, amounted to a little more than 10,000_l._; the returns by crops sold and sheep fed exceeding that sum by 88_l._, independent of the crops now in the ground, which will come to the landlord in September. This may appear to be an inadequate return for the fifteen years' experiment; but, as Lord Portman justly observes, "as a farmer he has lost nothing, whilst as landlord he is a considerable gainer, the land being now fully equal to any of the neighbouring farms." Two objects, both of great importance, have thus been obtained. These 200 acres have been fertilized, which would otherwise have been of no present or prospective value; and in the process of cultivation employment has, during that long period, been provided for several hundreds of labourers who, but for that resource, must, at some seasons at least, have become a burden to the parish. OUR LIBRARY TABLE. FREE TRADE, RECIPROCITY, AND COLONIZATION. _The Budget; a Series of Letters, published at intervals, addressed to Lord John Russell, Sir Robert Peel, Lord Stanley, and Lord Eliot, on Import Duties, Commercial Reform, Colonization, and the Condition of England._ By R. Torrens, Esq., F.R.S. _The Edinburgh Review._ No. CLVII. Article, Free Trade and Retaliation. _The Westminster Review._ No. LXXVIII. Article, Colonel Torrens on Free Trade. Our readers are not, in general, unacquainted with the public character and literary reputation of Colonel Torrens. He is, we believe, a self-taught political economist; and, like Colonel Thompson, early achieved distinction in a branch of moral science not considered particularly akin to military pursuits. But in his recent labours, he has very seriously damaged his reputation, by attempting to bolster up a policy whose influence on the welfare of the nation has been of the most deadly and pernicious kind; and we therefore advert to the letters called the _Budget_, more with the view of showing that they have been analysed, and their mischievous principles thoroughly refuted, than with any intention of entering at large into the discussion. It was, we believe, in the autumn of 1841, immediately following the accession of the present Government to office, that Colonel Torrens commenced the publication of his letters called the _Budget_. The two first were addressed to Lord John Russell, and professed to show that the commercial propositions of the late Whig Government would, if adopted, have altered the value of money, increased the pressure of taxation, and aggravated the distress of the people. The third letter was on commercial reform, addressed to Sir Robert Peel. The remainder of the series were on colonization and taxation, on the expediency of adopting differential duties, &c.; concluding with one on the condition of England, and on the means of removing the causes of distress; which was afterwards followed by a _Postscript_, in which the author, addressing Sir Robert Peel, said-- "I would beg to submit to your consideration what appears to me to amount to a mathematical demonstration, that a reduction of the duties upon foreign production, unaccompanied by a corresponding mitigation of the duties imposed by foreign countries upon British goods, would cause a further decline of prices, of profits, and of wages, and would render it doubtful whether the taxes could be collected, and faith with the public credit or maintained." Opinions like these, coming from a man considered to be of some little authority in economical science, were certainly important. The time was serious--the crisis really alarming. A new Government had come into power, and it was thought and expected were about to effect great changes. Even the _Quarterly Review_, alarmed by the aspect of affairs, came round, in the winter of 1841, to advocate commercial reform. At this critical period Colonel Torrens stepped forward. What his motives were we do not know; though we know that men neither harsh nor uncharitable, and with some opportunities of judging, considered that Colonel Torrens, soured by political disappointments and personal feeling, had permitted himself to be biassed by hopes of patronage from the new Government. The pamphlets composing the _Budget_ only appeared at intervals: but so far as they were then published, did attract considerable attention; the mere supporters of pure monopoly did not, of course, understand them: but that body who may be appropriately enough termed _middle men_, were not unaware of the value of such support as that afforded by Colonel Torrens, in staring off changes which seemed inevitable. Sir Robert Peel, too, was then in the very midst of his lesson-taking; and as he deeply studied Mr Hume's Import Duties Report, before he brought out his new Tariff, we need not consider it to be very discreditable to him, that he read the pamphlets of Colonel Torrens before he tried his diplomatic commercial policy. At all events, one of the chief arguments with which Sir Robert Peel and Mr Gladstone justified the great omissions of the new Tariff, was the fact that the Government was engaged in negotiations with other countries in order to obtain treaties of reciprocity. The utter failure of these efforts Sir Robert Peel has repeatedly confessed, accompanied with a sigh over the inutility of the attempt; and the last time that he adverted, in the House of Commons, to the authority of Colonel Torrens (he was citing the _Postscript_ to the _Letter_ addressed to himself) it was with the kind of manner which indicated want of confidence in the guide who had misled him. Whether or no, however, he had relied on that authority in his negotiations with other countries during his futile attempts to obtain commercial treaties, this much is certain enough, that Colonel Torrens did what he could to strengthen the old notion, that it was of no use for us to enlarge our markets unless other countries did so also at the same time and in the same way; and in condemning all reduction of import duties that was not based on "reciprocity," he certainly added all the weight of his authority to prop up a system whose injurious influence has affected the very vitality of our social state, and whose overthrow will yet require no small amount of moral force to effect. We are far indeed, from undervaluing treaties of reciprocity; but to make them a _sine qua non_ in the policy of a country whose condition is that of an overflowing population, a deficient supply of the first necessaries of life, and a contracted market for its artificial productions, is an error of the first magnitude. Therefore, though not attaching primary importance to the _Budget_ of Colonel Torrens, or believing that it could ultimately have any great effect in retarding the effectual settlement of the great question, it was not without some feeling of satisfaction that we perused the able article in the last _Edinburgh Review_, in which his delusions are completely set at rest. We quite agree with the writer (Mr Senior, it is said) that "if the _Budget_ were to remain unanswered, it would be proclaimed in all the strongholds of monopoly to which British literature penetrates--in Parliament, in Congress, in the _Algemeine Zeitung_, and in the councils of the Zollverein--that Adam Smith and the modern economists had been refuted by Colonel Torrens; that free trade is good only where reciprocity is perfect; that a nation can augment its wealth by restraining a trade that was previously free; can protect itself against such conduct on the part of its neighbours only by retaliation: and if it neglect this retaliatory policy, that it will be punished for its liberality by a progressive decrease of prices, of wages, and of profits, and an increase of taxation." The identity of Colonel Torrens's propositions with the exploded "Mercantile Theory" is very satisfactorily established by the Edinburgh reviewer; and it is certainly humbling to see a man of his ability coming forward to revive doctrines which had well nigh gone down to oblivion. On the subject where Colonel Torrens conceives himself strongest, the distribution of the precious metals, the reviewer has given a very able reply, though some points are left for future amplification and discussion; and, as a whole, if there be any young political economist whose head the _Budget_ has puzzled, the article in the _Edinburgh Review_ will be found a very sufficient antidote. With this, and another able article on the same subject in the last _Westminster Review_ (in fact, two articles of the _Westminster_ relate to the subject--one is on Colonel Torrens, the other on Free Trade and Colonization), we may very safely leave the _Budget_ to the oblivion into which it has sunk; and, meantime, the novice will not go far astray who adheres to the "golden rule" of political economy, propounded by the London merchants in 1820, and re-echoed by Sir Robert Peel in 1842: "The maxim of buying in the cheapest market, and selling in the dearest, which regulates every merchant in his individual dealings, is strictly applicable as the best rule for every nation. As a matter of mere diplomacy, it may sometimes answer to hold out the removal of particular prohibitions or high duties as depending on corresponding concessions; but it does not follow that we should maintain our restrictions where the desired concessions cannot be obtained; for our restrictions would not be the less prejudicial to our capital and industry, because other governments persisted in preserving impolitic regulations." MISCELLANEA. CAPTAIN JAMES CLARKE ROSS AND THE ANTARCTIC EXPEDITION. All the newspapers have quoted an account from the _Literary Gazette_ of the Antarctic Expedition, under the command of Captain James Ross. It was composed of two vessels, the _Erebus_, Captain Ross, and the _Terror_, Captain Crozier, and left England on the 29th of September, 1839. During the outward voyage to Australia, scientific observation was daily and sedulously attended to; experiments were made on the temperature and specific gravity of the sea; geological and geographical investigations were made at all available points, especially at Kerguelen's Land; and both here, as well as during the expedition, magnetic observation and experiment formed a specific subject of attention. This was a main object during 1840, the expedition remaining at the Auckland Islands for this purpose; and it was not till the 1st of January, 1841, that it entered the antarctic circle. Their subsequent adventures, deeply interesting as they are from the perils which they encountered, and the spirit and perseverance with which they were met, come hardly within our sphere to report. After an absence of four years, the expedition, as mentioned in last week's ECONOMIST, has returned to England, and the acquisitions to natural history, geology, geography, but above all towards the elucidation of the grand mystery of terrestrial magnetism, raise this voyage to a pre-eminent rank among the greatest achievements of British courage, intelligence, and enterprise. RELIGIOUS WORSHIP.--CHURCH PROPERTY.--The following Parliamentary Return has just been printed, entitled, "A Return of the amount applied by Parliament during each year since 1800, in aid of the religious worship of the Church of England, of the Church of Scotland, of the Church of Rome, and of the Protestant Dissenters in England, Scotland, and Ireland, respectively, whether by way of augmentation of the income of the ministers of each religious persuasion, or for the erection and endowment of churches and chapels, or for any other purposes connected with the religious instruction of each such section of the population of the United Kingdom, with a summary of the whole amount applied during the above period in aid of the religions worship of each of the above classes." The abstract of sums paid to the Established Church shows that the total was 5,207,546_l._ which is divided in the following manner:--Church of England, 2,935,646_l._; Church of Scotland, 522,082_l._; Church of Ireland, 1,749,818_l._ Church of Rome.--The total sum paid to the Church of Rome is set forth at 365,607_l._ 1s. 2d. comprised in the following two items;--Augmentation of incomes (including Maynooth College), 362,893_l._ 8s. 1d.; erection and repairs of chapels, 2,113_l._ 13s. 1d. Protestant Dissenters.--The total sum is 1,019,647_l._ 13s. 11d. in England and Ireland. The recapitulation shows the following three sums:--Established Church, 5,207,546_l._; Church of Rome, 365,607_l._; and Protestant Dissenters, 1,019,647_l._ The sums were advanced from 1800 to 1842. IMPERISHABLE BREAD.--On Wednesday, in the mayor's private room, at the Town hall, Liverpool, a box of bread was opened which was packed at Rio Janeiro nearly two years ago, and proved as sound, sweet, and in all respects as good, as on the day when it was enclosed. This bread is manufactured of a mixture in certain proportions of rice, meal, and wheat flour. ST GEORGE'S CHAPEL, WINDSOR.--The extensive alterations and embellishments which have been in progress since the early part of May last (from which period the chapel has been closed), at an outlay of several thousands of pounds, throughout the interior of this sacred edifice, having been brought to a close, it was reopened for Divine service on Thursday. FATHER MATHEW.--Father Mathew, after finishing his labours in the metropolis, went to Norwich, where he met the Bishop, who, in an earnest and eloquent speech, in St Andrew's hall, on Thursday week, introduced the reverend gentleman to that locality, and very warmly eulogized his conduct. Mr Gurney, the well-known Norwich banker, occupied the chair on this occasion, and seconded the Bishop in his patronage and approbation of the great temperance movement. After remaining at Norwich two or three days, Father Mathew started for Ireland, taking Birmingham and Liverpool in his way. IMPORTATION OF FRUIT FROM ANTWERP.--On Thursday, the steam-packet _Antwerpen_, Captain Jackson, arrived at the St Katherine's Steam Packet Wharf, after an expeditious passage, from Antwerp. The continental orchards continue to supply our fruit markets with large supplies, the _Antwerpen_ having brought 4,000 packages, or nearly 2,800 bushels of pears, apples, plums, and filberts. Advices were received by the _Antwerpen_ that another extensive importation of fruit from Antwerp may be expected at the St Katherine's Steam Packet Wharf this day (Saturday), by the steam-packet _Princess Victoria_, Capt. Pierce. LIEUT. HOLMAN, THE BLIND TRAVELLER.--This celebrated tourist and writer took his departure from Malta, on the 3rd of September, for Naples. He will afterwards proceed to the Roman States, and then to Trieste. During the few days of his residence in this island the greatest hospitality has been shown him. The veteran traveller had the honour of dining with his excellency the Governor, and with Admiral Sir E. Owen. Amidst all the vicissitudes of his perilous life and increasing age, he still maintains the same unabated thirst for travel, and his mental and bodily faculties appear to grow in activity and strength in the inverse ratio of his declining life and honoured grey hairs. RAILWAY FROM WORCESTER TO CARDIFF.--It is proposed, by means of this new line, to connect the population of the north of England and the midland counties with the districts of South Wales and the south of Ireland. It will commence at the Taff Vale Railway, pass through Wales, cross the Severn, and unite with the Birmingham and Gloucester Railway at Worcester. The cost will be 1,500,000_l._ FRENCH OPINIONS ON SPANISH EVENTS.--The French journals are loud in condemning the poor Barcelonese for the very same acts which drew down the applause of these same journals a week ago. The following remarks from the _National_ render any of our own useless:--"It must be admitted that the French journals appreciate in a strange way the deplorable events in Spain. Some soldiers revolt at Madrid, without going any length of insurrection, or at all endangering the Government. General Narvaez comes, and without consulting Government or any one else, shoots eight non-commissioned officers. Straight our Ministerial journals exclaim, What an act of vigour! Vigour if you will; but where is the humanity, the wisdom, the justice? Then behold Barcelona, of which the people some weeks ago rose against the established and constitutional Government. What heroes! exclaimed the French Ministerial papers. Now they do the same thing, rising against a provisional and extra-constitutional Government. What brigands! exclaim the Ministerial writers. A few weeks back a Spanish Government defended itself with violence against those who attacked it. Regiments fired rounds of musketry, and the cannons of forts bombarded the rebellious towns. The French Ministerialists forthwith pronounced the Spanish Regent as a malefactor, and devoted him to the execration of the civilized world. Now, another Government, without the same right, follows precisely the same course as the one overthrown. It defends itself, fires, bombards, and pours forth grape from behind walls upon insurgent bands in the street. This same conduct is glorified as firm, as legitimate, as what not. The system of political morality changes, it seems, with men and with seasons. What was infamy in Espartero and Zurbano, is heroism and glory in Narvaez and Prim. What is more infamous than all this is the press, that thus displays itself in the light of a moral weathercock, shifting round to every wind." STATISTICS OF THE METROPOLITAN POLICE.--By a return just issued in compliance with an order of the House of Commons relative to the City and Metropolitan Police Force, it appears that there are 20 superintendents in the metropolitan division, receiving from 200_l._ to 600_l._ per annum; 110 inspectors, whose salaries vary from 80_l._ to 200_l._ per annum; 465 sergeants, with incomes ranging from 60_l._ to 80_l._ per annum; and 3,790 constables, receiving from 44_l._ to 81_l._ per annum, including clothing and 40 pounds of coal weekly throughout the year. The amount paid on this account during the past year, including 3,620_l._ for superannuation and retiring allowances to officers and constables late of Bow-street horse patrol, and Thames police, amounted to 295,754_l._ In this is likewise included a sum of 9,721_l._ received from theatres, fairs, and races. The number of district surgeons is 60, and the amount paid for books, &c., is 757_l._ The total rate received during the past year from the various wards in the City of London and its liberties, for the maintenance of the City Police Force, is put down at 41,714_l._, and the expenditure at 41,315_l._, the gross pay, irrespective of other charges to the force, amounting to 29,800_l._ LOSS OF THE UNITED STATES STEAM FRIGATE "MISSOURI," AT GIBRALTAR, BY FIRE.--The superb American steam frigate _Missouri_, which was conveying the Hon. Caleb Cushing, American minister at China, to Alexandra, whilst at anchor in Gibraltar bay, on the 26th ult., was entirely consumed by fire. The fire broke out in the night, and raged with such determined fury as to baffle all the efforts of the crew, as well as that of the assistance sent from her Majesty's ship _Malabar_, and from the garrison. The magazines were flooded soon after the commencement of the fire; and, although a great many shells burst, yet, very fortunately, no accident happened to any of the crew. This splendid steamer was 2,600 tons and 600 horse power, and is said to have cost 600,000 dollars. THE ALLEGED ARREST OF THE MURDERER OF MR DADD.--The following are the remarks of _Galignani's Messenger_ on the report in the English papers that Dadd was arrested at Fontainbleau:--"The above statement has been partially rumoured in town for the last two days, but not in a shape to warrant our publishing it in the _Messenger_. The police have been everywhere active in their researches for the fugitive; and we perceive, by the _Courrier de Lyons_, that, on Thursday night, all the hotels in that city were visited by their agents, in pursuit of two Englishmen, one of them supposed to be the unfortunate lunatic. These individuals had, however, quitted the town on their way to Geneva, previously to the visit of the police." THE CARTOONS.--We understand that several of the prize cartoons, and a selection of some of the most interesting of the works of the unsuccessful competitors, have been removed from Westminster hall to the gallery of the Pantechnicon, Belgrave square, for further exhibition. MACKEREL.--The Halifax papers state that the coast of Nova Scotia is now visited by mackerel and herrings in larger quantities than ever were known at this season. In the straits of Canso the people are taking them with seines, a circumstance without a parralel for the last 30 years. The _Journal des Chemins de Fer_ says:--"An inventor announces that he has found a composition which will reduce to a mere trifle the price of rails for railroads. He replaces the iron by a combination of Kaolin clay (that used for making pottery and china) with a certain metallic substance, which gives a body so hard as to wear out iron, without being injured by it in turn." COMMERCE AND COMMERCIAL MARKETS. DOMESTIC. FRIDAY NIGHT.--We are still without the arrival of the Indian Mail, nor has any explanation of its detention transpired, except that which we mentioned last week. No serious apprehension exists for its safety, as similar detentions, of even much greater duration, have been experienced in the arrival of the September Mail in former years, as a consequence of the monsoon. In Manchester, during the week, the market has been somewhat flatter in goods suited for the Eastern markets, in consequence of merchants being anxious to receive their advices by the Indian Mail before extending their transactions materially at present prices. In the Yorkshire woollen markets a fair trade continues to be done; and in Bradford a very active demand has arisen for the goods peculiar to that neighbourhood. In the Scotch seats of manufactures, both woollen and cotton, the trade has considerably improved, especially in the demand for tartans of all kinds, in which there is a very active and brisk trade. In the iron districts, the trade continues without change since our last: most of the works are full of orders, at low prices. In the coal districts, in Northumberland and Durham, trade is without any improvement whatever, and this trade, as well as their shipping, is in the most depressed condition. _INDIGO._--The transactions in this article have not been on a more extensive scale in our market than last week, but a good demand continues for the home trade, and occasionally a small advance upon the last July rates is paid on such sorts suitable for that branch, but there is almost no demand for export, the consumption of the article in foreign countries being this year unusually slack. The shipments to Russia, since the opening of the season, amount to only 2,209 chests, against 3,439 chests during the same time last year. A public sale was held yesterday, in Liverpool, of about 400 chests of East India, and 120 serons of Caracas. Of the former about 100 chests were withdrawn by the poprietors, but the remainder, together with the serons, sold briskly for the home trade, at prices about 3d. to 4d. per lb. higher than the previous nominal value, and rather above that of the London market. There are now 6,070 chests declared for the quarterly sale on the 10th of October; a great portion of it consists of good shipping sorts. It is supposed that several thousand chests more will be declared upon arrival of the Indian Mail, now due. _COCHINEAL._--Only two small public sales were held this week, together of 97 serons. The first consisted of 30 serons Mexican, mostly silver, which sold at prices from 2d. to 3d. per lb. higher than those of last week. The lowest price for ordinary foxy silver was 4s. 4d. per lb. The second sale was held at higher prices still, in consequence of which the whole quantity was bought in. _COTTON._--The purchases at Liverpool, for this week, will again reach the large quantity of about 40,000 bales, of which a considerable proportion is on speculation. Prices have been extremely firm, without any decided advance, however, there not being much importance attached, or faith given, to the statements that the American crop has suffered, which have been received by the Halifax and New York steamers, up to 1st inst. from the latter place. In this market, business by private contract is again trifling. At public sales there have been offered 714 bales American, and 3,796 bales Surat; the former were held considerably above the value, and only 30 bales good fair were sold at 4-3/4d. in bond. Of the Surat about 2,300 bales found buyers, from 2-7/8d. to 3-1/8d. for middling, to 3-3/8d. to 3-1/2d. for fair; a few lots superior went at 3-5/8d. for good fair, and 4d. per lb. for good. The prices paid show an advance of 1/8d. to 1/4d. a lb. upon the last public sales of 24th August, and sustain the previous market rates, though the highest advance was conceded reluctantly, and not in many instances; there are buyers for low-priced cotton of every description, but there is little of it offering. _SUGAR._--The purchases for home consumption have been upon a limited scale, and prices barely maintained. The same remark applies to foreign sugar. Only one cargo of Porto Rico sugar has been sold afloat, for a near port, at 18s., with conditions favourable to the buyer. At public sale 630 chests Bahia, and 120 chests, and 240 barrels Pernambuco, were almost entirely bought in at extreme rates: since when only about 170 chests of the brown Bahia have been placed at an average of 17s. 6d., and with 50 chests of the lowest white at 21s. to 21s. 6d.; by private contract 300 chests old yellow Havannah, of good quality, sold at 20s. _COFFEE._--The home demand remains good; good and fine Jamaica fetched previous rates; a parcel of Ceylon, of somewhat better quality than the common run, sold at 51s. to 52s., which is rather dearer: very good Singapore Java sold at 36s. to 40s. In foreign Coffee a cargo of St Domingo has been sold afloat for Flanders at 26s. 6d. Two others being held above that price without finding a buyer, they have been sent on unsold. On the spot the transactions in coffee for export by private contract are quite insignificant, and of 650 bags old St Domingo _via_ Cape, only a small proportion sold at 28s. to 30s. for pale bold good ordinary. _RICE._--About 4,000 bags of Bengal offered at public sale sold from 10s. to 11s. per cwt., establishing a decline of 3d. per cwt. _SALTPETRE._--The market is sparingly supplied, and importers do not sell except upon extreme rates, which have been paid for about 3,000 bags, viz. from 23s. 6d. for very ordinary, to 25s. 6d. for good middling. _CASSIA LIGNEA._--For small parcels offering in public sale full prices have been paid; fine by private contract as high as 70s. _PIMENTO._--Fair quality has been sold 2-1/2d. to 2-5/8d., which is rather dearer. _TALLOW._--The demand on the spot is not improved and the price unaltered, 41s. 9d. to 42s.; for forward delivery there is rather more disposition to purchase. _RUM._--The demand is very limited, except for the finest qualities of Jamaica, and common are rather cheaper. FOREIGN. The accounts received from the United States up to the first of this month by the _Hibernia_ and _Great Western_ are favourable as regards commerce. The manufactories in the Union are reported to be in a state of considerable prosperity, notwithstanding which the demand for imports was increasing. The reports about the cotton crops were various; it was admitted that the weather had latterly been favourable. Large arrivals of wheat and flour were expected in the ports from the West. The commercial reports received this week from the continent of Europe do not show any great activity in foreign markets, though the prices of Colonial produce are well maintained. Sugar was somewhat more in demand both at Antwerp and Hamburg. In Coffee there was rather less doing at both places. * * * * * PRICES CURRENT, SEPT. 16, 1843. ------------------------------------------+----------- ENGLISH FUNDS. | PRICES | THIS DAY. ------------------------------------------+----------- India Stock | 266 3 per Cent. Red | Shut 3 per Cent. Consols Money | 94-3/4 3-1/2 per Cent. Annuity, 1818 | -- 3-1/2 per Cent. Red. | Shut New 3-1/2 per Cent. Annuity | 102 Long Annuities | Shut Annuities, terminable July, 1859 | -- India Bonds 3 per Cent. | 69s pm Exchequer Bills 1-3/4d. | 69s pm 3 per Cent. Consols for Account | 91-1/8 Bank Stock for Account | Shut ------------------------------------------+----------- ------------------------------------------+----------- FOREIGN FUNDS. | PRICES | THIS DAY. ------------------------------------------+----------- Belgium Bonds | 105 Brazilian Bonds | 74-1/2 Chilian Bonds, 6 per Cent. | -- Columbian Bonds, 6 per Cent. 1824 | 25-3/8 Dutch, 5 per Cent. | -- Ditto, 2-1/2 per Cent. Exchange 12 Guil. | 52-1/8 Mexican Bonds, 1837, 5 per Cent. | 34 Peruvian Bonds, 6 per Cent. | -- Portuguese 5 per Cent. Converted | 44-1/4 Ditto 3 per Cent. Ditto | -- Russian Bonds, 1822, 5 per Cent. | 114-1/2 Spanish Bonds, 5 per Cent. 1821 | 18-1/8 1822 | -- Ditto, Deferred | 11 Ditto, Passive | 4-1/8 ------------------------------------------+----------- CORN MARKETS. _(From Messrs Gillies and Horne's Circular.)_ CORN EXCHANGE, MONDAY, SEPT. 11.--The weather continued most beautiful here until yesterday, when we had some heavy thunder showers, and to-day is gloomy, damp and close. The wind, what little there is of it, is north. The arrivals during last week were moderate except of Foreign Wheat and Barley, of which of course there is yet some quantity to arrive. The new English Wheat coming soft in hand, is slow sale at 1s. to 2s. reduction--free Foreign finds buyers for mixing at last week's currency. Barley is dull sale at last week's rates. Oats are 6d. to 1s. lower. Some new Irish have appeared of fine quality. There is no change in Beans and Peas. Flour is the same as last week. ----------------------------------------------+------------- BRITISH. | PER QR. | Wheat, Essex, Kent, Suffolk, white | 59s to 61s ---- Lothian, Fife, Angus, do. | 52s to 57s ---- Inverness, Murray, &c. | 52s to 57s ---- Essex, Kent, Suffolk, red | 54s to 57s ---- Cambridge, Lincoln, red | 54s to 57s Barley, English Malting, and Chevalier | -- -- ---- Distiller's, English & Scotch | -- -- ---- Coarse, for grinding, &c. | 28s to 30s Oats, Northumberland & Berwick | 21s to 23s ---- Lothian, Fife, Angus | 21s to 23s ---- Murray, Ross | 21s to 23s ---- Aberdeen and Banff | 21s to 23s ---- Caithness | 21s to 23s ---- Cambridge, Lincoln, &c. | 20s to 23s ---- Irish | 17s to 19s ---- English, black | 18s to 21s ---- Irish " | 17s to 21s ---- Potato, Scotch | 23s to 26s ---- " Irish | 19s to 22s ---- Poland, Lincoln, &c. | 21s to 24s Beans, Ticks | 30s to 31s ---- Harrow | 31s to 34s ---- Small | 32s to 34s Peas, White | 36s to 38s ---- Boilers | -- -- Flour, Town made Households | 50s to 53s ---- Norfolk and Suffolk | 40s to 42s ----------------------------------------------+------------- ----------------------------------------------+------------- FOREIGN AND COLONIAL. | PER QR. | Wheat, White, Spanish, Tuscan | 52s to 59s ---- High mixed Danzig | 58s to 61s ---- Mixed do. | 52s to 58s ---- Rostock, new | 57s to 60s ---- Red Hamburg | 52s to 55s ---- Polish Odessa | 48s to 52s ---- Hard | -- -- ---- Egyptian | 32s to 37s Barley, Malting, &c. | -- -- ---- Distiller's, &c. | 28s -- ---- Grinding, &c. | 28s to 29s Oats, Brew, &c. | 21s to -- ---- Polands, &c. | 22s to -- ---- Feed, &c. | 18s to -- ---- Do, dried, Riga, &c. | -- 21s Rye, Dried | -- -- ---- Undried | -- -- Beans, Horse | 30s to 34s ---- Mediterranean | 26s to 29s Peas, White | 34s to -- ---- Yellow | -- 35s Flour, French, per 280 lbs. nett weight | -- -- ---- American, per Bar. 196 lbs. nett weight | -- -- ---- Danzig, &c. do. do. | -- -- ---- Canada, do. do. | 29s to 29s ---- Sour, do. do. | -- -- ----------------------------------------------+------------- CORN EXCHANGE, FRIDAY, SEPT. 15.--The weather threatened to be stormy yesterday, the barometer fell, and we had some heavy drops of rain, but it has since cleared up, and to-day is 10 degrees warmer and beautifully clear, with the wind south east. In Ireland and Scotland there was a good deal of rain on Sunday and Monday, which (we understand) stopped the harvest work for the time, but we hope by this time they have it fine again. The new English Wheat comes to hand softer and lighter than at first; as usual after being stacked, the yield is much complained of, besides that many of the stacks got so soaked by the heavy rains of the 21st and 23rd of August, that the condition of the Wheat is sadly spoiled. The arrivals are moderate this week, except of Irish Oats, several small parcels of which are of the new crop; there is also a small parcel of new Scotch Barley in fine condition, and new Scotch Oats, also good. Almost all the Wheat has been entered at the 14s. duty; we believe it is over 300,000 qrs. New English Wheat is dull sale: Foreign, on the other hand, is more inquired for, and not to be purchased in any quantity except at 1s. advance. Barley is saleable in retail at Monday's prices. Oats are again 6d. cheaper than on Monday, except for very fine samples. The averages lead us to suppose that on the 21st instant the duty on Foreign Wheat will rise to 16s. per qr.; on Barley it will remain 6s.; on Oats 6s.; on Rye it will rise to 9s. 6d.; on Beans it will remain 10s. 6d.; and on Peas, 9s. 6d. LONDON AVERAGES. For the week ending September 12. --------------------------------------------------------------------- Wheat. Barley. Oats. Rye. Beans. Peas. -----------+----------+-------------+----------+----------+---------- 4.113 qrs. | 345 qrs. | 25,600 qrs. | 50 qrs. | 147 qrs. | 132 qrs. 51s. 6d. | 32s. 2d. | 18s. 9d. | 30s. 2d. | 30s. 2d. | 42s. 1d. -----------+----------+-------------+----------+----------+---------- IMPERIAL AVERAGES. --------------------+--------+---------+--------+--------+--------+-------- | Wheat. | Barley. | Oats. | Rye. | Beans. | Peas. --------------------+--------+---------+--------+--------+--------+-------- Weeks ending | s. d. | s. d. | s. d. | s. d. | s. d. | s. d. Aug. 10th | 60 9 | 32 4 | 21 5 | 37 1 | 31 9 | 31 4 -- 17th | 61 2 | 32 11 | 21 9 | 38 7 | 32 1 | 33 7 -- 24th | 59 9 | 33 11 | 21 5 | 37 1 | 32 6 | 34 9 -- 31st | 56 8 | 32 11 | 20 7 | 31 8 | 31 10 | 33 9 Sept. 7th | 54 2 | 31 11 | 20 5 | 31 1 | 32 4 | 32 1 -- 14th | 53 0 | 31 11 | 19 7 | 31 3 | 31 9 | 33 8 +--------+---------+--------+--------+--------+-------- Aggregate of six | | | | | | weeks | 57 7 | 32 8 | 20 10 | 34 6 | 32 0 | 33 8 --------------------+--------+---------+--------+--------+--------+-------- Duties till Sept. | | | | | | 20th inclu. | 15 0 | 6 0 | 6 0 | 8 6 | 10 6 | 9 6 On Grain from B. | | | | | | Possession out | | | | | | of Europe | 2 0 | 0 6 | 2 0 | 0 6 | 1 6 | 1 0 --------------------+--------+---------+--------+--------+--------+-------- Flour--Foreign, 9s. 0d. per 196lbs.--British possession, 1s. 2d. ditto. PRICE OF SUGAR. The average price of brown or Muscovado sugar for the week ending September 12, 1843, is 34s. 1-3/4d. per cwt., exclusive of the duties of Customs paid or payable thereon on the importation thereof into Great Britain. SMITHFIELD MARKET. MONDAY.--There was a considerable and beneficial improvement in trade to-day for everything, but not, however, permanent; at least, the causes which produced the change this morning would not authorise a different conclusion, and the salesmen of the market, although looking forward to a very fair state of things next Monday, do not anticipate that the improvement will last the next succeeding Monday. It appears that London is clear of meat, the which, with small supplies of everything to-day, is the sole immediate cause of the improvement, for, notwithstanding that the market was well attended by both town and country butchers and stock-takers, they, nevertheless, at the opening of the market, appeared disposed to purchase briskly, on the supposition, according to the returns of over-night, that the supplies were large, but when this statement was discovered to be erroneous they then bought freely, and higher prices were more readily given. FRIDAY.--In consequence of the supply of beasts on sale being large for the time of year, we have to report a very heavy demand for beef, and in some instances the quotations declined 2d. per 8 lbs. From Scotland nearly 200 lots were received fresh up. Prime old downs maintained their previous value; but that of all other kinds of sheep had a downward tendency. In lambs very little was doing, at barely Monday's quotations. Calves moved off heavily, at a reduction of 2d. per 8 lbs. The pork trade was unusually dull, at previous currencies. Milch cows sold slowly at from 16_l._ to 20_l._ each. -----------------------------------------+--------------------------------- Prices per Stone. | At Market. -----------------------------------------+--------------------------------- Monday. Friday. | Monday. Friday. Beef 3s 0d to 4s 2d 2s 8d to 4s 0d | Beasts 2,840 800 Mutton 3s 2d to 4s 4d 2s 10d to 4s 4d | Calves 149 373 Veal 3s 6d to 4s 8d 3s 6d to 4s 6d | Sheep and Lambs 32,840 9,210 Pork 3s 6d to 4s 8d 3s 0d to 3s 10d | Pigs 410 326 Lamb 4s 0d to 5s 0d 3s 4d to 4s 8d | -----------------------------------------+--------------------------------- Prices of Hay and Straw, per load of 36 trusses. Hay, 3_l._ 5s. 0d. to 4_l._ 8s. 0d. Clover, 4_l._ 4s. 0d. to 5_l._ 8s. 0d. Straw, 1_l._ 18s. 0d. to 2_l._ 4s. 0d. BOROUGH HOP-MARKET. MONDAY.--There was no business whatever transacted during last week, and even the duty remains without fluctuation. In this state of inactivity the effects of the Metropolitan Total Abstinence movement was a topic of interest to the trade. As it appears that nearly 70,000 persons took the pledge, the consumption of malt liquor must seriously diminished, and the demand for Hops will consequently be very considerably decreased. It is fortunate, therefore, for the planters that this year's growth is not large, otherwise the prices would have been seriously low, and although that crop is not only about an average, yet from this diminished consumption, which is likely to progress, the value of the new will not be more than last year, and possibly even less. There have been a few small lots of 1843's at market, which go off very slowly. FRIDAY.--About ten pockets of new hops have been disposed of this week at from 7_l._ to 8_l._ per cwt. We are now almost daily expecting large supplied from Kent and Sussex, as picking is now going on rapidly. In old hops scarcely any business is doing, while the duty is called 150,000_l._ LIVERPOOL COTTON MARKET. SEPT. 14.--A large amount of business has been transacted in cotton at this day's market. The sales, inclusive of 5,000 American bought on speculation, have consisted of 10,000 bales. SEPT. 15.--We have a fair inquiry for Cotton this morning, and there is no change whatever in the general temper of the market. COAL MARKET. Buddle's West Hartley, 15s.; Davison's West Hartley, 15s. 6d.; Fenham, 13s. 6d.; Hastings Hartley, 15s.; Holywell Main, 15s. 6d.; New Tanfield, 14s.; Ord's Redheugh, 12s. 6d.; Pontop Windsor, 12s. 6d.; Tanfield Moor, 16s. 6d.; West Pelton, 12s. 9d,; West Hartley, 15s. 6d.; West Wylam, 14s. 6d.; Wylam, 14s. 6d. Wall's End:--Clennell, 14s. 6d.; Clarke and Co, 14s.; Hilda, 15s. 6d.; Riddell's, 16s. 9d.; Braddyll's Hetton, l8s. 9d.; Haswell, 19s.; Hetton, 18s. 6d.; Lambton, 18s. 3d.; Morrison, 16s.; Russell's Hetton, 18s,; Stewart's, 18s. 6d.; Whitwell, 17s.; Cassop, 18s.; Hartlepool, 16s. 6d.; Heselden, 16s, 6d.; Quarrington, 17s.; Trimdon, 17s. 6d.; Adelaide, 18s.; Barrett, 16s. 9d.; Bowburn, 15s. 6d.; South Durham, 17s.; Tees, 17s. 9d.; Cowpen Hartley, 15s. 6d.; Lewis's Merthyr, 19s. 6d.; Killingworth, 16s. Fifty-nine ships arrived since last day. THE GAZETTE. _Tuesday, September 12._ DECLARATIONS OF INSOLVENCY. J. Halls, Wilkes street, Spitalfields, braid manufacturer.--J. Brooke, Liverpool, cupper.--J. Thorburn, Hillhouse, Yorkshire, warehouseman.--J. Allwright, Basingstoke, Hampshire, boot maker.--J. Bland, Leeds, eatinghouse keeper.--W.S. Lawrence, Essex place, Grange-road, Dalston, out of business.--T. Leete, Finedon, Northamptonshire, butcher.--W, Simpson, Elland Upper Edge, Yorkshire, woollen spinner.--D. M'George, Huddersfield, tea dealer.--W. Hall, Cockhill, Wiltshire, out of business.--T. Mercer, Wansdon house, Fulham, out of business.--W. Elliott, Berners street, Oxford street, waiter at an hotel.--C.T. Jones, Charles street, Berkeley square, out of business.--T. Price, Cardiff road, Monmouthshire, coal dealer.--W. Williams, Newport, Monmouthshire, out of business.--W.G. Still, High street, Poplar, hair dresser.--T. Cook, Giltspur street, City, tailor.--J. Mayson, Marlborough road, Old Kent road, commission agent.--D. Taylor, Meltham, Yorkshire, licensed tea dealer.--W.W. Greaves, Newark-upon-Trent, Nottinghamshire, corn dealer.--C.H. Balls, Beccles, Suffolk, chemist.--J. Chapman (commonly known as J. Fitzjames), Bridges street, Covent garden, comedian. BANKRUPTCY ANNULLED. JONES, T., Liverpool, coal dealer. BANKRUPTS. SHARP, R., jun., Faversham, Kent, draper. [Reed and Shaw, Friday street, Cheapside. PEARSALL, C., Anderton, Cheshire, boiler maker. [Sharp and Co., Bedford row. JOHNSON, T., late of Great Bridge, Staffordshire, draper. [Messrs Nicolls and Pardoe, Bewdley. HOLT, W.J.; Grantham, Lincolnshire, tea dealer. [Messrs Hill and Matthews, St Mary Axe. DECLARATIONS OF DIVIDENDS. J.O. Palmer, Liverpool, music seller--first dividend of 6s. in the pound, any Wednesday after December 1, payable at 31 Basinghall street, City.--D. Ellis, Haverhill, Suffolk, draper--first dividend of 5s. 10d. in the pound, any Wednesday after December 1, payable at 31 Basinghall street.--P.J. Papillon, Leeds, wine merchant--first dividend of 2s. in the pound, on any Monday or Wednesday after October 4, payable at 15 Benson's buildings, Basinghall street, Leeds.--E. Cragg, Kendal, Westmoreland, innkeeper--first dividend of 2s. in the pound, on October 7, or on any succeeding Saturday, payable at 57 Grey street, Newcastle-upon-Tyne. DIVIDENDS. October 5, T. and J. Parker, J. Rawlinson, W. Abbott, J. Hanson, J. Bell, T. Chadwick, A. Emsley, R. Kershaw, J. Musgrave, J. Wooller, T. Pullan, J. Shaw, G. Eastburn, and D. Dixon, Leeds, dyers.--October 10, T. Bell, Newcastle-upon-Tyne, tea dealer.--October 10, J.G. Pallister and J.M.B. Newrick, Sunderland, Durham, grocers.--October 4, J. Fletcher, Maryport, Cumberland, boiler manufacturer.--October 11, J. Todd. Hylton ferry, Durham, ship builder.--October 3, J. Parke, Liverpool, druggist.--October 4, S. Boult and T. Addison, Liverpool, stock brokers.--October 7, T. Bourne, Liverpool, cotton broker.--October 14, H. Merridew, Coventry, ribbon manufacturer. CERTIFICATES. October 5, F. Robert, New Bond street, and Gower street North, coal merchant.--October 5, J. Bowie, Shoe lane, City, grocer.--October 14, J. Barnes, 14 Commercial place. Commercial road, engineer.--October 4, J. Davies, Westminster road, Lambeth, linendraper.--October 11, M. Jackson, East Thickley Steam mill, Durham, miller.--October 10, J. Todd, Hylton ferry, Durham, ship builder.--October 3, J. Gallop, jun., Bedminster, Bristol, painter.--October 12, G.B. Worboys, Bristol, perfumer.--October 4, R. Crosbie, Sutton, Cheshire, tea dealer.--October 7, C. Holebrook, Uttoxeter, Staffordshire, plumber.--October 17, J. Hedderly, Nottingham, druggist.--October 5, J. Oates, Glossop, Derbyshire, innkeeper. CERTIFICATES, OCTOBER 3. W. Pugh, Gloucester, auctioneer.--J. Lockwood, Wakefield, Yorkshire, and St. John's, New Brunswick, linendraper.--H. Francis, Feoek, Cornwall, agent.--G. Chapman, Aylesbury, Buckinghamshire, grocer.--E. Wheeler, Birmingham, corn dealer.--J. A. Boden, Sheffield, razor manufacturer.--W. Woodward, Birmingham, tailor.--S. J. Manning, 28 Camomile street, City, and Halleford, near Shepperton, manufacturer of bitters. PARTNERSHIPS DISSOLVED. Elizabeth O'Connor and Mary Rossiter, Brighton, Sussex, milliners.--C. Weatherley and H. O'Neil, Wilkes street, Spitalfields, and Ferdinand street, Camden town, fancy trimming manufacturers.--H.I. Isaacs and D. Israel, Duke street, Aldgate, City, poulterers.--J. Davis and A. Mottram, Warrington, Lancashire, timber merchants,--M. Fortier and Emile and Anna Levilly, Bruton street, Berkeley square, milliners.--T. and G. Stevenson, Dudley, Worcestershire, tailors.--D. Israel and J. Lyons, St Mary-axe, City, trunk makers.--W. Fairbairn, J. Hetherington, and J. Lee, Manchester, machine makers.--E. Archer, H. Ewbank, jun., and A.P.W. Philip, Gravel lane, Southwark, Surrey.--J.M. Pott and J. Midworth, Newark-upon-Trent, auctioneers.--T.P. Holden, T. Parker, and W. Burrow, Liverpool, upholsterers (as regards W. Burrow).--W.L. Springett, T. Beale, and E. Kine, Southwark, Surrey, hop merchants (as regards W.L. Springett). SCOTCH SEQUESTRATIONS. A. Dunn, Keithock Mills, near Coupar-Angus, farmer.--D. M'Intyre, jun., Fort William, merchant. * * * * * _Friday, September 15._ BANKRUPTS. GREENSLADE, W., Gray's inn lane, builder. [Oldershaw, King's Arms yard. BONE, G.B., Camberwell, builder. [Meymott and Sons, Blackfriars road. LEWIS, R.W., Shenfield, Essex, farmer. [Watson and Co., Falcon square. PHILLIPS, S., Brook street, Hanover square, carpet warehousman. [Reed and Shaw, Friday street, Cheapside. PINO, T.P., Liverpool, ship chandler. [Chester and Toulmin, Staple inn. HOOLE, W., Sheffield, leather dresser. [Branson, Sheffield. CAMBRIDGE, R.J., Cheltenham, wine merchant. [Packwood, Cheltenham. METCALF, E., Middlesbrough, Yorkshire, currier. [Blackburn, Leeds. DUFFIELD, C., Bath, grocer [Jay, Serjeants' inn. POPPLETON, C., York, linen manufacturer. [Blackburn, Leeds. LISTER, J.C., Wolverhampton, wine merchant. [Phillips and Bolton, Wolverhampton. DECLARATIONS OF INSOLVENCY. J. Brooke, Liverpool, cupper.--J. Thorburn, Hillhouse, Yorkshire, warehouseman.--J. Bland, Leeds, eating house keeper.--W.S. Lawrence, Essex place, Hackney, bank clerk.--T. Leete, Finedon, Northamptonshire, butcher.--W. Simpson, Elland Upper Edge, Yorkshire, woollen-spinner.--W. Hall, Cockhill, Wiltshire.--D. M'George, Huddersfield, tea dealer.--T. Mercer, Wansdown house, Fulham--W. Elliott, Berner's street, Oxford street, waiter.--C.T. Jones, Charles street, Berkeley square.--T. Price, Cardiffmouth, coal dealer.--W. Williams, George street, Newport.--W. G. Still, High street, Poplar, tobacconist.--T. Cook, Giltspur street, City, tailor,--J. Mayson, Marlborough road, Old Kent road, commission agent.--D. Taylor, Aldmondbury, Yorkshire, tea dealer.--W.W. Greaves, Newark-upon-Trent, corn dealer.--C. H. Balls, Ringsfield, Suffolk, chemist.--J. Chapman, Bridges street, Covent garden, comedian.--J. Robinson, Edmonton, butcher.--G. Dickinson, Chenies mews, Bedford square, coach painter.--J. Murphy, Gloucestershire, coachman.--J. Burnham, Harrold, Bedfordshire, chemist.--W.L. Phillips, Kennington green, omnibus proprietor.--J.D. Lockhart, Poplar, tobacconist.--J. Wilkinson, Cheltenham, licensed victualler.--J.D. Hubbarde, Wakefield, printer.--J. Ames, Holywell, Flintshire, licensed victualler.--S. Bone, Greenwich, cabinet maker.--J. Davis, Great Bolton, Lancashire, sawyer.--J. Pollard, Batley, Yorkshire, blanket manufacturer.--S. M'Millan, Llangollen, Denbighshire, tea dealer.--S. Brook, Birstal, Yorkshire, grocer.--F. Wormald, Birstal, Yorkshire, blacksmith.--W. Barnes, Knightsbridge, shopkeeper.--H. Manley, Belvidere buildings, St George the Martyr, Surrey, coach builder.--W. Jeffery, Queen street, Brompton, horse dealer.--R.W. Webb, Saville row, Walworth road, attorney. * * * * * BIRTHS. On the 10th inst., in Milman street, Bedford row, the wife of S.S. Teulon, Esq. of a son. On the 13th inst., at Nottingham place, the wife of Thomas A.H. Dickson, Esq., of a son. MARRIAGES. At St George's Church, Hanover square, Miss Louisa Georgina Augusta Anne Murray, only daughter of General the Right Honourable Sir George Murray, G.C.B., Master-General of the Ordnance, to Henry George Boyce, Esq., of the 2nd Life Guards, eldest son of Mr and the late Lady Amelia Boyce. On the 13th inst., at Kintbury, Berks, Lieutenant-Colonel J.A. Butler, to Martha, daughter of the late William Bruce Smith, Esq., of Starborough Castle, Surrey. On the 13th inst., at Rickmansworth Church, John, second son of Thomas Weall, Esq., of Woodcote Lodge, Beddington, to Susanna, eldest daughter of W. White, Esq., of Chorleywood. DEATHS. On the 7th inst., aged 69 years, the Rev. William Porter, who was for 44 years minister of the Presbyterian congregation of Newtownlimavady; for fourteen years clerk to the General Synod of Ulster; the first moderator of the Remonstrant Synod, and clerk to the same reverend body since its formation. At Bath, General W. Brooke. The deceased general, who had served with distinction throughout the Peninsular war, had been upwards of fifty years in the army. On Sunday, the 10th instant, after a lengthened illness, at the family residence in Great George street, Mr John Crocker Bulteel. He married, May 13, 1826, Lady Elizabeth Grey, second daughter of Earl Grey, by whom he leaves a youthful family. Lady Elizabeth Bulteel, who is inconsolable at her bereavement, has gone to Viscount Howick's residence, near Datchet. ADVERTISEMENTS. YORK and LONDON LIFE ASSURANCE COMPANY, King William-street, London. Empowered by Act of Parliament. GEORGE FREDERICK YOUNG, Esq., Chairman. MATHEW FORSTER, Esq. M.P. Deputy Chairman. The superiority of the system of Assurance adopted by this Company, will be found in the fact that the premium required by a bonus office to assure 1,000_l._ on the life of a person in the 20th year of his age would in this office insure 1,291_l._ 7s. 6d. Assurances at other ages are effected on equally favourable terms, and thus the assured has an immediate bonus instead of a chance dependent upon longevity and the profits of an office. In cases of assurance for a limited number of years, the advantage offered by this Company is still greater, no part of the profits of a bonus office being ever allotted to such assurances. Prospectuses, containing tables framed to meet the circumstances of all who desire to provide for themselves or those who may survive them by assurance, either of fixed sums or annuities, may be had at the office as above, or of the agents. JOHN REDDISH, Sec. * * * * * H. WALKER'S NEEDLES (by authority the "Queen's own"), in the illustrated Chinese boxes, are now in course of delivery to the trade. The needles have large eyes, easily threaded (even by blind persons), and improved points, temper, and finish. Each paper is labelled with a likeness of her Majesty or his Royal Highness Prince Albert, in relief on coloured grounds. Every quality of needles, fish hooks, hooks and eyes, steel pens, &c. for shipping. These needles or pens for the home trade are sent, free by post, by any respectable dealer, on receipt of 13 penny stamps for every shilling value.--H. Walker, manufacturer to the Queen, 20 Maiden lane, Wood street, London. * * * * * ONE HUNDRED FOREIGN MARBLE CHIMNEY-PIECES ON VIEW. THE WESTMINSTER MARBLE COMPANY have now completed their Machinery, which will enable them in future to supply every variety of Marble Work at a considerable reduction in price. A neat Box Belgium Marble Chimney-piece, with Moulded Caps, 3 feet high, can be supplied from 1_l._ to 2_l._ A Best Vein Marble Chimney-piece, from 2_l._ to 3_l._ A liberal commission for all orders will be allowed to the Trade; and those persons wishing to act as Agents, can have a Book of Designs forwarded by enclosing Twenty Postage Stamps. Direct, "The Westminster Marble Company, Earl street, Horseferry road." * * * * * CARRIAGES.--The attention of Gentlemen about purchasing, or having carriages to dispose of, is invited to MARKS and Co.'s London Carriage Repository, Langham place. An immense stock, new and second hand, by eminent builders, is always on sale, and a candid opinion of each carriage will be given as to its quality and condition. Invalid carriages for any journey. Carriages to be let on yearly job. * * * * * WONDERFUL CURE!--Read the following interesting facts, communicated by Mr Brown, bookseller, Gainsborough:-- "To Messrs T. Roberts and Co. Crane court, Fleet street, London, Proprietors of Parr's Life Pills. "Gentlemen, "West Stockwith, Aug. 11, 1843. "I, James Jackson Easton, do hereby testify, that, by taking your excellent Parr's Life Pills, I have derived greater benefit than in using all the other medicines I have tried since 1841; about which time I was attacked with severe illness, accompanied with excruciating pain and trembling, with large rupture. For the last six months I have had no return of this illness, nor the least appearance of the last-mentioned symptom. Through the mercy of God, I do at present feel perfectly recovered from it. I still continue the occasional use of your excellent Pills.--I am gentlemen, respectfully yours, J.J. EASTON." Sold by all respectable medicine venders, in boxes at 1s. 1-1/2d. 2s. 9d. and 11s.--See the words "Parr's Life Pills," in white letters on a red ground, engraved on the Government stamp. EUROPEAN LIFE INSURANCE COMPANY, No. 10 Chatham place, Blackfriars, London. Established, January, 1819. PRESIDENT. Sir James Rivett Carnac, Bart. VICE-PRESIDENT. George Forbes, Esq. No. 9 Fitzroy square. With Twelve Directors. Facilities are offered by this long-established Society to suit the views and the means of every class of insurers. Premiums are received yearly, half-yearly, or quarterly, or upon an increasing or decreasing scale. An insurance of 100_l._ may be effected on the ascending scale by an annual premium for the first five years of 1_l._ 9s. at the age of 25; 1_l._ 12s. 6d. at 30; 1_l._ 17s. at 35; 2_l._ 2s 5d. at 40; and 2_l._ 9s. 6d. at 45; or, one-half only of the usual rate, with interest on the remainder, will be received for five or seven years, the other half to be paid at the convenience of the assured. The insured for life participate septennially; in the profits realised. A liberal commission is allowed to Solicitors and Agents. DAVID FOGGO, Secretary. N.B. Agents are wanted in towns where none have yet been appointed. * * * * * BRITANNIA LIFE ASSURANCE COMPANY, 1 Princes street, Bank, London. Empowered by Special Act of Parliament, IV Vict. cap. IX. DIRECTORS. William Bardgett, Esq. Samuel Bevington, Esq. Wm. Fechney Black, Esq. John Brightman, Esq. George Cohen, Esq. Millis Coventry, Esq. John Drewett, Esq. Robert Eglinton, Esq. Erasmus Rt. Foster, Esq. Alex. Robert Irvine, Esq. Peter Morison, Esq. Henry Lewis Smale, Esq. Thomas Teed, Esq. AUDITORS. J.B. Bevington, Esq.; F.P. Cockerill, Esq.; J.D. Dow, Esq. MEDICAL OFFICER. John Clendinning, M.D. F.R.S. 16 Wimpolestreet, Cavendish square. STANDING COUNSEL. The Hon. John Ashley, New square, Lincoln's inn. Mr Serjeant Murphy, M.P. Temple. SOLICITOR. William Bevan, Esq. Old Jewry. BANKERS. Messrs Drewett and Fowler, Princes street, Bank. This Institution is empowered by a special Act of Parliament, and is so constituted as to afford the benefits of Life Assurance in their fullest extent to Policy-holders, and to present greater facilities and accommodation than are usually offered by other Companies. Assurances may either be effected by Parties on their own Lives, or by Parties interested therein on the Lives of Others. The effect of an Assurance on a person's own life is to create at once a Property in Reversion, which can by no other means be realized. Take, for instance, the case of a person at the age of Thirty, who, by the payment of 5_l._ 3s. 4d. to the Britannia Life Assurance Company, can become at once possessed of a bequeathable property, amounting to 1,000_l._, subject only to the condition of his continuing the same payment quarterly during the remainder of his life--a condition which may be fulfilled by the mere saving of Eight Shillings weekly in his expenditure. Thus, by the exertion of a very slight degree of economy--such indeed, as can scarcely be felt as an inconvenience, he may at once realise a capital of 1,000_l._, which he can bequeath or dispose of in any way he may think proper. A Table of Decreasing Rates of Premium on a novel and remarkable plan; the Policy-holder having the option of discontinuing the payment of all further Premiums after Twenty, Fifteen, Ten, and even Five years; and the Policy still remaining in force--in the first case, for the full amount originally assured; and in either of the three other cases, for a portion of the same according to a fixed and equitable scale endorsed upon the Policy. Increasing Rates of Premium on a new and remarkable plan for securing Loans or Debts; a less immediate payment being required on a Policy for the whole term of Life than in any other Office. Age of the Assured in every case admitted in the Policy. All claims payable within one Month after proof of death. Medical Attendants remunerated in all cases for their reports. Extract from Increasing Rates of Premium, for an Assurance of 100_l._ for Whole Term of Life. -----+-----------------------------------------------------------+ | Annual Premiums payable during | +-----------+-----------+-----------+-----------+-----------+ | 1st Five | 2nd Five | 3rd Five | 4th Five | Remainder | Age | Years. | Years. | Years. | Years. | of Life. | -----+-----------+-----------+-----------+-----------+-----------+ | £. s. d.| £. s. d.| £. s. d.| £. s. d.| £. s. d.| 20 | 1 1 4 | 1 5 10 | 1 10 11 | 1 16 9 | 2 3 8 | 30 | 1 6 4 | 1 12 2 | 1 19 1 | 2 7 4 | 2 17 6 | 40 | 1 16 1 | 2 4 4 | 2 14 6 | 3 7 3 | 4 3 4 | 50 | 2 16 7 | 3 9 4 | 4 5 5 | 5 6 3 | 6 13 7 | -----+-----------+-----------+-----------+-----------+-----------+ Detailed Prospectuses, and every requisite information as to the mode of effecting Assurances, may be obtained at the Office. PETER MORRISON, Resident Director. *** A Board of Directors attend daily at Two o'clock, for the despatch of Business. * * * * * PANCLIBANON IRON WORKS, BAZAAR, No. 58 BAKER STREET, PORTMAN SQUARE. LONDON.--Gentlemen about to furnish, or going abroad, will find it worth their attention to look into the above Establishment, where they will find the largest assortment of General Furnishing Ironmongery ever offered to the Public, consisting of tin, copper, and iron cooking utensils, table cutlery, best Shffield plate, German silver wares, papier machee tea trays, tea and coffee urns, stove grates, kitchen ranges, fenders and fire-irons, baths of all kinds, shower, hot, cold, vapour, plunging, &c. Ornamental iron and wire works for conservatories, lawns, &c. and garden engines. All articles are selected of the very best description, and offered at exceedingly low prices, for cash only; the price of each article being made in plain figures. * * * * * LIMBIRD'S MAGNUM BONUM PENS.--One dozen highly-finished Steel Pens, with Holder, in a box, for 6d.; name-plate engraved for 2s. 6d.; 100 cards printed for 2s. 6d,; crest and name engraved on visiting card for 6s.; arms and crests for book plates on the most reasonable terms; travelling writing-desks at 9s. 6d. 10s. 6d. 12s. 6d. and 14s 6d. each; dressing-cases from 6s. 6d. each; blotting-books in great variety, from 9d.; with locks, 2s. each; royal writing-papers--diamond, five quires for 1s. 2d.; the Queen's and Prince Albert's size, five quires for 1s. 6d.; envelopes, 6d. 9d. and 1s. the 100; and every article in stationery, of the best quality and lowest prices, at Limbird's, 143 Strand, facing Catherine street. * * * * * PIANOFORTES.--Messrs MOORE and CO. Makers of the Improved Pianofortes, are now selling their delightful Instruments as follows:--A Mahogany Piccolo, the best that can be made, in a plain but fashionable case, only 28_l._; a 6-1/2 Octave ditto, only 32_l._; a Cottage ditto, only 32_l._; a 6-1/2 Octave Cottage ditto, only 38_l._ Cabinets of all descriptions. All warranted of the very best quality, packed free of expense, and forwarded to any part of the world. Some returned from hire at reduced prices. Moore and Co. 138 Bishopsgate street Without, near Sun steet. Just Published, Two thick Volumes, 8vo. illustrated with Six large important Maps, 4_l._ cloth, A DICTIONARY, GEOGRAPHICAL, STATISTICAL, and HISTORICAL, of the various Countries, Places and principal Natural Objects in the WORLD. By J.R. M'Culloch, Esq. "The extent of information this Dictionary affords on the subjects referred to in its title is truly surprising. It cannot fail to prove a vade-mecum to the student, whose inquiries will be guided by its light, and satisfied by its clear and frequently elaborated communications. Every public room in which commerce, politics, or literature, forms the subject of discussion, ought to be furnished with these volumes."--Globe. London: Longman, Brown, Green, and Longmans. * * * * * Just published in 8vo. price 2s. 6d. RAILWAY REFORM--Its Expediency, Practicability, and Importance Considered, with a copious Appendix, containing an account of all the Railways in Great Britain and Ireland, Parliamentary Returns, &c. "An excellent pamphlet."--Morning Herald. "The subject is very fully, earnestly, and ably investigated."--Morning Advertiser. "Remarkable for originality of design, boldness of execution, and minuteness in statistical detail."--Sun. "We would recommend all who have an interest in Railways to purchase this work."--Sentinel. Pelham Richardson, Cornhill. * * * * * LA'MERT ON NERVOUS DEBILITY, GENERAL AND LOCAL WEAKNESS, &c. Just published, Seventh Edition, price 2s. 6d. or free by post for 3s. 6d. SELF-PRESERVATION; a popular Essay on the Concealed Causes of Nervous Debility, Local and General Weakness, Indigestion, Lowness of Spirits, Mental Irritability, and Insanity; with Practical Observations on their Treatment and Cure. By SAMUEL LA'MERT, Consulting Surgeon, 9 Bedford street, Bedford square, London; Matriculated Member of the University of Edinburgh; Honorary Member of the London Hospital Medical Society; Licentiate of Apothecaries' Hall, London, &c. Published by the Author; and sold in London by S. Gilbert, 51 and 52 Paternoster row; Field, 65 Quadrant; Gordon, 146 Leadenhall street; Noble, 109 Chancery lane; and by all Booksellers. "The design of this work will be tolerably obvious from its title, and we cordially recommend the author and his book to all who are suffering from nervous debility and general weakness. Mr La'Mert has treated the subject in a very scientific and intelligible manner."--Wakefield Journal. At home every day till Three, and from Five till Eight. * * * * * THE FOURTEENTH THOUSAND. Just Published, in a Sealed Envelope, Price 3s.; and sent free, on receiving a Post office Order for 3s. 6d. MANHOOD; the CAUSES of its PREMATURE DECLINE, with Plain Directions for its PERFECT RESTORATION; followed by Observations on Marriage, and the Treatment of Mental and Nervous Debility, Incapacity, Warm Climate, and Cure of the Class of Diseases resulting therefrom. Illustrated with Cases, &c. By J.L. Curtis and Co. Consulting Surgeons, London. Fourteenth Edition. Published by the Authors; and Sold by Burgess, Medical Bookseller, 28 Coventry street, Haymarket; Mann, 39 Cornhill; Strange, 21 Paternoster row, London; Guest, 51 Bull street, Birmingham; Hickling, Coventry; Robinson, Leamington; Journal office, Leicester; Cook, Chronicle office, Oxford; Sowler, 4 St Anne's square, Manchester; Philip, South Castle street, Liverpool; and sold, in a Sealed Envelope, by all Booksellers. OPINIONS OF THE PRESS. "This work, a Tenth Edition of which is now presented to the public--ten thousand copies have been exhausted since its first appearance--has been very much improved and enlarged by the addition of a more extended and clear detail of general principles, as also by the insertion of several new and highly interesting cases. The numberless instances daily occurring, wherein affections of the lungs, putting on all the outer appearances of consumption, which, however, when traced to their source, are found to result from certain baneful habits, fully proves that the principle of the division of labour is nowhere more applicable than in medical practice. We feel no hesitation in saying, that there is no member of society by whom the book will not be found useful, whether such person holds the relation of a parent, a preceptor, or a clergyman."--SUN, Evening Paper. "Messrs Curtis's work, called 'Manhood,' is one of the few books now coming before the public on such a subject which can lay claim to the character of being strictly professional, at the same time that it is fully intelligible to all who read it. The moral and medical precepts given in it render it invaluable."--MAGNET. Messrs Curtis and Co. are to be consulted daily at their residence, 7 Frith street, Soho square, London. Country Patients are requested to be as minute as possible in the details of their cases. The communication must be accompanied by the usual Consultation Fee of 1_l._; and in all cases the most inviolable secrecy may be relied on. * * * * * FOREIGN NEWSPAPER AND COMMISSION OFFICE, 18 CORNHILL, LONDON. P.L. SIMMONDS, Advertising Agent, receives regularly files of all the NEWSPAPERS published in the British Colonies and possessions beyond the seas, which are preserved for the facility of reference and inspection, and sent when requested to parties for perusal. Also various German, French, Italian, American, and other Foreign Journals. Orders and Advertisements received for every Foreign and European Publication. * * * * * PHOTOGRAPHY.--Great Improvements having been recently effected in this interesting and extraordinary science by Mr BEARD, the patentee, in the process of TAKING and COLOURING LIKENESSES, the public are particularly invited to an inspection of varieties, at the establishment, 85 King William street, City; Royal Polytechnic Institution; and 34 Parliament street, where exchanges for new in lieu of old portraits may be had, on payment of 5s. Colouring small busts, 5s. * * * * * GUARANTEE SOCIETY. ESTABLISHED BY ACT OF PARLIAMENT. Capital, £100,000. TRUSTEES. Charge Hugge Price, Esq. James Francis Maubert, Esq. Thomas Fowler, Esq. Major-General Parlby, C.B. TO Officers of her Majesty's service (both civil and military), secretaries, clerks, and all others holding, or about to hold, confidential and responsible situations, this Society presents immediate facilities for obtaining surety, or integrity, upon payment of a small annual premium, and by which relatives and friends are relieved from the various pecuniary responsibilities attendant on private suretiships. The surety of this Society is accepted by the War Office (for payment of regiments and of pensioners), the Ordnance, East India Company, the Customs, the Bank of England, and numerous banking, mercantile, and commercial firms, both in London and in the country. Forms of application and every information may be obtained at the Offices, 28 Poultry, London. THOMAS DODGSON, Sec. NATURAL MINERAL WATERS.--E. H. DUHAMEL and Co. 7 Duke street, Grosvenor square, have constantly on sale the undernamed Natural Mineral Waters, which they can supply fresh and genuine at a very reasonable price. Barèges Cheltenham Malvern Schwalbach Bath Ems Marienbad Sedlitz Bonnes Fachingen Pullna Selters Bristol Harrogate Pyrmont Spa Cauterets Kissengen Saidschutz Vichy, &c. Genuine Eau de Cologne, digestive Pastilles de Vichy, and various foreign articles of Pharmacy. E.H.D. and Co. are the only agents for the Copahine-Mège, and for J. Jourdain, Mège and Co.'s Dragées Minérales and Dragées Carboniques for effervescing lemonade, and also for their Pilules Carboniques, preventive of sea sickness and vomitings of every description. The Dragées Minérales, with which a tumbler of mineral water can be instantaneously produced, are considered as the best substitute to the genuine waters, when these cannot be procured and have the advantage of being much cheaper. * * * * * NOTICE. WOOD PAVING.--The Letters Patent granted to me, DAVID STEAD, for paving with Wooden Blocks being the first Patent obtained on the subject, and rendering all subsequent Patents for the same object void, have, after a long investigation at Liverpool, been declared valid, notwithstanding the most resolute opposition against me by the real defendants in the case--the Metropolitan Wood Paving Company. I therefore warn all Public Authorities and persons using, or assisting in using Wooden Blocks for Paving, that such infringement upon my Patent will be suppressed; but I am prepared (as is my Licencee, Mr Blackie), to execute any extent of Wood Paving of any description upon contract, and also to grant licenses for the adoption and promotion of the great advantage and benefits of Wood Paving in London, and all parts of England, Scotland, and Ireland. For terms, parties may apply to me, or to my solicitor, Mr John Duncan, 72 Lombard street, London, or to Mr A.B. Blackie, No. 250 Strand. (Signed) DAVID STEAD 250 Strand, London, Sept. 4, 1843. * * * * * WOOD PAVEMENT.--STEAD v. WILLIAMS AND OTHERS. (Abridged from the Liverpool Albion.) This was an action for an infringement of a patent for the paving of roads, streets, &c. with timber or wooden blocks. Mr Martin and Mr Webster were for the plaintiff; Mr Warren and Mr Hoggins for the defendants; Mr John Duncan, of 72 Lombard street, was the solicitor for the plaintiff. The plaintiff is Mr David Stead, formerly a merchant of the City of London; the defendants are, nominally, Mr Lewis Williams, and several others, who are the surveyors of streets and paving at Manchester; but the action was really against the Metropolitan Wood Paving Company. About the year 1836 or 1837 Mr Nystrom, a Russian merchant, with whom Mr Stead had had transactions in business came to England, having whilst in Russia devoted his attention to the mode of pavement in that country, which was done in a great measure by wood. He communicated with Mr Stead, who paid a great deal of attention to the matter, and materially improved the scheme; and it was the intention of Mr Nystrom and Mr Stead, in 1835 or 1837, to take out a patent, but Mr Nystrom found it necessary to return to Russia, and thus frustrated that intention. On the 19th of May, 1838, the plaintiff, however, took out a patent, and this was the one to which attention was directed. Four months were allowed for inrolment, but as six months was the usual period, the plaintiff imagined that that would be the period allowed to him, and inadvertently allowed the four months to elapse before he discovered his mistake. On the 21st of June, 1841, however, an Act of Parliament was passed, confirming the patent to Mr Stead, as though it had been regularly filed within the prescribed period. A second patent was afterwards obtained, but that related more particularly to the form of blocks. The first patent, which had been infringed, was for an invention consisting of a mode of paving with blocks of similar sizes and dimensions, of either a sexagonal, triangular, or square form, so as to make a level road or surface. The defendants pleaded, amongst other things, that the patent was not an original invention; that it was not useful; and that it was in use prior to the granting of the patent. The Jury retired to consult at a quarter past four, and returned at twenty minutes to six o'clock with a verdict for the plaintiff. * * * * * PARSONS'S ALEPPO OFFICE WRITING INK.--This very superior Ink, being made with pure Aleppo Galls, is equally adapted for Quills and Steel Pens, and combines the requisite qualities of Incorrodibility and Permanency of Colour with an easy flow from the Pen. It is therefore strongly recommended to Merchants, Bankers, Solicitors, Accountants, and others. *** Warranted not to be affected either by time or climate. Sold in Quart, Pint, Half-pint, and Sixpenny Bottles, by John Parsons, Manufacturer of Printing and Writing Inks, 35 Orange street, Gravel lane, Southwark; and 9 Ave Maria lane, London. * * * * * UNDER THE SPECIAL PATRONAGE OF HER MOST GRACIOUS MAJESTY, H.R.H. PRINCE ALBERT, THE ROYAL FAMILY AND THE SEVERAL COURTS OF EUROPE. ROWLAND'S MACASSAR OIL, For the Growth, and for _Preserving_ and Beautifying the Human Hair. *** To ensure the real article, see that the words _Rowland's Macassar Oil_ are engraven on the back of the label nearly 1,500 times, containing 29,028 letters. Without this _None are Genuine_. ROWLAND'S KALYDOR, For _Improving and Beautifying_ the Skin and Complexion. ROWLAND'S ODONTO, or PEARL DENTIFRICE, Renders the Teeth beautifully white, and preserves the Gums. * * * * * CAUTION. Numerous _pernicious Compounds_ are universally offered for sale as the real "MACASSAR OIL" and "KALYDOR," (some under the _implied_ sanction of Royalty), the labels and bills of the original articles are copied, and either a FICTITIOUS NAME or the word "GENUINE" is used in the place of "ROWLAND'S." It is therefore necessary on purchasing either Article to see that the word "ROWLAND'S" is on the Envelope. For the protection of the Public from fraud and imposition, the _Honourable Commissioners of Her Majesty's Stamps_ have authorized the Proprietors to have their Names engraven on the Government Stamp, which is affixed to the _KALYDOR_ and _ODONTO_, thus-- A. ROWLAND & SON, No. 20, HATTON GARDEN. *** All others are SPURIOUS IMITATIONS. * * * * * Printed by CHARLES REYNELL, 16 Little Pulteney street, in the Parish of St James, Westminster; and Published by him at the Office of the Journal, No. 6 Wellington street, Strand,--September 16, 1843. 
444	----	None 
33219	----	TRANSCRIBERS NOTE. In this book all words and phrases surrounded by '#' indicate they were #bold# in the original. Science Primers. POLITICAL ECONOMY. BY W. STANLEY JEVONS, LL.D., M.A., F.R.S., PROFESSOR OF POLITICAL ECONOMY IN UNIVERSITY COLLEGE, LONDON; EXAMINER IN LOGIC AND MORAL PHILOSOPHY IN THE UNIVERSITY OF LONDON. NEW YORK: D. APPLETON AND COMPANY, 549 AND 551 BROADWAY. 1880. CONTENTS. CHAP. PAGE I.--INTRODUCTION, 7 II.--UTILITY, 17 III.--PRODUCTION OF WEALTH, 24 IV.--DIVISION OF LABOUR, 32 V.--CAPITAL, 42 VI.--DISTRIBUTION OF WEALTH, 48 VII.--WAGES, 53 VIII.--TRADES-UNIONS, 61 IX.--CO-OPERATION, ETC., 77 X.--THE TENURE OF LAND, 87 XI.--EXCHANGE, 95 XII.--MONEY, 103 XIII.--CREDIT AND BANKING, 110 XIV.--CREDIT CYCLES, 115 XV.--THE FUNCTIONS OF GOVERNMENT, 123 XVI.--TAXATION, 126 PREFACE. In preparing this little treatise, I have tried to put the truths of Political Economy into a form suitable for elementary instruction. While connected with Owens College, it was my duty, as Cobden Lecturer on Political Economy, to instruct a class of pupil-teachers, in order that they might afterwards introduce the teaching of this important subject into elementary schools. There can be no doubt that it is most desirable to disseminate knowledge of the truths of political economy through all classes of the population by any means which may be available. From ignorance of these truths arise many of the worst social evils--disastrous strikes and lockouts, opposition to improvements, improvidence, destitution, misguided charity, and discouraging failure in many well-intended measures. More than forty years ago Miss Martineau successfully popularised the truths of political economy in her admirable tales. About the same time, Archbishop Whately was much struck with the need of inculcating knowledge of these matters at an early age. With this view he prepared his "Easy Lessons on Money Matters," of which many editions have been printed. In early boyhood I learned my first ideas of political economy from a copy of these lessons, from the preface to which I quote these remarks of Whately: "The rudiments of sound knowledge concerning these (subjects) may, it has been found by experience, be communicated at a very early age.... Those, therefore, who are engaged in conducting, or in patronising or promoting education, should consider it a matter of no small moment to instil, betimes, just notions on subjects with which all must in after-life be practically conversant, and in which no class of men, from the highest to the lowest, can, in such a country as this at least, be safely left in ignorance or in error." In later years like opinions have been held and efforts made by Mr. William Ellis, Professor W.B. Hodgson, Dr. John Watts, Mr. Templar, and others, and experience seems to confirm both the need and the practicability of the teaching advocated by Whately. But it is evident that one condition of success in such efforts is the possession of a small text-book exactly suited to the purposes in view. Relying upon my experience of ten years in the instruction of pupil-teachers at Manchester, I have now put my lessons into the simplest form which the nature of the subject seems to render advisable. It is hoped that this little treatise may also serve as a stepping-stone to a knowledge of the science among general readers of maturer age, who have hitherto neglected the study of political economy. Owing to the narrow limits of the space at my disposal, it was impossible to treat the whole of the science in a satisfactory way. I have, therefore, omitted some parts of political economy altogether, and have passed over other parts very briefly. Thus the larger portion of my space has been reserved for such subjects as Production, Division of Labour, Capital and Labour, Trades-Unions, and Commercial Crises, which are most likely to be interesting and useful to readers of this Primer. UNIVERSITY COLLEGE, GOWER STREET, LONDON, W.C. _31st January, 1878_. SCIENCE PRIMERS. _POLITICAL ECONOMY_. CHAPTER I.--INTRODUCTION. #1. What is Political Economy?# Political Economy treats of #the wealth of nations#; it inquires into the causes which make one nation more rich and prosperous than another. It aims at teaching what should be done in order that poor people may be as few as possible, and that everybody may, as a general rule, be well paid for his work. Other sciences, no doubt, assist us in reaching the same end. The science of mechanics shows how to obtain force, and how to use it in working machines. Chemistry teaches how useful substances may be produced--how beautiful dyes and odours and oils, for instance, may be extracted from the disagreeable refuse of the gasworks. Astronomy is necessary for the navigation of the oceans. Geology guides in the search for coal and metals. Various social sciences, also, are needed to promote the welfare of mankind. Jurisprudence treats of the legal rights of persons, and how they may be best defined and secured by just laws. Political Philosophy inquires into the different forms of government and their relative advantages. Sanitary Science ascertains the causes of disease. The science of Statistics collects all manner of facts relating to the state or community. All these sciences are useful in showing how we may be made more healthy, wealthy, and wise. But #Political Economy# is distinct from all these other sciences, and treats of #wealth# itself; it inquires what wealth is; how we can best consume it when we have got it; and how we may take advantage of the other sciences to get it. People are fond of finding fault with political economy, because #it treats only of wealth#; they say that there are many better things than wealth, such as virtue, affection, generosity. They would have us study these good qualities rather than mere wealth. A man may grow rich by making hard bargains, and saving up his money like a miser. Now as this is not nearly so good as if he were to spend his wealth for the benefit of his relatives, friends, and the public generally, they proceed to condemn the science of wealth. But these complainers misunderstand the purpose of a science like political economy. They do not see that in learning we must do one thing at a time. We cannot learn the social sciences all at the same time. No one objects to astronomy that it treats only of the stars, or to mathematics that it treats only of numbers and quantities. It would be a very curious Science Primer which should treat of astronomy, geology, chemistry, physics, physiology, &c., all at once. There must be many physical sciences, and there must be also many social sciences, and each of these sciences must treat of its own proper subject, and not of things in general. #2. Mistakes about Political Economy.# A great many mistakes are made about the science we are going to consider by people who ought to know better. These mistakes often arise from people thinking that they understand all about political economy without studying it. No ordinary person of sense ventures to contradict a chemist about chemistry, or an astronomer about eclipses, or even a geologist about rocks and fossils. But everybody has his opinion one way or another about bad trade, or the effect of high wages, or the harm of being underbid by cheap labour, or any one of hundreds of questions of social importance. It does not occur to such people that these matters are really more difficult to understand than chemistry, or astronomy, or geology, and that a lifetime of study is not sufficient to enable us to speak confidently about them. Yet, they who have never studied political economy at all, are usually the most confident. The fact is that, just as physical science was formerly hated, so now there is a kind of ignorant dislike and impatience of political economy. People wish to follow their own impulses and prejudices, and are vexed when told that they are doing just what will have the opposite effect to that which they intend. Take the case of #so-called charity#. There are many good-hearted people who think that it is virtuous to give alms to poor people who ask for them, without considering the effect produced upon the people. They see the pleasure of the beggar on getting the alms, but they do not see the after effects, namely, that beggars become more numerous than before. Much of the poverty and crime which now exist have been caused by mistaken charity in past times, which has caused a large part of the population to grow up careless, and improvident, and idle. Political economy proves that, instead of giving casual ill-considered alms, we should educate people, teach them to work and earn their own livings, and save up something to live upon in old age. If they continue idle and improvident, they must suffer the results of it. But as this seems hard-hearted treatment, political economists are condemned by soft-hearted and mistaken people. The science is said to be a dismal, cold-blooded one, and it is implied that the object of the science is to make the rich richer, and to leave the poor to perish. All this is quite mistaken. The political economist, when he inquires how people may most easily acquire riches, does not teach that the rich man should keep his wealth like a miser, nor spend it in luxurious living like a spendthrift. There is absolutely nothing in the science to dissuade the rich man from spending his wealth generously and yet wisely. He may prudently help his relatives and friends; he may establish useful public institutions, such as free public libraries, museums, public parks, dispensaries, &c.; he may assist in educating the poor, or promoting institutions for higher education; he may relieve any who are suffering from misfortunes which could not have been provided against; cripples, blind people, and all who are absolutely disabled from helping themselves, are proper objects of the rich man's charity. All that the political economist insists upon is that #charity shall be really charity, and shall not injure those whom it is intended to aid#. It is sad to think that hitherto much harm has been done by those who wished only to do good. It is sad, again, to see thousands of persons trying to improve their positions by means which have just the opposite effect, I mean by strikes, by refusing to use machinery, and by trying, in various ways, to resist the production of wealth. Working men have made a political economy of their own: they want to make themselves rich by taking care not to produce too much riches. They, again, see an immediate effect of what they do, but they do not see what happens as the after result. It is the same with the question of Free Trade. In England we have at length learned the wisdom of leaving commerce free. In other countries, and even in the Australian Colonies, laws are yet passed to make people richer by preventing them from using the abundant products of other lands. People actually refuse to see that wealth must be increased by producing it where it can be produced most easily and plentifully. Each trade, each town, each nation must furnish what it can yield most cheaply, and other goods must be bought from the places where they also can be raised most easily. Political economy teaches us to look beyond the immediate effect of what we do, and to seek the good of the whole community, and even of the whole of mankind. The present prosperity of England is greatly due to the science which Adam Smith gave to the world in his "Wealth of Nations." He taught us the value of #Free Labour and Free Trade#, and now, a hundred years after the publication of his great book, there ought not to be so many mistaken people vainly acting in opposition to his lessons. It is certain that #if people do not understand a true political economy, they will make a false one of their own#. Hence the imperative need that no one, neither man nor woman, should grow up without acquiring some comprehension of the science which we are going to study. #3. Divisions of the Science.# I will begin by stating the order in which the several branches or divisions of the science of economy are to be considered in this little treatise. Firstly, we must learn what wealth, the subject of the science, consists of. Secondly, we proceed to inquire how wealth is used or consumed; nothing, we shall see, can be wealth, unless it be put to some use, and before we make wealth we must know what we want to use. Thirdly, we can go on to consider how wealth is produced or brought into existence; and how, in the fourth place, having been produced, it is shared among the different classes of people who have had a hand in producing it. Briefly, we may say that political economy treats of (1) #The Nature#, (2) #The Consumption#, (3) #The Production#, and (4) #The Distribution of Wealth#. It will also be necessary to say a little about #Taxation#. A part of the wealth of every country must be taken by the government, in order to pay the expenses of defending and governing the nation. But taxation may come, perhaps, under the head of distribution. #4. Wealth and Natural Riches.# We do not learn anything by reading that #political economy is the science of wealth#, unless we know what science is, and what wealth is. When one term is defined by means of other terms, we must understand these other terms, in order to get any light upon the subject. In the Primer of Logic I have already attempted to explain what science is, and I will now attempt to make plain what wealth is. Doubtless many people think that there is no difficulty in knowing what #wealth# is; the real difficulty is to get it. But in this they are mistaken. There are a great many people in this country who have made themselves rich, and few or none of them would be able to explain clearly what wealth is. In fact it is not at all easy to decide the question. The popular idea is that wealth consists of money, and money consists of gold and silver; the wealthy man, then, would be one who has an iron safe full of bags of gold and silver money. But this is far from being the case; rich men, as a general rule, have very little money in their possession. Instead of bags of money they keep good balances at their bankers. But this again does not tell us what wealth is, because it is difficult to say what a bank balance consists of; the balance is shown by a few figures in the bankers' books. As a general rule the banker has not got in his possession the money which he owes to his customers. Perhaps some one will say that he is beyond question rich, who owns a great deal of land. But this depends entirely upon where and what the land is. A man who owns an English county is very wealthy; a man might own an equal extent of land in Australia, without being remarkably rich. The savages of Australia, who held the land before the English took it, had enormous quantities of land, but they were nevertheless miserably poor. Thus it is plain that land alone is not wealth. It may be urged that, in order to form wealth, the land should be fertile, the soil should be good, the rivers and lakes abounding in fish, and the forests full of good timber. Under the ground there should be plenty of coal, iron, copper, reefs of gold, &c. If, in addition to these, there is a good climate, plenty of sunlight, and enough, but not too much, water, then the country is certainly rich. It is true that these things have been called #natural riches#; but I mention them in order to point out that they are not in themselves wealth. People may live upon land full of natural riches, as the North American Indians lived upon the country which now forms the United States; nevertheless they may be very poor, because they cannot, or they will not labour, in such a way as #to turn the natural riches into wealth#. On the other hand, people like the Dutch live upon very poor bits of land, and yet become wealthy by skill, industry and providence. The fact is that wealth is more due to labour and ingenuity than to a good soil or climate; but all these things are needed in order that people shall become as rich as the inhabitants of England, France, the United States, or Australia. #5. What is Wealth?# Nassau Senior, one of the best writers on political economy, defined #wealth# in these words: #Under that term we comprehend all those things, and those things only, which are transferable, are limited in supply, and are directly or indirectly productive of pleasure, or preventive of pain.# It is necessary to understand, in the first place, exactly what Senior meant. According to him, whatever is comprehended under wealth must have three distinct qualities, and whatever has these three qualities must be a part of wealth. If these qualities are rightly chosen, we get a correct definition, which, as explained in the _Logic Primer_ (section 44), is a precise statement of the qualities which are just sufficient to make out a class, and to tell us what things belong to it and what do not. Instead, however, of the long phrase "directly or indirectly productive of pleasure or preventive of pain," we may substitute the single word #useful#, and we may then state the definition in this simple way:-- { (1) #transferable#. #Wealth = what is# { (2) #limited in supply#. { (3) #useful#. We still need to learn exactly what is meant by the three qualities of wealth; we must learn what it is to be transferable, limited in supply, and useful. #6. Wealth is transferable.# By being #transferable#, we mean that a thing can be passed over (Latin, _trans_, across, and _fero_, I carry) from one person to another. Sometimes things can be literally handed over, like a watch or a book; sometimes they can be transferred by a written deed, or by legal possession, as in the case of land and houses; services, also, can be transferred, as when a footman hires himself to a master. Even a musician or a preacher transfers his services, when his auditors have the benefit of hearing him. But there are many desirable things which cannot be transferred from one person to another; a rich man can hire a footman, but he cannot buy the footman's good health; he can hire the services of the best physician, but if these services fail to restore health, there is no help. So, too, it is impossible really to buy or sell the love of relatives, the esteem of friends, the happiness of a good conscience. Wealth may do a great deal, but it cannot really ensure those things which are more precious than pearls and rubies. Political economy does not pretend to examine all the causes of happiness, and those moral riches which cannot be bought and sold are no part of wealth in our present use of the word. The poor man who has a good conscience, affectionate friends, and good health, may really be much happier than the rich man, who is deprived of such blessings; but, on the other hand, a man need not lose his good conscience, and his other sources of happiness when he becomes rich and enjoys all the interesting occupations and amusements which wealth can give. #Wealth, then, is far from being the only good thing: nevertheless it is good#, because it saves us from too severe labour, from the fear of actual want, and enables us to buy such pleasant things and services as are transferable. #7. Wealth is limited in Supply.# In the second place, things cannot be called wealth unless they be _limited in supply_; if we have just as much of any substance as we want, then we shall not esteem a new supply of it. Thus the air around us is not wealth in ordinary circumstances, because we have only to open our mouths and we get as much as we can use. What air we do actually breathe is exceedingly useful, because it keeps us alive; but we usually pay nothing for it, because there is plenty for all. In a diving bell, or a deep mine, however, air becomes limited in supply, and then may be considered a part of wealth. When the tunnel under the English Channel is completed, it will be a great question how to get air to breathe in the middle of it. Even in the Metropolitan Railway tunnel a little more fresh air would be very valuable. On the other hand diamonds, though much valued, are used for few purposes; they make beautiful ornaments and they serve to cut glass or to bore rocks. Their high value chiefly arises from the fact that they are scarce. Of course scarcity alone will not create value. There are many scarce metals, or minerals, of which only a few little bits have ever yet been seen; but such substances are not valuable, unless some special use has been found for them. The metal iridium is sold at a very high price because it is wanted for making the tips of gold pens, and can be got only in small quantities. #8. Wealth is useful.# In the third place, we can easily see that everything which forms a part of wealth must be #useful#, or have #utility#, that is, it must serve some purpose, or be agreeable and desirable in some way or other. Senior said correctly that #useful things are those which directly or indirectly produce pleasure or prevent pain#. A well tuned and well played musical instrument produces pleasure; a dose of medicine prevents pain to one who is in need of it But it is often impossible to decide whether things give more pleasure or prevent more pain; dinner saves us from the pain of hunger and gives us the pleasure of eating good things. There is utility so far as pleasure is increased and pain decreased; nor does it matter, as far as political economy is concerned, what is the nature of the pleasure. Then, again, we need not be particular as to whether things #directly produce pleasure#, like the clothes we wear, or whether they #indirectly# do so, as in the cases of the machines employed to make the clothes. Things are indirectly useful when, like tools, machines, materials, &c., they are only wanted to make other things, which shall be actually consumed and enjoyed by some person. The carriage in which a person takes a pleasant drive is directly useful; the baker's cart which brings him food is indirectly useful. But sometimes we can hardly distinguish. Shall we say that the meat put into the mouth is directly, but the fork which puts it in is indirectly, useful? #9. Commodity.# We now know exactly what is wealth; but instead of speaking continually of wealth, it will often be convenient to speak of commodities, or goods. #A commodity is any portion of wealth#--anything, therefore, which is useful, and transferable, and limited in supply. Wool, cotton, iron, tea, books, boots, pianos, &c., are all commodities in certain circumstances, but not in all circumstances. Wool on a stray sheep lost in the mountains is not a commodity, nor iron in a mine which cannot be worked. #A commodity, in short, is anything which is really useful and wanted, so that people will buy or sell it.# But, instead of the long word commodity, I shall often use the shorter word goods, and the reader should remember that #goods = commodities = portion of wealth#. CHAPTER II. UTILITY. #10. Our Wants are various.# After a little reflection, we shall see that we generally want but little of any one kind of commodity, and prefer to have a portion of one kind and a portion of another kind. Nobody likes to make his dinner off potatoes only, or bread only, or even beef only; he prefers to have some beef, some bread, some potatoes, besides, perhaps, beer, pudding, &c. Similarly, a man would not care to have many suits of clothes all alike; he may wish to have several suits, no doubt, but then some should be warmer, others thinner; some for evening dress, others for travelling, and so on. A library all made of copies of the same book would be absurd; to keep several exact duplicates of any work would be generally useless. A collector of engravings would not care to have many identical copies of the same engraving. In all these, and many other cases, we learn that _human wants tend towards variety_; #each separate want is soon satisfied, or made full# (Latin, _satis_, enough, and _facere_, to make), and then some other want begins to be felt. This was called by Senior #the law of variety#, and it is the most important law in the whole of political economy. It is easy to see, too, that there is a natural order in which our wants follow each other as regards importance; we must have food to eat, and if we cannot get anything else we are glad to get bread; next we want meat, vegetables, fruit, and other delicacies. Clothing is not on the whole as necessary as food; but, when a man has plenty to eat, he begins to think of dressing himself well. Next comes the question of a house to live in; a mere cabin is better than nothing, but the richer a man is the larger the house he likes to have. When he has got a good house he wants to fill it with furniture, books, pictures, musical instruments, articles of vertu, and so forth. Thus we can lay down very roughly #a law of succession of wants#, somewhat in this order: air, food, clothing, lodging, literature, articles of adornment and amusement. It is very important to observe that there is no end nor limit to the number of various things which a rich man will like to have, if he can get them. He who has got one good house begins to wish for another: he likes to have one house in town, another in the country. Some dukes and other very rich people have four, five, or more houses. From these observations we learn that there can never be, among civilised nations, so much wealth, that people would cease to wish for any more. However much we manage to produce, there are still many other things which we want to acquire. When people are well fed, they begin to want good clothing; when they are well clothed, they want good houses, and furniture, and objects of art. If, then, too much wealth were ever produced, it would be #too much of one sort, not too much of all sorts#. Farmers might be ruined if they grew so much corn that nobody could eat it all; then, instead of producing so much corn, they ought to produce more beef and milk. Thus there is no fear that, by machinery or other improvements, things will be made so plentifully that workmen would be thrown out of employment, and not wanted any more. If men were not required at one trade, they would only need to learn a new trade. #11. When things are useful.# The chief question to consider, then, is when things are useful and when they are not. #This entirely depends upon whether we want them or not.# Most things about us, the air, rain water, stones, soil, &c., are not wealth, because we do not want them, or want so little that we can readily get what we need. Let us consider carefully whether we can say that #water is useful#, or in what sense we may say so. It is common to hear people say that water is the most useful substance in the world, and so it is--in the right place, and at the right time. But if water is too plentiful and flows into your cellars, it is not useful there; if it soaks through the walls and produces rheumatism, it is hurtful, not useful. If a man wanting pure good water, digs a well and the water comes, it is useful. But if, in digging a coal pit, water rushes in and prevents the miners reaching the coal seam, it is clear that the water is the opposite of useful. In some countries rain comes very irregularly and uncertainly. In Australia the droughts last for one or two or even three years, and in the interior of the continent the rivers sometimes dry up altogether. The dirtiest pools then become very valuable for keeping the flocks of sheep alive. In New South Wales water has been sold for three shillings a bucketful. When a drought breaks up, sudden floods come down the rivers, destroying the dams and bridges, sweeping away houses, and often drowning men and animals. It is quite plain that we cannot say water is always useful; it is often so hurtful as to ruin and drown people. All that we can really say is that #water is useful when and where we want it, and in such quantity as we want, and not otherwise#. We must not say that all water is useful, but only that such water is useful as we can actually use. It is now easy to see why things, in order to be wealth, must be #limited in supply#; for we never want an unlimited quantity of anything. A man cannot drink more than two or three quarts of water in the day, nor eat more than a few pounds of food. Thus we can understand why in South America, where there are great herds of cattle, the best beef is not wealth, namely, because there is so much that there are not people enough to eat it. The beef which is eaten there is just as useful in nourishing people as beef eaten in England, but it is not so valuable because there is plenty of beef to spare, that is, plenty of beef not wanted by the people. #12. What we must aim at.# Now we can see precisely what it is that we have to learn in political economy. It is #how to supply our various wants as fully as possible#. To do this we must, first of all, ascertain what things are wanted. There is no use making things unless, when made, they are useful, and the quantities of things must be proportioned to what are wanted. The cabinetmaker must not make a great many tables, and few chairs; he must make some tables and more chairs. Similarly, every kind of commodity must be supplied when it is most wanted; and nothing must be over-supplied, that is manufactured in such large quantities that it would have been better to spend the labour in manufacturing other things. Secondly, we must always try to produce things with the least possible labour; for labour is painful exertion, and we wish to undergo as little pain and trouble as we can. Thus, as Professor Hearn, of the University of Melbourne, well described it, #political economy is the science of efforts to satisfy wants#; it teaches us how to find the shortest way to what we wish for. The object which we aim at is #to obtain the most riches at the cost of the least labour#. #13. When to consume wealth.# To consume a commodity is to destroy its utility, as when coal is burnt, or bread eaten, or a jug broken, or a piano worn out. Things lose their utility in various ways, as when they go bad, like meat and fish; when the fashion changes, as with ladies' attire; or when they merely grow old, as in the case of an almanack, or a directory. Again, houses fall into bad repair; ricks of corn may be burnt down; ships may founder. In all these cases utility is destroyed, slowly or quickly, and the commodities may be said to be consumed. It is obvious that we must use things while they are fit to be used, if we are to use them at all. It is evident, too, that we ought to try to get the utmost possible use out of things which we are happy enough to possess. If an object is not injured nor destroyed by use, as in the case of reading a book, or looking at a picture, then the more often we use it the greater is the utility. Such things become more useful if they are passed on from one person to another, like books in a circulating library. In this case there arises what we may call #the multiplication of utility#. Public libraries, museums, picture galleries and like institutions all multiply utility, and the cost of such institutions is little or nothing compared with their usefulness. When a commodity is destroyed at once by use, as in the case of food, it is obvious that only one person can use the same portion of commodity. Our object must then be to consume it when it is most useful. If a man lost in the bush find himself with a short supply of food, it would be foolish of him to eat it all up at once, when he might starve for several days afterwards. He should spread out his supply, so as to eat each bit of food when it will support his strength the most. So we ought to do with the earnings of a life time. The working man should not spend all his wages when trade is brisk, because he will want some of it much more when trade becomes slack, and he is out of employment. Similarly, that which is spent in early life upon mere luxuries and frivolities, might be much more useful in old age, when even necessaries and ordinary comforts may be difficult to obtain. #All wealth is produced in order that it may be consumed, but then it must be consumed when it best fulfils its purpose; that is, when it is most useful.# #14. The Fallacy of Consumption.# It is not uncommon to hear people say that they ought to spend money freely in order to encourage trade. If every person were to save his money instead of spending it, trade, they think, would languish and workmen would be out of employment. Tradespeople favour these notions, because it is obvious that, the more a milliner or draper can persuade his customer to buy, the more profit he makes thereby. The customers, too, are quite inclined to think the argument a good one, because they enjoy buying new dresses, and other pleasant things. Nevertheless #the argument is a bad fallacy#. The fact is, that a person who has riches cannot help employing labour of some kind or other. If he saves up his money he probably puts it into a bank; but the banker does not keep it idle. The banker lends it out again to merchants, manufacturers and builders, who use it to increase their business and employ more hands. If he buy railway shares or government funds, those who receive the money put it to some other profitable use. If the rich man actually hoards up his money in the form of gold or silver, he gets no advantage from it, but he creates so much more demand for gold or silver. If many rich people were to take to hoarding up gold, the result would be to make gold mining more profitable, and there would be so many more gold miners, instead of railway navvies, or other workmen. We see then that, when a rich person decides how to spend his money he is deciding not how many more workpeople shall be set to work, but what kind of work they shall do. If he decide to give a grand fancy ball, then in the end there will be so many more milliners, costumiers, lacemakers, confectioners, &c. A single ball indeed will have no great effect; but, if many people were to do the same, there would soon be more tradespeople attracted to these trades. If, on the other hand, rich people invest their money in a new railway, there will be so many more surveyors, engineers, foremen, navvies, iron puddlers, iron rollers, engine mechanics, carriage builders, &c. The question really comes to this, whether people are made happier by more fancy balls, or by more railways. A fancy ball creates amusement at the time, but it costs a great deal of money, especially to the guests who buy expensive costumes. When it is over there is no permanent result, and no one is much the better for it. The railway, on the other hand, is no immediate cause of pleasure, but it cheapens goods by enabling them to be carried more easily: it allows people to live in the country, instead of the crowded town, or it carries them on pleasant and wholesome excursions. We see, then, that it is simple folly to approve of consumption for its own sake, or because it benefits trade. In spending our wealth we ought to think solely of the advantage which people get out of that spending. #15. The Fallacy of Non-consumption.# Some people fall into the opposite fallacy of thinking that all spending is an evil. The best thing to do with wealth is to keep it and let it grow by interest, or even to neglect the interest and keep the gold itself. Thus they become what we call misers, and there are always a certain number of people, who deprive themselves of the ordinary pleasures of life, in order that they may have the pleasure of feeling rich. Now these kind of people do no positive harm to their fellow-men; on the contrary they increase the wealth of the country, and some one or other will sooner or later benefit by it. Moreover, if they put their wealth into banks and other good investments, they do great service in increasing the capital of the nation, and thus enabling so many more factories, docks, railways, and other important works to be constructed. Most people are so fond of spending their money on passing amusements, entertainments, eating and drinking, and fine dressing, that it is a distinct advantage to have other people who will put their wealth into a more permanently useful form. Nevertheless, there could be no use in abstaining from all enjoyment in order that we might lay up a store of wealth. Things are not wealth unless they are useful and pleasant to us. If everybody invested his savings in railway shares, we should have so many railways that they could not be all used, and they would become rather a nuisance than a benefit. Similarly, there could be no good in building docks unless there were ships to load in them, nor ships unless there were goods or passengers to convey. It would be equally absurd to make cotton mills if there were already enough to manufacture as much cotton goods as people could consume. Thus we come to see that wealth must be fitted for use and consumption in some way or other. What we have to do is to endeavour to spend our means so as to get the greatest real happiness for ourselves, our relatives, friends, and all other people whom we ought to consider. CHAPTER III. PRODUCTION OF WEALTH. #16. The Requisites of Production.# The first thing in industry, as we now see, is to decide what we want; the next thing is to get it, or make it, or, as we shall say, #produce it#, and we ought obviously to produce it with the least possible labour. To learn how this may be done, we must inquire what is needful for the production of wealth. There are, as is commonly and correctly said, #three requisites of production#; before we can, in the present state of society, undertake to produce wealth, we must have the three following things:-- (1) #Land#, (2) #Labour#, (3) #Capital#. In production we bring these things together; we apply labour to the land, and we employ the capital in assisting the labourer with tools, and feeding him while he is engaged on the work. We must now proceed to consider each of the three requisites in succession. #17. Land or Source of Materials.# The word #production# is a very good one; it means #drawing forth# (Latin, _pro_, before, and _ducere_, to draw), and it thus exactly expresses the fact that, when we want to create wealth, we have to go to some piece of land, or to some lake, river, or sea, and draw forth the substance which is to be made into wealth. It does not matter whether the material comes from the surface of the earth, or from mines and quarries sunk into the earth, or from seas and oceans. Our food mostly grows upon the land, as in the case of corn, potatoes, cattle, game, &c.; our clothes are chiefly made of cotton, flax, wool, skins, raised in like manner. Minerals and metals are obtained by sinking pits and mines into the crust of the earth. Rivers, lakes, seas, and oceans are no slight source of wealth: they yield food, oil, whalebone, sealskin, &c. We cannot manufacture any goods unless we have some matter to work upon; to make a pin we must get copper, zinc, and tin out of mines; a ribbon requires the silk and the dye materials; everything that we touch, and use, and eat, and drink, contains substance, so that we must always begin by finding a supply of the right sort of materials. Commonly, too, we want something more than matter; we want force which shall help us to carry and work the raw material. People naturally wish to avoid tiring themselves by labouring with their own arms and legs, and so they make windmills to grind corn, ships to carry goods, steam-engines to pump water and to do all sorts of hard work. From the earth, or, as we say, from Nature, we obtain both the materials of wealth and the force which helps us to turn the materials into wealth. Whatever thus furnishes us with the first requisite of production is called a #natural agent#, that is, something which acts for us and assists us (Latin, _agens_, acting). Among natural agents #land# is by far the most important, because, when supplied with abundant sunlight and, moisture, it may be cultivated and made to yield all kinds of crops. Accordingly, economists often speak of land, when their remarks would really apply as well to rocks and rivers. Three-quarters of the whole surface of the globe is covered with seas; but this vast extent of salt water furnishes little wealth, except whales, seals, sea-weed, and a few other kinds of animals and plants. Hence, when we speak of land, we really mean any source of materials--any natural agent, and we may say that #land = source of materials = natural agent#. #18. Labour.# Nothing is more plain, however, than that natural agents alone do not make wealth. A man would perish in the most fertile spot if he did not take some trouble in appropriating the things around him. Fruit growing wild on the trees must be plucked before it becomes wealth, and wild game must be caught before it can be cooked and eaten. We must spend a great deal of labour if we wish to have comfortable clothes and houses and regular supplies of food; the proper sorts of materials must be gradually got together, and shaped and manufactured. Thus the amount of wealth which people can obtain depends far more upon their activity and skill in labouring than upon the abundance of materials around them. As already remarked, North America is a very rich land, containing plenty of fine soil, seams of coal, veins of metal, rivers full of fish, and forests of fine timber, everything, in short, needed in the way of materials; yet the American Indians lived in this land for thousands of years in great poverty, because they had not the knowledge and perseverance to enable them to labour properly and produce wealth out of natural agents. Thus we see clearly that skilful and intelligent and regular labour is requisite to the production of wealth. #19. Capital.# In order that we may produce much wealth, we require something further, namely, the #capital#, which supports labourers while they are engaged in their work. Men must have food once a day, not to say two or three times; if then they have no stock of food on hand, they must go at once and get it in the best way they can, for fear of starving. They must grub up roots, or gather grass seeds, or catch wild animals--if they can. When working in this way, they usually spend a great deal of labour for very little result; Australian natives sometimes have to cut down a large tree with stone axes, which is very hard work, in order to catch an opossum or two. Men who live in this way from hand to mouth have no time nor strength to make arrangements so as to get food and clothes in the easiest way. It requires much labour to plough the ground, to harrow it, and sow it with corn, besides fencing it in; when all this is done it is requisite to wait six months before the crop can be gathered. Certainly, the amount of food thus obtained is large compared with the labour: but wild Indians and other ignorant tribes of men cannot wait while the corn is growing; the poor Australian natives have to gather grass seeds or find worms and opossums every day. There is a good Japanese maxim which says, "Dig a well before you are thirsty," and it is evidently very desirable to do so. But you must have capital to live upon while you are digging the well. In the same way, almost every mode of getting wealth without extreme labour requires that we shall have a stock of food to subsist upon while we are working and waiting, and #this stock is called capital#. In the absence of capital people find themselves continually in difficulties, and in danger of starvation. In the first of her tales on political economy, called "Life in the Wilds," Miss Martineau has beautifully described the position of settlers at the Cape of Good Hope, who are imagined to have been attacked by Bushmen and robbed of their stock of capital. She shows us how difficult it is to get any food or to do any useful work, because something else is wanted beforehand--some tool, or material, or at any rate time to make it. But there is no time to make anything, because all attention has to be given to finding shelter for the night, and something for supper. Everybody who wishes to understand the necessity for capital, and the way capital serves us, should read this tale of Miss Martineau, and then go on to her other tales about Political Economy. We can hardly say that capital is as requisite to production as land and labour, for the reason that capital must have been the produce of land and labour. There must always, indeed, be a little capital in possession, even though it be only the last meal in the stomach, before we can produce more. But there is no good attempting to say exactly how capital began to be collected, because it began in the childhood of the world, when men and women lived more like wild animals than as we live now. Certain it is that we cannot have loaves of bread, and knives and forks, and keep ourselves warm with clothes and brick houses, unless we have a stock of capital to live upon while we are making all these things. #Capital is requisite, then, not so much that we shall labour, but that we shall labour economically and with great success.# We may call it a secondary requisite, and it would be best to state the requisites of production in this way-- { #natural agent.# #Primary requisites# { { #labour.# #Secondary requisite# #capital.# #20. How to make Labour most Productive.# The great object must be to make labour as productive as possible, that is, to get as much wealth as we can with a reasonable amount of labour. In order to do this we must take care to labour in the most favourable way, and there is no difficulty in seeing that we ought to labour (1) #At the best time#; (2) #At the best place#; (3) #In the best manner#. #21. Work at the best Time.# Of course we ought to do things when it is most easy to do them, and when we are likely to get most produce for our labour. The angler goes to the river in the early morning or the evening, when the fish will bite; the farmer makes hay while the sun shines; the miller grinds corn when the breeze is fresh, or the stream full; and the skipper starts when wind and tide are in his favour. By long experience farmers have found out the best time of year for doing every kind of work: seed is sown in autumn or spring; manure is carried in winter when the ground is frozen; hedges and ditches are mended when there is nothing else to do, and the harvest is gathered just when it is ripe, and the weather is fine. Norwegian peasants work hard all day in July and August to cut as much grass, and make as much hay as possible. They never think of timber then, because they know that there will be plenty of time during the long winter to cut down trees; and when the snow fills up all the hollows in the mountain side, they can easily drag the trees down to the rivers, which rise high with floods after the melting of the snow, and carry the logs away, without further labour, to the towns and ports. It is a good rule not to do to-day what we can probably do more easily to-morrow: but it is a still better rule not to put off till to-morrow what we can do more easily to-day. In order, however, that we may be able to wait and to do each kind of work at the best time, we must have enough #capital# to live upon in the meantime. #22. Work at the Best Place.# Again, we should carry on every kind of work at the place best suited for it, that we can get possession of. In many cases this is so obvious that the remark seems absurd. Does any one plant fruit trees on the sea sands, or sow corn among rocks? Of course not, because there would be no result. No one is so foolish as to spend his labour in a place where it would be wasted altogether. In other cases it is a question of degree; there may be some produce here, but there would be more produce there. In the south of England vines can be made to grow in the open air, and, in former days, wine used to be made from grapes grown in England. But vines grow much better on the sunny hills of France, Spain, and Germany, and the wine which can there be made with the same labour is far more plentiful and immensely better in quality. Those, then, who want to make wine had much better remove to the continent, or, still better, let the French, Spaniards, and Germans produce wine for us. In England we have good soil and a moist climate fitted for growing grass, and the best thing which our farmers can do is to raise cattle and produce plenty of milk, butter, and cheese. In order that the world may grow as rich as possible, each country should give its attention to producing what it can produce most easily in its present circumstances, getting other things in exchange by foreign trade. The United States can raise endless quantities of cotton, corn, bacon, meat, fruit, petroleum, besides plenty of gold, silver, copper, iron, &c. Australia, New Zealand, and South Africa will furnish much wool, hides, sugar, preserved meats, besides gold, copper, and diamonds. Tropical Africa has palm oil, ivory, teak wood, gum, &c. South America abounds in cattle from which we get tallow, hides, bones, horns, essence of beef, &c. China supplies us with vast quantities of tea, in addition to silk, ginger, and many minor commodities. India sends cotton, indigo, jute, rice, seeds, sugar, spices, and all kinds of other products. Every part of the world has some commodities which it can produce better than other countries, and if men and governments were wise, they would allow trade to be as free as possible, in order that each thing shall be produced where it costs the least labour to produce it. #23. Work in the Best Manner.# Whatever the kind of industry carried on in a place, we ought to take care, thirdly, that each labourer works in the best manner, so as not to waste his labour or to make mistakes. There are many different ways of setting about the same work, and, in order that he may choose the best, the labourer must be intelligent and skilful, or else he must be directed by some person who has knowledge and skill. Moreover, there must be, as we shall see, great division of labour, so that each man shall do the kind of work he can do best. We need, then-- (1) #Science#, (2) #Division of labour#. #24. The Need of Science.# In order that he may employ his labour to the best advantage, it is requisite that the labourer should be not merely skilful, that is, clever, and practised in handiwork, but that he should also be guided by a scientific knowledge of the things with which he is dealing. Knowledge of nature consists, to a great extent, in understanding the #causes of things#, that is, in knowing what things must be put together in order that certain other things shall be produced. Thus the steam-engine is due to the discovery that if heat be applied to water, the result is steam expanding with much force, so that a firebox, coal, boiler, and water are causes of force. Whenever we want to do any work, then, we must begin by learning, if possible, what are the causes which will produce it most easily and abundantly. By knowledge we shall often be saved from much needless labour. As Sir John Herschel has explained, science sometimes shows us that #things which we wish to do are really impossible#, as, for instance, to invent a perpetual motion, that is, a machine which moves itself. At other times science teaches us that the #way in which we are trying to make something is altogether the wrong way#. Thus, iron-masters used to think that the best way of smelting iron in the blast-furnace was to blow the furnace with cold air; science, however, showed that, instead of being cold, the air sent into the furnace should be made as hot as possible. Then, again, science often enables us #to do our work with a great saving of labour#. The boatman or bargeman takes care to learn the state of the tide, so that he may have the tide in his favour in making any journey. Meteorologists have now prepared maps of the oceans showing the sea-captain where he will find winds and currents most favourable to a rapid voyage. Lastly, #science sometimes leads us to discover wonderful things which we should not have otherwise thought it possible to do#; it is sufficient to mention the discovery of photography and the invention of the telegraph and the telephone. No doubt it may be said that all the greatest improvements in industry--most of what tends to raise man above the condition of the brute animals--proceed from science. The poet Virgil was right when he said, "#Happy is he who knows the causes of things.#" CHAPTER IV. DIVISION OF LABOUR. #25. How Division of Labour Arises.# When a number of workmen are engaged on any work, we find that each man usually takes one part of the work, and leaves other parts of the work to his mates. People by degrees arrange themselves into different trades, so that the whole work done in any place is divided into many employments or crafts. This division of labour is found in all civilised countries, and more or less in all states of society, which are not merely barbarous. In every village there is the butcher and the baker, and the blacksmith and the carpenter. Even in a single family there is division of labour: the husband ploughs, or cuts timber; the wife cooks, manages the house, and spins or weaves; the sons hunt or tend sheep; the daughters employ themselves as milkmaids. There is a popular couplet which says-- "When Adam delved and Eve span, Who was then the gentleman?" It seems to express the fact that this division of labour existed in very early times, before there were any gentlemen. In modern times the division of labour is immensely complicated: not only has every town and village its different tradespeople, and artisans and men in different posts and employments, but each district has its peculiar manufactures. In one place cotton goods are produced; in another, woollen goods; in other parts of the country flax, jute, silk are manufactured. Iron is made in Staffordshire, Cleveland, South Wales, and Scotland; copper is smelted in South Wales; crockery is baked in the potteries; hosiery is manufactured in Nottingham and Leicester; linens are sewed in the North of Ireland; and so on. In every separate factory, again, there is division of labour; there is the manager, the chief clerk, the assistant clerks; the foremen of different departments, the timekeeper, the engine-tenter, and stokers, the common labourers, the carters, errand boys, porters, &c., all in addition to the actual mechanics of different kinds and ranks who do the principal work. Thus the division of labour spreads itself throughout the whole of society, from the Queen and her Ministers, down to the errand boy, or the street scavenger. #26. Adam Smith on the Division of Labour.# There are many ways in which we gain by the division of labour, but Adam Smith has treated the subject so excellently that we had better, in the first place, consider his view of the matter. There are, as he thought, three ways in which advantage arises from the division of labour, namely-- (1.) Increase of dexterity in every particular workman. (2.) Saving of the time which is commonly lost in passing from one kind of work to another. (3.) The invention of a great number of machines, which facilitate and abridge labour, and enable one man to do the work of many. There can be no doubt as to the #increase of dexterity#, which arises from practice. Any one who has tried to imitate a juggler, or to play the piano, without having learned to do it, knows how absurdly he fails. Nobody could possibly do the work of a glass-blower without long practice. Even when a man can do a job in some sort of way, he will do it much more quickly if he does it often. Adam Smith states that if a blacksmith had to make nails without having been accustomed to the work, he would not make above 200 or 300 bad nails in a day. With practice he might learn to make 800 or 1000 nails in a day; but boys who are brought up to the nailer's trade can turn out 2300 nails of the same kind in the same time. But there is no need of many examples: everything that we see well or quickly made has been made by men who have spent a great deal of time and trouble in learning and practising the work. Secondly, there is #a great deal of time lost when a man changes from one kind of work to another# many times in the day. Before you can make a thing you must get all the right tools and materials around you; when you have finished one box, for instance, you are all ready to make another with less trouble than the first; but if you have to go off and do something quite different, such as to mend a pair of shoes or write a letter, a different set of implements have to be got ready. A man, as Adam Smith thought, saunters a little in turning his hand from one kind of employment to another, and if this happens frequently, he is likely to become lazy. In the third place, Smith asserted that #the division of labour leads to the invention of machines# which abridge labour, because men, he thought, were much more likely to discover easy methods of attaining an object when their whole attention is directed to that object. But it seems doubtful how far this is correct. Workmen do occasionally invent some mode of lessening their labour, and a few important inventions have been made in this way. But, as a general rule, the division of labour leads to invention, because it enables ingenious men to make invention their profession. The greatest inventors, such as James Watt, Bramah, Fulton, Roberts, Nasmyth, Howe, Fairbairn, Whitworth, the Stephensons, Wheatstone, Bessemer, Siemens, have not been led to invention in the way described by Adam Smith, but have cultivated an original genius by careful study and long practice in mechanical construction. But the division of labour greatly assists invention, because it enables each factory to adopt particular kinds of machinery. In England the division of labour is continually becoming more and more minute, and it is not uncommon to find that the whole supply of some commodity is furnished from a single manufactory, which can then afford to have a set of machines invented on purpose to produce this one commodity. Such is even more the case in the large manufactories of the United States. I will now describe four other ways in which great saving of labour arises from the division of labour, as follows:-- #27. The Multiplication of Services.# A great deal of labour is often saved by arranging work so that a labourer may serve many persons as easily as one. If a messenger is going to carry a letter to the post-office, he can as readily carry a score. Instead of twenty people each carrying their own letters, one messenger can do the whole work without more trouble. This explains why the post-office is able to forward a letter from any part of the kingdom to any other part for a penny or even a halfpenny. There are so many people sending and receiving letters, that a postman usually carries a great many, and often delivers half-a-dozen at once. But it would be quite impossible to send telegrams so cheaply, because every message has to be separately telegraphed along the wires, and then delivered at once by a special messenger, who can seldom carry more than one message at a time. Archbishop Whately pointed out that when a party of travellers exploring a new country camp out at night, they naturally divide the work: one attends to the horses, another unpacks the stores, a third makes a fire and cooks the supper, a fourth goes for water, and so on. It would be quite absurd if a dozen travellers in one party were to light a dozen separate fires, and cook a dozen separate meals. The labour of lighting a fire and cooking for twelve persons is not much greater than doing the same for one or two. There are many things which, if once done, will serve for thousands or millions of people. If a person gets important information, as, for instance, that a storm is coming across the Atlantic Ocean, he can warn a whole nation by means of the newspapers. It is a great benefit to have a meteorological office in London, where two or three men spend their labour in learning the weather all over the country by means of the telegraph, and thus enable us to judge, as far as possible, of the weather which is coming. This is a good case of the #multiplication of services#. #28. The Multiplication of Copies# is also a means of increasing immensely the produce of labour. When the proper tools and models for making a thing are once provided, it is sometimes possible to go on multiplying copies with little further trouble. To cut the dies for striking a medal or coin is a very slow and costly work; but, when once good dies are finished, it is easy to strike a great many coins with them, and the cost of the striking is very small. The printing press, however, is the best case of multiplication of copies. To have the whole of Shakespeare's Plays copied out by a law stationer would cost more than two hundred pounds, and every new copy would cost as much as the first. Before the invention of printing, books used to be thus copied out, and manuscript books were therefore very expensive, besides being full of mistakes. The whole of Shakespeare's Plays can now be bought for a shilling; and any one of the Waverley Novels can be had for sixpence. It may cost several hundred pounds to set up the type for a large book and stereotype it; but when this is once done, hundreds of thousands of copies can be struck off, and the cost of each copy is little more than that of the paper and the binding. Almost all the common things we use now, such as ordinary chairs and tables, cups and saucers, teapots, spoons and forks, &c., are made by machinery, and are copies of an original pattern. A good chair can be bought for five shillings or less, but if you wanted to have a chair made of a new pattern, it would cost perhaps five or ten times as much. #29. Personal Adaptation.# A further advantage of the division of labour is that, when there are many different trades, every person can choose that trade for which he is best suited--the strong healthy man becomes a blacksmith; the weaker one works a loom or makes shoes; the skilful man learns to be a watchmaker; the most ignorant and unskilful can find work in breaking stones or mending the hedges. Each man will generally work at the trade in which he can get the best wages, and it is an evident loss of skill if the artisan should break stones or sweep the streets. Now, the greater the division of labour and the more extensive factories become, the better chance there is for finding an employment just suited to each person's powers; clever workmen do the work which no one else can do; they have common labourers to help them in things which require no skill; foremen plan out the work, and allot it to the artisans; clerks, who are quick at accounts, keep the books, and pay and receive money; the manager of the factory is an ingenious experienced man, who can give his whole attention to directing the work, to making good bargains, or to inventing improvements in the business. Every one is thus occupied in the way in which his labour will be most productive and useful to other people, and at the same time most profitable to himself. #30. Local Adaptation.# Lastly, the division of labour allows of local adaptation--that is, it allows every kind of work to be done in the place most suitable for it. We have already learnt (sec. 22, p. 29) that each kind of labour should be carried on where it is most productive; but this cannot be done unless there be division of labour--so that while the French grow wine, weave silk, or make _articles de Paris_, they buy the cottons of Manchester, the beer of Burton-on-Trent, or the coals of Newcastle. When trade is free, and the division of labour is perfect, each town or district learns to make some commodity better than other places: watches are made in Clerkenwell; steel pens in Birmingham; needles at Redditch; cutlery at Sheffield; pottery at Stoke; ribbons at Coventry; glass at St. Helen's; straw bonnets at Luton; and so forth. It is not always possible to say exactly why certain goods are made better in one place--for instance, silks in Lyons--than anywhere else; but so it often is, and people should be left as free as possible to buy the goods they like best. Commodities are manufactured in order that they may produce pleasure and be useful, not, as we shall see, in order that labourers may be kept hard at work. Now, when trade is left free it gives rise to division of labour, not only between town and town, county and county, but between the most distant nations of the earth. Thus is created what may be called #the territorial division of labour#. Commerce between nation and nation is not only one of the best means of increasing wealth and saving labour, but it brings us nearer to the time when all nations will live in harmony, as if they were but one nation. #31. The Combination of Labour.# We now see what great advantages arise from each man learning a single trade thoroughly. This is called the division of labour, because it divides up the work into a great many different operations; nevertheless, it leads men to assist each other, and to work together in manufacturing the same goods. Thus, in producing a book, a great many trades must assist each other: type-founders cast the type; mechanics make the printing press; the paper is manufactured at the paper works; printers' ink is prepared at other works; the publishers arrange the business; the author supplies the copy; the compositors set up the type; the reader corrects the proofs; the pressmen work off the printed sheets; then there are still the bookbinders, and the booksellers, besides a great many other small trades which supply the tools wanted by the principal trades. Thus, society is like a very complicated machine, in which there is a great number of wheels, and wheels within wheels; each part goes on attending to its own business, and doing the same work over and over again. There is what we should call a #complex organization# (Greek, organon, instrument), that is to say, different people and different trades work as instruments of each other, all assisting in the ultimate result. But it is to be observed that nobody plans out these systems of divided labour; indeed few people ever know how many trades there are, and how they are connected together. There are said to be about thirty-six distinct kinds of employment in making and putting together the parts of a piano; there are about forty trades engaged in watchmaking; in the cotton business there are more than a hundred occupations. But new trades are frequently created, especially when any new discovery takes place; thus, there are at least sixteen different trades occupied in photography, or in making the things required by photographers; and railways have produced whole series of employments which did not exist fifty years ago. These trades arise without any Act of Parliament to make them or allow them. There is no law to say how many trades there shall be, nor how many people shall go into each trade, because nobody can tell what will be wanted in future years. These things are arranged by a kind of #social instinct#. Each person takes up the kind of work which seems to suit him and to pay him best at the time. Another and a totally different kind of combination of labour arises when men arrange to assist each other in doing the same work. Thus, sailors pulling at the same rope combine their labour together; other instances are, carrying the same ladder, rowing the same boat, and so forth. In this case there is said to be #simple combination of labour#, because the men do the same sort of work. When the men have different operations to perform, there is said to be #complex combination of labour#, as when one man points a pin and another makes the head. On board a ship there is both simple and complex combination. When several men work at the same capstan the combination is simple, because one man does exactly the same as the others. But the captain, mate, steersman, carpenter, boatswain, and cook work together in complex combination, since each attends to his own proper duties. Similarly, in a company of soldiers the privates act together in simple combination, but the officers of different ranks have distinct duties to perform, so that the combination becomes complex. Men who thus assist each other are usually able to do far more work than if they acted separately. #32. Disadvantages of the Division of Labour.# There are certainly some evils which arise out of the great division of labour now existing in civilised countries. These evils are of no account compared with the immense benefits which we receive; still it is well to notice them. In the first place, #division of labour tends to make a man's power narrow and restricted#; he does one kind of work so constantly, that he has no time to learn and practice other kinds of work. A man becomes, as it has been said, worth only the tenth part of a pin; that is, there are men who know only how to make, for instance, the head of a pin. In the time of the Romans it was said, _ne sutor ultra crepidam_, let not the shoemaker go beyond his last. When a man accustomed only to making pins or shoes goes into the far west states of America, he finds himself unfitted for doing all the kinds of hard work required from a settler. The poor peasant from Norway or Sweden, who seems at first sight a less intelligent man, is able to build his own house, till the ground, tend his horse, and in a rough way, make his own carts, implements, and household furniture. Even the Red Indian is much better able to take care of himself in a new country than the educated mechanic. The only thing to be said is that the skilled shoemaker, or mechanic of whatever sort, must endeavour to keep to the trade which he has learnt so well. It is a misfortune both for himself and for other people if he is obliged to undertake work which he cannot do so well. A second disadvantage of the division of labour is that #trade becomes very complicated, and when deranged the results are ruinous to some people#. Each person learns to supply only a particular kind of goods, and if change of fashion or any other cause leads to a falling off in the demand for that kind of goods, the producer is left in poverty, until he can learn another trade. At one time the making of crinoline skirts for ladies was a large and profitable trade; now it has ceased almost entirely, and those who learnt the business have had to seek other employments. But each trade is generally well supplied with hands perfectly trained to the work, and it is very difficult for fresh workmen, especially when old, to learn the new work, and compete with those who have long practised it. In some cases this has been successfully done; thus the Cornish miners, when the mines in Cornwall were no longer profitable, went into the collieries, where more hewers of coal were much wanted. But, generally speaking, it is very difficult to find a new employment in England, and this is a strong reason why trades-unions should make no objection to new men entering a trade to which they have not been brought up. The colliers tried to keep the Cornish miners out of the coal pits. In order to keep their own wages as high as possible they would let other men starve. But this is a very selfish and hurtful way of acting. If every trade were thus to try and keep all other people away, as if the trade were their own property, there would constantly be a number of unfortunate people brought to the workhouse through no fault of their own. It is most important, therefore, to maintain a man's right to do whatever kind of work he can get. It is one of the first and most necessary rights of a labourer to labour in any honest way he finds most profitable to himself. #Labour must be free.# CHAPTER V. CAPITAL. #33. What is capital?# We will now endeavour to understand the nature of #the third requisite of production, called capital, which consists of wealth used to help us in producing more wealth#. All capital is wealth, but it is not true that all wealth is capital. If a man has a stock of food, or a stock of money with which he buys food, and he merely lives upon this without doing any labour, his stock is not considered to be capital, because he is not producing wealth in the meantime. But if he is occupied in building a house, or sinking a well, or making a cart, or producing anything which will afterwards save labour and give utility, then his stock is capital. The great advantage of capital is that it enables us to do work in the least laborious way. If a man wants to convey water from a well to his house, and has very little capital, he can only get a bucket and carry every bucket-full separately; this is very laborious. If he has more capital, he can get a barrel and wheel it on a barrow, which takes off a large part of the weight; thus he saves much labour by the labour spent upon the barrel and barrow. If he has still more capital his best way will be to make a canal, or channel, or even to lay a metal pipe all the way from the well to his house; this costs a great deal of labour at the time, but, when once it is made, the water will perhaps run down by its own weight, and all the rest of his life he will be saved from the trouble of carrying water. #34. Fixed and Circulating Capitals.# Capital is usually said to be either fixed or circulating capital, and we ought to learn very thoroughly the difference between these two kinds. #Fixed capital# consists of factories, machines, tools, ships, railways, docks, carts, carriages, and other things, which last a long time, and assist work. It does not include, indeed, all kinds of fixed property. Churches, monuments, pictures, books, ornamental trees, &c., last a long time, but they are not fixed capital, because they are not used to help us in producing new wealth. They may do good, and give pleasure, and they form a part of the wealth of the kingdom; but they are not capital according to the usual employment of the name. #Circulating capital consists of the food, clothes, fuel, and other things which are required to support labourers while they are engaged in productive work.# It is called circulating because it does not last long; potatoes and cabbages are eaten up, and a new supply has to be grown; clothes wear out in a few months or a year, and new ones have to be bought. The circulating capital, which is in the country now, is not the same circulating capital which was in the country two years ago. But the fixed capital is nearly the same: some factories may have been burnt or pulled down; some machines may have become worn out, and have been replaced by new ones. But these changes in fixed capital are comparatively few; whereas the whole or nearly the whole of the circulating capital is changed every year or two. But the fact is that we cannot distinguish so easily as we may seem to do between fixed and circulating capitals; there may be kinds of capital which are neither quite fixed nor quite circulating, but something between the two. Flour is soon eaten up, and is circulating capital. A flour mill lasts fifty years, perhaps, and may certainly be called fixed capital; a flour sack lasts about ten years on an average. Is such a sack fixed or circulating capital? It seems to me difficult to say. In the case of a railway, the coal and oil wanted for the engine are used up at once, and are clearly circulating capital; the railway wagons last about ten years, the locomotive engines twenty years or more; the railway stations last at least thirty years; there is no reason why the bridges and tunnels and embankments should not last hundreds of years with proper care. Thus we see that #capital is altogether a question of time, and we must say that capital is more fixed as it endures or continues useful a longer time; it is more circulating in proportion as it is sooner worn out or destroyed, and thus requires to be more frequently replaced#. #35. How Capital is obtained. Capital is the result of saving or abstinence#, that is, it can only be obtained by working to produce wealth, and then not immediately consuming that wealth. The poor savage who has to labour hard every day for fear that he may have to go without food, has no capital; but when he has food in hand, and can employ himself in making bows and arrows to facilitate the capture of animals, he is investing capital in the bows and arrows. Whenever we work in this way for a future purpose, we are living on capital and investing it. The abstinence (Latin, _abs_, from, and _tenens_, holding) consists in holding off from the enjoyment of something which we have produced, or might produce with the same labour. #To save# is to keep something whole or untouched for future use; we save it as long as we do not consume it. If I have a stock of flour and eat it up, there is an end of the flour, and I cannot be said to save that. But if, while eating the flour, I am engaged in making a plough or a cart, or any other durable thing which will help me in production, I have turned one form of capital into another form. I might have eaten the flour in idleness, in which case it would not have been capital. But, while eating it, I worked for a future purpose. In so doing I am said to #invest capital#, which means #to turn circulating into fixed capital, or less durable into more durable capital#. Capital, accordingly, is invested for longer or shorter periods according to the durability of the form in which it is invested (Latin, _in_, on, and _vestire_, to clothe). A good plough will perhaps last twenty years; all through that time the owner should be getting back by its use the benefit of the labour and capital spent in making it. When it is worn out, he ought to have all the capital it cost paid back, with some increase or interest. Capital invested in railway wagons should pay itself back during the ten years that the wagons last on an average. The capital invested in any work may always be said to consist of wages or what is bought with wages. Thus the capital invested in railways really consisted of the food, clothes, and other commodities consumed by the labourers who made the railways. It is true that tools also were needed as well as the iron rails, sleepers, bricks, and other materials required for the work. But as these things had previously been made by labour, we may consider that the capital really invested in them was the wages of the labourers who had already made them. Thus, #when we go far enough back, we always find that the capital invested consisted of the maintenance of labourers#. #36. Investment of Capital.# We have two things to consider with regard to the investment of capital, #firstly, the quantity of the capital#, #and secondly, the length of time for which it is invested#. The same quantity of capital will keep more or less men at work, according as it is invested for shorter or longer periods. A man in growing potatoes only needs to wait for the result of his labour during one year on an average. If his food and clothing during one year cost thirty pounds, then capital worth thirty pounds is sufficient to keep him at work in this way. Three men cultivating potatoes will of course require three times as much capital, or ninety pounds worth; ten men will need three hundred pounds worth, and so on in proportion. But in growing vines it is necessary to wait several years after the vines are planted before they begin to bear. Suppose it to require five years waiting, then the labourer will want 5 x 30, or one hundred and fifty pounds worth of capital before he can grow vines. Three vine-growers will want 3 x 5 x 30, or four hundred and fifty pounds worth of capital; ten men, 10 x 5 x 30, or fifteen hundred pounds worth, and so on in proportion. Thus we see clearly that the capital required in any kind of industry is proportional to the number of men employed, and also to the length of time for which the capital remains locked up, or invested on the average. But there is no fixed proportion whatever between the number of labourers and the capital they require--it entirely depends upon the length of time in which the capital is turned over, that is, invested, and got back again. A poor savage manages to live on a few days' capital in hand; a potato grower on one year's capital. On a modern farm in which many durable improvements are made, the quantity of capital required is very much greater. To employ men upon a railway requires immense capital, because so much of it is sunk in a very fixed and durable form in the embankments, tunnels, stations, rails, and engines. #37. Labour cannot be Capital.# It is not uncommon to hear it said that #labour is the poor man's capital#; and then it is argued that the poor man has just as much right to live upon his capital as the rich man upon his. And so he has, if he can do it. If a labourer can go and produce any kind of wealth, and exchange it for food and necessaries, of course he may do so. But, as a general rule, he cannot do this without working for a length of time, waiting till the produce is finished and sold. In order to do this he wants something more than his labour, namely, his food in the meantime, besides materials and tools. These form the required capital, and there is no good in calling labour capital when it is really quite a different thing. At other times I have heard it said that #land is capital, intelligence is capital#, and so forth. These are all misleading expressions. The intended meaning seems to be that some people live upon what they get from land, or from intelligence, as other people live upon what they get as interest upon capital. Nevertheless, land is not capital, nor is intelligence capital. Production requires, as we have seen, three distinct things, namely, land, labour, and capital; and there is much harm in confusing things together by giving them the same name when they are not the same thing. CHAPTER VI. DISTRIBUTION OF WEALTH. #38. How Wealth is Shared.# We have learned what wealth is, how it is to be used, and how it may be produced in the greatest quantities, with the least possible labour, but we have yet to enter on the more difficult parts of our subject. We must now try to make out how wealth is shared among those who have a hand in producing it. The requisites of production, as we have seen, are land, labour, and capital; if these were all supplied by the same person, no doubt the produce ought all to belong to him, with the exception of what is taken by the government as taxes. But, in a state of society such as exists at present, the labourer seldom owns all the land and capital he uses; he goes to work on another man's farm, or in another man's factory; he lives in another man's house, and often eats another man's food; he derives benefits from other men's inventions, and discoveries; and he uses roads, railways, public buildings, &c., furnished at the cost of the community. The production of wealth, therefore, depends not on the will and exertions of a single man, but on the proper bringing together of land, labour, and capital, by different persons and classes of persons. These different persons must have their several shares of the wealth produced; if they furnish something requisite for producing, they can make a bargain and ask for more or less of the produce. But #it is not mere chance or caprice which governs the sharing of wealth, and we have to learn the natural laws according to which the distribution takes place#. We must ascertain how it is that many of the population get so little, and some so much. Men work very hard on a farm and raise crops; the landlord comes and takes away a large part as rent, so that the labourers have barely enough to live upon. When we are able to understand why the labourer gets so little at present, we shall see, perhaps, how he might manage to get more, but in any case we shall see that it is due in great part to the laws of nature. The part of our subject which we are now going to consider is called the #distribution of wealth#, because it teaches us how the wealth produced is distributed (Latin, _dis_, apart, and _tribuere_, to allot) between the labourers, the owners of land, the owners of capital, and the government. The part which the labourer gets is called #wages#; the share of the land owner is called #rent#; that of the capitalist is #interest#; and the government take #taxes#. We may say that, as a general rule, the produce of work is divided into four shares, which may be thus shown: #produce = wages + rent + interest + taxes.# #39. The Labourer's Share--Wages.# It ought to be carefully remembered that the names #wages#, #rent#, and #interest#, as here used, do not exactly agree in meaning with the names as we employ them in common life. The wages paid to workmen are sometimes more than wages, being partly interest; the rent almost always consists partly of interest; and what is called interest may in some degree be really wages or rent. By #wages# we mean, in political economy, nothing but what goes to pay for the trouble of labour. But many workmen own their own tools; masons have a boxful of chisels, mallets, rules, &c.; carpenters often require twenty or thirty pounds' worth of planes and other implements; a pianoforte maker sometimes owns seventy pounds' worth of tools; even gardeners require spades, rakes, a barrow, scythe, or perhaps a mowing machine and a roller. Now, all such tools represent so much invested capital, and a certain amount of interest must be paid for this capital. A pianoforte maker might expect five pounds a year as interest upon the cost of his tools. But true wages, are what remains after allowance has been made for such interest, and it would be proper to subtract also what is paid to the government as taxes. #40. The Land Owner's Share--Rent#, the second part of the produce, means, in political economy, what is paid for the use of a natural agent, whether land, or beds of minerals, or rivers, or lakes. The rent of a house or factory is, therefore, not all rent in our meaning of the word. Capital has been spent in building the house or factory, and interest must be paid on this capital; we must then deduct this interest from what is commonly called the rent, before we can find out what is really rent. The ground rent of a house is the rent paid for the ground on which it stands, and this will be more nearly the true rent, apart from interest. Similarly, the ordinary rent of a farm will usually include interest upon the capital spent on the farm buildings, roads, gates, fences, drains, and other improvements. We shall afterwards learn exactly how true rent arises. #41. The Capitalist's Share.# The proper share of the capitalist is #interest#; but this is usually a good deal less than what actually remains in the hands of the capitalist. Business is generally carried on by some capitalist who rents a piece of land, builds a factory, purchases machinery, and then employs men to work the machinery, paying them wages. The capitalist himself often acts as manager, and works every day almost as long as the workmen. When the goods are finished and sold, he keeps the whole of the money he gets for them; but then he has already paid out a large sum as wages, while the goods were being made; another part goes to pay the rent of the land which he has hired. Having struck off these portions, there ought to remain a certain #profit#, part of which he uses to live upon. But even this profit consists of more than interest upon his capital. It should include also a payment for his labour in superintending the business. The manager of a factory may seldom touch the cotton, flax, iron, or other material, which is manufactured; nevertheless, he works with his head and his pen, calculating the prices at which he can produce goods, inquiring where he can buy the materials most cheaply, choosing good workmen, keeping the accounts straight, and so on. Severe mental labour is really far more difficult and exhausting than manual labour; and in raising up a good business, and carrying it through times of danger, a manager has to undergo great anxiety and mental fatigue. Thus, it is necessary that a successful manager should receive a considerable share of the produce, so as to make it worth his while to give this labour. His share is called #the wages of superintendence#, and, although usually much larger than the share of a common labourer, it is really wages of the same nature. Another part of the capitalist's so-called profit ought to be laid aside as #recompense for risk#. There is always more or less uncertainty in trade, and even the most skilful and careful manager may lose money by circumstances over which he has no control. Sometimes, after building a factory, the demand for the goods which he is going to produce falls off; sometimes the materials cannot be bought; perhaps it is discovered, when too late, that the factory has been built in an unsuitable place; occasionally, too, the workmen are discontented, and refuse to work for such wages as the capitalist can afford to pay. Now, whenever any of these mistakes or misfortunes happen, it is the capitalist who mainly suffers, because he loses a great deal of money, on which he might otherwise have lived comfortably. Sometimes men who have worked hard all their lives, and grown rich by degrees, lose all their wealth again in the end, by some error of judgment or by some unfortunate event due to no fault of their own. A capitalist, then, must have some inducement for running into these disagreeable risks; by lending his capital to the government he might get interest for it, and be nearly sure not to lose. If, then, he puts it into trade, and runs the risk of loss, he must have a recompense for the risk. This ought to be at least enough to make the profits of the successful business balance the losses of the unfortunate ones, so that on the average capitalists will get the interest of capital and the wages of superintendence free from loss. We may say, then, that-- profit = wages of superintendence + interest + recompense for risk. #42. About Interest.# That which is paid for the use of capital altogether apart from what is due for the trouble and risk of the person conducting the business, is called #interest#. This interest, of course, will be greater or less according as the amount of capital is greater or less; it will also be greater or less according as the capital is employed for a longer or shorter time. Thus the rate of interest is always stated in proportion to the capital sum and to the time; _five per cent. per annum_ means that, for every hundred pounds of capital, five pounds are paid during every year in which the capital is used, and in the same proportion for longer or shorter times. The rates of interest actually paid in business vary very much, from one or two per cent. up to fifty per cent. or more. When the rate is above five or six per cent., it will be to some extent not true interest, but compensation for the risk of losing the capital altogether. To learn the true average rate of interest, we must inquire what is paid for money lent to those who are sure to pay it back, and who give property in pledge, so that there may be no doubt about the matter. It seems probable that the true average rate of interest in England is at present about four per cent., but it varies in different countries, being lower in England and Holland than anywhere else. In the United States it is probably six or seven per cent. The most important fact about #interest# is that #it is the same in one business as in another#. The rates of profit differ very much, it is true, but this is because the labour of superintendence is different, or because there is greater risk in one trade than another. But the true interest is the same, because capital, being lent in the form of money, can be lent to one trade just as easily as to another. There is nothing in circulating capital which fits it for one trade more than another: accordingly it will be lent to that trade which offers ever so little more interest than other trades. Thus #there is a constant tendency to the equality of interest in all branches of industry#. CHAPTER VII. WAGES. #43. Money Wages and Real Wages.# Wages, as we have already learnt, are the payments received by a labourer in return for his labour. It does not matter whether these payments are received daily, weekly, monthly, quarterly, or yearly. A day gardener is, perhaps, paid every evening; an artisan is usually paid on Saturday or Friday night, or sometimes fortnightly; clerks receive their salaries monthly; managers, officers, secretaries, and others, are paid quarterly, or sometimes half-yearly. When the wages are paid monthly, or at longer intervals, they are generally called #salary# (Latin, _salarium_, money given to Roman soldiers for salt); but if the salary is paid for labour and nothing else, it is exactly the same in nature as wages. I said, in the last chapter, that wages consist of a share of the produce of labour, land, and capital; in the preceding paragraph, I have been saying that it consists of payments. Here arises one of the great difficulties of our subject. As a matter of fact, the wages received by labourers, in the present day, consist almost always of money. A person working in a cotton mill produces cotton yarn; but he does not receive at the end of the week so much cotton yarn; he receives so many shillings. This is much more convenient; for if the labourer received cotton yarn, or any other commodity which he produces, he would have to go and sell it in order to buy food and clothes, and to pay the rent of his house. Instead, then, of receiving an actual share of the produce, he receives from the capitalist as much money as is supposed to be equal in value to his share. Now, we shall see that it is requisite to distinguish between #money wages# and #real wages#. What a labourer really works for is the bread, clothes, beer, tobacco, or other things which he consumes; these form the real wages. If he gets more of these, it does not matter whether he gets more or less money wages; he cannot eat money, or use it in any way except to spend it at shops. If corn or cotton becomes dearer, the wages of every workman are really lessened; because he can buy less corn or cotton with his money wages. On the other hand, everything which makes goods cheaper, increases the real wages of workmen; because they can get more of the goods in exchange for the same money wages. People are accustomed to think far too much about the number of shillings they get for a day's work; they fancy that, if they get 25 per cent. more money wages, they must be 25 per cent. more wealthy. But this is not necessarily the case; for if the prices of goods on the average have also risen 25 per cent, they will be really no richer nor poorer than before. We now begin to see that to increase the productiveness of labour is really the important thing for everybody. For if anything, such as cotton cloth, can be made with less labour, it can be sold more cheaply, and everybody can buy more of it for the same money, and thus be better clothed. If the same were the case with other goods, so that linen, stockings, boots, bricks, houses, chairs, tables, clocks, books, &c., were all made in larger quantities than before, with the same labour, everybody in the country would be better supplied with the things which he really wishes to have. It is certain that #a real increase of wages to the people at large is to be obtained only by making things cheaply#. No doubt a tradesman gains sometimes when the goods he deals in become dearer, but to the extent that they are dearer, all consumers of the goods lose, because they can enjoy less comforts and necessaries. But, if goods are made cheaply, all consumers gain thereby, and, all people being consumers, all gain so far as they use the cheapened articles. Nor does it follow that artisans and tradespeople suffer by the cheapening of goods. If, owing to some invention, much greater quantities are made with the same labour, the artisan will probably be able to sell his share of the produce for more than before, that is, his wages will rise instead of falling by the cheapening of the produce. The tradesman, again, may gain less on each separate article that he sells, but he may sell so much more than before, that his total profits may be increased. The result to which we come is, then, that #all increase of produce, and cheapening of goods tends to the benefit of the public, and this is the true way in which people are made richer#. #44. How Differences of Wages arise.# It is very important to understand rightly the reasons of the great differences which exist between the rates of wages paid in different occupations. Some kinds of labourers are paid a hundred or even a thousand times as much for a day's work as others, and it may seem very unfair that there should be such great differences. We must learn to see that this is the necessary result of the various characters and abilities of persons, partly arising from the actual strength of mind and body with which they were born, partly from the opportunities of education and experience which they have happened to enjoy. We are often told that all men are born free and equal; however this may be in a legal point of view, it is not true in other ways. One child is often strong and stout from its earliest years; another weakly and unfit for the same exertion. In mind there are still more remarkable differences. The rates of wages in different employments are governed by #the laws of supply and demand# which we shall afterwards consider. Just as goods rise in price when there is little in the market and much is wanted, so the price of men's labour rises when much of any particular kind is wanted and little is to be had. It does not matter much whether we speak of demand for goods or demand for the labour, which is necessary to make the goods. If more things of a certain sort are wanted, then more men able to make them must be found. If I buy an aneroid barometer, I use up the labour of a man able to make such a barometer; if many people take a fancy to have aneroid barometers, and only a few workmen have the necessary skill to make them, they can ask a high price for their labour. It is true that people buying barometers do not usually pay the workmen for making them; a man with capital gets the barometers made beforehand and puts them in shops ready for sale. The capitalist advances the wages of the workmen, but this is only for a few weeks or months, and according as the demand for barometers is brisk or slow, he employs more or fewer workmen. Thus, #demand for commodities comes to nearly, though not quite, the same thing as demand for labour#. There is the profit of the capitalist to be considered as well; but, with this exception, #rates of wages are governed by the same laws of supply and demand as the prices of goods#. Anything, then, which affects the numbers of men able and willing to do a particular kind of work, affects the wages of such men. Thus the principal circumstance governing wages is the comparative numbers of persons brought up with various degrees of strength, both of body and mind. The greater number of ordinary men, while in good health, have sufficient strength of arms and legs to do common work; the supply of such men is consequently very large, and, unless they can acquire some peculiar knowledge or skill, they cannot expect high wages. Dwarfs and giants are always much less common than men of average size; if there happened to be any work of importance which could only be done by dwarfs or giants, they could demand high wages. Dwarfs, however, are of no special use except to exhibit as curiosities; very large strong men, too, are not generally speaking of any particular use, because most heavy work is now done by machinery. They can, however, still get very high wages in hewing coal, or puddling iron, because this is work, requiring great strength and endurance, which is not yet commonly done by machinery. Iron puddlers sometimes earn as much as £250 a year. It is great skill and knowledge which generally enable a man to earn large wages. Rich people like to get the best of everything, and thus the few people who can do things in the best possible way can ask very high prices. Almost any one can sing badly; but hardly any one can sing as well as Mr. Sims Reeves: thus he can get perhaps £20 or £30 for every song which he sings. It is the same with the best artists, actors, barristers, engineers. An artist is usually his own capitalist, for he maintains himself during many months, or even years, while he is painting a great picture; if he succeeds in doing it excellently well, he can sell the picture for thousands of pounds, because there are many rich people who wish to possess good pictures. #45. Adam Smith on Wages.# There are, however, various circumstances which cause wages in any particular employment to be higher or lower than in other employments, and we had better attend to what Adam Smith has said on this subject. He mentioned five principal circumstances which make up for small wages in some occupations, and balance great wages in other ones, as follows: (1.) #The Agreeableness or Disagreeableness of the Employments themselves.# If an employment is in itself comparatively pleasant, it attracts many who would not otherwise go into it at the current wages. Thus, officers of the army and navy are not on the average highly paid; but there is never any difficulty in finding men willing to be officers, because the work is thought to be easy, and there is honour and power attaching to it. On the other hand, a good butcher makes high wages, because his business is a greasy one, besides being thought to be cruel, and a clever man must be attracted to it by good earnings. (2.) #The Easiness and Cheapness, or the Difficulty and Expense of learning the Occupation.# This circumstance always has much importance, because the greater number of the people are poor, and are consequently unable to give their children a long good education. Thus, the larger part of the young men who grow up are only fit for common manual employments, and therefore get low wages. To learn a profession, like that of an architect or engineer, it is requisite to pay a high premium, and become a pupil in a good office, and then there are many years to be spent in practising and waiting before profit begins to be made. Hence the comparatively few who succeed in the difficult professions gain very high wages. (3.) #The Constancy or Inconstancy of Employment.# When a man is sure of being employed and paid regularly all the year round, he is usually willing on that account to accept a less rate of wages. Thus, there is little difficulty in finding men to be policemen at about 25 shillings a week; for though they have to go on duty at night, and their work is often tedious and disagreeable, yet policemen are nearly sure to have employment as long as they behave well. A carpenter or bricklayer, on the contrary, is sometimes thrown out of work, and becomes anxious as to the means of keeping his family. Masons and bricklayers, who cannot work during frosty weather, ought of course to have higher wages during the rest of the year, so as to make up a good average. Dock-labourers, who are simply strong men without any particular skill, earn large wages when trade is brisk and many ships come into the docks; at other times, when trade is slack, or when contrary winds keep ships out of port, they often fall into destitution through want of employment. (4.) #The Small or Great Trust which must be reposed in those who exercise the Employments.# This circumstance considerably affects the supply of people suitable for certain occupations. A man cannot expect to get employment in a bank, or in a jeweller's shop, unless he has a good character. Nothing is more difficult than for a person convicted of dishonesty to find desirable employment. Thus, a good character is often worth a great deal of money. Honesty, indeed, is so far common that it does not alone command high wages; but it is one requisite. The cleverest man would never be made the manager of a large business, if there was reason to think that he had committed fraud. (5.) Lastly, #The Probability or Improbability of Success in Employments greatly affects the Wages of those who succeed#. In some cases, a man can hardly avoid succeeding; if he once enlists, he is made into a soldier whether he likes it or not. Almost all, too, who become clerks in banks, counting-houses, or public offices, can succeed in doing some of the work required in such offices. Accordingly clerks are seldom highly paid. But of those who become barristers, only a few have the peculiar knowledge, tact, and skill required to make them successful; these few make very large gains, and the unsuccessful men have to seek for other employments. Some occupations are very badly paid, because they can be taken up by men who fail in other work. Frequently a person who has learnt a trade or profession finds that he is unfit for it; in other cases, there is a failure in the demand for a commodity, which obliges its manufacturers to seek other work. Such people are usually too old and too poor to begin again from the beginning, and learn a new difficult trade. Thus they have to take to the first work they can do. Educated men who have not been successful become secretaries, house-agents, insurance-agents, small wine merchants, and the like. Uneducated men have to drive cabs, or go into the army, or break stones; poor women become seamstresses, or go out charing. Here again we see the need of leaving everybody at perfect liberty to enter any trade which he can manage to carry on; it is not only injurious to the public, but it is most unfair to people in misfortune, if they are shut out of employments by the artificial restrictions of those who already carry on those employments. #46. What is a Fair Day's Wages?# It is a favourite saying that #a man should have a fair day's wages for a fair day's work; but this is a fallacious saying#. Nothing, at first sight, can seem more reasonable and just; but when you examine its meaning, you soon find that there is no real meaning at all. It amounts merely to saying, that #a man ought to have what he ought to have#. There is no way of deciding what is a fair day's wages. Some workmen receive only a shilling a day; others two, three, four, or five shillings; a few receive as much as ten, or even twenty shillings a day; which of these rates is fair? If the saying means that all should receive the _same_ fair wages, then all the different characters and powers of men would first have to be made the same, and exactly equalised. We have seen that wages vary according to the laws of supply and demand, and as long as workmen differ in skill, and strength, and the kind of goods they can produce, there must be differences of demand for their products. Accordingly, there is no more a fair rate of wages than there is a fair price of cotton or iron. It is all a matter of bargain; he who has corn or cotton or iron or any other goods in his possession, does quite right in selling it for the best price he can get, provided he does not prevent other people from selling their goods as they think best. So, any workman does quite right in selling his labour for the highest rate of wages he can get, provided that he does not interfere with the similar right of other workmen to sell their labour as they like. CHAPTER VIII. TRADES-UNIONS. #47. The Purposes of Trades-Unions.# Working-men commonly think that the best way to raise their earnings is to form trades-unions, and oblige their employers to pay better wages. #A trades-union is a society of men belonging to any one kind of trade, who agree to act together as they are directed by their elected council, and who subscribe money to pay the expenses.# Some trades-unions are very different from others, and they are not all well conducted nor all badly conducted, any more than people are all well behaved or all badly behaved. Moreover, the same trades-union often does different kinds of business. Usually they act as benefit or friendly societies, that is to say, if a member of a trades-union pays his subscription of say one shilling weekly, together with an entrance-fee and other small payments, he has a right, after a little time, to receive say twelve shillings a week in case of illness; he gets back the value of his tools if they should happen to be burnt or lost; when thrown out of work he will enjoy say ten shillings a week for a certain length of time; if he is so unfortunate as to be disabled by accident, he receives a good sum of money as an accident benefit; and when he dies he is buried at the expense of the union. All these arrangements are very good, for they insure a man against events which are not usually under his own control, and they prevent workmen from becoming paupers. So far as trades-unions occupy themselves in this way, it is impossible not to approve of them very warmly. Then, again, trades-unions are able to take care of their members by insisting that employers shall make their factories wholesome and safe. If a single workman were to complain that the workshops were too hot, or that a machine was dangerous, or a mine not properly ventilated, he would probably not be listened to, or would be told to go about his business. But if all the workmen complain at once, and let it be known that they do not intend to go on working unless things are made better, the employer will think about the matter seriously, and will do anything that is reasonable to avoid disputes and trouble. Everybody is justified in taking good care of his own life and health, and in making things as convenient to himself as possible. Therefore we cannot find fault with workmen for discussing such matters among themselves, and agreeing upon the improvements they think right to demand. It is quite proper that they should do so. But nobody is perfectly wise, and those who have not much time to get knowledge, and learn science and political economy, will often not see the effects of what they demand. They may ask for something which is impossible, or would cost so much as to stop the trade altogether. In all such matters, therefore, working-men should proceed cautiously, hearing what their employers have to say, and taking note especially of what the public opinion is, because it is the opinion of many who have nothing to lose or gain in the matter. #48. The Regulation of Hours.# One of the principal subjects of dispute is usually the number of hours in the day that a workman should work. In some trades a man is paid by the hour or by the work done, so that each man can labour a longer or shorter time as he prefers. When this is the case, each man is the best judge of what suits him, and no trades-union ought to interfere. But in factories, generally speaking, it would not do to let the men come and go when they liked; they must work while the engines and machines are moving, and while other men need their assistance. Accordingly, somebody must settle whether the factory is to work for twelve, or ten, or nine, or eight hours a day. The employer would generally prefer long hours, because he would get more work and profit out of his buildings and machines, and he need not usually be on the spot all the time himself. It seems reasonable, then, that the workmen should have their opinion, and have a voice in deciding how long they will work. But workmen are likely to be mistaken, and imagine that they may get as much wages for nine hours' work as for ten. They think that the employer can raise the price of his goods, or that he can well afford to pay the difference out of his own great profits. But if political economy is to be believed, the wages of workmen are really the value of the goods produced, after the necessary rent of land and interest of capital have been paid. If factories, then, produce less goods in nine hours than in ten, as is usually the case, there cannot, in the long run, be so much wages to receive. On the other hand, as machinery is improved, labour becomes more productive, and it is quite right that those who are sufficiently well paid should prefer, within reasonable limits, to lessen their hours of work rather than increase their earnings. This is a matter which depends upon many considerations, and it cannot be settled in this Primer. What I should conclude is, that when workmen want to lessen their hours of work, they ought not to ask the same wages for the day's work as before. It is one thing to lessen the hours of work; it is another thing to increase the rate of wages per hour, and though both of these things may be rightly claimed in some circumstances, they should not be confused together. #49. The Raising of Wages.# The principal object of trades-unions, however, is to increase the rate of wages. Working men seem to believe that, if they do not take care, their employers will carry off the main part of the produce, and pay very low wages. They think that capitalists have it all their own way unless they are constantly watched, and obliged to pay by fear of strikes. Employers are regarded as tyrants who can do just as they like. But this is altogether a mistake. No capitalists can for more than a year or two make unusual profits, because, if they do, other capitalists are sure to hear of it, and try to do likewise. The result will be that the demand for labourers in that kind of trade will increase; the capitalists will bid against each other for workmen, and they will not, generally speaking, be able to get enough without raising the rate of wages. There is no reason whatever to think that trades-unions have had any permanent effect in raising wages in the majority of trades. No doubt wages are now much higher than they were thirty or forty years ago; but to a certain extent this is only a rise of money wages, due to the abundance of gold discovered in California and Australia. The rest of the increase can be easily accounted for by the great improvements in machinery, and the general prosperity of the country. It is certain, too, that the increase of wages is not confined to those trades which have unions; even common labourers who have no unions receive considerably more money wages than they did, and domestic servants, who never strike in a body, but simply leave one place when they can get a better, have raised their own wages quite as much as any union could have done it for them. #50. Strikes and Lockouts.# #Workmen are said to strike, that is, to strike work, when a number of them agree together to cease working on a certain day for certain employers#, in order to oblige these employers to pay better wages, or in some way to yield to their demands. When one or more employers suddenly dismiss their workpeople altogether, in order to oblige them to take lower wages, or agree to some alteration of work, it is called #a lockout#, and a #lockout is nearly the same as a strike of the employers#. Strikes sometimes last for many months, the workmen living on what savings they have, and on contributions sent to them by workmen or unions in the same or other trades. The employers at the same time lose much money by their factories standing still, and they sometimes receive aid from other employers. There is nothing legally or morally wrong in a strike or lockout when properly conducted. A man, when free from promises or contracts, has a right to work or not to work, as he thinks best, that is to say, the law regards it as beneficial to the country, on the whole, that people should be free to do so. Similarly, employers are free to work their mills or not as they like. Neither employers nor employed, indeed, must break engagements; men who have promised to work to the end of the week must of course do so; they are not free till their promise is performed. Again, nobody should be allowed suddenly to stop work in a way endangering other people. Enginedrivers and guards in America sometimes strike when a train is halfway on its journey, and leave the passengers to get to the next town as they best can. This is little better than manslaughter. Neither the owners nor the workmen in gasworks, waterworks, or any other establishment on which the public depends for necessaries of life, should be allowed suddenly to stop work without notice. The safety of the public is the first consideration. The law ought therefore to punish those who make such strikes. #51. The General Effect of Strikes.# There is not space in this little work to argue the matter out in detail, but I have not the least doubt that #strikes, on the whole, produce a dead loss of wages to those who strike, and to many others#. I believe that if there had not been a strike during the last thirty years, wages would now be higher in general than they are, and an immense amount of loss and privation would also have been saved. It has, in fact, been shown by Dr. John Watts of Manchester, in his "Catechism of Wages and Capital," that even a successful strike usually occasions loss. He has said, "Allowing for accidental stoppages, there will not be in the most regular trades above fifty working weeks in the year, and one week will therefore represent two per cent. of the year. If a strike for four per cent. rise on wages succeeds in a fortnight, it will take twelve months' work at the improved rate to make up for the lost fortnight; and if a strike for eight per cent. lasts four weeks, the workmen will be none the richer at the end of twelve months; so that it frequently happens that, even when a strike succeeds, another revision of wages takes place before the last loss is made up; a successful strike is, therefore, like a successful lawsuit--only less ruinous than an unsuccessful one." If we remember that a large proportion of strikes are unsuccessful, in which case of course there is simple loss to every one concerned; that when successful, the rise of wages might probably have been gradually obtained without a strike; that the loss by strikes is not restricted to the simple loss of wages, but that there is also injury to the employers' business and capital, which is sure to injure the men also in the end; it is impossible to doubt that the nett result of strikes is a dead loss. The conclusion to which I come is that, #as a general rule, to strike is an act of folly#. #52. Intimidation in Strikes.# Those who strike work have no right to prevent other workmen from coming and taking their places. If there are unemployed people, able and willing to work at the lower wages, it is for the benefit of everybody, excepting the strikers, that they should be employed. It is a question of supply and demand. The employer, generally speaking, is right in getting work done at the lowest possible cost; and, if there is a supply of labour forthcoming at lower rates of wages, it would not be wise of him to pay higher rates. But it is unfortunately common for those who strike to endeavour to persuade or even frighten workmen from coming to take their places. This is as much as to claim a right to the trade of a particular place, which no law and no principle gives to them. A strike is only proper and legal as long as it is entirely voluntary on the part of all concerned in refusing to work. When a striker begins to threaten or in any way prevent other people from working as they like, he commits a crime, by interfering with their proper liberty, and at the same time injuring the public. Men are free to refuse to labour, but it is absolutely necessary to maintain at the same time the freedom of other men to labour if they like. The same considerations, of course, apply to lockouts; no employer who locks out his workmen has any right to intimidate, or in any way to oblige other employers to do the same. No doubt voluntary agreements are made between employers, and lockouts are jointly arranged, just as extensive strikes are arranged beforehand. If any employers were to go beyond this and threaten to injure other employers if they did not join in the lockout, they should be severely punished. But such a case seldom or never occurs. Thus, strikes and lockouts are proper only as mere trials, to ascertain whether labour will be forthcoming at a certain rate of wages, or under certain conditions. If the workmen in a trade are persuaded that their wages are too low, then a strike will show whether it is the case or not; if their employers find themselves unable to get equally good workmen at the same wages, they will have to offer more; but if equally good can be got at the old rate, then it is a proof that the strikers made a mistake. Their wages were as good as the state of trade warranted. It is all a matter of bargain, and of supply and demand. Those who strike work are in the position of those who, having a stock of goods, refuse to sell it, hoping to get a better price. If they make a mistake, they must suffer for it, and those who choose to sell their goods in the meantime will have the benefit. But it is plain that it would never do to allow one holder of goods to intimidate and prevent other holders from selling to the public. It is worthy of consideration whether even voluntary combinations of dealers should not be prohibited, because they are often little better than conspiracies to rob the public. The good of consumers, that is, of the whole people, is what we must always look to, and this is best secured when men act freely and compete with each other to sell things at the cheapest rates. #53. Trades-Union Monopolies.# It cannot be denied that, in certain trades, the men may succeed to some extent in keeping their wages above the natural level by union. Wages, like the prices of goods, are governed by the laws of supply and demand. Accordingly, if the number of hat-makers can be kept down it reduces the number of hats that can be made, raises their prices, and enables the hat-makers to demand higher wages than they otherwise could do. Many unions try thus to limit production by refusing to admit more than a fixed number of apprentices, and by declining to work with any man who has not been brought up to the trade. It is probable that, where a trade is a small one, and the union powerful, there may be some success. The trade becomes a monopoly, and gets higher wages by making other people pay dearer for the goods they produce. They raise a tax from the rest of the nation, including all the workmen of other trades. This is a thoroughly selfish and injurious thing, and the laws ought by all reasonable means to discourage such monopolies. Moreover, monopoly is extremely hurtful in the long run to the working classes, because all the trades try to imitate those which are successful. Finding that the hatters have a strong union, the shoemakers, the tailors, and the seamstresses try to make similar unions, and to restrict the numbers employed. If they could succeed in doing so, the result would be absurd; #they would all be trying to grow richer by beggaring each other#. As I have pointed out in the _Logic Primer_ (section 177, p. 117), this is a logical fallacy, arising from the confusion between a general and a collective term. #Because any trade separately considered may grow richer by taxing other trades, it does not follow that all trades taken together, and doing the same thing, can grow richer.# No doubt, working men think that, when their wages are raised, the increase comes out of the pockets of their employers. But this is usually a complete mistake; their employers would not carry on business unless they could raise the prices of their goods, and thus get back from purchasers the increased sum which they pay in wages. They will even want a little more to recompense them for the risk of dealing with workmen who strike at intervals, and thus interrupt business. It is the consumers of goods who ultimately pay the increased wages, and though wealthy people no doubt pay a part of the cost, it is mainly the working people who contribute to the higher wages of some of their own class. The general result of trades-union monopolies to the working people themselves is altogether disastrous. If one in a hundred, or one in a thousand is benefited, the remainder are grievously injured. The restrictions upon work which they set up tend to keep men from doing that which they are ready and willing to do. The lucky fatten at the cost of those whom they shut out in want of work, and the strikes and interruptions of trade, occasioned by efforts to keep up monopolies, diminish the produce distributed as wages. #54. Professional Trades-Unions.# We often hear the proceedings of trades-unions upheld on the ground that lawyers, doctors, and other professional men have their societies, Inns of Court, or other unions, which are no better than trades-unions. This is what may be called a _tu quoque_ (thou also) argument. "We may form unions because you form unions." It is a poor kind of argument at best; one man acting unwisely is no excuse for another doing so likewise. I am quite willing to allow that many of the rules of barristers and solicitors are no better than those of trades-unions. That a barrister must begin to be a barrister by eating certain dinners; that he must never take a fee under a certain amount; that he must never communicate with a client except through a solicitor; that a senior counsel must always have a junior; and most of the rules of the so-called #etiquette# are clearly intended to raise the profits of the legal profession. Many things of this kind want reform. But, on the other hand, these unions avoid many of the faults of trades-unions. There is no limit to the number of persons who may enter them; all men of good character and sufficient knowledge can become barristers and solicitors. Moreover, the entrance to the legal, medical, and several other professions is being more and more regulated by examinations, which are intended purely to secure able men for the service of the public. Nor is any attempt made in these professional trades-unions to prevent men from exerting themselves as much as they can, so as to serve the public to the utmost of their ability. These professional trades-unions are thus free from _some_ of the evils which other unions produce. #55. The Fallacy of Making Work.# One of the commonest and worst fallacies into which people fall in political economy is to imagine that wages may be increased by doing work slowly, so that more hands shall be wanted. Workmen think they see plainly that the more men a job requires, the more wages must be paid by their employers, and the more money comes from the capitalists to the labourers. It seems, therefore, that any machine, invention, or new arrangement which gets through the work more quickly than before, tends to decrease their earnings. With this idea, bricklayers' labourers refuse (or did lately refuse) to raise bricks to the upper parts of a building by a rope and winch; they preferred the old, laborious, and dangerous mode of carrying the bricks up ladders in hods, because the work then required more hands. Similarly, brickmakers refused to use any machinery; masons totally declined to set stones shaped and dressed by machinery; some compositors still object to work in offices where type-composing machines are introduced. They are all afraid that if the work is done too easily and rapidly, they will not be wanted to do it; they think that there will be more men than there are berths for, and so wages will fall. In almost every case this is an absurd and most unfortunate mistake. No doubt, if men insist on sticking to a worse way of doing work after a better one has been invented, they may get bad wages, and perhaps go to the workhouse in old age. Thus, the hand-weavers in Spitalfields would continue weaving by hand, instead of learning to weave by steam power, and the case is somewhat the same with the hand-nailers of South Staffordshire. But when the younger workmen of a trade are wise and foreseeing enough to adopt a new invention as soon as it is successful, they are never injured, and usually much benefited by it. Seamstresses in England received wretchedly poor wages before the introduction of the American sewing machine, and they thought they would be starved altogether when the same work could be done twenty times as fast by machine as by hand. The effect, however, has been just of the opposite kind. Those who were not young, skilful or wise enough to learn machine-sewing, receive better wages for hand-sewing than they would formerly have done. The machine sewers earn still more, as much in many cases as 20s. a week. The explanation of this is that, when work is cheapened, people want much more of it. When sewing can be done so easily, more sewing is put into garments, and the garments being cheapened, more are bought. At the same time a good deal of the sewing, and finishing, and fitting, cannot be done by machinery, and this furnishes plenty of employment for those who cannot work machines. If masons were to employ machines for cutting stone, they would be benefited like the seamstresses, instead of being injured. The cost of cutting stone by hand is now so great that people cannot build many stone buildings, nor use stone to decorate brick buildings, unless they are wealthy people. Were the dressing of stone much cheapened by the aid of machinery, a great deal more stone would be used, and the masons, instead of labouring at the dull work of cutting flat surfaces, would find plenty of employment in finishing, and carving, and setting the machine-shaped stones. I have not the least doubt that, in addition to those engaged in working the machines, there would in the end be more masons wanted after the general introduction of machines than before. With type-setters the same thing will happen, if they take betimes to the new type-composing machines. It is true that a man with the aid of a good machine can set types several times as fast as without. But though the wages paid for setting a certain number of types might thus be reduced, so many more books, pamphlets, newspapers, and documents of various kinds would be printed, that no want of employment could be felt. Much of the work, too, such as the justifying, correcting, making into pages, &c., cannot be done by machinery, or not profitably, so that there would be plenty of work even for those who would not consent to work machines. The fact is that #wages are increased by increasing the produce of labour, not by decreasing the produce#. The wages of the whole working population consist of the total produce remaining after the subtraction of rent, interest, and taxes. People get high wages in Lancashire because they use spinning machinery, which can do an immense quantity of work compared with the number of hands employed. If they refused to use machinery, they would have to spin cotton by hand like the poor inhabitants of Cashmere. Were there no machinery of any kind in England we should, nearly all of us, be as poor as the agricultural labourers of Wiltshire lately were. People lose sight of the fact that #we do not work for the sake of working, but for the sake of what we produce by working#. The work itself is the disagreeable price paid for the wages earned, and these wages consist of the greater part of the value of the goods produced. It is absurd to suppose that people can become richer by having less riches. To become richer we must make more riches, and the object of every workman should be not to make work, but to make goods as rapidly and abundantly as possible. #56. Piece-Work.# Some trades unions endeavour to prevent their members from earning wages by piece work, that is, by payment for the quantity of work done, instead of payment for the time spent in doing it. If a man is paid tenpence an hour, whether he work quickly or slowly, it is evidently for his interest to work slowly rather than quickly, provided that he be not so lazy as to run a risk of being discharged. It is a well known fact that men employed on piece-work do much more work in the same time than those employed on time jobs, and it is altogether better that they should be paid by the piece when the work done can be exactly measured and paid for. The men earn better wages because they are incited to do so much more, and they earn it more fairly, as a general rule. Trades-unions, however, sometimes object to piece-work, the reason given being that it makes the men work too hard, and thus injures their health. But this is an absurd reason; for men must generally be supposed capable of taking care of their own health. There are many trades and professions in which people are practically paid by the piece, but it is not found necessary to have trades-unions to keep them from killing themselves. There is more fear that people will work too little rather than too much. The real objection which trades-unionists feel to piece-work is that it gets the work done quickly, and thus tends, as they think, to take employment away from other men. But, as I have already explained, men do not work for the sake of working, but for the sake of what they produce, and the more men in general produce, the higher wages in general will be. Trades-unionists put forward their views on the ground of unselfishness. They would say that it is selfish of Tom to work so as to take away employment from Dick and Harry; but they overlook the thousands of Toms, Dicks, and Harrys in other employments who get small wages indeed, and who are perhaps prevented by their rules from earning more. If the nation as a whole is to be wealthy and happy, we must each of us work to the best of our powers, producing the wealth which we can best produce, and not grudging others a greater success, if Providence has given them superior powers. People can seldom produce wealth for themselves without spreading a greater benefit over society in general, by cheapening commodities and lightening toil. #57. The Fallacy of Equality.# Workmen often show a dislike to allowing one man to earn more than another in the same shop, and at the same kind of work. This feeling is partly due to the mistaken notion that in doing more work than others he takes employment from them. It partly, however, arises from a dislike to see one man better off than his mates. This feeling is not confined to workmen. Any one who reflects upon the state of society must regret that the few are so rich, and the many so poor. It might seem that the laws must be wrong which allow such differences to exist. It is needful to reflect, therefore, that such differences of wealth are not for the most part produced by the laws. All men, it has been said, are born free and equal; it is difficult to see how they can be born free, when, for many years after birth, they are helpless and dependent on their parents, and are properly under their governance. No doubt they ought to become free when grown up, but then they are seldom equal. One youth is stout, healthy and energetic; another puny and weak; one bright and intelligent; another dull and slow. Over these differences of body and mind the laws have no power. An Act of Parliament cannot make a weak frame strong. It follows that in after life some men must be capable of earning more than others. Out of every thousand men and women, too, there will be a few who are distinguished by remarkable talents or inventive genius. One man by patient labour and great sagacity invents a sewing machine, a telegraph, or a telephone, and he thus confers the greatest possible advantage upon other men for centuries after. It is obviously to the advantage of everybody that those who are capable of benefiting society should be encouraged to do so by giving them all the reward possible, by patents, copyright, and the laws of property generally. To prevent or discourage a clever man in doing the best work he can, is certainly no benefit to other men. It tends to level all down to a low standard, and to retard progress altogether. Every man, on the contrary, who is incited to work, and study, and invent to the utmost of his powers, not only earns welfare for himself, but confers welfare upon other people. He shows how wealth may be created abundantly, and how toil may be lessened. What is true of great ability and great inventions is true, also, of the smallest differences of power or the slightest improvements. If one bricklayer's labourer can carry up more bricks than another, why should he be prevented from doing it? The ability is his property, and it is for the benefit of all that he should be allowed to use it. If he finds a better way of carrying bricks, of course it should be adopted in preference to worse ways. The purpose of carrying bricks is to get them carried and benefit those who want houses. Everything which makes it difficult and expensive to build houses, causes people to be lodged worse than they otherwise would be. We can only get things made well and cheaply if every man does his best, and is incited to do so by gaining the reward of his excellence. Every man then should not only be allowed, but should be encouraged to do and to earn all that he can; we must then allow the greatest inequalities of wealth; for a man who has once begun to grow rich, acquires capital, and experience, and means which enable him to earn more and more. Moreover, it is altogether false to suppose that, as a general rule, he does this by taking wealth from other people. On the contrary, by accumulating capital, by building, mills, warehouses, railways, docks, and by skilfully organising trades, he often enables thousands of men to produce wealth, and to earn wages to an extent before impossible. The profits of a capitalist are usually but a small fraction of what he pays in wages, and he cannot become rich without assisting many workmen to increase the value of their labour and to earn a comfortable subsistence. CHAPTER IX. CO-OPERATION, &c. #58. Arbitration.# We have now considered at some length the evils arising from the present separation of interests between the employed and their employers. The next thing is to discuss the various attempts which have been made to remedy these evils, and to bring labour and capital into harmony with each other. In the first place, many people think that when any dispute takes place, arbitrators or judges should be appointed to hear all that can be said on both sides of the question, and then decide what the rate of wages is to be for some time to come. No doubt a good deal may be said in favour of such a course, but it is nevertheless inconsistent with the principles of free labour and free trade. If the judges are to be real arbitrators, they must have power to compel obedience to their decision, so that they will destroy the liberty of the workman to work or not as he likes, and of the capitalist to deal freely with his own capital, and sell goods at whatever price suits the state of the market. If wages are to be arbitrarily settled in this way, there is no reason why the same thing should not be done with the prices of corn, iron, cotton, and other goods. But legislators have long since discovered the absurdity of attempting to fix prices by law. These prices depend entirely upon supply and demand, and no one is really able to decide with certainty what will be the conditions of supply and demand a month or two hence. Government might almost as wisely legislate about the weather we are to have next summer as about the state of trade, which much depends upon the weather, or upon wars and accidents of various kinds, which no one can foresee. It is impossible, then, to fix prices and wages beforehand by any kind of law or compulsory decision. The matter is one of bargain, of buying and selling, and the employer must be at liberty to buy the labour required at the lowest price at which he can get it, and the labourers to sell their labour at the highest price they can get, both subject of course to the legal notice of a week or fortnight. #59. Conciliation.# Though the compulsory fixing of wages is evidently objectionable, much good may be done by #conciliators#, who are men chosen to conduct a friendly discussion of the matters in dispute. The business is arranged in various ways; sometimes three or more delegates of the workmen meet an equal number of delegates from the masters, who place before the meeting such information as they think proper to give, and then endeavour to come to terms. In other cases the delegates lay their respective views before a man of sound and impartial judgment, who then endeavours to suggest terms to which both sides can accede. If the two parties previously engage that they will accept the decision of this conciliator or umpire, the arrangement differs little from arbitration, except that there is no legal power to compel compliance with the decision. Discredit has been thrown upon this form of conciliation by the fact that the workmen have in several instances refused to abide by the award of the umpire when given against them, and of course it cannot be expected that masters will accept adverse decisions as binding under such circumstances. Thus I am led to think that the conciliator should not attempt to be a judge; he should be merely an impartial friend of both sides, trying to remove misapprehension and hostile feelings, enlightening each party as to the views and reasons and demands of the other--acting, in short, as a go-between, and smoothing down the business as oil eases the movement of a machine. The final settlement must take the form of a voluntary bargain directly between the employers and employed, which will only have compulsory effect during the week or fortnight for which workmen usually enter into a legal agreement. Conciliation may in this way do much good, but it cannot remove the causes of difference--it cannot make the men feel that their interest is one with the interest of their employers. #60. Co-operation.# Among the measures proposed for improving the position of workmen, the best is co-operation, if we understand by this name #the uniting together of capital and labour#. The name co-operation is used indeed with various meanings, and some of the arrangements called by it have really nothing to do with what we are now considering. #To co-operate means to work together# (Latin, _con_, together, and _operor_, to work). About thirty-five years ago some workmen of Rochdale, noticing the great profits made by shopkeepers in retail trade, resolved to work together by buying their own supplies wholesale, and distributing them amongst the members of the society which they established. They called this #a co-operative society#, and a great number of so-called co-operative stores have since been established. Most of these are nothing but shops belonging to a society of purchasers, who agree to buy at the store and divide the profits. They have on the whole done a great deal of good by leading many men to save money and to take an interest in the management of affairs. The stores are also useful, because they compete with shopkeepers, and induce them to lower their prices and to treat their customers better. We frequently hear now of shops selling goods at #co-operative prices#. But such co-operative societies have little or nothing to do with the subject of capital and labour. Commonly these stores are conducted less upon the true co-operative principle than ordinary shops. A shop is usually managed by the owner or by a man who has a large interest in its success, and has the best reasons for taking trouble. Co-operative stores, on the contrary, are often managed by men who are paid by salary or wages only, and have nothing to do with the profits and the capital of the concern. #Real co-operation consists in making all those who work share in the profits.# At present a workman sells his labour for the best price he can get, and has nothing further to do with the results. If he does his work well, his master gets the benefit, and if he works badly his master is injured. It is true that he must not be very lazy or negligent for fear of being discharged; but if he takes care to be moderately careful and active, it is all that he need do for his own interests. No doubt it would be a good thing to reward the more active workmen with higher wages, and a wise employer endeavours to do this when he can, and to put the best workmen into the best places. But the trades-unions usually prevent it as far as they can, by insisting that men doing the same kind of work in the same place shall be paid alike. Moreover, as we have seen, many men are under the mistaken belief that if they work hard they decrease the demand for employment, and tend to take away the bread from their fellow-men. Thus it is not uncommon for workmen to study #how not to do the work too quickly#, instead of striving to make the most goods in the least time with the least trouble. Workmen do not see that what they produce forms in the long run their wages, so that if all workmen could be incited to activity and carefulness, wages would rise in all trades. #61. Industrial Partnerships.# The best way of reconciling labour and capital would be to give every workman a share in the profits of his factory when trade is so prosperous as to allow of it. Charles Babbage proposed, in the year 1832, that a part of the wages of every person employed should depend on the profits of the employers. In recent years this has been tried in several large works, especially in Messrs. Briggs' collieries, and in Messrs. Fox, Head & Co.'s iron-works. The arrangement generally made with the men was that the capitalists should first take enough of the profits to pay 10 per cent. interest on the capital, together with fair salaries for the managers as wages of superintendence, a sum to meet bad debts, the repairs and depreciation of the machinery, and all other ordinary causes of loss. Such profit as remained was then divided into two equal parts, one of which went to the employers, while the other was divided among the workpeople in proportion to the amounts of wages which they had received during the year. Many workmen under such a scheme found themselves at Christmas in possession of five or ten pounds, in addition to the ordinary wages of the trade received weekly during the year. This kind of co-operation has been called #industrial partnership#, and, if it could be widely carried into effect, there would arise many advantages. The workmen, feeling that their Christmas bonuses depended upon the success of the works, would not favour idleness, and would have some inducement for preventing needless waste whether of time or materials. By degrees they would learn that #the best trades-union is a union with their employers#. Strikes and lockouts would be for the most part a thing of the past, because, if wages were too low, the balance-sheet would prove the fact at the end of the year, and half the surplus would go to the workmen. To be free from the danger of strikes would be a very great advantage to the employers, and any portion of profits which they might seem to give up would be more than repaid by the increased care and activity of the workmen. The employers would continue to manage the business entirely according to their own judgment, and they need not make their affairs or accounts known to the men. All that is requisite is that skilful accountants should examine the books at the end of the year, and certify the amount of profits due to the men. If this plan were thoroughly carried out, the men would feel that they were really working for themselves as much as for their masters, and the troubles which at present exist would be nearly unknown. There are great difficulties in the way of this kind of co-operation: most capitalists do not like it, because they needlessly fear to make known their profits to their men, and they do not understand the advantages which would arise from a better state of things. The workmen also do not like the arrangement, because the trades-unions oppose co-operation, fearing that it will overthrow their own power. Where the scheme has been tried, it has usually succeeded well, until the men, urged by their trades-unions, refused to go on with it. Thus are people, through prejudice and want of knowledge, made blind to the best interests of themselves and the country. It is to be feared, then, that industrial partnerships will not make much progress just at present, so great is the dislike to them felt both by trades-unions and by prejudiced employers. Nevertheless, the arrangement is in accordance with the principles of political economy, and it will probably be widely adopted by some future generation. Already, indeed, many banks, mercantile firms, and public companies practically recognise the value of the principle, by giving bonuses or presents to their clerks at the end of a profitable year. A French railway company adopted this practice forty years ago, and as business falls more and more into the hands of companies whose profits are matters of general knowledge, there seems to be no reason whatever why the principle of industrial partnership should not be adopted. Somewhat the same principle is said to be carried into effect in the very extensive and successful newspaper business of Messrs. W. H. Smith & Son. #62. Joint-Stock Co-operation.# Another mode of co-operation consists in working men saving up their wages until they have got small capitals, so that they can unite together and own the factories, machines, and materials with which they work. They then become their own capitalists and employers, and secure all the profit to themselves. Co-operative societies of this kind are simply Joint-Stock Companies, the shares of which are held by the men employed. Of course the shareholders must choose directors from among themselves, and they must also have managers to arrange the business. The managers and directors ought to be well paid for what they do, and have a considerable share of the profits, in order to make them interested in the success of the works, and therefore active and careful. Incompetent or negligent management will soon ruin the best business. A great number of co-operative companies of this kind have been formed in the last twenty years in England, France, America, and elsewhere; but most of them have failed from want of good direction. The working-men shareholders do not generally understand what a great deal of skill and judgment is required in the conduct of a business; they are accustomed to see work going on as if it went of its own accord, but they do not see the constant anxiety and the careful calculation which is requisite to make the work profitable. Hence they usually fail to secure good managers, and they do not sufficiently trust those whom they appoint. Moreover, many of the so-called co-operative companies are not really co-operative; they frequently employ men who are neither shareholders nor receivers of a share of profits, and they pay their managers by a small fixed salary. #Such co-operative societies are badly-managed joint-stock companies, and cannot be expected to succeed well.# Another difficulty with such companies is, that they rarely have enough capital, and, when bad trade comes, they are unable to bear the losses which will sometimes occur for several years in succession. They can borrow money by the mortgage of the buildings and machinery belonging to the company, and this is usually done; but no banker will give credit to such companies without the security of fixed property. Thus they frequently fail when bad trade comes, and those who buy up their property cheaply reap advantage. It is to be hoped that at a future time all working-men will become capitalists on a small scale, and when education and experience have been acquired, co-operative factories of working-men may succeed. At present it would be better to leave the management of business in the hands of capitalists, who are not only experienced and clever men, but have the best reason to be careful and active, because their fortunes depend upon success. #63. Providence.# It is most deeply to be regretted that the working-people of England will not, for the most part, see the necessity of saving a portion of their wages in order to have something to live upon when trade is bad, or when ill-health and misfortune come upon them. Too many working-men's families spend all that is earned while trade is brisk, and when employment fails they are as badly off as ever. #There are several distinct reasons why every man or woman should save up some property when possible#:-- (1) It forms a provision in case of ill-health, accident, want of employment, or other misfortune; it is also wanted for support in old age, or for the helpless widow and orphans of a workman who dies early. (2) It yields interest, and adds to a workman's income. (3) It enables a man to go into trade, to buy good tools, and to enjoy good credit in case he sees an opportunity of setting up business on his own account. No man and no woman, who is in the prime of life and earning fair wages, should spend the whole. Even an unmarried person will generally reach a time of life when, through ill health, old age, or other unavoidable causes, it is no longer possible to get a living. By that time enough ought to have been saved to avoid the need of charity or the degradation of the poor-house. When there is a wife and young family, the need of saving is evidently greater still. Every great storm, colliery explosion, or other great accident leaves a number of helpless children to be brought up by a struggling widow, or to go on the parish. No doubt people may meet with disasters so unexpected and so great that they cannot be blamed for not providing against them. A man who is blinded, or crippled, or otherwise disabled in early life, is a proper object of charity, but there would be plenty of benevolent institutions to provide for such exceptional cases, if those who are more fortunate would provide properly for themselves. It is often said that working men really cannot save out of the small wages they receive; the expenses of living are too great. We cannot deny that there are labourers, especially agricultural labourers in the South of England, whose wages will not do more than barely provide necessary food and clothing for their families. The weekly earnings of a family in some parts are not more than 12 or 15 shillings on the average of the year, and sometimes even less. Such people can hardly be expected to save. But this is not the case with the artisans and labourers in the manufacturing districts. They seldom earn less than a pound a week, and often two pounds. The boys and girls, and sometimes the mother of the family, also earn wages, so that when trade is brisk a family in Manchester or Leicester, or other manufacturing town, will get altogether £150 a year, or more. Some kinds of workmen, especially coal-hewers, and iron-puddlers, earn twice that amount in good years, and are in fact better paid than schoolmasters, ministers of religion, and upper clerks. It is idle to say that the better-paid working men cannot save, and though we cannot make any strict rule, it is probable that #all who earn more than a pound (five dollars, or 25 francs) a week, might save something#. It is easy to prove this assertion by the fact that when a strike occurs, men voluntarily live on a half, or a third of their ordinary wages. Sometimes they will live for three or four months on 12 or 15 shillings a week, which is paid for their support by their trades-union, or by other unions, which subscribe money to assist them. It is quite common for workmen to pay #levies#, that is, almost compulsory subscriptions of a shilling or more a week, to be spent by other workmen who are #playing#, as it is called, during a long strike. Nobody wishes working people to live on the half of their wages, but #if, for the purpose of carrying on struggles against their employers, they can spare these levies, it is evident that they could spare them for the purpose of saving#. Then, again, we know that the money spent on drink is enormous in amount; in this country it is about £140,000,000 a year, or about four pounds a year for every man, woman, and child. To say the least, half of this might be saved, with the greatest advantage to the health and morals of the savers, and thus the working classes would be able to lay by an annual sum not much less than the revenue of the nation. CHAPTER X. TENURE OF LAND. 64. We have sufficiently considered the difficulties which exist regarding #Labour# and #Capital#, two of the requisites of production, and we will now turn to another part of political economy, and inquire into the way in which #Land#, the third requisite, is supplied. In different countries land is held in very different ways. It is a matter of custom, and in the course of time customs slowly change. The way in which farms are owned and managed in England at the present time is no indication of the way land is held in France, or Norway, or Russia, or even the United States; nor is it the same as the way in which farms were owned in England some centuries ago. What is fitting to one place and state of society will not necessarily be fitting in other circumstances. We have to consider the various ways in which the requisites of production, land, labour, and capital, are brought together; sometimes they are all furnished by the same person; sometimes by separate persons. In the condition of #slavery#, for instance, as it existed in the Southern States of North America, the owner of an estate owned the land, labour, and capital, all at once. Strictly speaking a slave is not a labourer, because he cannot sell his labour at his own price, and work or not as he likes. He is more in the position of the horse which drags the plough, a mere beast of burden. Just as a farmer owns his horses, and cows, and pigs, as part of his capital, so a slave-owner treats his slaves as part of his capital. Slave-labour being given unwillingly, and without hope of reward, is usually badly given, and is wasteful; but there is hardly any need to consider whether slavery is good or bad in an economical point of view, because it is altogether condemned from a moral point of view. We may show the way the requisites of production are furnished in slavery by the following diagram-- #Slave-Owner.# | /---------------------------------------------\ #Land.# #Labour.# #Capital.# In a very large part of the world, again, the government takes the place of land-owners, and collects the rent by means of tax-gatherers. The farming is done by poor peasants, who find the capital, so far as there is any, and also do the work. Thus, we have the arrangement-- #Government.# #Peasant.# | | /------\ /---------------------------\ #Land.# #Capital.# #Labour.# This system is called #Ryot Tenure#, and it exists at the present day in Turkey, Egypt, Persia, and many eastern countries; also in a somewhat altered form in British India. After slavery, it is the worst of all systems, because the Government can fix the rent at what it likes, and it is difficult to distinguish between rent and taxes. When their crops fail the ryot peasants are unable to pay the tax-gatherers, and they get into debt and become quite helpless. 65. #Peasant Proprietorship.# One of the best modes of holding land, when it can exist, is that known as peasant proprietorship, because the owner of the land is the peasant himself, who labours with his own arms, and finds the capital also. In this system, as in slavery, all the requisites of production are in the same hands; thus-- #Peasant.# | /------------------------------------------------\ #Land.# #Labour.# #Capital.# But in every other respect this system is the opposite of slavery. Its advantages are evident; the labourer being the owner of the farm and of all upon it, is an independent man, who has every inducement to work hard, and to increase his savings. Every little improvement which he can make in his farm is so much added to his wealth, and that of his family after him. There is what is called the #magic of property#. The feeling that he is working entirely for his own and his family's benefit #almost magically increases his inclination to work#. In newly-settled countries, such as the Western Territories of the United States, and Canada, or the colonies of Australia, and the Cape, this mode of holding land seems to be suitable, because the land is there very cheap, and crops can be raised with little capital. In such countries there is no need of expensive manures, elaborate machinery, and the cost of draining and improving land. The objection to peasant proprietorship is, that he who does the labour of a farm with his own hands, must usually be a poor and unskilful person. If he were rich he would probably prefer to buy up the labour of other men, and become a capitalist farmer; if he were a really skilful farmer, it would be a pity to waste his skill upon a small farm, when, with more division of labour, he might profitably direct and manage a large one. Being poor, his capital will be mostly absorbed in building his cottage and barns, and in paying the small price of his land; he will have little left to make improvements, or to buy good labour-saving implements, and good stock, such as well-bred horses, cows, and pigs. Thus, unless his land be new and very fertile, he will not get a large return for his labour. Owing to the magic of property, he may work very hard, and during long hours, but he will not work in an economical way, and therefore will remain poor in spite of his severe exertions. The peasant proprietors who still exist in Switzerland, Belgium, Norway, Sweden, and some other parts of Europe, work almost day and night during the summer, and they are very careful and saving; yet they seldom grow rich, or get more than a bare living out of the soil. Too frequently the peasant proprietor, if he is not very provident, runs short of money after one or two bad seasons. He will then be tempted to borrow money, to sell his timber, and other produce before it is ready for the market, and thus run in debt. When his farm has increased in value and would bring some rent, he will very likely mortgage it, that is, give it by a legal deed as security for his debts. The mortgagee or lender of the money then becomes part-owner of the land and capital, so that the arrangement tends to take this form-- #Money-Lender.# #Peasant.# | | /----------------\ /-----------------\ #Land.# #Capital.# #Capital.# #Labour.# 66. #Tenure of Land in England.#. As agriculture becomes more a science, farming will require greater skill, and larger capital, and the English mode of land tenure will probably spread. In this system there is the greatest division of labour, and different ranks of people have shares in the business, somewhat as follows:-- #Proprietor.# #Farmer.# #Labourer.# | | | /-----------\ /-------------\ /----\ #Land. Capital.# #Capital. Labour.# #Labour.# The land is usually owned by some rich man, who likes to have large estates, but does not wish to have the trouble of farming. In respect of the land only he is a #proprietor of a natural agent#, and the rent he receives is true rent; but there will usually be buildings, roads, fences, drains, and other improvements, of which he is also owner; in respect of these he is a capitalist, and the return he receives is interest. The farmer is a man of knowledge and skill, with considerable capital; he hires the land and its improvements from the proprietor, and stocks it with cattle, carts, improved implements of all kinds, and then employs day-labourers to do the manual work, labouring himself in superintendence, in keeping accounts, buying and selling, &c. The labourer, generally speaking, is nothing but a labourer; he lives in a cottage hired probably from the farmer or proprietor, and he has little motive for working harder than he is made to do, because the advantage goes to his employer. In this arrangement there are great advantages, and also great disadvantages. The farmer, being an intelligent man, acquainted with agricultural science, and furnished with plenty of capital, can adopt all the latest inventions, and raise the largest possible produce from the land and labour. It is also advantageous that the farmer does not own the land and fixed capital, because this leaves all his own capital free to provide more expensive implements and manures, and finer kinds of cattle. It is also a good thing that farms will, on this system, be large, so that there will be considerable division of labour, almost as in a factory; thus there will arise some of the advantages which were described as belonging to the Division of Labour (Sections 25-29). The disadvantages of the English mode of farming are also great, especially as regards the labourers, the most numerous class. They have none of the independence of peasant proprietors, and, when dismissed, or too old to work, have probably to go to the workhouse. Their wages have hitherto been very low, and saving was not possible. But this state of things is partly due to the bad Poor Laws which used to exist in England, and to the excessive numbers of poor, ignorant labourers. After a time, when the poor laws are improved, when labourers become more educated, and are employed, like factory hands, to work machines, there is no reason why they should not get good wages, and become independent, like artisans. In the English system, a great deal depends upon the nature of the agreement between the land-owner and the capitalist farmer. Many large land-owners in England refuse to let their land for long periods They like to have farmers who are #tenants at will#, and can be turned off their farms at a year's notice, and deprived of the value of all the improvements they have made, if they offend the great land-owner. It is easy to understand this; the land-owners wish to be lords, and to rule affairs in their own neighbourhood, as if they were little kings. This sort of thing is called #territorial influence#, and men who have become rich by making iron or cotton goods, often buy estates at a high price, in order to enjoy the pleasure of feeling like lords. The rural parts of England, Scotland, and Ireland are still, in fact, under #the feudal system#. In a Primer like this we have to look at the matter as regards political economy only, and in this respect the arrangement described is bad. Tenants at will have no inducement to improve their farms, because this would tempt the land-owner to turn them out, or to raise the rent. It is generally understood, indeed, that a land-owner will not use his power, so that many farmers act as if they were sure of holding their farms; if turned out after all, they are practically robbed of their capital; and, in any case, they cannot possibly feel the independence which every man ought to enjoy. We must always remember that the laws should be made not for the benefit of any one class, but for the benefit of the whole country. The laws concerning landlord and tenant have, however, been made by landlords, and are more fitted to promote their enjoyment than to improve agriculture. There are two modes of remedying the unfortunate state of land tenure in this country, namely:-- (1) By a system of long leases. (2) By tenant right. #67. Leasehold Tenure.# A lease is a formal agreement to let land or houses to a tenant for a certain number of years at a fixed rent, and with various conditions, which are carefully stated, to prevent misunderstanding. When land is taken by a farmer under a lease for thirty years or more, it becomes almost like his own property, because, in the earlier part of his term, he can make great improvements with the aid of his capital, and yet be sure of getting the value back before the lease comes to an end. In the eastern parts of England and Scotland, where the farms are largest and best managed, these long leases are the usual mode of letting land. It is certainly one of the best arrangements for promoting good farming, and it has few disadvantages, except that the farmer will not make improvements towards the end of his lease. #68. Tenant Right.# Another good arrangement is tenant right, which consists in #giving the tenant a right to claim the value of any unexhausted improvements#, which he may have made in his farm, if he be turned out of it. A farmer can prove without difficulty how much he has spent in building barns, stables, piggeries, &c., in draining the lands, making roads and fences, or in putting lime and costly manures into the soil. Those who are experienced in farming can form a good judgment how long each improvement will continue profitable, so as to calculate how much the tenant loses if he be turned away. Thus a good estimate may be formed as to the sum which the tenant should receive as compensation, and the landlord, if he chooses to dismiss the tenant, should be obliged to pay this compensation. He will get it back by charging a higher rent to the next tenant. Tenant right, though unknown in most parts of England, is not at all a new system; it has existed for a long time in the north of Ireland, where it is called the #Ulster tenant right#. A new tenant there pays the old tenant a considerable sum of money for the privilege of getting a good farm with various improvements, and the land-owner is practically prevented from turning out a good tenant at his mere will. In Yorkshire also it has been the custom to compensate an outgoing tenant, and there is no good reason why the custom should not be made into a legal right, and extended over the whole country. Mr. Gladstone's Irish Land Act has already established a somewhat similar system throughout Ireland. If the land is to be used for its proper purposes, and not merely for the amusement and pride of a few landlords, #every owner of land who lets it should be obliged either to give a long lease, say of thirty or fifty years, or else to pay the compensation fixed by a jury# after taking evidence from those skilled in valuing farms. It should be made illegal to let land on any other terms. #69. The Cause of Rent.# It is very important to understand exactly how rent arises, for without knowing this it is impossible to see why a landlord should be allowed to come and take away a considerable part of what is produced, without taking any other trouble in the matter. But the fact is that we cannot do away with rents: they must go to some one or other, and the only real question which can arise is whether there shall be many landlords receiving small rents or few landlords with great rent-rolls. Rent arises from the fact that different pieces of land are not equally fertile, that is, they do not yield the same quantities of produce for the same quantities of labour. This may arise from the soil being different, or from one piece of land getting more sun and moisture than another. If the earth had a perfectly smooth surface the same everywhere, and if it were all tilled and cultivated in exactly the same way, there would be no such thing as rent. But the earth's surface, as we know, has hills and valleys: there are flats of rich soil in one place, and wastes of dry sand and stones in other places. Now, where the soil is good and favourably situated for growing corn, or other produce, the owner of such land must get more, in return for his labour, than if he possessed a bad piece of land. Even then, if everybody owned the farm which he cultivates, those who owned the better pieces would get rent, because they would get more produce. Thus, after allowing the same wages to all, there would remain something in addition to the lucky owners of the better land. If, instead of working on this good land themselves, they let it to other workmen, they will be able to get a rent depending on the richness and the other advantages of the land. Now there can be little difficulty in seeing how the amount of rent of land is governed. That land will pay no rent at all which only gives produce enough to pay the wages of the labourers who work upon it, together with the interest of any capital which they require. The rent of better land will then consist of the surplus of its produce over that of the poorest cultivated land, after allowance has been made for the greater or less amount of labour and capital expended on it. Or we may look at the matter in this way: The price of corn is decided by the cost of producing it on land which just pays the expenses of cultivation, because when more corn is needed, it is from such land we must procure it, the better land having been long since occupied. But corn of the same quality sells at the same price whatever be its cost of production; hence the rent of more fertile land will be the excess of the price of its produce over that of land which only just pays the cultivator and leaves no rent. CHAPTER XI. EXCHANGE. #70. How Exchange Arises#. One of the most important ways in which we can increase wealth consists in exchange--#in giving what we do not want in return for what we do want#. Wealth, as we have seen, is anything which is actually useful to us, because we have not enough already, and which can be transferred to another person. But when our want of any kind of commodity is satisfied, we want no more of that, but we do want other kinds of commodity. The result is that exchange constantly produces a #gain of utility#. Some people have objected that there can be no good in exchange, because that which is given equals in value that which is received. Others have said that, if one party gains, it must evidently be by robbing the other party. According to this view, trade would consist in trying to beggar your neighbour. That which is given does really equal in value that which is received, but it does not equal it in utility, and to increase utility is the purpose of all production and all commerce. We do not pay for things in proportion to their usefulness, or else air and water would be the most costly of all things. A good-sized loaf may be bought for fourpence or sixpence, although bread is the staff of life. Before attempting to understand this apparent paradox, we must settle exactly what we mean by value. #71. What is Value?# In exchanging some goods for other goods, there arises the question, How much of one kind shall be given for so much of the other? Some things are said to be #valuable#, as in the case of a gold watch or a diamond ring, because in exchange for them we can get a great quantity of other articles. Ashes are of little or no value, because we cannot get anything in exchange for them. Now this word #value# is a very difficult one, and is employed to mean different things. We may say that quinine is valuable for curing fevers, that iron is valuable for improving the blood, or that water is valuable for putting out fires. Here we do not mean valuable in exchange, for quinine would cure fevers just as well if it cost a penny an ounce instead of some ten shillings. Water, if we can get it at the right time, puts out a fire whether it costs much or little or nothing. It is clear, then, that by valuable we often mean #valuable in use#. The words value and valuable are in fact #ambiguous#. (See Logic Primer, pp. 22-26, on The Correct Use of Words.) #There is value in use and value in exchange, and many things which would be commonly said to have little value in exchange have much value in use.# But of these meanings, "value in use" is nothing but the #utility# of a thing to us, that is, the utility of all such portions of it as we can actually employ. Thus, the value in use of water means the utility of the water that we drink, or wash in, or cook with, or water the roads with, and this utility is very great. But of course it cannot mean the utility of water which is not useful to us, but on the contrary hurtful, as in the case of floods, damp houses, wet mines, and so forth. We may now see how true was the remark of Genovesi, the Italian economist, that "#Exchange consists in giving the superfluous for the necessary#," or, as I should prefer to say, #the comparatively superfluous for the comparatively necessary#. He who has more than enough of one article has already enjoyed all the good which that article can do to him, but he probably needs supplies of other articles. The exchange, like an act of mercy, blesses both him who gives and him who receives, because what each receives in exchange is much wanted and has high utility. In England, for instance, we possess a great deal of coal, and France produces plenty of good wine. We could have little or no wine in England unless we got it from France or some foreign country, and France also is much in want of coal. It is obvious that there is a great gain of utility if we give some of our comparatively superfluous coal in exchange for some of the abundant wine of France. It has been objected to commerce that it is #sterile# and produces no new goods. There exist neither more nor less coal and wine after they are exchanged than before. But in political economy we treat of utility and wealth; the question is whether things are usefully consumed or not. Now that which is not wealth if it were consumed by one person, becomes wealth when handed over to another person for consumption. #Though exchange cannot create the material of wealth, it creates wealth because it gives utility to the material.# #72. Value means Proportion in Exchange.# When we speak of the value of a thing in exchange, we mean how much of some other thing we can get for it. This of course will depend upon the nature of that other thing. Obviously, I can get for a shilling much more potatoes than bread, and bread than beef, and beef than essence of beef. Therefore, when we speak of the value of a thing, we ought always to say what it is to be valued by. #The word value only means that so much of one thing is given for so much of the other#, and it is the #proportion# of these quantities (Latin _proportio_ from _pro_, in comparison with, and _portio_, share), which measures the values of the thing. A ton of pig-iron can usually be got for a quarter of corn; here the proportion is one to one. To get a ton of copper, we should probably have to give thirty quarters of corn; here the proportion is that of one to thirty. There cannot be such a thing as value in exchange, unless there be proportion--so much of one commodity for so much of another. Usually, indeed, we measure the values of things by their #prices#. The #price is the quantity of money which we give for a thing#; in this case the proportion is between the quantity of money and the quantity of goods we get for it, as when we give sixty shillings for ten yards of carpet. We shall learn later on that money is a kind of commodity, which has utility and value like other commodities. But there is great convenience in always thinking and speaking of values in money, because we can then readily compare the value of one thing with that of any other. If a pound of potatoes costs one penny, a pound of bread threepence, and a pound of beef ninepence, we can see at once that a pound of beef is of the same value as three pounds of bread and nine pounds of potatoes, and we can judge how much of each to use. 73. #Laws of Supply and Demand.# In the next place, we must try to understand how the values of things are governed, and made to change from time to time. The principal laws which govern values are called #the laws of supply and demand#, and they are very important indeed. #Supply# means the quantity of any goods which people are willing to give in exchange at a certain value, and #demand# means similarly the quantity of goods which people are willing to take in exchange; but, before a person can judge how much he wishes to buy of a particular kind of goods, he must know its price, that is, its proportion in exchange for money. If bread, instead of being threepence per pound, becomes fourpence, a poor person would perhaps decide to take less bread, and to buy more potatoes. If beef, instead of being ninepence, should rise to a shilling, or fourteenpence a pound, some people would refuse to buy it altogether, and others would buy less than before. The supply of things varies similarly; if the price of meat rises high, farmers who own cattle bring them to market, in order to get a good profit by selling them; if the price falls low, they keep their cattle to sell at another time. #The Laws of Supply and Demand# may be thus stated: a rise of price tends to produce a greater supply and a less demand; a fall of price tends to produce a less supply and a greater demand. Conversely, an increase of supply or a decrease of demand tends to lower price, and a decrease of supply or an increase of demand to raise price. These laws are so important that I will state them over again, in the form of a table:-- |-----------|------------|-------------| | #Price.# | #Supply.# | #Demand.# | |-----------|------------|-------------| | Higher. | Greater. | Less. | |-----------|------------|-------------| | Lower. | Less. | Greater. | |-----------|------------|-------------| We can now understand how the price of any kind of goods is decided. The price must be such that the quantity demanded at any time is equal to the quantity supplied. If those who want goods at a certain price, cannot get them, they will have to offer a higher price, so that they may induce other people to sell. The higher the price the greater the supply, as we have seen; moreover, if some people in a market are offering a higher price, it soon becomes known to other dealers. When a farmer's wife carries a basket of butter to sell at the Butter Cross in the neighbouring market town, she soon learns whether the supply is greater or less than usual. If the purchasers are few and slow in buying, she begins to fear that she may have to carry her butter back unsold, and go without the crockery and calico and other things which she intended to buy with the money. Then she begins to ask a penny or twopence a pound less, and the other sellers of butter are obliged to lower their prices also, since no one would buy butter from one woman at 1s. 6d., if he could get it as good from the next person at 1s. 4d. But, if few people bring butter to market, or if there are many purchasers with money in their pockets, the scene is quite changed. Those who have brought butter, find that they will have no difficulty in selling all they have; it is the purchasers who now become anxious to buy before all is gone, and their eagerness soon shows the sellers that they may ask higher prices. It is by this #higgling of the market#, by sellers asking the highest price they think they can get, and buyers trying to buy at the lowest price which they think will be taken--that the market price of any commodity is settled. #The market price will be such that the demand at that price will equal the supply at that price.# The quantity of butter or any other commodity that is sold must equal what is bought, because it is not sold until it is bought; but the price will settle itself accordingly. #74. How Value depends upon Labour.# We now come to the great question whether value is produced by labour, or how it is connected with labour. Some economists, observing that, when a thing like gold is very valuable, men spend a great deal of labour in getting it, have said that #the labour spent upon it is the cause of the high value#. #This is quite wrong#; for if it were true, anything, upon which great labour has been spent, ought to be very valuable; everybody knows that such is not the case. Great labour may be expended in writing, printing, and binding a book; but, if nobody wants the book, it is valueless, except as waste paper. A vast amount of labour was spent on building the Thames Tunnel, but, as few people wished to go through it, the tunnel was of small value, until it was required for a railway. Thus it is quite certain that we cannot make a thing valuable by simply labouring at it; we must labour in such a way as to make the thing useful. On the other hand, substances may be very valuable which have cost little or no labour. When a shepherd in Australia happens to pick up a nugget of gold on the mountain side, it takes no labour worth mentioning to pick it up, yet the gold is just as valuable in proportion to its weight as any other gold. Some gold mines produce a great quantity of gold: others which have cost quite as much to sink, produce little; nevertheless the gold out of the one mine is sold at the same price in proportion to its weight and fineness as that out of the other mine. #Thus it is quite certain that labour is not the cause of value.# Gold is valuable because a great many people want more gold than they have already got, and whenever a thing is valuable it is because somebody wants it. But we may look at this matter in another way. If it were possible to get a valuable thing like gold with little labour, many people would become gold miners. Much gold would then be produced; if this were wanted as much as what was already in use, it would be as valuable. But no one wants an unlimited quantity of any substance. Wealth, as we saw, must be limited in supply; if gold became as plentiful as lead or iron, it could not possibly remain as valuable as it is now. People would have far more than they could employ for ornaments, watches, gilding and so forth; there would be a large surplus to be used in making pots and pans, for which it is less needed. Now we can see through the whole subject of value. When much of a substance can usually be produced with little labour, the substance becomes so plentiful that people are satisfied with the supplies of it which they have; they do not want more, or at least do not want it so urgently. It follows that they are unwilling to give much wealth for it. Thus the labour spent upon producing a commodity does not affect the value of that commodity, unless it alters the quantity of it which people can get, and thus makes a further supply of the commodity more or less useful than before. #75. Why Pearls are valuable#. To make this still more plain, let us endeavour to answer this difficult question, "Do men dive for pearls because pearls fetch a high price, or do pearls fetch a high price because men must dive in order to get them?" Pearl-diving is a very dangerous and laborious kind of work. The divers have to jump into the deep sea with heavy weights to carry them down, and they must hold their breath a long time while they are engaged in collecting the oyster shells at the bottom. The number of good pearls which they generally get is small compared with the great toil of getting them. It follows that, on the average, they must receive a high price for what they do find, otherwise they would not have adequate wages for such work. But this alone is not a sufficient reason for the pearls being so valuable, otherwise the mother of pearl shells, in which the pearls are found, and brought up, would be as valuable as the pearls. But mother of pearl is a very cheap substance. Again, if it were merely a question of labour, a diver might go down anywhere, and, bringing up the first stone or shell he found, insist on selling it for a high price, because he had dived for it. The truth is, that pearls are valuable because there are many ladies who have not got pearl necklaces, and who would like to have them; and those who have some pearls would like to get more and finer ones. In short, then, pearls are valuable because they are useful to ladies who want more pearl ornaments: they are thus useful because the ladies have not hitherto been able to get as many as they would like; and they have not been able to get many, because it is so difficult to fish them up from the bottom of the sea. Here we have the whole theory of value and labour. #The labour which is required to get more of a commodity governs the supply of it; the supply determines whether people do or do not want more of it eagerly; and this eagerness of want or demand governs value.# CHAPTER XII. MONEY. #76. Barter.# When exchanges are made by giving one ordinary commodity for another, as a sack of corn for a side of bacon, or a book for a telescope, we are said to #barter# them. The operation is also called #truck# (French, _troc_, barter). Among uncivilised races trade is still carried on in this way; a traveller going into the interior of South Africa takes a stock of beads, knives, pieces of iron, looking-glasses, &c., in order that he may always have something which the natives will like to receive in exchange for food or services. People still occasionally barter things in England, or the United States, but this is seldom done, owing to the trouble which it gives. If, for instance, I want a telescope, in exchange for a book, I shall probably have to make many inquiries, and to wait a long time before I meet with a person who has a telescope to spare, and who is also willing to take my book in exchange. It is very unlikely that he who has a telescope will just happen to want that particular book. A second difficulty is, that the book will probably not be worth just as much as the telescope, and neither more nor less. He who owns a valuable telescope cannot cut it up, and sell a part to one and a part to another; this would destroy its value. #77. Convenience of Money.# With the aid of money all the difficulties of barter disappear; for #money consists of some commodity which all people in the country are willing to receive in exchange, and which can be divided into quantities of any amount#. Almost any commodity might be used as money in the absence of a better material. In agricultural countries corn was so used in former times. Every farmer had a stock of corn in his own granary, and if he wanted to buy a horse or cart, he took so many sacks of corn to his neighbour's granary in exchange. Now suppose that, with corn as money, a farmer wanted to part with a cart and get a plough instead; he need not inquire until he finds a person willing to receive a cart, and give a plough in exchange. It is sufficient if he find one farmer who will receive a cart and give corn, and any other farmer who will give a plough and receive corn. No difficulty arises, too, if the cart or plough are not of equal value; for if the cart be the more valuable, then the farmer finally gets for it the plough together with enough corn to make up the difference. Money thus acts as a #medium of exchange#; it is a go-between, or third term, and it facilitates exchange by dividing the act of barter into two acts, in this way-- #Sale.# #Purchase.# _____/\______ ____/\____ / \ / \ #Cart.# #Money.# #Plough.# No doubt it turns one act of exchange into two; but the two are far more easy to manage than one, because they need not be made with the same person. #78. Money as a Measure of Value.# When money is used in exchange, he who receives money is said #to sell goods#, and he who pays money is said #to buy or to purchase#. In each case there is an act of exchange, and sales and purchases are not really different in nature from acts of barter, except that one of the commodities given or received is employed for the purpose of arranging the exchange. Thus money may be called #current commodity#, because it is merchandise chosen #to run# about as a medium of exchange. Now, in every purchase or sale there must be some proportion between the quantity of the money, and the quantity of the other commodity. This proportion expresses the value of the one commodity as compared with the other. Value in exchange means nothing but this proportion, as was before explained (section 72). Now when money is used, the quantity of money given or received for a certain quantity of goods is called #the price of that goods#, so that the price is the value of goods stated in money. But as money when once introduced is used in almost every act of exchange, a further great advantage arises. We are able to compare the value of any commodity with that of any other commodity. If we know how much copper may be had for so much lead; how much iron for so much steel; and so on with zinc and brass, bricks and timber, and so forth, it would not be possible to compare the value of copper with zinc, or iron with timber. But if we know that for one ounce of gold we can get 950 ounces of tin, 1,700 ounces of copper, 6,400 ounces of lead, and 16,000 ounces of wrought iron, then we learn without any trouble that for 1,700 ounces of copper we can get 16,000 ounces of iron, and so on. Thus gold or any other substance used as money serves as a #common measure of value#; it measures the value of every other commodity, and thus enables us to compare the value of each commodity with that of every other. This is an immense convenience. It leads every one to think and speak of the values of things in terms of a money known to everybody. All lists of values of goods are given as lists of prices and everybody understands these prices and can compare the prices in one list with those in another. Money may then be said to have two chief functions. It serves as (1) #A medium of exchange.# (2) #A common measure of value.# But it is important to remember that, though money thus acts in a very useful and peculiar way, it never ceases to be a commodity. Its value is subject to the laws of supply and demand already stated (section 73); if the quantity of money increases, its value is likely to decrease, so that more money is given for the same commodity, and #vice versa#. #79. What Money is made of.# As already remarked almost any commodity may be used as money, and in different ages all kinds of things such as wine, eggs, olive oil, rice, skins, tobacco, shells, nails, have actually been employed in buying and selling. But metals are found to serve much the best for several reasons, and gold and silver are better for the purpose than any of the other metals. The advantages of having gold and silver money are evident. Such metals are #portable#, because they are so valuable that a small weight of metal equals in value a great weight of corn or timber or other goods. Then they are #indestructible#, that is, they do not rot like timber, nor go bad like eggs, nor sour like wine; thus they can be kept for any length of time without losing their value. Another convenience is, that there is no difference in quality in the metal itself; pure gold is always the same as pure gold, and though it may be mixed with more or less base metal, yet we can assay or analyse the mixture, and ascertain how much pure metal it contains. The metals are also #divisible#; they may be cut or coined into pieces, and yet the pieces taken together will be as valuable as before they were cut up. It is a further advantage of gold and silver that they are such beautiful, brilliant substances, and gold is also so heavy that it is difficult to make any counterfeit gold or silver; with a little experience and care, every one can tell whether he is getting real money or not--when the money is made of gold or silver. Finally, it is a great convenience that #these metals do not change in value rapidly#. A bad harvest makes corn twice as dear as before, and destructible things, like eggs, skins, &c., are always rising or falling in value. But gold and silver change slowly in value, because they last so long, and thus the new supply got in any one year is very little compared with the whole supply or stock of the metal. Nevertheless, #gold and silver, like all other commodities, are always changing in value more or less quickly#. #80. Metallic Money.# Almost all the common metals--copper, iron, tin, lead, &c.--have been used to make money at one time or other, besides various mixtures, such as brass, pewter, and bronze. But copper, silver, and gold have been found far more suitable than any of the other metals. Copper, indeed, being comparatively low in value, is wanting in portability. It was formerly the only money of Sweden, and I have seen a piece of old Swedish money consisting of a plate of copper about two feet long and one foot broad. A merchant making payments in such money had to carry his money about in a wheel-barrow. Now we use copper only for coins of small value, and to make the copper harder, it is melted up with tin and converted into bronze. In the Saxon times English money was made of silver only, but this was inconvenient both for very large and for very small payments. The best way is to use gold, silver, and bronze money according as each is convenient. #In the English system of money, gold is the standard money and the legal tender#, because no one can be obliged to receive a large sum of money in any other metal. If a person owes a hundred pounds, he cannot get rid of the debt without tendering or offering a hundred pieces of coined gold to his creditor. Silver coin is a legal tender only to the amount of forty shillings--that is, no creditor can be obliged to receive more than forty shillings in a single payment. Similarly, bronze coin is a legal tender only up to the amount of one shilling in all. #81. What is a Pound Sterling?# In England people are continually paying and receiving money in pounds, but few could say exactly what a pound sterling means. No doubt it is represented by a coin called a sovereign, but what is a sovereign? Strictly speaking, #a sovereign is a piece of gold coined, in accordance with an Act of Parliament, at a British mint, still bearing the proper stamp of that mint, and weighing not less than 122-1/2 grains#. On the average the sovereigns issued from the mint ought to weigh 123.274 grains, but it is impossible to make each coin of that exact weight, and if this were done, the coins would soon be lessened in weight by wear. A sovereign is legal tender for a pound as long as it weighs 122-1/2 grains or more, and is not defaced; but, in reality, people are in the habit of paying and receiving sovereigns which are several grains less in weight than the law requires. Twenty silver shillings are by law to be received as equal in value to a pound. This is necessary, in order that we may be able to pay a fraction of a pound, for a coin made of gold equal to the twentieth part of a pound would easily be lost, worn, or even blown away. But the silver in twenty shillings is not equal in value to the gold in a pound; its value varies with the gold price of silver, and, at present, twenty shillings are only worth about sixteen gold shillings and eightpence, that is, 5/6 of a pound. It is necessary to make the silver coin thus of less value than it is taken for, in order to render it unprofitable to melt the coin. In the same way, the metal in a bronze penny is worth only about the sixth part of a penny, so that people would lose a great deal by melting up or destroying pence. #82. Paper Currency.# Instead of using actual coins of gold, silver, or bronze, it is common to make use of paper notes containing promises to pay money. When the sum of money to be paid is large, a bank note is much more convenient, being of far less weight than the coins, and less likely to be stolen. A five-pound bank note is a promise to pay five pounds to any person who has the note in his possession, and who asks for five pounds in exchange for the note at the office of the bank issuing the note. A #convertible bank note# is one which actually can be thus changed into the coins whenever it is desired, and so long as this is really the case, it is evident that the note is just as valuable as the coins, and is more convenient. The only fear is that, if a banker be allowed to issue these bank notes, he will not always have coins enough to pay them when presented. Very frequently banks have been obliged to stop payment; that is, to refuse to perform their promises. Nevertheless, when there is no other currency to be had, the bank notes often go on circulating like money. They are then called #inconvertible notes#, and there is said to be a #paper money#. A person is willing to receive paper currency in exchange for goods, if he believes that other people will take it from him again. But such paper currency is very bad, because its value will rise or fall according to the quantity issued, and people who owe money will often be able to pay their debts with less value than they received. The subject of bank notes and paper money, however, is too difficult for us to pursue in this Primer. CHAPTER XIII. CREDIT AND BANKING. #83. What Credit means.# It is very important for those who would learn political economy to understand exactly what is meant by #credit#. John is said to give credit to Thomas when John leaves some of his property in the use of Thomas, expecting to have it returned at a future time. In short, any one who lends a thing #gives credit#, and he who borrows it #receives credit#. The word #credit# means #belief#, and John believes that he will get back his property from Thomas, though this, unfortunately, does not always prove to be the case. John is called the #creditor#, and Thomas the #debtor#. It is not common, indeed, to speak of credit in the case of most articles: when a man borrows a horse, a book, a house, an engine, or other common article, and pays for its use, he is said to #hire# it, and what he pays for the use is called the hire, fare, or rent. In some countries, where coins are not yet used, people lend and borrow corn, oil, wine, rice, or any common commodity which all like to possess. In the parts of Africa where palm oil is produced in great quantities, people give and take credit in oil. But in all civilised countries it has become the practice to borrow and lend money. If a man needs an engine, and has nothing to buy it with, he goes and borrows money enough from the person who will lend it on the lowest terms, and then he buys the engine where he can get it most cheaply. Frequently, indeed, the man who sells the engine will give credit for its price, that is, will lend the sum of money to the buyer, just sufficient to enable him to buy it. Credit is a very important thing, because, when properly employed, #it enables property to be put into the hands of those who will make# the #best use of it#. Many people have property but are unable to go into business, as is the case with women, children, old men, invalids, &c. Rich people perhaps have so much property that they do not care to trouble themselves with business, if they can get others to take the trouble for them. Even those who are engaged in business often have sums of money which they do not immediately want to use, and which they are willing to lend for a short time. On the other hand, there are many clever active men, who could do a great deal of work in establishing manufactories, sinking mines, or trading in goods, if they only had enough money to enable them to buy the requisite materials, tools, buildings, land, &c. A man must have some property of his own before he can expect to get credit; but with some property to fall back upon in case of need, and with a good character for honesty and ability, a trader can by credit obtain other people's capital to deal with. #84. Loans on Mortgage.# Credit is given in many different ways; sometimes a man is assisted by a permanent loan from a relative or friend who has confidence in him. Enormous sums of money are lent, as it is called, upon #mortgage#. A man, for instance, who has built a cotton mill with his own money, pledges the mill as security for a loan, that is, he gives his creditor a right to sell the mill unless the debt is paid when required. #The mill is called a mortgage or dead pledge#, because it becomes dead to the former owner, if he breaks the conditions of the loan. There are many institutions, such as insurance companies, building societies, &c., which have a great deal of capital to lend on mortgage, and many rich people invest their money in the same way. Thus a very large part of the houses, land, factories, shops, &c., are not really owned by the people who seem to own them, but by #mortgagees#, who have lent money on them. Generally speaking, the interest paid for such loans is 4-1/2 or 5 per cent. per annum, when the security is quite good, that is, when the property mortgaged is sure to sell for more than is lent upon it. A considerable margin is always left to cover mistakes or alterations as regards the value of the property; thus, if a house be said to be worth £1000, it will usually be security only for a debt of £700 or £800. When the security is not so good, because the ownership or the value of the property mortgaged is doubtful, the rate of interest charged will be higher, and may be six, seven, or more per cent. The surplus covers the risk, that is, compensates the lender, for the chance of losing what he lends. Mortgage loans are generally made upon fixed capital like houses, mills, ships, &c., which last a long time; but sometimes stocks of goods, such as cotton, wine, corn, &c., are mortgaged as security for temporary loans. #85. Banking.# A large part of the credit given, in a civilised country, is given by bankers, who may be said #to deal in credit#, or which comes to the same thing, #in debt#. A banker usually carries on three or four different kinds of work, but his proper work is that of borrowing from persons who have ready money to lend, and lending it to those who want to buy goods. As a shopkeeper sells his stock of goods, he receives money for it. And, until he buys a new stock, he has no immediate need of this money. Those, again, who receive salaries, dividends, rents, or other payments once a quarter, do not usually want to spend the whole at once. Instead of keeping such money in a house, where it pays no interest and is liable to be stolen, lost, or burnt, it is much better to deposit it with a banker, that is, to lend it to a banker who will undertake to pay it back when it is wanted. Generally speaking a merchant, manufacturer, or tradesman sends to his banker every day the money which he has received, and only keeps a few pounds to give change or make petty payments. The advantages of thus depositing money with the banker are chiefly as follows:-- (1.) The money is safe, as the banker provides strong rooms, locked and guarded at night. (2.) It is easy to pay the money away by means of cheques or written orders entitling the persons named therein to demand a specified sum of money from the banker. (3.) The banker usually allows some interest for the money in his care. Bankers receive deposits on various terms; sometimes the depositor engages to give seven days' notice before withdrawing his deposit; in other cases the money is lent to the banker for one, three, or six months certain, and the longer the time for which it is lent the better the rate of interest the banker can usually give. But a great deal of money is deposited #on current account#, that is, the customer puts his money into the bank, and draws it out just when he likes, without notice. In this case the banker gives very little interest, or none at all, because he has to keep much of the money ready for his customers, not knowing when it will be wanted. Nevertheless, while some depositors are drawing their money out, others will be putting more in, and it is exceedingly unlikely that all the thousands of customers of a large bank will want their deposits at the same time. Thus it happens that the banker, in addition to his own capital, has a large stock of money always on hand, and he makes profit by lending out this money to other customers, who need credit. There are various ways in which a banker arranges his loans; sometimes he lends upon the mortgage of goods, houses, and other property, or of shares in railways and government funds, in the way described; but this is not a proper way for a banker to employ much of his funds, because he may not be able to get back such loans rapidly enough when he needs them. One of the simplest ways of lending money is to allow customers to overdraw their accounts, that is, to draw more money out of the bank than they have put in. But a banker naturally takes care not to allow overdrafts unless he has great confidence in his customer, or has received a guarantee of repayment from him or his friends. #86. Discount of Bills.# The most common and proper way in which a banker gives credit and employs his funds is in the discount of bills, that is, in advancing money in exchange for a definite promise to pay it back at a stated time. Suppose that John Smith has sold a thousand pounds worth of cotton goods to Thomas Jones, a shopkeeper; several months will pass perhaps before Jones can sell the goods over the counter, and if he has not much capital, he agrees that John Smith shall give credit for the thousand pounds but in the mean time draw a bill upon Jones. This bill would very likely be somewhat in this form-- LONDON, 1st February, 1878. £1000, 0s. 0d. Three months after date pay to me or my order the sum of one thousand pounds, value received. JOHN SMITH. To Mr. Thomas Jones. John Smith is said to be the #drawer# of the bill; Thomas Jones is the #drawee#, and the bill amounts to a claim on the part of John Smith that Thomas Jones owes him the sum named. If the drawee acknowledges that this is the case, he signifies it when the bill is presented to him, by writing on the back the word "accepted," together with his name. Now if the drawer and drawee of a bill are persons of good credit, a banker will readily discount such a bill, that is, buy it up for the sum due, after subtracting interest at the rate of say five per cent. per annum for the length of time the bill has to run. The bill forms good security, because, when accepted, John Smith is bound to pay the thousand pounds when due, and if he fails, the drawee is liable. Such bills are often bought by one person after another, being #endorsed# by each to the next, that is, impressed with an order that the money shall be paid to the next person named. When due the last owner must claim the money from John Smith, and if he refuses to pay, each owner has a claim upon the previous owners. CHAPTER XIV. CREDIT CYCLES. #87. Industry is Periodic#. Everybody ought to understand that trade varies in activity, from time to time, in a periodic manner. #A thing is said to vary periodically, when it comes and goes at nearly equal intervals# like the sun, or rises and falls like the tides. Now, in industry, as Mr. William Langton pointed out twenty years ago, there are tides almost as regular as those of the sea. Shakespeare says truly-- "There is a tide in the affairs of men, Which, taken at the flood, leads on to fortune." Some of these tides depend upon the seasons of the year; business is more active in the spring and summer, and falls off in winter. It is comparatively easy to borrow money in January, February, March, June, July, August, and September; October and November are particularly bad months; the rate of interest then often runs up rapidly, and the bankruptcies in these months are more numerous than at any other time of year. April and May are also dangerous months, but in a less degree. Men of business should always bear these facts in mind, and, by being prepared beforehand, they may escape disaster. There is also a much longer kind of tide in business, which usually takes somewhere about ten years to rise and fall. The cause of this tide is not well understood, but there can be no doubt that in some years men become confident and hopeful. They think that the country is going to be very prosperous, and that if they invest their capital in new factories, banks, railways, ships, or other enterprises, they will make much profit. When some people are thus hopeful, others readily become so too, just as a few cheerful people in a party make everybody cheerful. Thus the hopefulness gradually spreads itself through all the trades of the country. Clever men then propose schemes for new inventions and novel undertakings, and they find that they can readily get capitalists to subscribe for shares. This encourages other speculators to put forth proposals, and when the shares of some companies have risen in value, it is supposed that other shares will do so likewise. The most absurd schemes find supporters in a time of great hopefulness, and there thus arises what is called a bubble or mania. #88. Commercial Bubbles or Manias.# When the schemes started during a bubble begin to be carried out, great quantities of materials are required for building, and the prices of these materials rise rapidly. The workpeople who produce these materials then earn high wages, and they spend these wages in better living, in pleasure, or in buying an unusual quantity of new clothes, furniture, &c. Thus the demand for commodities increases, and tradespeople make large profits. Even when there is no sufficient reason, the prices of the remaining commodities usually rise, as it is called, #by sympathy#, because those who deal in them think their goods will probably rise like other goods, and they buy up stocks in the hope of making profits. Every trader now wants to buy, because he believes that prices will rise higher and higher, and that, by selling at the right time, the loss of any subsequent fall of prices will be thrown upon other people. This state of things, however, cannot go on very long. Those who have subscribed for shares in new companies have to pay up the calls, that is, find the capital which they promised. They are obliged to draw out the money which they had formerly deposited in banks, and then the bankers have less to lend. Manufacturers, merchants, and speculators, who are making or buying large stocks of goods, wish to borrow more and more money, in order that they may have a larger business, the profit seeming likely to be so great. Then according to the laws of supply and demand, the price of money rises, which means that the rate of interest for short loans, from a week to three or six months in duration, is increased. The bubble goes on growing, until the more venturesome and unscrupulous speculators have borrowed many times as much money as they themselves really possess. #Credit is said to be greatly extended#, and a firm, which perhaps owns a capital worth ten thousand pounds, will have undertaken to pay two or three hundred thousand pounds, for the goods which they have bought on speculation. But the sudden rise which, sooner or later, occurs in the rate of interest, is very disastrous to such speculators; when they began to speculate interest was, perhaps, only two or three per cent.; but when it becomes seven or eight per cent., there is fear that much of the profit will go in interest paid to the lenders of capital. Moreover, those who lent the money, by discounting the speculators' bills, or making advances on the security of goods, become anxious to have it paid back. Thus the speculators are forced at last to begin selling their stocks, at the best prices they can get. As soon as some people begin to sell in this way, others who hold goods think they had better sell before the prices fall seriously; then there arises a sudden rush to sell, and buyers being alarmed, refuse to buy except at much reduced rates. The bad speculators now find themselves unable to maintain their credit, because, if they sell their large stocks at a considerable loss, their own real capital will be quite insufficient to cover this loss. They are thus unable to pay what they have engaged to pay, and #stop payment#, or, in other words, become bankrupt. This is very awkward for other people, manufacturers, for instance, who had sold goods to the bankrupts on credit; they do not receive the money they expected, and as they also perhaps have borrowed money while making the goods, they become bankrupt likewise. Thus the #discredit# spreads, and firms even which had borrowed only moderate sums of money, in proportion to their capital, are in danger of failing. #89. Commercial Crisis or Collapse.# The state of things described in the last section is called a commercial collapse, because there is #a sudden falling in of prices, credit, and enterprise#. It is also called #a Crisis, that is, a dangerous and decisive moment# (Greek, krinô, _to decide_), when it will soon be seen who is to become bankrupt, and who not. No sooner has such a crisis arrived, than everything changes. No one ventures to propose a new scheme, or a new company, because he knows that people in general have great difficulty in paying up what they promised to the schemes started during the bubble. #This bubble is now burst#, and it is found that many of the new works and undertakings from which people expected so much profit, are absurd and hopeless mistakes. It was proposed to make railways where there was nothing to carry; to sink mines where there was no coal nor metal; to build ships which would not sail; all kinds of impracticable schemes have to be given up, and the capital spent upon them is lost. Not only does this collapse ruin many of the subscribers to these schemes, but it presently causes workpeople to be thrown out of employment. The more successful schemes indeed are carried out, and, for a year or two, give employment to builders, iron-manufacturers, and others, who furnish the materials. But as these schemes are completed by degrees, no one ventures to propose new ones; people have been frightened by the losses and bankruptcies and frauds brought to light in the collapse, and when some people are afraid, others readily become frightened likewise by sympathy. In matters of this kind men of business are much like a flock of sheep which follow each other without any clear idea why they do so. In a year or two the prices of iron, coal, timber, &c., are reduced to the lowest point; great losses are suffered by those who make or deal in such materials, and many workmen are out of employment. The working classes then have less to spend on luxuries, and the demand for other goods decreases; trade in general becomes depressed; many people find themselves paupers, or spend their savings accumulated during previous years. Such a #state of depression# may continue for two or three years, until speculators have begun to forget their failures, or a new set of younger men, unacquainted with disaster, think they see a way to make profits. During such a period of depression, too, the richer people who have more income than they spend, save it up in the banks. Business men as they sell off their stocks of goods leave the money received in the banks; thus by degrees capital becomes abundant, and the rate of interest falls. After a time bankers, who were so very cautious at the time of the collapse, find it necessary to lend their increasing funds, and credit is improved. Then begins a new credit cycle, which probably goes through much the same course as the previous one. #90. Commercial Crises are Periodic.# It would be a very useful thing if we were able to foretell when a bubble or a crisis was coming, but it is evidently impossible to predict such matters with certainty. All kinds of events--wars, revolutions, new discoveries, treaties of commerce, bad or good harvests, &c.--may occur to decrease or increase the activity of trade. Nevertheless, #it is wonderful how often a great commercial crisis has happened about ten years after the previous one#. During the last century, when trade was so different from what it now is, there were crises in or near the years 1753, 1763, 1772 or '3, 1783, and 1793. In this century there have been crises in the years 1815, 1825, 1836-9, 1847, 1857, 1866, and there would probably have been a crisis in 1876 or 1877 had it not been for an exceptional collapse in America in 1873. There is at present (February, 1878) the great depression of trade which marks the completion of one cycle and the commencement of a new one. Good vintage years on the continent of Europe, and droughts in India, recur every ten or eleven years, and it seems probable that commercial crises are connected with a periodic variation of weather, affecting all parts of the earth, and probably arising from increased waves of heat received from the sun at average intervals of ten years and a fraction. A greater supply of heat increases the harvests, makes capital more abundant and trade more successful, and thus helps to create the hopefulness out of which a bubble arises. A falling off in the sun's heat makes bad harvests and deranges many enterprises in different parts of the world. This is likely to break the bubble and bring on a commercial collapse. Generally, #a credit cycle#, as Mr. John Mills of Manchester has called it, will last #about ten years#. The first three years will witness depressed trade, with want of employment, falling prices, low rate of interest, and much poverty; then there will be perhaps three years of active, healthy trade, with moderately-rising prices, a reasonable rate of interest, fair employment, and improving credit; then come some years of unduly-excited trade, turning into a bubble or mania, and ending in a collapse, as already described. This collapse will occupy the last of the ten years, so that the whole credit cycle will, on the average, be as follows:-- |---------------------------------------------------------------| | YEARS. | |---------------------------------------------------------------| | 1 2 3 | 4 5 6 | 7 8 | 9 | 10 | |----------- |----------- |--------- |-----------|--------------| | DEPRESSED | HEALTHY | EXCITED | _Bubble._ | _Collapse._ | | | | | | | | TRADE. | TRADE. | TRADE. | | | |----------- |----------- |--------- |-----------|--------------| #It is not to be supposed that things go as regularly as is here stated;# sometimes the cycle lasts only nine, or even eight years, instead of ten; minor bubbles and crises sometimes happen in the course of the cycle, and disturb its regularity. Nevertheless, it is wonderful how often the great collapse comes at the end of the cycle, in spite of war or peace or other interfering causes. 91. #How to avoid Loss by Crises.# Now, these bubbles and crises are very disastrous things; they lead to the ruin of many people, and there are few old families who have not lost money at one collapse or another. The working-classes are often much injured; many are thrown out of employment, and others, not seeing why their wages should be reduced, make things worse by strikes, which, after a collapse, cannot possibly succeed. It is most important, therefore, that all people--working-people, capitalists, speculators, and all connected with any kind of business--should remember that #very prosperous trade is sure to be followed by a collapse and by bad trade#. When, therefore, things look particularly promising, investors should be unusually careful into what undertakings they put their money. #As a general rule, it is foolish to do just what other people are doing, because there are almost sure to be too many people doing the same thing.# If, for instance, the price of coal rises high, and coal-owners make large profits, there are certain to be many people sinking new mines. Such a time is just the worst one for buying shares in a coal-mine, because, in the course of a few years, there will be a multitude of new mines opened, the next collapse of trade will decrease the demand for coal, and then there will be great losses in the coal business. This is what has happened in the last few years in England, and the same thing has happened over and over again in other trades. As a general rule, #the best time to begin a new factory, mine, or business of any kind, is when the trade is depressed, and when wages and interest are low#. Mining, building, or other work can then be done more cheaply than at other times, and the new works will be ready to start just when business is becoming active and there are few other new works opening. This rule, indeed, does not apply to the schemers, speculators, or #promoters#, as they are called, who start so many companies. These people make it their business to have new schemes and shares to offer just when people are in a mind to buy, that is, during a bubble or time of excited trade. They take care to sell their own shares before the collapse comes, and it is their dupes who bear all the loss. A prudent man, therefore, would never invest in any new thing during a mania or bubble; on the contrary, he would sell all property of a doubtful or speculative value, when its price is high, and invest it in the very best shares or government funds, of which the value cannot fall much during the coming collapse. The wisest men have been deluded during manias; and in the Library of the Royal Society is shown a letter from Sir Isaac Newton requesting a friend to buy shares for him in the South Sea Company, just at the moment when the South Sea Bubble was at its worst. Let people take warning by Sir Isaac Newton, and never speculate in a thing because other people are doing the same; then these bubbles and collapses will be prevented, or will become much less disastrous. Credit cycles will go on until the public learn to look out for them, and act accordingly. Business men must become bold during depressed trade, careful during excited trade, instead of acting exactly in the opposite way. It is only a knowledge of these credit cycles which can prevent them, and this is the reason why I have said so much about them in this Primer. CHAPTER XV. THE FUNCTIONS OF GOVERNMENT. 92. Functions mean performances (Latin, _fungi_, _functus_, to perform), and the functions of government mean those things which a government ought to do,--the duties which it undertakes to perform, or the services which it may be expected to render to the people governed. These functions are commonly divided into two classes-- (1) The necessary functions. (2) The optional functions. The #necessary functions# of a government are such as it is obliged to undertake; thus it must defend the nation against foreign enemies, it must keep the peace within the country, and prevent insurrections which might threaten the existence of the government itself; it must also punish evildoers who break the laws, and try to become rich by robbery; it must also maintain law courts in which the disputes of its subjects can be fairly decided, and set at rest. These are far from being all the necessary functions. The #optional functions# of government consist of those kinds of work which a government can execute with advantage, such as providing a good currency, establishing a uniform system of weights and measures, constructing and maintaining the roads, carrying letters through a national post office, keeping up a national observatory and a meteorological office, &c. The optional functions are in fact very numerous, and there is hardly any end to the things which one government or another has provided for the people. It would be a most important work, if it were possible, to decide exactly what undertakings a government should take upon itself, and what it should leave to the free action of other people; but it is impossible to lay down any precise rules upon this subject. The characters and habits and circumstances of nations differ so much, that what is good in one case might be bad in another. Thus in Russia the government makes all the railways, and the same is the case in the Australian States; but it does not at all follow that, because this is necessary or desirable in those countries, therefore it is desirable in England, or Ireland, or the United States. Experience shows that though the English Post Office is very profitable, the Postal Telegraphs cannot at present be made to pay. There can be no doubt that #it would be altogether ruinous to put the enormous system of English railways under the management of government officers#. Each case has thus to be judged upon its own merits, and all that the political economist can do is to point out the general advantages and disadvantages of government management. #93. The Advantage of Government Management.# There is often immense economy in having a single establishment to do a certain kind of work for the whole country. For instance, a weather office in London can get daily telegraphic reports of the weather in all parts of the kingdom and many parts of Europe; combining and comparing these reports it can form a much better opinion about the coming weather than would be possible to private persons, and this opinion can be rapidly made known by the telegraph and newspapers. The few thousand pounds spent by the government yearly on the meteorological office are inconsiderable compared with the services which it may render to the public by preventing shipwrecks, colliery explosions, and other great disasters and inconveniences which often arise from our ignorance of the coming weather. It is certainly proper then to make meteorological observation one of the functions of government. Great economy would arise, again, if an establishment like the post-office were created in Great Britain in order to convey small goods and parcels. At present there are a great number of parcel companies, but they often send a cart a long way to deliver a single parcel. In London some half a dozen independent companies send carts all over the immense town; each of the chief railway companies has its own system of delivering parcels, and the larger shops have their own delivery vans as well. Thus there is an enormous loss of horse power and men's time. If a government postal system undertook the work, only one cart would deliver goods in each street, and as there might be a parcel for almost every house, or sometimes several, there would be an almost incredible saving in the distance travelled and the time taken up. This illustrates the economy which may arise from government management. #94. The Disadvantage of Government Management.# On the other hand there is great evil in the government undertaking any work which can be fairly done by private persons or companies. Officers of the government are seldom dismissed when once employed, or, if turned away, they receive pensions. Thus when the government establishes any new work, it cannot stop it without great expense, and the work is usually carried on whether it is done economically or not. Then again, government officers, knowing that they will not be dismissed without a pension, are commonly less active and careful than men in private employment. For the work which they do they are paid at a higher rate than in private establishments. It is therefore very undesirable that the Government should take any kind of work into its own hands, unless it is perfectly clear that the work will be done much better, and more cheaply than private persons could do it. There is a balance of advantages and disadvantages to be considered: the advantage of a single great establishment with plenty of funds; and the disadvantage that work is always done more expensively by Government. In the case of the post-office, the advantages greatly outweigh the disadvantages; the same would probably be the case with a well-arranged parcel post; in the postal telegraphs, there are many advantages, but they are obtained at a considerable loss of revenue. If the state were to buy up and manage the railways of Great Britain, the advantages would be comparatively small, but the losses would be enormous. In America the express or parcel companies are so admirably managed that they do the work more safely and better than the Government post office. There can be little doubt, too, that the American railways and telegraphs are far better managed now than they would be if acquired by the Federal Government. CHAPTER XVI. TAXATION. #95. There must be Taxes.# Whether governments undertake more or less functions, it is certain that we must have some kind of government, and that this government will spend a great deal of money. This money, too, can very seldom be obtained in the form of real profit on the work done, so that it must be raised by taxation. We generally apply the name tax to any payment required from individuals towards the expenses of the local or general government. We may easily indeed be taxed without being aware of it; thus, nearly the half of every penny paid for posting a letter is a tax, and a town may be taxed through the price of gas or water. At one time or another, and in one country or another, taxes have been raised in every imaginable way. The #Poll Tax# was a payment required from every poll or head of the population, man, woman, or child. This was considered a very grievous tax and has never been levied in England since the reign of William III. The #Hearth Tax# consisted of a payment for each hearth in a house; then a rich family with a large house and many hearths paid far more than a poor family with only one or two hearths. But as people did not like the tax-gatherer coming into the house to count the hearths, the window tax was substituted, because the tax-gatherer could walk round the outside of the house, and count the windows. Now, in England, we do not tax the light of heaven at all, but we fix a man's payments by the rent of his house, the amount of his income, or the quantity of wine and beer he drinks. #96. Direct and Indirect Taxes.# Taxes are called #direct taxes# when the payment is made by the person who is intended to bear the sacrifice. This is the case generally with the assessed taxes, or the charges made upon people who have menservants, private carriages, &c. As most people keep carriages only for their own comfort, they cannot make other people repay the cost of the tax. But if a carrier or tradesman were taxed for his carts, he would be sure to make his customers repay it; thus the tax would not be direct, and carriages employed in trade are therefore exempt from taxation. Other taxes in England, which are generally direct ones, are the income-tax, the dog-tax, the poor-rates, the house-duty; but a tax which is usually direct, may sometimes become indirect, and it is often impossible to say what is really #the incidence of a tax#, that is, the manner in which it falls upon different classes of the population. #Indirect taxes# are paid in the first place by merchants and tradesmen, but it is understood that they recover the amount paid from their customers. The principal part of such taxes in England consist of the #customs duties# levied upon wine, spirits, tobacco, and a few other articles, when they are imported for use in this country. #Excise duties# are similar duties levied upon like goods produced within the kingdom. These were called #excise#, because it was originally the practice actually to cut off a portion of the goods themselves, and take it as the duty. In England, excise duties are now levied on a few things only, such as spirits and beer; and care is taken to make the excise duty as nearly as possible equal to the customs duty on the same kind of imported goods. English brandy pays a duty equivalent to that on French brandy, and the matter is arranged so that the duty shall neither encourage nor discourage the making of English brandy. Thus the trade is left as free as it can be, consistently with raising a large revenue. Another important class of indirect taxes consist of #the stamp duties#, which are payments required from people when they make legal agreements of various kinds. According to law, deeds, leases, cheques, receipts, contracts, and many other documents are not legally valid unless they be stamped, and the cost of the stamp varies from a penny up to hundreds or even thousands of pounds, according to the value of the property dealt with. Stamp duties are probably in most cases indirect taxes, but it would be very difficult to say who really bears the cost; this must depend much upon circumstances. #97. Maxims of Taxation.# Adam Smith first stated certain rules, or maxims, which should guide the statesman in laying on taxes; they are such good rules that everybody who studies political economy ought to learn them. They are as follows-- (1) The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. This we may call the #maxim of equality#, and equality consists in everybody paying, in one way or another, about an equal percentage of the wages, salary, or other income which he receives. In England the taxes amount to something like ten per cent., or one pound in every ten pounds, and this is pretty equally borne by different classes of society. It is probable, however, that the very rich do not pay as much as they ought to do. At the same time those who are too poor to pay income tax, and who do not drink nor smoke, are almost entirely free from taxation in this country; they pay very little, except poor rates. It would be impossible to invent any one tax which could be equally levied upon all persons. The income tax is a tax of so many pence in every pound of a person's income, but it is impossible to make people state their income exactly, and poor people could never be got to pay such a tax. Hence it is necessary to put on a certain number of different taxes so that those who manage to escape one tax shall be made to pay in some other way. (2) The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain. This is the #maxim of certainty#, and it is very important, because, if a tax is not certainly known, the tax-gatherers can oppress people, requiring more or less as they choose. In this case it is very probable that they will become corrupt, and will receive bribes to induce them to lower the tax. On this account duties ought never to be levied according to the value of goods, or _ad valorem_, as it is said. Wine, for instance, varies in value immensely according to its quality and reputation, but it is impossible for the custom-house officer to say exactly what this value is. If he takes the statement of the people who import the wine, they will be tempted to tell lies, and say that the value is less than it really is. And as it would not be easy to prove the guilt either of the customs officer or of the importers, it is to be feared that some officers will receive bribes. But if the wine is taxed simply according to its quantity, the amount of duty is known with great certainty, and fraud can easily be detected. The same remarks apply more or less to every kind of goods which varies much in quality. (3) Every tax ought to be levied at the time, and in the manner, in which it is most likely to be convenient for the contributor to pay it. This is #the maxim of convenience#, and the reason for it is sufficiently obvious. As government only exists for the good of the people at large, of course it ought to give the people as little trouble as possible. And as the Government has immensely more money at its command than any private person, it ought to arrange so as to demand a tax when the taxpayer is likely to be able to pay it. Thus there seems to be no sufficient reason why the government should make people pay the income-tax in January, when they are likely to have plenty of other bills to pay. In respect of this maxim, the customs and excise duties are very good taxes, because a person pays duty whenever he buys a bottle of spirits or an ounce of tobacco. If he does not want to pay taxes, let him leave off drinking and smoking, which will probably be better for him in every way. At any rate, if he can afford to drink spirits and smoke tobacco, he can afford something for the expenses of government. The penny receipt duty, again, is in this respect a good tax, because when a person is receiving money he is sure to be able to spare one penny for the State, and he is generally so glad to get his money that he thinks nothing of the penny. (4) Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury. This is the #maxim of economy#. Thus, a tax ought not to be imposed if it would require a great many officers to collect it, and thus waste much of what is collected, or if it disturbs trade and makes things dearer than they would otherwise be. Again, the government ought not to cause people to lose time and money in paying the taxes, because this is just as bad for them as if they paid so much more taxes. In this respect the stamp-duties are very bad taxes, because in many cases it is requisite for a person to take his deeds and other documents to the stamp-office and lose his time, or else employ lawyers and agents to do it for him, who charge considerable fees. So troublesome are some of the stamp-duties that in many cases people neglect to have their agreements stamped, and prefer to trust to the honesty of those they deal with. Such agreements are thus often rendered of no legal value, and the government, for the sake of sixpence or a shilling, practically denies law to the people. #98. Protection and Free Trade.# Almost every government has employed taxation at one time or another, for the purpose of encouraging industry within the country. It is often supposed that if purchasers are prevented from buying foreign goods, they will have to buy home-made goods, and thus manufacturers at home will be kept busy, and there will be plenty of employment. This is altogether a fallacy, which we may call the #fallacy of Protection#, but it is one which readily takes hold of people's minds. No tradesman or manufacturer likes to see himself underbid by those who offer better goods at lower prices. When foreign goods, then, are preferred by purchasers, the home manufacturers of such goods complain bitterly, and join together to persuade people that they are being injured by foreign trade. There is still so much national pride and animosity, that a nation does not like to be told that it is being beaten by foreigners. The manufacturers, misled by their own self-interest, use all kinds of bad arguments to show that if foreign products were kept out of the country, they could make as good ones in a little time, and then they could employ many people, and add to the wealth of the country. They fall, in fact, into #the fallacy of making work# before described (section 55), and argue as if the purpose of work was to work, and not to enjoy abundant supplies of the necessaries and comforts of life. Now it is impossible to deny that certain owners of lands and mines and works may be benefited by putting duties upon foreign goods of the kind which they want to produce. Those who are already enjoying the advantage of such improper duties may, of course, be injured when they are removed. But what we have in political economy to look to, is not the selfish interests of any particular class of people, but the good of the whole population. Protectionists overlook two facts--(1) that the object of industry is to make goods abundant and cheap; (2) that it is impossible to import cheap foreign goods without exporting home-made goods of some sort to pay for them. We have already learnt the obvious truth that wealth is to be increased by producing it in the place most suitable for its production. Now the only sure proof that a place is suitable is the fact that the commodities there produced are cheap and good. If foreign manufacturers can underbid home-producers, this is the best, and in fact the only conclusive proof that the things can be made more cheaply and successfully abroad. But then it may be objected, what is to become of workmen at home, if all our supplies be got from another country. The reply is, that such a state of things could not exist. Foreigners would never think of sending us goods unless we paid for them, either in other goods, or in money. Now, if we pay in goods, workmen will of course be needed to make those goods; and the more we buy from abroad, the more we shall need of home produce to send in exchange. Thus, the purchase of foreign goods encourages home manufactures in the best possible way, because it encourages just those branches of industry for which the country is most suited, and by which wealth is most abundantly created. #99. The Mercantile Theory.# Perhaps, however, it will be objected that our foreign imports will be paid for not in goods but in money; thus the country will be gradually drained of its wealth. This is #the old fallacy of the Mercantile Theory#, which was to the effect that a country becomes rich by bringing gold and silver into it. It is an absurd fallacy, because we can get no benefit by accumulating stocks of gold and silver. In fact, to keep precious metals causes a loss of interest upon their value; people who are rich may afford to have costly plate, and the pleasures they derive from it may be worth the interest. But to have more gold, or silver money than is just sufficient to make the ordinary payments of trade causes dead loss of interest. Nor is there any fear that the country will be drained of money entirely. For, if money became scarce, its value would rise according to the laws of supply and demand, and prices of goods would fall; then imports would decrease, and exports increase. It is only a country like Australia or North America, possessing gold or silver mines, which could go on paying money for its imports, and then it is quite right it should do so, the metal being a commodity which can be cheaply produced in the country. Gold and silver must be got out of mines, and therefore a country which buys goods with money must either have such mines, or else get the metal from other countries which possess mines. In no case, then, can we import foreign commodities without producing at home goods of equivalent value to pay for them, and thus we see beyond all doubt that foreign trade is a means of increasing, not decreasing, the activity of industry at home. #100. Is Political Economy a Dismal Science?# This is only a Primer, a very brief and elementary account of some parts of political economy, and it is evidently impossible to argue out the subjects of such a science in so small a compass. But the purpose of this little treatise will be fulfilled if those who begin with the primer can be persuaded to go on and study larger works on the science. But even he who has read only thus far must know that political economy is no cold-blooded or dismal science, as people say. Is it a dismal thing to relieve the labourer of his load, or to spread his table with the most nutritious food? No doubt the science is dismal enough so far as it leads us to reflect upon the needless misery existing on every side. It is dismal to think of the hundreds of thousands who lengthen out a weary life in workhouses and prisons and infirmaries. Strikes are dismal; lockouts are dismal; want of employment, bankruptcy, dear bread, famine, are all dismal things. But is it political economy which causes them? #Is not our science more truly described as that beneficent one, which, if sufficiently studied, would banish such dismal things, by teaching us to use our powers wisely in relieving the labours and misery of mankind.# END. 
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41856	----	TRANSCRIBER'S NOTE: Italic text is denoted by _underscores_ and bold text by =equal signs=. MANUAL OF REFERENCES AND EXERCISES IN ECONOMICS FOR USE WITH VOLUME II. MODERN ECONOMIC PROBLEMS BY FRANK A. FETTER, PH.D., LL.D. PROFESSOR OF ECONOMICS, PRINCETON UNIVERSITY [Illustration] NEW YORK THE CENTURY CO. 1917 FOREWORD This Manual follows the lines of the "Manual of References and Exercises," published in the autumn of 1916, to accompany the volume on Economic Principles. The literature of the field treated in "Modern Economic Problems" is now so vast that no more than a few of the titles could be included in the following lists. The references given are usually the more recent of those that would be helpful to students desiring to go more deeply into the subjects. The collection of questions and exercises is based upon the list printed, first in 1904 and much enlarged in 1910, in the author's "Principles of Economics." Much material has been added that had been shaped and used in class work at Princeton University, and a few other problems have been drawn from, or suggested by, other published lists. The plan of indicating the original sources of a number of these questions has been found to be too difficult to be completed for the present edition. Indeed, it appears that numerous test problems have become a common heritage for economic teachers, and one can hardly be sure when one has traced the ideas to their original sources. Some of them have appeared in somewhat differing forms in various lists for a half century past. Particular acknowledgment is made to my colleagues, Professors Adriance and McCabe, who devised a number of the questions for class use; and to Dr. Stanley E. Howard, who has given most valuable aid in the preparation of this Manual in its present form. F. A. F. Princeton, N. J., February, 1917. MANUAL OF REFERENCES AND EXERCISES IN ECONOMICS MANUAL OF REFERENCES AND EXERCISES IN ECONOMICS CHAPTER I MATERIAL RESOURCES OF THE NATION REFERENCES. (Those marked with an asterisk (*) are the shorter assignments that are most applicable.) _Adams, C. C._, Commercial geography. 1906. _Marsh, G. P._, Man and nature: or physical geography as modified by human action. 1864. (Later editions under the title, "The earth as modified by human action.") *_Materials_, 58-61 (Extract from _Mason, O. T._, Technogeography, or the relation of the earth to the industries of mankind. American Anthropologist, 7: 135-158. 1905); 61-66 (extract from _Semple, E. C._, Influence of geographic environment. 1911.) _Smith, J. R._, Industrial and commercial geography, 1913. *_Source Book_, 292-302 (extract from); _Daniels, W. M._, Economic causes as affecting the political history of the United States. Accountants' Magazine, May, 1907. _Teele, R. P._, Irrigation in the United States. 1915. _Trotter, S._, The geography of commerce. 1903. _United States Census_, 1910. Volume on wealth, debt, and taxation. _Van Hise, C. R._, Conservation of natural resources. 1910. QUESTIONS. 1. What relation can be observed between general industrial conditions and the per capita wealth? Between the character of the people and the per capita wealth? Can countries be grouped geographically according to per capita wealth? 2. How does the United States compare with other countries with respect to the estimated amounts and values of cereal products? Textile fibres? Coal? Iron and copper ore? Present the results of your study in tabular form. 3. From the reports of the Thirteenth Census prepare a statement in tabular form showing the geographical distribution of our chief domestic sources of supply of the leading cereals, of neat cattle, of textile fibres, of coal, iron ore and copper ore, and of water power. 4. What physical conditions account for the greatness of ancient Egypt, of Venice, of Holland, of England, of the United States? 5. Has the isothermal line any relation to the number of millionaires? CHAPTER 2 THE PRESENT ECONOMIC SYSTEM REFERENCES. _Cooley, C. H._, Human nature and the social order. 1902. _Cooley, C. H._, Personal competition. Amer. Econ. Assn., Econ. Studies, 4: 78-173. 1899. *_Ely, R. T._, Competition: its nature, its permanency, and its beneficence. A. E. Assn. Pubs., 3d ser., 2: 55-70. 1901. _Ely, R. T._, Evolution of industrial society. 1903. _Ely, R. T._, Property and contract in their relation to the distribution of wealth. 1914. (2 vols.) _Giddings, F. H._, The economic ages. P. S. Q., 16: 193-221. 1901. *_Gray, John H._, Economics and the law. A. E. Rev., 5 (no. 1, supp.): 3-23. 1914. _Kinley, David_, The renewed extension of government control of economic life. A. E. Rev., 4 (no. 1, supp.): 3-17. 1914. _Schmoller, Gustav_, The mercantile system. Trans. by Ashley, 1896. QUESTIONS. 1. State briefly and criticize the theories of the origin of private property. 2. What have been the theories put forward to justify the system of private property in the past? 3. Under private property, can men complain of the use made by others of their wealth on the ground merely that it was unwise? 4. What are the recognized limitations upon the right of private property? Are these limitations in opposition to the principle by which private property is now generally defended? 5. Is the right of bequest a necessary condition of private property? 6. Do you know of any father who created more wealth because he could bequeath it to his son? 7. Does the son work as hard when he inherits his father's wealth? 8. What is the effect of private property on saving? 9. What is meant by the "Factory System"? 10. Through what historic stages has production passed? CHAPTER 3 NATURE, USE AND COINAGE OF MONEY REFERENCES. _Jevons, W. S._, Money and the mechanism of exchange. 1875. Chs. III-VII, XIII. *_Johnson, J. F._, Money and currency. 1905. Chs. I, II, IX. *_Phillips, C. A. (Ed.)_, Readings in money and banking. 1916. Chs. I-III, XIV. _Walker, F. A._, Money in its relations to trade and industry. 1st ed. 1879. Chs. I, II. _White, Horace_, Money and banking illustrated by American history. Ed. 1914. Bk. I. QUESTIONS. 1. What are the qualities of metallic money? 2. What is the difficulty in deciding whether to call the following money: gold ingots, gold coin, silver dollars, copper cents, greenbacks, bank-checks, chalk-marks to keep account? 3. Who makes coins? Would jewelers make better ones? 4. What are the advantages and disadvantages of a seigniorage tax? CHAPTER 4 THE VALUE OF MONEY REFERENCES. _Fisher, Irving_, The purchasing power of money. 1911. _Gibson, Thomas_, Special market letters on the increasing gold supply and its effect on security values; interest rates; commodity prices, etc. 1908. *_Johnson_, chs. III-VIII, X. _Kemmerer, E. W._, Money and credit instruments in their relation to general prices. 2d ed. 1909. _Magee, J. D._, Money and prices. J. P. E., 21: 681-711, 798-818. 1913. *_Phillips_, chs. VIII, XI. _Round table discussion_, Money and prices. A. E. Assn. Bul., 4th ser., 1 (no. 2): 46-70. 1911. *_Source Book_, 303-313. (Extract from report of the Secretary of the Treasury, 1911.) _United States Secretary of the Treasury_, Finance report, 1911. _Walker, F. A._, chs. IV, V. QUESTIONS. 1. What are the functions of money? 2. What are the principal things besides money uses that cause a demand for gold and silver? 3. Why do you value money? Do you value it more than the things it buys? 4. When goods are exchanged for money or money for goods, what is the gain? 5. If money is a tool, what does it make? 6. When gold comes out of the mine is the gain to the community greater or less than when the same value of grain is harvested? 7. Are men wealthy in proportion to the money they have? Are countries? 8. Would a nation be poorer, if, like Sparta, it prohibited all money? 9. Is a community poor because it has little money in circulation or does it have little money in circulation because it is poor? 10. Could a country better do without money, horses, or roads? 11. Why does nearly all the gold produced in California leave the state? What keeps any of it there? 12. The mint price of an ounce of gold, .900 fine, is alike at San Francisco and Philadelphia, $18.604. Why is gold ever shipped from California to New York? 13. Does gold cost the day-laborer as much in California as in New York? 14. Note any habits of friends that result in their carrying more or less money than others of the same income. 15. What determines the amount of money needed by different persons, towns, states, and nations? 16. Give examples of things that increase the demand for money. 17. On an isolated island would it make any difference as to the value of money if there were but one gold-mine or several competing ones, supposing that the output were the same? 18. What per cent. of the total money in the world is the yearly output of gold; of silver; of gold and silver? Stat. Abst. 19. Is the value of gold and silver due to the action of government? 20. In what ways may the government determine the value of the monetary standard? 21. If all the different denominations of media of exchange were doubled in number, exchanges remaining unchanged, what would be the effect upon prices? 22. Is it true of all commodities that changes in supply affect their value proportionally? Is it true of money? If in your opinion there is any difference, explain it. 23. If the amount of coal in a country should be increased twenty-five per cent., in what percentage would you expect the value of coal to change? Give reasons. If the amount of money in a country should be increased twenty-five per cent., in what direction and in what percentage would the value of money change? Give reasons. (In each case the condition is "other things being equal.") 24. If in a given community all watch cases were made of gold, and each case contained one ounce of gold, would you expect the value of watch cases to fall by exactly one-half if the number of watch cases in the community were doubled, all other things remaining the same? If in another community (at another time) all exchanges were made exclusively by the use of gold coins, each containing an ounce of pure gold, would you expect that prices in general would be exactly doubled in case no change occurred in the community except a doubling of the number of coins in circulation? 25. Why might an increased resort to barter produce upon the general level of money prices effects similar to those produced by an increased use of credit media of exchange? 26. What gives rise to the belief sometimes held that money is an invariable standard of value? 27. Define depreciation and appreciation of the currency. What causes may produce either? What are the effects of either? More generally, what determines the value of the currency? 28. If gold were to become as plentiful as iron, would it be worth more or less than iron? 29. A nation having no foreign trade had originally in circulation 1,000,000 coins, each called a florin, and each containing an ounce of pure metal. To this original coin circulation the government adds 500,000 florins each containing one-half ounce of pure metal, and at the same time the government adds to the circulation 600,000 florins in the shape of inconvertible paper. Both the half ounce florin and the paper florin are by law made legal tender for a full weight florin. In the absence of any tendency to discriminate between accepting different kinds of florins in domestic trade, and with no other changes in the money situation except such as are necessitated by the aforesaid additions to the circulating medium, tell, first, what ultimately will be the number of florins in circulation, and give your reasons; and tell, second, of what kinds of florins and in what proportions the ultimate circulating medium will be composed. 30. Assume a country using gold alone as money and having in circulation 2,000,000 coins, under a system of free coinage. What would be the effect of closing the mints and issuing 1,500,000 new coins containing nine-tenths as much gold as the coins above mentioned, assuming that the number of goods exchanged remains the same? Explain clearly. What is the total quantity of such new coins the government can issue and keep in circulation? Explain clearly. 31. A country using gold money as its sole medium of exchange, under free and gratuitous coinage, makes the following change: it imposes a seigniorage charge of ten per cent., but without giving up free coinage or reducing the amount of fine gold in the coin. To what extent and in what direction will the value of money change, if at all (a) if the number of goods exchanged gradually increases five percent.; (b) if the number of goods exchanged gradually increases twenty-five percent.? Give your reasons clearly. CHAPTER 5 FIDUCIARY MONEY, METAL AND PAPER REFERENCES. *_Jevons_, chs. VIII, XVII, XVIII. *_Johnson_, chs. XIII-XVI. _Kemmerer, E. W._, Modern currency reforms. 1916. *_Phillips_, chs. IV, V, XII. _United States Director of the Mint_, Annual reports. _Walker_, chs. VIII-XII. _White_, Bk. II, chs. III-VI. QUESTIONS. 1. When 5160 grains of standard gold (i.e., by weight nine-tenths fine, with the other tenth composed of the alloy used in gold coin of the United States) sell in New York for $201.25 has the money "saturation point" been reached or exceeded, and will bullion be taken to the mint or coin melted down or exported? 2. Define legal-tender as applied to money. What is meant by fiat money? 3. Is a United States standard silver dollar commodity or fiduciary money? What determines its value? Of what importance is its legal tender quality? 4. Is the provision of law whereby the fractional silver coins of the United States are of less proportionate silver content than the standard silver dollar necessary to-day? Is it useful? Give your reasons. 5. Under what conditions will "bad money" fail to displace "good money" from circulation? 6. Under what circumstances will money that is not in fact convertible into other money have greater value than the material of which it (the first mentioned money) is made? Give an example from the monetary experience of the United States. 7. In a country which has hitherto had free and gratuitous coinage of gold, the government institutes a seigniorage charge of five per cent. by reducing to that extent the amount of gold put into each coin; the gold withheld by the government is not coined. What will be the effect of this seigniorage charge upon (a) prices in that country, (b) the comparative value of the gold in a new coin and the same weight of uncoined gold? Make your reasoning clear. 8. If a nation's entire money circulation consisting of 1,000,000 coins, all of them debased by a seigniorage charge of 50 per cent., were at once increased by the government's putting into circulation 300,000 pieces of inconvertible paper money, each piece of the same denomination as each coin, what effects might be anticipated on the basis of Gresham's law or otherwise, it being presupposed that the full amount of full weight coin required to conduct the nation's exchanges is only 900,000? Give your reasons. 9. A certain island has no silver mines and no foreign trade. It effects all its exchanges by the actual use of silver coin whose coinage is free and gratuitous. It has no banks, and does not resort either to barter or to credit. Silver is also used in the shape of plate in the island. Originally it had 100,000 silver coins in circulation, each containing one ounce of pure silver. After a certain date, as these coins were paid into the government treasury for taxes, at the rate of 5,000 one-ounce coins per week, the one-ounce coins were melted and the resulting bullion was recast, each new coin weighing 2 ounces and bearing the same name as the original one-ounce coins. Thereafter all coins struck at the island Mint contained two ounces of silver, and at that standard coinage continued free and gratuitous. When the government first pays out the new 2-ounce pieces, will they remain in circulation with the old one-ounce coins and have the same purchasing power? Give reasons. 10. If the above-described process of reminting 5,000 one-ounce coins per week continues for twelve weeks and then stops, how many old and how many new coins will at the end of the twelfth week be in circulation? Reasons. 11. The government of the island of Guernsey having no money, issued paper-notes to pay for the building of a market. They circulated and were gradually taken up as the market earned its cost, during ten years. When they were all redeemed and burned, the island had the market free of cost. Explain how this could be done. (From Sumner's Problems in political economy.) 12. Suppose a nation has 1,000,000,000 gold coins, each weighing one ounce (Troy) as its only circulating medium. Suppose that the government enacts that henceforth coins will be uttered containing only 99 per cent. as much pure gold as heretofore, the government taking one per cent. for its own use. Suppose "other things remain the same." What effect will this action have on the number of coins circulating? Will prices be affected? Now suppose the demand for money increases. Will bullion owners bring their bullion to the mint for coinage? Suppose this government had continued to utter coins of the same weight and fineness as before, but had kept back one per cent. of the bullion brought to the mint for its own use. Answer these three questions in the light of this supposition. 13. Tabulate the index numbers, the greenback price of the gold dollar, and the gold price of the greenback dollar, from 1861 to 1879. 14. Show the difference between convertible and inconvertible money. 15. Contrast the position of the commodity money theorists with that of the fiat money theorists. 16. In a gold-standard country, one-half of whose monetary circulation consists of silver dollars (which are unlimited legal tender) and of silver certificates payable on demand in silver dollars (and supported dollar for dollar by silver dollars in reserve), and whose mints are closed to the free coinage of silver, how would the money value of the silver dollars and silver certificates be affected if the gold price of silver should fall (1) 10 per cent.? (2) 50 per cent? (3) 5 per cent.? How would it be affected if the value of gold should fall 10 per cent? (Free coinage of gold is assumed). Explain the principles involved in your answer. CHAPTER 6 THE STANDARD OF DEFERRED PAYMENTS REFERENCES. _Fisher, Irving_, Appreciation and interest. A. E. Assn. Pubs., 11: 331-442. 1896. _Fisher, Irving_, A remedy for the rising cost of living--standardizing the dollar. A. E. Rev., 3 (no. 1, supp.): 20-28. 1913. Round table discussion of above, 29-51. _Fisher, Irving_, Objections to a compensated dollar answered. A. E. Rev., 4: 818-839. 1914. *_Jevons_, ch. XXV. *_Johnson_, chs. XI, XII, XVII. _Kinley, David_, Objections to a monetary standard based on index numbers. A. E. Rev., 3: 1-19. 1913. *_Materials_, 787, 788 (extract from _Brown, H. G._,), 788, 789 (extract from _Clark, W. E._, in "How to invest when prices are rising." 1912). _Noyes, A. D._, Forty years of American finance. 1909. Chs. I-III. _Patterson, E. M._, Objections to a compensated dollar. A. E. Rev., 3: 863-874. 1913. *_Phillips_, chs. VI, VII, XIII. _Taussig, F. W._, The plan for a compensated dollar. Q. J. E., 27: 401-416. 1912-1913. _United States Bureau of Labor Statistics_, Bul. 173. 1915. _Walker_, chs. III, VI, VII. QUESTIONS. 1. In which year between 1890 and the present year would a fixed salary of $1,000 have gone farthest? In which year would its purchasing power have been least? If a sum of $1,000 loaned in 1897 was returned in 1902, what was the difference in its purchasing power on its return and when it was loaned? 2. Will a day's work of a common laborer buy more to-day than it would a half century ago? Why? 3. The Bureau of Labor's index number for 1912 was 133. What was the percentage change in the value of money from the base period to 1912? Give your reasons and your work. 4. _Average prices for years 1860-65._ _Prices for 1900._ Coffee, lb. $ .12 $ .18 Coal, ton 3.00 3.60 Sugar, lb. .08 .06 Wool, lb. .30 .20 Wheat, bu. .80 .90 Upon the basis of the prices of the above commodities estimate the general price level for 1900, showing the percentage of its decline or advance from the basal price level. Indicate some of the causes which may have brought about this decline or advance. 5. At a given time the following commodity prices prevailed: cotton (raw), $.10 per lb.; wheat, $1.00 per bu.; sugar, $.07 per lb.; potatoes, $1.00 per bu.; beef (for roasting), $.25 per lb.; shoes, $5.00 per pair; cotton cloth of a standard grade, $.12 per yd.; woolen cloth of a standard grade, $1.25 per yd.; men's hats, $4.00, and coal, $7.00 per ton. At a later date the prices of the same commodities were respectively as follows: $.13, $1.05, $.06, $1.10, $.30, $5.75, $.15, $1.20, $4.50 and $6.50. Tabulate these facts and compute index numbers, which will show: (1) changes in the price level of all ten commodities. (2) changes in the price level of the articles of food. (3) changes in the price level of the articles of clothing. 6. In the preceding exercise, do the data afford sufficient grounds for saying that the cost of living has moved either upward or downward? If an affirmative answer be assumed, what has been the change in the value of money? 7. Assign to each of the commodities listed above a "weight" which represents, in your opinion, its importance as an article of popular consumption. Using this system of weights compute index numbers to show changes in the price levels of the same groups of commodities. How does the weighting affect your first conclusions regarding the changes in the cost of living? What is the importance of a system of weighting? 8. If the world's annual production of gold should suddenly increase five-fold, what would be the probable effect: upon the welfare of a stock exchange speculator as compared with the welfare of a teacher; upon the welfare of the creditor class as compared with that of the debtor class; upon prices? 9. What is the function of the standard of deferred payments? What is that standard now in America? What change in it has lately been going on? How is this affecting the incomes of various classes? 10. What ought to be the characteristics of a standard unit of value? 11. Can you get a kind of money that will make the things that are sold, dearer, and the things that are bought, cheaper? 12. Is the fact of one man's gain and another man's loss by chance of any economic or political importance? 13. If every piece of money should miraculously be doubled in a night, whose interests would be affected? 14. Compare the effect of an increasing gold output upon the price of outstanding bonds with its effect upon the price of common stock already issued. 15. X is an isolated industrial country with a certain volume of money. Its government on a given day doubles the amount of currency. What will be the effect upon the rate of interest. (a) of long-time loans, (b) of short-time loans, and (c) of demand loans? 16. The rate of interest on long-time investments in a certain isolated community has been six per cent. The amount of money in this community is increased so as to raise the general level of prices by 100 per cent. Assuming that the increase in money has come wholly from the more copious output of money-metal from the mines, to what extent will this rise in the general level of prices affect the rate of interest when thereafter capital is loaned for long-time periods? 17. Could a railway in the United States advantageously float a large issue of 20-year bonds in the year 1916? Give reasons for your answer. Show clearly what you mean by "advantageously." Would a railroad wish to float such an issue if it could? Why? 18. Is there anything in the nature of mining that keeps the ratio of the supply of gold and silver nearly uniform? 19. Some say Providence has indicated gold and silver as the materials for money. How has this been done? 20. What are the main reasons given for the ratio of 16 to 1? 21. Does the principle of the substitution of goods have any bearing on the value of metals under bimetallism? 22. What is the theory of money held by bimetallists? 23. "Inasmuch as gold (before 1848) was more valuable on the world's market than at the French mint, relatively to silver, it was impossible that gold should circulate in France." Is this a necessary conclusion? 24. What arguments advanced in favor of bimetallism in 1896 are inapplicable to-day? 25. What is the extent of the influence one nation can have on the ratio of the two precious metals? 26. How would the adoption of international bimetallism to-day at the ratio of 32 to 1 affect (a) the circulating medium, (b) the standard of value in different countries? Consider both the immediate and the eventual results. 27. What would have happened if a free silver law had been enacted in the United States in 1900? 28. Would an ideal monetary standard always measure the same quantity of goods? 29. A owes B a long term debt, which falls due just before the commencement of a commercial crisis; would it be to the advantage or disadvantage of A if the contract called for payment in terms of a tabular standard? 30. Why has not the tabular standard of deferred payments come into common use? Is the tabular standard sound or unsound in principle? Would your answer apply to the labor standard? CHAPTER 7 THE FUNCTIONS OF BANKS REFERENCES. _Cleveland, F. A._, Funds and their uses. 1902. _Conant, C. A._, History of modern banks of issue. 5th ed., 1915. _Dunbar, C. F._, Theory and history of banking. 2d ed., 1901. _Fisk, A. K._, The modern bank. 1903. _Holdsworth, J. T._, Money and banking. 1914. _Kinley, David_, The specie reserve in a banking system. J. P. E., 20: 12-24. 1912. *_Phillips_, chs. IX, X. _Scott, W. A._, Money and banking. 1903. _Veblen, T._, Theory of business enterprise. 1904. *_White_, bk. III, chs. I-III. QUESTIONS. 1. What does a bank do for a community? 2. What are the functions performed by a bank? 3. What are the sources of income to a bank? 4. Explain the most important ways in which the deposits of commercial banks originate; and state which of these ways creates the greatest amount of demand liabilities of the banks. 5. Do all banks issue notes? Why? 6. What is the advantage to a bank of the right to issue bank notes? 7. How does the issue of bank notes differ from the lending of funds to depositors? 8. Can a bank that issues its own notes afford to lend cheaper than the ordinary capitalist? 9. Two men A and B have notes each for $1000 discounted at the same bank. A is credited on the bank's books with the right to draw $950. B receives $950 in the circulating notes issued by this bank. Are the bank's liabilities increased to precisely the same extent by the two transactions? Does either transaction immediately lessen the bank's cash reserve? 10. The following are the items of a report of a National Bank: Capital stock, $50,000; Cash on hand and in banks, $77,066.21; Circulation, $49,400; Bills payable, $10,000; United States and other bonds, $239,050; Deposits, $465,417.41; Surplus and net undivided profits, $30,952.58; Loans and investments, $289,653.78. (a) Separate and arrange these items in accordance with a regular bank statement and prove your answer. (b) Show how these items illustrate the essential functions of a bank, explaining in detail the nature of these functions. 11. Sort out from the following items the resources and liabilities and show the equality of total resources and total liabilities: Unpaid dividends $ 782.00 Reserved for payment of taxes due 10,000.00 Undivided profits 85,228.57 Capital stock 500,000.00 Surplus fund 250,000.00 Cash items (checks to be presented for settlement in next day's exchanges) 280,347.43 Loans and discounts 2,782,713.15 U. S. legal tender notes and notes of national banks 435,296.00 Specie 278,304.48 Deposits 4,057,934.61 Overdrafts (checks paid in excess of deposits) 2,842.10 Due from banks and bankers 370,142.02 Real estate 43,900.00 Mortgage owned 1,000.00 Bonds 709,400.00 12. Classify the following items as resources or liabilities of a national bank and give reasons for your classification of the 1st, 4th, 6th, and 7th: (1) Capital stock, $50,000; (2) Real estate, furniture, fixtures, etc., $15,046.14; (3) Cash, $69,343.34; (4) Surplus and net undivided profits, $19,257.43; (5) United States bonds, $108,951.50; (6) Loans and discounts, $242,546.36; (7) Deposits, $301,679.91; (8) Circulation (i.e., notes outstanding), $64,950. Prove that your classification is correct by balancing the account. Then show the changes made in the account by the following transaction: The bank loans $25,000.00 for 90 days at 6 per cent. interest, and the borrower draws out one-half the amount, with which he is credited after the bank has made the proper deduction for interest. 13. The week's averages of the New York banks for the third week in May compare as follows in 1905 and 1904: 1905. 1904. Loans $1,120,426,800 $1,056,553,500 Deposits 1,165,151,700 1,100,586,100 Circulation 45,308,300 36,480,400 Specie 215,174,200 210,002,800 Legal tenders 84,333,700 78,143,000 Explain why loans and deposits in the above table show practically the same increase from 1904 to 1905. 14. How would the balance sheet of a commercial bank issuing an ordinary asset bank-note currency stand after the following operations? The bank opens business with a paid-up capital of $2,000,000 and a surplus of $400,000. It spends $50,000 in its own bank notes for furniture and fixtures. It discounts at six per cent. for various customers $4,000,000 of 60-day notes and bills receivable, the borrowers taking one-fourth of the proceeds in cash, one-fourth in the bank's own bank notes, and leaving the balance on deposit. Customers cash checks on their accounts for $600,000 receiving two-thirds of the amount in the bank's own bank notes and the other third in coin and other kinds of "lawful money." Other customers make deposits of $900,000, of which one-third is in "lawful money," one-third in the bank's own bank notes, and one-third in the checks of other depositors in the same bank. The bank buys at par $1,200,000 of railroad bonds, paying for them in its own bank notes. It pays with its own bank notes expenses for wages, stationery and taxes to the amount of $10,000. (b) What percentage of reserve is it carrying at the end of these operations? 15. Statement of a national bank. LIABILITIES | RESOURCES $ Thousand | $ Thousand Capital, 464. | Loans and discounts, 708. Surplus, 203. | Over-drafts, .1 Undivided profits, 53. | Bonds to secure circulation Circulation, 404. | (par value) 450. Deposits, 419. | Other stocks and bonds, 163. Due banks, 29. | Due from reserve agents, 105. | Due from banks, 21. | Banking house, 32. | Current expenses and taxes, 3. | Checks and cash items, 4. | Exchange for Clear. House, 11. | Notes of other banks, 15. | Gold, 30. | Silver, .9 | Legal tenders, 9. | Redemption fund in U. S. T. 20. ------- | ------- 1,572. | 1,572. What can you learn from this statement about the kind of business which the bank is carrying on, and its power to withstand a financial storm? 16. How would the balance sheet of a commercial bank stand after the following operations? The bank begins business with a paid-up capital of $300,000 and a surplus of $60,000. It discounts for customers $600,000 of four-months notes and bills receivable, at 6 per cent., the borrowers taking one third of the proceeds in cash (i.e., lawful money), and leaving two-thirds on deposit. Customers deposit $200,000, of which one-half is in cash, one-quarter is in checks drawn on this bank, and one-quarter is in checks drawn on other banks. 17. Suppose that this bank now reorganizes as a national bank and, to secure the privilege of note issue, buys United States 2 per cent. bonds of a par value of $90,000 at $102. These bonds it deposits with the Treasurer of the United States and receives the full amount of national bank notes to which it is entitled. Depositors withdraw by check $180,000, the bank giving them $45,000 in its notes and the balance in lawful money. A dividend of 2 per cent. is declared, and is paid, one-half in lawful money and one-half in the form of deposits. Present the balance sheet. CHAPTER 8 BANKING IN THE UNITED STATES BEFORE 1914 REFERENCES. _Hollander, J. H._, Security holdings of national banks. A. E. Rev., 3: 793-814. 1913. _Kemmerer, E. W._, Banking reform in the United States. A. E. Rev., 3 (no. 1, supp.): 52-63. 1913. Round table discussion of above, 64-88. _Kemmerer, E. W._, Seasonal variations in the New York money market. A. E. Rev., 1: 33-49. 1911. _National Monetary Commission_, Report. 1912. In Sen. Doc. 243, 62d Cong., 2d Sess. _Phillips_, ch. XXX. *_Source Book_, 324-336 (extract from National Monetary Commission Report), 314-323 (extract from 1910 report of the Comptroller of the Currency). _Sprague, O. M. W._, Proposals for strengthening the national banking system. Q. J. E., 24: 201-242, 634-659; 25: 67-95. 1909-1911. _United States Comptroller of the Currency_, Annual reports. *_White_, bk. III, chs. IV, XV, XVII, XX, XXI, and appendices A and B. _Willis, H. P._, The banking question in Congress. J. P. E., 20: 869-885. 1912. QUESTIONS. 1. Explain the method followed by national banks in issuing bank notes. Why did the banks often find it more profitable to use their money in other ways than by issuing bank notes? Ref.: Discussion in various reports of Comptroller of the Currency. 2. Section 28 of the National Bank Act of June 3, 1864, after providing that a national banking association may hold real estate "necessary for its immediate accommodation in the transaction of its business" and such other real estate and mortgages thereupon as it may have taken to secure debts previously contracted, provides that "Such associations (national banks) shall not purchase or hold real estate in any other case or for any other purpose...." (a) What is the reason for the above provision? (b) Would it be wise to make a similar prohibition on savings banks? 3. Describe the clearing house and define its economic advantages. 4. If there are twenty banks in a town and no clearing house, how many collections would have to be made by all the banks daily assuming that each day depositors of each bank receive checks on the other nineteen banks? 5. Does a clearing house enable the banks that belong to it to get along with a smaller cash reserve? CHAPTER 9 THE FEDERAL RESERVE ACT REFERENCES. _Conway, Thomas, Jr._, The financial policy of the Federal reserve banks. J. P. E., 22: 319-331. 1914. _Federal Reserve Board_, The Federal Reserve Bulletin. Monthly. *_Phillips_, ch. XXXI. _Scott, W. A._, Banking reserves under the Federal Reserve Act. J. P. E., 22: 332-344. 1914. _White_, bk. III, ch. XXII and appendices D and E. _Willis, H. P._, The Federal Reserve Act. A. E. Rev., 4: 1-24. 1914. QUESTIONS. 1. Name and contrast the different kinds of banks in the United States. 2. How are notes issued under the Federal Reserve Act? 3. If on a given date the surplus reserve (i.e., the reserve in excess of the legal minimum reserve required by law to be held against deposits) of the New York Associated Banks amounts to $11,000,000, and the deposits on the same date amount to $1,164,000,000, what is the total cash reserve held by the banks on said date? What would it have been in 1912? 4. The "New York Times" of December 8, 1916, said: "The rediscounting of commercial paper at the Federal Reserve Bank of New York by some of the city's largest banks on Wednesday had the effect yesterday of improving general money market conditions. Call loans which were made at 15 per cent. on Monday, and as high as 10 per cent. on Tuesday, and touched seven per cent. Wednesday, were placed yesterday at from three to five per cent. Most of the loans were made at four and one-half per cent., the renewal rate, and the closing quotation was three per cent. Time money rates were easier." Explain the process of rediscounting here referred to. In just what way did the rediscounting operations relieve the call money market? Do you consider that this use of the rediscounting facilities provided by the Federal Reserve System was in accord with sound banking principles? Was it the best possible use of the rediscounting mechanism? For suggestions see the "New York Times" of December 5, 1916, under the heading "Financial Markets." CHAPTER 10 CRISES AND INDUSTRIAL DEPRESSIONS REFERENCES. _Dewey, D. R._, Financial history of the United States, 4th ed., 1912. Ch. X. _England, Minnie T._, Promotion as the cause of crises. Q. J. E., 29: 748-767. 1914-1915. *_Hamilton_, Readings, 91-93, 93-95, 95-98. _Hobson, J. A._, Evolution of modern capitalism. Ed., 1912. Ch. 7. _Jones, E. D._, Economic crises. 1900. _Juglar, C._, and _Thom, C. W._, A brief history of panics and their periodical recurrence in the United States. Ed., 1916. *_Materials_, 391-396. _Mitchell, W. C._, Business cycles. 1913. _Moore, H. L._, Economic cycles: their law and cause. 1914. _Nelson, S. A._, The A B C of Wall Street. 1900. _Patterson, E. M._, The theories advanced in explanation of economic crises. A. A. A., 59: 133-147. 1915. *_Phillips_, chs. XXVIII, XXIX. *_Source Book_, 138-156. _Sprague, O. M. W._, The crisis of 1914 in the United States. A. E. Rev., 5: 499-533. 1915. _United States Bureau of Labor_, Annual report for 1886. QUESTIONS. 1. What is a financial crisis? An industrial depression? 2. Describe the trade, banking and price conditions which obtain just preceding, during and immediately following a crisis. 3. State clearly and explain the movement of prices of stocks, bonds, mortgages, land, commodities generally, wages and interest rates on long time and short time loans, before, during, and after a crisis. 4. Tabulate for a series of years covering periods of prosperity and depression, the prices of stocks, bonds, real estate, and of some commodities. 5. What economic changes occurred in your own community in the panic of 1893-94, or in the years 1903-04, or in 1907-08? 6. Is it possible that the amount of all goods produced shall be in excess of the community's power of consumption? 7. "As the average American can produce far more than he can consume, it has been proved repeatedly that as long as the sale of his products is confined to the home markets, over-production is certain to be a natural consequence of every prolonged period of activity. For half a century, therefore, with regularly recurring seasons of surplus production, there came those inevitable commercial crises which emphasized with increasing force the necessity for foreign markets." (This passage is taken from a reprint of a speech of a congressman.) Criticize the view as to the cause of commercial crises expressed in the above statement. 8. Is a crisis caused by too much or too little money, or by some other influence? 9. If there were twice as much money in the world, would panics take place? 10. In a period of depression is there less money than usual in the country? In the banks? 11. In what ways and to what extent are trade conditions apt to be affected by: The increasing gold supply? The trust movement? Increasing armies and navies? The agricultural situation? 12. Explain the difference in the motive of the borrower at ordinary times and in times of panic. 13. How are loans affected when the reserve limit as established either by law or custom is reached in England, Germany and the United States? 14. What in your opinion is the correct explanation of crises? 15. In what ways is business affected by the condition of the crops? Within what limitations? In the case of which crops is the connection closest? 16. What element of security is furnished by clearing houses during panics? 17. Describe the method used by the banks in meeting demands of depositors during the panics of 1893 and of 1907. (Dunbar is especially valuable. Also O. M. W. Sprague, History of crises under the National Banking System, pub. by Nat. Monetary Com.) CHAPTER 11 INSTITUTIONS FOR SAVING AND INVESTMENT REFERENCES. _Chamberlain, Laurence_, Principles of bond investment. 4th ed., 1913. The work of the bond house. 1913. _Devine, H. C._, People's coöperative banks for workers in towns, and small holders, allotment cultivators, and others in country districts. 1908. _Dexter, Seymour_, A treatise on coöperative savings and loan associations. Ed., 1894. _Fisher, Irving_, _Kemmerer, E. W._, _Brown, H. G._, and others, How to invest when prices are rising. 1912. _Guenther, Louis_, Investment and speculation. 1916. (La Salle Uni.) _Hamilton, J. H._, Savings and savings institutions. 1902. _Johnson, A. S._, Influences affecting the development of thrift. P. S. Q., 22: 224-244. 1907. _Kemmerer, E. W._, The United States Postal Savings bank. P. S. Q., 26: 462-499. 1911. _Kniffin, W. H._, The savings bank and its practical work. 1912. *_Phillips_, ch. XVI. _Wolff, H. W._, A coöperative bank handbook. 1909. Coöperative banking. 1907. People's banks. 3d ed., 1910. QUESTIONS. 1. What are the nature and purpose of legislation restricting the investments of savings banks? 2. What are these restrictions in this state? In your own state? In those states which are regarded as having the most highly developed laws in this field? 3. Is legislation in this field to be considered as subsidizing certain types of private enterprise? If so, is it socially justifiable? CHAPTER 12 PRINCIPLES OF INSURANCE REFERENCES. _Gephart, W. F._, Principles of insurance. 1913. _Gephart, W. F._, Insurance and the state. 1913. _Huebner, S. S._, Life insurance. 1915. _Huebner, S. S._, Property insurance. 1913. _Statistical Abstract of the United States._ _Valgren, V. N._, Farmers' mutual fire insurance in Minnesota. Q. J. E., 25: 387-396. 1910-1911. _Willet, A. H._, Economic theory of risk and insurance. 1901. _Zartman, L. W._ (Ed.), Fire insurance. Ed., 1915. _Zartman, L. W._ (Ed.), Life insurance. Ed., 1915. QUESTIONS. 1. What are the conditions of economically sound insurance? Give at least two examples. 2. What is the essential economic difference between gambling and insurance? 3. Give examples showing the difference between a gambling house and an insurance company? 4. Investors in Russian bonds are said to take out policies of insurance payable to themselves in the event of the Czar's death, their object being to guard themselves against loss by the depreciation of their Russian securities in case of political disturbances that might emerge upon a change of rulers. (a) Do you regard such insurance as gambling or legitimate speculation from the standpoint of either insurer or insured? (b) Do you regard the issue of such policies on the part of the insurance companies as "sound"? 5. Ought lotteries to be permitted by law? 6. Suppose 1,000 owners of 1,000 buildings worth $7,000 each wish to insure themselves against fire. If the risk for the class of buildings involved in such that seven out of 1,000 burn each year, what annual payment from each owner would be necessary to insure all against total loss--expenses of management, interest, etc., being ignored? (F. M. Taylor.) 7. Suppose that a corporation owns 500 buildings worth $100,000 each; that to insure against fire in an ordinary company would cost $250 for each building; and that the corporation is convinced that by the expenditure of $10,000 the fire loss can be reduced to an average of one building every three years. Would it pay the corporation to insure with some company? (F. M. Taylor.) CHAPTER 13 INTERNATIONAL TRADE REFERENCES. _Bastable, C. E._, The theory of international trade. 1897. _Brown, H. G._, International trade and exchange. 1914. _Clare, G._, The A B C of the foreign exchanges. 1895. _Escher, Franklin_, The elements of foreign exchange. 2d ed., 1911. _Goschen, Viscount_, The theory of the foreign exchanges. 1898. _Johnson, E. R._, Probable changes in the foreign trade of the United States resulting from the European war. A. E. Rev., 6 (no. 1, supp.): 17-25. 1916. Round table discussion of above, 26-49. _Johnson, E. R._, _Van Metre, T. W._, _Huebner, G. G._, and _Hanchett, D. S._, History of domestic and foreign commerce of the United States. 1915. *_Source Book_, 337-346. _Willis, H. P._, Transportation and competition in South American markets. A. E. Rev., 2: 814-833. 1912. QUESTIONS. 1. Is it bad policy to let the people of a suburban village spend money in the city for things that could be produced at home? 2. Is it bad policy for California to buy New England manufactures? 3. Give examples of the industrial advantages of America as compared with Europe. 4. Is the alleged superior efficiency of the American workman over the competing workman of Europe connected in any way with the principle of proportionality? 5. Community A has lands that can produce wheat at a cost of 60 cents per bushel, corn at 40 cents per bushel and potatoes at 40 cents per bushel. Community B can produce wheat at 70 cents per bushel, corn at 45 cents per bushel and potatoes at 42 cents per bushel. Supposing that each community can raise just enough of these foodstuffs for its own use, will there be any incentive for them to exchange these products? 6. "A man is of all sorts of luggage the most difficult to be transported." What is the bearing of this fact upon the theory of international trade? 7. Can a country have a persisting excess of merchandise exports over merchandise imports? If so, under what conditions? 8. If foreign exchange suddenly rose several cents, while imports and exports remained the same, to what causes might it be due? 9. If as the result of a year's foreign trade nation A obtains from other nations $10,000,000 in gold coin in settlement of the balance of international indebtedness, to what extent does that sum measure the gain of nation A from international trade? Reasons. 10. The statistics of exports and imports of the United States for the year 1908-1909 show an excess of exports over imports of $351,000,000 in merchandise; $12,000,000 in silver and $48,000,000 in gold. Explain clearly how the United States could have had an excess of exports of merchandise, silver and gold in the same year. 11. If demand exchange on London were selling at $4.835 in New York, would that indicate anything as to the relative values of our imports and exports? Would gold be shipped under these conditions and if so in which direction? Explain. 12. Explain clearly the condition of commerce under which demand sterling bills of exchange will sell at $4.875 in the New York exchange market. 13. If the merchandise imports from England to the United States equalled the exports from the United States to England, what would be the state of exchange on London? Would there be any greater advantage to either of the countries engaged in trade? 14. What effect on exchange has the holding of American bonds abroad? 15. If large shipments of wheat are made to England, will bills of exchange on London be higher or lower in New York? 16. When in New York a sight draft on London for £5000 sells for $24,150, in which direction are gold remittances likely to be moving? Give reasons. 17. If England sells $10,000,000 worth of our securities to Americans, what is the effect on exchange rates? 18. Show what, in a gold-producing country, would be the relations and interaction of new gold supply, prices, relative amounts of imports and exports, and rate of exchange. (Sumner.) 19. A nation with _n_ dollars in circulation has to pay a war indemnity of _n_ dollars to another country having the same circulation. How much money will each then have, and what will be the effect on prices, foreign trade, rate of exchange? (Davenport.) 20. Suppose an increase in the volume of our currency, due to a new issue of silver, what would be the effect upon international trade? Would this effect be lasting? Would your answer depend at all upon the condition of our currency at the time the increase occurred? 21. If through the improvement of our banking and currency system a much larger percentage of the business of the country comes to be done through the use of credits (rather than money) as the medium of exchange, what will be the effect on (a) the quantity of money in circulation, (b) the general level of prices, (c) the composition of the country's media of exchange, (d) the international movement of gold, (e) the interests of debtors and creditors, respectively? 22. Each one of two countries, A and B, can, by the application of a given amount of labor to its material resources, produce any one or all of the commodities M, N, O, P, Q, R and S, as exhibited in the following table: _Commodity._ _Country A._ _Country B._ =M= 50 tons 60 tons =N= 1000 yards 1100 yards =O= .25 bales 20 bales =P= 900 bushels 800 bushels =Q= 600 ounces 650 ounces =R= 5000 gallons 5000 gallons =S= 2500 pounds 2000 pounds (a) In the absence of restrictive legislation is each country likely to produce all of these commodities for itself? Why or why not? (b) If conditions are such as to lead to the territorial division of labor, which commodities are most likely to be produced in each country? (c) About which of these commodities is there the least certainty on this point? Why? CHAPTER 14 THE POLICY OF A PROTECTIVE TARIFF REFERENCES. _Bolen, G. L._, Plain facts as to the trusts and the tariff. 1902. Pt. II. _Daniels, W. M._, The elements of public finance. Ed., 1911. Pt. II, ch. VII. _Johnson, E. H._, The effect of a tariff on production. Q. J. E., 18: 135-137. 1903-1904. _Patten, S. N._, The economic basis of protection. 1890. *_Source Book_, 347-357, 358-360. _Wallace, H. B._, A balanced tariff. A. E. Rev., 2: 568-575. 1912. QUESTIONS. 1. Can it be of advantage to trade freely with one nation if general free trade is bad? 2. If there were no legal bar to a tariff between the states, would a tariff probably be imposed? If so, would it be a wise measure? 3. Discuss the contention that a protective tariff by helping to keep out imports of foreign goods tends to maintain a favorable balance of trade. 4. "The territorial distribution of money is both a determined and a determining factor in international trade." Explain the meaning of this statement and show its relation to the "favorable balance of trade" argument for protection. 5. An Englishman gave this argument for protection: "If an Englishman buys a frying pan from a German for a shilling (24 cents), then England gets the frying pan and Germany gets the shilling, whereas if an Englishman buys the frying pan from an English manufacturer for 13 pence (26 cents), England gets both the frying pan and the 13 pence. The increase in price benefits England because the money remains within the country, instead of going abroad to increase the wealth of foreign nations." Give your opinion of this argument. 6. Discuss this statement: "The American people send abroad over $100,000,000 a year to pay for imported sugar. To meet this bill requires the wheat crop of over 7,100,000 acres. But all the sugar now imported could be grown on 1,700,000 acres in beets or cane. In other words we are throwing away the product of approximately 5,400,000 acres of land by not growing our own sugar." 7. A New York daily has contended that "Of course, we should be the gainers if every pound of it (raw cotton) were exported in manufactured form. Every process through which the raw material passes in its conversion into fabrics would mean employment for American wage-earners." Discuss the proposition that the aggregate for the labor of American wage-earners is less if we export raw cotton than if we should manufacture the raw cotton in this country for export. 8. Assuming that an import duty on tea, if sufficiently high, would create a tea growing industry in the United States capable of supplying the whole domestic demand, trace the various economic effects of such a duty. 9. Who gained when Hawaiian sugar (before annexation) was admitted free of duty, while other sugar was taxed? 10. If the owners of marble quarries can show that their net income is 30 per cent. greater by reason of the protective tariff upon foreign marbles, does this show that the tariff increases the wealth of the protecting country? 11. State any proposition which you think that you can maintain about the relation between high or low wages and international competition. Maintain your proposition. 12. What do you say to the plan of so adjusting duties on imports as to equalize the "labor cost" of imported and domestic commodities, through the levy of duties which will just offset the higher wages paid by the American employer? 13. Is a high rate of money wages an obstacle to the successful conduct of industry in competition with countries where money wages are low? 14. What was the argument originally used as to the comparative wage levels here and abroad so far as the starting of certain industries in this country was concerned? Compare this argument with the current protectionist argument as to the relation between the tariff and the present general wage level in the United States. 15. What help should the law of wages give in explaining the present inequality as among the wage scales in Germany, France, England and the U. S.? 16. If it would pay us to admit goods free, may we be justified in taxing them to force concessions from the other country? 17. What conditions as to consumption and production at home and abroad would be most favorable to the shifting of an import duty on a manufactured article entirely to the consumer? 18. (a) A and B are two tropical islands inhabited by friendly peoples and producing the same commodities. The climate, soil and topography of A are such that all kinds of products can be produced there with less effort than they can be produced in B. Could there be any incentive for the people of A to trade with the people of B? (b) Debarring all feelings of hostility and of sentimental attachment to home, is there any reason why the people of B should not all emigrate to A? (c) Could B equalize conditions of production by enacting a protective tariff on the products of the two islands? (d) Suppose A were discovered after a strong civilization had grown up on B. Might conditions be such that A could with advantage to itself exact a protective tariff? CHAPTER 15 AMERICAN TARIFF HISTORY REFERENCES. *_Blakey, R. G._, The new revenue act. A. E. Rev., 6: 837-850. 1916. _Curtis, J. F._, The administrative provisions of the revenue act of 1913. Q. J. E., 28: 31-45. 1913-1914. _Hoffmann, I. N._, Customs administration under the 1913 tariff act. J. P. E., 22: 845-871. 1914. _McKinley, Wm._, History of tariff legislation, 1812-1896. 1896. _Sumner, W. G._, History of protection in the United States. 1877. _Taussig, F. W._, How tariffs should not be made. A. E. Rev., 1: 20-32. 1911. _Taussig, F. W._, Tariff History of the United States. 6th ed., 1914. _Taussig, F. W._, The tariff debate of 1909 and the new tariff act. Q. J. E., 24: 1-38. 1909-1910. *_Willis, H. P._, The tariff of 1913. J. P. E., 22: 1-42, 105-131, 218-238. 1914. QUESTIONS. 1. In the light of American tariff history what would you say were (1) the principal advantages and (2) the principal disadvantages of a highly protective tariff as a primary source of public revenue? Illustrate your points by historical references. 2. If other countries can carry our commerce cheaper than we can do it ourselves and if the citizens of this country can invest their money with greater profit in other industries, what are the advantages and disadvantages of allowing those countries to carry our commerce? 3. Tabulate and diagram the values of the imports and of the exports of the U. S. to and from Europe, N. A., S. A., Asia, Oceanica and Africa for the latest five years reported. Discuss the question of American exports and imports in a paragraph not exceeding 200 words in length. Stat. Abst. (under Progress of U. S.). 4. Make a list of the ten leading articles exported from and the ten leading articles imported into the U. S. for the latest year available. What do these show as to the position of the U. S. in international commerce? Stat. Abst. CHAPTER 16 OBJECTS AND PRINCIPLES OF TAXATION REFERENCES. *_Bullock, C. J._, Selected readings in public finance. 1906. Chs. VIII, IX. The growth of federal expenditures. P. S. Q., 18: 97-111. 1903. *_Daniels_, Pt. II, chs. I-IV. _Edgeworth, F. Y._, The subjective element in the first principles of taxation. Q. J. E., 24: 459-470. 1909-1910. *_Plehn, C. C._, Public finance. 3d ed., rev and enl. 1913. Pts. I, II. _Round table discussion of taxation._ A. E. Assn. Bul., 4th ser., 1 (no. 2): 333-346. 1911. _Seligman, E. R. A._, Essays in taxation. 8th ed., 1913. QUESTIONS. 1. Does taxation ever infringe on the right of private property? 2. What is it a citizen gets in return for his taxes? 3. Is there any relation between the taxes paid and the benefits secured from government? 4. In what ways may we understand the proposition that taxation should be proportioned to ability? 5. It is claimed by some that the use by the government of indirect taxes increases existing inequalities in the personal distribution of wealth. What reasons may be given for or against this opinion? CHAPTER 17 PROPERTY AND CORPORATION TAXES REFERENCES. _Brooks, R. C._, The German imperial tax on the unearned increment. Q. J. E., 25: 682-709. 1910-1911. _Bullock_, Chs. XI, XV. _Compton, W. M._, Recent tendencies in the reform of forest taxation. J. P. E., 23: 971-979. 1915. *_Hamilton_, Readings, 560, 561. _Robinson, M. H._, The Federal corporation tax. A. E. Rev., 1: 691-723. 1911. *_Source Book_, 130-137. _Tucker, R. S._, The British taxes on land values in practice. Q. J. E., 29: 794-819. 1914-1915. _United States Bureau of Corporations_, Report on the taxation of corporations. Pts. I-IV. 1909-1912. Special report on taxation. 1913. _Young, A. N._, The single tax movement in the United States. 1916. QUESTIONS. 1. A recent newspaper item says: "This is the year real estate is assessed. Turn the cow loose in the front yard, tear down the fence, make things look generally dilapidated, for it will be money in your pocket." What does this indicate regarding taxation? 2. The parts of an estate divided into fifteen equal shares by expert real estate agents were soon after assessed variously from $900 to $2850 for purposes of taxation. What does this indicate? (From Sumner's Problems.) 3. Explain how and why the general property tax has been breaking down in the United States with reference to the taxation of public service corporations. 4. What is meant by the separation of state and local revenues? What advantages do the advocates of separation claim for their plan? What is your judgment with reference to its advisability? 5. What is meant by the proposition that a single tax on land values is paid for all time by the one who owns the land at the time the tax is first imposed? 6. How does Massachusetts tax interstate railroads running through the state? What defects, if any, do you see in the Massachusetts plan? 7. Can taxation be used to secure some of the profits of large corporations? CHAPTER 18 PERSONAL TAXES REFERENCES. _Adams, T. S._, The effect of income and inheritance taxes on the distribution of wealth. A. E. Rev., 5 (no. 1, supp.): 234-244. 1915. The place of the income tax in the reform of state taxation. A. E. Assn. Bul., 4th ser., 1 (no. 2): 302-321. 1911. *_Blakey, R. G._, The new income tax. A. E. Rev., 4: 25-46. 1914. _Bowley, A. L._, The British super-tax and the distribution of income. Q. J. E., 28: 255-268. 1913-1914. *_Bullock_, chs. XII, XVI. The taxation of property and income in Massachusetts. Q. J. E., 31: 1-61. 1916-1917. _Daniels_, Pt. II, ch. VIII. _Grice, J. W._, Recent developments in taxation in England. A. E. Rev., 1: 488-504. 1911. _Hill, J. A._, The income tax of 1913. Q. J. E., 28: 46-68. 1913-1914. _Seligman, E. R. A._, The income tax. Ed., 1914. _Smith, R. H._, Distribution of income in Great Britain and incidence of the income tax. Q. J. E., 25: 216-238. 1910-1911. _West, Max_, The inheritance tax. 2d ed., 1908. QUESTIONS. 1. What is the present status of the inheritance tax in the American commonwealths? 2. Discuss the proposition that income is the normal source of taxation. 3. Outline the history of income tax legislation by the federal government. What were the conditions which led to the income tax legislation of 1913? 4. What conception of income does the recent income tax embody? Illustrate some peculiar distinctions resulting from this use of "income." 5. What is your opinion concerning the justice of progressive taxation? 6. Name the two principal arguments in favor of progressive taxation. Which two arguments in favor of progressive taxation do you consider the strongest and why? Which two arguments against progressive taxation do you consider the weakest and why? To what kinds of taxes, if to any, is the principle of progression inapplicable and why? CHAPTER 19 METHODS OF INDUSTRIAL REMUNERATION REFERENCES. *_Adams, T. S._, and _Sumner, H. L._, Labor problems. 8th ed., 1914. Chs. IV, IX, X. _Commons, J. R._ (Ed.), Trade unionism and labor problems. 1905. Ch. XI. *_Commons, J. R._, and _Andrews, J. B._, Principles of labor legislation. 1916. Ch. II, secs. 1-3. _Cross, Ira B._, Coöperation in California. A. E. Rev., 1: 535-544. 1911. _Fay, C. R._, Coöperation at home and abroad. 1898. _Gilman, N. P._, Profit-sharing between employer and employee. 1889. _Hoxie, R. F._, Why organized labor opposes scientific management. Q. J. E., 31: 62-85. 1916-1917. _Round table discussion._ Industrial efficiency and the interests of labor. A. E. Rev., 2 (no. 1, supp.): 117-130. 1912. _Schloss, D. F._, Methods of industrial remuneration. 3d ed., 1898. _Virtue, G. O._, Coöperative coopers of Minneapolis. Q. J. E., 19: 527-544. 1904-1905. _Wolff, H. W._, Neglected opportunities of coöperation. Econ. Rev., 16: 190-206. 1906. QUESTIONS. 1. With increasing division of labor is there greater or less opportunity for the payment of laborers according to the piece-wage plan? 2. Discuss the following statement: Under the piece-work system the foreman looks out for the quality and the operative for the quantity of the work; under the time-wage system the foreman looks out for the quantity and the laborer for the quality of the work. 3. What remedy has the foreman for an inefficient laborer working under the time-wage system? 4. Is time- or piece-work best adapted to the following kinds of laborers: coal-miners, coopers, farm-hands, printers, engravers, shoe-factory hands, railroad brakemen, telegraph operators? 5. Since under the piece-work system a man is paid only for what he does is there any reason for discharging a workman employed under this plan whose efficiency falls below the average? 6. Describe any case of profit-sharing you may have seen in operation. 7. In the case of a coöperative general store do economic profits emerge? If so, where do they go? 8. If you have seen a coöperative store in operation tell what was its success. 9. Compare and explain producers' and consumers' coöperation, showing the difficulties and advantages. CHAPTER 20 ORGANIZED LABOR REFERENCES. *_Adams_ and _Sumner_, chs. VI, VII. _Barnett, G. E._, National and district systems of collective bargaining in the United States. Q. J. E., 26: 425-443. 1911-1912. _Barnett, G. E._, The dominance of the national union in American labor organization. Ibid., 27: 455-481. 1912-1913. _Carlton, F. T._, The history and problems of organized labor. 1911. _Commons_, chs. II, VI. *_Commons_ and _Andrews_, Ch. III, sec. 1. _Groat, G. G._, An introduction to the study of organized labor in America. 1916. _Hoxie, R. F._, Scientific management and labor. 1915. _Hoxie, R. F._, The truth about the I. W. W. J. P. E., 21: 785-797. 1913. _Hoxie, R. F._, Trade unionism in the United States: general character and types; the interpretation of union types. J. P. E., 22: 201-217, 464-481. 1914. _Lewis, H. T._, The economic basis of the fight for the closed shop. J. P. E., 20: 928-952. 1912. _McCabe, D. A._, The standard rate in American trade unions. 1912. _Mitchell, John_, Organized labor. 1902. *_Source Book_, 214-227 (extract from McCabe). _Webb, Sidney and Beatrice_, Industrial democracy. 1897. _Wolman, L._, The boycott in American trade unions. 1916. QUESTIONS. 1. Are the opportunities for workmen to rise to the rank of masters as great as formerly? 2. What are the chief causes of the origin and rise of trade unions? Distinguish between a trade union and a labor union. 3. What are the conditions favorable to national agreements between trade unions and employers' associations? Explain clearly the bearing of each of these conditions. 4. Describe the practices included under the term "direct action," and contrast with the methods of collective bargaining and legislation. 5. Are strikes becoming more or less frequent and important in your state? In answer to this question give figures from 1881 on if obtainable, showing number of strikes; establishments affected and to what extent; loss in wages and to employers. Diagram the figures. Ref., U. S. Bu. of Labor, Annual report, 1906. 6. Do trade unions increase or decrease the number of strikes? 7. If you were an officer of a trade-union, would you begin a strike when trade was good or when it was poor? 8. Does it make any difference in the permanence of an increase of wages brought about by a strike, whether the employer is one of the more successful or one of the less successful in that business? 9. Give examples of the different kinds of boycott. What seems to be the attitude of the federal courts as to the lawfulness of boycotts? 10. Is there any similarity between the methods of trade unions and the etiquette of the medical and the legal professions? 11. Some trade unions limit the number of apprentices in their trades. Is this a justifiable policy on their part? 12. Of the methods employed by trade unions to raise the wages of their members, which are prejudicial and which are not prejudicial to the interests of the rest of the community, including non-union labor? Give reasons. 13. Can wages be affected by the "collective bargaining" of trade unions and if so indicate in that connection a justification (if one exists) for trade union organization. 14. If a trade union sets a minimum rate of wages lower than the competitive market rate would be in the absence of organization, which rate would the members receive? State the facts from the Source Book which lead you to your answer. 15. Have trade unions raised or lowered the wages of non-union labor? 16. What is the attitude of American trade unions toward efficiency systems as attempts to introduce improved methods of production (not systems of payment)? CHAPTER 21 PUBLIC REGULATION OF HOURS AND WAGES REFERENCES. _Abbott, Edith_, Progress of the minimum wage in England. J. P. E., 23: 268-277. 1915. Women in industry. 1915. *_Adams_ and _Sumner_, chs. II, VIII, XII, secs. 1-4, 9, XIII, sec. 2. _Barnett, G. E._, and _McCabe, D. A._, Mediation, investigation and arbitration of industrial disputes. 1916. _Clark, V. S._, The labor movement in Australasia. 1906. _Commons_, chs. VII, VIII, XVIII, XXI. *_Commons_ and _Andrews_, chs. III, secs. 2, 3, IV, V. _Compton, W. M._, Wage theories in industrial arbitration. A. E. Rev., 6: 324-342. 1916. _Hammond, M. B._, Judicial interpretation of the minimum wage in Australia. A. E. Rev., 3: 259-286. 1913. _Hammond, M. B._, Wages boards in Australia. Q. J. E., 29: 98-148, 326-361, 563-630. 1914-1915. _Holcombe, A. N._, The legal minimum wage in the United States. A. E. Rev., 2: 21-37. 1912. _Kelley, Florence_, Minimum-wage laws. J. P. E., 20: 999-1010. 1912. _Millis, H. A._, Some aspects of the minimum wage. J. P. E., 22: 132-155. 1914. _Mote, C. H._, Industrial arbitration. 1916. _Persons, C. E._, Women's work and wages in the United States. Q. J. E., 29: 201-234. 1914-1915. _Suffern, A. E._, Conciliation and arbitration in the coal industry of America. 1915. _United States Bureau of Labor Statistics_, Bul. 175. 1915. Summary of report on woman and child wage-earners. _Webb, Sidney_, The economic theory of a legal minimum wage. J. P. E., 20: 973-998. 1912. _Wise, E. F._, Wage boards in England. A. E. Rev., 2: 1-20. 1912. QUESTIONS. 1. If you can do more work in two hours than in one, can you do more continuously in sixteen consecutive hours than in eight? 2. What determines the maximum study time for the earnest student? 3. When does an industrious man stop working on his own farm, and why? 4. If production is reduced one-fourth by shorter hours, is "work made" to that degree for the unemployed? 5. Defend the minimum wage policy from the workman's point of view, and state the employers' objections thereto. 6. Suppose it were proposed to establish by law a universal nine-hour day for men. (a) Under what conditions would you consider such a law socially beneficial? (b) What other agencies might accomplish the ends which such a law is designed to effect? (c) What are the chief social and economic effects which you would expect from such a law? CHAPTER 22 OTHER PROTECTIVE LABOR AND SOCIAL LEGISLATION REFERENCES. *_Adams_ and _Sumner_, chs. V, sec. 3, XII, sec. 5, XIII, sec. 3. _Addams, Jane_, Child labor legislation, a requisite for industrial efficiency. A. A. A., 25: 542-550. 1905. _Commons_, chs. XIV, XIX, XX, XXII, XXIII, XXVI, XXXVIII. *_Commons_ and _Andrews_, Chs. VI, VII, IX. _Fisher, W. C._, The field of workmen's compensation in the United States. A. E. Rev., 5: 221-278. 1915. _Leiserson, W. M._, The movement for public labor exchanges. J. P. E., 23: 707-716. 1915. _Pigou, A. C._, Unemployment. 1914. _Rubinow, I. M._, The problem of unemployment. J. P. E., 21: 313-331. 1913. _Rubinow, I. M._, Subsidized unemployment insurance. Ibid., 412-431. 1913. _Sumner, H. L._, and _Merritt, E. A._, Child labor legislation in the United States. 1915. _United States Bureau of Labor Statistics_, Bul. 159. 1915. QUESTIONS. 1. What classes of economic goods or services are regulated by law and why? 2. Is there any likeness between trade-unions and tariffs? Between tariffs and factory legislation? 3. What reasons are given in justification of laws closing barber shops on Sundays? 4. May a person owning a lot on a residence street of a city erect a glue factory on it? 5. What have you noted as to the benefits or hardships of restricting child labor in factories? 6. In what kinds of social legislation is the federal character of our government a serious bar to experimentation? Show clearly the reasons why. 7. If population became stationary, neither increasing nor decreasing in numbers, and if methods were discovered which would render possible the production of the same amount of wealth per year as at present with only half the force of laborers employed, and if the average labor day were not shortened, would there not be a great and apparently permanent lack of employment? Discuss thoroughly and give reasons for your answer. 8. In what sense is the "unemployment," so manifest in a period of industrial depression, evidence that the number of workers is "in excess of the work to be done"? CHAPTER 23 SOCIAL INSURANCE REFERENCES. _Adams_ and _Sumner_, ch. XII, secs. 6-8. _Baldwin, F. S._, Old age pension schemes: a criticism and a program. Q. J. E., 24: 713-742. 1909-1910. _Commons_, ch. XXV. *_Commons_ and _Andrews_, ch. VIII. _Foerster, R. F._, The British national insurance act. Q. J. E., 26: 275-312. 1911-1912. _Frankel, L. K._, and _Dawson, M. M._, Workingmen's insurance in Europe. 1910. _Henderson, C. R._, Industrial insurance in the United States. 1909. _Lewis, F. W._, State insurance. 1909. _National Civic Federation, Social Insurance Department_, Report of the committee on preliminary foreign inquiry. 1915. _Rubinow, I. M._, Standards of sickness insurance. J. P. E., 23: 221-251, 327-364, 437-464. 1915. _United States Bureau of Labor_, Annual reports, 1908, 1909. _Warren, B. S._, and _Sydenstricker, Edgar_, Health insurance. 1916. QUESTIONS. 1. Are industrial accidents more frequent in low paid or in high paid occupations? 2. Suggest advantages and disadvantages of a general system of compulsory industrial insurance for old age, sickness and accidents. What are the essential differences between these three forms of insurance? 3. Show to what extent a system of workingmen's insurance has been developed in one of the following countries: Germany, France, Italy, England. In the development of a general system of workingmen's insurance in the U. S., which one of the above forms will probably first come in? For what reasons has a system of this kind not been developed in the U. S.? Henderson, C. R., Industrial insurance. CHAPTER 24 POPULATION AND IMMIGRATION REFERENCES. *_Adams_ and _Sumner_, ch. III. *_Commons_ and _Andrews_, ch. II, sec. 4. _Fairchild, H. P._, Immigration. 1913. The standard of living--up or down? A. E. Rev., 6: 9-25. 1916. _Fetter, F. A._, Population or prosperity. A. E. Rev., 3 (no. 1, supp.): 5-19. 1913. (Presidential address before the American Economic Association, 1912, much of which is incorporated with chap. 24 in the text.) _Goldenweiser, E. A._, Walker's theory of immigration. Am. J. Soc, 18: 342-351. 1912-1913. _Hall, P. F._, The recent history of immigration and immigration restriction. J. P. E., 21: 735-751. 1913. *_Hamilton_, Readings, 384-386, 392-395. _Husband, W. W._, The significance of emigration. A. E. Rev., 2 (no. 1, supp.): 79-85. 1912. Round table discussion of above, 86-88. _Jenks, J. W._, and _Lauck, W. J._, The immigration problem. 1912. _Lauck, W. J._, The vanishing American wage-earner. Atlan. Mo., 110: 691-696. 1912. *_Materials_, 146-156. _Mayo-Smith, Richmond_, Statistics and economics. 1899. Bk. I, ch. V. _Mayo-Smith, Richmond_, Statistics and sociology. 1895. Bk. I, chs. V-VII. _Millis, H. A._, Some economic aspects of Japanese immigration. A. E. Rev., 5: 787-804. 1915. _Page, T. W._, The distribution of immigrants in the United States before 1870. J. P. E., 20: 676-694. 1912. _Page, T. W._, Some economic aspects of immigration before 1870. Ibid., 20: 1011-1028; 21: 34-55. 1912, 1913. _Roberts, Peter_, The new immigration. 1912. _Ross, E. A._, The old world in the new. 1914. *_Source Book_, 187-198. (Extract from Jenks and Lauck.) _Warne, F. J._, The tide of immigration. 1916. QUESTIONS. 1. Tabulate and chart the changes that have taken place in our immigration in regard to (1) amount, (2) character. What problems are presented by these facts? Stat. Abst. 2. Explain the terms "the new immigration" and "the old immigration," and give the important statistical facts regarding them. 3. Show the application of the doctrine of population to the present problem of immigration and wages in America. 4. Do the figures on immigration show anything as to the need of legislation restricting immigration? 5. What has been the effect of the recent immigration into the United States upon the use of machinery? 6. Apply the theory of wages to explain the effect of present immigration on the wages of unskilled or slightly skilled workers. 7. If the supply of labor of any class were to be decreased ten per cent., would wages rise in like proportion? 8. Is immigration now adding to the general welfare in the United States? State the facts and general economic principles on which you base your answer. 9. If there is an immigration of half a million workers annually into a country for a period of ten years--during which no new natural resources are made available, would wages in that country be affected? If so, of what classes of workers? What would be the effect on the amount of income received by land owners? 10. Explain how the general principles of price-determination hold in the determination of wages. Show how these principles apply when there is extensive employment of southern and eastern Europeans. (See Source Book.) 11. If in a given labor market the number of laborers increases while the number and technical efficiency of indirect agents remains unchanged, what change, if any, will result in the average rate of wages? What change, if any, will there be in the return to the indirect agents? 12. Is common, unskilled labor "scarce" (in any reasonable sense of the word) in China? in the United States? CHAPTER 25 AGRICULTURAL AND RURAL POPULATION REFERENCES. _Carver, T. N._, Selected readings in rural economics. 1916. _Carver, T. N._, The work of rural organization. J. P. E., 22: 821-844. 1914. _Coulter, J. L._, Agricultural development in the United States, 1900-1910. Q. J. E., 27: 1-26. 1912-1913. _Hibbard, B. H._, Tenancy in the north central states. Q. J. E., 25: 710-729. 1910-1911. _Hibbard, B. H._, Tenancy in the north Atlantic states. Q. J. E., 26: 105-117. 1911-1912. _Hibbard, B. H._, Tenancy in the western states. Q. J. E., 26: 363-376. 1911-1912. _Hibbard, B. H._, Tenancy in the southern states. Q. J. E., 27: 482-496. 1912-1913. _Hoagland, H. E._, The movement of rural population in Illinois. J. P. E., 20: 913-927. 1912. _Nourse, E. G._, Agricultural economics. 1916. (A large volume of readings, well selected and edited.) _Round table discussion._ The decline of the rural population. A. E. Rev., 2 (no. 1, supp): 51, 52. 1912. _Round table discussion._ Rural conditions in the south. Ibid., 48-50. 1912. _Taylor, H. C._, Agricultural economics. 1905. _Vogt, P. L._, The farmer's labor income. A. E. Rev., 6: 808-822. 1916. QUESTIONS. 1. Cite any instances you have noted of local changes of population distribution as between country and city. What are the chief facts of interest in these cases? What forces can you assign as causes of the changes? Has agricultural activity been accelerated or retarded? Has it received a set-back? 2. A wealthy metropolitan banker purchases a large country estate in a section in which farming is practically on a subsistence basis and in which in recent years many farms have been abandoned. He applies labor and materials lavishly to the soil, sparing no expenditures for purposes which will assist in the production of crops of the best quality. Under what conditions can this be profitably done? What will be the probable effect on local agriculture, (a) if the entire product of the estate is consumed upon it? (b) if a substantial part of the product is marketed in competition with that of the local farmers? What changes are likely to occur with reference to the occupation of the local population? With reference to its migration? 3. Why is it that immigrants are now taking up the farms of New England which have, in some cases for years, been abandoned by native farmers? Is the fact that they are doing so an argument for or against the restriction of immigration? 4. What is the general tendency of immigrants in the matter of settlement in urban and rural communities? 5. If it is true that the relative decline of the agricultural population of the United States can be explained by the operation of purely economic forces, on what grounds is there justification for complaint as to the evils of concentration of population in cities? CHAPTER 26 PROBLEMS OF AGRICULTURAL ECONOMICS REFERENCES. _Carver, T. N._, Selected readings in rural economics. 1916. _Coulter, J. L._, Marketing of agricultural lands in Minnesota and North Dakota. A. E. Rev., 2: 282-301. 1912. _Goldenweiser, E. A._, The farmer's income. A. E. Rev., 6: 42-48. 1916. _Huebner, G. G._, Agricultural commerce: the organization of American commerce in agricultural commodities. 1915. _International Institute of Agricultural Statistics Year Book._ Monographs on agricultural coöperation in various countries. 1916. _Kemmerer, E. W._, Agricultural credit in the United States. A. E. Rev., 2: 852-872. *_Materials_, 407, 408, 409. _Metcalf, R._, and _Black, C. G._, Rural credit coöperation, and agricultural organization in Europe. 1915. _Olmsted, V. H._, The purchasing power of farm products. United States Dept. of Agric., Report, 1912. *_Phillips_, ch. XXVII. On agricultural credit. _Powell, F. W._, Coöperative marketing of California fresh fruit. Q. J. E., 24: 392-418. 1909-1910. _Putnam, G. E._, Agricultural credit legislation and the tenancy problem. A. E. Rev., 5: 805-815. 1915. _Putnam, G. E._, Farm credit in Kansas. Ibid., 27-37. 1915. _Putnam, G. E._, The federal rural credit bill. Ibid., 6: 770-789. 1916. _Shaw, A. W._, Some problems in market distribution. Q. J. E., 26: 703-765. 1911-1912. *_Source Book_, 34-47, 48-57, 75-80, 81-90. _Warren, G. F._, Farm management. 1913. (Treats primarily the problem of the individual farm, but also many of the broader economic questions.) _Weld, L. D. H._, The marketing of farm products. 1916. QUESTIONS. 1. Why has the corporate form of business organizations not been as extensively introduced into the farming industry as into other industries? 2. Discuss the following statements quoted from an article on the Federal Farm Loan Act of 1916. "There was no necessity for any kind of federal legislation affecting the land credit problem of land-owners.... There is, however, the more pressing problem ... of making the conditions of country life more attractive to the _younger_ generation of farmers. In accomplishing this end some form of land purchase legislation is needed." Amer. Econ. Rev., 6: 789. 1916. 3. How do urban and rural districts differ in their preference for and use of different kinds of bank credit? CHAPTER 27 THE RAILROAD PROBLEM REFERENCES. _Brown, H. G._, The competition of transportation companies. A. E. Rev., 4: 771-792. 1914. _Brown, H. G._, Transportation rates and their regulation. 1916. _Clark, J. M._, Some neglected phases of rate regulation. A. E. Rev., 4: 565-574. 1914. _Dixon, F. H._, The Mann-Elkins Act, amending the act to regulate commerce. Q. J. E., 24: 593-633. 1909-1910. _Dunn, S. O._, Railway discrimination. J. P. E., 20: 437-461. 1912. _Gephart, W. F._, The place of the canal in a national system of transportation. A. E. Assn. Bul., 4th ser., 1 (no 2): 188-196. 1911. Round table discussion, 197-203. _Hadley, A. T._, Railroad transportation. 1884. _Hammond, M. B._, Railway rate theories of the interstate commerce commission. Q. J. E., 25: 1-66, 279-336, 471-538. 1909-1910. _Johnson, E. R._, American railway transportation. 3d ed., 1908. _Johnson, E. R._, Inland waterway policy. A. E. Assn. Bul., 4th ser., 1: 166-174. 1911. _Johnson, E. R._, The principles of governmental regulation of railways. P. S. Q., 15: 37-49. 1900. _McFall, R. J._, Railway monopoly and rate regulation. 1916. _Materials_, 627, 628. _Meyer, B. H._, Certain considerations in railway rate making. A. E. Rev., 4 (no. 1, supp.): 69-80. 1914. Round table discussion of above, 81-100. _Prouty, C. A._, Railway discriminations and industrial combinations. A. A. A., 15: 41-50. 1900. _Ripley, W. Z._, (Ed.), Railway problems. 1907. _Ripley, W. Z._, Railroads: rates and regulation. 1912. _Ripley, W. Z._, Railroad overcapitalization. Q. J. E., 28: 601-629. 1913-1914. _Ripley, W. Z._, Railroads: finance and organization. 1915. *_Source Book_, 361-367, 368-378, 379-382. QUESTIONS. 1. Why is transportation a greater problem in the United States than in Europe? 2. Show in what way natural waterways have determined the location of leading cities in America. 3. Give examples of cities whose growth has been caused by railroads. 4. Upon what considerations are commodities classified for shipment by railroads? Is classification unfair discrimination? Illustrate by an example. 5. What classes of interests are affected by increasing the minimum weight for carloads? Explain in each case whether the effect is favorable or unfavorable and the reasons therefor. 6. Does cost of service have anything to do with the rates charged by railroads? 7. Give an example of a blanket rate territory and the reasons therefor. 8. What is the "long and short haul" clause of the Interstate Commerce Act? Explain why railroads make rates which contravene the terms of this clause, and why the government should forbid the railroads to make such rates. 9. A railroad connecting two competitive points charges one-fourth of a cent per ton mile on grain shipments from its inland terminus, while it charges one cent per ton mile on grain shipments from non-competitive territory. What considerations have probably led to the establishment of the above rates? Might not the railroad increase its net revenue by raising the rate on through traffic to one-half cent per ton mile and lowering the local rate to three-fourths of a cent per ton mile? 10. The rate on corn in carload lots from Omaha, Neb. to Newport News, Va. is 10 cents per hundred pounds. From the Omaha region there are competing carriers to the Gulf and other Atlantic ports. The rate on corn in carload lots from points in Virginia to Newport News over the same route is 12 cents per hundred pounds. Could not the local rates be lowered if the carriers advanced the rates on the long-distance haul? 11. What cases have you seen where the railroads impose unjustly on the public? 12. Give instances you have seen or heard of where two shippers paid different rates for the same service. 13. Do you know any large cities that are more favorable shipping points than neighboring towns? 14. What legal rights do the builders of a railroad have that are not enjoyed by all citizens? 15. Can you see any clear distinction between the public nature of a railroad and that of a horse and carriage? 16. What harm can there be in the acceptance of passes by judges, legislators, and other public officials? 17. Ought the law prohibit the sale of tickets by "scalpers"? 18. If your neighbor rides on a pass and you pay your fare, are you helping to pay for his ride? 19. Why should preachers get half-fare rates? 20. What are the chief reasons for the governmental regulation of railways? 21. Why does the question of the control of the railways in the interest of the public present especial difficulties in America? CHAPTER 28 THE PROBLEM OF INDUSTRIAL MONOPOLY REFERENCES. _Bolen, G. L._, Plain facts as to the trusts and the tariff. 1902. _Collier, W. M._, The trusts. 1900. _Cotter, A._, The authentic history of the United States Steel Corporation. 1916. _Hobson, J. A._, The evolution of modern capitalism. Ed., 1912. Ch. V. _Jones, Eliot_, The anthracite coal combination in the United States. 1914. _King, W. I._, The wealth and income of the people of the United States. 1915. _Meade, E. S._, The economics of combination. J. P. E., 20: 358-372. 1912. Trust finance. 1903. _Montague, G. H._, Trusts of to-day. 1904. _Ripley, W. Z._, Industrial concentration as shown by the census. Q. J. E., 21: 651-658. 1906-1907. (Ed.), Trusts, pools and corporations. Ed., 1916. *_Source Book_, 255-264. (Extract from United States Commissioner of Corporations, Report on the transportation of petroleum.) _Stevens, W. S._, Classification of pools and associations. A. E. Rev., 3: 545-575. 1913. _Stevens, W. S._, (Ed.), Industrial combinations and trusts. 1913. _Stevens, W. S._, A group of trusts and combinations. Q. J. E., 26: 593-643. 1911-1912. _Stevens, W. S._, The powder trust, 1872-1912. Ibid., 444-481. 1911-1912. _United States Commissioner of Corporations_, Report on the transportation of petroleum. 1906. _Willoughby, W. F._, The integration of industry in the United States. Q. J. E., 16: 94-115. 1901-1902. QUESTIONS. 1. What large trusts have recently been formed? 2. State the motives for forming trusts, separating those which are socially beneficial and those which are anti-social. 3. Enumerate the advantages possessed by a "trust" over a small competitor, and indicate which of these are the results of large scale production and which are due to the possession of monopoly power. 4. Are there any conditions under which a combination would be a more economical unit of production and distribution than a single plant large enough to secure all advantages to be obtained from mere quantity of output? If so, state them clearly. 5. Explain carefully the causes and limits of the advantages of large production. Give three examples of industries in which the advantages are seen. 6. Have you observed the growth of any local industry from a small beginning to large proportions? If so, how do you account for it? 7. What is the largest manufacturing establishment in your home town? Would a number of smaller establishments of the same sort and with the same aggregate capacity succeed as well? Why? 8. What relation has improved transportation and other means of communication to trusts? 9. What are the chief methods by which trusts or combinations have sought to make economies in management? 10. Describe the characteristic features of the pool, the trust and the holding company. 11. Describe any agreement of which you know, made between merchants or manufacturers for the purpose of regulating prices. Did prices go up or down as a result? 12. What is a simple price agreement? How does it differ from a pool? Is there any difference in the matter of legality? Reasons. 13. What are the limits to the price-fixing and profit-earning powers of monopolies? Are there any other conditions which will tend to check the indefinite growth of combinations? 14. Explain and illustrate by a concrete example the circumstances relating to cost of production which tend to make a monopoly price lower than the previous competitive price for the same article. No reference is here intended to local or temporary cuts in price by monopolies which are intent by such means on capturing a local market. 15. If all trade is exchange, do not the members of a trust reduce their income when they raise the price of their products by artificial agreement? 16. Five plants engaged in the production of a given article in different parts of the United States are combined under the ownership of a single corporation formed for this purpose. Before the combination these five plants produced 75 per cent. of the total output of the article in question, each producing approximately 15 per cent.; the remaining 75 per cent. was produced by seven plants, no one of these turning out more than 5 per cent. of the total output. Each of the first five plants was large enough to secure all known economies in the costs of transforming the raw material into the physically finished product, and each was running to its full capacity. The aggregate net earnings of the five plants were $1,000,000 a year. The cost of reproducing these five is $14,000,000. The new corporation issues and pays to the owners of the properties taken over $10,000,000 in 5 per cent. first mortgage bonds, $6,000,000 in cumulative preferred stock, and $8,000,000 in common stock. What will determine whether this combination possesses monopoly power? Is the corporation overcapitalized? If so, to what extent? State clearly what you mean by overcapitalization? Is it probable that the earnings of the new corporation will be greater than the aggregate earnings of the five plants, if the price of the product is not increased? If so, how will this increase be gained? If there is an increase in earnings, how will the price of each of the three kinds of securities of the corporation be affected? 17. Suppose that the effective demand for a certain kind of goods in the country as a whole will vary in the following manner with the price changes indicated: $1.00 1,000,000 units 1.10 900,000 units 1.20 800,000 units 1.30 700,000 units 1.40 600,000 units 1.50 500,000 units 1.60 400,000 units 1.70 300,000 units 1.80 200,000 units There are ten companies each producing 100,000 units at a cost of 90 cents (including all costs but an allowance for dividends on investment) this giving just enough of a margin to each company to cause it to continue in the industry. What immediate effect on prices could a combination consisting of six firms have, assuming that the cost per unit of product and that the output of the independents remain unchanged? Show for each of the prices indicated what the amount of the margin made by the four independent competitors (altogether) and by the combination would be. What less immediate effects would be likely to follow, and why? 18. Is granting patents an interference with trade similar to tariffs? 19. Is it right that the lucky inventor of a popular toy should make $100 a day from it? 20. Is it right that an inventor should by patent laws be able to keep the profits of his business high? CHAPTER 29 PUBLIC POLICY IN RESPECT TO MONOPOLY REFERENCES. _Anderson, B. M., Jr._, Competition versus monopoly the issue of the campaign. Independent, 73: 997-1002. 1912. _Bolen, G. L._, Plain facts as to the trusts and the tariff. 1902. _Brown, W. J._, The prevention and control of monopolies. 1915. _Clark, J. B._, The problem of monopoly. 1904. _Clark, J. B._, and _J. M._, The control of trusts. Ed., 1914. _Clark, J. M._, Rates for public utilities. A. E. Rev., 1: 473-487. 1911. _Collier, W. M._, The trusts. 1900. _Davies, J. E._, Trust laws and unfair competition. 1916. _Durand, E. D._, The trust problem. 1915. See also Q. J. E., 28: 381-416, 664-700. 1913-1914. _Durand, E. D._, The trust legislation of 1914. Q. J. E., 29: 72-97. 1914-1915. _Ely, R. T._, Monopolies and trusts. 1900. _Gray, J. H._, The control of public service corporations. A. E. Rev., 4 (no. 1, supp.): 18-44. 1914. Round table discussion of above, 45-68. _Hotchkiss, W. E._, Recent trust decisions and business. A. E. Rev., 4 (no. 1, supp.): 158-172. 1914. Round table discussion of above, 173-195. _Jenks, J. W._, The trust problem. 1900. _Knauth, O. W._, Capital and monopoly. P. S. Q., 31: 244-259. 1916. _Knauth, O. W._, Competition and capital. Ibid., 30: 578-590. 1915. _Knauth, O. W._, The policy of the United States toward industrial monopoly. 1914. _LeRossignol, J. E._, Monopolies past and present. 1900. _Orth, S. P._ (Ed.), Readings on the relation of government to property and industry. 1915. _Ripley, W. Z._, (Ed.), Trusts, pools and corporations. Ed., 1916. *_Source Book_, 383-385. The Sherman anti-trust act. _Stevens, W. S._, The Clayton act. A. E. Rev., 5: 38-54. 1915. The trade commission act. Ibid., 4: 840-855. 1914. _United States Industrial Commission_, Report. 1898-1901. 19 vols. _Wright C. W._, The economics of governmental price regulation. A. E. Rev., 3 (no. 1, supp.): 126-131. 1913. Round table discussion of this paper and that of J. M. Clark, 132-142. _Wyman, Bruce_, Control of the market. 1911. QUESTIONS. 1. What is the trust problem? 2. Does the public consider the growth of trusts to be good or bad? What do students of the question think of it? 3. Which one of the following views do you think to be nearest the truth and why? (a) The trust is a natural and inevitable outcome of modern conditions and is a distinct economic gain. (b) The trust is a result of special privileges and corporate abuses. (c) The trust is the greatest invention of this or any other age. 4. Would it be a good thing for society if a trust made great economies in production, crowded out its smaller competitors, and maintained prices just where they were before, dividing among its shareholders the amounts saved? 5. How would the effects on society be different if prices were reduced by better organization and the prevention of waste? 6. If it could be shown that trusts have lowered prices, should that fact exempt them from all interference from legislation? 7. Describe briefly the "unfair practices" of monopolistic corporations. What specific features of the recent railroad and trust legislation are aimed at the prevention of these practices? 8. Is it good public policy to allow a trust to undersell its smaller competitor in one district while it keeps up its prices elsewhere? 9. Are most positive laws intended to hinder competition or make it freer? 10. Copy from the statutes of two states far apart, those sections that pertain to anti-trust or anti-monopoly legislation. Note the general nature of this legislation, special features, penalties for violations, etc., and discuss. 11. What are the main provisions in one of the following: (a) Sherman Anti-Trust Law, (b) Massachusetts Business Corporation Law, (c) The New Companies' Acts, England, (d) German Company Law. 12. Abstract and discuss the Northern Securities decision. Do you see any arguments to be advanced for pooling? Do you think the decision effective in stopping pooling? Ripley (Ed.), Trusts, pools and combinations. CHAPTER 30 PUBLIC OWNERSHIP REFERENCES. _Bemis, E. W._, (Ed.), Municipal monopolies. 1899. _Brooks, R. C._, Municipal Affairs, 5: 1-346. 1901. (An exhaustive and well-arranged bibliography on all aspects of municipal problems.) _Dewsnup, E. R._, The attitude of the state toward railways, a discussion of the question of nationalization. A. E. Assn. Bul., 4th _Fairlie, J. A._, Recent extensions of municipal functions in the ser., 1, no. 2: 175-187. 1911. (Vol. of Papers and discussions.) United States. A. A. A., 25: 299-310. 1905. _Guyot, Yves_, Where and why public ownership has failed. Trans. by H. F. Baker. 1914. _Knapp, M. A._, Government ownership of railroads. A. A. A., 19: 61-73. 1902. _National Civic Federation_, Report on municipal and private operation of public utilities. 1907. 3 vols. (A monumental study by an American delegation, which visited many cities of Europe and America; favorable, in the main, to extension of municipal ownership.) _Winchell, B. L._, Drift toward government ownership of railways. Atlan. Mo., 110: 747-758. 1912. QUESTIONS. 1. Does every government enterprise necessarily narrow the field for private enterprise and diminish the amount of competition? 2. What forms of state activity favor survival of unfit men and bad traits of character? What forms help the fittest to survive? 3. What are municipal franchises? Where are they? 4. Why does the public consent to grant patents or public franchises? 5. What kinds of municipal industries have you seen in operation? How successful were they? 6. What are the main arguments for and against the city ownership and control of gas and waterworks? What troubles arise from city politics? 7. Name the industries that are owned and controlled by towns and cities of which you have a personal knowledge. Which of them are most satisfactory in your judgment? Which the least so? 8. What is the public sentiment in your home community as to the ownership of industries by the town or city? CHAPTER 31 SOME ASPECTS OF SOCIALISM REFERENCES. _Brooks, J. G._, The problem of syndicalism. A. E. Rev., 4 (no. 1, supp.): 115-130. 1914. Round table discussion of above, 131-157. _Clark, J. B._, Social justice without socialism. 1914. _Ensor, R. C. K._, (Ed.), Modern socialism. 2d ed., 1907. (Selections from socialistic sources.) _Gladden, Washington_, Tools and the man. 1893. (One example of a large number of American books appealing for the application of Christian ethics to social questions.) _Hillquit, M._, History of socialism in the United States. 1903. _Hillquit, M._, Socialism in theory and practice. 1909. _Hinds, W. A._, American communities. 2d ed., 1908. (Describes many experiments, all failures; by a sympathizer with socialism.) _Kirkup, T._, Inquiry into socialism. 3d ed., 1907. (A sympathetic, but not a partizan statement.) _Lockwood, G. B._, The New Harmony movement. 2d ed., 1907. _Martin, John_, An attempt to define socialism. A. E. Assn. Bul., 4th ser., 1 (no. 2): 347-354. 1911. Round table discussion of above, 355-367. _Menger, A._, The right to the whole produce of labor. Trans. 1899. (Masterly criticism.) _Rae, John_, Contemporary socialism. 3d ed., 1901. (Standard work by a non-socialist.) _Schaeffle, A._, The quintessence of socialism. Ed., 1898. (Exposition by a non-socialist, so favorable that it is used by the socialists as a tract.) _Spahr, C. B._, Present distribution of wealth in the United States. 1896. _Spargo, John_, Socialism. 1906. (Pro.) _Walling, W. E._, Socialism as it is. 1912. (Pro.) _Walling, W. E._, and others, The socialism of to-day. 1916. (A source book.) _Watkins, G. P._, Growth of large fortunes. 1907. _Wells, H. G._, New worlds for old. 1908. (An appeal for juster distribution; Fabian school.) QUESTIONS. 1. In the last analysis is there anyone--retired capitalist or unskilled day-worker--whose title to the real income he receives is derived solely from the property he owns, or solely from the labor he performs? 2. What is it to earn a living? How many people do it? 3. If capital is needed in production why is the question of justice raised when its use is paid for? 4. What is the doctrine of economic harmonies? Give three examples (distinct in kind) in modern legislation which run counter to this doctrine, with the justification for each of these. 5. Define charity. Apply the general principles of charity to free schools, free libraries, and free clothing to school children. 6. What is economic freedom? How different from political freedom? 7. Is custom a better regulator of economic action than competition? 8. What are vested rights? Do they ever stand in the way of progress? Examples. 9. Distinguish between the socialistic and the competitive principles of distribution. 10. What classes of thinkers are most inclined to take up socialism? (Classes considered socially, industrially, as to race, as to economic and historical training.) 11. If socialism reduced the total product, would it still be desirable because of the better distribution? 12. What effect would it have if the state should make laborers work for unsuccessful employers at lower wages than for successful ones? Or should reduce rents for the less capable merchants and manufacturers? 13. Is there any rule for determining the limits of state interference? 14. If you had the power, what single public measure that you believe would be practicable and effective would you put on the statute books, in order to make a juster division of the social income? Give reasons. 15. The wealth of the United States increased from $7,000,000,000 in 1850 to $188,000,000,000 in 1912. How was this wealth distributed according to (a) the socialistic theory of value? (b) the single tax theory? (c) the theory of value under competitive conditions? 16. What are the chief ways in which the rule of competitive value has been nullified in this period. 17. Would socialism guarantee steadiness or regularity in economic activity, thus eliminating the phenomena of economic crises and depressions? 18. In what way does taxation now shift the distribution of real incomes as among persons? By what other methods and in what degree could such taxation be extended? * * * * * TRANSCRIBER'S NOTES 1. All errors and inconsistencies in spelling, punctuation, italicization have been retained, except as noted below. 2. On p. 9, the title 'The geography of commerce' had a lower case 't' in 'The' in the original. 3. On p. 10, the question 'What is meant by the "Factory System"?' appeared in the original as 'What is meant by the "Factory System."' 4. On p. 12, the question 'What are the principal things besides money uses that cause a demand for gold and silver?' had a full stop (period) instead of a question mark in the original. 5. On p. 15, in the phrase 'piece of the same denomination' the original had 'demonination'. 6. On p. 17, in the reference to 'chs. VI, VII, XIII.', the name 'Phillips' was not italicized in the original. 7. In the table at the top of p. 18 labelled 'Average prices for', there was no comma after 'Wool' in the original. 8. On p. 18 the penultimate sentence in question 7, with the phrase 'weighting affect your first', lacked a question mark in the original. 9. On p. 21 question 9, about 'Two men A and B', had 'transacton' instead of 'transaction' in the original. 10. On p. 23, question 17, 'Suppose that this bank...', had two full stops (periods) instead of one after '$102'. 11. On p. 38, the hanging indent after the reference beginning 'Virtue,' was a regular indent in the original. 12. On p. 42, in the reference beginning 'United States', the abbreviation 'Bul.' was italicized in the original, although it was not italicized in its other occurrences. 13. On p. 44, the word 'and' in the reference beginning 'Warren, B.' was italicized in the original. 14. On p. 46, the hanging indent after the reference to 'The work of rural organization' was a normal indent in the original. 15. On p. 47, the author of 'Tenancy in the southern states', B. H. Hibbard, was shown as H. E. Hibbard in the original. 16. On p. 49, the question 'How do urban and rural...' had a full stop (period) instead of a question mark in the original. 17. On p. 53, presumably either the phrase 'these five plants produced 75 per cent.' was meant to be 'these five plants produced 25 per cent.' or the phrase 'the remaining 75 per cent.' was meant to be 'the remaining 25 per cent.' 18. On p. 55, the initials of LeRossignol were not italicized in the original. 19. On p. 56, the phrase 'its prices elsewhere' was 'its prices elsewere' in the original. 20. On p. 58, in the question about the 'doctrine of economic harmonies', the word 'justification' was 'justificaton' in the original. 21. On p. 59, the question about 'unsuccessful employers' had 'unsuccesful' in the original. 22. The phrase 'land owners' occurs once in the text; the word 'land-owners', broken across lines, occurs once. This discrepancy has been retained, with the word 'land-owners' rather than 'landowners' being arbitrarily chosen for the latter. 
33741	----	THE ACQUISITIVE SOCIETY BY R. H. TAWNEY FELLOW OF BALLIOL COLLEGE, OXFORD; LATE MEMBER OF THE COAL INDUSTRY COMMISSION NEW YORK HARCOURT, BRACE AND COMPANY COPYRIGHT, 1920, BY HARCOURT, BRACE AND HOWE, INC. PRINTED IN THE U. S. A. BY THE QUINN & BODEN COMPANY RAHWAY, N. J. CONTENTS CHAPTER I INTRODUCTORY II RIGHTS AND FUNCTIONS III THE ACQUISITIVE SOCIETY IV THE NEMESIS OF INDUSTRIALISM V PROPERTY AND CREATIVE WORK VI THE FUNCTIONAL SOCIETY VII INDUSTRY AS A PROFESSION VIII THE "VICIOUS CIRCLE" IX THE CONDITION OF EFFICIENCY X THE POSITION OF THE BRAIN WORKER XI PORRO UNUM NECESSARIUM _The author desires to express his acknowledgments to the Editor of the_ Hibbert Journal _for permission to reprint an article which appeared in it_. {1} THE ACQUISITIVE SOCIETY I INTRODUCTORY It is a commonplace that the characteristic virtue of Englishmen is their power of sustained practical activity, and their characteristic vice a reluctance to test the quality of that activity by reference to principles. They are incurious as to theory, take fundamentals for granted, and are more interested in the state of the roads than in their place on the map. And it might fairly be argued that in ordinary times that combination of intellectual tameness with practical energy is sufficiently serviceable to explain, if not to justify, the equanimity with which its possessors bear the criticism of more mentally adventurous nations. It is the mood of those who have made their bargain with fate and are content to take what it offers without re-opening the deal. It leaves the mind free to concentrate undisturbed upon profitable activities, because it is not distracted by a taste for unprofitable speculations. Most generations, it might be said, walk in a path which they neither make, nor discover, but accept; the main thing is that they should march. The blinkers worn by Englishmen enable them to trot all the more steadily along the beaten {2} road, without being disturbed by curiosity as to their destination. But if the medicine of the constitution ought not to be made its daily food, neither can its daily food be made its medicine. There are times which are not ordinary, and in such times it is not enough to follow the road. It is necessary to know where it leads, and, if it leads nowhere, to follow another. The search for another involves reflection, which is uncongenial to the bustling people who describe themselves as practical, because they take things as they are and leave them as they are. But the practical thing for a traveler who is uncertain of his path is not to proceed with the utmost rapidity in the wrong direction: it is to consider how to find the right one. And the practical thing for a nation which has stumbled upon one of the turning-points of history is not to behave as though nothing very important were involved, as if it did not matter whether it turned to the right or to the left, went up hill or down dale, provided that it continued doing with a little more energy what it has done hitherto; but to consider whether what it has done hitherto is wise, and, if it is not wise, to alter it. When the broken ends of its industry, its politics, its social organization, have to be pieced together after a catastrophe, it must make a decision; for it makes a decision even if it refuses to decide. If it is to make a decision which will wear, it must travel beyond the philosophy momentarily in favor with the proprietors of its newspapers. Unless it is to move with the energetic futility of a squirrel in a revolving cage, it must have a clear apprehension both of the {3} deficiency of what is, and of the character of what ought to be. And to obtain this apprehension it must appeal to some standard more stable than the momentary exigencies of its commerce or industry or social life, and judge them by it. It must, in short, have recourse to Principles. Such considerations are, perhaps, not altogether irrelevant at a time when facts have forced upon Englishmen the reconsideration of their social institutions which no appeal to theory could induce them to undertake. An appeal to principles is the condition of any considerable reconstruction of society, because social institutions are the visible expression of the scale of moral values which rules the minds of individuals, and it is impossible to alter institutions without altering that moral valuation. Parliament, industrial organizations, the whole complex machinery through which society expresses itself, is a mill which grinds only what is put into it, and when nothing is put into it grinds air. There are many, of course, who desire no alteration, and who, when it is attempted, will oppose it. They have found the existing economic order profitable in the past. They desire only such changes as will insure that it is equally profitable in the future. _Quand le Roi avait bu, la Pologne était ivre_. They are genuinely unable to understand why their countrymen cannot bask happily by the fire which warms themselves, and ask, like the French farmer-general:--"When everything goes so happily, why trouble to change it?" Such persons are to be pitied, for they lack the social quality which is {4} proper to man. But they do not need argument; for Heaven has denied them one of the faculties required to apprehend it. There are others, however, who are conscious of the desire for a new social order, but who yet do not grasp the implications of their own desire. Men may genuinely sympathize with the demand for a radical change. They may be conscious of social evils and sincerely anxious to remove them. They may set up a new department, and appoint new officials, and invent a new name to express their resolution to effect something more drastic than reform, and less disturbing than revolution. But unless they will take the pains, not only to act, but to reflect, they end by effecting nothing. For they deliver themselves bound to those who think they are practical, because they take their philosophy so much for granted as to be unconscious of its implications, and directly they try to act, that philosophy re-asserts itself, and serves as an overruling force which presses their action more deeply into the old channels. "Unhappy man that I am; who shall deliver me from the body of this death?" When they desire to place their economic life on a better foundation, they repeat, like parrots, the word "Productivity," because that is the word that rises first in their minds; regardless of the fact that productivity is the foundation on which it is based already, that increased productivity is the one characteristic achievement of the age before the war, as religion was of the Middle Ages or art of classical Athens, and that it is precisely in the century which has seen the greatest increase in {5} productivity since the fall of the Roman Empire that economic discontent has been most acute. When they are touched by social compunction, they can think of nothing more original than the diminution of poverty, because poverty, being the opposite of the riches which they value most, seems to them the most terrible of human afflictions. They do not understand that poverty is a symptom and a consequence of social disorder, while the disorder itself is something at once more fundamental and more incorrigible, and that the quality in their social life which causes it to demoralize a few by excessive riches, is also the quality which causes it to demoralize many by excessive poverty. "But increased production is important." Of course it is! That plenty is good and scarcity evil--it needs no ghost from the graves of the past five years to tell us that. But plenty depends upon co-operative effort, and co-operation upon moral principles. And moral principles are what the prophets of this dispensation despise. So the world "continues in scarcity," because it is too grasping and too short-sighted to seek that "which maketh men to be of one mind in a house." The well-intentioned schemes for social reorganization put forward by its commercial teachers are abortive, because they endeavor to combine incompatibles, and, if they disturb everything, settle nothing. They are like a man who, when he finds that his shoddy boots wear badly, orders a pair two sizes larger instead of a pair of good leather, or who makes up for putting a bad sixpence in the plate on Sunday by putting in a bad shilling the next. And when their fit of feverish energy {6} has spent itself, and there is nothing to show for it except disillusionment, they cry that reform is impracticable, and blame human nature, when what they ought to blame is themselves. Yet all the time the principles upon which industry should be based are simple, however difficult it may be to apply them; and if they are overlooked it is not because they are difficult, but because they are elementary. They are simple because industry is simple. An industry, when all is said, is, in its essence, nothing more mysterious than a body of men associated, in various degrees of competition and co-operation, to win their living by providing the community with some service which it requires. Organize it as you will, let it be a group of craftsmen laboring with hammer and chisel, or peasants plowing their own fields, or armies of mechanics of a hundred different trades constructing ships which are miracles of complexity with machines which are the climax of centuries of invention, its function is service, its method is association. Because its function is service, an industry as a whole has rights and duties towards the community, the abrogation of which involves privilege. Because its method is association, the different parties within it have rights and duties towards each other; and the neglect or perversion of these involves oppression. The conditions of a right organization of industry are, therefore, permanent, unchanging, and capable of being apprehended by the most elementary intelligence, provided it will read the nature of its countrymen in the large outlines of history, not in the bloodless {7} abstractions of experts. The first is that it should be subordinated to the community in such a way as to render the best service technically possible, that those who render no service should not be paid at all, because it is of the essence of a function that it should find its meaning in the satisfaction, not of itself, but of the end which it serves. The second is that its direction and government should be in the hands of persons who are responsible to those who are directed and governed, because it is the condition of economic freedom that men should not be ruled by an authority which they cannot control. The industrial problem, in fact, is a problem of right, not merely of material misery, and because it is a problem of right it is most acute among those sections of the working classes whose material misery is least. It is a question, first of Function, and secondly of Freedom. {8} II RIGHTS AND FUNCTIONS A function may be defined as an activity which embodies and expresses the idea of social purpose. The essence of it is that the agent does not perform it merely for personal gain or to gratify himself, but recognizes that he is responsible for its discharge to some higher authority. The purpose of industry is obvious. It is to supply man with things which are necessary, useful or beautiful, and thus to bring life to body or spirit. In so far as it is governed by this end, it is among the most important of human activities. In so far as it is diverted from it, it may be harmless, amusing, or even exhilarating to those who carry it on, but it possesses no more social significance than the orderly business of ants and bees, the strutting of peacocks, or the struggles of carnivorous animals over carrion. Men have normally appreciated this fact, however unwilling or unable they may have been to act upon it; and therefore from time to time, in so far as they have been able to control the forces of violence and greed, they have adopted various expedients for emphasizing the social quality of economic activity. It is not easy, however, to emphasize it effectively, because to do so requires a constant effort of will, against which egotistical instincts are in rebellion, and because, if that will is to prevail, it must be embodied in some social {9} and political organization, which may itself become so arbitrary, tyrannical and corrupt as to thwart the performance of function instead of promoting it. When this process of degeneration has gone far, as in most European countries it had by the middle of the eighteenth century, the indispensable thing is to break the dead organization up and to clear the ground. In the course of doing so, the individual is emancipated and his rights are enlarged; but the idea of social purpose is discredited by the discredit justly attaching to the obsolete order in which it is embodied. It is not surprising, therefore, that in the new industrial societies which arose on the ruins of the old régime the dominant note should have been the insistence upon individual rights, irrespective of any social purpose to which their exercise contributed. The economic expansion which concentrated population on the coal-measures was, in essence, an immense movement of colonization drifting from the south and east to the north and west; and it was natural that in those regions of England, as in the American settlements, the characteristic philosophy should be that of the pioneer and the mining camp. The change of social quality was profound. But in England, at least, it was gradual, and the "industrial revolution," though catastrophic in its effects, was only the visible climax of generations of subtle moral change. The rise of modern economic relations, which may be dated in England from the latter half of the seventeenth century, was coincident with the growth of a political theory which replaced the conception of purpose by that of mechanism. During a great part of history men had {10} found the significance of their social order in its relation to the universal purposes of religion. It stood as one rung in a ladder which stretched from hell to Paradise, and the classes who composed it were the hands, the feet, the head of a corporate body which was itself a microcosm imperfectly reflecting a larger universe. When the Reformation made the Church a department of the secular government, it undermined the already enfeebled spiritual forces which had erected that sublime, but too much elaborated, synthesis. But its influence remained for nearly a century after the roots which fed it had been severed. It was the atmosphere into which men were born, and from which, however practical, or even Machiavellian, they could not easily disengage their spirits. Nor was it inconvenient for the new statecraft to see the weight of a traditional religious sanction added to its own concern in the subordination of all classes and interests to the common end, of which it conceived itself, and during the greater part of the sixteenth century was commonly conceived, to be the guardian. The lines of the social structure were no longer supposed to reproduce in miniature the plan of a universal order. But common habits, common traditions and beliefs, common pressure from above gave them a unity of direction, which restrained the forces of individual variation and lateral expansion; and the center towards which they converged, formerly a Church possessing some of the characteristics of a State, was now a State that had clothed itself with many of the attributes of a Church. The difference between the England of Shakespeare, {11} still visited by the ghosts of the Middle Ages, and the England which merged in 1700 from the fierce polemics of the last two generations, was a difference of social and political theory even more than of constitutional and political arrangements. Not only the facts, but the minds which appraised them, were profoundly modified. The essence of the change was the disappearance of the idea that social institutions and economic activities were related to common ends, which gave them their significance and which served as their criterion. In the eighteenth century both the State and the Church had abdicated that part of the sphere which had consisted in the maintenance of a common body of social ethics; what was left of it was repression of a class, not the discipline of a nation. Opinion ceased to regard social institutions and economic activity as amenable, like personal conduct, to moral criteria, because it was no longer influenced by the spectacle of institutions which, arbitrary, capricious, and often corrupt in their practical operation, had been the outward symbol and expression of the subordination of life to purposes transcending private interests. That part of government which had been concerned with social administration, if it did not end, became at least obsolescent. For such democracy as had existed in the Middle Ages was dead, and the democracy of the Revolution was not yet born, so that government passed into the lethargic hand of classes who wielded the power of the State in the interests of an irresponsible aristocracy. And the Church was even more remote from the daily life of mankind than the State. Philanthropy abounded; but religion, {12} once the greatest social force, had become a thing as private and individual as the estate of the squire or the working clothes of the laborer. There were special dispensations and occasional interventions, like the acts of a monarch who reprieved a criminal or signed an order for his execution. But what was familiar, and human and lovable--what was Christian in Christianity had largely disappeared. God had been thrust into the frigid altitudes of infinite space. There was a limited monarchy in Heaven, as well as upon earth. Providence was the spectator of the curious machine which it had constructed and set in motion, but the operation of which it was neither able nor willing to control. Like the occasional intervention of the Crown in the proceedings of Parliament, its wisdom was revealed in the infrequency of its interference. The natural consequence of the abdication of authorities which had stood, however imperfectly, for a common purpose in social organization, was the gradual disappearance from social thought of the idea of purpose itself. Its place in the eighteenth century was taken by the idea of mechanism. The conception of men as united to each other, and of all mankind as united to God, by mutual obligations arising from their relation to a common end, which vaguely conceived and imperfectly realized, had been the keystone holding together the social fabric, ceased to be impressed upon men's minds, when Church and State withdrew from the center of social life to its circumference. What remained when the keystone of the arch was removed, was private rights and private interests, the materials of a society rather {13} than a society itself. These rights and interests were the natural order which had been distorted by the ambitions of kings and priests, and which emerged when the artificial super-structure disappeared, because they were the creation, not of man, but of Nature herself. They had been regarded in the past as relative to some public end, whether religion or national welfare. Henceforward they were thought to be absolute and indefeasible, and to stand by their own virtue. They were the ultimate political and social reality; and since they were the ultimate reality, they were not subordinate to other aspects of society, but other aspects of society were subordinate to them. The State could not encroach upon these rights, for the State existed for their maintenance. They determined the relation of classes, for the most obvious and fundamental of all rights was property--property absolute and unconditioned--and those who possessed it were regarded as the natural governors of those who did not. Society arose from their exercise, through the contracts of individual with individual. It fulfilled its object in so far as, by maintaining contractual freedom, it secured full scope for their unfettered exercise. It failed in so far as, like the French monarchy, it overrode them by the use of an arbitrary authority. Thus conceived, society assumed something of the appearance of a great joint-stock company, in which political power and the receipt of dividends were justly assigned to those who held the most numerous shares. The currents of social activity did not converge upon common ends, but were dispersed through a multitude of channels, {14} created by the private interests of the individuals who composed society. But in their very variety and spontaneity, in the very absence of any attempt to relate them to a larger purpose than that of the individual, lay the best security of its attainment. There is a mysticism of reason as well as of emotion, and the eighteenth century found, in the beneficence of natural instincts, a substitute for the God whom it had expelled from contact with society, and did not hesitate to identify them. "Thus God and nature planned the general frame And bade self-love and social be the same." The result of such ideas in the world of practice was a society which was ruled by law, not by the caprice of Governments, but which recognized no moral limitation on the pursuit by individuals of their economic self-interest. In the world of thought, it was a political philosophy which made rights the foundation of the social order, and which considered the discharge of obligations, when it considered it at all, as emerging by an inevitable process from their free exercise. The first famous exponent of this philosophy was Locke, in whom the dominant conception is the indefeasibility of private rights, not the pre-ordained harmony between private rights and public welfare. In the great French writers who prepared the way for the Revolution, while believing that they were the servants of an enlightened absolutism, there is an almost equal emphasis upon the sanctity of rights and upon the infallibility of the {15} alchemy by which the pursuit of private ends is transmuted into the attainment of public good. Though their writings reveal the influence of the conception of society as a self-adjusting mechanism, which afterwards became the most characteristic note of the English individualism, what the French Revolution burned into the mind of Europe was the former not the latter. In England the idea of right had been negative and defensive, a barrier to the encroachment of Governments. The French leapt to the attack from trenches which the English had been content to defend, and in France the idea became affirmative and militant, not a weapon of defense, but a principle of social organization. The attempt to refound society upon rights, and rights springing not from musty charters, but from the very nature of man himself, was at once the triumph and the limitation of the Revolution. It gave it the enthusiasm and infectious power of religion. What happened in England might seem at first sight to have been precisely the reverse. English practical men, whose thoughts were pitched in a lower key, were a little shocked by the pomp and brilliance of that tremendous creed. They had scanty sympathy with the absolute affirmations of France. What captured their imagination was not the right to liberty, which made no appeal to their commercial instincts, but the expediency of liberty, which did; and when the Revolution had revealed the explosive power of the idea of natural right, they sought some less menacing formula. It had been offered them first by Adam Smith and his precursors, who showed how the mechanism of economic life {16} converted "as with an invisible hand," the exercise of individual rights into the instrument of public good. Bentham, who despised metaphysical subtleties, and thought the Declaration of the Rights of Man as absurd as any other dogmatic religion, completed the new orientation by supplying the final criterion of political institutions in the principle of Utility. Henceforward emphasis was transferred from the right of the individual to exercise his freedom as he pleased to the expediency of an undisturbed exercise of freedom to society. The change is significant. It is the difference between the universal and equal citizenship of France, with its five million peasant proprietors, and the organized inequality of England established solidly upon class traditions and class institutions; the descent from hope to resignation, from the fire and passion of an age of illimitable vistas to the monotonous beat of the factory engine, from Turgot and Condorcet to the melancholy mathematical creed of Bentham and Ricardo and James Mill. Mankind has, at least, this superiority over its philosophers, that great movements spring from the heart and embody a faith; not the nice adjustments of the hedonistic calculus. So in the name of the rights of property France abolished in three years a great mass of property rights which, under the old régime had robbed the peasant of part of the produce of his labor, and the social transformation survived a whole world of political changes. In England the glad tidings of democracy were broken too discreetly to reach the ears of the hind in the furrow or the shepherd on the hill; {17} there were political changes without a social transformation. The doctrine of Utility, though trenchant in the sphere of politics, involved no considerable interference with the fundamentals of the social fabric. Its exponents were principally concerned with the removal of political abuses and legal anomalies. They attacked sinecures and pensions and the criminal code and the procedure of the law courts. But they touched only the surface of social institutions. They thought it a monstrous injustice that the citizen should pay one-tenth of his income in taxation to an idle Government, but quite reasonable that he should pay one-fifth of it in rent to an idle landlord. The difference, neverthelesss, was one of emphasis and expression, not of principle. It mattered very little in practice whether private property and unfettered economic freedom were stated, as in France, to be natural rights, or whether, as in England, they were merely assumed once for all to be expedient. In either case they were taken for granted as the fundamentals upon which social organization was to be based, and about which no further argument was admissible. Though Bentham argued that rights were derived from utility, not from nature, he did not push his analysis so far as to argue that any particular right was relative to any particular function, and thus endorsed indiscriminately rights which were not accompanied by service as well as rights which were. While eschewing, in short, the phraseology of natural rights, the English Utilitarians retained something not unlike the substance of them. For they assumed that private property in {18} land, and the private ownership of capital, were natural institutions, and gave them, indeed, a new lease of life, by proving to their own satisfaction that social well-being must result from their continued exercise. Their negative was as important as their positive teaching. It was a conductor which diverted the lightning. Behind their political theory, behind the practical conduct, which as always, continues to express theory long after it has been discredited in the world of thought, lay the acceptance of absolute rights to property and to economic freedom as the unquestioned center of social organization. The result of that attitude was momentous. The motive and inspiration of the Liberal Movement of the eighteenth century had been the attack on Privilege. But the creed which had exorcised the specter of agrarian feudalism haunting village and _château_ in France, was impotent to disarm the new ogre of industrialism which was stretching its limbs in the north of England. When, shorn of its splendors and illusions, liberalism triumphed in England in 1832, it carried without criticism into the new world of capitalist industry categories of private property and freedom of contract which had been forged in the simpler economic environment of the pre-industrial era. In England these categories are being bent and twisted till they are no longer recognizable, and will, in time, be made harmless. In America, where necessity compelled the crystallization of principles in a constitution, they have the rigidity of an iron jacket. The magnificent formulæ in which a society of farmers {19} and master craftsmen enshrined its philosophy of freedom are in danger of becoming fetters used by an Anglo-Saxon business aristocracy to bind insurgent movements on the part of an immigrant and semi-servile proletariat. {20} III THE ACQUISITIVE SOCIETY This doctrine has been qualified in practice by particular limitations to avert particular evils and to meet exceptional emergencies. But it is limited in special cases precisely because its general validity is regarded as beyond controversy, and, up to the eve of the present war, it was the working faith of modern economic civilization. What it implies is, that the foundation of society is found, not in functions, but in rights; that rights are not deducible from the discharge of functions, so that the acquisition of wealth and the enjoyment of property are contingent upon the performances of services, but that the individual enters the world equipped with rights to the free disposal of his property and the pursuit of his economic self-interest, and that these rights are anterior to, and independent of, any service which he may render. True, the service of society will, in fact, it is assumed, result from their exercise. But it is not the primary motive and criterion of industry, but a secondary consequence, which emerges incidentally through the exercise of rights, a consequence which is attained, indeed, in practice, but which is attained without being sought. It is not the end at which economic activity aims, or the standard by which it is judged, but a by-product, as coal-tar is a by-product of the {21} manufacture of gas; whether that by-product appears or not, it is not proposed that the rights themselves should be abdicated. For they are regarded, not as a conditional trust, but as a property, which may, indeed, give way to the special exigencies of extraordinary emergencies, but which resumes its sway when the emergency is over, and in normal times is above discussion. That conception is written large over the history of the nineteenth century, both in England and in America. The doctrine which it inherited was that property was held by an absolute right on an individual basis, and to this fundamental it added another, which can be traced in principle far back into history, but which grew to its full stature only after the rise of capitalist industry, that societies act both unfairly and unwisely when they limit opportunities of economic enterprise. Hence every attempt to impose obligations as a condition of the tenure of property or of the exercise of economic activity has been met by uncompromising resistance. The story of the struggle between humanitarian sentiment and the theory of property transmitted from the eighteenth century is familiar. No one has forgotten the opposition offered in the name of the rights of property to factory legislation, to housing reform, to interference with the adulteration of goods, even to the compulsory sanitation of private houses. "May I not do what I like with my own?" was the answer to the proposal to require a minimum standard of safety and sanitation from the owners of mills and houses. Even to {22} this day, while an English urban landlord can cramp or distort the development of a whole city by withholding land except at fancy prices, English municipalities are without adequate powers of compulsory purchase, and must either pay through the nose or see thousands of their members overcrowded. The whole body of procedure by which they may acquire land, or indeed new powers of any kind, has been carefully designed by lawyers to protect owners of property against the possibility that their private rights may be subordinated to the public interest, because their rights are thought to be primary and absolute and public interests secondary and contingent. No one needs to be reminded, again, of the influence of the same doctrine in the sphere of taxation. Thus the income tax was excused as a temporary measure, because the normal society was conceived to be one in which the individual spent his whole income for himself and owed no obligations to society on account of it. The death duties were denounced as robbery, because they implied that the right to benefit by inheritance was conditional upon a social sanction. The Budget of 1909 created a storm, not because the taxation of land was heavy--in amount the land-taxes were trifling--but because it was felt to involve the doctrine that property is not an absolute right, but that it may properly be accompanied by special obligations, a doctrine which, if carried to its logical conclusion, would destroy its sanctity by making ownership no longer absolute but conditional. {23} Such an implication seems intolerable to an influential body of public opinion, because it has been accustomed to regard the free disposal of property and the unlimited exploitation of economic opportunities, as rights which are absolute and unconditioned. On the whole, until recently, this opinion had few antagonists who could not be ignored. As a consequence the maintenance of property rights has not been seriously threatened even in those cases in which it is evident that no service is discharged, directly or indirectly, by their exercise. No one supposes, that the owner of urban land, performs _qua_ owner, any function. He has a right of private taxation; that is all. But the private ownership of urban land is as secure to-day as it was a century ago; and Lord Hugh Cecil, in his interesting little book on Conservatism, declares that whether private property is mischievous or not, society cannot interfere with it, because to interfere with it is theft, and theft is wicked. No one supposes that it is for the public good that large areas of land should be used for parks and game. But our country gentlemen are still settled heavily upon their villages and still slay their thousands. No one can argue that a monopolist is impelled by "an invisible hand" to serve the public interest. But over a considerable field of industry competition, as the recent Report on Trusts shows, has been replaced by combination, and combinations are allowed the same unfettered freedom as individuals in the exploitation of economic opportunities. No one really believes that the production of coal depends upon the payment of {24} mining royalties or that ships will not go to and fro unless ship-owners can earn fifty per cent. upon their capital. But coal mines, or rather the coal miner, still pay royalties, and ship-owners still make fortunes and are made Peers. At the very moment when everybody is talking about the importance of increasing the output of wealth, the last question, apparently, which it occurs to any statesman to ask is why wealth should be squandered on futile activities, and in expenditure which is either disproportionate to service or made for no service at all. So inveterate, indeed, has become the practice of payment in virtue of property rights, without even the pretense of any service being rendered, that when, in a national emergency, it is proposed to extract oil from the ground, the Government actually proposes that every gallon shall pay a tax to landowners who never even suspected its existence, and the ingenuous proprietors are full of pained astonishment at any one questioning whether the nation is under moral obligation to endow them further. Such rights are, strictly speaking, privileges. For the definition of a privilege is a right to which no corresponding function is attached. The enjoyment of property and the direction of industry are considered, in short, to require no social justification, because they are regarded as rights which stand by their own virtue, not functions to be judged by the success with which they contribute to a social purpose. To-day that doctrine, if intellectually discredited, is still the practical foundation of social {25} organization. How slowly it yields even to the most insistent demonstration of its inadequacy is shown by the attitude which the heads of the business world have adopted to the restrictions imposed on economic activity during the war. The control of railways, mines and shipping, the distribution of raw materials through a public department instead of through competing merchants, the regulation of prices, the attempts to check "profiteering"--the detailed application of these measures may have been effective or ineffective, wise or injudicious. It is evident, indeed, that some of them have been foolish, like the restriction of imports when the world has five years' destruction to repair, and that others, if sound in conception, have been questionable in their execution. If they were attacked on the ground that they obstruct the efficient performance of function--if the leaders of industry came forward and said generally, as some, to their honor, have:--"We accept your policy, but we will improve its execution; we desire payment for service and service only and will help the state to see that it pays for nothing else"--there might be controversy as to the facts, but there could be none as to the principle. In reality, however, the gravamen of the charges brought against these restrictions appears generally to be precisely the opposite. They are denounced by most of their critics not because they limit the opportunity of service, but because they diminish the opportunity for gain, not because they prevent the trader enriching the community, but because they make it {26} more difficult for him to enrich himself; not, in short, because they have failed to convert economic activity into a social function, but because they have come too near succeeding. If the financial adviser to the Coal Controller may be trusted, the shareholders in coal mines would appear to have done fairly well during the war. But the proposal to limit their profits to 1/2 per ton is described by Lord Gainford as "sheer robbery and confiscation." With some honorable exceptions, what is demanded is that in the future as in the past the directors of industry should be free to handle it as an enterprise conducted for their own convenience or advancement, instead of being compelled, as they have been partially compelled during the war, to subordinate it to a social purpose. For to admit that the criterion of commerce and industry is its success in discharging a social purpose is at once to turn property and economic activity from rights which are absolute into rights which are contingent and derivative, because it is to affirm that they are relative to functions and that they may justly be revoked when the functions are not performed. It is, in short, to imply that property and economic activity exist to promote the ends of society, whereas hitherto society has been regarded in the world of business as existing to promote them. To those who hold their position, not as functionaries, but by virtue of their success in making industry contribute to their own wealth and social influence, such a reversal of means and ends appears little less than a revolution. For it means that they must justify before a social tribunal {27} rights which they have hitherto taken for granted as part of an order which is above criticism. During the greater part of the nineteenth century the significance of the opposition between the two principles of individual rights and social functions was masked by the doctrine of the inevitable harmony between private interests and public good. Competition, it was argued, was an effective substitute for honesty. To-day that subsidiary doctrine has fallen to pieces under criticism; few now would profess adherence to the compound of economic optimism and moral bankruptcy which led a nineteenth century economist to say: "Greed is held in check by greed, and the desire for gain sets limits to itself." The disposition to regard individual rights as the center and pivot of society is still, however, the most powerful element in political thought and the practical foundation of industrial organization. The laborious refutation of the doctrine that private and public interests are co-incident, and that man's self-love is God's Providence, which was the excuse of the last century for its worship of economic egotism, has achieved, in fact, surprisingly small results. Economic egotism is still worshiped; and it is worshiped because that doctrine was not really the center of the position. It was an outwork, not the citadel, and now that the outwork has been captured, the citadel is still to win. What gives its special quality and character, its toughness and cohesion, to the industrial system built up in the last century and a half, is not its exploded theory of economic harmonies. It is the doctrine that {28} economic rights are anterior to, and independent of economic functions, that they stand by their own virtue, and need adduce no higher credentials. The practical result of it is that economic rights remain, whether economic functions are performed or not. They remain to-day in a more menacing form than in the age of early industrialism. For those who control industry no longer compete but combine, and the rivalry between property in capital and property in land has long since ended. The basis of the New Conservatism appears to be a determination so to organize society, both by political and economic action, as to make it secure against every attempt to extinguish payments which are made, not for service, but because the owners possess a right to extract income without it. Hence the fusion of the two traditional parties, the proposed "strengthening" of the second chamber, the return to protection, the swift conversion of rival industrialists to the advantages of monopoly, and the attempts to buy off with concessions the more influential section of the working classes. Revolutions, as a long and bitter experience reveals, are apt to take their color from the régime which they overthrow. Is it any wonder that the creed which affirms the absolute rights of property should sometimes be met with a counter-affirmation of the absolute rights of labor, less anti-social, indeed, and inhuman, but almost as dogmatic, almost as intolerant and thoughtless as itself? A society which aimed at making the acquisition of wealth contingent upon the discharge of social {29} obligations, which sought to proportion remuneration to service and denied it to those by whom no service was performed, which inquired first not what men possess but what they can make or create or achieve, might be called a Functional Society, because in such a society the main subject of social emphasis would be the performance of functions. But such a society does not exist, even as a remote ideal, in the modern world, though something like it has hung, an unrealized theory, before men's minds in the past. Modern societies aim at protecting economic rights, while leaving economic functions, except in moments of abnormal emergency, to fulfil themselves. The motive which gives color and quality to their public institutions, to their policy and political thought, is not the attempt to secure the fulfilment of tasks undertaken for the public service, but to increase the opportunities open to individuals of attaining the objects which they conceive to be advantageous to themselves. If asked the end or criterion of social organization, they would give an answer reminiscent of the formula the greatest happiness of the greatest number. But to say that the end of social institutions is happiness, is to say that they have no common end at all. For happiness is individual, and to make happiness the object of society is to resolve society itself into the ambitions of numberless individuals, each directed towards the attainment of some personal purpose. Such societies may be called Acquisitive Societies, because their whole tendency and interest and preoccupation is to promote the acquisition of wealth. The {30} appeal of this conception must be powerful, for it has laid the whole modern world under its spell. Since England first revealed the possibilities of industrialism, it has gone from strength to strength, and as industrial civilization invades countries hitherto remote from it, as Russia and Japan and India and China are drawn into its orbit, each decade sees a fresh extension of its influence. The secret of its triumph is obvious. It is an invitation to men to use the powers with which they have been endowed by nature or society, by skill or energy or relentless egotism or mere good fortune, without inquiring whether there is any principle by which their exercise should be limited. It assumes the social organization which determines the opportunities which different classes shall in fact possess, and concentrates attention upon the right of those who possess or can acquire power to make the fullest use of it for their own self-advancement. By fixing men's minds, not upon the discharge of social obligations, which restricts their energy, because it defines the goal to which it should be directed, but upon the exercise of the right to pursue their own self-interest, it offers unlimited scope for the acquisition of riches, and therefore gives free play to one of the most powerful of human instincts. To the strong it promises unfettered freedom for the exercise of their strength; to the weak the hope that they too one day may be strong. Before the eyes of both it suspends a golden prize, which not all can attain, but for which each may strive, the enchanting vision of infinite expansion. It assures men that there are no ends other {31} than their ends, no law other than their desires, no limit other than that which they think advisable. Thus it makes the individual the center of his own universe, and dissolves moral principles into a choice of expediences. And it immensely simplifies the problems of social life in complex communities. For it relieves them of the necessity of discriminating between different types of economic activity and different sources of wealth, between enterprise and avarice, energy and unscrupulous greed, property which is legitimate and property which is theft, the just enjoyment of the fruits of labor and the idle parasitism of birth or fortune, because it treats all economic activities as standing upon the same level, and suggests that excess or defect, waste or superfluity, require no conscious effort of the social will to avert them, but are corrected almost automatically by the mechanical play of economic forces. Under the impulse of such ideas men do not become religious or wise or artistic; for religion and wisdom and art imply the acceptance of limitations. But they become powerful and rich. They inherit the earth and change the face of nature, if they do not possess their own souls; and they have that appearance of freedom which consists in the absence of obstacles between opportunities for self-advancement and those whom birth or wealth or talent or good fortune has placed in a position to seize them. It is not difficult either for individuals or for societies to achieve their object, if that object be sufficiently limited and immediate, and if they are not distracted from its {32} pursuit by other considerations. The temper which dedicates itself to the cultivation of opportunities, and leaves obligations to take care of themselves, is set upon an object which is at once simple and practicable. The eighteenth century defined it. The twentieth century has very largely attained it. Or, if it has not attained it, it has at least grasped the possibilities of its attainment. The national output of wealth per head of population is estimated to have been approximately $200 in 1914. Unless mankind chooses to continue the sacrifice of prosperity to the ambitions and terrors of nationalism, it is possible that by the year 2000 it may be doubled. {33} IV THE NEMESIS OF INDUSTRIALISM Such happiness is not remote from achievement. In the course of achieving it, however, the world has been confronted by a group of unexpected consequences, which are the cause of its _malaise_, as the obstruction of economic opportunity was the cause of social _malaise_ in the eighteenth century. And these consequences are not, as is often suggested, accidental mal-adjustments, but flow naturally from its dominant principle: so that there is a sense in which the cause of its perplexity is not its failure, but the quality of its success, and its light itself a kind of darkness. The will to economic power, if it is sufficiently single-minded, brings riches. But if it is single-minded it destroys the moral restraints which ought to condition the pursuit of riches, and therefore also makes the pursuit of riches meaningless. For what gives meaning to economic activity, as to any other activity is, as we have said, the purpose to which it is directed. But the faith upon which our economic civilization reposes, the faith that riches are not a means but an end, implies that all economic activity is equally estimable, whether it is subordinated to a social purpose or not. Hence it divorces gain from service, and justifies rewards for which no function is performed, or which are out of all proportion to it. Wealth in modern societies is distributed according to {34} opportunity; and while opportunity depends partly upon talent and energy, it depends still more upon birth, social position, access to education and inherited wealth; in a word, upon property. For talent and energy can create opportunity. But property need only wait for it. It is the sleeping partner who draws the dividends which the firm produces, the residuary legatee who always claims his share in the estate. Because rewards are divorced from services, so that what is prized most is not riches obtained in return for labor but riches the economic origin of which, being regarded as sordid, is concealed, two results follow. The first is the creation of a class of pensioners upon industry, who levy toll upon its product, but contribute nothing to its increase, and who are not merely tolerated, but applauded and admired and protected with assiduous care, as though the secret of prosperity resided in them. They are admired because in the absence of any principle of discrimination between incomes which are payment for functions and incomes which are not, all incomes, merely because they represent wealth, stand on the same level of appreciation, and are estimated solely by their magnitude, so that in all societies which have accepted industrialism there is an upper layer which claims the enjoyment of social life, while it repudiates its responsibilities. The _rentier_ and his ways, how familiar they were in England before the war! A public school and then club life in Oxford and Cambridge, and then another club in town; London in June, when London is pleasant, the moors in August, and pheasants in October, Cannes in {35} December and hunting in February and March; and a whole world of rising bourgeoisie eager to imitate them, sedulous to make their expensive watches keep time with this preposterous calendar! The second consequence is the degradation of those who labor, but who do not by their labor command large rewards; that is of the great majority of mankind. And this degradation follows inevitably from the refusal of men to give the purpose of industry the first place in their thought about it. When they do that, when their minds are set upon the fact that the meaning of industry is the service of man, all who labor appear to them honorable, because all who labor serve, and the distinction which separates those who serve from those who merely spend is so crucial and fundamental as to obliterate all minor distinctions based on differences of income. But when the criterion of function is forgotten, the only criterion which remains is that of wealth, and an Acquisitive Society reverences the possession of wealth, as a Functional Society would honor, even in the person of the humblest and most laborious craftsman, the arts of creation. So wealth becomes the foundation of public esteem, and the mass of men who labor, but who do not acquire wealth, are thought to be vulgar and meaningless and insignificant compared with the few who acquire wealth by good fortune, or by the skilful use of economic opportunities. They come to be regarded, not as the ends for which alone it is worth while to produce wealth at all, but as the instruments of its {36} acquisition by a world that declines to be soiled by contact with what is thought to be the dull and sordid business of labor. They are not happy, for the reward of all but the very mean is not merely money, but the esteem of their fellow-men, and they know they are not esteemed, as soldiers, for example, are esteemed, though it is because they give their lives to making civilization that there is a civilization which it is worth while for soldiers to defend. They are not esteemed, because the admiration of society is directed towards those who get, not towards those who give; and though workmen give much they get little. And the _rentiers_ whom they support are not happy; for in discarding the idea of function, which sets a limit to the acquisition of riches, they have also discarded the principle which alone give riches their meaning. Hence unless they can persuade themselves that to be rich is in itself meritorious, they may bask in social admiration, but they are unable to esteem themselves. For they have abolished the principle which makes activity significant, and therefore estimable. They are, indeed, more truly pitiable than some of those who envy them. For like the spirits in the Inferno, they are punished by the attainment of their desires. A society ruled by these notions is necessarily the victim of an irrational inequality. To escape such inequality it is necessary to recognize that there is some principle which ought to limit the gains of particular classes and particular individuals, because gains drawn from certain sources or exceeding certain amounts are illegitimate. But such a limitation implies a {37} standard of discrimination, which is inconsistent with the assumption that each man has a right to what he can get, irrespective of any service rendered for it. Thus privilege, which was to have been exorcised by the gospel of 1789, returns in a new guise, the creature no longer of unequal legal rights thwarting the natural exercise of equal powers of hand and brain, but of unequal powers springing from the exercise of equal rights in a world where property and inherited wealth and the apparatus of class institutions have made opportunities unequal. Inequality, again, leads to the mis-direction of production. For, since the demand of one income of £50,000 is as powerful a magnet as the demand of 500 incomes of £100, it diverts energy from the creation of wealth to the multiplication of luxuries, so that, for example, while one-tenth of the people of England are overcrowded, a considerable part of them are engaged, not in supplying that deficiency, but in making rich men's hotels, luxurious yachts, and motorcars like that used by the Secretary of State for War, "with an interior inlaid with silver in quartered mahogany, and upholstered in fawn suede and morocco," which was recently bought by a suburban capitalist, by way of encouraging useful industries and rebuking public extravagance with an example of private economy, for the trifling sum of $14,000. Thus part of the goods which are annually produced, and which are called wealth, is, strictly speaking, waste, because it consists of articles which, though reckoned as part of the income of the nation, either should not have been produced until other articles had already {38} been produced in sufficient abundance, or should not have been produced at all. And some part of the population is employed in making goods which no man can make with happiness, or indeed without loss of self-respect, because he knows that they had much better not be made; and that his life is wasted in making them. Everybody recognizes that the army contractor who, in time of war, set several hundred navvies to dig an artificial lake in his grounds, was not adding to, but subtracting from, the wealth of the nation. But in time of peace many hundred thousand workmen, if they are not digging ponds, are doing work which is equally foolish and wasteful; though, in peace, as in war, there is important work, which is waiting to be done, and which is neglected. It is neglected because, while the effective demand of the mass of men is only too small, there is a small class which wears several men's clothes, eats several men's dinners, occupies several families' houses, and lives several men's lives. As long as a minority has so large an income that part of it, if spent at all, must be spent on trivialities, so long will part of the human energy and mechanical equipment of the nation be diverted from serious work, which enriches it, to making trivialities, which impoverishes it, since they can only be made at the cost of not making other things. And if the peers and millionaires who are now preaching the duty of production to miners and dock laborers desire that more wealth, not more waste, should be produced, the simplest way in which they can achieve their aim is to transfer to the public their whole incomes over (say) $5,000 a year, in order that it may {39} be spent in setting to work, not gardeners, chauffeurs, domestic servants and shopkeepers in the West End of London, but builders, mechanics and teachers. So to those who clamor, as many now do, "Produce! Produce!" one simple question may be addressed:--"Produce what?" Food, clothing, house-room, art, knowledge? By all means! But if the nation is scantily furnished with these things had it not better stop producing a good many others which fill shop windows in Regent Street? If it desires to re-equip its industries with machinery and its railways with wagons, had it not better refrain from holding exhibitions designed to encourage rich men to re-equip themselves with motor-cars? What can be more childish than to urge the necessity that productive power should be increased, if part of the productive power which exists already is misapplied? Is not _less_ production of futilities as important as, indeed a condition of, _more_ production of things of moment? Would not "Spend less on private luxuries" be as wise a cry as "produce more"? Yet this result of inequality, again, is a phenomenon which cannot be prevented, or checked, or even recognized by a society which excludes the idea of purpose from its social arrangements and industrial activity. For to recognize it is to admit that there is a principle superior to the mechanical play of economic forces, which ought to determine the relative importance of different occupations, and thus to abandon the view that all riches, however composed, are an end, and that all economic activity is equally justifiable. {40} The rejection of the idea of purpose involves another consequence which every one laments, but which no one can prevent, except by abandoning the belief that the free exercise of rights is the main interest of society and the discharge of obligations a secondary and incidental consequence which may be left to take care of itself. It is that social life is turned into a scene of fierce antagonisms and that a considerable part of industry is carried on in the intervals of a disguised social war. The idea that industrial peace can be secured merely by the exercise of tact and forbearance is based on the idea that there is a fundamental identity of interest between the different groups engaged in it, which is occasionally interrupted by regrettable misunderstandings. Both the one idea and the other are an illusion. The disputes which matter are not caused by a misunderstanding of identity of interests, but by a better understanding of diversity of interests. Though a formal declaration of war is an episode, the conditions which issue in a declaration of war are permanent; and what makes them permanent is the conception of industry which also makes inequality and functionless incomes permanent. It is the denial that industry has any end or purpose other than the satisfaction of those engaged in it. That motive produces industrial warfare, not as a regrettable incident, but as an inevitable result. It produces industrial war, because its teaching is that each individual or group has a right to what they can get, and denies that there is any principle, other than the mechanism of the market, which determines what {41} they ought to get. For, since the income available for distribution is limited, and since, therefore, when certain limits have been passed, what one group gains another group must lose, it is evident that if the relative incomes of different groups are not to be determined by their functions, there is no method other than mutual self-assertion which is left to determine them. Self-interest, indeed, may cause them to refrain from using their full strength to enforce their claims, and, in so far as this happens, peace is secured in industry, as men have attempted to secure it in international affairs, by a balance of power. But the maintenance of such a peace is contingent upon the estimate of the parties to it that they have more to lose than to gain by an overt struggle, and is not the result of their acceptance of any standard of remuneration as an equitable settlement of their claims. Hence it is precarious, insincere and short. It is without finality, because there can be no finality in the mere addition of increments of income, any more than in the gratification of any other desire for material goods. When demands are conceded the old struggle recommences upon a new level, and will always recommence as long as men seek to end it merely by increasing remuneration, not by finding a principle upon which all remuneration, whether large or small, should be based. Such a principle is offered by the idea of function, because its application would eliminate the surpluses which are the subject of contention, and would make it evident that remuneration is based upon service, {42} not upon chance or privilege or the power to use opportunities to drive a hard bargain. But the idea of function is incompatible with the doctrine that every person and organization have an unlimited right to exploit their economic opportunities as fully as they please, which is the working faith of modern industry; and, since it is not accepted, men resign themselves to the settlement of the issue by force, or propose that the State should supersede the force of private associations by the use of its force, as though the absence of a principle could be compensated by a new kind of machinery. Yet all the time the true cause of industrial warfare is as simple as the true cause of international warfare. It is that if men recognize no law superior to their desires, then they must fight when their desires collide. For though groups or nations which are at issue with each other may be willing to submit to a principle which is superior to them both, there is no reason why they should submit to each other. Hence the idea, which is popular with rich men, that industrial disputes would disappear if only the output of wealth were doubled, and every one were twice as well off, not only is refuted by all practical experience, but is in its very nature founded upon an illusion. For the question is one not of amounts but of proportions; and men will fight to be paid $120 a week, instead of $80, as readily as they will fight to be paid $20 instead of $16, as long as there is no reason why they should be paid $80 instead of $120, and as long as other men who do not work are paid anything {43} at all. If miners demanded higher wages when every superfluous charge upon coal-getting had been eliminated, there would be a principle with which to meet their claim, the principle that one group of workers ought not to encroach upon the livelihood of others. But as long as mineral owners extract royalties, and exceptionally productive mines pay thirty per cent. to absentee shareholders, there is no valid answer to a demand for higher wages. For if the community pays anything at all to those who do not work, it can afford to pay more to those who do. The naïve complaint, that workmen are never satisfied, is, therefore, strictly true. It is true, not only of workmen, but of all classes in a society which conducts its affairs on the principle that wealth, instead of being proportioned to function, belongs to those who can get it. They are never satisfied, nor can they be satisfied. For as long as they make that principle the guide of their individual lives and of their social order, nothing short of infinity could bring them satisfaction. So here, again, the prevalent insistence upon rights, and prevalent neglect of functions, brings men into a vicious circle which they cannot escape, without escaping from the false philosophy which dominates them. But it does something more. It makes that philosophy itself seem plausible and exhilarating, and a rule not only for industry, in which it had its birth, but for politics and culture and religion and the whole compass of social life. The possibility that one aspect of human life may be so exaggerated as to overshadow, {44} and in time to atrophy, every other, has been made familiar to Englishmen by the example of "Prussian militarism." Militarism is the characteristic, not of an army, but of a society. Its essence is not any particular quality or scale of military preparation, but a state of mind, which, in its concentration on one particular element in social life, ends finally by exalting it until it becomes the arbiter of all the rest. The purpose for which military forces exist is forgotten. They are thought to stand by their own right and to need no justification. Instead of being regarded as an instrument which is necessary in an imperfect world, they are elevated into an object of superstitious veneration, as though the world would be a poor insipid place without them, so that political institutions and social arrangements and intellect and morality and religion are crushed into a mold made to fit one activity, which in a sane society is a subordinate activity, like the police, or the maintenance of prisons, or the cleansing of sewers, but which in a militarist state is a kind of mystical epitome of society itself. Militarism, as Englishmen see plainly enough, is fetich worship. It is the prostration of men's souls before, and the laceration of their bodies to appease, an idol. What they do not see is that their reverence for economic activity and industry and what is called business is also fetich worship, and that in their devotion to that idol they torture themselves as needlessly and indulge in the same meaningless antics as the Prussians did in their worship of militarism. For what the military tradition and spirit have done for Prussia, {45} with the result of creating militarism, the commercial tradition and spirit have done for England, with the result of creating industrialism. Industrialism is no more a necessary characteristic of an economically developed society than militarism is a necessary characteristic of a nation which maintains military forces. It is no more the result of applying science to industry than militarism is the result of the application of science to war, and the idea that it is something inevitable in a community which uses coal and iron and machinery, so far from being the truth, is itself a product of the perversion of mind which industrialism produces. Men may use what mechanical instruments they please and be none the worse for their use. What kills their souls is when they allow their instruments to use _them_. The essence of industrialism, in short, is not any particular method of industry, but a particular estimate of the importance of industry, which results in it being thought the only thing that is important at all, so that it is elevated from the subordinate place which it should occupy among human interests and activities into being the standard by which all other interests and activities are judged. When a Cabinet Minister declares that the greatness of this country depends upon the volume of its exports, so that France, with exports comparatively little, and Elizabethan England, which exported next to nothing, are presumably to be pitied as altogether inferior civilizations, that is Industrialism. It is the confusion of one minor department of life with the {46} whole of life. When manufacturers cry and cut themselves with knives, because it is proposed that boys and girls of fourteen shall attend school for eight hours a week, and the President of the Board of Education is so gravely impressed by their apprehensions, that he at once allows the hours to be reduced to seven, that is Industrialism. It is fetich worship. When the Government obtains money for a war, which costs $28,000,000 a day, by closing the Museums, which cost $80,000 a year, that is Industrialism. It is a contempt for all interests which do not contribute obviously to economic activity. When the Press clamors that the one thing needed to make this island an Arcadia is productivity, and more productivity, and yet more productivity, that is Industrialism. It is the confusion of means with ends. Men will always confuse means with ends if they are without any clear conception that it is the ends, not the means, which matter--if they allow their minds to slip from the fact that it is the social purpose of industry which gives it meaning and makes it worth while to carry it on at all. And when they do that, they will turn their whole world upside down, because they do not see the poles upon which it ought to move. So when, like England, they are thoroughly industrialized, they behave like Germany, which was thoroughly militarized. They talk as though man existed for industry, instead of industry existing for man, as the Prussians talked of man existing for war. They resent any activity which is not colored by the predominant interest, because it seems a rival to it. So they {47} destroy religion and art and morality, which cannot exist unless they are disinterested; and having destroyed these, which are the end, for the sake of industry, which is a means, they make their industry itself what they make their cities, a desert of unnatural dreariness, which only forgetfulness can make endurable, and which only excitement can enable them to forget. Torn by suspicions and recriminations, avid of power, and oblivious of duties, desiring peace, but unable to "seek peace and ensue it," because unwilling to surrender the creed which is the cause of war, to what can one compare such a society but to the international world, which also has been called a society and which also is social in nothing but name? And the comparison is more than a play upon words. It is an analogy which has its roots in the facts of history. It is not a chance that the last two centuries, which saw the new growth of a new system of industry, saw also the growth of the system of international politics which came to a climax in the period from 1870 to 1914. Both the one and the other are the expression of the same spirit and move in obedience to similar laws. The essence of the former was the repudiation of any authority superior to the individual reason. It left men free to follow their own interests or ambitions or appetites, untrammeled by subordination to any common center of allegiance. The essence of the latter was the repudiation of any authority superior to the sovereign state, which again was conceived as a compact self-contained unit--a unit {48} which would lose its very essence if it lost its independence of other states. Just as the one emancipated economic activity from a mesh of antiquated traditions, so the other emancipated nations from arbitrary subordination to alien races or Governments, and turned them into nationalities with a right to work out their own destiny. Nationalism is, in fact, the counterpart among nations of what individualism is within them. It has similar origins and tendencies, similar triumphs and defects. For nationalism, like individualism, lays its emphasis on the rights of separate units, not on their subordination to common obligations, though its units are races or nations, not individual men. Like individualism it appeals to the self-assertive instincts, to which it promises opportunities of unlimited expansion. Like individualism it is a force of immense explosive power, the just claims of which must be conceded before it is possible to invoke any alternative principle to control its operations. For one cannot impose a supernational authority upon irritated or discontented or oppressed nationalities any more than one can subordinate economic motives to the control of society, until society has recognized that there is a sphere which they may legitimately occupy. And, like individualism, if pushed to its logical conclusion, it is self-destructive. For as nationalism, in its brilliant youth, begins as a claim that nations, because they are spiritual beings, shall determine themselves, and passes too often into a claim that they shall dominate others, so individualism begins by asserting the right of men to {49} make of their own lives what they can, and ends by condoning the subjection of the majority of men to the few whom good fortune or special opportunity or privilege have enabled most successfully to use their rights. They rose together. It is probable that, if ever they decline, they will decline together. For life cannot be cut in compartments. In the long run the world reaps in war what it sows in peace. And to expect that international rivalry can be exorcised as long as the industrial order within each nation is such as to give success to those whose existence is a struggle for self-aggrandizement is a dream which has not even the merit of being beautiful. So the perversion of nationalism is imperialism, as the perversion of individualism is industrialism. And the perversion comes, not through any flaw or vice in human nature, but by the force of the idea, because the principle is defective and reveals its defects as it reveals its power. For it asserts that the rights of nations and individuals are absolute, which is false, instead of asserting that they are absolute in their own sphere, but that their sphere itself is contingent upon the part which they play in the community of nations and individuals, which is true. Thus it constrains them to a career of indefinite expansion, in which they devour continents and oceans, law, morality and religion, and last of all their own souls, in an attempt to attain infinity by the addition to themselves of all that is finite. In the meantime their rivals, and their subjects, and they themselves are conscious of the danger of opposing forces, and seek to {50} purchase security and to avoid a collision by organizing a balance of power. But the balance, whether in international politics or in industry, is unstable, because it reposes not on the common recognition of a principle by which the claims of nations and individuals are limited, but on an attempt to find an equipoise which may avoid a conflict without adjuring the assertion of unlimited claims. No such equipoise can be found, because, in a world where the possibilities of increasing military or industrial power are illimitable, no such equipoise can exist. Thus, as long as men move on this plane, there is no solution. They can obtain peace only by surrendering the claim to the unfettered exercise of their rights, which is the cause of war. What we have been witnessing, in short, during the past five years, both in international affairs and in industry, is the breakdown of the organization of society on the basis of rights divorced from obligations. Sooner or later the collapse was inevitable, because the basis was too narrow. For a right is simply a power which is secured by legal sanctions, "a capacity," as the lawyers define it, "residing in one man, of controlling, with the assistance of the State, the action of others," and a right should not be absolute for the same reason that a power should not be absolute. No doubt it is better that individuals should have absolute rights than that the State or the Government should have them; and it was the reaction against the abuses of absolute power by the State which led in the eighteenth century to the declaration of the absolute rights of individuals. {51} The most obvious defense against the assertion of one extreme was the assertion of the other. Because Governments and the relics of feudalism had encroached upon the property of individuals it was affirmed that the right of property was absolute; because they had strangled enterprise, it was affirmed that every man had a natural right to conduct his business as he pleased. But, in reality, both the one assertion and the other are false, and, if applied to practice, must lead to disaster. The State has no absolute rights; they are limited by its commission. The individual has no absolute rights; they are relative to the function which he performs in the community of which he is a member, because, unless they are so limited, the consequences must be something in the nature of private war. All rights, in short, are conditional and derivative, because all power should be conditional and derivative. They are derived from the end or purpose of the society in which they exist. They are conditional on being used to contribute to the attainment of that end, not to thwart it. And this means in practice that, if society is to be healthy, men must regard themselves not as the owners of rights, but as trustees for the discharge of functions and the instruments of a social purpose. {52} V PROPERTY AND CREATIVE WORK The application of the principle that society should be organized upon the basis of functions, is not recondite, but simple and direct. It offers in the first place, a standard for discriminating between those types of private property which are legitimate and those which are not. During the last century and a half, political thought has oscillated between two conceptions of property, both of which, in their different ways, are extravagant. On the one hand, the practical foundation of social organization has been the doctrine that the particular forms of private property which exist at any moment are a thing sacred and inviolable, that anything may properly become the object of property rights, and that, when it does, the title to it is absolute and unconditioned. The modern industrial system took shape in an age when this theory of property was triumphant. The American Constitution and the French Declaration of the Rights of Man both treated property as one of the fundamental rights which Governments exist to protect. The English Revolution of 1688, undogmatic and reticent though it was, had in effect done the same. The great individualists from Locke to Turgot, Adam Smith and Bentham all repeated, in different language, a similar conception. Though what gave the Revolution its {53} diabolical character in the eyes of the English upper classes was its treatment of property, the dogma of the sanctity of private property was maintained as tenaciously by French Jacobins as by English Tories; and the theory that property is an absolute, which is held by many modern Conservatives, is identical, if only they knew it, with that not only of the men of 1789, but of the Convention itself. On the other hand, the attack has been almost as undiscriminating as the defense. "Private property" has been the central position against which the social movement of the last hundred years has directed its forces. The criticism of it has ranged from an imaginative communism in the most elementary and personal of necessaries, to prosaic and partially realized proposals to transfer certain kinds of property from private to public ownership, or to limit their exploitation by restrictions imposed by the State. But, however varying in emphasis and in method, the general note of what may conveniently be called the Socialist criticism of property is what the word Socialism itself implies. Its essence is the statement that the economic evils of society are primarily due to the unregulated operation, under modern conditions of industrial organization, of the institution of private property. The divergence of opinion is natural, since in most discussions of property the opposing theorists have usually been discussing different things. Property is the most ambiguous of categories. It covers a multitude of rights which have nothing in common except that they are exercised by persons and enforced by the State. {54} Apart from these formal characteristics, they vary indefinitely in economic character, in social effect, and in moral justification. They may be conditional like the grant of patent rights, or absolute like the ownership of ground rents, terminable like copyright, or permanent like a freehold, as comprehensive as sovereignty or as restricted as an easement, as intimate and personal as the ownership of clothes and books, or as remote and intangible as shares in a gold mine or rubber plantation. It is idle, therefore, to present a case for or against private property without specifying the particular forms of property to which reference is made, and the journalist who says that "private property is the foundation of civilization" agrees with Proudhon, who said it was theft, in this respect at least that, without further definition, the words of both are meaningless. Arguments which support or demolish certain kinds of property may have no application to others; considerations which are conclusive in one stage of economic organization may be almost irrelevant in the next. The course of wisdom is neither to attack private property in general nor to defend it in general; for things are not similar in quality, merely because they are identical in name. It is to discriminate between the various concrete embodiments of what, in itself, is, after all, little more than an abstraction. The origin and development of different kinds of proprietary rights is not material to this discussion. Whatever may have been the historical process by which they have been established and recognized, the {55} _rationale_ of private property traditional in England is that which sees in it the security that each man will reap where he has sown. "If I despair of enjoying the fruits of labor," said Bentham, repeating what were in all essentials the arguments of Locke, "I shall only live from day to day; I shall not undertake labors which will only benefit my enemies." Property, it is argued, is a moral right, and not merely a legal right, because it insures that the producer will not be deprived by violence of the result of his efforts. The period from which that doctrine was inherited differed from our own in three obvious, but significant, respects. Property in land and in the simple capital used in most industries was widely distributed. Before the rise of capitalist agriculture and capitalist industry, the ownership, or at any rate the secure and effective occupation, of land and tools by those who used them, was a condition precedent to effective work in the field or in the workshop. The forces which threatened property were the fiscal policy of Governments and in some countries, for example France, the decaying relics of feudalism. The interference both of the one and of the other involved the sacrifice of those who carried on useful labor to those who did not. To resist them was to protect not only property but industry, which was indissolubly connected with it. Too often, indeed, resistance was ineffective. Accustomed to the misery of the rural proprietor in France, Voltaire remarked with astonishment that in England the peasant may be rich, and "does not fear to increase the number of his beasts or to cover his roof with tiles." And {56} the English Parliamentarians and the French philosophers who made the inviolability of property rights the center of their political theory, when they defended those who owned, were incidentally, if sometimes unintentionally, defending those who labored. They were protecting the yeoman or the master craftsman or the merchant from seeing the fruits of his toil squandered by the hangers-on at St. James or the courtly parasites of Versailles. In such circumstances the doctrine which found the justification of private property in the fact that it enabled the industrious man to reap where he had sown, was not a paradox, but, as far as the mass of the population was concerned, almost a truism. Property was defended as the most sacred of rights. But it was defended as a right which was not only widely exercised, but which was indispensable to the performance of the active function of providing food and clothing. For it consisted predominantly of one of two types, land or tools which were used by the owner for the purpose of production, and personal possessions which were the necessities or amenities of civilized existence. The former had its _rationale_ in the fact that the land of the peasant or the tools of the craftsman were the condition of his rendering the economic services which society required; the latter because furniture and clothes are indispensable to a life of decency and comfort. The proprietary rights--and, of course, they were numerous--which had their source, not in work, but in predatory force, were protected from criticism by the wide distribution of some kind {57} of property among the mass of the population, and in England, at least, the cruder of them were gradually whittled down. When property in land and what simple capital existed were generally diffused among all classes of society, when, in most parts of England, the typical workman was not a laborer but a peasant or small master, who could point to the strips which he had plowed or the cloth which he had woven, when the greater part of the wealth passing at death consisted of land, household furniture and a stock in trade which was hardly distinguishable from it, the moral justification of the title to property was self-evident. It was obviously, what theorists said that it was, and plain men knew it to be, the labor spent in producing, acquiring and administering it. Such property was not a burden upon society, but a condition of its health and efficiency, and indeed, of its continued existence. To protect it was to maintain the organization through which public necessities were supplied. If, as in Tudor England, the peasant was evicted from his holding to make room for sheep, or crushed, as in eighteenth century France, by arbitrary taxation and seigneurial dues, land went out of cultivation and the whole community was short of food. If the tools of the carpenter or smith were seized, plows were not repaired or horses shod. Hence, before the rise of a commercial civilization, it was the mark of statesmanship, alike in the England of the Tudors and in the France of Henry IV, to cherish the small property-owner even to the point of offending the great. Popular sentiment idealized the {58} yeoman--"the Joseph of the country who keeps the poor from starving"--not merely because he owned property, but because he worked on it, denounced that "bringing of the livings of many into the hands of one," which capitalist societies regard with equanimity as an inevitable, and, apparently, a laudable result of economic development, cursed the usurer who took advantage of his neighbor's necessities to live without labor, was shocked by the callous indifference to public welfare shown by those who "not having before their eyes either God or the profit and advantage of the realm, have enclosed with hedges and dykes towns and hamlets," and was sufficiently powerful to compel Governments to intervene to prevent the laying of field to field, and the engrossing of looms--to set limits, in short, to the scale to which property might grow. When Bacon, who commended Henry VII for protecting the tenant right of the small farmer, and pleaded in the House of Commons for more drastic land legislation, wrote "Wealth is like muck. It is not good but if it be spread," he was expressing in an epigram what was the commonplace of every writer on politics from Fortescue at the end of the fifteenth century to Harrington in the middle of the seventeenth. The modern conservative, who is inclined to take _au pied de la lettre_ the vigorous argument in which Lord Hugh Cecil denounces the doctrine that the maintenance of proprietary rights ought to be contingent upon the use to which they are put, may be reminded that Lord Hugh's own theory is of a kind to make his ancestors turn in their graves. Of the two members of the {59} family who achieved distinction before the nineteenth century, the elder advised the Crown to prevent landlords evicting tenants, and actually proposed to fix a pecuniary maximum to the property which different classes might possess, while the younger attacked enclosing in Parliament, and carried legislation compelling landlords to build cottages, to let them with small holdings, and to plow up pasture. William and Robert Cecil were sagacious and responsible men, and their view that the protection of property should be accompanied by the enforcement of obligations upon its owners was shared by most of their contemporaries. The idea that the institution of private property involves the right of the owner to use it, or refrain from using it, in such a way as he may please, and that its principal significance is to supply him with an income, irrespective of any duties which he may discharge, would not have been understood by most public men of that age, and, if understood, would have been repudiated with indignation by the more reputable among them. They found the meaning of property in the public purposes to which it contributed, whether they were the production of food, as among the peasantry, or the management of public affairs, as among the gentry, and hesitated neither to maintain those kinds of property which met these obligations nor to repress those uses of it which appeared likely to conflict with them. Property was to be an aid to creative work, not an alternative to it. The patentee was secured protection for a new invention, in order to secure him the fruits of his own brain, but the monopolist who grew {60} fat on the industry of others was to be put down. The law of the village bound the peasant to use his land, not as he himself might find most profitable, but to grow the corn the village needed. Long after political changes had made direct interference impracticable, even the higher ranks of English landowners continued to discharge, however capriciously and tyrannically, duties which were vaguely felt to be the contribution which they made to the public service in virtue of their estates. When as in France, the obligations of ownership were repudiated almost as completely as they have been by the owner of to-day, nemesis came in an onslaught upon the position of a _noblesse_ which had retained its rights and abdicated its functions. Property reposed, in short, not merely upon convenience, or the appetite for gain, but on a moral principle. It was protected not only for the sake of those who owned, but for the sake of those who worked and of those for whom their work provided. It was protected, because, without security for property, wealth could not be produced or the business of society carried on. Whatever the future may contain, the past has shown no more excellent social order than that in which the mass of the people were the masters of the holdings which they plowed and of the tools with which they worked, and could boast, with the English freeholder, that "it is a quietness to a man's mind to live upon his own and to know his heir certain." With this conception of property and its practical expression in social institutions those who urge that society should be {61} organized on the basis of function have no quarrel. It is in agreement with their own doctrine, since it justifies property by reference to the services which it enables its owner to perform. All that they need ask is that it should be carried to its logical conclusion. For the argument has evidently more than one edge. If it justifies certain types of property, it condemns others; and in the conditions of modern industrial civilization, what it justifies is less than what it condemns. The truth is, indeed, that this theory of property and the institutions in which it is embodied have survived into an age in which the whole structure of society is radically different from that in which it was formulated, and which made it a valid argument, if not for all, at least for the most common and characteristic kinds of property. It is not merely that the ownership of any substantial share in the national wealth is concentrated to-day in the hands of a few hundred thousand families, and that at the end of an age which began with an affirmation of the rights of property, proprietary rights are, in fact, far from being widely distributed. Nor is it merely that what makes property insecure to-day is not the arbitrary taxation of unconstitutional monarchies or the privileges of an idle _noblesse_, but the insatiable expansion and aggregation of property itself, which menaces with absorption all property less than the greatest, the small master, the little shopkeeper, the country bank, and has turned the mass of mankind into a proletariat working under the agents and for the profit of those who own. The characteristic fact, which differentiates most {62} modern property from that of the pre-industrial age, and which turns against it the very reasoning by which formerly it was supported, is that in modern economic conditions ownership is not active, but passive, that to most of those who own property to-day it is not a means of work but an instrument for the acquisition of gain or the exercise of power, and that there is no guarantee that gain bears any relation to service, or power to responsibility. For property which can be regarded as a condition of the performance of function, like the tools of the craftsman, or the holding of the peasant, or the personal possessions which contribute to a life of health and efficiency, forms an insignificant proportion, as far as its value is concerned, of the property rights existing at present. In modern industrial societies the great mass of property consists, as the annual review of wealth passing at death reveals, neither of personal acquisitions such as household furniture, nor of the owner's stock-in-trade, but of rights of various kinds, such as royalties, ground-rents, and, above all, of course shares in industrial undertakings which yield an income irrespective of any personal service rendered by their owners. Ownership and use are normally divorced. The greater part of modern property has been attenuated to a pecuniary lien or bond on the product of industry which carries with it a right to payment, but which is normally valued precisely because it relieves the owner from any obligation to perform a positive or constructive function. Such property may be called passive property, or property for acquisition, for exploitation, or for power, {63} to distinguish it from the property which is actively used by its owner for the conduct of his profession or the upkeep of his household. To the lawyer the first is, of course, as fully property as the second. It is questionable, however, whether economists shall call it "Property" at all, and not rather, as Mr. Hobson has suggested, "Improperty," since it is not identical with the rights which secure the owner the produce of his toil, but is opposite of them. A classification of proprietary rights based upon this difference would be instructive. If they were arranged according to the closeness with which they approximate to one or other of these two extremes, it would be found that they were spread along a line stretching from property which is obviously the payment for, and condition of, personal services, to property which is merely a right to payment from the services rendered by others, in fact a private tax. The rough order which would emerge, if all details and qualification were omitted, might be something as follows:-- 1. Property in payments made for personal services. 2. Property in personal possessions necessary to health and comfort. 3. Property in land and tools used by their owners. 4. Property in copyright and patent rights owned by authors and inventors. 5. Property in pure interest, including much agricultural rent. 6. Property in profits of luck and good fortune: "quasi-rents." 7. Property in monopoly profits. {64} 8. Property in urban ground rents. 9. Property in royalties. The first four kinds of property obviously accompany, and in some sense condition, the performance of work. The last four obviously do not. Pure interest has some affinities with both. It represents a necessary economic cost, the equivalent of which must be born, whatever the legal arrangements under which property is held, and is thus unlike the property represented by profits (other than the equivalent of salaries and payment for necessary risk), urban ground-rents and royalties. It relieves the recipient from personal services, and thus resembles them. The crucial question for any society is, under which each of these two broad groups of categories the greater part (measured in value) of the proprietary rights which it maintains are at any given moment to be found. If they fall in the first group creative work will be encouraged and idleness will be depressed; if they fall in the second, the result will be the reverse. The facts vary widely from age to age and from country to country. Nor have they ever been fully revealed; for the lords of the jungle do not hunt by daylight. It is probable, at least, that in the England of 1550 to 1750, a larger proportion of the existing property consisted of land and tools used by their owners than either in contemporary France, where feudal dues absorbed a considerable proportion of the peasants' income, or than in the England of 1800 to 1850, where the new capitalist manufacturers made hundreds per cent. while manual workers were goaded by starvation into ineffectual {65} revolt. It is probable that in the nineteenth century, thanks to the Revolution, France and England changed places, and that in this respect not only Ireland but the British Dominions resemble the former rather than the latter. The transformation can be studied best of all in the United States, in parts of which the population of peasant proprietors and small masters of the early nineteenth century were replaced in three generations by a propertyless proletariat and a capitalist plutocracy. The abolition of the economic privileges of agrarian feudalism, which, under the name of equality, was the driving force of the French Revolution, and which has taken place, in one form or another, in all countries touched by its influence, has been largely counter-balanced since 1800 by the growth of the inequalities springing from Industrialism. In England the general effect of recent economic development has been to swell proprietary rights which entitle the owners to payment without work, and to diminish those which can properly be described as functional. The expansion of the former, and the process by which the simpler forms of property have been merged in them, are movements the significance of which it is hardly possible to over-estimate. There is, of course, a considerable body of property which is still of the older type. But though working landlords, and capitalists who manage their own businesses, are still in the aggregate a numerous body, the organization for which they stand is not that which is most representative of the modern economic world. The general tendency for the ownership and administration of {66} property to be separated, the general refinement of property into a claim on goods produced by an unknown worker, is as unmistakable as the growth of capitalist industry and urban civilization themselves. Villages are turned into towns and property in land changes from the holding worked by a farmer or the estate administered by a landlord into "rents," which are advertised and bought and sold like any other investment. Mines are opened and the rights of the landowner are converted into a tribute for every ton of coal which is brought to the surface. As joint-stock companies take the place of the individual enterprise which was typical of the earlier years of the factory system, organization passes from the employer who both owns and manages his business, into the hands of salaried officials, and again the mass of property-owners is swollen by the multiplication of _rentiers_ who put their wealth at the disposal of industry, but who have no other connection with it. The change is taking place in our day most conspicuously, perhaps, through the displacement in retail trade of the small shopkeeper by the multiple store, and the substitution in manufacturing industry of combines and amalgamations for separate businesses conducted by competing employers. And, of course, it is not only by economic development that such claims are created. "Out of the eater came forth meat, and out of the strong came forth sweetness." It is probable that war, which in barbarous ages used to be blamed as destructive of property, has recently created more titles to property than almost all other causes put together. Infinitely diverse as are these proprietary rights, they {67} have the common characteristic of being so entirely separated from the actual objects over which they are exercised, so rarified and generalized, as to be analogous almost to a form of currency rather than to the property which is so closely united to its owner as to seem a part of him. Their isolation from the rough environment of economic life, where the material objects of which they are the symbol are shaped and handled, is their charm. It is also their danger. The hold which a class has upon the future depends on the function which it performs. What nature demands is work: few working aristocracies, however tyrannical, have fallen; few functionless aristocracies have survived. In society, as in the world of organic life, atrophy is but one stage removed from death. In proportion as the landowner becomes a mere _rentier_ and industry is conducted, not by the rude energy of the competing employers who dominated its infancy, but by the salaried servants of shareholders, the argument for private property which reposes on the impossibility of finding any organization to supersede them loses its application, for they are already superseded. Whatever may be the justification of these types of property, it cannot be that which was given for the property of the peasant or the craftsman. It cannot be that they are necessary in order to secure to each man the fruits of his own labor. For if a legal right which gives $200,000 a year to a mineral owner in the North of England and to a ground landlord in London "secures the fruits of labor" at all, the fruits are the proprietor's and the labor that of some one else. Property {68} has no more insidious enemies than those well-meaning anarchists who, by defending all forms of it as equally valid, involve the institution in the discredit attaching to its extravagances. In reality, whatever conclusion may be drawn from the fact, the greater part of modern property, whether, like mineral rights and urban ground-rents, it is merely a form of private taxation which the law allows certain persons to levy on the industry of others, or whether, like property in capital, it consists of rights to payment for instruments which the capitalist cannot himself use but puts at the disposal of those who can, has as its essential feature that it confers upon its owners income unaccompanied by personal service. In this respect the ownership of land and the ownership of capital are normally similar, though from other points of view their differences are important. To the economist rent and interest are distinguished by the fact that the latter, though it is often accompanied by surplus elements which are merged with it in dividends, is the price of an instrument of production which would not be forthcoming for industry if the price were not paid, while the former is a differential surplus which does not affect the supply. To the business community and the solicitor land and capital are equally investments, between which, since they possess the common characteristic of yielding income without labor, it is inequitable to discriminate; and though their significance as economic categories may be different, their effect as social institutions is the same. It is to separate property from creative ability, and to divide society into two classes, of which one has its {69} primary interest in passive ownership, while the other is mainly dependent upon active work. Hence the real analogy to many kinds of modern property is not the simple property of the small land-owner or the craftsman, still less the household goods and dear domestic amenities, which is what the word suggests to the guileless minds of clerks and shopkeepers, and which stampede them into displaying the ferocity of terrified sheep when the cry is raised that "Property" is threatened. It is the feudal dues which robbed the French peasant of part of his produce till the Revolution abolished them. How do royalties differ from _quintaines_ and _lods et ventes_? They are similar in their origin and similar in being a tax levied on each increment of wealth which labor produces. How do urban ground-rents differ from the payments which were made to English sinecurists before the Reform Bill of 1832? They are equally tribute paid by those who work to those who do not. If the monopoly profits of the owner of _banalités_, whose tenant must grind corn at his mill and make wine at his press, were an intolerable oppression, what is the sanctity attaching to the monopoly profits of the capitalists, who, as the Report of the Government Committee on trusts tells us, "in soap, tobacco, wallpaper, salt, cement and in the textile trades ... are in a position to control output and prices" or, in other words, can compel the consumer to buy from them, at the figure they fix, on pain of not buying at all? All these rights--royalties, ground-rents, monopoly profits--are "Property." The criticism most fatal to them is not that of Socialists. It is contained in the {70} arguments by which property is usually defended. For if the meaning of the institution is to encourage industry by securing that the worker shall receive the produce of his toil, then precisely in proportion as it is important to preserve the property which a man has in the results of his own efforts, is it important to abolish that which he has in the results of the efforts of some one else. The considerations which justify ownership as a function are those which condemn it as a tax. Property is not theft, but a good deal of theft becomes property. The owner of royalties who, when asked why he should be paid £50,000 a year from minerals which he has neither discovered nor developed nor worked but only owned, replies "But it's Property!" may feel all the awe which his language suggests. But in reality he is behaving like the snake which sinks into its background by pretending that it is the dead branch of a tree, or the lunatic who tried to catch rabbits by sitting behind a hedge and making a noise like a turnip. He is practising protective--and sometimes aggressive--mimicry. His sentiments about property are those of the simple toiler who fears that what he has sown another may reap. His claim is to be allowed to continue to reap what another has sown. It is sometimes suggested that the less attractive characteristics of our industrial civilization, its combination of luxury and squalor, its class divisions and class warfare, are accidental maladjustments which are not rooted in the center of its being, but are excrescences which economic progress itself may in time be expected to correct. That agreeable optimism will not survive an {71} examination of the operation of the institution of private property in land and capital in industrialized communities. In countries where land is widely distributed, in France or in Ireland, its effect may be to produce a general diffusion of wealth among a rural middle class who at once work and own. In countries where the development of industrial organization has separated the ownership of property and the performance of work, the normal effect of private property is to transfer to functionless owners the surplus arising from the more fertile sites, the better machinery, the more elaborate organization. No clearer exemplifications of this "law of rent" has been given than the figures supplied to the Coal Industry Commission by Sir Arthur Lowes Dickenson, which showed that in a given quarter the costs per ton of producing coal varied from $3.12 to $12 per ton, and the profits from nil to $4.12. The distribution in dividends to shareholders of the surplus accruing from the working of richer and more accessible seams, from special opportunities and access to markets, from superior machinery, management and organization, involves the establishment of Privilege as a national institution, as much as the most arbitrary exactions of a feudal _seigneur_. It is the foundation of an inequality which is not accidental or temporary, but necessary and permanent. And on this inequality is erected the whole apparatus of class institutions, which make not only the income, but the housing, education, health and manners, indeed the very physical appearance of different classes of Englishmen almost as different from each other as though the minority were {72} alien settlers established amid the rude civilization of a race of impoverished aborigines. So the justification of private property traditional in England, which saw in it the security that each man would enjoy the fruits of his own labor, though largely applicable to the age in which it was formulated, has undergone the fate of most political theories. It has been refuted not by the doctrines of rival philosophers, but by the prosaic course of economic development. As far as the mass of mankind are concerned, the need which private property other than personal possessions does still often satisfy, though imperfectly and precariously, is the need for security. To the small investors, who are the majority of property-owners, though owning only an insignificant fraction of the property in existence, its meaning is simple. It is not wealth or power, or even leisure from work. It is safety. They work hard. They save a little money for old age, or for sickness, or for their children. They invest it, and the interest stands between them and all that they dread most. Their savings are of convenience to industry, the income from them is convenient to themselves. "Why," they ask, "should we not reap in old age the advantage of energy and thrift in youth?" And this hunger for security is so imperious that those who suffer most from the abuses of property, as well as those who, if they could profit by them, would be least inclined to do so, will tolerate and even defend them, for fear lest the knife which trims dead matter should cut into the quick. They have seen too many men drown to be {73} critical of dry land, though it be an inhospitable rock. They are haunted by the nightmare of the future, and, if a burglar broke it, would welcome a burglar. This need for security is fundamental, and almost the gravest indictment of our civilization is that the mass of mankind are without it. Property is one way of organizing it. It is quite comprehensible therefore, that the instrument should be confused with the end, and that any proposal to modify it should create dismay. In the past, human beings, roads, bridges and ferries, civil, judicial and clerical offices, and commissions in the army have all been private property. Whenever it was proposed to abolish the rights exercised over them, it was protested that their removal would involve the destruction of an institution in which thrifty men had invested their savings, and on which they depended for protection amid the chances of life and for comfort in old age. In fact, however, property is not the only method of assuring the future, nor, when it is the way selected, is security dependent upon the maintenance of all the rights which are at present normally involved in ownership. In so far as its psychological foundation is the necessity for securing an income which is stable and certain, which is forthcoming when its recipient cannot work, and which can be used to provide for those who cannot provide for themselves, what is really demanded is not the command over the fluctuating proceeds of some particular undertaking, which accompanies the ownership of capital, but the security which is offered by an annuity. Property is the instrument, security is the object, and when some alternative way is forthcoming {74} of providing the latter, it does not appear in practice that any loss of confidence, or freedom or independence is caused by the absence of the former. Hence not only the manual workers, who since the rise of capitalism, have rarely in England been able to accumulate property sufficient to act as a guarantee of income when their period of active earning is past, but also the middle and professional classes, increasingly seek security to-day, not in investment, but in insurance against sickness and death, in the purchase of annuities, or in what is in effect the same thing, the accumulation of part of their salary towards a pension which is paid when their salary ceases. The professional man may buy shares in the hope of making a profit on the transaction. But when what he desires to buy is security, the form which his investment takes is usually one kind or another of insurance. The teacher, or nurse, or government servant looks forward to a pension. Women, who fifty years ago would have been regarded as dependent almost as completely as if femininity were an incurable disease with which they had been born, and whose fathers, unless rich men, would have been tormented with anxiety for fear lest they should not save sufficient to provide for them, now receive an education, support themselves in professions, and save in the same way. It is still only in comparatively few cases that this type of provision is made; almost all wage-earners outside government employment, and many in it, as well as large numbers of professional men, have nothing to fall back upon in sickness or old age. But that does not alter the fact {75} that, when it is made, it meets the need for security, which, apart, of course, from personal possessions and household furniture, is the principal meaning of property to by far the largest element in the population, and that it meets it more completely and certainly than property itself. Nor, indeed, even when property is the instrument used to provide for the future, is such provision dependent upon the maintenance in its entirety of the whole body of rights which accompany ownership to-day. Property is not simple but complex. That of a man who has invested his savings as an ordinary shareholder comprises at least three rights, the right to interest, the right to profits, the right to control. In so far as what is desired is the guarantee for the maintenance of a stable income, not the acquisition of additional wealth without labor--in so far as his motive is not gain but security--the need is met by interest on capital. It has no necessary connection either with the right to residuary profits or the right to control the management of the undertaking from which the profits are derived, both of which are vested to-day in the shareholder. If all that were desired were to use property as an instrument for purchasing security, the obvious course--from the point of view of the investor desiring to insure his future the safest course--would be to assimilate his position as far as possible to that of a debenture holder or mortgagee, who obtains the stable income which is his motive for investment, but who neither incurs the risks nor receives the profits of the speculator. To insist that the elaborate apparatus of proprietary rights which {76} distributes dividends of thirty per cent to the shareholders in Coats, and several thousands a year to the owner of mineral royalties and ground-rents, and then allows them to transmit the bulk of gains which they have not earned to descendants who in their turn will thus be relieved from the necessity of earning, must be maintained for the sake of the widow and the orphan, the vast majority of whom have neither and would gladly part with them all for a safe annuity if they had, is, to say the least of it, extravagantly _mal-à-propos_. It is like pitching a man into the water because he expresses a wish for a bath, or presenting a tiger cub to a householder who is plagued with mice, on the ground that tigers and cats both belong to the genus _felis_. The tiger hunts for itself not for its masters, and when game is scarce will hunt them. The classes who own little or no property may reverence it because it is security. But the classes who own much prize it for quite different reasons, and laugh in their sleeve at the innocence which supposes that anything as vulgar as the savings of the _petite bourgeoisie_ have, except at elections, any interest for them. They prize it because it is the order which quarters them on the community and which provides for the maintenance of a leisure class at the public expense. "Possession," said the Egoist, "without obligation to the object possessed, approaches felicity." Functionless property appears natural to those who believe that society should be organized for the acquisition of private wealth, and attacks upon it perverse or malicious, because the question which they ask of any institution is, "What does it yield?" And such property yields much {77} to those who own it. Those, however, who hold that social unity and effective work are possible only if society is organized and wealth distributed on the basis of function, will ask of an institution, not, "What dividends does it pay?" but "What service does it perform?" To them the fact that much property yields income irrespective of any service which is performed or obligation which is recognized by its owners will appear not a quality but a vice. They will see in the social confusion which it produces, payments disproportionate to service here, and payments without any service at all there, and dissatisfaction everywhere, a convincing confirmation of their argument that to build on a foundation of rights and of rights alone is to build on a quicksand. From the portentous exaggeration into an absolute of what once was, and still might be, a sane and social institution most other social evils follow the power of those who do not work over those who do, the alternate subservience and rebelliousness of those who work towards those who do not, the starving of science and thought and creative effort for fear that expenditure upon them should impinge on the comfort of the sluggard and the _fainéant_, and the arrangement of society in most of its subsidiary activities to suit the convenience not of those who work usefully but of those who spend gaily, so that the most hideous, desolate and parsimonious places in the country are those in which the greatest wealth is produced, the Clyde valley, or the cotton towns of Lancashire, or the mining villages of Scotland and Wales, and the gayest and most luxurious {78} those in which it is consumed. From the point of view of social health and economic efficiency, society should obtain its material equipment at the cheapest price possible, and after providing for depreciation and expansion should distribute the whole product to its working members and their dependents. What happens at present, however, is that its workers are hired at the cheapest price which the market (as modified by organization) allows, and that the surplus, somewhat diminished by taxation, is distributed to the owners of property. Profits may vary in a given year from a loss to 100 per cent. But wages are fixed at a level which will enable the marginal firm to continue producing one year with another; and the surplus, even when due partly to efficient management, goes neither to managers nor manual workers, but to shareholders. The meaning of the process becomes startlingly apparent when, as in Lancashire to-day, large blocks of capital change hands at a period of abnormal activity. The existing shareholders receive the equivalent of the capitalized expectation of future profits. The workers, as workers, do not participate in the immense increment in value; and when, in the future, they demand an advance in wages, they will be met by the answer that profits, which before the transaction would have been reckoned large, yield shareholders after it only a low rate of interest on their investment. The truth is that whereas in earlier ages the protection of property was normally the protection of work, the relationship between them has come in the course of the economic development of the last two centuries to {79} be very nearly reversed. The two elements which compose civilization are active effort and passive property, the labor of human things and the tools which human beings use. Of these two elements those who supply the first maintain and improve it, those who own the second normally dictate its character, its development and its administration. Hence, though politically free, the mass of mankind live in effect under rules imposed to protect the interests of the small section among them whose primary concern is ownership. From this subordination of creative activity to passive property, the worker who depends upon his brains, the organizer, inventor, teacher or doctor suffers almost as much embarrassment as the craftsman. The real economic cleavage is not, as is often said, between employers and employed, but between all who do constructive work, from scientist to laborer, on the one hand, and all whose main interest is the preservation of existing proprietary rights upon the other, irrespective of whether they contribute to constructive work or not. If, therefore, under the modern conditions which have concentrated any substantial share of property in the hands of a small minority of the population, the world is to be governed for the advantages of those who own, it is only incidentally and by accident that the results will be agreeable to those who work. In practice there is a constant collision between them. Turned into another channel, half the wealth distributed in dividends to functionless shareholders, could secure every child a good education up to 18, could re-endow English Universities, and (since more efficient production is {80} important) could equip English industries for more efficient production. Half the ingenuity now applied to the protection of property could have made most industrial diseases as rare as smallpox, and most English cities into places of health and even of beauty. What stands in the way is the doctrine that the rights of property are absolute, irrespective of any social function which its owners may perform. So the laws which are most stringently enforced are still the laws which protect property, though the protection of property is no longer likely to be equivalent to the protection of work, and the interests which govern industry and predominate in public affairs are proprietary interests. A mill-owner may poison or mangle a generation of operatives; but his brother magistrates will let him off with a caution or a nominal fine to poison and mangle the next. For he is an owner of property. A landowner may draw rents from slums in which young children die at the rate of 200 per 1000; but he will be none the less welcome in polite society. For property has no obligations and therefore can do no wrong. Urban land may be held from the market on the outskirts of cities in which human beings are living three to a room, and rural land may be used for sport when villagers are leaving it to overcrowd them still more. No public authority intervenes, for both are property. To those who believe that institutions which repudiate all moral significance must sooner or later collapse, a society which confuses the protection of property with the preservation of its functionless perversions will appear as precarious as that which has left the memorials of its {81} tasteless frivolity and more tasteless ostentation in the gardens of Versailles. Do men love peace? They will see the greatest enemy of social unity in rights which involve no obligation to co-operate for the service of society. Do they value equality? Property rights which dispense their owners from the common human necessity of labor make inequality an institution permeating every corner of society, from the distribution of material wealth to the training of intellect itself. Do they desire greater industrial efficiency? There is no more fatal obstacle to efficiency than the revelation that idleness has the same privileges as industry, and that for every additional blow with the pick or hammer an additional profit will be distributed among shareholders who wield neither. Indeed, functionless property is the greatest enemy of legitimate property itself. It is the parasite which kills the organism that produced it. Bad money drives out good, and, as the history of the last two hundred years shows, when property for acquisition or power and property for service or for use jostle each other freely in the market, without restrictions such as some legal systems have imposed on alienation and inheritance, the latter tends normally to be absorbed by the former, because it has less resisting power. Thus functionless property grows, and as it grows it undermines the creative energy which produced property and which in earlier ages it protected. It cannot unite men, for what unites them is the bond of service to a common purpose, and that bond it repudiates, since its very {82} essence is the maintenance of rights irrespective of service. It cannot create; it can only spend, so that the number of scientists, inventors, artists or men of letters who have sprung in the course of the last century from hereditary riches can be numbered on one hand. It values neither culture nor beauty, but only the power which belongs to wealth and the ostentation which is the symbol of it. So those who dread these qualities, energy and thought and the creative spirit--and they are many--will not discriminate, as we have tried to discriminate, between different types and kinds of property, in order that they may preserve those which are legitimate and abolish those which are not. They will endeavor to preserve all private property, even in its most degenerate forms. And those who value those things will try to promote them by relieving property of its perversions, and thus enabling it to return to its true nature. They will not desire to establish any visionary communism, for they will realize that the free disposal of a sufficiency of personal possessions is the condition of a healthy and self-respecting life, and will seek to distribute more widely the property rights which make them to-day the privilege of a minority. But they will refuse to submit to the naïve philosophy which would treat all proprietary rights as equal in sanctity merely because they are identical in name. They will distinguish sharply between property which is used by its owner for the conduct of his profession or the upkeep of his household, and property which is merely a claim on wealth produced by another's labor. They will insist that {83} property is moral and healthy only when it is used as a condition not of idleness but of activity, and when it involves the discharge of definite personal obligations. They will endeavor, in short, to base it upon the principle of function. {84} VI THE FUNCTIONAL SOCIETY The application to property and industry of the principle of function is compatible with several different types of social organization, and is as unlikely as more important revelations to be the secret of those who cry "Lo here!" and "Lo there!" The essential thing is that men should fix their minds upon the idea of purpose, and give that idea pre-eminence over all subsidiary issues. If, as is patent, the purpose of industry is to provide the material foundation of a good social life, then any measure which makes that provision more effective, so long as it does not conflict with some still more important purpose, is wise, and any institution which thwarts or encumbers it is foolish. It is foolish, for example, to cripple education, as it is crippled in England for the sake of industry; for one of the uses of industry is to provide the wealth which may make possible better education. It is foolish to maintain property rights for which no service is performed, for payment without service is waste; and if it is true, as statisticians affirm, that, even were income equally divided, income per head would be small, then it is all the more foolish, for sailors in a boat have no room for first-class passengers, and it is all the more important that none of the small national income should be misapplied. It is foolish to leave the direction of industry {85} in the hands of servants of private property-owners who themselves know nothing about it but its balance sheets, because this is to divert it from the performance of service to the acquisition of gain, and to subordinate those who do creative work to those who do not. The course of wisdom in the affairs of industry is, after all, what it is in any other department of organized life. It is to consider the end for which economic activity is carried on and then to adapt economic organization to it. It is to pay for service and for service only, and when capital is hired to make sure that it is hired at the cheapest possible price. It is to place the responsibility for organizing industry on the shoulders of those who work and use, not of those who own, because production is the business of the producer and the proper person to see that he discharges his business is the consumer for whom, and not for the owner of property, it ought to be carried on. Above all it is to insist that all industries shall be conducted in complete publicity as to costs and profits, because publicity ought to be the antiseptic both of economic and political abuses, and no man can have confidence in his neighbor unless both work in the light. As far as property is concerned, such a policy would possess two edges. On the one hand, it would aim at abolishing those forms of property in which ownership is divorced from obligations. On the other hand, it would seek to encourage those forms of economic organization under which the worker, whether owner or not, is free to carry on his work without sharing its control or its profits with the mere _rentier_. Thus, if in certain {86} spheres it involved an extension of public ownership, it would in others foster an extension of private property. For it is not private ownership, but private ownership divorced from work, which is corrupting to the principle of industry; and the idea of some socialists that private property in land or capital is necessarily mischievous is a piece of scholastic pedantry as absurd as that of those conservatives who would invest all property with some kind of mysterious sanctity. It all depends what sort of property it is and for what purpose it is used. Provided that the State retains its eminent domain, and controls alienation, as it does under the Homestead laws of the Dominions, with sufficient stringency to prevent the creation of a class of functionless property-owners, there is no inconsistency between encouraging simultaneously a multiplication of peasant farmers and small masters who own their own farms or shops, and the abolition of private ownership in those industries, unfortunately to-day the most conspicuous, in which the private owner is an absentee shareholder. Indeed, the second reform would help the first. In so far as the community tolerates functionless property it makes difficult, if not impossible, the restoration of the small master in agriculture or in industry, who cannot easily hold his own in a world dominated by great estates or capitalist finance. In so far as it abolishes those kinds of property which are merely parasitic, it facilitates the restoration of the small property-owner in those kinds of industry for which small ownership is adapted. A socialistic policy towards the former is not {87} antagonistic to the "distributive state," but, in modern economic conditions, a necessary preliminary to it, and if by "Property" is meant the personal possessions which the word suggests to nine-tenths of the population, the object of socialists is not to undermine property but to protect and increase it. The boundary between large scale and small scale production will always be uncertain and fluctuating, depending, as it does, on technical conditions which cannot be foreseen: a cheapening of electrical power, for example, might result in the decentralization of manufactures, as steam resulted in their concentration. The fundamental issue, however, is not between different scales of ownership, but between ownership of different kinds, not between the large farmer or master and the small, but between property which is used for work and property which yields income without it. The Irish landlord was abolished, not because he owned a large scale, but because he was an owner and nothing more; if, and when English land-ownership has been equally attenuated, as in towns it already has been, it will deserve to meet the same fate. Once the issue of the character of ownership has been settled, the question of the size of the economic unit can be left to settle itself. The first step, then, towards the organization of economic life for the performance of function is to abolish those types of private property in return for which no function is performed. The man who lives by owning without working is necessarily supported by the industry of some one else, and is, therefore, too expensive a luxury to be encouraged. Though he deserves to be {88} treated with the leniency which ought to be, and usually is not, shown to those who have been brought up from infancy to any other disreputable trade, indulgence to individuals must not condone the institution of which both they and their neighbors are the victims. Judged by this standard, certain kinds of property are obviously anti-social. The rights in virtue of which the owner of the surface is entitled to levy a tax, called a royalty, on every ton of coal which the miner brings to the surface, to levy another tax, called a way-leave, on every ton of coal transported under the surface of his land though its amenity and value may be quite unaffected, to distort, if he pleases, the development of a whole district by refusing access to the minerals except upon his own terms, and to cause some 3,500 to 4,000 million tons to be wasted in barriers between different properties, while he in the meantime contributes to a chorus of lamentation over the wickedness of the miners in not producing more tons of coal for the public and incidentally more private taxes for himself--all this adds an agreeable touch of humor to the drab quality of our industrial civilization for which mineral owners deserve perhaps some recognition, though not the $400,000 odd a year which is paid to each of the four leading players, or the $24,000,000 a year which is distributed among the crowd. The alchemy by which a gentleman who has never seen a coal mine distills the contents of that place of gloom into elegant chambers in London and a place in the country is not the monopoly of royalty owners. A similar feat of prestidigitation is performed by the {89} owner of urban ground-rents. In rural districts some landlords, perhaps many landlords, are partners in the hazardous and difficult business of agriculture, and, though they may often exercise a power which is socially excessive, the position which they hold and the income which they receive are, in part at last, a return for the functions which they perform. The ownership of urban land has been refined till of that crude ore only the pure gold is left. It is the perfect sinecure, for the only function it involves is that of collecting its profits, and in an age when the struggle of Liberalism against sinecures was still sufficiently recent to stir some chords of memory, the last and greatest of liberal thinkers drew the obvious deduction. "The reasons which form the justification ... of property in land," wrote Mill in 1848, "are valid only in so far as the proprietor of land is its improver.... In no sound theory of private property was it ever contemplated that the proprietor of land should be merely a sinecurist quartered on it." Urban ground-rents and royalties are, in fact, as the Prime Minister in his unregenerate days suggested, a tax which some persons are permitted by the law to levy upon the industry of others. They differ from public taxation only in that their amount increases in proportion not to the nation's need of revenue but to its need of the coal and space on which they are levied, that their growth inures to private gain not to public benefit, and that if the proceeds are wasted on frivolous expenditure no one has any right to complain, because the arrangement by which Lord Smith spends wealth produced by Mr. Brown on objects which do no good to either is part {90} of the system which, under the name of private property, Mr. Brown as well as Lord Smith have learned to regard as essential to the higher welfare of mankind. But if we accept the principle of function we shall ask what is the _purpose_ of this arrangement, and for what end the inhabitants of, for example, London pay $64,000,000 a year to their ground landlords. And if we find that it is for no purpose and no end, but that these things are like the horseshoes and nails which the City of London presents to the Crown on account of land in the Parish of St. Clement Danes, then we shall not deal harshly with a quaint historical survival, but neither shall we allow it to distract us from the business of the present, as though there had been history but there were not history any longer. We shall close these channels through which wealth leaks away by resuming the ownership of minerals and of urban land, as some communities in the British Dominions and on the Continent of Europe have resumed it already. We shall secure that such large accumulations as remain change hands at least once in every generation, by increasing our taxes on inheritance till what passes to the heir is little more than personal possessions, not the right to a tribute from industry which, though qualified by death-duties, is what the son of a rich man inherits to-day. We shall treat mineral owners and land-owners, in short, as Plato would have treated the poets, whom in their ability to make something out of nothing and to bewitch mankind with words they a little resemble, and crown them with flowers and usher them politely out of the State. {91} VII INDUSTRY AS A PROFESSION Rights without functions are like the shades in Homer which drank blood but scattered trembling at the voice of a man. To extinguish royalties and urban ground-rents is merely to explode a superstition. It needs as little--and as much--resolution as to put one's hand through any other ghost. In all industries except the diminishing number in which the capitalist is himself the manager, property in capital is almost equally passive. Almost, but not quite. For, though the majority of its owners do not themselves exercise any positive function, they appoint those who do. It is true, of course, that the question of how capital is to be owned is distinct from the question of how it is to be administered, and that the former can be settled without prejudice to the latter. To infer, because shareholders own capital which is indispensable to industry, that therefore industry is dependent upon the maintenance of capital in the hands of shareholders, to write, with some economists, as though, if private property in capital were further attenuated or abolished altogether, the constructive energy of the managers who may own capital or may not, but rarely, in the more important industries, own more than a small fraction of it, must necessarily be impaired, is to be guilty of a robust _non-sequitur_ and to ignore the most obvious facts of {92} contemporary industry. The less the mere capitalist talks about the necessity for the consumer of an efficient organization of industry, the better; for, whatever the future of industry may be, an efficient organization is likely to have no room for _him_. But though shareholders do not govern, they reign, at least to the extent of saying once a year "_le roy le veult_." If their rights are pared down or extinguished, the necessity for some organ to exercise them will still remain. And the question of the ownership of capital has this much in common with the question of industrial organization, that the problem of the constitution under which industry is to be conducted is common to both. That constitution must be sought by considering how industry can be organized to express most perfectly the principle of purpose. The application to industry of the principle of purpose is simple, however difficult it may be to give effect to it. It is to turn it into a Profession. A Profession may be defined most simply as a trade which is organized, incompletely, no doubt, but genuinely, for the performance of function. It is not simply a collection of individuals who get a living for themselves by the same kind of work. Nor is it merely a group which is organized exclusively for the economic protection of its members, though that is normally among its purposes. It is a body of men who carry on their work in accordance with rules designed to enforce certain standards both for the better protection of its members and for the better service of the public. The standards which it maintains may be high or low: all professions have some rules which protect the interests {93} of the community and others which are an imposition on it. Its essence is that it assumes certain responsibilities for the competence of its members or the quality of its wares, and that it deliberately prohibits certain kinds of conduct on the ground that, though they may be profitable to the individual, they are calculated to bring into disrepute the organization to which he belongs. While some of its rules are trade union regulations designed primarily to prevent the economic standards of the profession being lowered by unscrupulous competition, others have as their main object to secure that no member of the profession shall have any but a purely professional interest in his work, by excluding the incentive of speculative profit. The conception implied in the words "unprofessional conduct" is, therefore, the exact opposite of the theory and practice which assume that the service of the public is best secured by the unrestricted pursuit on the part of rival traders of their pecuniary self-interest, within such limits as the law allows. It is significant that at the time when the professional classes had deified free competition as the arbiter of commerce and industry, they did not dream of applying it to the occupations in which they themselves were primarily interested, but maintained, and indeed, elaborated machinery through which a professional conscience might find expression. The rules themselves may sometimes appear to the layman arbitrary and ill-conceived. But their object is clear. It is to impose on the profession itself the obligation of maintaining the quality of the service, and to prevent its common purpose being frustrated through {94} the undue influence of the motive of pecuniary gain upon the necessities or cupidity of the individual. The difference between industry as it exists to-day and a profession is, then, simple and unmistakable. The essence of the former is that its only criterion is the financial return which it offers to its shareholders. The essence of the latter, is that, though men enter it for the sake of livelihood, the measure of their success is the service which they perform, not the gains which they amass. They may, as in the case of a successful doctor, grow rich; but the meaning of their profession, both for themselves and for the public, is not that they make money but that they make health, or safety, or knowledge, or good government or good law. They depend on it for their income, but they do not consider that any conduct which increases their income is on that account good. And while a boot-manufacturer who retires with half a million is counted to have achieved success, whether the boots which he made were of leather or brown paper, a civil servant who did the same would be impeached. So, if they are doctors, they recognize that there are certain kinds of conduct which cannot be practised, however large the fee offered for them, because they are unprofessional; if scholars and teachers, that it is wrong to make money by deliberately deceiving the public, as is done by makers of patent medicines, however much the public may clamor to be deceived; if judges or public servants, that they must not increase their incomes by selling justice for money; if soldiers, that the service comes first, and their private inclinations, {95} even the reasonable preference of life to death, second. Every country has its traitors, every army its deserters, and every profession its blacklegs. To idealize the professional spirit would be very absurd; it has its sordid side, and, if it is to be fostered in industry, safeguards will be needed to check its excesses. But there is all the difference between maintaining a standard which is occasionally abandoned, and affirming as the central truth of existence that there is no standard to maintain. The meaning of a profession is that it makes the traitors the exception, not as they are in industry, the rule. It makes them the exception by upholding as the criterion of success the end for which the profession, whatever it may be, is carried on, and subordinating the inclination, appetites and ambitions of individuals to the rules of an organization which has as its object to promote the performance of function. There is no sharp line between the professions and the industries. A hundred years ago the trade of teaching, which to-day is on the whole an honorable public service, was rather a vulgar speculation upon public credulity; if Mr. Squeers was a caricature, the Oxford of Gibbon and Adam Smith was a solid port-fed reality; no local authority could have performed one-tenth of the duties which are carried out by a modern municipal corporation every day, because there was no body of public servants to perform them, and such as there were took bribes. It is conceivable, at least, that some branches of medicine might have developed on the lines of industrial capitalism, with hospitals as factories, {96} doctors hired at competitive wages as their "hands," large dividends paid to shareholders by catering for the rich, and the poor, who do not offer a profitable market, supplied with an inferior service or with no service at all. The idea that there is some mysterious difference between making munitions of war and firing them, between building schools and teaching in them when built, between providing food and providing health, which makes it at once inevitable and laudable that the former should be carried on with a single eye to pecuniary gain, while the latter are conducted by professional men who expect to be paid for service but who neither watch for windfalls nor raise their fees merely because there are more sick to be cured, more children to be taught, or more enemies to be resisted, is an illusion only less astonishing than that the leaders of industry should welcome the insult as an honor and wear their humiliation as a kind of halo. The work of making boots or building a house is in itself no more degrading than that of curing the sick or teaching the ignorant. It is as necessary and therefore as honorable. It should be at least equally bound by rules which have as their object to maintain the standards of professional service. It should be at least equally free from the vulgar subordination of moral standards to financial interests. If industry is to be organized as a profession, two changes are requisite, one negative and one positive. The first, is that it should cease to be conducted by the agents of property-owners for the advantage of property-owners, {97} and should be carried on, instead, for the service of the public. The second, is that, subject to rigorous public supervision, the responsibility for the maintenance of the service should rest upon the shoulders of those, from organizer and scientist to laborer, by whom, in effect, the work is conducted. The first change is necessary because the conduct of industry for the public advantage is impossible as long as the ultimate authority over its management is vested in those whose only connection with it, and interest in it, is the pursuit of gain. As industry is at present organized, its profits and its control belong by law to that element in it which has least to do with its success. Under the joint-stock organization which has become normal in all the more important industries except agriculture, it is managed by the salaried agents of those by whom the property is owned. It is successful if it returns large sums to shareholders, and unsuccessful if it does not. If an opportunity presents itself to increase dividends by practices which deteriorate the service or degrade the workers, the officials who administer industry act strictly within their duty if they seize it, for they are the servants of their employers, and their obligation to their employers is to provide dividends not to provide service. But the owners of the property are, _qua_ property-owners functionless, not in the sense, of course, that the tools of which they are proprietors are not useful, but in the sense that since work and ownership are increasingly separated, the efficient use of the tools is not dependent on the maintenance of the proprietary rights exercised over them. {98} Of course there are many managing directors who both own capital and administer the business. But it is none the less the case that most shareholders in most large industries are normally shareholders and nothing more. Nor is their economic interest identical, as is sometimes assumed, with that of the general public. A society is rich when material goods, including capital, are cheap, and human beings dear: indeed the word "riches" has no other meaning. The interest of those who own the property used in industry, though not, of course, of the managers who administer industry and who themselves are servants, and often very ill-paid servants at that, is that their capital should be dear and human beings cheap. Hence, if the industry is such as to yield a considerable return, or if one unit in the industry, owing to some special advantage, produces more cheaply than its neighbors, while selling at the same price, or if a revival of trade raises prices, or if supplies are controlled by one of the combines which are now the rule in many of the more important industries, the resulting surplus normally passes neither to the managers, nor to the other employees, nor to the public, but to the shareholders. Such an arrangement is preposterous in the literal sense of being the reverse of that which would be established by considerations of equity and common sense, and gives rise (among other things) to what is called "the struggle between labor and capital." The phrase is apposite, since it is as absurd as the relations of which it is intended to be a description. To deplore "ill-feeling" or to advocate {99} "harmony" between "labor and capital" is as rational as to lament the bitterness between carpenters and hammers or to promote a mission for restoring amity between mankind and its boots. The only significance of these _clichés_ is that their repetition tends to muffle their inanity, even to the point of persuading sensible men that capital "employs" labor, much as our pagan ancestors imagined that the other pieces of wood and iron, which they deified in their day, sent their crops and won their battles. When men have gone so far as to talk as though their idols have come to life, it is time that some one broke them. Labor consists of persons, capital of things. The only use of things is to be applied to the service of persons. The business of persons is to see that they are there to use, and that no more than need be is paid for using them. Thus the application to industry of the principle of function involves an alteration of proprietary rights, because those rights do not contribute, as they now are, to the end which industry exists to serve. What gives unity to any activity, what alone can reconcile the conflicting claims of the different groups engaged in it, is the purpose for which it is carried on. If men have no common goal it is no wonder that they should fall out by the way, nor are they likely to be reconciled by a redistribution of their provisions. If they are not content both to be servants, one or other must be master, and it is idle to suppose that mastership can be held in a state of suspense between the two. There can be a division of functions between different grades of workers, or between worker and consumer, and each can {100} have in his own sphere the authority needed to enable him to fill it. But there cannot be a division of functions between the worker and the owner who is owner and nothing else, for what function does such an owner perform? The provision of capital? Then pay him the sum needed to secure the use of his capital, but neither pay him more nor admit him to a position of authority over production for which merely as an owner he is not qualified. For this reason, while an equilibrium between worker and manager is possible, because both are workers, that which it is sought to establish between worker and owner is not. It is like the proposal of the Germans to negotiate with Belgium from Brussels. Their proposals may be excellent: but it is not evident why they are where they are, or how, since they do not contribute to production, they come to be putting forward proposals at all. As long as they are in territory where they have no business to be, their excellence as individuals will be overlooked in annoyance at the system which puts them where they are. It is fortunate indeed, if nothing worse than this happens. For one way of solving the problem of the conflict of rights in industry is not to base rights on functions, as we propose, but to base them on force. It is to re-establish in some veiled and decorous form the institution of slavery, by making labor compulsory. In nearly all countries a concerted refusal to work has been made at one time or another a criminal offense. There are to-day parts of the world in which European capitalists, unchecked by any public opinion or authority {101} independent of themselves, are free to impose almost what terms they please upon workmen of ignorant and helpless races. In those districts of America where capitalism still retains its primitive lawlessness, the same result appears to be produced upon immigrant workmen by the threat of violence. In such circumstances the conflict of rights which finds expression in industrial warfare does not arise, because the rights of one party have been extinguished. The simplicity of the remedy is so attractive that it is not surprising that the Governments of industrial nations should coquet from time to time with the policy of compulsory arbitration. After all, it is pleaded, it is only analogous to the action of a supernational authority which should use its common force to prevent the outbreak of war. In reality, compulsory arbitration is the opposite of any policy which such an authority could pursue either with justice or with hope of success. For it takes for granted the stability of existing relationships and intervenes to adjust incidental disputes upon the assumption that their equity is recognized and their permanence desired. In industry, however, the equity of existing relationships is precisely the point at issue. A League of Nations which adjusted between a subject race and its oppressors, between Slavs and Magyars, or the inhabitants of what was once Prussian Poland and the Prussian Government, on the assumption that the subordination of Slavs to Magyars and Poles to Prussians was part of an unchangeable order, would rightly be resisted by all those who think liberty more precious than peace. A State which, in the {102} name of peace, should make the concerted cessation of work a legal offense would be guilty of a similar betrayal of freedom. It would be solving the conflict of rights between those who own and those who work by abolishing the rights of those who work. So here again, unless we are prepared to re-establish some form of forced labor, we reach an impasse. But it is an impasse only in so long as we regard the proprietary rights of those who own the capital used in industry as absolute and an end in themselves. If, instead of assuming that all property, merely because it is property, is equally sacred, we ask what is the _purpose_ for which capital is used, what is its _function_, we shall realize that it is not an end but a means to an end, and that its function is to serve and assist (as the economists tell us) the labor of human beings, not the function of human beings to serve those who happen to own it. And from this truth two consequences follow. The first is that since capital is a thing, which ought to be used to help industry as a man may use a bicycle to get more quickly to his work, it ought, when it is employed, to be employed on the cheapest terms possible. The second is that those who own it should no more control production than a man who lets a house controls the meals which shall be cooked in the kitchen, or the man who lets a boat the speed at which the rowers shall pull. In other words, capital should always be got at cost price, which means, unless the State finds it wise, as it very well may, to own the capital used in certain industries, it should be paid the lowest interest {103} for which it can be obtained, but should carry no right either to residuary dividends or to the control of industry. There are, in theory, five ways by which the control of industry by the agents of private property-owners can be terminated. They may be expropriated without compensation. They may voluntarily surrender it. They may be frozen out by action on the part of the working _personnel_, which itself undertakes such functions, if any, as they have performed, and makes them superfluous by conducting production without their assistance. Their proprietary interest may be limited or attenuated to such a degree that they become mere _rentiers_, who are guaranteed a fixed payment analogous to that of the debenture-holder, but who receive no profits and bear no responsibility for the organization of industry. They may be bought out. The first alternative is exemplified by the historical confiscations of the past, such as, for instance, by the seizure of ecclesiastical property by the ruling classes of England, Scotland and most other Protestant states. The second has rarely, if ever, been tried--the nearest approach to it, perhaps, was the famous abdication of August 4th, 1789. The third is the method apparently contemplated by the building guilds which are now in process of formation in Great Britain. The fourth method of treating the capitalist is followed by the co-operative movement. It is also that proposed by the committee of employers and trade-unionists in the building industry over which Mr. Foster presided, and which proposed that employers should be paid a fixed salary, and a fixed rate of {104} interest on their capital, but that all surplus profits should be pooled and administered by a central body representing employers and workers. The fifth has repeatedly been practised by municipalities, and somewhat less often by national governments. Which of these alternative methods of removing industry from the control of the property-owner is adopted is a matter of expediency to be decided in each particular case. "Nationalization," therefore, which is sometimes advanced as the only method of extinguishing proprietary rights, is merely one species of a considerable genus. It can be used, of course, to produce the desired result. But there are some industries, at any rate, in which nationalization is not necessary in order to bring it about, and since it is at best a cumbrous process, when other methods are possible, other methods should be used. Nationalization is a means to an end, not an end in itself. Properly conceived its object is not to establish state management of industry, but to remove the dead hand of private ownership, when the private owner has ceased to perform any positive function. It is unfortunate, therefore, that the abolition of obstructive property rights, which is indispensable, should have been identified with a single formula, which may be applied with advantage in the special circumstances of some industries, but need not necessarily be applied in all. Ownership is not a right, but a bundle of rights, and it is possible to strip them off piecemeal as well as to strike them off simultaneously. The ownership of capital involves, as we have said, three main claims; the right to interest as the price of capital, the right to {105} profits, and the right to control, in virtue of which managers and workmen are the servants of shareholders. These rights in their fullest degree are not the invariable accompaniment of ownership, nor need they necessarily co-exist. The ingenuity of financiers long ago devised methods of grading stock in such a way that the ownership of some carries full control, while that of others does not, that some bear all the risk and are entitled to all the profits, while others are limited in respect to both. All are property, but not all carry proprietary rights of the same degree. As long as the private ownership of industrial capital remains, the object of reformers should be to attenuate its influence by insisting that it shall be paid not more than a rate of interest fixed in advance, and that it should carry with it no right of control. In such circumstances the position of the ordinary shareholder would approximate to that of the owner of debentures; the property in the industry would be converted into a mortgage on its profits, while the control of its administration and all profits in excess of the minimum would remain to be vested elsewhere. So, of course, would the risks. But risks are of two kinds, those of the individual business and those of the industry. The former are much heavier than the latter, for though a coal mine is a speculative investment, coal mining is not, and as long as each business is managed as a separate unit, the payments made to shareholders must cover both. If the ownership of capital in each industry were unified, which does not mean centralized, those risks which are incidental to individual competition would be {106} eliminated, and the credit of each unit would be that of the whole. Such a change in the character of ownership would have three advantages. It would abolish the government of industry by property. It would end the payment of profits to functionless shareholders by turning them into creditors paid a fixed rate of interest. It would lay the only possible foundations for industrial peace by making it possible to convert industry into a profession carried on by all grades of workers for the service of the public, not for the gain of those who own capital. The organization which it would produce will be described, of course, as impracticable. It is interesting, therefore, to find it is that which experience has led practical men to suggest as a remedy for the disorders of one of the most important of national industries, that of building. The question before the Committee of employers and workmen, which issued last August a Report upon the Building Trade, was "Scientific Management and the Reduction of Costs."[1] These are not phrases which suggest an economic revolution; but it is something little short of a revolution that the signatories of the report propose. For, as soon as they came to grips with the problem, they found that it was impossible to handle it effectively without reconstituting the general fabric of industrial relationships which is its setting. Why is the service supplied by the industry ineffective? Partly because the workers do not give their full energies to the performance of their part in production. {107} Why do they not give their best energies? Because of "the fear of unemployment, the disinclination of the operatives to make unlimited profit for private employers, the lack of interest evinced by operatives owing to their non-participation in control, inefficiency both managerial and operative." How are these psychological obstacles to efficiency to be counteracted? By increased supervision and speeding up, by the allurements of a premium bonus system, or the other devices by which men who are too ingenious to have imagination or moral insight would bully or cajole poor human nature into doing what--if only the systems they invent would let it!--it desires to do, simple duties and honest work? Not at all. By turning the building of houses into what teaching now is, and Mr. Squeers thought it could never be, an honorable profession. "We believe," they write, "that the great task of our Industrial Council is to develop an entirely new system of industrial control by the members of the industry itself--the actual producers, whether by hand or brain, and to bring them into co-operation with the State as the central representative of the community whom they are organized to serve." Instead of unlimited profits, so "indispensable as an incentive to efficiency," the employer is to be paid a salary for his services as manager, and a rate of interest on his capital which is to be both fixed and (unless he fails to earn it through his own inefficiency) guaranteed; anything in excess of it, any "profits" in fact, which in other industries are distributed as dividends to shareholders, he is to {108} surrender to a central fund to be administered by employers and workmen for the benefit of the industry as a whole. Instead of the financial standing of each firm being treated as an inscrutable mystery to the public, with the result that it is sometimes a mystery to itself, there is to be a system of public costing and audit, on the basis of which the industry will assume a collective liability for those firms which are shown to be competently managed. Instead of the workers being dismissed in slack times to struggle along as best they can, they are to be maintained from a fund raised by a levy on employers and administered by the trade unions. There is to be publicity as to costs and profits, open dealing and honest work and mutual helpfulness, instead of the competition which the nineteenth century regarded as an efficient substitute for them. "Capital" is not to "employ labor." Labor, which includes managerial labor, is to employ capital; and to employ it at the cheapest rate at which, in the circumstances of the trade, it can be got. If it employs it so successfully that there is a surplus when it has been fairly paid for its own services, then that surplus is not to be divided among shareholders, for, when they have been paid interest, they have been paid their due; it is to be used to equip the industry to provide still more effective service in the future. So here we have the majority of a body of practical men, who care nothing for socialist theories, proposing to establish "organized Public Service in the Building Industry," recommending, in short, that their industry shall be turned into a profession. And they do it, it {109} will be observed, by just that functional organization, just that conversion of full proprietary rights into a mortgage secured (as far as efficient firms are concerned) on the industry as a whole, just that transference of the control of production from the owner of capital to those whose business is production, which we saw is necessary if industry is to be organized for the performance of service, not for the pecuniary advantage of those who hold proprietary rights. Their Report is of the first importance as offering a policy for attenuating private property in capital in the important group of industries in which private ownership, in one form or another, is likely for some considerable time to continue, and a valuable service would be rendered by any one who would work out in detail the application of its principle to other trades. Not, of course, that this is the only way, or in highly capitalized industries the most feasible way, in which the change can be brought about. Had the movement against the control of production by property taken place before the rise of limited companies, in which ownership is separated from management, the transition to the organization of industry as a profession might also have taken place, as the employers and workmen in the building trade propose that it should, by limiting the rights of private ownership without abolishing it. But that is not what has actually happened, and therefore the proposals of the building trade are not of universal application. It is possible to retain private ownership in building and in industries like building, {110} while changing its character, precisely because in building the employer is normally not merely an owner, but something else as well. He is a manager; that is, he is a workman. And because he is a workman, whose interests, and still more whose professional spirit as a workman may often outweigh his interests and merely financial spirit as an owner, he can form part of the productive organization of the industry, after his rights as an owner have been trimmed and limited. But that dual position is abnormal, and in the highly organized industries is becoming more abnormal every year. In coal, in cotton, in ship-building, in many branches of engineering the owner of capital is not, as he is in building, an organizer or manager. His connection with the industry and interest in it is purely financial. He is an owner and nothing more. And because his interest is merely financial, so that his concern is dividends and production only as a means to dividends, he cannot be worked into an organization of industry which vests administration in a body representing all grades of producers, or producers and consumers together, for he has no purpose in common with them; so that while joint councils between workers and managers may succeed, joint councils between workers and owners or agents of owners, like most of the so-called Whitley Councils, will not, because the necessity for the mere owner is itself one of the points in dispute. The master builder, who owns the capital used, can be included, not _qua_ capitalist, but _qua_ builder, if he surrenders some of the rights of ownership, as the Building Industry Committee proposed that he should. But {111} if the shareholder in a colliery or a shipyard abdicates the control and unlimited profits to which, _qua_ capitalist, he is at present entitled, he abdicates everything that makes him what he is, and has no other standing in the industry. He cannot share, like the master builder, in its management, because he has no qualifications which would enable him to do so. His object is profit; and if industry is to become, as employers and workers in the building trade propose, an "organized public service," then its subordination to the shareholder whose object is profit, is, as they clearly see, precisely what must be eliminated. The master builders propose to give it up. They can do so because they have their place in the industry in virtue of their function as workmen. But if the shareholder gave it up, he would have no place at all. Hence in coal mining, where ownership and management are sharply separated, the owners will not admit the bare possibility of any system in which the control of the administration of the mines is shared between the management and the miners. "I am authorized to state on behalf of the Mining Association," Lord Gainford, the chief witness on behalf of the mine-owners, informed the Coal Commission, "that if the owners are not to be left complete executive control they will decline to accept the responsibility for carrying on the industry."[2] So the mine-owners blow away in a sentence the whole body of plausible make-believe which rests on the idea that, while private ownership remains {112} unaltered, industrial harmony can be produced by the magic formula of joint control. And they are right. The representatives of workmen and shareholders, in mining and in other industries, can meet and negotiate and discuss. But joint administration of the shareholders' property by a body representing shareholders and workmen is impossible, because there is no purpose in common between them. For the only purpose which could unite all persons engaged in industry, and overrule their particular and divergent interests, is the provision of service. And the object of shareholders, the whole significance and _métier_ of industry to them, is not the provision of service but the provision of dividends. In industries where management is divorced from ownership, as in most of the highly organized trades it is to-day, there is no obvious halfway house, therefore, between the retention of the present system and the complete extrusion of the capitalist from the control of production. The change in the character of ownership, which is necessary in order that coal or textiles and ship-building may be organized as professions for the service of the public, cannot easily spring from within. The stroke needed to liberate them from the control of the property-owner must come from without. In theory it might be struck by action on the part of organized workers, who would abolish residuary profits and the right of control by the mere procedure of refusing to work as long as they were maintained, on the historical analogy offered by peasants who have destroyed {113} predatory property in the past by declining to pay its dues and admit its government, in which case Parliament would intervene only to register the community's assent to the _fait accompli_. In practice, however, the conditions of modern industry being what they are, that course, apart from its other disadvantages, is so unlikely to be attempted, or, if attempted, to succeed, that it can be neglected. The alternative to it is that the change in the character of property should be affected by legislation in virtue of which the rights of ownership in an industry are bought out simultaneously. In either case, though the procedure is different, the result of the change, once it is accomplished, is the same. Private property in capital, in the sense of the right to profits and control, is abolished. What remains of it is, at most, a mortgage in favor of the previous proprietors, a dead leaf which is preserved, though the sap of industry no longer feeds it, as long as it is not thought worth while to strike it off. And since the capital needed to maintain and equip a modern industry could not be provided by any one group of workers, even were it desirable on other grounds that they should step completely into the position of the present owners, the complex of rights which constitutes ownership remains to be shared between them and whatever organ may act on behalf of the general community. The former, for example, may be the heir of the present owners as far as the control of the routine and administration of industry is concerned: the latter may succeed to their right to dispose of residuary profits. The elements composing property, have, in fact, to be {114} disentangled: and the fact that to-day, under the common name of ownership, several different powers are vested in identical hands, must not be allowed to obscure the probability that, once private property in capital has been abolished, it may be expedient to re-allocate those powers in detail as well as to transfer them _en bloc_. The essence of a profession is, as we have suggested, that its members organize themselves for the performance of function. It is essential therefore, if industry is to be professionalized, that the abolition of functionless property should not be interpreted to imply a continuance under public ownership of the absence of responsibility on the part of the _personnel_ of industry, which is the normal accompaniment of private ownership working through the wage-system. It is the more important to emphasize that point, because such an implication has sometimes been conveyed in the past by some of those who have presented the case for some such change in the character of ownership as has been urged above. The name consecrated by custom to the transformation of property by public and external action is nationalization. But nationalization is a word which is neither very felicitous nor free from ambiguity. Properly used, it means merely ownership by a body representing the nation. But it has come in practice to be used as equivalent to a particular method of administration, under which officials employed by the State step into the position of the present directors of industry, and exercise all the power which they exercised. So those who desire to maintain the system under which industry is carried on, not as a profession {115} serving the public, but for the advantage of shareholders, attack nationalization on the ground that state management is necessarily inefficient, and tremble with apprehension whenever they post a letter in a letter-box; and those who desire to change it reply that state services are efficient and praise God whenever they use a telephone; as though either private or public administration had certain peculiar and unalterable characteristics, instead of depending for its quality, like an army or railway company or school, and all other undertakings, public and private alike, not on whether those who conduct it are private officials or state officials, but on whether they are properly trained for their work and can command the good will and confidence of their subordinates. The arguments on both sides are ingenious, but in reality nearly all of them are beside the point. The merits of nationalization do not stand or fall with the efficiency or inefficiency of existing state departments as administrators of industry. For nationalization, which means public ownership, is compatible with several different types of management. The constitution of the industry may be "unitary," as is (for example) that of the post-office. Or it may be "federal," as was that designed by Mr. Justice Sankey for the Coal Industry. Administration may be centralized or decentralized. The authorities to whom it is intrusted may be composed of representatives of the consumers, or of representatives of professional associations, or of state officials, or of all three in several different proportions. Executive work may be placed in the hands of civil {116} servants, trained, recruited and promoted as in the existing state departments, or a new service may be created with a procedure and standards of its own. It may be subject to Treasury control, or it may be financially autonomous. The problem is, in fact, of a familiar, though difficult, order. It is one of constitution-making. It is commonly assumed by controversialists that the organization and management of a nationalized industry must, for some undefined reason, be similar to that of the post-office. One might as reasonably suggest that the pattern exemplar of private enterprise must be the Steel Corporation or the Imperial Tobacco Company. The administrative systems obtaining in a society which has nationalized its foundation industries will, in fact, be as various as in one that resigns them to private ownership; and to discuss their relative advantages without defining what particular type of each is the subject of reference is to-day as unhelpful as to approach a modern political problem in terms of the Aristotelian classification of constitutions. The highly abstract dialectics as to "enterprise," "initiative," "bureaucracy," "red tape," "democratic control," "state management," which fill the press of countries occupied with industrial problems, really belong to the dark ages of economic thought. The first task of the student, whatever his personal conclusions, is, it may be suggested, to contribute what he can to the restoration of sanity by insisting that instead of the argument being conducted with the counters of a highly inflated and rapidly depreciating verbal currency, the exact situation, {117} in so far as is possible, shall be stated as it is; uncertainties (of which there are many) shall be treated as uncertain, and the precise meaning of alternative proposals shall be strictly defined. Not the least of the merits of Mr. Justice Sankey's report was that, by stating in great detail the type of organization which he recommended for the Coal Industry, he imparted a new precision and reality into the whole discussion. Whether his conclusions are accepted or not, it is from the basis of clearly defined proposals such as his that the future discussion of these problems must proceed. It may not find a solution. It will at least do something to create the temper in which alone a reasonable solution can be sought. Nationalization, then, is not an end, but a means to an end, and when the question of ownership has been settled the question of administration remains for solution. As a means it is likely to be indispensable in those industries in which the rights of private proprietors cannot easily be modified without the action of the State, just as the purchase of land by county councils is a necessary step to the establishment of small holders, when landowners will not voluntarily part with their property for the purpose. But the object in purchasing land is to establish small holders, not to set up farms administered by state officials; and the object of nationalizing mining or railways or the manufacture of steel should not be to establish any particular form of state management, but to release those who do constructive work from the control of those whose sole interest is pecuniary gain, in order that they may be free to {118} apply their energies to the true purpose of industry, which is the provision of service, not the provision of dividends. When the transference of property has taken place, it will probably be found that the necessary provision for the government of industry will involve not merely the freedom of the producers to produce, but the creation of machinery through which the consumer, for whom he produces, can express his wishes and criticize the way in which they are met, as at present he normally cannot. But that is the second stage in the process of reorganizing industry for the performance of function, not the first. The first is to free it from subordination to the pecuniary interests of the owner of property, because they are the magnetic pole which sets all the compasses wrong, and which causes industry, however swiftly it may progress, to progress in the wrong direction. Nor does this change in the character of property involve a breach with the existing order so sharp as to be impracticable. The phraseology of political controversy continues to reproduce the conventional antitheses of the early nineteenth century; "private enterprise" and "public ownership" are still contrasted with each other as light with darkness or darkness with light. But, in reality, behind the formal shell of the traditional legal system the elements of a new body of relationship have already been prepared, and find piece-meal application through policies devised, not by socialists, but by men who repeat the formulæ of individualism, at the very moment when they are undermining it. The Esch-Cummins Act in America, the {119} Act establishing a Ministry of Transport in England, Sir Arthur Duckham's scheme for the organization of the coal mines, the proposals with regard to the coal industry of the British Government itself, appear to have the common characteristic of retaining private ownership in name, while attenuating it in fact, by placing its operators under the supervision, accompanied sometimes by a financial guarantee, of a public authority. Schemes of this general character appear, indeed, to be the first instinctive reaction produced by the discovery that private enterprise is no longer functioning effectively; it is probable that they possess certain merits of a technical order analogous to those associated with the amalgamation of competing firms into a single combination. It is questionable, however, whether the compromise which they represent is permanently tenable. What, after all, it may be asked, are the advantages of private ownership when it has been pared down to the point which policies of this order propose? May not the "owner" whose rights they are designed to protect not unreasonably reply to their authors, "Thank you for nothing"? Individual enterprise has its merits: so also, perhaps, has public ownership. But, by the time these schemes have done with it, not much remains of "the simple and obvious system of natural liberty," while their inventors are precluded from appealing to the motives which are emphasized by advocates of nationalization. It is one thing to be an entrepreneur with a world of adventure and unlimited profits--if they can be achieved--before one. It is quite another to be a director of a railway company or coal {120} corporation with a minimum rate of profit guaranteed by the State, and a maximum rate of profit which cannot be exceeded. Hybrids are apt to be sterile. It may be questioned whether, in drawing the teeth of private capitalism, this type of compromise does not draw out most of its virtues as well. So, when a certain stage of economic development has been reached, private ownership, by the admission of its defenders, can no longer be tolerated in the only form in which it is free to display the characteristic, and quite genuine, advantages for the sake of which it used to be defended. And, as step by step it is whittled down by tacit concessions to the practical necessity of protecting the consumer, or eliminating waste, or meeting the claims of the workers, public ownership becomes, not only on social grounds, but for reasons of economic efficiency, the alternative to a type of private ownership which appears to carry with it few rights of ownership and to be singularly devoid of privacy. Inevitably and unfortunately the change must be gradual. But it should be continuous. When, as in the last few years, the State has acquired the ownership of great masses of industrial capital, it should retain it, instead of surrendering it to private capitalists, who protest at once that it will be managed so inefficiently that it will not pay and managed so efficiently that it will undersell them. When estates are being broken up and sold, as they are at present, public bodies should enter the market and acquire them. Most important of all, the ridiculous barrier, inherited from an age in which municipal corporations were corrupt oligarchies, which {121} at present prevents England's Local Authorities from acquiring property in land and industrial capital, except for purposes specified by Act of Parliament, should be abolished, and they should be free to undertake such services as the citizens may desire. The objection to public ownership, in so far as it is intelligent, is in reality largely an objection to over-centralization. But the remedy for over-centralization, is not the maintenance of functionless property in private hands, but the decentralized ownership of public property, and when Birmingham and Manchester and Leeds are the little republics which they should be, there is no reason to anticipate that they will tremble at a whisper from Whitehall. These things should be done steadily and continuously quite apart from the special cases like that of the mines and railways, where the private ownership of capital is stated by the experts to have been responsible for intolerable waste, or the manufacture of ornaments [Transcriber's note: armaments?] and alcoholic liquor, which are politically and socially too dangerous to be left in private hands. They should be done not in order to establish a single form of bureaucratic management, but in order to release the industry from the domination of proprietary interests, which, whatever the form of management, are not merely troublesome in detail but vicious in principle, because they divert it from the performance of function to the acquisition of gain. If at the same time private ownership is shaken, as recently it has been, by action on the part of particular groups of workers, so much the better. There are more ways of killing a cat than {122} drowning it in cream, and it is all the more likely to choose the cream if they are explained to it. But the two methods are complementary, not alternative, and the attempt to found rival schools on an imaginary incompatibility between them is a bad case of the _odium sociologicum_ which afflicts reformers. [1] Reprinted in _The Industrial Council for the Building Industry_. [2] _Coal Industry Commission, Minutes of Evidence_, Vol. I, p. 2506. {123} VIII THE "VICIOUS CIRCLE" What form of management should replace the administration of industry by the agents of shareholders? What is most likely to hold it to its main purpose, and to be least at the mercy of predatory interests and functionless supernumeraries, and of the alternations of sullen dissatisfaction and spasmodic revolt which at present distract it? Whatever the system upon which industry is administered, one thing is certain. Its economic processes and results must be public, because only if they are public can it be known whether the service of industry is vigilant, effective and honorable, whether its purpose is being realized and its function carried out. The defense of secrecy in business resembles the defense of adulteration on the ground that it is a legitimate weapon of competition; indeed it has even less justification than that famous doctrine, for the condition of effective competition is publicity, and one motive for secrecy is to prevent it. Those who conduct industry at the present time and who are most emphatic that, as the Duke of Wellington said of the unreformed House of Commons, they "have never read or heard of any measure up to the present moment which can in any degree satisfy the mind" that the method of conducting it can in any way be improved, are also those apparently who, with some {124} honorable exceptions, are most reluctant that the full facts about it should be known. And it is crucial that they should be known. It is crucial not only because, in the present ignorance of the real economic situation, all industrial disagreements tend inevitably to be battles in the dark, in which "ignorant armies clash by night," but because, unless there is complete publicity as to profits and costs, it is impossible to form any judgment either of the reasonableness of the prices which are charged or of the claims to remuneration of the different parties engaged in production. For balance sheets, with their opportunities for concealing profits, give no clear light upon the first, and no light at all upon the second. And so, when the facts come out, the public is aghast at revelations which show that industry is conducted with bewildering financial extravagance. If the full facts had been published, as they should have been, quarter by quarter, these revelations would probably not have been made at all, because publicity itself would have been an antiseptic and there would have been nothing sensational to reveal. The events of the last few years are a lesson which should need no repetition. The Government, surprised at the price charged for making shells at a time when its soldiers were ordered by Headquarters not to fire more than a few rounds per day, whatever the need for retaliation, because there were not more than a few to fire, establishes a costing department to analyze the estimates submitted by manufacturers and to compare them, item by item, with the costs in its own factories. It finds that, through the mere pooling of knowledge, {125} "some of the reductions made in the price of shells and similar munitions," as the Chartered Accountant employed by the Department tells us, "have been as high as 50% of the original price." The household consumer grumbles at the price of coal. For once in a way, amid a storm of indignation from influential persons engaged in the industry, the facts are published. And what do they show? That, after 2/6 has been added to the already high price of coal because the poorer mines are alleged not to be paying their way, 21% of the output examined by the Commission was produced at a profit of 1/- to 3/- per ton, 32% at a profit of 3/- to 5/-, 13% at a profit of 5/- to 7/-, and 14% at a profit of 7/- per ton and over, while the profits of distributors in London alone amount in the aggregate to over $3,200,000, and the co-operative movement, which aims not at profit, but at service, distributes household coal at a cost of from 2/- to 4/- less per ton than is charged by the coal trade![1] "But these are exceptions." They may be. It is possible that in the industries, in which, as the recent Committee on Trusts has told us, "powerful Combinations or Consolidations of one kind or another are in a position effectively to control output and prices," not only costs are cut to the bare minimum but profits are inconsiderable. But then why insist on this humiliating tradition of secrecy with regard to them, when every one who uses their products, and every one who renders honest service to production, stands to gain by publicity? If industry is to become a profession, whatever its {126} management, the first of its professional rules should be, as Sir John Mann told the Coal Commission, that "all cards should be placed on the table." If it were the duty of a Public Department to publish quarterly exact returns as to costs of production and profits in all the firms throughout an industry, the gain in mere productive efficiency, which should appeal to our enthusiasts for output, would be considerable; for the organization whose costs were least would become the standard with which all other types of organization would be compared. The gain in _morale_, which is also, absurd though it may seem, a condition of efficiency, would be incalculable. For industry would be conducted in the light of day. Its costs, necessary or unnecessary, the distribution of the return to it, reasonable or capricious, would be a matter of common knowledge. It would be held to its purpose by the mere impossibility of persuading those who make its products or those who consume them to acquiesce, as they acquiesce now, in expenditure which is meaningless because it has contributed nothing to the service which the industry exists to perform. The organization of industry as a profession does not involve only the abolition of functionless property, and the maintenance of publicity as the indispensable condition of a standard of professional honor. It implies also that those who perform its work should undertake that its work is performed effectively. It means that they should not merely be held to the service of the public by fear of personal inconvenience or penalties, but that they should treat the discharge of professional {127} responsibilities as an obligation attaching not only to a small _élite_ of intellectuals, managers or "bosses," who perform the technical work of "business management," but as implied by the mere entry into the industry and as resting on the corporate consent and initiative of the rank and file of workers. It is precisely, indeed, in the degree to which that obligation is interpreted as attaching to all workers, and not merely to a select class, that the difference between the existing industrial order, collectivism and the organization of industry as a profession resides. The first involves the utilization of human beings for the purpose of private gain; the second their utilization for the purpose of public service; the third the association in the service of the public of their professional pride, solidarity and organization. The difference in administrative machinery between the second and third might not be considerable. Both involve the drastic limitation or transference to the public of the proprietary rights of the existing owners of industrial capital. Both would necessitate machinery for bringing the opinion of the consumers to bear upon the service supplied them by the industry. The difference consists in the manner in which the obligations of the producer to the public are conceived. He may either be the executant of orders transmitted to him by its agents; or he may, through his organization, himself take a positive part in determining what those orders should be. In the former case he is responsible for his own work, but not for anything else. If he hews his stint of coal, it is no business of his whether the pit is a {128} failure; if he puts in the normal number of rivets, he disclaims all further interest in the price or the sea-worthiness of the ship. In the latter his function embraces something more than the performance of the specialized piece of work allotted to him. It includes also a responsibility for the success of the undertaking as a whole. And since responsibility is impossible without power, his position would involve at least so much power as is needed to secure that he can affect in practice the conduct of the industry. It is this collective liability for the maintenance of a certain quality of service which is, indeed, the distinguishing feature of a profession. It is compatible with several different kinds of government, or indeed, when the unit of production is not a group, but an individual, with hardly any government at all. What it does involve is that the individual, merely by entering the profession should have committed himself to certain obligations in respect of its conduct, and that the professional organization, whatever it may be, should have sufficient power to enable it to maintain them. The demand for the participation of the workers in the control of industry is usually advanced in the name of the producer, as a plea for economic freedom or industrial democracy. "Political freedom," writes the Final Report of the United States Commission of Industrial Relations, which was presented in 1916, "can exist only where there is industrial freedom.... There are now within the body of our Republic industrial communities which are virtually Principalities, oppressive to those dependent upon them for a livelihood {129} and a dreadful menace to the peace and welfare of the nation." The vanity of Englishmen may soften the shadows and heighten the lights. But the concentration of authority is too deeply rooted in the very essence of Capitalism for differences in the degree of the arbitrariness with which it is exercised to be other than trivial. The control of a large works does, in fact, confer a kind of private jurisdiction in matters concerning the life and livelihood of the workers, which, as the United States' Commission suggests, may properly be described as "industrial feudalism." It is not easy to understand how the traditional liberties of Englishmen are compatible with an organization of industry which, except in so far as it has been qualified by law or trade unionism, permits populations almost as large as those of some famous cities of the past to be controlled in their rising up and lying down, in their work, economic opportunities, and social life by the decisions of a Committee of half-a-dozen Directors. The most conservative thinkers recognize that the present organization of industry is intolerable in the sacrifice of liberty which it entails upon the producer. But each effort which he makes to emancipate himself is met by a protest that if the existing system is incompatible with freedom, it at least secures efficient service, and that efficient service is threatened by movements which aim at placing a greater measure of industrial control in the hands of the workers. The attempt to drive a wedge between the producer and the consumer is obviously the cue of all the interests which are conscious that by themselves they are unable to hold back {130} the flood. It is natural, therefore, that during the last few months they should have concentrated their efforts upon representing that every advance in the demands and in the power of any particular group of workers is a new imposition upon the general body of the public. Eminent persons, who are not obviously producing more than they consume, explain to the working classes that unless they produce more they must consume less. Highly syndicated combinations warn the public against the menace of predatory syndicalism. The owners of mines and minerals, in their new role as protectors of the poor, lament the "selfishness" of the miners, as though nothing but pure philanthropy had hitherto caused profits and royalties to be reluctantly accepted by themselves. The assumption upon which this body of argument rests is simple. It is that the existing organization of industry is the safeguard of productive efficiency, and that from every attempt to alter it the workers themselves lose more as consumers than they can gain as producers. The world has been drained of its wealth and demands abundance of goods. The workers demand a larger income, greater leisure, and a more secure and dignified status. These two demands, it is argued, are contradictory. For how can the consumer be supplied with cheap goods, if, as a worker, he insists on higher wages and shorter hours? And how can the worker secure these conditions, if as a consumer, he demands cheap goods? So industry, it is thought, moves in a vicious circle of shorter hours and higher wages and less production, which in time must mean {131} longer hours and lower wages; and every one receives less, because every one demands more. The picture is plausible, but it is fallacious. It is fallacious not merely in its crude assumption that a rise in wages necessarily involves an increase in costs, but for another and more fundamental reason. In reality the cause of economic confusion is not that the demands of producer and consumer meet in blunt opposition; for, if they did, their incompatibility, when they were incompatible, would be obvious, and neither could deny his responsibility to the other, however much he might seek to evade it. It is that they do not, but that, as industry is organized to-day, what the worker foregoes the general body of consumers does not necessarily gain, and what the consumer pays the general body of workers does not necessarily receive. If the circle is vicious, its vice is not that it is closed, but that it is always half open, so that part of production leaks away in consumption which adds nothing to productive energies, and that the producer, because he knows this, does not fully use even the productive energy which he commands. It is the consciousness of this leak which sets every one at cross purposes. No conceivable system of industrial organization can secure industrial peace, if by "peace" is meant a complete absence of disagreement. What could be secured would be that disagreements should not flare up into a beacon of class warfare. If every member of a group puts something into a common pool on condition of taking something out, they may still quarrel about the size of the shares, as children quarrel {132} over cake; but if the total is known and the claims admitted, that is all they can quarrel about, and, since they all stand on the same footing, any one who holds out for more than his fellows must show some good reason why he should get it. But in industry the claims are not all admitted, for those who put nothing in demand to take something out; both the total to be divided and the proportion in which the division takes place are sedulously concealed; and those who preside over the distribution of the pool and control what is paid out of it have a direct interest in securing as large a share as possible for themselves and in allotting as small a share as possible to others. If one contributor takes less, so far from it being evident that the gain will go to some one who has put something in and has as good a right as himself, it may go to some one who has put in nothing and has no right at all. If another claims more, he may secure it, without plundering a fellow-worker, at the expense of a sleeping partner who is believed to plunder both. In practice, since there is no clear principle determining what they ought to take, both take all that they can get. In such circumstances denunciations of the producer for exploiting the consumer miss the mark. They are inevitably regarded as an economic version of the military device used by armies which advance behind a screen of women and children, and then protest at the brutality of the enemy in shooting non-combatants. They are interpreted as evidence, not that a section of the producers are exploiting the remainder, but that a minority of property-owners, which is in opposition to {133} both, can use its economic power to make efforts directed against those who consume much and produce little rebound on those who consume little and produce much. And the grievance, of which the Press makes so much, that some workers may be taking too large a share compared with others, is masked by the much greater grievance, of which it says nothing whatever, that some idlers take any share at all. The abolition of payments which are made without any corresponding economic service is thus one of the indispensable conditions both of economic efficiency and industrial peace, because their existence prevents different classes of workers from restraining each other, by uniting them all against the common enemy. Either the principle of industry is that of function, in which case slack work is only less immoral than no work at all; or it is that of grab, in which case there is no morality in the matter. But it cannot be both. And it is useless either for property-owners or for Governments to lament the mote in the eye of the trade unions as long as, by insisting on the maintenance of functionless property, they decline to remove the beam in their own. The truth is that only workers can prevent the abuse of power by workers, because only workers are recognized as possessing any title to have their claims considered. And the first step to preventing the exploitation of the consumer by the producer is simple. It is to turn all men into producers, and thus to remove the temptation for particular groups of workers to force their claims at the expense of the public, by removing the valid excuse that such gains as they may get are {134} taken from those who at present have no right to them, because they are disproportionate to service or obtained for no service at all. Indeed, if work were the only title to payment, the danger of the community being exploited by highly organized groups of producers would largely disappear. For, when no payments were made to non-producers, there would be no debatable ground for which to struggle, and it would become evident that if any one group of producers took more, another must put up with less. Under such conditions a body of workers who used their strong strategic position to extort extravagant terms for themselves at the expense of their fellow-workers might properly be described as exploiting the community. But at present such a statement is meaningless. It is meaningless because before the community can be exploited the community must exist, and its existence in the sphere of economics is to-day not a fact but only an aspiration. The procedure by which, whenever any section of workers advance demands which are regarded as inconvenient by their masters, they are denounced as a band of anarchists who are preying on the public may be a convenient weapon in an emergency, but, once it is submitted to analysis, it is logically self-destructive. It has been applied within recent years, to the postmen, to the engineers, to the policemen, to the miners and to the railway men, a population with their dependents, of some eight million persons; and in the case of the last two the whole body of organized labor made common cause with those of whose exorbitant demands it was alleged to be the victim. But when these {135} workers and their sympathizers are deducted, what is "the community" which remains? It is a naïve arithmetic which produces a total by subtracting one by one all the items which compose it; and the art which discovers the public interest by eliminating the interests of successive sections of the public smacks of the rhetorician rather than of the statesman. The truth is that at present it is idle to seek to resist the demands of any group of workers by appeals to "the interests of society," because to-day, as long as the economic plane alone is considered, there is not one society but two, which dwell together in uneasy juxtaposition, like Sinbad and the Old Man of the Sea, but which in spirit, in ideals, and in economic interest, are worlds asunder. There is the society of those who live by labor, whatever their craft or profession, and the society of those who live on it. All the latter cannot command the sacrifices or the loyalty which are due to the former, for they have no title which will bear inspection. The instinct to ignore that tragic division instead of ending it is amiable, and sometimes generous. But it is a sentimentality which is like the morbid optimism of the consumptive who dares not admit even to himself the virulence of his disease. As long as the division exists, the general body of workers, while it may suffer from the struggles of any one group within it, nevertheless supports them by its sympathy, because all are interested in the results of the contest carried on by each. Different sections of workers will exercise mutual restraint only when the termination of the {136} struggle leaves them face to face with each other, and not as now, with the common enemy. The ideal of a united society in which no one group uses its power to encroach upon the standards of another is, in short, unattainable, except through the preliminary abolition of functionless property. Those to whom a leisure class is part of an immutable order without which civilization is inconceivable, dare not admit, even to themselves, that the world is poorer, not richer, because of its existence. So, when, as now it is important that productive energy should be fully used, they stamp and cry, and write to _The Times_ about the necessity for increased production, though all the time they themselves, their way of life and expenditure, and their very existence as a leisure class, are among the causes why production is not increased. In all their economic plans they make one reservation, that, however necessitous the world may be, it shall still support them. But men who work do not make that reservation, nor is there any reason why they should; and appeals to them to produce more wealth because the public needs it usually fall upon deaf ears, even when such appeals are not involved in the ignorance and misapprehensions which often characterize them. For the workman is not the servant of the consumer, for whose sake greater production is demanded, but of shareholders, whose primary aim is dividends, and to whom all production, however futile or frivolous, so long as it yields dividends, is the same. It is useless to urge that he should produce more wealth for the {137} community, unless at the same time he is assured that it is the community which will benefit in proportion as more wealth is produced. If every unnecessary charge upon coal-getting had been eliminated, it would be reasonable that the miners should set a much needed example by refusing to extort better terms for themselves at the expense of the public. But there is no reason why they should work for lower wages or longer hours as long as those who are to-day responsible for the management of the industry conduct it with "the extravagance and waste" stigmatized by the most eminent official witness before the Coal Commission, or why the consumer should grumble at the rapacity of the miner as long as he allows himself to be mulcted by swollen profits, the costs of an ineffective organization, and unnecessary payments to superfluous middlemen. If to-day the miner or any other workman produces more, he has no guarantee that the result will be lower prices rather than higher dividends and larger royalties, any more than, as a workman, he can determine the quality of the wares which his employer supplies to customers, or the price at which they are sold. Nor, as long as he is directly the servant of a profit-making company, and only indirectly the servant of the community, can any such guarantee be offered him. It can be offered only in so far as he stands in an immediate and direct relation to the public for whom industry is carried on, so that, when all costs have been met, any surplus will pass to it, and not to private individuals. It will be accepted only in so far as the workers in each industry are not merely servants executing orders, but {138} themselves have a collective responsibility for the character of the service, and can use their organizations not merely to protect themselves against exploitation, but to make positive contributions to the administration and development of their industry. [1] _Coal Industry Commission, Minutes of Evidence_, pp. 9261-9. {139} IX THE CONDITION OF EFFICIENCY Thus it is not only for the sake of the producers, on whom the old industrial order weighed most heavily, that a new industrial order is needed. It is needed for the sake of the consumers, because the ability on which the old industrial order prided itself most and which is flaunted most as an argument against change, the ability to serve them effectively, is itself visibly breaking down. It is breaking down at what was always its most vulnerable point, the control of the human beings whom, with characteristic indifference to all but their economic significance, it distilled for its own purposes into an abstraction called "Labor." The first symptom of its collapse is what the first symptom of economic collapses has usually been in the past--the failure of customary stimuli to evoke their customary response in human effort. Till that failure is recognized and industry reorganized so that new stimuli may have free play, the collapse will not correct itself, but, doubtless with spasmodic revivals and flickerings of energy, will continue and accelerate. The cause of it is simple. It is that those whose business it is to direct economic activity are increasingly incapable of directing the men upon whom economic activity depends. The fault is not that of individuals, but of a system, of Industrialism itself. {140} During the greater part of the nineteenth century industry was driven by two forces, hunger and fear, and the employer commanded them both. He could grant or withhold employment as he pleased. If men revolted against his terms he could dismiss them, and if they were dismissed what confronted them was starvation or the workhouse. Authority was centralized; its instruments were passive; the one thing which they dreaded was unemployment. And since they could neither prevent its occurrence nor do more than a little to mitigate its horrors when it occurred, they submitted to a discipline which they could not resist, and industry pursued its course through their passive acquiescence in a power which could crush them individually if they attempted to oppose it. That system might be lauded as efficient or denounced as inhuman. But, at least, as its admirers were never tired of pointing out, it worked. And, like the Prussian State, which alike in its virtues and deficiencies it not a little resembled, as long as it worked it survived denunciations of its methods, as a strong man will throw off a disease. But to-day it is ceasing to have even the qualities of its defects. It is ceasing to be efficient. It no longer secures the ever-increasing output of wealth which it offered in its golden prime, and which enabled it to silence criticism by an imposing spectacle of material success. Though it still works, it works unevenly, amid constant friction and jolts and stoppages, without the confidence of the public and without full confidence even in itself, a tyrant who must intrigue and cajole where formerly he commanded, a gaoler who, if not yet {141} deprived of whip, dare only administer moderate chastisement, and who, though he still protests that he alone can keep the treadmill moving and get the corn ground, is compelled to surrender so much of his authority as to make it questionable whether he is worth his keep. For the instruments through which Capitalism exercised discipline are one by one being taken from it. It cannot pay what wages it likes or work what hours it likes. In well-organized industries the power of arbitrary dismissal, the very center of its authority, is being shaken, because men will no longer tolerate a system which makes their livelihood dependent on the caprices of an individual. In all industries alike the time is not far distant when the dread of starvation can no longer be used to cow dissatisfied workers into submission, because the public will no longer allow involuntary unemployment to result in starvation. And if Capitalism is losing its control of men's bodies, still more has it lost its command of their minds. The product of a civilization which regarded "the poor" as instruments, at worst of the luxuries, at best of the virtues, of the rich, its psychological foundation fifty years ago was an ignorance in the mass of mankind which led them to reverence as wisdom the very follies of their masters, and an almost animal incapacity for responsibility. Education and experience have destroyed the passivity which was the condition of the perpetuation of industrial government in the hands of an oligarchy of private capitalists. The workman of to-day has as little belief in the intellectual superiority of many of those who direct industry as he has in the morality of {142} the system. It appears to him to be not only oppressive, but wasteful, unintelligent and inefficient. In the light of his own experience in the factory and the mine, he regards the claim of the capitalist to be the self-appointed guardian of public interests as a piece of sanctimonious hypocrisy. For he sees every day that efficiency is sacrificed to shortsighted financial interests; and while as a man he is outraged by the inhumanity of the industrial order, as a professional who knows the difference between good work and bad he has a growing contempt at once for its misplaced parsimony and its misplaced extravagance, for the whole apparatus of adulteration, advertisement and quackery which seems inseparable from the pursuit of profit as the main standard of industrial success. So Capitalism no longer secures strenuous work by fear, for it is ceasing to be formidable. And it cannot secure it by respect, for it has ceased to be respected. And the very victories by which it seeks to reassert its waning prestige are more disastrous than defeats. Employers may congratulate themselves that they have maintained intact their right to freedom of management, or opposed successfully a demand for public ownership, or broken a movement for higher wages and shorter hours. But what is success in a trade dispute or in a political struggle is often a defeat in the workshop: the workmen may have lost, but it does not follow that their employers, still less that the public, which is principally composed of workmen, have won. For the object of industry is to produce goods, and to produce them at the lowest cost in human effort. {143} But there is no alchemy which will secure efficient production from the resentment or distrust of men who feel contempt for the order under which they work. It is a commonplace that credit is the foundation of industry. But credit is a matter of psychology, and the workman has his psychology as well as the capitalist. If confidence is necessary to the investment of capital, confidence is not less necessary to the effective performance of labor by men whose sole livelihood depends upon it. If they are not yet strong enough to impose their will, they are strong enough to resist when their masters would impose theirs. They may work rather than strike. But they will work to escape dismissal, not for the greater glory of a system in which they do not believe; and, if they are dismissed, those who take their place will do the same. That this is one cause of a low output has been stated both by employers and workers in the building industry, and by the representatives of the miners before the Coal Commission. It was reiterated with impressive emphasis by Mr. Justice Sankey. Nor is it seriously contested by employers themselves. What else, indeed, do their repeated denunciations of "restriction of output" mean except that they have failed to organize industry so as to secure the efficient service which it is their special function to provide? Nor is it appropriate to the situation to indulge in full-blooded denunciations of the "selfishness" of the working classes. "To draw an indictment against a whole nation" is a procedure which is as impossible in industry as it is in politics. Institutions must be adapted to human nature, not {144} human nature to institutions. If the effect of the industrial system is such that a large and increasing number of ordinary men and women find that it offers them no adequate motive for economic effort, it is mere pedantry to denounce men and women instead of amending the system. Thus the time has come when absolutism in industry may still win its battles, but loses the campaign, and loses it on the very ground of economic efficiency which was of its own selection. In the period of transition, while economic activity is distracted by the struggle between those who have the name and habit of power, but no longer the full reality of it, and those who are daily winning more of the reality of power but are not yet its recognized repositories, it is the consumer who suffers. He has neither the service of docile obedience, nor the service of intelligent co-operation. For slavery will work--as long as the slaves will let it; and freedom will work when men have learned to be free; but what will not work is a combination of the two. So the public goes short of coal not only because of the technical deficiencies of the system under which it is raised and distributed, but because the system itself has lost its driving force--because the coal owners can no longer persuade the miners into producing more dividends for them and more royalties for the owners of minerals, while the public cannot appeal to them to put their whole power into serving itself, because it has chosen that they should be the servants, not of itself, but of shareholders. And, this dilemma is not, as some suppose, temporary, {145} the aftermath of war, or peculiar to the coal industry, as though the miners alone were the children of sin which in the last few months they have been described to be. It is permanent; it has spread far; and, as sleeping spirits are stirred into life by education and one industry after another develops a strong corporate consciousness, it will spread further. Nor will it be resolved by lamentations or menaces or denunciations of leaders whose only significance is that they say openly what plain men feel privately. For the matter at bottom is one of psychology. What has happened is that the motives on which the industrial system relied for several generations to secure efficiency, secure it no longer. And it is as impossible to restore them, to revive by mere exhortation the complex of hopes and fears and ignorance and patient credulity and passive acquiescence, which together made men, fifty years ago, plastic instruments in the hands of industrialism, as to restore innocence to any others of those who have eaten of the tree of knowledge. The ideal of some intelligent and respectable business men, the restoration of the golden sixties, when workmen were docile and confiding, and trade unions were still half illegal, and foreign competition meant English competition in foreign countries, and prices were rising a little and not rising too much, is the one Utopia which can never be realized. The King may walk naked as long as his courtiers protest that he is clad; but when a child or a fool has broken the spell a tailor is more important than all their admiration. If the public, which suffers from the slackening of economic activity, {146} desires to end its _malaise_, it will not laud as admirable and all-sufficient the operation of motives which are plainly ceasing to move. It will seek to liberate new motives and to enlist them in its service. It will endeavor to find an alternative to incentives which were always degrading, to those who used them as much as to those upon whom they were used, and which now are adequate incentives no longer. And the alternative to the discipline which Capitalism exercised through its instruments of unemployment and starvation is the self-discipline of responsibility and professional pride. So the demand which aims at stronger organization, fuller responsibility, larger powers for the sake of the producer as a condition of economic liberty, the demand for freedom, is not antithetic to the demand for more effective work and increased output which is being made in the interests of the consumer. It is complementary to it, as the insistence by a body of professional men, whether doctors or university teachers, on the maintenance of their professional independence and dignity against attempts to cheapen the service is not hostile to an efficient service, but, in the long run, a condition of it. The course of wisdom for the consumer would be to hasten, so far as he can, the transition. For, as at present conducted, industry is working against the grain. It is compassing sea and land in its efforts to overcome, by ingenious financial and technical expedients, obstacles which should never have existed. It is trying to produce its results by conquering professional feeling instead of using it. It is carrying not only its inevitable economic burdens, but an ever increasing {147} load of ill will and skepticism. It has in fact "shot the bird which caused the wind to blow" and goes about its business with the corpse round its neck. Compared with that psychological incubus, the technical deficiencies of industry, serious though they often are, are a bagatelle, and the business men who preach the gospel of production without offering any plan for dealing with what is now the central fact in the economic situation, resemble a Christian apologist who should avoid disturbing the equanimity of his audience by carefully omitting all reference either to the fall of man or the scheme of salvation. If it is desired to increase the output of wealth, it is not a paradox, but the statement of an elementary economic truism to say that active and constructive co-operation on the part of the rank and file of workers would do more to contribute to that result than the discovery of a new coal-field or a generation of scientific invention. The first condition of enlisting on the side of constructive work the professional feeling which is now apathetic, or even hostile to it, is to secure that when it is given its results accrue to the public, not to the owner of property in capital, in land, or in other resources. For this reason the attenuation of the rights at present involved in the private ownership of industrial capital, or their complete abolition, is not the demand of idealogues, but an indispensable element in a policy of economic efficiency, since it is the condition of the most effective functioning of the human beings upon whom, though, like other truisms, it is often forgotten, {148} economic efficiency ultimately depends. But it is only one element. Co-operation may range from mere acquiescence to a vigilant and zealous initiative. The criterion of an effective system of administration is that it should succeed in enlisting in the conduct of industry the latent forces of professional pride to which the present industrial order makes little appeal, and which, indeed, Capitalism, in its war upon trade union organization, endeavored for many years to stamp out altogether. Nor does the efficacy of such an appeal repose upon the assumption of that "change in human nature," which is the triumphant _reductio ad absurdum_ advanced by those who are least satisfied with the working of human nature as it is. What it does involve is that certain elementary facts should be taken into account, instead of, as at present, being ignored. That all work is distasteful and that "every man desires to secure the largest income with the least effort" may be as axiomatic as it is assumed to be. But in practice it makes all the difference to the attitude of the individual whether the collective sentiment of the group to which he belongs is on the side of effort or against it, and what standard of effort it sets. That, as employers complain, the public opinion of considerable groups of workers is against an intensification of effort as long as part of its result is increased dividends for shareholders, is no doubt, as far as mere efficiency is concerned, the gravest indictment of the existing industrial order. But, even when public ownership has taken the place of private capitalism, its ability to command {149} effective service will depend ultimately upon its success in securing not merely that professional feeling is no longer an opposing force, but that it is actively enlisted upon the side of maintaining the highest possible standard of efficiency which can reasonably be demanded. To put the matter concretely, while the existing ownership of mines is a positive inducement to inefficient work, public ownership administered by a bureaucracy, if it would remove the technical deficiencies emphasized by Sir Richard Redmayne as inseparable from the separate administration of 3,000 pits by 1,500 different companies, would be only too likely to miss a capital advantage which a different type of administration would secure. It would lose both the assistance to be derived from the technical knowledge of practical men who know by daily experience the points at which the details of administration can be improved, and the stimulus to efficiency springing from the corporate pride of a profession which is responsible for maintaining and improving the character of its service. Professional spirit is a force like gravitation, which in itself is neither good nor bad, but which the engineer uses, when he can, to do his work for him. If it is foolish to idealize it, it is equally shortsighted to neglect it. In what are described _par excellence_ as "the services" it has always been recognized that _esprit de corps_ is the foundation of efficiency, and all means, some wise and some mischievous, are used to encourage it: in practice, indeed, the power upon which the country relied as its main safeguard in an emergency was the professional zeal of the navy and nothing else. Nor is {150} that spirit peculiar to the professions which are concerned with war. It is a matter of common training, common responsibilities, and common dangers. In all cases where difficult and disagreeable work is to be done, the force which elicits it is normally not merely money, but the public opinion and tradition of the little society in which the individual moves, and in the esteem of which he finds that which men value in success. To ignore that most powerful of stimuli as it is ignored to-day, and then to lament that the efforts which it produces are not forthcoming, is the climax of perversity. To aim at eliminating from industry the growth and action of corporate feeling, for fear lest an organized body of producers should exploit the public, is a plausible policy. But it is short-sighted. It is "to pour away the baby with the bath," and to lower the quality of the service in an attempt to safeguard it. A wise system of administration would recognize that professional solidarity can do much of its work for it more effectively than it can do it itself, because the spirit of his profession is part of the individual and not a force outside him, and would make it its object to enlist that temper in the public service. It is only by that policy, indeed, that the elaboration of cumbrous regulations to prevent men doing what they should not, with the incidental result of sometimes preventing them from doing what they should--it is only by that policy that what is mechanical and obstructive in bureaucracy can be averted. For industry cannot run without laws. It must either control itself by professional standards, or it must be controlled by officials who are not of the {151} craft and who, however zealous and well-meaning, can hardly have the feel of it in their fingers. Public control and criticism are indispensable. But they should not be too detailed, or they defeat themselves. It would be better that, once fair standards have been established, the professional organization should check offenses against prices and quality than that it should be necessary for the State to do so. The alternative to minute external supervision is supervision from within by men who become imbued with the public obligations of their trade in the very process of learning it. It is, in short, professional in industry. For this reason collectivism by itself is too simple a solution. Its failure is likely to be that of other rationalist systems. "Dann hat er die Theile in seiner Hand, Fehlt leider! nur das geistige Band." If industrial reorganization is to be a living reality, and not merely a plan upon paper, its aim must be to secure not only that industry is carried on for the service of the public, but that it shall be carried on with the active co-operation of the organizations of producers. But co-operation involves responsibility, and responsibility involves power. It is idle to expect that men will give their best to any system which they do not trust, or that they will trust any system in the control of which they do not share. Their ability to carry professional obligations depends upon the power which they possess to remove the obstacles which prevent those obligations from being discharged, and upon their willingness, when they possess the power, to use it. {152} Two causes appear to have hampered the committees which were established in connection with coal mines during the war to increase the output of coal. One was the reluctance of some of them to discharge the invidious task of imposing penalties for absenteeism on their fellow-workmen. The other was the exclusion of faults of management from the control of many committees. In some cases all went well till they demanded that, if the miners were penalized for absenteeism which was due to them, the management should be penalized similarly when men who desired to work were sent home because, as a result of defective organization, there was no work for them to do. Their demand was resisted as "interference with the management," and the attempt to enforce regularity of attendance broke down. Nor, to take another example from the same industry, is it to be expected that the weight of the miners' organization will be thrown on to the side of greater production, if it has no power to insist on the removal of the defects of equipment and organization, the shortage of trams, rails, tubs and timber, the "creaming" of the pits by the working of easily got coal to their future detriment, their wasteful layout caused by the vagaries of separate ownership, by which at present the output is reduced. The public cannot have it both ways. If it allows workmen to be treated as "hands" it cannot claim the service of their wills and their brains. If it desires them to show the zeal of skilled professionals, it must secure that they have sufficient power to allow of their discharging professional responsibilities. In order that workmen may abolish any restrictions on output which {153} may be imposed by them, they must be able to insist on the abolition of the restrictions, more mischievous because more effective, which, as the Committee on Trusts has recently told us, are imposed by organizations of employers. In order that the miners' leaders, instead of merely bargaining as to wages, hours and working conditions, may be able to appeal to their members to increase the supply of coal, they must be in a position to secure the removal of the causes of low output which are due to the deficiencies of the management, and which are to-day a far more serious obstacle than any reluctance on the part of the miner. If the workmen in the building trade are to take combined action to accelerate production, they must as a body be consulted as to the purpose to which their energy is to be applied, and must not be expected to build fashionable houses, when what are required are six-roomed cottages to house families which are at present living with three persons to a room. It is deplorable, indeed, that any human beings should consent to degrade themselves by producing the articles which a considerable number of workmen turn out to-day, boots which are partly brown paper, and furniture which is not fit to use. The revenge of outraged humanity is certain, though it is not always obvious; and the penalty paid by the consumer for tolerating an organization of industry which, in the name of efficiency, destroyed the responsibility of the workman, is that the service with which he is provided is not even efficient. He has always paid it, though he has not seen it, in quality. To-day he is beginning to {154} realize that he is likely to pay it in quantity as well. If the public is to get efficient service, it can get it only from human beings, with the initiative and caprices of human beings. It will get it, in short, in so far as it treats industry as a responsible profession. The collective responsibility of the workers for the maintenance of the standards of their profession is, then, the alternative to the discipline which Capitalism exercised in the past, and which is now breaking down. It involves a fundamental change in the position both of employers and of trade unions. As long as the direction of industry is in the hands of property-owners or their agents, who are concerned to extract from it the maximum profit for themselves, a trade union is necessarily a defensive organization. Absorbed, on the one hand, in the struggle to resist the downward thrust of Capitalism upon the workers' standard of life, and denounced, on the other, if it presumes, to "interfere with management," even when management is most obviously inefficient, it is an opposition which never becomes a government and which has neither the will nor the power to assume responsibility for the quality of the service offered to the consumer. If the abolition of functionless property transferred the control of production to bodies representing those who perform constructive work and those who consume the goods produced, the relation of the worker to the public would no longer be indirect but immediate, and associations which are now purely defensive would be in a position not merely to criticize and oppose but to advise, to initiate and to enforce upon their own members the obligations of the craft. {155} It is obvious that in such circumstances the service offered the consumer, however carefully safeguarded by his representation on the authorities controlling each industry, would depend primarily upon the success of professional organizations in finding a substitute for the discipline exercised to-day by the agents of property-owners. It would be necessary for them to maintain by their own action the zeal, efficiency and professional pride which, when the barbarous weapons of the nineteenth century have been discarded, would be the only guarantee of a high level of production. Nor, once this new function has been made possible for professional organizations, is there any extravagance in expecting them to perform it with reasonable competence. How far economic motives are balked to-day and could be strengthened by a different type of industrial organization, to what extent, and under what conditions, it is possible to enlist in the services of industry motives which are not purely economic, can be ascertained only after a study of the psychology of work which has not yet been made. Such a study, to be of value, must start by abandoning the conventional assumptions, popularized by economic textbooks and accepted as self-evident by practical men, that the motives to effort are simple and constant in character, like the pressure of steam in a boiler, that they are identical throughout all ranges of economic activity, from the stock exchange to the shunting of wagons or laying of bricks, and that they can be elicited and strengthened only by directly economic incentives. In so far as motives in industry have been considered hitherto, it has usually been done {156} by writers who, like most exponents of scientific management, have started by assuming that the categories of business psychology could be offered with equal success to all classes of workers and to all types of productive work. Those categories appear to be derived from a simplified analysis of the mental processes of the company promoter, financier or investor, and their validity as an interpretation of the motives and habits which determine the attitude to his work of the bricklayer, the miner, the dock laborer or the engineer, is precisely the point in question. Clearly there are certain types of industry to which they are only partially relevant. It can hardly be assumed, for example, that the degree of skill and energy brought to his work by a surgeon, a scientific investigator, a teacher, a medical officer of health, an Indian civil servant and a peasant proprietor are capable of being expressed precisely and to the same degree in terms of the economic advantage which those different occupations offer. Obviously those who pursue them are influenced to some considerable, though uncertain, extent by economic incentives. Obviously, again, the precise character of each process or step in the exercise of their respective avocations, the performance of an operation, the carrying out of a piece of investigation, the selection of a particular type of educational method, the preparation of a report, the decision of a case or the care of live stock, is not immediately dependent upon an exact calculation of pecuniary gain or loss. What appears to be the case is that in certain walks of life, while the occupation is chosen after a consideration of {157} its economic advantages, and while economic reasons exact the minimum degree of activity needed to avert dismissal from it or "failure," the actual level of energy or proficiency displayed depend largely upon conditions of a different order. Among them are the character of the training received before and after entering the occupation, the customary standard of effort demanded by the public opinion of one's fellows, the desire for the esteem of the small circle in which the individual moves and to be recognized as having "made good" and not to have "failed," interest in one's work, ranging from devotion to a determination to "do justice" to it, the pride of the craftsman, the "tradition of the service." It would be foolish to suggest that any considerable body of men are uninfluenced by economic considerations. But to represent them as amenable to such incentives only is to give a quite unreal and bookish picture of the actual conditions under which the work of the world is carried on. How large a part such considerations play varies from one occupation to another, according to the character of the work which it does and the manner in which it is organized. In what is called _par excellence_ industry, calculations of pecuniary gain and loss are more powerful than in most of the so-called professions, though even in industry they are more constantly present to the minds of the business men who "direct" it, than to those of the managers and technicians, most of whom are paid fixed salaries, or to the rank and file of wage-workers. In the professions of teaching and medicine, in many branches of the {158} public service, the necessary qualities are secured, without the intervention of the capitalist employer, partly by pecuniary incentives, partly by training and education, partly by the acceptance on the part of those entering them of the traditional obligations of their profession as part of the normal framework of their working lives. But this difference is not constant and unalterable. It springs from the manner in which different types of occupation are organized, on the training which they offer, and the _morale_ which they cultivate among their members. The psychology of a vocation can in fact be changed; new motives can be elicited, provided steps are taken to allow them free expression. It is as feasible to turn building into an organized profession, with a relatively high code of public honor, as it was to do the same for medicine or teaching. The truth is that we ought radically to revise the presuppositions as to human motives on which current presentations of economic theory are ordinarily founded and in terms of which the discussion of economic question is usually carried on. The assumption that the stimulus of imminent personal want is either the only spur, or a sufficient spur, to productive effort is a relic of a crude psychology which has little warrant either in past history or in present experience. It derives what plausibility it possesses from a confusion between work in the sense of the lowest _quantum_ of activity needed to escape actual starvation, and the work which is given, irrespective of the fact that elementary wants may already have been satisfied, through the natural disposition of ordinary men to maintain, and of extraordinary {159} men to improve upon, the level of exertion accepted as reasonable by the public opinion of the group of which they are members. It is the old difference, forgotten by society as often as it is learned, between the labor of the free man and that of the slave. Economic fear may secure the minimum effort needed to escape economic penalties. What, however, has made progress possible in the past, and what, it may be suggested, matters to the world to-day, is not the bare minimum which is required to avoid actual want, but the capacity of men to bring to bear upon their tasks a degree of energy, which, while it can be stimulated by economic incentives, yields results far in excess of any which are necessary merely to avoid the extremes of hunger or destitution. That capacity is a matter of training, tradition and habit, at least as much as of pecuniary stimulus, and the ability of a professional association representing the public opinion of a group of workers to raise it is, therefore, considerable. Once industry has been liberated from its subservience to the interests of the functionless property-owner, it is in this sphere that trade unions may be expected increasingly to find their function. Its importance both for the general interests of the community and for the special interests of particular groups of workers can hardly be exaggerated. Technical knowledge and managerial skill are likely to be available as readily for a committee appointed by the workers in an industry as for a committee appointed, as now, by the shareholders. But it is more and more evident to-day that the crux of the economic situation is not {160} the technical deficiencies of industrial organization, but the growing inability of those who direct industry to command the active good will of the _personnel_. Their co-operation is promised by the conversion of industry into a profession serving the public, and promised, as far as can be judged, by that alone. Nor is the assumption of the new and often disagreeable obligations of internal discipline and public responsibility one which trade unionism can afford, once the change is accomplished, to shirk, however alien they may be to its present traditions. For ultimately, if by slow degrees, power follows the ability to wield it; authority goes with function. The workers cannot have it both ways. They must choose whether to assume the responsibility for industrial discipline and become free, or to repudiate it and continue to be serfs. If, organized as professional bodies, they can provide a more effective service than that which is now, with increasing difficulty, extorted by the agents of capital, they will have made good their hold upon the future. If they cannot, they will remain among the less calculable instruments of production which many of them are to-day. The instinct of mankind warns it against accepting at their face value spiritual demands which cannot justify themselves by practical achievements. And the road along which the organized workers, like any other class, must climb to power, starts from the provision of a more effective economic service than their masters, as their grip upon industry becomes increasingly vacillating and uncertain, are able to supply. {161} X THE POSITION OF THE BRAIN WORKER The conversion of industry into a profession will involve at least as great a change in the position of the management as in that of the manual workers. As each industry is organized for the performance of function, the employer will cease to be a profit maker and become what, in so far as he holds his position by a reputable title, he already is, one workman among others. In some industries, where the manager is a capitalist as well, the alteration may take place through such a limitation of his interest as a capitalist as it has been proposed by employers and workers to introduce into the building industry. In others, where the whole work of administration rests on the shoulders of salaried managers, it has already in part been carried out. The economic conditions of this change have, indeed, been prepared by the separation of ownership from management, and by the growth of an intellectual proletariat to whom the scientific and managerial work of industry is increasingly intrusted. The concentration of businesses, the elaboration of organization, and the developments springing from the application of science to industry have resulted in the multiplication of a body of industrial brain workers who make the old classifications into "employers and workmen," which is still current in common speech, an absurdly {162} misleading description of the industrial system as it exists to-day. To complete the transformation all that is needed is that this new class of officials, who fifty years ago were almost unknown, should recognize that they, like the manual workers, are the victims of the domination of property, and that both professional pride and economic interest require that they should throw in their lot with the rest of those who are engaged in constructive work. Their position to-day is often, indeed, very far from being a happy one. Many of them, like some mine managers, are miserably paid. Their tenure of their posts is sometimes highly insecure. Their opportunities for promotion may be few, and distributed with a singular capriciousness. They see the prizes of industry awarded by favoritism, or by the nepotism which results in the head of a business unloading upon it a family of sons whom it would be economical to pay to keep out of it, and which, indignantly denounced on the rare occasions on which it occurs in the public service, is so much the rule in private industry that no one even questions its propriety. During the war they have found that, while the organized workers have secured advances, their own salaries have often remained almost stationary, because they have been too genteel to take part in trade unionism, and that to-day they are sometimes paid less than the men for whose work they are supposed to be responsible. Regarded by the workmen as the hangers-on of the masters, and by their employers as one section among the rest of the "hands," they have the odium of capitalism without its power or its profits. {163} From the conversion of industry into a profession those who at present do its intellectual work have as much to gain as the manual workers. For the principle of function, for which we have pleaded as the basis of industrial organization, supplies the only intelligible standard by which the powers and duties of the different groups engaged in industry can be determined. At the present time no such standard exists. The social order of the pre-industrial era, of which faint traces have survived in the forms of academic organization, was marked by a careful grading of the successive stages in the progress from apprentice to master, each of which was distinguished by clearly defined rights and duties, varying from grade to grade and together forming a hierarchy of functions. The industrial system which developed in the course of the nineteenth century did not admit any principle of organization other than the convenience of the individual, who by enterprise, skill, good fortune, unscrupulous energy or mere nepotism, happened at any moment to be in a position to wield economic authority. His powers were what he could exercise; his rights were what at any time he could assert. The Lancashire mill-owner of the fifties was, like the Cyclops, a law unto himself. Hence, since subordination and discipline are indispensable in any complex undertaking, the subordination which emerged in industry was that of servant to master, and the discipline such as economic strength could impose upon economic weakness. The alternative to the allocation of power by the struggle of individuals for self-aggrandizement is its {164} allocation according to function, that each group in the complex process of production should wield so much authority as, and no more authority than, is needed to enable it to perform the special duties for which it is responsible. An organization of industry based on this principle does not imply the merging of specialized economic functions in an undifferentiated industrial democracy, or the obliteration of the brain workers beneath the sheer mass of artisans and laborers. But it is incompatible with the unlimited exercise of economic power by any class or individual. It would have as its fundamental rule that the only powers which a man can exercise are those conferred upon him in virtue of his office. There would be subordination. But it would be profoundly different from that which exists to-day. For it would not be the subordination of one man to another, but of all men to the purpose for which industry is carried on. There would be authority. But it would not be the authority of the individual who imposes rules in virtue of his economic power for the attainment of his economic advantage. It would be the authority springing from the necessity of combining different duties to attain a common end. There would be discipline. But it would be the discipline involved in pursuing that end, not the discipline enforced upon one man for the convenience or profit of another. Under such an organization of industry the brain worker might expect, as never before, to come to his own. He would be estimated and promoted by his capacity, not by his means. He would be less likely than at present to find doors closed to him because of poverty. His {165} judges would be his colleagues, not an owner of property intent on dividends. He would not suffer from the perversion of values which rates the talent and energy by which wealth is created lower than the possession of property, which is at best their pensioner and at worst the spend-thrift of what intelligence has produced. In a society organized for the encouragement of creative activity those who are esteemed most highly will be those who create, as in a world organized for enjoyment they are those who own. Such considerations are too general and abstract to carry conviction. Greater concreteness may be given them by comparing the present position of mine-managers with that which they would occupy were effect given to Mr. Justice Sankey's scheme for the nationalization of the Coal Industry. A body of technicians who are weighing the probable effects of such a reorganization will naturally consider them in relation both to their own professional prospects and to the efficiency of the service of which they are the working heads. They will properly take into account questions of salaries, pensions, security of status and promotion. At the same time they will wish to be satisfied as to points which, though not less important, are less easily defined. Under which system, private or public ownership, will they have most personal discretion or authority over the conduct of matters within their professional competence? Under which will they have the best guarantees that their special knowledge will carry due weight, and that, when handling matters of art, they will not be overridden or obstructed by amateurs? {166} As far as the specific case of the Coal Industry is concerned the question of security and salaries need hardly be discussed. The greatest admirer of the present system would not argue that security of status is among the advantages which it offers to its employees. It is notorious that in some districts, at least, managers are liable to be dismissed, however professionally competent they may be, if they express in public views which are not approved by the directors of their company. Indeed, the criticism which is normally made on the public services, and made not wholly without reason, is that the security which they offer is excessive. On the question of salaries rather more than one-half of the colliery companies of Great Britain themselves supplied figures to the Coal Industry Commission.[1] If their returns may be trusted, it would appear that mine-managers are paid, as a class, salaries the parsimony of which is the more surprising in view of the emphasis laid, and quite properly laid, by the mine-owners on the managers' responsibilities. The service of the State does not normally offer, and ought not to offer, financial prizes comparable with those of private industry. But it is improbable, had the mines been its property during {167} the last ten years, that more than one-half the managers would have been in receipt of salaries of under £301 per year, and of less than £500 in 1919, by which time prices had more than doubled, and the aggregate profits of the mine-owners (of which the greater part was, however, taken by the State in taxation) had amounted in five years to £160,000,000. It would be misleading to suggest that the salaries paid to mine-managers are typical of private industry, nor need it be denied that the probable effect of turning an industry into a public service would be to reduce the size of the largest prizes at present offered. What is to be expected is that the lower and medium salaries would be raised, and the largest somewhat diminished. It is hardly to be denied, at any rate, that the majority of brain workers in industry have nothing to fear on financial grounds from such a change as is proposed by Mr. Justice Sankey. Under the normal organization of industry, profits, it cannot be too often insisted, do not go to them but to shareholders. There does not appear to be any reason to suppose that the salaries of managers in the mines making more than 5/- profit a ton were any larger than those making under 3/-. The financial aspect of the change is not, however, the only point which a group of managers or technicians have to consider. They have also to weigh its effect on their professional status. Will they have as much freedom, initiative and authority in the service of the community as under private ownership? How that question is answered depends upon the form given to the administrative system through which a public service is {168} conducted. It is possible to conceive an arrangement under which the life of a mine-manager would be made a burden to him by perpetual recalcitrance on the part of the men at the pit for which he is responsible. It is possible to conceive one under which he would be hampered to the point of paralysis by irritating interference from a bureaucracy at headquarters. In the past some managers of "co-operative workshops" suffered, it would seem, from the former: many officers of Employment Exchanges are the victims, unless common rumor is misleading, of the latter. It is quite legitimate, indeed it is indispensable, that these dangers should be emphasized. The problem of reorganizing industry is, as has been said above, a problem of constitution making. It is likely to be handled successfully only if the defects to which different types of constitutional machinery are likely to be liable are pointed out in advance. Once, however, these dangers are realized, to devise precautions against them appears to be a comparatively simple matter. If Mr. Justice Sankey's proposals be taken as a concrete example of the position which would be occupied by the managers in a nationalized industry, it will be seen that they do not involve either of the two dangers which are pointed out above. The manager will, it is true, work with a Local Mining Council or pit committee, which is to "meet fortnightly, or oftener if need be, to advise the manager on all questions concerning the direction and safety of the mine," and "if the manager refuses to take the advice of the Local Mining Council on any question concerning the safety and health of the mine, such question shall be referred to {169} the District Mining Council." It is true also that, once such a Local Mining Council is formally established, the manager will find it necessary to win its confidence, to lead by persuasion, not by mere driving, to establish, in short, the same relationships of comradeship and good will as ought to exist between the colleagues in any common undertaking. But in all this there is nothing to undermine his authority, unless "authority" be understood to mean an arbitrary power which no man is fit to exercise, and which few men, in their sober moments, would claim. The manager will be appointed by, and responsible to, not the men whose work he supervises, but the District Mining Council, which controls all the pits in a district, and on that council he will be represented. Nor will he be at the mercy of a distant "clerkocracy," overwhelming him with circulars and overriding his expert knowledge with impracticable mandates devised in London. The very kernel of the schemes advanced both by Justice Sankey and by the Miners' Federation is decentralized administration within the framework of a national system. There is no question of "managing the industry from Whitehall." The characteristics of different coal-fields vary so widely that reliance on local knowledge and experience are essential, and it is to local knowledge and experience that it is proposed to intrust the administration of the industry. The constitution which is recommended is, in short, not "Unitary" but "Federal." There will be a division of functions and power between central authorities and district authorities. The former will lay down general rules as to those matters which must necessarily {170} be dealt with on a national basis. The latter will administer the industry within their own districts, and, as long as they comply with those rules and provide their quota of coal, will possess local autonomy and will follow the method of working the pits which they think best suited to local conditions. Thus interpreted, public ownership does not appear to confront the brain worker with the danger of unintelligent interference with his special technique, of which he is, quite naturally, apprehensive. It offers him, indeed, far larger opportunities of professional development than are open to all but a favored few to-day, when the considerations of productive efficiency, which it is his special _métier_ to promote, are liable to be overridden by short-sighted financial interests operating through the pressure of a Board of Directors who desire to show an immediate profit to their shareholders, and who, to obtain it, will "cream" the pit, or work it in a way other than considerations of technical efficiency would dictate. And the interest of the community in securing that the manager's professional skill is liberated for the service of the public, is as great as his own. For the economic developments of the last thirty years have made the managerial and technical _personnel_ of industry the repositories of public responsibilities of quite incalculable importance, which, with the best will in the world, they can hardly at present discharge. The most salient characteristic of modern industrial organization is that production is carried on under the general direction of business men, who do not themselves necessarily know anything of productive processes. "Business" {171} and "industry" tend to an increasing extent to form two compartments, which, though united within the same economic system, employ different types of _personnel_, evoke different qualities and recognize different standards of efficiency and workmanship. The technical and managerial staff of industry is, of course, as amenable as other men to economic incentives. But their special work is production, not finance; and, provided they are not smarting under a sense of economic injustice, they want, like most workmen, to "see the job done properly." The business men who ultimately control industry are concerned with the promotion and capitalization of companies, with competitive selling and the advertisement of wares, the control of markets, the securing of special advantages, and the arrangement of pools, combines and monopolies. They are preoccupied, in fact, with financial results, and are interested in the actual making of goods only in so far as financial results accrue from it. The change in organization which has, to a considerable degree, specialized the spheres of business and management is comparable in its importance to that which separated business and labor a century and a half ago. It is specially momentous for the consumer. As long as the functions of manager, technician and capitalist were combined, as in the classical era of the factory system, in the single person of "the employer," it was not unreasonable to assume that profits and productive efficiency ran similarly together. In such circumstances the ingenuity with which economists proved {172} that, in obedience to "the law of substitution," he would choose the most economical process, machine, or type of organization, wore a certain plausibility. True, the employer might, even so, adulterate his goods or exploit the labor of a helpless class of workers. But as long as the person directing industry was himself primarily a manager, he could hardly have the training, ability or time, even if he had the inclination, to concentrate special attention on financial gains unconnected with, or opposed to, progress in the arts of production, and there was some justification for the conventional picture which represented "the manufacturer" as the guardian of the interests of the consumer. With the drawing apart of the financial and technical departments of industry--with the separation of "business" from "production"--the link which bound profits to productive efficiency is tending to be snapped. There are more ways than formerly of securing the former without achieving the latter; and when it is pleaded that the interests of the captain of industry stimulate the adoption of the most "economical" methods and thus secure industrial progress, it is necessary to ask "economical for whom"? Though the organization of industry which is most efficient, in the sense of offering the consumer the best service at the lowest real cost, may be that which is most profitable to the firm, it is also true that profits are constantly made in ways which have nothing to do with efficient production, and which sometimes, indeed, impede it. The manner in which "business" may find that the methods which pay itself best are those which a truly {173} scientific "management" would condemn may be illustrated by three examples. In the first place, the whole mass of profits which are obtained by the adroit capitalization of a new business, or the reconstruction of one which already exists, have hardly any connection with production at all. When, for instance, a Lancashire cotton mill capitalized at £100,000 is bought by a London syndicate which re-floats it with a capital of £500,000--not at all an extravagant case--what exactly has happened? In many cases the equipment of the mill for production remains, after the process, what it was before it. It is, however, valued at a different figure, because it is anticipated that the product of the mill will sell at a price which will pay a reasonable profit not only upon the lower, but upon the higher, capitalization. If the apparent state of the market and prospects of the industry are such that the public can be induced to believe this, the promoters of the reconstruction find it worth while to recapitalize the mill on the new basis. They make their profit not as manufacturers, but as financiers. They do not in any way add to the productive efficiency of the firm, but they acquire shares which will entitle them to an increased return. Normally, if the market is favorable, they part with the greater number of them as soon as they are acquired. But, whether they do so or not, what has occurred is a process by which the business element in industry obtains the right to a larger share of the product, without in any way increasing the efficiency of the service which is offered to the consumer. Other examples of the manner in which the control of {174} production by "business" cuts across the line of economic progress are the wastes of competitive industry and the profits of monopoly. It is well known that the price paid by the consumer includes marketing costs, which to a varying, but to a large, extent are expenses not of supplying the goods, but of supplying them under conditions involving the expenses of advertisement and competitive distribution. For the individual firm such expenses, which enable it to absorb part of a rival's trade, may be an economy: to the consumer of milk or coal--to take two flagrant instances--they are pure loss. Nor, as is sometimes assumed, are such wastes confined to distribution. Technical reasons are stated by railway managers to make desirable a unification of railway administration and by mining experts of mines. But, up to the war, business considerations maintained the expensive system under which each railway company was operated as a separate system, and still prevent collieries, even collieries in the same district, from being administered as parts of a single organization. Pits are drowned out by water, because companies cannot agree to apportion between them the costs of a common drainage system; materials are bought, and products sold, separately, because collieries will not combine; small coal is left in to the amount of millions of tons because the most economical and technically efficient working of the seams is not necessarily that which yields the largest profit to the business men who control production. In this instance the wide differences in economic strength which exist between different mines discourage the unification which is economically desirable; naturally the {175} directors of a company which owns "a good thing" do not desire to merge interests with a company working coal that is poor in quality or expensive to mine. When, as increasingly happens in other industries, competitive wastes, or some of them, are eliminated by combination, there is a genuine advance in technical efficiency, which must be set to the credit of business motives. In that event, however, the divergence between business interests and those of the consumers is merely pushed one stage further forward; it arises, of course, over the question of prices. If any one is disposed to think that this picture of the economic waste which accompanies the domination of production by business interests is overdrawn, he may be invited to consider the criticisms upon the system passed by the "efficiency engineers," who are increasingly being called upon to advise as to industrial organization and equipment. "The higher officers of the corporation," writes Mr. H. L. Gantt of a Public Utility Company established in America during the war, "have all without exception been men of the 'business' type of mind, who have made their success through financiering, buying, selling, etc.... As a matter of fact it is well known that our industrial system has not measured up as we had expected.... _The reason for its falling short is undoubtedly that the men directing it had been trained in a business system operated for profits, and did not understand one operated solely for production_. This is no criticism of the men as individuals; they simply did not know the job, and, what is worse, they did not know that they did not know it." {176} In so far, then, as "Business" and "Management" are separated, the latter being employed under the direction of the former, it cannot be assumed that the direction of industry is in the hands of persons whose primary concern is productive efficiency. That a considerable degree of efficiency will result incidentally from the pursuit of business profits is not, of course, denied. What seems to be true, however, is that the main interest of those directing an industry which has reached this stage of development is given to financial strategy and the control of markets, because the gains which these activities offer are normally so much larger than those accruing from the mere improvement of the processes of production. It is evident, however, that it is precisely that improvement which is the main interest of the consumer. He may tolerate large profits as long as they are thought to be the symbol of efficient production. But what he is concerned with is the supply of goods, not the value of shares, and when profits appear to be made, not by efficient production, but by skilful financiering or shrewd commercial tactics, they no longer appear meritorious. If, in disgust at what he has learned to call "profiteering," the consumer seeks an alternative to a system under which product is controlled by "Business," he can hardly find it except by making an ally of the managerial and technical _personnel_ of industry. They organize the service which he requires; they are relatively little implicated, either by material interest or by psychological bias, in the financial methods which he distrusts; they often find the control of their professions by business men who are {177} primarily financiers irritating in the obstruction which it offers to technical efficiency, as well as sharp and close-fisted in the treatment of salaries. Both on public and professional grounds they belong to a group which ought to take the initiative in promoting a partnership between the producers and the public. They can offer the community the scientific knowledge and specialized ability which is the most important condition of progress in the arts of production. It can offer them a more secure and dignified status, larger opportunities for the exercise of their special talents, and the consciousness that they are giving the best of their work and their lives, not to enriching a handful of uninspiring, if innocuous, shareholders, but to the service of the great body of their fellow-countrymen. If the last advantage be dismissed as a phrase--if medical officers of health, directors of education, directors of the co-operative wholesale be assumed to be quite uninfluenced by any consciousness of social service--the first two, at any rate, remain. And they are considerable. It is this gradual disengagement of managerial technique from financial interests which would appear the probable line along which "the employer" of the future will develop. The substitution throughout industry of fixed salaries for fluctuating profits would, in itself, deprive his position of half the humiliating atmosphere of predatory enterprise which embarrasses to-day any man of honor who finds himself, when he has been paid for his services, in possession of a surplus for which there is no assignable reason. Nor, once large incomes from profits have been extinguished, need his salary be large, {178} as incomes are reckoned to-day. It is said that among the barbarians, where wealth is still measured by cattle, great chiefs are described as hundred-cow men. The manager of a great enterprise who is paid $400,000 a year, might similarly be described as a hundred-family man, since he receives the income of a hundred families. It is true that special talent is worth any price, and that a payment of $400,000 a year to the head of a business with a turnover of millions is economically a bagatelle. But economic considerations are not the only considerations. There is also "the point of honor." And the truth is that these hundred-family salaries are ungentlemanly. When really important issues are at stake every one realizes that no decent man can stand out for his price. A general does not haggle with his government for the precise pecuniary equivalent of his contribution to victory. A sentry who gives the alarm to a sleeping battalion does not spend next day collecting the capital value of the lives he has saved; he is paid 1/- a day and is lucky if he gets it. The commander of a ship does not cram himself and his belongings into the boats and leave the crew to scramble out of the wreck as best they can; by the tradition of the service he is the last man to leave. There is no reason why the public should insult manufacturers and men of business by treating them as though they were more thick-skinned than generals and more extravagant than privates. To say that they are worth a good deal more than even the exorbitant salaries which a few of them get is often true. But it is beside the point. No one has any business to {179} expect to be paid "what he is worth," for what he is worth is a matter between his own soul and God. What he has a right to demand, and what it concerns his fellow-men to see that he gets, is enough to enable him to perform his work. When industry is organized on a basis of function, that, and no more than that, is what he will be paid. To do the managers of industry justice, this whining for more money is a vice to which they (as distinct from their shareholders) are not particularly prone. There is no reason why they should be. If a man has important work, and enough leisure and income to enable him to do it properly, he is in possession of as much happiness as is good for any of the children of Adam. [1] The Coal Mines Department supplied the following figures to the Coal Industry Commission (Vol. III, App. 66). They relate to 57 per cent. of the collieries of the United Kingdom. Salary, including bonus and Number of Managers value of house and coal 1913 1919 £100 or less ............................... 4 2 £101 to £200 ............................... 134 3 £201 to £300 ............................... 280 29 £301 to £400 ............................... 161 251 £401 to £500 ............................... 321 213 £501 to £600 ............................... 57 146 £601 and over .............................. 50 152 {180} XI PORRO UNUM NECESSARIUM So the organization of society on the basis of function, instead of on that of rights, implies three things. It means, first, that proprietary rights shall be maintained when they are accompanied by the performance of service and abolished when they are not. It means, second, that the producers shall stand in a direct relation to the community for whom production is carried on, so that their responsibility to it may be obvious and unmistakable, not lost, as at present, through their immediate subordination to shareholders whose interest is not service but gain. It means, in the third place, that the obligation for the maintenance of the service shall rest upon the professional organization of those who perform it, and that, subject to the supervision and criticism of the consumer, those organizations shall exercise so much voice in the government of industry as may be needed to secure that the obligation is discharged. It is obvious, indeed, that no change of system or machinery can avert those causes of social _malaise_ which consist in the egotism, greed, or quarrelsomeness of human nature. What it can do is to create an environment in which those are not the qualities which are encouraged. It cannot secure that men live up to their principles. What it can do is to establish their social order upon principles to which, if they please, they can {181} live up and not live down. It cannot control their actions. It can offer them an end on which to fix their minds. And, as their minds are, so, in the long run and with exceptions, their practical activity will be. The first condition of the right organization of industry is, then, the intellectual conversion which, in their distrust of principles, Englishmen are disposed to place last or to omit altogether. It is that emphasis should be transferred from the opportunities which it offers individuals to the social functions which it performs; that they should be clear as to its end and should judge it by reference to that end, not by incidental consequences which are foreign to it, however brilliant or alluring those consequences may be. What gives its meaning to any activity which is not purely automatic is its purpose. It is because the purpose of industry, which is the conquest of nature for the service of man, is neither adequately expressed in its organization nor present to the minds of those engaged in it, because it is not regarded as a function but as an opportunity for personal gain or advancement or display, that the economic life of modern societies is in a perpetual state of morbid irritation. If the conditions which produce that unnatural tension are to be removed, it can only be effected by the growth of a habit of mind which will approach questions of economic organization from the standpoint of the purpose which it exists to serve, and which will apply to it something of the spirit expressed by Bacon when he said that the work of man ought to be carried on "for the glory of God and the relief of men's estate." {182} Viewed from that angle issues which are insoluble when treated on the basis of rights may be found more susceptible of reasonable treatment. For a purpose, is, in the first place a principle of limitation. It determines the end for which, and therefore the limits within which, an activity is to be carried on. It divided what is worth doing from what is not, and settles the scale upon which what is worth doing ought to be done. It is in the second place, a principle of unity, because it supplies a common end to which efforts can be directed, and submits interests, which would otherwise conflict, to the judgment of an over-ruling object. It is, in the third place, a principle of apportionment or distribution. It assigns to the different parties of groups engaged in a common undertaking the place which they are to occupy in carrying it out. Thus it establishes order, not upon chance or power, but upon a principle, and bases remuneration not upon what men can with good fortune snatch for themselves nor upon what, if unlucky, they can be induced to accept, but upon what is appropriate to their function, no more and no less, so that those who perform no function receive no payment, and those who contribute to the common end receive honourable payment for honourable service. Frate, la nostra volontà quieta Virtù di carità, che fa volerne Sol quel ch'avemo, e d'altro non ci asseta. Si disiassimo esse più superne, Foran discordi li nostri disiri Dal voler di colui che qui ne cerne. * * * * * {183} Anzi è formale ad esto beato esse Tenersi dentro alla divina vogli, Per ch'una fansi nostre vogli e stesse. * * * * * Chiaro mi fu allor com' ogni dove In Cielo è paradiso, e sì la grazia Del sommo ben d'un modo non vi piove. The famous lines in which Piccarda explains to Dante the order of Paradise are a description of a complex and multiform society which is united by overmastering devotion to a common end. By that end all stations are assigned and all activities are valued. The parts derive their quality from their place in the system, and are so permeated by the unity which they express that they themselves are glad to be forgotten, as the ribs of an arch carry the eye from the floor from which they spring to the vault in which they meet and interlace. Such a combination of unity and diversity is possible only to a society which subordinates its activities to the principle of purpose. For what that principle offers is not merely a standard for determining the relations of different classes and groups of producers, but a scale of moral values. Above all, it assigns to economic activity itself its proper place as the servant, not the master, of society. The burden of our civilization is not merely, as many suppose, that the product of industry is ill-distributed, or its conduct tyrannical, or its operation interrupted by embittered disagreements. It is that industry itself has come to hold a position of exclusive predominance among human interests, which no single interest, and least of all the provision of the {184} material means of existence, is fit to occupy. Like a hypochondriac who is so absorbed in the processes of his own digestion that he goes to his grave before he has begun to live, industrialized communities neglect the very objects for which it is worth while to acquire riches in their feverish preoccupation with the means by which riches can be acquired. That obsession by economic issues is as local and transitory as it is repulsive and disturbing. To future generations it will appear as pitiable as the obsession of the seventeenth century by religious quarrels appears to-day; indeed, it is less rational, since the object with which it is concerned is less important. And it is a poison which inflames every wound and turns each trivial scratch into a malignant ulcer. Society will not solve the particular problems of industry which afflict it, until that poison is expelled, and it has learned to see industry itself in the right perspective. If it is to do that, it must rearrange its scale of values. It must regard economic interests as one element in life, not as the whole of life. It must persuade its members to renounce the opportunity of gains which accrue without any corresponding service, because the struggle for them keeps the whole community in a fever. It must so organize industry that the instrumental character of economic activity is emphasized by its subordination to the social purpose for which it is carried on. {185} INDEX Abolition of private ownership, 147 Absenteeism, 152 Absolute rights, 50-51 Absolutism in industry, 144 Acquisitive societies, 29-32 Administration, 115-116 Allocation of power, 163-164 American Constitution, 18-19, 52 Annuities, 74 Arbitration, compulsory, 101 Bacon, quoted, 58, 181 Bentham, 16, 52, 55 Brain workers, position of the, 161-171 British Coal Industry, reorganization of, 166-171 Building Guilds, 103 Building Trade Report, 106-110 Bureaucracy, 116, 149 Capitalism, and production, 173-176; downward thrust of, 154; in America, 101; losing control, 141-142, 148 Cecil, Lord Hugh, 23, 58 Cecil, Robert, 59 Cecil, William, 59 Church and State, 10-13 Coal Industry Commission, 71, 126, 137, 143; report of, 166-167 Coal Mines Committees, 152 Combinations, 125, 130 Committee on Trusts, 153 Competition, 27 Compulsory arbitration, 101 Confiscations, 103 Conservatism, the New, 28 Consumer, exploitation of the, 133-134 Co-operative Movement and cost of coal, 125 Dante, quoted, 182-183 Death Duties, 22 Democratic control, 116 Dickenson, Sir Arthur Lowes, 71 Directorate control, 129 Duckham, Sir Arthur, 119 Duke of Wellington, quoted, 123 Economic confusion, cause of, 131-132 Economic discontent, increase of, 5 Economic egotism, 27, Economic expansion, 9 Efficiency, the condition of, 139-160; through _Esprit de Corps_, 149-150 Employer, waning power of the, 140 England, and natural right, 15-16; and France contrasted, 16-17; Industrialism in, 44-47; Liberal Movement in, 18; over-crowding of population in, 37; proprietary rights in, 64 _et seq._ English landlordism, 22-23 Englishmen, characteristics of, 1-3; vanity of, 129 English Revolution of 1688, 52 Esch-Cummins Act, 118 Expediency, rule of, 16 Feudalism, 18 Fixed salaries, 177-178 Forced labor, 102 France, social and industrial conditions in, 16-17; Feudalism in, 18; Revolution in, 15, 65, 69 French Revolution, 15, 65, 69 Function, definition of, 8; as a basis for remuneration, 41-42; as a basis of social reorganization, 180; Function and Freedom, 7 Functional Society, 29, 84-90 Functionless property-owners, 79, 86; abolishment of, 87-88; an expensive luxury, 87 Gainford, Lord, quoted, 26, 111 Gantt, H. L., 175 Government control in war time, 25-26 Ground-rents, 89-90, 91 Hobson, Mr., 63 "Hundred-Family Man," 178 Imperial Tobacco Company, 116 Incomes, 41 Income Tax, 22 Income without service, 68 Individualism, 48-49 Individual rights, 9 Individual rights _vs._ social functions, 27 Industrial problems, 7 Industrial reorganization, 151, 155 Industrial revolution, 9 Industrial societies, 9 Industrial warfare, cause of, and remedy for, 40-42 Industrialism, 18; a poison, 184; compared to Militarism, 44-46; exaggerated estimate of its importance, 45-46; failure of present system, 139-141; nemesis of, 33-51; spread of, 30; tendency of, 31-32 Industry, and a profession, 94, 97; as a profession, 91 _et seq._, 125-126; deficiencies of, 147; definition of, 6; how private control of may be terminated, 103-104; and the advantages of such a change, 106; Building Trades' Plan for, 108, 111; motives in, 155-159; nationalization of, 104, 114-118; present organization of intolerable, 129; purpose of, 8, 46, 181; right organization of, 6-7; the means not the end, 46-47 Inheritance taxes, 90 Insurance, 74 Joint control, 111-112 Joint-stock companies, 66 Joint-stock organizations, 97 Labor, absolute rights of, 28; and capital, 98-100, 108; compulsory, 100; control of breaking down, 139 _et seq._; degradation of, 35; forced, 102 League of Nations, 101 Liberal Movement, 18 Locke, 14, 52, 55 Management divorced from ownership, 112-113 Mann, Sir John, 126 Militarism, 44-45 Mill, quoted, 89 Mine managers, position of, 162, 166-168 Mining royalties, 23-24, 88 Nationalism, 48-49 Nationalization, 114, 117; of the Coal Industry, 115, 165, 168-169 Natural right in France, 15; in England, 15-16; doctrine of, 21 Officials, position under the present economic system, 162 Old industrial order a failure, 139; its effect on the consumer, 144 Organization, for public service instead of private gains, 127 Over-centralization, 121 Ownership, a new system of, 112-114 Pensioners, 34 Poverty a symptom of social disorder, 5 Private enterprise and public ownership, 118-120 Private ownership, 120; abolition of, 147; of industrial capital, 105-106 Private rights and public welfare, 14-15 Privileges, 24 Producer, obligation of the, 127-128; responsibility of, 128 Production, increased, 5; large scale and small scale, 87; misdirection of, 37-39; why not increased, 136 Productivity, 4, 46 Professional Spirit, the, 149-150 Profits, and production, 173-176; division of, 133 Proletariat, 19, 65 Property, absolute rights of, 52, 80; and creative work, 52 _et seq._; classification of, 63, 64; complexity of, 75; functionless, 76-77, 81; in land, 56-60; in rights and royalties, 62; minority ownership of, 79; most ambiguous of categories, 53-54; passive ownership of, 62; private, 70-72; protection of, 78-70; rights, 50-51; security in, 72-73; socialist fallacy regarding, 86 Proudhon, 54 Publicity of costs and profits, 85, 123-124, 126, 132 Redmayne, Sir Richard, 149 Reformation the, 10-13; effect on society, 12-14 Reform Bill of 1832, 69 Religion, 10; changes in, 11-12 Report of the United States Industrial Commission, 1916, 128-129 Riches, meaning of, 98 Rights of Man, French Declaration of, the, 16, 52 Rights, and Functions, 8-19; doctrine of, 21 _et seq._, 43-44; without functions, 61 Rights of the shareholder, 75 Royalties, 23-24, 62 Royalties, and property, 70; from coal mining properties, 88; a tax upon the industry of others, 89 Sankey, Justice, 115, 117, 143, 165, 167, 168, 169 Security of income, 73-75 Service as a basis of remuneration, 25, 41-42, 85, 133 Shareholders, 91-92 Shells, cost of making, 124-125 Smith, Adam, 15, 52, 95 Social inequality, 36-37 Social reorganizations, schemes for, 5 Social war, 40 Socialism, 53 Society, duality of modern, 135 Society, functional organization of, 52 State management, 116, 117 Steel Corporation, 116 Supervision from within, 151 Syndicalism, 130 Taxation, 22 Trusts, Report on, 23 United States, transformation in, 65 Utilitarians, the English, 17 Utility, 16-17 "Vicious Circle," the, 43, 123-138 Voltaire, quoted, 55 Wages and costs, 131 Wages and profits, 78 Wealth, acquisition of, 20 _et seq._; as foundation for public esteem, 35-36; distribution of on basis of function, 77; fallacy of increased, 42-45; how to increase output of, 147; inequality of, 37-38; limitation of, 36-37; output of, 37-38; production and consumption of--a contrast, 77-78; waste of, 37-39 Whitley Councils, 110 Women self-supporting, 74 Worker and Spender, 77-78 Workers, collective responsibility of, 154 Workers' control, 128 Workmen, as "hands," 152; present independence of, 145-146; responsibility of destroyed, 153-154; servants of shareholders, 136-137; treatment of, 152-153 
27519	----	THE SETTLEMENT OF WAGE DISPUTES The MacMillan Company New York · Boston · Chicago · Dallas Atlanta · San Francisco MacMillan & Co., Limited London · Bombay · Calcutta Melbourne The MacMillan Co. Of Canada, Ltd. Toronto THE SETTLEMENT OF WAGE DISPUTES by HERBERT FEIS, Ph.D. Associate Professor in Economics University of Kansas New York The MacMillan Company 1921 All rights reserved Printed in the United States of America Copyright, 1921, by The MacMillan Company. Set up and printed. Published October, 1921. Press of J. J. Little & Ives Company New York, U. S. A. To 37 Mellen St. PREFACE "The Settlement of Wage Disputes" falls naturally into two almost equal parts: the first an account of the present industrial situation in the United States, and of the factors which govern American wage levels at the present time; the second an attempt to formulate principles which might serve as the basis of a policy of wage settlement for the country. The proposals made in the second part are based on the theoretical analysis of the first part. Certain chapters in the first part (III and IV) may prove difficult for the ordinary reader. They are intended to be merely an analysis of a particular set of facts and tendencies--those which affect the present wage situation in the United States, or may affect it in the near future. Such an analysis of a particular set of facts is all that economic theory can successfully accomplish. This book was first projected in the summer of 1914. The Dress and Waist Industry of New York City had set up a Board of Protocol Standards to settle wage disputes. The late Robert C. Valentine was then engaged in finding a basis of wage settlement for the industry that would be of more than passing value--and as his assistant, I first became convinced that there could be no permanent peace under the wages system, once different interests became organized, unless a clear body of fundamentals principles applicable to all industries are supported and enforced. In the course of the work I have incurred many obligations both in the United States and Great Britain. I can only acknowledge a very few here. To my teachers, Prof. F. W. Taussig and W. Z. Ripley, I owe much, both for their instruction, direct help and example. In Great Britain, Mr. John A. Hobson, Mr. Henry Clay and Mr. and Mrs. Sidney Webb aided me greatly to understand British experience. My debt to the work of Judge Jethro W. Brown of the South Australia Industrial Court is heavy as the book shows. Above all I have to thank my friend Dr. Walter B. Kahn for his share in the work. H. F. _University of Kansas._ CONTENTS PAGE Chapter I--Introductory 1 § 1. In any attempt to formulate principles for use in the settlement of wage disputes, past experience furnishes much guidance. What this experience consists of. § 2. Such principles as have been used in the settlement of wage disputes have usually resulted from compromise; reason and economic analysis have usually been secondary factors. However, industrial peace cannot be secured by a recurrent use of expedients. § 3. The attitude most favorable to industrial peace. Chapter II--Some Pertinent Aspects of the Present Industrial Situation 8 § 1. The chief aims of any policy of wage settlement for industrial peace defined--the chief tests to be passed. A knowledge of present industrial facts essential to the formulation of sound policy. § 2. The present economic position of the wage earners. § 3. Their relations to the other groups in industry. The acceptance of the practice of collective bargaining essential to any policy of wage settlement in the United States to-day. Trade unionism must prove itself fit for this responsibility, however. § 4. The economic position of capital in the present industrial order. Its service to production. The problems to which the accumulation of capital has given rise. § 5. The economic position of the directors of industry. Industrial control an attribute of ownership. Two important suppositions used in this book, concerning: a. The forms of industrial income; b. The possible spread of public ownership, and its consequences for a policy of wage settlement. Chapter III--The Principles of Wages 35 § 1. A knowledge of the forces governing existing wage levels essential in any attempt to work out a policy of wage settlement for industrial peace. § 2. Wage incomes determined by great number of forces. The three most important and constant among these stated. § 3. These three to be taken up in order. The volume of the flow of wealth in the county of the worker the first to be considered. Its relation to wages indirect, as all product is joint result. § 4. The scientific management theories of wages based on a misconception of the relation between the productive contribution of labor and wages. These theories merely an elaboration of one method of wage payment. They have perceived one important truth, however. § 5. The "group-demand" theory of wages as held by some trade unions, based on a similar misconception. Valid, sometimes, from group point of view; unsound from point of view of labor in general. § 6. The second important force determining wages is the relative plenty or scarcity of the different groups or agents of production. How this governs the share of the product going to wage earners. § 7. Many important modifying forces to the influence upon wages of relative plenty or scarcity. The most important considered. § 8. The forces determining the sharing out of the product of industry summarized. The idea of normal equilibrium in distribution a mistaken one. § 9. A brief analysis of the factors which determine actual plenty or scarcity of the different agents of production at any one time. § 10. The third important force introduced--the relative plenty or scarcity of different kinds of labor. The existence of relatively separate groups of wage earners discussed. The nature of an investigation of the principles of wages. Chapter IV--Principles of Wages (_Continued_) 69 § 1. We have next to examine the causes of formation of relatively separate groups of wage earners. § 2. What is meant by a "relatively separate group"? § 3. The causes of the existence of these groups in the United States to-day. Inequality of natural ability; inequality of opportunity; artificial barriers. All these contradictory to assumptions behind theory of general rate of wages. § 4. Trade unions another factor in the formation of relatively separate groups. Indirect effects in opposite direction. § 5. Each of these groups has a relatively independent economic career. There are a series of wage levels, all of which are governed to a considerable extent by the same forces. § 6. The way in which the relative plenty or scarcity of each kind or group of labor affects its wages. Other forces play a part also. § 7. The nature of wage "differentials." Chapter V--Wages and Price Movements 87 § 1. The transactions of distribution arranged in terms of money. How does this affect the outcome of distribution as regards wages? § 2. The characteristics of price movements. § 3. The direct and indirect effects of upward price movements upon the distribution of the product. § 4. The direct and indirect effects of falling price movements upon the distribution of the product. § 5. The doctrine of the "vicious circle of wages and prices" examined. Its meaning and importance. Chapter VI--Wages and Price Movements (_Continued_) 106 § 1. The problems of wage settlement arising out of upward price movements two in number: (a) Should wages be increased during such periods? (b) If so, on what basis should increases be arranged? The doctrine of the maintenance of the standard of life analyzed. § 2. An alternative method of adjustment proposed, based on a new index number. § 3. Periods of falling prices also present two problems of wage settlement, similar in essentials to those presented by upward movement. These problems discussed. Chapter VII--The Standard Wage 121 § 1. The remainder of the book will consist of an attempt to mark out principles of wage settlement that could be applied with relative peace and satisfaction in the settlement of wage disputes. § 2. Some preliminary notes on the subsequent exposition. The question of the political machinery required to put any policy of wage settlement into effect, avoided on the whole. § 3. The principle of wage standardization defined and explained. § 4. The characteristics of the standard wage examined. § 5. The effect of the standard wage on individual independence and initiative. § 6. The effect of the standard wage on the distribution of employment within the group. § 7. Its effect upon industrial organization, prices, and managerial ability. § 8. Its effect upon the output of the wage earners. This question cannot be satisfactorily discussed apart from the larger one--that of the effect of unionism upon production. § 9. Wage standardization and the "rate of turnover" of labor. Chapter VIII--The Standard Wage (_Continued_) 147 § 1. What variations or limitations should be introduced into the principle of standardization in view of the great area and economic diversity of the United States? § 2. Differences in natural or acquired advantage between different enterprises as a reason for modification and limitation of the principle. § 3. Differences in the character of the work performed by any large group of wage earners as a reason. § 4. Differences in the cost of living at different points within the area of standardization as a reason. § 5. The grounds for "nominal variations" in standard wage rates. The policy to be pursued in regard to payment for irregular employment. § 6. The possibility of maintaining standard wage rates over a large and diversified area considered. § 7. Up to the present, the progress of standardization has not proceeded in accordance with reasoned conclusions as to the results produced. § 8. Where should level of standardization be set? The doctrine of "standardization upward." § 9. The importance of the principle of standardization in wage settlement. Chapter IX--The Living Wage 177 § 1. The reasons for seeking separate principles for the settlement of the wages of the lowest paid groups. § 2. Wage statistics of these groups a matter of familiar knowledge. § 3. The definition of the living wage idea. An inescapable element of indefiniteness contained in it. § 4. The living wage principle put in the form of applied policy. § 5. Should the living wage principle be applied to male labor? The arguments for and against. § 6. The theoretical case for the living wage principle. The verdict of past experience favorable to its extension. § 7. The dangers which must be guarded against in applying it. § 8. It should be administered through machinery which makes possible careful study of facts of each industry. This machinery discussed. § 9. The question of the relation to be established between living wage for men and women difficult. Alternatives considered. § 10. A plan for the adjustment of the living wage to price changes. The basis of adjustment. § 11. The policy of adjustment--already discussed. § 12. The hope of the living wage policy. Chapter X--The Regulation of Wage Levels 209 § 1. Why there must be in industry an ordered scheme of wage relationship between each and every group of wage earners. The limits of collective bargaining as a factor in industrial peace. § 2. In the beginning, the scheme must probably be based on an acceptance of existing wage "differentials." The reasons for this are of a practical kind. § 3. Any policy which planned to develop a scheme of wage relationships merely by maintaining existing differentials would be bound to fall to pieces in the end. The difficulties that would arise. § 4. Two principles proposed as the basis of the desired scheme of wage relationship. Their meaning as applied doctrines. § 5. These principles open to criticism both on practical and theoretical grounds. The chief criticisms examined and taken into account. § 6. Some notes on the best method of administering these principles. The necessity of avoiding political interference, if possible. Chapter XI--The Regulation of Wage Levels (_Continued_)--Wages And Prices 231 § 1. The scheme of wage relationship must recommend itself as just to the wage earners and the community in general. The ultimate distributive question to be met is the division of the product between profit and wages. § 2. Provision for the adjustment of wages to price movements would aid, however, towards reaching distributive goal. A policy of adjustment suggested. § 3. The difficulty of maintaining scheme of wage relationship of wages adjusted to price movements. The best method of adjustment a compromise. Chapter XII--The Regulation of Wage Levels (_Continued_)--Wages And Profits 239 § 1. The profits return in industry, under any policy of wage settlement, will be closely scrutinized. § 2. The possibility of measuring a "fair" profits return for all industry discussed. A method suggested. § 3. Would the principles of wage settlement worked out so far, produce a fair profits return? An open question. § 4. The scope and form of any measure designed to assure the desired distributive outcome can be discerned. § 5. The various steps in the formulation of such a measure reviewed. A measure tentatively suggested. § 6. The difficulties of calculating wage changes called for under the suggested measure. § 7. The chief practical weaknesses of the suggested measure examined. § 8. It would be open to theoretical criticism also. The alternatives even less satisfactory. Chapter XIII--A Concept of Industrial Peace 264 § 1. The hope for industrial peace in the United States. § 2. A policy of wage settlement composed out of the principles already set forth. § 3. What results might be expected from the adoption of these principles as a policy? § 4. The matter of economic security for the wage earners likely to be important for industrial peace. Hardly considered in this book. The question has been presented to the Kansas Court of Industrial Relations. § 5. Certain new ideas concerning industrial relationship have come to stay. They indicate the probable current of future change. THE SETTLEMENT OF WAGE DISPUTES CHAPTER I--INTRODUCTORY Section 1. In any attempt to formulate principles for use in the settlement of wage disputes, past experience furnishes much guidance. What this experience consists of.--Section 2. Such principles as have been used in the settlement of wage disputes have usually resulted from compromise; reason and economic analysis have usually been secondary factors. However, industrial peace cannot be secured by a recurrent use of expedients.--Section 3. The attitude most favorable to industrial peace. 1.--The industrial life of the United States is marked by an almost continuous series of open struggles between the employers and wage earners of its highly organized industries. No one defends these struggles for their own sake. There is a general inclination, however, to regard them as a necessary accompaniment of industrial activity and change. It must not be supposed that all labor troubles are merely wage controversies--that is to say, that they are all incidental to the settlement of the wage incomes of the laborers. Many of them arise in whole or part from a shifting and conflict of ideas about various other aspects of the industrial order. It is possible, however, to concentrate attention upon those conflicts which center around the settlement of wages. There is a quick and somewhat tumultuous stream of investigation directed to the invention and formulation of principles which could be used as a basis of settlement of wage controversies. In various countries such principles have been formally set forth and used. The awards of the War Labor Board are an example of their imperfect application. In the Industrial Court of the Commonwealth of Australia we have an example of the consistent use of one set of wage principles. The material that has arisen out of this process of discussion and experimentation is of the utmost value to any one endeavoring to work out a wage policy for industrial peace in the United States. It forms a body of doctrines. It gives evidence both as to the chief subjects of wage controversy, and indicates the suitability or the shortcomings of many of the principles or doctrines that might be proposed. Thus in any investigation of principles of wage settlement--with a view to industrial peace--we are not without the guidance of experience. This experience consists, firstly, of the principles worked out and applied in the decisions and orders of the courts or boards which have served as agents of wage settlement in the United States, England, Canada and the Australian dominions. Of almost equal value is the material growing out of those great industrial conflicts of recent years, in which claims have been put forward and agreement has been sought on the basis of some definite theory of wages. Such, for example, is the material prepared and presented in the course of the railway wage arbitrations in the United States and England. Such also is the evidence and material presented in the course of the inquiry recently held in Great Britain upon the wages of transport workers. 2.--It should be understood that the principles which have been used in wage settlements in the past were not ideal solutions. That is to say they were not arrived at solely by the use of reason, directed to the discovery of what is just and what is for the general good. The situation has been rather that described by Mr. Squires, when he writes: "Too often in the past arbitration has followed the line of least resistance. With much unction, the lion's share has been awarded to the lion. Decisions proposing another settlement were speedily forgotten because not enforced. Those submitting to arbitration frequently did so with the mental reservation that the decision to be acceptable must at least approximate the conditions they felt they would be able to establish by a show of strength. From this position to one of complacent acceptance of arbitrary decisions, applied not to an isolated group but seeking to comprehend all labor or a given class, is a long step for both employers and employees." And again: "In arbitrary wage adjustments the absence of well defined and acceptable standards to be used in wage determination as well as the difficulty in enforcing awards that did not conform closely to the law of supply and demand has forced arbitration to resort to the expediency of splitting the difference. Cost of living, proportionate expense of labor, and net profits, when taken into account have been more often evoked in defense of claims made than as a means of determining what claims were just under the circumstances."[1] So, also, with any attempt to devise principles which might serve as the basis of a policy of wage settlement in the United States. They would represent the effort to develop standards by which conflicting claims could be resolved. It is not desired to signify agreement by this admission with those who believe that all principles of wage settlement must be purely passive, with those who argue that wage settlement must perforce be nothing more than a recurrent use of expedients produced on the spur of the occasion out of the magical hat of the arbitrator. All that is meant is that no policy of wage settlement will succeed if its results diverge too greatly from the interests which it, in turn, would guide and restrain. Any policy of wage settlement must take into consideration the moral and social circumstances pertinent to the dispute as well as the economic. It must express active social and ethical claims as well as recognize economic facts. It must be supported by the sense that it is at least moderately just. Most attempts, furthermore, to settle wage disputes by the use of defined principles have resulted in an incoherence of policy due to the necessity of bowing to the facts of force. This interference of force and the consequent disturbance of policy is likewise to be expected in all future attempts. For, in all human affairs private interest will, on favorable occasions, revolt against laws or rules which restrain it. Again, in the United States all past attempts to settle wage disputes by reference to principles have been isolated and sporadic. They have, therefore, been virtually foredoomed to failure. For as will be made clearer as we progress, any successful attempt to base wage settlements upon principles will demand the consistent and courageous application of these principles for a not inconsiderable period, and to all important industries alike. Otherwise compromise and a search for any way out of the immediate crisis is the only possible principle of settlement. Any well-conceived policy of wage settlement must have regard for a far wider set of forces and facts than are presented by any single controversy. The objects of any policy could only be attained through a long series of decisions ranging throughout the field of industry, and related to each other. This, it is trusted, will become plain as the difficulties of formulating policy are discussed. 3.--Prof. Marshall in his great book has an arresting passage on the importance of the tendency to organization which characterizes the whole field of industry. He writes: "This is not a fitting place for a study of the causes and effects of trade combinations and of alliances and counter alliances among the employers and employed, as well as among traders and manufacturers. They present a succession of picturesque incidents and romantic transformations which arrest public attention and seem to indicate a coming change of our social arrangements now in one direction and now in another; and their importance is certainly great and grows rapidly. But it is apt to be exaggerated; for indeed many of them are little more than eddies such as have always flitted over the surface of progress. And though they are on a larger and more imposing scale in this modern age than before; yet now, as ever, the main body of the movement depends on the deep, silent, strong stream of the tendencies of normal distribution and exchange which 'are not seen' but which control the course of those episodes which 'are seen.' For even in conciliation and arbitration the central difficulty is to discover what is the normal level from which the decisions of the court must not depart far under penalty of destroying their own authority."[2] Writing in England in 1920, it seems to me as if the events of change in England were more than the surface movements he speaks of, and that slowly but definitely industrial arrangements are undergoing modification so as to give scope to new energies and ideas which will modify the "normal" distribution and exchange as he conceived it. The future in the United States is even less clearly marked. There too new purposes and claims are arising and will seek adjustment with established arrangements. The attitude of all those who really desire industrial peace must be that of readiness to judge such forces of change as may become active, by the balance of good or harm they seem to promise. For that is the attitude which alone can make possible a fusion of the conservatism of experience and of established interest, and the radicalism of hope and desire--by which fusion society can experience peaceful development. FOOTNOTES: [1] "New York Harbor Wage Adjustment," B. M. Squires, _Monthly Review of the U. S. Department of Labor_, Sept., 1918, page 19. [2] A. Marshall, "Principles of Economics," 7th Edition, page 628. CHAPTER II--SOME PERTINENT ASPECTS OF THE PRESENT INDUSTRIAL SITUATION Section 1. The chief aims of any policy of wage settlement for industrial peace defined--the chief tests to be passed. A knowledge of present industrial facts essential to the formulation of sound policy.--Section 2. The present economic position of the wage earners.--Section 3. Their relations to the other groups in industry. The acceptance of the practice of collective bargaining essential to any policy of wage settlement in the United States to-day. Trade unionism must prove itself fit for this responsibility, however.--Section 4. The economic position of capital in the present industrial order. Its service to production. The problems to which the accumulation of capital has given rise.--Section 5. The economic position of the directors of industry. Industrial control an attribute of ownership. Two important suppositions used in this book, concerning: a. The forms of industrial income; b. The possible spread of public ownership, and its consequences for a policy of wage settlement. 1.--The problem of wage settlement may be regarded as the task of elucidation or invention of methods and principles in accordance with which the product of industry might be shared among the wage earners and the other participants in the product with relative peace and satisfaction. It is necessary and permissible, as has been remarked, to separate this problem from other closely related problems. However, any policy of wage settlement that might be adopted would be also an important influence in other industrial issues outside of those it settles directly. It would affect in numberless ways the relations between the groups concerned in production. It follows that no policy of wage settlement will work successfully unless it accomplishes two ends. First, it must represent convincingly the effort to divide the product of industry so as to satisfy the most widely held conceptions of justice in the industrial system. Second, it must contribute, wherever it is a factor, to such an adjustment of industrial relations as will command the voluntary support of all groups whose coöperation is necessary for the maintenance of industrial peace. For the accomplishment of these two objects, any policy must be based upon a knowledge of the present economic position of the various groups engaged in industry, and of the present state of industrial relations between them. It is obviously impossible to review these matters adequately in this book. The most that can be attempted is a brief survey of those aspects of these questions with which the problem of wage settlement must definitely concern itself. Such a survey will occupy this chapter. If it serves no other purpose, it will serve the important one of making clear the source of certain general presuppositions with which the problem of formulating a policy of wage settlement for industrial peace is approached. 2.--It is convenient to deal with the general field under survey by considering in the order stated, the present economic position, firstly, of the wage earners; secondly, of those who own invested capital; and thirdly, of those who direct industrial activity. Questions of industrial relationship between these groups can then be presented at the point at which they arise most pertinently. Such a loose order as this is dictated by the desire to avoid all questions except those which inevitably arise when studying the problem of wage settlement. To begin with the wage earners. The task of giving exact scope to the term "wage earners" may be shirked. The term may be taken to include, at least, all those grades of workers whose incomes would be governed directly by any scheme of wage settlement. When using the term in the course of theoretical discussion, as in the ordinary analysis of distribution, it may be taken to include also other grades of workers, whose incomes probably would not be so governed, as for example, assistant or department managers of large businesses. The recent past has witnessed important changes both in the economic position of the wage earners, and in the relations between them and the other groups engaged in industry. A close connection may be traced between the two lines of change. Up to the beginning of the present century, at any rate, it may be asserted that the wage earners of the country were not separated from the rest of the industrial community, either socially or economically; although at all times throughout the last century, there was to be found a section of recent immigrant labor which had not yet found its way into the main channels of economic society. The farms, the shops and private businesses of the small and semi-rural towns; these were the common origins and discipline of our industrial leaders and of the more skilled groups of wage earners. There was no great difference either of educational or of industrial opportunity between the mass of men. The few great financial centers of the East may have been the home of an established and separate economic class, but this class was not one of the most important industrial forces. The standard of life as well as the economic prospects of all wage earners who had been thoroughly absorbed into the community encouraged a feeling of equality and independence. The tradition of our period of industrial expansion was that most men should seek to operate their own farm or business (and be their own master). This tradition could flourish as long as a great variety of industrial opportunity existed for the ordinary individual. The first stages in the development of our natural resources, the course of mechanical invention and improvement, the rapid growth of our population--all these changes stimulated independent enterprise, and offered great hopes of success in enterprise to men possessed of common sense, energy, and character. No family felt itself placed in a fixed position in the industrial scale except by reason of its own inferior powers of utilizing opportunity. The wage earners were those workers who worked for some one else, but they did not form a separate class different in experience and outlook from their employers. The possession of wealth, under such circumstances indicated individual capacity, temperament, and ambition. That phase of American industry is certainly not entirely past, although it has not persisted to the extent that some of the industrial leaders whose rise was contemporaneous with the earlier stages of industrial expansion, are wont to argue. At the present time able and determined individuals, who in youth are manual workers frequently succeed in discovering openings to the higher industrial positions. The need for business ability is still too great to be supplied by any one level of society; all are drawn upon. The thought that each man can attain to the possession of a business of his own, or to a position of importance in some big business, is even now a common conviction and inspiration among the more skilled groups of wage earners. Yet the economic position of the wage earners in industry has undergone genuine change. The chief characteristics of the present situation are familiar knowledge. First of all, the percentage of employers to wage earners in industry has decreased.[3] Again most new undertakings in the important branches of productive industry require a large amount of capital, a specialized and rather rare capacity for organization and a considerable knowledge of a wide sphere of industry. Indeed, the undertaking of new business enterprises has itself become to no small extent the function of organizations rather than of individuals. Further the personal coöperation between employer and the best men among his wage earners which was in the past the ordinary method of business education is not often practised now. Industry is not a good education for the skilled and able wage earners. Industrial management has usually taken the view that there is no need or profit in educating the wage earners beyond the requirements of their specialized task. The gap between ordinary wage work and managerial work and ownership is in most industries great--the path upward hard to discover. The jobs which carry the easiest opportunities for advancement in many important industries are now the subordinate positions in the various executive, administrative or sales branches. These jobs tend to be given to young men from that section of society which has affiliations, direct or indirect, with the management of industry. The growth in importance of these branches has led to the development of a specialized form of education for industrial leadership which the wage earner does not receive. Indeed, with the ever increasing complexity of the problems of business enterprise, prolonged education, itself, has become of more importance in determining individual chances of success. All these developments have greatly lessened the chances of the ordinary wage earner for any position of ownership or control. They have tended to separate the wage earners from the groups controlling industry; they have taken away in a large measure the inspiration which work receives from hopes of steady advancement. When that hope is gone only the hope for high wages is left, and that is not a sufficiently potent common aim to insure the coöperation required for so complex an activity as modern industry. Simultaneously with the revolution in industrial structure and interacting with it in many ways, there has occurred a great change in the composition and character of the wage-earning body. The change that occurred between 1870 and 1910 in the sources of the immigration which has furnished the United States with the bulk of its supply of unskilled and semi-skilled labor, is a commonplace of American industrial history. The effects of this change have been largely governed by other industrial events, chief among which may be put the increased concentration of industry in and around a relatively small number of cities or regions. For as Mr. Chapin in his study of the sources of urban increase has stated: "Immigration has been the chief source of urban increase in the United States during the past quarter of a century."[4] There has assembled in each of our great cities a mass of workers, many of whom are of recent alien origin, quickly habituated to the routine of existence in crowded city streets and busy factories. The interchange of opinion and of sympathy between these lowest grades of industrial workers and the rest of the community is very imperfect. Their industrial position and outlook tends to be that of a separate class. As a rule, they are unorganized. It is of these grades of labor that Prof. Marshall has written "Some of these indeed rise; for instance, particular departments of some steel works are so fully manned by Slavs, that they are beginning efficiently to take the place of Irish and others who have hitherto acted as foremen: while large numbers of them are to be found in relatively light, but monotonous work in large cities. They may lack the resolute will which put many British, German and Scandinavian immigrants on terms of equality with native Americans. But they are quick withal, versatile; and as a rule, easily molded; they take readily to the use of machinery; and they have no tradition that could prevent them from doing their best in using semi-automatic machines, which are simple of handling, while doing complex work. Thus America has obtained a plentiful supply of people who are able and willing to do the routine work of a factory for relatively low wages, and whose aptitudes supplement those of the stronger races that constitute the great bulk of the white population."[5] They have sought chiefly such improvement in their position as might come from increased wages. They have remained in the regions of the will and of thought subject to those who controlled industry; for they themselves have been in a strange environment, and so have not been able to display, to any considerable extent, the qualities requisite to industrial leadership. The difference of viewpoint and even of economic interest between the groups of skilled craftsmen in industry and the unskilled grades is being gradually reduced. Industrial developments have tended to emphasize the measure of common interest between all grades of wage earners. The steady trend to standardization in production and to simplification of the machine processes has lessened somewhat the difference between the character of the work of the upper and lower grades of labor. Modern industrial developments have led to an increased emphasis upon "general ability" and a lessened emphasis upon "special ability." To quote Marshall again, "Manual skill that is so specialized that it is quite incapable of being transferred from one occupation to another is becoming steadily a less and less important factor in production. Putting aside for the present the faculties of artistic perception and artistic creation, we may say that what makes one occupation higher than another, what makes the workers of one town or country more efficient than those of another, is chiefly a superiority in general sagacity and energy which are not specialized to any one occupation."[6] As labor organization tends to become recognized as a regular part of the framework of industry, as the duties put upon trade union leadership are broadened in order that industry may give the wage earners collective representation, it is to be expected that stronger bonds will arise between the skilled and unskilled grades of wage earners than those which unite them at present.[7] The position of the female industrial workers remains to be noted since the employment of women in industry seems likely to increase. Women are employed, on the whole, on the lighter and more routine stages of the process of production. They have shown capacity, endurance and steadiness upon monotonous and nerve straining work both upon machine and hand tasks. It seems likely that they will continue to displace men in many of the simpler mechanical jobs. Many individual women wage earners have risen to tasks of responsibility and direction. This number will be greatly added to by improvement in the education of women for industry and by their continued self-assertion. Nevertheless, it is likely that the great bulk of women wage earners will continue to be employed as at present upon relatively simple, light and unskilled work. Such, in briefest outline, is the economic position of the wage earners in American industry to-day. There is a diversity of outlook and of animating spirit among the various groups or classes. There is no very settled opinion among them as to the place of the wage earner in the industrial system. There is besides a diversity of racial and sex faculty and adaptability. 3.--Change and diversity also mark the relationships between the wage earners and the other industrial groups. Up to the very recent past, the connection of the wage earners with the enterprise in which they served was limited practically to the fulfillment of the individual wage contracts which were made. The obligation of the wage earners to the enterprise which employed them has been considered at an end with the performance of the work they were employed to do. Similarly, the obligation of the enterprise to the wage earners has been considered fulfilled by the payment of wages earned. The wage earners have been called upon to give their whole-hearted efforts to their work by reason of the belief that such effort was to their own interest, and by reason of their own hopes and desires for advancement. The American wage earners have usually tackled their jobs with energy, good will, and sincerity. It is impossible to attempt to sketch here the development of the practice of collective bargaining, and the various concepts of industrial relationship to which the rise of trade unionism has given impulse. We are now in the midst of a struggle brought about by the efforts of the wage earners to add to their traditional rights of freedom of contract and of enterprise certain other rights. These may be collectively described as the right to organize and to use their organized strength collectively in all ways which may be reconciled with the public interest. Some of the greatest industrial conflicts of recent years have been consequences of the efforts of the wage earners to establish these additional rights both in fact and in law (as for example the strike in the steel and iron industry in 1919). Much headway has been made in the establishment of the rule of collective bargaining in industry. The scope of the matters usually settled by that method varies greatly between individual, establishments and industries. Organized labor has frequently received official recognition by the fact of its representation on bodies concerned with the investigation or control of the conditions of labor, or with general questions arising out of, or closely connected with, industrial activity--especially during the war. The President's Second Industrial Conference, which was appointed to make recommendations concerning the most urgent problems of industrial relationship that had been accentuated by the war, emphasized the need for the "deliberate organization" of the relationship between employer and employees in large industries, but contributed little to the matters in dispute. Their view was expressed as follows: "To-day we have a complex interweaving of vital interests. But we have as yet failed to adjust our human relations to the facts of an economic interdependence. The process toward adjustment, though slow, nevertheless goes on. Right relations between employer and employee, in large industries, can be promoted only by deliberate organization of that relationship. Not only must the theory that labor is a commodity be abandoned, but the concept of leadership must be substituted for that of mastership." The attitude of the community has been to take no step in advance of what resulted from the trial of argument and force by the directly interested parties. But it is probable that in the future public opinion will be more positive and will grant to labor organizations fuller recognition and greater participation in the control of industrial activity than heretofore. It will be impossible to develop any policy of wage settlement while certain of these questions of industrial relationship remain unsettled--particularly the question of the acceptance of the method of collective bargaining. Any proposals of wage policy must put that matter, at least, on firm ground. It is probable that in order to administer any policy of wage settlement some means of representation for the wage earners will be indispensable. And it is likely that satisfactory representation can only be obtained by the organization of the wage earners. Furthermore, this organization will have to be on a wider scale than shop organization, although shop organization may also be useful. Thus it may be said that it will be found necessary in any attempt to secure industrial peace in the United States by the enforcement of a policy of wage settlement, not only to recognize labor unions where they already exist, but also to give encouragement to some form of organization where none exists.[8] If in the trying times immediately ahead the trade unions give proof that they are more than servants of craft interests; if they stand up as democratic institutions capable of exercising power in industry and not abusing it; if their leaders show they can be humble, when made powerful, then that opposition to the growth of trade union power which is based on a genuine concern for the public welfare will be disarmed. If the trade unions show none of these qualities, the common sense of the community will resist them in the name of traditional equality and democracy. Popular movements such as trade unionism must make mistakes constantly, but because of the spirit behind them, they have great powers of recovery. The trade union movement, as a whole in the United States, has not yet shown a thorough comprehension of the economic system of which it is a part; it has, therefore, often erred in its efforts to end an evil or injustice. Particular unions and leaders have often pursued mean, short-sighted and self-seeking policies--which have reflected upon the whole movement. Much like other economic groups, when their own interest has not coincided with the general interest, they have frequently put their own interest first. It is the test of all great popular movements, however, that they show they possess the ability to pursue a just and generous policy even while they are hard pressed, provoked by injustice, and maligned. That is the trial which trade unionism faces in the United States to-day; it is the example trade unionism must set before it can expect willing acceptance as a fundamental industrial institution. Unless the union movement proves itself intelligent, disciplined, and aware of ethical considerations, a continuance of industrial conflict will be inevitable; for any practicable policy of wage settlement for industrial peace will require union participation. 4.--Let us pass now to the economic position of "capital" (the owners of capital) in the industrial order which uses it (of which they are a part). In a society where labor works upon the gifts of nature almost unaided by instruments invented by man and fashioned by previous human labor, the society must content itself with small numbers or little product or both. Modern industry has been shaped, perhaps predominantly, by the effort to support large numbers at a high standard of economic existence. Production has become greatly subdivided among specialized groups. In industry to-day, the wage earners of various kinds perform their tasks with the assistance of such equipment, machinery, and general organization as will serve to make their labor result in a large product. The means which make possible this effective employment of labor in industry are what we mean by the term "capital."[9] The section of the community which owns and directs the investment of the bulk of these means has received the name of capitalists. Almost all the capital accumulated within the United States is privately owned. Since the beginning of our industrial history the opportunities for accumulation have been left to individuals and the capital which industry has used has been provided by private owners. We have depended upon the personal motives of individuals to persuade them to refrain from the immediate consumption of some part of the product of industry which has come into their possession, and to lead them to put their savings at the further command of industry. The circumstances which have governed the course and direction of this accumulation, and the question of the amount of economic cost that it involved have been the subjects of much capable exposition and of very violent differences. Much accumulation has resulted from the fact that industrial or rent incomes have been at certain times distinct surpluses over the possible consumption of the individuals in receipt of them. Much has been prompted and maintained by the efforts of men to move ahead to success and power--that is by ambition and rivalry; much by the idea that pecuniary success is itself an achievement, a mark of ability and leadership. The ordinary hopes of the multitude of men, such as the desire for a secure existence for themselves and their family, and the wish to figure among their friends as an equal, have been the steadiest motives of all. Saving is not one of the most deeply implanted habits. It is a habit that is closely bound up with the qualities of personal ambition, calculation and the desire for responsibility. That is the reason why rich men are so seldom very likable. It is the reason also why those who are the most needy are at times least disposed to save when they have a chance. And if in the immediate future, the responsibility for accumulation is to be more widely diffused than at present, there will have to be a general cultivation of these qualities--qualities, indeed, most requisite for a complex, mechanical civilization like our own. The accumulation of capital, as has been said, enables industry to utilize such methods of production as result in a high volume of product for a given expenditure of effort. Much of the hopefulness and energy which has characterized our industrial life arose out of the belief that the continuous course of capital accumulation, since it made possible the utilization of new inventions and improved methods of production, was preparing the way for a future that would be marked by even a wider distribution of comfort than men saw around them. Thus it has been urged that by devotion to industry and by consuming less than was produced, the time would come when the world would be so well equipped that none of its workers would have to be in want of the economic essentials of a satisfactory life. In Mr. Keynes words, "Society was working not for the small pleasures of to-day, but for the future security and improvement of the race,--in fact for 'progress.' If only the cake were not cut, but was allowed to grow in the geometrical proportion predicted by Malthus of population, but not less true of compound interest, perhaps a day might come when there would be at last the enjoyment of our labors. In that day, overwork, overcrowding and underfeeding would come to an end and men secure of the comforts and necessities of the body could proceed to the nobler exercise of their faculties."[10] Under the guiding force of this conviction, and in the United States, with the extra stimulus of the belief that individual effort was throwing open vast new resources to the world, the course of accumulation has been viewed with approval and in the spirit of emulation. We, however, have recently been assailed by growing doubts in regard to the idea of economic progress based upon capital accumulation. We have witnessed the growth of severe tensions between those who receive the greatest share of the income from accumulated wealth and the other groups engaged in production. It is pertinent to inquire into the reasons for this change of feeling; for, within the sphere of its operation, any policy of wage settlement must aim to lessen or eliminate this cause of discontent. First of all it must be observed that the bulk of the accumulation has been accomplished by a relatively small number of individuals. If this concentration of wealth were peculiar to the United States it might be attributed to the fact that this country has undergone exceptionally rapid expansion, during which the opportunities for accumulation were both unusual and irregularly distributed. But the explanation seems to lie deeper, for the same condition is to be found in all advanced industrial nations. The opinion may be ventured that it is characteristic of such industrial arrangements as have prevailed in the United States, that the tendency towards diffusion of the results of advances in production (obscured, besides, by the growth of population) should lag seriously behind the tendency towards concentration.[11] The condition of inequality of wealth, heretofore a condition of the process of capital accumulation, is one of the chief causes of the embitterment of industrial relations. Firstly, it is one of the factors which tend to the creation of separate group interests. A high degree of inequality of accumulated wealth leads to a concentration of the control of the larger industrial enterprises within the hands of a small section of the community. The interest in high returns from accumulated wealth appears to be a group interest. And, indeed, if the lag of diffusion behind concentration passes a certain point it is in reality a group interest--in the sense of being opposed to the general interest. Secondly, great inequality of wealth leads to the growth of institutions incompatible with the purposes of a democracy. These are a cause of economic antagonism, which has its reflection in industrial relations. Thirdly, it has evil psychological effects. In a country bred upon the general ideas of democracy, not even political equality and a wide distribution of economic necessities and comforts will suffice to produce general contentment, if a top stratum of the community is possessed of the social advantages of vast wealth. Few are satisfied with their lot as long as they see others, often through no qualities of their own, more satisfactorily endowed with worldly goods. Lastly, although great inequality of wealth makes possible a high level of production, it also makes great waste possible. Thus, grave dissatisfaction surrounds that very process of capital accumulation which has been regarded as the high road of economic progress. Grave doubts have arisen as to the ultimate attainment of the vision at its end. The task is presented of directing and safeguarding the course of capital accumulation. It is evident that no policy of wage settlement can, of itself, do a great deal in this regard. Something it can do. That, it is ventured, should be along the following lines: it must aim to effect a distribution of the product of industry in which the return to the owners of accumulated capital does not exceed a point determined by weighing the following considerations: First, the service of capital in production, the sacrifice involved in much accumulation, and the need of assuring capital accumulation, as discussed above. Secondly, the evil effects of inequality of wealth as discussed above. Thirdly, the fact that the health, energy, and intelligence of those that carry out the work of production are no less important factors in effective production than capital itself. And that the possession and use of these qualities by individuals is to a considerable measure dependent upon their economic position here and now. These various considerations, it need hardly be said, cannot be weighed mechanically, but only by the use of the informed judgment. The policy of wage settlement must, in addition, give indirect encouragement to the growth of such industrial beliefs and institutions as will enable the wage earners to participate in the control over the conditions of production. Only then will the effect of industrial methods on the welfare of the wage earner receive constant attention, and the desire of the wage earners for self-improvement be given encouragement. In these directions, then, the policy of wage settlement can and should safeguard and direct the course of capital accumulation. 5.--The preceding discussion bears directly upon the next question to be considered, namely, the present economic position of those who perform the work of direction in industry. Only one or two aspects of this subject require attention in this investigation. It may be remarked, to begin with, that those who own the capital invested in industrial enterprises thereby possess the most general powers of control and direction over them. These powers they may exercise personally or through their agents--but in either case, the fact of ownership is the decisive influence in the settlement of these questions in which the wage earners are most interested. The fact that some of the capital invested in particular enterprises may not carry with it any rights of control or direction--as for example, the capital invested in railway bonds, or the temporary borrowings from the banks contracted by most industrial concerns--does not affect this truth. It is entirely conceivable that enterprises might be carried on wholly with the use of such capital as gave no title to control over the conduct of the enterprise; but at present, the opposite, generally speaking, is the fact. And as is to be expected the work of direction is dominated normally by the necessity of earning profit for the owners of the enterprise--though many other sentiments and motives may and do mingle with the motive of profit-making. These facts form the basis of two suppositions, by the aid of which the argument of this book is carried out. The first one is to this effect: that if rent incomes (in the sense of Ricardian rent) are left out of consideration, since they will not be directly affected by the policy of wage settlement, the product of industry is distributed in two major forms. These are to wit: that which is received by workmen in direct return for their labor, which is called wages; and that which goes to those who own, and therefore govern, directly or indirectly, the operation of industrial enterprises, which is called profits. It is hardly necessary to remark that the same individual may be in receipt of both forms of income. The second form of income "profits" is a mixed form of income which may be analyzed in different instances, into very different quantities of the elements which make it up. This mixed form of income, which goes to the owners of industry by virtue of their dual connection with industrial enterprise--the connection of ownership and direction--contains in some forms of enterprise a large element of what has been called "the wages of management"; in other forms this element may be almost entirely absent. So too with the element of "interest" and with the other elements which may enter into it. Throughout this inquiry the term "profits" will be used to indicate this mixed form of income. The second supposition supplies an answer to a question that must be faced in any attempt to formulate a policy of wage settlement for industrial peace in the United States. That question is whether it shall be taken for granted that the desire for private profit will continue to govern the performance of the tasks of industrial direction. The wage policy that is developed in the course of this book is based on the assumption that the large majority, if not all, of the industries which would be included in it, were it adopted, will remain privately owned and operated. At the same time, it is by no means outside of current possibilities that certain of our greatest industries may change over into some form of public ownership; and that this ownership would be accompanied either by direct public operation, or very considerable public regulation of their operation. Therefore, we are led to ask whether a wage policy conceived on the assumption of private ownership and control would be applicable to industries under public ownership. The answer will be different according to circumstances. If the régime of public ownership should become general, as is contemplated in the orthodox socialist theory, it is likely that, then, an attempt would be made to rest wage policy on principles fundamentally different than any that would be practicable under a régime of private enterprise. On the other hand, if public ownership should be extended only to a very few though important industries such as the railroads and coal mines, it is almost certain that the principles underlying the settlement of wages in the publicly owned industries would have to be the same as those applied in the privately owned. The general policy of operation might differ, however, in other respects. Thus, a policy of wage settlement formulated on the assumption of private ownership would not become unsuitable in the event that some industries became publicly owned. The relations between those who carry out the actual work of direction in industry and the wage earners have been touched upon already from the point of view of the wage earners. It has been stated that the policy of wage settlement should give encouragement to such arrangements as will enable the wage earners to participate in the control over the conditions of production. Alongside of this general aim may now be put one other, which cannot in any way be embodied in the terms of wage policy, but which should be given a leading place in the calculations of those who execute the wage policy and therefore possess educative influence. That purpose is to try, by the educative power of their position to give vitality to the idea that those who direct industry have a duty to weigh the public interest in their operations, and to emphasize the necessity of seeking a basis of coöperation with the wage earners which will give them all possible chance to find their work healthy and interesting. FOOTNOTES: [3] A. Marshall, Appendix N, "Industry and Trade," entitled "The Recent Increase in the Size of the Representative Business Establishment in the United States," has drawn up some tables on this very subject. He writes, "The table given below shows that the 208,000 establishments engaged in manufacture in 1900 had increased to 268,000; but meanwhile the total value of their output had increased from $4,831 M to $8,529 M: that is, their average output had increased from 232,000 to 318,000: if we go back to 1850, when workshops, etc., were reckoned in, we find the average output of an establishment to have been less than 4,000 dollars." And again "Industrial establishments having a less output than 100,000 dollars accounted for 20.7 per cent. of the whole in 1904; but only 17.8 in 1909. In the same years the share of establishments with output between 100,000 dollars and 1,000,000 dollars fell from 46.0 to 43.8, while that of grant businesses with not less than 1,000,000 dollars output rose from 38 per cent. to 43." [4] _Publications of the American Statistical Association_, Sept., 1914. [5] A. Marshall, "Industry and Trade," p. 149. See for analysis of occupations of immigrants, "Report of U. S. Ind. Commission," Vol. IX. [6] A. Marshall, "Principles of Economics" (7th edition), page 206. [7] In an analysis of the trend toward union amalgamation published by Glocker in 1915, he concludes that "Instances in which the self interest of the skilled workers demand their amalgamation with the unskilled are still rare, however. If common laborers are admitted in the near future to unions of other workers in the same industry, they will be admitted not from self interest, but from more altruistic motives, from a growing spirit of class consciousness attended, perhaps, by a correspondingly growing realization of class responsibility"--"Amalgamation of Related Trades in Unions." _American Economic Review_, Sept., 1915, page 575. [8] Under the Kansas Industrial Court Law passed in 1920, no provision in that direction is made. The Court is instructed to deal either with organizations or with individuals. It is likely that the Court, in its efforts to get disputes settled before they reach it, will find it necessary to encourage organization. A related question which is bound to arise sooner or later is in regard to the stand that the court will take in disputes arising out of attempts to organize an industry. [9] It should be observed that the above definition of capital as the "means which make possible the effective employment of labor in industry" is a functional definition. To make the definition good, so to speak, it would be necessary to enter into an analysis of a complex series of interactions including a study of the action of the banking systems, and the methods of industrial finance. To attempt to state the various forms of capital would involve the same process--for capital is to some extent a secretion of the whole industrial organization. For present purposes it is better to disregard the finer shades of interaction involved in the process of creation of capital and the provision of capital to industry important as they are. It will suffice to take note only of the simpler and most fundamental aspect of the process. Thus it is not misleading, for present purposes, to say that the capital which is at the command of industry in the U. S. at the present time is the result of accumulation in private hands of some part of the product of past labor. [10] J. M. Keynes, "Economic Consequences of the Peace," pages 18-20. See also A. Marshall, "Industry and Trade," Appendix P headed "Possibilities of the Future." [11] In the very interesting study made by Prof. Bowley on "The Change in the Distribution of the National Income, 1880-1913" (Great Britain), page 27, a similar conclusion is stated. See also the article of Prof. A. A. Young entitled "Do the Statistics of the Concentration of Wealth in the United States mean what they are commonly assumed to mean?" In the March, 1917, issue of the _Journal of the American Statistical Association_. CHAPTER III--THE PRINCIPLES OF WAGES Section 1. A knowledge of the forces governing existing wage levels essential in any attempt to work out a policy of wage settlement for industrial peace.--Section 2. Wage incomes determined by great number of forces. The three most important and constant among these stated.--Section 3. These three to be taken up in order. The volume of the flow of wealth in the country of the worker the first to be considered. Its relation to wages indirect, as all product is joint result.--Section 4. The scientific management theories of wages based on a misconception of the relation between the productive contribution of labor and wages. These theories merely an elaboration of one method of wage payment. They have perceived one important truth, however.--Section 5. The "group-demand" theory of wages as held by some trade unions, based on a similar misconception. Valid, sometimes, from group point of view; unsound from point of view of labor in general.--Section 6. The second important force determining wages is the relative plenty or scarcity of the different groups or agents of production. How this governs the share of the product going to wage earners.--Section 7. Many important modifying forces to the influence upon wages of relative plenty or scarcity. The most important considered.--Section 8. The forces determining the sharing out of the product of industry summarized. The idea of normal equilibrium in distribution a mistaken one.--Section 9. A brief analysis of the factors which determine actual plenty or scarcity of the different agents of production at any one time.--Section 10. The third important force introduced--the relative plenty or scarcity of different kinds of labor. The existence of relatively separate groups of wage earners discussed. The nature of an investigation of the principles of wages. 1.--In the preceding chapter, an attempt was made to mark some of the broader tests which will confront any policy of wage settlement for industrial peace and to foresee the ends that must be accomplished. An effort was made to define some of the conditions of industrial peace. To what extent these conditions are attainable, and how they are to be sought, remains to be studied. The starting point of further study is a knowledge of the forces which govern the distribution of the product of industry at the present time in the United States--that is, a knowledge of the principles of distribution. Our intention, however, is to undertake that study only in so far as it is necessary to explain how wage incomes are determined. Such a partial study of the principles of distribution with the special purpose of making clear the factors that govern wage incomes will occupy the next two chapters. They will constitute a statement of wage principles. 2.--The distribution of the product of industry between the wage earners and the other groups who share in it is a continuous process in which each group asserts its own interests and purposes. Wages are settled through a series of separate bargains between the wage earners and the owners or directors of industrial enterprises. The outcome of these bargains, as regards wages, is determined by the interaction of a great number of circumstances or forces, some of which are relatively more constant and more important than others. We will begin our study of wage principles by considering those forces which are relatively the most important and the most constant. These have been cogently summarized as follows: "... the volume of the flow of wealth in the country of the worker; the relative plenty or scarcity of different agents of production; the relative plenty or scarcity of different kinds of labor."[12] They may be taken up in the order stated, at the same time noting the way their action is modified and complicated by other factors. One preliminary comment may be admissible. It is to the effect that there has been in the past a tendency to view the problem of distribution (and so, of wages) as if it consisted of making clear by analysis the balance or equilibrium of a few given and unchanging tendencies--which were deduced from human and physical nature. These forces furthermore, were frequently held to be universal; the conclusions based on them have often been likened to physical laws. Such a view obscures the fact that any analysis of distribution is but a description of the working of a particular industrial society at a particular time. To mistake what is a description of a particular society for a study of the action of physical laws has the effect of leading men to believe that the present must forever reappear in the future. 3.--The first factor, "the volume of the flow of wealth in the country of the worker," was never more under discussion than to-day, when from all sides demands are heard for the material means necessary to the realization of desires. As the matter is ordinarily put, the greater the product of industry is, the more there is for distribution among all. The truth of this statement seems obvious. Yet in interpreting it into policy more than usual care must be taken lest it be forgotten that other things may make a larger contribution to satisfactory living than an increase in these possessions which make up the flow of wealth. Instances are by no means lacking of increases of production obtained at the sacrifice of something more important to human life than the additional product secured. There is a "mean" here also between labor and leisure. All this, however, reads like a lawyer's brief about a simple matter. The greater the volume of goods and services resulting from the labor of society, the more there is to share out; and the greater in amount will the share of the wage earners be, even if their relative share is not increased.[13] The volume of production depends upon the quantity and quality of each and every agent that assists in production, and upon the organization of the separate powers, and above all upon the progress of invention and of the industrial arts. It depends directly upon: first, the natural resources of the country--which are ordinarily summarized in economic discussion under the term "land"--"by land is meant the material and the forces which nature gives freely for man's aid, in land and water, in air and light and heat;"[14] second, the "accumulated provision for the production of material goods"--capital--which was discussed in the preceding chapter; thirdly, on the labor of men and women--on the degree of spirit, skill, energy and intelligence which characterizes that labor; fourthly, on the quality of leadership which manifests itself in industrial affairs, and the success with which the elements of production are brought into well directed coöperation; fifthly, on the progress of invention and the industrial arts. The relationship between the volume of production and wages is indirect. Though it is true that the larger the product, the higher wages will be, all other forces remaining the same, the connection between them is by no means simple or direct. That is because the wage earners share in a product to the making of which other agents contribute. In our present industrial system work is done under direction, and by the aid of tools and machinery; it is highly subdivided. It is impossible to determine the contribution to total production of any group of workmen, or of all workmen. The product is a joint result in which the part played by any one group, instrument, or factor of production cannot be traced. Who, for example, is able to say how much productive activities have been aided by the invention of the telephone and the growth of the telephone system? The problem of the distribution of the product of modern industry is so difficult and so much to the fore because so many different people contribute in some way or other to the product and have a claim upon it. Wage incomes may be affected by changes in the volume of the product, no matter what the cause or nature of the change. If suddenly some new chemical fuel were discovered in the laboratory, or some business efficiency expert were to discover some formula which made motors go round, the labor now spent in coal mining could be turned to other tasks. The volume of economic goods produced would be increased. The product to be distributed would be greater, and wage incomes would rise. A similar result would ensue if the magic formula of the expert endowed all workingmen with greater skill and energy. Any addition to or subtraction from the capacity of any agent of production tends to affect not only its own income, but that of all claimants. The reward of any one agent of production, for example, labor, depends not only on its own part in production, but upon the contribution of all other factors. A craftsman in the United States may be no abler than his fellow workman in France, but may receive twice his wage. This line of reasoning must be qualified in one respect. There is some competition for employment between the several agents of production. Their relative efficiency will affect the demand for them, and so will also affect the share of the product each receives most directly. That is a phase of the subject that will be considered at greater length at another point.[15] 4.--Given an industrial society at work like the United States, producing each year a varied flow of commodities and services, the question arises as to what determines the share of that flow that goes to the wage earners. We have already seen that the larger the product is, the higher wages are likely to be. But what determines the sharing out? That is the next matter to be considered. First, however, let us examine briefly two theories of wages which are more or less current in certain quarters, and which are built upon partial or complete misunderstanding of the connection between wages and the work actually performed by the wage earners. The first theory, or rather group of theories, is that to which some of the leaders of the scientific management movement have given their sanction. The central idea of this group of theories is that in the output of the wage earners, considered either as individual output or as the output of a small group engaged on a common task, is to be found the final and just measure of wages. It is frequently assumed in the course of the reasoning used in support of these theories, that wages can and should measure a separate contribution which the individual wage earner makes to production. The positive, although hazy, belief which ordinarily underlies the scientific management theories of wages can be perceived in the following quotation from a speech of one of the leading advocates of the movement. "There are two ways in which wages can be advanced. One is the natural method, the proper method, the beneficial method, the one that tends to the uplift of the world. That is to make the advance depend absolutely on the effort of the worker. When the worker delivers more, it is perfectly proper that the returns should go up. In other words as unit costs go down wages can very properly rise, and they should rise. Under these circumstances, the worker is tremendously interested in seeing that the unit costs go down. There is a regular mathematical law here. Only to a certain extent can the unit cost go down and only to a certain extent can the wages go up.... On the other hand, when you raise wages without any connection whatever with the unit cost you inevitably find that the worker takes his bonus in the form of more leisure...."[16] At the risk of repetition, it may be remarked that the output of an individual or a group of individuals is of necessity but a contribution to a joint product, and is dependent upon many other things besides the effort of the individual. And, therefore, even if the view that each individual should get what he produces were found to be acceptable as a basis for distribution, any attempt to base wages solely upon considerations of individual or group output must rest on a false assumption. Any laws or principles for the determination of wages must reckon with a far wider and more numerous set of considerations than those taken into account by the scientific management theories of wages. These can only be understood by a study of the economic facts and arrangements which govern distribution, and by weighing many questions of social and economic expediency. To talk about basing wages solely on the effort of the worker is to ignore the obvious fact that much of the most laborious work is the worst paid. The exponents of scientific management have not discovered a law of wages; they have simply elaborated a method of wage payment. Mr. G. D. H. Cole has expressed that well. "Clearly, although scientific management methods may reduce the possible margin or error in determining piece-work prices, they cannot altogether remove it, and even if the time that ought to be taken for a job is clearly established a further complication confronts us. All the time-study in the world cannot show how much ought to be paid for a job. It can only show at most the length of time a job ought to take. That is to say, it cannot determine what is to be the standard of living or of remuneration of the workers.... This, indeed, is only another way of saying that Scientific Management has only devised a further method of payment under the wage system."[17] The exponents of these theories fell into the error of believing they have unveiled a law of wages because they grasped one important truth. That truth is that where the productivity of labor is high, where labor is efficient, there is a greater chance, all other circumstances being the same, of securing high wages than when the reverse is the case. Or as the matter has been put in one of the reports of the U. S. Industrial Commission (1912-16) "A close causal relationship exists between productive efficiency and _possible_ wages. Greater efficiency and output makes _possible_ higher wages in general and better conditions of employment and labor."[18] (Italics mine). That the scientific management doctrine of wages consists of nothing more than a method of wage payment is clearly established by its failure to substantiate in practice its claims of furnishing a scientific and equitable method of fixing wage rates. On that point the same Industrial Commission reports that "In analyzing the wage fixing problem in connection with scientific management two matters are considered; one--the "base-rate" sometimes called the day wage, which constitutes for any group of wage earners the minimum earnings or indicates the general wage level for that group, and two--added "efficiency payments" which are supposed to represent special additional rewards for special adjustments. The investigators sought in vain for any scientific methods devised or employed by scientific management for the determination of the base-rate, either as a matter of justice between the conflicting claims of capital and labor, or between the relative claims of individual and occupational groups."[19] As a method of wage payment, of course, the method of scientific management must be judged by its good and bad effects like other methods of wage payment. That, however, is not a task which need detain us. 5.--The other group of wage theories that is based upon a similar misconception of the relation between the productive contribution of labor and wages cannot be so briefly dealt with. This is the group of theories which has been named "the fixed group demand theory" and it has figured prominently in most discussions concerning restriction of output. This group of theories also rests upon the assumption that there is a fixed relation between the productive contribution of a group of workmen and the wages received by these workmen. The fixed group demand theory has been summarized as follows: "The demand for the labor of the group is determined by the demand for the commodity output of the group. The community--wealth and distribution remaining the same--has a fairly fixed money demand for the commodities of a group. It will devote about a given proportion of its purchasing power to these commodities, that is, if the prices of the group commodity are higher, it will buy less units and vice versa, but expend about the same purchasing power. Therefore, the demand for the labor of the group; profits remaining the same, is practically fixed, and increasing the group commodity output means simply conferring a benefit on the members of other groups as consumers without gain to the group itself. Therefore, to increase the efficiency and output of the group will not increase the group labor demand, and group wages. Decreasing the efficiency and output of the group will not decrease the group labor demand and the group wage."[20] Or in simpler terms, that the community will want a relatively fixed amount of the product which the group helps to produce. And thus if the group reduces the time needed to make that product, it will not benefit and may even be harmed, because the services of some of its members will be no longer needed. And, on the other hand, that the members of the group will not be harmed by keeping the products of its labor scarce and high. This line of reasoning, as held by some trade unionists, is valid on occasion, from the point of view of particular groups of workmen--especially during short periods. It is a fact that in many cases workmen employed in particular industries or occupations, may not be benefited and may even be injured by a display of extra effort or by the adoption of a new and more efficient method of production. The benefit of that extra effort or new method may not go _directly_ and _immediately_ to the group which makes the effort or utilizes the new method--it may not go to that group at all except in so far as they may be consumers of their own product. The question of an adequate supply of new houses is at present a vexed one and is likely to remain so for some years. Therefore it makes a good illustration of the difficulties involved in the question under discussion. Suppose it were possible for all the labor employed in the construction of houses to increase their effort and accomplish, let us say, a third again as much as at present. Would that increase of effort repay these workmen--would they receive higher wages? It is not a matter that can be argued with certainty. The expense of construction would fall rapidly, unless combination among the firms supplying building materials or among building contractors prevented such a fall. In the event that the cost of construction fell, there can be little doubt that more construction would be undertaken. Would the increased demand for construction lead immediately to an increase in demand for building labor sufficiently great to give employment to workmen who would not be needed on the old construction because of the increase in individual output? Would it be so great as to mean a more than proportionate increase in demand for building labor and a consequent rise in wages? Would its effect be felt immediately or only after the passage of some months, during which a number of the building laborers would be without employment? What will be the effect on employment two years hence? Looked at in this light, the skepticism of trade union groups in regard to appeals for an increase of effort is easy to understand. It arises from the simple desire of the group to protect their position in industry by the only means they possess. It is an attitude strengthened in many cases by the memory of weeks without work and efforts ignored. It is a bitterness, like to others, which men inherit from experience. Yet it can be stated with emphasis, that from the point of view of the wage earners as a whole, and of all of society, that any consistent adherence to this group demand theory of wages would be mistaken and unsound. The use of improved methods of production by any group, the more efficient performance of their work, may not result in a quick fall in the price of the product they are engaged upon, though sooner or later it usually does. The fall in price may or may not lead to rapid increase in the demand for the product of the group sufficiently great to give employment to all its members, or increased employment; although that result has usually appeared in the long run also. The fundamental fact is that the demand for the product of labor is ordinarily subject to indefinite increase. If labor is economized in one direction, the power dispensed with will be utilized in another direction. The community income of economic goods is a flow. Under our present system of division of labor each individual uses his share of the product (which he measures in terms of money) to buy the particular commodities, or to make the particular investments he desires. If he gets some commodities cheaper than formerly, he will buy more, or buy commodities he had not been able to buy hitherto or increase his investments. The demand of the community for the product of labor in general will ultimately keep pace with the supply of the product. Economies in production throughout the whole industrial field mean that there will be more commodities to be shared out. Thus, in spite of the fact that there may be, and often are, serious breaches of interest between particular groups of wage earners and society as a whole on the matter of increased production, there can be but one sound policy for labor as a whole. That is to strive to increase production up to a point where further effort would entail a sacrifice of welfare more important than that which the extra product might represent. Such general theoretical propositions as the above, however, will never be sufficient to persuade particular groups of wage earners to take a different view of the interests involved. It is easy to understand Carlyle's contempt for the smug complacency with which such propositions have often been put forward, when he wrote, "New Poor Law: Laissez faire, laissez passer! The master of horses, when the summer labor is done, has to feed his horses through the winter. If he said to his horses: 'Quadrupeds, I have no longer work for you; but work exists abundantly over the world: you are ignorant (or must I read you Political Economy pictures) that the steam engine always in the long-run creates additional work? Railways are forming in one quarter of this earth, canals in another, much cartage is wanted; somewhere in Europe, Asia, Africa and America, doubt it not, ye will find cartage, and good go with you!' They with protrusive upper lip snort dubiously; signifying that Europe, Asia, Africa and America be somewhat out of their beat: that what cartage may be wanted there is not too well known to them. _They_ can find no cartage. They gallop distracted along highways, all fenced in to the right and to the left. Finally under pains of hunger, they take to leaping fences; eating foreign property, and--we know the rest." The reasons are plain. First, because the fixed group demand theory is, after all, only one variation of the art of monopoly--though a variation in regard to which special conclusions may be drawn. Therefore, as long as monopoly is widely practised particular groups of wage earners will be likely to take advantage of whatever opportunities for monopoly may present themselves; even if it can be proved that the policy pursued injures the wage earners as a whole more than any other industrial group. Short-sighted selfishness will always arise in an atmosphere of distrust. If the wage earners, for example, believe that the product of their increased effort will serve but to add to the profits of rings or combinations controlling prices, they will not make that effort. They must be able to see that conscientious work really does contribute to the general good. And second, because at times, the general interest in effective production can only be served at the direct and serious expense of particular groups of wage earners. Such a situation arises, for example, when a skilled craft is faced with a revision of its processes that eliminates the need for skill, and results in the lowering of the wages of the group. This is a common event. Up to the present, such conflicts between particular interests and the general interest in effective production have been solved by a trial of economic strength, and by time. The viewpoint of the wage earners is clearly put in a statement by the National Organizer of The Transport Workers Federation (Great Britain) before the Court of Inquiry held upon the subject of the wages of the transport workers. He maintained "that the industry ought to carry to a greater extent than it had done hitherto the responsibility for the unemployment that was peculiar to it. He had always been quite frank with the employers. If they wanted a ship speedily dispatched he would not do it, if that meant that his men would be thrown out of work."[21] That, however, is a method which results ordinarily either in a sacrifice of welfare or production, or of both. The worst results incident to these conflicts could often be avoided by making them the subject of joint discussion by all those whose interests are directly involved. Discussion might lead to working compromise which would protect the wage earners against too great or too sudden loss. Even under the best arrangements, however, such conflicts of interest will be far from easy to resolve satisfactorily; they will remain in the words of Mr. Cole "a question, not of machinery, but of tact and temper."[22] 6.--We may now turn to the main question in hand. What forces do govern the sharing out of the product of industry in the United States to-day? What determines wage incomes? So far we have only examined the general proposition that the larger the product, the higher wages are likely to be, other things remaining unchanged. The relative plenty or scarcity of the different groups or agents of production is a constant and important force in the distribution of the product of industry. From the perception of its significance, spring many of the loose statements of the action of "supply and demand," which are ventured as complete explanations of the wage situation. It is not possible to give a simple explanation of the part which relative plenty or scarcity does play in the determination of wages. For other forces which affect distribution act simultaneously with it, and all intermingle their results. The influence of relative plenty or scarcity (to use an elliptic phrase) upon the outcome of distribution is easily understood if it is kept in mind that the distributive process is one of repeated negotiation and bargain. In this process each group or agent strives to get a high return for its services in production. There is a steady, though imperfect competition between the various units of each and every group or agent for employment; there is likewise a steady, though imperfect, competition for the use of the various units of each and every group or agent. These conditions require no elaboration. It is in this process of competition for employment, and competition to employ, that the return to labor--wages--is decided, simultaneously with the return to each and every group or agent. The return to labor will be high if the employment of the ordinary worker, _as part of a productive organization_, adds considerably to the total of market values produced. For if the ordinary wage earner, by his work, makes possible a considerable addition to the market values produced, competition among employers for men will lead to the payment of high wages, and vice versa. Now this last result will be largely determined by the relative plenty or scarcity of the various agents of production. If the productive organization has at its command a plentiful supply of capital; if in the community there are many men possessed of a high order of business ability; if then, labor for the commoner tasks of production is relatively scarce, the work of the ordinary wage earner will be a means of adding considerably to the total of market values produced. Or, as it is sometimes put, each use of labor will be an important use. Labor will be in great demand, and wages will be high. If the opposite conditions exist, the outcome will be reversed. In other words, there is a tendency for work to be highly valued when the number of men available for doing it is small and when the work is performed with the aid of highly perfected machinery, in a community in which able business men are plentiful. Each laborer will find his services easily sold for good wages; for his labor will be an important aid to production. A word of warning should be added to this summary conclusion. It does not follow that because the wage incomes of the individual laborers are high, the total relative share of the product which takes the form of wages will be high. The wages received by individual wage earners are no indication of the share of the product received by all wage earners. That depends not only on the return to each wage earner, but also on the total number of wage earners, and upon the number and return to each of the other agents of production. In China, for example, where most work is done by simple hand labor, wage incomes are low. But because the number of wage earners is great, and the amount of capital used is very small, the total share of the product that takes the form of wages is high. The opposite is true in the United States and England. There individual wage incomes are relatively high. But because of the great amount of capital employed, and the great call for business direction, it is doubtful whether much more than half the total product is received by wage earners.[23] 7.--Moreover, any statement as to the influence of the relative scarcity or plenty of the various groups or agents of production, as unqualified as that just made must be incorrect. It gives no clew to the importance of interacting factors. Here, as elsewhere in economics, many separate causes meet to produce a result. The disentanglement of their effects is frequently so difficult as to make more than an approach to the truth possible. The part each cause plays often remains somewhat obscure. Yet without reckoning with these interactions not even an approach to the truth is possible. So it is necessary to proceed now to a brief study of the other influences which play a part in distribution; and which lead to results somewhat different from those just described. First, account must be taken of the fact that the various groups or agents of production are not entirely complementary, as has been assumed up to this point. Their outstanding relation--that of coöperation in the production of a joint product--has already been studied. But there is also a measure of genuine competition between them for the field of employment. An unusually clear and detailed example of the nature of this competition is to be found in the report of the commission on "The Decline of the Agricultural Population in Great Britain." To quote "Many expedients, other than actually stopping the plow, were adopted to reduce the labor bill. But while manual labor has no doubt been economized to some extent by curtailing some of the operations which require it, the main cause of reduction is undoubtedly the extended use of labor saving machinery. This is referred to by the large majority of correspondents in all parts of the country. With the exception of the self-binding harvester, which was introduced into this country in the eighties, few machines for the performance of a specific manual operation have perhaps been invented since 1891 (unless milking machines, shearing machines, and perhaps potato diggers come within that category), but whereas twenty years ago labor saving machinery was fully employed by comparatively few, it has now become almost universal on all holdings of sufficient size to make its use practicable. The substitution of mechanical for horse or hand power, for mixed machinery, e.g., threshing machines, chaff cutters, pumps, etc., has taken place largely, although it has made comparatively little progress for tractive purposes. It may indeed, be questioned if steam is so largely employed in the cultivation of land as it was twenty years ago. But the displacement of manual labor arising from the greatly extended use of drills, horse hoes, mowers, binders, manure distributors and the like must have been in the aggregate very great and probably to this more than to any other single cause the reduced demand for farm laborers may be attributed."[24] As Professor Marshall has remarked of such cases of competition for employment between labor and capital as this, the competition is in reality between one kind of labor aided by much waiting, and another kind of labor aided by little waiting. Nevertheless, the fact of competition between the various groups or agents is a fact of no mean importance in distribution. As has already been suggested, the efficiency of the wage earners plays a part in determining their field of employment in this competition for employment. Secondly, the simpler statements of the action of the factor of relative plenty and scarcity, such as are represented by the marginal diagrammatic expositions familiar in economics, obscure the fact that distribution is a process in which human wills are actively engaged. The constant assertion of will is a real force in the working out of distribution. Each group with a claim to a share of the product, by organization, agitation, and other tricks of the market place strives to forward its interest. It explores, by pressure upon the price mechanism and otherwise, the full extent of the dependence of the industrial system upon it or its product, as when monopolists control prices, or a trade union strikes to enforce a wage demand. Each group or agent tends to favor or resist changes in laws, industrial methods, and institutions according as it expects to be benefited or otherwise by the change. This may be seen in the discussions surrounding the introduction of the eight hour day, or concerning the limitation of immigration. However, it is a careless exaggeration to state, as is frequently stated, that the attitude of groups to economic legislation must inevitably be determined by their economic interest. Every part of the industrial system yields at some time and occasion to the impact of the human will. Even changes in the arts of production may result therefrom, as is well exemplified in Mr. Clay's analysis of the way in which the standard of life of the wage earners may exert an influence over wage rates.... This conception of a standard of life, though fluctuating, is a relatively fixed thing in the flux of forces determining distribution. The workman, by combination tacit or explicit, fixes it and his employer adjusts production to it. The employer will do all in his power, usually with success, to secure an increase in output in return for every increase of wages, and where the local standard compels him to pay higher wages than his competitor in other districts to extract an amount of work correspondingly greater.[25] Or, take the hope entertained by the advocates of the living wage, that its enforcement would produce a better type of management in those industries to which the legislation is applicable. It is characteristic of the present industrial situation that no group should rest quietly under the dictation of what it is told is economic law or necessity. Given its way, each group tests anew the habits and arrangements by which it is constrained. Every time an industrial method is modified, the agents which share in distribution strike a slightly new balance. The direction of the stream of product changes with every modification of its banks. Some of these modifications occur so unexpectedly that they are not to be found upon the maps. The pilot, as Mark Twain said of the Mississippi, must carry the conformation in his head. Thirdly (this is usually stated as a limitation of the precision of economic analysis), such a simple analysis of the action of the factor of relative plenty or scarcity as has been given, takes no account of the existence of certain human traits and qualities. As a matter of fact each group or agent of production receives, not what it must receive, but rather what it manages to secure in the higgling of the market. Ignorance of the state of the market plays a part in distribution. A sense of fairness plays a part, as when an employer pays wages higher than are current because his business is prosperous. Anxiety plays a part, as when the fear of unemployment leads a man to accept a wage below that which he might have asked and secured if he had some money to fall back upon. Lastly, changes in distribution resulting from a change in the relative plenty or scarcity of the various groups or agents of production may, in turn, cause further changes in the actual state of plenty or scarcity; or may bring about changes in any of the other forces which affect distribution. For example, it is conceivable that an increase in men's wages in certain industries (due, let us say, to an improvement in productive methods) should be the cause of a withdrawal of a certain amount of juvenile labor from employment in these industries. This withdrawal might in turn lead to an increased demand in those industries for adult labor, and so in turn affect the distributive situation. The process of distribution is a process in which few changes can occur in any direction, without these changes in their turn giving rise to further changes. 8.--The foregoing exposition of the forces determining the share of the product of industry that goes to the wage earners can be briefly summarized. The process of distribution is carried out mainly by the action of competition; it is marked by active and stubborn self-assertion on the part of all groups which share in the product. One of the most important and constant factors in the determination of the outcome as regards wages is the relative plenty or scarcity of the various groups or agents of production. For the contribution made by the ordinary worker, _as a part of a productive organization_, to the total of market values produced, is largely settled thereby. However, other human qualities besides those which are ordinarily considered as to be active in the competitive process figure in the distributive outcome. Furthermore, changes in distribution, brought about by any other cause may in turn modify the relative plenty or scarcity of the various groups or agents of production, and thus result in further changes. And lastly, since the distributive situation at any given time, is dependent upon human arrangements, the idea that underlying all distributive action, there is a tendency to approach a point of "normal equilibrium" must be rejected. For human behavior is frequently directed to produce change, not repetition. The better informed that human beings and communities are of the consequences of their actions, the stronger the tendency mutually to control and adjust them for defined purposes. Therefore, the idea that the distributive situation at any given time is directed to a point of rest or equilibrium is incorrect. Many diverse tendencies, some of long standing, some of newer birth, act to produce future results different from those of the present or past. The concept of normal equilibrium is inadequate to account for the distributive situation at any given time; it is misleading with regard to prospective policy. 9.--The preceding sections were devoted to an explanation of the manner in which the relative plenty or scarcity of the various groups or agents of production influenced the sharing out of the product of industry, and of the interactions to which this factor was subject. It may now be asked what governs the actual state of relative plenty or scarcity of the various groups or agents of production. No answer could be returned to that question, however, without undertaking a far-reaching investigation of a great number of separate conditions and tendencies. The task is far beyond our present opportunity. It is worth while, however, for present purposes, to delimit the task sharply, and to attempt a brief enumeration of the most important of the conditions which determine, on the one hand, the need of the productive system for labor, and, on the other hand, the supply of labor--that is, of the relative plenty or scarcity of labor. The conditions which govern the need of the productive system for labor may be summarized as follows: Firstly, the consumption habits of the community, by which is decided the direction in which the productive powers are employed; secondly, the state of the productive arts, which governs the manner in which the various agents of production are combined for purposes of production; thirdly, the available supply of the agents of production, other than labor. Each of these are in return governed by a complex set of forces. The conditions determining the supply of labor may be summed up under two headings: Firstly, "the state of knowledge, and of ethical, social and domestic habits."[26] Secondly, the tide of immigration and emigration. The conditions which are summarized under the first heading govern the supply of labor in many different ways. They govern the length of the working day; they settle the regularity of work. They determine the number of the members of the family that seek work. They regulate the ages of entrance into industry and retirement from industry. They tend to govern the rate of growth of the population--both through the birth and the death rate. It should be clearly understood, however, that many of these habits or conditions are themselves, in a measure, a function of the level of production and of earnings. For example, the state of knowledge within a community is to-day very considerably affected by the financial support of education--by the amount the community can (as well as does) spend upon it. The importance of immigration and emigration is firstly, the addition or subtraction thereby made to or from the supply of labor, and, secondly, the influence of the immigrants upon those habits of the community, which in turn affect the supply of labor. 10.--The third of the forces quoted earlier in the chapter, as among those which play a constant and important part in the determination of wages, is the relative plenty or scarcity of different kinds of labor. The statement of this force acknowledges the existence of facts which up to this point have been barely recognized. It calls attention to the existence of considerable differences in the levels of earnings of different groups or kinds of labor. It suggests also that the relative plenty or scarcity of the different kinds of labor is the chief explanation of these wage differences. We shall investigate at some length the causes of these differences in the next chapter. Before going on to that subject, however, it is well to trace out the connection between the idea of "a general rate of wages" as it has been held, and the existence of different wage levels. The idea of a general rate of wages, as it appears in economic theory, rests upon certain broad assumptions. One of the most important of these is that there are no "differences of inborn gifts," which would lead to a limitation of the flow of labor into the upper grades, and thus lead to a separation of grades. A second important assumption is that of complete mobility of labor--no obstacles of habit, expense or ignorance to retard the flow of labor from place to place, or from industry to industry. A third assumption is the absence of combination among the workers. A fourth is that of equality of opportunity among the wage earners; and the absence of barriers of race, religion or sex. Granted these assumptions, the tendency to equality of earnings for labor demanding equal skill and effort and performed with equal efficiency is established. Competition among the workers for employment and among the employers for workmen would bring this about. Such differences of wages as would exist would arise from differences in the nature of the work performed. Thus Adam Smith wrote that "in a society where things were left to follow their natural course, where there was perfect liberty, and where every man was perfectly free both to choose what occupation he thought proper, and to change it as often as he thought proper" five circumstances would explain "a small pecuniary gain in some employments, and counter balance a great one in others." These in his words were: "First, the agreeableness or disagreeableness of the employments themselves; secondly, the easiness and cheapness, or the difficulty and expense of learning them; thirdly, the constancy or inconstancy of employment in them; fourthly, the small or great trust which must be reposed in those who exercise them; and, fifthly, the probability or improbability of success in them."[27] All such differences would be such as "equalize the attractiveness of occupations" and would be "equalizing differences."[28] If these assumptions were realized in fact, it would be correct to view the problem of wages as the study of one set of relationships that governed a basic level of wages--called the general rate of wages--with purely supplementary studies of the circumstances governing equalizing differences. The problem of wages would be a study of forces which were uniformly influential in relation to the wages of all labor. For all wages bargains would be governed by them. In truth, however, practically none of the assumptions underlying the theory of a general rate of wages are perfectly realized in the United States to-day, and some of them stand in almost direct opposition to the fact. It has come about, therefore, that different kinds of labor have relatively independent economic fortunes. The forces which govern distribution do not effect them equally. Facts and circumstances which enter into the determination of the level of earnings of one kind of labor may not affect the level of earnings in other groups. The differences between the level of earnings of the various groups cannot be explained entirely as "equalizing differences." The "perfect liberty" of choice of Adam Smith does not exist. Therefore, an investigation of wage principles requires study of two sets of forces and relationships. Firstly, of the forces which govern the outcome of distribution as between each and all of the labor groups and the other agents of production.[29] And secondly, of the causes of the formation of relatively separate groups of wage earners, and of the forces which govern the differences of wages between them. The first set of these distributive relationships has been the principal subject of this chapter. The other set will be the principal subject of the following chapter. Any policy of wage settlement must be based upon a knowledge of both sets. FOOTNOTES: [12] H. Clay, "Economics for the General Reader" (English edition), page 333. [13] See A. C. Pigou, "Wealth and Welfare," page 20. [14] A. Marshall, "Principles of Economics" (7th edition), page 138. [15] See pages 56-8, this chapter. [16] Address of Mr. Harrington Emerson at the National Conference of the "Society of Industrial Engineers and Western Efficiency Society" on labor problems. [17] G. D. H. Cole, "The Payment of Wages," page 67. [18] Final Report of the Committee on Industrial Relations (1912-16). Report signed by Commissioners Manly, Walsh, Lennon, O'Connell, and Garrettson--the section on scientific management stated to be based on an investigation conducted by Frey, Valentine, and Hoxie, page 128, Vol. I. [19] _Ibid._, Vol. I, pages 131-2. [20] R. F. Hoxie, "Trade Unionism in the United States," page 162. [21] London _Times_, Feb. 7, 1920. [22] G. D. H. Cole, "Payment of Wages," page 30. Discussion of the speeding up question. The best analysis of the problem created by the introduction of new and simplifying machine processes in skilled trades is to be found in a volume called "Labor, Finance, and the War," Report of the Committee of Investigation (1917), The Econ. Section, British Assn. Advancement of Science. In the same volume there is a careful analysis of the whole question of limitation of output. See also the chapter called "Unemployment" in Lord Askwith's "Industrial Problems and Disputes." [23] See A. L. Bowley, "Distribution of Income in the United Kingdom Before the War." [24] Report of the Commission on the "Decline of Agricultural Population" (Great Britain), 1906, page 14, CD 3273. [25] H. Clay, "Economics for the General Reader," pages 237-38. See also Essay by the same author entitled, "The War and the Status of the Wage Earner" in a volume entitled, "The Industrial Outlook" for a more extensive analysis of the part played by the standard of life in fixing wages. [26] A. Marshall, "Principles of Economics" (7th edition), page 642. [27] Adam Smith, "Wealth of Nations" (Cannan's Ed.), Book I, pages 101-2. [28] F. W. Taussig, "Principles of Economics" (Revised Edition), Vol. II, page 124. [29] The phrase "each and all of the labor groups" is used to indicate that the level of earnings of all the labor groups is determined largely by forces which affect them greatly (those examined in this chapter), and yet that the determination of the level of earnings of each group is something of a separate process--due to the fact that the suppositions underlying the idea of a general rate of wages are not fulfilled. CHAPTER IV--PRINCIPLES OF WAGES (_Continued_) Section 1. We have next to examine the causes of formation of relatively separate groups of wage earners.--Section 2. What is meant by a "relatively separate group"?--Section 3. The causes of the existence of these groups in the United States to-day. Inequality of natural ability; inequality of opportunity; artificial barriers. All these contradictory to assumptions behind theory of general rate of wages.--Section 4. Trade unions another factor in the formation of relatively separate groups. Indirect effects in opposite direction.--Section 5. Each of these groups has a relatively independent economic career. There are a series of wage levels, all of which are governed to a considerable extent by the same forces.--Section 6. The way in which the relative plenty or scarcity of each kind or group of labor affects its wages. Other forces play a part also.--Section 7. The nature of wage "differentials." 1.--We have next, therefore, to look at the causes which lead to the maintenance of relatively separate groups of wage earners, and then at the forces which govern their relative levels of earnings. 2.--First of all let us make clear some of the characteristics of the relatively separate groups of wage earners in the United States to-day. They vary greatly both in size and in kind. They are apt, however, to be conceived as similar because of the force of logic. It is not entirely satisfactory to classify them either as horizontal groups (having reference to their position in the scale of skill, or of society) or as vertical groups (having reference to their separation by industries). For the position of certain groups may be due both to the influence of those forces which bring about horizontal divisions, and of those which bring about vertical divisions. Such, for example, is the position of a craft which requires a measure of education and training which those who are placed by circumstances at the bottom of the industrial scale cannot easily get, and which besides it is difficult to enter because of trade union regulations. Marshall has described the situation in England in terms that roughly fit the facts in the United States also. He suggests that the different occupations may be thought of "as resembling a long flight of steps of unequal breadth, some of them being so broad as to act as landing stages." "Or even better still," he writes, "we may picture to ourselves two flights of stairs, one representing the 'hard-handed industries' and the other 'the soft-handed industries'; because the vertical division between the two is in fact as broad and as clearly marked as the horizontal between any two grades."[30] The position of any relatively separate group is usually to be accounted for only as the result of many forces, each of which has some effect upon the rest. For example, barriers of custom or on vested right may limit the field of employment for women. This would tend to establish one level of earnings for women, and a different one for men. As a result women might find it harder to get the training necessary to enable them to compete with men. And so the interaction of causes would proceed. So much in the way of preliminary remark upon the characteristics of the relatively separate groups of wage earners in the United States to-day. 3.--Among the causes which account for the existence of these groups there are some which if they stood alone would merely modify the applicability of the idea of a general rate of wages. Such, for example, is the fact that the wage earner's knowledge of existing opportunities for employment is limited. Considerable discrepancies of wages for the same work may arise; although the facilities for the spread of information regarding wages has greatly improved, especially in the more skilled trades. Then there are, also, various expenses of removal, both material and psychological, such as are involved in the shifting of a family from the city in which it has long been established.[31] There are, also, the handicaps and hazards attached to the learning of a new job or trade even though the new job holds out hopes of considerably better wages than the old one. All such facts as these--for but a few examples have been chosen from among many--however, are reconcilable with the theory of a general rate of wages. They are but minor qualifications of a broad general principle. Other facts challenge that theory more seriously. They really do point to the existence of relatively separate groups of wage earners, each with an economic career somewhat independently determined. First among them must be put the inequality of natural ability possessed by individuals, and the consequent fact that the numbers who possess the inborn capacity required for certain kinds of work is relatively small. It results from this limitation of the higher forms of natural ability, that the wages received for the more skilled forms of labor may be considerably higher than for the less skilled forms without such an increase of numbers in the more skilled groups as would bring down their wages to the general level. The competition for employment on the tasks demanding skill is limited; separate groups develop. It is impossible to tell the extent to which differences in inborn capacity would lead to the formation of relatively separate groups of labor, if all the other assumptions underlying the theory of a general rate of wages were fulfilled in fact. Prof. Taussig has expressed this well. "What would be the differences in wages, and to how great an extent would groups and classes persist, if all had the same opportunities, and if choice of occupation were in so far perfectly free? Would wages then differ only so far as they might be affected by attractiveness, risk, and other causes of equalizing variations? Would coarse manual labor, for instance, then receive a reward nearly as high as any other labor, nay, conceivably (since the work is dirty and disagreeable) higher than any other? Would the soft-handed occupations lose entirely the advantages in pay which they now commonly have? The answer must depend on our view as to the limitation of natural abilities. It is clear that some gifted individuals--a few men of science and letters, inventors and engineers, business men and lawyers, physicians and surgeons--would tower above their fellows, and would obtain in a competitive society unusual rewards. But would physicians as a class secure higher rewards than mechanics as a class? They would do so only if the faculties which a capable physician must possess are found among mankind in a limited degree. And mechanics, in turn, would receive wages higher than those of day laborers only if it proved that but a limited number possessed the qualities needed. On this crucial point, to repeat, we are unable to pronounce with certainty. What are the relative effects of nature and of nurture in bringing about the phenomena of social stratification, we cannot say."[32] Next among the facts which account for the existence of relatively separate groups of wage earners are those which are usually summed up under the phrase inequality of opportunity. Equality of opportunity in the way of education and training, and in the way of healthy and strengthening environment would have to be assured before the theory of a general rate of wages could possibly apply. This equality of opportunity is not realized in the United States to-day. The United States has been the scene of continuous and heavy immigration. The mass of this immigration entered into the field of unskilled labor. The great majority of these workers because of the partly unavoidable handicap of their strangeness, and their ignorance of American life, and because of their poor education, did not have equal chances with the older inhabitants to rise in the industrial scale. They could not possibly make the same use of the common opportunities--even if their natural ability were on a par with those of the older inhabitants. Furthermore, the rapid growth of our great cities and the accompanying social changes, the growth in the size of the average industrial enterprise, and the progress of standardization have all lessened equality of opportunity. The chances of the children born in the lowest industrial groups to discover and fairly test their natural abilities have declined in relation to the chances of the children more fortunately born. These conditions have certainly checked the working out of those forces on which the theory of a general rate of wages rests. Thirdly, there is the fact that certain forms of work on which youthful labor is employed, give no preparation and training for the further stages of life and work; and these blind alley employments are filled by children born in the lowest industrial groups. Then there are the barriers of different kinds to free movement throughout all parts of the field of employment. There are the barriers of sex which have added to the crowding of certain occupations and industrial grades. There are the barriers of race and religion, which have affected the flow of labor between different industries. Lastly, there is the barrier of color, which has prevented the negroes from developing their natural ability. These barriers may be well justified, in part or in whole, by other considerations. That question need not be considered here. But they certainly contribute to the formation of relatively separate groups of wage earners, with different levels of earnings. 4.--The existence and activities of labor unions are still another factor in the formation of relatively separate groups. In many cases labor organization tends to follow closely the lines of separation or unity established by the other causes of group separation or unity. There is often a tendency for a single union to include within its limits the whole of a group within which all the conditions underlying the idea of a general rate of wages are well fulfilled; or for various unions to merge or act together, if these conditions are well fulfilled between them. G. D. H. Cole has given a case in point. "Clearly the ease with which an industrial union can come into being depends upon the sharpness of the distinction between the skilled and unskilled in the industry concerned. Thus in the mining and textile industries, as we have already noted, there is no very sharp distinction between the two classes of workers. In mining, the boy who enters the pit has every chance of passing before many years have gone by into the ranks of the coal getters, who form the skilled section of the mining community. There is no sharp division or cleavage of interest between the main sections of the mining community. Promotion runs easily from one grade to another, and therefore, it is easier to realize a form of combination in which all the various sections are grouped together in a single industrial organization."[33]... This tendency, however, has not been perfectly realized by any means. It often happens that the scope of a labor union will coincide with the underlying facts of unity at one time, but not permanently. The limits of particular trade unions have sometimes been set by an accident of time or place; by some episode in union history. The internal politics of the union movement has been the decisive factor in still other instances. Furthermore, industrial conditions are constantly changing and creating new lines of group separation or unity, which may vary from the lines of the existing labor unions. Labor organization affects the formation of relatively separate groups of wage earners both directly and indirectly. First as to its direct influence. A labor union is a combination of a number of individuals, formed with the intention of advancing the material welfare of the group and for such wider purposes as the group may agree upon. The chief peaceful method of unionism is collective bargaining; its chief combative method is the strike. Labor unionism is a factor in the formation of relatively separate groups of wage earners, because each autonomous, or practically autonomous, trade union is a point of pressure upon the distributive mechanism. Each trade union strives to turn the balance of distribution in its own direction. This it does in a variety of ways. It may by its wage demands test out the nature of the demand for the products of its labor. It strives to force the price of these products up to the point which seems to promise the greatest wage income for the group. It may by its pressure on the employer bring about a revision of productive methods. It seeks by its strength to secure that portion of the product which, in its view, goes to the strongest contender for it. Unions, indeed, sometimes strive to restrict the flow of labor into their craft or industry by deliberate regulation or silent obstruction. Such instances are less important than formerly in all probability. On occasion unions may even play a part in determining the field of employment for their members. Thus G. D. H. Cole points out that in England the trade unions do not recognize "differences between skilled and less skilled workers as demarcation disputes, and do not recognize the right of unskilled workers to raise such cases against skilled unions. In fact, the skilled unions virtually claim the right to do such work as they think fit, and so far as they can enforce their claim, to exclude the less skilled where they think fit."[34] Again unionism may indirectly through its wage policy cause a slowing up of recruiting of new men into the craft or industry. In short, by every means at its command, a union strives to assert the importance of its group as against other interests. Thus, in respect to the activities just described, unionism must be included among the influences which lead to the formation and maintenance of relatively separate groups of wage earners. On the other hand, trade unionism in many indirect ways tends to have an effect in the opposite direction. By a constant adherence to certain broad policies, the trade union movement may contribute much to a realization of the conditions on which the idea of a general rate of wages is based. Such, for example, is the emphasis played by the trade union movement upon free and compulsory education, and the raising of the age of entry into industry. Such, also, is its advocacy of social legislation which is aimed to give more nearly equal opportunity to the lowest grades of industrial workers. Or, to take a third example, such is the result of the aid given by the skilled trade unions to the unskilled workers in their efforts to organize. Unionism works against the formation of relatively separate groups of wage earners to the extent that its activities contribute towards the achievement of equality of opportunity for all wage earners, and to the extent that the strong groups come to the assistance of the weaker. 5.--The main cause of the formation of relatively separate groups of wage earners, with different, though closely related levels of earnings have now been considered. As a result of these influences, it must be concluded that the determination of the wage level of each of the various groups of wage earners is a sufficiently independent process to make it necessary to account for it as such. The various groups of wage earners have relatively separate economic careers so to speak. The economic fortune of each group is not settled merely as part of one general process, though the economic fortunes of all are intimately connected. The wage situation is not to be explained as consisting of one basic level of wages with a series of equalizing differences; but rather as consisting of a series of wage levels, all of which are governed to a considerable extent by the same forces or conditions.[35] 6.--We can now pass on the final question which confronts us. How are the differences between the level of earnings of the relatively separate groups of wage earners determined? The factors which determine the relative levels of earnings of each of the different groups may be put into two sets. First, those factors in regard to which each group stands alone and separate. Second, those which arise out of the dealings between the several groups. "The relative plenty or scarcity of the different kinds of labor" falls in the first set. It will be remembered that this was among the three forces which, earlier in the book, were stated to be among the most constant and important in the determination of wages. The processes by and through which the facts of relative plenty or scarcity work out their effect in the distributive result have already been examined. If the numbers in any group of wage earners are high relative to the uses in which the employment of the members of that group results in a considerable addition to the product of market values, the wages of that group will be low, and vice versa. The need of the productive system for any kind of labor, relative to the supply available to fill that need is an important factor in determining the reward paid for that labor. Furthermore, the statements in regard to the interactions to which the action of the factor of relative plenty or scarcity was subject, apply with equal force to the problem under discussion. Every human quality plays its part in the actual processes and negotiations by which the wages of the various groups of wage earners are settled. The outcome depends on many forces, some stable, some shifting and difficult to trace. Among those forces labor unionism, as the assertion of group economic power, holds a significant place. In one respect, indeed, the previous analysis does not apply accurately to the question of different, though closely related wage levels. It is probable that the opportunities for the substitution of one type or group of labor for another type or group are more extensive and numerous than the opportunities for the substitution of one agent of production for another. And this fact limits the differences of wage levels that may arise between different kinds or groups of labor. For substitution of one type or group of labor for another is one of the ways in which changes in the relative plenty or scarcity of the different types or groups are brought about. So much for the first set of forces--those in regard to which each group stands alone. The second set--those which arise out of the relationships between the various groups--remains for consideration. Among these is the influence of customary wage relationships upon the course of wage movements within an industry, and to a lesser extent throughout industry. Because of the existence of vague customary relationships, wage movements affecting some groups or classes of labor are likely to stimulate similar movements among other groups; though it is plain that the efforts of different groups may not meet with equal success. This is well exemplified in the case of railway labor, of which Mr. Stockett has written, "Indeed there is every likelihood that the existence of a powerfully organized and highly paid group of labor in any industry--such as the engineers and conductors in railway transportation--far from being detrimental, may in the long run, be beneficial to the interests of the unorganized and low paid workmen. There is a tendency among the employees to keep a close watch on the wages paid to other groups of their fellow workmen, and the differential between their wage and that of some other grade of employment is jealously guarded. Thus on the railways, wage increases usually advance in cycles, an advance to engineers being followed at a close interval by an equivalent advance to firemen, conductors and trainmen. Existing differentials are more jealously maintained among the train service employees than among other railway workers, but that the latter do aim to maintain their relative level below the skilled groups is evidenced by the reference in arbitration proceedings to the advances made by the train service employees and by their claims to proportionate advances. Thus an increase in the wages of a highly paid group of employees, on account of this tendency to maintain existing differentials tends to put in motion a cycle of wage advances extending to all grades of labor."[36] Public opinion and public agencies of wage settlement have in the past been inclined to give support to the idea of the maintenance of customary relationships, even when the justification was flimsy. Far more important is the factor of mutual aid between groups. For example, in pursuance of some general object skilled groups of labor have given support to minimum wage legislation for unskilled female labor; or again, such instances as the occurrence after the panic of 1907, when various organized groups of wage earners made common cause to resist wage reductions even for unskilled and unorganized labor. Such mutual aid plays its part in determining the wage levels of the different groups of wage earners. This concludes the explanation of the forces which govern the relative wage levels of the separate groups or classes of labor. The actually existing differences of earnings between different groups of labor can only be explained by the combined influence of all the forces discussed. 7.--Differences in the levels of earnings of various groups of wage earners have been called "differentials." An effort has been made to explain their causes. Several practical conclusions, in regard to them, may be deduced from the preceding discussion. Firstly, that these differentials (which may be measured by the differences between the average earnings of various occupations) result from, and in that sense represent, a large variety of actual forces; some of which can only be changed slowly and with much effort, as, for example, the relative plenty of the lowest grades of labor. As complete a knowledge as is obtainable of the various forces which produce these differentials is absolutely necessary to any project of wage regulation. Secondly, although they represent a large variety of actual forces, it is misleading to apply such adjectives as "normal" or "natural" to them. For such adjectives inevitably suggest that the condition to which they are applied corresponds to a set of facts from which divergence can be only temporary, and is probably accidental. That, however, is not true in regard to the wage differentials which exist at any given time. Thus, and thirdly, in any project of wage regulation, existing wage differentials can neither be accepted nor rejected blindly. A policy of wage settlement for industrial peace need not be based upon the acceptance and maintenance of all existing differentials. On the other hand, whatever revisions are undertaken should rest upon a knowledge of the forces which have established existing differentials. The policy of the South Australian Industrial Court, as expressed by its President, would seem to be a practical application of this view. To quote from one of his decisions: "Preëxisting or customary marginal differences are followed by this court as a prima facie rule, but the rule is only prima facie, and is subject to revision in the light of argument and evidence."[37] FOOTNOTES: [30] A. Marshall, "Principles of Economics" (7th Edition), page 218. [31] For an interesting account--from the point of view of the visiting observer--of the mobility of American Labor, see the Board of Trade (Great Britain) investigation: "Working Class Rents, etc., in American Towns" (1911). CD 5609, Pt. V. "... As a consequence partly of the comparatively rapid industrial development of the country and partly of the scope of its resources, and acting in response to the opportunities which are offered, either in centers where urban industries may be more rapidly expanding, in agriculture or in mining the mobility of labor is unusually great. In fields of employment that are well known as centers towards which great numbers of foreigners drift; in which much of the labor is unskilled; in which work is especially laborious as in the iron and steel works, or especially intermittent as at the stock yards and packing houses of Chicago, the constantly changing stream of labor that passes through is a conspicuous factor of the situation. But in general, there is an unusual degree of movement and restless change." [32] F. W. Taussig, "Principles of Economics" (Revised Edition), Vol. II, page 142. [33] G. D. H. Cole, "Introduction to Trade Unionism," page 11. [34] G. D. H. Cole, "Introduction to Trade Unionism," page 61. [35] For an eloquent and incisive discussion of this whole subject, based, of course, on the facts of his own time, see the chapter in J. S. Mill, "Principles of Political Economy," entitled "Of the differences of wages in different employments." Book II, Chapter XIV, concludes: "Consequently the wages of each class have hitherto been regulated by the increase of its own population rather than of the general population of the country." Page 393. (Edition Ashley.) [36] J. N. Stockett, "Arbitral Determination of Railway Wages," pages 165-6. See also account in Lord Askwith's "Industrial Problems and Disputes" of the influence of customary differentials upon wage movements during the war, pp. 400-26. [37] Page 232, Vol. II (1918-19), S. Aust. Ind. Reports, The Furniture Trades Case. CHAPTER V--WAGES AND PRICE MOVEMENTS Section 1. The transactions of distribution arranged in terms of money. How does this affect the outcome of distribution as regards wages?--Section 2. The characteristics of price movements.--Section 3. The direct and indirect effects of upward price movements upon the distribution of the product.--Section 4. The direct and indirect effects of falling price movements upon the distribution of the product.--Section 5. The doctrine of the "vicious circle of wages and prices" examined. Its meaning and importance. 1.--Up to this point the investigation of the forces which govern wage incomes has proceeded with only the most incidental acknowledgment of the fact that the whole series of processes which is described as production and distribution is performed with the aid of a monetary system. Production entails a constant comparison and calculation of money values. The transactions of distribution likewise. How does the intervention of a monetary system affect the outcome of distribution? How does it modify the share of the wage earners in the total product of industry? The subject of prices and price levels is one of the most difficult of economic subjects. However, our purposes do not require any inquiry into the general theory of the subject. It will suffice for us merely to recognize the existence of different types of price movements, without investigating except at particular points the conditions which govern them. 2.--It is common practice to use the term "price level" to denote the position of prices of commodities in general. The price level is never anything more than the concept of a collection of prices of particular commodities. It is convenient to be able to express the position of this collection of prices by a single figure. To do this, use is made of various statistical devices by which this collection of prices can be combined into one price--which will be statistically representative of the collection. That single figure is known as the Index Number of that collection of prices. Changes of the Index Number represent changes in the position of the collection of prices from which it has been statistically derived. All price changes are changes in the prices of particular commodities. Of course, a change in the price of one commodity may produce a change in the prices of other commodities. Relatively small and occasional changes in a few, or even in a great many of the prices which make up the price level, have no importance for the problem of wages. Indeed, if the price level remained nearly stationary there would be no necessity of undertaking this investigation of the effects of price change upon the distribution of the product. However, large and protracted changes in the price level do occur, and these are genuinely important factors in the distributive outcome. A study of the major price movements of the past makes clear the chief characteristics of these large and protracted changes in the price level. They are irregular changes. That is to say, all of the individual prices which make up the price level do not change at the same time, nor to the same extent. Certain prices may even change in opposite directions.[38] It is well to mark also, in passing, that the prices of some or many of those articles which occupy a very important place in all calculations of the cost of living of the wage earners--the articles of food and clothing, and shelter--may change in a different measure, or even in a different direction from the prices of the other commodities which compose the general price level. This possibility is the most genuine as regards food prices. Movements of food prices, and, indeed, of the prices of all agricultural products, are apt over short periods to be determined by weather conditions rather than by the industrial events which govern the general price movement. Mr. W. C. Mitchell in his book on business cycles studied the relation between the movements of retail food prices (the figures ordinarily used in cost of living investigations) and general business conditions during the 1890-1910 period in the United States. He writes in conclusion that "these figures (i.e., of 30 retail food prices) indicate a certain correspondence between retail prices and business conditions. In 1893, indeed, the thirty foods rose slightly instead of falling, but they declined during the dull years which followed the panic, and rose again when prosperity returned. The rise was slow until 1900-02; it became slow again in 1902-04; but rapid in 1905-07. The panic of 1907 came too late in the autumn to exercise much influence upon the average retail price level of that year. On the whole, this series reflects the course of business cycles better than might have been expected. For the supply of vegetables and animal foods varies in an arbitrary fashion determined by the weather, and the demand for staple foods is less affected by prosperity and depression than that for the more dispensable commodities."[39] Even over periods of some duration there may be a marked difference between the movement of food prices and other prices. 3.--Changes in the general level of prices must have prior causes, but they, themselves in turn cause economic disturbance. They give a tilt to the whole industrial system which manifests itself in the outcome of distribution. The effects upon the distribution of the product of an upward movement of prices are ordinarily different from those produced by a general decline in prices. It is well to begin with the first case--a period of a rise in the general price level. To give an accurate analysis of the successive interactions by which an upward movement in the general price level, once stimulated, asserts itself, is both a delicate and lengthy task. It cannot be attempted here.[40] It suffices to note the ordinary distributive results of the process; with the important reservation, however, that they do not occur in the measure that the rise is occasioned by a general reduction in the productivity of industry such as might be caused by war. There are firstly what may be called the direct results. Prime costs of production do not increase as rapidly as prices, and supplementary costs rise even less rapidly than prime costs. Prices rise faster than wages and interest charges, and rents tend to remain fixed by leases and other arrangements. Especially in the first year or two of rising prices, the rise in wages tends to be slow; in the later stages it ordinarily becomes more rapid.[41] Thus Mitchell in his study of wage and price movements during the Greenback Period in the United States (1860-80) writes that "... The table shows an almost universal rise of wages during the war--though a rise far from equal to the advance of wholesale or retail price."[42] And in his study of price and wage movements from 1890-1910 in the United States he writes, "The figures indicate that the prices of labor are influenced by changes in business conditions, but in less measure than the price of commodities, even at retail. The general average declines after the panic of 1893, recovers in 1896, advances in 1898-1903, makes very little gain in the dull year of 1904, and then rises rapidly again in 1904-7. But the degree of rise and fall is considerably less than that of commodities at wholesale and just about the same as that of food at retail."[43] The lag of wages behind prices varies in degree in different industries and occupations, for neither prices nor wages go up uniformly. The general direction of wage change is marked, but there is nevertheless considerable variation in the amount of wage change.[44] These variations in wage change are to be explained by the fact that the wage earners tend to fall into groups whose economic fortunes are in some measure independent of each other. They therefore are only slowly affected by changes in each other's position. On the other hand, since the increase in expenses of production in most industries tends to lag behind the rise in the price obtainable for products, profit returns increase during such periods, especially in industries in which the wages bill is an important part of the expenses of production. To quote Mitchell again, "The net resultant of these processes is to increase profits. Of chief importance is the fact that supplementary costs rise slowly in comparison with the physical volume of business.... In many instances prime costs also lag behind selling prices on the rise...."[45] The definite exception to this last conclusion is when the rise in prices is caused by general lowering of the productivity of industry. And so also it may be said that to the extent that higher prices are merely a mark of an increased cost of labor, or a drop in the efficiency of industrial enterprises, it does not follow that profits are growing. It is generally held that there is such a falling off in the efficiency of industrial enterprises, and an increase in the cost of labor in a period of very rapid business expansion and rising prices--especially toward the end of the period. Mitchell writes: "... Prosperity is unfavorable to economy in business management. When mills are running overtime, when salesmen are sought out by importunate buyers, when premiums are being offered for quick deliveries, when the railways are congested with traffic, then neither the over-rushed managers nor their subordinates have the time and the patience to keep waste down to the possible minimum. The pressure which depression applies to secure the fullest utilization of all material and labor is relaxed, and in a hundred little ways the cost of business creeps upward."[46] Then there are the indirect effects of the process of price change upward. Since profits generally are large, production tends to be stimulated and the volume of production increases. The turnover of industry is quickened somewhat. Plants are more fully utilized, and unemployment is small. More overtime is worked. The total earnings of the wage earners are likely to advance more than wage rates. The extent of the divergence between the increase in hourly or piece rates and weekly or yearly earnings is likely to vary greatly according to the nature of the causes of the price movement. When the price movement is just the reflex of a situation of depreciated paper money, for example, the volume of production may or may not be increasing. An interesting study of the divergence between hourly earnings and weekly earnings for the recent war period (Sept., 1914-March, 1919) is contained in one of the Reports of the National Industrial Conference Board. In the metal industries (those most directly affected by the war) the advance in weekly earnings for men was stated to be 103 per cent. as against 71 per cent. in hourly earnings. In the rubber and chemical industries the increases in weekly earnings were greater than in hourly earnings also, but not to the same extent as the above. In the textile industries the percentage increases were practically equal, while in the boot and shoe industry the increase in weekly earnings for men was less than the increase in hourly earnings. And for women in most industries the weekly earnings show the smaller per cent. of increase.[47] Of course, figures of yearly earnings would be more significant as a comparison. It is not easy to reach a general conclusion in the matter. It may be said that if the increase in prices is but the mark of an ordinary business revival--with no unfavorable attendant circumstances--weekly and yearly earnings will be favorably affected. Whether they will be affected sufficiently to prevent real wages from falling, particularly at the beginning of the period of rising prices, whether towards the end of the period real wages may not actually have increased--these are questions it is not possible to answer except as regards a concrete situation. And if the increase in prices is the result of currency inflation, or of a general falling off in the level of production, weekly earnings are likely to be even more unfavorably affected during the period of price increase than hourly rates. 4.--The effects of the process of falling prices may also be considered as direct and indirect. The direct results are somewhat of the opposite character to those just related for a period of rising prices. It is difficult to generalize about them. If the period of falling prices follows closely upon a period of sharply rising prices, during which latter period wage increases lagged greatly behind price increases, the tendency for wages to rise may continue to manifest itself for some time after prices have begun to drop. An example of such a period is furnished by the years immediately following the Civil War.[48] In the case of the price decline of the year--1920-21, however, wage decreases have come promptly--and this is more likely to be the ordinary case. Unless industry in general becomes more efficient during the period, a continued fall in the price level tends to bring about a fall of some degree in the wage level. However, just as in periods of rising prices the wage increase usually tends to lag behind the retail price increase, and even more behind the wholesale price increase, so in times of falling prices, wages often tend to fall more slowly than retail prices, and much more slowly than wholesale prices.[49] The wages of different groups do not fall equally. The same dispersion that was noted in times of rising prices is found equally in periods of falling prices. This is to be explained in the same way as the dispersion which occurs in periods of rising prices.[50] Organization, however, is likely to play a more decisive part in resistance to reduction of wages than in demands for increased wages. Industries in which the wage earners are highly organized generally find it more difficult to economize by way of wage reduction than industries in which the wage earners are not organized. The range of profits of industry during periods of falling prices will depend upon the nature of the causes which produce the decline. If it is simply the result of an increase in industrial efficiency, or progress in the industrial arts, profits will continue to be satisfactory and may even be on the increase. If, on the other hand, the price decline results from the occurrence of those short periods of forced liquidation known as crises, and is accompanied by that state of recuperative and cautious business activity known as depression, profits in most industries are apt to be quite low. Such was the 1893-96 period in the United States. During the period of forced liquidation and immediately thereafter, the number of bankruptcies is likely to be high.[51] No general statement is possible concerning the duration of such a period of depression and low profits; all accompanying circumstances play a complicating part in retarding or hastening business recovery.--The present depression of 1920-21 is almost of unprecedented duration, for example. Nor should it be supposed that the state of depression must be identical with the period of price decline.[52] Given favorable circumstances, the price decline soon leads to a search for new methods of economy in production. Raw materials are likely to fall in price. Supplementary costs are rapidly reduced. The price of labor tends to fall. Even though prices continue to fall slowly, profits may rise to a level encouraging to business activity. This may also be true of a period of liquidation not preceded by crisis. In conclusion, it can only be repeated, however, that confident generalization as to the direct effects of falling prices is impossible. Each business cycle has its own peculiar characteristics--it is unique as Mitchell says.[53] So, too, as to the indirect effects of a general fall in the price level. No one description can be given that will hold true of all instances. If the main cause at work is of the kind that may be called "natural," for example, a gradual increase in the productivity of industry, or a decided falling off in gold production, such periods are not necessarily periods of depression in industry. Employment may be constant and weekly and yearly earnings high. Thus the period of 1873-1896 in the United States was one of declining prices and it is generally admitted that that period was one of great industrial activity.[54] Moments of excessive activity are rarer in periods of falling prices than in periods of rising prices, but the average amount of unemployment may be either greater or less. Again, if the decline of prices is in reality a movement from a state of depreciated paper money to a gold standard, there is a possibility that the period may be one of industrial activity due to a prevailing confidence in a coming recovery. It is more likely, however, that such a period will be characterized by a falling off in business activity and an increase in unemployment, particularly at its commencement. Lastly, if the price movement is an indication of such a period of depression as may precede and usually does follow serious industrial crises, it is ordinarily accompanied by liquidation and curtailment of production. In these periods, and especially at their height, unemployment grows and earnings fall more than wage rates. Or wage rates may remain comparatively steady, but weekly and yearly earnings will fall. The extent to which this fall in earnings will go depends upon the seriousness of the industrial maladjustments.[55] Still it is safe to conclude that a period of serious depression following upon a crisis is the least favorable phase of the industrial cycle for the wage earners--notwithstanding the fact that wages frequently fall more slowly than wholesale prices, and somewhat more slowly than retail prices. 5.--Our object in discussing the effect of price movements on distribution is to discover how they complicate the problems of wage settlement. Before proceeding to this main purpose, however, it is desirable to pay particular attention to one doctrine of the relation of wage change to price change which figures prominently in current discussion. That is the doctrine known as the "vicious circle of wages and prices." It has been well stated by Mr. Layton: "It is often asserted that a rise in wages is only a move around a vicious circle, the argument being put thus; starting with a rise in wages achieved, let us say, as the result of a strike, the increased wage bill will add to the cost of production, and so raise prices; if the rise becomes general, the cost of living will increase and diminish the purchasing power of wages; this will produce a renewal of discontent among the working classes and result, perhaps, in a further demand, culminating in a strike for still higher wages."[56] This doctrine is affirmed somewhat indifferently, when the demands for increased wages are made during a period of a relatively steady price level, or during a period in which the price level is rising steadily. What elements of truth does it possess and what is its importance? The first thing to note is that the series of events visualized in the above quotation can be set into motion by any other cause which disturbs the price level just as well as by a demand for increased wages. For example, a great influx of gold into the United States may take place as a result of a steadily favorable balance in international trade. Bank reserves may mount, discount rates may fall, and if all other circumstances happen to be already favorable, a period of increased industrial activity may follow. Demand for basic products will increase and prices will begin to rise. With the tendency of prices to rise, the general demand for labor will increase. Wage demands will follow, and all the conditions required to make the theory applicable are supplied. Certain conclusions may be stated at once. Firstly, the industrial situation is rarely so balanced, no matter what the price situation, that a measure of wage increase may not be possible without an equivalent increase in prices. The distributive situation is never one of static equilibrium. The gain of one group or agent of production may simply be another's loss. Each group or agent strives for a large return. If wages go up, profits may go down, or new methods of production may be devised, or strikes may cease. The same possibilities exist in essentials, irrespective of any prior price movement. The movement of prices upward simply gives ground for the presumption that there is a greater possibility than usual of increasing wages without causing equivalent price increases. It is incorrect to reason that all participants in distribution must come off equally well in this succession of changes. A continuous testing out of the distributive effectiveness of the various agents of production, and of any divisions which may exist within each agent, occurs. The various groups of wage earners may be better or worse off than before. When the price level has shown a prior tendency to rise, there is good reason to believe that the wage earners stand to gain by a vigorous policy of assertion. For then in particular, unless the general rise in prices is to be accounted for by a reduction in the general productivity of industry (a possibility always to be considered), wage increases can come out of the extra income which the other agents are in receipt of because of the price movement. Secondly, in normal times the process visualized could not go on indefinitely. Sound banking practice imposes a limit upon credit expansion. In an abnormal time such as Europe is now passing through credit expansion may, indeed, continue beyond the point dictated by banking reserves. Thus depreciation ensues. This, in turn, is ordinarily limited by the desire to return to a gold basis; otherwise it results in financial chaos. Barring out this last eventuality, the process of price change has a final limit, which must set a limit upon wage increases. What these general theoretical propositions regarding the idea of the vicious circle do show, is that this idea is in itself an attempt at a complete theory of distribution. That theory, if consistently formulated, would be that the product of industry is already being shared out among the various agents of production in such a way that an attempt on the part of any agent to get more than what it is receiving at any particular time can result only in a price increase. For each agent, it is presumed, is getting its "normal" share as settled by the general economic position and certain unchangeable economic laws. The idea is but the shadow of the theories of normal distribution mentioned in preceding chapters. It does, in common with these theories indeed draw attention to certain fundamental economic relationships. These Judge Brown has expressed well in one of his decisions which reads, "The element of truth in the 'Theory of the Pernicious Circle' is that, at a given stage in the history of a particular society, there is a limit to the amount which should properly be awarded for wages,--both wages and profits have to be paid out of the price paid by the consumer. If, whether by collective bargaining or by strikes, or by judicial regulation on the part of the public authorities, an attempt is made to narrow unduly the margin of profit on capital, then there is likely to be a period of industrial dislocation, and every class in the community is likely to suffer."[57] But the idea has all the misleading effects which have been attributed to that general theory of distribution of which it is a corollary. It is derived from an analysis of the distributive process which does not fit all the facts. FOOTNOTES: [38] For data upon this irregularity, see the tables in W. C. Mitchell, "Report on Prices in the United States," 1914-18. See also his "Gold, Prices and Wages under the Greenback Standard." Tables 20-22 for study of dispersion of retail prices. [39] "Business Cycles," W. C. Mitchell, page 95. See also page 109. "In the case of animal and farm products, however, where dependence is not upon natural deposits of minerals and forests which have grown through decades, but upon the fruits of human labor during one or two seasons, frequent contradictions between the movement of prices on the one hand, and changes in business conditions on the other hand, seem likely to continue for a long time to come." See also "Gold, Prices, and Wages under the Greenback Standard," pages 48-54. [40] See W. C. Mitchell, "Business Cycles." Also B. M. Anderson, Jr., "The Value of Money." [41] See W. C. Mitchell, "Business Cycles," pages 465-6, 476. [42] See W. C. Mitchell, "Gold, Prices, and Wages under the Greenback Standard," page 10. [43] See W. C. Mitchell, "Business Cycles," page 132, Chart 13. See also F. W. Taussig, "Results of Recent Investigations on Prices in the U. S.," in _Yale Review_, Nov., 1893. [44] Mitchell writes with reference to the 1890-1910 period that "on examining the figures for separate industries, one finds there is less variety of fluctuation than in commodity markets. But still considerable differences appear between, say, cotton mills and foundries, or building trades and shoe factories. However, no industry escaped a reduction of wages after 1893, and none failed to register a large advance between 1894 and 1907," page 132, "Business Cycles." See also for 1914-1919 data, Research Report Number 20 of the National Industrial Conference Board on "War Time Increases of Wages." [45] W. C. Mitchell, "Business Cycles," pages 468-9. [46] W. C. Mitchell, "Business Cycles," page 483. The increased cost of labor arises from many causes besides the increase of wages. The less efficient workers receive fuller employment; extra rates are paid for "the tired labor of overtime"; there is likely to be an increase in the rate of labor turnover due to the rapidity of wage movements and the ease of getting a job; and lastly it is said that work is carried out with less energy when the workmen are secure in their employment. Mitchell goes so far as to write that "labor is a highly changeable commodity--its quality deteriorates as its price rises" (pages 476-7), "Business Cycles." See also J. C. Stamp, "The Effect of Trade Fluctuations on Profits," _Journal of the Royal Statistical Society_, July, 1918. [47] See Research Report No. 20, National Industrial Conference Board, "Wartime Changes in Prices." See also the controversy between the railways and railwaymen arising from the difference described by J. N. Stockett, Jr., "Arbitral Determination of Railway Wages," pages 107-8: "In determining the increase in railway wages for the purpose of ascertaining whether wages have kept pace with increasing prices the question arises as to whether wages mean earnings or rates. The railways maintain that the cost of living argument is fundamentally directed to the establishment of the proposition that earnings have not kept pace with the increase in the price of commodities, and therefore wages, in connection with the cost of living, means earnings. The employees, on the other hand, contend that the computation of the increase in wages should be based on the assumption that wages mean rates of pay, and that the high earnings which the railways show for the men are the result of excessive hours worked. They claim that it is not valid to assert that wages have kept pace with the increase in prices, if an employee must work continually over the time set for the minimum day in order to make his wages bear the increased price of commodities." [48] W. C. Mitchell, "Gold, Wages and Prices under the Greenback Standard," page 102. [49] For examples, see W. C. Mitchell, "Gold, Wages, and Prices under the Greenback Standard," pages 102-3. [50] See pages 92-3, this chapter. [51] See W. C. Mitchell, "Business Cycles," pages 438-44. [52] _Ibid._, page 558. [53] _Ibid._, pages 449-450. [54] See Laughlin, "Money and Prices," Chart III, page 86. [55] See W. C. Mitchell, "Business Cycles," page 58. [56] W. T. Layton, "Introduction to the Study of Prices," Appendix C, page 128. [57] "The Carpenters' and Joiners' Case," Vol. I, S. Australian Ind. reports, page 174. CHAPTER VI--WAGES AND PRICE MOVEMENTS (_Continued_) Section 1. The problems of wage settlement arising out of upward price movements two in number: (a) Should wages be increased during such periods? (b) If so, on what basis should increases be arranged? The doctrine of the maintenance of the standard of life analyzed.--Section 2. An alternative method of adjustment proposed, based on a new index number.--Section 3. Periods of falling prices also present two problems of wage settlement, similar in essentials to those presented by upward movement. These problems discussed. 1.--We can now proceed to the consideration of the problems of wage settlement which arise out of price movements. First, we will deal with the problems presented by upward price movements. Then subsequently we shall take those questions presented by price movements downward. The problems presented by upward price movements are two in number. Firstly, is there any reason why wages should be increased during a period of advancing prices? Secondly, if there is reason, on what basis should the increases be arranged? The answer to the first of these questions is simple. In periods of rising prices wage increases tend to lag behind the retail price increase, and very much behind the wholesale price increase. The chief aim, therefore, of any plan for the adjustment of wages to upward price movement must be the protection of the interests of the wage earners. Changes in the distributive situation that are unfavorable--judged by reference to the distributive outcome to be sought by any policy of wage settlement--must be prevented, if possible. It is the second of the problems which presents the difficulty. There is one method of wage and price adjustment which holds an important place in current discussion. Indeed, it has tended to be the prevailing method although it has never been applied systematically in the United States.[58] That is the method based upon the doctrine of the maintenance of the standard of living. This doctrine aims to maintain real wages at a constant level throughout the course of price change. The labor unions have usually given it their support, finding in it a strong basis for their claims.[59] Is it the best possible method of adjustment considering the end to be attained? Its advantages are definite. It is a simple claim. It is a claim the justice of which could be denied only under unusual circumstances. It has in the past brought considerable benefits to the wage earners, because they have usually stood to gain by any vigorous assertion of their interests. What are its disadvantages? The first of its disadvantages is in the difficulty of interpreting the doctrine into practical policy. There has seemed to be one straightforward way of interpreting it. Investigations have been made from time to time of the commodities and services on which the working class household tends to spend the bulk of its income. As a result of these investigations budgets have been drawn up which were deemed sufficiently representative of the main currents of expenditure of the mass of wage earners at a given time and place. On the basis of this data an index number of the cost of living for the mass of wage earners, at the given time and place, has been prepared by methods too familiar to require explanation here. In the past the price collections ordinarily used were composed mainly of the prices of foodstuffs. But recent data covers a much wider portion of the total expenditure.[60] An index number for the cost of living having thus been prepared, it has been conceived that the variations in this index number were indicative of the change in the cost of living. This practice, however, is not altogether satisfactory. Firstly, the concept of a representative budget is necessarily more or less artificial; the budgets of wage earners, even in the same class, vary considerably in composition. Thus hardly any figure on the change of the cost of living has been given out without being challenged by one or other of the interested parties. Secondly, for all except the lowest grades of wage earners, the direction of expenditure changes somewhat as particular prices change in a different measure. This second disadvantage was noted particularly during the war, when the supplies of certain commodities were limited or rationed. Thirdly, and this difficulty is of a more serious nature, the prices of some or many of the articles which occupy an important place in all calculations of the cost of living of the wage earners may change in a different measure, or even in a different direction, from the prices of the other commodities produced within the country. Food prices in particular are apt to respond to different influences than those governing the general price level.[61] However, it is only from the course of change of the price level representing _all_ important commodities produced within the country that it is possible to get an indication of the change in the total conglomeration of market values, which has been called the product of industry. Even then the indication is far from an exact one. Let us consider the two cases in which the change in the prices of some or many articles important in the wage earners' budget diverges considerably from the change in the index number of the prices of all important commodities produced within the country. The first case is that in which the prices of the relatively small collection increase much faster than the index of general prices. Such might be the fact in the event of two bad harvests in succession. If wages are increased in accordance with the movement of the prices of the relatively limited collection of commodities, the result of the wage increase may be an increase in prices in general. As a result of this the wage earners may be better or worse off than before, depending upon circumstances. The second case is that in which the prices of the relatively small collection of articles may increase less than the index of prices in general. In this case any wage increase undertaken in accordance with the change of prices of the relatively small collection would fall considerably short of that which could have been ventured without fear of causing another price increase--and without waiting for the test of profit accumulation discussed elsewhere.[62] Fourthly, changes in a relatively small collection of prices, particularly if foodstuff prices bulk largely in the collection, are apt to be more convulsive than general price movements. They are likely to vary more than general price movements from year to year, and, indeed, from season to season. This is so, although it is true that retail prices tend to be far more stable than wholesale prices.[63] Lastly, as Mitchell states, as a business factor crops are less an effect than a cause of change in conditions. "Good crops tend to bring prosperity and poor crops depression in the seasons which follow...."[64] If foodstuffs fall because of a good harvest, it is more likely than not that the next industrial year will be a good year. There is, therefore, a preliminary presumption that there will be no occasion for wage reduction (if wage adjustments to falling prices are contemplated--which subject will be discussed immediately hereinafter). If foodstuff prices rise because of a poor harvest, there is a preliminary presumption that the succeeding industrial period will not be one of very great activity. Therefore, an increase in wages corresponding to the rise in the prices of food products would not serve to increase very much, if at all, the command of the wage earners over foodstuffs. This possibility of a divergence in the movement in the price of provisions and of wages was pointed out, indeed, by Adam Smith. To give the explanation in his words, "In a year of sudden and extraordinary plenty, there are funds in the hands of many of the employers of industry, sufficient to maintain and employ a greater number of people than had been employed the year before; and this extraordinary number cannot always be had. Those masters, therefore, who want more workmen bid against one another, in order to get them, which sometimes raises both the real and money price of their labor. The contrary of this happens in a year of sudden and extraordinary scarcity."[65] 2. Such are the disadvantages attaching to a policy of wage adjustment based on the doctrine of the maintenance of the standard of life. It may now be asked whether there is any alternative method to which smaller disadvantages attach? As to the matter of alternative, it is my opinion that a better plan of adjusting wages to price movements can be devised. The basis of it should be the change in the index number of prices of all important commodities produced within the country. Any scheme of adjustment arranged on that basis would have one distinct advantage. It would be representative of the fundamental distributive relationship--that is the relationship between the various levels of earnings and the total product of market values. It would assure a closer accord between wages and total product than the widely used method already studied. Nevertheless, it must be admitted that this plan also is not free from disadvantages and difficulties. Some difficulties of interpretation would remain. The selection of the ratio in which wages should be changed with reference to the course of price changes would be wholly a matter of judgment. For due to the changes in the expenses of production and to the changes in the volume of production, it will always be impossible to reason concerning profits merely from the facts of price change. And secondly, since all prices do not change equally, even if wages are increased in accordance with the changes in the index number of all prices, these wage increases might cause price changes in certain directions. Weighing all the difficulties, it may be that the best method that can be devised would be something in the way of a compromise between the two methods that have been discussed. That is, wage adjustment to a rising price (and to a falling price level--if such adjustment is contemplated) level could be made on the basis of the change in the price index number of all the important commodities produced within the country; but in the making of the index number, the prices of food, rent, and clothing could be given a heavy weight (50 per cent., for example) of the total. Such a compromise would tend to assure, on the one hand, that the wage change did express in a considerable measure the change in the cost of living. And, on the other hand, it would tend to keep wage changes in closer accord with the changes in the total value product of industry than any method based solely on a measurement of the change in the cost of living. In conclusion, however, it may be remarked that when the prices of the essentials of economic existence are increasing very rapidly, there is no way, under our wage system, by which the welfare of the lowest industrial classes can be effectively protected merely by wage adjustment. When supplies are short, if their distribution is left to the free play of the market, the poorest classes must come off badly. 3. There remain for consideration those questions of wage adjustment which are presented by downward price movements. They are two in number. Firstly, is there any reason why wages should be reduced during a period of declining prices? Secondly, if they should be reduced, on what basis should the reductions be arranged? In reference to the first question, three different types of situations may be distinguished on the basis of the analysis of the effects of price declines given in the preceding chapter. The first type is that in which the decline in prices is due to some such cause as the progress of invention or the development of the means of transport. In this case the fall of prices is brought about by an increase in the quantity of goods produced, and there is no reason why wages should be decreased. Indeed, there may even be occasion for an increase. The second case is that in which the decline in prices marks a period of reaction from a previous period of price increase and a tendency to limit production costs and to proceed cautiously, but is not accompanied by much forced liquidation and is not the result of any urgent necessity to reduce bank credit. In short, when the business conditions accompanying the price decline do not warrant apprehensions of a crisis, serious as they may be temporarily. Price declines of this sort may be considerable in extent; they will be gradual rather than violent. They are apt to be characterized by less dispersion than those which are precipitated by crises. In this case also there would seem to be no good reason why wages should be reduced. A decline of prices would be desirable, it is true. The industrial position would be improved thereby and industrial activity would be put upon a sound financial basis. Some contraction of credit is to be desired if, as is assumed in this case, the period of decline was preceded by one of considerable price increase and credit expansion. But these results may be obtained without any reduction in wage rates. The cost of labor will fall without any reduction in wage rates, as the amount of overtime work is lessened, as employment is concentrated upon the more efficient workers, and as workmen put more energy into their jobs in order to hold them. Such times as these usually lead, furthermore, to the introduction of new or forgotten economies, and to improvements in the method of production. Thus it can be concluded in this case that whatever reduction of the price level is required to restore industry to a sound financial basis can be accomplished without reducing wage rates. The third case is that in which the decline in prices is abrupt--at the beginning at all events--and is precipitated by much forced liquidation of a character disastrous to the enterprises forced to undertake it. In short, when it is brought about by an industrial crisis or when an industrial crisis is actively threatened. In this case the decline is usually preceded by a period of rapidly rising prices which brings about an over-extension of credit and puts heavy pressure upon the banking system. Maladjustments in industry manifest themselves and fear comes to govern all production. The price decline in different industries is apt to vary greatly in extent. In this case, as in the second, the process of price decline--the state of severe depression--tends to set in motion certain forces which work for recovery. The owners and directors of industry seek for economies. They strive to get greater output from the workers, and generally succeed since a job is more precious. Prime as well as supplementary costs are cut down. And yet if there has been great expansion of credit; if the banking system as a whole shows a very low reserve, and some banks suspend specie payment, a reduction in the wage level is necessarily essential to industrial recovery. This may be so especially, if buying is at a halt. The wage reduction should follow the price reduction. There would appear to be no compelling reason for the wage reduction to be in the same ratio as the price decline, since it is probable that the wage increases will have lagged behind prices in the preceding period. The conditions making the case should be clearly present; competition or control must be active, in order to insure that the reduction of wages really does assist price reduction. These important details will be considered at another point.[66] Against such a policy of wage reduction some arguments of weight can be brought forward. It may be said that all other branches of outlay will be subjected to a more severe overhauling when there can be no resort to wage reduction. It may also be argued out that the maintenance of wage levels would confer such indirect assistance to recovery as might come from the lessening of the fear that a future fall in wages will make present production unprofitable. The factor of industrial unrest and discontent is apt to be less menacing. Lastly, it may be said that wage reductions might be reflected in the efficiency of the least favorably placed groups of workers.[67] These objections should be overridden only if it is believed that a decline in the price level greater than that which could be secured without wage reduction must precede industrial recovery. Or that such a decline would, at all events, greatly facilitate the recovery. It must be believed that at the level of prices existing at the outset of the crises, or at a position somewhat but not markedly under that level, the margin of safety in the financial system by virtue of which modern industry is carried on, is too small--the ease with which the unfavorable turn of affairs could produce another crisis too great. Or that consumers will not resume buying until prices drop greatly. Under which circumstances the policy of wage reduction would be as much to the benefit of the wage earners as to the rest of the community. This case is to be distinguished from the previous one really only by the decided seriousness of the situation it reveals. In this case it is presumed that a decided judgment may be made that the price level must be greatly lowered before business operations can revive and be carried on with confidence in steady markets. In the previous one it is presumed that a decided judgment can be formed to the effect that the shock to business will be satisfactorily gotten over with just that reduction of prices that liquidation and a more careful conducting of business operations will bring about. The difference is, in the last analysis, one of degree. A price decline that is in reality a movement from a state of depreciated paper money back to a gold standard may be looked upon as a variant of the third case. For it is obvious that if the depreciation is extensive, the decline in the price level necessary to the attainment of the gold basis must also be extensive. There is a fourth possible case which will be described, but will not be followed up, since it is not applicable to the United States at the present time. It is the case of a country whose chief industries are export industries--the prices of the products of which are determined by world competition. This case is complex and not to be analyzed by a general rule. A few observations may be made. It is conceivable that a situation should arise in which a policy of wage reduction is expedient because the export industries are very gravely threatened by foreign competition. In such a situation it may be argued that any genuine necessity for a reduction of wages would be manifested by the pressure of the banking system, because of the outflow of gold that would occur consequent to a great falling off of exports. But, as we have seen during the war, such a banking situation may be avoided for a number of years by such devices as foreign loans, and the industries in question would decline in the meantime. On the other hand, any policy of general wage reduction could only be undertaken with caution. Situations of the sort described tend to call out the reserve energies of a country. They are always present to a greater or less extent. So much then in answer to the first question--as to whether there was any reason for wage reduction during periods of declining prices. The second question then presents itself--on what basis should such reductions as are advocated be arranged? On which subject the conclusions reached in the course of discussion of wage adjustment to upward price movement are applicable. These conclusions will be recalled at various points further on in the book. FOOTNOTES: [58] Nor has it for that matter been applied with consistency in Great Britain. See the Minority Report of the War Cabinet Committee on "Women's Wages," 1918, page 262. [59] Webb, "Industrial Democracy," Doctrine of the Vested Interests, pages 562-572, 595. [60] The data published in the monthly _U. S. Labor Bulletin_ covers most of the articles which are at all important in the wage earners' budget. The collection of such data, however, has remained spasmodic up to the present. See the article by H. S. Hanna in the October, 1919, issue of the Monthly Review of the U. S. Department of Labor. The Sumner Committee Report on the "Cost of Living in Great Britain" 1917 (CD 8980), covered food, rent, clothing, fares, fuel and light, insurance, and sundries. Data was collected for skilled, semi-skilled, and unskilled labor. [61] See pages 89-91, Chapter V. [62] See Chapter XII. [63] "While these two series (i.e., of wholesale and retail food prices) agree closely in the general trend of fluctuations, the retail prices are much more stable. They lag behind the wholesale prices both on the rise and on the fall, but more on the fall than on the rise." Mitchell, "Business Cycles," page 39. The tables given apply to the 1890-1910 period in the United States. They do not show fluctuations for periods less than a year. [64] W. C. Mitchell, "Business Cycles," page 39. [65] Adam Smith, "Wealth of Nations" (Cannan's Ed.), Vol. I, page 87. [66] See pages 203-7, Chapter IX. [67] These in general were the motives for the passing of the Temporary Regulation of Wages Act in England (1918). "During the period of six months from the passing of this act, any person who employs in any trade or industry a workman of a class to which a prescribed rate of wages as defined in the Act is applicable, shall pay wages to the workmen not less than the prescribed rate applicable to workmen of that class, or such other rate as may be substituted for the prescribed rate by the Interim Court of Arbitration ... and if he fails to do so, he will be guilty of an offense under this Act." CHAPTER VII--THE STANDARD WAGE Section 1. The remainder of the book will consist of an attempt to mark out principles of wage settlement that could be applied with relative peace and satisfaction in the settlement of wage disputes.--Section 2. Some preliminary notes on the subsequent exposition. The question of the political machinery required to put any policy of wage settlement into effect, avoided on the whole.--Section 3. The principle of wage standardization defined and explained.--Section 4. The characteristics of the standard wage examined.--Section 5. The effect of the standard wage on individual independence and initiative.--Section 6. The effect of the standard wage on the distribution of employment within the group.--Section 7. Its effect upon industrial organization, prices, and managerial ability.--Section 8. Its effect upon the output of the wage earners. This question cannot be satisfactorily discussed apart from the larger one--that of the effect of unionism upon production.--Section 9. Wage standardization and the "rate of turnover" of labor. 1.--In the first two chapters the aims towards which any policy of wage settlement for industrial peace should be directed were discussed. In the following four chapters an effort was made to throw into clear light the forces and relationships which determine wages at the present time. The way has thus been prepared for an attempt to work out principles for use in the settlement of industrial disputes. Past experience in industrial arbitration or adjudication is a fertile source of suggestion in this endeavor; although much of it has been rather like a search in the dark for objects not too well described beforehand. The definition of aims was an attempt to find out the objects of our search. The analysis of the present economic situation and of wage principles was an attempt to get acquainted with the area in which the search must go on. The remainder of this book will consist of an attempt to work out principles of wage settlement which could be applied in wage disputes with relative peace and satisfaction. If adopted, they would serve as a substitute for a resort to open force in such disputes. Their acceptance would mean that when ordinary collective bargaining fails as a means of settling wages, the dispute would be referred to some constituted authority, who would use these principles to reach a decision. 2.--The plan pursued in the subsequent exposition requires a few brief preliminary notes. First, in regard to the order of exposition. What follows is simply the direct statement of a series of principles (embodied in measures, as all principles must be). These principles, separately taken, cover most of the problems presented by wage disputes. Taken together they might be composed into a policy of wage settlement. Indeed, at the end of the book, an attempt is made to combine them into such a policy. Not that it is believed that any policy of wage settlement can really be wrought in a piece this way. But because it is believed that ultimately it will be recognized that wage disputes cannot be settled as isolated events. There will have to be recourse to thought out principles, systematically applied. It will be found that no single principle will suffice; that many principles will have to be combined and used with reference to each other. There will be, in short, a call for a unified policy of wage settlement. Secondly, in regard to the range of the exposition. The question of the political machinery that would have to be created in order to administer the proposed principles is on the whole avoided. To have attempted to discuss that question systematically would have greatly complicated this inquiry. In places, indeed, it will be found impossible to gauge the operation of some proposed principle without an understanding of the machinery by which it is applied. At such points an attempt is made to indicate the arrangements that would best serve the purposes in view. Thirdly, in the formulation of the principles suggested, past and present experiments in the application of such principles are liberally drawn upon for suggestion. No attempt will be made, however, to enumerate systematically the principles that have been applied in the pursuance of the aim of industrial peace. No effort will be made to classify the various theories or principles which have been put forward somewhere or sometime in the past, and then to submit each theory or principle to criticism.[68] Or, in other words, no attempt will be made to give a primer of opinions either as to the difficulties to be encountered in any attempt to formulate a policy of wage settlement, or of the suggested means of overcoming such difficulties. 3.--The first of the principles or measures which is put forward, is known as the principle of wage standardization. This principle has been well interpreted by Mr. Stockett: "The principle of standardization is designed to abolish within a given area the multiplicity of rates paid for similar service by the application of one standard rate for each occupation, minor differences in the nature of the work due to varying physical and other conditions being disregarded."[69] It represents the desire to do away with the great variety of wage rates for the same work which frequently exists, and the substitution therefor of a minimum wage rate. Good examples of its application are the wage agreements entered into by organized bodies of wage earners and employers. In these the standard rates agreed upon for the various occupations are the minimum to be paid for these occupations, regardless of the particular individuals employed, and of minor differences in the nature of the work performed. Trade union activity is undoubtedly responsible for the introduction into industry of the principle of standardization. By the device of the "common rule," so called, the possible influence upon the wage bargain of the economic position of the individual wage earner, or of the inefficiency or policy of the individual employer, is greatly curtailed. The common rule is a suitable instrument of expression for the group unity; by its use the competition for employment between the various members of the group is prevented from taking the form of underbidding.[70] The enforcement of standard rates throughout a large area hinders industries from locating in places because of the opportunities for the hire of labor at cheaper rates, notwithstanding the fact that other places may possess greater natural advantages. It puts all competing enterprises and localities comprised within the area of standardization upon the same plane. This is well brought out by a resolution brought forward in the 1920 Convention of the Cigar Makers which reads "Whereas, the cigar makers in local unions are working on prices in some instances ten to twenty dollars cheaper per thousand lower than the cigar makers and unions of different localities, and, Whereas cigar manufacturers are taking advantage of the situation, moving their factories or establishing branches of them in cheaper districts ... and, Whereas this is detrimental to the welfare of the cigar makers and detrimental to the principles of the Cigar Makers International Union be it resolved by this convention that the Cigar Makers International Union adopt as one of its aims the securing of a uniform bill of prices, taking into consideration all the local conditions and necessities of the trade and local interests of the cigar makers, etc...."[71] And finally the enforcement of standard rates tends to add to the competitive importance of able management. Shrewdness in bargaining with the labor force becomes a less important factor in economical production; ability to use the labor force, at the standard rate, to the best advantage becomes a more important factor. The tone of competition undergoes a change. The principle of wage standardization is already accepted in many branches of American industry. Even in those branches, however, there remain many open questions as to the limits of its applicability. It has in the main the approval of public opinion, as shown by its acceptance in all projects of wage regulation undertaken by the government in time of war, and by the report of the President's Second Industrial Conference. 4.--It is necessary to study the characteristics of standard wage rates in some detail, in order to be able to measure the effect of the introduction of the principle into industry, and in order, also, to mark out the limits of its applicability. The first characteristic of the standard wage to be noted is that it is only a minimum wage for the occupation for which it is enforced. Standard wage rates are not of necessity the actual wage rates received, by all or even a majority of the wage earners employed upon the tasks to which they apply. They do sometimes become the actual rates received by most of the wage earners concerned; they become the wage, ordinarily, of those workers who fall around the average in skill and experience. This fact is liable to misinterpretation. It may be taken to mean that the more efficient workmen do not receive recognition for their greater efficiency. What it usually would signify is that the wages of the less efficient members of the group are increased. As a matter of fact variations from the standard wage are commonly found. Mr. Collier, after an analysis of Australasian experience, concludes on this point "... But this is not saying that the minimum wage is necessarily the maximum. Although statistics as to wage distribution are largely lacking, the weight of opinion is contrary to this supposition. In some industries, such as the building trades, where contracts are made upon the basis of a legally fixed rate, this rate is frequently the maximum. Yet such instances are in the minority. Employers do not reduce the pay of their most competent workers because they are compelled to pay those less qualified at a minimum rate."[72] It will be found usually that the abler, the more skilled or more experienced workers in particular occupations receive higher wages than the standard, because of the special value of their services.[73] Occasionally also agreements are entered into for the employment of a small number of workers, who are acknowledged to be well below the ordinary level of efficiency in their trade or occupation, because of physical disability, old age or analogous causes. As Prof. McCabe has said, "Nearly all unions permit members who have become unable to command the minimum rate because of old age or physical infirmity to work for what they can get."[74] A second characteristic of standard wage rates is that they may take the form of time-rates, or payment by results, or any combination of the two. Trade union agreements in the United States include all these varieties. It is true that a system of standard time rates is likely to be more in accord with the sentiment underlying the standardization movement. For under a system of payment by results individual differences in capacity are apt to be more readily reflected in the actual wage payments. And the sentiment underlying the principle of standardization is nearer the idea of equal payment for equal effort or equal sacrifice within the group, than the idea of equal payment for equal product. This is illustrated in the report signed by the Labor Members of the Committee on Industrial Relations (1912-16) in reference to the wage payment systems of scientific management which reads, "... All of these systems of (i.e., of scientific management) payment tend to center the attention of the worker on his individual interest and gain and to repress the development of group consciousness and interest. Where the work of one man is independent of another, the individual has no motive to consider his fellow, since his work and pay in no wise depend on the other man. What either does will not affect the other's task or rates."[75] Furthermore, in some industries it is difficult under a system of payment by result to arrange that the actual wages received by the average members of the group for average effort, will be approximately equal. Those are the industries in which there are a great variety of jobs with different rates, which can only be more or less accurately estimated in the "price list"; or industries in which the working conditions vary greatly, either within the same factory or mine, or between different factories or mines engaged in similar work. Where the philosophy of unionism is firmly entrenched these two systems of wage payment tend to be so governed by the actions of the wage earners and employers as to lead to approximately the same results. The standard wage under a time-rate system tends to become the wage for an average or customary output. Employers tend to demand at least that output for the standard time wage, and strive to increase the customary output whenever the standard time-wage is increased. And, on the other hand, under a system of payment by results, there is frequently a tendency for the workers to keep their output around a certain general level; which level, indeed, is determined only by all the circumstances governing the group attitude in the particular shop or industry. The "Report on Collective Agreements in the United Kingdom" (1910) has stated this as follows: "Although the main distinction between time wages and piece wages is of the nature described above, it is of importance to note that, whether the method of remuneration adopted be expressed as payment by results or as payment by time, the amount of work performed and the time taken in performing the work are factors, both of which are, to a greater or less extent, taken into account in every agreement for the payment of wages. Thus, on the one hand, the employee who is working on time wages is expected by his employer to turn out in a given time not less than a more or less specifically agreed upon quantity of work--"to do a fair day's work"--while, on the other hand, a list of piece-wage rates usually has an implied, and in some cases has an explicit, reference to the amount of money which can be earned by a man working under the list in a given time."[76] The principle of standardization can and does find expression under either method of wage payment; its adoption does not exclude the system of payment by results. The terms of all such systems, however, should be made the subject of collective agreement. In that way the group interest in a defined minimum standard wage is protected, and the principle of standardization realized. As Prof. Pigou has written, "In order that the piece-wage system, and the benefit to production which it carries with it, may win further ground, what is required is to develop in these more difficult industries an adequate machinery for subordinating piece-wages, ... to the full control of collective bargaining."[77] 5.--Such then, being the leading characteristics of the standard wage, what results can be predicted for an attempt to introduce it throughout industry? During the decades which witnessed the introduction of wage standardization into industry in the United States, the most loudly expressed anxiety was in regard to its conceived effect upon individual independence and initiative. This question cannot be satisfactorily discussed apart from the larger one of which it is a part--that is the question of the influence of labor organization upon individual behavior. A few observations may be ventured with the explicit admission that they leave many sides of the question untouched. The "common rule" has come into operation only where the ground has been prepared for it, where there has been a growth of group consciousness and unity. Under such conditions its use and observance mould individual ambitions and actions in some measure. It is a device which attaches the individual to the group, and interests the individual in the group advancement more than he otherwise would be. On the other hand, it indirectly guards for the individual an independence and vigor of spirit often lost in modern industry. When the underlying philosophy of the "common rule" is deeply ingrained the problems of industrial direction are completely changed; they become more difficult. Production becomes a task involving the power to win men to their work. Where the ethics of the common rule are accepted, effective work on the part of wage earners depends upon interesting them as a group in their work. The usefulness of wage systems which aim to increase individual production through individual reward is not necessarily at an end. But all such systems are compelled to accommodate themselves to the widespread desire for a standard group minimum. 6.--Another question to which the introduction of the standard wage gives rise is that of its effect upon the distribution of the available employment among the members of the group to which the wage applies. This question should be distinguished from that of its possible effect on the total amount of employment. It has often been contended that the multiplicity of wage rates for approximately the same work in industries in which wages are not settled by collective bargaining, is to be accounted for, above all, by the varying efficiency of individual wage earners. And, therefore, it is argued, that any attempt to standardize wages must lead to a concentration of employment upon those members of the group who are the more efficient, and must deprive the relatively less efficient of their employment. It is almost impossible to say, except for concrete situations, to what extent irregularity of wage rates is due to differences in individual efficiency and to what extent to other causes. Such factors as differences in bargaining power, differences in the policy or efficiency of the employers, slight differences in the character of the work performed, local differences in the supply and demand situation for the type of labor in question, and the like, certainly account for a great many of the irregularities. Prof. Marshall has expressed one view of the matter well. He writes, "Cliffe Leslie and some other writers have naïvely laid stress on local variations of wages as tending to prove that there is little mobility among the working classes, and that competition among them for employment is ineffective. But most of the facts they quote ... are only half facts and when the missing halves are supplied, they generally support the opposite inference to that on behalf of which they are quoted."[78] In R. H. Tawney's study of "Minimum Rates in the Tailoring Industry" (Great Britain) a vigorous statement of the opposite view is given. He writes, "The wages paid to a group of workers in a given industry and a given area depend, in fact, very often not on the conditions obtaining in that industry in other areas, but on the conditions obtaining in that area in other industries."[79] It can be affirmed that the irregularity of wages is due to a considerable extent to other causes than differences in the efficiency of individuals. As D. A. McCabe writes, "Very little seems to be known as to differences of efficiency among men engaged in the same kind of work." But as he adds, "It is safe to assume, however, that they are not reflected in time-working trades with any exactness by the wages paid, even where there is no trade union minimum."[80] More to the point, it can be affirmed that the percentage of individuals in any occupation whose efficiency is decidedly below the average efficiency of the group is small. For, as a matter of fact, what really comes into question upon the introduction of wage standardization, is the employment of that small percentage of individuals whose efficiency is decidedly below that of group average. The employment of this small percentage in each group will be decisively affected by the general demand and supply situation of that group at the time when standardization is introduced. If the need for the services of a group is relatively great, employment at the standard rate will be given even to those members of the group who are decidedly below the average efficiency of the group. Such is the case during periods of industrial expansion. When the demand for the services of the group falls, however, it is probable that these men will be discharged first--more promptly than if wage standardization had not been introduced. There is probably some connection between the progress of the standard wage movement and the tendency to limit overtime in the industries in which the standard wage is enforced. Lastly, the effect of the enforcement of wage standardization upon the employment of the least efficient members of the group can be modified by special arrangements, whereby a wage lower than the standard is set for such individuals as are mutually acknowledged to be decidedly below the average of the group. In this regard Mr. Collier's report on the Australasian experience is a useful guide. He writes: "That workers may be displaced following the application of wage regulation to an industry is a fact sustained by the experience of Australasia. In New Zealand, many bona fide workers were thrown out of employment during the early years of the arbitration law. There was also considerable distress among the boot and clothing workers of Victoria. Many of the old, inefficient, and slow workers were discharged. But in each case other factors than labor legislation figured in the situation. We have seen that in the board trades of Victoria there has frequently been a decrease in the number of employees immediately after a determination became effective, but that in almost every instance this decline was temporary. After the period of adjustment, industry pursued its normal course. This seems to have been the general experience in this and other states."[81] It may be concluded that some redistribution of available employment will sometimes follow upon the introduction of the standard wage into industries in which wages were hitherto unstandardized, resulting in the partial or complete unemployment of the least efficient members of the group. As was said above, the extent of such redistribution will depend somewhat upon the demand and supply situation at the time when the standard wage is introduced. Those whose employment is reduced or taken away will either go into some work on which they compare more favorably with the other workers engaged, (leading to a further redistribution of employment perhaps), or will remain unemployed. The other members of the group will have increased employment. 7.--Still another possible effect of the introduction of the standard wage deserving of attention, is that which it may have upon industrial organization, and upon the level of managerial ability. As will be made clearer elsewhere, the enforcement of standard wage rates in an industry is usually equivalent in practice to the enforcement of those rates that are already being paid by the better organized units of that industry.[82] This leveling process may have any or all of several consequences. It may cause enterprises which had succeeded in competing partly because they paid lower wages than more efficient enterprises for the same grade of labor either to improve their productive methods, or gradually to cease production. It may result in a reduction of profit for certain enterprises. It may occasion an increase in the price of the commodities produced. It may result in an increase in the productive efforts of the wage earners. In the abstract, it is impossible to balance these various possibilities with complete assurance. The only inductive studies of value which give any indication of the probable result are those which have been made upon the results of living wage legislation. These, almost without exception, make the price increase resulting from standardization, inconsiderable.[83] They are witness to the fact that improvements in the level of industrial management and a gradual elimination of the less competent employers have frequently taken place. The opinion seems warranted that unless standardization is introduced under very unfavorable circumstances or in the form of an extremely violent upward movement, it will not cause a considerable or permanent rise of prices, but will rather bring improvement in industrial organization and lead to a more intelligent use of labor in industry. Along with this, there is reason to hope that it will have a favorable reaction on the efforts of the wage earners. 8.--The whole subject of the effect of wage standardization upon the output of the wage earners remains to be considered, however. It is an aspect of the subject which has been in the forefront of discussion. It also is a topic which cannot be satisfactorily discussed apart from a larger one--that of the effect of unionism upon production. The most bitter opposition to trade unionism has been connected with allegations made in this regard. These have taken different forms, but they almost always express one contention. That is that if a standard wage is set for work of a given kind, and if all men engaged upon that work receive that wage irrespective of small differences in ability, there will remain no stimulus for the abler workmen to exert themselves. Or in other words, that the standard wage makes slackers of all men. Sometimes this criticism is leveled only against the standard time wage; at other times against the standard guaranteed minimum wage, such as there used to be in the English coal fields; and, at still other times, against any method of wage payment which takes full power out of the hands of the employers to make an individual wage bargain with each worker. These contentions have some basis on occasion. More often they arise from a misconception of the place of the wage earner in industry, or from a general hostility to labor unionism. Wage standardization does not mean that all wage earners receive the same wage irrespective of differences in ability. It simply sets a minimum standard for all workers of the group who are about the average in ability. It is designed to end all differences in remuneration, save those which arise out of differences in ability. It may be worked out in systems of payment by results, as well as in systems of time payment. In reality a deeper conflict lies behind the antagonism to the standard wage--a conflict of social philosophy. Most unionists, it will be observed, are inclined to wave away all criticisms of the standard wage which rest upon its alleged effect upon output, no matter what the situation to which it may be addressed. In their opinion, these criticisms of the standard wage are based on a misconception of the place of the wage earner in industry. Or, as it is frequently put, they regard the worker in the same way as they do a machine, since they would have each worker paid solely according to his individual value to the industrial system. There exists a conflict between two views of the nature of industrial society, and of the way of industrial progress. In one the social importance of a high level of production predominates, and the wage earner is argued about merely as part of a productive organization. In the other, the wage earner is viewed primarily as a member of an occupational group or class, whose wages should be regulated by the standard of life of his group or class, rather than by strict measurement of his own individual capacity. This conflict is revealed, as R. F. Hoxie pointed out, in the antagonism between unionism and scientific management. To quote "much of the misunderstanding and controversy between scientific management and unionism ... results from the fact, that scientific management argues in terms of the individual worker or society as a whole, while the unions argue primarily in terms of group welfare." It is well to recognize these different philosophies. Is it possible to find common ground under the principle of standardization? Can the desire of the wage earners to be viewed primarily as members of occupational groups or classes be satisfied by the enforcement of standardization, without ignoring the need for a high level of production. It is usual to seek the common ground in the development of some variation of a system of differential time wages, or of a system of payment by results on the basis of a standardized price list. And certainly such ways of enforcing standardization, while at the same time giving special reward to individuals, deserve encouragement, provided they safeguard the group interest in a defined minimum standard wage. Still it is not likely that the solution for the problems of output that may arise as a consequence of the enforcement of the principle of standardization, _and of the acceptance of the philosophy to which it corresponds_, is to be found in the evolution of such methods of wage payment as these. For, as was observed above, if the philosophy of unionism is deeply implanted in the minds of the workers, the productive results under all methods of wage payment tend to be controlled in the end by the same influences. The views and motives of the wage earners and of the employers are likely to remain constant under different systems of wage payment--and thus the outcome is not likely to differ greatly. No matter what the method of wage payment, the question of output will be largely one of mutual confidence, of tact, and of fair dealing. It must be so in any arrangement, by which two or more groups mutually regulate their claims and desires. The conclusion that may be drawn as to the effect upon production of the enforcement of wage standardization is as follows. That its results may depend to some extent upon the success with which the principle can be adopted to those methods of wage payment under which wages are varied in accordance with small differences in in-unionism, and act accordingly, the system of wage earners believe heartily in the ideals and aims of unionism, and act accordingly, the system of wage payment adopted will be a factor of secondary importance in determining the effectiveness with which the wage earners perform their work. The motives and sentiments of the various organized groups will govern the action of the wage earners, and produce almost the same result under any system of wage payment. The state of industrial relations, the satisfaction the workers feel in their position, the reasonableness shown by the different groups, the intelligence or ignorance of labor leadership--these and similar other factors will, at bottom, govern the effort put forth by the wage earners. These are the matters to which all who realize the need for steady and willing effort in production will have to attend. The problem of maintaining a high level of production will be primarily one of developing the practice of open-handed and thoroughly understood negotiation between the directors of industry and the workmen. Barring the development of the practice of successful negotiation either industrial chaos or a return to individual bargaining must result. 9.--There is one other possible result of the enforcement of wage standardization which requires brief notice, because it was displayed prominently during the war. The demand during the war for certain essentials of warfare was abnormally great, and the result was a steady bidding up of wages for the supply of labor which could assist in the production of these essentials. This led to a constant shifting about of the wage earners from plant to plant. This movement not only hindered the effective organization of production, but also caused a considerable loss of working time, and fostered a continuous pre-occupation with the question of wages and related questions. In view of these facts, the various governmental agencies of wage settlement undertook to introduce into all wage contracts the principle of standardization throughout large areas. Witness, for example, the conclusion of the Shipbuilding Adjustment Board on the matter. "One of the most serious influences retarding the progress of the shipbuilding industry according to the unanimous testimony of the yard owners, and of the district officers of the Fleet Corporation who have come before us, is the shifting of men from yard to yard.... The only effective way to stop it is to remove its inciting cause, the variable wage rates paid by different yards in the same competitive region. With this purpose in view, we have sought in all our hearings to determine with accuracy the limits of each competitive region, so that we might extend over it a uniform wage scale for shipyard employees...."[84] The enforcement of wage standardization may serve to prevent wasteful shifting of the labor supply even in normal times. Theoretically, it should serve to limit the shifting of the labor supply to movement between different industries and occupations, and to cases which represent movement of unemployed wage earners to points where work exists. There would be, of course, innumerable cases of change based upon personal motives. FOOTNOTES: [68] An attempt to classify systematically and analyze the various theories of wages that have been used in attempts to settle wage controversies in accordance with defined principle has been made by Mr. Wilson Comption in an article entitled "Wage Theories in Industrial Arbitration." In its enumeration and discussion of the difficulties to be met in the application of principles, and of the attitude of most agencies of wage settlement it is particularly interesting. _American Economic Review_, June, 1916. [69] J. N. Stockett, "Arbitral Determination of Railway Wages," page 75. [70] See Webb's "Industrial Democracy," Chapter 5, Part II. [71] Resolution No. 18 offered to 1920 Convention, _Cigar Makers Official Journal_, May 15, 1920. [72] P. S. Collier, "Minimum Wage Legislation in Australasia," Appendix VIII, Fourth Report of the Factory Investigating Commission, New York State (1915). See also R. H. Tawney's investigations of Retail Tailoring and Chainmaking Trades (Great Britain). [73] D. A. McCabe in his book, "The Standard Rate in American Trade Unions," calls attention to two aspects of the subject that are frequently overlooked. Firstly, that "in any attempt to estimate the extent to which men receive wages above the minimum on account of superior efficiency, it is important to bear in mind that the minimum in different scales may stand in very different relation to the modal or predominant wage. The proportion of men receiving more than the union minimum is frequently large because the competitive wage has increased since the minimum was established" (page 116); and secondly, that "the extent to which differential wages are paid above the union minimum, when that rate is the rate actually paid to the men whose efficiency is about the average, varies widely in different trades.... Standardization of workmen and of work and the practice of dealing with large bodies of men as classes tend to standardize the wages paid in the railway service more than in trades calling for similar grades of skill in other industries" (page 117); so, too, "the tendency towards uniform rates for men engaged in the same kind of work is stronger in large establishments than in small establishments for the same reason" (page 117 ff.). Prominent among the factors which tend to make standard time rates actual rates he mentions: firstly, that the variations in efficiency within the membership of a time working union are not as likely to be as wide as among the men outside the union in the same trade, because the mere insistence on a standard rate tends to exclude some men much below the standard of competency. Secondly, practically all of the skilled trades unions require candidates for membership to prove their competency or be vouched for as competent by members who have worked with them. And thirdly, because the standard rate is the center of attention in negotiations and thus is made the presumptive rate (page 114-119). [74] D. A. McCabe, "The Standard Rate in American Trade Unions," page 105. [75] Report signed by Commissioners Manly, Walsh, Lennon, O'Connell, and Garrettson. Vol. I, "Final Report of the Commission on Industrial Relations" (1912-16), page 132. [76] Report on Collective Agreements in the United Kingdom (1910) (CD 5366), page xiv. [77] A. C. Pigou, "Economics of Welfare," page 441. [78] A. Marshall, "Principles of Economics" (7th Ed.), page 548. [79] R. H. Tawney, "Minimum Rates in the Tailoring Industry" (Great Britain), pages 110-111. See for similar view, 4th Report of N. Y. State Factory Investigating Commission, Vol. V (1915), testimony of Miss Van Kleeck. [80] D. A. McCabe, "The Standard Rate in American Trade Unions," page 14. [81] P. S. Collier, "Minimum Wage Legislation in Australasia," Fourth Report of the Factory Investigation Commission, N. Y. State, 1915, page 8243. [82] See pages 172-5, Chapter VIII. [83] See for examples, the reports of the Minimum Wage Commissions of The District of Columbia, Massachusetts and Oregon. Also the studies by R. H. Tawney and M. E. Bulkely on the English experience. Those of P. S. Collier and M. B. Hammond, on the Australasian experience. [84] Decision as to wages, etc., in North Atlantic & Hudson River Shipyards, Shipbuilding Adjustment Board, reported in _U. S. Monthly Labor Review_, May, 1918, page 136. See in same issue of the review, "Decision for Shipyards of San Francisco Bay and Columbia River, and Puget Sound Districts," pages 68-78. Also report of Benjamin M. Squires in the _Monthly Labor Review_, 1918, Sept., on the "New York Harbor Wage Adjustments." CHAPTER VIII--THE STANDARD WAGE (_Continued_) Section 1. What variations or limitations should be introduced into the principle of standardization in view of the great area and economic diversity of the United States?--Section 2. Differences in natural or acquired advantage between different enterprises as a reason for modification and limitation of the principle.--Section 3. Differences in the character of the work performed by any large group of wage earners as a reason.--Section 4. Differences in the cost of living at different points within the area of standardization as a reason.--Section 5. The grounds for "nominal variations" in standard wage rates. The policy to be pursued in regard to payment for irregular employment.--Section 6. The possibility of maintaining standard wage rates over a large and diversified area considered.--Section 7. Up to the present, the progress of standardization has not proceeded in accordance with reasoned conclusions as to the results produced.--Section 8. Where should level of standardization be set? The doctrine of "standardization upward."--Section 9. The importance of the principle of standardization in wage settlement. 1.--We have now completed our analysis of the general effects to be expected from the enforcement of wage standardization throughout industry. That analysis was carried out on the underlying assumption that the general economic position of the industrial enterprises which would be included within any area of standardization was substantially alike. That assumption must now be given up. A further question must be faced. That is whether the principle of standardization, as put forward up to this point, should be limited or varied in any way because it would have to apply, as a matter of fact, to an area so great and so diversified in economic character as the United States, and to an industrial situation which is the product of a great number of separate impulses, and which is made up of a vast number of separate interests. 2.--We will consider in order the grounds upon which limitation or variation of the principle of standardization has been argued for in the past--limiting ourselves, as we must, to the most important. The first that may be taken up has arisen almost every time that wage standardization has been introduced into a craft or industry. It is the contention that, due to differences in natural or acquired advantage possessed by different enterprises in the same industry, certain going enterprises will be forced to cease production, if all are compelled to pay the same wage rates for the same work.[85] The weight of this contention must be decided in each case by the facts which support it. In some instances it may be clear that the vigorous and summary application of wage standardization would cause men to be thrown out of work, who could not easily find work elsewhere, and would make a considerable amount of fixed capital valueless or almost so. In those instances there would be reason for considering the extent to which the standardization should be carried out, and also what variations should be introduced into its application. That such cases are not infrequent is borne out by the Australasian experience of which Mr. Collier writes, "In regard to the practicability of the common rule, opinion differs. In some staple industries such as coal mining, it has been said to operate fairly. But its application to small industries and retail stores, where conditions vary more widely, is fraught with considerable risk and is proceeded with slowly.... While the power to enforce industrial conditions throughout a state or given territory is of unquestionable value, experience shows it must be exercised with caution."[86] The test to be applied in each instance should be the balance of interest involved, including a strong public interest in standardization as one of the elements in a policy of wage settlement. When weighing the facts for or against the limitation or variation for the reason under discussion, several distinctions should be made. Firstly, in regard to the nature of the difference in advantage possessed by the various units of the industry in question. Secondly, in regard to the way in which the differences in advantage are distributed among the various units of the industry. The case for limitation or variation is apt to be stronger when the difference in advantage is a natural difference than when it is an acquired difference. In either case, the decision must rest upon the balance of good and harm to be anticipated from a straightforward and unmodified application of the principle. But when the difference in advantage is a natural difference, such as exists between different mining areas, there is greater reason for deliberate procedure than otherwise. For the possibility that an abrupt suspension of certain enterprises be caused without compensating extension of other enterprises, is the more genuine. Such a situation was recognized, for example, in the case of the living wage legislation for agriculture in England; and thus instead of applying one standard wage throughout all districts, standardization was carried out by districts.[87] Even in this case, however, the various district advisory boards are under a strong and constant pressure (under the terms of the act) to bring the rates in the various districts to the same level. Such, also, to take another example was the situation recognized in the course of the attempt during the war to standardize the wages of the stevedores and longshoremen employed in the South Atlantic ports. Here straightforward and unmodified standardization would have caused, it was judged, the diversion of certain freight carrying steamship lines from ports in which they now operate. If the differences in advantage are in the nature of acquired differences, only convincing evidence of the permanent harm likely to result from general standardization would justify limitation or variation. For in this case, the necessity of paying standard wage rates is itself a powerful force towards overcoming conditions that have been declared a definite competitive disadvantage. Probably no extension of wage standardization in industry has ever taken place without injuring some individuals. It is the net balance of gain or loss that is significant. In most past instances when standardization has been enforced in an industry, marked by an unequal distribution of acquired advantages, the consequences have not verified the predictions of those who believed it would cause great disturbance and unemployment. On the contrary, it has frequently resulted in the development of better organization within the industry. Again, the case for the limitation or variation is apt to be the stronger, when the difference in advantage is between concentrated but widely separated areas, such as might exist between two ports, for example, than when the differences are between different units in the same industrial area or field. For in the second case, the possibility of causing lasting unemployment would be less. The distinction, however, is entirely one of degree. Whatever limitations or variations are admitted should not be settled arbitrarily; they should correspond to the facts which make them advisable. The union attitude in respect to the extension of wage standardization is sometimes as cautious as that of the employers. That is because those workers employed at the points which are supposed to possess the smaller advantages, natural or acquired, are not likely to support an unmodified application of the principle of standardization, unless they believe the consequent industrial changes will be beneficial, or at least not harmful, to themselves. The advice, if not the concurrence, of all interested parties is of the greatest value in arriving at a satisfactory determination. A good example of such an arrangement is to be found in the agricultural living wage legislation in Great Britain. It is provided therein that "When a district committee has been established for any area, it shall be the duty of the Committee to recommend to the Agricultural Wages Board, minimum rates of wages fixed under this act, and no variation or cancellation of such a rate shall have effect within that area unless ... recommended by the district wages committee."[88] 3.--Another possible ground for limitation or variation of the principle of standardization is set forth often in the contention that the character of the work performed by any large group of wage earners is not the same throughout the field of its employment. Such, for example, was the argument of the directors of the American railways, as summarized by Mr. Stockett: "... The railways oppose district standardization on the ground that rates cannot be disassociated from conditions and since conditions vary widely on different roads in such extensive territories as the railway districts they maintain that rates cannot be made uniformly applicable on all the roads. The amount of compensation, the roads hold, is governed by the labor performed, the skill and efficiency required, the responsibility and hazard involved, the discipline necessary, the rapidity of promotion, and the cost of living."[89] It is plain that the point of view which inspires the above argument is at variance with the beliefs that are behind the movement for wage standardization. The argument accords no validity to the belief that group unity and group aims deserve recognition in the settlement of wages. The doctrine of standardization on the contrary represents this belief, and sets groups standards above the existence of minor difference in the work performed by the group. The practical consequences of any wage policy which gave full recognition to these minor differences must also be weighed. These have been vigorously stated, for the case of railway labor, by Mr. Stockett. "... The employees maintain that the varying physical and traffic conditions in the different roads should not constitute a basis for the payment of various rates. It may be true, they hold, that physical conditions and traffic peculiarities differ as between different roads, but it would be impossible to determine a separate rate of pay for each special condition. In the course of development of the railways conditions are always changing. Grades may be leveled, additional tracks laid, curves straightened, passenger and freight densities may differ from year to year and from day to day. The attempt to determine the proper rates for each different condition and to change them as conditions change, the employees assert, is obviously absurd. The plan of fixing a standard rate governing an entire district may be illogical and its basis arbitrary, but it is deemed the best devised and does substantial justice in a broader sense than any other system."[90] Cases may arise, indeed, where the difference in the character of the work performed really means that the same name covers two relatively distinct occupations, and two or more quite different classes of wage earners. Such cases are probably rare. In circumstances where the constant differences between the character of the work performed by workers is relatively great, it will usually be found that they are distinguished into different groups.[91] It is a question of degree, of course. And if the existing distinctions do not fit the facts, those distinctions should be changed.[92] In unorganized industries, it will sometimes be found that the classification of occupations is very defective. If wage standardization were to be introduced into those industries, it would be found necessary to standardize occupations first. Such was the task undertaken, for example, by the War Labor Board in the Worthington Pump and Machinery case.[93] 4.--A third possible ground for limitation or variation of the principle of standardization is the existence of differences in the cost of living in the various main centers or regions to which a standard rate might be applied. Such variation would be represented, for example, by a collective agreement in accordance with which the wage scale at different points was varied in accordance with the relative cost of living at these points. Up to the present there has been a tendency to disregard differences in the cost of living when wage standardization has been extended. No constant tendency, for example, can be found in the agreements made by different local branches of the same national trade union to build up a wage scale in accordance with differences in the cost of living at different points.[94] The most complete body of material on the subject is contained in the report of the Investigating Commission of the Board of Trade (Great Britain) on Working Class Rents, etc., in the United States (1911). This commission studied the wage schedules of skilled men in the building, engineering and printing trades in twenty-eight of the large cities of the United States and compared these wage schedules with the calculated cost of food and rent in these towns--weighing food three times as heavily as rent. The results are presented by single cities, by geographical groups, and by population groups--i.e., cities grouped in accordance with size of population. _Real_ wages tended to be more equal as between population groups than between geographical groups. The range of the index number between geographical groups is from 85 to 104 (New York is taken as 100); between population groups from 89 to 100 (New York, 100). They reveal a tendency for money wages and living costs to be high in the largest cities, and for both money wages and living costs to decline in the cities making up the smaller population groups. No correlation can be found between living costs and money wages as between individual cities, however. The argument for variation or limitation because of differences in the cost of living is a two-fold one. Firstly, it may be argued that such a policy is calculated to maintain industrial activity in the smaller centers, where the cost of living is usually lower, in the face of the competition of the larger centers, in which the cost of living is usually higher. Secondly, it may be argued, that variations in the cost of living at different places are indications of the fact that at some places the economic essentials can be procured with a smaller expenditure of human labor and capital than at other places (since labor and capital can move between them) and, therefore, it is to the general interest to encourage industrial development at the points where the cost of living is relatively low. As to the first argument, it seems to me that there is considerable wisdom in the wish to encourage a diffusion of industrial development, rather than concentration at a few points. The strain on the social and political structure of the nation would be less, to-day, if our industrial population were more widely distributed; and our problems of civic and economic life would be simpler. That I believe to be true, although it is probable that the wage earners in New York City are better governed, have more freedom, and enjoy a healthier and more stimulating environment than the wage earners in the smaller industrial towns of Massachusetts or Pennsylvania, for example. As to the second argument, it is true that differences in the cost of living do indicate that the essentials of economic life can be procured with a smaller expenditure of human labor and capital at some places than at others. There is a further question, however. Does not the ability of the enterprises established at the places where the cost of living is relatively high, to compete with the others, denote a compensating advantage in another stage of production? The answer depends on two conditions. Are the enterprises in genuine competition with each other? And secondly, do wages at the several places differ in correspondence with the differences in the cost of living? To the extent that these conditions hold true, any shift of industry away from the points where the cost of living is low, as a result of wage standardization, would not be uneconomical--in the sense of this argument. For then, the ability of the enterprises established at the points where the cost of living was relatively high to compete with the others would indicate that they benefited by some compensating advantage in their location. Still another matter to be noted is that if differences in the cost of living are recognized in the enforcement of standardization, there will be some tendency for the abler and more energetic workmen to drift to the points where money wages are higher. This movement is likely to occur even though real wages are the same at the different places. In addition to these theoretical considerations, one practical matter should be called to mind. The relative scale of the cost of living at the different points to which a standard wage might be applied does not usually remain fixed over a considerable period. Small changes and shifts in the relative scale occur constantly, and even large changes may take place within a short time. Experience has shown that wage differences which rest upon a fluctuating basis are apt to give rise to misunderstanding, and to be provocative of unrest. At best, only the relatively permanent and great differences in the cost of living between different points could be taken into consideration. Even then a great deal of arbitrary calculation might be involved. In view of the variety of considerations that bear upon the problem, only a tentative conclusion will be ventured. Namely, that when in any industry the wage scales prior to standardization do reflect the differences in the cost of living at the different centers in which the industry is carried on, such differences should be maintained. As has been remarked, only the relatively large and permanent differences could be taken into account. When, however, no such differences in wage scales is found prior to standardization, it will probably be inadvisable to introduce them, in order to encourage a wider geographical diffusion of industry.[95] 5.--There is yet another ground for limitation or variation of the principle of standardization. It is of a somewhat different character than those already considered. It is that in order to carry out the underlying idea of standardization--equal remuneration for the same type of work despite minor differences in conditions under which it is performed--it is necessary to introduce variations into the hourly or daily time rates (or equivalent piece-work schedules) paid in various sections of the industry. Such variations have been designated as "nominal variations" in the Australian courts. Distinctions may be drawn between different types of these so-called "nominal variations" according to the cause by which they are occasioned. The first type is that which rests on the fact that in certain trades or industries, it is extremely difficult or impossible to make the conditions of work even approximately uniform throughout the trade or industry. Agricultural work and coal mining may be cited as examples. In such trades or industries it is usually found that the principle of standardization can only be carried out satisfactorily under a system of time payment. For under a piece-work system a uniform scale of rates yields widely different earnings for labor of approximately the same type and quality. It may be, however, that a time-work system is ill suited to the trades or industries in question. In which case, the only alternative is to draw up different piece-work scales for different conditions of work. Different scales of this sort are to be found in the American coal mines for example. Such "nominal variations" between piece-work scales would appear to be justified when the differences of conditions upon which they rest are judged to be not subject to standardization. To be really practicable the differences of conditions should also be relatively great, fixed and measureable.[96] The second type is that which rests upon some difference in the "net advantages" of the same work carried on in different sections of the industry or occupation. For the purpose in hand, three sorts of difference in net advantage may be noted. The first sort would be represented by a claim for a higher rate than that stipulated in the general scale, because the work in question was carried on under conditions involving an _unusual_ degree of disagreeableness or risk. In my opinion, "nominal variations" based on such differences as these can safely be left to voluntary bargaining rather than enforced as a matter of policy. The conduct of almost any occupation involves differences in the conditions under which it is performed. Nobody entrusted with the duty of enforcing a policy of wage settlement would find it easy to define the conditions which warranted an addition to the standard rate. It would run the risk of being involved in a process of refined definition which would probably be futile. Justice Higgins stated this view aptly in a claim for "dirt" money. "My view," he writes, "is that the minimum rate of wages is not to be made to depend upon the degree of dirtiness of the work. A man must accept the conditions of the work to which he has devoted himself; and the court cannot be expected to define degrees of dirt or to express them in terms of money wages. If the employer puts the employee to work which is unnecessarily dirty, the remedy is in prohibition or in regulation--not in increase of wages. My decision in no way prevents the employer and employee from making a voluntary stipulation for dirt money in any particular case."[97] A second sort of difference in net advantage would be represented by a request on the part of an employer that certain payments in kind should be considered as part of the wage. An example of this would be the provision of meals. Such variations would seem to be permissible when the acceptance of the payment in kind is left optional with the workmen. A third sort of difference in net advantage, and possibly the most important, is that represented by differences in the regularity of employment in different sections of a trade or industry. This type of difference is exemplified in the work of longshoremen and lumbermen; some men being engaged on one type of work are employed regularly, while men engaged on other jobs are employed irregularly or casually. It is frequently claimed that irregular or casual work should be paid at higher rates than regular work. The justice of this claim seems apparent. Irregularity of work is undoubtedly a great handicap to the workman who seeks to maintain a well ordered life. Extra payment for irregularity of employment is a burden which can fairly be put upon an industry, or section of an industry--even if the irregularity is unavoidable. Yet the consequences of such a policy of "nominal variation" may be undesirable. It has been revealed by experience that there are some workmen who prefer irregular or casual work to regular work. And if higher wage rates are paid for irregular work this preference--an undesirable one, from the point of view of the community--is apt to be strengthened. On the other hand, it is usually true that only a small percentage of workmen prefer casual work to regular work. Most men engage in casual work because they cannot secure regular work. As was well established in the Court of Enquiry on the work and wages of transport workers (Great Britain) held early in 1920, the only real solution of the difficulty is the reorganization of the occupation so that the irregular and casual work is reduced to a minimum. Until that is accomplished, it is probable that the most advisable policy is to grant "nominal variations" for casual and irregular employment. These variations should not be so great as to influence the run of workmen to prefer casual work. The total earnings from regular work should be higher. Another policy that may be practicable, in many cases, is to define a minimum period of employment for all workmen engaged.[98] Such a policy puts strong pressure upon the industry to cut down irregularity of employment. Against such a policy stand the practical difficulties involved in determining the basis of any scheme of "nominal variations." The whole question is well surveyed in a decision of the Commonwealth Court of Australia which reads in part as follows: "The casual hand, I propose to define as an employee who is not employed for a fortnight continuously and who is not entitled to a week's notice before his employment is determined. A new light was thrown by the evidence in this case on the growing tendency of some men to depend on the high rates for casual work only, to enable them to work when they thought fit, and idle when they felt inclined.... The yearly return of so many seasonal hands for the wool and grain season, year after year, who look for casual work elsewhere in the meantime in shearing sheds--on the wharfs--in other industries and even in the Government temporary service--and prefer casual work is not an encouraging sign. The higher rates paid for casual work do, and will, encourage many men to rely on that class of labor. I do not think that is good for the community or for the employee. I have been asked not to encourage the tendency to prefer casual labor by granting high rates for casual labor. "Although the rates for casual labor ought not be so high as to induce men to become casual laborers, a higher rate must in fairness be allowed, where as in this industry, men, however anxious they may be to get permanent work, are not employed for the whole season without a break, and many of them are only employed a short broken part of the season, and some are employed for a day or a few days only."[99] 6.--In the examination of the reasons for and against limitation or variation of the principle of standardization, note must be taken of still one other argument of a somewhat different nature than those already dealt with. That argument is that it will prove impossible to maintain uniform standard wage rates throughout an industry in which the various enterprises are distributed over a wide area; in the several parts of which area the cost of living, the general conditions of labor, and the demand and supply situation for labor differ considerably. This contention is supported by two different lines of reasoning. The first is that, because of these differences, there will tend to be a flow of labor away from the less favorable points of employment within the area of standardization towards the more favorable. This flow, it is said, will cause a reappearance of the differentials which existed before standardization. The first comment to be made on this line of reasoning is explanatory, rather than contradictory. It is true that there may be some tendency for labor to flow from the less favorable points to the more favorable. But it must be remembered that the standard wage is intended only as a minimum. If differentials over the standard wage did arise in enterprises where the conditions of labor were worse than the average, or in regions where the cost of living was higher than the average, such differentials would not be incompatible with the ends sought, when standardization is enforced. Secondly, it may be commented that the experience of the past does not, in general, support the contention. In many industries the same standard wage scale applies over an area in which there are real differences of the kind set forth above, and no differentials as between the different points within the area have arisen--as, for example, on the railroads. This is to be accounted for, firstly, by the influence of the idea of standardization over trade union activity and policy; secondly, by the fact that relative money wages tend to govern, in a great measure, the calculations and movements of the wage earners; thirdly, by the fact that the application of the principle of standardization is in itself a strong force toward bringing about a leveling in the conditions of employment throughout an industry. The second line of reasoning with which this contention is supported is that the trade unions themselves will not long support any policy of standardization which does not make explicit allowances for such differences as are in question. It is said that the organization of the workers at the points where the cost of living was relatively high would insist upon a differential over other places for that reason. Such, for example, was the argument of the employers' counsel before the Court of Inquiry on the wages of transport workers (Great Britain), "... He submitted that one of the foundations of his argument was that in fixing wages they must have regard to the class of work. Having regard to the very great diversity of conditions and of methods in the different ports, and to the class of work done, he submitted that they could not standardize. They must do in the case of the ports as they did in the case of the coal mines."[100] There is but one pertinent comment to be made upon this opinion. If the wage earners' organizations, themselves, demand that variation be introduced into the policy of standardization, that demand should be granted. But it must be observed that these organizations must not give lip service to the application of the principle of standardization without variation, and once having secured it, make such a course impossible by demands for differentials over the uniform standard wage. In the face of such tactics, it will be impossible to maintain any definite policy of wage standardization. If the labor organizations desire the application of the principle of wage standardization without qualifications, they must be loyal to that desire, and they must not be swayed by small temporary advantages or by sectional interests. And, on the other hand, if they desire that the principle of standardization be applied with qualifications, they must not attempt to disguise demands for general wage increases as standardization movements. Such a policy is calculated to perpetuate industrial conflict. Such is the bearing of the pledge given by the representatives of the transport workers (Great Britain) incidental to their claim for a 16 shilling national minimum daily wage. "I am conscious that whatever your decision may be, if the principle of the minimum be established, some people in some ports are going to get more on the first settlement than others. We have faced that, and we have discussed it with the whole of our men. It was assumed by the chairman of the employers at the previous meeting, to take a striking illustration, that if Liverpool received 12 shillings per day and Glasgow 14 shillings, if you decided on 16 shilling a day, Glasgow would say 18 shilling, 'because I was above Liverpool before.' That is not so, my Lord. That is clearly understood by every member of the federation in every port in the country."[101] 7.--It may be hardly necessary to say, that up to the present, the various questions involved in the application of the principle of standardization in industry have not been settled by a careful study of the results produced. At the present time the manner in which the principle is applied is governed in the first instance, by the economic characteristics of the industry in question, and in the second instance by the area of influence of the various labor organizations, and by the degree of centralized control within each of them.[102] One of the circumstances which has played a part in determining the area of standardization in any industry is that success in the enforcement of collective agreements has depended largely upon whether all or most of the enterprises in competition with each other have been included in the same agreement. This circumstance has been sometimes decisive of the degree of centralized authority in the various trade unions. It has also tended to govern the attitude of particular trade unions towards the application of the principle of standardization without variation or modification.[103] The history of trade unionism is full of instances of organizations which have striven in vain to maintain uniform standardized wage rates throughout imperfectly organized areas.[104] Even when wage disputes have been settled by public agency, the usual procedure in the past has been to make the area covered by the agreement entirely dependent upon the area of dispute.[105] For all of that there has been in recent years a steady drift towards an extension of the area of standardization. In various industries careful thought has been given to the possibility of standardization on a national scale, though at present very few unions enforce such a scale.[106] On the railroads there are at present nation-wide wage scales. In Great Britain, to-day this is one of the most vexed of questions. Indeed Great Britain just has gone through a great coal strike in which it was one of the two great issues. The miners asked that "a levy be made upon each colliery company on every ton of coal raised to the surface to be used for ensuring the payment of wages agreed upon in a national wages settlement." The miners argue, and correctly, that district settlements would give unequal reward to men doing precisely the same work, and called upon for the same service.[107] 8.--The introduction of standardization into crafts or industries in which a variety of wage rates for substantially the same tasks exist gives rise to one other difficult problem. That is the determination of the level of standardization for each occupation. It will be argued, at a later point, that under any economic system in which labor organization is an accepted part of the economic structure, the wage levels established in different industries or occupations will have to be brought into relation with each other.[108] If that is so, the level of standardization of any industry or occupation would be determined in accordance with these principles, after they had been in operation for some time. As a matter of fact, however, under any policy of wage settlement, the enforcement of standardization will be something of an independent and prior process--prior, that is, to the application of any other principles intended to keep the wage levels in different industries or occupations in relation to each other. Standardization will be, so to speak, an initial stage of policy to be gone through before any other stages are entered upon. In this initial stage, the principal data that should be taken into consideration when fixing the level of standardization for any occupation is the actually existing variety of wage rates for that occupation. Where in the scale of actually existing rates the level of standardization is set must be a matter of judgment and compromise. That level of standardization should be chosen, which it is believed will produce more good and less harm than any other level that might be chosen. Or in other words, the level of standardization should be determined by a balance of the interests involved--that point being chosen at which, it is judged, the most favorable balance is established. There is current, indeed, one doctrine of standardization which holds that there is but one satisfactory level of standardization for an occupation in which wages have been hitherto unstandardized. That doctrine, crudely stated, is that the standard wage for the work in question should be the highest of the unstandardized wages.[109] That doctrine is called "standardization upward." If the suggested test is sound, it cannot be admitted that the doctrine of standardization upward is always valid. For there is no reason to believe that the level of the highest of the hitherto unstandardized rates is, of necessity, the one at which the most favorable balance of interests is established. In many cases there may be a presumption to that effect--if the doctrine is reasonably interpreted. That is to say, if it is taken to mean the higher range of wages, rather than the highest single wage. That presumption arises from the fact that, unless there is evidence to the contrary, the higher range of unstandardized wages indicates what wages may be enforced throughout the occupation without causing great disturbance and unemployment. The circumstances which would govern the correctness of this presumption are many and have already been discussed.[110] The actual range of difference between the various wage rates being paid for the same occupation in different enterprises should be given importance in the judgment as to whether standardization should take place at the level of the higher range of wages. Furthermore, in many cases where wages are standardized at a level lower than some of the wage rates already paid for the work in question, it would usually be sound to provide that these higher-wage rates should not be reduced at once. This ruling was adopted in the decisions of the War Labor Board and it has also been embodied in the so-called "saving clauses" in the American railway wage decisions.[111] 9.--The principle of standardization may be considered basic in any wage policy for industrial peace. This is not because the existence of various wage rates for the same work is the greatest source of industrial conflict. But because the establishment of clearly known wage rates for each type of labor, extending over the field of its employment (with whatever limitations or variations are admitted to the principle) is often essential to the operation of any other principles of wage settlement. The establishment of standard wage rates makes possible a clear knowledge of the economic position of the various classes of wage earners. Likewise, it makes possible the accurate measurement of wage change; and also makes for simplicity and uniformity in the application of changes. Lastly, it tends to produce a careful classification of the different kinds of work, in which the minor and local differences in the nature of the work are gradually eliminated. These are the reasons for the "strong public interest in standardization" which was spoken of above.[112] FOOTNOTES: [85] Thus, take the cautionary warning in the Report of Commission of Enquiry into Industrial Agreements (Great Britain) upon the proposal to make collective agreements entered into by joint industrial councils compulsory upon all enterprises engaged in the industry providing a certain majority (75 per cent. was the suggestion) of work people and employers in the industry or craft in question were represented in the council. "51--Attention has been drawn to the fact that, in the establishment of a scheme for dealing with proposals for extension of agreements, it would be necessary to provide for exceptions to be made in regard to individual firms or work people whose conditions of trade or employment were such as to differentiate them from the remainder of the trade to such an extent as to make the application of the agreement to them an inequitable proceeding." CD 6953, 1913, page 14. A bill embodying a clause providing for such a scheme for extension was proposed by the government in 1919 in return for certain concessions from the trade unions, but was withdrawn when the parliamentary labor leaders would not agree to the concessions. [86] P. S. Collier, Appendix VIII, 4th Report New York State Factory Investigating Commission, 1915, page 2113. [87] Much interesting material bearing on the question of district vs. national standardization is to be found in the report of the Commission on "Wages and Conditions of Employment in Agriculture" (Great Britain), 1919. An interesting bit of evidence was given by a farmer from Devonshire who was of the opinion "that the sticky nature of the ground in Essex induced a slow habit of moving, and he thought the Essex workmen did as much as could be expected in view of the labor involved in walking on wet land, during a large part of the year." Page 73. There is also much interesting material on the subject in the report of the Court of Inquiry into the "Wages and Conditions of Employment of Dock Labor" (Great Britain), 1920. The same problem has arisen, of course, many times in the course of trade union negotiations--for example, in the coal mines and railroads of the United States. [88] Section 12 (4), Trades Board Act, 1909, Restated in the Corn Production Act, 1917. [89] J. N. Stockett, Jr., "Arbitral Determination of Railway Wages," page 23. [90] J. N. Stockett, Jr., "The Arbitral Determination of Railway Wages," page 21. [91] See D. A. McCabe, "The Standard Rate in American Trade Unions," pages 82-91. [92] For example, see the recommendations of the Interstate Commission regarding classification of railroad employees. _U. S. Monthly Bulletin of Labor_, Nov., 1915. [93] Decision in Re Employees vs. Worthington Pump and Machinery Corp., Docket No. 163, National War Labor Board; see also decision in the Corn Products Case. [94] For a recent statistical study of the subject see an article by Ogburn and Kelley in the _Journal of the American Statistical Ass'n._ for September, 1916. [95] The Commonwealth Court of Australia, while setting up as an ideal "uniform rates all around Australia" (see The Case of the Federated Storemen and Packers' Union, page 150, Vol. X, Commonwealth Arbitration Reports), has frequently awarded a different basic minimum wage for different cities within the commonwealth. [96] See D. A. McCabe, page 54, and 162-3 for a review of trade union policy in this matter, "The Standard Rate in American Trade Unions." [97] Case of the Broken Hill Proprietary Company vs. Federated Engine Drivers' and Foremen's Association of Australia. Pages 196-7 (Vol. X, Commonwealth Arbitration Reports). [98] Thus in one of its opinions the Kansas Court of Industrial Relations recommended that the flour mills in the state should pay their skilled men a monthly wage whether the mill is running or not, Docket 3803, Opinion regarding "continuity of production in the flour-milling industry," 1920. In another case, however, the Court refused to order the packing industries to guarantee a minimum amount of employment each week to its employees. Docket 3926, Wolff Packing Co., Case 1921. [99] Case of "Federated Storemen and Packers' Union of Australia vs. Skin & Hide Merchants' Association of Brisbane," page 651, Vol. X, Commonwealth Arbitration Reports. For an example of difficulties to be expected, see the attempt made to set up such a scheme of nominal variations in the Salt Case, No. 1, "South Australian Industrial Reports," Vol. I, page 16. [100] London _Times_, Feb. 12, 1920. [101] Court of Inquiry into Wages of Dock Labour, etc., as reported in the _Monthly Labor Review_, U. S. Dept. of Labor, May, 1920, page 57. [102] See D. A. McCabe, "The Standard Rate in American Trade Unions," page 143. [103] See D. A. McCabe, "The Standard Rate in American Trade Unions," page 183. [104] For example, see "The Standard Rate in American Trade Unions," page 159. [105] Such now seems to be the policy of the most recent experiment in wage settlement in the United States--the Court of Industrial Relations of Kansas. [106] For a study of the influences which have governed the area of standardization in the United States, see Chapter III, especially page 120, etc., "The Standard Rate in American Trade Unions," by D. A. McCabe; also article in the _Quarterly Journal of Economics_ for 1912, pages 425-443. [107] See the statement of Frank Hodges, Secretary of the Miners' Federation, in the London _Observer_, April 17, 1921. [108] See Chapters X and XI. [109] An interesting statement of the doctrine of "standardization upward" is to be found in the evidence of Mr. J. H. Thomas (then Assistant Secretary of the Amalgamated Society of Railway Servants) before the "Commission of Inquiry into Industrial Agreements" (Great Britain), CD 6953, 1910, Q 13902. Chairman: I think there are eight railways running into Manchester. You were talking about uniformity in such a case. Supposing that five out of the eight railways had a particular rate for a particular class of labor, would you apply that rate to the other three railways? A: It may be that the five should be lower than the three, and in that case, I certainly would not apply the lower to the others. I would apply the higher rate as being the uniform rate; but think that would be got over by the suggestion that I have made whereby the rate would be determined for Manchester, for example, by one authority. Q 13903--I will assume for the moment that the three are less than the five. Would you then make the rate that the five are paying a minimum rate? A: Yes, if the three were less than the five, then the rate of the five would be the rate, but if one was higher than the seven, then the other seven would come up to the one quite naturally. For another good example, see the claim of the Unions in the Engineering and Foundry Trades (Special District Cases), Committee on Production Reports (Great Britain), Vol. II, New Series (545). [110] See pages 138-9, Chapter VII, also pages 192-5, Chapter IX. [111] Justice Higgins of the Commonwealth Court of Australia has dissented from the saving clause idea simply on the ground that if the unions desire standardization and uniformity, they "must take the rough with the smooth," Case of the Federated Shoremen & Packers' Union, page 150, Vol. X, "Commonwealth Arbitration Reports." [112] Compare J. N. Stockett, Jr., "Arbitral Determination of Railway Wages," pages 46-47. CHAPTER IX--THE LIVING WAGE Section 1. The reasons for seeking separate principles for the settlement of the wages of the lowest paid groups.--Section 2. Wage statistics of these groups a matter of familiar knowledge.--Section 3. The definition of the living wage idea. An inescapable element of indefiniteness contained in it.--Section 4. The living wage principle put in the form of applied policy.--Section 5. Should the living wage principle be applied to male labor? The arguments for and against.--Section 6. The theoretical case for the living wage principle. The verdict of past experience favorable to its extension.--Section 7. The dangers which must be guarded against in applying it.--Section 8. It should be administered through machinery which makes possible careful study of facts of each industry. This machinery discussed.--Section 9. The question of the relation to be established between living wage for men and women difficult. Alternatives considered.--Section 10. A plan for the adjustment of the living wage to price changes. The basis of adjustment.--Section 11. The policy of adjustment--already discussed.--Section 12. The hope of the living wage policy. 1.--In the brief survey earlier in this book of the present industrial situation in the United States, it was concluded that the improvement of the economic position of the lowest paid groups of wage earners was one of the chief objects to be borne in mind when striving to work out a policy of wage settlement for industrial peace. In the following chapters a study was made of the causes of the formation and existence of relatively separate groups of wage earners, and of the forces which determine the level of earnings for the various groups. It was observed that the lowest paid groups of wage earners tended to be separated from the more fortunate groups; they have relatively independent economic fortunes. Two reasons exist, therefore, for giving separate treatment to the question of the principles by which the wages of these least favorably placed groups of wage earners should be settled--as part of the policy of wage settlement for industrial peace. Firstly, because their economic position is a matter of special concern; secondly, because the wage incomes of these groups are determined, in part, by forces which do not affect equally, or in the same way, the wages of the other groups. The living wage principle as put forth in this chapter is the principle suggested for use in the settlement of wages for these least favorably placed groups of workers. It is the second of the measures, intended to form a policy of wage settlement for industrial peace. 2.--It is not necessary to give here the wage statistics for the groups of wage earners who are lowest in the industrial scale. They form the record of the fact that a considerable percentage of all female industrial wage earners, and some groups of male wage earners who perform unskilled work, are in receipt of wages insufficient to enable them to live according to those conceptions of the minimum level of satisfactory economic existence which have been formulated by public agencies from time to time.[113] 3.--The general idea of the living wage is not a new one. It has been the subject of many definitions. A comparison of a few of the best attempts to express the idea shows, on the one hand, the definite purpose which is its inspiration and, on the other hand, an inescapable element of indefiniteness which persists in all instances where the idea has been enacted into policy. The definition given to the living wage idea by the South Australian Industrial Court (an agency which has made searching efforts to explain its underlying assumptions) is that all wage earners should receive "a wage that will meet the reasonable and normal needs of the average citizen in a particular locality."[114] In the declaration of the war labor policy of the Dominion of Canada one can read that "all workers, including common laborers shall be entitled to a wage ample to enable them with thrift to maintain themselves and families in decency and comfort, and to make reasonable provision for old age."[115] And contained among those principles laid down for the guidance of the United States War Labor Board is the following, "In fixing wages, minimum rates of pay shall be established which will insure the subsistence of the worker and his family in health and comfort."[116] These definitions reveal clearly the aim which inspires them. They express a determination to secure for the least favorably placed members of the industrial community wages sufficient to enable them to share with the rest of the community prospects of an active and happy life, as the run of men understand that idea at any time and place. Still all these definitions--including the one just given--assert a goal sufficiently indefinite to permit, and indeed necessitate interpretation according to the circumstances under which the idea is translated into policy. The clarity of the idea arises from a simple belief. That belief is that any body of individuals of average honesty, though they disagree in many things, can reach a large measure of agreement as to the minimum income which will enable the ordinary wage earner to live a life which satisfies, in a minimum measure, the ideals of life current in the community. The indefiniteness of the idea arises out of the fact that it is not likely that this body of men will be in complete agreement as to this minimum income; and therefore the wage finally settled upon is likely to represent a compromise between conflicting opinions. This is well brought out in a passage contained in one of the reports of the Minimum Wage Board of the District of Columbia. "... Cost of living is such an unstandardized subject that a mathematically accurate determination is impossible. In each conference there are as many different opinions as there are members. In general, the employers want a wage sufficient to maintain existing standards of living in the industry, while the employees contend that the standard of living should be improved. The wage finally agreed upon is not a scientific determination based solely on facts, but rather a compromise of opinion between the two groups, modified as it may be, by the opinion of the public."[117] The reference contained in practically all definitions of the living wage principle to the standards of a particular time and place assists greatly in interpreting the principle into policy.[118] For this reference is tantamount to saying that the standard of economic life which shall be deemed to satisfy the principle, should be fixed primarily by comparison with the standard of life of the wage earning and middle classes in the community at the given time. This comparison tends to govern the content of the living wage idea. It brings the living wage determination into direct relation with--or makes it relative to--the productive capacity of the industrial system at the time and place in question. For a study of the standard of life of the wage earners and the middle classes of the community is of great assistance in indicating the standard of life to which it may be possible to raise even the worst paid industrial groups, by those adjustments in production and distribution which it is the object of a living wage policy to produce. This essential relativity of the living wage idea is well pointed out in a decision of Justice Brown of the South Australian Industrial Court. "... The statutory definition of the living wage is a wage adequate to meet the normal and reasonable needs of the worker. In other words, the conception is ethical rather than economic. The Court has not to determine the value of the services rendered, but to determine what is necessary to meet normal and relative needs. It should be obvious that in the interpretation of reasonable needs the court cannot be wholly indifferent to the national income. The reasonable needs of the worker in a community where national income is high are greater than the reasonable needs of the worker in a community where the national income is low."[119] The living wage has ordinarily been assessed on different bases for men and women. The basis of assessment for each has been the subject for much controversy. The most generally upheld basis of assessment is, in the case of the male wage earner, to assess his needs on the supposition that he is the supporter of a family consisting of himself, wife, and two or three small children; and in the case of the female wage earner, to assess her needs on the supposition that she is living alone, and is dependent upon her own earnings for her support, and that she has no other obligations. These bases of assessment do not meet all of the demands of logic--applied to the living wage idea--nor, as will be seen, is the choice of different bases of assessment for men and women entirely free of difficulty.[120] The reasoning, which has been used ordinarily in support of the suggested basis of assessment for men is well set forth in another decision of Justice Brown, "I look upon the maintenance of home life as of supreme importance to the community. I regard the wage paid to the adult male as essentially and in substance a family wage. True, so far as single men are concerned, it has long been settled that the minimum (living) wage should not be less than that of the married man. In other words, in discussing the needs of the male worker, a man with a family to support has been taken as a basis of assessment. Any other conclusion would prejudice the married man in search of employment and would tend to produce sterility of the population, and would place the industrial court in the invidious position of fixing wages at a rate which would make it difficult, if not impossible, for single men to save something for the time when they may have the felicity to become supporters of a family."[121] The argument in support of the suggested basis of assessment for women rests upon a sentiment to the effect that every worker should earn, at least, enough to enable her to support herself, even though the actual necessity does not exist in many cases, and though in many other cases the female wage earner has obligations beyond self-support. 4.--After these preliminaries, it is possible to make more definite recommendations concerning living wage policy--with a view towards the adoption of the living wage principle as part of a policy of wage settlement. Firstly, as to scope. It should apply to all groups of workers whose average annual earnings fall below the sum settled upon by the constituted agency as the minimum necessary for the fulfillment of the living wage idea. The statistical definition of the term "average" as just used should also be left to the constituted agency. Allowance should be made in each occupation for a small percentage of sub-ordinary workers. Secondly, as to the basis of assessment of the living wage, and the procedure by which it should be fixed. There should be an extensive and (so far as it is possible) impartial investigation of the cost of that minimum standard of economic life which it is the intention of living wage policy to secure for all industrial wage earners. In the determination of what should be included in the minimum standard, attention should be paid to the income levels of the wage earners in general, and of the middle classes. The wages now received by the lowest paid groups would also be an important consideration. The living wage settled upon by this process of investigation should be in the form of a weekly standard wage. It should be considered as a minimum only for any occupation to which it is applied. Like other standard wage rates, it should be subject to limitation or variation in accordance with the conclusions reached on that subject in the preceding chapters.[122] The questions which arise out of the fact that it would have to be enforced in a number of different industries, and under widely different conditions will be considered at a later point.[123] The bases of assessment for men and women should be those discussed and approved in the preceding section. The living wage that is fixed should be subject to reconsideration and revision at definite periods; aside from the revisions which may be called for as the result of price movement,[124] or under the profits test which is suggested later in the book.[125] 5.--So much then for the central features of the living wage proposals. We have now to consider the probable result of their enforcement; and any criticisms to which they may be fairly subject in their proposed form. Thus we will be enabled to discover what modifications, large or small, are advisable. Objection may be taken, first of all, against the scope of these proposals. So far living wage legislation in the United States has been applied to female industrial workers only. The argument against the extension of the principle to male wage earners is put on two grounds--the constitutional and the economic. On the constitutional argument, only the briefest comment will be attempted; and that without any intention to dogmatize upon a most complicated subject. That is that the test of the constitutionality of these proposals should be the balance of good or harm they promise. The constitution is at bottom but a very wise guide as to what public good and harm consists of. But as the conditions and facts which determine good and harm change, these changes should be reflected in the interpretation of the constitution. These living wage proposals do not, it seems to me, offend against any of the fundamental ideas which the constitution contains. The economic argument against the extension of the living wage policy to male wage earners is usually based on the contention that it is unnecessary, or that it has a bad effect upon the spirit and character of the male wage earners concerned, or upon both these contentions. As to its necessity, the statistics of wages for the least favorably placed groups of male wage earners, and observation of their economic handicaps offer sufficient evidence. As to the belief that the extension would be destructive of the spirit or character of the male wage earners concerned, there is little or no factual support for that view, and much to refute it. A minimum level of economic existence is requisite to the growth and development of personal initiative and of a spirit of self-confidence. Vigor and independence of temper and action is not bred in a position of extreme economic dependence. One does not have to be blind to the dangers of paternalistic legislation to believe that living wage policy for male wage earners is justified, under modern industrial conditions. All the more so, since experience with living wage legislation proves that it encourages voluntary organization among the wage earners. And this fact, indeed, is also a fair answer to the tough dislike of the American labor unions for all other methods of settling the wages of male workers than that of collective bargaining. 6.--We may now pass from the possible objections to the scope of these proposals, to those which may be fairly leveled against their substance. Although the living wage principle has been used in wage settlement throughout the Australian Dominions, in many English industries, and in a limited number of industries in some of the American states, the controversy which arose over it, when first it was introduced, is far from quieted. This is explained, in part, by the extreme difficulty of getting evidence as to its results which is beyond the shadow of doubt. That is due, in part, to the great variety of conditions under which it has operated. Its results are always complicated by circumstances which differ from place to place. Again, there is the fact that such experiments as that of the living wage are apt to be judged from a rapidly changing viewpoint. The very conscientious efforts which have been made, however, to measure the effect of the various experiments with living wage legislation furnish us with much valuable material on most of the debated matters. No attempt can be made here to reproduce the various sides of the controversy, or to summarize the evidence which has been collected upon the disputed aspects of the subject.[126] Much of it covers the same matters which were treated in our analysis of the principle of wage standardization. In my opinion, the existing evidence warrants the advocacy of an extension of the living wage policy in the United States. It furnishes us also with valuable instruction as to the form in which the policy is likely to work out most satisfactorily. The value of the living wage principle as an instrument for bringing about an improvement in the economic condition of the lowest grades of industrial workers, without producing equivalent harm in any other direction, is also supported by general theoretical reasoning; that is, by a study of the forces which govern wages in general, and the wages of these lowest groups in particular. In the study of these forces, earlier in the book, it was pointed out that the outcome of distribution may be affected by just such assertions of purpose as that represented by the living wage policy. If labor organization has been able to increase the wages of certain groups of wage earners without doing equivalent harm in any other direction, there is reason for believing that a living wage policy can accomplish something of the same result for the lowest grades of industrial labor, which have been up to the present practically without organization. And, indeed, in England, the Trades Boards, which are the machinery of the living wage policy, are ordinarily regarded as fulfilling practically the same functions as organization does for the more favorably placed groups.[127] Furthermore, the nature of certain of the forces which account for the low wage levels of the groups that would be affected by the living wage policy, give the above argument special force. For among those forces are these: that their wages have been, at times, less than the amount necessary to enable them to do as efficient work as they were capable of doing; and so low, frequently, as to make the struggle for self-improvement and advancement, for members of these groups, a very difficult matter. Thus the numbers in these groups have been kept greater than they would have been otherwise. Furthermore, their wages have been, at times so low that efficient industrial management counted little in success. Furthermore, these groups have had practically no organization or leadership to prevent their employment under conditions most unfavorable to their health, energy, and general welfare. And lastly, that the present industrial system has a tendency to take advantage of economic weakness wherever it exists. Against these considerations must be put, perhaps, the submission shown by these groups to the course of industrial development, and the constant service they have given, in their position of dependence, in monotonous and wearisome work. The case of the living wage policy rests upon the opinion that the introduction of living wage standards will give rise to a series of adjustments in production and distribution. And that the net sum of the results of these adjustments, perhaps only after a temporary period of dislocation in some instances, will be to increase the wages of the lowest grades of wage earners--without doing equivalent harm in any other direction. It also rests on the opinion that the permanent economic advancement of these lowest groups of wage earners is a practicable ideal--though fate seems to take a special delight in dealing harshly with this particular ideal. 7.--Among the adjustments, however, which general reasoning suggests as a possible consequence of the enforcement of a living wage policy are some which it is the part of policy to guard against. Existing evidence shows that they have not often followed upon previous enforcements of living wage policy; yet they must be borne in mind. They are firstly: the possibility that employment of the wage earners who are affected by the living wage policy may be permanently reduced. This may result either because of price increase in the commodities produced by these wage earners, or because of substitution into their occupations of other classes of labor or of machinery. And secondly: the possibility that the enforcement of the living wage policy will bring about a concentration of employment upon the more efficient members of the groups affected, and thus throw out of employment the very individuals who are most in need of help. And thirdly: the possibility that there will be an increase in the numbers of those groups which the living wage principle is designed to aid, with consequences similar to those suggested under the second heading. In my opinion, the chances that any of these things will result from the enforcement of a living wage policy in the United States to-day are small. Yet to put the matter summarily,--these are the dangers which those entrusted with the administration of a living wage policy would have to be alive to; and if they become real, seek to overcome, by shaping their policy according to the facts that confront them. The factors which will determine whether any or all of these undesirable results will ensue are many. They cannot be balanced in the abstract. Yet general reasoning enables us to discern those which will make that likelihood greater or smaller in any occupation or industry. We may start by enumerating those factors which enter into the likelihood that a reduction of employment will result from the enforcement of a living wage policy. They are: Firstly, the amount of wage increase undertaken; secondly, the importance of the wages received by the groups in question in the total expenses of production; thirdly, the shape of the demand curve for the products of the groups; fourthly, the chances for improvements in the methods of production; fifthly, the chances of encouraging better business management by enforcing living wage standards; sixthly, the effect of the wage increases upon the efficiency of the groups affected, and their fitness for advancement to more skilled work; seventhly, upon the opportunities for substitution of machinery; and lastly upon the ultimate effects of the introduction of machinery on the employment of these groups. Turning now to the second possibility, that the enforcement of living wage standards will cause a concentration of employment upon the more efficient workmen, thus throwing out of employment those most in need of help, here, too, a great number of factors have to be reckoned with. They, however, have already been dealt with in the previous discussion of the effect of standardization upon the distribution of employment. There is no need of enumerating them again in this place. One point of difference should be observed, however. The differences of individual efficiency among the workers that would be affected by the living wage policy are more substantial than the differences of individual efficiency among the members of the more skilled wage earners. And, therefore, while it would be unnecessary to make any special provision for the least efficient members of the more skilled groups upon the introduction of standardization, it might at the start be decidedly good policy to make special provision for the least efficient members of the unskilled groups. Under practically all living wage legislation special provision is made for them. It should also be remarked in this connection, that the probable greater range of individual efficiency among the unskilled as compared with the skilled is in some measure to be attributed to their present low wage levels. Inefficiency is likely to grow upon itself. Mr. Aves has remarked pertinently in this regard, "As with the 'unemployed' or the 'unfair employer' so with the 'incompetent' and the 'slow,' none of these represent well defined classes. All are elastic. Some can be created and all merge by imperceptible degrees into the classes above."[128] The enforcement of a living wage policy, it may be hoped, would in itself reduce the range of individual efficiency among the unskilled. For it would keep from the ranks of the "incompetent" and "slow" some who might have found place elsewhere had their chances been somewhat better. We turn to the third possibility--that as a result of enforcement of a living wage policy there will be an increase in numbers in those groups who fall within its scope. Here the pertinent factors are: Firstly, the movement out of the lowest paid groups into those more favorably placed, owing to the effect of increased wages upon individual capacity and the use of individual opportunity; secondly, upon the movement from other groups into the groups affected by the living wage policy, due to the wage increases brought about by the policy, and thirdly, upon the effect of these wage increases upon the frequency of family labor, and upon the age of entry into and retirement from industry. 8.--So much, then, for the possible undesirable consequences of the application of the living wage principle. It is evident that the policy must be put in such a form as will make possible a careful study of the facts of each industry or occupation and adaptation to these facts. The following proposals are made primarily with the view that they will permit this flexibility. They are also designed, however, to fit into the other requirements of the general policy of wage settlement for industrial peace, which is under study. It is proposed that there should be in every industry which is included within the general scheme of wage settlement a joint council or board. There might also be occupational boards or councils. These councils or boards should consist of representatives of the workers and of the employers. Representatives of the public might act upon these boards or councils in advisory capacity. There might be both a central board or council, and various district boards or councils in each industry. These joint boards could be given other duties outside of the administration of the living wage policy. That matter will be taken up at a later point. Here, note will be taken only of the part they could play in the administration of the living wage policy. The joint boards or councils should be advisory to the central authority which is constituted to administer the policy of wage settlement as a whole. The functions of this central authority in regard to the formulation and declaration of the living wage for men and women have already been discussed. It should be provided, however, that the central authority should make no living wage declaration or hand down any order until it has received the report of the joint boards or councils in the industries or occupations in question upon the subject of such decisions or orders. The report of the joint boards or councils should be given great weight by the central authority in arriving at decisions. The joint boards or councils should be permitted to submit both majority and minority reports to the central authority. Among the matters arising in the course of the administration of the living wage policy, upon which the joint boards or councils should be called upon to advise the central authority, are the following: Firstly, upon the wage to be prescribed in that industry or occupation. Each joint council should be free to recommend a wage less than the wage declared to be a living wage by the central authority, giving its reasons for the same. It should also be free to recommend a wage more than the declared living wage, giving its reasons in this case also. The conclusions reached in regard to "nominal variations" as between different sections of an industry are equally valid as between industries or occupations.[129] Secondly, upon questions connected with the form of wage payment, and the arrangement of piece-work lists designed to yield the prescribed living wage. Thirdly, upon the question of sub-ordinary workers in an occupation or industry, and upon the issuance of permits for the same to work for less than the prescribed wage. Fourthly, as to whether the wage fixed for any industry or occupation should be varied or limited. Fifthly, upon any difficulties that may present themselves because of the fact that the living wages for men and women are assessed on different bases. Lastly, upon these boards or councils should rest the duty of observing how well the declarations or orders of the central authority are observed; and of studying the effect of the prescribed wages upon these classes of wage earners that the living wage policy is designed to help, and upon the industry in general; and of reporting periodically to the central authority upon the same. It is true that the procedure of these councils would consist largely of the compromise of conflicting opinions. It will be the duty of the central authority, however, to prevent them from settling down to that régime--nor should the central authority consider itself bound to accept the advice of these joint councils or boards. 9.--The determination of the relation between the living wage for men and women is one of the difficult questions that will have to be met in the course of the enforcement of any living wage policy. The position of women, both in industry and in society is at present undergoing change. The limit and direction of this change cannot be marked out with certainty. Therefore, the presuppositions upon which present policy may be constructed may become invalid in a comparatively short time. The unsatisfactoriness of leaving the question to be settled by the decision of the market has become increasingly plain. That policy produces, on the one hand, a constant effort on the part of the employers to so modify their processes of production as to take advantage of the low range of women's wages, irrespective of the effect on men's wages and of the suitability of the occupation in question for women; and, on the other hand, a constant effort on the part of the men to keep the women out of all new employments. The best advised foundation for present policy, in my opinion, is the two separate bases of assessment, suggested above.[130] In its favor, it may be pointed out that it corresponds to a certain extent to the existing relation between the wages of men and women in industry, and it would not, therefore, produce any violent change. Its unsatisfactoriness lies in the possibility that it may gradually lead to a displacement of men by women in many employments. On the question of whether such displacement is to be desired, there is room for the very deepest differences of opinion. It seems to me, however, that the industrial history of the nineteenth century proves the supreme importance of the wage of the head of the family to the general welfare of the family. For that reason, it is, in my opinion, wise to protect the wage of the male head of the family; and thus to provide that when men and women are employed upon the same work or when women are introduced into employments hitherto filled by men, the wage rates for men should be enforced throughout the employment. This ruling could be interpreted in some cases in terms of the relative efficiency of men and women, if there was a clear difference of efficiency. Of course, if the term "relative efficiency" is construed to include the difference in the indirect or overhead expense involved in the employment of male or female labor in any occupation, such a policy would amount to throwing open every field of employment to women. There are a number of alternative policies that might be pursued in order to ensure that the use of different bases of assessment for the living wage for men and women should not lead to haphazard displacement of men by women. Justice Brown in the Printing Trades Case has called attention to the most important of them. "... I suggest," he writes, "that with respect to any industry or grade, where the prima facie formula above (that is, a different living wage for men and women) is challenged, evidence should be given to show that it is desirable, having in view the interests of all parties and of the community, that men should be retained in that industry or grade even though such retention might involve some departure from the formula in question. Where such evidence is satisfactory there are several alternatives open to an industrial court. (1) To fix the same wage for women as for men. (2) To fix a ratio wage where it is proved to the satisfaction of the Court that the average woman is not of equal value to the employer. (3) To exclude women. (4) To accept the prima facie mode of assessment, but to limit the proportion of women who may be employed by any particular employer in any particular industry or grade.... The task of choosing may often be one of extreme difficulty and delicacy."[131] The task of fixing the relation between men's wages and women's wages will be even more delicate when the introduction of women into a field of employment follows upon a modification of the processes of production involved.[132] As was said above, to give advice upon the question of the relation between men's wages and women's wages, should be one of the duties of the joint boards or councils in the various industries. The course to be pursued should be decided upon by balancing all of the interests involved. It is to be desired that the same policy be pursued throughout all industries or occupations rather than divergent ones, and the central authority should strive to attain unity of policy. 10.--The complications introduced into the administration of the living wage principle by changes in the general price level have yet to be dealt with. It has been seen that changes in the general price level affect the outcome of distribution and, for that reason, any policy of wage settlement must include provision for the adjustment of wages to price changes. We have now to consider how this adjustment can best be carried out. The central authority is obviously the most suitable body to supervise the process of adjustment. The adjustment to price change should be expressed as a percentage addition to or subtraction from the existing wage. The central authority should be charged with the collection of all necessary price data. This body should then proceed upon the advice of the joint boards or councils in the industries concerned. Unless some strong reason to the contrary exists, however, a uniform policy of adjustment should be pursued--resting upon the following principles. 11.--The conclusions reached in Chapter V in regard to the policy to be pursued in the adjustment of wages to changes in the price level fall into two groups. Firstly, those which have to do with the choice of the basis of calculation of wage adjustments. Secondly, those which have to do with the choice of the actual policy of adjustment during times of rising and falling prices. The same division and order is maintained in the following attempt to sketch out a good plan of adjustment of living wage rates. First, then, these wage rates should be varied in accordance with the movement of a price index number. This index number should represent the prices of all the important commodities produced within the country, but so weighted as to give a defined importance (50 per cent. was suggested) to the prices of those classes of foodstuffs, clothing, housing accommodations, and other commodities upon which the wage earners tend to spend the bulk of their income. It was sufficiently emphasized in the earlier discussion of this subject that this basis of calculation was in the nature of a compromise, and was not beyond criticism. Adjustments should not be undertaken unless the index number of prices has moved at least 5 per cent. (the figure is meant to be merely a suggestion) and adjustment should not be more frequent than twice a year (again a suggestion, only). Secondly, as to the policy of adjustment to be pursued in times of rising and falling price levels, respectively. The policy for a period of rising prices can be very briefly stated. All wage rates prescribed under the living wage policy should be increased by the same percentage as the index number of prices moves upward. There is one case in which this policy cannot be justified theoretically. That is when the increase of prices can be wholly or mainly accounted for by a falling off in the general level of industrial productivity. However, in my opinion, it will be hardly practicable to attempt to distinguish this case from other cases of price increase,--save in an entirely exceptional circumstance, such as a period of war invasion. The policy to be pursued during a period of falling prices cannot be stated so briefly. The difficulties involved have already been discussed at length.[133] The following policy based upon that analysis is tentatively suggested. The complexities of the subject are too great to permit of dogmatism. Firstly, the occasion for the price decline may be such as was termed "natural," as for example when it is brought about by a general advance in the arts of production, or by the development of the means of transport. In this case, it will be satisfactory to keep wage rates unchanged, though prices decline. It is in these periods that chance is afforded of bringing about genuine improvement in the economic position of the least favorably placed groups of wage earners. Secondly, the price decline may be a sign of reaction from a previous period of rapid price increase, and of a general tendency on the part of entrepreneurs to keep down production costs and to proceed with circumspection throughout. Nevertheless if little forced liquidation occurs; if there has been no serious overextension of credit during the previous period; if the maintenance of the existing price level, or of a slightly lowered one, would not impose too great a strain upon the banking system--there would be no good cause to reduce wages. This judgment rests on the supposition that the facts of the industrial situation give promise that industrial recovery will take place even if prices do not drop greatly, and drop gradually rather than sharply. Thirdly, the price decline may be caused--at the beginning at all events--by much forced liquidation of a character that is disastrous to the enterprises compelled to liquidate. It may have been preceded by a great over-expansion of credit; and the maintenance of the existing price level might mean a steady source of danger to the banking and commercial system. Then the soundest policy is to reduce wages as prices fall. To the extent that the trouble may be due to special causes such as over-investment in particular directions, this reduction of wages may be unnecessary. But it will probably be found that the recovery from a genuine industrial crisis will be facilitated if a heavy price decline is stimulated by wage reduction. No wage reductions should be undertaken unless conditions making the case are clearly present. The central authority could avail itself of the advice of the Federal Reserve Board. The lowering of wage rates might be put off until the price decline has reached, say, eight or ten per cent. And the percentage of the reduction of wages might be smaller than the percentage of price decline; say, a three per cent. reduction of wages for every four per cent. reduction in prices. Lastly, when it is judged that the pressure on the financial system is definitely at an end, no further reduction in wages should be ordered even though the price decline continues.[134] In concluding this discussion one general reflection may be permitted. That is to the effect that no policy of wage settlement will, in itself, suffice to protect the standard of life of the lowest industrial classes during critical industrial times; whether such a time be one of rapidly rising prices of foodstuffs due to poor harvests, or to war, or whether it be a period of industrial panic and precipitate price decline. Much can be done to protect the standard of life of these classes by measures outside of the scope of any policy of wage settlement. The suggestion made by Professor Taussig that it may be possible to regularize the supplies of the principal agricultural products from year to year deserves careful consideration.[135] The best policy, undoubtedly, is one which would enable and encourage the lowest paid industrial classes to accumulate something for hard times. 12.--The design of the living wage policy is to procure for all members of the industrial community the economic essentials of a hopeful and active life. Ultimate success in the maintenance of any conceived standard of life, will, in the long run, depend upon those general relationships which were examined in the earlier chapters. The more productive the industrial organization as a whole is, the better are the chances for the least favored industrial groups to improve their economic condition. The less the economic waste, due to maldistribution and to other causes, the greater the product of industry will be. The greater the economic capacity of the lowest grades of wage earners, the more general their intelligence and the steadier their spirit, the more determined their organization, the better will be their chances of increasing their share of the total product. And lastly, the smaller in numbers these are compared with the need of the economic system for them, the stronger their economic position will be. This is but to restate some of the important influences governing the wages of the lowest groups of industrial workers. But to restate them is to emphasize the fact that the living wage policy must be looked upon merely as one agency among many, directed to the same end. In economic affairs, as in political affairs, to bring about a change in one place it is necessary to bring about a change in many places. FOOTNOTES: [113] The best short summaries of the pre-war wage situation are--"The Standard of Living among the Industrial People of America" (1911), by F. H. Streightoff, and an article by C. E. Persons in the February, 1915, issue of _The Quarterly Journal of Economics_. For a more extensive study see the Report of the Commission of Enquiry of the Board of Trade (Great Britain) into working class rents, etc., which contains material of great value. A recent comprehensive survey of wages in the United States, undertaken by the Bureau of Labor Statistics for the War Industries Board was published in May, 1920. It is Bulletin No. 265, U. S. Bureau of Labor Statistics, "Industrial Survey in Selected Industries in the United States, 1919." [114] South Australian Ind. Reports. Vol. 2-3--1919. Page 6--Submission by Employees in Cardboard Box Industry. Quoted from Printing Trades Case. [115] _Labor Gazette of the Dominion of Canada_, August, 1918, page 617. [116] As reported in the _Survey_, April 6, 1918. [117] Second Annual Report of the Minimum Wage Board, District of Columbia (1919), page 18. [118] An excellent study of the technique of measurement of the cost of living is that by W. F. Ogburn, "Measurement of the Cost of Living and Wages." No. 170, _Annals of the American Academy of Political and Social Science_ (1919). The article helps to put much firm ground under the feet of those engaged in cost of living investigations for the United States. For a description of the methods pursued in official cost of living investigations in Great Britain, see the account by F. H. McLeod in the June, 1919, issue of the _U. S. Monthly Labor Bulletin_, page 119. [119] The Plumber's Case, South Australian Industrial Reports (Volume I, 1916-18), page 122. [120] See pages 199-202, this chapter, for further discussion of this question. [121] The Printing Trades Case, South Australian Industrial Reports, Vol. II, 1918-19, page 35. [122] See Chapters VII-VIII. [123] See pages 192-6, this chapter. [124] See pages 202-7, this chapter. [125] See Chapter XII. [126] A valuable collection of evidence in support of living wage legislation is contained in the briefs presented in the cases of Stettler v. O'Hara (The Oregon Minimum Wage Case) published by the National Consumers' League. This collection of evidence is brought up to date in the new brief just published in defense of the Minimum Wage Commission--District of Columbia (Children's Hospital vs. Minimum Wage Board), 1921. For a collection of theoretical opinions on various aspects of the subject, see the symposium on the Minimum Wage Problem, which is printed as Appendix III, Vol. I, 4th Report of the New York State Factory Investigating Commission (1915), pages 592-827. An excellent bibliography on the subject by Miss Irene Osgood Andrews is to be found in Appendix III, 3rd Report of the same Commission (1913). The best studies of the Australasian experience are those of M. B. Hammond (especially the articles in the _Quarterly Journal of Economics_ for Nov., 1914, and May, 1915), and P. S. Collier, Appendix VII, 4th Report of the N. Y. State Factory Investigating Commission. The bulletins of the Massachusetts, Oregon, and Washington (D. C.), Minimum Wage Commissions are the best studies of the effects of American legislation. Upon the results of the British Trades Boards see the studies of R. H. Tawney on the Chainmaking and Tailoring Trades and that of M. E. Bulkely on the Box Making Industry. The Parliamentary Debates 5th Series (Vols. 96-97, 107-108, Hansard), cover every aspect of the English experience. [127] The best theoretical statement of the dangers and difficulties presented is the article by F. W. Taussig, "Minimum Wages for Women," in the _Quarterly Journal of Economics_, June, 1916. The evidence, however, seems to me to stand against the skepticism expressed therein. [128] Report on Wage Boards and Industrial and Condition Acts of Australia and New Zealand (1908). [129] See pages 160-6, Chapter VIII. [130] See pages 183-4, this chapter. [131] The Printing Trades Case, South Australian Industrial Reports, Vol. II (1918-19), page 252. [132] The suggestion put forward in the "Report of the War Cabinet Committee on Women and Industry" (Great Britain), 1918, is as follows: "In such cases," the report reads, "the time rates for the simplified process or simplified machine should be determined as if this was to be allocated to male labor less skilled than the male labor employed before simplification. Only where it was definitely shown by employers that the value of the woman's work on the simplified process or machine was less than the value of the unskilled man, should the woman, if her introduction is agreed to, receive less than the unskilled man's rate in proportion to the value of her work." Page 192. [133] See pages 114-20, Chapter VI. [134] A number of collective agreements in which the arrangements for wage adjustment to price decline are similar to those suggested here, have recently been negotiated in England. The wage scales established in 1919 for many grades of railroad workers are an example. So also, the agreement of the Wool Textile Industrial Council, in October, 1919. The following agreement made for the Yorkshire Dyeing and Finishing Industry in March, 1919, may be given as an example. "(7) When the index figure as defined in classes 4 and 5 hereof exceeds 107 per cent. the War Wages shall be:-- "To male and female timeworkers--107.90 per cent. of the basis wage. "To male and female pressworkers--85.672 per cent. of the basis wage. "To hand pressers--64.254 per cent. of the basis wage, and when the index figure is 107 or less, but not less than 100, the percentage war wages of timeworkers shall be equal to the index figures; for every 1 per cent. decrease in the index figure below 100 the war wages of timeworkers shall be decreased 3/4 of 1 per cent. The ratio of percentage war wages of timeworkers, pieceworkers and pressers respectively, shall for all index figures, be the same as that shown for index figures, exceeding 107." [135] "Cost of Living and Wages," F. W. Taussig, _Collier's Weekly_, Sept. 27, 1919. CHAPTER X--THE REGULATION OF WAGE LEVELS Section 1. Why there must be in industry an ordered scheme of wage relationship between each and every group of wage earners. The limits of collective bargaining as a factor in industrial peace.--Section 2. In the beginning, the scheme must probably be based on an acceptance of existing wage "differentials." The reasons for this are of a practical kind.--Section 3. Any policy which planned to develop a scheme of wage relationships merely by maintaining existing differentials would be bound to fall to pieces in the end. The difficulties that would arise.--Section 4. Two principles proposed as the basis of the desired scheme of wage relationship. Their meaning as applied doctrines.--Section 5. These principles open to criticism both on practical and theoretical grounds. The chief criticisms examined and taken into account.--Section 6. Some notes on the best method of administering these principles. The necessity of avoiding political interference, if possible. 1.--We have now completed that part of this inquiry which was concerned with the formulation of principles suitable for the regulation of the wages of the lowest paid industrial groups. The task remains of working out principles which could be used satisfactorily in the settlement of wages for all other groups of wage earners. The subject may be introduced by recalling certain matters, set forth in the preceding analysis of wage principles. It was seen that while the wages of each and every group of wage earners were governed, in a great measure, by forces which acted upon them all in common, yet the wages of each group were settled somewhat independently of all the rest. Again, it was seen that one of the leading characteristics of the present distributive situation is the use of the group will and group power to serve group purposes. Wage movements in different industries or occupations begin independently of each other; yet because of the firm determination on the part of most groups of wage earners to maintain their position in the industrial scale, a wage movement in one part of the field of industry tends frequently to give rise to similar movements throughout the field. This tendency for the actions of one group to give rise to action on the part of other groups arises from the existence of some "power of interchange or close connection" as Mr. Aves has said. Before the use of group power becomes common and the sense of group interest becomes highly developed, that interchange or interconnection tends to exist only between classes or groups of workmen who can easily move into each other's field of employment. But with the extension and encouragement of unionism, with a constantly growing volume of public discussion of wage questions, there has arisen an interconnection between wage movements in groups very far apart in the industrial scale.[136] As long as wave movements in different industries and occupations are considered independently of each other, and the claims of each group are judged with only incidental reference to the claims of the other groups, the use of group strength will continue to be a conspicuous characteristic of distribution. The constant assertion of group power will cease only if all groups are brought within some acceptable plan of wage settlement, under which group wages are settled by principles recognized as fair. The problem is to establish an ordered scheme of wage relationship _between_ each and every group of wage earners--which scheme of relationship will do justice _between_ them, and which will also effect such a distribution of the product of industry between _all_ the wage earners and the other claimants to a share in the product, as will justify it to the wage earners and to the community in general. If the objection be raised that the establishment of such a scheme of wage relationship is not practicable, doubt must be admitted. Yet it is probably essential to industrial peace,--under our present industrial system, or under an alternative one. It would seem to be the only substitute for the continued reliance of each group upon group power. There has been a strong tendency, both in the United States and England, to believe that industrial peace could be secured by the development of joint industrial or occupational councils throughout industry--which councils would assure fair and complete consideration of all wage questions which arise. It would be a serious error to underestimate the possible value of such joint councils to the cause of industrial peace. Indeed, throughout this study of the means of industrial peace great reliance will be placed upon them. Yet I do not believe that their creation will suffice to bring industrial peace. Such joint councils are among the most satisfactory instruments yet devised for the conduct of collective bargaining. But will collective bargaining keep such an interdependent industrial society as our own at work peacefully? Can the philosophy of compromise be developed to that extent? Joint industrial councils can produce understanding between employers and wage earners; they can foster a spirit of coöperation between all groups engaged in a productive industry; they can stand in the way of the creation of such intolerable conditions of labor as have, on occasion in the past, led to a spontaneous revolt in an industry; they can foster reasonableness and compromise. But it is difficult to see how they can work out principles of wage settlement for any industry which will have sufficient authority over the actions of those engaged in it in times of stress. Before industrial peace can be obtained, particular groups of wage earners must forbear from pressing to the utmost the bargaining advantages they possess. This forbearance will come only from a knowledge of an interest larger than their own. There will have to be a recognition by all sides of principles which represent aims to which all subscribe, and which do justice to the interests of each. 2.--What then is required, to repeat, is a policy by which wages in various industries and occupations are brought into relation with each other. This policy should be calculated to result in such a distribution of the product of industry as would justify it to the wage earners and community in general. The scheme of wage relationship would have to rest upon expressed principles. In the beginning any policy which has as its aim the establishment of a scheme of wage relationship must accept and protect the existing wage levels of each group of wage earners. That would mean, of course, accepting the wage relationships existing between them. The reasons for this are practical, rather than theoretical. They are: Firstly, because it will be impossible to win general consent for any policy of wage settlement which does not guarantee to all wage earners at least their existing rates of wages. Secondly, because the existing relationships between the wage levels of the different groups of workers represent, though only vaguely and roughly, customary relationships, and they therefore have, on occasion, meaning to the wage earners. Thirdly, the mere fact that they exist makes them the most convenient basis for the very careful process of comparison and calculation involved in any attempt to establish gradually a scheme of wage relationships based upon principles. It should be kept in mind, however, that the reasons for their acceptance are of a practical nature, and that no theoretical considerations compel an unquestioning acceptance of them, as is sometimes urged. 3.--Since, on practical grounds, it is held that any attempt to create an ordered scheme of wage relationship must begin by accepting existing wage levels, it may be judged by some that the scheme that is sought could be developed merely by maintaining these relationships. That would mean that existing differentials would be maintained as customary differentials. That policy, it is true, would have the advantages of simplicity and continuity. But it would be found impossible to maintain. For the scheme of wage relationship to which it would give rise would lack the authority of principle--without which no scheme of wage relationship will receive voluntary and steady support from the various groups of wage earners. The wage earners will not voluntarily accept a place in the industrial scale, unless it is felt that the scale is the result of the application of rules of acknowledged fairness. The existing scale of wage relationship, however, has not been determined either by considerations of justice or of the general interest. Nor has it, as is sometimes claimed, the authority of being altogether necessary. It is the product of a multitude of forces, some of which may be given different importance in the future than they had in the past. It is easy to foresee the difficulties with which a policy which planned to create an ordered scheme of wage relationships by maintaining existing differentials would be confronted. Claims will constantly be presented by particular groups for some improvement in their economic position. These claims could not be disregarded merely on the score that they contravened the scheme of established differentials. The issue that would arise is clearly exemplified by statements made in the course of two of the most important industrial conflicts that occurred in England of recent years. "We claim," the Secretary of one of the Shop Committees of the Molders' Union wrote in defense of the demand of his union for differential treatment under an award made for the whole of Engineering Trades--which demand provoked the molders' strike, "we claim that our work is totally different in many ways from the other departments in the engineering industry. It is arduous, dirty, dangerous, hot, unhealthy, and highly skilled, and we claim separate treatment on these grounds. There is no other department in the engineering industry with so high a percentage of sickness or accidents.... You mention the employers' attitude towards the molders' application--a refusal to grant to molders any separate consideration because other classes of workers would also expect it. To me such an attitude is both unfair and untenable. If the molder can prove that his conditions of working are vile, dangerous and unhealthy, it is surely fair to ask for a proper recompense for such work...."[137] And consider this extract from one of the reports of the Coal Industry Commission, signed by six members of the Commission. "It will, however, be said that desirable as may be an improvement in the miners' conditions, the industry will not bear the cost of a reduction in hours, even if the aggregate output is, by an increase in numbers and, therefore, in the wages bill restored to its pre-war level, without involving a considerable advance in the price of coal, with possible adverse effects on our export trade, on manufacturing industry generally, and on the domestic consumer. We have to observe that if the improvement in the miner's standard of life is really required for the greater efficiency of the industry itself, or in the national interest, the fact that it might involve a temporary increase in the price of coal would not be conclusive against it. Moreover, if hours of labor have been reduced in other industries, and if the standard of life has been advanced among other sections of the community, it would be unsuitable to withhold a similar advance from the miners, merely because the others have got in first."[138] In short, under any scheme of wage relationship based on the preservation of existing differentials, it could not be established in the face of any claim that the relative position of a group was determined either by consideration of justice, or by implacable necessity. Therefore, that scheme would not receive the constant and widespread support requisite to its successful operation.[139] So far then, in this chapter, two conclusions have been reached. Firstly, that the course of wage settlement in each industry or occupation cannot be a process entirely independent from the course of wage settlement in every other industry and occupation. Secondly, that although the first step in the establishment of any scheme of wage relationship is the acceptance of existing wage levels and differentials, the policy must provide for the reconsideration of these differentials in the light of affirmed principles; with the aim of gradually evolving in industry an ordered scheme of wage relationship, upheld by common consent to the principles on which it rests. 4.--Thus we are put under the necessity of attempting to formulate principles or standards by which all claims made by groups of wage earners for reconsideration of existing wage differentials could be judged. This is not a task to be lightly undertaken. Nor is it to be expected that such clear principles of wage relationship can be elaborated as to escape the necessity of deciding many claims by an appeal to compromise and by taking refuge in a general sense of equity. All that it is hoped to do is to suggest certain lines along which a satisfactory formulation of the required principles of wage relationship may be sought. It might be possible gradually to construct such an ordered scheme of wage relationship as has been declared essential to industrial peace by applying to successive wage controversies, as they arose, two central doctrines. These doctrines are: Firstly, the doctrine of the unity of the wage income and of the wage earners--by which is meant that the wages of all groups should be regarded as part of one general wage income, to be shared out among all wage earners in as nearly equal proportions, as is practicable, without special favor to any one. And, secondly, what may be called for a lack of a better name, the doctrine of special reward--by which is meant, that the wage differentials between the standard wage levels of different types of labor should be regarded as special rewards, given in order to make it reasonably certain that industry will be provided with at least the existing proportion of the more skilled grades of labor, and to make it reasonably certain also that the more arduous, irregular, dangerous and disagreeable work will command the service of as much labor as at present. It should be observed, first of all, that neither of these two doctrines upholds the rights of particular groups of wage earners. They aim to bring all wage earning groups to perceive that they are part of a larger whole; they emphasize the fact that the wages of each group are what they are, more because the total wage income is what it is, than because of the special type of work performed by the group. They, however, recognize the necessity of giving extra reward for the training and skill or natural ability required for particular kinds of work, for more than common danger or disagreeableness incurred in the performance of particular kinds of work, and the like--in short, for all those factors which elevate a job above what is called common labor. As an applied doctrine, the doctrine of the unity of wage income and of the wage earners means that the same wage should be paid throughout industry for work which requires approximately the same human qualities, and which makes approximately the same demands upon the individual. The common effort involved in production is emphasized, rather than the differences between the work performed by workers in different parts of the field of production. As an applied doctrine, the doctrine of extra reward means that certain groups of wage earners should receive higher wages than other groups, because the work they perform is deemed to require considerably higher individual qualities or talents, or to make considerably greater demands upon the individuals engaged upon it.[140] The extra reward should not be regarded primarily as an ethical right; but rather as a payment to ensure the development and exercise of those higher qualities and talents required in the performance of the more skilled industrial tasks, and to ensure also the performance of the more arduous, irregular, disagreeable, and less desirable industrial tasks. It is a recognition of the fact that the spirit of serving without direct reward is not a sufficiently strong and constant motive to persuade men to make the special efforts, or to undergo the special disadvantages required for some kinds of work. It is an incentive to the development of those abilities and talents which are relatively scarce in industry; it is also an incentive to the undertaking of those tasks which the run of men, at any given time and place, regard as unusually difficult or undesirable. The extra reward for different kinds of work which are judged to require for their performance qualities equally difficult to secure, and which subject individuals to the same hardships should be the same. The test of the special reward must be in any particular case, the amount necessary to secure the performance of the work in question. The conscientious and consistent application of these two doctrines in settlement of wage controversies which involve the reconsideration of established differentials should result in the gradual building up of an ordered scheme of wage relationship, such as is sought. This scheme would rest upon fairly widely held ideas as to the most suitable basis for wage differences. It would not make greater call upon the human sense of fairness than must be made by any plan which hopes to secure industrial peace by getting all parties to industrial conflict to agree upon rules or principles for the settlement of the claims of each. Whether that aim, itself, is a fanciful one, need not be again debated here. 5.--Lest it appear that the above proposals have been put forward without giving due weight to their defects, it is now well to consider certain criticisms to which they may be fairly open. Two objections, in particular, are likely to be made. One is of practical nature, the other of a theoretical nature. They may be considered in that order. The objection of a practical nature is that it will not be possible to apply the suggested principles either accurately or consistently, and this for two reasons. Firstly, it may be asserted that the application of the proposed doctrines would require a scientific comparison of the characteristics of different kinds of work, which comparison is declared to be unobtainable. Secondly, it may be said that in order to fix such wage differentials as are reasonably certain to accomplish the ends for which they are set, it will be necessary to have a precise knowledge of many facts and forces. This knowledge may be declared to be unobtainable. No simple or very final answer can be returned to these doubts. It must be admitted that it will always remain difficult to compare occupations except in general descriptive terms. The relative training and talents required for different kinds of work, and the relative demands made upon the individual by different kinds of work will always remain, to a great extent, a matter of opinion. It is also true that only a general knowledge can be obtained of the factors governing the supply of any particular sort of labor at a given time, and the probable effect of any wage change upon that supply. The differentials which would be established from a consideration of such material could not claim to be more than a practical approximation to the differentials which would carry out the intention of the policy. Still, scientific method could be pushed further than it has been in the comparison of occupations. The statements of the various interested parties would be a valuable guide in the estimate of occupations. Furthermore, only the major relationships between occupations would have to be taken into consideration. For example, if the question at issue was whether the wages of miners were too low as compared with wages in other industries--that is to say, whether a demand on the part of the miners for an improvement in their relative economic position was justified--only the most important of mining occupations would have to be taken into account in reaching a decision. There would be small risk of error in applying a decision, based upon a study of the work performed and of the income received in the most important mining occupations, to the less important mining occupations also. And indeed such would prove probably the only practicable policy. Furthermore, revision of the existing differentials would be undertaken only when the case for revision seemed definite and clear. As for example, it was clear in England before the war, that railroad labor was underpaid; or, as was clear to the whole of the recent President's commission on the wages of coal miners, that the wages of the miners were too low, relative to wages in other industries--though the commission differed on the amount of wage increase to be awarded. But perhaps the most significant answer to those objections which rest on practical grounds is the fact that any wage level that might be set for any occupation under the proposed principles would be but the minimum standard wage for that occupation. And no element in the whole policy of wage settlement should stand in the way of the payment of a higher wage than that fixed by the central authority for any type of work. Thus no fear would have to be entertained that any industry would be faced with a shortage of labor due to the difficulty of getting precise knowledge on which to base wage differentials. Here, indeed, we approach very close to that other objection which may be put forward on theoretical grounds. Which objection is that all attempts at revision of existing wage differentials would involve a risk of producing, on the one hand, a shortage of certain kinds of labor, and, on the other hand, an oversupply of other kinds. It is reasoned that in spite of every effort of careful calculation of wage differentials, some danger of over or undersupply of certain kinds of labor will always be present. These fears would be based upon a misconception of the nature of the policy of wage settlement that is proposed. As has already been emphasized, the wage level that would be fixed for any kind of labor would be but a minimum standard wage. There is no part of the proposed policy of wage settlement which would interfere with the payment of higher wages than the standard minimum. Therefore, no industry would find itself unable to secure the labor it required merely because of the differentials established by the central authority. Each industry would still retain all its powers of bargaining for the labor it needs. Nor, on the other hand, would there be any serious danger that the wage rates set for any industry or occupation would be so high as to add to any already existing possibilities of oversupply of certain types of labor. For, after all, the central authority would consider the question of the revision of existing wage differentials only when the question is pressed upon it by the failure of the workers and employers to agree. The central authority would not be likely to declare wage rates higher than those contended for by the wage earners or lower than those contended for by the employers. And it is not too much to presume that in practically all cases neither of the two sides presses claims from which they do not expect to benefit. The employers are not likely to seek such wage rates as will not procure the needed labor supply; and only in rare cases are the wage earners likely to press for increases of wages that would bring about an increased measure of unemployment.[141] When those rare cases arise, indeed, it will be the duty of the central authority to protect the interested parties against their own bad judgment. Thus it cannot be admitted that the application of the proposed principles would produce an intensification of the already existing possibilities that particular industries or occupations would be short of the kind of labor they need, or that they would be overcrowded. This conclusion is greatly strengthened by the thought that under our present practices, wage settlements are constantly being reached without any reward whatsoever for the disturbance of customary differentials; and serious maladjustments in the supply of labor do not often result because of that. 6.--A note upon the procedure by which it is expected that the proposed principles would be brought into operation may help to explain away remaining doubts. First of all, it may be emphasized that nothing in these proposals contemplates the discontinuance of collective bargaining throughout industry. Rather the creation of joint industrial or occupational boards or councils (those suggested in the course of the living wage discussion) is advised. Only when any wage question cannot be settled peacefully by collective bargaining is it proposed that the central authority should enter into the dispute. It is to be expected that as the principles followed by the central authority in its decisions become known and understood--that is, as the probable result of disagreement, and of reference to the central authority become predictable--the agreements reached by collective bargaining would tend to approximate those which would result from reference to the central authority. For example, if a series of decisions expounded the doctrine that the existing relationships between the wages of the miners, railway conductors, and bricklayers are in accordance with the principles recognized by the central authority, the course of negotiation in these occupations will be governed, to some extent, by that knowledge. Such an outcome is to be expected, no matter what the principles upheld by the central authority--provided they are consistently upheld. Thus Judge Higgins records of the Australasian experience that "It is quite common now for the parties to ask the decision or guidance of the Court on a few main subjects in dispute and then to agree as to all the other items--even hundreds of items--in the light of the Court's findings; anticipating the application of the Court's principles."[142] Since we are on the subject of the method and machinery of application of the policy of wage settlement, one other aspect of the matter may be briefly noted. That is, that if any policy of wage settlement is to succeed, the course of wage decision must be kept as free from all political interference as possible.[143] Spending departments should not be given powers of decision which clash with those of the central authority. Appeals to the higher executive officers of the state must be avoided to the utmost possible extent. Conjecture as to the measure in which these conditions can be realized in the United States at the present time may be withheld. But unless they are realized in a high degree, wage settlement will continue to be a matter of force and opportunism. Freedom from political interference can be obtained, and the elimination of the necessity for frequent appeal to the higher executive officers of the state will be possible, only if the policy of wage settlement which is adopted has the vigorous support of all groups immediately concerned in wage settlement. FOOTNOTES: [136] See for examination of this question, "Report of Wage Boards and Industrial and Conciliation Acts of Australia and New Zealand." E. Aves (1908), page 38. Mr. Henry Clay in a review of the wage position before the National Council of the Pottery Industry (Great Britain), made an interesting statement in this regard. He said "... the one great lesson which the war taught everybody (including Government Departments) was that it was dangerous to make a change in the wages or basis of earnings of one section of workers or of one industry unless they considered what would be the effect on all related classes and grades of workers." Printed in the Staffordshire _Sentinel_, Oct. 8, 1920. See also Chapter 39, Lord Askwith's "Industrial Problems and Disputes" for a narrative account of the trouble caused by sectional wage advances during the war. [137] Letter printed in London _Times_, January 13, 1920. [138] Report of the Coal Industry Commission (1919), Majority Report, pages 15-16. For another interesting case, see that of Various Toronto Firms vs. Pattern Makers under the Canadian Industrial Disputes Act, in which case the pattern makers claimed differential treatment over machinists and molders. Reported in Jan., 1919, _Canadian Labor Gazette_. [139] The various courts in the Australian dominions tended on the whole to confirm existing differentials, occasionally changing the relative position of particular groups, when it has seemed clear to the court that the wages of these groups as compared to other groups is "unreasonable" considering all those factors which are considered to form the ground of "reasonableness" in the matter of differentials. Thus Justice Brown of the Industrial Court of South Australia has expressed himself on this very subject. "In the matter of such perplexity some guidance is afforded to the court by custom. It seems to me I cannot do better than proceed on this basis. I shall state the preëxisting wage, consider whether it is prima facie unreasonable applied to preëxisting conditions, and then if I find it not prima facie unreasonable, I shall consider whether any variations of the wage should be made in view of conditions now existing." (Hook Boys' Case--South Australia Industrial Reports, Vol. I, 1916-7, page 29.) [140] It is in this light that the Commonwealth Court of Australia looks upon its secondary wage. "The secondary wage is remuneration for any exceptional gifts or qualifications not of the individual employee, but gifts or qualifications necessary for the performance of the functions." H. B. Higgins, "A New Province for Law and Order," _Harvard Law Review_, March, 1915. [141] Mr. and Mrs. Webb have described aptly the usual trade union calculations in the formulation of their claims. "The Trade Unionist has a rough and ready barometer to guide him in this difficult navigation. It is impossible, even for the most learned economist or the most accomplished business men, to predict what will be the result of any particular advance of the Common Rule. So long, however, as a Trade Union without in any way restricting the numbers entering its occupation, finds that its members are fully employed, it can scarcely be wrong in maintaining its Common Rules at the existing level, and even, after a reasonable interval, in attempting gradually to raise them.... To put it concretely, whenever the percentage of the unemployed in any particular industry begins to rise from the 3 or 5 per cent characteristic of 'good trade' to the 10, 15 or even 25 per cent. experienced in 'bad trade' there must be a pause in the operatives' advance movement." "Industrial Democracy," pages 738-9. [142] H. B. Higgins, "A New Province for Law and Order," _Harvard Law Review_, Dec., 1920, page 114. [143] Justice Higgins, the head of the Commonwealth Court of Australia, has recently resigned because of the action of the legislature in providing that the executive may set up special and independent tribunals of appeal above the Court of Arbitration. His letter giving the reasons for his resignation (printed in the Melbourne _Argus_, Oct. 26, 1920), gives most convincingly the case for freedom from political interference. One passage of explanation in it is as follows: "On the other hand, a permanent court of a judicial character tends to reduce conditions to system, to standardize them, to prevent irritating contrasts. It knows that a reckless concession made in one case will multiply future troubles. A union that knows that a certain claim is likely to be contested by the court will bring pressure to bear for a special tribunal; and the special tribunal appointed by the government will be apt to yield to demands for the sake of continuity in the one industry before it, regardless of the consequences in other industries. The objectives of the permanent court and of the temporary tribunals are, in truth, quite different--one seeks to provide a just and balanced system which will tend to continuity of work in industries generally, whereas the other seeks to prevent or to end a present strike in its own industry." See also Lord Askwith's "Industrial Problems and Disputes" for another expression of the same view. CHAPTER XI--THE REGULATION OF WAGE LEVELS--(_Continued_)-- WAGES AND PRICES Section 1. The scheme of wage relationship must recommend itself as just to the wage earners and the community in general. The ultimate distributive question to be met is the division of the product between profit and wages.--Section 2. Provision for the adjustment of wages to price movements would aid, however, towards reaching distributive goal. A policy of adjustment suggested.--Section 3. The difficulty of maintaining scheme of wage relationship of wages adjusted to price movements. The best method of adjustment a compromise. 1.--In the last chapter the reasons for seeking an ordered scheme of wage relationship in industry were discussed, and some suggestions were made in regard to such a scheme. One essential to its success was pointed out. That is, that under it the distribution of the product of industry should recommend itself as just to the wage earners and the community in general. The possibility of satisfying this requirement remains to be considered. The ultimate distributive question to be met in any attempt to formulate a policy of wage settlement is the distribution of the product of industry between wages and profits (rent incomes, in the Ricardian sense, being left out of the question). It is entirely conceivable that a policy of wage settlement should be put into practice which would take note only of the facts of this relation. However, there are distinct advantages to be obtained by taking note of an intermediate relation. That is the relation between wages and changes in the price level. The relation between wages and general price movements has been discussed. It has been seen that movements in the general level of prices affect the outcome of distribution. They occasion changes in the distributive situation; and these changes may be desirable or undesirable--having reference to the distributive result that is sought. Any plan by which such changes as are undesirable are prevented from taking place would contribute, therefore, to the attainment of the aims of the proposed policy; and would be a valuable adjunct to the policy. The conclusions reached in the previous discussion on this subject make up a plan suitable for the purpose. They may now be fitted into the body of these proposals. Then in the following chapter that most difficult problem of wage settlement can be considered--the problem of governing the distribution of the product between profit and wages in order that a just distribution may result. 2.--The results of the discussion in Chapter V concerning a plan for the adjustment of wages to price change may be applied at this point without further comment. The central authority in its decisions should take note of all changes in the approved price index number since the time when the wage rates which are up for reconsideration were fixed. It should then in its awards adjust these wage rates to price changes in accordance with the following policy. It need hardly be explained that other considerations besides the fact of price change may enter into the award, as the adjustment of wages to price change is merely one part of a larger policy. The measure of price change by which the central authority should be guided--that is, the approved index number,--should be the movements of the index number of the prices of all important commodities produced within the country; this index number to be so weighted as to give a defined importance (50 per cent. suggested) to the prices of those classes of foodstuffs, clothing, housing accommodations and other commodities, upon which the wage earners spend the larger part of their income. It will be noted that this measure of price change is the same as that used in the adjustment of wages prescribed under the living wage policy. And, as was recommended in the discussion of living wage policy, so it is recommended here, that adjustments should not be undertaken unless the index number of prices has moved at least 5 per cent., and that adjustment should not be more frequent than twice a year. In regard to the actual policy of adjustment to be pursued in periods of rising and falling prices, here also, save in one important respect, the same policy that was sketched out for living wage adjustments should be followed. 3.--The one point in which it may be advisable to depart from the policy laid down for living wage adjustments is in regard to the _amount_ of wage change that should be undertaken for movements in the price level. In the earlier discussion it was suggested that wherever wages were adjusted to price changes, the adjustments should be on the basis of equal percentages. If this basis were to be used in adjusting the wages of all other groups of workers it is evident that during periods of changing prices there would be a different set of wage differentials for every position of the price level. And, furthermore, during periods of rising prices, the lowest paid classes of workers--those who could do least to meet the rise in the cost of living by changing their consumption habits--would receive the smallest wage increases. A great diversity of practice characterized the attempts at adjustment which were made during the period of rapid price increase inaugurated by the war. No two agencies of adjustment used the same basis. Possibly the most widespread practice has been to increase all wage levels by the same _absolute_ amount--which amount has been ordinarily calculated as a percentage of some basic wage (frequently the living wage). The advantages of that method are firstly, its simplicity, and secondly, the fact that if it favors any groups, it favors those whose needs are greatest. Justice Higgins has justified it as follows: "When the Court has increased the basic wage because of abnormal increase of prices due to the war it has not usually increased the secondary wage. It has merely added the old secondary wage, the old margin, to the new basic wage. It is true that the extra commodities which the skilled man usually purchases with his extra wages become almost as indispensable in his social habits, as the commodities purchased by the unskilled man, and have no less increased in price; but the Court has not seen fit to push its principles to the extreme in the abnormal circumstances of the war, and the moderate course taken has been accepted without demur."[144] Still as a permanent policy, the suitability of this method is not beyond question. The problem to be faced in the choice of method is, after all, this. Given a scheme of wage differentials, which are in accord with certain defined principles, at a given position of the price level, what method of adjustment is best calculated to produce such differentials as will be in accord with these principles, at all positions of the price levels? That sounds like a problem in astronomy. But it is not. It can be more understandably, but less accurately, put by asking, what system of adjustment is best calculated to maintain the same _relative_ position of the various groups of wage earners throughout all price movements? Under either of the two methods touched upon--that of change by equal percentages, and that of change by the same absolute amount for all groups--the differentials cannot be held in close accord with any such original principles of wage relationship as have been suggested. It cannot be helped. We have come to another point at which the aims of policy can only be imperfectly realized. It seems to me that the best method would be some sort of compromise between the two alternatives that have been presented. A compromise would make allowance, firstly; for the fact that in times of rising prices, those groups whose wages are lowest cannot meet the rise in the cost of living by changing their consumption habits as easily as can the more fortunately placed groups, and secondly; in times of rising prices, the movements of the wage earners from industry, or from occupation to occupation are governed, within limits, by calculations of the absolute change in the wages paid for different kinds of labor, rather than by calculations of relative change. It nevertheless would prevent the relative position of different grades of labor from changing so radically as to lead to great discontent and possibly to derangements in the distribution of the labor supply. It can be claimed, in addition, for this compromise method that its results would be in accord with the general trend of changes in the differentials that have occurred in the past in periods of rapid price movement. An inspection of the available material seems to show that in times of rapidly rising prices the _relative_ differentials between the lower grades of wage earners and the upper grades decrease, while the _absolute_ differentials increase--and the reverse in times of rapidly declining prices. They are in accord, for example, with the results obtained by analyzing the course of differentials during the war (1914-1919) in the industries for which wage data was gathered by the National Industrial Conference Board--"Report Wartime Changes in Wages." The data extends over the Metal, Cotton, Wool, Silk, Boot and Shoe, Paper, Rubber and Chemical Manufacturing Industries. If the wage earners are classified into five groups according to their pre-war wages, it is found that the relative wages of the least paid groups (pre-war standards) increased most, and so on in order to the best paid groups, the relative wages of which increased least; the absolute increases, however, are in exactly the opposite order.[145] They are borne out also by Mitchell's studies of price movements in the United States.[146] In conclusion, it may be said, that no matter which of the above methods is adopted, it should be applied with as much consistency as can be attained. The process of wage adjustment to movements of the price level cannot be left in the field of guess work, where it now rests, without giving rise to much quarreling and discontent. FOOTNOTES: [144] H. B. Higgins, "A New Province for Law and Order," _Harvard Law Review_, Jan., 1919. The Commission acting under the Canadian Industrial Disputes Act, carried this line of reasoning to its further logical consequences by awarding in some cases higher _absolute_ increases to the lowest paid men, and so on up the scale to the highest paid men who received the smallest increase. The large increases granted to the lowest paid men were justified by the Commission as necessary to bring their wages up to a living wage level. See, for example, the Report of the Commission on Disputes in Coal Mining and Other Industries in Nova Scotia. _Canadian Labor Gazette_, July, 1918. For a similar policy based on the same grounds, see the "Arbitration Award in Certain Packing Industries in the United States." _U. S. Monthly Labor Review_, May, 1918. [145] The figures are: ----------------------------------------------------------- (Wage groups) (Group average) 1914, wages Relative increase Absolute increase, earnings per hour of wages earnings per hour ----------------------------------------------------------- .15-.20 208% .193 .20-.25 187% .188 .25-.30 185% .230 .30-.35 184% .266 .35-.40 174% .268 ----------------------------------------------------------- Such figures as these are not, of course, sufficient ground for confident generalization, but they support an imputation that the compromise method does furnish the best solution of the difficulties the problem presents. [146] See W. C. Mitchell, "Business Cycles," page 134. Also W. C. Mitchell, "History of the Greenbacks," pages 33-37, 123-145. CHAPTER XII--THE REGULATION OF WAGE LEVELS--(_Continued_) WAGES AND PROFITS Section 1. The profits return in industry, under any policy of wage settlement, will be closely scrutinized.--Section 2. The possibility of measuring a "fair" profits return for all industry discussed. A method suggested.--Section 3. Would the principles of wage settlement worked out so far, produce a fair profits return? An open question.--Section 4. The scope and form of any measure designed to assure the desired distributive outcome can be discerned.--Section 5. The various steps in the formulation of such a measure reviewed. A measure tentatively suggested.--Section 6. The difficulties of calculating wage changes called for under the suggested measure.--Section 7. The chief practical weaknesses of the suggested measure examined.--Section 8. It would be open to theoretical criticism also. The alternatives even less satisfactory. 1.--We can now enter upon the further question of whether the principles so far formulated, if used in wage settlement, would produce such distributive results as would justify them to the wage earners and the community in general. It need hardly be said that the criterion of justice which will be applied by public opinion to any policy of wage settlement will not be a simple and clearly defined rule, but will be, rather, one joint in a loosely articulated social philosophy. The distributive justice of any set of wage principles will be judged by the shares of the product of industry which take the form of wages and profits, respectively. It is true that general satisfaction with them will be largely governed by the course of real wages after they have been in force a while. If real wages tended to increase in the period following their adoption, they would receive far greater approval and much sturdier defense than if real wages fall during that period. Most witnesses of the Australian experiments in wage settlement make that point clear.[147] But in either case, if the organizations of the wage earners in the United States become as powerful as they are in England to-day, and if the class-consciousness of the wage earners becomes as acute, any policy of wage settlement will be severely scrutinized in regard to the profits return prevailing throughout industry also. If, with the principles in force, the general level of profits throughout the field of industry consistently and considerably exceeded what was deemed to approximate a fair return, it will be held that they give the wage earners too small a share in the product of the industry. If the general level of profits throughout the field of industry tended to approximate a return thought to be fair, the principles will recommend themselves to the wage earners and to the community in general, as just. It may be added that the opinion held in regard to the justice of the principles of wage settlement may also be influenced, in some degree, by the distribution of the profits return in industry. If a comparatively few great industrial corporations earn very great profits, it is likely to arouse greater dissatisfaction than if the same amount of profits are earned by a larger number of enterprises. It is beyond the scope of any policy of wage settlement, however, to control the distribution of profits among the enterprises engaged in an industry. There are some groups who would argue that no division of the product of industry is fair unless it gives to the wage earners the whole of the product. Such a view, of course, amounts to a desire to revise the whole of the present economic system fundamentally. No policy of wage settlement akin to that put forward in this book could win favor in their eyes. And if their opinion should become dominant, industrial peace would have to be sought by arrangements far different from those under discussion. For those arrangements rest on the supposition that the country will continue to desire to depend, in the main, upon private accumulation for capital, and individual ambition for business leadership. 2.--It is possible by bringing into balance a numerous set of factors, to give a reasonably definite meaning to the idea of a fair profits return. That is to say, by weighing all relevant considerations, it is possible to define a general level of profits for industry as a whole, which would represent a just and sound division of the product of industry between wages and profits. The relevant considerations are those which will be likely to hold an important place in the better informed sections of public opinion during the period for which these proposals are intended; and which are admissible as sound and pertinent, on the supposition that the industrial system is to continue to depend mainly upon private initiative and private accumulation. The most important of these considerations are, in my opinion, as follows: First: that the ethical ideas of reward according to need, or reward according to sacrifice, would call for the elimination of the greatest present inequalities of reward; and that these ethical ideas must be given rank among the factors which deserve real consideration when arrangements affecting the distribution of the product are being made. Secondly: the service of capital in effective production, the sacrifice involved in much accumulation, and the risk involved in much investment; the great need of assuring continued capital accumulation and investment. Likewise, the importance to industry of active and enterprising leadership. Thirdly: the social and economic evil effects of great inequality of wealth. Fourthly: the fact that the health, energy, spirit, and intelligence of the wage earners are factors of high importance in the creation of a stable and effective industrial régime, and that the development and display of these qualities by individuals are affected by their economic conditions and surroundings, here and now. Likewise, the importance of giving the best possible opportunity to all to develop their natural ability. The general level of profits that would be settled upon by comparing and weighing these considerations could be defended as just and sound. The figure (which would be expressed in the form of a percentage, e.g. 12 per cent.) derived from the balance of these factors could be put forward as the mark of just distribution. The distributive goal for the policy of wage settlement would be to achieve a division of the product between wages and profits, such that the general level of profits throughout the field of industry (the basis of calculation of which will be considered at a later point) would approximate the figure defined as just. It is plain that if the suggested method is used to define a just level of profits, differences of opinion will manifest themselves in the process. The facts and circumstances that would have to be studied cannot be subjected to exact measurement. For example, the possible bad social and economic effects which may be produced by various degrees of inequality of distribution can only be guessed at in a general way. Or, to take another example, the motives and conditions which govern the bulk of private accumulation and the sacrifices involved therein are questions about which controversy continues to range. The profits return that one man may judge ample to assure an adequate flow of accumulation and investment will not appear to be so, in another man's judgment. Indeed, even differences in the general philosophy with which all men parade through life will lead to differences of opinion. For example, one man may believe a community to be better off if every man's income is increased somewhat, though the inequality of wealth within the community be thereby increased; while another man may believe that the poorer community, with the lesser inequality of wealth is likely to be more happy, and perhaps, in the end more prosperous. In spite, however, of the existence of such extensive ground for differences of opinion, it seems to me that an agreement may be expected which will be fair and sound enough to be accepted as a serviceable criterion of the distributive consequences of the policy of wage settlement. 3.--What grounds, if any, are there for the belief that the principles of wage settlement so far proposed would bring about a division of the product between wages and profits that would meet the test of just and sound distribution suggested above? The principles, so far proposed, leave the determination of the profits return predominantly to the action of industrial competition, reënforced by the action of public opinion in the direction of preventing the return from mounting to an obviously excessive point. They offer no safeguard against the reduction of the profit return below that point set as the mark of just and sound distribution, save the public will to continue the present system and a general knowledge of the motives and conditions upon which it rests. Nor could they very well. It is true that the enactment of the principles suggested up to this point would mean the imposition of certain genuine restrictions upon the actions of those who direct industry, as for example, in connection with the living wage program. It would give all wage earners the benefits of organization. It would make for rapid and certain compensation for price movements. It would prevent wage reductions merely because of the poverty of any group. Nevertheless, if the analysis of distribution made earlier in the book is substantially correct, the answer to the question at the head of this section must be that there would be no very compelling tendency for distribution to result justly, under the enforcement of the wage principles so far proposed. The distributive result would still depend largely upon the reality and intensity of industrial competition, upon the strength, activity, and foresightedness of the wage earners' organizations, upon the will and spirit of the directors of industry, and upon the quality and liveness of public opinion. That admission can be made, even though it is believed that under the suggested principles the outcome of distribution would be nearer the desired outcome than it is at present; and that there would be a clearer perception of the public interest in the outcome of distribution than at present. 4.--If a measure could be devised which would help to bring about the desired distributive outcome, without greatly weakening in some other direction the policy as already conceived, such a measure would be a most worth-while addition to the policy. It is possible to discern clearly what the scope and form of such a measure must be. Firstly: Such a measure should not single out the profits of particular enterprises for division or transfer to the wage earners, if the profits of these particular enterprises are in excess of what is conceived to be a just profit level for industry as a whole. For, in the first place, if the principle of standardization is enforced throughout industry, the excess profits of particular enterprises may frequently be the result of superior business ability, and to take them away would be to discourage the development and use of that ability. And, in the second place, even if it is acknowledged that this is not the true explanation of the great profits of very many enterprises, but that these are accounted for rather by the possession of special privileges or the weakness of competition, nevertheless, to adopt a policy under which these profits are transferred to the wage earners would lead to wastefulness and extravagance in business operation. And lastly, there is the fact that to make wages in any enterprise contingent upon the profit returns of that enterprise is contrary to the ordinary trade union policy. Nothing in this conclusion is meant to imply that the wage earners should not be free to enter into wage agreements calling for more than the standard wage. Or that profit sharing arrangements should not be permitted--on the contrary, such arrangements should be encouraged, provided the standard wage and the right of the wage earners' organization to be fully represented in such arrangements are not brought into question. The conclusion just reached is meant to apply also in the opposite case--that is, in the case of the profits of particular enterprises falling below the level defined as just and sound industry as a whole. The wages of the workers engaged in these enterprises should not, for that reason, be reduced. This conclusion, it is believed, is amply explained by what has been written in various other connections. Secondly: Even if almost all or all of the enterprises engaged in a particular industry should be in receipt of profits considerably in excess of what is conceived to be a fair profit return for industry as a whole, no attempt should be made to transfer the extra profits to the wage earners engaged in it by increasing their wages. Or to state the matter so as to include both this case and its opposite, the wages in any particular industry should not be adjusted by reference to the profits in that industry. It is clear that here we are upon difficult and very hotly disputed ground. At present, wages in different industries or occupations are not settled in accordance with any principle which includes them all and which is the basis of an ordered scheme of wage relationship. The existence of a very high profits return throughout a particular industry is an almost prima facie justification for a wage demand on the part of the wage earners employed in it. So too in the opposite case. And as long as wages are settled, as at present, it must be so; for the wage earners in each industry or occupation are dependent upon their own activity to make good their claims as against the other participants in distribution. It is this very state of affairs, however, that it is sought to supersede. In an earlier chapter it was argued that in order to maintain industrial peace, wages in different industries and occupations will have to be brought into relation with each other, which relation should rest upon defined principle. It is plain that, if any other principle were also to be adopted, under which wages in particular industries were adjusted by reference to the profits return in these industries, that scheme of relationship would be constantly disturbed. If wages in particular industries were adjusted with reference to the profits return in those industries, the result would be a series of uncoördinated wage movements in different parts of the industrial field, and the re-creation of a state of affairs not much different from the present. Then, too, if wages were to be adjusted with reference to the profits return in particular industries, the method that has been advocated of settling upon a criterion of just profits would not be suitable. A separate mark of fair profits would have to be set up for each industry; for different industries involve different degrees of risk and have different initial periods of little or no profits. What might correctly be considered an excessive profit for one industry might be but a fair profit for another. The task of setting up different criteria for the different industries would be extremely delicate, if it were possible at all. The same conclusion holds true in the opposite case wherein the profits in most all or all of the enterprises engaged in a particular industry are considerably below what is conceived as a fair profits return for industry as a whole. Cases will arise in which it may be to the interest of the wage earners in particular industries to accept wage reductions, because the industry is doing poorly. In such cases, however, the wage earners may be expected to agree--perhaps, only after a while--to wage reduction, in the course of wage bargaining. If, however, the wage earners will not agree that their interests are served by reduction, it will probably be sound policy to back them up. It must be admitted that this conclusion as to the inadvisability of adjusting wages by reference to the profits return of particular industries is not set down without hesitation. It is plain that if that idea is to be rejected, the policy of wage settlement as a whole must give some other guarantee of distributive justice to the wage earners. And, indeed, if after a certain period of operation and education it was found that very large profits were accruing steadily in certain industries, and if it did not seem likely that these profits would be reduced to what is conceived to be a fair level either by the forces of competition or public opinion, it might be found wiser to pursue the opposite course--that is, grant wage increases in those industries even at the risk of breaking down the scheme of wage relationship. Much will depend upon the way in which the employers respond to the purposes embodied in the policy of wage settlement. And upon the success of the wage earners and employers in reaching, by collective bargaining, agreements satisfactory to both. Justice W. Jethro Brown of the Industrial Court of South Australia has stated the problem with great clearness. He writes, "With respect to such an issue, one is on the horns of a dilemma. (1) If unusually high profits are being made in an industry, ought not the employees to have a right to share therein? (2) If one does award high rates of wages, is not one inviting discontent amongst other classes of workers in allied industries or industries generally? Employees are so apt to judge themselves well or ill treated by a comparison of nominal wages without any reference to conditions of industry. In various judgments I have held that it would be quite permissible, if not appropriate, for the Court to take into consideration the fact that an industry is prosperous. On the other hand, as a matter of practice I have tried to work towards an ordered scheme of wages throughout the industry of the community as a whole."[148] If the above conclusions are accepted, it must be agreed that the scope of any measure designed to help in the attainment of the desired distributive outcome must be the whole field of industrial enterprise to which the policy of wage settlement applies. The question that remains is, whether it is possible to devise a principle of wage settlement by which wages as a whole can be adjusted by reference to the profit situation in industry as a whole. That is to say, whether any measure can be elaborated by which all wages could be adjusted, according as profits in industry as a whole exceeded, approximated, or fell below the profits level that is taken to mark just and sound distribution of the product of industry. 5.--It is plain that if the measure is of such a character that no great harm can result from the possible error involved in the process of calculation, it can be adopted with less hesitation than if the opposite were the case. That is one of the considerations prompting the following proposals. Let us presume, in order that the proposals may be put in definite form, that the profits return for industry as a whole which is agreed upon as just is a 12 per cent. return. The next step would be the invention of some method by which the profits return of industry as a whole at any given time can be measured. This would be a matter of considerable difficulty; yet it is, in my opinion, not beyond the range of practical attainment.[149] The following method, for example, might not be too unsatisfactory. Let a certain number of enterprises be selected in each industry which comes within the field of wage regulation. The selections should be representative of the industry. If there is a variety of types of enterprises within the industry viewed from the standpoint of productive efficiency, the selected enterprises should tend to represent the more efficient sections of the industry. Then a valuation of these enterprises should be made. A standardized method should then be devised for keeping account of the profits of these selected enterprises. That might necessitate the inauguration of standard methods of accounting throughout all industry--which is a result to be favored. The profits return from the selected enterprises in all industries should be combined into an index number of profits. Possibly, in making up the index number, the figures for each industry should be weighted according to the number of wage earners employed in the industry. The resulting weighted average would be a reliable record of the profits return throughout industry at the particular time. The statistical method just described, however, is meant rather in the nature of a suggestion than as a declaration that it is the best method. Suppose the index number of profits so calculated for a given period of time proves to be, for example, 18 per cent.--6 per cent. higher than the approved level of profits. On the basis of this profit showing, the wages of all classes of wage earners could be increased for the subsequent period, with some hope of effecting a transfer to the wage earners of at least part of the product of industry represented by the 6 per cent. extra profit. That is to say, that whenever the index of profits showed a profits return in excess of this conceived just return, wages throughout industry should be increased to such an extent as is calculated to bring the profits return down to the approved level. Whenever the index of profits showed a profits return approximately equal to or less than the approved level, no wage change should be undertaken. For if the profits return was approximately equal to the approved level, it can be concluded that the distributive result is approximately that which is desired. And if the profits return is under the approved level, it would probably be both impracticable and inadvisable to reduce wages throughout the industry. For since no direct control is exercised over profits, the falling of the profits return to a point below the appointed mark of just and sound distribution, would be but the outcome of industrial competition. While it is conceivable, in particular cases, that the community would be better off if the profits return was greater than the return thereby produced, the contrary presumption is more likely to be correct under present conditions. For it is both desirable and likely that the figure that would be set as the mark of just and sound distribution will err on the side of being higher than the profits return required to assure adequate accumulation and investment. 6.--So much for the basis of the proposed measure. It is desirable to examine briefly its chief advantages and disadvantages. But first note must be taken of another problem that would arise in the attempt to enforce it. If the wages of all classes or groups of wage earners are to be increased when the profits return in industry as a whole is above the approved level, the question arises as to the best way to calculate the wage increases, and the most satisfactory basis for distributing them among the different groups of wage earners. If both of these calculations can be kept simple, it will be a distinct advantage. Possibly the most simple and satisfactory way is to determine the absolute amount of the extra profits, and of the total wages bill for the representative enterprises--putting one in terms of a percentage of the other. For example, if it be calculated that the profits of these enterprises in excess of the approved level be one hundred million dollars, and the total wages bill of the same enterprises two billion dollars, the amount of wage increase to be awarded should be stated as 5 per cent. That is, the wage increase to be awarded should total 5 per cent. of the total wages bill. And here the second problem arises. How should this wage increase be distributed among the various groups or classes of labor? It is probable that the most satisfactory method would be to raise the wages of all groups or classes of labor, including those groups whose wages were determined under the living wage policy, by the same absolute amount. This method does not meet all the demands of our previous reasoning regarding wage differentials. It would, however, be the only way to avoid too much complication in the determination of wages for different groups or classes of labor. 7.--What would be the chief difficulties and disadvantages attendant upon the application of the measure just sketched out? And what are the chief advantages which it gives promise of? These are the questions which now present themselves. First of all, certain difficulties of a practical nature must be faced. For example, there would be difficulty of settling upon a satisfactory method of calculating the profits return of industry. The most satisfactory method of calculation would probably be in the form of a percentage earned upon capital. If that basis of calculation is chosen, however, some method must be decided upon for the measurement of the capital value of all those enterprises, the profits return of which is combined to form the index number of profits. Probably the best way of meeting the difficulties would be to have such a capital valuation of these enterprises as has just been completed for the United States railways. And thereafter standard methods of recording new capital investment should be enforced. Such an evaluation would appear to be an unwelcome but inevitable preliminary to any attempt to measure and record business earnings. Experience has shown the vast labor and large margin of error involved in formal evaluations. Under the proposals made in this chapter, however, errors made in the evaluation of particular enterprises would be of no great consequence to these enterprises. Only the combined or general profits figure would be used in the course of wage adjustment. Second among the difficulties of a practical nature is that which comes from the necessity of defining clearly what is to be considered profits.[150] Clearly the earnings put back into the depreciation account should not be counted as profits. Loss or gain from the change in the value of the stock held should not be taken into account. Nor should taxes paid before the distribution of dividends be so counted. Bonus stock dividends, representing reinvestment out of current earnings should be counted as profits, as well as being recorded as additions to invested capital. Capital borrowed from banks should not be considered as capital--and the interest paid on such borrowings should be considered as a business expense. The question of the treatment to be accorded salaries of direction could be settled by reference to arbitrary rules drawn up upon the subject--some allowance being made in the case of partnerships or of businesses operating under private direction to compensate for the salaries of direction that are paid in large incorporated enterprises. Thirdly, provision would have to be made for the reconsideration, at stated intervals, of the profits return that is set as the mark of just and sound distribution. Thus heed could be taken of any significant changes in the price level, in the conditions of supply and demand for capital, or in any of the other relevant considerations. Likewise, provision would have to be made for the periodical revision of the list of enterprises and industries used in the computation of the profits return for industry as a whole. These matters, though vital, must be left without detailed consideration. Nevertheless, it is idle to overlook the amount of labor that would be involved in any attempt to keep a record of the profits return in industry. It would be dreary, and of a type demanding specialized knowledge and disinterestedness. Furthermore, any such plan would probably have to be put through in the face of the resentment of most business men. That resentment, however, is likely to flash out against any proposals that look forward to securing industrial peace by giving the wage earners a more assured position in industry, and ready access to the facts of business operation. The standpat temper of those business men who argue that their business is entirely their own private concern would make impossible any policy of wage settlement that did not throw the balance of industrial power in their hands. Unless they visualize their position in different terms than these, little hope can be entertained that any proposals calling for a record of profits will be supported by them. But then it is the normal rôle of the peace-maker to seek concessions that contestants are not ready to make; to plead general necessity where contestants see only their own; to represent each side to the other in its best light. 8.--Besides these difficulties of a precise and practical kind, certain weaknesses of a more theoretical nature may be urged against the measure. First, it may be argued that since the policy exerts no direct control over profits, there is little reason to believe that profits will be kept down to an approved level. This criticism would or would not be justified by the event, according as industrial competition were effective; according as employers acted up to the purposes and spirit of the policy of wage settlement, and gave the general interest a place alongside of their particular interests; according as government regulation of industry was competently carried out; and lastly, according to the measure in which public opinion made itself felt on the subject. Any such plan as the proposed, by clarifying ideas on the subject, would do much in the way of making public opinion more decisive than at present. It would serve to inform the community that wages can be increased without equivalent price increase, whenever the possibility exists. It would provide employers with a code of honor in industrial relations. And lastly, it must be remembered that the alternative to some such policy of wage increase is a system of direct profits control (leaving out of consideration the possibility of more general and fundamental change). It is conceivable that a policy of direct profits control for all industry can be worked out, which would not penalize and discourage productive capacity. But it would be an extraordinarily hard job and would necessitate a detailed study of the facts of each particular industry. No doubt a policy of direct profits control is to be strongly advised in particular cases. As, for example, on the American railways at present, where the rate-making power is in the hands of a public body; or in the case of the English coal mines, where the question of control is comparatively simple, and the occasion for control plain. But as a policy for all industries it would involve, in my opinion, an entirely impracticable amount of regulation, and it would be likely to lessen the effectiveness of production and to lead to the wasteful conduct of industry. Therefore, it must be concluded that some such attempt to control profits indirectly as has been proposed--depending upon the forces of competition, trade union activity, public opinion and government regulation--is to be preferred. There is another possible criticism of a theoretical sort. It may be pointed out that it is proposed to increase wages on the basis of data derived from the whole field of industry. And it may be argued, therefore, that the increases undertaken by the reason of the showing of that data may be considerably greater than particular industries could stand, without an increase in the price of their products. On the other hand, they may be considerably less than the increase required in other industries to reduce the profits return to approximately the approved level. As to the first possibility, it is entirely conceivable. A wage movement based upon the profits return from all industries and applied equally to all groups of wage earners might cause price increases in particular industries and possibly temporary dislocation and even some unemployment. Such price changes and dislocations, however, are constantly occurring in industry in the absence of any policy of wage settlement, due to the effect of wage increases in one industry on wage movements in other industries. There is little reason to believe that the measure advocated will add considerably to the frequency of their occurrence. It might in one respect serve to lessen the extent of such disturbances. It might make less frequent the recurrence of wage demands, originating in particular industries because of high profits in these industries, and spreading over a large part of the field of industry. For, as has been emphasized, organized groups of wage earners will not accept passively a change for the worse in their position in the economic scale. Finally, there is a safeguard in the fact that no wage increase need occur in any industry except upon the demand of the wage earners in that industry. Joint discussion might make it clear that wage increases could not be well afforded in particular industries, and joint agreement reached upon that fact. The self-interest of the wage earners, here as elsewhere, would prove to be some sort of a check upon unwise wage increases. As to the second possibility--that wage increases undertaken on the showing of data derived from all industries may be considerably less than the increases required in particular industries to bring down the profits return in those industries to the approved level--that, too, is entirely conceivable. But against this disadvantage must be weighed those which would be attendant upon any measure by which wages in particular industries are adjusted by reference to the profits return in those industries, which subject has already been considered. The fact must be accepted. In any plan such as the one proposed, faith would have to be put in the power of indirect influences to keep the profits return in particular industries from greatly and consistently exceeding the approved level. By way of conclusion, it may be made clear that any such plan as the proposed would call for the assent of the wage earners to the doctrine that, when the profits return in particular industries is greatly in excess of the approved level for industry as a whole, the community in general have the leading claim to those profits. It is plain that union assent to that doctrine would be forthcoming only if the community made effective its claims. The attainment of a just distributive outcome--one based upon considerations of the general interest--will be essential to the success of any policy of wage settlement for industrial peace. FOOTNOTES: [147] M. B. Hammond, "Wage Boards in Australia," _Quarterly Journal of Economics_, November, 1914, February, March, 1915. E. Aves, "Report on Wage Boards and Industrial and Conciliation Acts of Australia and New Zealand" (1908). [148] Letter dated March 16, 1920. [149] See pages 256-60, this chapter, for a further consideration of this question. [150] W. J. Ashley, in an article in the _Economic Journal_, December, 1910, entitled "The Statistical Measurement of Profit," reveals the many serious problems involved in the measurement of profit--when no prior preparation (such as the compulsory standardization of methods of accountancy) has been undertaken. The question of profit measurement he aptly states as that of finding out "what the suppliers of capital to business concerns get in the long run over and above the capital they actually put in them" (page 549). Unless prior preparation is undertaken for the purpose in hand, it is probable that his conclusion does not overstate the difficulties much, if at all. He writes, "Modern 'trust finance'--the finance of great new industrial combinations, creates difficulties in the way of gain statistics that will tax the highest skill of the economist and accountant--if, indeed, they are not insuperable" (page 549). There would appear to be no good reason, however, why prior preparation, such as is suggested, could not be undertaken; nor would that task be one of extreme difficulty. CHAPTER XIII--A CONCEPT OF INDUSTRIAL PEACE Section 1. The hope for industrial peace in the United States.--Section 2. A policy of wage settlement composed out of the principles already set forth.--Section 3. What results might be expected from the adoption of these principles as a policy?--Section 4. The matter of economic security for the wage earners likely to be important for industrial peace. Hardly considered in this book. The question has been presented to the Kansas Court of Industrial Relations.--Section 5. Certain new ideas concerning industrial relationship have come to stay. They indicate the probable current of future change. 1.--The hope that a policy of wage settlement for industrial peace may be adopted by consent, rests upon the supposition that there exists in the United States to-day a considerable measure of agreement upon a practicable ideal of industrial society. To put the matter more expressly, if half of the community sincerely believed in a policy of the greatest possible freedom of individual enterprise, and the other half were ardent believers in the desirability of a socialist state, the hope of the adoption of a policy of wage settlement would be fatuous. It may seem to many that this necessary measure of agreement upon a practicable ideal of industrial society does not exist in the United States to-day. And, therefore, that the process of debate and conflict in industrial affairs,--as we know it to-day--must continue for a much longer time before the country will be ready to agree upon any policy of wage settlement for industrial peace. In short, that more heads must be broken in order that reasonableness and light may enter into them. Still, various reflections should encourage us to go ahead in the search for some policy of wage adjustment for which the necessary general consent can be won. First of all, there is the fact that there is urgent need for industrial peace; that great suffering, and the constant disruption of industry, will be an accompaniment of a continuation of industrial conflict. And it is essential to the settlement of most economic issues, as well as political, that the members of a society do take heed of the needs of the society. It is the origin and justification of the habit of political compromise. Secondly, it is not easy after all to be cocksure as to what men will or will not agree to until they are directly faced with the task of decision. It is not easy to tell at what point in the conflict of "opposite convictions" an end may be made of the conflict.[151] It is usual that doubt be present in many men's minds when a grave decision is made by society. The constitution of the United States was adopted in the midst of a struggle of ideas, so violent that all agreement seemed to be precluded. The chances of agreement can rarely be certainly known until all possible grounds of agreement are explored. Thirdly, the belief that the continued battle of ideas will ultimately lead to agreement, and eventuate into policy is an optimistic belief which is not always supported by the facts. Sometimes, indeed, it does, as in the case of woman suffrage. Sometimes, however, it ends in the resort to force. And frequently not even the resort to force produces a solution of the difficulty. The conflict goes on even after the use of open force is surrendered. Lastly, it is possible, and indeed necessary so to frame policy, that even while it maintains peace and produces coöperation between conflicting interests and ideas, it does not stereotype forever the terms of peace and coöperation. Agreement is often obtained for an economic or political policy in the knowledge that it can be changed if different ideas come to prevail. A policy of wage adjustment, like any other measure, would have to be always subject to reconsideration and amendment. Indeed, it might carry provision in itself for such reconsideration; it might be adopted as an experiment for a definite period of years. 2.--In the preceding chapters the main problems that must arise in the course of any attempt to settle wages by official authority have been discussed. These problems were considered with reference to the possible formulation of a satisfactory policy of wage settlement for industrial peace. That policy may now be presented as a whole. Only in that way, indeed, can the significance of any particular principle of settlement be understood. It is presumed that whatever policy is put into force will be administered by a government agency, with and by the consent and support of both the wage earners and the employers. It is also presumed that the method of collective bargaining is accepted throughout industry. Indeed, the existence of organized joint boards or councils of wage earners and employers would be almost essential to the success of any policy. The central constituted agency for the administration of the policy should be a commission or court. The policy should then provide that whenever a dispute arises incidental to the settlement of wages in any industry included within the scope of the policy, which dispute is not settled by the ordinary course of collective bargaining, it should be referred to this commission or court. All sides should be permitted to submit evidence bearing upon the case. The court or commission should have its own expert staff, and its own record and statistical office; and it should be its duty to know the wage situation throughout industry.[152] Every possible effort should be made by the commission or court to render judgment without litigation. The commission or court should give in full the principles and the data upon which it bases its decisions. The wage policy of the commission or court should rest upon the following principles: _First_--The principle of standardization should be applied throughout industry. Wages should be standardized by occupations, despite minor differences in the character of the work performed by the same occupational group, or in the conditions under which the work is performed. Standard rates should be understood to be merely minimum rates; and the principle of standardization should be construed so as to permit of all methods of wage payment. When the introduction of standardization into a hitherto unstandardized industry or occupation is deemed to involve the possibility of doing more injury to certain sections of the wage earners and employers affected than it promises definite good, the application of the principle should be limited or varied so as to avoid producing such injury. Differences in the natural advantages possessed by various enterprises in the same industry, and relatively great and permanent differences in the cost of living in different localities--these are likely to be the chief grounds for limitation or variation in the application of the principle. The exceptions or variations admitted on these grounds would vary greatly in character and extent no doubt. It is to be expected that they would be numerous. Under certain conditions it might also prove advisable to grant "nominal variations" of the standard wage. Such "nominal variations" would ordinarily be established to compensate for differences of conditions of work governing output in piece-working trades, when such differences of conditions must be accepted as permanent, as in coal mining; or to cover payment in kind or to make up for irregularity of employment. The process of wage standardization should be regarded as an independent process, as a process logically prior to the other principles of wage settlement (though they may all be applied at the same time). That is to say, the determination of the level of standardization should be fixed upon independently of all other principles of wage settlement. The principal data to be taken into consideration when fixing the level of standardization should be the actual variety of wage rates in the industry or occupation in question. Wherein the scale of actually existing wage rates, the level of standardization is set will be a matter of judgment and compromise. Usually the correct level will be at the higher range of the wage rates already being paid. If any of the existing wage rates in an industry or occupation are higher than the level of standardization which is fixed, the higher rates should ordinarily not be lowered to the level of standardization. _Secondly_--The wages of those groups of wage earners who are at the bottom of the industrial scale should be regulated upon the living wage principle. That is to say, the policy of wage settlement for these groups should represent a consistent effort to secure to them a wage at least sufficient to permit them to satisfy their "normal and reasonable needs." These needs must be interpreted in the light of and by direct comparison with the standard of life of the wage earners in general, and of the middle classes in the community. In the determination of the living wage, the existing level of wages for the groups in question will also be an important consideration. The declared living wage--that wage which it is sought to secure for all industrial workers--should be assessed upon a different basis for male and female workers; but if, in particular cases, it is deemed best to safeguard the interests of male workers, or to keep women out of particular industries, this rule could be departed from in any one of a number of suggested ways. The most important of these possible departures from the ordinary basis of assessment is the enforcement of the same wage rates for men and women when they are employed upon the same work. The living wage in any industry should be a standard wage, subject to all the qualifications and limitations of other standard wage rates. The success of the living wage policy will depend in a great degree upon the good judgment with which it is adapted to the conditions obtaining in each individual industry or occupation in which it is enforced. Therefore, the court or commission should proceed upon the advice of the joint boards or councils concerned. It should be the function of each joint council to give definite advice to the central authority upon every feature of the policy to be pursued in its field--particularly upon the subject of the wages to be prescribed. The central authority should give no ruling in any industry until after the report of the joint council of that industry. Each joint council should have the further duty of observing and reporting upon the effect of the living wage policy in its industry or occupation. The living wage policy should be administered in such a way as to spread among the wage earners, the employers, and the public an understanding of the hope and purpose it embodies and a clear knowledge of the factors which will govern its success. Not the least of which factors will be the determination of all grades of wage earners to make good use of whatever new measure of participation in industry they may secure; and the recognition by the employers that the standard of life of their workers is one of their important concerns. _Thirdly_--The wages of all groups of wage earners not included in the scope of the living wage policy should be settled by reference to principles which apply equally to them all. The wage decisions, at the inauguration of the policy, must rest upon the acceptance and protection of existing wage levels, and of existing wage relationships. However, as cases arise, which bring up the question of the relative positions on the wage scale of the workers engaged in different industries and occupations (and such cases will arise constantly), they should be settled as part of a general process of building up in industry an ordered scheme of wage relationship. This scheme should rest upon defined principles. These principles should be two in number. They were set forth, both as theoretical and applied doctrines under the titles of the "principle of the unity of the wage income and of the wage earners," and the "principle of extra reward." Wage awards for different industries and occupations should be constantly related to each other. The underlying emphasis in the whole series of awards for different industries and occupations should be that the wages of each group are what they are, more because the total wage income is what it is than because of the special type of work performed by any group. The same wage should be paid throughout industry for different kinds of work which require approximately the same human qualities and which make approximately the same demands upon the individual. The wage differentials that are established should be such as will make it reasonably certain that industry will be provided with at least the existing proportion of the more skilled grades of labor, and to make it reasonably certain also that the more arduous, dangerous, irregular, and disagreeable work will command the service of as much labor as at present. The hopes for the establishment of any scheme of wage relationship will be realized or not, according as particular groups of wage earners are willing to accept a wage that may be less than that which they might secure by the continued use of their own group strength. This last remark applies in particular to those groups of wage earners, whose economic position, as organized groups, is very strong by virtue of the fact that the work they perform is essential to the economic existence of the whole community--such, for example, as the railway men, the bank clerks, the printers, and the miners. _Fourthly_--With a view to preventing those changes in the distributive situation which may result from price movements, and which are undesirable--judged by reference to the distributive outcome that is sought--all wages including those prescribed under the living wage policy should be promptly adjusted to movements in the general price level. The measure of price change should be the movement of the index number of prices of all the important commodities produced within the country--the index number to be so weighted as to give a defined importance (50 per cent. was suggested) to the prices of those classes of foodstuffs, clothing, housing accommodation, and other commodities upon which the wage earners spend a very great part of their income. The policy of adjustment to be pursued in times of rising and falling prices and the amount of wage adjustment to be undertaken in response to price movements of different degrees and character--in short, all the rules by which the adjustment of wages to price movements should be carried out--were considered, at some length, in several of the earlier chapters, and can hardly be produced satisfactorily in summary form. Special care should be taken to protect the standard of life of the least favorably placed groups of wage earners during periods of a rising price level. _Fifthly_--In order to bring about such a distributive outcome as will recommend the policy of wage settlement to the wage earners and to the community in general, some profits test should be devised. This profits test should be used to mark and measure the distributive situation in industry as a whole, indicating, as it will, the share in the product of industry that is taking the form of profits. Whenever the general range of profits in industry exceeds that profits return which is conceived to be just and sound, the wages of all groups of workers should be increased in an attempt to transfer the extra profits to the wage earners. The calculation of the wage increase to be awarded, when the profits test shows that the profits return in industry as a whole is greater than that conceived to be a fair return, and the basis of distribution of this wage increase among the various groups of wage earners, were dealt with at some length and cannot be described more summarily. In order to apply any profits test, such as the suggested one, it would probably be necessary to enforce standardized accounting methods throughout industry. The most satisfactory policy would not attempt any direct control of profits. Nor would it make provision for the transfer of the extra profits that may be earned by particular enterprises or industries to the wage earners of those particular enterprises or industries. The forces of industrial competition, trade union activity, public opinion, and government regulation would have to be depended upon to keep the profits return of industry at approximately the level which may be set as the mark of just and sound distribution. A policy of direct control of profits may, however, be advisable in particular industries or on special occasions. The continued assent of the wage earners to any policy of wage settlement will be largely governed by the success of the community in making good its claim to a large part of the extra profits which may accrue to particular enterprises or industries. _Sixthly_--Any policy of wage settlement of the type considered above should give encouragement to the organization of labor throughout industry. It would have to make use of joint councils or boards in many ways (there may be some craft joint councils also). The English and Australian experience seems to prove that. To quote Justice Higgins of the Commonwealth Court of Australia, "The system of arbitrations adopted by the act is based on unionism. Indeed, without unions, it is hard to conceive how arbitration could be worked."[153] Still, once a dispute has come up before the central authority, the final power to render decisions should rest intact in its hands. All organizations of wage earners or employers should be compelled (if necessary) to agree to a policy of open membership. Such a policy of open membership should suffice to prevent monopolistic action on the part of the union in any industry or trade.[154] It would also be well if shop rules could be brought within the field of public supervision, but that may prove impracticable. Finally, it may be said that no part of the policy should interfere with the development of profit-sharing plans--provided such plans are the product of joint agreement between the employers and the workers engaging in them; and if the workers immediately concerned so desire, the labor organizations should be given full representation in the arrangements. Nor, indeed, should it discourage any movement towards the participation of the workers in the control of industry, whatever the scope of such participation. On the contrary, by creating mutual confidence between the wage earners and the directors of industry, and by giving both the wage earners and the employers training in the art of mutual agreement, it should prepare the way for the growth of such participation. These principles of wage settlement would, it is believed, form a sound and forward looking policy of wage settlement for industrial peace. Nevertheless, they are not put forward with the idea that they, or any similar set of principles for the settlement of wages, would be workable in practice without many hitches, and without the need for constant adaptation to the facts encountered. Nor without a suspicion of the hard blows and unexpected eventualities which fate usually has in store for fine proposals. 3.--Ultimately, of course, behind any proposals for industrial peace there is a striving to catch sight of a future industrial society more content, more generous and creative than that of the present time. To the ordinary observer no such ultimate question appears to be involved in an ordinary wages dispute. Yet it is there. The trade union leader fighting for a wage increase does not always see his demand as a plain group claim for greater reward; it frequently appears as an act of justice to his class, a step towards improving their position and power in industrial society. To the employer more often the struggle is merely to protect his profits. But beyond that in many cases there is a fear lest industrial growth and extension be obstructed. Any policy of wage settlement that is more than a weakly supported truce must throw some rays of hope into the future. What type of future industrial society may be envisaged if any principles of wage settlement similar in substance to those discussed in this book should be adopted? What suggestions for the future are contained in them? It is not easy to see. Only a few features of the future can be discerned and those sketchily. Industry would still be carried on in the main by private enterprise and competitive activity. Particular industries, as for example, the railroads, may become government owned or government operated enterprises. But even so, wages in those industries would be, in all probability, determined by the same principle as wages in other industries, and by the same agency. The function of capital accumulation would still be a private function. The tasks of industrial direction would still be carried out by the will of those who owned industry; although, in many industries the power and duty of deciding some of the important questions of direction, especially those which affect the wage earners most directly, might be in the hands of a council or board on which the wage earners are strongly represented. It may be hoped that all wage earners, except those judged sub-ordinary, would be in receipt of a wage at least sufficient to enable them to maintain themselves (and in the case of men, their family) at a standard of life which did not compare too unfavorably with the standard of life of the rest of the community. By virtue of this, the way would be opened for even the lowest grades of the wage earners to take advantage of the opportunities that are provided for physical and mental life and education. The ideal would be to ensure that the whole of the industrial population had that original grant of health, security, and hope which is required to give reality to the idea of equality of opportunity. It is vain, perhaps, to attempt to predict whether the level of production throughout industry would rise or fall; for that will be affected in a decisive measure by influences over which the policy of wage settlement will have little or no control. The proposals made would give adequate encouragement to the accumulation of capital, and to the carrying out of business ventures. It would succeed also, it may be hoped, in securing the active interest of the wage earners in a high level of production, by bringing about such a distributive outcome as appears just to the wage earners, and by giving adequate expression to the aspirations of the wage earners. In an industrial system, largely dominated by the single motive of personal gain, it is not likely that any one group or class will respond to a general need for high production unless its interests are thereby directly served. If the policy adopted brought about a broadening of the motives on which the system rests and operates, there is much ground for the belief that the level of production would be favorably affected. However, as was said above, the possibility of such a result will be largely governed by influences outside of the present field of study. There remain the questions of the distribution of wealth and of opportunity. Here, also, any conclusions that are ventured must rest upon an insufficient knowledge of the events which will govern the future. One of the chief requirements that proposals made were designed to satisfy is the attainment of such a distributive outcome as may be judged to be both just and sound--weighing all relevant considerations. Yet it would probably be over-optimistic to believe that the result would satisfy the intention. For all that, the general desire for a high level of production will largely depend upon the fulfillment of that intention. The wage earners will only continue to subscribe to a doctrine of high production if they trust to the action of the distributive mechanism to bring them a fair share of the resulting product. Here we are at the very storm center of socialist economics. The question is, to what extent, as a matter of fact, do the wage earners share in the result of increased productive efficiency? To that question, the policy of wage settlement must furnish a satisfactory answer--though, of course, no answer will be satisfactory to all men. The question of the prospective distribution of wealth, however, can hardly be considered apart from the question of the future course of growth in population. Even if the wage earners do receive that share of the product of industry which represents a just and sound distributive outcome, will that mean a gradual evolution of higher permanent standards of living among the poor, and give them a fair start in the struggle for opportunity? Or will it mean but a greater rate of increase in population, such as will more than keep pace with the ability of our natural resources and the advances in production and invention to provide the basis of a rising standard of life for all the population? In the latter case, groups will remain at the bottom of the industrial scale whose economic position will be so unfavorable under any social arrangements as to prevent the individual members of these groups to fairly develop and test their natural ability. In which case the handicap of inequality would be very real. The nineteenth century has left us with a hopeful outlook in regard to the possibility of maintaining a progressive standard of living throughout the community; but the events, purposes, and habits which will determine the outcome are too many, and their relative influence is too indeterminate to warrant any certain predictions. However, even if the menace of population is avoided, even if the general level of production is raised, and if, besides, the distributive outcome laid down as a goal for the policy of wage settlement is attained, nevertheless, there would remain a considerable measure of inequality of wealth. For, it is to be anticipated, that in the course of the development of our industrial organization, the amount of invested capital relative to the number of wage earners will grow. This means that the absolute amount of the product of industry which takes the form of profits will increase, even if the relative share does not. As Professor Taussig has written, "In general, the very forces which make the total income of society high and the general rate of wages high cause the proportion of income which forms return on capital to be large."[155] And any continued increase in the absolute amount of the product of industry taking the form of profits will be likely to lead to a considerable measure of inequality of wealth; unless the amount of accumulation and investment on the part of the wage earners is largely increased. So much for the question of the distribution of wealth. Is it possible to venture any definite conclusions, at all, regarding the distribution of opportunity? The idea of equality of opportunity is not an easy one to define in terms of facts. It can be said that it would be realized, in the economic sphere, if such economic conditions prevail, as gave all individuals an approximately equal chance to follow their inclinations, and to make whatever use of their natural abilities they desire. If that definition is near the heart of the matter, it is evident that in a society in which there is considerable inequality of wealth it will not be possible to secure equality of opportunity. As Mr. Tawney has remarked, "Talent and energy can create opportunity. But property need only wait for it." Under almost all circumstances there is a tendency for the distribution of opportunity to conform to the distribution of wealth. Still it is not to be concluded that this tendency is unconditional. If it proves possible to secure to every industrial family (except perhaps the most incapable) such a minimum standard of economic life, and such a degree of economic security as will bring it about that these families are not gravely handicapped in their efforts to utilize the existing opportunities for education and for economic advancement, an important step towards equality of opportunity will have been accomplished. It is true that a small section of the population will be strongly favored from the start. But, in an environment which encourages individual effort, the most important step in the process of securing equality of opportunity is to get rid of the serious obstacles to the development and active use of the natural ability of those born low in the industrial order. 4.--One important factor in industrial peace, which might well be given consideration in the formulation of a policy of wage settlement for industrial peace, has received but scant mention in this effort to formulate the terms of policy. It is the question of economic security for the wage earners. It is argued by some students of our industrial troubles that the fundamental desire of most workers is not for advancement, or even for high wages, but rather for secure and steady employment at customary rates. That this desire is often uppermost in the struggles of individuals and organizations is undoubtedly true; though the relative ease with which work was to be found in normal times in the United States has prevented the question of insecurity from being as acute a problem as in Great Britain, for example. The principles of wage settlement that have been put forward contain but one measure which might prove useful in an attempt to modify the insecurity of the wage earner in a modern industrial community. They provide for the establishment of joint boards or councils in each industry which are intended to have those phases of industrial activity which effect the welfare of the wage earners under constant observation. These councils might conceivably work out plans in different industries intended to steady the employment of the wage earners, and methods of insurance against the worst vicissitudes of their employment. In the pottery trade of England, for example, the industrial council has been giving consideration to the question of an Unemployment Insurance Fund for the industry. The possibilities of coöperation between employers and employed in that direction are genuine. The realization of any such plans will depend, of course, upon the growth of mutual trust, and upon the ability of all parties to work for a common end. They require that every important business man and labor leader be a statesman in the sphere of business. In the act establishing the Kansas Court of Industrial Relations, and governing its operations, there is a provision which gives the Court a power which might enable it to deal with the question of irregularity of industrial activity. It is new in the history of industrial regulation in this country. It provides that the establishments covered by the act "shall be operated with reasonable continuity and efficiency in order that the people of this state may live in peace and security and be supplied with the necessaries of life"; it makes it unlawful for any establishment "wilfully to limit or cease operations for the purpose of limiting production or transportation or to affect prices for the purpose of avoiding any of the provisions of the act."[156] It further provides that such industries as are affected by changes in seasons, market conditions or other conditions inherent in the business may apply to the Court for an order fixing rules and practices to govern its operations. This provision may mean a great deal or very little, according as the Court and the higher courts interpret the idea of "reasonable continuity." If it is taken to mean simply that the enterprises covered by the act should not limit production in accordance with some agreement with each other in order to increase profits, or to fight the unions, it will have little or no importance as regards the question of security of employment. And that is probably the interpretation that will be given to it. It will be hardly possible to work out a plan for regularity of operation by mandate of a court, and under penalty. Such rules and practices as the Court may lay down will probably take cognizance of the laws of the market which ordinarily govern business operations. To rule otherwise would mean embarking upon a comprehensive reform of business operations; it would necessitate the development of some other gauge of business operation than business profits. Only one case which has come before the Court has brought up this question of continuity of operation. The Court investigated a complaint that the flour mills at Topeka were reducing production. It found that the mills were running at sixty per cent. capacity; and that the cause of this reduced operation was a falling off in the flour market, due to world-wide economic changes beyond the control of the industry and the Court. The Court found this limitation of production not unreasonable. It gave no sign of making any radical use of its powers to control the regularity of production, nor of interfering with the ordinary processes of business operation. This policy it tempered with concern for the workers--suggesting to the millers that they put their "skilled and faithful" employees on a monthly pay system. It appointed a committee to draw up rules and regulations to be observed in the operation of the industry, and to keep it informed. 5.--In the coming years there will take place in the United States much controversy and a great variety of experiments in wage settlement. To the realists of all parties, this course of controversy and experimentation will appear to be only a struggle for power. To the rest, it may appear that there are ideas at work; ideas springing partly from the example of political change, and partly from the fact that the industrial world has undergone such a rapid revolution. It is impossible to predict the ideas which will have the most abiding force. It is impossible even to assert that society will make a satisfactory choice among them. In the present confusion of counsel, two relatively new ideas, in particular, appear to me to be likely to endure and be accepted by society. The first is the idea that the welfare of the wage earners in each particular industry is one of the major questions in the conduct of that industry; and that the wage earners should participate effectively in those activities of direction by which the conditions of labor are determined. The second idea is that the whole body of wage earners in industry should possess the means of checking the action of private enterprise, when they can prove clearly that the methods of production that are being pursued are wasteful either of human or of material resources. An example of such a protest is that of the English coal miners against the organization of their industry--which was one of the grounds for the appointment of the Coal Commission. It would not appear to be impossible to reconcile the action of private investment and private enterprise with this concept of the right of the wage earners to exert control over the policy of production, in so far as they can establish the fact that human or material resources are not being well applied--the general interest being the test. The main current of industrial change will be, in my opinion, in the direction indicated by these two ideas. And change in that general direction is, it seems to me, essential to the peaceful conduct of industry, for only in some such way will a sense of common interest be established--which sense alone can hold together an undertaking so dependent upon a division of function as is modern industry. Through all changes, it will remain true that effective production depends upon the willingness to work hard for the sake of working well, and upon the existence of strong habits of self-dependence. FOOTNOTES: [151] "As law embodies beliefs that have triumphed in the battle of ideas, and have then translated themselves into action, while there is still doubt, while opposite convictions still keep a battle front against each other, the time for law has not yet come; the notion destined to prevail is not yet entitled to the field," "Law and the Court," address by Justice Oliver Wendell Holmes, Jr., before the Harvard Law School Association. [152] In this matter the Kansas Industrial Court law sets a good example by authorizing the Court to build up a staff of accountants, engineers and such other experts as it may need for the proper conduct of its operations. [153] H. B. Higgins, "A New Province for Law and Order," _Harvard Law Review_, March, 1915, page 23. [154] "Where the union admits all qualified workers to membership, under reasonable conditions, such a rule cannot become the basis of monopoly." U. S. Ind. Comm'n. Report (1915), Vol. I, page 116. Report signed by Commissioners Manly, Walsh, Lennon O'Connell and Garretson. [155] F. W. Taussig, "Principles of Economics," Vol. II, page 205. Revised Ed. [156] Sections 6 and 16 Act Creating Court of Industrial Relations, Kansas, 1920. 
4776	----	POLITICAL IDEALS by Bertrand Russell CONTENTS I: Political Ideals II: Capitalism and the Wage System III: Pitfalls in Socialism IV: Individual Liberty and Public Control V: National Independence and Internationalism Chapter I: Political Ideals In dark days, men need a clear faith and a well-grounded hope; and as the outcome of these, the calm courage which takes no account of hardships by the way. The times through which we are passing have afforded to many of us a confirmation of our faith. We see that the things we had thought evil are really evil, and we know more definitely than we ever did before the directions in which men must move if a better world is to arise on the ruins of the one which is now hurling itself into destruction. We see that men's political dealings with one another are based on wholly wrong ideals, and can only be saved by quite different ideals from continuing to be a source of suffering, devastation, and sin. Political ideals must be based upon ideals for the individual life. The aim of politics should be to make the lives of individuals as good as possible. There is nothing for the politician to consider outside or above the various men, women, and children who compose the world. The problem of politics is to adjust the relations of human beings in such a way that each severally may have as much of good in his existence as possible. And this problem requires that we should first consider what it is that we think good in the individual life. To begin with, we do not want all men to be alike. We do not want to lay down a pattern or type to which men of all sorts are to be made by some means or another to approximate. This is the ideal of the impatient administrator. A bad teacher will aim at imposing his opinion, and turning out a set of pupils all of whom will give the same definite answer on a doubtful point. Mr. Bernard Shaw is said to hold that _Troilus and Cressida_ is the best of Shakespeare's plays. Although I disagree with this opinion, I should welcome it in a pupil as a sign of individuality; but most teachers would not tolerate such a heterodox view. Not only teachers, but all commonplace persons in authority, desire in their subordinates that kind of uniformity which makes their actions easily predictable and never inconvenient. The result is that they crush initiative and individuality when they can, and when they cannot, they quarrel with it. It is not one ideal for all men, but a separate ideal for each separate man, that has to be realized if possible. Every man has it in his being to develop into something good or bad: there is a best possible for him, and a worst possible. His circumstances will determine whether his capacities for good are developed or crushed, and whether his bad impulses are strengthened or gradually diverted into better channels. But although we cannot set up in any detail an ideal of character which is to be universally applicable--although we cannot say, for instance, that all men ought to be industrious, or self-sacrificing, or fond of music--there are some broad principles which can be used to guide our estimates as to what is possible or desirable. We may distinguish two sorts of goods, and two corresponding sorts of impulses. There are goods in regard to which individual possession is possible, and there are goods in which all can share alike. The food and clothing of one man is not the food and clothing of another; if the supply is insufficient, what one man has is obtained at the expense of some other man. This applies to material goods generally, and therefore to the greater part of the present economic life of the world. On the other hand, mental and spiritual goods do not belong to one man to the exclusion of another. If one man knows a science, that does not prevent others from knowing it; on the contrary, it helps them to acquire the knowledge. If one man is a great artist or poet, that does not prevent others from painting pictures or writing poems, but helps to create the atmosphere in which such things are possible. If one man is full of good-will toward others, that does not mean that there is less good-will to be shared among the rest; the more good-will one man has, the more he is likely to create among others. In such matters there is no _possession_, because there is not a definite amount to be shared; any increase anywhere tends to produce an increase everywhere. There are two kinds of impulses, corresponding to the two kinds of goods. There are _possessive_ impulses, which aim at acquiring or retaining private goods that cannot be shared; these center in the impulse of property. And there are _creative_ or constructive impulses, which aim at bringing into the world or making available for use the kind of goods in which there is no privacy and no possession. The best life is the one in which the creative impulses play the largest part and the possessive impulses the smallest. This is no new discovery. The Gospel says: "Take no thought, saying, What shall we eat? or What shall we drink? or, Wherewithal shall we be clothed?" The thought we give to these things is taken away from matters of more importance. And what is worse, the habit of mind engendered by thinking of these things is a bad one; it leads to competition, envy, domination, cruelty, and almost all the moral evils that infest the world. In particular, it leads to the predatory use of force. Material possessions can be taken by force and enjoyed by the robber. Spiritual possessions cannot be taken in this way. You may kill an artist or a thinker, but you cannot acquire his art or his thought. You may put a man to death because he loves his fellow-men, but you will not by so doing acquire the love which made his happiness. Force is impotent in such matters; it is only as regards material goods that it is effective. For this reason the men who believe in force are the men whose thoughts and desires are preoccupied with material goods. The possessive impulses, when they are strong, infect activities which ought to be purely creative. A man who has made some valuable discovery may be filled with jealousy of a rival discoverer. If one man has found a cure for cancer and another has found a cure for consumption, one of them may be delighted if the other man's discovery turns out a mistake, instead of regretting the suffering of patients which would otherwise have been avoided. In such cases, instead of desiring knowledge for its own sake, or for the sake of its usefulness, a man is desiring it as a means to reputation. Every creative impulse is shadowed by a possessive impulse; even the aspirant to saintliness may be jealous of the more successful saint. Most affection is accompanied by some tinge of jealousy, which is a possessive impulse intruding into the creative region. Worst of all, in this direction, is the sheer envy of those who have missed everything worth having in life, and who are instinctively bent on preventing others from enjoying what they have not had. There is often much of this in the attitude of the old toward the young. There is in human beings, as in plants and animals, a certain natural impulse of growth, and this is just as true of mental as of physical development. Physical development is helped by air and nourishment and exercise, and may be hindered by the sort of treatment which made Chinese women's feet small. In just the same way mental development may be helped or hindered by outside influences. The outside influences that help are those that merely provide encouragement or mental food or opportunities for exercising mental faculties. The influences that hinder are those that interfere with growth by applying any kind of force, whether discipline or authority or fear or the tyranny of public opinion or the necessity of engaging in some totally incongenial occupation. Worst of all influences are those that thwart or twist a man's fundamental impulse, which is what shows itself as conscience in the moral sphere; such influences are likely to do a man an inward danger from which he will never recover. Those who realize the harm that can be done to others by any use of force against them, and the worthlessness of the goods that can be acquired by force, will be very full of respect for the liberty of others; they will not try to bind them or fetter them; they will be slow to judge and swift to sympathize; they will treat every human being with a kind of tenderness, because the principle of good in him is at once fragile and infinitely precious. They will not condemn those who are unlike themselves; they will know and feel that individuality brings differences and uniformity means death. They will wish each human being to be as much a living thing and as little a mechanical product as it is possible to be; they will cherish in each one just those things which the harsh usage of a ruthless world would destroy. In one word, all their dealings with others will be inspired by a deep impulse of _reverence_. What we shall desire for individuals is now clear: strong creative impulses, overpowering and absorbing the instinct of possession; reverence for others; respect for the fundamental creative impulse in ourselves. A certain kind of self-respect or native pride is necessary to a good life; a man must not have a sense of utter inward defeat if he is to remain whole, but must feel the courage and the hope and the will to live by the best that is in him, whatever outward or inward obstacles it may encounter. So far as it lies in a man's own power, his life will realize its best possibilities if it has three things: creative rather than possessive impulses, reverence for others, and respect for the fundamental impulse in himself. Political and social institutions are to be judged by the good or harm that they do to individuals. Do they encourage creativeness rather than possessiveness? Do they embody or promote a spirit of reverence between human beings? Do they preserve self-respect? In all these ways the institutions under which we live are very far indeed from what they ought to be. Institutions, and especially economic systems, have a profound influence in molding the characters of men and women. They may encourage adventure and hope, or timidity and the pursuit of safety. They may open men's minds to great possibilities, or close them against everything but the risk of obscure misfortune. They may make a man's happiness depend upon what he adds to the general possessions of the world, or upon what he can secure for himself of the private goods in which others cannot share. Modern capitalism forces the wrong decision of these alternatives upon all who are not heroic or exceptionally fortunate. Men's impulses are molded, partly by their native disposition, partly by opportunity and environment, especially early environment. Direct preaching can do very little to change impulses, though it can lead people to restrain the direct expression of them, often with the result that the impulses go underground and come to the surface again in some contorted form. When we have discovered what kinds of impulse we desire, we must not rest content with preaching, or with trying to produce the outward manifestation without the inner spring; we must try rather to alter institutions in the way that will, of itself, modify the life of impulse in the desired direction. At present our institutions rest upon two things: property and power. Both of these are very unjustly distributed; both, in the actual world, are of great importance to the happiness of the individual. Both are possessive goods; yet without them many of the goods in which all might share are hard to acquire as things are now. Without property, as things are, a man has no freedom, and no security for the necessities of a tolerable life; without power, he has no opportunity for initiative. If men are to have free play for their creative impulses, they must be liberated from sordid cares by a certain measure of security, and they must have a sufficient share of power to be able to exercise initiative as regards the course and conditions of their lives. Few men can succeed in being creative rather than possessive in a world which is wholly built on competition, where the great majority would fall into utter destitution if they became careless as to the acquisition of material goods, where honor and power and respect are given to wealth rather than to wisdom, where the law embodies and consecrates the injustice of those who have toward those who have not. In such an environment even those whom nature has endowed with great creative gifts become infected with the poison of competition. Men combine in groups to attain more strength in the scramble for material goods, and loyalty to the group spreads a halo of quasi-idealism round the central impulse of greed. Trade-unions and the Labor party are no more exempt from this vice than other parties and other sections of society; though they are largely inspired by the hope of a radically better world. They are too often led astray by the immediate object of securing for themselves a large share of material goods. That this desire is in accordance with justice, it is impossible to deny; but something larger and more constructive is needed as a political ideal, if the victors of to-morrow are not to become the oppressors of the day after. The inspiration and outcome of a reforming movement ought to be freedom and a generous spirit, not niggling restrictions and regulations. The present economic system concentrates initiative in the hands of a small number of very rich men. Those who are not capitalists have, almost always, very little choice as to their activities when once they have selected a trade or profession; they are not part of the power that moves the mechanism, but only a passive portion of the machinery. Despite political democracy, there is still an extraordinary degree of difference in the power of self-direction belonging to a capitalist and to a man who has to earn his living. Economic affairs touch men's lives, at most times, much more intimately than political questions. At present the man who has no capital usually has to sell himself to some large organization, such as a railway company, for example. He has no voice in its management, and no liberty in politics except what his trade-union can secure for him. If he happens to desire a form of liberty which is not thought important by his trade-union, he is powerless; he must submit or starve. Exactly the same thing happens to professional men. Probably a majority of journalists are engaged in writing for newspapers whose politics they disagree with; only a man of wealth can own a large newspaper, and only an accident can enable the point of view or the interests of those who are not wealthy to find expression in a newspaper. A large part of the best brains of the country are in the civil service, where the condition of their employment is silence about the evils which cannot be concealed from them. A Nonconformist minister loses his livelihood if his views displease his congregation; a member of Parliament loses his seat if he is not sufficiently supple or sufficiently stupid to follow or share all the turns and twists of public opinion. In every walk of life, independence of mind is punished by failure, more and more as economic organizations grow larger and more rigid. Is it surprising that men become increasingly docile, increasingly ready to submit to dictation and to forego the right of thinking for themselves? Yet along such lines civilization can only sink into a Byzantine immobility. Fear of destitution is not a motive out of which a free creative life can grow, yet it is the chief motive which inspires the daily work of most wage-earners. The hope of possessing more wealth and power than any man ought to have, which is the corresponding motive of the rich, is quite as bad in its effects; it compels men to close their minds against justice, and to prevent themselves from thinking honestly on social questions while in the depths of their hearts they uneasily feel that their pleasures are bought by the miseries of others. The injustices of destitution and wealth alike ought to be rendered impossible. Then a great fear would be removed from the lives of the many, and hope would have to take on a better form in the lives of the few. But security and liberty are only the negative conditions for good political institutions. When they have been won, we need also the positive condition: encouragement of creative energy. Security alone might produce a smug and stationary society; it demands creativeness as its counterpart, in order to keep alive the adventure and interest of life, and the movement toward perpetually new and better things. There can be no final goal for human institutions; the best are those that most encourage progress toward others still better. Without effort and change, human life cannot remain good. It is not a finished Utopia that we ought to desire, but a world where imagination and hope are alive and active. It is a sad evidence of the weariness mankind has suffered from excessive toil that his heavens have usually been places where nothing ever happened or changed. Fatigue produces the illusion that only rest is needed for happiness; but when men have rested for a time, boredom drives them to renewed activity. For this reason, a happy life must be one in which there is activity. If it is also to be a useful life, the activity ought to be as far as possible creative, not merely predatory or defensive. But creative activity requires imagination and originality, which are apt to be subversive of the _status quo_. At present, those who have power dread a disturbance of the _status quo_, lest their unjust privileges should be taken away. In combination with the instinct for conventionality,[1] which man shares with the other gregarious animals, those who profit by the existing order have established a system which punishes originality and starves imagination from the moment of first going to school down to the time of death and burial. The whole spirit in which education is conducted needs to be changed, in order that children may be encouraged to think and feel for themselves, not to acquiesce passively in the thoughts and feelings of others. It is not rewards after the event that will produce initiative, but a certain mental atmosphere. There have been times when such an atmosphere existed: the great days of Greece, and Elizabethan England, may serve as examples. But in our own day the tyranny of vast machine-like organizations, governed from above by men who know and care little for the lives of those whom they control, is killing individuality and freedom of mind, and forcing men more and more to conform to a uniform pattern. [1] In England this is called "a sense of humor." Vast organizations are an inevitable element in modern life, and it is useless to aim at their abolition, as has been done by some reformers, for instance, William Morris. It is true that they make the preservation of individuality more difficult, but what is needed is a way of combining them with the greatest possible scope for individual initiative. One very important step toward this end would be to render democratic the government of every organization. At present, our legislative institutions are more or less democratic, except for the important fact that women are excluded. But our administration is still purely bureaucratic, and our economic organizations are monarchical or oligarchic. Every limited liability company is run by a small number of self-appointed or coöpted directors. There can be no real freedom or democracy until the men who do the work in a business also control its management. Another measure which would do much to increase liberty would be an increase of self-government for subordinate groups, whether geographical or economic or defined by some common belief, like religious sects. A modern state is so vast and its machinery is so little understood that even when a man has a vote he does not feel himself any effective part of the force which determines its policy. Except in matters where he can act in conjunction with an exceptionally powerful group, he feels himself almost impotent, and the government remains a remote impersonal circumstance, which must be simply endured, like the weather. By a share in the control of smaller bodies, a man might regain some of that sense of personal opportunity and responsibility which belonged to the citizen of a city-state in ancient Greece or medieval Italy. When any group of men has a strong corporate consciousness--such as belongs, for example, to a nation or a trade or a religious body--liberty demands that it should be free to decide for itself all matters which are of great importance to the outside world. This is the basis of the universal claim for national independence. But nations are by no means the only groups which ought to have self-government for their internal concerns. And nations, like other groups, ought not to have complete liberty of action in matters which are of equal concern to foreign nations. Liberty demands self-government, but not the right to interfere with others. The greatest degree of liberty is not secured by anarchy. The reconciliation of liberty with government is a difficult problem, but it is one which any political theory must face. The essence of government is the use of force in accordance with law to secure certain ends which the holders of power consider desirable. The coercion of an individual or a group by force is always in itself more or less harmful. But if there were no government, the result would not be an absence of force in men's relations to each other; it would merely be the exercise of force by those who had strong predatory instincts, necessitating either slavery or a perpetual readiness to repel force with force on the part of those whose instincts were less violent. This is the state of affairs at present in international relations, owing to the fact that no international government exists. The results of anarchy between states should suffice to persuade us that anarchism has no solution to offer for the evils of the world. There is probably one purpose, and only one, for which the use of force by a government is beneficent, and that is to diminish the total amount of force used m the world. It is clear, for example, that the legal prohibition of murder diminishes the total amount of violence in the world. And no one would maintain that parents should have unlimited freedom to ill-treat their children. So long as some men wish to do violence to others, there cannot be complete liberty, for either the wish to do violence must be restrained, or the victims must be left to suffer. For this reason, although individuals and societies should have the utmost freedom as regards their own affairs, they ought not to have complete freedom as regards their dealings with others. To give freedom to the strong to oppress the weak is not the way to secure the greatest possible amount of freedom in the world. This is the basis of the socialist revolt against the kind of freedom which used to be advocated by _laissez-faire_ economists. Democracy is a device--the best so far invented--for diminishing as much as possible the interference of governments with liberty. If a nation is divided into two sections which cannot both have their way, democracy theoretically insures that the majority shall have their way. But democracy is not at all an adequate device unless it is accompanied by a very great amount of devolution. Love of uniformity, or the mere pleasure of interfering, or dislike of differing tastes and temperaments, may often lead a majority to control a minority in matters which do not really concern the majority. We should none of us like to have the internal affairs of Great Britain settled by a parliament of the world, if ever such a body came into existence. Nevertheless, there are matters which such a body could settle much better than any existing instrument of government. The theory of the legitimate use of force in human affairs, where a government exists, seems clear. Force should only be used against those who attempt to use force against others, or against those who will not respect the law in cases where a common decision is necessary and a minority are opposed to the action of the majority. These seem legitimate occasions for the use of force; and they should be legitimate occasions in international affairs, if an international government existed. The problem of the legitimate occasions for the use of force in the absence of a government is a different one, with which we are not at present concerned. Although a government must have the power to use force, and may on occasion use it legitimately, the aim of the reformers to have such institutions as will diminish the need for actual coercion will be found to have this effect. Most of us abstain, for instance, from theft, not because it is illegal, but because we feel no desire to steal. The more men learn to live creatively rather than possessively, the less their wishes will lead them to thwart others or to attempt violent interference with their liberty. Most of the conflicts of interests, which lead individuals or organizations into disputes, are purely imaginary, and would be seen to be so if men aimed more at the goods in which all can share, and less at those private possessions that are the source of strife. In proportion as men live creatively, they cease to wish to interfere with others by force. Very many matters in which, at present, common action is thought indispensable, might well be left to individual decision. It used to be thought absolutely necessary that all the inhabitants of a country should have the same religion, but we now know that there is no such necessity. In like manner it will be found, as men grow more tolerant in their instincts, that many uniformities now insisted upon are useless and even harmful. Good political institutions would weaken the impulse toward force and domination in two ways: first, by increasing the opportunities for the creative impulses, and by shaping education so as to strengthen these impulses; secondly, by diminishing the outlets for the possessive instincts. The diffusion of power, both in the political and the economic sphere, instead of its concentration in the hands of officials and captains of industry, would greatly diminish the opportunities for acquiring the habit of command, out of which the desire for exercising tyranny is apt to spring. Autonomy, both for districts and for organizations, would leave fewer occasions when governments were called upon to make decisions as to other people's concerns. And the abolition of capitalism and the wage system would remove the chief incentive to fear and greed, those correlative passions by which all free life is choked and gagged. Few men seem to realize how many of the evils from which we suffer are wholly unnecessary, and that they could be abolished by a united effort within a few years. If a majority in every civilized country so desired, we could, within twenty years, abolish all abject poverty, quite half the illness in the world, the whole economic slavery which binds down nine tenths of our population; we could fill the world with beauty and joy, and secure the reign of universal peace. It is only because men are apathetic that this is not achieved, only because imagination is sluggish, and what always has been is regarded as what always must be. With good-will, generosity, intelligence, these things could be brought about. Chapter II: Capitalism and the Wage System I The world is full of preventible evils which most men would be glad to see prevented. Nevertheless, these evils persist, and nothing effective is done toward abolishing them. This paradox produces astonishment in inexperienced reformers, and too often produces disillusionment in those who have come to know the difficulty of changing human institutions. War is recognized as an evil by an immense majority in every civilized country; but this recognition does not prevent war. The unjust distribution of wealth must be obviously an evil to those who are not prosperous, and they are nine tenths of the population. Nevertheless it continues unabated. The tyranny of the holders of power is a source of needless suffering and misfortune to very large sections of mankind; but power remains in few hands, and tends, if anything, to grow more concentrated. I wish first to study the evils of our present institutions, and the causes of the very limited success of reformers in the past, and then to suggest reasons for the hope of a more lasting and permanent success in the near future. The war has come as a challenge to all who desire a better world. The system which cannot save mankind from such an appalling disaster is at fault somewhere, and cannot be amended in any lasting way unless the danger of great wars in the future can be made very small. But war is only the final flower of an evil tree. Even in times of peace, most men live lives of monotonous labor, most women are condemned to a drudgery which almost kills the possibility of happiness before youth is past, most children are allowed to grow up in ignorance of all that would enlarge their thoughts or stimulate their imagination. The few who are more fortunate are rendered illiberal by their unjust privileges, and oppressive through fear of the awakening indignation of the masses. From the highest to the lowest, almost all men are absorbed in the economic struggle: the struggle to acquire what is their due or to retain what is not their due. Material possessions, in fact or in desire, dominate our outlook, usually to the exclusion of all generous and creative impulses. Possessiveness--the passion to have and to hold--is the ultimate source of war, and the foundation of all the ills from which the political world is suffering. Only by diminishing the strength of this passion and its hold upon our daily lives can new institutions bring permanent benefit to mankind. Institutions which will diminish the sway of greed are possible, but only through a complete reconstruction of our whole economic system. Capitalism and the wage system must be abolished; they are twin monsters which are eating up the life of the world. In place of them we need a system which will hold in cheek men's predatory impulses, and will diminish the economic injustice that allows some to be rich in idleness while others are poor in spite of unremitting labor; but above all we need a system which will destroy the tyranny of the employer, by making men at the same time secure against destitution and able to find scope for individual initiative in the control of the industry by which they live. A better system can do all these things, and can be established by the democracy whenever it grows weary of enduring evils which there is no reason to endure. We may distinguish four purposes at which an economic system may aim: first, it may aim at the greatest possible production of goods and at facilitating technical progress; second, it may aim at securing distributive justice; third, it may aim at giving security against destitution; and, fourth, it may aim at liberating creative impulses and diminishing possessive impulses. Of these four purposes the last is the most important. Security is chiefly important as a means to it. State socialism, though it might give material security and more justice than we have at present, would probably fail to liberate creative impulses or produce a progressive society. Our present system fails in all four purposes. It is chiefly defended on the ground that it achieves the first of the four purposes, namely, the greatest possible production of material goods, but it only does this in a very short-sighted way, by methods which are wasteful in the long run both of human material and of natural resources. Capitalistic enterprise involves a ruthless belief in the importance of increasing material production to the utmost possible extent now and in the immediate future. In obedience to this belief, new portions of the earth's surface are continually brought under the sway of industrialism. Vast tracts of Africa become recruiting grounds for the labor required in the gold and diamond mines of the Rand, Rhodesia, and Kimberley; for this purpose, the population is demoralized, taxed, driven into revolt, and exposed to the contamination of European vice and disease. Healthy and vigorous races from Southern Europe are tempted to America, where sweating and slum life reduce their vitality if they do not actually cause their death. What damage is done to our own urban populations by the conditions under which they live, we all know. And what is true of the human riches of the world is no less true of the physical resources. The mines, forests, and wheat-fields of the world are all being exploited at a rate which must practically exhaust them at no distant date. On the side of material production, the world is living too fast; in a kind of delirium, almost all the energy of the world has rushed into the immediate production of something, no matter what, and no matter at what cost. And yet our present system is defended on the ground that it safeguards progress! It cannot be said that our present economic system is any more successful in regard to the other three objects which ought to be aimed at. Among the many obvious evils of capitalism and the wage system, none are more glaring than that they encourage predatory instincts, that they allow economic injustice, and that they give great scope to the tyranny of the employer. As to predatory instincts, we may say, broadly speaking, that in a state of nature there would be two ways of acquiring riches--one by production, the other by robbery. Under our existing system, although what is recognized as robbery is forbidden, there are nevertheless many ways of becoming rich without contributing anything to the wealth of the community. Ownership of land or capital, whether acquired or inherited, gives a legal right to a permanent income. Although most people have to produce in order to live, a privileged minority are able to live in luxury without producing anything at all. As these are the men who are not only the most fortunate but also the most respected, there is a general desire to enter their ranks, and a widespread unwillingness to face the fact that there is no justification whatever for incomes derived in this way. And apart from the passive enjoyment of rent or interest, the methods of acquiring wealth are very largely predatory. It is not, as a rule, by means of useful inventions, or of any other action which increases the general wealth of the community, that men amass fortunes; it is much more often by skill in exploiting or circumventing others. Nor is it only among the rich that our present régime promotes a narrowly acquisitive spirit. The constant risk of destitution compels most men to fill a great part of their time and thought with the economic struggle. There is a theory that this increases the total output of wealth by the community. But for reasons to which I shall return later, I believe this theory to be wholly mistaken. Economic injustice is perhaps the most obvious evil of our present system. It would be utterly absurd to maintain that the men who inherit great wealth deserve better of the community than those who have to work for their living. I am not prepared to maintain that economic justice requires an exactly equal income for everybody. Some kinds of work require a larger income for efficiency than others do; but there is economic injustice as soon as a man has more than his share, unless it is because his efficiency in his work requires it, or as a reward for some definite service. But this point is so obvious that it needs no elaboration. The modern growth of monopolies in the shape of trusts, cartels, federations of employers and so on has greatly increased the power of the capitalist to levy toll on the community. This tendency will not cease of itself, but only through definite action on the part of those who do not profit by the capitalist régime. Unfortunately the distinction between the proletariat and the capitalist is not so sharp as it was in the minds of socialist theorizers. Trade-unions have funds in various securities; friendly societies are large capitalists; and many individuals eke out their wages by invested savings. All this increases the difficulty of any clear-cut radical change in our economic system. But it does not diminish the desirability of such a change. Such a system as that suggested by the French syndicalists, in which each trade would be self-governing and completely independent, without the control of any central authority, would not secure economic justice. Some trades are in a much stronger bargaining position than others. Coal and transport, for example, could paralyze the national life, and could levy blackmail by threatening to do so. On the other hand, such people as school teachers, for example, could rouse very little terror by the threat of a strike and would be in a very weak bargaining position. Justice can never be secured by any system of unrestrained force exercised by interested parties in their own interests. For this reason the abolition of the state, which the syndicalists seem to desire, would be a measure not compatible with economic justice. The tyranny of the employer, which at present robs the greater part of most men's lives of all liberty and all initiative, is unavoidable so long as the employer retains the right of dismissal with consequent loss of pay. This right is supposed to be essential in order that men may have an incentive to work thoroughly. But as men grow more civilized, incentives based on hope become increasingly preferable to those that are based on fear. It would be far better that men should be rewarded for working well than that they should be punished for working badly. This system is already in operation in the civil service, where a man is only dismissed for some exceptional degree of vice or virtue, such as murder or illegal abstention from it. Sufficient pay to ensure a livelihood ought to be given to every person who is willing to work, independently of the question whether the particular work at which he is skilled is wanted at the moment or not. If it is not wanted, some new trade which is wanted ought to be taught at the public expense. Why, for example, should a hansom-cab driver be allowed to suffer on account of the introduction of taxies? He has not committed any crime, and the fact that his work is no longer wanted is due to causes entirely outside his control. Instead of being allowed to starve, he ought to be given instruction in motor driving or in whatever other trade may seem most suitable. At present, owing to the fact that all industrial changes tend to cause hardships to some section of wage-earners, there is a tendency to technical conservatism on the part of labor, a dislike of innovations, new processes, and new methods. But such changes, if they are in the permanent interest of the community, ought to be carried out without allowing them to bring unmerited loss to those sections of the community whose labor is no longer wanted in the old form. The instinctive conservatism of mankind is sure to make all processes of production change more slowly than they should. It is a pity to add to this by the avoidable conservatism which is forced upon organized labor at present through the unjust workings of a change. It will be said that men will not work well if the fear of dismissal does not spur them on. I think it is only a small percentage of whom this would be true at present. And those of whom it would be true might easily become industrious if they were given more congenial work or a wiser training. The residue who cannot be coaxed into industry by any such methods are probably to be regarded as pathological cases, requiring medical rather than penal treatment. And against this residue must be set the very much larger number who are now ruined in health or in morale by the terrible uncertainty of their livelihood and the great irregularity of their employment. To very many, security would bring a quite new possibility of physical and moral health. The most dangerous aspect of the tyranny of the employer is the power which it gives him of interfering with men's activities outside their working hours. A man may be dismissed because the employer dislikes his religion or his politics, or chooses to think his private life immoral. He may be dismissed because he tries to produce a spirit of independence among his fellow employees. He may fail completely to find employment merely on the ground that he is better educated than most and therefore more dangerous. Such cases actually occur at present. This evil would not be remedied, but rather intensified, under state socialism, because, where the State is the only employer, there is no refuge from its prejudices such as may now accidentally arise through the differing opinions of different men. The State would be able to enforce any system of beliefs it happened to like, and it is almost certain that it would do so. Freedom of thought would be penalized, and all independence of spirit would die out. Any rigid system would involve this evil. It is very necessary that there should be diversity and lack of complete systematization. Minorities must be able to live and develop their opinions freely. If this is not secured, the instinct of persecution and conformity will force all men into one mold and make all vital progress impossible. For these reasons, no one ought to be allowed to suffer destitution so long as he or she is _willing_ to work. And no kind of inquiry ought to be made into opinion or private life. It is only on this basis that it is possible to build up an economic system not founded upon tyranny and terror. II The power of the economic reformer is limited by the technical productivity of labor. So long as it was necessary to the bare subsistence of the human race that most men should work very long hours for a pittance, so long no civilization was possible except an aristocratic one; if there were to be men with sufficient leisure for any mental life, there had to be others who were sacrificed for the good of the few. But the time when such a system was necessary has passed away with the progress of machinery. It would be possible now, if we had a wise economic system, for all who have mental needs to find satisfaction for them. By a few hours a day of manual work, a man can produce as much as is necessary for his own subsistence; and if he is willing to forgo luxuries, that is all that the community has a right to demand of him. It ought to be open to all who so desire to do short hours of work for little pay, and devote their leisure to whatever pursuit happens to attract them. No doubt the great majority of those who chose this course would spend their time in mere amusement, as most of the rich do at present. But it could not be said, in such a society, that they were parasites upon the labor of others. And there would be a minority who would give their hours of nominal idleness to science or art or literature, or some other pursuit out of which fundamental progress may come. In all such matters, organization and system can only do harm. The one thing that can be done is to provide opportunity, without repining at the waste that results from most men failing to make good use of the opportunity. But except in cases of unusual laziness or eccentric ambition, most men would elect to do a full day's work for a full day's pay. For these, who would form the immense majority, the important thing is that ordinary work should, as far as possible, afford interest and independence and scope for initiative. These things are more important than income, as soon as a certain minimum has been reached. They can be secured by gild socialism, by industrial self-government subject to state control as regards the relations of a trade to the rest of the community. So far as I know, they cannot be secured in any other way. Guild socialism, as advocated by Mr. Orage and the "New Age," is associated with a polemic against "political" action, and in favor of direct economic action by trade-unions. It shares this with syndicalism, from which most of what is new in it is derived. But I see no reason for this attitude; political and economic action seem to me equally necessary, each in its own time and place. I think there is danger in the attempt to use the machinery of the present capitalist state for socialistic purposes. But there is need of political action to transform the machinery of the state, side by side with the transformation which we hope to see in economic institutions. In this country, neither transformation is likely to be brought about by a sudden revolution; we must expect each to come step by step, if at all, and I doubt if either could or should advance very far without the other. The economic system we should ultimately wish to see would be one in which the state would be the sole recipient of economic rent, while private capitalistic enterprises should be replaced by self-governing combinations of those who actually do the work. It ought to be optional whether a man does a whole day's work for a whole day's pay, or half a day's work for half a day's pay, except in cases where such an arrangement would cause practical inconvenience. A man's pay should not cease through the accident of his work being no longer needed, but should continue so long as he is willing to work, a new trade being taught him at the public expense, if necessary. Unwillingness to work should be treated medically or educationally, when it could not be overcome by a change to some more congenial occupation. The workers in a given industry should all be combined in one autonomous unit, and their work should not be subject to any outside control. The state should fix the price at which they produce, but should leave the industry self-governing in all other respects. In fixing prices, the state should, as far as possible, allow each industry to profit by any improvements which it might introduce into its own processes, but should endeavor to prevent undeserved loss or gain through changes in external economic conditions. In this way there would be every incentive to progress, with the least possible danger of unmerited destitution. And although large economic organizations will continue, as they are bound to do, there will be a diffusion of power which will take away the sense of individual impotence from which men and women suffer at present. III Some men, though they may admit that such a system would be desirable, will argue that it is impossible to bring it about, and that therefore we must concentrate on more immediate objects. I think it must be conceded that a political party ought to have proximate aims, measures which it hopes to carry in the next session or the next parliament, as well as a more distant goal. Marxian socialism, as it existed in Germany, seemed to me to suffer in this way: although the party was numerically powerful, it was politically weak, because it had no minor measures to demand while waiting for the revolution. And when, at last, German socialism was captured by those who desired a less impracticable policy, the modification which occurred was of exactly the wrong kind: acquiescence in bad policies, such as militarism and imperialism, rather than advocacy of partial reforms which, however inadequate, would still have been steps in the right direction. A similar defect was inherent in the policy of French syndicalism as it existed before the war. Everything was to wait for the general strike; after adequate preparation, one day the whole proletariat would unanimously refuse to work, the property owners would acknowledge their defeat, and agree to abandon all their privileges rather than starve. This is a dramatic conception; but love of drama is a great enemy of true vision. Men cannot be trained, except under very rare circumstances, to do something suddenly which is very different from what they have been doing before. If the general strike were to succeed, the victors, despite their anarchism, would be compelled at once to form an administration, to create a new police force to prevent looting and wanton destruction, to establish a provisional government issuing dictatorial orders to the various sections of revolutionaries. Now the syndicalists are opposed in principle to all political action; they would feel that they were departing from their theory in taking the necessary practical steps, and they would be without the required training because of their previous abstention from politics. For these reasons it is likely that, even after a syndicalist revolution, actual power would fall into the hands of men who were not really syndicalists. Another objection to a program which is to be realized suddenly at some remote date by a revolution or a general strike is that enthusiasm flags when there is nothing to do meanwhile, and no partial success to lessen the weariness of waiting. The only sort of movement which can succeed by such methods is one where the sentiment and the program are both very simple, as is the case in rebellions of oppressed nations. But the line of demarcation between capitalist and wage-earner is not sharp, like the line between Turk and Armenian, or between an Englishman and a native of India. Those who have advocated the social revolution have been mistaken in their political methods, chiefly because they have not realized how many people there are in the community whose sympathies and interests lie half on the side of capital, half on the side of labor. These people make a clear-cut revolutionary policy very difficult. For these reasons, those who aim at an economic reconstruction which is not likely to be completed to-morrow must, if they are to have any hope of success, be able to approach their goal by degrees, through measures which are of some use in themselves, even if they should not ultimately lead to the desired end. There must be activities which train men for those that they are ultimately to carry out, and there must be possible achievements in the near future, not only a vague hope of a distant paradise. But although I believe that all this is true, I believe no less firmly that really vital and radical reform requires some vision beyond the immediate future, some realization of what human beings might make of human life if they chose. Without some such hope, men will not have the energy and enthusiasm necessary to overcome opposition, or the steadfastness to persist when their aims are for the moment unpopular. Every man who has really sincere desire for any great amelioration in the conditions of life has first to face ridicule, then persecution, then cajolery and attempts at subtle corruption. We know from painful experience how few pass unscathed through these three ordeals. The last especially, when the reformer is shown all the kingdoms of the earth, is difficult, indeed almost impossible, except for those who have made their ultimate goal vivid to themselves by clear and definite thought. Economic systems are concerned essentially with the production and distribution of material goods. Our present system is wasteful on the production side, and unjust on the side of distribution. It involves a life of slavery to economic forces for the great majority of the community, and for the minority a degree of power over the lives of others which no man ought to have. In a good community the production of the necessaries of existence would be a mere preliminary to the important and interesting part of life, except for those who find a pleasure in some part of the work of producing necessaries. It is not in the least necessary that economic needs should dominate man as they do at present. This is rendered necessary at present, partly by the inequalities of wealth, partly by the fact that things of real value, such as a good education, are difficult to acquire, except for the well-to-do. Private ownership of land and capital is not defensible on grounds of justice, or on the ground that it is an economical way of producing what the community needs. But the chief objections to it are that it stunts the lives of men and women, that it enshrines a ruthless possessiveness in all the respect which is given to success, that it leads men to fill the greater part of their time and thought with the acquisition of purely material goods, and that it affords a terrible obstacle to the advancement of civilization and creative energy. The approach to a system free from these evils need not be sudden; it is perfectly possible to proceed step by step towards economic freedom and industrial self-government. It is not true that there is any outward difficulty in creating the kind of institutions that we have been considering. If organized labor wishes to create them, nothing could stand in its way. The difficulty involved is merely the difficulty of inspiring men with hope, of giving them enough imagination to see that the evils from which they suffer are unnecessary, and enough thought to understand how the evils are to be cured. This is a difficulty which can be overcome by time and energy. But it will not be overcome if the leaders of organized labor have no breadth of outlook, no vision, no hopes beyond some slight superficial improvement within the framework of the existing system. Revolutionary action may be unnecessary, but revolutionary thought is indispensable, and, as the outcome of thought, a rational and constructive hope. Chapter III: Pitfalls in Socialism I In its early days, socialism was a revolutionary movement of which the object was the liberation of the wage-earning classes and the establishment of freedom and justice. The passage from capitalism to the new régime was to be sudden and violent: capitalists were to be expropriated without compensation, and their power was not to be replaced by any new authority. Gradually a change came over the spirit of socialism. In France, socialists became members of the government, and made and unmade parliamentary majorities. In Germany, social democracy grew so strong that it became impossible for it to resist the temptation to barter away some of its intransigeance in return for government recognition of its claims. In England, the Fabians taught the advantage of reform as against revolution, and of conciliatory bargaining as against irreconcilable antagonism. The method of gradual reform has many merits as compared to the method of revolution, and I have no wish to preach revolution. But gradual reform has certain dangers, to wit, the ownership or control of businesses hitherto in private hands, and by encouraging legislative interference for the benefit of various sections of the wage-earning classes. I think it is at least doubtful whether such measures do anything at all to contribute toward the ideals which inspired the early socialists and still inspire the great majority of those who advocate some form of socialism. Let us take as an illustration such a measure as state purchase of railways. This is a typical object of state socialism, thoroughly practicable, already achieved in many countries, and clearly the sort of step that must be taken in any piecemeal approach to complete collectivism. Yet I see no reason to believe that any real advance toward democracy, freedom, or economic justice is achieved when a state takes over the railways after full compensation to the shareholders. Economic justice demands a diminution, if not a total abolition, of the proportion of the national income which goes to the recipients of rent and interest. But when the holders of railway shares are given government stock to replace their shares, they are given the prospect of an income in perpetuity equal to what they might reasonably expect to have derived from their shares. Unless there is reason to expect a great increase in the earnings of railways, the whole operation does nothing to alter the distribution of wealth. This could only be effected if the present owners were expropriated, or paid less than the market value, or given a mere life-interest as compensation. When full value is given, economic justice is not advanced in any degree. There is equally little advance toward freedom. The men employed on the railway have no more voice than they had before in the management of the railway, or in the wages and conditions of work. Instead of having to fight the directors, with the possibility of an appeal to the government, they now have to fight the government directly; and experience does not lead to the view that a government department has any special tenderness toward the claims of labor. If they strike, they have to contend against the whole organized power of the state, which they can only do successfully if they happen to have a strong public opinion on their side. In view of the influence which the state can always exercise on the press, public opinion is likely to be biased against them, particularly when a nominally progressive government is in power. There will no longer be the possibility of divergences between the policies of different railways. Railway men in England derived advantages for many years from the comparatively liberal policy of the North Eastern Railway, which they were able to use as an argument for a similar policy elsewhere. Such possibilities are excluded by the dead uniformity of state administration. And there is no real advance toward democracy. The administration of the railways will be in the hands of officials whose bias and associations separate them from labor, and who will develop an autocratic temper through the habit of power. The democratic machinery by which these officials are nominally controlled is cumbrous and remote, and can only be brought into operation on first-class issues which rouse the interest of the whole nation. Even then it is very likely that the superior education of the officials and the government, combined with the advantages of their position, will enable them to mislead the public as to the issues, and alienate the general sympathy even from the most excellent cause. I do not deny that these evils exist at present; I say only that they will not be remedied by such measures as the nationalization of railways in the present economic and political environment. A greater upheaval, and a greater change in men's habits of mind, is necessary for any really vital progress. II State socialism, even in a nation which possesses the form of political democracy, is not a truly democratic system. The way in which it fails to be democratic may be made plain by an analogy from the political sphere. Every democrat recognizes that the Irish ought to have self-government for Irish affairs, and ought not to be told that they have no grievance because they share in the Parliament of the United Kingdom. It is essential to democracy that any group of citizens whose interests or desires separate them at all widely from the rest of the community should be free to decide their internal affairs for themselves. And what is true of national or local groups is equally true of economic groups, such as miners or railway men. The national machinery of general elections is by no means sufficient to secure for groups of this kind the freedom which they ought to have. The power of officials, which is a great and growing danger in the modern state, arises from the fact that the majority of the voters, who constitute the only ultimate popular control over officials, are as a rule not interested in any one particular question, and are therefore not likely to interfere effectively against an official who is thwarting the wishes of the minority who are interested. The official is nominally subject to indirect popular control, but not to the control of those who are directly affected by his action. The bulk of the public will either never hear about the matter in dispute, or, if they do hear, will form a hasty opinion based upon inadequate information, which is far more likely to come from the side of the officials than from the section of the community which is affected by the question at issue. In an important political issue, some degree of knowledge is likely to be diffused in time; but in other matters there is little hope that this will happen. It may be said that the power of officials is much less dangerous than the power of capitalists, because officials have no economic interests that are opposed to those of wage-earners. But this argument involves far too simple a theory of political human nature--a theory which orthodox socialism adopted from the classical political economy, and has tended to retain in spite of growing evidence of its falsity. Economic self-interest, and even economic class-interest, is by no means the only important political motive. Officials, whose salary is generally quite unaffected by their decisions on particular questions, are likely, if they are of average honesty, to decide according to their view of the public interest; but their view will none the less have a bias which will often lead them wrong. It is important to understand this bias before entrusting our destinies too unreservedly to government departments. The first thing to observe is that, in any very large organization, and above all in a great state, officials and legislators are usually very remote from those whom they govern, and not imaginatively acquainted with the conditions of life to which their decisions will be applied. This makes them ignorant of much that they ought to know, even when they are industrious and willing to learn whatever can be taught by statistics and blue-books. The one thing they understand intimately is the office routine and the administrative rules. The result is an undue anxiety to secure a uniform system. I have heard of a French minister of education taking out his watch, and remarking, "At this moment all the children of such and such an age in France are learning so and so." This is the ideal of the administrator, an ideal utterly fatal to free growth, initiative, experiment, or any far reaching innovation. Laziness is not one of the motives recognized in textbooks on political theory, because all ordinary knowledge of human nature is considered unworthy of the dignity of these works; yet we all know that laziness is an immensely powerful motive with all but a small minority of mankind. Unfortunately, in this case laziness is reinforced by love of power, which leads energetic officials to create the systems which lazy officials like to administer. The energetic official inevitably dislikes anything that he does not control. His official sanction must be obtained before anything can be done. Whatever he finds in existence he wishes to alter in some way, so as to have the satisfaction of feeling his power and making it felt. If he is conscientious, he will think out some perfectly uniform and rigid scheme which he believes to be the best possible, and he will then impose this scheme ruthlessly, whatever promising growths he may have to lop down for the sake of symmetry. The result inevitably has something of the deadly dullness of a new rectangular town, as compared with the beauty and richness of an ancient city which has lived and grown with the separate lives and individualities of many generations. What has grown is always more living than what has been decreed; but the energetic official will always prefer the tidiness of what he has decreed to the apparent disorder of spontaneous growth. The mere possession of power tends to produce a love of power, which is a very dangerous motive, because the only sure proof of power consists in preventing others from doing what they wish to do. The essential theory of democracy is the diffusion of power among the whole people, so that the evils produced by one man's possession of great power shall be obviated. But the diffusion of power through democracy is only effective when the voters take an interest in the question involved. When the question does not interest them, they do not attempt to control the administration, and all actual power passes into the hands of officials. For this reason, the true ends of democracy are not achieved by state socialism or by any system which places great power in the hands of men subject to no popular control except that which is more or less indirectly exercised through parliament. Any fresh survey of men's political actions shows that, in those who have enough energy to be politically effective, love of power is a stronger motive than economic self-interest. Love of power actuates the great millionaires, who have far more money than they can spend, but continue to amass wealth merely in order to control more and more of the world's finance.[2] Love of power is obviously the ruling motive of many politicians. It is also the chief cause of wars, which are admittedly almost always a bad speculation from the mere point of view of wealth. For this reason, a new economic system which merely attacks economic motives and does not interfere with the concentration of power is not likely to effect any very great improvement in the world. This is one of the chief reasons for regarding state socialism with suspicion. [2] Cf. J. A. Hobson, "The Evolution of Modern Capitalism." III The problem of the distribution of power is a more difficult one than the problem of the distribution of wealth. The machinery of representative government has concentrated on _ultimate_ power as the only important matter, and has ignored immediate executive power. Almost nothing has been done to democratize administration. Government officials, in virtue of their income, security, and social position, are likely to be on the side of the rich, who have been their daily associates ever since the time of school and college. And whether or not they are on the side of the rich, they are not likely, for the reasons we have been considering, to be genuinely in favor of progress. What applies to government officials applies also to members of Parliament, with the sole difference that they have had to recommend themselves to a constituency. This, however, only adds hypocrisy to the other qualities of a ruling caste. Whoever has stood in the lobby of the House of Commons watching members emerge with wandering eye and hypothetical smile, until the constituent is espied, his arm taken, "my dear fellow" whispered in his ear, and his steps guided toward the inner precincts--whoever, observing this, has realized that these are the arts by which men become and remain legislators, can hardly fail to feel that democracy as it exists is not an absolutely perfect instrument of government. It is a painful fact that the ordinary voter, at any rate in England, is quite blind to insincerity. The man who does not care about any definite political measures can generally be won by corruption or flattery, open or concealed; the man who is set on securing reforms will generally prefer an ambitious windbag to a man who desires the public good without possessing a ready tongue. And the ambitious windbag, as soon as he has become a power by the enthusiasm he has aroused, will sell his influence to the governing clique, sometimes openly, sometimes by the more subtle method of intentionally failing at a crisis. This is part of the normal working of democracy as embodied in representative institutions. Yet a cure must be found if democracy is not to remain a farce. One of the sources of evil in modern large democracies is the fact that most of the electorate have no direct or vital interest in most of the questions that arise. Should Welsh children be allowed the use of the Welsh language in schools? Should gipsies be compelled to abandon their nomadic life at the bidding of the education authorities? Should miners have an eight-hour day? Should Christian Scientists be compelled to call in doctors in case of serious illness? These are matters of passionate interest to certain sections of the community, but of very little interest to the great majority. If they are decided according to the wishes of the numerical majority, the intense desires of a minority will be overborne by the very slight and uninformed whims of the indifferent remainder. If the minority are geographically concentrated, so that they can decide elections in a certain number of constituencies, like the Welsh and the miners, they have a good chance of getting their way, by the wholly beneficent process which its enemies describe as log-rolling. But if they are scattered and politically feeble, like the gipsies and the Christian Scientists, they stand a very poor chance against the prejudices of the majority. Even when they are geographically concentrated, like the Irish, they may fail to obtain their wishes, because they arouse some hostility or some instinct of domination in the majority. Such a state of affairs is the negation of all democratic principles. The tyranny of the majority is a very real danger. It is a mistake to suppose that the majority is necessarily right. On every new question the majority is always wrong at first. In matters where the state must act as a whole, such as tariffs, for example, decision by majorities is probably the best method that can be devised. But there are a great many questions in which there is no need of a uniform decision. Religion is recognized as one of these. Education ought to be one, provided a certain minimum standard is attained. Military service clearly ought to be one. Wherever divergent action by different groups is possible without anarchy, it ought to be permitted. In such cases it will be found by those who consider past history that, whenever any new fundamental issue arises, the majority are in the wrong, because they are guided by prejudice and habit. Progress comes through the gradual effect of a minority in converting opinion and altering custom. At one time--not so very long ago--it was considered monstrous wickedness to maintain that old women ought not to be burnt as witches. If those who held this opinion had been forcibly suppressed, we should still be steeped in medieval superstition. For such reasons, it is of the utmost importance that the majority should refrain from imposing its will as regards matters in which uniformity is not absolutely necessary. IV The cure for the evils and dangers which we have been considering is a very great extension of devolution and federal government. Wherever there is a national consciousness, as in Wales and Ireland, the area in which it exists ought to be allowed to decide all purely local affairs without external interference. But there are many matters which ought to be left to the management, not of local groups, but of trade groups, or of organizations embodying some set of opinions. In the East, men are subject to different laws according to the religion they profess. Something of this kind is necessary if any semblance of liberty is to exist where there is great divergence in beliefs. Some matters are essentially geographical; for instance, gas and water, roads, tariffs, armies and navies. These must be decided by an authority representing an area. How large the area ought to be, depends upon accidents of topography and sentiment, and also upon the nature of the matter involved. Gas and water require a small area, roads a somewhat larger one, while the only satisfactory area for an army or a navy is the whole planet, since no smaller area will prevent war. But the proper unit in most economic questions, and also in most questions that are intimately concerned with personal opinions, is not geographical at all. The internal management of railways ought not to be in the hands of the geographical state, for reasons which we have already considered. Still less ought it to be in the hands of a set of irresponsible capitalists. The only truly democratic system would be one which left the internal management of railways in the hands of the men who work on them. These men should elect the general manager, and a parliament of directors if necessary. All questions of wages, conditions of labor, running of trains, and acquisition of material, should be in the hands of a body responsible only to those actually engaged in the work of the railway. The same arguments apply to other large trades: mining, iron and steel, cotton, and so on. British trade-unionism, it seems to me, has erred in conceiving labor and capital as both permanent forces, which were to be brought to some equality of strength by the organization of labor. This seems to me too modest an ideal. The ideal which I should wish to substitute involves the conquest of democracy and self-government in the economic sphere as in the political sphere, and the total abolition of the power now wielded by the capitalist. The man who works on a railway ought to have a voice in the government of the railway, just as much as the man who works in a state has a right to a voice in the management of his state. The concentration of business initiative in the hands of the employers is a great evil, and robs the employees of their legitimate share of interest in the larger problems of their trade. French syndicalists were the first to advocate the system of trade autonomy as a better solution than state socialism. But in their view the trades were to be independent, almost like sovereign states at present. Such a system would not promote peace, any more than it does at present in international relations. In the affairs of any body of men, we may broadly distinguish what may be called questions of home politics from questions of foreign politics. Every group sufficiently well-marked to constitute a political entity ought to be autonomous in regard to internal matters, but not in regard to those that directly affect the outside world. If two groups are both entirely free as regards their relations to each other, there is no way of averting the danger of an open or covert appeal to force. The relations of a group of men to the outside world ought, whenever possible, to be controlled by a neutral authority. It is here that the state is necessary for adjusting the relations between different trades. The men who make some commodity should be entirely free as regards hours of labor, distribution of the total earnings of the trade, and all questions of business management. But they should not be free as regards the price of what they produce, since price is a matter concerning their relations to the rest of the community. If there were nominal freedom in regard to price, there would be a danger of a constant tug-of-war, in which those trades which were most immediately necessary to the existence of the community could always obtain an unfair advantage. Force is no more admirable in the economic sphere than in dealings between states. In order to secure the maximum of freedom with the minimum of force, the universal principle is: _Autonomy within each politically important group, and a neutral authority for deciding questions involving relations between groups_. The neutral authority should, of course, rest on a democratic basis, but should, if possible, represent a constituency wider than that of the groups concerned. In international affairs the only adequate authority would be one representing all civilized nations. In order to prevent undue extension of the power of such authorities, it is desirable and necessary that the various autonomous groups should be very jealous of their liberties, and very ready to resist by political means any encroachments upon their independence. State socialism does not tolerate such groups, each with their own officials responsible to the group. Consequently it abandons the internal affairs of a group to the control of men not responsible to that group or specially aware of its needs. This opens the door to tyranny and to the destruction of initiative. These dangers are avoided by a system which allows any group of men to combine for any given purpose, provided it is not predatory, and to claim from the central authority such self-government as is necessary to the carrying out of the purpose. Churches of various denominations afford an instance. Their autonomy was won by centuries of warfare and persecution. It is to be hoped that a less terrible struggle will be required to achieve the same result in the economic sphere. But whatever the obstacles, I believe the importance of liberty is as great in the one case as it has been admitted to be in the other. Chapter IV: Individual Liberty and Public Control I Society cannot exist without law and order, and cannot advance except through the initiative of vigorous innovators. Yet law and order are always hostile to innovations, and innovators are almost always, to some extent, anarchists. Those whose minds are dominated by fear of a relapse towards barbarism will emphasize the importance of law and order, while those who are inspired by the hope of an advance towards civilization will usually be more conscious of the need of individual initiative. Both temperaments are necessary, and wisdom lies in allowing each to operate freely where it is beneficent. But those who are on the side of law and order, since they are reinforced by custom and the instinct for upholding the _status quo_, have no need of a reasoned defense. It is the innovators who have difficulty in being allowed to exist and work. Each generation believes that this difficulty is a thing of the past, but each generation is only tolerant of _past_ innovations. Those of its own day are met with the same persecution as though the principle of toleration had never been heard of. "In early society," says Westermarck, "customs are not only moral rules, but the only moral rules ever thought of. The savage strictly complies with the Hegelian command that no man must have a private conscience. The following statement, which refers to the Tinnevelly Shanars, may be quoted as a typical example: 'Solitary individuals amongst them rarely adopt any new opinions, or any new course of procedure. They follow the multitude to do evil, and they follow the multitude to do good. They think in herds.'"[3] [3] "The Origin and Development of the Moral Ideas," 2d edition, Vol. I, p. 119. Those among ourselves who have never thought a thought or done a deed in the slightest degree different from the thoughts and deeds of our neighbors will congratulate themselves on the difference between us and the savage. But those who have ever attempted any real innovation cannot help feeling that the people they know are not so very unlike the Tinnevelly Shanars. Under the influence of socialism, even progressive opinion, in recent years, has been hostile to individual liberty. Liberty is associated, in the minds of reformers, with _laissez-faire_, the Manchester School, and the exploitation of women and children which resulted from what was euphemistically called "free competition." All these things were evil, and required state interference; in fact, there is need of an immense increase of state action in regard to cognate evils which still exist. In everything that concerns the economic life of the community, as regards both distribution and conditions of production, what is required is more public control, not less--how much more, I do not profess to know. Another direction in which there is urgent need of the substitution of law and order for anarchy is international relations. At present, each sovereign state has complete individual freedom, subject only to the sanction of war. This individual freedom will have to be curtailed in regard to external relations if wars are ever to cease. But when we pass outside the sphere of material possessions, we find that the arguments in favor of public control almost entirely disappear. Religion, to begin with, is recognized as a matter in which the state ought not to interfere. Whether a man is Christian, Mahometan, or Jew is a question of no public concern, so long as he obeys the laws; and the laws ought to be such as men of all religions can obey. Yet even here there are limits. No civilized state would tolerate a religion demanding human sacrifice. The English in India put an end to suttee, in spite of a fixed principle of non-interference with native religious customs. Perhaps they were wrong to prevent suttee, yet almost every European would have done the same. We cannot _effectively_ doubt that such practices ought to be stopped, however we may theorize in favor of religious liberty. In such cases, the interference with liberty is imposed from without by a higher civilization. But the more common case, and the more interesting, is when an independent state interferes on behalf of custom against individuals who are feeling their way toward more civilized beliefs and institutions. "In New South Wales," says Westermarck, "the first-born of every lubra used to be eaten by the tribe 'as part of a religious ceremony.' In the realm of Khai-muh, in China, according to a native account, it was customary to kill and devour the eldest son alive. Among certain tribes in British Columbia the first child is often sacrificed to the sun. The Indians of Florida, according to Le Moyne de Morgues, sacrificed the first-born son to the chief....'"[4] [4] _Op cit._, p. 459. There are pages and pages of such instances. There is nothing analogous to these practices among ourselves. When the first-born in Florida was told that his king and country needed him, this was a mere mistake, and with us mistakes of this kind do not occur. But it is interesting to inquire how these superstitions died out, in such cases, for example, as that of Khai-muh, where foreign compulsion is improbable. We may surmise that some parents, under the selfish influence of parental affection, were led to doubt whether the sun would really be angry if the eldest child were allowed to live. Such rationalism would be regarded as very dangerous, since it was calculated to damage the harvest. For generations the opinion would be cherished in secret by a handful of cranks, who would not be able to act upon it. At last, by concealment or flight, a few parents would save their children from the sacrifice. Such parents would be regarded as lacking all public spirit, and as willing to endanger the community for their private pleasure. But gradually it would appear that the state remained intact, and the crops were no worse than in former years. Then, by a fiction, a child would be deemed to have been sacrificed if it was solemnly dedicated to agriculture or some other work of national importance chosen by the chief. It would be many generations before the child would be allowed to choose its own occupation after it had grown old enough to know its own tastes and capacities. And during all those generations, children would be reminded that only an act of grace had allowed them to live at all, and would exist under the shadow of a purely imaginary duty to the state. The position of those parents who first disbelieved in the utility of infant sacrifice illustrates all the difficulties which arise in connection with the adjustment of individual freedom to public control. The authorities, believing the sacrifice necessary for the good of the community, were bound to insist upon it; the parents, believing it useless, were equally bound to do everything in their power toward saving the child. How ought both parties to act in such a case? The duty of the skeptical parent is plain: to save the child by any possible means, to preach the uselessness of the sacrifice in season and out of season, and to endure patiently whatever penalty the law may indict for evasion. But the duty of the authorities is far less clear. So long as they remain firmly persuaded that the universal sacrifice of the first-born is indispensable, they are bound to persecute those who seek to undermine this belief. But they will, if they are conscientious, very carefully examine the arguments of opponents, and be willing in advance to admit that these arguments _may_ be sound. They will carefully search their own hearts to see whether hatred of children or pleasure in cruelty has anything to do with their belief. They will remember that in the past history of Khai-muh there are innumerable instances of beliefs, now known to be false, on account of which those who disagreed with the prevalent view were put to death. Finally they will reflect that, though errors which are traditional are often wide-spread, new beliefs seldom win acceptance unless they are nearer to the truth than what they replace; and they will conclude that a new belief is probably either an advance, or so unlikely to become common as to be innocuous. All these considerations will make them hesitate before they resort to punishment. II The study of past times and uncivilized races makes it clear beyond question that the customary beliefs of tribes or nations are almost invariably false. It is difficult to divest ourselves completely of the customary beliefs of our own age and nation, but it is not very difficult to achieve a certain degree of doubt in regard to them. The Inquisitor who burnt men at the stake was acting with true humanity if all his beliefs were correct; but if they were in error at any point, he was inflicting a wholly unnecessary cruelty. A good working maxim in such matters is this: Do not trust customary beliefs so far as to perform actions which must be disastrous unless the beliefs in question are wholly true. The world would be utterly bad, in the opinion of the average Englishman, unless he could say "Britannia rules the waves"; in the opinion of the average German, unless he could say "Deutschland über alles." For the sake of these beliefs, they are willing to destroy European civilization. If the beliefs should happen to be false, their action is regrettable. One fact which emerges from these considerations is that no obstacle should be placed in the way of thought and its expression, nor yet in the way of statements of fact. This was formerly common ground among liberal thinkers, though it was never quite realized in the practice of civilized countries. But it has recently become, throughout Europe, a dangerous paradox, on account of which men suffer imprisonment or starvation. For this reason it has again become worth stating. The grounds for it are so evident that I should be ashamed to repeat them if they were not universally ignored. But in the actual world it is very necessary to repeat them. To attain complete truth is not given to mortals, but to advance toward it by successive steps is not impossible. On any matter of general interest, there is usually, in any given community at any given time, a received opinion, which is accepted as a matter of course by all who give no special thought to the matter. Any questioning of the received opinion rouses hostility, for a number of reasons. The most important of these is the instinct of conventionality, which exists in all gregarious animals and often leads them to put to death any markedly peculiar member of the herd. The next most important is the feeling of insecurity aroused by doubt as to the beliefs by which we are in the habit of regulating our lives. Whoever has tried to explain the philosophy of Berkeley to a plain man will have seen in its unadulterated form the anger aroused by this feeling. What the plain man derives from Berkeley's philosophy at a first hearing is an uncomfortable suspicion that nothing is solid, so that it is rash to sit on a chair or to expect the floor to sustain us. Because this suspicion is uncomfortable, it is irritating, except to those who regard the whole argument as merely nonsense. And in a more or less analogous way any questioning of what has been taken for granted destroys the feeling of standing on solid ground, and produces a condition of bewildered fear. A third reason which makes men dislike novel opinions is that vested interests are bound up with old beliefs. The long fight of the church against science, from Giordano Bruno to Darwin, is attributable to this motive among others. The horror of socialism which existed in the remote past was entirely attributable to this cause. But it would be a mistake to assume, as is done by those who seek economic motives everywhere, that vested interests are the principal source of anger against novelties in thought. If this were the case, intellectual progress would be much more rapid than it is. The instinct of conventionality, horror of uncertainty, and vested interests, all militate against the acceptance of a new idea. And it is even harder to think of a new idea than to get it accepted; most people might spend a lifetime in reflection without ever making a genuinely original discovery. In view of all these obstacles, it is not likely that any society at any time will suffer from a plethora of heretical opinions. Least of all is this likely in a modern civilized society, where the conditions of life are in constant rapid change, and demand, for successful adaptation, an equally rapid change in intellectual outlook. There should be an attempt, therefore, to encourage, rather than discourage, the expression of new beliefs and the dissemination of knowledge tending to support them. But the very opposite is, in fact, the case. From childhood upward, everything is done to make the minds of men and women conventional and sterile. And if, by misadventure, some spark of imagination remains, its unfortunate possessor is considered unsound and dangerous, worthy only of contempt in time of peace and of prison or a traitor's death in time of war. Yet such men are known to have been in the past the chief benefactors of mankind, and are the very men who receive most honor as soon as they are safely dead. The whole realm of thought and opinion is utterly unsuited to public control; it ought to be as free, and as spontaneous as is possible to those who know what others have believed. The state is justified in insisting that children shall be educated, but it is not justified in forcing their education to proceed on a uniform plan and to be directed to the production of a dead level of glib uniformity. Education, and the life of the mind generally, is a matter in which individual initiative is the chief thing needed; the function of the state should begin and end with insistence on some kind of education, and, if possible, a kind which promotes mental individualism, not a kind which happens to conform to the prejudices of government officials. III Questions of practical morals raise more difficult problems than questions of mere opinion. The thugs honestly believe it their duty to commit murders, but the government does not acquiesce. The conscientious objectors honestly hold the opposite opinion, and again the government does not acquiesce. Killing is a state prerogative; it is equally criminal to do it unbidden and not to do it when bidden. The same applies to theft, unless it is on a large scale or by one who is already rich. Thugs and thieves are men who use force in their dealings with their neighbors, and we may lay it down broadly that the private use of force should be prohibited except in rare cases, however conscientious may be its motive. But this principle will not justify compelling men to use force at the bidding of the state, when they do not believe it justified by the occasion. The punishment of conscientious objectors seems clearly a violation of individual liberty within its legitimate sphere. It is generally assumed without question that the state has a right to punish certain kinds of sexual irregularity. No one doubts that the Mormons sincerely believed polygamy to be a desirable practice, yet the United States required them to abandon its legal recognition, and probably any other Christian country would have done likewise. Nevertheless, I do not think this prohibition was wise. Polygamy is legally permitted in many parts of the world, but is not much practised except by chiefs and potentates. If, as Europeans generally believe, it is an undesirable custom, it is probable that the Mormons would have soon abandoned it, except perhaps for a few men of exceptional position. If, on the other hand, it had proved a successful experiment, the world would have acquired a piece of knowledge which it is now unable to possess. I think in all such cases the law should only intervene when there is some injury inflicted without the consent of the injured person. It is obvious that men and women would not tolerate having their wives or husbands selected by the state, whatever eugenists might have to say in favor of such a plan. In this it seems clear that ordinary public opinion is in the right, not because people choose wisely, but because any choice of their own is better than a forced marriage. What applies to marriage ought also to apply to the choice of a trade or profession; although some men have no marked preferences, most men greatly prefer some occupations to others, and are far more likely to be useful citizens if they follow their preferences than if they are thwarted by a public authority. The case of the man who has an intense conviction that he ought to do a certain kind of work is peculiar, and perhaps not very common; but it is important because it includes some very important individuals. Joan of Arc and Florence Nightingale defied convention in obedience to a feeling of this sort; reformers and agitators in unpopular causes, such as Mazzini, have belonged to this class; so have many men of science. In cases of this kind the individual conviction deserves the greatest respect, even if there seems no obvious justification for it. Obedience to the impulse is very unlikely to do much harm, and may well do great good. The practical difficulty is to distinguish such impulses from desires which produce similar manifestations. Many young people wish to be authors without having an impulse to write any particular book, or wish to be painters without having an impulse to create any particular picture. But a little experience will usually show the difference between a genuine and a spurious impulse; and there is less harm in indulging the spurious impulse for a time than in thwarting the impulse which is genuine. Nevertheless, the plain man almost always has a tendency to thwart the genuine impulse, because it seems anarchic and unreasonable, and is seldom able to give a good account of itself in advance. What is markedly true of some notable personalities is true, in a lesser degree, of almost every individual who has much vigor or force of life; there is an impulse towards activity of some kind, as a rule not very definite in youth, but growing gradually more sharply outlined under the influence of education and opportunity. The direct impulse toward a kind of activity for its own sake must be distinguished from the desire for the expected effects of the activity. A young man may desire the rewards of great achievement without having any spontaneous impulse toward the activities which lead to achievement. But those who actually achieve much, although they may desire the rewards, have also something in their nature which inclines them to choose a certain kind of work as the road which they must travel if their ambition is to be satisfied. This artist's impulse, as it may be called, is a thing of infinite value to the individual, and often to the world; to respect it in oneself and in others makes up nine tenths of the good life. In most human beings it is rather frail, rather easily destroyed or disturbed; parents and teachers are too often hostile to it, and our economic system crushes out its last remnants in young men and young women. The result is that human beings cease to be individual, or to retain the native pride that is their birthright; they become machine-made, tame, convenient for the bureaucrat and the drill-sergeant, capable of being tabulated in statistics without anything being omitted. This is the fundamental evil resulting from lack of liberty; and it is an evil which is being continually intensified as population grows more dense and the machinery of organization grows more efficient. The things that men desire are many and various: admiration, affection, power, security, ease, outlets for energy, are among the commonest of motives. But such abstractions do not touch what makes the difference between one man and another. Whenever I go to the zoölogical gardens, I am struck by the fact that all the movements of a stork have some common quality, differing from the movements of a parrot or an ostrich. It is impossible to put in words what the common quality is, and yet we feel that each thing an animal does is the sort of thing we might expect that animal to do. This indefinable quality constitutes the individuality of the animal, and gives rise to the pleasure we feel in watching the animal's actions. In a human being, provided he has not been crushed by an economic or governmental machine, there is the same kind of individuality, a something distinctive without which no man or woman can achieve much of importance, or retain the full dignity which is native to human beings. It is this distinctive individuality that is loved by the artist, whether painter or writer. The artist himself, and the man who is creative in no matter what direction, has more of it than the average man. Any society which crushes this quality, whether intentionally or by accident, must soon become utterly lifeless and traditional, without hope of progress and without any purpose in its being. To preserve and strengthen the impulse that makes individuality should be the foremost object of all political institutions. IV We now arrive at certain general principles in regard to individual liberty and public control. The greater part of human impulses may be divided into two classes, those which are possessive and those which are constructive or creative. Social institutions are the garments or embodiments of impulses, and may be classified roughly according to the impulses which they embody. Property is the direct expression of possessiveness; science and art are among the most direct expressions of creativeness. Possessiveness is either defensive or aggressive; it seeks either to retain against a robber, or to acquire from a present holder. In either case an attitude of hostility toward others is of its essence. It would be a mistake to suppose that defensive possessiveness is always justifiable, while the aggressive kind is always blameworthy; where there is great injustice in the _status quo_, the exact opposite may be the case, and ordinarily neither is justifiable. State interference with the actions of individuals is necessitated by possessiveness. Some goods can be acquired or retained by force, while others cannot. A wife can be acquired by force, as the Romans acquired the Sabine women; but a wife's affection cannot be acquired in this way. There is no record that the Romans desired the affection of the Sabine women; and those in whom possessive impulses are strong tend to care chiefly for the goods that force can secure. All material goods belong to this class. Liberty in regard to such goods, if it were unrestricted, would make the strong rich and the weak poor. In a capitalistic society, owing to the partial restraints imposed by law, it makes cunning men rich and honest men poor, because the force of the state is put at men's disposal, not according to any just or rational principle, but according to a set of traditional maxims of which the explanation is purely historical. In all that concerns possession and the use of force, unrestrained liberty involves anarchy and injustice. Freedom to kill, freedom to rob, freedom to defraud, no longer belong to individuals, though they still belong to great states, and are exercised by them in the name of patriotism. Neither individuals nor states ought to be free to exert force on their own initiative, except in such sudden emergencies as will subsequently be admitted in justification by a court of law. The reason for this is that the exertion of force by one individual against another is always an evil on both sides, and can only be tolerated when it is compensated by some overwhelming resultant good. In order to minimize the amount of force actually exerted in the world, it is necessary that there should be a public authority, a repository of practically irresistible force, whose function should be primarily to repress the private use of force. A use of force is _private_ when it is exerted by one of the interested parties, or by his friends or accomplices, not by a public neutral authority according to some rule which is intended to be in the public interest. The régime of private property under which we live does much too little to restrain the private use of force. When a man owns a piece of land, for example, he may use force against trespassers, though they must not use force against him. It is clear that some restriction of the liberty of trespass is necessary for the cultivation of the land. But if such powers are to be given to an individual, the state ought to satisfy itself that he occupies no more land than he is warranted in occupying in the public interest, and that the share of the produce of the land that comes to him is no more than a just reward for his labors. Probably the only way in which such ends can be achieved is by state ownership of land. The possessors of land and capital are able at present, by economic pressure, to use force against those who have no possessions. This force is sanctioned by law, while force exercised by the poor against the rich is illegal. Such a state of things is unjust, and does not diminish the use of private force as much as it might be diminished. The whole realm of the possessive impulses, and of the use of force to which they give rise, stands in need of control by a public neutral authority, in the interests of liberty no less than of justice. Within a nation, this public authority will naturally be the state; in relations between nations, if the present anarchy is to cease, it will have to be some international parliament. But the motive underlying the public control of men's possessive impulses should always be the increase of liberty, both by the prevention of private tyranny and by the liberation of creative impulses. If public control is not to do more harm than good, it must be so exercised as to leave the utmost freedom of private initiative in all those ways that do not involve the private use of force. In this respect all governments have always failed egregiously, and there is no evidence that they are improving. The creative impulses, unlike those that are possessive, are directed to ends in which one man's gain is not another man's loss. The man who makes a scientific discovery or writes a poem is enriching others at the same time as himself. Any increase in knowledge or good-will is a gain to all who are affected by it, not only to the actual possessor. Those who feel the joy of life are a happiness to others as well as to themselves. Force cannot create such things, though it can destroy them; no principle of distributive justice applies to them, since the gain of each is the gain of all. For these reasons, the creative part of a man's activity ought to be as free as possible from all public control, in order that it may remain spontaneous and full of vigor. The only function of the state in regard to this part of the individual life should be to do everything possible toward providing outlets and opportunities. In every life a part is governed by the community, and a part by private initiative. The part governed by private initiative is greatest in the most important individuals, such as men of genius and creative thinkers. This part ought only to be restricted when it is predatory; otherwise, everything ought to be done to make it as great and as vigorous as possible. The object of education ought not to be to make all men think alike, but to make each think in the way which is the fullest expression of his own personality. In the choice of a means of livelihood all young men and young women ought, as far as possible, to be able to choose what is attractive to them; if no money-making occupation is attractive, they ought to be free to do little work for little pay, and spend their leisure as they choose. Any kind of censure on freedom of thought or on the dissemination of knowledge is, of course, to be condemned utterly. Huge organizations, both political and economic, are one of the distinguishing characteristics of the modern world. These organizations have immense power, and often use their power to discourage originality in thought and action. They ought, on the contrary, to give the freest scope that is possible without producing anarchy or violent conflict. They ought not to take cognizance of any part of a man's life except what is concerned with the legitimate objects of public control, namely, possessions and the use of force. And they ought, by devolution, to leave as large a share of control as possible in the hands of individuals and small groups. If this is not done, the men at the head of these vast organizations will infallibly become tyrannous through the habit of excessive power, and will in time interfere in ways that crush out individual initiative. The problem which faces the modern world is the combination of individual initiative with the increase in the scope and size of organizations. Unless it is solved, individuals will grow less and less full of life and vigor, and more and more passively submissive to conditions imposed upon them. A society composed of such individuals cannot be progressive or add much to the world's stock of mental and spiritual possessions. Only personal liberty and the encouragement of initiative can secure these things. Those who resist authority when it encroaches upon the legitimate sphere of the individual are performing a service to society, however little society may value it. In regard to the past, this is universally acknowledged; but it is no less true in regard to the present and the future. Chapter V: National Independence and Internationalism In the relations between states, as in the relations of groups within a single state, what is to be desired is independence for each as regards internal affairs, and law rather than private force as regards external affairs. But as regards groups within a state, it is internal independence that must be emphasized, since that is what is lacking; subjection to law has been secured, on the whole, since the end of the Middle Ages. In the relations between states, on the contrary, it is law and a central government that are lacking, since independence exists for external as for internal affairs. The stage we have reached in the affairs of Europe corresponds to the stage reached in our internal affairs during the Wars of the Roses, when turbulent barons frustrated the attempt to make them keep the king's peace. Thus, although the goal is the same in the two cases, the steps to be taken in order to achieve it are quite different. There can be no good international system until the boundaries of states coincide as nearly as possible with the boundaries of nations. But it is not easy to say what we mean by a nation. Are the Irish a nation? Home Rulers say yes, Unionists say no. Are the Ulstermen a nation? Unionists say yes, Home Rulers say no. In all such cases it is a party question whether we are to call a group a nation or not. A German will tell you that the Russian Poles are a nation, but as for the Prussian Poles, they, of course, are part of Prussia. Professors can always be hired to prove, by arguments of race or language or history, that a group about which there is a dispute is, or is not, a nation, as may be desired by those whom the professors serve. If we are to avoid all these controversies, we must first of all endeavor to find some definition of a nation. A nation is not to be defined by affinities of language or a common historical origin, though these things often help to produce a nation. Switzerland is a nation, despite diversities of race, religion, and language. England and Scotland now form one nation, though they did not do so at the time of the Civil War. This is shown by Cromwell's saying, in the height of the conflict, that he would rather be subject to the domain of the royalists than to that of the Scotch. Great Britain was one state before it was one nation; on the other hand, Germany was one nation before it was one state. What constitutes a nation is a sentiment and an instinct, a sentiment of similarity and an instinct of belonging to the same group or herd. The instinct is an extension of the instinct which constitutes a flock of sheep, or any other group of gregarious animals. The sentiment which goes with this is like a milder and more extended form of family feeling. When we return to England after being on the Continent, we feel something friendly in the familiar ways, and it is easy to believe that Englishmen on the whole are virtuous, while many foreigners are full of designing wickedness. Such feelings make it easy to organize a nation into a state. It is not difficult, as a rule, to acquiesce in the orders of a national government. We feel that it is our government, and that its decrees are more or less the same as those which we should have given if we ourselves had been the governors. There is an instinctive and usually unconscious sense of a common purpose animating the members of a nation. This becomes especially vivid when there is war or a danger of war. Any one who, at such a time, stands out against the orders of his government feels an inner conflict quite different from any that he would feel in standing out against the orders of a foreign government in whose power he might happen to find himself. If he stands out, he does so with some more or less conscious hope that his government may in time come to think as he does; whereas, in standing out against a foreign government, no such hope is necessary. This group instinct, however it may have arisen, is what constitutes a nation, and what makes it important that the boundaries of nations should also be the boundaries of states. National sentiment is a fact, and should be taken account of by institutions. When it is ignored, it is intensified and becomes a source of strife. It can only be rendered harmless by being given free play, so long as it is not predatory. But it is not, in itself, a good or admirable feeling. There is nothing rational and nothing desirable in a limitation of sympathy which confines it to a fragment of the human race. Diversities of manners and customs and traditions are, on the whole, a good thing, since they enable different nations to produce different types of excellence. But in national feeling there is always latent or explicit an element of hostility to foreigners. National feeling, as we know it, could not exist in a nation which was wholly free from external pressure of a hostile kind. And group feeling produces a limited and often harmful kind of morality. Men come to identify the good with what serves the interests of their own group, and the bad with what works against those interests, even if it should happen to be in the interests of mankind as a whole. This group morality is very much in evidence during war, and is taken for granted in men's ordinary thought. Although almost all Englishmen consider the defeat of Germany desirable for the good of the world, yet nevertheless most of them honor a German for fighting for his country, because it has not occurred to them that his actions ought to be guided by a morality higher than that of the group. A man does right, as a rule, to have his thoughts more occupied with the interests of his own nation than with those of others, because his actions are more likely to affect his own nation. But in time of war, and in all matters which are of equal concern to other nations and to his own, a man ought to take account of the universal welfare, and not allow his survey to be limited by the interest, or supposed interest, of his own group or nation. So long as national feeling exists, it is very important that each nation should be self-governing as regards its internal affairs. Government can only be carried on by force and tyranny if its subjects view it with hostile eyes, and they will so view it if they feel that it belongs to an alien nation. This principle meets with difficulties in cases where men of different nations live side by side in the same area, as happens in some parts of the Balkans. There are also difficulties in regard to places which, for some geographical reason, are of great international importance, such as the Suez Canal and the Panama Canal. In such cases the purely local desires of the inhabitants may have to give way before larger interests. But in general, at any rate as applied to civilized communities, the principle that the boundaries of nations ought to coincide with the boundaries of states has very few exceptions. This principle, however, does not decide how the relations between states are to be regulated, or how a conflict of interests between rival states is to be decided. At present, every great state claims absolute sovereignty, not only in regard to its internal affairs but also in regard to its external actions. This claim to absolute sovereignty leads it into conflict with similar claims on the part of other great states. Such conflicts at present can only be decided by war or diplomacy, and diplomacy is in essence nothing but the threat of war. There is no more justification for the claim to absolute sovereignty on the part of a state than there would be for a similar claim on the part of an individual. The claim to absolute sovereignty is, in effect, a claim that all external affairs are to be regulated purely by force, and that when two nations or groups of nations are interested in a question, the decision shall depend solely upon which of them is, or is believed to be, the stronger. This is nothing but primitive anarchy, "the war of all against all," which Hobbes asserted to be the original state of mankind. There cannot be secure peace in the world, or any decision of international questions according to international law, until states are willing to part with their absolute sovereignty as regards their external relations, and to leave the decision in such matters to some international instrument of government.[5] An international government will have to be legislative as well as judicial. It is not enough that there should be a Hague tribunal, deciding matters according to some already existing system of international law; it is necessary also that there should be a body capable of enacting international law, and this body will have to have the power of transferring territory from one state to another, when it is persuaded that adequate grounds exist for such a transference. Friends of peace will make a mistake if they unduly glorify the _status quo_. Some nations grow, while others dwindle; the population of an area may change its character by emigration and immigration. There is no good reason why states should resent changes in their boundaries under such conditions, and if no international authority has power to make changes of this kind, the temptations to war will sometimes become irresistible. [5] For detailed scheme of international government see "International Government," by L. Woolf. Allen & Unwin. The international authority ought to possess an army and navy, and these ought to be the only army and navy in existence. The only legitimate use of force is to diminish the total amount of force exercised in the world. So long as men are free to indulge their predatory instincts, some men or groups of men will take advantage of this freedom for oppression and robbery. Just as the police are necessary to prevent the use of force by private citizens, so an international police will be necessary to prevent the lawless use of force by separate states. But I think it is reasonable to hope that if ever an international government, possessed of the only army and navy in the world, came into existence, the need of force to enact obedience to its decisions would be very temporary. In a short time the benefits resulting from the substitution of law for anarchy would become so obvious that the international government would acquire an unquestioned authority, and no state would dream of rebelling against its decisions. As soon as this stage had been reached, the international army and navy would become unnecessary. We have still a very long road to travel before we arrive at the establishment of an international authority, but it is not very difficult to foresee the steps by which this result will be gradually reached. There is likely to be a continual increase in the practice of submitting disputes to arbitration, and in the realization that the supposed conflicts of interest between different states are mainly illusory. Even where there is a real conflict of interest, it must in time become obvious that neither of the states concerned would suffer as much by giving way as by fighting. With the progress of inventions, war, when it does occur, is bound to become increasingly destructive. The civilized races of the world are faced with the alternative of coöperation or mutual destruction. The present war is making this alternative daily more evident. And it is difficult to believe that, when the enmities which it has generated have had time to cool, civilized men will deliberately choose to destroy civilization, rather than acquiesce in the abolition of war. The matters in which the interests of nations are supposed to clash are mainly three: tariffs, which are a delusion; the exploitation of inferior races, which is a crime; pride of power and dominion, which is a schoolboy folly. The economic argument against tariffs is familiar, and I shall not repeat it. The only reason why it fails to carry conviction is the enmity between nations. Nobody proposes to set up a tariff between England and Scotland, or between Lancashire and Yorkshire. Yet the arguments by which tariffs between nations are supported might be used just as well to defend tariffs between counties. Universal free trade would indubitably be of economic benefit to mankind, and would be adopted to-morrow if it were not for the hatred and suspicion which nations feel one toward another. From the point of view of preserving the peace of the world, free trade between the different civilized states is not so important as the open door in their dependencies. The desire for exclusive markets is one of the most potent causes of war. Exploiting what are called "inferior races" has become one of the main objects of European statecraft. It is not only, or primarily, trade that is desired, but opportunities for investment; finance is more concerned in the matter than industry. Rival diplomatists are very often the servants, conscious or unconscious, of rival groups of financiers. The financiers, though themselves of no particular nation, understand the art of appealing to national prejudice, and of inducing the taxpayer to incur expenditure of which they reap the benefit. The evils which they produce at home, and the devastation that they spread among the races whom they exploit, are part of the price which the world has to pay for its acquiescence in the capitalist régime. But neither tariffs nor financiers would be able to cause serious trouble, if it were not for the sentiment of national pride. National pride might be on the whole beneficent, if it took the direction of emulation in the things that are important to civilization. If we prided ourselves upon our poets, our men of science, or the justice and humanity of our social system, we might find in national pride a stimulus to useful endeavors. But such matters play a very small part. National pride, as it exists now, is almost exclusively concerned with power and dominion, with the extent of territory that a nation owns, and with its capacity for enforcing its will against the opposition of other nations. In this it is reinforced by group morality. To nine citizens out of ten it seems self-evident, whenever the will of their own nation clashes with that of another, that their own nation must be in the right. Even if it were not in the right on the particular issue, yet it stands in general for so much nobler ideals than those represented by the other nation to the dispute, that any increase in its power is bound to be for the good of mankind. Since all nations equally believe this of themselves, all are equally ready to insist upon the victory of their own side in any dispute in which they believe that they have a good hope of victory. While this temper persists, the hope of international coöperation must remain dim. If men could divest themselves of the sentiment of rivalry and hostility between different nations, they would perceive that the matters in which the interests of different nations coincide immeasurably outweigh those in which they clash; they would perceive, to begin with, that trade is not to be compared to warfare; that the man who sells you goods is not doing you an injury. No one considers that the butcher and the baker are his enemies because they drain him of money. Yet as soon as goods come from a foreign country, we are asked to believe that we suffer a terrible injury in purchasing them. No one remembers that it is by means of goods exported that we purchase them. But in the country to which we export, it is the goods we send which are thought dangerous, and the goods we buy are forgotten. The whole conception of trade, which has been forced upon us by manufacturers who dreaded foreign competition, by trusts which desired to secure monopolies, and by economists poisoned by the virus of nationalism, is totally and absolutely false. Trade results simply from division of labor. A man cannot himself make all the goods of which he has need, and therefore he must exchange his produce with that of other people. What applies to the individual, applies in exactly the same way to the nation. There is no reason to desire that a nation should itself produce all the goods of which it has need; it is better that it should specialize upon those goods which it can produce to most advantage, and should exchange its surplus with the surplus of other goods produced by other countries. There is no use in sending goods out of the country except in order to get other goods in return. A butcher who is always willing to part with his meat but not willing to take bread from the baker, or boots from the bootmaker, or clothes from the tailor, would soon find himself in a sorry plight. Yet he would be no more foolish than the protectionist who desires that we should send goods abroad without receiving payment in the shape of goods imported from abroad. The wage system has made people believe that what a man needs is work. This, of course, is absurd. What he needs is the goods produced by work, and the less work involved in making a given amount of goods, the better. But owing to our economic system, every economy in methods of production enables employers to dismiss some of their employees, and to cause destitution, where a better system would produce only an increase of wages or a diminution in the hours of work without any corresponding diminution of wages. Our economic system is topsyturvy. It makes the interest of the individual conflict with the interest of the community in a thousand ways in which no such conflict ought to exist. Under a better system the benefits of free trade and the evils of tariffs would be obvious to all. Apart from trade, the interests of nations coincide in all that makes what we call civilization. Inventions and discoveries bring benefit to all. The progress of science is a matter of equal concern to the whole civilized world. Whether a man of science is an Englishman, a Frenchman, or a German is a matter of no real importance. His discoveries are open to all, and nothing but intelligence is required in order to profit by them. The whole world of art and literature and learning is international; what is done in one country is not done for that country, but for mankind. If we ask ourselves what are the things that raise mankind above the brutes, what are the things that make us think the human race more valuable than any species of animals, we shall find that none of them are things in which any one nation can have exclusive property, but all are things in which the whole world can share. Those who have any care for these things, those who wish to see mankind fruitful in the work which men alone can do, will take little account of national boundaries, and have little care to what state a man happens to owe allegiance. The importance of international coöperation outside the sphere of politics has been brought home to me by my own experience. Until lately I was engaged in teaching a new science which few men in the world were able to teach. My own work in this science was based chiefly upon the work of a German and an Italian. My pupils came from all over the civilized world: France, Germany, Austria, Russia, Greece, Japan, China, India, and America. None of us was conscious of any sense of national divisions. We felt ourselves an outpost of civilization, building a new road into the virgin forest of the unknown. All coöperated in the common task, and in the interest of such a work the political enmities of nations seemed trivial, temporary, and futile. But it is not only in the somewhat rarefied atmosphere of abstruse science that international coöperation is vital to the progress of civilization. All our economic problems, all the questions of securing the rights of labor, all the hopes of freedom at home and humanity abroad, rest upon the creation of international good-will. So long as hatred, suspicion, and fear dominate the feelings of men toward each other, so long we cannot hope to escape from the tyranny of violence and brute force. Men must learn to be conscious of the common interests of mankind in which all are at one, rather than of those supposed interests in which the nations are divided. It is not necessary, or even desirable, to obliterate the differences of manners and custom and tradition between different nations. These differences enable each nation to make its own distinctive contribution to the sum total of the world's civilization. What is to be desired is not cosmopolitanism, not the absence of all national characteristics that one associates with couriers, _wagon-lit_ attendants, and others, who have had everything distinctive obliterated by multiple and trivial contacts with men of every civilized country. Such cosmopolitanism is the result of loss, not gain. The international spirit which we should wish to see produced will be something added to love of country, not something taken away. Just as patriotism does not prevent a man from feeling family affection, so the international spirit ought not to prevent a man from feeling affection for his own country. But it will somewhat alter the character of that affection. The things which he will desire for his own country will no longer be things which can only be acquired at the expense of others, but rather those things in which the excellence of any one country is to the advantage of all the world. He will wish his own country to be great in the arts of peace, to be eminent in thought and science, to be magnanimous and just and generous. He will wish it to help mankind on the way toward that better world of liberty and international concord which must be realized if any happiness is to be left to man. He will not desire for his country the passing triumphs of a narrow possessiveness, but rather the enduring triumph of having helped to embody in human affairs something of that spirit of brotherhood which Christ taught and which the Christian churches have forgotten. He will see that this spirit embodies not only the highest morality, but also the truest wisdom, and the only road by which the nations, torn and bleeding with the wounds which scientific madness has inflicted, can emerge into a life where growth is possible and joy is not banished at the frenzied call of unreal and fictitious duties. Deeds inspired by hate are not duties, whatever pain and self-sacrifice they may involve. Life and hope for the world are to be found only in the deeds of love. 
31933	----	http://www.archive.org/details/landmarksofscien00engeuoft +-----------------------------------------------------------+ | Transcriber's Note: | | | | Inconsistent hyphenation and use of quotation marks in | | the original document have been preserved. | | | | Subscripted characters in chemical formulas are enclosed | | in curly braces after an underscore. For example, the | | formula for water is represented by H_{2}O. Obvious | | errors in chemical formulas were corrected without | | comment. | | | | Superscripted numbers are preceded by a carat character. | | For example, a-squared is represented by a^2. | | | | Obvious typographical errors have been corrected. For | | a complete list, please see the end of this document. | | | +-----------------------------------------------------------+ LANDMARKS OF SCIENTIFIC SOCIALISM "Anti-Duehring" by FREDERICK ENGELS Translated and Edited by Austin Lewis Chicago Charles H. Kerr & Company Co-Operative Copyright, 1907 by Charles H. Kerr & Company John F. Higgins Printer and Binder 376-382 Monroe Street Chicago, Illinois TABLE OF CONTENTS CHAPTER I PAGE TRANSLATOR'S INTRODUCTION 7 CHAPTER II PREFACES 23 Part I 23 Part II 27 Part III 35 CHAPTER III INTRODUCTION 36 I. In General 36 II. What Herr Duehring Has to Say 50 PART I CHAPTER IV Apriorism 54 The Scheme of the Universe 63 CHAPTER V NATURAL PHILOSOPHY 70 Time and Space 70 Cosmogony, Physics, and Chemistry 82 The Organic World 94 The Organic World (conclusion) 107 CHAPTER VI MORAL AND LAW 116 Eternal Truths 116 Equality 130 Freedom and Necessity 146 CHAPTER VII THE DIALECTIC 150 Quantity 150 Negation of the Negation 159 Conclusion 175 PART II CHAPTER VIII POLITICAL ECONOMY 176 I. Objects and Methods 176 II. The Force Theory 184 III. Force Theory (continued) 193 IV. Force Theory (conclusion) 203 V. Theory of Value 214 VI. Simple and Compound Labor 219 VII. Capital and Surplus Value 223 VIII. Capital and Surplus Value (conclusion) 227 IX. Natural Economic Laws--Ground Rent 232 X. With Respect to the "Critical History" 235 PART III CHAPTER IX SOCIALISM 236 Production 236 Distribution 245 The State, The Family, and Education 256 APPENDIX 261 LANDMARKS OF SCIENTIFIC SOCIALISM CHAPTER I TRANSLATOR'S INTRODUCTION When Dr. Eugene Duehring, privat docent at Berlin University, in 1875, proclaimed the fact that he had become converted to Socialism, he was not content to take the socialist movement as he found it, but set out forthwith to promulgate a theory of his own. His was a most elaborate and self-conscious mission. He stood forth as the propagandist not only of certain specific and peculiar views of socialism but as the originator of a new philosophy, and the propounder of strange and wonderful theories with regard to the universe in general. The taunt as to his all-comprehensiveness of intellect, with which Engels pursues him somewhat too closely and much too bitterly, could not have affected Herr Duehring very greatly. He had his own convictions with respect to that comprehensive intellect of his and few will be found to deny that he had the courage of his convictions. Thirty years have gone since Duehring published the fact of his conversion to socialism. The word "conversion" contains in itself the distinction between the socialism of thirty years ago and that of to-day. What was then a peculiar creed has now become a very widespread notion. Men are not now individually converted to socialism but whole groups and classes are driven into the socialist ranks by the pressure of circumstances. The movement springs up continually in new and unexpected places. Here it may languish apparently, there it gives every indication of strong, new and vigorous life. The proletariat of the various countries race as it were towards the socialist goal and, as they change in their respective positions, the economic and political fields on which they operate furnish all the surprises and fascinations of a race course. In 1892 Engels wrote that the German Empire would in all probability be the scene of the first great victory of the European proletariat. But thirteen years have sufficed to bog the German movement in the swamps of Parliamentarianism. Great Britain, whose Chartist movement was expected to provide the British proletariat with a tradition, has furnished few examples of skill in the management of proletarian politics, but existing society in Great Britain has none the less been thoroughly undermined. The year before that in which Herr Duehring made his statement of conversion, the British Liberals had suffered a defeat which, in spite of an apparent recuperation in 1880, proved the downfall of modern Liberalism in Great Britain, and showed that the Liberal Party could no longer claim to be the party of the working class. Not only that, but the British philosophic outlook has become completely changed. The nonconformist conscience grows less and less the final court of appeal in matters political. A temporary but fierce attack of militant imperialism coupled with the very general acceptance of an empiric collectivism has sufficed to destroy old ideas and to make the road to victory easier for a determined and relentless working class movement. But if thirty years have worked wonders in Europe, and disintegration can be plainly detected in the social fabric, the course of social and political development in the United States has been still more remarkable. In 1875 the country was still a farming community living on the edge of a vast wilderness through which the railroad was just beginning to open a path. Thirty years have been sufficient to convert it into the greatest of manufacturing and commercial states. The occupation of the public lands, the establishment of industry on an hitherto undreamed of scale, the marvellous, almost overnight creation of enormous cities, all these have resulted in the production of a proletariat, cosmopolitan in its character, and with no traditions of other than cash relations with the class which employs it. The purity of the economic fact is unobscured. Hence a socialistic agitation has arisen in the United States, the enthusiasm of which vies with that in any of the European countries and the practical results of which bid fair to be even more striking. This movement has arisen almost spontaneously as the result of economic conditions. It is a natural growth not the result of the preaching of abstract doctrines or the picturing of an ideal state. The modern American proletariat is, as a matter of fact, given neither to philosophic speculation nor to the imagination which is necessary to idealism. Such socialism as it has adopted it has taken up because it has felt impelled thereto by economic pressure. Hence, apart from all socialistic propaganda, a distinct disintegration-process has been proceeding in modern society. Each epoch carries within itself the seeds of its own dissolution. Things have just this much value, they are transitory, says Engels in his paraphrase of Hegel, and this is in fact the central idea of his dialectic philosophy. He criticises the work of Duehring from this standpoint. He labors not so much to show that Duehring is mistaken in certain conclusions as to prove that the whole method of his argument is wrong. His diatribes, though the subject matter of his argument requires him to attack the Berlin tutor, are directed chiefly against all absolute theories. "Eternal truth," in the realm of science, equally with that of philosophy, he scouts as absurd. To interpret the history of the time in terms of the spirit of the time, to discover the actual beneath the crust of the conventional, to analyse the content of the formulæ which the majority are always ready to take on trust, and to face the fact with a mind clear of preconceived notions is what Engels set out to do. It cannot be said that he altogether succeeded. No man can succeed in such a task. The prejudices and animosities created by incessant controversy warped his judgment in some respects, and tended on more than one occasion to destroy his love of fair play. The spirit which is occasionally shown in his controversial writing is to be deplored but it may be said in extenuation that all controversies of that time were disfigured in the same way. He pays the penalty for the fault. Much of the work is valueless to-day because of Engels' eagerness to score a point off his adversary rather than to state his own case. But where the philosopher lays the controversialist on one side for a brief period, and takes the trouble to elucidate his own ideas we discover what has been lost by these defects of temperament. He possesses in a marked degree the gift of clear analysis and of keen and subtle statement. The socialist movement everywhere arrives some time or other at what may be called the Duehring stage of controversy. There are two very distinct impulses towards socialism. The individuals who are influenced by these impulses must sooner or later come into collision, and as a result of the impact the movement is for a time divided into hostile parties and a war of pamphleteering and oratory supervenes. This period has just ended in France. For the last few years the French movement has been divided upon the question of the philosophical foundation of the movement, and the parties to the controversy may be divided into those who sought to justify the movement upon ethical grounds and those who have regarded it as a modern political phenomenon dependent alone upon economic conditions. The former of these parties based its claims to the suffrages of the French people upon the justice of the socialistic demands. It proclaimed socialism to be the logical result of the Revolution, the necessary conclusion from the teachings of the revolutionary philosophers. Justice was the word in which they summed up the claims of socialism, that and Equality, for which latter term as Engels points out in the present work, the French have a fondness which amounts almost to a mania. Hence one party of the French socialist movement chose as a platform those very "eternal truths" which Engels ridicules and which it is the sole purpose of the present work to attack. To kill "eternal truths" is however by no means an easy matter. Years of habit have made them part of the mental structure of the citizens of the modern democratic or semi-democratic states. Not only in France but to an even greater degree in the English speaking countries these "eternal truths" persist, they form the stock in trade of the clergyman and the ordinary politician. Bernard Shaw directs the shafts of his ridicule against these "eternal truths" and smites with a sarcasm which is more fatal than all the solemn German philosophy which Engels has at his command. But Shaw is not appreciated by the British socialist. The latter cannot imagine that the writer is really poking fun at things so exceedingly serious and so essential to any well constituted man, to a well-constituted Briton in particular. The British socialist is as much in love with "eternal truths" as is the stiffest and most unregenerate of his bourgeois opponents. He therefore toploftily declares that Mr. Shaw is an unbalanced person, a licensed jester. Precisely the same results would attend the efforts of an American iconoclast who would venture to ridicule the "eternal truths" which have been handed down to us in documents of unimpeachable respectability, like the Declaration of Independence, and by Fourth of July orators, portly of person and of phrase. The "eternal truth" phase of socialist controversy seems to be as eternal as the truth, and must necessarily be so as long as the movement is recruited by men who bring into it the ideas which they have derived from the ordinary training of the American citizen. The other side of the controversy to which reference has been made derived its philosophy from the experience of the proletariat. This modern proletariat, trained to, the machine, is a distinct product of the occupation by which it lives. The organisation of industry in the grasp of which the workman is held during all his working hours and manufacture by the machine-process, the motions of which he is compelled to follow have produced in him a mental condition which does not readily respond to any sentimental stimulus. The incessant process from cause to effect endows him with a sort of logical sense in accordance with which he works out the problems of life independent of the preconceptions and prejudices which have so great a hold upon the reason of his fellow citizens who are not of the industrial proletariat. Without knowing why he arrives by dint of the experience of his daily toil at the same conclusions as Engels attained as the result of philosophic training and much erudition. The Church is well aware of this fact to her sorrow for the industrial proletarian seldom darkens her portals. He has no hatred of religion, as the atheistic radical bourgeois had, but with a good-natured "non possumus" says by his actions what Engels says by his philosophy. Revolution is an every day occurrence with the industrial proletarian. He sees processes transformed in the twinkling of an eye. He wakes up one morning to find that the trade which he has learned laboriously has overnight become a drug on the market. He is used to seeing the machine whose energy has enchained him flung on the scrap heap and contemptuously disowned, in favor of a more competent successor whose motions he must learn to follow or be himself flung on the scrap heap also. This constant revolution in the industrial process enters into his blood. He becomes a revolutionist by force of habit. There is no need to preach the dialectic to him. It is continually preached. The transitoriness of phenomena is impressed upon him by the changes in industrial combinations, by the constant substitution of new modes of production for those to which he has been accustomed, substitutions which may make "an aristocrat of labor" of him to-day, and send him tramping to-morrow. The industrial proletarian therefore knows practically what Engels has taught philosophically. So that when in the course of his political peregrinations he strays into the socialist movement and there finds those who profess a socialism based upon abstract conceptions and "eternal truths" his contempt is as outspoken as that of a Friedrich Engels who chances upon a certain Eugen Duehring spouting paraphrases of Rousseau by the socialistic wayside. Engels simply anticipated by the way of books the point of view reached by the industrial proletarian of to-day by the way of experience, and by the American machine-made proletarian in particular. This is a matter of no mean importance. In the following pages we can detect if we can look beyond and beneath the mere criticism of Duehring, an attitude of mind, not of one controversialist to another merely but of an entire class, the class upon which modern society is driven more and more to rely, to the class which relies upon it. For their popular support classes and governments rely upon formulæ. When the cry of "Down with the Tsar" takes the place of the humbly spoken "Little Father" what becomes of the Tsardom? When the terms "Liberty" and "Equality" become the jest of the workshop, upon what basis can a modern democratic state depend? This criticism of "eternal truths" is destructive criticism, and destructive of much more than the "truths." It is more destructive than sedition itself. Sedition may be suppressed cheaply in these days of quick-firing guns and open streets. But society crumbles away almost insensibly beneath the mordant acid of contemptuous analysis. So to-day goaded on the one side by the gibes of the machine-made proletariat, and on the other, by the raillery of the philosophic jester, society staggers along like a wounded giant and is only too glad to creep into its cave and to forget its sorrows in drink. As for 1875, "Many things have happened since then" as Beaconsfield used to say, but of all that has happened nothing could have given more cynical pleasure to the "Old Jew" than the lack of faith in its own shibboleths which has seized the cocksure pompous society in which he disported himself. The rhetoric of a Gladstone based upon the "eternal truths" which constituted always the foundations of his political appeals would fail to affect the masses to-day with any other feeling than that of ridicule. We have already arrived at the "Twilight of the Idols" at least so far as "eternal truths" are concerned. They still find however an insecure roosting place in the pulpits of the protestant sects. If blows have been showered upon the political "eternal truths" in the name of which the present epoch came into existence social and ethical ideals have by no means escaped attack. Revolt has been the watchword of artist and theologian alike. The pre-Rafaelite school, a not altogether unworthy child of the Chartist movement, raised the cry of artistic revolt against absolutism and the revolt spread in ever widening circles until it has exhausted itself in the sickly egotism of the "art nouveau." Even Engels, with all his independence and glorification of change as a philosophy, can find an opportunity to fling a sneer at Wagner and the "music of the future." The remnants of early Victorianism cling persistently to Engels. He cannot release himself altogether from the bonds of the bourgeois doctrine which he is so anxious to despise. He is in many respects the revolutionist of '48, a bourgeois politician possessed at intervals by a proletarian ghost, such as he says himself ever haunts the bourgeois. The younger generation without any claims to revolutionism has gone further than he in the denunciation of authority and without the same self consciousness. The scorn of Bernard Shaw for the moguls of the academies and for social ideals is greater than the scorn of Engels for "eternal truths." Says Mr. Shaw, "The great musician accepted by his unskilled listener is vilified by his fellow musician. It was the musical culture of Europe that pronounced Wagner the inferior of Mendelssohn and Meyerbeer. The great artist finds his foes among the painters and not among the men in the street. It is the Royal Academy that places Mr. Marcus Stone above Mr. Burne Jones. It is not rational that it should be so but it is so for all that. The realist at last loses patience with ideals altogether and finds in them only something to blind us, something to numb us, something to murder self in us. Something whereby instead of resisting death we disarm it by committing suicide." Here is a note of modernity which Engels was hardly modern enough to appreciate and yet it was written before he died. Nietzsche, Tolstoy and a host of minor writers have all had their fling at "eternal truths" and modern ideals. The battle has long since rolled away from the ground on which Engels fought. His arguments on the dialectic are commonplaces to-day which it would be a work of supererogation to explain to anyone except the persistent victim of Little Bethel. The world has come to accept them with the equanimity with which it always accepts long disputed truths. The sacred right of nationality for which men contended in Engels' youth, as a direct consequence of political "eternal truths" has been ruthlessly brushed aside. The philosopher talks of the shameful spoliation of the smaller by the larger nations, a moral view of commercial progress, which an age, grown more impatient of "eternal truths" than Engels himself simply ignores, and moves on without a qualm to the destruction of free governments in South Africa. Backward and unprogressive peoples jeer, it is true, and thereby show their political ineptitude, for even the American Republic, having freed the negro under the banner of "eternal truth" annexes the Philippines and raids Panama in defiance of it. And so since the days of 1875 the world has come to accept the general correctness of Engels' point of view. The enemy which Engels was most anxious to dislodge was "mechanical socialism," a naïve invention of a perfect system capable of withstanding the ravages of time, because founded upon eternal principles of truth and justice. That enemy has now obeyed the law of the dialectic and passed away. Nobody builds such systems, nowadays. They have ceased their building however not in obedience to the commands of Friedrich Engels but because the lapse of time and the change in conditions have proved the dialectic to the revolutionist. With the annihilation of "eternal truths," system building ceased to be even an amusing pastime. The revolutionist has been revolutionized. He no longer fancies that he can make revolutions. He knows better. He is content to see that the road is kept clear so that revolutions may develop themselves. Your real revolutionist, for example, puts no obstacle in the path of the Trust, he is much too wise. He leaves that to the corrosion of time and the development of his pet dialectic. He sees the contradiction concealed in the system which apparently triumphs, and in the triumph of the system he sees also the triumph of the contradiction. He waits until that shadowy proletariat which haunts the system takes on itself flesh and blood and shakes the system with which it has grown up. But this waiting for the development of the inevitable is weary work to those who want to realise forthwith, so they, unable to confound the logic of Engels, attack the "abstractions" on which his theory is founded. They still oppose their "eternal truths" to the dialectic. Thus in England, where the strife between the two parties in the socialist movement has lately been waged with a somewhat amusing ferocity, Engels is charged with a wholesale borrowing from Hegel. In any other country than England this would not be laid up against a writer, but the Englishman is so averse to philosophy that the association of one's name with that of a philosopher, and a German philosopher in particular, is tantamount to an accusation of keeping bad company. But a glance at the following pages should tend to dispose of so romantic a statement which could, in fact, only have been made by those who know neither Hegel nor Engels. That Hegel furnished the original philosophic impetus to both Marx and Engels is true beyond question, but the impetus once given, the course of the founders of modern socialism tended ever further from the opinions of the idealistic philosopher. In fact Engels says somewhat self consciously, not to say boasts, that he and his followers were pioneers in applying the dialectic to materialism. Whatever accusation may be made against Engels, this much is certain that he was no Hegelian. In fact both in the present work and in "Feuerbach" he is at great pains to show the relation of the socialist philosophy as conceived by himself and Marx to that of the great man for whom he always kept a somewhat exaggerated respect, but from whom he differed fundamentally. Engels' attack upon the philosophy of Duehring is based upon dislike of its idealism, the fundamental thesis upon which the work depends being entirely speculative. Duehring insisted that his philosophy was a realist philosophy and Engels' serious arguments, apart from the elaborate ridicule with which he covers his opponent and which is by no means a recommendation to the book, is directed to show that it is not realist, that it depends upon certain preconceived notions. Of these notions some are axiomatic, as Duehring claims, that is they are propositions which are self evident to Herr Duehring but which will not stand investigation. Others again are untrue and are preconceptions so far as they are out of harmony with established facts. Much of Engels' work is out of date judged by recent biological and other discoveries, but the essential argument respecting the interdependence of all departments of knowledge, and the impossibility of making rigid classifications holds good to-day in a wider sense than when Engels wrote. Scientific truths which have been considered absolute, theories which have produced approximately correct results, have all been discredited. The dogmas of science against which the dogmatic ecclesiastics have directed their scornful contempt have shared the same fate as the ecclesiastical dogmas. Nothing remains certain save the certainty of change. There are no ultimates. Even the atom is suspect and the claims of the elements to be elementary are rejected wholesale with something as closely resembling scorn as the scientist is ever able to attain. A scientific writer has recently said "What is undeniable is that the Daltonian atom has within a century of its acceptance as a fundamental reality suffered disruption. Its proper place in nature is not that formerly assigned to it. No longer 'in seipso totus, teres, atque rotundus' its reputation for inviolability and indestructibility is gone for ever. Each of these supposed 'ultimates' is now known to be the scene of indescribable activities, a complex piece of mechanism composed of thousands of parts, a star-cluster in miniature, subject to all kinds of dynamical vicissitudes, to perturbations, accelerations, internal friction, total or partial disruption. And to each is appointed a fixed term of existence. Sooner or later the balance of equilibrium is tilted, disturbance eventuates in overthrow; the tiny exquisite system finally breaks up. Of atoms, as of men, it may be said with truth 'Quisque suos patitur manes.'" The discovery of radium was in itself sufficient to revolutionise the heretofore existing scientific theories and the revolution thereby effected has been enough to cause Sir William Crookes to say, "There has been a vivid new start, our physicists have remodelled their views as to the constitution of matter." In his address to the physicists at Berlin the same scientist said, "This fatal quality of atomic dissociation appears to be universal, and operates whenever we brush a piece of glass with silk; it works in the sunshine and raindrops in lightnings and flame; it prevails in the waterfall and the stormy sea" and a writer in the Edinburgh Review (December, 1903) remarks in this connection "Matter he (Sir William Crookes) consequently regards as doomed to destruction. Sooner or later it will have dissolved into the 'formless mist' of protyle and 'the hour hand of eternity will have completed one revolution.' The 'dissipation of energy' has then found its correlative in the 'dissolution of Matter.'" The scope of this revolution may only be gauged by the fact that one writer ("The Alchemy of the Sea," London "Outlook," Feb. 11, 1905) has ventured to say, and this is but one voice in a general chorus: "To-day no one believes in the existence of elements; no one questions the possibility of a new alchemy; and the actual evolution of one element from another has been observed in the laboratory--observed by Sir William Ramsey in London, and confirmed by a chemist in St. Petersburg." Helium being an evolution of radium and it is expected furthermore that radium will prove to be an evolution of uranium and so there is a constant process as the writer points out of what was formerly called alchemy the transmutation of one metal into another. It is clear that in face of these facts the arguments of Engels possess even greater force at the present day than when they were enunciated and that the old hard and fast method of arguing from absolute truths is dead and done for. Only statesmen see fit to still harp on the same phrases which have become as it were a part of the popular mental structure and by constant appeals to the old watchwords to obscure the fact of change. Were one not acquainted with the essential stupidity of the political mind and the lack of grasp which is the characteristic of statesmen, it might be imagined that all this was done with malice aforethought and that there was a sort of tacit conspiracy on the part of the politicians to delude the people. But experience of the inexcusable blunders and the inexplicable errors into which statesmen are continually driven forces the conclusion that they are in reality no whit in advance of the electorate and that only now and then a Beaconsfield appears who can understand the drift of events. Such a man is the "revolutionist" which Beaconsfield claimed himself to be. But what shall we say of the President of the country that has attained the highest place in industrial progress among the nations, whose whole history is a verification of the truth of the dialectic and who can still appeal to "individualism" as a guiding principle of political action? It is a wanton flying in the face of the experience of the last quarter of a century and such rashness will require its penalty. "Back to Kant" appears to be the hope of reactionary politicians as well as of reactionary philosophers. CHAPTER II PREFACES I The following work is by no means the fruit of some "inward compulsion," quite the contrary. When three years ago, Herr Duehring suddenly challenged the world, as a scholar and reformer of socialism, friends in Germany frequently expressed the wish that I should throw a critical light upon these new socialist doctrines, in the central organ of the Social Democratic Party, at that time the "Volkstaat." They held it as very necessary that new opportunity for division and confusion should not be afforded in a party so young and so recently definitely united. They were in a better condition than myself to comprehend the condition of affairs in Germany, so that I was compelled to trust to their judgment. It appeared furthermore that the proselyte was welcomed by a certain portion of the socialist press, with a warmth, which meant nothing more than kindliness to Herr Duehring, but it was seen by a portion of the party press that a result of this kindly feeling towards Herr Duehring was the introduction unperceived of the Duehring doctrine. People were found who were soon ready to spread his doctrine in a popular form among the workingmen, and finally Herr Duehring and his little sect employed all the arts of advertisement and intrigue to compel the "Volksblatt" to change its attitude respecting the new teachings which put forth such tremendous claims. However, a year elapsed before I could make up my mind to engage in so disagreeable a business to the neglect of my other labors. It was the sort of thing one had to get through as quickly as possible, once it was begun. And it was not only unpleasant but quite a task. The new socialist theory appeared as the last practical result of a new philosophic system. It therefore involved an investigation of it in connection with this system and therefore of the system itself. It was necessary to follow Herr Duehring over a wide expanse of country where he had dealt with everything under the sun, yea, and more also. So there came into existence a series of articles which appeared from the beginning of 1877 in the successor of the "Volkstaat," the "Vorwaerts" of Leipsic, and are collected here. It was my object which extended the criticism to a length out of all proportion to the scientific value of the matter and, therefore, of Herr Duehring's writings. There are two further reasons in extenuation of this lengthiness. In the first place it gave me an opportunity of developing my views, in a positive fashion, with respect to matters which are connected with this, though very different, and which are of more general scientific and practical interest to-day. I have taken the opportunity to do so in every chapter, and, as this book cannot undertake to set up a system in opposition to that of Herr Duehring, it is to be hoped that the reader will not overlook the real significance of the views which I have set forth. I have already had sufficient proof that my labors have not been altogether in vain in this regard. On the other hand the "system-shaping" Herr Duehring is by no means an exceptional phenomenon in Germany these days. Nowadays in Germany systems of cosmogony, of natural philosophy in particular, of politics, of economics, etc., are in the habit of shooting up over night like mushrooms. The most insignificant Doctor of Philosophy, nay, even the student, has no further use for a complete "system." In the modern state, it is predicated that every citizen is able to pass judgment on all the questions upon which he is called upon to vote; in political economy it is assumed that every consumer is thoroughly acquainted with all commodities, which he has occasion to buy to maintain himself withal, and the same idea is also held as regards knowledge. Freedom of knowledge demands that a person write of that which he has not learned and proclaim this as the only sound scientific method. But Herr Duehring is one of the most conspicuous types of those absurd pseudo-scientists, who to-day occupy so conspicuous a place in Germany and drown everything with their noisy nonsense. Noisy nonsense in poetry, in philosophy, in political economy, in writing history: noisy nonsense in the professor's chair and tribune; noisy nonsense too in the claims to superiority and intellectuality above the vulgar noisy nonsense of other nations, noisy nonsense the most characteristic and mightiest product of German intellectual activity, cheap and bad, like other German products, along with which, I regret to say, they were not exhibited at Philadelphia. So, German socialism, particularly since Herr Duehring set the example, beats the drum, and produces here and there one who prides himself upon a "science" of which he knows nothing. It is this, a sort of child's disease which marks the first conversion of the German university man to social democracy and is inseparable from him, but it will soon be thrust aside by the remarkable sound sense of our working class. It is not my fault that I am obliged to follow Herr Duehring into a realm in which I can at the very most only claim to be a dilettante. On such occasions I have for the most part limited myself to placing the plain incontrovertible facts in contrast with the false or crooked assertions of my opponent, as in relation to jurisprudence and many instances with regard to natural science. In other places he indulges in universal views on the subject of natural science theories and therefore on a field where the professional naturalist must range out of his own particular specialty to neighboring regions, where he, according to Herr Virchow's confessions is just as good a "half-knower" as the rest of us. For slight deficiencies and unavoidable errors in the publication I hope that the same indulgence will be extended to me as has been shown the other side of the controversy. Just as I was completing this preface I received the publishers' notice of a new important book by Herr Duehring. "New Foundations for rational Physics and Chemistry." Although I am very well aware of my deficiencies in physics and chemistry I still believe that I know my Duehring well enough, without having read the book, to venture to say that the laws of physics and chemistry there set forth are worthy of being placed alongside of Herr Duehring's former discoveries and the laws of economics, scheme of the universe, etc., examined in my writings and proved to be misunderstood or commonplace, and that the rhigometer, an instrument constructed by Herr Duehring for measuring temperature will be found to serve not only as a measure for high or low temperature but of the ignorance and arrogance of Herr Duehring. _London, 11 June, 1878._ II It came to me as quite a surprise that a new edition of this work was called for. The special views which it criticised are practically forgotten to-day. The work itself has not only been placed before many thousands of readers by its serial publication in "Vorwaerts" of Leipsic in 1877 and 1878, but it has also been published in large editions in its entirety. How then can there be any further interest in what I have to say about Herr Duehring? In the first place, I fancy, that it is owing to the fact that this book, as indeed, all my writings at that time, was prohibited in Germany soon after the publication of the anti-Socialist laws. Whosoever was not fettered by the inherited officialdom of the countries of the Holy Alliance should have clearly seen the effect of this measure--the double and treble sale of the prohibited books, and the advertisement of the impotence of the gentlemen in Berlin, who issued injunctions and could not make them effective. Indeed the amiability of the Government was the cause of the publication of several new editions of my shorter writings, as I am able to affirm. I have no time for a proper revision of the text and so allow it to go to press, just as it is. But there is still an additional circumstance. The "system" of Herr Duehring here criticised spreads over a very extensive theoretical ground and I was compelled to pursue him all over it and to place my ideas in antagonism to his. Negative criticism thereupon became positive; the polemic developed into a more or less connected exposition of dialectic methods and the socialist philosophy, of which Marx and myself are representative, and this in quite a number of places. These our philosophic ideas have had an incubation period of about twenty years since they were first given to the world in Marx's "Misère de la Philosophie" and the Communist Manifesto until they obtained a wider and wider influence through the publication of "Capital" and now find recognition and support far beyond the limits of Europe in all lands where a proletariat exists together with progressive scientific thinkers. It seems that there is also a public whose interests in this matter are sufficient to induce them to purchase the polemic against Duehring's opinions, in spite of the fact that it is now without an object, and who evidently derive pleasure from the positive development. I must call attention to the fact, by the way, that the views here set out were, for by far the most part, developed and established by Marx, and only to a very slight degree by myself, so that it is understood that I have not represented them without his knowledge. I read the entire manuscript to him before sending it to press and the tenth chapter of the section on Political Economy was written by Marx and unfortunately had to be somewhat abbreviated by me. It was our wont to mutually assist each other in special branches of work. The present edition is with the exception of one chapter an unchanged edition of the former. I had no time for revision although there was much in the mode of presentation which I wanted altered. But there is incumbent upon me the duty of preparing for publication the manuscripts which Marx left, and this is much more important than anything else. Then my conscience rebels against making any changes. The book is controversial and I have an idea that it is unfair to my antagonist for me to alter anything when he cannot do so. I could only claim the right to reply to Herr Duehring's answer. But what Herr Duehring has written with respect to my attack I have not read and shall not do so, unless obliged. I am theoretically done with him. Besides I must observe the rules of literary warfare all the more closely as a despicable wrong has since been inflicted upon him by the University of Berlin. It has been chastised for this, indeed. A university which so degrades itself as to refuse permission to Herr Duehring to teach under the known circumstances should not be surprised if a Herr Schwenninger is forced upon it under circumstances just as well known. The one chapter in which I have permitted myself any explanations is the Second of the Third Section "Theory." Here where the sole concern is the presentation of a most important part of the philosophy which I represent, my antagonist cannot complain if I put myself to some trouble to speak popularly and to generalise. This was undoubtedly a special occasion. I had made a French translation of three chapters of the book (the First of the Introduction and the First and Second of the Third Section) into a separate pamphlet for my friend Lafargue, and the French edition afterwards served as a basis for one in Italian and one in Polish. A German edition was provided under the title "The Development of Socialism from Utopia to Science." The latter has exhausted three editions in a few months and has also made its appearance translated into Russian and Danish. In all these publications only the chapter in question was added to and it would have been pedantic in me if I had confined myself to the actual wording of the original in the new edition in spite of the later and international form which it had assumed. Where I wished to make changes had particular reference to two points. In the first place with regard to primitive history, as far as known, to which Morgan was the first to give us the key in 1877. In my book "The Origin of the Family, Private Property and the State," Zurich, 1884, I have since had an opportunity of working up material more lately accessible which I employed in this later work. In the second place, as far as that portion which is concerned with theoretical science is concerned, the presentation of the subject is very defective and a much more definite one could now be given. If I did not allow myself the right of improving it now, I should be in duty bound to pass criticism on myself instead of the other. Marx and I were probably the first to import the well known dialectic of the German idealistic philosophy into the materialistic view of nature and history. But to a dialectical and at the same time materialistic view of nature there pertains an acquaintance with mathematics and natural science. Marx was a sound mathematician but the sciences we only knew in part, by fits and starts, sporadically. After I retired from mercantile pursuits and went to London and had time, I made as far as possible a complete mathematical and scientific "molting," as Liebig calls it, and spent the best part of eight years on it. I was occupied with this molting process when it chanced that I was called upon to busy myself with Herr Duehring's so-called philosophy. If, therefore, I often fail to find the correct technical expression, and am a little awkward in the field of natural science it is only too natural. On the other hand the consciousness of insecurity which I have not yet got over has made me cautious. Actual blunders respecting facts up to the present known, and incorrect presentations of theories thus far recognised cannot be proved against me. In this relation just one great mathematician, who is laboring under a mistake, has complained to Marx in a letter that I have made a mischievous attack upon the honor of the square root of minus one. As regards my review of mathematics and the natural science it was necessary for me to reassure myself on some special points--since I had no doubts about the truth of the general proposition--that in nature the same dialectic laws of progress fulfill themselves amid all the apparent confusion of innumerable changes as dominate the apparently accidental in nature; the same laws whose threads traverse the progressive history of human thought, and little by little come to the consciousness of thinking men. These were first developed by Hegel in a comprehensive fashion but in a mystical form. Our efforts were directed towards stripping away this mystical form and making them evident in their full simplicity and universal reality. It was self evident that the old philosophies of nature--in spite of all their actual value and fruitful suggestiveness--could be of no value to us. There was an error in the Hegelian form, as shown in this book, in that it recognised no progression of nature in time, no "one after another" (Nacheinander) but merely "one besides another" (Nebeneinander). This was due on the one hand to the Hegelian system itself which ascribed to the Spirit (Geist) alone a progressive historical development, but on the other hand, the general attitude of the natural sciences was responsible. So Hegel fell far behind Kant in this respect for the latter had already by his nebular hypothesis proclaimed the origin and, by his discovery of the stoppage of the rotation of the earth through the tides, the destruction of the solar system. And finally, I could not undertake to construct the dialectical laws of nature but to discover them in it and to develop them from it. To do this entirely and in each separate division is a colossal task. Not only is the ground to be covered almost immeasurable but on this entire ground natural science is involved in such tremendous changes that even those who have all their time to give can hardly keep up with it. Since the death of Marx however my mind has been occupied by more pressing duties and so I had to interrupt my work. I must, for the moment, confine myself to the hints in the work before us and wait for a later opportunity to correct and publish the results obtained, probably together with the most important manuscripts on mathematics left behind by Marx. But the advance of theoretical science makes my work in all probability, in a great measure, or altogether, superfluous. Since the revolution which overturned theoretical science the necessity of arranging the accumulation of purely empirical discoveries has caused the opposing empiricists to pay more and more attention to the dialectical character of the operations of nature. The old stiff antagonisms, the sharp impassable frontier lines are becoming more and more abolished. Since the last "true" gases have been liquefied, since the proof that a body can be put in a condition in which liquid and gaseous forms cannot be differentiated, aggregate conditions have to the last remnant lost their earlier absolute character. With the statement of the kinetic theory of gases that, in gases, the squares of the speeds with which the separate gas molecules move are in inverse ratio to the molecular weights, under the same temperature, heat takes its place directly in the series of such measurable forms of motion. Ten years ago the newly discovered great fundamental law of motion was still understood as a mere law of the conservation of energy, as a mere expression of the indestructibility and uncreatibility of motion, and therefore merely on its quantitative side. That narrow negative expression has been more and more subordinated to the transformation of energy, in which the qualitative content of the process is duly recognised and the last notion of an extramundane Creator is destroyed. That the quantity of motion (of energy, so called) is not changed when it is transformed into kinetic energy (mechanical force, so called), into electricity, heat, potential static energy need not now be preached any longer as something new, it served as the foundation, once attained, of many valuable investigations of the process of transformation itself, of the great fundamental process, in the knowledge of which is comprehended the knowledge of all nature. And since biology has been treated in the light of the theory of evolution it has abolished one stiff line of classification after another in the realm of organic nature. The entirely unclassified intermediate conditions increase in number every day. Later investigations throw organisms out of one class into another, and marks of distinction which have become articles of faith lose their individual reality. We have now mammals which lay eggs and, if the news is established, birds also which go on all fours. It was already observed, before the time of Virchow, as a conclusion of the discovery of the cell, that the identity of the individual creature is lost, scientifically and dialectically speaking, in a federation of cells, so the idea of animal (and therefore human) individuality is still further complicated by the discovery of the amoeba in the bodies of the higher animals constituting the white blood corpuscles. And these are just the things which were considered polar opposites, irreconcilable and insoluble, the fixed boundaries and differences of classification, which have given modern theoretical science its limited and metaphysical character. The knowledge that these distinctions and antagonisms actually do occur in nature, but only relatively, and that on the other hand that fixity and absoluteness are the products of our own minds--this knowledge constitutes the kernel of the dialectic view of nature. The view is reached under the compulsion of the mass of scientific facts, and one reaches it the more easily by bringing to the dialectic character of these facts a consciousness of the laws of dialectic thought. At all events, the scope of science is now so great that it no longer escapes the dialectic comprehension. But it will simplify the process if it is remembered that the results in which these discoveries are comprehended are ideas, that the art of operating with ideas is not inborn, moreover, and is not vouchsafed every day to the ordinary mind, but requires actual thought, and this thought has a long history crammed with experiences, neither more nor less than the accumulated experiences of investigation into nature. By these means, then, it learns how to appropriate the results of fifteen hundred years development of philosophy, it gets rid of any separate natural philosophy which stands above or alongside of it and the limited method of thought brought over from English empiricism. _London, 22nd September, 1885._ III The following new edition is, with the exception of a very few changes in form of expression, a reproduction of the former. Only in one chapter, namely in the Xth. of the Second Section (that on Critical History) I have allowed some important emendations, for the following reasons. As has been stated already in the preface to the second edition, this chapter is in all its essentials, the work of Marx. In its first form, which was intended as an article in a review, I was compelled to abbreviate the manuscript of Marx very much, particularly in those points in which the criticism of Herr Duehring's propositions is subordinate to the particular development of the history of economics. But these are just the portions of the manuscript which constitute the greatest and most important of, as regards its permanent interest, part of the work. The places in which Marx gives their appropriate place in the genesis of political economy to such writers as Petty, North, Locke and Hume, I consider myself obliged to give as literally and completely as possible, and still more so, his explanation of the "economic tableaux" by Quesnay, the insoluble riddle of the sphinx to all economists. I have omitted however that part which dealt solely with the writings of Herr Duehring as far as the connection permitted. For the rest, I am perfectly well satisfied with the extent to which the views represented in this work, have made their way into the minds of the working class and the scientists throughout the world since the publication of the former edition. F. ENGELS. _London, 23d May, 1894._ CHAPTER III INTRODUCTION _I. In General._ Modern socialism is in its essence the product of the existence on the one hand of the class antagonisms which are dominant in modern society, between the property possessors and those who have no property and between the wage workers and the bourgeois; and, on the other, of the anarchy which is prevalent in modern production. In its theoretical form however it appears as a development of the fundamental ideas of the great French philosophers of the eighteenth century. Like every new theory it was obliged to attach itself to the existing philosophy however deeply its roots were embedded in the economic fact. The great men in France who cleared the minds of the people for the coming revolution were themselves uncompromisingly revolutionary. They did not recognise outside authority of any kind whatsoever. Religion, natural science, society, the state, all were subjected to the most unsparing criticism, and everything was compelled to justify its existence before the judgment seat of reason or perish. Reason was established as the one and universal measure. It was the time when, as Hegel said, the world was turned upside down, first in the sense that the human mind and the principles arrived at by process of thought were claimed as the foundations of all human actions and social relations, but later also, in the wider sense, that the reality which contradicted these theories had indeed to be turned upside down. All forms of society and the state existent heretofore, all survivals of old notions, were thrown into the lumber room as unreasonable. Up to that time the world had only allowed itself to be led by prejudice. All that had been done deserved merely pity and contempt. Now for the first time day broke: from now on, superstition, injustice, tyranny and privilege should be replaced by eternal truth, eternal justice, equality founded on natural rights and the inalienable rights of man. We now know that the rule of reason was nothing more than the rule of the bourgeoisie idealised, that eternal right found its realisation in bourgeois justice, that equality was materialised in bourgeois equality before the law, that when the rights of man were proclaimed bourgeois rights of property were proclaimed at one and the same time, and that the state of reason, Rousseau's Social Contract, could only come into existence as the bourgeois democratic republic. To such a slight extent could the great thinkers of the eighteenth century, just as their predecessors, prevail over the limits which their own epoch had placed upon them. But besides the antagonism between feudal baron and bourgeois there existed the general antagonism between the robbers and the robbed, between the rich idlers and the toiling poor. It was just this antagonism which made it possible for the leaders of the bourgeoisie to pose as the representatives not merely of a special class but of the whole of suffering humanity. Furthermore the bourgeoisie was saddled with an antithesis right from the start. Capitalists cannot exist without laborers, and, in proportion, as the members of the gilds in the Middle Ages developed into the modern bourgeois, the journeymen of the gilds and the day laborers, on their part, developed into the proletariat. And though the bourgeois, as a general rule, might claim to represent also the interests of the different working classes of the period, still, independent movements of the latter classes broke out in connection with each great movement on the part of the bourgeoisie; such working classes being the more or less developed predecessors of the modern proletariat. Thus there came into being at the time of the German Reformation and the Peasant War the party of Thomas Munzer, in the great English Revolution the Levellers, and in the great French Revolution, Baboeuf. Besides these revolutionary demonstrations of a class still undeveloped, occurred certain theoretical manifestations of a corresponding nature. Thus in the sixteenth and seventeenth centuries, utopian pictures of an ideal social condition, in the eighteenth century, absolutely communistic theories (Morelly and Mably). The demand for equality was confined no longer to political rights, it had to be extended to the social condition of individuals; the demand was made for the abolition not merely of class privileges but of class distinctions also. An ascetic communism patterned on that of Sparta was the first form which the new teachings assumed. Then came the three great utopians--Saint Simon, in whose eyes bourgeois aims possessed a certain merit as well as those of the proletariat: then Fourier and Owen, who, in the land of the most highly developed capitalistic production, and under the influence of the antagonisms which arise therefrom, developed in direct relation to French materialism their proposals which tended to the abolition of class distinctions. One common feature pertaining to all the three is the fact that they did not appear as the representatives of the interests of the proletariat which had been in the meantime developed through the historical process. Like the philosophers, their ambition is not to free a particular class but the whole world. Like them they wish to introduce the government of reason and eternal justice. But there is a world of difference between their government and that of the philosophers. According to the philosophers, the bourgeois world as it exists is unreasonable and unjust and is destined for the rubbish heap, just as feudalism and all other earlier forms of society. The reason that true justice and reason have not dominated the world is because up to the present man has not properly comprehended them. That a man of genius has appeared and that the truth concerning these things should have now been made clear are not results arising from a combination of historical progress and necessity, but a mere piece of luck. He might just as well have been born five hundred years earlier and saved mankind the mistakes, conflicts and sorrows of five hundred years. This is actually the idea of all English and French socialists and of the earlier German socialists, Weitling included. According to this view, socialism is the expression of absolute truth, reason, and justice, and only has to be perceived in order to vanquish the world by reason of its truth. Hence, absolute truth, reason, and justice vary according to each founder of a school, and therefore with each one, the variety of absolute truth, reason and justice is dependent, in turn, upon the subjective temperament of that founder, his conditions of life, the extent of his knowledge and mental discipline, so that in this conflict of absolute truths there is no possible solution save that they rub each other smooth by mutual contact. Hence nothing could result from it except a sort of eclectic, average socialism, which is, as a matter of fact, up to the present, the prevailing notion in the minds of the great majority of socialist agitators in France and England--a mixture admitting of manifold shades, of a few notable critical utterances, economic teachings and pictures of a future state of society by leaders of different sects, a mixture which flows all the easier in proportion as the sharp precise corners are rubbed off the separate notions in the stream of debates, just as pebbles become round in a brook. In order that a science can be made out of socialism it is first necessary that it be placed on a sound basis. Meanwhile, close to and just after the French philosophy of the eighteenth century, the new German philosophy arose and culminated in Hegel. Its greatest service was the restoration of the dialectic as the highest form of thought. The old Greek philosophers were all natural dialecticians, and the most universal intellect among them, Aristotle, was already the discoverer of the essential forms of dialectic thought. On the other hand, subsequent philosophy although in it there were brilliant exponents of the dialectic (e.g. Descartes and Spinoza), was more and more involved in the so-called metaphysical mode of thought, chiefly owing to English influence which completely mastered the French philosophers, at least of the eighteenth century. Outside of the strict frontiers of philosophy, masterpieces of the dialectic might be found occasionally of which I can only recall "Rameau's Nephew" by Diderot, and the treatise upon the origin of human inequality by Rousseau. We now give briefly the essential features of the two modes of thought: we will return to them more fully later. If we examine nature, the history of man or our own intellectual activities, we have presented to us an endless coil of interrelations and changes in which nothing is constant whatever be its nature, time or position, but every thing is in motion, suffers change, and passes away. This original, naïve and very nearly correct philosophy of the world is that of the old Greek philosophers and was first put in a very clear form by Heraclitus. Everything is and yet is not, since everything is in a state of flux, is comprehended as undergoing constant modification, as eternally existing and disappearing. But this philosophy, correct as it is as regards phenomena in general, viewed as a picture, is insufficient to explain the individual phenomena of which the picture of the universe is composed, and as long as we cannot do that we are not clear about the general picture. In order to study these individual phenomena we are obliged to take them out of their natural or social connection, and examine each of them by itself according to its own form and its particular origin and development. This is the task of natural science and historical investigation, branches of discovery to which the Greeks of classical times assigned a subordinate place for very good reasons, since they, first of all, had to collect the material. The beginning of an exact observation of nature was made first by the Greeks of the Alexandrine period, and was later developed further by the Arabs in the Middle Ages. True natural science hence dates from the second half of the fifteenth century, and from then on has advanced at a constantly growing rate. The dissection of nature into its separate parts, the separation of different natural events and natural conditions into certain classes, the examination of the interiors of organic bodies with respect to their manifold anatomical forms, furnished the fundamental reasons for the progress in a knowledge of nature which the last four hundred years have brought in their train. But it has caused us occasionally to drop into the habit of regarding natural phenomena and events as entities, apart from the great universal interrelations, and therefore not as moving but quiescent, not as changeable in their essence but fixed and constant, not in their life but in their death. And hence, just as happened with Bacon and Locke, this point of view has been carried over from science into philosophy, and has constituted the specially narrow view of the last century, the metaphysical mode of thought. For the metaphysician, things and their pictures in the minds, concepts, are separate entities, one following the other without any regard to each other, stable, rigid, eternally fixed objects of investigation. The metaphysician thinks in antitheses. His conversation is "Yea, yea; Nay, nay" and whatsoever is more than these cometh of evil. For him a thing exists or it does not exist, a thing can never be itself and something else at the same time; positive and negative are mutually exclusive, cause and effect stand in stiff antagonism to each other. This method of thought seems at the first glance to be quite plausible because it is in accordance with sound common sense. But sound common sense, respectable fellow though he may be in his own home surrounded by his four walls, meets with strange adventures when he betakes himself into the wide world of investigation; and the metaphysical way of looking at things, sound and useful as it is, under given conditions, runs sooner or later into a stone wall, beyond which it is one-sided, stupid and abstract, and loses itself in insoluble contradictions. Because it omits to notice the interrelations of the individual phenomena, their existence, their coming and their going, their static and mobile conditions, and so to speak does not see the forest for trees. We know for example, with sufficient certainty for every day affairs, whether an animal is alive or dead, but, on closer examination, we find that this is sometimes no easy matter to decide, as jurists know very well and have gone indeed to great pains to discover a rational border line beyond which the killing of a child in the womb of its mother is murder. It is just as impossible too to fix the precise moment of death, for physiology shows that death is not a single and sudden event but a very slow process. Just so is every organic being at the same moment itself and not itself. Every moment it takes up matter coming to it from the outside and throws off other matter, every moment its body-cells die and are recreated. Indeed after a longer or shorter period the whole material of the body is renewed through the taking up of other particles of matter so that each organic being is at the same time itself and something else. We find also if we look at the matter more closely that the two poles of an antithesis, positive and negative, are just as inseparable as they are antagonistic, and that they, in spite of all their fixed antagonisms permeate each other, also that the cause and effect are concepts which can only realise themselves in relation to a particular case. However when we come to examine the separate case in its general relation to the world at large they come together and dissolve themselves in face of the working out of the universal problem, for, here, cause and effect exchange places, what was at one time and place effect becoming cause and vice versa. All these phenomena and thought-concepts do not fit into the frame of metaphysical philosophy. According to the dialectic method of thinking which regards things and their concepts in relation to their connection with each other, their concatenation, their coming into being and passing away, phenomena, like the preceding, are so many confirmations of its own philosophy. Nature is the proof of the dialectic, and we must give to modern science the credit of having furnished an extraordinary wealth and daily increasing store of material towards this proof, and thereby showing in the last instance things proceed dialectically and not in accordance with metaphysical notions. But as the scientists who have learned to think dialectically may be still easily counted, the chaos arising from the confusion between actual results and an antiquated mode of thought is thus explained, and this confusion is to-day dominant in theoretical science, and drives teachers and pupils, writers and readers to despair. A correct notion of the universe, of the human race, as well as of the reflection of this progress in the human mind can only be had by means of the dialectic method, together with a steady observation of the change and interchange which goes on in the universe, the coming into existence and passing away, progressive and retrogressive modification. And the later German philosophy has proceeded from this standpoint. Kant began his career in this way by abolishing Newton's conception of a stable solar system which persisted after receiving its first impulse, in favor of a historical process, to wit, the origin of the sun and all the planets from a rotating mass of nebulæ. From this concept he drew the conclusion that, granted this origin, the future dissolution of the solar system is inevitable. His theory was mathematically proved by Laplace half a century later, and half a century later still the spectroscope discovered the existence of such glowing masses of gas in space in different stages of condensation. This later German philosophy found its conclusion in the philosophy of Hegel where for the first time, and this is his greatest service, the entire natural, historical and spiritual universe was regarded as a process, that is, as in constant progress, change, transformation and development, and the attempt was made to show the more subtle relations of this process and development. From this historical point of view the history of mankind no longer appeared as a barren confusion of mindless forces, all alike subject to rejection before the judgment seat of the most recently ripened philosophy, and which, at the very best, man puts out of his mind as soon as possible, but as the development-process of humanity itself, to follow the process of which, little by little, through all its ramifications, and to establish the essential laws of which, in spite of all apparent accidents, is now the task of philosophic thought. It is immaterial at this place that Hegel did not solve this problem. His epoch-making service was to have proposed it. It is a problem, moreover, which no individual can solve. Though Hegel, next to Saint Simon, was the most universal intellect of his time he was still limited, in the first place, through the necessarily narrow grasp of his own knowledge and in addition through the limitations of the contemporary conditions of knowledge. There was a third reason, too. Hegel was an idealist, that is he regarded thought not as a mere abstract representation of real phenomena, but, on the contrary, phenomena and their development appeared to him as the representations of the Idea which existed before the world. The result was an inversion of everything, the actual interrelations of the universe were turned completely upside down, and though of these interrelations, many single ones were set out justly and correctly by Hegel, much of the detail is patched, labored, made up, in short, incorrect. The Hegelian system was, to speak briefly, a colossal miscarriage, and the last of its kind. It rested on an incurable contradiction; on the other hand, it actually proclaimed the historical conception according to which human history is a process of development, which, in its very nature, cannot find its intellectual conclusion in the discovery of a so-called absolute truth, on the other hand it declared itself to be the central idea of just such an absolute truth. An all embracing and determined knowledge of nature and history is in absolute contradiction with the foundations of dialectic thought, but it is not denied, on the contrary, it is strongly affirmed, that the systematic knowledge of the entire external world may from age to age make giant strides. The total perversion of modern German idealism of necessity drove men to materialism, but not, and this is well worth noting, to the mere metaphysical mechanical materialism of the eighteenth century. In contradiction to the naïvely simple revolutionary pushing on one side of all earlier history, modern materialism sees in history the process of the development of society, to discover the laws of whose development is its task. In contradistinction to the conception of nature which prevailed among the French philosophers, as well as with Hegel, as something moving in a narrow circle with an eternal and unchangeable substantial form, as Newton conceived it, and with invariable species of organic beings, as Linnæus thought, materialism embraces the more recent discoveries of natural science, according to which nature has also a history in time. For the forms of the worlds, like the species of organisms by which they are inhabited under suitable conditions, come into being and pass away, and the cycles of their progress, in so far as it is permissible to use the term, take on eternally more magnificent dimensions. In either case it is entirely dialectic and no longer forces a static philosophy upon the other sciences. As soon as the demand is made upon each separate branch of science that it make clear its relation to things in general, and science as a whole, the individual science thereupon becomes superfluous. Of all philosophy up to the present time the only peculiar property which remains as its characteristic is the study of thought and the formal laws of thought--logic and the dialectic. All else belongs to the positive sciences of nature and history. While the revolution in natural science was only able to be completely carried out in proportion as investigation furnished the necessary positive material, there were known a multitude of earlier historical facts which gave a distinct bias to the philosophy of history. In 1831 in Lyons the first purely working class revolt occurred. The first national working class movement, that of the English Chartists, reached its height between 1838 and 1842. The class war between the proletariat and the bourgeoisie proceeded historically in the most advanced European countries just in proportion as the newly developed greater industry has progressed, on the one hand, and the political power of the bourgeoisie on the other. The teachings of the bourgeois economists with respect to the identity of the interests of capital and labor and with respect to the universal peace and well being which would follow as a matter of course from the adoption of free trade were more and more contradicted by facts. All these things could be as little ignored as the French and English socialism which was their theoretical though very insufficient expression. But the old idealistic philosophy of history which was as yet by no means laid aside knew nothing of class wars dependent upon material interests, and nothing of material interests, specially. Production, like all economic phenomena only occupied a subordinate position as a secondary element of the "history of civilisation." The new facts, moreover rendered necessary a new investigation of all preceding history and then it became evident that all history up to then had been a history of class struggles and that these mutually conflicting classes are the results of a given method of production and distribution at a given period, in a word, of the economic conditions of that epoch. Hence, that the economic structure of society at a given time furnishes the real foundations upon which the entire superstructure of political and juristic institutions as well as the religious, philosophical and other abstract notions of a given period are to be explained in the last instance. Idealism was thereupon driven from its last refuge, the philosophy of history; a materialistic philosophy of history was set up, and the path was discovered by which the consciousness of man could be shown as springing from his existence rather than his existence from his consciousness. But the socialism which had existed so far was just as incompatible with the materialistic conception of history as was the naturalistic French materialism with the dialectic and the modern discoveries in natural science. The then existing socialism criticised the prevailing capitalistic methods of production and their results but it could not explain them and thus could not match itself against them, it could only brush them on one side as being bad. But it was necessary to show, on the one hand, the capitalistic methods of production in their historical connection, and their necessity at a given historical epoch and therefore the necessity of their ultimate disappearance. On the other hand their inner character had to be explained and this was all the more concealed for criticism had up to then been chiefly engaged in pointing out the evil results flowing from them rather than in destroying the thing itself. This was made clear by the discovery of surplus value. It was shown that the appropriation of unpaid labor is the basis of the capitalistic mode of production and the robbery of the worker is carried out by its means; that the capitalist, although he buys the labor-force of the worker at the full value which it possesses in the market as a commodity, yet derives more from it than he has paid for it, and that in the last instance this surplus creates the total amount of value from which the capital steadily increasing in the hands of the capitalistic class is amassed. The phenomenon not only of capitalistic production but of the creation of capital has thus been explained. For these two great discoveries, the materialistic conception of history and the disclosure of the mystery of capitalistic production we must thank Marx. Granted these, socialism became a science, which thereupon had to busy itself in the working out of these ideas in their individual aspects and connections. Thus matters stood in the realm of theoretical socialism and the dead philosophy (of metaphysics Ed.) when Herr Eugene Duehring, with no slight impressement sprang up before the public and announced that he had accomplished a complete revolution in political economy and socialism. Let us now see what Herr Duehring promises and--how he keeps his promises. _II. What Herr Duehring Has to Say._ Up to now, the notable writings of Herr Duehring are his "Course of Philosophy," his "Course of Political and Social Science" and his "Critical History of Political Economy and Socialism." The first work is the one which particularly claims our attention. Right on the first page Herr Duehring announces himself as "one who claims to represent this power (of philosophy) at the present time and its unfolding in the undiscoverable future." He discovers himself, therefore, as the one true philosopher for the present and the hidden future. Whoso differs from him differs from truth. Many people even before Herr Duehring, have thought this about themselves or something like it, but, with the exception of Richard Wagner, he is the first who has allowed himself to say it right out. And, as a matter of fact, the truth, as it is handled by him is "a final truth of the last instance." Herr Duehring's philosophy is "the natural system, or the philosophy of reality.... Reality is so understood as to exclude every sudden impulse towards an unreal and subjectively limited comprehension of the universe." The philosophy is therefore so shaped as to exclude Herr Duehring himself from the somewhat obvious limitations of his own personal, subjective narrowness. It is quite necessary to explain how this miracle is worked, if he is in a position to lay down unquestionable truths of the last instance, though, for our part, we cannot discover any particular merit in them. This "natural system of valuable knowledge" has "with great profundity established the foundation forms of existence." Out of his real critical attitude proceed the elements of a real critical philosophy, based on the realities of nature and life, which does not allow of any merely imaginary horizon but in its mighty revolutionary progress opens up the earth and heaven of external and inner nature; it is a "new method of thought" and its results are "from the bottom up, peculiar results and philosophies ... system-shaping ideas ... fixed truths." We have in it before us "a work which must seek its force in the concentrated initiative," whatever that may mean; an "investigation reaching to the roots ... a rooted science ... a severely scientific conception of things and men ... a comprehensive thorough effort of the mind ... a creative sketch of suppositions and conclusions from overmastering ideas ... the absolute fundamental." In the realm of political economy he gives us not only "historical and systematic comprehensive efforts" of which the historical are moreover distinguished by "my presentation of history in the grand style" and those in political economy have produced "creative movements," but closes with a special completely elaborated scientific scheme for a future society which is "the actual fruit of a clear and basic theory," and is therefore just as free from the possibility of error and as individual as Duehring's philosophy ... for "only in that socialistic structure which I have disclosed in my "Course of Political and Social Science" can a true ownership arise in place of the present apparent private property which rests on force such an ownership as must be recognised in the future." These flowers of rhetoric from the praises of Herr Duehring by Herr Duehring might be increased tenfold with ease. They must cause a doubt to arise in the mind of the reader whether he is reading the words of a philosopher or of a--but we must ask him to withhold his judgment until he shall have learnt the aforesaid grasp of the root of things by a closer acquaintance. We only quote the foregoing flowery remarks to show that we have to do with no ordinary philosopher and socialist who simply speaks what he thinks and leaves the future to decide with respect to their value, but with an extraordinary personality like the Pope whose individual teachings must be received if the damnable sin of heresy is to be avoided. We have not by any means to deal with the kind of work which abounds in all the socialist writings, and the later German ones, in particular, works in which people of varying calibre seek to explain in the most naïve fashion their notions of things in general and for an answer to whom there is more or less material available. But whatever may be the literary or scientific deficiencies of these works their goodwill towards socialism is always manifest. On the other hand, Herr Duehring presents us with statements which he declares to be final truths of the last instance, exclusive truths, according to which any other opinion is absolutely false. Thus he owns the only scientific methods of investigation, and all others are unscientific in comparison. Either he is right and we are face to face with the greatest genius of our time, the first superhuman, because infallible, man; or he is wrong, and then, since our judgment may always be at fault, benevolent regard for his possible good intentions would be the deadliest insult to Herr Duehring. When one is in possession of final truths of the last instance and the only absolutely scientific knowledge one must have a certain contempt for the rest of erring and unscientific humanity. We cannot therefore be surprised that Herr Duehring employs very abusive terms with regard to his predecessors, and that only a few exceptional people, recognised by him as great men, find favor in face of his comprehension of fundamental truths. (Then follows a list of the epithets applied by Duehring to philosophers, naturalists, Darwin, in particular, and to the socialist writers. This list has been omitted as it contributes nothing of value to the general discussion and is only useful for the particular controversial matter in hand. Ed.) And so on--and this is only a hastily gathered bouquet of flowers from Herr Duehring's rose garden. It will be understood that if these amiable insults which should be forbidden Herr Duehring on any grounds of politeness, are found somewhat disreputable and unpleasant, they are, still, final truths of the last instance. Even now we shall guard against any doubt of his profundity because we might otherwise be forbidden to discover the particular category of idiots to which we belong. We have but considered it our duty on the one hand to give what Herr Duehring calls "The quintessence of a modest mode of expression," and on the other hand, to show that in Herr Duehring's eyes the objectionableness of his predecessors is no less firmly established than his own infallibility. Accordingly if all this is actually true we bow in reverence humbly before the mighty genius of modern times. CHAPTER IV PHILOSOPHY _Apriorism._ Philosophy is, according to Herr Duehring, the development of the highest forms of consciousness of the world and life, and embraces, in a wider sense, the principles of all knowledge and volition. Wherever a series of perceptions, or motives or a group of forms of life becomes a matter of consideration in the human mind the principles which underly these forms, of necessity, become an object of philosophy. These principles are single, or, up to the present, have been considered as single ingredients out of which are composed the complexities of knowledge and volition. Like the chemical composition of material bodies, the entire universe may be also resolved into fundamental forms and elements. These elementary constituents and principles serve, when once discovered, not only for the known tangible world but for that also, which is unknown and inaccessible. Philosophical principles therefore constitute the last complement required by the sciences in order that they may become a uniform system by means of which nature and human life are explained. In addition to the examination of the fundamental forms of all existence, philosophy has only two particular objects of investigation, Nature and Humanity. Hence our material may be classified into three main groups,--a general scheme of the universe, the teaching of the principles of nature and finally the principles which regulate Humanity. This arrangement at the same time comprises an inner logical order, for the formal principles which are true for all existence take precedence, and the concrete realms in which these principles display themselves follow in the gradation of their successive arrangements. So far, this is Herr Duehring's conception of things given almost in his very words. He is therefore engaged with principles, formal conceptions, which are subjective and not derived from the knowledge of external phenomena, but which are applied to Nature and Humanity, as the principles according to which Nature and Humanity must regulate themselves. But how are these subjective principles derived? From thought itself? No, for Herr Duehring himself says: the purely ideal realm is limited to logical arrangements and mathematical conceptions (which latter as we shall later see is false). Logical arrangements can only be referred to forms of thought, but we are engaged here only with forms of existence, the external world, and these forms can never be created by thought nor derived from it but only from the external world. Hereupon the entire matter undergoes a change. We see that principles are not the starting point of investigation but the conclusion of it, they are not to be applied to nature and history but are derived from them. Nature and Humanity are not steered by principles, but principles are, on the other hand, only correct so far as they correspond with nature and history. That is just the materialistic conception of the matter, and the opposite, that of Herr Duehring is the idealistic conception, it turns things upside down and constructs a real world out of the world of thought, arrangements, plans and categories existing from everlasting before the world, just like Hegelianism. As a matter of fact, we prefer Hegel's "Encyclopedia," with all its fever phantoms, to the "final truths of the last instance" of Herr Duehring. In the first place, according to Herr Duehring we have the general scheme of the universe which by Hegel is called "logic." Then according to both of them we have the application of this scheme to nature by means of the logical categories, the philosophy of nature, and finally their application to Humanity, by what Hegel calls "the Philosophy of the Spirit." "The inner logical arrangement" of Duehring's scheme brings us therefore logically back to Hegel's "Encyclopedia" from which it is taken with a fidelity which would move that Wandering Jew of the Hegelian school, Professor Michelet of Berlin, to tears. Such a result follows if one takes it for granted that "consciousness," "thought," is something which has existed from the beginning in contradistinction to nature. It would then be of the greatest importance to bring consciousness and Nature, thought and existence, into harmony, to harmonise the laws of thought and the laws of Nature. But one enquires further what are thought and consciousness and whence do they originate. It is consequently discovered that they are products of the brain of man, and that Humanity is itself a product of nature which has developed in and along with its environment; wherefore it becomes self-apparent that the products of the brain of man being themselves, in the last instance, natural products, do not contradict all the rest of Nature but correspond with it. But Herr Duehring cannot allow so simple a treatment of the subject. He thinks not only in the name of Humanity which would be quite a large affair, but in the name of the conscious and thinking beings of the whole universe. Indeed, it would be "a degradation of the foundation concepts of knowledge and consciousness if one should wish to exclude or even to throw suspicion upon their sovereign value and undoubted claims to truth by means of the epithet 'human.'" In order that there may be no suspicion that upon some heavenly body or other twice two may make five, Herr Duehring does not venture to call thought a human attribute, and therefore he is obliged to separate it from the only true foundation on which it rests, as far as we are concerned, namely, from man and nature, and thereby falls, without any possibility of getting out, into an "ideology" which causes him to play baby to Hegel. It is self-evident that one cannot build materialistic doctrines on foundations so ideological. We shall see later that Herr Duehring is compelled to push nature to the front as a conscious agent and, therefore, as that, which people in plain English call God. Indeed, our philosopher had other motives in shifting the foundation of reality from the material world to that of thought. The knowledge of this general scheme of the universe, of these formal principles of being is just the foundation of Herr Duehring's philosophy. If we derive the scheme of the universe not from our own brain, but merely by means of our own brain, from the material world, we need no philosophy, but simply knowledge of the world and what occurs in it, and the results of this knowledge likewise do not constitute a philosophy, but positive science. In such a case, however, Herr Duehring's entire book would have been love's labor lost. Further, if no philosophy, as such, is longer required there is no longer the necessity of any philosophy of nature even. The view that all the phenomena of nature stand in systematic mutual relations compels science to prove this systematic interconnection in all respects, in single cases as well as in the entirety. But an appropriate creative, scientific representation of this mutual connection in such a way as to show the composition of an exact thought-picture of the system of the universe in which we live remains not only for us but for all time an impossibility. Should such a final conclusive system of the interconnection of the various activities of the universe, physical, as well as intellectual and historical, ever be brought to completion at any point of time in the history of the human race, human knowledge would forthwith come to an end and future historical progress would be cut off from the very moment in which society was directed in accordance with the system, which would be an absurdity, mere nonsense. Man is therefore confronted by a contradiction, on the one hand he is obliged to study the interconnections of the world-system exhaustively, and, on the other hand, he is unable to fully accomplish the task either as regards himself or as regards the system of nature. This contradiction, however, does not consist solely in the nature of the two factors World and Man; it is the main lever also of universal intellectual progress and is solved every day and for ever in an endless progressive development of humanity, just as mathematical problems find their solution in an endless progression of a recurring decimal. As a matter of fact also every concept of the universe is subject to objective limitations owing to the conditions of historical knowledge, and subjectively in addition owing to the physical and mental make up of the author of the concept. But Herr Duehring exhibits a mode of thought which is confined in its application to a limited and subjective idea of the universe. We saw earlier that he was omnipresent, in all possible forms of the universe, now we see that he is omniscient. He has solved the final problems of science and has nailed up tight all future knowledge. Herr Duehring considers that he can, as with the fundamental forms of existence, produce aprioristically by means of his own cogitations the whole of pure mathematics without making any use of the experience which is afforded us in the objective world. In pure mathematics the understanding is engaged "in its own free creations and imaginations"; the concepts of number and form are "self-sufficient objects proceeding from themselves" and so have "a value independent of individual experience and actual objective reality." That pure mathematics has a significance independent of particular individual experience is quite true as are also the established facts of all the sciences and indeed of all facts. The magnetic poles, the formation of water from oxygen and hydrogen, the fact that Hegel is dead and that Herr Duehring is alive, are facts independent of my experience or that of any other single individual, and will be independent of that of Herr Duehring himself, as soon as he shall sleep the sleep of the just. But in pure mathematics the mind is not by any means engaged with its own creations and imaginings. The concepts of number and form have only come to us by the way of the real world. The ten fingers on which men count and thereby performed the first arithmetical calculations are anything but a free creation of the mind. To count not only requires objects capable of being counted but the ability, when these objects are regarded, of subtracting all qualities from them except number and this ability is the product of long historical development of actual experience. The concept form is, like that of number, derived exclusively from the external world and is not a purely mental product. To it things possessed of shape were necessary and these shapes men compared until the concept form was arrived at. Pure mathematics considers the shapes and quantities of things in the actual world, very real objects. The fact that these objects appear in a very abstract form only superficially conceals their origin in the world of external nature. In order to understand these forms and qualities in their purity it is necessary to separate them from their content and thus one gets the point, without dimensions, the line, without breadth and thickness, a and b, x and y, constants and variables, and we finally first arrive at independent creations of the imagination and intellect, imaginary magnitudes. Also the apparent derivation of mathematical magnitudes from each other does not prove their aprioristic origin, but only their rational interconnection. Before one attained the concept that the form of a cylinder was derived from the revolution of a rectangle round one of its sides, he must have examined a number of rectangles and cylinders even if of imperfect form. Like all sciences, mathematics has sprung from the necessities of men, from the measurement of land and the content of vessels, from the calculation of time and mechanics. But, as in every department of thought, at a certain stage of development, laws are abstracted from the actual phenomena, are separated from them and set over against them, as something independent of them, as laws, which apparently come from the outside, in accordance with which the material world must necessarily conduct itself. So, it has happened in society and the state, so, and not otherwise, pure mathematics though borrowed from the world is applied to the world, and though it only shows a portion of its component factors is all the better applicable on that account. But as Herr Duehring imagines that the whole of pure mathematics can be derived from the mathematical axioms, "which according to purely logical concepts are neither capable of proof nor in need of any, and without empirical ingredients anywhere and that these can be applied to the universe, he likewise imagines, in the first place, the foundation forms of being, the single ingredients of all knowledge, the axioms of philosophy, to be produced by the intellect of man; he imagines also that he can derive the whole of philosophy or plan of the universe from these, and that his sublime genius can compel us to accept this, his conception of nature and humanity." Unfortunately nature and humanity are not constituted like the Prussians of the Manteuffel regime of 1850. The axioms of mathematics are expressions of the most elementary ideas which mathematics must borrow from logic. They may be reduced to two. (1) The whole is greater than its part; this statement is mere tautology, since the quantitatively limited concept, "part," necessarily refers to the concept, "whole,"--in that "part" signifies no more than that the quantitative "whole" is made up of quantitative "parts." Since the so-called axiom merely asserts this much we are not a step further. This can be shown to be a tautology if we say "The whole is that which consists of several parts--a part is that several of which make up a whole, therefore the part is less than the whole." Where the barrenness of the repetition shows the lack of content all the more strongly. (2) If two magnitudes are equal to a third they are equal to one another; this statement is, as Hegel has shown, a conclusion, upon the correctness of which all logic depends, and which is demonstrated therefore outside of pure mathematics. The remaining axioms with regard to equality and inequality are merely logical extensions of this conclusion. Such barren statements are not enticing either in mathematics or anywhere else. To proceed we must have realities, conditions and forms taken from real material things; representations of lines, planes, angles, polygons, spheres, etc., are all borrowed from reality, and it is just naive ideology to believe the mathematicians, who assert that the first line was made by causing a point to progress through space, the first plane by means of the movement of a line, and the first solid by revolving a plane, etc. Even speech rebels against this idea. A mathematical figure of three dimensions is called a solid--corpus solidum--and hence, according to the Latin, a body capable of being handled. It has a name derived, therefore, by no means from the independent play of imagination but from solid reality. But to what purpose is all this prolixity? After Herr Duehring has enthusiastically proclaimed the independence of pure mathematics of the world of experience, their apriorism, their connection with free creation and imagination, he says "it will be readily seen that these mathematical elements (number, magnitude, time, space, geometric progression), are therefore ideal forms with relation to absolute magnitudes and therefore something quite empiric, no matter to what species they belong." But "mathematical general notions are, apart from experience, nevertheless capable of sufficient characterization," which latter proceeds, more or less, from each abstraction, but does not by any means prove that it is not deprived from the actual. In the scheme of the universe of our author pure mathematics originated in pure thought, in his philosophy of nature it is derived from the external world and then set apart from it. What are we then to believe? _The Scheme of the Universe._ "All-comprehending existence is sole. It is sufficient to itself and has nothing above or below it. To associate a second existence with it would be to make it just what it is not, a part of a constituent or all-embracing whole. When we conceive of our idea of soleness as a frame there is nothing which can enter into this, nothing which retains twofoldness can enter into this concept of unity. But nothing can alienate itself from this concept of unity. The essence of all thought consists in uniting the elements of consciousness in a unity. The indivisible concept of the universe has arisen by comprehending everything, and the universe, as the word signifies, is recognised as something in which everything is united into one unity." So far Herr Duehring is quoted. The mathematical method, "Everything must be decided on simple axiomatic foundation principles, just as if it were concerned with the simple principles of mathematics," this method is for the first time here applied. "The all-embracing existence is sole." If tautology, simple repetition in the predicate of what has been stated in the subject, if this constitutes an axiom, then we have a splendid specimen. In the subject Herr Duehring tells us that existence comprehends everything, in the predicate he explains intrepidly that there is nothing outside it. What a system-shaping thought. It is indeed system-shaping until we find six lines further down that Herr Duehring has transformed the soleness of being by means of our idea of unity into its one-ness. As the work of all thought consists in the bringing together of all thought into a unity so is existence, as soon as it is conceived, thought of as a unity, an indivisible concept of the universe, and because existence so conceived is the sole universal concept, so is real existence, the real universe, just as much an indivisible unity, and consequently "the beings in the beyond have no further place as soon as the mind has learned to comprehend existence in the homogeneous universality." That is a campaign with which in comparison Austerlitz and Jena, Koeniggratz and Sedan sink in insignificance. In a couple of expressions after we have set the first axiom moving we have abolished, put away, and destroyed all the inhabitants of the spirit-world, God, the heavenly hierarchies, heaven, hell and purgatory as well as the immortality of the soul. How do we arrive at the idea of the unity of existence from that of its soleness? As a matter of fact, we generally conceive it. As we spread out our idea of unity as a frame around it the concept of existence becomes the concept of unity, for the existence of all thought consists in the bringing of elements of consciousness into unity. This last statement is simply false. In the first place thought consists in the decomposition of objects of consciousness into their elements as well as in the uniting of mutually connected elements into a unity. There can be no synthesis without analysis. In the second place, thought can, without error, only bring those elements of consciousness into a unity in which or in the actual prototypes of which this unity already existed beforehand. If I comprehend a shoebrush under the class mammal, it does not thereupon become a milk-giver. The unity of existence is therefore just the thing which had to be proved in order to justify his concept of thought as a unity, and if Herr Duehring assures us that he regards existence as a unity and not as twofold he tells us nothing more than that he himself personally thinks so. To give a clear explanation of his method of reasoning, it is as follows, "I begin with existence. Therefore I think of existence. The idea of existence is an idea of unity. Thought and existence must therefore belong together, they answer one another, they mutually cover each other. Therefore existence is in reality a unity and there are no beings beyond." But if Herr Duehring had spoken thus plainly instead of entertaining us with oracular statements, the ideology of his argument would have been completely exposed. To attempt to undertake to prove from the identity of thought and existence the reality of the result of thought, that indeed were one of the fever-phantoms of a Hegel. If his entire method of proof were really correct Herr Duehring would not have gained a single point over the spiritists. The spiritists would curtly reply, "The universe is simple from our standpoint also. The division into the hither and the beyond only exists from our special earthly original sin standpoint. In its essence, that is God, the entire universe is a unity." And they will take Herr Duehring with them to his beloved heavenly bodies, and will show him one or more where no original sin can be found, and where there is therefore no antagonism between the hither and the beyond, and the oneness of the universe is a demand of faith. The most comical thing about the matter is that Herr Duehring in order to prove the non-existence of God from his concept of existence, furnishes the ontological proof of God's existence. This runs as follows--If we think of God we think of Him as the concept of complete perfection. To the idea of perfection existence is a first essential, since a non-existent being is of necessity imperfect. We must therefore add existence to the perfections of God. Therefore God must exist. Thus Herr Duehring reasons exactly. If we think of existence we think of it as a concept. What is united into a concept is a unity, therefore existence would not correspond with its concept if it were not a unity. Therefore it must be a unity, therefore there is no God, etc. If we speak of existence and merely of existence, the unity can only consist in this that all objects with which it is concerned are--exist. They are comprised under the unity of this common existence, and no other, and the general dictum that they all exist cannot give them any further qualities, common or not common, but excludes all such from consideration in advance. For as soon as we take a step beyond the simple fact that existence is common to all things, the distinctions between these separate things engage our attention, and if these differences consist in this that some are black, some white, some alive, others not alive, some hither and some beyond, we cannot conclude therefrom that mere existence can be imputed to all of them alike. The unity of the universe does not consist in its existence, although its existence is a presumption of its unity, since it must first exist before it can be a unit. Existence beyond the boundary line of our horizon is an open question. The real unity of the universe consists in its materiality, and this is established, not by a pair of juggling phrases but by means of a long and difficult development of philosophy and natural science. With respect to the subject in hand; the existence which Herr Duehring presents to us is "not that pure existence which is self sufficient and without any other qualities, in fact, only representing the antithesis of no-idea or absence-of-idea." Now we shall very soon see that the universe of Herr Duehring has its origin simultaneously with an existence which is without essential differentiation, progress or change, and is therefore merely in fact a contradiction of absence of thought, therefore really nothing. From this non-existence is developed the present differentiated, changeable universe which represents progressive growth; and when we grasp this idea, only by virtue of this eternal change do we arrive at "the concept of the self sufficing, universal existence." We have therefore now the concept of existence on a higher plane where it comprises within itself stability as well as change, being as well as development. Arrived at this point we find that "species and genera in fact the special and the general, are the simplest forms of differentiation, without which the constitution of things cannot be grasped." But this is a means of distinguishing quality and after a discussion of this part of the subject we proceed "Over against the idea of species stands the idea of the whole, a homogeneity, as it were, in which no differentiation of species can longer be found," so we pass from quality to quantity and this is always "capable of measurement." Let us compare this "clear analysis of the actual, universal scheme of things" and its "real, critical standpoint" with the fever-phantasies of a Hegel. We find that Hegel's "Logic" begins with existence as does that of Herr Duehring; that existence displays itself as nothing, as with Herr Duehring; that out of this not-being, a leap is made into being, and that existence is the result of this, that is a more complete and higher form of being, as with Herr Duehring. Being leads to quality, quality to quantity, just as with Herr Duehring. And in order that no essential shall be lacking Herr Duehring tells us elsewhere "from the realm of absence of sensation man leaps to that of sensation in spite of all the quantitative steps with but one qualitative leap ... from which we can show that he is entirely differentiated from the mere gradation of one and the same quality." This is just the Hegelian standard of measurement according to which mere quantitative expansion or contraction causes a sudden qualitative change at a given point, as for example with heated or cooled water, there are points where the spring into a new set of conditions is fulfilled under normal circumstances, and where therefore quantity suddenly changes into quality. Our investigation has likewise sought to penetrate to the deepest roots, and discovers the rooted Duehring foundations to be the "fever-phantasies" of a Hegel, the categories of the Hegelian logic, in the first place, teachings in regard to existence after the antique Hegelian method, and an ineffective cloak of plagiarism. And not content with purloining the whole scheme of existence from his despised predecessors, Herr Duehring after giving the above example of a change of quantity into quality has the coolness to say of Marx, "Is it not comical, this appeal (of Marx) to Hegelian confusion and mistiness, that quantity changes into quality." Confused mixture, who changes his ground, who is a comical fellow Herr Duehring? All these pretty little statements are not only not "axiomatic utterances" according to label, but are simply taken from foreign sources, that is, from Hegel's "Logic." Of a truth there is not revealed in the whole chapter the shadow of any "inner connection," except so far as it is borrowed from Hegel, and the whole talk about stability and change finally runs out into mere garrulity on the subject of time and space. From existence Hegel comes to substance, to the dialectic. Here he treats of reflex-movements, antagonisms and contradictions, positive and negative for example, and thence proceeds to causality, or the conditions of cause and effect and closes with necessity. Herr Duehring does not vary this method. What Hegel calls the "doctrines of existence" Herr Duehring has translated into "logical properties of existence." These exist, above all else in the antagonism of forces, in antithesis, Herr Duehring denies the antithesis in toto, but we shall return to this matter later. Then he proceeds to causality and thence to necessity. If Herr Duehring says of himself, "I do not philosophise from a cage," he must mean that he philosophises in a cage, the cage of the Hegelian arrangement of categories. CHAPTER V NATURAL PHILOSOPHY _Time and Space._ We now come to natural philosophy. Here again Herr Duehring takes it upon himself to be dissatisfied with his predecessors. He says "Natural philosophy sank so low that it became barren dregs of poetry and had fallen into the degraded rubbish of the sham philosophy of a Schelling and the like, grubbing in priest-craft and mystifying the public." Disgust has rid us of these deformities, but up to the present it has been succeeded by instability, and "what is of concern to the public at large is that the disappearance of a particularly great charlatan merely gives an opportunity to a smaller but more expert successor who repeats the production in another form." Naturalists have little desire for "a flight into the kingdom of the universe-comprehending ideas," and therefore indulge too freely in speculations which "go to pieces." Thus complete salvation must be found, and, fortunately, Herr Duehring is at hand. In order to comprehend aright the following conclusions respecting the unfolding of the universe in time and its limitation in space, we must again turn our attention to certain portions of the "scheme of the universe." Eternity is ascribed to existence, in agreement with Hegel, what Hegel calls "tiresome (schlecht) eternity," and this eternity is now investigated. "The plainest form of an incontrovertible idea of eternity is the piling up of numbers unlimitedly in arithmetical progression. Just as we can give a complete unity to each number without the possibility of repetition, so at every stage of its being it progresses still further and eternity consists in the unlimited manifestation of this condition. This sufficiently conceived eternity has but one single beginning with one single direction. Although it is not material to our concept to imagine a direction opposite to that in which the progression piles up, this notion of a backward moving eternity is only a hasty picture drawn by the imagination. Since it must necessarily run in a contrary direction, it would have behind it in each instance an endless succession of numbers. But this would be inadmissible as constituting the contradiction of a calculated infinity of numbers, and so it seems absurd to imagine a second direction of eternity." The first conclusion to be drawn from this conception of eternity is that the chain of cause and effect in the universe must once have had a beginning: an endless number of causes which have followed one another endlessly is therefore unthinkable, "because innumerability is thus considered as enumerated," therefore a final cause is proved. The second conclusion is "the law of the definite number: the accumulation of identical independent objects of an actual species is only thinkable as being made up of a definite number of these individual objects." Not only must the actual number of the heavenly bodies be definite at a given time, but the total number of all existent objects, the smallest independent particles of matter. This last necessity constitutes the real reason why no composite body is thinkable except as made up of atoms. All actual division has a fixed limit and must have it, if the contradiction of a numerated innumerability is to be avoided. On the same grounds not only must the revolutions of the sun and earth be fixed as they have occurred up to the present, even if they cannot be indicated, but all the periodical processes of nature must have had a beginning somewhere, and all the distinctions and complexities of nature which succeed each other must similarly have had an origin. This must indisputably have existed from eternity, but such an idea would be excluded if time consisted of real parts and was not arbitrarily divided to accommodate the possibilities of our understanding. It is different with time, self regarded, but the facts and phenomena of which time is made up being capable of differentiation can be enumerated. Let us conceive of a condition in which no change occurs and which undergoes no alteration in its stable identity; the time concept then becomes transformed into the general notion of existence. What is the result of piling up an empty duration of time is not discoverable. So far, Herr Duehring writes and he is not a little edified concerning the significance of these discoveries. He hopes that "it is perceived as a not insignificant truth," and later on says, "One should note the very simple phrases by which we have helped the concept of immortality and the criticism of it to a point at present unknown, through the sharpening and deepening of the simple elements of the universal conception of time and space." We have helped! This deepening and sharpening! Who are we? In what are we manifest? Who deepens and who sharpens? "Thesis--the world has a beginning in time and is bounded by space. Proof--If one suppose that the world has no beginning in time he is bound to grant infinity to each point of time, and so an infinite succession of things has passed away in the universe. But infinity of a series consists in the impossibility of its completion by successive syntheses. Therefore an eternal progression of the world is impossible. Hence a beginning of the world is a necessary condition of its existence, which was to be proved. Let us take the other concept. The world now appears as an eternal given whole consisting of things which have a simultaneous existence. Now we can conceive of the mass of a quantity, which can only be regarded under certain conditions, in no other way than by means of the synthesis of its parts, and we conceive the totality of the quantity by means of the completed synthesis or repeated additions of the unity to itself. Thus, in order to conceive of the universe as a whole which fills all space, the successive syntheses of the parts of an infinite universe must be regarded as being completed, that is an eternity of time must in calculating all coexisting things, be regarded as having existed, but this is impossible. Therefore an unending aggregate of actual things cannot be regarded as a given whole and therefore also not as coexistent. A world is therefore extension in space which is not unlimited and which has therefore bounds. And this was the second thing to be proved." These statements are copied from a well-known book which made its appearance in 1781 and is entitled "The Critique of Pure Reason," by Immanuel Kant. They can be read there in Part I, Division 2, second section, second part. "First Antinomy of Pure Reason." To Herr Duehring alone remains the name and fame of having pasted the law of fixed numbers on one of the published thoughts of Kant and of having made the discovery that there was once a time when time did not exist but only a universe. For the rest, therefore, when we come across anything sensible in Herr Duehring's exposition "We" means Immanuel Kant, and the "present" is only ninety-five years old. Quite simple indeed, and unknown until now! But Kant does not establish the above statement by his proof. On the other hand, he shows the reverse, namely, that the universe has no beginning in time and no end in space, and he fixes his antinomy in this, the unsolvable contradiction that the one is just as capable of proof as the other. People of small calibre might be inclined to think that here Kant had found an insuperable difficulty, not so our bold author of fundamental results "especially his own." He copies all that he can use of Kant's antinomy and throws the rest away. The matter solves itself very simply. Eternity in time and endlessness in space signify from the very words that there is no end in either direction, forwards or backwards, over or under, right or left. This infinity is quite different from an endless progression, since the latter always has some beginning, a first step. The inapplicability of this progression idea to our object is evident directly we apply it to space. Infinite progression translated in terms of space is a line produced continuously in a given direction. Is infinity in space expressed in this way, even remotely? On the contrary it requires six of these lines drawn from this point in three opposite directions to express the dimensions of space and we should have accordingly six of these dimensions. Kant saw this so plainly that he employed his progression merely indirectly in a round about way to express the extent of the universe. Herr Duehring on the contrary forces us to accept his six dimensions of space and at the same time has no words in which to express his contempt of the mathematical mysticism of Gauss who would not content himself with the three dimensions of space. Applied to time, the series or row of objects, infinite at both extremities, has a certain figurative significance. But let us picture time as proceeding from unity or a line proceeding from a fixed point. We can say then that time has had a beginning. We assume just what we wanted to prove. We give a one-sided half-character to infinity of time. But a one-sided eternity split in halves is a contradiction in itself, the exact opposite of a hypothetical infinity, incapable of contradiction. We can only overcome this contradiction by assuming that the unity which we began to count the progression from, the point from which we measure the line, is a unity taken at pleasure in the series, a point taken at pleasure in the line. Hence as far as the line or series is concerned it is immaterial where we put it. But as for the contradiction of the "counted endless progression" we shall be in a position to examine it more closely as soon as Herr Duehring has taught us the trick of reckoning it. If he has accomplished the feat of counting from minus infinity to zero, we shall be glad to hear from him again. It is clear that wherever he begins to count he leaves behind him an endless progression, and with it the problem which he had to solve. Let him only take his own infinite progression 1 + 2 + 3 + 4 etc. and try to reckon back to 1 again from the infinite end. He evidently does not comprehend the requirements of the problem. And furthermore, if he affirms that the infinite progression of past time is capable of calculation he must affirm that time has a beginning for otherwise he could not begin to calculate. Therefore he again substitutes a supposition for what he had to prove. The idea of the calculated infinite series, in other words Duehring's all-embracing law of the fixed number, is therefore a contradiction in adjecto, is a self contradiction, and an absurd one, moreover. It is clear that an infinity which has an end but no beginning is neither more nor less than an infinity which has a beginning but no end. The least logical insight would have compelled Herr Duehring to the statement that beginning and end are mutually necessary to each other, like North Pole and South Pole, and that if one omit the end the beginning becomes the end, the one end which the series has and vice versa. The entire fallacy would not be possible if it were not for the mathematical practice of operating with an infinite series. Because in mathematics one must proceed from the given and finite to that which is not given and infinite, all mathematical series whether positive or negative, begin with a fixed point otherwise one cannot calculate. The ideal necessities of the mathematician however are very far from being a law compulsory upon the universe. Besides Herr Duehring will never succeed in imagining an infinity without contradiction. In the first place, infinity is a contradiction and full of contradictions. For example it is a contradiction that infinity should be made up of finite things and yet such is the case. The notion of a limited universe leads to contradictions just as much as the notion of its unlimitedness, and each attempt to abolish these contradictions leads, as we have seen, to new and worse contradictions. But just because infinity is a contradiction, it is without end, endlessly developing itself in time and space. The abolition of the contradiction would be the end of infinity. Hegel saw that very clearly, and covers the people who entered upon intricate arguments about this contradiction with merited scorn. Let us proceed. Now, time has had a beginning. What was before this beginning? The unchangeable universe incomparable with anything else. And as no changes occur in this condition the particular concept time is transformed into the general concept existence. In the first place we have nothing to do with the transformation which goes on in the brain of Herr Duehring. We are not engaged with a concept of time, but with actual time of which Herr Duehring cannot so easily dispose. In the second place no matter how much the concept of time is transformed into the general concept existence it does not bring us one step nearer the goal. For the fundamental forms of all existence are space and time, and a thing existing outside of time is as silly an idea as that of a being outside of space. The Hegelian "past existence in which there was no time" and the neo-Schelling "being beyond the scope of thought" are rational conceptions compared with this being outside of time. For this reason Herr Duehring goes to work very cautiously "intrinsically it may be called time, but one cannot really call it time, as time does not consist in itself of real parts but is merely divided by us into parts to suit our own convenience," only a real filling up of time with distinct facts makes it capable of calculation. It is impossible to see the significance of piling up an empty duration. But it does not matter anyway. The question is whether the universe in this presupposed condition continues, that is persists, through a period of time. We have long known that it is useless to try and measure such empty space and to calculate without plan or aim and just because of the tiresomeness of such a proceeding Hegel calls this infinity "miserable." According to Herr Duehring time exists only by virtue of change, not change in and through time. Because time is different from change and independent of it, we can measure it by the changes, because in order to measure we need something different from that which is to be measured. And the time in which no recognisible changes take place is very far from being no time, on the other hand since it is free from other ingredients, it is pure, that is to say, true time. Indeed if we want to contemplate time as a pure concept separated from all foreign admixture, we are obliged to eliminate all the various events which occur in time, either successively or simultaneously, and thus imagine a time in which nothing occurs. By this means we have not permitted the concept time to be overcome by the general concept of existence, but we have thereby arrived at a pure time concept. All these contradictions and impossibilities are mere child's play compared with the confusion into which he plunges the universe with its self-sufficient commencement. If the universe was in a condition in which no change occurred in it, how did it ever manage to get from that state to one of change? Moreover, an absolute condition of absence of change existing from eternity cannot possibly get out of that state unaided so as to pass over to a condition of progress and change. A first cause of motion must therefore have come from the outside, from beyond the universe, which caused the movement. This first cause of motion is clearly only another term for God, The God and the Beyond of which Herr Duehring fancied that he had so nicely settled in his scheme of the universe, return sharpened and deepened in his natural philosophy. Further Herr Duehring says: "Where a fixed element of existence is capable of measurement, it will remain in unalterable stability. This is evident from material and mechanical force." The former quotation gives, it may be incidentally mentioned, a good example of Herr Duehring's axiomatic grandiloquence. Fixed quantities remain exactly the same, the quantity of mechanical force, once in the universe, is always the same. We will not dwell on this, so far as it is true, Descartes knew and said it three hundred years ago as regards philosophy, while in mechanical science the doctrine of the conservation of energy has been preached for the last twenty years. Herr Duehring has not improved upon it in so far as he limits it to mechanical energy. But where was mechanical energy at the period of unchangeableness? To this question Herr Duehring stubbornly refuses an answer. Where was the unchangeable mechanical force then, Herr Duehring, and what was it busy about? Answer: "The original state of the universe, or, better, the existence of unchangeable matter, not allowing of any changes in time, is a question which no mind can pass except one which sees the acme of wisdom in the destruction of its own powers." Therefore you must either take my original condition with your eyes shut, or I, the lusty Eugene Duehring, brand you as an intellectual eunuch. Some people might be quite alarmed about this, but we who have seen a few examples of Herr Duehring's powers, can let the elegant abuse pass and reiterate the question, "But how about that mechanical energy, Herr Duehring, if you please?" Herr Duehring is staggered at once. In fact, he stammers, "There is no proof of the actual existence of that original condition. Let us remember that this is also the case with each new step in the series with which we are acquainted. He therefore who will make difficulties in the foregoing case may see that he does not avoid them in the smaller apparent cases. Besides, the possibility exists that there are successively graduated intermediate states inserted, and thus there is a stable bridge by the means of which we can work backwards to the solution of the problem. As a matter of fact this notion of stability does not assist the main thought, but it is for us the fundamental form of regular progression, and of each transition known so far, so that we have a right to consider it as intermediate between the first original state and its disturbance. But if we consider the independent condition of equipoise from the point of view of mathematical concepts as, admittedly, without independent existence, there is no need of indicating the mode in which matter came into a dynamic condition." Outside of the mechanics of matter a change in movement of matter depends upon a change in the movement of the most insignificant particles. "Up to the present we have no universal principle of knowledge and we must therefore not be surprised if we are somewhat in the dark as to these matters." That is all that Herr Duehring has to say, and we should seek the very pinnacle of wisdom not alone in a mutilation of the creative faculty, but in blind superstition, if we were to let the matter pass with these foolish evasions and statements. Absolute stability has no power of change in itself, Herr Duehring admits this. The absolute condition of equipoise possesses no means by which it can pass into a dynamic state. What have we then? Just three false and foolish phrases. In the first place, Herr Duehring says that to show the transition from each most insignificant step in the chain of things with which we are acquainted to the next presents the same difficulty. He seems to think that his readers are infants. The proof of the transitions and interrelations of the most insignificant links in the chain of existence is just what constitutes the subject matter of natural science. If there is an impediment anywhere, nobody, not even Herr Duehring, thinks to explain the development as proceeding from nothing, but on the other hand as only proceeding from transition, change, and forward movement from a completed evolutionary stage. Here, however, he undertakes to show with reference to matter that it proceeds from absence of movement and therefore from nothing. In the second place, we have the "stable bridge." This does not help us appreciably over the difficulty, but we have a right to use it as a bridge between rigid stability and motion. Unfortunately stability consists in absence of motion, and the question as to the generation of motion remains as dark a secret as before. And if Herr Duehring shifts his no-movement at all to universal movement in infinitely small particles and ascribes to this ever so long a duration of time, we are still not the thousand part of an inch further from the place whence we started. Without a creative act we can get nothing from nothing, not even anything as small as a mathematical differential. The bridge of stability is therefore not even a _pons asinorum_. Herr Duehring is the only person able to cross it. Thirdly, as long as the present theories of mechanics prevail, this constitutes one of Herr Duehring's most reliable props, we cannot indicate how anything passes from a state of quiescence to one of motion. But the mechanical theory of heat teaches us that the movement of the mass depends upon the movements of the molecules, (so that even in this case movement proceeds from other movement and not from lack of movement) and this Herr Duehring shyly points out might serve as a bridge between the entirely static (the state of equipoise) and the dynamic (self-movement). But here Herr Duehring leaves us entirely in the dark. All his deepening and sharpening has dug a pit of folly and we are brought up necessarily in "darkness." But Herr Duehring troubles himself very little about that. He says right on the next page, with considerable audacity that he has been able to endow the self contained stability with real significance by means of the properties of matter and the mechanical forces. In spite of all these errors and confused statements we have still an inspiring faith remaining that "The mathematics of the inhabitants of other planets cannot rest on any axioms other than our own." _Cosmogony, Physics, and Chemistry._ Proceeding we come to theories respecting the mode by which the world, as it is to-day, came into being. A universal separation of matter from one element was the notion of the Ionic philosophers, but, since Kant, the conception of an original nebulous state has played a new role and according to this gravitation and heat expansion have built up the worlds, little by little and one by one. The mechanical theory of heat of our time has fixed the origin of the earlier condition of the universe with much greater precision. In spite of all this "the universal condition of the gaseous form can only be a point of departure for serious conclusions if one can define the mechanical system of it more precisely beforehand. If not, the idea becomes not only very cloudy, but the original nebula becomes really in the progress of those conclusions denser and more impenetrable."... For the present everything remains in the vagueness and formlessness of an indefinite idea, and so with regard to the gaseous universe we have only an insubstantial conception. The theory of Kant that all existing worlds were created from a mass of rotating vapor was the greatest advance made by astronomy since the days of Copernicus. The idea that nature had no history in time was then shaken for the first time. Up to then the worlds were fixed in bounds and conditions from their very beginning, and though the individual organisms on the separate worlds were transient, the species remained unalterable. Nature was conceived as an apparently limited movement and its motion seemed to be the repetition of the same movements perpetually. It was in this conception which is entire accord with the metaphysical mode of thought that Kant made the first breach and so scientifically that most of his grounds of proof stand good to-day. Really the theory of Kant is a mere hypothesis even to-day. The Copernican theory of the universe has no longer any weight and since the spectroscope discovered such glowing gaseous matter in space all objections have been disposed of and scientific opposition to Kant's theory has been silenced. Even Herr Duehring cannot produce his universe without the nebulous state and he takes his revenge by asking to be shown the mechanical system of this nebulous state and because this cannot be done he inflicts all sorts of contemptuous remarks upon this nebulous state. Unfortunately modern science cannot show this system and please Herr Duehring. But there are many other questions which it cannot answer. For example regarding the question why toads have no tails it can only answer so far "Because they have lost them." But if people get angry and say that this is all vague and formless, a mere fanciful idea, incapable of being made definite and a very poor notion, such views would not carry us a step further, scientifically. Such insults and exaggerations are sufficiently numerous. What is there to hinder Herr Duehring himself from discovering the mechanical system of the original nebular state? Fortunately we are informed that the nebular hypothesis of Kant "is far from showing a fully distinct condition of the world-medium or of explaining how matter arrived at a similar state." This is really very fortunate for Kant who is to be congratulated on having been able to trace the existing celestial bodies to the nebular condition, and who yet does not allow himself to dream of the self-contained unchanged condition of matter. It is to be remarked by the way that although the nebular condition of Kant is supposed to be the original vapor-form of matter, this is to be understood merely relatively. It is to be understood on the one hand as the original vapor form of the heavenly bodies, as they are at present, and on the other hand as the earliest form of matter to which we have been able to trace our way backwards. The fact that matter passed through an endless series of other forms before arriving at the nebular state is not excluded from this conception but is on the other hand rather included in it. Herr Duehring is at an advantage here. Whereas science comes to a halt at the existence of the nebulous state his quack science carries him back to that "Condition of the development of the world which cannot be called actually static in the present sense of the word but most emphatically cannot be called dynamic. The unity of matter and mechanical force which we call the world is, so to speak, a formula of pure logic, to signify the self-contained condition of matter as the point of departure of all enumerable stages of material progress." We have obviously not yet got away from the original self-contained condition of matter. Here it is explained as consisting of mechanical force and matter, and this as a formula of pure logic, etc. As soon then as the unity of matter and mechanical force is at an end evolution proceeds. The formula of pure logic is nothing but a lame attempt to make the Hegelian categories "an Sich and fuer Sich" of use in a philosophy of realism. In "an Sich" according to Hegel the original unity of a thing consists; in "fuer Sich" begins the differentiation and movement of the concealed elements, the active antithesis. We shall therefore depict the original condition as one in which there is a unity of matter and mechanical force and the transition to movement as the separation and antithesis of these two elements. But we have not thereby established the proof of the real existence of the fantastic original condition but only this much that it exists according to the Hegelian category "an Sich" and just as fantastically disappears according to the Hegelian category "fuer Sich." Matter, says Duehring, implies all that is real, therefore there is no mechanical force outside of matter. Mechanical force is furthermore a condition of matter. In the original condition where no change occurred matter and its mechanical force were a unity. Afterwards when the change commenced there was a differentiation from matter. Thus we are obliged to be satisfied with these mystical phrases and with the assurance that the self contained original state was neither static nor dynamic, neither in a state of rest nor of motion. We are still without information with regard to the whereabouts of mechanical force at that period and how we arrived at a condition of motion from one of rest without a push from the outside, that is without God. Before the time of Herr Duehring materialists were wont to speak of matter and motion. He reduces motion to mechanical force as its necessary original form and so renders incomprehensible the real connection between matter and motion which was also not evident to the earlier materialists. Yet the thing is easy enough. Matter has never existed without motion, neither can it. Motion in space, the mechanical motion of smaller particles to single worlds, the motion of molecules as in the case of heat, or as electric or magnetic currents, chemical analysis or synthesis, organic life, each single atom of the matter of the world--they all discover themselves in one or other of the forms of motion or in several of them together at any given moment. All quiescence, all rest, is only significant in relation to this or that given form of motion. A body for example may be upon the ground in mechanical quiescence, in mechanical rest. This does not prevent its participation in the movements of the earth and of the whole solar system, just as little does it prevent its smallest component parts from completing the movements conditioned by the temperature or its atoms from going through a chemical process. Matter without motion is just as unthinkable as motion without matter. Motion is just as uncreatable or indestructible as matter itself, the older philosophy of Descartes proclaimed precisely that the quantity of motion in the world has been fixed from the beginning. Motion cannot be generated therefore it can only be transferred. If motion is transferred from one body to another, one may as far as it is regarded as transferring itself, as active, consider it as the original cause of motion, but so far as it is transferred, as passive. This active motion we call force; the passive, expression of force. It is therefore just as clear as noon that force is just as great as its expression because the same motion fulfils itself in both. A motionless condition of matter is therefore one of the hollowest and most absurd notions, a mere delirium. In order to arrive at it one is obliged to consider the relative absence of motion in the case of a body lying on the ground, as absolute rest, and then to transfer this idea to the entire universe. This is made easier by the reduction of motion in general to mere mechanical force. By the limitation of motion to mere mechanical force we can conceive of a force as at rest, as confined, as momentarily ineffective. If for example in the transference of motion which transference is very frequently a somewhat complicated process in the carrying out of which various intermediate steps are necessary, one may stay the actual transference at a chosen point and stop the process, as for example if one loads a gun and delays the moment when the charge shall be set at liberty by the pull of the trigger, through the firing of powder. Therefore one may conceive of matter as being loaded with force in the unprogressive static period, and this Herr Duehring appears to mean by his unity of matter and force if indeed he means anything at all. This notion is absurd, since it pictures as absolute for the entire universe a condition which is by nature only relative and to which therefore only a portion of matter can be subjected at one and the same time. Let us look at it from this point of view and we do not escape the difficulty of explaining first how the universe came to be loaded and in the second place, whose finger drew the trigger. We may revolve all we please but under the guidance of Herr Duehring we always come back over and over again to the finger of God. From astronomy our realist philosopher passes on to mechanics and physics and complains that the mechanical theory of heat has brought us no further in the course of a generation than the point which Robert Mayer reached by his own efforts. Moreover the whole thing is very obscure. We must "always remember that with conditions of the movement of matter statical conditions are also given and that these last are not measured in mechanical work. If we have earlier typified nature as a great workwoman, and we still hold to the statement, we must now add that the static condition, the condition of rest, does not imply any mechanical labor. We are again without the bridge from the static to the dynamic and if latent heat, so called, is up to the present a stumbling block to the theory we can recognise a lack which may be denied in the cosmic process." This whole oracular utterance is again merely an outpouring of bad science which very clearly perceives that it has got itself into a place from which it cannot be saved by creating motion from a state of absolute freedom from motion, and is ashamed to call upon its only saviour, the Creator of heaven and earth. If in mechanics, heat included, there is no bridge to be found from statics to dynamics, from equipoise to motion, why should Herr Duehring be obliged to find a bridge from his condition of absence of motion to motion? Thus he would have the luck to escape from his dilemma. In ordinary mechanics the bridge from statics to dynamics is--the push from the outside. If a stone of the weight of a hundred grammes be lifted ten meters high and then flung free so that it should remain hanging in a self-contained condition and in a state of rest, you would have to appeal to a public of sucking infants to declare that the existing condition of that body represents no mechanical labor and that its removal from its earlier condition has no measure in mechanical work. Any passerby would tell Herr Duehring that the stone did not come on the string by its own efforts and the first good hand book in mechanics would inform him that if he let the stone fall again, the latter in its fall does just as much mechanical work as is necessary to lift it to the height of ten meters. The very simple fact that the stone is suspended represents mechanical force in itself, since if it remain long enough, the string breaks, as soon as it, as a result of its chemical constitution, is no longer strong enough to hold the stone. All mechanical phenomena, may, we must inform Herr Duehring, be reduced to just such simple fundamental forms, and the engineer is still unborn who cannot discover the bridge from statics to dynamics as long as he has sufficient initial force at his disposal. It is quite a hard nut and bitter pill for our metaphysician that motion should find its measure in its opposite rest. It is such a glaring contradiction, and every contradiction is an absurdity in the eyes of Herr Duehring. It is nevertheless true that the hanging stone by reason of its weight and its distance from the ground represents a means of mechanical movement sufficiently easily measured in different ways, as for example through gravity direct, through glancing on an incline or through the undulation of a wave--and it is just the same with a loaded gun. The expression of motion in terms of its opposite rest presents no difficulty at all to the dialectic philosophy. The whole contradiction in its eyes is merely relative, for absolute rest, complete equipose does not exist. The movement of the particles strives towards equipose, the movement of the mass in turn destroys the equipose, so that rest and equipose where they occur are the results of arrested motion, and it is evident that this motion is capable of being measured in respect of its results, of being expressed in itself and of being restored in some form or other external to itself. But Herr Duehring would never be satisfied with such a simple explanation of the matter. Like a good metaphysician he creates a yawning gulf between motion and equipose which does not really exist and then wonders if he can find no bridge across the self-created chasm. He might just as well bestride his metaphysical Rosinante and hunt the "Ding an Sich" of Kant since it is in the last analysis nothing else than this which stands behind the undiscoverable bridge. But what about the mechanical theory of heat and of latent heat which is a "stumbling block" in the path of the theory? If one convert a pound of ice at freezing point under normal atmospheric pressure into a pound of water of the same temperature by means of heat there vanishes a quantity of heat which could heat the same pound of water from 0° centigrade to 79° centigrade, or seventy-nine pounds of water one degree centigrade. If one heat this pound of water to boiling point, that is, to one hundred degrees centigrade and change it into steam of the heat of one hundred degrees centigrade there vanishes up to the time when the last of the water is changed into steam a seven fold greater quantity of heat, capable of raising the temperature of 537.2 pounds of water one degree. This dissipated heat is called latent. It is transformed, by cooling the steam, into water again, and the water into ice, so the same mass of heat which was formerly latent, is again set free, that is, as heat capable of being felt and measured. This setting free of heat by the condensation of steam and the freezing of water is the reason that steam if it is cooled off at 100° transforms itself little by little into water, and that a mass of water at freezing point is but slowly transformed into ice. These are the facts. The question is what becomes of the heat while it is latent? The mechanical theory of heat according to which the heat of a body at a certain temperature is dependent upon the greater or less vibration of the smallest physical parts (molecules) a vibration which can, under certain conditions, be transformed into some other form of motion, shows the whole thing completely, that the latent heat has performed work, has been expended in work. By the melting of the ice the close connection of the separate particles is broken asunder and changed into a loose relationship; by the conversion of water into steam at boiling point a condition is entered where the separate molecules exercise no noticeable influence upon each other, and under the influence of heat fly from one another in all directions. It is now evident that the separate molecules of a body in the gaseous state are endowed with much greater energy than in the fluid state, and in the fluid state than in the solid. Latent heat is therefore not dissipated, it is merely transformed and has taken on the form of molecular elasticity. As soon as conditions are at an end under which the molecules can exercise this relative freedom with regard to each other as soon namely as the temperature falls below one hundred degrees to zero, this elasticity becomes released and the molecules come together with the same force with which they formerly flew apart, but only to appear again as heat, as exactly the same quantity of heat as was latent before. This explanation is of course a hypothesis, as is the whole mechanical theory of heat, in so far as no one has yet seen a molecule, much less a molecule in motion. Like all recent theories, this hypothesis is full of flaws but it can at least offer an explanation which does not conflict with the uncreatability and indestructibility of motion and it is able to give an account of the whereabouts of the heat in the transformation. Latent heat is therefore by no means an obstacle in the way of the mechanical theory of heat. On the contrary this theory for the first time provides a rational explanation of the subject and an obstacle arises from the fact in particular that the physicists make use of the old and ineffective expression "latent heat" to signify the heat transformed into some other shape by molecular energy. The static conditions of the solid, liquid and gaseous states therefore represent mechanical work in so far as mechanical work is a measure of heat. Thus the solid crust of the earth, like the water of the ocean, represents in its present form a certain quantity of heat set free which implies the same quantity of mechanical force. By the passing of the vaporous state which was the original form of the earth into the fluid state and later into a condition, for the most part solid, a certain quantity of molecular energy was set free in space, the difficulty of which Herr Duehring whispers does not therefore exist. We are frequently brought to a stop in our cosmic observations by lack of knowledge, but nowhere by insuperable theoretical difficulties. The bridge from statics to dynamics is therefore the push from the outside caused by the cooling or heating occasioned by other bodies which influence certain objects in equipoise. The further we explore Herr Duehring's philosophy, the more impossible appear all his attempts to explain rotation from absence of rotation, or to discover the bridge by which that which is purely static, self-contained, can without disturbance come to be the dynamic, in motion. We should here be glad to get rid of the whole self-contained condition business. Herr Duehring, however, goes to chemistry and gives us three permanent natural laws established by the philosophy of realism as follows, 1. The constant amount of matter in the universe. 2. The simple chemical elements, and 3. The mechanical forces are unchangeable. Therefore the impossibility of creating or destroying matter, the simple forms of its existence as far as they exist, and motion, these old, well known facts, inadequately expressed, that is the only positive thing which Herr Duehring is in a position to offer us as a result of his real philosophy of the inorganic world. All these things we have long known. But what we have not known is that they are permanent laws and as such natural properties of the system of things. It is just the same thing over again as in the case of Kant. Herr Duehring takes some universally known expressions, pastes the Duehring label on them and calls them "fundamentally original results and views, system shaping thoughts, profound science." We have not long to hesitate on this account. Whatever deficiencies the most profound science and the best contrived social theories may have, for once Herr Duehring can say precisely "The quantity of gold in the universe must always remain the same and cannot be increased or diminished any more than matter in general. But unfortunately Herr Duehring does not tell us what we may buy with this gold." _The Organic World._ "From mechanics in rest and motion to the relation of sensation and thought there is a uniform progression of interruptions." With this assurance Herr Duehring spares himself from saying anything further about the origin of life, though one might reasonably expect that a thinker who has followed the development of the world from its self-contained condition, and who is so much at home with the other heavenly bodies would be here at home also. Besides this assurance is only half true in so far as it is not yet completed by means of the log line of Hegel, of which mention has been made already. In all its gradations the transition from one form of evolution to another remains a leap, a differentiating movement. So in the transition from the mechanics of the worlds to those of the smaller amounts of matter in each single world, just so also in that from the mechanics of the mass to that of the molecule--the motion which we examine particularly in physics, so-called, heat, light, electricity, magnetism, just in the same way also the transition from the physics of the molecule to the physics of the chemical atom is completed by a differentiating leap, and it is just the same with the transition from ordinary chemical action to the chemistry of albumen which we call life. Within the sphere of life the changes become less frequent and less remarkable. Therefore Hegel must again correct Herr Duehring. The idea of purpose furnishes Herr Duehring with his conception of the transition to the organic world. This is again borrowed from Hegel, who in his "logic"--teachings of the concept--mingled with teachings of teleology or of purpose, passes over from chemistry to life. Whichever way we look we discover Herr Duehring to be in possession of Hegelian lore which he gives forth without any embarrassment as his own fundamental philosophy. It would be too long a task to find out here just how far the application of the ideas of purpose is correctly stated and applied to the organic world. The application of the Hegelian "inner purpose" at all events is evident, that is, of a purpose which is imported into nature not through a consciously acting third party, like the wisdom of Providence, but which is inherent in matter itself, which among people who are not well versed in philosophy proceeds to the unthinking supposition of a conscious and all-wise agent; the same Herr Duehring who breaks out into unmeasured moral indignation at the least tendency towards spiritism on the part of other people, tells us that "sex sensations are certainly mainly directed towards the gratification which is bound up in their exercise." He tells us moreover that "poor Nature must always hold the objective world in order" and it has besides to perform acts which require more subtlety from Nature than we usually attribute to her. But nature knows not only why she does this and that. She has not only her housemaid's duties to perform, she has not only subtlety, which is a very pretty accomplishment, in subjective conscious thought, she has also a will, for "we must regard the additional natural desires which occur, such as feeding and propagation, not as directly but as indirectly willed." We now arrive at a consciously thinking and acting nature, and we therefore stand right at the bridge, not indeed between the static and dynamic but between pantheism and deism, or perhaps Herr Duehring is pleased to indulge himself in a little "natural-philosophical half-poetry." Impossible. All that the realistic philosophy has to say on organic nature is limited to a war against this natural philosophical half-poesy against "Charlatanism with its wanton superficialities and pseudo-scientific mysticism, against the poetic features of Darwinism." Darwin comes in for a share of blame chiefly because he transferred the Malthusian theory of population from political economy to natural science, because he is entangled by his notions of breeding, so that his work is a sort of unscientific half-poetic attack against design in creation, and that the whole of Darwinism, after what he has borrowed from Lamark has been deducted, is a piece of brutality aimed against humanity. Darwin had brought home with him as the result of his scientific journeys the conclusion that species of plants and animals are not fixed but are subject to variations. In order to pursue this idea he entered upon experiments in the breeding of plants and animals. Just for this reason England has become a classic land. The scientists of other countries, Germany, for example, have nothing to offer comparable with England in this respect. Moreover, most of the conclusions belong to the last century so that the establishment of the facts presented few difficulties. Darwin found that this artificial breeding produced differences in the species of plants and animals greater than occur among those which are universally recognised as belonging to different species. Therefore it was, up to a certain point, proved that species can change and furthermore there was established the possibility of a common ancestry for organisms which partake of the characteristics of different species. Darwin now examined the question whether there were not in nature causes--which without the conscious intention of the breeder--might in the course of time, by means of heredity, produce changes in the living animal analogous to those produced by scientific breeding. These causes he found in the disproportion between the enormous number of germs made by nature and the small number of beings which actually come to maturity. But as the germ struggles for its own development there is of necessity a consequent struggle for existence, which not only shows itself directly in the wear and tear of the body, but also as a struggle for space and light, as in the case of plants. And it is evident that in this fight those individuals have the best prospect of coming to maturity and reproducing themselves which possess certain qualities, perhaps insignificant, but advantageous in their fight for existence. There is a tendency towards the inheritance of these individual properties, and if they occur in several individuals of the same species towards development in the direction once taken, by virtue of the accumulated heredity, while the individuals which are not possessed of these qualities succumb more easily and little by little disappear in the struggle for existence. Thus a species naturally changes by the survival of the fittest. Against this theory of Darwin Herr Duehring urges that the origin of the idea of the struggle for existence is, as Darwin himself confessed, based on the views of the political economist and theorist, Malthus, on the population question, and he covers it with all the abuse appropriate to the clerical Malthusian views on keeping down the population. Now it happens that Darwin never said that the cause of the struggle for existence theory was to be sought from Malthus. He only said that his theories respecting the struggle for existence are the theories of Malthus applied to the entire vegetable and animal world. How great a blunder Darwin made when he so naively accepted the teachings of Malthus without examination may be seen from the fact that there is no need to employ the spectacles of Malthus in order to detect the struggle for existence in nature,--the contradiction between the innumerable mass of germs which nature produces in such prodigality and the slight number which can manage to reach maturity, a contradiction which resolves itself into an apparently grim fight for existence. And with regard to the law of wages the Malthusian doctrines are widely advertised and Ricardo based his contentions upon them,--so the struggle for existence in nature may find a standing even without the Malthusian interpretation. Besides the organisms of nature have their law of population, the establishment of which would decide the theories of the development of species. And who gave the decisive impetus in that direction? Nobody but Darwin. Herr Duehring is on his guard against entering upon the positive side of this question. Instead he must again find fault with the struggle for existence. There can be no argument about a struggle for existence between plants and the genial eaters of plants "in a sufficiently accurate sense the struggle for existence only occurs within the sphere of brutality, in so far as nourishment depends upon robbery and consumption." And after he has reduced the concept struggle for existence to these narrow limits he gives his wrath free play as regards the brutality of this conception which he himself has narrowed down to a brutal conception. But this moral wrath simply reacts on Herr Duehring himself, the inventor of this sort of struggle for existence. It is not Darwin therefore who seeks among the lower animals the "conditions of the operations of nature" (as a matter of fact Darwin would have included the whole of organic nature in the struggle), but one of Herr Duehring's bugaboos. The expression "struggle for existence" in particular excites Herr Duehring's lofty moral scorn. That this actually exists among plants every meadow, every cornfield and every wood can show him. We need not trouble about the name, whether one call it "struggle for existence" or "lack of the conditions of existence and want of mechanical realisation," but as to how this fact operates as regards the maintenance or transformation of species. With regard to this Herr Duehring persists in a characteristically stubborn silence. We cannot trouble ourselves any more about natural selection. But "Darwinism produces its changes and differentiations out of nothing." Darwin thoroughly understands that he is engaged with the causes which have produced changes in individuals and in the second place he is engaged with the mode in which such individual differentiations tend to mark off a race, a genus, or a species. Darwin moreover was less occupied in discovering these causes, which up to the present are either entirely unknown or on which there is only general information, than in discovering a rational form in which to establish their reality, to embrace their permanent significance. But Darwin ascribed too wide a reach to his discovery in this that he made it an exclusive means of variation in species and neglected the causes of individual differentiations from the general form. This mistake however is common to most people who make a step forwards. Next, if Darwin produces his changes in individual types out of nothing and thereby excludes the wisdom of the breeder, the breeder on his part must not only display his wisdom but he must produce out of nothing real changes in plant and animal forms. But who has given the impetus to the investigation as to whence these variations and differentiations proceed? It is again no one but Darwin. Lately the conception of natural selection has been broadened, by Haeckel, in particular, and the variation of species has been shown to be the result of actual change owing to adaptation and inheritance, whereby adaptation is considered as the source of variations and heredity as the conserving element in the process. Even this is not correct in Herr Duehring's eyes. "Peculiar adaptation to the circumstances of life as they are offered or withheld by nature supposes impulses and facts which answer to the conception. Hence adaptation is only apparent and actual causality does not elevate itself above the lowest steps of physical, chemical and plant physiology." It is again the name which provokes Herr Duehring. But how does he deal with the matter? The question is if such changes do take place in the species of organic beings or not. And again Herr Duehring has no reply. "If a plant in the course of its growth takes a direction by which it gets the most light the result is nothing but a combination of physical forces and chemical agents, and if we are to call it an adaptation, not metaphorically but strictly, confusion is certain to arise in the motion." This man is so exacting with other people because he is quite well acquainted with the intentions of nature and speaks of the subtlety of nature, even of its will. There is confusion, indeed, but with whom, with Haeckel or with Herr Duehring? And the confusion is not only spiritual but logical. We have seen that Herr Duehring put forth all his efforts to make the purpose idea in nature real. "The relation of means and end does not by any means show a conscious intention." But what is adaptation without conscious intention, without any intrusion of design of which he complains so loudly, but an unconscious teleology? If the color of tree frogs and leaf eating insects is as a rule green and that of beasts that inhabit the desert sandy-yellow, and that of polar animals white, they have certainly not come into possession of this coloring intentionally or through any kind of mental process, on the contrary the coloring can only be explained by means of the operation of physical substances and chemical agents. And yet it cannot be denied that by these colors these animals are particularly adapted to the conditions in which they are and it is certain that they are by their means rendered less visible to their enemies. Just of a similar nature are the organs by which certain plants seize and consume certain insects (the means being on their under side, suited to this purpose and adapted to this end). Now if Herr Duehring insists that the adaptation must be realised through the operation of thought, he only says that the purpose must be carried out through mental operation, must be conscious and intentional. Thus again, just as in the philosophy of realism we arrive at the Creator with a purpose, at God. Formerly this kind of declaration was called "deism" and Herr Duehring says that we had not much regard for it, but it now appears that the world has gone backwards in this respect also. From adaptation we come to heredity and here according to Herr Duehring Darwinism is quite out. "The whole organic world, Darwin explained, came from a single germ, is, so to speak, the brood of a single being. Independent similar products of nature according to Darwin do not exist without heredity and his retrogressive philosophy must come to a full stop when the end of the thread of ancestry is reached, or the original vegetable form." The statement that Darwin traced all existing organisms from one original germ is to put it politely a piece of pure imagination on the part of Herr Duehring. Darwin says distinctly on the last page of the Origin of Species, Sixth Edition, that he regards all living beings not as separate creations but as the descendants in a direct line from some fewer beings and Haeckel makes a distinct advance on this ascribes "an entirely distinct source for plants and another for the animal kingdom" and on and between both of them "a number of original stems each of which has developed independently from one single primary monistic form." (History of Creation page 397.) This original form of life Herr Duehring discovers solely to bring it into contempt by paralleling it with the first man according to Jewish tradition, Adam. Here, unfortunately for Herr Duehring, he does not know how this original Jew turns out, according to Smith's Assyrian discoveries to have been the original Semite, and that the entire Biblical story of the Creation and the Flood has been shown to have been taken from a legendary store common to the Jews, Babylonians, Chaldeans, and Assyrians. It is brought forward as a severe and irrefutable reproach to Darwin that he is at an end where the thread of descent fails him. Unfortunately the whole of our science deserves the same reproach. When the thread of descent fails it it is "at an end." It has not yet come to the point of creating organic beings without an ancestry, not even once has it been able to make simple protoplasm or other albuminous bodily forms out of the chemical elements. It can only say therefore with any certainty regarding the origin of life, that it must have come about by a chemical process. But perhaps the philosophy of realism can give us some assistance here since it is engaged with independent organic natural products, without any descent one from another. How can these come into being? By original creation? But up to the present not even the most audacious advocates of spontaneous generation have claimed to create in this way anything except bacteria, fungi, or other very elementary organisms, but not insects, birds, fish or mammals. If these homogeneous products of nature--it is understood for all this discussion that they are organic--are not related through descent, they or their ancestors, then "where the thread of descent breaks" they must have been placed in the world by a separate act of creation, and this again requires a creator, what we call "deism." Herr Duehring further explains that "it was a piece of superficiality on the part of Darwin to make the mere fact of the sex-composition of qualities the foundation for the existence of these qualities." Here we have again a piece of pure imagination on the part of our profound philosopher. On the contrary Darwin says that natural selection has to do only with the maintenance of variations and not with their origin. This new supposition however of things which Darwin did not say serves to assist us to this deep idea of Duehring. "If a principle of individual variation had been sought in the inner scheme of creation it would have been an entirely rational idea. For it is natural to unite the idea of universal generation with that of sex propagation, and to regard the so-called original creation from the higher point of view, not as absolutely antagonistic to reproduction but even as reproduction itself." And the man who could write this is not ashamed to reproach Hegel with writing jargon. Let us call a halt to the vexatious and contradictory babble with which Herr Duehring proclaims his wrath against the advance given to science by the theory of Darwin. Neither Darwin nor his followers among the natural scientists have any idea of belittling Lamark's tremendous services, in fact they are the very people who first restored his fame. But we are unable to ignore the fact that in the time of Lamark science was still far from supplied with competent material to enable it to answer the question of the origin of species other than in a prophetic or, as it were anticipatory, manner. In addition to the enormous amount of material in the realm of general, as well as of that of anatomical, botany and zoology, accumulated since that time, two entirely new sciences have since come into existence--the investigation of the development of plant and animal germs (embryology), and the investigation of the organic survivals in the earth's crust which still remain. There is a distinct similarity between the steps in the development of the organic germ to mature organism, and the successive steps by which plants and animals succeed each other in the history of the world. It is just this similarity which has placed the evolution theory on its most secure foundations. The theory of evolution is however still very young and it is beyond question that upon further investigation the rigid Darwinian ideas upon the origin of species will be considerably modified. But what has the realist philosophy of a positive nature to contribute with respect to the evolution of organic life? "The variation of species is an acceptable supposition, but there exists, in addition, the independent order of the products of nature belonging to the same species without any intervention of descent." According to this we are to conclude that products of unlike species, that is species which vary, are descended from one another, but those of similar species not. But even this is not altogether correct, for he ventures to say of the varying species, "The part played by descent is on the contrary a very secondary activity of nature." There is heredity, then, but it is only to be reckoned as a factor of the second class. Let us be glad that heredity of which Herr Duehring has said so much that is evil and mysterious is at least let in by the back door. It is just the same with natural selection, since after all his moral indignation with respect to the struggle for existence by means of which natural selection fulfils itself he suddenly exclaims, "The most important constituent is to be found in the conditions of life and cosmic conditions, while natural selection as set forth by Darwin may be considered as secondary." Natural selection still exists, even if a factor of the second class, like the struggle for existence, and the clerical malthusian surplus-population theory. That is all, for the rest Herr Duehring refers us to Lamark. Finally, he warns against misuse of the terms metamorphosis and evolution. Metamorphosis, he says, is a very obscure notion, and the concept of evolution is only admissible in so far as a law of evolution can be really proved. Instead of either of these expressions we should employ the term "composition" and then everything would be all right. It is the same old story over again, Herr Duehring is satisfied if we change the names. If we speak of the evolution of the chicken in the egg we give rise to confusion because we have only an incomplete knowledge of the law of evolution. But if we speak of its "composition" everything becomes clear. We must therefore say no longer "this child is growing nicely" but, "he composes himself splendidly," and we congratulate Herr Duehring upon the fact that he is not only a peer of the author of the Niebelungen Ring in his opinion of himself but in his own particular capacity is also a composer of the future. _Organic World (Conclusion)._ "One reflects upon our natural philosophical portion of positive knowledge in order to fix it relatively to all one's scientific hypotheses. Next in importance come all the actual acquisitions of mathematics as well as the leading principles of exact science in mechanics, physics and chemistry and particularly the scientific results in physiology, zoology, and antiquarian investigation." Herr Duehring speaks in this confident and decided fashion with respect to the mathematical and scientific scholarship of Herr Duehring. One cannot detect in its meager shape and in its scanty and audacious results the extent of positive knowledge which lies behind. Every time the oracle is consulted for a definite statement as regards physics or chemistry we get nothing as regards physics but the equation which expresses the mechanical equivalent of heat, and concerning chemistry only this that all bodies are divisible into elements and combinations of elements. He who can speak as Duehring does about "gravitating atoms" shows at once that he is quite at a loss to understand the difference between an atom and a molecule. Atoms, of course, exist, not with respect to gravitation or any other physical or mechanical form of motion, but only as concerns chemical action. And if the last chapter on organic nature is read, the empty, self-contradictory, assertive, oracular, stupid, circuitous absolute nothingness of the final result lead one to the conclusion that Herr Duehring talks about things of which he knows very little and this conclusion becomes a certainty when we come to his proposal in the course of his writing on organic life (biology) to use the term "composition" instead of evolution. He who can make such a suggestion as that gives evidence that he is not acquainted with the building up of organic bodies. All organic bodies, the very lowest excepted, develop from small cells by the increment of visible pieces of albumen with a central cell. The cell generally develops an outer skin and the contents are more or less fluid. The lowest cell-bodies develop from one cell; the enormous majority of organic beings are many-celled and among the lower forms these take on similar, and among the higher forms greater variations of, groupings and activities. In the human body for example are bones, muscles, nerves, sinews, ligaments, cartilage, skin, all either made up of cells or originating in them. But for all organic bodies, from the amoeba which is a simple and for the most part unprotected piece of albumen with a cell centre in the midst to man, and from the smallest one-celled desmidian to the highest developed plant, the mode is one and the same by which the cells propagate themselves, that is by division. The cell centre is first laced across its midst, the lacing which separates the centre into two knobs becomes stronger and stronger and at last they become separated and two cell centres are formed. The same occurrence takes place in the cell itself. Each of the cell centres becomes the middle point of a collection of cell stuff which by knitting ever closer becomes combined with the other, and finally both of them part and live on as separate cells. Through such repeated cell divisions the full sized animal gradually develops from the germ of the animal egg after fructification and the substitution of used up cells in the full grown animal is brought about similarly. To call such a process "composition" and to speak of the term "evolution" as a purely imaginary term belongs to one who does not know anything of the matter, hard as it is to imagine such ignorance at this date. We have still somewhat to say with respect to Herr Duehring's views of life in general. Elsewhere he sets forth the following statement with respect to life. "Even the inorganic world is a self-regulated system but one may undertake to speak of life in the proper sense first when the organs and the circulation of matter through special separate channels from a central point to another germ collection of a minor formation begin." If life begins where the separate organs begin then we must hold all Haeckel's protozoa (Protistenreich) and probably many others as dead; all organisms at least up to those composed of one cell and those included are not capable of life. If the means of circulation of matter through different channels is the distinguishing mark of life we must place outside of this definition all the upper classes of the colenterata entirely, with the exception of the medusae, and therefore all the polypi and other plant animals are also to be considered as being outside the class of living creatures. And if the circulation of matter through different canals from an inner point is the distinguishing characteristic of life we must reckon all animals as dead which either have no heart or several hearts. Besides these there belong also to this category all worms, starfish and ringed creatures (annuloids and annulous according to Huxley's definition) a portion of the shell fish, crabs, and finally a vertebrate animal, the lancelet (amphioxus) and all plants. When Herr Duehring therefore undertakes to distinguish life narrowly and strictly, he gives four mutually contradictory modes of distinguishing life, one of which condemns not only the whole of plant life but about half the animal kingdom to eternal death. No one can accuse him of having deceived us when he promised us peculiar results based on individual ideas. In another place he says "There is a simple fundamental type in nature belonging to all organisms from the lowest to the highest" and this type is to be met "in the subordinate movements of the most undeveloped plants." This is again an absolutely false statement. The simplest type in the whole of organic nature is the cell, and it lies universally at the foundation of the highest organisms. On the other hand there is a substance among the lowest organisms lower even than the cell, the protomoeba, a single piece of undifferentiated protoplasm, without any differentiation, a complete series of monads and the entire class of siphoneae. All of these are connected with the higher organisms only by virtue of the fact that protoplasm is its substantial foundation, and that they fulfill the functions of protoplasm, that is they live and die. Further Herr Duehring tells us "physiologically the concept of existence consists in this, that it embraces a single nerve apparatus. Sensation is therefore the characteristic of all animal organisms that is the capacity of conscious subjective recognition of circumstances. The sharp line of differentiation between plants and animals consists in the leap to sensation. This distinguishing line cannot any more be abolished by known forms of transition than it can be brought into existence by the logical necessity of externally distinguishable characteristics." And further "Plants are totally and eternally without sensation and are devoid of the faculty for it." In the first place Hegel says that "sensation is the specific differentiation, the distinguishing mark of the animal." Thus one of Hegel's erudite statements becomes an indubitable truth of the last instance merely by being copied into Herr Duehring's book. In the second place we now arrive for the first time at the forms of transition between animals and plants. That these intermediate forms exist, that there are organisms concerning which we are unable to say flatly whether they are plants or animals, that we are therefore unable to fix accurately the frontiers between plant and animal life, all these things make Herr Duehring logically anxious to fix a decisively distinguishing line, which in the next breath he declares cannot be thoroughly relied on. But there is no need for us to go to the doubtful region; intermediate between plants and animals are sensitive plants which at the least contact fold their leaves or close their petals. Are insect eating plants utterly without sensation? Even Herr Duehring cannot make such an assertion without indulging in "unscientific half-poetry." In the third place Herr Duehring is again giving free rein to his imagination when he says that sensation is psychologically existent, even when the nerve apparatus is exceedingly simple. This is found regularly among reptiles yet Herr Duehring is the first to say that they have no sensation because they have no nerves. Sensation is not necessarily bound up with nerves but it is bound up with some albuminous substance the true nature of which has not yet been discovered. In addition, the biological knowledge of Herr Duehring becomes exceedingly evident in that he is not ashamed to fling at Darwin the question do animals develop from plants? so that it is a question whether he is more ignorant with regard to plants or animals. Of life in general Herr Duehring can only tell us "The change in the form of matter which fulfills itself by plastic constructive arrangement remains a distinguishing characteristic of the individual life-process." That is all that we learn of life and with respect to the plastic creative arrangement we sink knee deep in the nonsense of Duehring's jargon. If we want to learn what life is we shall have to look at the problem a little more closely on our own account. That organic change in matter is the most universal and distinctive evidence of life has been declared by physiological chemists and chemical physiologists times without number during the last thirty years and their utterances are translated by Herr Duehring into his own clear and elegant language. But to define life as an organic change of matter is simply to define life as life, for organic change of matter, or change of matter with plastic creative arrangement is a statement which must itself be explained by life, and the explanation in its turn by the difference between organic and inorganic, that is between that which is alive and that which is not alive. So that with this explanation we do not get at the problem. Organic change, as such, is frequently found where life does not exist. There are whole series of processes in chemistry, which by the proper combination of the elements, produce again their own conditions, so that thereby a certain body is the creator of a process. Thus in the manufacture of sulphuric acid by the burning of sulphur, there is created in this process sulphuric dioxide SO_{2}, and if one add steam and nitric acid thereto, the sulphuric dioxide takes up the water and the oxygen and becomes H_{2} SO_{4}. Nitric acid gives off oxygen and becomes nitric oxide, this nitric oxide simultaneously takes up new oxygen from the atmosphere and is transformed into a higher oxide of nitrogen and from this acid sulphuric dioxide is again given off and made by the same process, so that, theoretically, an infinitely small amount of nitric acid should be effective to transform an unlimited quantity of sulphuric dioxide, oxygen and water into sulphuric acid. Change in matter regularly occurs through the passing of fluids through dead organic and inorganic membranes as in the artificial cells of Traube. It therefore appears that there is no progress by the way of organic change for the quality of organic change which was to explain life must itself be explained by life. We must therefore seek it elsewhere. Life is a mode of existence of protoplasm and consists essentially in the constant renewal of the chemical constituents of this substance. Protoplasm is here understood in the modern chemical sense and comprises under this name all substances analogous to the white of an egg, otherwise called protein substances. The name is not satisfactory, for the ordinary white of egg plays the least active role of all transformed substances, since it only serves as mere nourishment for the yolk, for the self-developing germ. As long however as so little is known of the chemical constituents of protoplasm the name is better than any other because more inclusive. Whenever we discover life we also find it bound up with protoplasm, and when we find a piece of protoplasm not in solution there we find also life, without exception. Doubtless the presence of other chemical constituents is necessary to a living body, to produce the various differentiations of these elements of life. They are not necessary to life in itself, hence they enter as food and become transformed into protoplasm. The lowest forms of life with which we are acquainted are nothing but simple pieces of protoplasm and yet they have all the appearance of living objects. But in what consist these signs of life which are common to all living objects? In this, that the protoplasm takes from its surroundings other matter suitable to itself and assimilates it while other former portions of the body become decomposed and are thrown off. Other things, not living bodies, decompose or make combinations, but cease thereby to be what they were. The rock worn by atmospheric action is no longer rock, the metal which becomes oxidised goes off in rust. But what causes the destruction of dead bodies is the essential of the existence of living protoplasm. From the very moment when the unbroken interchange in the constituents of protoplasm ceases, the continual interchange of receiving and throwing off, from that moment the protoplasmic substance itself ceases, becomes decomposed, that is, dies. Life, the mode of existence of protoplasmic substance, therefore consists in this, that at one and the same moment it is itself and something else, and this is not the result of a process to which it is compelled by external agency, since this may happen also with objects which are dead. On the contrary life, which is change of matter, is consequent upon nourishment and throwing off, is a self-fulfilling process inherent in its medium, protoplasm, without which it cannot exist. Hence, it follows that if chemistry should ever discover how to make protoplasm artificially, this protoplasm must show some signs of life, even if very insignificant. It is, of course, doubtful if chemistry will discover the proper food for this protoplasm at the same time as the protoplasm. Through the changes in matter produced by nourishment and throwing off, as actual functions of the protoplasm, and through its own plasticity, proceed all the other most simple factors of life, sensibility which consists in the interchange between the protoplasm and its food, contractibility which shows itself at a very low stage in the consumption of food, possibility of growth which is shown in the lowest stages of development by splitting, and internal motion without which neither the consumption nor assimilation of food is possible. Our definition of life is, of course, very incomplete since in order to include all the widely differing manifestations of life it must confine itself to the most universal and simple. Definitions are of little scientific worth. In order to determine what life is we must examine all forms of its manifestation from the lowest to the highest. For ordinary use such definitions are very convenient and in a certain sense indispensable, and they can do no harm as long as their inevitable deficiencies are not forgotten. (The remainder of this section simply teases Herr Duehring.) CHAPTER VI MORALS AND LAW _Eternal Truths._ We refrain from offering examples of the hodge podge of stupidity and sham solemnity with which Herr Duehring regales his readers for fifty full pages as fundamental knowledge on the elements of consciousness. We merely quote the following: "He who merely conceives of thought through the medium of speech has never understood what is signified by abstract and true thought." Hence, animals are the most abstract and true thinkers, for their thought is never obscured by the importunate interference of speech. With regard to Herr Duehring's thought in particular, it may be perceived that they are but little suited to speech and that the German language in particular is quite inadequate to express them. The fourth part of his book, however, possesses some redeeming features, for here and there it offers us some comprehensible notions on the subject of morals and law in spite of the tedious and involved rhetoric. Right at the beginning we are invited to take a journey to the other heavenly bodies. Thus, the elements of morality are to be found among superhuman beings among whom exist an understanding of things and a regular system of the harmonious conduct of life. Our share in such conclusions must then be small, but there always remains a beneficent and enlarging idea in picturing that even in other spheres individual and social life follows one purpose which cannot be escaped or evaded by any intelligent living creature. There is good reason for our altering the position of the statement that Herr Duehring's truth is good for all possible worlds from the close to the beginning of the chapter. When once the correctness of Herr Duehring's notions of morals and law have been established so as to apply to all world the beneficent notion may easily be extended to all time. Here again, however, we run across another final truth of last instance. The moral universe has "just as well as that of universal knowledge its general principles and simple elements." Moral principles are beyond history and the national distinctions of to-day ... the various truths from which in the course of development the fuller moral consciousness, and, so to speak, conscience itself is derived, can, as far as their origin is investigated, claim a similar acceptation and extent to that of mathematics and its applications. Real truths are immutable and it is folly to conceive of correct knowledge as liable to the attacks of time or of change in material conditions. "Hence the certainty of sound knowledge and the sufficiency of general acceptation forbid to doubt the absolute correctness of the fundamental principles of knowledge.... Continual doubt is in itself an evidence of weakness and is merely the expression of a barren condition of confusion, which although conscious of possessing nothing still seeks to maintain the appearance of holding on to something. Regarding morals, it denies universal principles with respect to the manifold variations in moral ideas owing to geographical and historical conditions, and thinks that with the admission of the unavoidable necessity of evil and wickedness there is no need for it to acknowledge the truth and efficiency of moral impulses. This mordant scepticism which is not directed against any false doctrine in particular, but against human capacity to recognise morality resolves itself finally into nothingness, it is no more than mere nihilism. It flatters itself that it can attain supremacy and give free rein to unprincipled pleasures by destroying moral ideas and creating chaos. It is greatly deceived, however, if merely pointing at the inevitable fate of the intellect with respect to error and truth is sufficient to show by analogy that natural liability to error does not exclude the arriving at a correct decision but rather tends to that end." Up to now we have not commented upon Herr Duehring's pompous opinions on final truths of the last instance, sovereignty of the will, absolute certainty of knowledge, and so forth, until the matter could first be brought to an issue. Up to this point the investigation has been useful to show how far the separate assertions of the philosophy of realism had "sovereign validity" and "unrestricted claim to truth" but we now come to the question if any and what product of human knowledge can have in particular "sovereign validity" and "unrestricted claims to truth." If I speak of human knowledge I do not do so as an affront to the dwellers in other worlds whom I have not the honor to know, but only because animals have knowledge also, not sovereign, however. The dog recognises a divinity in his master, who may, however, be a great fool. "Is human thought sovereign?" Before we can answer "yes" or "no" we must first examine what human thought is. Is it the thought of an individual man? No. It exists only as the individual thoughts of many millions of men, past, present and to come. If I now say, having comprehended the thought of all men in the future also under my concept, that it is able to understand the entire universe, if man only lasts long enough, and the organs of perception are unlimited, and the objects to be comprehended have no limits upon their comprehensibility, my statement is banal and barren. The most valuable result of such a conclusion would be to cause in us a tremendous distrust of present day knowledge. Because, to all appearance, we are just standing at the threshold of human history and the generations which will correct us will be much more numerous than those whose knowledge--often with little enough regard,--we ourselves correct. Herr Duehring himself explains the necessity of consciousness, knowledge and perception only becoming apparent in a collection of separate individuals. We can only apply the word sovereignty to the thought of these individuals in so far as we do not know of any force which can defeat thought. But we all know that there is no significance to nor power of interpretation of the sovereign power of the knowledge of the thought of each individual, and, according to our experience, there is much more that requires improvement and correction in it than not. In other words, the sovereignty of thought is realised in a number of highly unsovereign men capable of thinking, the knowledge which has unlimited pretensions to truth is realised in a number of relative blunders; neither the one nor the other can be fully realised except through an endless eternity of human existence. We have here again the same contradiction as above between the necessary, as an absolute conceived characteristic of human thought, and its reality in the very limited thinking single individual, a contradiction which can only be solved in the endless progression of the human race, that is endless as far as we are concerned. In this sense human thought is just as sovereign as not--sovereign, and its possibility of knowledge just as unlimited as limited. It is sovereign and unlimited as regards its nature, its significance, its possibilities, its historical end, it is not sovereign and limited with respect to individual expression and its actuality at any particular time. It is just the same with eternal truths. If mankind only operated with eternal truths and with thought which possessed a sovereign significance and unlimited claims to truth, mankind would have arrived at a point where the eternity of thought becomes realised in actuality and possibility. Thus the famous miracle of the enumerated innumerable would be realised. But what about those truths which are so well established that to doubt them is to be, as it were, crazy? That twice two is four, that the three angles of a triangle are equal to two right angles, that Paris is in France, that a man will die of hunger if he does not receive food, etc.? Do we not perceive then that there are eternal truths, final truths of last instance? Quite so. We can divide the entire field of knowledge in the old-fashioned way into three great divisions. The first includes all the sciences which are concerned with inanimate nature and which can be treated mathematically, more or less--mathematics, astronomy, mechanics, physics and chemistry. If one like to use big words to express simple things, it may be said that certain results of these sciences are eternal truths, final truths of last instance, whence they are called the exact sciences. But all the results are by no means of this character. With the introduction of variable quantities and the extension of the variability to the infinitely small and the infinitely large, mathematics, otherwise erect, meets with its fall, it has eaten of the apple of knowledge and there has been opened up to it the path of limitless progress as well as that of error. The virgin condition of absolute purity, the undisturbable certainty of all mathematics has vanished forever, a period of controversy has intervened, and we have now arrived at the state of affairs in which most people carry on the operations of multiplication and division not because they really understand what they are engaged in, but from mere belief because the operation has so far always given correct results. Astronomy and mechanics, physics and chemistry are in a still more confused state, and hypotheses crowd one another thick as a swarm of bees. It cannot be otherwise. In physics we investigate the movements of molecules, in chemistry the development of molecules from atoms, and if the theory of light waves should not be correct we have no absolute knowledge that we even see these interesting things. The lapse of time produces a very thin crop of final truths of last instance. In geology we are in a still more embarrassing situation for we are here involved in the study of preceding epochs in which, as a matter of fact, neither we ourselves nor any other human being ever existed. Here there is much labor spent in the harvesting of truths of last instance, and they are a scanty crop withal. The second division of knowledge is occupied in the investigation of living organisms. In this field the changes and causalities are so complex that not only does the solution of each question bring about the rise of an unlimited number of new questions, but the solution of each of these separate new questions depends upon years, frequently centuries, of investigation, and can then be only partially completed. So that the need of systematic arrangement of the various interrelations continually surrounds the final truths of the last instance with a prolific and spreading growth of hypotheses. Look at the long succession of progressive steps from Galen to Malpighi necessary to establish correctly so simple a thing as the circulation of the blood of mammals, yet how little we know of the origin of blood corpuscles and how many mistakes we make in, for example, rationally connecting the symptoms and cause of a disease. Besides there are frequently discoveries like those of the cell which compel us to entirely revise all hitherto firmly established truth of the last instance in biology, and to lay numbers of such truths aside for good and all. He who would therefore in this science undertake the proclamation of absolute and immutable truths must be content with such platitudes as the following: "All men must die; all female mammals have mammary glands, etc." He will not even be able to say that the greater animals digest their food by means of the stomach and bowels and not with the head because the centralised system of nerves in the head is not adapted to digestion. But things are worse with regard to final truths of last instance in the third group of sciences--the historical. These are concerned with the conditions of human life, social conditions, forms of law and the state with their idealistic superstructure of philosophy, religion, art, etc., in their historic succession and in their present day manifestations. In organic nature we have at least to do with a succession of regular phenomena which regularly repeat themselves as far as our immediate observation goes, within very wide limits. Organic species have remained on the whole unaltered since the time of Aristotle. In social history, on the other hand, repetitions of conditions are the exception, not the rule, directly we leave behind the prehistoric conditions of humanity, the stone-age, so-called. Where such repetitions do occur, moreover, they never recur under precisely similar conditions, as for example the occurrence of early tribal communism among all peoples anterior to civilisation and the form of its break up. As regards human history, then, as far as science is concerned, we are at a greater disadvantage than in biology. Furthermore, when the intimate relations existing between a social and political phenomenon come to be recognised it is not, as a rule, perceived until the conditions are actually on the way to decay. Knowledge is therefore entirely relative, since it is limited to a given people and a given epoch, and their nature under transitory social and political forms, when it examines relations and forms conclusions. He who therefore is after final truths of last instance, pure and immutable, will only manage to catch flat phrases and the most arrant commonplaces, like these--man cannot, generally speaking, live without working; up to the present men have for the most part been divided into masters and servants; Napoleon died on May 5th, 1821, and things of that sort. It is worth noting that in this department of knowledge pretended final truths of last instance are met with most frequently. Only the person who wishes to show that there are eternal truth, eternal morality, and eternal justice in human history, and that these are similar in scope and application to those of mathematics, will proclaim that twice two is four and that birds have beaks and the like to be eternal truths. We can also certainly rely upon the same friend of humanity taking the opportunity to explain that all former inventors of eternal truths have been more or less asses or charlatans, that they have been circumscribed by error and have made mistakes. The fact of their error, however, is natural and proves the existence of the truth, and that it can be reached, and the newly arisen prophet has a ready-to-hand stock of final truths of last instance, eternal law and eternal justice. This has happened hundreds, nay, thousands of times, so that it is a wonder that men are still sufficiently credulous to believe it not only of others, but even of themselves. Here we find a prophet clad in the armour of righteousness who proclaims in the old-fashioned way that whoever else may deny there is still one left to declare final truths of last instance. Denial, nay, doubt even, is a weakness, barren confusion, mole-like scepticism, worse than blank nihilism, confusion worse confounded and other little amiabilities of this sort. As with all prophets, there is no scientific investigation, but merely off-hand condemnation. We might have made mention of the sciences which investigate the laws of human thought, logic and dialectics. Here we are, however, no better off as regards eternal truths. Herr Duehring explains that the dialectic proper is pure nonsense, and the many books which have been and are still being written on logic prove clearly that final truths of last instance are more sparsely distributed than many believe. Moreover, we are not at all alarmed because the step of science upon which we to-day stand is not a bit more final than any of the preceding steps. Already it includes an immense amount of material for investigation and offers a great chance for specialisation and study to anyone who desires to become expert in any particular branch. Whoever expects to find final and immutable truths in observations which in the very nature of things must remain relative for successive generations, and can only be completed piecemeal, as in cosmogony, geology and human history, which must always be incomplete owing to the complexity of the historical material, shows perverse ignorance even where he does not, as in the present case, set up claims of personal infallibility. Truth and error, like all such mutually antagonistic concepts, have only an absolute reality under very limited conditions, as we have seen, and as even Herr Duehring should know by a slight acquaintance with the first elements of dialectics, which show the insufficiency of all polar antagonisms. As soon as we bring the antagonism of truth and error out of this limited field it becomes relative and is not serviceable for new scientific statements. If we should seek to establish its reality beyond those limits we are at once confronted by a dilemma, both poles of the antagonism come into conflict with their opposite; truth becomes error and error becomes truth. Let us take, for example, the well-known Boyle's law, according to which, the temperature remaining the same, the volume of the gas varies as the pressure to which it is subjected. Regnault discovered that this law does not apply in certain cases. If he had been a realist-philosopher he would have been obliged to say, "Boyle's law is mutable, therefore it does not possess absolute truth, therefore it is untrue, therefore it is false." He would thus have made a greater error than that which was latent in Boyle's law, his little particle of truth would have been drowned in a flood of error; he would in this way have elaborated his correct result into an error compared with which Boyle's law with its particle of error fastened to it would have appeared as the truth. Regnault, scientist as he was, did not trouble himself with such childish performances. He investigated further and found that Boyle's law is only approximately correct, having no validity in the case of gases which can be made liquid by pressure when the pressure approaches the point where liquefaction sets in. Boyle's law therefore is shown only to be true within specific bounds. But is it absolute, a final truth of last instance within specific bounds? No physicist would say so. He would say that it is correct for certain gases and within certain limits of pressure and temperature, and even then within these somewhat narrow limits he would not exclude the possibility of a still narrower limitation or change in application as the result of further investigation. This is how final truths of last instance stand in physics, for example. Really scientific works as a rule avoid such dogmatic expressions as truth and error, but they are constantly cropping up in works like the Philosophy of Reality, where mere loose talking vaunts itself the supreme result of sovereign thought. But a naïve reader may say, "Where has Herr Duehring expressly stated that the content of his philosophy of reality is final truth of the last instance?" Well, for example, in his dithyramb on his system which we quoted above, and again where he says "Moral truths as far as they are known are as sound as those of mathematics." Does not Herr Duehring explain that by reason of his powers of criticism and searching investigations, the fundamental philosophy has been brought to light and that he has thus bestowed upon us final truths of last instance? But if Herr Duehring does not set up such a claim either on his own behalf or that of his time, if he says that some time in the misty future final truths of last instance will be established, and that therefore his own statements are merely accidental and confused, a kind of "mole-like scepticism" and "barren confusion," what is all the fuss about, and what useful purpose is served by Herr Duehring? If we gain no ground in the matter of truth and error we gain less in respect of good and evil. Here we have an antagonism of ethical significance, and ethics is a department of human history in which final truths are but slight and few. From people to people, from age to age, there have been such changes in the ideas of good and evil that these concepts are contradictory in different periods and among different peoples. But some one may remark, "Good is still not evil and evil is not good; if good and evil are confused all morality is abolished, and each may do what he will." When the rhetoric is stripped away this is the opinion of Herr Duehring. But the matter is not to be disposed of so easily. If things were as easy as that there would be no dispute about good and evil. Everybody would know what was good and what was evil. How is it to-day, however? What system of ethics is preached to us to-day? There is first the Christian-feudal, a survival of the early days of faith, which is as a matter of fact subdivided into Catholic and Protestant, of which there are still further subdivisions, from the Jesuit-Catholic and orthodox Protestant to loosely drawn ethical systems. There figure also the modern or bourgeois, and still further the proletarian future system of morality, so that the progressive European countries alone present three contemporaneous and coexistent actual theories of ethics. Which is the true one? No single one of them, regarded as a finality, but that system assuredly possesses the most elements of truth which promises the longest duration, which existent in the present is also involved in the revolution of the future, the proletarian. But if we now see that the three classes of modern society, the feudal aristocracy, the bourgeoisie and the proletarian, have their distinctive ethical systems, we can only conclude therefrom that mankind consciously or unconsciously shapes its moral views in accordance with the material facts upon which in the last instance the class existence is based--upon the economic conditions under which production and exchange are carried on. But in the three above mentioned systems of ethics there is much which is common to all three of them, and might not this at least constitute a portion of an eternally stable system of ethics? These ethical theories pass through three distinct steps in their historical development, they have therefore a common historical basis and hence necessarily much in common. Further, for approximately similar economic stages there must, necessarily be a coincidence of similar stages of economic development, and ethical theories must of necessity coincide with a greater or less degree of closeness. From the very moment when private property in movables developed there had to be ethical sanctions of general effect in all communities in which private property prevailed, thus: Thou shalt not steal. Is this commandment, then, an eternal commandment? By no means. In a society in which the motive for theft did not exist stealing would only be the practice of the weak-minded, and the preacher of morals who proclaimed "Thou shalt not steal" as an eternal commandment would only be laughed at for his pains. We here call attention to the attempt to force a sort of moral dogmatism upon us as eternal, final, immutable moral law, upon the pretext that the moral law is possessed of fixed principles which transcend history and the variations of individual peoples. We state, on the contrary, that up to the present time all ethical theory is in the last instance a testimony to the existence of certain economic conditions prevailing in any community at any particular time. And in proportion as society developed class-antagonisms, morality became a class morality and either justified the interests and domination of the ruling class, or as soon as a subject class became strong enough justified revolt against the domination of the ruling class and the interests of the subject class. That, by this means, there is an advance made in morals as a whole, just as there is in all other branches of human knowledge, there can be no doubt. But we have not yet advanced beyond class morals. Real human morality superior to class morality and its traditions will not be possible until a stage in human history has been reached in which class antagonisms have not only been overcome but have been forgotten as regards the conduct of life. Now the colossal egotism of Herr Duehring may be understood when it is seen that, on the eve of a revolution which will bring about a state of society devoid of classes, he claims from the midst of an old and class divided society to proclaim an eternal system of morals independent of time and material change. He himself declares what up to the present has been hid from the rest of us that he understands the structure of this future society at least as regards its salient features. In conclusion he makes a revelation which is essentially original but none the less "fundamental respecting the origin of evil." We have the fact that the type of the cat with its inherent treachery is pictured as the representative animal type, and this also displays a form of character to be found also in man. There is no mystery then about evil if one can detect a mysticism in the cat or any other beast of prey. Evil is--the cat. Goethe was evidently wrong when he introduced Mephistopheles as a black dog instead of a cat similarly colored. This is ethics suited not only to all worlds but to cats also. _Equality._ By dint of experience we have come to learn Herr Duehring's "method." It consists in separating each department of knowledge into what are assumed to be its most simple elements, then of making so called self evident axioms with regard to these simple elements, and thereupon operating with the results obtained in this way. Thus a sociological question is to be "decided on simple axiomatic principles just as if it were a matter of elementary mathematics." Thus the application of the mathematical method to history, ethics and law gives mathematical certainty to the final results which appear as pure and immutable truths. This is only another form of the old ideological, _a priori_ method so called, which learned the properties of an object not from the object itself but derived them by proof from the concept of the object. First you derive a concept of the object from the actual object, then you turn the spit and measure the object in terms of its derivative the concept. The concept is not shaped after the pattern of the object but the object after the pattern of the concept. In Herr Duehring's method, the simplest elements, the last abstractions to which he can attain do duty for the concept which is unchangeable, the simplest elements are under the best conditions purely imaginary in their nature. The philosophy of realism hence appears to be mere ideology, and has no derivation from real life but is absolutely dependent upon the imagination. When such an ideologist proceeds to construct a system of morals and law from his concept of the so-called simplest elements of society instead of from the real social conditions of the men about him, where does he get his material for construction? The material evidently consists of two kinds--firstly, the slim vestiges of reality which are still present in every fundamental abstraction, and secondly in the actual content which our ideologist evolves from his own consciousness. And what does he discover in his consciousness? For the most part moral and ethical philosophic ideas and these constitute an expression corresponding more or less closely, whether positive or negative, harmonious or hostile, with the social and political conditions which environ him. Besides he probably has notions derived from literature pertaining to these conditions, and finally he has possibly personal idiosyncrasies. Let our ideologist dodge all that he can, the historical reality which he has thrown out of doors comes in again at the window and although he may fancy that he is employed in the manufacture of moral and legal doctrines good for all worlds and all ages he is actually making a distorted, counterfeit of the conservation or revolutionary tendencies of his time, because torn from its real place, as things seen in a concave mirror are upside down. Herr Duehring therefore resolves society into its simplest elements and discovers accordingly that the most elementary society consists of at least two human beings. He thereupon operates with these two human beings to produce his axiom. Then he delivers himself of the fundamental maxim of morals, "Two human wills, as such, are entirely identical, and the one can in consequence make no positive demands upon the other." Here the "foundation of moral law" is apparent, so "in order to develop the principal concepts of justice we require two human beings under absolutely simple and elementary conditions." That two human wills or two human beings are just alike is not only no axiom, it is a glaring exaggeration. In the first place two human beings may differ as regards sex, and this simple fact shows us, if we look at childhood for a moment, that the elements of society are not two men, but a little man and a little woman, which constitute a family, the simplest and earliest form of association for productive purposes. But Herr Duehring cannot by any means agree to this. On the one hand the two constituents of society might very possibly be made alike and on the other Herr Duehring would not be able to construct the moral and legal equality of man and woman from the original family. Therefore one of two things must take place. Either the molecules of Herr Duehring's society from the multiplication of which all society is built up is merely _a priori_ and destined to fail, since two men cannot produce a child, or we must consider them as two heads of families. In this case the entire foundation is made its very opposite. Instead of the equality of man we have at the most the equality of two heads of families, and since women are not comprehended we have the consequent subjection of women. We are sorry to warn the reader that these two notorious men cannot be got rid of, for a long time. They take up in the realm of social conditions the role heretofore played by the dwellers in the other world with whom it is to be hoped we have now finished. Should any question of political economy, of politics or any other such matter require solution, out come the two men and make the thing axiomatic forthwith. This is a remarkable, clever, and system-shaping discovery of our system-shaping philosopher. But to give the truth its due we are regretfully bound to say that he did not discover the two men. They are common to the whole of the eighteenth century. They appear in Rousseau's Treatise on Equality, 1754, where, by the way, they serve to prove axiomatically the direct opposite of Herr Duehring's contentions. They play an important part in political economy from Adam Smith to Ricardo, but here they are so far unequal that they follow different trades, principally hunting and fishing, and they exchange their mutual products. They serve through the entire eighteenth century principally as mere illustrative examples, and the originality of Herr Duehring consists in the fact that he elevates this method of illustration to a fundamental method for all social science and to a measure of all historical instruction. There is no easier way to arrive at "a really scientific philosophy of things and men." In order to create the fundamental axiom the two men and their wills are mutually equal and neither has any right to lord it over the other. We cannot find two suitable men. They must be two men who are so free from all national, economic, political and religious conditions, from sex and personal peculiarities that nothing remains of either of them but the mere concept "man" and then they are entirely equal. They are therefore two fully-equipped ghosts conjured up by that very Herr Duehring who particularly ridicules and denounces "spiritistic" movements. These two phantoms must of course do all that their wizard wants of them and so their united productions are a matter of complete indifference to the rest of the world. Now let us follow Herr Duehring's axiomatic utterances a little further. These two men cannot make positive demands upon each other. The one who does so and enforces his demand thereupon performs an unjust act, and with this idea as a foundation Herr Duehring explains the injustice, the tyranny, the servitude, in short all the evil happenings of history up to the present time. Now Rousseau has in the work above mentioned proved the contrary just as axiomatically, by means of two men. A. cannot forcibly enslave B. except by putting B. in a place where he cannot do without A. This is far too materialistic an idea for Herr Duehring. He has accordingly put the same matter somewhat differently. Two shipwrecked men being by themselves on an island form a society. Their wills are, theoretically speaking, entirely equal and this is acknowledged by both. But in reality the inequality is tremendous. A. is resolute and energetic, B. inert, irresolute and slack. A. is sharp, B. is stupid. How long will it be before A. imposes his will upon B., first by taking the upper hand, and keeping it habitually, under the pretence that B.'s submission is voluntary. Whether the form of voluntariness continues or force is resorted to slavery still is slavery. Voluntary entering into a state of slavery lasted all through the Middle Ages in Germany up to the Thirty Years War. When serfdom was abolished in Prussia after the defeats of 1806 and 1807 and with it the duty of the nobility to take care of their subjects in need, sickness and old age the peasants thereupon petitioned to be allowed to remain in slavery--for who would care for them when they were in trouble? The concept of the two men is just as applicable to inequality and slavery as it is to equality and mutual aid, and since, under the penalty of extinction, men must assume the headship of a family, hereditary slavery may be foreseen in it. Let us put this view of the case on one side for a moment. We assume that we are convinced by Herr Duehring's maxim and that we are zealous for the full equalisation of the two wills, for the "universal sovereignty of man" for the "sovereignty of the individual," magnificent expressions, in comparison with which Stirner's "individual" with his private property is a mere bungler though he might claim his modest part therein. Then we are all free and independent. All? No, not even now. There are still "occasional dependent relations" but these are to be explained "on grounds which must be sought not in the action of two wills as such but in a third consideration, in the case of children, for example, in the inadequateness of their self-assertion." Indeed, the foundations of independence are not to be sought in the realisation of the two wills as such. Naturally not, since the realisation of one of the wills is thus interfered with. But they must be sought in a third direction. And what is the third direction? The actual fixing of a subjected will as an inadequate one. So far has our realistic philosopher departed from reality that will, the real content, the characteristic determination of this will serves him as a third ground, for abstract and indefinite speech. However this may be we must agree that equality has its exceptions. It does not apply to a will which is infected with inadequateness of self expression. Further, "Where the animal and the human are intermingled in one person can one in the name of a second fully developed human being demand the same actions as in the case of a single human being ... our supposition is here of two morally unequal persons of which one has a share of purely animal characteristics in a certain sense the typical fundamental conception which characterises the differences in and between groups of men." Now the reader may see by these modest excuses in which Herr Duehring turns and winds like a Jesuit priest to establish a casuistical position, how far the human human can prevail over the bestial human, how far he can employ deceit, warlike, keen terrorising means of deceit against the latter without overstepping immutable ethical bounds. Therefore, if two persons are "morally unequal" there is an end of equality. It was therefore not worth while to conjure up two fully equal men, since there are no two individuals who are morally equal. But inequality consists in this that one is a human being and the other has some part of the animal in his composition. It is evident that since man is descended from the animal creation he is not free from animality. So that as regards man degrees of animality can only be differentiated to a greater or less degree. A division of men into two sharply differentiated groups, into humans and human beasts, into good and bad, into sheep and goats, even Christianity, let alone the realist philosophy, is aware, implies a judge who makes the distinction. But who shall be judge as regards the realist philosophy? We must follow the practice of Christians according to which the pious little sheep undertake to act as judges of the universe against their unworthy neighbors the goats, with results which are too well known. The sect of the realist philosophers supposing it ever comes into existence will certainly not give up anything quietly. This is indeed a matter of small concern to us but we are interested in the confession that as a conclusion of the moral inequality between men equality no longer exists. Again "If the one acted in accordance with truth and science but the other in accordance with a superstition or prejudice a mutual disagreement would generally occur. At a certain stage of incapacity barbarism or an evil tendency of character must in all circumstances produce an antagonism. Force is the last resort not alone with children and incapables. The peculiar characteristics of whole classes of men, whether in a state of nature or civilised, may render necessary the subjection of their inimical will, due to their own impotency, in order to bring them into harmony with social arrangements. But such a man has challenged his own equality by the perversity of his inimical and hurtful actions, and if he suffers at the hands of a superior force he only reaps the recoil of his own actions." Thus not only moral but spiritual inequality is sufficiently potent to do away with the "full equality" of two wills and to furnish an ethical rule by which all the shameful acts of civilised plundering states against backward peoples down to the atrocities of the Russians in Turkestan may be justified. When General Kaufmann, in the summer of 1873, fell upon the Tartar tribes of the Jomuden, burnt their tents, mowed down their wives and families, as the command ran, he explained that the destruction was due to the perversity, the inimical minds of the people of the Jomuden, and was employed for the purpose of bringing them back to the social order, and the means used by him had been the most efficient. But he who wills the end wills also the means. But he was not so cruel as to insult the Jomuden people in addition and to say that he massacred them in the name of equality, that he considered their wills equal to his own. And again in this conflict the select, those who pose as champions of truth and science, the realist philosophers in the last instance must be able to distinguish superstition, prejudice, barbarism, evil tendencies of character, and when force and subjection are necessary to bring about equality. So that equality now means equalisation by means of force, and the will of one recognises the will of the other as equal by overthrowing it. The phrase that an external will in its bringing about equalisation by force is only to be regarded as producing equality is nothing but a distortion of the Hegelian theory that punishment is a right of the criminal. "That punishment is to be regarded as implying a right to it in accordance with which the criminal is respected as a rational being." (Rechtsphil, 100.) We may pause here. It would be superfluous to follow Herr Duehring any further in the piecemeal destruction of his axiomatically established equality, universal human sovereignty, etc., to observe how he brings society into existence with two men and produces yet a third in order to establish the state, because to put the matter briefly, no majority can be had without the third, and without him, that is, without the domination of the majority over the minority, no state can exist. There is no need either for us to observe how he launches his future social state on the more peaceful waters of construction, where we may have the honor some fine morning of beholding it. We have seen so far that the complete equality of two wills only exists as long as they do not will anything. That as soon as they cease to become human wills as such and to be converted into real individual wills, into wills of real persons, that is, equality ceases; that childhood, idiocy, animality so called, superstition, prejudice, supposed lack of power on the one hand and supposed humanity and insight into truth and science on the other hand, that therefore every difference in the quality of the two wills and in the degree of intelligence accompanying it justifies an inequality which may go as far as subjection. Why should we seek further since Herr Duehring has brought his own edifice of equality which he so laboriously constructed tumbling to the ground? But if we are now prepared to meet Herr Duehring's silly and incompetent consideration of equality of rights we are not yet ready to take issue with the idea itself which through the influence of Rousseau has played a theatrical part, and since the days of the great Revolution a practical and political part, and now plays no insignificant role in the agitation carried on by the socialist movement of all countries. The establishment of its scientific soundness has a value for the proletarian agitation. The idea that all men have something in common as men and that they are equal with respect to that common quality is naturally older than history. But the modern doctrine of equality is something quite different than that. This derives from the property of humanity, common to man, the equality of man, as man, or at least of all citizens of a given state or of all members of a given society. Until the conclusion of equality of rights in the state and society was deduced from the original notion of relative equality, and until this conclusion was to be stated as something natural and self evident, many thousands of years had to pass and indeed have passed. In the oldest and most elementary communities it may be said that equality of rights among the members existed in the highest degree, women, slaves, and foreigners, however, being excluded. Among the Greeks and Romans inequality existed to a greater degree. Greeks and barbarians, freemen and slaves, citizens and subjects, Roman citizens and Roman subjects (to employ a comprehensive expression) that these should have any claim to equality of political rights would have been regarded by the ancients necessarily as madness. Under the Roman Empire there was a complete elimination of all these distinctions with the exception of those of freemen and slaves. There arose therefore as far as the freemen were concerned that equality of private individuals upon which Roman law was founded and developed as the most perfect system of jurisprudence based on private property with which we are acquainted. But while the contradiction of freemen and slaves existed there could be no statement based upon the universal equality of man as such, as was recently shown in the slave states of the Northern American Union. Christianity recognised one equality on the part of all men, that of an equal taint of original sin, which entirely corresponded with its character as a religion of slaves and the oppressed. In the next place it recognised completely the equality of the elect but it only declared this at the beginning of its teaching. The traces of common property in possessions which may be found occasionally in the earliest days of the religion was based rather upon the mutual assistance which persecuted people hold out to each other, than upon any real concepts of human equality. Very soon the establishment of the antithesis between the priesthood and the laity put an end to even this expression of Christian equality. The inundation of Western Europe by the Germans abolished for centuries all concepts of equality by the creation of a universal, social and political gradation of rank of a much more complicated nature than had existed up to that time. Contemporaneously with this Western and Middle Europe entered upon a historical development, shaped for the first time a compact civilisation, and a system which was on the one hand dynamic and on the other conservative, the leading national states. Thereupon a soil was prepared for the declaration of the equality of human rights so recently made. The feudal middle ages moreover developed the class in its womb destined to be the apostle of the modern agitation for equality, the bourgeois class. In the beginning even under the feudal system the bourgeois class had developed the prevalent hand-industry and the exchange of products even within feudal society to a high degree considering the circumstances, until with the close of the fifteenth century the great discoveries of lands beyond the seas opened before it a new and individual course. The trade beyond Europe which up to that time had been carried on between the Italians and the Levant was now extended to America and the Indies and soon exceeded in amount the reciprocal trade of the European countries as well as the internal commerce of any particular land. American gold and silver flooded Europe and like a decomposing element penetrated all the fissures, crevices and pores of feudal society. The system of hand-labor was no longer sufficient for the growing demand, it was replaced by manufacture in the leading industries of the most highly developed peoples. A corresponding change in the political structure followed this powerful revolution in the economic conditions of society but by no means immediately. The organisation of the State remained feudal in form while society became more and more bourgeois. Trade, particularly international, and to a greater degree world-commerce demanded for its development the free and unrestricted possessors of commodities, who have equality of right to exchange commodities at least in one and the same place. The transition from hand labor to manufacture presupposes the existence of a number of free laborers, free on the one hand from the fetters of the gild and on the other free to employ their labor force in their own behalf, who could make contracts for the hire of their labor force to the manufacturers and therefore face him as if endowed with equal rights as contracting parties. At last then there arose equality of rights and actual equality of all human labor, for labor force finds its unconscious but strongest expression in the law of value of modern bourgeois economy according to which the value of a commodity finds its measure in the socially necessary labor incorporated in it. But where the economic circumstances render freedom and equality of rights necessary, the political code, gild restrictions and peculiar privileges oppose them at every step. Local provisions of a legal character, differential taxation, exceptional laws of every description, interfere not only with foreigners or colonials but frequently enough also with whole categories of citizens in the nation itself. Gild privileges in particular constituted a continual impediment to the development of manufacture. The course was nowhere open and the chances of the bourgeois victory were by no means equal, but to make the course open was the first and ever more pressing necessity. As soon as the demand for the abolition of feudalism and for the equality of rights was set on the order of the day it had necessarily to take an ever widening scope. As soon as the claim was made in behalf of commerce and industry it had also to be made in behalf of the peasants who, being in every stage of slavery from serfdom labored for the most part without any return for the feudal lords and were obliged in addition to perform innumerable services for them and for the State. Also it became desirable to abolish feudal privileges, the immunity of the nobility from taxation, and the superiority which attached to a certain status. And as men no longer lived in a world empire like the Roman, but in an independent system with states which approximated to a similar degree of bourgeois development and which had intercourse with one another on an equal footing, the demand took on necessarily a universal character reaching beyond the individual state, and freedom and equality were thus proclaimed as human rights. But as regards the special bourgeois character of these human rights, it is significant that the American Constitution which was the first to recognise these rights of man in the same breath established slavery among the colored people: class privileges were cursed, race privileges were blessed. As is well known, the bourgeois class as soon as it escaped from the domination of the ruling class in the cities, by which process the medieval stage passes into the modern, has been steadily and inevitably dogged by a shadow, the proletariat. So also the bourgeois demands for equality are accompanied by the proletarian demands for equality. Directly the demand for the abolition of class privileges was made by the bourgeois there succeeded the proletarian demand for the abolition of classes themselves. This was first made in a religious form and was based upon early Christianity, but later derived its support from the bourgeois theories of equality. The proletarians take the bourgeois at their word, they demand the realisation of equality not merely apparently, not merely in the sphere of government but actually in the sphere of society and economics. Since the French bourgeoisie of the great Revolution placed equality in the foreground of their movement, the French proletariat has answered it blow for blow with the demand for social and economic equality, and equality has become the special battle cry of the French proletariat. The demand for equality as made by the proletariat has a double significance. Either it is, as was particularly the case at first, in the Peasants' War, for example, a natural reaction against social inequalities which were obvious, against the contrast between rich and poor, masters and slaves, luxurious and hungry, and as such it is simply an expression of revolutionary instinct finding its justification in that fact and in that fact alone. On the other hand it may arise from reaction against the bourgeois claims of equality from which it deduces more or less just and far reaching claims, serves as a means of agitation to stir the workers, by means of a cry adopted by the capitalists themselves, against the capitalists, and in this case stands or falls with bourgeois equality itself. In both cases the real content of the proletarian claims of equality is the abolition of classes. Every demand for equality transcending this is of necessity absurd. We have already given examples and can furnish many more when we come to consider Herr Duehring's prophecies of the future. So the notion of equality, in its proletarian as well as in its bourgeois form, is itself a historic product. Certain circumstances were required to produce it and these in their turn proceeded from a long anterior history. It is therefore anything but an eternal truth. And if the public regards it as self-evident in one sense or another if it, as Marx remarks "already occupies the position of a popular prejudice" it is not due to its being an axiomatic truth but to the universal broadening of conception in accordance with the spirit of the eighteenth century. If Herr Duehring then can set up his two famous men in housekeeping on the grounds of equality, it is apparent that the prejudices of the mass of men in its favor is an antecedent condition. In fact Herr Duehring calls his philosophy the "natural" because it proceeds from generally recognised things, which appear to him to be entirely natural. But why they seem to him to be natural he does not take the trouble to enquire. _Freedom and Necessity._ (The former part of this section is taken up with a criticism of Herr Duehring's knowledge of law of which he had boasted. It is a purely technical discussion and is of merely local interest. Having disposed of Duehring's juristic claims Engels proceeds to discuss "Freedom and Necessity" as follows.) One cannot deal properly with the question of morals and law without a discussion of free will, human responsibility, and the limits of necessity and freedom. The realistic philosophy has not only one but two solutions of these questions. "One must substitute for false theories of freedom the actual conditions in which reason on the one hand and instinct on the other unite upon a middle ground. The fundamental facts of this sort of dynamics are to be learned from observation and as regards the calculation in advance of phenomena which have not yet occurred, we must judge of them in general terms according to their special qualities. In this way the silly speculations with respect to the freedom of the will which have wasted thousands of years are not only entirely removed but are replaced by something positive, something useful for practical life." So freedom of the will consists in this that reason impels men to the right and irrationality to the left and according to this parallelogram of forces the true direction is that of the diagonal. Freedom would therefore be the average between insight and impulse, between understanding and lack of understanding, and its degree would to use an astronomical expression be empirically established by the "personal equation." But a few pages later we read "We establish moral responsibility upon freedom by which we only mean susceptibility to known motives according to the measure of natural and acquired reason. All such motives in spite of antagonism realise themselves in action with the inevitability of natural law, but we count upon this inevitable necessity when we deal with morals." This second definition of freedom which is quite opposed to the first is nothing but a very weak paraphrase of Hegel's notions on the subject. Hegel was the first man to make a proper explanation of the relations of freedom and necessity. In his eyes freedom is the recognition of necessity. "Necessity is blind only in so far as it is not understood." Freedom does not consist in an imaginary independence of natural laws but in a knowledge of these laws and in the possibility thence derived of applying them intelligently to given ends. This is true both as regards the laws of nature and of those which control the spiritual and physical existence of man himself,--two classes of laws which we can distinguish as an abstraction but not in reality. Freedom of the will consists in nothing but the ability to come to a decision when one is in possession of a knowledge of the facts. The freer the judgment of a man then in relation to a given subject of discussion so much the more necessity is there for his arrival at a positive decision. On the other hand lack of certainty arising from ignorance which apparently chooses voluntarily between many different and contradictory possibilities of decision shows thereby its want of freedom, its control by things which it should in reality control. Freedom, therefore, consists in mastery over ourselves and external nature founded upon knowledge of the necessities of nature, it is, therefore, necessarily a product of historical development. The first human beings to become differentiated from the lower animals were in all essentials as devoid of freedom as these animals themselves but each step in human development was a step towards freedom. At the threshold of human history stands the discovery of the transformation of mechanical motion in heat, the generation of fire by friction; at the close of development up to the present stands the discovery of the transformation of heat into mechanical motion, the steam engine. In spite of the tremendous revolution in the direction of freedom which the steam engine has produced in society it is not yet half complete. There is no question that the production of fire by friction still surpasses it as an agent in the liberation of humanity. Because the production of fire by friction for the first time gave man power over the forces of nature and separated him for ever from the lower animals. The steam engine can never bridge so wide a chasm. It appears however as the representative of all those productive forces by the help of which alone a state of society is rendered possible in which no class subjection or pain will be produced by reason of the lack of means for the sustenance of the individual, in which moreover it will be possible to speak of real human freedom as arising from living in accordance with the recognised laws of nature. But considering the youth of humanity it would be absurd to wish to impute any universal absolute validity to our present philosophical views, and it follows from the mere facts that the whole of history up to the present time is to be regarded as the history of the period extending from the time of the practical discovery of the transformation of mechanical movement into heat to that of the transformation of heat into mechanical movement. (The above constitutes a reply to the view which regards history simply as the record of human error and is followed by a discussion of Duehring's opinions in that regard.) CHAPTER VII THE DIALECTIC _Quantity and Quality._ (Here Herr Duehring contends "The first and most important statement with respect to the foundation logical properties of existence points to the exclusion of contradiction. Contradiction is a category which can belong to thought alone but which can pertain to nothing real. There are no contradictions in things; in other words the law of contradiction is itself the crowning point of absurdity." To which Engels replies as follows): The thought content of the foregoing passages is contained in the statement that contradiction is an absurdity and cannot occur in the actual world. This statement will have for people of average common sense the same self-evident truth as to say that straight cannot be crooked nor crooked straight. But the differential calculus shows in spite of all the protests of common sense that under certain conditions straight and crooked are identical, and reaches thereby a conclusion which is not in harmony with the common sense view of the absurdity of there being any identity between straight and crooked. Considering moreover the significant role which the so called Dialectic of the Contradiction played in the ancient Greek philosophy, a stronger opponent than Herr Duehring would be obliged to meet it with better arguments than a mere affirmation and a number of epithets. As long as we regard things as static and without life, each by itself, separately, we do not run against any contradictions in them. We find certain qualities sometimes common, sometimes distinctive, occasionally contradictory, but in this last case they belong to different objects and are hence not self contradictory. While we follow this method we pursue the ordinary metaphysical method of thought. But it is quite different when we consider things in their movement, in their change, their life and their mutually reciprocal relations. Then we come at once upon contradictions. Motion is itself a contradiction since simple mechanical movement from place to place can only accomplish itself by a body being at one and the same moment in one place and simultaneously in another place by being in one and the same place and yet not there. And motion is just the continuous establishing and dissolving the contradiction. Here we have a contradiction which is "objective, and so to speak corporeal in things and events." And what does Herr Duehring say about it? He affirms that "in rational mechanics there is no bridge between the strictly static and the dynamic." Finally the reader is able to see that there is behind this pretty little phrase of Herr Duehring nothing more than this--that the metaphysical mode of thought can absolutely not pass from the idea of rest to that of motion because the aforesaid contradiction intervenes. Motion is absolutely inconceivable to the metaphysician, because a contradiction. And as he affirms the inconceivability of motion he admits the existence of this contradiction against his will and therefore admits that it constitutes an objective contradiction in actual facts and events, and is moreover an actual fact. But if simple mechanical motion contains a contradiction in itself still more so do the higher forms of motion of matter and to a high degree organic life and its development. We saw above that life consists chiefly in this that a being is at one and the same time itself and something different. Life itself then is likewise a contradiction contained in things and events, always establishing and dissolving itself, and as soon as the contradiction ceases life also ceases, death comes on the scene. Thus we saw also that we cannot put an end to the Contradictions in the realm of thought, and how for example the contradiction between the intrinsically unlimited possibilities of human knowledge and its actual existence in the persons of human beings with limited faculties and powers of knowledge, is dissolved in the, for us at least, practically endless progression of the race, in unending progress. We stated just now that higher mathematics holds as one of its basic principles that straight and crooked may be identical under certain circumstances. It shows another contradiction, that lines which apparently intersect yet are parallel from five to six centimeters from the point of intersection, should be such as should never intersect although indefinitely produced, and yet, notwithstanding these and even greater contradictions, it produces not only correct results but results which are unattainable by lower mathematics. But even in the latter there is a host of contradictions. It is a contradiction, for example, that a root of A should be and actually is a power of A. A to the power of one-half equals the square root of A. It is contradiction that a negative magnitude should be the square of anything, since every negative magnitude multiplied by itself gives a positive square. The square root of minus one is therefore not only a contradiction but an absurd contradiction, a veritable absurdity. And yet the square root of minus one is in many instances the necessary result of correct mathematical operations, nay further, where would mathematics higher or lower be if one were forbidden to operate with the square root of minus one. Mathematics itself enters the realm of the dialectic and significantly enough it was a dialectic philosopher, Descartes, who introduced this progressiveness into mathematics. As is the relation of the mathematics of variable magnitudes to that of invariable quantities, so is the relation of the dialectic method of thought to the metaphysical. This does not prevent the great majority of mathematicians from only recognising the dialectic in the realms of mathematics, a condition of things satisfactory to those who operate in the antiquated, limited, metaphysical fashion by methods attained by means of the dialectic. * * * * * (Duehring having made an attack upon Marx's "Capital" because of its reliance upon the dialectic, and having indulged in the epithets to which he is too prone with respect to this work, Engels takes up its defence in that respect as follows): It is not our business to concern ourselves at this point with the correctness or incorrectness of the investigations of Marx as regards economics, but only with the application which he makes of the dialectic method. So much is certain, that it is only now that the readers of "Capital" will by the aid of Herr Duehring understand what they have read properly, and among them Herr Duehring himself, who in the year 1867 was still in a position, as far as possible to a man of his calibre, to review the book rationally. He did not then, it may be noted, first translate the arguments of Marx into Duehringese, as now seems indispensable to him. Even if he at that time made the blunder of identifying the Marxian dialectic with that of Hegel he had not altogether lost the ability to distinguish methods from the results attained by them and to comprehend that an abuse of the former is no contradiction of the latter. Herr Duehring's most astonishing observation is that from the Marxian standpoint, "in the last analysis everything is identical," that therefore in the eyes of Marx, for example, capitalists and wage workers, feudal, capitalistic and social methods of production are "all one." In order to show the possibility of such sheer stupidity it only remains to point out that the mere word "dialectic" makes Herr Duehring mentally irresponsible and makes what he says and does so inaccurate and confused as to be in the last analysis "all one." * * * * * (Herr Duehring remarks, "How comical for example is the declaration based upon Hegel's confused notions that quantity becomes lost in quality and that money advanced [i.e. for productive purposes. Ed.] becomes capital when it reaches a certain limit merely through quantitative increase." To which Engels replies thus): This seems peculiar when presented in this washed out fashion by Herr Duehring. On page 313 (2nd ed. "Capital") Marx, after an investigation of fixed and variable capital and surplus value, derives from his investigations the conclusion that "not every amount of gold or value capable of being transformed into capital is so transformed; rather a certain minimum of gold or of exchange value is presupposed to be in the possession of the individual owner of gold or goods." He thereupon gives an example, thus, in a branch of industry the worker works eight hours per day for himself, i.e. in order to produce the value of his wages, and the following four hours for the capitalist in producing surplus value to go into their pockets. One must have sufficient values to permit of the setting up of two workmen with raw material, means of labor and wages, in order to live as well as a workman. But since capitalistic production is not undertaken for mere livelihood but for increase of wealth, our individual with his two workmen would still be no capitalist. If he lives twice as well as an ordinary workman and transforms half of the surplus value produced into capital he will have to employ eight workmen and possess four times the aforementioned amount of value, and only after this and other examples for the purpose of illustrating and establishing the fact that not every small amount of value can effect a transformation of itself into capital, but that each period of industrial development and each branch of industry has its own minimum, fixed, Marx remarks "Here, as in nature, the correctness of the law of logic, as discovered by Hegel, is established--that mere quantitative changes at a certain point suddenly take on qualitative differences." One may remark the elevated and dignified fashion in which Duehring makes Marx say the exact opposite of what he did say. Marx says "The fact that a given amount of value can only transform itself into capital as soon as it has attained a definite minimum, varying with circumstances, in each individual case,--this fact is proof of the correctness of the law of Hegel. Herr Duehring makes him say "Because, according to the law of Hegel, quantity is transformed into quality therefore 'a sum of money when it has reached a certain amount becomes capital.'" He says just the opposite. We have seen above in the Scheme of the Universe that Herr Duehring had the misfortune to acknowledge and apply, in a weak moment, this Hegelian system of calculation, according to which at a given point quantitative changes suddenly become qualitative. We then gave one of the best known examples, that of the transformation of the form of water which at 0° C. changes from a liquid to solid and at 100° C. from liquid to gaseous, where thus at both these points of departure a mere quantitative change in temperature produces a qualitative change in the water. We might have cited from nature and human society a hundred more such facts in proof of this law, thus the whole fourth section of Marx's "Capital" entitled "Production of Relative Surplus Value in the realm of co-operative industry, the Division of Labor, and Manufacture, Machinery and the Great Industry," goes to show innumerable instances in which qualitative change alters the quantity of the thing, and where also, to use Herr Duehring's exceedingly odious expression, quantity is converted and transformed into quality. So also the mere coöperation of large numbers, the melting of several diverse crafts into one united craft, to use Marx's expression, produces a new "industrial power" which is substantially different from the sum of the individual crafts. Marx, in the interest of the entire truth, has remarked, in complete contrast to the perverted style of Herr Duehring "The molecular theory employed in modern chemistry, first scientifically developed by Laurent and Gerhardt, rests upon no other law." But what does Herr Duehring care for that? He knows that "the eminently modern constructive elements of scientific thought make just the same mistake as was made by Marx and his rival Lassalle; half-knowledge and a touch of pseudo-philosophy furnish the tools necessary for a display of learning." While with Herr Duehring "elevated notions of exact knowledge in mechanics, physics and chemistry" are, as we have seen, the foundations. But that the public may be in a position to decide we shall examine somewhat more closely the example cited by Marx in his note. Here we have, for example, the homologous series of compounds of carbon of which many are known and each has its own algebraic formula. If we, for example, according to the practice of chemistry, represent an atom of carbon by C, an atom of hydrogen by H, an atom of oxygen by O and the number of atoms contained in each combination of carbon by n, we can express the molecular formula of each one of this series thus, C_{n}H_{2n+2}--Series of normal paraffin. C_{n}H_{2n+2}O--Series of primary alcohol. C_{n}H_{2n}O_{2}--Series of the monobasic oleic acids. Let us take, for example, the last of this series and set one after the other n = 1, n = 2, etc., we get the following results omitting the compounds. CH_{2}O_{2}--Formic Acid--boiling point 100°--melting point 1°. C_{2}H_{4}O_{2}--Acetic Acid--boiling point 118°--melting point 17°. C_{3}H_{6}O_{2}--Propionic Acid--boiling point 140°--melting point--. C_{4}H_{8}O_{2}--Butyric Acid--boiling point 162°--melting point--. C_{5}H_{10}O_{2}--Valerianic Acid--boiling point 175°--melting point--. And so on to C_{30}H_{60}O_{2}, Melissic Acid, which melts first at 180°, and which has no boiling point, because it does not evaporate without splitting up. Here we see therefore a whole series of qualitatively different bodies, produced by single quantitative additions of the elements and always in the same proportions. This occurs absolutely where all elements of the combinations change their quantity in the same proportions, so with normal paraffin, C_{n}H_{2n} + 2: the lowest is CH_{4} a gas, the highest known is C_{16}H_{34}, a body forming a hard colorless crystal which melts at 21° and boils at 278°. In both the series each new step is reached through the introduction of CH_{2}, an atom of carbon and two atoms of hydrogen, to the molecular form of the preceding step, and this quantitative change in the molecular form brings about a qualitatively different body. These series are merely obvious examples. Almost universally in chemistry, particularly in the different oxides of nitrogen, in the oxi-acids of phosphorus or sulphur, one can see how "quantity suddenly changes into quality" and how this so called "confused Hegelianism" is, so to speak, inherent in things and events, and no one is ever confused or beclouded by it, except Herr Duehring. If Marx is the first to observe this, and if Herr Duehring points this out, without understanding it (since he could not let so unheard of a crime pass), he should explain which of the two, Marx or Duehring, is without elementary conceptions of natural science and the established principles of chemistry, and do it without boasting about his own ideas on natural philosophy. In conclusion, let us call attention to a witness on the change of quantity into quality, namely Napoleon. He describes the conflicts between the French cavalry, bad riders but disciplined, with the Mamelukes who, as regards single combat were better horsemen but undisciplined, as follows--"Two Mamelukes were a match for three Frenchmen, one hundred Mamelukes were equal to one hundred Frenchmen, three hundred Frenchmen could beat three hundred Mamelukes and a thousand Frenchmen invariably defeated fifteen hundred Mamelukes." Just as in the statement of Marx, that a certain amount of money, variable in amount, is necessary as a minimum, to make its transformation into capital possible, so, according to Napoleon, a certain minimum number of cavalrymen is required to bring into being the force of discipline inherent in military organisation, to make them evidently superior to greater numbers of individually better riders and fighters, cavalry at least as brave, though irregular. But what effect has this argument on Herr Duehring? Was not Napoleon utterly defeated in his conflict with Europe? Did he not suffer defeat after defeat? And why? Simply as a result of his introduction of confused Hegelian ideas into cavalry tactics. _Negation of the Negation._ "The historical sketch (of the so called original accumulation of capital in England) is comparatively the best part of Marx's book and it would be even better if it had been developed scientifically and not by means of the Dialectic. The Hegelian negation of the negation is called upon to serve here as a midwife, in default of anything better and clearer, and by means of it the future is brought into existence from the present. The abolition of private property which is shown to have been going on since the sixteenth century is the first negation. Another negation must follow which is characterised as the negation of the negation and therefore the restoration of individual private property, but in a higher form, founded on the common ownership of land and instruments of labor. If this new 'individual private property' is called also 'social property' by Herr Marx, the higher Hegelian unity is here manifested in which the contradiction will be destroyed, that is, in accordance with this juggling of words, be destroyed and preserved.... The dispossession of the dispossessor is, as it were, in this case the automatic product of historical reality in its material external form.... It would be difficult for a cautious man to convince himself of the necessity of communism in land and property on the credit of Hegel's shiftiness, of which the negation of the negation is an example.... The confusion of the Marxian philosophic notions will not be strange to him who knows what can be done by means of the Hegelian dialectic or rather what cannot be done. For those who do not know the trick, it must be noted that the first negation of Hegel is the teaching of the catechism with respect to the Fall, and the second is a higher unity leading to the Redemption. On these analogies, which pertain to religion no logic of facts can be established.... Herr Marx consoles himself in the midst of his simultaneously individual and social property and leaves his disciples to solve his profound dialectic puzzle." (Thus far Herr Duehring is quoted.) So Marx cannot prove the necessity of the social revolution, the restoration of a common property in land and the means of production, except by a reliance upon Hegel's negation of the negation. And, since he founds his socialistic theories upon analogies pertaining to religion, he comes to the conclusion that in future society a simultaneously individual and social property will prevail, as the Hegelian higher unity of the contradiction destroyed. Let us leave the negation of the negation for a little and look at "the coexistent individual and social property." This will be called by Herr Duehring a "cloud realm," and, strange to say he is really right in this regard. But sad to say it is not Marx who is found to be in the cloud realm but on the contrary Herr Duehring himself. Since by virtue of his wonderful versatility in the vagaries of Hegel he does not experience any difficulty in telling us the necessary contents of the as yet unpublished volume of "Capital," so, after setting Hegel right, he is able to correct Marx without any trouble in that he ascribes to him a higher unity of a private property of which Marx has not said a word. Marx says "It is the negation of the negation. This reestablishes private property but on the basis of the acquisitions of the capitalistic era, of the cooperation of free laborers and their common ownership of the land and the means of production. The transformation of the private property of individuals, depending upon the labor of individuals, into capitalistic property is naturally a process much more tedious, hard and difficult than the transformation of capitalistic private property, as it now exists, resting upon social production, into social property." That is all. The condition attained by the dispossession of the dispossessor is here shown as the restoration of individual private property resting however on a basis of social property in the land and means of production. For people who can understand English, the meaning of this is that social property extends to the land and means of production, and private property to the products, therefore to consumption. And that the matter should be evident even to infants Marx shows on page 56. "A society of free men who labor with social means of production, and consciously expend their individual labor power as social labor power," therefore a socialistically organised society, and he says further "The total product of the society is a social product. A portion of this product serves again as a means of production. It remains social. But another portion is consumed by the members of the society. It must therefore be distributed among them." And that ought to be clear, even to Herr Duehring, in spite of his having Hegel on the brain. The coexistent individual and social property, this confused and indefinite thing, this nonsense proceeding from the Hegelian dialectic, this misty world, this deep dialectic puzzle which Marx leaves his pupils to solve is merely a creation of Herr Duehring's imagination. Marx, as a so-called Hegelian, is obliged, as a result of the negation of the negation, to furnish a correct higher unity, and since he does not do this in accordance with the taste of Herr Duehring, the latter has to take a lofty stand and to smite Marx in the interests of the full truth of things upon which Herr Duehring holds a patent. What attitude did Marx take to the negation of the negation? On page 761 and following he states the conclusion with respect to his economic and historical investigations into the so-called accumulation of original capital, extending over the fifty preceding pages. Before the capitalistic era in England, at least, small production existed, based upon the private property of the worker in his tools. The so-called accumulation of capital consists in the expropriation of these immediate producers, that is in the abolition of private property resting on the labor of individuals. This was possible because the aforesaid small production is only compatible with a narrow and primitive stage of production and of society and at a certain grade of development furnishes the means of its own suicide. This suicide, the transformation of individual and divided modes of production into social production, constitutes the early history of capitalism. As soon as the workers are transformed into proletarians and their means of labor into capital, as soon as the capitalistic methods of production are firmly established, the growing association of labor and the further transformation of the land and other means of production and hence the further expropriation of the owners of private property takes on a new form, "there is no longer the self-employing worker to expropriate, but the capitalist who expropriates many workers. This expropriation fulfils itself through the play of laws immanent in capitalistic production itself, through the concentration of capital. One capitalist kills many. Hand in hand with this concentration, or the expropriation of many capitalists by a few, there develop continually the conscious technical application of science, the deliberate organised exploitation of the soil, the transformation of the instruments of labor into instruments of labor which can only be employed collectively, and the economising of all means of production through their employment as the common means of production of combined social labor. With the constantly diminishing numbers of capitalist magnates who usurp and monopolise all the advantages of this process of transformation, grows the mass of misery, pressure, slavery, degradation and robbery but there grows also revolt and the constant progress in union and organisation of the working class brought about through the mechanism of the capitalistic process of production. Capitalism becomes an impediment to the methods of production developed with and under it. The concentration of the means of production and the organisation of labor reach a point where it comes into collision with its capitalistic covering. It is broken. The hour of capitalistic private property strikes. The expropriators are expropriated." And now I ask the reader, where are the dialectic twists and twirls, the intellectual arabesques, where the confused thought the result of which is the identity of everything, where the dialectic mystery for the faithful, where the dialectic hocus pocus, and the Hegelian intricacies, without which, Marx, according to Herr Duehring, cannot develop his own ideas? Marx simply pointed to history and showed briefly that just as the small industry necessarily produced the conditions of its own downfall, by its own development, that is to say by the expropriation of the small holders of private property so now the capitalistic method of production has itself developed likewise the material circumstances which must cause its downfall. The process is a historical one and, if it is at the same time dialectic, it is not to the discredit of Marx, that it happens to be so fatal to Herr Duehring. In the first place, since Marx is ready with his historical economic proof, he proceeds "The capitalistic method of production and method of appropriation, that is to say capitalistic private property is the first negation of individual private property founded on labor of individuals, the negation of capitalistic production will be self-produced with the necessity of a natural process, etc." (as quoted above). Although Marx therefore shows the occurrence of this event as negation of the negation, he has no intention of proving by this means that it is a historical necessity. On the contrary "After he has shown that the actual fact has partially declared itself, and has, as yet partially to declare itself, he shows it also as a fact which fulfils itself in accordance with a certain dialectic law." That is all. It is therefore again merely supposition on Herr Duehring's part to assert that the negation of the negation must act as a midwife by whose means the future is brought out of the womb of the present, or that Marx wants to convince anyone of the necessity of social ownership of land and capital upon the credit of the negation of the negation. It shows a complete lack of comprehension of the nature of the dialectic to regard it as Herr Duehring does, as an instrument of mere proof, just as one can after a limited fashion employ formal logic or elementary mathematics. Formal logic is itself more than anything else a method for the discovery of new results, for advancing from the known to the unknown, and so, but in a much more distinguished sense, is the dialectic, which, since it transcends the narrow limits of formal logic, attains a more comprehensive philosophical position. It is the same with mathematics. Elementary mathematics, the mathematics of constant quantities, proceeds within the limits of formal logic, at least as a rule: the mathematics of variable quantities which is peculiarly concerned with calculations running to the infinite, is substantially nothing but the application of the dialectic in mathematics. Mere proof becomes secondary before the manifold application of the method to new fields of investigation. But nearly all the proofs of higher mathematics from the first of the differential calculus, are, strictly speaking, false from the standpoint of elementary mathematics. This cannot be otherwise, if one, as is here the case, wishes to establish results won in the realm of dialectics by means of formal logic. For a crass metaphysician like Herr Duehring to want to prove anything by means of the dialectic would be the same wasted labor as Leibnitz and his pupils went through when they tried to establish the thesis of calculation to infinity by means of the mathematics of their time. The differential gave them the same spasms as the negation of the negation gives Herr Duehring and it played a role in it as we shall see. They admitted it at last, at least as many as did not die first, not because they were convinced but because it always worked out right. Herr Duehring, is, as he says, just in his forties, and if he attains old age, as we hope he will, he may also experience the same. But what is this dreadful negation of the negation which makes life so bitter to Herr Duehring and which is to him what the unpardonable sin, the sin against the Holy Ghost, is to Christianity? It is a very simple process, and one, moreover, which fulfils itself every day, which any child can understand when it is deprived of mystery, under which the old idealistic philosophy found a refuge, and beneath which it will pay unprotected metaphysicians to take refuge from the stroke of Herr Duehring. Let us take a grain of barley. Millions of such grains of barley will be ground, cooked and brewed and then consumed. But let such a grain of barley fall on suitable soil under normal conditions; a complete individual change at once takes place in it under the influence of heat and moisture, it germinates. The grain, as such disappears, is negated, in its place arises the plant, the negation of the grain. But what is the normal course of life of this plant? It grows, blossoms, bears fruit and finally produces other grains of barley and as soon as these are ripe the stalk dies, and becomes negated in its turn. As the result of this negation of the negation, we have the original grains of barley again, not singly, however, but ten, twenty or thirty fold. Forms of grain change very slowly and so the grain of barley remains practically the same as a hundred years ago. But let us take a cultivated ornamental plant, like the dahlia or orchid. Let us consider the seed and the plants developed from it by the skill of the gardener, and we have in testimony of this negation of the negation, no longer the same seeds but qualitatively improved seed which produces more beautiful flowers, and every repetition of this process, every new negation of the negation, increases the tendency to perfection. Similarly this process is gone through by most insects, butterflies, for example. They come out of the egg by a negation of the egg, they go through certain transformations till they reach sex maturity, they copulate and are again negated, since they die as soon as the process of copulation is completed, and the female has laid her innumerable eggs. That the matter is not so plainly obvious in the case of other plants and animals, seeing that they produce seeds, plants, and animals not once but oftener, does not affect us in this case, we are now only concerned in showing that the negation of the negation actually does occur in both kingdoms of the organic world. Besides, all geology is a series of negated negations, one layer after another following the destruction of old and the establishment of new rock foundations. First, the original crust of the earth, through the cooling of the fluid mass, and through oceanic, meteorological, and chemical atmospheric action, being broken up into small parts, these broken masses form layers in the seas. Local elevations of the seas, through the ebb and flow of the waters, bring portions of these layers afresh under the influence of rain, the warmth of the seasons, and the oxygen and carbon in the atmosphere: melted and almost cooled masses of rock from the interior of the earth underlie these and break through the layers. Through millions of centuries new layers are continually being formed, always to a large extent destroyed and serving again as building materials for new layers. But the result of the process is always positive, the restoration of a piece of ground made up of exceedingly diverse chemical elements to a condition of mechanical pulverisation, which is the cause of a most abundant and diverse vegetation. It is the same also in mathematics. Let us take an ordinary algebraic quantity a. Let us negate it, then we have-a (minus a). Let us negate this negation, that is let us multiply --a by --a and we have + a^2, that is the original positive quantity but in a higher form that is to the second power. It does not matter that we can attain the same a^2 by the multiplication of a positive by itself. The negated negation is established so completely in a^2 that under all circumstances it has two square roots a and --a. And this impossibility, the negated negation, the getting rid of the negative root in the square has much significance in quadratic equations. The negation of the negation is more evident in the higher analyses, in those "unlimited summations of small quantities," which Herr Duehring himself explains as being the highest operations of mathematics and which are usually called the differential and integral calculus. How do these forms of calculation fulfil themselves? I have for example in a given problem two variable quantities x and y, of which one cannot vary without causing the other to vary also under fixed conditions. I differentiate x and y, that is I consider x and y as being so infinitesimally small that they do not represent any real quantities, even the smallest, so that, of x and y nothing remains, except their reciprocal relations, a quantitative relation without any quantity; therefore dx/dy, the relation of the two differentials of x and y, is 0/0 but 0/0 is fixed as the expression of y/x. That this relation between two vanished quantities, the fixed moment of their vanishing, is a contradiction I merely mention in passing, it should give us as little uneasiness as it has given mathematics for the two hundred or so years past. What have I done except to negate x and y; not as in metaphysics so as not to trouble myself any further about them, but in a manner demanded by the problem? Instead of x and y, I have therefore their negation dx and dy in the formulæ or equations before me. I now calculate further with these formulæ. I treat dx and dy as real quantities, as quantities subject to certain exceptional laws, and at a certain point I negate the negation, that is, I integrate the differential formula. I get instead of dx and dy the real quantities x and y again, and am thereby no further forward than at the beginning, but I have thereby solved the problem over which ordinary geometry and algebra would probably have gnashed their teeth in vain. It is not otherwise in history. All civilised peoples began with common property in land. Among all peoples which pass beyond a certain primitive stage the common property in land becomes a fetter upon production in the process of agricultural development. It is cast aside, negated, and, after shorter or longer intervening periods, is transformed into private property. But at a higher stage, through the development still further of agriculture, private property becomes in its turn a bar to production, as is to-day the case with both large and small land proprietorship. The next step, to negate it in turn, to transform it into social property, necessarily follows. This advance however does not signify the restoration of the old primitive common property, but the establishment of a far higher better developed form of communal proprietorship, which, far from being an impediment to production, rather, for the first time is bound to put an end to its limitations and to give it the full benefit of modern discoveries in chemistry and mechanical inventions. But again; ancient philosophy was primitive naturalistic materialism. In the state of thought at that period it was, as such, incapable of clear conceptions of matter. But the necessity of clearness on this point led to the doctrine of a soul which could leave the body, then to the idea of the immortality of the soul, finally, to monotheism. The old materialism was therefore negated by idealism. But in the further development of philosophy idealism became untenable, and is negated by modern materialism. This, the negation of negation, is not the mere reestablishment of the old, but unites, with the surviving foundations, the whole thought content of a two thousand years' development of philosophy and science, as well as the history of these two thousand years. It is in a special sense no philosophy but a single concept of the universe which has to prove and realise itself not in a science of sciences apart, but in actual science. Philosophy is here also cast aside, that is "destroyed and preserved," destroyed as to its form, preserved as to its real content. Where Herr Duehring only sees word-jugglery a more real content is brought to light by the newer point of view. Finally, even the Rousseau doctrine of equality, of which that of Herr Duehring is only a feeble and false plagiarism, has no existence unless the Hegelian negation of the negation serve it as a midwife, although it originated twenty years prior to the birth of Hegel. Far from being ashamed of this it bears in plain sight the stamp of its dialectic derivation in its earliest manifestation. In a state of nature and savagery men were equal, and, since Rousseau regards speech as a falsifying of natural conditions, he is quite right in predicating equality of animals of one species as far as this reaches, and the same also with regard to those speechless animal-men, recently hypothetically classified by Haeckel as Alali. But these equal animal men had one quality beyond the other animals,--perfectibility, the power of further development and this was the reason of inequality. Rousseau sees therefore in the existence of equality a step forward. But this advance was self contradictory, it was at the same time a retrogression. "All further advances (beyond the primitive stage) were so many steps, seemingly in the development of individual men, but actually in the decay of the species. Working in metals and agriculture were the two arts whose discovery brought about this great revolution" (the transformation of the primitive forests into cultivated lands, but also the introduction of poverty and slavery together with private property). "The poets hold that gold and silver, the philosophers that iron and corn have civilised men and ruined the human race." Each new advance of civilisation is at the same time an advance of inequality. All contrivances with which society endows itself by means of civilisation are in direct opposition to their original purpose. "It is beyond question and a foundation principle of the entire public law that people made rulers to defend their liberties, not to destroy them." And yet these rulers become of necessity the oppressors of the people and they carry the oppression to the point where inequality is brought to a climax and, then, transformed into its opposite, again becomes the reason of equality, for to despots all are equal, that is equally of no account. Here is the extreme of inequality, the crowning point which closes the circle, and touches the point from which we have proceeded; here all private individuals are equal, since they are of no account, and subjects have no law other than the will of their master. "But the despot is master only as long as he has the power, and for this reason he cannot complain of the use of force if he is banished.... Force upholds him, force throws him down, everything goes according to a straight and naturally appointed path." And thus again inequality is transformed into equality, but not into the old materialistic equality of speechless, primitive men, but into the higher equality of organised society. The oppressor is oppressed, it is negation of the negation. We have then, as regards Rousseau, not merely a method of thought which is quite analogous to that pursued in Marx's "Capital," but also a whole series of single dialectic turns of which Marx avails himself: Processes, which are antagonistic in their nature, containing a contradiction in themselves, are transformed from one extreme to its opposite, finally, as the quintessence of the whole, negation of the negation. Although Rousseau in 1754 could not speak the jargon of Hegel, he was then, at a period twenty-three years before the birth of Hegel, deeply infected with the Hegel contagion, the dialectic of contradiction, doctrine of logic, theology, etc. And if Duehring in his misapplication of Rousseau's theory of equality, operates with his two victorious men, he having lost his feet, falls, of necessity into the arms of the negation of the negation. The conditions under which the equality of the two men flourishes and which is set forth as an ideal condition is shown on page 271 of the Philosophy as the original condition. This original condition on page 279 is of necessity destroyed by the "robber system"--first negation. But we have now, thanks to the philosophy of reality, arrived at the point of abolishing the "robber system" and substituting for it the economic commune discovered by Herr Duehring--negation of the negation, equality on a higher plane. What is the negation of the negation, therefore? It is a very far reaching, and, just, for this reason, a very important law of development of nature, human history and thought, a law which we see realised in the animal and vegetable kingdoms, in geology, in mathematics, in history, and philosophy, and which Herr Duehring himself, in spite of his opposition and resistance, must follow, after his own fashion. It is evident that I say nothing of the special development of the grain of barley from the germ to the crop bearing plant, if I say it is negation of the negation. Since the integral calculus is likewise negation of the negation, with the other assertion I should only affirm that the life process of a grain of barley is integral calculus or even socialism. But that is just the kind of thing which the metaphysicians push off on the dialectic. If I say that all these processes constitute negation of the negation, I embrace them all under this one law of progress, and leave the distinctive features of each special process without particular notice. The dialectic is, as a matter of fact, nothing but the science of the universal laws of motion, and evolution in nature, human society and thought. At this point, however, the objection may be urged that the final negation is no true negation, I negate a grain of barley also when I grind it, an insect when I crush it, a positive quantity when I eliminate it, etc. Or I negate the statement "the rose is a rose" if I say "the rose is no rose" and what happens if I negate this negation again and say "but the rose is a rose"? These objection are, in fact, the chief arguments of the metaphysicians against the dialectic and are quite worthy of this idiotic method of reasoning. To negate in the dialectic is not simply to say "No," or to describe a thing as non-existent, or to destroy it after any fashion that you may choose. Spinoza says "omnis determinatio est negatio," every limitation or determination is at the same time a negation. Furthermore, the sort of negation here is shown first by means of the universal and in the second place by means of the distinctive nature of the process. I must not only negate but I must also restore the negation again. I must therefore so direct the first negation that the second remains possible or shall be so. How? Just according to the peculiar nature of each particular case. I grind a grain of barley, I crush an insect, I have certainly fulfilled the first act but have made the second impossible. Every species of things has therefore its own peculiar properties to be negated in order that a progression may proceed, and every species of properties and ideas is precisely the same in this regard. In infinitesimal calculations the negation is brought about after a different fashion than in the restoration of positive powers from negative roots. That has to be learnt like everything else. With the mere knowledge that the stalk of barley and infinitesimal calculation fall under the principle of the negation of the negation, I cannot cultivate more barley nor can I differentiate and integrate, just as I cannot play the violin by virtue of a mere knowledge of the laws of harmony. But it is evident that a merely childish negation of the negation such as writing down a and erasing it, or by affirming that a rose is a rose and that it is not a rose leads to no conclusion other than to show the silliness of the people who undertake processes so tedious. And yet metaphysicians would inform us that that is the right way to carry out the negation of the negation. Herr Duehring is therefore a mystifier when he asserts that the negation of the negation was an analogy made by Hegel derived from religion and built up on the story of the Fall and the Redemption. Men thought dialectically a long time before they knew what the dialectic really was, just as they spoke prose a long time before the term "prose" was used. The law of the negation of the negation which operates in history and which until it is once learned goes on in our brains unconsciously to ourselves, was first clearly formulated by Hegel, and if Herr Duehring desires to employ it in secret but cannot stand the name, he should discover a better name. But if he insist on expelling it from the processes of thought, he must first be good enough to expel it from nature and from history, and find a system of mathematics in which --a multiplied by --a does not give us + a^2 and where the differential and integral calculus are both forbidden by law. _Conclusion._ In this short section Engels leaves the general discussion in order to again pay his respects to the shortcomings and deficiencies of Herr Duehring. The matter possesses no general interest for Engels merely teases his opponent upon the magnificence of his claims and the slightness of his performances. PART II CHAPTER VIII POLITICAL ECONOMY _I. Objects and Methods._ Political economy is, in the widest sense, the science of the laws controlling the production and exchange of the material necessities of life in human society. Production and exchange are two entirely different functions. Production may exist without exchange, exchange--since there can only be exchange of products--cannot exist without production. Each of the two social functions is controlled by entirely different external influences and thus has, generally speaking, its own peculiar laws. But on the other hand they become so mutually involved at a given time and react one upon the other that they might be designated the abscisses and ordinates of the economic curve. The conditions under which men produce and exchange develop from land to land, and in the same land from generation to generation. Political economy cannot be the same for all lands and for all historical epochs. From the bow and arrow, from the stone knife and the exceptional and occasional trading intercourse of the barbarian to the steam engine with its thousands of horse-power, to the mechanical weaving machine, to the railway and the Bank of England is a tremendous leap. The Patagonians do not have production on a large scale and world-commerce any more than they have swindling or bankruptcy. Anyone who should attempt to apply the same laws of political economy to Patagonia as to present-day England would only succeed in producing stupid commonplaces. Political economy is thus really a historical science. It is engaged with historical material, that is, material which is always in course of development. At the close of this investigation it can, for the first time, show the few (especially as regards production and exchange) general laws which apply universally. In this way it is made evident that the laws which are common to certain methods of production or forms of exchange are common to all historical periods in which these methods of production and forms of exchange are the same. Thus for example with the introduction of specie, there came into being a series of laws which holds good for all lands and historical epochs in which specie is a means of exchange. The method of distributing the product is in accordance with the method of production and exchange of a given society at a given time. In the tribal or village community with communal ownership of land, of which there are obvious survivals in the history of all civilized peoples, there is practically an equal distribution; where a greater inequality of distribution of the product has been introduced among the members of a society, it is a sign of the coming dissolution of the community--large and small farming have very different modes of distribution according to the historical circumstances from which they have developed. But it is apparent that large farming requires a different mode of distribution than small farming; that the large farming shows the existence of class antagonism--slave-holders and slaves, landlords and tenants, capitalists and wage workers,--but that, on the contrary, in small farming, class distinction does not arise from the farming operations of separate individuals but from the mere beginnings of farming on a large scale. The introduction and development of the use of gold into a country where formerly exchange of actual goods was the exclusive or general practice, is closely associated with a slow or rapid revolution of the mode of distribution hitherto prevailing, and to such an extent that inequality of distribution among individuals and, so, antagonism between rich and poor becomes more and more apparent. Local gild hand-production as it prevailed in the Middle Ages made great capitalists and life-long wage-workers just as impossible as the great modern industry, the credit system of to-day, and form of exchange, corresponding with the development of these, free competition, render them inevitable. With the difference in distribution however class differences are introduced. Society becomes divided into upper and lower classes, into plunderers and plundered, into master and servant classes, and the state which the original groups composed of societies claiming the same ancestry only regarded as a means of protection of the common interests (remnants of which remain in the Orient, e.g.) and against foreign force, takes upon itself the duty of maintaining the economic and political supremacy of the dominant class against the dominated class by means of force. So distribution is not a mere passive witness of production and exchange; it has an immediate influence on both. Every new method of production and form of exchange is impeded, not only through the old forms and their particular forms of political development, but also through the old method of distribution. It can only bring about its own method of distribution as the result of long conflict. But just in proportion as a given method of production and exchange is built up and develops, distribution all the more rapidly reaches a point where it outstrips its predecessor and where it comes into collision with the system of production and exchange existing up to that time. The old tribal communistic forms of which we have already spoken may last thousands of years, as is seen in the case of the Indians and Slavs of to-day, until intercourse with the outside world develops causes of disruption within them as a conclusion of which their dissolution comes about. Modern capitalistic production on the other hand which is hardly three hundred years old and which first became dominant with the introduction of the greater industry about one hundred years ago, has, in this short time, developed antagonisms in distribution--concentration of capital on the one hand in the possession of a few persons and, on the other, concentration of propertyless masses in the great cities--which must of necessity bring it to an end. The connection between the form of distribution and the material economic conditions of a society is so much in the nature of things that it is generally reflected in the popular instinct. As long as a method of production is in the course of development, even those whose interests are against it, who are getting the worst of the particular method of production, are highly satisfied. It was just so with the English working class at the introduction of the greater industry. As long as this method of production remained the normal social method, satisfaction with the methods of distribution was, on the whole, prevalent; and when a protest against it rose even in the bosom of the dominant class itself (Saint-Simon, Fourier, Owen) it found at first practically no sympathy among the masses of the exploited. But directly the method of production has travelled a good portion of its upward progress, when half of its life was over, when its destiny was in a great measure accomplished and its successor was knocking at the door--then for the first time the ever increasingly unequal distribution appeared as unjust. Then was the first appeal made from actual facts to so-called eternal justice. This appeal to morality and justice does not bring us a step further scientifically. Economic science can find no grounds of proof in moral indignation, however justifiable, but merely a symptom. Its task is to show the newly developing social wrongs as the necessary results of existing methods of production and, at the same time, as signs of its approaching dissolution, and to point out, amid the break up of the existing economic system, the elements of the new organization of production and exchange which will abolish those social wrongs. The feeling stirred up by the poets whether in the picturing of these social wrongs or by attack upon them or, on the other hand, by denial of them and the glorification of harmony in the interests of the dominant class, is quite timely, but its slight value as furnishing proof for a given period is shown by the fact that one finds an abundance of it in every epoch. Political economy, as the science of the conditions and forms under which various human societies have produced and exchanged and according to which they have distributed the products of their labor,--political economy, in this broad sense, has yet to be planned for the first time. All that we have so far of political economic science is almost entirely limited to the beginning and development of the capitalistic mode of production. It begins with the genesis and growth of the capitalistic mode of production, and exchange, recognises the necessity of the disappearance of these by means of the capitalistic forms, then develops the laws of the capitalistic methods of production and their corresponding forms of exchange on the positive side, that is on the side on which they further the objects of society, as a whole and closes with the socialist criticism of the capitalistic methods of production, that is, with the exhibition of its laws on the negative side, with the proof that this method of production arrives at the point, by its own development, where it is no longer possible. This criticism proves that the capitalistic methods of production and exchange constitute more and more an insufferable fetter upon production itself. The mode of distribution which is necessarily associated with this form of production has brought about a class condition which grows daily more unbearable. It has produced the daily sharpening antagonism between the continually less numerous but constantly richer capitalists and the more numerous, but on the whole, continually poorer propertyless wage-workers. Finally the tremendous productive forces of the capitalistic methods of production, which are practically unlimited, are only awaiting their seizure at the hands of an organized co-operative society to secure for all the members of that society the means of existence and the fuller development of their faculties in an ever increasing degree. In order to fully accomplish this criticism of the bourgeois economy acquaintance with the capitalistic form of production of exchange and of distribution was not enough. Preceding forms and others, existing side by side with the capitalistic mode in a few highly developed countries, had to be examined and compared at least in their chief features. Such an investigation and comparision has been undertaken as a whole by Marx alone and we consider that this investigation practically sums up all that has been established respecting theoretical economy prior to that of the bourgeois. While political economy in a narrow sense arose in the minds of a few geniuses of the seventeenth century, it is, in its positive formulation by the physiocrats and Adam Smith, substantially a child of the eighteenth century, and expresses itself in the acquisitions of the great contemporary French philosophers with all the excellencies and defects of that time. What we have said of the French philosophers applies also to the economists of that day. The new science was with them not the expression of the condition and needs of the time but the expression of eternal reason; the laws of production and exchange discovered by them were not the laws of a given historical form of those facts but were eternal natural laws; they derived them from the nature of man. But this man, seen clearly, was a burgher of the Middle Ages on the high road to becoming a modern bourgeois, and his nature consisted in this that he had to manufacture commodities and carry on his trade according to the given historical conditions of that period. (Herr Duehring having applied the two man theory to political economic conditions and having decided that such conditions are unjust, upon which conclusion he bases his revolutionary attitude, Engels remarks as follows): "If we have no better security for the revolution in the present methods of distribution of the products of labor with all their crying antagonisms of misery and luxury, of poverty and ostentation, than the consciousness that this method of distribution is unjust and that justice must finally prevail, we should be in evil plight and would have to stay there a long time. The mystics of the Middle Ages who dreamed of an approaching thousand years kingdom of righteousness had the consciousness of the injustice of class antagonisms. At the beginning of modern history three hundred years ago, Thomas Muenzer shouted it aloud to all the world. In the English and French bourgeois revolutions the same cry was heard and died away ineffectually. And if the same cry, after the formation of class antagonisms and class distinctions left the working, suffering classes cold until 1830, if it now takes hold of one land after another with the same results and the same intensity, in proportion as the greater industry has developed in the individual countries if, in one generation, it has acquired a force which defies all the powers opposed to it and can be sure of victory in the near future--how comes it about? From this, that the greater industry has created the modern proletariat, a class, which for the first time in history can set about the abolition not of this or that particular class organization or of this or that particular class privilege but of classes in general, and it is in the position that it must carry out this line of action on the penalty of sinking to the Chinese coolie level. And that the same greater industry has on the other hand produced a class which is in possession of all the tools of production and the means of life but in every period of prosperity (Schwindelperiode) and in each succeeding panic shows that it is incapable of controlling in the future the growing productive forces; a class under whose leadership society runs headlong to ruin like a locomotive whose closed safety valve the engine driver is too weak to open. In other words it has come about that the productive forces of the modern capitalistic mode of production as well as the system of distribution based upon it are in glaring contradiction to the mode of production itself and to such a degree that a revolution in the modes of production and distribution must take place which will abolish all class differences or the whole of modern society will fall. It is in these actual material facts, which are necessarily becoming more and more evident to the exploited proletariat, that the confidence in the victory of modern socialism finds its foundation and not in this or that bookworm's notions of justice and injustice. _II. The Force Theory._ (Herr Duehring argues that the causes of class subjection are to be sought in political conditions and that political force is the primary, and economic conditions merely the secondary, cause of class distinctions Engels makes the following reply to these arguments): * * * * * This is Herr Duehring's theory. It is set out, decreed so to say, here and in several other places. But we cannot find the slightest attempt to prove it or to disprove the opposite theory in the three thick volumes. Moreover if there was an abundance of proof we should get none from Herr Duehring, for the matter is proven by the famous fall of man in that Robinson Crusoe made Friday his slave. That was an act of force and so a political act. And this slavery constitutes the point of departure and fundamental fact of history up to the present time and inoculates the heirs of sin with injustice so certainly that only lately it has become milder and "transformed into the more indirect forms of economic dependency." Since the whole of the remaining actual "force-possession" rests upon this original enslavement, it is clear that all economic phenomena can be explained from original political causes, that is from force. And whoever is not satisfied with this is a secret reactionary. Let us first remark that one has to be as much in love with himself as Herr Duehring is to consider this idea as "original" since it is not so by any means. The idea that the political doings of monarch and states are decisive events in history is as old as the writing of history itself and is the reason why we are so little aware of the real and quietly developing progress of the peoples which goes on behind these noisy and spectacular activities. This idea has dominated the whole of history in the past and got its first shock at the hands of the French bourgeois historians of the Restoration period. To proceed, let us grant for the present that Herr Duehring is correct when he says that all history up to now has been the slavery of man by men, and we are still a long way from the root of the matter. Let us ask now how it was that Robinson came to enslave Friday. Was it merely for the pleasure of doing so? Surely not. On the contrary we are informed that Friday "was subjugated as a slave or mere tool for economic service and was kept in subjection merely as a tool." Robinson only enslaved Friday that he might work for the benefit of Robinson. And how could Robinson derive benefit from the labor of Friday? Only by virtue of the fact that Friday produced more means of livelihood by his labor than Robinson had to give him to keep him able to work. Robinson has therefore, contrary to Herr Duehring's pretty prescription, made, by the enslavement of Friday, a political organization, not just because he wanted to, but simply as a means of providing himself with food, and he ought to see how little he has in common with his lord and master Herr Duehring. The childish example therefore which Herr Duehring has discovered in order to show that force is the "historical fundamental" proves that force is only a means to further an economic interest, and in history the economic side is likewise more fundamental than the political. The example therefore proves just the opposite of what it ought to prove. And, as with Robinson and Friday, so it is also with all the examples of lordship and slavery up to now. Slavery, to use Duehring's own elegant expression, always implies a means for supplying sustenance (using the term in its broadest sense) and never merely implies a political organization which has been developed by its own will. One would have to be a Herr Duehring to venture to call taxes only a secondary feature of government, or, to say that the political groupings of the dominant bourgeois of to-day and the subjugated proletariat are purely voluntary and not made to serve the material interests of the bourgeois, namely profit making and the accumulation of capital. Let us give our attention again to our two men. Robinson "sword in hand" makes Friday his slave. But to do this Robinson uses something else besides his sword. A slave is not made by that means solely. In order to be able to keep a slave one has to be superior to him in two respects, one must first have control over the tools and objects of labor of the slave and over his means of subsistence also. Therefore, before slavery is possible, a certain point in production has to be reached and a certain degree of inequality in distribution attained. And when slave labor becomes the dominant mode of production of an entire society a higher development of the powers of production, of trade and of wealth, accumulation occurs. In early tribal communities which had common ownership of the soil, slavery is either nonexistent or its role is very subordinate. So it was at first in Rome, as a state of farmers, but when Rome became the capital city of the world and the soil of Italy came more and more to be owned by a numerically small class of enormously wealthy property owners, the population of farmers perished in front of the slave population. When at the time of the Persian War, the number of slaves in Corinth was 460,000, and in Ægina 470,000, and there were ten slaves to every freeman in the population, the explanation must be sought in something other than force; there were a highly developed art and handicraft and foreign commerce. Slavery in the United States of America was much less due to force than to the English cotton industry; where there was not cotton grown or where slaves were not raised, as in the border states, for the cotton producing states, it perished of its own accord and without any employment of force simply because it did not pay. When Herr Duehring therefore calls the property of the present day property resting on force and designates it as "that form of domination which does not merely signify the exclusion of one's fellow beings from the use of the natural means of sustenance, but implies in addition that the subjection of man has lain at the foundation of human slavery" he puts the matter upside down. The subjection of humanity to slavery in all its forms means the control by the master of the means of labor by virtue of which alone he can employ his slaves upon them and the disposal of the means of livelihood by which he can keep his slaves alive. In all cases therefore it implies a certain power of possession which transcends the ordinary? How did this arise? Occasionally it is clear that it was seized and can therefore be said to rest upon force but this is by no means essential. It can be got by labor, be robbed, be obtained by trade, or taken by fraud. It must be worked for generally before it can be stolen. Private property does not historically come into existence by any means as a rule as the product of robbery and violence. On the contrary. It arises from the limitation of certain things in the early tribal communes. It develops in the first place within the tribe and afterwards in exchange with peoples outside of the tribe in the form of wares. In proportion as the products of the tribe assume the form of commodities, i.e., the less they are produced for the use of the producer and the more for the purpose of exchange, the exchange destroys the original form of distribution in the commune itself, and the more unequal become the shares of the individual members of the community with respect to material possessions. So the old communal ownership of land becomes more and more invaded, the communal property is rapidly converted into a village of farmers, each tilling his own piece of ground. Oriental despotism and the changing government of conquering nomads had no power to alter the old form of communal ownership for a thousand years. But the continual destruction of the primitive domestic industry through the competition of the products of the great industry is bringing about its dissolution. The thing has little to do with force as has lately appeared in the matter of the division of the communal property of the feudal societies on the Moselle and in Hochwald. The peasants are finding the substitution of individual for communal holdings to their interests. Even the growth of a primitive aristocracy as among the Celts, the Germans, and in Mesopotamia, is a result of the communal ownership of landed property, and does not depend upon force in the slightest degree but upon free will and custom. Especially where private property arises it appears as the result of a change in the methods of production and exchange in the interests of the increase of production and the development of commerce and therefore arises from economic causes. Force plays no role in this. It is clear that the institution of private property must have already existed before the robber is able to possess himself of other people's goods and that force may change the possession but cannot alter private property as such. But to explain the "subjection of men to slavery" in its modern form, in wage-labor, we can make no use of either force or property acquired by force. We have already mentioned the part which the transformation of the products of labor into commodities, their production not for use alone, but for exchange, plays in the destruction of the primitive communal property and therefore in the bringing into existence directly or indirectly the universality of private property. But Marx has proved in his "Capital"--and Herr Duehring does not venture to intrude upon the matter--that at a certain stage in economic development the production of commodities is transformed into capitalistic production and that at this point "the law of appropriation resting upon the production and circulation of commodities, the law of private property, by its own inevitable dialectic becomes changed into its opposite, the exchange of equivalents, which appeared as its original mode of operation, but has now become so twisted that there is only an appearance of exchange since. In the first place, the portion of capital exchanged for labor-force is itself only a portion of the product of another's labor taken without an equivalent, and in the second place, it is not only supplied by its producers, the workers, but it must be supplied also with a new surplus. Originally property seemed to us to be established on labor only--property now appears (as a conclusion of the Marxian argument), on the side of the capitalist, as the right to unpaid labor and, on the side of the workingman, as an impossibility, the ownership of his own product. The difference between property and labor is the result of a law which apparently proceeded from their identity." In other words if we exclude the possibility of force, robbery, and cheating absolutely, if we take the position that all private property originally depended upon the personal labor of its possessor and that equivalents are always exchanged we nevertheless come, in the course of the development of production and exchange, of necessity, to the modern capitalistic methods of production, to the monopolisation of the means of production and livelihood in the hands of a single class few in numbers, to the degradation of the other consisting of the immense majority of producers to the position of propertyless proletarians, to the periodical alternations of swindling operations and trade crises and to the whole of the present anarchy in production. The entire result rests on purely economic grounds without robbery, force, or any intervention of politics or the government being necessary. Property resting on force becomes a mere phrase which merely serves to obscure the understanding of the real development of things. This course, historically expressed, is the story of the development of the bourgeoisie. If "political conditions are the decisive causes of economic conditions," the modern bourgeoisie would necessarily not have progressed as the result of a fight with feudalism, but would be the darling child of its womb. Everybody knows that the opposite is the case. The bourgeoisie, originally bound to pay feudal dues to the dominant feudal nobility, recruited from bond slaves and thralls, in a subject state, has, in the course of its conflict with the nobility captured position after position, and finally has come into possession of the power in civilized countries. In France it directly attacked the nobility, in England it made the aristocracy more and more bourgeois and finally incorporated it with itself as a sort of ornament. And how did this come about? Entirely through the transformation of economic conditions which was sooner or later followed either by the voluntary or compulsory transformation of political conditions. The fight of the bourgeoisie against the feudal nobility is the fight of the city against the country, of industry against landlordism, of economy based on money against economy based on natural products. The distinctive weapons of the bourgeois in this fight were those which came into existence through the development of increasing economic force by reason of the growth at first of hand manufacture and afterwards machine-manufacture and through the extension of trade. During the whole of this conflict the political power was in the hands of the nobility, with the exception of a period when the king employed the bourgeoisie against the nobility in order to hold one in check by means of the other. From the very moment, however, in which the bourgeoisie still deprived of political power began to be dangerous because of the development of its economic power the monarchy again turned to the nobility and thereby brought about the revolution of the bourgeois first in England and then in France. The political conditions in France remained unaltered until the economic conditions outgrew them. In politics the noble was everything, the bourgeois nothing. As a social factor the bourgeoisie was of the highest importance while the nobility had abandoned all its social functions and yet pocketed revenues, social services which it did not any longer perform. Even this is not sufficient. Bourgeois society was, as far as the whole matter of production is concerned, tied and bound in the political feudal forms of the Middle Ages, which this production, not only as regards manufacture but as regards handwork also had long transcended amid all the thousandfold gild-privileges and local and provincial tax impositions which had become mere obstacles and fetters to production. The bourgeois revolution put an end to them. But the economic condition did not, as Herr Duehring would imply, forthwith adapt itself to the political circumstances,--that the king and the nobility spent a long time in trying to effect--but it threw all the mouldy old political rubbish aside and shaped new political conditions in which the new economic conditions might come into existence and develop. And it has developed splendidly in this suitable political and legal atmosphere, so splendidly that the bourgeoisie is now not very far from the position which the nobility occupied in 1789. It is becoming more and more not alone a social superfluity but a social impediment. It takes an ever diminishing part in the work of production and becomes more and more, as the noble did, a mere revenue consuming class. And this revolution in its position and the creation of a new class, that of the proletariat, came about without any force-nonsense but by purely economic means. Further more, it has by no means accomplished it by its own willful act. On the other hand it has accomplished itself irresistibly against the wish and intentions of the bourgeoisie. Its own productive forces have taken the management of affairs and are driving modern bourgeois society to the necessity of revolution or destruction. And if the bourgeoisie now appeals to force to ward off the ruin arising from the decrepit economic condition it proves thereby that it suffers from the same error as Herr Duehring, in that it thinks that "political conditions are the distinctive causes of economic condition" and that by the use of the prime factor of mere political force it can manufacture the secondary factor of economic conditions. It thinks that it can shape economic conditions and their inevitable development, and therefore eliminate the economic effects of the steam engine, and the modern industry which has proceeded from it. It thinks that it can abolish the world commerce and the bank credit development of to-day from the universe by means of Krupp guns and Mauser rifles. _III. Force Theory (Continued)._ Let us look at this omnipotent "force" of Herr Duehring a little more closely. Robinson enslaved Friday "sword in hand." How did he get the sword? Robinson's imaginary island never grew swords on trees and some answer to this question is due from Herr Duehring. We might just as well assume that as Robinson became possessed of a sword so, one fine morning, Friday appeared with a loaded revolver in his hand. Thereupon the "force" is entirely reversed. Friday takes command and Robinson must submit. We beg pardon of the reader for returning to the story of Robinson Crusoe, which is more appropriate to the nursery than to an economic discussion, but what can we do about it? We are compelled to pursue Herr Duehring's axiomatic scientific methods and it is not our fault if we always find ourselves in the realms of childishness. The revolver then triumphs over the sword and it should be apparent even to the maker of childish axioms that superior force is no mere act of the will but requires very real preliminary conditions for the carrying out of its purposes, especially mechanical instruments, the more highly developed of which have the superiority over the less highly developed. Furthermore these tools must be produced, whence it appears that the producer of the more highly developed tool of force, commonly called weapon, triumphs over the producer of the less highly developed tool. In a word, the triumph of force depends upon the production of weapons, therefore upon economic power, on economic conditions, on the ability to organize actual material instruments. Force at the present day implies the army and the navy, and the two of them cost, to our sorrow, a heap of money. But force cannot make money, on the contrary it gets away very fast with what is made, and it does not make good use of it as we have just discovered painfully with respect to the French indemnity. Money must therefore finally be provided by means of economic production, force is thus again limited by the economic conditions which shape the means of making and maintaining the instruments of production. But that is not all by any means. Nothing is more dependent upon economic conditions than armies and fleets. Arming, concentration, organization, tactics, strategy, depend before anything else upon the degree of development in production and transportation. In the trade of war the free inventiveness of liberal-minded generals has never worked a revolution, but the discovery of better weapons and the change in military equipment have never failed to do so. The inventiveness of the general under the most favorable conditions finds its limitations in the adaptation of methods of warfare to the new weapons and the new soldiers. At the beginning of the fourteenth century gunpowder was brought from the Arabs to Western Europe and, as every schoolboy knows, entirely revolutionized warfare. The introduction of gunpowder and firearms was however by no means an act of force but an industrial and therefore economic advance. Industry is still industry whether its object in the creation or the destruction of material things. The introduction of firearms not only produced a revolution in the methods of warfare but also in the relations of master and subject. Trade and money are concomitants of gunpowder and firearms and these former imply the bourgeoisie. Firearms from the first were bourgeois instruments of warfare employed on behalf of the rising monarchy against the feudal nobility. The hitherto unassailable stone castles of the nobles submitted to the cannon of the burghers, the fire of their guns pierced the mail armor of the knights. The supremacy of the nobility fell with the heavily armed cavalry of the nobility. With the development of the bourgeoisie, infantry and artillery became more and more the important arms of the service and because of artillery the trade of war had to create another industrial subdivision, to-wit, engineering. The development of firearms proceeded very slowly. Shooting remained clumsy and small arms were ineffective in spite of many individual inventions. Three hundred years elapsed before a musket was produced which sufficed for the arming of a complete infantry. First at the beginning of the eighteenth century, a musket with a bayonet attached, which discharged a stone superseded the pike as an infantry weapon. The infantry of that day was exceedingly unreliable, only kept together by physical force, composed of the basest elements of society, frequently made up of men picked up by the press gang and prisoners of war intermingled with soldiers recruited by the various princes. The only fighting formation in which these soldiers could be made to use the new weapon was the linear tactic, which reached its highest development under Frederick II. The whole infantry of an army was drawn up in a very long hollow square three files deep and advanced in battle array en masse. It was usually permitted to one of the two wings to be a little in advance or a little in the rear. This helpless body could only advance and keep its formation on perfectly level ground and then only at a slow marching time (seventy-five steps to the minute) a change of formation during the fight was impossible and victory or defeat was determined rapidly at a stroke as soon as the infantry came under fire. These helpless lines in the American Revolutionary War came into collision with the rebel troops, which certainly could not drill but could shoot so much the better in that they were fighting for their own interests and therefore did not desert like the enlisted soldiers. These did not, like the English, deploy in massed bodies on the open field, but in rapidly moving bodies of sharpshooters in the thick woods. The organised lines were here powerless and had to contend against invisible and unapproachable foes. The sharpshooters thereupon were brought into existence as a part of the army organization--a new method of fighting arising from a change in the military material. What the American Revolution began the French completed in the military realm. To the drilled troops of the Coalition the French Revolution opposed soldiers who were badly drilled but who constituted large masses, the product of the whole nation. Some means had to be discovered of protecting Paris with these masses. That could not be done without victory in the open field. A mere musketry engagement would not suffice, a form would have to be discovered by which the masses could be utilized and this was found in the column. The column formation allowed slightly drilled troops to keep better order and by means of a better marching speed (one hundred steps to the minute) allowed it to break through the stiff old-fashioned line arrangement. It was possible by this formation to fight in country unsuitable to the line formation, to mass troops in places suitable, to associate scattered sharpshooters with the columns, to keep back, occupy and wear the lines of the enemy, until the decisive movement came when a charge could be made by the troops held in reserve. This new method of combining riflemen and columns and making a complete army corps consisting of all arms, which was fully developed on its tactical and strategic side by Napoleon, was only rendered possible by the change in military material brought about by the French Revolution. There were still two very important technical preliminaries, first the making of light carriages for field pieces which were constructed by Gribevaul by means of which alone the required quick advance was rendered possible, and making the army rifle a more precise weapon by adapting to it some of the features of the hunting rifle. Without these improvements military sharpshooting would have been impossible. The revolutionary method of arming the entire population was subjected to certain limitations and chiefly as regards the excusing of the well to do, and in this form became common to most of the great continental countries. Prussia alone sought by its militia system to make the entire force of its people available for military purposes. Prussia was the first state to provide its entire infantry with the latest weapons, and to place officers in the rear, since between 1830 and 1860 trained officers leading their troops had played an unimportant part. The results of 1866 were largely due to these innovations. In the Franco Prussian War two armies came into contact both of which had their officers in the rear and which both used substantially the same tactics as in the time of the old smooth bore flintlocks. The Prussians however by the introduction of company columns had made an attempt to discover a method of fighting more suitable to the new system of arming. But on the 18th of August at St. Privat the Prussian guard which employed the company column formation lost the most part of five regiments, over a third of its strength in two hours (176 officers and 5114 men) after which the company column form of battle order came in for no less criticism than the battalion column form and the line formation. Every attempt to oppose a solid formation to the fire of the enemy was thereafter abandoned. The battle was thereafter, on the German side, carried on by dense swarms of riflemen into which the columns dissolved under the fire of the enemy spontaneously, without orders from the superior officers, and this was, in fact, the only possible method of advance under fire. The private soldier was again cleverer than his officer; he had discovered the only form of fighting formation, and set himself to follow it in spite of the resistance of his leaders. In the Franco-German war there is a point of departure of entirely different significance from all preceding wars. In the first place the weapons are now so complete that a new revolutionary departure in this respect is no longer possible. When you have cannon with which you can decimate a battalion as far as your eye can make it out, and when you have rifles by which you can aim at individuals, and which take less time to load than to aim, all further advances as far as battle in the field goes are immaterial. The era of progress on this side is substantially closed. In the second place, however, this war has induced all the great states of the continent to adopt the highly developed Prussian militia system and thus to take up a military burden which will ruin them in a few years. The army has become the main object of the state, it has become an object in itself. The people only exist to furnish and maintain soldiers. Militarism dominates and devours Europe. But this militarism has in it the seeds of its own destruction. The competition of the various states with each other necessitates the spending of more money every year on the army, the fleet, weapons of destruction, etc., and thus accelerates financial breakdown. On the other hand, with the increasingly rigid military service, the whole people becomes familiar with the use of military weapons. It therefore becomes able at some time to impose its will upon the dominating military authority. And this time arrives as soon as the mass of the people--country and city workers and farmers--has the will. At this point the army of the classes becomes the army of the masses, the machine refuses to do the work, militarism goes under in the dialectic of its own development. What the bourgeois democrats of 1848 could not accomplish, just because they were bourgeois and not proletarian, namely the endowment of the laboring masses with a will, the content of which corresponded with their class condition, socialism will certainly accomplish. And that means the destruction of militarism and with it of all standing armies absolutely and entirely. That is the moral of our history of modern infantry. The second moral which brings us back to Herr Duehring is that the entire organization and methods of warfare of modern armies and, with them, victory and defeat, are dependent upon material things, that is upon economic conditions, upon soldier material and upon weapon material and therefore upon the quality of a population and upon technique. Only a hunting people like the Americans could rediscover the sharpshooter. Now the Yankees of the old States have, from purely economic causes, become transformed into farmers, industrialists, sailors and merchants, who no longer shoot in the primeval forests and on that account have become all the more successful in the field of speculation where they have developed into colossal appropriators. Only a Revolution like the French which emancipated the burghers and still more the peasants could discover the simultaneously massed armies and free advance by which they overcame the stiff old line formation, the military product of the absolutism against which they fought. And as for the advances in technique as soon as they were applicable and were applied, forthwith changes, nay revolutions, in the methods of warfare were at once made, often against the will of the military leaders as we have seen over and over again to be the case. A diligent subaltern could explain to Herr Duehring how at the present day the making of war is dependent upon the productivity and means of communication of the back country as well as of the theatre of war. In short, economic conditions and means of power are always the things which help "force" to victory, and without them "force" comes to an end. So that he who would reform the art of war according to the axioms of Herr Duehring would only get a flogging for his pains. If we go from the land to the sea we shall discover a complete revolution, even within the last twenty years. The warship of the Crimean War was the wooden three decker, with from sixty to a hundred guns, which depended upon its sailing power and had only a weak auxiliary steam engine. It carried in general thirty-two pounders of about sixty hundred weight and only a few sixty-eight pounders of ninety-five hundred weight. At the end of the war ironclad floating batteries were used, clumsy and slow but impregnable to the artillery of that time. Very soon iron plates were placed on the warships, at first thin, four inches thickness of iron was then considered to constitute a remarkably great thickness. But the progress in artillery soon discounted the thickness of armour, for every addition to the armour there was a new and more powerful artillery which pierced it with the greatest ease. So now we have warships with ten, twelve, fourteen, twenty-four inches of armour plate (the Italians are going to build a warship with armourplate three feet thick) on the one hand and on the other hand guns which reach to a hundred tons and which hurl projectiles amounting to two thousand pounds in weight to unheard of distances. The modern war vessel is a rapid travelling armoured screw steamer of eight to ten thousand tons and of from six to eight thousand horse power provided with turrets and four or six very powerful big guns, together with a ram at the bow below the water line for the purpose of destroying the ship of the enemy. It is a colossal machine in which steam not only furnishes the driving power but also steers, raises the anchor, moves the towers, aims and loads the guns, works the pumps, takes in and lowers the boats, which are frequently steamers, and so forth. And the contest between the armour plate and the projectile is so far from having been settled that a ship is to-day practically obsolete as soon as it has left the ways. The modern warship is not only a product of modern industry but a masterpiece, a product of the dissipation of wealth. The country in which the greater industry has developed the most completely has a monopoly of shipbuilding. All the Turkish, almost all the Russian and the greater part of the German warships are built in England. Armour plate of the best type is made almost exclusively in Germany. Of the three iron foundries which are alone in the position to turn out the heaviest artillery, two of them, Woolwich and Elswick, are in England, the third Krupp's is in Germany. Here it may be seen that the pure political power which Herr Duehring maintains to be the original reason for economic conditions is on the contrary inseparable from economic conditions and that not only the existence but the very management of the tool of force on the sea, the warship, is in itself a branch of modern industry. And that this is so gives nobody more trouble than just that force, the state, which has now to pay more for one ship than it had formerly for a small fleet and sees that these expensive ships are obsolete as soon as they are launched. And the state is just as much upset as Herr Duehring would be over the fact that the controller of the economic force of the ship, the engineer, is a much more important person than the man of pure force, the captain. On the other hand we have no further grounds for annoyance when we see that how as a result of this contest between armour plate and projectile the battle ship has arrived at the point when it is as expensive as it is unfit for fighting and that this contest shows the dialectic law of progress at work in naval warfare according to which militarism like every other historical phenomenon must come to an end as a result of its own development. We can thus see as plain as noonday that it is not true that "the original reason must be sought in pure political force and not in indirect economic force." Quite the contrary. Economic force is the control of the power of the great industry. Political force in naval matters which is dependent upon modern ships of war is by no means "pure force" but is involved in economic force, in the advanced development of metallurgy, in the mastery of historical technique and the possession of rich coal-fields. _IV. Force Theory (Conclusion)._ (Herr Duehring makes an argument which is briefly summarised by Engels as follows and which may be said to involve the notion that the monopolization of land is the cause of human slavery and is the product of force. Engels proceeds): Thesis--The domination of nature by man is the reason of the domination of man by man. Proof--The existence of landlordism on a large scale cannot be carried on anywhere except by means of slavery. Proof of proof--Landlordism on a large scale cannot exist without slavery because the great landlord with his own family without the help of slaves can only cultivate a small piece of his property. Therefore, in order to show that man cannot subdue nature without the subjugation of his fellowman, Herr Duehring transforms "nature" forthwith into "private ownership of large tracts of land" and this indefinite private ownership into the ownership exercised by a great landlord, who naturally cannot cultivate his land without slaves. In the first place the domination of nature and the cultivation of private landed property do not imply the same thing. The domination of nature in industrial affairs is displayed in a manner altogether different from that in agricultural affairs, for these latter are always at the mercy of the climate instead of being supreme over the climate. In the second place if we limit ourselves to the exploitation of private property in land in large amounts we come to the question as to whom the land belongs. We find that in the beginnings of civilised peoples the land was not owned by great landlords but was held in common by tribal and village communities. From India to Ireland the exploitation of land property in large tracts has proceeded from the tribal and village communal ownership which was the original form. Sometimes the land was cultivated in common for the benefit of the common members, sometimes in separate pieces, parcelled by the community to separate families from time to time with wood and willow land retained for communal use. It is pure imagination on the part of Herr Duehring to declare that the exploitation of landed property is responsible for the existence of master and servant. Who is the owner of private landed property in the entire Orient where the land is possessed by the community or the State and the word landlord is not to be found in the language? The Turks first introduced a species of feudalism into the lands which they conquered. The Greeks in heroic times had a classified system of rank which itself bore witness to a long unknown preceding history, but the land was then cultivated by an independent peasantry. The large possessions of the nobles and leaders of the tribes were the exception and had no permanence. Italy was originally cultivated by small peasant farmers; when in the latter days of the Roman Republic the great holdings, the _latifundia_ destroyed the small farmer-holdings, cattle raising was substituted for agriculture, and as Pliny points out Italy was ruined (_latifundia Italiam perdidere_). In the whole of Europe during the Middle Ages small farming was the rule and it is very appropriate to the above discussion to note what tasks these peasants were obliged to perform for the feudal lords. The Frisians, lower Saxons, Flemings and people from the lower Rhine who invaded the lands of the Slavs to the east of the Elbe and cultivated them did so under very favorable terms of rent but by no means under a species of slavery. In North America, by far the greatest amount of the land is cultivated by the labor of free small farmers, while the great landed proprietors of the South with their slaves and extravagant farming methods destroyed the soil until the land ceased to be productive and the cultivation of cotton travelled ever Westward. In Australia and New Zealand the attempts to artificially establish an agrarian aristocracy by the British government have failed. In short, if we except the tropical and sub-tropical colonies, in which the climate is prohibitive of agriculture by Europeans, it seems that the idea of a great land holding class originally dominating nature by means of the employment of slaves and serfs is a pure product of the imagination. Things are quite otherwise. If one goes to the older countries like Italy the land was not waste originally but the transformation of the agricultural land cultivated by the small farmers into cattle-land utterly ruined the country. Latterly, for the first time since the growth in the intensity of the population has increased the value of land and especially since the progress in agriculture has made possible the reclamation of poor lands, the greater landlordism has begun to obtain possession of waste and pasture lands and has stolen the old communal lands of the peasants in this country, as well in England as in Germany. And this has not happened without a counter-poise. For every acre of common land which the great landlords in England converted into arable land they have made at least three acres of arable land in Scotland into shooting preserves and mere places for the hunting of wild animals. We have to consider the declaration of Herr Duehring to the effect that the cultivation of large parcels of land has not come into existence otherwise than through great landlords and their slaves, a declaration which we have seen implies an entire ignorance of history. We have now to see how far at different epochs the cultivation of the soil has been carried on by means of slaves, as in the palmy days of Greece, or by means of tenants, like the socage tenure, since the Middle Ages, and then what has been the social function of the greater landlordism at different periods of history. If Herr Duehring means that the mastery of man by men as a preliminary to the mastery of nature by man is a universal law, that our present economic condition, the stage attained to-day in agriculture and industry, is the result of a society which has developed itself in class antagonisms, in mastership on the one hand and in slavery on the other hand, he says something which is a mere commonplace since the publication of the Communist Manifesto. We have thus to explain the existence of these classes and when Herr Duehring has no further explanation to give than "force" we are right back at the beginning again. The mere fact that the subject and the plundered have always been more numerous and that therefore the actual force has rested with them is enough to show the stupidity of the entire force theory. We have therefore still to explain the origin of master and subject classes. They have come into being in two ways. When men originally sprang from the lower animals they came into history, still half-wild animals, elementary, with no power over the forces of nature, still unacquainted with their own powers, as poor as the animals and hardly more productive than they. There prevailed a certain equality in the conditions of life and as far as the heads of families were concerned an equality of social condition--there was at least an absence of those class distinctions which developed later in the agricultural communities. In such a social state there were certain common interests which overrode the interests of the individual in certain respects, the settlement of disputes, the repression of individuals who exceeded their rights, the looking after the water supply, particularly in hot countries, and finally under the conditions of life in the primeval forests, religious functions. We find analogous communal duties exercised by communal officials at all periods as well in the oldest German mark communities as in India to-day. These are contemporaneous with a sort of beginning of authority and state power in a rudimentary form. The productive forces develop; a denser population produces common and then conflicting interests between members of the society, the grouping of which in accordance with a new division of labor causes the creation of new organs for the purpose of maintaining the society on the one hand and repressing the antagonistic interests on the other. These organs which act for the entire group have different forms according to the varying circumstances of the individual groups, partly through the natural growth of a hereditary leadership in a world where everything proceeds naturally and partly through a growing need owing to the development of conflicts with other groups. How these social functions which were subsidiary to society came in the course of time to triumph over society; how the original servant, under favorable conditions became transformed into the master, how, according to circumstances, this master made his appearance as Oriental despot or satrap, as Greek chieftain, as Celtic clan chief, etc., how far he relied on force for this transformation and finally how the individual leaders associated themselves into a dominant class we have here no opportunity to consider. We can only state that real social duties lay at the base of the political domination and that the political supremacy has only existed as long as the politically supreme fulfilled these social functions. How many despotisms have risen and fallen among the Persians and Hindoos, and everybody knows quite well that the public management of the irrigation was the prime necessity of agriculture in those places. The "educated" English were the first to observe this among the Hindoos; they let the canals and locks fall into disuse and they have now discovered by the regular recurrence of famine that they have neglected the only opportunity to make their rule at least as righteous as that of their predecessors. But there is another form of class distinction besides the one described. The natural division of labor in the agricultural families permitted at a certain point of prosperity the introduction of foreign labor power. This was particularly the case in countries where the old common ownership of the soil had disappeared or where at least the old system of common cultivation had become supplanted by the cultivation of separate plots by individual families. Production had so far developed that the human labor force was able to produce more than was necessary for the support of the individual laborer. The time was ripe for the employment of more labor-power, labor-power had become a value. But the limitations of the communal system did not afford any attainable surplus labor power. Yet war did give such an opportunity for getting surplus labor power and war was as old as the simultaneous existence of groups of communal groups in close juxtaposition. Up to this time men did not take prisoners of war, they killed them right off, and, at a still earlier date, they ate them. But at the stage of economic development of which we speak they had a value and they were not only allowed to live but were set to work. So force instead of being the master of economic conditions was pressed into the service of those conditions. Slavery was discovered. It soon became the dominant form of production among all people who had developed beyond the tribal communal stage and as a matter of fact was at the end one of the main reasons for the break up of the communal system. Slavery first made the division of labor between agriculture and industry completely possible and brought into existence the flower of the old world, Greece. Without slavery there would have been no Grecian state, no Grecian art and science and no Roman Empire. There would have been no modern Europe without the foundation of Greece and Rome. We must not forget that our entire economic, political and intellectual development has its foundation in a state of society in which slavery was regarded universally as necessary. In this sense we may say that without the ancient slavery there would have been no modern socialism. It is very easy to make preachments about slavery and to express our moral indignation at such a scandalous institution. Unfortunately the whole significance of this is that it merely says that these old institutions do not correspond with our present conditions and the sentiments engendered by these conditions. We do not however in this way explain how these institutions came into existence, why they came into existence and the role which they have played in history. And when we enter upon this matter we are obliged to say in spite of all contradiction and accusations of heresy that the introduction of slavery under the conditions of that time was a great step forwards. It is a fact that man sprang from the lower animals and has had to employ barbaric and really bestial methods in order to rid himself of barbarism. The old communal system where it persisted built up the most elementary form of the state, Oriental despotism, from India to Russia. Only where it has been dissolved has the people progressed and the next economic step lay in the development of production by means of slave labor. It is evident that as long as human labor was so little productive that it afforded only a small surplus over the necessary means of life, the development of the productive forces, the institution of commerce, the development of the State and of law and the foundation of art and science were only possible through an increase in the subdivision of labor. This implied the broad division between the mass of the workers and the directors of labor, trade, state, state-business, and later the occupation of a few privileged persons in art and science. The simplest and most natural form of this subdivision of labor was slavery. In the conditions of the ancient, and especially the Greek world, the advance to a society founded on class distinction could only be for the slaves, the prisoners of war from whom the majority of slaves were recruited instead of being murdered as they would have been at an earlier date or instead of being eaten as they would have been at a stage still earlier. Here we add that all the historical antitheses of robbers and robbed of master and subject classes find their explanation in the relatively undeveloped productivity of human labor. As long as the actual working people claim that they have no time left at the close of their necessary labors to attend to the common business of society--the organization of labor, the business of the government, the administration of justice, art, science, etc., just so long will distinct classes exist which are free from actual labor to carry on these functions. Naturally these classes do not hesitate to lean more and more and more upon the shoulders of the working class for their own advantage. The development of the great industry with its enormous increase in the forces of production for the first time permitted of the subdivision of labor in all social grades and thus allowed of the reduction of the time necessary for labor so that enough leisure remains for all to take part in the actual public business--theoretical as well as practical. So that now for the first time the dominant and exploiting classes have become superfluous and even an obstacle to social progress, and so now for the first time they will be unceremoniously brushed aside in spite of their "pure force." When Herr Duehring then shows his scorn of the Greek civilisation because it was founded on slavery he might just as reasonably reproach the Greeks for not having steam engines and electric telegraphs. And when he explains that our modern wage slavery is only a somewhat transformed and ameliorated inheritance of chattel slavery and not to be explained from itself (that is from the economic laws of modern society) it only signifies that wage slavery, like chattel slavery, is a form of class domination and class subjection as every child knows, or it is false. So we might with the same right maintain that wage slavery is only a milder form of cannibalism, the established original method of disposing of conquered enemies. The role which force has played in history with respect to economic development is therefore clear. In the first place, all political force rests originally on an economic social function, and developed in proportion as the old tribal communistic society was dissolved and transformed into various grades of private producers, and the administrators of the communal functions therefore became more widely separated from the rest of the community. In the second place, when political force, independent of society, has transformed itself from the position of servant to that of master, it may work in two directions. In the first place, it may work sensibly and in the direction of general economic development. In this case there is no quarrel between the two, economic development is advanced. Or it may work against it and then with few exceptions it succumbs to the economic development. These few exceptions consist of individual cases of tyranny where barbaric conquerors have overcome a country and have destroyed the economic forces which they did not know how to handle. Thus the Christians in Spain destroyed the irrigation works upon which the highly developed agriculture and horticulture of that country depended. Every conquest by a more barbarous people interferes with economic development and destroys numerous productive forces. But in the great majority of instances of the permanent conquest of a country, the more barbaric conquerors are obliged to adopt the higher economic conditions into which their conquest has brought them. They are assimilated into the conquered people and are compelled to adopt their language. But where--apart from instances of conquest--the inner political forces of a country comes in conflict with its economic development, which at the present day is practically true of all political force, the battle has always ended with the destruction of the political force. Without exception and inexorably, economic development has attained its goal. The last most striking example of which we have already called attention to, the French Revolution. If, as according to Herr Duehring's teachings, the economic development and the economic conditions of a certain country are altogether dependent upon political forces there is no explanation of the fact that Frederick William IV after 1848 could not succeed, in spite of his army, in attaching the guilds of the Middle Ages and other romantic tomfooleries to the steam-engines, railroads and the newly developing greater industry, or why the Czar who is still much more powerful could not only not pay his debts but could not collect his forces without drawing on the credit of the economic conditions of Western Europe. According to Herr Duehring force is the absolute evil. The first act of force is to him the first fall into sin. His whole conception is a preachment over the infection of all history up to the present time with the original sin. He talks about the disgraceful falsifying of all natural and social laws by the invention of the devil, force. That force plays another role in history, a revolutionary role, that it is in the words of Marx, the midwife of the old society which is pregnant with the new, that it is the tool by the means of which social progress is forwarded, and foolish, dead political forms destroyed,--of that Herr Duehring has no word to say, only with sighs and groans does he admit the possibility that force may be necessary for the overthrow of a thievish economic system. He simply declares that every application of force demoralizes him who uses it. And this in spite of the moral and intellectual uplift which has followed every victorious revolution. He says this in Germany, too, where a powerful and necessary uprising would at least have the advantage of abolishing the slavish snobbery of the national mind which has prevailed since the humiliation of the Thirty Years War. And this foolish and senseless sort of preaching is set up in opposition to the most revolutionary party known to history. _V. Theory of Value._ It is now about a hundred years since a book appeared in Leipsic which by the beginning of this century had gone through thirty-one editions and which was distributed throughout the towns and the country districts by officials, preachers and humanitarians, of all sorts, and which was universally adopted in the schools as a reader. This book was called, "The Children's Friend" by Rochow. It had the object of teaching the children of the peasant and laboring classes their vocation in life and their duties to their social and political superiors, and making them satisfied with their lot in life, with black bread and potatoes, compulsory servitude, low wages, fatherly beatings and other similar agreeable things. In pursuit of this end, the youth in town and country was informed what a wise provision of nature it was that man was obliged to get his food and enjoyment by means of his labor, and how fortunate the peasant and handworker ought to feel that they were able to spice their food with hard labor while the spendthrift and the picture suffered the pangs of indigestion or lack of appetite. These commonplaces which old Rochow thought good enough for the peasant children of his day have been elevated into the "absolute fundamental" of the newest political economy by Herr Duehring. Value is defined as follows by Herr Duehring "Value is what economic goods and activities will fetch in exchange." What they will fetch is shown "by the price or some other equivalent, wages for example." In other words Value is price. Or not to do Herr Duehring an injury and to show the absolute absurdity of his definition in his own language, "Value is prices." On page 19 he says "Value and its prices expressed in money" and he also affirms that the same value has very different prices and therefore has different values. If Hegel had not died long ago he would hang himself out of pure jealousy, for, with all his theology, he could not have produced this value which has as many different values as it has prices. One would have to possess the confidence of Herr Duehring to begin a new and more profound treatment of political economy with the declaration that there is no difference between value and price except that one is expressed in terms of money and the other is not. (After gentle raillery of Duehring's statements Engels proceeds.) The actual, practical value of an object according to Herr Duehring consists in two things, first in the amount of human labor contained in it and secondly in a forcibly imposed tax. In other words value as it exists to-day is a monopoly price. If all wares have this monopoly price, as according to this theory, only two things are possible. Either every buyer, as buyer, loses what he made as seller, for prices have only changed their names, they are really the same, everything remains as it was and the much talked of exchange value is merely imaginary, or the imposed cost represents real values, values produced by the working value-making class, but taken by the monopolising class, and this sum of values is simply unpaid labor. In this latter case we come, in spite of the force theory, and the compulsory taxation theory and the special exchange value theory back again to the Marxian theory of value. The fixing of the value of a commodity by wages which is frequently confused by Adam Smith with the fixing of value by the time expended in labor has been, since the time of Ricardo, denounced by political economists and only to-day persists in popular economics. It is now the sycophants of the existing capitalistic system who declare that value is fixed by wages and therefore declare the profits of the capitalists to be higher kind of wages, wages of abstinence, in that the capitalist has not dissipated his capital, wages of superintendence, premiums on risks, etc. Herr Duehring only differs from them in that he calls profits robbery. In other words Herr Duehring founds his socialism on the worst teachings of the popular economists. His popular economics and his socialism stand or fall together. It is clear that what a workman accomplishes and what he costs are different matters from what a machine makes and what it costs. The value which a workman makes in a day of twelve hours has nothing in common with the value of the means of life which he consumes in this working day and the periods of rest in connection with it. There may be one, three, four or seven hours of labor time incorporated in these means of livelihood according to the stage of the productivity of labor. Let us take seven hours as the necessary time for the production of them. Then Herr Duehring and the vulgar economists declare that the product of twelve hours labor has the value of the product of seven hours labor or in other words twelve is equal to seven. To make the matter more explicit, a peasant produces say twenty hectolitres of wheat in a year. During this time he consumes a sum of values which may be expressed by fifteen hectolitres. Then the twenty hectolitres have the same value as the fifteen in the same market under identical conditions. In other words 20 equals 15. And this is called political economy! The entire development of human society from the position of savagery began from the day when the labor of a family resulted in the production of more than was necessity for its support, from the day when a part of the labor was no longer expended on mere means of living but was transformed into means of production. A surplus of labor product over and above the cost of the maintenance of labor, and the creation and increase of a social production and reserve fund out of this surplus was and is the foundation of all social, political and intellectual development. In history up to the present time this fund has been the property of a certain superior class which has, with its possession, also the political mastery and the spiritual supremacy. The approaching social revolution will make this social production and reserve fund that is the entire mass of raw material, instruments of production, and means of life for the first time really social property, in that it will put an end to its monopolisation by the superior class and make it the common possession of the entire society. It is one of two things. Suppose value shows itself in the cost of maintenance of the necessary labor, that is in present society in wages. If such is the case every worker gets the value of his product in wages and the robbery of the working class by the capitalistic class is an impossibility. Let it be granted that the cost of maintaining a worker in a given society is three marks. Then the daily product of the worker is, according to the popular economist, of the value of three marks. Now let us consider that the capitalist who employs this worker takes a profit on this product and sells it for four marks. Other capitalists do the same thing. But thereupon the worker can no longer maintain himself with three marks a day, it will cost him four marks. Other conditions remaining the same, wages expressed in terms of the means of life must remain the same and wages expressed in gold will rise therefore from three to four marks daily. What the capitalists gain in the form of profit on the working class they have to return in the form of wages. So we are just where we were at the beginning. If wages signify value, no plunder of the working class by the capitalist is possible. But the creation of a surplus is impossible if, according to our hypothesis the workers consume as much as they produce. And since the capitalists produce no value it is impossible to see how they can live. And if such a surplus of production over consumption does exist, if such a production and reserve fund exists in the hands of the capitalists there is no other explanation possible than that the working class uses only enough values for its own maintenance and turns over the rest of the goods which it produces to the capitalist. On the other hand, if this production and reserve fund actually exists in the hands of the capitalist class, if it has really come into existence through the piling up of profits, (we will leave rent out of the question for the present); it necessarily comes from the accumulated profits of the capitalist class taken from the working class over and above the sums paid by the capitalist class to the working class in the form of wages. Value therefore does not depend upon wages, but upon amount of labor. The working class renders to the capitalist class a greater amount of value than it receives in wages and thus the profit of capital as of all other forms of the appropriation of unpaid for products of labor is to be explained on the simple ground of the surplus value discovered by Marx. _VI. Simple and Compound Labor._ (The argument of Duehring against which Engels here directs his efforts may be best summed up in Duehring's concluding words "Marx in his utterances on value cannot escape the lurking ghost of highly skilled labor. The prevalent notion of the intellectual classes has been a hindrance to him in this matter, for according to this idea it is an enormity to reckon the labor time of a barrow pusher and an architect as economic equivalents.") Engels thereupon says "the passage in the works of Marx which caused this outbreak on the part of Duehring is very short." Marx is examining the question as to the basis of the value of commodities and answers it by the statement that it is the amount of human labor contained in them. "This" he goes on "is the expression of that simple labor force which belongs to the average human being without any special development. Skilled labor is a power or rather a multiple of simple labor, so that a small amount of skilled labor is equivalent to a larger amount of unskilled labor. Practice shows that this reduction to the terms of unskilled labor takes place. A commodity may be the product of skilled labor, its value may be equivalent to a product of unskilled labor skilled labor. The proportion in which different forms of labor are reduced to their general standard in unskilled labor is established by a social process going on behind the backs of the producers, and appears to them merely customary." Here Marx is only dealing with the value of commodities, that is of objects produced and exchanged by private producers in a society consisting of private producers producing for their own profit. He is therefore not concerned here with "absolute value" whatever that may be but only with the value which is realised in a given form of society. This value under the given social conditions is shaped and measured by the human labor incorporated in the commodities and this human labor shows itself as the expression of simple human energy. But every piece of work is not merely an expression of simple labor force. Very many labor products require the expenditure of more or less time, money, trouble, and acquired skill or knowledge. Do these kinds of compound labor show at the same period of time the same commodity values as simple labor, are they the expression of merely simple labor force? Evidently not. The product of an hour of compound labor is a commodity of higher, double or three times the value of a product of an hour of simple labor. The value of the product of compound labor can in this comparison be expressed through the measure of simple labor; and this reduction of compound labor is carried on by means of a social progress behind the back of the producer, by means of which can here be established according to the theory of value but not explained. The thing which Marx states here is a simple fact which happens every day before our eyes in the present capitalistic society. (After some invective and satire hurled at Duehring Engels proceeds:) Let us examine with regard to equality of value a little more closely. All labor time is of equal value, that of the barrow pusher and that of the architect. Therefore labor time and consequently labor itself has a value. But labor is the creator of all values. It is the only thing which gives the original products of nature a value in the economic sense. Value in itself is nothing but the expression in a given object of necessary, social, human labor. One might just as well speak of and fix a value to labor as speak of the value of value, of the weight, not of a specific body, but of gravity itself. Herr Duehring calls people like Owen, St. Simon and Fourier, social alchemists. When he invents a value for labor time, that is for labor, he shows that he is far below these same alchemists. For Socialism, which will emancipate human labor force from its place as a commodity, the understanding that labor has no value and can have none is a matter of the greatest importance. With an understanding of it, all attempts made by Herr Duehring by means of his crude worker-socialism (Arbeitersozialismus) to regulate the division of the means of existence, as a kind of higher wages, fall to the ground. From it there follows the broader view, since it is controlled by purely economic motives, that distribution regulates itself in the interests of production, and production is advanced in the greatest degree by a method of distribution which permits all the social departments to develop, maintain, and express their capacities to the fullest possible extent. To the ideas of the intellectuals which have come into Herr Duehring's possession, it must always seem to be an enormity that it will abolish barrow pushing and architecture simultaneously as professions, and that the man who has given half an hour to architecture will also push the cart a little until his work as architect is again in demand. It would be a pretty sort of socialism which perpetuated the business of barrow-pushing. If the equality of value of labor time has the significance that workers produce equal products in equal periods of time it is evidently false, unless an average is first taken. Of two workmen at the same branch of industry the value of the product of their labor time will differ according to the intensity of labor and their respective ability. No scheme of economic equality, at least on our planet, can remedy this unfortunate state of affairs. What then is left of the equality of all and every sort of labor? Nothing but high sounding phrases which have no economic value, nothing but the evident inability of Herr Duehring to distinguish between the fixing of value by labor and the fixing of value by the wages of labor, only the ukase, which is the foundation of the new social economy, that wages shall be equal for equal amounts of labor time. Really the old French communists and Weitling had much better grounds for their equality of wages theories. How then do we solve the whole weighty question of the higher wages of compound labor? In a society of private producers, private individuals or their families have to bear the cost of creating intellectual workers. An intellectual slave always commanded a better price, an intellectual wage worker gets higher wages. In an organized socialist society, society bears the cost and to it therefore belong the fruits, the greater value produced by intellectual labor. The laborer himself has no further claim. Whence it follows that there are many difficulties connected with the beloved claim of the worker for the full product of his toil. _VII. Capital and Surplus Value._ ("Marx does not have the usual economic idea of capital that it is means of production already produced, but he seeks to endow it with a special dialectic history in the metamorphosis of a historical idea. Capital is expressed in gold, it creates an historical period which has its beginning in the sixteenth century and the establishment of a world-market. Any keen economic analysis is impossible with such a notion. Such barren conceptions which are half historical and half logical destroys the possibility of any proper discrimination with respect to the matter." These remarks of Duehring are answered as follows by Engels:) According to Marx, then, capital manifested itself as gold at the beginning of the sixteenth century. It is just as if anybody were to say that specie had expressed itself as cattle for three thousand years, because formerly cattle had performed the gold functions along with others. Only Herr Duehring could be guilty of such a crude and distorted expression. Marx in his analysis of the economic forms in which the process of the circulation of commodities takes places simply declares gold to be the last form. "This last product of the circulation of commodities is the form in which capital first appears. Historically capital comes with the possession of property in the form of money, as hoards of money, merchant-capital, and usury-capital.... This history is going on every day before our eyes. New capital comes on the scene, that is the market,--the market for commodities, the labor market or the money market, simply as money, money which is transformed into capital by a definite process." Again Marx states the fact. It is useless for you to struggle against it, Herr Duehring, Capital must express itself in gold. Marx further examines the process by which money is transformed into capital and discovers that the form in which money circulates as capital is the inversion of the form in which it circulates as the universal equivalent. The individual owner of commodities sells to buy, he sells what he does not need, and buys with the money thus obtained what he does need. The budding capitalist buys on the contrary what he does not want himself, he buys to sell, and to sell for a higher money value than he put into the business, he makes a money profit, and this profit Marx calls surplus value. What is the origin of this surplus value? Either the buyer buys goods below their value or the seller sells them above their value. In both cases gain and loss would balance one another, since every buyer is also a seller. It can also not arise from extortion, for extortion might enrich one at the expense of the other but it could not increase the total sum of money neither could it increase the amount of commodities in circulation. "The entire capitalist class of a country cannot overreach itself." Now, we find that the totality of the capitalist class in every country grows richer before our very eyes, by the process of selling dearer than it bought, by appropriating surplus value. So we are just at the beginning of the discussion. Where does this surplus value come from? This question has to be answered on purely economic grounds to the exclusion of all cheating, and all invasion of force. How is it possible to keep selling dearer than one buys under the assumption that equal values are always exchanged for equal values? The solution of this problem is the crowning glory of the work of Marx. He sheds clear daylight in economic places where the earlier socialists no less than the bourgeois economists have groped in utter darkness. From his work dates the origin of scientific socialism. The solution is as follows. The power of increase in money which is transformed into capital cannot proceed from the money neither does it depend upon trade, since the money only realizes the price of the commodities and this price is, since we hold that only equal values are exchanged, no different from its value. On the same grounds the power of increase cannot come from the exchange of commodities. The change therefore depends upon the commodities which are exchanged, but not upon their value, since they are bought and sold at their value. It arises from their consumption-value as such; that is the change must arise out of the consumption of commodities. "In order for a commodity to derive value from consumption our possessor of money must be fortunate enough to discover a commodity whose use-value has the peculiar property of being a source of value, whose consumption would imply the expenditure of labor and thus be value-producing. And the possessor of money finds such a specific commodity on the market in the shape of labor-power." If, as we have seen, labor has no value this is by no means the case with labor-force. This has a value, as it is a commodity, and, as a matter of fact, it is a commodity to-day and this value is fixed "like that of every other commodity by the amount of labor time necessary for the production and reproduction of this specific commodity." It is fixed by the labor time which is necessary for the procuring of the means of livelihood required to maintain the laborer in a condition to continue laboring and reproduce his kind. Let us suppose that these means of livelihood represent, taking one day with another, six hours labor-time a day. Our budding capitalist who buys labor force for his business, that is hires a laborer, pays this laborer the full daily value of his labor force, if he pays him a sum of money which represents six hours of labor. If the laborer has only expended six hours in the service of the capitalist he has got the full return of his expenditure, the day's value of his labor-force has been paid. But money could not be transformed into capital in this fashion, it would have produced no surplus value. The buyer of labor-power has quite another view of the nature of his business. Since only six hours' work is necessary to maintain the laborer for twenty-four hours, it does not follow that the laborer cannot work twelve hours out of the twenty-four. The value of labor force and its realization in the labor-process are two different magnitudes. The owner of money pays out a day's value of labor-force but there belongs to him its use for the day, the whole day's labor. That the value which it produces in the course of a day is double its own value for the day is fortunate for the buyer but according to the laws of exchange no injustice to the seller. The laborer then costs the owner of money according to our calculation the value product of six hours' labor, but he gives him daily the value product of twelve hours' labor. The difference to the credit of the owner of the money is six hours' unpaid extra labor, an unpaid for surplus product, in which the labor of six hours is incorporated. The trick is done. Surplus value is produced, money is transformed into capital. While Marx, in this way, proved how surplus value exists and the only possible way in which it can exist, under the laws which regulate the exchange of commodities he also exposed the present capitalistic methods of production and the methods of appropriation resting upon them and unveiled the secret upon which the whole arrangement of the society of to-day depends. There is a necessary presupposition to this origin and birth of capital. "For the transformation of money into capital the money owner must first find free laborers in the market, free in the double sense that as a free person the laborer can use his labor power as a commodity, that he has no other wares to sell, that he is unemployed and that he is free of everything necessary to the realisation of his labor power." But this condition of a possessor of money or commodities on the one hand, and, on the other, of the possessor of nothing, except his own labor force, is no natural condition of affairs nor is it common to all periods of history; "it is clearly the result of a historical development, the product of a whole series of older forms of social production." And this free laborer first strikes our notice as a historical phenomenon at the end of the fifteenth and the beginning of the sixteenth century as a result of the dissolution of feudal society. Thereupon with the creation of the world trade and the world market which dates from the same period the foundation was laid for the mass of moveable wealth to become more and more transformed into capital and for the capitalistic system, directed more and more to the production of surplus value, to become the dominant system. _VIII. Capital and Surplus Value (Conclusion)._ (Duehring having said that the term surplus value merely signifies in ordinary language, rent, profit and interest, Engels still further explains) We have already seen that Marx does not say that the surplus product of the industrial capitalist, of which he is the first owner, is always exchanged for its value, as Herr Duehring points out. Marx plainly says that trade profit only constitutes a portion of the surplus value and under the foregoing conditions this is only possible if the factory proprietor sells his product under value to the trader and thus parts with a portion of the booty. Marx' contention rationally put is How is surplus value transformed into its subordinate forms, profit, interest, trade-profits, ground rents etc.? and this question Marx undertakes to answer in the third volume of Capital. But since Herr Duehring cannot wait long enough for the second volume to appear he has in the meantime to take a close look at the first volume. He thereupon reads that the immanent laws of capitalistic production, the course of the development of capitalism, realise themselves as the necessary laws of competition and thus are brought to the consciousness of the individual capitalists as dominant motives. That therefore a scientific analysis of competition is only possible when the real nature of capital is grasped, just as the apparent movement of heavenly bodies can only be understood by apprehending their real movement, and not merely those movements which are perceptible to the senses. So Marx shows how a certain law, the law of value, appears under given conditions in the competitive system and makes evident its impelling force. Herr Duehring might have understood that competition plays an important role in the distribution of surplus values, and, after sufficient thought, might have grasped at least the outlines of the transformation of surplus value into its subordinate forms from the examples given in the first volume. Herr Duehring finds competition to be the stumbling block in the way of his comprehension. He cannot understand how competing entrepreneurs can manage to sell the entire product of labor including the surplus product for so much more than the natural cost of production. Here again that "force" of his which, in his estimation, is the very evil thing, comes into play. According to Marx, the surplus product does not have any cost of production, it is the part of the product which costs the capitalist nothing. If the entrepreneurs were to sell the surplus product at its real cost of production they would have to give it away. Is it not a fact that the competing entrepreneurs really sell the product of labor every day at its natural cost of production? According to Herr Duehring the cost of production consists "in the expenditure of labor or force and therefore in the last analysis must be measured by cost of maintenance," and therefore, in present day society, is to be estimated at the cost of the raw material, instruments of labor and actual wages paid in distinction to taxation, profit and compulsory raising of prices. It is well recognised that in modern society the competing entrepreneurs do not sell their wares at the natural cost of production but calculate on a profit and generally get it. This question which Herr Duehring fancies will level the walls of Marxism as the blast of Joshua did those of Jericho is a question which the economic doctrines of Duehring have to meet also. "Capitalistic property," he says, "has no practical value and only realises itself because it implies the exercise of indirect power over man. The testimony to the existence of this force is capitalistic profit, and the amount of this latter depends upon the extent and intensity of the power of 'force.'... Capitalistic profit is a political and social institution which manifests itself very strongly as competition. The entrepreneurs take their stand on this relation and each one of them maintains his position. A certain amount of profit is a necessity of the dominant economic condition." We know quite well that the entrepreneurs are in a position to sell the products of labor at a cost above the natural cost of production. Surely Herr Duehring does not think so meanly of his public as to hold the position that profit on capital stands above competition as the King of Prussia used to stand above the law. The proceeding by which the King of Prussia reached his position of superiority to the law we all know, the methods by which profit has come to be mightier than competition is just what Herr Duehring has to explain and what he stubbornly refuses to explain. It is no argument when he says that the entrepreneurs trade from this position and each one of them maintains his own place. If we take him at his word, how is it possible for a number of people each to be able to trade only on certain terms and yet each one of them to keep his position? The gildmen of the Middle Ages and the French nobility of 1789 operated from a decidedly superior position, and yet they came to grief. The Prussian army at Jena occupied an advantageous position and yet it had to abandon it and surrender piecemeal. It is not enough to tell us that a certain measure of profit is a necessary concomitant of domination in the economic sphere, it is necessary to tell us why. We do not get a step further by the statement of Duehring. "Capitalistic superiority is inseparable from landlordism. A portion of the peasantry is transformed in the cities into factory hands and in the final analysis into factory material. Profit appears as another form of rent." This is a mere assertion and only repeats what should have been explained and proved. We can come to no other conclusion, then, except that Herr Duehring does not like to tackle the answer to his own question how the capitalists are in a position to sell products of labor for more than the natural cost of production, in short Herr Duehring shirks an explanation of profit. He takes the only path open to him, a short cut, and simply declares that profit is the product of "force." This has been stated by Herr Duehring in his economic theory under the statement "force distributes." That is all very well; but the question still persists what does force distribute? There must be something to distribute otherwise force cannot distribute it. The profit which the competing capitalists pocket is something actual and tangible. Force may take but it cannot create. And if Herr Duehring still obstinately persists in his statement that "force" takes the profits for the entrepreneurs he is as silent as the grave as to whence it takes it. Where there is nothing the Kaiser, as all other "force," ceases to operate. From nothing comes nothing, particularly nothing in the shape of profits. If capitalistic private property has not practical actuality, and cannot realize itself, except by the exercise of indirect force over men, the question still persists, in the first place, how did the capitalist government come into possession of this "force" and in the second place how has this force been transformed into profits, and in the third place where does it get these profits? (The remainder of this section is merely further elaboration of this idea with more caustic satire at the expense of the antagonist of Engels.) _IX. Natural Economic Laws--Ground Rent._ (In this chapter Engels proceeds to examine what Herr Duehring called the "fundamental laws" of his theory of economic science.) LAW NO. I. "The productivity of economic instruments, natural resources and human force are capable of being increased by invention and discovery." We are amazed. Herr Duehring treats us like that joke of Moliere on the parvenu who was informed that he had talked prose all his life without being aware of it. That inventions and discoveries increase the productive force of labor in many cases (but in many cases not, as the patent records everywhere show) we have been for a long time aware. LAW NO. II. "Division of Labor. The formation of branches of work and the splitting up of activities increases the productivity of labor." As far as this is true it is a mere commonplace since the time of Adam Smith. How far it is true will appear in the third division of this work. LAW NO. III. "Distance and transportation are the most important causes of the advance or hindrance of the organization of productive forces." LAW NO. IV. "The industrial state has incomparably greater capacity for population than the agricultural state." LAW NO. V. "In economics only material interests count." These are the natural laws on which Herr Duehring founds his new economics. He remains true to his philosophic methods. (Hereupon Engels proceeds to the discussion of Duehring's opinions on ground-rent.) Herr Duehring defines ground-rent as "that income which the landowner as such derives from ground and land." The economic idea of ground-rent, which Herr Duehring undertakes to explain to us, is transformed right away into the juristic concept so that we are no further than at first. He compares the leasing of a piece of land with the loan of capital to an entrepreneur but finds, as is so often the case, that the comparison will not hold. Then he says "to pursue the analogy the profit which remains to the lessee after the payment of ground-rent, answers to that portion of the profit on capital which remains to the entrepreneur who operates with borrowed capital after the interest on the borrowed capital has been paid." (To these arguments Engels replies:) The theory of ground-rent is a special English economic matter, and this of necessity because only in England does a mode of production exist by which rent is separated from profit and interest. In England there prevail the greater landlordism and the greater agriculture. The individual landlords lease their lands in great farms to lessees who are able to cultivate them in a capitalistic fashion and do not, like our peasants, work with their own hands, but employ laborers just like capitalistic entrepreneurs. We have here then the three classes of bourgeois society, and the income which each receives--the private landlord in the form of ground-rent, the capitalist in that of profit and the laborer in the form of wages. No English economist has ever regarded the profit of the lessee as Herr Duehring does and still less would he have to explain that the profit of the lessee is what it indubitably is, profit on capital. In England there is no use to discuss this question for the question as well as its answer are obvious from the facts and, since the time of Adam Smith, there has been no doubt at all about it. The case in which the lessee cultivates his own land, as the rule in Germany, for the profit of the ground landlord does not make any difference in this respect. If the landlord cultivates the land for his own profit and furnishes the capital he puts the profit on capital in his pocket as well as the ground-rent for it cannot be otherwise under existing conditions. And if Herr Duehring thinks that rent is something different when the lessee cultivates the land for himself it is not so and only shows his ignorance of the matter. For example:-- "The revenue derived from labor is called wages; that derived from stock by the person who manages or employs it is called profit. The revenue which proceeds from land is called rent and belongs altogether to the landlord. The revenue of the farmer is derived partly from his labor and partly from his stock.... When those three different sorts of labor belong to different persons they are readily distinguished, but when they belong to the same they are sometimes confounded with one another at least in common language. A gentleman who farms part of his own estate, after paying the expenses of cultivation, should gain both the rent of the landlord and the profit of the farmer. He is apt to denominate, however, his whole gain, profit, and thus confounds rent with profit, at least in common language. The greater part of our North American and West Indian planters are in this situation. They farm, the greater part of them, their own estates, and accordingly we seldom hear of the rent of a plantation but frequently of its profit.... A gardener who cultivates his own garden with his own hands, unites in his own person the three different characters of landlord, farmer, and laborer. His produce, therefore, should pay him the rent of the first, the profit of the second and the wages of the third. The whole, however, is commonly considered as the wages of his labor. Both rent and profit are in this case confounded with wages." This passage is in the sixth chapter of the first book of Adam Smith. The case of the landholder who tills his own land has been examined a hundred years ago and the doubts which perplex Herr Duehring so much are caused entirely by his own ignorance. _X. With Respect to the "Critical History"._ This which is the concluding portion of the Second Division of the work and which deals with Herr Duehring's estimates of economic writers is omitted as being of too limited and polemic a character for general interest. PART III CHAPTER IX SOCIALISM The first two chapters of this Division, which deal respectively with the historical and the theoretical sides of Socialism, are omitted. They have been already translated. The well known pamphlet "Socialism, Utopian and Scientific" contains both of them. The second has also been translated by R.C.K. Ensor and published in his "Modern Socialism." _Production._ For him (Herr Duehring) socialism is by no means a necessary product of economic development, and, still less, a development of the purely economic conditions of the present day. He knows better than that. His socialism is a final truth of the last instance, it is "the natural system of society." He finds its root in a "universal system of justice." And if he cannot take notice of the existing conditions which are the product of the sinful history of man up to the present time in order to improve them that is so much the worse, we must look upon it as a misfortune for the true principles of justice. Herr Duehring forms his socialism as he does everything else on the basis of his two famous men. Instead of these two marionnetes, as heretofore, playing the game of lord and slave they are converted to that of equality and justice and the Duehring socialism is already founded. Clearly in the view of Herr Duehring the periodic industrial crises have by no means the same significance as we must attribute to them. According to Herr Duehring they are only occasional departures from normality and furnish a splendid motive for the institution of a properly regulated system. (Duehring attributes crises to underconsumption; to which Engels replies:) It is unfortunately true that the underconsumption of the masses and the limitation of the expenditures of the great majority to the necessities of life and the reproduction thereof is not by any means a new phenomenon. It has existed as long as the appropriating and the plundered classes have existed. Even in those historic periods where the condition of the masses was exceptionally prosperous, as in England in the fifteenth century, there was underconsumption; men were very far from having their entire yearly product at their own disposal. Although underconsumption has been a constant historical phenomenon for a thousand years, the general break down in trade, due to overproduction, has appeared, for the first time, within the last fifteen years. Yet the vulgar political economy of Herr Duehring attempts to explain the new phenomenon, not by means of the new factor of overproduction, but by means of the exceedingly old factor of underconsumption. It is just as if one were to try and explain a change in the relation of two mathematical quantities, one of which is constant and the other variable, not from the fact that the variable quantity has varied, but that the constant has remained constant. The underconsumption of the masses is a necessary condition of all forms of society in which robbers and robbed exist, and therefore of the capitalist system. But it is the capitalist system which first brings about the economic crisis. Underconsumption is a prerequisite of crises and plays a very conspicuous role in them, but it has no more to do with the economic crisis of the present day than it had with the former absence of such crises. * * * * * In every society in which production has developed naturally, to which class that of to-day belongs, the producers do not master the means of production but the means of production dominate the producers. In such a society every new leverage of production is converted into a new means of subduing the producers beneath the means of production. This was the cause of that instrument of production, the mightiest up to the time of the introduction of the greater industry, the division of labor. The first great division of labor, the separation of the city and country, doomed the inhabitants of the rural districts to a thousand years of stupidity and the people of the towns to be the slaves of their own handiwork. It denied the chance of intellectual development to the one and of physical development to the other. If the peasant had his land and the town dweller his handiwork, it is just as true to say that the land had the peasant and the handiwork the townsman. As far as there was a division of labor there was also a division of man. The rise of one single fact slaughtered all former intellectual and bodily capacities. This annexation of man grew in proportion as the division of labor developed and reached its culmination in manufacture. Manufacture distributes production into its separate operations, makes one of these operations the function of the individual worker, and imprisons the worker for his whole life to a given function and to a given tool. "It forces the workingman to become an abnormality, since it makes him concentrate his efforts on detail at the expense of the sacrifice of a world of forces and capacities.... The individual himself becomes subdivided, he is transformed into the automatic tool of the division of labor" (Marx). This tool in many cases finds its perfection in the literal crippling of the worker, body and soul. The machinery of the greater industry degrades the workingman from a machine to being the mere appendage of a machine. "From the lifelong specialization of looking after a machine there comes the lifelong specialization of serving a part of a machine. The abuse of machinery transforms the worker from childhood into a portion of a part of a machine" (Marx). And not only the workingman but the classes which indirectly or directly plunder the workingman are also themselves involved in the division of labor and become the slaves of their own tools. The spiritually-barren bourgeois is the slave of his own capital and his own profit-getting, the jurist is dominated by his ossified notions of justice which rule him as a self-contained force; the "refined classes" are dominated by the local limitations and prejudices, by their own physical and spiritual astigmatism, by their specialised education and their lifelong bondage to this specialty, even though the specialty be doing nothing. The Utopists were thoroughly aware of the effects of the division of labor, of the effect on the one hand of crippling the worker and on the other of crippling the work, the unavoidable result of the lifelong, monotonous repetition of one and the same act. The rise of the antagonism between town and country was regarded by Fourier as well as Owen as the beginning of the rise of the old division of labor. According to both of them the population should be divided into groups of from six hundred to three thousand each, distributed over the country. Each group has an enormous house in the midst of its territory and the housekeeping is done in common. Fourier occasionally speaks of towns but these only consist of four or five of the big communal houses in close proximity to each other. By both of them the work of society is divided into agriculture and industry. According to Fourier, handwork and machine manufacture were both included in the latter while Owen made the great industry play the most important part, and the steam engine and machinery performed the work of the community. But both in agriculture and manufacture the two writers named gave the greatest possible variety of occupation to individuals, and accordingly the education of the young provided for the most universal technical training. Both of them think that there will be a universal development of the human race as a result of a universal practical participation in practical work, and that work will recover its old attractiveness, which has been lost as a result of the division of labor, by virtue of this variety and the shortening of the time expended upon it. * * * * * Just as far as society obtains the domination of the social means of production in order to organize them socially it abolishes the existing servitude of man to his own means of production. Society cannot be free without every member of society being free. The old methods of production must be completely revolutionized and the old form of the division of labor must be done away with above all. In its place an organization of production will have to be made in which, on the one hand, no single individual will be able to shift his share in productive labor, in providing the essentials of human existence, upon another, and on the other hand productive labor instead of being a means of slavery will be a means towards human freedom, in that it offers an opportunity to everyone to develop his full powers, physical and intellectual, in every direction and to exercise them so that it makes a pleasure out of a burden. This is no longer at the present time a phantasy, a pious wish. Owing to the present development of the powers of production, production has proceeded far enough, provided that society endows itself with the possession of the social forces and abolishes the checks and impediments, as well as the waste of products and productive forces, which springs from the capitalistic methods, to make a general reduction of labor time, to an amount, small as compared with present day ideas. The abolition of the old method of division of labor is not an advance which would not be possible except at the expense of the productivity of labor, quite otherwise. It is a condition of production which has come about spontaneously through the great industry. "The machine industry does away with the necessity of constantly distributing groups of workmen at the different machines by keeping the worker constantly at the same task. Since the total product of the factory, proceeds not from the worker but from the machine, a continual changing about of individuals could not exist, without an interruption of the labor-process. Finally the speed with which work at the machine is learnt even by children does away with the necessity of training a distinct class of workmen exclusively as machine laborers." But while the capitalistic method of use of machinery does away with the old limited particularity of labor, and, in spite of the fact, that technique is rendered superfluous, machinery itself rebels against the anachronism. The technical basis of the greater industry is revolutionary. "Through machinery, chemical processes and other methods, the functions of the working class and the social labor process are revolutionized along with the technical basis of production. The division of labor is also revolutionized and masses of capital and labor are hurled incontinently from one branch of industry to another. The nature of the greater industry demands mobility of labor, a fluidity of functions and a complete adaptibility on the part of the laborers. We have seen how this absolute contradiction shows itself in the continual sacrifice of the working class, the most complete waste of labor force, and the dominance of social anarchy. But if the mobility of labor now appears to be a law of nature beyond human control which realizes itself, in spite of all obstacles, it also becomes a matter of life and death for the greater industry, owing to its catastrophic character, to recognise the mobility of labor and hence the greatest possible adaptibility of the working class, as a universal law of social production, and to accommodate circumstances to its normal development. It becomes a question of life and death for the greater industry to keep an enormous number of people on the edge of starvation always in reserve, in order that they may be able to be placed at the disposal of the needs of capital as these vary." While the greater industry has taught us how to transform molecular movement into mass movement in order to fulfill technical needs, it has, in the same measure, freed industrial production from local limits. Water power was local, steam power is free. If water power belongs to the country, steam power is by no means limited to the town. It is capitalistic practice which causes concentration into cities and which makes manufacturing towns of manufacturing villages. But thereby at the same time it undermines the essentials of its own motive force. The first requisite of the steam engine and a prime requisite of all branches of motive power is a sufficient quantity of pure water. The factory town transforms all water into evil smelling sewage. Therefore, in proportion as the concentration into cities is the foundation of capitalistic production, each individual capitalist tries to get away from the towns which have been necessarily produced to the motive forces of the country. This process may be individually observed in the textile districts of Lancashire and Yorkshire. The greater industry creates new towns in the course of its progress from the town to the country. The same phenomenon was to be observed in the districts of the metal industry where somewhat different causes produce identical results. The capitalistic character of the greater industry is responsible for this aimless blundering and these new contradictions. Only a society which organizes its industrial forces according to a single great harmonious plan, can permit industry to settle itself in such a manner throughout the land as to secure its own development and the retention and development of the most important elements of production. The abolition of the antagonism between town and country is now not only possible, it has become an absolute necessity for industrial production itself. It has also become a necessity for agricultural production, and is, above all, essential to the maintenance of the public health. Only through the amalgamation of city and country can the present poisoning of air, water, and localities, be put at an end and the waste filth of the cities be used for the cultivation of vegetation rather than the spreading of disease. The capitalistic industry has made itself relatively independent of local limitations for its raw materials. The textile industry works with imported raw materials for the most part. Spanish iron ores are worked up in England and Germany, and South American copper ores in England. Every coal field supplies a yearly increasing number of places beyond its own confines. The whole coast of Europe has steam engines driven by English and, occasionally German and Belgian, coal. A society freed from the limits of capitalistic production could make still further advances. While it makes a sort of all round skilled producers, who are acquainted with the scientific requirements of general industrial production, and by whom every new succession of branches of production is completely developed from beginning to end, it creates a new productive force which undertakes the transportation of a superabundance of raw material or fuel. The abolition of the separation between town and country is no Utopia, it is an essential condition of the proportionate distribution of the greater industry throughout the country. Civilization has left us a number of large cities, as an inheritance, which it will take much time and trouble to abolish. But they must and will be done away with, however much time and trouble it may take. Whatever fate may be in store for the German nation, Bismarck may have the proud consciousness that his dearest wish, the downfall of the great city, will be fulfilled. And now we can see the childishness of Herr Duehring's notion that society can obtain possession of the means of production without revolutionizing the old methods of production from the ground up and above all doing away with the old form of the division of labor. * * * * * It is easy to see that the revolutionary elements which will abolish the old division of labor together with the separation of town and country and will revolutionize production as a whole are already in embryo in the methods of production of the modern great industry and their unfolding is only hindered by the capitalistic methods of production of to-day. But to see all this, it is necessary to have a broader outlook than the mere limitations of the Prussian Code, the country where schnapps and beet sugar are the staple industries, and you have to study industrial crises by way of the book-trade. (This is a sneer at one of Duehring's illustrations: Ed.) One has to understand the history and the present manifestations of the greater industry particularly in that land where it has its home and where it has had its classic development. It must not be imagined that modern scientific socialism can be done away with by the specific Prussian Socialism of Herr Duehring. _Distribution._ We have seen that Duehring's economics depend upon the statement that the capitalistic method of production is good enough and can be kept up, but that the capitalistic method of distribution is bad and must be done away with. We now discover that the "sociality" of Herr Duehring is merely the imaginary putting into force of this statement. In fact it appears that Herr Duehring has nothing to declare respecting the method of production as such in a capitalistic society, and that he will maintain the old division of labor in all its essential features. So he has hardly a word to say about production in his social state. Production is too dangerous a ground for him to tread on. On the other hand, in his estimation, distribution is not bound up with production but can be settled by an act of the will. * * * * * Let us consider all the ideas of Herr Duehring as realized. Let us then assume that the society pays each of its members for his work a sum in gold in which are incorporated six hours of labor, say twelve marks. Let us now imagine that prices and values are in full accord, so that under our hypothesis only the cost of raw materials, the wear and tear of machinery, the use of tools and wages are comprehended. A society then of a hundred working members produces daily goods of the value of 1200 marks, and in a year of three hundred working days three hundred and sixty thousand marks and expends the entire amount on its working members and thus each member has his share of three thousand six hundred marks a year. At the end of the year and at the end of a hundred years the society is no better off than it was at the beginning. Accumulation is entirely overlooked. Worse than that, since accumulation is a social necessity and the hoarding of gold is an elementary form of accumulation, the organization of a society on this basis will necessitate private accumulation on the part of its members and consequently the destruction of the society. How can this difficulty with respect to the economic society be overcome? Refuge might be taken in a forcible raising of proceeds and the produce of the society sold at four hundred and eighty thousand marks instead of for three hundred and sixty thousand. But all other economic societies would be in the same fix and each would have to make it out of the other with the result that they would only be extorting tribute from their own members. Or it might find an easy way out by paying for six hours work less than the product of six hours work, eight marks a day instead of twelve, prices remaining the same. It accomplishes in this way plainly and openly what formerly it did secretly, it adopts the Marx surplus value notion to the amount of one hundred and twenty thousand marks a year, since it pays the members under the value of their work and reckons the goods which they are only able to buy by its means at their full value. His economic society therefore can only get a reserve fund by adopting the truck system. Therefore one of two things is certain, either the economic society practices "equal work for equal work" and then it can get no funds for the maintenance and development of industry except through private sources, or it does create such a fund and ceases to practice "equal work for equal work." This is the fact about the exchange in the economic society, but what about the form of it? According to Herr Duehring in his economic society money does not function as money between the members of the society. It serves merely as a labor certificate; it corresponds with the expression of Marx "only the share of the individual of the common labor, and his individual claim to the consumption of a certain portion of the common product" and in this function, says Herr Duehring, it is just as little money as a theater ticket. In short it functions in exchange like Owens "labor-time money." As far as the mere calculating between amount due for production and the amount to be expended in consumption of the individual member of the society is concerned, paper markers or gold would serve the purpose equally well. But it would not do for other purposes as will appear. If the specie does not function as money among the members of a given society, but as a mark of labor, it functions still less as money in the exchange between different economic societies. According to the theory of Herr Duehring, therefore, specie as money is entirely superfluous. In fact it would be mere bookkeeping to set off the products of equal labor against the products of equal labor, according to the natural measure of labor-time, taking the labor-hour as a unit--if the labor hours are first translated into terms of money. Exchange is in reality only simple exchange; all surpluses are easily and simply equalized by means of bills of exchange on other societies. But when one community has a deficit in its dealings with another community it can only make it up by increasing its labor output, if it is not to suffer disgrace in the eyes of other communities. The reader will notice here that this is no attempt at social reconstruction. We are simply taking the notions of Herr Duehring and showing their unavoidable conclusions. Therefore neither in exchange among the individual members of a society nor in exchange between different economic societies can gold realize itself as money. Yet Herr Duehring says that the function of money is carried out even in his "sociality." We must therefore discover another field of activity for this money function. Herr Duehring predicates a quantitatively equal consumption. But he cannot compel that. On the other hand, he prides himself that in his community one can do with his money as he will. He cannot prevent one man, therefore, from saving money and another from not making his wages sufficient. This is indisputable, for he recognises the common property of the family in inheritance and talks about the duty of parents to provide for their children. Thereby his quantitatively equal consumption comes a cropper. The young unmarried man can get along splendidly on twelve marks a day, but the widower with eight young children has a hard time of it. On the other hand the community, since it takes money in payment without ceremony, lets money be acquired otherwise than by individual labor when the opportunity offers. _Non olet._ It does not know whence it comes. But now arises the chance for money which has up to now played the role of a standard of work performed to operate as real money. The opportunities and the motives arise for saving money on the one hand and squandering it on the other. The needy borrows from the saver. The borrowed money taken by the community in payment for means of living becomes again, what it is in present day society, the social incarnation of human labor, the real measure of labor, the universal means of circulation. All the laws in the world are powerless against it, just as powerless as they are against the multiplication table or the chemical composition of water. And the saver of money is in a position to demand interest so that specie functioning as money again becomes a breeder of interest. So far as we have only dealt with the operation of specie inside of Herr Duehring's economic society. But beyond the confines of that society the world goes peacefully along its old way. Gold and silver remain in the world-market, as world money, as the universal means of purchase and payment, as the absolute social incorporation of wealth. And in this ownership of the precious metals the individual societies find a new motive for saving, for getting rich, for increasing their supply,--the motive of becoming free and independent of the communities beyond their borders and of converting into money their piled up wealth in the world market. The profit hunters transform themselves into traders in the means of circulation, into bankers, into controllers of the means of production, though these may remain forever as the property of the economic and trading communities in name. Therewith the savers and profit mongers who have been converted into bankers become the lords of the economic and trading communes. The "sociality" of Herr Duehring is very distinct from the "cloudy ideas" of the earlier socialists. It has no other end than the resurrection of the high finance. The only value with which political economy is acquainted is the value of commodities. What are commodities? Products produced in a society composed of more or less separated private producers and therefore private products. But these private products first become commodities when they are made not for private use but for the use of someone else, that is for social use. They are converted into objects of social use by means of exchange. The private producers are therefore in a social relationship, they constitute a society. Their private products, while the private products of each individual, are at the same time, unconsciously and indeed involuntarily, social products also. Wherein does the social character of these private products consist? Plainly in two properties, in the first place because they satisfy human needs but have no use-value for the producers, and in the second place that, while they are the products of individual private producers, they are at the same time plainly the products of human labor, of human labor in general. In so far as they have a use-value for other people they can be exchanged; in so far as they all possess the common quality of human labor in general, they can be mutually compared in exchange by means of this labor. In two similar products under identical social conditions there may be unequal amounts of private labor, but equal amounts of human labor in general. An unskillful smith might take as long to make five horseshoes as it would take a skillful smith to make ten. But society does not fix the price according to accidental lack of skill of the one, it recognises only human labor in general, the human labor of the ordinary normal skilled smith. Each of the five horseshoes then made by the first does not have any more value than each of the other ten which were made in the same time as the five. Only so far as is socially necessary does private labor comprehend human labor in general. Therefore I maintain that a commodity has a certain value, 1st. because it is a socially useful product, 2nd. because it is produced by a private individual for private profit, 3d. because while it is a product of private labor, it is, at the same time, unconsciously and involuntarily a social product and exchanges socially according to a definite social standard, 4th. this standard is not expressed in terms of labor, in so many hours, but in another commodity. If, therefore, I say that this clock is worth this piece of cloth and that they are both worth fifty marks, I say that in the clock, the cloth and the gold there is an equal amount of social labor. I also affirm that the amounts of social labor time in them are socially measured and found to be equal, not directly and absolutely however, as one measures labor time in hours or days, but in a round about fashion, relatively, by means of exchange. I cannot therefore express this certain amount of labor-time in labor hours, since their number is not known to me, but I can express it relatively in terms of another commodity, which has the same amount of labor time incorporated in it. The clock is worth as much as the piece of cloth. But while the production of commodities and the exchange of commodities compel the society resting upon them to take this roundabout course, they are impelled to a shortening of the process. They separate from the mass of commodities one sovereign commodity, in which the value of all other commodities can be universally expressed, a commodity which is the complete incarnation of social labor, and, against which, all other commodities may be set in direct comparison--gold. Gold already germinates in the idea of value, it is only developed value. But since the commodity value exists in gold also, itself being a commodity, a new factor arises in the society which produces and exchanges commodities, a factor with new social functions and operations. We can now examine this a little more closely. The economy of the production of commodities is by no means the only science which has to reckon with relatively known factors. Even in physics, we do not know how many single gas molecules there are in a given volume of gas, pressure and temperature being given. But we know, as far as Boyle's law is correct, that a given volume of that gas has as many molecules as a similar volume of another selected gas at the same pressure and the same temperature. We can therefore compare the different volumes of different gases with respect to their molecular content, and, if we take one litre of gas at 0° Fahrenheit as the unit we can refer the molecular content of each to this standard. In chemistry the absolute atomic weights of separate elements is unknown to us. But we know them relatively when we know their mutual conditions. And just as the production of commodities and their economy has a relative expression for the unknown quantities of labor existing in commodities, since it compares these commodities according to the relative amounts of labor which they contain, so chemistry makes a relative expression for the amounts of atomic weights unknown to it, since it compares the separate elements according to their atomic weights and expresses the weight of the one as multiples or factors of the other. And just as the production of commodities elevates gold to the position of an absolute commodity, to the universal equivalent for other commodities, the measure of values, so chemistry elevates hydrogen to the position of a chemical gold-commodity, since it fixes the atomic weight of hydrogen at 1 and reduces the atomic weights of all the other elements in terms of hydrogen and expresses them as multiples of its atomic weight. The production of commodities is by no means the exclusive form of social production. In the ancient Indian communities and the family communities of the Southern Slavs products were not transformed into commodities. The members of the community were directly engaged in social production, the work was distributed as custom and circumstances required as were the products as they came into the realm of consumption. Direct social production and direct social consumption exclude all exchange of commodities and hence the transformation of products into commodities (at least within the confines of the society) and therewith their transformation into value. As soon as society comes into direct possession of the means of production and undertakes production as a society, the labor of each, however distinctive its special useful character may be, becomes direct social labor. The amount of social labor existing in a product does not then have to be established in a roundabout way, daily experience shows the average amount of human labor necessary. Society can easily determine how many hours of labor there are in a steam engine, how many in a hectolitre of wheat of last harvest, how many in a hundred square yards of cloth of a given quality. It cannot therefore happen that the quantities of labor embodied in commodities, which will then be absolutely and directly known, will be expressed in terms of a measure which is only relative, fluctuating, inadequate and absolute, in a third product, and not in their natural, adequate and absolute measure, time. This would not happen any more than in chemistry. One would express the atomic weights indirectly by means of hydrogen if it were possible to express them absolutely in their adequate measure, that is in real weight, that is in billions or quadrillions of grammes. Under the foregoing conditions, then, society ascribes no value to products. The simple fact that a hundred yards of cloth have taken a thousand hours in their production need not be expressed in any distorted or foolish fashion, they would be worth a thousand labor hours. Society would then know how much labor each object of use required for its creation. It would have to direct the plan of production in accordance with the means of production to which labor-force also belongs. The advantageous effects of the different objects of use and their relations to each other and the creation of the necessary means of labor would be the sole determinants of the plan of production. People make things very easily without any interference on the part of the much discussed "value." The value idea is the most universal and the most comprehensive expression of the economic conditions of the production of commodities. In the idea of value there is not only the germ of gold but also of those more highly developed forms of commodity production and exchange. Since value is the expression of the social labor incorporated in individual products, there lies the possibility of a difference between this and the individual labor embodied in the same product. This difference becomes very apparent to a private producer who abides by an old fashioned method of production while the social method of production has taken a step forward. It then appears that the sum of all the private manufacturers of a given commodity produce an amount in excess of the social needs. Then, since the value of a commodity is expressed only in terms of other commodities and can only be realised in exchange with them, the possibility arises that either exchange will cease or that the commodity will not realise its full value. Finally, the specific commodity labor-force finds its value like that of other wares in the social labor time necessary for its production. In the value form of the product there is already in embryo the entire capitalistic form of production, the antagonism between the capitalists and the wage-workers, the industrial reserve army, the crisis. The capitalistic system will be abolished by the restoration of true value (just as Catholicism will be abolished by the restoration of the true Pope), or by the restoration of a society in which the producer finally dominates his product, by the doing away of an economic category which is the most comprehensive expression of the slavery of the producer to his own product. When the society producing commodities has developed the inherent value form of the commodities, as such, to the gold-form, various germs of value hitherto hidden thereupon begin to sprout. The next substantial step is the generalising of commodity forms. Gold makes objects directly produced for use into commodities by driving them into exchange. Thereupon the commodity and the gold smite the community which is engaged in social production, break one social tie after another and finally dissolve the society into a mass of private producers. Gold establishes, as in India, individual cultivation of the land in the place of communal cultivation, then it destroys the system of regular distribution of communal lands among individuals and makes ownership final, and lastly it leads to the division of the communal wood land. Whatever other causes arising from the industrial development may work along with it, gold is always the most powerful instrument for the destruction of the communal society. _The State, the Family, and Education._ (Herr Duehring says "In the free society there will be no religion, since, in all its degrees, it tends to destroy the originality of the child, in that it places something above nature or behind it, which may be affected by means of works or prayers" also "a properly constituted socialist state will do away with all the paraphernalia of spiritualistic magic, and all the actual forms of religion." Engels proceeds--) Religion will be forbidden. Now, religion is nothing but the fantastic reflection in men's minds of the external forces which dominate their every day existence, a reflection in which earthly forces take the form of the super-natural. In the beginning of history it is the forces of nature which first produce this reflection and in the course of development of different peoples give rise to manifold and various personification. This first process is capable of being traced, at least as far as the Indo-European peoples are concerned, by comparative mythology, to its source in the Indian Vedas and its advance can be shown among the Indians, Greeks, Persian, Romans, and Germans, and, as far as the material is available, also among the Celts, Lithuanians, and Slavs. But, besides the forces of nature, the social forces dominated men by their apparent necessity, for these forces were, in reality, just as strange and unaccountable to men as were the forces of nature. The imaginary forms in which, at first, only the secret forces of nature were reflected, became possessed of social attributes, became the representatives of historical forces. By a still further development the natural and social attributes of a number of gods were transformed to one all-powerful god, who is, on his part, only the reflection of man in the abstract. So arose monotheism, which was historically the latest product of the Greek vulgar philosophy, and found its impersonation in the Hebrew exclusively national god, Jahve. In this convenient, handy and adaptible form religion can continue to exist as the direct, that is, the emotional form of the relations of man to the dominating outside, natural, and social forces, as long as man is under the power of these forces. But we have seen over and over again in modern bourgeois society that man is dominated by the conditions which he has himself created and that he is controlled by the same means of production which he himself has made. The fundamental facts which give rise to the reflection by religion therefore still persist and with them the reflection persists also. And just because bourgeois economy has a certain insight into the relations of the original causes of this phenomenon, it does not alter it a particle. Bourgeois economy can neither prevent crises, on the whole, nor can it stop the greed of the individual capitalists, their disgrace and bankruptcy, nor can it prevent the individual laborers from suffering deprivation of employment and poverty. Man proposes and God (to wit, the outside force of the capitalistic method of production) disposes. Mere knowledge even though it be broader and deeper than bourgeois economics is of no avail to upset the social forces of the master of society. That is fundamentally a social act. Let us suppose that this act is accomplished and society in all its grades freed from the slavery to the means of production which it has made but which now dominate it as an outside force. Let us suppose that man no longer merely proposes but that he also disposes. Under such conditions the last vestiges of the external force which now dominates man are destroyed, that force which is now reflected in religion. Therewith, the religious reflection itself is destroyed owing to the simple fact that there is nothing more to reflect. But Herr Duehring cannot wait until religion dies a natural death. He treats it after a radical fashion. He out Bismarcks Bismarck, he makes severe "May laws" not only against Catholicism but against all religion. He sets his gendarmes of the future on religion and thereby gives it a longer lease of life by martyrdom. Wherever we look we find that Duehring's socialism has the Prussian brand. After Herr Duehring has blithely got rid of religion he says "Man can now, since he is dependent upon himself and nature alone, intelligently direct the social forces in every way which open to him the course of things and his own existence." Let us look for a little while at that course of things to which the self-reliant human can give direction. The first in the course of things by which man becomes self-reliant is being born. Then during the time of his immaturity his education is in the hands of his mother. "This period may, as in the old Roman law, reach to the age of puberty, that is to about fourteen years of age." Only where the older boys do not respect the authority of the mother does the father's assistance play a part and the public method of education robs this of all harm. With puberty the boy comes under the natural care of his father, where this is exercised in a truly fatherly manner, in other cases society takes charge of his education. As Herr Duehring has already maintained the position that it is possible to convert the capitalistic methods of production into social methods without disturbing the mode of production itself, so he here seems to think that one can separate the modern bourgeois family from its entire economic foundations without any change in the whole form of the family. This form is so permanent in his estimation that he thinks of the old Roman jurisprudence, in an "improved" form, as the model of the family for ever, and he does not conceive of the family otherwise than as a permanent unit. The Utopists have the superiority over Herr Duehring here. In their estimation a really free mutual condition would arise in all the family relations as a result of the free association and the public ownership of the instruments of production together with the institution of a system of public education. And Marx has shown furthermore in his "Capital" how "the greater industry, which takes widows, young persons and children of both sexes from the home, and employs them in organized social productive processes, lays the foundation for a higher form of the family and better conditions for people of both sexes." LANDMARKS OF SCIENTIFIC SOCIALISM APPENDIX The foregoing pages will have given the reader some idea of the infinite care which Engels expended in order to keep abreast of the chief scientific discoveries of his times. He was as painstaking as a genius. On the other hand, his modesty was almost absurd, for he never ventured to claim anything for himself, and such ability as was displayed in the laying of the economic political foundations of the socialist movement was invariably credited by him to the superior talent and comprehension of Marx. There is no question that the work constitutes a most effective reply to the arguments of Duehring, with whom, poor fellow, we need no longer trouble ourselves. It constitutes, moreover, a very formidable answer to all those who seek for a justification of the socialist movement in those abstract conceptions which the average man finds it so hard to escape. In fact, so removed is the point of view of the writer of the foregoing pages from that of the man in the street that it is doubtful whether it is possible for more than a comparatively few students thoroughly to grasp the significance of the dialectic and to apply it in a satisfactory and effective fashion. Still, there is no question that this understanding of the socialist movement, as a movement, is absolutely required of all who can be considered as taking an intelligent and useful attitude with regard to social and political questions. The possession of this key gave the two founders of the modern socialist movement such a comprehension of the tendencies of modern civilization as enabled them to make those economic and political predictions which have been so completely fulfilled. There is little need to call attention to the fact that much of Engels' argument is now antiquated in face of the growth of science and the almost incredible development of mechanical invention and the material progress consequent upon it. It could not have been otherwise. The wonders of Engels' day are the commonplaces of our existence. The machines, which he considered so wonderful and so change-compelling have already been "scrapped" for new machines of greater power and capacity for production. The remark that the battleship had in his time arrived at a point where it was as expensive as it was unfit for fighting sounds almost ridiculous in face of the tremendous development of the engines of naval warfare since he wrote, and the invention and use of the submarine. Still it must be remembered that there has been no really great test of ships of war since Engels' day and that the expense of modern navies is worrying the governments to distraction. Only a few weeks ago Lord Charles Beresford refused to accept the command of the Channel Squadron unless provided with an equipment the expense of which seemed almost intolerable to Great Britain, wealthy as that country is and dependent as she is on the maintenance of the sea power. Great armies are still on the increase and the expense of their support combined with the unsatisfactoriness of their performances is by no means reassuring to those who have the responsibility for national military organization. The Boer War proved the unreliability of the armed forces of one power, at all events, and the performances of great masses of trained men in the Russo-Japanese conflict have not inspired any very great respect for the effectiveness of these colossal and expensive fighting machines. Together with the breakdown of armies and navies, as a material fact, there has grown up a strong prejudice against their employment, and the anti-war attitude of the international proletariat has been supplemented and strengthened by the distinct growth of an international peace spirit in certain sections of the middle class. So that in spite of superficial appearances it does not seem to be so very unlikely that the action of the dialectic will be manifest in the destruction of modern armaments, at least as far as the greater nations are concerned, though there is little doubt that military forces will still be maintained for the purpose of bullying and overawing the smaller and weaker peoples. Mention has already been made of the fact that Engels never really divested himself of the old "forty-eight" spirit. The notion that a revolution would break out somewhere in the near future finds a curiously fixed, if unexpressed, lodgment in his mind. One cannot help feeling that he expected things to mature earlier than they have done and that he anticipated that changes in the mode of production and the development of industry would have made a stronger impression upon the mind of the proletarian than history shows to have been the case. This latent, but still persistent, notion is in curious contrast to the almost detached way in which, particularly in his later years, he views the course of economic and political events. He never really in fact divested his mind of the notion of the imminence of social revolution, for in his 1892 preface to "The Condition of the Working Class in England in 1844" he says, "I have taken care not to strike out of the text the many prophecies, amongst others that of an imminent social revolution in England, which my youthful ardor induced me to venture upon." His youthful ardor seems never to have really abated in that respect. The dreams of boyhood seem to have haunted him and the old fighter stirred uneasily in his study chair at the echoes of past conflicts in which he also heard the bugles of the coming fight. To those who have watched the development of Engels' thought, as shown in his works, this philosophic, unemotional way of looking at things proves the effect of experience and age upon the fighter. He started with a heart inflamed with the wrongs of the suffering, as the damning pages of the work above cited show; he ends with a calm and dispassionate enquiry (apart from what he considered to be the exigencies of controversy) into the fundamental causes of economic and social progress. The burning enthusiasm and white-hot indignation had died down in him ere he reached the stage of the Duehring controversy. He finds that although not everything that is real is reasonable, to use the phrase against which he has fulminated in "Feuerbach," nevertheless every step in human progress has been an essential step and it is impossible to hurry things. To the proletarian he looks of course as the next great actor in the drama of social development. But the proletarian, while his destiny is indubitable, is still not a being apart from existing conditions. He exists in the conditions, is in fact part of the conditions, and, while at war with them, takes on the color of his surroundings. The facts of life have driven him to an unconscious rejection of old faiths and old philosophies but they have not forced him to take up the sword against the actual realities of modern life, to which he appears, in fact, to submit himself with a humility which is at least provoking to the eager and enthusiastic revolutionist. What wonders of economic organization, what triumphs in mechanical production have been achieved since Engels gave the last revision to this book in 1894 we in the United States at least have cause to know. The entire structure of production has been modified from top to bottom, the old individual doctrine has fallen victim to its dialectic, and concentrated industry and collective capital now rise supreme over the ruins of that individualism which gave them birth and to which they owe their existence. In the name of the individual the individual is denied. The courts hand down decisions in the name of individual liberty which have for their result the dethroning and extermination of the individual. The conglomeration of individual states which was considered the very foundation of the American government, and the outward and visible sign of collective sovereignty is already in its death throes. The dialectic of the United States is in course of development and there comes about in consequence the birth of the United Imperial Republic, a republic which is so only in name, which is, in fact, as little of a republic as were those oligarchies of the Middle Ages whose very existence defamed the name of republic. The old things have passed away, all things have become new. Still there is one factor which has not really appreciably changed, one factor which is always confronted by the same necessity, the necessity of maintaining its existence. This factor is the working class. The dialectic is at work with the working class also, and that which according to the individualistic notion consisted of isolated units seeking their daily bread in meek conformity with the laws of contract and property will disappear into that great collective organized body of labor which spurns the theories of contract and thereby makes itself no longer subject but master. AUSTIN LEWIS. * * * * * +-----------------------------------------------------------+ | Typographical errors corrected in the text: | | | | Page 40: socalled replaced with so-called | | Page 85: "each single each single" replaced with | | "each single" | | Page 89: "self contained" replaced with "self-contained" | | Page 102: "any any" replaced with "any" | | Page 126: Boyles replaced with Boyle's | | Page 128: prevailng replaced with prevailing | | Page 134: stpuid replaced with stupid | | Page 140: excepiton replaced with exception | | Page 154: inaccurrate replaced with inaccurate | | Page 171: "serve it is a midwife" replaced with | | "serve it as a midwife" | | Page 173: "a grain or barley" replaced with | | "a grain of barley" | | Page 175: discusion replaced with discussion | | Page 181: unberable replaced with unbearable | | Page 186: framers replaced with farmers | | Page 192: "so so splendidly" replaced with | | "so splendidly" | | Page 192: bourgeoise replaced with bourgeoisie | | Page 193: maunfacture replaced with manufacture | | Page 194: inventivness replaced with inventiveness | | Page 205: "these peasant" replaced with "these peasants" | | Page 217: impossiblity replaced with impossibility | | Page 219: devolpment replaced with development | | Page 231: "on the first place" replaced with | | "in the first place" | | Page 233: entrepeneurs replaced with entrepreneurs | | Page 250: communties replaced with communities | | Page 251: horeshoes replaced with horseshoes | | Page 257: himsel replaced with himself | | Page 265: develment replaced with development | | | +-----------------------------------------------------------+ 
8436	----	SPECULATIONS FROM POLITICAL ECONOMY By C. B. Clarke, F.R.S. INTRODUCTION The following nine articles are "Speculations," by no means altogether recommendations. They are _from_ Political Economy, i.e. they have nearly all of them been suggested by considering mere propositions of Political Economy. Some of them are old, or given me by friends: some are, I believe, new: these many persons will set aside as unpractical or impracticable, as that is the approved word by which people indicate that an idea is new to them. The topics of the nine articles have been largely taken from those now under political discussion, but they can hardly be called ephemeral; and, though they do not form a treatise, they will hardly be called disconnected. As they are speculations, no trouble has been taken to work out suggestions in detail, or give the "shillings and pence" correctly. CONTENTS 1. EFFICIENCY OF LABOUR 2. RECIPROCITY AND RETALIATION 3. UNIVERSAL FREE TRADE 4. THE RANSOM OF THE LAND 5. MAKING THE MOST OF OUR LAND 6. FREE TRADE IN RAILWAYS 7. REFORM IN LAND LAW 8. EQUALISING OF TAXATION 9. WEALTH OF THE NATION SPECULATIONS _FROM POLITICAL ECONOMY_ 1. EFFICIENCY OF LABOUR. Political economists have not overlooked efficiency of labour: they have underestimated its importance in the opinion of Edward Wilson, who has supplied me with the examples and arguments that follow and who has verbally given me leave to publish as much as I like. The English workman, especially in a country town of moderate size, regards capital as unlimited, employment ("work") as limited. A wall six feet high is to be built along the length of a certain garden: if one bricklayer is employed, the fewer bricks he lays daily the more days' employment he will get; if several bricklayers are employed, the fewer bricks one lays daily the more employment is left for the others. It thus appears that the more inefficient the labourer is, the better for himself, his fellow-handicraftsmen, and for "labour" in general: the more money is drawn from the capitalist. There is a grain of truth in this view with respect to petty unavoidable repairs in a narrow locality: but the capital spent on such is as a drop in the ocean compared with that embarked in a single large work. Consider the case of the London Building Trade, as practised in the suburbs on all sides of London. The London bricklayers thoroughly believe that it is their interest to be inefficient: it is said that they have a rule that no bricklayer shall ever lay a brick with the right hand; they have also a rule against "chasing," i.e. that no bricklayer, whatever his skill, shall lay more than a certain number of bricks a day; they believe that if the bricklayer laid a larger number of bricks he would get no more pay for a harder day's work, while the "work" would afford employment to a smaller number of labourers. Look however a little further. The speculative builders round London compete against each other, so that they carry on their trade on ordinary trade profits. Such a builder is building streets, house after house, each house costing him £800, and selling for £1000 say; and this, after paying his interest at the bank, etc., pays him about 10 to 15 per cent on his own capital embarked. Suppose now that the bricklayers increase their inefficiency either by a trade rule or by a combination to shorten the hours of labour. The cost of each house is increased £50 to him: nothing in the new bricklaying rules or rates affects the purchasers; the builder estimates that his profits will fall to 5 to 8 per cent on his capital. He does not care to pursue so risky a business at this rate of profit; he determines to contract operations. When he goes to his bank, a branch of one of the gigantic London joint-stock banks, at the end of the quarter, the manager of the branch comes forward as usual ready to continue the bank advances; but the builder says simply, "The building trade is not so good as it was," and declines. The increased cost of bricklaying has affected all other speculative builders in much the same way; the consequence is that "gold" accumulates in the branch banks. The secretaries and managers of the great joint-stock banks do not let their capital idly accumulate; they buy New Zealand 6 per cents, or transfer to Frankfort or New York the capital that, but for the rise in cost of bricklaying, would have gone to the London bricklayers. In this case it is easy to see that the quantity of work to be done is not limited. Should the cost of building diminish but a little, the rate of profit of the builders on their _own_ capital (in many cases not one-tenth of the capital they employ) will run up to 20 or 30 per cent, or even more; and at even a 20 per cent profit the bricklayers would find that a perfect rage for building would set in. Every speculative builder in the trade would strain his credit to the utmost, and take up every £100 from his bank that he could induce the bank manager to let him have. A second illustration. Forty years ago, on our farm in the south of England, two men with flails used to begin threshing wheat in the long barn about 1st November, and used to thresh till 1st April. They got eight shillings a week with us, but in adjoining counties seven shillings (and even six) were winter wages. Now the steam threshing-machine will empty that long barn in two short days' work. It takes half a dozen men to do the work, and they get about fifteen shillings a week, though their labour is much shorter and easier than that of the old flail men. At the same time our farmers now are much poorer men than they were forty years ago: they have less capital, they have made for many years past a low rate of profit, and they are frequently themselves complaining that they cannot afford to pay their labourers well, and inferring that they should get Protection back again in some shape or other. The labourers on their part imagine very generally that their increased wages for less work are due to Mr. Arch and agitation; that the employers of labour will never pay more than is wrested from them (this is in large measure true); and that employers must pay whatever agitators are strong enough to demand (this is wholly erroneous). In this case it is evident on the surface that the labourers who thresh with the steam-thresher are more efficient than the flail-men: their labour is worth the half-a-crown a day to the employer, and therefore the employer, however poor, can afford to pay it as he receives it back with a profit. On the other hand, if the flail-men were raised from the dead, no farmer would now pay them even eight shillings a week for threshing; their labour would not be worth even that. One illustration more. Thirty years ago there were few more wretched trades than the shoemakers of Northampton. Wages were low, the labour was severe, the social condition of the workmen was necessarily low also. The sewing-machine, with some special adaptations to make it sew leather, increased about sixfold the bootmaking power of a workman. It is needless to say that the Northampton shoemakers met the introduction of this machine with the fiercest opposition: they said five-sixths of their number must be thrown out of employment. The struggle was won by the machine (as in other cases); shoemakers' wages have ruled 50 to 100 per cent higher ever since, at the same time that the shoemaking population has largely increased; and the social comforts and character of the workpeople have improved vastly too. This is an example that has always puzzled the workmen themselves; but it requires no explanation after what has been said about the efficiency of labour. The puzzle to the shoemakers is what becomes of the additional boots and shoes made. They do not reflect that, even of a necessary of life, only a certain quantity is used at a certain price. Nothing is more necessary in London, especially in winter, than coal; but, when coal some years ago went up to 40s. a ton in London, it was marvellous how people in all ranks managed to reduce their consumption of coal. Much more in the case of boots, which will bear the cost of export to remote countries, did the demand increase as the price fell. A fall of 10 per cent only in the price of boots would cause every wholesale boot exporter to export on the largest scale. No doubt the invention of a self-acting machine which should turn out 1000 pairs of boots an hour at a nominal cost of workmanship per pair would reduce the shoemakers of Northampton to idleness and starvation. But in practice it has rarely happened that any machine has been introduced in any trade that has thus completely choked the increased demand. It has happened often that the workmen who could only work the old way, and were not able to take up the new machine, have been reduced to starvation. Even then, after this generation has passed away, the new machine-workers have been better off than their predecessors. Employers of labour cannot pay as wages more than the labour is worth: no organisation or rules will make them. But employers may pay a good deal less than the labour is worth, and often have done so. However great their profits, there is, according to J. S. Mill, always a tacit understanding among all employers of labour to pay the minimum the labourers can be induced to accept. It is only by combination that the labourers can get the full value of their efficiency. Here Mr. Arch comes in: I have little doubt that the flail-threshers might, under a well-managed large trade combination, have got nine shillings a week instead of eight shillings forty years ago. But every rise in wages gained by the workmen, unless springing from or in conjunction with an increase in efficiency, will tell against themselves; it must increase the price of the article, whether houses, wheat, or boots; this must diminish the demand for the article, and this must throw some of the workmen out of employ. It is difficult to find an example of price of wages which presents any difficulty of explanation when we apply to it the consideration of efficiency. If bricklayers were to offer to exert themselves to the utmost, and do in eight hours the same amount and quality of work they now do in nine, the speculative builders would doubtless be willing to give the same wages for eight hours' work that they now give for nine. In case the labourers by increase in their efficiency are able to get higher wages, the choice will (in general) lie with them how much of the increase they take in increased money wages, how much they take in shortened hours of labour. We thus see how, in an uncivilised community, owing to the inefficiency of their labour, their whole time and energies are expended on their hunting, or otherwise providing bare subsistence. The greater skill of our civilised labourers, working with machines provided by our science, and profiting by our fixed capital (as our railway tunnels and embankments), is vastly more efficient: it ensures the labourers a certainty and regularity of food which the savage does not enjoy, and provides him a certain margin of leisure beyond what the inefficient savage labourer can count upon; it also provides the whole surplus production out of which the intellectual and leisure classes are supported. It is to be noted that an increase of efficiency in any industry (and very largely in the case of industries producing generally essential utilities) raises real wages in all other industries, and this, whether the particular trade gains (as we have seen it nearly always do) or loses, as is conceivable, though rarely occurring. Thus, if the introduction of a boot-sewing machine lowers the price of boots 50 per cent, this can have no effect in lowering the money wages of farm labourers; and, as a matter of fact, the fall in cost of boots has sensibly improved the position of farm labourers. In the same way the superior efficiency of carriers by railway over the old road carriers has diminished the cost of coal and all articles (the bulky ones most sensibly) in all parts of England. There thus arises the instructive result that handicrafts in which there has been no improvement in the last forty years have obtained a rise of real wages (amounting in some cases to 50 per cent) by the improvements in efficiency in all the trades around them. To sum up: No man in ordinary business will give a price for anything that he intends to sell again unless he expects to profit by selling it again. No capitalist will pay a workman to make a table unless he expects to sell the table for a sum somewhat exceeding the cost of the wood and the workman's labour. It follows directly that the one grand object of the workman, both as an individual, a trade, and a class, should be to improve the efficiency of his labour. He may gain something by combination and higgling for the turn of the market, but the limit to what he can get is the value of his labour to his employer. In order to attain this improved efficiency the most important practical aid is piecework. This has done much even in agriculture: the turnip-hoer by the acre earns more, while he does his work at his own time with more comfort to himself than the old day-labourer. What is more important, the men who by head and hand are superior at turnip-hoeing are able to do the work cheaper than ordinary labourers, and turnip-hoeing thus falls entirely to the most efficient hoers, whose efficiency thus again gets constantly improved. There is no doubt to me that, if the London bricklayers would arrange to work by contract, they would soon obtain more wages without being compelled (as they imagine would be the case) to work more severely or longer hours to gain those wages. If they were more efficient, nothing could prevent the competition of employers soon giving extra wages for extra value of work. But it may, finally, be urged that there is surely such a thing as over-production. If there is an over-production of boots, trade is flat, the wholesale dealers find they are making no profit, they stop their purchases, the workmen are thrown out of employ on a large scale. To this the reply is that there is almost a necessary alternation of up and down in every particular trade, whether the efficiency of the workmen is high or low. If trade is good, the large dealers will extend their purchases, and very commonly rather over-extend their purchases: a reaction follows, and _vice versa_ when trade is bad. But it must be recollected over-production in all trades at once is impossible: capital is now not buried in pots by our great joint-stock banks; if one trade is at standstill the capital is carried to the most remunerative use that the experienced bank secretaries can discover. If agriculture is, as we have lately seen it, in a depressed state for years, inasmuch as wheat is "over-produced" in America till the price in England falls to 36s. per quarter (and less), at which it hardly pays to produce it in England; this of itself implies an enormous spur to all other industries--the real cost of labour has in them fallen (for the labourer will not be able to keep to himself the whole benefit of cheapened food)--the rate of profit in all other industries has risen (_pro tanto_). If we ever do arrive at a state when all the desires are fully satisfied--when there is over-production in all industries--we shall have general reduction in the hours of labour: "efficiency" will take that form. 2. RECIPROCITY AND RETALIATION. The wealth of England is the sum of the wealth of each individual in England. An individual may have £10,000 in England, £5000 invested in Australia. We may reckon his wealth in England either as including or excluding the £5000, which he could transfer (probably very speedily) to England in gold if he desired it tangibly. Whichever way we reckon his wealth and that of other individuals, we shall in like manner in the sum get the wealth of England: it will be in one case the wealth in England-in the other case the wealth in England plus the lien which residents in England have on other countries in the world. In parallel manner the effective capital of England, which can be brought into the wages fund, must be the sum of the capital of all the individuals. These two self-evident truths are capable of many applications: we see directly from them that the National Debt, so far as it is held by residents in England, neither diminishes the national wealth nor affects the wages fund. We see also directly that any exchange between an Englishman and a foreigner which gives a profit to the Englishman gives an equal profit to the English nation. When a merchant buys 1000 quarters of wheat from America and pays in gold, he does so to make a profit for himself; but he cannot make a profit for himself without making an equal profit for the nation. The exchange of the wheat for gold is profitable to both seller and buyer; otherwise the bargain would not be struck. A value is added to the wheat by its being brought from Minnesota (where it is wanted, as all good things are wanted) to London, where it is much more wanted, and this increased value is greater than the cost of moving the wheat from Minnesota to London; this excess is the profit on the exchange which the buyer and seller divide between them. The exact shares in which they divide the profit between them depend on some of the most complicated considerations in the science of political economy. Indeed, political economy can no more work out a case in figures, even when every circumstance is given, than political economy can tell in pounds sterling what should be the rent of a given farm. But the point required for our present purpose is easy and certain,--unless the English buyer got _some_ share in the profit he would not give his gold for the wheat. The great principle of Free Trade is that in this, and in all similar cases, the individual shall be left to make what profit he can; that his dealings with foreigners shall be interfered with by Government in no way; that he shall not be checked in his operations by import duties, bounties on exports, staples, or any other of the numerous obsolete interferences in the statute-book. The principle is that each individual can manage his own trade better than Government can manage it for him; that, therefore, Government shall let any individual do his best in trade his own way, knowing that whatever profit an individual makes in foreign trade is an equal national profit. It may be shortly stated that in the old Protectionist theory, destroyed by Adam Smith, gold was considered to be wealth. Hence, if an individual bought foreign wheat for gold, the English suffered a national loss of wealth, and the foreign nation made a national gain. It is unnecessary to occupy space in refuting this (to us absurd) idea, as no refutation can be more satisfactory than Adam Smith's own. If I profit on the transaction of buying 1000 quarters of wheat for gold, I do so irrespectively of all other exchanges by others. Whether the firm next door to me has succeeded in selling to a Boston house £2000 worth of Sheffield cutlery or no is a matter entirely beside my bargain. My profit will depend practically on the movements in the English corn trade: a small rise in the price of wheat at Mark Lane between the date of my purchasing by cable the wheat in America and my selling it at Mark Lane, may give me a large profit, or _vice versa_. But my exchange of gold for the wheat is a separate transaction of itself: it stands entirely on its own bottom. It is perfectly true that if my neighbour in Threadneedle Street does succeed in selling £2000 worth of cutlery to the New Englander, there is another distinct national profit to England and to America. [Footnote: I am assuming for simplicity throughout that every exchange made by private merchants in this foreign trade is a successful speculation; if in any particular speculation a merchant loses, his country loses the same amount. As foreign trade, on the whole, is an enormous national profit, I am justified in sinking the particular cases of loss. It may be said, "But perhaps all your exchange of gold for wheat is a national loss": it is evident that when the trade takes this form the merchants who import foreign corn stop their operations instantly; in practice they stop them with prescient instinct.] But whether he succeeds in making a bargain or not, I object to being interfered with by Government, and prevented making my own little profit. If my neighbour is practically deprived of his profitable bargain by Government action on the part of the Americans--if they are Protectionists and believe that gold is the only National Wealth, and put a heavy duty on cutlery--if by doing this they prevent an exchange profitable to both nations--they stop TWO merchants from a profitable stroke of business. Whether they injure the English merchant or the Bostonian would-be purchaser of cutlery MOST is (as above explained) very difficult to prove in any well-ascertained instance, but it is quite certain that the interference of the American import duty causes a loss to each merchant and to each nation. Where now is Reciprocity and where Retaliation? We can no doubt say to the Americans, "As you have injured us in the matter of cutlery, so will we injure you by putting a duty on wheat." But it is merely cutting off one's nose to spite one's face. In the exchange of gold for wheat the division of the profit on one transaction is uncertain, but in the long run it is probably about equal between the English and the American merchants, i.e. between the English and the American nations. (I am not overlooking the fact that the ultimate benefit to England is cheap bread; but it is unnecessary in the present argument to follow the food down the throats of the consumers: the wheat is really worth to the corn merchants what they can get for it from the consumers.) We cannot stop the corn trade with America by a duty (or diminish it) without as great a loss to ourselves (probably a greater) than to them; the retaliation in putting a duty on corn because the Americans put a duty on cutlery would be (with our lights) mere spite: it would be as though a farmer who took one sample of wheat to market and one of barley, should meet a factor who offered him his price for the wheat, but would not spring to his price for the barley, and the farmer should thereupon sulkily carry both his samples home again. The ideas of Reciprocity and Retaliation are pure relics of the old Protectionist commercial theory, viz. that there is always a national loss in parting with gold--that the foreign trade can only be profitable to England so long as the value of the exports exceeds that of the imports, so that a continual accumulation of gold may go on. Now, first, we may meet this with the abstract scientific argument that there is no character by which gold can be diagnosed as wealth from steel or broadcloth. Our merchant who buys wheat for gold could buy from the Americans wheat for cutlery or wheat for broadcloth. The reason he gives gold for the wheat is merely because he makes a better profit by giving gold than by giving anything else in exchange for the wheat. The nation therefore gets a better profit that way too. Descending a little from this abstract argument, our opponent says, "If you go on buying wheat for gold, and cannot sell your cutlery and broadcloth out of the country for gold, you _must_ run out of gold." But the fact has been proved by many years' experience not so to be: for many years our imports have been some £150,000,000 sterling more than our exports, while our stock of gold in the Bank of England (and the gold in circulation) remain the same from year to year. This is one of those many things (like the supply of meat to London) which will regulate itself perfectly and insensibly (without any violent disturbances in trade or the money market) if Government will only leave the matter entirely alone. If our stock of gold is at all short our merchants give a little less per quarter for American wheat; the trade is checked; the sensibility of the market--the experience of our corn-traders--is such that the balance is preserved with very slight oscillations. The refusal of the Americans (enforced by an import duty) to purchase our cutlery, etc., _does_ partially check the reflux of gold to this country, and does lower sensibly the price which the Americans get for their wheat from us. Errors in political economy avenge themselves--often fearfully--on their perpetrators. But our objector will still want to have explained to him where the £150,000,000 sterling required in England annually comes from. It is not essential to, or indeed any part of, my present argument to explain this; but I will anticipate matters so far as to say shortly here that this £150,000,000 is, roughly speaking, the interest on English capital invested in foreign countries paid in cash to the owners resident in England--it is equivalent to an annual tribute. Professor Henry Fawcett's _Lectures on Free Trade_ is a sound and admirable book: it is occupied a good deal with the practical question why so few foreign nations have adopted Free Trade, and how such foreign nations are to be converted to the orthodox creed of Adam Smith. But, as I think, unfortunately Professor Fawcett has in that book used the words Reciprocity and Retaliation pretty freely. Their mere use is enough to fortify a French or American Protectionist in his present policy; he naturally says, "The English Free-traders themselves admit that we are making money out of them: we take their gold for our wine and wheat; we refuse to give our gold for their cutlery and broadcloth: those English have now to come to us whining for Reciprocity; as to their Retaliation we are not alarmed--we know they _must_ have wheat and _will_ have wine." I would wish to expunge the words Reciprocity and Retaliation from the subject, as being words merely suggestive of false views. But the most fatal course to the adoption of a Free Trade policy by foreign nations has been our plan of humbling, begging (and indirectly giving a consideration for) Commercial Treaties. Such a course is enough to (and does) counterbalance with foreign nations all our theoretical writings about Free Trade. We go to France and say, "We will let in your wines at a lower duty provided you do us the favour and give us the advantage of lowering your duties on English manufactures." I cannot conceive any way of putting the matter more strongly calculated to convince the French that we believe we lose by purchasing their wines and gain by selling them our manufactures. It appears to me that if we wish to convince Europe and America of the truth of Free Trade (as understood by our political economists), our proper course is to adopt Free Trade ourselves FULLY (if the principle is good for wheat it is good for tea--I shall return to this), and then to say to foreigners, "See how we prosper under Free Trade." If the Americans continue to maintain Protectionist duties on our manufactures, our line of conduct is not to offer to pay them indirectly to relax those duties, but to say, "You are losing more by your duties than we are; the proof of the pudding is in the eating." If I believe, as I do, that the Americans are gaining less wealth under Protection than they would under Free Trade, I cannot imagine any plan less likely to convert them to my views than my going to them and saying, "We will give you £5,000,000 sterling (or some valued political advantage) if you will alter your mistaken policy." If this course did not confirm the Americans in the very deepest suspicions that Protection is really advantageous to them, and that we in our inmost heart think so too, my ideas of human nature are altogether at fault. But every foreign debate, whether in France, Germany, or America, on Free Trade, convinces me that I am not mistaken in the effect which I attribute to our prayers to every foreign nation to grant us a Commercial Treaty. 3. UNIVERSAL FREE TRADE. Wheat is now admitted to England free of duty. Tea pays a duty of about £4,000,000 sterling a year. This is called a duty for revenue, not for protection. Tea is an article of universal consumption; the tax on it is open to the objections against a poll tax or hearth tax, viz. that by it many a poor old woman is taxed as heavily as far richer people; indeed, owing to the poor consuming the lower-priced teas, they are by the present duty taxed at a higher rate than those who can afford the more expensive teas. The reply in defence of these anomalies is, "We have to raise £4,000,000 sterling by a duty on something; on whatever we put it, it will no doubt be bad." Granting, however, this for a moment, the onus lies on the defender of the existing tariff to prove that it is better to raise the £4,000,000 required from tea than from wheat, or than to raise £2,000,000 from tea, £2,000,000 from wheat. Mr. Raban, a leading tea-planter in Assam, has observed that if the duty on tea was replaced by one on wheat to raise the same gross amount, the pressure on the English poor would be less; while an encouragement would thus be given both to tea-planting in India and to agriculture in England. I adduce this case of the duty on tea merely to bring out strongly the fact that Free Trade in wheat is not universal Free Trade. I do not recommend that the duty on tea should be replaced by other duties: I am going to raise the question whether it should not be replaced by direct taxation. In the case of tea, the duty can hardly be said to be "protective," except so far as by raising the cost of tea it impels English drinkers to have more free recourse than they otherwise would to other drinks; but in a large number of cases a duty operates both as a revenue and as a protective duty. It is a curious fact that the fanners, after unanimously struggling FOR the duty on wheat because it was a protective duty, subsequently unanimously struggled for thirty years AGAINST the malt tax (involving a duty on barley) because it was a revenue duty. As soon, however, as the malt duty was repealed, they discovered that it had been a protective duty; barley fell in price (malting samples) about l2s. a quarter, and has never recovered, nor does any farmer now suppose it ever will. This is rather a complex case, because on the abolition of the malt tax an equal tax (in gross amount) was put on beer; and it might be supposed at first sight that this would not affect the price of barley. It has in several ways: Firstly, Many brewers now brew common beer with one-third malt, two-thirds molasses, cane sugar, etc. The tax being on the beer, Government no longer cares whether it is brewed from malt or from rubbish, and the consumers grow soon accustomed to the lowered taste of malt in their beer; Secondly, The admission of foreign malt and barley without duty has quickened the importation by removing those restraints and interferences which hamper trade out of all proportion to their expressed amounts in pounds, shillings, and pence. In order to establish a Universal Free Trade and to make every port in England a free port, it would be necessary to raise by direct taxation about £40,000,000 annually, because the excise on beer, etc., would have to be abandoned with the Customs duties. We will consider the possibility of raising this £40,000,000 by direct taxation before we dilate on the advantages which would follow Universal Free Trade. Ricardo, at the end of his masterly consideration of the effect of taxation variously levied, comes to the general conclusion that the best tax is that which is least in amount. Adam Smith and the older economists held that one test which a well-devised tax had to satisfy was that it should take the money from the taxpayer insensibly, indirectly. Now, all taxes that thus insensibly drain the taxpayers invariably take more in gross from them than reaches the Government. To raise £40,000,000 by customs and excise costs about £3,000,000; so that the people have to pay £43,000,000, while the Government gets £40,000,000. In direct taxes, as income taxes, property rates, the cost of collection is very small--about two-pence in the pound. In public as in private business it is much more economic to look payments in the face and make them with our eyes open than to let the money slip away in driblets. Moreover, modern politicians think, in opposition to Adam Smith, that it has a good moral effect on the body politic to be made to feel exactly what taxes they pay, so that they cannot help knowing whenever taxation is increased. A serious objection to indirect taxation is that it always falls with unfair weight on the poor, as in the case of tea duties stated above. It may be urged that the existing duties are (except tea) nearly all on luxuries, as beer, spirits, tobacco. But the English have drunk beer for many hundred years; the taste for beer is largely fixed by inheritance; beer as supplying sustenance in a form that _rapidly_ assists exhausted nature is, to very many at least, as much a necessary of life as tea is. Whether we believe tobacco to be injurious or not, we have no right to impose on an article so very largely consumed a duty which amounts to taxing the poor out of proportion to the rich. If all the indirect taxes are removed, the poor (at least down to those earning £1 a week and upwards) must be made to contribute to direct taxes. It may be urged against Universal Free Trade that the poor are so ignorant that they would sooner pay sixteen-pence a week in taxes indirectly than eightpence directly. This might prove a fatal objection to carrying out Universal Free Trade at the first attempt; but one of the objects to be gained by direct taxation is the education of the people. It may also be urged that the whole political power being now in the hands of the masses, they are so selfish and unjust that if taxation is made a plain matter they will put all taxation on the rich and refuse to pay anything themselves. The reply to this is, If this is your estimate of the understanding and morality of the masses, you should not have put the whole political power in their hands. We are only attempting at present to show that the £40,000,000 sterling (to replace duties and those parts of the excise which hang on duties) _could_ be raised by direct taxation: we are not attempting to show the best way it could be raised by direct taxation; it will be seen hereafter that a portion of it might perhaps be better raised by a National Property Rate. The £40,000,000 would be raised by an income tax of sixteen-pence in the pound--(I am underestimating safely--about a shilling in the pound would raise it really),--carried down to £156 a year without any reductions; while incomes of £1 a week paid eightpence weekly, and incomes of £2 a week paid twelvepence weekly. In the Crimean War the nation endured an income tax of sixteen-pence in the pound; it is certain that the nation is richer now, and better able to bear such a rate. But this is not the strength of the argument. In the Crimean War England endured sixteen-pence in the pound _extra_, in addition to all existing taxes (some of which were raised too), and the capital thus taken from the people was destroyed (much of it) or dissipated in the Crimea. But the sixteen-pence in the pound here suggested would be in lieu of an equal amount of taxes taken off (it would be rather less in amount than the taxes taken off): the nation therefore, would not feel it at all, though individuals would feel it in different ways. A poor man would have eightpence a week deducted from his wages, but he would get his beer at three-fifths the present price, his tea at two-thirds the present price, etc. He would soon feel that he gained by the change. The rich would find that they lost; but that loss would, I believe, be made up to them over and over again. First, I believe it is impossible to realise the effect on our trade of having London, Liverpool, etc., free ports. We possess at present half the ocean trade of the world: with our ports free, we should get a yet larger share of the world's trade, and secure it permanently. That is to say, we should certainly keep it until other nations adopted Universal Free Trade. Secondly, The fall in the price of tea, beer, etc., would be more than the amount of the tax remitted: the freedom of universal manufacture without any Government interference, the liberty to land tea without delay, and put it into the market without having to advance the duty, would cause at once a great activity in the trades, and at the same time a fall in price. By diminishing the need for middle-men the quality of the beer, tea, etc., would be raised, and adulteration diminished. Thirdly, The fall in the price of tea and beer would bring down the price of all competing drinks: it would at first diminish the consumption of competing drinks. The cheapening the price of some of the prime necessaries of life would be to some extent divided between capital and labour. As in the case of wheat, the labourer would be made better off, while the profits of capital would be raised. A general and permanent improvement in all trades would result, except possibly in those of the tea-dealer and brewer--but I do not think they would lose. I see no end to the developments from Universal Free Trade: we can only gain some idea of what they would be by tracing as far as we may what the results of Free Trade in one article--wheat--have been; and in doing this we must recollect that before 1846 the quantity of wheat imported was trifling compared with the present importation. To this scheme of direct taxation Edward Wilson objects, "Taxation should fall on expenditure, not on income." It is true that our object must always be to encourage accumulation, and discourage destruction of capital (expenditure). Practically, it does not appear that a heavy income tax diminishes the taste for accumulation in England: it does increase the tendency of large capitalists to invest their capital out of England, so as to avoid the State charges on capital in England. But the capital in England and the quantity of English capital invested abroad are already so enormous that the "tendency" of an increased income tax may be disregarded. Lastly, it may be objected, Would the sixteen-pence income tax levied as you propose (or nearly so) raise £40,000,000? At the time of the Crimean War each penny in the pound income tax brought in a million sterling. At the present time, each penny in the pound income tax brings in nearer two millions sterling, but the productiveness of the tax is much interfered with by the large remissions now allowed, and subtractions which take effect just where the contributors to the tax are most numerous, say from £100 to £300 a year. I therefore reckon that, without remissions, the tax of sixteen-pence in the pound down to £156 a year would produce about £30,000,000, and that the tax down to £52 a year would about produce the rest. The _total_ income that income tax is now levied on is nearly £600,000,000. We need not be surprised at the productiveness of the income tax. A man of £10,000 a year pays tax on that. But he has a steward on £300 a year, he is worth to his firm of lawyers £100 a year, and so on: these pay income tax on the £300 and the £100 over again. When the income tax is carried down to incomes on £1 a week, the tax will be levied on the same income over and over again. Even a spendthrift with £10,000 a year usually scatters more than he actually destroys. Lastly, It has not been overlooked that there is an income tax now: and if the whole proceeds of the sixteen-pence income tax were used to fill up the deficiency in customs and excise, then we have to make up a deficiency equal to the present proceeds of the income tax. This might be done (to start with) by the National Property Rate now to be suggested. But the expectation is, that with Universal Free Trade, and the tremendous stimulus thereby given to commerce and manufacture, the National Income would rise with a bound, and that in two or three years a much lower rate than sixteen-pence income tax in the pound would supply the amount of all the indirect taxes abandoned. 4. THE RANSOM OF THE LAND. Many people see quite clearly that, the population of England being 25,000,000, the next baby born has a right to one twenty-fifth-millionth part of the area of England in soil of average fertility. The arrangements of society by which the laud is partitioned among a limited class, and the complicated rights sanctioned by law in one plot of land, are considered of no validity as against the natural right of the new-born baby. I do not see this theory to be self-evident: on the other hand the supporters of it always give it as fundamental, axiomatic; they no doubt presume rightly that the land is limited, and that if one man holds more than his arithmetical share, he must push out somebody else from his arithmetical share: while a man who keeps a hundred pocket-knives does not perceptibly hinder other people having numerous pocket-knives. Still I do not see how this consideration weighs against Lord Derby's title to his lands, if the body politic has determined that on the whole it is best for the community that land should not be held equally by all, and sanctions by law Lord Derby's monopoly of a large area. On the theory of the natural right of every infant born to its arithmetical share, the monopolisers of land are liable to a perpetually recurring ransom: this can only practically be carried out by a special National Rate on Real Property (_i.e._ Land, with the houses, mines, etc., inseparably attached to it), which must be in addition to such taxes as income tax, succession duty, etc., which land already suffers equally with trades, professions, offices, and personalty. The local rates in England exceed £25,000,000 annually; and the ratepayers perhaps reckon this a large enough ransom. I should remark in passing that one man with 1000 acres of land does not dispossess any more babies of their rights than do ten men with 100 acres each. The ransom therefore must be a strictly level rate: to put a higher rate on large holders, or to despoil large holders of a portion of their landed property, will be to work the ransom unfairly. It hence will follow that any heavy ransom is now impracticable. Of late years some farms have gone out of cultivation because they will not pay the tithe, land tax, and rates already on them: to put any heavy ransom on the land would at once throw large areas in England out of cultivation. The question of the ransom, therefore, is not so all-important as has been considered; the rates at present being £25,000,000, it might be possible to levy an additional national rate of £5,000,000 to keep down the perpetually upspringing rights of new-born infants, without throwing land out of cultivation to any sensible extent. The whole question will lie thus between a total rate of £25,000,000 and £30,000,000. I am about, however, as a corollary to this subject, to suggest a way of forming a National Rate Book which probably would not materially alter the present rating, but which would alter entirely the taking of land for public purposes, and would effectuate all that is good in the phrase the Nationalisation of Land. This phrase is liberally used but rarely defined. Different orators appear to have quite different ideas as to what it means; and when they explain what they suppose it to mean, they generally prove that, in the way they understand it, it would be serious national damage. It is unnecessary to observe that landlords now (omitting individual exceptions and idiosyncrasies) expend their best endeavours in getting the best rent they can for their land. They have no prejudices in favour of farms of a particular size; a landlord of a farm of 1000 acres would let it directly in five-acre plots if he could get a better (and equally certain) gross rent by so doing. "Nationalisation" is often taken to mean that Government is to buy land and let it out in small plots. But apart from expense of Government management and objections to Government interference, we may safely assume that there would be a national loss by this procedure: the private owner would discover very quickly if he could make a profit by letting his farms piecemeal. All Government interference can do to improve the produce of the land is to abolish all restrictive laws, and to make the general tenure of land such that every piece of land shall fall into the hands of that man who is able to make the most of it. The National Rate Book now suggested is designed to accomplish this end. We will subsequently consider how it might assist public companies. As the suggested way of getting a National Rate Book is at first sight rather startling, I would premise that it is no rash invention of mine; it worked admirably in Attica--as see Demosthenes or Boeckh. To make the National Rate Book, each landowner values (with the magistrate) his land at what price he pleases; the State has the right to buy the land at any time at that price, plus 33-1/3 per cent for compulsory purchase. The magistrate sees that each separate house, farm, and plot is valued separately. No person need prove his title; any man can value any piece of land, and need not prove himself to be owner, tenant, or agent; but any piece of land valued by no one would be claimed as public property. A man who valued himself unfairly low would not be bought out at once and dispossessed by Government, unless it happened that during that year his land was taken up by Government or by a railway company for some public purpose. The regular course of business would be as follows:--An owner A would put his house and curtilage in the Rate Book at £1200. The sycophant B would come to the magistrate, offer £1600 for the property, and lodge the £1600 with the magistrate. The magistrate then, without divulging the name of the sycophant, would write to A either to rate his house at £1600 (paying a fine for so doing), or to take £1600 for it. If he took the £1600, B would get the property, and Government the increased rate. If A preferred raising his rateable value to £1600, B would get the fine, Government would get the increased rate. _The utmost pressure put upon any owner under this system would be that, if he would not pay rates on x pounds for his property, he would lie obliged to take x pounds for the property._ The 33-1/3 per cent for compulsory purchase is illusory, and I have only put it in the statement of the scheme to meet an objection which I know to be common (and equally illusory). It is clear that if I know I am going to get 33-1/3 per cent for compulsory purchase, whether from Government or a secret sycophant, I shall proportionately undervalue my property. Thus if I estimate the real value of my house and curtilage at £1200, and feel that I do not care if I sell at that price, I shall put it down in the Rate Book at £900. This applies to all owners, so that the allowance for compulsory sale would only artificially depreciate by one-fourth all the rateable values put down in the magistrate's book. I have not stopped to cumber the statement of this simple plan by adding the details necessary to meet severance of a farm by a railway company, etc. The provisions to meet complicated tenures, etc., would run much the same as in the Lands Clauses Consolidation Act. It will be at once seen that this form of Rate Book would really nationalise the land by bringing each piece into the hands of him who could make most out of it. If I saw my way to use a piece of laud so that it should be worth £1000 to me, and if on looking into the Rate Book I saw that the present owner only considered it worth £600 to him, I should at once lodge my £900 with the magistrate. A few owners would really feel as Naboth. They could indulge this feeling by putting a very high rateable value on their property. The high rates they would thus have to pay would be the due ransom of the land; but in general every piece of land would pass into the hands of him who could make most of it. There would spring up, as in Attica, a large class of professional sycophants. By their incessant operations, properties small and great would be continually passing from the slothful and the old-fashioned to the enterprising and modern-educated. No nationalisation of the land could get so much out of it or conduce so highly to progress as the National Rate Book. We should have companies and adventurers buying up all sorts of pieces of land, just as formerly they speculated in taking up land for mining in Cornwall. We should see an extraordinary activity in the employment of capital in England. For all public improvements, as a new street or a Government military station, a few minutes with the map and Rate Book would show the Government officer or engineer the best route or plot to take, and would also show him the exact cost of the land for the scheme. There would be no law expenses, no prolonged fights, no juries, no arbitrations. Wastes, downs, heaths, bogs, would be rated very low. It would be in the power of Government to take up largely and at small cost large areas of Surrey heaths, etc., to provide air and recreation ground for an evergrowing metropolis. In this manner, too, public commons and quasi-public commons might be secured to the public all over England: a public-spirited town-council or a local Kyrle Society would have a wide field and an immense stimulus for action. I have not stopped to rebut the common (but mistaken) idea that burdens on the land (being in gross not more than the rackrent) affect the cultivation. Partners have long drunk at market dinners "Confusion to the black slug that devours the English farmer." How is it that these farmers did not (do not) see that there are tithe-free farms (and some tithe-free parishes) in England, and that the tenants of such farms get no advantage by being tithe-free? As I explain elsewhere, a tenant with several years of his lease to run is (economically considered) a part landowner: if the tithe were suddenly abolished, tenants with leases would get relief as well as their landlords. So if a new tax or rate is laid on land (and made payable by the tenant), all tenants with leases will have to pay such tax or rate out of their own pocket so long as their lease lasts; afterwards it will fall wholly on the landlords. It is repeated now, in nearly every country newspaper, that the English farmer cannot compete with the American grower because of the burdens on the land of England. I will not write out (I cannot improve) Ricardo's proof that rent does not enter into price. The "burdens" on land are really first charges on the rackrent and do not affect a year-to-year tenant at all. When a farmer meditates taking a farm he asks not merely what is the rent: he inquires what is the tithe, what the average amount of the rates (and is that likely to increase or diminish during the next seven years); the intending tenant only wants to know what sum in all he will have to pay for the farm; whether any of this payment is called tithe or not, or whether some of it is quit-rent, or whether he is to pay the land tax for his landlord's convenience,--about all this he cares nothing; they are mere questions of names to him. 5. MAKING THE MOST OF OUR LAND. John S. Mill, following W. T. Thornton, advocated a system of petty proprietors against the English system of large farms with hired labourers. Figures were quoted to show the splendid produce got by petty proprietors in France and elsewhere--as the result, however, of infinite toil. The petty proprietors were, moreover, shown to be much better off than our hired labourers; and the magic of property combined with independence was represented as having produced a superior class. These things may have been so, at least in some cases and particular countries, at the date (before 1846) when J. S. Mill originally put forward these views. The liberal, and radical writers on political economy and sociology still follow (most of them) on the same side, which has become in a manner historically the liberal side. There is much against it. First, Production on the large scale is cheaper than on the small; this is as true of agriculture as of other industries. The large farmer has one fixed and one movable steam-engine of his own; he has his own drills, threshing and winnowing machines, reaping and mowing machines. The petty proprietor may hire these, but at a dear rate, and few of them can work to any advantage on his small patches of corn. The large farmer has large fields; he saves area as against the petty proprietors; he has fewer headlands and fences, harbouring weeds and stopping the sun and air. The large farmer can work corn and sheep together; one shepherd and his boy will look after 500 ewes. You may travel 200 miles by rail in France and not see two flocks of sheep. Sheep-farming is seen all the world over to be an industry that pays on the large scale; and the want of it injures the corn produce of the French petty proprietor. Louis Napoleon sent Lavergne to make a report on English farming; the substance of his report is, that were France farmed on the English system by English farmers, the corn produce would be four or five times what it is now; leaving sheep out of the question. The advocates of peasant-proprietorship, at least the better informed ones, do not now suppose that a peasant receiving a few acres out of a large English average farm (and capital to make a start) could make a subsistence out of it. They believe that peasant-proprietors could maintain themselves on small plots of rich land in and close to towns, working as market-gardeners or cowkeepers rather than as farmers. This narrows down the peasant-proprietor theory vastly in its practical application; it remains hardly a national question. But I have been astonished to see in the neighbourhood of London of late years the large "gentleman" market-gardeners steadily displacing the smaller and all the single-handed men. The subject is so important that I will take one of two instances in detail. I have seen a gentleman market-gardener, eight miles or so from Covent Garden, growing strawberries, several acres in each patch. He had young men (a separate staff) out at daybreak to keep the birds off. The small gardener, growing a few long beds of strawberries, is ruined by the birds, whether he lets them eat or goes into the expense and labour of netting. The gentleman has his own large spring-vans waiting; these vans are fitted for fruit, and as the pickers gather the strawberries they deliver them in small and frequent parcels to the packers. The moment the first van is laden it starts at three miles per hour and travels to Covent Garden itself, where the strawberries are delivered to the fruit-dealer, who buys them wholesale of the gentleman-gardener. The small grower has to get his strawberries to the local railway station, and to arrange to get them from the London terminus to market; his trouble and expense are considerable; but, more important still, his strawberries do not come into the hands of the wholesale dealer in the "condition" that the large grower's do. This large grower admitted that he was paying £12 an acre per annum for some of his land; he added, "My labour per acre, and even my manure per acre, costs so much that I do not think about a few pounds rent more or less." These gentleman-gardeners are on the average better educated than the small market-gardeners; they travel about the country, gather hints, and pick up new good varieties of strawberries, etc. From their scale of operations and varied sorts of strawberries they can, even in rough wet weather or in drought, always supply to their wholesale dealer some fruit. In fine, they beat the small grower at every point; they undersell him at Covent Garden; they outbid him for desirable garden-land within reach of London. It may be said that in growing plain vegetables the small gardener would not be at such a disadvantage. I will reply (without detailing all my observations) that I have seen the same gentleman-gardener growing a two-acre plot of early radishes, and that he completely spoilt early radishes for all the small gardeners. The advocates of peasant-proprietors have thought cowkeeping hopeful for small men. In my experience dairies of fifty or sixty cows have an enormous advantage; they can have perfectly designed dairies; they have enough cream to make butter daily throughout the year (which saves much trouble, loss, and occasionally inferior butter); they can maintain approximately a uniform supply. In short, they beat, undersell, and displace the small cowkeepers wherever the large dairy is moderately well managed. The cottager or peasant-proprietor has, I believe, an advantage in poultry of all kinds. When poultry are kept in very large numbers they are more liable to disease, and the diseases are more disastrous--sweeping off the whole large stock. Fowl and egg farming is one of the most successful, perhaps the most successful point with the French peasant-proprietors. To make birdfarming successful the proper plan is to keep a moderate number of as many birds as possible--fowls, "galeenies," ducks, geese, turkeys, large pigeons--and to go in for eggs as well as fowls. I have not seen peasant-proprietors in England attempting this, which seems to me one of the most hopeful of experiments for them. The second point urged by Mill, and still by some, is that peasant-proprietors are better off than English labourers. With the present price of agricultural labour in England this seems to be very generally not the case; the French peasant-proprietors and the agricultural lower classes in Germany are (with small exceptions) now worse off than the English farm-labourer; they work very much harder and they get less to eat. The economic truth doubtless is that the hired labourer may or may not be better off than the peasant-proprietor, according to circumstances; and circumstances in England just now are in favour of the hired labourer. Then as to independence, it may fairly be questioned whether a good agricultural workman, now practically liberated from the Law of Settlement, and who can command a fair wage anywhere, is not really more independent than a French peasant absolutely tied to a three-acre plot for life. The real difference between the advocates of the nationalisation of the land and the Conservatives is this. The Conservative says, "Leave everything to its natural course, and let us have no Government interference. If the peasant-proprietor really can maintain himself while paying as high a rent as the ordinary farmer, we shall soon have plenty of them." Or, the Conservative has no objection to a philanthropist starting a few picked peasant-proprietors as an experiment. But he objects to starting any gigantic new scheme of working the land, except as a matter of business; he objects to Government philanthropy, which means giving away other people's money. Our farm-labourers, as a rule, know nothing of gardening, and few of them can command £10 capital. I have sometimes looked round to select a picked man, and wondered whether, if I put him in a selected five-acre plot near a town, and also lent him the £200 or so capital requisite to give him a chance, this picked agricultural labourer would succeed; and I have inclined to think he would not succeed. I need not therefore express any opinion as to what would happen if Government were to take 10,000 or 100,000 farm-labourers, advance them £200 each, and place them in five-acre or ten-acre plots: there would be a tremendous bill to pay, and the plan of peasant-proprietors would be put aside for many a day. If the plan is to be successful it must be introduced gradually and in a business manner, _i.e._ what does not pay must not be persisted in. The plan, now frequently put forward, that Government is to employ all men out of work to reclaim and bring into cultivation waste lands, is liable to additional objections. Who is to fix the wages, the hours of labour, and the tale of work for the Government labourers? If these were fixed as the advocates of the plan wish them fixed, Government would soon have all the labourers of the country in its employ. If, on the other hand, these were fixed below the market rate, Government would only have such labour as the Poor-Law Unions now have, and which they find hardly worth employing. Leaving this (practically grave) difficulty aside, if a heath or a moor is now uncultivated it is because nobody sees how it can be profitably brought into cultivation; it can always at a sufficient outlay be reclaimed, but that will not be done unless it is calculated that the rent of the land when reclaimed will pay the interest on the whole expense of reclamation, and something besides. If Government reclaims land that private persons cannot reclaim with profit, we may be sure that Government will suffer a considerable loss. This must be provided out of taxes: are the promoters of reclamation of wastes by Government prepared for this? The wastes of England are the only land left the public. Elsewhere the public can only walk along a pavement or a high road. The good land is all pretty well in cultivation; and the best of what is left can give but a moderate profit on reclamation, while its enclosure, under Act of Parliament, deprives the public of it for ever. Hence Professor H. Fawcett, throughout his parliamentary career, put his veto with great success on all enclosure schemes. It is possible that there might be a profit on the enclosure of Epping Forest: who will now support that reclamation? It is very desirable that wealthy private philanthropic individuals and wealthy private philosophic societies, should try experiments in small farming, market-gardening, co-operative farming, reclamation of wastes, etc. There is no hindrance to their so doing: they can readily hire as many farms as they please at cheap rents, and subdivide them, and put in picked labourers with an advance of capital. But that Government should embark in uncertain speculations of this kind is quite another thing. The safe general principle, whether in the sale of horses, the letting of houses, or the letting of land, is that Government should not interfere; or, to speak more correctly, Government interference should only interfere to prevent restrictive covenants and to ensure Free Trade, so that every article (land included) may pass without restraint into the hands of the man to whom it is worth most. The greater the individual profit the greater the national profit. Under a section headed "Law," below, I will say something about the removal of entail, etc.--a dry but important branch of the question. The National Property Rate, with the aid of sycophants, would remove many obstructions. There has been much controversy and several Parliamentary Acts concerning the regulation of bargains between landlord and tenant. How a tenant or a landlord can be injured in such a bargain is impossible to understand, except in so far as a man is injured who gives £30 for a horse worth only £20. Will Parliament interfere to protect such horse-purchasers? The matter has been obscured by omitting to notice that a tenant with a long lease at a fixed rent possesses a share (often the larger share) of the "landlord interest," in the language of political economy. As a simple example: A tenant took, say in 1850, a Scotch farm on a Scotch lease absolute of nineteen years, at £500 a year. Within two or three years of his so taking it the rise in wool, potatoes, and other things, caused the value of the farm to rise to £600 a year, and this increased value lasted the whole of his lease and some time after. Now, treating the increase of value of £100 a year as permanent (as it was very soon regarded both by landlord and tenant), it is clear that this £100 a year for the period of the lease (say seventeen years to run) went to the tenant, not to the landlord; and the first seventeen years of an annuity in fee is worth more than all the rest. It is evident that on a seven years' (absolute) lease the tenant would similarly get a good share (not the larger share) in all the improvement in value that occurred during his lease. Up to ten or twelve years ago the value of land had been rising very steadily in the South of England for near half a century. Rents were pushed up very generally at the termination of every lease, though noblemen, great county gentlemen, the Church, and the Universities, as a rule, never raised the rent on an old tenant; but they could raise the rent all the more by a jump when a new man came in. During all these years the tenant-farmers complained rarely of their leases, though they were often subject to covenant nuisances about cropping, selling off the farm, game, and incoming for the new tenant. But during the last ten years the process is reversed. A farmer took a farm for £500 a year for seven years in the south of England, and before the lease had run half out the farm was not worth £400 (and in many cases not £300). Here the tenant suffered a heavy loss. When in former years he got a gain he never proposed to allow his landlord 15 per cent extra rent. But now that the drop in value of such farms has taken place, and probably will not proceed further, a tenant who takes a new lease requires no Act of Parliament to protect him: he can protect himself. By the date the Abolition of the Game Laws (a wrong but intelligible phrase) was carried, the farmers in the South of England were in a position not to take any benefit under that Act, but to covenant for all the game and sporting on their farms for themselves. So as to the Act regulating the leases between tenant and landlord, where they chose to avail themselves of it, the tenant now can generally get more favourable terms outside the provisions of the Act. Farms are so down, tenants so scarce, that landlords have to give way on all minor points. Wherever Government interference operates at all, it is almost sure to operate harmfully. Consider for a moment the case of "incoming." Formerly, by the "custom of the country" south of London, the incoming tenant paid for two years' dressing for the corn crops, north of London he paid the outgoing tenant only for one year's dressing, by the custom of the country too. The question practically only amounted to increasing by 5 per cent the capital necessary to take the farm south of London. Now what can be gained by Government interference in such a matter as this, in which each farmer and land-agent was in general in favour of the "custom" he had grown up under? A prevalent idea is that the land is not highly farmed enough, and that the land of England might be made to yield much more, and that Government is to cause this to be done. It is most unfortunate to raise this theory at the moment when land is "down," i.e. when produce is cheap, labour expensive. Every farmer knows that the only way to meet these conditions is to farm "lower." In a south country farm the farmer will sow much less corn, and try to keep more sheep. In the Western States of America, where produce is very cheap, labour very dear, the "lowness" of the farming is always abused by the English traveller (who thus shows that he knows nothing about either farming or political economy). A farmer, twenty-five years ago, took a very large and fine corn farm: it had been worked on the five-course system, i.e. three white crops in five years; the farmer made a careful calculation whether a four-course husbandry, i.e. two white crops in four years, would not be more profitable; it appeared to come to exactly the same thing. At this juncture a rise of a shilling a week in wages took place; this gave a clear advantage to the four-course, and the farm was at once worked round to the four course shift. In this simple case a small rise in wages brought about a considerable diminution in gross produce, while the loss to the farmer was small. The remarks in this section have been directed to the case, common in the South of England, where there has been within the last twelve years a fall of rent from 25 to 50 per cent. In pasture farms, in rich land, and in potato farms (wherein you can keep one-sixth the land in potatoes), the fall in rent has been much less--sometimes inappreciable. But, some person may urge, if Government interferes, and compels the farmer to farm higher than he wishes to himself, the gross produce will be more, and the employment for labourers will be at the same time better. True, and this is the quintessence of Protection. The whole point of Free Trade is to allow capital to be employed where it is most profitable: high farming is only to be preferred (both for individual and nation) to low when it is the more profitable. Capital that cannot be employed to ordinary trade profit on the land must be transferred to other industries where it will earn the ordinary rate of trade profit; or, if there is no trade yielding such profit ready to absorb it in England, the capital must go to the United States or New Zealand and earn an increased profit. As to the labourers, they must follow the capital; or they may starve in England leaving few progeny, while the well-fed labourers of the Western States of America and New Zealand leave large families: this will do instead of emigration. It is to be noted that great improvements in farming, especially in machinery, have been effected in the last thirty years, largely by the operation of the All England and County Agricultural Societies. I note further that the people who abuse the farmers for bad farming and clamour for Government interference to promote high farming, conspicuously refrain from supporting these agricultural societies. 6. FREE TRADE IN RAILWAYS. Government might monopolise the retailing of tea in England. At present, in a country town like Exeter or Canterbury, there may be fifty grocers selling tea. In their competition they lay out a good deal in advertisement and handsome shop fronts in the most expensive streets; they keep (the fifty between them) many more hands than are necessary to retail the tea. All this outlay has to come out of the consumer. Government would buy pure tea first-hand in large quantities cheap; a few trustworthy highly-paid officials would test it, value it, and see it done up in sealed packages of sizes from 16 lbs. down to 2 oz.: these might be sold in an odd room attached to the Post Office in each town and village. There can be little doubt but that a saving in capital and labour would thus be effected, while the public would get the tea cheaper and purer than at present. The 2 oz. purchaser, in particular, would pay a good deal less for 2 oz. of real tea than she pays now for 2 oz. of rubbish. Or,--Government might hand over the tea-retailing of Canterbury and five miles round to a company as a monopoly: the state of things would be something like what we experience in the large stores now: the public would get their tea probably cheaper (quality considered) than at present; the company would make a large profit on their capital. If Government sanctioned two tea-retailing companies at Canterbury, these would probably make a less rate of profit: though, after the first heat of fight was over, they would probably agree to sell the same tea at the same (profitable) rates, and the consumers would gain little out of so restricted a competition. If a new company were to apply for a private Act to enable them to retail tea at Canterbury, the old company would show Parliament that themselves sufficed to satisfy the requirements of the public. The case of tea is a very specious one. By Government taking to itself each branch of business in succession till all was in Government hands we should arrive at Communism. For each successive interference of Government a reason from economy can generally be found: as in the case of telegraphs, so in the case of tea. The real objection to Government monopolising the retail of tea is, that so long as we live under a system of competition we had better stick to that plan altogether. At every turn of our present struggling system there is waste; but the ultimate effect of competition is to reduce the waste to a minimum. In the extreme case of tea it is pretty clear that the system of stores will, when fully developed, give the public all or nearly all they might hope to get from Government retailing, and at the same time will reduce the loss by competition among tea-retailers. But there is one industry, one branch of the public service, which should be the very last to be monopolised or restricted by Government, viz., the carrying of passengers and goods from one place to another, especially carrying by railway; and yet this particular industry is hampered by law and restricted by monopolies above all others--as I suppose, most unnecessarily; but I will take a few cases in detail before arguing from the general principle of Free Trade. There is one railway from London to Brighton: there are two railways from London to Exeter. There are fewer quick trains daily from London to Brighton than from London to Exeter. There are third-class carriages at a penny a mile on all the quick trains from Waterloo to Exeter: from London to Brighton the only penny a mile train starts at an inconvenient hour and travels exceedingly slow. The Brighton charge express fares on every convenient quick train they run; the South-Western have no express fares at all. The South-Western third-class carriages are padded, and as comfortable as the first; the Brighton third-class carriages are bare, very long, and run so badly that the shaking, the rattling of glass, and the draughts, keep everybody (who can possibly afford it) out of them. Naturally there have been numerous schemes for a second railway from London to Brighton in the course of the last twenty-five years. The present railway company has (they are not to blame for it) opposed each scheme tooth and nail. They have shown that they themselves satisfy the requirements of the public, and at the same time do not make a very high dividend. If a new grocer required an Act of Parliament to set up as a tea-retailer in Canterbury, could not all the existing tea-retailers there prove most triumphantly that an additional grocer was not wanted, and that their own profits were reasonable? It is not too much to say that the greater part of the evidence admitted by Parliamentary Committees against proposed new railways is foolery: without wasting time on it, the Parliamentary Committee might assume as proved that no monopolist trader wants a competitor. But the only safety for the public is in competition. In railway competition the public always profit: if the two companies agree to run at the same fares, the public gain in number and speed of trains, better carriages, and attentive consideration of their comfort. Moreover, in the case of two railways between London and Exeter, or between London and Brighton, the two lines only meet (not then quite) at the two termini; and the public is accommodated at all the new intermediate stations where there was no station at all before. The North-Western Railway was many years ago opposing a directly competing scheme. They brought before the Parliamentary Committee the late Mr. Horne, whom they justly credited with ability enough to throw dust in the eyes of almost any Parliamentary five. Mr Home's evidence was: "I understand railway traffic as well as anybody; the public are deluded in thinking they would gain by competition: the two companies might fight for a week or two, then they would more wisely agree, and put up their fares above the present North-Western fares, till they had recouped themselves out of the public all they had lost by their fight." This did very well for the Parliamentary Committee; but it is a fallacy. At present the North-Western Railway, though empowered by law to charge three-pence a mile first-class, charge twopence a mile only: why?--because twopence a mile they find to be on the whole the most paying rate. Ergo, after the fight with their directly competing brother was over, they would settle down to twopence a mile again. The public could not lose by the competition; they might gain. All experience shows that they invariably do gain. In France, Government has restricted the construction of railways very greatly, and protected the monopoly of each existing company closely. The mileage of railway open in France, in proportion to area and population, is very small in comparison with that in England. Moreover, the French lines are worked by quasi-Government officials, whose object is to avoid work, and still more to avoid responsibility, and who will not make the slightest effort to accommodate the public: they do not wish the trade at their station increased. Under this system the traffic on the French railways is low; especially when we consider how little each is interfered with by other lines, and what a broad band of country it has to drain. The immense progress made by England since 1846, as compared with the progress of France or of Germany, is often attributed _solely_ to Free Trade. I believe Free Trade has done much for us: but I am sure that our railway superiority (to France, Germany, etc.) has done much also. Probably no one who has not _resided_ some time in a French town (say a station on a main railway 150 miles from Paris as the least favourable case for my argument) can realise the enormous disadvantage by loss of time that a French business man is under, as compared with the Englishman. To get some necessary manufactured article from Paris is a matter of days; during which his machinery may all stand still. The communication with Paris, however, is where the Frenchman suffers least: the number of trains is so small, and the slowness of all (but the express) is such that the "local" traffic is nothing: unless a man intends to go a good many miles he would ride or even walk rather than go by train. He does not mind getting up at 2 a.m. to go to Paris; but he will not get up at that hour to go six or eight miles, especially if he is given no choice as to the hour at which he must return. But the usual remark about the French railways is, "See how much better they manage these things in France. While our railway companies are all spending their money in fighting and in competition, and pay dividends of 4 or 5 per cent, the French railways have their routes settled by Government engineers, and pay 8 or 10 per cent." I am going to propose a plan for stopping all company fighting in England for ever: but--as to the dividend--it can only mean that, like any other Government monopoly, the French public are being made to pay more for travelling than they need. As regards the interest of the public, the rate of dividend paid by a great railway company is of very small importance. For many years the South-Western Company paid double the dividend the Great Western did. How did this affect the work each did for the public--the conveyance of passengers and goods? Many common highways have been made by parishes and landowners combined for the public convenience; the capital so laid out paid no direct interest (the road was a highway, not a turnpike): how does this case differ from a railway that pays no dividend on the original stock? If the railway carried me from Exeter to London in five hours for thirteen shillings, what does it matter to me whether the company pays 2-1/2 per cent or 6-1/2 per cent to its original shareholders? In a very few small and special cases we have seen a railway line not pay for the working, and be closed. In a few other cases, where the dividend paid is less than 4-1/2 per cent, it is possible that the utility of the line to the public is less than the loss of the shareholders in a non-paying investment. I say this is a possible and conceivable case--in some very short lines or in some very thinly inhabited districts. Such cases I believe rare. Not rarely the initial cost of the line has been seriously increased by promotion, legal and parliamentary expenses, enormous sums extorted for land, severance, etc.; if these expenses can be done away with, these cases of railways constructed at a loss _on the whole_ to the nation may be made fewer still. The way in which the railway monopoly, the monopoly of the great companies, has grown up is noteworthy. To enable a company to take the land of a private man compulsorily a private Act of Parliament was necessary. The Parliamentary Committees then said, We will not enable you to dispossess forcibly private owners of their land for "a public purpose" unless you further shew that this includes a public advantage. Private owners were of course let in to show cause against a new railway; they always talked like Naboth (the Parliamentary Committees must have been wearied by the continual references to Naboth), but the genuine private owners sold themselves at the last minute; after they had pushed the company up to the highest bid, they well knew that this was above what they could get in the after arbitration, and "closed," withdrawing their opposition the last day in the Committee room. The opposition company, besides the grounds of insufficient need for a new line, etc., always supports and comforts the opposing landowners: but the great resource of the opposing company is to hire a landowner to oppose, especially a local attorney or agent who owns land proposed to be taken by the new line. Such an attorney, employed professionally by the opposing company, cannot be bought off at any price; he is a real Naboth, and in his character of a dispossessed landowner he will fight for the company every point that they cannot decently fight for themselves. Opposing a railway bill in Parliament has thus become an art; so much so, that no independent small line can be made unless they can get the support of one (at least) of the great companies that are supposed to occupy the area. The lines made (economically often) by the great companies themselves are not primarily designed for the accommodation of the public, but for the private purposes of the great company; sometimes they are made merely to diddle another great company. It is well to compare the law regarding making a new railway with that for making a new main-drain in the fens. In the latter case the new drain company receives extraordinary powers and may put a rate on the land benefited. In the case of a railway passing through a farm, the common estimate is that it adds a shilling an acre value to the rent of the farm; if there is a station on the farm it often adds much more to the agricultural value. Landlords are up to this: a landlord triumphantly told me, "I got £7000 from that company for cutting me up; but I would have given them £14,000 to cut me up more." (In this case, however, building value came in.) But the disgraceful squabbling of companies, who "sell" any owner without scruple when they come to terms among themselves, has disgusted landlords from actively supporting railway schemes. A great deal of the opposition between rival companies has been from their point of view an error, as they have subsequently discovered for themselves. When the Great Western Company first opened their station at Basingstoke there was war between them and the South-Western, who thought all their London West-End passengers would transfer themselves to the Great Western at Basingstoke in order to avoid a cab drive from Waterloo to Paddington. Some passengers do so transfer themselves. But _via_ Basingstoke a fine trade sprang up between the south of England and the Oxford and Leamington route, which far more than compensated the South-Western Company for the London passengers they lost at Basingstoke. So in a very few years there was peace at Basingstoke, and a through-carriage daily from Birkenhead to Southampton. I think it is impossible to estimate how much one railway company profits by the facilities afforded by all the surrounding companies. The loss at a limited number of competing termini is seen; the gain in the local and cross-country traffic is not. I propose Free Trade in Railways. I mean that any person or company shall be free to make a railway wherever they please. They will have, before commencing the line, to lodge with the Board of Trade the cost of the land they take as valued in the National Rate Book, with the 30 per cent for compulsory purchase. They will not have to lodge the money where they have come to terms with the owner; and the Board of Trade will allow them to construct the line in reasonable sections. Having lodged their money, the company (or private speculator) will only have to go to work under the (amended) Lands Clauses Consolidation Act. If this scheme were sanctioned we should have in the course of the next twenty years, _as I estimate_, £100,000,000 additional invested in England profitably--not under Government pressure, but by business men to get interest. Even where the new lines paid little interest we should get the accommodation of the public. We should have no big village without its railway; and we should have a great extension of private sidings. On the eastern half of England we might get a great number of narrow gauge steam trams running along the present trunk roads. (Suppose a steam tram from London to York by the Royston route, going through all the towns, running trams an hour apart all day, going eight miles an hour through the towns, sixteen or twenty miles an hour in the country, taking up and setting down everywhere, would it not pay?) The only objection to Free Trade in railways is that it would injure the existing railway monopoly. Under this principle no monopoly ever would have been or ever will be put down. But I believe the existing great companies would very generally gain by Free Trade in railways. For, first, few new railways would be in direct competition with the old. The old lines have level roads; they can run quicker and with less wear and tear than the new ones, which would generally have steeper gradients. The new Free Trade lines would be in the main a network in the interstices of the present lines. By this the existing companies would gain enormously; they would be the trunk lines which the network would feed. It is true that there would soon be a second line to Brighton; the present Brighton Company would possibly pay as good a dividend then as they do now. But if they did not, it would only show how they tax the public now as well as hinder trade. I am not bound to show that the monopolists would profit by Free Trade; I deny that the monopolists have any vested interest in their monopoly, or that Parliament, i.e. the nation, has made any covenant with them that their monopoly shall never be invaded. I have suggested three great changes: (1) Perfect Free Trade at all our ports; (2) The exploitation of the land through the National Rate Book machinery; (3) Free Trade in Railways. Of these the last is clearly advisable, nor is there anything (in my opinion) to be urged on the other side. At the same time it is not less important than either of the two other suggestions. But the three would work best together--each aiding and reacting on the other; they would thus provide "progress" (which means comfort to all classes) in England for at least two generations of men. If there was no National Rate Book, the new railways would have to pay exorbitantly for the land they took up under the existing arbitration system; they would be relieved merely from the parliamentary opposition of other companies and of private individuals. The private owner must be deprived of his present privilege of parliamentary opposition, which gives him the power to extort an exorbitant price for his land--because a company can always oppose in the garb of some private owner whom they have hired. A less but important branch of this reform is the narrowing of Government interference under pretence of protecting the public. Great expenses are thus thrown on railway companies. The companies cannot, therefore, charge increased fares, but such expenses diminish the number of new railway schemes brought forward. Nor do Government rules protect the public so well as the old plan (abolished by Chief-Justice Cockburn) of making the railway company pay for killing or injuring people. Now, after a great railway smash, the company comes forward and shows that there was no negligence on their part; that in the signals, breaks, etc., they had satisfied all the Board of Trade regulations, and the injured passengers can get nothing. The real way to protect the passengers is to allow the company to make their own arrangements, and to compel them to pay heavily for killing and maiming passengers. This is quite defensible in theory, as in the case of manslaughter by an individual we give him some punishment out of our civilised respect for human life, though he may have been little to blame. Great cost is thrown on railway companies (i.e. much injury is done the public) by standing orders (cast-iron orders) about gradients, etc. The company's solicitors order the company's engineer to comply with standing orders at all costs rather than introduce any special clause. The consequence is that we see much money spent and a most inconvenient level-crossing placed at the entrance to some large town, where a steep gradient for two hundred yards on a straight piece of road (to which there is no objection) would have avoided all difficulty. The responsibility in all such cases should be thrown on the company, and Government interference abolished. 7. REFORM IN LAND LAW. The transfer of stock in the name of two trustees in the funds is done in a few minutes at small expense. The transfer of land in South Australia is done in a few minutes at small expense at the Government registry. The transfer of land in England requires an uncertain time and cost--usually some weeks, and 5 per cent on the purchase money; sometimes months, and 10 to 25 per cent on the purchase money. It is equally expensive and slow in the register counties of York and Middlesex. The Acts of Brougham, Bethell, Cairns, to facilitate transfer have not materially reduced the evil. In many cases, however much the land may be wanted for public or other purposes, the lawyers tell you that no title can be made without a private Act of Parliament--so effectually has the land been tied up. The common idea is that this peculiar difficulty, delay, and cost in the transfer of land arise from the law of inheritance and the legal machinery of entail; but stock in the funds can be virtually entailed and made to "follow the estate," and yet this stock can be transferred just as readily as any other stock. The explanation is known to every lawyer; but I have met with more than one Member of Parliament who, though blatant about entail, understood no more about the matter than a chimney-sweep. The point is that, under English law, the trusts in the case of stock attach to the trustees, not to the stock; in the case of land, the trusts attach to the land itself as well as to the trustees. Hence, when I purchase stock of trustees I need not trouble about how they apply the purchase money; in the case of land I have to go into the whole title. A simple illustration. I provide for a daughter £300 a year by putting £10,000 in the hands of two trustees in the funds. Should the trustees prove rascals, sell the stock, and decamp with the money, my daughter will lose everything; the purchaser from the trustees can hold the stock clear of all charges or liability. But if I provide for my daughter by charging an estate with £300 a year for her, then however wrongfully that estate may be sold, mortgaged, or otherwise dealt with, she gets safely her £300 a year. If the bank B has advanced money on mortgage on that estate, not knowing the existence of the charge of £300 a year for my daughter's benefit, the law simply says to the bank, "It was your business to know; you should have completely investigated the title before you advanced your money." It follows, therefore, that if, with a Government Land Registry Office (say one for each county), you required the purchaser only to get in the legal estate, _i.e._ holding him not responsible for the trusts or the application of the purchase money, then land could be transferred exactly as money in the funds is now, in spite of all the complications of our law (or rather custom) of entail. The law of entail in England (so called) is not what the popular orators suppose. The eldest son inherits really; that is, if there be no will, no settlement, or other disposition of the property. But there nearly always is. It is a very rare thing for the heir-at-law to take land (except some very small pieces) by the law of inheritance. As to entail, it is practically carried out by a continued system of surrender and re-settlement--a device of lawyers which is, in its historical development, an evasion (rather than a part) of the law. Nevertheless, I think it is a matter of importance that the shackles which fetter land should be loosened, and that the present powers of owners to tie up land legally should be very much curtailed. It is a sad proof of the way riches cling to the heart of man even when he is leaving this world, that, whatever powers of tying up land are sanctioned, an owner will usually exert them to the uttermost. He is leaving his property, but he will keep a hold on it fifty years after he is dead if he can. He will, after exhausting his powers in life interests, leave the residuum to an unborn child "in strict tail-male so far as the rules of law will permit;" and he will stick in a springing use to effect that, if his greatnephew, the Rev. George, should ever from an Anglican become a pervert to Roman Catholicism, he shall take no benefit under the will. Now the fact is that all tying up is to the detriment of the public. No man can provide for all contingencies. Indeed he can see so little a way ahead that in a few years it frequently happens that all the careful provisions of the will are working exactly as the testator would have desired them not to work. Land tied up is always worth less to the owner because it is tied up; and we have seen that the interest of the commonwealth is the sum of the interests of all its component members. When you tell me that an estate is now of small value to its life-owner and unget-at-able for any public purposes, in consequence of a will made by a man who died twenty years ago, it appears to me that you shew me convincingly that we have not Free Trade in land. I would propose that, either by will, settlement, or other instrument, an owner should be able to give any number of life interests, and nothing more; all trusts being placed outside the law. The first objection will be that if the powers of owners are so restricted, the desire for the ownership of land will be lessened: the value of all the land in England will fall. This might be so, I admit, to some extent; and it would favour the employ of the land for agricultural profit. The next objection is that it would become necessary to give land (and money) directly to women without the intervention of trustees: that women do not understand business and require to be taken care of. My reply is that they always will require to be taken care of unless they are entrusted with the management of their own affairs. The loss to the nation, the expenses, the sacrifice of time and labour in trusteeships, have now assumed gigantic proportions. If women were given their own property to manage, some would (at first) fool it away: we know what high interest, adventurers, unprincipled persons, etc., can effect. But each woman defrauded or stripped of her property to starve would be a warning to all the rest: in a few years women would manage their property just as well as men. I believe they would manage it better. A smaller percentage of women would gamble on the Stock Exchange, the Mining Exchange, Austrian and Spanish lotteries, and horse-races; and a much smaller percentage of women would embark in desperate "business" speculations, heavy purchases of foreign produce, etc. It should be noted that in cutting down the powers of owners to legally tie up, I do not interfere with honourable trusteeships of any kind not enforceable by law or in equity. Such exist now, and more largely than is generally supposed. The absolute devises and bequests to friends (not relatives) are often on private (not expressed) trust to provide for illegitimate children or numerous other purposes which a man may not wish to parade to his family. 8. EQUALISING OF TAXATION. There has been no readjustment of the land tax for very many years. It is a property rate, and originally was rateably levied at four shillings in the pound. By the small increase in value of some land, the large increase in value of other land, since the days of Queen Anne, it has now become unequal in the highest degree. The farm A, gross rental £100 a year, has a land tax of £5 a year; the suburban estate B, gross rental £1000 a year, has a land tax of £2:l0s. a year. The land tax assessors were sworn in annually (twenty years ago, and may be still) to assess the tax equally, but it was perfectly understood that the tax was to be collected every year on the old long-standing assessment. Suppose that the estates A and B above were reassessed, and that the land tax on A was put 15s. per annum, that on B £6:15s. a year. Land tax can be redeemed at about thirty years' purchase. The effect of the readjustment would have been to take about £120 from the owner of B and give it in a lump sum to the owner of A. It is probable that the present owners of both A and B (or predecessors under whom they claim) had purchased the estates A and B after the land tax had become fixed on them, and the amount of land tax would then have been fully considered in the price paid. We see thus that in the case of the land tax, as we saw above of the tithe, and as is also the case in any tax permanently on, a disturbance of the existing taxation is inequitable. This point is so much misunderstood that I will give one more illustration. I am purchasing an estate, intending to farm it myself. There are 400 acres of land, and I reckon the land worth 30s. an acre. I am willing to give twenty-five years' purchase. I find the tithe is £100 a year. I therefore propose to give twenty-five times £500 = £12,500 for the land. But before the bargain is completed I find that the tithe is £150 a year. I at once sink my bid to twenty-five times £450 = £11,250, and buy the estate at that price. The next year some financier "equalises" the tithe, and my tithe is reduced to £100. Is it not clear that, by the equalisation, I pocket £1250, and somebody else loses it? New taxes when imposed should be "equal," as far as can be arranged. When a legacy duty was imposed, it would have been just to impose a succession duty also. But, after the legacy duty had been imposed twenty years with no succession duty, it was similarly inequitable to put on a succession duty; for quantities of land had been bought in the interval of twenty years at a slightly higher price than if there had been no legacy duty, because there was no succession duty. The proposal for "equalising" taxes is usually put forward in order to get a somewhat larger gross income from the taxes equalised, or as a political cry. Nothing can be more absurd than the cry that the land is over-burdened in comparison with other property. There is no comparison in the case. Some land being tithe free, some land tax free, some nearly rate free, those persons who do not trouble themselves to master the political economy may yet be satisfied that the "burdens" of the land affect neither the farmer, the labourer, nor the produce of the farm; the burdens fall _wholly_ on the landlord (a farmer with a lease being, as above shown, a part landlord). The efforts of some Conservative orators for the last twenty-five years to prove the contrary are erroneous in the reasoning; or I should say, much of the "reasoning" does not hang together at all. Without formally refuting these efforts, I repeat that they are fully refuted in the result. It is therefore that I have insisted above that, in order to carry out the proposed ransom of the land, a new Property Rate, separate from and in addition to all other taxes, is necessary. Though the manner of levying a National Property Rate which I have proposed lends itself very nicely to getting in such an extra tax, it is not at all on that ground that I have suggested the new manner of levy. The object of the new manner of levy and the sycophants is to get every piece of land in the country into the hands of that man who can make most of it; including herein as an important item the cheap and easy acquisition of land required for Government, public and commercial (railway, etc.) enterprises. In any great reform of our whole system of taxation a disturbance of existing interests must take place. Though I would not disturb existing interests for the sake of mere equalisation or official beauty of work, I would not let the fear of disturbing private interests stand in the way of any real or important reform. The introduction of Universal Free Trade and the abolition of all duties would be accompanied by a disturbance; but, as far as I can see, no one would lose, while many would gain enormously. On the same ground of equality of new taxation I should propose to replace the amount now levied in duties mainly by an income tax. That is a perfectly level tax; the idea that temporary incomes ought to pay a lower rate is fallacious. We are all agreed to tax the poor at a _lower_ rate; we have now a section of advanced Radicals proposing to tax the rich at a higher rate. One present candidate for Parliament is even willing to tax people of £100,000 a year and upwards at nineteen shillings in the pound. This of course, or anything approaching it, is unpractical. But I have suggested above, as a rough plan in accordance with the existing one, eight-pence a week on incomes of £1 a week, twelvepence a week on incomes of £2 a week, sixteen-pence a week on incomes of £3 a week and upwards. The question may very fairly be raised, Why stop this process at £3? why not continue the series and develop it into a mathematical law? This might be done more easily with a sixpenny income tax than a heavy one. To tax earnings and savings (that is an income tax) instead of expenditure can only be carried a certain way; if the tax is large enough to diminish saving and promote living up to one's income, and at the same time to send capital abroad, its effects would be serious. For a particular and noble purpose I have suggested sixteen-pence in the pound (which we bore without serious inconvenience in the Russian war); I should imagine twenty to twenty-four pence in the pound about the maximum that could be imposed for any purpose--such as the prevention of hostile invasion. It must be noted that more than the maximum bearable cannot be put on large incomes, £100,000 a year, etc., any more than on small ones. Indeed it is rather the contrary; for persons with large incomes are usually the very people who already invest largely abroad, and who could (and would) transfer their capital rapidly out of the country if they were subjected to anything like confiscation. Instead therefore of proceeding _upwards_ in our income tax sliding-scale we must proceed downwards. Taking sixteen-pence in the pound as the maximum rate we can impose on the big fish, the problem will be, What is the highest income to which you will allow any remission from the maximum rate? I think those having above £150 a year possess more than the necessaries for healthful existence; looking therefore to the equity and productiveness of the tax, I suggested remission to those earning less than £3 a week. 9. WEALTH OF THE NATION. The Wealth of Nations is a well-considered title. The economists anterior to Adam Smith conceived England as surrounded by a barrier impassable to property and money except by trade. In trade there was an exchange apparently on equal terms; but the old economists saw a difference in nature between imports and exports; when wool was sold to Flanders gold was received, and remained somewhere in the nation; it formed the national purchasing power, and could hire mercenaries or otherwise command foreign labour and productions. Inversely, when we imported wine or tea, we had to part with a portion of our national purchasing power, while the wine and tea went down our throats, leaving nothing in its place. It appeared clear that for any increase in national wealth the value of the exports must exceed that of the imports. Every well-prepared boy can now show in ten minutes' scribbling in a Government examination the ridiculous folly of the old economists; but several of them were experienced London merchants, and perhaps were not the complete idiots they are now triumphantly shown to be. If they had been asked whether wool was a part of the national wealth they might have returned an answer that their modern detractors are not quite prepared for. Adam Smith and his followers, and still more closely Ricardo, divided their Political Economy into two parts: in the first they consider the wealth of the nation without the "complication" of foreign trade, _i.e._ they, in fact, contemplate no money or goods as going out or coming in whatever. They then in separate chapters, forming a big appendix, consider the effects of Foreign Trade as a series of exchanges. They do not discuss even the payment of a lump sum of gold to a victorious nation. Senior, in his _Handbook of Political Economy_, has considered, first, the economy of the world conceived as a solitary, island of small size in a world-covered sea; secondly, he treats foreign trade by conceiving two such islands. There is no better way of treating Political Economy than this; and it is well for the beginner to conceive the solitary island with fifty (or a limited number of) families only on it, and work through the ordinary theorems (with figures) in this restricted case. Whatever is true of the fifty families in a small island must be true for 5,000,000 families in a big island. The facilities of modern communications have caused most countries to differ in their circumstances materially from the conditions assumed by Adam Smith and his successors as axioms. In the case of England, owing to its numerous wealthy colonies, gigantic foreign trade, and consequently world-over-spread capital, the circumstances are so completely altered that many results of the grammar of Political Economy no longer apply even in the rough to England. If Adam Smith had been asked what would happen to England if the imports for one year exceeded the exports by £150,000,000 sterling, he would have given the same answer as his predecessors, who reckoned wealth in gold and silver, or more probably he would have declined answer, pronouncing such a state of things an impossible conception. It is now as difficult to treat politico-economically the wealth of the nation as the wealth of Warwickshire--a difficulty that Adam Smith would have shrunk from. It is true that every abstract proposition concerning rent, capital, and wages now (and always) holds true for the whole world; but, so conceived, the propositions give no practical result. These things do not lesson the value of the science of Political Economy, Mr. Ranken or Dr. Pole would estimate very highly the value of a knowledge of elementary mechanics to the humblest engineer, though such elementary mechanics might not extend to the consideration of friction, etc., and might not be applicable to any bridge or steam-engine. Of this £150,000,000 that is now annually remitted to England, not in the way of exchange, some small portion is transferred by wealthy Australians returning to settle in England for purchase of houses, etc., in England; but by far the greater portion is the interest of capital owned by men resident in England, but invested abroad: it may be shortly termed tribute. This is mainly invested in the Colonies and India; New Zealand and Australia taking large shares. There is also much English capital invested in Continental railways, etc.; but it is noteworthy how capital (as well as commerce) follows the flag. The English capital invested in the United States is absolutely large, but relatively (to that invested in Canada, etc.) very small. It is certain that if the United States were under Queen Victoria the amount of English capital invested there would be far greater than at present. As far as England is concerned this £150,000,000 a year is a tribute paid her by the rest of the world. New Zealand or South Australia may take up a million sterling in London (because they get the loan placed there at 5 or 6 per cent, while the local rate of interest in Australia is far higher) in order to make a railway which perhaps pays the local Government as much as the interest of the money they give to England. Still, the capital being once fixed in Australia while (by hypothesis) the stock is held in England, the result is equivalent to a tribute. All Liberal stump-orators now agree in telling the agricultural population that their improved position is due to Free Trade (in wheat), and that therefore they should vote for the Liberals. Nothing is done more confidently in politics and history than the settling the causes of events, or predicting what would have been the course of events had some result been different, as, for instance, had the separation of the United States from England not occurred. The truth is that in politics causes are many; they act and react on each other in their operations; and to say exactly how much is due to one cause, or how much that cause acting alone would have effected, is impossible. To get some judgment how much of the present prosperity of the agricultural labourers (admitted on all sides as compared with their position in 1846) is due to free importation of wheat alone, let us (merely as a scientific artifice) imagine that a regular sliding-scale duty on wheat were put on now, bringing wheat to 48s. a quarter permanently. What would be the effect on the agricultural population? We may suppose that the produce of the duty, were it five or eight millions, or any other sum, was employed in remitting the duties on tea or other productions generally consumed by agricultural labourers. The placing of wheat at 48s. a quarter permanently would at once recall a good deal of capital to the land, it would carry out further the margin of cultivation, and at the same time cause a higher farming of that within the non-existing margin; in both ways it would raise the demand for agricultural labour, and would raise wages. On the whole, I incline to think that a sliding-scale duty on wheat up to 48s. a quarter would not perceptibly alter the position of the agricultural labourer, or might possibly improve it: it would lower the wages and diminish the profits of capital in other trades. This is not (as before explained) a fair way of arguing the question; because it is impossible to calculate the indirect effects of Free Trade in wheat, which ultimately came round to benefit the agricultural labourer. But considering how the efficiency of the agricultural labourer has been improved by improved machines since 1846, it is hardly possible to doubt that the agricultural labourer is much more indebted to the engineers than to the Corn Law League for his improved position. Under "machines" too may be included railway communications: also let us not forget how much the agricultural labourer owes, not only to drills and mowing-machines, but to boot-sewing machines, improved tea-ships, etc. If we look to the general increase of wealth in England since 1846, the first thing that strikes us is the increase in the tribute, which is about thrice what it was. This increase is largely imperial, i.e. due to colonisation, annexation, etc. But here again we must not overlook the reaction of causes on each other: our Free Trade in corn, our improvements in machinery and ships, have so largely contributed to spread our empire that it becomes impossible to disentangle the separate work, or indeed to speak of any one cause as a simple element: the causes all act together. England is the most comfortable country in the world for a rich man to live in, and consequently rich men congregate there; or, if they travel, keep a headquarters there. In this way we have congregated a disproportionate population in England. It may be argued that it would be a healthier economic state if the exports and imports balanced, and if the population of England was no larger than the country itself could grow wheat for, _at a price not exceeding 40s. a quarter_. However that may be, the important point for the working men of England to mark is, that every loss of rich men resident, every loss of tribute, every reduction of the wage-fund, every pressure on the population to emigrate, everything that leads in the direction of a self-supporting England, means immediate pressure on the poor, with reduction of wages. That is the only way emigration could be by natural law enforced. It is the poor, the labouring population, who are so hugely interested in the empire. Of all the follies taught to the labouring man the most foolish is the doctrine that the empire abroad is maintained to provide incomes for the rich, at the cost of the taxes paid for wars by the poor. It matters comparatively little to the rich whether they live at Florence or Dresden four or eight months in the year, whether the population of England is to be maintained stationary, to increase at its present rate of increase, or to be squeezed down to half its present number: but it matters vitally to the poor. Whether, ultimately, after our empire is gone and the population of England is stationary at fifteen millions say, the poor in England would be better off than now is a very difficult question, concerning which doctors differ; but it is absolutely certain that during the Banting process, in the reduction of the population down to that fifteen millions by a process of starvation and emigration, continued for two generations of men, the poor would have to go through experiences altogether novel. It is a thing that would revolutionise England; and in spite of the superior education of our labourers might lead to a break up of society. Starvation and bankruptcy make any and every man a Radical if not a Communist. To keep the poor comfortable for the present and for many years immediately in front of us, we require a continual increase in the wealth laid out in England annually in the purchase of labour. The growth of the empire, the profitable investment of capital in foreign countries (whereof the interest is paid and consumed in England), is one great resource: the profitable investment of capital in England itself is the other great, probably safer, resource. To effect this we require every acre of land to fall into the hand of the man (or company) who can make most of it: we require a Universal Free Trade that shall render our hold on the commerce of the world secure until all nations adopt Universal Free Trade (when we shall gain so much in other ways that we shall be able to afford to share our monopoly with others); we require the removal of all restraints on railways, tramways, electric lights, etc., that hamper or prevent the employment of capital in England (in other words, that send English capital abroad). Finally, underlying the whole, and as the prime cause that shall induce capitalists to employ their capital in England rather than to send it abroad, we require the labour of every working man to be in the highest degree efficient: this retards the fall of the natural rate of profits to a minimum, and the attainment of the stationary state. Whatever ideal beauty has been discovered in the stationary state by J. S. Mill, it is pretty clear that England is not approaching it. It is as difficult for us to stand still as it is impossible to go back; and our only (third) course open (for the present and for many years to come) is to progress. 
16575	----	1st edition held by The British Library, London. (Shelfmark: 432d12/432.d.12). The text was then compared against that of an original print of the 2nd edition held by the Library (Archives & Rare Books), London School of Economics and Political Science. -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= This book was copy TYPED by R.W. Jones <rwj@freeshell.org> from an original print of the 1st edition held by The British Library, London. (Shelfmark: 432d12/432.d.12). The resultant text was then compared, using a text to speech player, against that of an original print of the 2nd edition held by the Library (Archives & Rare Books), London School of Economics and Political Science. This e-text incorporates the (very few) modifications included in the later edition. Images of the four Charts are not included nor were they or the Indexes of the respective editions compared. -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= {Here appears before the fly-leaf the first chart, entitled "Chart of Universal Commercial History, from the year 1500 before the Christian Era TO THE PRESENT YEAR 1805. being a space of Three Thousand three hundred and four years, by William Playfair. Inventor of Linear Arithmetic"} AN INQUIRY INTO THE PERMANENT CAUSES OF THE DECLINE AND FALL OF POWERFUL AND WEALTHY NATIONS, ILLUSTRATED BY FOUR ENGRAVED CHARTS. ---o0o--- By WILLIAM PLAYFAIR, AUTHOR OF NOTES AND CONTINUATION OF AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS, BY ADAM SMITH, LL.D. AND INVENTOR OF LINEAR ARITHMETIC, &C. ---o0o--- DESIGNED TO SHEW HOW THE PROSPERITY OF THE BRITISH EMPIRE MAY BE PROLONGED. =========================== ___________________ THE SECOND EDITION ___________________ LONDON: PRINTED FOR GREENLAND AND NORRIS, BOOKSELLERS, FINSBURY-SQUARE. 1807. W. Marchant, Printer, 3 Greville-Street, Holborn. ---o0o--- P R E F A C E. ---o0o--- If it is of importance to study by what means a nation may acquire wealth and power, it is not less so to discover by what means wealth and power, when once acquired, may be preserved. The latter inquiry is, perhaps, the more important of the two; for many nations have remained, during a long period, virtuous and happy, without rising to wealth or greatness; but there is no example of happiness or virtue residing amongst a fallen people. In looking over the globe, if we fix our eyes on those places where wealth formerly was accumulated, and where commerce flourished, we see them, at the present day, peculiarly desolated and degraded. From the borders of the Persian Gulf, to the shores of the Baltic Sea; from Babylon and Palmyra, Egypt, Greece, and Italy; to Spain and Portugal, and the whole circle of the Hanseatic League, we trace the same ruinous [end of page #iii] remains of ancient greatness, presenting a melancholy contrast with the poverty, indolence, and ignorance, of the present race of inhabitants, and an irresistible proof of the mutability of human affairs. As in the hall, in which there has been a sumptuous banquet, we perceive the fragments of a feast now become a prey to beggars and banditti; if, in some instances, the spectacle is less wretched and disgusting; it is, because the banquet is not entirely over, and the guests have not all yet risen from the table. From this almost universal picture, we learn that the greatness of nations is but of short duration. We learn, also, that the state of a fallen people is infinitely more wretched and miserable than that of those who have never risen from their original state of poverty. It is then well worth while to inquire into the causes of so terrible a reverse, that we may discover whether they are necessary, or only natural; and endeavour, if possible, to find the means by which prosperity may be lengthened out, and the period of humiliation procrastinated to a distant day. Though the career of prosperity must necessarily have a termination amongst every people, yet there is some reason to think that the degradation, which naturally follows, and which has always followed hitherto, may be [end of page #iv] averted; whether it may be, or may not be so, is the subject of the following Inquiry; which, if it is of importance to any nation on earth, must be peculiarly so to England; a nation that has risen, both in commerce and power, so high above the natural level assigned to it by its population and extent. A nation that rises still, but whose most earnest wish ought to be rather directed to preservation than extension; to defending itself against adversity rather than seeking still farther to augment its power. With regard to the importance of the Inquiry, there cannot be two opinions; but, concerning its utility and success, opinions may be divided. One of the most profound and ingenious writers of a late period, has made the following interesting observation on the prosperity of nations. {1} "In all speculations upon men and human affairs, it is of no small moment to distinguish things of accident from permanent causes, and from effects that cannot be altered. I am not quite of the mind of those speculators, who seem assured, that necessarily, and, by the constitution of things, all states have the same period of infancy, manhood, and decrepitude, that are found in the individuals who compose them. The objects which are --- {1} Mr Burke. -=- [end of page #v] attempted to be forced into an analogy are not founded in the same classes of existence. Individuals are physical beings, subject to laws universal and invariable; but commonwealths are not physical, but moral essences. They are artificial combinations, and, in their proximate efficient cause, the arbitrary productions of the human mind. We are not yet acquainted with the laws which necessarily influence that kind of work, made by that kind of agent. There is not, in the physical order, a distinct cause by which any of those fabrics must necessarily grow, flourish, and decay; nor, indeed, in my opinion, does the moral world produce any thing more determinate on that subject than what may serve as an amusement (liberal indeed, and ingenious, but still only an amusement) for speculative men. I doubt whether the history of mankind is yet complete enough, if ever it can be so, to furnish grounds for a sure theory on the internal causes, which necessarily affect the fortune of a state. I am far from denying the operation of such causes, but they are infinitely uncertain, and much more obscure, and much more difficult to trace than the foreign causes that tend to depress, and, sometimes, overwhelm society." The writer who has thus expressed his scepticism on this sort of inquiry, speaks, at the same time, of the im-[end of page #vi] portance of distinguishing between accidental and permanent causes. He doubts whether the history of mankind is complete enough, or, if ever it can be so, to furnish grounds for a sure theory, on the internal causes which necessarily affect the fortune of a state. Thus, he not only admits the existence of permanent causes, but says, clearly, that it is from history they are discoverable, if ever their discovery can be accomplished. This is going as far as we could wish, and, as for the sure theory, we join issue with him in despairing of ever obtaining one that will deserve the name of sure. The meaning of the word, sure, in this place, appears to be intended in a sense peculiarly strict. It seems to imply a theory, that would be certain in its application to those vicissitudes and fluctuations to which nations are liable, and not merely to explaining their rise and decline. As to such fluctuations, it would be absurd to enter into any theory about them; they depend on particular combinations of circumstances, too infinite, in variety, to be imagined, or subjected to any general law, and of too momentary an operation to be foreseen. That Mr. Burke alludes to such fluctuation is, however, evident, from what that fanciful but deeply-read man says, immediately after: "We have seen some states which have spent their vigour at their commencement. Some have [end of page #vii] blazed out in their glory a little before their extinction. The meridian of some has been the most splendid. Others, and they the greatest number, have fluctuated, and experienced, at different periods of their existence, a great variety of fortune. The death of a man at a critical juncture, his disgust, his retreat, his disgrace, have brought innumerable calamities on a whole nation; a common soldier, a child, a girl, at the door of an inn, have changed the face of fortune, and almost of nature." From this it is abundantly evident, that the theory he wished for, but despaired of ever establishing, was one that would explain such effects; but the object of this Inquiry is totally different. When the Romans were in their vigour, their city was besieged by the Gauls, and saved by an animal of proverbial stupidity; but this could not have happened when Attila was under the walls, and the energy of the citizens was gone. The taking or saving the city, in the first instance, would have been equally accidental, and the consequences of short duration; but, in the latter days, the fall of Rome was owing to _PERMANENT_ causes, and the effect has been without a remedy. It is, then, only concerning the permanent causes, (that is to say, causes that are constantly acting, and produce [end of page #viii] permanent effects) that we mean to inquire; and, even with regard to those, it is not expected to establish a theory that will be applicable, with certainty, to the preservation of a state, but, merely to establish one, which may serve as a safe guide on a subject, the importance of which is great, beyond calculation. There remains but one other consideration in reply to this, and that is, whether states have, necessarily, by the constitution and nature of things, the same periods of infancy, manhood, and decrepitude, that are found in the individuals that compose them? Mr. Burke thinks they have not; and, indeed, if they had, the following Inquiry would be of no sort of utility. It is of no importance to seek for means of preventing what must of necessity come to pass: but, if the word necessity is changed for tendency or propensity, then it becomes an Inquiry deserving attention, and, as all states have risen, flourished, and fallen, there can be no dispute with the regard to their tendency to do so. However much, at first sight, Mr. Burke's opinion may appear to militate against such an Inquiry, when duly considered, it will be found, not only to approve of the end, but to point out the manner in which the inquiry ought to be conducted; namely, by consulting history. [end of page #ix] If it is allowed that any practical advantage is to be derived from the history of the past, it can only be, in so far as it is applicable to the present and the future; and, if there is none, it is melancholy to reflect on the volumes that have been written without farther utility than to gratify idle curiosity. Are the true lessons of history, because they are never completely applicable to present affairs, to be ranked with the entertaining, but almost useless, pages of romance? No, certainly. Of the inheritance possessed by the present generation, the history of those that are gone before, is not the least valuable portion. Each reader now makes his application in his own way. It is an irregular application, but not an useless one; and it is, therefore, hoped, that an Inquiry, founded on a regular plan of comparison and analogy, cannot but be of some utility. But why do we treat that as hypothetical, of which there can be no doubt? Wherefore should there be two opinions concerning the utility of an inquiry into those mighty events, that have removed wealth and commerce from the Euphrates and the Nile, to the Thames and the Texel? Does not the sun rise, and do not the seasons return to the plains of Egypt, and the deserts of Syria, the same as they did three thousand years ago? Is not [end of page #x] inanimate nature the same now that it was then? Are the principles of vegetation altered? Or have the subordinate animals refused to obey the will of man, to assist him in his labour, or to serve him for his food? No; nature is not less bountiful, and man has more knowledge and more power than at any former period; but it is not the man of Syria, or of Egypt, that has more knowledge, or more power. There he has suffered his race to decay, and, along with himself, his works have degenerated. When those countries were peopled with men, who were wise, prudent, industrious, and brave, their fields were fertile, and their cities magnificent; and wherever mankind have carried the same vigour, the same virtues, and the same character, nature has been found bountiful and obedient. Throughout the whole of the earth, we see the same causes producing nearly the same effects; why then do we remain in doubt respecting their connection? Or, if under no doubt, wherefore do we not endeavour to trace their operation, that we may know how to preserve those advantages we are so eager to obtain? If an Inquiry into the causes of the revolutions of nations is more imperfect and less satisfactory than when [end of page #xi] directed to those of individuals, and of single families, if, ever it should be rendered complete, its application will, at least, be more certain. Nations are exempt from those accidental vicissitudes which derange the wisest of human plans upon a smaller scale. Number and magnitude reduce chances to certainty. The single and unforeseen cause that overwhelms a man in the midst of prosperity, never ruins a nation: unless it be ripe for ruin, a nation never falls; and when it does fall, accident has only the appearance of doing what, in reality, was already nearly accomplished. There is no physical cause for the decline of nations, nature remains the same; and if the physical man has degenerated, it was before the authentic records of history. The men who built the most stupendous pyramid in Egypt, did not exceed in stature those who now live in mean hovels at its immense base. If there is any country in the world that proves the uniformity of nature, it is this very Egypt. Unlike to other countries, that owe their fertility to the ordinary succession of seasons, of which regular registers do not exist, and are never accurate, it depends on the overflowing of the waters of a single river. The marks that indicated the rising of the Nile, in the days of the Pharaos, and of the Ptolemies, do the same [end of page #xii] at the present day, and are a guarantee for the future regularity of nature, by the undeniable certainty of it for the past. By a singular propensity for preserving the bodies of the dead, the Egyptians have left records equally authentic, with regard to the structure of the human frame. {2} Here nothing is fabulous; and even the unintentional errors of language are impossible. We have neither to depend on the veracity nor the correctness of man. The proofs exhibited are visible and tangible; they are the object of the senses, and admit of no mistake. But while that country exhibits the most authentic proofs of the uniform course of nature, it affords also the most evident examples of the degradation of the human mind. It is there we find the cause of those ruins that astonish, and the desolation that afflicts. Had men continued their exertions, the labour of their hands would not have fallen to decay. It is in the exertion and conduct of man, and in the information of his mind, that we find the causes of the mutability of human affairs. We are about to trace --- {2} Most part of the mummies found in Egypt, instead of being of a larger size, are considerably under the middle stature of the people of England. Those dead monuments of the human frame give the direct lie to Homer and all the traditions about men's degenerating in size and strength. -=- [end of page #xiii] them through an intricate labyrinth; but, in this, we are not without a guide. The history of three thousand years, and of nations that have risen to wealth and power, in a great variety of situations, all terminating with a considerable degree of similarity, discovers the great outline of the causes that invigorate or degrade the human mind, and thereby raise or ruin states and empires. {3} _____________________________________________________________________ {3} The utility of this Inquiry is considerably strengthened by the opinion of a writer of great information and first-rate abilities. {*} An historical review of different forms under which human affairs have appeared in different ages and nations naturally suggests the question, whether the experience of former times may not now furnish some general principles to enlighten and direct the policy of future legislators? The discussion, however, to which the question leads is of singular difficulty; as it requires an accurate analysis of by far the most complicated class of phenomena that can possibly engage our attention; those which result from the intricate and often from the imperceptible mechanism of political society--a subject of observation which seems at first view so little commensurate to our faculties, that it has been generally regarded with the same passive emotions of wonder and submission with which, in the material world, we survey the effects produced by the mysterious and uncontroulable operation of phisical =sic= causes. It is fortunate that upon this, as on many other occasions, the difficulties which had long baffled the effort of solitary genius begin to appear less formidable to the united exertions of the race; and that, in proportion as the experience and the reasonings of different individuals are brought to bear on the objects, and are combined in such a manner as to illustrate and to limit each other, the science of politics assumes more and more that systematical form which encourages and aids the labours of future inquirers. _____________________________________________________________________ --- {*} Mr Dongald Stuart, whose name is well known and much honoured amongst men whose studies have led them to investigate these subjects: the intimate friend and biographer of Dr. Adam Smith. -=- [end of page #xiv] _ADVERTISEMENT_. ---o0o--- _In the following Inquiry I have inserted four engraved Charts, in order to illustrate the subjects treated of in the Book, by a method approved of both in this and in other countries. {4} The Chart, No. 1, representing the rise and fall of all nations or countries, that have been particularly distinguished for wealth or power, is the first of the sort that ever was engraved, and has, therefore, not yet met with public approbation. It is constructed to give a distinct view of the migrations of commerce and of wealth in general. For a very accurate view, there are no materials in existence; neither would it lead to any very different conclusion, if the proportional values were ascertained with the greatest accuracy. I first drew the Chart in order to clear up my own ideas on the subject, finding it very troublesome to retain a distinct notion of the changes that had taken place. I found it answer the purpose beyond my expectation, by bringing into one view the result of details that are dispersed over a very wide and intricate field of universal history; facts sometimes connected with each other, sometimes not, and always requiring reflection each time they were referred to. I found the first rough draft give =sic= me a better --- {4} The Charts, Nos. 3 and 4, were copied in Paris, before the revolution, and highly approved of by the Academy of Sciences. No. 2, though of late invention, has been copied in France and Germany. Of No. 1, the public has yet to judge, and, perhaps, it will treat me with indulgence and good nature, as on former occasions. -=- [end of page #xv] comprehension of the subject, than all that I had learnt from occasional reading, for half of my lifetime; and, on the supposition that what was of so much use to me, might be of some to others, I have given it with a tolerable degree of accuracy. No. 2, relates entirely to the present state of nations in Europe, and the extent, revenue, and population, as represented, are taken from the most accurate documents. Where statistical writers differed, I followed him who appeared to me the most likely to be right. Nos. 3 and 4, relate entirely to England, and are drawn from the most accurate documents. Opposite to each Chart are descriptions and explanations. The reader will find, five minutes attention to the principle on which they are constructed, a saving of much labour and time; but, without that trifling attention, he may as well look at a blank sheet of paper as at one of the Charts. I know of nothing else, in the Book, that requires previous explanation. _________________________________________________________________ I think it well to embrace this opportunity, the best I have had, and, perhaps, the last I ever shall have, of making some return, (as far as acknowledgement is a return,) for an obligation, of a nature never to be repaid, by acknowledging publicly, that, to the best and most affectionate of brothers, I owe the invention of those Charts. At a very early period of my life, my brother, who, in a most examplary manner, maintained and educated the family his father left, made me keep a register of a thermometer, expressing the variations by lines on a divided scale. He taught me to know, that, whatever can be expressed in numbers, may be represented by lines. The Chart of the thermometer was on the same principle with those given here; the application only is different. The brother to whom I owe this, now fills the Natural Philosophy Chair in the University of Edinburgh_. [end of page #xvi] CONTENTS. ---o0o--- Page. =BOOK I.= CHAP. I. INTRODUCTION and plan of the work.--Explanation of what the author understands by wealthy and powerful nations, and of the general cause of wealth and power......1 CHAP. II. Of the general causes that operate, both externally and internally, in bringing down nations that have risen above their level to that assigned to them by their extent, fertility, and population; and of the manner in which wealth destroyed power in ancient nations...............14 CHAP. III. Of the nations that rose to wealth and power previous to the conquests in Asia and Africa, and the causes which ruined them...............20 CHAP. IV. Of the Romans.--The causes of their rise under the republic, and of their decline under the emperors.--The great error generally fallen into with respect to the comparison between Rome and Carthage; proofs that it is wrong, and not at all applicable to France and England................27 CHAP. V. Of the cities and nations that rose to wealth and power in the middle ages, after the fall of the Western Empire, and previous to the discovery of the passage to the East Indies by the Cape of Good Hope, and of America.--Different effects of wealth on nations in cold and in warm climates, and of the fall of the Eastern Empire..............44 [end of page #xvii] CHAP. VI. Digression concerning the commerce with India.--This the only one that raised ancient nations to wealth.--Its continual variations.--The envy it excited, and revolutions it produced....................51 CHAP. VII. Of the causes that brought on the decline of the nations that had flourished in the middle ages, and of Portugal, Spain, Holland, and the Hans Towns..........62 CHAP. VIII. General view and analysis of the causes that operated in producing the decline of all nations, with a chart, representing the rise, fall, and migrations of wealth, in all different countries, from the year 1500, before the birth of Christ, to the end of the eighteenth century,--a period of 3300 years...............70 =BOOK II.= CHAP. I. Of the interior causes of decline, arising from the possession of wealth.--Its general operation on the habits of life, manners, education, and ways of thinking and acting of the inhabitants of a country................81 CHAP. II. Of the education of youth in nations increasing in wealth.--The errors generally committed by writers on that subject.--Importance of female education on the manners of a people.--Not noticed by writers on political economy.--Education of the great body of the people the chief object.--In what that consists............94 CHAP. III. Of increased taxation, as an interior cause of decline.--Its different effects on industry, according to the degree to which it is carried.--Its effects on the people and on government.............102 CHAP. IV. Of the interior causes of decline, arising from the encroachments of public and privileged bodies; and of those who have a common interest on those who have no common interest.....................116 [end of page #xviii] CHAP. V. Of the internal causes of decline, arising from the unequal division of property, and its accumulation in the hands of particular persons.--Its effects on the employment of capital...............125 CHAP. VI. Of the interior causes of decline, which arise from the produce of the soil becoming unequal to the sustenance of a luxurious people.--Of monopoly............137 CHAP. VII. Of the increase of the poor, as general affluence becomes greater.-- Of children left unprovided for.--Of their division into two classes.-- Those that can labour more or less, and those that can do no labour.................. 156 CHAP. VIII. Of the tendency of capital and industry to leave a wealthy country, and of the depreciation of money in agricultural and commercial countries............. 161 CHAP. IX. Conclusion of the interior causes.--Their co-operation.--Their general effect on the government and on the people.--The danger arising from them does not appear till the progress in decline is far advanced......... 166 CHAP. X. Of the external causes of decline.--The envy and enmity of other nations.--Their efforts, both in peace and war, to bring wealthy nations down to their level........ 175 CHAP. XI. Why the intercourse between nations is ultimately in favour of the poorer one, though not so at first............................. 179 CHAP. XII. Conclusion of exterior causes.--Are seldom of much importance, unless favoured by interior ones.--Rich nations, with care, capable, in most cases, of prolonging their prosperity.--Digression on the importance of public revenue, illustrated by a statistical chart................... 184 [end of page #xix] =BOOK III.= CHAP. I. Result of the foregoing Inquiry applied to Britain.--Its present state, in what its wealth consists; illustrated by a chart, shewing the increase of revenue and commerce........................191 CHAP. II. Of education, as conducted in England.--Amelioration proposed.-- Necessity of government interfering, without touching the liberty of the subject............................ 216 CHAP. III. Of the effects of taxation in England........229 CHAP. IV. Of the national debt and sinking fund.--Advantages and disadvantages of both.--Errors committed in calculating their effects. --Causes of error.--Mode proposed for preventing future increase....................234 CHAP. V. Of taxes for the maintenance of the poor.--Their enormous increase.-- The cause.--Comparison between those of England and Scotland.-- Simple, easy, and humane mode of reducing them..............247 CHAP. VI. Causes of decline, peculiar to England.................... 257 CHAP. VII. Circumstances peculiar to England, and favourable to it............. 261 CHAP. VIII. Conclusion.................... 276 Application of the present Inquiry to nations in general..............289 _AN I N Q U I R Y, &c. &c._ ====== BOOK I. ====== CHAP. I. _Introduction and Plan of the Work.--Explanation of what the Author understands by Wealthy and Powerful Nations, and of the General Causes of Wealth and Power_. One of the most solid foundations on which an enquirer can proceed in matters of political economy, as connected with the fate of nations, seems to be by an appeal to history, a view of the effects that have been produced, and an investigation of the causes that have operated in producing them. Unfortunately, in this case, the materials are but very scanty, and sometimes rather of doubtful authority; nevertheless, such as they are, I do not think it well to reject the use of them, and have, therefore, begun, by taking a view of the causes that have ruined nations that have been great and wealthy, beginning with the earliest records and coming down to the present time. {5} --- {5} Dr. Robertson very truly says, "It is a cruel mortification, in searching for what is instructive in the history of past times, to find that the exploits of conquerors who have desolated the earth, and the freaks of tyrants who have rendered nations unhappy, are recorded with minute, and often disgusting accuracy, while the discovery of useful arts, and the progress of the most beneficial branches of commerce are passed over in silence, and suffered to sink in oblivion." Disquisition on the Ancient Commerce to India. -=- [end of page #1] I divide this space into three periods, because in each is to be seen a very distinct feature. During the first period, previous to the fall of the Roman empire, the order of things was such as had arisen from the new state of mankind, who had gradually increased in numbers, and improved in sciences and arts. The different degrees of wealth were owing, at first, to local situation, natural advantages, and priority in point of settlement, till the causes of decline begun to operate on some; when the adventitious causes of wealth and power, producing conquest, began to establish a new order of things. The second period, from the fall of the Roman government till the discovery of America, and the passage to the East Indies, by the ocean, has likewise a distinct feature, and is treated of by itself. The rulers of mankind were not then men, who from the ease and leisure of pastoral life, under a mild heaven, had studied science, and cultivated the arts; they were men who had descended from a cold northern climate, where nature did little to supply their wants, where hunger and cold could not be avoided but by industry and exertion; where, in one word, the sterility of nature was counteracted by the energy of man. The possessors of milder climates, and of softer manners, falling under the dominion of such men, inferior greatly in numbers, as well as in arts, intermixed with them, and formed a new race, of which the character was different; and it is a circumstance not a little curious, that while mankind were in a state at which they had arrived by increasing population, and by the arts of peace, slavery was universal: but that when governed by men who were conquerors, and owed their superiority to force alone, where slavery might have been expected to originate, it was abolished. {6} --- {6} This fact, which is indisputable, has, at first sight, a most extraordinary appearance, that is to say, seems difficult to account for; but a little examination into circumstances will render it easily understood. In warm and fertile countries, the love of ease is predominant, and the services wanted are such as a slave can perform. The indolent habits of people make them consider freedom as an object of less importance than exemption from care. While the rulers of mankind were indolent and luxurious, they were interested in continuing slavery, which must have [end of page #2] originated in barbarism and ignorance. But the northern nations were different; with them, neither the moral character, the physical powers, or the situation of things, favoured slavery. The services one man wanted of another were not such as a slave could be forced to perform: neither are men who are fitted for performing such offices disposed to submit to slavery. Shepherds may be reduced to the situation of slaves, but hunters will not be likely to submit to such a situation, even if their occupation admitted of it. Slaves can only be employed to perform labour that is under the eye of an overseer or master, or the produce of which is nearly certain: but the labour of a hunter is neither the one nor the other, it is, therefore, not of the sort to be performed by slaves. The athletic active life necessary for a hunter is, besides, unfriendly to slavery, if not totally at variance with it. What does a slave receive in return for his service? Lodging, nourishment, and a life free from care. A hunter is obliged to provide the two former for himself, and the latter it is impossible for him to enjoy. The same thing goes even to hired servants. In the rudest state of shepherds, there are hired servants, but men in a rude state never hunt for wages: they are their own masters: they may hunt in society or partnership, but never as slaves or hired servants. -=- The progress towards wealth in this new state of things was very slow, but the equality that prevailed amongst feudal barons, their love of war and glory, and the leisure they enjoyed, by degrees extended the limits of commerce very widely, as the northern world never could produce many articles which its inhabitants had by their connection with the south learnt to relish and enjoy. The intermediate countries, that naturally formed a link of connection between the ancient nations of the east and the rough inhabitants of the north, profited the most by this circumstance; and we still find the borders of the Mediterranean Sea, though no longer the seat of power, the places where wealth was chiefly concentrated. The impossibility of the inhabitants of the northern countries transporting their rude and heavy produce, in order to exchange it for the luxuries of the south, gave rise to manufactures as well as fishing on the southern confines of the Baltic Sea; from whence arose the wealth of Flanders, Holland, and the Hans Towns. This forms an epoch entirely new in its nature and description, and its termination was only brought on by the great discovery of the passage to Asia, by the Cape of Good Hope, and to America, by sailing straight out into the Atlantic Ocean. The nations that had till those discoveries been the best situated for [end of page #3] commerce no longer enjoyed that advantage; by that means it changed its abode; but not only did it change its abode, it changed its nature, and the trifling commerce that had hitherto been carried on by the intervention of caravans by land, or of little barks coasting on the borders of the Mediterranean Sea, (never venturing, without imminent danger, to lose sight of the shore,) {7} was dropt for that bold and adventurous navigation, connecting the most distant parts of the world; between which since then large vessels pass with greater expedition and safety than they formerly did between the Grecian Islands, or from Italy to Africa. Three inventions, two in commerce and the other in war, nearly of equal antiquity, formed this into one of these epochs that gives a new feature to things. The discovery of the magnetic power of the needle improved and totally altered navigation. The art of printing gave the means of extending with facility, to mankind at large, the mode of communicating thoughts and ideas, which had till then been attended with great difficulty, and confined to a few. This placed men nearer upon an equality with respect to mind, and greatly facilitated commerce and the arts. The invention of gun-powder nearly at the same time changed the art of war, not only in its manner, but in its effect, a point of far greater importance. While human force was the power by which men were annoyed, in cases of hostility, bodily strength laid the foundation for the greatness of individual men, as well as of whole nations. So long as this was the case, it was impossible for any nation to cultivate the arts of peace, (as at the present time), without becoming much inferior in physical force to nations that preferred hunting or made war their study; or to such as preferred exercising the body, as rude nations do, to gratifying the appetites, as practised in wealthy ones. To be wealthy and powerful long together was then impossible. Since this last invention, the physical powers of men have ceased to occupy any material part in their history; superiority in skill is now the great object of the attainment of those who wish to excel, {8} and --- {7} It was forbidden by law, formerly, in Spain, to put to sea from the 11th of November to the 10th of March. {8} In the divine poem of the Iliad, Nestor, for experience and wisdom, and Ulysses, for [end of page #4] cunning, are the only two heroes whose minds gave them a superiority; but they make no figure compared to Achilles and Hector, or even the strong, rough, and ignorant Ajax. To bear fatigue, and understand discipline, is the great object at present; for though, of late years, the increased use of the bayonet seems to be a slight approximation to the ancient mode of contending by bodily strength, it is to be considered, on the other hand, that artillery is more than ever employed, which is increasing the dissimilarity. Again, though the bayonet is used, it is under circumstances quite new. Great strength enabled a single man, by wearing very thick armour, and wielding a longer sword or spear, to be invulnerable to men of lesser force, while he could perform what feats he pleased in defeating them. As gun-powder has destroyed the use of heavy armour, though with the sabre and bayonet men are not equal, they are all much more nearly so. No one is invulnerable, even in single combat, with the _arme blanche_, and with fire arms they are nearly on an equality. The changes that this makes, through every department of life, are too numerous to be enlarged upon, or not to be visible to all. -=- men may devote themselves to a life of ease and enjoyment without falling under a real inferiority, provided they do not allow the mind to be degraded or sunk in sloth, ignorance, or vice. Those discoveries, then, by altering the physical powers of men, by changing their relations and connections, as well as by opening new fields for commerce, and new channels for carrying it on, form a very distinct epoch in the history of wealth and power, and alter greatly their nature in the detail; though, in the main outline and abstract definition, they are still the same; having always the same relation to each other, or to the state of things at the time. This last period is then very different in its nature, and much more important than either of the others that preceded it; yet, in one thing, there is a similarity that runs through the whole, and it is a very important one. The passions and propensities of mankind, though they have changed their objects, and the means of their gratification, have not changed their nature. The desire of enjoyment; and of enjoyment with the least trouble possible, appears to be the basis of all the passions. Hence, envy, jealousy, friendship, and the endless train of second-rate effects, appear all to be produced by that primary passion; {9} and as from --- {9} The very learned and ingenious author of the Inquiry into the Origin and Causes of the Wealth of Nations, traces all this to an innate propensity to barter. But barter is only a means, and not even the means to which mankind shew the greatest pro-[end of page #5] pensity; for, wherever they have power to take by force or pillage, they never barter. This is seen both in an infantine and adult state; children cry for toys, and stretch at them before they offer to exchange; and, conquerors or soldiers never buy or barter, when they can take, unless they are guided by some other motive than mere natural propensity. A highwayman will pay for his dinner at an inn, as willingly as a traveller, because he acts from other motives than propensity, but he will strip the inn-keeper when he meets him on the road. -=- this originate the wealth as well as the decline of nations, the history of the revolutions in wealth and power, during the two first periods, are by no means unimportant; besides, as their duration was much longer than that of the latter, they lead to a more certain conclusion. The review of what has taken place will occupy the first book; and serve as a data for an inquiry into the nature and causes of the fall of nations. The first part of the second book will be dedicated to investigating the internal causes of decline; that is to say, all those causes which arise from the possession of wealth and power, operating on the habits, manners, and minds of the inhabitants; as also on the political arrangements, laws, government, and institutions, so far as they are connected with the prosperity or decline of nations. The latter part of the same book will treat of the exterior causes of decline, arising from the envy of other nations; their advancement in the same arts to which the nations that are rich owe their wealth, or their excelling them in other arts, by which they can be rivalled, reduced, or subdued. After having inquired into external and internal causes; and the operation of each and of both, (though they never act quite separately,) accidental causes, will make an object for consideration, which will bring the general inquiry to a conclusion. The third book will begin with an application of the information obtained to the present state of England: by comparing its situation with that of nations that were great; and, by endeavouring to point out a means by which its decline may be prevented. Though we know that, in this world, nothing is eternal, particularly in the institutions of man; yet, by a sort of fiction in language, when the final term is not fixed, and the end desirable, what is known to be [end of page #6] temporary is considered as perpetual. Thus, the contract between the king and the people, the constituent laws of a country, &c. are considered as permanent and of eternal duration. In this case, though the final decline of a nation cannot be prevented; though the nature of things will either, by that regular chain of causes which admits of being traced, or by their regular operation of coincident causes which is termed accidental, sooner or later put an end to the prosperity of every nation, yet we shall not speak of prolonging prosperity, but of preventing decline, just as if it were never to happen at any period. Before entering upon this Inquiry, it may be well, for the sake of being explicitly understood, to define what I mean by wealthy and powerful nations. In speaking of nations, wealth and power are sometimes related to each other, as cause and effect. Sometimes there is between a mutual action and re-action. In the natural or ordinary course of things, they are, at first, intimately connected and dependent on each other, till, at last, this connection lessening by degrees, and they even act in opposite directions; when wealth undermines and destroys power, but power never destroys wealth. {10} Though wealth and power are often found united, they are sometimes found separated. Wealth is altogether a real possession; power is comparative. Thus, a nation may be wealthy in itself, though unconnected with any other nation; but its power can only be estimated by a comparison with that of other nations. Wealth consists in having abundance of whatever mankind want or desire; and if there were but one nation on earth, it might be wealthy; but it would, in that case, be impossible to measure its power. Wealth is, however, not altogether real; it is in a certain degree comparative, whereas power is altogether comparative. The Romans, for example, may very justly be called the most --- {10} Till a nation has risen above its neighbours, and those to whom it compares itself, wealth and power act in the same direction; but, after it has got beyond that point, they begin to counteract each other. -=- [end of page #7] powerful nation that ever existed, yet a single battalion of our present troops, well supported with artillery, would have probably destroyed the finest army they ever sent into the field. A single ship of the line would certainly have sunk, taken, or put to flight, all the fleets that Rome and Carthage ever sent to sea. The feeblest and least powerful of civilized nations, with the present means of fighting, and the knowledge of the present day, would defeat an ancient army of the most powerful description. Power then is entirely relative; and what is feebleness now, would, at a certain time, have been force or power. It is not altogether so with wealth, which consists in the abundance of what men desire. The Egyptians, Greeks, and Romans, had wealth; and this, though, perhaps, not consisting in the same objects, was, perhaps, not inferior to ours at the present time; but as wealth, purely and simply, no comparison between different nations was necessary, farther than that men's desires are augmented, by seeing the abundance possessed by others; and therefore they become comparative, as to wealth. Without, however, entering into a long examination respecting the various possible combinations of wealth and power, which are something similarly connected in states, as health and strength are in the animal body, {11} let both be considered only in a comparative way; the comparison either being made with other nations at the same time, or with the same nation at different times. Thus, for example, in comparing the wealth and power of Britain now, with what they were at the latter end of Queen Elizabeth's reign, we find that the merchants of Liverpool, during the first three years of last =sic= war, fitted out a force of privateers equal to the Spanish armada; and consequently superior to the whole naval force of England at that time; there can be no doubt, then, that both the wealth and power of the nation are increased. Again, if we find that our ships block up the --- {11} A man may be very feeble, yet in very good health for his whole life-time. He may also have great strength, though he may not enjoy a very good state of health; yet nevertheless, health and strength are very intimately connected, and never can be completely separated. -=- [end of page #8] ports of Holland, and prevent their navy from venturing to sea, we must conclude, that the relative power of the two nations is altered, since the time that the Dutch fleet rode triumphant in the river Thames. But, if we want to make a comparison between the naval power of England and that of France and Spain, we must not compare it with the strength of their navies in the year 1780, when they bid us defiance at Plymouth, but take things actually as they are at this present time. When a nation is upon an equality with others, for wealth, it may be considered as neither deserving the name of a rich or a poor nation, whatever its real wealth or poverty may be. The same thing holds with power. When a nation is merely able to protect itself, but fully equal to that, though unable to make conquests, or aggrandize itself, against the will of other nations, it may be said to be neither weak nor strong. Thus, for example, Denmark as a nation is upon a par with others; and neither to be called wealthy and powerful, nor weak and poor, though it certainly has both more actual wealth and power than it had in the eighth century, when the Danes burnt London, Paris, and Cologne. Thus, then, with respect to my reasoning, the whole is to be considered as applying to other nations at the same time; and the degree they are above or below par, is the measure of wealth and power, poverty and weakness. {12} But, with respect to a nation itself, wealth is comparative in the progression of time. In speaking of power, we compare nations at the same period, and, in speaking of wealth, we may either compare a nation with itself at different periods, or with others at the same time. We shall not find any example of a nation's becoming less wealthy whilst it increased in power; but we shall find many instances of nations becoming wealthy whilst they were losing their power, though, --- {12} According to this definition, if all the nations on earth were to increase in wealth and power equally, they would be considered as stationary; their relative situations would remain the same; like those of the fixed stars, or those of soldiers who march in a regiment with perfect regularity, and retain their relative portion in the same manner as if they stood still. But this case, among nations, is only an imaginary one; therefore, the definition given answers the true purpose of investigation. -=- [end of page #9] together with the power, the wealth always, a little sooner or a little later, vanishes away. Sometimes nations owe their wealth and greatness to accidental causes, that, from their nature, must vanish away; and sometimes to causes which, depending upon the nations themselves, may be prolonged. In general, both the two sorts of causes have united to render every nation great that has been distinguished amongst others for riches or power. The causes, then, divide themselves into two of distinct kinds;--those which are independent of the nation itself, and those over which it has some degree of influence and controul. In early ages, when knowledge was but little advanced, and when the small stock that had been accumulated was confined nearly to a single spot, the first description of causes were the principal ones.--Local situation, priority in discovery, or in establishment, gave to one nation a superiority over others, and occasioned the accumulation of wealth, and the acquisition of power and territory. {13} As in the early stages of human life, a few years more or less occasion a greater difference, both in physical powers and mental faculties, than any difference of innate genius, or adventitious circumstances; so, in the early days of the world, when it was young in knowledge, and scanty in population, priority of settlement gave a great advantage to one nation over others, and, of consequence, enabled them to rule over others; thus the Assyrian and Egyptian empires were great, powerful, and extensive, while the nations that were beyond their reach were divided into small states or kingdoms, on the most contemptible scale. Time, however, did away the advantages resulting from priority of establishment. Local situation was another cause of superiority, of a more permanent nature; but this, also, new discovery has transferred from one na- --- {13} It is not meant, by any means, to enter into an inquiry, much less controversy, respecting the antiquity of mankind; but it is very clear that the knowledge of arts and sciences can be traced to an infant state about two thousand years before the Christian aera. -=- [end of page #10] tion to another. Qualities of the soil and climate are counteracted by the nature and habits of the inhabitants, which frequently, in the end, give the superiority where there was at first an inferiority. If ever the nations of the world come to a state of permanence, (which in all probability will never be the case,) it must be when population is nearly proportioned to the means of subsistence in different parts; when knowledge is nearly equally distributed and when no great discoveries remain to be made either in arts, science, or geography. While the causes from which wealth and power rise in a superior degree, are liable to change from one nation to another, wealth and power must be liable to the same alterations and changes of place; so long any equal balance among nations must be artificial. But when circumstances become similar, and when the pressure becomes equal on all sides, then nations, like the particles of a fluid, though free to move, having lost their impulse, will remain at rest. If such a state of things should ever arrive, then the wealth and power would be only real, not comparative. The whole might be very rich, very affluent, and possess great abundance of every thing, either for enjoyment or for defence, without one nation having an advantage over another: they would be on an equality. But this state of things is far from being likely soon to take place. Population is far from come to its equilibrium, and knowledge {14} is farther distant still. Russia and America, in particular, are both behind in population, and the inhabitants of the latter country are far from being on a par in knowledge with the rest of Europe; when they become so, the balance will be overturned, and must be re-established anew. The great discoveries that have taken place in knowledge and geography have been connected. While navigation was little understood, the borders of the Mediterranean Sea, and the islands in it, were naturally the first places for wealth and commerce. The discovery of the compass, and others that followed, rendered --- {14} By knowledge is only meant the knowledge of the arts that make men useful, =sic= such as agriculture, manufactures, legislation, &c. -=- [end of page #11] the navigation of the open ocean, more easy and safe than that of the circumscribed seas. This laid a great foundation for change and discovery; it brought Britain into importance, ruined Italy, Genoa, Venice, &c. and has laid the foundation for further changes still. As for discoveries in arts, it would be bold and presumptuous indeed to attempt to set any bounds to them. Discoveries, however, that alter the relations of mankind very materially, are probably near at an end. In arts they give only a temporary preference. {15} If a method should be discovered to cultivate a field with half the trouble, and to double the produce, which seems very possible, it would be a great discovery, and alter the general state of mankind considerably; but it would soon be extended to all nations, as the use of gunpowder has been. New produce, or means of procuring the old more easily, are the things chiefly sought after. Potatoes, coffee, tea, sugar, cotton, silk, distilled spirits, are new productions, unknown to the Romans. Glass, gunpowder, printing, windmills, watermills, steam-engines, and the most part of spinning and weaving machines, are new inventions, but they can be extended to all countries. The mariners compass changed the relative position of places, and no new invention of the same importance, as to its effects on nations, probably can take place. Navigation does not admit of a similar improvement to that which it has received. If goods could be conveyed for a quarter of the present price it would not produce the same sort of effect. To render navigating the ocean practicable was a greater thing than any possible improvement on that practicability. As for new discoveries in geography, they are nearly at an end. The form and the extent of the earth are known, and the habitable regions are nearly all explored. We have, then, arrived at a state of things where many of the causes that formerly operated on reducing wealthy nations can never again produce a similar effect. But still there are other causes which ope- --- {15} The end of all discovery is to supply men with what they want; and, accordingly, all nations that are considered as civilised find the means of participating in the advantage of a new discovery, by imitating that which possesses the invention first, and that is done almost immediately. It was very different formerly. -=- [end of page #12] rate as they did formerly; accordingly, wealth and power are very unequally distributed amongst nations at this moment; and, in Europe, there is not one nation that is not either rising or on its decline. (see Appendix A.) =sic--there is none.= The purpose of the present Inquiry is, by tracing those causes that still continue to operate, to discover how nations that now stand high may be prevented from sinking below their level: a thing to which history shews they have a natural tendency, and which history shews also is attended with very distressing consequences. We do not labour in Utopia on schemes, but in Britain on real business; and the inquiry is, how a nation, situated as this is, and having more than its share of power, importance, and wealth, may prolong their possession? In this Inquiry we shall begin with taking a lesson from history, which will serve as some guide. As to the rise of other nations, we neither can nor should attempt to impede that; let them rise to our level, but let us not sink down to theirs. [end of page #13] CHAP. II. _Of the General Causes that operate, both externally and internally, in bringing down Nations that have risen above their Level to that assigned to them by their Extent, Fertility, and Population; and of the Manner in which Wealth destroyed Power in ancient Nations_. Without considering the particular causes that have raised some nations greatly above others, there are some general causes of decline which operate in all cases; but even the general causes are not always similar, they vary their way of producing the effect, according to circumstances. If a nation excels in arts and manufactures, others acquire a taste for what they make, and imitate them. If they excel in the art of war, they teach their enemies to fight as well as themselves. If their territories are large, the unprotected and far distant parts provoke attack and plunder. They become more difficult and expensive to govern. If they owe their superiority to climate and soil, they generally preserve it but a short time. Necessity acts so much more powerfully on those who do not enjoy the same advantages, that they soon come to an equality.-- In whatever the superiority exists, emulation and envy prompt to rivalship in peace, and to frequent trials of strength in war. The contempt and pride which accompany wealth and power, and the envy and jealousy they excite amongst other nations, are continual causes of change, and form the great basis of the revolutions amongst the human race. The wants of men increase with their knowledge of what it is good to enjoy; and it is the desire to gratify those wants that increases necessity, and this necessity is the spur to action. There are a few natural wants that require no knowledge in order to be felt; such as hunger and thirst, and the other appetites which men have in common with all animals, and which are linked, as it [end of page #14] were, to their existence. {16} But while nations satisfy themselves with supplying such wants, there is neither wealth nor power amongst them. Of consequence, it is not into the conduct of such that we are to inquire. Excepting, however, those wants which are inseparable from our existence, all the others are, more or less, fictitious, and increase with our knowledge and habits; it is, therefore, evident that the nation that is the highest above others feels the fewest wants; or, in other words, feels no wants. She knows nothing that she does not possess, and therefore may be said to want nothing; or which is the same thing, not knowing what she does want, she makes no effort to obtain it. Thus necessity of rising higher, does not operate, on a nation that sees none higher than itself; at least, it does only operate in a very slender degree. {17} Whereas, in the nation that is behind hand with other nations around, every one is led by emulation and envy, and by a feeling of their own wants, to imitate and equal those that are farther advanced. --- {16} A child cries for food without knowing what it is; and all the other natural appetites, though they may be increased by habit, by knowledge, and fancy, are independent of the mind in its first state. {17} The necessity, no doubt, continues to preserve what they have; and, therefore, tends to keep them in a permanent state. Some individuals again, in less affluence than others, endeavour to equal them; by which means some progress is still making in the nation that possesses the greatest share of wealth and power; but it is only partial and feeble. Those who live in the nation that is the most advanced are contented and have all they wish; they possess every thing of which they know, they can have no particular desire for any thing they have not got, that will produce great energy and exertion. A man may wish for wings, or for perpetual youth; but, as he can scarcely expect to obtain either, he will make little exertion. With things really attainable, but not known, the case is less productive of energy still. The people of Asia found silk a natural produce of their country; till the Europeans saw it, they never attempted to produce so rich a material; but no pains has since been spared to try to produce it, in almost every country, where there was the least chance of success. We imitated the silk mills of Italy, and the Italians (as well as many other nations) are now imitating our cotton mills. In the case of a nation that follows others, it always knows what it wants, and may judge whether it can obtain it; but the nation the most advanced, gropes in the dark. -=- [end of page #15] Thus it is, that necessity acts but in a very inferior degree on the nation that is the farthest advanced; while it operates in a very powerful way on those that are in arrear; and this single reason, without the intervention of wars or any sort of contest or robbery, would, in the process of time, bring nations to a sort of equality in wealth and refinement; that is, it would bring them all into possession of the means of gratifying their wants. War, excited by the violent and vile passions,--by the overbearing pride and insolence of one, and the envy and villainy of another, derange this natural and smooth operation, which, nevertheless, continues to act in silence at all times, and in every circumstance, and which, indeed, is in general the chief cause of those very disorders by which its operations are sometimes facilitated; sometimes apparently interrupted; sometimes, their effect for a moment reversed; but their action never, for one instant, totally suspended. The desire of enjoyment makes all mankind act as if they were running a race. They always keep the goal in view, though they attempt to be the foremost to arrive at it by various means. But the greatest exertions are never made by those who have got the advance of their competitors. Amongst the wants of mankind, ease is one of very permanent operation; and whenever the necessity of supplying other wants ceases, the desire of supplying that, leads to a state of inaction and rest. {18} To seek ease, however, does not imply necessarily to seek total inaction or rest; a diminished exertion is comparative ease; and this is always observable in a state of prosperity, either of an individual or of a nation, after the prosperity has been long enough --- {18} The truth of this may be disputed by those who look at mankind in an artificial state; because a variety of their actions seem without any particular motive. But not the smallest exertion is ever made without it. The man who walks out and takes exercise, wants health or amusement as much as the working man does bread. Even those who toil in the rounds of pleasure, are always in pursuit of something. Their not finding the object is another part of the consideration; but they always have one in view. As to savages, and the poorer classes of people, they shew their propensity by a more simple process; that is, merely by resting inactive, when they are not compelled to labour. -=- [end of page #16] enjoyed to create a certain degree of lassitude and indifference, which it does on every nation. {19} Whatever may be the accidental circumstance which first raises one nation above others, or the train of adventitious ones that increase for a while and continue that superiority, nothing can be more clear and certain, than, that they have a natural tendency to come back to a level, merely by the exertions of men in the direction of acquiring wealth by industry, and without any of those causes which arise out of war, or interrupting the career of each other. When, from the conduct of one nation towards another, or from whatever other cause war, =sic= becomes the means by which the superiority of two nations is to be decided, there are many things in favour of the least wealthy nation. It has less to protect and to lose, and more to attack and to gain; the task is much easier and more alluring. There is a sort of energy in attempting to obtain, that is not to be found in those who are only exerting themselves to keep, of which it is difficult to explain the cause, but of which the existence is very certain. Where natural strength, and the struggle with want is great, as is the case with nations who have made but little progress in acquiring wealth, the contest with a people more enervated by ease, and less inured to toil is very unequal, and does more than compensate those artificial aids which are derived from the possession of property. {20} From this cause, the triumph of poorer over more wealthy nations has generally arisen, and, in most cases, has occasioned the contest to end in favour of the more hardy and poorer people. Of the revolutions that took place in the ancient world; whether operated by degrees or by violence and suddenly, those may be ge- --- {19} Doctor Garth, in his admirable poem of the Dispensary, says;-- "_Even health for want of change becomes disease_." This is the case with nations sunk in prosperity. {20} Why men should have been less tenacious to keep that which is fairly theirs, than rapaciously to obtain that which is not, is a strange thing; but nothing is more certain; and the effects of that propensity are very great, and its existence very general. In the ruin of nations, it is a most active and powerful cause. -=- [end of page #17] nerally traced as the causes. In those ancient nations any considerable degree of luxury and military success were incompatible with each other; but, in the present age, the case is greatly altered. Military discipline is not near so severe as formerly, and bodily strength has but little effect, while the engines of war can only be procured by those resources which wealth affords; by this means, the decline of nations is, at least, now become a less natural and slower progress than formerly; the operations of war have now a quite different tendency from what they formerly had, and this effect is produced by the introduction of cannon, and a different mode of attack and defence; to carry on which, a very considerable degree of wealth is necessary. {21} In former times, the character and situation of the people, the object they had in view, their bravery and the skill of their leaders, did every thing; but now the skill of leaders and the command of money are the chief objects; for there is not sufficient difference between any two nations in Europe as to counterbalance those: and, indeed, (except so far as military skill is accidental,) it is to be found principally in nations who have a sufficient degree of wealth to exercise it and call it into action. We shall see that the first revolutions in the world were effected by the natural strength, energy, and bravery of poor nations triumphing over those that were less hardy, in consequence of the enjoyment of wealth, until the time of the Romans; who, like other nations, first triumphed by means of superior energy and bravery; and, afterwards by making war a trade, continued, by having regular standing armies, to conquer the nations who had only temporary levies, or militias, to fight in their defence. The triumph of poor nations, over others in many respects their superiors, continued during the middle ages, but the wealth acquired by certain nations then was not wrested from them by war, but by an accidental and unforeseen change in the channel through which it --- {21} An idea has gone abroad, since the successes of the French armies, that money is not necessary to war, even in the present times. It will be shewn, in its proper place, that the French armies were maintained at very great expense, and that a poor country could not have done what France did. -=- flowed. At the same time that this change took place, without the intervention of force, the art of war changed in favour of wealthy nations, but the changes took place by slow degrees, and the power of nations now may almost be estimated by their disposable incomes. This change, however, has by no means secured the prosperity of wealthy nations; it has only prevented poor ones, unable by means of fair competition to do by conquest what they could not effect by perseverance in arts and industry; for, in other respects, though it makes the prosperity of a nation more dependant =sic= on wealth, and more independent of violence; it prevents any nation from preserving its political importance after it loses its riches. It does not by any means interrupt that progress by which poor nations gradually rise up and rival richer ones in arts. It has not done away the advantages that arise from superior industry and attention to business, or from the gradual introduction of knowledge amongst the more ignorant, thereby lessening their inferiority, and tending to bring nations to a level; on the contrary, by increasing the advantages, and securing the gradual triumphs gained by arts and industry, from the violence of war, it makes wealth a more desirable object, and the loss of it a greater misfortune. It tends to augment the natural propensity that there is in poor nations to equal richer ones {22}, although it, at the same time, augments the difficulty of accomplishing their intentions. The superior energy of poverty and necessity which leads men, under this pressure, to act incessantly in whatever way they have it in their power to act, and that seems likely to bring them on a level with those that are richer, is then the ground-work of the rise and fall of nations, as well as of individuals. This tendency is sometimes favoured by particular circumstances, and sometimes it is counteracted by them; but its operation is incessant, and it has never yet failed in producing its effect, for the triumph of poverty over wealth on the great scale as on the small, though very irregular in its pace, has continued without interruption from the earliest records to the present moment. --- {22} The present inferiority of Poland, Denmark, Sweden, Spain, and Portugal, compared with the rank they held in former times, is easily accounted for by looking at the scale of their revenues. -=- [end of page #19] CHAP. III. _Of the Nations that rose to Wealth and Power previously to the Conquests in Asia and Africa, and the Causes which ruined them_. Previous to the conquests made by Alexander the Great, the history of ancient nations is confused, incomplete, and inaccurate. During the contests of his successors, the intricacy and confusion are still continued, but materials are more plentiful, more accurate, and more authentic. During the first period, excepting what is contained in sacred history, a few detached facts, collected by writers long after, are our only guides in judging of the situation of ancient states, some of which consisted of great empires, and others of single cities possessed of a very small territory. Add to this, that great and striking events occupied almost exclusively the attention of historians. The means by which those events were produced were considered as of lesser importance. So far, however, as the present inquiry can be elucidated, although materials are few, yet, by adhering to a distinct plan, and keeping the object always before us, we may arrive at a conclusion. The countries that appear to have been first inhabited were Syria and Egypt, {23} both of them situated on the borders of the Mediterranean Sea; and as early as any authentic records extend, those were great and powerful countries in which agriculture and population had made great progress, and into which commerce had already brought many of the luxuries of the East. The Phoenicians, a people differing in name from those who were subjected to the Assyrian monarchs, occupied that part of Syria, now called the Levant, directly on the borders of the Mediterranean Sea; they were the first who rose to wealth and power by arts and com- --- {23} Reasons have been given in the preface for not taking any view of the situation of India, though, by its produce, it appears, at least of equal antiquity. -=- [end of page #20] merce. Tyre and Sidon were the abodes of commerce long before the arrival of the Jews in the land of Canaan, situated in the adjacent country, with whom, in the days of David and Solomon, the Phoenicians were on terms of friendship and alliance, {24} assisting the latter to carry on commerce, and enrich his people. (See Appendix B.) =sic--there is none.= The whole coast of the Mediterranean lay open to them for navigation, as did also the Grecian islands, and as their own soil was barren, they purchased the necessaries of life, giving in exchange the rich stuffs they had manufactured, and the produce of the East of which they almost exclusively possessed the commerce. The Egyptians were possessed of the most fertile soil in the world, bounded by the Mediterranean Sea on the north, and on the east and west by barren deserts. Their country was of a triangular form, and watered by the Nile, which, passing through it in its greatest extent, runs nearly down the middle. Thus situated, in the country depending on the Nile for its fertility, and on all sides protected from enemies, it was exceedingly natural to cultivate the arts of peace, and it was not possible that it should be divided into many different nations, as in other countries in early times was the case, when sovereignty rose from parental authority, and when there was no natural bond between the heads of different families. The great abundance with which the inhabitants were supplied, in years when the Nile overflowed in a favourable manner, and the uncertainty of future plenty were inducements for accumulation and foresight, which are not equally necessary in countries where the important circumstances of plenty or want do not depend on one single event over the whole face of a country, separated, besides, from others by a sea, which they could not navigate, and by deserts not very easy to pass over. The difficulties of transporting corn, which were sufficient to deter the Egyptians from depending on a supply from other parts, did not, however, prevent other nations from applying to them in times of scarcity, and accordingly it was the granary of the ancient world. --- {24} For farther particulars of this commerce see the Digression on the Trade to India. -=- [end of page #21] To those natural advantages, the Egyptians added some others, different in their nature, but not less precious. They enjoyed a mild government, and an admirable and simple code of laws. Their docility and obedience have never been equalled, and as one maxim, was, to admit of no person being idle, it is evident that the population must have increased rapidly, and that there must have been an impossibility to employ the whole labour of so many hands on the means of providing subsistence in a country, where the manners were simple, the soil fertile, and the wants few. The surplus of the industry of Egypt appears to have been at the disposal of the sovereigns to whom all the lands belonged, and for which they exacted a rent in kind, as is the custom among the native powers on both peninsulas of India to this day. By that means, they were enabled to produce those stupendous works which have been the admiration and wonder of all succeeding generations, and of every nation. The city of Thebes, with the labyrinth; Memphis, the canals, and the pyramids would all be incredible, had not their singular structure preserved those latter efforts of industry from the ravages of time, and left them nearly entire to the present day. The Phoenicians were a colony from that great country; for the Egyptians in general had a dislike to the sea. It is well known, however, that people who live immediately on the coast have a propensity to navigation, and it is probable that those Egyptians who left their own fruitful land to settle on the barren borders of Syria, were from the delta of Lower Egypt, which lies on the sea coast, and is intersected by a number of branches of the river Nile. {25} It is not surprising that such a colony, following the natural propensity to naval affairs, and carrying with it the arts of dying and weaving, together with whatever else the Egyptians knew, should become under the influence of necessity, and in a favourable situation for arts and commerce, as much celebrated for commercial riches, as their mother country had long been for agriculture and the cultivation of the sciences. --- {25} That the Phoenicians were from Egypt is not doubted, and their becoming a totally different people from being on a different soil and in a different situation, is a strong proof of the influence of physical circumstances on the characters of nations. -=- [end of page #22] Tyre accordingly is the first example of a city becoming rich and powerful by arts and commerce, and though few details are known, yet those are of a very decided character. The pride of the Tyrians appears to have been the cause of their fall, and that pride was occasioned by the possession of wealth, far beyond that of any other people then in the world. While they were great they aimed at monopoly, and were partly the cause of the rapid decay of Jerusalem. After the death of Solomon, they founded a colony, well situated for the extention of their own trade, which consisted chiefly in bringing the rich produce of Arabia, and India, into the western world. Carthage was placed on the south coast of the Mediterranean to the west of Egypt, so as never to have any direct intercourse with India itself, while it lay extremely well for distributing the merchandize, brought by the Tyrians, from thence in the interior of Africa, Spain, Sicily, Italy, and the parts that lay distant from the mother city. {26} From the extent of its territory and situation, Tyre could only be wealthy; it never could be powerful, as the great Assyrian monarchy, which lay immediately to the eastward, prevented the possibility of its extention; and, as to power at sea, there was =sic= at that time no contests on that element; the most then that could be expected was, that it should have sufficient strength to protect itself, which, being on a small island, very near the shore, was not difficult. If Alexander the Great had not joined it to the land by an earthen mound, or mole, Tyre could never have been taken till some other power got the superiority by sea; which could not have been till after the Romans had conquered Carthage. Babylon, which was the centre of the Assyrian empire, and commu- --- {26} The best account of the commodities in which the commerce of the Tyrians consisted, as well as the best description of their wealth, and the cause of the downfall is to be found in Ezekiel, chap. xxvi. and the two following. It is perfectly distinct and conclusive with respect to the principal points of wealth, pride, and luxury founded on wealth. The Tyre here spoken of is not the same taken by the king of Babylon, or Assyrian monarch long before Alexander's time, which only appears to have been a settlement on the main land belonging to the same people, and subject to the same prince. -=- [end of page #23] nicated with the eastern part of Asia, by the river Euphrates, and by the Persian Gulf with India, was, as Memphis, of Egypt, a capital; but the Assyrians were not protected on all sides, like the Egyptians, from foreign inroads; they consequently did not cultivate the arts of peace and the sciences so much. On the east, were the Medes and Persians; on the north, the Scythians and Partheans; but, as the territory was fertile and extensive, under one of the finest climates of the world, the monarchs became rich and luxurious, which was the cause of their subjection, and they were always subdued by people less advanced in luxury than themselves. The whole of these countries, Egypt, Syria, Phoenicia, and Greece, fell under the arms of Alexander. This was the first great and general revolution in that part of the world, from which Carthage alone, of all the ancient seats of wealth and greatness, escaped. The triumph of Alexander was, no doubt, that of a great captain; but, except the destruction of Tyre, and the foundation of Alexandria, which changed the principal seat of commerce, there was nothing durable in his conquests. The reigning families were destroyed, and the dynasties altered; but, under his immediate successors, the Egyptians, the inhabitants of Syria, and the Greeks, had different masters. It was after the foundation of Alexandria, and under the successors of Alexander, that Egypt became really a commercial country. Its wealth had hitherto arisen rather from the great population and fertility of the country, than from any participation in the trade to the East; but after Alexandria was founded, the seat of empire, which had always been in Upper Egypt, was established in Lower Egypt, canals were dug, and every means taken to make the passage from the Red Sea to the Mediterranean as commodious as possible. Carthage began then to decline. Tyre was no more: and Alexandria was situated on the same side of the Mediterranean Sea, in a much more advantageous position for receiving the productions of the East, and equally advantageous for distributing them. The Phoenicians never recovered their importance; and indeed it was not the interest of the Persian monarch to encourage trade by [end of page #24] the old channel of the Red Sea and Rhinocolura, but rather to come directly through the Persian Gulf, ascend the Euphrates, and cross the country to the borders of the Mediterranean, which was a way not much more expensive than by the old rout =sic=. As the greater part of the produce imported was to be consumed at the luxurious court of Persia, and in the numerous rich cities with which that empire was filled, there is no doubt that the way by the Persian Gulf was by much the least expensive; for even Solomon, King of Jerusalem, long before, though he lived at one extremity of the journey, and had ships for trading by the other channel, had carried on trade by this way; and, in order to facilitate it, had laid the foundation of the magnificent city of Palmyra, nearly in the middle between the Mediterranean Sea and the Gulf of Persia. Whilst those revolutions were effecting amongst the ancient nations on the continents of Asia and Africa, the Greeks, who had been the most barbarous of all, became, by degrees, the most refined; their learning and arts were all founded, originally, on the Egyptian learning; and though at last they carried them to a higher pitch than their masters; yet Egypt, for many centuries, was looked up to, even by the Greeks, as they were afterwards for a number of centuries by the Romans, and the other nations of the world. The education of the Greeks; very different in some of the states from what it was in others, had, however, the same tendency in all; that tendency was to invigorate the body, and instruct and strengthen the mind. While this continued, we see them at first resist the Persians, though in very unequal numbers; and, at last, the Grecian vigour, discipline, and skill, subdue the whole of the then civilized world. After the conquests of Alexander, the wealth and luxury of Asia were introduced into Greece, and indeed the Greeks refined on that luxury. At Athens and the other cities which might be said to give manners to the rest, shews, and theatrical representations were after that more attended to than the military art; and cabal, intrigue, and corruption, were introduced in the place of that manly, pure, and admirable love of their country, for which, in less wealthy, but in better [end of page #25] times, they had been so highly distinguished above every other people. This was the situation of things when a nation, less advanced in arts, and uncorrupted with the possession of wealth, but which was still considered by the Greeks as barbarous, prepared at once to subdue the whole of them, and give a still more striking proof of the triumph which vigour and energy obtain over those who have only wealth; the possession of which, undoubtedly, gives a certain means of defence, though one very unequal to resisting a nation when excited by the desire of sharing its possessions, and yet vigorous and strong, not being unnerved by the enjoyment of ease and luxury. [end of page #26] CHAP. IV. _Of the Romans.--the Causes of their Rise under the Republic, and of their Decline under the Emperors.--the great Error generally fallen into with respect to the Comparison between Rome and Carthage; Proofs that it is wrong, and not at all applicable to France and England_. In the rise and greatness of Rome, there was nothing accidental, all was the effect of the most unremitting perseverance in a plan, at first, of petty robbery; which, as it extended, was honoured with the title of conquest; and, as it succeeded, has been considered as deserving the appellation of great. It is true, that there were talents exercised, and methods practised, which deserve the highest praise, and are worthy of imitation. It is impossible to withhold admiration at the recital, but the end in view, from the beginning, cannot be justified. Although neither the end in view, nor, generally speaking, the means employed, are deserving of imitation, yet we shall find more advantage from examining them than from the history of any other nation. In the first place, so far as prosperity depends on good conduct, and good conduct depends on the state of the mind, the Romans are a most striking example. While they preserved the manners that first occasioned their rise, they continued to become more powerful; as they forsook these manners, their power abandoned them; and they, after having conquered all with whom they ever contended, because they had more skill or less corruption, were themselves overcome, by men infinitely inferior to what they had been, before they became enervated and corrupt. The smallness of the territory, which the Romans at first possessed, laid them under the necessity of extending it, and drawing resources from their neighbours; who, being brave and hardy, could not be easily either robbed or subdued. [end of page #27] The Romans began with robbing, and finished with subduing them all, but the modes they practised deserve attention. It is in vain to think that superior bravery or skill would alone have done the business; those are often triumphant, but occasionally defeated. The Romans owed their gradual aggrandizement to a line of conduct that, whether in good or ill fortune, tended to make them the sovereigns of the world. A line of conduct in which, if it had been in human nature to persevere, they would have preserved the situation to which they had elevated themselves. Along with this decided conduct, which seems to have arisen from something innate in themselves, or to have been occasioned by some circumstance that is not known, the Romans possessed a number of methods, in addition to personal bravery, by which they advanced the end they had in view. When the kings were abolished, Rome was only a small, rude, irregular place, and a receptacle for plunder; inhabited, however, by men who had great strength of mind, and who possessed a great command over themselves. Their moral code was suitable to their situation. To rob, plunder, and destroy an enemy was a merit; to betray a trust, or to defraud a fellow citizen, was a crime of the greatest magnitude. With the Romans, oaths were inviolable; and attachment to the public was the greatest virtue. As they had neither arts nor commerce, and but very little territory, plunder was their means of subsistence; it was to them a regular source of wealth, and it was distributed with perfect impartiality; they were in fact an association; the wealth of the public, and of the individual, were, to a certain degree, the same; they were as an incorporated company, in which private interest conspired with the love of their country to forward the general interest. Plundering and pillage, as well as the modes of dividing the spoil, were reduced to system and method; and the religious observation of oaths was conducive to the success of both. Every soldier was sworn to be faithful to his country, both in fighting its battles, and in giving a rigid account of whatever might be the fruits of the contest. [end of page #28] The moveables and lands taken from an enemy were sold for the benefit of the public; the former went wholly for that purpose, and the latter were divided into two equal portions; one of which, like the moveables, went into the general stock, the other was distributed to the poorer citizens, at the price of a small acknowledgement. The consequence of this system was, a perpetual state of warfare; in which it was clear that the armies must obtain a superiority over neighbours, who but occasionally employed themselves in acts of hostility. From such a plan of operations it naturally followed that they must either have been subdued altogether, or come off in general with some advantage, otherwise it would have been impossible to proceed. Of this they seem to have been fully sensible; for, with them, it was a maxim never to conclude peace unless they were victorious, and never to treat with an enemy on their own territory. Acting in this manner, and engaging in wars with different nations, unconnected with each other by treaties of alliance; without any common interest, or even any knowledge of each others =sic= affairs; ignorant, in general, even of what was going on, the Romans had, in most cases, a great advantage over those with whom they had to contend. There were in Italy some very warlike people, and those were nearest to Rome itself. The contest with those was long obstinate, and repeatedly renewed; but still the system of conquest was followed; and at last prevailed. The consular government was favourable, also, for perpetual warfare. Those temporary chief magistrates did not enjoy their dignity long enough to become torpid or careless, but were interested in distinguishing themselves by the activity of their conduct while in office; whereas, in hereditary power, or elective monarchy, the personal feelings of the chief, which must have an influence upon the conduct of a nation, must sometimes, happily for mankind, lead him to seek peace and quietness. {27} --- {27} During the interruption of consular government, by the decemvirs, though they did not reign long, the energy of the people was suspended, and their enemies found them much less difficult to resist. -=- [end of page #29] Even when the Gauls burned the city, the Romans yielded no advantages in treaty; they abandoned it to its fate, retired to Veii, and renewed the war. In the art of war, the Romans had those advantages which men generally possess in whatever is the natural bent of their genius, and their constant occupation. Every thing that continual attention, experience, or example, could do to increase their success was attended to; and their hardy manner of education and living, with constant exercise, enabled them to practice =sic= what other men were unable to perform. They accustomed themselves to heavier armour than any other nation. Their rate of marching was between four and five miles an hour, for four or five hours together, loaded with a weight of above 60lb. Their weapons for exercising were double the usual weight, and they were inured to running and leaping when completely armed. The success of the Romans in Europe was not sufficiently rapid, nor were the nations they conquered sufficiently rich to bring on that luxury and relaxation of discipline, which were the consequences in those victories obtained in Egypt, Syria, and Greece; nor were the soldiers the only persons inured to such exercises, for the Roman citizens practised the same at home, in the Campus Martius. No people educated with less hardiness of body, or a less firm attachment to their country, could have undergone, or would have submitted, to the terrible fatigues of a Roman soldier, which were such, that, even at a very late period of the republic, they were known to ask as a favour to be conducted to battle, as a relief from the fatigues they were made to undergo in the camp. {28} In addition to this unremitting and very severe discipline, and to the inventions of many weapons, machines, and stratagems, unknown to other nations, they had the great wisdom to examine very carefully, if they found an enemy enjoy any advantage, in what that advantage consisted. If it arose from any fault of their own, it was rectified --- {28} This happened under Sylla, in the war against Mithridates, which immediately preceded the fall of the republic. -=- [end of page #30] without delay; and if it arose from any new mode of fighting, or superior weapons, they adopted methods with such promptitude that the advantage was only once in favour of the enemy. {29} The Asiatic methods of fighting with elephants, though new, never disconcerted them twice. If they knew of any superior art that they could imitate, it was done; and when the advantage arose from natural circumstances, and they could not themselves become masters of the art, they took other methods. Expert slingers from the Balearian Islands, and bowmen from Crete, were added to their legions; as, in modern times, field-ordnance and riflemen are added to ours. It is impossible not to view with astonishment and admiration such wise conduct in such haughty men, whose simple citizens treated the sovereigns of other nations as equals; but that greatness of mind had a well-founded cause. They knew that the physical powers of men are limited, and that to obtain a victory with the greatest ease possible it was necessary to join together all the advantages that could be obtained; they knew, also, that war is altogether a trial of force, and a trial of skill, and that neither of the contending parties can act by rule, but must be guided by circumstances and the conduct of the enemy. {30} This conduct of the Romans in war was supported by the laws at home. The equal distribution of lands, their contempt for commerce and luxury, preserved the population of the country in that state where good soldiers are to be obtained. The wealthy, in any state, cannot be numerous; neither are they hardy to bear the fatigue. Their servants, and the idle, the indolent, and unprincipled persons they have about them are totally unfit, and a wretched populace, degraded by want, or inured to ease and plenty are equally unfit. --- {29} This conduct appears the more admirable to those who live in the present times that in the revolutionary war with the French, who invented a number of new methods of fighting, and had recourse to new stratagems, the regular generals opposed to them never altered their modes of warfare, but let themselves be beat in the most regular way possible. One single general (the Archduke Charles) did not think himself above the circumstances of the case, and his success was proportioned to his merit. {30} The copying the form and structure of a Carthaginian galley that was stranded. -=- [end of page #31] It has been a favourite opinion among many writers on political economy that artists and workmen are cowardly and unfit for soldiers; but experience does not warrant that conclusion; though it is certain that, according to the manner the Romans carried on war, the bodily fatigue was greater than men bred up promiscuously to trades of different sorts could in general undergo. So long as the Romans had enemies to contend with, from whom they obtained little, the manners and laws, the mode of education, and the government of their country, remained pure as at first. Their business, indeed, became more easy; for the terror of their name, their inflexibility, and the superior means they had of bringing their powers into action, all served to facilitate their conquests. But when they conquered Carthage, and begun =sic= to taste the fruits of wealth, their ground-work altered by degrees, and the superstructure became less solid. {31} Wealth, as we have already seen, was confined to Asia and Africa, and of it the Carthaginians possessed a great share. It has long been the opinion adopted by writers on those subjects that the Carthaginians, as being a commercial and a trading nation, were quite an unequal match for the Romans; that in Rome all was virtue, public spirit, and every thing that was great and noble, while at Carthage all was venal, vile, and selfish. A spirit of war and conquest reigned, say they, in one place together with a spirit of glory, in the other a spirit of gain presided over private actions and public counsels. This is all very true, and very well said, with respect to the fact, but with respect to the cause there is one of the greatest errors into which a number of men of discernment and ability have ever fallen. {32} The true state of the case is easily to be understood, if we only --- {31} It will be seen, in the subsequent part of this inquiry, that, in the present mode of warfare, the Romans would not have had equal advantage.--Skill, and not personal strength, is now the great object, and money to purchase arms and ammunition is the next. {32} M. Montesquieu, notwithstanding his very superior knowledge, accuracy, and acuteness, enlarges upon this subject; and never takes any notice of the corrupt, mercenary, and degraded state into which Rome fell when it became as rich as Carthage. -=- [end of page #32] throw aside, for a moment, the favour for the brave warrior, and the dislike to the selfish trader. The fact was, that Rome, in the days of its vigour, when it was poor, attacked Carthage in the days of its wealth and of its decline; but let us compare Carthage before its fall to Rome in the time of the Gordians, of Maximus, or Gallus, and see which was most vile, most venal, or most cowardly. This would at least be a fair comparison; and nothing relative to the two cities is more certain, than that Rome became far more degraded, in the character both of citizens and soldiers, than ever Carthage was. Wealth procured by commerce, far from degrading a nation more than wealth procured by conquest, does not degrade it near so much; and the reason is easily understood. Whenever a commercial nation becomes too corrupted and luxurious, its wealth vanishes, and the evil corrects itself. Whereas, a country that lives by tribute received from others, may continue for a considerable while to enjoy its revenues. This is so evident, that it would be absurd to enlarge on the subject. The reduction of Carthage, and the wealth it produced at Rome, soon brought on a change in the education, the nature, and the manner of acting, both in private life and public concerns. The conquest of Greece, Syria, and Egypt, completed the business; and the same people who had conquered every enemy, while they retained their poverty and simplicity, were themselves conquered, when they became rich and luxurious.. =sic= After the fall of Carthage {33}, Rome was fundamentally changed; but the armies still continued to act. Their ambition was now strengthened by avarice, and became ten times more active and dangerous to other nations. They then carried on war in every direction, and neither the riches of the East, nor the poverty of the North, could secure other nations from the joint effects of ambition and avarice. But the Romans did not only get gold and wealth by their con- --- {33} Considering circumstances, it is wonderful that the Carthaginians made so excellent a stand against the Romans: for a long time they were victorious; they fought excellently, even at the battle of Zama. The Romans could not say so much for themselves, when afterwards they were attacked by the barbarians. -=- [end of page #33] quests; they became corrupted by adopting the manners of the inhabitants of countries that had long been drowned in every voluptuous pleasure. Then it was that they ceased to trust so much to their bravery for their conquests; they began to employ politics and intrigue to divide their enemies. With the poorer states, they found gold a very useful weapon, and, with the richer, they employed weapons of iron. The terror of the Roman name, the actual force that they could exert against a powerful enemy, and the facility with which a weak one could be silenced, till a proper opportunity arrived for his destruction, were all calculated, and force and fraud were both called into action. Whatever truth or honour the Romans had amongst themselves, they at least had none towards other nations. They, in the most wanton manner, interfered in every quarrel between strangers; and, whenever it suited their conveniency to make war, they begun without almost being at the pains to search for a pretext. They set themselves up above all opinion, while, at the same time, they required all nations to submit to theirs. In a city where all great offices were elective, the evil effects of the introduction of riches were soon displayed. The first great changes were, that the people became corrupted, dependent, and degraded; fortunes became unequally divided; the provinces groaned under the heavy contributions of generals and proconsuls; and, at last, the country splitting into factions, the government was overturned. The splendour of Rome augmented, as a fiery meteor shines most bright before it falls; but the means by which it obtained the ascendency over other nations had long been at an end. The same laws that had been found excellent, when the state was small and poor, did not answer now that it had become great and splendid. The freedom of the city, and the title and privileges of a Roman citizen had been very widely extended; they were therefore become an illusion, and a very dangerous one for the public weal; they served as a foundation for cabal and intrigue of every description. Towards the latter days, after all those internal causes of decline, which are common to other nations had rendered Rome feeble, several [end of page #34] external ones began to act. The provinces became exhausted, and those who ruled them gradually retained more and more of the money. {34} Thus, while the oppression of the provinces was augmenting, the resources of the state were daily on the decline. The first effect of conquests had been to free the people at home from taxes; and when, in a state of poverty and simplicity, the effect was advantageous and tended to preserve that spirit by which the Roman empire aggrandized itself. After wealth flowed in from the destruction of Carthage, donations and shews were in use. The Roman populace, idle and degraded, clamoured for corn and public games. It is almost as difficult to conceive the degree to which the character of the people was degraded, as it is to give credit to the wealth and luxury of the great, in the latter days of the empire. Agriculture was neglected; and the masters of the world, who had obtained every thing for which they contended, while they preserved their purity of manners, now became unable either to govern others, to protect themselves, or even to provide food. Sicily and Africa supplied the Roman people with bread, long before the empire had become feeble, and even at the very time when it is reckoned to have been in its greatest splendour in the Augustan age. {35} The cause of its decline was fixed beyond the power of human nature to counteract: it began by unnerving the human character, and therefore its progress was accelerated and became irresistible. Of all the nations, into which luxury is introduced, none feels its effects --- {34} The detached facts related of the wealth of the governors of provinces, compared with the poverty of the state, are, if not incredible, at least, difficult to conceive. They are, however, too well attested to admit of a doubt, though the details are not sufficiently circumstantial to enable us to know exactly how they happened. {35} In the time of Augustus, the people depended on the supplies from Sicily and Egypt, in so complete a manner, that, if those failed, there was no remedy; and, at one time, when there was only a sufficient quantity of grain for twenty-four hours, that emperor was determined to have put an end to his existence: but the supply arrived in time. Such is the terrible situation into which a people is thrown, when agriculture and industry are abandoned, and when the population becomes too great for the production of the country!! This, however, was a very recent change. Till some time after the conquest of Egypt, Greece, and Sicily, it could not have happened. -=- [end of page #35] so severely as one where it comes by conquest. A people of conquerors, who are wealthy, must, at all events, be under military authority, and that is never a desirable circumstance; depending also on revenues which come without the aid of industry, they must become doubly degraded. With such a people, it would be fair to compare the Carthaginians before their fall; for, to say nothing more than that the principle of traffic and commerce is founded on morality and virtue, in comparison to that trade of pillage which robbed and ruined all nations; the physical situation of the Carthaginians was preferable to that of the Romans in the days of their decline. This is evident, from the noble struggle that the former made, and the contemptible manner in which the mistress of the world terminated her career. Montesquieu bewails the fate of a monarch, who is oppressed by a party that prevails after his fall. His enemies are his historians; and this reflection is employed in mitigation of the crimes imputed to Tarquin; but, surely, if true, on that occasion, it is no less so with respect to Carthage. All the historians that give us the character of the two nations were Romans and of the victorious party; yet most of them are more equitable than the historians of modern times, for they had not seen their own country in its last state of degradation and misery. Those who now make the comparison have proper materials; and it is the business of the writers of history to free it from the errors into which cotemporary =sic= authors fall, whether from prejudice, or from want of knowing those events which happened after their days. In the case of the Roman historians, the error arose from a combination of three different causes. In the first place, they compared Rome in its healthy days and its vigour, to Carthage in its decline.-- They were, next to that, led into an error, by not knowing that all countries that have been long rich are liable to the same evils as Carthage. And, last of all, they wrote with a spirit of party, and a prediliction =sic= in favour of Rome. These three causes are certain; and, perhaps, there was another. It is possible they did not dare to speak the truth, if they did know it. It is true, that the human mind is not proof against the effect pro-[end of page #36] duced by what is splendid and brilliant; and that success in all cases diminishes, and, in some, does away the reproach naturally attached to criminality. It is also to be admitted, that in the Roman character there was a degree of courage and magnanimity that commands admiration, though the end to which it was applied was in itself detestable. Even in individual life (moral principle apart) there is something that diminishes the horror attendant on injustice and rapacity, when accompanied with courage and prodigality. It is no less true, that the manners of commercial men, though their views are legitimate and their means fair, are prejudicial to them in the opinion of others. Individuals, gaining money by commerce, may sometimes have the splendour and magnanimity of princes; but nations that depend only on commerce for wealth never can. No nation, while it continues great or wealthy, can rid itself of the characteristic manners that attend the way in which it obtains its wealth and greatness. Merchants owe their wealth to a strict adherence to their interest, and they cannot help shewing it. The cruelties of the Spaniards have not excited the detestation they deserved, because they were accompanied with courage, and crowned with success; and that nation found means, in the midst of the most horrible of human crimes, to preserve an appearance of greatness and dignity of character. But the Dutch, who have gained wealth, like the Carthaginians, and though they were conquerors, never quitted the character of merchants, and they never possessed dignity of character, though they triumphed by virtue, perseverance, and bravery, over that very Spain which did preserve her dignity. It is much more difficult to reconcile the character of trading nations with the qualities that are improperly called great, than that of any other. A commercial nation naturally will be just; it may be generous; but it never can become extravagant and wasteful; neither can it be incumbered with the lazy and the idle; for the moment that either of these takes place, commerce flies to another habitation. {36} --- {36} It follows, from this, that a commercial people never become so degraded as those who obtain wealth by other means; but, then, it also follows, that they exist a much shorter time after they become so, and that wealth and power leave them much more speedily. -=- [end of page #37] The purpose of this inquiry being, to examine the effects of wealth, and its operation in the decline of nations; it appears to be of considerable importance to remove the error, in which historians and other writers have so long persevered, relative to the two greatest republics of antiquity; particularly as their example applies the most readily, and is the most frequently applied to two rival nations of modern times; although the parallel is extremely imperfect in almost every particular, and in some directly inadmissible. {37} It cannot but be attended with some advantage to set this matter right. It may, perhaps, tend in some degree to prevent the French from attempting to imitate the Romans, when we shew them that a state, whether a whole people, or a single city, exempted from taxes, and living by the tribute of other countries, must, at all events, be dependent on its armies. In short, military government and tributary revenue are inseparable. We see how closely they were connected in ancient Rome. It is fit that its imitators should know at what rate they pay (and in what coin) for those exemptions from taxes, occasioned by the burthens imposed upon other nations. In general we find, that all nations are inclined to push to the extreme those means by which they have attained wealth or power; and it will also be found that their ruin is thereby brought on with greater rapidity. --- {37} The reader must see the allusion is to England and France; but, in point of time, their situation is absolutely different. France is farther advanced in luxury than England. Rome was far behind Carthage. The Romans exceeded their rivals in perseverance; in following up their plans, and in attention to their liberty. The contrary is the case with France and England. The French, indeed, resemble the Romans in restlessness and ambition; but not in their mode of exerting the former, or of gratifying the latter: the resemblance, therefore, is a very faint one, even where it does hold at all. The English, in whatever they may resemble the Carthaginians, such as they have been represented, neither do it in their want of faith and honour, nor in their progress towards decline. The different wars with Rome, in which Carthage came off a loser and became tributary, though only for a limited time, were not the only causes of its decline. The trade of Alexandria, which was better situated for commerce, had diminished the resources of Carthage; so that it was, in every sense of the word, a falling nation. It will be seen, in the subsequent part of this inquiry, how, from the different modes of making war and also the different effects of wealth in the present times, the comparison is still less founded. -=- [end of page #38] Had the Romans stopped the career of conquest at an earlier period, they probably would not have so soon sunk into a state of corruption. It is very probable, that if Caesar had never attempted the useless conquest of Britain, he never would have succeeded in conquering the liberties of his own country. The reputation of having conquered an island, and the passage of the British Channel, made way for the passage of the Rubicon, and the battle of Pharsalia. Conquerors must be paid as well as common soldiers: and though every man may have his price, and money and dignities may be a sufficient reward for the most part, there are some who despise any reward under that of royal power.--Caesar was one of those men; and both ancient and modern history shew, that though, perhaps, in his abilities, he has had no equal, there have been others who have rated theirs at as high a price. The Romans at last became sensible, when too late, that they had pushed the spirit of conquest too far; and, as they had something great in all they did, they had the magnanimity to retract their error. The greatest extent of the Roman empire being from the north of England to the Gulf of Persia, they consequently abandoned Britain, and those conquests in Asia, which were the most difficult to keep. The river Euphrates became the boundary, the Emperor Adrian having, in a voluntary manner, given up all the country to the north of that river, situated on its left bank. The decline of the empire might have been as regular as the rise of the republic, had it not been for the different characters of the emperors; some of whom did honour to human nature, from their possessing almost every virtue, while others were such monsters, that their crimes excite the highest degree of horror and indignation, and are almost beyond credibility. It is but justice to the Romans to observe, that though they robbed and conquered, yet their policy was to instruct, improve, and civilize those whom they had robbed and conquered, wherever they stood in want of it. They aimed, in every case, at making the most of the circumstances in which they were placed, and they very truly conceived, that it was more profitable and advantageous, to rule over a civilized than a rude people. [end of page #39] After the great influx of wealth had corrupted Rome, its public expenses increased at an enormous rate, till at last that portion of the tribute exacted from the provinces, which it pleased the armies and the generals to remit to Rome, became unequal to the expenditure. Taxation of every kind then became necessary, in Italy itself, and the evils that attend the multiplication of imposts were greatly augmented by the ignorant manner in which they were laid on, by men who understood little but military affairs, added to the severe manner in which were they =sic= levied by a rude, imperious, and debauched soldiery. The characters of soldier and citizen, which had been so long united, ceased to have any connection. Soon after this, the corruption of manners became general; and, at last, the Romans unable to find soldiers amongst themselves, were obliged to retain barbarians to fight in their defence, {38} and to bribe the Persians, and other nations, to leave them in a state of tranquility. No nation that ever yet submitted to pay tribute, has long preserved its independence. The Romans knew this well; and if any one, having had recourse to that expedient, has escaped ruin, it has been from some other circumstance than its own exertion; or it has sometimes been the effort of despair when pushed to extremity. Though, in many respects, Montesquieu's opinion of the affairs of Rome is by no means to be taken, yet his short account of the whole is unexceptionally just. "Take," says that able and profound writer, "this compendium of the Roman history. The Romans subdued all nations by their maxims; but, when they had succeeded in doing so, they could no longer preserve their republican form of government. It was necessary to change the plan, and maxims contrary to their first, being introduced, they were divested of all their grandeur." This was literally the case; but then it is clear that this compendium, only includes the secondary causes, and their effects; for the perseverance in maxims till they had obtained their end, and then changing --- {38} This is exactly one of the charges brought against the Carthaginians in the last Punic war. -=- [end of page #40] them, which was not an act of the will, must have been occasioned by some cause inherent in their situation, which had gradually changed. In searching for this cause we shall be very much assisted, and the conclusion will be rendered more certain, by observing in what particular circumstances, they resembled other nations who had undergone a similar changes. =sic= In doing this, we find the inquiry wonderfully abridged indeed, and the conclusion reduced nearly to a mathematical certainty, by observing that the change of maxims, that is to say, the change in ways of thinking, whenever it has taken place, has followed soon after the introduction of wealth and refinement, which change manners, and consequently maxims. Wealth, acquired by conquest, was incompatible with that austere virtue and independent principle which form the basis of republican prosperity. As all public employments were obtained by the favour of the people; and as all wealth and power were obtained by the channels of public employment; bribery and corruption, which cannot take place in a poor republic, became very common in this wealthy one; so that this republican government, so constituted, lost all those advantages it possessed while it was poor. Had the murderers of Julius Caesar, either understood the real corruption of the commonwealth, or foreseen that a new master would rise up, they would never have destroyed that admirable man. Had Rome not been ready to receive a master, Julius Caesar, with all his ambition, would never have grasped at the crown. In nations that obtain wealth by commerce, manufactures, or any other means than by conquests, the corruption of the state is not naturally so great. The wealth originates in the people, and not in the state; and, besides that they are more difficult to purchase, there is less means of doing so, and less inducement; neither can they, being the sources of wealth themselves, become so idle and corrupted. {39} --- {39} The wild and ungovernable direction that the French revolution took originated chiefly in the creation of assignats, which not only exempted the people from taxes at first, but had the effect of producing an artificial and temporary degree of wealth, that [end of page #41] enabled vast numbers, either in the pay of others, or at their own expense, to make cabals and politics their whole study. Rome never was in such a licentious state, because, before the citizens got into that situation, the military power was established. -=- In the ancient nations that fell one after another, we have seen the young and vigorous subdue the more wealthy and luxurious; or we have seen superior art and skill get the better of valour and ignorance; but, in the fall of the Roman empire, the art and skill were all on the side of those who fell, and the vigour of those who conquered was not so powerful an agent as the very low and degraded state into which the masters of the world had themselves fallen. It is by no means consistent with the plan of this work, nor is it any way necessary for the inquiry, to enter into the particular details of the degraded and miserable state to which the Romans were reduced; insomuch, that those who emigrated previously to its fall, and settled amongst barbarous nations, found themselves more happy than they had been, being freed from taxation and a variety of oppressions. Though the Roman people are, of all others, those whose rise and fall are the most distinctly known; yet, in some circumstances, their case does not apply to nations in general. Had they cultivated commerce and the arts, with the same success that they pursued conquest, they must have become wealthy at a much earlier period, and they would not have found themselves in possession of an almost boundless empire, composed of different nations, subdued by force, and requiring force to be preserved. The decline of nations, who become rich by means of industry, may be natural; but, the fall of a nation, owing its greatness to the subjugation of others, must be necessary. Human affairs are too complicated and varied to admit of perfect equality, and the relative situations of mankind are always changing; yet, in some instances, perhaps, changes might be obviated, or protracted, by timely preventives. But there is no possibility of keeping them long in so unnatural a situation, as that of a nation of wealthy and idle people, ruling over and keeping in subjection others who are more hardy, poorer, and more virtuous, than themselves. Before the western empire fell, the following causes of its weakness were arrived at a great height. [end of page #42] Manners were corrupted to the highest degree; there was neither public nor private virtue; intrigue, cabal, and money, did every thing. Property was all in the hands of a few; the great mass of the people were wretchedly poor, mutinous, and idle. Italy was unable to supply its inhabitants with food. The lands were in the possession of men, who, by rapacity in the provinces, had acquired large incomes, and to whom cultivation was no object; the country was either laid out in pleasure grounds, or neglected. The revenues of the state were wasted on the soldiers; in shews to keep the people occupied, and on the purchase of corn, brought to Rome from a distance. The load of taxes was so great, that the Roman citizens envied the barbarians, and thought they could not be worse than they were, should they fall under a foreign yoke. All attachment to their country was gone; and every motive to public spirit had entirely ceased to operate. The old noble families, who alone preserved a sense of their ancient dignity, were neglected in times of quiet, and persecuted in times of trouble. They still preserved an attachment to their country, but they had neither wealth, power, nor authority. The vile populace, having lost every species of military valour, were unable to recruit the armies; the defence, against the provinces which rebelled, was in the hands of foreign mercenaries; and Rome paid tribute to obtain peace from some of those she had insulted in the hour of her prosperity and insolence. Gold corrupted all the courts of justice; there were no laws for the rich, who committed crimes with impunity; while the poor did the same through want, wretchedness, and despair. In this miserable state of things, the poor, for the sake of protection, became a sort of partizans or retainers of the rich, whom they were ready to serve on all occasions: so that, except in a few forms, there was no trace left of the institutions that had raised the Romans above all other nations. [end of page #43] CHAP. V. _Of the Cities and Nations that rose to Wealth and Power in the middle Ages, after the Fall of the Western Empire, and previously to the Discovery of the Passage to the East Indies by the Cape of Good Hope, and of America.--Different Effects of Wealth on Nations in cold and in warm Climates, and of the Fall of the Eastern Empire_. After the fall of the western empire, the Italian states were the first that revived commerce in the west of Europe, which they may indeed be said alone to have kept alive, with the single exception of the city of Marseilles. Venice had begun to flourish when the barbarians took Rome; and Florence afforded a refuge for those of the nobility who escaped from their terrible grasp: but, for four centuries after, till the time of Charlemagne, there was, indeed, nothing that had either the semblance of power, wealth, or greatness, in Europe. The Saracens, as early as the seventh century, had got possession of Egypt, and had extended their ravages in Asia, to the borders of the Black Sea, having in vain endeavoured to take the city of Constantinople, and make themselves masters of the eastern empire, as their rivals, the Goths, had conquered that in the west. The momentary greatness which shone forth in the reign of Charlemagne was, in many respects, like that during the reign of Alexander the Great. The power of each depended on the individual character of the man, and their empires, extended by their courage and skill, fell to pieces immediately after they were no more. As the only permanent change that Alexander had effected was that of removing the chief seat of commerce from Phoenicia to the southern border of the Mediterranean Sea; so, the only permanent effect of the reign of Charles the Great was, his extending Christianity, and some degree of civilization, to the north of the Danube; {40} thus bring- --- {40} The people to the north of the Danube had never been subdued by the Romans. In the time of Charlemagne they were Pagans, and in a most rude state of barbarism. -=- [end of page #44] ing the borders of the Baltic Sea within the limits of the civilized world. Charlemagne paved the way for the greatness of the Flemings, the Saxons, and the Hans Towns, which began to flourish a few centuries after his time; but his own country was never in a more abject situation than soon after his decease. The Danes took and burned the city of Paris, and they conquered, settled, and gave its name to the present country of Normandy. {41} It would throw no light on the subject of the present inquiry to notice the quarrels, the feuds, and revolutions, that took place during the dark ages, and the reign of the feudal system, previously to the time of the crusades; when a wild romantic spirit extended civilization a little more widely than before, and laid the foundation for a new order of things, and a new species of wealth and power, different from those of the ancient world, the extent of which was bounded by the fertile regions of the south. The first holy war took place in the eleventh century, and commerce and industry were introduced into the north of Europe very soon after. The Danes, who alone had power by sea in those times, exercised it by piracies and seizing all merchant vessels; particularly such as passed the Sound, from the Baltic to the North Sea. This rendered it necessary for the cities that had commerce to carry on to associate for the sake of protection, as the Arabian merchants had formerly done by land, and do to this day, to prevent being robbed by those who live by hunting and depredation. This gave rise to the famous Hanseatic League, which began to become formidable towards the end of the twelfth century. {42} As men living in northern countries have many wants unknown to those of the south, so the industry that began on the borders of the --- {41} They were equally successful in England, but that country was not then to be considered as making any part of that world, with the revolutions of which this inquiry is connected. {42} There is a dispute relative to this: but, as no writers give it a later date, and some give it an earlier one, it is certain that it must have existed at that time. Many disputes never ascertain the point intended, yet clear up something else that is equally useful. -=- [end of page #45] Baltic was very different from that which had flourished in ancient times on those of the Mediterranean Sea. In this new order of things, Flanders, for its fertility, might be compared to Egypt, and Holland to Phoenicia, from its want of territory: but clothing of a more substantial sort, and conveniences and pleasures of a different nature being necessary, industry took a different turn. Besides this, the nature of the governments, where men were more nearly upon an equality, made it necessary to provide for their wants in a very different way. Instead of building pyramids for the tombs of kings, industry was employed in procuring comfort for those who inhabited the country; and instead of the greatest art being employed on the fabrication of fine linen, and dying of purple, making vessels of gold and silver, and every thing for the use of courts, the art of making warm clothing of wool, and of fishing and salting fish, occupied the attention of this new race of men. The Flemish had three sources of wealth at one time: they possessed the depots of Indian produce, and dispersed it over the north of Europe; they were the first who excelled in the art of weaving, and in that of curing fish. The towns of Flanders and Brabant were associated in the Hanseatic League, and continued rising from the twelfth to the middle of the sixteenth century, when several circumstances operated in bringing on their decline. The Hanseatic association was one arising from the circumstances of the times and from necessity. It was an artificial connection or alliance, where towns, subject to different governments, acted as independent states, entering into a society which treated on a footing of equality with kings, and made war and peace like any single sovereign. It was not to be expected that such a sort of alliance could greatly outlive the cause of its formation. But neither did the destruction of the league or federation, of necessity, draw along with it that of the towns of which it was composed. We shall see, however, that the general prosperity, and that of the individual members of the league, disappeared for the most part nearly together. [end of page #46] The Dutch were far inferior to the Flemings for natural advantages; but they acted under the influence of necessity, which spurred on their industry; and no nation ever shewed so well how powerful its operation is: so that, though they were at first behind the Flemings in commerce and manufactures, they got the better, and became more rich and powerful. While the persecution of Philip, who was King of Spain, while his brother Ferdinand, Emperor of Germany, was at the head of the Austrian dominions there, and was a dependant of the Spanish monarchs. --While the persecution of Philip, uniting the authority of the hereditary dominions of Austria with that of Spain, compelled many of the most industrious artisans, of that portion of the Low Countries that has since been distinguished by the title of the Austrian Netherlands, to leave their country, the Dutch provinces were making preparations to throw off the yoke of Spain. [Transcriber's note: possible partly duplicated section, here reproduced as-is from the original.] Not only did the Dutch become more wealthy than their neighbours, but they became also more tenacious of their liberty, more patriotic and free; for the situation of their country required economy, union, and patriotic exertion, even for the preservation of its existence. After Holland had already made considerable advances towards wealth, it obtained great superiority by a fortunate improvement on the art of curing herrings. Though herrings had been barrelled for exportation, for more than two hundred years, it was only towards the end of the fourteenth, or beginning of the fifteenth century, that the present method of curing them was invented by the Dutch, which gave them a decided superiority in that article. {43} This prepared the way for the downfal =sic= of Flanders; to which its pride, and the mutinous spirit of the manufacturers in the towns did not a little contribute. The decline of the Austrian Low Countries was brought on entirely by three causes; the oppression of the government, the Dutch excelling and supplanting them in arts and industry, and their own pride and insolence. At one time, Bruges, at another time, Antwerp, took on them to act as sovereigns, and as if independent, while, at the same time, the people were almost constantly disobedient to their magistrates. They had first become industrious under the influence of --- {43} It was discovered in 1397, or soon after. -=- [end of page #47] necessity; but that was gone, and they could not continue in the same course, when in full enjoyment of wealth, and of every thing they wanted. The Hanseatic Towns, from at first merely defending their trade against the Danes, became their conquerors at sea, and, in the years 1361 and 1369, they took and burnt Copenhagen, the capital, twice. Crowned heads became desirous of their alliance, and no power, at sea, was equal to oppose them; but their insolence to the Dutch, their oppressions of the English, of Spain, and other powers, laid the foundation for their decline in less than half a century afterwards. {44} As the first three centuries of this extraordinary and unexampled association, were employed in protecting commerce and protecting trade, all those concerned in its success were ambitious of being admitted members, or received as friends: but when they began to assume the pride and dignity of sovereigns, and to meddle in political quarrels, to become irascible and unjust, their numbers diminished; and of those members that remained, the wealth and prosperity gradually began to fall. The Dutch, by great industry, by a strict attention to their interest, and by keeping down pride, continued to increase in wealth, while the Hans Towns and Flanders were considerably advanced in their decline. While this was happening on the northern shores of the continent of Europe; to which and to Italy trade had been nearly confined, Spain and Portugal, France and England, began to see the advantages of manufactures and commerce, and to encourage them. If money was wanted to be borrowed, it was either in Italy or Flanders, or in some of the Hans Towns, that it could alone be found; so, that though the monarchs of those days rather despised commerce, yet, as a means merely of procuring what they found so indispensably necessary, they began to think of encouraging it. Spain had taken possession of the Canary Islands, and Portugal had made conquests on the coast of Africa, and seized the island of --- {44} In 1411 they were compelled, by Henry IV. of England, to give him satisfaction for some of the injuries done. -=- [end of page #48] Madeira in the early part of the fifteenth century, and by an attention to naval affairs, and setting a value on possessions beyond seas, laid a foundation for those new discoveries which have totally changed the face of the world. In Europe then, at the end of the fifteenth century, the nations were nearly in the following state. The Italians, possessed of the whole trade to India, were wealthy but feeble. They had more art, policy, and money, than other nations; but they had of themselves scarcely any effective power, except a little exercised by the Venetians and Genoese at sea. The Hanse Towns, extending over the northern part of Europe and Flanders, which had become wealthy and powerful by their own industry, and a participation of the trade to India with the Italians, (though at second hand,) were on the decline, through pride and luxury. Holland alone was advancing fast towards wealth, by industry, and an attention to commerce and economy. Spain and Portugal had turned their attention to new discoveries; and France and England were endeavouring to follow, though at a great distance, those who, in this career, had gone before them. Of the places that enjoyed wealth, all were declining in power from the abuse of it; and Spain, which alone had possessed much power without wealth, was abusing it, by banishing industry from Flanders, and the Moors from their own country. In one case, there was wealth without power; in the other, there was power without wealth; and, in both, mistaken views and unwise conduct had laid the foundation for decline. The other nations that had not yet either wealth or power were all seeking with great energy to acquire them; and they were successful in their attempts. Even Spain, which had unwisely banished the Moors, and thereby laid a foundation for its own decline and fall, found that event retarded for a century, by a most unexpected discovery: in consequence of which discovery it fell from a greater height at a later period. {45} --- {45} It would not be to the purpose to speak at present either of Poland, Sweden, or Russia, or of the German empire, in which many of the Hanse Towns were situated. [end of page #49] The history of the Hanse Towns is very curious, and well worth attention: perhaps, next to that of Rome, it is the best calculated to illustrate the subject of this inquiry; but it is too long to be entered on. -=- As for the eastern empire; held up by a participation of the commerce of India, and retaining still some of the civilization of the ancient world, it had sustained the irregular, though fierce attacks of the barbarians till the middle of this century; when, having very imprudently made a display of the riches of the city, and the beauty of the women, the envy of the Mahomedan barbarians was raised to a pitch of frenzy, that it would, in any situation, have been difficult to resist, but for which the enervated emperors of the east were totally unequal. This added one instance more of a poor triumphing over an enervated and rich people. Nothing could exceed the poverty of the Turks, unless it was the ugliness of their women. But the case was not the same here as when the Goths and Vandals, from violence and revenge, attacked Rome merely to plunder and destroy. The Turks were, comparatively, from a southern climate themselves; though poor, they had been living amongst the wreck of ancient greatness, and they conquered with an intention to occupy and enjoy. Thus was extinguished the last remains of ancient grandeur, in the middle of the fifteenth century. About fifty years before, many new sources of wealth were discovered, and the old ones were entirely converted into a channel that was new also. Thus, those who had, from the earliest ages, been in possession of wealth were preparing the way for enriching poor nations, that, from their geographical situation and other circumstances, never could otherwise have participated in it. [end of page #50] CHAP. VI. _Digression concerning the Commerce with India.--This the only one that raised ancient Nations to Wealth.--Its continual Variations.-- The Envy it excited, and Revolutions it produced_. Before there are any authentic records, Syria and Egypt were populous; and the monarchs that ruled in those extensive countries had established their governments upon the plan that has more or less been adopted by all countries. There were different ranks of people. The same offices did not fall indifferently upon all. Wealth was unequally divided; and, of course, a foundation was laid for that commerce which consists in supplying the affluent with articles of taste and luxury, which are only produced in some countries; whereas, articles of necessity are produced in every country that is inhabited. Commerce appears at first to have been entirely confined to the productions of the eastern and middle parts of Asia, which have, from the earliest periods, been sought after with great avidity by the people of other countries. All that is most grateful to the taste, the eye, or the smell, is found in peculiar excellence in India. It is not to be wondered at then, if such objects of the desires of men were an abundant source of riches to those nations who had the means of obtaining them. Egypt and Syria lay immediately in the road for this commerce. They were rivals, and many contests and vicissitudes were the consequence: for no commerce has ever created so much envy and jealousy. None has ever raised those who carried it on so high, or, on forsaking them, left them so low, as that which has been carried on with India. Though at a very early period Egypt had a share of this lucrative commerce, yet the greatest part was carried on through Syria and Arabia, between the Persian Gulf and the Mediterranean Sea; that part now called the Levant, where Tyre and Sidon once stood. [end of page #51] We shall examine briefly the changes of this commerce; the only one almost existing, in early times, or at least which gave rise to nearly all that did exist. {46} As the common necessaries of life are found in greater or less abundance in every country, and as the population is in some degree regulated by their quantity, they made no objects of trade, except in the cases of famine. The precious metals, spices, jewels, and aromatics, rare in their production, universally desirable and easily transported, were long the chief objects of commerce; and the changes which this commerce has undergone and produced, amongst those who possessed it, greatly elucidate the subject of this inquiry. The distance from Babylon to the Persian gulf, down the Euphrates, to where Bussora now stands, was not great, and across the country to Tyre there was little interruption; the Assyrian empire extending to the sea-coast, and its monarchs being too powerful to have any thing to fear. There was, however, at a very early period, another channel, by which the Tyrians obtained the productions of the East, namely, by sailing up the Red Sea, or Arabian Gulf, and across Arabia Petrea to Rhinocolura. {47} The Egyptians, at that time, obtained the same sorts of merchandize, by sailing likewise up the Red Sea, and landing at the western extremity; from whence they were distributed through Lower Egypt. Commerce was carried on in this manner, and was nearly all engrossed by Tyre, when Alexander the Great, bred up under his father, who had been educated at Athens, and travelled through Greece, --- {46} To carry on trade, capital is necessary; that is to say, there must be some means of getting an article before it can be carried away and sold. Spices, precious stones, and the other produce of the East, cost little or almost nothing amongst those who had more than they could use; and, as they produced an immense profit to merchants, they laid a foundation for those capitals that afterwards were employed in other sorts of business. {47} Rhinocolura was merely a sort of sea port for embarking the merchandizes that had been brought across the desert from the Red Sea, It was situated at the south-east extremity or corner of the Mediterranean Sea, and till Alexandria was built was the nearest port to the Red Sea. -=- [end of page #52] turned his arms against those countries in which there was the most to be got by conquest, and from whom there was the least danger of defeat. Before this took place, the pride and insolence of the inhabitants of Tyre and Sidon had displayed itself on more than one occasion. After having been on friendly terms with the Jews, under David and Solomon, they became their enemies, and excited the King of Babylon to take Jerusalem; by that means destroying a neighbouring and dangerous rival. The wealth of these two cities had afterwards induced the Babylonians to attack them also. Sidon was taken and destroyed; and that part of the city of Tyre fell, which was upon the main land; but the Tyre that was the place of real trade, escaped the rage of the Assyrian monarchs. Alexander seems to have determined on destroying Tyre, in order to found Alexandria, which he placed indeed in a better situation for the eastern trade. His romantic expedition to India had in view the getting possession of the countries which had produced those gems and aromatics that were so much sought after in the other parts of the world. Had Alexander lived, perhaps he would not have found it in his interest to depress Syria; but the division of his conquests amongst his generals gave to Egypt and Syria two different masters. They were rivals, and then every advantage that nature gave to Alexandria was improved to the highest pitch under the Ptolemys. The river Nile, much more navigable than the Euphrates, was also better adapted for this trade, because, in coming from India, it was necessary to ascend the latter, while the other was descended. Besides this, the flat country of the Delta was cut into canals, which greatly facilitated this channel of commerce. {48} This was the first great revolution in eastern commerce. It was brought on first by the envy of Alexander and the pride of the in- --- {48} It does not appear what returns were made to the Indians for their produce, therefore it must have been money. The trade then consisted in bringing from thence goods, comparatively weighty, and returning, as it were, empty. The current of the rivers being in different directions was then an object of importance. -=- [end of page #53] habitants of Tyre, and gave a very great superiority to Egypt, which was increased by the canals dug in that country, and the discovery of the regular monsoon, (a periodical wind,) which, at a certain time of the year, carried navigators straight from the mouth of the Red Sea to the Malabar coast. {49} Under these disadvantages, flowing from superior prerogatives of Egypt, the commerce of Syria fell off almost to nothing, till, by another of those changes to which this commerce seems peculiarly liable, the Roman empire, which had swallowed up the whole of the civilized world, was itself divided into two, and one of the capitals fixed at Constantinople. The channel through Syria obtained then a preference for all the eastern part of the empire; and owing to some change, either in the politics or religion of the Persians, when conquered by the Parthians, they became willing to permit them the navigation of the Euphrates, which had long been shut up. This continued to be the state of matters, particularly after the fall of the western empire, when barbarians got possession of all that part of Europe that used to be supplied with East India produce by the way of Alexandria. It continued till the middle of the seventh century of the Christian aera, when the Mahometan religion was established from the westernmost part of Africa to the confines of the Chinese empire; and as the followers of that religion were unfriendly to commerce, and none could be carried on with India that did not pass through their country, it was nearly annihilated, and was almost wholly confined to the caravans of pilgrims, who, going to visit Jerusalem and Mecca, under the cloak of religious zeal, exchanged the various articles of traffic which they had collected in their different countries and on their journey. --- {49} This passage, from the straits of Babelmandel to the point of the peninsula of India, saved a very long and dangerous navigation by the coast. It is almost due east, and with the advantage of being much shorter, and having a fair wind, was next to the discovery of the passage of the Cape of Good Hope, the greatest discovery for shortening the route to India. This was discovered during the time that Egypt was a Roman province. -=- [end of page #54] Such were the vicissitudes, changes, and variations of this commerce in early periods, and during the middle ages; and, when we come to treat of the same within the last two centuries, we shall find it equally liable to alteration. Of all the spots on the face of the earth that have undergone revolution and ruin, they that are now the most completely sunk below their natural level, are those which were formerly the highest above it. We have left uninterrupted the detail of the commercial greatness of those places, in order not to break the narrative; but as cities cannot be great without connection, it is necessary to notice, that Marseilles in France, and Carthagena, and some other places on the coast of Spain, were those, by which eastern luxuries came into Europe from Alexandria and Tyre. The Carthaginians, a Tyrian colony, had the produce from Tyre, and from Rhinocolura, and supplied Spain and the western portion of Africa; but when Alexandria arose, Carthage began to fall. Alexandria, situated near to it on the same coast, was a rival, not a friend, as Tyre had been, and the first Punic war, in which the pride of that republic had involved it with Rome, following soon after, hastened its decline. {50} The nations of Greece, which had risen to power and wealth, owed these more to their superiority in mind, in learning, and the fine arts, than to any attention they ever paid to commerce; they had begun by being the most barbarous of all the people in that part of the globe, and got their first knowledge from the Egyptians, whom they long considered as their superiors in science, as the Romans afterwards did the Greeks; but when the barbarians broke down the western empire, learning as well as commerce was very soon extinguished. It was the share of Indian commerce, settled at Constantinople, that tended more than any other circumstance to preserve that empire so long. To that, and to the barbarians having other occupation, rather --- {50} Marseilles was founded soon after the city of Rome, but it was a government of itself, and made no part of ancient Gaul. The Gauls were warlike barbarians. The inhabitants of Marseilles were polished, like the inhabitants of other towns that enjoyed commercial wealth. They were always allies, and steady friends to the Romans, whom they never abandoned. -=- [end of page #55] than to any intrinsic strength of its own, did the eastern empire owe its long preservation. A new channel for this varying commerce of the East, was opened, as civilization extended to the north of Europe, and this chiefly on account of the very small supply that was obtained through the Mahomedan countries. Goods were transported by land from Hindostan and China, to Esterhabad, situated on the south-east corner of the Caspian Sea; from whence they were carried in vessels to the north-east corner of the same sea, and from thence by the Wolga and the Don; two rivers which rise in Russia, and, after nearly meeting together, fall into the Caspian Sea, and the Black Sea. By ascending the Wolga a short distance, and descending the Don, with only a few miles of land- carriage, the produce of India arrived at the Black Sea, and Constantinople became the emporium of the Indian trade. This was a great stroke to Venice and Genoa, {51} which rivalled each other in bringing the Asiatic commodities, for the supply of Europe, through the old channels. This jealousy of each other, and of Constantinople, was at its height when the crusades carried most of the princes and nobles of Europe to Venice and Constantinople. The Venetians, merely a mercantile people, with little territory or power, neither gave nor received umbrage from those warlike chiefs; but it was not so with Constantinople, the seat of a great empire; so that the crusaders and Venetians united against that power, and the eastern emperors were compelled to divide their city into four parts: the sovereignty of one part fell to the lot of the Venetians, who, for more than half a century, had by this means a decided superiority over both its rivals, and engrossed nearly the whole commerce of the East. The Genoese and Greek emperors now found -- {51} In the chart which I have given, Venice and Genoa are put together, as if one, though they were rivals, and the prosperity of the one injured the other; but as nearly situated the same, and neither being considered as a nation, but merely as an abode of commerce, I did not think it necessary to distinguish them in the general history more than the variations that take place between the different cities of the same country. If, however, I should do the chart on a large scale, I should certainly separate them, and shew their rises and falls minutely. -=- [end of page #56] it their interest to unite against Venice, and the Genoese, by supporting their ally with money, expelled the Venetians from Constantinople. The imperial family was reinstated, and the Genoese had the suburbs of Pera as a reward for their assistance. This quarter of the city the Genoese fortified, and the Venetians were compelled to return to their old channels by Egypt and Syria. {52} During those contests, Florence arose, and became a rival both to Venice and Genoa; and some degree of civilization, or, at least, a taste for the luxuries and produce of the East was brought into the north of Europe by those who returned from the crusades. The consumption of Asiatic produce in the North, occasioned depots to be established, and Bruges and Antwerp became to the north, what Venice and Genoa were to the south of Europe. The Hans Towns rose to wealth and opulence just about that period; but the effects of wealth acquired by commerce in the north were found to be different from what they had been in southern climates. Italy was going to decay, while three of its cities were increasing in splendour; but, in the north, the riches acquired by the cities set industry at work: manufactures were improved, and affluence and the comforts of life became more generally diffused than they had ever before been, or than they are in the southern countries even at the present day. While Constantinople was thus rivalling the cities of Italy, a new revolution took place there, which overturned the Greek empire, and established that of the Ottomans. When Mahomet II. mounted the throne, the Genoese were expelled from Pera, {53} and Venice regained the preponderance in eastern --- {52} The depot of India commerce being in the Crimea, which is near the mouth of the Wolga, is a strong reason for believing the trade was carried on through the Caspian Sea; but it has been asserted, that the chief route was directly by land from the Tigris to the Black Sea. This seems a very good way; but, in that case, why cross the Black Sea to go to the Crimea? Any one who looks at the map will be able to judge that as being very unlikely. Doctor Robertson, however, has taken no notice of this difficulty. Two things are certain: that the depot was in the Crimea, and that merchants never go out of their road without having some cause for doing it. The reader must then determine for himself. {53} Before the Genoese were expelled, their insolence and avarice had time to display themselves in their full extent; about the year thirteen hundred and forty, says an eye-witness, [end of page #57] (Nicepho[r/i]as [illeg.] Gregoras,) they dreamed that they had acquired the dominion of the sea, and claimed an exclusive right to the trade of the Euxine, prohibiting the Greeks to sail to the Chersonesus, or any part beyond the mouth of the Danube, without a licence from them. The Venetians were not excepted, and the arrogance of the Genoese went so far as to form a scheme for imposing a toll on every vessel passing through the Bosphorous. -=- commerce, which she maintained, till the discovery of the passage by the Cape of Good Hope, which opened a new channel, more certain, much less expensive, and not so liable to interruption from the revolutions that nations are liable to. It is deserving of observation, that whatever alterations took place in the channel through which the India trade was carried on, whatever were the vicissitudes or the difficulties, the trade itself never was suspended; so great was the propensity of those who were affluent in the West, to enjoy the productions of the East. {54} The vicissitudes of this eastern commerce were thus very great in former times. The wealth and arrogance which the possession of it produced, and the envy it excited, may, in general, be ascribed as the cause; indeed it is not certain whether the envy of the Genoese, at the success of the Venetians, did not make them, in an underhand manner, favour those attempts to find out a new channel which might destroy the prosperity of a haughty and successful rival. {55} Whether it was so or not, it is certain that the discovery of the passage by the Cape of Good Hope was not accidental; but that the Portuguese were induced to listen to the proposal of trading to India by that route, under the certainty of rivalling the greatest commercial city of the world, if she should succeed. Though no new channel can now be expected, and the present one is every day becoming more easy and frequented, yet the capricious shiftings of the India trade were not ended by this new discovery. Instead of the contest being, as formerly, between cities situated on --- {54} The prices of Asiatic produce were exorbitant. Silk was sold for its weight in gold; and a Roman emperor refused his empress the luxury, or rather the splendour, of a silk gown. {55} Amongst the passions that get hold of rivals in commerce, that of envy is so great, when avarice is defeated, that, to humble a successful rival, they will meet ruin themselves, without fear, and even with satisfaction. -=- [end of page #58] the borders of the Mediterranean Sea, those maritime powers who navigated the main ocean became the contending parties. There are only two ways by which wealth is accumulated and brought into few hands; the one by compulsion and levying taxes, the other by producing or procuring objects of desire; for a small quantity of which, people give up a great portion of their labour. Sovereigns have amassed wealth and possessed revenue by the first means, and the use they have put it to has been magnificence in building, or in great or useful works, for war, or for pleasure. The wealth obtained by the other means, of which the trade to the East seems to have been the chief, produced a different effect. In Italy it occasioned the invention of bills of exchange, and gave encouragement to the fine arts, and to some manufactures. In the north of Europe it infused a general spirit for trade and manufactures; for the luxuries of the East only served to teach the people of the north the necessity of acquiring comfort by manufacturing the produce of their own country. To improve the arts of weaving, to make woollen and linen cloths of a finer texture, was very natural, after having seen the silks and muslins that came from India; particularly to people living in a cold climate, where a more substantial covering was wanted, and where the materials were in abundance. It was, accordingly, in Flanders, and the adjacent country, that the modern spirit of manufactures rose up, nourished by the wealth which the ancient commerce of India had produced. In the early ages, when the Tyrians had this trade, they amassed great wealth, though they had not any large countries to supply; for, probably, neither Egypt nor the eastern part of Syria would receive the produce by so circuitous a road. But, during the first ages, sacrifices to the gods and the funeral ceremonies consumed vast quantities of aromatics of every sort, as well as the enjoyments of the living. The two former causes of request for aromatics have long been at an end, owing to the changes in religion. They are now neither burned on the altar nor at the grave; and custom and taste, which are to a certain [end of page #59] degree variable and arbitrary, have lessened the consumption of some, and others have been supplied by the progress that we have ourselves made in manufactures. {56} While this diminution of consumption took place, the western world was advancing in civilization, and the progress of wealth became vastly more extended; so that if the consumers of eastern luxuries were less profuse in the use of them, they were, at the same time, greatly increased in number. The taste for tea, alone, which was introduced not much above a century ago, has alone, overbalanced all the others, and it is still augmenting in Europe; besides the discovery of a new quarter of the world rapidly increasing in population, into which the custom of drinking tea, as in Britain, has been introduced also. The reasonable price at which an article can be afforded, always augments the consumption: and though we have no criterion to go by in judging of the prices in former times, yet it is certain they must have been very great. At the time when silk was sold for its weight in gold, that metal was compared with common labour of six times the value that it is now; silk was, then, at least three hundred times as dear as it is now; indeed, even that extravagant price scarcely accounts for the parsimony of the Roman emperor, who refused his wife a robe of that rich material. {57} Though new discoveries have robbed Egypt and Syria for ever of the commerce of the East; and though the loss of trade was the proximate cause of the degradation, yet both countries had long been desolate and --- {56} Wrought silks, muslins, and porcelains. Cotton stuffs are now no longer bought as formerly, so that, except in porcelain, the raw material is the only object of commerce. The silk worm was introduced into Italy during the time that the intercourse with the East was very difficult, and therefore had not the increase of wealth, and a taste for new articles extended the demand and brought a new one, the trade would at last have been nearly done away. {57} The carriage is 24 L. a ton backwards and forwards, or out and home, which is only equal to what is paid in England by land for 500 miles. Indeed, none but articles of a very great value and high price could pay for the carriage by any of the channels hitherto discovered but that of the Cape. -=- [end of page #60] degraded before this change happened; for though the commerce came through their countries, the riches it produced centred in Italy. Syria had long become a desert, and the ruined palaces were become the habitations of scorpions, reptiles, and beasts of prey, long before those discoveries which seemed to have sealed their doom. That discovery only completed what had long been begun, and rendered permanent and irrevocable what might otherwise have been altered. {58} At the rate at which this trade now goes on to increase, all the gold and silver mines in the West, will soon be insufficient to afford enough of the precious metals to pay for produce from that country: for few European manufactures are taken in return. This is laying a foundation for a great revolution, either in manners or in nations at some future day. It is extraordinary that, from the earliest ages, the inhabitants of India have been receiving gold and silver from all other countries, and yet, that those metals are not so abundant there as with European nations. As our demand for the produce of the mines increases in order to send remittances in specie to that country, the mines themselves diminish in their produce, so that whatever change this may bring on, can be at no very great distance. {59} --- {58} What Dr. Robertson says of Palmyra may be applied nearly to all the cities in Asia and Africa that shared in this commerce. "Palmyra, after the conquest by Aurelian never revived." At present, a few miserable huts of beggarly Arabs are scattered in the courts of its stately temples, or deform its elegant porticoes, and exhibit a humiliating contrast to its ancient magnificence. {59} If the taste of the Anglo Americans for tea continues, allowing one pound to each person in the year, which is very little, one hundred millions of pounds weight will be annually wanted in less than half a century. -=- [end of page #61] CHAP. VII. _Of the Causes that brought on the Decline of the Nations that had flourished in the middle Ages, and of Portugal, Spain, Holland, and the Hans Towns_. The trade with India, which had been almost the only one, and always an occasion for envy and contest, was sought for by the Spaniards and the Portuguese; who, as we have seen, were the first amongst modern nations that seemed to aspire at naval discovery. The manner in which Spain discovered America; and Portugal, the passage by the Cape of Good Hope, both nearly at the same period, and at the beginning of the sixteenth century, is too well known to require the smallest detail. Europeans, with the superior degree of knowledge they possessed, and particularly that of the use of fire-arms: incited also by the love of gold; and careless of keeping their word with the unsuspecting natives, soon triumphed wherever they went, and the consequence was, that both nations brought home immense riches. The trade of Venice, Alexandria, and Aleppo, was all transferred to Lisbon, {60} and never was so small a country so suddenly enriched; and it may be added, more quickly deprived afterwards of the chief source of its wealth. The Dutch had triumphed over the power of Spain, on their own soil, and they soon rivalled that of Portugal in the East. It was a very different thing to combat the natives, and to fight with the Dutch, who very soon deprived Portugal of the rich means of wealth she had discovered in India. The prosperity of Portugal, arising from its possession =sic= in the East, continued at its height exactly a century. Its decline is accounted for by the following causes. --- {60} Lisbon had its depot for the north of Europe, at Antwerp, and the value of the consignments have been estimated at a million of crowns, annually; but this is, probably, an exaggeration. -=- [end of page #62] Its domineering principles, too great an extent of conquests, which were widely scattered, and the haughtiness of the Portuguese, both towards the natives and Europeans; the envy and rivalship which brought the Dutch into the same countries; a great want of attention and energy; and, lastly, giving a preference to the trade to the Brazils. The Brazils had been first discovered by the Portuguese, afterwards seized upon by the Dutch, whom they, however, expelled about the middle of the sixteenth century; that is, about fifty years after its first discovery, and an equal period of time previous to the decline of their trade in India. The possession of the whole of this lucrative trade, that had enriched so many great nations, and that by so easy a channel, and without almost any contest, for nearly a whole century, had so enriched the small kingdom of Portugal, that after being too eager, and grasping at too much, it was almost ready to resign the whole without a struggle, had it not been for some reasons of another sort. {61} So immense was the influx of wealth, from the united sources of India and the Brazils, that the former, which has been at every other period the object of ambition of all nations, and is so still, was considered as scarcely worth retaining. It is almost unnecessary to add, that from that moment Portugal has been on the decline. If ever the cup of prosperity ran over, in large streams, it was then; and when the possession of the trade to India was scarcely thought worth preserving, it is clear that no great efforts could be made to encourage internal industry. Spain, extensive and powerful before it discovered the Indies, did not so immediately feel the effects of the wealth imported, as the Portuguese had done; but its prosperity was of less duration, though the decline was not quite so rapid. The Dutch must have known the effects of wealth on a nation, else --- {61} It was debated in council, at Lisbon, whether it would be worth while to keep India, the wealth from the Brazils was so much more easily obtained. A scruple of conscience, least =sic= the missionaries should be destroyed, turned the scale in favour of retaining the trade of India!! -=- [end of page #63] they would scarcely have tried to throw off the yoke of Spain, at the very moment when it appeared in its greatest splendour and power. {62} Insolence and pride, we have too often had occasion to remark, accompany wealth; and Philip was no more proof against its effects, than those potentates who had gone before him.--There was a great resemblance between the project of invading England, with the invincible armada, as it was called, and the attack on Greece by the King of Persia. That monarch must have thought very meanly of England, to suppose that the island could be conquered by 30,000 men, even if they could have made good their landing. Indeed, to try such an experiment on a nation that had supported its claim to valour so well at Agincourt and Cressy, and which was not, in any respect, degenerated, manifests his being blinded by the effects of wealth and greatness. The consequence was, a gradual decline of the affairs of his kingdom; so that, in little less than a century, England placed a king on the throne of Spain. Though the effect produced on Spain was not so rapid as on Portugal, it was, in some respects, more irretrievable. The vast numbers of persons who quitted that country, in quest of gold, injured its population, already reduced by the expulsion of the Moors, who were the most industrious of its inhabitants. The wealth that came to Spain, came in a very unequal distribution, which is a considerable disadvantage, and hastens on that state of things which is the natural forerunner of the decay of a nation. Wealth, arising by commerce, however great its quantity, must be distributed with some degree of equality; but the great adventurers in the gold mines only shared with their sovereign, and the whole of their wealth came in prodigious quantities, pouring in upon the country. {63} --- {62} Though the Dutch were subject to Spain, yet that had not prevented them from acting in an independent manner in their modes of following trade and commerce. {63} We see an example of this in our own trade to India. Captains of ships, merchants, and all those who get money by that trade, come home with moderate fortunes; but the governors, and civil and military officers, who have been settled in the country, come home with princely fortunes, and eclipse the old nobility of the country. -=- [end of page #64] Both Spain and Portugal, finding that wealth came with such ease from India and America, neglected industry. This, indeed, was a very natural consequence; and, when the sources of their riches began to dry up, they found, though too late, that instead of having increased in wealth, they had only been enriching more industrious nations, and ruining themselves. The gold that arrives from the West passes through the hands of its masters with almost the same rapidity as if they were only agents for the English and the Dutch; so chimerical an idea is that of wealth existing without industry. The Dutch were the only rivals of the Portuguese in the East Indies; for though other nations came afterwards in for a share, yet the transition from wealth to weakness was already made by the Portuguese, before any of them had begun to set seriously to work, in acquiring possessions, or in carrying on trade with that country. Portugal thus fell, merely from the rivalship of a more industrious and less advanced nation, after having embraced more territory than she had power to keep. Spain fell, because she had embraced a wrong object as a source of riches. {64} The Hans Towns, which owed their prosperity, partly to their own wisdom and perseverance, in the beginning, and partly to the contempt with which sovereigns, in the days of chivalry, viewed commerce, might, with very little penetration, and much less exertion of wisdom than they had displayed, have seen that the spirit of commerce was becoming general, and that moderation and prudence were necessary to preserve them in their proud situation; but the prudence which they possessed at first had given way to pride, and abandoned them; and the first great stroke they received was from Queen Elizabeth. The ruin of so widely-extended a confederacy could not be astonishing, and, indeed, was a natural consequence of the changes in the manners of the times: but it was not so with Flanders. There was nothing to have prevented the Flemish from continuing to enjoy wealth, and follow up industry, except in the rivalship of other nations, --- {64} So short a time did the wealth remain in the country, that, when the famous armada was fitted out against England, a loan of money was solicited, from Genoa, for the purpose. -=- [end of page #65] particularly of Holland and England; for, though France was farther advanced, as a manufacturing and wealthy nation, than England, yet it was not in the same line of industry with the people of the Netherlands, whose prosperity was not therefore injured by it in the same degree. As for the Dutch, they continued to increase in wealth till the end of the seventeenth century, and their decline requires a more particular attention. In addition to their great industry, the fisheries, and art of curing fish, the Dutch excelled in making machines of various sorts, and became the nation that supplied others with materials, in a state ready prepared for manufacturing: this was a new branch of business, and very lucrative, for, as the machines were kept a secret, the abbreviation of labour was great, and the materials had still the advantage in their sale that a raw material has over manufactured goods; so that the advantages were almost beyond example. Add to all this, that the Dutch were the first who established the banking system, (copying in part from the Italians,) on a solid plan. The advantages that Holland enjoyed were, indeed, all of its own procuring, but they were numerous and inappretiable, without counting the trade to India, of which it enjoyed a greater share than any other nation, for a considerable period. No nation has shewn, so completely as the Dutch, how exterior enemies may be repelled, and difficulties overcome, while there is a true attention to the real welfare of the country. The exertions of the Romans, to conquer others, scarcely surpassed those of the Dutch to preserve themselves, when they were in a state of necessity; but, when they became affluent, energy and unanimity left them. The manufacturers became merchants, and the merchants became agents and carriers; so that the solid sources of riches gradually disappeared. All this time, taxation increased, and though no nation ever allowed its manners to be less corrupted by the possession of wealth, yet there was a sensible change; but the change in the way of thinking was the most pernicious. Discontent with the government, and disagreements amongst themselves, completed their misfortunes, while England was [end of page #66] all the time endeavouring to supplant them in the most beneficial sources of their wealth. The Dutch, fairly sunk by that rivalship, and natural change of things, which transfers the seat of wealth and commerce from one nation to another. There was no violent revolution, no invasion by an enemy; it was the silent operation of that cause of decline, which has been already mentioned in the Second Chapter, and will be farther and more particularly illustrated and explained. The Dutch had a superabundance of capital; the interest of money was low; and wealth had begun to leave Holland long before the symptoms of decay became visible; by which means, the trade of other countries was encouraged, and, as always will be the case, capital emigrated, the moment it could find secure employment, and greater profits than were to be obtained at home. The leading causes of the decline of Holland may be distinguished thus: The taxes were gradually increasing. Its superiority in manufactures over other countries was continually diminishing; consequently, industry was not so well rewarded, and less active. The merchants preferred safe agencies for foreigners to trading on their own bottom, thereby lending their credit. Dutch capital was employed to purchase goods in one country and sell them in another: so that the Dutch became carriers for others, instead of manufacturing and carrying for themselves. The trade to India, and the banking business, were both taken up by other nations; so that Holland then lost her superiority in these branches. Thus circumstanced, Holland was gradually sinking, when political troubles, the end of which it is not easy to foresee, put her at the feet of France: an event that would not have happened in the manner it did, when the true spirit of patriotism reigned, that distinguished her in her more prosperous days. From this, at least, there is one distinct lesson to be learnt, that however it may be natural for nations to lose a superiority, owing to arts, inventions, or foreign trade, yet, if the minds of the people and their manners remain pure, they will not be degraded, by falling a prey to an enemy. When Holland was not rich [end of page #67] it resisted Spain in all her glory, during a very hard, arduous, and continued struggle; but then the people were united as one man: there were no traitors to raise a voice for Spain against their country. When Holland was wealthy, it did not even attempt to resist France when invaded; but then Holland was divided, and there were in every city men, who wished more for the plunder than the prosperity of their country. In viewing the fall of those nations that sunk before the discovery of America, the eastern empire was the last that attracted attention. It had been reduced by the Turks, with a vigour and energy that promised a renovation, which, however, it did not effect. The Turks brought with them the Mahometan religion, which has debased the manners and degraded the minds of every people. Constantinople, by this change, lost the remains of ancient learning and of commerce, which even the weakness of the emperors, and the repeated wars, had not been able entirely to destroy. The Greeks were reduced to a state of subordination and slavery, but the Turks were not civilized. They adopted what was luxurious and effeminate of Grecian manners, yet still retained their former ignorance and ferocity. Amongst modern nations, the Turkish government is, in form, a monster, and its existence an enigma; yet it extended its sway over all that was most valuable or most splendid in the ancient world. Greece, Egypt, Phoenicia, Syria, the three Arabias, and countries then but little known, are subject to a brutish people, who do not even condescend to mix with the inhabitants of the country, but who rule over them in a manner the most humiliating and disgraceful. {65} The Turkish government has never been powerful. The city of Venice was always its equal at sea; and, as it disdains to adopt the systems of other nations, it is every day becoming weaker, in comparison with them. It has formerly maintained successful struggles against --- {65} In all other conquests, the conquered and the conquerors have become, at last, one people, when they have settled in the same country, whether Christians or Pagans; but the Turks and Greeks keep as distinct to this day as at the first, and this is probably owing to the nature of the Turkish religion. --- [end of page #68] Germany, Poland, and Russia; but that time is now over, and it owes its present existence to the jealousy of other powers. It is possessed of a greater quantity of good territory than all the leading nations of Europe, Russia excepted; and it is not the interest of men living in less favoured climates, to endeavour to renovate the country of Alexander, and of the other great nations of antiquity. The Turkish nation is represented as greatly on the decline, but, soon after its establishment, it had every vice that could well exist in a government, and its greatest weakness now arises more from the alteration produced in other nations for the better, than in itself for the worse. The difficulty of keeping people in ignorance is becoming every day greater; and when the Ottoman throne falls the usual order of things will be reversed. For, as other governments may attribute their destruction to corruption of manners, and to ignorance, the Turkish government looks there for its security; and the day that any reasonable degree of light breaks in amongst its subjects will be its last. To endeavour tracing the causes of decline in a state that owes its existence to its defects, and is in every respect different from other nations, would be useless in the present Inquiry, it has only been noticed to shew, that, in the infinite variety of things, some may owe their existence to what is in general the cause of destruction. [end of page #69] CHAP. VII. [=sic=--error in printer's copy, should read VIII.] _General View and Analysis of the Causes that operated in producing the Decline of all Nations, with a Chart, representing the Rise, Fall, and Migrations of Wealth, in all different Countries, from the Year 1500, before the Birth of Christ, to the End of the Eighteenth Century, --a Period of 3300 Years_. From the revolutions that have taken place amongst wealthy and powerful nations to the present time, though the origin has been owing to very different causes, and the decline and removal from one place to another has been attended with circumstances not similar; yet the same leading cause for that decline may not only be traced easily and distinctly, but is so evident that it is impossible for it to be overlooked or mistaken. Local situation, or temporary circumstances, have always afforded the first means of rising to wealth and greatness. The minds of men, in a poor state, seem never to have neglected an opportunity, presented either by the one or the other, and they have generally proved successful, till energy of mind and industry were banished, by the habits of luxury, negligence, and pride, which accompany, or at least soon follow, the acquisition of either. Where wealth has been acquired first, power has generally been sought for afterwards; and, where power came first, it has always sought the readiest road to wealth, by attacking those who were in possession of it. The nations and cities on the borders of the Mediterranean Sea, where arts and commerce first began, where agriculture flourished, and population had risen to a high pitch, carried on perpetual struggles to supplant each other; and, in those struggles, the most wealthy generally sunk under; till Alexander, the first great conqueror, with whose history we are tolerably well acquainted, reduced them all to [end of page #70] his yoke; one small and brave people triumphing over the Egyptian and Assyrian empires, where wealth and luxury had already produced their effects. Though this triumph of poverty over riches was very complete, except in one single instance, it did not occasion any real change, either in the abodes of wealth, or the channels of commerce. Tyre, the richest commercial city till then, was ruined, to make way for the prosperity of Alexandria, which became the most wealthy; drawing great part of the commerce from Carthage on the west, and taking the whole from Rhinocolura on the east: but, in Egypt and Syria, Babylon and Memphis still remained great cities. The whole of this ancient world was for a moment under one chief, but was soon again divided amongst the generals who succeeded to that great conqueror; and the Egyptian and Persian empires became rivals, as Egypt and Syria had been before. The Grecian nations still remained the chief seats of civilization and the fine arts; and this continued till the Romans, originally a poorer people than the Macedonians, conquered the whole. This was the second great triumph of poverty and energy over wealth and grandeur, and, in this struggle, Greece itself fell. The effects of wealth were not less formidable to the Romans themselves, than they had been to those nations they had enabled that brave and warlike people to conquer; so that the mistress of the world, in her turn, fell before nations that were rude and barbarous, but uncorrupted by wealth and luxury. The conquerors of Rome were too rude, and too many in number, to become themselves enervated by wealth, which disappeared under their rapacious grasp, and which they neither had the art nor inclination to preserve. This invasion of the fertile and rich provinces by men rude and ignorant, but who came from northern climates, established a new order of things; and only a small remnant of former wealth and greatness was preserved in Egypt and at Constantinople. For several centuries of war and confusion commerce and the arts appear to have been undervalued and neglected; but still the taste [end of page #71] for oriental luxuries was not entirely banished, and, at the first interval of peace and safety, sprung up again. It was then that Alexandria, Venice, Genoa, and Constantinople, became the channels through which the people of Europe procured the luxuries of Asia. Babylon, Memphis, Palmyra, and all the other great cities of antiquity, were no more; even Greece had lost its arts and splendour; Alexandria and Constantinople were repeatedly assailed, taken, and conquered, by the barbarians, who envied their wealth, but who still found an interest in continuing them as channels for procuring to European nations the refinements of the East. Though Venice and Genoa were wealthy, they were but small, and of little importance; and all the nations who might have crushed them at a blow, only considering them as sea-ports of convenience and utility, allowed them to remain independent. As an intercourse had been established between the northern and southern parts, a taste for the luxuries of Asia had extended to the shores of the Baltic, soon after the victorious arms of Charlemagne had carried there some degree of civilization, and the Christian religion. Then it was that a new and more widely-extended system of commerce, but something like what had formerly existed in Tyre and Carthage, began in all the maritime towns of Europe, when Italy and Flanders became the most wealthy parts of Europe. A spirit of chivalry, and a desire of conquest, not founded on the same principles with the conquests of ancient nations, or of Rome, to obtain wealth, pervaded all Europe, and the greatest confusion prevailed. In the history of wealth and power, as connected together, this is a chasm. Those who had power despised wealth, and were seeking after what they esteemed more--military glory; and wealth was confined to a number of insulated spots, and possessed by men who were merchants, without any share of power or authority. This extraordinary and unprecedented state of things gave rise to the Hanseatic League, which rose at last to such importance that those who had been so long seeking after glory, without finding it, began to see the importance which was derived from wealth. They began to see that, even in the pursuit of their favourite object, wealth was an ex- [end of page #72] cellent assistant, and the friendship of merchants begun =sic= to be solicited by princes, as in the days of Tyre and Sidon. This progress was greatly facilitated and accelerated by the crusades, which, at the same time that they beggared half the nobility of Europe, gave them a taste for the refinements of the East, and taught them to set some value on the means by which such refinements could be procured. In this manner were things proceeding, when three great discoveries changed the situation of mankind. {66} The mariners compass, gunpowder, and the art of printing, were all discovered nearly about the same time; and, independent of their great and permanent effects, they were wonderfully calculated to alter the situation of nations at that period. The navigation of the ocean, which led to the discovery of a passage to the East Indies, and of America, gave a mortal blow to the nations situated on the borders of the Mediterranean Sea, who thus found themselves deprived of the commerce of the East. The discovery of gunpowder, a means so powerful of annoying an enemy, without the aid of human force, which places a giant and a dwarf in some sort upon an equality, was wonderfully adapted for doing away the illusions of knight errantry, that had such a powerful effect in making war be preferred to commerce: while printing facilitated the communication of every species of knowledge. It was then that northern nations began to cultivate arts and sciences, as those of the south under a mild heaven, and on a fertile soil, had done three thousand years before. But ingenuity and invention took a different direction in the north from what they had done in the southern climates; instead of sovereigns and slaves, men were more in mutual want of each other, and therefore a more equal division of the fruits of industry was required. The manufactures of former times had been confined chiefly to luxuries for the great, and simple necessaries for slaves; and commerce, though productive of great wealth to a few, was in its limits equally confined. --- {66} For the dates see the chart, and for their effects, chap. i. book ii. [Transcriber's note: See in the Chart "Mariners Compass /Gunpowder/Printing Invented 1300-1400"]. -=- [end of page #73] It was natural that the two nations which had first discovered the passage to the East, and the continent of the West, which abounded with the precious metals, should become rich and powerful, as those cities had formerly done that possessed exclusively the channels of commerce. Those two countries were Spain and Portugal; but here again we find the same fatality attend the acquisition of wealth that had formerly been remarked. It was, indeed, not to be expected, that the steadiness and virtue of the Spaniards and Portuguese could resist the operation of a cause, that neither the wisdom of the Egyptians; the arts and industry of Greece, nor the stubborn and martial patriotism of the Romans could withstand. Those two nations soon sunk, and the Dutch, the French, and the English, became participators of the commerce. Manufactures were a new source of wealth, almost unknown to the ancient world. Those begun first to be set in activity in Flanders, then in Holland and France, and, last of all, in England; but, like commerce, and every other means by which wealth is acquired, they have a tendency to leave a country. The cause and the effect are at variance, after a certain time; and though we cannot illustrate this from history, as we may the migrations of wealth arising from other sources, the tendency appears of the same nature, though with this difference; that men may always labour for themselves, and enjoy the fruits of their labours, though they cannot always find the means of being the carriers to other nations, or becoming merchants. This alteration in the nature of wealth; the inventions of mankind; the alterations brought on by the facility of communicating knowledge; the systematical manner in which men pursue their interests, and other changes: give reason to hope that, in the present situation of things, those possessions may be rendered permanent, that have hitherto been found to be so evanescent and fugitive. Where wealth has not been wrested from a country by absolute force, (in doing which the poorer nations were always successful,) it has emigrated from other causes, and taken up its abode amongst a new people, where circumstances were more favourable for its encouragement. [end of page #74] Before we leave this recapitulation, it is necessary, however, to take notice of one revolution that did not take place on similar principles with the others, so far as wealth and luxury are in question; but which has in some respects a similarity, and, in others, is precisely the reverse. About two centuries and a half ago, the Polish nation was one of the most powerful in Europe; Russia could not then, nor for long after, contend with it. The Prussians were its vassals; and the capital of the German empire, when besieged by the Turks, in 1650, owed its safety to the Poles, its brave and faithful allies. Such was the case; but, at this day, the Polish nation is no longer in existence: it is subdued, parcelled out, and divided, amongst those very powers, to any of which it was at least equal, and to the others superior, at so late a period. It may be asked, whether Poland was one of those states that has been borne down by its own wealth and opulence? If its ambition, injustice, or any of the other causes so prominent in the decline of nations, operated in the total extinction of it from the rank of independent states? Not one of those causes operated, but still it is not altogether an exception to the general rule. When the feudal system was established all over Europe, nations under its influence were so far on an equality; and as they all emerged from that situation nearly about the same time, Poland excepted, they still preserved their relative situations. The Poles, during this change in other states, comparatively lost power. Amongst the alterations produced, was that of placing in the hands of the sovereign all the disposable revenue and force of a country, with which standing armies were maintained. Those irregular militias, till then composed of the barons and their retainers; a species of force, at best, far inferior to regular armies, became useless; but particularly so, after the modes of fighting had been changed by the invention of gunpowder, and the adoption of large trains of artillery, which could never have been employed in the feudal armies. The disposable force of Poland and its revenues did not, by any means, keep pace with those of neighbouring nations; and what was still worse, the strength of that unfortunate country was divided; the [end of page #75] monarchy was elective, and foreign influence had a means of exertion, which, under a hereditary line of kings, is not practicable. Poland was not only weaker than its neighbours, but became a prey to intestine divisions, cabal, and intrigue. Though Poland was not wealthy, according to the meaning applied to that word, it was a populous and fertile country, and therefore a desirable possession to the neighbouring states. To Prussia, a most ambitious and aggrandising power, with a military government, and of a very limited extent, it was peculiarly desirable. To Russia, extensive as it is, the fruitful territory was also an object of ambition, from its proximity to the seat of an empire, the most fertile and fine provinces of which lie at a distance. The same desire of possessing what they wanted, operating at the same time on two neighbouring nations, occasioned them to unite their power in a first dismemberment of Poland, for their mutual benefit. The interior convulsions of the country served as a pretext, and its weakness furnished the means of executing the design. In 1772, that independent country first lost some of its finest provinces; but this was only a prelude to its final fall. The nature of ambition is to augment with success, and as the same divisions continued in the state, a pretence for a farther interference in its affairs was easily found; and, in 1794, Poland ceased to be one of the number of European states. In this last seizure, the house of Austria had no immediate hand. It was, however, necessary to have its consent: and, as the aggrandisement of Prussia was not an object of indifference to Austria, participation in the spoils was proposed, as the price of acquiescence, and it was readily accepted. In this case, the weakness of Poland, and the ambition of its rivals and neighbours, were the immediate causes of its destruction; but that weakness arose from a want of true patriotism and proper attention in the people themselves. Jealous of liberties, and disobedient to their king, the Poles were slaves to the feudal proprietors of the soil. Though the first cause was different, yet their divisions and quarrels were the same in effect, as if they had proceeded from real causes of discontent, and a deranged state of society, such as we have seen, when the love of the country is lost. In Poland, that love of the country [end of page #76] was not lost, but it was badly directed, which is nearly the same thing; at least, it is equally dangerous. Why, it may be asked, did not the other powers of Europe interfere? To this, indeed, it would be difficult to give a satisfactory answer. Those who did not interfere, probably, may have cause to repent their indifference. It was an infraction of that sort of federation of nations, which had been found necessary to prevent a repetition of conquests like those of Alexander, or of the Romans; yet, still there is a way of accounting for their conduct, though it cannot be vindicated. In the first place, Poland lays =sic= remote from those powerful nations that have had the greatest sway in modern times. It was not very easy to interfere with great efficacy; besides, as Poland was previously under foreign influence, the essential evil was done. The example of partitions, indeed, was not given, but it is not impossible that some powers on the continent, though they got no share, might not be sorry to see such an example. Britain and Spain certainly could not wish for the example, but others might, and others probably did wish for it. The first division was, besides, only a beginning; some degree of moderation was preserved, and Poland was only mutilated; it was not destroyed. The case was not entirely new, nor without example. The second and last division took place at a time when the nations whose interest it was, and whose wish it might have been to interfere, had not the means of doing so. It was when the republican frenzy in France was at its most desperate height, and whom =sic= the whole of civilized Europe appeared to be in danger. There is one more excuse to be found. The aspect of affairs in Poland resembled, with regard to its revolutions, those of France so much, that those, who at another time would have probably interfered, were rather inclined to co-operate in stifling a rising flame in the north, similar to that which had endangered the whole of the south of Europe. In all this, the thing the most difficult to be accounted for, is the conduct of the Polish nation; but an inquiry into the causes of that would be quite foreign to the present subject: this is, however, an instance of the danger arising from not keeping pace with other nations [end of page #77] in those arts of government, and internal policy, which constitute the power of nations in the general order of things, whatever that may be. Although we have seldom found intestine divisions carried to so blameable a length in any other nation that was not corrupt in itself, yet, it is clear, that the influence obtained by the wealth of its neighbours was at the bottom of those highly blameable, and dreadfully fatal divisions. When aggrandisement is the aim of modern states, there will not now be any difficulty of pleading example; and there is one of those very powers that on this occasion participated in the division which has all the seeds of discord in itself that brought on the ruin of the Polish empire. That power has already felt the effect of example; and, though it may repine, it cannot complain, as it might otherwise have done; or if it does, it cannot expect equal commiseration. EXPLANATION OF THE PLATE INTENDED TO ILLUSTRATE THE RISE AND FALL OF NATIONS. In the chart, at the beginning of the work, the lines, from top to bottom, represent the division of time into centuries, each indicating the year, marked under and above it, in the same way that has been adopted in Dr. Priestley's Chart of Universal History, in works of chronology, and in statements of commerce and finance. The countries that have flourished, whether by commerce, or any other means are supposed to be represented by the parallel spaces from right to left, according to the names written on the right hand. The rise of the black part, something like a distant range of low mountains, shews at what periods the country was great; when its greatness began and when it ended. This plan would be unexceptionally correct, if the materials for it could be procured; but if they were, it would not lead to any very different conclusion from what it does in its present state. The times, when the elevation began, and its duration are exact. The rises and falls are, as nearly as I am able, estimated from existing documents. The part shaded of a darkish colour, and growing gradually lighter at both edges, represent those centuries of ignorance which succeeded the fall of the Roman empire. [end of page #78] At the bottom, on the part not stained, is a chronological list of events, inventions, and discoveries, connected with the subject. Those which are not, however, important or curious, have no place. The commerce of France, Britain, Russia, and America, are upon a true scale with respect to their proportional amount, as well as to their rise and progress. The others are not, owing to want of documents; but, as before observed, the amount has very little to do with the subject; the business is to see how wealth and power were divided at any particular time, if they were rising or falling, or if they were at their height, comparing them with the manners of the people at the time. This is the use of the chart, as to the representation of individual places and nations. The general conclusion is, from taking the whole together, that wealth and power have never been long permanent in any place. That they never have been renewed when once destroyed, though they have had rises and falls, and that they travel over the face of the earth, something like a caravan of merchants. On their arrival, every thing is found green and fresh; while they remain all is bustle and abundance, and, when gone, all is left trampled down, barren, and bare. This chart is a sort of a picture, intended to make those migrations and change of place distinct and easily conceived, on which the whole of this book has been occupied. Being once acquainted with the changes that have taken place, we may more accurately compare them with the state of this country at the present time. Those who will take the trouble to read Ferguson's History of the Roman Republic, and Gibbon's Decline and Fall of the Empire, may form a judgement of the accuracy or inaccuracy of the chart. EXAMPLE OF THE MANNER OF INSPECTING THE CHART. To know when Rome was at the highest pitch of greatness, find, on the right hand, the space marked Roman empire: then look between the lines for the highest part of the dark ground, and look immediately under for the year, it will be seen to be at the birth of Christ, that is, during the reign of Augustus; and by the same means it will be found declining gradually till the year 490. [end of page #79] In like manner, Carthage will be found at the zenith of its power about 300 years before Christ. The founding of Alexandria and the wars with Rome began then to diminish both its wealth and power. It is intended by the author of this to execute a chart of the same sort on a very large scale, and assign to the different powers spaces proportioned to their importance, as nearly as he can ascertain. With respect to the chronology of this chart, to prevent criticisms which might perhaps be made; but do not apply to it, according to the purpose for which it was constructed, the reader is requested to observe, that I am desirous of illustrating a very important investigation, by representing a very confused and long series of events. The result to be derived from this, is not to be affected by any small inaccuracy. In counting before the birth of Christ, having found many different opinions, and much uncertainty relative to dates, (which I neither have abilities nor inclination to investigate,) I measured backwards, without pretending to settle the year of the world, respecting which there are so many different opinions. The materials for ancient history are few, and sometimes not much to be relied upon; but, in great leading facts, such as alone are of use in this picture, the authenticity is not to be doubted. The Assyrian and Egyptian empires had attained wealth and power previous to the time at which this commences. They stood then, and for long after, as if it =sic= were alone in the world; their revolutions, and the rise, prosperity, and decline of other nations, are all represented. I have not wished to continue the view of France, since the revolution, its present real situation is so imperfectly known; and, from what is known of it, it cannot be compared with any other nation, or with itself previous to that period. [end of page #80] ======== BOOK II. ======== CHAP. I. _Of the Interior Causes of Decline, arising from the Possession of Wealth.--Its general Operation on the Habits of Life, Manners, Education, and Ways of thinking and acting of the Inhabitants of a Country_. As necessity was the first cause of industry and invention, from which wealth and power arise, it is natural that, when the action of that necessity becomes less urgent, those exertions to which it gave rise will gradually fall away. Though habit may sometimes counteract this tendency, in the individual, yet, taken upon a general scale, and from generation to generation, it must inevitably take place. In this case, an individual who has obtained wealth enjoys an advantage, which no nation ever can expect. With only common prudence, he may cease from exertion or industry, and remain in affluence. If he has property in land, he may let it, and live on the rent; if in money, he may lend it, and live on the interest; but one nation cannot let its lands, or lend its capital to another. It must, by its own industry, render them productive. The great bulk of every nation, then, must be industrious, however wealthy it may be; otherwise, the wealth will soon be dissipated and disappear. The people of Flanders cannot, for example, cultivate the fields of the French, and live in Flanders; and, if the agriculture of a country is neglected, that country must soon become poor and miserable. {67} --- {67} We have seen what became of the Romans, when the tribute paid by other nations enabled them to live in idleness. The influx of wealth from America produced nearly the same effect on Spain: though it lasted for a very short time, yet it ruined the country. -=- [end of page #81] It is not absolutely necessary, then, for an individual to conciliate affluence with industry, or, which is the same thing, to preserve one of the effects of necessity, after the necessity has ceased to exist. But if it were possible for a sum of money, or property of any sort, to be given to each individual in a nation, which would be sufficient, in the midst of an industrious people, to enable him to live in perfect idleness, the whole nation could not become idle. Such a case never can exist, as that of all the individuals in a country becoming sufficiently rich to live without labour. But something approaching towards that state of things actually does take place, when, by the general increase of wealth, the necessity for labour is diminished. The number of idle people is constantly augmenting; and even those who continue to labour do it less intensely than when the operation of necessity was more severe. When a cause is diminished, the effect must in time fall off in proportion. With individuals, nature has given very powerful auxiliaries to necessity, which strengthen and prolong its operation, but which do not operate equally on nations. Habit or custom is the one auxiliary, and ambition or avarice is the other. Habit, in all cases, diminishes the reluctance to labour, which is inherent in the most part of mankind, and sometimes entirely overcomes it. {68} Ambition, which appears under many different forms, renders labour absolutely an enjoyment. Sometimes ambition is merely a desire of amassing property, an avaricious disposition: sometimes it is a desire to create a family; and even, sometimes, the vain and delusive idea of retiring from business, and becoming happy in a state of total idleness, spurs a man on to labour. It is a very curious, but well-known fact, that, after necessity has entirely ceased to promote industry, the love of complete idleness, and the hope of enjoying it at some distant date, leads the wealthy man on, to his last hour, in a train of augmented industry. Thus has nature most wisely counteracted --- {68} There are many instances where habit has rendered a particular sort of labour absolutely a want. It has become a necessary,--a means of enjoyment without which life has become a burthen. -=- [end of page #82] the disposition of man to idleness; by making the very propensity to it, after a certain time, active in promoting industry. But this can never be the case with a race of men: {69} and, as a nation consists of a greater number of individuals, so, also, its existence consists of successive generations. There is a difference between idleness and inaction. It is the natural propensity of man to be idle, but not to be inactive. Enjoyment is his aim, after he has secured the means of existence. Enjoyment and idleness are supposed, in many cases, to go hand in hand; at any rate, they can be reconciled, whereas inaction and enjoyment are irreconcilable. {70} But we may still go farther. As taste for any particular enjoyment is acquired when a man is young, and the same taste continues in a more advanced age; a man who has been long in business has had no time to acquire a taste for those enjoyments that are incompatible with, or perhaps that admit of being substituted for it. Reading the study of the fine arts, and such other means of employing time as men enjoy, who, at an early period of life, are exempted from labour, afford no amusement to the man who has been always accustomed to a life of business, {71} with whom there is an absolute ne- --- {69} It is perhaps amongst chances that seem likely enough; the only one that has never happened, that of a race of misers, in the same lineal descent, for several generations. The reason why I say it never has happened is, that, if it had, the effects would have become so conspicuous, by the riches accumulated, that they could not have passed unobserved. {70} By inaction is not meant the opposite of loco-motion, such as laying =sic= in bed, or basking in the sun; it is supposed that a man, to enjoy himself, must be reading, talking, in company, or _doing something_. {71} They sometimes affect this, but it is little else than through vanity. It would be easy to give a hundred striking proofs, but their frequency renders that unnecessary. Hunting and fishing, the two most anxious and painful occupations in the world, are, in all countries, followed by the affluent and idle as amusements; they want to interest the mind, and occupy themselves. Gaming, which is attended with very painful sensations, is followed much more frequently from propensity than from the love of gain; and, indeed, it would appear, that a life without occupations that interest the mind, is of all others the most insipid: it appears to be worse, it appears to be miserable. -=- [end of page #83] cessity of filling up the time in one way or another. A certain portion of time may be spent in company; but even that, to be enjoyed, must be spent in the society of men of the same class. The inducement, then, to a man who has dedicated the first part of his life advantageously to industry, to become idle, is not great, even when he is at free liberty to follow his inclination. It is totally different with a young man; his propensity is to idleness, without any of those favourable circumstances that counteract that propensity. Necessity alone can be expected to operate on him; it is in vain to seek for any other substitute. Not that we mean, by idleness, to signify inaction; but that sort of idleness, which resists regular labour. There is a natural propensity to action, but then it is a propensity that operates irregularly, unless under the influence of necessity. It is a continued and regular exertion, directed to a proper object, that is wanted to obtain wealth; to procure this, it is well to imitate nature, and create necessity. But, in proportion as a nation grows wealthy, that necessity is done away. It is of the art of prolonging necessity, or rather of reconciling necessity with affluence and ease, for which we are going to search, that we may, by that means, reconcile affluence with industry. We must, in the first place, find what the natural operation is by which industry leaves a country. When a country is in a state of poverty, it maintains the same degree of industry, from generation to generation, without any effort. The new race is brought up in the same way that the former was before it, and the same pressure of necessity, acting on the same desire (but no greater desire) to shun labour, produces the same effect at one time that it did at another. The son of a man, who has arrived at a greater degree of affluence than that to which he was born, is generally brought up differently. He is not brought up so hardily in his infancy as his father was, nor so soon called to labour; and probably when he is called to it, he is neither called with so imperious a voice, nor is he so willing to obey the call. Though we do not live long enough to see an example of this operation on a whole nation, the progression being too slow for the life [end of page #84] of a man, yet we see it in different parts of the same country, that are in different degrees of advancement. How frequent are the instances of men, bred in distant counties, (particularly in the North,) bringing all that industry and those habits of labour to London, that the poverty of their parents, and the state of their part of the country naturally occasioned. Some of those have arrived at affluence, and many of them have to competency; and even those who do not arrive at a comparatively higher rank in London, than their father held in his own county, bring up their children in a very different manner. Suppose, for example, a blacksmith, from Northumberland, or a baker, from Scotland, settles in London, as his father did at Newcastle or Edinburgh, his son or sons will be bred very differently from what he was; and, after their father's death, the business will most probably go to some new comer, from a distant county. The father was brought up with the necessity of labouring, or the alternative of wanting food to eat. From his earliest days, he considered himself as fortunate if he could obtain a competent living by honest industry; and this impression, with the habits acquired while it was strong, lead a man, so brought up, to fill his place in life with honour and advantage. The son, who sees that his father is in affluence, and who partakes of the fruits of a whole life of industry, seldom considers that he must continue that industry, otherwise, that the affluence will cease with the life of his father. It is impossible to make a young man, brought up in this manner, feel as his father did; and, not having the same impulse given to him at first, he never can set off in his course of life with the same energy. But the cause of this evil does not stop here. Frequently the mother is an enemy to the industry of her son; and between the workings of real affection, badly exercised, which leads her to humour the lad; and a sort of silly vanity, equally misplaced, she encourages him, if not in idleness, at least, in the hope that he will never need to stoop to incessant industry. It is not necessary to ascertain the absolute portion of idleness and pride that is infused into the young man; that depends [end of page #85] on particular circumstances: {72} but, in most cases, it is sufficient to prevent his following the footsteps of his father with equal energy. Perhaps the capital, or the connections a father leaves in trade, may, in some degree, and for some time, compensate for this; but the instances where they do so are not numerous. This is an example of the manner in which every succeeding generation is brought up differently from that preceding it; but it is an extreme example, and one that, though very real in the individuals, can never suddenly take place on a national scale. The difference between the general affluence of a nation, and the change of its manners during the life of a man, is by no means equal to the difference between a remote province and the capital of an empire; but, though the example is extreme, the same effect is produced, in the course of several generations upon a nation, that was occasioned by change of place in one individual family from father to son. {73} When a change like this takes place in one family, (and there are numerous instances of it every day,) poverty comes on again, and the children fall back into the laborious class of society, probably in a degraded state; but as the evil is supplied by new people rising up, it is little felt on the nation; if, however, it occurs very generally, it must have a bad effect; and, indeed, the best thing that can happen for the --- {72} If the mother has been herself born in affluence, she generally has a sort of smothered contempt for the mean origin of her husband. She seldom is fully sensible of the merit by which he has raised himself, and consequently cannot be capable of appreciating the advantage of bringing up her boy in the same way; on the contrary, the habits of industry, which the father acquired at an early age, under the pressure of necessity, are generally secret objects of ridicule to the rest of the family. If, again, the woman has been of low origin in herself, and is become affluent, then matters are ten times worse. Then there is all the pride and vanity that ignorance, and a desire to hide that mean extraction create. Incapable of shewing delicacy and fine breeding in herself, she spoils her harmless children by converting them into specimens of the gentility of the family. For more of this, see the chapter on Education. {73} In Rome, after the taking of Carthage; and in Portugal, immediately after it got possession of the trade to India; the change must have been as great over the whole of the people in one generation, as it is generally between a remote province and near the capital. -=- [end of page #86] general welfare is, that such men may return to a state of insignificance and labour as fast as possible; for, while they remain above that, and in a declining state, they are filling their place in society badly. It is different where the change goes on through a whole country, then no one can supply the place, they are all going the same way, and at nearly the same rate; {74} the consequence will be, that this will not be the fall of a family, but the fall of a whole people; the motion will, indeed, be much more slow, but the moving body will be vastly greater, and the effect will be in proportion. In every nation in Europe there is, between the capital and the distant provinces, a difference of affluence, of wealth, &c. equal to what probably takes place in a nation in one or two centuries. The inhabitants of the capital have some great advantages over those that come from a distance; they have connections, they have money and stock; and, generally speaking, in their early years, they possess a more ready and marketable knowledge. But all these avail nothing against habits of industry, and being taught to expect nothing from others, but to depend all on one's own powers. With this single, but signal, advantage, the sons of the wealthy citizens are always yielding to the son of the peasant; they are one by one giving way, and their places are filled by a new race; while their descendants are sinking into poverty, and filling prisons, poor-houses, and hospitals. This vicissitude is so observable, that it would be unnecessary to dwell upon it were it, =sic= not of such infinite importance. {75} The alarming and lamentable increase of the poor, in proportion as --- {74} It is always to be observed, that this reasoning is only applicable in general, and not in every particular case. It has been remarked by the writer of the notes on the Wealth of Nations, that where a fortune is not realized in a family, sufficient to enable it to withdraw entirely from trade, it seldom remains wealthy above two generations. The sons most frequently want intelligence or industry to augment what their father got, and the grandsons have generally dissipation enough to squander entirely away what remains. This is so frequent a case in London, that it may be called the regular routine of the business; and, what arises by regular routine, must be derived from some general and natural cause. {75} In the chapter on Education, this subject is entered into more fully, and the education of women makes a principal part. A subject not noticed by the author of the Wealth of Nations, though very important. -=- [end of page #87] a nation becomes rich, is a proof that it is not in capital cities alone that the effect takes place, but over the whole of a country. {76} In England, the number of inhabitants is about six times the number of those in Scotland; and, perhaps, it costs twice as much to maintain a poor person in the former as in the latter. The sum necessary for the maintenance of the poor in England may then be reckoned at about twelve times as much as in Scotland, in order to preserve a just proportion between the two countries. But the poor cost more than sixty times as much in England as in Scotland; that is, at least five times more than the true proportion that ought to be !!! This, it may be said, is owing to the different manner of managing the business, and, in some degree, it no doubt is; {77} but, as the poor are only maintained in England, and as they are also maintained in Scotland, it would be wrong to allow so great a difference for that alone. In order, however, to put the matter out of all doubt, let us compare England with itself, and we shall find that the poor's rates, or the expense of maintaining the indigent, has increased more rapidly than the price of provisions, or the price of labour. This ought not to be the case, as they would only have augmented in the same proportion, unless the number of poor was increased as well as the price of the provisions they eat, at the same time that the nation is growing more wealthy. Of whom do the poor in every nation consist, but of the lame, the sick, the infirm, the aged, or children unprovided for? Of those, the number, in proportion to the total number of inhabitants, will be pretty nearly the same at all times; for it is nature that produces this species of helpless poverty. It would then appear that there is another species of poverty, not of nature's creation, that comes in and destroys the proportion. It would likewise appear, that that new species of poverty --- {76} The Poor's Rate, and regulations respecting that augmenting class of persons, are treated in a chapter by itself. {77} For this see the chapter on the Poor, in which the subject is investigated at considerable length. At present, it is only mentioned by way of illustrating the effect of wealth on the manners of the people; and to prove, that it is not confined to the capital alone, but is general all over the country of England. -=- [end of page #88] is occasioned by the general wealth, since it increases in proportion to it. If we find, then, that the increase of wealth renders the descendants of a particular family helpless, and unable to maintain their place in society; if we find, also, that it gives those portions of a country, which are the least advanced, an advantage over those which are the most advanced; and, if we find that the number of indigent increase most where the wealth is greatest, we surely must allow, that there is a strong tendency to decay that accompanies the acquisition of wealth. The same revolutions that arise amongst the rich and poor inhabitants of a country, who change places gradually, and without noise, must naturally take place between the inhabitants of rich and poor countries, upon a larger scale and in a more permanent manner. {78} Such changes are generally attended with, or, at least, productive of, violent commotions. Nations are not subservient to laws like individuals, but make forcible use of the means of which they are possessed, to obtain the ends which they have in view. As this tendency is uniformly felt by a number of individuals over the whole of a country, when it advances in wealth, and over whole districts that are more advanced than the others, it must operate, in length of time, in producing the decline of a whole nation, as well as it does of a certain portion of its people at all times. Changes, in the interior of a nation, take place by piece-meal or by degrees; the whole mass sees nothing of it, and, indeed, it is not felt. {79} But it is vain to think, that the same cause that gives the poorer inhabitants of a nation an advantage over the richer, will not likewise --- {78} As we find that wealth seldom goes amongst people of business past the second, and almost never past the third generation, families that rise so high as to be partners in profit, and not in labour or attention, are an exception. Nations resemble the families that acquire enough to be affluent, but not enough to retire from business. A nation can never retire; it must always be industrious. The inference is clear and cannot be mistaken; neither can the fact stated be denied. {79} The number of bankruptcies have been considered as signs of wealth; and their increase is a sign most undoubtedly of more trade; but this is a barometer, of which it requires some skill to understand the real index. -=- [end of page #89] give poor nations an advantage over rich ones; or, at least, tend to raise the one and draw down the other. Though we find, from the history of the various revolutions that have taken place in different countries, that they arose from a variety of causes, some peculiar to one nation, and some to another; yet we have found a change of manners and ways of thinking and acting, more or less operating in all of them. Amongst the interior causes of the decline of wealthy nations, arising from the wealth itself, we must set this down as one of a very general and natural operation. We must be particularly careful to remove this, as far as possible, if we mean to avert those evils which hitherto have arisen from a superior degree of wealth and power in every nation. We are now going to examine other internal causes; but though they are separate from this, yet this is at the root of all, this is perpetually operating, we meet with it in every corner and at every turning. It is what Mr. Pope says, speaking of the master-passion in individuals: "The great disease that must destroy at length, Grows with our growth, and strengthens with our strength." This radical case of decline is augmented by an ill conceived vanity in the parents, as well as by necessity ceasing to act on the children. Each is following a very natural inclination; the one to indulge, the other to be indulged. It is the duty and the interest of the state to counteract this tendency, and the manner how that it is to be done will be inquired into in the first chapter of the third book of this work. =sic --there is none.= But it is not merely a neglect of industry and the means of rising in society, or keeping one's place in it that is hurtful; the general way of thinking and acting becomes different, and, by degrees, the character of a nation is entirely altered. This change was the most rapid, and the most observable in the Roman republic, and was the cause that brought it to an end, and prepared the people for submitting to be ruled by the emperors. The human character was as much degraded under them, when the citizens were rich, as it ever had been exalted under their consular government, when the people were indigent. [end of page #90] The various effects of this change in manners will be considered under different heads, but it is too deeply rooted in human nature ever to be entirely counteracted, much less entirely done away. It is firmly connected with the first principles of action in man, and can no more be removed than his entire nature can be altered. What is in the extreme, if dangerous, may be diminished; and that is all that it would be any way useful to attempt: it may be rendered less formidable in its operation, and that is all that can be expected. The degradation of moral character; the loss of attention to the first principles to which a society owes its prosperity and safety, both of which accompany wealth, are most powerful agents in the decline of nations. We have seen that the Romans, the greatest of all nations, were ruined, chiefly, by degradation of character, by effeminacy, by ignorance; for we generally find that idleness degenerates, at last, into sloth and inaction. To a love of justice, and a power of overcoming danger, or of preventing it, listlessness and a total want of energy succeed: at length, the mind becomes estranged from hope, and the body incapable of exertion. This is the case with those who have for a time enjoyed luxury when they begin to decline; their fall is then inevitable. The Eastern empire, as well as the Western, fell by this means; and it may be said to have been the ordinary course in the decline of nations that have fallen gradually. The Turks, {80} the Spaniards, and the Portuguese, all owe part of their present feebleness to this cause; and the government of France certainly, in a great measure, owed its downfal =sic= to the same. There the courtiers had sunk in character, and it was become impossible even for the energy, the activity, and intelligence of the nation at large, to counteract the baneful effect of the change that had taken place amongst those who regulated its affairs. In history we have seen scarcely any thing similar to this, for it was the effect operating on the rulers of the nation only; the strength of the great body of the nation, on which it did not operate, supported that --- {80} Those nations resemble each other in feebleness, and in the cause of it, though, with respect to the Turks, it has existed for a longer period. -=- [end of page #91] pride and ignorance; whereas in Spain, Portugal, and Turkey, this evil being general throughout the state, those who have the conducting of affairs are held in some check by the general feebleness of the nation. {81} This not only limits the power of action, but is so visible, that it is impossible for those who govern not to be led to reflection, and to be taught moderation by it. The power of laying on taxes and the means of defending itself against other nations are regulated by the situation of the people; but the wisdom with which the affairs are conducted is dependent on the rulers, and those who govern. It is therefore fortunate, when the rulers are so far sensible of the feeble state of the country as to be moderate and reasonable. {82} None of the nations that know their own weakness would ever have risked the experiment that was made on St. Domingo by the French; neither would any nation, in the vigour of acquiring riches, have done so. It required a nation, ruled by men who were ignorant of the true principles, who were corrupted with wealth, and, at the same time, had a vigorous nation to govern, to admit of such a situation of things. {83} Had the nation been less wealthy or weaker, so as to have made the poverty or weakness obvious, this could not have happened; or, had the rulers been less corrupted and ignorant, it could not have taken place. {84} --- {81} The French nation, in reality, was never so powerful and wealthy as at the time of the revolution breaking out. The effects of luxury had only perverted the city of Paris and the court. The power which the energies of the people at large put at the disposition of the government was ill applied. {82} Perhaps some of the greatest advantages that arise from a form of government like that of England are, that those who have ruled, owe their places to their abilities, and not to favour; that they maintain their situations by exertion, and not by flattery; and that the situation of the nation never can be long disguised. Without the turbulence of a democracy, we have most of the advantages that arise from one, while we have, at the same time, the benefits that proceed from the stability and order of established monarchy. {83} When the Portuguese were for abandoning the India trade, it was a case pretty similar. {84} Though the men who overturned the commerce of France were not the same with the members of the ancient government, yet they also were men ignorant of the true interests of the nation. A few amongst them were bent upon an experiment, regardless of the ruin with which it might be attended. -=- [end of page #92] In all the interior causes, for the decline of nations, which we are endeavouring to investigate, we shall find a change of manners, and ways of thinking, constantly producing some effect in the direction towards decline. This takes place, from the time that a nation becomes more wealthy than its neighbours; until then, when it is only struggling to equal them, a nation cannot be said to be rich, but to be emerging from poverty. The great aim then should be, to counteract this change of mind and manners, that naturally attends an increased state of prosperity. [end of page #93] CHAP. II. _Of the Education of Youth in Nations increasing in Wealth.--the Errors generally committed by Writers on that Subject.--Importance of Female Education on the Manners of a People.--Not noticed by Writers on Political Economy.--Education of the great Body of the People the chief Object.--In what that consists_ The changes of which we have spoken, that take place, gradually, in a nation, from the increasing luxury and ease in which every succeeding generation is raised, cannot be prevented. They are the natural consequences of the situation of the parents being altered. But when that period of life comes, when children enter upon what is called education, then a great deal may be done; for, though the fathers and mothers have still power over their offspring, it is a diminished power; besides which, they are seldom so much disposed to exert even what power remains, as at an earlier period. It is necessary and fair, after the severe censure that has been passed on parents, for bringing up children wrong, at an early period, to admit, that for the most part, they would not run into that error, and spoil their children, if they were sensible of doing so; and that, as they grow up, they would have them properly instructed, if it were in their power: that is to say, if they had the means. There are certain things for which individuals can pay, but which it is impossible for them to provide individually; and if they attempt to do it collectively, it is liable to great abuse, and to be badly done. Individuals never could afford to send their letters, from one end of the kingdom to the other, without combining together, unless government furnished them the means: but, by the aid of the government, they are enabled to do it at a very cheap rate, with expedition and safety, whilst a profit arises to government greater than any regular business in the world produces. There is a possibility of an individual sending a letter by a particu- [end of page #94] lar messenger, at his own expense, to the greatest distance, provided he can afford it; but, as it happens, there are many more letters require sending than there are messengers to send, or money to defray the expenses. It is the same with the education of youth. A man may have a tutor to his son, and educate him privately, if he can afford it; but it happens, as with the letters, that there are many more sons to educate than there are tutors to be found, or money to pay them. As the individual, in the case of the letters, would be obliged to depend on some self-created carrier, if government did not interfere, so they are with regard to the education of their children; and, as in the one case they would be very badly served, so they generally are in the other. In the first place, the plans of education are every where bad, and the manner of executing still worse.--Those to whom the education of youth, one of the most important offices in society, is intrusted undergo no sort of examination, to ascertain whether they are fit for the business. They, in general, depend upon their submissive conduct towards the parents and improper indulgence of the children for their success. It was found that the judges of criminal and civil law could not be intrusted with the administration of justice, while they depended on the pleasure of the crown. Can it then be expected that a much more numerous set of men, who are, in every respect, inferior in rank and education, to judges, will maintain that upright and correct conduct that is necessary, when they are infinitely more dependent than the judges ever were at any period? This is one of the questions that is to be argued on the same principles, that the independence, under a monarchical or democratic government, is decided. Under the dominion of one chief, on particular occasions, which occur but seldom, it may be necessary to yield to his will, if the ruler is shameless enough and infamous enough to insist upon it; but, with a community for one's master, there is a complete system of submission, a perpetual deviation from that which is right. In the first place, the fathers and mothers are no judges themselves of the merits of the master, or the proficiency of the boy, whom the [end of page #95] master is obliged to treat with indulgence, that he may not complain. Where there is a complete ignorance of the right and wrong of the case, any thing will turn the balance; and it is clear, that where there is no proof of superior merit, there must be good will, flattery, or some other method taken, to obtain a preference. There are, occasionally, men of real merit, who distinguish themselves as teachers; and who, having a solid claim to a preference, use no mean arts to obtain it. It is but justice to parents in general, to say that such men are always encouraged, while they keep their good qualities uncontaminated by some fault that counterbalances them. {85} As this is a case where individuals cannot serve themselves, nor provide the means of being properly served, it is one of those in which the government of every country ought to interfere. Not in giving salaries, at the public expense, to men, who, perhaps, would do no duty; but in seeing that the men who undertake the task of education are qualified, and that when they have undertaken it they do their duty, and follow a proper system. There should be proper examinations, from time to time, and registers should be kept of the number of scholars, and the satisfaction they have given to those who examined them. Parents would then have a measure, by which they could estimate the merit of a school; the master would have another motive for action, and there would be an emulation amongst the scholars. The business professed to be done, and undertaken, would then be performed. At present, at about three times the expense necessary, children learn about half what they are intended to be taught. Interfering in this manner would be no infringement on private liberty; nothing would be done that could hurt, in any way, the individuals, but what must greatly benefit them. The evil habits that are contracted in early childhood, at home, would be counteracted, and the --- {85} As even those find it is necessary to make a strong impression on the minds of parents, (and as some wish their children to be treated with rigour,) there are teachers, who obtain a credit by overstraining the discipline, after having obtained a fair reputation, by carrying it only to a proper length. -=- [end of page #96] youth would be taught to know what it is that renders a man happy in himself, and respected and valued by society. But the consideration of the system to be followed is not the least important part of the business. The useful should be preferred to the useless, and in this the example of the ancients might be followed with advantage. They had no dead languages to study, and the mind appears to have been in many cases expanded, far beyond its present compass. Nothing, indeed, can equal the ignorance of the most part of boys, when they leave school; those who are considered as bad scholars, have lost the good opinion of themselves, that ought to be maintained throughout life; they think every thing difficult or impossible. Those, again, who have excelled, are something less ignorant, but become vain and conceited, owing perhaps to their having learnt some useless and superfluous pieces of knowledge. Education, on the general principle, consists in learning what makes a man useful, respectable, and happy, in the line for which he is destined, whether for manual labour, or for study; for a high or a low occupation. What is useful becomes a question, in some sort depending upon place, and still more on circumstances, it will therefore be better to discuss it at length in the Third Book, where England is the place, and particular circumstances are taken into consideration. There are, however, some general rules that apply to all places and to all situations. Good principles, honour, honesty, and integrity, are equally necessary in every rank of society; with those qualities, even a beggar is respectable, and will be respected; without them, no man ever was or ever will be so. In every mode of education, the importance of those should be inculcated; and that they may be adhered to, every man, either by inheritance, or by talents, or by habits of industry, should have it put in his power to command the means of living in the way that he has been brought up. Were this attended to, many scenes of misery and vice would be prevented. Admitting that there are propensities in some minds, [end of page #97] that lead to evil, independent of every possible check or control, it must be allowed that the far greater proportion of those who do well or ill in the world owe it to the manner in which they have been brought up in their early days. It follows, from this general rule, that parents should carefully avoid bringing up children in a manner in which they have not the means of being afterwards maintained; and that, in the second place, when they cannot leave them in an independent fortune, they should, by making them learn a trade or profession, give them the means of obtaining what they have been accustomed to consider as necessary for them to enjoy. There are, indeed, great numbers, and the greatest numbers of all; unable even to have their children taught what is called a trade. But there are none whom poverty prevents from bringing their children up to industry; and, if they have been taught to live according to their situation, they will find themselves above their wants, and therefore the same general rule will still apply. Most writers have considered the subject of education as relative to that portion of it only which applies to learning; but the first object of all, in every nation, is to make a man a good member of society; and this can never be done, unless he is fitted to fill the situation of life for which he is intended. Governments and writers on education fall, generally speaking, into the same errors. They would provide for the education of persons destined for the learned professions and sometimes for the fine arts; but agriculture, commerce, and manufactures, are totally left out: {86} the most essential, the most generally useful, are not noticed at all. As so much value is set upon the language of the Greeks and Romans, surely we might pay a little attention to the example of those distinguished nations. The Greeks studied the Egyptian learning, and improved upon it; but this was only confined to those who followed learning as a profes- --- {86} Lord Somerville has some excellent observations, relative to this, in his publication on Agriculture, published in 1800. -=- [end of page #98] sion, or whose means allowed them to prosecute it as a study. The common education of citizens was different; it consisted in teaching them to perform what was useful, and to esteem what was excellent. It was a principle with them that all men ought to know how happiness is attained, and in what virtue consists; but they neither trusted to precept nor example. They enforced by habit and practice, and in this the Romans followed the plan the Greeks had laid down, and, by that means, they surpassed all other nations. When those great nations of antiquity abandoned their attention to the useful parts of education, they soon sunk in national character. It so happens, in this case, that the mode of education and the manners of a people are so closely connected that it is difficult, from observation, to know which is the cause, and which the effect. Youth, badly educated, make bad men, and bad men neglect the education of their children; they set them a wrong example: such is the case, when a government does not interfere. How this is to be done with advantage is the question. Writers on political economy have, in general, considered female education as making no part of the system; but surely, if the wealth and happiness of mankind is the end in view, there can scarcely be a greater object, for none is more nearly connected with it. Let it be granted that, in the first instance, women are not educated with any view to carry on those labours and manufactures, on which wealth is considered as depending. Let all this be admitted, and that, in an early state of life, they are of no importance in this respect; yet, surely, when they become wives and mothers, when the economy of the family, and the education of the younger children depend chiefly on them, they are then of very great importance to society. Their conduct, in that important situation, must be greatly influenced by their education. Female education ought then to be considered as one of the things, on the conducting of which well the prosperity of a state does in a great measure depend; it ought, therefore, to be attended to in the same manner as the education of youth of the other sex. In this case, also, so much depends on place and circumstances, [end of page #99] that we shall follow the same rule as with male education. It shall be treated of as for England, and with the different ranks of society as they are; but there are some general rules not to be forgotten, and which are applicable to all places and all countries. The great error, in female education, does not consist in neglecting to instil good principles; for that is, in most countries, for obvious reasons, pretty well attended to; but good principles, without the means of adhering to them, are of little avail. If a desire for dress, or other enjoyments, that cannot be gratified fairly, and by the means of which they are possessed, are encouraged, principles will be abandoned in order to gratify passions.--Females are taught frivolous accomplishments in place of what would be useful, and expensive vanity is substituted for that modest dignity that should be taught; the consequence is, that, in every rank of life, according to her station, the woman aims at being above it, and affects the manners and dress of her superiors. There is too much pains taken with adorning the person, and too little with instructing the mind, in every civilized country; and when women are wise, and good, and virtuous, it is more owing to nature than to education. As, indeed, the duties of a woman, in ordinary life, are of a nature more difficult to describe than those of a man, who, when he has learnt a trade, has little more to do, the care employed in seeing that proper persons only are intrusted with the important office of teaching them to perform those duties ought to be proportionally great. The farther remarks on the subject of education are deferred to the Fourth Book =sic--there is none.=, where place and circumstances come into consideration. It is, however, to be observed, that, in all cases, as a nation becomes more wealthy, the business of education becomes more important, and has a natural tendency to be worse managed; it therefore demands a double share of attention. If the women of a nation are badly educated, it must have a great effect on the education of their sons, and the conduct of their husbands. The Spartan and Roman mothers had the glory of making [end of page #100] their sons esteem bravery, and those qualities in a man that were most wanted in their state of society. It should be one part of female education to know and admire the qualities that are estimable in the other sex. To obtain the approbation of the other sex, is, at a certain time of life, the greatest object of ambition, and it is never a matter of indifference. The great general error consists in considering the woman merely in her identical self, without thinking of her influence on others. It appears to be for this reason, that writers on political economy have paid no attention to female education; but we find no state in which the virtue of men has been preserved where the women had none; though there are examples of women preserving their virtues, notwithstanding the torrent of corruption by which that of the men has been swept away. [end of page #101] CHAP. III. _Of increased Taxation, as an Interior Cause of Decline.--Its different Effects on Industry, according to the Degree to which it is carried.--Its Effects on the People and on Government_. There has been no instance of a government becoming more economical, or less expensive, as it became older, even when the nation itself was not increasing in wealth; but, in every nation that has increased in wealth, the expenditure, on the part of government, has augmented in a very rapid manner. Amongst the interior causes of the decline of nations, and the overthrow of governments, the increase of taxes has always been very prominent. It is in the levying of taxes that the sovereign and the subject act as if they were of opposite interests, or rather as if they were enemies to each other. In every case almost, where the subjects have rebelled against their sovereign, or where they have abandoned their country to its enemies, the discontents have been occasioned by taxes that were either too heavy, imprudently laid on, or rigorously levied. Sometimes the manner of laying on the tax has given the offence; sometimes its nature, and sometimes its amount. The revolution in England, in Charles the first's time, began about the manner of levying a tax. The revolution of the American colonies began in the same way; and it is generally at the manner that nations enjoying a certain degree of freedom make objection. The excise had very nearly proved fatal to the government of this country, as the stamp duties did to that of France, and as the general amount and enormity of taxes did to the Western Empire. {87} --- {87} The system of taxation was ill understood amongst the Romans, and its execution, under a military government, is always severe. The Romans were so tormented, at last, that they lost all regard for their country. Taxes seem to be the price we pay for the con-[end of page #102] stitution we live under, and as they increase, the value of the purchase lessens. The difference between value paid, and value received, constitutes the advantage or loss of every bargain. -=- Perhaps the chief motive for submitting to the difficulties, the oppressions, and the burthens, which people submit to under republican forms of government arises in deception. They seem to be paying taxes to themselves, and for themselves, when, in reality, they are not doing so any more than under a monarchy, where the taxes, in proportion to the service done, are generally less than in a republic.{88} --- {88} America is an exception, but then there is no similarity between the United States and any other country in the world. Their existence, as an independent country, is only of twenty-five years standing; they have had no wars during that time, and the revolutionary war cost little in actual money. The comparison between the states and other nations will not hold, but, if we compare the expense of their government now, and when under the British, it will be found they pay near thirty times as much; and, even allowing their population to have risen one-half, they still pay proportionately twenty times as much. Their revenue now amounts to 16,000,000 of dollars. The public expense, in 1795, when they revolted, was about 350,000 dollars. -=- This was the case in Holland and Venice. In England, the first great increase of taxes took place under the long Parliament and Commonwealth. The only administration carried on by delegated authority, that is from necessity obliged to be executed with unabaiting rigour, is the department of finance. Money is a thing of such a nature, that strict rules are absolutely necessary in its administration. There is here a great distinction between money and other property, or money's worth. A menial servant, of whose honesty there is no proof, and even when it may be dubious, is habitually trusted with the care of property to a considerable amount, and the account rendered is seldom very rigorous; but, in the case of trusting with money, every precaution is first taken, as to being trust-worthy. Security is generally demanded, and neither friendship, confidence, nor the highest respectability, will supply the place of a strict account, which, when not rendered, leaves an indelible stain. There are many causes for this, but they are so generally understood, or, at least, so generally felt, that it is not necessary to examine them; the consequences are in some cases, however, not so evident. One of the most important is, that the accuracy with [end of page #103] which those appointed to collect taxes are obliged to render their accounts, compels them to a strictness in doing their duty that appears frequently rigorous to an extreme degree, and scarcely consistent with justice or humanity. A king is considered as an unrelenting creditor, and he certainly appears in that character; but it should be considered why he is obliged to be so; for, as a master, he is generally the most indulgent in his dominions. No duty or service is exacted with less rigour than that belonging to a civil department under government, when it is not connected with accountability in money; none so rigorous where money is concerned. How is this to be accounted for, unless it is by shewing that the nature of the situation admits of giving way to the feelings of humanity in one case, and not in the other? A few examples will illustrate this point, which is very important, very well known, but not well understood. A clerk in a public office wants, either for health or private business, or, perhaps, only for amusement, to absent himself from duty; if his conduct merits any indulgence, and if his request is any way reasonable, it is immediately granted, though his salary during his absence may amount to a considerable sum; but he receives the gift under the form of time, not of money. If the same clerk is in arrear for taxes to one-twentieth part of the amount, if he does not pay, his furniture will be seized, and that perhaps by order of the same superior from whom he obtained the leave of absence from his duty. {89} The consequences would be fatal if the case were reversed. Supposing that leave of absence had been refused, and that a remission of taxes had been granted, the man who remitted the tax would be liable to suspicion, which he could never do away; the receipt of the revenue would never be secure, and the clerk, who had demanded a fair indulgence, would be disgusted and provoked at the refusal. We cannot, however, alter the nature of things. Taxes cannot be remitted, in any case, without discretional authority, and that it would --- {89} Accountability in money may be compared to military discipline, when on duty. No allowances are to be made for negligence or deviation from rule. Of this we have lately had a most striking and memorable example. -=- [end of page #104] be ruinous to the revenue to give, we must, therefore, never expect that the augmentation of taxes will take place without an increase of discontent, or, at least, an augmented indifference towards government. Perhaps nothing evinces more the general feeling, (even of the respectable part of society,) with regard to the revenues of the state, than the disposition to profit by evading the payment of duties imposed upon articles of consumption. The most respectable of the nobility or gentry will conceal a contraband article, or one on which there is a heavy duty, on their return from abroad: and what is more, if detected, they are more ashamed, on account of their want of address, than on account of the crime; for such it is, whatever custom may have taught us to think. A man who is rigorously treated, by what is commonly called a lawful creditor, whom he would never attempt to defraud must naturally feel doubly incensed, when still more rigorously treated by one whom he would think it very little harm, and no disgrace, to defraud. It is then very clear, that, the common habits of thinking on the subject of debts due to the king, is such as does not favour taxation, or incline people to submit willingly to rigorous modes of recovery. All taxes raise the prices of the articles taxed, but those are most felt and most obnoxious which fall on personal property, or on persons themselves. All taxes, then, when they pass a certain point, have a tendency to send away persons, and property, and trade, from a country, which, if they do, its decline is inevitable. The extent, however, of that effect must depend on a great variety of circumstances, such as the comparative situation of other nations, their distance, the difficulty of removing, &c. If America were as near to England as France is, the industrious class would emigrate in multitudes; and, if in France, property and persons were as safe and free as in England, part of both would go there; but, as matters are, to the former it is impossible to remove, and, to the latter, the risk surpasses the advantage. An increase of taxation tends to raise the wages of labour, and, where it does so in due proportion, the labourer pays almost nothing; he still for all that seems to pay, and he has the same disagreeable feeling [end of page #105] as if he did pay. No feeling is more disagreeable than that of being obliged, after earning money that can ill be spared, to pay it away to a surly tax-gatherer, who treats a man and his family with insolence, while he receives the money that should purchase them bread. Besides this, though the prices of many articles keep pace with the wages of labour, yet many others do not. Thus, in a country where wages are rapidly altering, though some are bettered by it, penury is entailed on others, who have not the means of raising their prices. If heavy taxes are levied on a few articles of consumption, then they become inefficient, and if they are divided amongst a great many, they become troublesome, so that either way they are attended with inconvenience and difficulty. In every country, where taxation has been carried to a great height, it has, at last, become necessary to bear heavily upon personal property. Such taxes are always attended with disagreeable feelings, and peculiar inconveniency. The tax always comes in the form of a debt, and whether convenient to be paid or not, it admits at best but of little delay. {90} In England the nature of the government, the disposition of the people, and the same sort of genius that made them succeed in commercial intercourse and regulation, led them to adopt the least objectionable modes of taxation. The customs were the first great branch of revenue at the time of the revolution. The excise, land-tax, and stamps, rose next, none of which can be objected to; for the person who pays the tax to government only advances the money, and is reimbursed by the consumer, who, again on his part, when he really pays the tax (for good and all) does it under the form of an advance in price. Thus, then, the tax is disguised to him that really pays it, and it is optional, inasmuch as he --- {90} It will be seen, in a future part of this work, that the farmers have lost nothing, but rather got by the high prices of grain in this country, and it is so probably in all others. Those who sell necessaries raise the price; those who make or sell superfluities have no such resource, and therefore pay in the severest manner. -=- [end of page #106] may avoid the tax, by not consuming the article. He never can be sued for the tax, and he pays it by degrees, as he can spare the money. {91} Some time before the taxation which the American war rendered necessary, it was thought that the customs and excise could not be carried much farther. Ministers did not chuse =sic= to venture on an additional tax on land, and, consequently, stamps were augmented and extended, as were also duties on windows. A variety of new taxes on particular articles of consumption were resorted to. Those sort of taxes harassed and tormented individuals more than they filled the treasury, yet still, when, after an interval of a few years of peace, new burthens became necessary, in 1793, the same plan was pursued, till it was found ineffectual, being too troublesome and tedious, besides being unequal to the increase of expenditure. It was necessity that suggested a plan, which is the simplest and easiest of any, so long as it succeeds and is productive. =sic= To increase the excise and customs by an additional five or ten per cent. on the articles that were supposed able to bear it. This has been done again and again with those two branches of revenue, and with the stamps likewise. But the necessities of the state still outrun the means, and the assessed taxes, the worst and most obnoxious of all, were augmented in the same way; but even those were not productive. The inducement to privation was too great, and the restraints laid on expenditure, suggested the adoption of a tax on income; that is, on the means a man has to pay, which carries in its very name a description of its nature. We have mentioned the influence that necessity has on industry. One of the effects of taxes, as well as of rent, is to prolong the operation of necessity, or to increase it. A man who has neither rent nor taxes to pay, as is the case in some savage nations, only labours to supply his wants. Whatever proportion rent and taxes bear to the wants of --- {91} The land-tax is not precisely the same, but very nearly. It operates as a tax on the produce of land, that is on commodities for the use of man, the same as those articles subject to duties of customs or excise. The landholder just feels as the brewer, distiller, or importer of foreign goods, he gets the tax reimbursed by the farmer, and the farmer is reimbursed by the consumer. -=- [end of page #107] a people their industry will be increased in the same proportion, unless their forces are exceeded, and then the operation is indeed very different. It follows, from this, that both rent and taxes, to a certain degree, increase the wealth of a people, by augmenting their industry. As rent is not compulsive, it never can in general be carried beyond the point that augmented industry will bear; but taxes are not either regulated by the industry of the individual, or of the community; they may therefore be carried too far, and when they are, the people become degraded, disheartened, their independent spirit is lost and broken, and industry, in place of increasing, as it did in the first stages of taxation, flies away. The government, in this case, generally becomes more severe, and certainly more obnoxious. The broken spirit of the people makes submission a matter of course, so that there is no effectual resistance made to its power. Incapacity to pay comes at last, and defeats the end; but, between incapacity and resistance, the difference is very wide. As calculators have been predicting the moment of a total stoppage to the increase of revenue for nearly half a century; as ministers, themselves, have never ventured to lay on a new burthen, except when forced to it by necessity. {92} As taxes have been laid on at random, in a manner similar to that in which the streets and houses of old cities were built, without regularity or design, and as the effects predicted have not taken place, it is fair to conclude, that the subject is not well understood. If it were, the evil would be in the way to be obviated; but still the conclusion would be the same, that increased taxation tends to bring on discontent, and to drive men and capital from a country. The degree of tendency, and the rapidity of its operations, are a question; but respecting the tendency itself there can be no question. Two things more are to be observed, relative to the effects of taxation, as tending towards decline. The first is, that the taxes are levied by and expended on men, who, having income only for their lives, --- {92} Mr. Pitt seems an exception to this; but the establishment of a sinking fund, at the end of the war, was as necessary for his administration as any of the loans, during the war, were for Lord North; and both measures required new taxes. -=- [end of page #108] generally leave families in distress. Those who lose their parents when young are often left destitute, and those who are farther advanced are frequently ruined by being educated and accustomed to a rank in life that they are not able to support. This is a very great evil, and is renewed as it were every generation. As the revenues of a country increase, this evil increases also: for, except what goes to the proprietors of money in the stocks, all the public revenue, very nearly, goes to people whose income perishes with themselves. To begin with those who collect the taxes, custom-house officers, excise men, collectors, and clerks of every rank and demonination =sic=, there is not one in ten who does not die in indigence; and if he leaves a family, he leaves it in distress. It is no doubt the lot of the great bulk of mankind, that is to say, the labouring part of the community in every country, to leave children unprovided for; but then they are left in a rank of society that does not prevent their going to work or to service, which is not the case with the vast number left by those who enjoy, during life, a genteel and easy existence under government. The education of such persons is either neglected entirely, or ill fitted for the line of life into which they are to go. If the sum-total of human vice and misery was to be divided into shares, and if it were calculated how much fell to each person, there is not a doubt but at least a double portion would fall to the lot of those unfortunate persons who are left by parents enjoying offices for life; who are generally obliged to expend their income as they earn it. As, according to the natural chance of things, a number of such persons must leave young families, the seeds of misery are continually sowing a-fresh, to the great detriment of society. This evil depends in a great degree upon the habits and nature of the people, which augment or diminish it; and, in commercial nations, the evil is far the greatest. Where commerce does not flourish, persons belonging to the revenue-department are seldom highly paid, and they by no means consider themselves as a class of persons distinguished above the general run, or obliged to live more expensively; but, in a manufacturing country, to live without working, implies a degree of gentility that is extremely ruinous to those who enjoy that fatal and flimsy pre-eminence. [end of page #109] A manufacturer, who is getting a thousand pounds a year, will, perhaps, not assume so much importance as a man in office who does not get one hundred pounds; and the former, as well as his family, knowing that they are beholden to industry for what they have, do not think themselves above following it. {93} Unfortunately, it also happens, that, in all sorts of occupation where trust is reposed and punctuality required, more than in ordinary business, it is rather late in life before those employed rise to situations of considerable emolument. When they are old, their families are generally young; thus it is, that the persons who are the most unfit to marry late in life are generally those who do so. This order of things cannot easily be changed. In the rate of payments governments are regulated by the service done, and by the dependence that can be placed on the person employed, who, on the other hand, follows the natural propensities of human nature. When young, and on a small allowance, a revenue-officer remains single; but when it is necessary to become serious, attentive, and confidential, and when he finds he has the means, he betakes himself to a domestic life, which is the most natural to men arrived at a certain time of life, and the best fitted for those who are to be depended upon for the correctness of their conduct. It is impossible to prevent this natural state of things; and if let go uncorrected, if not counteracted, the consequences are very pernicious. It is to this, in a great measure, the augmentation of vice and mendicity =sic= is to be attributed in nations, as they become wealthy and great. Perhaps more depends upon the manner of taxation than the amount; at least it certainly is so in all countries where the amount is not very high. In America, for example, the amount is of no importance; the manner might be of very pernicious consequence. In France, before the revolution, the taxes were more oppressive, from the manner of levying them than from their amount. The same thing might be said --- {93} This is a very important part of the consideration; but, as education and it are connected, and that comes into the Fourth Book =sic--there is none.=, the whole consideration is left till then; not only the national prosperity is injured, but the feelings of humanity are hurt, and the sum of human misery increased by this consequence. -=- [end of page #110] of almost every country in Europe, England and Holland excepted. At present, the case is greatly altered, in many countries, by the increase: yet, still, one of the principal evils arises from the manner of levying the taxes; the restraints imposed by them, the inconveniency, the vexation, and, finally, the misery and ruin they, in many cases, occasion. Of all the examples, where taxation contributed most to the fall of a country, Rome is the greatest. The luxury of the imperial court, and the expenses of a licentious and disorderly army, added to the ignorance of the subject, rendered the taxes every way burthensome. From the fall of Rome, to the time of Louis XIV. the splendour of courts, and their expenses, were objects of no great importance. We are but lately arrived at a new aera in taxation; for, though taxation has been the occasion of much discontent at all times, it was carried to no considerable length, in any country in Europe, except in Spain and Holland, till within this last century. Indeed, when we consider the great noise that has often been made about raising an inconsiderable sum, it is impossible not to be astonished at the reluctance with which people pay taxes, when they feel that they are paying them, and are not accustomed to the feeling. Taxation is, then, to the feelings of men, disagreeable; to their manners hurtful; they are also, in their operation, to a certain degree, inimical to liberty. The ultimate consequence of this is, that persons and property have both of them a tendency to quit a country where taxes are high, and to go to one, where, with the same means, there may be more enjoyment. Taxes may be called a rent paid for living in a country, and operate exactly like the rent of houses or land, or rent for any thing else; that is, they make the tenant remove to a cheaper place, unless he finds advantages where he is to counterbalance the expense. Unfortunately, the persons who have the greatest disposition to quit a country that is heavily taxed are those, who, having a certain income, which they cannot increase, wish to enjoy it with some degree of economy. They are, likewise, the persons who can remove with the greatest [end of page #111] facility. Thus, people whose income is in money are always the first to quit a country that is become too dear to live in with comfort. Many circumstances may favour or counteract this tendency, such as the difficulty of finding an agreeable place to retire to, where the money will be secure, or the interest regularly paid; but, an inquiry into that will come more properly when we examine the external causes of decline. Though the increase of taxes, by augmenting the expense of living, and of the necessaries of life, is little felt by the labouring class, their wages rising in proportion; yet a most disastrous effect is produced on the fine arts, and on all productions of which the price does not bear a proportional rise. Where taxes are high, and luxury great, there must be some persons who have a great deal of ostentation, even if they have little taste. A picture or a jewel of great value will, very certainly, find a purchaser, but that will only serve as a motive for bringing the fine painting from another country, where the necessaries of life are cheaper, and where men enjoy that careless ease which is incompatible with a high state of taxation. When Rome became luxurious, to the highest pitch, there were neither poets, painters, nor historians, bred within its walls; buffoons and fiddlers could get more money than philosophers, and they had more saleable talents. Had Virgil not found an Augustus, had he lived three centuries later, he must either have written ballads and lampoons, or have starved; otherwise he must have quitted Italy. When Rome was full of luxury, and commanded the world and its wealth, there was not an artist in it capable of executing the statues of its victorious generals. {94} Some Greek island, barren and bare, would breed artists capable of making ornaments for imperial Rome. --- {94} They were obliged to cut the heads off from ancient statues, as their artists were only sufficiently expert to carve the drapery of the body. -=- [end of page #112] It is an easy matter, in a rich country, to pay for a fine piece of art, But a difficult matter to find a price for the bringing up a fine artist. {95} The fine arts have not, indeed, any intimate or immediate connection with the wealth or strength of a nation. The balance of trade has never been greatly increased by the exportation of great masterpieces of art, nor have nations been subdued by the powers of oratory; but the knowledge and the arts, by which wealth and greatness are obtained, follow in the train of the finer performances of human genius. Where money becomes the universal agent, where it is impossible to enjoy ease or comfort for a single day without it, it becomes an object of adoration, as it were. To despise gold, which purchases all things, is reckoned a greater crime than to despise him to whose bounty we are indebted for all things; consequently, ambition, without which there never is excellence, is, at an early period of life, bent towards the gaining a fortune. A man, indeed, must either be of a singularly odd and obstinate disposition, or very indifferent about the opinion of others, and even about the good things of this world, (as they are termed,) to persevere in obtaining perfection in science or art, while without bread, when he might, with a tenth part of the care and study, live in affluence, and get money from day to day. There are few such obstinate fools; and without them, in a wealthy country, there can be found few men profound in science, or excelling in any of the arts. The augmentation of taxes, by rendering the produce of industry dearer than in other countries, tends to cut off a nation of that de- --- {95} This is liable to some exceptions. Natural genius may make a man excel; but, even then, it is ten to one if he is not compelled to labour in order to get bread, in place of trying to obtain fame. It was thus the great Dr. Johnson, with a genius that might have procured him immortal fame, drudged, during life, on weekly or daily labours, which will soon be forgotten. Even his dictionary, wonderful as it is for a single man, is not worthy of the English nation, and Johnson's name is little known beyond the limits of his own country. His genius was great, but his labours were little. His mind was in fetters; it was Sampson grinding at the mill to amuse the Philistines; not Sampson slaying lions, and putting to flight armies. -=- [end of page #113] scription, from the markets in poorer countries. If all other countries are poorer; and the taxes lower; it has a tendency to shut it out from all the markets in the world. An operation, that, at the same time that it renders people less happy, less contented, and more indifferent to the fate of their country, and at the same time tends to shut them out from foreign markets, is certainly very hurtful to any country, but particularly so to one, the greatness of which is founded on manufactures and commerce. It would be useless to enlarge on so self-evident a consequence; yet, even in this case, we shall find something of that mixture of good, along with the bad, which is to be found in all human things. As exertion originates in necessity or want, which it removes, taxation has the effect of prolonging the operation of necessity, after it would otherwise have ceased, and of rendering its pressure greater than it otherwise would be; the consequence of this is a greater and larger continued exertion on the part of those who have to pay the taxes. Human exertion, either in the way of invention or of industry, is like a spring that is pressed upon, and gains strength according to the pressure, until a certain point, when it gives way entirely. Those investigators, who have calculated the effect of such and such a degree of taxation, of national debt, &c. have all erred, in not making any, or a sufficient, allowance for the action of this elastic power. Mr. Hume and Mr. Smith, certainly, both of them, men of profound research, have erred completely in this. The former, in calculating the ultimatum of exertion, at a point which we have long since passed; and, the latter, in reasoning on the taxation at the time he wrote, as if nearly the utmost degree, though it has since trebled, and the difficulty in paying seems to be diminished; at least it appears not to have augmented. To fix the point at which this can stop is not, indeed, very easy; particularly, as the value of gold and silver, which are the measures of other values, do themselves vary. Thus, for example, a working man can, with his day's wages, purchase as much bread and beer as he could have done with it forty years ago. Though the national debt [end of page #114] is five times as great as it was then, at the present price of bread, it would not take twice the number of loaves to pay it that it would have required at that time. The depreciation of money, then, as well as the continuation and augmented pressure of necessity, counteract, to a certain degree, and for a certain time, the natural tendency of taxes; but that counteraction, though operating in all cases, in its degree and duration, must depend upon particular circumstances; and though, perhaps, it cannot be, with much accuracy, ascertained in any case, it is impossible to attempt resolving the question in a general way; we shall, therefore, return to the subject, when we apply the general principles to the particular situation of England. One conclusion, however, is, that as taxes, carried to a great extent, are very dangerous, though not so if only carried to a certain point; as that point cannot be ascertained, it ought to be a general rule to lay on as few taxes as possible; and the giving as little trouble and derangement to the contributor as may be, is also another point, with respect to which there cannot be two different opinions. [end of page #115] CHAP. IV. _Of the interior Causes of Decline, arising from the Encroachments of public and privileged Bodies, and of those who have a common Interest; on those who have no common Interest_. {96} From the moment that any particular form of government or order is established in a nation, there must be separate and adverse interests; or, which is the same thing, bodies acting in opposition to each other, and seeking their own power and advantage at the expense of the rest. In a country where the executive government is under no sufficient control, its strides to arbitrary power are well known; but, in a government poised like that of England, where there are deliberative bodies, with different interests, acting separately, and interested in keeping each other and the executive in check, it is not from the government that much danger is to be apprehended. It is not meant to dwell on this particular part of the subject. As those governed hold a check on the executive power, which alone can be supposed to profit by oppression, there is a means of defence, in the first instance, and of redress, in the second, which diminishes greatly, if it does not entirely do away all danger from encroachment. Another thing to be said about this government is, that government and the subject never come into opposition with each other, except where there is law or precedent to determine between them. The danger, then, of encroachment on that side, is not very great, and it is the less so in this country, that, when there have been contests, they have always ended in favour of the people; whereas, in most --- {96} The public certainly has a common interest, but it feels it not, and even those who have separate interests make part of that very public.--This will be exemplified, in a variety of instances, in the course of the present chapter. -=- [end of page #116] other countries, they have terminated in favour of the executive power. It is not so, however, with many other of the component parts of society. Those deliberating bodies, who have separate interests, and all those who live, as it were, on the public, and have what they call, in France, _l'esprit du corps_, for which we have no proper expression, though it may be defined to be those who have a common interest, a fellow feeling, and the means of acting in concert, are much more dangerous. In nations where the executive power has no control, the progress of public bodies is less dangerous than where the power of the king is limited. It is always the interest of the sovereign, who monopolises all power, and those around him, to prevent any man, or body of men, from infringing on the liberty of the subject, or becoming rivals, by laying industry under contribution, so we find that, in every such nation, the clergy excepted, all public bodies are kept under proper subjection. {97} --- {97} In all countries, those who have the care of religious matters must necessarily have some control over the minds of the people, which they can to a certain degree turn either to a good or a bad purpose. It is, therefore, impossible that the government and clergy can, for any length of time, act in opposition to each other: one or other of the two must soon fall, and there have been instances of the triumph of each. We have sometimes seen kings triumph over the clergy, but not very often; and we have frequently seen governments overturned by their means: except, therefore, in a state of revolution, they must mutually support each other. This is the natural state of things; but, in Roman Catholic countries, priests have a superior sway to what they have in any other, for several reasons that are very obvious. In the first place, the sovereign of the nation is not the head of the church; and, in the second, by means of a very superior degree of art and attention, during the dark ages, when the laity were sunk in ignorance, the catholic clergy contrived to entail the church property, from generation to generation, upon the whole body: at the same time, enjoining celibacy, by which all chance of alienation, even of personal property, was done away. As to the means of acquiring property, and of augmenting it; they were many, and, in every contest with the secular authority, they had a great advantage, by speaking, as it were, through ten thousand mouths at once, and giving the alarm to the consciences of the weak. In countries where the protestant religion has been established, the case is widely different. Gothic darkness was nearly fled before the reformation: besides this, the clergy are like other men, with regard to the manner of living; they are fathers and husbands, and, as such, liable to have all the property that is their own alienated, as much as any other set of men [end of page #117] whatever. The reformers, who were neither destitute of penetration nor zeal, and who knew all the abuses of the church of Rome, in matters of regulation as well as of opinion, were very careful to settle the new order of things on such a plan, as to be free from the evils which they had experienced, and against which they had risen with such energy and zeal. -=- The simple state of the case is, that the interest of the people is that of the sovereign; and, except in cases where there is a profound ignorance of what is good for the nation, every wise sovereign takes the part of the people. But, under a limited monarchy, or in a democracy, the case is different. There, those bodies, which an arbitrary monarch would reduce to obedience at once, stand upon prerogative themselves; they form a band in the legislature, and act true to their own interests; so that the sovereign himself is compelled to admit of abuses, which he is willing but not able to remedy. It is a great mistake, and one of the greatest into which people have of late been apt to run, that the government and people of a country are of opposite interests; and that governments wish to oppress the people, and rob them of the means of being affluent and happy: the very contrary is the case; all enlightened monarchs have acted quite differently. Alfred the Great, Edward III. Queen Elizabeth, and nearly all her successors have endeavoured to increase the wealth and happiness of the people in England. Henry IV. of France, even Louis XIV. Peter the Great of Russia, Catherine, and indeed all his successors, as also the Kings of Prussia, the Grand Duke of Tuscany, and other sovereigns, who know how to shew their disposition, have tried to enrich their people, and render them happy. The great study of the English government has always been directed to that end, and the Romans extended their care even to the nations they subdued. Though there are many sovereigns who have not known how to do this, and therefore have either not attempted it, or erred in the mode they have taken; yet, with very few exceptions indeed, sovereigns have been found to wish for the prosperity of the nations over which they ruled. In all human institutions there is much that is bad, and something [end of page #118] that is good; and the best, as well as the worst, are only combinations of good and evil, differing in the proportions. In mixt governments, or in limited governments, the people can defend their rights better against the sovereign than against those bodies that spring up amongst themselves: whereas, in pure monarchies, they have only to guard against the encroachments of the sovereign; and he will take care to prevent them from being oppressed by any other power. This tendency to destruction, from encroachments of public bodies in established governments, is more to be dreaded in limited monarchies, and in democracies, than in pure monarchies; but we have had little occasion to observe the progress in governments of the former sort, excepting the clergy, though the military and the nobles generally play their part. In Rome, the military never were dangerous, while the armies were only raised, like militias, for the purpose of a particular war; but, when they became a standing body, they were the proximate efficient cause of destroying liberty, though this was only the prelude to that decline which afterwards took place. In limited monarchies, the lawyers are the greatest body, from which this sort of danger arises, and the reasons are numerous and evident. United in interest, and constantly occupied in studying the law of the country, while the public at large are occupied on a variety of different objects, and without any bond of union, there can be nothing more natural than that they should contrive to render the business which they alone can understand, of as much importance and profit as possible. In the criminal law of the country, where the king is the prosecutor, and where the lawyers are not interested in multiplying expense or embarrassment, our laws are administered with admirable attention; though, perhaps, in some cases, they are blamed for severity, they are justly admired over the world for their mode of administration. It is very different in cases of property, or civil actions, where it is man against man, and where both solicitor and council =sic= are interested in the intricacy of the case. Here, indeed, the public is so glaringly imposed upon, that it would be almost useless to dwell on the sub-[end of page #119] ject, and, as a part of the plan of this work is to offer, or point out, a remedy, it may be sufficient, in this case, to go over the business once, and leave the examples till the relief is proposed. At present, it is, however, necessary to shew why, as things are constituted in mixed governments like this, no remedy is to be had. The public only acts by representatives; and, in the House of Lords, the law-lords, who have _l'esprit du corps_, may easily contrive to manage every thing. One or two noblemen excepted, no one either has, or pretends to have sufficient knowledge to argue or adjust a point of law. Indeed, it is no easy matter to do so with effect, for, besides that, the law-lords have ministers on their side, or, which is the same thing, are on the side of ministers, the speaker is himself at the head of the law. The other members who look up to the law-lords, and who are generally very few in number on a law-question, generally give their assent. In the House of Commons, in which there are a number of lawyers, they are still less opposed. The country gentlemen profess ignorance. They think that to watch money-bills, the privileges of the house, the general interests of the nation, roads, canals, and inclosures, is their province. The mercantile, and other interests, composed of men getting money with great rapidity, consider the abuses of law as not to them of much importance; they do not feel the inconvenience, and have neither time nor inclination to study the subject. {98} The prerogative of the king to refuse his assent, might, perhaps, be expected to come in as a protection, but here there is least of all any thing to be expected. In the first place, it is thought to be wise never to use that prerogative, and, in the second place, the lord-high-chancellor is the king's guide in every thing of the sort, insomuch, that he is styled the keeper of the king's conscience. With power, influence, and interest on one side, and nothing to oppose it on the other, (for the common proverb is true, as all common --- {98} The law is the widest, and the shortest, and the nearest road to a peerage. A Howe, Nelson, and St. Vincent, play a game, partly of skill, and partly of chance, for title; they must have luck and opportunity. The others are sure with fewer competitors to have more prizes. -=- [end of page #120] proverbs are, that what is every body's business is nobody's,) the lawyers must encroach on the public, and they have done so to a most alarming degree. In this case, it is not, as in others, where the great cut out work for and employ the small. No. The great generally (indeed almost always) begin with the advice and by the means of an attorney, who is only supposed to understand law-practice. The proceeding does not originate with the council, who could form some judgment of the justice of the case, so that a mean petty-fogging attorney may, for a trifle, which he puts into his own pocket, ruin two ignorant and honest men; he may set the ablest council to work, and occupy, for a time, the courts of justice, to the general interruption of law, and injury of the public. This is, perhaps, one of the greatest and most crying evils in the land, and calls out the most loudly for redress, as the effects are very universal. In a commercial country, so many interests clash, and there are such a variety of circumstances, that the vast swarms of attorneys, who crowd the kingdom, find no difficulty in misleading one of the parties, and that is the cause of most law-suits. As commercial wealth increases the evil augments, not in simple proportion, but in a far more rapid progression; first, in proportion to the wealth and gain to be obtained, and, secondly, according to the opportunities which augment with the business done. In addition to the real dead expense, the loss of time, the attention, and the misfortune and misery occasioned by the law, are terrible evils; and, if ever the moment comes, that a general dissatisfaction prevails, it will be the law that will precipitate the evil. The mildness of the civil laws in France, and the restraints under which lawyers are held, served greatly to soften the rigours of the revolution for the first two years. Had they possessed the power and the means they do in England, the revolution must have become much more terrible than it was at the first outset. The lawyers owe all their power to the nature of the government. An arbitrary monarch will have no oppressor but himself, but here the [end of page #121] different interests are supposed to be poised; and when they are, all goes right, but, when they happen not to be so, the most active interest carries the day. Though the law is the greatest of those bodies that is of a different interest from the public at large, yet there are some others deserving notice, and requiring reformation. It is the interest of all those who are connected with government to do away abuses that tend to endanger its security, or diminish its resources. As the public revenue is all derived from those who labour, and as it can come from no other persons, if the prosperity and happiness of the subject were a mere matter of indifference, which it cannot be supposed to be; still it would be an object for government to preserve his resources undiminished. It was our lot, in another chapter, to mention the enormous increase of the poor's rate, which was in part attributed to the general increase of wealth; mal-administration is, however, another cause, and, the public is the more to be pitied, that the parish-officers defend their conduct against their constituents at the expense of their constituents. In an inquiry after truth, it should be spoken without fear of offending; and, in this case, though the feelings of Englishmen may, perhaps, be hurt, and their pride wounded, it must be allowed, that if it were not for the mock-democratical form of administrating =sic= the funds for the maintenance of the poor, they would never suffer the extortion, and the bare-faced iniquities that are committed. {99} The ship- money, the poll-tax, the taxes on the Americans, and others, that have caused so much bloodshed and strife, never amounted to one-tenth, if all added together, of what the English public pays to be applied to maintain the poor, and administered by rude illiterate men, who render scarcely any account, and certainly, in general, evade all regular control. Those administrators, though chosen by the people, always, while in office, imbibe _l'esprit du corps_, and make a common cause. --- {99} In Brabant and Flanders the people were very jealous of their liberties. They were, however, most terribly oppressed by the churchmen and lawyers. -=- [end of page #122] The repairs of highways, bridges, streets, and expenses of police in general; whatever falls on parishes, towns, or counties, in the form of a tax or rate, is generally ill-administered, and the wastefulness increases with wealth. The difficulty of controling or redressing those evils proceeds from the same spirit pervading all the separate administrations. Government alone can remedy this; and it is both the interest and duty of the government to keep a strict watch over every body of men that has an interest separate from that of the public at large. Similar to the human body, which becomes stiff and rigid with age, so, as states get older, regulation upon regulation, and encroachment on encroachment, add friction and difficulty to the machine, till its force is overcome, and the motion stops. In the human body, if no violent disease intervenes, age occasions death. In the body politic, if no accidental event comes to accelerate the effect, it brings on a revolution; hence, as a nation never dies, it throws off the old grievances, and begins a new career. The tendency that all laws and regulations have to become more complicated, and that all bodies, united by one common interest, have to encroach on the general weal, are known from the earliest periods; but we have no occasion to go back to early periods for a proof of that in this country. As wealth increases, the temptation augments, and the resistance decreases. The wealthy part of society are scarcely pressed upon by the evils, and they love ease too well to trouble themselves with fighting the battles of the public. Those who are engaged in trade are too much occupied to spare time; and, if they were not, they neither in general know how to proceed, nor have they any fund at their disposal, from which to draw the necessary money for expenditure. It sometimes happens, that an individual, from a real public spirit, or from a particular humour or disposition, or, perhaps, because he has been severely oppressed, musters sufficient courage to undertake the redress of some particular grievance; but, unless he is very fortunate, and possesses both money and abilities, it is generally the ruin of his peace, if not of his fortune. He finds himself at once beset with a host of enemies, who throw every embarrassment in his way: his friends [end of page #123] may admire and pity, but they very seldom lend him any assistance. If some progress is made in redressing the grievance, it is generally attended with such consequences to the individual, as to deter others from undertaking a similar cause. Thus the incorporated body becomes safe, and goes on with its encroachments with impunity. Much more may be said upon this subject; but, as it is rather one of which the operation is regulated by particular circumstances, than by general rules, the object being to apply the result of the inquiry to England, we shall leave it till we come to the application of it to that country, only observing, that the church, the army, and the law, are the three bodies universally and principally to be looked to as dangerous; and each of them according to the situation and the form of government of the respective countries, though, in England, the church has less means than in any country in Europe of extending its revenues or power, the law and corporate bodies the most; and, under arbitrary governments, the church and the military have the most, and the law and corporate bodies little or none. [end of page #124] CHAP. V. _Of the internal Causes of Decline, arising from the unequal Division of Property, and its Accumulation in the Hands of particular Persons.-- Its Effects on the Employment of Capital_. In every country, the wealth that is in it has a natural tendency to accumulate in the hands of certain individuals, whether the laws of the society do or do not favour that accumulation. Although it has been observed in a former chapter that wealth follows industry, and flies from the son of the affluent citizen to the poor country boy, yet that is only the case with wealth, the possessor of which requires industry to keep it; for, where wealth has been obtained, so as to be in the form of land or money at interest, this is no longer the case. {100} In America, and in countries that are new, or in those of which the inhabitants have been sufficiently hardy, and rash to overturn every ancient institution, precautions have been taken against the accumulation of too much wealth in the hands of one person, or at least to discourage and counteract it; but, in old nations, where we do not chuse =sic= to run such risks, the case is different. The natural vanity of raising a family, the means that a rich man has to accumulate, the natural chance of wealth accumulating by marriages, and many other circumstances, operate in favour of all those rich men, who are freed from risk, and independent of industry. In some cases, extravagance dissipates wealth, but the laws favour accumulation of landed property, and counteract extravagance; the advantages are in favour of all the wealthy in general, and the consequence is, that from the first origin of any particular order of things, till some convulsion takes place, the division of property becomes more and more unequal. Far from counteracting this by the laws of the land, in all those --- {100} Amongst the Romans, in early times, property in land was by law to be equally divided; but that absurd law was never strictly attended to, and when the country became wealthy was totally set aside. -=- [end of page #125] countries, the governments of which took strength during this feudal system, there are regulations leading greatly to accelerate the progress. The law of primogeniture has this effect; and the law of entails, both immoral and impolitic in its operation, has a still greater tendency. These laws only extend to agricultural property; but commerce, which at first tends to disseminate wealth, in the end, has the same effect of accumulating it in private hands. Industry, art, and intelligence, are, in the early ages, the spring of commerce; but, as machinery and capital become necessary, a set of persons rise up who engross all the great profits, and amass immense fortunes. {101} The consequence of great fortunes, and the unequal division of property, are, that the lower ranks, though expensively maintained, become degraded, disorderly, and uncomfortable, while the middling classes disappear by degrees. Discontent pervades the great mass of the people, and the supporters of the government, though powerful, are too few in number, and too inefficient in character to preserve it from ruin. The proprietors of land or money should never be so far raised above the ordinary class of the people as to be totally ignorant of their manner of feeling and existing, or to lose sight of the connection between industry and prosperity; for, whenever they do, the industrious are oppressed, and wealth vanishes. {102} It requires not much knowledge, and little love of justice, to see that there must be gradations in society, which, instead of diminishing, increase the general happiness of mankind; but when we --- {101} Invention has nearly the same effect in commerce that the introduction of gunpowder and artillery have on the art of war. Wealth is rendered more necessary to carry them on. Every new improvement that is made, in either the personal strength and energy of man becomes of less importance. {102} Some of the greatest proprietors in this kingdom, much to their honour, are the most exemplary men in it, with respect to their conduct to their tenantry; but though the instances are honourable and splendid, they are not general; nor is it in the nature of things that they can be general. In France, matters were in general different; and the inattention of the nobility to their duty was one cause of the revolution; they had forgot, that, if they neglected or oppressed the industrious, they must ruin themselves. -=- [end of page #126] find that the chance of being born half an hour sooner or later makes one man the proprietor of 50,000 acres and another little better than a beggar; when we consider that, by means of industry, he never may be able to purchase a garden to grow cabbages for his family, it loosens our attachment to the order of things we see before us, it hurts our ideas of moral equity. A man of reflection wishes the evil to be silently counteracted, and if he is violent, and has any disposition to try a change, it furnishes him with arguments and abettors. When the Romans (with whose history we are tolerably well acquainted) {103} grew rich, the division of property became very unequal, and the attachment of the people for their government declined, the middle classes lost their importance, and the lower orders of free citizens became a mere rabble. When Rome was poor, the people did not cry for bread, but when the brick buildings were turned into marble palaces, when a lamprey was sold for fifty-six pounds, {104} the people became a degraded populace, not much better, or less disorderly than the Lazzeroni of Naples. A donation of corn was a bribe to a Roman citizen; {105} though there is not, perhaps, an order of peasantry in the most remote corner of Europe, who would consider such a donation in ordinary times as an object either worthy of clamour or deserving of thanks. {106} The Romans, at the time when Cincinatus held the plough, and the conquerors of nations roasted their own turnips, would have thought themselves degraded by eating bread obtained by such means; but it was different with the Romans after they had conquered the world. In a more recent example, we may trace a similar effect, arising from a cause not very different. --- {103} We know better about the laws and manners of the Romans 2000 years ago, in the time of the first Punic War, than about those of England, in the time of Henry the Fourth. They had fixed laws, their state was young, and the division of property tolerably equal. {104} See Arbuthnot on Coins. {105} Do not the soup-shops of late invention, and certainly well intended, bear some resemblance to these days of Roman wretchedness and magnificence. {106} It is to be observed, these donations were not on account of scarcity, but to save the people from the trouble of working to earn the corn; they were become idle in body and degraded in mind. -=- [end of page #127] The unequal division of property in France was one of the chief causes of the revolution; the intention of which was, to overturn the then existing order of things. The ignorance of the great proprietors concerning of their true interests, and the smallness of their numbers, disabled them from protecting themselves. The middle orders were discontented, and wished for a change; and the lower orders were so degraded, that, at the first signal, they became as mutinous and as mean as the Plebians at Rome, in the days of its splendor. {107} That this was not alone owing to the unequal division of property is certain, there were other causes, but that was a principal one. As a proof that this was so in England, where property is more equally divided than it was in France, the common people are more attached to government, and of a different spirit, though they are changing since the late great influx of wealth into this country, and since difficulties which have accumulated on the heads of the middle orders, while those who have large fortunes feel a greater facility of augmenting them than at any former period. In those parts of this country, where wealth has made the least progress, the character of the people supports itself the best amongst the lower classes; and the inverse progress of that character, and of the acquisition of wealth, is sufficiently striking to be noticed by one who is neither a very near, nor a very nice observer. Discontent and envy rise arise from comparison; and, where they become prevalent, society can never stand long. They are enemies to fair industry. Whatever may have been the delusive theories into which ill- intentioned, designing, and subtile men have sometimes deluded the great mass of the people, they have never been successful, except when they could fight under the appearance of justice, and thereby create discontent. The unequal division of property has frequently served them in this case. --- {107} The Parisian populace were the instruments in the hand of those who destroyed the former government, as the regular army is in the hands of him who has erected that which now exists. -=- [end of page #128] [Transcriber's note: possible omissis--page 128 ends as above, page 129 starts as next follows...] while it increased the ignorance, and diminished the number of the enemies they had to encounter. As this evil has arisen to a greater height in countries which have had less wealth in the aggregate than England, it is not the most dangerous thing we have to encounter; but, as the tendency to it increases very rapidly of late years, we must, by no means, overlook it. A future Chapter will be dedicated to the purpose of inquiring how this may be counteracted in some cases, in others modified and disguised, so as to prevent, in some degree, the evil effects that naturally arise from it. Of all the ways in which property accumulates, in particular hands, the most dangerous is landed property; not only on account of entails, and the law of primogeniture, (which attach to land alone,) but because it is the property the most easily retained, the least liable to be alienated, and the only one that augments in value in a state that is growing rich. An estate in land augments in value, without augmenting in extent, when a country becomes richer. A fortune, lent at interest, diminishes, as the value of money sinks. A fortune engaged in trade is liable to risks, and requires industry to preserve it: but industry, it has been observed, never is to be found for any great length of time in any single line of men; consequently, there are few great monied men, except such as have acquired their own fortunes, and those can never be very numerous nor overgrown. Besides our having facts to furnish proofs that there are no very great fortunes, except landed fortunes; it can scarcely have escaped the notice of any one, that no other gives such umbrage, or shews the inferiority men =sic= who have none so much. {108} That there is a perpetual tendency to the accumulation of property, in the hands of individuals, is certain; for, amongst the nations --- {108} If a man has wealth, in any other form, it is only known by the expenditure he makes, and it is quickly diminished by mismanagement; but the great landed estate, which is seldom well attended to, is mismanaged to the public detriment without ruin to the proprietor. -=- [end of page #129] of Europe, those who are the most ancient, exhibit the most striking contrasts of poverty and riches. Nations obtaining wealth by commerce are less liable to this danger than any others; at least we are led to believe so, from the present situation of things: we are, perhaps, however, not altogether right in the conclusion. In France there were, and in Germany, Russia, and Poland, there are some immense fortunes, though general wealth is not nearly equal to that of England: so much for a comparison between nations of the present day. Again, it is certain, there were some fortunes in England, in the times of the Plantagenets and Tudors, much greater than any of the present times. {109} England was not then near so wealthy as it is now, and had very little commerce: it would then appear, that whether we compare England with what it was before it became a wealthy and commercial nation, or with other nations, at the present time, which are not wealthy, commerce and riches appear to have operated in dividing riches, and making that division more equal, rather than in rendering their accumulation great in particular hands, and their distribution unequal. Before we are too positive about the cause, though we admit this effect, let us inquire whether there are not some other circumstances that are peculiar to the present situation of England, that may, if not wholly, at least in part, account for it. The form of government in England is different from that of any of those countries. It is also different in its nature, though not in its form, from what it was under the Plantagenets and Tudors. Court favour cannot enrich a family in this country, and the operation of the law is tolerably equal. As neither protection, nor rank, in this country, raise a man above the rest of society, so the richest subject is obliged to obtain, by his expenditure, that consideration which he would ob- --- {109} Two centuries ago, land was sold for twelve years purchase, and the rents are five times as great as they were then; 10,000 L. employed in buying land then would now produce 5000 L. a year. Had the same money been lent, at interest, it would but produce 500 L. The land, too, would sell for 140,000 L. The monied capital would remain what it was. -=- [end of page #130] tain by other means, under another form of government, {110} and he is as much compelled to pay his debts as any other man. It is not, however, the great wealth of one individual, or even of a few individuals, that is an object of consideration. It will be found that the great number of persons, who live upon revenues, sufficiently abundant to exempt them from care and attention, and to enable them to injure the manners of the people, (being above the necessity of economy, feeling none of its wants, and contributing nothing by their own exertion to its wealth or strength,) is a very great evil, and one that tends constantly to increase. But if this progress goes on, while a nation is acquiring wealth, how much faster does it not proceed when it approaches towards its decline? It is, then, indeed, that the extremes of poverty and riches are to be seen in the most striking degree. The higher classes can never be made to contribute their share towards the prosperity of a state; where there are no middling classes to connect the higher and lower orders, and to protect the lower orders from the power of the higher, a state must gradually decline. It is in the middling classes that the freedom, the intelligence, and the industry of a country reside. The higher class may be very intelligent, but can never be very numerous; and being above the feeling of want, except in a few instances, (where nature has endowed the wealthy with innate good qualities,) there is nothing to be expected or obtained of them, {111} towards the general good. From the working and laborious classes, again, little is to be expected. They fill the part assigned to them when they perform their duty to themselves and families; and they have neither leisure, nor other means of contributing to general prosperity as public men; --- {110} In France, the richest subject under the crown was a prince of the blood, &c. {111} In this case, the English form of government is good, because, it not only hinders any man from forgetting that he is a man, but whenever there is any ambition, no one in this country can rise above the necessity of acting with, and feeling for, their inferiors, of whom they sometimes have to ask favours, which they never do under a pure monarchy. -=- [end of page #131] they, indeed, pay more than their share of taxes in almost every country; {112} but they cannot directly, even by election, participate in the government of the country. If any number of persons engross the whole of the lands of a nation, then the labourers that live on those lands must be in a degraded situation; they then become less sound and less important members of the state than they would otherwise be. Necessity does not act with that favourable impulse on people, where property is very unequally divided, that it does where the gradation from the state of poverty to that of riches is more regular. As the action of the body is brought on by the effect produced on the mind; and as there is no hope of obtaining wealth where it appears very unequally divided, so also there is no exertion where there is no hope. {113} Where there is no regular gradation of rank and division of property, emulation, which is the spur to action, when absolute necessity ceases to operate, is entirely destroyed; thus the lower classes become degraded and discouraged, as is universally found to be the case in nations that have passed their meridian; the contrary being as regularly and constantly the case with rising nations. Besides the degradation and listlessness occasioned in the lower ranks, by an unequal distribution of property, the most agreeable, and the strongest bond of society is thereby broken. The bond that --- {112} This is less the case in England than in any other country. {113} It is strange how possibility, which is the mother of hope, acts upon, and controuls, the passions. Envy is generally directed to those who are but a little raised above us. They are reckoned to be madmen who envy kings, or fall in love with princesses, and, in fact, they are such, unless when they belong to the same rank themselves. Love, for example, which is not a voluntary passion, or under the controul of reason, ought, according to the chances of things, sometimes to make a sensible and wise man become enamoured of a princess, but that never happens. It would appear, that, in order to become the object of desire, there must be a hope founded on a reasonable expectation of obtaining the object. This can be but very small in the lower classes, when they look at the overgrown rich, and have no intermediate rank to envy or emulate. -=- [end of page #132] consists, in the attachment of the inferior classes, to those immediately above them. Where the distance is great, there is but little connection, and that connection is merely founded upon conveniency, not on a similarity of feeling, or an occasional interchange of good actions, or mutual services. By this means, the whole society becomes, as it were, disjointed, and if the chain is not entirely broken, it has at least lost that strength and pliability that is necessary, either for the raising a nation to greatness, or supporting it after it has risen to a superior degree of rank or power. Amongst the causes of the decline of wealthy nations, this then is one. The great lose sight of the origin of their wealth, and cease to consider, that all wealth originates in labour, and that, therefore, the industrious and productive classes are the sinews of riches and power. The French nation, to which we have had occasion to allude already, was in this situation before the revolution. Rome was so likewise before its fall. We are not, however, to expect to find this as a principal cause in the fall of all nations; many of them fell from exterior and not interior causes. Venice, Genoa, and all the places that flourished in the middle ages, fell from other causes. Whatever their internal energy might have been, their fate could not have been altered, nor their fall prevented. The case is different with nations of which the extent is sufficiently great to protect them against the attacks of their enemies; and where the local situation is such as to secure them from a change taking place in the channels of commerce, a cause of decline which is not to be resisted by any power inherent in a nation itself. In Spain and Portugal the internal causes are the preponderating ones, and, in some measure, though not altogether so, in Holland. If England should ever fall, internal causes must have a great share in the catastrophe. In this inquiry, then, we must consider the interior state of the country as of great importance. When property is very unequally divided, the monied capital of a nation, upon the employment of which, next to its industry, its wealth, or revenue, depend, begins to be applied less advantageously. A preference is given to employments, by which money is got with most ease and [end of page #133] certainty, though in less quantity. A preference also is given to lines of business that are reckoned the most noble and independent. Manufacturers aspire to become merchants, and merchants to become mere lenders of money, or agents. The detail is done by brokers, by men who take the trouble, and understand the nature of the particular branches they undertake, but who furnish no capital. The Dutch were the greatest example of this. Independent of those great political events, which have, as it were, completed the ruin of their country, they had long ceased to give that great encouragement to manufactures, which had, at first, raised them to wealth and power in so surprising a manner. They had, in the latter times, become agents for others, rather than merchants on their own account; so that the capital, which, at one time, brought in, probably, twenty or twenty- five per cent. annually, and which had, even at a late period, produced ten or fifteen, was employed in a way that scarcely produced three. If it were possible to employ large capitals with as much advantage, and to make them set in motion and maintain as much industry as small ones are made to do, there would scarcely be any limit to the accumulation of money in a country; but a vast variety of causes operate on preventing this. Whatever, therefore, tends to accumulate the capital of a nation in a few hands (thereby depriving the many) not only increases luxury, and corrupts manners and morals, but diminishes the activity of the capital and the industry of the country. {114} In all the great places that are now in a state of decay, we find families living on the interest of money, that formerly were engaged in manufactures or commerce. Antwerp, Genoa, and Venice, were full --- {114} It is a strange fact, that when this country was not nearly so far advanced as it is now, almost all the merchants traded on their own capitals; they purchased goods, paid for them, sold them, and waited for the returns; but now it is quite different. They purchase on credit, and draw bills on those to whom they sell, and are continually obliged to obtain discounts; or, in other words, to borrow money, till the regular time of payment comes round; they may, therefore, be said to be trading with the capital of money-lenders, who afford them discount. -=- [end of page #134] of such, but those persons would not have ventured a single shilling in a new enterprise. The connection between industry and revenue was lost in their ideas. They knew nothing of it, and the remnants of the industrious, who still cultivated the ancient modes of procuring wealth, were considered as an inferior class of persons, depending upon less certain means of existence, and generally greatly straitened for capital, which, as soon as they possessed in sufficient quantity, enabled them to follow the same example, and to retire to the less affluent, but more esteemed and idle practice of living upon interest. In countries where there are nobility, the capital of the commercial world is constantly going to them, either by marriage of daughters, or by the other means, which rich people take to become noble. Even where there are no nobility, the class of citizens living without any immediate connection with trade consider themselves as forming the highest order of society, and they become the envy of the others. There appears to be no means of preventing capital, when unequally divided, from being invested in the least profitable way that produces revenue. When more equally divided, it is employed in the way that produces the greatest possible income, by setting to work and maintaining the greatest possible quantity of labour. If there is not sufficient means of employing capital within a nation or country that has a very unequal division of wealth, there are plenty of opportunities furnished by poorer nations. Accordingly, every one of the nations, states, or towns, that has ever been wealthy, has furnished those who wanted it with capital, at a low interest. Amsterdam has lent great sums to England, to Russia, and France. The French owed a very large sum to Genoa at the beginning of the revolution. Antwerp, Cologne, and every one of the ancient, rich, and decayed towns had vested money in the hands of foreign nations, or lent to German princes, or to the great proprietors of land, on the security of their estates. The American funds found purchasers amongst the wealthy all over Europe, when they could not find any in their own states; and, it is probable, that the far greater portion of their debt is at this time in the hands of foreigners. Thus it is that wealthy nations let the means by which the wealth [end of page #135] was acquired go out of their hands; each individual in a new state, or in an old, follows his own interest and disposition in the disposal of his property. In the new state, the individual interest and that of the country are generally the same; in the old one, they are in opposition to each other, and that opposition is greatly increased by the unequal division of property. The middling class of proprietors never seek the most profitable employment for their money; the very wealthy are always inclined to seek for good security and certain payment, without any consideration of the interest of their country. To counteract the tendency of property to accumulate, without infringing on the rights of individuals, will be found desirable. In the Fourth Book =sic--there is none.=, a mode of doing this shall be attentively taken into consideration. [end of page #136] CHAP. VI. _Of the Interior Causes of Decline, which arise from the Produce of the Soil becoming unequal to the Sustenance of a luxurious People.-- Of Monopoly_. It has already been mentioned, and we have seen, in the case of Rome and Italy, that the country which was sufficient to maintain a certain population, when the manners of the people were simple, becomes incapable of doing so, when wealth has introduced luxury. The case of the Romans, though the most clearly ascertained of any, and the circumstances the best known, is only in part applicable to an inquiry into the effects of luxury at the present day. The nature of luxury, the nature of the wants of man, and the diffusion of that luxury, its distribution amongst the different classes, are so unlike to what they were, that the comparison scarcely holds in any single instance. A most enormous increase of population (a forced population as it were) in a small country, together with large tracts of land converted from agriculture to the purposes of pleasure were the principal causes why Italy, in latter times, was incapable of supplying itself with corn. Wherever wealth comes in more easily and in abundance, by other means than by agriculture, that is to a certain degree neglected. To cultivate ceases to be an object where it is more easy to purchase. This certainly is, at all times, and in all places, one of the consequences of an influx of wealth, from wheresoever it comes, or by whatever means it is acquired; though, in Italy, it was felt more than perhaps in any other part of the world. The manner in which wealth comes into a nation has a great effect on the consumption of produce, owing to the description of persons into whose hands it first comes. In Rome, the wealth came into the hands of the great. The slaves and servants, though more numerous, were, perhaps, fed in the same manner with the slaves in earlier periods, though probably not with so much economy. In a manufacturing country, [end of page #137] the greatest part of the wealth comes first into the hands of the labouring people, who then live better and consume more of the produce of the earth; not by eating a greater quantity, but by eating of a different quality. In every manufacturing or commercial country, wealth displays itself in general opulence amongst the lower orders, and the means of supplying that greater consumption is the same as it was in Rome. The money that arrives from other countries enables the community to purchase from other countries the deficiency of provisions, and prevents the evil effects from being felt at the moment. When, in course of time, there comes to be a difficulty of obtaining the supply, from the want of produce in the country itself, then the decline begins; and as no wealth, arising either from conquest, colonies, or commerce, bears any great proportion to the daily food of a people, its effect is soon felt in a very ruinous and terrible manner. England is the greatest country for extensive commerce that ever existed, yet the amount of the whole of its foreign trade would not do much more than furnish the people with bread, and certainly not with all the simple necessaries of life. If, therefore, a country, such as this is, were unable to furnish itself with the necessaries of life, the whole balance of trade, now in its favour, would not be sufficient to supply any considerable deficiency. The desire of eating animal food, in place of vegetables, is very general and, amongst a people living by manufactures, will always be indulged. If the country was fully peopled, before animal food was so much used; that is, if the population was as great as the vegetable produce of the country was able to supply; as the same quantity of ground cannot feed the same number of people with animal food, there will be a necessity of importing the deficiency. The change that this produces, when once it begins to operate, is a most powerful and effectual cause of decline; and, without the intervention of conquest, or any violent revolution, would of itself be sufficient to impoverish, in the first instance, and, in the second, to depopulate a country. We find every country that was once wealthy, but that has fallen [end of page #138] into decline, is thinly peopled; and if it were not for the want of information, from which the cause may be traced, a deficiency of food might most probably be found to be one of the most efficient. Flanders, which is one of the most fertile countries in Europe, and has experienced a partial decline, is probably not near so fully peopled as it once was. Its present population would not support those armies, or give it that rank amongst nations which it at one time maintained. It is true there have been persecutions and emigrations, which must have reduced the population of the country for a time, but not to an extent that would account for such a diminution in its numbers, as there is reason to think has taken place. Ghent, a town of an amazing size, could, at one time, send out fifty thousand fighting men. It certainly could not now (that is to say, at the time the French subdued the country) have furnished one-fourth part of the number. Ghent is not the only town in this situation, the others have all fallen off in the same manner. When manufactures declined, the people did not go to live in the country, for that also is thinly inhabited, the richness of the soil being taken into consideration. The peasants of that country lived much better than their French neighbours; they apparently brought up their children with more ease, and fed them more fully; but the country was not so populous, in proportion to its fertility. In southern climates, where the heat of the sun is great, and vegetation difficult, unless the crop is of a nature to protect the ground from its effects, natural grass is never luxuriant; and the cattle are neither so large nor so fat as in more northerly latitudes. Corn, on the other hand, which rises to a sufficient height, before the hot season, to protect the ground from the rays of the sun, is a more profitable crop; and, indeed, the only one that could (potatoes excepted) support a great population. In such countries, scarcely any degree of general affluence would enable the labouring classes to eat animal food. No degree of wealth, that can well be supposed, would enable the inhabitants of the southern parts of France, or of Spain, to live on butcher-meat, which, [end of page #139] if it became to be in general demand, would be dearer than poultry, or even than game. The absolute necessity of living on vegetables, or rather the absolute impossibility of contracting a habit of living on animal food, must, then, in those countries, counteract the taste, and prevent depopulation being produced by that cause.--But it is very different with more northerly countries, where it is almost a matter of indifference, in point of expense, to an individual who enjoys any degree of affluence, whether he lives on vegetable or animal food, and where he gives a decided preference to the former. {115} It is probable that nature (so admirable in adapting the manners of the inhabitants to the nature of the country) has made heavy animal food less congenial to the taste of southern nations than to those of the north. There is, indeed, reason to believe it is so, but, whether it is or not, as natural philosophy is not here the study, but political economy, the fact is, that if southern nations had the same propensity, it would be impossible to indulge it to an equal extent. As wealth and power are intimately connected with population, and depend in a great measure upon it, wherever they are the cause of introducing a taste that will, in the end, depopulate a country, they must, in so far, undermine their own support, and bring on decay. This is a case that applies to all northern nations, and particularly to Britain; in order, therefore, to treat the subject at full length, it will be better to enter into the minute examination when we come to apply the case directly to this country, and seek for a remedy. --- {115} The proportion between the prices of bread and butcher meat will help to a conclusion on this subject. The warmer and dryer the climate, the cheaper bread is in proportion. At Paris, which is a dry, but not a very warm climate, the proportion, in ordinary times, was as four to one. A loaf of bread of four pounds, and a pound of meat, were supposed to be nearly the same price, but the meat was generally the higher of the two. In England, the proportion (before the late revolution in prices) was about two to one, and, in Ireland, where the soil and climate are more moist, and better for cattle, flesh meat was still cheaper, in proportion. The poverty of the people, indeed, prevented them from living on animal food, but buttermilk, (an animal production) and potatoes, a cheaper vegetable, are their chief sustenance. -=- [end of page #140] Though this cause of depopulation, arising from wealth, increasing the consumption of food, is peculiar to northern nations, yet there are others that have a similar effect, that fall more heavily on the inhabitants of the south. Rest from labour is, in warm climates, a great propensity, and easily indulged. In no northern nation could there be found so idle a set of beings as the Lazzeroni of Naples. If the nations of the north have a desire to indulge themselves in consuming more, those of the south have a propensity to be idle, and produce less, the effect of which is in nearly the same; for, whether they produce any thing or not, they must consume something. The same listlessness and desire of rest, that produces idleness and beggary amongst the poor, makes the rich inclined to have a great retinue of servants, and, as those servants are idly inclined, they serve for low wages, on condition of having but light work to perform. Thus it is that the fertility of the soil, and the other natural advantages are destroyed by the disposition of the inhabitants. It does not appear, however, that this disposition was indulged or encouraged to any hurtful extent, until wealth had vitiated the original manners of the inhabitants. The Egyptians, Greeks, and Romans, all of them performed works requiring great exertion. They encouraged industry and arts, and became great, wealthy, and populous; but, when once they fell to decline, the same fate attended the descendants of them all. {116} Of all the countries that were once great, and have fallen to decay, Italy has retained its population the best; but, for this, there is an evident cause to be found in the natural fertility of the country, and the resource still drawn from foreigners, who have never ceased to visit that once famous seat of arts and military glory. The number of horses and of domestic animals maintained by the --- {116} After the Augustan age, the populace of Rome seem to have degenerated with great rapidity, as the donations of corn clearly prove. Had the tributary countries not furnished the means of providing food, the Goths would have been saved the trouble of sacking the city, as the people must have perished for want. -=- [end of page #141] fruits of the earth, but producing nothing, as they increase, in every country where wealth prevails, may be considered as a cause of depopulation, confined to no part of the world. Thus we find either the same cause acting throughout, or different causes producing the same effect in different countries; thereby reducing them all much more nearly to an equality than we could at first imagine. It has been observed, that when wealth comes to the working orders, and makes them indulge in animal food, it produces a greater effect, with respect to the consumption of produce, than if the same wealth came into the hands of the rich; this is, however, in some degree, compensated by their not keeping pleasure horses, the greatest of all consumers of the produce of the earth. One horse will consume as much as a family of four persons living on corn, and the ordinary vegetables used in England; and as much as two families, living as they do in Ireland or Scotland, on oat-meal, milk, and potatoes. As we find depopulation one of the effects that is universally occasioned by decline, it must originate in some cause equally general, and that cause must be one attending the state of wealth and greatness, for it does not appear to be a necessary effect of decline. We can very easily conceive a people, degraded and numerous, reduced to live poorly, as they do in Naples, Cairo, and some other particular spots: but taking the whole of those countries together, we find evident marks of a falling off in population; and we find it not progressive, but of long standing. Those countries seem to have found a new maximum of population, far inferior to the former standard, immediately after they ceased to be wealthy and flourishing. Perhaps it was from this cause that the idea of sumptuary laws originated; for though, in some cases, the pride of being distinguished might occasion the sovereign to enact, or the higher orders of society to solicit them, yet they were always considered as tending to prevent ruinous extravagance. When states become very wealthy, they may consider such regulations as ridiculous, and perhaps they may neither be necessary nor effectual; yet, nevertheless, there must be some cause for the general opinion of their utility. Though it is not the fashion of the present times to hold an opinion as good be-[end of page #142] cause it is general, and its prevalence in ignorant times is considered as a mark of its being erroneous; yet, observation and common sense have never been wanting at any period, and it is from those sources that such maxims and opinions arise. Any man who had travelled, first through Italy and Spain, and then through England and America, would be very likely to invent sumptuary laws, if he had never heard of such a thing before. In the application of sumptuary laws, as a device, for preventing decline, the traveller might, perhaps, be very whimsical; sometimes forbidding what would never be attempted; but there would be nothing at all ridiculous in his general intention. {117} It will certainly be found that, in all the causes of the decay of nations, the increase of consumption, and decrease of production, takes the greatest variety of forms, and disguises itself the most; it is, therefore, one that is much to be guarded against, particularly as its effects seem to be difficult to remedy. As the manner in which a country acquires riches has a considerable influence on the habits of the people, a country acquiring riches by conquest, or colonies, must naturally expend it in splendour and magnificence. Merchants are less splendid than conquerors and planters. Their ostentation is of a different sort; and, as the fortunes made in that way are rather more equally divided, they cannot launch out quite so far. Besides, merchants are seldom entirely independent of credit and industry; at least, when acquiring their fortunes they were not so; and, therefore, whether the necessity continues or not, the habit, once contracted, is never quite effaced. Manufacturers, again, are still less splendid than merchants. With them, the gifts of fortune are more equally divided than with either of the other three, and they seldom arrive at more than an ordinary degree of affluence; which affords the means of gratifying personal wants, of living with hospitality, ease, and comfort. --- {117} If, for example, it were a law at Manchester or Birmingham, that no man should keep above fifty servants in livery, or burn more than three-dozen wax-lights at a time, it would be like mockery, and would be perfectly useless; at Rome it would be very useful. -=- [end of page #143] The greatest part of manufacturing wealth, and that, indeed, is divided with a pretty equal hand, is that which goes to the working people, who spend nearly the whole on personal enjoyment. The quantity of food that an individual may consume is nearly limited by nature; but the extent of ground on which that food grows depends chiefly on the quality. Thus, for example, it will require nearly ten times the number of acres to maintain one hundred people, who live on animal food, that =sic= it would require to supply the same persons living on vegetables; and, as wealth increases, animal food always obtains the preference. This is evident, from so many proofs, that it scarcely needs illustration. In London, which is the most wealthy part of England, there is more animal food consumed than in any other part, in proportion to the numbers; and, in the country there is always less than in the towns. In the country, and in the towns of England, there is more than in any proportional part of Scotland, or in France, or, indeed, any part of Europe. Expensive as animal food is here, still it bears less proportion to the wages of labour, or the general wealth, than in any other country. In every country, as riches have increased, the consumption of the produce of the earth has augmented. The Dutch seem to have been well aware of the danger of wealth making the people consume too much. A man in moderate circumstances loses his credit there, who roasts his meat instead of boiling it. It is reckoned wastefulness, and, as such, is the occasion of confidence being withdrawn from him: it has nearly as bad an effect on a man's credit, as if he were seen coming from a gaming-house. It will, perhaps, be said, that the parsimony of the Dutch is ridiculous, but we ought not to attribute this merely to parsimony, but to a feeling similar to what we have very properly in England when we see bread wasted. It arises from a feeling of the general want, not of the particular loss, which is totally a different thing. If a man give away imprudently, that loss is to himself, not to the community. As there cannot be givers without receivers it is a change of hands, but there ends the matter. A habit of wasting is another [end of page #144] thing, it is a general loss, and, therefore, hurts the community at large as well as the individual. When this augmented consumption takes place, to any great extent, it is the infallible cause of depopulation. How nearly depopulation and decline are connected with each other is very easily and well understood; indeed, it is impossible not to see their intimate connection. {118} While the exports of a country amount to a great sum, a few millions can be spared for the importation of provisions, without any great difficulty; but the evil may increase imperceptibly, till it becomes impossible to remedy it. The distress that must be occasioned, in such a case, is beyond the power of calculation; for though, in times of plenty, animal food is preferred, whenever there comes any thing like want, that can only be supplied by corn, and there is no wealth sufficient, in any country, to procure that for a number of years, to any great extent. {119} It is calculated, by the author of the notes on Dr. Smith's Inquiry into the Wealth of Nations, that, if the supply of corn were to fall short, one-fourth part, in England, for a number of years running, there would be no means of finding either corn to buy, ships to transport it, or money to pay for it, without totally deranging the commerce of the country. In every country there are a number of persons who can afford to --- {118} Till within these twelve or fourteen years, England always was able to export some grain; but now the demand for importation is great and regular. It has had a vast influence on the balance of trade, which, though it has been great some years, has not, upon the whole, been equal to what it was previous to the American war, when the whole amount of foreign commerce was not one-half of what it has been for these last ten years. {119} If it could be done, it would bring on poverty; but, as the excess of crops over the consumption is not, in any nation, equal to one-tenth of its whole revenue; and, as the expense of eatables amount to nearly one-half, the wealth of a nation would soon be destroyed, if it were possible to produce from other nations a supply. The calculation would be nearly as under for England, putting the population at nine millions. In ordinary times, nine millions of people living on bread, potatoes, &c. would require about four millions of acres; but nine millions, living on animal food, will require thirty-six millions of acres. -=- [end of page #145] live in a more expensive way than the rest; perhaps, this may be reckoned at one-fourth, but, in countries that are poor, even that fourth cannot afford to eat animal food. If, however, a country becomes sufficiently rich for one-sixth to live chiefly on animal food, and the other five-sixths to live one day in the week on that food, the effect will be as if one-third lived on it constantly, which would require two- thirds more territory than when the whole lived on bread. Those who think that such matters find their own level, and regulate themselves, may be right in the long run, for so they indeed do. But how? When poverty and want came, no doubt the consumption of flesh-meat would be diminished; when the country had no means of supplying itself as it did when it was rich, famine would play its part in becoming one of the regulators; but, before this regulation could be effected, the evil we wish to prevent would have taken place. The country would be depopulated and ruined. We must, therefore, in trying to avert the decline of a nation, not set any thing down for the counteracting and adjusting power, which is known sometimes to interfere so very advantageously in the affairs of men. Though it is true that it does interfere, it is in all cases of this sort too late, it is an effect of the cause which we wish to avoid; we can only look to it here for stopping the career in process of time, but, never for preventing it. We know that the extravagance of an individual impairs his fortune, and, that the diminution of means will, at length, counteract the extravagance; but, then it will do so when it is too late, and after he is ruined. Wastefulness may be stopped, but it cannot possibly stop itself, as the diminution of means is the cause of the extravagance ceasing, and itself is an effect of the prior existence of the extravagance. Regarding men merely then as producing and consuming, (the proportion between which regulates the wealth of a nation,) we find that, in their own persons, there is a rooted tendency to bring on the decline. But we shall farther find that not only do people in wealthy and luxurious nations produce less and consume more than in nations less advanced, but they increase the number of unproductive labourers, all of whom consume without producing. They also main- [end of page #146] tain animals who consume, but do nothing towards production. {120} No country, in which the people live much upon animal food, can be well peopled. Two hundred persons to a square mile of country is nearly the highest population of any nation in Europe, that is, as near as may be, three acres and a quarter to each person; but, on an average, even in France, there are more than four acres to each. Supposing that one-half of the land is cultivated, then that gives about two acres to each person. Supposing, again, that one-third of this is consumed by horses or other animals who labour; or, supposing that they do not serve for the food of man, then there will be nearly about one acre and a quarter for the maintenance of each person. It will, however, only require half an acre to one person, if they all lived on field vegetables; {121} and, if they all lived on fresh meat, it would require four acres; the natural conclusion is, that one-fourth live on animal food, and the other three-fourths on vegetables, or what is the same thing, that the proportions of the two sorts of food are as one to three. According to the proportion of the prices in France, of four to one, it would certainly cost double the price to live on animal food that =sic= it does on vegetables; that is to say, if the only vegetable was bread, supposing which is the case, that one pound of meat supplies the place of two pounds of bread, as it certainly does. In England, where beef is only twice the price of bread, {122} it is almost a matter of indifference as to price, whether a working man lives on vegetables or animal food. To the taste and the stomach, however, it is no matter of indifference, the animal food, therefore, is preferred; but if it were a matter of some importance, in point of economy, that would not prevent the people of a country, flourishing by manufactures, from --- {120} One good horse well kept, whether for pleasure or labour (it has already been said) will consume nearly as much as a moderate family. {121} Vegetables raised in the kitchen-garden would go vastly further, but this is a rough average, the subject neither admitting of, nor requiring accurate investigation. {122} That is about the usual proportion, though about a year ago it was four times as much in France. -=- [end of page #147] eating it, and thereby at length sinking to a lower degree of population than a poor country living on vegetable food. In all nations getting wealthy this is a consideration, but most so when the wealth is acquired by manufactures, when the lower and numerous class have an opportunity of gratifying themselves by indulging in the species of food which they find the most agreeable. This, like the other changes of manners, of which it is only a part, is a natural consequence of a propensity inherent in human nature; it cannot, therefore, be prevented or done away, though it may, to a certain degree, be counteracted. The manner of counteracting it not being a general manner, but depending on circumstances, shall be treated of when investigating the increasing danger, arising from this cause, in the English nation. It remains at present for us to examine another evil attendant on the inadequacy of the soil to supply the consumption of a country. One of the most alarming circumstances attendant on this situation of things is, that provisions become an object of monopoly, and the most dangerous and destructive of all objects. The law has interfered in regulating the interest of money, but not in the rent of houses or of other use of property. Circumstances may occur, in which the necessity of procuring a loan of money is so great, as to induce the borrower to engage to pay an interest that would be ruinous to himself, and that would grant the lender the means of extortion, or of obtaining exorbitant profit. The same interference would be just as reasonable, wherever the same sort of necessity, by existing, puts one man in the power of another. This is the case with every necessary article of provision, which, indeed, may be considered as all one article, for the price of one is connected with the prices of all the others. Provisions, indeed, are, in general, articles that cannot be preserved for any very great length of time; but then, again, they are articles of a nature that the consumers must have within a limited time also, and for which they are inclined to give an exorbitant price rather than not to have. The interference of the law between a man and the use of his property, ought to be as seldom as possible; but it has never been maintained as a general principle, that it ought never to interfere. [end of page #148] If it is at any time, or in any case, right to interfere legally, the question of when it is to be done becomes merely one of expediency, one of circumstance, but not one that admits of a general decision. A writer of great (and deservedly great) reputation has said so much on this subject, and treated it in a way that both reason and experience prove to be wrong, that it is become indispensably necessary to argue the point. {123} Monopoly, regrating, and forestalling, which two last are only particular modes of monopolizing, have been considered as chimeras, as imaginary practices that have never existed, and that cannot possibly exist. They have been likewise assimilated to witchcraft, an ideal belief, arising in the times of ignorance. It is now become the creed of legislators and ministers, that trade should be left to regulate itself, that monopoly cannot exist. With all the respect justly due to the learned writer who advanced so bold an opinion, it may be asked, since many instances occur, both in sacred and profane history, in ancient times, and in our own days, of provisions, on particular occasions, selling at one hundred times their natural price, (and, every price above the natural one, is called a monopoly price,) how can it be asserted that they may not become an object of monopoly in a more general way, though not at so exorbitant a price? How, it may be asked, can this thing, that has so often occurred in an extreme degree, a thing that is allowed to be possible, be compared with the miraculous effect of witchcraft, of the existence of which there does not appear to be one authentic record? The one, at all events, a natural, and the other, a supernatural effect. How are those to be admitted in fair comparison? If we know that, at the siege of Mantua, the provisions rose to one hundred times their usual price, we may believe the same thing possible, at the siege of Jerusalem, two thousand years ago, and at the siege of Leyden, or at that of Paris. If we know that a guinea is given for a --- {123} Dr. Smith, in his Inquiry into the Nature and Causes of the Wealth of Nations. The author of the notes, and continuation, has, indeed, answered his arguments; but that does not render it less necessary to do so here. -=- [end of page #149] bad dinner at an inn, which is not worth a shilling, merely because some particular circumstance has drawn more people together than can be provided for; and, because hunger admits not patiently of delay, can we dispute the inclination to extortion on the one hand, and the disposition to submit to it on the other? If that is admitted, the interference of the law is allowable on the same principle on which it regulates the interest of money, though not to the same extent; that is, it is allowable, in particular instances, where the effects are similar, but not in all instances, because, in all instances, they are not similar. {124} The rate of provisions is then liable, on particular occasions, to rise to a monopoly price, such as that of those rare productions of nature, the quantity of which cannot be increased, whatever the demand may be. {125} It follows, as an evident consequence, that the price increases as the scarcity augments; but, if it only did so, the evil would not be so great as it really is. In the first place, the anxiety attendant on the risk of wanting so necessary an article creates a greater competition amongst buyers than the degree of scarcity would occasion in an article of less necessity and importance. In a wealthy nation, the evil is still farther increased, by two other causes. The high price which one part of the society is able to afford, and the wealth of those who sell, enables them to keep back the provisions from the market; the first cause operates in all countries nearly alike, for, the anxiety to have food is nearly equal all the world over. But the last two operate more or less, according to the wealth of the buyers and of the sellers, as the eagerness and ability of the former to purchase, and the interest and ability of the latter to keep back from selling, are regulated by the degree of wealth in a country. {126} --- {124} The law concerning money is a general law, because, at all times, there are some individuals in want of it, and would be liable to grant exorbitant interest. It is not so with provisions, for, it is only occasionally that they cannot be had at reasonable prices. {125} Dr. Smith divides produce into three different sorts; the two first are such as can be only produced in a certain quantity, whatever the demand may be; and such as can be produced always in sufficient quantity. {126} This was proved by what happened in Paris in 1789, and in England in 1790. The [end of page #150] want in Paris was so real that there often was not, in that great city, bread, and materials to make it, more than sufficient for twenty-four hours: yet it never rose to above double the usual price, or twopence English the pound, (that is, sixteen sols for the four-pound loaf,) although the people were obliged to wait from six in the morning till two or three in the afternoon, before they could get a loaf a piece, and more they were not permitted to purchase or carry away. In London, where bread could always be had in plenty, for money, it rose to more than three times the usual price, (one and tenpence the quartern loaf,) yet bread is a much more necessary article to the poor in Paris than in London. But the case was, in London, the people are richer, and, in each place, it rose as high as the people were found able to pay. -=- When the necessaries of life become dear, and arrive at a monopoly- price, then all taxes and other burthens laid on the people become a matter comparatively of little importance. In England, where the taxes are higher than in any nation in the world, they do not come on the poor to above three pounds a head; {127} and, of those, at least one- half can be avoided by a little self-denial. But, when the provisions increase one-half in price, it amounts to at least four pounds a head to each person; so that the effect falls on the population of the country, with a most extraordinary degree of severity. But, great as this evil is, it has, by the circumstances and nature of things, a tendency to increase the very cause in which it originates. Though the highness of price diminishes the consumption of victuals in general, it diminishes the consumption of vegetable food, or bread, more than it does that of animal food. Though all sorts of eatables rise in price, in times of scarcity, yet bread, being the article that excites the greatest anxiety, rises higher in proportion than the others. This affords an encouragement to gratify the propensity for eating animal food; and this propensity is encouraged by an absurd and mistaken policy, by which (or perhaps rather an affectation of policy) economy in bread is prescribed, and not in other food; so that when people devour animal food, and increase the evil, they think they are most patriotically and humanely diminishing it. {128} --- {127} The whole taxes in this country do not amount to above four pounds a head, of which one-third is paid entirely by those wealthy, or at least affluent; it is, then, putting the share paid by the labouring body very high to put it at three pounds each person. {128} Both in France and England, during the last scarcity, the use of every other sort of [end of page #151] food was recommended, to save the consumption of bread-corn. Potatoes are the only substitute that tended really to relieve the distress; all others, and, in particular, animal food, had an effect in augmenting it. -=- The danger of wanting food, though very formidable, does not act so instantaneously as to serve as an excuse for want of reflection, like an alarm of fire, where the anxiety to escape sometimes prevents the possibility of doing so; yet the fact is, that all the measures that have generally been taken, in times of scarcity, have tended rather to increase than to diminish the evil. In monopoly, a sort of combination is supposed to exist between the sellers of an article, when the article does not happen to be all in the hands of one person, or one body of persons. But combinations are of various sorts; there are express combinations entered into by people having the same interest for a particular purpose. Those are done by a sort of an agreement, when the interest of the individual and of the body are the same. Such combinations are generally effectual, {129} but unlawful. There are combinations not less effectual, that arise merely from circulating intelligence of prices, and certain circumstances on which prices are known to depend, amongst all those concerned, who immediately know how to act in unison.--This is not unlawful. An elegant historian has said that there was a time when the sovereign pontiff, like the leader of a band of musicians, could regulate all the clergy in Europe, so that the same tones should proceed from all the pulpits on the same day. The list of prices, at a great corn-market, has the same effect on the minds of all the sellers within a certain distance. Intelligence now flies so swift that there is no interval of uncertainty; the whole of the dealers know how to act, according to circumstances, and they are all led to act nearly as if they were in one single body. Like gamesters, who have won a great deal, rather than hasten to sell, even when they fear that prices may fall, they keep back their stock, and risk to lose something of what they have gained, by continuing to speculate on the agreeable and winning chance by which they have already profited. --- {129} There are sometimes combinations which it is the interest of a whole body to preserve, but of each individual to break, if he can with impunity; such generally soon fall to the ground. -=- [end of page #152] The dealers in an article of ready sale, or for which there is a certain demand, have never any difficulty, in a wealthy country, of procuring money to make purchases, or to enable them to keep their stock; and the gains are so immense that there is no speculation equally attractive. As the rent of land, in England, is reckoned at twenty-five millions a year; and it is reckoned that, in a common year, the rent is worth one- third of the produce; it follows that, of all sorts of produce of land, the value is seventy-five millions. But, in the year 1799, when the prices were more than doubled, the value was one hundred and fifty millions, of which the landlord received (as usual) twenty-five to his share, leaving for the farmer, &c. one hundred and twenty-five, instead of fifty, the usual sum. As the wages of servants remained the same, and, in an ordinary year, would amount to one-third of the rent, eight millions went for that, leaving one-hundred and seventeen millions, in place of forty-two, the usual residue. Two-thirds of the value of rent, or sixteen millions, is, in an ordinary year, supposed to go for seed, the maintenance of cattle, and labourers; so that, in that year, the portion so consumed must be estimated at double value, or thirty-four millions, which, deducted from one hundred and seventeen, leaves eighty-three for the farmers, in place of twenty-five, in an ordinary year: so that, when the price doubles, the farmers =sic= profit does more than triple. In the year 1799, the farmers were known to have the profit of four ordinary years, supposing that they had been the actual sellers in the market. The fact was otherwise no doubt, with regard to those who pocketed the profit, which went in part only to farmers, and the rest went to the monopolists, dealers, regraters, forestallers, &c. who advanced money to keep up the price. To the public who paid, the matter is the same, and, to the business itself, there is little difference as to who profited, or who found capital; for, as they shared the profit amongst them, and as they received three times as much as in an ordinary year, they could, out of the sales of the first four or five months, make all the payments [end of page #153] for the whole year to the landlord; and, therefore, could have the means of keeping the remainder, just as long as they thought proper. Thus, then, while there is any degree of scarcity, the provisions of a country are at a monopoly-price; and the dealers act, though individually, as if they enjoyed one general monopoly. {130} Before leaving his important subject, it is necessary to observe, that, though dealers in provisions, in times of any degree of scarcity, that is, when there is not quite enough fully to supply the consumption of the country, act, in keeping up prices, as if they had an exclusive privilege for monopoly, yet that is the only cases =sic= in which they do so. A single monopolizer can diminish the quantity, and perhaps destroy a part of it with advantage to himself. Thus the Dutch East India company were said to have done with the spices. {131} But the individual dealer, though he is interested in a general high price and monopoly, is still more interested in selling as much as he can; and the higher the price, the more careful he is not to waste or consume more than he can help. In this respect, the monopoly of the many is not half so hurtful as the individual monopoly. This proves that all the vulgar errors, which occasion reports of farmers and dealers destroying their corn, are not only without foundation, but would produce an effect quite contrary to the avaricious principle, by which such men are considered as being governed. {132} --- {130} There is one moment only when they do not, that is, when they find out, for certain, that prices are going to fall. There, for a moment, individual interest, and general interest are opposite, and they hasten to sell, and to reduce the price too much. But even this does not relieve the public; for, though it makes the reduction very rapid for a time, and may sometimes bring it below the level, it quickly rises again and finishes when the panic amongst the dealers is over, by remaining higher than it ought to be. {131} If diminishing the quantity one-quarter rises =sic= the price one-half, then the monopolist gains, if he possesses the whole market; but the individual dealer, if he were to burn his whole stock, would not diminish the quantity in the country one-thousandth part, and therefore make no sensible difference. {132} Both in London and Paris, the reports of this sort, and, (making a little allowance for the language and nature of the people,) exceedingly similar in nature and tendency, prevailed during the scarcity of 1789 and 1799. -=- [end of page #154] Monopoly of this sort, by raising the prices of the necessaries of life, in the end, augments the prices of labour, the rent of land, and the taxes of a country. We have already examined the tendency of all this; it is only necessary to observe that the rise in prices, or depreciation of money, which other causes bring on by degrees, this brings on violently and suddenly. {133} This cause will always exist in a country that cannot provide enough for its own subsistence. How far this may go it is not easy to say; for if it is clear that the farmer, by double prices, gets eighty-three pounds in place of twenty- five, he can certainly afford to give his landlord something more. If he gave him double the usual rent, it would still leave more than double for himself. {134} Of all the causes, then, that hasten the crisis of a country, none is equal to that of the produce becoming unequal to the maintenance of the inhabitants; for it is only in that case that the effects of monopoly are to be dreaded. In the case of animal food becoming too much in request, there is a remedy which may be easily applied; of which it will be our purpose to speak, in treating of the application of the present inquiry to the advantage of the British dominions. --- {133} The few years of dearth altered wages and rent more than had been known for half a century before. Wages rose more, from 1790 to 1802, than they had done from 1740 to 1790. {134} As the usual rent was twenty-five, and the usual profit twenty- five, the landlord and tenant had fifty to divide, at ordinary prices; but, at double prices, they had eighty-three added to twenty-five, or one hundred and seven to divide: so that, if the farmer gave fifty, that is, double, he would still have fifty-seven to himself, which is more than double, by nearly one-third over and above. No allowance has been made in this calculation for the diminution in quantity. The reason is, that was comparatively very small; increased consumption, rather than deficiency of produce, being the cause. Besides, we only stated the rise as being double the usual price, whereas, it was three times greater. [end of page #155] -=- CHAP. VII. _Of the Increase of the Poor, as general Affluence becomes greater.-- Of Children left unprovided for.--Of their Division into two Classes-- Those that can labour more or less, and those that can do no Labour_. In the career of wealth, in its early state, when individual industry is almost without any aid from capital, men are as nearly on an equality as the nature of things can admit. But, in proportion as capital comes in to the aid of industry, that equality dies away, and men, who have nothing but industry, lose their means of exerting it with advantage, some become then incapable of maintaining their rank in society altogether. At the same time that this is taking place, articles of every sort, that are necessary for the existence of men, are becoming dearer. As some ranks of society have been described as bringing up their children not to know the existence of necessity, others, who are depressed below the natural situation of men, are bringing them up to feel the extreme pressure of want. There is no situation of things in which a man, with natural strength, and a very slender capacity, may not gain sufficient to maintain himself, if he will be industrious; but, in a wealthy country, numbers are so pressed upon by penury, in their younger years, that neither the powers of their body, nor of their mind, arrive at maturity. Accustomed, from an early age, to depend rather upon chance, or charity, for existence, than upon industry, or energy of their own, they neither know the value of labour, nor are they accustomed to look to it for a supply to their wants. Whilst the foundation of idleness and poverty is laid in, for one part of a nation, from the affluence of their parents, another portion seems as if it were chained down to misery, from the indigence in which they were born and brought up. [end of page #156] The depressed and degraded populace of great and wealthy cities are not the accidental victims of misfortune; they are born to its hard inheritance, and their numbers contaminate more, who, were it not for their own misconduct and imprudence, might have shared a better lot. When nations increase in wealth, the fate of individuals ceases to become an object of attention; and, of all the animals that exist, and are capable of labour, the least value is set upon the human species. {135} Like individuals who rise to wealth, and forget their origin, societies forget the first foundation of all wealth, happiness, and power. That individuals should do so is not to be wondered at. They never saw society in an infant state; nor is it the business of individual citizens to occupy themselves with public affairs; but those who are intrusted with their management, and whose business is to know the original sources of prosperity, ought to attend to and counteract this growing evil. When the Romans were poor, the people depended on exertion, and they enjoyed plenty; but when Lucullus and other citizens were squandering millions, at a single banquet, the people were clamouring for bread. While the person of a Roman lady was ornamented with the wealth of a province, the multitude were covered with rags, and depressed with misery. It would have been no hard matter, then, to have foretold the fate of Rome. The natural order of things was deranged to too violent an extreme to be of long duration. The state was become like a wall that had declined from the perpendicular, while age was every day weakening the cement, by which it was held together, and though of the time and hour of destruction no man knew, the event was certain. It would, at first sight, appear that great cities are the only places in which misery of this description arises; but that is not the case. --- {135} It was never heard of, that a young horse, or any useful animal of the brute creation, was left to die with hunger in a land of plenty; but it happens to many of the human race, because there is no provision made, by which those who furnish them food may be repaid by their labour, which would be a very easy matter to adjust, if a little attention were paid to the subject. -=- [end of page #157] Great cities are the refuge of the miserable, who, perhaps, find it in some shapes augmented, by a residence in so friendless an asylum; but there they avoid shame, they see not the faces that have smiled upon them in better days; they are more at ease amongst strangers, and they are kept in countenance by companions in penury and want. {136} In every wealthy nation, the rich shun the view of wretchedness, which is attended with a silent reproach. Those who have property, mistrust the honesty, and blame the conduct of those who have none. In this state of things, the country affords no retreat nor residence, and want and wretchedness find the evils of a crowded society, where they pass unnoticed, much more tolerable. In most countries, the law has taken precautions to punish, or to stop the evil in the individual; but in no great and wealthy country has it been thought of sufficient importance to take effectual means to prevent it. In small states, when society is new, and under some absolute sovereigns, (remarkable for their penetration, genius, and love of their people,) a momentary stop has been put to this career of misery; but, in the first place, there has been no such monarch in any wealthy country; and, in the second, as soon as power fell into other hands, the progress has begun again where it left off. One great cause of the increase of mendicity is the increase of unproductive labourers, as a state becomes more wealthy, who, dying before their children are able to provide for themselves, increase the number of the indigent. Men living by active industry naturally marry at an early age; menial servants, revenue officers, and all those who administer to the gratifications of a wealthy and luxurious people, marry later in life; and besides their not having an industrious example to set before their children, are torn from them sooner, by the course of things. --- {136} If one of the brute creation is in want, it will supply that where it is most easily to be had, physical difficulty is the only one it knows; bodily pain the only one it feels. But men are different, they often undergo great want amongst strangers, to avoid more insufferable feelings amongst friends. -=- [end of page #158] It has been noticed, that, in every society, as wealth increases hospitality dies away. And those good offices interchanged between man and man, to which life owes many of its comforts in a less advanced state of society, and which protect individuals from the frowns of fortune, gradually disappear. The social feelings become less active, and men turn selfish and interested, thinking for themselves, and careless for the community; while, on the other hand, the causes for poverty increase; on the other, the means of relief are misapplied, neglected, or squandered away. The funds that ought to be administered with disinteredness and integrity are committed to the hands of men who live on the general misfortune, and thus the wretched, who are relieved, are not fairly treated, while the public, that is burthened with their misfortunes, is loaded far beyond its proper degree. The population of a country is diminished in a double ratio as the poor increases: they create nothing, but they consume; and if a country sees one-tenth of its population living on charity, it is equivalent at least to seeing one-seventh diminished in numbers altogether. Most sorts of labour require those employed in it to have some capital, such as decent clothes, or tools, or money to live upon till wages are due. Little as that capital is, yet thousands are reduced to absolute beggary for want of it; their industry finding no means of exertion. A man becomes dependant =sic= on charity for existence; and, though able to work, eats the bread of idleness, and that without being in fault. The number of persons absolutely unable to labour is nearly the same in every country, and is not much augmented by its wealth; so that if there were, as there easily might be, always employment for those who would otherwise be entitled to relief, and if they were allowed a fair price for their labour, they would then cease either to be a burthen to themselves or to the public. Little coercion would, in this case, be necessary. A few proper regulations, to prevent theft and losses, would be all that could be wanted with those who could labour; and those who could not, being few in number, would be provided for in a better manner than when [end of page #159] they can be, where their portion is shared with those who are able to procure for themselves an existence. We must by no means look for relief, in cases of this sort, from difficult or intricate management and regulation. If we look at the nature of things, it points out the way. Those that cannot labour are the only persons who ought to be a burthen on the public; and they are the only ones that would be so, if the matters were properly regulated and attended to. As it is in most countries, there are many who cannot get work to do, and those are provided for in different ways, but always at the expense of the public. Sometimes it is by a regular assessment, sometimes by theft and depredation, sometimes by individual charity, or those other means to which a man has recourse before he will absolutely starve for want. Those who, from philanthropy, are for relieving all, soon find themselves deceived, and unable to proceed. Those who, disgusted with the vices of a few, consider them all as equally culpable are much to blame. Surely, the individual case of a fellow-creature in misfortune is worth attending to; and he must be ignorant indeed who cannot, in most instances, avoid deception. [end of page #160] CHAP. VIII. _Of the Tendency of Capital and Industry to leave a wealthy Country, and of the Depreciation of Money in agricultural and commercial Countries_. As the increase of capital in every country is the consequence of former productive industry, so also is it the support of future exertion. When the capital of a country has become sufficient for all the employment that can be procured for it, the first effect is the lowering of interest, which sinks down under the rate appointed by law, and under the rate at which it is lent out at in other countries. When capital is not in sufficient quantity, those who want to borrow are more numerous than those who have money to lend; then the competition is amongst the borrowers to obtain the preference, and they all give as high an interest as the law allows, and would give more if they could avoid the penalty, which, in all countries, has been attached to accepting more than the regulated sum; a sum regulated merely to prevent the effect of competition, which might induce people to give more than in the end they would find they could afford to pay. When capital becomes over abundant, the very reverse takes place; the lenders become rivals, and offer to lend at an under rate of interest. The first effect of this is, that people who were but scantily supplied with capital before borrow, and carry on business more at ease, so that more capital is employed in business, and new employments are found out for capital. The usual employments for a superabundant capital are improving lands, building houses, erecting machines, digging canals, &c. for the use of trade; and finally, giving longer credit to merchants in other countries, {137} as well as to those who are running in debt in their own. The stock on hand in manufactured goods increases something also. But when all these have taken place, to as great an extent as wanted, then the money begins to flow into other countries. By degrees, more money is sent away than should go, and the persons who are the proprietors of it frequently follow. If the capital that leaves a country were only that which cannot find employment in it, the harm would not be great, though it would tend to enrich other countries, and bring them nearer a level. But that is not the case, the advantage of lending money abroad, if regularly paid at a higher interest than can be obtained at home, induces people to draw their money from trade, and vest it in the hands of foreigners. The Venetians, the Genoese, the Dutch, the Hanseatic Towns, and the cities of Flanders, did this; and the capital, which, when employed at home, formerly maintained perhaps one hundred people in affluence and industry, only supported one single family living in indolence and splendid penury. {138} After being in possession of money for a considerable time, men prefer a certain employment at a low interest to one attended with risk, even where the interest is higher; and when great sums have been got by trade, those who have got them retire and live on the interest, which men, who have only gained a small capital cannot do. There are many other circumstances, besides the abundance of capital, that tend to carry it away from a wealthy country. The depreciation of money that takes place, in every country that grows --- {137} As the subject is here treated in the general way, applicable to all nations, the employment found by national debt, and the funds rising is not taken into account, as it will be noticed in the case of England. When money is plenty, all individuals in trade give longer credit; but this employs little more capital, when they give it to each other it employs no more, but when to consumers it does. {138} The manner in which those families live is peculiar to themselves; great shew with great economy, and without the smallest spark of love, either for their fellow-citizens or their country. -=- [end of page #162] rich, falls nearly all on the lender at interest, {139} who, as he cannot bring back things to their former value, seeks enjoyment in another country, and obtains, by change of place, what he lost by lapse of time. The weight of taxes is another cause that drives capital from wealthy to poorer countries; and last of all, in case of anxiety, or of mistrust, the capitalists are generally the first to emigrate. [{140}] Anxiety and mistrust are periodical amongst a wealthy people. As the burthens sustained by a people in prosperity are generally great, in proportion to their capital and industry, it is clear, that when capital and industry diminish, the burthens, (which do not admit of being diminished in the same proportion,) fall more heavily on those who remain; this increased cause produces, naturally, an increased effect. Thus, like a falling column, the weight increases, and the momentum becomes irresistible. It is then that necessity, the spur to industry in new and rising nations, (that spur which taxes and rent continue to excite, for the good of mankind, for a certain period,) begins to crush what it had raised, and to stab where it formerly stimulated. Then it is that the money-lenders, who, at first, sent off their capital, having ceased to be engaged in trade, withdraw, by degrees, and rather content themselves with a diminished income in another country, than struggle with the difficulties they find they have to encounter in their own. --- {139} Money lent out at interest loses, money laid out in purchases gains, in a country that is advancing in riches. If a man, who had 2000 L. thirty years ago, had laid out 1000 L. at interest, and, with the other bought land, he would, indeed, have got less rent for his land at first, but now it would be doubled, he would get 60 L. a year, and if he wished to sell he would get 2000 L. whereas, the other 1000 L. would only produce 50 L. and, if called in, the single thousand would be all he would receive. {140} [Transcriber's note: footnote not assigned a place in the original text, intended location assumed to be as shown] This was seen at the beginning of the French revolution, though the assignats, by lowering the rate of exchange, frightened many from transferring their money, at an apparent loss of twelve or fifteen per cent. But those that overlooked this loss have rejoiced in it ever since, as the others have repented bitterly the avarice that made them risk all to save a little, and to become beggars. -=- [end of page #163] It is difficult to say at what point this would stop, if the effect produced did not affix the boundary. The prices of land, of rent, of houses, and of provisions, sink low, and induce some people to remain; for, as those articles cannot be transported, or carried off, and are always worth possessing and enjoying, it is clear there must be a term set to the decay and emigration, by the nature of things. Unfortunately for countries that have been great, that term does not seem to arrive till it is reduced far below the level of other nations. {141} There are, however, some peculiar causes that operate in some modern nations, in counteracting this effect, so far as it is occasioned by a superabundance of capital; but, as this is not general to all nations, the proper place for speaking of it will be when we come to treat of the tendency of capital to quit this country. The effects, arising from that depreciation of money, which takes place in every wealthy country, are great and numerous, and have been always found where wealth abounded. The people in such countries can easily command the labour of others that are not so rich, but the others cannot afford to pay for theirs; this tends to remove industry. On the other hand, if a supply of the necessaries of life are wanted in a rich country, they may be obtained from countries where the value of money is less, without throwing prices out of their level; whereas, in the country where money is of great value, that is not the case. The price of bread, for instance, is, at Paris, one penny the pound, and in London at eight-pence the quartern loaf, which weighs just four French pounds, the price is exactly double. If every thing was conducted in a fair way, corn, from all countries, where it is equally as cheap as in France, might be brought and sold in London, at the --- {141} At Bruges, (in Flanders) at Antwerp, Cologne, Ghent, or any of those decayed towns, house-rent was fallen, before the French revolution, to little more than an acknowledgement for occupation, where the houses were large and retired. This induced people to live at those places, who would not otherwise have done so. Small houses, lately built, were more expensive than the large old ones, built in the time that commerce flourished. -=- [end of page #164] usual market price; but, before Paris could get a supply from London, the bread would cost three times its usual price. This circumstance, if properly managed, might be turned to advantage; why it is not, is difficult to say, and is a proof that there are either regulations, or practices without regulation, that counteract the true nature of things; for it would not cost a farthing a pound to bring the corn from Paris to the London market. Paris is only mentioned here for the sake of comparison, and because the average prices have nearly the proportion of one to two. The reasons why corn is not brought from thence are no secret, but the same reasoning will apply to American corn, corn from Barbary, or the Baltic, and from other places, where the value of money is greater than in England. {142} The principal of the other effects of the depreciation of money are to be found in the chapter on the exterior Causes of the Decline of Nations, as it is in its foreign transactions that the depreciation of money is the most felt. In the interior, that depreciation only acts when there is a considerable lapse of time, during which the value has altered; it has, in general, no effect on transactions that are begun and finished within a short period, and in the interior of the country itself. The depreciation of money, wherever it takes place, would cause an increase of taxes, even if there were no other reason for it; but, in so far it counteracts itself, by making them to be more easily born. =sic= Whatever its particular effects may be, and however complicated they are, the general tendency of the depreciation of money is to depress industry in that country, and to encourage it in others, where the value is greater than in it. --- {142} In America the value of money is less than in England, compared with wages; but the usual proportion, between the wages of labour and the price of corn, is different in that country from every other with which we have any connection. -=- [end of page #165] CHAP. IX. _Conclusion of the interior Causes.--Their Co-operation.--Their general Effect on the Government and on the People.--The Danger arising from them does not appear till the Progress in Decline is far advanced_. Though these causes enumerated have all one general tendency, yet their distinguishing characteristics deserve attention. Some begin their operation from the moment the wealth of a country commences, others are only felt late in the progress of its decline. The effects of some may be diminished greatly, others may be prevented entirely; but, in all cases, the attention of government is necessary, and that before the operation of decline is actually commenced; for, prevention, and not remedy, is what ought to be aimed at, besides which, when decline has once begun, governments are too feeble to be capable of any effectual regulations. To assist nature, in every case where her operations are favourable to the enjoyment and happiness of men, and to counteract those that are unfavourable, is the business of individuals and of states. What the individual is unable to do, should be done by those to whom the care of public affairs is given; by those who act for the benefit of all, and in the name of all. From the first approaches of a state to wealth and greatness, we find that there are a combination of causes that begin to operate in promoting its decline. The first moving principle, necessity, is gradually done away, and with it flies industry; so that, from one generation to another, both the moral and physical man becomes changed, till he is unable to sustain the weight that he has raised; and, at last, he is crushed by the decent =sic= of the ponderous mass. While a gradual progress destroys that industry, from which all wealth springs, other causes act to remove or misapply the labour [end of page #166] that is left, while others again are putting capital to flight, or leading to a misapplication of it. Last of all come discord and war, the most universal cause of all those that tend to depopulate a country, and to diminish as well as degrade the inhabitants, thus giving durability to misfortune, and rendering hopeless the fate of a fallen nation. Amongst all the causes of decline, one alone is found that has a double effect, and counteracts in one direction what it promotes in another. This is taxation, a very certain cause of ruin if carried too far, and always dangerous; but, for a length of time, having a very powerful effect in repressing the progress of luxury, in continuing the action of necessity, the mother of industry, and in preventing that species of consumption that lays the foundation for the depopulation of a country. From this it would seem to be almost as dangerous to take off the burthens that have been laid upon a people, as to lay them on with too heavy a hand. There is not any example worth noticing of such a case, therefore, it must stand on its own ground: history informs us nothing on the subject. The supposed case would be thus. That a nation should rise to a high pitch of wealth by industry, and support a heavy load of taxes, still increasing in wealth, and superior to most other nations. We are to suppose the load of taxes greatly diminished, and then to investigate the consequences. Perhaps this is an useless hyyothesis =sic=, the case never has been, and perhaps never will be; but, still it is, at least, a possible case; it is a matter of curiosity, at least, if it is not one of utility, and I have a great example to plead as my apology. Dr. Adam Smith amused himself in his inquiry into the causes of the wealth of nations =sic= in a similar manner, by a hypothesis concerning the taxation of the British colonies. Supposing the pressure of necessity were to be suddenly taken away, those whose income is regulated by their efforts would relax in exertion; that is to say, the productive labourers of the country would relax, while those whose incomes are fixed, that is principally [end of page #167] the unproductive labourers, would become comparatively more opulent, and their luxury would increase. This is an effect very different from what the public expects. The most useful class would gain little or nothing, while the drones of society would find their wealth greatly augmented, which would be one of the most unfortunate effects that could well be conceived, and might very soon bring about a very serious and disagreeable event. In the course of investigating the national debt of England, in the Fourth Book =sic--there is none.=, it will be necessary to examine this at length, but, there it will be attended with another circumstance, not one of general consideration; (as national debt is not any general or necessary appendage to a government) namely, the letting loose a great monied capital, which must either be employed here, or it will seek employment in another country, which may rise on the ruin of this. In considering the reduction of taxes that have been long standing, and have risen to a great amount, there is certainly reason to fear evil consequences, though this is no argument in favour of taxation; on the contrary, it is a reason for avoiding it, for, it is in all cases dangerous to do what it will be attended with danger to undo. Though the precise case of taxes being done away may never come before us, there is, at this time, an operation going on that is nearly similar, and the result of which will soon be known. The French people were loaded with nearly twenty-five millions sterling annually to the church, and they do not now pay three. This, indeed, was partly in taxes, and part in church-lands; they have also got rid of a great deal of rent, by the sale of emigrant estates, the lands have got into the hands of men, who mostly cultivate them themselves, and have no rent to pay. On the supposition that the new government is not more expensive than the old, (and it ought not to be so, the debts having been nearly all wiped off,) the burthens on industry will be much less than formerly, it will then be curious to observe if agriculture flourishes more, if prices are reduced, and if the taxes that still remain are better paid. There are, indeed, many concomitant circumstances that will tend to derange the experiment, or render the conclusion uncertain; but, still it is an in-[end of page #168] teresting and a great event, and will be worth attentive observation. {143} We must, so far as this investigation goes, conclude, that, unless the natural tendency of things to decline is powerfully counteracted, every country that rises to wealth must have a fall; and that, therefore, it merits investigation, whether it is or is not possible to counteract the tendency to decline, without interrupting the progress towards greater prosperity, and, to manage matters so, that whether it is not possible, after having attained the summit of wealth, we may remain there instead of immediately descending, as most nations have hitherto done. From individuals, the exertion necessary is not to be expected; but, it may be looked for from the government of a country, which, though composed of individuals, the succession of persons is differently carried on; it is not from age to age, and from an old father to a young son, but from men in the vigour of life, to men in the vigour of life, who, while they are occupied in public affairs, may be considered, with respect to whatever is to be done for the good of the nation, (for its prosperity, defence, or protection,) as animated with the same spirit, without any interruption. With respect to the interior causes of decline, they may be counteracted always with more or less effect, by a proper system of govern- --- {143} The burthens on the industry of old France, were, Livres. Rent of land 700,000,000 Revenues of clergy 600,000,000 Taxes, including the expense of levying 800,000,000 ____________ 2,100,000,000 In sterling money L. 87,500,000 Half land now occupied by the cultivators, } and the remainder let at lower rents } 350,000,000 Revenues of clergy, and the expenses 50,000,000 Taxes as before 800,000,000 _____________ 1,200,000,000 Or in sterling money L. 50,400,000 This makes a diminution of L. 37,100,000; or something more than a third of the whole expense, and more than all the taxes to the state estimated at the highest rate. -=- [end of page #169] ment. In the latter portion of this work we shall endeavour to shew how that may be attempted with safety, if not accomplished with full success. Before, however, we conclude this subject, and rely on government, it is necessary to mention that, in treating with other nations, a kind of overbearing haughty pride is natural to those who govern a powerful and wealthy people. In that case, they act as individuals, and are not to be trusted; and the less so, that a nation of proud pampered citizens is but too apt to applaud insolence in those who govern them. This pride has been a very constant forerunner of the fall of wealthy and great nations, and, in Rome excepted, it has never failed. The emperors of Rome were much less haughty than the ambassadors of the republic; a love of false splendour had supplanted a ferocious affectation of dignity, yet, the former was the less humiliating of the two to other nations. {144} While the rulers of wealthy nations are apt to act haughtily to others, they are liable to fall into another error, in mistaking the strength of their own people, and loading them too heavily, trusting too much both to their internal energy, and external force. As the near observers of the inability of the people are generally afraid to carry unwelcome tidings to their superior; and, if they did, as he is seldom inclined to give credit to unwelcome news, the ruin of a nation has probably made a very considerable progress before he, whose business it is to put a stop to it, is aware of the danger. The continual clamour that is made about every new burthen that is laid on, and the cry of ruin, which perpetually is sounded in the ears of a minister, and of those who execute his orders, are some ex- --- {144} The appearance of virtue and self-command, which the republican Romans preserved, added to the bravery with which they maintained whatever claims they put in, overawed a great part of their enemies; and those, who were not absolutely overawed thought that defeat and submission were, at least, robbed of their shame, when such was the character of the conqueror; and the claim once allowed was no longer questioned. Very different was the case, when the emperor was a fidler, or a buffoon, the senators puppets, and the pro- consuls themselves robbers. -=- [end of page #170] cuses for their not attending to them; but the consequence is not the less fatal to the nation on that account. A nation that is feeble has, at least, the advantage of knowing it, and is not insensible if she receives a wound; but the government of a powerful nation is like the pilot of a ship, who navigates in a sea, the depth of which he cannot sound, and who spreads all his sails: if he strikes upon a rock, his ship is dashed to pieces in a moment. The other, sailing amongst shallows and sands, proceeds with caution, avoids them if possible, and, if she touches, it is so gently, that even her feeble frame is scarcely injured. The rulers of nations appear, in general, not to be aware of the evil that arises from the government they have to manage becoming too unwieldly =sic=, or too complicated; in either case, a check, though but of short duration, is irretrievable. This is a great oversight, and, at least, greatly augments the chances against the durability of a government. In proportion as the machine is unmanageable and complex, the embarrassment of those who have the conduct of it will be great, and the enemies will be proportionately bold and audacious. In all such conflicts, much depends on the spirit of the combatants, and more still on that of those who, at first, are lookers on, who act in consequence of the opinion they have of the force or feebleness of either party. {145} The tendency that a nation has to decline is not, then, in general, counteracted, by the government; but, on the contrary, is pushed on by it, and precipitated into the gulf. No wonder, then, that the career is rapid, and the fall irretrievable. It is, nevertheless, to the government, and to it alone, that we must look for that counteracting force that is to stay the general current. Individuals can only look to their own conduct, and they neither can --- {145} Not only when the French revolution began, but a hundred times afterwards, did the party triumph that appeared the strongest, merely because it appeared so. All those who stand neutral at first, take a side the moment they have fixed their opinion as to the strength of the contending parties, and this decision is always in favour of the party they think the strongest. -=- [end of page #171] be expected to have time nor inclination to study the public welfare, and, even if they had, they would want the means. Government can never be better employed than in counteracting this tendency to decay. It has the means, and is but performing its duty in doing so. The previous step to all this, however, is a knowledge of what is to be done, a full sense of the necessity of doing it, and a disposition to submit to the regimen necessary. For this purpose, both the government and the people must give up something. The people must allow government to interfere in the education of children, and, in that, give up a little of their liberty; {146} and those who govern must attend to many things which are generally neglected. To do the routine business of the day is the occupation of most of the governments of Europe, whether in war or at peace; they therefore habitually become agents of necessity, and what can be procrastinated is never done; that is to say, what is good is very seldom done, and what is necessary to prevent immediate evil, is always the chief, and sometimes the only, occupation. There are some men in the world who prosper merely because they look beforehand, and conduct their affairs. There are others who, with equal industry, and much more trouble and care, are always a little behind, and allow their affairs to conduct them; such men never succeed, and, if they can keep off the extreme of misfortune, it is all that is to be expected. Most governments, in wealthy nations, are like those latter species of individuals,--they do not conduct their affairs, but are conducted by them, and think they succeed, when the necessary business of the day is done. This listlessness must be done away, and, though the --- {146} From the impossibility of a nation, once immersed in sloth and luxury, returning to the tone and energy of a new people, we may judge of the impossibility of a nation going on progressively towards wealth, not suffering from the manner of educating children. The leading distinction between a rising and a fallen people is the disposition to industry and exertion, in the one, and to sloth and negligence, in the other. It is while a nation is increasing in wealth that this alteration gradually takes place; and, as this is the main point on which all depends, the nation is safe when it is well attended to, even if other things are, in some degree, neglected. -=- [end of page #172] governments of countries that are wealthy have no occasion, like Peter the Great, or the founders of new states, to create new institutions, and eternally try to ameliorate, they ought to be very carefully and constantly employed in preventing those good things that they enjoy from escaping their grasp, so far as it depends upon interior arrangement. Exterior causes are not within their power to regulate, therefore they should be the more attentive to those that are; and, though exterior causes are out of their dominion, yet, sometimes, by wise interior regulations, the evil effects of exterior ones may be prevented. Nothing of all this can be done, however, until the government rises above the routine business of the day, and until all the necessary and pressing business is got over. The first thing, then, for a government is to extricate itself from the situation of one who struggles with necessity, after which, but not before, it may study what is beneficial, and of permanent utility. So far it would appear all nations are situated alike, with regard to the general tendency to decay; {147} and so far all of them may be guided by general rules, but as to the particular manner of applying those rules, it must depend on the peculiar circumstances of the nation to which they are meant to be applied. In general, revenue has become the great object with modern nations: and, as their rulers have not ventured to tax the necessaries of the people to any high degree, but have laid their vices, rather than their wants, under contribution, the revenue-system, (as it may be called,) tends to make a government encourage expensive vice, by which it profits, and check innocent enjoyment, by which it has nothing to gain. This is a terrible, but it is a very prevalent system; it is immoral, inhuman, and impolitic. So far as this goes, a government, instead of checking, accelerates the decline of a people; but, as this is not a natural cause of decline, as it is not universal or necessary, it is to be considered with due --- {147} The Chinese, and, in general, the nations of Asia have not been considered as included in this inquiry. The Chinese, in particular, are a people in a permanent situation: they do not increase in riches, and they seem to have no tendency to decline. Their laws and mode of education and living remain the same. -=- [end of page #173] regard to particular circumstances. In general, we may say, that, in place of inviting the lower classes to pass their time in drinking, by the innumerable receptacles that there are for those who are addicted to that vice, every impediment should be put in the way. Drinking is a vice, the disposition to which grows with its gratification; most other avocations (for drinking in moderation is only such) have no tendency of the sort. Those enjoyments which have a tendency to degenerate into vice should be kept under some check; those which have no such tendency ought to be encouraged; for, where the main and general mass of the population of a country is corrupted, it is impossible to prevent its decline. If it remains uncorrupted, the matter is very easy, or, more properly, it may be said that prosperity is the natural consequence. Manners will always be found of more consequence than laws, and they depend, in a great measure, on the wise regulations of government in every country. Not only do most governments profit by laying the vices of the people under contribution; but, as revenue is, by a very false rule, taken as a criterion from which the prosperity of a nation may be estimated, the very evil that brings on decay serves to disguise its approach. A nation may be irretrievably undone, before it is perceived that it has any tendency to decline; it is, therefore, unwise for governments to wait till they see the effects of decay, and then to hope to counteract them; they must look before-hand, and prevent, otherwise all their exertions will prove ineffectual. [end of page #174] CHAP. X. _Of the external Causes of Decline.--the Envy and Enmity of other Nations.--their Efforts, both in Peace and War, to bring Wealthy Nations down to their level_. The external causes of the decline of nations are much more simple in themselves than the internal ones, besides which, their action is more visible; the way of operation is such as to excite attention, and has made them thought more worthy of being recorded. The origin of envy and enmity are the same. The possession of what is desirable, in a superior degree, is the cause of envy. That occasions injurious and unjust proceedings, and enmity is the consequence, though both originated in the same feeling at first, they assume distinct characteristics in the course of time. The desire of possession, in order to enjoy, is the cause of enmity and envy; and all the crimes of nations, and of individuals, have the same common origin. It follows, as a natural consequence, arising from this state of things, that those nations which enjoyed a superior degree of wealth, became the objects of the envy of others. If that wealth was accompanied by sufficient power for its protection, then the only way to endeavour to share it was by imitation; but if the wealth was found unprotected, then conquest or violence was always considered as the most ready way of obtaining possession. The wandering Arabs, who are the only nations that profess robbery at the present day, (by land,) follow still the same maxim with regard to those whose wealth they mean to enjoy. If too powerful to be compelled by force to give up what they have got, they traffic and barter with the merchants of a caravan; but if they find themselves able to take, they never give themselves the trouble to adopt the legitimate but less expeditious method of plunder and robbery =sic=. [end of page #175] As it has been found that wealth operates, by degrees, in destroying the bravery of a people, after a certain time, so it happens that, in the common course of things, a moment arrives when it is considered safe, by some one power or other, to attack the wealthy nation, and partake of its riches; thus it was that the cities of Tyre and of Babylon were attacked by Alexander; and thus it was that his successors, in their turn, were attacked and conquered by the Romans; and, again, the Romans themselves, by the barbarous nations of the north. Besides those great revolutions, of which the consequences were permanent, there have been endless and innumerable struggles for the possession of wealth, amongst different nations; but the real and leading causes are so uniform, and so evident, that there is not a shadow of a doubt left on that subject. Mr. Burke had good reason to say that the external causes were much easier traced, and more simple, than the internal ones; for, the Romans excepted, the instances of rich nations attacking and conquering poor ones are very rare indeed. The Romans had erected their republic on a different plan from that of any other; they had neither arts, industry, nor territory of their own, and they conquered nations upon speculation, and for the sake of civilizing the people, and making them contribute revenue; how they were successful has been explained. But even the Romans would not have attacked poor nations, if they had been, at an earlier period, possessed of the means of attacking those that were wealthy. Necessity obliged them to begin with Italy: their safety made them defend themselves against the Gauls, and, till they had a navy, it was impracticable to carry their conquests into Asia or Africa; but, after they had conquered Carthage, they lost very little time in attacking Egypt, and those countries occupied by the successors of Alexander. The taking of Constantinople was the last decided victory of this sort, and in nothing but time and circumstance did it differ from the others; in all the great outlines it was exactly the same. [end of page #176] The effeminacy and luxury of the rich, those interior causes, of which we have already spoken, always give facility to those efforts which envy and avarice excite. The rivalship, in time of peace, is a contest confined to modern nations; or, at least, but little known to the ancients. Indeed, it is only amongst commercial nations that it can exist. There can be no competition in agriculture; and, indeed, it is only in war, or in commerce, that nations can interfere with each other. The Phoenicians were the only commercial people of antiquity. Carthage was the colony, and received the Indian produce at second hand. It was in no way a rival. When Solomon mounted on the throne of his father David, he applied himself to commerce; but the wisdom and power he possessed were such as bore down all opposition during his reign. Having married the daughter of the King of Egypt, who assisted him in several conquests, he founded the city of Palmyra, or Tadmore in the Wilderness, for the greater conveniency of the Eastern trade. The King of Tyre was his ally, but he was so, most probably, from necessity, for the alliance was very unnatural; and, soon after the death of Solomon, the Tyrians excited the King of Babylon to destroy Jerusalem: so, that if there had been, in ancient times, more people concerned in commerce, there is no doubt there would likewise have been more envy and rivality. =sic= The cities of Italy, the Dutch, the Flemish, the English, and the French, have been incessantly struggling to supplant each other in manufactures and commerce; and the war of custom-house duties and drawbacks has become very active and formidable. This modern species of warfare is not only less bloody, but the object is more legitimate, and the consequences neither so sudden nor so fatal as open force; to which is to be added, that if a nation will but determine to be industrious, it never can be greatly injured. If it enjoyed any peculiarly great advantages, those may, indeed, be wrested from it, but that is only taking away what it has no right to possess, and what it may always do without. [end of page #177] The intention of this inquiry is not to discover a method by which a nation may engross the trade that ought to belong to others, it is only to enable it, by industry and other means, to guard against the approaches of adversity, which tend to sink it far below its level, thereby making way for the elevation of some other nation, on the ruins of its greatness. As, in the interior causes of decline, we have traced the most part to the manners and habits of the people, so, in the exterior causes, it will be found that much depends upon the conduct of the government. [end of page #178] CHAP. XI. _Why the Intercourse between Nations is ultimately in Favour of the poorer one, though not so at first_. In all commercial intercourse with each other, (or competition in selling to a third nation,) the poorer nation has the advantage in its gain; but this advantage is generally prevented by the length of credit which the wealthy nation is enabled to give, by which manufacturers are sometimes ruined in their own country by strangers, who can neither rival them in lowness of price nor goodness in quality. In countries that are poor, those who have the selling, but not the manufacturing of goods, are so much greater gainers by selling goods purchased on credit, of which they can keep a good stock and assortment, than in selling from a shop or store scantily supplied with ready money, that there is not almost any question about either price or quality; there is not scarcely an alternative. In one line, a man can begin who has scarcely any capital, and do a great deal of business; he can even afford to sell the articles he purchases on credit with very little profit, because they procure him ready money; whereas, if he sells an article upon which he has no credit, he must replace it with another, by paying money immediately. The consequence is, that while those who sell to the public are poor, the nation or manufacturer that gives the longest credit will have the preference; but this is daily diminishing, for even with the capital of the rich nation itself, the manufactures of the poor one are encouraged; the manner is as follows: A, at New York, purchases goods for one thousand pounds from B, at London, which he sells without any profit, and, perhaps, at a considerable loss; because B gives him twelve months credit. But A, who has, by this means, got hold of money, as if by a loan, will not lay that out with B, nor let him touch it till the year's end; and, having made no profit by the sale of B's goods, he must turn to advantage the money he obtained for them. According to the situation of mat-[end of page #179] ters in the country, and the nature of A's concerns, he will make more or less, but what he makes it is not the business to investigate; it is sufficient to know, that he will lay his ready money out with those who will sell cheap, in order to get by it; that is to say, he will lay it out with some person in his own country. {148} Thus, though the rich nation sells goods on credit at a price which cannot be obtained for them by the purchaser, yet its capital serves to give activity to the manufacturers in the poor country. It is true, that this operation is slow, but it produces an effect in time, and finishes by robbing the wealthy nation of its superiority, obtained by giving credit. It is thus that in all their intercourse, the first advantage is to the rich nation, but terminates in favour of the poor; for whenever equality of prices are the question, and both can give sufficient credit, the poorer nation has the advantage in point of price. With regard to rivalling each other, in a third place, the poor nation has the advantage, if the merchants there have the means of paying with ready money, because the price is lower than that of the richer country. {149} If they have not that means, they cannot deal with them, but must wait till they have, by perseverance; and, in course of time, come to have the means when the poor nation is certain to enter into competition with advantage. But this is not the only way in which the capital of a rich nation is employed in fostering a rivalship in a poorer nation. Were the manufacturers the only persons who sold goods, it would be confined to this; but that is not the case, for merchants, who are the sellers, study only where they can purchase the cheapest; thus English merchants purchase cloths in Silesia, watches in Switzerland, fire- arms at Liege, --- {148} The Dutch used to give long credit, and buy with ready money, by which means they had great advantage for a long time; but, at last, the ready money they paid to some, and the credit they gave to others, set their industry at work, and they became rivals. Dutch capital was, at one period, of great service to the English, as that of England now is to the Americans. {149} This is not meant to apply to any particular sort of manufacture. In some, a nation may have a permanent advantage over another; in others, only a temporary one, and in the greater portion no other advantage than what arises from superior capital. -=- [end of page #180] in preference to laying out the money in England or Ireland; and they will give credit, as before explained, to the nation that wants it. In this manner it is, that the capital of a rich country supplies the want of it in poorer ones, and that, by degrees, a nation saps the foundation of its own wealth and greatness, and gives encouragement to them in others. It is then that the weight of taxes, the high price of commodities, and the various causes which encumber those who live in wealthy nations, begin to produce a pernicious effect. The tendency of industry is to remove its abode, and the capital of the merchants, who know no country, but understand arithmetic, and the profits of trade, gives the industry the means of doing it with more ease and promptitude. The Dutch, for the last century, employed their capital in this manner, and, at one time, were the chief carriers, for they secured custom by paying readily and giving credit largely. They ruined many of their own manufactures in this manner, but it is impossible to separate the calculation of gain from the mercantile system and mercantile practice in individuals; therefore it is no reproach to their patriotism, for patriotism cannot be the rule in purchasing goods from an individual. A merchant can have no other rule, but his own advantage, or, if he has, he will soon be ruined. There are many manufactures in England that originally rose by means of Dutch capital, not lent capital, but by ready money paid for goods, which were carried to other nations, and sold here upon credit. The English have, for a long time, been able to do this piece of business for themselves; and, of course, the Dutch did not find the same means of supporting their carrying trade; and as they had ruined many of their own manufactures, they sunk both as a commercial and manufacturing people. If the time should ever come that capital should be so abundant in all nations, as that obtaining credit will not be an object, then it will be seen that no nation will have so very great a share of manufactures and commerce more than others, as has hitherto been the case. In countries where the common practice is to sell, chiefly, for [end of page #181] ready money, great fortunes are seldom gained. Even in wealthy countries, in branches of business where no credit is given, great fortunes are very seldom got, and for a very simple reason. The business is pretty equally divided. But in a country that gives long credits, or in a branch of trade on which long credits are given, we always see some individuals gaining immense fortunes, by means of doing a great deal more business than others, who, having less capital, are enabled to do less. There is not any one thing in which a nation resembles an individual so much, as in mercantile transactions; the rule of one is the rule of all, and the rich individual acts like a rich nation, and the poor one like a poor nation. The consequences are the same in both cases. The rich carry on an extensive trade, by means of great capital; the poor, a limited one, dependant =sic= chiefly on industry; but wherever the poor persevere in good conduct, they finish by getting the command of the capital of the rich, and then becoming their rivals. There is one thing peculiar to the intercourse of rich and poor nations, in which it differs from the intercourse between rich and poor individuals in the same country. Money, which is the common measure of value, has a different price in different countries, and, indeed, in different parts of the same country. If a man, from a poor country, carries a bushel of corn with him into a rich, he can live as long upon it as if he had remained where he was; but if he carry the money, that would have bought a bushel of corn at home, he perhaps may not be able to live upon it half so long. {150} The effect that this produces, in the intercourse between two countries, is, that in proportion as the difference becomes greater, the rich country feels it can command more of the industry of the poor, and the poor feels it can command less of the industry of the rich; so that --- {150} In common life, this difference, between carrying money and necessaries, is perfectly well understood, but it is experience that is the teacher; and the rough countryman, or woman, when they have the opportunity of judging from fact, understand the motives as well as the most profound and ingenius =sic= writer on political economy. -=- [end of page #182] when their industry can be both applied, with any degree of equality, to the same object, the poor supplies the rich, and therefore increases its own wealth. It is thus that great numbers of the people in London are fed with butcher-meat from Scotland, and wear shoes from Yorkshire; but there would be a very limited sale in either of those places for meat from Smithfield, or shoes manufactured in London. {151} This diminution of the value of money, that takes place in all rich countries, serves farther to increase the advantage of poorer ones in manufacturing, and accelerates the natural effect of competition, which is facilitated, as has been said, by the capital of the rich country giving activity to the industry of the poorer one. This last neither can be called an exterior nor an interior cause, as it is derived entirely from the relative situations of the two countries, and belongs to both, or originates in both; but, as it raises the poor nation nearer the level of the rich one, its effect gradually becomes less powerful. Though there is no means of preventing the operation of two nations coming nearly to a level by this means, yet it does not appear to be a necessary consequence that the nation that was the richer should become the poorer. As this, however, has been a general case, we must conclude it to be a natural one, but there we stop, and make a distinction between what is natural only, and what is a necessary effect. Their coming to a level was a necessary effect; but, though the other may be natural, it cannot be necessary, and therefore may be counteracted; to find the means of doing this, is all that is proposed by the present inquiry. --- {151} If it was not for taxes and rent, that are chiefly spent in large towns, as well as law-expenses, and the prices of luxuries, of dress, and furniture, the cities, like London, would soon be reduced. -=- [end of page #183] CHAP. XII. _Conclusion of exteror Causes.--Are seldom of much Importance, unless favoured by interior ones.--Rich Nations, with care, capable, in most Cases, of prolonging their Prosperity.--Digression on the Importance of Public Revenue, illustrated by a statistical Chart_. The exterior causes of the decline of any nation, that has risen above its level, though formidable, are nothing, in comparison to the interior causes, and are of no great effect without their co-operation. As the government of a country has an influence over the interior causes, so its alliances, and the laws of nations, though not very well attended to, (yet seldom altogether forgot,) have a tendency to stop the progress of the exterior causes, before they advance too far; that is to say, before they absolutely depress a nation. For several centuries, the stronger nations of Europe protected the weaker, and the matter was carried so far, that the weak powers generally gained the most. Prussia and Sardinia are two examples of nations rising by political connections; and though the system is lately changed, and Poland has been despoiled and divided amongst nations, to each of which it was superior in power only two centuries ago, and though Holland and Switzerland groan under the yoke of France, yet, it is to be hoped, the old system is not abandoned, otherwise there will be no end to the encroachments of the great powers on the smaller. The means of communicating, between nations, are now easy; they have felt the advantage of preserving a sort of balance, {152} and the ad- --- {152} The expression, balance of power, gives a false idea. It seems to imply, that alliances in Europe were so nicely arranged, as to make the force of nations, in opposite interests, equal; but this never was the case for half an hour, nor was it ever intended. The whole [end of page #184] that is meant, is to prevent the present order from being overturned, by one nation annihilating or subduing another; and then, by their united strength, swallowing up a third, as was the case with the Romans. -=- vantages are so great, that they probably never will be entirely abandoned, though we have strong proofs, of late years, that they are not always held very sacred. The chart subjoined to this, giving a statistical representation of the powers of Europe, shews nearly in what manner power is distributed at this time; the population and extent are there represented with accuracy: these are the foundation of power; and the amount of the revenue may be said to shew the means, which a nation has of exerting that power. (For the description and explanation see the page opposite the chart). [Transcriber's note: seemingly a reference to Chart No. 2; the explanation in fact appears on page 190.] The balance of power, however well attended to, could not prevent the decline of a nation from interior causes. It may prevent the operation of exterior causes from pushing a nation to the extreme of humiliation, by taking advantage of its internal situation. But the decline of almost every nation has commenced within its own bosom, and has been completed by causes acting from without. The common termination of the interior causes of decline is revolt, or a division into parties, when the party that has the disadvantage generally calls in some neighbour to its aid. This is the most miserable fate that can befal =sic= a country, and no punishment is sufficiently severe for the men, who have so far lost every sentiment of patriotism as to have recourse to such a step. The exterior causes of decline, namely, rivalship in peace and the combined efforts of enemies in war may be considered as irresistible, if the government, which has the direction of a nation, does not act wisely; but, if it does, they may be put at defiance. If a nation preserves its interior sources of prosperity, and acts with moderation and firmness towards others, their envy and efforts will be without effect, and need never be a cause of much uneasiness. In its relation to other nations, the government of a country acts like an individual. The first thing is to regulate its interior affairs, and, the next is, in treating with others, to consider circumstances, and take justice and moderation for a rule of conduct. [end of page #185] The circuitous politics attributed to ambassadors, who represent states, is a common theme of invective: as custom has established it as a sort of rule, in all such transactions as they conduct, to conceal a part of what is meant, to demand more than is expected to be obtained, and offer less than is intended to be given, there is no immediate remedy; but this is only in the mode and manner of treating, and does not necessarily imply unfair intention. If it has become a custom to ask three by way of obtaining two, and of offering only two to prevent the necessity of giving four, (which would be expected if three, the number intended to be given, were offered at first) it is an abuse of language, in so far that what is expressed is neither meant by one, nor understood by the other to be meant; but, it is nothing more: neither is it a custom void of meaning; it is founded on the nature of man. If men were perfect, and capable of seeing at one view what was fair, each might come prepared to ask exactly what he wanted, and determined not to yield any thing; and it would result from their being perfect, that each would just demand what was right, and the other was disposed to give; but, as men are not perfect, and as it is the inclination and even the duty of each to obtain the most favourable terms he can, (and as he does not see exactly what is right,) he naturally demands more than he has a right to expect, or than the other is disposed to give. If ambassadors met together with a determination to speak explicitly at first, and with a determination not to recede, the consequence would probably be, that they would not treat at all, so that the mode of receding a little does not absolutely imply that more is asked than is wished for, but that each party over-rates its own pretensions, in order to obtain what is right. One thing is certain, that the treaties that have been the best observed have been those founded on equity, where the contracting parties were neither of them under the influence of fear or necessity. The exterior dangers of a country are not only more simple in their nature than the interior ones, but, being less silent and gradual in their progress have been more noticed by historians. Even the ambitious rapacity of the Romans was first directed [end of page #186] against Carthage, on account of its pride and injustice in attacking other states; and, in the history of the nations of the world, there is scarcely a single example of national prosperity being unattended with some degree of pride, arrogance, and injustice; nor can it easily be otherwise, for, notwithstanding all the boasted law of nations, power seems amongst them to be one of the principal claims on which right is founded, though, in the moral nature of things, power and right have not the most distant connection. It is then an object for those who govern nations, in the first place, to counteract as much as possible the internal tendency to decline, arising from the causes that have been enumerated; and, after having done that, to regulate their conduct with regard to other nations, so as to protect themselves from those external causes of decline, on the existence of which they have no direct influence, but which are not capable of producing any great effect, unless favoured by the internal state of the country, and by the unwise conduct of those by whom it is governed. ======== _Digression concerning the Importance of Public Revenue_. No state, what ever its wealth may be, can possess power, unless a certain portion of that wealth is applicable to public purposes. As the want of revenue has not been a very common cause of weakness, we shall give, as an example, the almost solitary, but very strong, case of Poland. Its feebleness, in repelling the attacks of its enemies, was occasioned, in a great measure, by want of revenue. It was with far superior population, with more fertile soil, and a people no way inferior in bravery, greatly inferior in actual exertion to Prussia. When, at last, the Poles, seeing their danger, united together, and were willing to make every personal exertion and sacrifice, to preserve their country, they had no means of executing their good intentions. They had not kept up an army when it was not wanted, and they could not, on the emergency, create one when it was become necessary. [end of page #187] The definition given of power makes it a relative thing, and, therefore, the revenue necessary to maintain that power or force must be relative also; it, therefore, depends on circumstances, what is to be considered as a sufficient or insufficient revenue. If the United States of America were accessible with ease to European nations, or if they had powerful neighbours on their own soil, they would find their present revenues quite unequal to preserving their independence; but, as it is, perhaps they are the most wealthy civilized nation in the world, if an excess of revenue constitutes wealth. In Europe, whatever nations are unable to keep up forces sufficient to make those exertions which, according to their alliances and dangers, may be necessary, they are weak from want of revenue, and ought to augment it. In the course of making greater exertions than the revenues would bear, some nations have contracted debts. It is not the purpose here to enter into the complication such debts occasion, and the alterations they make on the revenue, and the disposal of the revenue of a country; but, so far as that subject is yet understood, it appears that the clear revenue, after paying the interest of the debt, ought to be as great as it would be altogether, if there were no debt; that is to say, after paying interest, there ought to remain a sufficient surplus to pay all the expenses necessary for government and defence. The money that goes for the payment of interest has some tendency to increase the influence of government at home, but is of no manner of use with regard to enemies. From the statistical chart here annexed, which shews the relative proportion of the revenues of all the nations in Europe, as well as their actual amount, it is perfectly clear, that, great and extensive as the Russian empire is, it will not be very powerful until its revenues are considerably increased. The great value of money, and the prices of provisions, and many sorts of warlike stores, enable great armies to be maintained in that country, even with small revenues; but the Russians can make no great effort, at a distance from home, till their revenues are augmented. The revenues of Spain are considerable; but the free revenue is not, [end of page #188] and it has no credit to supply the place. The same thing may be said of Portugal; and if England had no credit, it would be in the same situation; but as it has better credit than any nation ever had, so, likewise, it is the only one whose efforts have never been in any way, or at any time, either restricted or suspended, for want of money to carry them into effect. The Dutch were, at one time, situated nearly as England is now; they had not sufficient free revenue, but they had good credit; of which, however, they were not willing to make the necessary use, and the French marched into Amsterdam with greater ease than the Russians did into Warsaw. The greatest victories of the French, during the revolution, were gained at a time when her regular revenues were inconsiderable, and when she was in a state of absolute bankruptcy. This is considered by some as a proof that force is independent of revenue, and that Frederick the Great was mistaken in saying, that money was the sinews of war; but this case has been misunderstood as well as misrepresented. Though, in general, regular resources for money are necessary to support war, and regular resources imply revenue, it never was asserted, that, if irregular resources could be obtained, they would not answer the same purpose, so long as they lasted. During the first five years of the French revolution, a sum equal to at least four hundred millions sterling was consumed, besides what was pillaged from the enemy. So that at the time that France was without regular revenue, she was actually expending seventy-five millions sterling per annum: a sum greater than any other nation ever had at its disposal. The impossibility of such a resource continuing is of no importance in the present argument, although it is luckily of very great importance to the peace of mankind. France supported war, for a certain time, by consuming capital, and without revenue, but not without money; so that what his Prussian Majesty said, stands uncontroverted, and the necessity of revenue, regular and durable, for the maintenance of regular and durable force, is established beyond the power of contradiction. [end of page #189] EXPLANATION OF STATISTICAL CHART, NO. 2. In this chart, the different nations of Europe are represented by circles, bearing the proportion of their relative extent. This is done in order to give a better idea of the proportions than a geographical map, where the dissimilar and irregular forms prevent the eye from making a comparison. The graduated scale of lines represents millions of pounds sterling; and the red lines, that rise on the left of each circle, express the number of inhabitants in millions, which may be known by observing at what cross-line the red one stops. The yellow lines, on the right of the circles, shew the amount of revenue in pounds sterling. The nations stained green, are maritime powers; those stained pale red, are only powerful by land. The dotted lines, to connect the extremities of the lines of population and revenue, serve, by their descent from right to left, or from left to right, to shew how revenue and population are proportioned to each other. The impression made by this chart is such, that it is impossible not to see by what means Sweden and Denmark are of little importance, as to wealth or power; for, though population and territory are the original foundation of power, finances are the means of exerting it. What must the consequences be if the Russian empire should one day become like other nations? If ever that should happen, it either will be divided, or it will crush all Europe. The prodigious territory of Russia, and the immense revenues of England, are the most astonishing things represented in that chart; they are out of all proportion to the rest. [end of page #190] ========= BOOK III. ========= CHAP. I. _Result of the foregoing Inquiry applied to Britain.--Its present State, in what its Wealth consists, illustrated by a Chart, shewing the Increase of Revenue and Commerce_. Having now taken a view, and inquired into the causes that have ruined nations that have been great and wealthy, from the earliest to the present time; having also inquired into the causes that naturally will operate where those did not, and that would, at a later period, have produced the same effect; it is now the business to examine how far and in what way the result of the inquiry applies to the British empire. The power and wealth of Britain, according to the definition given at the beginning of this work, are founded not on conquests, extent of territory, superior population, or a more favourable soil or climate, or even in bravery; for in those it is but on a par with other nations. The only natural advantages of Britain are, its insular situation and the disposition of the people, and the excellent form of its government. From the two first have arisen that good government, commerce, and industry; and on those have arisen again a great naval power, and an uncommon degree of wealth. In arms, it does not appear that England is so powerful by land, in proportion as in former times: her power must then be considered as a naval power, and that founded principally on commerce. {153} --- {153} Our last brilliant achievements by land were under the Duke of Marlborough; but even then, with allies to assist, we were but a balance to France. Before the conquest, England seems to have been far below the level of most other nations, as a power by land. Soon after [end of page #191] she appears to have risen above France, and other nations, or they probably rather sunk; but, ever since England became formidable at sea, she has lost her superiority in the army; although she has never sunk under the level, and never, in any instance, were her armies beat when the numbers were equal to those of the enemy. -=- {Here appears at page 192 the second chart, entitled "Chart Representing the Extent, Population & Revenue -of the- PRINCIPAL NATIONS in EUROPE --in 1804--by W. Playfair"} As such then we have only to examine the foundation on which she stands, and find in what she is vulnerable. We must first begin with the interior situation, to follow the same order that has been attended to in the rest of the work. Changes of manners, habits of education, and the natural effects of luxury, are as likely to operate on the British empire, as on some others which they have destroyed. From the unequal division of property, there is perhaps less danger, but from the employment of capital there is more than almost in any other nation. From the abuses of law and public institutions and _l'esprit du corps_, we run a very great risk; more indeed than under an arbitrary government or even a republic. These last are the dangers that most seriously threaten a nation living under a mixed government. As to the produce of the soil becoming unequal to the maintenance of a people addicted to luxurious habits, we have much also to fear from that: the operation is begun, and its effects will soon be most serious: they are already felt, and very visible. From taxation, unproductive and idle people, we have more to fear than most nations; and from an alteration in the manner of thinking, and persons and property leaving the nation, we have as much as any other nation, according to the degree of wealth that we possess; so that, upon the whole, the interior causes of decline are such as it is extremely necessary to guard against in the most attentive manner. In respect to the exterior causes, we are exempt entirely from some, from others we are not; and, in one case, we have exterior causes for hope that no nation ever yet had. The advancement of other nations, their enmity and envy, are full as likely to operate against this nation as against any other that ever existed; but as we owe none of our superiority to geographical situa- [end of page #192] tion like the Greek islands, the Delta of Egypt, and borders of the Mediterranean Sea, we run no risk of any discovery in geography, or in navigation, operating much to our disadvantage. We are not so far advanced before other nations in arts as to have any great reason to dread that their advancement will be our ruin; but still we must allow, that a number of external causes may combine to bring us to their level, when the effects of our present wealth may soon operate in reducing us under it. Since, then, commerce is the foundation of our wealth, and since our power, which is naval, is built upon commerce, let us begin with taking a view of its present situation. The increase of the trade of Britain to foreign parts, within these last fifteen years, though a very natural effect of the causes that have operated during that period, is not itself a natural increase, because the causes that produced it are uncommon, temporary, and unnatural. The East and West India trades have been both lost to France and Holland. The French, before the revolution, had a greater share of the West India trade than ever we had, and they could undersell us in foreign markets. The Dutch and French together had a very great share of the commerce of the East; this partly accounts for the rapid increase of English commerce since they lost theirs. Besides, the French nation itself, which formerly consumed scarcely any English manufactures, and supplied Germany, and many parts of Europe, with its own, has been employed for several years in consuming its manufactured stock, eating up its capital, and ruining its own manufactories; so that France itself, Germany, and a great portion of the continent, have been obliged to apply to Britain, both for manufactures and colonial produce, as well as for the goods that come from India. Add to this, that capital on the continent of Europe has suffered an unexampled diminution, from a variety of causes. A great part has been consumed in France, and in all the countries into which her armies have penetrated, particularly in Holland; and that confidence, [end of page #193] which serves in place of capital, has been impaired in all countries, and ruined in many. It has already been shewn that the want of capital prevents a poor nation from supplying itself, and furnishes a rich one with the means of supplying it, and, as it were, extorting usury from it by giving credit. The misfortunes of the continent had, by this means, all of them a direct tendency to advance the commercial prosperity of England; but still the matter does not rest even here, for the real capital that fled from the continent of Europe has, in part, taken refuge in England. We have risen, (for the moment,) by their depression; and though the advantage will be of some duration, yet we ought not to consider it as permanent. {154} Those causes have operated, as indeed might be expected, in a most powerful manner, but that operation has already begun to cease. In such uncommon and unexampled circumstances as the present, it is impossible to forsee =sic= what may happen, yet it is scarcely possible to suppose things will remain as they are. Terror and alarm are too painful to continue their action long on the human mind; and even if the cause were not diminished, the effect would become less violent with time and custom. Again, we are not to suppose, that such times as those of 1793 and 1794 are ever to return, therefore the alarm will be diminished, new capital will rise up, and, as security of private property is now understood to be the basis of all wealth and prosperity, confidence will be restored by degrees. The increase of trade is not then to be expected from the same causes that have of late operated with so rapid and powerful an effect: on the contrary, they may be expected so far to cease, as to occasion a diminution of our exports. This will, however, be counteracted by some circumstances, while others will tend to augment the violence of its effects. The trade with the American States and with Russia increase, from --- {154} As one proof of capital taking refuge in England, the sudden rise of stock, during the first three years of the French revolution, may be adduced, without fear of being contradicted as to the fact, or the assigned cause controverted. [end of page #194] -=- no temporary or fallacious cause. In the former country, population very rapidly increases, and, in the latter, wealth and civilization, which have a similar effect {155} upon the wants of a nation. These are in favour of a manufacturing country, like England. These two are not only, then, permanent, but augmenting causes for our commerce; {156} they are causes that augment rapidly, and may, with proper care, be carried to a great extent. The superiority in the West India trade is so far of a permanent nature, that France will never again be a formidable rival there. St. Domingo is not only lost, but probably lost for ever, while it is expected that Britain may retain her islands. This trade, then, may be set down as permanent; that is to say, that there does not seem to be any immediate cause for its decline; {157} and the government of this country is sufficiently aware of consequences not to neglect taking every precaution possible. The East India trade does not, indeed, appear equally secure. There we are powerfully rivalled by the Americans, and the merchants of other countries; but, on the other hand, the demand for the produce of Asia is augmenting rapidly all over the continent of Europe; so that perhaps we may be able to maintain our ground, even though other nations regain part of the trade they have lost. To remain, then, in the situation in which we are, with respect to --- {155} The great augmentation of fine fertile territory, in America, will retard the progress of manufactures and commerce in that country, by employing the capital and attention of the inhabitants on agriculture. This may be the case for half a century, and, if England improves, the circumstances may continue to operate in favour of British manufactures for many centuries to come. {156} The ports in the Black Sea add a new district to the commercial world, which, in course of time, must greatly increase the demand for such articles, as a civilized people consume. The fineness of the climate and of the country will enable the inhabitants to gratify the taste which civilization will bring along with it. {157} It would be quite foreign to the end of this inquiry to examine into the interior state of the West India islands, or as to their continuing subject to Great Britain. This is entirely a political affair, unconnected with commerce, though its effects on it would be prodigious. [end of page #195] -=- foreign trade, we must exert ourselves; those external causes that have forced trade upon us, for these last fifteen years, being but of a temporary nature. In order to be more sensible of this necessity, let us consider a few other circumstances. The wealth of England, which was the envy of Europe, even previous to the American war, in which we stood single-handed and alone (having the three most powerful maritime nations against us, and none to take our part) has now become more conspicuous, and much more likely to excite envy. Not only the situation of Britain is much more exalted, but the other nations feel a comparison that is infinitely more humiliating; add to this, that old attachments, and a regard to the laws of nations, and to a balance of power in Europe, are much enfeebled, or rather nearly done away. Britain has alone, for some time, stood forward to resist the innovations and power of France; and, after having at first subsidized every nation that would fight in the common cause, it has alone maintained the common right itself, thereby adding a double humiliation to those who wanted means of assisting, or whose courage had failed. France, with all its acquisition of territory and alliance, with all that influence over neutral nations, which terror of its arms inspires, will never cease to combat the prosperity of England. Some other nations, through envy or shame, stimulated by a hope of partaking in the wealth that England loses, will either sit passive or assist. {158} The East India trade is that which excites the greatest portion of envy, and it will be difficult to resist its effects. This superior degree of envy is occasioned by three principal causes: The splendid establishments of the East India company, its fleets, --- {158} Gratitude, some will say, may prevent this; but nations have no gratitude, they only know their interest, and nothing retrospective is any motive for action. We need not search into remote periods for proofs of this, see Holland, Spain, Russia, &c. during the latter part of the last war. [end of page #196] -=- and the fact that it is the greatest commercial company that does now, or ever did, exist, constitute the first cause, not only for envy, but for a wish to participate in the trade. The second cause arises from the extent of our possessions, the immensity of the territorial revenues, and the evident injustice of a company of merchants becoming sovereigns, and holding the ancient princes of the East, and the successors of the Great Mogul, as tributary vassals. {159} It is in vain that we say the people are happier than they were before we did them the honour to become their masters. Whether this is true or not, there is no means of proving it, besides there can be no right established by London merchants to force the inhabitants of Hindostan to become happy, whether they will or not. The same pretence has been used by the French, in subduing Flanders and Brabant, in governing Holland and Switzerland; but they have not been able to obtain credit. The regular governments, who partitioned Poland, have pretended the same thing; and our slave-merchants and planters give very positive assurances that the negroes toiling on the West India plantations are much happier than they were in their own country; yet, in defiance of all this cloud of witnesses, there is something in the human breast that resists and rejects such evidence; evidence doubtful, on account of the quarter from whence it comes, and the interests of the witnesses, as well as con- --- {159} However we may look upon this, other nations certainly see the matter as iniquitous and unjust; and it is well known with what feelings such a belief is entertained. Though the revolutions in Farther Asia have not made any part of the basis of our inquiry, yet it is impossible, having mentioned the Mogul empire, not to notice its rapid and terrible fall. In 1707, only ninety- eight years ago, the Great Mogul ruled over a country equal in extent, and little inferior in population, to France, Spain, Germany, and England. His revenues amounted to thirty-two millions sterling, which, at that time, was nearly equal to the whole revenues of all the monarchs of Europe. He is now circumscribed to a territory less than the smallest county in England, and is the vassal at will of a company of English merchants, who, with all their greatness, do not divide profits equal to one week of his former revenues! [end of page #197] -=- trary to the natural feelings of beings endowed with the power of reason; at variance, also, with an opinion of a very ancient origin, "that coercion and force are enemies to enjoyment." In defiance, then, of our assertions, the other nations of Europe will and do view this acquired territory with anger, as well as envy; and, though it is true, that, out of the immense revenues that arise to the company, they divide little profit, though their debts are annually augmenting, yet individual Englishmen, it must be admitted, bring home great fortunes. This fact is not to be denied, and is so much the worse, that though a government even of merchants may be supposed to obtain revenues fairly, individuals, who rapidly acquire great wealth are always supposed to do it by extortion or unfair means. {160} The third cause for envy is of great antiquity. The commerce of the East, from the earliest ages, has been that which has enriched all the nations that ever possessed it; and, consequently, has been a perpetual cause of envy and contention, as we have already seen, in its proper place. For all those reasons, not one of which we can remove entirely, the East India trade is a particular object of envy; and, unless great care is taken, will entail the same danger on this country, as it has on all those that ever possessed it. Tyre and Sidon, in Syria, Alexandria, in Egypt, Venice, Genoa, the Hans Towns, and Portugal, have all been raised and ruined by this trade, which seems to --- {160} So far back as 1793, Mr. Dundas estimated the sums remitted by individuals at an annual million; add to this, plunder arising from war, (which is become as natural a state in India as peace,) and we shall see that now the revenues and establishments are nearly doubled. The following will not be an unfair estimate: Private fortunes remitted in 1793 L. 1,000,000 Average ditto arising from years of war, the plunder of Seringapatam, &c 300,000 Increase remitted home since, in proportion to revenue 700,000 ____________ Remitted now by the same description of men L. 2,000,000 Besides what is remitted home, those servants of the company expend immense sums in the country, living there in the greatest luxury. [end of page #198] -=- have been the cradle and the grave of most of those nations that have become rich and powerful by the means of commerce. Our West India wealth, though derived from a source still more, or at least equally, impure, and though not inferior in amount, is, for several reasons, not the cause of so much envy. It is not confined to a company, and therefore the splendour and ostentation that, in the case of the Asiatic trade, occasion envy, do not exist in that to the American islands. Our monopoly is by no means so complete, which has a double effect in our favour; for, besides preventing others from envying us so much, it prevents them from condemning us so severely. The same nations that see, in its full force, the injustice of subjecting the inhabitants of the East, in their own country, in a way that, at the worst, is not very rigorous, join cordially in robbing Africa of its inhabitants, to make them slaves in America, in a way, that, at the best, is very rigorous. Such are the baneful effects of sordid interest acting on the mind of man! But our business is not here to investigate opinions, but their result; and, in the present instance, we find that to admit participation in criminality is the only way to avoid envy and offence. The third cause for envy is likewise wanting. The commerce with the West Indies is but of a recent date, and no nation has ever owed its greatness or decline to that single source. {161} It is not like the Asiatic trade, a sort of hereditary cause of quarrel; a species of heirloom, entailing upon the possessor the envy and enmity of all other nations. The envy occasioned by the West India trade is farther diminished by the circumstance that the plantations have been raised with the money of the persons by whom they are possessed; and that if they had no original right to the soil in its barren state, the cultivation at least is owing to their capital and industry. The most solid and secure portion of our trade is that which con- --- {161} France was the nation that, before the revolution, gained the most by this trade; indeed, no nation has, to this date, gained so much as it did. -=- [end of page #199] sists of our manufactures at home. In those, though we excite envy, we excite no other of the hateful passions. Emulation is natural, and admiration is unavoidable, on seeing the vast progress that arts and industry have made in this country; so that England is absolutely considered as the first country in the world for manufactures. This cause of greatness and wealth operates in a more uniform and durable manner; though, like others, it has its bounds, yet the nature of them is not easily ascertained. In this there are two things essential,--the procuring a market, and the means of supplying it. We have always yet found the means of supplying every market we have got; but we have not always been able to extend our market so much as it might have been wished. America and Russia offer new markets, as has already been observed, but, to extend our old markets, we must either reduce the price, improve the quality, or extend the credit, and invention is the only means by which these things can be done; and there is no possibility of knowing where to set bounds to invention, aided by capital and the division of labour. We are, however, not to forget that priority in point of time being one of the causes of a nation's rise, and being of a nature to be destroyed in the course of years, the superiority we enjoy may leave us, as it did other nations in former times. When a country produces the raw material, and labour is cheap, and the art established, we might suppose the superiority secure; but it is not. The cotton trade was first established in the East Indies, where the material grows, where the labour is not a tenth of the price that it is in England, and the quality of the manufactured article is good; yet machinery and capital have transplanted it to England. But the same machinery may give a superiority, or at least an equality, to some other country; it is, therefore, our business to persevere in encouraging invention, by the means that have hitherto been found so successful. {162} --- {162} The law of patents, and the premiums offered by the Society of Arts, suggest improvements, and reward them when made. To those, to the security of property, and nature of the government, we chiefly owe the great improvements made in England. -=- [end of page #200] The most necessary thing for our commerce is the support of mercantile credit, without which it is in vain to expect that trade will be carried on to any great amount. In 1772, when a great failure occasioned want of confidence, the exports of the country fell off above three millions, but its imports fell off very little. {163} In 1793, when the internal credit of the mercantile people was staggered, precisely the same effect was produced. These are the only two instances of individual credit being staggered to such a degree, as to prevent mercantile men from putting confidence in each other; and they are the only two instances of any very great falling off in the exports in one year, except during the American war, when the chief branches of trade in the country were cut off or diminished. The falling off, in exports, in 1803, which was very great indeed, (being no less than one-third of the whole,) was not occasioned by the same cause, but appears to have been owing to three others of a different nature. First, the French had actually shut us out from a great extent of coast, and this occasioned a diminution of exports, which will, in part, be done away, when new channels of conveyance are found out. It will nevertheless operate in causing some diminution, as circuitous channels render goods more difficult to be introduced, and consequently dearer to the consumers. The second cause appears to have been, the uncertainty of our merchants where to send the goods, and who to trust, as the fear of the extension of French power took away confidence, and produced a sort of irresolution, which is always hurtful to business. The third cause of the diminution of trade, no doubt, arose from the cessation of that alarm about property, that has been described as having occasioned so much to be sent from the continent to England. In other words, it is the return of the pendulum which had vibrated, --- {163} This is a sort of paradox: when money became scarce, the nation bought nearly as much as ever, but sold less. This is not the case with individuals, and, at first sight, does not appear natural. -=- [end of page #201] through a temporary impulse, beyond the natural perpendicular. Had there been no revolution in France, and had it not been conducted on the principles it was, our trade could not have augmented so fast as it did; but a falling off of fifteen millions in one year is too much to be ascribed to that cause alone. An examination of the branches that did fall off will elucidate this. The commerce with the United States of America is one of those that has fallen off, and is the only one that does not appear to be directly connected with these causes. There are some reasons, however, for thinking that it had an indirect connection with them. Whatever interrupts our connection with the continent of Europe, or renders it unsafe, has, in some degree, the same effect with a stagnation of credit at home. This has taken place; and as it of course affected every branch of trade, that with America felt the blow amongst the rest, and, indeed, more than in proportion; for, as there is no course of exchange with any town in America, and as the credits there are long, the exportation to that country suffers in a particular manner when there is any heaviness in the money market here. Thus it was that, in 1772, the American exports suffered a diminution of two millions from the stagnation; and, in 1793, of rather more than half a million. In the former case, the American trade seems alone almost to have suffered, and, even in the latter case, it fell off more than in its just proportion. It has been observed, that the improving our manufactures at home is the most secure support of our foreign trade, which chiefly depends on superior skill, industry, and invention, the wages of labour being greatly against us. We shall consider by what stability of tenure we hold that advantage. The nation or individual that proceeds first in improvement is always uncertain how much farther it can be carried; those who follow, on the contrary, know what can be done, and therefore act with certainty and confidence. As to individuals, those who are the foremost in improvement have great difficulties to encounter; they seldom can procure the pecuniary aid necessary, and always do so with great difficulty; whereas, those who copy, without half their merit, or, [end of page #202] perhaps, without any merit at all, meet with support from every quarter. {164} From this it is very evident, that the nation the farthest advanced in invention has only to remain stationary a few years, and it will soon be overtaken, and perhaps surpassed. Holland, Flanders, and France, were all originally superior, in the arts of manufacturing most goods, to England; and, indeed, it is no great length of time since we obtained the superiority over Holland in several articles of importance, and in particular where machinery was wanting. If it were necessary, it would not be difficult to give examples, to shew with what eagerness those who imported inventions were taken by the hand, on the bare probability of success, while the inventors of machines, and of methods of manufacturing entirely new, and of still more importance, were left to grope their way, and, until crowned with success, rather considered as objects of pity than of praise or admiration. {165} It is not then altogether by a sure or lasting tenure that we hold this superiority of manufactures. We have examined several other sources of wealth, and the general conclusion is, that, without care and atten- --- {164} Mr. Arkwright, who produced the cotton-spinning machine, underwent great difficulties for many years; as also did Mr. Watt, the ingenious and scientific improver of the steam-engine; and, had not good fortune thrown him in the way of Mr. Boulton, a man of fortune and resource, and himself a man of genius, he probably must have languished in obscurity, and the nation remained without his admirable invention. The profits derived from the spinning-machine may, at first sight, appear the greater national advantage of the two; but it is not so in reality, for the spinning-machine only manufactures a raw material, brought from another country, cheaper than before; whereas, the steam-engine enables us to obtain raw materials from our own soil cheaper; a thing more important, more permanent, and of which we were more in want: besides this, the steam-engine is extending the scope of its utility every day; whereas, the spinning machines can go little farther. But to leave this digression, which is not altogether foreign to the purpose, and return to the facility with which inventors are followed, it is a fact, that in almost every country in Europe, money can be got by any adventurer who will propose to establish either a cotton spinning machine, or a manufactory of steam- engines; and it is a fact, that immense sums have been, and are still given, for those purposes. {165} Slitting-mills, saw-mills, the art of imitating porcelain, and of making good earthen-ware, and paper, together with a vast number of other inventions, were imported from Holland; in every one of which we have gone beyond the Dutch, just as they got the better of the Flemings in the art of curing herrings. Priority of invention is not then a permanent tenure. -=- [end of page #203] tion, this nation cannot be expected long to maintain its superiority over others, in the degree it at present enjoys. The American market, {166} and the Russian (in a smaller degree,) however, hold out a prospect of increased commerce to us, from external causes, that we cannot flatter ourselves with in the internal ones. It is to those we must look, and to those only, for the extension of the sale of our manufactures; but, even in this case, we must use efforts, for it is very seldom that a good end is effected by accident, or without a view towards its accomplishment. Having now taken a view of the situation of this country, and seen that, though it is not likely to be deprived of its commerce by conquest, like Babylon, Tyre, or Alexandria, or by a new discovery in geography and the art of navigation, like Venice and Genoa; though, indeed, it has no great appearance of sharing the fate of Spain, Portugal, or Holland, yet there are other causes that may stop its career. If it is exempt from the dangers they laboured under, it is subject to others from which they were free. We have already examined the effect of taxes and national debt on the industry of a country, even whilst augmenting in wealth; but we have not examined what that effect will be when a country comes to be on a level with other nations that do not labour under the same burthens. There is no possibility of standing long still with a burthen on the shoulders, it must either be thrown off or it will become a cause of decline. Let us endeavour to point out methods by which that may be averted, or at least procrastinated. In doing this, we are either exposing our ignorance and presumption, or doing a signal service to our country. --- {166} The American exports from this country consist almost entirely in manufactures; we neither supply that country with East or West India produce. The Russians are aspiring at possessions in the West Indies, and, no doubt, will succeed; they are advancing still more rapidly in power than the Americans are in population. It was only in 1769, (not forty years ago,) that the first Russian flag was seen in the Mediterranean Sea, and now Russia stands fair to be sovereign of a number of the Greek islands; and, at any rate, by the Dardanelles, to carry on a great commerce. What may thirty years more not effect with such a country, and such a race of sovereigns? -=- [end of page #204] The load must be taken off, or it will crush the bearer; but how this is to be done is the difficulty. If our debt is paid off, the capital will go to other nations, for it will not find employment amongst ourselves; and this will reduce the nation, and raise others. If it continues, we sink under it; and, if we break faith with the creditors, it destroys confidence for ever; we can no longer give law, by means of our capital, to the markets in other nations, and we probably overturn the government of our own. Amongst the _exterior_ causes of decline that are general, none applies so completely to Great Britain as that of the envy and enmity, occasioned by the possession of colonies we have settled, or countries we have conquered. The wealth of Britain and its power arise from agriculture, manufactures, commerce, colonies, and conquests. The envy they excite is not, however, in proportion to the wealth that arises from them, but rather to the right we have to possess them, and the consequent right that others have to contest the possession. Improved agriculture has never been a source of enmity amongst civilized nations, though it has been an object of conquest when an opportunity presented itself. Manufactures, the great source of our wealth, are, in a certain degree, beyond the reach of our enemies. Our greatest consumption for them is amongst ourselves, and if we did not export to any part of the world, except enough to procure materials, we should enjoy nearly all that we now do. Our wealth would not be very materially diminished, though our naval strength would. The means of destroying our manufactures is not then very easily to be found. The commerce with other nations, our enemies, or rivals, have a more effectual means of diminishing, by the laying on duties on our manufactures, and augmenting those duties when the goods happen to be carried in English vessels; but still the advantage we enjoy in this competition is great. Not so with our colonies and conquests. The whole imports from the East Indies, from 1700 to the present day, have only amounted [end of page #205] to 165,000,000 L. and our exports, during the same period, to 83,000,000 L. while our total exports have amounted to 1,486,000 L. during the same period. {167} There would be much affectation, and little accuracy, in attempting to make any thing like a strict comparison between the relative proportions of the wealth procured by general trade, and that procured by trade with India. The exports amount to about one-nineteenth part of the whole; and, perhaps, as they are manufactured goods, to about one-tenth part of the whole manufactures of the country exported: but the manufactures exported are not equal to one-third part of those consumed at home, so that not above one-thirtieth part of our manufacturers are maintained by the trade to India. In 1793, when the charter of the company was renewed, the India- budget stated the private fortunes acquired and brought home, at one million annually: that has probably increased since then; but it was at that time greater than it had been before: if, then, we take the annual arrival, since the year 1765, at one million, it will make forty millions, which, compared with the balance of trade during that period, amounts to about one-sixth part of the balance supposed to come into the country. How much of our national debt might be set down to the account of India, is another question. By debt contracted, and interest of debt paid, during the same period, we have disbursed the sum of 1,100,000,000 L. which is equal to more than twelve times the whole of the property acquired by our India affairs, supposing the 45,000,000 L. --- {167} Comparison between the total foreign trade of the country, to that with the East Indies only, for 104 years. Total Exports. Total Balance Exports to India. in our favour. From 1700 to 1760, L540,000,000 L249,000,000 L18,000,000 1760 to 1785, L370,000,000 L101,000,000 L25,000,000 1785 to 1805, L576,000,000 L142,000,000 L40,000,000 ____________ ____________ ____________ L1,486,000,000 L492,000,000 L80,000,000 ____________ ____________ ____________ [Transcriber's note: L=GBP/Pounds Sterling.] This is about a nineteenth part of our foreign trade, and the balance is greatly against us. -=- [end of page #206] remitted, to be all gain, together with one-half of the 83,000,000 L. which surely is allowing the gain at the highest rate for both. {168} Supposing, then, that the wars that India has occasioned have cost (or the proportion of the debt they have occasioned) one-sixth part of the whole of our debt, and that the profits on goods to India, and private fortunes, came into the public treasury, there would still have been a great loss to the state; but this has not been the case, the interest of the debt has been levied on the people, and will continue to be so, till all is paid off; which, according to the plan of the sinking fund, will be in thirty-five years, so that we shall have about 750,000,000 L. more to pay, {169} supposing we have peace all that time, and continue to possess India. There is something very gloomy in this view of national affairs, and yet there is no apparent method of making it more pleasing. It is, on the contrary, very possible, that as Malta, on account of its being supposed the key to India, has cost us 20,000,000 L. within a few years, that, in less than thirty-five years, it may cost us _something_ more; and, it is not by any means impossible, that, before that period, we may either lose India, or give it away; on either of which suppositions, the arithmetical balance of profit and loss will be greatly altered, to our farther disadvantage. On the possessions in India, and the complicated manner in which our imports (again exported) affect the nation, a volume might be written, but it would be to very little purpose, in a general inquiry of this sort. It is sufficient to shew here that the wealth obtained by that channel is not of great magnitude, in comparison either of the --- {168} The nearness of the balance of trade, to the amount of debt contracted, will naturally excite attention, but it appears merely accidental, and to have not any real connection. Debt borrowed L500,000,000 Interest paid L590,000,000 ______________ L1,090,000,000 [Transcriber's note: L=GBP/Pounds Sterling.] {169} Let the future profits and expenses be set against each other, like the last. -=- [end of page #207] wealth acquired by foreign trade, or by our industry at home; and that, at the same time, we see that it excites more envy and jealousy than all the rest of the advantages we enjoy put together. Badly as men act in matters of interest, and much as envy blinds them in cases of rivalship, yet still there is a certain degree of justice predominant in the mind, that admits the claim of merit and true desert. Every person, who has heard the conversation, or read the opinions of people in other nations, on the wealth and greatness of England, will allow, that, as commercial men, and as manufacturers, we are the wonder of the world, and excite admiration; but, concerning our dominion over India, and our plantations in the American islands, foreigners speak very differently. In order to bring down a nation, that has risen above its level, there is followed a system of enmity in war, and rivalship in peace. The Portuguese seized on a lucky opportunity to undermine and supplant the Venecians and the Genoese, who had long been the envy of all nations, for the wealth they obtained, by the monopoly of the trade to India. The Dutch soon rivalled the Portuguese in trade, and the Flemings in manufactures; and, indeed, there is no saying in how great a variety of ways the superiority of a nation may not be pulled down. England, commencing later than any, has now obtained her full share of the commerce of the East, and of manufactures; but the nations that envy the wealth of others have always several great advantages. The nation that is highest treads in discovery, invention, &c. a new path, and is never certain how far she can go, nor how to proceed. Those who follow have, in general, but to copy, and, in doing that, it is generally pretty easy to improve. At all events, a day must arrive when the nation that is highest, ceasing to proceed, the others must overtake it. As the nation that is farthest advanced is ignorant of the improvements that may be made, it does not feel what it wants; and, like a man in full health, will give no encouragement to the physician. The countries that follow behind act differently; and they generally, in order [end of page #208] to protect their rising manufactures, impose duties on similar ones imported; thus preventing a competition between old established manufactures, and those recently begun. So far as priority of settlement, or of invention, give a superiority to a nation over others, the equalizing principle acts with a very natural and evident force; but, when the manners and modes of thinking of a people have once taken a settled turn, in addition to their proficiency in manufactures, it does not appear easily to be altered. The Germans excelled at working in metals, and possessed most of the arts, in a superior degree to any other people in Europe, a few centuries ago. In some arts they have been surpassed by the French, in more by the Dutch, and in nearly all by the English. {170} Conquests and colonies are wrested from nations suddenly and by force; arts and manufactures leave them in time of peace, silently and by degrees, without noise or convulsion; but the consequences are not the less fatal on that account; nor, indeed, is the effect slower, though more silent. Though colonies or conquests pass away at once, such changes only take place after a long chain of causes have prepared the way for them; whereas, manufactures are perpetually emigrating from one country to another: the operation, though slow and silent, is incessant, and the ultimate effect great beyond calculation. A good government, and wise laws, that protect industry and property, and preserve, in purity, the manners of the people, are the most difficult obstacles for a rival nation to overcome. Prosperity, which is founded upon that basis, is of all others the most secure. There are sometimes customs and habits that favour industry, the operation of which is not perceptible to those who wish to imitate and rival successful and wealthy nations. In general, it is not to be expected that the southern nations can come in competition with those living in more northerly climates in --- {170} The individual German workmen have not been excelled by the workmen of any other nation, but the German nation itself has been outdone. -=- [end of page #209] those manufactures, where continued or hard labour is necessary. Nature has compensated the inhabitants of such countries for this incapacity, by giving them a fine climate, and, in general, a fertile soil; and, when they do justice to it, they may live affluent and happy. But, since industry and civilization have got into northern countries, it is impossible for the southern ones to rival them in manufactures. It would be impossible for any people living on the banks of the Nile, where the finest linen was once manufactured, to rival the cloths of Silesia, or of Ireland: as well might we think to bring back the commerce with India to Alexandria by the Red Sea. The fine manufactures of India, notwithstanding the materials are all found in the country, the lowness of labour, and the antiquity of their establishment, are, in many cases, unable to keep their ground against the invention and industry of Europeans. The art of making porcelain- ware, from a want of some of the materials, has not, in every respect, equalled that manufactured in China; but in everything else, except material, it excels so much, that the trade to that country in that article is entirely over. Many of the finest stuffs are nearly sharing the same fate, and they all probably will do so in time. Those whom we hope to surpass are determined to remain as they are, while Europeans aim at going as far in improvement as the nature of things will allow. But the nations that follow others in arts are not always confined to imitation, though we have seen that even there they have a great advantage. It frequently happens that they get hold of some invention which renders them superior, in a particular line, to those whom they only intended to imitate. When the superiority of a nation arises from the natural produce of the earth, such as valuable minerals, then it is very difficult for others to rival it with advantage; and it is very unwise of any nation to employ its efforts in rivalling another in an article where nature has given to the other a decided advantage; and it is equally ill-judged of a nation to neglect cultivating the advantages which she enjoys from nature, as they are the most permanent and their possession the most certain of any she can enjoy. [end of page #210] If nations were to consider in what branches of manufacture they are best fitted to excel, it would save much rivalship, misunderstanding, and jealousy; at the same time that it would tend greatly to increase the general aggregate wealth of mankind. It is not to industry and effort alone that mankind owe wealth, but to industry and effort well directed. This is well explained in the excellent Inquiry into the Causes of the Wealth of Nations, and it is to be regretted that this truth is not more generally understood; for it would contribute still more to the peace and happiness of mankind, than to their commercial wealth. There is not, however, any subject on which nations are so apt to err, and, indeed, the error is natural enough, if the ambition of a rival is not checked by judgement and attention to circumstances. When a nation is particularly successful in one branch of manufacture more than in any other, it is generally because some peculiar circumstances give it an advantage. This ought to operate as a reason for doubting whether it might be prudent to attempt to rival a nation in an object in which it had particular advantages; but quite the contrary is the case; a rival nation aims directly at the thing in which another excels the most, and frequently fails when, in any other object, she might have proved successful. {171} The changes of the taste and manners of mankind, as well as discoveries in arts and science, lay a foundation for political changes; but it is an irregular foundation for change; its operation is sometimes in favour of, and sometimes against the same nation, and it never can be calculated beforehand. As the nations that have improved in manufactures the latest have always carried them to the greatest perfection, it is natural to inquire how this happens. The exertion of the mind and body are both of them greatly aug- --- {171} How many ridiculous attempts have been made, in the north, to rival the Italians in raising silk, and by enlightened men too; but it is not sufficient to be enlightened, it is necessary to follow a proper train of reasoning.--Good natural sense sometimes supplies the place of regular reasoning, and, as if it were intuitively, arrives at a true conclusion. -=- [end of page #211] mented by success, and diminished by any thing of a contrary description. The rising nation has always an increased energy, and that which is about being rivalled a sort of discouragement and dismay. This is one cause, but there are others. So far as methods of working and machinery are connected, the imitating nation has the advantage; it copies the best sort of machine, and the best manner of working at once. The workmen have neither an attachment to the old inferior methods, nor do they use old inferior machines, to avoid the expense of new ones. {172} In short, they adopt all improvements without much additional expense; and, as men's minds are always more occupied in thinking about a new object than an old one, they are even more likely to make improvements. As to difficulties in rivalling a nation in skill, in any mechanical art, there are none. The only difficulties in manufactures are in the inventions and improvements, and those have been overcome by the leading nation, and are no difficulties to that which follows. There are, indeed, some arts which require particular talents, and a real exertion of genius; but those are so few in number, and have so little connection with the common affairs of mankind, or the wealth of nations, that they do not deserve to be noticed. There is nothing in the art of weaving, or working in metals, or in any other material for common use, that is of such difficulty but that any man, with a common capacity, may do it nearly as well as any other man. The habits and manners of mankind, their disposition to labour, and the nature of the government under which they live, may encourage or discourage manufacturing; but both the strength and capacity of any of the natives of Europe, taking them on an average, are fully sufficient to enable them to excel in any work. --- {172} Where machines are very expensive, new improvements, that require other machinery, are sometimes crushed and rejected on that account. To adopt them, a man must sometimes begin by sacrificing half his fortune, by destroying his old machinery. There have been several instances of this seen, particularly in the making of iron, when it was proposed to convert the rough gueze into good malleable iron bar, by rolling it at a welding heat, instead of hammering it by a forge-mill. -=- [end of page #212] {Here appears at page 212 the third chart, entitled "Chart Shewing the Amount of the Exports and Imports -of- ENGLAND to and from all parts from 1800 to 1805"} The British nation has begun to seek for wealth from agriculture. It had long been the mode to pay attention and give the preference to manufactures; but the current is, for the present, set in, in another direction. Calculation has, till of late, been confined to mercantile men; but, after all, they have not carried it to a very great length: and, as to their speculative wisdom, it consists chiefly in taking a ready advantage of some immediate object. EXPLANATION OF PLATE NO. III. The space from right to left is divided into years, each line representing the year marked under and above. From the beginning of the last century, till the year 1770, every tenth year only is expressed, and the average amount of exports and imports only is shewn; but, from 1770 to the present time, every year is separately represented by a line going from the top to the bottom. The divisions from top to bottom are millions of pounds sterling, each representing a million, measuring from the bottom, the number of millions indicated is marked on the right margin. As the exports, which are expressed by a red line, increased or diminished, the red line rises or falls, crossing the division representing the year at the line which indicates the number of millions to which the exports amounted that year. The yellow line is drawn on the same principle, and represents the imports for the same years; the difference between the two, which is stained green, being the balance for or against England. Thus, for example, we see that, till the year 1775, the exports rose very fast, and were far above the imports, but that then their proportion begun =sic= to vary; insomuch that, in 1781, the yellow line rose above the red, when the balance in favour of England turned against it, to the amount of a million for one year. In 1782, the balance again became favourable; but, though the trade was increasing, the balance was once more, in 1785, against England; ever since which it has been more or less in our favour. The difference between the two lines is stained pale green, when the balance was favourable, but of a pale red when against England. [end of page #213] The advantages proposed by this mode of representing matters are the same that maps and plans have over descriptions, and dimensions written in figures; and the same accuracy is in one case as the other; for, whatever quantities can be expressed in numbers may be represented by lines; and, where proportional progression is the business, what the eye does in an instant, would otherwise require much time. The impression is not only simple, but it is as lasting in retaining as it is easy in receiving. Such are the advantages claimed for the invention twenty years ago, when it first appeared; the claim has been allowed by many, and not objected to, so far as the inventor knows, either in this or in any other country. EXPLANATION OF PLATE NO. IV. Chart of revenue, from the time of Queen Elizabeth to the present day. Till the accession of William III. in 1688, the materials for this are not altogether accurate; but they are not far wrong, and indeed, the low state of the revenue, previous to that period, is such that it is a matter of little importance whether or not they are very exact. It is represented here rather as a contrast to the present high revenue, and a matter of curiosity, than as being of much importance. The pale red part expresses the free revenue, or what is over, after paying the interest of our debt. This free revenue has not increased so fast as the value of money has decreased, previous to the year 1793; and certainly, at that time, the annual sum of 7,000,000 L. was no equal to 4,000,000 L. in the reign of Queen Anne. The green part shews the annual interest of the national debt, and proves, beyond contradiction, that, under such a system, expenses of war (for the whole debt has been contracted for wars) augment in much more than a simple proportion. The yellow part, bounded by a curved line, shews the manner in which the sinking fund will increase in its operation of paying off the debt, on the supposition that the nation continues to borrow as it has [end of page #214] done for the last twelve years; setting apart one per cent. on every new loan, for its liquidation. As comparative views are the great object of these charts, a yellow dotted line is made, representing the amount of the revenue of France during the same period, till 1789, when the revolution stopped its progress; since which its amount has not been regularly known. {173} --- {173} The author published an Atlas, containing twenty-seven charts of the different branches of commerce, revenue, and finance, of England, which was translated into French. The fifth edition, much improved, and brought to the present time, is now printing, and will be published in November. -=- [end of page #215] CHAP. III. [=sic=--error in printer's copy, should read II.] _Of Education, as conducted in England.--Amelioration proposed.-- Necessity of Government interfering, without touching the Liberty of the Subject_. The importance of education has been already mentioned, as it in general regards all nations, and certainly when we have examples to shew what are the lasting and terrible consequences of degradation of national character and manners, it is impossible to pay too strict an attention to that subject. The natural tendency in a nation, while growing richer, to alter its character, owing to the different manner in which the children are educated and brought up, applies particularly to England, and to every nation getting rich by trade or manufactures. In another part, it has been observed, that where the wealth of a country circulates amongst the labouring classes first, it alters the manner of living more than when it originates with the higher; it produces, also, a greater change on the education of children. No part of the general inquiry is so particularly applicable to England, in an excessive degree, as that relative to education. In proportion as ignorant people arrive at that sort of affluence, which manufactures and trade produce, in that same proportion do they ruin their children. The manners, the nature of the government, and the way of thinking of the people, all lead to this in England; and so far as it is possible to observe the effect, it may be said to appear as if it operated with rapidity at the present period. Many volumes have been written on education, by the ablest men; but it has already been observed, that they have all treated the subject in a manner much too intricate and complex. Fully aware of the importance, they seem to have thought that it could not be treated too much at length, or investigated too minutely; and, by this means, what they have said is little applicable to general purposes; for, if to educate a man for common life were a difficult complicated operation, it would very seldom be performed. [end of page #216] {Here appears at page 216 the fourth and final chart, entitled "Chart Representing the Increase of the Annual Revenues -of- ENGLAND AND FRANCE, from the beginning of the 17th Century to the present time"} The word education itself appears to be misapplied or misunderstood, owing, probably, to its original construction and use, and no other word having been substituted in its place. By education was meant, in former times, the teaching to read and write; and these accomplishments, which, at that time, distinguished a gentleman from the lower classes, and, by that means, education is still considered as only applying to the learning of what is taught at schools or universities. It is principally in this light that those who have written on it have viewed it, though in fact _well brought up (bien eleve)_ comes nearer to the meaning than being _well learnt_, which is equivalent to well educated. In this, as in every other thing, the end in view should never be forgotten; but, as it happens with respect to the middling and lower orders, it is forgotten so soon as affluence has made a little progress in a country. The education of the higher classes is generally pretty well conducted; and, indeed, human beings, when beyond the reach of want, who do not inherit the necessity derived from Adam, of gaining their bread by the sweat of their brows, require much more teaching than others, whose conduct is regulated by necessity, and who have not the means of giving way to the passions that beset human nature. With respect, however, to the higher classes, it is scarcely possible for a government to interfere to much purpose. Those who are possessed of fortune will act according to inclination; and, in respect to this class of society, in England, it is already in less need of reform or interference than any others, while the lower and middling classes require it more. There is no possibility for an ignorant man to become of any importance in this country, even with the aid of wealth and fortune. An immoral character, or a mean selfish one, has not a much better chance, while, by talents and good conduct, every thing desirable may be obtained: perhaps, nothing further can be done to excite men of rank and fortune to emulation and virtue. With respect to the learned professions, the modes by which students are brought up to them are by no means unexceptionable; but that is not a point of very great national importance; at any rate, [end of page #217] it is not the part in which England stands the most in need of attention {174} and interference from the government of the country. The two classes to whom bringing up, as it is generally understood, would apply better than the word education, are the middle rank of society, and the lower order of people in trade. The middle rank of society is, in all countries, the most important in point of principles and manners. To keep it pure is always of the highest importance, and it is the most difficult, for there a baneful change is the most apt to take place. Gentlemen of rank, in all countries, resemble each other very nearly; not, perhaps, in exterior, because that depends on fashion, which is arbitrary, but in mind and manners there is less difference than between men in a second rank of society. The lower orders, so far as they are forced, by necessity, to labour, resemble each other also; they are pressed by necessities and passions on one side, and the desire of rest on the other; and a fair allowance being made for variety of climate, of circumstances, and of natural dispositions, there is nothing very different amongst them. {175} What applies with respect to the higher and lower orders does not --- {174} Our lawyers (barristers) are probably superior to those of any other nation, and the clergy are, at least, equal. This is not, indeed, saying a great deal; but it is so difficult, in matters of religion, to temper zeal, and draw a line between emulation and fanaticism, that, perhaps, it is better that they should be a little remiss than righteous overmuch. It is not in the education of churchmen, but in the manner of paying and providing for them, that the error lies; and that subject is treated elsewhere. {175} Cervantes, in his admirable romance of Don Quixote, paints the mind of a gentleman, which all countries will acknowledge to be like the truth. The madness apart, the manner of thinking and acting was that of the gentleman of Spain, France, Germany, or England. Neither was he the gentleman of the fifteenth or eighteenth century, but of any other century. His dress was Spanish; his madness and manners belonged to the ages of chivalry and romance, but the mind and principles of the gentleman suited all ages and all countries. Sancho, again, barring likewise his oddities, is the peasant of all countries; studying to live as well as he can, and labour as little as he may. In short, a mind continually occupied about personal wants, and alive to personal interest. In the middle ranks of society there is no such similarity. -=- [end of page #218] apply at all to the middling classes, nor even to the most wealthy class of labourers in a manufacturing country: in those we can find no fixed character; it is as variable as the circumstances in which the individuals are placed, and it is there that a government should interfere. It should interfere in guiding the richer classes of working people, and the middling ranks, in the education of their children, and in assisting those of the lower orders, who are too much pressed upon by indigence. The end in view in all education is to make the persons, whether men or women, fill their place well and properly in life; and this is only to be done by setting a good example, instilling good principles, accustoming them, when young, to good habits; and, above all, by teaching them how to gain more than they are habituated to spend. It follows from this, that industry, and a trade, are the chief parts of education, that reading and writing are not, being but of a very doubtful utility to the labouring class of society. On this subject, it is absolutely necessary to advert to what Dr. Smith says relative to apprenticeships; the opinion of so great a writer is of too much importance not to be examined, and refuted, if found wrong. Apprenticeships, or teaching a trade, is the basis of the future happiness and prosperity of the individual in the lower and middle classes. On this subject, however, Mr. Smith says quite the contrary. That the idleness of apprentices is well known, that their inducement to industry is small, and that, as to what they have to learn, a few weeks, or sometimes a few days, would, in most cases, be sufficient. In short, he maintains, that they would learn better, be more industrious and useful, if employed on wages, than if bound for a term of years; and, finally, that there were no apprentices amongst the ancients. As to there being no apprentices in the ancient world, if that was the case, is no argument with respect to the present state of things; for, while most part of working men were slaves, there could not possibly be much occasion for apprentices; but are we quite certain, that the freed men, so often mentioned, were not people who had served apprenticeships? Freed men are so often mentioned, that there must have been probably something else to which they owed their freedom, besides the goodwill or [end of page #219] caprice of their masters, particularly as that goodwill must have been exercised to deserving objects, and consequently the sacrifice made in giving liberty was the greater. {176} As men cultivated difficult arts; that is, as luxury increased, it must have become difficult to get labour done by slaves, merely by compulsive means; there must have been bargain and mutual interest settled between the master and the slave, so as to accomplish the end intended. {177} Amongst rewards to a slave, liberty, at a certain period, is not only the greatest, but is the only one that effectually serves the slave; for, while he remains the property of a master, his rewards can consist of little else than good treatment, as all property given is liable to be taken back again. Supposing, however, the point yielded, and that there were no apprentices in the early ages; but that the practice originated in the days of ignorance; in the dark ages, under the feudal system, together with the invention of corporations and privileged bodies, against whose existence the whole set of economists have leagued together, as the Greeks did against Troy; still the obscurity of the origin is no objection. A constitution like that of Britain, for example, is not an invention of antiquity; it took its rise in the dark ages and in times of ignorance, but it is not for that the less an object of admiration. Many other examples may be furnished of the admirable things that took rise in the dark ages; and amongst them, not the least, is the abolition of slavery itself. {178} Let us, however, examine the effect of apprenticeships in those places where they can be compared with persons brought up entirely free. --- {176} We may form some idea of the difficulty of getting work done by people in no way interested in the success, by the workhouses in this country. The smallest quantity, and of the most simple nature, is all we get done, because the overseers are ignorant, and the nation inattentive, and the labour compulsive. {177} In Egypt, and most other ancient countries, the son followed, by law, the trade of his father: this was equivalent to an apprenticeship. {178} Whether it arose from the mixture of a northern with the southern people, or from what other cause, it is certain, that, during the ages of ignorance, the foundation was laid for almost all that is great, at the present time. -=- [end of page #220] If there are trades, where it is true, (as Mr. Smith affirms,) that the art of working may be learnt in a few weeks, what are the consequences? At the age of sixteen or seventeen, a boy can get as much money as he will be able to earn at any future time in his life; he will be able to get as much as a man, who has a wife and five or six children to maintain. There will be required a very great share of moderation and wisdom, indeed, under such circumstances, to prevent such a boy from wasting his money in ways that will incapacitate him from living easy when he shall become a father of a family himself, or from idling away the spare time that his gains afford him. He will, naturally, do part of both: but the way that is generally done is this. Without controul from a master, and totally independent of parents, who are quite left behind in poverty, (not having more to maintain their whole family than the youth himself earns,) he despises them, saves a little money at first, and purchases finery. The novelty of dress soon wears off, and the more immediate pleasures of eating, drinking, and keeping company, as it is termed, take the lead. The consequence of the same is idleness and rags. Ashamed to shew himself amongst persons of better conduct, the youth changes his place of residence and work; habit has got hold of him, and labour becomes hateful; a soldier's life appears the best for a youth of such a description; and, it is an undoubted fact, that, at those places where trades are carried on, that can be learnt in a short time, {179} there are more recruits obtained for the army than in any other districts of equal population. It is also an undoubted fact, that, in these same districts, the most respectable people bind their sons apprentices; and, in doing so, they are guided by experience, and affection for their children, not by interested motives. --- {179} This is not the case with many trades, and Mr. Smith is under a mistake as to the fact; but, granting it to be true, the places in question, Birmingham, Sheffield, Manchester, and other towns where the division of labour reduces every operation to great simplicity, are the best for recruiting the army. In those places, all respectable people, who can afford it, bind their sons apprentices, to prevent the danger. -=- [end of page #221] In the other case, again, where a trade is not easily learnt, how is skill to be obtained but by an apprenticeship. The bringing the son up to his father's trade, a practice that prevails in the eastern parts of Asia, is one way; parental authority needs not the aid of a written indenture; but, where this is not the case, who is to teach a youth, if he is not to be bound for a certain number of years, but to go away as soon as he has learnt a trade? The father, in some cases, may be able to pay for his son learning the trade, and this experiment has sometimes been tried, but generally with very imperfect success. The youth, for the most part, in those cases, considers himself as independent of the master, and gives himself very little trouble to learn his business. Where the reward of the master, or rather the remuneration for his pains and trouble, is to arise from the labour of the boy, the master is interested in his learning; and the other feels an obligation, as well as an interest in learning. Though the apprentice is not absolutely paid for what he does, he finds his ease, his importance, and comfort, all depend on his proficiency; and, with young minds, such motives are much more powerful, and act through a better channel than avarice. The power that the legislature gives to a master over his apprentice appears not only to be wise but necessary; and, if rewards for earning a trade could be given, in addition to that without infringing on liberty, or burthening the state, it would be a great advantage. But learning a trade is not the only advantage of an apprenticeship; a good moral conduct, fidelity, and attention to his duties, are all acquired at the same time, or ought to be so; whereas, the youth who, at an early age, is left without control, is apt to learn just the contrary. Where people have fortune, circumstances give them a control over their children by expectancies; but, where there is no fortune, and children must provide for themselves, an apprenticeship is a substitute for expectancies, which appears highly necessary; and it is wonderful how so discriminating and profound a man as Dr. Smith could overlook so material a circumstance. It shews how far prejudice, and an [end of page #222] opinion once adopted, will lead men of the first judgement and genius astray; {180} for it is not to be supposed that any person will stand forward of himself to maintain an opinion against which experience speaks so decidedly. To learn a trade, and be taught a good moral conduct, and attention to one's duty, is certainly the essential part of education, both in the lower and middling classes; and that portion of education, which appears to have got an exclusive title to the name, reading and writing, are, with the working classes, a very inferior object. One of the duties of government, then, is to watch over the education of the children of the middling and lower orders, which has a tendency to grow worse, as the nation advances in wealth. In England, the pride of the middling classes is to have their children educated at boarding-schools, where the business of eating, sleeping, dressing, and exercise, is pretty well understood; where the branches of education, pretended to be taught, are little attended to, (writing, and some exterior accomplishments, of which the father and mother can judge, excepted,) where moral conduct, the duties in life, and the conduct necessary to be followed, are scarcely once thought of. It is true, that, till a certain age, it is generally not known for what particular line of life a young man is intended; but, there are certain things necessary to every line of life, and those should never be neglected. The habits contracted at schools are very often of a sort never to be got the better of; and how can good habits be contracted when no attention is bestowed on the subject? The consequence of this is, that, when the good sense of the father or mother, or of the boy himself, does not correct the evil, he is bred up to consider himself as born to be waited on, and provided for, without any effort of his own; he is led to suppose that he is to indulge --- {180} In the notes upon the Wealth of Nations, this case is argued, but the matter is too important not to be examined on every occasion and opportunity. The opinion here alluded to is that general way of thinking, respecting corporations, privileges, and regulations, or restraints of every sort imposed on trade, which the writers on political economy, in general, think ought all to be entirely done away. -=- [end of page #223] in a life similar to that his father leads at home, where a few indulgencies =sic= are the natural consequences of age, and the fair returns for a life employed in care and industry. In England, it would be absolutely necessary to make school-masters undergo an examination; not only at first, and before the school should be licensed, but the boys should be examined twice a year, and the result enregistered, so that the business would really be to learn something, and not merely to spend the time. The small proficiency made in the schools, in England, and around London in particular, is incredible. It is even difficult to conceive how the boys avoid learning a little more than they generally do, during eight or ten years. {181} The masters pretend, for the most part, to teach boys Latin, by way of teaching them English, but without almost ever accomplishing it. In arithmetic, the common rules are taught, but scarcely ever decimal fractions, and almost never book-keeping, so useful and so easy an art. Writing and spelling are better taught, perhaps, than in any other country, and, certainly, those are great advantages; but, according to the time and money spent, it is the least that can be expected. Here we may remark, that those are the only acquirements with the proficiency in which the father and mother are necessarily acquainted; it therefore gives reason for thinking, that, if the same check were held in other branches of their education, they would be excited to make equal progress. When the time comes that it is fixed on what line of life a young man is to adopt, then there should be schools for different branches, where --- {181} Without contesting the point, whether dead languages are of any use, it will be allowed that the study costs pretty dear. Three- quarters of the time, for seven years employed on that is equal to five years employed constantly, and twenty pounds a year, at least, is the expense. Not above one in one hundred learns to read even Latin decently well, that is one good reader for every 10,000 L. expended. As to speaking Latin, perhaps, one out of one thousand may learn that, so that there is a speaker for each sum of 100,000 L. spent on the language. It will, perhaps, be said, that Latin is necessary to the understanding English, but the Greeks, (particularly at Athens,) who learnt no language but their own, understood and spoke it better than the people of any other country. -=- [end of page #224] there should be knowledge taught, analogous to the profession. For the mercantile line, for agriculture, for every line of life, boys should be prepared; and, above all, it should never be neglected to instil into them the advantages of attention to industry, to doing their duty, and in every case making themselves worthy of trust. Public examinations, such honours and rewards as would be gratifying, but not expensive, for those that excelled, would produce emulation. Though, perhaps, it is not of very great importance to excel in some of the studies to which a young man applies at school, yet it is of great importance to be taught that habit of application that produces excellence. With regard to the education of the lower classes, it would be no great additional burthen to the nation if there were proper schools established in every parish in the kingdom, at the expense of the public, in order that there might be a proper control over those who teach, and over what is taught. {182} Without going so far as to compel people of the lower classes to send their children to school, they might be induced to do it for a short time, and, at all events, care should be taken that the teachers were fit for the office they undertake. In no country do the lower classes neglect the care of their children more, or set them a worse example, than in England; they are mostly brought up as if the business of eating and drinking were the chief purpose of human existence; they are taught to be difficult to please, and to consider as necessary what, in every other nation in Europe, is considered, by the same rank of people, as superfluous. Although the lower orders have as good a right as the most affluent to indulge in every enjoyment they can afford, yet to teach this to children, without knowing what may be their lot, is doing both them and society an injury. A great number of crimes arise from early indul- --- {182} As there are between nine and ten thousand parishes, twenty pounds given in each, to which the schoolmaster would be allowed to add what those who were able could pay, might perhaps answer the purpose, and would not amount to a great sum. -=- [end of page #225] gence of children, and from neglecting to instil into them those principles which are necessary to make them go through life with credit and contentment. {183} The Spartans used to shew their youth slaves or Helots in a state of intoxication, in order to make them detest the vice of drunkenness; but this was the exhibition of a contemptible and mean person in a disgraceful situation. The effect is very different when children see those they love and respect in this state; it must have the effect of either rendering the parent contemptible, or the vice less odious, it perhaps has some effect both ways; but, at all events, it must operate as a bad example, and, amongst the lower classes, it is a very common one. When a nation becomes the slave of its revenue, and sacrifices very =sic= thing to that object, abuses that favour revenue are difficult to reform; but surely it would be well to take some mode to prevent the facility with which people get drunk, and the temptation that is laid to do so. The immense number of public houses, and the way in which they give credit, are undoubtedly, in part, causes of this evil. It would be easy to lessen the number, without hurting liberty, and it would be no injustice if publicans were prevented from legal recovery for beer or spirits consumed in their houses, in the same manner that payment cannot be enforced of any person under twenty-one years of age, unless for necessaries. There could be no hardship in this, and it would produce a great reform in the manners of the lower orders. There are only three modes of teaching youth the way to well-doing,-- by precept, by example, and by habit at an early age. Precept, without example and habit, has but little weight, yet how can a child have either of these, if the parents are encouraged and assisted in living a vicious life? Nations and individuals should guard --- {183} The French, before the revolution, were not be =sic= considered as a more virtuous people than the English, yet there were fewer crimes, and less dissipation amongst the lower orders than in England, and more amongst the higher. The French, particularly the mothers, have less affection for their children, yet they brought them up better, both in habits and in principles. -=- [end of page #226] against those vices to which they find they have a natural disposition; and drinking and gluttony are the vices to which the common people in this country are the most addicted. Whatever other things may be taught, let this truth be instilled into all children brought up to earn their bread, that in proportion to their diligence will be their ease and enjoyment, and that this world is a world of sorrow and grief to the idle and the ignorant; that knowledge does not consist in being able to read books, but in understanding one's business and duty in life, and that industry consists in doing it. Female education, in England, requires as much reform as that of the other sex; but, though the subject is not much less important, it is perhaps still more difficult. It has been remarked, by those who have travelled abroad, that, in other countries, women are in general not better, but rather worse dressed than men of the same rank: in England it is different; for, at an early age, the women are dressed, both as to style and quality of clothes, far above their rank. This might, perhaps, not be difficult to account for, but it undoubtedly is a misfortune, and one that is greatly increased by the mode of education and manner of thinking; for the main and indispensable virtue of that amiable sex excepted, (for which Englishwomen are highly distinguished,) perhaps no women in the world are brought up in a more frivolous unmeaning manner. The French women, with all their vivacity and giddy airs, have more accomplishment; {184} and, as they speak their mind pretty plainly, they have, on many occasions, testified surprise to find English ladies, who had studied music for years, who could scarcely play a tune, and who, after devoting years to the needle, were incapable of embroidering a pin-cushion. Novels, a species of light, insipid, and dangerous reading, are the bane of English female education. They teach a sort of false romantic sentiment, and withdraw the mind from attention to the duties of --- {184} The emigrants have taught to ladies of rank, fashions; and to those of an inferior class, arts and industry. The English women did not know half what they could do, till the French came amongst them, about twelve years ago. -=- [end of page #227] life, at a time when it should be taught to learn their high importance. In female education the government should interfere; for the education of the mother will always have an influence on the education of the son, as her conduct in life must have on that of her husband. As one general observation, relative to the education given at most public schools, it may be observed, that, whilst much time is taken up in teaching things that can never probably be of great utility, that species of knowledge that does not belong to any particular class, but which is of the utmost importance, is left to chance and to accident. While a boy is tormented with learning a dead language he is left to glean, as in a barren field, for all those rules of conduct on which the prosperity and happiness of his future life depends. {185} A public education is, in many respects, better than a private one for boys, but, in some things, it is inferior: consequently those who can afford it, and wish to give their sons the most complete education, try to unite the advantages of both, by sending them to a public school, under the care of a private tutor. It is not in the power of the middling classes to do this; but modes should be adopted to give the boys, either by books or public lectures, those instructions, relative to moral conduct, to prudence, behaviour, &c. which a private tutor gives to those under his particular charge. As to female education, it is a difficult subject: one great improvement would, nevertheless, be not to allow above a certain number in any one seminary; to have people of irreproachable conduct over them, and, wherever the parents can, to bring them home at the age of thirteen or fourteen. The public education ought certainly to finish at an early age, and, in all cases, with respect to females, a private is much preferable to a public education. {186} --- {185} The most virtuous of the Roman emperors attributed to his preceptors every one of those excellent qualities he possessed. The ancient education of Greece and Rome was very different from that of the moderns. {186} Since this was written, we understand a book for this very purpose is about to be printed, with the professed design of uniting the advantages of a public and private education. -=- [end of page #228] CHAP. III. _Of the Effects of Taxation in England_. What has been said of the increase of taxes, their tendency to ruin a nation, and bring on its decline, together with the counteraction occasioned by the continuance of necessity, as being applicable to all nations in general, applies, in every sense, to England, and even more to England than to any other nation. Taxes are carried to greater excess than in any other country; and, as England flourishes by trade and manufactures, (the price of which taxes enhance,) they gradually tend to shut foreign markets against us. This has already been explained; we, however, still have to inquire into the particular manner in which it operates upon this country. That the system of taxation, though irregular in England, is less so than in any other country, in proportion to the extent to which it has been carried, is true; but still, however, if a number of the most troublesome and ill-contrived taxes were done away, and others established in their place, it would be a great advantage. Greater danger arises from the augmentation of taxes in a wealthy country than in a poor one, when they stretch beyond the proper line, because the general prosperity hinders the effect from being visible, till it has advanced beyond the power of remedy; whereas, in a poor country, the injury is soon felt. The invention and industry of this country have been most wonderfully increased by the necessity of exertion, under the protection of good laws, which rendered property secure. But we trust too much to our resources, and, like men in health and vigour, are the most likely to injure our constitution. The most part of the arts, in point of manufacturing, seem to have come to nearly the last degree of perfection, so far as abbreviation of labour can carry them. [end of page #229] The division of labour, and the modes of working in the iron and metal branches, have not of late been in any material degree improved in our towns, the most famous for them; and as to any particular gift of bringing things to perfection, or reducing prices, it does not appear to be confined to England. Watches and fire-arms are two of the most ingenious and nice branches of metal manufactures; yet, at Liege, the latter is carried to greater perfection than at Birmingham, and London and Lancashire are outdone by Switzerland, in the former. Those, indeed, are not manufactures of which the taste or form is constantly altering; but they are a proof of the ability to work with equal advantage, both as to quality and price, with the manufacturers of this country. The next great branches are the weaving. For silks, France has always had the advantage of us; and our fine woollen cloths have never equalled those of Louvier and Sedan for quality, although, in point of price, they have the advantage. In linens, we enjoy no particular pre-eminence; and, in the American market, we are beginning to be undersold by those of Silesia. For a second quality of woollen cloth, and for the manufacture of cotton, in all its branches, we still have the superiority; but our great advantage, the cause of the general preference to our manufactures is the long credit we give, which, if it should ever cease to be practicable, would ruin not one, but all our manufactures, nearly at a stroke. It is very natural and very well for Englishmen, who have never been out of their own country, to ascribe to superiority of quality, (and inferiority of price is the same thing,) the great success they have in selling their goods in foreign countries; but such as have had an opportunity to see how it really is, know the contrary; and those who have not, may know it by observing who are the individuals in any branch of business at home that do the most, and they will find it always to be those who have the power of giving the longest credit. It is true that, in the course of time, and by struggling hard, those who have little means of extending their business at first, do it by degrees; but, until they do, they never can, in point of quantity, rival those who give long credit. [end of page #230] In the inability of other nations to give equal length of credit, consists our principal advantage; but we have seen, by the vicissitudes of ancient nations, that the wants of others, or their being behindhand, are but a very insecure tenure for the prosperity of any nation. The exportation of Britain was but inconsiderable at the beginning of last =sic= century, or about one-ninth of what it was two years ago.{187} Previous to the American war, it gradually increased to about three times what it was in the year 1700; that is, in seventy-five years. The progression was pretty regular till the year 1750, when it had risen to nearly double; but, in twenty-five years after, it increased as much as it had in fifty years before. The American war threw it back forty years, but it soon got up again to where it probably would have been, had the American war not intervened; it, however, rose beyond any thing that had ever been seen. It doubled in less than ten years; and, from this, we are led to conclude, that the taxes had not then begun to hurt national industry. But we shall see the reason, for the great increase was not owing so much to any cause inherent in this nation, as to the absolute impossibility of other nations continuing their commerce. We had got all the East and West India trade of the French and Dutch, and America had again become our greatest customer for British manufactures. Capital that could be removed was, in a manner, banished from the continent of Europe, and had taken refuge in England, and a great extent of the continent had been desolated with war. We are not, however, to expect this amazing export trade to continue; indeed, it has already fallen, in one year, as much as it ever rose in any three years; it fell fifteen millions in one year. The taxes may have operated much against our prosperity, without our knowing it, in a crisis of this sort, though they did not absolutely counteract the favourable effect produced by other causes. The commerce of the American states, which were, (like England,) out of the vortex of danger, and secure, increased in fully as rapid --- {187} In 1802, the exports amounted to 45,500,000 L. In 1702 to 5,500,000 L. -=- [end of page #231] a manner as ours, and fell off in the same way. We must not then, consider as durable, or owing to ourselves, circumstances that arose out of the general and temporary situation of other nations. It has been said in the general chapter on taxation, and again repeated in that on national debt, that both the one and the other operate, for a certain time, in augmenting the industry and wealth of a country, but that there is some point at which they begin to have a contrary effect; that point, however, being dependent on a variety of circumstances, is not a fixed one, it cannot be discovered by investigation before the time, but it may by symptoms and signs that become visible soon after. It is a sign that a nation has passed the point at which taxes cease to be a spur to industry, when the duties on consumption, or optional duties, which one may avoid paying, by not using the article taxed, become less productive than formerly, and when it is found necessary to lay taxes on land, houses, and such sort of property as can be made to pay, independent of the will of the proprietor. When taxes are laid upon property, not on consumption, it is to be supposed the latter can bear no more. Taxes on property are forced taxes; on consnmption =sic=, they are generally, to a certain degree, voluntary, though not always so. The augmentation of wealth has, in this country, been great, but it has never been regular or uninterrupted; that of taxation has, on the contrary, been uninterrupted, and this is better seen from the chart than from any thing that can be said. There can be no doubt that, though hitherto our increasing prosperity has been so great as to counteract the effect of heavy taxation, yet that the same thing cannot be expected to continue long. How long it may continue, or whether it has not already ceased, or is on the point of ceasing, is uncertain; but there is nothing more positive, than that, if taxes increase, they must, in process of time, crush industry, and, therefore, at all events, they should be kept as low as possible. The whole income of the country is estimated only at 150,000,000 L. The taxes to the state amount to 40,000,000 L. and those for the maintenance of the poor to 5,500,000 L. But this is the mere money ac-[end of page #232] count, without estimating loss of time, trouble, and inconvenience; so that it may fairly and reasonably be put down at one-third of the whole revenue or income of the individuals, yet the complaints are not so loud, and the clamour is not so great, as when they did not amount to one-twentieth of that revenue. This may, however, be accounted for. One-third part of revenue is derived from the state itself, so that there are but two-thirds remain independent of it. The habit of bearing burthens, and experience of the inutility of complaint, are likewise reasons for acquiescence; besides these, we cannot but all be sensible, that complaints were very violent when there was little occasion for them. We cannot deny, that the nation has been prospering for a hundred years, while the cry of ruin has been resounding perpetually in every corner; it is therefore natural to mistrust our fears, and sit in silence, waiting the event. The portion of our expense that consists in interest of money, on which no economy can operate, is so great, that it prevents any hope of much diminution from economy; and, indeed, in the time of peace, no economy that could be practised, more than what has commonly been done, would diminish our burthens one-fiftieth part. Even that would be very difficult, perhaps impracticable; for our free revenue, in time of peace, has not augmented in proportion to the diminution of the value of money; so that, in 1792, the expenses of the state were comparatively less than in the reign of Queen Anne. Economy, then, is not the mode in which we must seek relief in time of peace. To carry on war in a less expensive manner in future, and take a solid and effectual method of reducing our debts, are the means, both of which are treated of in their proper place. The modes of relief then, are three: 1. Economy in war. 2. A solid and fair method of reducing the present interest. 3. Attention, to render the system of taxation as little troublesome, and as fair and equal as possible. [end of page #233] CHAP. IV. _Of the National Debt and Sinking Fund.--Advantages and Disadvantages of both.--Errors committed in calculating their Effects.--Causes of Error.--Mode proposed for preventing future Increase_. In no circumstance does the British empire differ so widely from all nations recorded in history, or from any now in existence, as with regard to the national debt. Not only the invention of contracting debt to carry on war is but of recent origin, but no nation has ever carried it to near the extent that it has arrived at in England. The Italian states, in which this mode was first practised, never had the means of carrying it very far. In Spain, France, and Holland, national debt met with obstacles that arrested its progress long before it arrived at the pitch to which it has now come in this country. The interest of the debt is above thrice the free revenue of the country, in time of peace, as that revenue was, previous to hostilities in 1793. Whenever any operation is begun, the result of which is not known, owing to its being new, but which is in itself of great importance; the anxiety it occasions must be great, and, generally, the alarm is more than proportioned to the danger. If ever this truth was exemplified in any thing, it has been with regard to the national debt of England, which has been a continual object of terror since its first creation; not a public terror, merely amongst the ignorant, but the most profound and enlightened statesmen. Calculators, and writers on political economy, have served to augment the uneasiness by their predictions of a fatal termination. While the debt has been augmenting with great rapidity, the wealth and resources of the nation have, at least, augmented equally fast, and the matter of fact has given the lie to all the forebodings of those who [end of page #234] occasioned the alarm. This very extraordinary circumstance merits an investigation. It unfortunately happens, that, where people are deeply interested in a subject, they form their opinion before they begin to examine and investigate, and consequently the mind commences with a bias, and acts under its influence, the consequence of which is, that the conclusion is not so accurate as it otherwise would be. Not that, in calculating with figures, the disposition of the mind can make an unit of difference, the question being once fairly stated; but the previous impression on the mind tends to prevent the fair statement of the question. That an uninterrupted practice of borrowing must end in an inability to pay is a self-evident axiom. It is not a matter that admits of dispute; but to fix the point where the inability will commence is a problem to resolve of a very difficult nature; it is indeed a problem, the re- solution =sic= of which depends upon some circumstances that cannot be ascertained. There are, it is true, certain fixed principles; but there are some points also that depend on events entirely unconnected with the debt, and, in themselves, uncertain. Two great considerations, that operate powerfully, have been omitted by most writers on this subject. The first, is the increased energy of human exertion, under an increased operation of necessity; the second, is the effect that the depreciation of money has, on lessening the apparent burthen occasioned by the interest of the debt. That these two causes, which have not been taken into account, have rendered the calculations erroneous, there is not a doubt; and how far they may still continue to operate is, at this time, as uncertain as ever; but they ought not to be considered as of operation beyond a certain unknown point, else the practice of contracting debt would be capable of infinite extension, which is impossible. But the augmentation of the debt itself is not the only circumstance that excites attention, as intimately connected with the fate of this nation. The increasing wealth and prosperity of the nation, under the heavy load of taxes, of which the debt is the principal occasion, is as much a matter of surprize as the ultimate result is an object of anxiety. So long, however, as the nation is not actually born =sic= down by the [end of page #235] weight of taxes, its wealth must increase; and, what is considered as a very strange phenomenon, is only the natural and necessary consequence of increased taxation. When men inhabit and cultivate land of their own, they are under no necessity of creating any greater value than they consume; but, when they pay RENT and TAXES, they are laid under a necessity of producing enough to supply their own wants, and to pay the rent and taxes to which they are subject. The same is the case with regard to manufacturers in every line of business, for though they do not, perhaps, consume any part of what they produce, (what comes to the same thing is that,) they are obliged to produce as much as will exchange, or sell, for all they want to consume, over and above paying their rent and taxes. Without rent and taxes there are only three things that excite the exertion of man:--Necessity, arising from natural wants; a love of pleasure; or, a love of accumulation. When a man labours no more than for his mere natural necessities, he is a poor man, in the usual acceptation =sic= of the word, that is, he has no wealth; {188} and a nation, peopled with such men, would justly be called a poor nation. When a man labours for nothing more than what he expends on pleasure, or to gratify his taste and passions, it is still the same, he consumes what he creates, and there is an end of the matter; and, whether he creates much or little, as his consumption is regulated by it, no difference is made to society; but, when rent and taxes constitute a part of the price of every commodity, the consumption of every man, whether he pays any taxes directly or not, himself, is attended with an increase to the revenues of those who receive the rent and taxes, and obliges him to create more than he consumes. --- {188} Some philosophers call a man rich, who wants little, and has that little; they are quite right, in their way, but that does not apply here. Perhaps, according to their definition, the Lazzaroni of Naples are richer than the merchants of London; and, a man who is contented in a parish work-house, is, beyond dispute, rich; to say that such a man is wealthy would be absurd, because wealth, with writers on political economy, implies being possessed of real tangible property. -=- [end of page #236] It arises from this, that the aggregate wealth of a people increases with rent and taxes; for, where there are neither, the desire of accumulation is the only thing that increases wealth. {189} It is for this reason, that, by obliging a man to create more than he himself consumes, taxation increases the wealth of a nation; so that the flourishing state of England is a very natural effect of heavy taxation. The misery and poverty of those people who have little or nothing to pay, is equally natural, though it does not astonish one quite so much. As there is nothing in the world without a bound, and a limit, it is clear, that, in laying it down as a principle, that rent and taxes occasion wealth instead of poverty, it is only to be understood, to a certain extent; that is to say, to the length to which the nature of things will admit of the exertion of man augmenting his industry, but not a step farther. To ascertain this point would be to solve a most curious problem; observing, that the solution would, in every case, depend on a great variety of particular circumstances. Something like a general investigation, however, is possible. It will not be accurate, nor is that wanted, but it may lay the foundation for understanding the matter better at a future period. In London, rent and taxes are heavier than in any other part of the kingdom, and in Scotland they are less than in any other; yet, the working people, from all parts of the kingdom, come to London, and from the poorest places, in the greatest numbers. Ireland, Scotland, and Wales, are the poor countries, _lightly taxed_, and from them --- {189} Accumulation is sometimes not a passion, but arises from necessity; by accumulation, is meant the increasing the value of the stock you possess, whether it consists of land, cattle, money, or merchandize. Thus, for example, the Americans are increasing in wealth, from necessity, because their country is becoming better, by being cultivated, in order to produce what is necessary. They cannot have what they want, in the way they wish, without increasing or bettering the property of which they have taken possession. If they had no more rent and taxes than they have, and if this were not the case, they would remain a poor people. Thus, the inhabitants of Syria, of Egypt, of Arabia Felix, formerly the finest countries in the world, having a property that does not better in their possession, and having scarcely either rent or taxes to pay, remain, from generation to generation, creating little, and consuming what they create. -=- [end of page #237] people come, perpetually, to pay _heavy taxes_ in London. Yes, but it will be said, in answer, these are poor countries. They are, however, richer than England was in the days of Queen Elizabeth; and, if the nature of things could have admitted of people _changing centuries_, as they _change countries_, the people of the seventeenth century, with light taxes, would have emigrated to the nineteenth century, with all its heavy taxes, just as those Irish and Scotch come to London. This proves that, even in London, the excess of taxes is not yet such as to create a retrograde effect, and it proves it in a very striking manner. Though there may, at first sight, appear something ludicrous in the idea of emigrating from the seventeenth to the nineteenth, from the reign of Queen Elizabeth to that of his present majesty, it is a perfectly fair comparison, and will hold good, examine it as much as one will. The common expression, (and a very significant one it is,) that one part of the country is a century behind another, or twenty years, or fifty years, is exactly the same idea, expressed in other words, for it is a comparison between the changes which a lapse of time makes in one case, and a removal of place in the other. The present times are then better to live in than those of Elizabeth, as London is better than any distant part of the country. That the ability of the nation to sustain a given burthen, for a certain number of years, is no proof of a permanent ability to support it, must be admitted, even if the same annual resources were to continue; but, that permanent ability becomes much less certain, when we consider that the annual resources are perpetually varying, that, therefore, they have so many uncertain quantities, that it is impossible to resolve the problem. As to the effect, with respect to the increasing the burthens of the people, that has been treated under the general head of taxation. Whether the money goes to pay for a ship of war, a regiment of soldiers, or the interest of loans, makes no difference to him who pays the tax; and, indeed, makes little to the general system of national economy, as, in every case, what is paid to the state is employed on unproductive labourers or idle people. That is to say, it is consumed, and never appears again. [end of page #238] National debt, then, so far as it increases the taxes of a country, is like any other national expenditure; and, in maintaining unproductive and idle people, it is also the same; but it has, in another point of view, a different effect, and that effect is an advantageous one. In every nation, the greatest part of the capital is employed, or, as it is called, sunk. Land, houses, machines, merchandize, &c. are the principal employments of capital. As those are transferred from one to another, or as the use or produce of them is paid for, by one to another, money is wanted occasionally; and, if there were no other employments, money must either be lying idle in some persons =sic= hands, till an employment could be found for it, or the possessor of it must begin some enterprise, and sink it himself. But, when money is thus employed, it is no longer in the power of the proprietor; and, though money may be borrowed on such sort of security, it is slowly, and with difficulty. The expense, the inconveniency =sic=, and time necessary, prevent the lenders of money from lending any for occasional purposes on such sort of security; but when a nation borrows, and the stock is divisible and transferable at will, money can always be realized when it is wanted for any purpose that affords a greater advantage than the stock affords. {190} Without this had been one of the effects of national debt, how could the facility of borrowing have increased, {191} as it has done? or how could merchants and individuals raise the sums they now do? {192} --- {190} In 1793, 5,000,000 L. was lent to merchants on exchequer-bills. The property, on which the money was secured, was really merchandize, but the lenders would have nothing to do with the goods; government stepped in, and took the goods as a security, creating a stock transferrable, that represented the same goods, and, as if by magic, the money was found in a moment. I know of no operation so fit for elucidating the advantage of national debt as this. {191} Borrowing on life rents is bad, for this reason; where there is no employment of this sort, all money is constantly employed in some sort of trade or enterprise that will produce profit, but cannot be realised. Example, Paris, &c. {192} When money was wanted, in Queen Anne's time, the Chancellor of the Exchequer, (Mr. Montague,) attended by the Lord Mayor and Sheriffs, went about, from shop to shop, to borrow it, much in the way that is occasionally practised by the beadles for a public charity!! Yet England's credit was good, it owed little, the war was popular, and the country rich. -=- [end of page #239] It must be allowed that one hundred millions, or at least a much smaller sum than our debts amount to now, would have produced this effect, and might answer every purpose of this sort, but there is still a consideration arising from the fluctuations in a stock, when it is small, and also from the number of persons possessed of it. People buy in and sell out with total indifference when the quantity is great, and the fluctuations small; but, the moment the funds are agitated, whether in rising or falling, money becomes scarce for those who want it for other purposes. That the number of persons ready to buy and sell must be proportioned, in some degree, to the quantity of stock, is of itself so evident, that it would be useless to enlarge upon it; but it must be granted that the national debt has long ago passed the sum that was necessary to produce this advantage. We find, then, that the evils attending the increase of debt are greatly counteracted by the debt itself, and that, to a certain amount, it is productive of a very considerable advantage to a trading nation. As those who calculated its ill effects, and foretold the ruin it would bring upon the state, did not take into account those circumstances, the result of their enquiries was necessarily wrong, in point of time, though the effect of which they spoke is perfectly certain to take place, if the debt continues to increase. Their reasoning may be compared to that of an astronomer, who observed the position of a planet, but, in his calculations, made no allowance for the refraction of the atmosphere, who would therefore err as to the place of the star, but not as to its existence. Let us now consider the natural consequence, supposing that future increase is prevented by means of the sinking fund established for that purpose. As to the probability of this, it depends on so many circumstances that are concealed in the womb of time, that it would be madness to give any other than a hypothetical solution of the question. If the war continues, and expenses increase nearly as they have hitherto done, great as is the operation of a sinking fund, it will not have time to counteract the evil. If the war stops soon, it will dim- [end of page #240] inish the debt with a most prodigious rapidity, {193} if it continues; the question, whether taxes can be found to pay the interest or not? can only be answered as a matter of opinion, which is, in a case of this sort, equivalent to no answer at all. With respect to the supposed case of the debt augmenting, the observations that apply to that have been made already; they now only remain to be made with respect to the debt being paid off. It has been observed already, in the chapter on Taxation, that the case of taxes being taken off to a great amount would be a new one of sudden and hurtful operation. Wages of labour would be diminished, as well as the burthens on those who live on settled income; it would therefore render people of fixed income more affluent, without giving ease to those who want it; in short, as the augmentation of taxes falls most on people with fixed incomes, so the advantages of this would principally be felt by them; and, as the baneful operation carries a sort of counteracting antidote with it, so, likewise, this beneficial operation would be attended with some drawback and inconveniency =sic=. The diminution of taxes, though the ultimate is not, however, the immediate consequence of the operation of the sinking fund, the efficacy of which depends on the taxes being kept up to their full extent for a considerable time. =sic= The first effect of the fund is, that a large sum, annually expended, as revenue drawn from the subject, is reimbursed to the stockholders, and becomes capital. This would immediately raise the funds, and thereby would counteract the sinking fund itself in a very material degree. Money would become abundant for all the purposes of trade, and it would be difficult --- {193} A sort of ridicule has been thrown on the operation of compound interest, because its effects are so amazing as not to be capable of being realized; but, on this subject, two things are to be said,--first of all, it has never been to the operation during the first hundred years that either incredulity or ridicule have applied, and the sinking fund was never meant to continue to operate so long. Secondly, though there are many drawbacks on the employment of large sums laid out at interest, that diminish, and would at last destroy, the result of the calculation in accumulating; it is not so in paying off debt, where the effect calculated is produced with the greatest certainty. -=- [end of page #241] to find employment for it; and, if the progress continued, part of it would most undoubtedly be sent to other countries, and so be the means of impoverishing this. If, then, we could suppose fifty years of peace, and that the national debt could be paid off, (as it might be in that time,) the situation of productive labourers would be worse; of unproductive, better; and, finally, capital would leave the country, which would be deprived of that transferable stock, the beneficial effects of which have been mentioned. The necessity that creates industry would be diminished, so that nothing could tend more effectually to bring on the decline of the nation than if all the debt were to be paid off; an operation which, though possible in calculation, never certainly would take place; the evils attending it would be so manifest, so clear, and so palpably felt before that was accomplished. To let the national debt continue to increase is, then, certain ruin, at some period unknown, but perhaps not very distant; to pay it off would be equally dangerous: what then are we to do? We must try to raise the resources necessary for war within the year, by which means we may avoid augmenting the debt. That is not, however, to be done while the present heavy interest remains, and that cannot be got rid of, according to any method yet publicly known, without bankruptcy, breaking faith with creditors, or paying off the debt; a resource in itself dangerous, and one that, after all, would bring relief at a very distant day. Since the debt has been contracted, let it be kept up; but let a mode be taken of reducing the interest, without breaking faith with the creditors of the state, so that we may never be obliged to borrow any more. At present, the sum that goes annually for interest, and for the sinking fund, (that is for paying off capital,) amounts to twenty-four millions, and the expenses of a year of war do not exceed that sum. Twelve millions of this may be found by war-taxes, and twelve millions diminution of the interest would just leave a residue sufficient to pay for a constant state of war; and, if peace came, the war-taxes would be taken off. The enemies of England would then not be able to make notches [end of page #242] in a stick, and say, "When we come to such a notch England will be ruined." If this could be done it would be a solid and permanent system of revenue, arising out of an unsolid and transitory one. Any thing like want of faith with the creditors would, however, not only be disgraceful and dishonourable, but would reduce such numbers to beggary, and ruin credit so completely, that the nation would be lost for ever; and, certainly, if we are to be ruined, there is no balancing between ruin with honour and ruin with disgrace. There is a mode that would be fair and practicable, and the present is the most favourable moment for executing it; indeed, it is perhaps the only one when it has been practicable or would be just. By practicability and justice, two words very well understood, we mean, in this instance, that it is a moment when those who would have to pay the difference would be willing to do it, would see their interest in doing it, and would feel that they ought to do it. We mean not to propose any of those imaginary means, by which debts will be paid off without burthens laid on. We have no talent for schemes, where all is produced from nothing, and no faith in their practicability. The late and present wars, which have occasioned one-half of the debt, and for which our exertions are to be continued, were undertaken for the preservation of property; for, though the French system is so completely bad that even the beggars in England would be losers by adopting it, yet, it will be allowed, that the evil to people of property would be much greater than to those who have no property. Let us look to Flanders, Holland, and other countries, and say no if we can. It was on this idea that an income-tax, afterwards termed a property- tax, was laid on, by which the rich are made to pay, and the poor are exempted. The justice and expediency of this was universally admitted: there might be some difference of opinion as to modes and rates, but there was none as to the general principle. We would, then, propose to RAISE LOANS, at a low rate of interest to reimburse the present creditors, ON THE SAME PRINCIPLE ON WHICH THE PROPERTY-TAX EXISTS, in the following manner: There are, by Mr. Pitt's calculation, (and his may be taken [end of page #243] in order to prevent caviling) 2,400,000,000 L. of capital in the kingdom. Let us then create a two and a half per cent. stock, into which every person possessed of property should be _compelled_ to purchase at par, in proportion to their capital, so as to redeem fifty millions every year, thereby creating fifty millions of new debt at two and a half per cent. and reimbursing an equal sum bearing an interest of five per cent. A loan of two per cent. per annum, on each man's capital would do this, and would never be an object for the safety of the whole, particularly as it would only last for ten years. As he would have interest at two and a half per cent. he would, in reality, only lose half, that is, one per cent. a year during twelve years; so that a man, with 10,000 L. would only have given 100 L. a year for twelve years. At the end of ten years, the interest of the national debt would be reduced to one-half its present amount, which, together with the war- taxes, would be sufficient to prevent the necessity of creating more debt. This, however, is not all, a more prompt effect and advantage may be expected. It is more than probable, that the moment our enemy found that the nation, could, without any great exertion, put its finances on a permanent footing, the present contest would finish. It is now only continued, in hopes of ruining our finances, and it is on the accumulation of the debt that the expectation of that is alone founded. We observed, in the beginning of this Chapter, that most people are biased by hope or fear, in examining a question of great importance; and that, therefore, they do not state it quite fairly, without being sensible of their error. In the case of the gloomy calculators of this country, fear and anxiety operated in causing a misstatement; but, with regard to our enemies, hope is the cause of their magnifying the effect of our national debt, and, it must be allowed, that hope had seldom ever a more easy business to perform. The general conclusion is certain, and all the question that remains, is with respect to time. The only mode of putting an end to this hope of our enemy, and to the war, at once, will be by shewing that enemy _that it is quite out of his power to augment our debt_, but untill =sic= a method shall be adopted by [end of page #244] us, that is PRACTICABLE AND EASILY UNDERSTOOD, that will not be believed by our enemy. The rapidity of the operation of a sinking fund is easily calculated, but not so easily credited, particularly by people not inclined to do so, and who would not themselves have the constancy and self-denial to leave it time to operate. Besides, by this operation, we shall not get free of debt till the taxes are raised far above their present amount. Our enemies may be pardoned for believing it impracticable, particularly as many of our friends are of the same opinion. France, which has always been the rival of this country, and hates it now more than ever, (envy being now an ingredient of its hatred,) knows well that it is fallen and degraded, that it has less wealth and happiness than England; but then it considers, that, however bad its finances may be, they are getting no worse; that to continue the war for twenty years will bring no more ruin on the nation, while half the term would probably ruin us. Till we show the fallacy of this calculation, we cannot expect a durable peace. Our ruin is become an object, not only of ambition, but of necessity, as it were, to France; and nothing but despair of being able to accomplish their object will make them abandon the attempt. We must be permitted here to ask a few questions: Is not the time favourable for the plan here proposed? Would it not be fair in its operation? Would it not bring relief effectually and speedily? Would it not reduce our burthens, without breaking faith with the creditors of the state? Would it not reduce the interest, without setting too much capital afloat, that might leave the country? Could our enemies then calculate on the national debt destroying England? The affairs of nations, it has been observed, become so complicated, and the details so multiplied, that those who have the management of them are scarcely equal to the business of the day; and they have no leisure to inquire into the best modes of keeping off evil when it is yet distant; of this we have had ample experience. [end of page #245] Allowing all the credit possible to the sinking fund, (and a great deal is due,) still during war its operation is a sort of paradox; it does not obtain relief: it is liable to be questioned; but we are come to a point, where the stability of our finances ought to be put out of doubt, and beyond all question. The mode of settling our affairs ought not only to be such as in the end may succeed, but its efficacy and practicability ought to be such as our enemies can understand and give credit to. Without this, we shall have no end to the contest. With respect to what our enemies will give credit to, a good deal depends on their own natural disposition. A fickle and arbitrary people, who are continually breaking their faith, can have little belief in the constancy of a sinking fund, but they will be perfectly well inclined to believe, that men of property may be compelled, and will even be glad to pay one per cent. a year, for ten years, to ensure the safety of that property. Supposing then that the sinking fund were the better plan of the two in reality, it would not be so in the present circumstances, because it would not obtain credit, and the other will. As to the rest, deprive the French of their hopes of ruining our finances, and they will make peace on reasonable terms, whenever we please; their object for continuing the war will then be at an end; and, if they do continue it, we can go on as long as they can, without any addition to our burthens. Whatever the cause of a war may be, the hope of success is the only possible motive for persisting in it. The French have been led into two errors; first, by the comparison of this country to Carthage, and of their own to Rome, (an absurd comparison that does not hold,) and, in the second place, by looking on our ruin, from the increase of our debt, as certain. We ought to undeceive them, and then they will have less inclination to persist in war. No pains has hitherto been taken to set them right; nor, indeed, with respect to the national debt, can it ever be done by the present method, till they see the effect; for though the progress of a sinking fund in peace is easily understood, in time of war there is much appearance of deception; it looks like slight =sic= of hand more than a real and solid transaction. [end of page #246] CHAP. V. _Of Taxes for the Maintenance of the Poor.--Their enormous Increase.--The Cause.--Comparison between those of England and Scotland.--Simple, easy, and humane Mode of reducing them_. Amongst the interior causes that threaten England with decline, none is more alarming than the increasing expenses of the poor; expenses evidently rising in a proportion beyond our prosperity, and totally without example, either in the history of past times, or in that of any modern nation. The poor of England cost more to maintain than the free revenue of the country amounted to thirty years ago, and to nearly three times the amount of the whole revenues of the nation, at the time of the revolution. The proportion between the healthy and the sick cannot have changed so much as to account for this augmentation; we must, therefore, seek for the cause elsewhere. It probably arises from several causes; the increasing luxury, which leaves more persons in indigence when they come to an advanced age, owing to their being unwilling or unable to undergo the hardships to which nature subjects those who have been born to labour, and outlive their vigour; being thereby deprived of those indulgences which, in better days, they have experienced. In England, menial servants are accustomed to consume more than people of moderate fortune do in other countries, and they are the race of people most likely to be left to penury in their old age. In countries where there are, indeed, greater trains of menial attendants than in England, they, in general, belong to the great, who make some provision for them, or who, keeping them from ostentation, can retain them to a more advanced age; and, at all events, as they live a less luxurious life, they can make a better stand against that penury which it is their hard destiny to encounter. [end of page #247] In a commercial country there is less attachment between master and servant, than in any other; and the instances of provision for them are very rare. In proportion as a nation gets wealthy, the human race shares the same fate with other animals employed in labour; they are worked hard, and well fed while they are able to work, but their services are not regarded when they can do but little. {194} Want of economy in the management of the funds destined for the purpose of their maintenance is another cause of increase in the expense of the poor. In a nation where every individual is fully occupied with his affairs, and has little time to attend to any thing else, those who manage the affairs of the poor find that few are inclined to look close into matters, and fewer still have the means of doing it if they would; so that abuses increase, as is always the case when there is no counteracting check to keep them within bounds. Another cause, no doubt, is that, as the number of unproductive labourers increase, greater numbers of children are left in want. To all those causes we must add the increase of towns, and the decrease of hamlets and villages. Towns are the places where indigence has the greatest consolation, and where the relief which is held out is attended with the least degree of humiliation and reproach. When we compare the cases of England and Scotland, the causes cannot be doubted; for, there, servants live harder, the working class do not labour so hard, and are not so soon worn out, neither have the towns increased so much, at the expense of the hamlets and villages. The greatest of all the causes of the increase of poor, however, arises from taxation and rent. It has been observed, in the chapter on Taxation, that, for a certain length, taxes and rent are productive of industry, and that, at last, they finish by crushing it entirely. --- {194} If it were the custom to keep horses that were worn out till they died a natural death, the maintenance of them would cost more in England than in any other country; for their vigour is exhausted before the term of old age arrives. The calculation is in this country, to pay well, and be well served. -=- [end of page #248] The manner that this happens, is, that long before a country is as highly taxed as the majority of its inhabitants will bear, those who are the least able to pay are crushed, and reduced to absolute poverty. There are two causes which may render a person unable to support the burthen of taxation: the one is, having a great family; the other is, being able to gain but little from weakness, or some other cause; and, where there are two causes that tend to produce the same effect, though they operate separately, they must, of course, sometimes act in conjunction. The weakest part of society gives way first, in every country; and, on account of the arbitrary and ignorant, though lavish method of relieving that portion of society, in England, the evil is increased to more than double. There is no relief at home in their own houses, no help, no aid, for the indigent, which might produce so admirable an effect, by counteracting the ruin brought on by heavy taxes and high prices; no, the family must support itself, or go wholesale to the workhouse. This is one of those clumsy rude modes of proceeding that a wealthy people, not overburthened with knowledge, naturally takes to overcome a difficulty, but without care or tenderness for the feelings of those relieved, or that regard for public interest, which ought to go hand in hand. For this it would be well to search a remedy. A father and mother, and six children, will cost, at least, fifty pounds a year in a workhouse; but, perhaps, the aid of twelve or fifteen pounds would keep them from going there, and by that means save the greatest part of the money, while the country, which loses their industry, would be doubly a gainer. There is a sort of rough, vulgar, and unfeeling character, prevalent amongst the parish-officers, that is a disgrace to the country and to the character of Englishmen. It is highly prejudicial to the nation; and, if there were no moral evil attending it, if the feelings of the poor were no object, =sic= the rich ought to attend to it for self-interest. If they will not, the government of the country is interested, both in honour and in interest, to do so. Exemption from taxes will do little or nothing, the lower orders [end of page #249] are nearly all exempt, but that general dearness, that is the consequence of a general weight of taxes, is severely felt by them, and from that they cannot be exempted. They must get relief by assistance, and that assistance ought to be given in a manner that will not throw them altogether a burthen on the public. {195} It is impossible to tax the people of a nation so highly, as they can all bear, because, before some will feel, others will be crushed; before the bachelor feels the tax, the father of a large family is obliged to starve his innocent offspring. Before he who has only two children feels the hard pressure, the family of twelve will be reduced to want; and so in proportion. The mode, then, to raise the most money possible, would be to tax the whole nearly as high as the bachelor can bear, and then to give a drawback in favour of the man with the children, they would then be on a perfect equality as to taxation, and the highest sum possible might be raised without hurting any one portion of the people more than another. If the links of a chain are not all equally strong, before any strain is felt by the strong links the weak ones give way, and the chain is broken. The case is the same with the members of a community. Now, when you lay on taxes, the general tendency is to raise the price of food and labour; most labourers receive the advantage of the price of labour, but many pay unequally for the rise of food. A tax on the wealthy, it will be said, is the thing proposed, but no, that would do nothing, it must be a premium or drawback to men with families who are poor, not merely to counteract the effect of any one tax, but the total effect of taxation with respect to maintaining their children. Wide, indeed, is the difference between a tax on those who are well able to pay, and a premium or drawback in favour of those who are not. The manner of providing for the poor in England leads to a degree --- {195} Probably, the reason that so small a sum serves the purpose in Scotland is, that relief is administered to the families, at their own houses, by the minister and elders of the parish. It is a rare instance of an administration, without emoluments and without controul. The funds are distributed with clean hands, in all cases, and impartially in most. -=- [end of page #250] of wastefulness and improvidence unknown in any other country. Improvidence ought as much as possible to be discouraged; for, with those who labour hard and are indigent, the desire to gratify some pressing want, or present appetite, is continually uppermost. This may be termed the war between the belly and the back, in which the former is generally the conqueror. It would be a small evil if this victory were decided seldom, as in other countries, but in the great towns of England there is as it were a continual state of hostility. In London, the battle is fought, on an average, at least, once a week; and idleness, and the profits of those sort of petty usurers, called pawnbrokers, are greatly promoted by it. Some part of this evil cannot, perhaps, be remedied, but there are certain articles that ought not to be taken in pledge, such as the clothes of young children and working tools. {196} There is no doubt but, that, in a populous inhospitable trading town, where there is no means of obtaining aid, from friendship, where the want is sometimes extreme, the resource of pledging is a necessary one. This is to be admitted in the degree, but by no means without limitation; for the facility creates the want, (even when it is a real want) for it brings on improvidence and carelessness. The lower classes come to consider their apparel as money, only that it requires changing before it is quite current. {197} If this matter were well looked into, together with the other causes from which mendicity proceeds, which increases so rapidly, we should --- {196} In Scripture it is forbidden to pledge the upper or the nether mill-stone. This is a proof, of very great antiquity, and indisputable authority, of the care taken to prevent that sort of improvidence that hurts the general interest of a people. It should be imitated in this country with regard, to all portable implements of labour, such as mill-stones were in those early times. {197} In Scotland, twenty years ago, there were not so many pawnbrokers as there are in Brentford, or any little village round London. In Paris, as debauched a town as London, and where charity was as little to be expected, there was only one lending company, the profits of which, after dividing six per cent., went to the Foundling Hospital. It was, as in London, a resource in cases of necessity, but there was too much trouble to run it on every trifling occasion, as is done in London, and, indeed, in most towns in England. -=- [end of page #251] soon perceive a diminution of the poors' rates, and the wealthiest country of Europe would not exhibit the greatest and most multiplied scenes of misery and distress. The numbers of children left in indigence, by their parents, would be comparatively lower, and there would not be that waste in the administration of the funds on which they are supported. There is, probably, no means of greatly diminishing the number of helpless poor, but by an encouragement to lay up in the hour of health an abundance to supply the wants of feebleness and age, but this might go a great way to diminishing the evil. All persons who have places under government, of whatever nature, ought to be compelled to subscribe to such institutions; this would be doing the individuals, as well as the community, a real service, and would go a great way to the counteracting of the evil. {198} Preventatives are first to be applied, and after those have operated as far as may be, remedies. The poor, &c. to whose maintenance 5,500,000 L. a year goes, (a sum greater than the revenues of any second rate monarchy in Europe,) may be divided into three classes: First, Those who by proper means might be prevented from wanting aid. Second, Those who, for various reasons, cannot get a living in the regular way, but might, with a little aid, either maintain themselves, or nearly so; and, Third, Those who, from inability, extreme age, tender youth, or bodily disease, are unable to do any thing, and must be supported at the public expense. Nobody will dispute that there are of all those descriptions maintained at pressnt =sic=; and, therefore, all that can create a difference of opinion is about the proportions between the three. It is probable that one-half, at least, could maintain, or nearly --- {198} The widows scheme, as it is called in Scotland, for the aid of the widows and children of clergymen, is a most excellent institution; it has been attended with the best effects, both on individual happiness and national prosperity so far as it goes. The plan is such as might, with very little variation, be applied to all the officers of the revenue, clerks in office, &c. &c. -=- [end of page #252] maintain, themselves; one-quarter might be prevented from ever requiring any aid at all; and the other quarter would be assisted as at present. This would reduce the expenses to less than one-third, and, probably, to one-quarter of what they are now; that is, of 5,500,000 L. there would be a saving of 3,500,000 L. but that is not all, for the national industry would be augmented by 2,000,000 L. and more; that is to say, by the industry of the half that maintained themselves, so that the nation would gain partly in money saved, and partly in money got, 5,500,000 L. According to the true spirit of the English nation, in which there is a great fund of generosity and goodness at the bottom, it may perhaps be said, that the poor are not able to labour at all, and, that the plan would not answer. This is but a rough manner of answering a proposal, which neither is in reality, nor is meant to be, void of humanity. There were, by last years =sic= accounts, nearly 900,000 persons of one sort and another maintained or relieved, which does not make above six pounds a year for each person, now, where is there a person that can work at all, that cannot earn above four-pence a day in England? {199} The plan for remedying this abuse ought to be very simple, for it will be administered by such ignorant and rough directors, that, if it is not simple, it must fail entirely. --- {199} It would be foreign to the plan of this Inquiry to enter into the details of the poor persons, and shew the absurdity of the management; but, it is very evident, from those that are printed, that they get no work to do, the quantity of materials delivered to them to work upon will not admit of earning money to maintain themselves. The following is a specimen of the attention given to this subject, and the means taken to enable the poor to pay for their maintenance, by their labour. In Middlesex, where the expense amounted, in 1803, to 123,700 L. or about 340 L. a day, the sum expended to buy materials amounted to no more than 4L.1s.11d. !!! It is impossible to comprehend how this capital stock could be distributed amongst above ten thousand labourers. It is not very easy to conceive the impertinence of those who presented this item, as a statement to the House of Commons, which would have done well to have committed to the custody of the sergeant-at-mace, the persons who so grossly insulted it. One thing, however, is very easily understood and collected from all this. The business altogether is conducted with ignorance, and executed carelessly and negligently, and that to an extreme and shameful degree. -=- [end of page #253] To have a good surgeon or physician is essential; and those who would not work, and who were able, should have the same allowance that a prisoner has in a jail; but those who would work should be paid a fair price, and allowed to lay out the money, to hoard it, or do as they please, except drinking to excess. [{200}] Though many for want of vigour are refused employment in a workshop, some for want of character, and others for various reasons, become burthensome, yet there are not a few, who, from mere laziness, throw themselves upon the parish, where they live a careless life, free from hunger, cold, and labour. When the mind is once reconciled to this situation, the temptation is considerable, and there are many of those poor people, who will boast that the have themselves been overseers, and paid their share to the expenses. Whatever evil is found to have a tendency to increase with the wealth of a nation ought, most carefully, to be kept under; and this is one not of the least formidable, and, of all others, most evidently arising from bad management and want of attention. It would be necessary to have all sorts of employment, that the persons in such places can, with advantage, be occupied in doing, and a small allowance should be made to defray general expenses; amongst which, ought to be that of surveyors of districts, who should, like those employed by the excise-office, inspect into the state of the different poor-houses, and the whole should be reported, in a proper and regular manner, to the government of the country, from time to time. Those little paltry parish democracies that tax one part of the people, and maltreat the other, ought to be under some proper con- --- {200} [Transcriber's note: assumed location--footnote not assigned a place in the text.] The system, in England, of only employing people in the vigour of life is a source of much mischief, and is an increasing evil, which government, the East India company, and all the public bodies, are encouraging. Men are treated in this instance exactly like horses. They are worked hard and well rewarded in their vigour; but, in so wealthy a county =sic= as this, those occupied in commerce, and men in power, will not be troubled with any but such as can do their business with little trouble to the master. They do not consider what mischief they are preparing for their country. Shenstone, the poet, seems to have thought of this when he says, in a case of woe: "But power and wealth's unvarying cheek was dry." -=- [end of page #254] troul; and the happiness and prosperity of England should not be left at their mercy. In a country where every thing is done with such admirable accuracy in the revenue-department, as England, it would be useless to attempt pointing out the manner of executing the plan; it is sufficient to shew its practicability and the necessity of attending to it. If, in the first instance, the advantage would be such as is here mentioned, it would, in a few years, be much greater, particularly in so far as fewer families would be left in a state of indigence; for, it is clear, that such families are a continual encumbrance on the rising generation, and tend to the diminution of the general mass of useful citizens. If it should so happen, that taxes augment, or that trade falls off, (both of which may very likely happen,) then the interference of government may become a matter of absolute necessity; but then, perhaps, it may be too late. It would be much better if government would interfere, before the evil is actually come to the highest pitch. The parishes might, perhaps, look with jealousy on an interference of this sort, as being an infringement on their rights; for Englishmen are sometimes very tenacious of privileges that are highly pernicious to themselves. This difficulty, (for it probably would be one,) might be got over, by previously establishing inspectors in the different bishop's sees, who should be obliged to render an account to the bishop, to be communicated to government, by which means, the evil would either be removed, or its existence ascertained, so as to answer the complaints that might be made, and thereby prevent all discontent on the subject. Without being able to say what might absolutely be the best remedy, it is, at least, fair to ask the question, whether it is fit that the administration of 5,500,000 L. a year should be intrusted to the hands of ignorant men? It may likewise be asked, if the feelings of the necessitous ranks of society (as keen in many instances as those of their betters,) should be wounded by men, who have not sufficient knowledge of any sort to act with the humanity necessary. The candidates for popular favour, amongst the lower housekeepers, are generally flattering, fauning =sic=, cringing men, and such are almost without exception, cunning, ignorant, and overbearing, wherever they have the least [end of page #255] authority over others. Such, in general, are the parish-officers, to whose care this important affair is committed. Though this is an institution almost on the purely democratic principle of equal representation, it is a very bad specimen of that mode of government. The shameful lawsuits between parishes, about paupers, the disgraceful and barbarous treatment of women, who have been betrayed and abandoned, admit of no excuse. They are not productive even of gain or economy. Amongst some tribes of savage Indians, the aged and helpless are put to death, that they may not remain a burthen on those who are able and in health; and it is equally true, that, in England, the young innocents, who have not parents to protect them, are considered as a burthen; and, if they are not absolutely sent out of the world, the means necessary to preserve them in it are very inadequate to the purpose. If criminality could be engraved on a graduated scale, their deaths ought in general to be written down at some intermediate point between accidental homicide and wilful murder. The persecution of this unfortunate race may be said to commence before they are born; and, though the strength of a nation depends much on its population, less care is taken to encourage it, than to produce mushrooms, or to preserve hares and partridges. [end of page #256] CHAP. VI. _Causes of Decline, peculiar to England_. In addition to the causes of decline which Britain, as a wealthy country, has, in common with most other nations, it has some peculiar to itself, (or of which the degree at least is peculiar to it). The national debt, the high rate of taxation, the prodigious expense of the poor, and the nature of the government, are peculiar to this country. There are other circumstances in its favour, of which we shall speak in the next chapter; but, in this, we shall review those that are against it, and of an unfavourable nature and operation. The high rate of taxation, for the very reason that it is the highest ever known, inspires our enemies with hopes of our downfall, and makes them persevere in continuing to put us to expense. The unprecedented commerce we enjoy, of which every other nation would wish to have a share, (and of which each, most mistakenly, thinks it would have a share, if Britain was undone,) is a cause of attracting envy and enmity, and repelling friendship. Our colonies in the West, and our possessions in the East, act like the conductors that draw the electric fluid to a building, but they do not, like those conductors, serve to protect it from violence. We have seen, that the advantage arising from them is more than doubtful, that they enrich individuals and impoverish the state; but all this would be nothing new, were it not for the vast scale on which those evils exist. The poor's rate, which is in itself completely unexampled, though a common thing to all nations, is so exorbitant in England, that it may very properly be ranked amongst the dangers peculiar to this country. Who would believe, that Frederick the Great of Prussia carried on his brilliant and successful wars against the most formidable enemies, expended more than one-eighth of his revenues annually on the encouragement of industry, and left his treasury well stored, yet all this with an income, less by one-fourth than the sums that go to support [end of page #257] the poor in England, notwithstanding all the miserable manoeuvres that are practiced =sic= to avoid giving them assistance? The form of government in England, though best for the liberty of the subject, and for the security of persons and property, is deficient in the means of repressing those infringements which particular bodies of people make upon the community at large. The representative system, when well understood, divides itself into parties, having different interests. There are the commercial, the landed, the East India, the West India, and the law, all of which have great parliamentary influence, and can be formidable to any minister; they therefore have a means of defending their interests, and they are concerned so deeply as to take a very active part whenever any questions are agitated relative to them. The landed interest and the law are, indeed, the only ones that have any great party in the House of Peers; but then the House of Peers seldom interferes in matters that concern the interests of the others. The Lords seem not to think it their province; and, in general, more through diffidence than negligence, they avoid meddling, though, to do that honourable house justice, to it we owe much. Many bills, of a dangerous tendency, have been thrown out by it, after they had passed the other house; and it has been generally done with a wisdom, magnanimity, and moderation, which is only to be accounted for by a true love of the country and an upright intention. {201} --- {201} It is wonderful to what a length good intention, (zeal apart,) will go in leading men right, even when they have not paid very particular attention to a subject. There is a feeling of what is wise, as well as of what is right, that partakes a little of instinct, perhaps, but is more unerring than far fetched theory on many occasions. This was seen in a most exemplary manner, at the time that the principles of the French revolution were most approved of here. Those principles were plausible, though flimsy, and founded on sophisms, and a species of reasoning, that plain unlettered men could not answer, and men who did give themselves the pains to reason might have answered; yet, three times in four, it was the man who could not answer it, who, guided by upright intentions, rejected it as bad, without being able to tell why. The most acute were, in this case, the most deceived; for it must now be allowed, that all approbation of the theories, relative to the rights of man, and the manner of asserting them were wrong. Many of those who fell into the error had, no doubt, unblameable intentions, but they did not consult common sense. -=- [end of page #258] In every assembly, a small number, who completely understand their own interest, can do a great deal, if they will act together; but, this is not all, they can use arguments with a minister that pave the way for obtaining the ends they have in view, while the general interests of the country alarm no one but upon great occasions. Under arbitrary monarchs, all bodies with separate interests, are kept in due order, they have no means of defending themselves but by remonstrance, which, against power, is but a very inadequate protection. There is nothing forced or chimerical in this statement of the case, and the consequence is, that no country ever saw any bodies rise to such a height, except the clergy in Roman Catholic countries, and the barons during the feudal system, when they had arms in their hands; who, if they could not absolutely resist their sovereign, were at least able to refuse him aid, and could annoy him greatly. But those examples will bear no comparison with the separate interests in England at this time. The barons have long lost their power, and the Roman Catholic clergy have lost the greatest part of their power and revenue also. If they had not, wealthy and powerful kingdoms would not have existed. Under a free government, where people think that an opposition to a minister in parliament is a most excellent thing, the energies of the nation, as to war, are greatly lessened. This must, in its connections with other nations, produce very hurtful effects; but, where the evil is without a remedy, there is no advantage in dwelling upon it; and it does not appear that there is any possibility of separating from a free government, some sort of an opposing power, that must hamper the executive, and lessen the energies of the nation. Under pure monarchies, kings can reward merit; they can encourage talents, and act according to circumstances. In England, the king, or his ministers, have no fund from which they can do this. An application to parliament is expensive and troublesome; and, in many cases, where the object would be fair, it would be unattainable. But this is not all, for when, by act of parliament, any thing of the sort is [end of page #259] once done, it is left without proper controul, and the expense is generally double what it ought to be. On the whole, there is too little of discretional =sic= power in a representative government; good cannot be done but by rules, which, in many cases, it is impossible to comply with. This is a disadvantage which we labour under, and is a sort of drawback on our excellent form of government; but this is not like the opposition in the senate, it may be got over, and merits attention. Such appear to be the disadvantages to which Britain is peculiarly liable, either in toto, or in the degree; but, on the other hand, she has many circumstances in her favour, if they are properly taken hold of; and, indeed, some, of which the effect will be favourable, whether any particular attention is paid to them or not. To those we shall advert with peculiar pleasure, and hope that they will not be neglected, but that they may afford a means of continuing our career of prosperity on the increasing scale, or that, at least, they may prevent us from sharing the fate of those nations that have gone before. [end of page #260] CHAP. VII. _Circumstances peculiar to England, and favourable to it_. It has been observed, that, in northern nations, where luxury is not attended with such a degree of sloth and effeminacy as in warm climates, the habits of industry can never so completely leave a country. The feelings of cold and a keen appetite are enemies to sloth and laziness; indeed they are totally incompatible with those habits and that degradation of character, that are to be found in southern climates. This advantage Britain shares with other nations of the north; but she has some peculiar to herself. Situated in an island, the people have a character peculiar to themselves, that prevents foreigners and foreign influence from producing those baneful effects that are so evident in many nations, where they come and depart with more facility, and where a greater similarity in manners and in character enable them to act a conspicuous and a very dangerous part, in the cases of misunderstanding and party dispute. In all the wars, bloody and long-contested as they were, between the houses of York and Lancaster, foreign influence never produced any effect such as that of Spain did in France, previous to the accession of Henry IV. or as the influence of France and Spain have produced in Italy, or that of France on Spain itself, or those of Russia and Prussia in Poland, with numerous other examples on the continent. We know of no ideal boundaries in this country. In this country we are all one people, and can distinguish ourselves from any other; indeed, the national character is rather too averse to mixing with people from the continent; but this, that seems now a fault, may some day be considered as a very useful virtue. Even in the times when an unfortunate jealousy and mistaken interest kept England and Scotland at variance, and when the latter kingdom was in the habit of adopting the politics of France, and [end of page #261] embracing its interests, there seems to have been some repelling principle that kept the little nation out of the gripe of the great one. The French never had any preponderating power there, and, indeed, in latter times so little, as not to be able to defend Queen Mary or the Romish religion against the reformers; to do both of which there was no want of inclination. It appears, then, very clearly, that though, on the best terms of friendship, the Scotch had at the bottom that British mistrust of foreigners, that, ever since it was civilized, has freed the island from foreign influence. The form of government, the security of property, and the free scope that is given to exertion in every line of business, will continue to enable this country to hold itself high, even if some of its present sources of wealth should be dried up; and, whatever may be the feelings of the representatives of the people upon ordinary occasions, the moment that any real danger occurs, they will, we are certain, act like men, determined to stand by their country. How feeble was the former French government when assailed with difficulty? It was at once as if struck motionless, or, the little animation that was left was just sufficient to enable it to go from one blunder to another. How different has England been on every emergency? In place of the arm of government seeming to slacken in the day of danger, it has risen superior to it. We have never seen the same scenes happen here, that have taken place in Poland, Sweden, and so many other places. In the three attempts to invasion, {202} (Monmouth's and the two other rebellions,) where foreign influence was used, the event was the most fatal possible to those who made them; they were contemptible in the extreme; and, if it is considered in whose favour they were, it is probable the support from a foreign power rather did injury to the cause. --- {202} Here we must not confound the case of the Stuarts with that of the King of France. In England, it was the government that was divided, the legislative being against the executive; _one_ part of the government was feeble, but the other was not, and therefore we cannot say that the government was feeble. In France, the king and ministers governed alone, they were the whole government, and therefore as they were feeble, the government may be taxed with weakness. -=- [end of page #262] The form of government has this great advantage in it, that, as abilities are the way to preferment, the higher classes (at least) have a better education than the same rank of persons in any other nation, so far as regards the interest of the public, and the nature of the connection between the different orders of society; ignorance of which, is the surest way to be destroyed. In all new and rising states the higher orders, even under despotic governments, and where all the distinctions of ranks are completely established, have a proper regard for the importance and welfare of the lower orders of people. As they increase in wealth and have lost sight of its origin, which is industry, they change their mode of thinking; and, by degrees, the lower classes are considered as only made for the convenience of the rich. The degradation into which the lower orders themselves fall, by vice and indolence, widens the difference and increases the contempt in which they are held. This is one of the invariable marks of the decline of nations; but the nature of the English government prevents that, by keeping up a connection and mutual dependence amongst the poor and the rich, which is not found either under absolute monarchies or in republics. In republics, the people become factious and idle, when they become any way wealthy. In this country, besides the insular situation, circumstances in general are such as to prevent the lower classes from falling into that sort of idleness, apathy, and contempt, that they do in other countries, even supposing these burthens were done away, that at present necessitate exertion. To those causes let another still be added, the religious worship of the country, which, without any dispute or question, is greatly in its favour. To speak nothing of the religious opinions or modes of worship in ancient times, there are three at present that merit attention and admit of comparison. The Christian religion is distinguished for raising men in character, and the Mahomedan for sinking them low. Whenever the Mahomedan faith has extended, the people are degraded in their manners, and the governments despotic. The disposition of a Mahomedan king [end of page #263] or emperor is more different in its nature, from that of a Christian sovereign, than the form of a hat is from that of a turban. Under the most despotic Christian sovereigns, matters are governed by law, there are no regular murders committed by the hand of power, without the intervention of justice; and if plenitude of power admits of the greatest excesses in the sovereign, in some Christian countries, the opinion of his fellow men, the fear of his God, or some sentiment or principle in his own breast, restrains him in the exercise of it. It is not so with Mahomedan princes: with them, nothing is sacred that they hate, nothing shameful that they do. Whatever their conscience may be, whatever may be the nature of their moral rules, rapine and murder are certainly not forbidden by them, or the law is not obeyed. In proportion to the despotism and ferocity of the sovereign, is the slavishness of the people, their brutality, and vice, in all Mahomedan countries; their character and its great inferiority is so well known, that it is impossible for any person to be ignorant of it. When the Mahomedan governments possess power, they are proud and overbearing; the people luxurious, and given to every refinement in vice. When they sink, that pride becomes ferocity, and the luxury degenerates into brutality and sloth; but neither in the one nor in the other case have they the proper value for science, for literature, for liberty, or for any of the acquirements that either make a man estimable or useful. They neither excel in arts, nor in science; phisically =sic=, they are inferior in utility, and their minds are less instructed. They are not equal to Christians either in war or in peace, nor to be compared to them for any one good quality. The greatest and the best portion of the old world is, however, in their hands; but, in point of wealth or power, they are of little importance, and every day they are sinking lower still. Amongst those who profess Christianity it has been remarked, by all who have travelled, and who have had an opportunity of observing it, that agriculture, commerce, and manufactures, flourish most in Protestant countries. Even where there are different sects of the Christian religion in the same country, arts, manufactures, and commerce, appear to have flourished most amongst the Protestants. The [end of page #264] cruelties of the Duke of Alva, and the absurd bigotry of Louis XIV. drove the most industrious inhabitants from the Netherlands, and from France, merely because they happened to be Protestants, which is a proof that there is a connection between that branch of the Christian religion and industry. The Protestants were the most industrious. The Protestants appear also to be the most attentive to preserving a good form of government, and to set a greater value upon liberty than people of any other religion. In this, England has an advantage that is inappretiable. {203} The reformation in religion, and the establishment of manufactures in England, date from nearly the same period; it was about the same time, also, that the spirit of liberty began to break out first in Scotland, and then in England, which terminated in the revolution. There are, therefore, many reasons, from experience, for believing that the Protestant religion is particularly favourable to industry and freedom. There are other reasons, likewise, that arise from a consideration of the subject, that would lead one to the same conclusion, even if there were no experience of the fact. Whatever frees the human mind from useless prejudice, and leads it to pure morality, gives dignity to man, and increases his power of becoming a good and useful member of society. The Christian religion not only contains the most pure moral code, but the best, most useful, and simple rules for conduct in life are --- {203} The great influence, founded on attachment to her person, and the feeling of the long happiness they had enjoyed, under Queen Elizabeth: her great authority, supported by esteem, and confirmed by long habit, restrained the spirit of freedom which so soon after tormented her successors. James had had full experience of that spirit before he left Scotland; and, when he mounted the English throne, was known, frequently, to exclaim against presbytry, as the enemy of monarchy. He, as was very natural, thought that the difference of religion caused the superior love of freedom in Scotland, for he was not sensible of the different effects produced by the calm, steady, and dignified deportment of Elizabeth, and the unsteady conduct of his unhappy mother, Mary. He also confounded hatred for arbitrary prerogative in kings, with hatred for kings themselves; and considered monarchy, and his own sort of monarchy, as essentially the same. Had he lived in our days, he would have experienced the difference, and not have considered the church of Scotland as being a greater enemy to kingly power than that of England, or as being more favourable to liberty. -=- [end of page #265] there promulgated. The Roman Catholic faith was clogged, in the early days of the church, with a great number, both of dogmatical and practical errors, that tend not only to fetter the mind, but actually embarrass the business of human life. In a former chapter, we had occasion to speak of the encroachments made by public bodies on the general mass of the people, but none ever was so pernicious in its effects, so grasping, and so well calculated to retain, as the Roman Catholic church. Their celibacy took away from the clergy every disposition to alienate even personal property, while the practice of auricular confession, and the doctrine of the remission of sins, gave them an opportunity of besieging the human mind in its weakest moment, and the weakest place, in order to rob posterity, and enrich the church. In the moment of weakness, when a man's mind is occupied in reflecting on the errors, and perhaps the crimes, of a long and variegated life; when his ties to this world are loosened, and his interest in eternity becomes more lively, and near; a religion that enables a zealous or interested priest (aided by the casuistry and argument of centuries) to barter a promise of everlasting bliss, for lands and tenements bequeathed to the church, provides amply for the acquisition of earthly treasure, for its ministers, and those devoted to a life of religious pursuits. It is, indeed, wonderful, that, with such means, the church, in Roman Catholic countries, did not become more wealthy than it was. {204} With a continual means of acquiring, and none of alienating, it appears well qualified for absorbing the whole landed property of a nation. Such an encroachment on the public wealth, and industry of a people, is a sufficient reason for the Protestant countries (where the clergy have not the same means) becoming more wealthy and industrious. It would not be difficult to prove that there is an effect produced on the minds of individuals in Protestant countries, that is favourable to industry; but a discussion of this nature might seem displaced in a book of this sort. It is sufficient that we see, from experience and --- {204} In France, before the revolution, the revenues of the clergy, in lands, tythes, &c. were reckoned to amount to 25,000,000 L. sterling per annum. The number of feasts and fasts was also a great drawback on industry. -=- [end of page #266] reason, that, of all religions, the Christian is the most favourable to the prosperity of a people, and that of its different branches, the Protestant, or what is termed the Reformed Religion, is again the best. It is the religion established in Britain. Another source of hope arises from a circumstance of very great importance, and very peculiarly favourable to Great Britain. It has been observed, that the colonies in the West, and conquests in the East, cost a great deal and produce little; that, in short, their possession is of very doubtful advantage. The possession of the North American provinces, now the United States, were a great burthen to England, from their first settlement till about the year 1755, when their trade began to be of advantage to this nation; but, in twenty years after, the revolt took place, and cost England a prodigious sum. To enter into a long detail on this subject it is not necessary; but no sooner were the hostilities at an end, than the American states bought more of our manufactures than ever. Their laws and manners are similar to our own, the same language, and a government evidently approaching as near to ours as a republican well can to a monarchical form. There is not, at this time, any branch of trade, either so great in its amount, or beneficial in its nature, as that with the United States; with this farther advantage, that it is every day augmenting, {205} and as no country ever increased so fast in population and wealth, so none ever promised to afford so extensive a market for our mannfactures =sic= as the United States. This market is the more secure, that it will not be the interest of the people who have got possession of that immense tract of country to neglect agriculture and become manufacturers, for a long period of time. The greatest project, by which any nation ever endeavoured to enrich itself, was certainly that of peopling America with a civilized race of inhabitants. It was a fair and legitimate mode of extending her means of acquiring riches; but Britain failed in the manner of obtaining her object, though not in the object itself, and --- {205} By this is not literally meant, that the trade every year is greater than the preceding, but that it continues to increase. -=- [end of page #267] the United States promise to support the industry of England, now that it has humbled its ambition, far more than both the Indies, which gratify it so much. It is highly probable, that America will increase more rapidly in wealth and population than in manufactures, such as she at present takes from great Britain; but if the ratio merely continues the same that it is now, the purpose will be completely answered, and a market for British manufactures insured for ages to come. In 1802, by the last census, the inhabitants of the United States amounted to about eight millions; and, for several years together, the exports of British goods have amounted to seven millions, so that it is fair to reckon a consumption equal to sixteen shillings a year to each person. It was about the same in 1774, previous to the revolt; and, as the population doubles in about fifteen years, in the course of thirty years more, the exports to that country alone would amount to 24,000,000 L. provided we continue to be able to sell at such rates as not to be undersold by others =sic= nations in the American market. There is nothing great, nothing brilliant, in this commerce, all is solid and good; it is a connection founded on mutual wants and mutual conveniencey, not on monopoly, restriction, or coercion; for that reason it will be the more durable, and ought to be the more valued; but it is not. Governments, like individuals, are most attached to what is dear to purchase and difficult to keep. It is to be hoped, however, that this matter will be seen in its true light. One circumstance, that makes the matter still more favourable for Britain is, that the western country of America, by far the most fertile, as well as the most extensive, is now peopling very rapidly. The labour and capital of the inhabitants are entirely turned to agriculture and not to manufactures, and will be so for a great number of years; for, when there are fifty millions of inhabitants in the United States, their population will not amount to one-half of what may naturally be expected, or sufficient to occupy the lands. The fertility of the soil will enable the Americans, with great ease to themselves, to make returns in produce wanted in Europe, so that we may expect a durable, a great, and an advantageous trade with them. In British [end of page #268] manufactures our trade was not near so great before the revolt, for we then supplied America with every article. This, however, will depend partly on our circumstances; for, if wages and the prices of our manufactures rise, as they lately have done, our merchants will buy upon the continent of Europe, what they otherwise would purchase in England, to supply the American market. America is the only country in the world where, with respect to the wages of labour, and the produce of industry, money is of less value than in England. The Americans will then be able to afford to purchase English goods, when other nations will not; but then, they will only purchase such articles as cannot be had elsewhere; for though they may and will continue able to purchase, they will not do it if they can get goods that suit them elsewhere. {206} No country, that we read of in history, ever enjoyed equal advantages with the American states; they have good laws, a free government, and are possessed of all the inventions and knowledge of the old world. Arts are now conveyed across the Atlantic with more ease than they formerly were from one village to another. It is possible, that a new market of so great an extent being opened may do away those jealousies of commerce, which have, for these two or three last centuries, occasioned many quarrels, and which are peculiarly dangerous to a nation that has risen high above its level. All those things, with care and attention, will prove advantageous to Britain in a superior degree. They afford us much reason for hope and comfort, and do away one of the causes for fearing a decline that has been stated, namely, the being supplanted by poorer nations, or by not having a market for our increasing manufactures. There remains yet another consideration in favour of Britain, as a manufacturing and a commercial country; for, as such, we must view it, reckoning more on industry than on the ideal wealth of our colonies in the West, and our conquests in the East. It is this, we are the --- {206} England begins already to lose the market for linen-cloth, window-glass, fire-arms, and a number of other articles. It would have entirely lost that of books, if any nation on the continent of Europe could print English correctly. As, it is, they are printing in America, in place of our keeping the trade, which we might have done with great profit and advantage. -=- [end of page #269] latest of European nations that has risen to wealth by commerce and manufactures. In looking over the map, there does not seem to be any one to supplant us; all those, who have great advantages, have already gone before, and, till we see the example of a country renewing itself, we have a right to disbelieve that it is possible. Russia is the only country in Europe that is newer than England, and many circumstances will prevent it from becoming a rival in commerce. It does not, nor it ever can increase in population, and carry civilization and manufactures to the same point. Though, very new, as a powerful European nation, the people are as ancient as most others in Europe; the territory is so extensive, the climate so cold, and the Baltic Sea so much to the north, and frozen so many months in the year, that it never will either be a carrying or a manufacturing country. To cultivate its soil, and export the produce of its mines, the skins, tallow, hides, timber, &c. &c. will be more profitable, and suit better the inhabitants than any competition in manufactures. It is not in great extensive empires that manufactures thrive the most, they are great objects for small countries, like England or Holland; but, for such as Russia, Turkey, or France, they are a less object than attention to soil and natural productions; and, thus we see, that China, the greatest of all countries in extent, encourages interior trade and manufactures, but despises foreign commerce. {207} One peculiar advantage England enjoys favourable to manufactures, deserves notice. The law of patents, if it does not make people invent or seek after new inventions, it at least encourages and enables them to improve their inventions. Invention is the least part of the business in respect to public wealth and utility. There has long been a collection of models, at Paris, made by one of the most in- --- {207} The smaller a district, or an island is, the exports and imports will be the greater, when compared with the number of inhabitants. Take the exports and imports of all Europe, with the other quarters of the world;--considering Europe as one country, and it will not be found to amount to one shilling a person per annum. Take the amount in Britain, it will be found about forty shillings a person. Consider what is bought and sold by a single village, and it will be still greater than that; and, last of all, a single labouring family buys all that it uses, and sells all that it produces. And the meanest family, taken in this way, does proportionably =sic= more buying and selling than the richest state, taken in a body. Consider the whole earth as one state, and it neither exports nor imports. -=- [end of page #270] genious mechanics of the last century, (Mr. Vaucusson,) at the expense of that government, in which were nearly all the curious inventions brought forth in England, together with many not known in it. Some Englishmen, in going through it, brought over new inventions here, for which they obtained patents, and, by which, they, as well as the public, were gainers, while the inventions lay useless and dormant in France. Invention is not a thing in a man's power, and great inventions are generally more the effect of accident than of superior abilities; at any rate, no encouragement is certain to produce invention, but it always will produce improvement on invention. When a man has a patent for fourteen years, he does every thing in his power to make the object of that patent become as generally useful as possible, and this is only to be done by carrying the improvements as far as he is able. {208} Others, again, who have no patent, but are of the same trade, endeavour to preserve their business by improvement, and to this contest in excellence may be attributed the great progress, made in England, in bringing manufactures to a higher degree of perfection than in any other country. The great inventions, from which others branch out and spring, are not due, it has often been asserted, to natives of this country. Probably this may be owing to the circumstance, that they were known before the advancement of this country in any of the arts; but let that be as it may, there are a vast number of inventions carried to greater --- {208} This is sufficiently important to deserve to be illustrated by some examples. The improvement of the steam-engine, by Mr. Watt, was a matter of accident; an accident, indeed, that could not have happened, had he been an ignorant man; but the improvement of it was not accidental. It was, in consequence of great encouragement given, and to the prolongation of the patent, by an express act of parliament. This patent has been the occasion of almost totally changing the machine, and of extending its use to a vast variety of objects, to which it probably might never have been extended, had it not been the sole business of a very able man, aided by a number of other ingenious persons, whom he was enabled to employ. It was the cause of improving the mechanism of mills for grinding corn, and others of different descriptions, far beyond what they had been, although the most able engineer in that line (Mr. Smeaton) died before the last and greatest improvements were made. The same thing may be observed of the cotton-spinning-machines, and with a little difference of all the inventions that have been brought to perfection, under the influence of exclusive privileges. -=- [end of page #271] perfection, and turned to more advantage in this country than in any other. This advantage, which England enjoys over other countries, is a more solid one than it appears to be, for it is intimately connected with the government and laws of the country, and with that spirit which sees the law well administered, which, in the case of patents, is a matter of no small difficulty, and prevents others from becoming our rivals, or attaining the same degree of perfection; {209} for, unless the law is well administered, there can never be the great exertion that is necessary to create excellence. The fine arts and the mechanic arts are quite different in regard to the manner in which they are brought to perfection. Individual capacity and genius will make a man, even without much teaching, excel in one of the fine arts; whereas, in the mechanic arts, to know how an operation is performed is every thing, and all men can do it nearly equally well. The consequence of this is, that, as experience improves the manner of working, the mechanic arts improve, from age to age, as long as they are encouraged and practised. It is not so with the fine arts, or only so in a very small degree, and from this it arises, that, in sculpture, poetry, painting, and music, the ancients, perhaps, excelled the moderns. In the mechanic arts they were quite inferior. The best examples of this, (and better need not be,) are an antique medal, boldly and finely executed, but ragged on the edges, not on a flat ground, or of equal thickness, compared with a new guinea, or a Birmingham button tamely engraved but trimly executed. In the former, there is every mark of the artist, none of the machine. In the latter, there are some faint and flat traces of an artist, but great proof of mechanical excellence. The skill of the artist, necessary to produce the first, cannot be commanded, though it may, by encouragement, be called forth; but the reunion of talents, such as are necessary for the latter, is so certainly obtainable, that it, at all times, may be procured at will, after it has once been possessed. --- {209} In 1790 the French laid down the law of patents, on the English plan, and rather, in some respects, improved; but the people never understood it. The lawyers never understood it; and, even before the anarchy came on, it was evident it would never produce any very great effect, for want of proper administration. -=- [end of page #272] Security, to reap the fruits of improvements, is all that is wanted, and this the law of patents, as applied and enforced in England, affords in a very superior degree. Although, by the communication everywhere, the ground-work of every art whatever is now no longer confinable to any one nation, though the contrary is the case, and that the knowledge necessary circulates freely, and is extended by a regular sort of system, in periodical publications of various descriptions, yet the manner of turning that knowledge to advantage does not, by any means, seem equally easy to communicate. The legislature of the United States of America has, indeed, in this case, done full justice to the encouragement of arts and to inventions; but circumstances, as has been already said, make other objects more advantageous for the employment of labour and skill in that country. For these reasons, therefore, we may look forward with some confidence, to the flourishing of arts and manufactures, for a long term of years, if the same attention that has been paid to their encouragement still continues; but neither this advantage alone, nor all the advantages united, that have been enumerated, will be sufficient to preserve our superiority, if those, who regulate the affairs of the country, do not favour them. It is in consequence of great pains and care, that manufactures have flourished in this country, and they cannot be preserved without a continuation of the same care, although it is individual effort that appears to be the principal cause. Thus, the travellers, on a well-made highway, proceed with rapidity and ease, at their individual expense, and by their individual energy; but, if the road is not kept in repair, their progress must be impeded, and their efforts will cease to produce the same effect, for they cannot individually repair the road. Such appear to be the peculiar circumstances that favour Great Britain; and that under disadvantages that are also peculiarly great, give hopes of prolonging the prosperity of the country. There is still, however, something wanting to increase our advantage. Any person acquainted with the manufactures of England will naturally have observed, that they are all such as meet with a market in this country. We have no mannfactories =sic= for goods, for the sole [end of page #273] purpose of our foreign markets; so that, though we consider ourselves as so much interested in foreign trade, yet we have adapted all our manufacturies, expressly, as if it were to supply the home market. This observation will be found to apply very generally, though there are a few exceptions, and though the quality of the goods manufactured, and intended for exportation, is adapted to the market for which they are destined. This last, indeed, is very natural, nor could it well be otherwise, but that is not going half the length necessary. Instead of carrying our goods into a strange country, and trying whether the inhabitants will purchase, we should bring home patterns of such articles as they use themselves, and try if we can supply them with advantage. Nations vary, exceedingly, in taste, and so they always will. The colour of the stuffs, the figures on printed cottons, and even the forms of cutlery, and articles of utility, are, in some sort, matters of taste. If we are to manufacture for other nations, let us try to suit their taste as we do to suit that of our own people at home. The reasons why we do not do this are pretty evident. In the first place, it would not answer the purpose of an individual to procure the information necessary, and make a collection where the advantage, in case of success, would be divided with all that chose to imitate them; besides this, in many cases, the means are wanting to procure what is necessary. The study of botany has been greatly advanced, and kitchen gardens greatly enriched, by the importation of exotic plants; and, probably, our manufactures might be greatly extended, if the same care were taken to collect foreign articles, the produce of industry. {210} We do not find every foreign plant succeed in this country, but if it seems pro- --- {210} A collection of all sorts of stuffs, with the prices in the country, where worn, and the same of all sorts of hardware, toys, trinkets, &c., should be made, at the public expense, and be open, on application, to the inspection of every person who might apply in a proper manner; and even specimens, or patterns, should be delivered out, on the value being deposited. In Persia, and many places, if we would copy their colours and patterns, we might sell great quantities of cotton stuffs. Our hatchets, and some other of our tools, are not made of a form liked by the Americans. -=- [end of page #274] bable, and worth trying, we never fail to do that; we trust it would be so with foreign manufactures, if we had proper patterns. A fair trial would be made, where success seemed probable, and the event would determine the future exertion. Accidental circumstances, a few centuries ago, brought new plants into this country, they now come into it in consequence of regular exertions for that purpose. What was then true, with regard to plants imported, is still true with respect to manufactures exported. We manufacture for ourselves, and if any thing of the same sort suits other nations, we send it, if not, there is no trade to that part; now, this must be allowed to be an accidental cause, for the promotion of foreign trade. Wherever it is possible to prevent the debasing the quality of an article, so as to hinder it answering the purpose, or gratifying the expectations of the purchaser, that ought to be done, for it has long been such a practice for English manufacturers to undersell each other, that they stick at no means of being able to do so. A variety of qualities, according to price, is necessary. All persons cannot afford to buy the best sort of goods; but, when a reduction of price is carried so far as to be obtained by making an article that is useless, this is a means of losing the trade; and it would be very easy to prove that such examples are very numerous, and that various branches of trade have been lost by that means. With regard to the extent of sea coast, the advantage that may be derived from the fisheries, and the benefit arising from that circumstance to commerce, they are natural advantages, and already perfectly understood. [end of page #275] CHAP. VIII. _Conclusion_. After having gone through the subject of the Inquiry, according to the mode that appeared to be the best, in which there has been one invariable rule, never to oppose theory and reasoning to facts, but to take experience as the surest guide, a recapitulation can scarcely be very necessary; but a conclusion, applicable to the situation of this country, certainly may. This, however, ought to be short, as the reader has all the materials for it in his own power, but it may save him trouble. The great end of all human effort is, to improve upon the means which nature has furnished men with, for obtaining the objects of their wants and wishes, and to obviate, to counteract, or do away those inconveniencies =sic= and disadvantages which nature has thrown in the way of their enjoyment. {211} With the mind, the same course should be used as with material bodies. It is impossible, in either case, to create; but we may turn the good to as profitable an advantage as we are able, and counteract the bad. To attempt to hinder men from following their propensities, when in power, is always arduous, generally ineffectual, and frequently impracticable; besides, when it can be done coercively, it infringes too much on the liberty and the enjoyment of mankind. A controuling power should be employed as seldom as possible. --- {211} Thus, in building a house, you form the stones, the clay, and other materials, which nature has furnished, in order to counteract the effect of heat or cold, moist or dry, as is most agreeable. Thus, men have learned to melt and vitrify the sand on the sea-shore, to make glass, grind it into a form, and make a microscope to view the most minute objects of nature, or to bring the most distant nearer, by the telescope: thus, rectifying the imperfection of human sight. Perhaps the burning of _coals_ to convert _water_ into _steam_, and, with that _steam_, raising _coals_ and _water_ from the mine is the most complete triumph of human skill over physical difficulties. How invention and discovery have improved the state of man since the time that the uses of corn and fire were unknown in Greece!!! -=- [end of page #276] To attempt to smother the passions is vain, to controul them difficult; besides, it is from energy, arising from passions or propensities, that all good, as well as all evil, arise. The business, then, will neither be to curb nor to crush, but to give a proper direction. This is to be done by good habits, when young, and a proper education, which cannot be obtained by individual exertion, without the assistance of government; an assistance that it is therefore bound to give. The general tendency of wealth and power are to enervate people, to make them proud and indolent, and, after a certain time, they leave a country. Individuals have no means to counteract this tendency, unless the governing power of the country gives a general impulse to them, in cases where they can act, and acts itself, with care and attention, where individuals can do nothing. In the case of education and manners, in the case of providing for children, individuals may do much, but government must not only give the means, but the impulse. In the case of the soil becoming insufficient for the inhabitants, and of taxes and national debt increasing, government may stop the progress; and in the cases of individual bodies trenching on the general weal, as well as in the tendency of inventions, capital, &c. to emigrate to other countries, the government may counteract, and, perhaps, totally prevent them all. In all cases, individuals will and must follow their lawful propensities, both in the means of employing capital and expending revenue; that is, they must be left free, in a general way, and only interrupted and regulated in particular cases; but, sometimes, the means must be furnished them of going right, and in other cases the inducements to do so augmented. We shall take the subjects in the same order that they followed in the Second Book. Though the manners of people, arrived at maturity, can only be regulated by their education, when young, if that is properly attended to, it will be sufficient; for though it will not prevent the generation that has attained wealth, from enjoying it according to the prevailing taste, it will prevent contamination being communicated with increased force, as it now is, to the children. The evils then will go on in a simple proportion; they now go on with a compound one, and the evils arising from the [end of page #277] luxury of each generation are doubled on that which follows after. If that is prevented, it will be all that probably is necessary; at all events it is probably all that is possible. In taxation, the government should study to do away what is obnoxious in its mode of collection, for that does more injury to the subject, in many cases, than an equal sum would do levied in another manner; and when payments are to be made, the mode should be rendered as easy as possible. Every unnecessary trouble should be avoided in collecting a tax. In the tax on receipts and bills, why should the sums to which they extend not be printed on them, so as to prevent error, which is sometimes attended with great loss, and always with inconvenience? If this had been done, how many law-suits, how many nefarious tricks, would have been prevented? But not to speak of those inconveniences only, how much useless trouble, uneasiness, and uncertainty, would have been saved in the common way of transacting business? In most cases, the subject is treated as if neither his time, nor his conveniency, nor his feelings, were worth attending to. This is equally impolitic and unjust: there is, perhaps, no country where people are more careful to keep within the pale of the law, than in England; but when they are within it, and have power, no people use it with a more insulting rigour; and for this there is no redress. In many cases, this would be entirely prevented by proper attention in first laying on the tax. There should be a board of taxation, to receive, digest, and examine, the suggestions of others. In short, pains should be taken to bring to perfection the system. At present, it is left to chance; that is to say, it is left for those to do who have not time to do it, and, of consequence, the blunders committed are seen by all the world. {212} --- {212} An act of parliament for a new tax is seldom ever right till it has been evaded a number of times, and even then in perfectioning =sic= it, an increase of revenue is the only object attended to; the conveniency of the subject is scarcely ever thought of. Taxes are laid on, that experience proves to be unproductive and oppressive, and sometimes are, and oftener ought, to be repealed; thousands of persons are sometimes ruined for a mere experiment. As the public pays for it, they, at least, might be indulged with a little attention; nothing costs less than civility. If half the attention were paid to preventing unnecessary trouble to the subject, [end of page #278] in cases of taxation, that is paid to the preservation of partridges, we should have the thing very differently managed. There should also be a public office, to hear just complaints against those who give unnecessary trouble, as there is for hackney coachmen. Men in all situations require to be under some controul, where they have power. Most of those who _drive_ others, go wrong sometimes, unless held in check by some authority. -=- The encroachments of separate bodies on the public, it is entirely in the power of the state to prevent. It is owing to weakness or carelessness, or ignorance, that governments admit of such encroachments, and they are easily to be prevented, partly, as has been shewn, by positive regulation, and partly by counteracting them, whenever they appear to be proceeding in a direction any way doubtful. When they do so, the conclusion may be, that they are working for themselves; and, in that case, they ought to be very minutely examined into; and, as all public bodies, and men belonging to a class that has a particular interest generally derive their means of trenching on the public from government, it may very easily controul their action, or counteract the effect. As lawyers have the administration of justice amongst themselves; as the executive part is in their hand, the law-makers should be particularly careful to make them amenable by law for bad conduct; it ought not to be left in the bosom of a court, to strike off, or keep on, an improper man. It is not right, on the one hand, that attorneys, or any set of men, should be subject to an arbitrary exertion of power; and it is equally unfair for them to be protected, by having those who are to judge between them and the public, always belonging to their own body. In defence of this, it is said, that attornies are servants of the court, and that the business of the court being to do justice, their correction cannot be in better hands. This is a tolerably ingenious assertion, if it were strictly true; but the court consists both of judge and jury; whereas, in this case, the judge assumes all the power; that is to say, when a case is to be determined relative to the conduct of a lawyer, a lawyer is to be the sole judge, and the jury, who represent the public, are to have their power set aside; thus, when their opinion is most wanted, it is not allowed to be given. Under such regulation, what real redress can be expected? As for the taxing costs by a master, it is [end of page #279] rarely that a client, from prudential motives, dares appeal; and, when he does, the remedy is frequently worse than the disease; and, even in this case a lawyer judges a lawyer. Without saying any thing against the judgments, it will be allowed, that in neither case is the principle of Magna Carta adhered to, of a man being judged by his peers; besides, in every other fraud there is punishment proportioned to the crime. In this case there is no punishment, unless the extortion is exorbitant, and then the punishment is too great. It ought to be proportioned to the offence, as in cases of usury, and then it would be effectual; but to let small misdemeanors go free and to punish great ones beyond measure is the way to elude punishment in all cases. A man ought to pay his bill; let the attorney take the money at his peril, and let there be a court to judge fairly, at little expense, and with promptitude, and punish the extortion by a treble fine. This would answer; but all regulations, relative to law, are left to the lawyers themselves; and the fable of the Man, the Lion, and the Picture, was never so well exemplified, Never, in any case, was redress more wanted; perhaps, never was it less likely to be had. The unequal division of property, as has been shewn, arises partly from bad laws, and partly from neglect of regulation; it is, indeed, one of the most delicate points to interfere in; nevertheless, as it has been proved, that laws do already interfere between a man and the use of his property, (and that it is, in some cases, necessary that they should do so) the question is reduced to one of circumstances and expediency, it is not one to be determined, in the abstract, on principle. It is also of too nice a nature to be touched roughly by general regulation; but, if large estates in land, and large farms, were taxed higher in proportion than small ones, it would counteract, to a certain degree, the tendency of landed property to accumulate in any one person's hand; and, except in land, property seldom remains long enough in one family to accumulate to a dangerous degree. {213} --- {213} Besides the above truth, of other property being liable to be dissipated from its nature the law of primogeniture does not attach on it, and the evil, if it did, would not be any way considerable. -=- [end of page #280] The increased consumption of a nation, which we have found one of the causes of decline that increases with its wealth, may be more effectually prevented than any other; not by interfering with the mode in which individuals expend their wealth, but by managing it so that vegetable food shall always be in abundance; and if so, the high prices of animal food, and the low price of vegetables will answer the purpose of counteracting the taste for the former, which is the cause of the dearth, and brings on depopulation; and therefore its hurtful effect will be prevented. {214} To this, gentlemen of landed property may object, and no doubt will object, but let them consider how rapidly ruin is coming on. At the rate matters now go, it would not be a surprising, but a natural effect, if most of the fields in Britain were converted into pasture, and our chief supply of corn obtained from abroad. The rent of land would, indeed, be doubled, the wages of labour would rise more than in an equal proportion, and a very few years would complete the ruin of this country. The landed proprietors surely would not, for any momentary gain, risk the ruin of themselves and of their country, for both may be the consequence of persisting in this system. {215} Or, if they will persist in it, will the government, which has other interests to consult and to protect, allow that single one to swallow up all the rest? It is true, the freedom of trade will be invoked; but the freedom of --- {214} Suppose that, of the waste lands, eleven millions of acres were cultivated, and that as much as possible (suppose five millions) were always in grain, those five millions would be able to supply the nation nearly in an ordinary year. A law might also be made, compelling all landlords and farmers to have only three-fourths in grass; this could be no hardship. There would then be always corn in plenty; monopoly would be prevented, because anxiety would be avoided; for a real deficiency to a small amount gives cause to great anxiety and grievous monopoly. The waste lands, when disposed of, might have whatever condition attached to them was thought fit. {215} We say persisting in this system, for when bread fell to be at a moderate price, last summer, (1804,) the outcry amongst the farmers was great and violent, and the legislature altered the law about exports; the consequence of this was, that the price of wheat rose regularly every week till it was doubled. All this was the effect of opinion, for the price of corn rose too quickly to allow any to be sent out of the kingdom, by the new law. -=- [end of page #281] trade is a principle not to be adopted without limitation, but with due regard to times and circumstances; let it then never be invoked upon a general question, without examination. Though this is the true way of arguing the question, let freedom of trade be taken in another way; let it be considered as a general principle, it will then be immutable, and cannot be changed. {216} The present corn-laws must on that principle be done away, and no bounty allowed for exportation or for importation, which indeed would be the best way; but, at all events, let us have one weight and one measure for both parties, and not invoke freedom of trade to protect the corn-dealers when prices are high, and enact laws to counteract the effects of plenty, which produces low prices. On this subject, government must set itself above every consideration, but that of the welfare of the country: it is too important to be trifled with, or to be bartered for any inferior consideration. The prices of our manufactures will soon become too high for other nations. Our inventions, to abbreviate labour, cannot be perpetual, and, in some cases, they can go no farther than they have already gone; besides, the same inventions, copied by nations where labour is cheaper, give them still a superiority over us. If increased consumption was the leading cause of the destruction of Rome, to which money was sent from tributary nations, and employed to purchase corn, (so that its supply was independent of its industry,) how much more forcible and rapid must be its effects in this country, living by manufactures, and having no other means to procure a supply from strangers, when that is necessary? {217} The burthens of our national taxes continuing the same, those for --- {216} When corn was dear, and the public cry was for regulation, it was announced, in the highest quarters, that trade was free. Ministers acted as if they had been the colleagues of of =sic= the economist Turgot; but, when prices fell, the language was changed, and new regulations were made. Compare the Duke of Portland's letter, in 1799, with the act for the exportation of grain, in 1804. {217} The money sent out of the country for corn is a direct diminution of the balance due to us from other nations, and it now amounts to near three millions a year on an average. The balance in our favour is not much more than twice that sum at the most, and was not equal to that till lately: the imports of grain may soon turn the balance against us. -=- [end of page #282] the poor increasing, our means diminishing; what could possibly produce a more rapid decline? The danger is too great and too evident to require any thing farther to be said; particularly as the last ten years have taught us so much, by experience. It is unnecessary to repeat what was said about the mode of reducing the interest of the national debt without setting too much capital afloat; without breaking faith with the creditors of the state, or burthening the industry of the country. On the increase of the poor and the means of diminishing their numbers enough has been said. That must originate with government in every case and in some cases exclusively belongs to it. They must act of themselves entirely, with respect to the very poor and to their children. With those who are not quite reduced to poverty, they should grant aid, to enable them to struggle against adversity, and prevent their offspring from becoming burthensome to the public. The other affairs well attended to, capital and industry will lose their tendency to leave the country; and, if they should continue to leave it, the case will be desperate; for, after the lands are improved, and the best encouragement given to the employment of capital, and to the greatest extent nothing more can be done. It will find employment elsewhere. The efficacy of a remedy, like every thing else in this world, has a boundary, but the extent and compass of that depends, in a great degree, on exertion and skill, and particularly so in the present instance. It remains with the government to make that exertion, either directly itself, or by putting individuals in the way to make it. The government of a country must then interfere, in an active manner, in the prevention of the interior causes of decline. As to the exterior ones, they do not depend on a country itself; but, so far as they do, it is exclusively on the government, and in no degree on the individual inhabitants. The envy and enmity which superior wealth create, can only be diminished by the moderation and justice with which a nation conducts itself towards others; and if they are sufficiently envious and [end of page #283] unfair to persist, a nation like Britain has nothing to fear. But we must separate from envy and enmity occasioned by the possession of wealth, that envy and enmity that are excited by the unjust manner in which wealth is acquired. In respect to Britain, it has been shewn, that the envy and enmity excited, are chiefly by her possessions in the East Indies; we have seen, also, that the wealth obtained by those possessions is but very inconsiderable, and that they have, at least, brought on one-third of our national debt; it would then be well, magnanimously to state the question, and examine whether we ought not to abandon the possession of such unprofitable, such expensive, and such a dangerous acquisition; till we do so, it is to be feared that we shall never have a true friend, nor be without a bitter enemy. We have had experience from America, which is become precious to us now, that we have lost it, and which was a mill-stone about our neck, while we were in possession of it. Let us take a lesson from experience, and apply its result to what is at this moment going on, and we cannot mistake the conclusion to be formed. Let the nation be above the little vanity of retaining a thing, merely because it has possessed it. {218} Let the great general outline of happiness, and of permanent happiness, be considered, and not that ephemerical splendour and opulence, that gilded pomp that remains but for a day, and leaves a nation in eternal poverty and want. Britain can only be firm and just in its conduct towards other nations, give up useless possessions, defend its true rights to the last point, encourage industry at home, and take every step to prevent the operation of those causes of decline that we have been examining; let merit be encouraged, and --- {218} In this country, public opinion would be against a minister, who proposed to give up any possession abroad, however useless. This is owing to the pride occasioned by wealth. The people are not rapacious for conquests, but once in possession they are very unwilling to let them go. It is not necessary to quit the trade to India, or abandon all our possessions, but to diminish our establishments, circumscribe our conquests, and not aim at possessing more than we had thirty years ago. That moderation would conciliate all nations, and envy would find its occupation gone. -=- [end of page #284] let it never be forgotten or lost sight of, that wealth and greatness can only be supported, for a length of time, by industry and abilities well directed, guided by justice and fair intention. This is the truth of which we are never to lose sight. We may keep sounding for the bottom, and reconnoitring the shore, the better to direct our steps, but we must never lose sight of the beacon, with the help of which alone we can safely enter the wished-for harbour. There is a great disposition in the human mind to give the law, when there is the power of doing it. The abuse of power appears to be natural and dangerous; yet, we have seen, that most nations, both ancient and modern, have fallen into that error. The hour of British insolence has also been mentioned, and, certainly, with regard to America, we did not more materially mistake our power than we did the rights of those with whom we had to treat. It is much to be questioned, whether the undaunted and brave spirit of our naval commanders does not, in some cases, lead them too far in their rencontres with vessels of other nations on the high seas, and we ought not to forget that, in this case, the match played is that of England against all the world. As no other nation is under the same circumstances with this, no one will be inclined to take our part, or to wink at, or pardon, any error we may commit. The Hans Towns, at one time, were paramount at sea; they could bid defiance to all the world; and, at first, they did great actions, and employed their power to a good purpose. They destroyed the pirates, and humbled the Danes, after they had robbed both the English and French, and burnt both London and Paris; but they also had their hour of insolence. They began to be unjust, and to be insolent, and the cities that had begged to be united to them, in the times when their conduct was honourable and wise, withdrew from the participation of their injustice, pride, and arrogance. While they attended to protecting themselves, and to following their own affairs, they did numberless good offices to the ships of foreign nations; they had universal good will and commanded admiration. But, when they became supercilious, and a terror to others, their pride was soon humbled, never again to rise. [end of page #285] In considering the whole, there is a considerable degree of consolation arises to British subjects, to see the very mistaken comparisons that have, in the first place, been made between Rome and Carthage; and, in the second place, the still more unfair comparison made between those two rival powers, and France and England. As opinion and belief have a great power over the minds of men, whether they act in conformity to their views and wishes, or in opposition to them, it is of great importance to remove an error, which was of very long standing, very general, and had the direct tendency to make the people of both countries think the parallel well drawn, and therefore conclude that this mercantile country must, sooner or later, sink under the power of France. But, when it appears that most authors have been inadvertently led into the same mistake, with respect to those two ancient republics, and that, even if there had not been the mistake, the parallel drawn would not have been true, then France will probably cease to found her hopes on that comparison, and we may, at least, cease to feel any apprehension from so ill-grounded a cause. That a nation once gone on in the career of opulence can never go back with impunity is as certain as its tendency to going back is. The possession of riches is of a transitory nature, and their loss attended with innumerable evils. Though nations in affluence, like men in health, refuse to follow any regimen, and use great freedom with themselves, yet they should consider there is a vast difference. A man, well and in health, is in his natural state; yet even that will not resist too much liberty taken with his constitution; but a nation that has risen to more wealth than others is always in an artificial state, insomuch as it owes its superiority, not to nature, but either to peculiar circumstances, our =sic--sc.: or = superior exertion and care; it is therefore not to be supposed capable of being preserved, without some of that attention and care, which are necessary to all nations under similar circumstances, and which, in the history of the world, we have not yet seen one nation able to resist. There are sufficient circumstances, new and favourable in the [end of page #286] case of Britain, to inspire us with the courage necessary for making the effort. There is one part of the application of this Inquiry, to the British dominions, left intentionally incomplete. It has been left so with a design to keep clear of those discussions that awaken a spirit of party, which prevents candid attention. It is of little use to enquire, unless those who read can do it without prevention or prejudice. It is therefore, very necessary not to awaken those feelings, by adding any thing that may rouse a spirit of party; and it is difficult to touch matters that concern men, deeply interested in an object, without that danger. What seems impartial to an unconcerned man, seems partial to those who are concerned; and sometimes the observer is blamed by both the parties, between whom he thinks he is keeping in the middle way. The advantages of the form of government adopted in Britain have been fairly stated in account; but constitutions and forms of government, however good, are only so in the degree; they are never perfect, and have all a tendency to wear out, to get worse, and to get encumbered. The French were the first, perhaps, that ever tried the mad scheme of remedying this by making a constitution that could be renewed at pleasure. But it was a violent remedy, to implant, in the constitution itself, the power of its own destruction, under the idea of renovation. The English constitution has taken, perhaps, the best way that is possible for this purpose; it has given to king, lords, and commons, the power of counteracting each other, and so preserving its first principles. Without going into that inquiry, it is sufficient to say, that the advantages which may be derived from the British constitution can only be expected by the three different powers having that will, and exercising it; for, if they should act together on a system of confidence, without an attention to preserving the balance, they must overset, instead of navigating the vessel. The individuals of whom a nation is composed, we have seen, never can, by their efforts, prevent its decline, as their natural propensities tend to bring it on. It is to the rulers of nations we must look for the [end of page #287] prolongation of prosperity, which they cannot accomplish, unless they look before them, and, in place of seeking for remedies, seek for preventatives. It is very natural and very common for those who wield the power of a great nation, to trust to the exertion of that power, when the moment of necessity arrives; but that will seldom, if ever, be found to answer. The time for the efficacy of remedy will be past before the evil presents itself in the form of pressing necessity; and that very power, which can so effectually be applied in other cases, in this will be diminished, and found unequal to what it has to perform. [end of page #288] _Application of the present Inquiry to Nations in general_ IF there is a lesson taught by political economy that is of greater importance than any other, it is, that industry, well directed, is the way to obtain wealth; and that the modes by which nations sought after it in the early and middle ages, by war and conquest, are, in comparison, very ineffectual. Notwithstanding that princes themselves are now convinced of the truth of this, by a strange fatality, the possession of commercial wealth has itself become the cause of wars, not less ruinous than those that formerly were the chief occupation of mankind. It was discovered a few centuries ago, that small principalities, and even single cities, acquired more wealth by industry, than all the mighty monarchs of the middle ages did by war; but we are not yet advanced to the ultimate end of the lessons that experience and reason give in regard to the interests of nations, with regard to wealth and power. To suppose that mankind will ever live entirely at peace is absurd, and is to suppose them to change their nature. Such a reverie would only suit one of the revolutionists of France; but let us hope that there is still a possibility to lessen the causes of quarrels amongst nations. The true principles of political economy lead to that, and the object is sufficiently important. By _agriculture_ and _manufactures_; that is, by producing such things as are conducive to the happiness of man, the _aggregate wealth of mankind_ can alone be increased. By _commerce_, which consists in conveying or selling the produce of industry, the aggregate wealth of mankind is not increased, but its _distribution is altered_. {219} --- {219} Though the produce of soil is not obtained without industry, yet, to make a distinction that is simple and easily understood and retained, we suppose manufactured produce to go by the name of the produce of industry. -=- [end of page #289] As individuals, and sometimes nations, have obtained great wealth, not by producing, but by altering the distribution of wealth produced; that is, by commerce, that seems, to those who aim at wealth, to be the greatest object of ambition. If every nation in the world were industrious, and contented with consuming the articles it produced, they would all be wealthy and happy without commerce; or, if each nation enjoyed a share of commerce, in proportion to what it produced, there would be no superiority to create envy. Variety of soil and climate, difference of taste, of manners, and an infinity of other causes, have rendered commerce necessary, though it does not increase the aggregate wealth of mankind: but nations are in an error when they set a greater value on commerce than on productive industry. Some nations are situated by nature so as to be commercial, just as others are to raise grapes and fine fruits; therefore, though one nation has more than what appears to be an equal share of commerce, it ought not to be a reason for envy, much less for enmity. Some nations also find it their interest to attend chiefly to agriculture, others may find it necessary to attend more to manufactures; but that ought to be no cause of enmity or rivalship. With a view, if possible, to diminish a little the envy and rivalship that still subsists, let us take a view of this business in its present state. Britain, the wealthiest of nations, at this time, sells little of the produce of her soil, and a great deal of the produce of her industry; but she purchases a great deal of the produce of the soil of other countries, though not much of their industry: in this there is great mutual conveniency and no rivalship. In fact, her wealth arises nearly altogether from internal industry, and, by no means from that commerce that is the envy of other nations; for it is clear, that whoever produces a great deal may consume a great deal, without any exchange of commodities, and without commerce. The English, number for number, produce more, by one-half, than [end of page #290] any other people; they can, therefore, consume more; they are, therefore, richer. If France would cultivate her soil with the same care that we attend to manufactures, (at the same time manufacturing for herself as much as she did before the revolution,) she would be a much richer country than England, without having a single manufacture for exportation. Her wines, brandies, fruits, &c. &c. would procure her amply whatever she might want from other nations. Let France make good laws to favour industry; and, above all, render property secure, and she will have no occasion to envy England. Russia, part of Germany, Spain, Italy, and Portugal, are all in a similar situation with France in this respect; they will each be as rich as England the moment they are as industrious, and have as many inventions for the abbreviation of labour. Holland, Sweden, Denmark, Prussia, and some parts of Germany, are, more or less, in the same situation with England; they require to pay attention to manufactures, for they have not the means of raising produce enough to exchange for all they want. If there is any occasion for rivalship, or ground for envy, it is then but very small, and it happens that the rivalship which exists is between those nations that, in reality, ought to be the least envious of each other, the nations who have the fewest quarrels are those who really might be rivals. Rivalship is natural between those who are in similar situations. France, Spain, and Portugal, might be rivals. England, Holland, Prussia, and Denmark, might also be rivals; but there can be no reason for France envying England her manufactures and commerce, any more than for England envying France for her climate, soil, extent, =sic= of territory and population. The way to produce the most, being to give industry its best direction. Nations, differently situated, ought never to be rivals or enemies, on account of trade. If those, who regulate the affairs of nations, were to consider this in its true light, there would be less jealousy and more industry. [end of page #291] There appears to be only one real cause for war, so far as it is occasioned by a wish to obtain wealth; and that arises from possessions in the East and West Indies, and in America. If there were no such possessions, or if they were more equally divided, there would be very little cause for war amongst nations. It may, very possibly, at some distant time, be an object for a general congress of nations, to settle this point; so that it shall be no longer an object of jealousy. This can be done only by abandoning entirely, or dividing more equally; but, at present, the animosity and enmity occasioned is considerable, though not well founded. The Spaniards are not envied for the possession of Peru, nor the Portuguese for the Brazils, though they draw more wealth from them than ever England or Holland did from their foreign possessions; yet, England is, and Holland was, an object of envy, on account of possessions abroad. This is the more unreasonable, that the Spaniards and Portuguese keep the trade strictly to themselves, while England allows nations, at peace with her, the most liberal conditions for trading with her Indian possessions: conditions, indeed, that give them a superiority over ourselves. {220} This conduct ought not to bring down upon England, envy or enmity, (though it does); for the fact is, that if all nations were at peace with England, they might, if they had capital and skill, (and that they have not is no fault of England,) trade with India to great advantage, while we should have the trouble of defending our establishments, and of keeping the country. Before the revolution, France obtained more produce from Saint Domingo alone, in one year, than Britain did from all her West India Islands together, in three years, and much more than England did from all her foreign possessions together; yet, France was never obnoxious to other nations on that account. --- {220} This may seem strange, but it is literally true; the quarrels between the India Company, and the free trade, as it is called, are an ample proof of the truth of it. The free-trade-merchants chiefly act under the name of agents for Swedish and Danish houses, so liberally has England acted with regard to neutral nations. -=- [end of page #292] It appears, then, very evident, that the envy and jealousy do not arise from the _magnitude or value of foreign possessions_, but from some other cause, though it is laid to that account. This cause is worth inquiring into. It appears that Holland and England have, alone, been causes of jealousy to other nations, on account of foreign possessions; but, that Spain, Portugal, and France, never have, though there was more real reason for envy and jealousy. The reason of this appears to be, that those nations, who excited no envy, escaped it, because their indolence, or internal economy, prevented them from becoming rich; but, that Holland and England, which, in reality, owed their wealth chiefly to internal industry, and very little of it to foreign possessions, have excited great envy, and that England does so to the present hour. {221} It is, then, wealth arising from industry, that is the object to be aimed at, and that cannot be obtained by war or conquest. The purpose is not advanced, but retarded, by such contests; and if those, who rule nations, would condescend to enter into the merits of the case, they would find, not only that the happiness of the people, and every purpose at which they aim, would be better answered than by contesting about the means of wealth, which, consisting in internal industry, does not admit of a transfer. One nation may be ruined, and another may rise, (as, indeed, they are continually doing,) but one nation does not rise merely by ruining another; the wealth of a nation, like the happiness of an individual, draws the source from its own --- {221} From both the East and West Indies, England never has, till within these last ten years, drawn three millions a year, that could be termed profit or gain, and, even in the last and most prosperous times, not eight millions, which is not equal to more than one-twentieth part of the produce of national industry at home. Even the foreign commerce of England, except so far as it procures us things we want, in exchange for things we have to spare, is not productive of much wealth. Supposing the balance in our favour to be six millions a year, which it has never uniformly been, it would only amount to one- twenty-fourth of our internal productive industry. In short, we gain five times as much by a wise division of labour, the use of machinery, ready and expeditious methods of working, as by the possession of both the Indies!!! -=- [end of page #293] bosom. The possession of all the Indies would never make an indolent people rich; and while a people are industrious, and the industry is well directed, they never can be poor. It is to be hoped, that the time is fast approaching, when nations will cease to fight about an object that is not to be obtained by fighting, and that they will seek for what they want, by such means as are safe and practicable. [end of page #294] ====== INDEX. ====== ****************************************************************** [Transcriber's note: the original work itself omits the page references in the many instances where there is a trailing comma.] ****************************************************************** [=sic=--no section heading in original] ABSOLUTE monarchy, in some particular instances, has an advantage over limited monarchy; particularly in preventing the infringement made by corporate bodies or professions on the public, 117, 118, 119. AGES, middle, commerce made slow progress during them, 3.--What places flourished in them, 44 to 50. AGE, golden, the tradition, if that founded in any thing, must have been a very ignorant one, though very happy, 214. ALEXANDER, the Great, history confused before his time, 20.--His conquests had no permanent consequences, 24.--The only permanent consequence was Alexandria supplanting Tyre, 52.--His expedition to India was on purpose to get possession of the fine countries that produced aromatics and precious stones, 53. ALEXANDRIA, rendered Egypt first a commercial country, and brought on the decline of Carthage, 24.--Loses its commerce in the 7th century by the conquests of the Mahomedans, 54, 55. ALFRED the Great, made many efforts to render the people happy, 118. AMBASSADOR. See Diplomacy. AMBITION, sometimes renders labour an enjoyment, 82. AMERICA, its discovery forms a new epoch in the history of commerce, 3.--Little similarity between it and other nations, 103.-- United States, of, their revenues, ib.--May take all the goods Britain can manufacture, 195.--British exports to, consist nearly all of manufactured goods, 204.--Probability of its great increase and consumption of English manufactures, 268, 269.--Encourages arts and inventions, but agriculture a better object to it, 273. ANCIENT nations. See Nations. ANIMAL food, much used in northern nations and by manufacturing people, 138.--Its effects on population, 139 to 146.--Price compared with bread, 147.--In case of the demand becoming too great, a remedy proposed, 155. ANTWERP, at one time acted as a sovereign, 47.--Became, in the north, what Venice was in the south of Europe, 57. APPRENTICES. See Education. ARABIAN Gulf. See Red Sea. ARKWRIGHT, Sir Richard, as an inventor met with great difficulties, 203. ARTS. See Manufactures. ARTS, fine. See Fine Arts. ARTISTS, not unfit for soldiers, 32.--Banished by luxury from a country, 113. ASIA, passage to it by the Cape of Good Hope a new aera in commerce, 3.--Its mode of fighting with elephants only disconcerted the Romans once, 31. ASSIGNATS. See France. ATHENS. See Greece. AUGUSTUS, his resolution to kill himself when supplies of corn were likely to fail, 35. [=sic=--no section heading in original] BABYLON. See Syria. BALANCE of trade, of England, has never much exceeded five millions.--To be seen on the chart 3, p.213, during 105 years.--Is not equal to more than one twenty-fourth of the produce of industry, 293. BALANCE of power could not preserve a nation from interior causes producing decline, 185. BALTIC Sea, manufacturers early established on its southern shores, 45 to 48. BARTER, not an innate principle, as Dr. Smith thinks, 5, 6. BLACK Sea, a new market opened to commerce,195. BIRMINGHAM division of labour renders business easy, 217.-- Apprenticeships not necessary to learn the art, but for other reasons.-- Recruiting service succeeds there, ib. BOARDING Schools. See Education. BODIES Corporate and Public, their tendency to trench on the public, 117 to 124. BOULTON, M. Esq. his spirited conduct in bringing forward the improvements, invented by Mr. Watt, on the steam-engine, 203. BORROWING. See Money. BRAZILS. See Portugal. BREAD, proportion between the price of, and butchers meat, 140.-- Prices in Paris and London,164. BRITAIN, in what its power and wealth consist, 191.--Its interior situation and exterior, 192, 193, 194, 195.--Its conquests and colonies, 196 to 200.--Its great increase, 201.-- [end of page #295] Farthest advanced in manufacture, the consequence of that investigated, 203, 204, 205.--Comparison between its general trade and that to India, 206 to 211.--Begins to encourage agriculture, 213.--Its exports and imports represented in chart 3 described, 213, 214. BRUGES acted once as a sovereign, 47.--Became a depot for India goods in the north, as Venice was in the south, 157. BURKE, Right Honourable Edmund, his opinion relative to exterior causes of decline, 176. BUTCHERS meat. See Animal Food. C. CAPE of Good Hope. Its passage a new epoch in commercial history, 3. CAPITAL, the result of past industry, 161.--Commands trade, but supplies poor countries at the expense of richer ones, 181.--Tends to leave a country when it becomes too abundant, 161, 162, 163.-- Would leave England if the sinking fund were to operate long in time of peace, 242. CARTHAGE, of wealthy places alone escaped the conquests of Alexander, 24.--Mistake relative to its state, 32, 33.--Its fall ruined the Roman manners, ib.--Comparison between it and Rome unfair, 36, 37, 38.--Was never so degraded as Rome, ib. CASPIAN Sea, goods brought by that route from India, 56. CHANGES, interior, take place by degrees, 89.--Most rapid and observable amongst the Romans, 91. CHARLEMAGNE, from the fall of the Roman empire till his time, nothing like wealth or power, 44.--Paved the way for civilizing and enriching the north of Europe, 45. CHARTS, description and explanation of, illustrating the rise and fall of nations, 78, 79, 80.--Statistical explanation of, 190.--Of commerce, exports and imports, 213.--Of revenue and debts, 214. CHILDREN. See Education. CHRISTIAN religion most favourable to industry, 263, 264, 265, 267. COMMERCE, progress slow in feudal times, 3.--Changed its abode when the magnet rendered navigating the ocean practicable, 4.-- Commercial wealth degrades a nation less than wealth obtained by conquests, 33.--Commercial spirit, its operation on national character, 37.--Commerce with India, the only one in the ancient world, 51.-- How carried on, 52.--Its vicissitudes, the envy it created, quarrels and revolutions it occasioned, 53 to 59.--Of Britain during the last fifteen years; the increase great, but not arising from any permanent cause, 193.--Its dependence on credit, 201. CONSTANTINOPLE shares in the trade of India, 56.--Revolution occasioned partly by the contests about that commerce, 57.--Sunk before the discovery of America, by the conquest of the eastern Empire by the Turks, 68. CONSUMPTION of food regulates the population of a country, 140.-- Its nature and tendency in northern nations, 141, 142, 143.--Requires attention from government, 146. CONQUEST first altered the natural state of the world, 2.--Its first effect to lessen taxes, 35.--Ultimately degrades a nation, ib. CONDUCT in life. See Education. CORN, donations of at Rome, 35.--State of crops in England, 145.-- Impossibility, if it fell much short, to find ships to bring over the quantity wanted, ib.--calculations concerning, 146 to 154. CREDIT necessary to carry on trade extensively, 202, 203. CRUSADES tended to extend civilization and commerce, 45. CUSTOMS, the first great branch of public revenue, 106. CURING herrings, an improvement in the mode of, raised Holland above Flanders, 47. D. DEAD languages. See Education. DECAY. See Decline. DECLINE of nations. Though it cannot be finally prevented, may be considered as if it never were to come on in this Inquiry, 7.--Are of two sorts, 10.--Of the Carthaginians attended with less degradation than that of the Romans, 36.--Mistaken or misrepresented by historians in the instances of Rome and Carthage, 37.--Cause of it amongst the Romans, 39, 40, 41, &c.--Cause of in Flanders, 47.-- General in all nations that had been wealthy at the time of the discovery of the passage to India and of America, 49.--Of the Turkish government, 69.--Occasioned by taxation, 167.--How to be prevented or retarded, 169.--Interior causes may be counteracted, ib.-- In general hastened by the conduct of governments, 171.--Might be otherwise, ib.--Certain causes of, common to all nations, 173.-- External causes of operating on a nation, envy, enmity, &c. 176, 177, 178.--Causes of peculiar to Great Britain, 257, 258, 259, 260. DENMARK. Example of comparative power.--Occasions the Hanseatic League by its piracies, and is afterwards pillaged and nearly ruined by that confederacy, 48. DEPRECIATION of money counteracts the effect of taxation, 114, 115.--Takes place where ever wealth is, 164.--Its effects in dealing with poor nations, 165. DIPLOMACY. The circuitous conduct ascribed to ambassadors, partly necessary and not to be blamed, 186. [end of page #296] DIVISION of land. See Property. DIVISION of property. See Property. DUTCH. See Holland. E. EAST INDIES. See India. EASTERN Empire. See Constantinople. EDUCATION of children in all countries grows worse as a nation grows more wealthy, 90.--Brings on a change of manners, 91.-- Would be better managed if parents were aided by govetnment, =sic= 94.--Cannot be properly taken care of without the aid of government, 95.--In what it consists generally, 96, 97, 98.--Has been in general wrong understood =sic= by writers on it, 98, 99.--Female, its importance, ib.--Has been ill understood and conducted, 100, 101.-- Its importance, 216.--Of the higher classes of society is well enough, 217.--Not so of the lower, ib.--Apprenticeships, their advantages, 218.--To become a good member of society, the end of all education, whatever the rank or situation, 219.--Dr. Smith's opinion about apprenticeships examined, ib. and 220, 221, 222, 223, 224, 225, 226.-- Of females in England badly conducted, 227, 228. EGYPT, one of the first countries settled, 20.--Its fertility, &c. 21.-- Its surplus industry appears to have belonged to the sovereign, 22.-- Shared in the commerce to India at an early period, 51, 52.--Became the chief channel for the trade to India after the founding of Alexandria, 54. ELIZABETH, queen, Spanish armada in her reign not equal to the privateers of our merchants now, 8.--Endeavoured to enrich the country, 118. EMIGRANT ladies, astonishment shewn by them at the little progress made in female education at public schools in this country, 228. ENERGY of those who attack greater than that of they =sic= who defend, 17.--Occasioned by poverty, and necessity the cause of changes and revolution, 19. ENGLAND began to see the advantages of manufactures and commerce very late, 48, 74.--Its form of government a great advantage, 191.--Manners likely to change, 193.--Increase of its trade since 1791, owing to temporary causes, 195.--The American and Russian markets great and increasing, 204.--Envy and enmity excited by its conquests in India, 206.--Effects of taxation on it, 229, 230, 231, 232, 233.--Its national debt, 234 to 246.--Causes of decline peculiar to it, 257 to 260.--Circumstances peculiarly favourable to it, 261 to 270.--Ought not to be envied for its possessions in India 291.-- Owes its wealth chiefly to internal industry, 293. ENVY leads to rivalship in peace and brings on war, 14.--One of the external causes of the fall of nations, 175.--Occasioned the fall of Jerusalem after the death of Solomon, 177.--Excited by the wealth of England, and particularly by its possessions in the east, 206. ESPRIT DE CORPS. See Bodies public and corporate. EUPHRATES. See Syria. EUROPE, wealth and power unequally divided in it, 13.--Division of states, with the population and revenues, illustrated by a statistical chart,190. EXCISE, established long after the customs, 107. EXPENDITURE of England consists chiefly in interest of debt, 233.-- Cannot by any economy be much reduced in time of peace. ib. EXPORTS, chart shewing, 213. EXTERNAL causes of decline, cannot be prevented altogether by internal arrangements, but their effect greatly diminished, 173.--More simple than the internal causes, 175.--Envy and enmity, ib.--Opinion of Mr. Burke, 176, 177, 178.--Causes arising from poor nations having the advantage over rich in all dealings, 179.--High value of money in poorer nations, 182.--Conclusion of exterior causes, 184 to 187. F. FALL. See Decline. FINANCES. See Revenue. FINE arts do not flourish in a very wealthy country, 113.--Very different as to their improvement, from the mechanic arts. FLANDERS enriched by manufactures, 3, 46.--The discovery of a bettar =sic= method of curing herrings by the Dutch is hurtful to it, 47. FLORENCE served as a refuge for the nobles of Rome, when the city was taken by the Goths, 44. FOOD. See Animal Food and Corn. FORCE, human, the superiority it gave nearly done away by the invention of gun-powder, 4. FORESTALLING. See MONOPOLY. FRANCE has, since the revolution, invented new modes of fighting, 31.--Does not resemble Rome, 38.--Its assignats the principal cause of the nature of the revolution, 48.--Its monied capital was sent away when the revolution broke out,163.--Its burthens before the revolution, 169.--It expended great sums in the last war, 189.--It, before the revolution, gained more by the west-India trade than any other nation, 193.--Have now nearly lost it, ib.--Its capital greatly diminished, ib.--Will probably never possess great West-India trade again, 195.--Will never cease to be an enemy to England, 196. FREED men. FREE revenue. See Revenue. FUND, public. See National Debt. FUND, sinking. See National Debt. G. GAMING, though attended with painful sensations, is oftener followed from propensity, as a mode of occupying the mind and interesting it, than from a love of gain, 83. [end of page #297] GENTLEMEN resemble each other pretty nearly in all countries, 218. GEOGRAPHICAL discovery so far as connected with the rise and fall of nations nearly at an end, 12. GENOA, why put with Venice in the chart of commercial history, 56.-- Its greatness, ib.--Loses its superiority, 57.--Its power in the Black- Sea, ib. GOLD. See Money. GOLDEN Age. See Age. GOVERNMENTS ought to aid in the education of the lower and middling classes, 94, 95.--Neglect education in the useful arts, 98.-- Should counteract the internal causes of decline, 172, 173, 187.-- Government of Great Britain should take care of education, 225. GRAIN. See Corn. GREEKS, their education peculiar to themselves, 25.--Studied Egyptian learning, 98, 99. GUN-POWDER changed the art of war, 4. H. HANS Towns rose first to wealth in the north of Europe, 3.--Became formidable towards the end twelfth century, 45.--Arose from the circumstances of the times and necessity.--Became conquerors, 48.-- Began to decline through pride and luxury, 49. HERRINGS, a new mode of curing them, discovered by the Dutch, raised that country, and began to make Flanders decline, 47. HISTORY, an appeal to the best mode of inquiry, 1.--Dr. Robertson's complaint about the scarcity of materials, ib.--Is confused previous to the conquests of Alexander the Great, 20.--Commercial chart of, for 3005 years, 78. HOLLAND compared to the Phoenicians, 46.--New method of curing herrings raised it above Flanders. Great industry and economy, 48.-- Triumph over Spain at home, and Portugal in India, 62, 63, 64, 65.-- Increase in wealth till the end of the seventeenth century, 66.--The best example of overcoming difficulties, ib.--How it began to fall, 67.--How it at last sunk before France, 68. HORSES, there =sic= great consumption of food, 147, 157. HOUSE rent. See Rent. HUME, David, Esq. his errors respecting national debt, though a man of great abilities, 114. I. JAMES I. did not understand the true reason, why the Scotch were greater lovers of liberty in his time than the English, 280. IDLENESS, incompatible with riches in a nation, in every case, but not so with an individual, 82. IMPORTS of, England, chart of, 213. INDIA. Its productions seem to have been the first objects of commerce, 51.--Digression concerning this trade, 51 to 69.--Its trade and possessions excite envy, 193, 194, 195.--Our possessions too great, 197.--Budget, its statement and calculation of sums remitted home, 198.--Has lost the cotton trade notwithstanding the low rate of labour, 200.--Its trade compared with that of the country at large, 206, 207.--A peculiar cause of other nations envying England, 257.-- Ought not to be so, as they produce very little wealth compared with what springs from national industry, 291.--The division of labour, ready methods of working, and inventions produce more wealth than both the Indies, 293. INDIES, West, the trade of, lost to France, 193.--Trade of England to, of a permanent nature, 195.--A cause of envy, 196, 197, 198, 199.-- Ought not to be a cause of envy. INDIVIDUALS, some may live without labour, but all those of a country never can, 82.--Can pay for certain things, for which they cannot provide, 95. INDUSTRY caused by poverty and necessity, 19.--A more permanent source of wealth than any other, 42.--Industry in youth, the great advantage of through life, 84.--Diminishes as wealth increases, 90.--Tends to leave a wealthy nation after a certain time, 161.-- Industry of England, the great support of its wealth, and if other nations were as industrious, each in the way most advantageous, they would be as rich as England, 292. INTERIOR causes of decline enumerated and examined as habits of life and manners, 81 to 93.--Arising from education, 94 to 101. The effects on the people and the government, from 102 to 115.--Arising from public bodies, from 116 to 124.--Arising from unequal division of property and employment of capital, from 125 to 136.--Arising from the produce of the soil, becoming unequal to the consumption, from page 137 to 160.--From the tendency of industry and capital to leave a wealthy country, from 161 to 166.--Conclusion of interior causes, from 166 to 174. INTEREST, compound, its progress, more certain in paying off debts than in accumulating capital, 241. INVENTIONS, three great ones almost totally changed the state of mankind, 4.--Inventions render more capital necessary to commerce, 126.--Is one of the things that renders our superiority in manufactures secure, 202.--A nation that remains stationary will soon be surpassed, 203. JOHNSON, Dr. would have been a greater man if he had lived in a poorer nation, 113. ITALY was unable to supply its inhabitants with food in the splendour of the Roman empire, 43. L. LABOUR, some individuals may, but a nation never [end of page #28] can exist without it, 82.--Division of, produces great wealth. LAND, price of, two centuries ago, and comparison of the profit of purchasing, or lending on interest in a nation increasing in wealth, 130.--Its unequal division discourages industry, 132, 133, 134.--Total amount of rent in England, 153, 154, 155. LANGUAGES, dead. See Education. LAWS better administered in England in criminal than civil cases, 119.--Tend to become more complicated, 123. LAWYERS, their ESPRIT DE CORPS, 120, 121, 122.--Individuals have no means to resist their incroachments, 123.--Government ought to do it, 124. LIVERPOOL fitted out privateers last war, equal in tonnage and men to the Spanish Armada, 8. LOANS. See National Debt. LOCAL situation, one of the causes of wealth, 2.--The discoveries in geography and navigation have changed that with regard to particular nations, LONDON burnt by the Danes, 9.--Rent and taxes heavier than in any other place, 237.--People prefer living in London, where all is dear, to the cheaper parts of England, 238, 239. M. MISERS, never a race of them for three or four generations, 83. MOGUL, the prodigious and rapid decline of his empire, 197. MONEY corrupted every thing at Rome when its decline begun, 46.-- Money to borrow, only to be found in Italy and Flanders, 48.--Let =sic= out at interest, loses; laid out to buy land, gains in a country growing rich, 163.--Its value less in England than any country except America, 165.--Though the best measure of value is not accurate, being different in different countries, 182.--Its great value in poor countries serves to enrich them in dealing with wealthy nations, 183. MONARCHY. See Absolute Monarchy. MONOPOLY not an imaginary evil, 49.--Dr. Smith's opinion contradicted by experience, 150.--Proof of its existence, 151, 152, 153, 154.--Augments rent, and labour, and prices, 153. MONTESQUEU, his mistake relative to Rome and Carthage, 32.-- His opinion of the affairs of Rome, 40. MONTAGUE, chancellor of the exchequer, attended by the lord mayor and sheriffs, went from shop to shop in London to borrow money, 239. MORALS. See Education. MOTHERS. See Education. MACHINERY. See Manufactures. MAHOMEDAN RELIGION, its rapid establishment, 54.--Its effects on the commerce with India, ib. MANNERS greatly corrupted at Rome, 43.--A change in them constantly going on, and tending to bring decline, MANUFACTURES settled early on the shores of the Baltic, 3.-- Those who possess them first, lose them by imitation of others, 14.-- India surpassed in them by England, 63.--In ancient times, only, extended to luxuries for the great and simple necessaries for the poor, 73.--Manufacturers less splendid than merchants, 143.--The working men consume more animal food than the same rank of people in any other nation, 144.--England considered as excelling all other nations for manufacturers =sic=, 200.--The effects of the inventions of the steam engine and spinning machines, 203.--Scarcely any thing sold to the American states, except our own manufactures, 204.--Southern nations cannot rival northerly ones, 210.--Manufactures, and agriculture, more conducive to wealth than commerce, are not the same thing, 209. MEDITERRANEAN, its shores the first abodes of commerce, 3 and 4, 20.--Lost its importance by the discovery of America, the magnet, and the passage to India by the Cape, MERCHANTS less splendid than conquerors and planters, 143.--Can have no rule of conduct in transactions but their own advantage, 181. N. NATIONS, none that ever submitted to pay tribute, ever flourished long, 40.--Enriched by commerce, not so certain to decline as by conquests, 41.--There =sic= situation with respect to wealth and power previous to the discovery of America, 49.--Feeble nations have some advantage in knowing their weakness, 171.--Exterior causes of their decline of less importance than interior ones, 184.--Should consider which is the best object on which to employ their industry, 210, 211.--Their comparative extent, revenues, and population, illustrated by an engraved chart, 213, 214.--Nations of Europe, application of the present inquiry to them, 284. NECESSITY consisting of a desire to supply wants, the cause of industry and wealth, 14.--Necessity ceases its operation on the nation that is risen highest, 15, 16.--Operated very powerfully on the Dutch, 47.--Habit prolongs the action of it, 81.--With young men that can, alone, produce industry, 84.--Less and less on each generation as wealth increases, 85. The consequences of this, 87.--Its operation prolonged to a certain degree by taxation, 239.-- NORTHERN countries most favourable to industry, 44. NILE. See Egypt. P. PALMYRA founded by Solomon, King of Israol =sic=, for the purpose of trading with India, PARIS burnt by the Danes soon after the death of Charlemagne. Prices of bread at, compared with those of London, 150. PARISH-OFFICERS defend themselves against the public at the expense of the public, 122.--Bad administrators, 123, 124.--Rough, vulgar, and a disgrace to the country, 249. PATENTS, laws of, its utility, 200, 201. PETER the Great endeavoured to improve his country, and make his people happy, 118. PITT, Right Hon. W. his estimate of national property, 243, 244. POLAND, causes of its decline, and subjugation, different from that of most other nations, 75. POOR, their wretched state at Rome, 43.--Of England cost six times as much, in proportion, as in Scotland, and fifty times as much in reality, 88.--Increase, as capital becomes necessary for industry, 156.-- Causes of their increase, &c. &c. 157, 158, 159, 160.--Of England, cost more to maintain, than the revenues of many kingdoms, 247.-- Causes, inquired into, and remedy, 248 to 256. POPULATION, 142.--Connected with wealth, and the manner of living, so that a nation may not require to import ordinary food in great quantities 159.--May be considered as diminished in a double ratio as the poor increase, 249. PORTUGAL, 65. POWER in nations, sometimes united with wealth, sometimes not, 7.-- Definition of, 8, 9.--Sought after by the Romans, and most nations, too eagerly, 39.--Quitted Rome when wealth was too great, 36. PRICES of animal and vegetable food; highness of price diminishes consumption, 161.--Those of the late dearth at Paris compared with London, ib.--When known to the corn-dealers, they can combine without any express stipulation, 152, 153.--Rises to that of monopoly as soon as an article of necessity becomes scarce, 154, 155.--Of rent and wages have advanced more within these last twelve years, than in half a century before, 155. PRINCIPLES. See Education. PRIORITY of possession of settlement, or of invention, one of the causes of wealth and power, PRODUCE, indulging in eating animal food renders it unequal to maintaining the population of a country, 138, 139.--Of Italy, inadequate to its population in the time of Augustus, 3.--Easier purchased than raised when a nation is rich, PROPERTY at Rome very unequally divided before its fall, 43.--Has a natural tendency to accumulate in particular hands as a nation gets rich, 125, 126, 127.--Its accumulation and unequal division, one of the causes of decline, 128.--In land, the accumulation is the most dangerous, 129 to 136. PROSPERITY. See Wealth and Power. R. REFORMATION favourable to manufactures and industry, RELIGION, Christian, more favourable than any other to industry and good moral conduct, 264.--Protestant still more favourable than the Roman Catholic, 265, 266, 267. RENT. See Prices. REVENUE of Rome wasted on soldiers and public shews, 43.--Want of, tended to ruin Poland, 75.--Digression concerning, 187, 188, 189, 190.--When it becomes the chief object of, to government, encourages vice, 226. REVOLUTIONS in ancient nations traced, 17, 18, 53, 54, 55.--Of Poland, the account of, 75, 76, 77. ROBINSON, Dr. his complaint about ancient history, 1. ROME, her rise not accidental, but from the most unremitting perseverance, 27.--An account of her conduct in war, and internal policy, 28 to 33.--Lost her purity of manners, neglected agriculture and the arts, when she became rich by her conquests in Asia, and the fall of Carthage, 34, 35.--Became more degraded than ever Carthage was, 36, 37.--Her courts of justice became venal, property divided in a very unequal way, taxes became oppressive, her armies enervated, and she fell, 38, 39, 40. S. SARACENS got possession of Egypt, &c. 44. SCHOOLS. See Education. SINKING Fund, its progress shewn in a stained chart, 215.--Will not immediately diminish the taxes, 241.--When the capital was reimbursed to individuals, part of it would leave the country, 242.--If it completely paid off the debt in time of peace, would be productive of much mischief, ib.--Plan proposed to be substituted for it, 243.--If ever so effectual, its operation in time of war will never obtain credit amongst ourselves, and much less with the enemy, 244, 245, 246. SMITH, Dr. Adam, did not make proper allowance about national debt, 114.--His opinions concerning monopoly, examined, 149, 150.-- His opinion about apprentices, 219. SOLOMON, king of Israel, on terms of friendship with the king of Tyre, 21.--Founded Palmyra for the purpose of trade to India, 25.-- After his death, rivalship in trade, and the envy of the Tyrians, caused them to excite the king of Babylon to besiege Jerusalem, 53. SPAIN, its grand armada not equal to the privateers fitted out at Liverpool during the last war, 8.--Persecutes the Flemings, 47.--The effects of wealth on it, 63.--Its insolence and pride, 64.--And sudden decline, ib.--Wealth made it neglect industry, 65.--Gains great sums by South America, yet is not an object of envy, 292. T. TAXES at Rome, in its decline, became terrible, 40,--41, 42.--Taxes in France taken off while the assignats were creating, 42.--So great at Rome, that the citizens envied the barbarians, 43.--The power of laying on depends on circumstances, 92.--Always increasing, 102.-- Of the American States an exception, 103.--Why collected rigorously, 104.--Those which fall on persons or personal property, the most obnoxious, 105.--Of England, laid on better than in any other nation, 106.--Prolong the action of necessity, and augment industry to a certain point, which, when they pass, they crush it, 107, 108.--Their produce expended on unproductive people, 109, 110, 111.--Are like a rent paid for living in a country, 112 to 115.--In England, their effects, 229 to 233.--Taxes and rent augment industry, 236, 237.--In London, heavier than elsewhere, yet people crowd to London, 238, 239.--If taken off suddenly, would be hurtful, 240 to 244.--For the maintenance of poor, 247 to 256. TRADE--See Commerce. TREATIES, the best observed, have been those founded on equity add =sic= mutual interest, 186. TYRE, early commerce, 21, 23.--Its destruction one of the most permanent effects of Alexander's wars, 24.--Excited the king of Babylon to take Jerusalem, 45. V. VENICE, its greatness, 56, 57. UNITED STATES. See States of America. W. WAGES. See Prices. WAR generally occasioned by envy or rivalship, 14, 175, 219.-- Ought not to be followed to procure wealth, as it is much more easily done by industry, 293. WATT, James Esq. his invention of the steam engine, 203. WEALTH, its definition in contra-distinction to power, 8, 9, 10.-- Diminishes the necessity of industry, 29, 30.--Leaves richer to go into poorer countries, 93.--In England arises from industry, not from foreign possessions, 293, 294. WEST Indies. See Indies, West. Y. YOUTH. See Education. ---> _The reader will observe, on one =sic= of the pages, reference to an Appendix, but the design was altered, from the consideration that readers of history do not require solitary facts, by way of illustration, though such are very easy to be produced._ THE END. -------------------------------------- W. Marchant, Printer, Greville-street. -------------------------------------- ************************************************************** [Transcriber's note: In the original work: --the footnotes are designated by [*] but are here serially numbered for ease of reference; --in some cases the same word is spelt differently in various parts of the text, e.g. controul/control; Hans/Hanse Towns, shew/show (one instance only of the latter) etc. These and other vagaries are reproduced largely without special note. Likewise treated are the numerous examples of the number of the subject not agreeing with that of the verb.] ************************************************************** 
33310	----	file was produced from images generously made available by the Posner Memorial Collection (http://posner.library.cmu.edu/Posner/)) +---------------------------------------------------+ | Transcriber's note: | | Corrections in the ERRATA section have been made | | and duplicate Chapter numbers are marked by | | asterisks as shown in the original text. | +---------------------------------------------------+ ON THE PRINCIPLES OF POLITICAL ECONOMY, AND TAXATION. BY DAVID RICARDO, Esq. LONDON: JOHN MURRAY, ALBEMARLE-STREET 1817. J. M^{c}CREERY. Printer, Black Horse Court, London. PREFACE. The produce of the earth--all that is derived from its surface by the united application of labour, machinery, and capital, is divided among three classes of the community; namely, the proprietor of the land, the owner of the stock or capital necessary for its cultivation, and the labourers by whose industry it is cultivated. But in different stages of society, the proportions of the whole produce of the earth which will be allotted to each of these classes, under the names of rent, profit, and wages, will be essentially different; depending mainly on the actual fertility of the soil, on the accumulation of capital and population, and on the skill, ingenuity, and instruments employed in agriculture. To determine the laws which regulate this distribution, is the principal problem in Political Economy: much as the science has been improved by the writings of Turgot, Stuart, Smith, Say, Sismondi, and others, they afford very little satisfactory information respecting the natural course of rent, profit, and wages. In 1815, Mr. Malthus in his "Inquiry into the Nature and Progress of Rent," and a Fellow of University College, Oxford, in his "Essay on the Application of Capital to Land," presented to the world, nearly at the same moment, the true doctrine of rent; without a knowledge of which it is impossible to understand the effect of the progress of wealth on profits and wages, or to trace satisfactorily the influence of taxation on different classes of the community, particularly when the commodities taxed are the productions immediately derived from the surface of the earth. Adam Smith, and the other able writers to whom I have alluded, not having viewed correctly the principles of rent, have, it appears to me, overlooked many important truths, which can only be discovered after the subject of rent is thoroughly understood. To supply this deficiency, abilities are required of a far superior cast to any possessed by the writer of the following pages; yet after having given to this subject his best consideration--after the aid which he has derived from the works of the above-mentioned eminent writers--and after the valuable experience which a few late years, abounding in facts, have yielded to the present generation--it will not, he trusts, be deemed presumptuous in him to state his opinions on the laws of profits and wages, and on the operation of taxes. If the principles which he deems correct should be found to be so, it will be for others more able than himself to trace them to all their important consequences. The writer, in combating received opinions, has found it necessary to advert more particularly to those passages in the writings of Adam Smith from which he sees reason to differ; but he hopes it will not on that account be suspected that he does not, in common with all those who acknowledge the importance of the science of Political Economy, participate in the admiration which the profound work of this celebrated author so justly excites. The same remark may be applied to the excellent works of M. Say, who not only was the first, or among the first, of continental writers, who justly appreciated and applied the principles of Smith, and who has done more than all other continental writers taken together, to recommend the principles of that enlightened and beneficial system to the nations of Europe; but who has succeeded in placing the science in a more logical, and more instructive order; and has enriched it by several discussions, original, accurate, and profound.[1] The respect, however, which the author entertains for the writings of this gentleman, has not prevented him from commenting with that freedom which he thinks the interests of science require, on such passages of the "Economie Politique," as appeared at variance with his own ideas. CONTENTS. CHAP. Page I. _On Value_ 1 II. _On Rent_ 49 III. _On the Rent of Mines_ 77 IV. _On Natural and Market Price_ 82 V. _On Wages_ 90 V*. _On Profits_ 116 VI. _On Foreign Trade_ 146 VII. _On Taxes_ 186 VIII. _Taxes on Raw Produce_ 194 VIII*. _Taxes on Rent_ 221 IX. _Tithes_ 225 X. _Land-Tax_ 232 XI. _Taxes on Gold_ 247 XII. _Taxes on Houses_ 262 XIII. _Taxes on Profits_ 269 XIV. _Taxes on Wages_ 285 XV. _Taxes on other Commodities than Raw Produce_ 330 XVI. _Poor Rates_ 354 XVII. _On Sudden Changes in the Channels of Trade_ 363 XVIII. _Value and Riches, their Distinctive Properties_ 377 XIX. _Effects of Accumulation on Profits and Interest_ 398 XX. _Bounties on Exportation, and Prohibitions of Importation_ 417 XXI. _On Bounties on Production_ 449 XXII. _Doctrine of Adam Smith concerning the Rent of Land_ 458 XXIII. _On Colonial Trade_ 476 XXIV. _On Gross and Net Revenue_ 491 XXV. _On Currency and Banks_ 499 XXVI. _On the comparative Value of Gold, Corn, and Labour, in Rich and in Poor Countries_ 527 XXVII. _Taxes paid by the Producer_ 538 XXVIII. _On the Influence of Demand and Supply on Prices_ 542 XXIX. _Mr. Malthus's Opinions on Rent_ 549 CHAPTER I. ON VALUE. It has been observed by Adam Smith, that "the word Value has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called _value in use_; the other, _value in exchange_. The things," he continues, "which have the greatest value in use, have frequently little or no value in exchange; and, on the contrary, those which have the greatest value in exchange, have little or no value in use." Water and air are abundantly useful; they are indeed indispensable to existence, yet, under ordinary circumstances, nothing can be obtained in exchange for them. Gold, on the contrary, though of little use compared with air or water, will exchange for a great quantity of other goods. Utility then is not the measure of exchangeable value, although it is absolutely essential to it. If a commodity were in no way useful,--in other words, if it could in no way contribute to our gratification,--it would be destitute of exchangeable value, however scarce it might be, or whatever quantity of labour might be necessary to procure it. Possessing utility, commodities derive their exchangeable value from two sources: from their scarcity, and from the quantity of labour required to obtain them. There are some commodities, the value of which is determined by their scarcity alone. No labour can increase the quantity of such goods, and therefore their value cannot be lowered by an increased supply. Some rare statues and pictures, scarce books and coins, wines of a peculiar quality, which can be made only from grapes grown on a particular soil, of which there is a very limited quantity, are all of this description. Their value is wholly independent of the quantity of labour originally necessary to produce them, and varies with the varying wealth and inclinations of those who are desirous to possess them. These commodities, however, form a very small part of the mass of commodities daily exchanged in the market. By far the greatest part of those goods which are the objects of desire, are procured by labour; and they may be multiplied, not in one country alone, but in many, almost without any assignable limit, if we are disposed to bestow the labour necessary to obtain them. In speaking then of commodities, of their exchangeable value, and of the laws which regulate their relative prices, we mean always such commodities only as can be increased in quantity by the exertion of human industry, and on the production of which competition operates without restraint. In the early stages of society, the exchangeable value of these commodities, or the rule which determines how much of one shall be given in exchange for another, depends solely on the comparative quantity of labour expended on each. "The real price of every thing," says Adam Smith, "what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it, or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people." "Labour was the first price--the original purchase-money that was paid for all things." Again, "in that early and rude state of society, which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labour necessary for acquiring different objects, seems to be the only circumstance which can afford any rule for exchanging them for one another. If among a nation of hunters, for example, it usually cost twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for, or be worth two deer. It is natural that what is usually the produce of two days', or two hours' labour, should be worth double of what is usually the produce of one day's, or one hour's labour."[2] That this is really the foundation of the exchangeable value of all things, excepting those which cannot be increased by human industry, is a doctrine of the utmost importance in political economy; for from no source do so many errors, and so much difference of opinion in that science proceed, as from the vague ideas, which are attached to the word value. If the quantity of labour realized in commodities, regulate their exchangeable value, every increase of the quantity of labour must augment the value of that commodity on which it is exercised, as every diminution must lower it. Adam Smith, who so accurately defined the original source of exchangeable value, and who was bound in consistency to maintain, that all things became more or less valuable in proportion as more or less labour was bestowed on their production, has himself erected another standard measure of value, and speaks of things being more or less valuable, in proportion as they will exchange for more or less of this standard measure. Sometimes he speaks of corn, at other times of labour, as a standard measure; not the quantity of labour bestowed on the production of any object, but the quantity which it can command in the market: as if these were two equivalent expressions, and as if because a man's labour had become doubly efficient, and he could therefore produce twice the quantity of a commodity, he would necessarily receive twice the former quantity in exchange for it. If this indeed were true, if the reward of the labourer were always in proportion to what he produced, the quantity of labour bestowed on a commodity, and the quantity of labour which that commodity would purchase, would be equal, and either might accurately measure the variations of other things: but they are not equal; the first is under many circumstances an invariable standard, indicating correctly the variations of other things; the latter is subject to as many fluctuations as the commodities compared with it. Adam Smith, after most ably shewing the insufficiency of a variable medium, such as gold and silver, for the purpose of determining the varying value of other things, has himself, by fixing on corn or labour, chosen a medium no less variable. Gold and silver are no doubt subject to fluctuations, from the discovery of new and more abundant mines; but such discoveries are rare, and their effects, though powerful, are limited to periods of comparatively short duration. They are subject also to fluctuation, from improvements in the skill and machinery with which the mines may be worked; as in consequence of such improvements, a greater quantity may be obtained with the same labour. They are further subject to fluctuation from the decreasing produce of the mines, after they have yielded a supply to the world, for a succession of ages. But from which of these sources of fluctuation is corn exempted? Does not that also vary, on one hand, from improvements in agriculture, from improved machinery and implements used in husbandry, as well as from the discovery of new tracts of fertile land, which in other countries may be taken into cultivation, and which will affect the value of corn in every market where importation is free? Is it not on the other hand subject to be enhanced in value from prohibitions of importation, from increasing population and wealth, and the greater difficulty of obtaining the increased supplies, on account of the additional quantity of labour which the cultivation of inferior lands requires? Is not the value of labour equally variable; being not only affected, as all other things are, by the proportion between the supply and demand, which uniformly varies with every change in the condition of the community, but also by the varying price of food and other necessaries, on which the wages of labour are expended? In the same country double the quantity of labour may be required to produce a given quantity of food and necessaries at one time, that may be necessary at another, and a distant time; yet the labourer's reward may possibly be very little diminished. If the labourer's wages at the former period, were a certain quantity of food and necessaries, he probably could not have subsisted if that quantity had been reduced. Food and necessaries in this case will have risen 100 per cent. if estimated by the _quantity_ of labour necessary to their production, while they will scarcely have increased in value, if measured by the quantity of labour for which they will _exchange_. The same remark may be made respecting two or more countries. In America and Poland, a year's labour will produce much more corn than in England. Now, supposing all other necessaries to be equally cheap in those three countries, would it not be a great mistake to conclude, that the quantity of corn awarded to the labourer, would in each country be in proportion to the facility of production? If the shoes and clothing of the labourer, could, by improvements in machinery, be produced by one fourth of the labour now necessary to their production, they would probably fall 75 per cent.; but so far is it from being true, that the labourer would thereby be enabled permanently to consume four coats, or four pair of shoes, instead of one, that his wages would in no long time be adjusted by the effects of competition, and the stimulus to population, to the new value of the necessaries on which they were expended. If these improvements extended to all the objects of the labourer's consumption, we should find him probably at the end of a very few years, in possession of only a small, if any, addition to his enjoyments, although the exchangeable value of those commodities, compared with any other commodity, in the manufacture of which no such improvement were made, had sustained a very considerable reduction; and though they were the produce of a very considerably diminished quantity of labour. It cannot then be correct, to say with Adam Smith, "that as labour may sometimes _purchase_ a greater, and sometimes a smaller quantity of goods, it is their value which varies, not that of the labour which purchases them;" and therefore, "that labour _alone never varying in its own value_, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared;"--but it is correct to say, as Adam Smith had previously said, "that the proportion between the quantities of labour necessary for acquiring different objects, seems to be the only circumstance which can afford any rule for exchanging them for one another;" or in other words, that it is the comparative quantity of commodities which labour will produce, that determines their present or past relative value, and not the comparative quantities of commodities, which are given to the labourer in exchange for his labour. If any one commodity could be found, which now and at all times required precisely the same quantity of labour to produce it, that commodity would be of an unvarying value, and would be eminently useful as a standard by which the variations of other things might be measured. Of such a commodity we have no knowledge, and consequently are unable to fix on any standard of value. It is, however, of considerable use towards attaining a correct theory, to ascertain what the essential qualities of a standard are, that we may know the causes of the variation in the relative value of commodities, and that we may be enabled to calculate the degree in which they are likely to operate. * * * * * In speaking however of labour, as being the foundation of all value, and the relative quantity of labour as determining the relative value of commodities, I must not be supposed to be inattentive to the different qualities of labour, and the difficulty of comparing an hour's, or a day's labour, in one employment, with the same duration of labour in another. The estimation in which different qualities of labour are held, comes soon to be adjusted in the market with sufficient precision for all practical purposes, and depends much on the comparative skill of the labourer, and intensity of the labour performed. The scale, when once formed, is liable to little variation. If a day's labour of a working jeweller be more valuable than a day's labour of a common labourer, it has long ago been adjusted, and placed in its proper position in the scale of value.[3] In comparing therefore the value of the same commodity, at different periods of time, the consideration of the comparative skill and intensity of labour, required for that particular commodity, needs scarcely to be attended to, as it operates equally at both periods. One description of labour at one time is compared with the same description of labour at another; if a tenth, a fifth, or a fourth, has been added or taken away, an effect proportioned to the cause will be produced on the relative value of the commodity. If a piece of cloth be now of the value of two pieces of linen, and if, in ten years hence, the ordinary value of a piece of cloth should be four pieces of linen, we may safely conclude, that either more labour is required to make the cloth, or less to make the linen, or that both causes have operated. As the inquiry to which I wish to draw the reader's attention, relates to the effect of the variations in the relative value of commodities, and not in their absolute value, it will be of little importance to examine into the comparative degree of estimation in which the different kinds of human labour are held. We may fairly conclude, that whatever inequality there might originally have been in them, whatever the ingenuity, skill, or time necessary for the acquirement of one species of manual dexterity more than another, it continues nearly the same from one generation to another; or at least, that the variation is very inconsiderable from year to year, and therefore, can have little effect for short periods on the relative value of commodities. "The proportion between the different rates both of wages and profit in the different employments of labour and stock, seems not to be much affected, as has already been observed, by the riches or poverty, the advancing, stationary, or declining state of the society. Such revolutions in the public welfare, though they affect the general rates both of wages and profit, must in the end affect them equally in all different employments. The proportion between them therefore must remain the same, and cannot well be altered, at least for any considerable time, by any such revolutions."[4] It will be seen by the extract which I have made in page 4, from the "Wealth of Nations," that though Adam Smith fully recognized the principle, that the proportion between the quantities of labour necessary for acquiring different objects, is the only circumstance which can afford any rule for our exchanging them for one another, yet he limits its application to "that early and rude state of society, which precedes both the accumulation of stock and the appropriation of land;" as if, when profits and rent were to be paid, they would have some influence on the relative value of commodities, independent of the mere quantity of labour that was necessary to their production. Adam Smith, however, has no where analyzed the effects of the accumulation of capital, and the appropriation of land, on relative value. It is of importance, therefore, to determine how far the effects which are avowedly produced on the exchangeable value of commodities, by the comparative quantity of labour bestowed on their production, are modified or altered by the accumulation of capital and the payment of rent. First, as to the accumulation of capital. Even in that early state to which Adam Smith refers, some capital, though possibly made and accumulated by the hunter himself would be necessary to enable him to kill his game. Without some weapon, neither the beaver nor the deer could be destroyed, and therefore the value of these animals would be regulated, not solely by the time and labour necessary to their destruction, but also by the time and labour necessary for providing the hunter's capital, the weapon, by the aid of which their destruction was effected. Suppose the weapon necessary to kill the beaver, were constructed with much more labour than that necessary to kill the deer, on account of the greater difficulty of approaching near to the former animal, and the consequent necessity of its being more true to its mark; one beaver would naturally be of more value than two deer, and precisely for this reason, that more labour would on the whole be necessary to its destruction. All the implements necessary to kill the beaver and deer might belong to one class of men, and the labour employed in their destruction might be furnished by another class; still, their comparative prices would be in proportion to the actual labour bestowed, both on the formation of the capital, and on the destruction of the animals. Under different circumstances of plenty or scarcity of capital, as compared with labour, under different circumstances of plenty or scarcity of the food and necessaries essential to the support of men, those who furnished an equal value of capital for either one employment or for the other, might have a half, a fourth, or an eighth of the produce obtained, the remainder being paid as wages to those who furnished the labour; yet this division could not affect the relative value of these commodities, since whether the profits of capital were greater or less, whether they were 50, 20, or 10 per cent., or whether the wages of labour were high or low, they would operate equally on both employments. If we suppose the occupations of the society extended, that some provide canoes and tackle necessary for fishing, others the seed and rude machinery first used in agriculture, still the same principle would hold true, that the exchangeable value of the commodities produced would be in proportion to the labour bestowed on their production; not on their immediate production only, but on all those implements or machines required to give effect to the particular labour to which they were applied. If we look to a state of society in which greater improvements have been made, and in which arts and commerce flourish, we shall still find that commodities vary in value conformably with this principle: in estimating the exchangeable value of stockings, for example, we shall find that their value, comparatively with other things, depends on the total quantity of labour necessary to manufacture them, and bring them to market. First, there is the labour necessary to cultivate the land on which the raw cotton is grown; secondly, the labour of conveying the cotton to the country where the stockings are to be manufactured, which includes a portion of the labour bestowed in building the ship in which it is conveyed, and which is charged in the freight of the goods; thirdly, the labour of the spinner and weaver; fourthly, a portion of the labour of the engineer, smith, and carpenter, who erected the buildings and machinery, by the help of which they are made; fifthly, the labour of the retail dealer, and of many others, whom it is unnecessary further to particularize. The aggregate sum of these various kinds of labour, determines the quantity of other things for which these stockings will exchange, while the same consideration of the various quantities of labour which have been bestowed on those other things, will equally govern the portion of them which will be given for the stockings. To convince ourselves that this is the real foundation of exchangeable value, let us suppose any improvement to be made in the means of abridging labour in any one of the various processes through which the raw cotton must pass, before the manufactured stockings come to the market, to be exchanged for other things; and observe the effects which will follow. If fewer men were required to cultivate the raw cotton, or if fewer sailors were employed in navigating, or shipwrights in constructing the ship, in which it was conveyed to us; if fewer hands were employed in raising the buildings and machinery, or if these when raised, were rendered more efficient, the stockings would inevitably fall in value, and consequently command less of other things. They would fall, because a less quantity of labour was necessary to their production, and would therefore exchange for a smaller quantity of those things in which no such abridgment of labour had been made. Economy in the use of labour never fails to reduce the relative value of a commodity, whether the saving be in the labour necessary to the manufacture of the commodity itself, or in that necessary to the formation of the capital, by the aid of which it is produced. In either case the price of stockings would fall, whether there were fewer men employed as bleachers, spinners, and weavers, persons immediately necessary to their manufacture; or as sailors, carriers, engineers, and smiths, persons more indirectly concerned. In the one case, the whole saving of labour would fall on the stockings, because that portion of labour was wholly confined to the stockings; in the other, a portion only would fall on the stockings, the remainder being applied to all those other commodities, to the production of which the buildings, machinery, and carriage, were subservient. In every society the capital which is employed in production, is necessarily of limited durability. The food and clothing consumed by the labourer, the buildings in which he works, the implements with which his labour is assisted, are all of a perishable nature. There is however a vast difference in the time for which these different capitals will endure: a steam-engine will last longer than a ship, a ship than the clothing of the labourer, and the clothing of the labourer longer than the food which he consumes. According as capital is rapidly perishable, and requires to be frequently reproduced, or is of slow consumption, it is classed under the heads of circulating, or of fixed capital. A brewer, whose buildings and machinery are valuable and durable, is said to employ a large portion of fixed capital: on the contrary, a shoemaker, whose capital is chiefly employed in the payment of wages, which are expended on food and clothing, commodities more perishable than buildings and machinery, is said to employ a large proportion of his capital as circulating capital. Two trades then may employ the same amount of capital; but it may be very differently divided with respect to the portion which is fixed, and that which is circulating. Again two manufacturers may employ the same amount of fixed, and the same amount of circulating capital; but the durability of their fixed capitals may be very unequal. One may have steam engines of the value of 10,000_l._ the other, ships of the same value. Besides the alteration in the relative value of commodities, occasioned by more or less labour being required to produce them, they are also subject to fluctuations from a rise of wages, and consequent fall of profits, if the fixed capitals employed be either of unequal value, or of unequal duration. Suppose that in the early stages of society, the bows and arrows of the hunter were of equal value, and of equal durability, with the canoe and implements of the fisherman, both being the produce of the same quantity of labour. Under such circumstances the value of the deer, the produce of the hunter's day's labour, would be exactly equal to the value of the fish, the produce of the fisherman's day's labour. The comparative value of the fish and the game, would be entirely regulated by the quantity of labour realised in each; whatever might be the quantity of production, or however high or low general wages or profits might be. If for example the canoes and implements of the fisherman were of the value of 100_l._ and were calculated to last for ten years, and he employed ten men, whose annual labour cost 100_l._ and who in one day obtained by their labour twenty salmon: If the weapons employed by the hunter were also of 100_l._ value and calculated to last ten years, and if he also employed ten men, whose annual labour cost 100_l._ and who in one day procured him ten deer; then the natural price of a deer would be two salmon, whether the proportion of the whole produce bestowed on the men who obtained it, were large or small. The proportion which might be paid for wages, is of the utmost importance in the question of profits; for it must at once be seen, that profits would be high or low, exactly in proportion as wages were low or high; but it could not in the least affect the relative value of fish and game, as wages would be high or low at the same time in both occupations. If the hunter urged the plea of his paying a large proportion, or the value of a large proportion of his game for wages, as an inducement to the fisherman to give him more fish in exchange for his game, the latter would state that he was equally affected by the same cause; and therefore under all variations of wages and profits, under all the effects of accumulation of capital, as long as they continued by a day's labour to obtain respectively the same quantity of fish, and the same quantity of game, the natural rate of exchange would be, one deer for two salmon. If with the same quantity of labour a less quantity of fish, or a greater quantity of game were obtained, the value of fish would rise in comparison with that of game. If, on the contrary, with the same quantity of labour a less quantity of game, or a greater quantity of fish was obtained, game would rise in comparison with fish. If there were any other commodity which was invariable in its value, requiring at all times, and under all circumstances, precisely the same quantity of labour to obtain it, we should be able to ascertain, by comparing the value of fish and game with this commodity, how much of the variation was to be attributed to a cause which affected the value of fish, and how much to a cause which affected the value of game. Suppose money to be that commodity. If a salmon were worth 1_l._ and a deer 2_l._ one deer would be worth two salmon. But a deer might become of the value of three salmon, for more labour might be required to obtain the deer, or less to get the salmon, or both these causes might operate at the same time. If we had this invariable standard, we might easily ascertain in what degree either of these causes operated. If salmon continued to sell for 1_l._ whilst deer rose to 3_l._ we might conclude that more labour was required to obtain the deer. If deer continued at the same price of 2_l._ and salmon sold for 13_s._ 4_d._ we might then be sure that less labour was required to obtain the salmon; and if deer rose to 2_l._ 10_s._ and salmon fell to 16_s._ 8_d._ we should be convinced that both causes had operated in producing the alteration of the relative value of these commodities. No alteration in the wages of labour could produce any alteration in the relative value of these commodities; for if profits were 10 per cent., then to replace the 100_l._ circulating capital with 10 per cent. profit, there must be a return of 110_l._: to replace the equal portion of fixed capital, when profits are at the rate of 10 per cent. there should be annually received 16.27_l._; for, the present value of an annuity of 16.27_l._ for ten years, when money is at 10 per cent., is 100_l._; consequently all the game of the hunter should annually sell for 126.27_l._ But the capital of the fisherman being the same in quantity, and divided in the same proportion into fixed and circulating capital, and being also of the same durability, he, to obtain the same profits, must sell his goods for the same value. If wages rose 10 per cent. and consequently 10 per cent. more circulating capital were required in each trade, it would equally affect both employments. In both, 210_l._ instead of 200_l._ would be required in order to produce the former quantity of commodities; and these would sell precisely for the same money, namely 126.27_l._: they would therefore be at the same relative value, and profits would be equally reduced in both trades. The prices of the commodities would not rise, because the money in which they are valued is by the supposition of an invariable value, always requiring the same quantity of labour to produce it. If the gold mine from which money was obtained were in the same country, in that case, after the rise of wages, 210_l._ might be necessary to be employed, as capital, to obtain the same quantity of metal that 200_l._ obtained before: for the same reason that the hunter and fisherman required 10_l._ in addition to their capitals, the miner would require an equal addition to his. No greater quantity of labour would be required in any of these occupations, but it would be paid for at a higher price, and the same reasons which should make the hunter and fisherman endeavour to raise the value of their game and fish, would cause the owner of the mine to raise the value of his gold. This inducement acting with the same force on all these three occupations, and the relative situation of those engaged in them being the same before and after the rise of wages, the relative value of game, fish, and gold, would continue unaltered. Wages might rise twenty per cent., and profits consequently fall in a greater or less proportion, without occasioning the least alteration in the relative value of these commodities. Now suppose, that with the same labour and fixed capital, more fish could be produced, but no more gold or game, the relative value of fish would fall in comparison with gold or game. If, instead of twenty salmon, twenty-five were the produce of one day's labour, the price of a salmon would be sixteen shillings instead of a pound, and two salmon and a half, instead of two salmon, would be given in exchange for one deer, but the price of deer would continue at 2_l._ as before. In the same manner, if fewer fish could be obtained with the same capital and labour, fish would rise in comparative value. Fish then would rise or fall in exchangeable value, only because more or less labour was required to obtain a given quantity; and it never could rise or fall beyond the proportion of the increased or diminished quantity of labour required. If we had then an invariable standard, by which we could measure the variation in other commodities, we should find that the utmost limit to which they could permanently rise, was proportioned to the additional quantity of labour required for their production; and that unless more labour were required for their production, they could not rise in any degree whatever. A rise of wages would not raise them in money value, nor relatively to any other commodities, the production of which required no additional quantity of labour, which employed the same proportion of fixed and circulating capital, and fixed capital of the same durability. If more or less labour were required in the production of the other commodity, we have already stated that this will immediately occasion an alteration in its relative value, but such alteration is owing to the altered quantity of requisite labour, and not to the rise of wages. If the fixed and circulating capitals were in different proportions, or if the fixed capital were of different durability, then the relative value of the commodities produced, would be altered in consequence of a rise of wages. First, when the fixed and circulating capitals were in different proportions, suppose that instead of 100_l._ fixed capital and 100_l._ circulating capital, the hunter should employ 150_l._ fixed capital and 50_l._ circulating capital, and that the fisherman should on the contrary employ only 50_l._ fixed capital and 150_l._ circulating capital. If profits be 10 per cent., the hunter must sell his goods for 79_l._ 8_s._ For, To replace his circulating capital of 50_l._ with a profit of 10 per cent. would require a value of 55_l._ To replace his fixed capital with 10 per cent. profit, the present value of an annuity for ten years of 24.4_l._ at 10 per cent. being 150_l._ 24.4_l._ ------ 79.4_l._ If profits be 10 per cent., the fisherman must sell his goods for 173_l._ 2_s._ 7_d._ To replace his circulating capital of 150_l._ with 10 per cent. profit 165_l._ To replace his fixed capital with 10 per cent. profit, one-third of the hunter's 8.13 ------ 173.13_l._ Now if wages rise, although neither of these commodities should require more labour for their production, yet their relative value will be altered. Suppose wages to rise 6 per cent., the hunter would not require more than an increase of 3_l._ to his capital, to employ the same number of men, and obtain the same quantity of game; the fisherman would require three times that sum, or 9_l._ The profits of stock would fall to 4 per cent., the hunter would be obliged to sell his game for 73_l._ 12_s._ 2_d._ To replace his circulating capital of 53_l._ with a profit of 4 per cent. 55.12_l._ To replace fixed capital, annually wasted, the present value of an annuity of 18.49_l._ for ten years, when money is at 4 per cent., being 150_l._ 18.49 ----- £73.61 The fisherman would sell his fish for 171_l._ 11_s._ 5_d._ viz. To replace his circulating capital of 159_l._ with a profit of 4 per cent. £165.360 To replace fixed capital annually wasted, the present value of an annuity of 6.163_l._, for ten years at 4 per cent., being 50_l._ 6.163 -------- £171.523 Game was to fish before as 100 to 218. It would now be as 100 to 233. Thus we see, that with every rise of wages, in proportion as the capital employed in any occupation consists of circulating capital, its produce will be of greater relative value than the goods produced in another occupation, where a less proportion of circulating, and a greater proportion of fixed capital are employed. Secondly, suppose the proportions of fixed capital to be the same; but of different degrees of durability. In proportion as fixed capital is less durable, it approaches to the nature of circulating capital. It will be consumed in a shorter time, and its value reproduced in order to preserve the capital of the manufacturer. We have just seen, that in proportion as circulating capital preponderates in a manufacture, when wages rise, the value of commodities produced in that manufacture, is relatively higher than that of commodities produced in manufactures where fixed capital preponderates. In proportion to the less durability of fixed capital, and its approach to the nature of circulating capital, the same effect will be produced by the same cause. Suppose that an engine is made, which will last for a hundred years, and that its value is 20,000_l._. Suppose too, that this machine, without any labour whatever, could produce a certain quantity of commodities annually, and that profits were 10 per cent.: the whole value of the goods produced would be annually 2,000_l._ 2_s._ 11_d._; for the profit of 20,000_l._ at 10 per cent. per annum, is £2,000 And an annuity of 2_s._ 11_d._ for 100 years, at 10 per cent. will, at the end of that period, replace a capital of 20,000_l._ 2 11 ---------- Consequently the goods must sell for £2000 2 11 ---------- If the same amount of capital, viz. 20,000_l._, be employed in supporting productive labour, and be annually consumed and reproduced, as it is when employed in paying wages, then to give an equal profit of 10 per cent. on 20,000_l._ the commodities produced must sell for 22,000_l._ Now suppose labour so to rise, that instead of 20,000_l._ being sufficient to pay the wages of those employed in producing the latter commodities, 20,952_l._ is required; then profits will fall to 5 per cent.: for as these commodities would sell for no more than before, viz. £22,000 and to produce them £20,952 would be requisite, there would remain ------- no more than £1,048 on a capital of 20,952_l._ If labour so rose, that 21,153_l._ were required, profits would fall to 4 per cent. and if it rose, so that 21,359_l._ was employed, profits would fall to 3 per cent. But, as no wages would be paid by the owner of the machine, which would last 100 years, when profits fell to 5 per cent. the price of his goods must fall to 1007_l._ 13_s._ 8_d._ viz. 1000_l._ to pay his profits, and 7_l._ 13_s._ 8_d._ to accumulate for 100 years at 5 per cent. to replace his capital of 20,000_l._ When profits fell to 4 per cent. his goods must sell for 816_l._ 3_s._ 2_d._, and when at 3 per cent. for 632_l._ 16_s._ 7_d._ By a rise in the price of labour then, under 7 per cent., which has no effect on the prices of commodities wholly produced by labour, a fall of no less than 68 per cent. is effected on those commodities wholly produced by machinery. If the proprietor of the machine sold his goods for more than 632_l._ 16_s._ 7_d._, he would get more than 3 per cent., the general profit of stock; and as others could furnish themselves with machines at the same price of 20,000_l._ they would be so multiplied, that he would be inevitably obliged to sink the price of his goods, till they afforded only the usual and general profits of stock. In proportion as this machine were less durable, prices would be less affected by the fall of profit, and the rise of wages. If, for example, the machine would last only ten years, when profits were at 10 per cent. the goods should sell for £3254 when at 5 per cent. 2590 4 per cent. 2465 3 per cent. 2344 for such are the sums requisite to place his profits on a par with others, and to replace his capital at the end of ten years; or, which is the same thing, such are the annuities which 20,000_l._ would purchase for ten years at those rates. If the machine would last only three years, when profits were 10 per cent. the price of the goods would be £8042 at 5 per cent. 7344 4 per cent. 7206 3 per cent. 7070 If it would last only one year, when profits were 10 per cent. the goods would sell for £22,000 at 5 per cent. 21,000 4 per cent. 20,800 3 per cent. 20,600: therefore when profits fell from 10 to 3 per cent. the goods, which were produced with equal capitals, would fall 68 per cent. if the machine would last 100 years. 28 per cent. if the machine would last 10 years. 13 per cent. if it would last 3 years. And little more than 6 per cent. if it} would last only } 1 year. These results are of such importance to the science of political economy, yet accord so little with some of its received doctrines, which maintain that every rise in wages is necessarily transferred to the price of commodities, that it may not be superfluous to elucidate the subject still further. A manufacturer of hats employs a hundred men at an annual expense of 50_l._ each, who produce him commodities of the value of 8000_l._ A machine calculated to last precisely a year, and to do equally well the same work as the 100 men, is offered to him for 5000_l._, the sum, exactly, that he is expending on wages. It will be a matter of indifference to the manufacturer, whether he purchase the machine, or continue to employ the men. Now if the wages of labour rise 10 per cent. and an additional capital of 500_l._ be consequently required to enable him to employ the same labour, whilst his commodities continue to sell for 8000_l._, he will no longer hesitate, but will at once purchase the machine, and will do the same annually, while wages continue above the original 5000_l._ But will he be able now to purchase the machine at the former price? will not its value be increased, in consequence of the rise of labour? It would be increased, if there were no stock employed in its construction, and no profits to be paid to the maker of it. If, for example, the machine were produced by 100 men working one year upon it with wages of 50_l._ each, and its price were 5000_l._, should those wages rise to 55_l._ its price would be 5500_l._: but this cannot be the case; less than 100 men are employed, or it could not be sold for 5000_l._; for out of the 5000_l._ must be paid the profits of the stock which employed the men. Suppose then that only eighty-five men were employed at an expense of 4250_l._ per annum, and that the 750_l._, which the sale of the machine would produce over and above the wages advanced to the men, constituted the profits of the engineer's stock. When wages rose 10 per cent., he would be obliged to employ an additional capital of 425_l._, and would therefore employ 4675_l._, instead of 4250_l._, on which capital he would only get a profit of 325_l._ if he continued to sell his machine for 5000_l._; but this is precisely the case of all manufacturers and capitalists; the rise of wages affects them all. If therefore the maker of the machine should raise the price of his machine in consequence of a rise of wages, an unusual quantity of capital would be employed in the construction of such machines, till their price afforded only the usual profits. The manufacturer of hats, by the employment of the machine, if he sells his hats for 8000_l._, is precisely in the same situation as before; he employs no more capital, and obtains the same profits. The competition of trade would not long allow this; for as capital would flow to the most profitable employment, he would be obliged to lower the price of hats, till his profits had sunk to the general level. Thus then is the public benefited by machinery: these mute agents are always the produce of much less labour than that which they displace, even when they are of the same money value. Through their influence, an increase in the price of provisions which raises wages, will affect fewer persons: it will reach, as in the above instance, eighty-five men instead of a hundred; and the saving which is the consequence, shews itself in the reduced price of the commodity manufactured. Neither machines nor any other commodities are raised in price, but all commodities which are made by machines fall, and fall in proportion to their durability. It appears, then, that in proportion to the quantity and the durability of the fixed capital employed in any kind of production, the relative prices of those commodities on which such capital is employed, will vary inversely as wages; they will fall as wages rise. It appears too that no commodities whatever are raised in absolute price, merely because wages rise; that they never rise unless additional labour be bestowed on them; but that all commodities in the production of which fixed capital enters, not only do not rise with a rise of wages, but absolutely fall; fall too as much as 68 per cent., with a rise of seven per cent. in wages, if fixed capital be exclusively employed, and be of the duration of 100 years. The above statement, which asserts the compatibility of a rise of wages, with a fall of prices, has, I know, the disadvantage of novelty, and must trust to its own merits for advocates; whilst it has for its opponents, writers of distinguished and deserved reputation. It should however be carefully remembered, that in this whole argument I am supposing money to be of an invariable value; in other words, to be always the produce of the same quantity of unassisted labour. Money, however, is a variable commodity; and the rise of wages as well as of commodities, is frequently occasioned by a fall in the value of money. A rise of wages from this cause will indeed be invariably accompanied by a rise in the price of commodities: but in such cases, it will be found that labour and all commodities have not varied in regard to each other, and that the variation has been confined to money. Money, from its being a commodity obtained from a foreign country, from its being the general medium of exchange between all civilized countries, and from its being also distributed among those countries in proportions which are ever changing with every improvement in commerce and machinery, and with every increasing difficulty of obtaining food and necessaries for an increasing population, is subject to incessant variations. In stating the principles which regulate exchangeable value and price, we should carefully distinguish between those variations which belong to the commodity itself, and those which are occasioned by a variation in the medium in which value is estimated, or price expressed. A rise in wages, from an alteration in the value of money, produces a general effect on price, and for that reason it produces no real effect whatever on profits. On the contrary, a rise of wages, from the circumstance of the labourer being more liberally rewarded, or from a difficulty of procuring the necessaries on which wages are expended, does not produce the effect of raising price, but has a great effect in lowering profits. In the one case, no greater proportion of the annual labour of the country is devoted to the support of the labourers, in the other case, a larger portion is so devoted. It is according to the division of the whole produce of the land and labour of the country, between the three classes of landlords, capitalists, and labourers, that we are to judge of rent, profit, and wages, and not according to the value at which that produce may be estimated in a medium which is confessedly variable. It is not by the absolute quantity of produce obtained by either class, that we can correctly judge of the rate of profit, rent, and wages, but by the quantity of labour required to obtain that produce. By improvements in machinery and agriculture, the whole produce may be doubled; but if wages, rent, and profit, be also doubled, these three will bear the same proportions to one another, and neither could be said to have relatively varied. But if wages partook not of the whole of this increase; if they, instead of being doubled, were only increased one half, if rent, instead of being doubled, were only increased three-fourths, and the remaining increase went to profit, it would, I apprehend, be correct for me to say, that rent and wages had fallen, while profits had risen; for if we had an invariable standard, by which to measure the value of this produce, we should find that a less value had fallen to the class of labourers and landlords, and a greater to the class of capitalists, than had been given before. We might find for example, that though the absolute quantity of commodities had been doubled, they were the produce of precisely the former quantity of labour. Of every hundred hats, coats, and quarters of corn produced, if the labourers had 25 The landlords 25 And the capitalists 50 --- 100 And if, after these commodities were doubled in quantity, of every 100 The labourers had only 22 The landlords 22 And the capitalists 56 --- 100 In that case I should say, that wages and rent had fallen, and profits risen; though in consequence of the abundance of commodities, the quantity paid to the labourer and landlord would have increased in the proportion of 25 to 44. Wages are to be estimated by their real value, viz. by the quantity of labour and capital employed in producing them, and not by their nominal value either in coats, hats, money, or corn. Under the circumstances I have just supposed, commodities would have fallen to half their former value; and, if money had not varied, to half their former price also. If then in this medium, which had not varied in value, the wages of the labourer should be found to have fallen, it will not the less be a real fall, because they might furnish him with a greater quantity of cheap commodities, than his former wages. The variation in the value of money, however great, makes no difference in the _rate_ of profits; for suppose the goods of the manufacturer to rise from 1000_l._ to 2000_l._, or 100 per cent., if his capital, on which the variations of money have as much effect as on the value of produce, if his machinery, buildings, and stock in trade rise more than 100 per cent., his rate of profits has fallen, and he has a proportionably less quantity of the produce of the labour of the country at his command. If, with capital of a given value, he double the quantity of produce, its value falls one half, and then it will bear the same proportion to the capital which produced it, as it did before. If at the same time that he doubles the quantity of produce by the employment of the same capital, the value of money is by any accident lowered one half, the produce will sell for twice the money value that it did before; but the capital employed to produce it, will also be of twice its former money value; and therefore in this case too, the value of the produce will bear the same proportion to the value of the capital as it did before; and although the produce be doubled, rent, wages, and profits will only vary as the proportions vary, in which this double produce may be divided among the three classes that share it. It appears then that the accumulation of capital, by occasioning different proportions of fixed and circulating capital to be employed in different trades, and by giving different degrees of durability to such fixed capital, introduces a considerable modification to the rule, which is of universal application in the early states of society. Commodities, though they continue to rise and fall, in proportion as more or less labour is necessary to their production, are also affected in their relative value by a rise or fall of profits, since equal profits may be derived from goods which sell for 2,000_l._ and from those which sell for 10,000_l._; and consequently the variations of those profits, independently of any increased or diminished quantity of labour required for the goods in question, must affect their prices in different proportions. It appears too, that commodities may be lowered in value in consequence of a real rise of wages, but they never can be raised from that cause. On the other hand, they may rise from a fall of wages, as they then lose the peculiar advantages of production, which high wages afforded them. CHAPTER II. ON RENT. It remains however to be considered, whether the appropriation of land, and the consequent creation of rent, will occasion any variation in the relative value of commodities, independently of the quantity of labour necessary to production. In order to understand this part of the subject, we must inquire into the nature of rent, and the laws by which its rise or fall is regulated. Rent is that portion of the produce of the earth, which is paid to the landlord for the use of the original and indestructible powers of the soil. It is often however confounded with the interest and profit of capital, and in popular language the term is applied to whatever is annually paid by a farmer to his landlord. If, of two adjoining farms of the same extent, and of the same natural fertility, one had all the conveniences of farming buildings, were, besides, properly drained and manured, and advantageously divided by hedges, fences, and walls, while the other had none of these advantages, more remuneration would naturally be paid for the use of one, than for the use of the other; yet in both cases this remuneration would be called rent. But it is evident, that a portion only of the money annually to be paid for the improved farm, would be given for the original and indestructible powers of the soil; the other portion would be paid for the use of the capital which had been employed in ameliorating the quality of the land, and in erecting such buildings as were necessary to secure and preserve the produce. Adam Smith sometimes speaks of rent, in the strict sense to which I am desirous of confining it, but more often in the popular sense, in which the term is usually employed. He tells us, that the demand for timber, and its consequent high price, in the more southern countries of Europe, caused a rent to be paid for forests in Norway, which could before afford no rent. Is it not however evident, that the person who paid, what he thus calls rent, paid it in consideration of the valuable commodity which was then standing on the land, and that he actually repaid himself with a profit, by the sale of the timber? If, indeed, after the timber was removed, any compensation were paid to the landlord for the use of the land, for the purpose of growing timber or any other produce, with a view to future demand, such compensation might justly be called rent, because it would be paid for the productive powers of the land; but in the case stated by Adam Smith, the compensation was paid for the liberty of removing and selling the timber, and not for the liberty of growing it. He speaks also of the rent of coal mines, and of stone quarries, to which the same observation applies--that the compensation given for the mine or quarry, is paid for the value of the coal or stone which can be removed from them, and has no connexion with the original and indestructible powers of the land. This is a distinction of great importance, in an inquiry concerning rent and profits; for it is found, that the laws which regulate the progress of rent, are widely different from those which regulate the progress of profits, and seldom operate in the same direction. In all improved countries, that which is annually paid to the landlord, partaking of both characters, rent and profit, is sometimes kept stationary by the effects of opposing causes, at other times advances or recedes, as one or other of these causes preponderates. In the future pages of this work, then, whenever I speak of the rent of land, I wish to be understood as speaking of that compensation, which is paid to the owner of land for the use of its original and indestructible powers. On the first settling of a country, in which there is an abundance of rich and fertile land, a very small proportion of which is required to be cultivated for the support of the actual population, or indeed can be cultivated with the capital which the population can command, there will be no rent; for no one would pay for the use of land, when there was an abundant quantity not yet appropriated, and therefore at the disposal of whosoever might choose to cultivate it. On the common principles of supply and demand, no rent could be paid for such land, for the reason stated, why nothing is given for the use of air and water, or for any other of the gifts of nature which exist in boundless quantity. With a given quantity of materials, and with the assistance of the pressure of the atmosphere, and the elasticity of steam, engines may perform work, and abridge human labour to a very great extent; but no charge is made for the use of these natural aids, because they are inexhaustible, and at every man's disposal. In the same manner the brewer, the distiller, the dyer, make incessant use of the air and water for the production of their commodities; but as the supply is boundless, it bears no price.[5] If all land had the same properties, if it were boundless in quantity, and uniform in quality, no charge could be made for its use, unless where it possessed peculiar advantages of situation. It is only then because land is of different qualities with respect to its productive powers, and because in the progress of population, land of an inferior quality, or less advantageously situated, is called into cultivation, that rent is ever paid for the use of it. When, in the progress of society, land of the second degree of fertility is taken into cultivation, rent immediately commences on that of the first quality, and the amount of that rent will depend on the difference in the quality of these two portions of land. When land of the third quality is taken into cultivation, rent immediately commences on the second, and it is regulated as before, by the difference in their productive powers. At the same time, the rent of the first quality will rise, for that must always be above the rent of the second, by the difference between the produce which they yield with a given quantity of capital and labour. With every step in the progress of population, which shall oblige a country to have recourse to land of a worse quality, to enable it to raise its supply of food, rent, on all the more fertile land, will rise. Thus suppose land--No. 1, 2, 3,--to yield, with an equal employment of capital and labour, a net produce of 100, 90, and 80 quarters of corn. In a new country, where there is an abundance of fertile land compared with the population, and where therefore it is only necessary to cultivate No. 1, the whole net produce will belong to the cultivator, and will be the profits of the stock which he advances. As soon as population had so far increased as to make it necessary to cultivate No. 2, from which ninety quarters only can be obtained after supporting the labourers, rent would commence on No. 1; for either there must be two rates of profit on agricultural capital, or ten quarters, or the value of ten quarters must be withdrawn from the produce of No. 1, for some other purpose. Whether the proprietor of the land, or any other person, cultivated No. 1, these ten quarters would equally constitute rent; for the cultivator of No. 2 would get the same result with his capital, whether he cultivated No. 1, paying ten quarters for rent, or continued to cultivate No. 2, paying no rent. In the same manner it might be shewn that when No. 3 is brought into cultivation, the rent of No. 2 must be ten quarters, or the value of ten quarters, whilst the rent of No. 1 would rise to twenty quarters; for the cultivator of No. 3 would have the same profits whether he paid twenty quarters for the rent of No. 1, ten quarters for the rent of No. 2, or cultivated No. 3 free of all rent. It often, and indeed commonly happens that before No. 2, 3, 4, or 5, or the inferior lands are cultivated, capital can be employed more productively on those lands which are already in cultivation. It may perhaps be found, that by doubling the original capital employed on No. 1, though the produce will not be doubled, will not be increased by 100 quarters, it may be increased by eighty-five quarters, and that this quantity exceeds what could be obtained by employing the same capital on land, No. 3. In such case, capital will be preferably employed on the old land, and will equally create a rent; for rent is always the difference between the produce obtained by the employment of two equal quantities of capital and labour. If with a capital of 1000_l._ a tenant obtain 100 quarters of wheat from his land, and by the employment of a second capital of 1000_l._, he obtain a further return of eighty-five, his landlord would have the power at the expiration of his lease, of obliging him to pay fifteen quarters, or an equivalent value, for additional rent; for there cannot be two rates of profit. If he is satisfied with a diminution of fifteen quarters in the return for his second 1000_l._, it is because no employment more profitable can be found for it. The common rate of profit would be in that proportion, and if the original tenant refused, some other person would be found willing to give all which exceeded that rate of profit to the owner of the land from which he derived it. In this case, as well as in the other, the capital last employed pays no rent. For the greater productive powers of the first 1000_l._, fifteen quarters is paid for rent, for the employment of the second 1000_l._ no rent whatever is paid. If a third 1000_l._ be employed on the same land, with a return of seventy-five quarters, rent will then be paid for the second 1000_l._ and will be equal to the difference between the produce of these two, or ten quarters; and at the same time the rent of the first 1000_l._ will rise from fifteen to twenty-five quarters; while the last 1000_l._ will pay no rent whatever. If then good land existed in a quantity much more abundant than the production of food for an increasing population required, or if capital could be indefinitely employed without a diminished return on the old land, there could be no rise of rent; for rent invariably proceeds from the employment of an additional quantity of labour with a proportionally less return. The most fertile, and most favourably situated land will be first cultivated, and the exchangeable value of its produce will be adjusted in the same manner as the exchangeable value of all other commodities, by the total quantity of labour necessary in various forms, from first to last, to produce it, and bring it to market. When land of an inferior quality is taken into cultivation, the exchangeable value of raw produce will rise, because more labour is required to produce it. The exchangeable value of all commodities, whether they be manufactured, or the produce of the mines, or the produce of land, is always regulated, not by the less quantity of labour that will suffice for their production under circumstances highly favourable, and exclusively enjoyed by those who have peculiar facilities of production; but by the greater quantity of labour necessarily bestowed on their production by those who have no such facilities; by those who continue to produce them under the most unfavourable circumstances; meaning--by the most unfavourable circumstances, the most unfavourable under which the quantity of produce required renders it necessary to carry on the production. Thus, in a charitable institution, where the poor are set to work with the funds of benefactors, the general prices of the commodities, which are the produce of such work, will not be governed by the peculiar facilities afforded to these workmen, but by the common, usual, and natural difficulties, which every other manufacturer will have to encounter. The manufacturer enjoying none of these facilities might indeed be driven altogether from the market, if the supply afforded by these favoured workmen were equal to all the wants of the community; but if he continued the trade, it would be only on condition that he should derive from it the usual and general rate of profits on stock; and that could only happen when his commodity sold for a price proportioned to the quantity of labour bestowed on its production.[6] It is true, that on the best land, the same produce would still be obtained with the same labour as before, but its value would be enhanced in consequence of the diminished returns obtained by those who employed fresh labour and stock on the less fertile land. Notwithstanding then, that the advantages of fertile over inferior lands are in no case lost, but only transferred from the cultivator, or consumer, to the landlord, yet since more labour is required on the inferior lands, and since it is from such land only that we are enabled to furnish ourselves with the additional supply of raw produce, the comparative value of that produce will continue permanently above its former level, and make it exchange for more hats, cloth, shoes, &c. &c. in the production of which no such additional quantity of labour is required. The reason then, why raw produce rises in comparative value, is because more labour is employed in the production of the last portion obtained, and not because a rent is paid to the landlord. The value of corn is regulated by the quantity of labour bestowed on its production on that quality of land, or with that portion of capital, which pays no rent. Corn is not high because a rent is paid, but a rent is paid because corn is high; and it has been justly observed, that no reduction would take place in the price of corn, although landlords should forego the whole of their rent. Such a measure would only enable some farmers to live like gentlemen, but would not diminish the quantity of labour necessary to raise raw produce on the least productive land in cultivation. Nothing is more common than to hear of the advantages which the land possesses over every other source of useful produce, on account of the surplus which it yields in the form of rent. Yet when land is most abundant, when most productive, and most fertile, it yields no rent; and it is only when its powers decay, and less is yielded in return for labour, that a share of the original produce of the more fertile portions is set apart for rent. It is singular that this quality in the land, which should have been noticed as an imperfection, compared with the natural agents by which manufacturers are assisted, should have been pointed out as constituting its peculiar pre-eminence. If air, water, the elasticity of steam, and the pressure of the atmosphere, were of various qualities; if they could be appropriated, and each quality existed only in moderate abundance, they as well as the land would afford a rent, as the successive qualities were brought into use. With every worse quality employed, the value of the commodities in the manufacture of which they were used would rise, because equal quantities of labour would be less productive. Man would do more by the sweat of his brow, and nature perform less; and the land would be no longer pre-eminent for its limited powers. If the surplus produce which land affords in the form of rent be an advantage, it is desirable that, every year, the machinery newly constructed should be less efficient than the old, as that would undoubtedly give a greater exchangeable value to the goods manufactured, not only by that machinery, but by all the other machinery in the kingdom; and a rent would be paid to all those who possessed the most productive machinery.[7] The rise of rent is always the effect of the increasing wealth of the country, and of the difficulty of providing food for its augmented population. It is a symptom, but it is never a cause of wealth; for wealth often increases most rapidly while rent is either stationary, or even falling. Rent increases most rapidly, as the disposable land decreases in its productive powers. Wealth increases most rapidly in those countries where the disposable land is most fertile, where importation is least restricted, and where through agricultural improvements, productions can be multiplied without any increase in the proportional quantity of labour, and where consequently the progress of rent is slow. If the high price of corn were the effect, and not the cause of rent, price would be proportionally influenced as rents were high or low, and rent would be a component part of price. But that corn which is produced with the greatest quantity of labour is the regulator of the price of corn, and rent does not and cannot enter in the least degree as a component part of its price. Adam Smith, therefore, cannot be correct in supposing that the original rule which regulated the exchangeable value of commodities, namely the comparative quantity of labour by which they were produced, can be at all altered by the appropriation of land and the payment of rent. Raw material enters into the composition of most commodities, but the value of that raw material as well as corn, is regulated by the productiveness of the portion of capital last employed on the land, and paying no rent; and therefore rent is not a component part of the price of commodities. We have been hitherto considering the effects of the natural progress of wealth and population on rent, in a country in which the land is of variously productive powers; and we have seen, that with every portion of additional capital which it becomes necessary to employ on the land with a less productive return, rent would rise. It follows from the same principles, that any circumstances in the society which should make it unnecessary to employ the same amount of capital on the land, and which should therefore make the portion last employed more productive, would lower rent. Any great reduction in the capital of a country, which should materially diminish the funds destined for the maintenance of labour, would naturally have this effect. Population regulates itself by the funds which are to employ it, and therefore always increases or diminishes with the increase or diminution of capital. Every reduction of capital is therefore necessarily followed by a less effective demand for corn, by a fall of price, and by diminished cultivation. In the reverse order to that in which the accumulation of capital raises rent, will the diminution of it lower rent. Land of a less unproductive quality will be in succession relinquished, the exchangeable value of produce will fall, and land of a superior quality will be the land last cultivated, and that which will then pay no rent. The same effects may however be produced when the wealth and population of a country are increased, if that increase is accompanied by such marked improvements in agriculture, as shall have the same effect of diminishing the necessity of cultivating the poorer lands, or of expending the same amount of capital on the cultivation of the more fertile portions. If a million of quarters of corn be necessary for the support of a given population, and it be raised on land of the qualities of No. 1, 2, 3; and if an improvement be afterwards discovered by which it can be raised on No. 1 and 2, without employing No. 3, it is evident that the immediate effect must be a fall of rent; for No. 2, instead of No. 3, will then be cultivated without paying any rent; and the rent of No. 1, instead of being the difference between the produce of No. 3 and No. 1, will be the difference only between No. 2 and 1. With the same population, and no more, there can be no demand for any additional quantity of corn; the capital and labour employed on No. 3, will be devoted to the production of other commodities desirable to the community, and can have no effect in raising rent unless the raw material from which they are made cannot be obtained without employing capital less advantageously on the land, in which case No. 3 must again be cultivated. It is undoubtedly true, that the fall in the relative price of raw produce, in consequence of the improvement in agriculture, or rather in consequence of less labour being bestowed on its production, would naturally lead to increased accumulation; for the profits of stock would be greatly augmented. This accumulation would lead to an increased demand for labour, to higher wages, to an increased population, to a further demand for raw produce, and to an increased cultivation. It is only, however, after the increase in the population, that rent would be as high as before; that is to say, after No. 3 was taken into cultivation. A considerable period would have elapsed, attended with a positive diminution of rent. But improvements in agriculture are of two kinds: those which increase the productive powers of the land, and those which enable us to obtain its produce with less labour. They both lead to a fall in the price of raw produce; they both affect rent, but they do not affect it equally. If they did not occasion a fall in the price of raw produce, they would not be improvements; for it is the essential quality of an improvement to diminish the quantity of labour before required to produce a commodity; and this diminution cannot take place without a fall of its price or relative value. The improvements which increase the productive powers of the land, are such as the more skilful rotation of crops, or the better choice of manure. These improvements absolutely enable us to obtain the same produce from a smaller quantity of land. If, by the introduction of a course of turnips, I can feed my sheep besides raising my corn, the land on which the sheep were fed becomes unnecessary, and the same quantity of raw produce is raised by the employment of a less quantity of land. If I discover a manure which will enable me to make a piece of land produce 20 per cent. more corn, I may withdraw at least a portion of my capital from the most unproductive part of my farm. But, as I have before observed, it is not necessary that land should be thrown out of cultivation, in order to reduce rent: to produce this effect, it is sufficient that successive portions of capital are employed on the same land with different results, and that the portion which gives the least result should be withdrawn. If, by the introduction of the turnip husbandry, or by the use of a more invigorating manure, I can obtain the same produce with less capital, and without disturbing the difference between the productive powers of the successive portions of capital, I shall lower rent; for a different and more productive portion will be that which will form the standard from which every other will be reckoned. If, for example, the successive portions of capital yielded 100, 90, 80, 70; whilst I employed these four portions, my rent would be 60, or the difference between 70 and 100 = 30 } { 100 70 and 90 = 20 } { 90 70 and 80 = 10 } whilst the produce { 80 -- } would be 340 { 70 60 } { --- { 340 and while I employed these portions, the rent would remain the same, although the produce of each should have an equal augmentation. If, instead of 100, 90, 80, 70, the produce should be increased to 125, 115, 105, 95, the rent would still be 60, or the difference between 95 and 125 = 30 } { 125 95 and 115 = 20 } whilst the produce { 115 95 and 105 = 10 } would be increased { 105 -- } to 440 { 95 60 } { --- { 440 But with such an increase of produce, without an increase of demand, there could be no motive for employing so much capital on the land; one portion would be withdrawn, and consequently the last portion of capital would yield 105 instead of 95, and rent would fall to 30, or the difference between 105 and 125 = 20 } whilst the produce would be still { 125 105 and 115 = 10 } adequate to the wants of the { 115 -- } population, for it would be 345 { 105 30 } quarters, or { --- { 345 the demand being only for 340 quarters.--But there are improvements which may lower the relative value of produce without lowering the corn rent, though they will lower the money rent of land. Such improvements do not increase the productive powers of the land, but they enable us to obtain its produce with less labour. They are rather directed to the formation of the capital applied to the land, than to the cultivation of the land itself. Improvements in agricultural implements, such as the plough and the threshing machine, economy in the use of horses employed in husbandry, and a better knowledge of the veterinary art, are of this nature. Less capital, which is the same thing as less labour, will be employed on the land; but to obtain the same produce, less land cannot be cultivated. Whether improvements of this kind, however, affect corn rent, must depend on the question, whether the difference between the produce obtained by the employment of different portions of capital be increased, stationary, or diminished. If four portions of capital, 50, 60, 70, 80, be employed on the land, giving each the same results, and any improvement in the formation of such capital should enable me to withdraw 5 from each, so that they should be 45, 55, 65, and 75, no alteration would take place in the corn rent; but if the improvements were such as to enable me to make the whole saving on the largest portion of capital, that portion which is least productively employed, corn rent would immediately fall, because the difference between the capital most productive and the capital least productive would be diminished; and it is this difference which constitutes rent. Without multiplying instances, I hope enough has been said to shew, that whatever diminishes the inequality in the produce obtained from successive portions of capital employed on the same or on new land, tends to lower rent; and that whatever increases that inequality, necessarily produces an opposite effect, and tends to raise it. In speaking of the rent of the landlord, we have rather considered it as the proportion of the whole produce, without any reference to its exchangeable value; but since the same cause, the difficulty of production, raises the exchangeable value of raw produce, and raises also the proportion of raw produce paid to the landlord for rent, it is obvious that the landlord is doubly benefited by difficulty of production. First he obtains a greater share, and secondly the commodity in which he is paid is of greater value.[8] CHAPTER III. ON THE RENT OF MINES. The metals, like other things, are obtained by labour. Nature, indeed, produces them; but it is the labour of man which extracts them from the bowels of the earth, and prepares them for our service. Mines, as well as land, generally pay a rent to their owner; and this rent, as well as the rent of land, is the effect, and never the cause of the high value of their produce. If there were abundance of equally fertile mines, which any one might appropriate, they could yield no rent; the value of their produce would depend on the quantity of labour necessary to extract the metal from the mine and bring it to market. But there are mines of various qualities, affording very different results, with equal quantities of labour. The metal produced from the poorest mine that is worked, must at least have an exchangeable value, not only sufficient to procure all the clothes, food, and other necessaries consumed by those employed in working it, and bringing the produce to market, but also to afford the common and ordinary profits to him who advances the stock necessary to carry on the undertaking. The return for capital from the poorest mine paying no rent, would regulate the rent of all the other more productive mines. This mine is supposed to yield the usual profits of stock. All that the other mines produce more than this, will necessarily be paid to the owners for rent. Since this principle is precisely the same as that which we have already laid down respecting land, it will not be necessary further to enlarge on it. It will be sufficient to remark, that the same general rule which regulates the value of raw produce and manufactured commodities, is applicable also to the metals; their value depending not on the rate of profits, nor on the rate of wages, nor on the rent paid for mines, but on the total quantity of labour necessary to obtain the metal, and to bring it to market. Like every other commodity, the value of the metals is subject to variation. Improvements may be made in the implements and machinery used in mining, which may considerably abridge labour; new and more productive mines may be discovered, in which, with the same labour, more metal may be obtained; or the facilities of bringing it to market may be increased. In either of these cases the metals would fall in value, and would therefore exchange for a less quantity of other things. On the other hand, from the increasing difficulty of obtaining the metal, occasioned by the greater depth at which the mine must be worked, and the accumulation of water, or any other contingency, its value, compared with that of other things, might be considerably increased. It has therefore been justly observed, that however honestly the coin of a country may conform to its standard, money made of gold and silver is still liable to fluctuations in value, not only to accidental and temporary, but to permanent and natural variations, in the same manner as other commodities. By the discovery of America and the rich mines in which it abounds, a very great effect was produced on the natural price of the precious metals. This effect is by many supposed not yet to have terminated. It is probable however that all the effects on the value of the metals, resulting from the discovery of America have long ceased, and if any fall has of late years taken place in their value, it is to be attributed to improvements in the mode of working the mines. From whatever cause it may have proceeded, the effect has been so slow and gradual, that little practical inconvenience has been felt from gold and silver being the general medium in which the value of all other things is estimated. Though undoubtedly a variable measure of value, there is probably no commodity subject to fewer variations. This and the other advantages which these metals possess, such as their hardness, their malleability, their divisibility, and many more, have justly secured the preference every where given to them, as a standard for the money of civilized countries. Having acknowledged the imperfections to which money made of gold and silver is liable as a measure of value, from the greater or less quantity of labour which may, under varying circumstances, be necessary for the production of those metals, we may be permitted to make the supposition that all these imperfections were removed, and that equal quantities of labour could at all times obtain, from that mine which paid no rent, equal quantities of gold. Gold would then be an invariable measure of value. The quantity indeed would enlarge with the demand, but its value would be invariable, and it would be eminently well calculated to measure the varying value of all other things. I have already in a former part of this work considered gold as endowed with this uniformity, and in the following chapter I shall continue the supposition. In speaking therefore of varying price, the variation will be always considered as being in the commodity, and never in the medium in which it is estimated. CHAPTER IV. ON NATURAL AND MARKET PRICE. In making labour the foundation of the value of commodities, and the comparative quantity of labour which is necessary to their production, the rule which determines the respective quantities of goods which shall be given in exchange for each other, we must not be supposed to deny the accidental and temporary deviations of the actual or market price of commodities from this, their primary and natural price. In the ordinary course of events, there is no commodity which continues for any length of time to be supplied precisely in that decree of abundance, which the wants and wishes of mankind require, and therefore there is none which is not subject to accidental and temporary variations of price. It is only in consequence of such variations, that capital is apportioned precisely, in the requisite abundance and no more, to the production of the different commodities which happen to be in demand. With the rise or fall of price, profits are elevated above, or depressed below their general level, and capital is either encouraged to enter into, or is warned to depart from the particular employment in which the variation has taken place. Whilst every man is free to employ his capital where he pleases, he will naturally seek for it that employment which is most advantageous; he will naturally be dissatisfied with a profit of 10 per cent., if by removing his capital he can obtain a profit of 15 per cent. This restless desire on the part of all the employers of stock, to quit a less profitable for a more advantageous business, has a strong tendency to equalize the rate of profits of all, or to fix them in such proportions, as may in the estimation of the parties, compensate for any advantage which one may have, or may appear to have over the other. It is perhaps very difficult to trace the steps by which this change is effected: it is probably effected, by a manufacturer not absolutely changing his employment, but only lessening the quantity of capital he has in that employment. In all rich countries, there is a number of men forming what is called the monied class; these men are engaged in no trade, but live on the interest of their money, which is employed in discounting bills, or in loans to the more industrious part of the community. The bankers too employ a large capital on the same objects. The capital so employed forms a circulating capital of a large amount, and is employed, in larger or smaller proportions, by all the different trades of a country. There is perhaps no manufacturer, however rich, who limits his business to the extent that his own funds alone will allow: he has always some portion of this floating capital, increasing or diminishing according to the activity of the demand for his commodities. When the demand for silks increases, and that for cloth diminishes, the clothier does not remove with his capital to the silk trade, but he dismisses some of his workmen, he discontinues his demand for the loan from bankers and monied men; while the case of the silk manufacturer is the reverse: he wishes to employ more workmen, and thus his motive for borrowing is increased: he borrows more, and thus capital is transferred from one employment to another, without the necessity of a manufacturer discontinuing his usual occupation. When we look to the markets of a large town, and observe how regularly they are supplied both with home and foreign commodities, in the quantity in which they are required, under all the circumstances of varying demand, arising from the caprice of taste, or a change in the amount of population, without often producing either the effects of a glut from a too abundant supply, or an enormously high price from the supply being unequal to the demand, we must confess that the principle which apportions capital to each trade in the precise amount that it is required, is more active than is generally supposed. A capitalist, in seeking profitable employment for his funds, will naturally take into consideration all the advantages which one occupation possesses over another. He may therefore be willing to forego a part of his money profit, in consideration of the security, cleanliness, ease, or any other real or fancied advantage which one employment may possess over another. If from a consideration of these circumstances, the profits of stock should be so adjusted that in one trade they were 20, in another 25, and in another 30 per cent., they would probably continue permanently with that relative difference, and with that difference only; for if any cause should elevate the profits of one of these trades 10 per cent. either these profits would be temporary, and would soon again fall back to their usual station, or the profits of the others would be elevated in the same proportion. Let us suppose that all commodities are at their natural price, and consequently that the profits of capital in all employments are exactly at the same rate, or differ only so much as, in the estimation of the parties, is equivalent to any real or fancied advantage which they possess or forego. Suppose now, that a change of fashion should increase the demand for silks, and lessen that for woollens; their natural price, the quantity of labour necessary to their production, would continue unaltered, but the market price of silks would rise, and that of woollens would fall; and consequently the profits of the silk manufacturer would be above, whilst those of the woollen manufacturer would be below, the general and adjusted rate of profits. Not only the profits, but the wages of the workmen would be affected in these employments. This increased demand for silks would however soon be supplied, by the transference of capital and labour from the woollen to the silk manufacture; when the market prices of silks and woollens would again approach their natural prices, and then the usual profits would be obtained by the respective manufacturers of those commodities. It is then the desire, which every capitalist has, of diverting his funds from a less to a more profitable employment, that prevents the market price of commodities from continuing for any length of time either much above, or much below their natural price. It is this competition which so adjusts the exchangeable value of commodities, that after paying the wages for the labour necessary to their production, and all other expenses required to put the capital employed in its original state of efficiency, the remaining value or overplus will in each trade be in proportion to the value of the capital employed. In the 7th chap. of the Wealth of Nations, all that concerns this question is most ably treated. Having fully acknowledged the temporary effects which, in particular employments of capital, may be produced on the prices of commodities, as well as on the wages of labour, and the profits of stock, by accidental causes, without influencing the general price of commodities, wages, or profits, since these effects are equally operative in all stages of society, we may be permitted to leave them entirely out of our consideration, whilst we are treating of the laws which regulate natural prices, natural wages, and natural profits, effects totally independent of these accidental causes. In speaking then of the exchangeable value of commodities, or the power of purchasing possessed by any one commodity, I mean always that power which it would possess, if not disturbed by any temporary or accidental cause, and which is its natural price. CHAPTER V. ON WAGES Labour, like all other things which are purchased and sold, and which may be increased or diminished in quantity, has its natural and its market price. The natural price of labour is that price which is necessary to enable the labourers, one with another, to subsist and to perpetuate their race, without either increase or diminution. The power of the labourer to support himself, and the family which may be necessary to keep up the number of labourers, does not depend on the quantity of money, which he may receive for wages; but on the quantity of food, necessaries, and conveniences become essential to him from habit, which that money will purchase. The natural price of labour, therefore, depends on the price of the food, necessaries, and conveniences required for the support of the labourer and his family. With a rise in the price of food and necessaries, the natural price of labour will rise; with the fall in their price, the natural price of labour will fall. With the progress of society, the natural price of labour has always a tendency to rise, because one of the principal commodities by which its natural price is regulated, has a tendency to become dearer, from the greater difficulty of producing it. As, however, the improvements in agriculture, the discovery of new markets, whence provisions may be imported, may for a time counteract the tendency to a rise in the price of necessaries, and may even occasion their natural price to fall, so will the same causes produce the correspondent effects on the natural price of labour. The natural price of all commodities excepting raw produce and labour has a tendency to fall, in the progress of wealth and population; for though, on one hand, they are enhanced in real value, from the rise in the natural price of the raw material of which they are made, this is more than counterbalanced by the improvements in machinery, by the better division and distribution of labour, and by the increasing skill, both in science and art, of the producers. The market price of labour is the price which is really paid for it, from the natural operation of the proportion of the supply to the demand; labour is dear when it is scarce, and cheap when it is plentiful. However much the market price of labour may deviate from its natural price, it has, like commodities, a tendency to conform to it. It is when the market price of labour exceeds its natural price, that the condition of the labourer is flourishing and happy, that he has it in his power to command a greater proportion of the necessaries and enjoyments of life, and therefore to rear a healthy and numerous family. When however, by the encouragement which high wages give to the increase of population, the number of labourers is increased, wages again fall to their natural price, and indeed from a re-action sometimes fall below it. When the market price of labour is below its natural price, the condition of the labourers is most wretched: then poverty deprives them of those comforts which custom renders absolute necessaries. It is only after their privations have reduced their number, or the demand for labour has increased, that the market price of labour will rise to its natural price, and that the labourer will have the moderate comforts, which the natural price of wages will afford. Notwithstanding the tendency of wages to conform to their natural rate, their market rate may, in an improving society, for an indefinite period, be constantly above it; for no sooner may the impulse, which an increased capital gives to a new demand for labour be obeyed, than another increase of capital may produce the same effect; and thus if the increase of capital be gradual and constant, the demand for labour may give a continued stimulus to an increase of people. Capital is that part of the wealth of a country, which is employed in production, and consists of food, clothing, tools, raw material, machinery, &c. necessary to give effect to labour. Capital may increase in quantity at the same time that its value rises. An addition may be made to the food and clothing of a country, at the same time that more labour may be required to produce the additional quantity than before; in that case not only the quantity, but the value of capital will rise. Or capital may increase without its value increasing, and even while its value is actually diminishing; not only may an addition be made to the food and clothing of a country, but the addition may be made by the aid of machinery, without any increase, and even with an absolute diminution in the proportional quantity of labour required to produce them. The quantity of capital may increase, while neither the whole together, nor any part of it singly, will have a greater value than before. In the first case, the natural price of wages, which always depends on the price of food, clothing, and other necessaries, will rise; in the second, it will remain stationary, or fall; but in both cases the market rate of wages will rise, for in proportion to the increase of capital will be the increase in the demand for labour; in proportion to the work to be done will be the demand for those who are to do it. In both cases too the market price of labour will rise above its natural price; and in both cases it will have a tendency to conform to its natural price, but in the first case this agreement will be most speedily effected. The situation of the labourer will be improved, but not much improved; for the increased price of food and necessaries will absorb a large portion of his increased wages; consequently a small supply of labour, or a trifling increase in the population, will soon reduce the market price to the then increased natural price of labour. In the second case, the condition of the labourer will be very greatly improved; he will receive increased money wages, without having to pay any increased price, and perhaps, even a diminished price for the commodities which he and his family consume; and it will not be till after a great addition has been made to the population, that the market price of wages will again sink to their then low and reduced natural price. Thus, then, with every improvement of society, with every increase in its capital, the market wages of labour will rise; but the permanence of their rise will depend on the question, whether the natural price of wages has also risen; and this again will depend on the rise in the natural price of those necessaries, on which the wages of labour are expended. It is not to be understood that the natural price of wages, estimated even in food and necessaries, is absolutely fixed and constant. It varies at different times in the same country, and very materially differs in different countries. It essentially depends on the habits and customs of the people. An English labourer would consider his wages under their natural rate, and too scanty to support a family, if they enabled him to purchase no other food than potatoes, and to live in no better habitation than a mud cabin; yet these moderate demands of nature are often deemed sufficient in countries where "man's life is cheap," and his wants easily satisfied. Many of the conveniences now enjoyed in an English cottage, would have been thought luxuries at an early period of our history. From manufactured commodities always falling, and raw produce always rising, with the progress of society, such a disproportion in their relative value is at length created, that in rich countries a labourer, by the sacrifice of a very small quantity only of his food, is able to provide liberally for all his other wants. Independently of the variations in the value of money, which necessarily affect wages, but which we have here supposed to have no operation, as we have considered money to be uniformly of the same value, wages are subject to a rise or fall from two causes: 1st. The supply and demand of labourers. 2dly. The price of the commodities on which the wages of labour are expended. In different stages of society, the accumulation of capital, or of the means of employing labour, is more or less rapid, and must in all cases depend on the productive powers of labour. The productive powers of labour are generally greatest when there is an abundance of fertile land: at such periods accumulation is often so rapid, that labourers cannot be supplied with the same rapidity as capital. It has been calculated, that under favourable circumstances population may be doubled in twenty-five years; but under the same favourable circumstances, the whole capital of a country might possibly be doubled in a shorter period. In that case, wages during the whole period would have a tendency to rise, because the demand for labour would increase still faster than the supply. In new settlements, where the arts and knowledge of countries far advanced in refinement are introduced, it is probable that capital has a tendency to increase faster than mankind: and if the deficiency of labourers were not supplied by more populous countries, this tendency would very much raise the price of labour. In proportion as these countries become populous, and land of a worse quality is taken into cultivation, the tendency to an increase of capital diminishes; for the surplus produce remaining, after satisfying the wants of the existing population, must necessarily be in proportion to the facility of production, viz. to the smaller number of persons employed in production. Although, then, it is probable, that under the most favourable circumstances, the power of production is still greater than that of population, it will not long continue so; for the land being limited in quantity, and differing in quality; with every increased portion of capital employed on it, there will be a decreased rate of production, whilst the power of population continues always the same. In those countries where there is abundance of fertile land, but where, from the ignorance, indolence, and barbarism of the inhabitants, they are exposed to all the evils of want and famine, and where it has been said that population presses against the means of subsistence, a very different remedy should be applied from that which is necessary in long settled countries, where, from the diminishing rate of the supply of raw produce, all the evils of a crowded population are experienced. In the one case, the misery proceeds from the inactivity of the people. To be made happier, they need only to be stimulated to exertion; with such exertion, no increase in the population can be too great, as the powers of production are still greater. In the other case, the population increases faster than the funds required for its support. Every exertion of industry, unless accompanied by a diminished rate of increase in the population, will add to the evil, for production cannot keep pace with it. In some countries of Europe, and many of Asia, as well as in the islands in the South Seas, the people are miserable, either from a vicious government or from habits of indolence, which make them prefer present ease and inactivity, though without security against want, to a moderate degree of exertion, with plenty of food and necessaries. By diminishing their population, no relief would be afforded, for productions would diminish in as great, or even in a greater, proportion. The remedy for the evils under which Poland and Ireland suffer, which are similar to those experienced in the South Seas, is to stimulate exertion, to create new wants, and to implant new tastes; for those countries must accumulate a much larger amount of capital, before the diminished rate of production will render the progress of capital necessarily less rapid than the progress of population. The facility with which the wants of the Irish are supplied, permits that people to pass a great part of their time in idleness: if the population were diminished, this evil would increase, because wages would rise, and therefore the labourer would be enabled, in exchange for a still less portion of his labour, to obtain all that his moderate wants require. Give to the Irish labourer a taste for the comforts and enjoyments which habit has made essential to the English labourer, and he would be then content to devote a further portion of his time to industry, that he might be enabled to obtain them. Not only would all the food now produced be obtained, but a vast additional value in those other commodities, to the production of which the now unemployed labour of the country might be directed. In those countries, where the labouring classes have the fewest wants, and are contented with the cheapest food, the people are exposed to the greatest vicissitudes and miseries. They have no place of refuge from calamity; they cannot seek safety in a lower station; they are already so low, that they can fall no lower. On any deficiency of the chief article of their subsistence, there are few substitutes of which they can avail themselves, and dearth to them is attended with almost all the evils of famine. In the natural advance of society, the wages of labour will have a tendency to fall, as far as they are regulated by supply and demand; for the supply of labourers will continue to increase at the same rate, whilst the demand for them will increase at a slower rate. If, for instance, wages were regulated by a yearly increase of capital, at the rate of 2 per cent., they would fall when it accumulated only at the rate of 1-1/2 per cent. They would fall still lower when it increased only at the rate of 1, or 1/2 per cent., and would continue to do so until the capital became stationary, when wages also would become stationary, and be only sufficient to keep up the numbers of the actual population. I say that, under these circumstances, wages would fall, if they were regulated only by the supply and demand of labourers; but we must not forget, that wages are also regulated by the prices of the commodities on which they are expended. As population increases, these necessaries will be constantly rising in price, because more labour will be necessary to produce them. If, then, the money wages of labour should fall, whilst every commodity on which the wages of labour were expended rose, the labourer would be doubly affected, and would be soon totally deprived of subsistence. Instead, therefore, of the money wages of labour falling, they would rise; but they would not rise sufficiently to enable the labourer to purchase as many comforts and necessaries as he did before the rise in the price of those commodities. If his annual wages were before 24_l._, or six quarters of corn when the price was 4_l._ per quarter, he would probably receive only the value of five quarters when corn rose to 5_l._ per quarter. But five quarters would cost 25_l._; he would therefore receive an addition in his money wages, though with that addition he would be unable to furnish himself with the same quantity of corn and other commodities, which he had before consumed in his family. Notwithstanding, then, that the labourer would be really worse paid, yet this increase in his wages would necessarily diminish the profits of the manufacturer; for his goods would sell at no higher price, and yet the expense of producing them would be increased. This, however, will be considered in our examination into the principles which regulate profits. It appears, then, that the same cause which raises rent, namely, the increasing difficulty of providing an additional quantity of food with the same proportional quantity of labour, will also raise wages; and therefore if money be of an unvarying value, both rent and wages will have a tendency to rise with the progress of wealth and population. But there is this essential difference between the rise of rent and the rise of wages. The rise in the money value of rent is accompanied by an increased share of the produce; not only is the landlord's money rent greater, but his corn rent also; he will have more corn, and each defined measure of that corn will exchange for a greater quantity of all other goods which have not been raised in value. The fate of the labourer will be less happy: he will receive more money wages, it is true, but his corn wages will be reduced; and not only his command of corn, but his general condition will be deteriorated, by his finding it more difficult to maintain the market rate of wages above their natural rate. While the price of corn rises 10 per cent., wages will always rise less than 10 per cent., but rent will always rise more; the condition of the labourer will generally decline, and that of the landlord will always be improved. When wheat was at 4_l._ per quarter, suppose the labourer's wages to be 24_l._ per annum, or the value of six quarters of wheat, and suppose half his wages to be expended on wheat, and the other half, or 12_l._, on other things. He would receive £24.14. } { £4.4.8. } { 5.83 qrs. 25.10. } when wheat { 4.10. } or the { 5.66 qrs. 26.8. } was at { 4.16. } value of { 5.50 qrs. 27.8.6 } { 5.2.10 } { 5.33 qrs. He would receive these wages to enable him to live just as well, and no better, than before; for when corn was at 4_l._ per quarter, he would expend for three quarters of corn, at 4_l._ per qr. £12 and on other things 12 -- 24 When wheat was 4_l._ 4_s._ 8_d._, three quarters, which he and his family consumed, would cost him £12.14 other things not altered in price 12 ----- 24.14 When at 4_l._ 10_s._, three quarters of wheat would cost £13.10 and other things 12 ----- 25.10 When at 4_l._ 16_s._, three qrs. of wheat £14.8 Other things 12 ---- 26.8 When at 5.2.10_l._ three quarters of wheat would cost £15.8.6. Other things 12 ------ 27.8.6 In proportion as corn became dear, he would receive less corn wages, but his money wages would always increase, whilst his enjoyments on the above supposition, would be precisely the same. But as other commodities would be raised in price in proportion as raw produce entered into their composition, he would have more to pay for some of them. Although his tea, sugar, soap, candles, and house rent, would probably be no dearer, he would pay more for his bacon, cheese, butter, linen, shoes, and cloth; and therefore, even with the above increase of wages, his situation would be comparatively worse. But it may be said that I have been considering the effect of wages on price, on the supposition that gold, or the metal from which money is made, is the produce of the country in which wages varied; and that the consequences which I have deduced agree little with the actual state of things, because gold is a metal of foreign production. The circumstance however, of gold being a foreign production, will not invalidate the truth of the argument, because it may be shewn, that whether it were found at home, or were imported from abroad, the effects ultimately and indeed immediately would be the same. When wages rise, it is generally because the increase of wealth and capital have occasioned a new demand for labour, which will infallibly be attended with an increased production of commodities. To circulate these additional commodities, even at the same prices as before, more money is required, more of this foreign commodity from which money is made, and which can only be obtained by importation. Whenever a commodity is required in greater abundance than before, its relative value rises comparatively with those commodities with which its purchase is made. If more hats were wanted, their price would rise, and more gold would be given for them. If more gold were required, gold would rise, and hats would fall in price, as a greater quantity of hats and of all other things would then be necessary to purchase the same quantity of gold. But in the case supposed, to say that commodities will rise, because wages rise, is to affirm a positive contradiction; for we first say that gold will rise in relative value in consequence of demand, and secondly, that it will fall in relative value because prices will rise, two effects which are totally incompatible with each other. To say that commodities are raised in price, is the same thing as to say that money is lowered in relative value; for it is by commodities that the relative value of gold is estimated. If then all commodities rose in price, gold could not come from abroad to purchase those dear commodities, but it would go from home to be employed with advantage in purchasing the comparatively cheaper foreign commodities. It appears then, that the rise of wages will not raise the prices of commodities, whether the metal from which money is made be produced at home or in a foreign country. All commodities cannot rise at the same time without an addition to the quantity of money. This addition could not be obtained at home, as we have already shewn; nor could it be imported from abroad. To purchase any additional quantity of gold from abroad, commodities at home must be cheap, not dear. The importation of gold, and a rise in the price of all home-made commodities with which gold is purchased or paid for, are effects absolutely incompatible. The extensive use of paper money does not alter this question, for paper money conforms, or ought to conform to the value of gold, and therefore its value is influenced by such causes only as influence the value of that metal. These then are the laws by which wages are regulated, and by which the happiness of far the greatest part of every community is governed. Like all other contracts, wages should be left to the fair and free competition of the market, and should never be controlled by the interference of the legislature. The clear and direct tendency of the poor laws, is in direct opposition to these obvious principles: it is not, as the legislature benevolently intended, to amend the condition of the poor, but to deteriorate the condition of both poor and rich; instead of making the poor rich, they are calculated to make the rich poor; and whilst the present laws are in force, it is quite in the natural order of things that the fund for the maintenance of the poor should progressively increase, till it has absorbed all the neat revenue of the country, or at least so much of it as the state shall leave to us, after satisfying its own never failing demands for the public expenditure.[9] This pernicious tendency of these laws is no longer a mystery, since it has been fully developed by the able hand of Mr. Malthus; and every friend to the poor must ardently wish for their abolition. Unfortunately however they have been so long established, and the habits of the poor have been so formed upon their operation, that to eradicate them with safety from our political system requires the most cautious and skilful management. It is agreed by all who are most friendly to a repeal of these laws, that if it be desirable to prevent the most overwhelming distress to those for whose benefit they were erroneously enacted, their abolition should be effected by the most gradual steps. It is a truth which admits not a doubt, that the comforts and well being of the poor cannot be permanently secured without some regard on their part, or some effort on the part of the legislature, to regulate the increase of their numbers, and to render less frequent among them early and improvident marriages. The operation of the system of poor laws has been directly contrary to this. They have rendered restraint superfluous, and have invited imprudence by offering it a portion of the wages of prudence and industry. The nature of the evil points out the remedy. By gradually contracting the sphere of the poor laws; by impressing on the poor the value of independence, by teaching them that they must look not to systematic or casual charity, but to their own exertions for support, that prudence and forethought are neither unnecessary nor unprofitable virtues, we shall by degrees approach a sounder and more healthful state. No scheme for the amendment of the poor laws merits the least attention, which has not their abolition for its ultimate object; and he is the best friend to the poor, and to the cause of humanity, who can point out how this end can be attained with the most security, and at the same time with the least violence. It is not by raising in any manner different from the present, the fund from which the poor are supported, that the evil can be mitigated. It would not only be no improvement, but it would be an aggravation of the distress which we wish to see removed, if the fund were increased in amount, or were levied according to some late proposals, as a general fund from the country at large. The present mode of its collection and application has served to mitigate its pernicious effects. Each parish raises a separate fund for the support of its own poor. Hence it becomes an object of more interest and more practicability to keep the rates low, than if one general fund were raised for the relief of the poor of the whole kingdom. A parish is much more interested in an economical collection of the rate, and a sparing distribution of relief, when the whole saving will be for its own benefit, than if hundreds of other parishes were to partake of it. It is to this cause, that we must ascribe the fact of the poor laws not having yet absorbed all the net revenue of the country; it is to the rigour with which they are applied, that we are indebted for their not having become overwhelmingly oppressive. If by law every human being wanting support could be sure to obtain it, and obtain it in such a degree as to make life tolerably comfortable, theory would lead us to expect that all other taxes together would be light compared with the single one of poor rates. The principle of gravitation is not more certain than the tendency of such laws to change wealth and power into misery and weakness; to call away the exertions of labour from every object, except that of providing mere subsistence; to confound all intellectual distinction; to busy the mind continually in supplying the body's wants; until at last all classes should be infected with the plague of universal poverty. Happily these laws have been in operation during a period of progressive prosperity, when the funds for the maintenance of labour have regularly increased, and when an increase of population would be naturally called for. But if our progress should become more slow; if we should attain the stationary state, from which I trust we are yet far distant, then will the pernicious nature of these laws become more manifest and alarming; and then too will their removal be obstructed by many additional difficulties. CHAPTER V*. ON PROFITS. The profits of stock in different employments, having been shewn to bear a proportion to each other, and to have a tendency to vary all in the same degree and in the same direction, it remains for us to consider what is the cause of the permanent variations in the rate of profit, and the consequent permanent alterations in the rate of interest. We have seen that the price[10] of corn is regulated by the quantity of labour necessary to produce it, with that portion of capital which pays no rent. We have seen too that all manufactured commodities rise and fall in price, in proportion as more or less labour becomes necessary to their production. Neither the farmer who cultivates that quality of land, which regulates price, nor the manufacturer, who manufactures goods, sacrifice any portion of the produce for rent. The whole value of their commodities is divided into two portions only: one constitutes the profits of stock, the other the wages of labour. Supposing corn and manufactured goods always to sell at the same price, profits would be high or low in proportion as wages were low or high. But suppose corn to rise in price because more labour is necessary to produce it; that cause will not raise the price of manufactured goods in the production of which no additional quantity of labour is required. If then wages continued the same, profits would remain the same; but if, as is absolutely certain, wages should rise with the rise of corn, then profits would necessarily fall. If a manufacturer always sold his goods for the same money, for 1000_l._ for example, his profits would depend on the price of the labour necessary to manufacture those goods. His profits would be less when wages amounted to 800_l._ than when he paid only 600_l._ In proportion then as wages rose, would profits fall. But if the price of raw produce would increase, it may be asked, whether the farmer at least would not have the same rate of profits, although he should pay an additional price for wages? Certainly not: for he will not only have to pay, in common with the manufacturer, an increase of wages to each labourer he employs, but he will be obliged either to pay rent, or to employ an additional number of labourers to obtain the same produce; and the rise in the price of raw produce will be proportioned only to that rent, or that additional number, and will not compensate him for the rise of wages. If both the manufacturer and farmer employed ten men, on wages rising from 24_l._ to 25_l._ per annum. per man, the whole sum paid by each would be 250_l._ instead of 240_l._ This is, however, the whole addition that would be paid by the manufacturer to obtain the same quantity of commodities; but the farmer on new land would probably be obliged to employ an additional man, and therefore to pay an additional sum of 25_l._ for wages; and the farmer on the old land would be obliged to pay precisely the same additional sum of 25_l._ for rent; without which additional labour, corn would not have risen. One will therefore have to pay 275_l._ for wages alone, the other, for wages and rent together; each 25_l._ more than the manufacturer: for this latter 25_l._ they are compensated by the addition to the price of raw produce, and therefore their profits still conform to the profits of the manufacturer. As this proposition is important, I will endeavour still further to elucidate it. We have shewn that in early stages of society, both the landlord's and the labourer's share of the _value_ of the produce of the earth, would be but small; and that it would increase in proportion to the progress of wealth, and the difficulty of procuring food. We have shewn too, that although the value of the labourer's portion will be increased by the high value of food, his real share will be diminished; whilst that of the landlord will not only be raised in value, but will also be increased in quantity. The remaining quantity of the produce of the land, after the landlord and labourer are paid, necessarily belongs to the farmer, and constitutes the profits of his stock. But it may be alleged, that though as society advances, his proportion of the whole produce will be diminished, yet as it will rise in value, he, as well as the landlord and labourer, may, notwithstanding, receive a greater value. It may be said for example, that when corn rose from 4_l._ to 10_l._, the 180 quarters obtained from the best land would sell for 1800_l._ instead of 720_l._; and therefore, though the landlord and labourer be proved to have a greater value for rent and wages, still the value of the farmer's profit might also be augmented. This however is impossible, as I shall now endeavour to shew. In the first place, the price of corn would rise only in proportion to the increased difficulty of growing it on land of a worse quality. It has been already remarked, that if the labour of ten men will, on land of a certain quality, obtain 180 quarters of wheat, and its value be 4_l._ per quarter, or 720_l._; and if the labour of ten additional men, will on the same or any other land, produce only 170 quarters in addition, wheat would rise from 4_l._ to 4_l._ 4_s._ 8_d._; for 170: 180:: 4_l._: 4_l._ 4_s._ 8_d._ In other words, as for the production of 170 quarters, the labour of ten men is necessary, in the one case, and only that of 9.44 in the other, the rise would be as 9.44 to 10, or as 4_l._ to 4_l._ 4_s._ 8_d._ In the same manner it might be shewn, that if the labour of ten additional men would only produce 160 quarters, the price would further rise to 4_l._ 10_s._; if 150, to 4_l._ 16_s._, &c. &c. But when 180 quarters were produced on the land paying no rent, and its price was 4_l._ per quarter, it sold for £720 And when 170 quarters were produced on the land paying no rent, and the price rose to 4_l._ 4_s._ 8_d._ it still sold for 720 So, 160 quarters at 4_l._ 10_s._ produce 720 And 150 quarters at 4_l._ 16_s._ produce the same sum of 720 Now it is evident, that if out of these equal values, the farmer is at one time obliged to pay wages regulated by the price of wheat at 4_l._, and at other times at higher prices, the rate of his profits will diminish in proportion to the rise in the price of corn. In this case, therefore, I think it is clearly demonstrated that a rise in the price of corn, which increases the money wages of the labourer, diminishes the money value of the farmer's profits. But the case of the farmer of the old and better land will be in no way different; he also will have increased wages to pay, and will never retain more of the value of the produce, however high may be its price, than 720_l._ to be divided between himself and his always equal number of labourers; in proportion therefore as they get more, he must retain less. When the price of corn was at 4_l._, the whole 180 quarters belonged to the cultivator, and he sold it for 720_l._ When corn rose to 4_l._ 4_s._ 8_d._ he was obliged to pay the value of ten quarters out of his 180 for rent, consequently the remaining 170 yielded him no more than 720_l._: when it rose further to 4_l._ 10_s._ he paid twenty quarters, or their value, for rent, and consequently only retained 160 quarters, which yielded the same sum of 720_l._ It will be seen then, that whatever rise may take place in the price of corn, in consequence of the necessity of employing more labour and capital to obtain a given additional quantity of produce, such rise will always be equalled in value by the additional rent, or additional labour employed; so that whether corn sells for 4_l._, 4_l._ 10_s._, or 5_l._ 2_s._ 10_d._, the farmer will obtain for that which remains to him, after paying rent, the same real value. Thus we see, that whether the produce belonging to the farmer be 180, 170, 160, or 150 quarters, he always obtains the same sum of 720_l._ for it; the price increasing in an inverse proportion to the quantity. Rent then, it appears, always falls on the consumer, and never on the farmer; for if the produce of his farm should uniformly be 180 quarters, with the rise of price, he would retain the value of a less quantity for himself, and give the value of a larger quantity to his landlord; but the deduction would be such as to leave him always the same sum of 720_l._ It will be seen too that, in all cases, the same sum of 720_l._ must be divided between wages and profits. If the value of the raw produce from the land exceed this value, it belongs to rent, whatever may be its amount. If there be no excess, there will be no rent. Whether wages or profits rise or fall, it is this sum of 720_l._ from which they must both be provided. On the one hand, profits can never rise so high as to absorb so much of this 720_l._, that enough will not be left to furnish the labourers with absolute necessaries; on the other hand, wages can never rise so high as to leave no portion of this sum for profits. Thus in every case, agricultural, as well as manufacturing profits are lowered by a rise in the price of raw produce, if it be accompanied by a rise of wages.[11] If the farmer gets no additional value for the corn which remains to him after paying rent, if the manufacturer gets no additional value for the goods which he manufactures, and if both are obliged to pay a greater value in wages, can any point be more clearly established than that profits must fall, with a rise of wages? The farmer then, although he pays no part of his landlord's rent, that being always regulated by the price of produce, and invariably falling on the consumers, has however a very decided interest in keeping rent low, or rather in keeping the natural price of produce low. As a consumer of raw produce, and of those things into which raw produce enters as a component part, he will in common with all other consumers, be interested in keeping the price low. But he is most materially concerned with the high price of corn as it affects wages. With every rise in the price of corn, he will have to pay out of an equal and unvarying sum of 720_l._, an additional sum for wages to the ten men whom he is supposed constantly to employ. We have seen in treating on wages, that they invariably rise with the rise in the price of raw produce. On a basis assumed for the purpose of calculation, page 106, it will be seen that if when wheat is at 4_l._ per quarter, wages should be 24_l._ per annum. £ _s._ _d._ £ _s._ _d._ { 4 4 8 } { 24 14 0 When Wheat { 4 10 0 } wages would be { 25 10 0 is at { 4 16 0 } { 26 8 0 { 5 2 10 } { 27 8 6 Now, of the unvarying fund of 720_l._ to be distributed between labourers and farmers, £ _s._ _d._ _s._ _d._ £ _s._ _d._ When the { 4 0 0 } the { 240 0 } the { 480 0 0 price of { 4 4 8 } labourer { 247 0 } farmer { 473 0 0 Wheat is { 4 10 0 } will { 255 0 } will { 465 0 0 at { 4 16 0 } receive { 264 0 } receive { 456 0 0 { 5 2 10 } { 274 5 } { 445 15 [12] And supposing that the original capital of the farmer was 3000_l._, the profits of his stock being in the first instance 480_l._, would be at the rate of 16 per cent. When his profits fell to 473_l._, they would be at the rate of 15.7 per cent. 465_l._ 15.5 456_l._ 15.2 445_l._ 14.8 But the _rate_ of profits will fall still more, because the capital of the farmer, it must be recollected, consists in a great measure of raw produce, such as his corn and hay-ricks, his unthreshed wheat and barley, his horses and cows, which would all rise in price in consequence of the rise of produce. His absolute profits would fall from 480_l._ to 445_l._ 15_s._; but if from the cause which I have just stated, his capital should rise from 3000_l._ to 3200_l._ the rate of his profits would, when corn was at 5_l._ 2_s._ 10_d._, be under 14 per cent. If a manufacturer had also employed 3000_l._ in his business, he would be obliged in consequence of the rise of wages, to increase his capital, in order to be enabled to carry on the same business. If his commodities sold before for 720_l._, they would continue to sell at the same price; but the wages of labour, which were before 240_l._, would rise when corn was at 5_l._ 2_s._ 10_d._ to 274_l._ 5_s._ In the first case he would have a balance of 480_l._ as profit on 3000_l._, in the second he would have a profit only of 445_l._ 15_s._, on an increased capital, and therefore his profits would conform to the altered rate of those of the farmer. There are few commodities which are not more or less affected in their price by the rise of raw produce, because some raw material from the land enters into the composition of most commodities. Cotton goods, linen, and cloth, will all rise in price with the rise of wheat; but they rise on account of the greater quantity of labour expended on the raw material from which they are made, and not because more was paid by the manufacturer to the labourers whom he employed on those commodities. In all cases, commodities rise because more labour is expended on them, and not because the labour which is expended on them is at a higher value. Articles of jewellery, of iron, of plate, and of copper, would not rise, because none of the raw produce from the surface of the earth enters into their composition. It may be said that I have taken it for granted, that money wages would rise with a rise in the price of raw produce, but that this is by no means a necessary consequence, as the labourer may be contented with fewer enjoyments. It is true that the wages of labour may previously have been at a high level, and that they may bear some reduction. If so, the fall of profits will be checked; but it is impossible to conceive that the money price of wages should fall, or remain stationary with a gradually increasing price of necessaries; and therefore it may be taken for granted that, under ordinary circumstances, no permanent rise takes place in the price of necessaries, without occasioning, or having been preceded by a rise in wages. The effects produced on profits, would have been the same, or nearly the same, if there had been any rise in the price of those other necessaries, besides food, on which the wages of labour are expended. The necessity which the labourer would be under of paying an increased price for such necessaries, would oblige him to demand more wages; and whatever increases wages, necessarily reduces profits. But suppose the price of silks, velvets, furniture, and any other commodities, not required by the labourer, to rise in consequence of more labour being expended on them, would not that affect profits? certainly not: for nothing can affect profits but a rise in wages; silks and velvets are not consumed by the labourer, and therefore cannot raise wages. It is to be understood that I am speaking of profits generally. I have already remarked that the market price of a commodity may exceed its natural or necessary price, as it may be produced in less abundance than the new demand for it requires. This however is but a temporary effect. The high profits on capital employed in producing that commodity will naturally attract capital to that trade; and as soon as the requisite funds are supplied, and the quantity of the commodity is duly increased, its price will fall, and the profits of the trade will conform to the general level. A fall in the general rate of profits is by no means incompatible with a partial rise of profits in particular employments. It is through the inequality of profits, that capital is moved from one employment to another. Whilst then general profits are falling, and gradually settling at a lower level in consequence of the rise of wages, and the increasing difficulty of supplying the increasing population with necessaries, the profits of the farmer, may, for an interval of some little duration, be above the former level. An extraordinary stimulus may be also given for a certain time, to a particular branch of foreign and colonial trade; but the admission of this fact by no means invalidates the theory, that profits depend on high or low wages, wages on the price of necessaries, and the price of necessaries chiefly on the price of food, because all other requisites may be increased almost without limit. It should be recollected that prices always vary in the market, and in the first instance, through the comparative state of demand and supply. Although cloth could be furnished at 40_s._ per yard, and give the usual profits of stock, it may rise to 60 or 80_s._ from a general change of fashion, or from any other cause which should suddenly and unexpectedly increase the demand, or diminish the supply of it. The makers of cloth will for a time have unusual profits, but capital will naturally flow to that manufacture, till the supply and demand are again at their fair level, when the price of cloth will again sink to 40_s._, its natural or necessary price. In the same manner, with every increased demand for corn, it may rise so high as to afford more than the general profits to the farmer. If there be plenty of fertile land, the price of corn will again fall to its former standard, after the requisite quantity of capital has been employed in producing it, and profits will be as before; but if there be not plenty of fertile land, if, to produce this additional quantity, more than the usual quantity of capital and labour be required, corn will not fall to its former level. Its natural price will be raised, and the farmer, instead of obtaining permanently larger profits, will find himself obliged to be satisfied with the diminished rate which is the inevitable consequence of the rise of wages, produced by the rise of necessaries. The natural tendency of profits then is to fall; for, in the progress of society and wealth, the additional quantity of food required is obtained by the sacrifice of more and more labour. This tendency, this gravitation as it were of profits, is happily checked at repeated intervals by the improvements in machinery, connected with the production of necessaries, as well as by discoveries in the science of agriculture which enable us to relinquish a portion of labour before required, and therefore to lower the price of the prime necessary of the labourer. The rise in the price of necessaries and in the wages of labour is however limited; for as soon as wages should be equal (as in the case formerly stated) to 720_l._, the whole receipts of the farmer, there must be an end of accumulation; for no capital can then yield any profit whatever, and no additional labour can be demanded, and consequently population will have reached its highest point. Long indeed before this period, the very low rate of profits will have arrested all accumulation, and almost the whole produce of the country, after paying the labourers, will be the property of the owners of land and the receivers of tithes and taxes. Thus, taking the former very imperfect basis as the grounds of my calculation, it would appear that when corn was at 20_l._ per quarter, the whole net income of the country would belong to the landlords, for then the same quantity of labour that was originally necessary to produce 180 quarters, would be necessary to produce 36; since 20_l._ : 4_l._ :: 180 : 36. The farmer then, who originally produced 180 quarters, (if any such there were, for the old and new capital employed on the land would be so blended, that it could in no way be distinguished,) would sell the 180 qrs. at 20_l._ per qr. or £3600 the value of 144 qrs. {to landlord for rent, being the } --- {difference between 36 and 180 qrs.} 2880 36 qrs. 720 the value of 36 qrs. to labourers ten in number 720 --- leaving nothing whatever for profit. At this price of 20_l._ the labourers would continue to consume three quarters each per annum or £60 And on other commodities they would expend 12 -- 72 for each labourer. -- And therefore ten labourers would cost 720_l._ per annum. In all these calculations I have been desirous only to elucidate the principle, and it is scarcely necessary to observe, that my whole basis is assumed at random, and merely for the purpose of exemplification. The results though different in degree, would have been the same in principle, however accurately I might have set out in stating the difference in the number of labourers necessary to obtain the successive quantities of corn required by an increasing population, the quantity consumed by the labourer's family, &c. &c. My object has been to simplify the subject, and I have therefore made no allowance for the increasing price of the other necessaries, besides food, of the labourer; an increase which would be the consequence of the increased value of the raw material from which they are made, and which would of course further increase wages, and lower profits. I have already said, that long before this state of prices was become permanent, there would be no motive for accumulation; for no one accumulates but with a view to make his accumulation productive, and it is only when so employed that it operates on profits. Without a motive there could be no accumulation, and consequently such a state of prices never could take place. The farmer and manufacturer can no more live without profit, than the labourer without wages. Their motive for accumulation will diminish with every diminution of profit, and will cease altogether when their profits are so low as not to afford them an adequate compensation for their trouble, and the risk which they must necessarily encounter in employing their capital productively. I must again observe, that the rate of profits would fall much more rapidly than I have estimated in my calculation: for the value of the produce being what I have stated it under the circumstances supposed, the value of the farmer's stock would be greatly increased from its necessarily consisting of many of the commodities which had risen in value. Before corn could rise from 4_l._ to 12_l._ his capital would probably be doubled in exchangeable value, and be worth 6000_l._ instead of 3000_l._ If then his profit were 180_l._, or 6 per cent. on his original capital, profits would not at that time be really at a higher _rate_ than 3 per cent.; for 6000_l._ at 3 per cent. gives 180_l._; and on those terms only could a new farmer with 6000_l._ money in his pocket enter into the farming business. Many trades would derive some advantage, more or less, from the same source. The brewer, the distiller, the clothier, the linen manufacturer, would be partly compensated for the diminution of their profits, by the rise in the value of their stock of raw and finished materials; but a manufacturer of hardware, of jewellery, and of many other commodities, as well as those whose capitals uniformly consisted of money, would be subject to the whole fall in the rate of profits, without any compensation whatever. We should also expect that, however the rate of the profits of stock might diminish in consequence of the accumulation of capital on the land, and the rise of wages, yet the aggregate amount of profits would increase. Thus supposing that, with repeated accumulations of 100,000_l._, the rate of profit should fall from 20 to 19, to 18, to 17 per cent., a constantly diminishing rate, we should expect that the whole amount of profits received by those successive owners of capital would be always progressive; that it would be greater when the capital was 200,000_l._, than when 100,000_l._; still greater when 300,000_l._; and so on, increasing, though at a diminishing rate, with every increase of capital. This progression however is only true for a certain time: thus 19 per cent. on 200,000_l._ is more than 20 on 100,000_l._; again 18 per cent. on 300,000_l._ is more than 19 per cent. on 200,000_l._; but after capital has accumulated to a large amount, and profits have fallen, the further accumulation diminishes the aggregate of profits. Thus suppose the accumulation should be 1,000,000_l._, and the profits 7 per cent. the whole amount of profits will be 70,000_l._; now if an addition of 100,000_l._ capital be made to the million, and profits should fall to 6 per cent., 66,000_l._ or a diminution of 4000_l._ will be received by the owners of stock, although the whole amount of stock will be increased from 1,000,000_l._ to 1,100,000_l._ There can, however, be no accumulation of capital, so long as stock yields any profit at all, without its yielding not only an increase of produce, but an increase of value. By employing 100,000_l._ additional capital, no part of the former capital will be rendered less productive. The produce of the land and labour of the country must increase, and its value will be raised, not only by the value of the addition which is made to the former quantity of productions, but by the new value which is given to the whole produce of the land, by the increased difficulty of producing the last portion of it, which new value always goes to rent. When the accumulation of capital, however, becomes very great, notwithstanding this increased value, it will be so distributed that a less value than before will be appropriated to profits, while that which is devoted to rent and wages will be increased. Thus with successive additions of 100,000_l._ to capital, with a fall in the rate of profits, from 20 to 19, to 18, to 17 per cent. &c. the productions annually obtained will increase in quantity, and be of more than the whole additional value, which the additional capital is calculated to produce. From 20,000_l._ it will rise to more than 39,000_l._ and then to more than 57,000_l._, and when the capital employed is a million, as we before supposed, if 100,000_l._ more be added to it, and the aggregate of profits is actually lower than before, more than 6000_l._ will nevertheless be added to the revenue of the country, but it will be to the revenue of the landlords; they will obtain more than the additional produce, and will from their situation be enabled to encroach even on the former gains of the capitalist. Thus, suppose the price of corn to be 4_l._ per quarter, and that therefore, as we before calculated, of every 720_l._ remaining to the farmer after payment of his rent, 480_l._ were retained by him, and 240_l._ were paid to his labourers; when the price rose to 6_l._ per quarter, he would be obliged to pay his labourers 300_l._ and retain only 420_l._ for profits. Now if the capital employed were so large as to yield a hundred thousand times 720_l._ or 72,000,000_l._ the aggregate of profits would be 48,000,000_l._ when wheat was at 4_l._ per quarter; and if by employing a larger capital, 105,000 times 720_l._ were obtained when wheat was at 6_l._, or 75,600,000_l._, profits would actually fall from 48,000,000_l._ to 44,100,000_l._ or 105,000 times 420_l._, and wages would rise from 24,000,000_l._ to 31,500,000_l._ Wages would rise because more labourers would be employed, in proportion to capital; and each labourer would receive more money wages; but the condition of the labourer, as we have already shewn, would be worse, inasmuch as he would be able to command a less quantity of the produce of the country. The only real gainers would be the landlords; they would receive higher rents, first, because produce would be of a higher value, and secondly, because they would have a greatly increased proportion. Although a greater value is produced, a greater proportion of what remains of that value, after paying rent, is consumed by the producers, and it is this, and this alone, which regulates profits. Whilst the land yields abundantly, wages may temporarily rise, and the producers may consume more than their accustomed proportion; but the stimulus which will thus be given to population, will speedily reduce the labourers to their usual consumption. But when poor lands are taken into cultivation, or when more capital and labour are expended on the old land, with a less return of produce, the effect must be permanent. A greater proportion of that part of the produce which remains to be divided, after paying rent, between the owners of stock and the labourers, will be apportioned to the latter. Each man may, and probably will, have a less absolute quantity; but as more labourers are employed in proportion to the whole produce retained by the farmer, the value of a greater proportion of the whole produce will be absorbed by wages, and consequently the value of a smaller proportion will be devoted to profits. This will necessarily be rendered permanent by the laws of nature, which have limited the productive powers of the land. Thus we again arrive at the same conclusion which we have before attempted to establish:--that in all countries, and at all times, profits depend on the quantity of labour requisite to provide necessaries for the labourers, on that land or with that capital which yields no rent. The effects then of accumulation will be different in different countries, and will depend chiefly on the fertility of the land. However extensive a country may be where the land is of a poor quality, and where the importation of food is prohibited, the most moderate accumulations of capital will be attended with great reductions in the rate of profit, and a rapid rise in rent; and on the contrary a small but fertile country, particularly if it freely permits the importation of food, may accumulate a large stock of capital without any great diminution in the rate of profits, or any great increase in the rent of land. In the Chapter on Wages, we have endeavoured to shew that the money price of commodities would not be raised by a rise of wages, either on the supposition that gold, the standard of money, was the produce of this country, or that it was imported from abroad. But if it were otherwise, if the prices of commodities were permanently raised by high wages, the proposition would not be less true, which asserts that high wages invariably affect the employers of labour, by depriving them of a portion of their real profits. Supposing the hatter, the hosier, and the shoemaker, each paid 10_l._ more wages in the manufacture of a particular quantity of their commodities, and that the price of hats, stockings, and shoes, rose by a sum sufficient to repay the manufacturer the 10_l._; their situation would be no better than if no such rise took place. If the hosier sold his stockings for 110_l._ instead of 100_l._, his profits would be precisely the same money amount as before; but as he would obtain in exchange for this equal sum, one tenth less of hats, shoes, and every other commodity, and as he could with his former amount of savings employ fewer labourers at the increased wages, and purchase fewer raw materials at the increased prices, he would be in no better situation than if his money profits had been really diminished in amount, and every thing had remained at its former price. Thus then I have endeavoured to shew, first, that a rise of wages would not raise the price of commodities, but would invariably lower profits; and secondly, that if the prices of commodities could be raised, still the effect on profits would be the same; and that in fact the value of the medium only in which prices and profits are estimated would be lowered. CHAPTER VI. ON FOREIGN TRADE. No extension of foreign trade will immediately increase the amount of value in a country, although it will very powerfully contribute to increase the mass of commodities, and therefore the sum of enjoyments. As the value of all foreign goods is measured by the quantity of the produce of our land and labour, which is given in exchange for them, we should have no greater value, if by the discovery of new markets, we obtained double the quantity of foreign goods in exchange for a given quantity of ours. If by the purchase of English goods to the amount of 1000_l._ a merchant can obtain a quantity of foreign goods, which he can sell in the English market for 1,200_l._, he will obtain 20 per cent. profit by such an employment of his capital; but neither his gains, nor the value of the commodities imported, will be increased or diminished by the greater or smaller quantity of foreign goods obtained. Whether, for example, he imports twenty-five or fifty pipes of wine, his interest can be no way affected, if at one time the twenty-five pipes, and at another the fifty pipes, equally sell for 1,200_l._ In either case his profit will be limited to 200_l._, or 20 per cent. on his capital; and in either case the same value will be imported into England. If the fifty pipes sold for more than 1,200_l._, the profits of this individual merchant would exceed the general rate of profits, and capital would naturally flow into this advantageous trade, till the fall of the price of wine had brought every thing to the former level. It has indeed been contended, that the great profits which are sometimes made by particular merchants in foreign trade, will elevate the general rate of profits in the country, and that the abstraction of capital from other employments, to partake of the new and beneficial foreign commerce, will raise prices generally, and thereby increase profits. It has been said, by high authority, that less capital being necessarily devoted to the growth of corn, to the manufacture of cloth, hats, shoes, &c. while the demand continues the same, the price of these commodities will be so increased, that the farmer, hatter, clothier, and shoemaker, will have an increase of profits, as well as the foreign merchant.[13] They who hold this argument agree with me, that the profits of different employments have a tendency to conform to one another; to advance and recede together. Our variance consists in this: They contend, that the equality of profits will be brought about by the general rise of profits; and I am of opinion, that the profits of the favoured trade will speedily subside to the general level. For, first, I deny that less capital will necessarily be devoted to the growth of corn, to the manufacture of cloth, hats, shoes, &c., unless the demand for these commodities be diminished; and if so, their price will not rise. In the purchase of foreign commodities, either the same, a larger, or a less portion of the produce of the land and labour of England will be employed. If the same portion be so employed, then will the same demand exist for cloth, shoes, corn, and hats, as before, and the same portion of capital will be devoted to their production. If, in consequence of the price of foreign commodities being cheaper, a less portion of the annual produce of the land and labour of England is employed in the purchase of foreign commodities, more will remain for the purchase of other things. If there be a greater demand for hats, shoes, corn, &c. than before, which there may be, the consumers of foreign commodities having an additional portion of their revenue disposable, the capital is also disposable with which the greater value of foreign commodities was before purchased; so that with the increased demand for corn, shoes, &c. there exists also the means of procuring an increased supply, and therefore neither prices nor profits can permanently rise. If more of the produce of the land and labour of England be employed in the purchase of foreign commodities, less can be employed in the purchase of other things, and therefore fewer hats, shoes, &c. will be required. At the same time that capital is liberated from the production of shoes, hats, &c. more must be employed in manufacturing those commodities with which foreign commodities are purchased; and consequently in all cases the demand for foreign and home commodities together, as far as regards value, is limited by the revenue and capital of the country. If one increases, the other must diminish. If the importation of wine, given in exchange for the same quantity of English commodities be doubled, the people of England can either consume double the quantity of wine that they did before, or the same quantity of wine and a greater quantity of English commodities. If my revenue had been 1000_l._, with which I purchased annually one pipe of wine for 100_l._ and a certain quantity of English commodities for 900_l._; when wine fell to 50_l._ per pipe, I might lay out the 50_l._ saved, either in the purchase of an additional pipe of wine, or in the purchase of more English commodities. If I bought more wine, and every wine-drinker did the same, the foreign trade would not be in the least disturbed; the same quantity of English commodities would be exported in exchange for wine, and we should receive double the quantity, though not double the value of wine. But if I, and others contented ourselves with the same quantity of wine as before, fewer English commodities would be exported, and the wine-drinkers might either consume the commodities which were before exported, or any others for which they had an inclination. The capital required for their production would be supplied by the capital liberated from the foreign trade. There are two ways in which capital may be accumulated: it may be saved either in consequence of increased revenue, or of diminished consumption. If my profits are raised from 1000_l._ to 1200_l._ while my expenditure continues the same, I accumulate annually 200_l._ more than I did before. If I save 200_l._ out of my expenditure while my profits continue the same, the same effect will be produced; 200_l._ per annum will be added to my capital. The merchant who imported wine after profits had been raised from 20 per cent. to 40 per cent., instead of purchasing his English goods for 1000_l._, must purchase them for 857_l._ 2_s._ 10_d._, still selling the wine which he imports in return for those goods for 1200_l._; or, if he continued to purchase his English goods for 1000_l._, must raise the price of his wine to 1400_l._; he would thus obtain 40 instead of 20 per cent. profit on his capital; but if, in consequence of the cheapness of all the commodities on which his revenue was expended, he and all other consumers could save the value of 200_l._ out of every 1000_l._ they before expended, they would more effectually add to the real wealth of the country; in one case, the savings would be made in consequence of an increase of revenue, in the other in consequence of diminished expenditure. If, by the introduction of machinery, the generality of the commodities on which revenue was expended fell 20 per cent. in value, I should be enabled to save as effectually as if my revenue had been raised 20 per cent.; but in one case the rate of profits is stationary, in the other it is raised 20 per cent.--If, by the introduction of cheap foreign goods, I can save 20 per cent. from my expenditure, the effect will be precisely the same as if machinery had lowered the expense of their production, but profits would not be raised. It is not, therefore, in consequence of the extension of the market that the rate of profits is raised, although such extension may be equally efficacious in increasing the mass of commodities, and may thereby enable us to augment the funds destined for the maintenance of labour, and the materials on which labour may be employed. It is quite as important to the happiness of mankind, that our enjoyments should be increased by the better distribution of labour, by each country producing those commodities for which by its situation, its climate, and its other natural or artificial advantages it is adapted, and by their exchanging them for the commodities of other countries, as that they should be augmented by a rise in the rate of profits. It has been my endeavour to shew throughout this work, that the rate of profits can never be increased but by a fall in wages, and that there can be no permanent fall of wages but in consequence of a fall of the necessaries on which wages are expended. If, therefore, by the extension of foreign trade, or by improvements in machinery, the food and necessaries of the labourer can be brought to market at a reduced price, profits will rise. If, instead of growing our own corn, or manufacturing the clothing and other necessaries of the labourer, we discover a new market from which we can supply ourselves with these commodities at a cheaper price, wages will fall and profits rise; but if the commodities obtained at a cheaper rate, by the extension of foreign commerce, or by the improvement of machinery, be exclusively the commodities consumed by the rich, no alteration will take place in the rate of profits. The rate of wages would not be affected, although wine, velvets, silks, and other expensive commodities, should fall 50 per cent., and consequently profits would continue unaltered. Foreign trade, then, though highly beneficial to a country, as it increases the amount and variety of the objects on which revenue may be expended, and affords, by the abundance and cheapness of commodities, incentives to saving, and to the accumulation of capital, has no tendency to raise the profits of stock, unless the commodities imported be of that description on which the wages of labour are expended. The remarks which have been made respecting foreign trade, apply equally to home trade. The rate of profits is never increased by a better distribution of labour, by the invention of machinery, by the establishment of roads and canals, or by any means of abridging labour either in the manufacture or in the conveyance of goods. These are causes which operate on price, and never fail to be highly beneficial to consumers; since they enable them with the same labour, or with the value of the produce of the same labour, to obtain in exchange a greater quantity of the commodity to which the improvement is applied; but they have no effect whatever on profit. On the other hand, every diminution in the wages of labour raises profits, but produces no effect on the price of commodities. One is advantageous to all classes, for all classes are consumers; the other is beneficial only to producers; they gain more, but every thing remains at its former price. In the first case, they get the same as before; but every thing on which their gains are expended, is diminished in exchangeable value. The same rule which regulates the relative value of commodities in one country, does not regulate the relative value of the commodities exchanged between two or more countries. Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by rewarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically: while, by increasing the general mass of productions, it diffuses general benefit, and binds together by one common tie of interest and intercourse, the universal society of nations throughout the civilized world. It is this principle which determines that wine shall be made in France and Portugal, that corn shall be grown in America and Poland, and that hardware and other goods shall be manufactured in England. In one and the same country, profits are, generally speaking, always on the same level; or differ only as the employment of capital may be more or less secure and agreeable. It is not so between different countries. If the profits of capital employed in Yorkshire, should exceed those of capital employed in London, capital would speedily move from London to Yorkshire, and an equality of profits would be effected; but if in consequence of the diminished rate of production in the lands of England, from the increase of capital and population, wages should rise, and profits fall, it would not follow that capital and population would necessarily move from England to Holland, or Spain, or Russia, where profits might be higher. If Portugal had no commercial connexion with other countries, instead of employing a great part of her capital and industry in the production of wines, with which she purchases for her own use the cloth and hardware of other countries, she would be obliged to devote a part of that capital to the manufacture of those commodities, which she would thus obtain probably inferior in quality as well as quantity. The quantity of wine which she shall give in exchange for the cloth of England, is not determined by the respective quantities of labour devoted to the production of each, as it would be, if both commodities were manufactured in England, or both in Portugal. England may be so circumstanced, that to produce the cloth may require the labour of 100 men for one year; and if she attempted to make the wine, it might require the labour of 120 men for the same time. England would therefore find it her interest to import wine, and to purchase it by the exportation of cloth. To produce the wine in Portugal, might require only the labour of eighty men for one year, and to produce the cloth in the same country, might require the labour of ninety men for the same time. It would therefore be advantageous for her to export wine in exchange for cloth. This exchange might even take place, notwithstanding that the commodity imported by Portugal could be produced there with less labour than in England. Though she could make the cloth with the labour of ninety men, she would import it from a country where it required the labour of 100 men to produce it, because it would be advantageous to her rather to employ her capital in the production of wine, for which she would obtain more cloth from England, than she could produce by diverting a portion of her capital from the cultivation of vines to the manufacture of cloth. Thus, England would give the produce of the labour of 100 men for the produce of the labour of 80. Such an exchange could not take place between the individuals of the same country. The labour of 100 Englishmen cannot be given for that of 80 Englishmen, but the produce of the labour of 100 Englishmen may be given for the produce of the labour of 80 Portuguese, 60 Russians, or 120 East Indians. The difference in this respect, between a single country and many, is easily accounted for, by considering the difficulty with which capital moves from one country to another, to seek a more profitable employment, and the activity with which it invariably passes from one province to another in the same country.[14] It would undoubtedly be advantageous to the capitalists of England, and to the consumers in both countries, that under such circumstances, the wine and the cloth should both be made in Portugal, and therefore that the capital and labour of England employed in making cloth, should be removed to Portugal for that purpose. In that case, the relative value of these commodities would be regulated by the same principle, as if one were the produce of Yorkshire, and the other of London; and in every other case, if capital freely flowed towards those countries where it could be most profitably employed, there could be no difference in the rate of profit, and no other difference in the real or labour price of commodities, than the additional quantity of labour required to convey them to the various markets where they were to be sold. Experience however shews, that the fancied or real insecurity of capital, when not under the immediate control of its owner, together with the natural disinclination which every man has to quit the country of his birth and connexions, and intrust himself with all his habits fixed, to a strange government and new laws, check the emigration of capital. These feelings, which I should be sorry to see weakened, induce most men of property to be satisfied with a low rate of profits in their own country, rather than seek a more advantageous employment for their wealth in foreign nations. Gold and silver having been chosen for the general medium of circulation, they are, by the competition of commerce, distributed in such proportions amongst the different countries of the world, as to accommodate themselves to the natural traffic which would take place if no such metals existed, and the trade between countries were purely a trade of barter. Thus, cloth cannot be imported into Portugal, unless it sell there for more gold than it cost in the country from which it was imported; and wine cannot be imported into England, unless it will sell for more there than it cost in Portugal. If the trade were purely a trade of barter, it could only continue whilst England could make cloth so cheap as to obtain a greater quantity of wine with a given quantity of labour, by manufacturing cloth than by growing vines; and also whilst the industry of Portugal were attended by the reverse effects. Now suppose England to discover a process for making wine, so that it should become her interest rather to grow it than import it: she would naturally divert a portion of her capital from the foreign trade to the home trade; she would cease to manufacture cloth for exportation, and would grow wine for herself. The money price of these commodities would be regulated accordingly; wine would fall here while cloth continued at its former price, and in Portugal no alteration would take place in the price of either commodity. Cloth would continue for some time to be exported from this country, because its price would continue to be higher in Portugal than here; but money instead of wine would be given in exchange for it, till the accumulation of money here, and its diminution abroad, should so operate on the relative value of cloth in the two countries, that it would cease to be profitable to export it. If the improvement in making wine were of a very important description, it might become profitable for the two countries to exchange employments; for England to make all the wine, and Portugal all the cloth, consumed by them: but this could be effected only by a new distribution of the precious metals, which should raise the price of cloth in England, and lower it in Portugal. The relative price of wine would fall in England in consequence of the real advantage from the improvement of its manufacture; that is to say, its natural price would fall: the relative price of cloth would rise there from the accumulation of money. Thus, suppose before the improvement in making wine in England, the price of wine here were 50_l._ per pipe, and the price of a certain quantity of cloth were 45_l._, whilst in Portugal the price of the same quantity of wine was 45_l._, and that of the same quantity of cloth 50_l._; wine would be exported from Portugal with a profit of 5_l._, and cloth from England with a profit of the same amount. Suppose that, after the improvement, wine falls to 45_l._ in England, the cloth continuing at the same price. Every transaction in commerce is an independent transaction. Whilst a merchant can buy cloth in England for 45_l._, and sell it with the usual profit in Portugal, he will continue to export it from England. His business is simply to purchase English cloth, and to pay for it by a bill of exchange, which he purchases with Portuguese money. It is to him of no importance what becomes of this money; he has discharged his debt by the remittance of the bill. His transaction is undoubtedly regulated by the terms on which he can obtain this bill, but they are known to him at the time; and the causes which may influence the market price of bills, or the rate of exchange, is no consideration of his. If the markets be favourable for the exportation of wine from Portugal to England, the exporter of the wine will be a seller of a bill, which will be purchased either by the importer of the cloth, or by the person who sold him his bill; and thus without the necessity of money passing from either country, the exporters in each country will be paid for their goods. Without having any direct transaction with each other, the money paid in Portugal by the importer of cloth will be paid to the Portuguese exporter of wine; and in England by the negociation of the same bill, the exporter of the cloth will be authorized to receive its value from the importer of wine. But if the prices of wine were such that no wine could be exported to England, the importer of cloth would equally purchase a bill; but the price of that bill would be higher, from the knowledge which the seller of it would possess, that there was no counter bill in the market by which he could ultimately settle the transactions between the two countries: he might know that the gold or silver money which he received in exchange for his bill, must be actually exported to his correspondent in England, to enable him to pay the demand which he had authorized to be made upon him, and he might therefore charge in the price of his bill all the expenses to be incurred, together with his fair and usual profit. If then this premium for a bill on England should be equal to the profit on importing cloth, the importation would of course cease; but if the premium on the bill were only 2 per cent., if to be enabled to pay a debt in England of 100_l._, 102_l._ should be paid in Portugal, whilst cloth which cost 45_l._ would sell for 50_l._, cloth would be imported, bills would be bought, and money would be exported, till the diminution of money in Portugal, and its accumulation in England, had produced such a state of prices, as would make it no longer profitable to continue these transactions. But the diminution of money in one country, and its increase in another, do not operate on the price of one commodity only, but on the prices of all, and therefore the price of wine and cloth will be both raised in England, and both lowered in Portugal. The price of cloth from being 45_l._ in one country, and 50_l._ in the other, would probably fall to 49_l._ or 48_l._ in Portugal, and rise to 46_l._ or 47_l._ in England, and not afford a sufficient profit after paying a premium for a bill, to induce any merchant to import that commodity. It is thus that the money of each country is apportioned to it in such quantities only as may be necessary to regulate a profitable trade of barter. England exported cloth in exchange for wine, because by so doing, her industry was rendered more productive to her; she had more cloth and wine than if she had manufactured both for herself; and Portugal imported cloth, and exported wine, because the industry of Portugal could be more beneficially employed for both countries in producing wine. Let there be more difficulty in England in producing cloth, or in Portugal in producing wine, or let there be more facility in England in producing wine, or in Portugal in producing cloth, and the trade must immediately cease. No change whatever takes place in the circumstances of Portugal; but England finds that she can employ her labour more productively in the manufacture of wine, and instantly the trade of barter between the two countries changes. Not only is the exportation of wine from Portugal stopped, but a new distribution of the precious metals takes place, and her importation of cloth is also prevented. Both countries would probably find it their interest to make their own wine and their own cloth; but this singular result would take place: in England, though wine would be cheaper, cloth would be elevated in price, more would be paid for it by the consumer; while in Portugal the consumers, both of cloth and of wine, would be able to purchase those commodities cheaper. In the country where the improvement was made, prices would be enhanced; in that where no change had taken place, but where they had been deprived of a profitable branch of foreign trade, prices would fall. This, however, is only a seeming advantage to Portugal, for the quantity of cloth and wine together produced in that country would be diminished, while the quantity produced in England would be increased. Money would in some degree have changed its value in the two countries--it would be lowered in England, and raised in Portugal. Estimated in money, the whole revenue of Portugal would be diminished; estimated in the same medium, the whole revenue of England would be increased. Thus then it appears, that the improvement of a manufacture in any country tends to alter the distribution of the precious metals amongst the nations of the world: it tends to increase the quantity of commodities, at the same time that it raises general prices in the country where the improvement takes place. To simplify the question, I have been supposing the trade between two countries to be confined to two commodities, to wine and cloth, but it is well known that many and various articles enter into the list of exports and imports. By the abstraction of money from one country, and the accumulation of it in another, all commodities are affected in price, and consequently encouragement is given to the exportation of many more commodities besides money, which will therefore prevent so great an effect from taking place on the value of money in the two countries, as might otherwise be expected. Beside the improvements in arts and machinery, there are various other causes which are constantly operating on the natural course of trade, and which interfere with the equilibrium, and the relative value of money. Bounties on exportation or importation, new taxes on commodities, sometimes by their direct, and at other times by their indirect operation, disturb the natural trade of barter, and produce a consequent necessity of importing or exporting money, in order that prices may be accommodated to the natural course of commerce; and this effect is produced not only in the country where the disturbing cause takes place, but, in a greater or less degree, in every country of the commercial world. This will in some measure account for the different value of money in different countries; it will explain to us why the prices of home commodities, and those of great bulk, are, independently of other causes, higher in those countries where manufactures flourish. Of two countries having precisely the same population, and the same quantity of land of equal fertility in cultivation, with the same knowledge too of agriculture, the prices of raw produce will be highest in that where the greater skill, and the better machinery is used in the manufacture of exportable commodities. The rate of profits will probably differ but little; for wages, or the real reward of the labourer, may be the same in both; but those wages, as well as raw produce, will be rated higher in money in that country, into which, from the advantages attending their skill and machinery, an abundance of money is imported in exchange for their goods. Of these two countries, if one had the advantage in the manufacture of goods of one quality, and the other in the manufacture of goods of another quality, there would be no decided influx of the precious metals into either; but if the advantage very heavily preponderated in favour of either, that effect would be inevitable. In the former part of this work, we have assumed for the purpose of argument, that money always continued of the same value; we are now endeavouring to shew that besides the ordinary variations in the value of money, and those which are common to the whole commercial world, there are also partial variations to which money is subject in particular countries; and in fact, that the value of money is never the same in any two countries, depending as it does on relative taxation, on manufacturing skill, on the advantages of climate, natural productions, and many other causes. Although, however, money is subject to such perpetual variations, and consequently the prices of the commodities which are common to most countries, are also subject to considerable difference, yet no effect will be produced on the rate of profits, either from the influx or efflux of money. Capital will not be increased, because the circulating medium is augmented. If the rent paid by the farmer to his landlord, and the wages to his labourers, be 20 per cent. higher in one country than another, and if at the same time the nominal value of the farmer's capital be 20 per cent. more, he will receive precisely the same rate of profits, although he should sell his raw produce 20 per cent. higher. Profits, it cannot be too often repeated, depend on wages; not on nominal, but real wages; not on the number of pounds that may be annually paid to the labourer, but on the number of days' work necessary to obtain those pounds. Wages may therefore be precisely the same in two countries: they may bear too the same proportion to rent, and to the whole produce obtained from the land, although in one of those countries the labourer should receive ten shillings per week, and in the other twelve. In the early states of society, when manufactures have made little progress, and the produce of all countries is nearly similar, consisting of the bulky and most useful commodities, the value of money in different countries will be chiefly regulated by their distance from the mines which supply the precious metals; but as the arts and improvements of society advance, and different nations excel in particular manufactures, although distance will still enter into the calculation, the value of the precious metals will be chiefly regulated by the superiority of those manufactures. Suppose all nations to produce corn, cattle, and coarse clothing only, and that it was by the exportation of such commodities that gold could be obtained from the countries which produced them, or from those who held them in subjection; gold would naturally be of greater exchangeable value in Poland than in England, on account of the greater expense of sending such a bulky commodity as corn the more distant voyage, and also the greater expense attending the conveying of gold to Poland. This difference in the value of gold, or which is the same thing, this difference in the price of corn in the two countries, would exist although the facilities of producing corn in England should far exceed those of Poland, from the greater fertility of the land, and the superiority in the skill and implements of the labourer. If however Poland should be the first to improve her manufactures, if she should succeed in making a commodity which was generally desirable, including great value in little bulk, or if she should be exclusively blessed with some natural production, generally desirable, and not possessed by other countries, she would obtain an additional quantity of gold in exchange for this commodity, which would operate on the price of her corn, cattle, and coarse clothing. The disadvantage of distance would probably be more than compensated by the advantage of having an exportable commodity of great value, and money would be permanently of lower value in Poland than in England. If on the contrary, the advantage of skill and machinery were possessed by England, another reason would be added to that which before existed, why gold should be less valuable in England than in Poland, and why corn, cattle, and clothing, should be at a higher price in the former country. These I believe to be the only two causes which regulate the comparative value of money in the different countries of the world; for although taxation occasions a disturbance of the equilibrium of money, it does so by depriving the country in which it is imposed of some of the advantages attending skill, industry, and climate. It has been my endeavour carefully to distinguish between a low value of money, and a high value of corn, or any other commodity with which money may be compared. These have been generally considered as meaning the same thing; but it is evident, that when corn rises from five to ten shillings a bushel, it may be owing either to a fall in the value of money, or to a rise in the value of corn. Thus we have seen, that from the necessity of having recourse successively to land of a worse and worse quality, in order to feed an increasing population, corn must rise in relative value to other things. If therefore money continue permanently of the same value, corn will exchange for more of such money, that is to say, it will rise in price. The same rise in the price of corn will be produced by such improvement of machinery in manufactures, as shall enable us to manufacture commodities with peculiar advantages: for the influx of money will be the consequence; it will fall in value, and therefore exchange for less corn. But the effects resulting from a high price of corn when produced by the rise in the value of corn, and when caused by a fall in the value of money, are totally different. In both cases the money price of wages will rise, but if it be in consequence of the fall in the value of money, not only wages and corn, but all other commodities will rise. If the manufacturer has more to pay for wages, he will receive more for his manufactured goods, and the rate of profits will remain unaffected. But when the rise in the price of corn is the effect of the difficulty of production, profits will fall; for the manufacturer will be obliged to pay more wages, and will not be enabled to remunerate himself by raising the price of his manufactured commodity. Any improvement in the facility of working the mines, by which the precious metals may be produced with a less quantity of labour, will sink the value of money generally. It will then exchange for fewer commodities in all countries; but when any particular country excels in manufactures, so as to occasion an influx of money towards it, the value of money will be lower, and the prices of corn and labour will be relatively higher in that country, than in any other. This higher value of money will not be indicated by the exchange; bills may continue to be negotiated at par, although the prices of corn and labour should be 10, 20, or 30 per cent. higher in one country than another. Under the circumstances supposed, such a difference of prices is the natural order of things, and the exchange can only be at par when a sufficient quantity of money is introduced into the country excelling in manufactures, so as to raise the price of its corn and labour. If foreign countries should prohibit the exportation of money, and could successfully enforce obedience to such a law, they might indeed prevent the rise in the prices of the corn and labour of the manufacturing country; for such rise can only take place after the influx of the precious metals, supposing paper money not to be used; but they could not prevent the exchange from being very unfavourable to them. If England were the manufacturing country, and it were possible to prevent the importation of money, the exchange with France, Holland, and Spain, might be 5, 10, or 20 per cent. against those countries. Whenever the current of money is forcibly stopped, and when money is prevented from settling at its just level, there are no limits to the possible variations of the exchange. The effects are similar to those which follow, when a paper money, not exchangeable for specie at the will of the holder, is forced into circulation. Such a currency is necessarily confined to the country where it is issued: it cannot, when too abundant, diffuse itself generally amongst other countries. The level of circulation is destroyed, and the exchange will inevitably be unfavourable to the country where it is excessive in quantity: just so would be the effects of a metallic circulation, if by forcible means, by laws which could not be evaded, money should be detained in a country, when the stream of trade gave it an impetus towards other countries. When each country has precisely the quantity of money which it ought to have, money will not indeed be of the same value in each, for with respect to many commodities it may differ 5, 10, or even 20 per cent., but the exchange will be at par. One hundred pounds in England, or the silver which is in 100_l._, will purchase a bill of 100_l._, or an equal quantity of silver in France, Spain, or Holland. In speaking of the exchange and the comparative value of money in different countries, we must not in the least refer to the value of money estimated in commodities, in either country. The exchange is never ascertained by estimating the comparative value of money in corn, cloth, or any commodity whatever, but by estimating the value of the currency of one country, in the currency of another. It may also be ascertained by comparing it with some standard common to both countries. If a bill on England for 100_l._ will purchase the same quantity of goods in France or Spain, that a bill on Hamburgh for the same sum will do, the exchange between Hamburgh and England is at par; but if a bill on England for 130_l._, will purchase no more than a bill on Hamburgh for 100_l._, the exchange is 30 per cent. against England. In England 100_l._ may purchase a bill, or the right of receiving 101_l._ in Holland, 102_l._ in France, and 105_l._ in Spain. The exchange with England is, in that case, said to be 1 per cent. against Holland, 2 per cent. against France, and 5 per cent. against Spain. It indicates that the level of currency is higher than it should be in those countries, and the comparative value of their currencies, and that of England, would be immediately restored to par, by abstracting from theirs, or by adding to that of England. Those who maintained that our currency was depreciated during the last ten years, when the exchange varied from 20 to 30 per cent. against this country, have never contended, as they have been accused of doing, that money could not be more valuable in one country than another, as compared with various commodities; but they did contend, that 130_l._ could not be detained in England, when it was of no more value, estimated in the money of Hamburgh, or of Holland, than 100_l._ By sending 130_l._ good English pounds sterling to Hamburgh, even at an expense of 5_l._, I should be possessed there of 125_l._; what then could make me consent to give 130_l._ for a bill which would give me 100_l._ in Hamburgh, but that my pounds were not good pounds sterling?--they were deteriorated, were degraded in intrinsic value below the pounds sterling of Hamburgh, and if actually sent there, at an expense of 5_l._, would sell only for 100_l._ With metallic pounds sterling, it is not denied that my 130_l._ would procure me 125_l._ in Hamburgh, but with paper pounds sterling I can only obtain 100_l._; and yet it is maintained that 130_l._ in paper, is of equal value with 130_l._ in silver or gold. Some indeed more reasonably maintained, that 130_l._ in paper was not of equal value with 130_l._ in metallic money; but they said that it was the metallic money which had changed its value, and not the paper money. They wished to confine the meaning of the word depreciation to an actual fall of value, and not to a comparative difference between the value of money, and the standard by which by law it is regulated. One hundred pounds of English money was formerly of equal value with, and could purchase 100_l._ of Hamburgh money: in any other country a bill of 100_l._ on England, or on Hamburgh, could purchase precisely the same quantity of commodities. To obtain the same things, I was lately obliged to give 130_l._ English money, when Hamburgh could obtain them for 100_l._ Hamburgh money. If English money was of the same value then as before, Hamburgh money must have risen in value. But where is the proof of this? How is it to be ascertained whether English money has fallen, or Hamburgh money has risen? there is no standard by which this can be determined. It is a plea which admits of no proof, and can neither be positively affirmed, nor positively contradicted. The nations of the world must have been early convinced, that there was no standard of value in nature, to which we might unerringly refer, and therefore chose a medium, which, on the whole appeared to them less variable than any other commodity. To this standard we must conform till the law is changed, and till some other commodity is discovered, by the use of which we shall obtain a more perfect standard, than that which we have established. While gold is exclusively the standard in this country, money will be depreciated, when a pound sterling is not of equal value with 5 dwts. and 3 grs. of standard gold, and that, whether gold rises or falls in general value. CHAPTER VII. ON TAXES. Taxes are a portion of the produce of the land and labour of a country, placed at the disposal of the government; and are always ultimately paid, either from the capital, or from the revenue of the country. We have already shewn how the capital of a country is either fixed or circulating, according as it is of a more or of a less durable nature. It is difficult to define strictly, where the distinction between circulating and fixed capital begins; for there are almost infinite degrees in the durability of capital. The food of a country is consumed and reproduced, at least once in every year; the clothing of the labourer is probably not consumed and reproduced in less than two years; whilst his house and furniture are calculated to endure for a period of ten or twenty years. When the annual productions of a country exceed its annual consumption, it is said to increase its capital; when its annual consumption at least is not replaced by its annual production, it is said to diminish its capital. Capital may therefore be increased by an increased production, or by a diminished consumption. If the consumption of the government, when increased by the levy of additional taxes, be met either by an increased production, or by a diminished consumption on the part of the people, the taxes will fall upon revenue, and the national capital will remain unimpaired; but if there be no increased production or diminished consumption on the part of the people, the taxes will necessarily fall on capital. In proportion as the capital of a country is diminished, its productions will be necessarily diminished; and therefore, if the same expenditure on the part of the people and of the government continue, with a constantly diminishing annual reproduction, the resources of the people and the state will fall away with increasing rapidity, and distress and ruin will follow. Notwithstanding the immense expenditure of the English government during the last twenty years, there can be little doubt but that the increased production on the part of the people has more than compensated for it. The national capital has not merely been unimpaired, it has been greatly increased, and the annual revenue of the people, even after the payment of their taxes, is probably greater at the present time than at any former period of our history. For the proof of this we might refer to the increase of population--to the extension of agriculture--to the increase of shipping and manufactures--to the building of docks--to the opening of numerous canals, as well as to many other expensive undertakings; all denoting an increase both of capital and of annual production. There are no taxes which have not a tendency to impede accumulation, because there are none which may not be considered as checking production, and as causing the same effects as a bad soil or climate, a diminution of skill or industry, a worse distribution of labour, or the loss of some useful machinery; and although some taxes will produce these effects in a much greater degree than others, it must be confessed that the great evil of taxation is to be found, not so much in any selection of its objects, as in the general amount of its effects taken collectively. Taxes are not necessarily taxes on capital, because they are laid on capital; nor on income, because they are laid on income. If from my income of 1000_l._ per annum, I am required to pay 100_l._, it will really be a tax on my income, should I be content with the expenditure of the remaining 900_l._; but it will be a tax on capital, if I continue to spend 1000_l._ The capital from which my income of 1000_l._ is derived may be of the value of 10,000_l._; a tax of one per cent. on such capital would be 100_l._; but my capital would be unaffected, if after paying this tax, I in like manner contented myself with the expenditure of 900_l._ The desire which every man has to keep his station in life, and to maintain his wealth at the height which it has once attained, occasions most taxes, whether laid on capital or on income, to be paid from income; and therefore as taxation proceeds, or as government increases its expenditure, the annual expenditure of the people must be diminished, unless they are enabled proportionally to increase their capitals and income. It should be the policy of governments to encourage a disposition to do this in the people, and never to lay such taxes as will inevitably fall on capital; since by so doing, they impair the funds for the maintenance of labour, and thereby diminish the future production of the country. In England this policy has been neglected, in taxing the probates of wills, in the legacy duty, and in all taxes affecting the transference of property from the dead to the living. If a legacy of 1000_l._ be subject to a tax of 100_l._, the legatee considers his legacy as only 900_l._, and feels no particular motive to save the 100_l._ duty from his expenditure, and thus the capital of the country is diminished; but if he had really received 1000_l._ and had been required to pay 100_l._ as a tax on income, on wine, on horses, or on servants, he would probably have diminished, or rather not increased his expenditure by that sum, and the capital of the country would have been unimpaired. "Taxes upon the transference of property from the dead to the living," says Adam Smith, "fall finally, as well as immediately, upon the persons to whom the property is transferred. Taxes on the sale of land fall altogether upon the seller. The seller is almost always under the necessity of selling, and must therefore take such a price as he can get. The buyer is scarce ever under the necessity of buying, and will therefore only give such a price as he likes. He considers what the land will cost him in tax and price together. The more he is obliged to pay in the way of tax, the less he will be disposed to give in the way of price. Such taxes, therefore, fall almost always upon a necessitous person, and must therefore be very cruel and oppressive." "Stamp duties, and duties upon the registration of bonds and contracts for borrowed money, fall altogether upon the borrower, and in fact are always paid by him. Duties of the same kind upon law proceedings fall upon the suitors. They reduce to both the capital value of the subject in dispute. The more it costs to acquire any property, the less must be the neat value of it when acquired. All taxes upon the transference of property of every kind, so far as they diminish the capital value of that property, tend to diminish the funds destined for the maintenance of labour. They are all more or less unthrifty taxes, that increase the revenue of the sovereign, which seldom maintains any but unproductive labourers, at the expense of the capital of the people, which maintains none but productive." But this is not the only objection to taxes on the transference of property; they prevent the national capital from being distributed in the way most beneficial to the community. For the general prosperity, there cannot be too much facility given to the conveyance and exchange of all kinds of property, as it is by such means that capital of every species is likely to find its way into the hands of those who will best employ it in increasing the productions of the country. "Why," asks M. Say, "does an individual wish to sell his land? it is because he has another employment in view in which his funds will be more productive. Why does another wish to purchase this same land? it is to employ a capital which brings him in too little, which was unemployed, or the use of which he thinks susceptible of improvement. This exchange will increase the general income, since it increases the income of these parties. But if the charges are so exorbitant as to prevent the exchange, they are an obstacle to this increase of the general income." Those taxes however are easily collected; and this by many may be thought to afford some compensation for their injurious effects. CHAPTER VIII. TAXES ON RAW PRODUCE. Having in a former part of this work established, I hope satisfactorily, the principle, that the price of corn is regulated by the cost of its production on that land exclusively, or rather with that capital exclusively, which pays no rent, it will follow that whatever may increase the cost of production will increase the price; whatever may reduce it, will lower the price. The necessity of cultivating poorer land, or of obtaining a less return with a given additional capital on land already in cultivation, will inevitably raise the exchangeable value of raw produce. The discovery of machinery, which will enable the cultivator to obtain his corn at a less cost of production, will necessarily lower its exchangeable value. Any tax which may be imposed on the cultivator, whether in the shape of land-tax, tithes, or a tax on the produce when obtained, will increase the cost of production, and will therefore raise the price of raw produce. If the price of raw produce did not rise so as to compensate the cultivator for the tax, he would naturally quit a trade where his profits were reduced below the general level of profits: this would occasion a diminution of supply, until the unabated demand should have produced such a rise in the price of raw produce, as to make the cultivation of it equally profitable with the investment of capital in any other trade. A rise of price is the only means by which he could pay the tax, and continue to derive the usual and general profits from this employment of his capital. He could not deduct the tax from his rent, and oblige his landlord to pay it, for he pays no rent. He would not deduct it from his profits, for there is no reason why he should continue in an employment which yields small profits, when all other employments are yielding greater. There can then be no question, but that he will have the power of raising the price of raw produce by a sum equal to the tax. A tax on raw produce would not be paid by the landlord; it would not be paid by the farmer; but it would be paid, in an increased price, by the consumer. Rent, it should be remembered, is the difference between the produce obtained by equal portions of labour and capital employed on land of the same or different qualities. It should be remembered too, that the money rent of land, and the corn rent of land, do not vary in the same proportion. In the case of a tax on raw produce, of a land tax, or tithes, the corn rent of land will vary, while the money rent will remain as before. If, as we have before supposed, the land in cultivation were of three qualities, and that with an equal amount of capital, 180 qrs. of corn were obtained from land No. 1. 170 " " " from " 2. 160 " " " from " 3. the rent of No. 1 would be 20 quarters, the difference between that of No. 3 and No. 1; and of No. 2, 10 quarters, the difference between that of No. 3 and No. 2; while No. 3 would pay no rent whatever. Now if the price of corn were 4_l._ per quarter, the money rent of No. 1 would be 80_l._, and that of No. 2, 40_l._ Suppose a tax of 8_s._ per quarter to be imposed on corn; then the price would rise to 4_l._ 8_s._; and if the landlords obtained the same corn rent as before, the rent of No. 1 would be 88_l._, and that of No. 2, 44_l._ But they would not obtain the same corn rent; the tax would fall heavier on No. 1 than on No. 2, and on No. 2 than on No. 3, because it would be levied on a greater quantity of corn. It is the difficulty of production on No. 3 which regulates price; and corn rises to 4_l._ 8_s._, that the profits of the capital employed on No. 3 may be on a level with the general profits of stock. The produce and tax on the three qualities of land will be as follows: No. 1, yielding 180 qrs. at 4_l._ 8_s._ per qr. £792 Deduct the value of 16.3 or 8_s._ per qr. on 180 qrs. 72 ----- ---- Net corn produce 163.7 Net money produce £720 ----- ---- No. 2, yielding 170 qrs. at 4_l._ 8_s._ per qr. £748 Deduct the value of 15.4 {qrs. at 4_l._ 8_s._ or 8_s._ per} { qr. on 170 qrs. } 68 ----- ---- Net corn produce 154.6 Net money produce of £680 ----- ---- No. 3, 160 qrs. at 4_l._ 8_s._ £704 Deduct the value of 14.5 {qrs. at 4_l._ 8_s._ or 8_s._ per} { qr. on 160 } 64 ----- ---- Net corn produce 145.5 Net money produce £640 ----- ---- The money rent of No. 1 would continue to be 80_l._, or the difference between 640 and 720_l._; and that of No. 2, 40_l._, or the difference between 640_l._ and 680_l._, precisely the same as before; but the corn rent will be reduced from 20 quarters on No. 1 to 18.2 quarters, and that on No. 2 from 10 to 9.1 quarters. A tax on corn, then, would fall on the consumers of corn, and would raise its value as compared with all other commodities, in a degree proportioned to the tax. In proportion as raw produce entered into the composition of other commodities, would their value also be raised, unless the tax were countervailed by other causes. They would in fact be indirectly taxed, and their value would rise in proportion to the tax. A tax, however, on raw produce, and on the necessaries of the labourer, would have another effect--it would raise wages. From the effect of the principle of population on the increase of mankind, wages of the lowest kind never continue much above that rate which nature and habit demand for the support of the labourers. This class is never able to bear any considerable portion of taxation; and, consequently, if they had to pay 8_s._ per quarter in addition for wheat, and in some smaller proportion for other necessaries, they would not be able to subsist on the same wages as before, and to keep up the race of labourers. Wages would inevitably and necessarily rise; and in proportion as they rose, profits would fall. Government would receive a tax of 8_s._ per quarter on all the corn consumed in the country, a part of which would be paid directly by the consumers of corn; the other part would be paid indirectly by those who employed labour, and would affect profits in the same manner as if wages had been raised from the increased demand for labour compared with the supply, or from an increasing difficulty of obtaining the food and necessaries required by the labourer. In as far as the tax might affect consumers, it would be an equal tax, but in as far as it would affect profits, it would be a partial tax; for it would neither operate on the landlord nor on the stockholder, since they would continue to receive, the one the same money rent, the other the same money dividends as before. A tax on the produce of the land then would operate as follows: 1st. It would raise the price of raw produce by a sum equal to the tax, and would therefore fall on each consumer in proportion to his consumption. 2dly. It would raise the wages of labour, and lower profits. It may then be objected against such a tax, 1st. That by raising the wages of labour, and lowering profits, it is an unequal tax, as it affects the income of the farmer, trader, and manufacturer, and leaves untaxed the income of the landlord, stockholder, and others enjoying fixed incomes. 2dly. That there would be a considerable interval between the rise in the price of corn and the rise of wages, during which much distress would be experienced by the labourer. 3rdly. That raising wages and lowering profits is a discouragement to accumulation, and acts in the same way as a natural poverty of soil. 4thly. That by raising the price of raw produce, the prices of all commodities into which raw produce enters, would be raised, and that therefore we should not meet the foreign manufacture on equal terms in the general market. With respect to the first objection, that by raising the wages of labour and lowering profits it acts unequally, as it affects the income of the farmer, trader, and manufacturer, and leaves untaxed the income of the landlord, stockholder, and others enjoying fixed incomes,--it may be answered, that if the operation of the tax be unequal, it is for the legislature to make it equal, by taxing directly the rent of land, and the dividends from stock. By so doing, all the objects of an income tax would be obtained, without the inconvenience of having recourse to the obnoxious measure of prying into every man's concerns, and arming commissioners with powers repugnant to the habits and feelings of a free country. With respect to the second objection, that there would be a considerable interval between the rise of the price of corn and the rise of wages, during which much distress would be experienced by the lower classes,--I answer, that under different circumstances, wages follow the price of raw produce with very different degrees of celerity; that in some cases no effect whatever is produced on wages by a rise of corn; in others, the rise of wages precedes the rise in the price of corn; again, in some the effect is slow, and in others the interval must be very short. Those who maintain that it is the price of necessaries which regulates the price of labour, always allowing for the particular state of progression in which the society, may be seem to have conceded too readily, that a rise or fall in the price of necessaries will be very slowly succeeded by a rise or fall of wages. A high price of provisions may arise from very different causes, and may accordingly produce very different effects. It may arise from 1st. A deficient supply. 2nd. From a gradually increasing demand, which may be ultimately attended with an increased cost of production. 3dly. From a fall in the value of money. 4thly. From taxes on necessaries. These four causes have not been sufficiently distinguished and separated by those who have inquired into the influence of a high price of necessaries on wages. We will examine them severally. A bad harvest will produce a high price of provisions, and the high price is the only means by which the consumption is compelled to conform to the state of the supply. If all the purchasers of corn were rich, the price might rise to any degree, but the result would remain unaltered; the price would at last be so high, that the least rich would be obliged to forego the use of a part of the quantity which they usually consumed, as by diminished consumption alone, the demand could be brought down to the limits of the supply. Under such circumstances no policy can be more absurd, than that of forcibly regulating money wages by the price of food, as is frequently done, by misapplication of the poor laws. Such a measure affords no real relief to the labourer, because its effect is to raise still higher the price of corn, and at last he must be obliged to limit his consumption in proportion to the limited supply. In the natural course of affairs a deficient supply from bad seasons, without any pernicious and unwise interference, would not be followed by a rise of wages. The raising of wages is merely nominal to those who receive them; it increases the competition in the corn market, and its ultimate effect is to raise the profits of the growers and dealers in corn. The wages of labour are really regulated by the proportion between the supply and demand of necessaries, and the supply and demand of labour; and money is merely the medium, or measure, in which wages are expressed. In this case then the distress of the labourer is unavoidable, and no legislation can afford a remedy, except by the importation of additional food. When a high price of corn is the effect of an increasing demand, it is always preceded by an increase of wages, for demand cannot increase, without an increase of means in the people to pay for that which they desire. An accumulation of capital naturally produces an increased competition among the employers of labour, and a consequent rise in its price. The increased wages are not immediately expended on food, but are first made to contribute to the other enjoyments of the labourer. His improved condition however induces, and enables him to marry, and then the demand for food for the support of his family naturally supersedes that of those other enjoyments on which his wages were temporarily expended. Corn rises then because the demand for it increases, because there are those in the society who have improved means of paying for it; and the profits of the farmer will be raised above the general level of profits, till the requisite quantity of capital has been employed on its production. Whether, after this has taken place, corn shall again fall to its former price, or shall continue permanently higher, will depend on the quality of the land from which the increased quantity of corn has been supplied. If it be obtained from land of the same fertility, as that which was last in cultivation, and with no greater cost of labour, the price will fall to its former state; if from poorer land, it will continue permanently higher. The high wages in the first instance proceeded from an increase in the demand for labour: inasmuch as it encouraged marriage, and supported children, it produced the effect of increasing the supply of labour. But when the supply is obtained, wages will again fall to their former price, if corn has fallen to its former price: to a higher than the former price, if the increased supply of corn has been produced from land of an inferior quality. A high price is by no means incompatible with an abundant supply: the price is permanently high, not because the quantity is deficient, but because there has been an increased cost in producing it. It generally happens indeed, that when a stimulus has been given to population, an effect is produced beyond what the case requires; the population may be, and generally is so much increased as, notwithstanding the increased demand for labour, to bear a greater proportion to the funds for maintaining labourers than before the increase of capital. In this case a re-action will take place, wages will be below their natural level, and will continue so, till the usual proportion between the supply and demand has been restored. In this case then, the rise in the price of corn is preceded by a rise of wages, and therefore entails no distress on the labourer. A fall in the value of money, in consequence of an influx of the precious metals from the mines, or from the abuse of the privileges of banking, is another cause for the rise of the price of food; but it will make no alteration in the quantity produced. It leaves undisturbed too the number of labourers, as well as the demand for them; for there will be neither an increase nor a diminution of capital. The quantity of necessaries to be allotted to the labourer, depends on the comparative demand and supply of necessaries, with the comparative demand and supply of labour; money being only the medium in which the quantity is expressed; and as neither of these is altered, the real reward of the labourer will not alter. Money wages will rise, but they will only enable him to furnish himself with the same quantity of necessaries as before. Those who dispute this principle, are bound to shew why an increase of money should not have the same effect in raising the price of labour, the quantity of which has not been increased, as they acknowledge it would have on the price of shoes, of hats, and of corn, if the quantity of those commodities were not increased. The relative market value of hats and shoes is regulated by the demand and supply of hats, compared with the demand and supply of shoes, and money is but the medium in which their value is expressed. If shoes be doubled in price, hats will also be doubled in price, and they will retain the same comparative value. So if corn and all the necessaries of the labourer be doubled in price, labour will be doubled in price also, and while there is no interruption to the usual demand and supply of necessaries and of labour, there can be no reason why they should not preserve their relative value. Neither a fall in the value of money, nor a tax on raw produce, though each will raise the price, will _necessarily_ interfere with the quantity of raw produce; or with the number of people, who are both able to purchase, and willing to consume it. It is very easy to perceive why, when the capital of a country increases irregularly, wages should rise, whilst the price of corn remains stationary, or rises in a less proportion; and why, when the capital of a country diminishes, wages should fall whilst corn remains stationary, or falls in a much less proportion, and this too for a considerable time; the reason is, because labour is a commodity which cannot be increased and diminished at pleasure. If there are too few hats in the market for the demand, the price will rise, but only for a short time; for in the course of one year, by employing more capital in that trade, any reasonable addition may be made to the quantity of hats, and therefore their market price cannot long very much exceed their natural price; but it is not so with men; you cannot increase their number in one or two years when there is an increase of capital, nor can you rapidly diminish their number when capital is in a retrograde state; and therefore, the number of hands increasing or diminishing slowly, whilst the funds for the maintenance of labour increase or diminish rapidly, there must be a considerable interval before the price of labour is exactly regulated by the price of corn and necessaries; but in the case of a fall in the value of money, or of a tax on corn, there is not necessarily any excess in the supply of labour, nor any abatement of demand, and therefore there can be no reason why the labourer should sustain a real diminution of wages. A tax on corn does not necessarily diminish the quantity of corn, it only raises its money price; it does not necessarily diminish the demand compared with the supply of labour; why then should it diminish the portion paid to the labourer? Suppose it true that it did diminish the quantity given to the labourer, in other words, that it did not raise his money wages in the same proportion as the tax raised the price of the corn which he consumed; would not the supply of corn exceed the demand?--would it not fall in price? and would not the labourer thus obtain his usual portion? In such case indeed capital would be withdrawn from agriculture; for if the price were not increased by the whole amount of the tax, agricultural profits would be lower than the general level of profits, and capital would seek more advantageous employment. In regard then to a tax on raw produce, which is the point under discussion, it appears to me that no interval which could bear oppressively on the labourer, would elapse between the rise in the price of raw produce, and the rise in the wages of the labourer; and that therefore no other inconvenience would be suffered by this class, than that which they would suffer from any other mode of taxation, namely, the risk that the tax might infringe on the funds destined for the maintenance of labour, and might therefore check or abate the demand for it. With respect to the third objection against taxes on raw produce, namely, that the raising wages, and lowering profits, is a discouragement to accumulation, and acts in the same way as a natural poverty of soil; I have endeavoured to shew in another part of this work that savings may be as effectually made from expenditure as from production; from a reduction in the value of commodities, as from a rise in the rate of profits. By increasing my profits from 1000_l._ to 1200_l._, whilst prices continue the same, my power of increasing my capital by savings is increased but it is not increased so much as it would be if my profits continued as before, whilst commodities were so lowered in price, that 800_l._ would procure me as much as 1000_l._ purchased before. Taxation under every form presents but a choice of evils; if it does not act on profit, it must act on expenditure; and provided the burden be equally borne, and do not repress reproduction, it is indifferent on which it is laid. Taxes on production, or on the profits of stock, whether applied immediately to profits, or indirectly, by taxing the land or its produce, have this advantage over other taxes; no class of the community can escape them, and each contributes according to his means. From taxes on expenditure a miser may escape; he may have an income of 10,000 per annum, and expend only 300_l._; but from taxes on profits, whether direct or indirect, he cannot escape; he will contribute to them either by giving up a part or the value of a part of his produce; or by the advanced prices of the necessaries essential to production, he will be unable to continue to accumulate at the same rate. He may indeed have an income of the same value, but he will not have the same command of labour, nor of an equal quantity of materials on which such labour can be exercised. If a country is insulated from all others, having no commerce with any of its neighbours, it can in no way shift any portion of its taxes from itself. A portion of the produce of its land and labour will be devoted to the service of the state; and I cannot but think that, unless it presses unequally on that class which accumulates and saves, it will be of little importance whether the taxes be levied on profits, on agricultural, or on manufactured commodities. If my revenue be 1000_l._ per annum, and I must pay taxes to the amount of 100_l._, it is of little importance whether I pay it from my revenue, leaving myself only 900_l._, or pay 100_l._ in addition for my agricultural commodities, or for my manufactured goods. If 100_l._ is my fair proportion of the expenses of the country, the virtue of taxation consists in making sure that I shall pay that 100_l._, neither more nor less; and that cannot be effected in any manner so securely as by taxes on wages, profits, or raw produce. The fourth and last objection which remains to be noticed is: That by raising the price of raw produce, the prices of all commodities into which raw produce enters, will be raised, and that therefore we shall not meet the foreign manufacturer on equal terms in the general market. In the first place, corn and _all_ home commodities could not be materially raised in price without an influx of the precious metals; for the same quantity of money could not circulate the same quantity of commodities, at high as at low prices, and the precious metals never could be purchased with dear commodities. When more gold is required, it must be obtained by giving more, and not fewer commodities in exchange for it. Neither could the want of money be supplied by paper, for it is not paper that regulates the value of gold as a commodity, but gold that regulates the value of paper. Unless then the value of gold could be lowered, no paper could be added to the circulation without being depreciated. And that the value of gold could not be lowered appears clear, when we consider that the value of gold as a commodity must be regulated by the quantity of goods which must be given to foreigners in exchange for it. When gold is cheap, commodities are dear; and when gold is dear, commodities are cheap, and fall in price. Now as no cause is shewn why foreigners should sell their gold cheaper than usual, it does not appear probable that there would be any influx of gold. Without such an influx there can be no increase of quantity, no fall in its value, no rise in the general price of goods. The probable effect of a tax on raw produce would be to raise the price of all commodities in which raw produce entered, but not in any degree proportioned to the tax; while other commodities in which no raw produce entered, such as articles made of the metals and the earths, would fall in price: so that the same quantity of money as before would be adequate to the whole circulation. A tax which should have the effect of raising the price of all home productions, would not discourage exportation, except during a very limited time. If they were raised in price at home, they could not indeed immediately be profitably exported, because they would be subject to a burthen here from which abroad they were free. The tax would produce the same effect as an alteration in the value of money, which was not general and common to all countries, but confined to a single one. If England were that country, she might not be able to sell, but she would be able to buy, because importable commodities would not be raised in price. Under these circumstances nothing but money could be exported in return for foreign commodities, but this is a trade which could not long continue; a nation cannot be exhausted of its money, for after a certain quantity has left it, the value of the remainder will rise, and such a price of commodities will be the consequence, that they will again be capable of being profitably exported. When money had risen, therefore, we should no longer export it in return for goods imported, but we should export those manufactures which had first been raised in price, by the rise in the price of the raw produce from which they were made, and then again lowered by the exportation of money. But it may be objected, that when money so rose in value, it would rise with respect to foreign as well as home commodities, and therefore that all encouragement to import foreign goods would cease. Thus, suppose we imported goods which cost 100_l._ abroad, and which sold for 120_l._ here, we should cease to import them, when the value of money had so risen in England, that they would only sell for 100_l._ here: this however could never happen. The motive which determines us to import a commodity, is the discovery of its relative cheapness abroad: it is the comparison of its natural price abroad, with its natural price at home. If a country exports hats, and imports cloth, it does so because it can obtain more cloth by making hats, and exchanging them for cloth, than if it made the cloth itself. If the rise of raw produce occasions any increased cost of production in making hats, it would occasion also an increased cost in making cloth. If therefore both commodities were made at home, they would both rise. One, however, being a commodity which we import, would not rise, neither would it fall, when the value of money rose; for by not falling, it would regain its natural relation to the exported commodity. The rise of raw produce makes a hat rise from 30 to 33 shillings, or 10 per cent.: the same cause if we manufactured cloth, would make it rise from 20_s._ to 22_s._ per yard. This rise does not destroy the relation between cloth and hats; a hat was, and continues to be, worth one yard and a half of cloth. But if we import cloth, its price will continue uniformly at 20_s._ per yard, unaffected first by the fall, and then by the rise in the value of money; whilst hats, which had risen from 30_s._ to 33_s._, will again fall from 33_s._ to 30_s._, at which point the relation between cloth and hats will be restored. To simplify the consideration of this subject, I have been supposing that a rise in the value of raw materials would affect, in an equal proportion, all home commodities; that if the effect on one were to raise it 10 per cent., it would raise all 10 per cent.; but as the value of commodities is very differently made up of raw material and labour; as some commodities, for instance all those made from the metals, would be unaffected by the rise of raw produce from the surface of the earth, it is evident that there would be the greatest variety in the effects produced on the value of commodities, by a tax on raw produce. As far as this effect was produced, it would stimulate or retard the exportation of particular commodities, and would undoubtedly be attended with the same inconvenience that attends the taxing of commodities; it would destroy the natural relation between the value of each. Thus, the natural price of a hat, instead of being the same as a yard and a half of cloth, might only be of the value of a yard and a quarter, or it might be of the value of a yard and three quarters, and therefore rather a different direction might be given to foreign trade. All these inconveniences would not interfere with the value of the exports and imports; they would only prevent the very best distribution of the capital of the whole world, which is never so well regulated, as when every commodity is freely allowed to settle at its natural price. Although then the rise in the price of most of our own commodities, would for a time check exportation generally, and might permanently prevent the exportation of a few commodities, it could not materially interfere with foreign trade, and would not place us under any comparative disadvantage as far as regarded competition in foreign markets. CHAPTER VIII.* TAXES ON RENT. A tax on rent would affect rent only; it would fall wholly on landlords, and could not be shifted to any class of consumers. The landlord could not raise his rent, because he would leave unaltered the difference between the produce obtained from the least productive land in cultivation, and that obtained from land of every other quality. Three sorts of land, No. 1, 2, and 3, are in cultivation, and yield respectively with the same labour 180, 170, and 160 quarters of wheat; but No. 3 pays no rent, and is therefore untaxed: the rent then of No. 2 cannot be made to exceed the value of ten, nor No. 1, of twenty quarters. Such a tax could not raise the price of raw produce, because as the cultivator of No. 3 pays neither rent nor tax, he would in no way be enabled to raise the price of the commodity produced. A tax on rent would not discourage the cultivation of fresh land, for such land pays no rent, and would be untaxed. If No. 4 were taken into cultivation, and yielded 150 quarters, no tax would be paid for such land; but it would create a rent of ten quarters on No. 3, which would then commence paying the tax. A tax on rent, as rent is constituted, would discourage cultivation, because it would be a tax on the profits of the landlord. The term rent of land, as I have elsewhere observed, is applied to the whole amount of the value paid by the farmer to his landlord, a part only of which is strictly rent. The buildings and fixtures, and other expenses paid for by the landlord, form strictly a part of the stock of the farm, and must have been furnished by the tenant, if not provided by the landlord. Rent is the sum paid to the landlord for the use of the land, and for the use of the land only. The further sum that is paid to him under the name of rent, is for the use of the buildings, &c., and is really the profits of the landlord's stock. In taxing rent, as no distinction would be made between that part paid for the use of the land, and that paid for the use of the landlord's stock, a portion of the tax would fall on the landlord's profits, and would therefore discourage cultivation, unless the price of raw produce rose. On that land, for the use of which no rent was paid, a compensation under that name might be given to the landlord for the use of his buildings. These buildings would not be erected, nor would raw produce be grown on such land, till the price at which it sold would not only pay for all the usual outgoings, but also for this additional one of the tax. This part of the tax does not fall on the landlord, nor on the farmer, but on the consumer of raw produce. There can be little doubt, but that if a tax were laid on rent, landlords would soon find a way to discriminate between that which was paid to them for the use of the land, and that which was paid for the use of the buildings, and the improvements which were made by the landlord's stock. The latter would either be called the rent of house and buildings, or in all new land taken into cultivation such buildings and improvements would be made by the tenant, and not by the landlord. The landlord's capital might indeed be really employed for that purpose; it might be nominally expended by the tenant, the landlord furnishing him with the means, either in the shape of a loan, or in the purchase of an annuity for the duration of the lease. Whether distinguished or not, there is a real difference between the nature of the compensations which the landlord receives for these different objects; and it is quite certain, that a tax on the real rent of land falls wholly on the landlord, but that a tax on that remuneration which the landlord receives for the use of his stock expended on the farm, falls on the consumer of raw produce. If a tax were laid on rent, and no means of separating the remuneration now paid by the tenant to the landlord under the name of rent were adopted, the tax, as far as it regarded the rent on the buildings and other fixtures, would never fall for any length of time on the landlord, but on the consumer. The capital expended on these buildings, &c., must afford the usual profits of stock; but it would cease to afford this profit on the land last cultivated, if the expenses of those buildings, &c. did not fall on the tenant; and if they did, the tenant would then cease to make his usual profits of stock, unless he could charge them on the consumer. CHAPTER IX. TITHES. Tithes are a tax on the gross produce of the land, and, like taxes on raw produce, fall wholly on the consumer. They differ from a tax on rent, inasmuch as they affect land which such a tax would not reach; and raise the price of raw produce, which that tax e of raw produce, which that tax would not alter. Lands of the worst quality, as well as of the best, pay tithes, and exactly in proportion to the quantity of produce obtained from them; tithes are therefore an equal tax. If land of the last quality, or that which pays no rent, and which regulates the price of corn, yield a sufficient quantity to give the farmer the usual profits of stock, when the price of wheat is 4_l._ per quarter, the price must rise to 4_l._ 8_s._ before the same profits can be obtained after the tithes are imposed, because for every quarter of wheat the cultivator must pay eight shillings to the church. The only difference between tithes and taxes on raw produce, is, that one is a variable money tax, the other a fixed money tax. In a stationary state of society, where there is neither increased nor diminished facility of producing corn, they will be precisely the same in their effects; for in such a state corn will be at an invariable price, and the tax will therefore be also invariable. In either a retrograde state, or in a state in which great improvements are made in agriculture, and where consequently raw produce will fall in value comparatively with other things, tithes will be a lighter tax than a permanent money tax; for if the price of corn should fall from 4_l._ to 3_l._, the tax would fall from eight to six shillings. In a progressive state of society, yet without any marked improvements in agriculture, the price of corn would rise, and tithes would be a heavier tax than a permanent money tax. If corn rose from 4_l._ to 5_l._, the tithes on the same land would advance from eight to ten shillings. Neither tithes nor a money tax will affect the money rent of landlords, but both will materially affect corn rents. We have already observed how a money tax operates on corn rents, and it is equally evident that a similar effect would be produced by tithes. If the lands, No. 1, 2, 3, respectively produced 180, 170, and 160 quarters, the rents might be on No. 1, twenty quarters, and on No. 2, ten quarters; but they would no longer preserve that proportion after the payment of tithes: for if a tenth be taken from each, the remaining produce will be 162, 153, 144, and consequently the corn rent of No. 1 will be reduced to eighteen, and that of No. 2 to nine quarters. But the price of corn would rise from 4_l._ to 4_l._ 8_s._ 10-2/3_d._; for nine quarters are to 4_l._ as ten quarters to 4_l._ 8_s._ 10-2/3_d._, and consequently the money rent would continue unaltered; for on No. 1 it would be 80_l._, and on No. 2, 40_l._ The chief objection against tithes is, that they are not a permanent and fixed tax, but increase in value, in proportion as the difficulty of producing corn increases. If those difficulties should make the price of corn 4_l._ the tax is 8_s._, if they should increase it to 5_l._, the tax is 10_s._, and at 6_l._, it is 12_s._ They not only rise in value, but they increase in amount: thus, when No. 1 was cultivated, the tax was only levied on 180 quarters; when No. 2 was cultivated, it was levied on 180 + 170, or 350 quarters; and when No. 3 was cultivated, on 180 + 170 + 160 = 510 quarters. Not only is the amount of the tax increased from 100,000 quarters, to 200,000 quarters, when the produce is increased from one to two millions of quarters; but, owing to the increased labour necessary to produce the second million, the relative value of raw produce is so advanced, that the 200,000 quarters may be, though only twice in quantity, yet in value three times that of the 100,000 quarters which were paid before. If an equal value were raised for the church by any other means, increasing in the same manner as tithes increase, proportionably with the difficulty of cultivation, the effect would be the same. The church would be constantly obtaining an increased portion of the net produce of the land and labour of the country. In an improving state of society, the net produce of land is always diminishing in proportion to its gross produce; but it is from the net income of a country that all taxes are ultimately paid, either in a progressive or in a stationary country. A tax increasing with the gross income, and falling on the net income, must necessarily be a very burdensome, and a very intolerable tax. Tithes are a tenth of the gross, and not of the net produce of the land, and therefore as society improves in wealth, they must, though the same proportion of the gross produce, become a larger and larger portion of the net produce. Tithes however may be considered as injurious to landlords, inasmuch as they act as a bounty on importation, by taxing the growth of home corn, while the importation of foreign corn remains unfettered. And if in order to relieve the landlords from the effects of the diminished demand for land, which such a bounty must encourage, imported corn were also taxed one tenth, and the produce paid to the state, no measure could be more fair and equitable; since whatever were paid to the state by this tax, would go to diminish the other taxes which the expenses of government make necessary: but if such a tax were devoted only to increase the fund paid to the church, it might indeed on the whole increase the general mass of production, but it would diminish the portion of that mass allotted to the productive classes. If the trade of cloth were left perfectly free, our manufacturers might be able to sell cloth cheaper than we could import it. If a tax were laid on the home manufacturer, and not on the importer of cloth, capital might be injuriously driven from the manufacture of cloth to the manufacture of some other commodity, as it might then be imported cheaper than it could be made at home. If imported cloth should also be taxed, cloth would again be manufactured at home. The consumer first bought cloth at home, because it was cheaper than foreign cloth; he then bought foreign cloth, because it was cheaper untaxed than home cloth taxed: he lastly bought it again at home, because it was cheaper when both home and foreign cloth were taxed. It is in the last case that he pays the greatest price for his cloth, but all his additional payment is gained by the state. In the second case, he pays more than in the first, but all he pays in addition is not received by the state, it is an increased price caused by difficulty of production, which is incurred, because the easiest means of production are taken away from us, by being fettered with a tax. CHAPTER X. LAND-TAX. A land-tax, levied in proportion to the rent of land, and varying with every variation of rent, is in effect a tax on rent; and as such a tax will not apply to that land which yields no rent, nor to the produce of that capital which is employed on the land with a view to profit merely, and which never pays rent, it will not in any way affect the price of raw produce, but will fall wholly on the landlords. In no respect would such a tax differ from a tax on rent. But if a land-tax be imposed on all cultivated land, however moderate that tax may be, it will be a tax on produce, and will therefore raise the price of produce. If No. 3 be the land last cultivated, although it should pay no rent, it cannot, after the tax, be cultivated, and afford the general rate of profit, unless the price of produce rise to meet the tax. Either capital will be withheld from that employment until the price of corn shall have risen, in consequence of demand, sufficiently to afford the usual profit; or if already employed on such land, it will quit it, to seek a more advantageous employment. The tax cannot be removed to the landlord, for by the supposition he receives no rent. Such a tax may be proportioned to the quality of the land and the abundance of its produce, and then it differs in no respect from tithes; or it may be a fixed tax per acre on all land cultivated, whatever its quality may be. A land-tax of this latter description would be a very unequal tax, and would be contrary to one of the four maxims with regard to taxes in general, to which, according to Adam Smith, all taxes should conform. The four maxims are as follow: 1. "The subjects of every state ought to contribute towards the support of the Government, as nearly as possible in proportion to their respective abilities. 2. "The tax which each individual is bound to pay ought to be certain and not arbitrary. 3. "Every tax ought to be levied at the time, or in the manner in which it is most likely to be convenient for the contributor to pay it. 4. "Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible, over and above what it brings into the public treasury of the state." An equal land-tax, imposed indiscriminately and without any regard to the distinction of its quality, on all land cultivated, will raise the price of corn in proportion to the tax paid by the cultivator of the land of the worst quality. Lands of different quality, with the employment of the same capital, will yield very different quantities of raw produce. If on the land which yields a thousand quarters of corn with a given capital, a tax of 100_l._ be laid, corn will rise 2_s._ per quarter to compensate the farmer for the tax. But with the same capital on land of a better quality, 2,000 quarters may be produced, which at 2_s._ a quarter advance, would give 200_l._; the tax, however, bearing equally on both lands will be 100_l._ on the better as well as on the inferior, and consequently the consumer of corn will be taxed, not only to pay the exigencies of the state, but also to give to the cultivator of the better land, 100_l._ per annum. during the period of his lease, and afterwards to raise the rent of the landlord to that amount. A tax of this description then would be contrary to the fourth maxim of Adam Smith, it would take out and keep out of the pockets of the people, more than what it brought into the treasury of the state. The taille in France before the Revolution, was a tax of this description; those lands only were taxed, which were held by an ignoble tenure, the price of raw produce rose in proportion to the tax, and therefore they whose lands were not taxed, were benefited by the increase of their rent. Taxes on raw produce as well as tithes are free from this objection: they raise the price of raw produce, but they take from each quality of land a contribution in proportion to its actual produce, and not in proportion to the produce of that which is the least productive. From the peculiar view which Adam Smith took of rent, from his not having observed that much capital is expended in every country, on the land for which no rent is paid, he concluded that all taxes on the land, whether they were laid on the land itself in the form of land-tax or tithes, or on the produce of the land, or were taken from the profits of the farmer, were all invariably paid by the landlord, and that he was in all cases the real contributor, although the tax was in general, nominally advanced by the tenant. "Taxes upon the produce of the land," he says, "are in reality taxes upon the rent; and though they may be originally advanced by the farmer, are finally paid by the landlord. When a certain portion of the produce is to be paid away for a tax, the farmer computes as well as he can, what the value of this portion is, one year with another, likely to amount to, and he makes a proportionable abatement in the rent which he agrees to pay to the landlord. There is no farmer who does not compute before hand what the church tithe, which is a land-tax of this kind, is, one year with another, likely to amount to." It is undoubtedly true, that the farmer does calculate his probable outgoings of all descriptions, when agreeing with his landlord concerning the rent of his farm; and if for the tithe paid to the church, or for the tax on the produce of the land, he were not compensated by a rise in the relative value of the produce of his farm, he would naturally deduct them from his rent. But this is precisely the question in dispute: whether he will eventually deduct them from his rent, or be compensated by a higher price of produce. For the reasons which have been already given, I cannot have the least doubt but that they would raise the price of produce, and consequently that Adam Smith has taken an incorrect view of this important question. Dr. Smith's view of this subject is probably the reason why he has described "the tithe, and every other land-tax of this kind, under the appearance of perfect equality, as very unequal taxes; a certain portion of the produce being in different situations, equivalent to a very different portion of the rent." I have endeavoured to shew that such taxes do not fall with unequal weight on the different classes of farmers or landlords, as they are both compensated by the rise of raw produce, and only contribute to the tax in proportion as they are consumers of raw produce. Inasmuch indeed as wages, and through wages, the rate of profits are affected, landlords, instead of contributing their full share to such a tax, are the class peculiarly exempted. It is the profits of stock, from which that portion of the tax is derived which falls on those labourers, who from the insufficiency of their funds, are incapable of paying taxes; this portion is exclusively borne by all those whose income is derived from the employment of stock, and therefore it in no degree affects landlords. It is not to be inferred from this view of tithes, and taxes on the land and its produce, that they do not discourage cultivation. Every thing which raises the exchangeable value of commodities of any kind, which are in very general demand, tends to discourage both cultivation and production; but this is an evil inseparable from all taxation, and is not confined to the particular taxes of which we are now speaking. This may be considered indeed as the unavoidable disadvantage attending all taxes received and expended by the state. Every new tax becomes a new charge on production, and raises natural price. A portion of the labour of the country which was before at the disposal of the contributor to the tax, is placed at the disposal of the state. This portion may become so large, that sufficient surplus produce may not be left to stimulate the exertions of those who usually augment by their savings the capital of the state. Taxation has happily never yet in any free country been carried so far as constantly from year to year to diminish its capital. Such a state of taxation could not be long endured; or if endured, it would be constantly absorbing so much of the annual produce of the country as to occasion the most extensive scene of misery, famine, and depopulation. "A land-tax," says Adam Smith, "which like that of Great Britain, is assessed upon each district according to a certain invariable canon, though it should be equal at the time of its first establishment, necessarily becomes unequal in process of time, according to the unequal degrees of improvement or neglect in the cultivation of the different parts of the country. In England the valuation according to which the different counties and parishes were assessed to the land-tax by the 4th. William and Mary, was very unequal, even at its first establishment. This tax, therefore, so far offends against the first of the four maxims above mentioned. It is perfectly agreeable to the other three. It is perfectly certain. The time of payment for the tax being the same as that for the rent, is as convenient as it can be to the contributor. Though the landlord is in all cases the real contributor, the tax is commonly advanced by the tenant, to whom the landlord is obliged to allow it in the payment of the rent." If the tax be shifted by the tenant not on the landlord but on the consumer, then if it be not unequal at first, it can never become so; for the price of produce has been at once raised in proportion to the tax, and will afterwards vary no more on that account. It may offend if unequal, as I have attempted to shew that it will, against the fourth maxim above mentioned, but it will not offend against the first. It may take more out of the pockets of the people than it brings into the public treasury of the state, but it will not fall unequally on any particular class of contributors. M. Say appears to me to have mistaken the nature and effects of the English land-tax, when he says, "Many persons attribute to this fixed valuation, the great prosperity of English agriculture. That it has very much contributed to it there can be no doubt. But what should we say to a Government, which, addressing itself to a small trader, should hold this language: 'With a small capital you are carrying on a limited trade, and your direct contribution is in consequence very small. Borrow, and accumulate capital; extend your trade, so that it may procure you immense profits; yet you shall never pay a greater contribution. Moreover, when your successors shall inherit your profits, and shall have further increased them, they shall not be valued higher to them than they are to you; and your successors shall not bear a greater portion of the public burdens.' "Without doubt this would be a great encouragement given to manufactures and trade; but would it be just? Could not their advancement be obtained at any other price? In England itself, has not manufacturing and commercial industry made even greater progress, since the same period, without being distinguished with so much partiality? A landlord by his assiduity, economy, and skill, increases his annual revenue by 5000 francs. If the state claim of him the fifth part of his augmented income, will there not remain 4000 francs of increase to stimulate his further exertions?" If Mr. Say's suggestion were followed, and the state were to claim the fifth part of the augmented income of the farmer, it would be a partial tax, acting on the farmer's profits, and not affecting the profits of other employments. The tax would be paid by all lands, by those which yielded scantily as well as by those which yielded abundantly; and on some lands there could be no compensation for it by deduction from rent, for no rent is paid. A partial tax on profits never falls on the trade on which it is laid, for the trader will either quit his employment, or remunerate himself for the tax. Now those who pay no rent could be recompensed only by a rise in the price of produce, and thus would M. Say's proposed tax fall on the consumer, and not either on the landlord or farmer. If the proposed tax were increased in proportion to the increased quantity, or value, of the gross produce obtained from the land, it would differ in nothing from tithes, and would equally be transferred to the consumer. Whether then it fell on the gross or on the net produce of land, it would be equally a tax on consumption, and would only affect the landlord and farmer in the same way as other taxes on raw produce. If no tax whatever had been laid on the land, and the same sum had been raised by any other means, agriculture would have flourished at least as well as it has done; for it is impossible that any tax on land can be an encouragement to agriculture; a moderate tax may not, and probably does not, greatly prevent, but it cannot encourage production. The English Government has held no such language as M. Say has supposed. It did not promise to exempt the agricultural class and their successors from all future taxation, and to raise the further supplies which the state might require, from the other classes of society; it said only, "in this mode we will no further burthen the land; but we retain to ourselves the most perfect liberty of making you pay, under some other form, your full quota to the future exigencies of the state." Speaking of taxes in kind, or a tax of a certain proportion of the produce, which is precisely the same as tithes, M. Say says, "This mode of taxation appears to be the most equitable; there is however none which is less so: it totally leaves out of consideration the advances made by the producer; it is proportioned to the gross, and not to the net revenue. Two agriculturists cultivate different kinds of raw produce: one cultivates corn on middling land, his expenses amounting annually on an average to 8000 francs; the raw produce from his lands sells for 12,000 francs; he has then a net revenue of 4000 francs. "His neighbour has pasture or wood land, which brings in every year a like sum of 12,000 francs, but his expenses amount only to 2000 francs. He has therefore on an average a net revenue of 10,000 francs. "A law ordains that a twelfth of the produce of all the fruits of the earth be levied in kind, whatever they may be. From the first is taken in consequence of this law, corn of the value of 1000 francs; and from the second, hay, cattle, or wood, of the same value of 1000 francs. What has happened? From the one, a quarter of his net income, 4000 francs, has been taken; from the other, whose income was 10,000 francs, a tenth only has been taken. Income is the net profit which remains after replacing the capital exactly in its former state. Has a merchant an income equal to all the sales which he makes in the course of a year? certainly not; his income only amounts to the excess of his sales above his advances, and it is on this excess only that taxes on income should fall." M. Say's error in the above passage lies in supposing that because the value of the produce of one of these two farms, after re-instating the capital, is greater than the value of the produce of the other, on that account the net income of the cultivators will differ by the same amount. M. Say has wholly omitted the consideration of the different amount of rent, which these cultivators would have to pay. There cannot be two rates of profit in the same employment, and therefore when produce is in different proportions to capital, it is the rent which will differ, and not the profit. Upon what pretence would one man with a capital of 2000 francs, be allowed to obtain a net profit of 10,000 francs from its employment, whilst another with a capital of 8000 francs would only obtain 4000 francs? Let M. Say make a due allowance for rent; let him further allow for the effect which such a tax would have on the prices of these different kinds of raw produce, and he will then perceive that it is not an unequal tax, and further that the producers themselves will not otherwise contribute to it, than any other class of consumers. CHAPTER XI. TAXES ON GOLD. The rise in the price of commodities, in consequence of taxation or of difficulty of production, will in all cases ultimately ensue; but the duration of the interval, before the market price of commodities conforms to their natural price, must depend on the nature of the commodity, and on the facility with which it can be reduced in quantity. If the quantity of the commodity taxed could not be diminished, if the capital of the farmer or of the hatter for instance, could not be withdrawn to other employments, it would be of no consequence that their profits were reduced below the general level by means of a tax; unless the demand for their commodities should increase, they would never be able to elevate the market price of corn and hats up to the increased natural price. Their threats to leave their employments, and remove their capitals to more favoured trades, would be treated as an idle menace which could not be carried into effect; and consequently the price would not be raised by diminished production. Commodities however of all descriptions can be reduced in quantity, and capital can be removed from trades which are less profitable to those which are more so, but with different degrees of rapidity. In proportion as the supply of a particular commodity can be more easily reduced, the price of it will more quickly rise after the difficulty of its production has been increased by taxation, or by any other means. Corn being a commodity indispensably necessary to every one, little effect will be produced on the demand for it in consequence of a tax, and therefore the supply could not be long excessive, even if the producers had great difficulty in removing their capitals from the land; the price of corn therefore, will speedily be raised by taxation, and the farmer will be enabled to transfer the tax from himself to the consumer. If the mines which supply us with gold were in this country, and if gold were taxed, it could not rise in relative value to other things till its quantity were reduced. This would be more particularly the case, if gold were exclusively used for money. It is true that the least productive mines, those which paid no rent, could no longer be worked, as they could not afford the general rate of profits till the relative value of gold rose, by a sum equal to the tax. The quantity of gold, and therefore the quantity of money would be slowly reduced; it would be a little diminished in one year, a little more in another, and finally its value would be raised in proportion to the tax; but in the interval, the proprietors or holders, as they would pay the tax, would be the sufferers, and not those who used money. If out of every 1000 quarters of wheat in the country, and every 1000 produced in future, government should exact 100 quarters as a tax, the remaining 900 quarters would exchange for the same quantity of other commodities that 1000 did before; but if the same thing took place with respect to gold, if of every 1000_l._ money now in the country, or in future to be brought into it, government could exact 100_l._ as a tax, the remaining 900_l._ would purchase very little more than 900_l._ purchased before. The tax would fall upon him, whose property consisted of money, and would continue to do so till its quantity were reduced in proportion to the increased cost of its production caused by the tax. This perhaps would be more particularly the case with respect to a metal used for money, than any other commodity, because the demand for money is not for a definite quantity, as is the demand for clothes, or for food. The demand for money is regulated entirely by its value, and its value by its quantity. If gold were of double the value, half the quantity would perform the same functions in circulation, and if it were of half the value, double the quantity would be required. If the market value of corn be increased one tenth by taxation, or by difficulty of production, it is doubtful, whether any effect whatever would be produced on the quantity consumed, because every man's want is for a definite quantity, and, therefore, if he has the means of purchasing, he will continue to consume as before; but for money, the demand is exactly proportioned to its value. No man could consume twice the quantity of corn, which is usually necessary for his support, but every man purchasing and selling only the same quantity of goods, may be obliged to employ twice, thrice, or any number of times the same quantity of money. The argument which I have just been using, applies only to those states of society in which the precious metals are used for money, and where paper credit is not established. The metal gold like all other commodities has its value in the market ultimately regulated by the comparative facility or difficulty of producing it; and although from its durable nature, and from the difficulty of reducing its quantity, it does not readily bend to variations in its market value, yet that difficulty is much increased from the circumstance of its being used as money. If the quantity of gold in the market for the purpose of commerce only, were 10,000 ounces, and the consumption in our manufactures were 2000 ounces annually, it might be raised one fourth, or 25 per cent. in its value, in one year, by withholding the annual supply; but if in consequence of its being used as money, the quantity employed were 100,000 ounces, it would not be raised one fourth in value in less than ten years. As money made of paper may be readily reduced in quantity, its value, though its standard were gold, would be increased as rapidly as that of the metal itself would be increased if it had no connexion whatever with money. If gold were the produce of one country only, and it were used universally for money, a very considerable tax might be imposed on it, which would not fall on any country, except in proportion as they used it in manufactures, and for utensils; upon that portion which was used for money, though a large tax might be received, nobody would pay it. This is a quality peculiar to money. All other commodities of which there exists a limited quantity, and which cannot be increased by competition, are dependant for their value, on the tastes, the caprice, and the power of purchasers; but money is a commodity which no country has any wish or necessity to increase: no more advantage results from using twenty millions, than from using ten millions of currency. A country might have a monopoly of silk, or of wine, and yet the prices of silks and wine might fall, because from caprice or fashion, or taste, cloth and brandy might be preferred, and substituted; the same effect might in a degree take place with gold, as far as its use is confined to manufactures: but while money is the general medium of exchange, the demand for it is never a matter of choice, but always of necessity; you must take it in exchange for your goods, and therefore there are no limits to the quantity which may be forced on you by foreign trade, if it fall in value; and no reduction to which you must not submit, if it rise. You may indeed substitute paper money, but by this you do not, and cannot lessen the quantity of money; it is only by the rise of the price of commodities, that you can prevent them from being exported from a country where they are purchased with little money, to a country where they can be sold for more, and this rise can only be effected by an importation of metallic money from abroad, or by the creation or addition of paper money at home. If then the King of Spain, supposing him to be in exclusive possession of the mines, and gold alone to be used for money, were to lay a considerable tax on gold, he would very much raise its natural value; and as its market value in Europe is ultimately regulated by its natural value in Spanish America, more commodities would be given by Europe for a given quantity of gold. But the same quantity of gold would not be produced in America, as its value would only be increased in proportion to the diminution of quantity consequent on its increased cost of production. No more goods then would be obtained in America, in exchange for all their gold exported, than before; and it may be asked, where then would be the benefit to Spain and her colonies? The benefit would be this, that if less gold were produced, less capital would be employed in producing it; the same value of goods from Europe would be imported by the employment of the smaller capital, that was before obtained by the employment of the larger; and therefore all the productions obtained by the employment of the capital withdrawn from the mines, would be a benefit which Spain would derive from the imposition of the tax, and which she could not obtain in such abundance, or with such certainty, by possessing the monopoly of any other commodity whatever. From such a tax, as far as money was concerned, the nations of Europe would suffer no injury whatever; they would have the same quantity of goods, and consequently the same means of enjoyment as before, but these goods would be circulated with a less quantity of money. If in consequence of the tax, only one tenth of the present quantity of gold were obtained from the mines, that tenth would be of equal value with the ten tenths now produced. But the King of Spain is not exclusively in possession of the mines of the precious metals; and if he were, his advantage from their possession, and the power of taxation, would be very much reduced by the limitation of demand and consumption in Europe, in consequence of the universal substitution, in a greater or less degree, of paper money. The agreement of the market and natural prices of all commodities, depends at all times on the facility with which the supply can be increased or diminished. In the case of gold, houses, and labour, as well as many other things, this effect cannot, under some circumstances, be speedily produced. But it is different with those commodities which are consumed and reproduced from year to year, such as hats, shoes, corn, and cloth; they may be reduced if necessary, and the interval cannot be long before the supply is contracted in proportion to the increased charge of producing them. A tax on raw produce from the surface of the earth, will, as we have seen, fall on the consumer, and will in no way affect rent; unless, by diminishing the funds for the maintenance of labour, it lowers wages, reduces the population, and diminishes the demand for corn. But a tax on the produce of gold mines must, by enhancing the value of that metal, necessarily reduce the demand for it, and must therefore necessarily displace capital from the employment to which it was applied. Notwithstanding then, that Spain would derive all the benefits which I have stated from a tax on gold, the proprietors of mines from which capital was withdrawn would lose all their rent. This would be a loss to individuals, but not a national loss; rent being not a creation, but merely a transfer of wealth: the King of Spain, and the proprietors of the mines which continued to be worked, would together receive not only all that the liberated capital produced, but all that the other proprietors lost. Suppose the mines of the 1st, 2nd, and 3rd quality to be worked, and to produce respectively 100, 80, and 70 pounds weight of gold, and therefore the rent of No. 1 to be thirty pounds, and that of No. 2 ten pounds. Suppose now the tax to be seventy pounds of gold per annum on each mine worked; and consequently that No. 1 alone could be profitably worked; it is evident that all rent would immediately disappear. Before the imposition of the tax, out of the 100 pounds produced on No. 1, a rent was paid of thirty pounds, and the worker of the mine retained seventy, a sum equal to the produce of the least productive mine. The value then of what remains to the capitalist of the mine No. 1 must be the same as before, or he would not obtain the common profits of stock; and consequently, after paying seventy out of his 100 pounds for tax, the value of the remaining thirty must be as great as seventy were before, and therefore the value of the whole hundred as great as 233 pounds before. Its value might be higher, but it could not be lower, or even this mine would cease to be worked. Being a monopolised commodity, it could exceed its natural value, and then it would pay a rent equal to that excess; but no funds would be employed in the mine, if it were below this value. In return for one-third of the labour and capital employed in the mines, Spain would obtain as much gold as would exchange for the same, or very nearly the same, quantity of commodities as before. She would be richer by the produce of the two thirds liberated from the mines. If the value of the 100 pounds of gold should be equal to that of the 250 pounds extracted before; the king of Spain's portion, his seventy pounds, would be equal to 175 at the former value: a small part of the king's tax only would fall on his own subjects, the greater part being obtained by the better distribution of capital. The account of Spain would stand thus: _Formerly produced_: Gold 250 pounds, of the value of (suppose) 10,000 yards of cloth. _Now produced_: By the two capitalists who quitted the mines,} 5,600 yards of the value of 140 pounds of gold, or } cloth. By the capitalist who works the mine, No. 1, } thirty pounds of gold increased in value, } 3,000 yards of as 1 to 2-1/2, and therefore now of the } cloth. value of } Tax to the king seventy pounds, now of the } 7,000 yards of value of } cloth. ------ 15,600 ------ Of the 7000 received by the king, the people of Spain would contribute only 1400, and 5600 would be pure gain, effected by the liberated capital. If the tax, instead of being a fixed sum per mine worked, were a certain portion of its produce, the quantity would not be reduced in consequence. If a half, a fourth, or a third of each mine were taken for the tax, it would nevertheless be the interest of the proprietors to make their mines yield as abundantly as before; but if the quantity were not reduced, but only a part of it transferred from the proprietor to the king, its value would not rise; the tax would fall on the people of the colonies, and no advantage would be gained. A tax of this kind would have the effect that Adam Smith supposes taxes on raw produce would have on the rent of land--it would fall entirely on the rent of the mine. If pushed a little further, the tax would not only absorb the whole rent, but would deprive the worker of the mine of the common profits of stock, and he would consequently withdraw his capital from the production of gold. If still further extended, the rent of still better mines would be absorbed, and capital would be further withdrawn; and thus the quantity would be continually reduced, and its value raised, and the same effects would take place as we have already pointed out; a part of the tax would be paid by the people of the Spanish colonies, and the other part would be a new creation of produce, by increasing the power of the instrument used as a medium of exchange. Taxes on gold are of two kinds, one on the actual quantity of gold in circulation, the other on the quantity that is annually produced from the mines. Both have a tendency to reduce the quantity, and to raise the value of gold; but by neither will its value be raised till the quantity is reduced, and therefore such taxes will fall for a time, until the supply is diminished, on the proprietors of money, but ultimately they will be paid by the owner of the mine in the reduction of rent, and by the purchasers of that portion of gold, which is used as a commodity contributing to the enjoyments of mankind, and not set apart exclusively for a circulating medium. CHAPTER XII. TAXES ON HOUSES. There are also other commodities besides gold which cannot be speedily reduced in quantity; any tax on which will therefore fall on the proprietor, if the increase of price should lessen the demand. Taxes on houses are of this description; though laid on the occupier, they will frequently fall by a diminution of rent on the landlord. The produce of the land is consumed and reproduced from year to year, and so are many other commodities; as they may therefore be speedily brought to a level with the demand, they cannot long exceed their natural price. But as a tax on houses may be considered in the light of an additional rent paid by the tenant, its tendency will be to diminish the demand for houses of the same annual rent, without diminishing their supply. Rent will therefore fall, and a part of the tax will be paid indirectly by the landlord. "The rent of a house," says Adam Smith, "may be distinguished into two parts, of which the one may very properly be called the building rent, the other is commonly called the ground rent. The building rent is the interest or profit of the capital expended in building the house. In order to put the trade of a builder upon a level with other trades, it is necessary that this rent should be sufficient first to pay the same interest which he would have got for his capital, if he had lent it upon good security; and secondly, to keep the house in constant repair, or what comes to the same thing, to replace within a certain term of years the capital which had been employed in building it." "If in proportion to the interest of money, the trade of the builder affords at any time a much greater profit than this, it will soon draw so much capital from other trades, as will reduce the profit to its proper level. If it affords at any time much less than this, other trades will soon draw so much capital from it as will again raise that profit. Whatever part of the whole rent of a house is over and above what is sufficient for affording this reasonable profit, naturally goes to the ground rent; and where the owner of the ground, and the owner of the building are two different persons, it is in most cases completely paid to the former. In country houses, at a distance from any great town, where there is a plentiful choice of ground, the ground rent is scarcely any thing, or no more than what the space upon which the house stands, would pay if employed in agriculture. In country villas, in the neighbourhood of some great town, it is sometimes a good deal higher, and the peculiar conveniency, or beauty of situation, is there frequently very highly paid for. Ground rents are generally highest in the capital, and in those particular parts of it, where there happens to be the greatest demand for houses, whatever be the reason for that demand, whether for trade and business, for pleasure and society, or for mere vanity and fashion." A tax on the rent of houses may either fall on the occupier, on the ground landlord, or on the building landlord. In ordinary cases it may be presumed, that the whole tax would be paid both immediately and finally by the occupier. If the tax be moderate, and the circumstances of the country such, that it is either stationary or advancing, there would be little motive for the occupier of a house to content himself with one of a worse description. But if the tax be high, or any other circumstances should diminish the demand for houses, the landlord's income would fall, for the occupier would be partly compensated for the tax by a diminution of rent. It is, however, difficult to say, in what proportions that part of the tax, which was saved by the occupier by a fall of rent, would fall on the building rent and the ground rent. It is probable, that in the first instance, both would be affected; but as houses are, though slowly, yet certainly perishable, and as no more would be built, till the profits of the builder were restored to the general level, building rent, would, after an interval, be restored to its natural price. As the builder receives rent only whilst the building endures, he could pay no part of the tax, under the most disastrous circumstances, for any longer period. The payment of this tax, then, would ultimately fall on the occupier and ground landlord, but "in what proportion, this final payment would be divided between them," says Adam Smith, "it is not perhaps very easy to ascertain. The division would probably be very different in different circumstances, and a tax of this kind might, according to those different circumstances, affect very unequally both the inhabitant of the house, and the owner of the ground."[15] Adam Smith considers ground rents as peculiarly fit subjects for taxation. "Both ground rents, and the ordinary rent of land," he says, "are a species of revenue, which the owner in many cases enjoys, without any care or attention of his own. Though a part of this revenue should be taken from him, in order to defray the expenses of the state, no discouragement will thereby be given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground rents, and the ordinary rent of land, are, therefore, perhaps the species of revenue, which can best bear to have a peculiar tax imposed upon them." It must be admitted that the effects of these taxes would be such as Adam Smith has described; but it would surely be very unjust, to tax exclusively the revenue of any particular class of a community. The burdens of the state should be borne by all in proportion to their means: this is one of the four maxims mentioned by Adam Smith, which should govern all taxation. Rent often belongs to those who after many years of toil, have realised their gains, and expended their fortunes in the purchase of land; and it certainly would be an infringement of that principle which should ever be held sacred, the security of property, to subject it to unequal taxation. It is to be lamented, that the duty by stamps, with which the transfer of landed property is loaded, materially impedes the conveyance of it into those hands, where it would probably be made most productive. And if it be considered, that land, regarded as a fit subject for exclusive taxation, would not only be reduced in price, to compensate for the risk of that taxation, but in proportion to the indefinite nature and uncertain value of the risk, would become a fit subject for speculations, partaking more of the nature of gambling, than of sober trade, it will appear probable, that the hands into which land would in that case be most apt to fall, would be the hands of those, who possess more of the qualities of the gambler, than of the qualities of the sober-minded proprietor, who is likely to employ his land to the greatest advantage. CHAPTER XIII. TAXES ON PROFITS. Taxes on those commodities, which are generally denominated luxuries, fall on those only who make use of them. A tax on wine is paid by the consumer of wine. A tax on pleasure horses, or on coaches, is paid by those who provide for themselves such enjoyments, and in exact proportion as they provide them. But taxes on necessaries do not affect the consumers of necessaries, in proportion to the quantity that may be consumed by them, but often in a much higher proportion. A tax on corn, we have observed, not only affects a manufacturer in the proportion that he and his family may consume corn, but it alters the rate of profits of stock, and therefore also affects his income. Whatever raises the wages of labour, lowers the profits of stock; therefore every tax on any commodity consumed by the labourer, has a tendency to lower the rate of profits. A tax on hats will raise the price of hats; a tax on shoes, the price of shoes; if this were not the case, the tax would be finally paid by the manufacturer; his profits would be reduced below the general level, and he would quit his trade. A partial tax on profits will raise the price of the commodity on which it falls: a tax, for example, on the profits of the hatter, would raise the price of hats; for if his profits were taxed, and not those of any other trade, his profits, unless he raised the price of his hats, would be below the general rate of profits, and he would quit his employment for another. In the same manner a tax on the profits of the farmer would raise the price of corn; a tax on the profits of the clothier, the price of cloth; and if a tax in proportion to profits were laid on all trades, every commodity would be raised in price. But if the mine, which supplied us with the standard of our money, were in this country, and the profits of the miner were also taxed, the price of no commodity would rise, each man would give an equal proportion of his income, and every thing would be as before. If money be not taxed, and therefore be permitted to preserve its value, whilst every thing else is taxed, and is raised in value, the hatter, the farmer, and clothier, each employing the same capitals, and obtaining the same profits, will pay the same amount of tax. If the tax be 100_l._, the hats, the cloth, and the corn, will each be increased in value 100_l._ If the hatter gain by his hats 1100_l._, instead of 1000_l._, he will pay 100_l._ to Government for the tax; and therefore will still have 1000_l._ to lay out on goods for his own consumption. But as the cloth, corn, and all other commodities, will be raised in price from the same cause, he will not obtain more for his 1000_l._ than he before obtained for 910_l._, and thus will he contribute by his diminished expenditure to the exigencies of the state; he will, by the payment of the tax, have placed a portion of the produce of the land and labour of the country at the disposal of Government, instead of using that portion himself. If instead of expending his 1000_l._, he adds it to his capital, he will find in the rise of wages, and in the increased cost of the raw material and machinery, that his saving of 1000_l._ does not amount to more than a saving of 910_l._ amounted to before. If money be taxed, or if by any other cause its value be altered, and all commodities remain precisely at the same price as before, the profits of the manufacturer and farmer will also be the same as before, they will continue to be 1000_l._; and as they will each have to pay 100_l._ to Government, they will retain only 900_l._, which will give them a less command over the produce of the land and labour of the country, whether they expend it in productive or unproductive labour. Precisely what they lose, Government will gain. In the first case the contributor to the tax would, for 1000_l._, have as great a quantity of goods as he before had for 910_l._; in the second, he would have only as much as he before had for 900_l._ This proceeds from the difference in the amount of the tax; in the first case it is only an eleventh of his income, in the second it is a tenth; money in the two cases being of a different value. But although, if money be not taxed, and do not alter in value, all commodities will rise in price, they will not rise in the same proportion; they will not after the tax bear the same relative value to each other which they did before the tax. In a former part of this work, we discussed the effects of the division of capital into fixed and circulating, or rather into durable and perishable capital, on the prices of commodities. We shewed that two manufacturers might employ precisely the same amount of capital, and might derive from it precisely the same amount of profits, but that they would sell their commodities for very different sums of money, according as the capitals they employed were rapidly, or slowly, consumed and reproduced. The one might sell his goods for 4000_l._, the other for 10,000_l._, and they might both employ 10,000_l._ of capital, and obtain 20 per cent. profit, or 2000_l._ The capital of one might consist for example of 2000_l._ circulating capital, to be reproduced, and 8000_l._ fixed, in buildings and machinery; the capital of the other on the contrary might consist of 8000_l._ of circulating, and of only 2000_l._ fixed capital in machinery and buildings. Now if each of these persons were to be taxed 10 per cent. on his income, or 200_l._, the one, to make his business yield him the general rate of profit, must raise his goods from 10,000_l._ to 10,200_l._; the other would also be obliged to raise the price of his goods from 4000_l._ to 4200_l._ Before the tax, the goods sold by one of these manufacturers were 2-1/2 times more valuable than the goods of the other; after the tax they will be 2.42 times more valuable: the one kind will have risen 2 per cent.; the other 5 per cent.: consequently a tax upon income, whilst money continued unaltered in value, would alter the relative prices and value of commodities. This is true, if the tax instead of being laid on the profits were laid on the commodities themselves: provided they were taxed in proportion to the value of the capital employed on their production, they would rise equally, whatever might be their value, and therefore they would not preserve the same proportion as before. A commodity, which rose from ten to eleven thousand pounds, would not bear the same relation as before, to another which rose from 2 to 3000_l._ If under these circumstances money rose in value, from whatever cause it might proceed, it would not affect the prices of commodities in the same proportion. The same cause which would lower the price of one from 10,200_l._ to 10,000_l._ or less than 2 per cent., would lower the price of the other from 4200_l._ to 4000_l._ or 4-3/4 per cent. If they fell in any different proportion, profits would not be equal; for to make them equal, when the price of the first commodity was 10,000_l._, the price of the second should be 4000_l._; and when the price of the first was 10,200_l._, the price of the other should be 4200_l._ The consideration of this fact will lead to the understanding of a very important principle, which I believe has never been adverted to. It is this; that in a country where no taxation subsists, the alteration in the value of money arising from scarcity or abundance will operate in an equal proportion on the prices of all commodities; that if a commodity of 1000_l._ value rise to 1200_l._, or fall to 800_l._, a commodity of 10,000_l._ value will rise to 12,000_l._ or fall to 8000_l._; but in a country where prices are artificially raised by taxation, the abundance of money from an influx, or the exportation and consequent scarcity of it from foreign demand, will not operate in the same proportion on the prices of all commodities; some it will raise or lower 5, 6, or 12 per cent., others 3, 4, or 7 per cent. If a country were not taxed, and money should fall in value, its abundance in every market would produce similar effects in each. If meat rose 20 per cent., bread, beer, shoes, labour, and every commodity, would also rise 20 per cent.; it is necessary they should do so, to secure to each trade the same rate of profits. But this is no longer true when any of these commodities is taxed; if in that case they should all rise in proportion to the fall in the value of money, profits would be rendered unequal; in the case of the commodities taxed profits would be raised above the general level, and capital would be removed from one employment to another, till an equilibrium of profits was restored, which could only be, after the relative prices were altered. Will not this principle account for the different effects, which it was remarked were produced on the prices of commodities, from the altered value of money during the Bank-restriction? It was objected to those who contended that the currency was at that period depreciated, from the too great abundance of the paper circulation, that, if that were the fact, all commodities ought to have risen in the same proportion; but it was found that many had varied considerably more than others, and thence it was inferred that the rise of prices was owing to something affecting the value of commodities, and not to any alteration in the value of the currency. It appears however, as we have just seen, that in a country where commodities are taxed, they will not all vary in price in the same proportion, either in consequence of a rise or of a fall in the value of currency. If the profits of all trades were taxed, excepting the profits of the farmer, all goods would rise in money value, excepting raw produce. The farmer would have the same corn income as before, and would sell his corn also for the same money price; but as he would be obliged to pay an additional price for all the commodities, except corn, which he consumed, it would be to him a tax on expenditure. Nor would he be relieved from this tax by an alteration in the value of money, for an alteration in the value of money might sink all the taxed commodities to their former price, but the untaxed one would sink below its former level; and therefore, though the farmer would purchase his commodities at the same price as before, he would have less money with which to purchase them. The landlord too would be precisely in the same situation, he would have the same corn, and the same money rent as before, if all commodities rose in price, and money remained at the same value; and he would have the same corn, but a less money rent, if all commodities remained at the same price: so that in either case, though his income were not directly taxed, he would indirectly contribute towards the money raised. But suppose the profits of the farmer to be also taxed, he then would be in the same situation as other traders; his raw produce would rise, so that he would have the same money revenue, after paying the tax, but he would pay an additional price for all the commodities he consumed, raw produce included. His landlord however would be differently situated, he would be benefited by the tax on his tenant's profits, as he would be compensated for the additional price at which he would purchase his manufactured commodities, if they rose in price; and he would have the same money revenue, if in consequence of a rise in the value of money, commodities sold at their former price. A tax on the profits of the farmer, is not a tax proportioned to the gross produce of the land, but to its net produce, after the payment of rent, wages, and all other charges. As the cultivators of the different kinds of land, No. 1, 2, and 3, employ precisely the same capitals, they will get precisely the same profits, whatever may be the quantity of gross produce, which one may obtain more than the other; and consequently they will be all taxed alike. Suppose the gross produce of the land of the quality No. 1, to be 180 qrs., that of No. 2, 170 qrs., and of No 3, 160, and each to be taxed 10 quarters, the difference between the produce of No. 1, No. 2, and No. 3, after paying the tax, will be the same as before; for if No. 1 be reduced to 170, No. 2 to 160, and No. 3 to 150 qrs.; the difference between 3 and 1 will be as before, 20 qrs.; and of No. 3 and No. 2, 10 qrs. If after the tax the prices of corn and of every other commodity should remain the same as before, money rent as well as corn rent, would continue unaltered; but if the price of corn, and every other commodity should rise in consequence of the tax, money rent will also rise in the same proportion. If the price of corn were 4_l._ per quarter, the rent of No. 1 would have been 80_l._, and that of No. 2, 40_l._; but if corn rose ten per cent., or to 4_l._ 8_s._, rent would also rise ten per cent., for twenty quarters of corn would then be worth 88_l._, and ten quarters 44_l._; so that in every case the landlord will be unaffected by such a tax. A tax on the profits of stock always leaves corn rent unaltered, and therefore money rent varies with the price of corn; but a tax on raw produce, or tithes, never leaves corn rent unaltered, but generally leaves money rent the same as before. In another part of this work I have observed, that if a land-tax of the same money amount, were laid on every kind of land in cultivation, without any allowance for difference of fertility, it would be very unequal in its operation, as it would be a profit to the landlord of the more fertile lands. It would raise the price of corn in proportion to the burden borne by the farmer of the worst land; but this additional price being obtained for the greater quantity of produce yielded by the better land, farmers of such land would be benefited during their leases, and afterwards, the advantage would go to the landlord in the form of an increase of rent. The effect of an equal tax on the profits of the farmer is precisely the same; it raises the money rent of the landlords, if money retains the same value; but as the profits of all other trades are taxed, as well as those of the farmer, and consequently the prices of all goods, as well as corn, are raised, the landlord loses as much by the increased money price of the goods and corn on which his rent is expended, as he gains by the rise of his rent. If money should rise in value, and all things should, after a tax on the profits of stock, fall to their former prices, rent also would be the same as before. The landlord would receive the same money rent, and would obtain all the commodities on which it was expended at their former price; so that under all circumstances he would continue untaxed. A tax on the profits of stock would also affect the stockholder, if all commodities were to rise in proportion to the tax; but if from the alteration in the value of money, all commodities were to sink to their former price, the stockholder would pay nothing towards the tax; he would purchase all his commodities at the same price, but would still receive the same money dividend. If it be agreed, that by taxing the profits of one manufacturer only, the price of his goods would rise, to put him on an equality with all other manufacturers; and that by taxing the profits of two manufacturers, the prices of two descriptions of goods must rise, I do not see how it can be disputed, that by taxing the profits of all manufacturers, the prices of all goods would rise, provided the mine which supplied us with money, were in the country taxed. But as money, or the standard of money, is a commodity imported from abroad, the prices of all goods could not rise; for such an effect could not take place without an additional quantity of money, which could not be obtained in exchange for dear goods, as was shewn in page 108. If however, such a rise could take place, it could not be permanent, for it would have a powerful influence on foreign trade. In return for commodities imported, those dear goods could not be exported, and therefore we should for a time continue to buy, although we ceased to sell; and should export money, or bullion, till the relative prices of commodities were nearly the same as before. It appears to me absolutely certain, that a well regulated tax on profits, would ultimately restore commodities both of home and foreign manufacture, to the same money price which they bore before the tax was imposed. As taxes on raw produce, tithes, taxes on wages, and on the necessaries of the labourer, will, by raising wages, lower profits, they will all, though not in an equal degree, be attended with the same effects. The discovery of machinery, which materially improves home manufactures, always tends to raise the relative value of money, and therefore to encourage its importation. All taxation, all increased impediments, either to the manufacturer, or the grower of commodities, tend on the contrary to lower the relative value of money, and therefore to encourage its exportation. CHAPTER XIV. TAXES ON WAGES. Taxes on wages will raise wages, and therefore will diminish the rate of the profits of stock. We have already seen that a tax on necessaries will raise their prices, and will be followed by a rise of wages. The only difference between a tax on necessaries, and a tax on wages is, that the former will necessarily be accompanied by a rise in the price of necessaries, but the latter will not; towards a tax on wages, consequently, neither the stockholder, the landlord, nor any other class but the employers of labour will contribute. A tax on wages is wholly a tax on profits, a tax on necessaries is partly a tax on profits, and partly a tax on rich consumers. The ultimate effects which will result from such taxes then are precisely the same as those which result from a direct tax on profits. "The wages of the inferior classes of workmen," says Adam Smith, "I have endeavoured to shew in the first book, are every where necessarily regulated by two different circumstances; the demand for labour, and the ordinary or average price of provisions. The demand for labour, according as it happens to be either increasing, stationary, or declining, or to require an increasing, stationary, or declining population, regulates the subsistence of the labourer, and determines in what degree it shall be either liberal, moderate, or scanty. The _ordinary or average_ price of provisions determines the quantity of money which must be paid to the workman, in order to enable him one year with another to purchase this liberal, moderate, or scanty subsistence. While the demand for labour, and the price of provisions, therefore remain the same, a direct tax upon the wages of labour can have no other effect than to raise them somewhat higher than the tax." To the proposition, as it is here advanced by Dr. Smith, Mr. Buchanan offers two objections. First, he denies that the money wages of labour are regulated by the price of provisions; and secondly, he denies that a tax on the wages of labour would raise the price of labour. On the first point, Mr. Buchanan's argument is as follows, page 59: "The wages of labour, it has already been remarked, consist not in money, but in what money purchases, namely, provisions and other necessaries; and the allowance of the labourer out of the common stock, will always be in proportion to the supply. Where provisions are _cheap and abundant_, his share will be the larger; and where they are _scarce and dear_, it will be the less. His wages will always give him his just share, and they cannot give him more. It is an opinion indeed, adopted by Dr. Smith and most other writers, that the money price of labour is regulated by the money price of provisions, and that when provisions rise in price, wages rise in proportion. But it is clear that the price of labour has no necessary connexion with the price of food, since it depends entirely on the supply of labourers compared with the demand. Besides, it is to be observed, that the high price of provisions is a certain indication of a deficient supply, and arises in the natural course of things, for the purpose of retarding the consumption. A smaller supply of food, shared among the same number of consumers, will evidently leave a smaller portion to each, and the labourer must bear his share of the common want. To distribute this burden equally, and to prevent the labourer from consuming subsistence so freely as before, the price rises. But wages it seems must rise along with it, that he may still use the same quantity of a scarcer commodity; and thus nature is represented as counteracting her own purposes: first, raising the price of food, to diminish the consumption, and afterwards, raising wages to give the labourer the same supply as before." In this argument of Mr. Buchanan, there appears to me, to be a great mixture of truth and error. Because a high price of provisions is sometimes occasioned by a deficient supply, Mr. Buchanan assumes it as a certain indication of a deficient supply. He attributes to one cause exclusively, that which may arise from many. It is undoubtedly true, that in the case of a deficient supply, a smaller quantity will be shared among the same number of consumers, and a smaller portion will fall to each. To distribute this privation equally, and to prevent the labourer from consuming subsistence so freely as before, the price rises. It must therefore be conceded to Mr. Buchanan, that any rise in the price of provisions, occasioned by a deficient supply, will not necessarily raise the money wages of labour; as the consumption must be retarded; which can only be effected by diminishing the power of the consumers to purchase. But, because the price of provisions is raised by a deficient supply, we are by no means warranted in concluding, as Mr. Buchanan appears to do, that there may not be an abundant supply, with a high price; not a high price with regard to money only, but with regard to all other things. The natural price of commodities, which always ultimately governs their market price, depends on the facility of production; but the quantity produced is not in proportion to that facility. Although the lands, which are now taken into cultivation, are much inferior to the lands in cultivation three centuries ago, and therefore the difficulty of production is increased, who can entertain any doubt, but that the quantity produced now, very far exceeds the quantity then produced? Not only is a high price compatible with an increased supply, but it rarely fails to accompany it. If, then, in consequence of taxation, or of difficulty of production, the price of provisions be raised, and the quantity be not diminished, the money wages of labour will rise; for as Mr. Buchanan has justly observed, "The wages of labour consist not in money, but in what money purchases, namely, provisions and other necessaries; and the allowance of the labourer out of the common stock, will always be in proportion to the supply." With respect to the second point, whether a tax on the wages of labour would raise the price of labour, Mr. Buchanan says, "After the labourer has received the fair recompense of his labour, how can he have recourse on his employer, for what he is afterwards compelled to pay away in taxes? There is no law or principle in human affairs to warrant such a conclusion. After the labourer has received his wages, they are in his own keeping, and he must, as far as he is able, bear the burthen of whatever exactions he may ever afterwards be exposed to: for he has clearly no way of compelling those to reimburse him, who have already paid him the fair price of his work." Mr. Buchanan has quoted with great approbation, the following able passage from Mr. Malthus's work on population, which appears to me completely to answer his objection. "The price of labour, when left to find its natural level, is a most important political barometer, expressing the relation between the supply of provisions, and the demand for them, between the quantity to be consumed, and the number of consumers; and, taken on the average, independently of accidental circumstances, it further expresses, clearly, the wants of the society respecting population, that is, whatever may be the number of children to a marriage necessary to maintain exactly the present population, the price of labour will be just sufficient to support this number, or be above it, or below it, according to the state of the real funds, for the maintenance of labour, whether stationary, progressive, or retrograde. Instead, however, of considering it in this light, we consider it as something which we may raise or depress at pleasure, something which depends principally on his majesty's justices of the peace. When an advance in the price of provisions already expresses that the demand is too great for the supply, in order to put the labourer in the same condition as before, we raise the price of labour, that is, we increase the demand, and are then much surprised, that the price of provisions continues rising. In this, we act much in the same manner, as if, when the quicksilver in the common weather glass, stood at _stormy_, we were to raise it by some forcible pressure to settled fair, and then be greatly astonished that it continued raining." "The price of labour will express, clearly, the wants of the society respecting population;" it will be just sufficient to support the population, which at that time the state of the funds for the maintenance of labourers, requires. If the labourer's wages were before only adequate to supply the requisite population, they will, after the tax, be inadequate to that supply, for he will not have the same funds to expend on his family. Labour will therefore rise, because the demand continues, and it is only by raising the price, that the supply is not checked. Nothing is more common, than to see hats or malt rise when taxed; they rise because the requisite supply would not be afforded if they did not rise: so with labour, when wages are taxed, its price rises, because, if it did not, the requisite population would not be kept up. Does not Mr. Buchanan allow all that is contended for, when he says, that "were he (the labourer) indeed reduced to a bare allowance of necessaries, he would then suffer no further abatement of his wages, as he could not on such conditions continue his race?" Suppose the circumstances of the country to be such, that the lowest labourers are not only called upon to continue their race, but to increase it; their wages would have been regulated accordingly. Can they multiply, if a tax takes from them a part of their wages, and reduces them to bare necessaries? It is undoubtedly true, that a taxed commodity will not rise in proportion to the tax, if the demand for it will diminish, and if the quantity cannot be reduced. If metallic money were in general use, its value would not for a considerable time be increased by a tax, in proportion to the amount of the tax, because at a higher price, the demand would be diminished, and the quantity would not be diminished; and unquestionably the same cause frequently influences the wages of labour, the number of labourers cannot be rapidly increased or diminished in proportion to the increase or diminution of the fund, which is to employ them; but in the case supposed, there is no necessary diminution of demand for labour, and if diminished, the demand does not abate in proportion to the tax. Mr. Buchanan forgets that the fund raised by the tax is employed by Government in maintaining labourers, unproductive indeed, but still labourers. If labour were not to rise when wages are taxed, there would be a great increase in the competition for labour, because the owners of capital, who would have nothing to pay towards such a tax, would have the same funds for imploying labour; whilst the Government who received the tax would have an additional fund for the same purpose. Government and the people thus become competitors, and the consequence of their competition is a rise in the price of labour. The same number of men only will be employed, but they will be employed at additional wages. If the tax had been laid at once on the people, their fund for the maintenance of labour would have been diminished in the very same degree that the fund of Government for that purpose had been increased; and therefore there would have been no rise in wages; for though there would be the same demand, there would not be the same competition. If when the tax were levied, Government at once exported the produce of it as a subsidy to a foreign state, and if therefore these funds were devoted to the maintenance of foreign, and not of English labourers, such as soldiers, sailors, &c. &c.; then, indeed, there would be a diminished demand for labour, and wages might not increase although they were taxed; but the same thing would happen if the tax had been laid on consumable commodities, on the profits of stock, or if in any other manner the same sum had been raised to supply this subsidy: less labour could be employed at home. In one case wages are prevented from rising, in the other they must absolutely fall. But suppose the amount of a tax on wages were, after being raised on the labourers, paid gratuitously to their employers, it would increase their money fund for the maintenance of labour, but it would not increase either commodities or labour. It would consequently increase the competition amongst the employers of labour, and the tax would be ultimately attended with no loss either to master or labourer. The master would pay an increased price for labour; the addition which the labourer received would be paid as a tax to Government, and would be again returned to the masters. It must however not be forgotten that the produce of taxes is often wastefully expended, and that by diminishing capital they tend to diminish the real fund destined for the maintenance of labour; and therefore to diminish the real demand for it. Taxes then, generally, as far as they impair the real capital of the country, diminish the demand for labour, and therefore it is a probable, but not a necessary, nor a peculiar consequence of a tax on wages, that though wages would rise, they would not rise by a sum precisely equal to the tax. Adam Smith, as we have seen, has fully allowed that the effect of a tax on wages would be to raise wages by a sum at least equal to the tax, and would be finally, if not immediately, paid by the employer of labour. Thus far we fully agree; but we essentially differ in our views of the subsequent operation of such a tax. "A direct tax upon the wages of labour, therefore," says Adam Smith, "though the labourer might perhaps pay it out of his hand, could not properly be said to be even advanced by him; at least if the demand for labour and the average price of provisions remained the same after the tax as before it. In all such cases, not only the tax, but something more than the tax, would in reality be advanced by the person who immediately employed him. The final payment would in different cases fall upon different persons. The rise which such a tax might occasion in the wages of manufacturing labour, would be advanced by the master manufacturer, _who would be entitled and obliged to charge it with a profit, upon the price of his goods_. The rise which such a tax might occasion in country labour would be advanced by the farmer, who, in order to maintain the same number of labourers as before, would be obliged to employ a greater capital. In order to get back this greater capital, _together with the ordinary profits of stock_, it would be necessary that he should retain a larger portion, or what comes to the same thing, the price of a larger portion of the produce of the land, and consequently that he should pay less rent to the landlord. The final payment of this rise of wages, therefore, would in this case fall upon the landlord, _together with the additional profits of the farmer who had advanced it_. In all cases a direct tax upon the wages of labour must, in the long run, occasion both a greater reduction in the rent of land, and a greater rise in the price of manufactured goods, than would have followed, from the proper assessment of a sum equal to the produce of the tax, partly upon the rent of land, and partly upon consumable commodities." Vol. iii. p. 337. In this passage it is asserted that the additional wages paid by farmers will ultimately fall on the landlords, who will receive a diminished rent; but that the additional wages paid by manufacturers will occasion a rise in the price of manufactured goods, and will therefore fall on the consumers of those commodities. Now suppose a society to consist of landlords, manufacturers, farmers, and labourers. The labourers, it is agreed, would be recompensed for the tax;--but by whom?--who would pay that portion which did not fall on the landlords?--the manufacturers could pay no part of it; for if the price of their commodities should rise in proportion to the additional wages they paid, they would be in a better situation after than before the tax. If the clothier, the hatter, the shoemaker, &c., should be each able to raise the price of their goods 10 per cent.,--supposing 10 per cent. to recompense them completely for the additional wages they paid,--if, as Adam Smith says, "they would be entitled and obliged to charge the additional wages _with a profit_ upon the price of their goods," they could each consume as much as before of each other's goods, and therefore they would pay nothing towards the tax. If the clothier paid more for his hats and shoes, he would receive more for his cloth, and if the hatter paid more for his cloth and shoes, he would receive more for his hats. All manufactured commodities then would be bought by them with as much advantage as before, and inasmuch as corn would not be raised in price whilst they had an additional sum to lay out upon its purchase, they would be benefited, and not injured by such a tax. If then neither the labourers nor the manufacturers would contribute towards such a tax; if the farmers would be also recompensed by a fall of rent, landlords alone must not only bear its whole weight, but they must also contribute to the increased gains of the manufacturers. To do this, however, they should consume all the manufactured commodities in the country, for the additional price charged on the whole mass is little more than the tax originally imposed on the labourers in manufactures. Now it will not be disputed that the clothier, the hatter, and all other manufacturers, are consumers of each other's goods; it will not be disputed that labourers of all descriptions consume soap, cloth, shoes, candles, and various other commodities: it is therefore impossible that the whole weight of these taxes should fall on landlords only. But if the labourers pay no part of the tax, and yet manufactured commodities rise in price, wages must rise, not only to compensate them for the tax, but for the increased price of manufactured necessaries, which, as far as it affects agricultural labour, will be a new cause for the fall of rent; and, as far as it affects manufacturing labour, for a further rise in the price of goods. This rise in the price of goods will again operate on wages, and the action and re-action, first of wages on goods, and then of goods on wages, will be extended without any assignable limits. The arguments by which this theory is supported, lead to such absurd conclusions that it may at once be seen that the principle is wholly indefensible. All the effects which are produced on the profits of stock and the wages of labour, by a rise of rent and a rise of necessaries, in the natural progress of society, and increasing difficulty of production, will be produced by a rise of wages in consequence of taxation; and therefore the enjoyments of the labourer, as well as those of his employers, will be curtailed by the tax; and not by this tax particularly, but by any other which should raise an equal amount. The error of Adam Smith proceeds in the first place from supposing, that all taxes paid by the farmer must necessarily fall on the landlord, in the shape of a deduction from rent. On this subject I have explained myself most fully, and I trust that it has been shewn, to the satisfaction of the reader, that since much capital is employed on the land which pays no rent, and since it is the result obtained by this capital which regulates the price of raw produce, no deduction can be made from rent; and consequently either no remuneration will be made to the farmer for a tax on wages, or if made, it must be made by an addition to the price of raw produce. If taxes press unequally on the farmer, he will be enabled to raise the price of raw produce, to place himself on a level with those who carry on other trades; but a tax on wages, which would not affect him more than it would affect any other trade, could not be removed or compensated by a high price of raw produce; for, the same reason which should induce him to raise the price of corn, namely, to remunerate himself for the tax, would induce the clothier to raise the price of cloth, the shoemaker, hatter, and upholsterer, to raise the price of shoes, hats, and furniture. If they could all raise the price of their goods, so as to remunerate themselves, with a profit, for the tax; as they are all consumers of each other's commodities, it is obvious that the tax could never be paid; for who would be the contributors if all were compensated? I hope then that I have succeeded in shewing, that any tax which shall have the effect of raising wages, will be paid by a diminution of profits, and therefore that a tax on wages is in fact a tax on profits. This principle of the division of the produce of labour and capital between wages and profits, which I have attempted to establish, appears to me so certain, that excepting in the immediate effects, I should think it of little importance whether the profits of stock, or the wages of labour, were taxed. By taxing the profits of stock, you would probably alter the rate at which the funds for the maintenance of labour increase, and wages would be disproportioned to the state of that fund, by being too high. By taxing wages, the reward paid to the labourer would also be disproportioned to the state of that fund, by being too low. In the one case by a fall, and in the other by a rise in money wages, the natural equilibrium between profits and wages would be restored. A tax on wages then does not fall on the landlord, but it falls on the profits of stock: it does not "entitle and oblige the master manufacturer to charge it with a profit on the prices of his goods," for he will be unable to increase their price, and therefore he must himself wholly and without compensation pay such a tax.[16] If the effect of taxes on wages be such as I have described, they do not merit the censure cast upon them by Dr. Smith. He observes of such taxes, "These, and some other taxes of the same kind, by raising the price of labour, are said to have ruined the greater part of the manufactures of Holland. Similar taxes, though not quite so heavy, take place in the Milanese, in the states of Genoa, in the duchy of Modena, in the duchies of Parma, Placentia, and Guastalla, and in the ecclesiastical states. A French author of some note, has proposed to reform the finances of his country, by substituting in the room of other taxes, this most ruinous of all taxes. 'There is nothing so absurd,' says Cicero, 'which has not sometimes been asserted by some philosophers.'" And in another place he says: "taxes upon necessaries, by raising the wages of labour, necessarily tend to raise the price of all manufactures, and consequently to diminish the extent of their sale and consumption." They would not merit this censure; even if Dr. Smith's principle were correct that such taxes would enhance the prices of manufactured commodities; for such an effect could be only temporary, and would subject us to no disadvantage in our foreign trade. If any cause should raise the price of a few manufactured commodities, it would prevent or check their exportation; but if the same cause operated generally on all, the effect would be merely nominal, and would neither interfere with their relative value, nor in any degree diminish the stimulus to a trade of barter; which all commerce, both foreign and domestic, really is. I have already attempted to shew, that when any cause raises the prices of all commodities in general, the effects are nearly similar to a fall in the value of money. If money falls in value, all commodities rise in price; and if the effect is confined to one country, it will affect its foreign commerce in the same way as a high price of commodities caused by general taxation; and therefore in examining the effects of a low value of money confined to one country, we are also examining the effects of a high price of commodities confined to one country. Indeed Adam Smith was fully aware of the resemblance between these two cases, and consistently maintained that the low value of money, or, as he calls it, of silver in Spain, in consequence of the prohibition against its exportation, was very highly prejudicial to the manufactures and foreign commerce of Spain. "But that degradation in the value of silver, which being the effect either of the peculiar situation, or of the political institutions of a particular country, takes place only in that country, is a matter of very great consequence, which, far from tending to make any body really richer, tends to make every body really poorer. The rise in the money price of all commodities, which is in this case peculiar to that county, tends to discourage more or less every sort of industry which is carried on within it, and to enable foreign nations, by furnishing almost all sorts of goods for a smaller quantity of silver than its own workmen can afford to do, to undersell them not only in the foreign, but even in the home market." Vol. ii. page 278. One, and I think the only one of the disadvantages of a low value of silver in a country, proceeding from a forced abundance, has been ably explained by Dr. Smith. If the trade in gold and silver were free, "the gold and silver which would go abroad, would not go abroad for nothing, but would bring back an equal value of goods of some kind or another. Those goods too would not be all matters of mere luxury and expense, to be consumed by idle people, who produce nothing in return for their consumption. As the real wealth and revenue of idle people would not be augmented by this extraordinary exportation of gold and silver, so would neither their consumption be augmented by it. Those goods would, probably the greater part of them, and certainly some part of them, consist in materials, tools, and provisions, for the employment and maintenance of industrious people, who would reproduce with a profit, the full value of their consumption. A part of the dead stock of the society would thus be turned into active stock, and would put into motion a greater quantity of industry than had been employed before." By not allowing a free trade in the precious metals when the prices of commodities are raised, either by taxation, or by the influx of the precious metals, you prevent a part of the dead stock of the society from being turned into active stock--you prevent a greater quantity of industry from being employed. But this is the whole amount of the evil; an evil never felt by those countries where the exportation of silver is either allowed or connived at. The exchanges between countries are at par only, whilst they have precisely that quantity of currency which in the actual situation of things they should have to carry on the circulation of their commodities. If the trade in the precious metals were perfectly free, and money could be exported without any expense whatever, the exchanges could be no otherwise in every country than at par. If the trade in the precious metals were perfectly free, if they were generally used in circulation, even with the expenses of transporting them, the exchange could never in any of them deviate more from par, than by these expenses. These principles I believe are now no where disputed. If a country used paper money not exchangeable for specie, and therefore not regulated by any fixed standard, the exchanges in that country might deviate as much from par, as its money might be multiplied beyond that quantity which would have been allotted to it by general commerce, if the trade in money had been free, and the precious metals had been used, either for money, or for the standard of money. If by the general operations of commerce, 10 millions of pounds sterling, of a known weight and fineness of bullion, should be the portion of England, and 10 millions of paper pounds were substituted, no effect would be produced on the exchange; but if by the abuse of the power of issuing paper money, 11 millions of pounds should be employed in the circulation, the exchange would be 9 per cent. against England; if 12 millions were employed, the exchange would be 16 per cent.; and if 20 millions, the exchange would be 50 per cent. against England. To produce this effect it is not however necessary that paper money should be employed: any cause which retains in circulation a greater quantity of pounds than would have circulated, if commerce had been free, and the precious metals of a known weight and fineness had been used, either for money, or for the standard of money, would exactly produce the same effects. Suppose that by clipping the money, each pound did not contain the quantity of gold or silver which by law it should contain, a greater number of such pounds might be employed in the circulation, than if they were not clipped. If from each pound one tenth were taken away, 11 millions of such pounds might be used instead of 10; if two tenths were taken away, 12 millions might be employed; and if one half were taken away, 20 millions might not be found superfluous. If the latter sum were used instead of 10 millions, every commodity in England would be raised to double its former price, and the exchange would be 50 per cent. against England, but this would occasion no disturbance in foreign commerce, nor discourage the manufacture of any one commodity. If for example, cloth rose in England from 20_l._ to 40_l._ per piece, we should just as freely export it after as before the rise, for a compensation of 50 per cent. would be made to the foreign purchaser in the exchange; so that with 20_l._ of his money, he could purchase a bill which would enable him to pay a debt of 40_l._ in England. In the same manner if he exported a commodity which cost 20_l._ at home, and which sold in England for 40_l._ he would only receive 20_l._, for 40_l._ in England would only purchase a bill for 20_l._ on a foreign country. The same effects would follow from whatever cause 20 millions could be forced to perform the business of circulation in England, if 10 millions only were necessary. If so absurd a law, as the prohibition of the exportation of the precious metals, could be enforced, and the consequence of such prohibition were to force 11 millions instead of 10 into circulation, the exchange would be 9 per cent. against England; if 12 millions, 16 per cent.; and if 20 millions, 50 per cent. against England. But no discouragement would be given to the manufactures of England; if home commodities sold at a high price in England, so would foreign commodities; and whether they were high or low would be of little importance to the foreign exporter and importer, whilst he would, on the one hand, be obliged to allow a compensation in the exchange when his commodities sold at a dear rate, and would receive the same compensation, when he was obliged to purchase English commodities at a high price. The sole disadvantage then which could happen to a country from retaining by prohibitory laws a greater quantity of gold and silver in circulation than would otherwise remain there, would be the loss which it would sustain from employing a portion of its capital unproductively, instead of employing it productively. In the form of money this capital is productive of no profit; in the form of materials, machinery, and food, for which it might be exchanged, it would be productive of revenue, and would add to the wealth and the resources of the state. Thus then I hope I have satisfactorily proved, that a comparatively low price of the precious metals, in consequence of taxation, or in other words, a generally high price of commodities, would be of no disadvantage to a state, as a part of the metals would be exported, which, by raising their value, would again lower the prices of commodities. And further, that if they were not exported, if by prohibitory laws they could be retained in a country, the effect on the exchange would counterbalance the effect of high prices. If then taxes on necessaries and on wages would not raise the prices of all commodities on which labour was expended, they cannot be condemned on such grounds; and moreover, even if the opinion that they would have such an effect were well founded, they would be in no degree injurious on that account. It is undoubtedly true, that "taxes upon luxuries have no tendency to raise the price of any other commodities, except that of the commodities taxed;" but it is not true, that "taxes upon necessaries, by raising the wages of labour, necessarily tend to raise the price of all manufactures." It is true, that "taxes upon luxuries are finally paid by the consumers of the commodities taxed, without any retribution. They fall indifferently upon every species of revenue, the wages of labour, the profits of stock, and the rent of land;" but it is not true, "that taxes upon necessaries _so far as they affect the labouring poor_, are finally paid partly by landlords in the diminished rent of their lands, and partly by rich consumers, whether landlords or others, in the advanced price of manufactured goods;" for _so far as these taxes affect the labouring poor_, they will be almost wholly paid by the diminished profits of stock, a small part only being paid by the labourers themselves in the diminished demand for labour, which taxation of every kind has a tendency to produce. It is from Dr. Smith's erroneous view of the effect of those taxes, that he has been led to the conclusion, that "the middling and superior ranks of people, if they understood their own interest, ought always to oppose all taxes upon the necessaries of life, as well as all direct taxes upon the wages of labour." This conclusion follows from his reasoning, "that the final payment of both one and the other falls altogether upon themselves, and always with a considerable overcharge. They fall heaviest upon the landlords, who always pay in a double capacity; in that of landlords, by the reduction of their rent, and in that of rich consumers, by the increase of their expense. The observation of Sir Matthew Decker, that certain taxes are in the price of certain goods, sometimes repeated and accumulated four or five times, is perfectly just with regard to taxes upon the necessaries of life. In the price of leather, for example, you must pay, not only for the tax upon the leather of your own shoes, but for a part of that upon those of the shoemaker and the tanner. You must pay too for the tax upon the salt, upon the soap, and upon the candles, which those workmen consume while employed in your service, and for the tax upon the leather, which the salt-maker, the soap-maker, and the candle-maker consume, while employed in their service." Now as Dr. Smith does not contend that the tanner, the salt-maker, the soap-maker, and the candle-maker, will either of them be benefited by the tax on leather, salt, soap, and candles; and as it is certain, that government will receive no more than the tax imposed, it is impossible to conceive, that more can be paid by the public upon whomsoever the tax may fall. The rich consumers may, and indeed will, pay for the poor consumer, but they will pay no more than the whole amount of the tax; and it is not in the nature of things, that "the tax should be repeated and accumulated four or five times." A system of taxation may be defective; more may be raised from the people, than what finds its way into the coffers of the state, as a part, in consequence of its effect on prices, may possibly be received by those, who are benefited by the peculiar mode in which taxes are laid. Such taxes are pernicious, and should not be encouraged; for it may be laid down as a principle, that when taxes operate justly, they conform to the first of Dr. Smith's maxims, and raise from the people as little as possible beyond what enters into the public treasury of the state. M. Say says, "others offer plans of finance, and propose means for filling the coffers of the sovereign, without any charge to his subjects. But unless a plan of finance is of the nature of a commercial undertaking, it cannot give government more than it takes away, either from individuals, or from government itself, under some other form. Something cannot be made out of nothing, by the stroke of a wand. In whatever way an operation may be disguised, whatever forms we may constrain a value to take, whatever metamorphosis we may make it undergo, we can only have a value by creating it, or by taking it from others. The very best of all plans of finance is to spend little, and the best of all taxes is, that which is the least in amount." Dr. Smith uniformly, and I think justly, contends, that the labouring classes cannot materially contribute to the burdens of the state. A tax on necessaries, or on wages, will therefore be shifted from the poor to the rich: if then, the meaning of Dr. Smith is, "that certain taxes are in the price of certain goods sometimes repeated, and accumulated four or five times," for the purpose only of accomplishing this end, namely, the transference of the tax from the poor to the rich, they cannot be liable to censure on that account. Suppose the just share of the taxes of a rich consumer to be 100_l._, and that he would pay it directly, if the tax were laid on income, on wine, or on any other luxury, he would suffer no injury if by the taxation of necessaries, he should be only called upon for the payment of 25_l._, as far as his own consumption of necessaries, and that of his family was concerned, but should be required to repeat this tax three times, by paying an additional price for other commodities to remunerate the labourers, or their employers, for the tax which they have been called upon to advance. Even in that case the reasoning is inconclusive: for if there be no more paid than what is required by Government; of what importance can it be to the rich consumer, whether he pay the tax directly, by paying an increased price for an object of luxury, or indirectly, by paying an increased price for the necessaries and other commodities he consumes? If more be not paid by the people, than what is received by Government, the rich consumer will only pay his equitable share; if more is paid, Adam Smith should have stated by whom it is received. M. Say does not appear to me to have consistently adhered to the obvious principle, which I have quoted from his able work; for in the next page, speaking of taxation, he says, "When it is pushed too far, it produces this lamentable effect, it deprives the contributor of a portion of his riches, without enriching the state. This is what we may comprehend, if we consider that every man's power of consuming, whether productively or not, is limited by his income. He cannot then be deprived of a part of his income, without being obliged proportionally to reduce his consumption. Hence arises a diminution of demand for those goods, which he no longer consumes, and particularly for those on which the tax is imposed. From this diminution of demand, there results a diminution of production, and consequently of taxable commodities. The contributor then will lose a portion of his enjoyments; the producer, a portion of his profits; and the treasury, a portion of its receipts." M. Say instances the tax on salt in France, previous to the revolution; which, he says, diminished the production of salt by one half. If, however, less salt was consumed, less capital was employed in producing it; and therefore, though the producer would obtain less profits on the production of salt, he would obtain more on the production of other things. If a tax, however burdensome it may be, falls on revenue, and not on capital, it does not diminish demand, it only alters the nature of it. It enables Government to consume as much of the produce of the land and labour of the country, as was before consumed by the individuals who contribute to the tax. If my income is 1000_l._ per annum, and I am called upon for 100_l._ per annum for a tax, I shall only be able to demand nine tenths of the quantity of goods, which I before consumed, but I enable Government to demand the other tenth. If the commodity taxed be corn, it is not necessary that my demand for corn should diminish, as I may prefer to pay 100_l._ per annum more for my corn, and to the same amount abate in my demand for wine, furniture, or any other luxury.[17] Less capital will consequently be employed in the wine or upholstery trade, but more will be employed in manufacturing those commodities, on which the taxes levied by Government will be expended. M. Say says that M. Turgot, by reducing the market dues on fish (_les droits d'entrée et de halle sur la marée_) in Paris one half, did not diminish the amount of their produce, and that consequently, the consumption of fish must have doubled. He infers from this, that the profits of the fisherman and those engaged in the trade, must also have doubled, and that the income of the country must have increased, by the whole amount of these increased profits; and by giving a stimulus to accumulation, must have increased the resources of the state.[18] Without calling in question the policy, which dictated this alteration of the tax, I may be permitted to doubt whether it gave any great stimulus to accumulation. If the profits of the fisherman and others engaged in the trade, were doubled in consequence of more fish being consumed, capital and labour must have been withdrawn from other occupations to engage them in this particular trade. But in those occupations capital and labour were productive of profits, which must have been given up when they were withdrawn. The ability of the country to accumulate was only increased by the difference between the profits obtained in the business in which the capital was newly engaged, and those obtained in that from which it was withdrawn. Whether taxes be taken from revenue or capital, they diminish the taxable commodities of the state. If I cease to expend 100_l._ on wine, because by paying a tax of that amount I have enabled Government to expend 100_l._ instead of expending it myself, one hundred pounds worth of goods are necessarily withdrawn from the list of taxable commodities. If the revenue of the individuals of a country be 10 millions, they will have at least 10 millions worth of taxable commodities. If by taxing some, one million be transferred to the disposal of Government, their revenue will still be nominally 10 millions, but they will remain with only nine millions worth of taxable commodities. There are no circumstances under which taxation does not abridge the enjoyments of those on whom the taxes ultimately fall, and no means by which those enjoyments can again be extended, but the accumulation of new revenue. Taxation can never be so equally applied, as to operate in the same proportion on the value of all commodities, and still to preserve them at the same relative value. It frequently operates very differently from the intention of the legislature, by its indirect effects. We have already seen, that the effect of a direct tax on corn and raw produce, is, if money be also produced in the country, to raise the price of all commodities, in proportion as raw produce enters into their composition, and thereby to destroy the natural relation which previously existed between them. Another indirect effect is, that it raises wages, and lowers the rate of profits; and we have also seen, in another part of this work, that the effect of a rise of wages, and a fall of profits, is to lower the money prices of those commodities which are produced in a greater degree by the employment of fixed capital. That a commodity when taxed can no longer be so profitably exported, is so well understood, that a drawback is frequently allowed on its exportation, and a duty laid on its importation. If these drawbacks and duties be accurately laid, not only on the commodities themselves, but on all which they may indirectly affect, then indeed there will be no disturbance in the value of the precious metals. Since we could as readily export a commodity after being taxed as before, and since no peculiar facility would be given to importation, the precious metals would not, more than before, enter into the list of exportable commodities. Of all commodities, none are perhaps so proper for taxation, as those which either by the aid of nature or art, are produced with peculiar facility. With respect to foreign countries, such commodities may be classed under the head of those which are not regulated in their price by the quantity of labour bestowed, but rather by the caprice, the tastes, and the power of the purchasers. If England had more productive tin mines than other countries, or if from superior machinery or fuel she had peculiar facilities in manufacturing cotton goods, the prices of tin, and of cotton goods would still in England be regulated by the comparative quantity of labour and capital required to produce them, and the competition of our merchants would make them very little dearer to the foreign consumer. Our advantage in the production of these commodities might be so decided, that probably they could bear a very great additional price in the foreign market, without very materially diminishing their consumption. This price they never could attain, whilst competition was free at home, by any other means but by a tax on their exportation. This tax would fall wholly on foreign consumers, and part of the expenses of the Government of England would be defrayed, by a tax on the land and labour of other countries. The tax on tea, which at present is paid by the people of England, and goes to aid the expenses of the Government of England, might, if laid in China, on the exportation of the tea, be diverted to the payment of the expenses of the Government of China. Taxes on luxuries have some advantage over taxes on necessaries. They are generally paid from income, and therefore do not diminish the productive capital of the country. If wine were much raised in price in consequence of taxation, it is probable that a man would rather forego the enjoyments of wine, than make any important encroachments on his capital, to be enabled to purchase it. They are so identified with price, that the contributor is hardly aware that he is paying a tax. But they have also their disadvantages. First, they never reach capital, and on some extraordinary occasions it may be expedient that even capital should contribute towards the public exigencies; and secondly, there is no certainty as to the amount of the tax, for it may not reach even income. A man intent on saving will exempt himself from a tax on wine, by giving up the use of it. The income of the country may be undiminished, and yet the state may be unable to raise a shilling by the tax. Whatever habit has rendered delightful, will be relinquished with reluctance, and will continue to be consumed notwithstanding a very heavy tax; but this reluctance has its limits, and experience every day demonstrates that an increase in the nominal amount of taxation, often diminishes the produce. One man will continue to drink the same quantity of wine, though the price of every bottle should be raised three shillings, who would yet relinquish the use of wine rather than pay four. Another will be content to pay four, yet refuse to pay five shillings. The same may be said of other taxes on luxuries: many would pay a tax of 5_l._ for the enjoyment which a horse affords, who would not pay 10_l._ or 20_l._ It is not because they cannot pay more, that they give up the use of wine and of horses, but because they will not pay more. Every man has some standard in his own mind by which he estimates the value of his enjoyments, but that standard is as various as the human character. A country whose financial situation has become extremely artificial, by the mischievous policy of accumulating a large national debt, and a consequently enormous taxation, is particularly exposed to the inconvenience attendant on this mode of raising taxes. After visiting with a tax the whole round of luxuries; after laying horses, carriages, wine, servants, and all the other enjoyments of the rich, under contribution; a minister is disposed to conclude that the country is arrived at the maximum of taxation, because by increasing the rate, he cannot increase the amount of any one of these taxes. But in this conclusion he will not be always correct, for it is very possible that such a country could bear a very great addition to its burdens without infringing on the integrity of its capital. CHAPTER XV. TAXES ON OTHER COMMODITIES THAN RAW PRODUCE. On the same principle that a tax on corn would raise the price of corn, a tax on any other commodity would raise the price of that commodity. If the commodity did not rise by a sum equal to the tax, it would not give the same profit to the producer which he had before, and he would remove his capital to some other employment. The taxing of all commodities, whether they be necessaries or luxuries, will, while money remains at an unaltered value, raise their prices by a sum at least equal to the tax.[19] A tax on the manufactured necessaries of the labourer would have the same effect on wages as a tax on corn, which differs from other necessaries only by being the first and most important on the list; and it would produce precisely the same effects on the profits of stock and foreign trade. But a tax on luxuries would have no other effect than to raise their price. It would fall wholly on the consumer, and could neither increase wages, nor lower profits. Taxes which are levied on a country for the purpose of supporting war, or for the ordinary expenses of the state, and which are chiefly devoted to the support of unproductive labourers, are taken from the productive industry of the country; and every saving which can be made from such expenses will be generally added to the income, if not to the capital of the contributors. When for the expenses of a year's war, twenty millions are raised by means of a loan, it is the twenty millions which are withdrawn from the productive capital of the nation. The million per annum which is raised by taxes to pay the interest of this loan, is merely transferred from those who pay it to those who receive it, from the contributor to the tax to the national creditor. The real expense is the twenty millions, and not the interest which must be paid for it.[20] Whether the interest be or be not paid, the country will neither be richer nor poorer. Government might at once have required the twenty millions in the shape of taxes; in which case it would not have been necessary to raise annual taxes to the amount of a million. This however would not have changed the nature of the transaction. An individual instead of being called upon to pay 100_l._ per annum, might have been obliged to pay 2000_l._ once for all. It might also have suited his convenience rather to borrow this 2000_l._, and to pay 100_l._ per annum for interest to the lender, than to spare the larger sum from his own funds. In one case it is a private transaction between A and B, in the other Government guarantees to B the payment of the interest to be equally paid by A. If the transaction had been of a private nature, no public record would be kept of it, and it would be a matter of comparative indifference to the country whether A faithfully performed his contract to B, or unjustly retained, the 100_l._ per annum in his own possession. The country would have a general interest in the faithful performance of a contract, but with respect to the national wealth, it would have no other interest than whether A or B would make this 100_l._ most productive, but on this question it would neither have the right nor the ability to decide. It might be possible, that if A retained it for his own use, he might squander it unprofitably, and if it were paid to B, he might add it to his capital, and employ it productively. And the converse would also be possible, B might squander it, and A might employ it productively. With a view to wealth only, it might be equally or more desirable that A should or should not pay it; but the claims of justice and good faith, a greater utility, are not to be compelled to yield to those of a less; and accordingly, if the state were called upon to interfere, the courts of justice would oblige A to perform his contract. A debt guaranteed by the nation, differs in no respect from the above transaction. Justice and good faith demand that the interest of the national debt should continue to be paid, and that those who have advanced their capitals for the general benefit, should not be required to forego their equitable claims, on the plea of expediency. But independently of this consideration, it is by no means certain, that political utility would gain any thing by the sacrifice of political integrity; it does by no means follow, that the party exonerated from the payment of the interest of the national debt would employ it more productively than those to whom indisputably it is due. By cancelling the national debt, one man's income might be raised from 1000_l._ to 1500_l._, but another man's would be lowered from 1500_l._ to 1000_l._ These two men's income now amount to 2500_l._, they would amount to no more then. If it be the object of Government to raise taxes, there would be precisely the same taxable capital and income in one case, as in the other. It is not then by the payment of the interest on the national debt that a country is distressed, nor is it by the exoneration from payment that it can be relieved. It is only by saving from income, and retrenching in expenditure, that the national capital can be increased; and neither the income would be increased, nor the expenditure diminished by the annihilation of the national debt. It is by the profuse expenditure of Government, and of individuals, and by loans, that a country is impoverished; every measure therefore which is calculated to promote public and private oeconomy will relieve the public distress; but it is error and delusion, to suppose that a real national difficulty can be removed, by shifting it from the shoulders of one class of the community, who justly ought to bear it, to the shoulders of another class, who upon every principle of equity ought to bear no more than their share. From what I have said, it must not be inferred that I consider the system of borrowing as the best calculated to defray the extraordinary expenses of the state. It is a system which tends to make us less thrifty--to blind us to our real situation. If the expenses of a war be 40 millions per annum, and the share which a man would have to contribute towards that annual expense were 100_l._, he would endeavour, on being at once called upon for his portion, to save speedily the 100_l._ from his income. By the system of loans he is called upon to pay only the interest of this 100_l._, or 5_l._ per annum, and considers that he does enough by saving this 5_l._ from his expenditure, and then deludes himself with the belief that he is as rich as before. The whole nation, by reasoning and acting in this manner, save only the interest of 40 millions, or two millions; and thus, not only lose all the interest or profit which 40 millions of capital, employed productively, would afford, but also 38 millions, the difference between their savings and expenditure. If, as I before observed, each man had to make his own loan, and contribute his full proportion to the exigencies of the state, as soon as the war ceased, taxation would cease, and we should immediately fall into a natural state of prices. Out of his private funds, A might have to pay to B interest for the money he borrowed of him during the war, to enable him to pay his quota of the expense; but with this the nation would have no concern. A country which has accumulated a large debt is placed in a most artificial situation; and although the amount of taxes, and the increased price of labour, may not, and I believe does not, place it under any other disadvantage with respect to foreign countries, except the unavoidable one of paying those taxes, yet it becomes the interest of every contributor to withdraw his shoulder from the burthen, and to shift this payment from himself to another; and the temptation to remove himself and his capital to another country, where he will be exempted from such burthens, becomes at last irresistible, and overcomes the natural reluctance which every man feels to quit the place of his birth, and the scene of his early associations. A country which has involved itself in the difficulties attending this artificial system, would act wisely by ransoming itself from them, at the sacrifice of any portion of its property which might be necessary to redeem its debt. That which is wise in an individual, is wise also in a nation. A man who has 10,000_l._, paying him an income of 500_l._, out of which he has to pay 100_l._ per annum towards the interest of the debt, is really worth only 8000_l._, and would be equally rich, whether he continued to pay 100_l._ per annum, or at once, and for only once, sacrificed 2000_l._ But where, it is asked, would be the purchaser of the property which he must sell to obtain this 2000_l._? The answer is plain: the national creditor, who is to receive this 2000_l._, will want an investment for his money, and will be disposed either to lend it to the landholder, or manufacturer, or to purchase from them a part of the property of which they have to dispose. To such an effect the stockholders themselves would largely contribute. Such a scheme has been often recommended, but we have, I fear, neither wisdom enough, nor virtue enough, to adopt it. It must however be admitted, that during peace, our unceasing efforts should be directed towards paying off that part of the debt which has been contracted during war; and that no temptation of relief, no desire of escape from present, and I hope temporary distresses, should induce us to relax in our attention to that great object. No sinking fund can be efficient for the purpose of diminishing the debt, if it be not derived from the excess of the public revenue over the public expenditure. It is to be regretted, that the sinking fund in this country is only such in name; for there is no excess of revenue above expenditure. It ought by economy, to be made what it is professed to be, a really efficient fund for the payment of the debt. If on the breaking out of any future war, we shall not have very considerably reduced our debt, one of two things must happen, either the whole expenses of that war must be defrayed by taxes raised from year to year, or we must, at the end of that war, if not before, submit to a national bankruptcy; not that we shall be unable to bear any large additions to the debt; it would be difficult to set limits to the powers of a great nation; but assuredly there are limits to the price, which in the form of perpetual taxation, individuals will submit to pay for the privilege merely of living in their native country. When a commodity is at a monopoly price, it is at the very highest price at which the consumers are willing to purchase it. Commodities are only at a monopoly price, when by no possible device their quantity can be augmented; and when therefore, the competition is wholly on one side--amongst the buyers. The monopoly price of one period may be much lower or higher than the monopoly price of another, because the competition amongst the purchasers must depend on their wealth, and their tastes and caprices. Those peculiar wines, which are produced in very limited quantity, and those works of art, which from their excellence or rarity, have acquired a fanciful value, will be exchanged for a very different quantity of the produce of ordinary labour, according as the society is rich or poor, as it possesses an abundance or scarcity of such produce, or as it may be in a rude or polished state. The exchangeable value therefore of a commodity which is at a monopoly price, is no where regulated by the cost of production. Raw produce is not at a monopoly price, because the market price of barley and wheat is as much regulated by their cost of production, as the market price of cloth and linen. The only difference is this, that one portion of the capital employed in agriculture regulates the price of corn, namely, that portion which pays no rent; whereas, in the production of manufactured commodities, every portion of capital is employed with the same results; and as no portion pays rent, every portion is equally a regulator of price: corn, and other raw produce, can be augmented too in quantity, by the employment of more capital on the land, and therefore they are not at a monopoly price. There is competition among the sellers, as well as amongst the buyers. This is not the case in the production of those rare wines, and those valuable specimens of art, of which we have been speaking; their quantity cannot be increased, and their price is limited only by the extent of the power and will of the purchasers. The rent of these vineyards may be raised beyond any moderately assignable limits, because no other land being able to produce such wines, none can be brought into competition with them. The corn and raw produce of a country, may indeed for a time sell at a monopoly price; but they can do so permanently only when no more capital can be profitably employed on the lands, and when, therefore, their produce cannot be increased. At such time, every portion of land in cultivation, and every portion of capital employed on the land will yield a rent, differing indeed in proportion to the difference in the return. At such a time too, any tax which may be imposed on the farmer, will fall on rent, and not on the consumer. He cannot raise the price of his corn, because, by the supposition, it is already at the highest price at which the purchasers will or can buy it. He will not be satisfied with a lower rate of profits, than that obtained by other capitalists, and, therefore, his only alternative will be to obtain a reduction of rent, or to quit his employment. Mr. Buchanan considers corn and raw produce as at a monopoly price, because they yield a rent: all commodities which yield a rent, he supposes must be at a monopoly price; and thence he infers, that all taxes on raw produce would fall on the landlord, and not on the consumer. "The price of corn," he says, "which always affords a rent, being in no respect influenced by the expenses of its production, those expenses must be paid out of the rent; and when they rise or fall, therefore, the consequence is not a higher or a lower price, but a higher or a lower rent. In this view, all taxes on farm servants, horses, or the implements of agriculture, are in reality land-taxes; the burden falling on the farmer during the currency of his lease, and on the landlord, when the lease comes to be renewed. In like manner all those improved implements of husbandry which save expense to the farmer, such as machines for threshing and reaping, whatever gives him easier access to the market, such as good roads, canals, and bridges, though they lessen the original cost of corn, do not lessen its market price. Whatever is saved by those improvements, therefore, belongs to the landlord as part of his rent." It is evident that if we yield to Mr. Buchanan the basis on which his argument is built, namely, that the price of corn always yields a rent, all the consequences which he contends for would follow of course. Taxes on the farmer would then fall not on the consumer but on rent; and all improvements in husbandry would increase rent: but I hope I have made it sufficiently clear, that until a country is cultivated in every part, and up to the highest degree, there is always a portion of capital employed on the land which yields no rent, and that it is this portion of capital, the result of which, as in manufactures, is divided between profits and wages, that regulates the price of corn. The price of corn then, which does not afford a rent, being influenced by the expenses of its production, those expenses cannot be paid out of rent. The consequence therefore of those expenses increasing, is a higher price, and not a lower rent.[21] It is remarkable that both Adam Smith and Mr. Buchanan, who entirely agree that taxes on raw produce, a land-tax, and tithes, all fall on the rent of land, and not on the consumers of raw produce, should nevertheless admit that taxes on malt would fall on the consumer of beer, and not on the rent of the landlord. Adam Smith's argument is so able a statement of the view which I take of the subject of the tax on malt, and every other tax on raw produce, that I cannot refrain from offering it to the attention of the reader. "The rent and profits of barley land must always be nearly equal to those of other equally fertile, and equally well cultivated land. If they were less, some part of the barley land would soon be turned to some other purpose; and if they were greater, more land would soon be turned to the raising of barley. When the ordinary price of any particular produce of land is at what may be called a monopoly price, a tax upon it necessarily reduces the rent and profit[22] of the land which grows it. A tax upon the produce of those precious vineyards, of which the wine falls so much short of the effectual demand, that its price is always above the natural proportion to that of other equally fertile, and equally well cultivated land, would necessarily reduce the rent and profit[22] of those vineyards. The price of the wines being already the highest that could be got for the quantity commonly sent to market, it could not be raised higher without diminishing that quantity; and the quantity could not be diminished without still greater loss, because the lands could not be turned to any other equally valuable produce. The whole weight of the tax, therefore, would fall upon the rent and profit;[23] properly upon the _rent_ of the vineyard." "But the ordinary price of barley has never been a monopoly price; and the rent and profit of barley land have never been above their natural proportion to those of other equally fertile and equally well cultivated land. The different taxes which have been imposed upon malt, beer, and ale, _have never lowered the price of barley_; have never reduced the rent and profit[24] of barley land. The price of malt to the brewer has constantly risen in proportion to the taxes imposed upon it; and those taxes, together with the different duties upon beer and ale, have constantly either raised the price, or, what comes to the same thing, reduced the quality of those commodities to the consumer. The final payment of those taxes has fallen constantly upon the consumer, and not upon the producer." On this passage Mr. Buchanan remarks, "A duty on malt never could reduce the price of barley, because, unless as much could be made of barley by malting it as by selling it unmalted, the quantity required would not be brought to market. It is clear, therefore, that the price of malt must rise in proportion to the tax imposed on it, as the demand could not otherwise be supplied. The price of barley, however, is just as much a monopoly price as that of sugar; they both yield a rent, and the market price of both has equally lost all connexion with the original cost." It appears then to be the opinion of Mr. Buchanan, that a tax on malt would raise the price of malt, but that a tax on the barley from which malt is made, would not raise the price of barley; and therefore, if malt is taxed, the tax will be paid by the consumer; if barley is taxed, it will be paid by the landlord, as he will receive a diminished rent. According to Mr. Buchanan then, barley is at a monopoly price, at the highest price which the purchasers are willing to give for it; but malt made of barley is not at a monopoly price, and consequently it can be raised in proportion to the taxes that may be imposed upon it. This opinion of Mr. Buchanan of the effects of a tax on malt appears to me to be in direct contradiction to the opinion he has given of a similar tax, a tax on bread. "A tax on bread will be ultimately paid, not by a rise of price, but by a reduction of rent."[25] If a tax on malt would raise the price of beer, a tax on bread must raise the price of bread. The following argument of M. Say is founded on the same views as Mr. Buchanan's: "The quantity of wine or corn which a piece of land will produce, will remain nearly the same, whatever may be the tax with which it is charged. The tax may take away a half, or even three-fourths of its net produce, or of its rent if you please, yet the land would nevertheless be cultivated for the half or the quarter not absorbed by the tax. The rent, that is to say the landlord's share, would merely be somewhat lower. The reason of this will be perceived, if we consider, that in the case supposed, the quantity of produce obtained from the land, and sent to market, will remain nevertheless the same. On the other hand the motives on which the demand for the produce is founded continue also the same. "Now, if the quantity of produce supplied, and the quantity demanded, necessarily continue the same, notwithstanding the establishment or the increase of the tax, the price of that produce will not vary; and if the price do not vary, the consumer will not pay the smallest portion of this tax. "Will it be said that the farmer, he who furnishes labour and capital, will, jointly with the landlord, bear the burden of this tax? certainly not; because the circumstance or the tax has not diminished the number of farms to be let, nor increased the number of farmers. Since in this instance also the supply and demand remain the same, the rent of farms must also remain the same. The example of the manufacturer of salt, who can only make the consumers pay a portion of the tax, and that of the landlord who cannot reimburse himself in the smallest degree, prove the error of those who maintain, in opposition to the economists, that all taxes fall ultimately on the consumer."--Vol. ii. p. 338. If the tax "took away half, or even three-fourths of the net produce of the land," and the price of produce did not rise, how could those farmers obtain the usual profits of stock who paid very moderate rents, having that quality of land which required a much larger proportion of labour to obtain a given result, than land of a more fertile quality? If the whole rent were remitted, they would still obtain lower profits than those in other trades, and would therefore not continue to cultivate their land, unless they could raise the price of its produce. If the tax fell on the farmers, there would be fewer farmers disposed to hire farms; if it fell on the landlord, many farms would not be let at all, for they would afford no rent. But from what fund would those pay the tax who produce corn without paying any rent? It is quite clear that the tax must fall on the consumer. How would such land, as M. Say describes in the following passage, pay a tax of one-half or three-fourths of its produce? "We see in Scotland poor lands thus cultivated by the proprietor, and which could be cultivated by no other person. Thus too we see in the interior provinces of the United States vast and fertile lands, the revenue of which alone would not be sufficient for the maintenance of the proprietor. These lands are cultivated nevertheless, but it must be by the proprietor himself, or, in other words, he must add to the rent, which is little or nothing, the profits of his capital and industry, to enable him to live in competence. It is well known that land, though cultivated, yields no revenue to the landlord when no farmer will be willing to pay a rent for it: which is a proof that such land will give only the profits of the capital and of the industry necessary for its cultivation."--_Say_, Vol. ii. p. 127. CHAPTER XVI. POOR RATES. We have seen that taxes on raw produce, and on the profits of the farmer, will fall on the consumer of raw produce; since unless he had the power of remunerating himself by an increase of price, the tax would reduce his profits below the general level of profits, and would urge him to remove his capital to some other trade. We have seen too that he could not, by deducting it from his rent, transfer the tax to his landlord; because that farmer who paid no rent, would, equally with the cultivator of better land, be subject to the tax, whether it were laid on raw produce, or on the profits of the farmer. I have also attempted to shew, that if a tax were general, and affected equally all profits, whether manufacturing or agricultural, it would not operate either on the price of goods or raw produce, but would be immediately, as well as ultimately, paid by the producers. A tax on rent, it has been observed, would fall on the landlord only, and could not by any means be made to devolve on the tenant. The poor rate is a tax which partakes of the nature of all these taxes, and under different circumstances falls on the consumer of raw produce and goods, on the profits of stock, and on the rent of land. It is a tax which falls with peculiar weight on the profits of the farmer, and therefore may be considered as affecting the price of raw produce. According to the degree in which it bears on manufacturing and agricultural profits equally, it will be a general tax on the profits of stock, and will occasion no alteration in the price of raw produce and manufactures. In proportion to the farmer's inability to remunerate himself, by raising the price of raw produce, for that portion of the tax which peculiarly affects him, it will be a tax on rent, and will be paid by the landlord. To know then the operation of the poor rate at any particular time, we must ascertain whether at that time it affects in an equal or unequal degree the profits of the farmer and manufacturer; and also whether the circumstances be such as to afford to the farmer the power of raising the price of raw produce. The poor rates are professed to be levied on the farmer in proportion to his rent; and accordingly, the farmer who paid a very small rent, or no rent at all, should pay little or no tax. If this were true, poor rates, as far as they are paid by the agricultural class, would entirely fall on the landlord, and could not be shifted to the consumer of raw produce. But I believe that is not true; the poor rate is not levied according to the rent which a farmer actually pays to his landlord; it is proportioned to the annual value of his land, whether that annual value be given to it by the capital of the landlord or of the tenant. If two farmers rented land of two different qualities in the same parish, the one paying a rent of 100_l._ per annum for 50 acres of the most fertile land, and the other the same sum of 100_l._ for 1000 acres of the least fertile land, they would pay the same amount of poor rates, if neither of them attempted to improve the land; but if the farmer of the poor land, presuming on a very long lease, should be induced at a great expense to improve the productive powers of his land, by manuring, draining, fencing, &c., he would contribute to the poor rates, not in proportion to the actual rent paid to the landlord, but to the actual annual value of the land. The rate might equal or exceed the rent; but whether it did or not, no part of this rate would be paid by the landlord. It would have been previously calculated upon by the tenant; and if the price of produce were not sufficient to compensate him for all his expenses, together with this additional charge for poor rates, his improvements would not have been undertaken. It is evident then that the tax in this case is paid by the consumer; for if there had been no rate, the same improvements would have been undertaken, and the usual and general rate of profits would have been obtained on the stock employed, with a lower price of corn. Nor would it make the slightest difference in this question, if the landlord had made these improvements himself, and had in consequence raised his rent from 100_l._ to 500_l._; the rate would be equally charged to the consumer; for whether he should expend a large sum of money on his land, would depend on the rent, or what is called rent, which he would receive as a remuneration for it; and this again would depend on the price of corn, or other raw produce, being sufficiently high not only to cover this additional rent, but also the rate to which the land would be subject. But if at the same time all manufacturing capital contributed to the poor rates, in the same proportion as the capital expended by the farmer or landlord in improving the land, then it would no longer be a partial tax on the profits of the farmer's or landlord's capital, but a tax on the capital of all producers; and therefore it could no longer be shifted either on the consumer of raw produce or on the landlord. The farmer's profits would feel the effect of the rate no more than those of the manufacturer; and the former could not, any more than the latter, plead it as a reason for an advance in the price of his commodity. It is not the absolute, but the relative fall of profits, which prevents capital from being employed in any particular trade: it is the difference of profit which sends capital from one employment to another. It must be acknowledged however, that in the actual state of the poor rates, a much larger amount falls on the farmer than on the manufacturer, in proportion to their respective profits; the farmer being rated according to the actual productions which he obtains, the manufacturer only according to the value of the buildings in which he works, without any regard to the value of the machinery, labour, or stock, which he may employ. From this circumstance it follows, that the farmer will be enabled to raise the price of his produce by this whole difference. For since the tax falls unequally, and peculiarly on his profits, he would have less motive to devote his capital to the land, than to employ it in some other trade, unless the price of raw produce were raised. If on the contrary, the rate had fallen with greater weight on the manufacturer than on the farmer, he would have been enabled to raise the price of his goods by the amount of the difference, for the same reason that the farmer, under similar circumstances, could raise the price of raw produce. In a society therefore, which is extending its agriculture, when poor rates fall with peculiar weight on the land, they will be paid partly by the employers of capital in a diminution of the profits of stock, and partly by the consumer of raw produce in its increased price. In such a state of things, the tax may, under some circumstances, be even advantageous rather than injurious to landlords; for if the tax paid by the cultivator of the worst land, be higher in proportion to the quantity of produce obtained, than that paid by the farmers of the more fertile lands, the rise in the price of corn, which will extend to all corn, will more than compensate the latter for the tax. This advantage will remain with them during the continuance of their leases, but it will afterwards be transferred to their landlords. This then would be the effect of poor rates in an advancing society; but in a stationary, or in a retrograde country, so far as capital could not be withdrawn from the land, if a further rate were levied for the support of the poor, that part of it which fell on agriculture would be paid, during the current leases, by the farmers, but at the expiration of those leases it would almost wholly fall on the landlords. The farmer, who during his former lease, had expended his capital in improving his land, if it were still in his own hands, would be rated for this new tax according to the new value which the land had acquired by its improvement, and this amount he would be obliged to pay during his lease, although his profits might thereby be reduced below the general rate of profits; for the capital which he has expended may be so incorporated with the land, that it cannot be removed from it. If indeed he, or his landlord, (should it have been expended by him) were able to remove this capital, and thereby reduce the annual value of the land, the rate would proportionably fall, and as the produce would at the same time be diminished, its price would rise; he would be compensated for the tax, by charging it to the consumer, and no part would fall on rent; but this is impossible, at least with respect to some proportion of the capital, and consequently in that proportion the tax will be paid by the farmers during their leases, and by landlords at their expiration. This additional tax, as far as it fell unequally on manufacturers, would under such circumstances be added to the price of their goods; for there can be no reason why their profits should be reduced below the general rate of profits, when their capitals might be easily removed to agriculture.[26] CHAPTER XVII. ON SUDDEN CHANGES IN THE CHANNELS OF TRADE. A great manufacturing country is peculiarly exposed to temporary reverses and contingencies, produced by the removal of capital from one employment to another. The demands for the produce of agriculture are uniform, they are not under the influence of fashion, prejudice, or caprice. To sustain life, food is necessary, and the demand for food must continue in all ages, and in all countries. It is different with manufactures; the demand for any particular manufactured commodity, is subject not only to the wants, but to the tastes and caprice of the purchasers. A new tax too may destroy the comparative advantage which a country before possessed in the manufacture of a particular commodity; or the effects of war may so raise the freight and insurance on its conveyance, that it can no longer enter into competition with the home manufacture of the country to which it was before exported. In all such cases, considerable distress, and no doubt some loss, will be experienced by those who are engaged in the manufacture of such commodities; and it will be felt not only at the time of the change, but through the whole interval during which they are removing their capitals, and the labour which they can command, from one employment to another. Nor will distress be experienced in that country alone where such difficulties originate, but in the countries to which its commodities were before exported. No country can long import unless it also exports, or can long export unless it also imports. If then any circumstance should occur, which should permanently prevent a country from importing the usual amount of foreign commodities, it will necessarily diminish the manufacture of some of those commodities which were usually exported; and although the total value of the productions of the country will probably be but little altered, since the same capital will be employed, yet they will not be equally abundant and cheap; and considerable distress will be experienced through the change of employments. If by the employment of 10,000_l._ in the manufacture of cotton goods for exportation, we imported annually 3000 pair of silk stockings of the value of 2000_l._, and by the interruption of foreign trade we should be obliged to withdraw this capital from the manufacture of cotton, and employ it ourselves in the manufacture of stockings, we should still obtain stockings of the value of 2000_l._ provided no part of the capital were destroyed; but instead of having 3000 pair, we might only have 2,500. In the removal of the capital from the cotton to the stocking trade, much distress might be experienced, but it would not considerably impair the value of the national property, although it might lessen the quantity of our annual productions. The commencement of war after a long peace, or of peace after a long war, generally produces considerable distress in trade. It changes in a great degree the nature of the employments to which the respective capitals of countries were before devoted; and during the interval while they are settling in the situations which new circumstances have made the most beneficial, much fixed capital is unemployed, perhaps wholly lost, and labourers are without full employment. The duration of this distress will be longer or shorter according to the strength of that disinclination, which most men feel to abandon that employment of their capital to which they have long been accustomed. It is often protracted too by the restrictions and prohibitions, to which the absurd jealousies which prevail between the different states of the commercial commonwealth give rise. The distress which proceeds from a revulsion of trade, is often mistaken for that which accompanies a diminution of the national capital, and a retrograde state of society; and it would perhaps be difficult to point out any marks by which they may be accurately distinguished. When, however, such distress immediately accompanies a change from war to peace, our knowledge of the existence of such a cause will make it reasonable to believe, that the funds for the maintenance of labour have rather been diverted from their usual channel than materially impaired, and that after temporary suffering, the nation will again advance in prosperity. It must be remembered too that the retrograde condition is always an unnatural state of society. Man from youth grows to manhood, then decays, and dies; but this is not the progress of nations. When arrived to a state of the greatest vigour, their further advance may indeed be arrested, but their natural tendency is to continue for ages, to sustain undiminished their wealth, and their population. In rich and powerful countries where large capitals are invested in machinery, more distress will be experienced from a revulsion in trade, than in poorer countries where there is proportionally a much smaller amount of fixed, and a much larger amount of circulating capital, and where consequently more work is done by the labour of men. It is not so difficult to withdraw a circulating as a fixed capital, from any employment in which it may be engaged. It is often impossible to divert the machinery which may have been erected for one manufacture, to the purposes of another; but the clothing, the food, and the lodging of the labourer in one employment may be devoted to the support of the labourer in another, or the same labourer may receive the same food, clothing, and lodging, whilst his employment is changed. This, however, is an evil to which a rich nation must submit; and it would not be more reasonable to complain of it, than it would be in a rich merchant to lament that his ship was exposed to the dangers of the sea, whilst his poor neighbour's cottage was safe from all such hazard. From contingencies of this kind, though in an inferior degree, even agriculture is not exempted. War, which in a commercial country, interrupts the commerce of states, frequently prevents the exportation of corn from countries where it can be produced with little cost, to others not so favourably situated. Under such circumstances an unusual quantity of capital is drawn to agriculture, and the country which before imported becomes independent of foreign aid. At the termination of the war, the obstacles to importation are removed, and a competition destructive to the home-grower commences, from which he is unable to withdraw, without the sacrifice of a great part of his capital. The best policy of the state would be, to lay a tax, decreasing in amount from time to time, on the importation of foreign corn, for a limited number of years, in order to afford to the home-grower an opportunity to withdraw his capital gradually from the land. In so doing the country might not be making the most advantageous distribution of its capital, but the temporary tax to which it was subjected, would be for the advantage of a particular class, the distribution of whose capital was highly useful in procuring a supply of food when importation was stopped. If such exertions in a period of emergency were followed by risk of ruin on the termination of the difficulty, capital would shun such an employment. Besides the usual profits of stock, farmers would expect to be compensated for the risk which they incurred of a sudden influx of corn, and therefore the price to the consumer, at the seasons when he most required a supply, would be enhanced, not only by the superior cost of growing corn at home, but also by the insurance which he would have to pay, in the price, for the peculiar risk to which this employment of capital was exposed. Notwithstanding then, that it would be more productive of wealth to the country, at whatever sacrifice of capital it might be done, to allow the importation of cheap corn, it would perhaps be advisable to charge it with a duty for a few years. In examining the question of rent, we found, that with every increase in the supply of corn, and with the consequent fall of its price, capital would be withdrawn from the poorer land; and land of a better description, which would then pay no rent, would become the standard by which the natural price of corn would be regulated. At 4_l._ per quarter, land of an inferior quality, which may be designated by No. 6, might be cultivated; at 3_l._ 10_s._ No. 5; at 3_l._ No. 4, and so on. If corn, in consequence of permanent abundance, fell to 3_l._ 10_s._ the capital employed on No. 6 would cease to be employed; for it was only when corn was at 4_l._ that it could obtain the general profits, even without paying rent: it would therefore be withdrawn to manufacture those commodities with which all the corn grown on No. 6 would be purchased and imported. In this employment it would necessarily be more productive to its owner, or it would not be withdrawn from the other; for if he could obtain more corn by growing it on land for which he paid no rent, than by manufacturing a commodity with which he purchased it, its price could not be under 4_l._ It has, however, been said that capital cannot be withdrawn from the land; that it takes the form of expenses, which cannot be recovered, such as manuring, fencing, draining, &c., which are necessarily inseparable from the land. This is in some degree true; but that capital which consists of cattle, sheep, hay and corn ricks, carts, &c. may be withdrawn; and it always becomes a matter of calculation whether these shall continue to be employed on the land, notwithstanding the low price of corn, or whether they shall be sold, and their value transferred to another employment. Suppose, however, the fact to be as stated, and that no part of the capital could be withdrawn; the farmer would continue to raise corn, and precisely the same quantity too, at whatever price it might sell; for it could not be his interest to produce less, and if he did not so employ his capital, he would obtain from it no return whatever. Corn could not be imported, because he would sell it lower than 3_l._ 10_s._ rather than not sell it at all, and by the supposition the importer could not sell it under that price. Although then the farmers, who cultivated land of this quality, would undoubtedly be injured by the fall in the exchangeable value of the commodity which they produced,--how would the country be affected? We should have precisely the same quantity of every commodity produced, but raw produce and corn would sell at a much cheaper price. The capital of a country consists of its commodities, and as these would be the same as before, reproduction would go on at the same rate. This low price of corn would however only afford the usual profits of stock to the land, No. 5, which would then pay no rent, and the rent of all better land would fall: wages would also fall, and profits would rise. However low the price of corn might fall; if capital could not be removed from the land, and the demand did not increase, no importation would take place; for the same quantity as before would be produced at home. Although there would be a different division of the produce, and some classes would be benefited, and others injured, the aggregate of production would be precisely the same, and the nation collectively would neither be richer nor poorer. But there is this advantage always resulting from a relatively low price of corn,--that the division of the actual production is more likely to increase the fund for the maintenance of labour, inasmuch as more will be allotted, under the name of profit, to the productive class, a less, under the name of rent, to the unproductive class. This is true, even if the capital cannot be withdrawn from the land, and must be employed there, or not be employed at all: but if great part of the capital could be withdrawn, as it evidently could, it will be only withdrawn, when it will yield more to the owner by being withdrawn than by being suffered to remain where it was; it will only be withdrawn then, when it can elsewhere be employed more productively both for the owner and the public. He consents to sink that part of his capital which cannot be separated from the land, because with that part which he can take away, he can obtain a greater value, and a greater quantity of raw produce, than by not sinking this part of the capital. His case is precisely similar to that of a man who has erected machinery in his manufactory at a great expense, machinery which is afterwards so much improved upon by more modern inventions, that the commodities manufactured by him very much sink in value. It would be entirely a matter of calculation with him whether he should abandon the old machinery, and erect the more perfect, _losing all the value of the old_, or continue to avail himself of its comparatively feeble powers. Who, under such circumstances, would exhort him to forego the use of the better machinery, because it would deteriorate or annihilate the value of the old? Yet this is the argument of those who would wish us to prohibit the importation of corn, because it will deteriorate or annihilate that part of the capital of the farmer which is for ever sunk in land. They do not see that the end of all commerce is to increase production, and that by increasing production, though you may occasion partial loss, you increase the general happiness. To be consistent, they should endeavour to arrest all improvements in agriculture and manufactures, and all inventions of machinery; for though these contribute to general abundance, and therefore to the general happiness, they never fail, at the moment of their introduction, to deteriorate or annihilate a part of the existing capital of farmers and manufacturers. Agriculture like all other trades, and particularly in a commercial country, is subject to a re-action, which, in an opposite direction, succeeds the action of a strong stimulus. Thus, when war interrupts the importation of corn, its consequent high price attracts capital to the land, from the large profits which such an employment of it affords; this will probably cause more capital to be employed, and more raw produce to be brought to market than the demands of the country require. In such case, the price of corn will fall from the effects of a glut, and much agricultural distress will be produced, till the average supply is brought to a level with the average demand. CHAPTER XVIII. VALUE AND RICHES, THEIR DISTINCTIVE PROPERTIES. "A man is rich or poor," says Adam Smith, "according to the degree in which he can afford to enjoy the necessaries, conveniences, and amusements of human life." Value then essentially differs from riches, for value depends not on abundance, but on the difficulty or facility of production. The labour of a million of men in manufactures, will always produce the same value, but will not always produce the same riches. By the invention of machinery, by improvements in skill, by a better division of labour, or by the discovery of new markets, where more advantageous exchanges may be made, a million of men may produce double, or treble the amount of riches, of "necessaries, conveniences, and amusements," in one state of society, that they could produce in another, but they will not on that account add any thing to value; for every thing rises or falls in value, in proportion to the facility or difficulty of producing it, or in other words, in proportion to the quantity of labour employed on its production. Suppose with a given capital, the labour of a certain number of men produced 1000 pair of stockings, and that by inventions in machinery, the same number of men can produce 2000 pair, or that they can continue to produce 1000 pair, and can produce besides 500 hats; then the value of the 2000 pair of stockings; or of the 1000 pair of stockings, and 500 hats, will be neither more nor less than that of the 1000 pair of stockings before the introduction of machinery; for they will be the produce of the same quantity of labour. But the value of the general mass of commodities will nevertheless be diminished; for although the value of the increased quantity produced in consequence of the improvement will be the same exactly as the value would have been of the less quantity that would have been produced, had no improvement taken place, an effect is also produced on the portion of goods still unconsumed, which were manufactured previously to the improvement; the value of those goods will be reduced, inasmuch as they must fall to the level, quantity for quantity, of the goods produced under all the advantages of the improvement: and the society will, notwithstanding the increased quantity of its commodities, notwithstanding its augmented riches, and its augmented means of enjoyment, have a less amount of value. By constantly increasing the facility of production, we constantly diminish the value of some of the commodities before produced, though by the same means we not only add to the national riches, but also to the power of future production. Many of the errors in political economy have arisen from errors on this subject, from considering an increase of riches, and an increase of value, as meaning the same thing, and from unfounded notions as to what constituted a standard measure of value. One man considers money as a standard of value, and a nation grows richer or poorer, according to him, in proportion as its commodities of all kinds can exchange for more or less money. Others represent money as a very convenient medium for the purpose of barter, but not as a proper measure by which to estimate the value of other things: the real measure of value according to them is corn,[27] and a country is rich or poor, according as its commodities will exchange for more or less corn. There are others again, who consider a country rich or poor, according to the quantity of labour that it can purchase.[28] But why should gold, or corn, or labour, be the standard measure of value, more than coals or iron?--more than cloth, soap, candles, and the other necessaries of the labourer?--why, in short, should any commodity, or all commodities together, be the standard, when such a standard is itself subject to fluctuations in value? Corn, as well as gold, may from difficulty or facility of production, vary 10, 20, or 30 per cent., relatively to other things; why should we always say, that it is those other things which have varied, and not the corn? That commodity is alone invariable, which at all times requires the same sacrifice of toil and labour to produce it. Of such a commodity we have no knowledge, but we may hypothetically argue and speak about it, as if we had; and may improve our knowledge of the science, by shewing distinctly the absolute inapplicability of all the standards which have been hitherto adopted. But supposing either of these to be a correct standard of value, still it would not be a standard of riches, for riches do not depend on value. A man is rich or poor, according to the abundance of necessaries and luxuries, which he can command; and whether the exchangeable value of these for money, for corn, or for labour, be high or low, they will equally contribute to the enjoyment of their possessor. It is through confounding the ideas of value and wealth, or riches, that it has been asserted, that by diminishing the quantity of commodities, that is to say, of the necessaries, conveniences, and enjoyments of human life, riches may be increased. If value were the measure of riches this could not be denied, because by scarcity the value of commodities is raised; but if Adam Smith be correct, if riches consist in necessaries and enjoyments, then they cannot be increased by a diminution of quantity. It is true, that the man in possession of a scarce commodity is richer, if by means of it he can command more of the necessaries and enjoyments of human life; but as the general stock out of which each man's riches are drawn, is diminished in quantity, by all that any individual takes from it, other men's shares must necessarily be reduced in proportion as this favoured individual is able to appropriate a greater quantity to himself. Let water become scarce, says Lord Lauderdale, and be exclusively possessed by an individual, and you will increase his riches, because water will then have value; and if wealth be the aggregate of individual riches, you will by the same means also increase wealth. You undoubtedly will increase the riches of this individual, but inasmuch as the farmer must sell a part of his corn, the shoemaker a part of his shoes, and all men give up a portion of their possessions for the sole purpose of supplying themselves with water, which they before had for nothing, they are poorer by the whole quantity of commodities which they are obliged to devote to this purpose, and the proprietor of water is benefited precisely by the amount of their loss. The same quantity of water, and the same quantity of commodities, are enjoyed by the whole society, but they are differently distributed. This is however supposing rather a monopoly of water than a scarcity of it. If it should be scarce, then the riches of the country and of individuals would be actually diminished, inasmuch as it would be deprived of a portion of one of its enjoyments. The farmer would not only have less corn to exchange for the other commodities which might be necessary or desirable to him, but he and every other individual would be abridged in the enjoyment of one of the most essential of their comforts. Not only would there be a different distribution of riches, but an actual loss of wealth. It may be said then of two countries possessing precisely the same quantity of all the necessaries and comforts of life, that they are equally rich, but the value of their respective riches would depend on the comparative facility or difficulty with which they were produced. For if an improved piece of machinery should enable us to make two pair of stockings, instead of one, without additional labour, double the quantity would be given in exchange for a yard of cloth. If a similar improvement be made in the manufacture of cloth, stockings and cloth will exchange in the same proportions as before, but they will both have fallen in value; for in exchanging them for hats, for gold, or other commodities in general, twice the former quantity must be given. Extend the improvement to the production of gold, and every other commodity; and they will all regain their former proportions. There will be double the quantity of commodities annually produced in the country, and therefore the wealth of the country will be doubled, but this wealth will not have increased in value. Although Adam Smith has given the correct description of riches, which I have more than once noticed, he afterwards explains them differently, and says, "that a man must be rich or poor according to the quantity of labour which he can afford to purchase." Now this description differs essentially from the other, and is certainly incorrect; for suppose the mines were to become more productive, so that gold and silver fell in value, from the greater facility of their production; or that velvets were to be manufactured with so much less labour than before, that they fell to half their former value; the riches of all those who purchased those commodities would be increased: one man might increase the quantity of his plate, another might buy double the quantity of velvet; but with the possession of this additional plate, and velvet, they could employ no more labour than before; because as the exchangeable value of velvet and of plate would be lowered, they must part with proportionally more of these species of riches to purchase a day's labour. Riches then cannot be estimated by the quantity of labour which they can purchase. From what has been said, it will be seen that the wealth of a country may be increased in two ways: it may be increased by employing a greater portion of revenue in the maintenance of productive labour,--which will not only add to the quantity, but to the value of the mass of commodities; or it may be increased, without employing any additional quantity of labour, by making the same quantity more productive,--which will add to the abundance, but not to the value of commodities. In the first case, a country would not only become rich, but the value of its riches would increase. It would become rich by parsimony; by diminishing its expenditure on objects of luxury and enjoyment; and employing those savings in reproduction. In the second case, there will not necessarily be either any diminished expenditure on luxuries and enjoyments, or any increased quantity of productive labour employed, but with the same labour more would be produced; wealth would increase, but not value. Of these two modes of increasing wealth, the last must be preferred, since it produces the same effect without the privation and diminution of enjoyments, which can never fail to accompany the first mode. Capital is that part of the wealth of a country which is employed with a view to future production, and may be increased in the same manner as wealth. An additional capital will be equally efficacious in the production of future wealth, whether it be obtained from improvements in skill and machinery, or from using more revenue reproductively; for wealth always depends on the quantity of commodities produced, without any regard to the facility with which the instruments employed in production may have been procured. A certain quantity of clothes and provisions will maintain and employ the same number of men, and will therefore procure the same quantity of work to be done, whether they be produced by the labour of 100 or of 200 men; but they will be of twice the value if 200 have been employed on their production. M. Say appears to me to have been singularly unfortunate in his definition of riches and value in the first chapter of his excellent work: the following is the substance of his reasoning: riches, he observes, consist only of things which have a value in themselves: riches are great, when the sum of the values of which they are composed is great. They are small when the sum of their values is small. Two things having an equal value, are riches of equal amount. They are of equal value, when by general consent they are freely exchanged for each other. Now, if mankind attach value to a thing, it is on account of the _uses_ to which it is applicable. This faculty, which certain things have, of satisfying the various wants of mankind, I call utility. To create objects that have a value of any kind is to create riches, since the utility of things is the first foundation of their value, and it is the value of things which constitutes riches. But we do not create objects: all we can do is to reproduce matter under another form--we can give it utility. Production then is a creation, not of matter but of utility, and it is measured by the value arising from the utility of the object produced. The utility of any object, according to general estimation, is pointed out by the quantity of other commodities for which it will exchange. This valuation, arising from the general estimate formed by society, constitutes what Adam Smith calls value in exchange; what Turgot calls appreciable value; and what we may more briefly designate by the term _value_. Thus far M. Say, but in his account of value and riches he has confounded two things which ought always to be kept separate, and which are called by Adam Smith, value in use and value in exchange. If by an improved machine I can, with the same quantity of labour, make two pair of stockings instead of one, I in no way impair the _utility_ of one pair of stockings, though I diminish their value. If then I had precisely the same quantity of coats, shoes, stockings, and all other things, as before, I should have precisely the same quantity of useful objects, and should therefore be equally rich, if utility were the measure of riches; but I should have a less amount of value, for my stockings would be of only half their former value. Utility then is not the measure of exchangeable value. If we ask M. Say in what riches consist, he tells us in the possession of objects having value. If we then ask him what he means by value, he tells us that things are valuable in proportion as they possess utility. If again we ask him to explain to us by what means we are to judge of the utility of objects, he answers, by their value. Thus then the measure of value is utility, and the measure of utility is value. M. Say, in speaking of the excellences and imperfections of the great work of Adam Smith, imputes to him, as an error, that "he attributes to the labour of man alone the power of producing value. A more correct analysis shews us that value is owing to the action of labour, or rather the industry of man, combined with the action of those agents which nature supplies, and with that of capital. His ignorance of this principle prevented him from establishing the true theory of the influence of machinery in the production of riches." In contradiction to the opinion of Adam Smith, M. Say, in the fourth chapter, speaks of the value which is given to commodities by natural agents, such as the sun, the air, the pressure of the atmosphere &c., which are sometimes substituted for the labour of man, and sometimes concur with him in producing.[29] But these natural agents, though they add greatly to _value in use_, never add exchangeable value, of which M. Say is speaking, to a commodity: as soon as by the aid of machinery, or by the knowledge of natural philosophy, you oblige natural agents to do the work which was before done by man, the exchangeable value of such work falls accordingly. If ten men turned a corn mill, and it be discovered that by the assistance of wind, or of water, the labour of these ten men may be spared, the flour, which is the produce of the work performed by the mill, would immediately fall in value, in proportion to the quantity of labour saved; and the society would be richer by the commodities which the labour of the ten men could produce, the funds destined for their maintenance being in no degree impaired. M. Say accuses Dr. Smith of having overlooked the value which is given to commodities by natural agents, and by machinery, because he considered that the value of all things was derived from the labour of man; but it does not appear to me, that this charge is made out; for Adam Smith no where under-values the services which these natural agents and machinery perform for us, but he very justly distinguishes the nature of the value which they add to commodities--they are serviceable to us, by increasing the abundance of productions, by making men richer, by adding to value in use; but as they perform their work gratuitously, as nothing is paid for the use of air, of heat, and of water, the assistance which they afford us, adds nothing to value in exchange. In the first chapter of the second book, M. Say himself gives a similar statement of value, for he says that "utility is the foundation of value, that commodities are only desirable, because they are in some way useful, but that their value depends not on their utility, not on the degree in which they are desired, but on the quantity of labour necessary to procure them." "The utility of a commodity thus understood, makes it an object of man's desire, makes him wish for it, and establishes a demand for it. When to obtain a thing, it is sufficient to desire it, it may be considered as an article of natural wealth, given to man in an unlimited quantity, and which he enjoys, without purchasing it by any sacrifice; such are the air, water, the light of the sun. If he obtained in this manner all the objects of his wants and desires, he would be infinitely rich: he would be in want of nothing. But unfortunately this is not the case; the greater part of the things which are convenient and agreeable to him, as well as those which are indispensably necessary in the social state, for which man seems to be specifically formed, are not given to him gratuitously; they could only exist by the exertion of certain labour, the employment of a certain capital, and, in many cases, by the use of land. These are obstacles in the way of gratuitous enjoyment; obstacles from which result a real expense of production; because we are obliged to pay for the assistance of these agents of production." "It is only when this utility has thus been communicated to a thing (viz. by industry, capital, and land,) that it is a production, _and that it has a value_. It is its utility which is the foundation of the demand for it, _but the sacrifices, and the charges necessary to obtain it, or in other words, its price_, limits the extent of this demand." The confusion which arises from confounding the terms "value" and "riches" will best be seen in the following passages.[31] His pupil observes: "You have said, besides, that the riches of a society were composed of the sum total of the values which it possessed; it appears to me to follow, that the fall of one production, of stockings for example, by diminishing the sum total of the value belonging to the society, diminishes the mass of its riches;" to which the following answer is given: "the _sum_ of the society's riches will not fall on that account. Two pair of stockings are produced instead of one; and two pair at three francs, are equally valuable with one pair at six francs. The income of the society remains the same, because the manufacturer has gained as much on two pair at three francs, as he gained on one pair at six francs." Thus far M. Say, though incorrect, is at least consistent. If value be the measure of riches, the society is equally rich, because the value of all its commodities is the same as before. But now for his inference. "But when the income remains the same, and productions fall in price, the society is really enriched. If the same fall took place in all commodities at the same time, which is not absolutely impossible, the society by procuring at half their former price, all the objects of its consumption, without having lost any portion of its income, would really be twice as rich as before, and could purchase twice the quantity of goods." In the first passage we are told, that if every thing fell to half its value, from abundance, the society would be equally rich, because there would be double the quantity of commodities at half their former value, or in other words, there would be the same value. But in the last passage we are informed, that by doubling the quantity of commodities, although the value of each commodity should be diminished one half, and therefore the value of all the commodities together be precisely the same as before, yet the society would be twice as rich as before. In the first case riches are estimated by the amount of value: in the second, they are estimated by the abundance of commodities contributing to human enjoyments. M. Say further says, "that a man is infinitely rich without valuables, if he can for nothing obtain all the objects he desires;" yet in another place we are told, "that riches consist, not in the product itself, for it is not riches if it have not value, but in its value." Vol. ii. p. 2. CHAPTER XIX. EFFECTS OF ACCUMULATION ON PROFITS AND INTEREST. From the account which has been given of the profits of stock, it will appear, that no accumulation of capital will permanently lower profits, unless there be some permanent cause for the rise of wages. If the funds for the maintenance of labour were doubled, trebled, or quadrupled, there would not long be any difficulty in procuring the requisite number of hands, to be employed by those funds; but owing to the increasing difficulty of making constant additions to the food of the country, funds of the same value would probably not maintain the same quantity of labour. If the necessaries of the workman could be constantly increased with the same facility, there could be no permanent alteration in the rate of profits or wages, to whatever amount capital might be accumulated. Adam Smith, however, uniformly ascribes the fall of profits to accumulation of capital, and to the competition which will result from it, without ever adverting to the increasing difficulty of providing food for the additional number of labourers which the additional capital will employ. "The increase of stock he says, which raises wages, tends to lower profit. When the stocks of many rich merchants are turned into the same trade, their mutual competition naturally tends to lower its profit; and when there is a like increase of stock in all the different trades carried on in the same society, the same competition must produce the same effect in all." Adam Smith speaks here of a rise of wages, but it is of a temporary rise, proceeding from increased funds before the population is increased; and he does not appear to see, that at the same time that capital is increased, the work to be effected by capital, is increased in the same proportion. M. Say has however most satisfactorily shewn, that there is no amount of capital which may not be employed in a country, because demand is only limited by production. No man produces, but with a view to consume or sell, and he never sells, but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some other person. It is not to be supposed that he should, for any length of time, be ill-informed of the commodities which he can most advantageously produce, to attain the object which he has in view, namely, the possession of other goods; and therefore it is not probable that he will continually produce a commodity for which there is no demand.[32] There cannot then be accumulated in a country any amount of capital which cannot be employed productively, until wages rise so high in consequence of the rise of necessaries, and so little consequently remains for the profits of stock, that the motive for accumulation ceases.[33] While the profits of stock are high, men will have a motive to accumulate. Whilst a man has any wished-for gratification unsupplied he will have a demand for more commodities; and it will be an effectual demand while he has any new value to offer in exchange for them. If ten thousand pounds were given to a man having 100,000_l._ per annum, he would not lock it up in a chest, but would either increase his expenses by 10,000_l._; employ it himself productively, or lend it to some other person for that purpose; in either case, demand would be increased, although it would be for different objects. If he increased his expenses, his effectual demand might probably be for buildings, furniture, or some such enjoyment. If he employed his 10,000_l._ productively, his effectual demand would be for food, clothing, and raw material, which might set new labourers to work; but still it would be demand.[34] Productions are always bought by productions, money is only the medium by which the exchange is effected. Too much of a particular commodity may be produced, of which there may be such a glut in the market, as not to repay the capital expended on it; but this cannot be the case with respect to all commodities; the demand for corn is limited by the mouths which are to eat it, for shoes and coats by the persons who are to wear them; but though a community, or a part of a community, may have as much corn, and as many hats and shoes, as it is able or may wish to consume, the same cannot be said of every commodity produced by nature or by art. Some would consume more wine, if they had the ability to procure it. Others having enough of wine, would wish to increase the quantity or improve the quality of their furniture. Others might wish to ornament their grounds, or to enlarge their houses. The wish to do all or some of these is implanted in every man's breast; nothing is required but the means, and nothing can afford the means, but an increase of production. If I had food and necessaries at my disposal, I should not be long in want of workmen who would put me in possession of some of the objects most useful or most desirable to me. Whether these increased productions, and the consequent demand which they occasion, shall or shall not lower profits, depends solely on the rise of wages; and the rise of wages, excepting for a limited period, on the facility of producing the food and necessaries of the labourer. I say excepting for a limited period, because no point is better established, than that the supply of labourers will always ultimately be in proportion to the means of supporting them. There is only one case, and that will be temporary, in which the accumulation of capital with a low price of food may be attended with a fall of profits; and that is, when the funds for the maintenance of labour increase much more rapidly than population;--wages will then be high, and profits low. If every man were to forego the use of luxuries, and be intent only on accumulation, a quantity of necessaries might be produced, for which there could not be any immediate consumption. Of commodities so limited in number, there might undoubtedly be an universal glut, and consequently there might neither be demand for an additional quantity of such commodities, nor profits on the employment of more capital. If men ceased to consume, they would cease to produce. This admission, does not impugn the general principle. In such a country as England, for example, it is difficult to suppose that there can be any disposition to devote the whole capital and labour of the country to the production of necessaries only. When merchants engage their capitals in foreign trade, or in the carrying trade, it is always from choice, and never from necessity: it is because in that trade their profits will be somewhat greater than in the home trade. Adam Smith has justly observed "that the desire of food is limited in every man by the narrow capacity of the human stomach, but the desire of the conveniences and ornaments of building, dress, equipage, and household furniture, seems to have no limit or certain boundary." Nature then has necessarily limited the amount of capital which can at any one time be profitably engaged in agriculture, but she has placed no limits to the amount of capital that may be employed in procuring "the conveniences and ornaments" of life. To procure these gratifications in the greatest abundance is the object in view, and it is only because foreign trade, or the carrying trade, will accomplish it better, that men engage in them, in preference to manufacturing the commodities required, or a substitute for them, at home. If, however, from peculiar circumstances, we were precluded from engaging capital in foreign trade, or in the carrying trade, we should, though with less advantage, employ it at home; and while there is no limit to the desire of "conveniences, ornaments of building, dress, equipage, and household furniture," there can be no limit to the capital that may be employed in procuring them, except that which bounds our power to maintain the workmen who are to produce them. Adam Smith however, speaks of the carrying trade as one not of choice, but of necessity; as if the capital engaged in it would be inert if not so employed, as if the capital in the home trade could overflow, if not confined to a limited amount. He says, "when the capital stock of any country is increased to such a degree, _that it cannot be all employed in supplying the consumption, and supporting the productive labour of that particular country_, the surplus part of it naturally disgorges itself into the carrying trade, and is employed in performing the same offices to other countries." "About ninety-six thousand hogsheads of tobacco are annually purchased with a part of the surplus produce of British industry. But the demand of Great Britain does not require, perhaps, more than fourteen thousand. If the remaining eighty-two thousand, therefore, could not be sent abroad _and exchanged for something more in demand at home_, the importation of them would cease immediately, _and with it the productive labour of all the inhabitants of Great Britain, who are at present employed in preparing the goods with which these eighty-two thousand hogsheads are annually purchased_." But could not this portion of the productive labour of Great Britain be employed in preparing some other sort of goods, with which something more in demand at home might be purchased? And if it could not, might we not employ this productive labour, though with less advantage, in making those goods in demand at home, or at least some substitute for them? If we wanted velvets, might we not attempt to make velvets; and if we could not succeed, might we not make more cloth, or some other object desirable to us? We manufacture commodities, and with them buy goods abroad, because we can obtain a greater quantity than we could make at home. Deprive us of this trade, and we immediately manufacture again for ourselves. But this opinion of Adam Smith is at variance with all his general doctrines on this subject. "If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage. _The general industry of the country being always in proportion to the capital which employs it_, will not thereby be diminished, but only left to find out the way in which it can be employed with the greatest advantage." Again. "Those, therefore, who have the command of more food than they themselves can consume, are always willing to exchange the surplus, or, what is the same thing, the price of it, for gratifications of another kind. What is over and above satisfying the limited desire, is given for the amusement of those desires which cannot be satisfied, but seem to be altogether endless. The poor, in order to obtain food, exert themselves to gratify those fancies of the rich; and to obtain it more certainly, they vie with one another in the cheapness and perfection of their work. The number of workmen increases with the increasing quantity of food, or with the growing improvement and cultivation of the lands; and as the nature of their business admits of the utmost subdivisions of labours, the quantity of materials which they can work up increases in a much greater proportion than their numbers. Hence arises a demand for every sort of material which human invention can employ, either usefully or ornamentally, in building, dress, equipage, or household furniture; for the fossils and minerals contained in the bowels of the earth, the precious metals, and the precious stones." Adam Smith has justly observed, that it is extremely difficult to determine the rate of the profits of stock. "Profit is so fluctuating, that even in a particular trade, and much more in trades in general, it would be difficult to state the average rate of it. To judge of what it may have been formerly, or in remote periods of time, with any degree of precision, must be altogether impossible." Yet since it is evident that much will be given for the use of money, when much can be made by it, he suggests, that "the market rate of interest will lead us to form some notion of the rate of profits, and the history of the progress of interest afford us that of the progress of profits." Undoubtedly if the market rate of interest could be accurately known for any considerable period, we should have a tolerably correct criterion, by which to estimate the progress of profits. But in all countries, from mistaken notions of policy, the state has interfered to prevent a fair and free market rate of interest, by imposing heavy and ruinous penalties on all those who shall take more than the rate fixed by law. In all countries probably these laws are evaded, but records give us little information on this head, and point out rather the legal and fixed rate, than the market rate of interest. During the present war, exchequer and navy bills have frequently been at so high a discount, as to afford the purchasers of them 7, 8 per cent., or a greater rate of interest for their money. Loans have been raised by Government at an interest exceeding 6 per cent., and individuals have been frequently obliged, by indirect means, to pay more than 10 per cent., for the interest of money; yet during this same period the legal rate of interest has been uniformly at 5 per cent. Little dependance for information then can be placed on that which is the fixed and legal rate of interest, when we find it may differ so considerably from the market rate. Adam Smith informs us, that from the 37th of Henry VIII., to 21st of James I., 10 per cent. continued to be the legal rate of interest. Soon after the restoration, it was reduced to 6 per cent., and by the 12th of Anne, to 5 per cent. He thinks the legal rate followed, and did not precede the market rate of interest. Before the American War, Government borrowed at 3 per cent., and the people of credit in the capital, and in many other parts of the kingdom at 3-1/2, 4, and 4-1/2 per cent. The rate of interest, though ultimately and permanently governed by the rate of profit, is however subject to temporary variations from other causes. With every fluctuation in the quantity and value of money, the prices of commodities naturally vary. They vary also, as we have already shewn, from the alteration in the proportion of supply to demand, although there should not be either greater facility or difficulty of production. When the market prices of goods fall from an abundant supply, from a diminished demand, or from a rise in the value of money, a manufacturer naturally accumulates an unusual quantity of finished goods, being unwilling to sell them at very depressed prices. To meet his ordinary payments, for which he used to depend on the sale of his goods, he now endeavours to borrow on credit, and is often obliged to give an increased rate of interest. This however is but of temporary duration; for either the manufacturer's expectations were well grounded, and the market price of his commodities rises, or he discovers that there is a permanently diminished demand, and he no longer resists the course of affairs: prices fall, and money and interest regain their real value. If by the discovery of a new mine, by the abuses of banking, or by any other cause, the quantity of money be greatly increased, its ultimate effect is to raise the prices of commodities in proportion to the increased quantity of money; but there is probably always an interval, during which some effect is produced on the rate of interest. The price of funded property is not a steady criterion by which to judge of the rate of interest. In time of war, the stock market is so loaded by the continual loans of Government, that the price of stock has not time to settle at its fair level before a new operation of funding takes place, or it is affected by anticipation of political events. In time of peace, on the contrary, the operations of the sinking fund, the unwillingness, which a particular class of persons feel to divert their funds to any other employment than that to which they have been accustomed, which they think secure, and in which their dividends are paid with the utmost regularity, elevates the price of stock, and consequently depresses the rate of interest on these securities below the general market rate. It is observable too, that for different securities, Government pays very different rates of interest. Whilst 100_l._ capital in 5 per cent. stock is selling for 95_l._, an exchequer bill of 100_l._, will be sometimes selling for 100_l._ 5_s._, for which exchequer bill, no more interest will be annually paid than 4_l._ 11_s._ 3_d._: one of these securities pays to a purchaser at the above prices, an interest of more than 5-1/4 per cent., the other but little more than 4-1/4; a certain quantity of these exchequer bills is required as a safe and marketable investment for bankers; if they were increased much beyond this demand, they would probably be as much depreciated as the 5 per cent. stock. A stock paying 3 per cent. per annum will always sell at a proportionally greater price than stock paying 5 per cent., for the capital debt of neither can be discharged but at par, or 100_l._ money for 100_l._ stock. The market rate of interest may fall to 4 per cent., and Government would then pay the holder of 5 per cent. stock at par, unless he consented to take 4 per cent., or some diminished rate of interest under 5 per cent.: they would have no advantage from so paying the holder of 3 per cent. stock, till the market rate of interest had fallen below 3 per cent. per annum. To pay the interest on the national debt, large sums of money are withdrawn from circulation four times in the year for a few days. These demands for money being only temporary, seldom affect prices; they are generally surmounted by the payment of a large rate of interest.[36] CHAPTER XX. BOUNTIES ON EXPORTATION, AND PROHIBITIONS OF IMPORTATION. A bounty on the exportation of corn tends to lower its price to the foreign consumer, but it has no permanent effect on its price in the home market. Suppose that to afford the usual and general profits of stock, the price of corn should in England be 4_l._ per quarter; it could not then be exported to foreign countries where it sold for 3_l._ 15_s._ per quarter. But if a bounty of 10_s._ per quarter were given on exportation, it could be sold in the foreign market at 3_l._ 10_s._, and consequently the same profit would be afforded to the corn grower, whether he sold it at 3_l._ 10_s._ in the foreign, or at 4_l._ in the home market. A bounty then, which should lower the price of British corn in the foreign country, below the cost of producing corn in that country, would naturally extend the demand for British, and diminish the demand for their own corn. This extension of demand for British corn could not fail to raise its price for a time in the home market, and during that time to prevent also its falling so low in the foreign market as the bounty has a tendency to effect. But the causes which would thus operate on the market price of corn in England would produce no effect whatever on its natural price, on its real cost of production. To grow corn would neither require more labour nor more capital, and, consequently, if the profits of the farmer's stock were before only equal to the profits of the stock of other traders, they will, after the rise of price, be considerably above them. By raising the profits of the farmer's stock, the bounty will operate as an encouragement to agriculture, and capital will be withdrawn from manufactures to be employed on the land, till the enlarged demand for the foreign market has been supplied, when the price of corn will again fall in the home market to its natural and necessary price, and profits will be again at their ordinary and accustomed level. The increased supply of grain operating on the foreign market, will also lower its price in the country to which it is exported, and will thereby restrict the profits of the exporter to the lowest rate at which he can afford to trade. The ultimate effect then of a bounty on the exportation of corn, is not to raise or to lower the price in the home market, but to lower the price of corn to the foreign consumer--to the whole extent of the bounty, if the price of corn had not before been lower in the foreign, than in the home market--and in a less degree, if the price in the home had been above the price in the foreign market. A writer in the fifth vol. of the Edinburgh Review on the subject of a bounty on the exportation of corn, has very clearly pointed out its effects on the foreign and home demand. He has also justly remarked, that it would not fail to give encouragement to agriculture in the exporting country; but he appears to have imbibed the common error which has misled Dr. Smith, and I believe most other writers on this subject. He supposes, because the price of corn ultimately regulates wages, that therefore it will regulate the price of all other commodities. He says that the bounty, "by raising the profits of farming, will operate as an encouragement to husbandry; by raising the price of corn to the consumers at home, it will diminish for the time their power of purchasing this necessary of life, and thus abridge their real wealth. It is evident, however, that this last effect must be temporary: the wages of the labouring consumers had been adjusted before by competition, and the same principle will adjust them again to the same rate, by raising the money price of labour, _and, through that, of other commodities, to the money price of corn_. The bounty upon exportation, therefore, will ultimately raise the money price of corn in the home market; not directly, however, but through the medium of an extended demand in the foreign market, and a consequent enhancement of the real price at home: _and this rise of the money price, when it has once been communicated to other commodities, will of course become fixed_." If, however, I have succeeded in shewing that it is not the rise in the money wages of labour which raises the price of commodities, but that such rise always affects profits, it will follow that the prices of commodities would not rise in consequence of a bounty. But a temporary rise in the price of corn, produced by an increased demand from abroad, would have no effect on the money price of wages. The rise of corn is occasioned by a competition for that supply which was before exclusively appropriated to the home market. By raising profits, additional capital is employed in agriculture, and the increased supply is obtained; but till it be obtained, the high price is absolutely necessary to proportion the consumption to the supply, which would be counteracted by a rise of wages. The rise of corn is the consequence of its scarcity, and is the means by which the demand of the home purchasers is diminished. If wages were increased, the competition would increase, and a further rise of the price of corn would become necessary. In this account of the effects of a bounty, nothing has been supposed to occur to raise the natural price of corn, by which its market price is ultimately governed; for it has not been supposed that any additional labour would be required on the land to insure a given production, and this alone can raise natural price. If the natural price of cloth were 20_s._ per yard, a great increase in the foreign demand might raise the price to 25_s._, or more, but the profits which would then be made by the clothier would not fail to attract capital in that direction, and although the demand should be doubled, trebled, or quadrupled, the supply would ultimately be obtained, and cloth would fall to its natural price of 20_s._ So in the supply of corn, although we should export 2, 3, or 800,000 quarters, annually, it would ultimately be produced at its natural price, which never varies unless a different quantity of labour becomes necessary to production. Perhaps in no part of Adam Smith's justly celebrated work are his conclusions more liable to objection, than in the chapter on bounties. In the first place, he speaks of corn as of a commodity of which the production cannot be increased in consequence of a bounty on exportation; he supposes invariably that it acts only on the quantity actually produced, and is no stimulus to further production. "In years of plenty," he says, "by occasioning an extraordinary exportation, it necessarily keeps up the price of corn in the home market above what it would naturally fall to. In years of scarcity, though the bounty is frequently suspended, yet the great exportation which it occasions in years of plenty, must frequently hinder, more or less, the plenty of one year from relieving the scarcity of another. Both in the years of plenty and in years of scarcity, therefore, the bounty necessarily tends to raise the money price of corn somewhat higher than it otherwise would be in the home market."[37] Adam Smith appears to have been fully aware, that the correctness of his argument entirely depended on the fact, whether the increase "of the money price of corn, by rendering that commodity more profitable to the farmer, would not necessarily encourage its production." "I answer," he says, "that this might be the case, if the effect of the bounty was to raise the real price of corn, or to enable the farmer, with an equal quantity of it, to maintain a greater number of labourers in the same manner, whether liberal, moderate, or scanty, as other labourers are commonly maintained in his neighbourhood." If nothing were consumed by the labourer but corn, and if the portion which he received, was the very lowest which his sustenance required, there might be some ground for supposing that the quantity paid to the labourer could, under no circumstances, be reduced,--but the money wages of labour sometimes do not rise at all, and never rise in proportion to the rise in the money price of corn, because corn, though an important part, is only a part of the consumption of the labourer. If half his wages were expended on corn, and the other half on soap, candles, fuel, tea, sugar, clothing, &c., commodities on which no rise is supposed to take place, it is evident that he would be quite as well paid with a bushel and a half of wheat, when it was 16_s._ a bushel, as he was with two bushels, when the price was 8_s._ per bushel; or with 24_s._ in money, as he was before with 16_s._ His wages would rise only 50 per cent. though corn rose 100 per cent., and, consequently, there would be sufficient motive to divert more capital to the land, if profits on other trades continued the same as before. But such a rise of wages would also induce manufacturers to withdraw their capitals from manufactures, to employ them on the land; for whilst the farmer increased the price of his commodity 100 per cent., and his wages only 50 per cent., the manufacturer would be obliged also to raise wages 50 per cent., whilst he had no compensation whatever, in the rise of his manufactured commodity, for this increased charge of production; capital would consequently flow from manufactures to agriculture, till the supply would again lower the price of corn to 8_s._ per bushel, and wages to 16_s._ per week; when the manufacturer would obtain the same profits as the farmer, and the tide of capital would cease to set in either direction. This is in fact the mode in which the cultivation of corn is always extended, and the increased wants of the market supplied. The funds for the maintenance of labour increase, and wages are raised. The comfortable situation of the labourer induces him to marry--population increases, and the demand for corn raises its price relatively to other things,--more capital is profitably employed on agriculture, and continues to flow towards it, till the supply is equal to the demand, when the price again falls, and agricultural and manufacturing profits are again brought to a level. But whether wages were stationary after the rise in the price of corn, or advanced moderately, or enormously, is of no importance to this question, for wages are paid by the manufacturer as well as by the farmer, and, therefore, in this respect they must be equally affected by a rise in the price of corn. But they are unequally affected in their profits, inasmuch as the farmer sells his commodity at an advanced price, while the manufacturer sells his for the same price as before. It is however the inequality of profit, which is always the inducement to remove capital from one employment to another, and therefore more corn would be produced, and fewer commodities manufactured. Manufactures would not rise, because fewer were manufactured, for a supply of them would be obtained in exchange for the exported corn. A bounty, if it raises the price of corn, either raises it in comparison with the price of other commodities, or it does not. If the affirmative be true, it is impossible to deny the greater profits of the farmer, and the temptation to the removal of capital, till its price is again lowered by an abundant supply. If it does not raise it in comparison with other commodities, where is the injury to the home consumer, beyond the inconvenience of paying the tax? If the manufacturer pays a greater price for his corn, he is compensated by the greater price at which he sells his commodity, with which his corn is ultimately purchased. The error of Adam Smith proceeds precisely from the same source as that of the writer in the Edinburgh Review; for they both think "that the money price of corn regulates that of all other home-made commodities."[38] "It regulates," says Adam Smith, "the money price of labour, which must always be such as to enable the labourer to purchase a quantity of corn sufficient to maintain him and his family, either in the liberal, moderate, or scanty manner, in which the advancing, stationary, or declining circumstances of the society oblige his employers to maintain him. By regulating the money price of all the other parts of the rude produce of land, it regulates that of the materials of almost all manufactures. By regulating the money price of labour, it regulates that of manufacturing art, and industry; and by regulating both, it regulates that of the complete manufacture. _The money price of labour, and of every thing that is the produce either of land and labour, must necessarily rise or fall in proportion to the money price of corn._" This opinion of Adam Smith, I have before attempted to refute. In considering a rise in the price of commodities as a necessary consequence of a rise in the price of corn, he reasons as though there were no other fund from which the increased charge could be paid. He has wholly neglected the consideration of profits, the diminution of which forms that fund, without raising the price of commodities. If this opinion of Dr. Smith were well founded, profits could never really fall, whatever accumulation of capital there might be. If when wages rose, the farmer could raise the price of his corn, and the clothier, the hatter, the shoemaker, and every other manufacturer, could also raise the price of their goods in proportion to the advance, although estimated in money, they might be all raised, they would continue to bear the same value relatively to each other. Each of these trades could command the same quantity as before of the goods of the others, which, since it is goods, and not money, which constitute wealth, is the only circumstance that could be of importance to them; and the whole rise in the price of raw produce and of goods, would be injurious to no other persons but to those whose property consisted of gold and silver, or whose annual income was paid in a contributed quantity of those metals, whether in the form of bullion or of money. Suppose the use of money to be wholly laid aside, and all trade to be carried on by barter. Under such circumstances, could corn rise in exchangeable value with other things? If it could, then it is not true that the value of corn regulates the value of all other commodities; for to do that, it should not vary in relative value to them. If it could not, then it must be maintained, that whether corn be obtained on rich, or on poor land, with much labour, or with little, with the aid of machinery, or without, it would always exchange for an equal quantity of all other commodities. I cannot, however, but remark that, though Adam Smith's general doctrines correspond with this which I have just quoted, yet in one part of his work he appears to have given a correct account of the nature of value. "The proportion between the value of gold and silver, and that of goods of any other kind, _depends in all cases_," he says, "_upon the proportion between the quantity of labour which is necessary in order to bring a certain quantity of gold and silver to market, and that which is necessary to bring thither a certain quantity of any other sort of goods_." Does he not here fully acknowledge that if any increase takes place in the quantity of labour, required to bring one sort of goods to market, whilst no such increase takes place in bringing another sort thither, those goods will rise in relative value. If no more labour be required to bring cloth and gold to market, they will not vary in relative value, but if more labour be required to bring corn and shoes to market, will not corn and shoes rise in value relatively to cloth, and money made of gold? Adam Smith again considers that the effect of the bounty is to cause a partial degradation in the value of money. "That degradation," says he "in the value of silver, which is the effect of the fertility of the mines, and which operates equally, or very nearly equally, through the greater part of the commercial world, is a matter of very little consequence to any particular country. The consequent rise of all money prices, though it does not make those who receive them really richer, does not make them really poorer. A service of plate becomes really cheaper, and every thing else remains precisely of the same real value as before." This observation is most correct. "But that degradation in the value of silver, which being the effect either of the peculiar situation, or of the political institutions of a particular country, takes place only in that country, is a matter of very great consequence, which, far from tending to make any body really richer, tends to make every body really poorer. The rise in the money price of all commodities, which is in this case peculiar to that country, tends to discourage more or less every sort of industry which is carried on within it, and to enable foreign nations, by furnishing almost all sorts of goods for a smaller quantity of silver than its own workmen can afford to do, to undersell them, not only in the foreign, but even in the home market." I have elsewhere attempted to shew that a partial degradation in the value of money, which shall affect both agricultural produce, and manufactured commodities, cannot possibly be permanent. To say that money is partially degraded, in this sense, is to say that all commodities are at a high price; but while gold and silver are at liberty to make purchases in the cheapest market, they will be exported for the cheaper goods of other countries, and the reduction of their quantity will increase their value at home; commodities will regain their usual level, and those fitted for foreign markets will be exported, as before. A bounty therefore cannot, I think, be objected to on this ground. If then, a bounty raises the price of corn in comparison with all other things, the farmer will be benefited, and more land will be cultivated; but if the bounty do not raise the value of corn relatively to other things, then no other inconvenience will attend it, than that of paying the bounty; one which I neither wish to conceal nor underrate. Dr. Smith states, that "by establishing high duties on the importation, and bounties on the exportation of corn, the country gentlemen seemed to have imitated the conduct of the manufacturers." By the same means both had endeavoured to raise the value of their commodities. "They did not perhaps attend to the great and essential difference which nature has established between corn, and almost every other sort of goods. When by either of the above means, you enable our manufacturers to sell their goods for somewhat a better price than they otherwise could get for them, you raise not only the nominal, but the real price of those goods. You increase not only the nominal, but the real profit, the real wealth and revenue of those manufacturers--you really encourage those manufactures. But when, by the like institutions, you raise the nominal or money price of corn, you do not raise its real value, you do not increase the real wealth of our farmers or country gentlemen, you do not encourage the growth of corn. The nature of things has stamped upon corn a real value, which cannot be altered by merely altering its money price. Through the world in general, that value is equal to the quantity of labour which it can maintain." I have already attempted to shew, that the market price of corn, would, under an increased demand from the effects of a bounty, exceed its natural price, till the requisite additional supply was obtained, and that then it would again fall to its natural price. But the natural price of corn is not so fixed as the natural price of commodities; because, with any great additional demand for corn, land of a worse quality must be taken into cultivation, on which more labour will be required to produce a given quantity, and the natural price of corn would be raised. By a continued bounty, therefore, on the exportation of corn, there would be created a tendency to a permanent rise in the price of corn, and this, as I have shewn elsewhere,[39] never fails to raise rent. Country gentlemen then have not only a temporary but a permanent interest in prohibitions of the importation of corn, and in bounties on its exportation; but manufacturers have no permanent interest in a bounty on the exportation of commodities, their interest is wholly temporary. A bounty on the exportation of manufactures will undoubtedly, as Dr. Smith contends, raise the market price of manufactures, but it will not raise their natural price. The labour of 200 men will produce double the quantity of these goods that 100 could produce before; and consequently, when the requisite quantity of capital was employed in supplying the requisite quantity of manufactures, they would again fall to their natural price. It is then only during the interval after the rise in the market price of commodities, and before the additional supply is obtained, that the manufacturers will enjoy high profits; for as soon as prices had subsided, their profits would sink to the general level. Instead of agreeing, therefore, with Adam Smith, that the country gentlemen had not so great an interest in prohibiting the importation of corn, as the manufacturer had in prohibiting the importation of manufactured goods, I contend that they have a much superior interest; for their advantage is permanent, while that of the manufacturer is only temporary. Dr. Smith observes, that nature has established a great and essential difference between corn and other goods, but the proper inference from that circumstance is directly the reverse of that which he draws from it; for it is on account of this difference that rent is created, and that country gentlemen have an interest in the rise of the natural price of corn. Instead of comparing the interest of the manufacturer with the interest of the country gentleman, Dr. Smith should have compared it with the interest of the farmer, which is very distinct from that of his landlord. Manufacturers have no interest in the rise of the natural price of their commodities, nor have farmers any interest in the rise of the natural price of corn, or other raw produce, though both these classes are benefited while the market price of their productions exceeds their natural price. On the contrary, landlords have a most decided interest in the rise of the natural price of corn; for the rise of rent is the inevitable consequence of the difficulty of producing raw produce, without which its natural price could not rise. Now as bounties on exportation and prohibitions of the importation of corn increase the demand, and drive us to the cultivation of poorer lands, they necessarily occasion an increased difficulty of production. The sole effect of the bounty either on the exportation of manufactures, or of corn, is to divert a portion of capital to an employment, which it would not naturally seek. It causes a pernicious distribution of the general funds of the society--it bribes a manufacturer to commence or continue in a comparatively less profitable employment. It is the worst species of taxation, for it does not give to the foreign country all that it takes away from the home country, the balance of loss being made up by the less advantageous distribution of the general capital. Thus, if the price of corn is in England 4_l._, and in France 3_l._ 15_s._ a bounty of 10_s._ will ultimately reduce it to 3_l._ 10_s._ in France, and maintain it at the same price of 4_l._ in England. For every quarter exported, England pays a tax of 10_s._ For every quarter imported into France, France gains only 5_s._, so that the value of 5_s._ per quarter is absolutely lost to the world, by such a distribution of its funds as to cause diminished production, probably not of corn, but of some other object of necessity or enjoyment. Mr. Buchanan appears to have seen the fallacy of Dr. Smith's arguments respecting bounties, and on the last passage which I have quoted, very judiciously remarks: "In asserting that nature has stamped a real value on corn, which cannot be altered by merely altering its money price, Dr. Smith confounds its value in use, with its value in exchange. A bushel of wheat will not feed more people during scarcity than during plenty; but a bushel of wheat will exchange for a greater quantity of luxuries and conveniences when it is scarce, than when it is abundant; and the landed proprietors, who have a surplus of food to dispose of, will therefore, in times of scarcity, be richer men; they will exchange their surplus for a greater value of other enjoyments, than when corn is in greater plenty. It is vain to argue, therefore, that if the bounty occasions a forced exportation of corn, it will not also occasion a real rise of price." The whole of Mr. Buchanan's arguments on this part of the subject of bounties, appear to me to be perfectly clear and satisfactory. Mr. Buchanan however has not, I think, any more than Dr. Smith, or the writer in the Edinburgh Review, correct opinions as to the influence of a rise in the price of labour on manufactured commodities. From his peculiar views, which I have elsewhere noticed, he thinks that the price of labour has no connexion with the price of corn, and therefore that the real value of corn might and would rise without affecting the price of labour; but if labour were affected, he would maintain with Adam Smith and the writer in the Edinburgh Review, that the price of manufactured commodities would also rise; and then I do not see how he would distinguish such a rise of corn, from a fall in the value of money, or how he could come to any other conclusion than that of Dr. Smith. In a note to page 276, vol. i. of the Wealth of Nations, Mr. Buchanan observes, "but the price of corn does not regulate the money price of all the other parts of the rude produce of land. It regulates the price neither of metals, nor of various other useful substances, such as coals, wood, stones, &c.; _and as it does not regulate the price of labour, it does not regulate the price of manufactures_; so that the bounty, in so far as it raises the price of corn, is undoubtedly a real benefit to the farmer. It is not on this ground, therefore, that its policy must be argued. Its encouragement to agriculture, by raising the price of corn, must be admitted; and the question then comes to be, whether agriculture ought to be thus encouraged?"--It is then, according to Mr. Buchanan, a real benefit to the farmer, because it does not raise the price of labour; but if it did, it would raise the price of all things in proportion, and then it would afford no particular encouragement to agriculture. It must, however, be conceded, that the tendency of a bounty on the exportation of any commodity is to lower in a small degree the value of money. Whatever facilitates exportation, tends to accumulate money in a country; and on the contrary, whatever impedes exportation, tends to diminish it. The general effect of taxation, by raising the prices of the commodities taxed, tends to diminish exportation, and therefore to check the influx of money; and on the same principle, a bounty encourages the influx of money. This is more fully explained in the general observations on taxation. The injurious effects of the mercantile system have been fully exposed by Dr. Smith; the whole aim of that system was to raise the price of commodities, in the home market, by prohibiting foreign competition; but this system was no more injurious to the agricultural classes than to any other part of the community. By forcing capital into channels where it would not otherwise flow, it diminished the whole amount of commodities produced. The price, though permanently higher, was not sustained by scarcity, but by difficulty of production; and therefore, though the sellers of such commodities sold them for a higher price, they did not sell them, after the requisite quantity of capital was employed in producing them, at higher profits.[40] The manufacturers themselves, as consumers, had to pay an additional price for such commodities, and therefore it cannot be correctly said, that "the enhancement of price occasioned by both, (corporation laws and high duties on the importation of foreign commodities,) is every where finally paid by the landlords, farmers, and labourers of the country." It is the more necessary, to make this remark, as in the present day the authority of Adam Smith is quoted by country gentlemen for imposing similar high duties on the importation of foreign corn. Because the cost of production, and therefore the prices of various manufactured commodities, are raised to the consumer by one error in legislation, the country has been called upon, on the plea of justice, quietly to submit to fresh exactions. Because we all pay an additional price for our linen, muslin, and cottons, it is thought just that we should pay also an additional price for our corn. Because, in the general distribution of the labour of the world, we have prevented the greatest amount of productions from being obtained by that labour in manufactured commodities; we should further punish ourselves by diminishing the productive powers of the general labour in the supply of raw produce. It would be much wiser to acknowledge the errors which a mistaken policy has induced us to adopt, and immediately to commence a gradual recurrence to the sound principles of an universally free trade. "I have already had occasion to remark," observes M. Say, "in speaking of what is improperly called the balance of trade, that if it suits a merchant better to export the precious metals to a foreign country than any other goods, it is also the interest of the state that he should export them, because the state only gains or loses through the channel of its citizens; and in what concerns foreign trade, that which best suits the individual, best suits also the state; therefore, by opposing obstacles to the exportation which individuals would be inclined to make of the precious metals, nothing more is done, than to force them to substitute some other commodity less profitable to themselves, and to the state. It must however be remarked, that I say only _in what concerns foreign trade_; because the profits which merchants make by their dealings with their countrymen, as well as those which are made in the exclusive commerce with colonies, are not entirely gains for the state. In the trade between individuals of the same country, there is no other gain but the value of an utility produced; _Que la valeur d'une utilité produite_."[41] Vol. i. p. 401. I cannot see the distinction here made between the profits of the home and foreign trade. The object of all trade is to increase productions. If for the purchase of a pipe of wine, I had it in my power to export bullion, which was bought with the value of the produce of 100 days' labour, but Government, by prohibiting the exportation of bullion, should oblige me to purchase my wine with a commodity bought with the value of the produce of one hundred and five days' labour, the produce of five days' labour is lost to me, and, through me, to the state. But if these transactions took place between individuals, in different provinces of the same country, the same advantage would accrue both to the individual, and, through him, to the country, if he were unfettered in his choice of the commodities, with which he made his purchases; and the same disadvantage, if he were obliged by Government to purchase with the least beneficial commodity. If a manufacturer could work up with the same capital, more iron where coals are plentiful, than he could where coals are scarce, the country would be benefited by the difference. But if coals were no where plentiful, and he imported iron, and could get this additional quantity, by the manufacture of a commodity, with the same capital and labour, he would in like manner benefit his country by the additional quantity of iron. In the 6th Chap. of this work, I have endeavoured to shew that all trade, whether foreign or domestic, is beneficial, by increasing the quantity, and not by increasing the value of productions. We shall have no greater value, whether we carry on the most beneficial home and foreign trade, or in consequence of being fettered by prohibitory laws, we are obliged to content ourselves with the least advantageous. The rate of profits, and the value produced, will be the same. The advantage always resolves itself into that which M. Say appears to confine to the home trade; in both cases there is no other gain but that of the value of an _utilité produite_. CHAPTER XXI. ON BOUNTIES ON PRODUCTION. It may not be uninstructive to consider the effects of a bounty on the _production_ of raw produce and other commodities, with a view to observe the application of the principles which I have been endeavouring to establish, with regard to the profits of stock, the annual produce of the land and labour, and the relative prices of manufactures and raw produce. In the first place, let us suppose that a tax was imposed on all commodities, for the purpose of raising a fund to be employed by Government, in giving a bounty on the _production_ of corn. As no part of such a tax would be expended by Government, and as all that was received from one class of the people, would be returned to another, the nation collectively would neither be richer nor poorer, from such a tax and bounty. It would be readily allowed, that the tax on commodities by which the fund was created, would raise the price of the commodities taxed; all the consumers of those commodities therefore would contribute towards that fund; in other words, their natural or necessary price being raised, so would too their market price. But for the same reason that the natural price of those commodities would be raised, the natural price of corn would be lowered; before the bounty was paid on production, the farmers obtained as great a price for their corn as was necessary to repay them their rent and their expenses, and afford them the general rate of profits; after the bounty, they would receive more than that rate, unless the price of corn fell by a sum at least equal to the bounty. The effect then of the tax and bounty, would be to raise the price of commodities in a degree equal to the tax levied on them, and to lower the price of corn by a sum equal to the bounty paid. It will be observed too, that no permanent alteration could be made in the distribution of capital between agriculture and manufactures, because as there would be no alteration, either in the amount of capital or population, there would be precisely the same demand for bread and manufactures. The profits of the farmer would be no higher than the general level, after the fall in the price of corn; nor would the profits of the manufacturer be lower after the rise of manufactured goods; the bounty then would not occasion any more capital to be employed on the land in the production of corn, nor any less in the manufacture of goods. But how would the interest of the landlord be affected? On the same principles that a tax on raw produce would lower the corn rent of land, leaving the money rent unaltered, a bounty on production, which is directly the contrary of a tax, would raise corn rent, leaving the money rent unaltered.[42] With the same money rent the landlord would have a greater price to pay for his manufactured goods, and a less price for his corn; he would probably therefore be neither richer nor poorer. Now whether such a measure would have any operation on the wages of labour, would depend on the question, whether the labourer, in purchasing commodities, would pay as much towards the tax, as he would receive from the bounty, in the low price of his food. If these two quantities were equal, wages would continue unaltered; but if the commodities taxed were not those consumed by the labourer, his wages would fall, and his employer would be benefited by the difference. But this is no real advantage to his employer; it would indeed operate to increase the rate of his profits, as every fall of wages must do; but in proportion as the labourer contributed less to the fund from which the bounty was paid, and which, let it be remembered, must be raised, his employer must contribute more; in other words, he would contribute as much to the tax by his expenditure, as he would receive in the effects of the bounty and the higher rate of profits together. He obtains a higher rate of profits to requite him for his payment, not only of his own quota of the tax, but of his labourer's also; the remuneration which he receives for his labourer's quota appears in diminished wages, or, which is the same thing, in increased profits; the remuneration for his own appears in the diminution in the price of the corn which he consumes, arising from the bounty. Here it will be proper to remark the different effects produced on profits from an alteration in the real labour value of corn, and an alteration in the relative value of corn, from taxation and from bounties. If corn is lowered in price by an alteration in its labour price, not only will the rate of the profits of stock be altered, but the absolute profits also; which does not happen, as we have just seen, when the fall is occasioned artificially by a bounty. In the real fall in the value of corn, arising from less labour being required to produce one of the most important objects of man's consumption, labour is rendered more productive. With the same capital the same labour is employed, and an increase of productions is the result; not only then will the rate of profits, but the absolute profits of stock be increased; not only will each capitalist have a greater money revenue, if he employs the same money capital, but also when that money is expended, it will procure him a greater sum of commodities; his enjoyments will be augmented. In the case of the bounty, to balance the advantage which he derives from the fall of one commodity, he has the disadvantage of paying a price more than proportionally high for another; he receives an increased rate of profits in order to enable him to pay this higher price; so that his real situation is in no way improved: though he gets a higher rate of profits, he has no greater command of the produce of the land and labour of the country. When the fall in the value of corn is brought about by natural causes, it is not counteracted by the rise of other commodities; on the contrary, they fall from the raw material falling from which they are made: but when the fall in corn is occasioned by artificial means, it is always counteracted by a real rise in the value of some other commodity, so that if corn be bought cheaper, other commodities are bought dearer. This then is a further proof, that no particular disadvantage arises from taxes on necessaries, on account of their raising wages and lowering the rate of profits. Profits are indeed lowered, but only to the amount of the labourer's portion of the tax, which must at all events, be paid either by his employer, or by the consumer of the produce of the labourer's work. Whether you deduct 50_l._ per annum from the employer's revenue, or add 50_l._ to the prices of the commodities which he consumes, can be of no other consequence to him or to the community, than as it may equally affect all other classes. If it be added to the prices of the commodity, a miser may avoid the tax by not consuming; if it be indirectly deducted from every man's revenue, he cannot avoid paying his fair proportion of the public burthens. A bounty on the production of corn then, would produce no real effect on the annual produce of the land and labour of the country, although it would make corn relatively cheap, and manufactures relatively dear. But suppose now that a contrary measure should be adopted, that a tax should be raised on corn for the purpose of affording a fund for a bounty on the production of commodities. In such case, it is evident that corn would be dear, and commodities cheap; labour would continue at the same price, if the labourer were as much benefited by the cheapness of commodities as he was injured by the dearness of corn; but if he were not, wages would rise, and profits would fall, while money rent would continue the same as before; profits would fall, because, as we have just explained, that would be the mode in which the labourer's share of the tax would be paid by the employers of labour. By the increase of wages the labourer would be compensated for the tax which he would pay in the increased price of corn; by not expending any part of his wages on the manufactured commodities, he would receive no part of the bounty; the bounty would be all received by the employers, and the tax would be partly paid by the employed; a remuneration would be made to the labourers, in the shape of wages, for this increased burden laid upon them, and thus the rate of profits would be reduced. In this case too there would be a complicated measure producing no national result whatever. In considering this question, we have purposely left out of our consideration the effect of such a measure on foreign trade; we have rather been supposing the case of an insulated country, having no commercial connexion with other countries. We have seen that as the demand of the country for corn and commodities would be the same, whatever direction the bounty might take, there would be no temptation to remove capital from one employment to another: but this would no longer be the case if there were foreign commerce, and that commerce were free. By altering the relative value of commodities and corn, by producing so powerful an effect on their natural prices, we should be applying a strong stimulus to the exportation of those commodities whose natural prices were lowered, and an equal stimulus to the importation of those commodities whose natural prices were raised, and thus such a financial measure might entirely alter the natural distribution of employments; to the advantage indeed of the foreign countries, but ruinously to that in which so absurd a policy was adopted. CHAPTER XXII. DOCTRINE OF ADAM SMITH CONCERNING THE RENT OF LAND. "Such parts only of the produce of land," says Adam Smith, "can commonly be brought to market, of which the ordinary price is sufficient to replace the stock which must be employed in bringing them thither, together with its ordinary profits. If the ordinary price is more than this, the surplus part of it will naturally go to the rent of land. _If it is not more, though the commodity can be brought to market, it can afford no rent to the landlord._ Whether the price is, or is not more, depends upon the demand." This passage would naturally lead the reader to conclude that its author could not have mistaken the nature of rent, and that he must have seen that the quality of land which the exigencies of society might require to be taken into cultivation would depend on "_the ordinary price of its produce," whether it were "sufficient to replace the stock, which must be employed in cultivating it, together with its ordinary profits_." But he had adopted the notion that "there were some parts of the produce of land for which the demand must always be such as to afford a greater price than what is sufficient to bring them to market;" and he considered food as one of those parts. He says, that "land, in almost any situation, produces a greater quantity of food than what is sufficient to maintain all the labour necessary for bringing it to market, in the most liberal way in which that labour is ever maintained. The surplus too is always more than sufficient to replace the stock which employed that labour, together with its profits. Something, therefore, always remains for a rent to the landlord." But what proof does he give of this?--no other than the assertion that "the most desert moors in Norway and Scotland produce some sort of pasture for cattle, of which the milk and the increase are always more than sufficient, not only to maintain all the labour necessary for tending them, and to pay the ordinary profit to the farmer, or owner of the herd or flock, but to afford some small rent to the landlord." Now of this I may be permitted to entertain a doubt. I believe that as yet in every country, from the rudest to the most refined, there is land of such a quality that it cannot yield a produce more than sufficiently valuable to replace the stock employed upon it, together with the profits ordinary and usual in that country. In America we all know that this is the case, and yet no one maintains that the principles which regulate rent are different in that country and in Europe. But if it were true that England had so far advanced in cultivation, that at this time there were no lands remaining which did not afford a rent, it would be equally true that there formerly must have been such lands; and that whether there be or not is of no importance to this question, for it is the same thing if there be any capital employed in Great Britain on land which yields only the return of stock with its ordinary profits, whether it be employed on old or on new land. If a farmer agrees for land on a lease of seven or fourteen years, he may propose to employ on it a capital of 10,000_l._, knowing that at the existing price of grain and raw produce, he can replace that part of his stock which he is obliged to expend, pay his rent, and obtain the general rate of profit. He will not employ 11,000_l._, unless the last 1,000_l._ can be employed so productively as to afford him the usual profits of stock. In his calculation, whether he shall employ it or not, he considers only whether the price of raw produce is sufficient to replace his expenses and profits, for he knows that he shall have no additional rent to pay. Even at the expiration of his lease his rent will not be raised; for if his landlord should require rent, because this additional 1000_l._ was employed, he would withdraw it; since by employing it he gets, by the supposition, only the ordinary and usual profits which he may obtain by any other employment of stock; and therefore he cannot afford to pay rent for it, unless the price of raw produce should further rise, or, which is the same thing, unless the usual and general rate of profits should fall. If the comprehensive mind of Adam Smith had been directed to this fact, he would not have maintained that rent forms one of the component parts of the price of raw produce; for price is everywhere regulated by the return obtained by this last portion of capital, for which no rent whatever is paid. If he had adverted to this principle, he would have made no distinction between the law which regulates the rent of mines and the rent of land. "Whether a coal mine, for example," he says, "can afford any rent, depends partly upon its fertility, and partly upon its situation. A mine of any kind may be said to be either fertile or barren, according as the quantity of mineral which can brought from it by a certain quantity of labour, is greater or less than what can be brought by an equal quantity from the greater part of other mines of the same kind. Some coal mines, advantageously situated, cannot be wrought on account of their barrenness. The produce does not pay the expense. They can afford neither profit nor rent. There are some, of which the produce is barely sufficient to pay the labour, and replace, together with its ordinary profits, the stock employed in working them. They afford some profit to the undertaker of the work, but no rent to the landlord. They can be wrought advantageously by nobody but the landlord, who being himself the undertaker of the work, gets the ordinary profit of the capital which he employs in it. Many coal mines in Scotland are wrought in this manner, and can be wrought in no other. The landlord will allow nobody else to work them without paying some rent, and nobody can afford to pay any. "Other coal mines in the same country, sufficiently fertile, cannot be wrought on account of their situation. A quantity of mineral sufficient to defray the expense of working, could be brought from the mine by the ordinary, or even less than the ordinary quantity of labour; but in an inland country, thinly inhabited, and without either good roads or water-carriage, this quantity could not be sold." The whole principle of rent is here admirably and perspicuously explained, but every word is as applicable to land as it is to mines; yet he affirms that "it is otherwise in estates above ground. The proportion, both of their produce and of their rent, is in proportion to their absolute, and not to their relative fertility." But suppose that there were no land which did not afford a rent; then, the amount of rent on the worst land would be in proportion to the excess of the value of the produce above the expenditure of capital and the ordinary profits of stock: the same principle would govern the rent of land of a somewhat better quality, or more favourably situated, and therefore the rent of this land would exceed the rent of that inferior to it, by the superior advantages which it possessed; the same might be said of that of the third quality, and so on to the very best. Is it not then as certain that it is the relative fertility of the land which determines the portion of the produce which shall be paid for the rent of land, as it is that the relative fertility of mines determines the portion of their produce, which shall be paid for the rent of mines? After Adam Smith has declared that there are some mines which can only be worked by the owners, as they will afford only sufficient to defray the expense of working, together with the ordinary profits of the capital employed, we should expect that he would admit that it was these particular mines which regulated the price of the produce. If the old mines are insufficient to supply the quantity of coal required, the price of coal will rise, and will continue rising till the owner of a new and inferior mine finds that he can obtain the usual profits of stock by working his mine. If his mine be tolerably fertile, the rise will not be great before it becomes his interest so to employ his capital; but if it be less productive, it is evident that the price must continue to rise till it will afford him the means of paying his expenses, and obtaining the ordinary profits of stock. It appears, then, that it is always the least fertile mine which regulates the price of coal. Adam Smith, however, is of a different opinion: he observes, that "the most fertile coal mine too regulates the price of coals at all the other mines in its neighbourhood. Both the proprietor and the undertaker of the work find, the one that he can get a greater rent, the other, that he can get a greater profit, by somewhat underselling all their neighbours. Their neighbours are soon obliged to sell at the same price, though they cannot so well afford it, and though it always diminishes, and sometimes takes away altogether, both their rent and their profit. Some works are abandoned altogether; others can afford no rent, and can be wrought only by the proprietor." If the demand for coal should be diminished, or if by new processes the quantity should be increased, the price would fall, and some mines would be abandoned; but in every case, the price must be sufficient to pay the expenses and profit of that mine which is worked without being charged with rent. It is therefore the least fertile mine which regulates price. Indeed it is so stated in another place by Adam Smith himself, for he says, "The lowest price at which coals can be sold for any considerable time, is like that of all other commodities, the price which is barely sufficient to replace, together with its ordinary profits, the stock which must be employed in bringing them to market. At a coal mine for which the landlord can get no rent, but which he must either work himself, or let it alone all together, the price of coals must generally be nearly about this price." But the same circumstance, namely, the abundance and consequent cheapness of coals, from whatever cause it may arise, which would make it necessary to abandon those mines on which there was no rent, or a very moderate one, would, if there were the same abundance, and consequent cheapness of raw produce, render it necessary to abandon the cultivation of those lands for which either no rent was paid, or a very moderate one. If, for example, potatoes should become the general and common food of the people, as rice is in some countries, one fourth, or one half of the land now in cultivation, would probably be immediately abandoned; for if, as Adam Smith says, "an acre of potatoes will produce six thousand weight of solid nourishment, three times the quantity produced by the acre of wheat," there could not be for a considerable time such a multiplication of people, as to consume the quantity that might be raised on the land before employed for the cultivation of wheat; much land would consequently be abandoned, and rent would fall; and it would not be till the population had been doubled or trebled, that the same quantity of land could be in cultivation, and the rent paid for it as high as before. Neither would any greater proportion of the gross produce be paid to the landlord, whether it consisted of potatoes, which would feed three hundred people, or of wheat, which would feed only one hundred; because, though the expenses of production would be very much diminished if the labourer's wages were chiefly regulated by the price of potatoes and not by the price of wheat, and though therefore the proportion of the whole gross produce, after paying the labourers, would be greatly increased, yet no part of that additional proportion would go to rent, but the whole invariably to profits,--profits being at all times raised as wages fall, and lowered as wages rise. Whether wheat or potatoes were cultivated, rent would be governed by the same principle--it would be always equal to the difference between the quantities of produce obtained with equal capitals, either on the same land or on land of different qualities; and therefore, while lands of the same quality were cultivated, and there was no alteration in their relative fertility or advantages, rent would always bear the same proportion to the gross produce. Adam Smith, however, maintains that the proportion which falls to the landlord would be increased by a diminished cost of production, and therefore, that he would receive a larger share as well as a larger quantity, from an abundant than from a scanty produce. "A rice field," he says, "produces a much greater quantity of food than the most fertile corn field. Two crops in the year, from thirty to sixty bushels each, are said to be the ordinary produce of an acre. Though its cultivation therefore requires more labour, a much greater surplus remains after maintaining all that labour. In those rice countries therefore, where rice is the common and favourite vegetable food of the people, and where the cultivators are chiefly maintained with it, _a greater share of this greater surplus should belong to the landlord than in corn countries_." Mr. Buchanan also remarks, that "it is quite clear, that if any other produce which the land yielded more abundantly than corn, were to become the common food of the people, the rent of the landlord would be improved in proportion to its greater abundance." If potatoes were to become the common food of the people, there would be a long interval during which the landlords would suffer an enormous deduction of rent. They would not probably receive nearly so much of the sustenance of man as they now receive, while that sustenance would fall to a third of its present value. But all manufactured commodities, on which a part of the landlord's rent is expended, would suffer no other fall than that which proceeded from the fall in the raw material of which they were made, and which would arise only from the greater fertility of the land, which might then be devoted to its production. When from the progress of population, land of the same quality as before should be taken into cultivation, to produce the food required, and the same number of men should be employed in producing it, the landlord would have not only the same proportion of the produce as before, but that proportion would also be of the same value as before. Rent then would be the same as before; profits, however, would be much higher, because the price of food, and consequently of wages, would be much lower. High profits are favourable to the accumulation of capital. The demand for labour would further increase, and landlords would be permanently benefited by the increased demand for land. The interest of the landlord is always opposed to that of the consumer and manufacturer. Corn can be permanently at an advanced price, only because additional labour is necessary to produce it; because its cost of production is increased. The same cause invariably raises rent, it is therefore for the interest of the landlord that the cost attending the production of corn should be increased. This, however, is not the interest of the consumer; to him it is desirable that corn should be low relatively to money and commodities, for it is always with commodities or money that corn is purchased. Neither is it the interest of the manufacturer that corn should be at a high price, for the high price of corn will occasion high wages, but will not raise the price of his commodity. Not only then must more of his commodity, or, which comes to the same thing, the value of more of his commodity, be given in exchange for the corn which he himself consumes, but more must be given, or the value of more, for wages to his workmen, for which he will receive no remuneration. All classes therefore, except the landlords, will be injured by the increase in the price of corn. The dealings between the landlord and the public are not like dealings in trade, whereby both the seller and buyer may equally be said to gain, but the loss is wholly on one side, and the gain wholly on the other; and if corn could by importation be procured cheaper, the loss in consequence of not importing is far greater on one side, than the gain is on the other. Adam Smith never makes any distinction between a low value of money, and a high value of corn, and therefore infers, that the interest of the landlord is not opposed to that of the rest of the community. In the first case, money is low relatively to all commodities; in the other, corn is high relatively to all. In the first, corn and commodities continue at the same relative values, in the second, corn is higher relatively to commodities as well as money. The following observation of Adam Smith is applicable to a low value of money, but it is totally inapplicable to a high value of corn. "If importation (of corn) was at all times free, our farmers and country gentlemen would probably one year with another, get less money for their corn than they do at present, when importation is at most times in effect prohibited; but the money which they got would be of more value, _would buy more goods of all other kinds_, and would employ more labour. Their real wealth, their real revenue, therefore, would be the same as at present, though it might be expressed by a smaller quantity of silver; and they would neither be disabled nor discouraged from cultivating corn as much as they do at present. On the contrary, as the rise in the real value of silver, in consequence of lowering the money price of corn, lowers somewhat the money price of all other commodities, it gives the industry of the country where it takes place, some advantage in all foreign markets, and thereby tends to encourage and increase that industry. But the extent of the home market for corn, must be in proportion to the general industry of the country where it grows, or to the number of those who produce something else, to give in exchange for corn. But in every country the home market, as it is the nearest and most convenient, so is it likewise the greatest and most important market for corn. That rise in the real value of silver, therefore, which is the effect of lowering the average money price of corn, tends to enlarge the greatest and most important market for corn, and thereby to encourage, instead of discouraging its growth." A high or low money price of corn, arising from the abundance and cheapness of gold and silver, is of no importance to the landlord, as every sort of produce would be equally affected, just as Adam Smith describes; but a relatively high price of corn is at all times greatly beneficial to the landlord, as with the same quantity of corn it not only gives him a command over a greater quantity of money, but over a greater quantity of every commodity which money can purchase. CHAPTER XXIII. ON COLONIAL TRADE. Adam Smith, in his observations on colonial trade, has shewn, most satisfactorily, the advantages of a free trade, and the injustice suffered by colonies, in being prevented by their mother countries, from selling their produce at the dearest market, and buying their manufactures and stores at the cheapest. He has shewn, that by permitting every country freely to exchange the produce of its industry when and where it pleases, the best distribution of the labour of the world will be effected, and the greatest abundance of the necessaries and enjoyments of human life will be secured. He has attempted also to shew, that this freedom of commerce, which undoubtedly promotes the interest of the whole, promotes also that of each particular country; and that the narrow policy adopted in the countries of Europe respecting their colonies, is not less injurious to the mother countries themselves, than to the colonies whose interests are sacrificed. "The monopoly of the colony trade," he says, "like all the other mean and malignant expedients of the mercantile system, depresses the industry of all other countries, but chiefly that of the colonies, without, in the least, increasing, but on the contrary diminishing, that of the country in whose favour it is established." This part of his subject, however, is not treated in so clear and convincing a manner as that in which he shews the injustice of this system towards the colony. Without affirming or denying, that the actual practice of Europe with regard to their colonies is injurious to the mother countries, I may be permitted to doubt whether a mother country may not sometimes be benefited by the restraints to which she subjects her colonial possessions. Who can doubt, for example, that if England were the colony of France, the latter country would be benefited by a heavy bounty paid by England on the exportation of corn, cloth, or any other commodities? In examining the question of bounties, on the supposition of corn being at 4_l._ per quarter in this country, we saw, that with a bounty of 10_s._ per quarter, on exportation in England, corn would have been reduced to 3_l._ 10_s._ in France. Now, if corn had previously been at 3_l._ 15_s._ per quarter in France, the French consumers would have been benefited by 5_s._ per quarter on all imported corn; if the natural price of corn in France were before 4_l._, they would have gained the whole bounty of 10_s._ per quarter. France would thus be benefited by the loss sustained by England: she would not gain a part only of what England lost, but in some cases the whole. It may however be said, that a bounty on exportation is a measure of internal policy, and could not easily be imposed by the mother country. If it would suit the interests of Jamaica and Holland to make an exchange of the commodities which they respectively produce, without the intervention of England, it is quite certain, that by their being prevented from so doing, the interests of Holland and Jamaica would suffer; but if Jamaica is obliged to send her goods to England, and there exchange them for Dutch goods, an English capital, or English agency, will be employed in a trade in which it would not otherwise be engaged. It is allured thither by a bounty, not paid by England, but by Holland and Jamaica. That the loss sustained, through a disadvantageous distribution of labour in two countries, may be beneficial to one of them, while the other is made to suffer more than the loss actually belonging to such a distribution, has been stated by Adam Smith himself; which, if true, will at once prove that a measure, which may be greatly hurtful to a colony, may be partially beneficial to the mother country. Speaking of treaties of commerce, he says, "When a nation binds itself by treaty, either to permit the entry of certain goods from one foreign country which it prohibits from all others, or to exempt the goods of one country from duties to which it subjects those of all others, the country, or at least the merchants and manufacturers of the country, whose commerce is so favoured, must necessarily derive great advantage from the treaty. Those merchants and manufacturers enjoy a sort of monopoly in the country, which is so indulgent to them. That country becomes a market both more extensive and more advantageous for their goods; more extensive, because the goods of other nations, being either excluded or subjected to heavier duties, it takes off a greater quantity of them; more advantageous, because the merchants of the favoured country enjoying a sort of monopoly there, will often sell their goods for a better price than if exposed to the free competition of all other nations." Let the two nations, between which the commercial treaty is made, be the mother country and her colony, and Adam Smith, it is evident, admits, that a mother country may be benefited by oppressing her colony. It may, however, be again remarked, that unless the monopoly of the foreign market be in the hands of an exclusive company, no more will be paid for commodities by foreign purchasers than by home purchasers; the price which they will both pay will not differ greatly from their natural price in the country where they are produced. England, for example, will, under ordinary circumstances, always be able to buy French goods, at the natural price of those goods in France, and France would have an equal privilege of buying English goods at their natural price in England. But at these prices, goods would be bought without a treaty. Of what advantage or disadvantage then is the treaty to either party? The disadvantage of the treaty to the importing country would be this: it would bind her to purchase a commodity, from England for example, at the natural price of that commodity in England, when she might perhaps have bought it at the much lower natural price of some other country. It occasions then a disadvantageous distribution of the general capital, which falls chiefly on the country bound by its treaty to buy in the least productive market; but it gives no advantage to the seller on account of any supposed monopoly, for he is prevented by the competition of his own countrymen from selling his goods above their natural price; at which he would sell them, whether he exported them to France, Spain, or the West Indies, or sold them for home consumption. In what then does the advantage of the stipulation in the treaty consist? It consists in this: these particular goods could not have been made in England for exportation, but for the privilege which she alone had of serving this particular market; for the competition of that country, where the natural price was lower, would have deprived her of all chance of selling those commodities. This, however, would have been of little importance, if England were quite secure that she could sell to the same amount any other goods which she might fabricate, either in the French market, or with equal advantage in any other. The object which England has in view, is, for example, to buy a quantity of French wines of the value of 5000_l._--she desires then to sell goods somewhere by which she may get 5000_l._ for this purpose. If France gives her a monopoly of the cloth market, she will readily export cloth for this purpose; but if the trade is free, the competition of other countries may prevent the natural price of cloth in England from being sufficiently low to enable her to get 5000_l._ by the sale of cloth, and to obtain the usual profits by such an employment of her stock. The industry of England must be employed then on some other commodity; but there may be none of her productions which, at the existing value of money, she can afford to sell at the natural price of other countries. What is the consequence? The wine drinkers of England are still willing to give 5000_l._ for their wine, and consequently 5000_l._ in money is exported to France for that purpose. By this exportation of money its value is raised in England, and lowered in other countries; and with it the _natural price_ of all commodities produced by British industry is also lowered. The advance in the price of money is the same thing as the decline in the price of commodities. To obtain 5000_l._, British commodities may now be exported; for at their reduced natural price they may now enter into competition with the goods of other countries. More goods are sold, however, at the low prices to obtain the 5000_l._ required, which, when obtained, will not procure the same quantity of wine; because, whilst the diminution of money in England has lowered the natural price of goods there, the increase of money in France has raised the natural price of goods and wine in France. Less wine then will be imported into England, in exchange for its commodities, when the trade is perfectly free, than when she is peculiarly favoured by commercial treaties. The _rate_ of profits however will not have varied; money will have altered in relative value in the two countries, and the advantage gained by France will be the obtaining a greater quantity of English, in exchange for a given quantity of French goods, while the loss sustained by England will consist in obtaining a smaller quantity of French goods in exchange for a given quantity of those of England. Foreign trade then, whether fettered, encouraged, or free, will always continue, whatever may be the comparative difficulty of production in different countries; but it can only be regulated by altering the natural price, not the natural value at which commodities can be produced in those countries, and that is effected by altering the distribution of the precious metals. This explanation confirms the opinion which I have elsewhere given, that there is not a tax, a bounty, or a prohibition on the importation or exportation commodities which does not occasion a different distribution of the precious metals, and which does not therefore every where alter both the natural and the market price of commodities. It is evident then, that the trade with a colony may be so regulated, that it shall at the same time be less beneficial to the colony, and more beneficial to the mother country, than a perfectly free trade. As it is disadvantageous to a single consumer to be restricted in his dealings to one particular shop, so is it disadvantageous for a nation of consumers to be obliged to purchase of one particular country. If the shop or the country afforded the goods required the cheapest, they would be secure of selling them without any such exclusive privilege; and if they did not sell cheaper, the general interest would require that they should not be encouraged to continue a trade which they could not carry on at an equal advantage with others. The shop, or the selling country, might lose by the change of employments, but the general benefit is never so fully secured, as by the most productive distribution of the general capital; that is to say, by an universally free trade. An increase in the cost of production of a commodity, if it be an article of the first necessity, will not necessarily diminish its consumption; for although the general power of the purchasers to consume, is diminished by the rise of any one commodity, yet they may relinquish the consumption of some other commodity whose cost of production has not risen. In that case, the quantity supplied will be in the same proportion to the demand as before; the cost of production only will have increased, and yet the price will rise, and must rise, to place the profits of the producer of the enhanced commodity on a level with the profits derived from other trades. M. Say acknowledges that the cost of production is the foundation of price, and yet in various parts of his book he maintains that price is regulated by the proportion which demand bears to supply. The real and ultimate regulator of the relative value of any two commodities, is the cost of their production, and neither the respective quantities which may be produced, nor the competition amongst the purchasers. According to Adam Smith the colony trade, by being one in which British capital only can be employed, has raised the rate of profits of all other trades; and as in his opinion high profits, as well as high wages, raise the prices of commodities, the monopoly of the colony trade has been, according to him, injurious to the mother country; as it has diminished her power of selling manufactured commodities as cheap as other countries. He says, that "in consequence of the monopoly, the increase of the colony trade has not so much occasioned an addition to the trade which Great Britain had before, as a total change in its direction. Secondly, this monopoly has necessarily contributed to keep up the rate of profit in all the different branches of British trade, higher than it naturally would have been, had all nations been allowed a free trade to the British colonies." "But whatever raises in any country the ordinary rate of profit higher than it otherwise would be, necessarily subjects that country both to an absolute, and to a relative disadvantage in every branch of trade of which she has not the monopoly. It subjects her to an absolute disadvantage, because in such branches of trade, her merchants cannot get this greater profit without selling dearer than they otherwise would do, both the goods of foreign countries which they import into their own, and the goods of their own country which they export to foreign countries. Their own country must both buy dearer and sell dearer; must both buy less and sell less; must both enjoy less and produce less than she otherwise would do." "Our merchants frequently complain of the high wages of British labour as the cause of their manufactures being undersold in foreign markets; but they are silent about the high profits of stock. They complain of the extravagant gain of other people, but they say nothing of their own. The high profits of British stock, however, may contribute towards raising the price of British manufacture in many cases as much, and in some perhaps more, than the high wages of British labour." I allow that the monopoly of the colony trade will change, and often prejudicially, the direction of capital; but from what I have already said on the subject of profits, it will be seen that any change from one foreign trade to another, or from home to foreign trade, cannot, in my opinion, affect the rate of profits. The injury suffered will be what I have just described; there will be a worse distribution of the general capital and industry, and therefore less will be produced. The natural price of commodities will be raised, and therefore, though the consumer will be able to purchase to the same money value, he will obtain a less quantity of commodities. It will be seen too, that if it even had the effect of raising profits, it would not occasion the least alteration in prices; prices being regulated neither by wages nor profits. And does not Adam Smith agree in this opinion, when he says, that "the prices of commodities, or the value of gold and silver, as compared with commodities, depends upon the proportion between the _quantity of labour_ which is necessary, in order to bring a certain quantity of gold and silver to market, and that which is necessary to bring thither a certain quantity of any other sort of goods?" That quantity will not be affected, whether profits be high or low, or wages low or high. How then can prices be raised by high profits? CHAPTER XXIV. ON GROSS AND NET REVENUE. Adam Smith constantly magnifies the advantages which a country derives from a large gross, rather than a large net income. "In proportion as a greater share of the capital of a country is employed in agriculture," he says, "the greater will be the quantity of productive labour which it puts into motion within the country; as will likewise be the value which its employment adds to the annual produce of the land and labour of the society. After agriculture, the capital employed in manufactures puts into motion the greatest quantity of productive labour, and adds the greatest value to the annual produce. That which is employed in the trade of exportation has the least effect of any of the three."[43] Granting for a moment that this were true; what would be the advantage resulting to a country from the employment of a great quantity of productive labour, if, whether it employed that quantity or a smaller, its net rent and profits together would be the same. The whole produce of the land and labour of every country is divided into three portions; of these, one portion is devoted to wages, another to profits, and the other to rent. It is from the two last portions only, that any deductions can be made for taxes, or for savings; the former, if moderate, constituting always the necessary expenses of production. To an individual, with a capital of 20,000_l._, whose profits were 2000_l._ per annum, it would be a matter quite indifferent, whether his capital would employ a hundred, or a thousand men, whether the commodity produced sold for 10,000_l._, or for 20,000_l._, provided, in all cases, his profits were not diminished below 2000_l._ Is not the real interest of the nation similar? Provided its net real income, its rent and profits be the same, it is of no importance whether the nation consists of ten or of twelve millions of inhabitants. Its power of supporting fleets and armies, and all species of unproductive labour, must be in proportion to its net, and not in proportion to its gross income. If five millions of men could produce as much food and clothing as was necessary for ten millions, food and clothing for five millions would be the net revenue. Would it be of any advantage to the country, that to produce this same net revenue, seven millions of men should be required, that is to say, that seven millions should be employed to produce food and clothing sufficient for twelve millions? The food and clothing of five millions would be still the net revenue. The employing a greater number of men would enable us neither to add a man to our army and navy, nor to contribute one guinea more in taxes. It is not on the grounds of any supposed advantage accruing from a large population, or of the happiness that may be enjoyed by a greater number of human beings, that Adam Smith supports the preference of that employment of capital, which gives motion to the greatest quantity of industry, but expressly on the ground of its increasing the power of the country; for he says, that "the riches, and, so far as power depends upon riches, the power of every country must always be in proportion to the value of its annual produce, the fund from which all taxes must ultimately be paid." It must however be obvious, that the power of paying taxes, is in proportion to the net, and not in proportion to the gross revenue. In the distribution of employments amongst all countries, the capital of poorer nations will be naturally employed in those pursuits, wherein a great quantity of labour is supported at home, because in such countries the food and necessaries for an increasing population can be most easily procured. In rich countries, on the contrary, where food is dear, capital will naturally flow, when trade is free, into those occupations, wherein the least quantity of labour is required to be maintained at home: such as the carrying trade, the distant foreign trade, where profits are in proportion to the capital, and not in proportion to the quantity of labour employed.[44] Although I admit, that from the nature of rent, a given capital employed in agriculture, on any but the land last cultivated, puts in motion a greater quantity of labour than an equal capital employed in manufactures and trade, yet I cannot admit that there is any difference in the quantity of labour employed by a capital engaged in the home trade, and an equal capital engaged in the foreign trade. "The capital which sends Scots manufactures to London, and brings back English corn and manufactures to Edinburgh," says Adam Smith, "necessarily replaces, by every such operation, two British capitals which had both been employed in the agriculture or manufactures of Great Britain. "The capital employed in purchasing foreign goods for home consumption, when this purchase is made with the produce of domestic industry, replaces too, by every such operation, two distinct capitals; but one of them only is employed in supporting domestic industry. The capital which sends British goods to Portugal, and brings back Portuguese goods to Great Britain, replaces, by every such operation, only one British capital, the other is a Portuguese one. Though the returns, therefore, of the foreign trade of consumption should be as quick as the home trade, the capital employed in it will give but one half the encouragement to the industry or productive labour of the country." This argument appears to me to be fallacious; for though two capitals, one Portuguese and one English, be employed, as Dr. Smith supposes, still a capital will be employed in the foreign trade, double of what would be employed in the home trade. Suppose that Scotland employs a capital of a thousand pounds in making linen, which she exchanges for the produce of a similar capital employed in making silks in England. Two thousand pounds, and a proportional quantity of labour will be employed by the two countries. Suppose now, that England discovers, that she can import more linen from Germany, for the silks which she before exported to Scotland, and that Scotland discovers that she can obtain more silks from France in return for her linen, than she before obtained from England,--will not England and Scotland immediately cease trading with each other, and will not the home trade of consumption be changed for a foreign trade of consumption? But although two additional capitals will enter into this trade, the capital of Germany and that of France, will not the same amount of Scotch and of English capital continue to be employed, and will it not give motion to the same quantity of industry as when it was engaged in the home trade? CHAPTER XXV. ON CURRENCY AND BANKS. It is not my intention to detain the reader by any long dissertation on the subject of money. So much has already been written on currency, that of those who give their attention to such subjects, none but the prejudiced are ignorant of its true principles. I shall therefore take only a brief survey of some of the general laws which regulate its quantity and value. Gold and silver, like all other commodities, are valuable only in proportion to the quantity of labour necessary to produce them, and bring them to market. Gold is about fifteen times dearer than silver, not because there is a greater demand for it, nor because the supply of silver is fifteen times greater than that of gold, but solely because fifteen times the quantity of labour is necessary to procure a given quantity of it. The quantity of money that can be employed in a country must depend on its value: if gold alone were employed for the circulation of commodities, a quantity would be required, one fifteenth only of what would be necessary, if silver were made use of for the same purpose. A circulation can never be so abundant as to overflow; for by diminishing its value, in the same proportion you will increase its quantity, and by increasing its value, diminish its quantity.[45] While the state coins money, and charges no seignorage, money will be of the same value as any other piece of the same metal of equal weight and fineness; but if the state charges a seignorage for coinage, the coined piece of money will generally exceed the value of the uncoined piece of metal by the whole seignorage charged, because it will require a greater quantity of labour, or, which is the same thing, the value of the produce of a greater quantity of labour, to procure it. While the state alone coins, there can be no limit to this charge of seignorage; for by limiting the quantity of coin, it can be raised to any conceivable value. It is on this principle that paper money circulates: the whole charge for paper money may be considered as seignorage. Though it has no intrinsic value, yet, by limiting its quantity, its value in exchange is as great as an equal denomination of coin, or of bullion in that coin. On the same principle too, namely, by a limitation of its quantity, a debased coin would circulate at the value it should bear, if it were of the legal weight and fineness, not at the value of the quantity of metal which it actually contained. In the history of the British coinage, we find accordingly that the currency was never depreciated in the same proportion that it was debased; the reason of which was, that it never was multiplied in proportion to its diminished value.[46] After the establishment of banks, the state has not the sole power of coining or issuing money. The currency may as effectually be increased by paper as by coin; so that if a state were to debase its money, and limit its quantity, it could not support its value, because the banks would have an equal power of adding to the whole quantity of circulation. On these principles it will be seen, that it is not necessary that paper money should be payable in specie to secure its value; it is only necessary that its quantity should be regulated according to the value of the metal which is declared to be the standard. If the standard were gold of a given weight and fineness, paper might be increased with every fall in the value of gold, or, which is the same thing in its effects, with every rise in the price of goods. "By issuing too great a quantity of paper," says Dr. Smith, "of which the excess was continually returning, in order to be exchanged for gold and silver, the Bank of England was, for many years together, obliged to coin gold to the extent of between eight hundred thousand pounds and a million a year, or at an average, about eight hundred and fifty thousand pounds. For this great coinage the Bank, in consequence of the worn and degraded state into which the gold coin had fallen a few years ago, was frequently obliged to purchase bullion, at the high price of four pounds an ounce, which it soon after issued in coin at 3_l._ 17_s._ 10-1/2_d._ an ounce, losing in this manner between two and a half and three per cent. upon the coinage of so very large a sum. Though the Bank therefore paid no seignorage, though the Government was properly at the expense of the coinage, this liberality of Government did not prevent altogether the expense of the Bank." On the principle above stated, it appears to me most clear, that by not re-issuing the paper thus brought in, the value of the whole currency, of the degraded as well as the new gold coin, would have been raised; when all demands on the Bank would have ceased. Mr. Buchanan, however, is not of this opinion, for he says, "that the great expense to which the Bank was at this time exposed, was occasioned, not, as Dr. Smith seems to imagine, by any imprudent issue of paper, but by the debased state of the currency, and the consequent high price of bullion. The Bank, it will be observed, having no other way of procuring[47] guineas but by sending bullion to the mint to be coined, was always forced to issue new coined guineas, in exchange for its returned notes; and when the currency was generally deficient in weight, and the price of bullion high in proportion, it became profitable to draw these heavy guineas from the Bank in exchange for its paper; to convert them into bullion, and to sell them with a profit for bank paper, to be again returned to the Bank for a new supply of guineas, which were again melted and sold. To this drain of specie, the Bank must always be exposed while the currency is deficient in weight, as both an easy and a certain profit then arises from the constant interchange of paper for specie. It may be remarked, however, that to whatever inconvenience and expense the Bank was then exposed by the drain of its specie, it never was imagined necessary to rescind the obligation to pay money for its notes." Mr. Buchanan evidently thinks that the whole currency must, necessarily, be brought down to the level of the value of the debased pieces; but surely by a diminution of the quantity of the currency, the whole that remains can be elevated to the value of the best pieces. Dr. Smith appears to have forgotten his own principle, in his argument on colony currency. Instead of ascribing the depreciation of that paper to its too great abundance, he asks whether, allowing the colony security to be perfectly good, a hundred pounds, payable fifteen years hence, would be equally valuable with a hundred pounds to be paid immediately? I answer yes, if it be not too abundant. Experience however shews, that neither a state nor a bank ever have had the unrestricted power of issuing paper money, without abusing that power: in all states, therefore, the issue of paper money ought to be under some check and control; and none seems so proper for that purpose, as that of subjecting the issuers of paper money to the obligation of paying their notes, either in gold coin or bullion. A currency is in its most perfect state when it consists wholly of paper money, but of paper money of an equal value with the gold which it professes to represent. The use of paper instead of gold substitutes the cheapest in place of the most expensive medium, and enables the country, without loss to any individual, to exchange all the gold which it before used for this purpose, for raw materials, utensils, and food, by the use of which both its wealth and its enjoyments are increased. In a national point of view it is of no importance whether the issuers of this well regulated paper money, be the government or a bank, it will on the whole be equally productive of riches, whether it be issued by one or by the other; but it is not so with respect to the interest of individuals. In a country where the market rate of interest is 7 per cent., and where the state requires for a particular expense 70,000_l._ per annum, it is a question of importance to the individuals of that country, whether they must be taxed to pay this 70,000_l._ per annum, or whether they could raise it without taxes. Suppose that a million of money should be required to fit out an expedition. If the state issued a million of paper, and displaced a million of coin, the expedition would be fitted out without any charge to the people; but if a bank issued a million of paper, and lent it to Government at 7 per cent., thereby displacing a million of coin, the country would be charged with a continual tax of 70,000_l._ per annum: the people would pay the tax, the bank would receive it, and the society would in either case be as wealthy as before; the expedition would have been really fitted out by the improvement of our system, by rendering capital, of the value of a million, productive in the form of commodities, instead of letting it remain unproductive in the form of coin; but the advantage would always be in favour of the issuers of paper; and as the state represents the people, the people would have saved the tax, if they, and not the bank, had issued this million. I have already observed, that if there were perfect security that the power of issuing paper money would not be abused, it would be of no importance with respect to the riches of the country collectively, by whom it was issued; and I have now shewn that the public would have a direct interest that the issuers should be the state, and not a company of merchants or bankers. The danger, however, is, that this power would be more likely to be abused, if in the hands of Government, than if in the hands of a banking company. A company would, it is said, be more under the control of law, and although it might be their interest to extend their issues beyond the bounds of discretion, they would be limited and checked by the power which individuals would have of calling for bullion or specie. It is argued that the same check would not be long respected, if Government had the privilege of issuing money; that they would be too apt to consider present convenience, rather than future security, and might, therefore, on the alleged grounds of expediency, be too much inclined to remove the checks, by which the amount of their issues was controlled. Under an arbitrary government this objection would have great force, but in a free country, with an enlightened legislature, the power of issuing paper money, under the requisite checks of convertibility at the will of the holder, might be safely lodged in the hands of commissioners appointed for that special purpose, and they might be made totally independent of the control of ministers. The sinking fund is managed by commissioners, responsible only to parliament, and the investment of the money entrusted to their charge, proceeds with the utmost regularity; what reason can there be to doubt that the issues of paper money might be regulated with equal fidelity, if placed under similar management? It may be said, that although the advantage accruing to the state, and, therefore, to the public, from issuing paper money, is sufficiently manifest, as it would exchange a portion of the national debt, on which interest is paid by the public, into a debt bearing no interest, yet it would be disadvantageous to commerce, as it would preclude the merchants from borrowing money, and getting their bills discounted, the method in which bank paper is partly issued. This, however, is to suppose that money could not be borrowed, if the Bank did not lend it, and that the market rate of interest and profit depends on the amounts of the issues of money, and on the channel through which it is issued. But as a country would have no deficiency of cloth, of wine, or any other commodity, if they had the means of paying for it, in the same manner neither would there be any deficiency of money to be lent, if the borrowers offered good security, and were willing to pay the market rate of interest for it. In another part of this work, I have endeavoured to shew, that the real value of a commodity is regulated, not by the accidental advantages which may be enjoyed by some of its producers, but by the real difficulties encountered by that producer who is least favoured. It is so with respect to the interest for money; it is not regulated by the rate at which the Bank will lend, whether it be 5, 4, or 3 per cent., but by the rate of profits, which can be made by the employment of capital, and which is totally independent of the quantity, or of the value of money. Whether a bank lent one million, ten millions, or a hundred millions, they would not permanently alter the market rate of interest; they would alter only the value of the money which they thus issued. In one case 10 or 20 times more money might be required to carry on the same business, than what might be required in the other. The applications to the Bank for money, then, depend on the comparison between the rate of profits that may be made by the employment of it, and the rate at which they are willing to lend it. If they charge less than the market rate of interest, there is no amount of money which they might not lend,--if they charge more than that rate, none but spendthrifts and prodigals would be found to borrow of them. We accordingly find, that when the market rate of interest exceeds the rate of 5 per cent. at which the Bank uniformly lend, the discount office is besieged with applicants for money; and, on the contrary, when the market rate is even temporarily under 5 per cent. the clerks of that office have no employment. The reason then why for the last twenty years, the Bank is said to have given so much aid to commerce, by assisting the merchants with money, is, because they have, during that whole period, lent money below the market rate of interest; below that rate at which the merchants could have borrowed elsewhere; but I confess that to me this seems rather an objection to their establishment, than an argument in favour of it. What should we say of an establishment which should regularly supply half the clothiers with their wool under the market price? Of what benefit would it be to the community? It would not extend our trade, because the wool would equally have been bought, if they had charged the market price for it. It would not lower the price of cloth to the consumer, because the price, as I have said before, would be regulated by the cost of its production to those who were the least favoured. Its sole effect then, would be to swell the profits of a part of the clothiers beyond the general and common rate of profits. The establishment would be deprived of its fair profits, and another part of the community would be in the same degree benefited. Now this is precisely the effect of our banking establishments; a rate of interest is fixed by the law below that at which it can be borrowed in the market, and at this rate the Bank are required to lend, or not to lend at all. From the nature of their establishment, they have large funds which they can only dispose of in this way; and a part of the traders of the country are unfairly, and for the country unprofitably, benefited by being enabled to supply themselves with an instrument of trade, at a less charge than those who must be influenced only by market price. The whole business, which the whole community can carry on, depends on the quantity of capital, that is, of its raw material, machinery, food, vessels, &c., employed in production. After a well regulated paper money is established, these can neither be increased nor diminished by the operations of banking. If then the state were to issue the paper money of the country, although it should never discount a bill, or lend one shilling to the public, there would be no alteration in the amount of trade; for we should have the same quantity of raw materials, of machinery, food, and ships; and it is probable too, that the same amount of money might be lent, not at 5 per cent. indeed, a rate fixed by law, but at 6, 7, or 8 per cent., the result of the fair competition in the market between the lenders and the borrowers. Adam Smith speaks of the advantages derived by merchants from the superiority of the Scotch mode of affording accommodation to trade, over the English mode, by means of cash accounts. These cash accounts are credits given by the Scotch banker to his customers, in addition to the bills which he discounts for them; but as the banker, in proportion as he advances money, and sends it into circulation in one way, is debarred from issuing so much in the other, it is difficult to perceive in what the advantage consists. If the whole circulation will bear only one million of paper, one million only will be circulated; and it can be of no real importance either to the Banker or merchant, whether the whole be issued in discounting bills, or a part be so issued, and the remainder be issued by means of these cash accounts. It may perhaps be necessary to say a few words on the subject of the two metals, gold and silver, which are employed in currency, particularly as this question appears to perplex, in many people's minds, the plain and simple principles of currency. "In England," says Dr. Smith, "gold was not considered as a legal tender for a long time after it was coined into money. The proportion between the values of gold and silver money was not fixed by any public law or proclamation; but was left to be settled by the market. If a debtor offered payment in gold, the creditor might either reject such payment altogether, or accept of it at such a valuation of the gold, as he and his debtor could agree upon." In this state of things it is evident that a guinea might sometimes pass for 22_s._ or more, and sometimes for 18_s._ or less, depending entirely on the alteration in the relative market value of gold and silver. All the variations too in the value of gold, as well as in the value of silver, would be rated in the gold coin,--it would appear as if silver was invariable, and that gold only was subject to rise or fall. Thus, although a guinea passed for 22_s._ instead of 18_s._ gold might not have varied in value, the variation might have been wholly confined to the silver, and therefore 22_s._ might have been of no more value than 18_s._ were before. And on the contrary, the whole variation might have been in the gold: a guinea, which was worth 18_s._ might have risen to the value of 22_s._ If now we suppose this silver currency to be debased by clipping, and also increased in quantity, a guinea might pass for 30_s._; for the silver in 30_s._ of such debased money might be of no more value than the gold in one guinea. By restoring the silver currency to its mint value, silver money would rise; but it would appear as if gold fell, for a guinea would probably be of no more value than 21 of such good shillings. If now gold be also made a legal tender, and every debtor be at liberty to discharge a debt by the payment of 420 shillings, or twenty guineas, for every 21_l._ that he owes, he will pay in one or the other according as he can most cheaply discharge his debt. If with five quarters of wheat he can procure as much gold bullion as the mint will coin into twenty guineas, and for the same wheat as much silver bullion as the mint will coin for him into 430 shillings, he will prefer paying in silver, because he would be a gainer of ten shillings by so paying his debt. But if on the contrary he could obtain with this wheat as much gold as would be coined into twenty guineas and a half, and as much silver only as would coin into 420 shillings, he would naturally prefer paying his debt in gold. If the quantity of gold which he could procure could be coined only into twenty guineas, and the quantity of silver into 420 shillings, it would be a matter of perfect indifference to him in which money, silver or gold, it was that he paid his debt. It is not then a matter of chance; it is not because gold is better fitted for carrying on the circulation of a rich country, that gold is ever preferred for the purpose of paying debts; but simply because it is the interest of the debtor so to pay them. During a long period previous to 1797, the year of the restriction on the Bank payments in coin, gold was so cheap, compared with silver, that it suited the Bank of England, and all other debtors, to purchase gold in the market, and not silver, for the purpose of carrying it to the mint to be coined, as they could in that coined metal more cheaply discharge their debts. The silver currency was during a great part of this period very much debased, but it existed in a degree of scarcity, and therefore on the principle which I have before explained, it never sunk in its current value. Though so debased, it was still the interest of debtors to pay in the gold coin. If indeed the quantity of this debased silver coin had been enormously great, or if the mint had issued such debased pieces, it might have been the interest of debtors to pay in this debased money; but its quantity was limited and it sustained its value, and therefore gold was in practice the real standard of currency. That it was so, is no where denied; but it has been contended that it was made so by the law which declared that silver should not be a legal tender for any debt exceeding 25_l._, unless by weight, according to the mint standard. But this law did not prevent any debtor from paying any debt, however large its amount, in silver currency fresh from the mint; that the debtor did not pay in this metal, was not a matter of chance, nor a matter of compulsion, but wholly the effect of choice; it did not suit him to take silver to the mint, it did suit him to take gold thither. It is probable that if the quantity of this debased silver in circulation had been enormously great, and also a legal tender, that a guinea would have been again worth thirty shillings; but it would have been the debased shilling that would have fallen in value, and not the guinea that had risen. It appears then, that whilst each of the two metals was equally a legal tender for debts of any amount, we were subject to a constant change in the principal standard measure of value. It would sometimes be gold, sometimes silver, depending entirely on the variations in the relative value of the two metals, and at such times the metal, which was not the standard, would be melted, and withdrawn from circulation, as its value would be greater in bullion than in coin. This was an inconvenience which it was highly desirable should be remedied, but so slow is the progress of improvement, that although it had been unanswerably demonstrated by Mr. Locke, and had been noticed by all writers on the subject of money since his day, a better system was never adopted till the last session of Parliament, when it was enacted that gold only should be a legal tender for any sum exceeding forty-two shillings. Dr. Smith does not appear to have been quite aware of the effect of employing two metals as currency, and both a legal tender for debts of any amount; for he says that "in reality, during the continuance of any one regulated proportion between the respective values of the different metals in coin, the value of the most precious metal regulates the value of the whole coin." Because gold was in his day the medium in which it suited debtors to pay their debts, he thought that it had some inherent quality by which it did then, and always would regulate the value of silver coin. On the reformation of the gold coin in 1774 a new guinea fresh from the mint would exchange for only twenty-one debased shillings; but in the reign of King William, when the silver coin was in precisely the same condition, a guinea also new and fresh from the mint would exchange for thirty shillings. On this Mr. Buchanan observes, "here, then, is a most singular fact, of which the common theories of currency offer no account; the guinea exchanging at one time for thirty shillings, its intrinsic worth in a debased silver currency, and afterwards the same guinea exchanged for only twenty-one of those debased shillings. It is clear that some great change must have intervened in the state of the currency between these two different periods, of which Dr. Smith's hypothesis offers no explanation." It appears to me, that the difficulty may be very simply solved, by referring this different state of the value of the guinea at the two periods mentioned, to the different _quantities_ of debased silver currency in circulation. In King William's reign gold was not a legal tender, it passed only at a conventional value. All the large payments were probably made in silver, particularly as paper currency, and the operations of banking, were then little understood. The quantity of this debased silver money exceeded the quantity of silver money, which would have been maintained in circulation, if nothing but undebased money had been in use; and consequently it was depreciated as well as debased. But in the succeeding period when gold was a legal tender, when bank-notes also were used in effecting payments, the quantity of debased silver money did not exceed the quantity of silver coin fresh from the mint, which would have circulated if there had been no debased silver money; hence though the money was debased, it was not depreciated. Mr. Buchanan's explanation is somewhat different, he thinks that a subsidiary currency is not liable to depreciation, but that the main currency is. In King William's reign silver was the main currency, and hence was liable to depreciation. In 1774 it was a subsidiary currency, and therefore maintained its value. Depreciation, however, does not depend on a currency being the subsidiary or the main currency, it depends wholly on its being in excess of quantity. To a moderate seignorage on the coinage of money there cannot be much objection, particularly on that currency which is to effect the smaller payments. Money is generally enhanced in value to the full amount of the seignorage, and therefore it is a tax which in no way affects those who pay it, while the quantity of money is not in excess. It must, however, be remarked, that in a country where a paper currency is established, although the issuers of such paper should be liable to pay it in specie on the demand of the holder, still, both their notes and the coin might be depreciated to the full amount of the seignorage on that coin, which is alone the legal tender, before the check, which limits the circulation of paper, would operate. If the seignorage on gold coin were 5 per cent., for instance, the currency, by an abundant issue of bank-notes, might be really depreciated 5 per cent. before it would be the interest of the holders to demand coin for the purpose of melting it into bullion; a depreciation to which we should never be exposed, if either there was no seignorage on the gold coin; or, if a seignorage were allowed, the holders of bank-notes might demand bullion, and not coin, in exchange for them, at the mint price of 3_l._ 17_s._ 10-1/2_d._ Unless then the bank should be obliged to pay their notes in bullion or coin, at the will of the holder, the late law which allows a seignorage of 6 per cent., or four pence per oz., on the silver coin, but which directs that gold shall be coined by the mint without any charge whatever, is perhaps the most proper, as it will more effectually prevent any unnecessary variation of the currency.[48] CHAPTER XXVI. ON THE COMPARATIVE VALUE OF GOLD, CORN, AND LABOUR, IN RICH AND IN POOR COUNTRIES. "Gold and silver, like all other commodities," says Adam Smith, "naturally seek the market where the best price is given for them; and the best price is commonly given for every thing in the country which can best afford it. Labour, it must be remembered, is the ultimate price which is paid for every thing; and in countries where labour is equally well rewarded, the money price of labour will be in proportion to that of the subsistence of the labourer. But gold and silver will naturally exchange for a greater quantity of subsistence in a rich than in a poor country; in a country which abounds with subsistence, than in one which is but indifferently supplied with it." But corn is a commodity, as well as gold, silver, and other things; if all commodities, therefore, have a high exchangeable value in a rich country, corn must not be excepted; and hence we might correctly say, that corn exchanged for a great deal of money, because it was dear, and that money too exchanged for a great deal of corn, because that also was dear; which is to assert that corn is dear and cheap at the same time. No point in political economy can be better established, than that a rich country is prevented from increasing in population, in the same ratio as a poor country, by the progressive difficulty of providing food. That difficulty must necessarily raise the relative price of food, and give encouragement to its importation. How then can money, or gold and silver, exchange for more corn in rich, than in poor countries? It is only in rich countries, where corn is dear, that landholders induce the legislature to prohibit the importation of corn. Who ever heard of a law to prevent the importation of raw produce in America or Poland?--Nature has effectually precluded its importation by the comparative facility of its production in those countries. How then can it be true, that "if you except corn, and such other vegetables, as are raised altogether by human industry, all other sorts of rude produce--cattle, poultry, game of all kinds, the useful fossils and minerals of the earth, &c., naturally grow dearer as the society advances." Why should corn and vegetables alone be excepted? Dr. Smith's error throughout his whole work, lies in supposing that the value of corn is constant; that though the value of all other things may, the value of corn never can be raised. Corn, according to him, is always of the same value, because it will always feed the same number of people. In the same manner it might be said, that cloth is always of the same value, because it will always make the same number of coats. What can value have to do with the power of feeding and clothing? Corn, like every other commodity, has in every country its natural price, viz. that price which is necessary to its production, and without which it could not be cultivated: it is this price which governs its market price, and which determines the expediency of exporting it to foreign countries. If the importation of corn were prohibited in England, its natural price might rise to 6_l._ per quarter in England, whilst it was only at half that price in France. If at this time, the prohibition of importation were removed, corn would fall in the English market, not to a price between 6_l._ and 3_l._, but ultimately and permanently to the natural price of France, the price at which it could be furnished to the English market, and afford the usual and ordinary profits of stock in France; and it would remain at this price, whether England consumed a hundred thousand, or a million of quarters. If the demand of England were for the latter quantity, it is probable that, owing to the necessity under which France would be, of having recourse to land of a worse quality, to furnish this large supply, the natural price would rise in France; and this would of course affect also the price of corn in England. All that I contend for is, that it is the natural price of commodities in the exporting country, which ultimately regulates the prices at which they shall be sold, if they are not the objects of monopoly, in the importing country. But Dr. Smith, who has so ably supported the doctrine of the natural price of commodities ultimately regulating their market price, has supposed a case in which he thinks that the market price would not be regulated either by the natural price of the exporting or of the importing country. "Diminish the real opulence either of Holland, or the territory of Genoa," he says, "while the number of their inhabitants remains the same; diminish their power of supplying themselves from distant countries, and the price of corn, instead of sinking with that diminution in the quantity of their silver which must necessarily accompany this declension, either as its cause or as its effect, will rise to the price of a famine." To me it appears, that the very reverse would take place: the diminished power of the Dutch or Genoese to purchase generally, might depress the price of corn for a time below its natural price in the country from which it was exported, as well as in the countries in which it was imported, but it is quite impossible that it could ever raise it above that price. It is only by increasing the opulence of the Dutch or Genoese, that you could increase the demand, and raise the price of corn above its former price; and that would take place only for a very limited time, unless new difficulties should arise in obtaining the supply. Dr. Smith further observes on this subject: "When we are in want of necessaries, we must part with all superfluities, of which the value, as it rises in times of opulence and prosperity, so it sinks in times of poverty and distress." This is undoubtedly true; but he continues, "it is otherwise with necessaries. Their real price, the quantity of labour which they can purchase or command, rises in times of poverty and distress, and sinks in times of opulence and prosperity, which are always times of great abundance, for they could not otherwise be times of opulence and prosperity. Corn is a necessary, silver is only a superfluity." Two propositions are here advanced, which have no connexion with each other; one, that under the circumstances supposed, corn would command more labour, which is not disputed; the other, that corn would sell at a higher money price, that it would exchange for more silver; this I contend to be erroneous. It might be true, if corn were at the same time scarce, if the usual supply had not been furnished. But in this case it is abundant, it is not pretended that a less quantity than usual is imported, or that more is required. To purchase corn, the Dutch or Genoese want money, and to obtain this money, they are obliged to sell their superfluities. It is the market value and price of these superfluities which falls, and money appears to rise as compared with them. But this will not tend to increase the demand for corn, nor to lower the value of money, the only two causes which can raise the price of corn. Money, from a want of credit, and from other causes, may be in great demand, and consequently dear, comparatively with corn; but on no just principle can it be maintained, that under such circumstances money would be cheap, and therefore, that the price of corn would rise. When we speak of the high or low value of gold, silver, or any other commodity in different countries, we should always mention some medium in which we are estimating them, or no idea can be attached to the proposition. Thus, when gold is said to be dearer in England than in Spain, if no commodity is mentioned, what notion does the assertion convey? If corn, olives, oil, wine, and wool, be at a cheaper price in Spain than in England; estimated in those commodities, gold is dearer in Spain. If again, hardware, sugar, cloth, &c. be at a lower price in England than in Spain, then, estimated in those commodities, gold is dearer in England. Thus gold appears dearer or cheaper in Spain, as the fancy of the observer may fix on the medium by which he estimates its value. Adam Smith, having stamped corn and labour as an universal measure of value, would naturally estimate the comparative value of gold by the quantity of those two objects for which it would exchange: and, accordingly, when he speaks of the comparative value of gold in two countries, I understand him to mean its value estimated in corn and labour. But we have seen, that, estimated in corn, gold may be of very different value in two countries. I have endeavoured to shew that it will be low in rich countries, and high in poor countries; Adam Smith is of a different opinion: he thinks that the value of gold estimated in corn is highest in rich countries. But without further examining which of these opinions is correct, either of them is sufficient to shew, that gold will not necessarily be lower in those countries which are in possession of the mines, though this is a proposition maintained by Adam Smith. Suppose England to be possessed of the mines, and Adam Smith's opinion, that gold is of the greatest value in rich countries, to be correct: although gold would naturally flow from England to all other countries in exchange for their _goods_, it would not follow that gold was necessarily lower in England, as compared with corn and labour, than in those countries. In another place, however, Adam Smith speaks of the precious metals being necessarily lower in Spain and Portugal, than in other parts of Europe, because those countries happen to be almost the exclusive possessors of the mines which produce them. "Poland, where the feudal system still continues to take place at this day as beggarly a country as it was before the discovery of America. _The money price of corn, however, has risen_; THE REAL VALUE OF THE PRECIOUS METALS HAS FALLEN in Poland, in the same manner as in other parts of Europe. Their quantity, therefore, must have increased there as in other places, _and nearly in the same proportion to the annual produce of the land and labour_. This increase of the quantity of those metals, however, has not, it seems, increased that annual produce, has neither improved the manufactures and agriculture of the country, nor mended the circumstances of its inhabitants. Spain and Portugal, the countries which possess the mines, are, after Poland, perhaps, the two most beggarly countries in Europe. The value of the precious metals, however, _must be lower in Spain and Portugal_ than in any other parts of Europe, loaded, not only with a freight and insurance, but with the expense of smuggling, their exportation being either prohibited, or subjected to a duty. _In proportion to the annual produce of the land and labour, therefore, their quantity must be greater in_ those countries than in any other part of Europe: those countries, however, are poorer than the greater part of Europe. Though the feudal system has been abolished in Spain and Portugal, it has not been succeeded by a much better." Dr. Smith's argument appears to me to be this:--Gold, when estimated in corn, is cheaper in Spain than in other countries, and the proof of this is, not that corn is given by other countries to Spain for gold, but that cloth, sugar, hardware, are by those countries given in exchange for that metal. CHAPTER XXVII. TAXES PAID BY THE PRODUCER. M. Say greatly magnifies the inconveniences which result if a tax on a manufactured commodity is levied at an early, rather than at a late period of its manufacture. The manufacturers, he observes, through whose hands the commodity may successively pass, must employ greater funds in consequence of having to advance the tax, which is often attended with considerable difficulty to a manufacturer of very limited capital and credit. To this observation no objection can be made. Another inconvenience on which he dwells is, that in consequence of the advance of the tax, the profits on the advance also must be charged to the consumer, and that this additional tax is one from which the treasury derives no advantage. In this latter objection I cannot agree with M. Say. The state, we will suppose, wants to raise _immediately_ 1000_l._ and levies it on a manufacturer, who will not, for a twelve-month, be able to charge it to the consumer on his finished commodity. In consequence of such delay, he is obliged to charge for his commodity an additional price, not only of 1000_l._ the amount of the tax, but probably of 1100_l._, 100_l._ being for interest on the 1000_l._ advanced. But in return for this additional 100_l._ paid by the consumer, he has a real benefit, inasmuch as his payment of the tax which Government required immediately, and which he must finally pay, has been postponed for a year; an opportunity, therefore, has been afforded to him of lending to the manufacturer, who had occasion for it, the 1000_l._ at 10 per cent., or at any other rate of interest which might be agreed upon. Eleven hundred pounds payable at the end of one year, when money is at 10 per cent. interest, is of no more value than 1000_l._ to be paid immediately. If Government delayed receiving the tax for one year till the manufacture of the commodity was completed, it would, perhaps, be obliged to issue an Exchequer bill bearing interest, and it would pay as much for interest as the consumer would save in price, excepting, indeed, that portion of the price which the manufacturer might be enabled, in consequence of the tax, to add to his own real gains. If, for the interest of the Exchequer bill, Government would have paid 5 per cent., a tax of 50_l._ is saved by not issuing it. If the manufacturer borrowed the additional capital at 5 per cent., and charged the consumer 10 per cent., he also will have gained 5 per cent. on his advance over and above his usual profits, so that the manufacturer and Government together gain, or save, precisely the sum which the consumer pays. M. Simonde, in his excellent work, _De la Richesse Commerciale_, following the same line of argument as M. Say, has calculated that a tax of 4000 francs, paid originally by a manufacturer, whose profits were at the moderate rate of 10 per cent., would, if the commodity manufactured only passed through the hands of five different persons, be raised to the consumer to the sum of 6734 francs. This calculation proceeds on the supposition, that he who first advanced the tax, would receive from the next manufacturer 4400 francs, and he again from the next, 4840 francs; so that at each step 10 per cent. on its value would be added to it. This is to suppose that the value of the tax would be accumulating at compound interest, not at the rate of 10 per cent. per annum, but at an absolute rate of 10 per cent., at every step of its progress. This opinion of M. de Simonde would be correct if five years elapsed between the first advance of the tax, and the sale of the taxed commodity to the consumer; but if one year only elapsed, a remuneration of 400 francs, instead of 2734, would give a profit at the rate of 10 per cent. per annum, to all who had contributed to the advance of the tax, whether the commodity had passed through the hands of five manufacturers or fifty. CHAPTER XXVIII. ON THE INFLUENCE OF DEMAND AND SUPPLY ON PRICES. It is the cost of production which must ultimately regulate the price of commodities, and not, as has been often said, the proportion between the supply and demand: the proportion between supply and demand may, indeed, for a time affect the market value of a commodity, until it is supplied in greater or less abundance, according as the demand may have increased or diminished; but this effect will be only of temporary duration. Diminish the cost of production of hats, and their price will ultimately fall to their new natural price, although the demand should be doubled, trebled, or quadrupled. Diminish the cost of subsistence of men, by diminishing the natural price of the food and clothing, by which life is sustained, and wages will ultimately fall, notwithstanding that the demand for labourers may very greatly increase. The opinion that the price of commodities depends solely on the proportion of supply to demand, or demand to supply, has become almost an axiom in political economy, and has been the source of much error in that science. It is this opinion which has made Mr. Buchanan maintain that wages are not influenced by a rise or fall in the price of provisions, but solely by the demand and supply of labour; and that a tax on the wages of labour would not raise wages, because it would not alter the proportion of the demand of labourers to the supply. The demand for a commodity cannot be said to increase, if no additional quantity of it be purchased or consumed; and yet under such circumstances its money value may rise. Thus, if the value of money were to fall, the price of every commodity would rise, for each of the competitors would be willing to spend more money than before on its purchase; but though its price rose 10 or 20 per cent. if no more were bought than before, it would not, I apprehend, be admissible to say, that the variation in the price of the commodity was caused by the increased demand for it. Its natural price, its money cost of production, would be really altered by the altered value of money; and without any increase of demand, the price of the commodity would be naturally adjusted to that new value. "We have seen," says M. Say, "that the cost of production determines the lowest price to which things can fall: the price below which they cannot remain for any length of time, because production would then be either entirely stopped or diminished." Vol. ii. p. 26. He afterwards says that the demand for gold having increased in a still greater proportion than the supply, since the discovery of the mines, "its price in goods, instead of falling in the proportion of ten to one, fell only in the proportion of four to one;" that is to say, instead of falling in proportion as its natural price had fallen, fell in proportion as the supply exceeded the demand.[49] "_The value of every commodity rises always in a direct ratio to the demand, and in an inverse ratio to the supply._" The same opinion is expressed by the Earl of Lauderdale. "With respect to the variations in value, of which every thing valuable is susceptible, if we could for a moment suppose that any substance possessed intrinsic and fixed value, so as to render an assumed quantity of it constantly, under all circumstances, of an equal value, then the degree of value of all things, ascertained by such a fixed standard, would vary according to the proportion _betwixt the quantity of them_, and the demand for them, and every commodity would of course be subject to a variation in its value, from four different circumstances. 1. "It would be subject to an increase of its value, from a diminution of its quantity. 2. "To a diminution of its value, from an augmentation of its quantity. 3. "It might suffer an augmentation in its value, from the circumstance of an increased demand. 4. "Its value might be diminished by a failure of demand. "As it will, however, clearly appear that no commodity can possess fixed and intrinsic value, so as to qualify it for a measure of the value of other commodities, mankind are induced to select, as a practical measure of value, that which appears the least liable to any of these four sources of variations, _which are the sole causes of alteration of value_. "When in common language, therefore, we express the _value_ of any commodity, it may vary at one period from what it is at another, in consequence of eight different contingencies. 1. "From the four circumstances above stated, in relation to the commodity of which we mean to express the value. 2. "From the same four circumstances, in relation to the commodity we have adopted as a measure of value."[50] This is true of monopolized commodities, and indeed of the market price of all other commodities for a limited period. If the demand for hats should be doubled, the price would immediately rise, but that rise would be only temporary, unless the cost of production of hats, or their natural price, were raised. If the natural price of bread should fall 50 per cent. from some great discovery in the science of agriculture, the demand would not greatly increase, for no man would desire more than would satisfy his wants, and as the demand would not increase, neither would the supply; for a commodity is not supplied merely because it can be produced, but because there is a demand for it. Here then we have a case where the supply and demand have scarcely varied, or if they have increased they have increased in the same proportion; and yet the price of bread will have fallen 50 per cent. at a time too when the value of money had continued invariable. Commodities which are monopolized, either by an individual, or by a company, vary according to the law which Lord Lauderdale has laid down: they fall in proportion as the sellers augment their quantity, and rise in proportion to the eagerness of the buyers to purchase them; their price has no necessary connexion with their natural value: but the prices of commodities, which are subject to competition, and whose quantity may be increased in any moderate degree, will ultimately depend, not on the state of demand and supply, but on the increased or diminished cost of their production. CHAPTER XXIX. MR. MALTHUS'S OPINIONS ON RENT. Although the nature of rent has in the former pages of this work been treated on at some length; yet I consider myself bound to notice some opinions on the subject, which appear to me erroneous, and which are the more important, as they are found in the writings of one to whom, of all men of the present day, some branches of economical science are the most indebted. Of Mr. Malthus's Essay on Population, I am happy in the opportunity here afforded me of expressing my admiration. The assaults of the opponents of this great work have only served to prove its strength; and I am persuaded that its just reputation will spread with the cultivation of that science of which it is so eminent an ornament. Mr. Malthus too--has satisfactorily explained the principles of rent, and shewed that it rises or falls in proportion to the relative advantages, either of fertility or situation, of the different lands in cultivation, and has thereby thrown much light on many difficult points connected with the subject of rent, which were before either unknown, or very imperfectly understood; yet he appears to me to have fallen into some errors, which his authority makes it the more necessary, whilst his characteristic candour renders it less unpleasing to notice. One of these errors lies in supposing rent to be a clear gain and a new creation of riches. I do not assent to all the opinions of Mr. Buchanan concerning rent; but with those expressed in the following passage, quoted from his work by Mr. Malthus, I fully agree; and therefore I must dissent from Mr. Malthus's comment on them. "In this view it (rent) can form no general addition to the stock of the community, as the neat surplus in question is nothing more than a revenue transferred from one class to another; and from the mere circumstance of its thus changing hands, it is clear that no fund can arise, out of which to pay taxes. The revenue which pays for the produce of the land, exists already in the hands of those who purchase that produce; and, if the price of subsistence were lower, it would still remain in their hands, where it would be just as available for taxation as when, by a higher price, it is transferred to the landed proprietor." After various observations on the difference between raw produce and manufactured commodities, Mr. Malthus asks, "Is it possible then, with M. de Sismondi, to regard rent as the sole produce of labour, which has a value purely nominal, and the mere result of that augmentation of price which a seller obtains in consequence of a peculiar privilege; or, with Mr. Buchanan, to consider it as no addition to the national wealth, but merely transfer of value, advantageous only to the landlords, and proportionably _injurious_ to the consumers?"[51] I have already expressed my opinion on this subject in treating of rent, and have now only further to add, that rent is a creation of value, as I understand that word, but not a creation of wealth. If the price of corn, from the difficulty of producing any portion of it, should rise from 4_l._ to 5_l._ per quarter, a million of quarters will be of the value of 5,000,000_l._ instead of 4,000,000_l._, and as this corn will exchange not only for more money but for more of every other commodity, the possessors will have a greater amount of value; and as no one else will in consequence have a less, the society altogether will be possessed of greater value, and in that sense rent is a creation of value. But this value is so far nominal that it adds nothing to the wealth, that is to say, to the necessaries, conveniences, and enjoyments of the society. We should have precisely the same quantity, and no more of commodities, and the same million quarters of corn as before; but the effect of its being rated at 5_l._ per quarter, instead of 4_l._, would be to transfer a portion of the value of the corn and commodities from their former possessors to the landlords. Rent then is a creation of value, but not a creation of wealth; it adds nothing to the resources of a country, it does not enable it to maintain fleets and armies; for the country would have a greater disposable fund if its land were of a better quality, and it could employ the same capital without generating a rent. In another part of Mr. Malthus's "inquiry" he observes, "that the immediate cause of rent is obviously the excess of price above the cost of production at which raw produce sells in the market," and in another place he says, "that the causes of the high price of raw produce may be stated to be three:-- "First, and mainly, that quality of the earth, by which it can be made to yield a greater portion of the necessaries of life than is required for the maintenance of the persons employed on the land. "2dly. That quality peculiar to the necessaries of life of being able to create their own demand, or to raise up a number of demanders in proportion to the quantity of necessaries produced. "And 3dly. The comparative scarcity of the most fertile land." In speaking of the high price of corn, Mr. Malthus evidently does not mean the price per quarter or per bushel, but rather the excess of price for which the whole produce will sell, above the cost of its production, including always in the term "cost of production," profits as well as wages. One hundred and fifty quarters of corn at 3_l._ 10_s._ per quarter, would yield a larger rent to the landlord than 100 quarters at 4_l._, provided the cost of production were in both cases the same. High price, if the expression be used in this sense, cannot then be called a _cause_ of rent; it cannot be said "that the immediate cause of rent is obviously the excess of price above the cost of production, at which raw produce sells in the market," for that excess is itself rent. Rent, Mr. Malthus has defined to be "that portion of the value of the whole produce which remains to the owner of the land, after all the outgoings belonging to its cultivation, of whatever kind, have been paid, including the profits of the capital employed, estimated according to the usual and ordinary rate of the profits of agricultural stock at the time being." Now whatever sum this excess may sell for, is money rent; it is what Mr. Malthus means by "the excess of price above the cost of production at which raw produce sells in the markets;" and therefore in an inquiry into the causes which may elevate the price of raw produce, compared with the cost of production, we are inquiring into the causes which may elevate rent. In reference to the first cause of the rise of rent, Mr. Malthus has the following observations: "We still want to know why the consumption and supply are such as to make the price so greatly exceed the cost of production, and the main cause is evidently the _fertility_ of the earth in producing the necessaries of life. Diminish this plenty, diminish the fertility of the soil, and the excess will diminish; diminish it still further, and it will disappear." True, the excess of necessaries will diminish and disappear, but that is not the question. The question is, whether the excess of their price above the cost of their production will diminish and disappear, for it is on this, that money rent depends. Is Mr. Malthus warranted in his inference, that because the excess of quantity will diminish and disappear, therefore "the cause of the _high price_ of the necessaries of life above the cost of production is to be found in their abundance, rather than in their scarcity; and is not only essentially different from the high price occasioned by artificial monopolies, but from the high price of those peculiar products of the earth, not connected with food, which may be called natural and necessary monopolies?" Are there no circumstances under which the fertility of the land, and the plenty of its produce may be diminished, without occasioning a diminished excess of its price above the cost of production, that is to say, a diminished rent? If there are, Mr. Malthus's proposition is much too universal; for he appears to me to state it as a general principle, true under all circumstances, that rent will rise with the increased fertility of the land, and will fall with its diminished fertility. Mr. Malthus would undoubtedly be right, if, in proportion as the land yielded abundantly, a greater share of the whole produce were paid to the landlord; but the contrary is the fact: when no other but the most fertile land is in cultivation, the landlord has the smallest share of the whole produce, as well as the smallest value, and it is only when inferior lands are required to feed an augmenting population, that both the landlord's share of the whole produce, and the value he receives, progressively increase. Suppose that the demand is for a million of quarters of corn, and that they are the produce of the land actually in cultivation. Now, suppose the fertility of all the land to be so diminished, that the very same lands will yield only 900,000 quarters. The demand being for a million of quarters, the price of corn would rise, and recourse must necessarily be had to land of an inferior quality sooner than if the superior land had continued to produce a million of quarters. But it is this necessity of taking inferior land into cultivation which is the cause of the rise of rent. Rent, it must be remembered, is not in proportion to the absolute fertility of the land in cultivation, but in proportion to its relative fertility. Whatever cause may drive capital to inferior land, must elevate rent; the cause of rent being, as stated by Mr. Malthus in his third proposition, "the comparative scarcity of the most fertile land." The price of corn will naturally rise with the difficulty of producing the last portions of it; but as the cost of production will not increase, as wages and profits taken together will continue always of the same value,[52] it is evident that the excess of price above the cost of production, or, in other words, rent, must rise with the diminished fertility of the land, unless it is counteracted by a great reduction of capital, population, and demand. It does not appear then that Mr. Malthus's proposition is correct: rent does not immediately and necessarily rise or fall with the increased or diminished fertility of the land; but its increased fertility renders it capable of paying at some future time an augmented rent. Land possessed of very little fertility can never bear any rent; land of moderate fertility may be made, as population increases, to bear a moderate rent; and land of great fertility a high rent; but it is one thing to be able to bear a high rent, and another thing actually to pay it. Rent may be lower in a country where lands are exceedingly fertile than in a country where they yield a moderate return, it being in proportion rather to relative than absolute fertility--to the value of the produce, and not to its abundance. Mr. Malthus says, that the "cause of the excess of price of the necessaries of life above the cost of production, is to be found in their abundance rather than their scarcity, and is essentially different from the high price of those peculiar products of the earth, not connected with food, which may be called natural and necessary monopolies." In what are they essentially different? Would not the abundance of those peculiar products of the earth cause a rise of rent, if the demand for them at the same time increased? and can rent ever rise, whatever the commodity produced may be, from abundance merely, and without an increase of demand? The second cause of rent mentioned by Mr. Malthus, namely, "that quality peculiar to the necessaries of life, of being able to create their own demand, or to raise up a number of demanders in proportion to the quantity of necessaries produced," does not appear to me to be any way essential to it. It is not the abundance of necessaries which raises up demanders, but the abundance of demanders which raises up necessaries. We are under no necessity of producing permanently any greater quantity of a commodity than that which is demanded. If by accident any greater quantity were produced, it would fall below its natural price, and therefore would not pay the cost of production, together with the usual and ordinary profits of stock: thus the supply would be checked till it conformed to the demand, and the market price rose to the natural price. Mr. Malthus appears to me to be too much inclined to think that population is only increased by the previous provision of food,--"that it is food that creates its own demand,"--that it is by first providing food that encouragement is given to marriage, instead of considering that the general progress of population is affected by the increase of capital, the consequent demand for labour, and the rise of wages; and that the production of food is but the effect of that demand. It is by giving the workman more money, or any other commodity in which wages are paid, and which has not fallen in value, that his situation is improved. The increase of population, and the increase of food will generally be the effect, but not the necessary effect of high wages. The amended condition of the labourer, in consequence of the increased value which is paid him, does not necessarily oblige him to marry and take upon himself the charge of a family--he may, if it please him, exchange his increased wages for any commodities that may contribute to his enjoyments--for chairs, tables, and hardware; or for better clothes, sugar, and tobacco. His increased wages then will be attended with no other effect than an increased demand for some of those commodities; and as the race of labourers will not be materially increased, his wages will continue permanently high. But although this might be the consequence of high wages, yet so great are the delights of domestic society, that in practice it is invariably found that an increase of population follows the amended condition of the labourer; and it is only because it does so, that a new and increased demand arises for food. This demand then is the effect of an increase of population, but not the cause--it is only because the expenditure of the people takes this direction, that the market price of necessaries exceeds the natural price, and that the quantity of food required is produced; and it is because the number of people is increased, that wages again fall. What motive can a farmer have to produce more corn than is actually demanded, when the consequence would be a depression of its market price below its natural price, and consequently a privation to him of a portion of his profits, by reducing them below the general rate? "If," says Mr. Malthus, "the necessaries of life, the most important products of land, had not the property of creating an increase of demand proportioned to their increased quantity, such increased quantity would occasion a fall in their exchangeable value.[53] However abundant might be the produce of a country, its population might remain stationary. And this abundance without a proportionate demand, and with a very high corn price of labour, which would naturally take place under these circumstances, might reduce the price of raw produce, like the price of manufactures, to the cost of production." "Might reduce the price of raw produce to the cost of production?" Is it ever for any length of time either above or below this price? Does not Mr. Malthus himself, state it never to be so? "I hope," he says, "to be excused for dwelling a little, and presenting to the reader in various forms the doctrine, that corn, in reference to the quantity _actually produced_, is sold at its necessary price like manufactures, because I consider it as a truth of the highest importance, which has been overlooked by the economists, by Adam Smith, and all those writers, who have represented raw produce as selling always at a monopoly price." "Every extensive country may thus be considered as possessing a gradation of machines for the production of corn and raw materials, including in this gradation not only all the various qualities of poor land, of which every territory has generally an abundance, but the inferior machinery which may be said to be employed when good land is further and further forced for additional produce. As the price of raw produce continues to rise, these inferior machines are successively called into action; and as the price of raw produce continues to fall, they are successively thrown out of action. The illustration here used serves to shew at once the _necessity of the actual price of corn to the actual produce_, and the different effect which would attend a great reduction in the price of any particular manufacture, and a great reduction in the price of raw produce."[54] How are these passages to be reconciled to that which affirms, that if the necessaries of life had not the property of creating an increase of demand proportioned to their increased quantity, the abundant quantity produced would then, and then only, reduce the price of raw produce to the cost of production? If corn is never under its natural price, it is never more abundant than the actual population require it to be for their own consumption; no store can be laid up for the consumption of others; it can never then by its cheapness and abundance be a stimulus to population. In proportion as corn can be produced cheaply, the increased wages of the labourers will have more power to maintain families. In America, population increases rapidly, because food can be produced at a cheap price, and not because an abundant supply has been previously provided. In Europe population increases comparatively slowly, because food cannot be produced at a cheap value. In the usual and ordinary course of things, the demand for all commodities precedes their supply. By saying, that corn would, like manufactures, sink to its price of production, if it could not raise up demanders, Mr. Malthus cannot mean that all rent would be absorbed; for he has himself justly remarked, that if all rent were given up by the landlords, corn would not fall in price; rent being the effect, and not the cause of high price, and there being always one quality of land in cultivation which pays no rent whatever, the corn from which replaces by its price, only wages and profits. In the following passage, Mr. Malthus has given an able exposition of the causes of the rise in the price of raw produce in rich and progressive countries, in every word of which I concur; but it appears to me to be at variance with some of the propositions maintained by him in some parts of his Essay on Rent. "I have no hesitation in stating, that, independently of the irregularities in the currency of a country, and other temporary and accidental circumstances, the cause of the high comparative money price of corn is its high comparative _real price_, or the greater quantity of capital and labour which must be employed to produce it; and that the reasons why the real price of corn is higher, and continually rising in countries which are already rich, and still advancing in prosperity and population, is to be found in the necessity of resorting constantly to poorer land, to machines which require a greater expenditure to work them, and which consequently occasion each fresh addition to the raw produce of the country to be purchased at a greater cost; in short, it is to be found in the important truth, that corn in a progressive country, is sold at the price necessary to yield the actual supply; and that, as this supply becomes more and more difficult, the price rises in proportion." The real price of a commodity is here properly stated to depend on the greater or less quantity of labour and capital (that is, accumulated labour) which must be employed to produce it. Real price does not, as some have contended, depend on money value; nor, as others have said, on value relatively to corn, labour, or any other commodity taken singly, or to all commodities collectively; but, as Mr. Malthus justly says, "on the greater (or less) quantity of capital and labour which must be employed to produce it." Among the causes of the rise of rent, Mr. Malthus mentions, "such an increase of population as will lower the wages of labour." But if, as the wages of labour fall, the profits of stock rise, and they be together always of the same value,[55] no fall of wages can raise rent, for it will neither diminish the portion, nor the value of the portion of the produce which will be allotted to the farmer and labourer together, and therefore will not leave a larger portion, nor a larger value for the landlord. In proportion as less is appropriated for wages, more will be appropriated for profits, and _vice versa_. This division will be settled by the farmer and his labourers, without any interference of the landlord; and indeed it is a matter in which he can have no interest, otherwise than as one division may be more favourable than another, to new accumulations, and to a further demand for land. If wages fall, profits, and not rent, would rise. If wages rose, profits, and not rent, would fall. The rise of rent and wages, and the fall of profits, are generally the inevitable effects of the same cause--the increasing demand for food, the increased quantity of labour required to produce it, and its consequently high price. If the landlord were to forego his whole rent, the labourers would not be in the least benefited. If the labourers were to give up their whole wages, the landlords would derive no advantage from such a circumstance; but in both cases the farmer would receive and retain all which they relinquished. It has been my endeavour to shew in this work, that a fall of wages would have no other effect than to raise profits. Another cause of the rise of rent, according to Mr. Malthus, is "such agricultural improvements, or such increase of exertions, as will diminish the number of labourers necessary to produce a given effect." This would not raise the value of the whole produce, and would therefore not increase rent. It would rather have a contrary tendency, it would lower rent; for if in consequence of these improvements, the actual quantity of food required could be furnished either with fewer hands, or with a less quantity of land, the price of raw produce would fall, and capital would be withdrawn from the land.[56] Nothing can raise rent, but a demand for new land of an inferior quality, or some cause which shall occasion an alteration in the relative fertility of the land already under cultivation.[57] Improvements in agriculture, and in the division of labour, are common to all land; they increase the absolute quantity of raw produce obtained from each, but probably do not much disturb the relative proportions which before existed between them. Mr. Malthus has justly commented on an error of Adam Smith, and says, "the substance of his (Dr. Smith's) argument is, that corn is of so peculiar a nature, that its real price cannot be raised by an increase of its money price; and that, as it is clearly an increase of real price alone, which can encourage its production, the rise of money price, occasioned by a bounty, can have no such effect." He continues: "It is by no means intended to deny the powerful influence of the price of corn upon the price of labour, on an average of a considerable number of years; but that this influence is not such as to prevent the movement of capital to, or from the land, which is the precise point in question, will be made sufficiently evident by a short inquiry into the manner in which labour is paid, and brought into the market, and by a consideration of the consequences to which the assumption of Adam Smith's proposition would inevitably lead."[58] Mr. Malthus then proceeds to shew, that demand and high price will as effectually encourage the production of raw produce, as the demand and high price of any other commodity will encourage its production. In this view it will be seen, from what I have said of the effects of bounties, that I entirely concur. I have noticed the passage Mr. Malthus's "Observations on the Corn Laws," for the purpose of shewing in what a different sense the term real price is used here, and in his other pamphlet, entitled "Grounds of an Opinion, &c." In this passage Mr. Malthus tells us, that "it is clearly an increase of real price alone which can encourage the production of corn," and by real price he evidently means the increase in its value relatively to all other things, or in other words, the rise in its market above its natural price, or the cost of its production. If by real price this is what is meant, Mr. Malthus's opinion is undoubtedly correct; it is the rise in the market price of corn which alone encourages its production, for it may be laid down as a principle uniformly true, that the only encouragement to the increased production of a commodity, is its market value exceeding its natural or necessary value. But this is not the meaning which Mr. Malthus, on other occasions, attaches to the term, real price. In the Essay on Rent, Mr. Malthus says, by "the real growing price of corn, I mean the real _quantity_ of labour and capital, _which has been employed_ to produce the last additions which have been made to the national produce." In another part he states "the cause of the high comparative real price of corn to be the greater _quantity_ of capital and labour, which must be _employed_ to produce it."[59] Suppose that in the foregoing passage we were to substitute this definition of real price, would it not then run thus?--"It is clearly the increase in the quantity of labour and capital which must be employed to produce corn, which alone can encourage its production." This would be to say, that it is clearly the rise in the natural or necessary price of corn, which encourages its production--a proposition which could not be maintained. It is not the price at which corn can be produced, that has any influence on the quantity produced, but the price at which it can be sold. It is in proportion to the degree of the excess of its price above the cost of production, that capital is attracted to or repelled from the land. If that excess be such as to give to capital so employed, a greater than the general profit of stock, capital will go to the land; if less, it will be withdrawn from it. It is not then by an alteration in the real price of corn that its production is encouraged, but by an alteration in its market price. It is not "because a greater quantity of capital and labour must be employed to produce it," Mr. Malthus's just definition of real price, that more capital and labour are attracted to the land, but because the market price rises above this its real price, and, notwithstanding the increased charge, makes the cultivation of land the more profitable employment of capital. Nothing can be more just than the following observations of Mr. Malthus, on Adam Smith's standard of value. "Adam Smith was evidently led into this train of argument, from his habit of considering _labour as the standard measure of value_, and corn as the measure of labour. But that corn is a very inaccurate measure of labour, the history of our own country will amply demonstrate; where labour, compared with corn, will be found to have experienced very great and striking variations, not only from year to year, but from century to century; and for ten, twenty, and thirty years together. _And that neither labour nor any other commodity can be an accurate measure of real value in exchange_, is now considered as one of the most incontrovertible doctrines of political economy; and, indeed, follows from the very definition of value in exchange." If neither corn nor labour are accurate measures of real value in exchange, which they clearly are not, what other commodity is?--certainly none. If then the expression real price of commodities, have any meaning, it must be that which Mr. Malthus has stated, in the Essay on Rent--it must be measured by the proportionate quantity of capital and labour necessary to produce them. In Mr. Malthus's "Inquiry into the Nature of Rent," he says, "that, independently of irregularities in the currency of a country, and other temporary and accidental circumstances, the cause of the high comparative money price of corn, is its high comparative real price, _or the greater quantity of capital and labour which must be employed to produce it_."[60] This, I apprehend, is the correct account of all permanent variations in price, whether of corn or of any other commodity. A commodity can only permanently rise in price, either because a greater quantity of capital and labour must be employed to produce it, or because money has fallen in value; and on the contrary, it can only fall in price, either because a less quantity of capital and labour may be employed to produce it, or because money has risen in value. A variation arising from the latter of either of these alternatives, an altered value of money, is common at once to all commodities; but a variation arising from the former cause, is confined to the particular commodity requiring more or less labour in its production. By allowing the free importation of corn, or by improvements in agriculture, raw produce would fall; but the price of no other commodity would be affected, except in proportion to the fall in the real value, or cost of production, of the raw produce which entered into its composition. Mr. Malthus, having acknowledged this principle, cannot, I think, consistently maintain that the whole money value of all the commodities in the country must sink exactly in proportion to the fall in the price of corn. If the corn consumed in the country were of the value of ten millions per annum, and the manufactured and foreign commodities consumed were of the value of twenty millions, making altogether thirty millions, it would not be admissible to infer that the annual expenditure was reduced to 15 millions, because corn had fallen 50 per cent., or from 10 to 5 millions. The value of the raw produce which entered into the composition of these manufactures might not, for example, exceed 20 per cent. of their whole value, and, therefore, the fall in the value of manufactured commodities, instead of being from 20 to 10 millions, would be only from 20 to 18 millions; and after the fall in the price of corn of 50 per cent., the whole amount of the annual expenditure, instead of falling from 30 to 25 millions, would fall from 30 to 23 millions.[61] Instead of thus considering the effect of a fall in the value of raw produce; as Mr. Malthus was bound to do by his previous admission; he considers it as precisely the same thing with a rise of 100 per cent. in the value of money, and, therefore, argues as if all commodities would sink to half their former price. "During the twenty years, beginning with 1794," he says, "and ending with 1813, the average price of British corn per quarter was about eighty-three shillings; during the ten years ending with 1813, ninety-two shillings; and during the last five years of the twenty, one hundred and eight shillings. In the course of these twenty years, the Government borrowed near five hundred millions of real capital; for which, on a rough average, exclusive of the sinking fund, it engaged to pay about five per cent. But if corn should fall to fifty shillings a quarter, and other commodities in proportion, instead of an interest of about five per cent., the Government would really pay an interest of seven, eight, nine, and, for the last two hundred millions, ten per cent. "To this extraordinary generosity towards the stockholders, I should be disposed to make no kind of objection, if it were not necessary to consider by whom it is to be paid; and a moment's reflection will shew us, that it can only be paid by the industrious classes of society, and the landlords, that is, by all those whose nominal income will vary with the variations in the measure of value. The nominal revenues of this part of the society, compared with the average of the last five years, will be diminished one half, and out of this nominally reduced income, they will have to pay the same nominal amount of taxes."[62] In the first place, I think, I have already shewn, that the nominal income of the whole country will not be diminished in the proportion for which Mr. Malthus here contends; it would not follow, that because corn fell fifty per cent., each man's income would be reduced fifty per cent. in value.[63] In the second place, I think the reader will agree with me, that the increased charge, if admitted, would not fall exclusively "on the landlords and the industrious classes of society:" the stockholder, by his expenditure, contributes his share to the support of the public burdens in the same way as the other classes of society. If then money became really more valuable, although he would receive a greater value, he would also pay a greater value in taxes, and, therefore, it cannot be true that the whole addition to the real value of the interest would be paid by "the landlords and the industrious classes." The whole argument, however, of Mr. Malthus, is built on an infirm basis: it supposes, because the gross income of the country is diminished, that, therefore, the net income must also be diminished, in the same proportion. It has been one of the objects of this work to shew, that with every fall in the real value of necessaries, the wages of labour would fall, and that the profits of stock would rise--in other words, that of any given annual value a less portion would be paid to the labouring class, and a larger portion to those whose funds employed this class. Suppose the value of the commodities produced in a particular manufacture to be 1000_l._, and to be divided between the master and his labourers, in the proportion of 800_l._ to labourers, and 200_l._ to the master; if the value of these commodities should fall to 900_l._, and 100_l._ be saved from the wages of labour, in consequence of the fall of necessaries, the net income of the masters would be in no degree impaired, and, therefore, he could with just as much facility pay the same amount of taxes, after, as before the reduction of price.[64] And that wages would fall as much as the mass of commodities, or rather that the net income remaining to landlords, farmers, manufacturers, traders, and stockholders, the only real payers of taxes, would be as great as before, is very highly probable; for nothing would be even nominally lost to the society by the freest importation of corn, but that portion of rent of which the landlords would be deprived in consequence of the fall of raw produce. The difference between the value of corn and all other commodities sold in the country, before and after the importation of cheap corn, would be only equal to the fall of rent; because, independently of rent, the same quantity of labour would always produce the same value. The whole reduction which is made in wages, is a value actually added to the value of the net income before possessed by the society; whilst the only value which is taken from that net income is the value of that part of their rent of which the landlords will be deprived by a fall of raw produce. When we consider that the fall of produce acts upon a limited number of landlords, while it reduces the wages not only of those who are employed in agriculture, but of all those who are occupied in manufactures and commerce, it may well be doubted, whether the net revenue of the society would suffer any abatement whatever.[65] But, if it did, it must not be supposed that the ability to pay taxes will diminish in the same degree, as the money value, even of the net revenue. Suppose that my net revenue were diminished from 1000_l._ to 900_l._; but that my taxes continued to be the same, to be 100_l._: is it not probable that my ability to pay this 100_l._ may be greater with the smaller than with the larger revenue? Commodities cannot fall so universally as Mr. Malthus supposes, without greatly benefiting the consumers, without enabling them with a much smaller money revenue to command more of the conveniences, necessaries, and luxuries of human life; and the question resolves itself into this--whether those who are in possession of the net revenue of the country will be benefited as much by the diminished price of commodities, as they will suffer by the greater real taxation. On which side the balance may preponderate, will depend on the proportion which taxes bear to the annual revenue; if it be enormously large, it may undoubtedly more than counterbalance the advantages from cheap necessaries; but I trust enough has been said, to shew, that Mr. Malthus has very greatly over-rated the loss to the tax-payers, from a fall in one of the most important necessaries of life; and that if they were not entirely remunerated for the real increase of taxes, by the fall of wages and increase of profits, they would be more than compensated, by the cheaper price of all objects on which their incomes were expended. That the stockholder is benefited by a great fall in the value of corn, cannot be doubted; but if no one else be injured, that is no reason why corn should be made dear: for the gains of the stockholder are national gains, and increase, as all other gains do, the real wealth and power of the country. If they are unjustly benefited, let the degree in which they are so, be accurately ascertained, and then it is for the legislature to devise a remedy; but no policy can be more unwise than to shut ourselves out from the great advantages arising from cheap corn, and abundant productions, merely because the stockholder would have an undue proportion of the increase. To regulate the dividends on stock by the money value of corn, has never yet been attempted. If justice and good faith required such a regulation, a great debt is due to the old stockholders; for they have been receiving the same money dividends for more than a century, although corn has, perhaps, been doubled or trebled in price.[66] Mr. Malthus says, "It is true, that the last additions to the agricultural produce of an improving country are not attended with a large proportion of rent; and it is precisely this circumstance that may make it answer to a rich country to import some of its corn, if it can be secure of obtaining an equable supply. But in all cases the importation of foreign corn must fail to answer nationally, if it is not so much cheaper than the corn that can be grown at home, as to equal both the profits and the rent of the grain which it displaces." _Grounds_, &c. p. 36. As rent is the effect of the high price of corn, the loss of rent is the effect of a low price. Foreign corn never enters into competition with such home corn as affords a rent; the fall of price invariably affects the landlord till the whole of his rent is absorbed;--if it fall still more, the price will not afford even the common profits of stock; capital will then quit the land for some other employment, and the corn, which was before grown upon it, will then, and not till then, be imported. From the loss of rent, there will be a loss of value, of estimated money value, but there will be a gain of wealth. The amount of the raw produce and other productions together will be increased, from the greater facility with which they are produced; they will, though augmented in quantity, be diminished in value. Two men employ equal capitals--one in agriculture, the other in manufactures. That in agriculture produces a net annual value of 1200_l._ of which 1000_l._ is retained for profit, and 200_l._ is paid for rent; the other in manufactures produces only an annual value of 1000_l._ Suppose that by importation, the same quantity of corn can be obtained for commodities which cost 950_l._, and that, in consequence, the capital employed in agriculture is diverted to manufactures, where it can produce a value of 1000_l._ the net revenue of the country will be of less value, it will be reduced from 2200_l._ to 2000_l._, but there will not only be the same quantity of commodities and corn for its own consumption, but also as much addition to that quantity as 50_l._ would purchase, the difference between the value at which its manufactures were sold to the foreign country, and the value of the corn which was purchased from it. Mr. Malthus says, "It has been justly observed by Adam Smith, that no equal quantity of productive labour employed in manufactures can ever occasion so great a reproduction as in agriculture." If Adam Smith speaks of value, he is correct, but if he speaks of riches, which is the important point, he is mistaken, for he has himself defined riches to consist of the necessaries, conveniences, and enjoyments of human life. One set of necessaries and conveniences admits of no comparison with another set; value in use cannot be measured by any known standard, it is differently estimated by different persons. FOOTNOTES: [1] Chap. xv. part i. "Des Débouchés," contains in particular some very important principles, which I believe were first explained by this distinguished writer. [2] Book i. chap. 5. [3] "But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated. It is often difficult to ascertain the proportion between two different quantities of labour. The time spent in two different sorts of work will not always alone determine this proportion. The different degrees of hardship endured, and of ingenuity exercised, must likewise be taken into account. There may be more labour in an hour's hard work, than in two hours' easy business; or, in an hour's application to a trade, which it costs ten years' labour to learn, than in a month's industry at an ordinary and obvious employment. But it is not easy to find any accurate measure, either of hardship or ingenuity. In exchanging, indeed, the different productions of different sorts of labour for one another, some allowance is commonly made for both. It is adjusted, however, not by any accurate measure, but by the higgling and bargaining of the market, according to that sort of rough equality, which, though not exact, is sufficient for carrying on the business of common life."--_Wealth of Nations._ Book i. chap. 10. [4] Wealth of Nations, book i. chap. 10. [5] "The earth, as we have already seen, is not the only agent of nature which has a productive power; but it is the only one, or nearly so, that one set of men take to themselves, to the exclusion of others; and of which consequently they can appropriate the benefits. The waters of rivers, and of the sea, by the power which they have of giving movement to our machines, carrying our boats, nourishing our fish, have also a productive power; the wind which turns our mills, and even the heat of the sun, work for us; but happily no one has yet been able to say: the 'wind and the sun are mine, and the service which they render must be paid for.'"--_Economie Politique, par J. B. Say_, vol. ii. p. 124. [6] Has not M. Say forgotten, in the following passage, that it is the cost of production which ultimately regulates price? "The produce of labour employed on the land has this peculiar property, that it does not become more dear by becoming more scarce, because population always diminishes at the same time that food diminishes, and consequently the quantity of these products _demanded_, diminishes at the same time as the quantity supplied. Besides it is not observed that corn is more dear in those places where there is plenty of uncultivated land, than in completely cultivated countries. England and France were much more imperfectly cultivated in the middle ages than they are now; they produced much less raw produce: nevertheless from all that we can judge by a comparison with the value of other things, corn was not sold at a dearer price. If the produce was less, so was the population; the weakness of the demand compensated the feebleness of the supply." vol. ii. 338. M. Say being impressed with the opinion that the price of commodities is regulated by the price of labour, and justly supposing that charitable institutions of all sorts tend to increase the population beyond what it otherwise would be, and therefore to lower wages, says, "I suspect that the cheapness of the goods, which come from England is partly caused by the numerous charitable institutions which exist in that country." vol. ii. 277. This is a consistent opinion in one who maintains that wages regulate price. [7] "In agriculture too," says Adam Smith, "nature labours along with man; and though her labour costs no expense, its produce has its value, as well as that of the most expensive workman." The labour of nature is paid, not because she does much, but because she does little. In proportion as she becomes niggardly in her gifts, she exacts a greater price for her work. Where she is munificently beneficent, she always works gratis. "The labouring cattle employed in agriculture, not only occasion, like the workmen in manufactures, the reproduction of a value equal to their own consumption, or to the capital which employs them, together with its owner's profits, but of a much greater value. Over and above the capital of the farmer and all its profits, they regularly occasion the reproduction of the rent of the landlord. This rent may be considered as the produce of those powers of nature, the use of which the landlord lends to the farmer. It is greater or smaller according to the supposed extent of those powers, or in other words, according to the supposed natural or improved fertility of the land. It is the work of nature which remains, after deducting or compensating every thing which can be regarded as the work of man. It is seldom less than a fourth, and frequently more than a third of the whole produce. No equal quantity of productive labour employed in manufactures, can ever occasion so great a reproduction. _In them nature does nothing, man does all_; and the reproduction must always be in proportion to the strength of the agents that occasion it. The capital employed in agriculture, therefore, not only puts into motion a greater quantity of productive labour than any equal capital employed in manufactures, but in proportion too to the quantity of the productive labour which it employs, it adds a much greater value to the annual produce of the land and labour of the country, to the _real_ wealth and revenue of its inhabitants. Of all the ways in which a capital can be employed, it is by far the most advantageous to the society."--Book II. chap. v. p. 15. Does nature nothing for man in manufactures? Are the powers of wind and water, which move our machinery, and assist navigation, nothing? The pressure of the atmosphere and the elasticity of steam, which enable us to work the most stupendous engines--are they not the gifts of nature? to say nothing of the effects of the matter of heat in softening and melting metals, of the decomposition of the atmosphere in the process of dyeing and fermentation. There is not a manufacture which can be mentioned, in which nature does not give her assistance to man, and give it too, generously and gratuitously. In remarking on the passage which I have copied from Adam Smith, Mr. Buchanan observes, "I have endeavoured to shew, in the observations on productive and unproductive Footnote: labour, contained in the fourth volume, that agriculture adds no more to the national stock than any other sort of industry. In dwelling on the reproduction of rent as so great an advantage to society, Dr. Smith does not reflect that rent is the effect of high price, and that what the landlord gains in this way, he gains at the expense of the community at large. There is no absolute gain to the society by the reproduction of rent; it is only one class profiting at the expense of another class. The notion of agriculture yielding a produce, and a rent in consequence, because nature concurs with human industry in the process of cultivation, is a mere fancy. It is not from the produce, but from the price at which the produce is sold, that the rent is derived; and this price is got, not because nature assists in the production, but because it is the price which suits the consumption to the supply." [8] To make this obvious, and to shew the degrees in which corn and money rent will vary, let us suppose that the labour of ten men will, on land of a certain quality, obtain 180 quarters of wheat, and its value to be 4_l._ per quarter, or 720_l._; and that the labour of ten additional men will, on the same or any other land, produce only 170 quarters in addition; wheat would rise from 4_l._ to 4_l._ 4_s._. 8_d._ for 170: 180:: 4_l._: 4_l._ 4_s._ 8_d._; or, as in the production of 170 quarters, the labour of 10 men is necessary in one case, and only of 9.44 in the other, the rise would be as 9.44 to 10, or as 4_l._ to 4_l._ 4_s._ 8_d._ If 10 men be further employed, and the return be 160, the price will rise to £4 10 0 150, " " " " " 4 16 0 140, " " " " " 5 2 10 Now if no rent was paid for the land which yielded 180 quarters when corn was at 4_l._ per quarter, the value of 10 quarters would be paid as rent when only 170 could be procured, which, at 4_l._ 4_s._ 8_d._ would be 42_l._ 7_s._ 6_d._ 20 qrs. when 160 were produced, which at £4 10 0 would be £ 90 0 0 30 qrs. " 150 " " " " 4 16 0 " " 144 0 0 40 qrs. " 140 " " " " 5 2 10 " " 205 13 4 {100} { 100 Corn rent then would increase {200} and money rent in the { 212 in the proportion of {300} proportion of { 340 {400} { 485 [9] With Mr. Buchanan in the following passage, if it refers to temporary states of misery, I so far agree, that "the great evil of the labourer's condition, is poverty, arising either from a scarcity of food or of work; and in all countries, laws without number have been enacted for his relief. But there are miseries in the social state which legislation cannot relieve; and it is useful therefore to know its limits, that we may not, by aiming at what is impracticable, miss the good which is really in our power."--_Buchanan_, page 61. [10] The reader is desired to bear in mind, that for the purpose of making the subject more clear, I consider money to be invariable in value, and therefore every variation of price to be referable to an alteration in the value of the commodity. [11] The reader is aware, that we are leaving out of our consideration the accidental variations arising from bad and good seasons, or from the demand increasing or diminishing by any sudden effect on the state of population. We are speaking of the natural and constant, not of the accidental and fluctuating price of corn. [12] The 180 quarters of corn would be divided in the following proportions between landlords, farmers, and labourers, with the above-named variations in the value of corn. Price per qr. Rent. Profit. Wages. Total. _£. s. d._ In Wheat. In Wheat. In Wheat. 4 0 0 None. 120 qrs. 60 qrs.} 4 4 8 10 qrs. 111.7 58.3 } 4 10 0 20 103.4 56.6 } 180 4 16 0 30 95 55 } 5 2 10 40 86.7 53.5 } and, under the same circumstances, money rent, wages, and profit, would be as follows: Price per qr. Rent. Profit. Wages. Total. _£. s. d._ _£. s. d._ _£. s. d._ _£. s. d._ _£. s. d._ 4 0 0 None. 480 0 0 240 0 0 720 0 0 4 4 8 42 7 6 473 0 0 247 0 0 762 7 6 4 10 0 90 0 0 465 0 0 255 0 0 810 0 0 4 16 0 144 0 0 456 0 0 264 0 0 864 0 0 5 2 10 205 13 4 445 15 0 274 5 0 925 13 4 [13] See Adam Smith, book i. chap. 9. [14] It will appear then, that a country possessing very considerable advantages in machinery and skill, and which may therefore be enabled to manufacture commodities with much less labour than her neighbours, may in return for such commodities, import a portion of the corn required for its consumption, even if its land were more fertile, and corn could be grown with less labour than in the country from which it was imported. Two men can both make shoes and hats, and one is superior to the other in both employments; but in making hats, he can only exceed his competitor by one-fifth or 20 per cent., and in making shoes he can excel him by one-third or 33 per cent.;--will it not be for the interest of both, that the superior man should employ himself exclusively in making shoes, and the inferior man in making hats? [15] Book V. ch. ii. [16] M. Say appears to have imbibed the general opinion on this subject. Speaking of corn, he says, "thence it results, that its price influences the price of _all_ other commodities. A farmer, a manufacturer, or a merchant, employs a certain number of workmen, who all have occasion to consume a certain quantity of corn. If the price of corn rises, he is obliged to raise, in an equal proportion, the price of his productions." Vol. i. p. 255. [17] M. Say says, that "the tax, added to the price of a commodity, raises its price. Every increase in the price of a commodity, necessarily reduces the number of those who are able to purchase it, or at least the quantity they will consume of it." This is by no means a necessary consequence. I do not believe, that if bread were taxed, the consumption of bread would be diminished, more than if cloth, wine, or soap, were taxed. [18] The following remark of the same author appears to me equally erroneous: "When a high duty is laid on cotton, the production of all those goods, of which cotton is the basis, is diminished. If the total value added to cotton in its various manufactures, in a particular country, amounted to 100 millions of francs per annum, and the effect of the tax was, to diminish the consumption one half, then the tax would deprive that country every year of 50 millions of francs, in addition to the sum received by government." Vol. ii. p. 314. [19] It is observed by M. Say, "that a manufacturer is not enabled to make the consumer pay the whole tax levied on his commodity, because its increased price will diminish its consumption." Should this be the case, should the consumption be diminished, will not the supply also speedily be diminished? Why should the manufacturer continue in the trade if his profits are below the general level? M. Say appears here also to have forgotten the doctrine which he elsewhere supports, "that the cost of production determines the price, below which commodities cannot fall for any length of time, because production would then be either suspended or diminished."--Vol. ii. p. 26. "The tax in this case falls then partly on the consumer who is obliged to give more for the commodity taxed, and partly on the producer, who, after deducting the tax, will receive less. The public treasury will be benefited by what the purchaser pays in addition, and also by the sacrifice which the producer is obliged to make of a part of his profits. It is the effort of gunpowder, which acts at the same time on the bullet which it projects, and on the gun which it causes to recoil." Vol. ii. p. 333. [20] "Melon says, that the debts of a nation are debts due from the right hand to the left, by which the body is not weakened. It is true that the general wealth is not diminished by the payment of the interest on arrears of the debt: The dividends are a value which passes from the hand of the contributor to the national creditor: Whether it be the national creditor or the contributor who accumulates or consumes it, is I agree of little importance to the society; but the principal of the debt--what has become of that? It exists no more. The consumption which has followed the loan has annihilated a capital which will never yield any further revenue. The society is deprived not of the amount of interest, since that passes from one hand to the other, but of the revenue from a destroyed capital. This capital, if it had been employed productively by him who lent it to the state, would equally have yielded him an income, but that income would have been derived from a real production, and would not have been furnished from the pocket of a fellow citizen."--_Say_, vol. ii. p. 357. This is both conceived and expressed in the true spirit of the science. [21] "Manufacturing industry increases its produce in proportion to the demand, and the price falls; _but the produce of land cannot be so increased_; and a high price is still necessary to prevent the consumption from exceeding the supply." _Buchanan_, vol. iv. p. 40. Is it possible that Mr. Buchanan can seriously assert, that the produce of the land cannot be increased, if the demand increases? [22] I wish the word "Profit" had been omitted. Dr. Smith must suppose the profits of the tenants of these precious vineyards to be above the general rate of profits. If they were not, they would not pay the tax, unless they could shift it either to the landlord or consumer. [23] See note, p. 346. [24] See note, p. 346. [25] Vol. iii. p. 355. [26] In a former part of this work, I have noticed the difference between rent, properly so called, and the remuneration paid to the landlord under that name, for the advantages which the expenditure of his capital has procured to his tenant; but I did not perhaps sufficiently distinguish the difference which would arise from the different modes in which this capital might be applied. As a part of this capital, when once expended in the improvement of a farm, is inseparably amalgamated with the land, and tends to increase its productive powers, the remuneration paid to the landlord for its use is strictly of the nature of rent, and is subject to all the laws of rent. Whether the improvement be made at the expense of the landlord or the tenant, it will not be undertaken in the first instance, unless there is a strong probability that the return will at least be equal to the profit that can be made by the disposition of any other equal capital; but when once made, the return obtained will ever after be wholly of the nature of rent, and will be subject to all the variations of rent. Some of these expenses however, only give advantages to the land for a limited period, and do not add permanently to its productive powers: being bestowed on buildings, and other perishable improvements, they require to be constantly renewed, and therefore do not obtain for the landlord any permanent addition to his real rent. [27] Adam Smith says, "that the difference between the real and the nominal price of commodities and labour, is not a matter of mere speculation, but may sometimes be of considerable use in practice." I agree with him; but the real price of labour and commodities, is no more to be ascertained by their price in goods, Adam Smith's real measure, than by their price in gold and silver, his nominal measure. The labourer is only paid a really high price for his labour, when his wages will purchase the produce of a great deal of labour. [28] In vol. i. p. 108, M. Say infers, that silver is now of the same value, as in the reign of Louis XIV. "because the same quantity of silver will buy the same quantity of corn." [29] "The first man who knew how to soften metals by fire, is not the creator of the value which that process adds to the melted metal. That value is the result of the physical action of fire added to the industry and capital of those who availed themselves of this knowledge." "From this error Smith has drawn this false result, that the value of all productions represents the recent or former labour of man, _or in other words, that riches are nothing else but accumulated labour; from which, by a second consequence, equally false, labour is the sole measure of riches, or of the value of productions_."[30] The inferences with which M. Say concludes are his own, and not Dr. Smith's; they are correct if no distinction be made between value and riches: but though Adam Smith, who defined riches to consist in the abundance of necessaries, conveniences, and enjoyments of human life, would have allowed that machines and natural agents might very greatly add to the riches of a country, he would not have allowed that they add any thing to value in exchange. [30] Chap. iv. p. 31. [31] M. Say, _Catechisme d'Economie Politique_, p. 99. [32] Adam Smith speaks of Holland, as affording an instance of the fall of profits from the accumulation of capital, and from every employment being consequently overcharged. "The Government there borrow at 2 per cent., and private people of good credit, at 3 per cent." But it should be remembered, that Holland was obliged to import almost all the corn which she consumed, and by imposing heavy taxes on the necessaries of the labourer, she further raised the wages of labour. These facts will sufficiently account for the low rate of profits and interest in Holland. [33] Is the following quite consistent with M. Say's principle? "The more disposable capitals are abundant in proportion to the extent of employment for them, the more will the rate of interest on loans of capital fall."--Vol. ii. p. 108. If capital to any extent can be employed by a country, how can it be said to be abundant compared with the extent of employment for it? [34] Adam Smith says, that "When the produce of any particular branch of industry exceeds what the demand of the country requires, the surplus must be sent abroad, and exchanged for something for which there is a demand at home. _Without such exportation a part of the productive labour of the country must cease, and the value of its annual produce diminish._ The land and labour of great Britain produce generally more corn, woollens, and hardware, than the demand of the home market requires. The surplus part of them, therefore, must be sent abroad, and exchanged for something for which there is a demand at home. It is only by means of such exportation, that this surplus can acquire a value sufficient to compensate the labour and expense of producing it." One would be led to think by the above passage, that Adam Smith concluded we were under some necessity of producing a surplus of corn, woollen goods, and hardware, and that the capital which produced them could not be otherwise employed. It is, however, always a matter of choice in what way a capital shall be employed, and therefore there can never, for any length of time, be a surplus of any commodity; for if there were, it would fall below its natural price, and capital would be removed to some more profitable employment. No writer has more satisfactorily and ably shewn than Dr. Smith, the tendency of capital to move from employments in which the goods produced do not repay by their price the whole expenses, including the ordinary profits, of producing and bringing them to market.[35] [35] See Chap. 10. Book I. [36] "All kinds of public loans," observes M. Say, "are attended with the inconvenience of withdrawing capital, or portions of capital, from productive employments, to devote them to consumption; and when they take place in a country, _the Government of which does not inspire much confidence_, they have the further inconvenience of raising the interest of capital. Who would lend at 5 per cent. per annum to agriculture, to manufacturers, and to commerce, when a borrower may be found ready to pay an interest of 7 or 8 per cent.? That sort of income, which is called profit of stock, would rise then at the expense of the consumer. Consumption would be reduced by the rise in the price of produce; and the other productive services would be less in demand, less well paid. The whole nation, capitalists excepted, would be the sufferers from such a state of things." To the question: "who would lend money to farmers, manufacturers, and merchants, at 5 per cent. per annum, when another borrower having little credit, would give 7 or 8?" I reply, that every prudent and reasonable man would. Because the rate of interest is 7 or 8 per cent. there where the lender runs extraordinary risk, is this any reason that it should be equally high in those places where they are secured from such risks? M. Say allows, that the rate of interest depends on the rate of profits; but it does not therefore follow, that the rate of profits depends on the rate of interest. One is the cause, the other the effect, and it is impossible for any circumstances to make them change places. [37] In another place he says, that "whatever extension of the foreign market can be occasioned by the bounty, must, in every particular year, be altogether at the expense of the home market; as every bushel of corn which is exported by means of the bounty, and which would not have been exported without the bounty, would have remained in the home market to increase the consumption, and to lower the price of that commodity. The corn bounty, it is to be observed, as well as every other bounty upon exportation, imposes two different taxes upon the people; first, the tax which they are obliged to contribute, in order to pay the bounty; and, secondly, the tax which arises from the advanced price of the commodity in the home market, and which, as the whole body of the people are purchasers of corn, must in this particular commodity be paid by the whole body of the people. In this particular commodity, therefore, this second tax is by much the heaviest of the two." "For every five shillings, therefore, which they contribute to the payment of the first tax, they must contribute six pounds four shillings to the payment of the second." "The extraordinary exportation of corn, therefore, occasioned by the bounty, not only in every particular year diminishes the home, just as much as it extends the foreign market and consumption, but, by restraining the population and industry of the country, its final tendency is to stunt and restrain the gradual extension of the home market, and thereby, in the long run, rather to diminish than to augment the whole market and consumption of corn." [38] The same opinion is held by M. Say. Vol. ii. p. 335. [39] See Chap. on Rent. [40] M. Say supposes the advantage of the manufacturers at home to be more than temporary. "A Government which absolutely prohibits the importation of certain foreign goods, establishes a monopoly _in favour of those_ who produce such commodities at home, _against those_ who consume them; in other words, those at home who produce them having the exclusive privilege of selling them, may elevate their price above the natural price; and the consumers at home, not being able to obtain them elsewhere, are obliged to purchase them at a higher price." Vol. i. p. 201. But how can they permanently support the market price of their goods above the natural price, when every one of their fellow citizens is free to enter into the trade? they are guaranteed against foreign, but not against home competition. The real evil arising to the country from such monopolies, if they can be called by that name, lies, not in raising the market price of such goods, but in raising their real and natural price. By increasing the cost of production, a portion of the labour of the country is less productively employed. [41] Are not the following passages contradictory to the one above quoted? "Besides, that home trade, though less noticed, (because it is in a variety of hands) is the most considerable, it is also the most profitable. The commodities exchanged in that trade are necessarily the productions of the same country." Vol. i. p. 84. "The English Government has not observed, that the most profitable sales are those which a country makes to itself, because they cannot take place, without two values being produced by the nation; the value which is sold, and the value with which the purchase is made." Vol. i. p. 221. I shall, in the 24th chapter, examine the soundness of this opinion. [42] See page 198. [43] M. Say is of the same opinion with Adam Smith: "The most productive employment of capital, for the country in general, after that on the land, is that of manufactures and of home trade; because it puts in activity an industry of which the profits are gained in the country, while those capitals which are employed in foreign commerce, make the industry and lands of all countries to be productive, without distinction. "The employment of capital, the least favourable to a nation, is that of carrying the produce of one foreign country to another." _Say_, vol. ii. p. 120. [44] "It is fortunate that the natural course of things draws capital, not to those employments where the greatest profits are made, but to those where their operation is most profitable to the community."--Vol. ii. p. 122. M. Say has not told us what those employments are, which, while they are the most profitable to the individual, are not the most profitable to the state. If countries with limited capitals, but with abundance of fertile land, do not early engage in foreign trade, the reason is, because it is less profitable to individuals, and therefore also less profitable to the state. [45] "The use of gold and silver then establishes in every place a certain necessity for these commodities; and when the country possesses the quantity necessary to satisfy this want, all that is further imported, not being in demand, is unfruitful in value, and of no use to its owners."--_Say_, vol. i. p. 187. In page 196, M. Say says, that supposing a country to require 1000 carriages, and to be possessed of 1500--all above 1000 would be useless; and thence he infers, that if it possesses more money than is _necessary_, the overplus will not be employed. [46] Whatever I say of gold coin, is equally applicable to silver coin; but it is not necessary to mention both on every occasion. [47] "In the transactions of Government with individuals, and in those of individuals between themselves, a piece of money is never received, whatever denomination may be given to it, but at its intrinsic value, increased by the value of the utility which the impression it bears has added to it."--_Say_, vol. i. p. 327. "Money is so little a mark of value, that if the pieces of money lose a part of their value by friction, from use, or by the knavery of the clippers of money, all goods rise in price in proportion to the alteration which they have experienced; and if Government orders a recoinage, and restores each piece to its legal weight and fineness, goods will fall to their former price; if they have not been exposed to variations from other causes."--_Say_, vol. i. p. 346. [48] M. Say recommends that the seignorage should vary according to the quantity of business that the mint might be called upon to perform. "Government should not coin the bullion of individuals except on payment, not only of the expenses, but also of the profits of coining. This profit might be carried to a considerable height, in consequence of the exclusive privilege of coining; but it must vary according to the circumstances of the mint, and the quantity required for circulation." Vol. i. p. 380. Such a regulation would be extremely pernicious, and would expose us to considerable and unnecessary variation in the bullion value of the currency. [49] If with the quantity of gold and silver which actually exists, these metals only served for the manufacture of utensils and ornaments, they would be abundant, and would be much cheaper than they are at present; in other words, in exchanging them for any other species of goods, we should be obliged to give proportionally a greater quantity of them. But as a large quantity of these metals is used for money, and as this portion is used for no other purpose, there remains less to be employed in furniture and jewellery; now this scarcity adds to their value.--_Say_, vol. i. p. 316. See also note to p. 78. [50] An Inquiry into the Nature and Origin of Public Wealth, page 13. [51] An Inquiry into the Nature and Progress of Rent, p. 15. [52] See page 124, where I have endeavoured to shew, that whatever facility or difficulty there may be in the production of corn; wages and profits together will be of the same value. When wages rise, it is always at the expense of profits, and when they fall, profits always rise. [53] Of what increased quantity does Mr. Malthus speak? Who is to produce it? Who can have any motive to produce it, before any demand exists for an additional quantity? [54] Inquiry, &c. "In all progressive countries, the average price of corn is never higher than what is necessary to continue the average increase of produce." Observations, p. 21. "In the employment of fresh capital upon the land, to provide for the wants of an increasing population, whether this fresh capital is employed in bringing more land under the plough, or improving land already in cultivation, the main question always depends upon the expected returns of this capital; and no part of the gross profits can be diminished, without diminishing the motive to this mode of employing it. Every diminution of price, not fully and immediately balanced by a proportioned fall in all the necessary expenses of a farm, every tax on the land, every tax on farming stock, every tax on the necessaries of farmers, will tell in the computation; and if, after all these outgoings are allowed for, the price of the produce will not leave a fair remuneration for the capital employed, according to the general rate of profits, and a rent at least equal to the rent of the land in its former state, no sufficient motive can exist to undertake the projected improvement." Observations, p. 22. [55] See p. 124. [56] See p. 70, &c. [57] It is not necessary to state on every occasion, but it must be always understood, that the same effect will be produced by employing different, but equal portions of capital on the land already in cultivation, with different results. Rent is the difference of produce obtained with equal capitals, and with equal labour on the same, or on different qualities of land. [58] Observations on the Corn Laws, p. 4. [59] Upon shewing this passage to Mr. Malthus, at the time when these papers were going to the press, he observed, "that in these two instances he had inadvertently used the term _real price_, instead of _cost of production_." It will be seen from what I have already said, that to me it appears, that in these two instances he has used the term _real price_ in its true and just acceptation, and that in the former case only it is incorrectly applied. [60] Page 40. [61] Manufactures, indeed, could not fall in any such proportion, because, under the circumstances supposed, there would be a new distribution of the precious metals among the different countries. Our cheap commodities would be exported in exchange for corn and gold, till the accumulation of gold should lower its value, and raise the money price of commodities. [62] The Grounds of an Opinion, &c. page 36. [63] Mr. Malthus, in another part of the same work, supposes commodities to vary 25 or 20 per cent. when corn varies 33-1/3. [64] In Chap. 24. I have observed, that the real resources of a country, and its ability to pay taxes, depend on its net, and not on its gross income. [65] This is on the supposition that money continued at the same value. In the last note, I have endeavoured to shew that money would not continue of the same value,--that it would fall, from increased importation; a fact which is much more favourable to my argument. [66] Mr. M'Culloch, in an able publication, has very strongly contended for the justice of making the dividends on the national debt conform to the reduced value of corn. He is in favour of a free trade in corn, but he thinks it should be accompanied by a reduction of interest to the national creditor. THE END. ERRATA. _Page_ 190, _line_ 8, _for_ obtained, _read_ attained. 521, _line_ 20, _for_ twenty-one shillings, _read_ forty-two shillings. 543, _last line_, _for_ give, _read_ spend. 555, _last line_, _for_ rent money, _read_ money rent. INDEX. A. _Accumulation_ of capital, effects of, on the relative value of commodities, 16-42. And on profits and interest, 398-416. _Agriculture_, effects of improvements in, on rents, 70-76. Is affected by the distress proceeding from sudden revulsions of trade, 368-372. Agricultural improvements, no cause of the increase of rent, 570, 571. B. _Banks_, establishment of, affects the sole power of the state in coining money, 502. Consequence of the Bank of England issuing too great a quantity of paper, 503-506. The assistance given by the Bank of England to commerce, accounted for, 513, 514.--See _Paper Currency_. _Bounties_, on the exportation of corn, lower its price to the foreign consumer, 417-427. Effects of a bounty in raising the price of corn, illustrated, 428. Though such bounty may cause a partial degradation in the value of money, yet such degradation cannot be permanent, 432-434. Bounties on the exportation of manufactures raise their _market_ but not their _natural_ price, 436-438. The sole effect of bounty is to divert a portion of capital to an employment which it would not naturally seek, 438. Evils of such a system, 439-445. A bounty on the production of corn, will produce no real effect on the annual produce of the land and labour of the country, though it would make corn relatively cheap, and manufactures relatively dear, 449-455. But the effect of a tax on corn, in order to afford a fund for a bounty on the production of commodities, would be to enhance the price of corn, and render commodities cheap, 456, 457. _Buchanan_ (Mr.), observations of, on Adam Smith's doctrine of productive and unproductive labour, 64-66, _note_. Remarks on his opinions respecting bounties on exportation, 440-442. C. _Capital_, nature of, effects of the accumulation of, on the relative value of commodities investigated, 16. Effects of, in a savage or infant state of society, 17, 18, 23, 24. And in a more advanced state of society, 19-21. The relative values of _circulating_ and _fixed_ capitals considered, 22, 23. The distinction between circulating and fixed capitals difficult to be strictly defined, 186, 187. Considerations on the different modes of employing it, 83-88. The increase of capital in quantity and value, productive of a rise in the natural price of wages, 94, 95. Increase of capital in quantity only, productive of a rise in the market price of wages, _ibid._ Effects of the accumulation of capital on profits and interest, 398-416. The sole effect of bounties on exportation, upon capital, is to divert a portion of it to an employment which it would not naturally seek, 438. Remarks on such effect, 439-445. The profits, made by the employment of capital, regulate the rate of interest for money, 512, 513. _Carrying trade_, observations on, 407. _Circulation_ of money can never overflow, and why, 500, 501. Circulation of Paper, see _Paper Currency_. _Colonial Trade_, observations on, 476, 477. Proofs, that trade with a colony may be so regulated as to be less beneficial to the colony, and more beneficial to the mother country, than a perfectly free trade, 477-486. Benefits of a colonial trade, 487-490. _Commodities_, gold and silver an insufficient medium for determining the varying value of, 7, 8. Corn, an inadequate standard of the value of, 9-12. The effects of an accumulation of capital on the relative value of commodities, considered, 16-42. Effects of a rise in wages on their value, 43, 44, and of the payment of rent, 45, 46. Their exchangeable value regulated by the greater quantity of labour bestowed on their production by those who labour under the most unfavourable circumstances, 59, 60. The prices of commodities not necessarily increased by a rise in the price of labour, 109, 110. The cost of production regulates the price of commodities, 542, 567, 568, 572, 573. _Corn_, a variable standard for determining the varying value of things, 7-12. Effects of the price of, on rent, 67-70. Corn-rents materially affected by tithes, 227. Advantage resulting from the relatively low price of corn, 373. Bounties on the exportation of it, lower its price to the foreign consumer, 417-427. Effects of a bounty in raising the price of corn, 428. A bounty on the production of, productive of no real effect on the annual produce of the land and labour of the country, 449-455. The price of corn enhanced by a tax on it, in order to afford a fund for a bounty on the production of commodities, 456, 457. Benefit of a high price of corn to landlords, 474, 475. Investigation of the comparative value of corn, gold, and labour, in rich and in poor countries, 527-537. The production of corn encouraged by alteration in its market price, 574, 575. A fall in the value of corn beneficial to the stockholder, 586. _Cultivation_, not discouraged by a tax on land and its produce, 238. _Currency_. See _Gold_ and _Silver_, _Paper Currency_. D. _Demand_ and supply, influence of, on prices, considered, 542. Opinion of M. Say on this subject, 544. And of the Earl of Lauderdale, 545-547. Observations thereon, 547, 548. E. _Economy_ in labour, reduces the relative value of commodities, 21. Illustration of this principle, 22-42. _Exchange_, no criterion of the increased value of money, 178. To be ascertained by estimating the value of the currency in the currency of another country, 181, and also by comparing it with some standard common to both countries, 181-184. Effects of paper currency on exchange, 310-314. _Exportation_ of corn, bounties on, lower its price to the foreign consumer, 417-427. Effects of, in raising the price of corn, illustrated, 428. Bounties on the exportation of manufactures raise the market, but not the natural, price of these, 436-438. F. _Farmers_ pay more poor-rate than the manufacturers, 359-362. _Foreign Trade_, effects of an extension of, 146, 147. Proofs that the profits of the favoured trade will speedily subside to the general level, 148-154. _Funded Property_, the price of, no steady criterion by which to judge of the rate of interest, 413-415. G. _Gold_, and Silver, an insufficient medium for determining the _variable_ value of commodities, 7, 8. But, upon the whole, the least inconvenient standard for money, 80, 81. On whom a tax upon gold would ultimately fall, 249, 250. The value of gold ultimately regulated by the comparative facility or difficulty of producing it, 251. Effects of a tax upon gold, 252-261. Evils of prohibiting a free trade in the precious metals, when the prices of commodities are raised, 309. The value of gold and silver proportioned to the quantity of labour necessary to produce them and bring them to market, 499. Remarks on the employment of these metals in currency, 516. Their relative values at different periods, accounted for, 516-526. Investigation of the comparative value of gold, corn, and labour, in rich and in poor countries, 527-537. _Gross Revenue_, advantages of, over-rated by Adam Smith, 491. And by M. Say, 492, _note_. Examination of this doctrine, 492-498. A diminution of gross income, no diminution of net income, 579-583. H. _Holland_, low rate of interest in, accounted for, 400, note. _Houses_, rents of, distinguished into two parts, 263. Difference between rent of houses and that of land, 264. Taxes on houses by whom ultimately borne, 266. I. _Importation_ of corn, effects of a prohibition of, considered, 437, 438. _Interest_, low rate of, in Holland, accounted for, 400, _note_. Effects of accumulation on profits and interest, 398-410. Observations on the rates of interest, 412-416. The interest for money is regulated by the rate of profits which can be made by the employment of capital, 512, 513. L. _Labour_, the quantity of, requisite to obtain commodities, the _principal_ source of their exchangeable value, 4, 5. Effects of machinery on, considered, 9-11. Economy in labour reduces the relative value of a commodity, 21, 22. Illustrations of this principle, 22-42. Adam Smith's theory of productive and unproductive labour, considered, 64-66, _notes_. Natural price of, explained, 90, 91. Market price of, what, 92. Its influence on the happiness of the labourer, 92, 93. Investigation of the comparative value of labour, gold, and corn, in rich and in poor countries, 527-537. _Land_, the division of the whole produce of, between landlords, capitalists, and labourers, is the criterion of rent, profits, and wages, 44-48. Its different productive qualities, a cause of rent, 54-58. Effects of increasing its productive powers by agricultural improvements, 70-76. _Landlords_, tithes injurious to, 229, 230. Benefit of a high price of corn to them, 474, 475. _Land-Tax_, virtually a tax on rent, 232. Effects of an equal land-tax, imposed indiscriminately on all land cultivated, 234, 235. Error of Dr. Adam Smith, on the inequality of land and all other taxes, accounted for, 236-238. Tax on land and its produce, no bar to cultivation, 238, 239. Operation of the land-tax of Great Britain, considered, 239, 240. Mistake of M. Say, corrected, 241, 242-246. _Lauderdale_ (Earl of), opinion of, on the influence of demand and supply on prices, 545-547. Remarks thereon, 547, 548. _Luxuries_, observations on the taxing of, 314. Advantages and disadvantages of taxing them, considered, 327-329. M. _Machinery_, effects of, in fixing the relative values of commodities, 34-41. _Malthus_ (Mr.), examination of the opinions of, on rent, 549-566. The real cost of production regulates the price of commodities, 567, 568, 572, 573. Increase of population no cause of the rise of rent, 569; nor agricultural improvements, 570, 571. His supposition, that net income is diminished, in proportion to a diminution of gross income, disproved, 579-583. Loss of rent, the effect of a low price of corn, 587, 588. _Manufactures_, improvement of, in any country, tends to alter the distribution of the precious metals among the nations of the world, 157-170. Manufacturers pay less poor rate than farmers, 359-362. The market price of manufactures, but not their natural price, raised by bounties on their exportation, 436-438. _Mines_, distinguished by their fertility or barrenness, 77-79. Effect of discovering the rich mines of America on the price of the precious metals, 80. Observations on the rent of mines, 462-467. _Money_, effects of the rise of, in value, on the price of commodities, 43, 44. The rate of profit not affected by variations in the value of money, 46-48. Different value of money in different countries, accounted for, 170-173. The value of money, _generally_, diminished by improvements in the facility of working the mines of the precious metals, 178. The demand for, regulated by its value, and its value by its quantity, 250, 251. Low value of, in Spain, prejudicial to the commerce and manufactures of that country, 307. Observations on the rates of interest for money, 412-416, 512, 513. The value of, though partially degraded by a bounty on corn, yet not permanently degraded, 432-434. The quantity of, employed in a country, dependant upon its value, 500. Effects of the state charging a seignorage on coining money, 501, 524, 525. _Monopoly-price_, observations on, 340-345. N. _National Debt_, observations on, 340. _Net Revenue_, advantages of, unduly estimated by Adam Smith, 491, and by M. Say, 492, _note_. Examination of their doctrines, 492-498. Is not diminished by a proportionate diminution of gross revenue, 579-583. P. _Paper Currency_, circulation of, explained, 501. Paper-money not necessarily payable in specie, to secure its value, 502. But the quantity issued must be regulated according to the value of the standard metal, _ibid._ 503. The Bank of England, why liable to be drained of specie for its paper currency, 504-506. Compelling the issuers of paper money to pay their notes either in gold coin or bullion, is the only control upon their abusing their power of issuing such money, 507. Provided there were perfect security against such abuse, it is immaterial by whom paper money is issued, 509. Illustration of this point, 510-516. _Poor-Laws_, pernicious tendency of, as they now exist, 111, 112, 115. Remedies for, 113, 114. _Poor-Rates_, nature of, 355. How levied, 356-358. More falls on the farmer than on the manufacturer, in proportion to their respective profits, 359-362. _Population_, increase of, no cause of the rise of rent, 569. _Price_ (real), of things, distinguished, 4. Natural and market prices distinguished, and how governed, 82-89. The prices of commodities not necessarily raised by a rise in the price of labour, 109, 110. Rise of price on raw produce, the only means by which the cultivator can pay the tax imposed thereon, 195. The market, but not the natural price of manufactures, raised by bounties on their exportation, 436-438. The influence of demand and supply on prices, considered, 542-548, 567, 568, 572, 573. Alteration in the market price of corn encourages its production, 574, 575. _Produce_ of land, and labour of the country, must be divided between capitalists, landlords, and labourers, to afford a criterion of rent, profits, and wages, 44-48. Effect of taxes on raw produce, 194. Tax on raw produce raises the price of wages, 199. Objections against taxing the produce of land, considered, 201-224. Remarks on the inconveniences supposed to result from the payment of taxes by the producer, 538-541. _Production_, difficulty of, benefits the landlord, 76. The cost of production, the regulator of the price of commodities, 542, 567, 568, 572, 573. _Profits_ of stock difficult to ascertain, 410. The quantity of labour necessary to obtain the produce of land, is the criterion by which to estimate the rate of profit, wages, and rent, 44-48. A rise in the price of corn, productive of a diminution in the money value of the farmer's profits, 117-122. A rise in the price of raw produce, if accompanied by a rise of wages, lowers the agricultural and manufacturing profits, 125-130. Proofs, that profits depend on the quantity of labour requisite to provide necessaries for labourers, on that land, or with that capital which yields no rent, 131-144. Effects of an extension of foreign trade on profits, 146, 147. Proofs, that the profits of the favoured trade will speedily subside to the general level, 148-154. And so with respect to home trade, 155-157. Further proofs that profits depend on real wages, 173-175. Tax on necessaries virtually a tax on profits, 269, 270. Effects of a taxation of profits, considered, 270-284. The profits of stock diminished by a tax on wages, 285. Effects of accumulation on profits and interest, 398-416. _Prohibition_ of importation of corn, effects of, considered, 437, 438. _Provisions_, causes of the high prices of, 203. First, a deficient supply, _ibid._--204. Secondly, a gradually increasing demand, ultimately attended with an increased cost of production, 205. Thirdly, a fall in the value of money, 209. Fourthly, a tax on necessaries, 210. R. _Rent_, nature of, 49, 50, 52, 362, _note_. Adam Smith's doctrine of rents, considered, 50, 51. The different productive qualities of land and increase of population, the cause of rents, 54-58. Rise of, the _effect_ of the increasing wealth of a country, 65, 66. Influence of the prices of corn on rent, 67-69. Effects of agricultural improvements on rent, 70-76. Observations on the rent of mines, 77-81. Tax on rent falls wholly on the landlords, 220-224. Corn-rents materially affected by tithes, 227. Examination of Dr. Adam Smith's doctrine concerning the rent of land, 458-475. And of Mr. Malthus's opinions on rent, 549-566. Increase of population is no cause of the rise of rent, 569. Neither are agricultural improvements, 570, 571. Loss of rent, the effect of low price of corn, 587, 588. _Riches_, defined, 377. Difference between value and riches, 377-386. Means of increasing the riches of a country, 386-388. Erroneous views of M. Say on this subject considered, 388-397. S. _Say_ (M.), erroneous views of, concerning the principles of the land-tax in Great Britain, corrected, 241-244. Examination of some of his principles of taxation, 319-324, 330, 331, _notes_. Remarks on his mistaken view of value and riches, 388-397. Examination of his doctrine concerning bounties on exportation, 443-448. And on gross and net revenue, 492-498. Danger resulting from his recommendation respecting the charging of seignorage for coining money, 525, 526, _notes_. Observations on his statement of the inconveniences resulting from payment of taxes by the producer, 538-540. His opinion on the influence of demand and supply on prices, considered, 544, 545. _Scarcity_, a source of exchangeable value, 2. _Seignorage_, effects of, on the value of money, 501, 524, 525. _Simonde_ (M.), remarks on the opinion of, concerning the inconveniences resulting from the payment of taxes by the producer, 540, 541. _Silver._ See _Gold_ and _Silver_. _Sinking fund_, in England, merely nominal, 340. How conducted, 510. _Smith_ (Dr. Adam), on the meaning of the term value, 1. His doctrine that corn is a proper medium for fixing the varying value of other things, examined, 7-9. Strictures on his doctrine relative to labour being the _sole_ ultimate standard of the exchangeable value of commodities, 10, 11, 575, 576. And on his definitions of rent, 49, 50. His theory of productive and unproductive labour considered, 64-66, _notes_. Correction of his erroneous view of the inequality of taxes on land, and all other taxes, 236-238. His opinion on the taxes upon the wages of labour, 286. Examination thereof by Mr. Buchanan, 287-292. Observations thereon by the author of this work, 293-306. Correction of his mistaken view of taxes upon luxuries, 314-319. Remarks on his doctrine concerning bounties on exportation, 420, 422-439. Examination of his doctrine concerning the rent of land, 458-475. And on gross and net revenue, 492-498. Strictures on his principles of paper-currency, 503-508. His statement respecting the advantages of the Scottish mode of affording accommodation to trade, disproved, 515, 516-523. Remarks on his doctrine relative to the comparative value of gold, corn, and labour, in rich and in poor countries, 529-537. _Spain_, commerce and manufactures of, injured by the low value of money there, 307. _Stamp-duty_, weight of, a bar to the transfer of landed property, 267, 268. T. _Taxes_, nature of, explained, 186. Impolicy of taxes on capital, 190. Taxes upon the transfer of property, 191. On whom the several kinds of taxes principally fall, 192. Objections to taxes on the transference of property, 192, 193. Effect of taxes on raw produce, 194. A rise of price in raw produce the only means by which the cultivator can pay the tax, 195. Such tax in fact paid by the consumer, 196-198. Tax on raw produce and on the necessaries of the labourer, raises the price of wages, 199. Objections against the taxation of the produce of land, considered and refuted, 201-224. Tithes, an equal tax, 225. Difference between them and a tax on raw produce, 226. Objections to them, 227-231. Tax on land, virtually a tax on rent, 232. They ought to be clear and certain, 233, 234. Effects of taxes on gold, considered, 247-261. Ground rents, not a fair subject of taxation, 267. Taxes on houses by whom ultimately borne, 266. Taxes on necessaries, virtually a tax on profits, 269, 270. Effects of taxation of profits considered, 270-284. Taxes upon luxuries, 314. Advantages and disadvantages of, 327-329. Supposed absurdities in taxation, explained and obviated, 315-317. Proper objects of taxation, 326. Observations on the taxation of other commodities than raw produce, 330. Effect of taxes to defray the interest of loans, 332-334. Remarks on the tax upon malt, and every other tax on raw produce, 346-353. Nature and operation of the poor-rate, 355-362. Examination of the inconveniences supposed to be sustained by the payment of taxes by the producer, 538-541. _Tithes_, nature of, 225. Are an equal tax, _ibid._ Difference between tithes and a tax on raw produce, 226. Tithes materially affect corn-rents, 227. They act as a bounty on importation, and therefore are injurious to landlords, 229, 230. Do not discourage cultivation, 237, 238. _Trade_, general causes of sudden changes in the channels of, 363-365. More particularly the commencement of war after a long peace, or vice versa, 365-368. The effects of such revulsions on agriculture, considered, 369-376. Observations on the carrying trade, 407. See _Foreign Trade_. U. _Utility_, essential to exchangeable value, 2. V. _Value_, definition of, 1. The distinctive properties of value and riches considered, 377-397. See _Labour_. Utility essential to exchangeable value, 2. Scarcity, one source of such value, _ibid._ The quantity of labour required to obtain commodities, the principal source of their exchangeable value, 3-15. The effects of accumulation of capital on relative value, 16-42. Effects of a rise in wages, on relative value, 43, 44. Effects of payment of rent, on value, 45, 46. Variations in the value of money make no difference in the _rate_ of profits, 46, 47. The value of gold and silver is in proportion to the labour necessary to produce and bring them to market, 499, 500. Investigation of the comparative value of gold, corn, and labour, in rich and in poor countries, 527-537. W. _Wages_, effects of a rise in, on relative value, 27-33, 43, 44, 48. Natural and market prices of labour, 90-93. Increase of capital in quantity and value, increases the natural price of wages, 94, 95. Increase of capital, but not in value, augments the market price of wages, _ibid._ Proofs that the increasing difficulty of providing an additional quantity of food with the same proportional quantity of labour, will raise wages, 97-104. A rise in wages not necessarily productive of comfort to the labourer, 105-108. A rise of wages not _necessarily_ productive of a rise in the prices of commodities, 109, 110, 286-289. Wages will be raised by a tax on necessaries, 269-270. And by a tax on wages, 285. Effects of a tax upon wages, considered, 297-306. _Wealth_, causes of the increase of, 66. J. M^{c}Creery, Printer, Black-Horse-court, London. _Albemarle-street, London, May, 1817._ NEW PUBLICATIONS. SPEECH of the Rt. Hon. 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12217	----	Economics--Volume II MODERN ECONOMIC PROBLEMS BY FRANK A. FETTER, PH.D., LL.D. PROFESSOR OF ECONOMICS, PRINCETON UNIVERSITY 1916 TO THE MOTHER WITH A YOUTHFUL HEART AND SYMPATHETIC INTEREST IN ALL THINGS HUMAN TABLE OF CONTENTS PART I. RESOURCES AND ECONOMIC ORGANIZATION. 1. Material resources of the nation 2. The present economic system PART II. MONEY AND PRICES. 3. Nature, use, and coinage of money 4. The value of money 5. Fiduciary money, metal and paper 6. The standard of deferred payments PART III. BANKING AND INSURANCE. 7. The functions of banks 8. Banking in the United States before 1914 9. The Federal Reserve Act 10. Crises and industrial depressions 11. Institutions for saving and investment 12. Principles of insurance PART IV. TARIFF AND TAXATION. 13. International trade 14. The policy of a protective tariff 15. American tariff history 16. Objects and principles of taxation 17. Property and corporation taxes 18. Personal taxes PART V. PROBLEMS OF THE WAGE SYSTEM. 19. Methods of industrial remuneration 20. Organized labor 21. Public regulation of hours and wages 22. Other protective labor and social legislation 23. Social insurance 24. Population and immigration PART VI. PROBLEMS OF INDUSTRIAL ORGANIZATION. 25. Agricultural and rural population 26. Problems of agricultural economics 27. The railroad problem 28. The problem of industrial monopoly 29. Public policy in respect to monopoly 30. Public ownership 31. Some aspects of socialism Index FOREWORD The present volume deals with various practical problems in economics, as a volume published a year earlier dealt with the broader economic principles of value and distribution. To the student beginning economics and to the general reader the study of principles is likely to appear more difficult than does that of concrete questions. In fact, the difficulty of the latter, tho less obvious, is equally great. The study of principles makes demands upon thought that are open and unmistakable; its conclusions, drawn in the cold light of reason, are uncolored by feeling, and are acceptable of all men so long as the precise application that may justly be made of them is not foreseen. But conclusions regarding practical questions of public policy, tho they may appear to be simple, usually are biased and complicated by assumptions, prejudices, selfish interests, and feelings, deep-rooted and often unsuspected. No practical problem in the field of economics can be solved as if it were solely and purely an economic problem. It is always in some measure also a political, moral, and social problem. The task of the economist "as such" is the analysis of the economic valuation-aspects of these problems. We may recall Francis A. Walker's comparison of the economist's task with that of the chemist, which task, in a certain case, was to analyze the contents of a vial of prussic acid, not to give advice as to the use to make of it. Accordingly, in the following pages, the author has endeavored primarily to develop the economic aspects of each problem, and has repeatedly given warning when the discussion or the conclusions began to transcend strict economic limits. In many questions feeling is nine-tenths of reason. If the reader has different social sympathies he may prefer to draw different conclusions from the economic analysis. The outlook and sympathies that are expressed or tacitly assumed throughout this work are not so much those personal to the author as they are those of our present day American democratic society, taken at about its center of gravity. When the people generally feel differently as to the ends to be attained, a different public policy must be formulated, tho the economic analysis may not need to be changed. Therefore, in some cases, the author has discussed merely the economic aspect, or has referred to the general principles treated in volume one, and has purposely refrained from expressing his personal judgment as to "the best" policy for the moment. The present volume was planned some years ago as a revision of a part of the author's earlier text, "The Principles of Economics" (1904). The intervening years have, however, been so replete with notable economic and social legislation and have witnessed the growth of a wider public interest in so many economic subjects, that both in range and in treatment this work necessarily grew to be more than a revision. Except in a few chapters, occasional sentences and paragraphs are all of the specific features of the older text that remain. Suggestive of the rapid changes occurring in the economic field is the fact that a number of statements made in the manuscript a few months or a few weeks ago had to be amended in the proof sheets to accord with recent events. The author's debt for information, inspiration, and assistance in various phases of the work is a large one. The debt is owing to many,--authors, colleagues, and students. A few of the sources that have been drawn upon will be indicated in a pamphlet following the plan of the "Manual of References and Exercises in Economics," already published for use in connection with Volume I; but the limits of space will prevent a complete enumeration. I wish, however, in particular, to acknowledge gratefully the aid and friendly criticisms given in connection with the chapters on money and banking, on labor problems, and on the principles of insurance, respectively, by my colleagues, E.W. Kemmerer, D.A. McCabe, and N. Carothers. In completing, at least provisionally, the present work, the author cherishes the hope that it will be of assistance not only to teachers and to students in American colleges, but also to citizen-readers seeking to gain a better and a non-partisan insight into the great economic problems now claiming the nation's conscience and thought. F.A.F. Princeton, N.J., October, 1916. MODERN ECONOMIC PROBLEMS PART I RESOURCES AND ECONOMIC ORGANIZATION CHAPTER I MATERIAL RESOURCES OF THE NATION § 1. Politico-economic problems. § 2. American economic problems in the past. § 3. Present-day problems: main subjects. § 4. Attempts to summarize the nation's wealth. § 5. Average wealth and the problem of distribution. § 6. Changes in the price-standard. § 7. A sum of capital, not of wealth. § 8. Sources of food supply. § 9. The sources of heat, light, and power. § 10. Transportation agencies. § 11. Raw materials for clothing, shelter, machinery, etc. § 1. #Politico-economic problems.# The word "problem" is often on our tongues. Life itself is and always has been a problem. In every time and place in the world there have been questions of industrial policy that challenged men for an answer, and new and puzzling social problems that called for a solution. And yet, when institutions, beliefs, and industrial processes were changing slowly from one generation to another and men's lives were ruled by tradition, authority, and custom, few problems of social organization forced themselves upon attention, and the immediate struggle for existence absorbed the energies and the interests of men. But our time of rapid change seems to be peculiarly the age of problems. The movement of the world has been more rapid in the last century than ever before--in population, in natural science, in invention, in the changes of political and economic institutions; in intellectual, religious, moral, and social opinions and beliefs. Some human problems are for the individual to solve, as, whether it is better to go to school or to go to work, to choose this occupation or that, to emigrate or to stay at home. Other problems of wider bearing concern the whole family group; others, still wider, concern the local community, the state, or the nation. In each of these there are more or less mingled economic, political and ethical aspects. Economics in the broad sense includes the problems of individual economy, of domestic economy, of corporate economy, and of national economy. In this volume, however, we are to approach the subject from the public point of view, to consider primarily the problems of "political economy," considering the private, domestic, and corporate problems only insomuch as they are connected with those of the nation or of the community as a whole. Our field comprises the problems of national wealth and of communal welfare. What then are our politico-economic problems in America? They are problems that are economic in nature because they concern the way that wealth shall be used and that citizens are enabled to make a living; but that are likewise political, because they can be solved only collectively by political action. § 2. #American economic problems in the past.# With the first settlements of colonists on this continent politico-economic problems appeared. Take, for example, the land policy. Each group of colonists and each proprietary landholder had to adopt some method of land tenure whether by free grant or by sale of separate holdings or by leasing to settlers. In one way and another these questions were answered, but rapidly changing conditions soon forced upon men the reconsideration of the problem as the old solution ceased to be satisfactory. In large part our political history is but the reflection of the economic motives and economic changes in the national life. Thus the American Revolution arose out of resistance to England's trade regulations, commercial restrictions, and attempted taxation of the colonies. The War of 1812 was brought on by interference with American commerce on the high seas. The Mexican War was the result of the colonization of Texan territory by American settlers and the desire of powerful interests to extend the area of land open to slavery. The Civil War arose more immediately out of a difference of opinion as to the rights of states to be supreme in certain fields of legislation, but back of this political issue was the economic problem of slave labor. Illustrations of this kind, which may be indefinitely multiplied, do not prove that the material, economic changes are the cause of all other changes, political, scientific, and ethical; for in many cases the economic changes themselves appear to be the results of changes of the other kinds. There is a constant action and reaction between economic forces and other forces and interests in human society, and the needs of economic adjustment are constantly changing in nature. § 3. #Present-day problems: main subjects#. The particular economic problems in America at this time are determined by the whole complex economic and social situation. Two main factors in this may be distinguished: the objective and the subjective, or the material environment and the population composing the nation. The one is what we have, the other is what we are, as a people. These factors are closely related; for what we are as a people (our tastes, interests, capacities, achievements) depends largely on what we have, and what we have (our wealth and incomes) depends largely on what we are. We may consider the following phases; the first two of the objective factor, and the last two of the subjective factor. (a) The basic material resources, consisting of the materials of the earth's surface and the natural climatic conditions which together provide the physical conditions necessary for human existence, and which furnish the stuff out of which men can create new forms of wealth. (b) The industrial equipment, consisting of all those artificial adaptations and improvements of the original resources by which men fit nature better to do their will. These two (a and b) become more and more difficult to distinguish in settled and civilized communities, and become blended into one mass of valuable objects, the wealth of the nation. (c) The social system under which men live together, make use of wealth and of their own services, and exchange economic goods. (d) The people, considered with reference to their number, race, intelligence, education, and moral, political, and economic capacity. The particular economic problems which are presented to each generation of our people are the resultant of all these factors taken together. A change in any one of them alters to some extent the nature of the problem. The problems change, for example, (a) with the discovery or the exhaustion (or the increase or decrease) of any kind of basic material resources; (b) with the multiplication or the improvement of tools and machinery or the invention of better industrial equipment; (c) with changes in the ideals, education, and capacities of any portion of the people whether or not due to changes in the race composition of the population; (d) with the increase or decrease of the total number of people, and the consequent shift in the relation of population to resources. Many examples of such changes may be found in American history, and some knowledge of them is necessary for an appreciation of the genesis and true relation of our present-day problems. § 4. #Attempts to summarize the nation's wealth.# If we seek to compare the material resources of the nation at one period in our history with those at another period, we find that it is impossible to find a single satisfactory expression for them. Let us examine the figures for the (so-called) "wealth of the people of the United States",[1] as it has been calculated by the census officials. Average total per capita Population. "wealth." wealth. 1850 23,200,000 $7,136,000,000[a] $308 1860 31,400,000 16,160,000,000[a] 514 1870 38,600,000 24,055,000,000[a b] 624 1880 50,200,000 43,642,000,000 870 1890 62,900,000 65,037,000,000 1,036 1900 76,000,000 88,517,000,000 1,165 1904 82,500,000 107,104,000,000 1,318 1912 95,400,000 187,739,000,000 1,965 [Footnote a: Taxable only; all other figures include exempt.] [Footnote b: Estimated on a gold basis.] A detailed comparison of the classes of concrete things making up the totals is possible only in the last three sets of figures (1900 to 1912), and they are here given (omitting 000,000). 1900. 1904. 1912. 1. Real property (excepting some items below) 52,538 62,331 110,700 2. Irrigation enterprises [a] [a] 360 3. Agricultural equipment (livestock, tools, etc.) 3,822 4,919 7,706 4. Manufacturing equipment 2,541 3,298 6,069 5. Transportation agencies 11,249 14,434 22,360 6. Telegraph and telephones 612 813 1,304 7. Waterworks (privately owned) 263 275 290 8. Electric lighting plants 403 563 2,099 9. Products (still in trade)[b] 8,294 10,212 21,577 10. Direct goods in use[c] 6,880 8,250 12,758 11. Gold and silver 1,677 1,999 2,617 [Footnote a: No figures for these years.] [Footnote b: The main items are agricultural and mining products and imported merchandise.] [Footnote c: The main items are clothing, personal adornment, furniture, and carriages.] § 5. #Average wealth and the problem of distribution#. The foregoing figures make a most satisfactory showing, and appear to indicate that mere economic problems are rapidly being solved by the growth of national wealth. But unfortunately these figures have little significance in connection with such an inquiry, if indeed they are not badly misleading. In the first place, the final figures of "per capita wealth" are merely averages; a per capita increase, therefore, may appear when total wealth increases, altho the total may be due to the growth of comparatively few very large fortunes. The fact is evident that vast numbers of individuals and families are nearly propertyless and in so far as this is true there is involved one of the greatest of our socio-economic problems, that of the distribution of wealth and income among the people. The more unequal the distribution, the greater, in all likelihood, is the discontent; and the greater the effort of many men to find some methods by which greater equality may be attained. § 6. #Changes in the price-standard#. These figures, moreover, are expressed in terms of the monetary price-unit, in dollars of the gold standard, and therefore the increasing total figure (and correspondingly, the increasing per capita) may be but the reflection of a change in the value of the monetary unit. It is well known that the gold dollar has now less purchasing power than in 1880, and less also than at any intervening time.[2] To the extent that this is true the increase in the figures of wealth (total and per capita) is only nominal and does not indicate increase in the quantity and betterment in the quality of real wealth. This fact is so evident that it would seem unnecessary to call attention to it, if it were not constantly overlooked in citing these figures. § 7. #A sum of capital, not of wealth#. Consider further, that the figures here given for wealth really express but the sum of capitals of the individuals (or private corporations) of the nation. These do not constitute a sum of social wealth in any proper sense of the term.[3] Arithmetically it is a fallacious kind of a total, for the sum of the individual capitals contains some items that should be canceled to find the sum of wealth. Moreover, capital is an acquisitive concept. It is an expression of the value of a man's possessions, and not of the utility[4] of them. It measures intensity of desire for goods and not necessarily the degree of welfare. Such a total, therefore, embodies the difficulties of the paradox of value; in some cases increased value reflects a growing scarcity and not greater abundance.[5] For example, between 1900 and 1915, with the growth of population, the total number of improved acres in farms in the United States increased but little, and the per capita number diminished. At least in part as a result of this fact, the prices of nearly all kinds of food rose rapidly, as did also the price of farm land. The prices (and estimated values) of farm lands are the expression of the individual capitals, which formed each year an increasing statistical total of so-called wealth. The people had less land per capita, and were poorer per capita as respects this item of landed-wealth, had less meat per capita, and had to give more labor in exchange for food, at the same time that the statistical per capita of land values increased. So it may be as respects forests, coal, cotton, and eventually iron, copper, and many other things. When forests were plentiful, lumber and fire wood were free goods in many neighborhoods. Forests entered into the total of national "wealth" in 1850 and 1860 at a comparatively small sum. But in 1910 when the forests had been half used up they appeared as a greater total and probably as a greater per capita item of "wealth" than in 1850. The figures reflect changes in the paradoxical section of the scale of values, and express scarcity rather than wealth. Altho the wealth of a nation may not be expressed as a single sum of values that accurately reflects the weal-bringing things composing its environment, some conception of the situation is to be gained by an enumeration of goods in their kinds and quantities and by studying their relations to the life of the people. Objects of wealth may be grouped in various ways. The following may serve our purpose of a general survey of our present resources. § 8. #Sources of food supply#. The land area of the country in 1910 was about 1,900,000,000 acres, of which 879,000,000 acres were in farms, this being 46 per cent of the total area. A very small part of the remainder is used for residential and commercial purposes, the rest being barren mountains, deserts, swamps, and forests. Of the total in farms a little more than one-half was improved, 478,000,000 acres altogether, a per capita average of 5.2 acres; and a little less than one-half was unimproved, 400,000,000 acres altogether, a per capita average of 4.3 acres. The improved land produced not merely food but many kinds of materials, such as cotton, wool, hides, and lumber, while much of the unimproved land was either in farm wood-lots, or in rough range pasture. Of course the kinds and amounts of produce per acre vary with the climate, particularly with sunshine and rainfall; possibly the proportion of the area of the United States that is true desert and infertile mountain land is greater than that of any other equal area in the temperate zones. The actual productive capacity per acre of the lands of America cannot be expressed in a very helpful way as a general average per acre, but each area must be carefully studied in respect to its climate, rainfall, and possibility of irrigation and drainage. It is evident that a very large number of economic problems must arise in connection with the land supply for food: such as problems of land-ownership, taxation, irrigation, drainage, forestry, and encouragement or limitation of population. We are just beginning to awaken to the needs in this direction. The rivers, lakes, and ocean waters near our coasts are other great sources of food, but no statistics are available to show adequately their yield. Few of them are in private possession and they do not appear at all in a total of "capitals," yet they are more important to the nation than a large part of the land area. They are only beginning to be developed artificially by the propagation of oysters, clams, and fish. The development of a proper policy in this matter is one of our economic problems. There were in 1910 (mostly on farms) about 64,000,000 beef and dairy cattle, 60,000,000 swine, 56,000,000 sheep and goats, and there were raised in the one year nearly 500,000,000 fowls of all kinds. § 9. #The sources of heat, light, and power#. The law of the conservation of energy expresses the fundamental likeness of heat, light, and power. The principal sources from which man derives these agencies are coal and falling waters, tho wood is of importance as fuel in some localities. About 500,000 square miles of land (about 13 per cent of the area of the country) are underlaid with coal. These deposits are widely distributed, so that nearly every part of the country is within 500 miles of a mine. The enormous deposits if used at the present amounts per year would last probably 2,000 to 4,000 years, but if used at the present increasing rate (doubling the product every ten years) they would, it has been estimated, last but 150 years. What shall be the actual rate as between these extremes is a question whose answer depends on our economic legislation as to ownership, exploitation, prices, use, and substitution. This is another of our important socio-economic problems. The one great available substitute for coal as a source of heat and light and power is water power. It is estimated that in 1908 but 5,400,000 horse power was being developed from water falls, whereas about 37,000,000 primary horse power[6] was available; but, by the storage of flood waters so as to equalize the flow, at least 100,000,000 horse power, and possibly double that amount, could be developed. As it requires ten tons of coal to develop one horse power a year in a steam engine by present methods, there is here a potential substitute for coal equal to two to four times our present annual use of coal (about 500,000,000 tons in 1912). But this does not mean that it would be economical, at present costs of mining coal and of building reservoirs, to make this substitution now. To determine when, how far, and by what methods to develop this water power from lakes and rivers for the use of the people and to make this substitution, is another of our great economic problems. Petroleum and natural gas, of which our original reservoirs were perhaps the richest in the world, are being rapidly exhausted. These may be merely mentioned as being related to coal in the source of their supply, in the nature of their uses, and in the economic problems to which they give rise. § 10. #Transportation agencies#. First to mention among the means of transportation are the navigable waters--oceans, lakes, rivers, and canals, with the necessary equipment of dredged inlets, harbors, docks, locks, and lighthouses. Few of these appear in the total of "capitals," for they are not in private possession. Yet a good system of natural waterways may be greater wealth to one nation than costly additional railroads are to another. Good natural harbors on the waterways leading out to the oceans are a most important kind of national wealth, as are the navigable great lakes within the boundaries or on the borders of a country. Just in proportion as these natural means of transportation are lacking, is the need to build costly artificial means of transportation. Both in natural and in artificial means of transportation, America is well provided. The straight coast line is 5700 miles long, and the line following indentations of the coast is about 64,000 miles. The Great Lakes with a straight shore line of 2760 miles are the most important inland waterways in the world. The 295 navigable rivers in the country have a length of 26,400 miles of navigable water. About 2000 miles of canals are still in operation. On the waterways some 27,000 American vessels are in use, with a capacity of 8,000,000 gross tons.[7] There are about 250,000 route miles of steam railroads, or with additional tracks, yard tracks, and sidings, a total of about 370,000 miles. On these are over 63,000 locomotives, 52,000 passenger cars, and 2,400,000 freight and company cars. Besides these are 45,000 track miles of electric railways and nearly 100,000 cars. These railroads include an enormous aggregate of works and structures in the form of tunnels, cuts, banks, bridges, stations, and shops. There are in the country (1914) about 2,228,000 miles of public roads, of which 10 per cent are "surfaced" roads. No figures are now available of the number of wagons, horses, automobiles, and other vehicles in use on the roads and streets for purposes of transportation. Many of our economic problems are presented by these transportation agencies, from the question of opening a new dirt road in a rural township to that of building an inter-oceanic canal, from the question whether to have free public roads or toll roads to that of regulating the railroad rates on the whole railroad system of the country. § 11. #Raw materials for clothing, shelter, machinery, etc.# The farm lands supply, besides food, a large part of the raw materials for many other goods, such materials as cotton, flax, wool, hides, feathers, lumber, and firewood. The farm woodlots compose about 200,000,000 acres, and the large forests, public and private, about 350,000,000 acres, a total of about one-fourth the area of the country in forests, containing about one-half of the lumber that the country once possessed. The economic problem of a sound forestry policy is one of the largest we have to solve. The most important other sources of raw materials for industry are the mineral deposits in the earth's surface.[8] This country is stored more bountifully, probably, than is any other country, with the metal ores of iron, copper, lead, zinc, gold, and silver. Aluminum is the most abundant metal, composing about 8 per cent of the crust of the earth, but by present methods it can be extracted only at considerable cost from certain compounds that are limited in amount. The details as to our metal stores are too complex for fuller treatment here, and may be found in treatises on economic geology or on industrial geography. The determination of wise policies as to the use of these stores involves many economic problems, private and public. Another great class of material wealth is in the form of tools, machinery, and other agencies for carrying on the industrial processes of farming and of manufacturing. These are sometimes called instrumental goods, or the industrial equipment. Still another class consists of the great mass of completed direct goods, such as houses to live in, libraries, museums, school buildings, theaters, all kinds of buildings and equipment for pleasure and entertainment, parks, and pleasure resorts in mountains, at lakes or sea shore. The possession and use of these forms of wealth give rise to some economic problems of public ownership and to others connected with the institution of private property in general, as sketched in the following chapter. [Footnote 1: It is to be observed that these figures appear under the general title of Part I, "Estimated valuation of national wealth: 1850-1912," and the tables are spoken of (volume on Wealth, Debt, and Taxation, p. 20) as "estimates of the aggregate wealth of the nation as prepared by the United States censuses," but the tables themselves are described (pp. 23-25) as the "estimated true valuation of all property," this phrase being used as equivalent to "wealth." For the definitions of wealth and property see Vol. I, pp. 264-265.] [Footnote 2: This change will be described below in ch. 6, in treating of the standard of deferred payments.] [Footnote 3: See Vol. I, pp. 265, 278, 508 for the distinction between wealth and capital.] [Footnote 4: See Vol. I, p. 25, for the definition of utility.] [Footnote 5: See Vol. I, p. 510 on the paradox of value.] [Footnote 6: That is, "the amount which can be developed upon the basis of the flowage of the streams for a period of two weeks in which the flow is the least," all the rest being allowed to escape unused. Van Hise, "Conservation of Natural Resources," p. 119.] [Footnote 7: These and other figures in this section relate to the year 1913.] [Footnote 8: Coal has been mentioned above, sec. 9.] CHAPTER 2 THE PRESENT ECONOMIC SYSTEM § 1. The place of private property. § 2. Nature of property. § 3. Relation of wealth, property, and capital. § 4. Some theories of private property. § 5. Origin vs. justification. § 6. Limitations of private property. § 7. Limitations of bequest and inheritance. § 8. Social expediency of private property. § 9. The monetary economy. § 10. The competitive system. § 11. Limitation of competition by custom. § 12. Effect of modern forces upon custom. § 13. Adam Smith's influence. § 14. The wage-system. § 1. #The place of private property#. Of fully equal importance with material wealth in determining the economic power of a people is the _social system_ under which the nation lives. This is the term applied to the whole complex of institutions and arrangements in which and by which people live together in society. It is the embodiment of the opinions, ideas, and habits of life inherited by each generation from its forbears. It is, indeed, a people's whole state of civilization with its political, economic, intellectual, scientific, religious, and esthetic aspects. The most important economic aspect of the existing system is, broadly speaking, the institution of private property. So closely connected with this that they are hardly more than different phases of the same thing, are the use of money (the monetary economy), the wage system, and competition as a mode of distribution. "The institution of private property" is the general expression for the way in which men in the modern state make use of their own energies and of material wealth within the nation. Nearly all the total of the things mentioned in the table in Chapter 2, section 4, are owned by private citizens.[1] We live in a régime of private property, and all our economic problems are affected by that fact. The determination of the exact boundaries of private property makes up a large part of the politico-economic problems which the people in each generation have to solve. A large share, possibly, in a certain sense, every one of the economic problems that are discussed involve change, limitation, definition, or, more radically, abolition of present laws of property. Broadly understood, as above, therefore, determination of the nature of private property is _the essential_ economic problem. § 2. #Nature of property#. Property means ownership, and "ownership" is the abstract noun expressing the quality of possessing a thing. Correspondingly, "owner" is the Anglo-Saxon equivalent of "proprietor." Property thus, fundamentally, means not an object held, or possessed, but the right in or belonging to a person to control something that he owns. Ownership is a legal right to control under certain conditions.[2] Physical, possession of an object is not necessarily ownership. There are different kinds of ownership. It may be private, as that of individuals, families, partnerships, or corporations; or it may be public, as that of nations, states, counties, cities and towns, owning such things as public buildings, parks, highways, the Adirondack forest-reserve, or the Erie Canal. These two kinds are equally effective as against the claims of outsiders, but the rights of those inside the circle of ownership differ. For example, the rights of one shareholder against another, or the rights of one member of a family as against another, are not the same as the rights against outsiders. Private property is the characteristic feature of our present industrial society, but it exists side by side with public property and with many intermediate grades between private and common property. Tho property meant originally and essentially the intangible right to a thing, the word came to be applied also to the object of the right. This is done both in common speech and in judicial decisions, with inevitable ambiguity. This may be readily seen by trying to substitute the word ownership for property, a thing quite simple in some cases but impossible in others. One would not point to a house and say, "This is my ownership," but either, "This is my property," or "I exercise ownership over it." It is well recognized that a man may have a property right in this abstract sense in or over his own services, as to practise a trade or in the "good will" of a business or in an intangible patent or a copyright, quite as well as in a material object. § 3. #Relation of wealth, property, and capital#. A failure to see this distinction and to keep it clearly in mind has led to confusion, even on the part of legislatures, learned judges, and able economists. If property is said to be (for example) a house and lot and at the same time the right to that house and lot, then there are two properties at once for each economic good, viz.: the object itself and the right to it.[3] This difficulty could be avoided by the consistent definition and use of terms. A material economic object is a good, is a form of wealth. The usance of wealth and the service of laborers at the moment rendered constitute forms of income. The right of ownership, i.e., the right to control, use, or direct the use of wealth and services, is property, which is therefore the right to receive incomes. The value of the incomes of an individual constitute his capital. Goods, rights to goods, value of rights to goods: these three things are clearly distinguishable. § 4. #Some theories of private property#. Various theories have been framed to explain the origin and to justify the existence of private property. The occupation theory is that property is based upon the priority of claim of one who finds wealth without an owner and appropriates it. This is not an explanation of the property rights that are arising every moment, nor does it give a logical reason for the continuance of ancient property rights. It is a statement applying to a case that has rarely happened, the settlement of an unoccupied territory. More adequate to explain many cases is the conquest theory, that property is based on force; for nearly all lands to-day are occupied by the descendants of conquering invaders who took the lands and natural resources from the former inhabitants, who in turn had taken them from other occupants, many centuries before. The conquest theory applies, for example, to the invasion of the Roman provinces by barbarian tribes who divided the country and developed the feudal system based on land tenure. But it hardly applies to present-day happenings, and at its best it cannot, to modern minds, "justify" present property rights. The labor theory, meeting some queries where others fail, is that ownership is based on the act of production. It is declared that every man has a right to that to which his brain and his muscle have imparted value. It is evident that this test leaves without explanation or justification a great number of things that do exist and have existed as property. Usually the basis of the labor theory of property is declared to be each individual's natural right to the results of his own labor, which claim is assumed to be an ultimate, undebatable, axiomatic fact. However, that type of natural-right doctrine, which makes no appeal to experience and results, is now quite discredited in political science. Another form of natural-rights theory is that property is necessary for the realization of the dignity of human nature and every individual has the natural right to self-realization. This theory is, in a way, based on an appeal to experience, as to the effect of property on human character, and it has the virtue of expressing one of the ideals of modern democracy. Altho, in common with various other "natural-rights" theories, it must be deemed too absolute and too individualistic, it contains a far-reaching truth, of which due account must be taken in our social philosophy. The legal theory is that property exists because the law says it shall. This expresses a truth, but is no more than a truism. The law determines the limits of property, but what determines the limits of the law? What practical or social justification is there for passing and continuing such law? The legal theory does not contain a final explanation. Each of these theories has its defects, but each points to some fact important and significant, at certain times and places, in the explanation of this widespread institution. § 5. #Origin vs. justification#. The question of the origin is not the same as that of the present justification of the existing system of private property. The institution of private property has evolved under diverse conditions. In early societies individual property rights were not very clearly marked. Every tribe asserted against other tribes, and tried to uphold by war, its claims upon its customary hunting grounds; but the claims of the individual hunters on land within the tribe did not often come into conflict. Private property at the outset was in personal possessions, ornaments, weapons, utensils, which were very meager in that primitive society in which it was the custom "to go calling with a club instead of a card-case." Only later came individual property in land. A few years ago it was generally believed that the organization of the old German tribes was politically an almost perfect democracy, and economically a communism in which all had equal claims upon the land. To-day this opinion is very seriously questioned. It seems probable that there was a goodly measure of communism in the control and use of lands (tho not in other things), but this was largely confined to an oligarchy of the favored; whereas the masses lived in subjection, cut off from all but a meager share in the common lands. However that may have been, strong forces within historic times have put an end to the common ownership and tillage of land as it existed among the peasants of Europe. That system was shown by experience to be wasteful. Competition tended to bring the economic agents into more efficient hands, and the movement was furthered by many acts of injustice and violence on the part of those in power. Inquiries into the origin and development of any social institution are interesting and helpful in forming an estimate of its present significance, but the problems of the past are not those of to-day. Whether or not the ancient beginning of property in Europe was in violence and evil has but a remote bearing on the question as to the present working of it. Social conditions and needs have not changed more than have the forms and limits of property itself. Each generation has its own problems to solve, and ignoring for the most part the evils of the distant past, each generation must test existing institutions by their present results. § 6. #Limitations of private property#. It is well, in discussing private property, to rid the mind at once of the idea that it is an absolute and unchanging thing. Few realize the manifold ways in which property rights are limited. Unmodified private control of property is unknown; the public makes many reservations in its own interest. There is, first, a whole set of limitations to prevent nuisances. An owner in many situations is not free to build a slaughter-house or to start a glue-factory on his land. Property is governed by general public utility, and anything that threatens to become a nuisance or a danger may be excluded. Under the right of "eminent domain," the state or the railroad takes the old homestead from the owner who would live and die there. Altho pecuniary damages are paid to him, this is a limitation of his property rights. Rights of way on property exist either by contract or by prescription permitting its public use. Most important of all limitations is the right of taxation, by which society takes more or less of private incomes for purposes of which the individual owners may not approve. The law enforces a multitude of private claims by some persons against others. A variety of rights called easements or servitudes may attach to private property, modifying its exclusive use. Leases for any period are a limitation of the owner's control. Both the holder of the lease and the owner of the property have certain rights before the law. The lender of money secured by mortgage has a legally recognized and enforceable interest in the mortgaged wealth. Property is left in trust for the benefit of persons or of institutions or of the public, and is administered by trustees who are strictly bound to execute the terms of their instructions. Contracts of many sorts are entered into by owners, limiting their control in manifold ways, and the law enforces these contracts. These all form a complex of equitable claims, which together equal in value one undivided property right, which in turn equals the value of the wealth.[4] § 7. #Limitations of bequest and inheritance#. The term bequest implies a will, usually a written will in which the person, in anticipation of death, expresses his wishes as to the disposition of his property. It is said sometimes that bequest is a "logical" result of private property, but the law does not treat it as such. The right of bequest, or of gift at death, is limited in various ways in different countries. In countries where hereditary aristocracies exist, primogeniture is in some cases required by law, in others so strongly favored by public opinion that it is practically always followed. Custom limits bequests in England to members of the family, and wills given outside the family are rare, and are almost always broken in the courts. John Stuart Mill contrasted this with the practice in America, frequent even in his day and still more frequent now, of rich men giving for public purposes. In France the right of bequest outside the family is legally limited; only the share of one child can be willed away by the father, and the rest must be equally divided among the children. Settlements and _fidei commissa_ are limited in many countries, because of the recognized social evils resulting from the tying up of estates for generations. Throughout the history of England, Parliament has given attention to the question of mortmain, which chiefly concerned the drifting of great estates into the hands of the church or of corporations, as the result of bequests by the pious. In England, of late (and to a less extent in this country), the policy of permitting unlimited endowments to charitable institutions has been seriously questioned, and by legislation some of the old endowments have been diverted from their original purposes when these have ceased to be of social utility. Inheritance, in contrast with bequest, usually means succession to the property of one who has died intestate, that is, has made no will. The law of inheritance likewise varies greatly with time and place. § 8. #Social expediency of private property#. In the light of present political philosophy the explanation and justification of private property must be on grounds of social expediency. This is a broad explanation and it has the fault of a broad explanation, that it needs to be further explained. Under it can be brought the many varying conditions. Even if private property works hardship to individuals in many cases, yet it may be justified if, on the whole, it is best for the progress of society. Laws must be judged by their average working, not by exceptional cases. In general, the system of private property must be judged by this test: Does it further the welfare of the nation better than would any alternative plan for the control of economic wealth? The question is not whether it is faultless, for no human institution is so. Nor must it be assumed that the rule of property needs to be uniform in respect to all kinds of wealth. There are many kinds of property, and the test may be applied separately to the different forms and to the varying degrees of property rights. The varied and often strict limitations of property mentioned above are all determined by some thought, wise or foolish, of social expediency. Different parts of wealth may be treated in different ways: there may be private property in wagons, and public property in roads; private property in houses, and public property in forests; private property in automobiles, and public property in railway carriages. But any rule of property, like any other workable human law, must be applicable to all individuals that meet the conditions. The very acceptance of the theory of social expediency implies the need of frequent readjustment of the institution of private property. The essential thought in the various attacks on the institution of property is that, because it either causes or makes possible the inequality of incomes, it is not socially expedient. Private property, as it is found to-day, is complicated by many historical accidents. Survivals of ancient injustice and relics of feudal institutions that rest on no vital reason remain in our new country as well as in the older ones. The limits of property in many respects are determined not according to the logic of expediency, but by the social inertia which often governs successive generations. The question is raised in many minds: If private property is not an absolute right, what shall be its limits? What changes should be made in it? These questions put the greatest economico-political problem of our day, one that contains within it, indeed, many minor problems. A number of these will receive attention in the following pages. § 9. #The monetary economy#. So greatly does the use of money facilitate the transfer, buying, and selling of private property and so closely are property and pecuniary trade connected in practice and in the thoughts of men, that every radical proposal to abolish private property has included a plan to do away with money also. But money and private property are not essentially and logically bound up together, for a certain measure of private property always has been found where money was little or not at all used. True, if there were absolutely no private property, there would be little use for money, altho it might still be used as a form of counter by the communistic state. We have already seen[5] how a monetary unit comes into use, and we shall treat more fully of the nature of money in later chapters. We may note here merely that the use of money is an outstanding feature of the present economic system and gives rise to many of the problems of political economy. § 10. #The competitive system#. The existing system is likewise characterized by competition[6] in the buying and selling of wealth and of the usances and services of economic agents. By competition we mean here the condition of political freedom on the part of each man to trade his property (goods, uses, or services) as he chooses, and this combined with the disposition on his part to get what he values most highly for himself and his family. Whenever any one else (official or citizen) forbids and prevents a man from getting all he can, in so far competition is limited. Whenever any one is deterred by fear of, or by affection for, some other trader, from getting all he can, in so far competition is limited. Whenever any one conspires with another trader to act together with him to withdraw or to alter his bid, in so far competition is limited. Private property and economic competition do not merely happen to exist side by side, forming more or less favored conditions each for the other; they are essentially connected.[7] It is not our task at this point to present the advantages and disadvantages of competition, but merely to indicate its important place in the actual economic world. Like private property, competition is not the universal feature of our present system, but it is the most general and characteristic method of valuation, of price fixing, and of trade. § 11. #Limitation of competition by custom.#[8] The relatively large influence of competition in present society appears more plainly in comparing the present system with that of an earlier state of society or with that of a present savage tribe. A member of the lowest human societies is subject to law; tho he is a savage he is not "untutored." On the contrary he is bound in many ways to follow customary lines of conduct, and a large part of his time is given to learning the traditions and then to observing the ceremonials of the tribe. Primitive customs always take on a religious sanction, and every member of the tribe is piously bound to do as his fathers have done and as his neighbors are doing. This limitation applies to the choice of food to eat, clothes to wear, time to hunt, plant, and harvest, weapons and tools to use, where and how to trade, how much to give or take, and to countless other details of economic choice. So, in early society, economic relations were complex and but slowly changing from generation to generation. Custom, rather than competition, ruled in manifold ways the economic actions of men. Custom continued to rule a large share of the individual life of the peoples of northern Europe through barbarian and feudal times. Its force has gradually decreased, but even yet is not entirely set aside. Political and economic interests were not clearly distinct in the Middle Ages. Land was the all-important kind of wealth. Military and other public services were performed by the higher landlords (as vassals of their overlords) who in this way paid at the same time what we to-day would call rent and taxes. The landlord in turn received from his underlings services and goods in kind (food and supplies) and so (in modern eyes) was both a collector of taxes and a receiver of rent. The rent, however, was not a competitive price, but consisted of the dues and services which the forefathers had been accustomed to pay. In many ways also in the towns, close organizations of craftsmen and of merchants regulated prices and kept others out of their industries. Industrial privilege pervaded the life of that time. Yet through all the Middle Ages ran the forces of competition. The inefficiency of customary services and the high prices charged by selfish privilege were constant invitations to men to become competitors. Men strove to break over the barriers of custom and of prejudice. Their efforts to attain freedom to compete was the vital force of the time. The industrial history of the Middle Ages was largely the story of the struggle of the forces of competition against the bonds of custom and privilege. § 12. #Effect of modern forces upon custom#. The industrial events following the discovery of America strengthened the forces making for economic freedom. Discoveries in the Western hemisphere opened up a wide field for the adventure and enterprise of Europe. Commerce is the strongest enemy of custom, and new opportunities gave a rude shock to the conservatism both of the manor and of the village. With the rapid growth of industry and manufactures, old methods broke down. In an open market custom declines; it flourishes best in sheltered places. Further, the movement of thought in the Reformation, and the spirit of the times which expressed the principle of personal liberty and allowed the individual to follow his own opinions and take the consequences, were favorable to competition. Despite these facts, the restraints of the national governments on trade continued great, in some respects increasing during the seventeenth and eighteenth centuries, in France, Holland, and England. The regulation before attempted by towns and villages was employed on a larger scale by national governments with their industrial systems. The colonies in America were used for the economic ends of the "mother country" and for the selfish interests of the home merchants in Europe. The American Revolution was one of the bitter fruits of the English policy of trade restriction. § 13. #Adam Smith's influence#. "The Wealth of Nations," the first great work on political economy, was published in the year 1776. That was the "psychological moment" for its appearance, as public thought was so prepared for it that it had its maximum possible influence. The year of the American Declaration of Independence gave the most striking object lesson on the evils of a selfish colonial policy that interfered on a grand scale with economic freedom. The old customs had become ill fitted to life, ill adapted to the rapid industrial changes that were going on. What was needed in many directions, both in politics and in industry, was merely negative action by the government, the repeal of the old laws, the overthrow of old abuses. The French Revolution, following a few years later, emphasized this thought in the political field. The philosophers of the time believed in a "natural law" in industry and politics. The reformers of the time wished to throw off the trammels of the past and to give men opportunity to exert themselves "naturally." In America the old abuses never had taken deep root, as the conditions of a new continent were not favorable to monopoly and privilege. Altho the movement for the repeal of medieval laws has continued in Europe from 1776 till the present time, yet custom still is stronger to-day in Europe than in America. Serfdom was not abolished until the first half of the nineteenth century in Austria and southeastern Europe, and not until the last half in Russia. Many economic and cultured forces furthered this movement, but the most powerful intellectual force in its favor was the work of Adam Smith. So strong an impression did Smith's book make, that in the minds of men "free trade" became almost identical in thought with political economy, whereas that was but the temporary economic problem of the eighteenth century. Many men then thought that in "free and unlimited competition" had been found a solution of all economic problems for all time. But soon, it was apparent that it was no such simple and absolute solution. Indeed many of the present economic problems--in one sense all of them--center around this one: to determine the proper forms and limits of competition. The varied aspects that this problem takes will appear in every portion of the following pages. § 14. #The wage-system.# Viewed in another aspect the present economic and social order is called the wage-system.[9] The wage-contract, like the use of money, is not essential to the existence of a system of private property. Communities such as the American colonies and as many of the newly settled states, may consist almost entirely of self-employed owners of land. Bulgaria, before the Balkan wars called the peasant state, presented this organization (tho of course with some wage-payment), as did also its neighbor Serbia. But given the institution of private property with competition (freedom to buy and sell), let manufactures and commerce develop to any extent, and inequalities of fortunes increase while an increasing number of persons work for wages. It is noteworthy that as this goes on (as it has done in America at an increasing rate since the middle of the nineteenth century) it is the agricultural and rural hand industries that continue to be mainly worked by owner-managers and workers, while it is the manufacturing, transporting, and large commercial enterprises in which the labor is done for wages. The acceptance of the wage-system thus far has been the inevitable price to be paid for manufacturing and industrial development; and one of our economic problems is to determine whether this must continue, and if so, whether in the same measure as in the past. [Footnote 1: The exceptions are probably unstated amounts of exempt real estate (owned by municipalities, state, and nation), some of the irrigation plants, part of the canals, and that part of the gold and silver which is in the public treasury.] [Footnote 2: See Vol. I, pp. 264-267. The law makes between property rights and equitable rights some subtle distinctions, which have their reason in the history, if not in the logic, of the law but which are not essential to economic discussion. In some states this distinction has been in large measure abolished. What interests us are the rights (claims) that men have to the control of wealth and services, whether by technical law these are called legal or equitable, and this right is what is meant by "property" in our discussion of it.] [Footnote: 3 This confusion has had important practical consequences in the field of taxation. See Vol. I, pp. 265-267, and below, ch. 17.] [Footnote 4: These claims mutually delimit each other (whether they be called equitable claims, or liens, or property rights), and wealth is not multiplied by multiplying the claims, as is unfortunately sometimes assumed to be the case. See above, sec. 3.] [Footnote 5: See Vol. I, p. 51.] [Footnote 6: See Vol. I, p. 73.] [Footnote 7: This will appear in comparing the competitive method of distribution with other methods in ch. 31.] [Footnote 8: See Vol. I, p. 143, on medieval land tenures; p. 158, on customary rents; p. 190, on the effect of caste.] [Footnote 9: See Vol. I, p. 227.] PART II MONEY AND PRICES CHAPTER 3 NATURE, USE, AND COINAGE OF MONEY § 1. Origin of money. § 2. Qualities of the original money-goods. § 3. Industrial changes and the forms of money. § 4. The precious metals as money. § 5. Gold-using countries. § 6. Varying extent of the use of money. § 7. Money defined and reviewed. § 8. Metal money without or with coinage. § 9. Technical features of coinage. § 10. Seigniorage defined. § 1. #Origin of money#. Everywhere in the world where the beginnings of regular trade have appeared, some one of the articles of trade soon has come to be taken by many traders who did not expect to keep or use it themselves, but to pass it along in another trade.[1] This made it money, for money is whatever comes to be used as a general price-good. The character of a _general_ price good clearly distinguishes money from goods bought and sold by a particular class of merchants, such as grain, cattle, etc., to be sold again. It is only in so far as a particular good comes to be taken by persons not specially dealing in it, taken for the purpose of using it as a price-good to get something else which they desire, that a thing has the character of money. The thing called money thus is a durative good passing from hand to hand in a community, and completing its use in turn to each possessor of it only as he parts with it. The use of money is of such social importance, that it would be impossible for modern industrial society to exist without it. The discussion of money touches many interests, it raises many questions of a political and of an ethical nature. There are perhaps more popular errors on this than on any other one subject in economics, but the general principles of money are as fully understood and as firmly established as are any parts of economics. § 2. #Qualities of the original money-good#. The selection of any money-commodity has not been mere chance, but has been the result of that object being better fitted than others to serve as a medium of exchange. The main qualities that affected the selection of primitive form of money were as follows: 1. Marketability (or saleability); that is, it must be easy to sell. The first forms of money had to be things which every one desired at some time and many people desired at any time. That was the essential quality that made any one ready to take it even when he did not wish to use it himself. Many kinds of food and of clothing are very generally desired goods. But few of these classes of goods have in a high measure certain other important qualities, now to be named. 2. Transportability; that is, the money material must be easy to carry, it must have a large value in small bulk and weight. To carry a bag of wheat on one's back a few miles requires as great an effort ordinarily as does the raising of the wheat, and the cost of carriage for fifty miles even by wagon will often equal the whole value of the wheat. Cattle, while not comparatively very valuable in proportion to weight, and not possessing the other qualities of money in the highest degree, have the advantage that they can be made to carry themselves long distances, and therefore they have been much used as money in simpler economic conditions. 3. Cognizability; that is, the money-good must be easy to know, and to judge as to quality. If expert knowledge or special apparatus are needed to test it in order to avoid counterfeits, few could be ready to take it and trading would be a costly process. 4. Durability; that is, the money-good must be easy to keep without much loss in amount or in quality, perhaps for long periods, until it can be passed on in trade. Few kinds of food answer very well to this last requirement, being organic and perishable. But all four qualities above named were pretty well embodied in primitive times in rock salt, in rare flints and bits of copper suitable for tools and weapons, in furs in northern countries, and in many articles of personal adornment, such as beads, feathers, jewels, and metal ornaments. 5. Divisibility; that is, the quality in the monetary material that permits it to be divided easily into smaller amounts and then to be united again into larger masses at little cost and without loss in amount or in quality. This quality is present only when the material is quite homogeneous throughout the whole mass, a condition fulfilled more completely by the metals than by any other goods. This quality makes it possible to put the governmental stamp upon the money material, and to produce pieces, some of which are exact duplicates and some exact multiples, of others. In this manner pieces of money are provided suitable for transactions of different magnitudes, down to small fractional amounts. A monetary system of this kind aids greatly the development of the sense and habit of exact estimation of price. § 3. #Industrial changes and the forms of money#. The money use, as has just been shown, is a resultant of a number of different motives in men. The changing material and industrial conditions of society change the kind of money that is used. Things that have the highest claim to fitness for money with a people at one stage of development have a low claim at another. The final choice of the money-good depends on the resultant of all the advantages. Shells are used for ornament in poor communities but cease to be so used in a higher state of advancement, and thus their saleability ceases. Furs cease to be generally marketable in northern climes, when the fur-bearing animals are nearly killed off and the fur trade declines. When tobacco was the great staple of export from Virginia, everybody was willing to take it, and its market price was known by all. It served well then as the chief money, but, as it ceased to be the almost exclusive product of the province, it lost the knowableness and marketability it had before. In agricultural and pastoral communities where every one had a share in the pasture, cattle were a fairly convenient form of money, but in the city trade of to-day their use as money is impossible. Thus, in a sense, different commodities compete, each trying to prove its fitness to be a medium of trade; but only one, or two, or three at the most, can at one time hold such a place. While industrial changes and conditions affect the choice of money, in turn money reacts upon the other industrial conditions. If a new and more convenient material is found or the value of the money metal changes to a degree that affects the generalness of its use, industry is greatly affected. The discovery of mines in America brought into Europe in the sixteenth century a great supply of the precious metals, and this change in the use of money reacted powerfully upon industry. Money, being itself one of the most important of the industrial conditions, is affected by and in turn affects all others. § 4. #The precious metals as money#. Certain of the metals early began to show their superior fitness to perform the monetary function. The metals first used as money were copper, bronze (an alloy of copper with nickel), and iron. These were truly precious metals in early times for they were found only in small quantities in a few localities. They, therefore, were widely sought and highly valued as ornaments and for use as tools and weapons. But as the great ancient nations emerged into history, these materials were already being displaced in large measure. Their value fell greatly as a result of greater production due to somewhat regular mining. As wealth grew, as trade increased, as the use of money developed, as commerce extended to more distant lands, the heavier, less precious metals failed to serve the growing monetary need, especially in the larger transactions. Silver and gold, step by step, often making little progress in a century, became the staple and dominant forms of money in the world, while copper and nickel still continued to be used for the smaller monetary pieces. Every community has witnessed some stages of this evolution. In this contest silver had proved itself a few centuries ago to be on the whole the fittest medium of exchange for most purposes, though gold was at the same time in use in larger transactions and in international trade. § 5. #Gold-using countries#. At the beginning of the nineteenth century nations were divided, in accordance with the metals they used as standards, into two great groups, silver- and gold-using. Since that time, and more rapidly after 1850, gold has displaced silver as the standard money. In a higher degree than any other one material, gold has the qualities of a good standard for rich and industrially developed communities. England for a long period practically has had gold as its standard money; the United States since 1834 (except for the period of paper money from 1862 to 1879); France since about 1879, having shifted gradually from silver, after 1855, under the working of the bimetallic law; Germany since 1873; and Japan since the later nineties. Other countries have been striving to attain it. Since about 1890 some states (including Mexico) and some of the colonial possessions of the great nations (including India and the Philippines) have adopted the plan of "the gold-exchange standard." By this plan gold is the standard price unit, while silver continues to be used all but exclusively as the material in circulation, its amount being controlled and its value regulated on principles to be explained below under coinage, seigniorage, and foreign exchange. There are now left but a few silver-standard countries, the most important being China. There are, however, numerous countries, notably in South America and Central America, which have fiduciary paper-money standards.[2] § 6.# Varying extent of the use of money#. Trade by the use of money at no time has become the exclusive method. Barter still lingers to-day.[3] The extent to which, on an average, money is used in different parts of the world differs widely. The use of money in Siberia is less than in European Russia, and its use is less there than in western Europe. The use of money as compared with barter is generally much greater in the cities than in the rural districts. In the cities of Mexico not only money, but banks and credit agencies are in general use; whereas the rural districts are more backward and make far more use of barter than is the case in the United States. At the ports in the cities of China, India, and South America the use of money may be very like that in European cities; but go a little way into the interior of these countries and conditions as to the use of money change greatly. However, the comparative per capita amounts of money (in terms of American dollars) in circulation in different countries is far from being a true index of their industrial development or of their commercial activity. Indeed, beyond a certain point the larger average amount of money in circulation in a country may indicate backwardness in the development of banks and other credit agencies rather than greater amount of wealth or of business. Notice, for example, the medium position of the great commercial countries, Germany and the United Kingdom, as compared with other countries above and below them in the following list. PER CAPITA CIRCULATION OF MONEY IN LEADING COUNTRIES DECEMBER 31, 1912. France..................$48.91 America (U.S.)..........$32.98 Australia............... 38.45 Portugal................ 29.46 Canada.................. 33.57 Netherlands............. 26.86 Switzerland............. 24.32 Mexico.................. 9.17 Germany................. 21.36 Finland................. 8.38 United Kingdom.......... 21.21 Chile................... 8.24 Spain................... 19.96 Turkey.................. 7.09 Brazil.................. 18.79 Russia.................. 6.45 Denmark................. 17.73 Japan................... 5.68 Belgium................. 15.83 Bulgaria................ 5.57 Austria-Hungary......... 14.68 Serbia.................. 5.49 Rumania................. 13.24 Venezuela............... 5.51 Italy................... 13.09 India (British)......... 5.19 South Africa............ 12.93 Ecuador................. 4.62 Norway.................. 12.50 Peru.................... 3.17 Sweden.................. 11.59 Colombia................ 2.32 Greece.................. 11.02 Paraguay................ .57 7. #Money defined and reviewed#. Money may be defined as a material means of payment and medium of trade, generally accepted as the price-good and passing from hand to hand. The definition contains several ideas. The words "generally accepted" imply that money has a peculiar social character, is not an ordinary good. As a price-good, money itself must be a thing having value, otherwise it could not be accepted. Trade means the taking and giving of things of value. Money is, therefore, not merely an order for goods, as a card or paper requesting payment; it is itself a thing of value (tho this value may be due partly or solely to its possessing the money function). Such things as a telegram when transferring an order for the payment of money, as the spoken word, and as a mere promise to pay, are not money. Even checks and drafts are merely substitutes for money. Money passes from hand to hand, is a thing that can be handled, and is or can be bodily transported. The application of the definition is not always easy, for money shades off into other things that serve the same purpose and are related in nature. In many problems money appears to be at the same time like and unlike other things of value, and just wherein lies the difference often is difficult to determine. Even special students differ as to the border-line of the concept, but as to the general nature of money there is essential agreement. 8.# Metal money without or with coinage#. In antiquity the metals were used as money in bulk; that is, the amount was weighed at each transaction and the quality was tested whenever there was doubt.[4] In countries industrially backward, payments are still made in this manner. For some time after the discovery of gold in California, gold dust was roughly measured out on the thumb-nail. In shipments of gold to-day by bankers to settle international balances, metal may be in the form of bars that bear the mark of some well-known banking house. In all of the cases of this kind the gold is money in fact, but not by virtue of any act of government. The metal is simply a valuable good, the receiver of which values it according to its weight and fineness. This is true even when the government mint, for a small charge, tests and stamps the bars at the request of citizens. Very early it became the practice of governments to shape and stamp pieces of metal to be used as money, so as to indicate their weight and fineness. The act of shaping and marking metal for this purpose is called coinage.[5] The coinage by government had notable advantages in giving to the monetary units uniformity of size, fineness, and value, with the stamp that was readily recognized. But in its simplest form coinage in no way changed the value of the money, and any other mark equally plain put upon it would have served equally well, if only it had carried with it equal assurance of the quality and weight of the metal. 9. #Technical features of coinage#. For each kind of metal money there is an established _ratio of fineness_ for the more precious material, which is mixed with baser metals used as alloys. In the United States all gold and silver coins are made nine-tenths fine; in Great Britain, eleven-twelfths. The established weight of the gold dollar in the United States is 25.8 grains of standard gold which contain 23.22 grains of fine gold. The _limit of tolerance_ is the variation either above or below the standard weight or fineness that a coin is allowed to have when it leaves the mint. This is different for each of the principal coins, being about one-fifth of one per cent on a gold eagle. The _par of exchange_ between standard coins of different countries is the expression of the ratio of fine metal in them. Thus the par of exchange between the American dollar and the English sovereign (the "pound") is 4.866; that is, that number of dollars contains the same amount of fine gold as an English gold sovereign. The embossed design is merely to make the coins easily recognizable and difficult to counterfeit; and milled or lettered edges are to prevent clipping and otherwise abstracting metal from the coins. 10. #Seigniorage defined#. Coinage, as practised by early governments and rulers, came to be a function of great importance politically as well as economically. The right to issue money came to be one of the most essential prerogatives of sovereignty. The prince, king, or emperor stamped his own device or portrait upon the coin; hence the term seigniorage from _seignior_ (meaning lord or ruler). Seigniorage meant primarily the right the ruler, or the estate, has to charge for coinage, and hence it has come to mean also the charge made for coinage, and often, in a still broader sense, the profit made by the government in issuing any kind of money with a value higher than that of the materials (whether metal or paper) composing it. Coinage is rarely without charge, and often has been a source of revenue to the ruler. In antiquity and in the Middle Ages this right was frequently exercised by princes for their selfish advantage to the injury and unsettling of trade. This introduced a very great problem of value into the use of money. The coinage is said to be _gratuitous_ when no charge is made for coinage. Coinage is said to be _free_ if the subject or citizen may take bullion to the mint whenever he pleases, paying the usual seigniorage. Coinage is _limited_ if the government or ruler determines when coinage is to take place. Thus, coinage may be both free and gratuitous, when citizens are allowed to bring bullion whenever they please and have it converted into coins without charge or deduction. But coinage is free without being gratuitous when any citizen may bring metal to the mint, whenever he chooses, to be coined subject to the seigniorage charge. [Footnote 1: See Vol. I, pp. 15-16 and 50-53 for an introductory statement of the origin of money in connection with markets.] [Footnote 2: See ch. 5.] [Footnote 3: See Vol. I, p. 43, on the decline of barter.] [Footnote 4: "I will ... refine them as silver is refined, and will try them as gold is tried." Zech. xiii, 9. "I bought the field ... and weighed him the money, even seventeen shekels of silver. And I ... weighed him the money in the balances." Jer. xxxii, 9, 10. A shekel was 224 grains, troy weight, which is about equal to six-tenths of the pure metal in a silver dollar to-day and worth now about twenty-four cents in gold. At that time, however, the purchasing power of silver was many times greater than it now is.] [Footnote 5: From the French _coin_, in turn from Latin _cuneus_, wedge, suggestive either of an earlier wedge-shaped piece, or of a wedge-shaped mark on the piece. The German word _Münze_ is from the Latin _moneta_ (as is the English _mint_, the place where coins are made), which meant money, that name being taken from the temple of Juno, called _Moneta_, where coins were made.] CHAPTER 4 THE VALUE OF MONEY § 1. Standard-commodity money. § 2. Alternative uses of the money-good. § 3. Money as a valuable tool. § 4. Relative importance of money. § 5. Concept of the individual monetary demand. § 6. Concept of the community's monetary demand. § 7. The money-material in its commodity uses. § 8. The general level of prices. § 9. Effect of increasing gold production. § 10. The quantity theory of money. § 11. Interpretation of the quantity theory. § 12. Practical application of the quantity theory. § 1. #Standard-commodity money#. The actual money in use in almost every country to-day consists of a wide and confusing variety: gold, silver, nickel, copper, paper in various forms, issued by various authorities under various conditions as to amount and as to seigniorage. But among all the kinds, in each country some one kind is found standing preëminent and in a peculiar position, as the _standard_ money to which the value of all the other kinds of money is in some manner adjusted. Usually this standard money is composed of a material (gold or silver) which is a commodity; but there are many examples of paper money being for the time the standard. The difficulties of the money problem must be attacked at the point of standard-commodity money, where it is nearest to ordinary value problems and is less complicated than when the various other kinds of money and the various money substitutes are included. We mean by standard money that kind, no matter what its form, which serves in any country as the unit in which the value of other kinds of money is expressed. The standard usually is a quantity of metal of a certain weight and fineness, which, as a commodity, has a value also in industrial uses. Coins of this standard are called full, or real, money by some writers that deny the title of money to everything else. § 2. #Alternative uses of the money-good.# Let us consider the problem of money-value as it would present itself if only one kind of commodity money were in use. This doubtless was in large measure, if not entirely, the case for a time in early societies after one material had proved itself to be the best suited for the purpose. The history of many kinds of money may, we have seen, be traced back to a point where they were not money, but commodities with a direct value-in-use. Such were ornaments, shells, furs, feathers, salt, cattle, fish, game, and tobacco. Each of these materials has, in each situation, a value which is the reflection of its power to appeal to choice. Now, if to the commodity-use is added the money-use, this increases the demand for that good. No new theory is required to explain the value of a commodity as it gradually acquires the added use of a medium of trade. The money use is one that works no physical or visible change in goods except a slight unavoidable abrasion, and at any time a person receiving a piece of commodity money may retain it for its use-value, as food, ornament, tool, or weapon, or may retain it for a time and then spend it as money. This case of value is no more difficult than that of anything else having two or more uses. For example, cattle are used for milk, for meat, and as beasts of burden. Each of these uses is logically independent as a cause of value, yet all are mutually related, the value of cattle to a particular person being determined by the consideration of all the uses united into one scale of varying gratification. § 3. #Money as a valuable tool.# Money is often, by a figure of speech, called a tool. A tool is a piece of material taken into the hand to apply force to other things, to shape them or move them. Figuratively, this is what money does. A man takes it not to get enjoyment out of it directly, but to apply force, to move something, and that which he moves is the other commodity. Money thus (as money) is always an indirect agent. Adam Smith aptly likened money to the roads and wagons that transport goods, thus gratifying desires by putting goods into more convenient places. The fundamental use that money serves is to apportion one's income conveniently as it accrues and as it is spent. The use of money increases the value of goods by increasing the ease with which trade takes place. Like any tool or agent, money is valued for what it does or helps to do. It enhances the value of the goods that it buys and sells by dividing them into quantities convenient for use and by making them available at the right times. In the light of the principles of diminishing gratification and of time-preference it is clear that the amounts in which, and the times at which, goods are available have an essential bearing on their values. Money is the most successful device ever discovered for distributing the supplies of a journey along its course, and the goods of daily need over a period of time. The use of money as a storehouse of value by hoarding it is merely a more extreme case of keeping income until a time when it will have a greater value to the owner than it has in the present.[1] § 4. #Relative importance of money.# Because money is the general expression of purchasing power, and comes to symbolize all other wealth, it often assumes undue and exaggerated importance in men's eyes. Money is but one of many forms of wealth. It constitutes but a small percentage of the total wealth of a country, and it is far from being the most indispensable to human welfare. Yet its importance, as a whole, in determining the form of industrial organization is enormous. In a society without money, industrial processes would be very different, and trade would be hampered in manifold ways. A poor community has little money because it cannot afford more; it gets along with less money than is convenient just as it gets along with fewer agents of every other kind that it could use. Pioneers in a poor community where the average wealth is low cannot afford to keep a large number of wagons, plows, good roads, or schoolhouses. If the members of the community were wealthy enough each would have more of these and of other things, and the sum total of money would be greater. Great as is the convenience of money, poorer communities have to do with little of it. It is, therefore, a confusion of cause and effect when poor communities imagine that their poverty is due to lack of money. § 5. #Concept of the individual monetary demand.# Let us now seek to get in mind the idea of an _individual monetary demand,_ as that amount of money which at any time is required by an individual to make his purchases in expending his income. Every man may be thought of as having an average monetary demand, or his average individual cash reserve, throughout a period. A man with a salary of $50 a month paid monthly has ordinarily a maximum monetary demand of $50. If his expenditures are made in two equal parts, the one on pay-day, the other thirty days later, his average monetary demand during the month is a little over $25. If most of his purchasing is done in the first week of the month, his average monetary demand may be perhaps $10. Many a workman purchases on credit, running accounts at the stores for a month. Then on pay day he spends his entire month's wages the day he receives it, and goes without money for the rest of the month. His average monetary demand throughout the month would then be about equal to one day's wages. Evidently any person's cash reserve may be expressed as that proportion of his income that is to him of more value retained in money form for any period than if at once expended. In this conception of the individual monetary demand, must, however, be included not merely the demands of retail purchasers, made by themselves, but also those of all agencies such as merchants, bankers, and transportation companies, serving the needs of ultimate consumers of goods. The use of money may be necessary several times before a commodity completes its journey from producer to consumer. Of two persons whose expenditures of money are of the same kind and made at the same rate, the one having the larger amount of purchases to make has the larger monetary demand. But the amount of purchases does not always vary directly with the amount of real income[2]; for example, a farmer and a village mechanic may have at their disposal incomes equal in the quantities of goods, such as food, fuel, clothing, and house-uses (worth, let us say, $1000 for each), but the farmer would be getting a larger part of his goods directly from his farm and by his own labor, while the mechanic would be getting first a money income to be expended afterward for food, clothing, and rent. The mechanic would in this case have an average monetary demand much larger than the farmer. We see thus that a person's monetary demand at any time is that amount of money which rests in his possession as the necessary condition to making his purchases as he desires. Individual monetary demand varies in proportion directly to the delay, and inversely to the rapidity with which the individual passes the money on; and directly to the amount of the person's income that is received and expended in monetary form. § 6. #Concept of the community's monetary demand.# The monetary demand of a community at a given time is the sum of the monetary demands of the various individuals and enterprises. It is that stock of money which is necessarily present to effect the exchanges of the community in the prevailing manner at the existing price level. A single dollar as it circulates helps to supply the monetary demand of many individuals in turn: the more quickly each person spends the piece of money he receives, the greater its rapidity of circulation. Let us suppose that every piece of money passed from one person to another once each day. Then a dollar would, in the course of a business year (about 300 days), serve to buy (and at the same time to sell) $300 worth of goods. If the average purchases of each individual amounted to $1000 a year, the average monetary demand of each would be about 3-1/3 dollars. But every moment beyond the average time that any one kept money would increase his monetary demand. If he delayed a day, a week, or a month in spending the money, waiting until he could buy in some other market, or until a better time to buy, he would thus increase insomuch the amount of money needed to make the trade (on that scale of prices). It requires more slow dollars than swift dollars to make a given volume of purchases. Evidently the times of maximum monetary demand of the different individuals do not coincide; rather they alternate with each other, and the community's total monetary demand at a given time is a composite of the many individual variations. The amount of money that will remain in circulation in a community depends on several factors, the chief among them being the amount of goods to exchange, the methods of exchange, and the prevailing scale of prices. The amount of goods to be exchanged may change even when the amount produced is unaltered (e.g., a change from agricultural to industrial conditions). The methods of exchange may alter so as to require either more money (e.g., cash instead of credit business), or less money (e.g., use of bank checks displacing use of money by individuals). Or, apart from the other factors, the scale of prices may change as the conditions of gold and silver production are altered. The interrelations of gold and silver production, paper money issues, banking growth, and money-inflow and outflow in foreign exchanges give rise to the most interesting and important problems in the field of monetary theory. § 7. #The money-material in its commodity uses#. We are now prepared to take up the question: What determines the ratio at which money exchanges for other goods? And, as money comes to be the unit in which prices are generally expressed, the question becomes: What determines the general level of monetary prices? We have this problem in its simplest form in the case of a commodity-money such as gold. It may be looked upon merely as so much precious metal. The problem of its value as bullion is the same as that of the value of pig iron or of zinc, of meat or of potatoes. There is here no special monetary problem. The value of gold as bullion and its value as money are kept in equilibrium by choice and by substitution. The several uses of gold are constantly competing for it: its uses for rings, pens, ornaments, championship cups, photography, dentistry, delicate instruments, and as a circulating medium. If the metal becomes worth more in any one use, its amount is increased there and is correspondingly diminished in other uses.[3] When coinage is free and gratuitous[4] the standard money is a commodity. Such coinage is essentially but the stamp and certificate that the coin contains a certain weight and fineness of metal. Where coinage is free and gratuitous each coin will be worth the same as the bullion that is in it so far as the citizens exercise their choice. They will not long keep uncoined metal in their possession when it is worth more in the form of money, nor will they long keep money from the melting-pot when it is worth more as bullion. Yet there may be a slight disparity between the bullion value and the monetary value before the metal is converted into coin or the coin melted down into metal. This adjustment of the value of commodity-money to other things is made also on the side of supply, in the use of labor and material agents to produce the precious metals and to produce other things. Gold-mining, for example, is one among various industries to which men may apply their labor and their available material agents. Some mines are superior, others medium, others marginal which it barely pays to work. There is, therefore, a rise and fall of the margin of gold production with changes in prices and changes in the cost of production. Large new deposits of gold are discovered from time to time and new methods of extracting gold are invented. If, when it barely pays to work a mine, such changes occur, gold becomes worth less, and the poorer mines eventually must go out of use. As gold rises in value some abandoned mines again come into use. A similar variation may be noted in the utilization of marginal land, marginal factories, marginal forges, and marginal agents of every kind.[5] § 8. #The general level of prices#. We come now to a more peculiar aspect of the monetary value problem. In performing its function as general medium of trade, money determines the general level of monetary prices. We have the idea of a general level of prices whenever we contrast the price ratio of money to other commodities at one time with its ratio at another time. Now the monetary prices of the various commodities are constantly changing, and in somewhat different degrees, but on the average there may be a general trend upward or downward, and this is called a change in the general scale (or level) of prices, as contrasted with changes in the values of any two commodities in terms of each other. The general price level will be more fully discussed below (Chapter 6, section 3) in connection with the method of measuring by index numbers its changes. This brief explanation may, perhaps, be enough for our present purpose. Our question now is: What is the effect of changes in the quantity of money (considered apart from chance accompanying changes) upon the general level of prices? § 9. #Effect of increasing gold production#. Let us take a case where gold is in general use as money, and where for some time there has been no noticeable change in the amount of business, the methods of trade, and the general scale of prices. What would happen when new gold mines were found that were much easier to operate, and gold began to be produced at a much more rapid rate than formerly? The amount of gold as compared with other forms of wealth evidently would be increased. What if all the increase went into the industrial arts? The value of gold in its industrial uses would fall. Then a part of the increase must be diverted to monetary uses. When any man, by reason of the increasing gold supplies, gets a larger stock of money than he had before, the proportion formerly existing between his use for money and his monetary stock is altered. He has more money than meets his monetary demand at the existing prices. As he seeks to reduce his stock of money to due proportions by buying more goods, he thereby distributes a part of the excess of money to others. This bids up the prices of goods further until the total value of goods exchanged again bears the same ratio as before to the average monetary demand of each individual. Take an extreme case: if twice as many dollars get into circulation in a community, either some few men may have far more dollars than before, while others have nearly the same number; or every man may have his due proportion of the new supplies, just twice as many as before in proportion to his income. The latter result, "other things being equal," is the logical one after equilibrium has been restored. If prices of goods remained the same as before, there would be twice as many pieces of money available to effect the same number of trades at the same prices. There is no reason why each person should tie up twice as large a proportion of his income in the form of money. If, however, there is a concerted movement to spend the surplus money, there results a general bidding down of the value of money, a general bidding up of the prices of goods. At what point will this movement stop? The rational conclusion must be that, other things being equal, the new equilibrium will be established when the ratio between the value of money and the price of the goods which each individual is purchasing becomes the same as before. The money being doubled, prices must be doubled, and likewise for any other change in quantity. § 10. #The quantity theory of money.# This explanation of the effect of changes in the quantity of money in a country upon prices (the general scale of prices) is known as the quantity theory of money. This theory has, for a century, been very generally accepted by competent students of the money problem. It may be summed up thus: other things being equal, the value of the monetary unit, expressed in terms of all other commodities, falls as the quantity of money increases, and _vice versa_. That is, prices rise and fall in direct proportion to changes in the total quantity. This is a simple explanation of a complex and difficult set of conditions. The phrase, "other things being equal," betokens the statement of a tendency where there are several factors. The quantity theory explains what happens when there is a change in one of the factors--the number of pieces of money. There are three large sets of facts to be brought into relationship with each other in the quantity theory: (1) the amount of business, or the number of trades effected; (2) the rapidity of circulation, depending on the methods by which business is done; (3) the amount of money available. According to the quantity theory we must expect that, when conditions (1) and (2) remain fixed, the value of money will vary inversely as its quantity. This quantity theory may be expressed in the formula P = MR/N when P is the symbol for price, or the general price level, N is (1) above, R is (2), and M is (3). P, therefore, changes directly with either M or R, or inversely with N.[6] § 11. #Interpretation of the quantity theory.# The quantity theory must be carefully interpreted to avoid various misunderstandings of it that have appeared again and again in economic discussion. (1) It does not mean that the price level changes with the absolute quantity of money, independently of growth of population and of the corresponding growth in the volume of exchanges. (2) It is not a mere per capita rule to be applied at a certain moment to different countries. For example, Mexico may have $9 per capita and the United States $35, while average prices may not differ in anything like that proportion. But in these two countries not only the amounts of exchanges per capita but the methods of exchange and the rapidity of the circulation of money differ greatly.[7] (3) It cannot be applied as a per capita rule to the same country through a series of years, without taking account of the many changing factors. It is estimated that in 1800 the money stock was about $5 per capita in the United States, and in 1914 about $35[8], but average prices have not necessarily changed in the same ratio. In a period of years a country may change in a multitude of ways, in complexity of industry, modes of exchange, transportation, wealth, and income. These changes require, some larger, others smaller, per capita amounts of money to maintain the same level of prices. For example, the substitution of cash payments for book-credit in retail trade calls for a larger per capita stock of money; whereas an increased use of banks and checking accounts, by economizing the use of money, enables a smaller amount of money to maintain the same level.[9] (4) Tho applied originally to standard money, the quantity theory applies to all other kinds of money circulating side by side and at a parity of value, so far as these fulfil the definition of money and are not merely supplementary aids of money. These substitutes for, or supplements to, money enable each dollar to do more work, to circulate more rapidly. If the standard money alone were doubled in quantity, while the various forms of fiduciary money (smaller coins, bank notes, government notes) remained unchanged, the quantity of money as a whole would not be doubled. Indeed, in such a case, the method of exchange would be greatly altered. According to the quantity theory, therefore, prices would not be expected to double. § 12. #Practical application of the quantity theory#. Despite the number of changing factors affecting the methods of exchange and the amount of business, the quantity theory is a rule unable at any moment. These various factors change slowly, and the quantity theory answers the question: What general change occurs in prices as a result of the increase or decrease of the money in a given community at a given moment? Like the law of gravitation and the law of projectiles, the theory must be interpreted with relation to actual conditions. The quantity theory makes intelligible the great and rapid changes in prices which have followed sudden changes in the quantity of money. Inductive demonstration of broadly stated economic principles is usually difficult, but there have been many "monetary experiments" to teach their lessons. Many inflations and contractions of the circulating medium have occurred, now in a single country, again in the whole world; and the local or general results have helped to exemplify richly the working of the quantity principle. With the scanty yield of silver and gold mines during the Middle Ages, prices were low. After the discovery of America, especially in the sixteenth century, quantities of silver flowed into Europe. The great rise of prices that occurred was explained by the keenest thinkers of that day along the essential lines of the quantity theory, tho there were many monetary fallacies current at that time. The experience in England during the Napoleonic wars, when the money of England was inflated (by the forced issue of large amounts of bank notes) and prices rose above those of the Continent, led to the modern formulation of the theory by Ricardo and others about 1810. The discovery of gold in California and Australia in 1848-50 greatly increased the gold supply, and gold prices rose throughout the world. Between 1870 and 1890 the production of gold fell off while its use as money increased greatly, and prices fell. A great increase of gold production has occurred in the period since 1890. In part the rising prices since 1897 are explicable as the periodic upswing of confidence and credit, but in the main doubtless they are due to the stimulus of increasing gold supplies.[10] These are but a few of many instances in monetary history, which, taken together, make an argument of probability in favor of the quantity theory so strong as to constitute practically an inductive proof. [Footnote 1: The old-fashioned miser, however, withdraws his hoarded gold for the time from its usual monetary function as an indirect agent and treats it as a direct good yielding to him psychic income by its mere possession.] [Footnote 2: See on kinds of income, Vol. I, p. 26 ff.] [Footnote 3: See secs. 1 and 2 of this chapter; also Vol. 1, especially pp. 31-38 and 353-355.] [Footnote 4: This means actually gratuitous, for any real difficulty in getting metal to or from the mint operates as a cost in the conversion of bullion into money, or _vice versa_; e.g., the gold may be in Australia and the mint in London.] [Footnote 5: See Vol. I, pp. 138 ff. and 361 ff. FIG. 1. GOLD PRODUCTION OF THE WORLD, 1493-1914. The changes in gold production here shown have bearings not only upon problems of money, but in some respects upon nearly every modern economic problem. Compare in the present connection this figure with Figure 3, in Chapter 6, Section 4, showing changes in index numbers of prices. [Illustration: FIG. 1. GOLD PRODUCTION OF THE WORLD. 1493-1710. AVERAGES FOR PERIODS BEFORE 1870]] [Footnote 6: This formula is presented by E.W. Kemmerer in "Money and Prices" (2d ed., 1909), p. 15 ff.] [Footnote 7: See above, ch. 3, sec. 6, table.] [Footnote 8: PER CAPITA CIRCULATION OF MONEY (ESTIMATED) IN THE UNITED STATES IN VARIOUS YEARS. 1800......$4.99 1850......$12.02 1890......$22.82 1810...... 7.60 1860...... 13.85 1900...... 26.93 1820...... 6.96 1870...... 17.51 1910...... 34.33 1830...... 6.78 1880...... 19.41 1915...... 35.44 1840......10.91 ] [Footnote 9: On the function of deposits, see below, ch. 7, sec. 11.] [Footnote 10: Consult Figure 1 in ch. 4 and Figure 2 in ch. 6 for the graphic presentation of these and related facts.] CHAPTER 5 FIDUCIARY MONEY, METAL AND PAPER § 1. Commodity and fiduciary defined. § 2. Present monetary system of the United States. § 3. Saturation point of fractional money. § 4. Light-weight fractional coins. § 5. Worn coins and Gresham's law. § 6. A general seigniorage charge on standard money. § 7. Coinage on governmental account. § 8. The gold-exchange standard. § 9. Nature of governmental paper money. § 10. Irredeemable paper money. § 11. Theories of political money. § 1. #Commodity and fiduciary defined#. The actual moneys in circulation in every modern country consist of a wide variety of pieces, differing in denomination, physical size, shape and materials, mode of issue, source or authority of issue, and legal character. Among these kinds, one is the standard and is a commodity-money.[1] In such cases the coinage is free and nearly gratuitous, and the value of the money is kept close to parity with its value as bullion by changing bullion into coin, or coin back into bullion, whenever there is an appreciable difference between the values in the two uses. This adjustment is brought about by the free action of the people. The government, having declared what is the standard money unit, and having provided a mint to make coins, leaves it to citizens, acting from the ordinary competitive motives, to decide when they will reduce or increase the number of coins in circulation. The other kinds of money are not commodity-money and the materials of which they are made, whatever they be, are not worth as much in any other uses as they are in their present monetary form. Their value is always referred to, and adjusted to, that of the commodity-money, so long as any of it is in circulation. In contrast with commodity-money, these other kinds may be called fiduciary money. By fiduciary money we mean money that has not a commodity value equal to its money value, but which is generally accepted because each receiver has faith that others in turn will take it in the same way.[2] § 2. #Present monetary system of the United States.# Here is given a summary of the main features marking the present monetary system of the United States (in 1915). Not all this variety is essential to an efficient monetary system and several of the kinds survive as the result of historical accidents (political and legislative). But all are now kept in accord with the value of the gold coin which, it will be observed, is the only kind the amount of which is not artificially limited. Silver dollars are no longer coined, subsidiary silver and minor coins are issued only in exchange for other money, as are gold and silver certificates in exchange for gold or for silver, which they merely represent while in circulation. § 3. #Saturation point of fractional money.# Fiduciary money is that on which regularly the issuer makes a seigniorage charge.[3] Let us consider now the effect of seigniorage on the value of money. Fractional coins are those of smaller denominations than the standard unit of money, as shillings and pence in England, and half dollars, quarter dollars, dimes, nickels, and cents in America. Money to serve well a variety of uses must be of different denominations, and "small change" is necessary to make small purchases and for exact settlement in larger payments that are not multiples of the standard unit. The amount required (or most convenient to use) in each denomination of fractional coins is thus a more or less certain portion of each person's monetary demand, shaped by experience and fixed by habit. For example, within certain elastic limits of convenience quarters may be used for halves, and dimes for nickels (and _vice versa_); but each person has a point of preference. The total demand for each kind of change is the sum of the individual demands. This point where the amount of coins of any denomination (in relation to the whole monetary system) is most convenient may be called the saturation point of that kind of small change, up to which point the people prefer a share of their money in that form, and beyond which they will, if free to choose, exchange that kind for other denominations (smaller or larger). Each kind of money, as the cent, nickel, dime, has its own peculiar demand and its saturation point. MONETARY SYSTEM OF THE UNITED STATES, 1915 Metals | Weight, grains | Fineness |Ratio to gold 1. Gold coins | 25.8 | .90 | 100 2. Silver dollar | 412.5 | .90 | 15.988 to 1 3. Silver, subsidiary | 385.8 | .90 | 14.953 to 1 4. Nickel (5 cents) | 77.0 | .25 | ........... 5. Copper (1 cent) | 48.0 | .95 | ........... ---------------------------------------------------------------- Metal |Limit of issue | Legal tender for|Receivable for | | private debts |public dues 1. Gold coins | Unlimited. | Unlimited. |For all 2. Silver dollar |Ceased in 1905 | Unlimited. |For all 3. Silver, | Needs of the | $10 |$10 subsidiary | people | | 4. Nickel (5 cts.) | Do. | 25 cts. |25 cts. 5. Copper (1 ct.) | Do. | 25 cts. |25 cts. | \ | _Paper_ | | | 6. Gold certificates|Unlimited in ex-| No |For all |change for gold | | 7. Silver |In exchange for | No |For all certificates | silver $ | | 8. US notes | No new issues. |Unlimited. |Except customs 9. Treasury notes | No new issues. |Unlimited |For all of 1890 | | | 10. National bank |Capital of banks|No |Except customs notes. | | | 11. Federal reserve |Per cent. of |At banks of |For all notes. | gold reserves |reserve system | ---------------------------------------------------------------------- Metal |Exchangeable at |Redeemable at |In circulation |treasury for | treasury in |Oct 1, 1915 1. Gold coins |Gold certificates| |616,000,000 |U.S., Treas., or | | |Fed, res. notes | | 2. Silver dollar |Silver | |65,000,000 |certificates | | 3. Silver, |Minor coins |Lawful money[a]| subsidiary | |in sums or mul-|162,000,000 | |tiples of $20 | 4. Nickel | | Do. \ > 62,000,000[d] 5. Copper | | Do. / Paper | | | 6. Gold certificates| Subsidiary and |Gold coin |1,172,000,000 | minor coins | |[e] 7. Silver | Silver and |Silver dollars | 482,000,000[f] certificates | minor coins | | 8. US notes | Subsidiary and |Gold | 337,000,000 | minor coins | | 9. Treasury notes of| Silver and |Gold | 2,200,000 1890 | minor coins | | 10. National bank |Subsidiary silver|Lawful money[b]|761,000,000 notes |and minor coins | | 11. Federal reserve | Gold[c] |Gold[c] |133,000,000 notes | | | ------------------------------------------------------------------- Total[g]...........................................3,792,200,000 [Footnote a: "Lawful money" includes gold coin, silver dollars, U.S. notes, and Treasury notes.] [Footnote b: Redeemable also in lawful money at bank of issue.] [Footnote c: Redeemable also at Federal reserve banks in gold.] [Footnote d: Not usually included in the estimates of total money in circulation.] [Footnote e: Represented dollar for dollar by gold kept in the U.S. treasury.] [Footnote f: Represented dollar for dollar by silver kept in the U.S. treasury.] [Footnote g: Besides, there were about $312,000,000 in the U.S. Treasury not offset by outstanding paper. The total money stock (in circulation and in the Treasury, eliminating certificates representing gold and silver), was about $4,233,000,000, of which 70 per cent was metal (largely represented in circulation by paper certificates) and 30 per cent was paper. Of the 70 per cent 50 was gold, 18 was silver, and 2 was copper and nickel.] § 4. #Light-weight fractional coins.# The standard metal is usually too valuable to be suitable for coins of the smaller denominations. Therefore, when gold is the standard, copper, nickel, and silver remain in restricted use. But when coins of these metals are issued at weights corresponding with their bullion value, difficulties arise. Not only are they too heavy for convenience, but with every slight rise in their bullion value as compared with that of the standard metal, they become worth more as bullion than as coin and begin to disappear from circulation. This happened often throughout the Middle Ages and until the nineteenth century. The attempt was generally made to coin gold and silver at a ratio of weight corresponding exactly to their market values at a given moment and, every time the market conditions varied, the best full-weight coins of one of the two metals were taken out of circulation. [4]The country thus suffered for lack either of the larger gold coins or of fractional coins. At length, to remedy this difficulty, fractional silver coins, often called "token coins," were issued, in limited numbers, of less than full proportionate weight and bullion value. This plan, having been partially tried, was generally adopted by the United States in 1853 at a time when the silver dollar of 371.25 fine grains was legally rated at the same value as the gold dollars of 23.22 grains, and was freely coined. The fractional coins were made a little over 6 per cent lighter per dollar than the dollar coin; two half-dollars or four quarters or ten dimes contained 93.52 cents worth of silver. Since then silver bullion has become worth much less in terms of gold, and for years past the bullion value of the silver in a dollar of silver small change has been between 40 and 60 cents. Why then has the fractional coinage a monetary value equal to the standard money, dollar for dollar? The answer is, because it is artificially limited in quantity, so that it does not pass the point of saturation in the field of its use. Its value rests on its monetary use; it is fiduciary money, not commodity money. It is limited simply by letting "the needs of the people" determine its amount. This is done by issuing it only in exchange for other money of the larger denominations, and by redeeming it in other money on demand. Fractional coins are issued on the request of banks in exchange for standard money. One needing "change" gets it at the bank; when the bank finds its supply falling short it gets more from the government mints. As business increased in 1898, the demand for nickels, dimes, and quarters became unprecedented, and the mints worked night and day to supply them. If these coins were made in great quantities and forced into circulation by the government through paying them out to creditors and officials, their quantity would become excessive and they would fall in value (be at a discount) compared with standard money. But as this is not done, and as, moreover, they are redeemed on demand at the treasury (and practically at every bank and post office) in other money, any slight tendency to depreciation in any locality is at once corrected. As it is, the government makes a seigniorage profit on the fiduciary coinage, as shown in the following table. [5] The fractional coinage is maintained at a parity with the standard money in accordance with the monopoly principle, expressed in the limitation of the amount. _Receipts:_ Earnings (charges for refining, assaying, manufacture for other countries, etc.)......................... $392,000 Bullion recovered, by-products, old materials, etc... 143,000 Profits on seigniorage, subsidiary silver............ 3,013,000 Profits on seigniorage minor coinage and recoinage... 2,387,000 ---------- Total receipts.......................................$5,935,000 _Expenditures_: All kinds............................................$1,138,000 ---------- Net revenues from mint service.....................$4,797,000 § 5. #Worn coins and Gresham's law.# Coins may be light-weight as the result of another cause--namely, the abrasion (wearing off) of the coins in circulation. Nearly always when this has occurred the worn coins have still been accepted as money,[6] and ordinarily without any depreciation. That is to say, they have a value as money greater than the value of the bullion that is in them. Everybody takes them without hesitation as readily as if they were full weight. If, however, at this point, new full-weight coins are put into circulation, these at once disappear while the old ones remain in circulation--a fact that has always been somewhat mystifying. In explanation of the phenomenon was formulated "Gresham's law" of the circulation side by side of coins of different bullion value: bad money drives out good money. Sir Thomas Gresham (whose name has but recently been given to this so-called law), explained the principle to Queen Elizabeth when counseling her regarding the recoinage of the debased money of the realm as was done in 1560. He showed that when old, worn coins were in circulation and the mint began putting out full-weight coins, the old lighter ones remained as money, while the new ones, being heavier, were picked out by jewelers and by those needing to send money abroad. Gresham's law has a paradoxical wording and is frequently misunderstood. "Bad" money means not counterfeit money, but merely money that has not as great a bullion value compared with its money value as some other kind of money then in circulation. But not every piece of such money will drive out every piece of good money. The law applies only under certain conditions, and within certain limitations. The "good" will be driven out only if the total amount of money in circulation is in excess of what would be needed if all were of full weight and of best quality. Paradoxically speaking, if there is not too much of the bad money, it is just as good as the good money. But even if good money is driven out, it may not leave the country. It may be hoarded, or be picked out by banks and savings-institutions to retain as their reserves, or be melted for use in the arts. Gresham's "law" becomes thus a practical precept. As applied to the plan of recoinage it is: Withdraw the worn coins as rapidly (in equal numbers) as you put new coins into circulation. The continued circulation of "bad" money along side of "good" money (light-weight along side of full-weight coins), so long as the total number of coins is not in excess of the money demand for full-weight coins, is explained thus on just the same principle as is the circulation at parity of a light-weight fractional coinage, in the preceding section. § 6. #A general seigniorage charge on standard money.# The fiduciary coinage problem presents itself under a some-what different guise in case a seigniorage charge is made on all coinage, even of that metal used as the standard unit. In this case coinage is free but not gratuitous. In this case no bullion is brought to the mint unless the coined pieces the owners receive have a value equal to the bullion value plus the seigniorage charge. The power to impose a seigniorage charge is a monopoly power. Artificial limitation is present. Evidently, the number of coins that can be issued without depreciation is limited to that number which would circulate if they were made full weight without a seigniorage charge.[7] This number of pieces of full-weight metal is the saturation point of the money demand of the country. If more than that could in any way be put into circulation it would become worth less as money than as bullion, and would be melted or exported. Assume that this full supply of money at a given moment is 100,000 pieces or dollars; then consider the effect of imposing a seigniorage charge of ten per cent on further coinage. The government alone having the right of coinage, the need of money would give the circulating medium a monopoly value. The value of the money would rise. When it had risen until the coin would buy any more than one-ninth more bullion than was in it, the citizens would begin to take metal to the mint. After the ten per cent charge was taken out they would receive a coin which, the containing one-tenth less bullion, would be worth very nearly the same as the metal taken to the mint. No considerable depreciation could take place unless the volume of business fell off so that less money was needed than before. In that case there would be no outlet for the excess of coins until they fell to their bullion value, i.e., till they lost the entire value of the seigniorage, the monopoly element in them. Melting or exporting them before that point was reached would cause to the owner the loss of whatever element of seigniorage value they contained. We thus have arrived at the general principle of seigniorage: when the number of coins issued is limited to the saturation point, a seigniorage charge does not reduce their money value; they are worth more as money than as bullion. And this holds good of a large seigniorage charge as well as of a small one, even up to the extreme limit of a charge of 100 per cent. In this last case the government would retain the whole of the bullion brought to it and would give in return a piece of money made of material (metal or paper) with a negligible value. § 7. #Coinage on governmental account.# The fiduciary coinage problem may be presented also when coinage is not free, and the times and amount of coinage are determined by law or by legally authorized officials. In this case the bullion must be obtained by purchase in the open market (and paid for by some form of legal money, or by bonds). Coinage is then said to be "on governmental account." Now, assuming that the normal money-demand (the volume of business, or sum of exchanges) remains unchanged, let us consider what will result if the government begins to issue money in this way, when, as in the preceding case, 100,000 units of full-weight money are in circulation. This action might be taken most simply by recoining all the full-weight pieces that came into the treasury, making them contain 1/10 less precious metal, and paying out 1111 pieces for every 1000 received. Every time this was done there would be an excess of 111 pieces above the normal money-demand, and 111 full-weight pieces would be exported or melted (Gresham's law). The process (in strict theory) may be repeated 90 times, at which point 90,000 full-weight coins have been received, 100,000 light-weight coins have been issued to take their place and 10,000 full-weight coins have gone out of circulation. The total seigniorage charge would be 1-10 of 90,000, or 9000 units. No depreciation has taken place, and the pieces, by reason of their limitation, bear a money value in excess of the bullion that is in them. Now the government, with the next 1000 pieces collected by taxation, could buy enough bullion (in the open market) to make another 1111. The excess of 111 pieces could not now be promptly removed by the melting down or exporting of 111 coins, for all those remaining in circulation have a bullion value 1/10 below their money value. As this process is repeated the excess must continue to grow from 100,000 to 111,111, and the value of the money piece in terms of bullion continue to fall from 10 to 9. At this point the 111,111 pieces would contain just the same amount of bullion and have just the same value as the 100,000 pieces did before. Thereafter no further profit would accrue to the government from issuing coins of that weight. To make a further profit it must again reduce the amount of pure metal in the coin. This process was often repeated in the Middle Ages. A ruler, either by making a higher seigniorage charge or by coining on his own account, debased the quality or reduced the weight of the money of his realm. For a time the new coins, having the same monetary use, circulated at par with the old coins. The ruler, pleased with this almost magical power of getting a revenue with little trouble, continued to issue coins until suddenly the heavier coins began to be exported or melted, and the value of the other money fell, to the mystification alike of the prince and of his people. The reason is now perfectly plain: the number of coins was not kept within the proper limits and they went down to their bullion value. The only way a further profit could be made in this way was to debase the coin again. By successive steps the coinage came to consist almost entirely of cheaper alloy. § 8. #The gold-exchange standard.# In a number of silver-using countries and colonial dependencies near the end of the nineteenth century, the fluctuations of the value of silver in terms of gold was a constant source of difficulty in the payment of foreign obligations to gold standard countries. Yet there were strong reasons in the habits of the people and in the industrial conditions of the country to forbid the adoption of gold and the disuse of silver as the actual money in circulation. The method adopted, that of the gold-exchange standard, involved these features. (1) Closing the mints of the country to the free coinage of silver, as was done most notably in India in 1893 and in Mexico in 1904. (2) Adoption of a fixed ratio of exchange between the silver coins in circulation and some gold coin which is made the standard of value in all transactions (as the dollar or the pound sterling), the money in circulation thus being all or nearly all of a fiduciary nature. (3) Regulation and limitation of the amount of money in circulation so that a fixed parity between it and gold may be maintained (a) by the limited issue of coins only on governmental account, (b) by the sale, at a fixed rate, of foreign exchange bills payable abroad in the standard unit, the money paid for the bills being withheld from circulation in a special reserve, (c) by the purchase of foreign bills of exchange at a fixed rate, thus paying out and putting again into circulation some of the fiduciary money in the special reserve. These monetary changes furnish numerous illustrations and demonstrations of the quantity theory of money as applied to the entire circulating medium of a country.[8] §9. #Nature of governmental paper money.# The problem of seigniorage presents itself in its most extreme form when money is made of paper. Paper money is issued either by a government or by a bank. We will consider governmental notes here, reserving until Chapter 7 the case of bank notes. The issue of paper money in some cases grew out of the practice of debasing metal. However this may have been, governmental paper money may be looked upon as money for which a seigniorage of one hundred per cent is charged. The gain of seigniorage from paper money is greater and is just as easily secured as that from coinage of metals. Governmental paper money is called "political money," in contrast with commodity money. However, all coins that contain an element of seigniorage, or monopoly value, are to that degree "political money." The typical paper money is irredeemable; that is, it cannot be turned into bullion money on demand. It is simply put into circulation, usually with the "legal-tender" quality. Money has the _legal-tender_ quality (as the term is used in the United States) when, according to law, it must be accepted by citizens as a legal discharge for debts due them, unless otherwise provided in the contract. The prime purpose of making money legal tender is to reduce the danger of dispute as to payments; but another purpose often has been to force people to use a depreciated money whether they would or not. The purpose of the issue of political money is usually to gain the profit of seigniorage for the public treasury, and often it has been the desperate expedient of nearly bankrupt governments. Governmental paper money differs from bank notes in that its value does not necessarily depend on the promise of redemption by the issuer. It differs from promissory notes and bonds in that its value is not based on the interest it yields, but mainly on its monetary uses. The issue of paper money may save the government the payment of interest on an equal amount of bonds. The promise to receive paper in payment for taxes or for public lands may help to maintain its value by reducing its quantity, but nothing short of its prompt redemption in standard coins makes it truly redeemable. § 10. #Irredeemable paper money.# The most notable examples of paper money in the eighteenth century were the American colonial currencies, the continental notes, and the French assignats. In all the American colonies before the Revolution, notes or bills of credit were issued which were in most cases legal tender. Parliament forbade the issues, but to no effect. Without exception they were issued in large amounts and without exception they depreciated. The continental notes were issued by the Continental Congress in the first year of the war (1775), and for the next five years. The object at first was to anticipate taxes, and it was expected that the states would redeem and destroy the notes, but this was not done. The notes passed at par for a time, but depreciated rapidly as their number increased. It has been estimated that the country had less than $10,000,000 of coin before the war, and when, in 1780, over $200,000,000 of notes were in circulation they were completely discredited: hence the phrase "not worth a continental." Specie then quickly came back into use. A few years later the leaders of the French Revolution, failing to learn the lesson of the American experience, issued, on the security of land, notes called assignats in such enormous quantities that they became worth no more than the paper on which they were printed. The paper money issued under the English bank restriction act of 1797-1820 is especially notable because it gave rise to the controversy which did much to develop the modern theory of the subject. Parliament forbade the Bank of England to redeem its notes in coin because the government wished to borrow the coin the bank held. The result was the issue of a large amount of bank money not subject to the ordinary rule of redemption on demand. It was virtually governmental paper money. The notes depreciated and drove gold out of circulation, and it was not until 1821 that specie payments were definitely resumed. The United States, under the Constitution, did not try legal-tender paper money till 1862 when paper notes (called greenbacks, because of the color of ink with which the reverse side was printed) were first issued, later increased to a total of about $450,000,000. Other interest-bearing notes were issued with the legal-tender quality and circulated as money to some extent. Greenbacks depreciated in terms of gold, and gold rose in price in terms of greenbacks until, in June, 1864, it sold at 280 a hundred. Fourteen years elapsed after the war before these notes rose to par, in terms of gold (in December, 1878), and they became legally redeemable in gold January 1, 1879. This was called "the resumption of specie payments." Almost every nation has at some time issued political money. During the Franco-Prussian War in 1870, France, through the medium of its great state bank, made forced issues of notes of a political nature, which only slightly depreciated. Many countries--Russia, Austria, Portugal, Italy, and most of the South and Central American republics--have had or still have depreciated paper currencies. At once, at the outbreak of the great war in 1914, the governments of the warring nations began to exercise a strict control over the issue of paper money, sought to gather into the public treasury all the specie, and to give paper (either governmental notes or bank notes) practically a forced circulation, making it almost the sole circulating medium. The values of the paper moneys have fallen in all the countries, especially in Germany and Russia. In such cases the money partakes somewhat of the characters both of bank notes and of political money. Resorted to in desperate extremities, political money has usually proved to be a costly experiment. A result usually unintended is the derangement of business and of the existing distribution of incomes. The rapid and unpredictable changes in prices gives opportunity for speculative profits, but injure legitimate business. This incidental effect on debts and industry offers the main motive to some citizens for advocating the issue of paper money. It is peculiarly liable to be the subject of political intrigue and of popular misunderstanding. It is this danger, more than anything else, which makes political money in general a poor kind of money. § 11. #Theories of political money.# There are two extreme views regarding the nature of paper money, and a third which endeavors to find the truth between these two. First is that of the cost-of-production theorists, who declare that government is powerless to influence value, or to impart value to paper by law. They deny that there is any other basis for the value of money than the cost of the material that is in it. Money made of paper, on a printing press, has a cost almost negligibly small, and, therefore, they say it can have no value. The facts that it does circulate and that it is treated as if it had value are explained by the cost-of-production theorists as follows: while the paper note is a mere promise to pay, with no value in itself, it is accepted because of the hope of its redemption, just as any private note. Depreciation, according to this view, is due to loss of confidence; the rise toward par measures the hope of repayment. Taking a very different view, the extreme fiat-theorists assert that the government has unlimited power to maintain the value of paper money by conferring upon it the legal-tender quality. The meaning of _fiat_ is "let there be," and the fiat-money advocates believe that the government has but to say, "Let there be money," to impart value to a piece of paper. The typical fiat-money advocates in the United States were the "Greenbackers," who wished to retain the greenbacks issued in the Civil War and to increase the amount greatly. They saw in paper money an unlimited source of income to the government. They proposed the payment of the national debt, the support of the government without taxes, and the loan of money without interest to citizens. All might live in luxury if the extreme fiat-money theorists could realize their dreams. The depreciation that has taken place in nearly every case where government notes have been issued, the fiat-theorists declare to be due to a mild enforcement of the law of legal tender. To them the fact that paper money may circulate for a time at par appears a reason why it always should. They do not recognize that there is a saturation point in the use of money, and that its use is still further limited by the fear of larger issues. The almost universally accepted opinion among economists rejects both of these views, tho recognizing in each a certain limited aspect of the truth. The cost-of-production view quite overlooks the features in which paper money differs from ordinary credit paper. The value of one's promises to pay depends on his reputation and his resources; the resources constitute the basis of value. Bonds have value because they yield interest and are payable at a definite time in standard money. But paper money, lacking this basis for its value, has another basis in its money use, in its power to buy goods. The theory of paper money here outlined makes the value of paper money a special case of monopoly value. As the power of any private monopoly over price is relative, not absolute, so is that of the government over the value of political money. The money use is the source of value of the paper notes. It is this which gives the economic condition for value in paper money and strictly limits the power of the government--a fact overlooked by the fiat-theorists. Business conditions remaining unchanged, the limit of possible issue without depreciation is the number of units in circulation before the paper money was issued, the saturation point of full-weight and full-value coins. Whenever governments have failed to stop at that point, paper money has depreciated. But under wise and honest control and regulation political paper money might serve the monetary function very effectively. [Footnote 1: The problem of a legally authorized double standard, bimetallism, is treated in the next chapter. An irredeemable paper money may be, for a time, the standard money.] [Footnote 2: The faith _(fides)_ is not always that the issuer of the money (whether it be a bank or the government) will redeem the money on demand at any future time; for fiduciary money may circulate while irredeemable, that is, either carrying no promise of redemption in the standard money or in fact not being redeemed. Yet undoubtedly actual redemption on demand or a good prospect of future redemption is one of the circumstances stimulating the faith and the readiness of each person in turn to receive fiduciary money.] [Footnote 3: In the broad sense as above defined, ch. 3, sec. 10.] [Footnote 4: See next section on worn coins.] [Footnote 5: Receipts and Expenditures of Mint Service in 1914:] [Footnote 6: It makes no difference what may be deemed the cause of their acceptance; whether it be habit, public opinion in business circles, or the act of law making them a legal tender; the essential thing is that they continue to be accepted as money.] [Footnote 7: In this and following numerical examples no account is taken of the possibility that the standard metal may depreciate in the world market in terms of all other goods as a result of its diminished use as money in one or more countries. This properly belongs in a complete theoretical treatment of the subject.] [Footnote 8: See "Modern Currency Reforms" (1916), by E.W. Kemmerer, professor of Economics and Finance in Princeton University, for a detailed treatment of this remarkable series of monetary changes, probably unequaled in instructiveness to the student of monetary theory.] CHAPTER 6 THE STANDARD OF DEFERRED PAYMENTS § 1. Relative positions of gold and silver; historical. § 2. Gold production, first half of nineteenth century. § 3. Concept of the general price level. § 4. Index numbers. § 5. Gold production and monetary legislation, 1850 to 1879. § 6. Definition of the standard of deferred payments. § 7. Increasing importance of the standard. § 8. Fluctuating standard and the interest-rate. § 9. Notable changes in prices. § 10. Nature and object of bimetallism. § 11. The movement for national bimetallism in America. § 12. Rising prices after 1896. § 13. Defectiveness of the gold standard. § 14. Various ideal standards suggested. § 15. The tabular standard. § 1. #Relative positions of gold and silver: historical.# It is not possible within the limits of our space to enter here into the details of the world's monetary history. It must suffice for our purpose to sketch briefly the period preceding the nineteenth century. Both gold and silver were used as moneys in Europe in the Middle Ages, tho silver was much the more common. The two metals continued to be used side by side in Europe and in the new settlements in America, silver for the smaller and gold for many of the larger transactions. Both were made legalized forms of money (and standards of deferred payments) in units of specified weights and fineness, the weights bearing a certain ratio to each other. Thus it was possible for a debtor to discharge his obligations with that one of the two metals that at the moment was the cheaper at the legal ratio. Fluctuations in the prices of gold in terms of silver were at times such as to cause a large part of the full-weight coins of one or the other metal to leave circulation (in accordance with Gresham's law). So from time to time the ratio was slightly changed by law in the various countries to permit the circulation or to bring back the kind of money that had been undervalued in terms of the other. But it is a very remarkable fact that from the time of Xenophon until the discovery of America (a period of nearly 2000 years), the market ratio of silver to gold bullion in Europe remained pretty close to 10 to 1, being only temporarily altered by sudden and unusual occurrences. From 1492 to 1660 the ratio changed to 15 to 1, where it remained with remarkable stability until about the year 1800. At the establishment of the mint of the United States in 1792 that ratio was found to exist. Men had come to look upon the ratio of 15 to 1 as the natural order, determined (it was sometimes said) providentially by the deposit of the two metals in due proportion in the earth's surface. But as we now see it, this in part was mere chance and in part was due to the equalizing effect of the wide use of both metals so that the one could be easily substituted for the other in case of a divergence of the market ratio from the legal ratio as money. From the year 1500 until 1800 the Western hemisphere was the main source of the precious metals, the alluvial deposits were widely scattered, were gradually discovered, were usually found in small quantities, and were extracted in primitive ways. The existing stock of precious metals, gold and silver, more than other products of mine and field, is at any time the accumulation of many years' production, and is changed very little, proportionally, by a large change of output in any year or short period. It changes in volume as does a glacier fed by the snows of many years, not as does a river, filled by a single rainfall. For a short time after the discovery of America (from 1493 to about 1544) the average coining value[1] of the world's production of gold, nearly all found in America, was about 1-1/2 times as great as that of silver; but thereafter for three centuries from about 1545, the annual value of silver produced was between 1-1/2 to 4 times as great as that of gold, averaging about twice as great. Silver was the money chiefly in use in the ordinary transactions in all of the principal countries of the world. § 2. #Gold production, first half of nineteenth century.# We have now to note some great changes in the production of gold in the nineteenth century, changes both absolute and relative to that of silver. The market ratio of the two metals had been gradually changing before 1792 and continued to change. Gold was slowly becoming more valuable in terms of silver and the legal ratio of 15 to 1 in the United States (at which both metals were admitted free to the mint) proved to have undervalued gold. Gold largely left circulation and silver and bank notes formed the greater part of our circulating medium. Then, in 1834, soon after the production of gold had begun to increase somewhat more rapidly than that of silver, the legal ratio of the United States was changed to 16 to 1. This brought a good deal of gold back into circulation and gradually drove out most of the silver (the heavier coins disappearing first). In the decade 1841-50 the average annual value of the gold production had, for the first time since the early sixteenth century, exceeded that of silver. Then, from 1848 to 1850, came the great gold discoveries in California and in Australia. In 1851 the value of gold produced was one and one-half times that of silver; in 1852 was three times, and in 1853 four times as great; and then slowly declined, but continued every year as late as 1870 to be over twice as great. This caused the displacement of silver by gold and drove out a large proportion of the silver coins of smaller denominations. This led to the law of 1853, authorizing subsidiary coinage (on government account only) of lighter weight.[2] Let us observe the effect on prices that was brought about by the discoveries of 1848-49, and, first, we must consider briefly the method of measuring and expressing general changes in prices. § 3. #Concept of the general price level.# The price of any good is some other good or group of goods given for it in trade.[3] The standard unit of money coming to be the most convenient expression for price (whether or not money be actually passed from hand to hand in that particular trade), prices usually are monetary prices, and more specifically are prices in gold, or in silver, or in whatever constitutes the standard money unit. But the price of each good is a definite, separate fact, which expresses the ratio at which that commodity is sold. The price of any particular kind of goods may fluctuate in either direction as compared with the prices of other goods at the same time. For example, iron and many other goods may rise while wheat and many other goods fall in price. There is, therefore, no such thing as an actual _general_ change in the prices of goods in terms of money, but it may be seen that the prices of large classes of goods, often of nearly all goods, change upward or downward at the same time and in the same general direction. We thus have need to distinguish between changes in the valuations of particular kinds of goods in terms of each other and general changes in the valuation of a number of different goods in terms of the monetary unit. To get some idea of whether such a general trend occurs, the algebraic sum of all the changes in the particular prices of a selected group of goods may be taken, and for convenience this may be reduced to an average price (by dividing the sum by the number of articles). Such an average is called a general price and, when comparing it with the general price of another time, we speak of changes up or down in _general prices,_ or in the _general scale of prices,_ or in the _price level._ When gold is the standard unit, its value is the converse of general prices; as prices go up the value of gold goes down, and gold is said to _depreciate_. As prices go down, the value of gold goes up and gold is said to _appreciate_. Rising prices mean falling value of gold (and at the same time falling purchasing power), and _vice versa._ [Illustration: FIG. 2. INDEX NUMBERS OF PRICES. The four series of prices here shown begin at different periods; the American in 1840 (Aldrich report 1840-1889 and Bureau of Labor from 1890 on); the English in 1846; the German in 1851; the French in 1857. We have adjusted each of these series to a base of the average prices for 1890-1899, in accord with the basic period used by the American Bureau of Labor. The reader must be on his guard against misunderstanding the diagram. It does not represent the heights of the prices of the different countries compared with each other either at any one date or for the entire period. For example, the heights of the lines at the year 1860, do not indicate that American prices were lowest and French the highest at that date, or, indeed, tell anything whatever directly on that point. The various series of prices are compared within themselves, every year with the average of the prices for 1890-1899 in each country, respectively. The only comparison allowable, therefore, between the several lines, is that between the fluctuations, both as to their times and as to their directions, both as to the larger tidal movements and as to the lesser wave-like movements within the business cycles. The Figure does indicate that both American and German prices have risen somewhat as compared with the English and French prices, since the period before 1860. This figure should be studied in connection with Figure 1, in ch. 4, sec. 9, on gold production. The Figures indicate that the rapidly growing monetary use of gold offset a large part of the effects of increasing gold production between 1840-1860 and 1884-1914. Between 1884 and 1896 prices actually continued to fall after gold production had begun to climb. Likewise the growing monetary use of gold accentuated strongly the effects, between 1873 and 1883 of a comparatively small decrease in gold production.] § 4. #Index numbers.# The process of calculating general prices and changes in them has in it, inevitably, something of arbitrariness and incompleteness. For not all prices can be included, but only those of articles of somewhat standardized grades and those that are pretty regularly sold in markets where prices are publicly quoted. Any list of articles that can be selected is of unequal importance to different persons and classes of persons, at different places, at different times, and for different purposes. And yet the study of general prices as shown by any broadly selected list reveals changes which in some measure affect the interests of every member of the community. General prices are conveniently compared from one time to another through the use of index numbers. An _index number_ of any article is the per cent which its price at any certain date is of its price at another date (or of the average for a series of prices) taken as a base or standard. Thus if the average price of cotton in the base year were 10 cents (taken as 100) and the price rose to 12 cents, the index number would be 120. _A tabular index number_ is the per cent which the price of a selected group of articles at any certain date is of the price of the same group of articles at a date which has been taken as the base.[4] The principal index numbers of the leading countries are here shown. The fact that from 1862 to 1879 inclusive prices in the United States were expressed in an irredeemable paper standard makes comparisons for that period misleading. A better idea is obtained by using as the base for each of the several series, the average of prices in each country for the years 1890 to 1899. § 5. #Gold production and monetary legislation, 1850 to 1879#. The unprecedented increase in gold production between 1849 and 1853, and the continuance of production in volume about four-fold as great as that of the decade 1840-49 was reflected at once in a rise of prices. This was a period of prosperity in business culminating in the crisis of 1857 (felt more or less in all the leading countries). This prosperity accelerated the effect of increasing quantities of the standard money. Credit was stimulated and the rate of circulation and the efficiency of money were increased. Prices rose to a temporary maximum in 1857 and then fell as a great international financial crisis occurred. The great new supplies of gold had been readily taken ("absorbed") into the monetary circulation of the world, to meet the needs of rapidly growing commerce and industry. In the European countries,[5] prices in terms of gold, tho fluctuating somewhat, kept at about the same level from 1860 to 1870. The years 1871 and 1872 were very prosperous and showed rapidly rising prices which reached a maximum in 1873, when a financial panic occurred. In that very year, just as the gold production for the first time since 1851 had fallen below $100,000,000, several notable changes in monetary legislation were made which made gold more important in the circulation of a number of countries. In 1873 Germany made gold the standard throughout the new German Empire (having prepared the way by legislation in 1871 which made gold a legal tender alongside of silver), and provided that silver was thenceforth to be used only in the subsidiary coinage. The same year Belgium, and the next year the other countries of the Latin Union (France, Switzerland, and Italy) took steps which resulted in demonetizing silver; that is, in limiting its coinage to governmental account, and in making gold their one standard money. The United States at that time had neither gold nor silver regularly in circulation (except in California), and there was a long-continued discussion of "a return to specie payments," which meant the return to a metallic standard, and the redemption of greenbacks on demand. Meantime in 1873 a law was passed making the gold dollar "the unit of value," and dropping out the standard silver dollar from the list of coins authorized to be issued at the mint.[6] From 1873 until 1879, prices (in greenbacks) were falling in this country very rapidly because the country with the increase in population, wealth, and business, was "growing up to" its unchanging currency supply. For a like reason at the same time gold prices throughout the world were falling. While this country was lowering its level of prices from an inflated paper money to a gold commodity basis, the gold basis itself was sinking to a lower level. The very demand of our treasury and banks for gold caused the retention of our own gold product (which between 1864 and 1876 had been nearly all exported) and required an enormous net importation of gold between 1878 and 1888. This reduced suddenly by one-half the amount available each year from our production for the rest of the world. § 6. #Definition of the standard of deferred payments.# These various changes in the purchasing power of the standard money had great effects upon industrial conditions. Particularly had they shifted the positions and claims of debtors and creditors, because of the enormous importance of money as "the standard of deferred payments," Let us now get a more definite understanding of that term. As a medium of exchange, money comes to be the unit in which most prices are expressed and compared; in other words, it becomes the common denominator of prices.[7] This makes it also the most convenient unit in which to express the amount of credit transactions and of existing debts.[8] A credit transaction is a trade lengthened in time; one party fulfils his part of the contract, the other party promises to give an equivalent at a later date. The equivalent may be in any kind of goods; for example, in barter one may part with a horse on the promise of a cow to be received later; or a small horse on the promise of a large one; or a flock of sheep on the promise of its return at the end of the year with a part of the increase of the flock. A simple standard in which to express the debt is the thing borrowed, as horse, sheep, wheat, house. Again, the thing to which the value of debts is referred may be a thing quite different from the goods borrowed and, with the growth of the monetary economy and the use of the interest contract, money comes more and more to be used as the standard. At length the law declares that, in the absence of any other agreement, the amount of a debt is to be payable in terms of the unit of standard money, which thus is made legal tender as well as the customary standard of deferred payments. A _standard of deferred payments_ is the thing of value in which, by law or by contract, the amount of a debt is expressed and payable. § 7. # Increasing importance of the standard.# Until the use of money develops, the use of credit is difficult and limited; it becomes easy when the value of all things is expressed in terms of a common circulating medium. It therefore generally is true that the importance of money as the standard of deferred payments increases with the use of money as a medium of trade. The volume of outstanding debts expressed in terms of money now very greatly exceeds the total value of the circulating medium. Changes in the general level of prices have, therefore, great effects upon all existing debts. The value of all debts changes in the same proportion as does that of the standard unit of money; when this rises or falls in value, it means increase or reduction, in the same ratio, of the purchasing power of every creditor. It is as if he had in his possession metal dollars equal in amount to the face of the debt, and they had changed by so much in purchasing power. The debtor's interests in such changes are, of course, just the reverse of the creditor's interests. Outstanding contract debts may be roughly divided into two classes: short-time loans, running less than a year; and long-time loans, running for a year or more.[9] Fluctuations are rarely rapid and great enough to affect appreciably the debtors and creditors in the case of short-time loans. The results are appreciable in the case of loans running from one to five years, and may be very great in the case of loans made for still longer periods, such as the bonded indebtedness of nations, states, municipalities, and business corporations, and as mortgages given by farmers on their land or by owners of city real estate. A multitude of interests are thus affected by a change in the value of money. When money rises in purchasing power, receivers of fixed incomes are gainers. When it falls in purchasing power, they lose. Receivers of fixed incomes from loans include not merely private investors, but also many educational and charitable institutions which dispense their incomes for public purposes. Wages and salaries of many kinds go up and down less rapidly than do other prices, and thus to some extent wage-earners are in the position of passive capitalists[10] as regards changes in the monetary standard. In a capitalistic age, therefore, almost every individual is affected in some way by a change in the value of money. § 8. #Fluctuating standard and the interest-rate.# In connection with the standard of deferred payments there is presented a problem of the effect that fluctuations of the standard may have upon the interest-rate.[11] As the general price-level falls or rises, the monetary standard conversely appreciates or depreciates.[12] If these changes are slight in amount and imperceptible in their direction they may not affect considerably the motives of borrowers and lenders. Therefore, the rate of interest this year in long-time loans would be just that resulting in the expectation, on all hands, of a stationary level of general prices. Suppose that rate to be 5 per cent on the standard investment (such as real-estate loans and good bonds). Then the lender of $1000 will receive each year a $50 income and at the end of the investment period $1000 principal, each dollar of which will purchase the same composite quantum of goods that a dollar would have purchased at the time the loan was made. Likewise, the borrower would pay interest and principal in a standard that reflected an unchanging general level of prices. But, now, if the general level of prices unexpectedly falls 1 per cent within the year, the creditor of a loan maturing at the end of the year would receive (principal and interest) $1050 which will purchase 1 per cent more goods per dollar than the sum he loaned, or (approximately) $1060 worth of goods. Hence, he has received, in quantum of goods, a yield of 6 per cent on his investment. If this change continues for five years, the lender of a five-year loan would receive each year $50 having a purchasing power successively 1, 2, 3, 4, and 5 per cent greater than the same sum had at the making of the loan; and at the end of the five years would collect the principal, having a purchasing power 5 per cent greater. The lender, on his part, would have to pay interest and repay the principal in a money that is to be obtained only in exchange for a larger sum of goods than that which could be bought with each dollar that he borrowed. This means that, with individual exceptions, creditors generally gain and debtors lose by falling prices. But this is fully true only in respect to loans already made. For just to the extent that such a movement of prices comes to be more or less regularly in the same direction, both borrowers and lenders are able to take it into account, and as experience shows, do take it into account.[13] When prices fall men become more eager to sell wealth, to lend the proceeds, and more reluctant to borrow for investment at the prevailing rate of interest and at the prevailing prices. There is an incentive to divest one's self of ownership (e.g., by selling stocks) and to become a lender (e.g., by buying bonds). This whole situation is reversed in a period of rising prices. The result is that the rate of interest in any long continued period of falling prices (such as from 1873 to 1896) has a trend downward and in a period of rising prices (such as from 1897 to 1915) has a trend upward. This movement of readjustment would not go on indefinitely, even if the same trend of prices continued; for in the strict theory of the case the adjustment would be complete when the interest rate had changed by just the amount of the annual change in the level of prices. For example, if 5 per cent is the static normal rate of interest, then when prices are falling 1 per cent each year, the adjusted rate of interest would be 4 per cent; and when prices were rising 1 per cent each year, the adjusted rate of interest would be 6 per cent. Such adjustments serve to some extent to neutralize the effects of changes in the standard of deferred payments so far as concerns new loans made in view of just such a change and in expectation of its continuance. But no one can foresee exactly, and most persons take little account of, such a change until it has continued for several years in the same direction. The adjustment is therefore never very prompt or very exact. In some years the general level of prices has risen more than 5 per cent, or more than enough to offset the entire interest received by most lenders. A man with dollars to invest would have been as well off if he had kept them buried during that period.[14] § 9. #Notable changes in prices#. In most cases the true effects of monetary changes escape recognition. In a few cases, however, the change has been so great as to cause an economic revolution. Such was the change in prices following the discovery of America, which occurred soon after the old feudal dues had come to be generally expressed in terms of money instead of labor services. In modern times, since the mass of debts has become greater than ever before, such changes bring even graver economic consequence. The increase in the output of gold in 1849-57,[15] caused what was the most rapid, if not the greatest money inflation that had occurred since the sixteenth century. The substitution of gold for silver by some countries at that time, by making a great additional market for gold, helped to check the fall in its value. Indeed, a considerable decline in the output of gold after 1870 combined with its widening use to cause in 1873 the beginning of a great fall of gold prices. The resulting increase in the burden of outstanding debts was felt by all debtors, but particularly by great numbers of the agricultural classes both in Europe and in America. Their tribulations were aggravated by the fact that at that time (especially from about 1873 to 1896) the prices of their products were falling much more rapidly than were general prices, as a result of the very rapid extension of the agricultural land supply.[16] There was complaint, agitation, and demand for relief on the part of many interests in France, Germany, England, and the United States. As a result, the money question became in this country a leading political issue and continued to be such between 1873 and 1900. § 10. #Nature and object of bimetallism.# First came "the greenback movement," which, lasted until after 1880.[17] This then gave way to an agitation for bimetallism. _Bimetallism_ is the plan of using two metals as standard moneys. Bimetallism is legally authorized when both metals are admitted to the mints for free coinage at an established ratio of weight. Bimetallism may be legally authorized, but not actually working, for, if the market-value long continues to vary appreciably from the legal ratio, only one of the metals may in fact be left in circulation. This situation is called _limping_ bimetallism (or the halting double standard), tho this is a contradiction of terms. National bimetallism is confined to a single country, as was the case in the United States before the Civil War, or in France before 1867. International bimetallism is that resulting from an agreement among several nations to use two metals on the same terms. The theory of bimetallism is that the government can act on the value of the two metals through the principle of substitution. The metal tending to become dearer will not be coined, the other will be coined in greater quantities. The degree of influence that can thus be exerted on the value of the two metals depends on the size of the reservoir of the metal that is rising in value. When it all leaves circulation, the law on the statute book permitting it to be coined becomes a mere phrase. In such a case there is bimetallism _de jure,_ but monometallism _de facto._ The greater the league of states the greater is the likelihood that the plan will continue to work. The only notable historical instance of international bimetallism is that of the Latin Union, which united France, Belgium, Italy, and Switzerland in an agreement remaining actually in force from 1866 to 1874. A strong movement developed between 1878 and 1892 in favor of forming a great international bimetallic union of states. One object of the movement was to put an end to the great fluctuations in the rates of exchange of money between the silver-using and gold-using countries, fluctuations which occasioned much uncertainty and loss to individuals engaged in foreign trade. The rise in the price of gold-exchange in the silver-using countries (notably India) meant also an increase in their burden of taxation. These countries collected their revenues in silver, but they had to pay their debts, principal and interest, in gold. Another object of this movement was to prevent the burden of individual debts from increasing by reason of the rise in the value of the single standard, gold. It was, indeed, hoped that by bringing silver much more into use, the value of gold would be reduced, thus bringing relief to the debtor classes. Still another object of the bimetallic movement was to aid the silver miners and silver-producing districts by creating a larger market for silver. Several international conferences were held which were taken part in by some of the leading financiers of the world representing their respective governments. The United States was foremost in advocating the policy, France at first favored it, as did in large measure the British Indian administration, tho England was in the main opposed. The movement came to nothing. § 11. #The movement for national bimetallism in America#. When all hope of international bimetallism failed, the efforts of many of its advocates were turned to the plan of legalizing national bimetallism in the United States at a ratio of 16 to 1. This was very different from the market ratio. Gold had become before 1860, in fact, the standard of our money system, and after 1873 it was the only metal admitted to free coinage. Silver, little by little, had been losing purchasing power in terms of gold, until from being worth, in 1873, one-sixteenth as much, ounce for ounce, it became, in 1896, worth but one-thirtieth as much as gold. The power of silver to purchase general commodities fell much less than the change in its ratio to gold would indicate, gold having risen in terms of most other goods as well as of silver. Nevertheless, the proposal to open the mints to the free coinage of silver at the ratio of 16 to 1 in the year 1896 threatened a sudden and marked cheapening of money.[18] Probably gold would have been entirely driven out as money and silver would have taken its place as the standard. In any event "free silver" would have accomplished the purpose of making the standard of deferred payments cheaper. It was at first a debtors' movement, but to succeed it had to enlist the support of other large classes of voters. And thus it developed into the more sweeping theory that wages, welfare, and prosperity were favored by a larger supply of money quite apart from the effect it would have upon debts. In its extreme form the free-silver plan was a fiat scheme, for some of its supporters believed that by the mere passage of the law the two metals could be made to bear to each other any ratio desired. But its most intelligent advocates recognized that the force of the law was limited by economic conditions. The victory of the gold standard in the campaign of 1896 was, it would seem, due more to the well-founded fear that a sudden change of the money standard would cause a panic than to a popular understanding of the question. The free-silver advocates got what they desired, a reversal of the movement of general prices, through an occurrence for which no political party could claim the credit. In 1883 the gold production of the world was less than $100,000,000. From that date, with the opening of newer gold-yielding territory in South Africa and in the Klondike, the annual output of gold had been increasing rapidly and almost steadily. The methods of extracting gold theretofore had still been in large part of a primitive sort. But intricate machinery was taking the place of crude tools, chemical processes had been introduced (notably, the cyanide process), and the principal product began to come from the regular and certain working of deep mines rather than from chance surface discoveries. In many parts of the world were enormous deposits of low-grade ores, before useless, that could be worked economically by the new methods. The general price level fluctuated, but on the whole tended downward between 1884 and 1893 (the year of panic), and reached a minimum in the year 1895 in Germany, 1896 in England, and 1897 in America. It is noteworthy that the very year 1896, which marked the height of the political agitation to abandon the gold standard for silver, saw the gold production for the first time in all history surpass the two hundred million dollar mark. The gold output had caught up with, and began to surpass, the normal monetary demands of the world, meaning by that phrase, the amount of gold needed to maintain a stationary level of prices. § 12. #Rising prices after 1896#. The whole character of the monetary problem then changed. A period of rising prices set in, which has continued to the present time. By 1913 prices had risen just about 50 per cent above the low level of 1896. The rise has been, and still is, at the average rate of nearly 3 per cent each year. This caused a reversal of the former positions of advantage and disadvantage on the part of debtor and creditor respectively. The purchasing power of a 3 per cent annual interest on notes and bonds has been offset by the decrease in the purchasing power of the principal of the debt. The burden of the average debt began relatively to decrease. A wide field for enterpriser's profits was opened up by the rapid displacement of prevailing prices in all quarters of the industrial world. The price of manufacturer's products rose in advance of the rise of costs of many raw materials and especially of the labor costs of manufacture. The average enterpriser's gain was the average wage-worker's loss. Wages (and salaries), as nearly always in the case of a change of price levels, moved more slowly than did the prices of most of the commodities which are bought with wages, thus causing great hardship to large classes living on comparatively slowly moving incomes.[19] Extremes meet, and these classes include both those living on passive investments, and those dependent on their daily labor for a livelihood. Thus we escape the evils of a rising standard of deferred payments, only to meet those of a falling standard. And as long as we have so fluctuating a standard these difficulties must arise again and again, continually repeated, causing unmerited gains and losses to individuals. Let us conclude with a brief consideration of the fundamental principles involved in this problem. § 13. #Defectiveness of the gold standard#. Money is, in general, for both borrowers and lenders the most convenient standard of deferred payments. But from the usage of speaking of all things in terms of gold, arises the popular notion that the value of gold is always the same, while the value of other things changes. In truth, a fixed objective standard of value is not possible of attainment. Altho the value of gold is stable as compared with most things, it rests on the estimates made by men and is constantly changing with conditions. The current new supplies of gold are comparatively regular. For centuries at a time there was little change in the methods of mining gold and there were no radical changes in its output. The nature of the use of gold, likewise, is such as to made changes in the amount of it needed, under ordinary conditions, more stable than is that of most other goods. Moreover, the stock of gold in monetary uses is but slowly worn out; it is, therefore, a large reservoir into which flows a comparatively small stream of annual production; the existing stock is twenty or thirty times the annual output. Yet the value of gold expressed in other things is never quite stable, and sometimes several influences combine to affect it greatly and suddenly. Recent inventions, chemical and mechanical, moreover, have considerably altered the conditions of production. While, therefore, it is the best standard yet devised and put into actual practice, it is very imperfect. A standard better than a single metal, more stable than a single commodity, is desirable if it can be found. § 14. #Various ideal standards suggested.# It may, perhaps, be agreed that the ideal standard of deferred payments is one that would insure justice between borrower and lender. Yet different views may be and have been taken as to what constitutes justice in this matter. The suggestion is attractive that repayment should involve the return of enjoyment equal to that which could be purchased with the sum at the time of the loan. Such a standard is impossible of perfect realization in any general way, for men's circumstances are constantly changing. To insure even to the average man the same amount of enjoyment is only roughly possible. The same goods do not afford the same enjoyment when conditions, either subjective or objective, have changed. Another suggestion is that the goods returned should represent the same sacrifice as those loaned. Here again the difficulty is in the lack of a standard applicable to all men. Whose sacrifice? That of the lender, who may be rich, or that of the borrower, who may be poor? Some have supposed that the condition of equal sacrifices was met by the labor standard, according to which the sum returned should purchase the same number of days of labor as when borrowed. But what kind of labor is to be taken, that of the lender or that of the borrower or that of some one else? Labor is of many different qualities, which can be exactly compared only through their objective value in terms of some one good.[20] It must be recognized that any possible concrete standard of deferred payments will sometimes work hardship in individual cases. The best average results for justice and social welfare will be secured by measuring debts in some standard that will change least often, and least rapidly, in relation to the great majority of people of all classes in the community. § 15. #The tabular standard.# Apart from the difficulties of its practical operation, a standard better than a single metal and more stable than a single commodity would be a _tabular standard_, consisting of a number of leading commodities in fixed proportions, such as is used in calculating index numbers expressing the general scale of prices. Such a standard averages the fluctuations of particular goods and would give a fair approximation in practice to the ideals of equal sacrifice and equal enjoyment (on the average tho not in individual cases). While some natural materials are growing more scarce and call for more sacrifice, other products are by industrial progress becoming more plentiful. This kind of standard has been viewed with favor by many monetary authorities, and despite the administrative difficulties ways may yet be found for putting it into practice. After determining the tabular standard, the actual regulation of the quantity of money to make prices conform to the standard might be accomplished in one of several ways. It might be done by letting the value of the gold dollar fluctuate as it does now, while requiring a greater or less number of dollars to be given in fulfilment of all outstanding contracts. For example, if prices by the tabular standard fell from 100 to 95 in the time between the origin of a debt of $100 and its payment, the debt would be discharged by paying $95; if prices rose to $110, the debt would be discharged only by the payment of $110. By the plan of a "compensated gold dollar" the legal weight of the gold coins would be increased or decreased from time to time to conform with the tabular standard. Still a third method would be to regulate the issue of standard paper money, contracting and expanding its amount by issue and redemption, by deposit in and withdrawal from depository banks, at regular intervals to bring prices into conformity with the tabular standard. These are as yet but distant possibilities, and for some time to come gold will continue to serve as the standard money in the same manner as in the past. [Footnote 1: The amount of silver is here expressed at its coining value; this is not the commercial value, but rather the number of silver dollars 371.25 fine grains weight that could be made out of the silver produced. Silver and gold of equal coining value are, therefore, as to weight always in the ratio of 16 to 1.] [Footnote 2: See above, ch. 5, sec. 4.] [Footnote 3: See Vol. I, p. 45 ff. See also above, ch. 4, sec. 8.] [Footnote 4: Numerous tabular index numbers have been worked out for different countries and periods. The main results of the more recent ones have been brought together with critical comments, by Professor Wesley C. Mitchell, in Bulletin 173 of the U.S. Bureau of Labor Statistics, July, 1915, from which the figures here used are quoted.] [Footnote 5: The price movements in the United States between 1860 and 1879 must be left out of consideration here, for the excessive issues of greenbacks drove gold out of circulation and made greenbacks the standard money, except in California and elsewhere on the Pacific Coast where, by public opinion, gold was retained as the circulating medium.] [Footnote 6: This change was what later was referred to in political discussions as "the crime of '73." The dollar referred to was the _standard_ silver dollar; at the same time the coinage of a _trade_ dollar was authorized (intended to be used only in foreign trade), which, after 1876, was not legal tender in the United States.] [Footnote 7: See Vol. I, p. 262.] [Footnote 8: See Vol. I, p. 263, on credit transactions, and p. 302, on the interest contract.] [Footnote 9: See Vol. I, p. 304.] [Footnote 10: See Vol. I, p. 319.] [Footnote 11: This could not be treated in connection with the interest-rate in Vol. I, Part IV, for the reason that even its elementary treatment must presuppose the fuller study of the nature of money and the study of changes in the level of prices, that has just been given in this and the three preceding chapters. The theory of interest in Vol. I, therefore, is a static theory in respect to the standard of deferred payments, and requires adjustment to apply to a condition of a changing price-level.] [Footnote 12: See above, sec. 3.] [Footnote 13: Mention was made in Vol. I of the prospect of profit as affecting the motives of commercial borrowers; e.g., pp. 298, 335, 348, 495.] [Footnote 14: The modern explanation of this phenomenon was worked out in the period of falling prices before 1896 and hence was referred to as the theory of "appreciation and interest" (meaning the relation of the appreciating dollar to a falling rate of interest). More generally the theory is that of the relation of a changing standard of deferred payments and the rate of interest.] [Footnote 15: See ch. 4, sec. 12, and above secs. 1, 2, 4, 5.] [Footnote 16: See Vol. I, on agricultural leases, p. 159, wheat prices, p. 436, and changes in the land supply, p. 442.] [Footnote 17: See ch. 5, sec. 11.] [Footnote 18: The advocacy of this proposal was called "the free-silver movement" because it involved resuming the free coinage of silver at the legal ratio of 16 to 1.] [Footnote 19: This happened to coincide with a relative increase of the price of food-products and of other necessities of daily life at a greater rate than general prices. This aspect of the much discussed rising cost of living must be carefully distinguished from that of the change of the _general_ price level, and also from that of the relatively slower change of wages. See Vol. I, pp. 437, 445-446 on population and food supply.] [Footnote 20: See on the labor theory of value, Vol. I, pp. 210, 228-229, 502.] PART III BANKING AND INSURANCE CHAPTER 7 THE FUNCTIONS OF BANKS § 1. Nature and classes of banks. § 2. Functions of banks. § 3. The essential banking function. § 4. Time deposits. § 5. Demand deposits. § 6. Discount and deposit. § 7. Nature of banking reserves. § 8. Bills of exchange, domestic. § 9. Issue of notes. § 10. Divergent views of typical bank notes. § 11. Banking credit as a medium of trade. § 12. Productive services of banks. § 13. Income of banks. § 1. #Nature and classes of banks.# Banks perform a variety of useful functions in every modern community. All these functions touch in some way upon the use of money, and banking problems always are related to money problems. It is our purpose now to understand the general nature and work of banks in relation to the general business activity of the community. A bank, as one first comes to know it, is a building (or a room in some building) in which there is a fire- and burglar-proof safe. In this room are men receiving and paying out money and acting as bookkeepers. Gradually one comes to understand that the bank is perhaps not the building but the business organization that is there performing these transactions. In the United States there were in 1913 about 26,000 banks reported.[1] These may be classified first according to the source from which they derive their charters or authority to do a banking business as: national, state, and private. The last are unchartered and act under the general state laws governing private contracts; in general they are unsupervised.[2] Banks may be classified also according to the two main types of business they perform, as banks for savings and commercial banks. Most banks do mainly a general commercial business; some are distinctly banks for savings; but in truth this dividing line can be less and less sharply drawn between banks as wholes; rather the distinction must be made between the savings function and the commercial discount function, which are more and more being performed by one and the same bank. The trust company usually well exemplifies this union of functions. This will best be explained in connection with the subject to which we now turn, the analysis of the functions which banks perform. § 2. #Functions of banks.# Almost every bank performs various functions useful to its customers, but some of which are not essentially bound up with banking, and may be performed by institutions that are not truly banks. Among these are: (a) Maintaining a safe deposit vault, where space may be rented by an individual to keep his valuable papers, jewels, etc. The customer does not usually deliver to the bank possession of the valuables, but himself retains the key to the box which the bank has no right to open. In larger cities this work is often done by separate institutions. (b) Acting as money-changer to buy and sell moneys of different nations. This function is of less importance in America than elsewhere because of the great size of our country and of the small portion of our boundaries touching those of other nations using different monetary units. Moreover, the function is in large part performed for Americans by ticket agencies at the ports of embarkation and by the steamship companies en route. (c) Selling bonds and other investments to customers. In smaller communities the customers of a bank turn to it as the best source of information for safe investments of personal or trust funds. This opens to it a new possibility of service. Large investments, however, are usually made through the agency of more specialized investment brokers. (d) Acting as trustee and business manager for passive investors, and especially as executor and administrator of estates or as guardian of a minor heir. This function has been taken up rapidly since about 1890 by the trust company[3] organized under state laws. § 3. #The essential banking function.# The one essential function of a bank, however, is selling (lending) its credit to its customers in some form which will conveniently serve the same function as money. A bank is sometimes defined as a business whose income is derived from lending its promises. The bank's credit is sold in the form of its promises, the evidences of which are its receipts, depositors' account books, drafts and checks on other banks, and bank notes. The indispensable condition to the exercise of this function by a bank is public confidence in its ability to fulfil its promise to pay whenever it is due. This confidence is built upon the bank's paid-up capital; its surplus and undivided profits: the further liability of the stockholders to make good any losses up to an amount equal to the capital stock each holds ("stockholder's double liability"); the financial prestige of the bank's officers, directors, and stockholders; the bank's established reputation and "good will" in the community after a period of successful operation; the character of its loans and of the securities which it owns; and, finally, by the reliance placed in the control and inspection by official examiners. The bank may then sell its credit in any one or in all of the following five ways: (1) by receiving time deposits; (2) by receiving demand deposits; (3) by the method of discount and deposit; (4) by selling exchange of funds to distant points; (5) by issuing bank notes. § 4. #Time deposits.# Time deposits are funds to the credit of customers which, by agreement, are to be left for some specified minimum time or on condition that the bank may require notice in advance of the depositor's intention to withdraw them. The notice that may be required is usually thirty to ninety days; but only in times of general financial crises or of runs on particular banks is this requirement enforced. A sufficient deterrent to irregular withdrawal of funds is usually found in the loss of interest if deposits are withdrawn at other than stated times. The bank's right to require notice makes prudent the investment of a much larger proportion of its deposits and for a longer time; it reduces the proportion of deposits needed for reserves, and yet reduces the danger of a "run" upon the bank in time of financial distress. These are reasons why banks can and usually do pay interest on time deposits (at from 2 to 4 per cent), as until more recently they rarely did on demand deposits[4]. From the standpoint of the depositor a time deposit is, by its very nature, an investment and not a demand credit available for current monetary uses. Only that portion of a person's capital that for some more or less considerable period is not likely to be needed for other purposes ought to be put into time deposits. A bank, however, is generally a much safer place in which to keep a fund of purchasing power for the future than is the strongest private treasure box. Receiving time deposits is the one essential function of savings banks, but this function is increasingly performed by other banks[5]. Sometimes time deposits are cared for by a separate department and kept separate from the general business of a commercial bank. § 5. #Demand deposits#. Demand deposits are those payable on demand, the demand in practice being by means of personal checks requesting the bank to pay to (or on the order of) a specified person, or to pay to bearer. A customer's bank account consisting of demand deposits is called a checking account. Since the turn of the century it has become increasingly the practice to pay a low rate of interest (about 2 per cent) on current balances, oftener to large depositors. Banks attract demand deposits mainly by the convenience and economy which they offer to their customers in the guarding of funds from theft and fire and in saving the time, trouble, and expense of carrying money for making payments. A deposit in a bank is to the depositor for most purposes "just as good" as money in the pocket and for many purposes is even better. Thus the banks have become the custodians of a large proportion of the money (or funds) needed for current use by individuals and business corporations. § 6. #Discount and deposit#. The process of discount and deposit is the purchase of the promissory note of a customer,[6] the price being a credit in the form of a demand deposit on the books of the bank. This--the central and most characteristic banking operation--has something of mystery in it at first view. The simplest idea of making a deposit is that of bringing to a bank window bags and rolls of money or other funds (credit papers such as checks and drafts, calling for the payment of money). The bank in that case becomes the debtor and the depositor becomes the creditor of the bank. But in discount and deposit the depositor brings no money, and the credit paper that he gives is his own promise to pay whereby he becomes the bank's debtor. For example, when a bank discounts a thousand dollar note for three months and credits its customer with the proceeds, its deposits are at that moment increased (let us say) $985. Notice that hereby the bank does not add a cent to the cash in its vaults while it has added to its liabilities payable on demand. As an off-setting asset it holds the note of its customer receivable at some future time. §7. #Nature of banking reserves#. Banks would have nothing to gain by receiving deposits or by issuing notes if they were obliged to keep in the vaults actual money to the amount of their deposits and outstanding notes (unless they were paid by depositors for taking care of deposits). Banks have found it necessary in practice to keep on hand money amounting to only a fraction of all their outstanding obligations in order to be able to pay promptly all due demands, excepting in periods of general financial distress. The sum thus kept on hand is called the _reserve_ or the _reserves_ of the bank, and this is frequently expressed as a percentage of reserves against deposits or against note issues, respectively. Frequently, as in the United States, a minimum percentage of reserves is fixed by law.[7] A bank's reserves consist, first, of the lawful money which it actually holds in its vaults at any moment and secondly, of certain other credit items in other banks or with the government, of such a nature that a bank is permitted to count them as tho immediately available. The explanation of the adequacy of a mere fractional reserve is found in the nature of the individual monetary demand[8] and in the effective way in which a checking account serves as a substitute for actual money.[9] Every customer, if he would avoid overdrawing his account, must at most times keep a goodly balance to his credit that he does not immediately need. Many individuals and corporations must at times keep very large balances. The times of maximum monetary need of the customers of a bank never exactly coincide and many payments are made among the customers of a single bank, requiring only bookkeeping transfers. A fractional reserve is therefore ordinarily fully adequate, altho with any less than a 100 per cent reserve any bank would be insolvent if all of its demand obligations were presented at the same instant. Such a contingency is made impossible by business custom and public opinion especially among the larger customers of banks, but the panic of small depositors often brings about dangerous conditions. § 8. #Bills of exchange, domestic.# Foreign and domestic exchange is the sale of orders for the payment of specified sums of money at distant points. But for this, payments at distant points would ordinarily have to be made by sending the money in some way. It must often occur, for example, that hundreds of payments, aggregating millions of dollars, must be made by persons in and near Chicago to those in and near New York, while, at the same time, equally large sums are due from New York to Chicago. The wasteful process of shipping these sums back and forth is avoided by the cancellation of indebtedness between the two localities. It has been the practice for each small bank to keep a part of its legal reserves in correspondent banks in one or more of the larger cities on which it draws bills of exchange for its customers and to which in turn it remits for collection drafts and checks which it has received. From time to time, as balances of accounts increase on the one side or the other, shipments of actual money become necessary, but these are only a small fraction of the total amount of the bills of exchange. Similarly, the settlement of accounts between any two localities can be made by the shipment of comparatively small sums of money. Under the Federal Reserve Act the reserve banks are in various ways assuming the functions of the correspondent banks. The wider use and acceptance of individual checks at long distances from the banks upon which they are drawn limit by so much the proportion of special bills of exchange drawn by the banks themselves. Domestic exchange involves just the same principles as foreign exchange of funds, except that in the latter, usually, two different units of standard money are used. In connection with the discussion of foreign trade below, foreign exchanges will be explained and further light will be thrown upon the adjustment of the money supplies and levels of prices of the various sections of a single country as well as between different countries. § 9. #Issue of notes#. The issue of bank notes as a mode of lending a bank's credit calls for consideration here. Yet it must be observed at once that comparatively few banks in the world have now the legal right to issue their own notes. In some cases the right has been granted as a monopoly to certain banks in return for specified payments and services. But in general the function of bank note issue has come to be treated as so closely connected with that of the coinage and regulation of the standard money that it has been increasingly limited in each country to a central national bank, or group of banks, which is in many respects practically if not technically an organ of the government. This public nature of bank note issues has been strikingly evident in Russia, England, France, Germany, and other countries since the outbreak of the war in 1914. No two countries have quite the same system and kind of bank notes. It is well to consider first, therefore, the qualities of typical bank money. This consists of notes issued by banks on the credit of their general assets, without special regulation by law. With such a form of note we have had until 1914 no experience in the United States since 1866, at which time a federal tax of 10 per cent on state bank notes made their issue unprofitable. Since the passage of the Federal Reserve Act we have temporarily two kinds of national-bank notes, the old bond-secured notes, in use since 1863 (very different from the typical form),[10] and the new kind of Federal reserve notes very nearly typical in character but issued only by the Federal reserve banks, not by individual banks. A bank, by the issue of notes, puts into circulation as money its own promises to pay. The customer, in borrowing money or in withdrawing deposits or cashing checks and drafts from other banks, is paid with the bank's notes instead of with standard money. These notes may be returned to the issuing bank either to be redeemed in specie or to be paid in some other form of credit, such as deposits or exchange. The limit of the issue of such notes is the need of the community for that form of money, and if they are promptly redeemed in standard money on demand, they never can exceed that amount. A holder of a note (in the absence of special regulations) has the same claim on the bank that a depositor has. As it is to the interest of the bank to keep in circulation as many notes as possible, there is a temptation to abuse the power of note issue, to which many banks in America yielded in the period of so-called "wild-cat" banking before the Civil War. § 10. #Divergent views of typical bank notes#. Some persons seeing in bank notes but a form of ordinary commercial credit (like a promissory note or an individual's check) have contended that their issue should be entirely unlimited and unregulated except by the ordinary law of contract which makes the bank liable to redeem the notes on demand. Such bank notes would not be legal tender, and every one would be free to take or refuse them as he pleased. Each bank would thus put into circulation as many notes as it could, and as they would constantly be returned for redemption when not needed as money their volume would expand and contract with the needs of business. It may be conceded that there is much truth in this view, but not the whole truth. For, in reality, when bank notes are in common use, every one is compelled to take the money that is current. This offers a constant temptation to the reckless and unscrupulous promotion of banking enterprises, as has been repeatedly shown (notably in America in the days of "wild-cat" banking before 1860). The average citizen cannot know the credit of distant banks, and thus has not the same power of judging wisely in taking bank notes that he has even in making deposits in the bank of his own neighborhood. Between bank notes and ordinary promissory notes there are other differences. Bank notes pass without endorsement and thus depend on the credit of the bank alone, not, like checks, on the credit of the person, from whom received. Unlike ordinary promissory notes, they yield no interest to the holder. They go into circulation and remain in circulation for considerable time by virtue of their monetary character in the hands of the holders. Thus they approach political money in their nature, and the banks are near to exercising the sovereign right of the issue of money. At the other extreme of view have been those who consider bank notes to be essentially of the nature of political money. If they are so, it is argued, the power of issue should not be exercised by any but the sovereign state. In this view it is overlooked that bank notes, unlike inconvertible paper money, depend for their value on the credit of the bank, not on their legal-tender quality and on political power.[11] They must be redeemed on penalty of insolvency; government notes need not be, and yet will circulate at par if properly limited. Adequate provision for the prompt return and redemption of bank notes makes them "elastic" in their adaptation to monetary needs, which fluctuate with changes in commerce and industry from season to season and even from day to day. The predominant opinion to-day is that in their economic nature bank notes share to some extent the character both of private promissory notes and of political paper money. They stand midway between the two. Everywhere it has come to be held that the issue of paper money of any kind is in its nature a public monopoly, and yet everywhere the bank note policy has come to be that of permitting the issue only to certain institutions, under strict public legislation and regulation, and of requiring in return for this privilege some substantial services or payments to the government. § 11. #Banking credit as a medium of trade.# The credit which, in five ways, banks sell (see above, section 3) serves, in most cases, the purposes of money to their customers. This is least true of time deposits, for the motive of the depositor in such cases is usually to _invest_ his funds for a time rather than to keep them available as money. However, there are many cases in which persons save for some moderately distant use--such as the purchase of furniture, of a piano, of a house. The safety and convenience of time deposits, combined with the reward of a small rate of interest, cause great sums, in the aggregate, to be deposited as _temporary_ savings, which otherwise would be hoarded in the form of money and thus withdrawn from circulation. In all such cases the time deposit is serving both as an investment and as a monetary fund for future use. This is a great economy in the use of money, for experience shows that in the savings banks of America the average reserves of actual money kept against deposits are only about 1-1/2 per cent. In countries where banks are little known, the amount of actual money hoarded is therefore vastly greater than it is in the United States where there are $5,000,000,000 of individual deposits in _regular_ savings banks, besides large sums in time deposits in commercial banks. Demand deposits, while not money, clearly perform the function of a reserve of purchasing power for depositors and reduce by so much the amount of money each must keep at hand to meet his current needs of purchasing power. If the depositor's credit balance bears no interest, he has no motive to keep a balance greater than he would require of actual money, and he has the motive to spend it or invest it in income-bearing capital whenever his balance (plus his cash in hand) exceeds his monetary needs.[12] Thus demand deposits are often spoken of (somewhat inaccurately) as "deposit currency," being funds at the command of depositors which are as disposable and as active and current for the monetary function as so much actual money would be. It is estimated that the rate of turnover of deposits in the United States is about 50 times a year. We may view the demand deposits subject to check as either a substitute for money or as a means by which the rapidity of circulation and the monetary efficiency of actual money held in bank reserves is multiplied many fold.[13] The method of payment by bank drafts in domestic exchange reduces the need for, or increases the efficiency of, money in just the same way as does the use of checks. By the mutual credit of banks in different parts of the country, very large payments may be made in both directions with the movement of only the comparatively small amount of physical money needed to pay the balance after the cancellation of drafts, bills of exchange, and checks. The use of bank notes reduces the amount needed of other kinds of money more directly, tho not more effectively, than do deposit accounts. Bank notes _are_ money, and so long as their amount is limited by prompt redemption they circulate _instead of_ so much of other kinds of money. Redemption is possible by the use of a reserve of standard (or of legal tender) money very much smaller than the amount of notes outstanding. § 12. #Productive services of banks.# There have always been some erroneous ideas regarding the magic power of banks to multiply the power of money. But there should be no more of mystery about banking credit than about the nature of money itself. Banks are the labor-saving machinery of finance. They gather loanable funds, reduce hoarding, make money move more rapidly, and create a central market between borrowers and lenders for the sale of credit. While not creating more physical wealth directly, they add to the efficiency of wealth; they simplify and quicken the movement of nearly all commercial transactions. Banks perform incidentally a further service in developing better business methods in the community. They enforce promptness and exactitude in business dealings. In supplying credit to enterprises, banks are constantly passing judgment on the collateral security presented to them and on the soundness of the enterprises that are seeking support. This gives to bankers great economic power, capable at times of misuse in political and social affairs, especially where a group of selfish men come to exercise a practical monopoly of business credit in any community. § 13. #Income of banks.# The income of banks is drawn from different sources, according to the size of the community and the nature of the banks. While in the villages and smaller cities the commercial banks perform a number of functions, in the larger cities they usually specialize in a far greater degree. The trust companies, however, with their greater versatility, are increasing in number. The income of banks is derived from discounts, interest on their own capital, charges for exchange and collection, dividends, interest and rents on investments, and profit from their bank notes. The capital with which a bank starts in business[14] could be loaned with less trouble and more cheaply without starting a bank, but used as a banking capital it can be loaned in part while still serving to attract deposits, which are the main source of the income of banks to-day. Charging smaller customers for exchange is a source of income to some banks, but in many cases this service is freely performed for regular customers and becomes a considerable expense. Banks make few investments in real estate or other physical property; it is, in fact, their duty to keep out of ordinary enterprises, but they are forced sometimes to take for unpaid debts things that have been held as security. Profits on bank notes have at times been the main, almost the sole, motive for starting banks; but that is not the case to-day when the right of issue is so strictly limited. [Footnote 1: These are classified as follows: _Number_ --_Per Cent_-- _National charter_: 28.56 National banks 7,404 28.56 _State charter_: 67.52 State banks 14,011 54.05 Loan and trust companies 1,515 5.84 Savings banks 1,978 7.63 _Private_: 3.92 Private banks 1,016 3.92 ------ ------ ------ 25,924 100.00 100.00 ] [Footnote 2: Opinion favors prohibiting the use of the word bank to any except regularly incorporated organizations, or at least subjecting private banks to the same supervision as the chartered banks.] [Footnote 3: Not to be confused with a trust in the sense of a monopolistic enterprise, with which it has no connection except by mere verbal accident, through the word trust.] [Footnote 4: See next sec.] [Footnote 5: The Federal Reserve Act of 1913 has given encouragement to this practice by reducing to 5 per cent the reserve required to be kept against time deposits. See ch. 9, sec. 7.] [Footnote 6: Usually with deduction of interest in advance; a process called discount. See Vol. 1, pp. 275, 302.] [Footnote 7: The legal requirements as to minimum reserves vary greatly from no specific per cent to 40 or more in different countries, for different classes of banks, and for different purposes. Some examples of legal reserve requirements in the United States occur in the two following chapters.] [Footnote 8: See above, ch. 4, sec. 5.] [Footnote 9: See below, sec. 10.] [Footnote 10: Including, now, some Federal Reserve bank notes secured by United States bonds.] [Footnote 11: In some cases, as during the bank restriction in England, 1797-1821, bank notes become inconvertible--practically political money.] [Footnote 12: Payment of interest on credit balances reduces the motive to withdraw for investment elsewhere any such excess, and mingles in the depositor's thought monetary and investment motives.] [Footnote 13: In the United States in 1914 there were individual deposits reported in banks other than savings banks to the amount of about $13,400,000,000 In national banks .................................. $6,000,000,000 In state banks ..................................... 3,250,000,000 In loan and trust companies .......................... 4,000,000,000 In private banks ..................................... 150,000,000 Nearly all these were doubtless demand deposits (what proportion were time deposits we have no data for determining), and were available as immediate purchasing power for the depositors. The total money (other than bank notes) in the commercial banks of the country was hardly 11 per cent of this amount. In that year the total amount of money of all kinds in circulation (and in banks) in the United States (outside the Treasury), including gold and silver and certificates represented by bullion in the treasury, United States notes of all kinds, and national bank notes, was about one fourth of the amount of these individual deposits in commercial banks. This may suggest the enormous influence that banking has in determining the average efficiency of the circulating medium of the country.] [Footnote 14: See above, sec. 3.] CHAPTER 8 BANKING IN THE UNITED STATES BEFORE 1914 § 1. The First and Second Banks of the United States. § 2. Banking from 1836 to 1863. § 3. National Banking Associations, 1863-1913. § 4. Defects of our banking organization before 1913. § 5. Lack of system. § 6. Inelasticity of credit. § 7. Periodical local congestion of funds. § 8. Unequal territorial distribution of banking facilities. § 9. Lack of provision for foreign financial operations. § 10. The "Aldrich plan." § 1. #The First and Second banks of the United States.# A knowledge of the history of banking is helpful to an understanding of the present banking system in our country. The form of our present banking system has been affected by various economic and political events which will be sketched here in broad outline to give a background for our present study. Alexander Hamilton, the great first Secretary of the Treasury in Washington's cabinet, advocated the charter of a central national bank as one portion of his larger plan of national financiering. His purpose was realized in the chartering, in 1791, of the First Bank of the United States, for a period of twenty years. The capital for this institution was in small part subscribed by the government, but mostly by private capitalists. The management of the bank was left almost entirely in private hands. The central bank established branches in many parts of the country, issued bank notes which circulated everywhere without depreciation, acted as the governmental depository of funds and as governmental agency in various ways. It seems to have been successful and useful as a banking institution until the expiration of its charter in 1811, but it was touched by the contemporary controversies over state rights and was from the first opposed by those who feared the growth of a strong central government. This opposition prevented the extension of its charter. In 1816, however, after only a moderate discussion, the Second Bank of the United States was chartered for a period of twenty years. This also, in its purely banking aspects, seems to have been distinctly successful, conducting numerous branches in various parts of the country, maintaining at all times the parity of its notes, facilitating domestic exchange throughout the country, and enjoying unquestioned credit and solvency. However, this bank became, even in a greater degree than did the First Bank, the creature of political rivalries. In the period of rising democratic sentiment typified and led by Andrew Jackson, the bank came to be looked upon as the embodiment, or the stronghold, of plutocratic interests, and Congress permitted its charter to expire by limitation in 1836, near the close of Jackson's administration. § 2. #Banking from 1836 to 1863#. The Federal Government, which up to that time had deposited its funds in the central bank and its branches and in local state banks, established the "independent treasury," in 1840 (abolished in 1841 and re-established in 1846). By this plan the government kept its money of all kinds in various depositories (or sub-treasuries) in charge of public officials. While from 1792 to 1836 almost continuously a central banking system was in operation, other banks, organized under state charters, were steadily increasing in number. They received deposits, issued bank notes under state laws, and cared for local commercial needs. The abolition of the central national bank in 1836 left to the various state banks for twenty seven years all the banking functions of the country. The banks of some states (notably those of New England and New York), under careful regulation and held to strict standards by public sentiment, for the most part maintained a high credit; but many banks, under lax laws and regulations, were guilty of great abuses of credit and of downright dishonest practices. The evils were more especially evident in connection with excessive issues of bank notes. § 3. #National Banking Associations, 1863-1913#. The next step in federal legislation was taken in 1863 in the midst of the Civil War by chartering local "national banking associations." The purpose was in part to provide banks under national charters for banking purposes (both of deposit and of issue), and in part it was to make a wider market for United States bonds at a time when government credit was at low ebb. The plan adopted followed the experience of New York state (1829 on) with a system of bond-secured bank notes. Congress provided that every bank taking out a national charter must purchase bonds of the United States and deposit them with the treasurer of the United States, in return for which it would receive bank notes to the amount of 90 per cent of the denomination or of the market value of the bonds.[1] Bank notes issued on this plan, being secured by the bonds, rest ultimately on the credit of the government, not on the credit of the bank. They are not promptly sent back for redemption to the banks issuing them, as should be done if they were typical bank notes. They may circulate thousands of miles away from the bank that issued them, and for years after the bank has gone out of business. They are not an "elastic currency," increasing or diminishing with the needs of business. The changes in their amount depend upon the chance of the banks to make more or less in this way than by any other use of their capital, and this in turn depends largely on the price of bonds and on the rate of interest they bear. From 1864 to 1870, fortunes were made from this source, but thereafter banks could make little more from note issues than they could by investing the same amount in other ways. Many banks for a long period did not avail themselves in the least of their privilege of issue. The notes were subject to a tax.[2] A national bank (as the law now stands) may be organized, with $25,000 capital in towns not exceeding three thousand population, with $50,000 in towns not exceeding six thousand, with $100,000 in cities not exceeding fifty thousand, and with $200,000 in large cities. Three cities, New York, Chicago, and St. Louis, have long been designated as central reserve cities, and some 47 other cities as reserve cities, in which the reserves of banks were required to bear a considerably larger proportion to their deposits than in other cities.[3] Other banks might count as part of their legal reserves their deposits in reserve city banks, up to a certain proportion. The national banks in the larger cities thus became the great capital reservoirs of cash for the whole country. National banks have been subject to stricter inspection than have been the banks in most of the states, a fact which has strengthened public confidence in their stability. Except in this and the other respects above mentioned, a national charter offered few, if any, attractions to small banks, a majority of which have found it more advantageous to operate under state charters because of less stringent regulations as to amount of capital, reserves, and supervision. § 4. #Defects of our banking organization before 1913#. Taken altogether, the banks in the United States since 1868 have represented great banking power and very efficient service for the community in times of normal business. But in several respects it long ago became evident that our banks were operating less satisfactorily than those of several other countries. American banking organization had failed to keep pace with the increasing magnitude and difficulty of its task. Especially at the recurring periods of financial stress, such as occurred in 1893, 1903, and 1907, our banking machinery showed itself to be wofully unequal to the strain put upon it. Financial panics were more acute here than in any other land, and the evil clearly was traceable in large part to defects in the banking situation. In academic teaching and in public conferences of bankers, business men, publicists, and students, the subject was continually discussed after 1890. At length Congress in 1908 created a "National Monetary Commission" to inquire into and report what changes were necessary and desirable in the monetary system of the United States or in the laws relative to banking and currency. After the most extended inquiry and discussion that the subject had ever received, the commission submitted its report in January, 1912. The defects to be remedied, as enumerated in the report,[4] may be reduced to the following five headings: (a) Lack of system, (b) Inelasticity of credit, (c) Periodic local congestion of funds. (d) Unequal territorial distribution of banking facilities. (e) Lack of provision for foreign banking. § 5. #Lack of system#. Only in a loose sense could the banks of the United States be said (before 1914) to constitute a system at all. Both national and state laws dealt with individual banks only. It was not legal for a bank to establish branches in another city as is done in most countries. The several national banks in one city were legally quite separate. It was only by voluntary agreement that in some of the larger cities they came together into clearing-house associations. They made possible some measure of coöperation which, small as it was, proved at times of stress to be of much service within a limited sphere for the local communities. But even with the aid of these organizations the banks were unable in times of emergency to avoid the suspension of cash payments. There was no provision whatever for the concentration of bank revenues so that each bank would be supported by the strength of the other banks, if a movement began to withdraw deposits in unusual amounts. Each bank then was compelled for self-protection to call for any sums it had deposited with other banks,[5] and to keep for its own use all the reserves it might have in excess of its own immediate needs. This threw a great strain upon the banks in the reserve cities, which in normal times had become the depositories of a good part of the reserves of the banks in other places. Thus developed a spirit of panic, like the fright of theater-goers crowding toward the door at the cry of fire. The maintenance of the government's independent treasury contributed to the difficulties by causing the irregular withdrawal of money from circulation and thus depleting bank reserves in periods of excessive government revenues and by returning these funds into circulation only in periods of deficient revenues. Efforts to modify this system by a partial distribution of the public moneys among national banks had resulted, it was charged, in discrimination and favoritism in the treatment of different banks and of different sections of the country. § 6. #Inelasticity of credit#. Our banks, considered both separately and collectively, were unable to increase their loaning powers quickly and easily to respond to business needs. The need of greater elasticity of credit was felt in the more or less regular seasonal variations within the year, and in the more irregular variations in cycles of years from periods of prosperity to those of panic and depression in business. The inelasticity was necessitated by illogical federal and state laws restricting absolutely the further extension of credit when the reserves fell below the percentage of deposits (15 or 25 per cent) fixed by law. Reserves thus could not legally be used to meet demands for cash payments at the very time when most needed. This feature has been likened to the rule of the liveryman who always refused to allow the last horse to leave his stable so that he would never be without a horse when a customer called for one. The refusal of credit by the banks at such times when they still had large amounts of cash in their vaults increased the need and eagerness of the public to draw from the bank all the cash they could, and often precipitated the insolvency of the banks. Clearly some means were needed to enable the loaning power of the individual banks to be increased at such times, so that no customer with good commercial paper need fear to be refused a loan, even tho the rate of interest might have to be somewhat higher for a few days or weeks than the normal rate. Our bond-secured bank notes lacked almost entirely the quality of elasticity needed to meet these changing business needs.[6] Their value being dependent primarily upon the amount and price of United States bonds, they might be most numerous just when least needed as a part of our circulating medium. § 7. #Periodical local congestion of funds#. In times of general confidence each bank finds it profitable, and is tempted, to extend its credit to the extreme limit permitted by the law governing the proportion of reserves to deposits. Of the 15 per cent reserves required in most banks, three-fifths (9 per cent) might be kept in banks in reserve cities, and of the 25 per cent in reserve city banks, 12-1/2 per cent might be kept in central reserve cities, where it counted as part of the depositing banks' legal reserves, was a fund upon which domestic exchanges could be drawn, and usually earned a small rate of interest (usually 2 per cent). Very large reserves were kept in New York city where they could be loaned "on call," and the largest use for call loans was in stock-exchange speculation. Thus every period of prosperity encouraged an unhealthy distribution of reserves, gave an unhealthy stimulus to rising prices, and "promoted dangerous speculation." § 8. #Unequal territorial distribution of banking facilities.# Another aspect of this concentration of surplus money and available funds in the larger cities was the comparatively ample provision of banking facilities in the cities and in the manufacturing sections, and imperfect provision in the agricultural districts. The whole financial system seemed designed to induce the poorer country districts to lend funds at low rates of interest to be used speculatively in cities, instead of enabling the richer districts, the cities, to lend to the rural districts for productive enterprise. The rates of bank discount in different sections of our country have long been most unequal--lowest in the largest cities, and highest in the rural South and West--whereas in all parts of Canada, with a different system of banking, the rates have long been much more approximately uniform. Indeed, our national banking development has been predominantly urban and commercial to the neglect of rural and agricultural interests. National banks were (until 1913) forbidden to make loans on real estate, and this greatly "restricted their power to serve farmers and other borrowers in rural communities." There was "no effective agency to meet the ordinary or unusual demands for credit or currency necessary for moving crops or for other legitimate purposes." The lack of uniform standards of regulation, examination, and publication of reports in the different sections prevented the free extension of credit where most needed. Finally, the methods and agencies for making domestic exchange of funds were, compared with other countries, imperfect and uneconomical even in normal times and could not "prevent disastrous disruption of all such exchanges in times of serious trouble." § 9. #Lack of provision for foreign financial operations.# Not without its influence on public opinion was the consideration that we had "no American banking institutions in foreign countries." Many bankers and business men felt, as did the commission, that the time had come when the organization of such banks was "necessary for the development of our foreign trade." Foreign banks in South America and the Orient, handling American trade, were believed to favor their own countrymen rather than the interests of American merchants. In contrast with the European nations with their centralized control of banking, we had "no instrumentality that" could "deal effectively with the broad questions which, from an international standpoint, affect the credit and status of the United States as one of the great financial powers of the world. In times of threatened trouble or of actual panic these questions, which involve the course of foreign exchange and the international movements of gold, are even more important to us from a national than from an international standpoint." § 10. #The "Aldrich plan."# The National Monetary Commission submitted with its report a plan which was known by the name of the commission's chairman, Senator Aldrich. This plan was embodied in a bill for a National Reserve Association, a bank for banks which bore some likeness to the great central banks of Europe. In the many details of the plan an effort has been made to remedy every one of the difficulties above described and to supply all the needs indicated. The plan was favored pretty generally by bankers, but called forth many adverse opinions. In the year of a presidential election, however, Congress took no action in the matter. All parties were pledged to some kind of banking reform, but particular proposals were not discussed in the campaign. [Footnote 1: Whichever was the smaller. In 1900 this was changed so that notes could be issued to the full amount of the denomination of the bonds.] [Footnote 2: In recent years this has been one half of 1 per cent when 2 per cent bonds, and 1 per cent when bonds bearing a higher interest, were deposited.] [Footnote 3: In reserve cities 25 per cent and in other cities 15 per cent. The details of the regulations in the old law (given in part below, sec. 7) were ll altered by the legislation of 1913.] [Footnote 4: The expressions within quotation marks in the following sections are taken from this report.] [Footnote 5: See further on this in sec. 7 on periodical congestion of funds.] [Footnote 6: See above, sec. 3.] Chapter 9 THE FEDERAL RESERVE ACT § 1. General banking organization. § 2. The Federal Reserve Board. § 3. Federal reserve banks. § 4. Federal reserve notes. § 5. Reserves against Federal reserve notes. § 6. Reserves against Federal reserve bank deposits. § 7. Reserves in member banks. § 8. Rediscount by Federal reserve banks. § 9. Changes in national banks. § 10. Operation of the Act. § 1. #General banking organization#. President Wilson and the newly elected Congress with its Democratic majority made banking reform one of the main objects on the program for the special session beginning March 5, 1913. The result was the Glass-Owen bill, which became law as the Federal Reserve Act December 23 of that year. The bill was actively discussed within and without the halls of Congress, and many of its features were attacked by bankers individually and acting through the bankers' associations, at various stages of its progress. As a result it underwent numerous amendments in details, and tho it remained in most essentials as it was first proposed, it was at last accepted even by its critics as on the whole a beneficent act of legislation. Indeed, its strongest critics had been the friends of the Aldrich plan, and the Federal Reserve Act embodies, in a greater degree than its authors were ready to admit, the main features of the Aldrich plan. In one important respect, however, it is different; it provides for more decentralization of control and of reserves than did the Aldrich plan. It created not one central banking reserve, but, in the end, twelve regional, or district, banks each to keep the reserves of its district. The Jacksonian tradition of opposition to a central bank[1] in part helps to explain this; in part the contemporary congressional investigation and discussion of the so-called "money-trust" and the consequent desire to decrease the importance of "Wall Street" and of New York city banking power. On the accompanying map are given the outlines of the districts as constituted and altered down to 1916.[2] [Illustration: FEDERAL RESERVE BANK DISTRICTS] § 2. #The Federal Reserve Board#. At the head of the banking system stands the Federal Reserve Board of seven members, five of them appointed by the President and Senate of the United States for this purpose, and two serving _ex-officio_--the Secretary of the Treasury and the Comptroller of the Currency. One of the five shall be designated by the President as Governor and one as Vice-Governor of the Board, but the Secretary of the Treasury is _ex-officio_ chairman. The term of the appointive members is ten years and the salary is $12,000 a year. The powers of the board are numerous and important. The board is made the head of a real _system_ of banking, the twelve parts of which can, in times of emergency, and at the board's discretion, be compelled to combine their reserves by means of lending to each other (rediscounting), to the very limit of their resources, at rates fixed by the board. By this means the reserves of the several district banks may be "piped together" and thus be practically made into one central bank under governmental control, altho centralization was in outward form avoided by the bill. Alongside of the Reserve Board, is placed a Federal Advisory Council, consisting of one member from the board of directors of each of the twelve district banks. This council has only the power to confer with, make representations and recommendations to, and call for information from, the Federal Reserve Board. § 3. #Federal reserve banks#. The twelve Federal reserve banks which opened for business November 16, 1914, are of a type of institution new in our financial history. They are "banks for banks" belonging to the system in their respective districts. Every national bank must, and any state bank or trust company may,[3] subscribe for stock to the amount of 6 per cent of its capital and surplus, and thus become a "member bank." The capital of each Federal reserve bank was to be at least $4,000,000; in fact only two of those organized (Atlanta and Minneapolis) had at their opening less than $5,000,000 capital; the largest (New York) had $21,000,000, and the average was $9,000,000. The member banks are to receive dividends of 6 per cent, cumulative, on this stock, and net earnings above that amount are to be paid to the Government as a franchise tax.[4] Each reserve bank has nine directors, consisting of three classes of three men each. Classes A and B are elected by the member banks by a system of group and preferential voting designed to prevent the large banks from outvoting the smaller ones. Directors of class A are chosen by the banks to represent them, and are expected to be bankers; those of class B, tho chosen by the banks and tho they may be stockholders, shall not be officers of any bank, and shall at the time of their election be actively engaged within the district in commerce, agriculture, or some other industrial pursuit. Directors in class C are appointed by the Federal Reserve Board, one of them being designated as chairman of the board of directors and as Federal reserve agent. They represent the public particularly, and may not be stockholders of any bank. Any Federal reserve bank may: a. Receive deposits from member banks and from the United States. b. Discount upon the indorsement of any of its member banks negotiable papers, with maturity not more than ninety days, that have arisen out of actual business transactions, but not drawn for the purpose of trading in stock and other investment securities. c. Purchase in the open market anywhere various kinds of negotiable paper. d. Deal anywhere in gold coin and bullion. e. Buy and sell anywhere bills, notes, revenue bonds, and warrants of the states and subdivisions in the continental United States. f. Fix the rate of discount it shall charge on each class of paper (subject to review by the Federal Reserve Board). g. Establish accounts with other Federal reserve banks and with banks in foreign countries or establish foreign branches. h. Apply to the Federal Reserve Board for Federal reserve notes to be issued in the manner below indicated. § 4. #Federal reserve notes#. In 1914 there were outstanding about $750,000,000 of what we may now call the old-style bank notes (bond-secured). These were by the new act not forcibly retired at once; but, as the law is shaped, they probably will be retired at the rate of about $25,000,000 a year, and will all disappear from circulation in thirty years.[5] Whenever the banks having old-style bank notes outstanding desire to retire any of their circulating notes, the Federal reserve banks are required[6] to purchase the bonds in due quota (not to exceed $25,000,000 in any one year). On the deposit of these bonds with the Treasurer of the United States, the Federal reserve banks may receive other circulating notes (essentially of the old style) called Federal reserve bank notes, or may receive 3 per cent bonds not bearing the circulating privilege. The new kind of notes provided by the act are called Federal reserve notes. They are not secured by the deposit of government bonds, but they are secured beyond all question in other ways. First, they are obligations of the United States receivable for all taxes, customs, and other public dues, and are redeemable in gold on demand at the Treasury of the United States. Secondly they are receivable by all member banks in the twelve districts and by all Federal reserve banks, and redeemable by the latter in gold or lawful money (which includes greenbacks and gold and silver certificates). Thirdly, their credit and prompt redemption is insured by certain elastic rules as to reserves in gold which must be kept for the redemption of outstanding notes. Fourthly, they are secured by collateral, consisting of notes and bills accepted for rediscount from member banks, which must be deposited by a Federal reserve bank with the Federal reserve agent of its district, dollar for dollar for every note it receives. Fifthly, the notes become "a first and paramount lien on all the assets of the bank." This is what gives the notes their character of asset currency. It is evident that the notes unite in a manner without example the characteristic of asset bank notes with the characteristics of political paper money.[7] No notes, it will be observed, are issued by or on request of the member banks, but only on request of a Federal reserve bank. After the notes have been issued, the bank may reduce its liability any day by depositing lawful money with the Federal reserve agent who is right there in the bank. The Federal reserve banks and the United States Treasury must promptly return to the banks through which they were issued all notes as fast as they are received, and "no Federal reserve bank shall pay out notes issued through another on penalty of a tax of ten per centum." The regulations do not apply to the member banks, but their effect must be to keep notes from circulating long in any district except that for which they were issued. § 5. #Reserves against Federal reserve notes.# The rule applying in normal times to reserves against note issues is that each bank must provide a reserve in gold equal to 40 per cent "against the Federal reserve notes in actual circulation, and not offset by gold or lawful money deposited with the Federal reserve agent." At least 5 per cent is to be on deposit in the Treasury of the United States. The proportion of reserves to the liability for note issues by any bank, however, may be allowed to fall below 40 per cent, on condition that the Federal Reserve Board shall establish a graduated tax of not more than 1 per cent per annum (it evidently might be made less if the board chose) upon such deficiency, until the reserves fall to 32-1/2 per cent and thereafter a graduated tax of not less than 1-1/2 per cent on each additional 2-1/2 per cent deficiency or fraction thereof.[8] This tax must be paid by the reserve bank, but it must add an amount equal to the tax to the rates of interest and discount charged to member banks. The effect of these rules is to give a power of note issue in time of emergency without compelling the reserve banks to lock up their reserves held against notes. Suppose for example that the circulating notes were in normal times $1,000,000,000 and the reserves, therefore, were $400,000,000 and the rate of discount 5 per cent. Then the circulation might be doubled with the same reserves, the proportion thus falling to 20 per cent of outstanding notes, and the rate of discount to customers rising to 13.5 per cent (5 plus 8.5). Or, to take a most extreme supposition, suppose that the withdrawal of gold had been so great as to reduce the reserves against notes to $50,000,000; yet outstanding notes might be doubled (becoming $2,000,000,000,) the proportion falling to 2.5 per cent, the rate of discount rising to 24 (5 plus 19). § 6. #Reserves against Federal reserve bank deposits.# Every Federal reserve bank shall, under normal conditions, maintain reserves in lawful money of not less than 35 per cent against its deposits. But the Federal Reserve Board may suspend any reserve requirement in the Act for a period not exceeding 30 days and from time to time renew the suspension for periods not exceeding 15 days; but in that case it must establish a graduated tax upon the amounts by which the reserve requirements may be permitted to fall below the levels specified as to note issues. Altho the amount of the tax on the deficiency of reserves against deposits is not indicated in the act (as it is in respect to excess note issues) it is plainly the thought that the Board, to which discretion is left, will follow somewhat the same rule in both cases. The great discretionary power as to reserve requirements thus lodged in the hands of the Board makes possible at times of emergency the use of the reserves both of the reserve banks and of the member banks, down to the last dollar, if need be, without violation of law. This gives practically unlimited opportunity to expand credit both by the issue of bank notes and by discount and deposit in periods of financial crises. § 7. #Reserves in member banks.# A fundamental change is made in the rules as to the reserves against deposits that must be maintained by the member banks. A new distinction is made between time and demand deposits. Time deposits are defined as those payable after thirty days or subject to not less than thirty days' notice; and demand deposits as those payable within thirty days. In every case the reserve requirement against time deposits is only 5 per cent. This gives encouragement to banks to maintain savings departments. The requirements as to reserves against demand deposits are not uniform, being the lowest for banks in smaller cities (the great majority), larger for banks in the reserve cities, and largest for banks in the three central reserve cities (New York, Chicago, St. Louis). The act substitutes the new Federal reserve banks for the banks in reserve and central reserve cities as the depositories of funds that may[9] be counted as a part of the reserves of member banks. The new rule requires that one-third must be in the bank's own possession, a fraction slightly over a third must be in the Federal reserve bank, and the remainder may be kept in either place. This may be tabulated as follows: _Not in In reserve In central reserve cities cities reserve cities_ Total reserves, per cent 12 15 18 Must be in its own vaults 4/12 5/15 6/18 May be either place 3/12 4/15 5/18 Must be in a Federal reserve bank 5/12 6/15 7/18 These requirements as to total reserves are, as compared with requirements of national banks under the old law, a reduction respectively of 20 per cent, 40 per cent, and 28 per cent. The total decrease in the amount of reserves required for all three classes of national banks was about $400,000,000 on the amount of deposits held in September, 1914. § 8. #Rediscounts by Federal reserve banks.# More important than any other single feature of the act is, however, that by which each Federal reserve bank is to rediscount notes, drafts, and bills of exchange arising out of actual commercial transactions, when indorsed and presented by any of its member banks. This, quite apart from the note issues, gives a power to the banks collectively, under the general supervision and control of the board, to expand credits indefinitely at any time for real business purposes. Any business man able to offer any commercial paper of sound quality should now be able to borrow on it at some rate of discount, even in the most stringent times. And, in turn, every member bank will now be able at such times to rediscount such paper and thus secure credit toward its reserve requirement on the books of its Federal reserve bank. Suppose, for example, that a member bank (in a central reserve city) saw its reserve in the Federal bank fall below 7 per cent of its deposits. It could by rediscounting $7000 worth of notes increase by $38,888 the amount to which it might legally extend credit to its customers (i.e., $7000 is 18 per cent of that sum). The deposits of the Federal reserve bank would then be increased $7000, against which it must have a reserve of 35 per cent, or $2450. If the reserves of any Federal reserve bank fall too low, it can in turn rediscount its paper with the other Federal reserve banks.[10] If the time comes when no one of the twelve banks can longer maintain a 35 per cent reserve, the board may reduce or suspend the requirement, levying a tax graduated according to the deficiency. The provision here for elasticity of credit combined with union and solidarity of all the central banking reserves of the country to meet unusual demands in emergencies, exceeds any needs which can be expected to arise. § 9. #Changes in national banks.# There is here created a national system of reserves, but it will be observed that membership in the new system of the Federal reserve banks is not limited to national banks, but is open on equal terms to banks organized under state laws. While in most respects the general banking law remains as it was, certain changes are of importance. The percentage of reserves henceforth required of all member banks (as above indicated) is a substantial reduction of the former requirement for national banks. In some other respects the powers of national banks are enlarged. One with a capital and surplus of $1,000,000 may with the approval of the Board establish foreign branches, and one not situated in a central reserve city may loan on farm lands for a term not longer than five years, but not to exceed one third of its time deposits or 25 per cent of its capital and surplus. National banks may now be granted permission by the board to act as trustee, executor, administrator, or registrar of stocks and bonds, thus having the rights that have proved in many cases to be of advantage to trust companies organized under state laws. § 10. #Operation of the Act#. It was fortunate that this act was nearly ready to be put into operation when, August 1, 1914, the great European war broke out. The able appointees to the Federal Reserve Board commanded the confidence of the bankers and of the public. The knowledge that the reserve banks would early begin operations was reassuring during the grave financial stress of the next three months, and the opening of the district banks in November, 1914, at once made possible the release for commercial uses of cash reserves and credits to meet the needs of reviving business.[11] Only an extended experience can show how this enormous new banking organization will operate as a whole and in its details. Because of the very wide discretionary powers given to the board in the administration of the act much depends on the character and ability of the members of the board as well as on a sound public opinion that will keep this great power from use in partisan and selfish ways. No doubt amendments of the act will appear necessary, but there can be no question that the Federal Reserve Act has inaugurated a new epoch in the banking and financial history of our country.[12] [Footnote 1: See ch. 8, sec. 1.] [Footnote 2: The law provided that an organization committee should designate not less than eight nor more than twelve cities as Federal reserve cities and should divide the continental United States, excluding Alaska, into districts each containing one such city. Twelve districts were designated. Wherever, therefore, the act speaks of "not less than eight nor more than twelve," or of "as many as there are Federal reserve districts," we may, for convenience, speak of twelve.] [Footnote 3: On agreeing to comply with reserve and capital requirements of national banks and to submit to Federal examination.] [Footnote 4: Except that until the surplus of any reserve bank amounts to 40 per cent of its paid-in capital stock, one half of its net earnings shall be paid into a surplus fund.] [Footnote 5: These notes are all secured by the deposit of bonds of the United States, a large share of them bearing interest at the very low rate of 2 per cent. Two per cent is less than the market rate for government loans, for 3 per cent bonds without this privilege sell above par. Therefore these 2 per cent bonds were held almost exclusively by banks, and would have lost a good share of their value had the note-deposit privilege been withdrawn.] [Footnote 6: Through the Federal Reserve Board or they may do it voluntarily, sec. 4.] [Footnote 7: The Act does not explicitly say by whom the notes are issued: it says that they are "to be issued at the discretion of the Federal Reserve Board"; that "the said notes shall be obligations of the United States." Further on the notes are spoken of as "issued to" a Federal reserve bank, and again as "issued through" a Federal reserve bank, but not _by_ it. But the phrase occurs (sec. 16) "its [i.e., the Federal reserve bank's] Federal reserve notes." The notes thus are technically issued by the United States, but not as ordinary political (fiat) money, for they are not given a forced circulation by the Government in paying its indebtedness. But the banks "shall pay such rate of interest on" the amounts of notes outstanding as may be established by the Federal Reserve Board (i.e., to the Government of the United States). Practically the notes (as respects choice of time of issue, amounts, profits from them, commercial assets to secure them and to redeem them) are asset currency issued by the several Federal reserve banks.] [Footnote 8: This may be shown in the following table: When reserves against notes are the tax rate upon the total are-- deficiency shall be-- Below 40.0 to 32.5 per cent 1.0 per cent " 35.5 to 30.0 " " 2.5 " " " 30.0 to 27.5 " " 4.0 " " " 27.5 to 25.0 " " 5.5 " " " 25.0 to 22.5 " " 7.0 " " " 22.5 to 20.0 " " 8.5 " " " 20.0 to 17.5 " " 10.0 " " " 17.5 to 15.0 " " 11.5 " " " 15.0 to 12.5 " " 13.0 " " " 12.5 to 10.0 " " 14.5 " " " 10.0 to 7.5 " " 16.0 " " " 7.5 to 5.0 " " 17.5 " " " 5.0 to 2.5 " " 19.0 " " " 2.5 to 0.0 " " 20.5 " " ] [Footnote 9: The complete application of the new rule is deferred for a period of three years from the passage of the act.] [Footnote 10: See on "piping" provision, sec. 2, above.] [Footnote 11: See sec. 7 above.] [Footnote 12: Several other features of the law well merit description. Among these features are measures for developing bankers' acceptances, open market operations, the gold clearing system of the Federal Reserve Board, and the clearing of checks and parring of exchange.] CHAPTER 10 CRISES AND INDUSTRIAL DEPRESSIONS § 1. Mischance, special and general, in business. § 2. Definitions. § 3. A feature of a money economy. § 4. European crises. § 5. American crises. § 6. A business cycle. § 7. General features of a crisis. § 8. "Glut" theories of crises. § 9. Monetary theories of crises. § 10. Capitalization theory of crises. § 11. The use of credit. § 12. Interest rates in a crisis. § 13. Dynamic conditions and price readjustments. § 14. Tariff changes and business uncertainty. § 15. Rhythmic changes in weather and in crops. § 16. Remedies for crises. § 1. #Mischance, special and general, in business.# Every separate business enterprise is subject to chances which suddenly decrease its profits and the prosperity of its owners; such are fire, flood, illness of its owners, unfavorable changes in prices of materials or of the products.[1] The interests of many other persons in the neighborhood may be so bound up with an enterprise that its losses may mean unemployment, lower wages to workingmen, and bankruptcy to local merchants and to banks. Sometimes misfortune and disaster affect whole communities. The lack of cotton while the Civil War was in progress compelled the factories of Manchester to close in 1864, and the earthquake and fire in San Francisco in 1906 left a quarter of a million people homeless. But a change of business conditions is constantly occurring that is of wider extent, that is of less accidental and of more rhythmic nature, and that appears to be the effect of slowly working and more general causes. The enterprise of a modern community, as a whole, "general business," moves along, in a wavelike manner, going through a somewhat regular series of changes that is called a business cycle. We are now to study the nature of these cycles. § 2. #Definitions.# Crisis means, generally, a decisive moment or turning point. The word crisis suggests a brief period, a moment, something that is sudden, severe, and soon over. In medical usage it is the period when the disease must take a turn for better or for worse. As used in economics, the term, however, implies a sudden change of business conditions for the worse, a collapse of prosperity. What precedes has not the appearance of disease, but rather that of exuberant health. Crises in economics may be distinguished as industrial, speculative, and financial, according as one or another influence seems to be more potent, but all are essentially financial. The change that occurs always is connected in some way with the use of money and credit. A financial _crisis_ is the culmination of a period of rising prices, and a sudden fall which shatters the credit of some banks, brokers, merchants, and manufacturers. Every crisis is marked by much confusion and loss and by hasty efforts of individuals and institutions to meet their pressing obligations. Sometimes this process of liquidation goes on quietly and in other cases it becomes a wild scramble, each one trying to save himself, in which case it is a financial _panic_. An _industrial depression_ is the period of hard times that usually follows a financial crisis. § 3. #A feature of a money economy.# Financial crises, by their very nature, are confined to communities in which the money economy prevails and where there is a developed state of industry. The periods of industrial hardship in the Middle Ages were connected usually not with the collapse of prices, but with political oppression, famine, wars, pestilence, and scourges of nature. Throughout the lands money was little used and there was no development of credit and of credit prices. The money economy began, as has been noted, in the cities. As the use of money spread, as larger commercial enterprises were undertaken, as borrowing and the payment of interest became common, there began to appear in city trading circles, on a small scale, the phenomena of the modern crisis.[2] § 4. #European crises.# In Europe financial crises date from 1763 and have occurred at more or less regular intervals since. The common statement that the cycle of a crisis is run in a period of ten years, finds only partial support in history. The chief crises of the eighteenth century occurred in 1763, 1783, 1793, these dates marking the close of wars of some magnitude. The crises were not widespread or general, but were more marked in England, which was at that time farther developed industrially and in its money economy than other countries. Likewise, in the nineteenth century, the crises were of unequal force in various countries, usually being severer in England. They may be dated 1803, 1825, 1838, 1847, 1857, 1864-66, 1875, 1890, 1900, 1907, and 1914. These were attributed to various causes; that of 1825 to over-trading abroad; that of 1847 to railroad-building; while that of 1866 followed the severe disturbance of trade in 1864 caused by the interruption of the cotton trade and commerce by the Civil War in America. While in many parts of England the crisis of 1864 was unusually severe, in other countries it was of little moment. Germany, after several years of great speculative prosperity, had a most severe crisis in 1875; while France, although prostrated by the war of 1870-71, losing a large amount of wealth, and paying a thousand millions of dollars to Germany as a war indemnity, escaped a commercial crisis almost entirely at that time. § 5. #American crises.# Since the beginning of the nineteenth century, the financial connections of the United States with London, the leading loan market of Europe, have been such that every crisis in either England or America has extended its effects to the other country. But the disturbances are so modified by the particular conditions (of crops, politics, and speculation) that the phenomena never correspond exactly in time of occurrence, in duration, or in intensity. The first notable crisis in America occurred about 1817 in the very violent readjustment of trade after the resumption of commerce with Europe in 1816.[3] In 1837-39 came in quick succession two crises, not quite distinct from each other, the second similar to the relapse of a fever patient. The conditions were rapid westward expansion, over-speculation in lands, reckless state internal improvements, great issues of state bank notes, and the financial measures of Andrew Jackson, which included the dissolution of the Second Bank of the United States in 1836.[4] The crisis of 1857 followed a period of great prosperity marked by rising gold production and prices and a great increase in foreign trade. The crisis of 1873, possibly the severest in our history, followed great speculation, especially in the direction of railroad building on an unexampled scale after the war. The blow, when it fell, was intensified by the relative contraction of currency then in progress, leading to the return to a specie basis and lower prices.[5] The crisis of 1884, a comparatively slight one, occasioned (rather than caused) by the discussion of the money question, was followed by some years of noticeable depression. The years 1889 to 1892 witnessed prosperity, only slightly interrupted in 1890, that culminated in a crisis in May, 1893 (likewise generally explained as due to the unsettled state of our monetary system), followed by a period of great depression lasting until 1897. A rapid growth of business was checked but little in 1900 when a crisis occurred in Europe, especially severe in Germany. In November, 1902, began in America what has been called "the rich man's panic" of 1903 in which for a year many securities were sold by holders because European creditors were recalling their loans. American business, however, slackened but little, altho building operations were somewhat checked. General prices, which had been moving upward since 1897, remained almost unchanged in 1903 and 1904, and then continued going upward until 1907. In the period from September to November of that year occurred a severe crisis both in Europe and in America. The industrial depression following this was marked in 1908, slowly growing less. The crisis at the outbreak of the war in August, 1914, was quite exceptional, being due to the sudden demand of Europe upon New York for funds. Within a couple of months it was over and soon prices were again rising as the result of large exports of merchandise followed by gold imports. § 6. #A business cycle#. Let us now sketch in broad outline a business cycle, bearing in mind that this series of changes does not repeat itself with unvarying regularity, but that it is fairly typical in the modern business world. The period leading up to a crisis is one of relative prosperity; then occurs a crisis in which prices fall, at first rapidly, and afterward for a while going slowly lower. When prices are at the lowest point many factories are closed, and much labor is unemployed. Let us start at that point. Conditions are worse in some industries than in others. General economy and great caution prevail; few new enterprises are undertaken. For those persons having available funds this is a good time to buy, and property begins to change hands. Then hoarded money begins to come out of its hiding places. Money and credit flow in from other countries, particularly if business conditions are better abroad than here, for when prices are lower than they have been, relative to those of other countries, a country is a good place in which to buy. At the same time that the money in circulation thus increases, there is a general return of confidence that increases credit. Not only are there more dollars, but each does more work. Then old enterprises are resumed and new ones are undertaken. The purchase of materials in larger quantities causes a rapid rise in the prices of many raw materials and of all kinds of industrial equipment. The less efficient laborers and others that have been out of work, begin to find employment, and then, more tardily, wages begin to rise. As a result, the costs of many products begin to rise rapidly. The only classes not sharing in this improvement are the receivers of fixed incomes. As prices rise, the purchasing power of their incomes correspondingly falls. At length prices begin to go up less rapidly, and the question arises in many minds whether the movement can continue, and if not, when it will cease. Men wish to hold on for the last profits, and are willing to risk something to gain them. When prices rise not only as compared with former domestic prices, but as compared with current foreign prices, foreign imports are stimulated and exports fall. This calls for a new equilibrium of money and requires at length large and continued exportation of specie. This checks prices, and, reducing the specie reserves of the banks, compels them to be more cautious. At the same time the increase of costs in many industries begins to reduce profits. The fall in the value of many stocks and securities held by the banks forces many brokers and speculators to convert their resources into ready money. This is the moment of danger; weak enterprises find their foundations crumbling, and there are many failures.[6] The falling prices, the shattered credit, and the financial losses force many factories to close, and many workmen are thrown out of employment. This moment of widespread loss is the crisis, It is followed by another period of low prices and of small output, and therefore of profits small or negative in many industries. Business must again enter upon a period of retrenchment, for it has completed another cycle. § 7. #General features of a crisis.# Altho irregular in time of occurrence and unlike in their immediate occasions, financial crises show certain general features. They are a part of the larger movement here outlined as the business cycle. Some have thought this cycle to be normally a period of ten years, divided into one year of crisis, three years of depression, three years of recovery, and three years of unusual prosperity. This succession of events occurs pretty regularly, though not in the regular intervals of time. Crises are more severe in countries with more extensive use of money and credit, but still more severe where the credit system is more loosely administered and less efficiently coördinated. They are harder in the United States and England than in Germany, harder in Germany than in France, harder in western Europe than in eastern Europe, harder in Christendom than in heathendom. They are less severe in rural districts, where prosperity depends more on crop conditions, and business has in it less of financial speculation. Their effects are least felt in the staple industries, for when hard times come people economize on the less essential things. The glove-factory, the silk-factory, the golf-club-factory are more likely to close than the flour-mill. In a crisis wages and salaries are less affected than are profits, but wageworkers suffer in the loss of employment. Those money lenders who have eliminated chance as far as possible and have taken a low rate of interest lose little; the risk-takers who draw their incomes from dividends on stock or from bonds of a less stable kind, often lose much. § 8. #"Glut" theories of crises#. Many explanations of the causes of financial crises have been offered.[7] Nearly all of these belong to the general group of "glut" theories, of which genus there are two species, under-consumption and over-production theories. These are, in truth, but two aspects of the same idea.[8] The one view is that too many goods are produced, the other that too few are consumed. The over-production theorist seeing that in a crisis warehouses are filled with goods that cannot be disposed of for what they cost (or at best, not so as to give a profit), and that factories are shut down and men are out of employment for lack of demand, declares that productive power has grown too great. The under-consumption theorist, seeing the same facts, says that the trouble is lack of purchasing power. He observes that there are some people who would like to buy more of some of these things, but that such people lack income with which to buy. Usually he asserts that this is because production grows faster than wages, wages being fixed, as he believes, by the minimum of subsistence--a theory akin to the iron law of wages. In both over-production and under-consumption theories, the inequality of demand and supply is looked upon as a general one. There is supposed to be not merely an unequal and mistaken distribution of production, but a general excess of productive power. The wide vogue held by these views would justify a fuller discussion and disproof of them here, did space permit. It must suffice to indicate merely that they have the same taint of illogicalness as the "fallacy of waste," and the "fallacy of luxury."[9] They overlook the fact that an income, either of money or of other goods, coming even to the wealthiest, will be used in some way. It may be used either for immediate consumption or for further indirect use in durable form. Through miscalculation there may be, at a given moment, too many consumption goods of a particular kind, but the durable applications can find no limit until the inconceivable day when the material world is no longer capable of improvement. At the time of a crisis, there is unquestionably a bad apportionment of productive agents, and a still worse adjustment of their valuations, but these facts should not be taken as proving that there is an excess of all kinds of economic goods. § 9. #Monetary theories of crises.# Another group of theories explains the crises as being due to money, either too much or too little. The unregulated issue of bank notes has been assigned as the cause of crises, especially under the circumstances accompanying such crises as those of 1837 and 1857 in America, when bank note issues greatly contributed to the unsound expansion of credit. The issue of government paper money years before, leading to inflation and speculation, was by many believed to be the cause of the crisis of 1873. The reverse view is taken by the advocates of a cheap and plentiful money. They say that these crises were caused, not by the expansion, but by the contraction of the money stock; for example, not by the inflation of prices through the issue of greenbacks in 1862 to 1865, but by the contraction of the currency from 1866 to 1873. There is only a fragment of truth in these various views. It is always lack of "money" at the moment of the crisis that causes any particular failure, and in that sense it is always lack of "money" that causes a crisis. The question is, whether in any reasonable sense it can be said that it was lack of a circulating medium before the crisis that brought it on. There is no support for this view, except in the rare case when the money standard is undergoing a rapid change, as in the United States from 1866 to 1873, and the statement then needs much modification and explanation. The monetary theories of crises are a bit nearer to the truth than are those of the over-production type, for the crisis is always connected with prices and credit. But it is clear that these rhythmic price changes occurring in the business cycle are not due to the same causes as are the general movements of the price level, due to an increasing or decreasing output of gold or again to a paper money inflation. Statistics show that while a general price level is slowly changing like a tidal movement, the effect of the rhythmic business cycle appears now in hastening, now in retarding, the changes in the price level. § 10. #Capitalization theory of crises#. Here we verge upon a different type of explanation of the financial crisis--one of a psychological nature. The quantity of money, we have seen, affects prices more or less according as credit is more or less used in connection with it. Money plus confidence has a larger power of sustaining prices, than money without, or with less, confidence. And throughout the business cycle the amount of confidence, expressed in such ways as the readiness to grant credits and in the easy extension of the time of collection, is constantly changing. Over-confidence at one time is suddenly followed by widespread lack of confidence. This has led some to say that lack of confidence is the cause of crises. This is a truism, but it does not explain what is the real cause of this lack of confidence, which, when the crisis comes, is not mere unreasoning fear that needs only to ignore the danger to banish it. Might it not just as truly, if not more truly, be said that the cause is _over-confidence_ in the period preceding the crisis? The essential characteristic of a crisis is the forcible and sudden movement of readjustment in the mistaken capitalization of productive agents. Capitalization runs through all industry. The value of everything that lasts for more than a moment is built in part upon incomes that are not actual, but expectative, whose amount, therefore, is a matter of guesswork, or "speculation."[10] Many unknown factors enter into the estimate of future incomes. The universal tendency to rhythm in motion (material or psychic) manifests itself in an overestimate or underestimate of incomes and of every other factor in value. This is emphasized by a psychological factor called sometimes the "hypnotism of the crowd," and sometimes, the "mob mind." Most men follow a leader in investment as in other things. The spirit of speculation grows till often it becomes almost a frenzy, and people rush toward this or that investment, throwing capitalization in some industries far out of equilibrium with that in others. The cause of crises immediately back of the maladjusted capitalization thus is seen to be a psychological factor; it is the rhythmic miscalculation of incomes and of capital value, occurring to some degree throughout industry, but particularly in certain lines. This subjective cause in men is given an opportunity for action only when certain favoring objective conditions are present. § 11. #The use of credit.# Most noteworthy of these objective conditions is the general use of credit. The credit system greatly enhances the rhythm of price. If the value of a thing that is fully paid for falls, the owner alone loses; but if the value of a thing only partly paid for falls so much that the owner is forced to default in his payment, the loss may be transmitted along the line of credit to every one in a long series of transactions. A credit system, highly developed, is a house of cards at a time of financial stress. Demand liabilities are at such a time the greatest danger, so that the banks, ordinarily the pillars of financial strength, become at such a time the points of greatest weakness in the financial situation. If many of the customers were not restrained by their sense of personal obligation to the banks, by the strong pressure which the banks can bring to bear upon them, or by the force of public opinion among business men, from withdrawing the balances to their credit in a time of crisis, all commercial banks would become insolvent at once in a crisis by the very nature of their business; for all their ordinary deposits are nominally payable on demand. § 12. #Interest rates in a crisis.# In normal times there is always outstanding a great mass of short-time, commercial loans.[11] The motive of the borrower, in most cases has been to hire more labor and to buy more materials for use in his business. Ordinarily these loans can and are renewed without difficulty or are replaced by others, based on the security of new business transactions in unbroken succession. Now at the time of a crisis a general contraction of credit occurs, and all borrowers with maturing obligations are faced with bankruptcy. The effort of the business man at such a time is not to make a positive profit, but to save what he can from the threatened wreck. The demand for short-time loans, therefore, in such times of stress, fluctuates rapidly, and exceedingly high interest rates prevail in these loan markets for a few days or a few weeks, rates which have only a remote relationship with the usual capitalization of most agents. The distress of the business man is magnified by the fact that it is just at such times that both the equipment he has bought and the products he has made become temporarily almost unsaleable at prices as high as he paid for them when he bought them with the borrowed money. He may know that prices will soon be higher, but he cannot wait. Various courses are open to him in this emergency; he may borrow the money at a very high rate of interest, holding the goods for better prices; or he may sell the goods under the unfavorable conditions; or he may sell other capital such as stocks and bonds. The end sought is the same--to get ready money; and the methods are not essentially unlike--the exchange of greater future values for smaller present values. The sacrifice sale thus reveals the merchant's high estimate of present goods in the form of money. The purchaser of some kinds of property in times of depression is securing them at a lower capitalization than they will later have. The rise in value may be foreseen as well by seller as by buyer, but the low capitalization reflects the high interest rate temporarily obtaining. A.T. Stewart, once the most famous New York merchant, is said to have laid the foundation of his fortune when, being out of debt himself, he bought up the bankrupt stocks of his competitors in a great financial panic. The high interest at such times is but the reflection of the high premium on present purchasing power. The worst of the evils of crises are confined to the markets where the greatest numbers of short-time loans are made. Most of the long-time loans do not fall due in such seasons of stress, and the great mass of slowly exchanging wealth alters little and slowly in price. Such loans as fall due can generally be renewed for long periods at rates little higher than usual, the market for long-time and short-time loans being in large measure independent of each other. But they are not quite independent, and some lenders take whatever sums they can collect on maturing long-time obligations and loan them on short terms at high rates of interest, or buy goods, whole enterprises, bonds, and stocks, at the unusually low prices temporarily prevailing. The effect of this is to raise somewhat the interest rate on long-time paper to accord with the new conditions. § 13. #Dynamic conditions and price readjustments.# Another condition favorable to the rhythmic movement of capitalization is a dynamic economic society. The past century has opened up new fields for investment on an unexampled scale. Investment has advanced both intensively and extensively in a series of great waves. New machinery and processes have given undreamt of opportunities for enterprise in the older countries, and the physical frontier of investment has moved outward with the march of millions of immigrants to people the fertile wilderness. Such factors disturb the equilibrium of prices both in time and space, give a powerful impulse toward higher values in the older lands, and stimulate the hopes of all investors. When the balance between the capitalizations of various industries and between the incomes of the various periods proves to be false, the inevitable readjustment causes suffering and loss to many, but particularly in the inflated industries. But, because of the mutual relations of men in business, few even of those who have kept freest from speculation can quite escape the evils. Among the dynamic conditions in industry are changes in the general price level whether due to changes in the production of the standard money commodity (relative to population) or to changing methods of doing business. If the price level is falling (i.e., the standard unit is appreciating), the burden of the great mass of outstanding debts is growing heavier upon the debtors.[12] Sooner or later some of them break down under its weight. At such times many attempt to shift their capital from active investments such as stocks, to passive investments such as bonds. When the price level is rising, the opposite conditions prevail. But such adjustments proceed uncertainly and unevenly in different industries, with much speculation in shifting from one type of business to another, and with much accompanying miscalculation. § 14. #Tariff changes and business uncertainty.# Another variable influence in American business has been the tariff. Every tariff revision, whether the rates go upward or downward, shifts somewhat the relative opportunities and profitableness of different industries. Some of these call for far-reaching readjustments of investments and of productive forces. Some persons gain and some lose by every such change. It is observed that a reduction of tariff rates seems to have a more disturbing effect upon business than does an increase. This probably is because the industries favored by protective tariffs in America are those most fully within the circle affected by crises; whereas most of the consumers adversely affected by a rise of tariff rates are outside the commercial circles where short-time credit is common and where the rapid readjustment of investment leads to a financial crisis. It never has been convincingly shown, however, that there is any large measure of correspondence in time (not to say causal relation) between tariff revisions and crises.[13] § 15. #Rhythmic changes in weather and in crops#. A psychological movement, once started, accumulates force and momentum up to a certain point where a reaction begins. This rhythmic movement as it appears in the capitalization of enterprises is favored and magnified, we have seen, by the wide use of credit and by the constantly changing technical and physical conditions of industry. These call for constant revaluations of the sources of incomes, thus destroying customary and habitual valuations. But why should the cycle begin or end at one point of time rather than at another; and what determines the length of the cycle? Some of the new dynamic forces such as inventions and growth of population are distributed pretty regularly along the line, so that their influences are nearly equalized. But occasionally some large impulse may serve to start a swing and if this impulse is somewhat regularly repeated, it may serve to keep up the rhythmic motion. True, the lack of coincidence in the impact of various influences which occur accidentally, such as political changes, wars, and the rapid opening of new routes of transportation, would serve to hasten or to retard, perhaps for a time quite to alter, what would otherwise be the rhythm of the cycle. That there is nevertheless, a noticeable degree of regularity in the recurrence of crises may be due to the presence of one dominating factor. Alternation of good and poor harvests has always seemed to be favorable to business prosperity. In America since about 1865, farm products have constituted the larger part of our exports, so that a succession of large harvests has usually acted to stimulate exports (one of the features of a period of prosperity), to give us a larger credit balance in international trade, and to reduce the rate of exchange. Large harvests of the staple agricultural crops in America have been known to be closely related to the amount of rainfall in the three most important growing months. Recently, it has been shown that the rainfall of the Ohio Valley occurs in cycles of about eight years, and in a larger cycle of thirty-three years. The cycle of yield per acre of the nine principal crops is shown to correspond closely with the cycle of pig iron production (one of the best single indices of growing business) dated one to two years later.[14] As the cycles of rainfall and of harvests are not coincident in different countries, it will require further study to adjust to these observations the fact of the world-wide extent of the great financial crises. But a better understanding of objective conditions of this kind will give fuller meaning to the psychological interpretation of crises. § 16. #Remedies for crises#. The financial crisis must be looked upon as an economic disease which brings many evils in its train. The need is not merely to mitigate the severity of the brief period of crisis, but also to smooth out the curve of the business cycle so as to reduce periodic unemployment, the lottery element in profits, and the number of unmerited failures in business. Several measures may aid toward this end. In the past the crisis has been more severe in America than in Europe because of certain well-recognized defects which now have been largely remedied in the Federal Reserve Act.[15] The provisions whereby any one may get credit on good commercial assets should make it impossible for a crisis to degenerate into a panic. This legislation has provided springs to reduce the jolt of the change from a higher to a lower level of prices. Probably other improvements may be made in our banking laws. Competent students of the subject have urged that the payment of interest on deposits not subject to notice before withdrawal should be made unlawful, because demand deposits constitute the greatest danger at critical times. In principle this objection is sound, tho experience may show that this evil has been practically remedied by other features of the Federal Reserve Act. Moreover, bankers could, by pursuing a more conservative policy, discourage speculative methods of enterprise. The strong public disapproval of stock-market speculation on margins may some day be able to express itself effectively in ways that will not injure healthy business. Greater stability in our tariff policy would remove a constantly disturbing factor in prices, as would likewise the stabilizing of the standard of deferred payments. In the attempt to remedy the great evil of unemployment, public works of every kind might be planned and distributed in time so as to better equalize the demand for labor and materials. Finally, much better commercial statistics are needed, and for collecting them and reporting the outlook, government organization is required comparable in range and methods to the weather bureau. It cannot be expected, however, that financial crises, in the sense of general readjustments of prices downward from time to time, ever can be completely abolished. There will always be changes in general industrial conditions calling for reevaluation of the existing sources of income; and in this process there will always be a tendency to rhythmic swing like that of a river, which carries the stream of prices now on this side of the valley, now on that. But this fluctuation of general prices surely can be so greatly moderated in magnitude and in evil results as to make the word "crisis" almost a misnomer. It is toward the attainment of this irreducible minimum of uncertainty and disaster in business that efforts should be directed. [Footnote 1: On the way these affect private profits see Vol. I, pp. 340, 341 (and references there given in note), 348 ff. and 361 ff. There are thus good reasons for discussing crises in connection with profits, as well as with money and banking.] [Footnote 2: See Vol. I, pp. 51, 154, 300-302.] [Footnote 3: See below, ch. 15, sec. 5, on the tariff legislation at this time.] [Footnote 4: See ch. 8, sec. 1.] [Footnote 5: See ch. 6, sec 5.] [Footnote 6: See diagram of business failures 1890-1914, in Vol. I p. 364.] [Footnote 7: In the first annual report of the United States Commissioner of Labor is given a long catalog of theories that have been suggested, many of them quite fantastic.] [Footnote 8: See Vol. I, ch. 38, on Abstinence and Production. Believers in the glut theory usually condemn efforts to encourage frugality among the masses, calling it the "fallacy of saving."] [Footnote 9: See Vol. I, ch. 37, secs, 6 and 9.] [Footnote 10: See e.g., Vol. I, pp. 271. 335, 365 367.] [Footnote 11: See Vol. I, p. 304.] [Footnote 12: See above, ch. 6, on the standard of deferred payments.] [Footnote 13: See note on tariff legislation and business crises, end of ch. 15.] [Footnote 14: In both cases there is what is called in statistics a high degree of correlation (viz., .719 and .800), indicating that there is that percentage of probability that there is some causal relation between the two sets of figures.] [Footnote 15: See above, ch. 9, secs. 5, 6, 8.] CHAPTER 11 INSTITUTIONS FOR SAVING AND INVESTMENT § 1. The nature of saving. § 2. Economic limit of saving. § 3. Commercial bank deposits of an investment nature. § 4. Investment banking. § 5. Savings banks in the United States. § 6. Typical mutual savings banks. § 7. Postal savings plan. § 8. Advantages of the postal savings plan. § 9. Collection of savings and education in thrift. § 10. Building and loan associations. § 11. The main features. § 12. The continuous plan. § 13. The distribution of earnings. § 14. Possible developments of savings institutions. § 1. #The nature of saving.# The motives actuating the different classes of lenders may, for our present purpose, be reduced to two: to postpone the consumption of income, and to obtain a net income from wealth (or investment). Saving always is relative to a particular period and is for more or less distant ends. The child saves its pennies to go to the circus next week, the working girl saves her dimes for a new hat next spring, the earnest high school pupil saves to go to college next year, and the provident man saves for his family's future needs and for his own old age. But always, to constitute saving, there must be for the time a net result: the excess of income over consumptive outgo in that period. This is easily distinguishable from various forms of pseudo-saving of which many persons that are really spending all their incomes are very proud. Such forms are: planning to buy a particular thing and then deciding not to do so, but buying something else; finding the price less than was expected, and thereupon using this so-called saving for another purpose; spending less than some one else for a particular purpose, such as food, but off-setting this by larger outlay for another purpose, such as clothing; spending all one's own income but less than some one else with a larger income. We may define saving as the conversion, into expenditure for consumptive use, of less than one's net income within a given income period. Saving goes on in a natural economy both by accumulation of indirect agents and by elaboration so as to improve their quality.[1] It goes on to-day by the replacement of perishable by durative agents, as in replacing a wooden house by one of stone or concrete, and by producing wealth without consuming it, as in increasing the number of cattle on one's farm. But saving has come to be increasingly made in the form of money (or of monetary funds), and in this chapter we shall consider some of the ways in which this can now be done. § 2. #Economic limit of saving#. There is an economic limit to saving, as judged from the standpoint of each individual.[2] The ultimate purpose of every act of saving is the provision of future incomes, either as total sums to be used later or as new (net) incomes to be received at successive periods. The economic limit of saving in each case is dependent upon the person's present needs in relation to present income and conditions, as compared with the prospect of his future needs in relation to his future income and conditions. Each free economic subject must form a judgment and make his choice as best he can and in the light of experience. There is no absolute and infallible standard of judgment that can be applied by outsiders to each case. Yet there is occasion to deplore the improvidence that is fostered and that prevails, especially among those receiving their incomes in the form of wage or salary. Considered with reference to the possible maximum of welfare of the individuals themselves, the apportionment of their incomes in time is frequently woful. It is uneconomic for families of small income to save through buying less food than is needed to keep them in health; but it is likewise uneconomic to spend the income, when work is plentiful and wages good, for expensive foods having little nutriment and then, for lack of savings, to go badly underfed when work is slack and wages are small. There is for each class of circumstances a golden mean of saving. The saving habit may develop to irrational excess and become miserliness, but this happens rarely compared with the many cases where men in the period of their largest earnings spend up to the limit on a gay life and make no provision for any of the mischances of life--business reverses, loss of employment, accidents, temporary sickness, permanent invalidity, or unprovided old age. Despite the development of late of new agencies and opportunities for saving there is need of doing more toward popular education in thrift.[3] § 3. #Commercial bank deposits of an investment nature.# If a commercial bank pays no interest on demand deposits there is no motive for the depositor to keep a balance larger than he needs as current purchasing power. When his bank account increases beyond that point, it becomes available for a more or less lasting investment to yield financial income. If the sum is small or if the owner is at all uncertain as to his plans or if he is not in a position to find another attractive form of investment, the offer by the bank of a small rate of interest on special time deposits (2 to 3 per cent is not an unusual rate in such cases) will suffice to cause him to leave such funds in the bank. Since about 1900 the practice has been greatly extended of paying interest even on "current balances" of regular checking accounts (demand deposits). If the new 5 per cent rule[4] as to reserves against time deposits operates to cause commercial banks generally to pay a rate ranging from 2-1/2 to 3-1/2 per cent on time deposits, their amount will doubtless increase greatly. But still, in the future as in the past, those depositors having funds that can be invested for considerable periods will seek a higher rate of interest than can be obtained from commercial banks. In their loaning function the "commercial" banks (as the adjective indicates) serve mainly the special needs of the _commercial_ elements of the community--business men borrowing for short terms to carry out particular transactions. Loans made on short-time commercial paper (quick assets) are very suitable to the needs of a bank that has its liabilities largely in the form of demand deposits. Time deposits can be more safely loaned on the security of real estate and for longer periods. Despite their limitations in this respect, the commercial banks must be recognized as of growing importance in the work of encouraging and collecting small savings, which in many cases are better invested in other ways. In 1916, the centenary of the beginning of savings banks in this country, a nation-wide propaganda was undertaken by the American Bankers' Association for the encouragement of savings. § 4. #Investment banking#. Enormous amounts of securities issued by governments or by corporations (railroad or industrial) are now on the market and to be bought conveniently by private investors. Through special bond houses some bonds are to be had in denominations as small as $100 and $500. The regular brokers on the stock exchanges buy and sell, for a small commission, the regular bonds and investment stocks. Several large statistical and financial expert agencies[5] in return for an annual subscription, offer advice to investors regarding general market conditions and special securities. For a large number of investors the personal examination and selection of sound securities is too difficult a task. To serve their needs many bonds and trust companies have of late developed special departments for investment banking. Through these agencies the banks are constantly placing as relatively permanent investments securities which they have bought or have aided "to float" or which they handle only as commission agents. In any case the real investment banker is bringing to his task special training and a high sense of his professional obligations, and is employing the services of statisticians, financial experts, and of practical engineers to determine exactly the fundamental conditions of each investment. Investment banking promises to increase steadily in amount and importance. § 5. #Savings banks in the United States.# For the increasing number of wage-earners, salaried employees, and persons following professions, investment as active capitalists is impossible.[6] Their savings must take the form of passive investments. But there are few good opportunities for lending money in small amounts, without great risk, and the requirement of skill, time, and labor to look after the loans and to collect the interest is prohibitive to a small lender. To provide a place where small sums could be kept with safety and so as to yield a moderate rate of income, the first modern savings bank in the United States was instituted in New York in 1816 after a plan already developed in England. In form these banks are mutual, having no capital stock on which dividends are to be paid. The boards of trustees are self-perpetuating and receive only fees for attending meetings. In their legal aspect these banks have a philanthropic character. Their investments are limited by law to specified, conservative classes of securities and loans on real estate. The total increase from investments is, after paying the expenses of operation and setting aside a surplus, distributable to the depositors at regular periods. In the United States the number of such institutions reported in 1914 was 2100.[7] They have over 11,000,000 depositors, deposits to the amount of $5,000,000,000, an average deposit of $444 per depositor, or of $50 per capita of the whole population. These figures are very unequally distributed geographically, the divisions ranking as to total deposits in the following order: the Eastern Middle, New England, Middle Western, Pacific, Southern, and Western divisions. The first two of these groups of states have about 75 per cent of all the deposits, the Southern states hardly 2 per cent, and the Western (North Dakota to Oklahoma) only 1/4 of 1 per cent. § 6. #Typical mutual savings banks#. About one third of these banks are on the mutual plan, having no capital stock (most of them in the East) and these contain about four fifths of all the deposits. The stock savings banks have individual deposits of over a billion dollars, and have outstanding capital stock to the amount of about $90,000,000 (about 9 per cent of their deposits). These stock savings banks to a much greater extent than do the mutual banks transact also a commercial business. The banks on the mutual plan are therefore the most important, the typical savings banks. The average rate of interest they paid to depositors in 1914 was 3.86 per cent. About one half of their resources are invested in loans, mostly to small borrowers on the security of real estate, and most of the remainder consists of bonds and other securities of the safer kinds. Savings banks are subject to the supervision and inspection of the banking departments in the several states, a fact that exerts a salutary effect though not insuring absolutely against either mistaken judgment or dishonesty on the part of the bank officials.[8] Savings banks seek to keep invested as large a part as possible of their assets, keeping only in ready cash enough to meet a possible temporary excess of withdrawals over deposits. In contrast with the policy of commercial banks with their demand deposits, the sound policy for savings banks is to reserve the right to require notice of intention to withdraw. The period of such notice varies from a minimum of ten days to a maximum of about sixty days. In ordinary circumstances it is not needful or usual for a bank to exercise this right, but it is a needful safeguard in times of commercial crises. This requirement of notice is greatly to the advantage of depositors collectively and thus of the community as a whole. It is not an undue limitation of the rights of the individual depositor. It is unfair for the individual, in a period of financial stress, to seek his own safety in a manner which is impossible for all, and thus to endanger the interests of all.[9] The mutual savings banks in 1914 had (on the average) but six tenths of a cent of actual cash (and "checks and cash items") in their tills for every dollar of deposits, but in addition they had for every dollar of deposits four cents due on demand from state and national (commercial) banks. In the aggregate these demand deposits amounted to the large sum of $172,000,000, a large part of which bore a low rate of interest. The depositors in savings banks have a direct legal claim on the bank as a corporation. The bank's only means of payment are its assets, consisting of claims upon the owners of such wealth as houses, factories, railroads, electric light plants, good roads, and school buildings. Thus virtually the depositors have by their savings made possible the building and equipping of these actual forms of wealth, and have an equitable claim upon the usance of them, which claim is met by the payment of interest and dividends to the savings banks. Viewed in this way the great social importance of the savings function appears, and the importance of developing the savings institutions. § 7. #Postal savings plan.# In many countries of the world the governments have not only authorized private, corporate, and trustee savings banks, but have provided public agencies where it is possible for the citizens to deposit small amounts. Thus municipal, and what are called communal, savings banks are operated by many European cities; but the most effective and widely used agencies for the purpose are the national post-offices. Postal savings banks, or postal savings systems as divisions of the postal service, are now found in all the larger countries of the world, and in many smaller ones. The United States of America was almost the last civilized country to establish such a system, which was authorized by act of Congress in 1910, and went into operation in a few designated cities in January, 1911. The number of offices at which it was in operation was rapidly increased, and the number in 1914 was about 10,000. Any one ten years of age may become a depositor. Deposit must be made always in multiples of one dollar. Not more than $100 will be accepted for deposit in any one calendar month, and nothing after the total balance to the depositor's credit is as much as $1000, exclusive of accumulated interest. However, amounts less than one dollar may be saved for deposit by purchasing a ten-cent postal savings card and affixing ten-cent postal savings stamps until the nine blank spaces are filled. Such a filled card will be accepted as a deposit of one dollar either in opening an account or in adding to an existing account. Deposits are not entered in a depositor's book, as is the usual practice of savings banks, but are evidenced by certificates issued in fixed denominations of $1, $2, $5, $10, $20, $50, and $100. These bear interest, from the first day of the month next following that in which the deposit is made, at the rate of 2 per cent per annum for a whole year (interest is not paid for any fraction of a year). Interest is not compounded, unless the depositor withdraws the interest and redeposits it, but simple interest continues to accrue annually on a certificate so long as it is outstanding, without limitation as to time. By the end of the first year (1911) of operation the savings system held a balance to the credit of depositors of nearly $11,000,000; in the next year (1912) there was added to this about $17,000,000; in the next year (1913) about $12,000,000; and this average rate of one million dollars a month net addition to deposits has continued to the present (1916). These funds are deposited in banks belonging to the federal reserve system, which must deposit with the Treasurer of the United States designated kinds of bonds (national, state, and municipal) as security and pay interest at the rate of 2-1/2 per cent on the amount of the deposits. The one-half per cent difference between this rate and that paid to individuals goes far toward paying the expense of operating the system. Provision is made for the issue of postal savings bonds in exchange for certificates issued in sums of $20 or multiples thereof up to $500. These bonds bear interest at the rate of 2-1/2 per cent payable in semi-annual instalments, January 1 and July 1. These bonds are not counted as a part of the $500 maximum of deposits allowed to one person, and there is no limit to the amount of bonds which may be acquired by one depositor. Postal savings bonds are exempt from all kinds of taxes, federal and local. These bonds are issued only on the surrender of postal savings deposits, but may be sold by the owner at any time. Three years after the law went into effect, there were $4,635,820 of postal savings bonds outstanding. § 8. #Advantages of the postal savings plan.# As compared with corporate savings banks the postal savings system has certain advantages. (a) It protects the small depositors from the danger of dishonest private bankers who have preyed upon the immigrants in the larger cities. To foreigners, accustomed to the postal savings plan in their home countries, it is especially useful. (b) It gives to every depositor the greatest safety possible, as "the faith of the United States is solemnly pledged" for the repayment of depositors. (c) It brings a savings institution to many a small town and rural place formerly entirely lacking in facilities for small depositors. The benefit of this has not immediately appeared to be great, but may in time prove to be. (d) It pays interest from the first of the month following the date of deposit whereas the usual practice of savings and commercial banks is to pay only from the beginning of the quarter year or half year. (e) It provides for the exchange of deposits for bonds bearing a higher rate of interest--a unique feature greatly simplifying for the small saver the process of buying bonds for more lasting investment. In some respects, however, the postal savings system falls short of the advantages of the regular savings banks. These usually accept for deposit as small an amount as ten cents; they pay interest either quarterly or semi-annually; they pay on the average (at present) almost double the rate of interest, and the interest is credited to the depositor's account at stated intervals and automatically compounded. The postal savings system, as the law now stands, may be looked upon, therefore, as supplementing the regular savings banks rather than competing with them. § 9. #Collection of savings and education in thrift.# Small savings have been encouraged in many places by penny provident funds, dime savings banks, and school savings funds, which have been conducted at public schools, social settlements, and factories, by school officers and by charitable and educational societies acting through canvassers. These plans all call for much personal effort and cost, which must be provided by volunteer services and private gifts. These plans being undertaken mainly as a means of education in thrift and in the related moralities, their results are not to be measured merely by the magnitude of the sums collected. They are not rivals of the ordinary savings banks, but rather auxiliary methods of encouraging their use. The funds collected by these agencies are usually deposited in local savings banks, and depositors are encouraged to open individual accounts there, whenever they have considerable sums saved. In Germany the public schools have been furnished with automatic stamp vending machines, from which savings stamps in as small denominations as ten pfennigs (2-1/2 cents) may be had by dropping a coin into a slot.[10] This method could be used very effectively in connection either with the postal savings system or with a local savings bank. It ought to be made easy to deposit funds at every school house, at every post-office, at every factory counter on pay day, and wherever people pass in numbers. Allurements to foolish expenditures meet old and young at every turn; to spend the dime is made all too easy, whereas to save it and deposit it in a safe place too often calls for wasteful and discouraging efforts from the person of small means. § 10. #Building and loan associations.# Building and loan association is the name applied to a coöperative organization of persons with the purpose of collecting regularly from members small sums which are loaned to some members for the purpose of building or paying for homes.[11] The first association of this type was organized in Frankford, Pennsylvania, in 1831. It and others of its kind have made Philadelphia notable among all the larger cities as "the city of homes." The number of such associations has almost steadily increased in the United States. Pennsylvania continues to rank first in respect to amount of total assets, with Ohio a close second, and New Jersey third (the ranking first in proportion to population). Associations of this type have been hardly second in importance in America to the savings banks as institutions for savings for persons of moderate means. The number of their members (nearly 3,000,000) is about one-fourth of that of savings bank depositors, and the amount of their assets (1-1/4 billion dollars) is about one-fourth that of the reported savings banks. But their relative influence in educating and encouraging to thrift is doubtless much greater than these figures indicate. There are more than three times as many of them as of reported savings banks, their management is much more democratic than is that of the banks, and many of their members attend and participate in the meetings and understand how they are conducted. Moreover, the savings made through these associations are constantly passing on into the houses that are fully paid for, and which continue to yield their incomes to their owners. Each year these associations collect from their members as dues and in repayment of loans (made to build houses) the sum of over half a billion dollars, which is twice as much as the annual increase in the deposits of the reported savings banks.[12] § 11. #The main features.# A building and loan association is organized by a group of persons in a neighborhood, uniting to form a corporation under the laws of the state, every member to subscribe for one or more shares. The officers elected all serve without pay excepting the secretary-treasurer, who receives a small fee for his services. All official meetings are open to all members. The shares vary in denomination from $25 to $200; the larger figure being common under the serial plan and $100 being usual under the continuous (or permanent) plan, described below. Whenever there is a sufficient sum it is loaned to one of the members for the purpose of building a house. The borrower must subscribe for shares to the par value of his loan. The receipts of the association are of several kinds. (a) Interest is received from members, usually at the rate of 6 per cent, and from banks at a lower rate on the small working cash balances kept on deposit. Usually the loans made are large enough to cover a large proportion of the cost of the house, but the land on which the house stands must be free from all incumbrance, and its value gives a margin of safety to the association. Then by the method of payment of dues the debt is, from the first month, steadily reduced and the security for the loan therefore grows constantly better. (b) Premiums are collected in addition, sometimes in the form of a higher rate of interest, but the practice of charging premiums has been mostly abandoned and the total amount of premiums now constitutes less than 1 per cent of all payments from members. (c) Fines for delinquency also are less commonly imposed now and constitute a small fraction of 1 per cent of total payments. (d) Deductions are made on account of withdrawal before the maturity of the shares; under these circumstances it is usual to pay a portion but not all of the accumulated profits, sometimes a proportion increasing as the shares approach maturity. Different plans have been and still are followed in respect to the method of issuing the shares. Under the _terminating plan_ all the shares begin and mature at the same time (for all members that continue to the end). Whereupon the association dissolves or starts anew. The chief difficulty in this plan is that the association has too few funds to loan at the beginning of its career, and a surplus of unloanable funds as it nears the maturity of the series. It is therefore necessary to encourage or to compel the withdrawal of non-borrowing members on the payment of estimated profits to date. The better to remedy this difficulty the _serial plan_ was devised, by which new series of stock are issued at intervals--yearly, half-yearly, quarterly, and even oftener. § 12. #The continuous plan.# A further development is the continuous plan (usually called the _permanent_ or the Dayton plan), by which much greater flexibility is attained in the organization. Shares of stock may be subscribed for at any time, each man's separate subscription of shares being treated as a separate series, and maturing each at its own time. There is thus, after an association has been for some time in operation, a continuous stream of new members (or new subscriptions) flowing into the association, and a continuous outflow of shareholders whose shares have matured. The maturing shares of borrowing members discharge their indebtedness to the association; the maturing shares of non-borrowing members are paid in money, or may (if the association has use for the funds) be left as an interest-bearing loan. Additional funds are obtained when needed by issuing paid-up stock to non-borrowers. This is convenient at the beginning of an association and when the movement in building is more active than usual. But if an association has funds that cannot be loaned, outstanding paid-up stock may be called in. In practice a large part of the paid-up stock as well as of the running stock is subscribed for and held not by large capitalists but by persons of small means, especially "the more frugal element in the working classes." Non-borrowing members desiring to withdraw may do so at any time under certain conditions; but to safeguard the association, the laws usually require that thirty days' notice of intention to withdraw shall be given, that not more than one half of the funds received in any one month shall be paid on withdrawals, and that withdrawing shareholders shall be paid in the order of the notices of intention to withdraw. The most intelligent and prudent workers were formerly deterred from subscribing by the fear that sickness, unemployment, or other mishap might make it impossible to keep up regular payments. Now, however, fines for late payment have been almost entirely done away with. On the other hand, extra payments may be made at any time by borrowing members, to hasten the date when their shares mature and their debt be discharged. These privileges are possible because of the method of distributing earnings which will now be described. § 13. #The distribution of earnings.# Every six months is ascertained the amount of the gross earnings which, under this plan, consist almost entirely of interest paid on loans. From this amount are deducted expenses (and in some states 5 per cent of the total is placed in a "loss fund" to meet possible losses) and the rest is divided in proportion to the amount standing to the credit of each member, being credited to the account of running stock and paid in cash to holders of paid-up stock. The payment of dues is correspondingly simple. The dues at twenty-five cents a week amount to $13 a year per share of $100. This is the whole bill; there are no extras. The interest at 6 per cent (the usual rate) is $6, and the rest, $7, is credited upon the stock. Thus at the end of the first six months the member has $3.50 to his credit, and is entitled to his share of the net earnings on that amount. Thus his share of the earnings is steadily increased by compound interest, and if he keeps up his regular payments the shares mature in about sixteen years. This means in most cases that a prudent tenant can become the owner of a house in sixteen years while paying no more than the rent would be. As the active investor he becomes his own rent collector and uses the house with less need of repairs, thus dispensing with services and costs which are included in contractual rents.[13] These associations are properly made subject to supervision and examination by state officials, in the manner of that exercised over banks. They have been favored by exempting the shares of members and the mortgages held by the associations from all state and municipal taxation. As the houses built or paid for are taxed, this is of course but just, but it is an exception to the rule of the illogical general property tax.[14] § 14. #Possible developments of savings institutions.# The social importance of increasing and improving the agencies of savings for the masses is being more fully recognized, but much more might be done in these directions. Some possible changes have been suggested above, and a few words more may be added. Probably the greatest developments in the near future will be through the savings departments of commercial banks (favored by the reserve rules of the Federal Reserve Act) rather than by the increase in the number of special banks for savings. The initial expense and risk of starting a savings bank is considerable, and outside of cities of some size this is prohibitive. Whereas a savings department, with its funds and reserves separated, can be easily and cheaply operated in connection with a general bank. It is much to be desired, however, that a larger measure of popular coöperation might be made possible to the depositors, both for its educational value and to reduce the real evil of the autocratic or the plutocratic centralization of the money power in the small communities. Savings banks usually limit the amount of an account to $3000. It is desirable that depositors should be able easily to convert their savings-bank deposits over certain amounts into good bonds, bearing a higher rate of interest (after the method of the issue of postal savings bonds). There is need of a central market in each community where such bonds can be bought and sold at any time; and the savings banks might easily serve to buy and sell for their customers in this way in the larger bond market. This would be of benefit also to the states and municipalities which issue bonds for such purposes as schools, roads, and public utilities, by creating a more open and regular market to small investors than now is provided for such securities. This might somewhat reduce the rate of interest and there would be a gain divided between taxpayers and lenders. The general plan and principles of local building and loan associations might well be extended to groups of rural coöperators, enabling them to make loans to their members; and to groups of small investors, permitting them to hold real estate mortgages and bonds and stocks of corporations, free from taxation other than that paid on the wealth itself. Members of such organizations could get a higher income on their investments than a savings bank could pay, and with greater security than if each attempted to save and invest by himself.[15] Savings institutions are necessarily also lending institutions. In this chapter they have been looked at mainly from the saver's (the lender's) standpoint, though their service to the borrower is of coördinate importance. In the case of building and loan associations this feature is most apparent. Later, the problem of the agricultural borrower will receive further consideration. [Footnote 1: See Vol. I, chs. 9 and 10.] [Footnote 2: See Vol. I, pp. 285-290 for the analysis of saving from the individual standpoint; and pp. 482-499 for its relation to general economic conditions.] [Footnote 3: See Vol. I, p. 484.] [Footnote 4: See above, ch. 9, sec. 7.] [Footnote 5: E.g., Babson Statistical Organization, Brookmire Economic Service, Moody Manual Co., Moody Corporation Service.] [Footnote 6: See Vol. I, p. 318.] [Footnote 7: Report of the Comptroller of the Currency. Not all of these are mutual. Statistics, moreover, include in some cases (e.g., California) the savings deposits of commercial banks but not the number of such banks, and in other cases (Michigan) some banks that do chiefly a commercial business. The line of demarcation between savings banks and savings departments of commercial banks cannot be sharply drawn. The Comptroller of the Currency reported in 1914 in a different form the amount of savings deposits and of time certificates of deposits in _all_ kinds of banks as the enormous sum of $8,675,000,000.] [Footnote 8: In the last twenty-three years, on the average, seven savings banks a year have failed, the annual excess of liabilities over assets being about $200,000, or about $30,000 for each failing bank. The total loss has been about 1/5 of 1 per cent of total deposits.] [Footnote 9: The Federal Reserve Act, by making it possible for loans to be had at any time (through member banks) on good security, should reduce the danger of runs on savings banks.] [Footnote 10: The author saw in operation a new machine of this kind which had been installed in a German public school as early as 1910.] [Footnote 11: See Vol. I, pp. 290, 297-298, 484, and 486.] [Footnote 12: The figures here given and the description of methods apply to the "local" building and loan associations. The success of this kind led to the organization of other associations which took the name "National" building and loan associations, to carry on a business in a larger field. The number of these has always been comparatively small, and their operation is less simple, democratic, and economical than the local associations. They have borne more of the nature of ordinary profit-making enterprises. They should not be confused with the local associations.] [Footnote 13: On these economies, see Vol. I, p. 298.] [Footnote 14: See ch. 17, sec. 4.] [Footnote 15: Since this was written the Federal Rural Credits Act has been passed, embodying the main idea here described.] CHAPTER 12 PRINCIPLES OF INSURANCE § 1. Chance, unavoidable and average. § 2. Uneconomic character of gambling. § 3. Borderland of gambling. § 4. Insurance: definition and kinds. § 5. Insurance viewed as a wager. § 6. Insurance as mutual protection. § 7. Conditions of sound insurance. § 8. Purpose of life insurance. § 9. Assessment plan. § 10. The reserve plan. § 11. The mortality table. § 12. The single premium for any term. § 13. Level annual premiums and reserves. § 14. Different features of policies. § 15. Insurance assets and investments as savings. § 16. Excessive costs of insurance operation. § 1. #Chance, unavoidable and average.# Every action and every movement in life has in it some element of chance. There are what may be called natural chances, arising from the uncertainties of the seasons, or from rainfall, heat, hail, storm, flood, lightning, or land-slides. Such chances must be taken both by the small enterpriser and by the large. In earlier conditions of society natural chance dominated industry, and it still remains and must always remain important. There is the chance of unexpected political events, such as war, riot, and legislation on money, tariffs, credit, and business relations. These things are caused, it is true, by the action of men, but it is a collective action out of the control of the individual. There is the chance of human carelessness causing fire, explosions, and wrecks on misplaced switches. There is the chance of physical or mental collapse, as the sudden insanity or the sudden death of one performing responsible duties. There is the chance of sickness that often wrecks the plans and the fortunes of a whole family. There is the chance of economic alterations in methods of production and of transportation, in fashions and demand in this direction or for those materials. Some of these chances are more connected with money-lending, others with manufacturing, some with agriculture, others with commerce; but all are present in some degree in every industry. Some events are unique in nature and seem unlikely ever to occur again; others are of a kind occurring so irregularly that no reasonable prediction can be made as to the time and frequency of their occurrences. Still others occur frequently and to many different persons; but no individual can tell when and how they will occur to him. A general average of chances in different lines of business causes some to be called safe, others extra-hazardous. Chance has its favorable as well as its unfavorable aspects. Chances are averaged and added algebraically to the profit or loss in an industry, for an extra-hazardous enterprise must in general afford a higher average of profit in order to induce men to engage in it. It is folly to take a risk without ascertaining its degree so far as general experience enables one to choose. But inasmuch and in so far as the gains and losses fall unequally upon different individuals, income depends upon chance. § 2. #Uneconomic character of gambling.# This prevalence of chance sometimes tempts men to say that business is "a gamble." But a distinction in principle must be made between gambling and legitimate risk-taking. The chances enumerated above are not sought, but avoided as far as possible; yet they must be borne by some one if productive enterprise is to continue, and the burden must somehow be distributed throughout the community. Gambling is, however, a kind of risk-taking which has a very different economic and moral quality. Gambling creates the hazard, making the gain or loss of income depend on an event that is not a necessary part of productive enterprise. Typical gambling is the transfer of wealth on the outcome of events absolutely unpredictable, so far as the two gamblers are concerned. Examples are the shaking of unloaded dice or the honest dealing of a pack of cards, and the betting on prices in so-called "bucket-shops" by persons having no connection with the market of real things, and seeking to get something for nothing as a result of mere chance. Cheating is not a necessary mark of gambling, altho the cruder forms of dishonesty, such as the loading of dice or the collusion of horse-owners or of horse-jockeys to deceive the betting public, are so common that they seem often to be an essential feature. Gamblers recognize fair as opposed to unfair methods. Fair gambling is a kind of minor morality within the immoral field of gambling, like the honor found among thieves. The chance-taking in gambling has no useful purpose or result outside itself. Betting and gambling do not produce wealth, but merely shift the ownership of existing wealth. The gamblers constitute themselves a little fictitious economic circle, and they transfer gains and losses on the turn of events that have no practical objective result within their circle except to determine the direction of the transfer. Even when fairest, gambling must, in its average results, be uneconomic. In any economic trade each trader gains by getting goods that are, on the marginal principle, to him more valuable than the other kinds of goods he gives up.[1] But in gambling the winner gets all, the loser gets nothing. If two men of like incomes gamble the additional desires that the winner is able to gratify are (by the principle of decreasing gratification) less in amount than the desires which the loser must forego. As a result the loser is often depressed and seriously injured by the loss of his income, the winner makes reckless and extravagant use of his winnings. Easy come, easy go, is the rule of gamblers. Moreover, gambling reduces the amount of wealth by relaxing the motives of economic activity, diverting energy from productive enterprise, tempting men into dishonesty to offset their losses, and leading them into speculation and embezzlement. § 3. #Borderland of gambling.# Ranging between the extremes of unavoidable risk-taking and of gambling are a number of cases of a mixed nature. In nearly all wagers, judgment in some degree influences the choice of sides. One man bets on a horse whose pedigree and performances he knows thoroly; another judges by the horse's appearance as it comes upon the track. The professional bookmakers have the latest possible and most exact information on which to base their bids. In the bets made on one's own prowess, as on speed in running, the chance-taking is still on the uneconomic side of the borderland, certainly if the running is for the sake of the wager, not for pleasure or for a useful purpose. A premium won by a runner for speed in delivering a message of economic importance presents an essential contrast to the winnings in a wager. Finally, the very borderland of difficulty is reached in the purchase and sale of goods in the market with a view of profiting by chance changes in price. The purchasing and holding of land, lumber, grain, cattle, and other tangible and useful things, that need to be stored, held for buyers, or taken to market, must be judged liberally. The quality of gambling depends somewhat on the motive as well as on the ability of the trader. The enterpriser dealing with real wealth, and fitted to take the risks both because of his resources and of his exceptional knowledge, needs the motive of gain in such cases, and in a sense can be said to earn socially what he gets. The motive of the uninformed must be a blind trust in luck, and a hope to gain from a rise in prices which they are quite unable to foresee or to explain. § 4. #Insurance: definition and kinds.# The large element of luck in industry due to unavoidable chances has something of the same evil character as gambling. It brings unearned prizes to some and to others unmerited losses. It must therefore be a benefit to the community, if this element of unavoidable chance cannot be reduced as a whole, at least to regularize it and make it exactly calculable for any individual. In this way each may be encouraged by the more certain prospect of receiving a reward proportionate to his efforts and abilities. This desirable condition has in many respects been accomplished by means of insurance. _Insurance_ is the act of providing a guarantee of indemnity against a financial loss that will result if an event of a specified kind occurs. The person seeking some surety against the possible loss is the _insured_; the person contracting to indemnify against the loss is the _insurer_; the written contract of insurance is the _policy_; and the price paid by the insured in fulfillment of his part of the contract is the _premium_; the amount paid when a loss has been incurred is the _indemnity_; and the person to whom the indemnity is paid is the _beneficiary_ (who may or may not be the insured). The insurance with which we are here concerned is that which gives financial indemnity. This is given for loss of expected net income, when by chance either receipts are less or costs are more than average. The two main classes as regards kinds of loss are property insurance and personal insurance. _Property insurance_ is that which indemnifies for loss of one's possession in specified ways, such as by fire, by the elements at sea (marine), by hail, lightning, or cyclone, by death (of valuable animals), by robbery, and by breakage (of window glass). _Personal insurance_ is that which indemnifies the beneficiary for loss of income as the result of various happenings to persons, the chief being death, accident, sickness, invalidity, old age, and unemployment. The principle of insurance is being constantly extended to new subjects[2] and it is capable of further development in a variety of directions. § 5. #Insurance viewed as a wager.# Insurance, without question a highly useful thing, appears, paradoxically, to be in its outer form a bet. The large merchant with many vessels used in many kinds of business had in the days before marine insurance an advantage in distributing his losses over a number of voyages. Antonio, the wealthy merchant, is made thus to express his security: "My ventures are not in one bottom trusted Nor to one place; nor is my whole estate Upon the fortune of the present year. Therefore my merchandise makes me not sad." In its early form marine insurance was the attempt of smaller ship-owners to distribute their losses (as could the wealthy merchant) over a number of undertakings, lucky and unlucky. It became customary for a ship-owner to bet with a wealthy man that the ship would not return. If it did come back, the owner could afford to pay the bet; if it did not, he won his bet and thus recovered a part of his loss. Gradually there came about a specialization of risk-taking by the men most able to bear it. They could tell by experience about what was the degree of uncertainty, and could lay their wagers accordingly. When several insurers were in the same business, competition forced them to insure the vessel and cargo of the ordinary trader for something near the percentage of risk involved. The insurance thus tended to become a mutual protection to the ship-owners; what had to be paid in premiums to cover risk came to be counted as part of the cost of carrying on that business. Every legitimate form of insurance exhibits substantially the same characteristics; it reduces loss at the margin where it is felt most keenly. The difference between insurance and gambling, thus, lies primarily in the purpose of insurance, which is not to increase artificially the risk that any individual runs, but to neutralize or offset an already existing chance. The insurance bet is what is called a "hedge." The difference lies further in the collective method of insurance, which combines the chances scattered among a number of persons. Insurance does not increase the total of risks and of losses, but merely combines, averages, and distributes them equally among all the insured. This eliminates the chance element to the individual by converting it into a regular cost. § 6. #Insurance as mutual protection.# Modern insurance is conducted either by enterprisers for profit, or by mutual companies; but in any case in large measure the losses in insurance are mutually shared, as the premiums (plus interest earned) equal the total losses plus operating expenses and profit, if any is made. Each insured gets a contract of indemnity for the payment of a sum that will help cover the losses of others. Such an exchange is mutually beneficial. The premium comes from marginal income; the loss if it occurs would fall upon the parts of income having higher value to the insured. The less urgent needs of the present are sacrificed in order to protect the income that gratifies the more urgent needs of the future. In insurance each party gives a smaller value for a greater; each makes a gain. The greater security in business stimulates effort. This effect is quite the opposite of that of gambling. § 7. #Conditions of sound insurance.# To be economically sound, insurance must have to do with real productive agents, and with a group of occurrences which, as a whole, are approximately ascertainable in advance--however irregularly they may fall upon individuals. The beneficiary must have an _incurable interest_ in the property or person insured; that is, the beneficiary must actually suffer a loss by the occurrence insured against. Finally, the amount of the indemnity must not be greater than the loss incurred. Some of the greatest difficulties in insurance arise from the absence of these essential conditions. When there is no insurable interest or when the indemnity is greater than the loss that may be incurred, the beneficiary may and sometimes does find it to his interest to bring about the socially injurious event insured against. He artificially increases the loss against which insurance was taken. When the insured sets fire to his own buildings, he makes an illegitimate use of insurance. Constant efforts are made by insurance companies to guard against these "moral risks," the least calculable of any. Merchants whose stocks have been mysteriously burned two or three times find difficulty in getting further insurance. Formerly insurance was not paid in case of death by suicide; but now usually no such limitation is contained in a policy after a period of one or more years. As men rarely plan suicide years in advance, death by one's own hand some years after taking life insurance is regarded as coming under the ordinary rules of chance. Yet it is to be feared that this liberal policy serves as a temptation at times to crime and to self-destruction. § 8. #Purpose of life insurance.# Property insurance is mainly an aspect of enterpriser's cost, whereas personal insurance is more closely connected with the object of saving.[3] We shall in the rest of this chapter limit the discussion to the one most important form of personal insurance, that called life insurance (sometimes called survivors' insurance). Life insurance is that form of insurance in which partial indemnity is provided for survivors against the financial loss incurred by the death of the insured. Usually the insured is the breadwinner of the family and the beneficiary is a member of his family, but in an increasing number of cases the beneficiary is the surviving business partner, a creditor, or a business corporation with an insurable interest in the life of one of its employees. Life insurance has been much used by persons mainly dependent on labor incomes[4] rather than on incomes from capital, by those receiving salaries, professional fees, and by active business men. It has of late been extended rapidly, as "industrial insurance" to wage earners, in policies never exceeding $1000, but averaging very much less, and often being for no more than enough to pay funeral expenses. The premiums on such policies are usually collected weekly and by agents making personal visits. The cost to the insured is, therefore, necessarily very high in proportion to the amount of insurance. § 9. #Assessment plan.# Life insurance plans may be distinguished, with reference to the time and method of collecting the premiums, as assessment and reserve insurance. In the simple form of assessment insurance originally the losses were paid by contributions taken after the losses occurred, each member paying an equal share without regard to age. In a slightly improved plan the assessments are made at the beginning of the year, based upon the expected mortality for the year. The sum just sufficient for this purpose (omitting expenses) is called the _natural premium_. The cost of such insurance is closely related to the average age of the members. The rates are very low in a new organization with a membership of young men; but each year the average age, and therefore the mortality of the membership, rises and the annual assessments must be increased. By constant additions of young members, this rise of cost may be retarded. But when these members grow older, a still larger addition of young members is required to keep down the average, and the mathematically inevitable result is an increasing rate of assessment. This keeps young men from entering, and finally results in failure or in some form of "reorganization" that drives out the older members. The assessment plan carries with it the seeds of its own decay. To meet these difficulties in part, various modifications of the flat-rate assessment plan are employed, such as classification by age at entry, so that each member pays a flat-rate according to age at entry; or large initiation fees at entry which form a temporary "reserve" to offset increasing mortality in late years. Finally, the policies may be issued on the natural premium plan, by which the members of each age class pay exactly what the insurance costs for the year. Under this plan the company will remain solvent, but with this and all the other expedients the surviving members are forced to drop the insurance in later years. Assessment insurance is sold by business companies organized for profit, by fraternal orders, and by various types of mutual organizations. The business companies have had a dismal history of hardship to surviving members and of eventual failure. They are disappearing under the influence of hostile legislation resulting from a better popular knowledge of insurance principles. The fraternal orders combine insurance with other objects of a benevolent and social character. With good management, a favorable death rate, and very low expenses, some of them have provided protection at very low rates for many years. Others have failed with disappointment and disaster to the older members. Still others are struggling with difficulties that presage dissolution. Many now have some form of reserve accumulations, and some have so improved their methods that they closely resemble reserve companies. The assets of all the assessment companies are now $1.37 per $100 of insurance in force, while the legal reserve companies have $22.66. The assessment companies now get 10 per cent of their total incomes from their funded investments, as against 24 per cent for the old-line companies. Even with the favorable conditions under which the fraternal orders conduct their insurance business they are doomed to failure unless they adopt rates and policies based upon adequate reserve accumulations. Many thousands of present members are paying for insurance at rates which will not suffice to meet the future losses. The assessment plan fails to eliminate the one great risk, that of leaving the survivors without insurance in advancing years. § 10. # The reserve plan.# The reserve plan, if honestly administered, gives complete protection against the difficulties just indicated. The essential purpose of the reserve plan is to collect during the earlier years of the insurance policy when the mortality is less, a sum larger than is needed to meet the current losses. This sum, the reserve, is kept invested and accumulating an income, sufficient to offset the increase in losses as years advance. In reserve insurance, therefore, the premium never increases from year to year, altho it may be so arranged as to diminish or to cease entirely sometime within the term for which the insurance continues. The premium must always be fixed in advance. The calculations for determining the premiums on different kinds of insurance policies are many and complex, but all conform to a few general principles. The three factors assumed are an average mortality table, a rate of interest (or yield on investments), and an expense rate in proportion to the premiums or outstanding insurance. Insurance on the reserve plan is often called "scientific insurance" because, upon the basis of these assumptions resulting from experience, it makes exact mathematical calculations of the premiums and reserves needed for insurance of any particular kind in respect to age of insured, number of payments, method of paying the beneficiary, and any other conditions. The premium thus fixed is, however, only a maximum, and usually is reduced as the result of conditions more favorable than those assumed. § 11. #The mortality table.# When large numbers of men are taken as a group, a certain proportion of those at each age may be expected to die. A mortality table starts with a group of persons, as 100,000, at a given age, as 10 years, and shows the number who die and the number who survive at each year of age until all are dead. The table most widely used in the United States is the American Experience Table of Mortality, constructed by Sheppard Homans in 1868. The figures of this table, at different years, are given below: Age Number Living Deaths each year Death rate per 1,000 10 100,000 749 7.49 20 92,637 723 7.80 30 84,441 720 8.43 35 81,822 732 8.95 40 78,106 765 9.79 50 69,804 962 13.78 60 57,917 1,546 26.69 70 38,569 2,391 61.99 80 14,474 2,091 144.47 90 847 385 454.54 95 3 3 1,000.00 The actual number of deaths of any group of insured will not correspond exactly with the figures of any mortality table. But this is not an essential defect of a table so long as the figures of the table are approximately correct and are at least as great in the earlier years as the actual mortality. For any excess of premium thus collected but increases the safety of the insurance and reduces later payments. In fact the mortality in nearly all companies in the United States is much below the figures of the American Experience Table, partly because of the influence of medical selection on the recently insured and partly because of the decided improvement in longevity since the table was constructed. § 12. #The single premium for any term.# It is evident that the natural assessment premium payable at the beginning of the year for $1000 of insurance for that year is expressed by the death rate, e.g., at age 35, the payment of $8.95 by each of the 81,822 living at the beginning of the year will provide the $732,000 needed to pay the losses.[5] In the same manner would be determined the natural assessment premium for each year of insurance. Now, when it is possible to invest the premiums so as to yield a minimum rate of income it is a simple matter to determine the amount of a single premium, at any age, that is adequate to pay for insurance covering any selected number of years (term insurance) up to the entire period of each insured person's life (full life). It is necessary only to apply the formula of present worth and that of compound interest on investments.[6] Thus the expected losses of any year according to the table of mortality, divided by 1 + rate of yield on investments raised to the power of years distant, equals the present worth of insuring the entire group for that year. The sum of the discounted cost of insurance for all the years of the term divided by the number living at the beginning of the period, gives the single premium for each of the insured. Let P be the present worth of all the policies for a group of the same age, p the present worth of one policy, X the total insured at the beginning of the period, f the natural assessment premium this year, or the natural premium required for any year. Then f f1 f2 fn P = __________ + _________ + ________ + _________ (l + r) (l + r)^2 (l + r)^3 (l + r)^n P p = _________ X The payment in advance of the single premium for any selected period provides a reserve fund sufficient, on the assumptions made, to carry all the insurance without further payments. Each year there is added to the fund the income earned on investments, and there is subtracted the amount of the losses for the year, until the death of the last member of the insured group. If the deaths in the earlier years are fewer than were expected in the mortality table, this will be offset eventually by more deaths at the advanced years; but in the meantime a reserve larger than was expected is yielding income, thus providing a larger sum than is needed to pay all the policies at maturity. This surplus might be distributed as so-called "dividends" from time to time to those surviving, or be added pro-rata, at intervals, to the amount of the policies as accumulated dividends. § 13. #Level annual premiums and reserves.# It is a matter of no very abstruse mathematics (in principle) to find the equivalent of this single premium in any one of many other forms of premium payment. The processes are mainly but variations of present worth and compound interest calculations. Such calculations, however, lead into many complexities of practical detail difficult to explain in brief compass, and are the special task of the actuary (the mathematical expert dealing with such problems in the insurance business). The most useful actuarial equivalent of the single premium is the level annual premium for any period (term or life). Almost all policies now written have the level annual premium as a feature. The amount of the level annual premiums at first is greater than the losses; this causes for a time the steady accumulation of a reserve which yields income. Then, as the losses grow, they overtake and finally surpass the amount of the annual premiums. Therefore, the total reserve for any group of insured increases year by year to a maximum and then declines until it reaches zero with the payment of the last claim. The individual reserve for each policy not yet matured increases steadily the longer it is in force. The total reserve is essential to the solvency of the company and the payment of all the policies as they fall due. The companies which issue policies on the level premium plan or reserve plan are known as "old line" companies, or as "legal reserve" companies, because the state laws require every company of this type to maintain the reserves calculated on the basis of a certain rate of yield. The growth of the legal reserve companies in recent times constitutes one of the financial marvels of the age. § 14. #Different features of policies.# The premiums thus far discussed are "net premiums" estimated as just sufficient to meet the actual payments required by the contracts in the policies. To provide for the expenses of management an addition is made to the net premium called the "loading." The entire premium is called the "gross premium." Reserve insurance is still carried on by a few stock companies, but of late some stock companies have been transformed into mutual companies, which are the prevailing type. The mutual company legally belongs to the policyholders. The gross premiums in reserve insurance are, for the purpose of safety, fixed at a figure larger than the expected cost of the insurance, and normally the earnings from interest are higher, the mortality is lower, and expenses are less than those on which the calculation of rates is based. From the excess of income resulting, the company sets aside a surplus and then divides the rest among the policyholders. These returns, virtually but the refund of excess premiums, are called "dividends" (a somewhat misleading term, not to be confused with dividends on corporate stock). The policies that receive dividends are called "participating" and are said to participate in the earnings. Formerly the majority of policies paid "deferred" dividends after 5, 10, or 20 years, according to various tontine and semi-tontine plans, the survivors to these periods receiving their dividends plus those of the other policyholders who had died or had withdrawn from the company. This form of payment having been found objectionable, it was made illegal in New York and other states, and in most cases dividends are now paid annually. The stock company, organized for profit, frequently charges lower premiums for "non-participating" policies, and then retains such profits as may result from keeping expenses below receipts. The most popular policies are term policies (usually for 5, 10, 15, or 20 years); ordinary life policies with annual premiums; limited payment life policies (the policy payable at death, with premiums fully paid up after 10, 15, or 20 years); and endowment policies (the face of the policy payable after 10, 15, or 20 years if the insured is still living). An endowment policy must be understood to be a regular term policy of insurance for the specified number of years, plus a plan of regular annual savings, which at compound interest, accumulate to the face of the policy. Many persons are attracted to endowment insurance by the oft expressed thought that "you don't have to die to beat it." But this is a mistaken thought. For the premium in endowment insurance is much higher than that for life insurance alone during the same period, so that the endowment is merely a pretty convenient but somewhat costly plan of saving, hitched on to an insurance policy, with which "actuarially," it has no essential connection. In "scientific" insurance the insured pays its full actuarial cost for each additional feature of the policy that he buys. The various policies issued by a company are approximately equivalent actuarially, on the basis of the assumptions made, but they are of very different degrees of desirability, in view of the circumstances of the insuring individual. The choice of policies deserves a more careful investigation than it usually received. Moreover, carelessness and ignorance in the choice of a company is responsible for widespread loss and suffering. Policies differ in respect to the mode of payment. The payment usually takes the form of a lump sum payment at death or at the maturity of the endowment. In recent times there has been a growing use of optional forms of payment which give to the beneficiary annual or monthly installments for a definite number of years or for life. § 14. #Insurance assets and investments as savings.# The discussion of savings institutions in the last chapter left unmentioned insurance, which probably is destined to be the most important of all. The assets of life insurance companies in the United States have already attained the enormous sum of $5,000,000,000, a sum equal to the reported savings bank deposits. In the last twenty years life insurance assets have more than doubled in each decade, and are now increasing by about a quarter of a billion dollars every year.[7] These great funds, which in equity nearly all belong to the policyholders, form already approximately one thirtieth of all the private capital of the country. They are invested in many ways, in real estate, in loans secured by mortgages on real estate, in bonds--municipal, railroad, and industrial. The problem of wise legislation for these organizations, of their competent and honest management, and of their relation to the social, business, and political life of the nation, is certain to be of ever-increasing importance. We are hardly more than emerging from the experimental stage of life insurance, hardly more than at the beginning of its development. The premium in personal insurance (life, accident, sickness, invalidity, old age pensions) is in almost all cases paid out of some current income. The premium paid is just so much subtracted from the amount available for present direct use and applied to the purchase of future incomes for one's self or family. The insurance method differs from the method of depositing savings by its contingent nature, the resulting income of any individual being possibly much greater than the amounts actually saved (e.g., when the insured dies or is injured soon after taking insurance), and possibly less or nothing at all. A very desirable kind of insurance which is yet little developed is that for a term ending with the usual retirement age (say 65 years) combined with an old-age pension for life thereafter. It is probable that abstinence will more and more express itself not in accumulating large capital sums to provide for one's old age or for survivors, but in providing insurance for survivors, and invalidity and old-age pensions for the insured and others, payable as terminable annuities. In any case the results to be expected in the changing forms and magnitude of private fortunes are certain to be great. § 15. #Excessive costs of insurance operation.# So beneficent is insurance that the enormous cost of transacting the business under present methods is much to be regretted. A very large part of the premiums paid by the insured is retained by the companies.[8] In the case of reserve life insurance a considerable part of what is not returned is, however, set aside as reserve virtually held in trust for the policyholders. In the case of the other kinds of insurance, nearly all of the amount not returned is either cost of operation or profits, tho it must be recognized that a part of the cost of some kinds of insurance is for real services, such as inspection and fire prevention. It is remarkable that the percentage returned by the life insurance companies, accumulating, as they do, large reserves in trust for the policyholders, is greater than it is for the other kinds of companies (fire, marine, casualty, surety, liability, accident, and health insurance). It is a striking evidence of the importance of the marginal principle[9] that insurance at such a cost should still be desired by men. The use of insurance would be much wider and its benefits greater if this "tare and tret" of doing the business could be reduced. It seems a reasonable hope, now that the experimental stages are passed, that this may be done. In the case of all kinds of insurance as yet a large expense for agents has been necessary to educate men to see the value of insurance and to purchase it, as well as for many other competitive expenses. It has been found that much of this expense can be saved by insurance in groups (for all employees in an establishment), by compulsory insurance (as of all working men), and by central state administration serving to regularize and unify the organizations. This important question will be further considered in connection with "social insurance" as a measure to benefit the working classes. [Footnote 1: See Vol. 1, ch. 5, sec. 7.] [Footnote 2: The Jeffries-Johnson prize-fight was insured, against rain, for $30,000. Frequently, race-horses, the fingers of pianists, the lives of ball-players, and the throats of singers, are now insured. Summer hotels in England regularly insure for large sums against more than so many days of rain per season.] [Footnote 3: On the former, see Vol. I, pp. 365 and 374; and on the latter, below, sec. 14.] [Footnote 4: See Vol. I, labor-incomes, in Index.] [Footnote 5: There is an appearance of a slight discrepancy due to the omission of fractions of cents. If premiums are collected at the beginning of the year and losses are paid at the end of the year, and if interest can be earned meantime at the rate of 3-1/2 per cent, the natural premium for a one year term policy is about $8.64, that being the present worth of $8.95 due a year hence, interest being 3-1/2 per cent. In these calculations there is no allowance for expenses, the necessary "loading," on which see below, sec. 14.] [Footnote 6: See Vol. I, p. 279.] [Footnote 7: The following are the chief statistical facts regarding the life insurance business in the United States, Jan. 1, 1914, showing separately legal reserve and assessment companies, and the total. ------------------------------------------------------------------ | Number of | Policies | Insurance | Companies | in force | in force | | | Legal reserve ..| 260 | 38,206,000 | $20,256,000,000 Assessment .....| 605 | 8,789,000 | 10,023,000,000 Total ..........| 865 | 46,995,000 | 30,587,000,000 ----------------------------------------------------------------- | Premium | Total | Per cent income | income | income | from premiums | | | Legal reserve ..| $715,000,000 | $946,000,000 | 75.6 Assessment .....| 138,000,000 | 153,000,000 | 90.2 Total ..........| 853,000,000 |1,099,000,000 | 77.6 ---------------------------------------------------------------- | Payments to| Assets | Assets for each | policyholders| | 100 insurance | | | in force | | | Legal reserve | $470,000,000 |$4,659,000,000 | $22.66 Assessment .... | 106,000,000 | 195,000,000 | 1.37 Total ....... | 576,000,000 | 4,854,000,000 | 15.87 ] [Footnote 8: In 1913 the total premiums collected by all kinds of insurance companies reported (Statistical Abstract of the U.S., 1914, pp. 549-557) were about $1,512,000,000, and the amount returned to policy holders the same year was $918,000,000, or about 61 per cent of all premiums, the amount not returned ($584,000,000) being 39 per cent. Premiums received Returned to policyholders Amount Percent Life insurance reserve companies ..$715,000,000 $470,000,000 67 assessment companies 138,000,000 106,000,000 76 Other kinds ......... 659,000,000 342,000,000 52 ------------- ----------- -- Total ........... $1,512,000,000 $918,000,000 61 ] [Footnote 9: See above, secs. 2 and 5.] PART IV TARIFF AND TAXATION CHAPTER 13 INTERNATIONAL TRADE § 1. Political and trade boundaries. § 2. Benefits of international trade. § 3. Choice of the more advantageous occupations. § 4. Persistence of differences between nations. § 5. Doctrine of comparative advantages. § 6. Equation of international exchange. §7. Balance of merchandise movements. § 8. Cancellation of foreign indebtedness. § 9. Par of exchange. § 10. International monetary balance and price-levels. § 1. #Political and trade boundaries.# By international trade is meant, in general, trade between persons resident in different countries; comparatively rare is the case in which one of the two parties to a trade is a whole nation acting through its government as a unit (e.g., in the purchase of munitions of war in neutral countries). Outside of a communistic group such as the family, trade is a necessary accompaniment of division of labor. As territorial division of labor began between neighboring tribes,[1] international trade was the earliest kind of regular interchange of goods. Indeed the very word "market" meant originally the boundary between tribes. Thus, from primitive times when wandering savages gave bits of flint or copper in return for salt or fish, individuals have sought to adjust their goods to their desires through trade with men of other political groups. With the progress of the world in the means of communication and transportation, international trade has widened in extent and grown in volume. Economic relations never have been coextensive with political relations. The economic groupings of men connected by a network of trades never have and never will correspond very nearly with political groupings of men bound together by common citizenship in particular states. Indeed it is not uncommon for many of the residents in two adjoining states to trade far more with each other than they do with their own fellow citizens. Lawmakers and rulers from the beginnings of formal governments have constantly tried to hinder this kind of trade. They have done this chiefly because of their belief that they could strengthen their states in political and economic ways, and could favor some of their citizens, by confining economic relations within political boundaries--if not exclusively, more closely than when trade was left to take its natural course, guided by individual motives. The regulation of international trade, therefore, has always constituted an economic problem of great importance in the field of political action. § 2. #Benefits of international trade#. Now, bearing in mind that international trade is carried on by individual traders in any two countries, we may ask what motive impels men to trade across the political boundaries of a state. The simple answer is that each trader has something to give and desires to get something in return. Each is seeking to get something that has to him a greater value than the thing he gives, and believes he can do this in trade with a foreigner better than by trading at home. In any trade, both parties gain, or think they are gaining.[2] In international trade there is the same chance for mistake as in domestic trade, but no more. In a single transaction in either domestic or foreign trade one party may be cheated, but the continuance of trade relations is dependent upon continued benefits. The once generally accepted maxim that the gain of one in trade is the loss of another is now generally rejected, but often still it is assumed to be true of international trade. The starting point for the consideration of this subject is in this proposition: Foreign trade is carried on by individuals, for individual gain, with the same motives and for the same benefits as are found in other trade. The advantages of international trade are indeed but those of division of labor in general, in the particular case where it happens to cross political boundaries. The great territorial divisions of industry are determined first and mainly by natural differences of climate, soil, and material resources. Thus trade arises easily between North and South, between warm and frigid climates, between new countries and old, between regions sparsely and regions densely populated.[3] Territorial divisions of industry are determined secondly by social and economic differences such as those with respect to accumulation of wealth, amount of loanable capital, invention, organization and intelligence of the workers, and the grade of civilization. Foreign trade normally imparts increased efficiency to the productive forces of each country. In most cases it is apparent that labor is more effective and gets a larger product when it is applied in those ways for which the country is best fitted and for which it offers the best and most bountiful materials; and that, further, when special branches of industry have developed at one place, they make possible the advantages of large production and of high specialization. Certain erroneous explanations of the advantages of foreign trade may be dismissed with brief mention. It is said to give vent for surplus production and to give a wider market to what would otherwise go to waste. This involves the same fallacy as the "lump of labor notion," the destruction of machinery, and the praise of waste and luxury.[4] If it were true that sale to backward nations were now necessary to give an outlet for products which would otherwise rot in the warehouses, a time would come at length when the world would have an enormous surplus unless neighboring planets could be successively annexed. Again it is said that the great purpose of foreign trade is to keep exports in excess of imports so that the money of the country may constantly increase in amount. The ideal of such theorists is an impossible condition where the country would constantly sell and never buy.[5] In the narrow commercial view of the subject the sole object of foreign trade is to afford a profit to the merchants, regardless of the welfare of the mass of the citizens. § 3. #Choice of the more advantageous occupations#. Let us consider the cases of two countries somewhat differently situated, such as an old country like England and a newer country such as was the United States in the nineteenth century. Now the relative advantages of various industries in two such countries are very unlike. The newer country excels in its broad area, its abundant rich lands, its bountiful natural resources of forests and mines. These are the superior opportunities which give the economic motives for settlement and for continued immigration from the other lands. Most of the newcomers find it to their advantage to develop the peculiar opportunities of the new land, rather than to go on producing the same things in the same way as they did in the old country.[6] Thus they get a larger quantity of products per day's labor, and are able to gain by trading a part of these for the products of the older country. Thus the characteristic industries of the two countries must differ. Without any government supervision, therefore, but simply through the choice of enterprises, each seeking the best investment of capital for himself, industries are developed in which each country is either most markedly superior, or least inferior, to its neighbors. If either laborers or capitalists in the new country were to turn to the less-favored industries they would be forced to accept a smaller reward than they can earn in the more favored. § 4. #Persistence of difference between nations#. If both men and wealth interchanged between industries and between countries with perfect readiness and without any outlay whatever for transportation, these differences would soon disappear, and perfect equilibrium of advantage would everywhere result. In every country, in every occupation, labor and wealth of given quality and amount would receive the same reward. But the interchange of labor and of products between countries is never without friction. The laborers, enterprisers, and investors in a naturally rich country are thus in a position of more or less enduring advantage relative to those of older and poorer countries. Differences of the same nature appear as between different parts of the same country, as between the Northern and the Southern states of the American union, between the Eastern and the Western states, and even between neighboring countries of the same state. The differences between two countries, however, are likely to be more marked, the circulation of factors being so active within a country that it is allowable to speak broadly of prevailing national rates of wages and of interest. Altho, as Adam Smith said, "a man is of all sorts of luggage the most difficult to be transported," the higher wages in a new country attract constantly from the older lands a portion of their laborers. The higher rate of interest in new countries constantly attracts investments from abroad; yet, despite these forces working toward equalization, the inequality may remain and, through the working of other influences, may even increase in the course of years. § 5. #Doctrine of comparative advantages.# It may be that two countries both possess the necessary technical conditions for making both articles that are to be traded for each other. It may even be that the people in one country would be able to make not only one of the two objects of trade, but both of them, more easily and with less sacrifice and effort than the people in the other. If, for example, American labor can produce two bushels of wheat in a day and English labor but one bushel a day; and American labor can produce just as much iron in a day as English labor--or more--the question always arises: Is it not foolish and wasteful not to produce both the wheat and the iron? Now, exactly the same case is presented in almost every simple neighborhood trade. The proprietor may be able to keep his books better than does the bookkeeper whom he employs. The merchant may be able to sweep out the store better than the cheap boy does it. The carpenter may be able to raise better vegetables than can the gardener from whom he purchases. Yet the merchant does not turn to sweeping and the carpenter to raising vegetables, because if they did they would have to quit or limit by so much their present better-paying work, and would lose far more than they would gain. So whenever the people in one country have a greater advantage in one article than in another, relative to another country, the foreigners, like the low-paid man, will be willing to exchange at a ratio that will make it profitable to specialize in the product wherein the greater superiority lies.[7] But this is always hard doctrine for the popular mind, and particularly for the commercial mind endeavoring to carry on a business that can not be made "to pay" in the face of foreign competition. It is easy to believe that a country ought not to import goods unless it is at an _absolute_ disadvantage in their production. It is often declared that as our country can produce any kind of goods "as well" as foreign countries (meaning with as few days' labor), there is a loss on every unit imported. The fundamental principle of trade as applied to such cases shows that not the advantage which one country enjoys over the other as to a single product determines whether it will gain by producing at home, but the comparative advantages enjoyed in the production of the two articles in question. As a simple example, suppose that a day's labor in country A will secure two bushels of wheat (2x) and two hundred pounds of iron (2y), whereas in B a day's labor will secure 1x or 2y. Then A's comparative advantage in producing x becomes a reason for A's not trying to produce y. Trade can take place (aside from transportation outlay) at any ratio between 2x = 2x (A's minimum) and 2x = 4y (B's maximum). Evidently at any rate between these two ratios each party would gain something by the trade, e.g., at 2x = 3y A would get 3 instead of 2y by a day's labor, and B would get 1-1/3x instead of 1x for a day's labor (2x for 1-1/2 day's labor instead of for two days'). If, however, A could produce exactly twice as much of everything as B could, then there could be no motive on either side for trade. But this never happens. § 6. #Equation of international exchange.# Foreign trade of course can take place as barter, and in earlier times, particularly, very commonly did so. But in the existing monetary economy nearly all trades are expressed in terms of monetary prices. Both the prices of all the particular objects of international trade and the general levels of prices in any two trading countries come to be pretty definitely interrelated. Changes in the one country at once compel readjustments in the other. To understand in the most general way how this occurs, a knowledge at least of the elementary principles of foreign exchange is required, and to this we may now turn. Let us begin with the proposition known as the equation of international exchange, which is sometimes given thus: the value of the imports of a country must in the long run equal the value of the exports. But this proposition (especially the words imports and exports) must be understood in a much broader sense than that of the movements of merchandise merely. The proposition might better be expressed: the total credits of a nation (including money actually sent abroad) must just equal its total debits (including money imported). Into the balance of accounts between any two nations enter many items: the cash values of the imports and exports of merchandise; freights, insurance premiums, and commissions; the expenses of citizens while traveling abroad; money brought in or taken out by immigrants; the cost of the governmental foreign services (such as the salaries of consuls and of diplomatic representatives); subsidies and war indemnities received from or paid to foreign nations; the investments of foreign capital; and credit items of many kinds, on both sides of the account. The effect of loans upon the equation differs at different periods according as they are just being made, are continuing, or are being repaid. When foreign capital is first invested in a country, whether it is loaned to the government or to individuals or to corporations, either gold must be remitted to the borrowing country or goods be sent. But later the interest payments and the eventual repayment of the principal of the loan act in the opposite direction. Accruing interest must be offset annually by exports from the debtor country and the repayment of the principal requires that either money or goods be exported equal in value to the original obligations. In popular opinion an excess of exports of merchandise is an index, if not the real cause, of national prosperity; but evidently it is no true index whatever on this point. An excess of exports may at any given moment indicate that the country is rich and is lending abroad, or that it is in debt and is paying interest, or that it is repaying the principal. On the other hand, an excess of imports may indicate either that a country is poor, and is borrowing from abroad, or that it is rich, with many foreign investments, and is receiving the income from them in the form of a regular shipment of goods from the debtors. The following statistics of the foreign commerce (merchandise imports and exports) of the principal countries of the world are given in significant groupings which call for various explanations. Figures are in million dollars ($1,000,000) and are mostly for the year 1908, (Stat. Abst. 1908, p. 769). At the present writing the war has altered all the lines of commerce. COUNTRIES HAVING EXCESS OF IMPORTS OF MERCHANDISE |Excess %|Imports.|Exports.| United Kingdom ..| 57 | 2886 | 1835 | Germany ..........| 20 | 1824 | 1523 | Netherlands ......| 30 | 1130 | 873 | France ...... | 12 | 1089 | 975 | Belgium ..........| 33 | 642 | 484 | Italy ............| 68 | 562 | 334 | Aust.-Hung .......| 7 | 487 | 457 | Switzerland ......| 44 | 287 | 200 | Spain ............| 10 | 168 | 153 | Sweden ...........| 26 | 163 | 129 | Denmark ..........| 16 | 191 | 165 | Norway ...........| 58 | 101 | 64 | Canada ...........| 34 | 298 | 222 | China ............| 43 | 254 | 178 | Turkey ...........| 59 | 135 | 85 | COUNTRIES HAVING EXCESS OF EXPORTS OF MERCHANDISE |Imports.|Exports.|Excess %| United States ....| 1312 | 1638 | 25 | Russia ...........| 436 | 542 | 24 | British Colonies .| 558 | 615 | 5 | British India ....| 418 | 486 | 16 | Australasia ......| 242 | 302 | 25 | Japan ............| 196 | 206 | 5 | Cuba .............| 84 | 116 | 40 | Mexico ...........| 78 | 115 | 42 | San Domingo ......| 5 | 10 | 100 | Argentina ........| 263 | 353 | 34 | Brazil ...........| 172 | 214 | 24 | Chile ............| 98 | 116 | 18 | Uruguay ..........| 35 | 37 | 6 | Bolivia ..........| 21 | 24 | 14 | Venezuela .... | 10 | 15 | 50 | #§ 7. Balance of merchandise movements.# The first group evidently consists of the older, creditor countries which are drawing some of the income of their investments from abroad each year in the form of food and of raw materials of many kinds. The second group includes countries of very diverse conditions, possibly all having some investments abroad; Italy receives large imports in return for the services of many Italians working in foreign countries, and the three Scandinavian countries (especially Norway) carry on a large commerce for other nations which is paid for in these ways. The excess of imports in the third group probably is the result of new investments that were being made in Canada by English and American capitalists, in Turkey especially by Germans, and in China by Americans and Europeans. The countries in the second column are doubtless on the whole debtors, but in varying degrees. The excess exports of some are insufficient even to pay all the current interest, and they are borrowing still more (possibly the British colonies, Japan and several South American countries); others have ceased to borrow and are simply paying interest; whereas the United States at least with its excess of exports was at this time both paying interest and getting out of debt. With the outbreak of the war in 1914 the United States began rapidly buying up its foreign-held securities, and events are fast making it a creditor nation. Its imports must therefore in future more nearly equal if not exceed its exports, the actual outcome being dependent as well on various other items in the balance as on those here considered. § 8. #Cancelation of foreign indebtedness.# In the international business of any two important countries to-day, such as England and America, the number of credit and debit transactions is enormous. If each trader had to attend to the forwarding of the means of payment for his purchases he would, of course, deduct from the amount of his indebtedness the amount due him from his foreign correspondent, and might from time to time "remit" the balance in the form of a shipment of gold. This simple offsetting and cancelation of debits and credits would greatly limit the amount of gold that would have to be shipped. But still, under such conditions, there must be a very large number of shipments of gold by different individuals, and a large proportion of these shipments would be going in opposite directions at the same time. Now a merchant in New York called M may have a balance to pay in London to X and at the same time a merchant in London called Y have a balance to pay in New York to a man called N. If M can buy from N his claim in the form of an order, draft, or bill of exchange, and send it to X, the latter may through his bank collect the sum from Y. In this way a further cancelation of indebtedness would occur. When all persons having either debits or credits to be paid in New York and in London, respectively, are dealing with the banks in these cities, and the banks and special exchange brokers are constantly buying and selling these bills, a market is created for London exchange in New York (and conversely in London), and a much easier and more nearly complete cancelation of indebtedness results. In effect, all the debits and credits between the two countries are merged into one big ledger balance, and the international shipment of gold bullion finally made is just the amount needed to balance the accounts payable at the time. Industrial indebtedness is represented in various forms: bills of lading for goods shipped, drafts made by the creditor on his debtor for goods shipped or property sold, checks or letters of credit for travelers, bonds and notes public and private. These are the objects dealt in by the bankers who are the agents to carry on the work of exchange. The balance of foreign exchanges is of essentially the same nature as the domestic cancelation of indebtedness. It is going on constantly between the two merchants in the same town, between two banks in the same town who represent groups of merchants, between men in neighboring towns, and between distant states like New York and California.[8] The price of exchange to the individual is reduced by the specializing of the business in the hands of a few dealers, permitting the cancelation of indebtedness or offsetting of exchange, and greatly reducing the amount of bullion to be transported in making the payments. The cost to the bank of providing this exchange for its customers varies as conditions change, but in any case is not great, so that in domestic business when any charge is made it is usually at a fixed rate, and is mainly for the service. § 9. #Par of exchange.# Foreign exchange from America to Europe is, however, in two features different from domestic exchange: (a) the cost of shipment of gold is greater; (b) the monetary units of the two countries usually differ in name, weight, and fineness, and sometimes in materials. We may define foreign exchange as the purchase and sale of the right to receive a given kind and weight of metal or its monetary equivalent in current funds at a specified time and place. _Par of exchange_ between two countries using the same metal as a standard is the number of units of the standard coin of the one country that contains the same amount of fine metal as the standard coin of the other country. There is no fixed par of exchange between gold-using and silver-using countries: par of exchange between them fluctuates with changes in the comparative values of the two metals. The _gold shipping points_ for importing or exporting gold are respectively par of exchange plus or minus the cost of moving the actual metal. These points vary with means of transportation and communication. The par of exchange between New York and London being nearly $4.866 and the cost of expressing and insuring a gold pound between New York and London being approximately $.02,[9] the shipping point for the export of gold from New York is $4.886 and for the import of gold to New York is $4.846. At these upper and lower limits, there is a motive for shipping gold as a commodity. When large sales have been made to Europe and credits are accumulating in New York and the importation of gold is imminent or already begun, the claims are bought by bankers in New York at less than par. At such a time one needing to remit a sum to London can buy exchange for less than par, for every such draft remitted reduces London's indebtedness and, by so much, the need of shipping gold to this country. As a rule then, accumulating credits here mean a low rate of exchange, accumulating debits a high rate of exchange from this to the foreign country. These are the merest rudiments of the subject. The many problems arising, such as the adjustment of foreign credits to changing needs, and such as arbitrage (the readjustment of the rates of exchange prevailing among different financial centers) make foreign exchange both a complex science and a difficult art. § 10. #International monetary balance and price-levels.# The balance of all accounts for or against a country (including new loans, current interest, and repayments) must thus eventually be settled in money. This cannot fail to affect the general level of prices in both countries, tho this is brought about often only in indirect and gradual ways. The flow of money out of a country causes the loan market of a country to tighten (interest and discount rates to rise) in proportion as the reserves of the banks are reduced. Then "general prices" begin to fall.[10] When prices fall, imports decline, as the country is not so good a place in which to sell: when prices rise, imports increase, as it is a better place in which to sell. The opposite effect is produced on exports, and thus in a short time the national credits and debits are again brought into equilibrium. A slight movement of money in either direction is enough to influence prices and set in motion forces to counteract a further flow of money. Decade after decade the circulating medium of leading countries changes very slightly in amount, and the fluctuations in its amounts during periods of so-called "favorable balance of trade" and of "unfavorable balance of trade" are only the smallest fraction of the value of goods passing through the ports of the country. It is therefore absurd to imagine, as is sometimes done, that a country could, by continually importing goods, be drained of all its money, or that by any possible set of devices it could forever have an excess of exports to be paid for by a continual inflow of gold. Long before either of such movements could go far, the automatic readjustment of prices would inevitably check it, and secure and retain for each country its due portion of the money. [Footnote 1: See Vol. I, ch. 17, sec. 10.] [Footnote 2: See Vol. I, ch. 5, secs. 1 and 7.] [Footnote 3: See Vol. I, ch. 6, sec. 11, on the origin of markets.] [Footnote 4: See Vol. I, chs. 36 and 37.] [Footnote 5: Recall ch. 4, in general, on the nature of monetary demand.] [Footnote 6: See Vol. 1 for numerous statements of the effects of varying quantities of agents upon the economy of utilization; e.g., pp. 138, 163, 164, 213, 228, and chs. 34 and 35 entire.] [Footnote 7: This theory has usually been presented under the name of "the doctrine of comparative costs." The word "costs" is very misleading in this connection because it is now always applied to enterpriser's outlay. It seems best, therefore, to replace it in this phrase by the word "advantages." Of course, it _never_ can be true that an article can be "profitably" imported when its monetary costs (all things considered) are higher in the exporting than in the importing country. Indeed, the importation of any article is proof conclusive that the importer thinks that the monetary costs of an article would be higher in the importing than in the exporting country. See further, ch. 15, secs. 11 and 13 (note).] [Footnote 8: See ch. 7, sec. 7.] [Footnote 9: This varies also with conditions; after the outbreak of the war in 1914 it was for a time as high as $.05 because of high war rates of insurance.] [Footnote 10: The connection between a high rate of interest and falling price is a dynamic phenomenon of a very temporary nature. In long-time static conditions the general level of prices and the prevailing rate of interest are dependent on entirely different sets of forces. See on the theory of interest, Vol. I, p. 308. In long-time movements of prices, in contrast with brief changes due to foreign trade such as are referred to above, high rates of interest are connected with rising prices, and _vice versa._ See above, ch. 6, sec. 8, on fluctuating price-levels and the interest rate.] CHAPTER 14 THE POLICY OF A PROTECTIVE TARIFF § 1. Military and political motives for interference with trade. § 2. Revenue and protective tariffs. § 3. Growth of a protective system. § 4. The infant-industry argument. § 5. The home-market argument. § 6. The "two-profits" argument. § 7. The balance-of-trade argument. § 8. The claim that protection raises wages. § 9. Tariffs and unemployment. § 10. Exports and exhaustion of the soil. § 11. Protection as a monopoly measure. § 12. Harm of sudden tariff reductions. § 1. #Military and political motives for interference with trade.# The considerations set forth in the last chapter raise a strong presumption in favor of the sovereign state permitting its citizens to trade freely across its boundaries, as the best way to further their own prosperity and, on the whole and in the long run, that of the nation. Indeed, this presumption and belief has been held by nearly all serious students of the question, with more or less of modifications and qualifications, ever since Adam Smith published his work on the "Wealth of Nations" in 1776.[1] But in conflict with this belief has been the all but unanimous policy of nations from early times, throughout the Middle Ages, and down to this day, of interposing some special hindrances (of varying degrees and kinds) to this kind of trade. Sometimes this has been done by prohibitions, but more often by taxes imposed upon either imports or exports. Sometimes the attempt is made to justify the policy of governmental interference with foreign trade by arguments which crumble before the slightest examination, and again it is admitted that free trade is true in theory, but it is declared to be false in practice. The latter view is not to be entertained for a moment. If free trade in theory (as an explanation) is complete and true, it will in practice (as a plan of action) be sound and workable. In truth, however, the practical policy of governmental interference with foreign trade has always in part rested on other than the simple economic grounds. Interference with free trade with the foreigner has always been in large measure due to political motives. In every petty medieval state or self-governing city, the aim was to make the economic boundaries coincide as nearly as possible with the political boundaries. Except for the trade in a few articles of comparative luxury this aim was at that time nearly attainable. The peasantry surrounding a fortified town and enjoying its protection were compelled to trade there. Down to our own time it has seemed to statesmen expedient to forbid or discourage trade that might nourish the economic power of future enemies. Sometimes governments have used embargoes, bounties, or tariffs as weapons to injure the trade of other nations and to secure diplomatic or commercial concessions. Often they have sought by tariffs to encourage the building of ships and the manufacture of armaments and of all kinds of munitions by private enterprise within their own borders, even when the immediate cost of these products was greater than if they were purchased abroad. In such cases it is always a question whether an outright expenditure would not be better, whether the government could not build its own arsenals and shipyards more economically than it can foster private enterprise by means of a protective tariff. However, the political (or military) argument for protection recognizes that it is in itself a costly (not a profitable) policy, and that the cost is only justified on the grounds that military necessity warrants the outlay. The military argument as applied to the preparation of ships and munitions has no application to a tariff on those articles which have no bearing upon military power. But the most recent application of science and the mechanical arts to the uses of war has given new significance to a larger policy of industrial preparedness for military purposes. The year 1914 doubtless ushered in for the world a new epoch of protective and discriminatory tariff legislation determined by political rather than by direct economic considerations. § 2. #Revenue and protective tariffs.# An important distinction in principle is to be made between a tariff for revenue and a tariff for protection. A _revenue tariff_ is a schedule of duties on goods entering or leaving a country, so arranged that the collection of taxes causes the least possible disturbance to domestic industry. Speaking generally, the duties may be on either imports or exports; but, as export duties are unconstitutional in the United States, our tariff discussions are concerned only with import duties. The most completely revenue-yielding tariff is one touching only articles which, even at the higher prices are not in the least to be produced profitably in the home country. A _protective tariff_ is a schedule of import duties so arranged as to give appreciably higher prices to some domestic enterprises than they could obtain with free trade. It shuts out some foreign goods which would otherwise enter, an in so far it "protects" the domestic producer from the foreign competitors who would sell at lower prices than those at which he can or will sell. In other words, "protection" means governmental interference with the freedom of trade. The distinction between revenue and protective tariffs, thus clear in principle, is not always easy to make in practice. It does not lie in the intention of the taxing power, but in the actual effects produced. Most tariffs combine the characteristics both of revenue and of protective measures. A tariff that reduces imports but does not cut them off entirely may be called either a revenue tariff with incidental protection or a protective tariff with incidental revenue. The difference is one of degree. But notice particularly that the two features of protection and of revenue are mutually exclusive. To the extent that one is present the other is impossible. A tariff rate that in whole or in part excludes the foreign article to that extent affords "protection" but does not yield revenue. Whenever the government collects a cent of tariff taxes, the domestic producer in so far and as respects that unit of goods is unprotected. Likewise, whenever any domestic producer enjoys "protection" in respect to any unit of goods, importation is in so far prohibited and the government is deprived of any revenue whatever derived from the production and sale of that unit of goods. § 3. #Growth of a protective system.# The protective policy developed at first accidentally, as it were, out of the practice of levying taxes for revenue only. Tolls, dues (or duties), customs (that is, in former times the customary dues paid by merchants, now the dues fixed by law), tariffs (that is, schedules or lists of rates of duties) were at first intended to raise revenues for the sovereign, the city, or the state. The unintended, and to some degree inevitable, result of the taxation of goods in commerce, whether imports or exports, is to prevent and discourage trade and to raise the prices of the goods imported. Any change in tariff duties, therefore, at once alters the previously existing adjustment of profits and of industries in a country. The first effect of the tariff is the same as that of any new factor in enterpriser's cost; the same, for example, as that of a new domestic tax on an article or as that of a rise of freight rates--the domestic price of the taxed article tends to rise. Other results then follow. If the article cannot, even at the higher price, be produced within the country (as in the cases of oranges, spices, and coffee in England, Norway, and Sweden), its consumption is reduced. The lessening of demand may, however, depress somewhat the price in the producing country. But as such a tariff does not increase home production of the taxed article, it is therefore for revenue, not for protection. But if the article can be profitably produced in the importing country at the new price, "home industries" will start. Where the transportation charges are low, as on the coasts and on the main lines of railways, some imported goods may be bought, while farther inland where transportation charges are higher home production of some or all grades of such goods may take place. If the whole demand at home is supplied and all imports stop, therewith cease all revenues to the government from that source. A completely protective tariff is completely prohibitive. Experience abundantly shows that, with a few exceptions, due to climate and natural resources, it is impossible to put into effect the most moderate schedule of duties without the increase in price at once causing some men to shift their occupations, and to begin producing articles of the kinds that have risen in price. At once appears a group of "protected industries," the owners of which are dependent for the safety and profits of their investments, and the workmen in which are dependent for the security of their present jobs (possibly for the chance to continue the pursuit of highly skilled trades) on the continuance, if not the increase, of the existing tariff rates. A tariff may be adopted mainly from stress of financial need (as in our own history in 1789 or in 1861), but its modification or repeal cannot be decided by fiscal considerations. The "incidental protection" it affords has created a wealthy and influential group of employers and a large body of employees who are irresistibly tempted to exercise their influence in politics almost solely in favor of continuing and of increasing the rates to the sacrifice of the higher civic life of their communities. Of course the beneficiaries of the tariff usually believe sincerely that it is indispensable for the prosperity of the country as a whole, and they can do much to persuade others to the same opinion. This commercial motive for maintaining existing protective tariffs explains in large part their wide prevalence, whatever other reasons may be adduced in their justification. § 4. #The infant-industry argument.# Most free-trade writers concede a limited validity to the claim that protection may be used to encourage infant industries and thus diversify the industries of the country. If the natural resources of a land are adapted to an industry, it may be called into being earlier by a fostering protective tariff. This is merely anticipating and hastening the natural order of progress. In the American colonies the manufactures of such goods as iron, cloth, hats, ships, and furniture sprang up and continued not only without "protection," but despite numerous harassing trade restrictions made in the interest of English merchants. Can it be doubted that many of these industries would have developed and flourished after the adoption of the Constitution with no other favoring influences than those of rich resources and of economy in freights? In the Mississippi Valley since 1880 natural gas, abundant coal, ore, and timber have made possible a great growth of industries without protection against the Eastern states. Industries capable of eventual self-support must in most cases naturally appear in due time. Economic forces will bring them out. The protective system has often been likened to a hothouse, anticipating the season by a few weeks and at great cost. The question is whether the mere possession of the hothouse is a luxury worth the price, if meantime the products can be got more cheaply by trade. English manufactures flourished in the nineteenth century because they were well established, had excellent coal supplies, great stores of iron ore, and low-paid labor which did not have the opportunity of better alternatives, as did the American workman. If America had imported more (it would not have been all) of her iron and coal, the English mines would have begun to shown signs of exhaustion earlier, and America's advantage surely would have asserted itself in time. Her iron manufactures undoubtedly were hastened--they cannot truly be said to have been created--by the protective tariff. The peculiar advantages of a new country attract labor and enterprise into a few lines. Industries are forced into an earlier diversification by tariffs. Which is the better economic situation? Contrast Iowa, Dakota, and Minnesota, or Kansas, if you please, with New York and Pennsylvania. Is it so certain that a dense population congested in cities and crowded in factories and mines is a more ideal social aggregation than is a community of prosperous farmers? The smoky industrialism fostered by protection often puts a premium on a low grade of immigrants, crowds then into city slums and into forlorn mill towns, and keeps them aliens to the American spirit. It would be surprising if Americanism on the Western plains were not as sound as in the crowded cities. But the infant-industry argument appeals strongly to the enterprise and the speculative spirit of Americans, who like to do all things rapidly and on a large scale. Every village aspires to be a great industrial center. Americans are impatient of the suggestion that things "will come in time"; they like things to come at once. It must, however, be recognized that in a new country there is often a certain monotony and poverty of life because of the lack of diversified industries. There are not sufficiently varied avenues for the expression and use of the manifold talents of the nation. There are unused materials and opportunities, but the initial expense of experimentation, the initial difficulties of gathering and training a working force, are discouraging to individual enterprise, prices being as they are. A protective tariff is not necessarily and always the best way, but it is one way of helping private enterprise to establish and conduct such industries through their initial period. But as has been pointed out by many writers, the infant-industry argument is self-limiting, and involves always the assumption that the industries selected as fit for protection are such as ultimately, and within a moderately short period, can grow into self-dependence. The infant must sometime grow to be a man and stand on his own legs, or he is either a chronic invalid or a degenerate. #§ 5. The home-market argument.# The home-market argument seeks to show a more permanent need for a tariff. At the same time it appeals to the farmers, whom it has been hard to reconcile to a policy which in America[2] has been peculiarly favorable to manufacturers. The home-market argument extols the advantages of having near to the farms customers for agricultural products, and dwells on the greater steadiness of domestic trade. War or political changes, it is said, may change the demand for products. This is true, but no other changes have affected American agriculture so radically as the peaceful development of domestic transportation and the opening of the West. The main economic claim made in the home-market argument is that the shipping of food to Europe and the importing of manufactures involve a great cost for double freights which could be saved by manufacturing at home. The farmer is supposed to pay this cost. The obvious defects in this view are: first, there is nothing to show that the freight is not partly or entirely paid by the European, either the manufacturer or the food consumer; secondly, home trade "saves the freights" for the farmer only in case he can buy goods under a tariff with less of his own labor and products than under free trade. The payment of freight charges is true economy when the goods can be bought at a distance on more favorable terms than near home. The freight argument attempts to prove too much for it condemns every trade within the country, of goods produced a stone's throw away from the consumer. The home-market appeal is strongest when addressed not to all farmers, but to one class of farmers, those whose lands are situated nearer the manufacturing cities. As city population grows, some land is converted from the extensive cultivation of corn and wheat to dairying, fruit- and market-gardening in the neighborhood of cities, and perhaps at length is used for factory sites or as city lots. There is, thus, a partial validity in the argument as applied to a comparatively small number of farmers, who gain as landlords, not as tillers of the soil. Even greater gains have sometimes been reaped by the owners of timber lands, ore mines, coal lands, and other natural resources, the values of which have been raised by tariff legislation. But unless these gains come from truly productive additions due to the tariff, there is no benefit to the community as a whole. #§ 6. The "two-profits" argument.# Somewhat related to this idea of the saving of two freights is the "two-profits" argument. It is said that the tariff keeps "two profits" at home, foreign trade gives but one. The word "profits" is here used in the popular sense of gain from a single transaction. Both parties are said to profit and both profits are thought to be secured at home when two citizens are forced to trade with each other. The view that there are "two profits" in a trade is an advance upon the notion that "one man's gain is another's loss,"[3] but there is an error in elementary arithmetic here, both as to the number and as to the aggregate amount of profits. The purpose of a protective tariff is to compel two of the citizens of a country to trade with each other instead of trading with two citizens of a foreign state; the number of profits made by each country is therefore not increased by substituting domestic for foreign trade. What, then, as to individual size and aggregate amount of the profits? The gain is not the same in all trades; the trade is made if there is a gain to each party, no matter how small it is; but the generous "profit" on one transaction where the conditions of the two parties are very different may be greater than the total of petty gains on a dozen trades between two traders of evenly matched powers. Indeed, the greater the difference in the conditions and the capacities of two groups of traders, the greater is the sum of the profits which they may secure through the members of each group trading with those of the other, rather than by the members of each group trading only among themselves. Can it safely be assumed that every trade with a foreigner is less advantageous than one with a fellow-citizen? Diamond cuts diamond, but two Yankees left to themselves surely should not be worsted in bargains with the universe. If they could exchange to better advantage with each other they probably would discover it as soon as the interested manufacturers and political orators who can prove so eloquently that they know the other man's business better than he knows it himself. Forcing the home trade by making our citizens trade with each other whether both wish to or not may be to the advantage of one citizen, but it is not likely to be to the advantage of both citizens. § 7. #The balance-of-trade argument.# At the foundation of nearly all belief in the virtues of a protective tariff will be found the "favorable balance-of-trade" notion. The ideal of the more thorogoing upholders of a protective policy is to keep merchandise consistently flowing out of the country, and to have nothing come in--in any case, nothing that by any fair amount of effort (whatever that be) could be produced at home. This is called maintaining a "favorable balance of trade." Sometimes the emphasis is more on the advantages of an excess of exports of goods, sometimes more on the importance of the need "to keep money at home." The simple error in these opinions is clearly apparent in the explanation of foreign exchanges and of the principles regulating the international flow of money.[4] An interesting commentary on the opinion before us is the fact already noted[5] that an excess of exports is the usual situation in poor debtor countries having constant interest payments to meet; while, on the contrary, rich creditor countries have an excess of merchandise imports. The "favorable balance-of-trade" argument, with the emphasis on money rather than on goods, is that the protective tariff keeps money at home which, if trade is free, will be sent abroad to buy foreign goods, thus impoverishing the country. This doctrine as presented in the seventeenth and eighteenth centuries in Europe, was known as _mercantilism_. It had great influence upon the commercial policies of all the great European nations. A superficial glance at the trade relations of an old, rich country with a new province seems to give evidence for such a belief. A richer country that is lending capital (sent to the debtor country in the form of goods) has at the same time a larger supply of money. The lack of money and the poverty of the newer country are looked upon by the protectionist as due to the importation of goods. The common cause of the imports to newly settled districts and of their scanty stocks of money, it need hardly be repeated here, is the comparative poverty of settlers and pioneers.[6] Often these are paying for imports by means of loans, and in any case their monetary stocks are not decreased either by their foreign trade or by their domestic trade with the older and richer parts of the same country. Europe and the United States, in their trade with China and South America, usually do not get gold in exchange, but merchandise of various sorts. It is true that in the trade of England and New York with great gold-producing districts, such as California, South Africa, and Alaska, gold is received in return for merchandise, for much of the gold in gold-producing districts is merely merchandise, and its export does not drain them of their due portion of money. There was a time when the states of Kansas, Nebraska, Iowa, and their neighbors were filled with resentment against the money-lenders of the Eastern states. There was a widespread belief that hard times were due to an insufficient currency.[7] Attempted action took the form of the greenback and free silver movements, which were defeated by the opposition of the East, but there can be little doubt that if the Federal Constitution had not forbidden it, the discontented states would have established a protective tariff "to keep their money at home." Few advocates of protective tariffs are ready to admit that the money stock of the country is dependent on the general wealth of the country and on the methods of doing business, rather than on a protective tariff. § 8. #The claim that protection raises wages.# The most effective popular claim made for protection is that it raises, or maintains, the general scale of wages in the country. This argument takes two forms: first, when wages are low in a country it is claimed that a tariff is needed to raise them; and, secondly, when wages are high it is argued that a tariff alone can preserve them. In Germany the fear is of the higher paid and more efficient labor of England. In America, where general wages at all times have been higher than in England, it was first argued (in the time of Henry Clay) that because of the greater cost of production, due to high wages, the tariff was needed to start certain industries; but after the tariff had long been established and the old argument had been forgotten (ever since 1865), it has been urged that the tariff, being the cause of high wages, must be maintained to protect against the "pauper" labor of the older countries. The higher wages in new countries where a tariff exists are always claimed to be the fruits of a protective policy. The true cause of the high general scale of wages in America is the greater efficiency of industry under existing conditions.[8] Labor is surrounded here with advantages in the forms of rich natural resources and of mechanical appliances such as never before were combined. Because of the scarcity of workers in particular protected industries, wages may be temporarily higher in them than in some other industries; but such workers form a small fraction of the population, and it is impossible to show that the general scale of wages in all occupations is raised by the tariff protecting this fraction. There is, of course, no question that every tariff change affects certain enterprises and classes of workmen. Enterprisers already acquainted with and engaged in a business always may hope to gain by the higher prices immediately following a rise in the tariff rates on their particular products. Though they are granted no enduring monopoly by the protection, they for a time enjoy the advantage of being on the ground, and may reap the first fruits of the favoring conditions. The enterpriser usually profits when the price of his product suddenly rises. Usually skilled workmen are affected slowly by competition when there is any considerable increase of prices in their special industries. The important question is, Who bears the burden of the higher prices that result from a tariff? The burden is very soon distributed. A part of it may be for a short time borne by the retail merchants, but ultimately nearly the whole of it must be borne by their customers, the unfortunate, less favored citizens. The weight falling on each is usually small, often unsuspected, always hard to measure. The increased benefit is concentrated in a few industries and accrues to a comparatively few producers. Here is a recipe for riches: get everybody to give you a penny; it's so little that no one will miss it, and it will mean a great deal to you. Something like this happens in the case of many protected industries; every consumer of the article pays a few cents more, a small group of wage-earners temporarily gains, and a few enterprises wax wealthy. § 9. #Tariffs and unemployment#. The claim that a low tariff is bad for the workers is made with peculiar success in any period when unemployment is greater than usual. It is vain in reply to show that again and again equally bad periods of unemployment have occurred when a high tariff was in force, and that often the most highly protected industries are most affected. It is vain to suggest that fluctuations of unemployment are related rather to the rhythm of industrial cycles and panics, than to any particular level of the tariff, whatever it be.[9] The fact that at the moment is seen is that here are some men for the time out of work, and here are some foreign goods coming in. Of course, what is not seen is that if we stop importing goods we thereby eventually will stop the exportation of goods of equal value now being sent in payment and this must throw as many men out of jobs as we helped into jobs by raising the tariff. But the view easy to take is the short view, and the ulterior consequences seem to the popular mind to be vain imaginings. § 10. #Exports and exhaustion of the soil#. It has been ingeniously argued that a tariff may keep some of the natural agricultural resources of a new country from becoming quickly exhausted. The export of food takes out of the soil and out of the country fertile qualities never to be returned. The shipment of several hundred million dollars of food products year after year represented a tremendous drain from the soil of the United States, but this has now largely ceased. The assumption, however, that the use of the food in this country preserves the fertility of our own fields is in the main mistaken. The fertile material in the food for human consumption hauled to a town five miles away from the field is almost as entirely lost as if it were shipped to Europe. Engineering skill has as yet succeeded in returning economically to the fields from which it comes hardly a fraction as much fertile organic matter as that which flows into the sewers, that is dumped into river and ocean, and that is buried in heaps at the borders of our own cities. Artificial fertilizers are increasingly used, to be sure, but they are obtained in other ways. On the other hand, the increased use of iron, coal, and timber, as a result of encouraging manufacturers, has very effectually hastened the exhaustion of the natural resources of the country. § 11. #Protection as a monopoly measure#. It has rightly been observed that a new country has a limited potential monopoly in certain kinds of products and that a tariff may make it effective. The rapid opening up of America with its rich natural resources greatly benefited the average consumer in Western Europe, altho it caused a loss to a special class of landowners.[10] Whether the citizens of the older or of the newer country shall reap the greater benefit in the trade depends on the reciprocal demand for the two classes of goods, as was seen in discussing the equation of international demand. A wide margin of advantage may go to one party and a narrow margin to the citizen of the more favored land. To put it concretely: America, having great natural resources for agriculture, might continue to trade food for manufactured goods even tho England reaped most of the benefits of the trade. An American tariff on manufactures from England would, under such conditions, check the demand for English products and compel some Americans to leave farming. This reduction of the American supply of wheat or corn and of the American demand for English manufactures compels a new ratio of trade (expressed in prices). It is conceivable that trading fewer goods with a larger gain on each trade would give a larger total of gain to the favored nation. Thus, foreigners may conceivably be compelled to pay a part of the tariff duties to enjoy the favored market. This is but a special case of the monopoly principle; the government by law artificially limits the supply of goods offered by its citizens. This argument is somewhat subtle, but probably is the soundest one in the theory of protection. The supposed conditions seldom occur in a marked measure, but they may exist, and probably have existed in America. When the great system of internal transportation was developed in the United States before that of the other new countries (say from 1840 to 1894), this country had such peculiar advantages for the production of food that the quantity was enormously increased and agricultural prices fell.[11] At such a time the tariff may have worked toward checking the fall and earlier reestablishing a more favorable ratio. It did this by making prices of manufactured goods in this country artificially higher and thus tempting men from rural to urban callings. But the limited application of the principle must be recognized. The potential competition of undeveloped countries on all sides, seeking to develop their resources, and profiting by the higher prices of food in the world-market caused by our tariff, threatens the peculiar advantages of the favored land. Russia, Argentina, and Australia have rapidly taken the place of America in supplying food to Western Europe, in part, no doubt, because we refused to take Europe's goods in trade. A great nation with its manifold interests is not eminently fitted to practise the gentle art of monopoly. The period in America from about 1840 to 1890 shows certain absurd contradictions in economic policy. By governmental action, national, state, and municipal, enormous grants of money and lands were made in aid of transportation. Canals, roads, and railways were built into new agricultural territory far faster than was healthy and normal. A prodigal land policy put a premium upon a wastefully rapid extension of the farming area. These things were done to favor the agricultural states, but agricultural prices fell so greatly that our farmers for a long period were nowhere prosperous, and great numbers of them, both in the East and in the West, were ruined. At the same time a high tariff on nearly everything the farmers needed to buy was the political spoil obtained by the Eastern and Middle states. This further depressed the condition of the farmers and forced them or their sons into urban industries. A slower development would have occurred without the waste of national resources in such conflicting policies of artificial stimulation. § 12. #Harm of sudden tariff reductions.# It is rarely appreciated how great is the tactical advantage which the advocates of a high tariff enjoy in popular political discussion. They can so easily impress the popular judgment with the evident fruits of their own policy and with the immediate dangers of the policy of their opponents. When a protective rate is first applied or is increased, it calls into existence something visible and tangible, which can be measured in terms of factories built, men employed, and products turned out. The increased cost of these results is diffused among many consumers and reaches them in such indirect ways and in such small increments of price that they are quite unaware of the way they are affected.[12] On the other hand, reduction of the tariff works in a direction the reverse of the enactment. It may cause local crises and may even bring on general crises. The benefits of the lower prices are diffused and lost to view; the immediate injury is concentrated and strikingly evident. Factories are closed, investments depreciate, laborers are thrown out of employment. The organic nature of local industry causes these evils to be felt by many classes. Merchants, professional men, servants, and skilled laborers, that are tributary to the depressed industry, suffer. The effects are transmitted to commercial and financial centres and often credit is much shaken. Then follows a slow and painful process of readjustment. The low-tariff advocates in America undoubtedly have underestimated these immediate effects. They have been too abstractly doctrinaire, have argued too absolutely for the merits of free trade to be applied instantly regardless of the existing distribution of investments and of occupations. They have opposed one extreme system by another, with no thought of the inexpediency and injustice of sweeping changes. There is a strong feeling among business men that any tariff, be it high or low, is better than a shifting policy. Despite the great preponderance of domestic production over foreign trade, it is perhaps too much to say that the tariff is unimportant in our present conditions. It can, however, be truly said that business can adjust itself in large measure to any settled conditions and that radical changes, especially sudden and large reductions, are fraught with evils. Long before a new tariff law goes into effect, even months in advance of its passage, while it is merely in prospect, the course of trade is abnormally affected. If the rate is likely to be raised, large importations take place under the lower rate, and for a considerable time after the law goes into effect imports are small, while prices rise and domestic production gradually increases. But if the rate is likely to fall, importations are for months meager, stocks of goods are reduced to the lowest point, and when the lower rate goes into effect, large importations follow to the injury of domestic producers. In many cases a year or two of notice, time given to enterprisers to adjust their business, would probably do away with a large part both of the serious losses and of the lottery-like gains that otherwise occur. The obvious measure of precaution and of justice would be to put any new rate into effect gradually.[13] The difficulties are of a political nature and in the desire of the party in power to "make a showing" at once of the results of its campaign pledges, in the one case by starting and stimulating industries through a higher tariff and in the other by reducing prices to consumers through a lower tariff. Under the new permanent tariff board, constituted to suggest tariff changes and to administer the tariff laws, it would be possible to apply some such feature. [Footnote 1: See above, ch. 2, secs. 12, 13.] [Footnote 2: In European countries, on the contrary, the rates that have been mainly effective have been those levied upon food products, and the agricultural landholders have been the "protected interests," such as the England "landed aristocracy," the German agrarian "Junkertum," and the French peasant landowners.] [Footnote 3: See above, ch. 13, sec. 2.] [Footnote 4: See ch. 4, sec. 6 and ch. 13, secs. 6-10.] [Footnote 5: In ch. 13, sec. 7.] [Footnote 6: See ch. 4, secs. 4 and 9.] [Footnote 7: That there is a certain measure of truth in this opinion is recognized in our discussion of the standard of deferred payments, ch. 6, sec. 9. But the relation of a world-wide appreciation of the standard money commodity with the burden that this change puts upon debtors has nothing to do with the question now before us, viz.: Does a protective tariff enable a country to keep and increase its proportion of the world's stock of gold; and if it could, would it be a general benefit?] [Footnote 8: See Vol. I, especially p. 228, and chs. 34 and 36.] [Footnote 9: See on wages in times of crises, ch. 10, secs. 6 and 7; and on tariff changes, ch. 10, sec. 14, and ch. 15, sec. 13.] [Footnote 10: See Vol. 1, pp. 361 and 443.] [Footnote 11: See Vol. 1, p. 436, for average wheat prices in England, practically in the world-market.] [Footnote 12: See above, sec, 8. On the next paragraph, see ch. 10, sec. 14.] [Footnote 13: For example, the maximum alteration in any year might be limited to 3.65 per cent of the value of the goods and in any case not to exceed one tenth of the old duty, this change to be applied day by day. Thus, if, on a valuation of $1000, the duty collected under the old rate has been $400, and under the new law is to be $290.50, three years would be required for the full change to become effective, the reduction each day being $.10 per $1000 valuation. The administration of such a rule would be simple, and it has been favored by men of practical commercial experience.] CHAPTER 15 AMERICAN TARIFF HISTORY § 1. Prevalence of protective tariffs. § 2. Specific and _ad valorem_ rates. § 3. Some technical features of the tariff. § 4. The tariff, 1789-1815. §5. The tariff, 1816-1845. §6. The tariff, 1846-1860. §7. The tariff, 1861-1871. § 8. The tariff, 1872-1889. § 9. The tariff, 1890-1896. § 10. The Dingley tariff, 1897-1909. § 11. Sentiment favoring lower rates. § 12. The Payne-Aldrich tariff, 1909-1913. § 13. The Underwood tariff, 1913. § 14. Some lessons from our tariff history. Note on Tariff legislation and business depressions. § 1. #Prevalence of protective tariffs.# For a century and a half most serious students of economics have favored a larger measure of freedom, if not absolute freedom, in foreign trade. But the actual practice of most nations has never been in accord with the principles laid down by the philosophers. Great Britain alone among the larger countries has, since 1846, steadily pursued a low tariff policy for revenue only, and her example has been most nearly followed by Holland and Denmark. Germany, which had always had restrictive duties, adopted still more protective measures under Bismarck in 1879. France, Italy, and most of the other nations of Europe have strong protective tariffs. The United States has followed a restrictive policy since near the beginning of the last century. The explanation of this contradiction between precept and practice is not entirely simple. Great interests are affected by foreign trade and certain of these interests are able to influence opinion and to dominate legislation. Free trade is not the most desirable thing for every one. The general policy of free trade between nations, as advocated by most English economists since Adam Smith, has usually been rejected by the people and the legislators of other countries. In its details American policy in tariff legislation under the Constitution has been varied and vacillating. The changes have been determined in most cases by motives of temporary partisan advantage or by the political activity of the immediate beneficiaries rather than by clear knowledge and consistent purpose of the electorate as a whole. Thus its lessons for the student are largely of a negative nature, but they well repay serious study. § 2. #Specific and _ad valorem_ rates.# Before entering upon the history of the American policy let us make clear the meaning of certain technical terms and explain certain methods which are frequently referred to. Rates (and duties) may be by either specific or _ad valorem. Specific duties_ are those that are calculated and levied according to some physical test, as so much per pound, per yard, per hundred-weight, or per ton. _Ad valorem_ duties are those that are calculated and levied according to the value of the goods (usually as it was at the place of shipment) determined by an assessor, by invoice of sale, by statement of the importer under oath, etc. The actual duty collected on any article may result from various combinations of the two rates (as, to take an actual example, $4.50 a pound and 25 per cent _ad valorem_ on cigars and cigarettes) or _ad valorem_ with a minimum valuation so that on the cheaper goods the rate is specific. Specific rates are more easily applied in administration, not offering the temptation to undervaluation and misrepresentation that _ad valorem_ rates do; on the other hand, specific rates do not adjust themselves to price changes as _ad valorem_ rates do. If the prices of goods go up the specific rate is relatively less and affords less of "protection" to the domestic producer; whereas if prices go down (as, in general trend, the prices of manufactured goods have done most of the time) the specific duties are relatively greater. To take a historical example, the specific rate of 6-1/4 cents a yard on cotton goods in 1816 which was at first in fact only about 25 per cent, within a few years became about 75 per cent and absolutely prohibitive. For this reason specific rates have most often been used in acts intended to increase the "protective" duties and often as a device for immediately raising rates; while _ad valorem_ rates have been more often used in acts prompted by the desire for less drastic exclusion and for a more adequate revenue; but there is no essential connection between the protective policy and specific rates. Indeed, in the period from 1897 to 1909, when most prices were rising, many of the specific rates under the Dingley Act, intended to be strongly protective, afforded less and less "protection."[1] § 3. Some technical features of the tariff. All goods not subject to duties are said to be on the _free list_. It is customary to group articles in _schedules_, of which there are fourteen in the law of 1913, designated from A to N (for chemicals, pottery, metals, wood, etc.), but the rates are not uniform for all the articles in each schedule. _Drawbacks_ are a certain amount, the whole or a part, of the duties that have been paid on imported commodities, which is paid back by the government on the reëxportation of the goods. _Compensatory duties_ (or compensatory rates) are those levied on certain manufactured articles with the purpose of raising their price as much as domestic producers' costs are raised by a tariff on their raw materials. Examples are a duty on woolen goods to offset a duty on wool, or a duty on shoes to offset one on hides. They may be intended to be partial or complete or more than sufficient, and are likely in any case to work either more or less to the advantage of the domestic producer than was intended. It may be that the conditions of supply are such that the home price of the raw materials is raised little or none by the tariff while the price of the finished product is considerably raised, or _vice versa._ § 4. #The tariff, 1789-1815.# The main difficulty of government in 1781-1789 under the Articles of Confederation was lack of the power to obtain revenues by taxation. The separate states alone could levy duties, and a good many tariff restrictions on freedom of trade among them developed in this period. The Constitution established the principle of entire freedom of trade among the states. The first act of Congress under the Constitution levied a tariff, primarily for revenue purposes, but clearly having a protective purpose, in the view of some of the representatives. However, most of the separate rates, as well as the general average rate, were the lowest ever levied by Congress, except that there was no free list and that 5 per cent was imposed upon all goods not otherwise enumerated. _Ad valorem_ duties up to a maximum of 15 per cent (that on carriages) were laid upon certain articles of luxury, and low specific duties on a few articles such as glass, nails, iron manufactures, hemp, and cordage. From 1789 until 1812, thirteen tariff laws, all told, were passed. One after another many rates were raised to get larger revenues, but some goods were put upon the free list. The foreign trade, in both imports and exports, grew largely and with considerable regularity, rising then rapidly to a maximum in 1807. Then followed troublous times, with British Orders in Council and our embargo and nonintercourse acts until 1812, and war until 1815, trade falling off at first to one-half, and at last (in 1814) to less than one-twelfth of the former maximum. Just as trade was, in the war period, sinking to the vanishing point, the tariff rates were doubled in hopes of getting increased revenues needed for the war, but in vain. [Illustration: FIG. 3. IMPORTS INTO THE UNITED STATES. 1821-18565 Many statistics bearing upon tariff history are graphically brought together here. This figure should be carefully studied in connection with the following sections. Observe how invariably in the years following a crisis, the amounts of dutiable imports and of duties collected have diminished, whether the tariff meantime was changed or not.] § 5. #The tariff, 1816-1845.# Tho rates had been rising, manufacturers had been making efforts to secure higher rates for protection, even as early as 1803. Effectual exclusion of foreign goods and consequent stimulus to the establishment of manufactures in the eastern states resulted, in the period 1808 and 1815, from the embargoes and the war. On the return of peace imports were resumed on a large scale and the call for a higher tariff was loud. In the revision of 1816, rates in a number of cases were fixed higher than those before the war. Average rates are said to have been about 20 per cent. The rate on both cotton and woolen goods was 25 per cent (and the minimum on cotton goods was a specific rate of 6-1/4 cents a yard). High rates were imposed on pig iron (50 cents a hundred), hammered bar (75 cents a hundred), and rolled bar ($1.50 a hundred, equivalent to about 100 per cent _ad valorem_). Rates were raised on many other articles. The average _ad valorem_ rates collected in 1821 attained the remarkably high figures of 36 per cent on dutiable goods, and almost 35 per cent on free and dutiable together. In 1824 in response to the growing sentiment in favor of the so-called "American policy of protection," many rates were still further increased, as those on cotton goods and woolen goods (to 33-1/3 per cent) and some kinds of iron. Cheap wool was now taxed 15 per cent and that valued over 10 cents a pound at 20 per cent (to be 30 per cent after 1826). In 1828, in the "tariff of abominations" which evoked much bitter criticism, the rates on all these goods were again raised, those on woolen goods being in some cases 100 per cent on the value, and those on iron being from 40 to 100 per cent on the value, and duties were levied on molasses, hemp, and flax. The results appear in the statistics of 1830, showing the average _ad valorem_ rates on dutiable imports to be nearly 49 per cent, and on free and dutiable together to be over 45 per cent. This marks a temporary high point in tariff rates. Revenues were then becoming excessive and that year the rates on tea and coffee and some other goods were reduced. Violent protests, especially from the South, were made against the protective system, and the tariff became a more important political issue. Then in 1832 a number of changes were made, mostly downward; the iron tariff, for example, being reduced to about the level of 1824. Average rates were thus brought down to about 33 per cent on dutiable goods. The compromise tariff act of 1833 provided for a process of reduction during a period terminating in 1842, the cut to be small at first, then to be made more rapidly to bring the maximum rate on any article down to about 20 per cent.[2] These changes, while as yet incompleted had, in 1840, brought the average rates on dutiable goods down to but 30 per cent and on free and dutiable together to 15 per cent. The 20 per cent rate, however, remained in effect only two months in 1842, when it was replaced by a tariff with higher rates distinctly protective, passed by the Whig party and which remained in force four years. § 6. #The tariff, 1846-1860.# The Democratic party coming into power, passed the Act of 1846, called the Walker tariff, after the Secretary of the Treasury. As he was a believer in free trade, this act is often mistakenly described as a free-trade measure. It was, in truth, far from that. Most of the rates were indeed lower than those that had been in force between 1816 and 1846 (with the exception of those between 1840 and 1842), but still some of the rates were high (a few as high as 100 per cent) and many of them were strongly protective in nature. The fact that tea and coffee were on the free list is marked evidence that considerations of revenue did not dominate. The rate on cotton goods was 25 per cent and the rates on many of the most important other protected articles (iron, woolen goods, manufactures of iron, leather, paper, glass, and wood) were 30 per cent. The average rates under the act for its last eight years (to 1857) were on dutiable 26 per cent, on free and dutiable 23 per cent. The country prospered for eleven years under this tariff. In 1857, rates were again reduced, the more important protective rates from 30 per cent to a level of 24 per cent. This time partizan considerations played no part in the discussion. The revenues of the government had been excessive and the need of a reduction was admitted by nearly every one. The average _ad valorem_ rates under the nearly four years of the act of 1857 were about 20 per cent on dutiable and 16 per cent on free and dutiable (the lowest in the century between 1812 and 1913). § 7. #The tariff, 1861-1871.# The reduction of rates in 1857 was made just at the time when the country was at the height of a wave of prosperity and of speculation which culminated in the financial crisis of that year.[3] As always at such times, the government's revenues fell greatly. The first purpose in the revision of the tariff in 1861 was simply to restore the rates in the act of 1846. But the Morrill act which became a law just before Fort Sumter was fired upon, contained many higher rates and its purpose was avowedly protective. This necessarily involved a sacrifice of possible revenues for the government.[4] Then from the beginning of the Civil War till its close some rates were raised almost every month with little scrutiny or debate. The average _ad valorem_ rate jumped from 19 per cent on dutiable in 1861 (under the law of 1857) to an average of 35 per cent in the three years, 1862-1865. The most important tariff acts of the war were those of 1862 and 1864 by which large increases were made on many articles. These tariff acts were passed in connection with far-reaching and burdensome applications of internal revenue taxes on many kinds of manufactures. The tariff rates were primarily intended to offset these taxes, "to impose an additional duty on imports equal to the tax which had been put on the domestic articles," as was said by the sponsors of the bill. These rates were similar in purpose to compensatory rates, and in many cases they were more than sufficient to offset the internal taxes. Under the last of these acts the duties collected in the six years from 1865 to 1870 averaged nearly 48 per cent on dutiable and nearly 44 per cent on free and dutiable. The remarkable fact was that soon after the war the internal revenue taxes began to be repealed one after another, and by 1872 nearly all those bearing upon general manufactures (apart from cigars and alcoholic beverages) were gone. The tariff, however, remained almost unaltered. This repeal of internal revenue taxation had the same "protective" effect as raising the tariff rates by so much. As if this were not enough for the protected interests, in 1867 the duty on woolens was further raised and in 1870 numerous other increases were made in the duties having a protective character. Some reductions were made, but these were almost all on articles of a distinctly "revenue" character such as tea, coffee, sugar, molasses, spices, wines. Revenues were superabundant for current expenses of government, and altho there was a large national debt, hardly any of it was redeemable at the time. There was therefore need to reduce taxation, but the attention of the consuming and tax-paying public was distracted by the somewhat passionate political issues of the day. Besides, the public had not the technical knowledge or the unified opinion on this subject to protect itself against the greedy lobby in this process of tax revision. And so, selfish commercial interests could get nearly what they asked for in Congress, and the politicians at Washington, who had come to have a well-nigh superstitious faith in the efficacy of very high protective duties, could quietly use the opportunity to raise the people's taxes for the people's good. These virtual increases in the protective power of the rates in force are not evident in the statistics of average _ad valorem_ rates, because the higher rates in many cases were sufficient to exclude relatively more of the foreign products to which they applied.[5] The imports came, by a process of selection, to consist more largely of goods subject to lower rates. So the year 1868 showed the highest average rate on dutiable goods (48.6 per cent) of any year after the act of 1828 until that of 1890, and the rate fell somewhat each year until in the fiscal year 1872 it was 41.3 per cent. § 8. #The tariff, 1872-1889#. In 1872 the country was again, as in 1857, nearing the crest of a wave of prosperity and of speculation. Imports and customs receipts attained new high points in our history, and, despite the enormous reductions of internal revenue taxation, the government's receipts continued to be excessive.[6] The important revenue articles, tea and coffee, were then transferred to the free list, as were also raw hides and paper stock and some other articles; the rate on salt was reduced one-half and that on coal almost as much. Many other specific rates were reduced and the _ad valorem_ rates on a long list of articles were cut to "90 per cent of existing rates." The effects of these reductions were mingled with those of the severe financial panic occurring in 1873 and of the depression following, which reduced especially the importation of luxuries bearing the higher rates. The average rate of the three (fiscal) years 1873 to 1875 was 39 per cent on dutiable (a fall of 9) and 28 on free and dutiable (a fall of 16). The ratio of imports entering free, which in 1872 was still only about 1 in 14, became the next year 1 in 4. But government revenues falling short in 1874, advantage was soon taken of the circumstance to repeal in 1875 with little discussion the horizontal cut of tariff rates made in 1872. The specific rates that had been reduced in 1872 were little changed, however. From 1876 to 1883 (8 fiscal years) nearly a third of the imports consisted of goods on the free list. The average rate on dutiable was over 43 per cent, and on free and dutiable was 30 per cent. The tariff was a leading issue in the campaigns of 1876 and 1880. In 1876, the Democratic party's platform contained a plank for "a tariff for revenue only." It was a time of great industrial depression, and as is usual in such cases a large number of the electors held the party in power responsible for business adversity (as in turn they credit it with any more or less fortuitous prosperity). The Republican candidate Hayes, after a long contest in Congress, was declared elected by a margin of one electoral vote. His opponent, Tilden had received a quarter of a million more votes in the country as a whole. In 1880, when business prosperity was rapidly returning, the party in power was successful by a goodly margin of votes in the electoral college, tho having a bare plurality of the popular vote. Garfield, the Republican candidate, was known as one of the more moderate protectionists and his opponent, General Hancock, who was without any political record, declared the tariff to be a "local issue," to be determined in the Congressional districts. The tariff issue was thus not very sharply drawn. The tragic death of President Garfield left no clear leadership. The tariff question from 1876 to 1884 was politically in the doldrums. Yet there was undoubtedly a somewhat growing popular demand for some moderation of the very high duties. To this demand the friends of protection who were in power felt compelled to concede something--or to appear to do so. Congress appointed a Tariff Commission of which the Chairman was secretary of the wool manufacturers' association, and after a report the tariff act of 1883 was passed. The net results were almost nil. Some rates were lowered, while others were raised with a definite protectionist purpose. The average rates for the next seven years, 1884-1890, were 45 on dutiable (an increase of nearly 2 per cent) and 30 on free and dutiable (unchanged as compared with the period ending 1883). In 1884, the Democratic party elected its presidential candidate (Cleveland) and a majority of the House, but as it did not control the Senate it could not pass any of the various proposed measures for a "reform" of the tariff. In 1888 the protective principle was a leading issue in the campaign. Altho Cleveland received a few ten thousands larger popular plurality than he had obtained four years before, and held the electoral votes of 18 of the states, he lost New York and Indiana by very narrow margins, a result in which other issues played a large part. Harrison was elected and the party favoring a high protective tariff came into power. § 9. #The tariff, 1890-1896#. The tariff act (known as the McKinley act) of October, 1890, followed. This was a general extension of the principle of protection. The rates on woolen goods were on the whole increased and made in more cases prohibitive. The rates on wool were increased. The rates on iron, which was already highly protected, were little changed except by the increase of the duty on tin-plates. The duty on sugar (in the main a revenue duty, yielding $55,000,000 a year) was removed and a bounty was granted to domestic sugar producers. In the next three (fiscal) years, 1892-1894, the average rate proved to be over 49 per cent on dutiable (4 per cent increase) and 22 per cent on free and dutiable (the remission of sugar duties accounting for the most of this fall of 8 per cent from the average under the preceding law--4 per cent fall from the last year of its operation). Particularly noticeable, however, was the increase in the proportion of goods entering free, which was nearly 55 per cent of all merchandise as contrasted with about 33 per cent between 1884 and 1890. Again the political weather vane shifted. The month after the McKinley bill became law, the Congressional elections (November, 1890) returned an overwhelming Democratic majority in the House, altho this was a period of business prosperity, a fact usually favoring the party in power. In 1892, Cleveland, being again a candidate, was successful over Harrison by a largely increased plurality of the popular vote, and received almost double the electoral vote of his opponent. The House was Democratic, and the Senate soon became so. Business prosperity was rising again to a high level, but there were many features of financial and speculative weakness in the situation, intensified by growing fear of a cheap money (silver dollar) inflation under the act of 1878 providing for the annual purchase of silver. A financial panic occurred in September, 1893, six months after Cleveland's inauguration. Nevertheless Congress enacted the next year, Aug. 28, 1894, the Wilson tariff act. The changes made by this legislation were not on the whole very great, but were nearly all in the direction of the lowering of the tariff. Most notable was the putting of raw wool upon the free list. Some rates on woolen goods were reduced, but hardly more than enough to offset the effects, upon manufacturers' costs, of the reduction of the tariff on raw wool. Likewise small reductions were made on cotton and silk goods, on pig iron, steel and tin plate and many other articles; and larger reductions on coal, iron ore, chinaware, and glassware. To make up for the expected reduction of receipts from other sources, a duty was laid again upon raw sugar, and an income tax law was passed (this soon, however, to be declared unconstitutional). Under this law, for three fiscal years (1894-1897) the average rates were 41 per cent on dutiable and 21 per cent on free and dutiable,--pretty high rates. The proportion entering free under this act was actually less than under the McKinley act, partly because of the sugar item, and partly, probably, because of general business conditions. § 10. #The Dingley tariff, 1897-1909.# The campaign of 1896 was waged almost solely on the issue of free silver. Undoubtedly great numbers of voters supported William McKinley rather despite of, than because of, his high protectionist beliefs. But his inauguration was promptly followed by the passage of the Dingley act of July 24, 1897, which embodied a marked increase of protective rates. A duty was again levied on wool, and also on hides which had been untaxed since 1872. High rates were made for woolens, linens, silks, chinaware, and the rate on sugar was doubled. Provision was made for some reduction of rates by reciprocity agreements, but the conditions were so complex that the effect could not be great. This high protective tariff, thus enacted without popular discussion, remained almost unchanged for twelve years, the longest life, by one year, of any tariff act in our history,[7] The rate under the first full fiscal year of the law's operation, 1899, was the highest on dutiable in our history, 52 per cent, and was nearly 30 per cent on free and dutiable. In practical operation, however, the average rate steadily became more moderate because of the rapid rise of the general price level that was in progress throughout this period, amounting to 35 per cent from 1898 to 1909.[8] The average rate of duties collected for the period of 12 years was 47 per cent on dutiable and 26 per cent on free and dutiable. It was steadily falling and the last year, 1909, was 43 per cent on dutiable and 23 per cent on free and dutiable. § 11. #Sentiment favoring lower rates.# While the Dingley act was thus in operation showing declining average rates, sentiment was developing in every part of the country in favor of a further moderation of the tariff. This was due partly to the discontent resulting from steadily rising general prices, in which change the rise in the prices of food and of many other necessities was not fully compensated by the rise of the wages and incomes of the masses. Partly the growth of this sentiment accompanied the agitation against trusts and the belief that protective duties in some cases were an aid to the formation of domestic monopolies. But more fundamentally, this changing sentiment was the result of the changing industrial conditions in America. The character of our foreign trade had altered greatly since the early nineties. We were importing relatively less and less of manufactured and finished products, and more of raw materials; and we were exporting less and less of raw materials and more of finished products. A growing number of manufacturers were feeling the need of cheaper raw materials and were looking hopefully toward an enlargement of their foreign trade. The Republican platform in 1908, in view of the changing public sentiment, formulated a new rule for maintaining "the true principle of protection," namely, that it "is best maintained by the imposition of such duties as will equal the difference between the cost of production at home and abroad, together with a reasonable profit to American industries." This rule is very attractive in its suggestion at the same time of the idea of a moderation of the tariff and of an exact practical (not to say scientific) standard for the determination of the proper rate in every case. The rule is, however, fallacious. "Costs of production" mean here the monetary costs of the enterpriser. Now a first difficulty is that costs are not uniform for all establishments in any one industry, and a tariff high enough to protect some is entirely too low to protect others. As long as a tariff rate is too low to exclude every unit of the foreign product its importation is conclusive proof that for some home producers the tariff rates fall short of the "true principle" (better proof, indeed, than the most elaborate investigation by any tariff board could be). The indubitable truth is that no trade ever can take place (in a monetary régime) unless the monetary price is lower in the exporting than it is in the importing country. This virtually means that the product cannot be profitably exported unless the monetary costs of production ("together with a fair profit") of the article exported are for each party less than those of the other party in the other country.[9] The so-called "true principle" would lead thus to absolute prohibition of every article to which it was applied. § 12. #The Payne-Aldrich tariff, 1909-1913#. In the campaign of 1908 the Republicans admitted that the protective tariff needed to be revised, but they declared that it should be revised by its friends. It was doubtless the general understanding that "revision" in this promise meant revision downward, tho this was left somewhat unclear in a campaign wherein the tariff played a somewhat minor part. The tariff act of 1909 (the Payne-Aldrich act) was the attempt of the successful party to redeem its promise in this regard. Many changes of rates were made, both downwards and upwards. It was estimated that rates were reduced in 584 instances, affecting 20 per cent of imports. These changes included placing hides upon the free list (before taxed 15 per cent), and cutting down the rate on leather, shoes, coal, lumber, iron ore, pig iron, and steel-rails. But on the other hand rates were increased in 300 instances (including many items in the cotton schedule). The general belief that little reduction was effected, on the whole, was confirmed by the experience under the act. As compared with the last two years (1908-1909) of the Dingley tariff the first two years of the Payne-Aldrich tariff showed a decline of 1.5 per cent, and on free and dutiable a decline of less than 3 per cent. These reductions in the statistical results are no greater than occurred within like periods while the Dingley act continued in operation without change.[10] No other tariff since "the act of abominations" in 1828 has called forth such widespread criticism as this one, and the tariff became a leading issue in the campaign of 1912. After 1910, the House being Democratic, many bills to reduce duties were presented, and some were passed by both houses, but all were vetoed by President Taft mainly on the ground that it would be best to await the report of the tariff board which had been authorized and appointed for the purpose of ascertaining the cost of production referred to in the "true principle of protection." § 13. #The Underwood tariff, 1913#. After President Wilson was inaugurated, March 4, 1913, the tariff was at once taken up by Congress. The general features of the act that was passed were as follows: (a) Considerable additions to the free list of raw materials. (b) Abolition of compensatory duties corresponding with the old rates on raw materials. (c) Replacement of specific by _ad valorem_ rates in many cases. (d) Taxation of plain kinds of goods less than fancy kinds--luxuries higher than necessities. (e) Reduction of rates generally (most of the few increases being to correct some evident error in the old law). (f) Application of the so-called competitive principle to rates intended to be protective, viz., to leave the rate just barely high enough to keep out foreign products.[11] Articles placed on the free list were raw wool (which had borne a rate equivalent to about 44 per cent), metals, agricultural implements, raw sugar (the lower rate to go into effect gradually), coal, lumber, many agricultural products including live cattle, meats, wheat, corn, flax, tea, and hemp, and numerous manufactures including boots, shoes, gunpowder, wood pulp, and print paper. Moderate reductions were made in the schedules for chemicals, earths, cotton goods, and sundries, while rates on various luxuries were either unchanged or raised. Left almost unchanged were the schedules for tobacco, for spirits and wines, and for silks (already very high). This act was signed October 3, 1913, and had been in operation about nine months when the great war broke out in August, 1914. What its effects would have been under normal conditions we can judge little from the actual experience. The first eight months that the act was in operation, the _ad valorem_ rate on dutiable goods proved to be 36 per cent (about 4 per cent less than in the preceding year) and the rate on free and dutiable together about 14 per cent (over 3 per cent less than the preceding year). The first complete fiscal year (that of 1915) under the act, the average rate on dutiable goods was 33.5 per cent and that on all imports was 12.5 per cent. Evidently this is far from a "free trade tariff." The reduction in the average _ad valorem_ rate is less than was expected. Many of the reductions had little effect, the former rate having been much higher than was needed to exclude the goods. In other cases the old rates were but nominal and inoperative because they were upon goods regularly exported, not imported (e.g., farm products, cotton goods, and some other manufactures). But some of the reductions doubtless will force the less efficient plants in some industries touched to increase their efficiency or go out of business. Time, in any normal period, is needed for adjustment, but an adjustment of a most abnormal kind is in progress during the war. Imports from Europe have fallen greatly, while exports are enormously increased. Old industrial establishments have been converted to different and temporary uses. The conclusion of the war must bring a new readjustment that must cause a severe shock to some enterprises--and this must have been so under any possible variety of tariff.[12] § 14. #Some lessons from our tariff history.# Can we draw from the checkered course of tariff history in America clear lessons of wisdom for the future? At least certain negative conclusions may be safely drawn. It is a history of a vacillating public opinion toward the policy of protective duties. Always the policy has kept some hold on public sentiment, but it has varied in strength, now waxing, now waning. The time of revisions has been determined nearly always by varying needs of revenue. When more income has had to be raised, this has nearly always been made the occasion and pretext for increasing the degree of protection for many industries. This is not at all a necessary connection, for it would be possible to couple internal revenue taxes and customs duties in such a way that the rates would go up and down together and give the varying amounts of revenue required for the government without appreciably altering the relative profitableness of various private enterprises. Our tariff history is too largely a record of special favors granted to classes of citizens, to the citizens of certain localities, and to particular enterprises. This is apparent even in a general survey, but almost every more detailed examination of particular protective rates reveals evidence of suspicious and sometimes scandalous personal influences at work. The protective policy has always professedly been advocated for the general welfare to raise wages or to make the country prosperous, but the initiative has always been taken, and the valiant work in contributing funds for campaign purposes and in lobbying bills through Congress has been done, by the interested manufacturers. Even if it were beyond question sound in principle to exclude goods that can be bought more cheaply by trade, it is very doubtful whether any net good could have resulted from this policy as it has been in fact applied and followed. The frequent and unpredictable changes have been a great evil, and have again and again brought unmerited losses to the many in business and still greater and unearned gains to a favored few. It is incredible that such a hit-or-miss, in large part selfishly determined, policy could have been an important cause of our national prosperity. The fundamental causes of the general high wages and popular welfare that we have enjoyed is to be found rather in our rich natural resources, our capacity for self-government with free institutions, and the industrial energies of our people.[13] The revision of the tariff of 1913, viewed with non-partizan eyes, appears to have been carried out, to say the least, as consistently with regard to its professed doctrine, and as little influenced by the malevolent arts of the old-time Congressional lobby, as any debated tariff act in our history. It still contains on the whole a large measure of protection. Under various pretexts such as the danger of a flood of cheap goods after the close of the great war, attempts will be made to make it still more prohibitive. But one lesson of our tariff history is that such an act should be given a period of fair trial before extensive changes are made in it. Even further reductions should be cautiously undertaken and put into effect gradually. If the attempt is made through temporary rates to reduce the shock of the trade adjustments, of the "dumping" after the war, then the devising and administration of such measures should be delegated to an expert, disinterested, permanent tariff board. The task is to prevent temporary "unfair competition" and sudden changes, rather than to raise permanent barriers to fair trade.[14] [Footnote 1: It is evident that it is only through _ad valorem_ rates that it is possible to compare the average rate of duty for one tariff act, with that for another. As, however, every tariff act is made up of both specific and _ad valorem_ duties, it is only at the end of the year that an average _ad valorem_ rate can be estimated by comparing the total of duties collected with the total estimated value of the goods imported. Average _ad valorem_ rates are estimated in this way both on the dutiable goods alone, and on all goods, free and dutiable combined. There may be an element of error, even of misrepresentation, in such estimates. They do not give the simple test of the relative height of duties, or of the degree of "protection" that we might at first suppose. Just to the extent that a new and higher rate really operates to exclude imports (and thus is protective in its effect) the goods subject to that rate cease to form part of the total imports. For example, if the average rate of duty were 25 per cent, and a 50 per cent rate on an article were increased to 75 per cent, it is possible that this rate would prove to be absolutely prohibitive. This raise of rate, therefore, would tend to reduce the average rates collected on all dutiable articles. Changes in general conditions of industry from causes quite apart from the tariff may result in shifting the proportions of imports that are dutiable so that the average rates go either up or down while the tariff law has remained unchanged on the statute book. A failure to consider these and related facts leads to much confusion in popular and political discussion of the tariff.] [Footnote 2: Usually given as 20 per cent. However a good many rates under the full operation of the act worked out as 21-1/2 or 23 per cent, and a few at 26 and at 29 per cent. Besides there were numerous specific rates, the _ad valorem_ force of which cannot be determined.] [Footnote 3: The political argument that the small tariff reduction of 1857 caused the crisis of 1857 will not bear serious examination. See below, sec. 13.] [Footnote 4: See ch. 14, sec. 2.] [Footnote 5: See above, sec. 2, note 1.] [Footnote 6: Internal revenue receipts in 1866 had been $309,000,000; in 1872 they had fallen to $131,000,000, yet the government's surplus for the three years 1870-1872 was little less than $100,000,000 a year. This was almost half of the total receipts from customs, which were $216,000,000.] [Footnote 7: Other issues absorbed public attention in this period--the Spanish war, colonial policy, "imperialism," railway rate regulation, corporation control, etc.] [Footnote 8: See above, sec. 2.] [Footnote 9: Compare with ch. 13, sec. 5.] [Footnote 10: Probably resulting from the rising prices, as explained above, sec. 2. For example, in one year, from 1899 to 1900, the average _ad valorem_ rate collected on dutiable goods fell 3 per cent, and that on all goods fell 2 per cent; in the two years from 1904 to 1906 the average rates on dutiable fell 4 per cent, and on all goods fell 2 per cent.] [Footnote 11: This "competitive principle" is essentially the same as the so-called "true principle" of equalizing the cost of production (see above, sec. 11). It is essentially a prohibitive, not a free trade, principle. Strictly applied it would cause complete exclusion of imports. But as applied to selected articles which it is desired to exclude in order to "protect" the domestic producer, this principle would simply prevent the rate being placed appreciably higher than was needed to exclude them. Anything beyond that point but offers temptation and opportunity for the formation of a monopoly by domestic producers. Then, too, the rate may intentionally be fixed so as to make just possible the survival of the most favorably located or most efficiently operated establishments, while compelling the abandonment of other establishments. See ch. 14, sec. 3.] [Footnote 12: Such changes are logically related to the subject of financial crises rather than to that of the tariff. See note at end of the next section.] [Footnote 13: See Vol. I, e.g., pp. 228, 431, 445ff, 466, 490, 506ff.] [Footnote 14: #Tariff legislation and business depressions.# The relation between new tariff legislation and the business conditions following it has been the subject of much debate in political campaigns. In the few cases where a relationship has been most often asserted to exist, it is more probable that the tariff change was the _result_ of business conditions preceding it, than that it was the cause of the conditions following it. For usually a tariff has been revised downward because a few years of prosperity with large imports had so increased customs duties that the government has had surplus revenues. Just when the tariff was reduced, the conditions were ripe for a crisis. This happened in 1857 (already in 1856 there had been a preliminary halt of business), again in 1872, and on a small scale in 1883. But the main reduction resulting from the compromise act of 1833 did not occur until after the crisis of 1837-39; the Walker act of 1846 was passed just as business was starting upward on a long wave of prosperity; and the act of 1894 was passed a full year after the severe crisis of 1893, when business had already entered upon a period of depression. In none of these cases does it seem reasonable to attribute business depression to the reduction of the tariff, as is commonly done in protectionist arguments even to the point of attributing the panic of 1893 to the reduction of the tariff a year later! At several times the tariff has been raised soon after a crisis when a good occasion was presented by the need of larger revenues as in 1842, 1860, 1875, and 1897. Business at such times is just at the point of the cycle when prosperity is due. The higher tariff of 1842 was succeeded by the low tariff of 1846 without any check to business. The war obscured the ordinary industrial effects of the tariff acts of the sixties. The increase in the year 1875 was followed by four years of hard times and slow recovery. The increase of the tariff in 1890 occurred as business was nearing the top of the cycle and was followed by two years of prosperity culminating in the very severe crisis of 1893. The authors of the tariff of 1897 were peculiarly fortunate in the time of their action, for the country was just fairly recovering from the very severe crisis of 1893 and prosperity was to continue (with brief hesitation in 1900 and 1903) until the severe crisis and panic of 1907. The advocates of higher rates are, of course, correct in declaring that the great business prosperity of the years 1915 and 1916 resulted from the unexpected demands in foreign trade growing out of the war, and is not to be credited in large measure to the act of 1913. But reason requires that the same restraint be exercised in crediting to higher protective acts the prosperity which has in some--not all--cases, followed their enactment; and requires further that the present act be not held accountable for the next reaction in trade, whenever it may occur, inasmuch as a reaction would be sure to occur no matter what kind of tariff act we might chance to have at the time.] CHAPTER 16 OBJECTS AND PRINCIPLES OF TAXATION § 1. Public finance as a division of economics. § 2. The police function. § 3. Social and industrial functions. § 4. The enlarging sphere of the state. § 5. Industrial revenues of governments. § 6. Governmental receipts from loans. § 7. Nonrevenue character of receipts from loans. § 8. Revenues from taxation. § 9. Forms of taxation. §10. Defective tax "systems." §11. Various standards of justice suggested. § 12. Social welfare as the aim. § 13. Principles of administration. § 14. Shifting and incidence. § 15. Taxes as costs. § 1. #Public finance as a division of economics.# Men live together in politically organized societies which employ public officials as agents to carry on the functions of government. Every governmental unit, large or small, may be viewed not only as a political body, but as an economic enterprise. Each has its economic aspects, such as receipts and expenditures, employer and employee, borrowing and lending, etc. Each political unit is in this sense "an economy." The study of the public economy, of the economic aspects of government as distinguished from its political aspects, constitutes the science of public finance, an important division, tho not the whole, of political economy. The primary fact determining the public finances is the extent of the sphere of "the state," meaning by the state the totality of political powers and functions in a community. There are two typical ideals of a state, each with corresponding functions: the ideal of the police state, and that of the social-industrial state. In fact every system of government provides for the exercise of both functions in some measure. The police function is primary. All governments alike exercise it, but they differ most in respect to the degree in which they exercise the social-industrial functions. § 2. #The police function.# The police function is that of public defense and the maintenance of domestic order. In family or patriarchal communities all share a common income and combine in the common defense, but self-preservation often has compelled such small communities to form a larger, stronger state for the common defense. Public defense requires sacrifice of some independence on the part of the family and of the individual. Personal service in the field gives place later in some measure to the payment of taxes, so that a regular income may permit the government to attain a more regular, continuing, and perfect organization of military forces. As political unity and power grow, the citizens need less often protection against foreign foes, and they need more often, relatively, defense against the aggressions of some of their own countrymen. The preservation of domestic order requires police, courts of justice, and other agencies. The ideal of the anarchist to do without government is nowhere realized. Everywhere there must be government to preserve peace and to protect property. Unfortunately, this need grows with the growing density of population. Crime increases when men swarm in great cities. The courts which settle disputes between men, and which interpret their contracts, are agencies of peace, displacing physical contests. To maintain and operate the various parts of the social machinery requires ever increasing governmental revenues. From many causes government has, in modern times, grown increasingly costly. § 3. #Social and industrial functions.# The social and industrial functions of government seem naturally to grow out of the primary ones just mentioned. In a democratic society, popular education is a necessity, as it appears that domestic order is not possible in a democratic state without intelligent citizens. The system of public education has, in many states, expanded to include a publicly supported university as the dominant educational and scientific organ of the community. Some industrial functions are performed by the government in connection with the primary needs. Lighthouses are necessary to guide the navy, but they also serve to guide the merchant marine and to aid industry. The post was established as an agent of political and military government to connect the ruler with the outposts (a fact the name post indicates), but the postal service has grown in every country to be a great industrial and social agency. The consular service, originating in the political need of keeping official representatives in foreign lands, has become a valuable economic agency; consuls are commercial agents, advancing the business interests of their countries in all quarters of the globe. § 4. #The enlarging sphere of the state.# A mere police state would leave to private initiative the provision of every kind of economic agencies not needed for political government. The state might, for example, even leave the provision of roads and bridges to private individuals or to companies, permitting them to charge tolls to obtain a return on their investment. Whenever a toll-road is made public and a toll-bridge becomes free, and the state maintains the roads, it is becoming less strictly a mere police state. Reacting from the ideal of the police state which was most highly praised in the first half of the nineteenth century, the functions of government have been extending in many directions in the last half century. More and more economic functions are performed through the agency of government. If we think of an act as done by the government _for_ private citizens, we call it paternalism; but if we think of an act as done _by_ citizens collectively _for_ themselves as the best way to get these things done, we may call it, in a broad sense, socialism.[1] Government is in one aspect a direct good to its citizens. In return for its collective cost men collectively get the enjoyment of social organization, markedly in contrast with the uncertain ties and hazards of primitive communities. But government becomes also a mode of social investment, an indirect agent, a productive enterprise. Wealth applied through it secures in some cases a greater product than is possible by individual action. But when the government undertakes these various tasks the expense falls unequally on individuals and affects differently their incomes. When free schools take the place of private schools, the law compels every one to contribute to education. To many individuals it is a matter of indifference whether they pay tuition or taxes, but the wealthy bachelor sometimes grumbles when forced to help in educating the day-laborer's family. The average result of a certain social policy may be right, but individuals diverge from the average and thus have constantly a motive to attempt to change the limits of governmental action. Happily the subject is not always viewed with selfish eyes. The ethical and patriotic thought is not, "How will this affect my interests?" but. "How will it affect the general interests?" But as the question of value is always involved men are usually found favoring or opposing the industrial and social activity of the state according as it affects their own incomes. Thus the determination of the sphere of the state is in large part an economic question. § 5. #Industrial revenues of governments#. The costs of government at any stage are met in varying degrees in one of three ways: (1) from industrial sources, (2) by borrowing and thus creating a public debt, (3) from taxation. (1) Receipts from industrial sources in the broad sense include all rents from wealth owned, interest on loans made, and proceeds of sales from enterprises conducted, by the government. In feudal times, these were mostly obtained in the form of rents from the private domains of kings and nobles. In many early and medieval states these sources of receipts were adequate to the need of government; then they decreased in many countries, both relatively and absolutely, because of the sale of publicly owned wealth (lands and mines) and with the recent extension of the functions of government have again increased very rapidly. Now industrial revenues come not only from the rents of forests, mines, docks, lands, and buildings, but from profits in the operation of industrial enterprises such as waterworks, railways, mines, and factories, and from interest on funds deposited in banks or otherwise invested. At present the industrial revenues of the aggregate governments of the United States (national, state, and municipal) amount to about a fifth of all revenue receipts. Since the middle of the nineteenth century the number and variety of the industrial enterprises undertaken by governments has been steadily increasing, and this increase has been most marked in the cities. The change in this respect in the United States, great as it has been, has been proceeding more slowly than in the European countries. In 1913 the receipts of this nature (earnings of departments and of public service enterprises) were nearly $500,000,000. The larger part of this sum comes to the national government ($288,000,000), mostly from the post-office department. Most of the remainder comes to the minor divisions ($176,000,000), and but little to the states. The total "earnings" (this means here receipts, not profits) of public service enterprises in incorporated places were $120,000,000. § 6. #Governmental receipts from loans.# The funds to invest in these commercial undertakings are originally obtained in nearly all cases from public loans. Almost every unit or division of government may become a borrower to provide for its citizens at once certain needed advantages and improvements when the funds are not at hand and immediate taxation is deemed too heavy a burden.[2] The indebtedness (less funds available for payment of debt) of the aggregate governments of the United States in 1913 was: Nation ................................. $1,028,000,000 States ................................. 346,000,000 Minor divisions ......................... 3,476,000,000 ------------- Total .................................. $4,850,000,000 The larger part of nearly every national debt has been incurred for purposes of war and preparation for war, while nearly all public debt other than national has been created for the purpose of peaceful social and industrial development. The debts of the American states have partly been made necessary to meet deficits in current expenses, but largely of late to erect public buildings, purchase forest lands, improve roads, and construct canals. The minor divisions are counties, cities, villages, boroughs, towns, townships, school districts, drainage, irrigation, and levee districts, fire districts, poor-relief districts, road districts, and various other subdivisions of states and of counties. Every one of them has more or less legal power to incur debts and to levy taxes for the purpose of paying the interest and of repaying the principal. The purposes for which the debts are incurred by specially organized districts are sometimes indicated in the names (e.g., drainage, irrigation), while the regular political divisions of counties, cities, villages, towns, townships, incur debts for a large variety of objects, such as streets, sewage disposal, water supply, electric light or gas plants, school houses, libraries, and other public buildings. Large expenditures for these purposes are necessary because the local governments are undertaking new functions, and either existing equipment (such as waterworks systems, and street railways) must be bought from private companies or new ones must be built. They are necessary further because the rapid growth of population calls for an immediate "capital investment," the payment of which may be, through borrowing, more easily spread over a series of years (e.g., in the extension of streets and paving, and in the provision of school houses for the children). § 7. #Nonrevenue character of receipts from loans.# The proceeds from loans (and certain other items of sales) are called nonrevenue receipts, because they are but in anticipation of receipts from other sources. The economic theory of such loans is essentially the same as that of private loans, but it is the people of the political district collectively that are the borrowers. To get the present uses of goods they sell their promise to make future payments totaling a larger amount. The loan is the present worth of those promises. In the case of loans made for local purposes, provision is now usually made for their complete repayment within a definite number of years, usually 10, or 20, or 30. Meantime interest is payable annually or semi-annually, and from some source an additional sum is collected to repay a part of the loan, sometimes by redeeming a certain part annually, sometimes by accumulating a sinking fund until that amounts to the whole debt. The minor divisions in the United States are thus constantly creating debts at the rate of about $2,000,000,000 each year and at the same time paying former debts in instalments, in a total amount somewhat less than this. In the case of some municipal investments which are commercial enterprises (such as those supplying gas, electricity, and water), these annual payments can be made out of the profits; in the case of others, the payments come from special assessments upon the owners; and in most other cases they are collected by the usual methods of taxation. In America, a large part of these costs are, by the law of special assessments, placed upon the owners of adjacent lands, whose outlays are usually more than offset by the increased value of their lands as a result of the improvements. In this case also, the present investment is in anticipation of the future incomes which the owners of the improved lands will get.[3] § 8. #Revenues from taxation.# Much the largest part of the receipts of most governments, apart from loans, and in many cases nearly all such revenue receipts, come from taxation. Tax (as a verb) meant originally to touch or handle, then to estimate or appraise, and then to charge a burden upon some one, especially to impose a payment of services, goods, or money upon persons or property for the support of government.[4] _Taxation_ is the legal process of taking income, services, or wealth from private persons for public uses. Taxes are of various kinds, but they always are incomes, or wealth representing future incomes, transferred from private ownership of the taxpayers to the government. In rare cases, more than the net current income of a certain kind may be taken for public uses. As economic income has many sources, it may be intercepted at many different points, and taxation may take various forms. The differences are so manifold that it is difficult to classify particular taxes satisfactorily. § 9. #Forms of taxation.# The following are the forms of taxation most frequently referred to. (a) The simplest form of tax is a _poll tax_, a uniform amount payable by every person of the taxable class. This form of tax is being less and less used in America and now amounts to little more than $17,000,000,[5] this being only .6 of 1 per cent of the aggregate taxes in the United States. The national government gets about one-fourth of this amount from a tax on immigrants and the rest is collected by (some of) the states, counties, and minor divisions. Usually, if not always, the poll tax is imposed only upon voters, as a condition to the right to vote. (b) Taxes may be laid upon _incomes_, as they come into the possession of the owner. Usually, only monetary incomes that arise in commercial transactions are taxable, and no attempt is made to estimate the value of psychic incomes. Commercial incomes are more easily measured, but the omission of the other elements must cause many inequalities in the burden of the tax as between two individuals controlling equal incomes of real things. (c) Taxes may be on _property_, either general upon all property in the taxing district, or special, upon certain forms of property. A property tax may be specific or _ad valorem_, in proportion to value, as to the method of its determination. Since the value of material wealth is the capitalization of the rentals at the prevailing rate of interest, a general, _ad valorem_, property tax, so far as it applies to material wealth, and if it were accurately assessed, would take an approximately equal proportion of wealth-incomes. It does not, of course, touch directly incomes derived from wages and salaries, but it reduces their purchasing power in many cases. It is in some respects more searching than a tax on actual rents, for it reaches the prospective, or speculative, rental. (d) Taxes may be on _expenditure_ (sometimes called taxes on consumption). This is but another mode of attacking income, for in the long run most income is spent, not always by the individual who earned it, but by some one, and thus it is reached by a tax on expenditure. Usually in the United States the tariff duties are accounted to be taxes on expenditure, as also the internal revenues (also called excises) of the national government. In time of war, internal revenues are extended in the United States to a multitude of articles, but usually they have been limited (with minor exceptions) to liquor and tobacco. Most of these taxes are in fact levied not at the time of purchase by the ultimate consumer, but upon the specific goods in the hands of some merchant or business agency, and some of them are essentially special property taxes and others are business taxes of the kind next to be mentioned. (e) Taxes may be levied on selected agencies of industry or on the process of _business_; such are business taxes, licenses, taxes on investment in business, and corporation taxes. These burdens are diffused and rest eventually on some income, rarely to be ascertained exactly. § 10. #Defective tax "systems."# The actual tax laws of each division of government in a country combine the various forms in different proportions. Most of the federal taxes are from tariff duties and from internal revenues; the latter include a variety of special business and property taxes and, since 1913, the federal income tax. The largest receipts of states, of counties, and of minor divisions are from property taxes, some special but most of them general in form. Among the various states a wide diversity is found. Some use the general property tax for all the divisions (state and local), while others (several of the Northern states and California) have separated the sources of state and local taxation, taxing corporations for state purposes, and most other forms of wealth for local purposes. Some states, particularly those of the South, make large use of licenses and taxes on business both for state and local purposes. The tax laws of many states have been much modified of late and are still in process of change. It is only in a loose sense that one can speak of the tax "system" of any state, made up as it is of so many diverse elements, each used to tap in some independent way some source of private income for public purposes. Every tax "system" has grown up more or less accidentally, guided by no more of a general principle than the advice of the cynical old statesman--so to pluck the feathers of the goose that it will squawk as little as possible. Thus, everywhere, the existing situation must be largely accounted for by custom and ignorance, by the weakness of some classes and the undue influence of other classes, rather than by clearly thought out principles soundly administered. § 11. #Various standards of justice suggested.# There have not been lacking earnest attempts to arrive at some general principles. Many standards have been suggested to measure the distribution of the burden of taxation, such as benefit, equality, and ability. Each of these terms is capable of various interpretations which have changed from time to time. The benefit derived by any citizen from most of the public services evidently cannot be measured with exactness. The standard of equality cannot be applied in any literal sense to strong and weak, to rich and poor. It is possible, however, to interpret equality with reference not to objective goods, but to the psychic sacrifice occasioned by taxation. Ability is of many kinds and may be differently understood. Some think ability to bear taxation is "in exact proportion to the money income"; others believe that it increases at a greater rate than money income, and favor, therefore, progressive taxation, that is, higher rates on the larger incomes. § 12. #Social welfare as the aim.# The conflicting interests of the various classes of taxpayers in each period are to some degree softened by the prevailing public opinion, sometimes called the social conscience, and taxes are adjusted according to a vaguely held ideal of the social welfare. Social expediency, more or less broadly interpreted, determines who shall be taxed and what social results are to be sought. The exemptions from taxation in feudal times were great and, viewed from our standpoint, were inequitable, for the upper classes escaped while the peasants bore most of the burdens. The landlords and nobility, who were assumed to be performing important social functions, generally had outgrown their usefulness in the period preceding the French Revolution, which swept away many of these abuses. Exemptions from taxation are granted liberally in most states to-day on some kinds of wealth and to some classes of citizens, because of their supposed relations to the public interest. Real estate and equipment devoted to educational, religious, and charitable purposes, the homes of priests and ministers, homesteads purchased with pension money, as well as all public lands, buildings, and equipment are exempt. The social interest requires that taxes be both elastic and productive, so that the needs of the government shall be amply provided for. The harmonizing of these needs in the laws of taxation requires a high degree of wisdom, of foresight, and of integrity in the legislator and in the citizen. No hard-and-fast rule for the apportioning of taxes can be laid down. The decision must be made in each generation by the public opinion as to what is most expedient for the general welfare. § 13. #Principles of administration.# Whatever forms of taxes are adopted, whether on property or income, whether at proportional or at progressive rates, their justice and expediency depend largely on their administration. Principle and practice in this, as in most affairs, may go far apart. The administration of taxation should be economical, certain, and uniform. Some laws are more easily and economically executed than others. The time of collection should be as convenient as possible for the citizen, and the mode of payment should be the most simple. The utmost certainty is desirable as to the time, method of payment, and amount. Taxation that, in its principle, is variable, shifting, or dependent on personal whim and favoritism, is despotism. But the greatest evils, in practice, result from the failures in assessment. The assessment of taxes has to be intrusted to men with fallible judgment, imperfect knowledge, and selfish interests. The assessor is as near a despot as any agent of popular government to-day. Not infrequently men of proved incapacity in every private business they have attempted are, for partizan or corrupt reasons, selected as assessors, and are given the power of passing judgment on the value of millions of dollars' worth of property. Under the circumstances, evils are to be expected, and they occur. The small owner often is crushed under the unequal assessment while the large owner comes lightly off. Political friends are favored, political foes are made to suffer. Even the most honest and capable of assessors find in the imperfections of the tax laws[6] an insuperable obstacle to even-handed justice. § 14. #Shifting and incidence.# The person paying a tax into the public treasury is not always the one whose income is reduced in the long run. This is most clearly seen in the case of taxes paid by middlemen. In most cases the final and regular burden of the tax is distributed over a number of incomes. The passing on of the burden is called the _shifting_ of the tax; the final location of the burden is called the _incidence_ of the tax. The lawmaker cannot tell exactly where the weight will fall. The principles of value give some guidance in the inquiry, but the workings of the principle are difficult to follow. Consider a situation where certain taxes have been for some time levied. They have become a part of the general adjustment of prices. If paid by any one in business they may be looked upon as a deduction from the gross proceeds or product of the business, prior to cost, or as a part of cost.[7] In either case every one choosing that business does so in the light of this fact. Unless the business promises to yield as good incomes (wages, profits) as other lines, the number engaging in it, and the output, must diminish and thus the price of the product rise, or the cost of the factors fall, or both in some proportion. The tax on any durative agent or on any established business thus becomes incorporated after a time in its price and in the prices of the products, and any purchaser pays a price based on the net income remaining to the owner of the wealth after the tax is paid. Viewed in this way, taxes are seen to be borne to some extent by every one, by those who do not as well as by those who do actually meet the tax-collector face to face. The citizen with no taxable property is affected, far more than he realizes, by extravagance of government and by inequities in taxation, for the effects of most taxes are diffused so that every self-sustaining member of the community has some share in them. § 15. #Taxes as costs.# Now if a new tax is levied, or an old tax changed in amount or in its incidence, it becomes a new influence in industry. Some occupations are made more attractive, others less so. Some places are made more, others less, desirable to live in. Property thus fluctuates in value, and investments become more or less remunerative. If the new tax reduces the net income of any productive agent, it reduces likewise its value, which is but the capitalization of its net rental. If taxes are taken off of factories and put upon farm rents, factories rise and farms fall in value in the hands of their owners. The immediate change in value is much greater than the annual tax, for if five dollars is to be taken permanently from the annual rental of the farm, nearly one hundred dollars is taken at once from its selling value when the prevailing yield on investment is 5 per cent. The rate of adjustment varies greatly under different conditions, and the inflow and the outflow of labor and capital are more or less rapid in the various industries. Taxes that enterprisers are unable to shift to others are reckoned by them as a part of their costs of production whenever the conditions of competition and of substitution make it possible to do so. Every new tax that curtails the supply of any necessary agent must raise the price of the products and cause more or less of the tax to fall upon the consumers. In the Civil War an increase in the tax on whisky increased its selling price, and distillers who owned stocks on which a smaller tax had already been paid reaped profits of millions of dollars. When the tax on tea was increased in England, all dealers that had accumulated a stock before the law went into effect were gainers. Every change in taxation inevitably affects, either favorably or unfavorably, many interests. The chance to anticipate a change in tax laws or to get, from those in power, information of a proposed change, makes speculation possible and political corruption profitable. The fact that a change in taxation is a disturbing element in price is not to be deemed insignificant merely because "all comes out right in the end." Every change in taxation is an element of uncertainty in business and increases the fortunes of some men at the expense of others. Hence no considerable change should be made without good reasons in its favor. The older taxes have the virtue of stability, but in many cases they have grown out of harmony with the industrial conditions. While, therefore, from time to time there is a real need of a reform in the tax system, it should not be undertaken without recognizing the many and complex interests involved. [Footnote 1: Meaning here not a certain political party, but a principle of social action.] [Footnote 2: The total debts of the _national_ governments of the world just before the outbreak of the great war in 1914 were estimated at about $44,000,000,000. (These figures include the debts of the separate states in the federal unions of Australia and the German Empire, and the separate debts of European colonial governments, but not those of the states of the United States, and in no case including the debts of minor divisions, the total figures for which are not to be had.) The new debts created by the war give already more than double the foregoing total.] [Footnote 3: The special assessment is thus in its nature, in part a private investment. The plan, of special assessments could easily be applied in many more cases than is done at present.] [Footnote 4: There are border-line cases where it is difficult to decide whether a particular payment to the government in the form of a fee, price for service (as water rates, etc.), and special assessment (as for street paving) is in the legal sense a tax or not. Some courts have, for example, decided that for certain purposes a special assessment is to be called a tax, and in certain other cases it is not to be if this would defeat the evident and just intention of the legislature.] [Footnote 5: The figures do not include returns from incorporated places having a population of less than 2500 where the poll taxes may be a considerable sum.] [Footnote 6: Particularly the difficulties noted in the next chapter, sees. 2-5.] [Footnote 7: See Vol. I, p. 374.] CHAPTER 17 PROPERTY AND CORPORATION TAXES § 1. Importance of taxation as a public question. § 2. The general property tax; nature and difficulty. § 3. Ambiguity of the term "property." § 4. Various temporizing policies. § 5. A consistent policy of wealth-taxation. § 6. Needed reform of assessment. § 7. Separation of state and local taxation. § 8. Federal taxation of merchandise in commerce. § 9. The proposal of the single tax on land values. § 10. Various reforms in land taxation. § 11. Difficulties in taxing corporations. § 12. Special taxes on banks. § 13. Special taxes on insurance. § 14. Special taxes on transportation. § 15. Alternative policies of corporate taxation. § 16. General plan for corporate taxation. § 1. #Importance of taxation as a public question.# The discussion of taxation has accompanied the growth of free government in England and America from the time of Magna Charta. The control of the public purse has been found to give the key to political power, and therefore it has frequently become the occasion of conflict between the monarch and the people. But in our own national history since the adoption of the Constitution, taxation has not had a leading place in politics except in the one aspect of the tariff. The constitutional question of states' rights long absorbed most of the interest of citizens and of legislators. But with the quickened attention of the public to economic questions, the problem of taxation became of increasing importance. It has come to be recognized that taxation can be made to play, and is bound to play, a leading part as an agency in the distribution of wealth, and thus it is the center of much of the ardent controversy regarding social reform. Ultimately, almost every proposal of social change and betterment involves some cost. The question then must be answered. Who is to receive the benefits and upon whom and how shall new taxes be levied to pay the cost? Further, it is often urged that this result of taxation in redistributing incomes is in itself (or can be made) a virtue; and some even see in tax reform the answer to the largest social questions of our time. We are now to take up a few of the more important problems of taxation, to see the difficulties, and to suggest the direction in which their solution is to be sought. The tariff having been already separately considered, the chief kinds of taxes we have here to treat are property taxes, general and special, and inheritance and income taxes. § 2. #The general property tax; nature and difficulty.# The rates both of assessment and of levy of the general property tax are uniform and equal in proportion to the value of all (or nearly all) property in the taxing district.[1] There are always some exceptions of certain kinds of property, or of the property of certain persons, or of property and things put to certain uses--public, educational, religious, and charitable in their nature. The federal government levies no general property tax, but the other branches of government[2] receive about three-fifths of all their revenues from it. At first view nothing would seem to be simpler and juster in principle than such a plan of taxation, but those who have most carefully studied its practical operation, almost with one accord, pronounce it to be "a dismal failure." The chief reason assigned for this failure has been that the assessment of the tax is imperfect and incomplete. The usual thought is that if all property could be assessed the plan would be excellent. Undoubtedly the difficulty of just assessment has its part in the weakness of the tax, but back of, and more important than this, is an inherent fallacy in the apparently simple principle of the tax. § 3. #Ambiguity of the term "property."# Unfortunately, the word property is applied, even by the most competent courts, both to the intangible right of ownership (the fundamental meaning) and to the concrete thing that is owned, the source of the income.[3] But evidently the value of the right to the income yielded by a house, for example, is merely the value of the house. The value of the _property in the one sense_ (the abstract ownership, the intangible right) is merely a reflection of the value of the _property in the other sense_ (the concrete wealth). There are not here two independent bodies of economic wealth. Whatever value belongs to the one is subtracted from the other. Nor is it rational to take the paper document called a deed (which is but the evidence of ownership) and call it tangible property having a value in addition to the house itself. Yet, in fact, all these confusions are constantly made in taxation. The term "intangible personal property" is applied to such things as mercantile credits, promissory notes, bonds--in general to the right to collect sums from another person, whether these rights arise out of sales or of loans--and all are treated as parts of taxable property. Sometimes the evidences of indebtedness, the promissory notes or the mortgage papers, are even called tangible property, the same term that is applied to land, houses, and machinery. By universal practice supported by a long line of court decisions, these rights (whether evidenced by paper or not) are made subject to taxation, except as by piecemeal legislation certain grudging exceptions have been made. These views and this practice are supported by the popular desire to tax money-lenders. The result is "double taxation" of many sources of income. This involves a burden that is ruinous in some cases, both to borrowers and to lenders, and that tempts in all cases to the evasion of the tax. Take, for example, a house assessed at $10,000 which is owned free of debt and which has a rental value of $600. At the rate of 1.5 per cent the tax paid would be $150. Now if the owner borrows $8000 he is still taxable $150 on the full value of the house, and the lender nearly everywhere is taxable $120 on the amount of his mortgage. The total tax payable out of the one source of income, the house, is then $270. The same analysis will show that any credit is but a contractual claim upon some other source of income which is, or should have been, already taxed. If one person owns all the capital-value invested in a specific piece of wealth, no attempt is made to tax both the capital and the wealth; but if it happens that two or more persons share the capital-value invested in the same wealth, the attempt is made to tax as a unit the full value of the wealth and, in addition, some part of the capital also. It is, however, easy in most cases to conceal this "intangible property" from the assessor's eyes, and a comparatively small amount of it is ever taxed. This means inequality and hardship in the operation of the tax and, as a result, unceasing temptation to perjury by the taxpayer and to favoritism and graft by public officials. § 4. #Various temporizing policies.# The general property tax in practice is unjust and demoralizing. What, then, shall be done about it? Various policies have been followed. One has been to declare that the law would be good if it could be enforced, but that as in practice it cannot be, the best thing is to go on as before, catching a few "tax dodgers," and letting the rest go. Another policy is to hire "tax ferrets," paying them large commissions to discover cases where intangible property of this sort has been concealed from the assessors. This method, no matter how stringently applied, has never reached more than a small proportion of the cases, and becomes a potent agency of political favoritism and corruption. Another policy is to maintain the general principle, but to make exceptions here and there. Usually the exceptions are made just at those points where the law would with earnest effort be most easily enforceable, and therefore where it has become most inconvenient. As a result of these changes the state laws display a bewildering and illogical variety. By constitutional interpretation, United States notes and federal bonds are exempt from state and local taxation; generally, by state law, building and loan association and savings-bank loans are exempt as, in a majority of states, are state and municipal bonds if held within the state. In at least eight states, bonds of the state are exempt, but those of the municipalities are taxable, while in a few states the reverse is the case. In several states both kinds of bonds when issued after specified dates, are exempt, but in Ohio state bonds are exempt only if issued prior to 1913. All but seven of the forty-eight states, however, attempt to tax the resident holders of state and municipal bonds of other states; but the exceptional states are those in which most of the investors in this class of securities reside. In many cases private debts receivable are allowed to be offset against debts payable. In some states mortgages on real estate are exempted or (in Massachusetts) treated as an interest in the real estate. Rarely mortgages are exempted up to a certain amount (in Indiana, to $700, the purpose being to tempt the borrower to reveal the name of the lender). Sometimes a special mortgage registration tax, payable but once (in New York 1/2 of 1 per cent) is levied, and otherwise mortgages are free from taxation. Small as this rate is, the fiscal yield of mortgage taxation under this plan exceeds that under the general property tax. By the overlapping of these laws, so contradictory in principle, it may happen that securities held by taxpayers residing in other states than those of the issue are taxable two or three or more times; but few if any loans of this kind are made except by those evading all taxation. § 5. #A consistent policy of wealth taxation.# These exceptions still leave the law in its general principles as to the taxation of intangible property illogical and unjust. A solution can be found only by abandoning the ambiguous legal concept of property, and making use of economic concepts. A consistent tax law might take either wealth or capital as the basis of assessment, but not sometimes the one and sometimes the other. Wealth is an impersonal basis of taxation; each piece of wealth might be taxed once as a unit no matter how the ownership were divided. Or the other alternative might be chosen. Capital would be a personal basis of taxation; each person's capital might be taxed no matter from what sources the incomes were derived (the concrete wealth, of course, then being left untaxed). The wealth basis is much nearer to the present general property tax as actually administered. The assessment of general tangible wealth would undoubtedly be more easily done than would that of individual capitals, and likewise be both easier and juster than the present inconsistent policy. Tangible things are comparatively easy to find, measure, and evaluate where they are, and if they are all taxed it is evidently the same as if all the capital values based upon them were taxed in the owners' hands. The various equitable claims of different owners in one source of income could be left to adjust themselves through shifting, mainly in the choice of investments, once the plan had become generally applied. § 6. #Needed reform of assessment.# The assessment of the present general property tax is notoriously inefficient and unjust. The root of most of the present evils (other than those above discussed) is the method of local election of assessors, which usually is by townships, but in some cases by counties. The local assessor's estimate of value is used as a basis for taxation not only for his district but for the larger units (county and state). Thus every local assessor is tempted by the conflict of interests not only among the taxpayers in the district which elects him, but by the conflict of interests between his district as a whole and other districts. The lower the ratio of assessment to true valuation in any township compared with that of the other tax districts, the smaller the proportion of county and state taxes that the people of the district have to pay. Willingness to under-assess property often becomes thus the chief virtue of an assessor in the eyes of his political constituents. This has led in many cases to absurd underassessment, which boards of equalization have proved powerless to remedy in any great measure. A sounder plan would be general state assessment, with a permanent expert board of commissioners employing a corps of state assessors under the merit system of appointment. This plan has as yet been applied only to assessment of railroads and some other public-service corporations. § 7. #Separation of state and local taxation.# For the reason just indicated the failure of the general property tax has been most conspicuous where it is used as a basis for state taxation. This has led some financial students to advocate the plan of separation of state and local taxation. This means the assignment of certain sources of revenue (such as corporations and the liquor business) primarily or exclusively to the state, leaving all real estate and the general property of non-corporate persons to be taxed by the counties and minor divisions under the general property tax. The plan has been increasingly applied in New York, until, in 1906, it became almost complete. In 1910 the plan was adopted in California; and it is largely used in New Jersey, Connecticut, Delaware, and Pennsylvania, and to a small extent in some other states. An efficient state assessment of general wealth would accomplish most of the advantages claimed for this plan, while avoiding some of its dangers. § 8. #Federal taxation of merchandise and acts in commerce.# Tariff and internal revenue duties constitute the two chief revenues of the federal government. Both of these are mainly taxes on wealth. Unlike the general property taxes they are not levied upon the main body of wealth held in possession, but almost entirely upon articles of merchandise and upon acts in course of trade. Stamps on receipts, checks, deeds, bills of sale, and licenses on the sale of liquor and tobacco are taxes on business acts which are necessary to the acquisition, use, or expenditure of wealth. Goods imported are taxed at the time of entering the country; domestic products such as cigars, spirituous or malt liquors, playing cards, and (at times) matches, pig iron, and other products, are taxed usually at the time of exit from the factory. It has already been shown that when the tariff duty prevents the importation of foreign goods and by raising the price encourages domestic manufacture of the article, there is virtually taxation of the consumer to subsidize the private manufacturer. A system of properly adjusted compensatory duties (tariffs and internal duties combined) which would prevent tariff duties from having any prohibitive effect whatever could, in a great country like ours, be made to produce any revenues desired. Such a system, combined with the federal income tax, seems destined to be the chief dependence for the national government. § 9. #Proposal of the single tax on land values.# Besides the general property tax there are found in the country as a whole a large number of special property taxes. Some of these have been introduced as substitutes for the general property tax; such is the special taxation (above referred to) of mortgages, and bonds. Other special property taxes have been introduced because they were believed to be good in themselves; such are special franchise taxes on corporations and some kinds of taxes on land. The special taxation of land, or of land values, has been strongly urged by Henry George and his followers since the publication of the remarkable book "Progress and Poverty" in 1879. The doctrine there set forth is that the state should "appropriate land rent by taxation," should "tax land values, irrespective of improvements." It is maintained that "a single tax" of this kind would be quite sufficient for all the purposes of government. The main arguments adduced for this plan may be reduced to three propositions: first, private property in land is essentially unjust, because land is made by nature, not by men; second, the plan would make assessment simple and certain by limiting it to the unimproved land, and making unnecessary the more difficult assessment both of tangible improvements and of intangible personal property; and third, it would work a marvelous reform in social conditions, abolishing poverty and greatly increasing production. It is impossible within our limits of space to discuss this proposal further than to indicate that: (1) It assumes an untenable theory of property.[4] (2) It overlooks the difficulty of distinguishing the value of the land "irrespective of improvements," from that of the land as it actually is, a difficulty especially great in the case of agricultural land.[5] The difficulty is present even in the case of urban land when the improvements of filling, draining, and leveling have become incorporated with the site.[6] (3) The plan ignores the stimulus (motivating force) which private ownership has given and still gives to the maintenance and fuller productive use of land. Nowhere has production thriven where the state was the universal landlord. § 10. #Various reforms in land taxation.# While the single tax plan is defective in principle, its wide discussion has served to direct attention toward the need of reform in the taxation of land. Some proposals looking toward this end are widely favored by opponents as well as by advocates of the single tax. Such are the following: (a) The abandonment of the taxation of mortgages.[7] (b) A more correct assessment, in accordance with the present laws, of lots and lands held for speculative purposes, which in practice are now greatly under-assessed. (c) More adequate special franchise taxation upon corporations for special privileges in the public highways. (d) Exemption, in value equal to the costs, of improvements on land, such as buildings, drains, fences, and fertilizers, for a limited time after they are made, perhaps five years. (e) The separate assessment of urban lands used as mere building sites and of the buildings on them. (f) Taxation of the increase ("increment") of urban land values, periodically or on the occasion of transfer of ownership. § 11. #Difficulties in taxing corporations.#[8] Until near the second quarter of the nineteenth century, business corporations (of which there were few) were taxed just as was the general property of individuals. This still continues to be the case in the main in most of the states. The methods and machinery of assessment were (and still are) essentially local and simple, and have proved to be inadequate to reach or justly assess the larger and more complex corporate enterprises when their equipment and business extend beyond town, then county and, finally, state lines. Moreover, the corporate forms of organization presented in complex and puzzling forms the dual conception of property.[9] Here was the tangible wealth of the corporation and there were the diffused rights of ownership, the capital of individual stockholders and bondholders. Confused by this ambiguity, the men of that time believed (as many still believe) that there were here two separate and justly taxable funds of value. The popular will declared (and still declares) that "all kinds of property ought to bear their fair share of the burdens of taxation." Yet to apply this principle would obviously be double taxation and result in confiscation in many cases. Between this doubt and the practical difficulty of assessment, it turned out that corporate wealth, far from being doubly taxed, was largely escaping even its due single burden. § 12. #Special taxes on banks.# Attempts to deal with the difficulty without clear perception of its cause took the form of legislative tinkering and patching. Taxes were gathered from corporations by any device that seemed workable. The banks, being the earlier important corporations, were first experimented upon. Taxes on capital stock and on circulation were tried first (in 1805, by Georgia), then a tax on dividends (in 1814, in Pennsylvania, and in 1815 in Ohio), examples which were followed or modified by a number of states. After the national banking system was started in 1864, attempts to tax both the capital of the banks and the stock in the hands of individuals led to federal court decisions and then to state legislation by which now in many of the states the banks are separately taxed on their real estate and the shares are assessed to the individual holders (by various rules), but the taxes deducted from dividends and paid by the bank. There are, besides, special franchise taxes and fees paid by banks in various states. § 13. #Special taxes on insurance companies#. Insurance companies present in a striking manner the complexities of the ambiguous property concept. The assets of the insurance companies (we refer here particularly to the reserve companies), which belong in equity to the policy holders (less the claim of the stockholders in the case of the stock companies), are nearly all invested in stocks and bonds of corporations and in mortgages on real estate. Now under the general property tax, strictly interpreted, the policies are assessable at their surrender or reserve valuation in the hands of the policy holders; secondly, the securities and credits which compose the assets are assessable to the company; and, thirdly, the railroads, factories, and houses, built with the outstanding loans made by the insurance companies, are assessable as tangible wealth, to the owners. If such an interpretation were practically enforced it would result in triple taxation to be drawn from the same economic source, and would be utterly prohibitive of the insurance business. The enforcement has, however, been impossible in practice. Insurance companies have comparatively little tangible wealth excepting real estate for offices. This is taxed locally. Several methods have been tried (beginning as early as 1824) to make insurance companies pay taxes (usually for state purposes) on something besides tangible wealth. A tax on receipts from premiums proved most workable, first as applied to "foreign corporations" (that is, to those of other states) and later, generally, to domestic companies also. Now, amid bewildering variety and interstate rivalries in tax laws, the most usual rate is two per cent on gross (in a few cases on net) premiums collected. The taxes on premiums, with various licenses and fees, now amount to 2.15 per cent of the total receipts from life insurance premiums in the United States. This is taxation not on an existing body of accumulated wealth, but upon the process of accumulation, a tax directly on the act of saving. A consistent policy of wealth taxation combined with income taxation would require the abandonment of the present forms of special insurance taxes. § 14. #Special taxes on transportation.# Another great group of businesses whose taxation has been especially complex, because they are distributed throughout different taxing districts, are agencies of transportation and communication, especially railroad, sleeping car, express, telegraph, and telephone companies. A state tax on railroad tonnage (Pennsylvania, 1860) was declared unconstitutional by the United States Supreme Court. But many other plans have been tried to compel the railroads to contribute, the chief being by taxes on dividends, gross earnings, equipment, and valuation of capital stock, taxed either to the company or to the stock-holders, (Connecticut since 1849). About a third of the states no longer make the physical plant the basis of taxation, except that in most of them some part or kinds of real estate are taxed locally.[10] Telegraph companies are still locally assessed in most states, but in over a third of the states are taxed either on gross receipts, or on mileage of wire. Telephone companies are similarly taxed, but sometimes on the number of transmitters, or of subscribers, or on each plant, or otherwise. In a similar manner, express and sleeping car companies are taxed, in the same group of states, on mileage, or on capital stock proportional to mileage, or by license and privilege taxes. In the case of these corporations, and also of various other miscellaneous kinds of companies, no clear-cut principles serve to guide. The result is "a chaos in practice--a complete absence of principle."[11] § 15. #Alternative policies as to corporate taxation.# If the taxation of corporations is not to continue to be treated in a mere hit-or-miss manner, with every possible kind of inconsistency among the various states, some general principles must be recognized and some clear policy be formulated. But there is no general agreement to-day among jurists and economists upon a definite and consistent plan in this matter. Two alternative policies appear. The first is to make the scheme for taxing corporations quite different in principle and plan from that for taxing natural persons. The assumption in this is that the "general property tax" is an irremediable failure, and is particularly inapplicable to corporations. This plan goes along with the separation of state and local taxation.[12] An unfortunate result of this is to relieve the great mass of taxpayers of the state from, any apparent and measurable part of the tax burden for state purposes and thus to separate responsibility and power in state government. This policy nevertheless is favored by some of the leading authorities on finance. The other policy is to tax the wealth and business of corporations (excepting those enjoying special privileges) in essentially the same way as other wealth and business. The improvement of corporate taxation would thus be but a part of the transformation of the "general property tax" into a general tax on tangible wealth.[13] If first there is recognized the error of assessing the equitable ownership interests in addition to the body of wealth, and secondly there is created an efficient agency of assessment, the taxation of corporations can be logically and easily brought into accord with a harmonious system of state and local taxation.[14] § 16. #General plan for corporate taxation.# The main features in such a plan of reform would be as follows: (a) Assessment of all wealth by a state agency, with expert nonlocal assessors, appointed and serving only under the merit system. (b) The assessment of the value of each enterprise and body of wealth as a unit for the whole state, and apportioned to the minor divisions as the basis for levying local taxes. (c) Apportionment of the total value in the state among the localities by general rule, in the case of transportation and transmission companies, by mileage with due regard to the presence of local real estate and of special industrial equipment such as repair shops and power plants. (d) Taxation of interstate enterprises only in due proportion to the whole business, by mileage or other rules; inter-state comity to be further developed in this matter. (e) Account to be taken, in assessment, of various factors determining the earning power, such as good will, patents, and other monopolistic elements, pertaining to and helping to determine the value of the tangible plant of the enterprise. (f) Account to be taken of the market value of securities and notes owned by a corporation, in determining the taxable value of the whole business, but these not to be treated as a separately assessable "property" (in addition to the tangible plant). (g) Exemption of the holders of securities and evidences of indebtedness of corporations.{15} (h) Treatment of special privileges granted to public-service corporations for the use of streets and public highways on the principle of rent-payment to the community rather than by levying a percentage on an assessment. [Footnote 1: For example, the constitution of Alabama declares: "All taxes levied on property in this state shall be assessed in exact proportion to the value of such property," etc. And the constitution of Indiana declares: "The general assembly shall provide, by law, for a uniform and equal rate of assessment and taxation of all property, both real and personal, excepting," etc. Similar statements occur in most state constitutions.] [Footnote 2: The general property tax in the United States constitutes: Of the revenue receipts of the states 38 per cent. Of the revenue receipts of the counties 76 per cent. Of the revenue receipts of the incorporated places. 60 per cent. The total amount collected in this way in 1913 was over $1,083,000,000.] [Footnote 3: See above, ch. 2, secs. 2, 3, and reference there to Vol. I.] [Footnote 4: See above, ch. 2.] [Footnote 5: See Vol. I, pp. 116, 117, 145, 445-455.] [Footnote 6: See Vol. I, pp. 117, 146, 453.] [Footnote 7: See above, sec. 4.] [Footnote 8: No reference is made in what follows to fees payable but once for the incorporation of new companies or at times of increasing the capital stock of an old one, variously called taxes on corporate charters, license taxes, incorporation fees, organization fees, and charter fees.] [Footnote 9: See above, sec. 3.] [Footnote 10: E.R.A. Seligman, "Essays on Taxation" (1895), p. 156.] [Footnote 11: Seligman, op. cit. p. 136.] [Footnote 12: See above, sec. 7.] [Footnote 13: See above, sec. 5.] [Footnote 14: The assessment feature of this proposal is exemplified more nearly than anywhere else, tho still imperfectly, in the "Indiana plan," in which, however, the true concept of property is recognized only in so far as the shares of corporations of which all the wealth is taxed are not assessed to the shareholders.] [Footnote 15. This need not prevent a supplementary system of graduated taxation on incomes. See below, ch. 18, sec. 10.] CHAPTER 18 PERSONAL TAXES § 1. Inheritance tax laws. § 2. Fiscal importance of inheritance taxes. § 3. Income taxes; general nature. §4. Income taxation by the states. § 5. History of federal income taxation. § 6. Events leading up to the law of 1913. § 7. Main features of the law. § 8. Exemptions and stoppage at source. § 9. The graduation principle. § 10. A system of taxation. § 1. #Inheritance tax laws.# There remain to be considered at least two important forms of taxation that are essentially _personal_ in their unit of assessment, in contrast with the foregoing which are (or should be, if consistent) essentially _impersonal_[1] These are the inheritance and the income taxes. Until 1916 little use had been made of inheritance taxation for federal purposes. In that year, however. Congress passed a law which was expected to obtain about $20,000,000 a year from inheritances. Forty-one states in America have inheritance tax laws (in 1915) which apply generally to property passing either by will or under the intestate laws of the state. The tax is for state purposes. These laws differ in many ways, but are nearly all alike in certain respects: (1) In applying to the separate legacies rather than to the estate as a whole.[2] (2) In taxing legacies to relatives in the direct line at a lower rate (or even exempting them entirely) than those to collateral relatives.[3] (3) In exempting legacies below a certain amount.[4] (4) In having rates progressing with the size of the legacy; (this feature is less general, but is prominent in most of the later laws). § 2. #Fiscal importance of inheritance taxes.# The fiscal importance of inheritance taxes has been comparatively not very great (except in New York State), but it has rapidly grown. In 1903 the receipts from this source (in 27 states) were over $7,000,000; in 1913 they were (in 35 states) $26,000,000. The spread of inheritance taxes and the higher and progressive rates applied are an expression in part of the need of additional revenues and in part of the growing popular concern regarding the concentration of wealth. Yet the actual legislation is something of a compromise between fiscal policy (to get revenues) and social policy (to reduce or to distribute the larger fortunes).[5] In New York legacies of over $1,000,000 are now taxable at 4 per cent to relatives in the direct line and to all others at 8 per cent. In Washington the tax to relatives in the direct line is but 1 per cent, but to others it may go as high as 12 per cent on legacies over $100,000. In Wisconsin, somewhat similarly, the tax may rise to 15 per cent on the excess above $500,000. § 3. #Income taxes; general nature.# All taxes, whether assessed upon the capital value of goods or not, come out of (reduce) the incomes now or later available for individuals. But there are various ways of attacking incomes, i.e., of apportioning the tax burden. Income taxation is that form in which the basis of the assessment and levy is the income of the taxpayer as it arises (not accumulated wealth, or capital, or business processes, or expenditures). Of the various conceptions of income[6] the one mainly employed in income taxation is monetary income arising in the course of business, supplemented occasionally (but not consistently) by some items of material income that are expected to come to the person. There is not in the long run such a contrast between wealth taxation and income taxation in their ultimate burden and effect as is usually supposed. Indeed wealth (or capital) taxation as applied to accumulated wealth is more far-reaching than income taxation, for it falls upon the present worth alike of monetary and of psychic incomes (e.g., the value of a house whether it is let to a tenant or occupied by the owner). But, on the other hand, income taxation attacks directly the monetary incomes from labor, coming as wages, salaries, fees, and profits in business. This feature goes naturally with the fact that the income tax is essentially a personal tax, grouping the items of assessment about a person, whereas the "property" taxes are mainly (tho not consistently) impersonal, making the piece of wealth the primary object of assessment. This summation of each person's income makes income taxation peculiarly suitable for progressive taxation with the social-welfare motive of equalizing the distribution of wealth. It is doubtless this technical assessment feature, rather than any essential advantage as a mode of taxation, that has led to its recent growth in popular favor. § 4. #Income taxation by the states#. Income taxes have been used widely in European countries, but not so much in the United States. Numerous attempts have been made by the states to tax incomes, but with small results. Personal incomes, when sought by local assessors, proved to be most elusive. There are (in 1913) but seven states with anything resembling a personal income tax.[7] These are Virginia, North Carolina, South Carolina, Mississippi, Oklahoma, Massachusetts, and Wisconsin. Of these states Wisconsin has the most recent law, and one the widest in its application and the most important fiscally. The law applies a progressive rate to all incomes (with exemption of $700 from wages and salaries) and contains elaborate provisions for corporate taxation. The proceeds are distributed 10 per cent to the state, 20 per cent to the county, and 70 per cent to the municipality in which the tax is collected. In the six other states the tax is on incomes only exceeding a certain amount (North Carolina, $1000, the other states from $2000 to $3500 exemption); some apply to incomes from any source but others do not apply to incomes from property otherwise taxed. The total receipts from these state income taxes in 1913 were but $314,000. § 5. #History of federal income taxation.# The income tax seems destined to play a more important part in the fiscal system of the federal government. Until 1913, however, its part had been small. It began to be used under the law of 1867 (when the law passed in 1861 was replaced before it went into effect). This was repeatedly amended and finally repealed in 1870, to continue in force until the year 1872. The rate was 3 per cent on the excess of incomes over $600, and 5 per cent on the excess over $10,000. This law was repeatedly upheld by the United States Supreme Court as not in conflict with the Constitution. Its fiscal results were not large, as it was never effectively administered. The next income tax law was that of 1894, enacted in connection with the tariff revision of that year. It was declared unconstitutional before it had gone into effect. The main ground for the decision was that a tax on incomes from rent of land as well as on incomes from personal property is direct, and must therefore be apportioned among the states according to population. In the active discussion of social legislation in the years following this decision public sentiment developed favoring a renewed attempt to get such legislation by amending the Constitution. This was shown by the remarkable fact that a bill for the sixteenth amendment to the Constitution was passed unanimously by the Senate, and almost unanimously by the House. It was ratified by three-fourths of the states and became a law in 1913.[8] § 6. #Events leading up to the law of 1913.# Meantime, in 1909 and excise tax law had been passed, applying to corporations in a manner not open to the objections found by the Supreme Court to the law of 1894. The Democratic party, which had passed the law of 1894, was pledged to the passage of an income tax law when it came into power again in 1913. The reduction of the tariff, as well as growing expenditures, moreover, made necessary the development of new sources of revenue for the national government. In other countries the income tax had been found to be a part of a system of taxation especially valuable as "a balance wheel" to equalize the revenues and expenditures. It was deemed by some to be an additional advantage of an income tax that it would make the richer citizens better realize the nature and burden of public expenditure. Most other federal revenues, being derived from the tariff and from taxes on merchandise, are borne mainly by the purchasers and consumers. An income tax was opposed as sectional taxation by many in the Eastern states where the owners of most of the larger fortunes reside. But to this Senator Elihu Root replied that the states where there was the greatest ownership of wealth pay the largest taxation under any scheme, and ought to. § 7. #Main features of the law.# The law as enacted[9] imposes (a) a "normal" tax of 1 per cent on the entire net income of every corporation (engaged in business for profit); (b) a "normal" tax of 1 per cent on the excess above $3000 of every unmarried individual's income (or $4000 for husband and wife, as indicated in the next section); (c) an "additional tax" (often called a super-tax) ranging from 1 to 6 per cent on individual incomes of larger amounts than $20,000. There are thus eight classes of persons, those entirely exempt, those paying only at the normal tax rate, and six different classes paying a super-tax.[10] A person with an income of $1,000,000 thus pays $60,020, this being the amount indicated, $25,020 for the first half million plus 7 per cent on the second half million. § 8. #Exemptions and stoppage at source#. There are various exemptions, the first being that of $3000 on every individual income and of $4000 on the aggregate income of husband and wife living together.[11] Among other exceptions are sums paid for taxes (except assessments for local benefits), necessary business expenses, losses sustained, and (for the normal tax only) those parts of individual incomes derived from corporations which have paid the tax on them. The difficulty of getting an honest and complete assessment of incomes is great. All taxation is deemed by the taxpayer to be "inquisitorial" in some degree, and this is particularly true of an income tax. In England had been developed the plan called "stoppage at source." In our law the taxation of corporations at the rate of the normal tax, while requiring them to report the names of those receiving dividends and interest payments, affords an ingenious way of checking up the returns of individuals in respect to a class of investments which is steadily increasing in importance. § 9. #The graduation principle#. The most disputed feature of the income tax is the principle of graduation, or of progression. It is upheld in part because in this case it but offsets _regression_, that is relatively heavier taxation on the smaller incomes, in the case of the other kinds of taxes (tariff, property taxes, etc.). It is urged further that those of larger incomes, especially the largest, have marked advantages over others in making investments. Further it is urged that the higher the income the less does a certain rate cut into "the amount necessary for good living" (as was said in Congressional debate). This is in accord with the psychological principles of choice, of value, and of diminishing gratification. Finally, there is a widespread approval of the progressive rate just because it in so far acts as a leveling influence upon fortunes. The "additional" tax is already important fiscally, yielding over one-half of the total paid by individuals and one-fourth of the total from corporations and individuals. The income tax returns for the first ten months of the law (March to December, 1913) showed 356,598 taxable individual incomes, equal to about 1 per cent of the taxable population (considering minors to be usually not taxable). Even this proportion, small as it is, is much larger than that of the European countries having a general income tax. The first ten months' yield (March 1, 1913, to December 31, 1913) was over $60,000,000. A remarkable fact is that 21 per cent of all taxable incomes (not persons) were in the single Borough of Manhattan (the main part of New York City). The receipts from the income tax in 1913 were nearly 10 per cent of the ordinary receipts of the federal government, and about 2 per cent of total revenue receipts of all branches of government, the income taxes paid by individuals being about 1 per cent of the same total, and the super-tax about 1/2 per cent of the same. The receipts from the income tax during the fiscal year ending June 30, 1915, were $80,000,000, of which $39,000,000 was paid by corporations and $41,000,000 by individuals. Of the latter sum, over $24,000,000 was from the super-tax. § 10. #A system of taxation.# The task of reforming and developing the various kinds of taxes and of uniting them into a just and consistent plan for each of the divisions of government in the United States is a vast and difficult one. There are many conflicting interests among states, between states and nation, among the various minor political divisions, and among individuals and classes. There are also conflicting opinions regarding many features of the possible practical plans. Because of these it is safe to predict that progress will not be made quickly, steadily, nor always directed toward a clear ideal. If progress is to be rapid, the public must, however, have consistent principles by which its steps may be guided. In the foregoing kinds of taxation are the various elements which may be united into a system of taxation. It is useful to consider how this might be done. At the basis of the whole tax structure is taxation, by value, of concrete wealth at the place where it is situated (_in situ_). This should be regardless of the distribution of ownership or of the residence of the owner. The present misnamed "general property tax" already presents the main outlines of this form of taxation and the general changes necessary in law and method of assessment have been indicated above.[12] Corporation taxation may be adjusted to this either by separate treatment and assignment to state purposes only, or more simply for most states, by assimilating it with the general taxation of wealth and allotting due shares of the proceeds to the various taxing divisions.[13] The national government can, because of its exclusive power of levying tariff duties and also because of its exclusive control over interstate commerce, reach the tax-paying ability of the nation effectively by a combination of tariff and internal revenue taxes. These become a part of business costs, and are diffused over the whole population in general prices.[14] This system of impersonal wealth taxation may then be supplemented by personal taxation, applied through inheritance and income taxes. These forms of taxation extend over and reach many of the same persons and incomes as do ultimately the impersonal taxes. But the summation of personal incomes gives the necessary condition for applying the principle of progression so far as this is, by public opinion, deemed desirable either for fiscal or for social reasons. [Footnote 1: See above, ch.17, sec. 3, note, and sec. 5, on this distinction. The poll tax also is personal: see ch. 16, sec. 9.] [Footnote 2: In Utah the tax is 5 per cent on all estates over $10,000.] [Footnote 3. Exception, Utah.] [Footnote 4: Exceptions are Missouri, New Hampshire, Vermont, Virginia.] [Footnote 5: It would be more consistent with the purpose of equalizing fortunes to vary the rate not according to the size of the legacy but according to the size of the fortune which the legatee has, or would have, after receiving the legacy.] [Footnote 6: See Vol. I, p. 26.] [Footnote 7: In addition, certain items of receipts of companies or incomes of individuals are arbitrarily defined as property for purposes of taxation in a few cases in about fifteen other states. See Wealth, Debt, and Taxation, Report of the Bureau of the Census, 1907, p. 622.] [Footnote 8: Article XVI. The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census enumeration.] [Footnote 9: It constitutes sec. 2 of the tariff act of 1913 entitled "An act to reduce tariff duties and to provide revenue for the government and for other purposes."] [Footnote 10: This may be seen in the following table: Normal Rate on excess Total tax on in next class tax on lower Nor- Addi- upper Total rate limit mal tional limit per cent Under $3,000 0 0 0 0 0.00 to 0.00 $3,000-$20,000 0 1 0 170 0.00 to 0.85 $20,000-$50,000 170 1 1 770 0.85 to 1.54 $50,000-$75,000 770 1 2 1,520 1.54 to 2.02 $75,000-$100,000 1,520 1 3 2,520 2.02 to 2.52 $100,000-$250,000 2,520 1 4 10,020 2.52 to 4.00 $250,000-$500,000 10,020 1 5 25,020 4.00 to 5.00 In excess of $500,00 25,020 1 6 upwards 5.00 to 7.00 By legislation in the summer of 1916, after the foregoing was in type, the "normal" rate was doubled and the additional rates were raised.] [Footnote 11: The exemption is $3000 for each if they are not living together. Thus the law offers a reward of $20 to make marriage a failure.] [Footnote 12: See above, ch. 17, sec. 5.] [Footnote 13: See above, ch. 17, secs. 15, 16.] [Footnote 14: See above, ch. 15, sec. 14, first paragraph.] PART V PROBLEMS OF THE WAGE SYSTEM CHAPTER 19 METHODS OF INDUSTRIAL REMUNERATION § 1. Workers subordinate in early societies. § 2. Workers in the Middle Ages. § 3. Growth of the wage system. § 4. Practicability of the wage system. § 5. Time work. § 6. Task work. § 7. Piece work. § 8. Premium plans. § 9. Aim of profit-sharing. § 10. Examples of profit-sharing. § 11. Difficulties in profit-sharing. § 12. Defective theory of profit-sharing. § 13. Purpose of producers' coöperation. § 14. Limited success of the plan. § 15. Its main difficulty. § 1. #Workers subordinate in early societies#. As far back as the history of settled and populous communities can be traced, the masses of workers have been subordinate. Civilization began with direction, with obedience to superiors on the part of the mass of men. Even in the rudest tribes, the women and children were subject to the will of the stronger, the head of the family. Among the Aryan races the family system was widened, and the patriarch of the tribe secured personal obedience and economic services from all members of the community. Chattel slavery, the typical form of industrial organization in early tropical civilization, seems to have been one of the necessary steps to progress from rude conditions; students to-day incline to view it as an essential stage in the history of the race. But as conditions changed with industrial development, chattel slavery became an inefficient form of industrial organization and a hindrance to progress. § 2. #Workers in the Middle Ages#. Serfdom for rural labor and many limitations on the workman's freedom in the towns were the prevailing conditions in medieval Europe. Serfdom was both a political and an economic relation. The self was bound to the soil; the lord could command and control him; but the serf's obligations were pretty well defined. He had to give services, but in return for them he got something definite in the form of protection and the use of land. Between the lord and the serf there continued an implied contract, which passed by inheritance from father to son, in the case both of the master and of the serf. In the towns conditions were better for the free master class of the artisans who owned their tools and often a little shop where they both made and sold their products. But the mass of the workers, shut out from special privileges, bore a heavy burden. There were strict rules of apprenticeship; gild regulations forbidding the free choice of a trade or a residence; laws against migration into the town; settlement laws making it impossible for poor men to remove from one place to another; arbitrary regulation of wages, either by the gilds in the towns or by national councils and parliaments, forbidding the workmen to take the competitive wages that economic conditions would have forced the employers to pay; combination laws forbidding laborers to combine in their own interest. These conditions prevailed even in the periods and in the countries often referred to as particularly favorable for the working classes (such as England in the fifteenth century). § 3. #Growth of the wage system#. Throughout the Middle Ages these conditions were gradually changing, and the changes were hastened by the discovery of America, by the social unrest accompanying the Reformation, and by other forces. Servile dues in the rural districts were, by the sixteenth century, commuted for cash payments in England and had begun to disappear in the other Western countries of Europe. The agricultural work was done partly by the peasant landowners, partly by yeomen farmers on their own land, and partly by laborers hired by landowners or by tenant farmers (enterprisers with some capital for equipment). The growth of commerce and of the mechanical trades in the towns required larger ships, factories, and shops, and increasing investments. This required in the towns an increasing proportion of hired laborers having little or no capital invested in industry, and living on wages. This change went on more and more rapidly with the introduction of machinery in the eighteenth and nineteenth centuries, and "the wage system" grew steadily to be a more and more important part of the whole economic structure.[1] § 4. #Practicability of the wage system#. This change has brought with it grave problems of social organization and social welfare, which it is not the place here to discuss. But whatever be the difficulties of the wage system it has certain practical merits of workableness which account for its progress and dominance.[2] The larger the market and the longer the waiting period in industry, the greater the element of uncertainty and financial risk. Under the wage contract the employer, as the one best prepared to do it, takes the risk as to the future selling price of the product; the worker gets in a definite sum at once the market value of his services. Wage payment, therefore, is a form of insurance to the workingman; he gets something definite instead of taking chances he is ill prepared to take. Wage payment is a form of credit to the laborer whose labor is applied to producing the goods for customers distant in time and in place. The employer advances to the workman the present value of the future sale, discounting it at the prevailing rate of interest. Wage payment implies a contract by which the employee on his part agrees to render service and the employer on his part agrees to pay for it. The methods of determining and measuring the amount of service of the employee are called "methods of industrial remuneration." The many varieties may be grouped in two classes: time payment and piece payment, corresponding with the two modes of measuring labor, time work and piece work. § 5. #Time work.# Time work came first and was long almost the only method. In time work the employee is paid by the hour, day, week, month, or year, as the case may be. This is very satisfactory for small enterprises, where the master works with his own hands alongside of the employee, overseeing him, teaching him, and stimulating him by his own presence and example of industry. This method prevails still in nearly all farming work, in many kinds of manufacturing, in most transportation, in clerical positions in trade, and in general where the employee must perform a variety of tasks. Considering a brief period, it might seem that in time work the worker is paid by time regardless of his effort or performance. However, in every industry there is a recognized, fairly definite standard of accomplishment for those getting the regular market rates of wages, so that the time-standard implies some performance- or piece-standard also. But this is judged by the employer only in a general way, and very commonly men of different degrees of efficiency continue for some time to receive the same money wage. Still, where any differences become noticeable to the employer in quantity of work, quality of work, or personal qualities of honesty, reliability, and good temper, the better workman is likely to obtain a better position, higher pay, more regular employment, or some other form of reward. The employer is more likely at the end of any period of employment, to discharge the man who falls short either in quantity or quality of work, and to retain and advance the better worker. The method of time-payment does not directly tempt the workman to slight the quality of his work by haste. It does not keep constantly before the worker the thought of his own interest in rapid work, often with an accompanying nervous and mental strain. In most occupations, therefore, the workers prefer time work. It does not take exclusive account of the quantity of material product, but leaves place for estimating various personal qualities of the employee which are of value in a business. § 6. #Task work#. There are thus both advantages and disadvantages in time work, and their relative importance varies in different industries and industrial conditions. Especially is the difficulty of supervising workers and of ensuring the performance of a certain standard, or minimum, amount and quality of work great in larger enterprises. Various methods of measuring the performance of the worker directly by some other than the time-standards have been developed. All of these, in a general way, involve the piece work principle. Task work is nominally time work, with a penalty if a certain amount of product is not turned out within a given period. The agreement may be that if the specified task is not done within the regular time, it must be completed in overtime without additional pay. This is also called "doing a stint." This method has been extensively used in the ready-made clothing business in America, and is to some extent involved in many cases of wage payment in manufacturing. § 7. #Piece work.# Piece work of the simpler, or ordinary kind, is that where the payment varies just according to the amount of the product, by some physical measurement, as yards of cloth woven, number of pieces turned on a lathe, or amount of type set by a printer. Usually careful inspection by some agent of the employer serves to keep the quality up to a certain standard. The rejected pieces are not paid for, and sometimes also the workmen are required to pay for the materials wasted by their poor work. Piece payment is convenient for home work, such as that of rural peasants weaving cloth for commission merchants or as that of tenement workers in cities. It is also employed very widely in the larger factories in textile and mechanical industries. Selling on commission is a form of piece work. In piece work the motive to activity is ever present to the worker, and almost always the worker turns out a larger product when paid by the piece than when paid by time. The employer benefits by the more efficient use of his machinery and equipment even when the price per piece is not reduced with the larger output per worker. The worker's earnings may increase rapidly under this plan, but as the manual dexterity acquired is usually of a very special kind which can be used only on one particular machine, the worker has little opportunity to resist a cut in his wages. For this reason and because of the undue strain upon the worker that often occurs, piece work is in many trades not favored by the workers.[3] § 8. #Premium plans.# Various modifications of piece work have been developed of late, all involving the features of a minimum task and of a premium for performance beyond that point. These plans are called "premium plans," "progressive wage systems," and "gain sharing." One of the first of these, Halsey's premium plan, fixes a standard time for a job and if the worker falls short of, or merely attains to, that standard he gets the regular pay; but if he takes less than the standard time he receives a fixed premium per hour for the time saved. For example, if the standard time is 10 hours for a $3.00 job and the premium for speed is ten cents per hour, the worker would receive 20 cents premium if he did the work in 8 hours ($2.40 +.20, total $2.60), and 50 cents premium if he did it in 5 hours ($1.50 + 50, total $2.00). His average wage per hour thus rises as his speed increases; it becomes 32.5 cents per hour when the job is done in 8 hours, and 40 cents per hour when the job is done in 5 hours. The reduction of cost per job to the employer evidently would be 40 cents in the first case, and $1.00 in the second. This is Halsey's plan, by which the worker gets one-third and the employer two-thirds of the time saved. The same plan has been applied (Weir's method) with a premium that equally divides between the workman and the employer the time saved. By Rowan's method the premium is not a fixed sum but a percentage of the standard rate per hour equal to the percentage of reduction in time consumed. For example, if in the foregoing example the time were reduced 20 per cent (to 8 hours) the premium would be 20 per cent of 30 cents, and the workman would receive 36 cents per hour. By this plan the premium becomes less for the later reductions than in either of the other plans. The utmost possible wages would be double the standard rate. A number of other variations have been worked out by the promoters of recent scientific management, and are known as Taylor's, Gantt's, and Emerson's plans. The authors of all these plans agree as to the importance of fixing the standard rate so that it will leave a possibility of considerable improvement with unusual effort, and of leaving the standard rate and premium unchanged as long as no new process or new machinery is introduced into the business. If this is not done the employees lose faith in the plan and refuse to make the necessary effort to earn the premium. Most of these plans of payment recently have been connected with experiments and studies in scientific management to reduce the time and increase the ease of the operations. In a variety of ways a bonus or a premium may be paid for quality, or for economy in the use of materials (as to a fireman for using less coal), or for various other results. Every business has its peculiar conditions, which make certain results especially desirable, and certain methods of reward practicable. In some industries, for example, the various plans of piece work and of premium payment are applied to groups of workers (as in collective piece work), the total payment being then divided among the members of the group in some agreed proportion. § 9. #Aim of profit-sharing.# Profit-sharing is rewarding the laborer with a share of the profits in addition to his usual contract wages. Payments by the piece and premiums for output are solely dependent on the efforts of the particular workman (or collective group), but in the plan of profit-sharing a premium is given in addition to the regular wage if, at the end of the year, the business as a whole has yielded a profit above a certain amount. Profit-sharing is not merely a gift; it is done usually in accordance with a definite promise in advance. The employer adopting the plan does not intend to lose by it. His purpose is to stimulate the industry of the workers, thus reducing waste and cost of labor and supervision, and thereby increasing profits. He offers to divide with the workman the additional profits which are expected to result from their efforts. There is, in every factory, greater or less waste of materials, destruction of tools, and loss of time, that no rules or penalties can prevent. If the worker can be made to take a strong enough personal interest he will use care when the eye of the foreman is not upon him. The product also can be slightly increased in many ways by the workman's exertions or suggestions. In some cases the quality of the work cannot be insured by the closest inspection as well as it can be by a small degree of personal interest. Either responsibility for the fault cannot be fixed, or the defect is one not measurable by any easily applied standard. Strikes may be averted, good feeling promoted, and contentment furthered if the interest of the worker can be made to approach, and in large measure to become in harmony with, that of the employer. The economic result of the plan, if it can be made to work, should be to reduce the costs of these establishments below what they are. The crucial question is whether profit-sharing alone in any particular case will insure that the costs will be less than those of competitors, thus giving a source out of which an increased amount, really a wage, can be paid to the laborer. For the amount of profits is affected not only by the amount of output, but also by a number of other things that are quite outside the control of the workmen. § 10. #Examples of profit-sharing.# The profit-sharing plan seems first to have been successfully tried in Paris, in 1842, by Leclaire, a house-painter. In house-painting there is often a great waste of materials and time by men working singly or in small groups in different parts of the city. By this new method Leclaire enlisted the aid of the workmen, reduced the costs, and increased the profits. It is a remarkable fact that the plan has been continued successfully by the same firm to the present time. It has been tried in many hundreds, possibly thousands, of cases, and is operating in some form or another in more than a hundred firms in Europe and America. The most notable examples of profit-sharing in the United States are the Pillsbury Mills in Minneapolis, Procter and Gamble's soap-factories, in Ivorydale, Ohio, the Nelson Mfg. Co., in Leclaire, Ill., and the Ford Automobile Works, in Detroit. In some cases both manufacturer and workmen value the system highly. It probably has its greatest success when applied in prosperous establishments where profits are regular and large, and where a steady working force is especially desired. The proportion of business done in this way is not large. One hundred firms is a very small fraction of 1 per cent of the total number of firms in Germany, France, England, and America. A still more important fact is that true profit-sharing has spread little since 1890, tho various practices have developed under that name. The most noteworthy of these is the selling of stock, usually at a somewhat lower price, to the employees of a corporation so that, as stockholders, they may have a motive to work for the success of the company (e.g., the United States Steel Corporation). This method as applied to a select few of the employees, who are advanced to official positions in a corporation, is very widely adopted. § 11. #Difficulties in profit-sharing.# It seems at first difficult to explain this comparative failure of a plan that looks so attractive in spirit and of which so much was hoped. Yet objections come from the side both of the workman and of the employer. The workman lacks knowledge of the business and is suspicious of the bookkeeping. If at the end of the year the books show no profits, the workman loses confidence, considers the plan to be mere deception, and rejects it. The working of the plan remains in the employer's hands, and the workman really is not a partner in the business. Moreover, the plan puts a limitation upon the workman's freedom to compete for better wages by changing his place of work. It is indispensable to make length of service in some degree a condition to the sharing of profits. Workmen, coming and going, cannot be allowed to share; the percentage given to the others increases with length of employment. Whenever men are thus practically subject to a fine (equal to the amount of shared profits) if they accept a better position, there is danger of a covert lowering of wages. The plan tends to break up the trade-unions, which is one of the reasons that the employers like it, and is the main reason that organized labor opposes it. The employer on his part objects to the interference with his management, the troublesome inspection of the books, and the constant complaints of the workmen. He dislikes to have the profits known; if they are large, the advertisement of success invites competition; if they are small, publicity may injure credit and depress the value of the enterprise. In view of all these difficulties it is not surprising that while the plan often starts promisingly, it usually fails after a short trial. Business methods are severely subject to the principle of the survival of the fittest. Through competition and the survival of the firms that adopt improvements, better methods must eventually supplant poorer ones. If a method fails to spread when it has been tried for seventy-five years and all are free to adopt it, the strong probability is that it has serious defects inherent in it. § 12. #Defective theory of profit-sharing.# It is usually better to make wages depend on the worker's efficiency rather than on the profits of the whole business. The strongest motive to efficiency is present when reward is connected immediately and directly with effort, not with some result only slightly under the worker's control. Any change in the amount of profits is only partially and indirectly related to increased effort of the worker. The "profits" may be nothing, tho all the manual workers may be exerting themselves to the utmost. The wage bill is but one of the groups of costs. Profits are the net result of many influences. Chief among these is the skill in planning and conducting the business. This function of management is either performed by the same person that is carrying the financial risk, or by some salaried employee selected by him. It is this management function the reward of which should, in theory, be made to vary with the amount of profits; and in fact such an arrangement (managerial profit-sharing, so to speak) is undoubtedly in operation in thousands of cases, but is not included in the usual conception of profit-sharing. Many salaried managers are in receipt of a share of profits and are gradually acquiring an interest in partnerships or a larger share of ownership in the enterprise for which they work. But ordinary profit-sharing is not in accord with the general trend toward the centralization of responsibility in the hands of competent managers, ensuring to the worker a definite amount in advance, as high as conditions make possible. The system of premiums, or bonus payments, for output, where it can be safeguarded against abuses, gives in most cases better results and is rapidly spreading. It is sounder in conception and works better in practice as a method of remuneration for most of the workers. § 13. #Purpose of producers' coöperation.# Since the early part of the nineteenth century many well-wishers of humanity have cherished high hopes that the whole wage system might gradually be replaced by the plan of producers' coöperation among workingmen. Producers' coöperation is the union of workers in a self-employing group, performing for themselves the enterpriser's function. The workers hope to get what seems to them to be a needless drain of profits into the pockets of the employer and unnecessarily high salaries to managers. To do this they must perform the enterpriser's function as to investment and risk. Collectively or through their representatives they must undertake to furnish capital and management as well as hand-work. The capital may be supplied either by the members, individually or collectively, or may be borrowed from outsiders, who are thus merely passive investors. Usually the return to capital invested by members is limited to 5 or 6 per cent, so that this part of the capital likewise is treated as a passive investment, and all the real variable profits are distributed to the members as wages. The hope has been as in profit-sharing to increase the amount of profits through the stimulus the plan might give to the workers and by saving in friction, disputes, and strikes. § 14. #Limited success of the plan.# Practically the plan has been made to work in a comparatively few simple industries. The most notable example of successful coöperation in America was in the cooper-shops in Minneapolis. There were few and uniform materials, patterns, and qualities of product, few machines and much hand-labor, simple well-known processes, a simple problem of costs, a sure local market. After more than thirty years the main shop was still in operation, but with a membership of the older men and with no growth, A number of the less skilled workers receive ordinary wages. In America a few of the productive coöperative companies are found operating small factories. In England, there have been numerous successful societies, but all in small enterprises, mostly connected with agriculture. Within the whole field of industry, this method of organization makes little if any progress. Most experiments have failed and the successful ones have become or are tending to become ordinary stock companies with most of the stock in the hands of a few men. Therefore, whether losing or making money, they nearly all cease to exist as coöperative enterprises. This result has disappointed the hopes and prophecies of many well-wishers of the working classes. § 15. #Its main difficulty.# The main difficulty in producers' coöperation is to get and retain managerial ability of a high order. Failure to do this results in inability to maintain and keep in repair the equipment and to pay the ordinary returns to the passive investment, and financial failure follows. There is no touchstone for business talent, no way of selecting it with any certainty in advance of trial. This selection is made hard in coöperative shops by jealousies and rivalries, and by politics among the workmen. A man selected by his fellows finds it difficult to enforce discipline. In coöperation there is occasionally developed good business ability that might have remained dormant under the wage system; some work-men showing unusual capacity cease to be handicraftsmen. But the unwillingness on the part of the workers to pay high salaries results in the loss of able managers. Having demonstrated their ability, the leaders go to competing establishments where their function is not in such bad repute, and where they are given higher salaries, or they go into business independently, being able easily to get the needed backing from passive capitalists. Coöperative schemes thus suffer from the workers' inability to appreciate the functions of enterprise and management. Most men make a very imperfect analysis of the productive process. They see that a large part of the product does not go to the workmen; they see the gross amount going to the enterpriser, and they ignore the fact that this contains the cost of materials, interest on capital, and incidental expenses. Further, they fail to see that the investment function is an essential one. The theory of exploitation, as explaining profits, is very commonly held in a more or less vague way by work-men. With a body of intelligent and thoroughly honest work-men, keenly alive to the truth, the dangers, and the risks of the enterprise, coöperation would be possible in many industries where now it is not. Producers' coöperative schemes usually stumble into unsuspected pitfalls. When a heedless and over-confident army ventures into an enemy's country without a knowledge of its geography, without a map, and without leaders that have been tested on the field of battle, the result can easily be foreseen. The coöperative principle has been embodied much more successfully and on a larger scale in America in the form of producers' selling organizations or of consumers' coöperative stores. As, however, both of these forms of organization have been developed in America more largely by farmers than by wageworkers, the discussion of them may better be undertaken in connection with problems of rural organization rather than with those of labor. [Footnote 1: See Vol. 1, pp. 227, 318, 322; also above, ch. 2, sec. 14.] [Footnote 2: See e.g., Vol. 1, p. 329, on selection of managed and of managers.] [Footnote 3: See below, ch. 20, sec. 6.] CHAPTER 20 ORGANIZED LABOR § 1. Changing relations between employers and wage-workers. § 2. Need of common action among wage-workers. § 3. Functions of labor organizations. § 4. Types of labor organizations. § 5. Statistics of labor organizations. § 6. Collective bargaining. § 7. Limitation of competition among workers. § 8. Strikes in labor disputes. § 9. Frequency and causes of strikes. § 10. Picketing and the boycott. § 11. Effects of organization upon general wages. § 12. Competitive aspect of organization and particular wages. § 13. Monopolistic aspect of organization and particular wages. § 14. Open vs. closed shop. §15. Political and economic considerations. §16. The public's view of unions. § 17. Future role of organization. § 1. #Changing relations between employers and wage-workers.# The "organization of labor," or the "labor movement," so striking a feature of the world to-day, is of comparatively recent origin. It did not begin and advance _pari passu_ with the beginning and early growth of the wage-system as above briefly described.[1] In anything like its modern form the labor movement dates from the early years of the eighteenth century. Much of the largest part of its history in all countries, excepting England, is after 1860. Why was organization among the workers so long delayed after wage-payment became common, and why when it once appeared did it spread so rapidly in some directions, and why is it still limited in the main to certain fields of industry? These three questions are but one question in three forms and to answer one fully would be to answer all. The modern trade union appeared in England shortly before the industrial revolution,[2] and has extended as fast and as far as the same stage of industrial development has been attained in other countries. The effort of wage workers to organize themselves appears everywhere to result from the separation of the economic and personal interests of employers and workmen. As the control of industry became more concentrated in larger units with the advent of power machinery, the feeling of economic unity among the different ranks of industry was further weakened. The average workman had less opportunity of becoming a master, an employer. In the days of the old hand industry, master, journeyman, and apprentice worked side by side at the same bench. Almost every apprentice might hope to become some time a master, and many a one did so. To-day most wage-workers in large establishments have no hope of rising out of their positions. The mere largeness of an establishment forbids also the personal acquaintance of employer and workman. As a result of these changes, the workmen become more "class-conscious" of their position as wage-workers and the employers in many establishments take the attitude of buyers of labor as a mere ware. When the employer then feels the pressure of competition he is more likely to force the lowest wage that is possible and to compel the workers to accept less favorable conditions than if he were in more personal relations with them. Where the immediate direction of an establishment is intrusted to paid managers who are responsible to stockholders, the managers' success is judged almost exclusively by the dividends they succeed in earning. Hence they are under stronger and more persistent temptation than are active owners to drive hard bargains with their employees. Many examples might be found where managers and resident directors have wished to pursue a more liberal policy than absentee shareholders would permit. § 2. #Need of common action among wage-workers.# These same industrial changes caused employers, even earlier than it did employees, to have something of a "class-conscious" feeling, which tempered the spirit of their mutual competition, especially in bidding for the services of workers. The smaller the number of employers the easier it is by an understanding to suppress competition on their side. If there is only one factory of a kind in a town the employer is able at times to drive a harder bargain with his employees. Especially in times of industrial depression is a change of employment difficult for the laborer, involving for him much trouble and loss of time and money in moving. But it is possible to exaggerate the degree to which competition among employers of labor is weakened to-day. In the long run and at many points competition must be felt in all such cases. The notoriously unfair employer will find his workmen drifting away, his working-force reduced in number and quality at times of greatest need, and his evil reputation going abroad among workmen. A better realization of this fact has led many employers to pursue a farther-sighted policy that fosters a better understanding and a kindlier feeling on both sides of the labor-contract. Another effect of the growing size of business units is to give the workers less personal acquaintance with each other. When they are unorganized they have less unity, common opinion, and power than the workers in the old-fashioned shop with its close personal acquaintance and ready interchange of views. In the wilderness of a great modern factory a worker may be unknown in name and interests to the man touching elbows with him. Moreover, in America, differences in nationality and in speech among immigrant workers often effectively prevent a common feeling of their interests and assertion of them. There is an analogy between these conditions and the political conditions that early led simple democracies to give way to representative governments. So long as a community is small and men know each other personally, popular government may exist without complex machinery, but when numbers become larger, public opinion can be concentrated and made effective only by delegating the functions to elected representatives. § 3. #Functions of labor organizations.# Out of these conditions have grown the various kinds of labor organizations. Their first object is to maintain and increase wages. Closely connected with this is the remedying of various abuses in respect to methods of payment, measurement of the output, and conditions of work. Almost coördinate with the aim of higher wages of recent years has been that of the shorter work day. Labor leaders have frequently asserted when the two demands have been made together, that a reduction of hours is the more desirable. Better conditions of safety and sanitation in their work were not the first thought of laborers when they organized. As a result of habit and ignorance (widely prevalent at that time) they were remarkably unconcerned about this matter. Reforms in this direction at the outset had to come largely from sympathetic observers, the "philanthropists," often described as sentimentalists. But the modern, more enlightened, labor movement has better ideals and policies in respect to the safety, sanitation, and decency of the working places. Labor organizations have also secondary objects of very great importance. They are nearly always in some measure mutual-benefit associations, and provide in varying degrees insurance against accident, sickness, death, or lack of employment. All unions in a measure serve their members as employment bureaus, and some make this am important feature. Through trade-papers, correspondence, traveling members, and in meetings, information is exchanged regarding conditions of employment in various parts of the country. Labor organizations by means of their discussions and through their special periodicals are a strong educational force in matters political and economic. The local labor organizations often come to be the center of the social activities and interests of many of their members, and even of all the members of their families. The organizations thus serve the functions of social clubs, of literary societies, and of civic centers for their members. § 4. #Types of labor organizations.# Among the many organizations of wage-earners three main types may be distinguished: the labor union, the trade union, and the industrial union, tho often they are all spoken of as trade unions without distinction. A labor union admits all classes of wage-earners and even business and professional men into the same local chapter. The "Knights of Labor" is the most notable example that America has seen of this type. The national organization was composed of local chapters, to membership in which every one was eligible excepting bankers, lawyers, gamblers, and saloon keepers. Organized as a single local chapter in 1869 it grew very rapidly until it attained its maximum membership of 600,000 in 1886. From this point it rapidly declined in membership, and since 1900, altho its organization is still maintained, has been of very little influence. A trade union is an organization of wage-earners in the same handicraft or occupation. Unions exist among workers in all the old distinctive handicrafts, such as the printers, stone cutters, cigar makers, carpenters and in many other groups such as musicians and retail clerks. The local chapters in many cases have been long united in national unions (often international, including the United States and Canada). An industrial union is one that seeks to unite all workers employed in the same class of establishments regardless of their craft or the kind of work they do. The most notable examples are the United Mine Workers, the Brewery Workers, and the Industrial Workers of the World. In 1881 a number of national trade unions united for certain purposes, to form the American Federation of Labor with a membership of about a quarter million workers, which has steadily increased since that date. The American Federation of Labor now includes also some important unions of the industrial type. Several strong national trade unions (the most important being the brotherhoods of railroad employees) are not affiliated with the American Federation of Labor. § 5. #Statistics of labor organization.# The ratio of organized workers to the population is estimated (figures for 1910) to be highest in the United Kingdom, being nearly 7 per cent; it is next highest in the German Empire, being nearly 6 per cent; whereas, in the United States, it is but 2.3 per cent. This difference is largely due to the much greater relative importance of agriculture in the United States. The total membership of trade unions in the United States and Canada is estimated to have been in 1910 about 2,200,000, of which only about 100,000 were in Canada. This was 5.5 per cent of all persons (38,130,000) gainfully employed, or 6.8 per cent of male employees, and 9 per cent of female employees. Organization was very weak (less than 1 per cent) among the workers in a group of industries occupying nearly one-half of all workers, including agriculture, the hand trades, oil and natural gas, salt, and rubber factories. Organization was not of large extent (1 to 10 per cent) in other groups of industries occupying more than one fourth of all workers, including those engaged in producing quarried stone, food stuffs, iron and steel, metal, paper and pulp, stationary engineers, in public, professional, and domestic service, and in clerical work. Organization was of much greater strength, including 10 per cent or more of the workers, in the remaining industries and occupations. If deduction be made of the employing and salaried classes, about 7.7 per cent of all persons occupied were organized. If, further, deduction be made of agricultural, clerical, publicly employed, commercial and domestic workers, about 16 per cent of the remaining 13,760,000 persons are organized (of women 3.7 per cent). Among the occupations most highly organized are those of railway conductors (87 per cent) and engineers (74 per cent). In the building trades about 16 per cent are organized, of granite cutters 69 per cent, masons 39 per cent, plasterers 32 per cent, carpenters 21 per cent, and painters 17 per cent. Similar striking differences appear among the occupations in the printing industry; of stereotypers 90 per cent are organized and of compositors only 35 per cent. These figures point to inherent differences in the conditions favoring organization. Even in the same craft a high degree of organization may be found in the cities and little or none in the smaller towns (e.g., in the case of the printing and building trades in general).[3] § 6. #Collective bargaining.# The fundamental policy of trade unions is the substitution, for the individual wage bargain, of collective bargaining between the delegated representatives of the working men and the employer, or group of employers, or their representatives. The wage-earners bargaining collectively may be those of a single establishment, or of a group of establishments in the same locality, or of a wider territory even national in extent. Accordingly, they are represented in the negotiations by trade-union officials with narrower or wider jurisdiction. Employers in some cases had tacit understandings with each other before laborers were organized. But in many cases the individual employer was at a marked disadvantage after the organization of his employees. The result has been the rapid spread of employers' organizations, so that in industries where laborers are highly organized, two-sided collective bargaining has become more and more usual. A large part of the effort of trade unions is directed toward ensuring the use of collective bargaining. This is the purpose of many of their demands, even of some that hardly appear to have any such consideration. Collective bargaining practically necessitates the use of "the standard rate," since only with reference to some standard rate, a market price for labor, is it possible for a wage contract to be made by labor officials for a group of men. The standard rate may be a piece price or a time price, and in many cases the unions strive to secure the latter as more convenient for their purposes. The standard time rate usually is but a minimum and many of the more skilful workers receive wages above the minimum. But the standard minimum tends to become also the maximum in many cases, the more so when the union has succeeded in enforcing a pretty high standard rate. § 7. #Limitation of competition among workers#. In order that the representatives of organized laborers may act effectively in collective bargaining the first condition necessary is that a large proportion, if not all, of the workers of the trade in the establishments concerned shall be organized. A common sense of wrong is one of the strongest motives to bring workers together, and has prompted the origin of many a local chapter. Then constant and strenuous efforts are made to bring workers into the organized ranks. Experienced organizers knowing all the arts of persuasion devote their whole time to this task, being paid regular salaries. When friendly argument fails, threats may be used and sometimes personal violence. The public opinion and class feeling fostered among members of an organization in times of difficulties are analogous to the sense of patriotism in the nation at large and at times may displace it in the hearts of organized laborers as is seen in opposition to the militia and to the maintenance of order in times of strikes. The most effective of all peaceful methods if petty persecution rising at times to social ostracism. The individual who declines to enter the union is denounced as a traitor to his fellow workers and is made to feel their scorn. The use of the union card to be carried by every member to show whether he is in good standing is an effective way of enforcing these measures. Finally, where all these measures fail, pressure may be brought upon the employer to get him to force unwilling workers into the union.[4] Further to give control over those working in a trade and to reduce competition among workers, unions often limit the number of apprentices and determine who shall have the privilege of learning the trade. By a variety of regulations they limit the output and in many cases (tho less frequently now) have opposed the use of labor-saving machinery. Further to enforce these policies they seek to have each special kind of work controlled by a special union. This gives rise to disputes between rival unions and causes annoyance and loss to the workers themselves, to the employers, and to the general public. § 8. #Strikes in labor disputes.# A strike is a concerted stopping of work by a group of employees to enforce a demand upon the employer. A lockout is an employer's closing of his shop because of a disagreement with his employees. The strike is, in its direct and indirect, immediate and ultimate, effects the most important weapon of the organized wage-earners in their relations with their employers. To newly organized laborers the union appeals mainly as an instrument for striking, for threatening the employer, or for making him suffer to compel him to accede to their demands. The effectiveness of a strike lies in the loss it threatens or occasions in the stopping of machinery, the ruin of materials, the loss of custom, and the failure to complete contracts that have been undertaken. The employers will often, to break a strike, pay to others for a time more than the current rate of wages. The success of the strikers being dependent on their ability to keep the employer from filling their places, their energies are bent upon that end. The losses that strikes cause to workers in stoppage of wages, to employers and investors in destruction of plant and in suspension of profits, and to the public in the interruption of business, aggregate an enormous sum. The direct losses to employers and strikers in the 20 years between 1881 and 1900 have been estimated to have been nearly $500,000,000, a large sum, but amounting to less than 1 per cent of the wage-earners' incomes. It is, however, impossible to estimate at all exactly losses that in many cases are indirect and intangible. The strikers are concerned in each case not with the balance of total losses and total gains to society as a whole, but with the net gain that they expect to accrue in the long run to themselves. Viewed in this way it is true that there are various indirect benefits in strikes that are not easily calculable, particularly the advances of wages made by employers to avoid strikes which they know will otherwise occur. In regard to the wisdom of any contemplated strike, opinion is always somewhat divided, as it is in regard to the value of strikes in general. § 9. #Frequency and causes of strikes#. Strikes were relatively decreasing in number from 1880 to 1900, but from 1901 to 1905 the annual average was more than twice as large as in the preceding decade. On the whole, strikes have been more numerous in periods of business prosperity when there was a better chance to get concessions from the employers. But they occur also in the periods following crises, when the workers seek to minimize cuts in wages and to prevent the depression of working conditions. More broadly viewed, strikes appear to accompany readjustments to dynamic conditions. As wages as a rule rise more slowly than general prices,[5] it was to be expected that the period since 1900, in which the general price level was rising at the rate of about 3 per cent a year, should have been marked by increasing resort to strikes. The immediate causes of strikes have been changing in relative importance. In 1881, at the time of the very rapid organization of unions, over 71 per cent of all strikes were directly connected with wage demands (61 per cent for increase and 10 per cent against reduction). But in 1905 the total for these causes was only 37 per cent, whereas the proportion of strikes for reduction of hours nearly doubled (from 3 to 5 per cent) and the proportion of those concerning recognition of unions and union rules increased fivefold (from 6 to 31 per cent). Ultimately nearly every demand of the laborers is related to the question of wages; but these figures show that when organization is new this relationship is more immediate, whereas later more effort is directed toward securing the stronger strategic position that comes with recognition of the union. § 10. #Picketing and the boycott#. Picketing by strikers or their friends is intercepting and accosting all persons approaching or leaving the place of work, to inform them of conditions and to dissuade them from working there. When peaceable means fail, often there is recourse to violence both against the employer and his property and against nonstriking workers. Indeed, many persons declare that peaceable picketing is impossible, and it surely is difficult to attain in view of the temptations of human nature under the circumstances. Almost always connected with a strike is the practice of the boycott, which is a combination of wage-earners to cut off an employer (or group of employers) from business dealings. The boycott is found in varying forms and degrees, broadly distinguished as simple and compound-boycott. In simple boycott only persons directly interested in the trade dispute refuse to deal with the boycotted person. The question arises as to who are to be deemed directly interested, whether it includes only the actual strikers in a particular establishment, or whether it includes organized workers in sympathy with them. The latter case is presented when an "unfair" list is published in labor journals. It seems that only the former case is a really simple boycott. The use of the simple boycott, the refusal of a person, or even of a conspiring group of persons, to deal with a person with whom they have an industrial dispute, appears to be a part of the elementary rights of personal liberty. Beyond that point the boycott is compound in varying degrees.[6] It is the compound form which is usually referred to in discussion and in court decisions on the subject. It is the compound boycott that has been described as "a combination to harm one person by coercing others to harm him." The compound boycott, as experience shows, has moral limits as well as legal limits. It is doubtful whether the boycott can be extended at all beyond the first degree of personal relations without becoming antisocial, whether it is the weapon of organized workers or of organized wealth. The endless-chain boycott, a measure of excommunication without limit, pronounced against an offending employer, non-union workers, and every one in any way befriending them, is an effort to drag every one else into a dispute that is primarily a private matter. § 11. #Effects of organization upon general wages.# The crucial economic problem in connection with trade unions is not as to their methods (that being rather a political problem) but as to their effect upon wages. There must be distinguished two questions: first, as to their effect upon the general level of wages; and next, as to their effect in raising the wages of the organized laborers alone. As to the first, the thought has sometimes been expressed by sympathetic social students outside of trade-union circles that but for the organization of labor wages in America would be no higher than they were in 1850. This seems to be assumed in much of the argument of labor leaders, for they speak as if all wages, but for trade unions, would be at the starvation level; and they credit everything above that level to the work of the union.[7] This claim is peculiarly effective in America, where wages are and always have been relatively high. But proof of the claim is lacking. As we have seen, even now fewer than 1 in 16 of all gainfully employed, and fewer than 1 in 12 of those working for contractual wages are organized. On no principle of value could the mere organization of one-twelfth of the wage-earners, without permanently withdrawing them from the labor market, explain the relatively high wages of the other eleven-twelfths. In many lines where labor is not organized, as in teaching, clerical, professional, domestic, and agricultural services, wages have risen as much or even more than in most of the organized trades. The underlying economic forces determining the general level of labor-incomes in a country are much more fundamental in nature than labor unions or protective tariffs.[8] The trade-union authority already cited seems in another passage to admit a view not essentially unlike that just expressed when he says: "Capital is increasing faster than population.... It seems therefore merely in obedience to natural laws that wages should rise." The only reasons ever suggested for thinking that the organization of one-twelfth (or any larger proportion of the wage-earners) could in any general way raise the labor-incomes of those remaining unorganized are: first, that organized labor sometimes leads the way in securing favorable legislation; and, secondly, that if organized workers get higher wages this sets a standard which it is easier for the unorganized then to attain. Both of these suggestions may have some little validity in special cases, affecting slightly a small proportion of the unorganized workers, but neither touches fundamental causes of general high wages. Whereas, it is clear that when the unorganized laborers constitute the main body of consumers for the products of organized labor (and this unquestionably is in large measure the case) any increase in wages that can be secured through organization by a portion of the workers must, in part, be subtracted from the "real" incomes of the unorganized workers. The employer is middleman, not to a great degree the ultimate consumer of labor.[9] Some part, it is true, of the higher wage might be taken from profits or from wealth-incomes, but this would still leave the unorganized workers the losers. § 12. #Competitive aspect of organization and particular wages.# A different question is presented as regards the influence of organization upon particular wages, and primarily upon the wages of organized labor. The trade-union authority before cited says, "Where there are no unions wages should be lower. This is exactly the case." And he quotes: "Wherever we find union principles ignored, a low rate of wages prevails and the reverse where organization is perfect." But he later explains in part this difference: "The union men are the best workmen and often employers pay a man more than union wages. This is not surprising as no man can be a union carpenter unless he be in good health, have worked a certain number of years at his trade, be a good workman, of steady habits and good moral character." If this be true, as doubtless it is to some degree in many trades and places, it is in accordance with competitive principles that, as the elite of the trade, the organized laborers should get higher wages than those outside the unions. Moreover, the unions exist mainly in the more populous places where costs of living as well as wages range higher than in the small towns and in the rural districts. A comparison merely of wages in money in such cases is misleading as to the conditions of real income. Further, a higher standard of output prevails in the cities where organization is greatest, and older men and the less efficient that are unable to "keep up the pace" drift away into unorganized shops or to villages where no standard union rate is in force. So far as unions help to develop the intelligence and promote the sobriety and efficiency of their members, they are a positive economic force making for higher wages. The book before quoted expresses, somewhat vaguely, an opinion in accord with these facts when it says: "It is an error to think that the trade union seeks to determine the rate of wages. It cannot do that. It can do no more than affect them." And so, with organization as well as without, the wages of individuals and of classes of laborers are determined by the general principles of price as applied to their services. Where neither the employer has a monopoly in his business nor the organized laborers have a monopoly of the labor supply, there is two-sided competition in the labor bargain, and organization may help to raise particular wages inasmuch as it acts in the competitive ways above mentioned and as it helps to restore to the laborers a truer equality of competition. § 13. #Monopolistic aspect of organization and particular wages.# The action of organized labor is not, however, limited to the competitive field, above discussed. Wages in particular industries may, by the action of trade unions be raised and maintained above a true competitive rate. This of course can be done only in accordance with the principles of the service-value to the consumer and of service-price in the employment-market. The supply of labor is in a variety of ways artificially limited by the efforts of the unions. It may be done temporarily by striking when a failure to fill orders will cause the employer exceptional loss. Violence in strikes and boycotts is often the desperate attempt to create and assert a measure of monopoly power where of itself it does not exist, i.e., where other workers stand ready to take the jobs at the prevailing rates of wages. Monopoly is created if apprentices are limited to fewer than in the long run would be attracted into the trade by the prevailing wages. It is created if the unions artificially limit output to less than is consistent with the health of the worker. Monopoly is created if unions strong enough to keep "scabs" from getting work, fix their dues high or put other obstacles in the way of increasing the membership. Probably the most striking cases of high wages for organized labor are of this kind. The element of labor-monopoly evidently is mingled in all degrees from the slightest to a very great amount, in particular economic situations. § 14. #Open vs. closed shop.# The question of labor monopoly is involved in the very crucial question of the closed vs. the open shop. A closed shop (or union shop) is a shop in which no non-union men may be employed, even at union wages. Its existence is evidence that the union is strong enough to compel the employer to act on this principle and thus virtually to force all his employees into the union. The refusal of a demand for the closed shop is often the ground for a strike. Where this is so unions usually assert that the closed shop is essential to the existence of the union. If union and non-union men work side by side there are many ways in which the employer is able to discriminate so as gradually to break down the union. If business slackens, the union man may be the first to be discharged; if any preference is given it is to the non-union man. While this may be true, it would seem, on the other hand, that an unmodified closed shop, with the conditions of membership in the control of the union, creates a distinct monopoly of labor leaving the employer helpless in any wage dispute and enabling the union to enforce its every demand regardless of the competitive conditions of the labor-market for that class of services. § 15. #Political and economic considerations.# The question here takes on a broad aspect, Is the closed shop, and are the other policies of trade unions, morally right; and ought they to be legally sanctioned? The answer to such questions is not for the economist alone to give. The questions involve other than economic considerations. They involve moral and political considerations--not merely existing formal law, but the fundamental issue of personal liberty and of interference with the liberty of some citizens by another group acting without political authority. For example, if a workman is unable to earn the standard rate[10] and is not permitted to take less, he is forced to move to a place where there is no union, or is forced out of the trade entirely. In the latter case he probably is compelled to take a lower wage than he could get in his regular occupation. Likewise, this change artificially increases the pressure of competition and reduces the wages of others in the occupation to which he turns. So in the case of persons prevented from becoming apprentices in a trade, or kept from taking work by threats, or by the dread of boycott, or by the fear of violence, in any degree however slight, there is present an element of personal coercion by the organized laborers. This is the price others are made to pay for a favorable effect on the wages of the organized laborers. Now the strictly economic question concerns merely the part as to the effects upon wages, and the economist (as such) is going outside of his special field when he pronounces on the moral rectitude (and the desirability in law) of such acts and policies. One who fully shares the feelings of the organized workers will believe that the winning of a strike or the general improvement of the strikers' condition is so important that it outweighs the evils to other individuals and to society as a whole. Indeed, to one in that state of mind the evils appear very small or nonexistent. The economist can only issue the warning that the commonest illusion he encounters is the belief of each class--commercial, banking, manufacturing, wage-earning--that what is for its particular interest is, in a peculiar manner, for the general interest, so much as to justify favoring legislation or special exemption from the general law, or even sheer lawlessness. § 16. #The public's view of unions.# We may, however, observe the view of the onlooker striving to be impartial. The attitude of the public in labor disputes, and particularly in regard to the closed shop, is a vacillating one. The general public sympathizes in large measure with the unions in their efforts up to a more or less uncertain point; but the public does not like to see organized labor with the power to dictate terms absolutely to the employers any more than it likes to see employers crush the union. The unions are effective in varying degrees in strengthening the bargaining power of the workers, and accordingly the results vary not merely in degree but in kind. The public wishes to see "fair play," and up to a certain point the union is a device to get fair play. In truth, what is in the public's thought, somewhat vaguely, is approval of unions so far as they go to establish a real equality in competitive bargaining with the employers, but disapproval where the power of the union gets greater and becomes monopolistic. It is at this point that organized labor loses the sympathy of most of "the general public" outside of unions. When the union tries to force a higher wage than the market will warrant, when it strives not to establish but to defeat competition, the public condemns. It sees, tho not quite clearly, that such action makes an unstable equilibrium of wages which tempts to constant friction and discord with employers and with unorganized laborers. It sees also that if the unions force a wage higher than a fair and open market affords, this is rarely done at the expense of the employer; that in the long run it is at the expense of the purchasing public itself, including the unprivileged workmen.[11] In accordance with these facts and opinions there has developed, at least in one respect, a pretty definite conviction on the part of the public regarding the closed shop, namely: the closed shop should go only with the open union. A union under the closed shop policy is exercising a quasi-public function, that of controlling the industrial action of private citizens against their will. The union therefore, in this view, must cease to be a purely private, voluntary organization, and become in some respects subject to public regulations as to its internal rules and administration. This view, however, is very unacceptable to the leaders of organized labor in America, and there the question now stands. § 17. #Future role of organization#. In the light of the principles of wages it appears that organization most easily gains results, and the most stable results, when wages are below or near the competitive rate. An earnest effort on the part of the workers is necessary for them to get the share that true competition would accord them, but the attempt to force wages beyond that point must be the occasion of increasing friction. With so modest an ideal however, as the true competitive wage, organized laborers and their leaders cannot be expected always to be content. Aside from its effects upon the wage-bargain, unionism finds its greatest justification is in its unspectacular fraternal, mutual-benefit, and educational functions. The chief forces favorable in the long run to wages that can be affected by organization are domestic peace, order, and security to wealth; honesty and good faith between man and master, in law-maker and in judge; efficiency and intelligence of the workers; and far-sighted social legislation. Some of these contribute to greater productiveness, others to a fairer distribution. In all these ways organized laborers have made valuable contributions, unfortunately neutralized in many cases by a narrow class outlook. Organized labor is here to stay for a long time to come, and as the elite of the wage-earning class it should, and probably will, be an increasing force for political betterment and for social welfare in the republic. [Footnote 1: See ch. 19, secs. 1-3.] [Footnote 2: See Vol. I, p. 459.] [Footnote 3: See _Quarterly Journal of Economics_, May, 1916, article by L. Wolman.] [Footnote 4: See below, sec. 14, on the closed shop.] [Footnote 5: See Vol I, pp. 223-224, and above, ch. 6, sec. 12 and ch. 10, sec. 7.] [Footnote 6: The "unfair list" is usually given as a form distinct from either the simple or compound forms. The "fair list" published either by labor journals or by a consumer's league is not declared to be a boycott.] [Footnote 7: In a book by an English trade-unionist, Trant, reprinted and circulated by the American Federation of Labor as representing its theory and claims, all the advances that have been made in wages are said to be due to the trade-unions.] [Footnote 8: See Vol. I, pp. 227, 439, 466, 467, 504-507; and above, ch. 14, sec. 8.] [Footnote 9: See Vol. I, pp. 217, 222-223, 352, 356.] [Footnote 10: See above, sec 12.] [Footnote 11: We are expressing here the general opinion, not pronouncing a final justification of competition as a rule of conduct. On this something will be said later, in ch. 31.] CHAPTER 21 PUBLIC REGULATION OF HOURS AND WAGES § 1. Spread of the shorter working day. § 2. The shorter day and the lump of labor notion. § 3. Fewer hours and greater efficiency. § 4. Child-labor. § 5. Child-labor legislation. § 6. Limitation of the working day for women. § 7. Limitation of the working day for men. § 8. Broader aspects of tins legislation. § 9. Plan of the minimum wage. § 10. Some problems of the minimum wage. § 11. Mediation and voluntary arbitration. § 12. Compulsory arbitration. § 13. Organized labor's attitude, toward labor legislation. § 14. Organized labor's opposition to compulsory arbitration. § 15. The public and labor legislation. §16. The public and compulsory arbitration. § 1. #Spread of the shorter working day.# Since about 1880 a shorter working day has been one of the prime objects of organized labor in America. Notable progress was early made in some trades, reducing hours from 11 to 10, or from 10 to 9, and in a few cases from 9 to 8. In the building trades in the cities, especially, the eight-hour day has come to be well nigh the rule. In 1912 it was estimated[1] that 1,847,000 wage earners were working in the United States on the eight-hour basis; of these 475,000 were public employees. A large proportion of the remainder were women and children whose hours were limited by law, or were men working in the same establishments with them. Since that date the eight-hour day has been more widely adopted both through private action in many establishments and by legislation. The year 1915 witnessed an especially rapid spread of the eight-hour day. § 2. #The shorter day and the lump of labor notion.# The shorter working day is advocated by most workers in the belief that it will result not in less pay per day, but in even greater pay than the longer day, even if the output should be decreased. This view is connected with the lump of labor notion.[2] It assumes that men will work no faster in a shorter day, and that there is so much work to be done regardless of the rate of wages; and concludes that the shorter day will reduce the amount of labor for sale and cause wages to rise. To the extent, however, that laborers, as consumers, mutually buy each other's labor, evidently this loss due to curtailing production must fall upon the laborers as a class. The workers nearly always call for the same daily pay for a shorter day, which means a higher wage per hour. If wages per hour increase less than enough to make up for the fewer hours,[3] the purchasing power of the workers must be reduced. If the output per hour is increased proportionally to the pay per hour, the existing wages equilibrium would not be disturbed. But if the output increases not at all or in less than the proportion of the increase in pay, there is an inevitable disturbance of the wage equilibrium. In a competitive industry this would compel a speedy readjustment of wages downward. If a certain group, or large number, of workers were to begin turning out only 80 per cent as large a product as they did before while getting the same money wage, the costs per unit would be thereby increased. Prices must rise or many of the establishments must close, and then prices would rise as a result. This must throw some of the workmen out of employment and create a new bargaining situation for wages. If the general eight-hour day were applied to every industry and to all wage workers at once, then all workers and all employers in the industry would be in a like situation. But at once there must occur changes of consumers' choices in a great number of ways. If there are one fifth fewer goods evidently at least one fifth of the consumers must go without. This would largely be the wage workers. The things of which wage labor makes up a large part of the costs will rise in price relative to the things of which self-employed labor and of which materials and machinery make up a relatively larger part. This must compel a reduction of the demand for the products of wage labor relative to other things, and be reflected to labor in a lower wage. This reduction would not necessarily be just in proportion to the reduced output (that is, say, 20 per cent if from 10 to 8 hours, or 11 per cent, if from 9 to 8 hours). It might even be more, but probably would be somewhat less. In any case, both the money wages and the real wages of laborers, either in the particular trade or generally, must be reduced by a general reduction of hours that results in a decreased output. In such cases, even when the workmen by a strike or general movement secured the same wage scale for a day of fewer hours (a higher wage per hour), they would be unable to hold it excepting where they had monopolistic control of the trade. In a period of rising prices due to an increasing supply of gold, the readjustment of wages (per hour) away from an artificially high level down to a competitive rate goes steadily on. Even when money wages remain the same their purchasing power declines at such times, and this serves soon to bring the high money wages into accord with the lower value of the services.[4] § 3. #Fewer hours and greater efficiency.# Quite contrary to the foregoing view is the claim that in the shorter day the rate of work is so increased that the output is at least as large as in the longer day, or even larger. A faster working pace is possible with a shorter day, particularly in those operations calling for physical or mental dexterity. This view is less attractive to the workers than the preceding one, but is more acceptable to the employers and to the public. The change undoubtedly has resulted in many cases in the manner indicated, and could be made to result so in many other cases by applying the methods of scientific management. But it is a change which cannot be repeated indefinitely and under all conditions with like favorable results. Whether in any particular case it can be, depends in part on the length of the working day at the start. Such an increase in output might occur in a change from exhausting hours, as from 12 to 10, and again from 10 to 9, and yet not be possible in a change from 9 to 8. Moreover, the speeding up of the workers beyond a certain point may have had physiological effects outweighing the benefit from shorter hours. It is now said that with the increase of automatic machinery there are more and more workmen who much of the time have merely to watch the machine-tool run, and occasionally adjust the material. There has, however, been collected a notable body of evidence to show that, in many industries and in different establishments using much machinery, a reduction of hours to a number as few as eight has been followed by the increase of the output per worker, or by improvement in the quality of work, or by improvement in the management, resulting in a reduction of the cost of production. This is often sufficient, or more than sufficient, to compensate for the shorter time. Wages have remained as high as, or higher than, before, and employment has been more regular. So far as this result is due to the individual worker, it is explained by the same evidence referred to below[5] as bearing upon the health of the worker. This evidence tends to prove that with longer periods of rest and recreation the worker lives in a physical and mental condition fitting him far better for his work, and for continuing his working life. § 5. #Child-labor.# All the foregoing arguments are weighed in terms of private incomes and of the value of the products, whereas the main considerations that have of late been influencing legislation and judicial decision in favor of shorter hours have been those of public welfare. The legal limitation of working hours is being treated primarily as a health measure, into the judgment of which is more and more entering a broader conception of the happiness, morality, and opportunities for good citizenship for the worker and his family. In agricultural conditions, such as have prevailed generally in America, there is little need of limiting the hours of work and the age at which children may begin to work. The barefoot boy trudging over clover fields to carry water to the harvesters may be the happier, healthier, and better for his work. Child-labor in agriculture has never become a social "problem" so long as the children work with their own parents at their own homes; but the labor of children for wages, especially in gangs on large farms (as in beet cultivation and cranberry picking) or in canning factories, has exhibited evils as pronounced as any in urban manufacturing conditions. The evil of forcing children into factories was early recognized. The most obvious evils of child-labor are neglect of the child's schooling; destruction of home life; overwork, overstrain, and loss of sleep, with resulting injury to health; unusual danger of industrial accidents; and exposure to demoralizing conditions. The usual assumption that the worker is able to contract regarding the conditions of labor on terms of equality with the employer is most palpably false in the case of children. The child, subject to the commands of his parents and guardians, is not a free agent. Lazy fathers are tempted to support themselves in idleness on the wages of their young children. Often poverty leads the parents to rob their children of health, of schooling, and of the joys of childhood. The competition of child-labor also depresses the wages of adults, and thus the evil grows. § 5. #Child-labor legislation.# The limitation of hours was first applied to children working in English factories early in the nineteenth century and thence has extended throughout the world, tardily following the spread of the factory system. The first American law of the kind was in Massachusetts, in 1842, limiting to 10 hours the labor of children under twelve years of age in manufacturing establishments. All the earlier state laws established low minimums of age and high maximums of hours, and were poorly enforced for lack of adequate administrative machinery, this in turn being the result of lack of active public interest. In all these respects many states gradually improved their child-labor laws in the latter part of the last century, and much more rapidly since 1903. Now the maximum working day for children in about one half of the states is 8 hours, in one quarter is 9 hours, and in one quarter is 10 hours (and in a few southern states, 11 hours). Night work by children is very generally forbidden (in about forty states). During the same time the minimum age has been pretty generally raised to fourteen years for factory work, with higher ages (sixteen, eighteen, or even twenty-one) in some states for certain occupations dangerous to health or morals. In addition to these general limitations, special provision is made for individual examinations to determine whether the child is mentally and physically fit to work and has met the requirements of the compulsory education laws of the state. The most important child-labor legislation in recent years was the enactment of the long debated national child-labor law (passed in August, 1916). This prohibits the interstate shipment of goods produced in factories wherein any child has, within thirty days, been employed under unfavorable conditions as to hours and time of work as specified in the act. The passage of this act was the culmination of years of efforts in and out of Congress. Child-labor legislation viewed as a merely negative policy is not of great moment. Its real significance is to be judged only in connection with the broader social policy of protecting and developing all of the children of the nation to be healthy, intelligent, moral, and efficient citizens. Children growing into blighted and ignorant manhood and womanhood are threats to society. § 6. #Limitations of the working day for women#. But little later than the limitation of child-labor usually comes some legislation to limit the hours and conditions of employment of women. The grounds of this policy are that women likewise are less able than men to protect themselves in the labor contract, that they are physically weak and are peculiarly exposed to certain dangers to health, that as future mothers they need protection for their own and the public welfare, and that in the period of maternity the dangers are especially great. The work of women in factories operates in some ways to depress the wages of men, and it is harmful in its effects upon the home and family life. At present five states limit the hours of women to 8 a day, twelve to 9 a day, fifteen to 19 a day, four to 11 or less a day. A number of states forbid the work of women in designated places of work such as saloons, mines, or where constant standing is required. Only as late as 1911, in America, has legislation, now in four states, given maternity protection, as is now more fully provided in European countries in connection with systems of health insurance. In all of the great industrial countries of Europe night work by women is restricted (prohibited between 10 P.M. and 5 A.M. or yet more narrowly limited); but legislation along this line is found in only eight American states. § 7. #Limitations of the working day for men#. The general assumption made in law has been that the adult male worker is competent to judge of the working conditions, hours of labor, and wages, and is capable of protecting his own interests sufficiently by his power of refusal to accept employment. The legislatures have, much more tardily than in their legislation for children and for women, acted contrary to this assumption, but, when this has been done, the courts in America have vigorously asserted the general doctrine and denied the constitutionality of the laws. However, some exceptions were made in legislation, and, after much apparent hesitation and vacillation, were allowed by, the courts to stand, and these have now grown in number until they form an impressive total. These exceptions have come in various ways. There is first, the eight-hour limitation in public employment, required in federal employment in 1868, really effective since 1892, and now in force likewise in about two thirds of the states. In almost the same jurisdictions--national, state and municipal--eight hours is the legal day on work done in private business for the governments. Work on railroads and street railways, particularly in the direct operation of trains, such as the work of dispatchers, signal men, and trainmen, is subjected to a large variety of regulative measures, hours being limited in some cases to 8, in others to 9, 10, 12, or 16, and in a number of cases a specified minimum number of hours of rest is required after the maximum hours of labor. These laws are primarily for the protection of the public, but they afford a protection to the employee much needed, as many well-authenticated cases of excessive and exhausting hours demonstrate. The limitation of hours has very recently been extended to many private businesses in which exceptional conditions exist affecting the health of the workers or the safety of the public. This development has occurred almost entirely since the United States Supreme Court in 1898 (Holden vs. Hardy) sustained a Utah statute limiting to eight the hours of labor in underground mines. Now 8 hour laws in certain specified cases are found applying to mines, smelters, tunnels, and a variety of other kinds of work, and in a few cases the limit is 9, 10, or 11 hours. § 8. #Broader aspects of this legislation#. The subject took on a new aspect when the legislature of Oregon, in 1913, declared broadly that "no person shall be hired, nor permitted to work for wages, under any conditions or terms, for longer hours or days of service than is consistent with his health and physical well-being and ability to promote the general welfare by his increasing usefulness as a healthy and intelligent citizen," and fixed ten hours as the limit of work consistent with such a measure of health and welfare, in work in any mill, factory, or manufacturing establishment. This law was sustained by the Supreme Court of that state and was carried on appeal to the United States Supreme Court.[6] In support of the law there was presented a voluminous brief giving a most impressive body of evidence from scientific and from practical business sources, to show the many evils, popularly unsuspected or underestimated, that result from long hours even in industries of no exceptional hazards.[7] Physiological and psychological tests demonstrate that the fatigue following more than a moderate working period not only reduces immediate efficiency, but so poisons the system that greater liability to accident, disease, intemperance, immorality, and premature decay, results. Two main purposes appear somewhat intermingled in this legislation in limitation of hours. The first purpose is to protect the public directly where the safety of others is dependent on the health and efficiency of the worker. The second purpose is to protect directly the worker's health and welfare, that policy being recognized to be in the long run the best likewise for the public welfare. In legal reasoning it is being recognized that the individual wage-worker, even the adult male, is not in a position to judge the number of hours he ought, for his own good, to work, and is unable to fix the length of his own working day. As a matter of economic theory, the usance of a child, a woman, or a man, is merely that kind and amount of service that can be given out by each without repressing the normal possibilities of growth, reducing the normal health and vigor, or shortening the normal period of healthy productive human existence.[8] It is becoming a general social policy to prevent the abnormal strains of industry that cause the unnatural deterioration of the human factor in industry. A wage-worker may be permitted to sell his daily _net_ fund of working power--his usance--but not his life. § 9. #Plan of the minimum wage.# Even more recent than the legislative regulation of hours downward is the attempt to regulate wages upward in the case of certain low-paid wage-workers. The modern[9] movement for the minimum wage began in Victoria in 1896, and it soon extended to nearly all the other Australasian states. Great Britain applied the plan in 1910 to industries in which wages were exceptionally low. The plan was first adopted in the United States by Massachusetts in the year 1912, tho in an emasculated form, and spread so rapidly that at the end of 1915 it was found in at least 11 states. Minimum wage laws usually lay down "a living wage" as the standard to be used, and either prescribe a flat rate of wages, or, more often, leave the decision in each case to the wage commission established to administer the law. Generous sympathies have guided this movement of which much has been hoped and which, on the other hand, has always had its adverse critics. The most that can be claimed for it by its friends after more than twenty years of experience, is that the "dire predictions" have not been verified. In truth it would seem that the plan as yet has not been tried on a scale that could yield very large fruits either for good or for evil. The persons whom it is sought to aid are only selected groups of the lowest paid workers, generally limited to minors and young women, who in many cases are those of immigrant families in urban districts. A large volume of discussion on this subject has developed, mostly of an _a priori_ nature, of which we may here touch only a few of the salient points. At first glance the principles involved in the legislation limiting hours and those in minimum wage legislation may seem to be the same. But an important difference soon appears. In the former case the evil is that of a too long working period, injurious to health, and this can be reached directly and stopped by an efficiently administered law. But in the latter case the real evil is industrial weakness and incapacity such that the workers are unable to command "a living wage" in a competitive market. A minimum wage law, by itself, neither cures the industrial incapacity nor ensures employment to the industrially weak at any wage. The law does not attempt to compel employers to employ at the legal minimum wage every one who wishes to work; it merely declares that the employer shall _not_ employ any one whom, in his employ, he finds to be not worth that high a wage. § 10. #Some problems of the minimum wage#. Unless the demand for a particular kind of service is absolutely inelastic (a rare if not impossible situation in a large market), there must be fewer jobs for the less capable workers at high than at low wages, other prices remaining the same. Further, some of the less capable workers must be crowded out of such jobs as remain; for an artificially higher wage attracts into an occupation some from other occupations before paid more highly. It seems to be admitted by the friends of minimum wage legislation that this result is logically to be expected and that to some degree it appears. Of course it is never possible to tell to just what extent workers have been and are being excluded in this way from any particular establishment or occupation. Forbidden to earn what they can, the poorer workers must become dependent on charity. It may be said, and perhaps truly: better this than underpaid labor destructive to the health of the workers and evil in its competitive effects upon other wage workers. In most discussions of the wages of women there is a ready confusion of sympathetic ideals of what one would like to see with the cold facts as they are. Women's services (especially those of young women) have increasingly of late been coming upon the labor market in such a way as to cause abnormal congestion in a few occupations. Employers have not caused low wages in these cases. Partly these occupations are the clean, light, and agreeable ones, partly they have a relative social glamour, largely they can be followed for a few years near the home of the worker, nearly always they may be undertaken with brief training and little skill. Investigation has shown that at least eighty per cent of this group of girl workers live at home. A wage that is amply a "living wage" when used as a pro-rata contribution to an American family income is frequently insufficient for the girl living "independently." Such a girl is, under the conditions, unable to earn a living in her chosen occupation, and it may be better to recognize that fact and to deal with such individual cases as appear among the one fifth of all girls employed. The one unquestioned service of the minimum wage law is that of diagnosing the evil of low wages rather than in remedying it. The minimum wage law brings to light the industrial incapacity of particular individuals to earn a living wage. The direct remedy is to abolish the incapable workers or their incapacity by such methods as regulating foreign or cityward immigration, custodial care of the physically, mentally, and morally weak, vocational guidance, and more effective measures of industrial education. Alongside of the abnormally low paid occupations or elsewhere in the industrial organization are other occupations in which with, or often even without, special training, the sweated workers could get, competitively, more than the minimum wage, if they could, or would, qualify for the work. § 11. #Mediation and voluntary arbitration#. The labor controversies in which the public has the largest interest as a third party[10] are those which result or may result in strikes. The public interest becomes acute when a strike results in interference with the individual freedom of other workers and of nonparticipants, when it causes a blocking of the highways and disturbance of the peace, and when it prevents the regular production and transportation of the commodities which the public consumes. The public, therefore, has steadily become more interested in all methods and agencies designed to conserve better relations between employers and wageworkers, and to diminish or, if possible, to do away with strikes when individual and collective bargaining between the two parties fail. _Mediation_, or conciliation, is the effort of a third party to get the two parties to a trade dispute to come together to agree peaceably upon a settlement. Mediation may be voluntarily undertaken in a particular case by any citizen or by a public official, usually the executive (mayor, governor, or President); or it may be by a regular public state or national commission charged with this duty (as in some 17 states). _Arbitration_ is the decision, by a disinterested person (or commission) to whom it is submitted, of the exact terms, after a provisional settlement of a dispute. It is voluntary when the parties agree in advance to accept the verdict, and compulsory when they are compelled by law to submit to arbitration and abide by the verdict. Some provision either of voluntary private or of public agencies to mediate between the parties in labor disputes and to facilitate voluntary arbitration has been made of late in most communities of the civilized world, including 32 of our states, and the nation as a whole particularly in respect to disputes between railroads and train operatives engaged in interstate commerce.[11] No one objects to them, and they accomplish much good, but fail oftenest in the greater emergencies because of the unwillingness of one or the other party to submit the case, or because of lack of any power to enforce the decisions. § 12. #Compulsory arbitration#. The serious question in the subject of arbitration concerns the introduction of the principle of coercion by government, in compulsory arbitration. This, in principle, is pretty radically different from voluntary arbitration, for as it denies to the parties the right to settle their dispute by private agreement, it becomes in effect the legal regulation of rates of wages and conditions of work. In principle this was involved in the legal regulation of wages in England from the fourteenth to the nineteenth centuries. The plan is closely approached in the industrial courts that are now provided in a number of European countries for a cheap and expeditious settlement of small disputes regarding trade matters, arising in the relations between employer and employees. The new modern development began when New Zealand passed a compulsory arbitration act in 1894, followed to some extent since by all the other Australian states, largely through the action of the Labor party. Through the operation of its act New Zealand came to be called the "land without strikes," tho the description was inaccurate, especially after 1907. The Canadian Industrial Disputes Act of 1907 is an example that has had influence upon public opinion everywhere, and has been followed to some extent in recent legislation in New Zealand, America, and elsewhere. It involves the compulsory principle in a limited degree, making it unlawful in public utilities and mines to change the terms of employment without thirty days' notice, or to strike or lock-out until after investigation and hearing before a board to be nominated for the purpose. The Colorado Act of 1915 goes even beyond the Canadian act in its scope. The plan seems destined to have wider applications and a larger development in the not distant future. Let us note the general attitude of the various interests concerned. § 13. #Organized labor's attitude toward labor legislation#. Labor organizations hitherto have been in their legal nature almost entirely private and voluntary. They are seldom incorporated and are rarely even recognized in any way by legislatures and by courts, which deal merely with the members as individuals.[12] Their private character, combined with their limited membership as compared with the total population, leaves them without the power to accomplish legally by themselves the results which they desire in their own interest. Hence they are tempted at times to usurp public authority over the field of private rights in industry.[13] In other cases, when they have come to the end of their unaided powers, they invoke the aid of the law to accomplish their objects. But the appeal of organized labor to the law is special and qualified, being confined to cases where the actions of others are controlled to the advantage of the union, such as regulating the work of women and children, controlling the acts of employers in respect to construction of factories, and limiting the length of trains. This does not imply a peculiarly selfish attitude on the part of organized labor. Action together in any social group always develops in men their loyalty and spirit of coöperation without always making them more considerate to those outside of their group. Indeed, often men acting through their chosen officials, private or public, are more selfish collectively than they are individually. The leaders of any group of men, whether of wage workers, merchants, manufacturers, or political constituents, find it necessary to show that the interest of their supporters rather than a broader "sentimentality" is uppermost in their thought. And further, the jealousy of any limitation of their power is as powerful a motive in one group of men as in another. All are made of the same human clay. But the stronger and more successful a labor organization is, the more vigorously do its leaders resist any legislation that limits the functions and field of action of the labor leaders, or that settles labor troubles in a way that makes the voluntary labor organization less necessary to the individual worker. Of course self-help, as a spirit and as a policy, is a virtue, if it does not sacrifice the rights of others. But if the facts above suggested are borne in mind they will help to explain the otherwise often puzzling attitudes of organized labor toward different measures of social legislation. § 14. #Organized labor's opposition to compulsory arbitration.# Organized labor in America has attained to a highly influential position. On the whole it constitutes an "aristocracy of labor," consisting largely of skilled workers that obtain a wage exceeding that of unskilled workers to a degree not seen anywhere else in the world. In this they have been favored by a combination of conditions which it is not possible to describe briefly; suffice it here to say that organization is itself not the whole explanation, but only a small part of it. That organized labor, officially, is strongly opposed to compulsory arbitration in America, is thus perhaps sufficiently to be understood on the principle of "Let well enough alone." When in August, 1916, a strike on the entire railroad system was threatened by the four railroad brotherhoods, and some action was proposed in the form of the Canadian act, the trade-union officials issued a statement containing these words: "Since the abolition of slavery no more effectual means has been devised for insuring the bondage of the workingman than the passage of compulsory investigation acts of the character of the Canadian Industrial Disputes Act." Within less than a week the brotherhoods called off the strike after Congress had passed an act giving the men immediately the eight-hour day--a substantial part of what they had asked--and providing for investigation, by a commission, of the effects of the rule. This is compulsory upon the railroads but it is not compulsory upon the men to accept these terms. § 15. #The public and labor legislation.# It has come to be recognized that in every serious labor dispute, especially in such as develop into strikes, those concerned are not merely the two parties, employers and employees, but a third party, the public, consisting of every one else whose interests are not directly or indirectly bound up with one of the other two parties. The line of demarcation is not easy to draw exactly. An individual may be divided in sympathy, inclining to the one party perhaps because of some personal friendships or class loyalty or to the other party because of material investments, while in the main having interests distinct from either. But wherever the public is drawn in as a party, it includes far more persons and embraces far larger interests than does either of the other two parties or than do both of them together. The public becomes a party primarily because it consists of the purchasers and consumers of the products, who are deprived of the usual supply of goods, more or less essential to their welfare or even to their existence. With the increasing division of labor and complexity of industrial organization more and more kinds of business have, in a greater and greater degree, become "affected with a public interest." The public becomes an unwilling party, therefore, in every serious labor controversy. In order that any kind of labor legislation shall be enacted, it is necessary (so far as we have a government by public opinion) for a majority of the public to be convinced that the conditions are such as call for governmental interference. It becomes so convinced in two broadly distinguishable classes of cases: one, when the masses of unorganized workers are too weak to secure for themselves conditions of work and wages consistent with health and morality; and the other, when strong bodies of organized workers, in their attempts to win their ends in an industrial dispute, exceed their private rights and invade the public welfare. § 16. #The public and compulsory arbitration#. Where the railways are owned and operated by the state (as is now the case pretty generally except in America and Great Britain) the question of the "right to strike" arises from time to time, in critical forms. The logic of the situation compels even those officials that are of the labor party or are most favorable to labor, to maintain an uninterrupted service on the public railways. The experiences of that nature in France and in Australasia have been notable. Nowhere in the United States has the principle of compulsory arbitration been adopted, but at the time of the great anthracite strike, in 1902, public sentiment grew strong in favor of it. As a result of the intolerable conditions in the mines of Colorado was passed the compulsory investigation act of 1915 in that state. In 1916 the threat of a general railroad strike brought from many quarters strong expressions of condemnation in principle, of the strike as a method of settlement of wage disputes on the railroads. And in the end the organized laborers themselves accepted, apparently with much satisfaction, a law involving the legal fixation of wages and the principle of compulsion as applied to the employers. [Footnote 1: By the Secretary of the American Federation of Labor.] [Footnote 2: See Vol. I, pp. 458-467.] [Footnote 3: For example, increase less than 25 per cent per hour in changing from a 10 hour to an 8 hour day.] [Footnote 4: See above, ch. 6, sec. 12.] [Footnote 5: See especially, sec. 8.] [Footnote 6: At this writing the case, Bunting vs. the State of Oregon, is still undecided.] [Footnote 7: Published as "The case for the shorter working day," by the National Consumers' League, see especially pp. 621-892.] [Footnote 8: See Vol. I, pp. 135 and 197.] [Footnote 9: Much public regulation of wages occurred in Europe until near the end of the eighteenth century. In England this was done mainly by the justices of the peace and, in the main was directed toward limiting the demands of the wage-workers.] [Footnote 10: See below, sec. 15.] [Footnote 11: By the act of 1888, the Erdman act of 1898, superseded by the Newlands act of 1913, and supplemented by measures for mediation by the Department of Labor.] [Footnote 12: The few exceptions to this statement are mostly recent; such as the recognition of the unions in New Zealand in 1894 as parties in the plan of compulsory arbitration, and in Great Britain in 1909 as agencies through which unemployment insurance may be administered.] [Footnote 13: As appeared in ch. 20.] CHAPTER 22 OTHER PROTECTIVE LABOR AND SOCIAL LEGISLATION § 1. Evils of early factory conditions. § 2. Improvement of factory conditions. § 3. Limitation of the wage contract. § 4. Usury laws. § 5. Public inspection of standards and of foods. § 6. Charity, and control of vice. § 7. City growth and the housing problem. § 8. Good housing legislation. § 9. General grounds of this social legislation. § 10. Training in the trades. § 11. Prevalence of unemployment. § 12. Evils of unemployment. § 13. Definition of unemployment. § 14. Individual maladjustments causing unemployment. § 15. Maladjustment of wages causing unemployment. § 16. Individual maladjustment in finding jobs, § 17. Public employment offices. § 18. Fluctuations of industry causing unemployment. § 19. Remedies for seasonal fluctuations. § 20. Reducing cyclical unemployment and its effects. § 1. #Evils of early factory conditions#. The time is but brief in the life of nations since the main manufacturing processes, now mostly conducted in great factories, were carried on in or near the homes of the workers. This change has been reflected in the meaning of "manufactures," which first meant literally goods made by hand but now conveys the thought of goods made by machinery. The craftsmen worked alone in their own homes or with the help of their wives and children. If the master craftsmen had other helpers these were usually lodged and fed in the homes, and were taught by the side of the masters' own families. The old English law of master and servant was the labor law of that time as, to some extent, it still is to-day in Great Britain and America. The living and working conditions of the wage-workers were in general the same as those of the master himself and of his own family; and this was the best possible guarantee that the conditions would be kept up to the best standards of that time. The same change in industrial relations that led to the rise of the organized labor movement[1] revealed new and often horrible neglect and evil in and about the factories. They had been erected with no thought of sanitation, safety, and decency for the workers. § 2. #Improvement of factory conditions#. Legislation to remedy these evils began in England a century ago, and the English code of factory laws, regulating the construction and operation of factories and providing for their inspection, has become voluminous. It has been copied, and in some respects improved, by all of the great industrial nations. This is true in America of the manufacturing states, tho the agricultural states have still very few such regulations. As a result of these measures, accompanying and stimulating an enlightenment of the employers' self-interest, there has been a very remarkable improvement in such matters in recent years. In many American factories erected in the last quarter-century the conditions as to lighting, heating, ventilation, stairways, fire-escapes, protection of the workers against accidents, and lavatory and sanitary arrangements, are better than the best conditions ever existing in domestic manufactures. A somewhat corresponding improvement has taken place on railroads, in mercantile establishments and, perhaps less, in mining. Factory legislation often has been opposed by employers because of the expense it causes; but if the regulations apply to all factories, the expense becomes a part of the cost of production and is shifted, like the other expenses of production, to the general body of consumers, of which the employers form only a small part. Much of the recent progress in some establishments has, however, gone much beyond the requirements of any existing laws. Many employers recognize that it is costly and unprofitable to themselves to allow their workmen to be in surroundings that reduce their vitality and efficiency, such as do the conditions mentioned at the close of the preceding section. § 3. #Limitation of the wage contract#. In general the law does not attempt to interfere with the making, by individuals, of such contracts as they choose to make. Its main function is to interpret and enforce the contracts that are made. But there has been an increasing group of exceptions to this general statement. It was forbidden even by the English common law for wage-workers under some conditions to sign away their right to claim damages in case of accident, and many recent statutes have added more specific limitations in this respect.[2] Legislatures and courts have been particularly watchful of the interests of children, who are usually deemed incapable of entering into contracts binding them to their injury. Sailors, likewise, have been somewhat exceptionally treated, because, journeying far from home, they are under the often despotic control of their employers. The English courts may even change the contract if the sailors have been coerced by their masters. Laws regulate the form, time, and methods of payment in manufactures and mining. Companies sometimes keep stores and pay the workers in mines and factories in goods instead of money. Such a store in the hands of a philanthropic employer might easily be made, without expense to himself, a great boon to his workmen, giving them the benefits of consumers' coöperation. But the usual result is told by the fact that such stores are often known as "truck stores" and "pluck-me stores," and heartily disliked by the wage-workers. They are most often found where some one large corporation dominates in the community, as in a mining district, and the workers are in a very dependent condition. If the higher prices demanded practically lower real wages, it would seem that the worker had an immediate remedy in his power to demand higher money-wages. Recognizing that this is for the most part an illusion--for it is just in such places that the conditions for free competition are least present--the law in many states prohibits these stores. It regulates also the measuring of work, fixing the size of screens and of cars used in coal-mining. The law is especially favorable to the hand-laborer in regard to the collection of his wages, requiring monthly or fortnightly or sometimes weekly payments. Mechanics' liens give to workmen in the building trades the first claim upon the products of their labor. § 4. #Usury laws#. The limitation by law of the rate of interest that may be charged affects many persons outside the ranks of wage-workers. Usury laws are found almost universally in civilized lands. By usury was formerly meant any payment for the loan of goods or money; now it means only excessive payments. In former times moralists and lawmakers were opposed to all usury or interest. The reason for this attitude is not hard to find.[3] Most loans were made in times of distress. The sources of loanable capital and the chances of profitable investment were few. But for the last four centuries there has been on the question of usury a gradual change of opinion, beginning in the commercial centers and progressing most rapidly in the countries with the most developed industry. A moderate rate of interest is now everywhere permitted; but in all but a few communities the rate that can be collected is limited by law, and penalties more or less severe are imposed upon the usurious lender. Usury laws are practically evaded in a number of ways within the letter of the law.[4] Many persons maintain that they do more harm than good even to the borrower, whom they are designed to protect. In a developed credit economy, where a regular money-market exists, they are superfluous, to say the least, as most loans are made below the legal rate. Such laws, however, have a partial justification. In a small loan market they to some extent protect the weak borrower at the moment of distress from the rapacity of the would-be usurer. There has been great need to check the rapacity of the "loan-shark" in the cities. Usury laws are fruits of the social conscience, a recognition of the duty to protect the weaker citizen in the period of his direst need. Their utility is diminishing; and at best they are only negative in their action, preventing the needy borrower from borrowing when his need is acute. In many European countries a more positive remedy has been found in the provision of public pawn-shops. In America a very little has yet been done in this way, and that mostly by private philanthropy.[5] § 5. #Public inspection of standards and of foods#. The determination and testing of standards of weights and measures has long been a function of government. English laws of the Middle Ages forbade false measures and the sale of defective goods, and provided for the inspection of markets in the cities. Usually, the self-interest of the purchaser is the best means of ensuring the quality of goods; but personal inspection by each buyer frequently is difficult and time-consuming, requiring special and unusual knowledge of the products and special costly testing apparatus. The states and the nation undertake, in some cases, therefore, to set minimum standards of quality, and to enforce them by governmental inspection. Government coinage had its origin in this need. This policy is applied, however, mainly to commodities affecting health; its application to art products, except to protect the morality of the community, would be difficult or unwise. Recent legislation in many lands and in all of the American states has developed greatly the policy of insuring the purity or the safety of many articles consumed in the home; notable is the Federal Pure Food and Drug Act of 1906. The federal law levying a tax on oleomargarine, however, was designed as protective legislation in the interest of the farmer. Public regulation and inspection sometimes raises the price, but the cost is small compared with the convenience and the benefits resulting to the citizen. § 6. #Charity, and control of vice#. The public relief of the defective classes, insane, feeble-minded, and paupers, is a part of the social protective policy. The public interest undoubtedly is served by having these suffering classes systematically relieved, but the extent and nature of the provision are questions ever in debate. Still more debated is temperance legislation, both as to licensing and as to prohibiting the liquor traffic. Nowhere is the manufacture and sale of intoxicating liquor treated quite like the traffic in most other goods, because it is recognized that the public interest is affected in a different way. While it is beyond question that society should protect itself and its innocent members against the drunkard, it is more doubtful whether it owes to the man, for his sake, protection against his own blunders. Not even the gods can save the stupid. Temperance legislation is strongest in its social aspect. The opponent of it usually champions the individualist view; its partizans uphold, in varying degrees, the social view. Similar questions arise regarding lotteries, gambling, betting, and horse-racing. When a man backs a worthless horse against the field, money probably is transferred from the stupider to the shrewder party. The philosopher may say that the sooner a prodigal and his money are parted the better; but the broken gambler remains a burden and a threat to honest society. Gambling, lotteries, and speculation cause embezzlement, crime, unhappy homes, and wrecked lives.[6] Here are to be found with difficulty the true boundaries between ethics and expediency. A busybody despotism may protect the fool, but it thereby helps to perpetuate and multiply his folly; yet if the fool is left alone, he too often is a plague to the wise and the virtuous. § 7. #City growth and the housing problem#. In 1790, of our population only 3 per cent lived in cities of over eight thousand inhabitants; in 1900 the percentage was 33. Then the largest city (Philadelphia) numbered 50,000; in 1910 the largest city (New York) numbered 5,500,000; that is, 110 times as large 120 years later. The total number of persons living in cities of 8000 had increased in more than double that ratio. The rapid growth of cities brought with it many evils. Considered in their more material aspects, nearly all of these are summed up in the expression "the housing problem." As population grows denser in cities, land rises in value, yards and gardens narrow and then disappear, light, sun, and air are shut out, and cleanliness, decency, and home life become more difficult and, for many, impossible. The residents gradually group themselves in districts corresponding to their economic incomes, and the poorer parts of the population become tenement dwellers in the neighborhood of factories or become segregated in "slum" districts of unsanitary and dilapidated houses. § 8. #Good housing legislation.# Two policies are open under these conditions. The one, always followed for a time, is to leave individual self-interest unguided to solve the problem. If the tenant agrees to rent a disease-breeding house, he is the first to suffer. The interests of investors, it is said, will supply as good a house as each tenant can pay for. The other policy now adopted is to set a minimum standard of sanitation and comfort, in respect to plans, lighting, materials, and proportion of lots to be covered, to which standard all builders and owners must attain. Complying with the legal requirements, they are left free to collect whatever rent they can get. As one bad building may bring down the rent of all on the street, such legislation may sometimes be in the interest of the body of landowners as against the selfish desires of some individuals. Mainly, however, the regulation is in the interest of the tenants and of society as a whole, and against that of the landlords. The rents from slum property are threatened, hence the strong opposition always manifested against tenement-house legislation by some landlords, architects, and contractors, who fight it as an interference with their interests and as a confiscation of their property. It is not unlikely that this policy has the effect of making rents too high for some poorer tenants and driving them into the country. But this result is not so undesirable. Moreover, the control and inspection of housing conditions has in a few states been made statewide to reach even "the country slums" which lately have been recognized to exist. Enlightened sentiment to-day favors efforts to destroy the breeding-places of disease, misery, and crime, no matter where they may be. Property owners are in many communities no longer left free to determine height of buildings, appearance, or even the uses for which houses may be erected in any district. American cities have still much to learn in this regard from the example of many European cities which have developed the art of city planning with wonderful results in beauty of landscape and of architecture, in practical economy for business, and in the health and welfare of the mass of the people. § 9. #General grounds of this social legislation#. Why are not such matters as we have been discussing safely left to individuals? It is for the interest of every one that his back yard should not be a place of noisome smells and disagreeable sights. But men are at times strangely obstinate, selfish, and neglectful, and through one man's fault a whole community may suffer. The refusal of one man to put a sewer in front of his house may block the improvement of a whole street. The heedlessness of one family may bring an epidemic upon an entire city. There must be a plan, and by law the will of the majority must be imposed upon the unsocial few. Where voluntary coöperation fails, compulsory coöperation often is necessary. Thus health laws, tax laws, and improvement laws regulate many of the acts of citizens, limit the use of property, and compel men to better social courses against their own wishes and judgments. All such laws as these are protective legislation, in that they depart from the rule of free trade taken in its broadest sense. It does not follow, however, that all these laws stand or fall together. The justification of such measures is limited and relative, and therefore of varying strength. All protective measures are alike in that the free choice of one citizen is forbidden by law in the supposed interest of some other citizen who is to be "protected." While the purpose of the tariff is economic and political, in a large majority of social laws the moral purpose is fundamental. It is the demand of humanity that competition be placed upon a higher plane. Most social legislation is to protect the weak from being forced into contracts, or from living in conditions injurious to their welfare and happiness. The justification for these limitations upon the right of private property, upon the free choice of the individual, upon "free competition," must be found in the social result secured. The best test of social protective laws is their contribution to a higher independence and to a freer competition on a higher, more worthy, and more humane plane. § 10. #Training in the trades#. Free elementary and secondary education has become the all but unquestioned public policy in the American commonwealths. The main motive for it has been the belief that education in books is a necessity for good citizenship in a republic. At the same time it has been thought that the training of the school would help the child to earn a living. This appears to have been true so long and so far as it was combined with, or supplemented by, industrial training on the farm, in the home, and through apprenticeship in the manual trades, as once was so prevalent. But industrial conditions have changed. Most of the old-time education of the schools has now little relation to the industrial life of the great majority of the children, for few enter clerical or professional callings. Germany was the first nation to recognize the new educational need (in fact, never as urgent there as here) and to provide for systematic and efficient training in all the industrial arts. Since the beginning of the century the American public has been awaking to the needs of the situation. We appear to be on the eve of a great development in industrial training that will equip youth for more efficient life in business and in the home, either in rural or in urban conditions. § 11. #Prevalence of unemployment.# Many other forms of social legislation on behalf of the common man might well deserve, did time and space permit, a larger measure of the economic student's attention. However, excepting the subjects treated in the next two chapters, the one remaining that is most important at this time is the problem of unemployment. In every country and at all times where the wage system prevails, some wage-workers, now more and now less, are "out of work" and unable to get it. The proportion that they constitute of all workers cannot, with the aid of any existing statistics, be exactly told, nor can exact comparisons be made between different countries. Of the magnitude, importance, and difficulty of this "problem of the unemployed" there is, however, no question. It is greatest, speaking generally, in manufacturing industries, tho, among the various kinds, great differences in this respect appear. In 1900 the United States census reported that of all persons in gainful occupations 2.5 per cent had been unemployed more than half the year, 8.8 per cent from three to six months, and 11 per cent one to three months, a total of 22.3 per cent more than one month.[7] In 1911 in a large group (nearly all) of the manufacturing industries, the minimum number of wage-earners employed (in January) was 13 per cent below the maximum (in November). In some the difference was much greater (e.g., 24 per cent in the iron industry, 63 per cent in the brick and tile industry). Statistics of unemployment among trade-unions in New York and Massachusetts indicate that the annual average of unemployment is between 12 and 15 per cent. In some years upwards of 10 per cent of all the working time of the wage-earning population is lost by unemployment. § 12. #Evils of unemployment.# A considerable part of the total in an ordinary year may be set aside as "normal" in the sense that it is allowed for in the wage-workers' plans;[8] and a part of it may even be desirable. Yet there remains an inconceivable sum of suffering in the lives of the workers, and an enormous economic waste of productive energy not only for them but for the whole community. The irregularity, and occasionally the excessive duration, of these periods of unemployment too often makes unemployment not a beneficent vacation (comparable to shorter hours), but a period of tragic anxiety, demoralizing and unfitting for return to work. Irregular work is generally recognized to be a greater cause of poverty and of actual pauperism than is a low wage regularly received. § 13. #Definition of unemployment.# Unemployment is the state of a wage-worker for the time out of a job. But this definition needs to be further explained and limited if it is to be useful in the discussion of unemployment as an evil calling for social remedy. There must be set aside the cases where the lack of a job is due to one rest day in seven and to legal holidays, a total of nearly 65 days in most American states; to the worker's being on strike; to temporary sickness; finally, and more difficult to distinguish, that due to continued disability, physical, mental, or moral, to do the work up to an acceptable standard and to retain a job in the occupation chosen by the applicant. The first cannot be called a problem, and the others constitute the problems of strikes, of industrial sickness, and of the unemployables, respectively. There still remain some unanswered questions such, for example, as: whether in seasonal trades (e.g., teaching, or the building trades) allowance should be made for normal vacations and for slack times, not to be counted as unemployment; and whether lack of work at one's principal occupation is ever or always unemployment when the person is actually employed or can get work at some lower paid employment. The more frequent answer to these questions is in the negative but this in some cases is almost palpably absurd. Further study is necessary to work out a generally acceptable concept of unemployment. § 14. #Individual maladjustments causing unemployment.# The cause or causes of the evil must be ascertained before a remedy can be intelligently applied. It is pretty generally agreed that unemployment is essentially a problem of maladjustment of the labor supply, and not that of an absolutely and permanently redundant supply. That is, there is, under static conditions, work for all to do at various rates of wages that would bring about a value equilibrium of services.[9] The maladjustments are either of an individual or of a general character. Individual maladjustment may be due to a mistake in choosing an occupation (e.g., through the vain ambition of one unfitted to be an artist, actor, lawyer, or teacher); or to failure to acquire by adequate training the necessary skill; or to loss of capacity by accident, old age, or failure of mental or moral powers; in all of which cases the problem verges upon or becomes that of the unemployable. The "can't-works" and the "won't-works" must be divided from the "want-works." If there is any remedy in such cases it must be through re-education, personal reform, or change of occupation. Many persons look upon this type of cases as almost wholly accounting for the problem of the unemployed. They are confirmed in this opinion by the fact that the out-of-work group in any trade at any time is, on the average, the least efficient group of workers in the trade. This results from selection by the employers. This selection is due to the _relative_ not to the _absolute_ efficiency or inefficiency of workers, and must result whenever there are any discoverable economic differences in the workers (all things considered) that are employed at the same wage. This would continue even tho the poorest workers were to raise their efficiency above that of the best men now retained. "Personal inefficiency" may explain a chronic low wage or absolute unemployability in a particular case, but it does not explain intermittent lack of work for those willing and able to work. Unemployment is a social problem and not merely an individual problem. § 15. #Maladjustment of wages causing unemployment.# It seems highly probable that the artificial maintenance of a wage above the competitive, or value-equilibrium, rate of the individual, whether this be done by sympathy, by custom, or by the action of trade unions, must cause some maladjustment of workers in relation to available jobs and thus increase unemployment. To doubt this is again to maintain the absolute inelasticity of the demand for labor with changes in its price.[10] If the true equilibrium wage in a certain industry were $3.00 a day, then a wage of $4.00 a day would attract to the trade more than enough workers to meet the demand for labor in normal periods (unless entry to the trade is controlled by monopoly power), and at length the losses from unemployment would balance the day-wages received in excess of the rate obtaining elsewhere for that quality of labor. Any artificial obstacles to change of occupation or to concessions in the kind of work done and in the rate of wages must operate to increase the maladjustment. So far as this maladjustment occurs, it may cause unemployment neutralizing the apparent gain of higher day-wages obtained by monopoly power. The very inertia of wages, however, in new price situations[11] makes the wage-workers resist more vigorously such a policy of wage concessions. Moreover, the difficulty here indicated is more particularly one occurring in static conditions and is to be distinguished from the dynamic maladjustments next to be considered. § 16. #Individual maladjustment in finding jobs.# Another kind of individual maladjustment is the failure of the jobless man to connect with the manless job. A certain amount of this maladjustment must exist in the most stable industries and in the most settled industrial conditions. Fluctuations occur in the market demand for the products of various establishments, requiring the taking on or laying off of some men. Fluctuations occur in the plans both of employers and of wage-workers as a result of age, of removal, for reasons more or less non-economic, of desire to change occupations, of variations in health, and of countless other causes. The needs of the employer for a worker, and of the worker for a job, are mutual. To a large degree these various fluctuations are mutually compensatory, workers going and coming, orders increasing here and decreasing there. Total jobs and total workers capable of filling the jobs, are at any moment in normal times equal quantities, if they can be brought together. But almost everywhere is lacking a real labor-market. The substitutes for it are largely ineffective: trade-union action, employers' associations, "want ads," cards in shop windows, weary walks from door to door, lines of waiting men outside of factories, private employment agencies. At their best the private employment agencies perform valuable services within limited fields, but they are uncoordinated, and utterly inadequate to meet the chief need, and at their worst they are the instruments of great abuses against the unemployed. § 17. #Public employment offices.# Vigorous efforts to create local "free employment offices," or "labor exchanges," began in a number of countries about 1895. The movement gained headway in the next ten years and has since steadily grown. In Germany the chief exchanges have been founded and conducted by the municipalities (while others are controlled by the unions and by groups of employers) and have remained largely decentralized, tho coöperating to some extent through voluntary state conferences of officials of the exchanges, and since 1915 required to report to the imperial statistical office. The total number of exchanges in Germany (in 1915) was nearly 3000. The general results have been remarkably good, altho not completely satisfactory. Every industrial country of Europe has done something of this kind. Great Britain, however, after some experiments with a similar local system, established in 1909 the first national system of "labor-exchanges." In America the movement is developing in three directions, through municipal, state, and federal offices. These are united (since 1913) in an "American Association of Public Employment Offices." In 1915 there were known to be 99 state and city employment offices distributed through 30 states, besides federal offices operated in 18 cities in connection with the Bureau of Immigration. The clearly recognized task is now to coördinate these various agencies into an efficient national system, eliminating partizan politics and elevating the management of all branches to the plane of professional service. Through these agencies can be operated an industrial service, analogous in function to the weather bureau, and reporting from day to day the pressure of demand and the prospects for labor in the various parts of the country. The economic results of a complete, exclusive, and efficient service of this kind would far exceed its legitimate cost to the community. § 18. #Fluctuations of industry causing unemployment.# Any one of the maladjustments in employment thus far considered may occur at a given moment, in static conditions of industry. But there are also maladjustments resulting from more general industrial changes throughout a period of time. The two main types of these are seasonal and cyclical changes, the one occurring within a year, and the other occurring within the longer period of the business cycle. At the downward swing of these seasonal and cyclical changes the number of would-be workers exceeds the number of jobs [12] and the resulting unemployment is greatest when the minor and the major swings are both downward, about midwinter in a period of industrial depression. Thus in 1893-94, and to a lessening degree in 1894-95, 1895-96; in 1907-08, and 1914-15. Of course employment offices alone are no remedy for the exceptional difficulties of such times, and the individual, whether he be an unfortunate "out-of-work" or a more fortunate well-wisher, feels helpless in the face of the overwhelming burden of distress. Such a situation is declared by the radical communists to spell the bankruptcy of the wage-system; while the most conservative students of the subject confess that this periodic chaos in the labor market is the strongest indictment of, and involves the gravest dangers to, the existing economic and social order. § 19. #Remedies for seasonal fluctuations.# But of late there has been a growing hope that an answer may be found to this economic riddle of the Sphinx. A number of different measures are being experimentally tested and applied. Many years of effort will be required for the perfecting of these plans separately and collectively. Some of these plans may be here indicated, however briefly. To remedy seasonal fluctuations within the establishments output may be regularized by taking orders in advance; by producing various products successively in the same factory; by overcoming weather conditions as has been done successfully in brick and tile making, ditch digging, and building operations; by transferring workers from one department of an establishment to another; by improving the employment departments so as to build up a more stable force, thus reducing the great expense of "hiring and firing" and the loss through training "green hands"; by varying the length of the working day while keeping the same working force throughout the year; by coöperating with other industries to build up a regular working force and transferring it from one establishment to another with seasonal changes. Of great aid in a number of these measures is a broader industrial training for the workers, making them more able to change from one occupation to another. For this purpose every period of unemployment and of temporary shortening of the working day ought to be used as a time for trade education, by the recently devised and successfully applied "short-unit courses for wage-earners."[13] § 20. #Reducing cyclical unemployment and its effects.# The maladjustments due to the movement of the business cycle are even more difficult to remedy completely, but are diminished by every measure that helps to reduce the great financial fluctuations.[14] Further, many communities have already begun to plan large public works more systematically so that they may be carried on mainly when private business is more slack. A comparatively small amount of such work would serve as a gyroscope to preserve the balance of employment for a large part of the less skilled workers. It has been estimated by Bowley, an English statistician, that in the United Kingdom, it would be necessary to set aside only 3 per cent of the annual expenditure for public works to be used additionally in years of industrial depression, in order to balance the wage loss at such times. This is a well-nigh incredibly small proportion, hardly as great as that of the weight of the gyroscope compared with the car or ship to which it is applied. It is hardly to be doubted that hitherto, in America, public undertakings have been executed much more largely in periods of business prosperity, and have been diminished during "hard times," thus greatly accentuating the harmful swing of the labor-demand. Finally, unemployment insurance, which has already been applied by parliamentary legislation in Great Britain to a group of nearly 3,000,000 wage-workers, is an indispensable and highly hopeful measure of relief. The place of this in a general system of industrial insurance will be indicated in the next chapter. [Footnote 1: See above, ch. 20, sec. 1.] [Footnote 2: See ch. 23, secs. 5-7, on the old law of employer's liability.] [Footnote 3: See Vol. I, pp. 292-293.] [Footnote 4: See Vol. I, p. 304.] [Footnote 5: See Vol. I, pp. 293 and 303.] [Footnote 6: See above, ch. 12, sec. 2.] [Footnote 7: Great importance should not be attached to these figures for they contain errors resulting from the inexact notions of inexperienced enumerators as to what constitutes unemployment, and from the inclusion of all persons gainfully employed, whether self-employed or in professional, salaried, or wage-earning positions.] [Footnote 8: See Vol. I, p. 207, on irregularity of employment as influencing wages, psychic income, and choice of employment.] [Footnote 9: On static, see Vol. I, ch. 32; on the scarcity of labor, see Vol. I, ch. 18, sec. 2 and references there; on value of services and wages see Vol. I, ch. 18, especially sec. 3, and ch. 19, especially sec. 7.] [Footnote 10: See above, ch. 21, sec. 9 on the minimum wage.] [Footnote 11: See Vol. I, p. 223, on friction in the adjustment of wages.] [Footnote 12: See above, ch. 10, secs. 6 and 7, on the industrial crisis.] [Footnote 13: See Bulletin of the United States Bureau of Labor Statistics, No. 159 (April, 1915). ] [Footnote 14: See above, ch. 8, secs. 6, 7; ch. 9, secs. 6, 8; ch. 10, secs. 14, 16; ch. 14, sec. 12. ] CHAPTER 23 SOCIAL INSURANCE § 1. Purpose and meaning of social insurance. § 2. Increasing need of social insurance. § 3. The new era of social insurance. § 4. Features of social insurance. § 5. Historical roots of accident insurance. § 6. Development of compensation for accidents. § 7. The compensation plan in America. § 8. Standards for a compensation law. § 9. Historical roots of sick-insurance. § 10. Need of sick-insurance in America. § 11. Old-age and invalidity pensions. § 12. Unemployment insurance. § 13. Need of ideals in social insurance. § 14. Insurance rather than penalty. § 15. The compulsory principle. § 16. State insurance and a unified system. § 17. The contributory principle. § 1. #Purpose and meaning of social insurance.# In importance surpassing at present any one of the various measures on behalf of the wage-earning class that have thus far been considered is the remarkable development now under way of plans and agencies to provide insurance for "the common man." Insurance means making some kind of provision out of present means, so as to reduce the injury and suffering that would result from a future mishap. Usually, likewise, it implies uniting with others to distribute the expense fairly over all in the group. Social insurance is the term most frequently applied to the various institutions and plans provided, more or less under the regulation of law, for the protection of the lower-paid workers in most modern countries. The terms industrial insurance and workingmen's insurance are likewise used. The principal types of events for which social insurance in its various branches provides, are (1) accident, (2) sickness, (3) incapacitation (either by old age or by invalidity, that is, permanent failure of health within the normal working years), (4) death (generally called "life" or "survivor" insurance), and (5) unemployment. The direct aim of social insurance is not to prevent these mishaps (tho that may be an indirect result), but it is to provide some financial indemnity for the economic loss and expense involved in the mishap. The principal kinds of losses are two. First, that occasioned directly in caring for the sick or injured person, the expense of medical attention, nursing, hospital care, drugs and special apparatus such as crutches and glasses, and burial expenses. The second is the loss of income because of inability to work as a result of injury, of illness, or of permanent disability, or (in the case of life insurance) of the death of the bread-winner, or of want of employment. § 2. #Increasing need of social insurance.# In various connections we have observed how the changes that have been occurring in modern times have increased the uncertainties of the industrial life and of the earning power of the mass of the workers.[1] It should be further observed that in city conditions, a working family does not have, as in agricultural conditions, the supplementary sources of income from garden, field, forest, and stream, and it is not so possible to use the earning power of children, of old people, and of the partially disabled. The faster working pace of factories, the rapid fluctuations of employment with changing fashions, inventions, shifts of population, and waves of industrial prosperity and depression, all have introduced new risks and problems into the worker's life. The increasing payment of wages in money, and the more temporary nature of employment of men in many kinds of factory work, have added to the problem. With these changes have come a growing interest in the welfare of the mass of the workers and a growing sense of responsibility on the part of the public. There is an appalling mass of misfortune in the United States requiring social insurance for its relief, altho satisfactory statistics of the various types of misfortune are still lacking. On the basis of the experience of private industrial insurance companies it appears that there are not less than 25.000 fatal industrial accidents yearly, and 700,000 injuries causing disability for more than four weeks, to say nothing of the enormous number of slight injuries--if injuries, many of them very painful, disabling for a period from one day to four weeks, should be called slight. As to loss of time due to illness, the experience of Germany shows an average of eight or nine days a year per worker, which figure, applied to those gainfully employed in America, would mean nearly 300,000,000 days of illness, or 1,000,000 one-man working years, causing a loss estimated to be $750,000,000 annually. It is estimated that one on eighteen of American wage-workers attains the age of sixty-five with no financial provision for old age, and that about 1,250,000 persons above the age of sixty-five are dependent on their families or on charity, public or private, receiving $250,000,000 yearly. The losses and suffering to dependents due to the death of the bread-winner are very partially accounted for by accidents, but no estimate of much value can now be made of the other cases. Some notion of the losses from unemployment has been given in discussing that subject in the preceding chapter. § 3. #The new era of social insurance.# Some not insignificant attempts to deal with these problems were made throughout the nineteenth century, but the new era of social insurance may be said to date from the message of the Emperor William to the German Reichstag in 1881, in which he said: We consider it our imperial duty to impress upon the Reichstag the necessity of furthering the welfare of the working people.... In order to realize these views, a bill for the insurance of workmen against industrial accidents will first of all be laid before you; after which a supplementary measure will be submitted, providing for a general organization of industrial sick-relief insurance. Likewise, those who are disabled in consequence _of_ old age, or invalidity, possess a well-founded claim to more relief on the part of the state than they have hitherto enjoyed. The program here outlined was carried out by the enactment between 1883 and 1889 of a series of laws, which taken together constituted a pretty effective system of social insurance for the mass of wage-workers in the German Empire. Later amendments have extended and improved the various features of the plan, which has served as a stimulative example to other countries. America has been the tardiest among all the industrial nations to undertake this kind of social reform. § 4. #Features of social insurance.# The plans of social insurance, in force in various countries, present a great variety of features combined in many ways. The main characteristics in which they may differ relate to (1) the element of compulsion, (2) contributions by the insured, (3) the nature of the insurance organization. Insurance may be _voluntary_ or _compulsory_. It is voluntary when the state simply encourages the formation of insurance agencies, and perhaps contributes something to them, leaving it to the individuals to insure themselves as they choose, in mutual societies, or in privately managed companies. In the case of accident insurance, however, there is often a semi-compulsion by which the employer is requires to pay indemnity to his workers, according to fixed scales of compensation, but is left free to insure himself against this risk or not as he pleases, in which case it is still called voluntary insurance. Compulsory insurance is that which the state requires to be provided be means of some mutual organization of the insured, or of the employers, or by the state. Insurance may be _contributory_ or _noncontributory_. It is on the contributory plan when the insured workers contribute something toward the premiums that provide the funds for eventual payment. It is noncontributory when the funds are provided either by the employers or by the state without any payments from the insured. Insurance may be (a) in _private_ companies, carrying on the business for profit; or (b) in _mutual_ companies of workingmen, or of employers insuring themselves against the cost of compensation in case of accident to their employees; or (c) in a _state_ bureau, or fund, organized and conducted by government. § 5. #Historical roots of accident insurance#. The different kinds of social insurance had different origins, some knowledge of which is necessary to an understanding of the present situation. These origins still affect the nature of social insurance to-day, and have prevented the development of a truly unified and logical system in accord with present conceptions of needs and of justice. Accident insurance had its beginnings in the liability of employers for accidents that happened as a result of the employer's negligence, a principle found to some degree in all countries. Thus the earlier payments to workers in cases of accidents were not insurance indemnity but merely damages collected in court for the fault of the employer. In Great Britain and the United States, indeed, by judicial interpretation the law grew more strict as against the claims of the workers, until about 1880 in Great Britain and 1910 in the United States. To collect damages it was not enough for the workman to prove the employer's negligence, for collection was made more difficult by (1) the doctrine of contributory negligence, (2) the doctrine of the assumption of risk, and (3) the fellow-servant doctrine. By the doctrine of contributory negligence, the workman's claim could be defeated by showing that he had by his carelessness contributed to the accident even when the employer had been negligent. By the doctrine of assumption of risk the workman was presumed, in entering upon employment, to have taken upon himself the risks usually incident to the employment, including the chance of imperfections in the machinery, of which he might by some care have known. By the fellow-servant doctrine the employer was freed from responsibility for accidents due to the negligence of other employees, "fellow servants," even when it was impossible for him to know their character and reputation as in the case of a large factory or of a great railroad. § 6. #Development of compensation for accidents#. In some countries of continental Europe, notably Germany and France, the law of employers' liability was altered in favor of the worker early in the nineteenth century, so as to make compensation more usual and adequate. Since 1885, especially, this liability has been much further extended in many countries and in various directions, and yet the laws of accident compensation still retain many features of the old liability laws and remain in their legal character somewhat apart from the other branches of social insurance. Even in the newer type of "compensation" laws the indemnity paid by employers on account of accident is looked upon as commuted damages, but the old employers' defenses, just named, are abolished or made more difficult to plead. The new plan has the advantages of granting compensation by a schedule fixed in the law, insuring greater certainty, more adequate payments, greater ease of securing redress, and abolishing the cost of law suits. Still, in most countries and in most states in America, the worker has the option of suing under the old law. In some forty countries the principle of compensation by a prearranged schedule of rates has to some degree replaced that of litigation, and determination by a jury of the damages, in each separate case. The insurance spoken of in relation to accidents is technically that which the employers may or must take to protect themselves against loss, not that which the workman has. The situation as to compensation in a few leading countries is as follows, the dates given being those of important legislation. ACCIDENT INSURANCE _Voluntary_ (as to employers insuring, but compulsory compensation). Great Britain, 1897, 1906, 1907. France, 1898, 1907, (compulsory for seamen, 1898, 1905). Denmark, 1898, 1908. Belgium, 1903, (voluntary except for miners). _Compulsory insurance of their risks, by employers_. Belgium, for miners, 1868. Germany, 1884, (in employers' associations), 1887, 1900, 1911 (voluntary for some classes). Austria, 1887 (as in Germany), 1894 (voluntary for some classes). Norway, 1894 (in a state central insurance office), 1896. Italy, 1898, 1904. Holland, 1901 (in the Royal Bank or in private companies). Sweden, 1901 (as in Norway). § 7. #The compensation plan in America#. Under the practical operation of the law of employers' liability in force in any American state until 1911, a very small proportion of the workers injured while at work were legally entitled to any indemnity, and a still smaller proportion could succeed in recovering any substantial amount. Employers, and the accident companies with which employers insured, either compromised the claims for small amounts or fought bitterly in the courts the claims of those who refused to compromise. When the courts awarded damages, large or small, a large part of the proceeds went for legal expenses. But a small proportion of the total costs to employers came as benefits to the victims of accidents. It appeared in an extensive investigation of the business of the large industrial insurance companies that but 28 per cent of the premiums paid by employers were paid to workmen as indemnity. Between 1911 and 1916 the laws have been changed to some extent in their application to selected occupations in at least 34 states and territories of the United States, and covering nearly all but some of the distinctly agricultural states. This remarkable development has been largely actuated and guided by a comparatively small group of socially minded nonworking class citizens rather than by either employees or organized workers. It is an encouraging example of what can be done by skilful methods, when conditions are ripe, in furthering righteous social legislation without the use of money or of corrupting influences. § 8. #Standards for a compensation law#. The standards which, in detail, in one jurisdiction or another, have already been attained, and which are the provisional ideals now sought by reformers, may be briefly stated as follows.[2] All employments should be included, altho, as yet, there are various exceptions, such as farm labor and domestic service, employers with but few employees (the number excepted being one to five), and nonhazardous employments. Compensation should be granted for all injuries, suffered in the course of employment, that cause disability beyond a definite waiting period of three to seven days. Compensation should include medical attendance for a limited period, and two-thirds of the estimated loss of wages for disability, either total or partial, during its continuance; and, in case of death, funeral expenses, and from one to two-thirds of the estimated wages, to the widow (or dependent widower) and children, or to other dependent relatives. To secure the full benefit of the plan it must be made the exclusive remedy, replacing entirely the old remedy of suits for negligence. The employer should be required to insure his risk, and general sentiment is moving rapidly toward the plan of a state insurance bureau as the exclusive agency.[3] For the administration of the system an accident and insurance board should be created in each jurisdiction. Experience shows the importance of careful attention to numerous other details, and many amendments will be made as the needs become manifest in practice. § 9. #Historical roots of sick-insurance.# Sick-insurance had its origin partly in trade unions and in fraternal societies voluntarily organized by workers, and partly in the system of public poor relief. The voluntary societies were first recognized, regulated, and encouraged by law (in some cases being given state subsidies), and later, in some cases, being made compulsory for some classes of members (i.e., such as miners and seamen). On these institutions have been built the later state systems of social sick-insurance. This movement had made large headway by the end of the third quarter of the nineteenth century in various European countries. The two systems that are the most typical and influential examples are those of the German Empire and of Great Britain, the former local and the latter national in organization. The British plan of national health insurance promises to be on the whole of the greatest influence upon American opinion and policy. However, the best informed American students favor in some features the more decentralized German rather than the centralized British system. While it is impossible to describe the various systems in detail, the situation in the leading industrial countries of Europe may be indicated as follows. SICK-INSURANCE _Voluntary_. France, 1850, 1898 (voluntary except for miners). Belgium, 1851, 1894. Italy, 1886. Sweden, 1891. Denmark, 1892. Holland (authorized private societies and poor relief). _Compulsory_. Germany, 1883, 1911 (voluntary for others with earnings of $500). Austria, 1888 (voluntary for some classes). France, for miners, 1894. Norway, 1909. Great Britain, national system 1911 (was voluntary 1875-1911). § 10. #Need of sick-insurance in America#. Contrary to the usual opinion in America, the sick-insurance in Germany is, both in amount of contributions collected and in importance to the welfare of the workers and their families, of more importance than is either accident compensation or the system of invalidity pensions. Yet, thus far, our interest and efforts in America have been directed almost entirely toward the reform of accident compensation and almost everything remains to be done in the matter of social insurance against sickness. It is true that in recent years there has been a rapid development, in some of the larger cities, of medical insurance clubs conducted by private companies, with dues of ten cents weekly. They give medical care in ordinary cases, but require extra payments for surgical treatment and for medical supplies. They as yet touch only the outer fringe of the problem, but they testify to the need and to the increasing desire of the wage-workers for insurance of this kind. It is believed that at least 4 per cent of the income of wage-workers now is expended for the care of sickness and for burial insurance. The losses of wages meantime remain unequalized by insurance indemnities. A large proportion of the cases of temporary destitution in ordinarily self-supporting families is due to sickness. The German experience shows that 4 per cent of wages, collected in part from employers and in part from wage-workers, is sufficient to give a far better medical service than can be had through private effort, to give some indemnity for loss of wages, and to carry on a very useful hygienic work for the families and for the public health. § 11. #Old-age and invalidity pensions#. Insurance to provide pensions for old-age and permanent (partial or total) disability is in nature but an extension of the insurance against accident and sickness. In a relatively small number of cases accidents result in permanent disability and it is both illogical and inhumane to limit, arbitrarily, the compensation in such cases to a certain period, as two or three years, as is done in many compensation laws. The disability due to advancing years is in nature a chronic illness, inevitable, sooner or later, to all who survive. The movement to provide some indemnity in such cases has been rapid in European countries, doubtless because the problem was a very pressing one where the average earnings are low. In Germany and Austria this development has been more in connection with other forms of insurance; in Denmark, Great Britain, and France it has had more the aspect of an extension of poor relief. In the United States little has been done to provide for these great needs. Massachusetts in 1907 authorized savings banks to sell insurance and old-age pensions to those who applied. An increasing number of corporations, especially railroads, are adopting a pension system for men growing old in their service, but nothing has been done of a general public nature toward compulsory and universal protection against these misfortunes. The following table shows the situation in some of the leading countries: OLD AGE AND INVALIDITY PENSIONS _Voluntary_. Belgium, 1850, 1903 (voluntary except for miners). Italy, 1898, 1907 (all wage earners). _Compulsory_. Belgium, for miners, 1868. Germany, 1889, 1899, 1911. Austria, 1889 (miners only); 1906 (office employees). Denmark, 1891, 1908 (noncontributory). France, for seamen 1850, 1881; for miners, 1894, 1905, 1907 (noncontributory, all indigent citizens); 1910 (contributory, all workmen and employees; was voluntary by laws 1850, 1886). Great Britain, 1908 (noncontributory, old age pensions, granted by the government). Sweden, 1913 (universal, contributory). § 12. #Unemployment insurance#. The most difficult of all the problems of insurance is that of unemployment. There the amount of the risk in any case is so largely dependent on the personal qualities of the worker. There are obvious objections to making the competent, steady, sober members of any trade bear the burden of the infirmities of their fellows. But, on the other hand, as we have seen,[4] a large part of the problem of unemployment is chargeable to social maladjustments rather than to individual faults. At present development in this field is along two lines, that of subsidized trade-union relief (the Ghent system), and that of compulsory state insurance in certain industries. The former has been adopted by many cities and by some countries in western Europe, the public paying a certain proportion (from one sixth to one third) of the amounts of the benefits paid by the unions. Great Britain is the only country as yet to adopt a compulsory state system. It began operation in 1912, and applied to 2,500,000 persons, or one sixth of all the wage-earners. The contributions are made 3/8 by employers, 3/8 by wage-earners, and 2/8 by the state. There are several original and interesting features of the act, such as rewarding, by the refunding of dues, those employers that provide regular employment and older workmen that have received benefits amounting to less than their contributions. Its administration in close connection with the labor exchanges will give valuable experience in this field. The working out of the many minor problems of classification, assessment, and administration, of unemployment insurance, will require many more years of experimentation. § 13. #Need of ideals in social insurance#. The world has had nearly forty years of experimentation of a remarkably varied kind, in the field of social insurance, since the German system was inaugurated in the eighties of the nineteenth century. America stands almost at the beginning of a development along those lines that is certain to be of enormous extent and importance. It would be folly for us to repeat the costly errors of other countries by failing to recognize certain principles which have been clearly established by experience. If these could be grasped and firmly kept in mind our progress in this field in America would be faster, more certain, less costly, and farther reaching than it promises otherwise to be. We can here attempt no more than merely to outline these principles that must be embodied in an ideal system of social insurance in America. § 14. #Insurance rather than penalty#. The principle of social insurance rather than that of legal penalty should be universally recognized. At present, in all countries where the several kinds of insurance are found side by side, accidents are indemnified on plans that are still rooted in the notion of employers' liability for negligence; whereas, necessarily, the indemnity in case of sickness and of old age has no such explanation. The unfortunate result of this difference of view is that whereas all cases of sickness and invalidity entitle to benefits, only those accidents suffered "in the course of employment" are indemnified, and the worker is left unprotected in a large share of the accidents to which he is liable. The worker's need and the social need are thus not adequately met. We have started along the same line of development in America, and it is to be feared that only through a long series of legal fictions and contradictory judicial decisions shall we be able to work out toward consistency in this matter. Another unfortunate result of this difference is that accident compensation, being made peculiarly the task of the employers, does not develop the spirit of responsibility on the part of the workers and of coöperation between them and employers that other forms of insurance call forth, where representatives of both parties sit together in the administration of the system. § 15. #The compulsory principle#. Insurance must be general in its application to all the persons within broad wage-earning classes, and in order to be general it must necessarily be compulsory, not voluntary, in its application. To leave any form of insurance optional, or elective, with either employers or wage-workers, is to fail of the main purpose in a large proportion of the individual cases where it is most needed, and to increase the expense to those that are included. Within a compulsory system, however, there should be given wide opportunity for the voluntary principle by admitting to the system others that are not compelled to insure, and to enable any insured person to increase his paid-up, nonforfeitable insurance at any time by extra payments made at times of unusually high wages, from legacies, or from any other exceptional income. § 16. #State insurance and a unified system#. The state, through the public insurance office, must ultimately be the sole agency for insurance. Only in this way can the maximum of simplicity and economy be attained. Of course, this calls for a better appreciation of expert training, and a broader sentiment in favor of the merit system in the public service than we yet have in America. There should be a unification of various kinds of insurance in one general plan and under one general administration for the whole state. This should be done with full regard to the actuarial differences in costs as among various kinds of insurance, various trades, various establishments, and, to some extent, even the various individuals, so as to ascertain the costs and to distribute them equitably. Only in this way can provision be made for entire mobility of labor, so that men may not be bound, as a condition for obtaining benefits, to continue in the service of any one employer. To this end there should be interstate comity and coöperation, so that the insured could at any time transfer his actuarial equity from one state to another. § 17. #The contributory principle#. The contributory principle should be adopted, and both employers and wage-earners contribute to the cost in equal amounts. But further, the general public interests may be recognized through the payments in aid of the funds (subsidies, subventions). Both employers and employees usually seek to escape the burden, by getting the state to bear the whole expense[5] or by getting the other party to pay all or the larger part. But it is much to be desired that in large part the finances of a system of social insurance should be disassociated from the ordinary budgetary system of taxation and public expenditures. The fundamental reason why the premiums should be divided between employers and employees is that this is most favorable to the equal participation and coöperative efforts toward reducing the risk, and developing right industrial and political relations. Everywhere it is the practice to provide for representation nearly in proportion to contributions. It is usually assumed by employers, by wage-workers, and by others in the discussion of the subject, that the burden remains and is borne by those who directly pay the premiums, and just in proportion to their payments. This is an almost utterly mistaken view. There is, on the contrary, every reason to believe that the general principles of shifting and incidence of taxation apply fully here.[6] It cannot be doubted that, if wages are not arbitrarily fixed, if they result, as we must believe, from an adjustment and equilibrium of the various classes of labor in a general economic situation, then after a time the premiums become a part of that general situation. Payments compulsorily made by employers (by all, without exception) will ultimately be offset by a lower wage, and if transferred to the workmen will ultimately be offset by a higher wage. Of course, there is some delay and friction in making the adjustment, but, under any settled policy, the adjustment once made will be maintained. The benefit of social insurance to the workingmen is not mainly that their wages are increased by the direct contributions of employers to the premiums, tho there are doubtless some cases of "parasitic" industries and parasitic employers that escape their due share of payments for risk, now that there is no insurance system. The great benefits are that total wages and losses are apportioned economically to the points of maximum utility; that accumulation of capital by and for the wage workers is made regular, automatic, safe, and in great amounts; and that financial aid, physical care, and mental relief from, some of the most tragic anxieties of life, are given effectively and economically to the masses of the people. But, as has been indicated in another connection above, it is far from being a matter of indifference, psychologically, where the first, immediate burden of premium payment falls. The persons paying the premiums, in whole or in part, are far more keenly aware of the cost, and alive to reducing and removing the evil conditions. Moreover, their interest is stimulated by the fact that they are the first to gain by any temporary economies, and the more so because of the illusory belief sure to persist, that they are the ultimate as well as the immediate bearers of the costs. The development of a complete system of social insurance along these lines promises to do more than any other single measure of practical social reform now under consideration to change the conditions and the outlook of the wage-earning class. [Footnote 1: See above ch. 2, sec. 14; ch. 10, sec. 7; ch. 20, sec. 1; ch. 22, secs. 11-18.] [Footnote 2: The American Association for Labor Legislation has issued a pamphlet describing these features more in detail.] [Footnote 3: Thirteen states had, in 1916, state insurance funds, and, in five states (Oregon, Nevada, Washington, West Virginia, and Wyoming), they are the only insurance agencies allowed.] [Footnote 4: Ch. 22, secs. 14-18.] [Footnote 5: See examples in the lists of laws above cited, sec. 11.] [Footnote 6: See above, ch. 16, sec. 14.] CHAPTER 24 POPULATION AND IMMIGRATION § 1. Nature of the population problem. § 2. Complexity of race problems. § 3. Economic aspects of the negro problem. § 4. Favorable economic aspects of early immigration. § 5. Employers' gains from immigration. § 6. Pressure of immigration upon native wage-workers. § 7. Abnormal labor conditions resulting from immigration. § 8. Popular theory of immigrant competition. § 9. Divergent views of effects on population. § 10. The displacement theory; its fundamental assumption. § 11. Magnitude of the inflow of immigrants. § 12. Earlier and recent effects of immigration upon wages. § 13. _Laissez-faire_ policy of immigration. § 14. Social-protective policy of immigration. § 15. Population and militarism. § 16. Problem of maximum military power. § 1. #Nature of the population problem.# No one of the problems of labor thus far discussed is of so great importance in relation to popular welfare as is "the problem of population." By this is meant the problem of determining and maintaining the best relation between the population and the area and resources of the land. What is to be deemed "best" in this case depends, of course, on the various human sympathies and points of view of those pronouncing judgment. Very generally, until the nineteenth century, the only view that found expression was that of a small ruling class which favored all increase in population as magnifying the political power of the rulers and as increasing the wealth of the landed aristocracy. This view still is unconsciously taken by the members of a small but influential class, and is echoed without independent thought by many other persons. But more and more, in this and other labor problems, another more democratic standard of judgment has come to be taken, that of the abiding welfare of the masses of the people. This is the point of view that must be taken by the political economist in a free republic. The problem of population presents two main aspects: one as to composition, and the other as to numbers of the people. Changes in either of these respects concern the welfare of the masses. Changes in the kinds of people, or in their relative numbers, may greatly affect the welfare of the people, in some cases touching special large classes, and in others affecting the whole mass of the people. § 2. #Complexity of race problems.# The questions of race composition that we shall here consider are those of the negro and of the immigrant.[1] Both of these questions are complex and go beyond the limits of mere economic considerations, touching the most vital political and social interests of the nation. Indeed they involve the very soul and existence of peoples, for who can doubt that ultimately racial survival and success are mainly to be determined by physical and spiritual capacity? The negro in America is the gravest of our population problems. In large portions of our land it overshadows every other public question. Yet the negro is here because men of the seventeenth century ignored the complexity of the labor problem and thought only of its economic aspect. The landowners wished cheaper labor and, reckless of other consequences, they imported slaves from Africa to get it. They gained for themselves and a few generations of their descendants a measure of comparative ease, but at a frightful cost to our national life--a cost of which the Civil War now seems to have been merely a first installment on account rather than a final payment. § 3. #Economic aspects of the negro problem.# The negro as a wage earner is found very little outside of the least skilled branches of a limited range of occupations. Of these the principal ones, as is a matter of common knowledge, are farm work, domestic service (including janitor service in stores and factories and work in hotels), and crude manual outdoor labor. Repeated attempts to operate factories with a labor force of negroes have proved unsuccessful. In some of the better-paying occupations in which large numbers of negroes were found in the North soon after the Civil War, such as barbering, waiting on table in the best hotels, and skilled manual work, they have been largely displaced by European immigrants. Negroes are a disturbing and unwelcome influence in labor organizations, and even when nominally eligible to membership are in fact rarely accepted. They very frequently are employed as strike-breakers and this fosters race antagonism both immediately and permanently. The negro problem is, from our present outlook, insoluble. The most laudable of present efforts, that for industrial training, represented by Hampton and Tuskegee Institutes, and the work of Booker T. Washington, leaves the dire fact of two races side by side and yet unassimilated socially, politically, and, in large measure, economically. Two other possibilities, race admixture and caste, are both so repellent to white American thought, that they cannot be looked upon as solutions. Segregation in a separate state, or separate states, is a thorogoing proposal, but is practically impossible. Finally there is the conceivable, but improbable, event of the decrease and extinction of the negroes in America, Their relative number has declined since 1800,[2] but their absolute number still continues to increase. It seems probable that if European immigration were to be stopped that a very large migration of negroes from the South to the North and the West would occur to take places hitherto filled by unskilled immigrant workers. In the year 1915, following the check to immigration as a result of the European war, a very marked movement of this kind set in. If this occurred on a much larger scale it might result in greatly reducing the negro population in some portions of the South, and as the "natural rate of increase" of the negroes in the North is a negative quantity, it might cause the total negro population of the country to begin absolutely decreasing. § 4. #Favorable economic aspects of earlier immigration.# Regarding the immigration problem we are not confined to futile expressions of regret as in the last case. For by the "immigration problem" is meant primarily and mainly the coming of immigrants, and we can by legislation limit or stop their coming, if we will. The question at issue is whether their coming really is an evil or, on the whole, a blessing to the country. The historic American attitude toward immigration has been highly favorable to it. The early settlers on these coasts were led by various motives, some political, some religious, but far the largest part economic, the motive of bettering their worldly condition. Land was plentiful and all men of any capacity could easily become landowners. An inflow of laborers was favorable to the interests of all the influential elements of the population, especially to landowners and active business men. Increase of numbers, favoring division of labor and the economies of production in manufacturing, and reducing the dangers from Indians and from foreign enemies, seemed an unmixed blessing. Many of the newcomers soon became landowners and employers, and in turn favored a continuance of the movement. Thus was hastened the peopling of the wilderness. The interest of these classes harmonized to a certain point with the public interest; but likewise it was in some respects in conflict with the abiding welfare of the whole nation. It led to the fateful introduction of slavery from Africa, and it encouraged much defective immigration from Europe, the heritage of which survives in many defective and vicious strains of humanity, some of them notorious, such as the Jukes, the Kallikak family, and the Tribe of Ishmael. § 5. #Employers' gains from immigration.#. The immigration from Europe has furnished an ever-changing group of workers, moderating the rate of wages which employers otherwise would have had to pay. The continual influx of cheap labor aided in imparting values to all industrial opportunities. A large part of these gains have been in trade, in manufacturers, and in real estate as the cities have taken and retained an ever-growing share of the immigrants. Successive waves of immigration, composed of different races, have ever been ready to fill the ranks of the unskilled workers at wages somewhat lower than the current American rate. The lower enterprisers' costs that resulted from immigration surely did not accrue to the advantage of the employers alone. Bearing in mind the fact that the employing-enterpriser is a middleman,[3] we may see that the lower costs must, in most cases, be passed on to the consumers in the form of lower prices of products. And often the consumer, as the employer of domestic service at lower rates than otherwise would be possible, gets this advantage directly. This increases the number of those whose self-interest, at least when narrowly judged, leads them to favor the policy of unrestricted immigration, Tho perhaps less general than it once was, this sentiment in favor of immigration is still potent. The continuous inflow of immigrants has in many industries come to be looked upon as an indispensable part of the labor supply. Conditions of trade, methods of manufacturing, prices, profits, and the capital value of the enterprises have become adjusted to the fact. Hence results one of those illusions cherished by men whenever they identify their own profits with the public welfare. Without immigration, it is said, "the supply of labor would not be equal to the demand." It would not at the wages prevailing. But supply and demand have reference to a certain price. At a higher wage the amount of labor offered and the amount demanded would come to an equality. This would temporarily curtail profits, and other prices would, after readjustment, be in a different ratio to wages. § 6. #Pressure of immigration upon native wage-workers.# There must always have been cases where the labor incomes of workers were somewhat depressed by the incoming of immigrants. Indeed, that must to some extent always be so when the natives continue to work alongside of the immigrant at just the same job. But before the Civil War living conditions were simple, wages comparatively high and (more important) pretty steadily rising, and the wage-earning class not yet a large share of the population. Moreover, this conflict of interest was minimized and often quite avoided by the native changing to another occupation. In the old days there was always the outlet of free land on the frontier, now closed. Always there has been a better opportunity for natives to move into higher positions of foremanship or as employers of immigrant labor. As the wage-earners have become relatively more numerous, many of them have felt more keenly the pressure of competition from immigrant labor. Moreover, the immigration since 1890 has been increasingly from southern and southeastern Europe, from countries with much lower standards of living, and has been of enormous proportions. Here are some significant figures as to immigration since 1820. -------------------------------------------------------------- | | | Immigration, | Immigration | Increase of | per cent of Decade | in the period | population | population- | | | increase -----------------|---------------|-------------|-------------- 1820-30 | 124,000 | 3,300,000 | 3.8 1830-40 | 528,000 | 4,200,000 | 12.3 1840-50 | 1,604,000 | 6,100,000 | 26.3 1850-60 | 2,648,000 | 8,200,000 | 32.3 1860-70 | 2,369,000 | 8,400,000 | 28.2 1870-80 | 2,812,000 | 10,400,000 | 27.0 1880-90 | 5,246,000 | 12,700,000 | 41.3 1890-1900 | 3,687,000 | 13,100,000 | 28.1 1900-1910 | 8,795,000 | 16,000,000 | 55.0 Total, 90 yrs. | 27,800,000 | 82,400,000 | 33.7 § 7. #Abnormal labor conditions resulting from immigration.# The labor supply coming from countries of denser population and with low standards of living creates, in some occupations, an abnormally low level of wages and prices. Children cannot be born in American homes and raised on the American standard of living cheaply enough to maintain at such low wages a continuous supply of laborers. Many industries and branches of industry in America are thus parasitical A condition essentially pathological has come to be looked upon as normal. The commercial ideal imposes itself upon the minds of men in other circles. Statistics show that the prevailing wages for unskilled manual workers in America have risen much less since the Civil War than have other wages.[4] Wages in the great lower stratum of the unskilled and slightly skilled workers are much lower in America relative to those of more skilled and professional workers than they are in Europe. It can hardly be doubted that the most important, tho not the sole, cause of this situation has been the unceasing inflow of immigrants going into these low-paid occupations. The "general economic situation" in America, but for immigration, would compel higher wages to be paid to the masses of the workers. If immigration were suddenly stopped in a period of normal or of increasing business, wages in these occupations would at once rise, and that, without the aid of organization, of strikes, or of arbitration. This would affect most those occupations which now present the most serious social problems, in mines, factories, and city sweatshops. In some small measure the war in the Balkan States, by recalling many men for service, had this influence in 1912; and the great war beginning in 1914, by stopping a large part of the usual immigration, gave a striking demonstration of this principle. In employing circles the rise of wages was sometimes referred to with an air of grievance as due to the "monopoly of labor," as if the economic situation here, enabling the wage-earners (millions of them immigrants), to get a higher competitive wage when immigration temporarily was diminished, constituted a monopoly. § 8. #Popular theory of immigrant competition.# The depressing effect of the ever-present and ever-renewing supply of immigrant labor upon wages appears most clearly at the time of wage contests, and often seems to be the most important aspect of the question. Laws against contract labor, passed to prevent this particular evil, have put no check to the great stream of those guided by friends to a "job." Organized labor thinks most of these immediate effects. Commonly labor's protest is expressed in terms of the untenable "lump of labor" theory of wages. "Every foreign workman who comes to America" is believed to take "the place of some American workman." The error in this too rigid conception of the influence exerted upon wages by new supplies of labor is evident in the light of the principles of wages. Yet it may be true that, both immediately and ultimately, the foreign workman depresses the incomes of those already here with whom he directly competes. On the other hand, those in occupations into which few immigrants enter may, as consumers of cheaper products, be immediately the gainers in real wages, by the very change that depresses the wages in the lower strata.[5] The manufacturing-employers advocate "protection" which enhances the price of their products, while usually favoring "free trade" in immigration to cheapen their costs. What more natural than that laborers should favor a policy of protection to labor, to keep foreigners from coming here to be their competitors. § 9. #Divergent views of effects on population.# The foregoing views of the effects of immigration upon wages, both of those favoring and those opposing it, are short-time views, relating to immediate rather than ultimate effects. If the immediate causes are continuously repeated throughout the lives of successive generations the results are for those mortal men as ultimate as anything that concerns them. In this case it would make no difference to the millions of workers, whose wages are depressed, if it could be shown that wages fifty or a hundred years from now would be no lower as a result of continued immigration than they otherwise would be; or to the employer that wages would then be no higher. But to the social philosopher and to the statesman, interested in the abiding general welfare, the ultimate economic effects are of the greatest importance. The question is: What will be the far-reaching, long-time effects of immigration upon the general economic situation, as that determines the welfare of the mass of the people? We confine ourselves here to the economic effects, leaving aside as far as possible the racial, moral, religious, political, and general social aspects of the subject. We are met at the outset by two divergent opinions as to the permanent results of immigration upon the growth of population. The one is that all immigrants coming to our shores are net additions, hastening by so much the growth in density of population; the other opinion, the displacement theory, is that immigration has the effect of checking the natural increase of the native stock so much that it does not materially change the total population, or actually causes it to be less than it would have been had no immigration occurred. § 10. #The displacement theory; its fundamental assumption.# The latter opinion which still has many upholders[6] was first advanced by a distinguished economist, Francis A. Walker, but his first statement of it referred only to the period between 1830 and 1860. The main argument in support of this opinion was that in the three decades from 1830 to 1860 during which a large immigration occurred, the decennial rates of increase of the population were almost the same as in the three decades from 1800 to 1830.[7] The conclusion drawn from these figures is that the immigrants were the cause of the decline of the average birthrate that occurred in the families of native stock. The validity of this conclusion is absolutely dependent on the assumption that no other forces were at work to produce this result. Must we believe that, but for immigration, the native birthrate would not have declined at all? This is incredible. The birthrate of the native stock had already begun to decline before 1820 as is shown by many family records, and by the fall of the decennial rate of increase from 35 and 36 in the decades ending 1800 and 1810, to 33.1 and 33.5 in the next two decades. This occurred despite the enormous western settlement then under way on the Louisiana Purchase. The decline of the birthrate began at that time to appear as a world-wide phenomenon, accompanying improved transportation (roads, steamboats, steam railways), the rapid growth of cities, and the general industrial revolution. The general birthrate has declined of recent years in Australia and New Zealand, where there has been little immigration, more rapidly than it has in the United States.[8] § 11. #Magnitude of the inflow of immigrants.#In view of these facts it seems necessary to modify the displacement theory greatly. To the extent that the coming of immigrants caused a net addition to the population, it doubtless hastened the growth of cities and the development of industrialism, and thus helped to reduce the birthrate in some classes. But this view admits the effect upon population which the displacement theory denies. Probably, in a good many cases the more rapid business advancement of the natives, because of the coming of the immigrants, led to the decline of birthrate that is a consequence of economic success.[9] But a large part of this change would have inevitably occurred even if there had been no immigration after 1820. Between 1820 and 1910 the population increased 82,400,000, and the total number of immigrants was 27,800,000, or 33.7 per cent of the total increase. In an urban environment the birthrate among immigrants always has been very much higher than that of native Americans. This fact alone might well be taken as sufficient to offset whatever depressing effects the coming of the immigrants may have had upon the native birthrate, leaving the immigration nearly a net addition to population. It does not seem possible to believe that if there had been no immigration, our native population, rapidly advancing in average wealth, wages, and general education, would have continued with an unchecked birthrate, and would have filled all the places taken by immigrants. And no believer in the displacement theory has ever ventured to claim, as the argument requires, that if immigration were now stopped, the birthrate would again return to the old standard of 1820, or would cease to decrease somewhat. Especially of late, since the rate of increase of the native population has become much less, is the effect of continuing immigration apparent. In the decade of 1900-1910 the total population increased 16,000,000, while nearly 9,000,000 immigrants arrived. Of the remaining increase, 3,000,000 consisted of children born of foreign parents. That leaves three or at the most four million (4,000,000) increase attributable to the native stock, white and negro combined. § 12. #Earlier and recent effects of immigration upon wages.# Let us now correlate the principle of decreasing returns and the facts as to the exploitation of our natural resources[10] with the growth of our population, on the assumption that immigration has been a net contribution to our numbers. While the vast frontier was open to settlement, the growth of population could not fail to be looked upon as a blessing, even tho somewhat mixed with political evils, immorality, and pauperism. Beginning in colonial times, the policy of "the open door" to immigrants came thus to be deemed the traditional, patriotic American policy. Yet there is grave reason to believe that the rate of growth in the nineteenth century was wastefully rapid and that a slower and sounder growth might have been better.[11] However, this rapid growth was largely extensive, spreading over wider areas, and was consistent with a pretty steady rise of real wages in America until about 1895,[12] the level continuing higher than that of Europe despite the contemporaneous rise of wages there. Much of this general rise is undoubtedly attributable to the adoption of better tools, machinery, and industrial processes, the more so as inventions and new methods have rapidly become free goods.[13] The beneficial improvements long cooperated with the rapid exploitation of rich resources to raise real wages, and then undoubtedly continued to offset for a time the unfavorable effects as the richer resources began to show signs of exhaustion. Since the end of the last century, however, the net trend upward seems to be checked, and "the rising cost of living" (real cost) has come to be a serious actuality for larger sections of the population.[14] Yet so long as wages are enough higher in America to pay the passage of the low-paid workers of the industrially backward nations, they will continue to come. The ease and cheapness of migration in these days of steamships, the encouragement of immigration by the agencies and advertisements of the steamship lines, and the increasing readiness of the peasantry to migrate, have become well known through recent discussions. Unless immigration is limited, it must continue to depress the wages of American workingmen, through both its immediate and its ultimate effects. § 13. #Laissez-faire policy of immigration.# There are those who take a fatalistic, or a _laissez-faire_, view of the subject, and declare that the problem will solve itself as the level of American wages comes to be nearly the same as that of the countries of Europe from which our immigration is coming. True enough, if this can be called a "solution." There are many who cherish the commercial ideal according to which cheap labor is absolutely desirable and needful to produce cheaper products. This ideal has spread to wider circles. Here, for example, are the words of a man who combines wide knowledge of the facts of immigration with keen sympathy for the working classes:[15] "The past industrial development of America points unerringly to Europe as the source whence our unskilled labor supply is to be drawn . . . America is in the race for the markets of the world; its call for workers will not cease." Yet a little further on he must say: "All wage-earners in America agree that it is not as easy to make a living to-day as it was twenty years ago, and the dollar does not go so far now as it did then. The conflict for subsistence on the part of the wage-earner is growing more stern as we increase in numbers and industrial life becomes more complicated, and the fact must be faced that the vast army of workers must live more economically if peace and well-being are to prevail." § 14. #Social-protective policy of immigration.# A different kind of solution is offered by those who favor the strict limitation, if not the complete prohibition, of immigration. The foregoing study indicates that the time has come, if it is not far past, when the traditional policy of fostering immigration is opposed to the welfare of the masses of the people. This belief can be based solely on grounds of numbers, the relation of population to resources, quite apart from a preference for particular races or the familiar arguments regarding social and political evils and lack of assimilation, however valid they may be. The limitation of immigration would immediately improve working-class conditions where they are worst in America,[16] and would check and probably reverse the tendency to diminishing returns already manifest in many directions. This opinion does not necessitate an absolute prohibition of immigration; it is consistent with the continuance of immigration of a strictly selected character, and in numbers so small that all European immigrants now here could be rapidly and completely assimilated, economically and racially. With a slow national increase of population and with the continued progress of science and the arts, it should be possible for real wages to continue indefinitely rising in America. The selection of immigrants to be admitted should be a part of a national policy of eugenics,[17] which aims to improve the racial quality of the nation by checking the multiplication of the strains defective in respect to mentality, nervous organization, and physical health, and by encouraging the more capable elements of the population to contribute in due proportion to the maintenance of a healthy, moral, and efficient population. In such a view, a eugenic opportunity is presented in the selection and admission of immigrants that are distinctly above (not merely equal to) the average of our general population. § 15. #Population and militarism#. In view of the recrudescence of the spirit of armed national aggression evident of late, and especially in the outbreak of the Great War in 1914, the military aspect of the population question deserves serious consideration. The growth of savage and barbarian tribes in numbers, so that their customary standards of living were threatened, frequently has led to the invasion and conquest of their richer neighbors.[18] To-day nations on a higher plane of living are probably repeating history. The nation with an expanding population is tempted to seek an outlet for its numbers and for its products by entering upon a policy of commercial expansion, which in turn has to be supported by stronger military and naval establishments. It is led by primitive impulses that to it carry their own moral justification, to possess the territory of its neighbors. The immediate occasion is probably some matter of internal politics, such as growing discontent and democratic sentiment among the people. Nations with slowly growing populations, and still possessed of ample territories to maintain their accustomed standards of life, naturally favor the _status quo_, and are pacifist or nonmilitarist. If they arm it is for their own safety. In this view, militarism is seen to consist not in having drilled soldiers and stores of munitions, but in the national state of mind that would use these for aggression, not merely for defense. When, therefore, a powerful nation has reached a certain stage in the relation of its population to resources, limitation of population not limitation of armaments is the real pacifism; and increase of population, not increased military training or a larger navy, is the real militarism. § 16. #Problem of maximum military power.# It is a grave question, however, whether a nation with a comparatively sparse population, high wages, and great wealth can safely limit that population in the presence of a capable, ambitious, and efficient rival that covets such opportunities. On the one hand, a population may be so sparse that it has not soldiers enough to defend its territory against a numerous enemy; on the other hand, it may be so dense, and consequently average incomes be so low, that it cannot properly train, arm, and support its population of military age. The recent developments in the art of warfare call for great use of the mechanical industries, for great power to endure taxation, and for great financial resources, conditions found only where the average of national income is high. The point of maximum military power must be far short of the maximum possible population. It would seem that a nation of 100,000,000 inhabitants favorably situated to resist aggression, well supplied with the natural materials for munitions, and well equipped to produce them, might safely limit its numbers so as to ensure a high level of popular income. This safety would be greatly increased by permanent alliance with other peoples likewise limiting their numbers and, therefore, interested in maintaining the peace of the world. In this way it would be possible for them all to maintain a standard of popular well-being even higher than is fully consistent with the maximum military power, even in the presence of prolific and aggressive rival nations. [Footnote 1: Even more important than these is the relative decrease of the successful strains of the population, briefly treated in Vol. I, ch. 33. This is the problem of eugenics, the choice and biologic breeding of capable men to be the citizens of the nation, and broadly understood, it includes both the negro and the immigrant problems.] [Footnote 2: See Vol. I, p. 430, figure 58, showing the fall in the decennial rate of increase of negroes compared with whites; and see comment in accompanying note.] [Footnote 3: See above, ch. 20, sec. 11, and references in note.] [Footnote 4: See below, sec. 12.] [Footnote 5: See Vol. I, p. 221, on non-competing classes.] [Footnote 6: The latest and best statement is that of H.P. Fairchild, "Immigration," pp. 215-225, citing various opinions, and accepting the view of Walker. But he says (p. 216): "It must be admitted that this is not a proposition which can be demonstrated in an absolutely mathematical way, which will leave no further ground for argument."] [Footnote 7: See Vol. I, p. 429, for figures of population and of decennial rates of increase.] [Footnote 8: The effect of the growth of cities is discussed in the "American Journal of Sociology," Vol. 18, p. 342, in an article on "Walker's Theory of Immigration," by E.A. Goldenweiser.] [Footnote 9: See Vol. I, p. 420.] [Footnote 10: See Vol. I, chs. 34 and 35.] [Footnote 11: E.g., see above ch. 14, sec. 11 on the prodigal land policy.] [Footnote 12: See Vol. I, p. 436 ff.] [Footnote 13: See Vol. I, ch. 36, on machinery and wages.] [Footnote 14: For analysis of the available statistics bearing on the subject, with conclusions that real wages are no longer rising, see H.P. Fairchild, in "American Economic Review" (March, 1916), "The standard of living-up or down?"] [Footnote 15: Peter Roberts, in "The New Immigration," 1912, preface, p. viii, and p. 47.] [Footnote 16: See above, sec. 7; also ch. 21, sec. 9.] [Footnote 17: See above, sec. 2, note; also Vol. I, p. 422.] [Footnote 18: See Vol. I, p, 412, on war and the pressure of population.] PART VI PROBLEMS OF INDUSTRIAL ORGANIZATION CHAPTER 25 AGRICULTURAL AND RURAL POPULATION § 1. Agriculture and farms in the United States. § 2. Rural and agricultural. § 3. Lack of a social agricultural policy in America. § 4. Period of decaying agricultural prosperity. § 5. Sociological effects of agricultural decay. § 6. Fewer, relatively, occupied in agriculture; use of machinery. § 7. Transfer of work from farm to factory. § 8. The rural exodus. § 9. The farmer's income in monetary terms. § 10. Compensations of the farmer's life. § 11. Ownership and tenancy. § 1. #Agriculture and farms in the United States#. There were nearly 12,400,000 persons in the United States gainfully occupied in agriculture in 1910, this being 32.5 per cent of all in occupations. These, together with other family members not reported as engaged in gainful occupations, constitute the agricultural population, and comprize more than one third of the total population of the country. "Agriculture" is here used in a broad sense, including floriculture, animal husbandry (poultry, bee culture, stock raising), regular fishing and oystering, forestry and lumbering. Agriculture thus produces not only the food but (excepting minerals, including coal, stone, natural gas, and oil) the raw or partly finished materials for all the manufacturing and mechanical industries. With the exception of areas devoted to forestry on a large scale and to fishing, the industry of agriculture is pursued on the 6,400,000 farms, covering 46 per cent of the total land area of the country. Of the land in farms, a little over half is classified as improved. The estimated value of farm property, including buildings, implements, machinery, and live stock, was, in 1910, about $41,000,000,000, somewhere near one fourth of the estimated wealth of the country at that date.[1] § 2. #Rural and agricultural.# The adjectives rural and agricultural are often used loosely as synonyms. Agricultural refers primarily to the occupation of cultivating the soil, and is properly contrasted with other occupations, as mechanical and professional; whereas rural refers to place of residence outside of incorporated places of a specified minimum population (of late, 2500), and is properly contrasted with urban, applied to those living in larger population groupings. In 1910 the rural population comprised 53.7 per cent of the total population. It is true that the two groups of the agricultural and the rural populations are largely composed of the same persons, but to a considerable extent they are not. Many farm houses, together with part or all of the farm lands, lie inside urban boundaries, and, besides, some persons engaged in agriculture reside in urban places. On the other hand, any one acquainted in the least with a rural district (in the statistical sense) can at once think of many persons living there that are not engaged in agriculture; they may be merchants, warehousemen, railway employees, physicians, handicraftsmen, teachers, artists, retired business men, and others. The percentages given in this and in the preceding section indicate that about two fifths of the rural families are not engaged in agriculture. It is often important to make this distinction, tho it is difficult to do; for some of the much-discussed rural questions are of a broad social nature, are matters of rural sociology, relating pretty generally to the rural population; while other questions of "rural economics" are more strictly matters of agricultural economics and relate to the farm as a unit of industry, or to agriculture as an occupation. § 3. #Lack of a social agricultural policy in America.# It is a common remark that the farmer lives an independent life. This develops in him a self-reliant spirit. He readily gives and takes simple neighborly help in informal ways, but he does not readily turn to government for aid. While every influential urban group, organized or unorganized--manufacturers, merchants, wage-earners--has sought and obtained special protective social legislation, the farmer has, from choice or necessity, usually had to work out his economic problems unaided. The exceptions are few and of small importance. For example, the prodigal land-policy of the state and national governments encouraging the settlement of the frontiers was not a farmers' policy. It was originally inspired by the larger political purpose of extending the bounds of the nation; later it was advocated and fostered by a land-speculating element, linked with bad politics, in the frontier states, and not by farmers as such. It in time greatly injured the farmers of the eastern states. The "Granger legislation," to regulate railroad rates, was so called by the East in a spirit of derision because it began in the distinctively agricultural states of the Northwest; but it had neither the aim, nor the result, of obtaining especially for farmers any rates that were not open to every one on the same terms. The tariff rates on American agricultural products, placed in the acts as a matter of form, have, with minute exceptions, been ineffective to favor farmers, as the shipments were all outward and none inward, while heavy and effective rates were placed on most things that the farmers had to buy.[2] In part the explanation of the lack of legislation favoring farmers is to be found in their small part and influence, as a class, in political affairs, outside of minor executive offices in township and county governments. In the state legislatures farmers are few relative to their numbers in the community, and still fewer in either House in Washington. Among the real exceptions to the otherwise fair record of the farming class in this respect is the tax on oleomargarine and the special favor accorded to farmers' associations in the Clayton Act. It might be cynically said that the farmer has not been "sharp" enough to get his share of the "good" things" that the business classes were passing around in protective legislation. But farmers have, as has every economic group, interests which may legitimately be the subject of social legislation; whereas they have limited their attention to their private affairs at home and have been prone to vote patiently and proudly the "straight ticket" to elect business men and lawyers to office. § 4. #Period of decaying agricultural prosperity#. Despite the facts just stated, every campaign orator admits that there is no other occupational class of the nation of greater importance to the nation than the farmers, or more deserving of prosperity. Every other part of the industrial organization of a nation is interrelated with its agriculture. Great changes, in respect to growth of population, immigration, exhaustion of natural resources, mechanical inventions, scientific discovery, and many things more, have been occurring, which have altered and, in some communities, have destroyed the very foundations of agricultural enterprise in America since the close of the Civil War in 1865. But the farmers have been left to struggle individually with their individual difficulties, tho the outcome was of the gravest portent to the whole social economy. Such was the case in the period of agricultural depression from 1873 to about 1896.[3] Multitudes of ancestral homesteads were then left behind by the last farmer-descendant of the old line. No longer able to make a living on the soil, he took up an urban occupation. § 5. #Sociological effects of agricultural decay#. Such changes caused a relative decline in the birthrate of the old American stock. The places of many of these long-settled families remained unfilled as thousands of abandoned farm houses testified. The places of others were taken by a tenantry, white or black, lacking the thrift of ownership; the lands of others passed to new owners of alien races. The populations of many rural neighborhoods thus became heterogeneous, with results calamitous to the social life. Once prosperous schools declined, once thronging country churches were deserted, and much of the old neighborhood democracy disappeared. When, about the year 1900, prosperity began slowly to return to the American countrysides in the form of rising prices of farm produce, it was in large part too late to remedy the evil, except as it may be done by generations of effort under more favoring conditions. There are merely suggested here some of the complex sociological effects of past economic changes in American agriculture. It is certain that in the future also the economic changes in this field will be related closely to social and political changes of a fundamental character. § 6. #Fewer, relatively, occupied in agriculture; use of machinery.# Probably ever since the first census in 1790, the relative number of agriculturists in this country has been decreasing. Beginning in 1880, the numbers of those occupied in agriculture for gain have been reported at the census dates in a form that makes them fairly comparable.[4] The explanation of this decrease in the proportion of the population that is engaged in agriculture is twofold; the first is the real increase in the productive output per person in agricultural industry. In larger part this is due to the increasing use of machinery in place of simple hand tools, and the substitution of horse-, hydraulic-, windmill-, steam-, and gasoline-power for human labor. This change has been made readily in the regions of level fields, but of late has been made possible to a greater extent in hilly country, by rearranging and combining the old irregular fields into regular fairly level rectangular fields easily tillable, while turning the rougher lands and hillsides into wood lots and pastures.[5] One man, thus, driving three or four or more horses, can do the work formerly done by two or more men and do it just as well. The farmers' incomes in different parts of the country vary pretty nearly with the amount of horse-power used per man. Economies equally great are made in the work done in the barnyards and barns. In most parts of the country only a beginning has been made in these ways, and in future the census will continue to reflect the progress in these directions. § 7. #Transfer of work from farm to factory#. The other part of the explanation of the decrease in the proportion of the population that is engaged in agriculture is that many operations are, step by step, being transferred from the farm to the factory. "Agriculture," we have observed, is a great complex of industries, in which many different products are taken from the first simplest extractive stage, and then put through successive processes to make them more nearly fitted for their final uses. Not so long ago grain cut in the field was threshed, winnowed, shelled, made into flour, and baked on the farm, as it still is in many places. Logs were cut into boards, planed, and made into houses or furniture by the farmer. The old-time farmer made by hand a large number of his farm implements--rakes, ax handles, pumps, carts, and even wagons. Until a generation ago all butter, cheese, and other dairy products were made on the farm. Now these things are being done in steadily increasing proportion by workers classified as in the manufacturing industries, and agriculture contains fewer separate industries and processes. Of course there is economy of labor in nearly all of these changes, but the number occupied in agriculture is greatly reduced. Many farmers and more farmers' sons are moving from agriculture into occupations of manufacturing, trade, transportation, and the professions, and are becoming more narrow specialists. § 8. #The rural exodus#. The percentage of persons in the rural population changes at about the same rate as does that of the persons occupied in agriculture. In 1890 it was 64, in 1900 it was 60, and in 1910 it was 54 per cent. The percentage of the population in cities of 8000 or more has steadily increased. This phenomenon has been marked in all of the countries that have been developing along industrial lines. It has been variously described as "the rural exodus," "the abandonment-of-the-farm-movement," and "the city-ward drift."[6] It is only in part explained by the change from agriculture to other occupations; perhaps even in greater part it is due to the decline and disappearance in many rural places of small manufacturing and mercantile businesses before the competition of large business in the cities. In much of the long-settled area of the country every hillside stream once turned a little mill to saw timber, grind corn, forge iron, or weave cloth. Most of these mills are now deserted. In countless villages the old blacksmith shop, once a center of business, is abandoned. Here and there a patriarchal smith still serves a dwindling group of customers and speaks with mingled pride and pathos of his sons, now in the automobile business in the city. The movement away from the countryside has been but little counteracted as yet, but may be more in future, by the growing enjoyment of rural life, by the back-to-the-land movement, by interurban railways, by improved roads, and by automobiles. § 9. #The farmer's income in monetary terms#. Census figures and some additional investigations have led to the estimate of the average real income of the farmers of the United States in 1909, expressed in monetary terms, as $724. The estimated value of all products, whether sold or used by the farmer, plus the value of his house rent and fuel consumed by family, was $1236, from which expenditures of $512 are deducted for outside labor, and for materials used for operating and maintaining the farm. Of the $724 the sum of $402 is estimated to be the labor-income of the family and $322 is estimated to be the wealth-income (at 5 per cent of the capitalization of the farm). This was in a period of rising values in farm lands, averaging about $323 per farm annually, and this to most farmers was equivalent to so much monetary savings. The main items of net income, therefore, are as follows: Rent $125 Food from the farm 261 Fuel 35 Cash 303 Total $724 Increase in value of farm 323 Total estimated monetary income $1047 Of the total, $422 is a labor-income, and $645 is a wealth income.[7] It would be difficult, even if the available statistics were much more exact than they are, to compare exactly the farmer's income with those of urban classes. Averages of such large numbers and over such a wide area have a limited significance in the specific case; and living conditions and the purchasing power of money are so different in country and city and in different parts of the country.[8] § 10. #Compensations of the farmer's life#. In bare monetary terms the average farmer's family gets a labor-income less than that of the ordinary wage-earner in a factory, and it is only by the aid of the wealth-income that it appears to fare as well or better. Even the few largest incomes made in farming are small in comparison with many of those made in commerce, transportation, and manufacturing. The great mass of farmers of the nation are hard-laboring men, poor in the eyes of the city dwellers.[9] But this much is certain: the farmer's income in monetary terms has on the average much larger power to purchase the main goods of life (material and psychic goods) than it would have in town. Equally good house usance would cost more in nearly all towns, and much more in larger cities. Retail prices of the same food and fuel even in small towns would be much greater. The necessary outlay for clothes to maintain the class standard is much less for farmers than for city dwellers. Moreover, in the use of horses and carriages, and now of automobiles, and in the free control of his own time--in many elements of psychic income--the farmer is on a parity with men in other occupations of double or quadruple his income expressed in monetary terms. Tho the farmer's working day in the busiest season of summer is very long compared with that of factory or office workers, his working day at other seasons is usually much shorter than the average urban worker's day. The farmer's life is nearly always free from the excessive pressure, haste, and competition of city life, and the value, to many a man, of the more natural and wholesome conditions of outdoor life and outdoor work are hardly to be measured in terms of even the most untainted dollars. § 11. #Ownership and tenancy.# Since 1880, when the first figures on farm tenures were collected, the proportion of farms operated by owners has steadily decreased. Percentage of farms operated by Owners Cash tenants Share tenants 1880 ............ 74.5 8.0 17.5 1890 ............ 71.6 10.0 18.4 1900 ............ 64.7 13.1 22.2 1910 ............ 63.0 13.0 24.0 These statistics arouse fears that the class of independent farmers operating their own farms is gradually giving way to a tenantry in America. But in some respects the figures are misleading unless carefully interpreted. The increasing proportion of tenants is due not so much to owners falling into the class of tenants as to the hired laborers rising into the class of tenants. The number of male operating owners compared with all male workers (not merely with all farms) has remained almost constant at about 42 per cent; while the per cent of hired workers has decreased from 43.3 (in 1880) to 41.4 (in 1890) and to 34.6 (in 1900). Most hired men on farms are farmers' sons; the city boy does not adapt himself readily to farm work. Most hired men of native stock become tenants, and finally owners. Only 11 per cent of the hired workers in agriculture (in 1900) were over 35 years of age. The landlord of a farm let to a tenant, especially to a share tenant, is still to a large extent the general manager, controlling in a large measure through the renting contract and by his oversight, the operations of the farm. Older men find that letting the farm to a share tenant is easier for them and gives better results than continuing to operate the farm with hired labor. And it evidently gives a man a somewhat higher status to become a tenant than to continue to be a hired laborer. In the South this movement has taken on large proportions in the breaking up of large plantations once operated by the owner with hired labor, and now let in smaller lots to operating tenants. Yet such a change appears, statistically, as a decrease in the proportion of farms operated by owners. Despite these somewhat reassuring facts, the problem of maintaining and increasing operating ownership of farms in America is one deserving of the most earnest thought and efforts. The best form of farm tenure is not necessarily that giving the best immediate economic results. Politically in a democratic nation, and sociologically in its effects upon the size of families and the raising of healthy children, the preservation of an independent American yeomanry is of fundamental importance to the nation. The problem is as difficult as it is important, and becomes more difficult with the rise in the acreage value of lands and with the economical size of farms, both calling for a larger investment to become an owner. Changes in the system of taxation should be made with reference to this object; the system of agricultural credit should be developed and administered to assist; special efforts in agricultural education should be made and active administrative efforts should be directed, toward this important end. [Footnote 1: See above, ch. 1, secs. 7 and 8.] [Footnote 2: See ch. 14, sec. 5.] [Footnote 3: See Vol. I, p. 437.] [Footnote 4: It must be observed in studying these figures, that farmers' wives and children, working at home, are not reported as gainfully occupied. But a widow or a spinster owner, if herself acting as the enterpriser, is reported as "occupied" in agriculture. The increasing number of such cases in the past generation in part explains the growing number and percentage of females in agriculture. Number occupied in agriculture Per cent of all persons occupied Males Females Both sexes Males Females Both sexes 1880... 7,068,658 594,385 7,663,043 47.9 22.5 44.1 1890... 7,787,539 678,824 8,466,363 41.4 17.3 37.2 1900... 9,272,315 977,336 10,249,651 39.0 18.4 35.3 1910...10,582,039 1,806,584 12,388,623 35.2 22.4 32.5 ] [Footnote 5: See further, ch. 26, secs. 1 and 2 on the size of farms as an economic factor.] [Footnote 6: See above, sec. 2, on the distinction between rural and agricultural. In part the change here noted results from increases in the population of towns and incorporated places from a little below 2500 to something about 2500. For example, if there were 2499 persons in a town in 1900 they would all be classified as rural; if in 1910 there were 2500 or more they would all be classified as urban.] [Footnote 7: Sec Vol. I, p. 225, and note 11.] [Footnote 8: See Vol. I, p. 206.] [Footnote 9: See Vol. I, p. 227, note, for figures on owners and farm laborers.] CHAPTER 26 PROBLEMS OF AGRICULTURAL ECONOMICS § 1. Size of farms, and total farming area. § 2. Influences acting upon the size of farms. § 3. Self-sufficing versus commercial farming. § 4. Farming viewed as a capitalistic enterprise. § 5. Diversified versus specialized farming. § 6. Conditions favoring diversified farming. § 7. Intensive farming in Europe and America. § 8. Prospect of more intensive cultivation of land in America. § 9. The new agriculture. § 10. Difficulty of coöperation among farmers. § 11. Rapid growth of farmers' selling coöperation. § 12. Some economic features of farmers' selling coöperation. § 13. Coöperation in buying. § 14. Need of agricultural credit. § 15. Recent provisions for farm loans. § 1. #Size of farms, and total farming area#. The average area of farms has varied from a maximum of 203 acres, in 1850 (the first figures), to a minimum of 134 acres in 1880, being 138 acres in 1910. A better index, perhaps, is the average improved area per farm, which has been more nearly stationary, varying from a maximum of 80 acres in 1860 to a minimum of 71 acres in 1870 and 1880, being 75 acres in 1910. Here again the statistics require interpretation, for in the spread of the frontier the addition of large farms in the arid and semi-arid regions may raise the average, or the breaking up of large plantations in the South may decrease the average, without this indicating any essential change in the technical conditions of farming in the country generally. Since about 1900 the total area in farms has increased very slowly. Between 1900 and 1910 the increase was only 4.8 per cent; whereas a larger increase occurred in the area of improved land, 15.4 per cent, and the unimproved area in farms decreased 5.6. Future changes of farm areas may be expected to be of this same nature, mainly in the improvement of rough pastures, swamps, partly cleared woodlands, and desert lands awaiting irrigation. An increasing population will have to be provided with food and other products of agriculture on a farming area that henceforth will be increasing less rapidly than it has in the past and than the population increases. § 2. #Influences acting upon the size of farms#. In these averages for the whole country many conflicting influences unite and neutralize each other. Making for smaller farms is the breaking up of large grazing areas in the West into smaller general purpose farms or irrigated fruit districts, and of larger general farms in the North and East into small poultry, flower, and fruit farms. Opposed to this is a movement toward the merging of farms of 50 to 100 acres into larger farms of 300 acres, more or less. The economic cause of this movement is interesting and important. The typical and economic size of farms when the Atlantic states were settled, was determined by the use of hand tools, which permitted a man and his family to operate a farm of about 75 acres of which about half was tilled and the rest was in permanent pasture and woodland. The fields were small and were laid out irregularly, which was no disadvantage for hand cultivation. But for the most economic use of land in field crops and under more modern conditions it is necessary to have pretty level fields, of regular rectangular shape. The farm unit should be of such extent as to permit of the proper use of the soil by rotation of crops, and to employ fully the best modern labor-saving machinery for each purpose. Numerous recent agricultural surveys point to the conclusion that for general farming this unit is a comparatively large area of about 300 acres. These conditions offer a reward to those agricultural enterprisers who can purchase lands at a price based upon the high costs and lower yields of the older methods and cultivate them at the lower costs and with the larger yields of the newer methods. This movement, therefore, toward the consolidation of smaller into larger farms is likely to continue in many communities for several decades. This is likewise an advantage to the community in increasing the production with less labor. But the net effect upon the social life of the countryside is more doubtful, and calls for careful consideration. § 3. #Self-sufficing versus commercial farming. The typical American farming family once produced nearly everything it used, and used nearly everything it produced. It was very nearly a self-sufficing economic unit, "a closed economy," as it sometimes called. Food, clothing, fuel, lumber, houses, furniture, tools, were on the farm carried through the various processes from the first gathering of the raw materials to the finished product. They were then consumed by the farm household. It is true that even in the first settlements there were some craftsmen, cobblers, millers, weavers, blacksmiths--whose services and wares were got by trading some of the surplus products from the farms--butter, cheese, eggs, wool, hides, furs, live stock, grain lumber. A few rare commodities of foreign make found their way to the farm through peddlers and merchants; but altogether the goods produced outside the farm were a small fraction of the family's consumption, and were exchanged for but little of the farm's production. Most farmers tried to produce for themselves, as far as possible, everything their families needed, when the soil and situation were poorly suited to the purposes. True, there were early some exceptions to the general rule, where only one kind of crop was taken from the land. Such was the forest product of masts, shingles, lumber, and turpentine, and the great southern staple, tobacco, and later, cotton. The exceptions have been tending to become the rule in more and more communities. Farmers have been specializing more and more in the kinds of products to which their farms are adapted in respect to soil, relation to market, and otherwise. These products are taken to market and sold for money with which are bought the things needed for use on the farm. § 4. #Farming viewed as a capitalistic enterprise#. Thus the farm comes to be looked upon more and more, not just as a home, but much as if it were a commercial enterprise or a factory, by which products are made for sale. This change, to be sure, is far from complete, as the figures for the average farmer's income show that a large share of the family living still comes from the farm. It has gone on much further in some districts than in others, as is indicated in the types of farming discussed below. But just to the extent that the farmer grows crops to sell, his outlook on his work undergoes a change. He is less exclusively a farmer, concerned with the technical processes of farming; he must be more largely a business man. Like a manufacturing enterpriser, he buys the factors of production, combines them into new products, and sells them again. He becomes interested in market conditions and prices. He grows more commercially-minded. He views the farm no longer as a fixed area, but one that may be enlarged by purchase or by rental, and that may be reduced by selling or letting the less needed parts. One-fifth of farm owners now rent additional land. In commercial farming the land is not contrasted with capital as something apart, consisting of the value of the equipment and stock; but the whole complex of land and other goods is thought of as a capital-investment. The greater ease of transferring landed-property in America and the greater mobility of our population have always made it more natural here than in Europe to look upon land as a capital investment. This view is now becoming more general as a result of the commercializing of farming enterprise. This change has been favored by other influences. Particularly has the use of machinery and of other equipment, calling for a larger investment per man and per acre, been making agriculture, in its form of enterprise, more and more like manufacturing and commercial undertakings. § 5. #Diversified versus specialized farming#. To be self-sufficing a farming family must carry on general farming, that is, must produce a diversity of products. As farming becomes more commercialized it necessarily becomes somewhat more specialized, and produces a smaller variety of products. In some parts of the country and on particular farms this specialization is extreme: in California, citrus fruits, or prunes, or beans, may be the only crop raised; wheat in Kansas and the Dakotas, and dairy products in thousands of farms surrounding the great cities, are the main, tho not the exclusive products. Many farmers in these districts have no gardens or orchards, keep no cow, and buy much or all of the grain for their horses, as well as milk, butter, vegetables and fruits for their own use. Poultry and eggs are shipped in trainloads two thousand miles from the Middle West to California to be consumed by orange growers. Many farmers in the East no longer keep sheep, pigs, or beef cattle, and they buy out of the butcher's wagon all the meat except fowls used by their families. This partly explains the decrease of live stock in the whole country in recent years and the increase in the price of meat. § 6. #Conditions favoring diversified farming#. There are, however, limits to the net advantage of specialization in crops, and competent authorities on agriculture question whether in many cases that limit has not been readied and passed. Most farms have a variety of soils and of conditions--hilltops, slopes, bottom lands--which are suitable for different purposes. A rotation of crops is necessary to get good yields. Live stock must be kept to maintain the fertility of the land, which deteriorates fast if hay and grain are continually sold. Some live stock can be kept on every farm very cheaply with the food that would go to waste otherwise. The specialization in stock raising in the prairie states ceased to be profitable when lands became more valuable. Specialization in wheat production in the states just west of the Mississippi is possible only so long as wheat will grow on the virgin soil without costly fertilizers. The cotton farmers of the South, especially the negro farmers, have been forced by debt and thriftlessness into a one-crop policy that is now seen to be wasteful in the long run. A variety of production is necessary to employ labor somewhat regularly on a farm throughout the year. These and other conditions will make most farming always an industry of comparatively diversified products. Only 1 per cent of the farms get as much as 40 per cent of their receipts from fruit; 2 per cent get that much from tobacco; 3 per cent from vegetables; 6 per cent from dairy products; and 19 per cent from cotton. The remaining 60 per cent of receipts were in most cases from various sources, and these figures did not include the value of produce consumed by the farmer's family. § 7. #Intensive farming in Europe and America#. No other farm problem interests the city man so much as that of increasing the production of the land. To most city men farming hardly seems to be an occupation giving livelihood and life to the farmer; it seems rather to exist for the sole purpose of feeding men living in cities. The city man, therefore, measures the success of farming not by the farmer's income, by the level of countryside prosperity, but by the number of bushels per acre raised to ship to town. Every city newspaper and magazine contains articles pointing to the fact that larger crops per acre are raised in Europe than in America, and broadly suggesting that the American farmer could do as well, if only he would. Foreign travelers comment in like vein on the wasteful use of land in America as compared with farming methods in Europe. Land is used most extensively, with respect to labor, when it is in forests; somewhat less so when in pasture as care must be given to the live stock; and still less when used for hay, grain, and other crops. But the use of machinery in large fields is far more extensive than the patient work of peasants with their hand tools. The more labor or the more equipment (or both together) that is put upon an acre, the larger the product, but the larger the cost per unit. It is a familiar economic principle.[1] It would bankrupt any farmer, excepting the millionaire amateur, to farm in America by European methods. American farmers, at least many of them, could raise as many bushels per acre and keep their farms as thoroly cultivated as do the European peasants, if wages were as low here as are the peasants' incomes. § 8. #Prospect of more intensive cultivation of land in America#. As the aggregate need for food increases in America there must come a steady pressure upon our stock of land uses, resulting in decreasing returns to labor in agriculture, unless this movement can be counteracted by the spread of better methods in agriculture--not European peasant methods, but new American methods consistent with high labor-incomes. A good deal of our farm land is undoubtedly too intensively used now in view of present and prospective commodity prices and wages. Maladjustment of land uses has resulted from mistaken judgment, from changing conditions as to prices, transportation, and markets, and from loss of soil fertility. There are thus, on nearly every old farm, some fields that would better be in pasture and much hillside pasture that would better be woodland. It is often declared extravagantly that our country could support easily the total population of China, or as great a population per square mile as that of Italy. If it did so it would be only on the penalty of lowering wages toward, if not quite to, the level of the Chinese coolie or of the Italian peasant. Great metropolitan dailies gravely present as an argument in favor of unrestricted immigration, the proposition that "if" the cheaper immigrants would but go upon our "waste" land (which they refuse to do), and raise food by European methods the problem of the rising cost of food in the cities would be solved. This urban ideal of a frugal, low-paid agricultural peasantry can hardly be adopted in America as the national ideal. Rather, it would seem, any movement toward more intensive agriculture that necessitates a lowering of the standard of living of the masses of the American people will, when it is recognized, be condemned and opposed. § 9. #The new agriculture#. Agricultural method, the technic of farming, has been constantly progressing for two hundred years in Europe and in America, Were it not for this, the great growth of population on this combined area would have been quite impossible. But the betterments since about 1890 in America have been especially great. They are mostly the first large fruits of the scientific study made possible by the land-grant colleges and agricultural experiment stations fostered by state and national, legislation. These many diverse improvements are grouped under the general title of "the new agriculture." Its chief features are: new machinery and other labor-saving methods; better methods of cultivation of the soil; better selection of seed; introduction of new plants and trees from abroad to utilize low-grade lands; plant-breeding to develop new varieties of better quality, heavier bearing, or immune to disease; more efficient and economical ways of maintaining soil fertility; better methods of marketing; and better technical education of the individual farmer. Each of these topics, and a number of other minor ones, would require a chapter in a complete treatise on agricultural economics. Here this mere enumeration must be allowed to convey its own suggestion of far-reaching results for the whole political economy of the nation and of the world. Indeed, so much has been written in a Barnumesque way of the wonders of the new agriculture, that its actual results and further possibilities are in many minds absurdly exaggerated. It has not as yet been potent enough to prevent diminishing returns in respect to the great staple foods and raw materials obtained by agriculture. It apparently has barely kept pace with the needs of the growing population of Christendom. It has enabled a larger population to exist in about the same, if not in a worse condition, on the same area, while progress in cheapness of goods has come almost entirely from the side of the chemical and the mechanical industries. It does not give the promise of an indefinite amelioration of the lot of an indefinitely multiplying population. But to a population slowly increasing, a new and ever newer agriculture, utilizing constantly the achievements of the natural sciences and the mechanic arts, ensures the possibility of a steady betterment of the popular welfare in city and in open country alike. § 10. #Difficulty of coöperation among farmers#. Rural communities are proverbially conservative; the American farmer is proverbially an individualist. No wonder, then, that the new ideas and plans of coöperation in business matters have made headway in agriculture slowly and with difficulty. The need of mutual aid among American farmers is especially great, for, as has often been, said, isolation is the problem of the farm as congestion is that of the city. On the frontier a coöperative spirit manifested itself frequently in mutual helpfulness, in house raising bees, husking bees, threshing bees, and other similar gatherings. But this spirit seems to have almost disappeared in the older communities, the more rapidly doubtless in the period of decaying agricultural prosperity.[2] To-day, for example, it is impossible on a certain Pennsylvania road for one more progressive farmer to get his neighbors to coöperate in so simple a matter as hauling their milk cans to the creamery, and so every day in the year ten horses are hitched to ten delivery wagons carrying two or three milk cans apiece, and driven by ten drivers along the same road to and from the railroad station. One driver and two horses could easily carry as much or more, as is done now in many other dairy districts. Even of successful coöperation among farmers sympathetic critics are forced to say: "Many students of rural economics assert that coöperation as applied to the distribution and marketing of farm products is not very successful unless it is founded upon dire necessity. When the records of the organizations of the country are analyzed it becomes almost necessary to accept that statement. So long as farmers do fairly well in their own way they are not inclined to coöperate." § 11. #Rapid growth of farmers' selling coöperation#. Despite what has just been said, coöperation among farmers now is more developed and is growing faster than all other kinds of coöperation in America. This is most marked in farming communities in the West, especially in California and in the Middle Western or Northwestern states (e.g., Minnesota and Wisconsin). There the farmers are younger, and many have been educated in the state agricultural colleges. They all produce nearly the same kinds of crops of staple produce which must be shipped to distant markets. The need of uniting to get what they thought would be fair treatment from the railroads, and to protect themselves against the abuses of the competitive commission salesagents, seems to have given the first impetus to farmers' coöperation. The most notable developments were those of the California Fruit Exchange and of coöperative societies of the Northwest for marketing grain. The membership of the former is made up entirely of the local citrus growers' associations in California. It has a complete organization of selling agents in the Eastern cities and a remarkably efficient, tho simple, system of equalizing and expediting shipments. Now the agricultural coöperative associations of various kinds are multiplying all over the country, for shipping live stock, fruits, butter, cheese, and other farm products. Coöperation for these purposes called forth new activities; packing houses were built, and grain elevators and creameries and dairies, and now a goodly number of the simple manufacturing processes are undertaken by these societies, now numbering thousands. § 12. #Some economic features of farmers' selling coöperation#. This type of producers' selling coöperation is proving in America to be far more successful than producers' coöperation among workingmen;[3] and certain important economic features in it should be noted. The local producers' selling coöperative society is composed of farmers who as enterprisers own and carry on their own separate businesses; they are not, as in the other case, wage workers. Any productive processes undertaken by this kind of society are subordinate to the main business, being such as picking, packing, drying, preserving, and making boxes for packing. This form of coöperation with the related form of consumers' coöperation that is fostered by it, promises to have a wide extension. Some of these societies, as those dealing in citrus fruits, regulate with some success the picking and the marketing so as to distribute them more evenly throughout the year. They watch the markets and direct their agents by telegraph to divert cars _en route_ away from markets that are glutted with products and into markets where prices are higher. They take some of the products, as eggs in the spring at the period of low prices, and pack or refrigerate them, to be sold when prices are higher. For thus withholding the supply they are said by some to exercise a monopolistic power. But this is a more than doubtful view. So long as only the seasonal variations are equalized and the total supply of the year is not reduced it is, on the marginal principle, an economic service to the consumers, comparable to insurance in its utility. Any reduction of the area planted or of the entrance of others into the industry would be a monopolistic act but this as yet has not occurred. § 13. #Coöperation in buying.# Coöperative buying (called also consumers' coöperation or distributive coöperation) has had a large growth in the British Isles, since 1844, when the society called the Rochdale Pioneers was founded by a group of factory workingmen. The coöperative stores, both in Great Britain and on the Continent, have continued to develop mainly among the industrial classes in urban centers. However, this has not been exclusively the case, and particularly in Denmark and Ireland coöperative buying has increased in agriculture in connection with selling associations. Since 1890 the growth of consumers' coöperation among European industrial wage-earners has been phenomenal, especially in Belgium, Germany, and Switzerland. American wage-workers, however, have made few and feeble efforts in this direction. In the period beginning 1867 many coöperative stores were founded in America by farmers in the Grange movement, who operated also grain elevators, warehouses, and steamboat lines. But the movement failed about 1877. This result is easily explained by lack of commercial knowledge and lack of harmony among the members, selling on credit, and inefficient management. A new era in consumers' coöperation for farmers began about 1900 and now in several widely separated parts of the country--Minnesota, Kansas, California, Washington, and elsewhere--the movement is spreading rapidly, supported in large part by the same persons who are members of the selling associations. § 14. #Need of agricultural credit.# Banking originated in cities and for the use of the merchant-class. It still retains pretty faithfully its commercial character. The change of farming toward a more commercial form[4] has been little aided by banking credit. National banks and many others were forbidden in their charters to lend on the security of real-estate, the farmer's one business asset.[5] A great number of farms are always in course of being purchased, the balance of purchase money being borrowed by the purchaser. A group of private agencies such as life insurance and mortgage loan companies and local money lenders has supplied in somewhat costly ways the need of farm credits. Tho rates of interest have become more equalized throughout the whole country, they still range between 7 and 10 per cent in the Southern and Western states, averaging 7 per cent in the whole country for interest and commission. The need of better opportunities for credit in the agricultural districts has long been recognized. The high rate of interest for borrowed money necessarily placed a limit on improvements in equipment and methods of farming.[6] § 15. #Recent provisions for farm loans#. The Federal Reserve Act made two important changes to improve agricultural credit.[7] Soon afterward some of the states took more vigorous action to provide a special system of agricultural credit, especially New York and Missouri. In the latter state, on the initiative of a public-spirited citizen of St. Louis, was passed in 1915 a notable act of legislation known as the Gardner State Land Bank Act (effective December 1, 1916, provided a constitutional amendment is adopted in November, 1916). This authorizes the establishment of a land bank, with power to lend on the security of farming lands, for buying farms and for productive improvements, and to issue bonds to be sold to investors. Following this general plan the Federal Farm Loan Act became law July 17, 1916. It authorized the establishment of twelve Federal Land Banks, each with a capital of not less than $750,000 to make loans through national farm loan associations organized somewhat after the model of the building and loan associations. The bonds issued by these banks are to bear not to exceed 5 per cent interest. It is hoped that they will have the high credit of municipal bonds so that they may be sold at parity, bearing interest at 4 or 4.5 per cent. The loan is repaid by the farmers under a regular plan of amortization. The practical results of these measures are yet to appear. They are expected to give to loans that are made on the security of farms as wide a market and as high credit as state and municipal bonds now have. They bid fair to bring the rate of interest on long-time loans to farmers down to 5 per cent or less in the remotest parts of the land. This will stimulate agricultural improvement, and facilitate the purchase of land by tenants. Where the interest rate has been the highest it should raise the value of farm lands as it brings them within the circle of a lower-interest-rate economy. This may hasten the transfer of the lands from less provident to more provident owners, who are willing to take the land at a higher capitalization. But the system of loans will probably help to develop greater thrift in the younger farming population. [Footnote 1: See Vol. I, chs. 12 and 13 on proportionality and usance.] [Footnote 2: See ch. 25, secs. 4 and 5.] [Footnote 3: See above, ch. 19, secs. 13, 14, 15.] [Footnote 4: See above, sec. 3.] [Footnote 5: See ch. 8, sec. 8.] [Footnote 6: See Vol. I, pp. 495-497, on the relation between lower interest rates and productive processes.] [Footnote 7: See ch. 9, sec. 7 on time deposits, and sec. 9 on farm loans.] CHAPTER 27 THE RAILROAD PROBLEM § 1. Rise of the corporation concept. § 2. The modern era of corporations. § 3. Beginning of corporation problems. § 4. The era of canals. § 5. Rapid building of American railroads. § 6. Reasons for governmental aid. § 7. Kinds of governmental aid. § 8. Emergence of the railroad problem. § 9. Discrimination as to goods. § 10. Local discrimination. § 11. Personal discrimination. § 12. Economic power of railroad managers. § 13. Political power of railroad managers, § 14. Consolidation of railroads. § 15. State railroad commissions. § 16. Passage of the Interstate Commerce Act. § 17. Working of the Act. § 18. Public nature of the railroad franchise. § 19. Other peculiar privileges of railroads. § 20. Private and public interests to be harmonized. § 1. #Rise of the corporation concept#. In the legal systems of primitive people and long afterward, only natural persons had legal rights, could make contracts, have property, and carry on a business. But in a number of cases, very early, groups of men came to have certain interests in common and certain possessions. Gradually some such groups gained more or less of legal recognition, with certain political and economic rights as a body and not as individuals. Thus evolved the conception of a "corporation" (body) having men as "members," an artificial person, yet not the same as any one or as all the individuals together, and legally distinct from the individuals. A group of burghers obtaining a charter from the lord of the realm became a municipal corporation; a group of teachers, a _collegium_, became the corporation of the college or a university (a number of persons united into one association); a group of craftsman became a gild-corporation. Each corporation had certain rights, privileges, and immunities, and used a corporate seal as a signature. All of the early corporations had some economic features that were incidental to the main purposes, which were political, ecclesiastical, educational, and fraternal. Toward the end of the Middle Ages groups of traders obtained charters to act as corporations permanently for business purposes, such as foreign trade, colonization, and banking. These increased in the sixteenth and seventeenth centuries, and in the eighteenth century this form of organization was adopted also and parliamentary charters obtained, by groups of men for building turnpikes and canals and for carrying on other kinds of business. § 2. #The modern era of corporations#. The great era of the corporations did not begin, however, until well on in the second quarter of the nineteenth century. Then, both in Europe and in America, the corporate form of organization was extended to a greater number, and to other kinds, of enterprises. It proved itself to be well adapted to enterprises for the construction and operation of canals and railroads, requiring a larger amount of capital than usually could or would be risked by one person. The investor in a corporation bought shares, and his liability for debts and losses was limited by charter to his share capital. It is an advantage that permanent enterprises of that kind are owned by corporations with charters perpetual or for long periods. It is possible for corporations to make investments running for longer periods than would be safe for individuals. The corporation with an unlimited charter has legally an immortal life. Sale and change of management are not necessary on the death or failure in health of any one owner. As the factory system and large production developed, the corporate form of organization was found to have these same advantages in manufacturing. It appeared in textile, iron, mercantile, and other industries. After 1865 the corporate form of organization increased at a cumulative rate, until now it is applied to many enterprises of small extent and local in operation. There are 300,000 corporations making returns to the United States Commissioner of Internal Revenue.[1] There were 70,000 manufacturing corporations, which were 26 per cent of the whole number of manufacturing establishments, but which employed 76 per cent of all wage earners and turned out 79 per cent of the whole product. § 3. #Beginning of corporation problems.# With the corporations came "the corporation problem," a single name for a complex of problems--legal, political, moral, and economic--which arise out of the relations of corporations to their individual stockholders, to their employees, to the state, to the general public, and to their competitors in business. The problems differ also in corporations of different sizes and in different businesses. We shall discuss in this and succeeding chapters but a few of the larger aspects of the corporation problem, the railroad, the industrial trust, and certain other kinds of monopolistic industry. Of the various forms of corporations, banks first presented problems calling for economic legislation and regulation. This is explained by the fact that it was the first kind of business corporation to become important, and further by the fact that its work was in various ways closely connected with the coinage and regulation of money, which had already become a governmental function. The railroad was the form of corporation next in point of time to become a great problem; this because of the peculiarly vital and far-reaching effects that such railroad transportation has upon all other kinds of business in the community, as appears in what follows. § 4. #The era of canals.# Canals were used in the ancient empires for irrigating, for the supplying of cities with water, and for navigation. In the late eighteenth and the early nineteenth centuries they were rapidly built in England and America. Six canals had been built in the United States before 1807, but the "canal-era" in America dated from the beginning of work on the Erie canal in 1817, and continued until about 1840, when nearly all new work ceased; over 4000 miles of canals had been built at a cost of $200,000,000. The great advantage of canals is cheapness of operation due to the simplicity of the machinery needed and to the great loads that can be moved with small power. A cent a ton-mile proved to be a paying rate on a small canal. For heavy, slow-moving freight, a railroad can even now barely rival a parallel canal at its best. As canals, however, can be built only along pretty level routes and where the water supply is at high level, their construction is limited to a small portion of the country. The principle of diminishing returns applies strongly to the construction of canals; the first canals in favored locations are easily constructed and economically operated, but it is only with greater cost and difficulty that the system can be successively extended. In temperate climates the use of canals is limited by ice to a part of the year, and by the summer's drought sometimes still further. At its best, therefore, the small land-locked canal is fitted only to be a supplementary agent in the system of transportation wherever another transportation agency of higher speed and greater regularity is possible. Far different is the case of the oceanic canal in a tropical climate. Canals do not appear to have developed any serious problems calling for public regulation of rates. A first simple legislative act fixing the rate of tolls for boats was sufficient. Charges were made by distance as on a toll road and the boats were owned by different private shippers or by common carriers among whom competition prevailed. § 5. #Rapid building of American railroads#. The canal was just reaching the peak of popular favor when the railroad in 1830, after a half-century of slowly accumulating technical improvements, burst into view as a demonstrated success as a means of transportation.[2] The railroad excels in adaptability any other agent of transportation; it can go over mountains or tunnel through them. It is markedly superior in certainty; it may be blocked for a day or two by floods and snows, but it suffers no seasonal stoppage of traffic. In speed, even the early railroad so far excelled that the canal could survive only by dividing the traffic, taking the lower grades of freight, and leaving to the railroad the passenger traffic and fast freight. Even in respect to cheapness, the unique virtue of waterways in favored localities, the railroad made rapid gains. Improvements in roadbed, rails, cars, engines, and other equipment soon reduced greatly the cost of conducting traffic on the main lines of roads. Because of these qualities railroads soon surpassed in importance every other agency of internal transportation. The miles constructed and miles in operation in the United States, by decades since 1830 were as follows (route mileage, not counting double tracks and sidings): Miles constructed Total route miles in decade. in operation. 1830 ........................ 23 23 1840 ........................ 2,795 2,818 1850 ........................ 6,203 9,021 1800 ........................ 21,605 30,626 1870 ........................ 22,296 52,922 1880 ........................ 40,345 93,267 1890 ........................ 73,924 167,191 1900 ........................ 31,773 198,964 1910 ........................ 51,028 249,992 1915 (5 yrs.) ............... 13,555 263,547 The extension of railroads was so rapid that there was not time for a gradual adjustment of industrial conditions. In many places the resulting changes were revolutionary. The building of railroads in the Mississippi valley in the seventies lowered the value of eastern farms, ruined many English farmers, and depressed the condition of the peasantry in all western Europe.[3] With the lower prices that resulted when the fertile lands of the western prairies were opened to the world's markets, the less fertile lands of the older districts could not compete. Many other changes, of no less moment in limited districts, resulted from the building of railroads. Local trading-centers decreased in importance. Villages and towns, hoping to be enriched by the railroads, saw their trade going to the cities. Commerce became centralized. Enormous increases of value at a few points were offset by losses in other localities. § 6. #Reasons for governmental aid#. The growth of railroads in America was more rapid than in any other part of the world, but it did not occur without much help to private capital from governmental agencies. The railroad enterprise was uncertain, the possibilities of its growth could not be foreseen, and private capital would not invest without great inducements. In European countries the railways were built through comparatively densely populated districts to connect cities already of large size. Yet railroad extension was very slow there, even tho the states in many ways aided the enterprises. America was comparatively sparsely populated, and most of the railroads were built in advance of and to attract population, business, and traffic. In many cases railroad building in America was part of a gigantic real-estate speculation undertaken collectively by the taxpayers of the communities. § 7. #Kinds of governmental aid#. American states recklessly abandoned the policy of non-interference, and vied with each other in giving railroad enterprises lands, money, and privileges, in loaning bonds, in subscribing for stock, and in releasing from taxation. These fostering measures were expected to increase wealth and to diffuse a greater welfare through the community. Many states were forced to the point of bankruptcy by their reckless generosity, and some states repudiated the debts thus incurred. The national government then took up the same policy and granted lands to the states to be used for this purpose. The first case of this kind was the grant to the Illinois Central road, in 1850, of a great strip of land through the state from north to south. Grants were made in fourteen states, covering tens of millions of acres of land. Then the national government, between 1863 and 1869, aided the building of the Pacific railroads by granting outright twenty square miles of land for every mile of track and by loaning the credit of the government to the extent of fifty million dollars,--a debt which was settled by compromise only after thirty years. Counties, townships, cities, and villages then entered into keen competition to secure the building of railroads, projected by private enterprise. Bonds, bonuses, tax-exemptions, and many special privileges were granted. To obtain this new Aladdin's lamp, this great wealth-bringer, localities mortgaged their prosperity for years to come. The promoters bargained skilfully for these grants, playing off town against town, cultivating the speculative spirit, punishing the obdurate. Not the civil engineer, but the railroad promoter determined the devious lines of many a railroad on the level prairies of America. The effects of these grants were in many cases disastrous, and after 1870 they were forbidden in a number of states by legislation and by constitutional amendments. But before this era of generosity ended, probably the railroads in America had received more public aid than has ever been given to any other form of industry in private hands. § 8. #Emergence of the railroad problem#. In most charters and laws authorizing the building of railroads, either nothing was specified regarding rates, or maximum rates were fixed which proved to be so high that they were of little, if any, practical effect. But very soon began to appear some serious evils in the policy of railroads toward the shipping and traveling public in matters of rates and of service. As the ownership of the wagons, ships, and canal-boats of a country is usually divided, ocean ports and points along the lines of turnpikes and canals enjoy competition between carriers. In the early days of the railroads it was believed that a company or the government would own the rails and charge toll to the different carriers, who would own cars and conduct the traffic as was done on the canals. Experience soon showed the impracticability of this scheme and the need of unified management. An operating railroad company, therefore, has a monopoly at all points on its line not touched by other carriers. This, like any other monopoly, is limited, for the railroad, to secure traffic, is led to meet competition of whatever kind--that of wagons, canals, rivers, or of other railroads--wherever it occurs. The railroads in private hands early began to "charge what the traffic would bear," high where they could, and low where they must, to get the business. Thus developed the various forms of discrimination which are now to be described. § 9. #Discrimination as to goods#. Discrimination as to goods is charging more for transporting one kind of goods than for another without a corresponding difference in the cost. When reasonably understood, this proposition does not apply to a higher charge for goods of greater bulk, as more per pound for feathers than for iron, the "dead weight" of car being much greater in one case than in the other. It does not apply where there is a difference in risk, as between bricks and powder, or coal and crockery; nor where there is a difference in trouble, as between live stock and wheat. Any difference that can reasonably be explained as due to a difference in cost is not discrimination; on the other hand a difference in cost without a difference in rate is discrimination. Discrimination as to goods may be by value, as low rates for heavy, cheap goods, and high rates for lighter, valuable ones. Coal always goes at a low rate as compared with dry goods, and sometimes more is charged for coal to be used for gas than for coal to be used for heating purposes. Railroad discrimination so frequently has resulted in injustice to the shipping public that the term has taken on an evil significance. But it is well to observe that the word discrimination is not derived from _crimen_ (crime), but from _discernere_ (to discern). There are both reasonable and unreasonable forms of discrimination. In general discrimination as to goods more often appears, under certain conditions and made with due regard to the public interest, to be reasonable; less often to be justified is the form of local discrimination, next to be described; and least often of all to be justified is the last named form of personal discrimination. § 10. #Local discrimination#. Discrimination between places (called also local discrimination) is charging different rates to two localities for substantially the same service. This occurs when local rates are high and through rates are low; when rates at local points are high and at competing points are low; when less is charged for shipments consigned to foreign ports than for domestic shipments; when, more is charged for goods going east than for goods going west. The causes of local discrimination are: first, water-competition, found at great trade centers such as New York and San Francisco; second, differences in terminal facilities, making some places better shipping-points than others; third, competition by other railroads, which is concentrated at certain points, only one tenth of the stations of the United States being junctions; fourth, the influence of powerful individuals or large corporations and the personal favoritism shown by railroad officials. The effects of local discrimination are to develop some districts and depress others; to stimulate cities and blight villages; to destroy established industries; to foster monopolies at favored points; and to sacrifice the future revenues of the road by forcing industry to move in the competing points to get the low rates. The power of railroad officials arbitrarily to cause rates to rise or fall is happily limited in practice by the need of earning as large and as regular an income as possible, but even as exercised it has been at times as great as that possessed by many political rulers. § 11. #Personal discrimination#. Discrimination between shippers (personal discrimination) is charging one person more than another for substantially the same service. This most odious of railroad vices, rarely practised openly, is done by false billing of weight, by wrong descriptions or false classification to reduce the charge below published rate-sheets, by carrying some goods free, by issuing passes to some and not to all patrons under the same conditions, or by donations or rebates after the regular rate has been paid. In some cases a subordinate agent shares his commission with the shipper, and the transaction does not appear on the books of the company. In other cases favored shippers are given secret information that the rate is to be changed, so that they are enabled to regulate their shipments to secure the lower rate. One group of reasons for personal discrimination is connected with the interests of the road. It is to build up new business; it is to make competition with rival roads more effective by favoring certain agents, as was very commonly done in the Western grain business; it is to exclude competition, as by refusing to make a rate from a connecting line or to receive materials for a new railroad which is to be a competitor; and it is to satisfy large shippers whose power, skill, and persistence make the concession necessary. Another group of reasons has to do with the interests of the corporate officials. It is to enable them to grant special favors to friends; or it is to build up a business in which they are interested; or it is to earn a bribe that has been given them. The evils of personal discrimination are great. It introduces uncertainty, fear, and danger into all business; it causes business men to waste, socially viewed, an enormous fund of energy to get good rates and to guard against surprises; it grants unearned fortunes and destroys those honestly made; it gives enormous power and presents strong temptations to railroad officials to injure the interests of the stockholders on the one hand and of the public on the other. § 12. #Economic power of railroad managers.# Other evils of unregulated private management of railroads appeared. When the railroad was a young industry, it was thought to be simply an iron-track turnpike to which the old English law of common carriers would apply. This and similar notions soon, however, proved illusory. It was seen that the higher railroad officials had, in the granting of transportation service and the fixing of rates, a great economic power. They had complex and sometimes conflicting duties to the stockholders and to the shipping public. They wore their conscience-burdens lightly, before the days of effective regulation, and frequently made little attempt to meet the one and no attempt whatever to meet the other obligation. The opportunities for private speculation brought to many railroad managers great private fortunes. There were no precedents, no ripened public opinion, no established code of ethics, to govern. It was a betrayal of the interests of the stockholders when directors formed "construction companies" and granted contracts to themselves at outrageously high prices. It was an injury not only to shippers, but also to the stockholders, when special rates were granted to friends and to industries in which the directors were interested. In general, however, the interests and rights of the stockholders were more readily recognized than were those of the public. A railroad manager is engaged by the stockholders, is responsible to them, and looks to them for his promotion. Hence their interests are uppermost whenever the welfare of the public is not in harmony with the earning of liberal dividends. The managers long felt bound to defend the principle of "charging what the traffic will bear" in the case of each individual, locality, and kind of goods, even if this ruined some men and enriched others, and if it destroyed the prosperity of cities to increase the earnings of the road. § 13. #Political power of railroad managers.# Likewise in various ways railroad managers may exercise great political influence and power. Some writers maintain that the power to make rates on railroads is a power of taxation. They point out that if rates are not subject to fixed rules imposed by the state, the private managers of railroads wield the power of the lawmaker. By changing the rates on foreign exports or imports, the railroads frequently have made or nullified tariff rates and have defeated the intention of the legislature. High rates on state-owned roads in Europe have been used in lieu of protective duties. These facts go to show that a change of railroad rates between two places within the country is similar in effect to the imposing or repeal of tariff duties between them. The wealth and industrial importance of the railroads soon began to give them widespread political power in other ways. It was commonly charged in some states that the legislature and the courts were "owned" by the railroads. The railroads, in part because they were the victims at times of attempts at blackmail by dishonest public officials, declared that they were compelled, in self-defense to maintain a lobby. The railroad lobby, defensive and offensive, was, in many states, the all-powerful "third house." Railroads even had their agents in the primaries, entered political conventions, dictated nominations from the lowest office up to that of governor, and elected judges and legislators. The extent to which this was done differed according as the railroads had large or small interests within the state. These statements can with approximate truth now be made in the past tense, as was not possible a few years ago. A better code of business morality has developed, and the railroad management's relationship of private trusteeship toward the shareholders and of public trusteeship toward the patrons of the road is now much more fully recognized. The change was not brought about without long and strenuous agitation and effort, educational and legislative, as is in part described below. § 14. #Consolidation of railroads#. Gradually the consolidation of the railroad mileage into larger units put into fewer hands greater and greater economic power. The early railroads, many of which were built in sections of a few miles in length, have been slowly welded into continuous trunk lines with many branches. The New York Central between Albany and Buffalo was a consolidation, by Commodore Vanderbilt, of sixteen short lines. The Pennsylvania system was formed link by link from scores of small roads. In the decade of the nineties the growth of consolidation went on more rapidly than ever before. In 1903 it could be said that 60 per cent of the mileage of the United States was under the control of five interests; 75 per cent was controlled by a group of men who could sit about one table. The country was being divided territorially into great railroad domains, within each of which one financial interest was dominant. Since that time the policy of the leading roads has been still further unified by great financial alliances and by the method known as "community of interests." Toward this result strong economic forces have been working. Consolidation has many technical advantages: it saves time, reduces the unit cost of administration and of handling goods, gives better use of the rolling stock and of the terminal facilities of the railroads, and insures continuous train service. It has the advantage of other large production and the possible economies of the trusts. Most important, however, from the point of view of the railroads, is the prevention of competition and the making possible of higher rates and larger dividends. The statement that competition is not an effective regulator of railroads often is misunderstood to mean that it in no way acts on rates. It is true that competition between roads does not prevent discrimination and excessive charges between stations on one line only; but competition usually has acted powerfully at well-recognized "competing points." The larger the area controlled by one management, the fewer are the competing points; the larger, therefore, is the power over the rate and the more completely the monopoly principle applies. It is a grim jest to say that consolidation does not change the railroad situation as regards the question of rates. § 15. #State railroad commissions.# When it became evident that public and private interests in the railroads were so divergent, it still was not easy to determine how the public was to be safeguarded. At first, some general conditions such as maximum rates were inserted in the laws and charters; but these were not adaptable to changing conditions and, for lack of administrative agents, could not be enforced. Some early efforts at state ownership were disastrous. The old law of common carriers gave to individual shippers an uncertain redress in the courts for unreasonable rates; but the remedy was costly because the aggrieved shipper had to employ counsel, to gather evidence, and to risk the penalty of failure; it was slow, for, while delay was death to the shipper's business, cases hung for months or years in the courts; it was ineffectual, for, even when the case was won, the shipper was not repaid for all his losses, and the same discrimination could be immediately repeated against him and other shippers. In the older Eastern states, attempts to remedy these and other evils by creating some kind of a state railroad commission date back to the fifties of the last century. Massachusetts developed in the seventies a commission of "the advisory type" which investigated and made public the conditions, leaving to public opinion the correction of the evils. A number of the Western states, notably Illinois and Iowa, developed in the seventies commissions of "the strong type," with power to fix rates and to enforce their rulings. The commission principle, strongly opposed at first by the railroads, was upheld by the courts and became established public policy. By 1915 every state and the District of Columbia had a state commission. In Wisconsin and in New York, in 1907, in New Jersey, in 1911, and in many other states since, the "railroad" commissions were replaced by "public utilities" or "public service" commissions, having control not only over the railroads but over street railway, gas, electric light, telephone, and some other corporations. The state commissions have found their chief field in the regulation of local utilities, and they fall far short of a solution of the railroad problem. Altho they from the first did much to make the accounts of the railroads intelligible, something to make the local rates reasonable and subject to rule, and much to educate public sentiment, on the whole their results have been disappointing. It was difficult to get commissioners at once strong, able, and honest; the public did not know its own mind well enough to support the commissions properly; and the courts decided that state commissions could regulate only the traffic originating and ending within the state. § 16. #Passage of the Interstate Commerce Act.# Public hostility to private railroad management was greatest in the regions where the most rapid building of roads occurred from 1866 to 1873. One center of grievances was in "the granger states' of Illinois, Wisconsin, Kansas, Nebraska, Iowa, and Minnesota; another center was in the oil regions of Ohio and Pennsylvania. The Eastern states were not without their troubles, for the report of the Hepburn Committee of the New York legislature in 1879 showed that discrimination between shippers prevailed to an almost incredible degree in every portion of New York state. When the courts, in 1886, decided that the greater portion of the railroad rates could not be treated by state commissions, national control was loudly demanded. Scores of bills were presented to Congress between 1870 and 1886, and, despite much opposition, the Interstate Commerce Act was passed in 1887. The act laid down some general rules: that rates should be just and reasonable; that railroads should not pool, or agree to divide, their earnings to avoid competition; that they should, under similar conditions, and, unless expressly excused, fix rates in accordance with the long- and short-haul principle (to charge no more for a shorter distance than for a longer one on the same line and in the same direction, the shorter being included within the longer). The act provided for a commission of five men, to be appointed by the President, which might require uniform accounts from the railroads, and which should enforce the provisions of the act. § 17. #Working of the Act.# The commission in its earlier years gave promise of effectiveness, but its powers, as interpreted by the courts, proved inadequate to its assigned task. The railroads in many cases refused to obey its orders, and court decisions paralyzed its activity. Competent authorities declared in 1901, after fourteen years of the commission's operation, that discrimination never had been worse, and a series of exposures of abuses strengthened the popular demand for stricter legislation. The result was first the Elkins' Act of 1903, aimed at discrimination and rebates, and then the Hepburn Act Of 1906, which marked a new era in railroad regulation in this country. The commission was increased to seven members, its authority was extended to include express, sleeping car, and other agencies of transportation, and it was given the power to fix maximum rates, not to be suspended by the courts without a hearing. It became thus unquestionably a commission of "the strong type." It began to exercise its new powers with vigor, and the carriers reluctantly accepted its authority. Responsive to a calmer but insistent popular demand further amendments were made by the Mann-Elkins Act of 1910, which strengthened the long-and-short-haul clause, and gave to the commission, among other new powers, that of suspending new rates proposed by carriers. A special Commerce Court of five judges was created with exclusive jurisdiction in certain classes of railroad cases, but this was abolished after a short trial. It cannot be said that a final satisfactory solution of the railroad problem has been attained; indeed, in most human affairs such a thing is unattainable. But it can be said that there is no considerable sentiment anywhere in favor of reversing the railroad policy that has been developed, as here briefly outlined. Certainly the public has no such sentiment, and the railroads, which for many years opposed the progress of strong federal control, are now foremost in advocacy of a policy of exclusive national regulation, to remedy the evil of "forty-nine masters." § 18. #Public nature of the railroad franchise.# A pretty definite public opinion regarding the nature of the problem has emerged from the nearly half-century of experience and discussion, since the first vigorous agitation of the subject in the seventies of the last century. Railroads in our country are owned by private corporations and are managed by private citizens, not, as in some countries, by public officials. They have been built by private enterprise, in the interest of the investors, not as a charity or as a public benefaction. Railroad-building appears thus at first glance to be a case of free competition where public interests are served in the following of private interests. But, looked at more closely, it may be seen to be in many ways different from the ordinary competitive business. Competition would make the building of railroads a matter of bargain with proprietors along the line, and an obdurate farmer could compel a long detour or could block the whole undertaking. But the public says: a public enterprise is of more importance than the interests of a single farmer. By charter or by franchise the railroad is granted the power of eminent domain, whereby the property of private citizens may be taken from them at an appraised valuation. The manufacturer, enjoying no such privilege, can only by ordinary purchase obtain a site urgently needed for his business. Why may the railway exercise the sovereign power of government as against the private property rights of others? Because the railway is peculiarly "affected with a public interest." The primary object is not to favor the railroads, but to benefit the community. These charters and franchises are granted sparingly in most European countries. In this country they have been granted recklessly, often in general laws, by states keen in their rivalry for railroad extension. When thus great public privileges had been granted without reserve to private corporations, it was realized, too late in many cases, that a mistake had been made and that an impossible situation had been created. § 19. #Other peculiar privileges of railroads.# Further, do the various grants of lands and money to the railroads make them other than mere private enterprises? One answer, that of those financially interested in the railroads, was No. They said that the bargain was a fair one, and was then closed. The public gave because it expected benefit; the corporation fulfilled its agreement by building the road. The terms of the charter, as granted, determined the rights of the public; but no new terms could later be read into it, even tho the public came to see the question in a new light. Similar grants, tho not so large, have been made to other industries. Sugar-factories were given bounties; iron-forges and woolen-mills were favored by tariffs; factories have been given, by competing cities, land and exemption from taxation; yet these enterprises have not on that account, been treated, thereafter, in any exceptional way. So, it was said, the railroad was still merely a private business. But the social answer is stronger than this. The privileges of railroads are greater in amount and more important in character than those granted to any ordinary private enterprise. The legislatures recognize constantly the peculiar public functions of the railroads. In other private enterprises, investors take all the risk; legislatures and courts recognize the duty of guarding, where possible, the investment of capital in railroads. Laws have been passed in several states to protect the railroads against ticket-scalping. Whenever the question comes before them, the courts maintain the right of the railroads to earn a fair dividend. Private enterprise has been invited to undertake a public work, yet public interests are paramount. § 20. #Private and public interests to be harmonized.# If an extremely abstract view is taken there is danger of losing sight of the real problem, which is that of harmonizing these two interests in thought and in public policy. Yet the extreme advocates of the private control of railroads for a long time resented indignantly any public interference with railroad rates and with railroad management as an infringement of individual liberty. Before the passage of the Interstate Commerce Act, in 1887, this position was inconsistently taken by those in whose interests free competition had been violently set aside at the very outset of railroad construction, and for whom governmental interference had made possible great fortunes. It has become generally recognized that the railroads ought not to be allowed to change from a public to a private character just as it suits their convenience. True, they are private enterprises as regards the character of the investment, but they are public enterprises as to their privileges, functions, and obligations. Finally, it might be said that if there were none of these special reasons for the public control of railways, there is an all-sufficient general reason in the fact that a railroad is always, in some respects and to some degree, a monopoly. Therefore, the railroad problem may be viewed as but one aspect of the general problem of monopoly. To other aspects of this problem we are now to turn our attention. [Footnote 1: Returns for 1915. The following figures are from the census taken in 1909.] [Footnote 2: See A.T. Hadley, "Railroad Transportation," pp. 10, 32.] [Footnote 3: See Vol. I, pp. 437, 438, 443.] CHAPTER 28 THE PROBLEM OF INDUSTRIAL MONOPOLY § 1. Kinds of monopoly. § 2. Political sources of monopoly. § 3. Natural agents as sources of monopoly. § 4. Capitalistic monopoly; aspects of the problem. § 5. Industrial monopoly and fostering conditions. § 6. Growth of large industry in the nineteenth century. § 7. Methods of forming combinations. § 8. Growth of combinations after 1880. § 9. The great period of trust formation. § 10. Height of the movement toward combinations. § 11. Motive to avoid competition. § 12. Motive to effect economies. § 13. Profits from monopoly and gains of promoters. § 14. Monopoly's power to raise prices. § 1. #Kinds of monopoly.# Monopolies may, for special purposes, be classified as selling or buying, producing or trading, lasting or temporary, general or local, monopolies. The terms selling or buying monopoly explain themselves, tho the latter conflicts with the etymology.[1] Under conditions of barter the selling and the buying monopoly would be the same thing in two aspects. A selling monopoly is by far the more common, but a buying monopoly may be connected with it. A large oil-refining corporation that sells most of the product may by various methods succeed in driving out the competitors who would buy the crude oil. It thus becomes practically the only outlet for the oil product, and the owners of the land thus must share their ownership with the buying monopoly by accepting, within certain limits, the price it fixes. The Hudson Bay Company, dealing in furs, had practically this sort of power in North America. Many instances can be found, yet, relatively to the selling monopolies, those of the buying kind are rare. A producing monopoly is one controlling the manufacture or the source of supply of an article; a trading monopoly is one controlling the avenues of commerce between the source and the consumers. Monopolies are lasting or temporary, according to the duration of control. By far the larger number are of the temporary sort, because high prices strongly stimulate efforts to develop other sources of supply. Yet the average profits of a monopoly may be large throughout a succession of periods of high and low prices. Monopolies are general or local, according to the extent of territory where their power is felt. At its maximum where transportation and other costs most effectually shut out competition, monopoly power shades off to zero on the border-line of competitive territory. The frequent use of the adjectives partial, limited, and virtual are implied but usually superfluous recognitions of the relative character of monopoly. § 2. #Political sources of monopoly.# Monopoly gets its power from various sources. A political monopoly derives its power of control from a special grant from the government, forbidding others to engage in that business. The typical political monopoly is that conferred by a crown patent bestowing the exclusive right to carry on a certain business. A second kind is that conferred by a patent for invention, or the copyright on books, the object of which is to stimulate invention, research, and writing by giving the full control and protection of the government to the inventor and the writer or their assignees. In this case the privilege is socially earned by the monopolist; it is not gotten for nothing. Moreover, the patent, being limited in time, expires and becomes a social possession. A third kind is a governmental monopoly for purposes of revenue. In France and Japan the governments control the tobacco trade, and the high price charged for tobacco makes this monopoly yield large revenues. A fourth kind is that derived from franchises for public service corporations, such as those supplying electricity, gas and water. These franchises are granted to private capitalists to induce them to invest capital in enterprises that are helpful to the community. § 3. #Natural agents as sources of monopoly.# "Economic" monopoly, so-called, arises when the ownership of scarce natural agents, as mines, land, water-power, comes under the control of one man or one group of men who agree on a price. Economic monopoly is a result of private property that is undesigned by the government or by society. It is exceptional, considering the whole range of private property, but it is important. The oil-wells embracing the main sources of the world's supply have largely come under one control. One corporation may control so many of the richest iron mines of the country as to be able to fix a price different from that which would result under competition. Coal mines, especially those of some peculiar and limited kind, such as anthracite, appear to become easily an object of monopolization. Economic monopoly merges into political monopolies, such as patents and franchises. Private property is a political institution designed to further social welfare, and only rarely is property in any particular business a monopoly. Private control of great natural resources might have been prevented in many cases had it been foreseen. § 4. #Capitalistic monopoly; aspects of the problem.# Capitalistic monopoly, variously called contractual, organized, commercial or industrial monopoly, arises when men unite their wealth to control a market, to overpower or intimidate opposition, and to keep out or limit competition by the mere magnitude of their wealth. These various kinds so merge into each other that they cannot always be distinguished in practice. A patent may help a capitalistic monopoly in getting control of a market; great wealth may enable a company to get control of rare natural resources. In the discussion of industrial monopoly, the problem now before us, there is a good deal of vagueness and misunderstanding because of lack of definiteness in the use of words which have rapidly shifted in meaning. The word "trust" originally applied, and still in legal usage applies, to a particular form of organization, that of a board of trustees holding the stock, and thus unifying the control, of two or more formerly separate enterprises. The Standard Oil Company at one time had this form of organization, which was declared by the courts to be illegal _(ultra vires)_ for corporations. Now "trust" often is used in the sense of a corporation having monopoly power in some degree; either broadly, of any monopolistic corporation (including railways and local public utilities), or, oftener, limited to manufacturing and commercial monopolies, otherwise called "industrial trusts" in contrast with franchise trusts and railroads.[2] The word "combination" referred originally to a more or less thoro "merger," with a view to attaining monopolistic power, of a number of formerly separate organizations, as in the case of the United States Steel Corporation. But the word is often used as if it were a synonym for trust (in a narrower or wider sense) even as applied to a single enterprise that has grown to be monopolistic. A "trust" in the legal sense of a form of organization, and "combinations" as above defined, might have no monopoly power whatever; whereas a monopoly may be possessed by an individual owner (e.g., of a patent right, railroad, waterworks plant), or by a single corporation that has simply grown monopolistic without the trust form of organization or without combination. Now it is evident that the real problem is that of monopoly, however attained. Monopoly may be defined as such a degree of control over the supply of goods in a given market that a net gain will result if a portion is withheld.[3] In accord with growing and now dominant usage it is well to observe the following meanings in our discussion. "_Combination"_ is a term referring particularly to one method by which monopolies are formed. "_Trust,"_ in the now popular sense, is best limited to an industrial, primarily manufacturing, enterprise or group of enterprises, with some degree of monopoly power due not to a "special franchise" giving the use of streets and highways and the right of eminent domain, nor to a single patent, but to a group of favoring technical, financial, and economic conditions. The trust may consist of a single establishment; or of a group of establishments separately operated but united in a "pool" to divide output, territory, or earnings; or of such a group held together by a holding company, or combined into one corporation. Public utility is the name of special franchise enterprises of the kind just mentioned, including, in the broad sense, railroads and local utilities such as street railways, gas, water, and electric light-plants. § 5. #Industrial monopoly and fostering conditions.# The problem of monopoly is probably as old as markets. From the first coming together of groups of men to trade there were doubtless efforts made by some individuals and groups of traders to manipulate conditions so as to get higher prices than they could get in a free and open market.[4] There are traces of these practices in ancient times, and the history of the Middle Ages is full of evidences both of monopolistic practices and of the efforts to prevent or control them. If this fact is borne in mind it may help us to distinguish in thought four features of enterprise that are readily and constantly confused, viz: large individual capital, large production, corporate organization, and monopoly.[5] Evidently any one of these features may appear without the other; e.g., a person of large aggregate capital may have his investments distributed among a large number of small enterprises, such as farms, without a trace of corporate organization or monopoly, and numerous examples could be given of large production, or of corporate organization, or of monopoly without one or more of the other features. But the presence of any one of these features is a favoring condition for the development of the others. Hence they are frequently found together, and of late this occurs increasingly. It is difficult to say in every, indeed in any, case which feature has been cause and which effect in this development, but, on the whole, large production seems to have been primary. Itself made possible by inventions, by better transportation, and by the widening of markets, it in turn helped to build up large individual fortunes, and then to create a need for the corporate form of organization. And monopoly power no doubt is more easily gained by large aggregations of capital in a corporation having the advantages of large production. § 6. #Growth of large industry in the nineteenth century.# The great recent growth of the monopoly problem is in part to be explained as the result of the growth of large industry, not as the sole cause, but as a favoring condition. Before the middle of the last century a tool-using household industry, on farms and in homes where the greater part of the things used were produced in the family, was still the typical organization in the United States.[6] A family produced somewhat more than it needed of food and cloth and exchanged with its neighbors; so with shoes, candles, soap, and cured meats. The early factories growing out of the household industry were small. Since that time two counter forces have been at work to affect the ratio of manufacturing establishments to population. The number of small establishments has been increased by the many industries producing the things once made on farms, and by increasing demands for comforts and luxuries. Many establishments producing the staple products that can be transported have been consolidated or have been enlarged, so that the unit of production now averages much larger. The number of cotton-weaving factories was about the same in 1900 as it had been seventy years earlier, while population has grown six fold. Iron- and steel-mills were fewer in 1900 than in 1880. In industries having local markets or local sources of materials, such as grist mills and saw mills, the change in numbers was less, for many small establishments were started in outlying districts at the same time that the mills became larger in the great population centers. But the average number of employees and the average capital per establishment increased in every period between census enumerations. § 7. #Methods of forming combinations.# Combinations of previously independent enterprises may be more or less complete and are made by different methods. Four major methods are: (1) The pool, by which the enterprises continue to be separately operated, but divide the traffic (or output), or the earnings, or the territory, in prearranged proportions. (2) The trust, in a legal sense (as defined above in section 5). (3) The holding company, a corporation with the sole purpose of holding the shares of stock, or a controlling number of them, in various corporations otherwise nominally independent. (4) Consolidation into one company. At least five minor methods may be distinguished; these are here numbered continuously with the preceding four. (5) Lease by one company of the plants of one or more other companies. (6) Ownership of stock by one corporation in another corporation, sufficient to give substantial influence over its policy, if not absolute control. (7) Ownership of stock in two or more competing companies, by the same individual or group of individuals, to such an extent as appreciably to unify the policies of the competing companies. (8) Interlocking directorates, that is, boards of competing companies containing one or more of the same persons as directors. (9) Gentlemen's agreements, mere friendly informal conferences and understandings as to common policies. § 8. #Growth of combinations after 1880.# Undoubtedly industry before 1860 had some elements of monopoly. Monopoly constituted part of the banking problem; it began to be evident in the railroads almost at once, and it rapidly increased as street railways and other public utilities were constructed. But after 1880 occurred the formation in larger numbers of industrial enterprises which appeared to exercise some monopoly power. In the years between 1890 and 1900 this movement was still more rapid. Consolidation took place on a great scale in railroads and in manufactures. Much of this has been of such a kind that it does not appear at all in the figures showing the number of establishments and of employees. In the data regarding this movement given by different authorities, many discrepancies appear, as there is no generally accepted rule by which to determine the selection of the companies to be included in the lists. One financial authority gave the following figures[7] regarding the industrial companies reorganized into larger units in the United States between 1860 and 1899, not including combinations in such businesses as banking, shipping, and railroad transportation. Some of the enterprises here included have much and others probably have little or no monopolistic power. _Decade Number Organized Total Nominal Capital_ 1860-60 ............... 2 $ 13,000,000 1870-79 ............... 4 135,000,000 1880-89 ............... 18 288,000,000 1890-99 ............... 157 3,150,000,000 --------------- ------ --------------- Total, 40 years ........ 181 $3,586,000,000 § 9. #The great period of trust formation.# The number of trusts organized and the capital represented by this movement in the last of these decades were seven times as great as in the thirty years preceding. The figures by years for the decade 1890-1899 are as follows: Decade Number Organized Total Nominal Capital 1890 ................... 6 $82,000,000 1891 ................... 13 168,000,000 1892 ................... 13 140,000,000 1893 ................... 5 226,000,000 1894 ................... 2 35,000,000 1895 ................... 7 104,000,000 1896 ................... 3 40,000,000 1897 ................... 6 93,000,000 1898 ................... 22 574,000,000 1899 ................... 80 1,688,000,000 ---------------- ---- -------------- Total, 10 years ......... 157 $3,150,000,000 The influence of great prosperity shows in the large number of combinations; but in 1893, the number was less, altho the total nominal capital (stocks and bonds) was still the greatest it had ever been in any year. Then came the period of depression, 1894-97, when both the numbers and the capital were comparatively small. Then from 1898 to 1901 followed the period of the greatest formation of trusts the world has ever seen. The list of these four years contains the names of the most widely known American combinations, a few of which are here given with the years of their formation: 1898, American Thread, National Biscuit; 1899, Amalgamated Copper, American Woolen, Royal Baking Powder, Standard Oil of N.J., American Hide and Leather, United Shoe Machinery, American Window Glass; 1900, Crucible Steel, American Bridge; 1901, United States Steel Corporation, Consolidated Tobacco, Eastman Kodak, American Locomotive. § 10. #Height of the movement toward combinations.# In a list by another authority[8] it appears that the data for all industrial trusts are in round numbers as follows: Number of Plants Acquired Total Date Number or Controlled Nominal Capital Jan. 1, 1904 318 5288 $7,246,000,000 These figures compared with those given above would indicate that the industrial trusts had about doubled in the years 1900-1903 inclusive. Probably most of this growth was in the years 1900 and 1901; then the movement became very slow, because, as is generally believed, of the aroused public opinion, of more vigorous prosecution by the government, and of additional legislation against trusts. The authority last cited gives in a more comprehensive list, in six groups, all the monopolistic combinations in the United States, at the date of January 1, 1904, as follows (the figures just given above being the totals of the first three groups): No. of Plants Total Nominal Groups Number Acquired or Controlled Capital 1. Greater industrial trusts 7 1528 $2,260,000,000 2. Lesser industrial trusts 298 3426 4,055,000,000 3. Other industrial trusts in process of reorganization or readjustment 13 334 528,000,000 4. Franchise trusts 111 1336 3,735,000,000 5. Great steam railroad groups 6 790 9,017,000,000 6. Allied independent 10 250 380,000,000 --- ----- -------------- Total, 445 8664 $20,000,000,000 § 11. #Motive to avoid competition.# This remarkable movement toward the formation of united corporations from formerly independent enterprises called forth a variety of explanations. The organizers of trusts gave as the first explanation of their action that it was the necessary result of excessive competition. It is not to be denied that a hard fight and lower prices often preceded the formation of the trusts. But as this excessive competition usually is begun for the very purpose of forcing others into a combination, this explanation is a begging of the question. It is fallacious also in that it ignores the marginal principle in the problem of profits. Profits are never the same in all factories, and to those manufacturers that are on the margin competition may appear excessive. It generally has been the largest and strongest factories, in the more favored situations, that, in order to get rid of troublesome competitors, have forced the smaller, weaker, industries to come into the trust. In other cases the smaller enterprises have been eager to be taken in at a good price, altho they might have continued to operate independently with moderate profits. When, therefore, it is said that competition is destructive, it may be a partial truth, but more likely it is a pleasantry reflecting the happy humor of the prosperous promoters of the combination. § 12. #Motive to effect economies.# Another advantage of the combination of competing plants that was strongly emphasized was the economy of large production.[9] The economies that are possible within a single factory may be still greater in a number of combined or federated industries. The cost of management, amount of stock carried, advertising, cost of selling the product, may all be smaller per unit of product. Each independent factory must send its drummers into every part of the country to seek business. In combination they can divide the territory, visit every merchant and get larger orders at smaller cost. A large aggregation can control credit better and escape losses from bad debts. By regulating and equalizing the output in the different localities, it can run more nearly full time. Being acquainted with the entire situation, it can reduce the friction. A combination has advantages in shipment. It can have a clearing-house for orders and ship from the nearest source of supply. The least efficient factories can be first closed when demand falls off. Factories can be specialized to produce that for which each is best fitted. The magnitude of the industry and its presence in different localities often, in the period of trust formation, served to strengthen its influence with the railroads, and to increase its political as well as its economic power. Another phase of corporate growth is the "integration of industry," that is, the grouping under one control of a whole series of industries. One company may carry the iron ore through all the processes from the mine to the finished product. A railroad line across the continent owns its own steamers for shipping goods to Asia or Europe. Large wholesale houses own or control the output of entire factories. § 13. #Profits from monopoly and gains of promoters.# There are, however, well-recognized limitations to the economy of large production in the single establishment,[10] and of late there has been ever-increasing skepticism as to the net economy actually attributable to combinations. Undoubtedly the merging of a number of old plants has sometimes effected an immediate improvement in the weaker ones. A new broom sweeps clean. This movement chanced to be contemporaneous with the development of "efficiency engineering," and of "scientific cost-accounting," and these better methods, already developed and applied in comparatively small plants, could be more quickly extended to the other plants brought into the combination. Moreover, the personal organizations in the separate enterprises had been brought to a high state of efficiency by the stimulus of competition, and there is reason to fear that, after some years of centralized bureaucratic organization, much of this efficiency may be lost. There seems no doubt that the strong motive for forming combinations is the profit to the organizers.[11] Whatever was the more generous motive or more fundamental economic reason assigned by the promoters, the investing public confidently expected that higher prices would be the chief result. There are indirect as well as direct gains to the promoters of a combination. There is the gain from the production and sale of goods to consumers, and there is the gain from the financial management, from the rise and fall in the value of stock. The promoters of a combination often expect to make from sales to the investing public far more than from sales to the consumer of the product. A season of prosperity and confidence, when trusts and their enormous profits are constantly discussed, has an effect on the public mind like that of the gold discoveries in California and in the Klondike. Then is the time for the promoter to offer shares without limit to investors. § 14. #Monopoly's power to raise prices#. There is no doubt that the formation of a combination from competing plants can and does give a control over prices, a monopoly power, not possessed by the separate competing establishments. The same kind of power might be attained by the growth of one establishment outstripping all its competitors, or by a new enterprise coming into the field backed by powerful capitalists. But this would work slower and less extensive results than does the formation of a combination. Of course, the fundamental principles of price cannot be changed by a trust; a selling monopoly can affect price only as it affects supply or demand.[12] The strongest trust yet seen has not been omnipotent. Many careless expressions on the subject are heard even from ordinarily careful writers and speakers: "The trust can fix its own prices," "has unlimited control," "can determine what it will pay and for what it will sell." This implies that trusts are benevolent, seeing that the prices they charge are usually not far in excess of competitive prices in the past. Such a view overlooks the forces that limit the price a monopoly can charge. If the supply remains the same, no trust can make the price go higher. The monopoly usually directs its efforts to affecting the supply, leaving the price to adjust itself. It can affect the supply either by lessening its own output or by intimidating and forcing out its competitors. It is true that this logical order is not always the order of events. The trust may not first limit the supply, and then wait for prices to adjust themselves; it may first raise its prices, but unless it is prepared to limit the supply in accordance with the new resulting conditions of demand, such action would be vain. The control of the sources of supply is the logical explanation of the higher price, even tho the limitation of supply is effected later by successive acts found necessary to maintain the higher price. The report of the Federal Industrial Commission, which, from 1898 to 1901, investigated the trusts, showed that immediately upon their formation, the industrial combinations had raised their prices.[13] Prices might be lowered again but only when and where competition became troublesome, thus causing either "price-wars" or discrimination. [Footnote 1: See Vol. I, p. 76.] [Footnote 2: As in the list in sec. 8, below.] [Footnote 3: See Vol. I, chs. 8 and 31.] [Footnote 4: See Vol. I, ch. 8, on competition and monopoly, and ch. 31, on monopoly prices and large production. An understanding of the definitions and of the general principles distinguishing competition and monopoly is a necessary prerequisite to a profitable discussion of the practical problem of monopoly.] [Footnote 5: See Vol. I, p. 267, on capital; pp. 388-393, on large production. See also references in preceding note on monopoly; and ch. 27, secs. 1 and 2, on corporate organization.] [Footnote 6: See above, ch. 26, sec. 3; and ch. 25, secs. 6 and 7.] [Footnote 7: Compiled from data given by "The Journal of Commerce and Commercial Bulletin," reprinted in "The Commercial Year Book," Vol. V, 1900, pp. 564-569.] [Footnote 8: John Moody, "The Truth About the Trusts," 1904] [Footnote 9: See Vol. I, pp. 388-393.] [Footnote 10: See Vol. I, pp. 391-392.] [Footnote 11: See Vol. I, p. 334, on the function of the promoter.] [Footnote 12: See Vol. I, pp. 80-85, 382-387, 394-396.] [Footnote 13: A summary of this evidence is given in the author's "Principles of Economics" (1904), pp. 327-330. A fuller outline of the results of the Commission's conclusions may be found in "The Trust Problem," by J.W. Jenks, who acted as expert in the investigation.] CHAPTER 29 PUBLIC POLICY IN RESPECT TO MONOPOLY § 1. Moral judgments of competition and monopoly. § 2. Public character of private trade. § 3. Evil economic effects of monopolistic price. § 4. Common law on restraint of trade. § 5. Growing disapproval of combination. § 6. Competition sometimes favored regardless of results. § 7. Increasing regard for results of competition. § 8. Common law remedy for monopoly ineffective. § 9. First federal legislation against monopoly. § 10. Policy of the Sherman anti-trust law. § 11. Policy of monopoly-accepted-and-regulated. § 12. Field of its application. § 13. Industrial trusts,--a natural evolution? § 14. Artificial versus natural growth. § 15. Kinds of unfair practices. § 16. Growing conception of fair competition. § 17. The trust issues in 1912. § 18. Anti-trust legislation in 1914. § 1. #Moral judgments of competition and monopoly.# What should be the attitude of society toward monopoly? Is it good or bad as compared with competition? Some very strong ethical judgments bearing on practical problems are found in the popular mind connected with the ideas of competition and monopoly. Competition usually is pronounced bad when viewed from the standpoint of the competitors who are losing by it, and as good when viewed from the standpoint of the traders on the other side of the market who gain by that competition. Competition among buyers thus appears to sellers to be a good thing; that among sellers appears to themselves to be a bad thing (and _vice versa_). Many persons are moved by sympathy to pronounce competition among low-paid and underfed workers to be bad, and each worker is convinced that it is so in his own trade. Yet nearly all men are of one mind that competition is a good thing in most industries, those that are thought of as supplying "the general public." Monopoly is believed by the public to be wrong in such cases, and competition to be the normal and right condition of trade. Yet there are some men interested in "large business" who look upon competition as bad, and upon monopoly as having essentially the nature of friendly coöperation. The roots of these opinions, or prejudices, are easily discoverable in the theoretical study of the nature of monopoly.[1] Yet often different men or groups of men feel so strongly on this matter, viewing it from their own standpoints, that they are quite unable to understand how any one else can feel otherwise. There is thus a great deal of controversy to no purpose. § 2. #Public character of private trade.# Any such general judgment as that of the public, tho it may be mistaken in some details, is likely to be a resultant of broad experience. There is in competitive trade a public, a social character, which monopoly destroys. Even in a simple auction, when the bidding is really competitive, price depends far less on shrewd bargaining, on bluff, or on stubbornness, than is the case in isolated trade. Each bidder is compelled by self-interest to outbid his less eager competitors, and thus the limits within which the price must fall are narrowly fixed. The auction-sale is less a purely personal matter, takes on a more public aspect, has a more socialized character than isolated trade, depends more on forces outside the control of any one man, and results in a price fixed with greater definiteness. The price in a more developed market results from the play of impersonal forces, or at least from the play of personal forces which have come under the rules of the market.[2] This price men are ready to accept as fair. It has a democratic character, whereas the gains of monopoly price arouse resentment as being the work of personal, and felt to be despotic, power. Monopoly price is a bad price to the one who pays it, not only because it is a high price but because it bears the character of personal extortion. The medieval notion of _justum pretium_, the just price, may have been often misapplied, and it was often criticized and ridiculed by economists in the period of idealized competition (from Adam Smith to John Stuart Mill). But at the heart of the notion was the judgment that general uniform prices fixed in the open market are the proper norms for prices when one of the traders is caught at an exceptional disadvantage. The modern world has been compelled to reëxamine the conception of the just price. § 3. #Evil economic effects of monopolistic price.# Theoretical analysis confirms this view. Any exercise of monopolistic power over price keeps some, the weaker bidders, from getting any of the desired goods, or limits them to their most urgently desired units. What may be called "the theoretically correct price"[3] with two-sided competition is the one that permits the maximum number of trades with a margin of gain to each trader. In narrowing the possibility of substitution of goods by trade, the sum of values of goods for most men is diminished. All citizens thus that are the victims of an artificially created scarcity look upon monopoly as "bad," just as they do upon the evils of nature--drought, locusts, fires, and pestilence. A monopoly has an indirect and more distant effect upon the spirit of all those trading with it. If they are producers selling at prices depressed by monopoly, their money incomes are reduced; if they are consumers buying at monopoly prices, their real-incomes are reduced; in either case their psychic incomes, the motives of all industry, are diminished, and their industrial energies are relaxed. § 4. #Common law on restraint of trade.# The first recorded case in English law, wherein the courts sought to prevent the limiting of competition by agreement, runs back to the year 1415, in the reign of Henry V. This was a very simple case of a contract in restraint of trade, whereby a dyer agreed not to practise his craft within the town for half a year. The court declared the contract illegal (and hence unenforceable in a court) and administered a severe reproof to the craftsman who made it. Thus was set forth the doctrine of the moral and legal obligation of each economic agent to compete fully, freely, and without restraint upon his action, even restraint imposed upon himself by a contract voluntarily entered into for his own advantage. Not until the eighteenth century was this rigid doctrine somewhat relaxed so as to permit the sale of the "good will" of a business under limited conditions, and some "reasonable" contracts in restraint of trade. Later the emphasis was somewhat further shifted, by judicial interpretations, from the notion of free competition to that of "fair" competition, so as to permit contracts involving moderate restraint of trade, if the essential element of competition was retained. Thus it was said that a piano manufacturer might by contract grant an exclusive agency to a dealer in a certain territory, there being many other competing makes of pianos, and such a contract "does not operate to suppress competition nor to regulate the production or sale of any commodity."[4] But with such moderate limitations the courts in cases under the common law have steadily disapproved contracts in restraint of trade that would appear to be to the disadvantage of third parties, whether producers or consumers. § 5. #Growing disapproval of combination.# The attitude of the courts became in one respect stricter. Some earlier cases involved the doctrine that what is lawful for an individual to do alone is lawful if done in combination with others. Indeed, a comparatively recent case[5] declared regarding a group of dealers, agreeing not to deal with another, that "desire to free themselves from competition was a sufficient excuse" for such action. But the general trend has been to the doctrine that a combination of men "has hurtful powers and influences not possessed by the individual." Hence threats of associations of traders (retailers or wholesalers) not to deal with another if he continued to deal with some third party have been declared acts in restraint of trade.[6] Yet in the case cited the court seemed to have been more concerned with protecting "the individual against encroachment upon his rights by a greater power," "one of the most sacred duties of the courts," than with rights and interests of the general public, endangered by such restraint of trade. § 6. #Competition sometimes favored regardless of results.# In another respect the courts have wavered in their attitude toward competition, the general doctrine being that competition, particularly the cutting of prices, is absolutely justifiable, regardless of circumstances. In the leading English case[7] the facts were that the larger steamship companies sent to Hankow additional ships, now called, figuratively, "fighting ships," to "smash" freights in order to ruin tramp steamship owners and drive them out of the field. The court held that this constituted no legal wrong to the tramp steamship owners, and scouted the idea of the court's looking at the motives in price cutting, or taking into consideration in any way what the court called "some imaginary normal standard of freights and prices." And of this case the lawyer is forced to say: "Undoubtedly the excellent opinion just quoted represents the law everywhere," even tho there are other cases difficult to harmonize with it.[8] To the economist, not bound in like manner by legal precedent, such a verdict was from the first impossible. The court appears to have considered that only the rights of the private litigants, the tramp steamship owners, were involved, not the rights and interests of the shipping public; it considered the immediate and not the ultimate effects of the "smashing" of rates; it allowed itself to be deceived by the appearance of acts that in outer form were competition, but that had as their purpose the strengthening and maintenance of monopoly. These acts are forms of the "unfair" practices that will be mentioned later.[9] § 7. #Increasing regard for results of competition.# Despite the binding precedents, the courts in some later decisions have refused to look upon competition as good regardless of its motives and of its consequences. In a federal case[10] the judge, in a brief and acute dictum, recognized the evil of a rate war that would result from threats of definite cuts. They impair "the usefulness of the railroads themselves, and cause great public and private loss." The court's opinion was no doubt largely influenced by the fact that railroad rates were already subject to regulation: "Every precaution has been taken by state legislatures and by the congress to keep them just and reasonable,--just and reasonable for the public and for the carriers." In a state case[11] the facts were that a man of wealth started a barber shop and employed a barber to injure the plaintiff and drive him out of business. The court recognized that while, as a general proposition, "competition in trade and business is desirable," it may in certain cases result in "grievous and manifold wrongs to individuals"; and in this case the "malevolent" man of wealth was declared to be "guilty of a wanton wrong and an actionable tort." The economists can but pronounce this judgment admirable so far as it goes, but it is remarkably confined to a consideration of the private legal rights of the injured competitor, and gives hardly a hint of a higher criterion for judging competitive acts, that of the general welfare. § 8. #Common law remedy for monopoly ineffective.# The common law contained prohibitions enough, both broad and specific, against contracts and acts in restraint of trade. The common law contained likewise a closely related body of doctrine by which the railroads, as common carriers, ought to have given equitable and undiscriminating rates to all shippers. There was a strong body of influential opinion that long maintained that the case was sufficiently covered, that the only thing needed was to enforce the common law. Even now, after all that has elapsed, there are some in railroad and business circles who still appear to hold that opinion. But the evils of railroad discrimination and of other monopolistic practices continued, and for some cause the common law was not enforced, excepting occasionally, disconnectedly, and without important results. Why? The answer may be ventured that in the common law the whole question of restraint of trade was treated primarily as one of private rights and only incidentally as one involving general public policy. Cases came before the courts only on complaint of some individual that felt injured. Now the injury of higher prices due to contracts in restraint of trade is usually diffused among many customers, and the loss of any one is less than the expense of bringing suit. Consequently, it rarely happened that cases were brought before the courts except by one of the two equally guilty parties to a contract in restraint of trade, when the other party had failed in some way to do his part. When such an illegal contract in restraint of trade was proved before a court by a defendant in a civil suit the contract was declared unenforceable, and the only penalty in practice was that the plaintiff could not collect his debt or secure performance from the defendant.[12] A very similar situation existed in the case of the individual's grievances against railroad charges and services. § 9. #Federal legislation against monopoly.# The passage of the Interstate Commerce Act in 1887[13] prohibiting discrimination and railway pooling, and that of the Act of 1890 "to protect trade and commerce against unlawful restraints and monopolies," popularly known as the "Sherman Anti-trust Law," were part of one public movement to remedy monopoly. From one point of view it seems true, as has often been said, that in essence these statutes were simply enactments of long established principles of the common law. Section 1 of the Sherman law declared illegal "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations." Section 2 made it a misdemeanor "to monopolize, or attempt to monopolize." But from another point of view, these new laws showed a marked change both in the conception of the interests involved and in the means of preventing the evils. The evil was at last conceived of as a general public evil; the laws are not merely to protect individuals,[14] but "to regulate commerce," "to protect trade and commerce." More important still, it was made the duty of public officers (district-attorneys of the United States) to institute proceedings in equity "to prevent and restrain" violation of the Sherman Act, and a special Commission was instituted to deal with railroad cases. It was this undertaking of the initiative by the government, the treatment of the problem as one of the general welfare, that marked a new epoch in this field. The methods and agencies provided might be at first inadequate and ineffective, but time and experience could remedy those defects. § 10. #Policy of the Sherman anti-trust law.# But in important respects opinion and policies were not yet clear and consistent. They wavered from one to another conception of the method for dealing with the problem. It was clear only that _laissez-faire_ had been laid aside. There are three other possible policies reflecting as many different conceptions of the problem of monopoly: (1) monopoly-prosecuted, (2) monopoly-accepted-and-regulated, (3) competition-maintained-and-regulated. The policy of monopoly-prosecuted is merely negative. This is the policy of the Sherman law. It opposed no positive action to the making of monopolistic contracts and to the formation of combinations, but declared them to be illegal and provided for their prosecution and punishment after the mischief had been done. The great epoch of the formation of combinations[15] followed the enactment of this law. True, lack of experience by the department of justice, and lack of vigorous effort to enforce the law, and the slow action of the courts were largely to blame for this result. The law has proved to be more effective to prevent new combinations since it has been successfully enforced in a few notable cases. But once large combinations have been formed and complex individual financial interests have become involved, the courts have proved to be incapable of undoing the deeds. In practice the most sweeping remedy attempted under the law has been the dissolution of enormous combinations formed years after the law went into effect. This has been called the job of unscrambling the eggs. The most notable cases were those of the Standard Oil Company and of the Tobacco Company, decided in 1911, the results being absurdly futile. § 11. #Policy of monopoly-accepted-and-regulated.# A second policy may be called that of monopoly-accepted-and-regulated. This is represented by the Interstate Commerce Act (at first weakly, and more vigorously after its amendment), and by the great mass of state legislation putting the local and interurban public utilities under the control of regulative commissions. For some decades after these industries developed, the public faith was in competition as the effective regulator. If monopolistic prices were too high, another company was chartered to build a parallel railroad or another horse-car line on the next street, or to lay down another set of gas pipes in the same block. Almost from the first some students of the subject saw the wastefulness and futility of this kind of competition, and nearly a half century later the public reluctantly came to this view. Still, sad to relate, the same history had to be repeated in regard to the telegraph and telephone industry, and in some quarters the ultimate outcome is not yet recognized. The Interstate Commerce Act itself, with odd inconsistency, contains an anti-pooling provision (section 5) the purpose of which seems to have been to compel competition as to rates which is now practically impossible under the other provisions of the law. The policy of "monopoly-accepted" was seen to involve as a necessary feature, public regulation of rates, to the point, if necessary, of absolutely fixing them. The principle has come to be accepted that wherever competition ends there public regulation of prices and service begins. Monopolistic enterprises are _ipso facto_ quasi-public institutions. § 12. #Field of its application#. This policy, gradually extending in practice, came to be applied to the class of industries which, for lack of a better name, are called local utilities. The one characteristic that they all have in common is that the service, or product, which is sold requires for its delivery an expensive, permanent, physical plant, and some special use of public highways. Thus gas pipes, water pipes, poles and wires for telegraph, telephones and electric light, street railways, regular steam railroads and some other minor industries all answer to this test.[16] Beginning about the year 1900 one state after another enlarged the powers of its state railroad commission or created a new corporation commission to regulate these "local" or "public utilities."[17] They have accomplished much, but the development of this kind of regulation has not proceeded in many cases beyond the adjustment of relative rates and the abolition of discrimination among the different individuals and classes of customers. Experience has shown the great difficulty of determining what is a fair absolute level of charges. A new science of accounting has been developing to assist in the solution of a problem, the complexity of which transcends the agencies at hand to deal with it. With this policy applied to the local utility (and railroad) phase of monopoly, there remains still the problem of the industrial trusts in the manufacturing enterprises. § 13. #The industrial trust,--a natural evolution?# The policy that one is inclined to favor regarding industrial trusts depends very much on one's answer to the question: Are or are not industrial trusts natural growths? In this bare form the question is somewhat vague, but the thought of those who answer it in the affirmative is positive if not always entirely clear. They (at least the extreme representatives of this view) declare that trusts have been, are, and will continue to be, the results of a "natural evolution" of business conditions, as inevitable as the great changes in the physical world. If this is so man and society must recognize the facts, must waste no efforts vainly in fighting against fate, but should accept the trusts and realize their possibilities for good. And these are declared to be great, for it is assumed that without the trusts all of the economies of large production must be sacrificed. Irresistible economic forces, it is said, are creating larger and larger units of business; friendly coöperation and unified action must take the place of competition in business. The outcome must be monopoly in every important line of manufacturing industry and perhaps of commerce. In view of public opinion toward monopoly, its acceptance necessitates its regulation. This argument is supported by appeal to the experience in the field of railroads and other local utilities, where public opinion has, after long hesitation, recognized competition to be impracticable and the acceptance of monopoly as inevitable. As extremes often meet, the view of the industrial trust as a natural evolution is most favored on the one hand by men of "big business," already interested financially in trusts, and on the other hand by the most radical communists (or socialists) whose ideal is the complete monopolization of industry under the government. § 14. #Artificial versus natural growth.# Opposed to this view is a deep and widespread popular opinion or prejudice, against the trust and in favor of competition. General opinion in this case (as not always) finds much support in special economic studies of the methods by which the existing industrial trusts came into being. First the question properly is raised; just what is meant by "natural"? In a sense everything has been the natural outcome of evolution,--the steam engine, the submarine, the boycott, militarism. In an equally good, if not better sense, every mechanical invention and every method of industrial organization is artificial, has been the result of man's choice and effort. In any case men may choose as good or reject as unsuitable or bad, any particular mechanical device, and society may decide to adopt any particular policy toward a certain form of business organization and certain business practices (unless, indeed, our philosophy be that of automatism, crude determination or fatalism, regarding all human affairs). Now when one examines the methods which the notable trusts actually did employ, and apparently had to employ, even when they were already powerful single enterprises, in order to destroy their competitors and to attain their monopolistic power, the word "natural" seems hardly to describe the process. The evidence is not a matter of hearsay but is embodied in a long line of judicial decisions, and in numerous special inquiries by governmental commissions and officials.[18] § 15. #Kinds of unfair practices#. This evidence is a startling array of "unfair practices" and "unfair" forms of competition, which, however novel in appearance, are essentially of the kind that has been illegal under the common law for the past five hundred years. Many of these practices were baldly dishonest, many of them were contemptibly mean. The manifold varieties of unfair competition may be roughly grouped under three headings according as they are connected with (1) Illegal favors received from public or quasi-public officials; (2) Discrimination against, or control of, customers; (3) Foul tactics against competitors. (1) Among the practices in the first group are discriminatory rates and rebates from railroads, favoritism in matters of taxation, undue influence in legislatures, special manipulation of tariff rates through powerful lobbies, or paid agents, undue influence in the courts through the employment of lawyers of the highest talent, who often later became judges. (2) Among the unfair practices toward customers are discriminations among them by the various forms of price cutting, grants of credit, and kinds of service. The liberty of retail dealers is limited in a variety of ways, such as fixing resale prices, requirement of exclusive dealing, and full-line forcing. (3) All the methods just mentioned as employed in dealings with customers are likewise unfair toward competitors. Many other methods are used to the same end, such as: enticing away their employees, or corrupting and bribing them to act as spies, paying secret commissions, false advertising, misrepresenting competitors, imitating their patterns in goods of defective workmanship, shutting off their credit or their supplies of materials, acquiring stock in competing companies, malicious suits, infringement of patents, intimidation by threats of business injury or of scandalous exposures, operation of bogus independent companies. § 16. #Growing conception of fair competition.# Any industrial trust that was able to gain domination and monopoly power only by the use of such practices, or any part of them, can hardly be deemed the result of a "natural evolution." If "artificial" means the use of artifices surely this development deserves the adjective. Yet even if not natural, this development may be thought to be "inevitable," human nature being as it is. But the bald fact is that while the great trust movement was in progress no effort worthy of the name was being made to enforce even the then existing laws and to oppose this artificial development. The same allegation of inevitableness was once commonly made of discriminatory railroad rates and rebates, evils which have been in large part remedied only since the period 1903-1906, when at last intelligent action was taken. To those that came to see the problem in this light, acceptance of industrial monopoly with its complex task of fixing by public commission the prices on innumerable kinds and qualities of goods seemed at least premature. Rather, the first step toward a solution seemed to be the vigorous prevention of unfair practices, and the next step a positive regularizing of "fair competition."[19] The fundamental idea in this is the enforcement of a common market price (plus freights) at any one time to all the customers of an enterprise. By this plan potential competition would become actual, and small enterprises that were efficient might compete successfully within their own fields with large enterprises that maintained prices above a true competitive level. Even general lowering of prices by a large enterprise with evident purpose of killing off smaller competitors is unfair competition under this conception. It was for years recognized that the realization of this policy required legislation regarding uniform prices and the creation of a commission for the administration of the law. § 17. #The trust issues in 1912#. The campaign of 1912 presented in an interesting manner the three policies above outlined. The Republican party led by President Taft stood for the policy of monopoly-prosecuted; its program was the vigorous enforcement of the Sherman law. The Progressive party, led by Mr. Roosevelt, stood in the main for the policy of "monopoly-accepted-and-regulated"; its program called for minimizing prosecution and for developing a system of regulation of trust-prices. The Democratic party, led by Mr. Wilson, stood for the policy of competition-maintained-and-regulated, and the problem was to find means to strengthen and regularize the forces of competition. In practice these programs doubtless would be less divergent than they appear. All alike proposed the retention of the Sherman law. The two proposals to go further were presented as mutually exclusive alternatives, whereas they necessarily must supplement each other in some degree. The Progressives did not expect all industries to become monopolies, and the Democrats tacitly conceded to monopoly-accepted the large field of transportation and local utilities it already had occupied. But there was a real difference in the angle of approach and a real difference in emphasis. The Democratic program (the somewhat unclearly) showed greater distrust of monopoly and greater faith in the possibilities of creating fair conditions of competition (which never had fully prevailed) in which efficiency would be able to prove its merits and monopoly would work its own undoing. It was the more logical for the country to give this policy at least a trial before adopting irrevocably the policy of general industrial monopoly. In either case competition actual or potential is the fundamental principle by which prices have to be regulated. Where competition is enforced it is by applying some general rules that create a general market price instead of discriminatory prices, but the fixing of the price is left to the competitors. Where monopoly is accepted prices must be fixed with reference to an estimated competitive standard, that which under hypothetically free conditions would just suffice to attract and retain private enterprise and capital. § 18. #Anti-trust legislation of 1914#. The anti-trust legislation of 1914, passed by the Democratic party to carry out its program, is embodied in two acts: the Clayton Act, laying down new rules; and the Federal Trade Commission Act, mainly to provide an agency with administrative and quasi-judicial functions to deal with unfair practices. This displaced the Bureau of Corporations, established in 1903. The Clayton Act forbids discrimination where the effect may be to lessen competition, or tend to create a monopoly. Due allowance may be made for difference in the cost of selling or transportation, but a difference is not required in such cases. It forbids contracts to prevent dealers from handling other brands. It forbids corporate ownership of stock in a competing corporation, forbids interlocking directorates in large banks and in other competing corporations, with capital, surplus and undivided profits aggregating more than $1,000,000. The Trade Commission Act in addition to its administrative provisions for investigation, reports, and readjustment of the business of companies upon request of the courts, declares that "unfair methods of competition in commerce" are unlawful, and both empowers and directs the Commission to prevent their use (banks and common carriers subject to other acts being excepted). These acts are too new to have been given a fair test. They have, however, given evidence of exercising at once an influence upon the situation. They are imperfect in some details that will require amendment; but they mark the beginning of a new policy toward industrial monopoly, the results of which will be watched with the deepest interest. [Footnote 1: See Vol. I, especially pp. 74 and 75.] [Footnote 2: See Vol. I, pp 59, 68, 70-71] [Footnote 3: See Vol. I, pp. 66, 67.] [Footnote 4: 77 Miss., 476. Cited by Bruce Wyman, "Control of the Market," p. 137.] [Footnote 5: 19 R.I., 255.] [Footnote 6: 115 Ga., 429.] [Footnote 7: Mogul Steamship Company v. McGregor (L.R. 23 Q.B.D. 598).] [Footnote 8: Bruce Wyman, "Control of the Market," p. 22. In 1914 (216 Fed. 971), a federal court granted an injunction restraining the use of fighting ships by a combination, and in 1915 (220 Fed 235), the court indicated a willingness to grant a similar injunction if necessary. Similarly "fighting brands" of goods have been recently prohibited.] [Footnote 9: See below, sec. 15.] [Footnote 10: Averrill v. Southern Railway (75 Fed. Rep. 736).] [Footnote 11: 107 Minn. 145.] [Footnote 12: Arnott v. Pittston and Elmira Coal Co., 68 N.Y. 558 (1877).] [Footnote 13: See ch. 27, sec. 16.] [Footnote 14: At the same time the rights of injured individuals are better safeguarded by sec. 7 of the Sherman law, permitting the recovery of threefold damages and attorney's fees.] [Footnote 15: See ch. 28, sec. 9.] [Footnote 16: See further, ch. 30, secs. 5-9.] [Footnote 17: See ch. 27, sec. 15, on state commissions.] [Footnote 18: A few among the most important sources are the Report of the Industrial Commission, 1898-1901, 19 volumes; reports of the Bureau of Corporations on the petroleum and tobacco industries; U.S. Supreme Court decisions, e.g., the Addystone Pipe case (175 U.S. 211), given in Ripley, Trusts, Pools, and Corporations, p. 86; the Standard Oil case (221 U.S. 1), and the Tobacco Trust case (221 U.S. 106); and the very comprehensive volume on "Trust Laws and Unfair Competition," by Joseph E. Davies, Commissioner of Corporations, Washington, 1916.] [Footnote 19: John B. Clark, the distinguished professor of economics in Columbia University, has been the foremost and clearest exponent of this idea, in his "The Control of Trusts," 1901, 2d ed., 1912, and in other works.] CHAPTER 30 PUBLIC OWNERSHIP § 1. Waves of opinion as to public ownership. § 2. Primary functions of government favoring public ownership. § 3. Economic influences favoring public ownership. § 4. Forms of municipal ownership. § 5. Localized production favoring monopoly. § 6. Economies of large production favoring monopoly, § 7. Uniformity of products favoring monopoly. § 8. Franchises favoring monopoly. § 9. Various policies toward local public service industries. § 10. State ownership of various kinds. § 11. National ownership. § 12. Economic basis of public ownership. § 1. #Waves of opinion as to public ownership.# Opinion and practice in the matter of the public ownership of wealth and the direct management of enterprises has moved in waves. In feudal times, when government was practically identical with the personal ruler, and the private "domains" of the lord or king were the sole source of his public revenues,[1] holdings of this kind were very large. Their public nature came to be more fully recognized, but they did not yield large revenues, and gradually were in large part sold or given away to private owners. This was particularly true in England, and in a less degree on the continent of Europe. The conviction grew that the state, or government, was an inefficient enterpriser, and that the sound public policy was to foster private industry and obtain public revenues by taxation. The ideal was embodied in the _laissez-faire_ philosophy that government should confine itself exclusively to the most essential political functions, leaving the economic functions absolutely alone. It should keep the peace, prevent men from beating and robbing each other, and preserve the personal liberty of the citizen.[2] Thus, it was believed, all of the economic needs would be provided for by competition, in the best way humanly possible, in the quantities and at the rate needed. This policy attained its maximum influence in the first half of the nineteenth century in England, and in America probably just before the Civil War, in the decade of the fifties. § 2. #Primary functions of government favoring public ownership#. Some public ownership, however, is necessary for the exercise even of the primary political functions of the state. Civilized government requires the use of numerous material agents. Buildings for legislative and executive offices, custom-houses, post-offices, lighthouses, can be rented of private citizens, as post-offices usually are in small places; but it is obviously economical and convenient in large cities for the government to own the public buildings. Government can reduce to a minimum its direct employment of officials by "farming out" the taxes, as all countries once did to some extent, and as France continued to do up to the French Revolution. It is now the general policy for government to own or control its essential agencies, but this does not involve in every case the employment of day-labor direct as in cleaning the streets or collecting garbage. The more simple political functions shade off into the economic. To coinage usually are added the issue of legal-tender notes and certain banking functions: the post carries packages, transmits money, and in most countries now performs the function of a savings-bank for small amounts. The social and industrial functions undertaken by public agencies have steadily increased since the middle of the nineteenth century, and the sphere of the state has been enlarging.[3] The question ever open is as to the proper limits to this development. § 3. #Economic influences favoring public ownership#. In some cases private ownership is difficult because of the excessive cost of collecting for the service. The cost of maintaining toll houses on a turnpike sometimes exceeds the amount collected. Collection in other cases, as for the service of lighthouses to passing ships, is impossible. Public industry may secure, through the economy of large production, a cheaper and more efficient service, the benefits and costs being diffused throughout the community. The benefits of the work of experiment-stations for agriculture are felt immediately by the farmers, but are diffused to all citizens. A manufacturer able to keep his method secret, or to retain his advantages for a time, can afford to undertake experiments in his factory, but the farmer seldom can. The public ownership of parks for the use of all gives a maximum of economy in the production of the most essential goods,--fresh air, sunshine, natural beauty, and playgrounds in the midst of crowded populations. Municipal ownership of waterworks is an extension of the same idea. Not only because large amounts of water are used by the public, but because cheap, pure, abundant water is an essential condition to good citizenship, speculation should in every possible way be eliminated from this industry. The assumption is made in the _laissez-faire_ doctrine that the interest of the public harmonizes with that of the individual. But this proves often not to be the case. For example, the forest has an immediate value to its owners and to the consumers of lumber, and it has also a diffused utility in its influence on industry, on climate, on navigation, on water-power and on floods. Yet, as the private owner, unless a great land monopolist, does not control enough of the forest to appreciably affect any of these things, and could rarely sell them even if he could affect them, he will cut down the tree whenever he can gain by doing so. In this situation either governmental control or governmental ownership of forests is essential. Each kind of political unit, or subdivision of government, develops characteristic kinds of public ownership and industry. Federal states consist of three main groups of political units: national, provincial, and local. Provincial units are the largest subdivisions, as the American "states," or commonwealths, the German states, and the provinces in other countries. The term local political unit is more complex and may mean county, township, village, city, or school or sanitary district; but most of what is to be said of local ownership refers to cities or to incorporated villages. § 4. #Forms of municipal ownership#. Local political units acquire ownership only in local industries and in wealth used locally by the citizens. Nearly all parks and recreation grounds are owned by cities. As population has become more dense, private yards of any extent have become impossible, in cities, for all but the wealthy. Public ownership of parks insures a "breathing place" and recreation grounds to the common man in the most economical way. Of late the movement for large and small public parks and playgrounds has gone on rapidly in American cities. Related to parks are public baths, public libraries, art collections, museums, zoological gardens, etc. Some have seen danger in this policy, but the public sees no such danger so long as the things supplied gratify the higher tastes--as art, music, literature, and social recreation. These give no encouragement to the increase of improvident families and to the breaking down of independent character. The means of local communication--streets, roads, bridges--were once owned largely by private citizens. Here and there still are found toll roads and toll bridges built under charters granted a century ago, but tolls on public thoroughfares are for the most part abolished. A public market, where the producer from the farm and the city consumer can meet, is an old institution. About two thirds of the cities of 30,000 population or more have public markets or scales, and fully one third have public markets of importance. New York City has six large retail and wholesale markets, for selling meat and farm produce, in which rents or fees are charged, and several open markets. There has recently been a large movement in this direction. The providing of apparatus for extinguishing fires is always a public duty; the conveyance of waste water is increasingly a public function. The supply of pure water for domestic and business uses, for fire protection and for street cleaning, while often a private enterprise in villages, and sometimes in large cities, is increasingly undertaken by public agencies. Most of the largest cities now own their own water supply systems. Public ownership of gas and electric lighting is less common, as the utility supplied is not so essential and the industry is somewhat less subject to monopoly; but the difference is one of degree only. Street railroads are often under public ownership in Europe; but there have thus far been few cases of the kind in the United States and Canada.[4] § 5. #Localized production favoring monopoly#. A number of these enterprises have characteristics in common which appear to make inevitable their drift into monopolistic control. Waterworks, gas, electric lighting, street railways, telephone systems, are among these. However fierce may be the competition for a time, sooner or later either one company drives out the other or buys it up, or both come to an agreement by which the public is made to pay higher prices. A feature favoring the growth of monopoly when such industries are left to private enterprise is the need to produce and supply the commodity or service at a given locality. While two street railways can compete on neighboring streets, it is physically impossible for two or more to compete on the same street. Two systems of water-mains or gas-mains can be put down, as sometimes is done, but this is not only a great economic waste, but the tearing up of the streets is an intolerable public nuisance. This difficulty is less marked in the case of telephones and electric lighting, and some persons still cling to faith in competition to regulate the rates in those industries; but faith in competition between water companies and between gas companies has been given up by nearly all persons now, as it was long since by students of the subject. § 6. #Economies of large production favoring monopoly#. A second feature favoring monopoly in such industries is the marked advantage of large production in them. These industries are usually spoken of as "industries of increasing returns." This advantage is enjoyed in some degree by every enterprise, but it is gradually neutralized and limited. The need to extend an expensive physical plant to every point where customers are to be served, and the very much smaller cost per unit of delivering large amounts of water, gas, electricity, and transportation, on the same street, offers a greater inducement for one competitor to crowd out or buy out the other at a more than liberal price. Even then, larger net dividends and correspondingly larger capitalization are secured than were before possible to both companies combined. § 7. #Uniformity of products favoring monopoly#. A third feature favoring monopoly is uniformity in the quality of the furnished. It is a general truth that competition is most persistent where there is the greatest range of choice open to the customer, and consequently the most individual treatment required of the enterpriser. An artist, even a storekeeper, attracts about him a body of patrons who like his product (for the merchant's manner and method of dealing are a part of the quality of his goods), and who cannot be tempted away by slight differences in price. Rival companies in the stage of competition are seen to claim superiority for their particular goods and to improve their service in every way possible. A new telephone company, entering where a monopoly has held the field, works at once a wonderful betterment in rates, courtesy, and service. But as the product of all competitors attains the highest technical standard possible at the time, the rivalry is reduced to one of price, and it is usually a "fight to the finish." § 8. #Franchises favoring monopoly#. A fourth feature favoring monopoly in these enterprises is the necessity of making permanent and exceptional use of the public streets and alleys. If this right were granted by a general law to every citizen, this feature would be sufficiently implied in the foregoing discussion. As it would be intolerable to allow private interests to use public property in whatever way they wished, the legislative body makes special grants in such cases in view of the circumstances. Not only is the legislature (or council, or county board of commissioners, etc.) led by the economic difficulties to withhold a charter from a second company, but it may be corruptly influenced by the company already established. The knowledge of the opposition to be encountered in getting a franchise must keep competitors out, even tho monopoly prices are maintained. In view of these several features, which are so closely related that they form a common character, more or less fully shared by various industries, and especially in view of the necessity for the formal granting to them of peculiar privileges in the form of a public franchise, the public, in order to protect the general interest, is forced to undertake an exceptional control of these industries. § 9. #Various policies toward local public service industries#. Several courses are open to the public, acting in its political capacity, to retain those monopolistic advantages for the general welfare. (a) It may do nothing, trusting vainly to competition to regulate the rate, or consciously leaving the result to be worked out by the monopoly principle; this is what in most cases has been done in the past in America. (b) It may attempt, in granting the franchise, to fix near cost the charge for the service or product, so that the franchise will be worth little as private property. (c) It may leave the rate to be fixed by the monopoly principle, but charge for the franchise so much that the value of the monopoly is appropriated into the public treasury. (d) It may have public officials carry on the business, either selling the product at cost or making monopoly profits that go into the public treasury. Various combinations of these plans are followed in practice, the most common plan being the fixing of maximum rates which, with improved methods, generally become ineffective. It is difficult to fix a uniform rate that is equitable, because conditions change, and, further, because a uniform rate must be applied to all parts of the town, altho the cost of service varies greatly. It is difficult because of the limited number of competent bidders, to sell the franchise for what it is worth. There remains the policy of public ownership to secure the profits of monopoly to the public, either directly or in a diffused manner. There is no doubt that the general trend of municipal policy everywhere is toward public ownership of this type of local public service industries. § 10. #State ownership of various kinds#. The movement toward public ownership by the American states has been much less marked than that by the municipalities. The commonwealths have retired from some fields where once they were engaged in industry. Students of American history know that between the years 1830 and 1840 some states engaged largely, even wildly, in canal building, railroad construction, banking and in other enterprises. The undertaking of these industries was determined often by political and by selfish local interests, and their operation often was wasteful. A few enterprises succeeded, the most notable of these being the Erie Canal in New York. The unsuccessful ones remained worthless property in the hands of the state or were sold to private companies, as in the case of the Pennsylvania Railroad. This reckless state enterprise was a bitter lesson in public ownership, and continued for three quarters of a century to have such an effect on public opinion, that few proposals for public ownership could have a fair hearing in America, But railroads and canals are publicly owned, and more or less successfully operated, by many foreign states, as in Prussia and other German states, in Switzerland, and in the new states of Australia, and this policy is rapidly extending to other countries and to varied industries. There has been recently a greatly increased interest in forestry shown by the American states. This is especially likely to be a state enterprise wherever the forest tracts are entirely within the limits of the state, as is the case in New York and Pennsylvania which have been foremost in this work. At present at least 32 states have forestry departments. Most of the forests in Germany are either communal or state-owned. The schools, a great industry for turning out a product of public utility, are largely conducted by the American states and by local units rather than by the nation or by private enterprise. The state encourages researches in the arts and sciences, and gives technical training. A variety of minor enterprises have been undertaken by states to supply salt, phosphate, banking facilities, even some manufactures. One after another the states are adopting the "state use" system of labor in the prisons and public institutions, engaging in agriculture and manufacturing on a large scale, and using the products, amounting to millions of dollars annually, almost entirely for public purposes. § 11. #National ownership#. The national governments everywhere appear to be enlarging the field of their ownership. This policy has its roots far in the past. Some industries grow out of the political needs of government. Established as a means of communication with military outposts, the post became a convenient means of communication for merchants and other citizens and grew into a great economic institution. In most countries the telegraph is publicly owned and has been annexed to the post, to which it is very closely related in purpose. National ownership of railroads is the rule, and our policy of private ownership the great exception in the world to-day. Many persons, even some in railroad circles, believe that national ownership of railroads is sure to develop out of our present policy of regulation. The national improvements connected with rivers and harbors were first political--that is, they were for the use of the government's navy; they became, secondly, commercial--for the free use of all citizens engaged in trade; and they continue to unite these two characters. Forestry is most largely undertaken in this country by the national government, partly because some forest areas in the West extend over state boundaries, and largely because large tracts of public forest lands were still unsold at the time public attention was attracted to the subject. Since 1890, the policy of reserving great areas for forests, and picturesque districts for national parks, has developed greatly in the United States. The national forest area contained in the various forests in 20 states (not including Alaska and Porto Rico), now covers about 225,000 square miles, equal in area to five states of the size of Pennsylvania. There are, besides, fourteen large national parks, ranging in size from a few hundred acres up to over 2,140,000 acres (the area of the Yellowstone National Park), and aggregating 4,600,000 acres, nearly the size of Massachusetts or of New Jersey, besides numerous other national reservations for monuments and antiquities. In some countries mines are thought to be peculiarly fitted for national ownership and control. In the German Empire the several states own coal, salt, and other mines. Coinage and banking are everywhere looked upon as functions of sovereignty, and yet it is no more necessary for a nation to own its own mint in order to control the monetary system than for it to print the banknotes in order to regulate their issue. The American government has its own printing office. The fish commission, and the various branches of the department, coöperate with private industry in many ways. This brief survey suggests that the industries undertaken by government are both varied in nature and large in extent, altho small in proportion to the mass of private industry. § 12. #Economic basis of public ownership#. The question as to the proper limits of public ownership is one most actively debated. The movement is progressing in accordance with the principle that public ownership is economically justified wherever it secures a product or service of widespread use that would otherwise be impossible, or insures the public a better quality or a lower price. The question of public ownership is not exclusively an economic question. There are incidental problems, such as its effects on enterprise and on political integrity, with which it is not possible here to deal. In the main, however, public ownership is simply a business policy which must be justified by its economic results. In the case of a general social benefit not to be secured without public ownership (as popular education or the climatic effect of forests), the only question to answer is whether the utility is worth the cost. In the case of industries already in private hands, as waterworks, gas and electric lighting, there is needed, to make a wise decision possible, a knowledge of the effect a change to public ownership will have upon cost and service. If public officials can furnish some goods cheaper than they are furnished by private enterprise, it is because of the wide margin of monopoly profit, not because there is any magic in public ownership. The same general items of cost must be met. The first cost of the plant and the annual interest payments are much the same. Experience shows that, because of political influence and of public opinion, wages are likely to be higher under public ownership, but salaries for management lower. Public collection of dues along with taxes is an advantage not enjoyed by private companies. Several public officials sometimes share the same office and thus reduce expenses. In small towns the public electric lighting and waterworks have been operated more economically under one roof. Some items of cost may be less under public management, but on the whole, public industry probably has no advantage in these respects. Public industry does not have to meet the costs of lobbying and blackmail which are often forced upon private companies. But the greatest source of saving in public ownership is the value of monopoly privileges that, under private management, go into private pockets. The temptation of political corruption may be more insistent when a large force of men is constantly employed, and when large supplies are constantly purchased, by public officials, but the temptation is not so strong or so centralized as it is in the granting of franchises to wealthy corporations. Public industry is weakened by the absence of certain motives to excellence that are present in private business. The income of public officials not being dependent on the economy of management, the spur and motives of competitive industry are lacking. No social discovery has made individual honesty and civic virtue useless to good government. The decision in any specific case is one dependent on local conditions, and the exact limits of public ownership are not fixed. Industry is changing so rapidly that new adjustments are made every year. The main outlines of public ownership, however, are now in large part determined. Some industries do well, others ill, under public management, and between these lie many debatable cases. Waterworks and probably electric lighting, because of the comparative simplicity of their operation, are more suitable for public ownership than are gas works. No absolute line divides the one group from the other. But whatever the changes, the fact can not be ignored that the increase of public ownership is altering in manifold ways the organization of industry, and is reacting upon the production of wealth, and the distribution of incomes. [Footnote 1: See above, ch. 16, sec. 5.] [Footnote 2: See above, ch. 16, sec. 2, on the police function.] [Footnote 3: See ch. 16, secs. 3 and 4.] [Footnote 4: See above, ch. 16, sec. 5, statistics of receipts from public service enterprises.] CHAPTER 31 SOME ASPECTS OF SOCIALISM § 1. The distribution of incomes. § 2. Distribution by force and by status. § 3. Social effects of the right to transmit property. § 4. Effects of the right to inherit property. § 5. Broader social effects of inheritance. § 6. Limitations upon intestate inheritance. § 7. Some merits of competition. § 8. Wide acceptance of competition. § 9. "Economic harmonies" and discords. § 10. Competition modified by charitable distribution. § 11. Competition modified by authoritative distribution. § 12. Meanings of socialism. § 13. Philosophic socialism. § 14. Socialism in action. § 15. Origin of the radical socialist party. § 16. The two pillars of "scientific" socialism. § 17. Aspects of the materialistic philosophy of history. § 18. Utopian nature of "scientific" socialism. § 19. Its unreal and negative character. § 20. Revisionism and opportunism in the socialist party. § 21. Alluring claims of party-socialism. § 22. Growth and nature of the socialist vote. § 23. Economic legislation and the political parties. § 1. #The distribution of incomes#. The great economic progress of the past two centuries has been mainly in lines of technical production. The developing natural sciences and mechanic arts have given men a marvelously increased control over forces and materials. This has multiplied the quantities of goods of most kinds at the disposal of men, collectively considered. All men, with rare exceptions, have been gainers; but the increased production has been very unequally distributed among the members of the community. More and more insistently the plea and the demand have been made for better methods of distribution that will give to the masses of the people a larger share of the goods produced. Production is largely a problem of the technical arts; distribution is a problem of social economy. Two aspects of distribution may be distinguished: functional distribution is the attribution of value (yields) to wealth and labor considered impersonally, as groups of productive agents; and personal distribution is the actual movement of incomes into the control of persons.[1] Personal incomes, whether monetary, real, or psychic, are the sum of a number of elements. Some parts are due to services performed by the person himself. When one combs his own hair he is performing for himself a service that is a part of his income. Benjamin Franklin said it was better to teach a boy to shave himself than to give him a thousand dollars with which to pay barbers for a life-time. Other parts of income are the uses and fruits of legally controlled wealth; chance finds, as gifts of value or lost and abandoned goods; goods assigned to one by authority; wealth inherited; illegal gains by robbery; goods secured on credit; gifts either of things or of services. The many methods by which incomes are distributed to the persons making up a society may be grouped in the following five general classes: force, status, charity, competition, and authority. These will be discussed in due order. § 2. #Distribution by force and by status.# Distribution by force is the most primitive mode of distribution. The stronger takes from the weaker. Forceful distribution still persists in the form of crime, and if we include fraud within the term it still affects an enormous amount of income. The lawless take whatever they can, and the supporters and officers of the law do what they can to check the acts. Slavery is distribution by force, as is the levying of war indemnities from a conquered people. Distribution may be by status, or set rules and customs. In this case men receive incomes that are independent of their efforts and outside of their control. Distribution by status is guided neither by the personal merit of the recipients nor by the value of their direct services, but the merits and acts of men not living. Feudal society was built on status. Men were born to certain privileges and positions; they inherited property which could neither be bought nor sold; they followed trades which could rarely be entered by any outside of favored families. Caste in India and in other Oriental countries regulates a large part of the life of the people. This method still prevails to a greater extent in our society than is usually recognized.[2] By public opinion and by prejudice, status is still maintained in respect to the choice of occupations even where the law has formally abolished it, as is seen in modern race problems, in western countries to-day inheritance of property is the main legal form of status and it shades off into other forms of distribution. Private property must find its justification in social expediency.[3] There is no feature of it that is more questioned than is the right of inheritance. § 3. #Social effects of the right to transmit property.# The right to transmit property by inheritance or by bequest may be judged with reference to its effects upon the giver, upon the receiver, and upon society at large. It is well to take these three points of view. The right to dispose of property either during life or at death has undoubtedly in many ways a good effect upon the character of men. It stimulates the husband and father to provide for his wife and children, and spurs others to continued economic activity. There is a joy in giving, a joy in the power to bestow one's wealth upon those one loves, or as one pleases. Much of the existing wealth probably never would have been created if men had not had this right. But there is a limit to the working of this motive, and other motives often are more effective. Many a man after gaining a competence continues to work for love of wealth and power in his own lifetime, as the miser continues to toil for love of gold. When men without families die wealthy, when men not having the slightest interest in their nearest relatives labor till their dying days to amass wealth, it is evident that the right to bequeath property has little to do with their efforts. Love of accumulation and love of power in these cases supply the motives. A more limited liberty to dispose of property at death might still suffice, therefore, to call out the greater part of the efforts now made to accumulate property. § 4. #Effects of the right to inherit property#. That the effects upon the receiver of the property are good is somewhat more doubtful. It is true that children reared in families of large incomes would be great sufferers if plunged into poverty at the death of their parents. There is much social justification for permitting families to maintain an accustomed standard of comfort. Few would deny that provision by parents to provide education and opportunity for their children is commendable and desirable. But the evil effects of waiting for dead men's shoes are proverbial. Many a boy's greatest curse has been his father's fortune. Many a man of native ability waits idly for fortune to come and lets opportunities for self-help slip by unheeded. The world often exclaims over the failure of the sons of noted men to achieve great things, for, despite confusing evidence, men still have faith in biologic heredity. A too easy fortune saps ambition and relaxes energy; and thus rich men's sons, if not most carefully and wisely trained, are often made paupers in spirit, while the self-made fathers think their boys have better opportunities than they themselves enjoyed. The greater social loss is not the dissipated fortunes, but the ruined characters. Andrew Carnegie said that it would be a good thing if every boy had to start in poverty and make his own way. Cecil Rhodes recorded in his will his contempt for the idle, expectant heir. § 5. #Broader social effects of inheritance#. Inheritance has good effects for the community insofar as it helps to secure efficient management of wealth. If the son or relative has been in business with the deceased, there is a reason that he should inherit the property, and his succession to it makes the least disturbance to existing business conditions. This consideration, however, has less weight as the corporate form of organization becomes well nigh universal in "big business." Every profligate son, every incompetent heir, is an argument against the inheritance of property. It is to society's interest that no able-bodied member should stand idle. Every child should have presented to him the motive to use his powers in useful ways. Moreover, many feel that the great fortunes now accumulating through successive generations in the hands of a few families are a danger to our free society, even if these fortunes should continue to be well administered. There is a widespread feeling that the heredity of great wealth is, like the heredity of political power, out of harmony with the democratic spirit. Democracy wishes to see men and individuals put to the test, not profiting forever by the deeds of their forebears. This feeling is shared by those who cannot be charged with radical prejudices. It was startling when a conservative body of lawyers meeting in their state association in Illinois, passed a resolution favoring moderate limits to inherited fortunes. Almost every year sees bills of this purport introduced in the legislatures and in Congress. Probably no one of many current radical proposals is more widely favored than this, among men of otherwise conservative social views. Tho sum most often mentioned as the proper limit is $1,000,000, but in every case it is a sum larger than the fortune of the person speaking.[4] § 6. #Limitations upon intestate inheritance#. A proposal less crude and with strong reasons of social expediency in its favor is to limit the right of intestate inheritance to persons that have been in essential economic and social relations with the deceased. The foregoing considerations show that the case for the right of gift in the lifetime of the giver is strongest; that for the right of bequest comes next. The man who has acquired wealth may usually be trusted to decide who bear to him close social or personal relations, and to say whose lives have in a measure furnished the motives of his activity. But the right of intestate inheritance by distant relatives is one that stands on weak social foundations. It is a survival from more patriarchal conditions when, in the large family, or clan, the bond of unity was very strong. A truer test to-day of the proper limits for intestate inheritance is whether the wish to provide for these heirs has furnished the motive for the producing and preserving of the wealth. The claims of those nearest in blood and closest in personal relations are strongest. Family affection and friendship form the strongest of social ties, and it is socially expedient to cultivate them. Motives for abstinence and industry must be strengthened. But the same test shows that the zealous regard of the American law for the rights of distant kinsmen in foreign lands, or in distant quarters of this country, is irrational, and is unjust to the community where the fortune was made. Public opinion tends strongly toward this idea. Property rights as they exist are clearly seen not to be a product of pure reason. They are the result of social evolution, of historical accidents, of class legislation, and in many cases, of selfish interests. Changing social conditions and ideas are bringing many changes in law, and further changes must be expected to come, which will reduce the influence of inheritance of property in fostering status in distribution. Especially important are the increasing application of the progressive principle to incomes and inheritance,[5] and the development of insurance to put family savings into the form of terminable annuities instead of capital sums.[6] § 7. #Some merits of competition#. The dominant method of distribution to-day is that of competition.[7] This is not a mere accident, but is a resultant of unending experimentation with different methods of distribution carried on since the beginning of human society. A method of distribution had to be found and retained that would work under the conditions of human nature at each stage of social progress; and competition, however imperfectly, has worked. It is evident from the voices of praise and of blame that competition has its good and its bad aspects. Let us observe first the good ones. Competition acts to distribute the working force over the field of industry wherever it is most needed. The remarkable (tho far from perfect) adjustment of industry to the needs of each neighborhood is brought about by individual motives, not by centralized authority. Wherever consumers settle, stores are started and factories are built. Wherever work is to be done, men come in about the right number to do it. It is not mere chance that produces this result. The available skill is adjusted to varying needs by the delicate measurement of the market rate of wages. Two-sided competition gives a definite rule of price--the only definite impersonal rule. The theoretical competitive price is the standard to which things tend constantly to adjust themselves in an open market.[8] Competition is an essentially economic method as contrasted with the legal and personal methods above and later described, because it is impersonal and reducible to a rule of value. Distribution under competition is made, not with reference to abstract ethical principles or to personal affection, but to the value of the product. Each worker strives to do what will bring him the largest return, and the price others pay expresses their estimates of the service in that market. Each seeking his own interest is led to make himself more valuable to others. In most cases and in large measure, competition stimulates men to sacrifice, to invention, to preparation; thus is zeal animated and are efforts sustained. In the economic realm, as is now seen to be the case in the biologic realm, competition of some effective kind is an indispensable condition not only of progress but of life without degeneration. Monopoly, as we have noted, never has ceased to rest under the ban of Anglo-Saxon law, and therefore to exemplify compulsory, as opposed to competitive distribution. A striking feature of the competitive method is its decentralization. Each helps to value the economic services of each. If one pays more for the services of the singer than for those of the cook, it is not because one would rather listen to the singing than to eat when starving, but because by apportioning one's income one can get the singing and the eating too. In the existing circumstances, the singer's services seem to the music lover to be worth paying for, and he backs his opinion with his money. So each is measuring the services of all others, and all are valuing the services of each. It is distribution by valuation, and it is valuation by democracy. § 8. #Wide acceptance of competition.# On purely abstract and _a priori_ grounds competition cannot be accorded an ethical sanction, as is sometimes assumed. But because of the qualities above outlined, and because it meets in large measure the pragmatic tests, the competitive rule of distribution appeals to all men (even to those who denounce it) as having in many of its applications a moral character, as compared with the other possible methods of distribution. Indeed, the competitive rule is the only rule that does not involve either personal and arbitrary judgment (force, charity, and authority) or status. Even such measure of justification as is found in status (as in property and inheritance laws) is traceable, in the long run, to competition. The case for a limited application of status is based upon its results in stimulating motives of effort and accumulation.[9] When the rule of authority is applied to-day in the large field of public regulation where _actual_ competition has become impossible, almost the only guiding rule is _hypothetical_ competition. The just rate is felt to be that which in the long run _would be_ just sufficient to afford "normal" incomes to labor and to capital, to call forth the necessary effort, skill, judgment, and forethought, if competition _were_ at work, as it is not.[10] Only this rule of hypothetical competition redeems these public rates from arbitrariness, favoritism, and force. § 9. #"Economic harmonies" and discords.# Every truth in political philosophy finds some exaggerated expression. Competition, as compared with status and custom, has some notable merits; and when the eighteenth century was throwing off some of the burdens inherited from the more static Middle Ages, competition appeared to be a panacea for all the ills of society.[11] The belief in the benefits of competition and the virtues of economic freedom found its extremist expression in the first half of the nineteenth century in the doctrine of "the economic harmonies." According to this, if men are left entirely free to do as their interests dictate, the highest efficiency and best results for all will follow; the economic interests of all men are in harmony. Corresponding with this doctrine is the economic policy of extreme _laissez faire._ But experience has shown that the economic interests of the individuals in a community are only partly very rarely are they wholly, in harmony. There are three species of competition in every market: that between sellers, that between buyers, and that between sellers on the one hand and buyers on the other.[12] If at any point free competition is hindered, even the disciple of economic harmony must, from the very nature of his doctrine, expect a discordant result. In reality competition is rarely quite complete on both sides, and when it is not the weak usually suffer. Men do not start with fair opportunities. All that they may be entitled to have under competition may be so little that social sympathy seeks to better the results; hence poor relief, public and private. Society as a whole has an interest in the outcome of the individual's economic struggle. It cannot see men starving or driven into crime. Moreover, when competition is the rule of valuation, it, like all valuations, partakes of the quality of those choosing--wise or foolish, good or evil.[13] And tho competition is the rule of democracy in economics, yet democracy cannot permit the economic vote of a vicious or of a foolish group to stand, where the goods, services, and prices resulting offend the prevailing public judgment and social conscience. § 10. #Competition modified by charitable distribution.# In practice the competitive method of distribution always has been modified or supplemented in varying degrees by the other methods. Important among these is charitable distribution. Charitable is here used in its original sense, as synonymous with benevolence and affection. First is parental love, the root and type of all the forms of charity. There is a complete lack of economic equivalence in the relation of parent and child in early years. The helpless infant does nothing for the parent, the parent gives all and does all for the child. Gradually, however, the balance is regained; as the years go on, not only do children repay in affection but in many cases they repay in material ways. Especially in the factory districts and on the farm the child sooner or later begins to reestablish the balance, becomes a worker, and contributes to the family income as much as the cost of his support, and finally more. A student of modern English town life has traced the curve of poverty traversed by the average poor family as the children are first an economic burden, and later an aid to their parents. In the middle, or propertied, classes the children do not for many years cease to be a financial burden to their parents, and in most eases the economic balance is never reestablished. It is not to the parents, but to the succeeding generation, that the debt is tardily paid. Friendship widens the range of generosity and multiplies the mass of gifts. Broad sentiments of humanity lead to gifts outside the range of personal affection and personal interest, to the beggar on the street, to institutions devoted to charity. In New York state alone a sum of more than $20,000,000 a year is expended by institutional charities. About $512,000,000 in public benefactions were given in the United States by private donors in the year 1915, and in this respect that year was not exceptional. An enormous and increasing body of property is thus being year by year socialized, largely through bequests from persons without direct heirs. Great public subscriptions to the sufferers from great disasters, such as the Irish and the Indian famines, the Chicago fire, the Galveston flood, the San Francisco earthquake, the great European war, bespeak a widening generosity. Religion impels to the building of churches, to the support of priests, missions, and manifold religious undertakings. Charity in this connection is the expression of a sentiment that varies from the most intense personal, affection to the broadest and most general humanitarian sentiment. § 11. #Competition modified by authoritative distribution.# Authority is, after force, the oldest and was the earliest widely operative method of distribution. It shades into force, status, and charity in manifold ways, but it is essentially the assignment of a common, or social, income to individuals by some person or persons chosen, or accepted, by the society to perform this function. Thus it may be distinguished from force, which takes for itself what belongs to another; and from charity, which gives to another what belongs to one's self; and from status, which transmits claims to income from one generation to another by a fixed impersonal rule, not by a personal judgment in the particular case. Authoritative distribution is the dominant method in patriarchal tribes, in communal societies, and in monastic and other religious orders. Each person works at what he is commanded to do, and some one in authority (patriarch, head of the community, father of the monastic order) portions out the tasks and the rewards. In the family this rule largely prevails, and even after the children have come to years of discretion they not infrequently accept, from habit or affection, the will of the parents, and give up their entire wages to receive back a portion. The method of charitable distribution while the child is young gradually changes to authoritative distribution after the child becomes a worker. The untrained and indocile youth, however, is made the subject of compulsory distribution. The collection and distribution of taxes is by public authority. No attempt is made to give back an exact equivalent to each taxpayer. The money is taken and spent by authority. The new forms, or at least the new extensions, of taxation, especially of incomes and inheritances at progressive rates, are very important examples of authoritative distribution.[14] The courts sometimes find themselves obliged to apply the method of authoritative distribution, altho they do it unwillingly. They try to confine their efforts to interpreting the contracts men have voluntarily entered into, and they avoid, so far as possible, the making of contracts or the fixing of rates. Authoritative distribution is exemplified in the work of many commissions appointed by law to fix rates or settle disputes, such as boards of conciliation and arbitration and railway commissions. § 12. #Meanings of socialism.# Our reason for leaving to the last the discussion of _authority_ as a method of distribution is not that it appeared last in historical development, but that it now is the most strongly advocated as an alternative of competition. One of the most striking developments of opinion in the nineteenth century was that favoring an increasing use of authority in distribution. This was meant not merely to supplement and modify competition, but to displace it completely, or (in the more moderate program) in large part. This opinion, or plan, has appeared under a variety of names, the main ones being communism, collectivism, social-democracy, and socialism, of which the last name has just now the greatest vogue. Socialism is a word of manifold meanings no one of which is generally accepted. Discussion is therefore often a Babel of tongues. Socialism designates (1) a social[15] philosophy (2) a mode of social action, (3) a particular political party. There is thus philosophic, active, and partisan socialism. Each of these may be taken either in an absolute or in a more or less relative sense. The first meaning is the most fundamental, the second less so, and the last the least fundamental, but just now the most frequently used. § 13. #Philosophic socialism.# As a philosophy socialism is related to social just as individualism is related to individual. Socialism is faith in the group motive and group action rather than in self-interest and competitive action. Instead of social philosophy we may say social faith, or social ideals. This faith may be absolute, or radical, to the rejection of all economic competition; or it may be moderate, and leave more or less place for self-interest and competition. Every man of conscience and of ideals has moods that are socialistic (in this sense) and dreams of a world without toil, competition, or poverty. This social philosophy has taken form as "Christian Socialism" among men of strong religious natures, in various religious denominations. Great secular dreamers--Plato in his "Republic," Sir Thomas More, in his "Utopia," Edward Bellamy, in "Looking Backward," William Morris, in "News from Nowhere," and others--have painted beautiful pictures of ideal economic states from which all of the great evils and problems of our society have been banished. § 14. #Socialism in action.# Active socialism is group action in economic affairs. This may be by private voluntary groups, as a club, church, or trade union, or by a public group, or political unit of government, which has therefore a compulsory character. The radical kind of active socialism would be the ownership by government of all the means of production and the conduct of all business, assigning men, by authority, to particular work and granting them such incomes as the established authority thought they deserved. This kind exists nowhere. A moderate kind of active socialism is represented by each separate case of public ownership or industry. Even public regulation by authority, of the many kinds described in this volume, is touched with a quality of active socialism. In this sense there can be more or less of active socialism in a community; a state may be more or less socialized in its economic aspects. An English Chancellor of the Exchequer declared in the last decade of the nineteenth century, "We are all socialists now." The ever-increasing sphere of the state[16] gives to that statement to-day a larger, fuller meaning than when it was uttered. Socialism in action is of course always the expression of a more or less socialistic philosophy shared by a majority of the people. This great recent movement of socialization in industry is the expression not of a radical but of a moderate social philosophy. It does not look to the abolition, but only to the modification and limitation in some directions, of private property and of competitive industry. The spirit of this movement is opportunist, or experimental. It is ready to try public action, but recognizes that it has difficulties and limitations. The ultra-radical and the ultra-conservative alike declare that these measures "logically" lead on to the complete destruction of private property. But men find that they can warm their hands without being "logically" compelled to thrust them into the fire, and that they can quench their thirst without a growing resolution to drink the well dry. When this governmental activity has proceeded somewhat extensively and systematically in cities, as in Great Britain, it is called municipal socialism; and in states, as in Germany, it is called state socialism. § 15. #Origin of the radical socialist party.# Socialism in the partizan sense is an actual political organization. Both in Europe and in America such organizations have been designated as "social-democratic," "socialist labor," or "labor" parties. Socialism in this sense of a party organization, or movement, is very different from a social philosophy. In its partizan phase socialism exhibits all of the baffling variability and elusiveness that it does in its other aspects. However, in its printed program the socialist party sets forth both a socialist philosophy and an ideal of active socialism in their most radical forms. Modern political socialism traces its origin directly to the most radical of German social philosophers, Marx, Engels, and Lassalle. Karl Marx (1818-1883), preeminently the philosophic leader of the movement, sought to give a solider foundation of reason to the somewhat romantic socialist philosophy current in his day. His own doctrine, first set forth connectedly[17] in the Communist Manifesto in 1848, he called Communism. This has come to be called by his followers, "scientific socialism." "Scientific" was meant to emphasize the contrast with "Utopian" socialism, as Marx and Engels somewhat scornfully characterized the older communist philosophy, romances of the ideal state, and attempts to found and conduct small communistic states. § 16. #The two pillars of "scientific" socialism.# Scientific communism was to be based upon two immovable pillars. The one was "the labor theory of value," by which all profits and incomes from investment were shown to be robbery of the wage-workers.[18] "Capital," that is, the ownership of the means of production, was declared to be the instrument of this "exploitation." The other foundation stone was "the materialistic philosophy of history," that is, the explanation of all the intellectual, cultural, and political changes of mankind from the side of the material economic conditions as causes. As Engels expressed it, "The pervading thought ... that the economic production with the social organization of each historical epoch necessarily resulting therefrom forms the basis of the political and intellectual history of this epoch." This doctrine denies that, in an equally valid sense, biological changes in brain, and cultural changes in science, arts, and education, cause the mechanical inventions and improved processes and thus alter the form bf economic production. § 17. #Aspects of the materialistic philosophy of history#. Marx's general formula of economic materialism had three minor propositions or corollaries: (a) The doctrine of the _class conflict_; all history is a record of the class struggle between those who have property, the ruling classes within the nations, and those who have not, the oppressed working class, (a conception of history blind to most of the great international conflicts). The class conflict was declared to be more sharply marked and bitter than ever before; "the entire human society more and more divides itself into two great hostile camps, into two great conflicting classes, _bourgeoisie_ and proletariate." (b) The doctrine of _increasing misery_; the conditions before described must cause the steadily increasing degradation of the masses. (c) The _catastrophic theory_; the final and inevitable result of this movement must be a revolution, when the downtrodden workers will throw off their chains and expropriate the expropriators. There is no doubt that Marx, when he first formulated this philosophy, believed that such a revolution, most violent in nature, would occur within a few years. § 18. #Utopian nature of "scientific" socialism#. The term "scientific" set in contrast with "utopian" was meant to imply that the doctrine of Marx was not "utopian" (a word which had come to mean fanciful and impracticable). Marx had a contempt for the romances of the ideal state and for what he deemed to be the unfounded speculations of earlier prophets of communism. But utopian (from _utopia_, Greek for no place) means nonexistent, and Marxian socialism surely was that. "Experimental" or "actually at work" would have been a more logical contrast with "utopian." Marx and his followers likewise had a contempt for the communistic experiments, or settlements and colonies, which by the scores had been started and had failed, bringing discredit upon all communistic proposals. The beauty of "scientific" socialism was that it never could be tried on a small scale--or tried at all until a whole nation adopted it. The old time "scientific" socialist had a lofty scorn for any less dogmatic philosophy than his own or for any less sweeping social change than that he expected. Moderate social reform to him was but temporizing; indeed, it was evil, inasmuch as it helped to postpone the inevitable, but in the end, beneficent catastrophe of the social revolution. A step-by-step movement toward socialism, state socialism,[19] even of a pretty sweeping character, was, to the old-time Marxians, not really socialism at all. A valid reason for this attitude was found in the extremely limited manhood suffrage and in the aristocratic class government of most European countries, especially of Germany; so that, as the party socialists saw it, multiplying state enterprises but increased the power of the ruling, and eventually of the militarist, class. The social-democratic leaders felt that until they themselves were in power, the growth of "state socialism" would be a calamity for the nation. The events of 1914 may make our judgment tolerant toward their feeling. § 19. #Its unreal and negative character.# The so-called "scientific" socialism had, therefore, a peculiarly unscientific spirit; for, in a modern sense, science implies a patient search for truth, not a sudden revelation; a constant testing of opinions by observation and experiment, not a dogmatic conviction that refuses the test of reality. "Scientific" socialists talked much (and still talk much) of the "evolution" of social institutions; but they refused to admit the essential condition for institutional evolution, the competitive trial on a small scale, of a new form of economic organization to prove its fitness to survive. Indeed, it had been tried on a small scale many times, and had always failed in a brief time. Lincoln said that a man's legs ought to be long enough to reach to the ground; but "scientific" socialism was not built on that plan. To be sure it contained many elements of truth, but these were so distorted that the result was a caricature of history, of philosophy, of economics, and of prophecy. The most important influence of radical socialism has been exerted through negative criticism. It has performed the function of a party in opposition, relentlessly hunting out and pointing out the defects of existing institutions, arousing the smugly contented, and, by its very recklessness and bitterness, inspiring at times a wholesome fear of more revolutionary evils. This has been a real service to the cause of moderate and constructive reform. § 20. #Revisionism and opportunism in the socialist party#. Most men have always agreed in an adverse judgment of the claims of "scientific" socialism. The criticisms have been admitted in part even by the intellectual leaders among the Social-democrats. They lost some of their fantastic illusions, they tempered some of their exaggerated claims of oracular inspiration. "Revisionism," the socialist higher criticism, became influential in the party. Whenever the party gained any success at the polls, the socialists in public office and the party leaders found it necessary to "do something" immediately. The rank and file might be willing to talk of the millennium, but preferred to take it in instalments instead of waiting for it to come some centuries after they were dead. And so the socialist party, as fast as it gained any practical power, became "opportunist" and worked for moderate practical reforms. The leaders did this with many misgivings lest the masses might become so reconciled to the present order that they would refuse to rise in revolt. In that case the revolution never could happen (altho it was inevitable). As the party socialists did more to improve the present, they talked less of the distant future state. They ceased their criticisms of "mere temporizing" "_bourgeois_" reforms, and began to claim these as the achievements of the socialist party. They began to write of the remarkable growth of social legislation in Europe and America in the past half century under such titles of "socialism in practice" and "socialists at work." This was despite the fact that these reforms were all brought about by governments in which the socialist party had no part whatever or was a well-nigh insignificant minority. This bald sophistry, or self-deception, was easily possible by confusing the word "socialist" as relating to the abstract principle of social action, with socialist as applied to their own party organization. It is as if the Republican party in the United States were to claim as its own all the works of the republican spirit and principles of government in the world from the party's organization to the present time. § 21. #Alluring claims of party socialism.# In thus changing the emphasis of its claims, the socialist party has been somewhat put to it to retain any clear distinction between itself and other parties of social reform. It has done this however by continuing to proclaim the _ultimate_ desirability of reorganizing all society without leaving any productive wealth in private hands. It has had no misgivings prompted by the experience of the world. Its case continues to be far the strongest in its negative aspect, the exposure of the evils in present society. To many natures the claims of the socialist party have all the allurements of patent medicine advertisements. These describe the symptoms so exactly and promise so positively to cure the disease, that they are irresistible--especially when the regular physicians keep insisting that the only way to get well is to take baths and exercise, and stop the use of whisky and tobacco. Those attracted to the socialist party by its sweeping claims are of two main types. The one is the low-paid industrial wage-worker; the other is the sympathetic person of education or of wealth (or of both), who has become suddenly aroused to the misery in our industrial order. To both of these types, feeling intensely on the subject, the socialist party appeals as the only party with promises sweeping enough to be attractive. The one becomes the proletarian, the other the intellectual, the one becomes the workshop, the other the parlor-socialist. Many of the latter type are persons overburdened either with unearned inherited wealth or with an undigested education. Many of them, having enjoyed for a time the interesting experience of radical thought and of bohemianism, come later to more moderate social opinions. § 22. #Growth and nature of the socialist vote.# In 1912 the socialist party in the United States polled 900,000 votes in the presidential election. The socialist parties in the various lands have almost steadily grown, and now cast votes numbering in the aggregate six to ten million (as variously estimated, the name socialist being elastic). The socialist parties may be expected to continue growing. They will ultimately gather within their folds most of the ultra-discontented, and others that are not able to find an alternative economic philosophy and a plan that inspire their hopes. But the socialist party vote is made up of men of many shades of opinion, a large number of whom hold only the mildest sort of socialistic philosophy. Not many of the more than 3,000,000 social-democratic voters in Germany before the war were members of the regular party organization; but they supported the party as the one unequivocal way to declare themselves against militarism and undemocratic class-government. In the United States only about one tenth of the socialistic party voters have been enrolled as members of the party. § 23. #Economic legislation and the political parties.# This floating socialist vote is now so large that it is eagerly sought by candidates of the older parties. These independent voters care little for the radical and distant tenets of the socialist party leaders, and these, to attract wider support, are forced to place increasing stress upon immediate and moderate reforms. On the other hand, men of larger qualities of leadership in the older parties are constantly adopting and advancing pending measures of social reform. Where this is not done the socialist party tends more quickly to develop into the one powerful party of protest and of popular aspiration, receiving support from many elements of the middle and small propertied classes and from non-radical wageworkers. This movement from both sides is leaving less noticeable the contrast between the socialist party and other parties claiming to be "progressive" or "forward looking." The strongest allies of the more radical communistic faction of the socialist party are those members of the conservative parties who fail to recognize the need of humane legislation, who irritate by their unsympathetic utterances, and who unduly postpone by their powerful opposition the gradual and healthful unfolding of the social spirit, energy, and capacity of the nation. The greatest problem of social and economic legislation for the next generation is to determine how far, and how, the principle of authority may wisely be substituted for the principle of competition in distribution. [Footnote 1: Distribution as a problem of incomes is not to be confused with distribution of physical goods by transportation (as on the railroads) or by commercial agencies transferring goods from producer to consumer (as in coöperative distribution). Functional distribution is the prime subject of the theory of value in Vol. I (e.g., usance, value of labor, time-preference, profits), a study of which is prerequisite to an intelligent study of the problems of personal distribution.] [Footnote 2: See Vol. I, pp. 190, 223; and above, ch. 2, secs. 11-13.] [Footnote 3: See Vol. I, pp. 248-255, 297-298, 406, 408, 415-418, 480-481, 483-484: also Vol. II, pp. 22-23, 146-148, 161-162, 178-180, 283, and various passages in the chapters of this Part.] [Footnote 4: See above, ch. 2, sec. 7, on limitations upon bequest and inheritance.] [Footnote 5: See ch. 18.] [Footnote 6: See ch. 12, sec. 14.] [Footnote 7: See ch. 2, sec. 10.] [Footnote 8: See Vol. I, pp. 54 and 66; also pp. 504 507 in an organic theory of value.] [Footnote 9: See above, sec. 2, note 3.] [Footnote 10: Compare, e.g., portions of chs. 9, 15, 20, 21, 27; and 29, see. 17.] [Footnote 11: See ch. 2, sees. 11-13.] [Footnote 12: See Vol. I, p. 75.] [Footnote 13: See, e.g., Vol. I, pp. 25, 71, 205, 479, 509, 511, 513.] [Footnote 14: See above, ch. 18.] [Footnote 15: See Vol. I, p. 6, on "social" and the social sciences.] [Footnote 16: See e.g., ch. 9, secs. 2, 10; ch. 11, secs. 7, 8; ch. 16, secs. 3, 4, 12; chs. 18, 21, 22, 23, 27, 29, and 30.] [Footnote 17: See Vol. I, p. 502, on communism and value theory.] [Footnote 18: See Vol. I, pp. 210, 228, 502 on the labor-theory of value.] [Footnote 19: See above, sec. 14.] INDEX Accident insurance, Agricultural credit, Agricultural, decay, economics, problems of, prices, fall of, Agricultural, and rural population, Agriculture and crises, Agriculture, exhaustion of the soil, medieval, number in, the new, Aldrich report, Senator, plan, American Federation of Labor, Appreciation and interest, Arbitration, voluntary, compulsory, Assessment insurance, Assessment of taxes, Authoritative distribution, B Balance of merchandise, Balance of trade argument, Bank, deposits as investments, notes, restriction act, Banking, in the U.S., before 1914, Banks, functions of, in U.S., taxes on, Bellamy, Edward, Bills of exchange, Bimetallism, Bonds, taxation of, Bowley, statistician, Boycott, Building and loan associations, Business cycle, C California Fruit Exchange, Canadian Industrial Disputes Act, Canals, Capital, Capitalistic monopoly, Charitable distribution, Capitalization theory of rises, Charity, and control of vice, Child-labor, Christian socialism, City growth, Clark, John B., Clay, Henry, Clayton Act, and farmers, Cleveland, Grover, Closed shop, see Open shop Coal, Coinage on governmental account, Collective bargaining, Combination, Combinations, industrial, Common law, on monopoly, Comparative advantages, doctrine of, Compensated gold dollar, Compensation, for accidents, Competition among employers, among workers, of railroads, and monopoly, as regulative principle, merits of, see also Monopoly Competitive system, Compulsory insurance, economy of, Consolidation, of railroads, Consumers' League, Contributory principle in insurance, Coöperation, producers', consumers', among farmers, Corporation taxation, difficulty of, Corporations, Costs of production, and the tariff, Crises, and industrial depressions, and unemployment, Custom, D Davies, Joseph E., Deferred payments, standard of, Deposits, bank, Debts, public, Dingley Act, Discrimination, railroad, Displacement theory of immigration, Distribution of incomes, Doctrine of comparative advantages, Dollar, Dynamic conditions, E Economic, harmonies, problems, system, the present, Emerson's premium plan, Employers, and immigration, Employment offices, Engels, Friederich, Erdman act, Eugenics, F Factory conditions, Fair competition, see also Unfair practices Fairchild, H.P., Farm, stock, raw materials, and factory, loans, Farmer's income, life, Farming, commercial, capitalistic, diversified, intensive, Farms, area, woodlots, equipment, in U.S., size of, and railroads, Federal Industrial Commission, Federal legislation against monopoly, Federal Reserve Act, Federal Rural Credits Act, Federal taxation, Federal Trade Commission Act, Fiat money, Finance, public, Food prices, supply, Foreign, banking, exchange, trade, Forestry, Forests, Fractional coins, Franchises, railroad, for public utilities, Free trade, see also Protective tariff G Gambling, uneconomic character of, Gantt's premium plan, Gardner Land Bank Act, Garfield, James A., Ghent, unemployment insurance, General property tax, see Property George, Henry, Glass-Owen bill, Glut theories of crises, Gold-exchange standard, Gold, production, standard, defectiveness of, Gold-using countries, Goldenweiser, E.A., Governmental aid to railroads, Graduated taxation, Graduation principle, Greenbacks, Gresham's law, H Hadley, A.T., Halsey's premium plan, Hamilton, Alexander, Hancock, Gen. Winfield Scott, Harrison, Benjamin, Hayes, Rutherford B., Home market argument, Housing problem, Hours and wages, public regulation of, I Immigrants, and organized labor, Immigration, and low wages, and population, economic aspects of, and wages, and farming, Imports into the U.S. chart, Income, taxation, federal, taxes, Independent treasury, Index numbers, chart, Industrial revenues of government, remuneration, methods of, monopoly, problem of, trust, nature of growth, depressions, see Crises Infant industry argument, Inheritance, taxes, limitations of, Interest rate, and deferred payments, and prices, in crises, Insurance, principles of, companies, taxes on, against unemployment, Internal revenue, International exchange, equation of, International trade, Interstate Commerce Act, Invalidity pensions, Investment banking, J Jackson, Andrew, Jenks, J.W., Justice in taxation, K Kemmerer, E.W., Knights of Labor, L Labor, legislation, and social legislation, exchanges, see Employment offices Laissez-faire, Land, taxation, reform of, banks, Large production, in public utilities, Large industry, Lassalle, Ferdinand, Leclaire, profit sharing, Legal tender, Loans, governmental, Lump of labor notion, M McKinley Act, McKinley, William, Market, public, Materialistic philosophy, Marx, Karl, Mediation, Mercantilism, Merchandise, imports and exports, Militarism, and population, Military power, maximum, Mill, J.S., Minimum wage, Mitchell, Wesley C., Monetary economy, system, theory of crises, Money, nature, use, and coinage, value of, quantity theory, per capita circulation, fiduciary, commodity, Monopolistic nature of protection, Monopoly, and labor organization, in railroads, industrial, prices, public policy in respect to, in public utilities, Moody, John, Moral judgments of monopoly, More, Sir Thomas, Morris, William, Mortality table for insurance, Mortgage taxation, Municipal ownership, N National banks, ownership, National Monetary Commission, Negro problem, Natural agents, and monopoly, Newlands act, O Old-age pensions, Open shop, Opportunism, Organized labor, and legislation, Ownership of farms, P Paper money, Par of exchange, Paradox of value, Payne-Aldrich tariff, Personal taxes, Picketing, Piece work, Plato, Police state, Political, money, aspects of labor, aspect of railroads, Population, agricultural and rural, and immigration, Postal savings, Power, Precious metals as money, Premium plans, Price, standard, common market, Prices, general level, changes in, rising, and international trade, and monopoly, Profit sharing, Profits from monopoly, Progressive taxes, see graduation, Promoters of monopoly, Property, private, taxes on, tax on, concept, Property tax, general, Protection, "true principle" of, Protective, tariff, policy of, tariffs, prevalence of, railroad rates, Public finance, view of trade unions, and labor legislation, inspection, ownership, Public utility commissions, Public utilities, monopolistic nature of, Q Quantity theory of money, R Race problems, Railroad mileage, building, problem, commissions, Resources, material, of the nation, Reserve, cities, plan of insurance, Reserves, bank, against notes, against deposits, Restraint of trade, Revenue tariff, Revisionism, Ricardo, David, Rich man's panic, Ripley, W.Z., Roads, Roberts, Peter, Roosevelt, Theodore, Root, Elihu, Rowan's premium plan, Rural, definition, exodus, S Saturation point of money, Saving, and investment, Savings, banks, deposits, insurance assets as, "Scientific" socialism, Seasonal fluctuations, and unemployment, Seigniorage, charge, Seligman, E.R.A., Sherman Anti-trust law, Shifting and incidence, of insurance premiums, Shorter working day, Sickness, insurance against, Single tax, Smith Adam, Social, legislation, protective policy of immigration, agricultural policy, effects of inheritance, Social insurance, by trade unions, Social utility, Social welfare, in taxation, and shorter working day, Socialism, some aspects of, meanings of, philosophic, active, Marxian, political, "scientific", Socialist, party, vote, Standard money, defined, see also Deferred payments, State, sphere of, insurance, ownership, Status, Strike, right to, Strikes, T Tabular standard, Taft, William Howard, Tariff, changes and crises, and wages, and unemployment, reductions, harm of, board, a permanent, history, American, rates, for revenue, "true principle" of, "competitive principle" of, and business depressions, Task work, Taxation, objects and principles of, revenues from, forms of, as a public question, separation of, system of, Taxes, effect upon property valuations, property and corporation, Taylor's premium plan, Tenancy on farms, Tilden, Samuel J., Time work, Trade education, Trade unions, see also Organized labor, Transportation, taxes on, Trant, on trade unions, Trust company, Trust, definition, see Monopoly, Two-profits argument, U Underwood tariff, Unemployment, in crises, insurance, Unfair practices, Usance of wealth, of labor, Usury laws, Utility, V Van Hise, C.R., W Wage contract, limitation of, Wage-system, growth of, practicability of, Wages, and tariff, and general prices, general, and organization, particular, and organization, maladjustment of, and unemployment, and immigration, see Immigration, see also Hours and wages, Walker, Francis A., Walker tariff, Washington, Booker T., Wealth, the nation's, taxation of, "Wealth of Nations", Weir's premium plan, Wild-cat banking, Wilson tariff act, Wilson, Woodrow, Wolman, L., Women, working day for, Wyman, Bruce, 
36541	----	UNTO THIS LAST AND OTHER ESSAYS ON POLITICAL ECONOMY by JOHN RUSKIN London Melbourne & Toronto Ward Lock & Co Limited 1912 CONTENTS. PART I. PAGE THE POLITICAL ECONOMY OF ART 7 LECTURE I. 11 1. Discovery 23 2. Application 28 LECTURE II. 46 3. Accumulation 46 4. Distribution 65 ADDENDA 86 Note 1.--"Fatherly Authority" 86 " 2.--"Right to Public Support" 90 " 3.--"Trial Schools" 95 " 4.--"Public Favour" 101 " 5.--"Invention of new wants" 102 " 6.--"Economy of Literature" 104 " 7.--"Pilots of the State" 106 " 8.--"Silk and Purple" 107 PART II. UNTO THIS LAST 117 ESSAY I.--The Roots of Honour 127 II.--The Veins of Wealth 143 III.--"Qui Judicatis Terram" 156 IV.--Ad Valorem 173 PART III. ESSAYS ON POLITICAL ECONOMY[A] I.--MAINTENANCE OF LIFE: WEALTH, MONEY AND RICHES 207 Section 1. Wealth 214 " 2. Money 219 " 3. Riches 222 II.--NATURE OF WEALTH, VARIATIONS OF VALUE, THE NATIONAL STORE, NATURE OF LABOUR, VALUE AND PRICE, THE CURRENCY 225 III.--THE CURRENCY-HOLDERS AND STORE-HOLDERS, THE DISEASE OF DESIRE 252 IV.--LAWS AND GOVERNMENTS: LABOUR AND RICHES 278 [A] These Essays were afterwards revised and amplified, and published with others under the title "Munera Pulveris." THE POLITICAL ECONOMY OF ART. PREFACE. The greater part of the following treatise remains in the exact form in which it was read at Manchester; but the more familiar passages of it, which were trusted to extempore delivery, have been since written with greater explicitness and fullness than I could give them in speaking; and a considerable number of notes are added, to explain the points which could not be sufficiently considered in the time I had at my disposal in the lecture-room. Some apology may be thought due to the reader, for an endeavour to engage his attention on a subject of which no profound study seems compatible with the work in which I am usually employed. But profound study is not, in this case, necessary either to writer or reader, while accurate study, up to a certain point, is necessary for us all. Political economy means, in plain English, nothing more than "citizens' economy"; and its first principles ought, therefore, to be understood by all who mean to take the responsibility of citizens, as those of household economy by all who take the responsibility of householders. Nor are its first principles in the least obscure: they are, many of them, disagreeable in their practical requirements, and people in general pretend that they cannot understand, because they are unwilling to obey them; or, rather, by habitual disobedience, destroy their capacity of understanding them. But there is not one of the really great principles of the science which is either obscure or disputable--which might not be taught to a youth as soon as he can be trusted with an annual allowance, or to a young lady as soon as she is of age to be taken into counsel by the housekeeper. I might, with more appearance of justice, be blamed for thinking it necessary to enforce what everybody is supposed to know. But this fault will hardly be found with me, while the commercial events recorded daily in our journals, and still more the explanations attempted to be given of them, show that a large number of our so-called merchants are as ignorant of the nature of money as they are reckless, unjust, and unfortunate in its employment. The statements of economical principle given in the text, though I know that most, if not all, of them are accepted by existing authorities on the science, are not supported by references, because I have never read any author on political economy, except Adam Smith, twenty years ago.[1] Whenever I have taken up any modern book upon this subject, I have usually found it encumbered with inquiries into accidental or minor commercial results, for the pursuit of which an ordinary reader could have no leisure, and, by the complication of which, it seemed to me, the authors themselves had been not unfrequently prevented from seeing to the root of the business. [1] 1857. Finally, if the reader should feel inclined to blame me for too sanguine a statement of future possibilities in political practice, let him consider how absurd it would have appeared in the days of Edward I. if the present state of social economy had been then predicted as necessary, or even described as possible. And I believe the advance from the days of Edward I. to our own, great as it is confessedly, consists, not so much in what we have actually accomplished, as in what we are now enabled to conceive. LECTURE I. Among the various characteristics of the age in which we live, as compared with other ages of this not yet _very_ experienced world, one of the most notable appears to me to be the just and wholesome contempt in which we hold poverty. I repeat, the _just_ and _wholesome_ contempt; though I see that some of my hearers look surprised at the expression. I assure them, I use it in sincerity; and I should not have ventured to ask you to listen to me this evening, unless I had entertained a profound respect for wealth--true wealth, that is to say; for, of course, we ought to respect neither wealth nor anything else that is false of its kind: and the distinction between real and false wealth is one of the points on which I shall have a few words presently to say to you. But true wealth I hold, as I said, in great honour; and sympathize, for the most part, with that extraordinary feeling of the present age which publicly pays this honour to riches. I cannot, however, help noticing how extraordinary it is, and how this epoch of ours differs from all bygone epochs in having no philosophical nor religious worshippers of the ragged godship of poverty. In the classical ages, not only there were people who voluntarily lived in tubs, and who used gravely to maintain the superiority of tub-life to town-life, but the Greeks and Latins seem to have looked on these eccentric, and I do not scruple to say, absurd people, with as much respect as we do upon large capitalists and landed proprietors; so that really, in those days, no one could be described as purse proud, but only as empty-purse proud. And no less distinct than the honour which those curious Greek people pay to their conceited poor, is the disrespectful manner in which they speak of the rich; so that one cannot listen long either to them, or to the Roman writers who imitated them, without finding oneself entangled in all sorts of plausible absurdities; hard upon being convinced of the uselessness of collecting that heavy yellow substance which we call gold, and led generally to doubt all the most established maxims of political economy. Nor are matters much better in the middle ages. For the Greeks and Romans contented themselves with mocking at rich people, and constructing merry dialogues between Charon and Diogenes or Menippus, in which the ferryman and the cynic rejoiced together as they saw kings and rich men coming down to the shore of Acheron, in lamenting and lamentable crowds, casting their crowns into the dark waters, and searching, sometimes in vain, for the last coin out of all their treasures that could ever be of use to them. But these Pagan views of the matter were indulgent, compared with those which were held in the middle ages, when wealth seems to have been looked upon by the best men not only as contemptible, but as criminal. The purse round the neck is, then, one of the principal signs of condemnation in the pictured Inferno; and the Spirit of Poverty is reverenced with subjection of heart, and faithfulness of affection, like that of a loyal knight for his lady, or a loyal subject for his queen. And truly, it requires some boldness to quit ourselves of these feelings, and to confess their partiality or their error, which, nevertheless, we are certainly bound to do. For wealth is simply one of the greatest powers which can be entrusted to human hands: a power, not indeed to be envied, because it seldom makes us happy; but still less to be abdicated or despised; while, in these days, and in this country, it has become a power all the more notable, in that the possessions of a rich man are not represented, as they used to be, by wedges of gold or coffers of jewels, but by masses of men variously employed, over whose bodies and minds the wealth, according to its direction, exercises harmful or helpful influence, and becomes, in that alternative, Mammon either of Unrighteousness or of Righteousness. Now, it seemed to me that since, in the name you have given to this great gathering of British pictures, you recognise them as Treasures--that is, I suppose, as part and parcel of the real wealth of the country--you might not be uninterested in tracing certain commercial questions connected with this particular form of wealth. Most persons express themselves as surprised at its quantity; not having known before to what an extent good art had been accumulated in England: and it will, therefore, I should think, be held a worthy subject of consideration, what are the political interests involved in such accumulations; what kind of labour they represent, and how this labour may in general be applied and economized, so as to produce the richest results. Now, you must have patience with me, if in approaching the specialty of this subject, I dwell a little on certain points of general political science already known or established: for though thus, as I believe, established, some which I shall have occasion to rest arguments on are not yet by any means universally accepted; and therefore, though I will not lose time in any detailed defence of them, it is necessary that I should distinctly tell you in what form I receive, and wish to argue from them; and this the more, because there may perhaps be a part of my audience who have not interested themselves in political economy, as it bears on ordinary fields of labour, but may yet wish to hear in what way its principles can be applied to Art. I shall, therefore, take leave to trespass on your patience with a few elementary statements in the outset, and with, the expression of some general principles, here and there, in the course of our particular inquiry. To begin, then, with one of these necessary truisms: all economy, whether of states, households, or individuals, may be defined to be the art of managing labour. The world is so regulated by the laws of Providence, that a man's labour, well applied, is always amply sufficient to provide him during his life with all things needful to him, and not only with those, but with many pleasant objects of luxury; and yet farther, to procure him large intervals of healthful rest and serviceable leisure. And a nation's labour, well applied, is in like manner, amply sufficient to provide its whole population with good food and comfortable habitation; and not with those only, but with good education besides, and objects of luxury, art treasures, such as these you have around you now. But by those same laws of Nature and Providence, if the labour of the nation or of the individual be misapplied, and much more if it be insufficient,--if the nation or man be indolent and unwise,--suffering and want result, exactly in proportion to the indolence and improvidence,--to the refusal of labour, or to the misapplication of it. Wherever you see want, or misery, or degradation, in this world about you, there, be sure, either industry has been wanting, or industry has been in error. It is not accident, it is not Heaven-commanded calamity, it is not the original and inevitable evil of man's nature, which fill your streets with lamentation, and your graves with prey. It is only that, when there should have been providence, there has been waste; when there should have been labour, there has been lasciviousness; and, wilfulness, when there should have been subordination.[2] [2] Proverbs xiii. 23: "Much food is in the tillage of the poor: but there is that is destroyed for want of judgment." Now, we have warped the word "economy" in our English: language into a meaning which it has no business whatever to bear. In our use of it, it constantly signifies merely sparing or saving; economy of money means saving money--economy of time, sparing time, and so on. But that is a wholly barbarous use of the word--barbarous in a double sense, for it is not English, and it is bad Greek; barbarous in a treble sense, for it is not English, it is bad Greek, and it is worse sense. Economy no more means saving money than it means spending money. It means, the administration of a house; its stewardship; spending or saving, that is, whether money or time, or anything else, to the best possible advantage. In the simplest and clearest definition of it, economy, whether public or private, means the wise management of labour; and it means this mainly in three senses: namely, first, _applying_ your labour rationally; secondly, _preserving_ its produce carefully; lastly, _distributing_ its produce seasonably. I say first, applying your labour rationally; that is, so as to obtain the most precious things you can, and the most lasting things, by it: not growing oats in land where you can grow wheat, nor putting fine embroidery on a stuff that will not wear. Secondly, preserving its produce carefully; that is to say, laying up your wheat wisely in storehouses for the time of famine, and keeping your embroidery watchfully from the moth: and lastly, distributing its produce seasonably; that is to say, being able to carry your corn at once to the place where the people are hungry, and your embroideries to the places where they are gay, so fulfilling in all ways the Wise Man's description, whether of the queenly housewife or queenly nation. "She riseth while it is yet night, and giveth meat to her household, and a portion to her maidens. She maketh herself coverings of tapestry, her clothing is silk and purple. Strength and honour are in her clothing, and she shall rejoice in time to come." Now, you will observe that in this description of the perfect economist, or mistress of a household, there is a studied expression of the balanced division of her care between the two great objects of utility and splendour; in her right hand, food and flax, for life and clothing; in her left hand, the purple and the needlework, for honour and for beauty. All perfect housewifery or national economy is known by these two divisions; wherever either is wanting, the economy is imperfect. If the motive of pomp prevails, and the care of the national economist is directed only to the accumulation of gold, and of pictures, and of silk and marble, you know at once that the time must soon come when all these treasures shall be scattered and blasted in national ruin. If, on the contrary, the element of utility prevails, and the nation disdains to occupy itself in any wise with the arts of beauty or delight, not only a certain quantity of its energy calculated for exercise in those arts alone must be entirely wasted, which is bad economy, but also the passions connected with the utilities of property become morbidly strong, and a mean lust of accumulation merely for the sake of accumulation, or even of labour merely for the sake of labour, will banish at last the serenity and the morality of life, as completely, and perhaps more ignobly, than even the lavishness of pride and the lightness of pleasure. And similarly, and much more visibly, in private and household economy, you may judge always of its perfectness by its fair balance between the use and the pleasure of its possessions. You will see the wise cottager's garden trimly divided between its well-set vegetables, and its fragrant flowers; you will see the good housewife taking pride in her pretty table-cloth, and her glittering shelves, no less than in her well-dressed dish, and her full storeroom; the care in her countenance will alternate with gaiety, and though you will reverence her in her seriousness, you will know her best by her smile. Now, as you will have anticipated, I am going to address you, on this and our succeeding evening, chiefly on the subject of that economy which relates rather to the garden than the farm-yard. I shall ask you to consider with me the kind of laws by which we shall best distribute the beds of our national garden, and raise in it the sweetest succession of trees pleasant to the sight, and (in no forbidden sense) to be desired to make us wise. But, before proceeding to open this specialty of our subject, let me pause for a few moments to plead with you for the acceptance of that principle of government or authority which must be at the root of all economy, whether for use or for pleasure. I said, a few minutes ago, that a nation's labour, well applied, was amply sufficient to provide its whole population with good food, comfortable clothing, and pleasant luxury. But the good, instant, and constant application is everything. We must not, when our strong hands are thrown out of work, look wildly about for want of something to do with them. If ever we feel that want, it is a sign that all our household is out of order. Fancy a farmer's wife, to whom one or two of her servants should come at twelve o'clock at noon, crying that they had got nothing to do; that they did not know what to do next: and fancy still farther, the said farmer's wife looking hopelessly about her rooms and yard, they being all the while considerably in disorder, not knowing where to set the spare hand-maidens to work, and at last complaining bitterly that she had been obliged to give them their dinner for nothing. That's the type of the kind of political economy we practise too often in England. Would you not at once assert of such a mistress that she knew nothing of her duties? and would you not be certain, if the household were rightly managed, the mistress would be only too glad at any moment to have the help of any number of spare hands; that she would know in an instant what to set them to;--in an instant what part of to-morrow's work might be most serviceably forwarded, what part of next month's work most wisely provided for, or what new task of some profitable kind undertaken? and when the evening came, and she dismissed her servants to their recreation or their rest, or gathered them to the reading round the work-table, under the eaves in the sunset, would you not be sure to find that none of them had been overtasked by her, just because none had been left idle; that everything had been accomplished because all had been employed; that the kindness of the mistress had aided her presence of mind, and the slight labour had been entrusted to the weak, and the formidable to the strong; and that as none had been dishonoured by inactivity so none had been broken by toil? Now, the precise counterpart of such a household would be seen in a nation in which political economy was rightly understood. You complain of the difficulty of finding work for your men. Depend upon it, the real difficulty rather is to find men for your work. The serious question for you is not how many you have to feed, but how much you have to do; it is our inactivity, not our hunger, that ruins us: let us never fear that our servants should have a good appetite--our wealth is in their strength, not in their starvation. Look around this island of yours, and see what you have to do in it. The sea roars against your harbourless cliffs--you have to build the breakwater, and dig the port of refuge; the unclean pestilence ravins in your streets--you have to bring the full stream from the hills, and to send the free winds through the thoroughfare; the famine blanches your lips and eats away your flesh--you have to dig the moor and dry the marsh, to bid the morass give forth instead of engulphing, and to wring the honey and oil out of the rock. These things, and thousands such, we have to do, and shall have to do constantly, on this great farm of ours; for do not suppose that it is anything else than that. Precisely the same laws of economy which apply to the cultivation of a farm or an estate apply to the cultivation of a province or of an island. Whatever rebuke you would address to the improvident master of an ill-managed patrimony, precisely that rebuke we should address to ourselves, so far as we leave our population in idleness and our country in disorder. What would you say to the lord of an estate who complained to you of his poverty and disabilities, and, when you pointed out to him that his land was half of it overrun with weeds, and that his fences were all in ruin, and that his cattle-sheds were roofless, and his labourers lying under the hedges faint for want of food, he answered to you that it would ruin him to weed his land or to roof his sheds--that those were too costly operations for him to undertake, and that he knew not how to feed his labourers nor pay them? Would you not instantly answer, that instead of ruining him to weed his fields, it would save him; that his inactivity was his destruction, and that to set his labourers to work was to feed them? Now, you may add acre to acre, and estate to estate, as far as you like, but you will never reach a compass of ground which shall escape from the authority of these simple laws. The principles which are right in the administration of a few fields, are right also in the administration of a great country from horizon to horizon: idleness does not cease to be ruinous because it is extensive, nor labour to be productive because it is universal. Nay, but you reply, there is one vast difference between the nation's economy and the private man's: the farmer has full authority over his labourers; he can direct them to do what is needed to be done, whether they like it or not; and he can turn them away if they refuse to work, or impede others in their working, or are disobedient, or quarrelsome. There _is_ this great difference; it is precisely this difference on which I wish to fix your attention, for it is precisely this difference which you have to do away with. We know the necessity of authority in farm, or in fleet, or in army; but we commonly refuse to admit it in the body of the nation. Let us consider this point a little. In the various awkward and unfortunate efforts which the French have made at the development of a social system, they have at least stated one true principle, that of fraternity or brotherhood. Do not be alarmed; they got all wrong in their experiments, because they quite forgot that this fact of fraternity implied another fact quite as important--that of paternity or fatherhood. That is to say, if they were to regard the nation as one family, the condition of unity in that family consisted no less in their having a head, or a father, than in their being faithful and affectionate members, or brothers. But we must not forget this, for we have long confessed it with our lips, though we refuse to confess it in our lives. For half an hour every Sunday we expect a man in a black gown, supposed to be telling us truth, to address us as brethren, though we should be shocked at the notion of any brotherhood existing among us out of church. And we can hardly read a few sentences on any political subject without running a chance of crossing the phrase "paternal government," though we should be utterly horror-struck at the idea of governments claiming anything like a father's authority over us. Now, I believe those two formal phrases are in both instances perfectly binding and accurate, and that the image of the farm and its servants which I have hitherto used, as expressing a wholesome national organization, fails only of doing so, not because it is too domestic, but because it is not domestic enough; because the real type of a well-organized nation must be presented, not by a farm cultivated by servants who wrought for hire, and might be turned away if they refused to labour, but by a farm in which the master was a father, and in which all the servants were sons; which implied, therefore, in all its regulations, not merely the order of expediency, but the bonds of affection and responsibilities of relationship; and in which all acts and services were not only to be sweetened by brotherly concord, but to be enforced by fatherly authority.[3] [3] See note 1st, in Addenda [p. 86]. Observe, I do not mean in the least that we ought to place such an authority in the hands of any one person, or of any class or body of persons. But I do mean to say that as an individual who conducts himself wisely must make laws for himself which at some time or other may appear irksome or injurious, but which, precisely at the time they appear most irksome, it is most necessary he should obey, so a nation which means to conduct itself wisely, must establish authority over itself, vested either in kings, councils, or laws, which it must resolve to obey, even at times when the law or authority appears irksome to the body of the people, or injurious to certain masses of it. And this kind of national law has hitherto been only judicial; contented, that is, with an endeavour to prevent and punish violence and crime: but, as we advance in our social knowledge; we shall endeavour to make our government paternal as well as judicial; that is, to establish such laws and authorities as may at once direct us in our occupations, protect us against our follies, and visit us in our distresses: a government which shall repress dishonesty, as now it punishes theft; which shall show how the discipline of the masses may be brought to aid the toils of peace, as discipline of the masses has hitherto knit the sinews of battle; a government which shall have its soldiers of the ploughshare as well as its soldiers of the sword, and which shall distribute more proudly its golden crosses of industry--golden as the glow of the harvest, than now it grants its bronze crosses of honour--bronzed with the crimson of blood. I have not, of course, time to insist on the nature or details of government of this kind; only I wish to plead for your several and future consideration of this one truth, that the notion of Discipline and Interference lies at the very root of all human progress or power; that the "Let alone" principle is, in all things which man has to do with, the principle of death; that it is ruin to him, certain and total, if he lets his land alone--if he lets his fellow-men alone--if he lets his own soul alone. That his whole life, on the contrary, must, if it is healthy life, be continually one of ploughing and pruning, rebuking and helping, governing and punishing; and that therefore it is only in the concession of some great principle of restraint and interference in national action that he can ever hope to find the secret of protection against national degradation. I believe that the masses have a right to claim education from their government; but only so far as they acknowledge the duty of yielding obedience to their government. I believe they have a right to claim employment from their governours; but only so far as they yield to the governour the direction and discipline of their labour; and it is only so far as they grant to the men whom they may set over them the father's authority to check the childishnesses of national fancy, and direct the waywardnesses of national energy, that they have a right to ask that none of their distresses should be unrelieved, none of their weaknesses unwatched; and that no grief, nor nakedness, nor peril should exist for them, against which the father's hand was not outstretched, or the father's shield uplifted.[4] [4] Compare Wordsworth's Essay on the Poor-Law Amendment Bill. I quote one important passage:--"But, if it be not safe to touch the abstract question of man's right in a social state to help himself even in the last extremity, may we not still contend for the duty of a Christian government, standing _in loco parentis_ towards all its subjects, to make such effectual provision that no one shall be in danger of perishing either through the neglect or harshness of its legislation? Or, waiving this, is it not indisputable that the claim of the State to the allegiance, involves the protection of the subject? And, as all rights in one party impose a correlative duty upon another, it follows that the right of the State to require the services of its members, even to the jeoparding of their lives in the common defence, establishes a right in the people (not to be gainsaid by utilitarians and economists) to public support when, from any cause, they may be unable to support themselves."--(See note 2nd in Addenda [p. 90]). Now, I have pressed this upon you at more length than is needful or proportioned to our present purposes of inquiry, because I would not for the first time speak to you on this subject of political economy without clearly stating what I believe to be its first grand principle. But its bearing on the matter in hand is chiefly to prevent you from at once too violently dissenting from me when what I may state to you as advisable economy in art appears to imply too much restraint or interference with the freedom of the patron or artist. We are a little apt, though, on the whole a prudent nation, to act too immediately on our impulses, even in matters merely commercial; much more in those involving continual appeals to our fancies. How far, therefore, the proposed systems or restraints may be advisable, it is for you to judge; only I pray you not to be offended with them merely because they _are_ systems and restraints. Do you at all recollect that interesting passage of Carlyle, in which he compares, in this country and at this day, the understood and commercial value of man and horse; and in which he wonders that the horse, with its inferior brains and its awkward hoofiness, instead of handiness, should be always worth so many tens or scores of pounds in the market, while the man, so far from always commanding his price in the market, would often be thought to confer a service on the community by simply killing himself out of their way? Well, Carlyle does not answer his own question, because he supposes we shall at once see the answer. The value of the horse consists simply in the fact of your being able to put a bridle on him. The value of the man consists precisely in the same thing. If you can bridle him, or which is better, if he can bridle himself, he will be a valuable creature directly. Otherwise, in a commercial point of view, his value is either nothing, or accidental only. Only, of course, the proper bridle of man is not a leathern one: what kind of texture it is rightly made of, we find from that command, "Be ye not as the horse or as the mule which have no understanding, whose mouths must be held in with bit and bridle." You are not to be without the reins, indeed, but they are to be of another kind; "I will guide thee with mine Eye." So the bridle of man is to be the Eye of God; and if he rejects that guidance, then the next best for him is the horse's and the mule's, which have no understanding; and if he rejects that, and takes the bit fairly in his teeth, then there is nothing left for him than the blood that comes out of the city, up to the horsebridles. Quitting, however, at last these general and serious laws of government--or rather bringing them down to our own business in hand--we have to consider three points of discipline in that particular branch of human labour which is concerned, not with procuring of food, but the expression of emotion; we have to consider respecting art: first, how to apply our labour to it; then, how to accumulate or preserve the results of labour; and then, how to distribute them. But since in art the labour which we have to employ is the labour of a particular class of men--men who have special genius for the business, we have not only to consider how to apply the labour, but first of all, how to produce the labourer; and thus the question in this particular case becomes fourfold: first, how to get your man of genius; then, how to employ your man of genius; then, how to accumulate and preserve his work in the greatest quantity; and lastly, how to distribute his work to the best national advantage. Let us take up these questions in succession. I. DISCOVERY.--How are we to get our men of genius: that is to say, by what means may we produce among us, at any given time, the greatest quantity of effective art-intellect? A wide question, you say, involving an account of all the best means of art education. Yes, but I do not mean to go into the consideration of those; I want only to state the few principles which lie at the foundation of the matter. Of these, the first is that you have always to find your artist, not to make him; you can't manufacture him, any more than you can manufacture gold. You can find him, and refine him: you dig him out as he lies nugget-fashion in the mountain-stream; you bring him home; and you make him into current coin, or household plate, but not one grain of him can you originally produce. A certain quantity of art-intellect is born annually in every nation, greater or less according to the nature and cultivation of the nation or race of men; but a perfectly fixed quantity annually, not increaseable by one grain. You may lose it, or you may gather it; you may let it lie loose in the ravine, and buried in the sands, or you may make kings' thrones of it, and overlay temple gates with it, as you choose: but the best you can do with it is always merely sifting, melting, hammering, purifying--never creating. And there is another thing notable about this artistical gold; not only is it limited in quantity, but in use. You need not make thrones or golden gates with it unless you like, but assuredly you can't do anything else with it. You can't make knives of it, nor armour, nor railroads. The gold won't cut you, and it won't carry you; put it to a mechanical use, and you destroy it at once. It is quite true that in the greatest artists, their proper artistical faculty is united with every other; and you may make use of the other faculties, and let the artistical one lie dormant. For aught I know, there may be two or three Leonardo da Vincis employed at this moment in your harbours and railroads: but you are not employing their Leonardesque or golden faculty there, you are only oppressing and destroying it. And the artistical gift in average men is not joined with others; your born painter, if you don't make a painter of him, won't be a first-rate merchant, or lawyer; at all events, whatever he turns out, his own special gift is unemployed by you; and in no wise helps him in that other business. So here you have a certain quantity of a particular sort of intelligence, produced for you annually by providential laws, which you can only make use of by setting it to its own proper work, and which any attempt to use otherwise involves the dead loss of so much human energy. Well, then, supposing we wish to employ it, how is it to be best discovered and refined? It is easily enough discovered. To wish to employ it is to discover it. All that you need is, a school of trial[5] in every important town, in which those idle farmers' lads whom their masters never can keep out of mischief, and those stupid tailors' 'prentices who are always stitching the sleeves in wrong way upwards, may have a try at this other trade; only this school of trial must not be entirely regulated by formal laws of art education, but must ultimately be the workshop of a good master painter, who will try the lads with one kind of art and another, till he finds out what they are fit for. Next, after your trial school, you want your easy and secure employment, which is the matter of chief importance. For, even on the present system, the boys who have really intense art capacity, generally make painters of themselves; but then, the best half of their early energy is lost in the battle of life. Before a good painter can get employment, his mind has always been embittered, and his genius distorted. A common mind usually stoops, in plastic chill, to whatever is asked of it, and scrapes or daubs its way complacently into public favour.[6] But your great men quarrel with you, and you revenge yourselves by starving them for the first half of their lives. Precisely in the degree in which any painter possesses original genius, is at present the increase of moral certainty that during his early years he will have a hard battle to fight; and that just at the time when his conceptions ought to be full and happy, his temper gentle, and his hopes enthusiastic--just at that most critical period, his heart is full of anxieties and household cares; he is chilled by disappointments, and vexed by injustice; he becomes obstinate in his errors, no less than in his virtues, and the arrows of his aims are blunted, as the reeds of his trust are broken. [5] See note 3rd, in Addenda [p. 95]. [6] See note 4th, in Addenda [p. 101]. What we mainly want, therefore, is a means of sufficient and unagitated employment: not holding out great prizes for which young painters are to scramble; but furnishing all with adequate support, and opportunity to display such power as they possess without rejection or mortification. I need not say that the best field of labour of this kind would be presented by the constant progress of public works involving various decoration; and we will presently examine what kind of public works may thus, advantageously for the nation, be in constant progress. But a more important matter even than this of steady employment, is the kind of criticism with which you, the public, receive the works of the young men submitted to you. You may do much harm by indiscreet praise and by indiscreet blame; but remember, the chief harm is always done by blame. It stands to reason that a young man's work cannot be perfect. It _must_ be more or less ignorant; it must be more or less feeble; it is likely that it may be more or less experimental, and if experimental, here and there mistaken. If, therefore, you allow yourself to launch out into sudden barking at the first faults you see, the probability is that you are abusing the youth for some defect naturally and inevitably belonging to that stage of his progress; and that you might just as rationally find fault with a child for not being as prudent as a privy councillor, or with a kitten for not being as grave as a cat. But there is one fault which you may be quite sure is unnecessary, and therefore a real and blameable fault: that is haste, involving negligence. Whenever you see that a young man's work is either bold or slovenly, then you may attack it firmly; sure of being right. If his work is bold, it is insolent; repress his insolence: if it is slovenly, it is indolent; spur his indolence. So long as he works in that dashing or impetuous way, the best hope for him is in your contempt: and it is only by the fact of his seeming not to seek your approbation that you may conjecture he deserves it. But if he does deserve it, be sure that you give it him, else you not only run a chance of driving him from the right road by want of encouragement, but you deprive yourselves of the happiest privilege you will ever have of rewarding his labour. For it is only the young who can receive much reward from men's praise: the old, when they are great, get too far beyond and above you to care what you think of them. You may urge them then with sympathy, and surround them then with acclamation; but they will doubt your pleasure, and despise your praise. You might have cheered them in their race through the asphodel meadows of their youth; you might have brought the proud, bright scarlet into their faces, if you had but cried once to them "Well done," as they dashed up to the first goal of their early ambition. But now, their pleasure is in memory, and their ambition is in heaven. They can be kind to you, but you never more can be kind to them. You may be fed with the fruit and fullness of their old age, but you were as the nipping blight to them in their blossoming, and your praise is only as the warm winds of autumn to the dying branches. There is one thought still, the saddest of all, bearing on this withholding of early help. It is possible, in some noble natures, that the warmth and the affections of childhood may remain unchilled, though unanswered; and that the old man's heart may still be capable of gladness, when the long-withheld sympathy is given at last. But in these noble natures it nearly always happens, that the chief motive of earthly ambition has not been to give delight to themselves, but to their parents. Every noble youth looks back, as to the chiefest joy which this world's honour ever gave him, to the moment when first he saw his father's eyes flash with pride, and his mother turn away her head lest he should take her tears for tears of sorrow. Even the lover's joy, when some worthiness of his is acknowledged before his mistress, is not so great as that, for it is not so pure--the desire to exalt himself in her eyes mixes with that of giving her delight; but he does not need to exalt himself in his parents' eyes: it is with the pure hope of giving them pleasure that he comes to tell them what he has done, or what has been said of him; and therefore he has a purer pleasure of his own. And this purest and best of rewards you keep from him if you can: you feed him in his tender youth with ashes and dishonour; and then you come to him, obsequious, but too late, with your sharp laurel crown, the dew all dried from off its leaves; and you thrust it into his languid hand, and he looks at you wistfully. What shall he do with it? What can he do, but go and lay it on his mother's grave? Thus, then, you see that you have to provide for your young men: first, the searching or discovering school; then the calm employment; then the justice of praise: one thing more you have to do for them in preparing them for full service--namely, to make, in the noble sense of the word, gentlemen of them; that is to say, to take care that their minds receive such training, that in all they paint they shall see and feel the noblest things. I am sorry to say, that of all parts of an artist's education this is the most neglected among us; and that even where the natural taste and feeling of the youth have been pure and true, where there was the right stuff in him to make a gentleman of, you may too frequently discern some jarring rents in his mind, and elements of degradation in his treatment of subject, owing to want of gentle training, and of the liberal influence of literature. This is quite visible in our greatest artists, even in men like Turner and Gainsborough; while in the common grade of our second-rate painters the evil attains a pitch which is far too sadly manifest to need my dwelling upon it. Now, no branch of art economy is more important than that of making the intellect at your disposal pure as well as powerful; so that it may always gather for you the sweetest and fairest things. The same quantity of labour from the same man's hand, will, according as you have trained him, produce a lovely and useful work, or a base and hurtful one, and depend upon it, whatever value it may possess, by reason of the painter's skill, its chief and final value, to any nation, depends upon its being able to exalt and refine, as well as to please; and that the picture which most truly deserves the name of an art-treasure, is that which has been painted by a good man. You cannot but see how far this would lead, if I were to enlarge upon it. I must take it up as a separate subject some other time: only noticing at present that no money could be better spent by a nation than in providing a liberal and disciplined education for its painters, as they advance into the critical period of their youth; and that also, a large part of their power during life depends upon the kind of subjects which you, the public, ask them for, and therefore the kind of thoughts with which you require them to be habitually familiar. I shall have more to say on this head when we come to consider what employment they should have in public buildings. There are many other points of nearly as much importance as these, to be explained with reference to the development of genius; but I should have to ask you to come and hear six lectures instead of two if I were to go into their detail. For instance, I have not spoken of the way in which you ought to look for those artificers in various manual trades, who, without possessing the order of genius which you would desire to devote to higher purposes, yet possess wit, and humour, and sense of colour, and fancy for form--all commercially valuable as quantities of intellect, and all more or less expressible in the lower arts of ironwork, pottery, decorative sculpture, and such like. But these details, interesting as they are, I must commend to your own consideration, or leave for some future inquiry. I want just now only to set the bearings of the entire subject broadly before you, with enough of detailed illustration to make it intelligible; and therefore I must quit the first head of it here, and pass to the second, namely, how best to employ the genius we discover. A certain quantity of able hands and heads being placed at our disposal, what shall we most advisably set them upon? II. APPLICATION.--There are three main points the economist has to attend to in this. First, To set his men to various work. Secondly, To easy work. Thirdly, To lasting work. I shall briefly touch on the first two, for I want to arrest your attention on the last. I say first, to various work. Supposing you have two men of equal power as landscape painters--and both of them have an hour at your disposal. You would not set them both to paint the same piece of landscape. You would, of course, rather have two subjects than a repetition of one. Well, supposing them sculptors, will not the same rule hold? You naturally conclude at once that it will; but you will have hard work to convince your modern architects of that. They will put twenty men to work, to carve twenty capitals; and all shall be the same. If I could show you the architects' yards in England just now, all open at once, perhaps you might see a thousand clever men, all employed in carving the same design. Of the degradation and deathfulness to the art-intellect of the country involved in such a habit, I have more or less been led to speak before now; but I have not hitherto marked its definite tendency to increase the price of _work_, as such. When men are employed continually in carving the same ornaments, they get into a monotonous and methodical habit of labour--precisely correspondent to that in which they would break stones, or paint house-walls. Of course, what they do so constantly, they do easily; and if you excite them temporarily by an increase of wages, you may get much work done by them in a little time. But, unless so stimulated, men condemned to a monotonous exertion, work--and always, by the laws of human nature, _must_ work--only at a tranquil rate, not producing by any means a maximum result in a given time. But if you allow them to vary their designs, and thus interest their heads and hearts in what they are doing, you will find them become eager, first, to get their ideas expressed, and then to finish the expression of them; and the moral energy thus brought to bear on the matter quickens, and therefore cheapens, the production in a most important degree. Sir Thomas Deane, the architect of the new Museum at Oxford, told me, as I passed through Oxford on my way here, that he found that, owing to this cause alone, capitals of various design could be executed cheaper than capitals of similar design (the amount of hand labour in each being the same) by about 30 per cent. Well, that is the first way, then, in which you will employ your intellect well; and the simple observance of this plain rule of political economy will effect a noble revolution in your architecture, such as you cannot at present so much as conceive. Then the second way in which we are to guard against waste is by setting our men to the easiest, and therefore the quickest, work which will answer the purpose. Marble, for instance, lasts quite as long as granite, and is much softer to work; therefore, when you get hold of a good sculptor, give him marble to carve--not granite. That, you say, is obvious enough. Yes; but it is not so obvious how much of your workmen's time you waste annually in making them cut glass, after it has got hard, when you ought to make them mould it while it is soft. It is not so obvious how much expense you waste in cutting diamonds and rubies, which are the hardest things you can find, into shapes that mean nothing, when the same men might be cutting sandstone and freestone into shapes that meant something. It is not so obvious how much of the artists' time in Italy you waste, by forcing them to make wretched little pictures for you out of crumbs of stone glued together at enormous cost, when the tenth of the time would make good and noble pictures for you out of water-colour. I could go on giving you almost numberless instances of this great commercial mistake; but I should only weary and confuse you. I therefore commend also this head of our subject to your own meditation, and proceed to the last I named--the last I shall task your patience with to-night. You know we are now considering how to apply our genius; and we were to do it as economists, in three ways:-- To _various_ work; To _easy_ work; To _lasting_ work. This lasting of the work, then, is our final question. Many of you may, perhaps, remember that Michael Angelo was once commanded by Pietro di Medici to mould a statue out of snow, and that he obeyed the command.[7] I am glad, and we have all reason to be glad, that such a fancy ever came into the mind of the unworthy prince, and for this cause: that Pietro di Medici then gave, at the period of one great epoch of consummate power in the arts, the perfect, accurate; and intensest possible type of the greatest error which nations and princes can commit, respecting the power of genius entrusted to their guidance. You had there, observe, the strongest genius in the most perfect obedience; capable of iron independence, yet wholly submissive to the patron's will; at once the most highly accomplished and the most original, capable of doing as much as man could do, in any direction that man could ask. And its governour, and guide, and patron sets it to build a statue in snow--to put itself into the service of annihilation--to make a cloud of itself, and pass away from the earth. [7] See the noble passage on this tradition in "Casa Guidi Windows." Now this, so precisely and completely done by Pietro di Medici, is what we are all doing, exactly in the degree in which we direct the genius under our patronage to work in more or less perishable materials. So far as we induce painters to work in fading colours, or architects to build with imperfect structure, or in any other way consult only immediate ease and cheapness in the production of what we want, to the exclusion of provident thought as to its permanence and serviceableness in after ages; so far we are forcing our Michael Angelos to carve in snow. The first duty of the economist in art is, to see that no intellect shall thus glitter merely in the manner of hoar-frost; but that it shall be well vitrified, like a painted window, and shall be set so between shafts of stone and bands of iron, that it shall bear the sunshine upon it, and send the sunshine through it, from generation to generation. I can conceive, however, some political economist to interrupt me here, and say, "If you make your art wear too well, you will soon have too much of it; you will throw your artists quite out of work. Better allow for a little wholesome evanescence--beneficent destruction: let each age provide art for itself, or we shall soon have so many good pictures that we shall not know what to do with them." Remember, my dear hearers, who are thus thinking, that political economy, like every other subject, cannot be dealt with effectively if we try to solve two questions at a time instead of one. It is one question, how to get plenty of a thing; and another, whether plenty of it will be good for us. Consider these two matters separately; never confuse yourself by interweaving one with the other. It is one question, how to treat your fields so as to get a good harvest; another, whether you wish to have a good harvest, or would rather like to keep up the price of corn. It is one question, how to graft your trees so as to grow most apples; and quite another, whether having such a heap of apples in the store-room will not make them all rot. Now, therefore, that we are talking only about grafting and growing, pray do not vex yourselves with thinking what you are to do with the pippins. It may be desirable for us to have much art, or little--we will examine that by and by; but just now, let us keep to the simple consideration how to get plenty of good art if we want it. Perhaps it might be just as well that a man of moderate income should be able to possess a good picture, as that any work of real merit should cost £500 or £1,000; at all events, it is certainly one of the branches of political economy to ascertain how, if we like, we can get things in quantities--plenty of corn, plenty of wine, plenty of gold, or plenty of pictures. It has just been said, that the first great secret is to produce work that will last. Now, the conditions of work lasting are twofold: it must not only be in materials that will last, but it must be itself of a quality that will last--it must be good enough to bear the test of time. If it is not good, we shall tire of it quickly, and throw it aside--we shall have no pleasure in the accumulation of it. So that the first question of a good art-economist respecting any work is, Will it lose its flavour by keeping? It may be very amusing now, and look much like a work of genius. But what will be its value a hundred years hence? You cannot always ascertain this. You may get what you fancy to be work of the best quality, and yet find to your astonishment that it won't keep. But of one thing you may be sure, that art which is produced hastily will also perish hastily; and that what is cheapest to you now, is likely to be dearest in the end. I am sorry to say, the great tendency of this age is to expend its genius in perishable art of this kind, as if it were a triumph to burn its thoughts away in bonfires. There is a vast quantity of intellect and of labour consumed annually in our cheap illustrated publications; you triumph in them; and you think it is so grand a thing to get so many woodcuts for a penny. Why, woodcuts, penny and all, are as much lost to you as if you had invested your money in gossamer. More lost, for the gossamer could only tickle your face, and glitter in your eyes; it could not catch your feet and trip you up: but the bad art can, and does; for you can't like good woodcuts as long as you look at the bad ones. If we were at this moment to come across a Titian woodcut, or a Durer woodcut, we should not like it--those of us at least who are accustomed to the cheap work of the day. We don't like, and can't like, _that_ long; but when we are tired of one bad cheap thing, we throw it aside and buy another bad cheap thing; and so keep looking at bad things all our lives. Now, the very men who do all that quick bad work for us are capable of doing perfect work. Only, perfect work can't be hurried, and therefore it can't be cheap beyond a certain point. But suppose you pay twelve times as much as you do now, and you have one woodcut for a shilling instead of twelve; and the one woodcut for a shilling is as good as art can be, so that you will never tire of looking at it; and is struck on good paper with good ink, so that you will never wear it out by handling it; while you are sick of your penny-each cuts by the end of the week, and have torn them mostly in half too. Isn't your shilling's worth the best bargain? It is not, however, only in getting prints or woodcuts of the best kind that you will practise economy. There is a certain quality about an original drawing which you cannot get in a woodcut, and the best part of the genius of many men is only expressible in original work, whether with pen and ink--pencil or colours. This is not always the case; but in general, the best men are those who can only express themselves on paper or canvass; and you will, therefore, in the long run, get most for your money by buying original work; proceeding on the principle already laid down, that the best is likely to be the cheapest in the end. Of course, original work cannot be produced under a certain cost. If you want a man to make you a drawing which takes him six days, you must, at all events, keep him for six days in bread and water, fire and lodging; that is the lowest price at which he can do it for you, but that is not very dear: and the best bargain which can possibly be made honestly in art--the very ideal of a cheap purchase to the purchaser--is the original work of a great man fed for as many days as are necessary on bread and water, or perhaps we may say with as many onions as will keep him in good humour. That is the way by which you will always get most for your money; no mechanical multiplication or ingenuity of commercial arrangements will ever get you a better penny's worth of art than that. Without, however, pushing our calculations quite to this prison-discipline extreme, we may lay it down as a rule in art-economy, that original work is, on the whole, cheapest and best worth having. But precisely in proportion to the value of it as a production, becomes the importance of having it executed in permanent materials. And here we come to note the second main error of the day, that we not only ask our workmen for bad art, but we make them put it into bad substance. We have, for example, put a great quantity of genius, within the last twenty years, into water-colour drawing, and we have done this with the most reckless disregard whether either the colours or the paper will stand. In most instances, neither will. By accident, it may happen that the colours in a given drawing have been of good quality, and its paper uninjured by chemical processes. But you take not the least care to ensure these being so; I have myself seen the most destructive changes take place in water-colour drawings within twenty years after they were painted; and from all I can gather respecting the recklessness of modern paper manufacture, my belief is, that though you may still handle an Albert Durer engraving, two hundred years old, fearlessly, not one-half of that time will have passed over your modern water-colours, before most of them will be reduced to mere white or brown rags; and your descendants, twitching them contemptuously into fragments between finger and thumb, will mutter against you, half in scorn and half in anger, "Those wretched nineteenth-century people! they kept vapouring and fuming about the world, doing what they called business, and they couldn't make a sheet of paper that wasn't rotten." And note that this is no unimportant portion of your art economy at this time. Your water-colour painters are becoming every day capable of expressing greater and better things; and their material is especially adapted to the turn of your best artists' minds. The value which you could accumulate in work of this kind would soon become a most important item in the national art-wealth, if only you would take the little pains necessary to secure its permanence. I am inclined to think, myself, that water-colour ought not to be used on paper at all, but only on vellum, and then, if properly taken care of, the drawing would be almost imperishable. Still, paper is a much more convenient material for rapid work; and it is an infinite absurdity not to secure the goodness of its quality, when we could do so without the slightest trouble. Among the many favours which I am going to ask from our paternal government, when we get it, will be that it will supply its little boys with good paper. You have nothing to do but to let the government establish a paper manufactory, under the superintendence of any of our leading chemists, who should be answerable for the safety and completeness of all the processes of the manufacture. The government stamp on the corner of your sheet of drawing-paper, made in the perfect way, should cost you a shilling, which would add something to the revenue; and when you bought a water-colour drawing for fifty or a hundred guineas, you would have merely to look in the corner for your stamp, and pay your extra shilling for the security that your hundred guineas were given really for a drawing, and not for a coloured rag. There need be no monopoly or restriction in the matter; let the paper manufacturers compete with the government, and if people liked to save their shilling, and take their chance, let them; only, the artist and purchaser might then be sure of good material, if they liked, and now they cannot be. I should like also to have a government colour manufactory; though that is not so necessary, as the quality of colour is more within the artist's power of testing, and I have no doubt that any painter may get permanent colour from the respectable manufacturers, if he chooses. I will not attempt to follow the subject out at all as it respects architecture, and our methods of modern building; respecting which I have had occasion to speak before now. But I cannot pass without some brief notice our habit--continually, as it seems to me, gaining strength--of putting a large quantity of thought and work, annually, into things which are either in their nature necessarily perishable, as dress; or else into compliances with the fashion of the day, in things not necessarily perishable, as plate. I am afraid almost the first idea of a young rich couple setting up house in London, is, that they must have new plate. Their father's plate may be very handsome, but the fashion is changed. They will have a new service from the leading manufacturer, and the old plate, except a few apostle spoons, and a cup which Charles the Second drank a health in to their pretty ancestress, is sent to be melted down, and made up with new flourishes and fresh lustre. Now, so long as this is the case--so long, observe, as fashion has influence on the manufacture of plate--so long _you cannot have a goldsmith's art in this country_. Do you suppose any workman worthy the name will put his brains into a cup or an urn, which he knows is to go to the melting pot in half a score years? He will not; you don't ask or expect it of him. You ask of him nothing but a little quick handicraft--a clever twist of a handle here, and a foot there, a convolvulus from the newest school of design, a pheasant from Landseer's game cards; a couple of sentimental figures for supporters, in the style of the signs of insurance offices, then a clever touch with the burnisher, and there's your epergne, the admiration of all the footmen at the wedding-breakfast, and the torment of some unfortunate youth who cannot see the pretty girl opposite to him, through its tyrannous branches. But you don't suppose that _that's_ goldsmith's work? Goldsmith's work is made to last, and made with the man's whole heart and soul in it; true goldsmith's work, when it exists, is generally the means of education of the greatest painters and sculptors of the day. Francia was a goldsmith; Francia was not his own name, but that of his master the jeweller; and he signed his pictures almost always, "Francia, the goldsmith," for love of his master; Ghirlandajo was a goldsmith, and was the master of Michael Angelo; Verrocchio was a goldsmith, and was the master of Leonardo da Vinci. Ghiberti was a goldsmith, and beat out the bronze gates which Michael Angelo said might serve for gates of Paradise.[8] But if ever you want work like theirs again, you must keep it, though it should have the misfortune to become old fashioned. You must not break it up, nor melt it any more. There is no economy in that; you could not easily waste intellect more grievously. Nature may melt her goldsmith's work at every sunset if she chooses; and beat it out into chased bars again at every sunrise; but you must not. The way to have a truly noble service of plate, is to keep adding to it, not melting it. At every marriage, and at every birth, get a new piece of gold or silver if you will, but with noble workmanship on it, done for all time, and put it among your treasures; that is one of the chief things which gold was made for, and made incorruptible for. When we know a little more of political economy, we shall find that none but partially savage nations need, imperatively, gold for their currency;[9] but gold has been given us, among other things, that we might put beautiful work into its imperishable splendour, and that the artists who have the most wilful fancies may have a material which will drag out, and beat out, as their dreams require, and will hold itself together with fantastic tenacity, whatever rare and delicate service they set it upon. [8] Several reasons may account for the fact that goldsmith's work is so wholesome for young artists; first, that it gives great firmness of hand to deal for some time with a solid substance; again, that it induces caution and steadiness--a boy trusted with chalk and paper suffers an immediate temptation to scrawl upon it and play with it, but he dares not scrawl on gold, and he cannot play with it; and, lastly, that it gives great delicacy and precision of touch to work upon minute forms, and to aim at producing richness and finish of design correspondent to the preciousness of the material. [9] See note in Addenda on the nature of property [p. 107]. So here is one branch of decorative art in which rich people may indulge themselves unselfishly; if they ask for good art in it, they may be sure in buying gold and silver plate that they are enforcing useful education on young artists. But there is another branch of decorative art in which I am sorry to say we cannot, at least under existing circumstances, indulge ourselves, with the hope of doing good to anybody, I mean the great and subtle art of dress. And here I must interrupt the pursuit of our subject for a moment or two, in order to state one of the principles of political economy, which, though it is, I believe, now sufficiently understood and asserted by the leading masters of the science, is not yet, I grieve to say, acted upon by the plurality of those who have the management of riches. Whenever we spend money, we of course set people to work: that is the meaning of spending money; we may, indeed, lose it without employing anybody; but, whenever we spend it, we set a number of people to work, greater or less, of course, according to the rate of wages, but, in the long run, proportioned to the sum we spend. Well, your shallow people, because they see that however they spend money they are always employing somebody, and, therefore, doing some good, think and say to themselves, that it is all one _how_ they spend it--that all their apparently selfish luxury is, in reality, unselfish, and is doing just as much good as if they gave all their money away, or perhaps more good; and I have heard foolish people even declare it as a principle of political economy, that whoever invented a new want[10] conferred a good on the community. I have not words strong enough--at least I could not, without shocking you, use the words which would be strong enough--to express my estimate of the absurdity and the mischievousness of this popular fallacy. So, putting a great restraint upon myself, and using no hard words, I will simply try to state the nature of it, and the extent of its influence. [10] See note 5th, in Addenda [p. 102]. Granted, that whenever we spend money for whatever purpose, we set people to work; and, passing by, for the moment, the question whether the work we set them to is all equally healthy and good for them, we will assume that whenever we spend a guinea we provide an equal number of people with healthy maintenance for a given time. But, by the way in which we spend it, we entirely direct the labour of those people during that given time. We become their masters or mistresses, and we compel them to produce, within a certain period, a certain article. Now, that article may be a useful and lasting one, or it may be a useless and perishable one--it may be one useful to the whole community, or useful only to ourselves. And our selfishness and folly, or our virtue and prudence, are shown, not by our spending money, but by our spending it for the wrong or the right thing; and we are wise and kind, not in maintaining a certain number of people for a given period, but only in requiring them to produce, during that period, the kind of things which shall be useful to society, instead of those which are only useful to ourselves. Thus, for instance: if you are a young lady, and employ a certain number of sempstresses for a given time, in making a given number of simple and serviceable dresses, suppose, seven; of which you can wear one yourself for half the winter, and give six away to poor girls who have none, you are spending your money unselfishly. But if you employ the same number of sempstresses for the same number of days, in making four, or five, or six beautiful flounces for your own ball-dress--flounces which will clothe no one but yourself, and which you will yourself be unable to wear at more than one ball--you are employing your money selfishly. You have maintained, indeed, in each case, the same number of people; but in the one case you have directed their labour to the service of the community; in the other case you have consumed it wholly upon yourself. I don't say you are never to do so; I don't say you ought not sometimes to think of yourselves only, and to make yourselves as pretty as you can; only do not confuse coquettishness with benevolence, nor cheat yourselves into thinking that all the finery you can wear is so much put into the hungry mouths of those beneath you: it is not so; it is what you yourselves, whether you will or no, must sometimes instinctively feel it to be--it is what those who stand shivering in the streets, forming a line to watch you as you step out of your carriages, _know_ it to be; those fine dresses do not mean that so much has been put into their mouths, but that so much has been taken out of their mouths. The real politico-economical signification of every one of those beautiful toilettes, is just this; that you have had a certain number of people put for a certain number of days wholly under your authority, by the sternest of slave-masters--hunger and cold; and you have said to them, "I will feed you, indeed, and clothe you, and give you fuel for so many days; but during those days you shall work for me only: your little brothers need clothes, but you shall make none for them: your sick friend needs clothes, but you shall make none for her: you yourself will soon need another, and a warmer dress; but you shall make none for yourself. You shall make nothing but lace and roses for me; for this fortnight to come, you shall work at the patterns and petals, and then I will crush and consume them away in an hour." You will perhaps answer--"It may not be particularly benevolent to do this, and we won't call it so; but at any rate we do no wrong in taking their labour when we pay them their wages: if we pay for their work we have a right to it." No;--a thousand times no. The labour which you have paid for, does indeed become, by the act of purchase, your own labour: you have bought the hands and the time of those workers; they are, by right and justice, your own hands, your own time. But, have you a right to spend your own time, to work with your own hands, only for your own advantage?--much more, when, by purchase, you have invested your own person with the strength of others; and added to your own life, a part of the life of others? You may, indeed, to a certain extent, use their labour for your delight: remember, I am making no general assertions against splendour of dress, or pomp of accessories of life; on the contrary, there are many reasons for thinking that we do not at present attach enough importance to beautiful dress, as one of the means of influencing general taste and character. But I _do_ say, that you must weigh the value of what you ask these workers to produce for you in its own distinct balance; that on its own worthiness or desirableness rests the question of your kindness, and not merely on the fact of your having employed people in producing it: and I say farther, that as long as there are cold and nakedness in the land around you, so long there can be no question at all but that splendour of dress is a crime. In due time, when we have nothing better to set people to work at, it may be right to let them make lace and cut jewels; but, as long as there are any who have no blankets for their beds, and no rags for their bodies, so long it is blanket-making and tailoring we must set people to work at--not lace. And it would be strange, if at any great assembly which, while it dazzled the young and the thoughtless, beguiled the gentler hearts that beat beneath the embroidery, with a placid sensation of luxurious benevolence--as if by all that they wore in waywardness of beauty, comfort had been first given to the distressed, and aid to the indigent; it would be strange, I say, if, for a moment, the spirits of Truth and of Terror, which walk invisibly among the masques of the earth, would lift the dimness from our erring thoughts, and show us how--inasmuch as the sums exhausted for that magnificence would have given back the failing breath to many an unsheltered outcast on moor and street--they who wear it have literally entered into partnership with Death; and dressed themselves in his spoils. Yes, if the veil could be lifted not only from your thoughts, but from your human sight, you would see--the angels do see--on those gay white dresses of yours, strange dark spots, and crimson patterns that you knew not of--spots of the inextinguishable red that all the seas cannot wash away; yes, and among the pleasant flowers that crown your fair heads, and glow on your wreathed hair, you would see that one weed was always twisted which no one thought of--the grass that grows on graves. It was not, however, this last, this clearest and most appalling view of our subject, that I intended to ask you to take this evening; only it is impossible to set any part of the matter in its true light, until we go to the root of it. But the point which it is our special business to consider is, not whether costliness of dress is contrary to charity; but whether it is not contrary to mere worldly wisdom: whether, even supposing we knew that splendour of dress did not cost suffering or hunger, we might not put the splendour better in other things than dress. And, supposing our mode of dress were really graceful or beautiful, this might be a very doubtful question; for I believe true nobleness of dress to be an important means of education, as it certainly is a necessity to any nation which wishes to possess living art, concerned with portraiture of human nature. No good historical painting ever yet existed, or ever can exist, where the dresses of the people of the time are not beautiful: and had it not been for the lovely and fantastic dressing of the 13th to the 16th centuries, neither French, nor Florentine, nor Venetian art could have risen to anything like the rank it reached. Still, even then, the best dressing was never the costliest; and its effect depended much more on its beautiful and, in early times, modest, arrangement, and on the simple and lovely masses of its colour, than on gorgeousness of clasp or embroidery. Whether we can ever return to any of those more perfect types of form, is questionable; but there can be no question, that all the money we spend on the forms of dress at present worn, is, so far as any good purpose is concerned, wholly lost. Mind, in saying this, I reckon among good purposes, the purpose which young ladies are said sometimes to entertain--of being married; but they would be married quite as soon (and probably to wiser and better husbands) by dressing quietly, as by dressing brilliantly: and I believe it would only be needed to lay fairly and largely before them the real good which might be effected by the sums they spend in toilettes, to make them trust at once only to their bright eyes and braided hair for all the mischief they have a mind to. I wish we could, for once, get the statistics of a London season. There was much complaining talk in Parliament last week, of the vast sum the nation has given for the best Paul Veronese in Venice--£14,000: I wonder what the nation meanwhile has given for its ball-dresses! Suppose we could see the London milliners' bills, simply for unnecessary breadths of slip and flounce, from April to July; I wonder whether £14,000 would cover _them_. But the breadths of slip and flounce are by this time as much lost and vanished as last year's snow; only they have done less good: but the Paul Veronese will last for centuries, if we take care of it; and yet we grumble at the price given for the painting, while no one grumbles at the price of pride. Time does not permit me to go into any farther illustration of the various modes in which we build our statue out of snow, and waste our labour on things that vanish. I must leave you to follow out the subject for yourselves, as I said I should, and proceed, in our next lecture, to examine the two other branches of our subject, namely, how to accumulate our art, and how to distribute it. But, in closing, as we have been much on the topic of good government, both of ourselves and others, let me just give you one more illustration of what it means, from that old art of which, next evening, I shall try to convince you that the value, both moral and mercantile, is greater than we usually suppose. One of the frescoes by Ambrozio Lorenzetti, in the town-hall of Siena, represents, by means of symbolical figures, the principles of Good Civic Government and of Good Government in general. The figure representing this noble Civic Government is enthroned, and surrounded by figures representing the Virtues, variously supporting or administering its authority. Now, observe what work is given to each of these virtues. Three winged ones--Faith, Hope, and Charity--surround the head of the figure, not in mere compliance with the common and heraldic laws of precedence among Virtues, such as we moderns observe habitually, but with peculiar purpose on the part of the painter. Faith, as thus represented, ruling the thoughts of the Good Governour, does not mean merely religious faith, understood in those times to be necessary to all persons--governed no less than governours--but it means the faith which enables work to be carried out steadily, in spite of adverse appearances and expediencies; the faith in great principles, by which a civic ruler looks past all the immediate checks and shadows that would daunt a common man, knowing that what is rightly done will have a right issue, and holding his way in spite of pullings at his cloak and whisperings in his ear, enduring, as having in him a faith which is evidence of things unseen. And Hope, in like manner, is here not the heavenward hope which ought to animate the hearts of all men; but she attends upon Good Government, to show that all such government is _expectant_ as well as _conservative_; that if it ceases to be hopeful of better things, it ceases to be a wise guardian of present things: that it ought never, as long as the world lasts, to be wholly content with any existing state of institution or possession, but to be hopeful still of more wisdom and power; not clutching at it restlessly or hastily, but feeling that its real life consists in steady ascent from high to higher: conservative, indeed, and jealously conservative of old things, but conservative of them as pillars, not as pinnacles--as aids, but not as idols; and hopeful chiefly, and active, in times of national trial or distress, according to those first and notable words describing the queenly nation. "She riseth, _while it is yet night_." And again, the winged Charity which is attendant on Good Government has, in this fresco, a peculiar office. Can you guess what? If you consider the character of contest which so often takes place among kings for their crowns, and the selfish and tyrannous means they commonly take to aggrandize or secure their power, you will, perhaps, be surprised to hear that the office of Charity is to crown the King. And yet, if you think of it a little, you will see the beauty of the thought which sets her in this function: since in the first place, all the authority of a good governor should be desired by him only for the good of his people, so that it is only Love that makes him accept or guard his crown: in the second place, his chief greatness consists in the exercise of this love, and he is truly to be revered only so far as his acts and thoughts are those of kindness; so that Love is the light of his crown, as well as the giver of it: lastly, because his strength depends on the affections of his people, and it is only their love which can securely crown him, and for ever. So that Love is the strength of his crown as well as the light of it. Then, surrounding the King, or in various obedience to him, appear the dependent virtues, as Fortitude, Temperance, Truth, and other attendant spirits, of all which I cannot now give account, wishing you only to notice the one to whom are entrusted the guidance and administration of the public revenues. Can you guess which it is likely to be? Charity, you would have thought, should have something to do with the business; but not so, for she is too hot to attend carefully to it. Prudence, perhaps, you think of in the next place. No, she is too timid, and loses opportunities in making up her mind. Can it be Liberality then? No: Liberality is entrusted with some small sums; but she is a bad accountant, and is allowed no important place in the exchequer. But the treasures are given in charge to a virtue of which we hear too little in modern times, as distinct from others; Magnanimity: largeness of heart: not softness or weakness of heart, mind you--but capacity of heart--the great _measuring_ virtue, which weighs in heavenly balances all that may be given, and all that may be gained; and sees how to do noblest things in noblest ways: which of two goods comprehends and therefore chooses the greatest: which of two personal sacrifices dares and accepts the largest: which, out of the avenues of beneficence, treads always that which opens farthest into the blue fields of futurity: that character, in fine, which, in those words taken by us at first for the description of a Queen among the nations, looks less to the present power than to the distant promise; "Strength and honour are in her clothing--and she shall rejoice IN TIME TO COME." LECTURE II. The heads of our subject which remain for our consideration this evening are, you will remember, the accumulation and the distribution of works of art. Our complete inquiry fell into four divisions--first, how to get our genius; then, how to apply our genius; then, how to accumulate its results; and lastly, how to distribute them. We considered, last evening, how to discover and apply it;--we have to-night to examine the modes of its preservation and distribution. III. ACCUMULATION.--And now, in the outset, it will be well to face that objection which we put aside a little while ago; namely, that perhaps it is not well to have a great deal of good art; and that it should not be made too cheap. "Nay," I can imagine some of the more generous among you, exclaiming, "we will not trouble you to disprove that objection; of course it is a selfish and base one: good art, as well as other good things, ought to be made as cheap as possible, and put as far as we can within the reach of everybody." Pardon me, I am not prepared to admit that. I rather side with the selfish objectors, and believe that art ought not to be made cheap, beyond a certain point; for the amount of pleasure that you can receive from any great work, depends wholly on the quantity of attention and energy of mind you can bring to bear upon it. Now, that attention and energy depend much more on the freshness of the thing than you would at all suppose; unless you very carefully studied the movements of your own minds. If you see things of the same kind and of equal value very frequently, your reverence for them is infallibly diminished, your powers of attention get gradually wearied, and your interest and enthusiasm worn out; and you cannot in that state bring to any given work the energy necessary to enjoy it. If, indeed, the question were only between enjoying a great many pictures each a little, or one picture very much, the sum of enjoyment being in each case the same, you might rationally desire to possess rather the larger quantity, than the small; both because one work of art always in some sort illustrates another, and because quantity diminishes the chances of destruction. But the question is not a merely arithmetical one of this kind. Your fragments of broken admirations will not, when they are put together, make up one whole admiration; two and two, in this case, do not make four, nor anything like four. Your good picture, or book, or work of art of any kind, is always in some degree fenced and closed about with difficulty. You may think of it as of a kind of cocoa-nut, with very often rather an unseemly shell, but good milk and kernel inside. Now, if you possess twenty cocoa-nuts, and being thirsty, go impatiently from one to the other, giving only a single scratch with the point of your knife to the shell of each, you will get no milk from all the twenty. But if you leave nineteen of them alone, and give twenty cuts to the shell of one, you will get through it, and at the milk of it. And the tendency of the human mind is always to get tired before it has made its twenty cuts; and to try another nut; and moreover, even if it has perseverance enough to crack its nuts, it is sure to try to eat too many, and so choke itself. Hence, it is wisely appointed for us that few of the things we desire can be had without considerable labour, and at considerable intervals of time. We cannot generally get our dinner without working for it, and that gives us appetite for it; we cannot get our holiday without waiting for it, and that gives us zest for it; and we ought not to get our picture without paying for it, and that gives us a mind to look at it. Nay, I will even go so far as to say, that we ought not to get books too cheaply. No book, I believe, is ever worth half so much to its reader as one that has been coveted for a year at a bookstall, and bought out of saved half-pence; and perhaps a day or two's fasting. That's the way to get at the cream of a book. And I should say more on this matter, and protest as energetically as I could against the plague of cheap literature, with which we are just now afflicted, but that I fear your calling me to order, as being unpractical, because I don't quite see my way at present to making everybody fast for their books. But one may see that a thing is desirable and possible, even though one may not at once know the best way to it--and in my island of Barataria, when I get it well into order, I assure you no book shall be sold for less than a pound sterling; if it can be published cheaper than that, the surplus shall all go into my treasury, and save my subjects taxation in other directions; only people really poor, who cannot pay the pound, shall be supplied with the books they want for nothing, in a certain limited quantity. I haven't made up my mind about the number yet, and there are several other points in the system yet unsettled; when they are all determined, if you will allow me, I will come and give you another lecture, on the political economy of literature.[11] [11] See note 6th, in Addenda [p. 104]. Meantime, returning to our immediate subject, I say to my generous hearers, who want to shower Titians and Turners upon us, like falling leaves, "Pictures ought not to be too cheap;" but in much stronger tone I would say to those who want to keep up the prices of pictorial property, that pictures ought not to be too dear, that is to say, not as dear as they are. For, as matters at present stand, it is wholly impossible for any man in the ordinary circumstances of English life to possess himself of a piece of great art. A modern drawing of average merit, or a first-class engraving, may perhaps, not without some self-reproach, be purchased out of his savings by a man of narrow income; but a satisfactory example of first-rate art--masterhands' work--is wholly out of his reach. And we are so accustomed to look upon this as the natural course and necessity of things, that we never set ourselves in any wise to diminish the evil; and yet it is an evil perfectly capable of diminution. It is an evil precisely similar in kind to that which existed in the middle ages, respecting good books, and which everybody then, I suppose, thought as natural as we do now our small supply of good pictures. You could not then study the work of a great historian, or great poet, any more than you can now study that of a great painter, but at heavy cost. If you wanted a book, you had to get it written out for you, or to write it out for yourself. But printing came, and the poor man may read his Dante and his Homer; and Dante and Homer are none the worse for that. But it is only in literature that private persons of moderate fortune can possess and study greatness: they can study at home no greatness in art; and the object of that accumulation which we are at present aiming at, as our third object in political economy, is to bring great art in some degree within the reach of the multitude; and, both in larger and more numerous galleries than we now possess, and by distribution, according to his wealth and wish, in each man's home, to render the influence of art somewhat correspondent in extent to that of literature. Here, then, is the subtle balance which your economist has to strike: to accumulate so much art as to be able to give the whole nation a supply of it, according to its need, and yet to regulate its distribution so that there shall be no glut of it, nor contempt. A difficult balance, indeed, for us to hold, if it were left merely to our skill to poise; but the just point between poverty and profusion has been fixed for us accurately by the wise laws of Providence. If you carefully watch for all the genius you can detect, apply it to good service, and then reverently preserve what it produces, you will never have too little art; and if, on the other hand, you never force an artist to work hurriedly, for daily bread, nor imperfectly, because you would rather have showy works than complete ones, you will never have too much. Do not force the multiplication of art, and you will not have it too cheap; do not wantonly destroy it, and you will not have it too dear. "But who wantonly destroys it?" you will ask. Why, we all do. Perhaps you thought, when I came to this part of our subject, corresponding to that set forth in our housewife's economy by the "keeping her embroidery from the moth," that I was going to tell you only how to take better care of pictures, how to clean them, and varnish them, and where to put them away safely when you went out of town. Ah, not at all. The utmost I have to ask of you is, that you will not pull them to pieces, and trample them under your feet. "What!" you will say, "when do we do such things? Haven't we built a perfectly beautiful gallery for all the pictures we have to take care of?" Yes, you have, for the pictures which are definitely sent to Manchester to be taken care of. But there are quantities of pictures out of Manchester which it is your business, and mine too, to take care of no less than of these, and which we are at this moment employing ourselves in pulling to pieces by deputy. I will tell you what they are, and where they are, in a minute; only first let me state one more of those main principles of political economy on which the matter hinges. I must begin a little apparently wide of the mark, and ask you to reflect if there is any way in which we waste money more in England, than in building fine tombs? Our respect for the dead, when they are _just_ dead, is something wonderful, and the way we show it more wonderful still. We show it with black feathers and black horses; we show it with black dresses and bright heraldries; we show it with costly obelisks and sculptures of sorrow, which spoil half of our most beautiful cathedrals. We show it with frightful gratings and vaults, and lids of dismal stone, in the midst of the quiet grass; and last, and not least, we show it by permitting ourselves to tell any number of lies we think amiable or credible, in the epitaph. This feeling is common to the poor as well as the rich, and we all know how many a poor family will nearly ruin themselves, to testify their respect for some member of it in his coffin, whom they never much cared for when he was out of it; and how often it happens that a poor old woman will starve herself to death, in order that she may be respectably buried. Now, this being one of the most complete and special ways of wasting money;--no money being less productive of good, or of any percentage whatever, than that which we shake away from the ends of undertakers' plumes--it is of course the duty of all good economists, and kind persons, to prove and proclaim continually, to the poor as well as the rich, that respect for the dead is not really shown by laying great stones on them to tell us where they are laid; but by remembering where they are laid, without a stone to help us; trusting them to the sacred grass and saddened flowers; and still more, that respect and love are shown to them, not by great monuments to them which we build with _our_ hands, but by letting the monuments stand, which they built with _their own_. And this is the point now in question. Observe, there are two great reciprocal duties concerning industry, constantly to be exchanged between the living and the dead. We, as we live and work, are to be always thinking of those who are to come after us; that what we do may be serviceable, as far as we can make it so, to them as well as to us. Then, when we die, it is the duty of those who come after us to accept this work of ours with thanks and remembrance, not thrusting it aside or tearing it down the moment they think they have no use for it. And each generation will only be happy or powerful to the pitch that it ought to be, in fulfilling these two duties to the Past and the Future. Its own work will never be rightly done, even for itself--never good, or noble, or pleasurable to its own eyes--if it does not prepare it also for the eyes of generations yet to come. And its own possessions will never be enough for it, and its own wisdom never enough for it, unless it avails itself gratefully and tenderly of the treasures and the wisdom bequeathed to it by its ancestors. For, be assured, that all the best things and treasures of this world are not to be produced by each generation for itself; but we are all intended, not to carve our work in snow that will melt, but each and all of us to be continually rolling a great white gathering snowball, higher and higher--larger and larger--along the Alps of human power. Thus the science of nations is to be accumulative from father to son: each learning a little more and a little more; each receiving all that was known, and adding its own gain: the history and poetry of nations are to be accumulative; each generation treasuring the history and the songs of its ancestors, adding its own history and its own songs: and the art of nations is to be accumulative, just as science and history are; the work of living men not superseding, but building itself upon the work of the past. Nearly every great and intellectual race of the world has produced, at every period of its career, an art with some peculiar and precious character about it, wholly unattainable by any other race, and at any other time; and the intention of Providence concerning that art, is evidently that it should all grow together into one mighty temple; the rough stones and the smooth all finding their place, and rising, day by day, in richer and higher pinnacles to heaven. Now, just fancy what a position the world, considered as one great workroom--one great factory in the form of a globe--would have been in by this time, if it had in the least understood this duty, or been capable of it. Fancy what we should have had around us now, if, instead of quarrelling and fighting over their work, the nations had aided each other in their work, or if even in their conquests, instead of effacing the memorials of those they succeeded and subdued, they had guarded the spoils of their victories. Fancy what Europe would be now, if the delicate statues and temples of the Greeks,--if the broad roads and massy walls of the Romans,--if the noble and pathetic architecture of the middle ages, had not been ground to dust by mere human rage. You talk of the scythe of Time, and the tooth of Time: I tell you, Time is scytheless and toothless; it is we who gnaw like the worm--we who smite like the scythe. It is ourselves who abolish--ourselves who consume: we are the mildew, and the flame, and the soul of man is to its own work as the moth, that frets when it cannot fly, and as the hidden flame that blasts where it cannot illumine. All these lost treasures of human intellect have been wholly destroyed by human industry of destruction; the marble would have stood its two thousand years as well in the polished statue as in the Parian cliff; but we men have ground it to powder, and mixed it with our own ashes. The walls and the ways would have stood--it is we who have left not one stone upon another, and restored its pathlessness to the desert; the great cathedrals of old religion would have stood--it is we who have dashed down the carved work with axes and hammers, and bid the mountain-grass bloom upon the pavement, and the sea-winds chaunt in the galleries. You will perhaps think all this was somehow necessary for the development of the human race. I cannot stay now to dispute that, though I would willingly; but do you think it is _still_ necessary for that development? Do you think that in this nineteenth century it is still necessary for the European nations to turn all the places where their principal art-treasures are into battle-fields? For that is what they are doing even while I speak; the great firm of the world is managing its business at this moment, just as it has done in past time. Imagine what would be the thriving circumstances of a manufacturer of some delicate produce--suppose glass, or china--in whose workshop and exhibition rooms all the workmen and clerks began fighting at least once a day, first blowing off the steam, and breaking all the machinery they could reach; and then making fortresses of all the cupboards, and attacking and defending the show-tables, the victorious party finally throwing everything they could get hold of out of the window, by way of showing their triumph, and the poor manufacturer picking up and putting away at last a cup here and a handle there. A fine prosperous business that would be, would it not? and yet that is precisely the way the great manufacturing firm of the world carries on its business. It has so arranged its political squabbles for the last six or seven hundred years, that not one of them could be fought out but in the midst of its most precious art; and it so arranges them to this day. For example, if I were asked to lay my finger, in a map of the world, on the spot of the world's surface which contained at this moment the most singular concentration of art-teaching and art-treasure, I should lay it on the name of the town of Verona. Other cities, indeed, contain more works of carriageable art, but none contain so much of the glorious local art, and of the springs and sources of art, which can by no means be made subjects of package or porterage, nor, I grieve to say, of salvage. Verona possesses, in the first place, not the largest, but the most perfect and intelligible Roman amphitheatre that exists, still unbroken in circle of step, and strong in succession of vault and arch: it contains minor Roman monuments, gateways, theatres, baths, wrecks of temples, which give the streets of its suburbs a character of antiquity unexampled elsewhere, except in Rome itself. But it contains, in the next place, what Rome does not contain--perfect examples of the great twelfth-century Lombardic architecture, which was the root of all the mediæval art of Italy, without which no Giottos, no Angelicos, no Raphaels would have been possible: it contains that architecture, not in rude forms, but in the most perfect and loveliest types it ever attained--contains those, not in ruins, nor in altered and hardly decipherable fragments, but in churches perfect from porch to apse, with all their carving fresh, their pillars firm, their joints unloosened. Besides these, it includes examples of the great thirteenth- and fourteenth-century Gothic of Italy, not merely perfect, but elsewhere unrivalled. At Rome, the Roman--at Pisa, the Lombard, architecture may be seen in greater or in equal nobleness; but not at Rome, nor Pisa, nor Florence, nor in any city of the world, is there a great mediæval Gothic like the Gothic of Verona. Elsewhere, it is either less pure in type or less lovely in completion: only at Verona may you see it in the simplicity of its youthful power, and the tenderness of its accomplished beauty. And Verona possesses, in the last place, the loveliest Renaissance architecture of Italy, not disturbed by pride, nor defiled by luxury, but rising in fair fulfilment of domestic service, serenity of effortless grace, and modesty of home seclusion; its richest work given to the windows that open on the narrowest streets and most silent gardens. All this she possesses, in the midst of natural scenery such as assuredly exists nowhere else in the habitable globe--a wild Alpine river foaming at her feet, from whose shore the rocks rise in a great crescent, dark with cypress, and misty with olive: illimitably, from before her southern gates, the tufted plains of Italy sweep and fade in golden light; around her, north and west, the Alps crowd in crested troops, and the winds of Benacus bear to her the coolness of their snows. And this is the city--such, and possessing such things as these--at whose gates the decisive battles of Italy are fought continually: three days her towers trembled with the echo of the cannon of Arcola; heaped pebbles of the Mincio divide her fields to this hour with lines of broken rampart, whence the tide of war rolled back to Novara; and now on that crescent of her eastern cliffs, whence the full moon used to rise through the bars of the cypresses in her burning summer twilights, touching with soft increase of silver light the rosy marbles of her balconies--along the ridge of that encompassing rock, other circles are increasing now, white and pale; walled towers of cruel strength, sable-spotted with cannon-courses. I tell you, I have seen, when the thunderclouds came down on those Italian hills, and all their crags were dipped in the dark, terrible purple, as if the winepress of the wrath of God had stained their mountain-raiment--I have seen the hail fall in Italy till the forest branches stood stripped and bare as if blasted by the locust; but the white hail never fell from those clouds of heaven as the black hail will fall from the clouds of hell, if ever one breath of Italian life stirs again in the streets of Verona. Sad as you will feel this to be, I do not say that you can directly prevent it; you cannot drive the Austrians out of Italy, nor prevent them from building forts where they choose. But I do say,[12] that you, and I, and all of us, ought to be both acting and feeling with a full knowledge and understanding of these things, and that, without trying to excite revolutions or weaken governments, we may give our own thoughts and help, so as in a measure to prevent needless destruction. We should do this, if we only realized the thing thoroughly. You drive out day by day through your own pretty suburbs, and you think only of making, with what money you have to spare, your gateways handsomer, and your carriage-drives wider--and your drawing-rooms more splendid, having a vague notion that you are all the while patronizing and advancing art, and you make no effort to conceal the fact, that within a few hours' journey of you, there are gateways and drawing-rooms which might just as well be yours as these, all built already; gateways built by the greatest masters of sculpture that ever struck marble; drawing-rooms, painted by Titian and Veronese; and you won't accept, nor save these as they are, but you will rather fetch the house-painter from over the way, and let Titian and Veronese house the rats. "Yes," of course, you answer; "we want nice houses here, not houses in Verona. What should we do with houses in Verona?" And I answer, do precisely what you do with the most expensive part of your possessions here: take pride in them--only a noble pride. You know well, when you examine your own hearts, that the greater part of the sums you spend on possessions are spent for pride. Why are your carriages nicely painted and finished outside? You don't see the outsides as you sit in them--the outsides are for other people to see. Why are your exteriors of houses so well finished, your furniture so polished and costly, but for other people to see? You are just as comfortable yourselves, writing on your old friend of a desk, with the white cloudings in his leather, and using the light of a window which is nothing but a hole in the brick wall. And all that is desirable to be done in this matter, is merely to take pride in preserving great art, instead of in producing mean art; pride in the possession of precious and enduring things, a little way off, instead of slight and perishing things near at hand. You know, in old English times, our kings liked to have lordships and dukedoms abroad, and why should not you merchant princes like to have lordships and estates abroad? Believe me, rightly understood, it would be a prouder, and in the full sense of our English word, more "respectable" thing to be lord of a palace at Verona, or of a cloister full of frescos at Florence, than to have a file of servants dressed in the finest liveries that ever tailor stitched, as long as would reach from here to Bolton:--yes, and a prouder thing to send people to travel in Italy, who would have to say every now and then, of some fair piece of art, "Ah! this was _kept_ here for us by the good people of Manchester," than to bring them travelling all the way here, exclaiming of your various art treasures, "These were _brought_ here for us, (not altogether without harm) by the good people of Manchester." "Ah!" but you say, "the Art Treasures Exhibition will pay; but Veronese palaces won't." Pardon me. They _would_ pay, less directly, but far more richly. Do you suppose it is in the long run good for Manchester, or good for England, that the Continent should be in the state it is? Do you think the perpetual fear of revolution, or the perpetual repression of thought and energy that clouds and encumbers the nations of Europe, is eventually profitable for _us_? Were we any the better of the course of affairs in '48; or has the stabling of the dragoon horses in the great houses of Italy, any distinct effect in the promotion of the cotton-trade? Not so. But every stake that you could hold in the stability of the Continent, and every effort that you could make to give example of English habits and principles on the Continent, and every kind deed that you could do in relieving distress and preventing despair on the Continent, would have tenfold reaction on the prosperity of England, and open and urge, in a thousand unforeseen directions, the sluices of commerce and the springs of industry. [12] The reader can hardly but remember Mrs. Browning's beautiful appeal for Italy, made on the occasion of the first great Exhibition of Art in England:-- "O Magi of the east and of the west, Your incense, gold, and myrrh are excellent!-- What gifts for Christ, then, bring ye with the rest? Your hands have worked well. Is your courage spent In handwork only? Have you nothing best, Which generous souls may perfect and present, And He shall thank the givers for? no light Of teaching, liberal nations, for the poor, Who sit in darkness when it is not night? No cure for wicked children? Christ,--no cure, No help for women, sobbing out of sight Because men made the laws? no brothel-lure Burnt out by popular lightnings? Hast thou found No remedy, my England, for such woes? No outlet, Austria, for the scourged and bound, No call back for the exiled? no repose, Russia, for knouted Poles worked underground, And gentle ladies bleached among the snows? No mercy for the slave, America? No hope for Rome, free France, chivalric France? Alas, great nations have great shames, I say. No pity, O world, no tender utterance Of benediction, and prayers stretched this way For poor Italia, baffled by mischance? O gracious nations, give some ear to me! You all go to your Fair, and I am one Who at the roadside of humanity Beseech your alms,--God's justice to be done. So, prosper!" I could press, if I chose, both these motives upon you, of pride and self-interest, with more force, but these are not motives which ought to be urged upon you at all. The only motive that I ought to put before you is simply that it would be right to do this; that the holding of property abroad, and the personal efforts of Englishmen to redeem the condition of foreign nations, are among the most direct pieces of duty which our wealth renders incumbent upon us. I do not--and in all truth and deliberateness I say this--I do not know anything more ludicrous among the self-deceptions of well-meaning people than their notion of patriotism, as requiring them to limit their efforts to the good of their own country;--the notion that charity is a geographical virtue, and that what it is holy and righteous to do for people on one bank of a river, it is quite improper and unnatural to do for people on the other. It will be a wonderful thing, some day or other, for the Christian world to remember, that it went on thinking for two thousand years that neighbours were neighbours at Jerusalem, but not at Jericho; a wonderful thing for us English to reflect, in after-years, how long it was before we could shake hands with anybody across that shallow salt wash, which the very chalk-dust of its two shores whitens from Folkestone to Ambleteuse. Nor ought the motive of gratitude, as well as that of mercy, to be without its influence on you, who have been the first to ask to see, and the first to show to us, the treasures which this poor lost Italy has given to England. Remember all these things that delight you here were hers--hers either in fact or in teaching; hers, in fact, are all the most powerful and most touching paintings of old time that now glow upon your walls; hers in teaching are all the best and greatest of descendant souls--your Reynolds and your Gainsborough never could have painted but for Venice; and the energies which have given the only true life to your existing art were first stirred by voices of the dead, that haunted the Sacred Field of Pisa. Well, all these motives for some definite course of action on our part towards foreign countries rest upon very serious facts; too serious, perhaps you will think, to be interfered with; for we are all of us in the habit of leaving great things alone, as if Providence would mind them, and attending ourselves only to little things which we know, practically, Providence doesn't mind unless we do. We are ready enough to give care to the growing of pines and lettuces, knowing that they don't grow Providentially sweet or large unless we look after them; but we don't give any care to the good of Italy or Germany, because we think that they will grow Providentially happy without any of our meddling. Let us leave the great things, then, and think of little things; not of the destruction of whole provinces in war, which it may not be any business of ours to prevent; but of the destruction of poor little pictures in peace, from which it surely would not be much out of our way to save them. You know I said, just now, we were all of us engaged in pulling pictures to pieces by deputy, and you did not believe me. Consider, then, this similitude of ourselves. Suppose you saw (as I doubt not you often do see) a prudent and kind young lady sitting at work, in the corner of a quiet room, knitting comforters for her cousins, and that just outside, in the hall, you saw a cat and her kittens at play among the family pictures; amusing themselves especially with the best Vandykes, by getting on the tops of the frames, and then scrambling down the canvasses by their claws; and on someone's informing the young lady of these proceedings of the cat and kittens, suppose she answered that it wasn't her cat, but her sister's, and the pictures weren't hers, but her uncle's, and she couldn't leave her work, for she had to make so many pairs of comforters before dinner. Would you not say that the prudent and kind young lady was, on the whole, answerable for the additional touches of claw on the Vandykes? Now, that is precisely what we prudent and kind English are doing, only on a larger scale. Here we sit in Manchester, hard at work, very properly, making comforters for our cousins all over the world. Just outside there in the hall--that beautiful marble hall of Italy--the cats and kittens and monkeys are at play among the pictures: I assure you, in the course of the fifteen years in which I have been working in those places in which the most precious remnants of European art exist, a sensation, whether I would or no, was gradually made distinct and deep in my mind, that I was living and working in the midst of a den of monkeys;--sometimes amiable and affectionate monkeys, with all manner of winning ways and kind intentions;--more frequently selfish and malicious monkeys, but, whatever their disposition, squabbling continually about nuts, and the best places on the barren sticks of trees; and that all this monkeys' den was filled, by mischance, with precious pictures, and the witty and wilful beasts were always wrapping themselves up and going to sleep in pictures, or tearing holes in them to grin through; or tasting them and spitting them out again, or twisting them up into ropes and making swings of them; and that sometimes only, by watching one's opportunity, and bearing a scratch or a bite, one could rescue the corner of a Tintoret, or Paul Veronese, and push it through the bars into a place of safety. Literally, I assure you, this was, and this is, the fixed impression on my mind of the state of matters in Italy. And see how. The professors of art in Italy, having long followed a method of study peculiar to themselves, have at last arrived at a form of art peculiar to themselves; very different from that which was arrived at by Correggio and Titian. Naturally, the professors like their own form the best; and, as the old pictures are generally not so startling to the eye as the modern ones, the dukes and counts who possess them, and who like to see their galleries look new and fine (and are persuaded also that a celebrated chef-d'oeuvre ought always to catch the eye at a quarter of a mile off), believe the professors who tell them their sober pictures are quite faded, and good for nothing, and should all be brought bright again; and, accordingly, give the sober pictures to the professors, to be put right by rules of art. Then, the professors repaint the old pictures in all the principal places, leaving perhaps only a bit of background to set off their own work. And thus the professors come to be generally figured in my mind, as the monkeys who tear holes in the pictures, to grin through. Then the picture-dealers, who live by the pictures, cannot sell them to the English in their old and pure state; all the good work must be covered with new paint, and varnished so as to look like one of the professorial pictures in the great gallery, before it is saleable. And thus the dealers come to be imaged, in my mind, as the monkeys who make ropes of the pictures, to swing by. Then, every now and then, in some old stable or wine-cellar, or timber-shed, behind some forgotten vats or faggots, somebody finds a fresco of Perugino's or Giotto's, but doesn't think much of it, and has no idea of having people coming into his cellar, or being obliged to move his faggots; and so he whitewashes the fresco, and puts the faggots back again; and these kind of persons, therefore, come generally to be imaged in my mind, as the monkeys who taste the pictures, and spit them out, not finding them nice. While, finally, the squabbling for nuts and apples (called in Italy "bella libertà") goes on all day long. Now, all this might soon be put an end to, if we English, who are so fond of travelling in the body, would also travel a little in soul. We think it a great triumph to get our packages and our persons carried at a fast pace, but we never take the slightest trouble to put any pace into our perceptions; we stay usually at home in thought, or if we ever mentally see the world, it is at the old stage-coach or waggon rate. Do but consider what an odd sight it would be, if it were only quite clear to you how things are really going on--how, here in England, we are making enormous and expensive efforts to produce new art of all kinds, knowing and confessing all the while that the greater part of it is bad, but struggling still to produce new patterns of wall-papers, and new shapes of tea-pots, and new pictures, and statues, and architecture; and pluming and cackling if ever a tea-pot or a picture has the least good in it;--all the while taking no thought whatever of the best possible pictures, and statues, and wall-patterns already in existence, which require nothing but to be taken common care of, and kept from damp and dust: but we let the walls fall that Giotto patterned, and the canvasses rot that Tintoret painted, and the architecture be dashed to pieces that St. Louis built, while we are furnishing our drawing-rooms with prize upholstery, and writing accounts of our handsome warehouses to the country papers. Don't think I use my words vaguely or generally: I speak of literal facts. Giotto's frescos at Assisi are perishing at this moment for want of decent care; Tintoret's pictures in San Sebastian at Venice, are at this instant rotting piecemeal into grey rags; St. Louis's Chapel, at Carcassonne, is at this moment lying in shattered fragments in the market-place. And here we are all cawing and crowing, poor little half-fledged daws as we are, about the pretty sticks and wool in our own nests. There's hardly a day passes, when I am at home, but I get a letter from some well-meaning country clergyman, deeply anxious about the state of his parish church, and breaking his heart to get money together that he may hold up some wretched remnant of Tudor tracery, with one niche in the corner and no statue--when all the while the mightiest piles of religious architecture and sculpture that ever the world saw are being blasted and withered away, without one glance of pity or regret. The country clergyman does not care for _them_--he has a sea-sick imagination that cannot cross Channel. What is it to him, if the angels of Assisi fade from its vaults, or the queens and kings of Chartres fall from their pedestals? They are not in his parish. "What!" you will say, "are we not to produce any new art, nor take care of our parish churches?" No, certainly not, until you have taken proper care of the art you have got already, and of the best churches out of the parish. Your first and proper standing is not as churchwardens and parish overseers in an English county, but as members of the great Christian community of Europe. And as members of that community (in which alone, observe, pure and precious ancient art exists, for there is none in America, none in Asia, none in Africa), you conduct yourselves precisely as a manufacturer would, who attended to his looms, but left his warehouse without a roof. The rain floods your warehouse, the rats frolic in it, the spiders spin in it, the choughs build in it, the wall-plague frets and festers in it, and still you keep weave, weave, weaving at your wretched webs, and thinking you are growing rich, while more is gnawed out of your warehouse in an hour than you can weave in a twelvemonth. Even this similitude is not absurd enough to set us rightly forth. The weaver would, or might, at least, hope that his new woof was as stout as the old ones, and that, therefore, in spite of rain and ravage, he would have something to wrap himself in when he needed it. But _our_ webs rot as we spin. The very fact that we despise the great art of the past shows that we cannot produce great art now. If we could do it, we should love it when we saw it done--if we really cared for it, we should recognise it and keep it; but we don't care for it. It is not art that we want; it is amusement, gratification of pride, present gain--anything in the world but art: let it rot, we shall always have enough to talk about and hang over our sideboards. You will (I hope) finally ask me what is the outcome of all this, practicable, to-morrow morning by us who are sitting here? These are the main practical outcomes of it: In the first place, don't grumble when you hear of a new picture being bought by Government at a large price. There are many pictures in Europe now in danger of destruction which are, in the true sense of the word, priceless; the proper price is simply that which it is necessary to give to get and to save them. If you can get them for fifty pounds, do; if not for less than a hundred, do; if not for less than five thousand, do; if not for less than twenty thousand, do; never mind being imposed upon: there is nothing disgraceful in being imposed upon; the only disgrace is in imposing; and you can't in general get anything much worth having, in the way of Continental art, but it must be with the help or connivance of numbers of people who, indeed, ought to have nothing to do with the matter, but who practically have, and always will have, everything to do with it; and if you don't choose to submit to be cheated by them out of a ducat here and a zecchin there, you will be cheated by them out of your picture; and whether you are most imposed upon in losing that, or the zecchins, I think I may leave you to judge; though I know there are many political economists, who would rather leave a bag of gold on a garret-table, than give a porter sixpence extra to carry it downstairs. That, then, is the first practical outcome of the matter. Never grumble, but be glad when you hear of a new picture being bought at a large price. In the long run, the dearest pictures are always the best bargains; and, I repeat (for else you might think I said it in mere hurry of talk, and not deliberately), there are some pictures which are without price. You should stand, nationally, at the edge of Dover cliffs--Shakespeare's--and wave blank cheques in the eyes of the nations on the other side of the sea, freely offered, for such and such canvasses of theirs. Then the next practical outcome of it is: Never buy a copy of a picture, under any circumstances whatever. All copies are bad; because no painter who is worth a straw ever _will_ copy. He will make a study of a picture he likes, for his own use, in his own way; but he won't and can't copy; whenever you buy a copy, you buy so much misunderstanding of the original, and encourage a dull person in following a business he is not fit for, besides increasing ultimately chances of mistake and imposture, and farthering, as directly as money _can_ farther, the cause of ignorance in all directions. You may, in fact, consider yourself as having purchased a certain quantity of mistakes; and, according to your power, being engaged in disseminating them. I do not mean, however, that copies should never be made. A certain number of dull persons should always be employed by a Government in making the most accurate copies possible of all good pictures; these copies, though artistically valueless, would be historically and documentarily valuable, in the event of the destruction of the original picture. The studies also made by great artists for their own use, should be sought after with the greatest eagerness; they are often to be bought cheap; and in connection with the mechanical copies, would become very precious: tracings from frescos and other large works are also of great value; for though a tracing is liable to just as many mistakes as a copy, the mistakes in a tracing are of one kind only, which may be allowed for, but the mistakes of a common copyist are of all conceivable kinds: finally, engravings, in so far as they convey certain facts about the pictures, without pretending adequately to represent or give an idea of the pictures, are often serviceable and valuable. I can't, of course, enter into details in these matters just now; only this main piece of advice I can safely give you--never to buy copies of pictures (for your private possession) which pretend to give a _facsimile_ that shall be in any wise representative of, or equal to, the original. Whenever you do so, you are only lowering your taste, and wasting your money. And if you are generous and wise, you will be ready rather to subscribe as much as you would have given for a copy of a great picture, towards its purchase, or the purchase of some other like it, by the nation. There ought to be a great National Society instituted for the purchase of pictures; presenting them to the various galleries in our great cities, and watching there over their safety: but in the meantime, you can always act safely and beneficially by merely allowing your artist friends to buy pictures for you, when they see good ones. Never buy for yourselves, nor go to the foreign dealers; but let any painter whom you know be entrusted, when he finds a neglected old picture in an old house, to try if he cannot get it for you; then, if you like it, keep it; if not, send it to the hammer, and you will find that you do not lose money on pictures so purchased. And the third and chief practical outcome of the matter is this general one: Wherever you go, whatever you do, act more for _preservation_ and less for _production_. I assure you, the world is, generally speaking, in calamitous disorder, and just because you have managed to thrust some of the lumber aside, and get an available corner for yourselves, you think you should do nothing but sit spinning in it all day long--while, as householders and economists, your first thought and effort should be, to set things more square all about you. Try to set the ground floors in order, and get the rottenness out of your granaries. _Then_ sit and spin, but not till then. IV. DISTRIBUTION.--And now, lastly, we come to the fourth great head of our inquiry, the question of the wise distribution of the art we have gathered and preserved. It must be evident to us, at a moment's thought, that the way in which works of art are on the whole most useful to the nation to which they belong, must be by their collection in public galleries, supposing those galleries properly managed. But there is one disadvantage attached necessarily to gallery exhibition, namely, the extent of mischief which may be done by one foolish curator. As long as the pictures which form the national wealth are disposed in private collections, the chance is always that the people who buy them will be just the people who are fond of them; and that the sense of exchangeable value in the commodity they possess, will induce them, even if they do not esteem it themselves, to take such care of it as will preserve its value undiminished. At all events, so long as works of art are scattered through the nation, no universal destruction of them is possible; a certain average only are lost by accidents from time to time. But when they are once collected in a large public gallery, if the appointment of curator becomes in any way a matter of formality, or the post is so lucrative as to be disputed by place-hunters, let but one foolish or careless person get possession of it, and perhaps you may have all your fine pictures repainted, and the national property destroyed, in a month. That is actually the case at this moment, in several great foreign galleries. They are the places of execution of pictures: over their doors you only want the Dantesque inscription, "Lasciate ogni speranza, voi che entrate." Supposing, however, this danger properly guarded against, as it would be always by a nation which either knew the value, or understood the meaning, of painting,[13] arrangement in a public gallery is the safest, as well as the most serviceable, method of exhibiting pictures; and it is the only mode in which their historical value can be brought out, and their historical meaning made clear. But great good is also to be done by encouraging the private possession of pictures; partly as a means of study (much more being always discovered in any work of art by a person who has it perpetually near him than by one who only sees it from time to time), and also as a means of refining the habits and touching the hearts of the masses of the nation in their domestic life. [13] It would be a great point gained towards the preservation of pictures if it were made a rule that at every operation they underwent, the exact spots in which they have been re-painted should be recorded in writing. For these last purposes the most serviceable art is the living art of the time; the particular tastes of the people will be best met, and their particular ignorances best corrected, by painters labouring in the midst of them, more or less guided to the knowledge of what is wanted by the degree of sympathy with which their work is received. So then, generally, it should be the object of government, and of all patrons of art, to collect, as far as may be, the works of dead masters in public galleries, arranging them so as to illustrate the history of nations, and the progress and influence of their arts; and to encourage the private possession of the works of _living_ masters. And the first and best way in which to encourage such private possession is, of course, to keep down the prices of them as far as you can. I hope there are not a great many painters in the room; if there are, I entreat their patience for the next quarter of an hour: if they will bear with me for so long, I hope they will not, finally, be offended by what I am going to say. I repeat, trusting to their indulgence in the interim, that the first object of our national economy, as respects the distribution of modern art, should be steadily and rationally to limit its prices, since by doing so, you will produce two effects; you will make the painters produce more pictures, two or three instead of one, if they wish to make money; and you will, by bringing good pictures within the reach of people of moderate income, excite the general interest of the nation in them, increase a thousandfold the demand for the commodity, and therefore its wholesome and natural production. I know how many objections must arise in your minds at this moment to what I say; but you must be aware that it is not possible for me in an hour to explain all the moral and commercial bearings of such a principle as this. Only, believe me, I do not speak lightly; I think I have considered all the objections which could be rationally brought forward, though I have time at present only to glance at the main one, namely, the idea that the high prices paid for modern pictures are either honourable, or serviceable, to the painter. So far from this being so, I believe one of the principal obstacles to the progress of modern art to be the high prices given for good modern pictures. For observe, first, the action of this high remuneration on the artist's mind. If he "gets on," as it is called, catches the eye of the public, and especially of the public of the upper classes, there is hardly any limit to the fortune he may acquire; so that, in his early years, his mind is naturally led to dwell on this worldly and wealthy eminence as the main thing to be reached by his art; if he finds that he is not gradually rising towards it, he thinks there is something wrong in his work; or, if he is too proud to think that, still the bribe of wealth and honour warps him from his honest labour into efforts to attract attention; and he gradually loses both his power of mind and his rectitude of purpose. This, according to the degree of avarice or ambition which exists in any painter's mind, is the necessary influence upon him of the hope of great wealth and reputation. But the harm is still greater, in so far as the possibility of attaining fortune of this kind tempts people continually to become painters who have no real gift for the work; and on whom these motives of mere worldly interest have exclusive influence;--men who torment and abuse the patient workers, eclipse or thrust aside all delicate and good pictures by their own gaudy and coarse ones, corrupt the taste of the public, and do the greatest amount of mischief to the schools of art in their day which it is possible for their capacities to effect; and it is quite wonderful how much mischief may be done even by small capacity. If you could by any means succeed in keeping the prices of pictures down, you would throw all these disturbers out of the way at once. You may perhaps think that this severe treatment would do more harm than good, by withdrawing the wholesome element of emulation, and giving no stimulus to exertion; but I am sorry to say that artists will always be sufficiently jealous of one another, whether you pay them large or low prices; and as for stimulus to exertion, believe me, no good work in this world was ever done for money, nor while the slightest thought of money affected the painter's mind. Whatever idea of pecuniary value enters into his thoughts as he works, will, in proportion to the distinctness of its presence, shorten his power. A real painter will work for you exquisitely, if you give him, as I told you a little while ago, bread and water and salt; and a bad painter will work badly and hastily, though you give him a palace to live in, and a princedom to live upon. Turner got, in his earlier years, half-a-crown a day and his supper (not bad pay, neither); and he learned to paint upon that. And I believe that there is no chance of art's truly flourishing in any country, until you make it a simple and plain business, providing its masters with an easy competence, but rarely with anything more. And I say this, not because I despise the great painter, but because I honour him; and I should no more think of adding to his respectability or happiness by giving him riches, than, if Shakespeare or Milton were alive, I should think we added to _their_ respectability, or were likely to get better work from them, by making them millionaires. But, observe, it is not only the painter himself whom you injure, by giving him too high prices; you injure all the inferior painters of the day. If they are modest, they will be discouraged and depressed by the feeling that their doings are worth so little, comparatively, in your eyes;--if proud, all their worst passions will be aroused, and the insult or opprobrium which they will try to cast on their successful rival will not only afflict and wound him, but at last sour and harden him: he cannot pass through such a trial without grievous harm. That, then, is the effect you produce on the painter of mark, and on the inferior ones of his own standing. But you do worse than this; you deprive yourselves, by what you give for the fashionable picture, of the power of helping the younger men who are coming forward. Be it admitted, for argument's sake if you are not convinced by what I have said, that you do no harm to the great man by paying him well; yet certainly you do him no special good. His reputation is established, and his fortune made; he does not care whether you buy or not: he thinks he is rather doing you a favour than otherwise by letting you have one of his pictures at all. All the good you do him is to help him to buy a new pair of carriage horses; whereas, with that same sum which thus you cast away, you might have relieved the hearts and preserved the health of twenty young painters; and if among those twenty, you but chanced on one in whom a true latent power had been hindered by his poverty, just consider what a far-branching, far-embracing good you have wrought with that lucky expenditure of yours. I say, "Consider it" in vain; you cannot consider it, for you cannot conceive the sickness of heart with which a young painter of deep feeling toils through his first obscurity;--his sense of the strong voice within him, which you will not hear;--his vain, fond, wondering witness to the things you will not see;--his far away perception of things that he could accomplish if he had but peace, and time, all unapproachable and vanishing from him, because no one will leave him peace or grant him time: all his friends falling back from him; those whom he would most reverently obey rebuking and paralysing him; and last and worst of all, those who believe in him the most faithfully suffering by him the most bitterly;--the wife's eyes, in their sweet ambition, shining brighter as the cheek wastes away; and the little lips at his side parched and pale, which one day, he knows, though he may never see it, will quiver so proudly when they name his name, calling him "our father." You deprive yourselves, by your large expenditure for pictures of mark, of the power of relieving and redeeming _this_ distress; you injure the painter whom you pay so largely;--and what, after all, have you done for yourselves, or got for yourselves? It does not in the least follow that the hurried work of a fashionable painter will contain more for your money than the quiet work of some unknown man. In all probability, you will find, if you rashly purchase what is popular at a high price, that you have got one picture you don't care for, for a sum which would have bought twenty you would have delighted in. For remember always that the price of a picture by a living artist, never represents, never _can_ represent, the quantity of labour or value in it. Its price represents, for the most part, the degree of desire which the rich people of the country have to possess it. Once get the wealthy classes to imagine that the possession of pictures by a given artist adds to their "gentility," and there is no price which his work may not immediately reach, and for years maintain; and in buying at that price, you are not getting value for your money, but merely disputing for victory in a contest of ostentation. And it is hardly possible to spend your money in a worse or more wasteful way; for though you may not be doing it for ostentation yourself, you are, by your pertinacity, nourishing the ostentation of others; you meet them in their game of wealth, and continue it for them; if they had not found an opposite player, the game would have been done; for a proud man can find no enjoyment in possessing himself of what nobody disputes with him. So that by every farthing you give for a picture beyond its fair price--that is to say, the price which will pay the painter for his time--you are not only cheating yourself and buying vanity, but you are stimulating the vanity of others; paying literally, for the cultivation of pride. You may consider every pound that you spend above the just price of a work of art, as an investment in a cargo of mental quick-lime or guano, which, being laid on the fields of human nature, is to grow a harvest of pride. You are in fact ploughing and harrowing, in a most valuable part of your land, in order to reap the whirlwind; you are setting your hand stoutly to Job's agriculture, "Let thistles grow instead of wheat, and cockle instead of barley." Well, but you will say, there is one advantage in high prices, which more than counterbalances all this mischief, namely, that by great reward we both urge and enable a painter to produce rather one perfect picture than many inferior ones: and one perfect picture (so you tell us, and we believe it) is worth a great number of inferior ones. It is so; but you cannot get it by paying for it. A great work is only done when the painter gets into the humour for it, likes his subject, and determines to paint it as well as he can, whether he is paid for it or not; but bad work, and generally the worst sort of bad work, is done when he is trying to produce a showy picture, or one that shall appear to have as much labour in it as shall be worth a high price.[14] [14] When this lecture was delivered, I gave here some data for approximate estimates of the average value of good modern pictures of different classes; but the subject is too complicated to be adequately treated in writing, without introducing more detail than the reader will have patience for. But I may state, roughly, that prices above a hundred guineas are in general extravagant for water-colours, and above five hundred for oils. An artist almost always does wrong who puts more work than these prices will remunerate him for into any single canvass--his talent would be better employed in painting two pictures than one so elaborate. The water-colour painters also are getting into the habit of making their drawings too large, and in a measure attaching their price rather to breadth and extent of touch than to thoughtful labour. Of course marked exceptions occur here and there, as in the case of John Lewis, whose drawings are wrought with unfailing precision throughout, whatever their scale. Hardly any price can be remunerative for such work. There is however, another point, and a still more important one, bearing on this matter of purchase, than the keeping down of prices to a rational standard. And that is, that you pay your prices into the hands of living men, and do not pour them into coffins. For observe that, as we arrange our payment of pictures at present, no artist's work is worth half its proper value while he is alive. The moment he dies, his pictures, if they are good, reach double their former value; but, that rise of price represents simply a profit made by the intelligent dealer or purchaser on his past purchases. So that the real facts of the matter are, that the British public, spending a certain sum annually in art, determines that, of every thousand it pays, only five hundred shall go to the painter, or shall be at all concerned in the production of art; and that the other five hundred shall be paid merely as a testimonial to the intelligent dealer, who knew what to buy. Now, testimonials are very pretty and proper things, within due limits; but testimonial to the amount of a hundred per cent. on the total expenditure is not good political economy. Do not therefore, in general, unless you see it to be necessary for its preservation, buy the picture of a dead artist. If you fear that it may be exposed to contempt or neglect, buy it; its price will then, probably, not be high: if you want to put it into a public gallery, buy it; you are sure, then, that you do not spend your money selfishly: or, if you loved the man's work while he was alive, and bought it then, buy it also now, if you can see no living work equal to it. But if you did not buy it while the man was living, never buy it after he is dead: you are then doing no good to him, and you are doing some shame to yourself. Look around you for pictures that you really like, and in buying which you can help some genius yet unperished--that is the best atonement you can make to the one you have neglected--and give to the living and struggling painter at once wages, and testimonial. So far, then, of the motives which should induce us to keep down the prices of modern art, and thus render it, as a private possession, attainable by greater numbers of people than at present. But we should strive to render it accessible to them in other ways also--chiefly by the permanent decoration of public buildings; and it is in this field that I think we may look for the profitable means of providing that constant employment for young painters of which we were speaking last evening. The first and most important kind of public buildings which we are always sure to want, are schools: and I would ask you to consider very carefully, whether we may not wisely introduce some great changes in the way of school decoration. Hitherto, as far as I know, it has either been so difficult to give all the education we wanted to our lads, that we have been obliged to do it, if at all, with cheap furniture in bare walls; or else we have considered that cheap furniture and bare walls are a proper part of the means of education; and supposed that boys learned best when they sat on hard forms, and had nothing but blank plaster about and above them whereupon to employ their spare attention; also, that it was as well they should be accustomed to rough and ugly conditions of things, partly by way of preparing them for the hardships of life, and partly that there might be the least possible damage done to floors and forms, in the event of their becoming, during the master's absence, the fields or instruments of battle. All this is so far well and necessary, as it relates to the training of country lads, and the first training of boys in general. But there certainly comes a period in the life of a well educated youth, in which one of the principal elements of his education is, or ought to be, to give him refinement of habits; and not only to teach him the strong exercises of which his frame is capable, but also to increase his bodily sensibility and refinement, and show him such small matters as the way of handling things properly, and treating them considerately. Not only so, but I believe the notion of fixing the attention by keeping the room empty, is a wholly mistaken one: I think it is just in the emptiest room that the mind wanders most; for it gets restless, like a bird, for want of a perch, and casts about for any possible means of getting out and away. And even if it be fixed, by an effort, on the business in hand, that business becomes itself repulsive, more than it need be, by the vileness of its associations; and many a study appears dull or painful to a boy when it is pursued on a blotted deal desk, under a wall with nothing on it but scratches and pegs, which would have been pursued pleasantly enough in a curtained corner of his father's library, or at the lattice window of his cottage. Nay, my own belief is, that the best study of all is the most beautiful; and that a quiet glade of forest, or the nook of a lake shore, are worth all the schoolrooms in Christendom, when once you are past the multiplication table; but be that as it may, there is no question at all but that a time ought to come in the life of a well trained youth, when he can sit at a writing table without wanting to throw the inkstand at his neighbour; and when also he will feel more capable of certain efforts of mind with beautiful and refined forms about him than with ugly ones. When that time comes, he ought to be advanced into the decorated schools; and this advance ought to be one of the important and honourable epochs of his life. I have not time, however, to insist on the mere serviceableness to our youth of refined architectural decoration, as such; for I want you to consider the probable influence of the particular kind of decoration which I wish you to get for them, namely, historical painting. You know we have hitherto been in the habit of conveying all our historical knowledge, such as it is, by the ear only, never by the eye; all our notions of things being ostensibly derived from verbal description, not from sight. Now, I have no doubt that, as we grow gradually wiser--and we are doing so every day--we shall discover at last that the eye is a nobler organ than the ear; and that through the eye we must, in reality, obtain, or put into form, nearly all the useful information we are to have about this world. Even as the matter stands, you will find that the knowledge which a boy is supposed to receive from verbal description is only available to him so far as in any underhand way he gets a sight of the thing you are talking about. I remember well that, for many years of my life, the only notion I had of the look of a Greek knight was complicated between recollection of a small engraving in my pocket Pope's Homer, and reverent study of the Horse Guards. And though I believe that most boys collect their ideas from more varied sources, and arrange them more carefully than I did; still, whatever sources they seek must always be ocular: if they are clever boys, they will go and look at the Greek vases and sculptures in the British Museum, and at the weapons in our armouries--they will see what real armour is like in lustre, and what Greek armour was like in form, and so put a fairly true image together, but still not, in ordinary cases, a very living or interesting one. Now, the use of your decorative painting would be, in myriads of ways, to animate their history for them, and to put the living aspect of past things before their eyes as faithfully as intelligent invention can; so that the master shall have nothing to do but once to point to the schoolroom walls, and for ever afterwards the meaning of any word would be fixed in a boy's mind in the best possible way. Is it a question of classical dress--what a tunic was like, or a chlamys, or a peplus? At this day, you have to point to some vile woodcut, in the middle of a dictionary page, representing the thing hung upon a stick, but then, you would point to a hundred figures, wearing the actual dress, in its fiery colours, in all actions of various stateliness or strength; you would understand at once how it fell round the people's limbs as they stood, how it drifted from their shoulders as they went, how it veiled their faces as they wept, how it covered their heads in the day of battle. _Now_, if you want to see what a weapon is like, you refer, in like manner, to a numbered page, in which there are spear-heads in rows, and sword-hilts in symmetrical groups; and gradually the boy gets a dim mathematical notion how one scymitar is hooked to the right and another to the left, and one javelin has a knob to it and another none: while one glance at your good picture would show him,--and the first rainy afternoon in the schoolroom would for ever fix in his mind,--the look of the sword and spear as they fell or flew; and how they pierced, or bent, or shattered--how men wielded them, and how men died by them. But far more than all this, is it a question not of clothes or weapons, but of men? how can we sufficiently estimate the effect on the mind of a noble youth, at the time when the world opens to him, of having faithful and touching representations put before him of the acts and presences of great men--how many a resolution, which would alter and exalt the whole course of his after-life, might be formed, when in some dreamy twilight he met, through his own tears, the fixed eyes of those shadows of the great dead, unescapable and calm, piercing to his soul; or fancied that their lips moved in dread reproof or soundless exhortation. And if but for one out of many this were true--if yet, in a few, you could be sure that such influence had indeed changed their thoughts and destinies, and turned the eager and reckless youth, who would have cast away his energies on the race-horse or the gambling-table, to that noble life-race, that holy life-hazard, which should win all glory to himself and all good to his country--would not that, to some purpose, be "political economy of art?" And observe, there could be no monotony, no exhaustibleness, in the scenes required to be thus pourtrayed. Even if there were, and you wanted for every school in the kingdom, one death of Leonidas; one battle of Marathon; one death of Cleobis and Bito; there need not therefore be more monotony in your art than there was in the repetition of a given cycle of subjects by the religious painters of Italy. But we ought not to admit a cycle at all. For though we had as many great schools as we have great cities (one day I hope we _shall_ have), centuries of painting would not exhaust, in all the number of them, the noble and pathetic subjects which might be chosen from the history of even one noble nation. But, besides this, you will not, in a little while, limit your youths' studies to so narrow fields as you do now. There will come a time--I am sure of it--when it will be found that the same practical results, both in mental discipline, and in political philosophy, are to be attained by the accurate study of mediæval and modern as of ancient history; and that the facts of mediæval and modern history are, on the whole, the most important to us. And among these noble groups of constellated schools which I foresee arising in our England, I foresee also that there will be divided fields of thought; and that while each will give its scholars a great general idea of the world's history, such as all men should possess--each will also take upon itself, as its own special duty, the closer study of the course of events in some given place or time. It will review the rest of history, but it will exhaust its own special field of it; and found its moral and political teaching on the most perfect possible analysis of the results of human conduct in one place, and at one epoch. And then, the galleries of that school will be painted with the historical scenes belonging to the age which it has chosen for its special study. So far, then, of art as you may apply it to that great series of public buildings which you devote to the education of youth. The next large class of public buildings in which we should introduce it, is one which I think a few years more of national progress will render more serviceable to us than they have been lately. I mean, buildings for the meetings of guilds of trades. And here, for the last time, I must again interrupt the course of our chief inquiry, in order to state one other principle of political economy, which is perfectly simple and indisputable; but which, nevertheless, we continually get into commercial embarrassments for want of understanding; and not only so, but suffer much hindrance in our commercial discoveries, because many of our business men do not practically admit it. Supposing half a dozen or a dozen men were cast ashore from a wreck on an uninhabited island and left to their own resources, one of course, according to his capacity, would be set to one business and one to another; the strongest to dig and to cut wood, and to build huts for the rest: the most dexterous to make shoes out of bark and coats out of skins; the best educated to look for iron or lead in the rocks, and to plan the channels for the irrigation of the fields. But though their labours were thus naturally severed, that small group of shipwrecked men would understand well enough that the speediest progress was to be made by helping each other,--not by opposing each other; and they would know that this help could only be properly given so long as they were frank and open in their relations, and the difficulties which each lay under properly explained to the rest. So that any appearance of secresy or separateness in the actions of any of them would instantly, and justly, be looked upon with suspicion by the rest, as the sign of some selfish or foolish proceeding on the part of the individual. If, for instance, the scientific man were found to have gone out at night, unknown to the rest, to alter the sluices, the others would think, and in all probability rightly think, that he wanted to get the best supply of water to his own field; and if the shoemaker refused to show them where the bark grew which he made the sandals of, they would naturally think, and in all probability rightly think, that he didn't want them to see how much there was of it, and that he meant to ask from them more corn and potatoes in exchange for his sandals than the trouble of making them deserved. And thus, although each man would have a portion of time to himself in which he was allowed to do what he chose without let or inquiry,--so long as he was working in that particular business which he had undertaken for the common benefit, any secresy on his part would be immediately supposed to mean mischief; and would require to be accounted for, or put an end to: and this all the more because, whatever the work might be, certainly there would be difficulties about it which, when once they were well explained, might be more or less done away with by the help of the rest; so that assuredly every one of them would advance with his labour not only more happily, but more profitably and quickly, by having no secrets, and by frankly bestowing, and frankly receiving, such help as lay in his way to get or to give. And, just as the best and richest result of wealth and happiness to the whole of them, would follow on their perseverance in such a system of frank communication and of helpful labour;--so precisely the worst and poorest result would be obtained by a system of secresy and of enmity; and each man's happiness and wealth would assuredly be diminished in proportion to the degree in which jealousy and concealment became their social and economical principles. It would not, in the long run, bring good, but only evil, to the man of science, if, instead of telling openly where he had found good iron, he carefully concealed every new bed of it, that he might ask, in exchange for the rare ploughshare, more corn from the farmer, or in exchange for the rude needle, more labour from the sempstress: and it would not ultimately bring good, but only evil, to the farmers, if they sought to burn each other's cornstacks, that they might raise the value of their grain, or if the sempstresses tried to break each other's needles, that each might get all the stitching to herself. Now, these laws of human action are precisely as authoritative in their application to the conduct of a million of men, as to that of six or twelve. All enmity, jealousy, opposition, and secresy are wholly, and in all circumstances, destructive in their nature--not productive; and all kindness, fellowship, and communicativeness are invariably productive in their operation,--not destructive; and the evil principles of opposition and exclusiveness are not rendered less fatal, but more fatal, by their acceptance among large masses of men; more fatal, I say, exactly in proportion as their influence is more secret. For though the opposition does always its own simple, necessary, direct quantity of harm, and withdraws always its own simple, necessary, measurable quantity of wealth from the sum possessed by the community, yet, in proportion to the size of the community, it does another and more refined mischief than this, by concealing its own fatality under aspects of mercantile complication and expediency, and giving rise to multitudes of false theories based on a mean belief in narrow and immediate appearances of good done here and there by things which have the universal and everlasting nature of evil. So that the time and powers of the nation are wasted, not only in wretched struggling against each other, but in vain complaints, and groundless discouragements, and empty investigations, and useless experiments in laws, and elections, and inventions; with hope always to pull wisdom through some new-shaped slit in a ballot-box, and to drag prosperity down out of the clouds along some new knot of electric wire; while all the while Wisdom stands calling at the corners of the streets, and the blessing of heaven waits ready to rain down upon us, deeper than the rivers and broader than the dew, if only we will obey the first plain principles of humanity, and the first plain precepts of the skies; "Execute true judgment, and show mercy and compassion, every man to his brother; and let none of you imagine evil against his brother in your heart."[15] [15] It would be well if, instead of preaching continually about the doctrine of faith and good works, our clergymen would simply explain to their people a little what good works mean. There is not a chapter in all the Book we profess to believe, more specially and directly written for England, than the second of Habakkuk, and I never in all my life heard one of its practical texts preached from. I suppose the clergymen are all afraid, and know that their flocks, while they will sit quite politely to hear syllogisms out of the epistle to the Romans, would get restive directly if they ever pressed a practical text home to them. But we should have no mercantile catastrophes, and no distressful pauperism, if we only read often, and took to heart, those plain words:--"Yea, also, because he is a proud man, neither keepeth at home, who enlargeth his desire as hell, and cannot be satisfied,--Shall not all these take up a parable against him, and a taunting proverb against him, and say, 'Woe to him that increaseth that which is not his: and to him that _ladeth himself with thick clay_.'" (What a glorious history, in one metaphor, of the life of a man greedy of fortune.) "Woe to him that coveteth an evil covetousness that he may set his nest on high. Woe to him that buildeth a town with blood, and stablisheth a city by iniquity. Behold, is it not of the Lord of Hosts that the people shall labour in the very fire, and the people shall weary themselves for very vanity." The Americans, who have been sending out ships with sham bolt-heads on their timbers, and only half their bolts, may meditate on that "buildeth a town with blood." Therefore, I believe most firmly, that as the laws of national prosperity get familiar to us, we shall more and more cast our toil into social and communicative systems; and that one of the first means of our doing so, will be the re-establishing guilds of every important trade in a vital, not formal, condition;--that there will be a great council or government house for the members of every trade, built in whatever town of the kingdom occupies itself principally in such trade, with minor council halls in other cities; and to each council-hall, officers attached, whose first business may be to examine into the circumstances of every operative, in that trade, who chooses to report himself to them when out of work, and to set him to work, if he is indeed able and willing, at a fixed rate of wages, determined at regular periods in the council-meetings; and whose next duty may be to bring reports before the council of all improvements made in the business, and means of its extension: not allowing private patents of any kind, but making all improvements available to every member of the guild, only allotting, after successful trial of them, a certain reward to the inventors. For these, and many other such purposes, such halls will be again, I trust, fully established, and then, in the paintings and decorations of them, especial effort ought to be made to express the worthiness and honourableness of the trade for whose members they are founded. For I believe one of the worst symptoms of modern society to be, its notion of great inferiority, and ungentlemanliness, as necessarily belonging to the character of a tradesman. I believe tradesmen may be, ought to be--often are, more gentlemen than idle and useless people: and I believe that art may do noble work by recording in the hall of each trade, the services which men belonging to that trade have done for their country, both preserving the portraits, and recording the important incidents in the lives, of those who have made great advances in commerce and civilization. I cannot follow out this subject, it branches too far, and in too many directions; besides, I have no doubt you will at once see and accept the truth of the main principle, and be able to think it out for yourselves. I would fain also have said something of what might be done, in the same manner, for almshouses and hospitals, and for what, as I shall try to explain in notes to this lecture, we may hope to see, some day, established with a different meaning in their name than that they now bear--workhouses; but I have detained you too long already, and cannot permit myself to trespass further on your patience except only to recapitulate, in closing, the simple principles respecting wealth which we have gathered during the course of our inquiry; principles which are nothing more than the literal and practical acceptance of the saying, which is in all good men's mouths; namely, that they are stewards or ministers of whatever talents are entrusted to them. Only, is it not a strange thing, that while we more or less accept the meaning of that saying, so long as it is considered metaphorical, we never accept its meaning in its own terms? You know the lesson is given us under the form of a story about money. Money was given to the servants to make use of: the unprofitable servant dug in the earth, and hid his Lord's money. Well, we, in our poetical and spiritual application of this, say, that of course money doesn't mean money, it means wit, it means intellect, it means influence in high quarters, it means everything in the world except itself. And do not you see what a pretty and pleasant come-off there is for most of us, in this spiritual application? Of course, if we had wit, we would use it for the good of our fellow-creatures. But we haven't wit. Of course, if we had influence with the bishops, we would use it for the good of the Church; but we haven't any influence with the bishops. Of course, if we had political power, we would use it for the good of the nation; but we have no political power; we have no talents entrusted to _us_ of any sort or kind. It is true we have a little money, but the parable can't possibly mean anything so vulgar as money; our money's our own. I believe, if you think seriously of this matter, you will feel that the first and most literal application is just as necessary a one as any other--that the story does very specially mean what it says--plain money; and that the reason we don't at once believe it does so, is a sort of tacit idea that while thought, wit, and intellect, and all power of birth and position, are indeed _given_ to us, and, therefore, to be laid out for the Giver,--our wealth has not been given to us; but we have worked for it, and have a right to spend it as we choose. I think you will find that is the real substance of our understanding in this matter. Beauty, we say, is given by God--it is a talent; strength is given by God--it is a talent; position is given by God--it is a talent; but money is proper wages for our day's work--it is not a talent, it is a due. We may justly spend it on ourselves, if we have worked for it. And there would be some shadow of excuse for this, were it not that the very power of making the money is itself only one of the applications of that intellect or strength which we confess to be talents. Why is one man richer than another? Because he is more industrious, more persevering, and more sagacious. Well, who made him more persevering or more sagacious than others? That power of endurance, that quickness of apprehension, that calmness of judgment, which enable him to seize the opportunities that others lose, and persist in the lines of conduct in which others fail--are these not talents?--are they not, in the present state of the world, among the most distinguished and influential of mental gifts? And is it not wonderful, that while we should be utterly ashamed to use a superiority of body, in order to thrust our weaker companions aside from some place of advantage, we unhesitatingly use our superiorities of mind to thrust them back from whatever good that strength of mind can attain? You would be indignant if you saw a strong man walk into a theatre or a lecture-room, and, calmly choosing the best place, take his feeble neighbour by the shoulder, and turn him out of it into the back seats, or the street. You would be equally indignant if you saw a stout fellow thrust himself up to a table where some hungry children were being fed, and reach his arm over their heads and take their bread from them. But you are not the least indignant if, when a man has stoutness of thought and swiftness of capacity, and, instead of being long-armed only, has the much greater gift of being long-headed--you think it perfectly just that he should use his intellect to take the bread out of the mouths of all the other men in the town who are of the same trade with him; or use his breadth and sweep of sight to gather some branch of the commerce of the country into one great cobweb, of which he is himself to be the central spider, making every thread vibrate with the points of his claws, and commanding every avenue with the facets of his eyes. You see no injustice in this. But there is injustice; and, let us trust, one of which honourable men will at no very distant period disdain to be guilty. In some degree, however, it is indeed not unjust; in some degree it is necessary and intended. It is assuredly just that idleness should be surpassed by energy; that the widest influence should be possessed by those who are best able to wield it; and that a wise man, at the end of his career, should be better off than a fool. But for that reason, is the fool to be wretched, utterly crushed down, and left in all the suffering which his conduct and capacity naturally inflict?--Not so. What do you suppose fools were made for? That you might tread upon them, and starve them, and get the better of them in every possible way? By no means. They were made that wise people might take care of them. That is the true and plain fact concerning the relations of every strong and wise man to the world about him. He has his strength given him, not that he may crush the weak, but that he may support and guide them. In his own household he is to be the guide and the support of his children; out of his household he is still to be the father, that is, the guide and support of the weak and the poor; not merely of the meritoriously weak and the innocently poor, but of the guiltily and punishably poor; of the men who ought to have known better--of the poor who ought to be ashamed of themselves. It is nothing to give pension and cottage to the widow who has lost her son; it is nothing to give food and medicine to the workman who has broken his arm, or the decrepit woman wasting in sickness. But it is something to use your time and strength to war with the waywardness and thoughtlessness of mankind; to keep the erring workman in your service till you have made him an unerring one; and to direct your fellow-merchant to the opportunity which his dullness would have lost. This is much; but it is yet more, when you have fully achieved the superiority which is due to you, and acquired the wealth which is the fitting reward of your sagacity, if you solemnly accept the responsibility of it, as it is the helm and guide of labour far and near. For you who have it in your hands, are in reality the pilots of the power and effort of the State.[16] It is entrusted to you as an authority to be used for good or evil, just as completely as kingly authority was ever given to a prince, or military command to a captain. And, according to the quantity of it that you have in your hands you are the arbiters of the will and work of England; and the whole issue, whether the work of the State shall suffice for the State or not, depends upon you. You may stretch out your sceptre over the heads of the English labourers, and say to them, as they stoop to its waving, "Subdue this obstacle that has baffled our fathers, put away this plague that consumes our children; water these dry places, plough these desert ones, carry this food to those who are in hunger; carry this light to those who are in darkness; carry this life to those who are in death;" or on the other side you may say to her labourers: "Here am I; this power is in my hand; come, build a mound here for me to be throned upon, high and wide; come, make crowns for my head, that men may see them shine from far away; come, weave tapestries for my feet, that I may tread softly on the silk and purple;[17] come, dance before me, that I may be gay; and sing sweetly to me, that I may slumber; so shall I live in joy, and die in honour." And better than such an honourable death, it were that the day had perished wherein we were born, and the night in which it was said there is a child conceived. [16] See note 7th, in Addenda [p. 106]. [17] See note 8th, in Addenda [p. 107]. I trust, that in a little while, there will be few of our rich men who, through carelessness or covetousness, thus forfeit the glorious office which is intended for their hands. I said, just now, that wealth ill used was as the net of the spider, entangling and destroying: but wealth well used, is as the net of the sacred fisher who gathers souls of men out of the deep. A time will come--I do not think even now it is far from us--when this golden net of the world's wealth will be spread abroad as the flaming meshes of morning cloud are over the sky; bearing with them the joy of light and the dew of the morning, as well as the summons to honourable and peaceful toil. What less can we hope from your wealth than this, rich men of England, when once you feel fully how, by the strength of your possessions--not, observe, by the exhaustion, but by the administration of them and the power--you can direct the acts,--command the energies,--inform the ignorance,--prolong the existence, of the whole human race; and how, even of worldly wisdom, which man employs faithfully, it is true, not only that her ways are pleasantness, but that her paths are peace; and that, for all the children of men, as well as for those to whom she is given, Length of days are in her right hand, as in her left hand Riches and Honour? ADDENDA. Note, p. 19.--"_Fatherly authority._" This statement could not, of course, be heard without displeasure by a certain class of politicians; and in one of the notices of these lectures given in the Manchester journals at the time, endeavour was made to get quit of it by referring to the Divine authority, as the only Paternal power with respect to which men were truly styled "brethren." Of course it is so, and, equally of course, all human government is nothing else than the executive expression of this Divine authority. The moment government ceases to be the practical enforcement of Divine law, it is tyranny; and the meaning which I attach to the words, "paternal government," is, in more extended terms, simply this--"The executive fulfilment, by formal human methods, of the will of the Father of mankind respecting His children." I could not give such a definition of Government as this in a popular lecture; and even in written form, it will necessarily suggest many objections, of which I must notice and answer the most probable. Only, in order to avoid the recurrence of such tiresome phrases as "it may be answered in the second place," and "it will be objected in the third place," etc., I will ask the reader's leave to arrange the discussion in the form of simple dialogue, letting _O._ stand for objector, and _R._ for response. _O._--You define your paternal government to be the executive fulfilment, by formal human methods, of the Divine will. But, assuredly, that will cannot stand in need of aid or expression from human laws. It cannot fail of its fulfilment. _R._--In the final sense it cannot; and in that sense, men who are committing murder and stealing are fulfilling the will of God as much as the best and kindest people in the world. But in the limited and present sense, the only sense with which _we_ have anything to do, God's will concerning man is fulfilled by some men, and thwarted by others. And those men who either persuade or enforce the doing of it, stand towards those who are rebellious against it exactly in the position of faithful children in a family, who, when the father is out of sight, either compel or persuade the rest to do as their father would have them, were he present; and in so far as they are expressing and maintaining, for the time, the paternal authority, they exercise, in the exact sense in which I mean the phrase to be understood, paternal government over the rest. _O._--But, if Providence has left a liberty to man in many things in order to prove him, why should human law abridge that liberty, and take upon itself to compel what the great Lawgiver does not compel? _R._--It is confessed, in the enactment of any law whatsoever, that human lawgivers have a right to do this. For, if you have no right to abridge any of the liberty which Providence has left to man, you have no right to punish any one for committing murder or robbery. You ought to leave them to the punishment of God and Nature. But if you think yourself under obligation to punish, as far as human laws can, the violation of the will of God by those great sins, you are certainly under the same obligation to punish, with proportionately less punishment, the violation of His will in less sins. _O._--No; you must not attempt to punish less sins by law, because you cannot properly define nor ascertain them. Everybody can determine whether murder has been committed or not, but you cannot determine how far people have been unjust or cruel in minor matters, and therefore cannot make or execute laws concerning minor matters. _R._--If I propose to you to punish faults which cannot be defined, or to execute laws which cannot be made equitable, reject the laws I propose. But do not generally object to the principle of law. _O._--Yes; I generally object to the principle of law as applied to minor things; because, if you could succeed (which you cannot) in regulating the entire conduct of men by law in little things as well as great, you would take away from human life all its probationary character, and render many virtues and pleasures impossible. You would reduce virtue to the movement of a machine, instead of the act of a spirit. _R._--You have just said, parenthetically, and I fully and willingly admit it, that it is impossible to regulate all minor matters by law. Is it not probable, therefore, that the degree in which it is _possible_ to regulate them by it, is also the degree in which it is _right_ to regulate them by it? Or what other means of judgment will you employ, to separate the things which ought to be formally regulated from the things which ought not. You admit that great sins should be legally repressed; but you say that small sins should not be legally repressed. How do you distinguish between great and small sins; and how do you intend to determine, or do you in practice of daily life determine, on what occasions you should compel people to do right, and on what occasions you should leave them the option of doing wrong? _O._--I think you cannot make any accurate or logical distinction in such matters; but that common sense and instinct have, in all civilized nations, indicated certain crimes of great social harmfulness, such as murder, theft, adultery, slander, and such like, which it is proper to repress legally; and that common sense and instinct indicate also the kind of crimes which it is proper for laws to let alone, such as miserliness, ill-natured speaking, and many of those commercial dishonesties which I have a notion you want your paternal government to interfere with. _R._--Pray do not alarm yourself about what my paternal government is likely to interfere with, but keep to the matter in hand. You say that "common sense and instinct" have, in all civilized nations, distinguished between the sins that ought to be legally dealt with and that ought not. Do you mean that the laws of all civilized nations are perfect? _O._--No; certainly not. _R._--Or that they are perfect at least in their discrimination of what crimes they should deal with, and what crimes they should let alone? _O._--No; not exactly. _R._--What _do_ you mean, then? _O._--I mean that the general tendency is right in the laws of civilized nations; and that, in due course of time, natural sense and instinct point out the matters they should be brought to bear upon. And each question of legislation must be made a separate subject of inquiry as it presents itself: you cannot fix any general principles about what should be dealt with legally, and what should not. _R._--Supposing it to be so, do you think there are any points in which our English legislation is capable of amendment, as it bears on commercial and economical matters, in this present time? _O._--Of course I do. _R._--Well, then, let us discuss these together quietly; and if the points that I want amended seem to you incapable of amendment, or not in need of amendment, say so: but don't object, at starting, to the mere proposition of applying law to things which have not had law applied to them before. You have admitted the fitness of my expression, "paternal government:" it only has been, and remains, a question between us, how far such government should extend. Perhaps you would like it only to regulate, among the children, the length of their lessons; and perhaps I should like it also to regulate the hardness of their cricket-balls: but cannot you wait quietly till you know what I want it to do, before quarrelling with the thing itself? _O._--No; I cannot wait quietly: in fact I don't see any use in beginning such a discussion at all, because I am quite sure from the first, that you want to meddle with things that you have no business with, and to interfere with healthy liberty of action in all sorts of ways; and I know that you can't propose any laws that would be of real use.[18] [18] If the reader is displeased with me for putting this foolish speech into his mouth, I entreat his pardon; but he may be assured that it is a speech which would be made by many people, and the substance of which would be tacitly felt by many more, at this point of the discussion. I have really tried, up to this point, to make the objector as intelligent a person as it is possible for an author to imagine anybody to be, who differs with him. _R._--If you indeed know that, you would be wrong to hear me any farther. But if you are only in painful doubt about me, which makes you unwilling to run the risk of wasting your time, I will tell you beforehand what I really do think about this same liberty of action, namely, that whenever we can make a perfectly equitable law about any matter, or even a law securing, on the whole, more just conduct than unjust, we ought to make that law; and that there will yet, on these conditions, always remain a number of matters respecting which legalism and formalism are impossible; enough, and more than enough, to exercise all human powers of individual judgment, and afford all kinds of scope to individual character. I think this; but of course it can only be proved by separate examination of the possibilities of formal restraint in each given field of action; and these two lectures are nothing more than a sketch of such a detailed examination in one field, namely, that of art. You will find, however, one or two other remarks on such possibilities in the next note. Note 2nd, p. 21.--"_Right to public support._" It did not appear to me desirable, in the course of the spoken lecture, to enter into details or offer suggestions on the questions of the regulation of labour and distribution of relief, as it would have been impossible to do so without touching in many disputed or disputable points, not easily handled before a general audience. But I must now supply what is wanting to make my general statement clear. I believe, in the first place, that no Christian nation has any business to see one of its members in distress without helping him, though, perhaps, at the same time punishing him: help, of course--in nine cases out of ten--meaning guidance, much more than gift, and, therefore, interference with liberty. When a peasant mother sees one of her careless children fall into a ditch, her first proceeding is to pull him out; her second, to box his ears; her third, ordinarily, to lead him carefully a little way by the hand, or send him home for the rest of the day. The child usually cries, and very often would clearly prefer remaining in the ditch; and if he understood any of the terms of politics, would certainly express resentment at the interference with his individual liberty: but the mother has done her duty. Whereas the usual call of the mother nation to any of her children, under such circumstances, has lately been nothing more than the foxhunter's,--"Stay still there; I shall clear you." And if we always _could_ clear them, their requests to be left in muddy independence might be sometimes allowed by kind people, or their cries for help disdained by unkind ones. But we can't clear them. The whole nation is, in fact, bound together, as men are by ropes on a glacier--if one falls, the rest must either lift him or drag him along with them[19] as dead weight, not without much increase of danger to themselves. And the law of right being manifestly in this, as, whether manifestly or not, it is always, the law of prudence, the only question is, how this wholesome help and interference are to be administered. [19] It is very curious to watch the efforts of two shopkeepers to ruin each other, neither having the least idea that his ruined neighbour must eventually be supported at his own expense, with an increase of poor rates; and that the contest between them is not in reality which shall get everything for himself, but which shall first take upon himself and his customers the gratuitous maintenance of the other's family. The first interference should be in education. In order that men may be able to support themselves when they are grown, their strength must be properly developed while they are young; and the state should always see to this--not allowing their health to be broken by too early labour, nor their powers to be wasted for want of knowledge. Some questions connected with this matter are noticed farther on under the head "Trial Schools:" one point I must notice here, that I believe all youths of whatever rank, ought to learn some manual trade thoroughly; for it is quite wonderful how much a man's views of life are cleared by the attainment of the capacity of doing any one thing well with his hands and arms. For a long time, what right life there was in the upper classes of Europe depended in no small degree on the necessity which each man was under of being able to fence; at this day, the most useful things which boys learn at public schools, are, I believe, riding, rowing, and cricketing. But it would be far better that members of Parliament should be able to plough straight, and make a horseshoe, than only to feather oars neatly or point their toes prettily in stirrups. Then, in literary and scientific teaching, the great point of economy is to give the discipline of it through knowledge which will immediately bear on practical life. Our literary work has long been economically useless to us because too much concerned with dead languages; and our scientific work will yet, for some time, be a good deal lost, because scientific men are too fond or too vain of their systems, and waste the student's time in endeavouring to give him large views, and make him perceive interesting connections of facts; when there is not one student, no, nor one man, in a thousand, who can feel the beauty of a system, or even take it clearly into his head; but nearly all men can understand, and most will be interested in, the facts which bear on daily life. Botanists have discovered some wonderful connection between nettles and figs, which a cowboy who will never see a ripe fig in his life need not be at all troubled about; but it will be interesting to him to know what effect nettles have on hay, and what taste they will give to porridge; and it will give him nearly a new life if he can be got but once, in a spring time, to look well at the beautiful circlet of the white nettle blossom, and work out with his schoolmaster the curves of its petals, and the way it is set on its central mast. So, the principle of chemical equivalents, beautiful as it is, matters far less to a peasant boy, and even to most sons of gentlemen, than their knowing how to find whether the water is wholesome in the back-kitchen cistern, or whether the seven-acre field wants sand or chalk. Having, then, directed the studies of our youth so as to make them practically serviceable men at the time of their entrance into life, that entrance should always be ready for them in cases where their private circumstances present no opening. There ought to be government establishments for every trade, in which all youths who desired it should be received as apprentices on their leaving school; and men thrown out of work received at all times. At these government manufactories the discipline should be strict, and the wages steady, not varying at all in proportion to the demand for the article, but only in proportion to the price of food; the commodities produced being laid up in store to meet sudden demands, and sudden fluctuations in prices prevented:--that gradual and necessary fluctuation only being allowed which is properly consequent on larger or more limited supply of raw material and other natural causes. When there was a visible tendency to produce a glut of any commodity, that tendency should be checked by directing the youth at the government schools into other trades; and the yearly surplus of commodities should be the principal means of government provision for the poor. That provision should be large, and not disgraceful to them. At present there are very strange notions in the public mind respecting the receiving of alms: most people are willing to take them in the form of a pension from government, but unwilling to take them in the form of a pension from their parishes. There may be some reason for this singular prejudice, in the fact of the government pension being usually given as a definite acknowledgment of some service done to the country;--but the parish pension is, or ought to be, given precisely on the same terms. A labourer serves his country with his spade, just as a man in the middle ranks of life serves it with his sword, pen, or lancet: if the service is less, and therefore the wages during health less, then the reward, when health is broken, may be less, but not, therefore, less honourable; and it ought to be quite as natural and straightforward a matter for a labourer to take his pension from his parish, because he has deserved well of his parish, as for a man in higher rank to take his pension from his country, because he has deserved well of his country. If there be any disgrace in coming to the parish, because it may imply improvidence in early life, much more is there disgrace in coming to the government: since improvidence is far less justifiable in a highly educated than in an imperfectly educated man; and far less justifiable in a high rank, where extravagance must have been luxury, than in a low rank, where it may only have been comfort. So that the real fact of the matter is, that people will take alms delightedly, consisting of a carriage and footmen, because those do not look like alms to the people in the street; but they will not take alms consisting only of bread and water and coals, because everybody would understand what those meant. Mind, I do not want any one to refuse the carriage who ought to have it; but neither do I want them to refuse the coals. I should indeed be sorry if any change in our views on these subjects involved the least lessening of self-dependence in the English mind: but the common shrinking of men from the acceptance of public charity is not self-dependence, but mere base and selfish pride. It is not that they are unwilling to live at their neighbours' expense, but that they are unwilling to confess they do: it is not dependence they wish to avoid, but gratitude. They will take places in which they know there is nothing to be done--they will borrow money they know they cannot repay--they will carry on a losing business with other people's capital--they will cheat the public in their shops, or sponge on their friends at their houses; but to say plainly they are poor men, who need the nation's help, and go into an almshouse--this they loftily repudiate, and virtuously prefer being thieves to being paupers. I trust that these deceptive efforts of dishonest men to appear independent, and the agonizing efforts of unfortunate men to remain independent, may both be in some degree checked by a better administration and understanding of laws respecting the poor. But the ordinances for relief and the ordinances for labour must go together; otherwise distress caused by misfortune will always be confounded, as it is now, with distress caused by idleness, unthrift, and fraud. It is only when the state watches and guides the middle life of men, that it can, without disgrace to them, protect their old age, acknowledging in that protection that they have done their duty, or at least some portion of their duty, in better days. I know well how strange, fanciful, or impracticable these suggestions will appear to most of the business men of this day; men who conceive the proper state of the world to be simply that of a vast and disorganized mob, scrambling each for what he can get, trampling down its children and old men in the mire, and doing what work it finds _must_ be done with any irregular squad of labourers it can bribe or inveigle together, and afterwards scatter to starvation. A great deal may, indeed, be done in this way by a nation strong-elbowed and strong-hearted as we are--not easily frightened by pushing, nor discouraged by falls. But it is still not the right way of doing things for people who call themselves Christians. Every so named soul of man claims from every other such soul, protection and education in childhood--help or punishment in middle life--reward or relief, if needed, in old age; all of these should be completely and unstintingly given; and they can only be given by the organization of such a system as I have described. Note 3rd, p. 24.--"_Trial Schools._" It may be seriously questioned by the reader how much of painting talent we really lose on our present system,[20] and how much we should gain by the proposed trial schools. For it might be thought, that as matters stand at present, we have more painters than we ought to have, having so many bad ones, and that all youths who had true painters' genius forced their way out of obscurity. [20] It will be observed that, in the lecture, it is _assumed_ that works of art are national treasures; and that it is desirable to withdraw all the hands capable of painting or carving from other employments, in order that they may produce this kind of wealth. I do not, in assuming this, mean that works of art add to the monetary resources of a nation, or form part of its wealth, in the vulgar sense. The result of the sale of a picture in the country itself is merely that a certain sum of money is transferred from the hands of B. the purchaser, to those of A. the producer; the sum ultimately to be distributed remaining the same, only A. ultimately spending it instead of B., while the labour of A. has been in the meantime withdrawn from productive channels; he has painted a picture which nobody can live upon, or live in, when he might have grown corn or built houses; when the sale therefore is effected in the country itself, it does not add to, but diminishes, the monetary resources of the country, except only so far as it may appear probable, on other grounds, that A. is likely to spend the sum he receives for his picture more rationally and usefully than B. would have spent it. If, indeed, the picture, or other work of art, be sold in foreign countries, either the money or the useful products of the foreign country being imported in exchange for it, such sale adds to the monetary resources of the selling, and diminishes those of the purchasing nation. But sound political economy, strange as it may at first appear to say so, has nothing whatever to do with separations between national interests. Political economy means the management of the affairs of _citizens_; and it either regards exclusively the administration of the affairs of one nation, or the administration of the affairs of the world considered as one nation. So when a transaction between individuals which enriches A., impoverishes B. in precisely the same degree, the sound economist considers it an unproductive transaction between the individuals; and if a trade between two nations which enriches one, impoverishes the other in the same degree, the sound eoonomist considers it an unproductive trade between the nations. It is not a general question of political economy, but only a particular question of local expediency, whether an article in itself valueless, may bear a value of exchange in transactions with some other nation. The economist considers only the actual value of the thing done or produced; and if he sees a quantity of labour spent, for instance, by the Swiss, in producing woodwork for sale to the English, he at once sets the commercial impoverishment of the English purchaser against the commercial enrichment of the Swiss seller; and considers the whole transaction productive only so far as the woodwork itself is a real addition to the wealth of the world. For the arrangement of the laws of a nation so as to procure the greatest advantages to itself, and leave the smallest advantages to other nations, is not a part of the science of political economy, but merely a broad application of the science of fraud. Considered thus in the abstract, pictures are not an _addition_ to the monetary wealth of the world, except in the amount of pleasure or instruction to be got out of them day by day: but there is a certain protective effect on wealth exercised by works of high art which must always be included in the estimate of their value. Generally speaking, persons who decorate their houses with pictures, will not spend so much money in papers, carpets, curtains, or other expensive and perishable luxuries as they would otherwise. Works of good art, like books, exercise a conservative effect on the rooms they are kept in; and the wall of the library or picture gallery remains undisturbed, when those of other rooms are re-papered or re-panelled. Of course, this effect is still more definite when the picture is on the walls themselves, either on canvass stretched into fixed shapes on their panels, or in fresco; involving, of course, the preservation of the building from all unnecessary and capricious alteration. And generally speaking, the occupation of a large number of hands in painting or sculpture in any nation may be considered as tending to check the disposition to indulge in perishable luxury. I do not, however, in my assumption that works of art are treasures, take much into consideration this collateral monetary result. I consider them treasures, merely as permanent means of pleasure and instruction; and having at other times tried to show the several ways in which they can please and teach, assume here that they are thus useful; and that it is desirable to make as many painters as we can. This is not so. It is difficult to analyse the characters of mind which cause youths to mistake their vocation, and to endeavour to become artists, when they have no true artist's gift. But the fact is, that multitudes of young men do this, and that by far the greater number of living artists are men who have mistaken their vocation. The peculiar circumstances of modern life, which exhibit art in almost every form to the sight of the youths in our great cities, have a natural tendency to fill their imaginations with borrowed ideas, and their minds with imperfect science; the mere dislike of mechanical employments, either felt to be irksome, or believed to be degrading, urges numbers of young men to become painters, in the same temper in which they would enlist or go to sea; others, the sons of engravers or artists, taught the business of the art by their parents, and having no gift for it themselves, follow it as the means of livelihood, in an ignoble patience; or, if ambitious, seek to attract regard, or distance rivalry, by fantastic, meretricious, or unprecedented applications of their mechanical skill; while finally, many men earnest in feeling, and conscientious in principle, mistake their desire to be useful for a love of art, and their quickness of emotion for its capacity, and pass their lives in painting moral and instructive pictures, which might almost justify us in thinking nobody could be a painter but a rogue. On the other hand, I believe that much of the best artistical intellect is daily lost in other avocations. Generally, the temper which would make an admirable artist is humble and observant, capable of taking much interest in little things, and of entertaining itself pleasantly in the dullest circumstances. Suppose, added to these characters, a steady conscientiousness which seeks to do its duty wherever it may be placed, and the power, denied to few artistical minds, of ingenious invention in almost any practical department of human skill, and it can hardly be doubted that the very humility and conscientiousness which would have perfected the painter, have in many instances prevented his becoming one; and that in the quiet life of our steady craftsmen--sagacious manufacturers and uncomplaining clerks--there may frequently be concealed more genius than ever is raised to the direction of our public works, or to be the mark of our public praises. It is indeed probable, that intense disposition for art will conquer the most formidable obstacles, if the surrounding circumstances are such as at all to present the idea of such conquest, to the mind; but we have no ground for concluding that Giotto would ever have been more than a shepherd, if Cimabue had not by chance found him drawing; or that among the shepherds of the Apennines there were no other Giottos, undiscovered by Cimabue. We are too much in the habit of considering happy accidents as what are called "special Providences;" and thinking that when any great work needs to be done, the man who is to do it will certainly be pointed out by Providence, be he shepherd or sea-boy; and prepared for his work by all kinds of minor providences, in the best possible way. Whereas all the analogies of God's operations in other matters prove the contrary of this; we find that "of thousand seeds, He often brings but one to bear," often not one; and the one seed which He appoints to bear is allowed to bear crude or perfect fruit according to the dealings of the husbandman with it. And there cannot be a doubt in the mind of any person accustomed to take broad and logical views of the world's history, that its events are ruled by Providence in precisely the same manner as its harvests; that the seeds of good and evil are broadcast among men, just as the seeds of thistles and fruits are; and that according to the force of our industry, and wisdom of our husbandry, the ground will bring forth to us figs or thistles. So that when it seems needed that a certain work should be done for the world, and no man is there to do it, we have no right to say that God did not wish it to be done, and therefore sent no man able to do it. The probability (if I wrote my own convictions, I should say certainty) is, that He sent many men, hundreds of men, able to do it; and that we have rejected them, or crushed them; by our previous folly of conduct or of institution, we have rendered it impossible to distinguish, or impossible to reach them; and when the need for them comes, and we suffer for the want of them, it is not that God refuses to send us deliverers, and specially appoints all our consequent sufferings; but that He has sent, and we have refused, the deliverers; and the pain is then wrought out by His eternal law, as surely as famine is wrought out by eternal law for a nation which will neither plough nor sow. No less are we in error in supposing, as we so frequently do, that if a man be found, he is sure to be in all respects fitted for the work to be done, as the key is to the lock; and that every accident which happened in the forging him, only adapted him more truly to the wards. It is pitiful to hear historians beguiling themselves and their readers, by tracing in the early history of great men, the minor circumstances which fitted them for the work they did, without ever taking notice of the other circumstances which as assuredly unfitted them for it; so concluding that miraculous interposition prepared them in all points for everything and that they did all that could have been desired or hoped for from them: whereas the certainty of the matter is that, throughout their lives, they were thwarted and corrupted by some things as certainly as they were helped and disciplined by others; and that, in the kindliest and most reverent view which can justly be taken of them, they were but poor mistaken creatures, struggling with a world more profoundly mistaken than they;--assuredly sinned against, or sinning in thousands of ways, and bringing out at last a maimed result--not what they might or ought to have done, but all that could be done against the world's resistance, and in spite of their own sorrowful falsehood to themselves. And this being so, it is the practical duty of a wise nation, first to withdraw, as far as may be, its youth from destructive influences;--then to try its material as far as possible, and to lose the use of none that is good. I do not mean by "withdrawing from destructive influences" the keeping of youths out of trials; but the keeping them out of the way of things purely and absolutely mischievous. I do not mean that we should shade our green corn in all heat, and shelter it in all frost, but only that we should dyke out the inundation from it, and drive the fowls away from it. Let your youth labour and suffer; but do not let it starve, nor steal, nor blaspheme. It is not, of course, in my power here to enter into details of schemes of education; and it will be long before the results of experiments now in progress will give data for the solution of the most difficult questions connected with the subject, of which the principal one is the mode in which the chance of advancement in life is to be extended to all, and yet made compatible with contentment in the pursuit of lower avocations by those whose abilities do not qualify them for the higher. But the general principle of trial schools lies at the root of the matter--of schools, that is to say, in which the knowledge offered and discipline enforced shall be all a part of a great assay of the human soul, and in which the one shall be increased, the other directed, as the tried heart and brain will best bear, and no otherwise. One thing, however, I must say, that in this trial I believe all emulation to be a false motive, and all giving of prizes a false means. All that you can depend upon in a boy, as significative of true power, likely to issue in good fruit, is his will to work for the work's sake, not his desire to surpass his schoolfellows; and the aim of the teaching you give him ought to be, to prove to him and strengthen in him his own separate gift, not to puff him into swollen rivalry with those who are everlastingly greater than he: still less ought you to hang favours and ribands about the neck of the creature who is the greatest, to make the rest envy him. Try to make them love him and follow him, not struggle with him. There must, of course, be examination to ascertain and attest both progress and relative capacity; but our aim should be to make the students rather look upon it as a means of ascertaining their own true positions and powers in the world, than as an arena in which to carry away a present victory. I have not, perhaps, in the course of the lecture, insisted enough on the nature of relative capacity and individual character, as the roots of all real _value_ in Art. We are too much in the habit, in these days, of acting as if Art worth a price in the market were a commodity which people could be generally taught to produce, and as if the _education_ of the artist, not his _capacity_, gave the sterling value to his work. No impression can possibly be more absurd or false. Whatever people can teach each other to do, they will estimate, and ought to estimate, only as common industry; nothing will ever fetch a high price but precisely that which cannot be taught, and which nobody can do but the man from whom it is purchased. No state of society, nor stage of knowledge, ever does away with the natural pre-eminence of one man over another; and it is that pre-eminence, and that only, which will give work high value in the market, or which ought to do so. It is a bad sign of the judgment, and bad omen for the progress, of a nation, if it supposes itself to possess many artists of equal merit. Noble art is nothing less than the expression of a great soul; and great souls are not common things. If ever we confound their work with that of others, it is not through liberality, but through blindness. Note 4th, p. 24.--"_Public favour._" There is great difficulty in making any short or general statement of the difference between great and ignoble minds in their behaviour to the "public." It is by no means _universally_ the case that a mean mind, as stated in the text, will bend itself to what you ask of it: on the contrary, there is one kind of mind, the meanest of all, which perpetually complains of the public, contemplates and proclaims itself as a "genius," refuses all wholesome discipline or humble office, and ends in miserable and revengeful ruin; also, the greatest minds are marked by nothing more distinctly than an inconceivable humility, and acceptance of work or instruction in any form, and from any quarter. They will learn from everybody, and do anything that anybody asks of them, so long as it involves only toil, or what other men would think degradation. But the point of quarrel, nevertheless, assuredly rises some day between the public and them, respecting some matter, not of humiliation, but of Fact. Your great man always at last comes to see something the public don't see. This something he will assuredly persist in asserting, whether with tongue or pencil, to be as _he_ sees it, not as _they_ see it; and all the world in a heap on the other side will not get him to say otherwise. Then, if the world objects to the saying, he may happen to get stoned or burnt for it, but that does not in the least matter to him; if the world has no particular objection to the saying, he may get leave to mutter it to himself till he dies, and be merely taken for an idiot; that also does not matter to him--mutter it he will, according to what he perceives to be fact, and not at all according to the roaring of the walls of Red sea on the right hand or left of him. Hence the quarrel, sure at some time or other to be started between the public and him; while your mean man, though he will spit and scratch spiritedly at the public, while it does not attend to him, will bow to it for its clap in any direction, and say anything when he has got its ear, which he thinks will bring him another clap; and thus, as stated in the text, he and it go on smoothly together. There are, however, times when the obstinacy of the mean man looks very like the obstinacy of the great one; but if you look closely into the matter, you will always see that the obstinacy of the first is in the pronunciation of "I;" and of the second, in the pronunciation of "It." Note 5th, p. 38.--"_Invention of new wants._" It would have been impossible for political economists long to have endured the error spoken of in the text,[21] had they not been confused by an idea, in part well founded, that the energies and refinements, as well as the riches of civilized life arose from imaginary wants. It is quite true, that the savage who knows no needs but those of food, shelter, and sleep, and after he has snared his venison and patched the rents of his hut, passes the rest of his time in animal repose, is in a lower state than the man who labours incessantly that he may procure for himself the luxuries of civilization; and true also, that the difference between one and another nation in progressive power depends in great part on vain desires; but these idle motives are merely to be considered as giving exercise to the national body and mind; they are not sources of wealth, except so far as they give the habits of industry and acquisitiveness. If a boy is clumsy and lazy, we shall do good if we can persuade him to carve cherrystones and fly kites; and this use of his fingers and limbs may eventually be the cause of his becoming a wealthy and happy man; but we must not therefore argue that cherrystones are valuable property, or that kite-flying is a profitable mode of passing time. In like manner, a nation always wastes its time and labour _directly_, when it invents a new want of a frivolous kind, and yet the invention of such a want may be the sign of a healthy activity, and the labour undergone to satisfy the new want may lead, _indirectly_, to useful discoveries or to noble arts; so that a nation is not to be discouraged in its fancies when it is either too weak or foolish to be moved to exertion by anything but fancies, or has attended to its serious business first. If a nation will not forge iron, but likes distilling lavender, by all means give it lavender to distil; only do not let its economists suppose that lavender is as profitable to it as oats, or that it helps poor people to live, any more than the schoolboy's kite provides him his dinner. Luxuries, whether national or personal, must be paid for by labour withdrawn from useful things; and no nation has a right to indulge in them until all its poor are comfortably housed and fed. [21] I have given the political economists too much credit in saying this. Actually, while these sheets are passing through the press, the blunt, broad, unmitigated fallacy is enunciated, formally and precisely, by the Common Councilmen of New York, in their report on the present commercial crisis. Here is their collective opinion, published in the _Times_ of November 23rd, 1857:--"Another erroneous idea is that luxurious living, extravagant dressing, splendid turn-outs and fine houses, are the cause of distress to a nation. No more erroneous impression could exist. Every extravagance that the man of 100,000 or 1,000,000 dollars indulges in adds to the means, the support, the wealth of ten or a hundred who had little or nothing else but their labour, their intellect, or their taste. If a man of 1,000,000 dollars spends principal and interest in ten years, and finds himself beggared at the end of that time, he has actually made a hundred who have catered to his extravagance, employers or employed, so much richer by the division of his wealth. He may be ruined, but the nation is better off and richer, for one hundred minds and hands, with 10,000 dollars apiece, are far more productive than one with the whole." Yes, gentlemen of the Common Council! but what has been doing in the time of the transfer? The spending of the fortune has taken a certain number of years (suppose ten), and during that time 1,000,000 dollars' worth of work has been done by the people, who have been paid that sum for it. Where is the product of that work? By your own statement, wholly consumed; for the man for whom it has been done is now a beggar. You have given, therefore, as a nation, 1,000,000 dollars' worth of work, and ten years of time, and you have produced, as ultimate result, one beggar! Excellent economy, gentlemen! and sure to conduce, in due sequence, to the production of _more_ than one beggar. Perhaps the matter may be made clearer to you, however, by a more familiar instance. If a schoolboy goes out in the morning with five shillings in his pocket, and comes home at night penniless, having spent his all in tarts; principal and interest are gone, and fruiterer and baker are enriched. So far so good. But suppose the schoolboy, instead, has bought a book and a knife; principal and interest are gone, and bookseller and cutler are enriched. But the schoolboy is enriched also, and may help his schoolfellows next day with knife and book, instead of lying in bed and incurring a debt to the doctor. The enervating influence of luxury, and its tendencies to increase vice, are points which I keep entirely out of consideration in the present essay; but, so far as they bear on any question discussed, they merely furnish additional evidence on the side which I have taken. Thus, in the present case, I assume that the luxuries of civilized life are in possession harmless, and in acquirement, serviceable as a motive for exertion; and even on these favourable terms, we arrive at the conclusion that the nation ought not to indulge in them except under severe limitations. Much less ought it to indulge in them if the temptation consequent on their possession, or fatality incident to their manufacture, more than counterbalances the good done by the effort to obtain them. Note 6th, p. 48.--"_Economy of Literature._" I have been much impressed lately by one of the results of the quantity of our books; namely, the stern impossibility of getting anything understood, that required patience to understand. I observe always, in the case of my own writings, that if ever I state anything which has cost me any trouble to ascertain, and which, therefore, will probably require a minute or two of reflection from the reader before it can be accepted,--that statement will not only be misunderstood, but in all probability taken to mean something very nearly the reverse of what it does mean. Now, whatever faults there may be in my modes of expression, I know that the words I use will always be found, by Johnson's dictionary, to bear, first of all, the sense I use them in; and that the sentences, whether awkwardly turned or not, will, by the ordinary rules of grammar, bear no other interpretation than that I mean them to bear; so that the misunderstanding of them must result, ultimately, from the mere fact that their matter sometimes requires a little patience. And I see the same kind of misinterpretation put on the words of other writers, whenever they require the same kind of thought. I was at first a little despondent about this; but, on the whole, I believe it will have a good effect upon our literature for some time to come; and then, perhaps, the public may recover its patience again. For certainly it is excellent discipline for an author to feel that he must say all he has to say in the fewest possible words, or his reader is sure to skip them; and in the plainest possible words, or his reader will certainly misunderstand them. Generally, also, a downright fact may be told in a plain way; and we want downright facts at present more than any thing else. And though I often hear moral people complaining of the bad effects of want of thought, for my part, it seems to me that one of the worst diseases to which the human creature is liable is its disease of thinking. If it would only just _look_[22] at a thing instead of thinking what it must be like, or _do_ a thing, instead of thinking it cannot be done, we should all get on far better. [22] There can be no question, however, of the mischievous tendency of the hurry of the present day, in the way people undertake this very _looking_. I gave three years' close and incessant labour to the examination of the chronology of the architecture of Venice; two long winters being wholly spent in the drawing of details on the spot: and yet I see constantly that architects who pass three or four days in a gondola going up and down the Grand Canal, think that their first impressions are just as likely to be true as my patiently wrought conclusions. Mr. Street, for instance, glances hastily at the façade of the Ducal Palace--so hastily that he does not even see what its pattern is, and misses the alternation of red and black in the centres of its squares--and yet he instantly ventures on an opinion on the chronology of its capitals, which is one of the most complicated and difficult subjects in the whole range of Gothic archæology. It may, nevertheless, be ascertained with very fair probability of correctness by any person who will give a month's hard work to it, but it can be ascertained no otherwise. Note 7th, p. 84.--"_Pilots of the State._" While, however, undoubtedly, these responsibilities attach to every person possessed of wealth, it is necessary both to avoid any stringency of statement respecting the benevolent modes of spending money, and to admit and approve so much liberty of spending it for selfish pleasures as may distinctly make wealth a personal _reward_ for toil, and secure in the minds of all men the right of property. For although, without doubt, the purest pleasures it can procure are not selfish, it is only as a means of personal gratification that it will be desired by a large majority of workers; and it would be no less false ethics than false policy to check their energy by any forms of public opinion which bore hardly against the wanton expenditure of honestly got wealth. It would be hard if a man who had passed the greater part of his life at the desk or counter could not at last innocently gratify a caprice; and all the best and most sacred ends of almsgiving would be at once disappointed, if the idea of a moral claim took the place of affectionate gratitude in the mind of the receiver. Some distinction is made by us naturally in this respect between earned and inherited wealth; that which is inherited appearing to involve the most definite responsibilities, especially when consisting in revenues derived from the soil. The form of taxation which constitutes rental of lands places annually a certain portion of the national wealth in the hands of the nobles, or other proprietors of the soil, under conditions peculiarly calculated to induce them to give their best care to its efficient administration. The want of instruction in even the simplest principles of commerce and economy, which hitherto has disgraced our schools and universities, has indeed been the cause of ruin or total inutility of life to multitudes of our men of estate; but this deficiency in our public education cannot exist much longer, and it appears to be highly advantageous for the State that a certain number of persons distinguished by race should be permitted to set examples of wise expenditure, whether in the advancement of science, or in patronage of art and literature; only they must see to it that they take their right standing more firmly than they have done hitherto, for the position of a rich man in relation to those around him is, in our present real life, and is also contemplated generally by political economists as being, precisely the reverse of what it ought to be. A rich man ought to be continually examining how he may spend his money for the advantage of others: at present, others are continually plotting how they may beguile him into spending it apparently for his own. The aspect which he presents to the eyes of the world is generally that of a person holding a bag of money with a staunch grasp, and resolved to part with none of it unless he is forced, and all the people about him are plotting how they may force him; that is to say, how they may persuade him that he wants this thing or that; or how they may produce things that he will covet and buy. One man tries to persuade him that he wants perfumes; another that he wants jewellery; another that he wants sugarplums; another that he wants roses at Christmas. Anybody who can invent a new want for him is supposed to be a benefactor to society: and thus the energies of the poorer people about him are continually directed to the production of covetable, instead of serviceable things; and the rich man has the general aspect of a fool, plotted against by all the world. Whereas the real aspect which he ought to have is that of a person wiser than others, entrusted with the management of a larger quantity of capital, which he administers for the profit of all, directing each man to the labour which is most healthy for him, and most serviceable for the community. Note 8th, p. 84.--"_Silk and Purple._" In various places throughout these lectures I have had to allude to the distinction between productive and unproductive labour, and between true and false wealth. I shall here endeavour, as clearly as I can, to explain the distinction I mean. Property may be divided generally into two kinds; that which produces life, and that which produces the objects of life. That which produces or maintains life consists of food, in so far as it is nourishing; of furniture and clothing, in so far as they are protective or cherishing; of fuel; and of all land, instruments, or materials, necessary to produce food, houses, clothes and fuel. It is specially and rightly called useful property. The property which produces the objects of life consists of all that gives pleasure or suggests and preserves thought: of food, furniture, and land, in so far as they are pleasing to the appetite or the eye, of luxurious dress; and all other kinds of luxuries; of books, pictures, and architecture. But the modes of connection of certain minor forms of property with human labour render it desirable to arrange them under more than these two heads. Property may therefore be conveniently considered as of five kinds. 1st. Property necessary to life, but not producible by labour, and therefore belonging of right, in a due measure, to every human being as soon as he is born, and morally unalienable. As, for instance, his proper share of the atmosphere, without which he cannot breathe, and of water, which he needs to quench his thirst. As much land as he needs to feed from is also inalienable; but in well regulated communities this quantity of land may often be represented by other possessions, or its need supplied by wages and privileges. 2. Property necessary to life, but only producible by labour, and of which the possession is morally connected with labour, so that no person capable of doing the work necessary for its production has a right to it until he has done that work:--"he that will not work, neither should he eat." It consists of simple food, clothing, and habitation, with their seeds and materials, or instruments and machinery, and animals used for necessary draught or locomotion, etc. It is to be observed of this kind of property, that its increase cannot usually be carried beyond a certain point, because it depends not on labour only, but on things of which the supply is limited by nature. The possible accumulation of corn depends on the quantity of corn-growing land possessed or commercially accessible; and that of steel, similarly, on the accessible quantity of coal and ironstone. It follows from this natural limitation of supply that the accumulation of property of this kind in large masses at one point, or in one person's hands, commonly involves, more or less, the scarcity of it at another point and in other persons' hands; so that the accidents or energies which may enable one man to procure a great deal of it, may, and in all likelihood will partially prevent other men procuring a sufficiency of it, however willing they may be to work for it; therefore, the modes of its accumulation and distribution need to be in some degree regulated by law and by national treaties, in order to secure justice to all men. Another point requiring notice respecting this sort of property is, that no work can be wasted in producing it, provided only the kind of it produced be preservable and distributable, since for every grain of such commodities we produce we are rendering so much more life possible on earth.[23] But though we are sure, thus, that we are employing people well, we cannot be sure we might not have employed them _better_; for it is possible to direct labour to the production of life, until little or none is left for that of the objects of life, and thus to increase population at the expense of civilization, learning, and morality: on the other hand, it is just as possible--and the error is one to which the world is, on the whole, more liable--to direct labour to the objects of life till too little is left for life, and thus to increase luxury or learning at the expense of population. Right political economy holds its aim poised justly between the two extremes, desiring neither to crowd its dominions with a race of savages, nor to found courts and colleges in the midst of a desert. [23] This point has sometimes been disputed; for instance, opening Mill's "Political Economy" the other day, I chanced on a passage in which he says that a man who makes a coat, if the person who wears the coat does nothing useful while he wears it, has done no more good to society than the man who has only raised a pineapple. But this is a fallacy induced by endeavour after too much subtlety. None of us have a right to say that the life of a man is of no use to _him_, though it may be of no use to _us_; and the man who made the coat, and thereby prolonged another man's life, has done a gracious and useful work, whatever may come of the life so prolonged. We may say to the wearer of the coat, "You who are wearing coats, and doing nothing in them, are at present wasting your own life and other people's;" but we have no right to say that his existence, however wasted, is wasted _away_. It may be just dragging itself on, in its thin golden line, with nothing dependent upon it, to the point where it is to strengthen into good chain cable, and have thousands of other lives dependent on it. Meantime, the simple fact respecting the coat-maker is, that he has given so much life to the creature, the results of which he cannot calculate; they may be--in all probability will be--infinite results in some way. But the raiser of pines, who has only given a pleasant taste in the mouth to some one, may see with tolerable clearness to the end of the taste in the mouth, and of all conceivable results therefrom. 3. The third kind of property is that which conduces to bodily pleasures and conveniences, without directly tending to sustain life; perhaps sometimes indirectly tending to destroy it. All dainty (as distinguished from nourishing) food, and means of producing it; all scents not needed for health; substances valued only for their appearance and rarity (as gold and jewels); flowers of difficult culture; animals used for delight (as horses for racing), and such like, form property of this class; to which the term "luxury, or luxuries," ought exclusively to belong. Respecting which we have to note first, that all such property is of doubtful advantage even to its possessor. Furniture tempting to indolence, sweet odours, and luscious food, are more or less injurious to health: while jewels, liveries, and other such common belongings of wealthy people, certainly convey no pleasure to their owners proportionate to their cost. Farther, such property, for the most part, perishes in the using. Jewels form a great exception--but rich food, fine dresses, horses and carriages, are consumed by the owner's use. It ought much oftener to be brought to the notice of rich men what sums of interest of money they are paying towards the close of their lives, for luxuries consumed in the middle of them. It would be very interesting, for instance, to know the exact sum which the money spent in London for ices, at its desserts and balls, during the last twenty years, had it been saved and put out at compound interest, would at this moment have furnished for useful purposes. Also, in most cases, the enjoyment of such property is wholly selfish, and limited to its possessor. Splendid dress and equipage, however, when so arranged as to produce real beauty of effect, may often be rather a generous than a selfish channel of expenditure. They will, however, necessarily in such case involve some of the arts of design; and therefore take their place in a higher category than that of luxuries merely. 4. The fourth kind of property is that which bestows intellectual or emotional pleasure, consisting of land set apart for purposes of delight more than for agriculture, of books, works of art, and objects of natural history. It is, of course, impossible to fix an accurate limit between property of the last class and of this class, since things which are a mere luxury to one person are a means of intellectual occupation to another. Flowers in a London ball-room are a luxury; in a botanical garden, a delight of the intellect; and in their native fields, both; while the most noble works of art are continually made material of vulgar luxury or of criminal pride; but, when rightly used, property of this fourth class is the only kind which deserves the name of _real_ property; it is the only kind which a man can truly be said to "possess." What a man eats, or drinks, or wears, so long as it is only what is needful for life, can no more be thought of as his possession than the air he breathes. The air is as needful to him as the food; but we do not talk of a man's wealth of air; and what food or clothing a man possesses more than he himself requires, must be for others to use (and, to him, therefore, not a real property in itself, but only a means of obtaining some real property in exchange for it). Whereas the things that give intellectual or emotional enjoyment may be accumulated and do not perish in using; but continually supply new pleasures and new powers of giving pleasures to others. And these, therefore, are the only things which can rightly be thought of as giving "wealth" or "well being." Food conduces only to "being," but these to "_well_ being." And there is not any broader general distinction between lower and higher orders of men than rests on their possession of this real property. The human race may be properly divided by zoologists into "men who have gardens, libraries, or works of art; and who have none;" and the former class will include all noble persons, except only a few who make the world their garden or museum; while the people who have not, or, which is the same thing, do not care for gardens or libraries, but care for nothing but money or luxuries, will include none but ignoble persons: only it is necessary to understand that I mean by the term "garden" as much the Carthusian's plot of ground fifteen feet square between his monastery buttresses, as I do the grounds of Chatsworth or Kew; and I mean by the term "art" as much the old sailor's print of the Arethusa bearing up to engage the Belle Poule, as I do Raphael's "Disputa," and even rather more; for when abundant, beautiful possessions of this kind are almost always associated with vulgar luxury, and become then anything but indicative of noble character in their possessors. The ideal of human life is a union of Spartan simplicity of manners with Athenian sensibility and imagination, but in actual results, we are continually mistaking ignorance for simplicity, and sensuality for refinement. 5. The fifth kind of property is representative property, consisting of documents or money, or rather documents only, for money itself is only a transferable document, current among societies of men, giving claim, at sight, to some definite benefit or advantage, most commonly to a certain share of real property existing in those societies. The money is only genuine when the property it gives claim to is real, or the advantages it gives claim to certain; otherwise, it is false money, and may be considered as much "forged" when issued by a government, or a bank, as when by an individual. Thus, if a dozen of men, cast ashore on a desert island, pick up a number of stones, put a red spot on each stone, and pass a law that every stone marked with a red spot shall give claim to a peck of wheat;--so long as no wheat exists, or can exist, on the island, the stones are not money. But the moment as much wheat exists as shall render it possible for the society always to give a peck for every spotted stone, the spotted stones would become money, and might be exchanged by their possessors for whatever other commodities they chose, to the value of the peck of wheat which the stones represented. If more stones were issued than the quantity of wheat could answer the demand of, the value of the stone coinage would be depreciated, in proportion to its increase above the quantity needed to answer it. Again, supposing a certain number of the men so cast ashore were set aside by lot, or any other convention, to do the rougher labour necessary for the whole society, they themselves being maintained by the daily allotment of a certain quantity of food, clothing, etc. Then, if it were agreed that the stones spotted with red should be signs of a Government order for the labour of these men; and that any person presenting a spotted stone at the office of the labourers, should be entitled to a man's work for a week or a day, the red stones would be money; and might--probably would--immediately pass current in the island for as much food, or clothing, or iron, or any other article as a man's work for the period secured by the stone was worth. But if the Government issued so many spotted stones that it was impossible for the body of men they employed to comply with the orders; as, suppose, if they only employed twelve men, and issued eighteen spotted stones daily, ordering a day's work each, then the six extra stones would be forged or false money; and the effect of this forgery would be the depreciation of the value of the whole coinage by one-third, that being the period of shortcoming which would, on the average, necessarily ensue in the execution of each order. Much occasional work may be done in a state or society, by help of an issue of false money (or false promises) by way of stimulants; and the fruit of this work, if it comes into the promiser's hands, may sometimes enable the false promises at last to be fulfilled: hence the frequent issue of false money by governments and banks, and the not unfrequent escapes from the natural and proper consequences of such false issues, so as to cause a confused conception in most people's minds of what money really is. I am not sure whether some quantity of such false issue may not really be permissible in a nation, accurately proportioned to the minimum average produce of the labour it excites; but all such procedures are more or less unsound; and the notion of unlimited issue of currency is simply one of the absurdest and most monstrous that ever came into disjointed human wits. The use of objects of real or supposed value for currency, as gold, jewellery, etc., is barbarous; and it always expresses either the measure of the distrust in the society of its own government, or the proportion of distrustful or barbarous nations with whom it has to deal. A metal not easily corroded or imitated, is a desirable medium of currency for the sake of cleanliness and convenience, but were it possible to prevent forgery, the more worthless the metal itself, the better. The use of worthless media, unrestrained by the use of valuable media, has always hitherto involved, and is therefore supposed to involve necessarily, unlimited, or at least improperly extended, issue; but we might as well suppose that a man must necessarily issue unlimited promises because his words cost nothing. Intercourse with foreign nations must, indeed, for ages yet to come, at the world's present rate of progress, be carried on by valuable currencies; but such transactions are nothing more than forms of barter. The gold used at present as a currency is not, in point of fact, currency at all, but the real property[24] which the currency gives claim to, stamped to measure its quantity, and mingling with the real currency occasionally by barter. [24] Or rather, equivalent, to such real property, because everybody has been accustomed to look upon it as valuable: and therefore everybody is willing to give labour or goods for it. But real property does ultimately consist only in things that nourish body or mind; gold would be useless to us if we could not get mutton or books for it. Ultimately all commercial mistakes and embarrassments result from people expecting to get goods without working for them, or wasting them after they have got them. A nation which labours, and takes care of the fruits of labour, would be rich and happy; though there were no gold in the universe. A nation which is idle, and wastes the produce of what work it does, would be poor and miserable, though all its mountains were of gold, and had glens filled with diamonds instead of glacier. The evils necessarily resulting from the use of baseless currencies have been terribly illustrated while these sheets have been passing through the press; I have not had time to examine the various conditions of dishonest or absurd trading which have led to the late "panic" in America and England; this only I know, that no merchant deserving the name ought to be more liable to "panic" than a soldier should; for his name should never be on more paper than he can at any instant meet the call of, happen what will. I do not say this without feeling at the same time how difficult it is to mark, in existing commerce, the just limits between the spirit of enterprise and of speculation. Something of the same temper which makes the English soldier do always all that is possible, and attempt more than is possible, joins its influence with that of mere avarice in tempting the English merchant into risks which he cannot justify, and efforts which he cannot sustain; and the same passion for adventure which our travellers gratify every summer on perilous snow wreaths, and cloud-encompassed precipices, surrounds with a romantic fascination the glittering of a hollow investment, and gilds the clouds that curl round gulfs of ruin. Nay, a higher and a more serious feeling frequently mingles in the motley temptation; and men apply themselves to the task of growing rich, as to a labour of providential appointment, from which they cannot pause without culpability, nor retire without dishonour. Our large trading cities bear to me very nearly the aspect of monastic establishments in which the roar of the mill-wheel and the crane takes the place of other devotional music; and in which the worship of Mammon or Moloch is conducted with a tender reverence and an exact propriety; the merchant rising to his Mammon matins with the self-denial of an anchorite, and expiating the frivolities into which he may be beguiled, in the course of the day by late attendance at Mammon vespers. But, with every allowance that can be made for these conscientious and romantic persons, the fact remains the same, that by far the greater number of the transactions which lead to these times of commercial embarrassment may be ranged simply under two great heads,--gambling and stealing; and both of these in their most culpable form, namely, gambling with money which is not ours, and stealing from those who trust us. I have sometimes thought a day might come, when the nation would perceive that a well-educated man who steals a hundred thousand pounds, involving the entire means of subsistence of a hundred families, deserves, on the whole, as severe a punishment as an ill-educated man who steals a purse from a pocket, or a mug from a pantry. But without hoping for this excess of clearsightedness, we may at least labour for a system of greater honesty and kindness in the minor commerce of our daily life; since the great dishonesty of the great buyers and sellers is nothing more than the natural growth and outcome from the little dishonesty of the little buyers and sellers. Every person who tries to buy an article for less than its proper value, or who tries to sell it at more than its proper value--every consumer who keeps a tradesman waiting for his money, and every tradesman who bribes a consumer to extravagance by credit, is helping forward, according to his own measure of power, a system of baseless and dishonourable commerce, and forcing his country down into poverty and shame. And people of moderate means and average powers of mind would do far more real good by merely carrying out stern principles of justice and honesty in common matters of trade, than by the most ingenious schemes of extended philanthropy, or vociferous declarations of theological doctrine. There are three weighty matters of the law--justice, mercy, and truth; and of these the Teacher puts truth last, because that cannot be known but by a course of acts of justice and love. But men put, in all their efforts, truth first, because they mean by it their own opinions; and thus, while the world has many people who would suffer martyrdom in the cause of what they call truth, it has few who will suffer even a little inconvenience, in that of justice and mercy. UNTO THIS LAST: FOUR ESSAYS ON THE FIRST PRINCIPLES OF POLITICAL ECONOMY. "FRIEND, I DO THEE NO WRONG. DID'ST NOT THOU AGREE WITH ME FOR A PENNY? TAKE THAT THINE IS, AND GO THY WAY. I WILL GIVE UNTO THIS LAST EVEN AS UNTO THEE." "IF YE THINK GOOD, GIVE ME MY PRICE; AND IF NOT, FORBEAR. SO THEY WEIGHED FOR MY PRICE THIRTY PIECES OF SILVER." PREFACE. The four following essays were published eighteen months ago in the _Cornhill Magazine_, and were reprobated in a violent manner, as far as I could hear, by most of the readers they met with. Not a whit the less, I believe them to be the best, that is to say, the truest, rightest-worded, and most serviceable things I have ever written; and the last of them, having had especial pains spent on it, is probably the best I shall ever write. "This," the reader may reply, "it might be, yet not therefore well written." Which, in no mock humility, admitting, I yet rest satisfied with the work, though with nothing else that I have done; and purposing shortly to follow out the subjects opened in these papers, as I may find leisure, I wish the introductory statements to be within the reach of any one who may care to refer to them. So I republish the essays as they appeared. One word only is changed, correcting the estimate of a weight; and no word is added. Although, however, I find nothing to modify in these papers, it is a matter of regret to me that the most startling of all the statements in them--that respecting the necessity of the organization of labour, with fixed wages,--should have found its way into the first essay; it being quite one of the least important, though by no means the least certain, of the positions to be defended. The real gist of these papers, their central meaning and aim, is to give, as I believe for the first time in plain English--it has often been incidentally given in good Greek by Plato and Xenophon, and good Latin by Cicero and Horace,--a logical definition of WEALTH: such definition being absolutely needed for a basis of economical science. The most reputed essay on that subject which has appeared in modern times, after opening with the statement that "writers on political economy profess to teach, or to investigate,[25] the nature of wealth," thus follows up the declaration of its thesis--"Every one has a notion, sufficiently correct for common purposes, of what is meant by wealth." ... "It is no part of the design of this treatise to aim at metaphysical nicety of definition."[26] [25] Which? for where investigation is necessary, teaching is impossible. [26] "Principles of Political Economy." By J. S. Mill. Preliminary remarks, p. 2. Metaphysical nicety, we assuredly do not need; but physical nicety, and logical accuracy, with respect to a physical subject, we as assuredly do. Suppose the subject of inquiry, instead of being House-law (_Oikonomia_), had been Star-law (_Astronomia_), and that, ignoring distinction between stars fixed and wandering, as here between wealth radiant and wealth reflective, the writer had begun thus: "Every one has a notion, sufficiently correct for common purposes, of what is meant by stars. Metaphysical nicety in the definition of a star is not the object of this treatise;"--the essay so opened might yet have been far more true in its final statements, and a thousand-fold more serviceable to the navigator, than any treatise on wealth, which founds its conclusions on the popular conception of wealth, can ever become to the economist. * * * * * It was, therefore, the first object of these following papers to give an accurate and stable definition of wealth. Their second object was to show that the acquisition of wealth was finally possible only under certain moral conditions of society, of which quite the first was a belief in the existence and even, for practical purposes, in the attainability of honesty. Without venturing to pronounce--since on such a matter human judgment is by no means conclusive--what is, or is not, the noblest of God's works, we may yet admit so much of Pope's assertion as that an honest man is among His best works presently visible, and, as things stand, a somewhat rare one; but not an incredible or miraculous work; still less an abnormal one. Honesty is not a disturbing force, which deranges the orbits of economy; but a consistent and commanding force, by obedience to which--and by no other obedience--those orbits can continue clear of chaos. It is true, I have sometimes heard Pope condemned for the lowness, instead of the height, of his standard:--"Honesty is indeed a respectable virtue; but how much higher may men attain! Shall nothing more be asked of us than that we be honest?" For the present, good friends, nothing. It seems that in our aspirations to be more than that, we have to some extent lost sight of the propriety of being so much as that. What else we may have lost faith in, there shall be here no question; but assuredly we have lost faith in common honesty, and in the working power of it. And this faith, with the facts on which it may rest, it is quite our first business to recover and keep: not only believing, but even by experience assuring ourselves, that there are yet in the world men who can be restrained from fraud otherwise than by the fear of losing employment;[27] nay that it is even accurately in proportion to the number of such men in any State, that the said State does or can prolong its existence. [27] "The effectual discipline which is exercised over a workman is not that of his corporation, but of his customers. It is the fear of losing their employment which restrains his frauds, and corrects his negligence" (_Wealth of Nations_, Book I. chap. 10). To these two points, then, the following essays are mainly directed. The subject of the organization of labour is only casually touched upon; because, if we once can get a sufficient quantity of honesty in our captains, the organization of labour is easy, and will develop itself without quarrel or difficulty; but if we cannot get honesty in our captains, the organization of labour is for evermore impossible. The several conditions of its possibility I purpose to examine at length in the sequel. Yet, lest the reader should be alarmed by the hints thrown out during the following investigation of first principles, as if they were leading him into unexpectedly dangerous ground, I will, for his better assurance, state at once the worst of the political creed at which I wish him to arrive. 1. First,--that there should be training schools for youth established, at Government cost,[28] and under Government discipline, over the whole country; that every child born in the country should, at the parent's wish, be permitted (and, in certain cases, be under penalty required) to pass through them; and that, in these schools, the child should (with other minor pieces of knowledge hereafter to be considered) imperatively be taught, with the best skill of teaching that the country could produce, the following three things:-- (_a_) the laws of health, and the exercises enjoined by them; (_b_) habits of gentleness and justice; and (_c_) the calling by which he is to live. [28] It will probably be inquired by near-sighted persons, out of what funds such schools could be supported. The expedient modes of direct provision for them I will examine hereafter; indirectly, they would be far more than self-supporting. The economy in crime alone (quite one of the most costly articles of luxury in the modern European market), which such schools would induce, would suffice to support them ten times over. Their economy of labour would be pure gain, and that too large to be presently calculable. 2. Secondly,--that, in connection with these training schools, there should be established, also entirely under Government regulation, manufactories and workshops, for the production and sale of every necessary of life, and for the exercise of every useful art. And that, interfering no whit with private enterprise, nor setting any restraints or tax on private trade, but leaving both to do their best, and beat the Government if they could,--there should, at these Government manufactories and shops, be authoritatively good and exemplary work done, and pure and true substance sold; so that a man could be sure, if he chose to pay the Government price, that he got for his money bread that was bread, ale that was ale, and work that was work. 3. Thirdly,--that any man, or woman, or boy, or girl, out of employment, should be at once received at the nearest Government school, and set to such work as it appeared, on trial, they were fit for, at a fixed rate of wages determinable every year:--that, being found incapable of work through ignorance, they should be taught, or being found incapable of work through sickness, should be tended; but that being found objecting to work, they should be set, under compulsion of the strictest nature, to the more painful and degrading forms of necessary toil, especially to that in mines and other places of danger (such danger being, however, diminished to the utmost by careful regulation and discipline) and the due wages of such work be retained--cost of compulsion first abstracted--to be at the workman's command, so soon as he has come to sounder mind respecting the laws of employment. 4. Lastly,--that for the old and destitute, comfort and home should be provided; which provision, when misfortune had been by the working of such a system sifted from guilt, would be honourable instead of disgraceful to the receiver. For (I repeat this passage out of my _Political Economy of Art_, to which the reader is referred for farther detail[29]) "a labourer serves his country with his spade, just as a man in the middle ranks of life serves it with sword, pen, or lancet: if the service is less, and, therefore the wages during health less, then the reward, when health is broken, may be less, but not, therefore, less honourable; and it ought to be quite as natural and straightforward a matter for a labourer to take his pension from his parish, because he has deserved well of his parish, as for a man in higher rank to take his pension from his country, because he has deserved well of his country." [29] "The Political Economy of Art:" Addenda, p. 93. To which statement, I will only add, for conclusion, respecting the discipline and pay of life and death, that, for both high and low, Livy's last words touching Valerius Publicola, "_de publico est elatus_,"[30] ought not to be a dishonourable close of epitaph. [30] "P. Valerius, omnium consensu princeps belli pacisque artibus, anno post moritur; gloriâ ingenti, copiis familiaribus adeo exiguis, ut funeri sumtus deesset: de publico est elatus. Luxêre matronæ ut Brutum."--Lib. II. c. xvi. These things, then, I believe, and am about, as I find power, to explain and illustrate in their various bearings; following out also what belongs to them of collateral inquiry. Here I state them only in brief, to prevent the reader casting about in alarm for my ultimate meaning; yet requesting him, for the present to remember, that in a science dealing with so subtle elements as those of human nature, it is only possible to answer for the final truth of principles, not for the direct success of plans: and that in the best of these last, what can be immediately accomplished is always questionable, and what can be finally accomplished, inconceivable. _Denmark Hill, 10th May, 1862._ ESSAY I. THE ROOTS OF HONOUR. Among the delusions which at different periods have possessed themselves of the minds of large masses of the human race, perhaps the most curious--certainly the least creditable--is the modern _soi-disant_ science of political economy, based on the idea that an advantageous code of social action may be determined irrespectively of the influence of social affection. Of course, as in the instances of alchemy, astrology, witchcraft, and other such popular creeds, political economy has a plausible idea at the root of it. "The social affections," says the economist, "are accidental and disturbing elements in human nature; but avarice and the desire of progress are constant elements. Let us eliminate the inconstants, and, considering the human being merely as a covetous machine, examine by what laws of labour, purchase, and sale, the greatest accumulative result in wealth is obtainable. Those laws once determined, it will be for each individual afterwards to introduce as much of the disturbing affectionate element as he chooses, and to determine for himself the result on the new conditions supposed." This would be a perfectly logical and successful method of analysis, if the accidentals afterwards to be introduced were of the same nature as the powers first examined. Supposing a body in motion to be influenced by constant and inconstant forces, it is usually the simplest way of examining its course to trace it first under the persistent conditions, and afterwards introduce the causes of variation. But the disturbing elements in the social problem are not of the same nature as the constant ones; they alter the essence of the creature under examination the moment they are added; they operate, not mathematically, but chemically, introducing conditions which render all our previous knowledge unavailable. We made learned experiments upon pure nitrogen, and have convinced ourselves that it is a very manageable gas: but behold! the thing which we have practically to deal with is its chloride; and this, the moment we touch it on our established principles, sends us and our apparatus through the ceiling. Observe, I neither impugn nor doubt the conclusions of the science, if its terms are accepted. I am simply uninterested in them, as I should be in those of a science of gymnastics which assumed that men had no skeletons. It might be shown, on that supposition, that it would be advantageous to roll the students up into pellets, flatten them into cakes, or stretch them into cables; and that when these results were effected, the re-insertion of the skeleton would be attended with various inconveniences to their constitution. The reasoning might be admirable, the conclusions true, and the science deficient only in applicability. Modern political economy stands on a precisely similar basis. Assuming, not that the human being has no skeleton, but that it is all skeleton, it founds an ossifiant theory of progress on this negation of a soul; and having shown the utmost that may be made of bones, and constructed a number of interesting geometrical figures with death's-heads and humeri, successfully proves the inconvenience of the reappearance of a soul among these corpuscular structures. I do not deny the truth of this theory: I simply deny its applicability to the present phase of the world. This inapplicability has been curiously manifested during the embarrassment caused by the late strikes of our workmen. Here occurs one of the simplest cases, in a pertinent and positive form, of the first vital problem which political economy has to deal with (the relation between employer and employed); and at a severe crisis, when lives in multitudes, and wealth in masses, are at stake, the political economists are helpless--practically mute; no demonstrable solution of the difficulty can be given by them, such as may convince or calm the opposing parties. Obstinately the masters take one view of the matter; obstinately the operatives another; and no political science can set them at one. It would be strange if it could, it being not by "science" of any kind that men were ever intended to be set at one. Disputant after disputant vainly strives to show that the interests of the masters are, or are not, antagonistic to those of the men: none of the pleaders ever seeming to remember that it does not absolutely or always follow that the persons must be antagonistic because their interests are. If there is only a crust of bread in the house, and mother and children are starving, their interests are not the same. If the mother eats it, the children want it; if the children eat it, the mother must go hungry to her work. Yet it does not necessarily follow that there will be "antagonism" between them, that they will fight for the crust, and that the mother, being strongest, will get it, and eat it. Neither, in any other case, whatever the relations of the persons may be, can it be assumed for certain that, because their interests are diverse, they must necessarily regard each other with hostility, and use violence or cunning to obtain the advantage. Even if this were so, and it were as just as it is convenient to consider men as actuated by no other moral influences than those which affect rats or swine, the logical conditions of the question are still indeterminable. It can never be shown generally either that the interests of master and labourer are alike, or that they are opposed; for, according to circumstances, they may be either. It is, indeed, always the interest of both that the work should be rightly done, and a just price obtained for it; but, in the division of profits, the gain of the one may or may not be the loss of the other. It is not the master's interest to pay wages so low as to leave the men sickly and depressed, nor the workman's interest to be paid high wages if the smallness of the master's profit hinders him from enlarging his business, or conducting it in a safe and liberal way. A stoker ought not to desire high pay if the company is too poor to keep the engine-wheels in repair. And the varieties of circumstance which influence these reciprocal interests are so endless, that all endeavour to deduce rules of action from balance of expediency is in vain. And it is meant to be in vain. For no human actions ever were intended by the Maker of men to be guided by balances of expediency, but by balances of justice. He has therefore rendered all endeavours to determine expediency futile for evermore. No man ever knew or can know, what will be the ultimate result to himself, or to others, of any given line of conduct. But every man may know, and most of us do know, what is a just and unjust act. And all of us may know also, that the consequences of justice will be ultimately the best possible, both to others and ourselves, though we can neither say what _is_ best, or how it is likely to come to pass. I have said balances of justice, meaning, in the term justice, to include affection,--such affection as one man _owes_ to another. All right relations between master and operative, and all their best interests, ultimately depend on these. We shall find the best and simplest illustration of the relations of master and operative in the position of domestic servants. We will suppose that the master of a household desires only to get as much work out of his servants as he can, at the rate of wages he gives. He never allows them to be idle; feeds them as poorly and lodges them as ill as they will endure, and in all things pushes his requirements to the exact point beyond which he cannot go without forcing the servant to leave him. In doing this, there is no violation on his part of what is commonly called "justice." He agrees with the domestic for his whole time and service, and takes them;--the limits of hardship in treatment being fixed by the practice of other masters in his neighbourhood; that is to say, by the current rate of wages for domestic labour. If the servant can get a better place, he is free to take one, and the master can only tell what is the real market value of his labour, by requiring as much as he will give. This is the politico-economical view of the case, according to the doctors of that science; who assert that by this procedure the greatest average of work will be obtained from the servant, and therefore, the greatest benefit to the community, and through the community, by reversion, to the servant himself. That, however, is not so. It would be so if the servant were an engine of which the motive power was steam, magnetism, gravitation, or any other agent of calculable force. But he being, on the contrary, an engine whose motive power is a Soul, the force of this very peculiar agent, as an unknown quantity, enters into all the political economist's equations, without his knowledge, and falsifies every one of their results. The largest quantity of work will not be done by this curious engine for pay, or under pressure, or by help of any kind of fuel which may be supplied by the chaldron. It will be done only when the motive force, that is to say, the will or spirit of the creature, is brought to its greatest strength by its own proper fuel; namely, by the affections. It may indeed happen, and does happen often, that if the master is a man of sense and energy, a large quantity of material work may be done under mechanical pressure, enforced by strong will and guided by wise method; also it may happen, and does happen often, that if the master is indolent and weak (however good-natured), a very small quantity of work, and that bad, may be produced by the servant's undirected strength, and contemptuous gratitude. But the universal law of the matter is that, assuming any given quantity of energy and sense in master and servant, the greatest material result obtainable by them will be, not through antagonism to each other, but through affection for each other; and that if the master, instead of endeavouring to get as much work as possible from the servant, seeks rather to render his appointed and necessary work beneficial to him, and to forward his interests in all just and wholesome ways, the real amount of work ultimately done, or of good rendered, by the person so cared for, will indeed be the greatest possible. Observe, I say, "of good rendered," for a servant's work is not necessarily or always the best thing he can give his master. But good of all kinds, whether in material service, in protective watchfulness of his master's interest and credit, or in joyful readiness to seize unexpected and irregular occasions of help. Nor is this one whit less generally true because indulgence will be frequently abused, and kindness met with ingratitude. For the servant who, gently treated, is ungrateful, treated ungently, will be revengeful; and the man who is dishonest to a liberal master will be injurious to an unjust one. In any case, and with any person, this unselfish treatment will produce the most effective return. Observe, I am here considering the affections wholly as a motive power; not at all as things in themselves desirable or noble, or in any other way abstractedly good. I look at them simply as an anomalous force, rendering every one of the ordinary political economist's calculations nugatory; while, even if he desired to introduce this new element into his estimates, he has no power of dealing with it; for the affections only become a true motive power when they ignore every other motive and condition of political economy. Treat the servant kindly, with the idea of turning his gratitude to account, and you will get, as you deserve, no gratitude, nor any value for your kindness; but treat him kindly without any economical purpose, and all economical purposes will be answered; in this, as in all other matters, whosoever will save his life shall lose it, whoso loses it shall find it.[31] [31] The difference between the two modes of treatment, and between their effective material results, may be seen very accurately by a comparison of the relations of Esther and Charlie in _Bleak House_, with those of Miss Brass and the Marchioness in _Master Humphrey's Clock_. The essential value and truth of Dickens's writings have been unwisely lost sight of by many thoughtful persons, merely because he presents his truth with some colour of caricature. Unwisely, because Dickens's caricature, though often gross, is never mistaken. Allowing for his manner of telling them, the things he tells us are always true. I wish that he could think it right to limit his brilliant exaggeration to works written only for public amusement; and when he takes up a subject of high national importance, such as that which he handled in _Hard Times_, that he would use severer and more accurate analysis. The usefulness of that work (to my mind, in several respects, the greatest he has written) is with many persons seriously diminished because Mr. Bounderby is a dramatic monster, instead of a characteristic example of a worldly master; and Stephen Blackpool a dramatic perfection, instead of a characteristic example of an honest workman. But let us not lose the use of Dickens's wit and insight, because he chooses to speak in a circle of stage fire. He is entirely right in his main drift and purpose in every book he has written; and all of them, but especially _Hard Times_, should be studied with close and earnest care by persons interested in social questions. They will find much that is partial, and, because partial, apparently unjust; but if they examine all the evidence on the other side, which Dickens seems to overlook, it will appear, after all their trouble, that his view was the finally right one, grossly and sharply told. The next clearest and simplest example of relation between master and operative is that which exists between the commander of a regiment and his men. Supposing the officer only desires to apply the rules of discipline so as, with least trouble to himself, to make the regiment most effective, he will not be able, by any rules, or administration of rules, on this selfish principle, to develop the full strength of his subordinates. If a man of sense and firmness, he may, as in the former instance, produce a better result than would be obtained by the irregular kindness of a weak officer; but let the sense and firmness be the same in both cases, and assuredly the officer who has the most direct personal relations with his men, the most care for their interests, and the most value for their lives, will develop their effective strength, through their affection for his own person, and trust in his character, to a degree wholly unattainable by other means. The law applies still more stringently as the numbers concerned are larger; a charge may often be successful, though the men dislike their officers; a battle has rarely been won, unless they loved their general. Passing from these simple examples to the more complicated relations existing between a manufacturer and his workmen, we are met first by certain curious difficulties, resulting, apparently, from a harder and colder state of moral elements. It is easy to imagine an enthusiastic affection existing among soldiers for the colonel, not so easy to imagine an enthusiastic affection among cotton-spinners for the proprietor of the mill. A body of men associated for purposes of robbery (as a Highland clan in ancient times) shall be animated by perfect affection, and every member of it be ready to lay down his life for the life of his chief. But a band of men associated for purposes of legal production and accumulation is usually animated, it appears, by no such emotions, and none of them are in anywise willing to give his life for the life of his chief. Not only are we met by this apparent anomaly, in moral matters, but by others connected with it, in administration of system. For a servant or a soldier is engaged at a definite rate of wages, for a definite period; but a workman at a rate of wages variable according to the demand for labour, and with the risk of being at any time thrown out of his situation by chances of trade. Now, as, under these contingencies, no action of the affections can take place, but only an explosive action of _dis_affections, two points offer themselves for consideration in the matter. The first--How far the rate of wages may be so regulated as not to vary with the demand for labour. The second--How far it is possible that bodies of workmen may be engaged and maintained at such fixed rate of wages (whatever the state of trade may be), without enlarging or diminishing their number, so as to give them permanent interest in the establishment with which they are connected, like that of the domestic servants in an old family, or an _esprit de corps_, like that of the soldiers in a crack regiment. The first question is, I say, how far it may be possible to fix the rate of wages irrespectively of the demand for labour. Perhaps one of the most curious facts in the history of human error is the denial by the common political economist of the possibility of thus regulating wages; while, for all the important, and much of the unimportant, labour on the earth, wages are already so regulated. We do not sell our prime-ministership by Dutch auction; nor, on the decease of a bishop, whatever may be the general advantages of simony, do we (yet) offer his diocese to the clergyman who will take the episcopacy at the lowest contract. We (with exquisite sagacity of political economy!) do indeed sell commissions, but not, openly, generalships: sick, we do not inquire for a physician who takes less than a guinea; litigious, we never think of reducing six-and-eightpence to four-and-sixpence; caught in a shower, we do not canvass the cabmen, to find one who values his driving at less than a sixpence a mile. It is true that in all these cases there is, and in every conceivable case there must be, ultimate reference to the presumed difficulty of the work, or number of candidates for the office. If it were thought that the labour necessary to make a good physician would be gone through by a sufficient number of students with the prospect of only half-guinea fees, public consent would soon withdraw the unnecessary half-guinea. In this ultimate sense, the price of labour is indeed always regulated by the demand for it; but so far as the practical and immediate administration of the matter is regarded, the best labour always has been, and is, as _all_ labour ought to be, paid by an invariable standard. "What!" the reader, perhaps, answers amazedly: "pay good and bad workmen alike?" Certainly. The difference between one prelate's sermons and his successor's,--or between one physician's opinion and another's,--is far greater, as respects the qualities of mind involved, and far more important in result to you personally, than the difference between good and bad laying of bricks (though that is greater than most people suppose). Yet you pay with equal fee, contentedly, the good and bad workmen upon your soul, and the good and bad workmen upon your body; much more may you pay, contentedly, with equal fees, the good and bad workmen upon your house. "Nay, but I choose my physician and (?) my clergyman, thus indicating my sense of the quality of their work." By all means, also, choose your bricklayer; that is the proper reward of the good workman, to be "chosen." The natural and right system respecting all labour is, that it should be paid at a fixed rate, but the good workman employed, and the bad workmen unemployed. The false, unnatural, and destructive system is, when the bad workman is allowed to offer his work at half-price, and either take the place of the good, or force him by his competition to work for an inadequate sum. This equality of wages, then, being the first object towards which we have to discover the directest available road; the second is, as above stated, that of maintaining constant numbers of workmen in employment, whatever may be the accidental demand for the article they produce. I believe the sudden and extensive inequalities of demand which necessarily arise in the mercantile operations of an active nation, constitute the only essential difficulty which has to be overcome in a just organization of labour. The subject opens into too many branches to admit of being investigated in a paper of this kind; but the following general facts bearing on it may be noted. The wages which enable any workman to live are necessarily higher, if his work is liable to intermission, than if it is assured and continuous; and however severe the struggle for work may become, the general law will always hold, that men must get more daily pay if, on the average, they can only calculate on work three days a week, than they would require if they were sure of work six days a week. Supposing that a man cannot live on less than a shilling a day, his seven shillings he must get, either for three days' violent work, or six days' deliberate work. The tendency of all modern mercantile operations is to throw both wages and trade into the form of a lottery, and to make the workman's pay depend on intermittent exertion, and the principal's profit on dexterously used chance. In what partial degree, I repeat, this may be necessary, in consequence of the activities of modern trade, I do not here investigate; contenting myself with the fact, that in its fatallest aspects it is assuredly unnecessary, and results merely from love of gambling on the part of the masters, and from ignorance and sensuality in the men. The masters cannot bear to let any opportunity of gain escape them, and frantically rush at every gap and breach in the walls of Fortune, raging to be rich, and affronting, with impatient covetousness, every risk of ruin; while the men prefer three days of violent labour, and three days of drunkenness, to six days of moderate work and wise rest. There is no way in which a principal, who really desires to help his workmen, may do it more effectually than by checking these disorderly habits both in himself and them; keeping his own business operations on a scale which will enable him to pursue them securely, not yielding to temptations of precarious gain; and, at the same time, leading his workmen into regular habits of labour and life, either by inducing them rather to take low wages in the form of a fixed salary, than high wages, subject to the chance of their being thrown out of work; or, if this be impossible, by discouraging the system of violent exertion for nominally high day wages, and leading the men to take lower pay for more regular labour. In effecting any radical changes of this kind, doubtless there would be great inconvenience and loss incurred by all the originators of movement. That which can be done with perfect convenience and without loss, is not always the thing that most needs to be done, or which we are most imperatively required to do. I have already alluded to the difference hitherto existing between regiments of men associated for purposes of violence, and for purposes of manufacture; in that the former appear capable of self-sacrifice--the latter, not; which singular fact is the real reason of the general lowness of estimate in which the profession of commerce is held, as compared with that of arms. Philosophically, it does not, at first sight, appear reasonable (many writers have endeavoured to prove it unreasonable) that a peaceable and rational person, whose trade is buying and selling, should be held in less honour than an unpeaceable and often irrational person, whose trade is slaying. Nevertheless, the consent of mankind has always, in spite of the philosophers, given precedence to the soldier. And this is right. For the soldier's trade, verily and essentially, is not slaying, but being slain. This, without well knowing its own meaning, the world honours it for. A bravo's trade is slaying; but the world has never respected bravos more than merchants: the reason it honours the soldier is, because he holds his life at the service of the State. Reckless he may be--fond of pleasure or of adventure--all kinds of bye-motives and mean impulses may have determined the choice of his profession, and may affect (to all appearance exclusively) his daily conduct in it; but our estimate of him is based on this ultimate fact--of which we are well assured--that, put him in a fortress breach, with all the pleasures of the world behind him, and only death and his duty in front of him, he will keep his face to the front; and he knows that this choice may be put to him at any moment, and has beforehand taken his part--virtually takes such part continually--does, in reality, die daily. Not less is the respect we pay to the lawyer and physician, founded ultimately on their self-sacrifice. Whatever the learning or acuteness of a great lawyer, our chief respect for him depends on our belief that, set in a judge's seat, he will strive to judge justly, come of it what may. Could we suppose that he would take bribes, and use his acuteness and legal knowledge to give plausibility to iniquitous decisions, no degree of intellect would win for him our respect. Nothing will win it, short of our tacit conviction, that in all important acts of his life justice is first with him; his own interest, second. In the case of a physician, the ground of the honour we render him is clearer still. Whatever his science, we should shrink from him in horror if we found him regard his patients merely as subjects to experiment upon; much more, if we found that, receiving bribes from persons interested in their deaths, he was using his best skill to give poison in the mask of medicine. Finally, the principle holds with utmost clearness as it respects clergymen. No goodness of disposition will excuse want of science in a physician, or of shrewdness in an advocate; but a clergyman, even though his power of intellect be small, is respected on the presumed ground of his unselfishness and serviceableness. Now there can be no question but that the tact, foresight, decision, and other mental powers, required for the successful management of a large mercantile concern, if not such as could be compared with those of a great lawyer, general, or divine, would at least match the general conditions of mind required in the subordinate officers of a ship, or of a regiment, or in the curate of a country parish. If, therefore, all the efficient members of the so-called liberal professions are still, somehow, in public estimate of honour, preferred before the head of a commercial firm, the reason must lie deeper than in the measurement of their several powers of mind. And the essential reason for such preference will be found to lie in the fact that the merchant is presumed to act always selfishly. His work may be very necessary to the community; but the motive of it is understood to be wholly personal. The merchant's first object in all his dealings must be (the public believe) to get as much for himself, and leave as little to his neighbour (or customer) as possible. Enforcing this upon him, by political statute, as the necessary principle of his action; recommending it to him on all occasions, and themselves reciprocally adopting it; proclaiming vociferously, for law of the universe, that a buyer's function is to cheapen, and a seller's to cheat,--the public, nevertheless, involuntarily condemn the man of commerce for his compliance with their own statement, and stamp him for ever as belonging to an inferior grade of human personality. This they will find, eventually, they must give up doing. They must not cease to condemn selfishness; but they will have to discover a kind of commerce which is not exclusively selfish. Or, rather, they will have to discover that there never was, or can be, any other kind of commerce; that this which they have called commerce was not commerce at all, but cozening; and that a true merchant differs as much from a merchant according to laws of modern political economy, as the hero of the _Excursion_ from Autolycus. They will find that commerce is an occupation which gentlemen will every day see more need to engage in, rather than in the businesses of talking to men, or slaying them; that, in true commerce, as in true preaching, or true fighting, it is necessary to admit the idea of occasional voluntary loss; that sixpences have to be lost, as well as lives, under a sense of duty; that the market may have its martyrdoms as well as the pulpit; and trade its heroisms, as well as war. May have--in the final issue, must have--and only has not had yet, because men of heroic temper have always been misguided in their youth into other fields, not recognizing what is in our days, perhaps, the most important of all fields; so that, while many a zealous person loses his life in trying to teach the form of a gospel, very few will lose a hundred pounds in showing the practice of one. The fact is, that people never have had clearly explained to them the true functions of a merchant with respect to other people. I should like the reader to be very clear about this. Five great intellectual professions, relating to daily necessities of life, have hitherto existed--three exist necessarily, in every civilized nation: The Soldier's profession is to _defend_ it. The Pastor's, to _teach_ it. The Physician's, to _keep it in health_. The Lawyer's, to _enforce justice_ in it. The Merchant's, _to provide_ for it. And the duty of all these men is, on due occasion, to _die_ for it. "On due occasion," namely:-- The Soldier, rather than leave his post in battle. The Physician, rather than leave his post in plague. The Pastor, rather than teach Falsehood. The Lawyer, rather than countenance Injustice. The Merchant--What is _his_ "due occasion" of death? It is the main question for the merchant, as for all of us. For, truly, the man who does not know when to die, does not know how to live. Observe, the merchant's function (or manufacturer's, for in the broad sense in which it is here used the word must be understood to include both) is to provide for the nation. It is no more his function to get profit for himself out of that provision than it is a clergyman's function to get his stipend. The stipend is a due and necessary adjunct, but not the object, of his life, if he be a true clergyman, any more than his fee (or _honorarium_) is the object of life to a true physician. Neither is his fee the object of life to a true merchant. All three, if true men, have a work to be done irrespective of fee--to be done even at any cost, or for quite the contrary of fee; the pastor's function being to teach, the physician's to heal, and the merchant's, as I have said, to provide. That is to say, he has to understand to their very root the qualities of the thing he deals in, and the means of obtaining or producing it; and he has to apply all his sagacity and energy to the producing or obtaining it in perfect state, and distributing it at the cheapest possible price where it is most needed. And because the production or obtaining of any commodity involves necessarily the agency of many lives and hands, the merchant becomes in the course of his business the master and governor of large masses of men in a more direct, though less confessed way, than a military officer or pastor; so that on him falls, in great part, the responsibility for the kind of life they lead: and it becomes his duty, not only to be always considering how to produce what he sells in the purest and cheapest forms, but how to make the various employments involved in the production, or transference of it, most beneficial to the men employed. And as into these two functions, requiring for their right exercise the highest intelligence, as well as patience, kindness, and tact, the merchant is bound to put all his energy, so for their just discharge he is bound, as soldier or physician is bound, to give up, if need be, his life, in such way as it may be demanded of him. Two main points he has in his providing function to maintain: first, his engagements (faithfulness to engagements being the real root of all possibilities in commerce); and, secondly, the perfectness and purity of the thing provided; so that, rather than fail in any engagement, or consent to any deterioration, adulteration, or unjust and exorbitant price of that which he provides, he is bound to meet fearlessly any form of distress, poverty, or labour, which may, through maintenance of these points, come upon him. Again: in his office as governor of the men employed by him, the merchant or manufacturer is invested with a distinctly paternal authority and responsibility. In most cases, a youth entering a commercial establishment is withdrawn altogether from home influence; his master must become his father, else he has, for practical and constant help, no father at hand: in all cases the master's authority, together with the general tone and atmosphere of his business, and the character of the men with whom the youth is compelled in the course of it to associate, have more immediate and pressing weight than the home influence, and will usually neutralize it either for good or evil; so that the only means which the master has of doing justice to the men employed by him is to ask himself sternly whether he is dealing with such subordinate as he would with his own son, if compelled by circumstances to take such a position. Supposing the captain of a frigate saw it right, or were by any chance obliged, to place his own son in the position of a common sailor; as he would then treat his son, he is bound always to treat every one of the men under him. So, also; supposing the master of a manufactory saw it right, or were by any chance obliged, to place his own son in the position of an ordinary workman; as he would then treat his son, he is bound always to treat every one of his men. This is the only effective true, or practical RULE which can be given on this point of political economy. And as the captain of a ship is bound to be the last man to leave his ship in case of wreck, and to share his last crust with the sailors in case of famine, so the manufacturer, in any commercial crisis or distress, is bound to take the suffering of it with his men, and even to take more of it for himself than he allows his men to feel; as a father would in a famine, shipwreck, or battle, sacrifice himself for his son. All which sounds very strange: the only real strangeness in the matter being, nevertheless, that it should so sound. For all this is true, and that not partially nor theoretically, but everlastingly and practically: all other doctrine than this respecting matters political being false in premises, absurd in deduction, and impossible in practice, consistently with any progressive state of national life; all the life which we now possess as a nation showing itself in the resolute denial and scorn, by a few strong minds and faithful hearts, of the economic principles taught to our multitudes, which principles, so far as accepted, lead straight to national destruction. Respecting the modes and forms of destruction to which they lead, and, on the other hand, respecting the farther practical working of true polity, I hope to reason further in a following paper. ESSAY II. THE VEINS OF WEALTH. The answer which would be made by any ordinary political economist to the statements contained in the preceding paper, is in few words as follows:-- "It is indeed true that certain advantages of a general nature may be obtained by the development of social affections. But political economists never professed, nor profess, to take advantages of a general nature into consideration. Our science is simply the science of getting rich. So far from being a fallacious or visionary one, it is found by experience to be practically effective. Persons who follow its precepts do actually become rich, and persons who disobey them become poor. Every capitalist of Europe has acquired his fortune by following the known laws of our science, and increases his capital daily by an adherence to them. It is vain to bring forward tricks of logic, against the force of accomplished facts. Every man of business knows by experience how money is made, and how it is lost." Pardon me. Men of business do indeed know how they themselves made their money, or how, on occasion, they lost it. Playing a long-practised game, they are familiar with the chances of its cards, and can rightly explain their losses and gains. But they neither know who keeps the bank of the gambling-house, nor what other games may be played with the same cards, nor what other losses and gains, far away among the dark streets, are essentially, though invisibly, dependent on theirs in the lighted rooms. They have learned a few, and only a few, of the laws of mercantile economy; but not one of those of political economy. Primarily, which is very notable and curious, I observe that men of business rarely know the meaning of the word "rich." At least if they know, they do not in their reasonings allow for the fact that it is a relative word, implying its opposite "poor" as positively as the word "north" implies its opposite "south." Men nearly always speak and write as if riches were absolute, and it were possible, by following certain scientific precepts, for everybody to be rich. Whereas riches are a power like that of electricity, acting only through inequalities or negations of itself. The force of the guinea you have in your pocket depends wholly on the default of a guinea in your neighbour's pocket. If he did not want it, it would be of no use to you; the degree of power it possesses depends accurately upon the need or desire he has for it,--and the art of making yourself rich, in the ordinary mercantile economist's sense, is therefore equally and necessarily the art of keeping your neighbour poor. I would not contend in this matter (and rarely in any matter), for the acceptance of terms. But I wish the reader clearly and deeply to understand the difference between the two economies, to which the terms "Political" and "Mercantile" might not unadvisably be attached. Political economy (the economy of a State, or of citizens) consists simply in the production, preservation, and distribution, at fittest time and place, of useful or pleasurable things. The farmer who cuts his hay at the right time; the shipwright who drives his bolts well home in sound wood; the builder who lays good bricks in well-tempered mortar; the housewife who takes care of her furniture in the parlour, and guards against all waste in her kitchen; and the singer who rightly disciplines, and never overstrains her voice: are all political economists in the true and final sense; adding continually to the riches and well-being of the nation to which they belong. But mercantile economy, the economy of "merces" or of "pay," signifies the accumulation, in the hands of individuals, of legal, or moral claim upon, or power over, the labour of others; every such claim implying precisely as much poverty or debt on one side, as it implies riches or right on the other. It does not, therefore, necessarily involve an addition to the actual property, or well-being, of the State in which it exists. But since this commercial wealth, or power over labour, is nearly always convertible at once into real property, while real property is not always convertible at once into power over labour, the idea of riches among active men in civilized nations, generally refers to commercial wealth; and in estimating their possessions, they rather calculate the value of their horses and fields by the number of guineas they could get for them, than the value of their guineas by the number of horses and fields they could buy with them. There is, however, another reason for this habit of mind; namely, that an accumulation of real property is of little use to its owner, unless, together with it, he has commercial power over labour. Thus, suppose any person to be put in possession of a large estate of fruitful land, with rich beds of gold in its gravel, countless herds of cattle in its pastures; houses, and gardens, and storehouses full of useful stores; but suppose, after all, that he could get no servants? In order that he may be able to have servants, some one in his neighbourhood must be poor, and in want of his gold--or his corn. Assume that no one is in want of either, and that no servants are to be had. He must, therefore, bake his own bread, make his own clothes, plough his own ground, and shepherd his own flocks. His gold will be as useful to him as any other yellow pebbles on his estate. His stores must rot, for he cannot consume them. He can eat no more than another man could eat, and wear no more than another man could wear. He must lead a life of severe and common labour to procure even ordinary comforts; he will be ultimately unable to keep either houses in repair, or fields in cultivation; and forced to content himself with a poor man's portion of cottage and garden, in the midst of a desert of waste land, trampled by wild cattle, and encumbered by ruins of palaces, which he will hardly mock at himself by calling "his own." The most covetous of mankind would, with small exultation, I presume, accept riches of this kind on these terms. What is really desired, under the name of riches, is, essentially, power over men; in its simplest sense, the power of obtaining for our own advantage the labour of servant, tradesman, and artist; in wider sense, authority of directing large masses of the nation to various ends (good, trivial, or hurtful, according to the mind of the rich person). And this power of wealth of course is greater or less in direct proportion to the poverty of the men over whom it is exercised, and in inverse proportion to the number of persons who are as rich as ourselves, and who are ready to give the same price for an article of which the supply is limited. If the musician is poor, he will sing for small pay, as long as there is only one person who can pay him; but if there be two or three, he will sing for the one who offers him most. And thus the power of the riches of the patron (always imperfect and doubtful, as we shall see presently, even when most authoritative) depends first on the poverty of the artist, and then on the limitation of the number of equally wealthy persons, who also wants seats at the concert. So that, as above stated, the art of becoming "rich," in the common sense, is not absolutely nor finally the art of accumulating much money for ourselves, but also of contriving that our neighbours shall have less. In accurate terms, it is "the art of establishing the maximum inequality in our own favour." Now the establishment of such inequality cannot be shown in the abstract to be either advantageous or disadvantageous to the body of the nation. The rash and absurd assumption that such inequalities are necessarily advantageous, lies at the root of most of the popular fallacies on the subject of political economy. For the eternal and inevitable law in this matter is, that the beneficialness of the inequality depends, first, on the methods by which it was accomplished, and, secondly, on the purposes to which it is applied. Inequalities of wealth, unjustly established, have assuredly injured the nation in which they exist during their establishment; and, unjustly directed, injure it yet more during their existence. But inequalities of wealth justly established, benefit the nation in the course of their establishment; and, nobly used, aid it yet more by their existence. That is to say, among every active and well-governed people, the various strength of individuals, tested by full exertion and specially applied to various need, issues in unequal, but harmonious results, receiving reward or authority according to its class and service;[32] while, in the inactive or ill-governed nation, the gradations of decay and the victories of treason work out also their own rugged system of subjection and success; and substitute, for the melodious inequalities of concurrent power, the iniquitous dominances and depressions of guilt and misfortune. [32] I have been naturally asked several times, with respect to the sentence in the first of these papers, "the bad workmen unemployed," "But what are you to do with your bad unemployed workmen?" Well, it seems to me the question might have occurred to you before. Your housemaid's place is vacant--you give twenty pounds a year--two girls come for it, one neatly dressed, the other dirtily; one with good recommendations, the other with none. You do not, under these circumstances, usually ask the dirty one if she will come for fifteen pounds, or twelve; and, on her consenting, take her instead of the well-recommended one. Still less do you try to beat both down by making them bid against each other, till you can hire both, one at twelve pounds a year, and the other at eight. You simply take the one fittest for the place, and send away the other, not perhaps concerning yourself quite as much as you should with the question which you now impatiently put to me, "What is to become of her?" For all that I advise you to do, is to deal with workmen as with servants; and verily the question is of weight: "Your bad workman, idler, and rogue--what are you to do with him?" We will consider of this presently: remember that the administration of a complete system of national commerce and industry cannot be explained in full detail within the space of twelve pages. Meantime, consider whether, there being confessedly some difficulty in dealing with rogues and idlers, it may not be advisable to produce as few of them as possible. If you examine into the history of rogues, you will find they are as truly manufactured articles as anything else, and it is just because our present system of political economy gives so large a stimulus to that manufacture that you may know it to be a false one. We had better seek for a system which will develop honest men, than for one which will deal cunningly with vagabonds. Let us reform our schools, and we shall find little reform needed in our prisons. Thus the circulation of wealth in a nation resembles that of the blood in the natural body. There is one quickness of the current which comes of cheerful emotion or wholesome exercise; and another which comes of shame or of fever. There is a flush of the body which is full of warmth and life; and another which will pass into putrefaction. The analogy will hold, down even to minute particulars. For as diseased local determination of the blood involves depression of the general health of the system, all morbid local action of riches will be found ultimately to involve a weakening of the resources of the body politic. The mode in which this is produced may be at once understood by examining one or two instances of the development of wealth in the simplest possible circumstances. Suppose two sailors cast away on an uninhabited coast, and obliged to maintain themselves there by their own labour for a series of years. If they both kept their health, and worked steadily, and in amity with each other, they might build themselves a convenient house, and in time come to possess a certain quantity of cultivated land, together with various stores laid up for future use. All these things would be real riches or property; and, supposing the men both to have worked equally hard, they would each have right to equal share or use of it. Their political economy would consist merely in careful preservation and just division of these possessions. Perhaps, however, after some time one or other might be dissatisfied with the results of their common farming; and they might in consequence agree to divide the land they had brought under the spade into equal shares, so that each might thenceforward work in his own field and live by it. Suppose that after this arrangement had been made, one of them were to fall ill, and be unable to work on his land at a critical time--say of sowing or harvest. He would naturally ask the other to sow or reap for him. Then his companion might say, with perfect justice, "I will do this additional work for you; but if I do it, you must promise to do as much for me at another time. I will count how many hours I spend on your ground, and you shall give me a written promise to work for the same number of hours on mine, whenever I need your help, and you are able to give it." Suppose the disabled man's sickness to continue, and that under various circumstances, for several years, requiring the help of the other, he on each occasion gave a written pledge to work, as soon as he was able, at his companion's orders, for the same number of hours which the other had given up to him. What will the positions of the two men be when the invalid is able to resume work? Considered as a "Polis," or state, they will be poorer than they would have been otherwise: poorer by the withdrawal of what the sick man's labour would have produced in the interval. His friend may perhaps have toiled with an energy quickened by the enlarged need, but in the end his own land and property must have suffered by the withdrawal of so much of his time and thought from them; and the united property of the two men will be certainly less than it would have been if both had remained in health and activity. But the relations in which they stand to each other are also widely altered. The sick man has not only pledged his labour for some years, but will probably have exhausted his own share of the accumulated stores, and will be in consequence for some time dependent on the other for food, which he can only "pay" or reward him for by yet more deeply pledging his own labour. Supposing the written promises to be held entirely valid (among civilized nations their validity is secured by legal measures[33]), the person who had hitherto worked for both might now, if he chose, rest altogether, and pass his time in idleness, not only forcing his companion to redeem all the engagements he had already entered into, but exacting from him pledges for further labour, to an arbitrary amount, for what food he had to advance to him. [33] The disputes which exist respecting the real nature of money arise more from the disputants examining its functions on different sides, than from any real dissent in their opinions. All money, properly so called, is an acknowledgment of debt; but as such, it may either be considered to represent the labour and property of the creditor, or the idleness and penury of the debtor. The intricacy of the question has been much increased by the (hitherto necessary) use of marketable commodities, such as gold, silver, salt, shells, etc., to give intrinsic value or security to currency; but the final and best definition of money is that it is a documentary promise ratified and guaranteed by the nation to give or find a certain quantity of labour on demand. A man's labour for a day is a better standard of value than a measure of any produce, because no produce ever maintains a consistent rate of productibility. There might not, from first to last, be the least illegality (in the ordinary sense of the word) in the arrangement; but if a stranger arrived on the coast at this advanced epoch of their political economy, he would find one man commercially Rich; the other commercially Poor. He would see, perhaps with no small surprise, one passing his days in idleness; the other labouring for both, and living sparely, in the hope of recovering his independence, at some distant period. This is, of course, an example of one only out of many ways in which inequality of possession may be established between different persons, giving rise to the Mercantile forms of Riches and Poverty. In the instance before us, one of the men might from the first have deliberately chosen to be idle, and to put his life in pawn for present ease; or he might have mismanaged his land, and been compelled to have recourse to his neighbour for food and help, pledging his future labour for it. But what I want the reader to note especially is the fact, common to a large number of typical cases of this kind, that the establishment of the mercantile wealth which consists in a claim upon labour, signifies a political diminution of the real wealth which consists in substantial possessions. Take another example, more consistent with the ordinary course of affairs of trade. Suppose that three men, instead of two, formed the little isolated republic, and found themselves obliged to separate in order to farm different pieces of land at some distance from each other along the coast; each estate furnishing a distinct kind of produce, and each more or less in need of the material raised on the other. Suppose that the third man, in order to save the time of all three, undertakes simply to superintend the transference of commodities from one farm to the other; on condition of receiving some sufficiently remunerative share of every parcel of goods conveyed, or of some other parcel received in exchange for it. If this carrier or messenger always brings to each estate, from the other, what is chiefly wanted, at the right time, the operations of the two farmers will go on prosperously, and the largest possible result in produce, or wealth, will be attained by the little community. But suppose no intercourse between the landowners is possible, except through the travelling agent; and that, after a time, this agent, watching the course of each man's agriculture, keeps back the articles with which he has been entrusted until there comes a period of extreme necessity for them, on one side or other, and then exacts in exchange for them all that the distressed farmer can spare of other kinds of produce; it is easy to see that by ingeniously watching his opportunities, he might possess himself regularly of the greater part of the superfluous produce of the two estates, and at last, in some year of severest trial or scarcity, purchase both for himself, and maintain the former proprietors thenceforward as his labourers or servants. This would be a case of commercial wealth acquired on the exactest principles of modern political economy. But more distinctly even than in the former instance, it is manifest in this that the wealth of the State, or of the three men considered as a society, is collectively less than it would have been had the merchant been content with juster profit. The operations of the two agriculturists have been cramped to the utmost; and the continual limitations of the supply of things they wanted at critical times, together with the failure of courage consequent on the prolongation of a struggle for mere existence, without any sense of permanent gain, must have seriously diminished the effective results of their labour; and the stores finally accumulated in the merchant's hands will not in anywise be of equivalent value to those which, had his dealings been honest, would have filled at once the granaries of the farmers and his own. The whole question, therefore, respecting not only the advantage, but even the quantity, of national wealth, resolves itself finally into one of abstract justice. It is impossible to conclude, of any given mass of acquired wealth, merely by the fact of its existence, whether it signifies good or evil to the nation in the midst of which it exists. Its real value depends on the moral sign attached to it, just as sternly as that of a mathematical quantity depends on the algebraical sign attached to it. Any given accumulation of commercial wealth may be indicative, on the one hand, of faithful industries, progressive energies, and productive ingenuities; or, on the other, it may be indicative of mortal luxury, merciless tyranny, ruinous chicane. Some treasures are heavy with human tears, as an ill-stored harvest with untimely rain; and some gold is brighter in sunshine than it is in substance. And these are not, observe, merely moral or pathetic attributes of riches, which the seeker of riches may, if he chooses, despise; they are, literally and sternly, material attributes of riches, depreciating or exalting, incalculably, the monetary signification of the sum in question. One mass of money is the outcome of action which has created,--another, of action which has annihilated,--ten times as much in the gathering of it; such and such strong hands have been paralysed, as if they had been numbed by nightshade: so many strong men's courage broken, so many productive operations hindered; this and the other false direction given to labour, and lying image of prosperity set up, on Dura plains dug into seven-times-heated furnaces. That which seems to be wealth may in verity be only the gilded index of far-reaching ruin; a wrecker's handful of coin gleaned from the beach to which he has beguiled an argosy; a camp-follower's bundle of rags unwrapped from the breasts of goodly soldiers dead; the purchase-pieces of potter's fields, wherein shall be buried together the citizen and the stranger. And therefore, the idea that directions can be given for the gaining of wealth, irrespectively of the consideration of its moral sources, or that any general and technical law of purchase and gain can be set down for national practice, is perhaps the most insolently futile of all that ever beguiled men through their vices. So far as I know, there is not in history record of anything so disgraceful to the human intellect as the modern idea that the commercial text, "Buy in the cheapest market and sell in the dearest," represents, or under any circumstances could represent, an available principle of national economy. Buy in the cheapest market?--yes; but what made your market cheap? Charcoal may be cheap among your roof timbers after a fire, and bricks may be cheap in your streets after an earthquake; but fire and earthquake may not therefore be national benefits. Sell in the dearest?--yes, truly; but what made your market dear? You sold your bread well to-day; was it to a dying man who gave his last coin for it, and will never need bread more, or to a rich man who to-morrow will buy your farm over your head; or to a soldier on his way to pillage the bank in which you have put your fortune? None of these things you can know. One thing only you can know, namely, whether this dealing of yours is a just and faithful one, which is all you need concern yourself about respecting it; sure thus to have done your own part in bringing about ultimately in the world a state of things which will not issue in pillage or in death. And thus every question concerning these things merges itself ultimately in the great question of justice, which, the ground being thus far cleared for it, I will enter upon in the next paper, leaving only, in this, three final points for the reader's consideration. It has been shown that the chief value and virtue of money consists in its having power over human beings; that, without this power, large material possessions are useless, and, to any person possessing such power, comparatively unnecessary. But power over human beings is attainable by other means than by money. As I said a few pages back, the money power is always imperfect and doubtful; there are many things which cannot be reached with it, others which cannot be retained by it. Many joys may be given to men which cannot be bought for gold, and many fidelities found in them which cannot be rewarded with it. Trite enough,--the reader thinks. Yes: but it is not so trite,--I wish it were,--that in this moral power, quite inscrutable and immeasurable though it be, there is a monetary value just as real as that represented by more ponderous currencies. A man's hand may be full of invisible gold, and the wave of it, or the grasp, shall do more than another's with a shower of bullion. This invisible gold, also, does not necessarily diminish in spending. Political economists will do well some day to take heed of it, though they cannot take measure. But farther. Since the essence of wealth consists in its authority over men, if the apparent or nominal wealth fail in this power, it fails in essence; in fact, ceases to be wealth at all. It does not appear lately in England, that our authority over men is absolute. The servants show some disposition to rush riotously upstairs, under an impression that their wages are not regularly paid. We should augur ill of any gentleman's property to whom this happened every other day in his drawing-room. So also, the power of our wealth seems limited as respects the comfort of the servants, no less than their quietude. The persons in the kitchen appear to be ill-dressed, squalid, half-starved. One cannot help imagining that the riches of the establishment must be of a very theoretical and documentary character. Finally. Since the essence of wealth consists in power over men, will it not follow that the nobler and the more in number the persons are over whom it has power, the greater the wealth? Perhaps it may even appear after some consideration, that the persons themselves _are_ the wealth--that these pieces of gold with which we are in the habit of guiding them, are, in fact, nothing more than a kind of Byzantine harness or trappings, very glittering and beautiful in barbaric sight, wherewith we bridle the creatures; but that if these same living creatures could be guided without the fretting and jingling of the byzants in their mouths and ears, they might themselves be more valuable than their bridles. In fact, it may be discovered that the true veins of wealth are purple--and not in Rock, but in Flesh--perhaps even that the final outcome and consummation of all wealth is in the producing as many as possible full-breathed, bright-eyed, and happy-hearted human creatures. Our modern wealth, I think, has rather a tendency the other way;--most political economists appearing to consider multitudes of human creatures not conducive to wealth, or at best conducive to it only by remaining in a dim-eyed and narrow-chested state of being. Nevertheless, it is open, I repeat, to serious question, which I leave to the reader's pondering, whether, among national manufactures, that of Souls of a good quality may not at last turn out a quite leadingly lucrative one? Nay, in some faraway and yet undreamt-of hour, I can even imagine that England may cast all thoughts of possessive wealth back to the barbaric nations among whom they first arose; and that, while the sands of the Indus and adamant of Golconda may yet stiffen the housings of the charger, and flash from the turban of the slave, she, as a Christian mother, may at last attain to the virtues and the treasures of a Heathen one, and be able to lead forth her Sons, saying-- "These are MY Jewels." ESSAY III. "QUI JUDICATIS TERRAM." Some centuries before the Christian era, a Jew merchant, largely engaged in business on the Gold Coast, and reported to have made one of the largest fortunes of his time (held also in repute for much practical sagacity), left among his ledgers some general maxims concerning wealth, which have been preserved, strangely enough, even to our own days. They were held in considerable respect by the most active traders of the middle ages, especially by the Venetians, who even went so far in their admiration as to place a statue of the old Jew on the angle of one of their principal public buildings. Of late years these writings have fallen into disrepute, being opposed in every particular to the spirit of modern commerce. Nevertheless, I shall reproduce a passage or two from them here, partly because they may interest the reader by their novelty; and chiefly because they will show him that it is possible for a very practical and acquisitive tradesman to hold, through a not unsuccessful career, that principle of distinction between well-gotten and ill-gotten wealth, which, partially insisted on in my last paper, it must be our work more completely to examine in this. He says, for instance, in one place: "The getting of treasures by a lying tongue is a vanity tossed to and fro of them that seek death:" adding in another, with the same meaning (he has a curious way of doubling his sayings): "Treasures of wickedness profit nothing: but justice delivers from death." Both these passages are notable for their assertion of death as the only real issue and sum of attainment by any unjust scheme of wealth. If we read, instead of "lying tongue," "lying label, title, pretence, or advertisement," we shall more clearly perceive the bearing of the words on modern business. The seeking of death is a grand expression of the true course of men's toil in such business. We usually speak as if death pursued us, and we fled from him; but that is only so in rare instances. Ordinarily, he masks himself--makes himself beautiful--all-glorious; not like the King's daughter, all-glorious within, but outwardly: his clothing of wrought gold. We pursue him frantically all our days, he flying or hiding from us. Our crowning success at three-score and ten is utterly and perfectly to seize, and hold him in his eternal integrity---robes, ashes, and sting. Again: the merchant says, "He that oppresseth the poor to increase his riches, shall surely come to want." And again, more strongly: "Rob not the poor because he is poor; neither oppress the afflicted in the place of business. For God shall spoil the soul of those that spoiled them." This "robbing the poor because he is poor" is especially the mercantile form of theft, consisting in taking advantage of a man's necessities in order to obtain his labour or property at a reduced price. The ordinary highwayman's opposite form of robbery--of the rich, because he is rich--does not appear to occur so often to the old merchant's mind; probably because, being less profitable and more dangerous than the robbery of the poor, it is rarely practised by persons of discretion. But the two most remarkable passages in their deep general significance are the following:-- "The rich and the poor have met. God is their maker." "The rich and the poor have met. God is their light." They "have met:" more literally, have stood in each other's way, (_obviaverunt_). That is to say, as long as the world lasts, the action and counteraction of wealth and poverty, the meeting, face to face, of rich and poor, is just as appointed and necessary a law of that world as the flow of stream to sea, or the interchange of power among the electric clouds:--"God is their maker." But, also, this action may be either gentle and just, or convulsive and destructive: it may be by rage of devouring flood, or by lapse of serviceable wave;--in blackness of thunderstroke, or continual force of vital fire, soft, and shapeable into love-syllables from far away. And which of these it shall be depends on both rich and poor knowing that God is their light; that in the mystery of human life, there is no other light than this by which they can see each other's faces, and live;--light, which is called in another of the books among which the merchant's maxims have been preserved, the "sun of justice,"[34] of which it is promised that it shall rise at last with "healing" (health-giving or helping, making whole or setting at one) in its wings. For truly this healing is only possible by means of justice; no love, no faith, no hope will do it; men will be unwisely fond--vainly faithful, unless primarily they are just; and the mistake of the best men through generation after generation, has been that great one of thinking to help the poor by almsgiving, and by preaching of patience or of hope, and by every other means, emollient or consolatory, except the one thing which God orders for them, justice. But this justice, with its accompanying holiness or helpfulness, being even by the best men denied in its trial time, is by the mass of men hated wherever it appears: so that, when the choice was one day fairly put to them, they denied the Helpful One and the Just;[35] and desired a murderer, sedition-raiser, and robber, to be granted to them;--the murderer instead of the Lord of Life, the sedition-raiser instead of the Prince of Peace, and the robber instead of the Just Judge of all the world. [34] More accurately, Sun of Justness; but, instead of the harsh word "Justness," the old English "Righteousness" being commonly employed, has, by getting confused with "godliness," or attracting about it various vague and broken meanings, prevented most persons from receiving the force of the passages in which it occurs. The word "righteousness" properly refers to the justice of rule, or right, as distinguished from "equity," which refers to the justice of balance. More broadly, Righteousness is King's justice; and Equity, Judge's justice; the King guiding or ruling all, the Judge dividing or discerning between opposites (therefore, the double question, "Man, who made me a ruler--[Greek: dikastês]--or a divider--[Greek: meristês]--over you?") Thus, with respect to the Justice of Choice (selection, the feebler and passive justice), we have from lego,--lex, legal, loi, and loyal; and with respect to the Justice of Rule (direction, the stronger and active justice), we have from rego,--rex, regal, roi, and royal. [35] In another place written with the same meaning, "Just, and having salvation." I have just spoken of the flowing of streams to the sea as a partial image of the action of wealth. In one respect it is not a partial, but a perfect image. The popular economist thinks himself wise in having discovered that wealth, or the forms of property in general, must go where they are required; that where demand is, supply must follow. He farther declares that this course of demand and supply cannot be forbidden by human laws. Precisely in the same sense, and with the same certainty, the waters of the world go where they are required. Where the land falls, the water flows. The course neither of clouds nor rivers can be forbidden by human will. But the disposition and administration of them can be altered by human forethought. Whether the stream shall be a curse or a blessing, depends upon man's labour, and administrating intelligence. For centuries after centuries, great districts of the world, rich in soil, and favoured in climate, have lain desert under the rage of their own rivers; not only desert, but plague-struck. The stream which, rightly directed, would have flowed in soft irrigation from field to field--would have purified the air, given food to man and beast, and carried their burdens for them on its bosom--now overwhelms the plain, and poisons the wind; its breath pestilence, and its work famine. In like manner this wealth "goes where it is required." No human laws can withstand its flow. They can only guide it: but this, the leading trench and limiting mound can do so thoroughly, that it shall become water of life--the riches of the hand of wisdom;[36] or, on the contrary, by leaving it to its own lawless flow, they may make it, what it has been too often, the last and deadliest of national plagues: water of Marah--the water which feeds the roots of all evil. [36] "Length of days in her right hand; in her left, riches and honour." The necessity of these laws of distribution or restraint is curiously overlooked in the ordinary political economist's definition of his own "science." He calls it, shortly, the "science of getting rich." But there are many sciences, as well as many arts, of getting rich. Poisoning people of large estates was one employed largely in the middle ages; adulteration of food of people of small estates is one employed largely now. The ancient and honourable Highland method of black mail; the more modern and less honourable system of obtaining goods on credit, and the other variously improved methods of appropriation--which, in major and minor scales of industry, down to the most artistic pocket-picking, we owe to recent genius,--all come under the general head of sciences, or arts, of getting rich. So that it is clear the popular economist, in calling his science the science _par excellence_ of getting rich, must attach some peculiar ideas of limitation to its character. I hope I do not misrepresent him, by assuming that he means _his_ science to be the science of "getting rich by legal or just means." In this definition, is the word "just," or "legal," finally to stand? For it is possible among certain nations, or under certain rulers, or by help of certain advocates, that proceedings may be legal which are by no means just. If, therefore, we leave at last only the word "just" in that place of our definition, the insertion of this solitary and small word will make a notable difference in the grammar of our science. For then it will follow that, in order to grow rich scientifically we must grow rich justly; and, therefore, know what is just; so that our economy will no longer depend merely on prudence, but on jurisprudence--and that of divine, not human law. Which prudence is indeed of no mean order, holding itself, as it were, high in the air of heaven, and gazing for ever on the light of the sun of justice; hence the souls which have excelled in it are represented by Dante as stars forming in heaven for ever the figure of the eye of an eagle: they having been in life the discerners of light from darkness; or to the whole human race, as the light of the body, which is the eye; while those souls which form the wings of the bird (giving power and dominion to justice, "healing in its wings") trace also in light the inscription in heaven: "DILIGITE JUSTITIAM QUI JUDICATIS TERRAM." "Ye who judge the earth, give" (not, observe, merely love, but) "diligent love to justice:" the love which seeks diligently, that is to say, choosingly, and by preference to all things else. Which judging or doing judgment in the earth is, according to their capacity and position, required not of judges only, nor of rulers only, but of all men:[37] a truth sorrowfully lost sight of even by those who are ready enough to apply to themselves passages in which Christian men are spoken of as called to be "saints" (_i.e._, to helpful or healing functions); and "chosen to be kings" (_i.e._, to knowing or directing functions); the true meaning of these titles having been long lost through the pretences of unhelpful and unable persons to saintly and kingly character; also through the once popular idea that both the sanctity and royalty are to consist in wearing long robes and high crowns, instead of in mercy and judgment; whereas all true sanctity is saving power, as all true royalty is ruling power; and injustice is part and parcel of the denial of such power, which "makes men as the creeping things, as the fishes of the sea, that have no ruler over them."[38] [37] I hear that several of our lawyers have been greatly amused by the statement in the first of these papers that a lawyer's function was to do justice. I did not intend it for a jest; nevertheless it will be seen that in the above passage neither the determination nor doing of justice are contemplated as functions wholly peculiar to the lawyer. Possibly, the more our standing armies, whether of soldiers, pastors, or legislators (the generic term "pastor" including all teachers, and the generic term "lawyer" including makers as well as interpreters of law), can be superseded by the force of national heroism, wisdom, and honesty, the better it may be for the nation. [38] It being the privilege of the fishes, as it is of rats and wolves, to live by the laws of demand and supply; but the distinction of humanity, to live by those of right. Absolute justice is indeed no more attainable than absolute truth; but the righteous man is distinguished from the unrighteous by his desire and hope of justice, as the true man from the false by his desire and hope of truth. And though absolute justice be unattainable, as much justice as we need for all practical use is attainable by all those who make it their aim. We have to examine, then, in the subject before us, what are the laws of justice respecting payment of labour--no small part, these, of the foundations of all jurisprudence. I reduced, in my last paper, the idea of money payment to its simplest or radical terms. In those terms its nature, and the conditions of justice respecting it, can be best ascertained. Money payment, as there stated, consists radically in a promise to some person working for us, that for the time and labour he spends in our service to-day we will give or procure equivalent time and labour in his service at any future time when he may demand it.[39] [39] It might appear at first that the market price of labour expressed such an exchange: but this is a fallacy, for the market price is the momentary price of the kind of labour required, but the just price is its equivalent of the productive labour of mankind. This difference will be analysed in its place. It must be noted also that I speak here only of the exchangeable value of labour, not of that of commodities. The exchangeable value of a commodity is that of the labour required to produce it, multiplied into the force of the demand for it. If the value of the labour = _x_ and the force of demand = _y_, the exchangeable value of the commodity is _xy_, in which if either _x_ = 0, or _y_ = 0, _xy_ = 0. If we promise to give him less labour than he has given us, we under-pay him. If we promise to give him more labour than he has given us, we over-pay him. In practice, according to the laws of demand and supply, when two men are ready to do the work, and only one man wants to have it done, the two men under-bid each other for it; and the one who gets it to do, is under-paid. But when two men want the work done, and there is only one man ready to do it, the two men who want it done over-bid each other, and the workman is over-paid. I will examine these two points of injustice in succession, but first I wish the reader to clearly understand the central principle lying between the two, of right or just payment. When we ask a service of any man, he may either give it us freely, or demand payment for it. Respecting free gift of service, there is no question at present, that being a matter of affection--not of traffic. But if he demand payment for it, and we wish to treat him with absolute equity, it is evident that this equity can only consist in giving time for time, strength for strength, and skill for skill. If a man works an hour for us, and we only promise to work half an hour for him in return, we obtain an unjust advantage. If, on the contrary, we promise to work an hour and a half for him in return, he has an unjust advantage. The justice consists in absolute exchange; or, if there be any respect to the stations of the parties, it will not be in favour of the employer: there is certainly no equitable reason in a man's being poor, that if he give me a pound of bread to-day, I should return him less than a pound of bread to-morrow; or any equitable reason in a man's being uneducated, that if he uses a certain quantity of skill and knowledge in my service, I should use a less quantity of skill and knowledge in his. Perhaps, ultimately, it may appear desirable, or, to say the least, gracious, that I should give in return somewhat more than I received. But at present, we are concerned on the law of justice only, which is that of perfect and accurate exchange;--one circumstance only interfering with the simplicity of this radical idea of just payment--that inasmuch as labour (rightly directed) is fruitful just as seed is, the fruit (or "interest" as it is called) of the labour first given, or "advanced," ought to be taken into account, and balanced by an additional quantity of labour in the subsequent repayment. Supposing the repayment to take place at the end of a year, or of any other given time, this calculation could be approximately made; but as money (that is to say, cash) payment involves no reference to time (it being optional with the person paid to spend what he receives at once or after any number of years), we can only assume, generally, that some slight advantage must in equity be allowed to the person who advances the labour, so that the typical form of bargain will be: If you give me an hour to-day, I will give you an hour and five minutes on demand. If you give me a pound of bread to-day, I will give you seventeen ounces on demand, and so on. All that is necessary for the reader to note is, that the amount returned is at least in equity not to be _less_ than the amount given. The abstract idea, then, of just or due wages, as respects the labourer, is that they will consist in a sum of money which will at any time procure for him at least as much labour as he has given, rather more than less. And this equity or justice of payment is, observe, wholly independent of any reference to the number of men who are willing to do the work. I want a horseshoe for my horse. Twenty smiths, or twenty thousand smiths, may be ready to forge it; their number does not in one atom's weight affect the question of the equitable payment of the one who _does_ forge it. It costs him a quarter of an hour of his life, and so much skill and strength of arm to make that horseshoe for me. Then at some future time I am bound in equity to give a quarter of an hour, and some minutes more, of my life (or of some other person's at my disposal), and also as much strength of arm and skill, and a little more, in making or doing what the smith may have need of. Such being the abstract theory of just remunerative payment, its application is practically modified by the fact that the order for labour, given in payment, is general, while the labour received is special. The current coin or document is practically an order on the nation for so much work of any kind; and this universal applicability to immediate need renders it so much more valuable than special labour can be, that an order for a less quantity of this general toil will always be accepted as a just equivalent for a greater quantity of special toil. Any given craftsman will always be willing to give an hour of his own work in order to receive command over half an hour, or even much less, of national work. This source of uncertainty, together with the difficulty of determining the monetary value of skill,[40] renders the ascertainment (even approximate) of the proper wages of any given labour in terms of currency, matter of considerable complexity. But they do not affect the principle of exchange. The worth of the work may not be easily known; but it _has_ a worth, just as fixed and real as the specific gravity of a substance, though such specific gravity may not be easily ascertainable when the substance is united with many others. Nor is there so much difficulty or chance in determining it as in determining the ordinary maxima and minima of vulgar political economy. There are few bargains in which the buyer can ascertain with anything like precision that the seller would have taken no less;--or the seller acquire more than a comfortable faith that the purchaser would have given no more. This impossibility of precise knowledge prevents neither from striving to attain the desired point of greatest vexation and injury to the other, nor from accepting it for a scientific principle that he is to buy for the least and sell for the most possible, though what the real least or most may be he cannot tell. In like manner, a just person lays it down for a scientific principle that he is to pay a just price, and, without being able precisely to ascertain the limits of such a price, will nevertheless strive to attain the closest possible approximation to them. A practically serviceable approximation he _can_ obtain. It is easier to determine scientifically what a man ought to have for his work, than what his necessities will compel him to take for it. His necessities can only be ascertained by empirical, but his due by analytical, investigation. In the one case, you try your answer to the sum like a puzzled schoolboy--till you find one that fits; in the other, you bring out your result within certain limits, by process of calculation. [40] Under the term "skill" I mean to include the united force of experience, intellect, and passion in their operation on manual labour: and under the term "passion," to include the entire range and agency of the moral feelings; from the simple patience and gentleness of mind which will give continuity and fineness to the touch, or enable one person to work without fatigue, and with good effect, twice as long as another, up to the qualities of character which render science possible--(the retardation of science by envy is one of the most tremendous losses in the economy of the present century)--and to the incommunicable emotion and imagination which are the first and mightiest sources of all value in art. It is highly singular that political economists should not yet have perceived, if not the moral, at least the passionate element, to be an inextricable quantity in every calculation. I cannot conceive, for instance, how it was possible that Mr. Mill should have followed the true clue so far as to write,--"No limit can be set to the importance--even in a purely productive and material point of view--of mere thought," without seeing that it was logically necessary to add also, "and of mere feeling." And this the more, because in his first definition of labour he includes in the idea of it "all feelings of a disagreeable kind connected with the employment of one's thoughts in a particular occupation." True; but why not also, "feelings of an agreeable kind?" It can hardly be supposed that the feelings which retard labour are more essentially a part of the labour than those which accelerate it. The first are paid for as pain, the second as power. The workman is merely indemnified for the first; but the second both produce a part of the exchangeable value of the work, and materially increase its actual quantity. "Fritz is with us. _He_ is worth fifty thousand men." Truly, a large addition to the material force;--consisting, however, be it observed, not more in operations carried on in Fritz's head, than in operations carried on in his armies' heart. "No limit can be set to the importance of _mere_ thought." Perhaps not! Nay, suppose some day it should turn out that "mere" thought was in itself a recommendable object of production, and that all Material production was only a step towards this more precious Immaterial one? Supposing, then, the just wages of any quantity of given labour to have been ascertained, let us examine the first results of just and unjust payment, when in favour of the purchaser or employer; _i.e._, when two men are ready to do the work, and only one wants to have it done. The unjust purchaser forces the two to bid against each other till he has reduced their demand to its lowest terms. Let us assume that the lowest bidder offers to do the work at half its just price. The purchaser employs him, and does not employ the other. The first or _apparent_ result, is, therefore, that one of the two men is left out of employ, or to starvation, just as definitely as by the just procedure of giving fair price to the best workman. The various writers who endeavoured to invalidate the positions of my first paper never saw this, and assumed that the unjust hirer employed _both_. He employs both no more than the just hirer. The only difference (in the outset) is that the just man pays sufficiently, the unjust man insufficiently, for the labour of the single person employed. I say, in "the outset;" for this first or apparent difference is not the actual difference. By the unjust procedure, half the proper price of the work is left in the hands of the employer. This enables him to hire another man at the same unjust rate on some other kind of work; and the final result is that he has two men working for him at half-price, and two are out of employ. By the just procedure, the whole price of the first piece of work goes into the hands of the man who does it. No surplus being left in the employer's hands, _he_ cannot hire another man for another piece of labour. But by precisely so much as his power is diminished, the hired workman's power is increased; that is to say, by the additional half of the price he has received; which additional half _he_ has the power of using to employ another man in _his_ service. I will suppose, for the moment, the least favourable, though quite probable, case--that, though justly treated himself, he yet will act unjustly to his subordinate; and hire at half-price, if he can. The final result will then be, that one man works for the employer, at just price; one for the workman, at half-price; and two, as in the first case, are still out of employ. These two, as I said before, are out of employ in _both_ cases. The difference between the just and unjust procedure does not lie in the number of men hired, but in the price paid to them, and the _persons by whom_ it is paid. The essential difference, that which I want the reader to see clearly, is, that in the unjust case, two men work for one, the first hirer. In the just case, one man works for the first hirer, one for the person hired, and so on, down or up through the various grades of service; the influence being carried forward by justice, and arrested by injustice. The universal and constant action of justice in this matter is therefore to diminish the power of wealth, in the hands of one individual, over masses of men, and to distribute it through a chain of men. The actual power exerted by the wealth is the same in both cases; but by injustice it is put all into one man's hands, so that he directs at once and with equal force the labour of a circle of men about him; by the just procedure, he is permitted to touch the nearest only, through whom, with diminished force, modified by new minds, the energy of the wealth passes on to others, and so till it exhausts itself. The immediate operation of justice in this respect is, therefore, to diminish the power of wealth, first in acquisition of luxury, and, secondly, in exercise of moral influence. The employer cannot concentrate so multitudinous labour on his own interests, nor can he subdue so multitudinous mind to his own will. But the secondary operation of justice is not less important. The insufficient payment of the group of men working for one, places each under a maximum of difficulty in rising above his position. The tendency of the system is to check advancement. But the sufficient or just payment, distributed through a descending series of offices or grades of labour,[41] gives each subordinated person fair and sufficient means of rising in the social scale, if he chooses to use them; and thus not only diminishes the immediate power of wealth, but removes the worst disabilities of poverty. [41] I am sorry to lose time by answering, however curtly, the equivocations of the writers who sought to obscure the instances given of regulated labour in the first of these papers, by confusing kinds, ranks, and quantities of labour with its qualities. I never said that a colonel should have the same pay as a private, nor a bishop the same pay as a curate. Neither did I say that more work ought to be paid as less work (so that the curate of a parish of two thousand souls should have no more than the curate of a parish of five hundred). But I said that, so far as you employ it at all, bad work should be paid no less than good work; as a bad clergyman yet takes his tithes, a bad physician takes his fee, and a bad lawyer his costs. And this, as will be farther shown in the conclusion, I said, and say, partly because the best work never was, nor ever will be, done for money at all; but chiefly because, the moment people know they have to pay the bad and good alike, they will try to discern the one from the other, and not use the bad. A sagacious writer in the _Scotsman_ asks me if I should like any common scribbler to be paid by Messrs. Smith, Elder and Co. [the original publishers of this work] as their good authors are. I should, if they employed him--but would seriously recommend them, for the scribbler's sake, as well as their own, _not_ to employ him. The quantity of its money which the country at present invests in scribbling is not, in the outcome of it, economically spent; and even the highly ingenious person to whom this question occurred, might perhaps have been more beneficially employed than in printing it. It is on this vital problem that the entire destiny of the labourer is ultimately dependent. Many minor interests may sometimes appear to interfere with it, but all branch from it. For instance, considerable agitation is often caused in the minds of the lower classes when they discover the share which they nominally, and to all appearance, actually, pay out of their wages in taxation (I believe thirty-five or forty per cent.). This sounds very grievous; but in reality the labourer does not pay it, but his employer. If the workman had not to pay it, his wages would be less by just that sum: competition would still reduce them to the lowest rate at which life was possible. Similarly the lower orders agitated for the repeal of the corn laws,[42] thinking they would be better off if bread were cheaper; never perceiving that as soon as bread was permanently cheaper, wages would permanently fall in precisely that proportion. The corn laws were rightly repealed; not, however, because they directly oppressed the poor, but because they indirectly oppressed them in causing a large quantity of their labour to be consumed unproductively. So also unnecessary taxation oppresses them, through destruction of capital, but the destiny of the poor depends primarily always on this one question of dueness of wages. Their distress (irrespectively of that caused by sloth, minor error, or crime) arises on the grand scale from the two reacting forces of competition and oppression. There is not yet, nor will yet for ages be, any real over-population in the world; but a local over-population, or, more accurately, a degree of population locally unmanageable under existing circumstances for want of forethought and sufficient machinery, necessarily shows itself by pressure of competition; and the taking advantage of this competition by the purchaser to obtain their labour unjustly cheap, consummates at once their suffering and his own; for in this (as I believe in every other kind of slavery) the oppressor suffers at last more than the oppressed, and those magnificent lines of Pope, even in all their force, fall short of the truth-- "Yet, to be just to these poor men of pelf, Each does but HATE HIS NEIGHBOUR AS HIMSELF: Damned to the mines, an equal fate betides The slave that digs it, and the slave that hides." [42] I have to acknowledge an interesting communication on the subject of free trade from Paisley (for a short letter from "A Well-wisher" at ----, my thanks are yet more due). But the Scottish writer will, I fear, be disagreeably surprised to hear, that I am, and always have been, an utterly fearless and unscrupulous free trader. Seven years ago, speaking of the various signs of infancy in the European mind (_Stones of Venice_, vol. iii. p. 168), I wrote: "The first principles of commerce were acknowledged by the English parliament only a few months ago, in its free trade measures, and are still so little understood by the million, that _no nation dares to abolish its custom-houses_." It will be observed that I do not admit even the idea of reciprocity. Let other nations, if they like, keep their ports shut; every wise nation will throw its own open. It is not the opening them, but a sudden, inconsiderate, and blunderingly experimental manner of opening them, which does harm. If you have been protecting a manufacture for a long series of years, you must not take the protection off in a moment, so as to throw every one of its operatives at once out of employ, any more than you must take all its wrappings off a feeble child at once in cold weather, though the cumber of them may have been radically injuring its health. Little by little, you must restore it to freedom and to air. Most people's minds are in curious confusion on the subject of free trade, because they suppose it to imply enlarged competition. On the contrary, free trade puts an end to all competition. "Protection" (among various other mischievous functions) endeavours to enable one country to compete with another in the production of an article at a disadvantage. When trade is entirely free, no country can be competed with in the articles for the production of which it is naturally calculated; nor can it compete with any other, in the production of articles for which it is not naturally calculated. Tuscany, for instance, cannot compete with England in steel, nor England with Tuscany in oil. They must exchange their steel and oil. Which exchange should be as frank and free as honesty and the sea-winds can make it. Competition, indeed, arises at first, and sharply, in order to prove which is strongest in any given manufacture possible to both: this point once ascertained, competition is at an end. The collateral and reversionary operations of justice in this matter I shall examine hereafter (it being needful first to define the nature of value); proceeding then to consider within what practical terms a juster system may be established; and ultimately the vexed question of the destinies of the unemployed workmen.[43] Lest, however, the reader should be alarmed at some of the issues to which our investigations seem to be tending, as if in their bearing against the power of wealth they had something in common with those of socialism, I wish him to know, in accurate terms, one or two of the main points which I have in view. [43] I should be glad if the reader would first clear the ground for himself so far as to determine whether the difficulty lies in getting the work or getting the pay for it. Does he consider occupation itself to be an expensive luxury, difficult of attainment, of which too little is to be found in the world? or is it rather that, while in the enjoyment even of the most athletic delight, men must nevertheless be maintained, and this maintenance is not always forthcoming? We must be clear on this head before going farther, as most people are loosely in the habit of talking of the difficulty of "finding employment." Is it employment that we want to find, or support during employment? Is it idleness we wish to put an end to, or hunger? We have to take up both questions in succession, only not both at the same time. No doubt that work _is_ a luxury, and a very great one. It is, indeed, at once a luxury and a necessity; no man can retain either health of mind or body without it. So profoundly do I feel this, that, as will be seen in the sequel, one of the principal objects I would recommend to benevolent and practical persons, is to induce rich people to seek for a larger quantity of this luxury than they at present possess. Nevertheless, it appears by experience that even this healthiest of pleasures may be indulged in to excess, and that human beings are just as liable to surfeit of labour as to surfeit of meat; so that, as on the one hand, it may be charitable to provide, for some people, lighter dinner, and more work,--for others, it may be equally expedient to provide lighter work, and more dinner. Whether socialism has made more progress among the army and navy (where payment is made on my principles), or among the manufacturing operatives (who are paid on my opponents' principles), I leave it to those opponents to ascertain and declare. Whatever their conclusions may be, I think it necessary to answer for myself only this: that if there be any one point insisted on throughout my works more frequently than another, that one point is the impossibility of Equality. My continual aim has been to show the eternal superiority of some men to others, sometimes even of one man to all others; and to show also the advisability of appointing such persons or person to guide, to lead, or on occasion even to compel and subdue, their inferiors, according to their own better knowledge and wiser will. My principles of Political Economy were all involved in a single phrase spoken three years ago at Manchester: "Soldiers of the Ploughshare as well as Soldiers of the Sword:" and they were all summed in a single sentence in the last volume of _Modern Painters_--"Government and co-operation are in all things the Laws of Life; Anarchy and competition the Laws of Death." And with respect to the mode in which these general principles affect the secure possession of property, so far am I from invalidating such security, that the whole gist of these papers will be found ultimately to aim at an extension in its range; and whereas it has long been known and declared that the poor have no right to the property of the rich, I wish it also to be known and declared that the rich have no right to the property of the poor. But that the working of the system which I have undertaken to develop would in many ways shorten the apparent and direct, though not the unseen and collateral, power, both of wealth, as the Lady of Pleasure, and of capital, as the Lord of Toil, I do not deny: on the contrary, I affirm it in all joyfulness; knowing that the attraction of riches is already too strong, as their authority is already too weighty, for the reason of mankind. I said in my last paper that nothing in history had ever been so disgraceful to human intellect as the acceptance among us of the common doctrines of political economy as a science. I have many grounds for saying this, but one of the chief may be given in few words. I know no previous instance in history of a nation's establishing a systematic disobedience to the first principles of its professed religion. The writings which we (verbally) esteem as divine, not only denounce the love of money as the source of all evil, and as an idolatry abhorred of the Deity, but declare mammon service to be the accurate and irreconcileable opposite of God's service; and, whenever they speak of riches absolute, and poverty absolute, declare woe to the rich, and blessing to the poor. Whereupon we forthwith investigate a science of becoming rich, as the shortest road to national prosperity. "Tai Cristian dannerà l'Etiòpe, Quando si partiranno i due collegi, L'UNO IN ETERNO RICCO, E L'ALTRO IN�PE." ESSAY IV. AD VALOREM. In the last paper we saw that just payment of labour consisted in a sum of money which would approximately obtain equivalent labour at a future time: we have now to examine the means of obtaining such equivalence. Which question involves the definition of Value, Wealth, Price, and Produce. None of these terms are yet defined so as to be understood by the public. But the last, Produce, which one might have thought the clearest of all, is, in use, the most ambiguous; and the examination of the kind of ambiguity attendant on its present employment will best open the way to our work. In his Chapter on Capital,[44] Mr. J. S. Mill instances, as a capitalist, a hardware manufacturer, who, having intended to spend a certain portion of the proceeds of his business in buying plate and jewels, changes his mind, and "pays it as wages to additional workpeople." The effect is stated by Mr. Mill to be that "more food is appropriated to the consumption of productive labourers." [44] Book I. chap. iv. s. 1. To save space, my future references to Mr. Mill's work will be by numerals only, as in this instance, I. iv. 1. Ed. in 2 vols. 8vo, Parker, 1848. Now I do not ask, though, had I written this paragraph, it would surely have been asked of me, What is to become of the silversmiths? If they are truly unproductive persons, we will acquiesce in their extinction. And though in another part of the same passage, the hardware merchant is supposed also to dispense with a number of servants, whose "food is thus set free for productive purposes," I do not inquire what will be the effect, painful or otherwise, upon the servants, of this emancipation of their food. But I very seriously inquire why ironware is produce, and silverware is not? That the merchant consumes the one, and sells the other, certainly does not constitute the difference, unless it can be shown (which, indeed, I perceive it to be becoming daily more and more the aim of tradesmen to show) that commodities are made to be sold, and not to be consumed. The merchant is an agent of conveyance to the consumer in one case, and is himself the consumer in the other:[45] but the labourers are in either case equally productive, since they have produced goods to the same value, if the hardware and the plate are both goods. [45] If Mr. Mill had wished to show the difference in result between consumption and sale, he should have represented the hardware merchant as consuming his own goods instead of selling them; similarly, the silver merchant as consuming his own goods instead of selling them. Had he done this, he would have made his position clearer, though less tenable; and perhaps this was the position he really intended to take, tacitly involving his theory, elsewhere stated, and shown in the sequel of this paper to be false, that demand for commodities is not demand for labour. But by the most diligent scrutiny of the paragraph now under examination, I cannot determine whether it is a fallacy pure and simple, or the half of one fallacy supported by the whole of a greater one; so that I treat it here on the kinder assumption that it is one fallacy only. And what distinction separates them? It is indeed possible that in the "comparative estimate of the moralist," with which Mr. Mill says political economy has nothing to do (III. i. 2), a steel fork might appear a more substantial production than a silver one: we may grant also that knives, no less than forks, are good produce; and scythes and ploughshares serviceable articles. But, how of bayonets? Supposing the hardware merchant to effect large sales of _these_, by help of the "setting free" of the food of his servants and his silversmith,--is he still employing productive labourers, or, in Mr. Mill's words, labourers who increase "the stock of permanent means of enjoyment" (I. iii. 4)? Or if, instead of bayonets, he supply bombs, will not the absolute and final "enjoyment" of even these energetically productive articles (each of which costs ten pounds[46]) be dependent on a proper choice of time and place for their _enfantement_; choice, that is to say, depending on those philosophical considerations with which political economy has nothing to do?[47] [46] I take Mr. [afterwards Sir A.] Helps' estimate in his essay on War. [47] Also when the wrought silver vases of Spain were dashed to fragments by our custom-house officers, because bullion might be imported free of duty, but not brains, was the axe that broke them productive?--the artist who wrought them unproductive? Or again. If the woodman's axe is productive, is the executioner's? as also, if the hemp of a cable be productive, does not the productiveness of hemp in a halter depend on its moral more than on its material application? I should have regretted the need of pointing out inconsistency in any portion of Mr. Mill's work, had not the value of his work proceeded from its inconsistencies. He deserves honour among economists by inadvertently disclaiming the principles which he states, and tacitly introducing the moral considerations with which he declares his science has no connection. Many of his chapters, are, therefore, true and valuable; and the only conclusions of his which I have to dispute are those which follow from his premises. Thus, the idea which lies at the root of the passage we have just been examining, namely, that labour applied to produce luxuries will not support so many persons as labour applied to produce useful articles, is entirely true; but the instance given fails--and in four directions of failure at once--because Mr. Mill has not defined the real meaning of usefulness. The definition which he has given--"capacity to satisfy a desire, or serve a purpose" (III. i. 2)--applies equally to the iron and silver; while the true definition,--which he has not given, but which nevertheless underlies the false verbal definition in his mind, and comes out once or twice by accident (as in the words "any support to life or strength" in I. i. 5)--applies to some articles of iron, but not to others, and to some articles of silver, but not to others. It applies to ploughs, but not to bayonets; and to forks, but not to filigree.[48] [48] Filigree: that is to say, generally, ornament dependent on complexity, not on art. The eliciting of the true definition will give us the reply to our first question, "What is value?" respecting which, however, we must first hear the popular statements. "The word 'value,' when used without adjunct, always means, in political economy, value in exchange" (Mill, III. i. 3). So that, if two ships cannot exchange their rudders, their rudders are, in politico-economic language, of no value to either. But "the subject of political economy is wealth."--(Preliminary remarks, page 1.) And wealth "consists of all useful and agreeable objects which possess exchangeable value."--(Preliminary remarks, page 10.) It appears then, according to Mr. Mill, that usefulness and agreeableness underlie the exchange value, and must be ascertained to exist in the thing, before we can esteem it an object of wealth. Now, the economical usefulness of a thing depends not merely on its own nature, but on the number of people who can and will use it. A horse is useless, and therefore unsaleable, if no one can ride,--a sword if no one can strike, and meat, if no one can eat. Thus every material utility depends on its relative human capacity. Similarly: The agreeableness of a thing depends not merely on its own likeableness, but on the number of people who can be got to like it. The relative agreeableness, and therefore saleableness, of "a pot of the smallest ale," and of "Adonis painted by a running brook," depends virtually on the opinion of Demos, in the shape of Christopher Sly. That is to say, the agreeableness of a thing depends on its relative human disposition.[49] Therefore, political economy, being a science of wealth, must be a science respecting human capacities and dispositions. But moral considerations have nothing to do with political economy (III. i. 2). Therefore, moral considerations have nothing to do with human capacities and dispositions. [49] These statements sound crude in their brevity; but will be found of the utmost importance when they are developed. Thus, in the above instance, economists have never perceived that disposition to buy is a wholly _moral_ element in demand: that is to say, when you give a man half-a-crown, it depends on his disposition whether he is rich or poor with it--whether he will buy disease, ruin, and hatred, or buy health, advancement, and domestic love. And thus the agreeableness or exchange value of every offered commodity depends on production, not merely of the commodity, but of buyers of it; therefore on the education of buyers, and on all the moral elements by which their disposition to buy this, or that, is formed. I will illustrate and expand into final consequences every one of these definitions in its place: at present they can only be given with extremest brevity; for in order to put the subject at once in a connected form before the reader, I have thrown into one, the opening definitions of four chapters; namely, of that on Value ("Ad Valorem"); on Price ("Thirty Pieces"); on Production ("Demeter"); and on Economy ("The Law of the House"). I do not wholly like the look of this conclusion from Mr. Mill's statements:--let us try Mr. Ricardo's. "Utility is not the measure of exchangeable value, though it is absolutely essential to it."--(Chap. 1. sect. i.) Essential to what degree, Mr. Ricardo? There may be greater and less degrees of utility. Meat, for instance, may be so good as to be fit for any one to eat, or so bad as to be fit for no one to eat. What is the exact degree of goodness which is "essential" to its exchangeable value, but not "the measure" of it? How good must the meat be, in order to possess any exchangeable value; and how bad must it be--(I wish this were a settled question in London markets)--in order to possess none? There appears to be some hitch, I think, in the working even of Mr. Ricardo's principles; but let him take his own example. "Suppose that in the early stages of society the bows and arrows of the hunter were of equal value with the implements of the fisherman. Under such circumstances the value of the deer, the produce of the hunter's day's labour, would be _exactly_" (italics mine) "equal to the value of the fish, the product of the fisherman's day's labour. The comparative value of the fish and game would be _entirely_ regulated by the quantity of labour realized in each." (Ricardo, chap. iii. On Value.) Indeed! Therefore, if the fisherman catches one sprat, and the huntsman one deer, one sprat will be equal in value to one deer; but if the fisherman catches no sprat, and the huntsman two deer, no sprat will be equal in value to two deer? Nay; but--Mr. Ricardo's supporters may say--he means, on an average;--if the average product of a day's work of fisher and hunter be one fish and one deer, the one fish will always be equal in value to the one deer. Might I inquire the species of fish. Whale? or whitebait?[50] [50] Perhaps it may be said, in farther support of Mr. Ricardo, that he meant, "when the utility is constant or given, the price varies as the quantity of labour." If he meant this, he should have said it; but, had he meant it, he could have hardly missed the necessary result, that utility would be one measure of price (which he expressly denies it to be); and that, to prove saleableness, he had to prove a given quantity of utility, as well as a given quantity of labour: to wit, in his own instance, that the deer and fish would each feed the same number of men, for the same number of days, with equal pleasure to their palates. The fact is, he did not know what he meant himself. The general idea which he had derived from commercial experience, without being able to analyse it, was, that when the demand is constant, the price varies as the quantity of labour required for production; or,--using the formula I gave in last paper--when _y_ is constant, _xy_ varies as _x_. But demand never is, nor can be, ultimately constant, if _x_ varies distinctly; for, as price rises, consumers fall away; and as soon as there is a monopoly (and all scarcity is a form of monopoly; so that every commodity is affected occasionally by some colour of monopoly), _y_ becomes the most influential condition of the price. Thus the price of a painting depends less on its merit than on the interest taken in it by the public; the price of singing less on the labour of the singer than the number of persons who desire to hear him; and the price of gold less on the scarcity which affects it in common with cerium or iridium, than on the sun-light colour and unalterable purity by which it attracts the admiration and answers the trust of mankind. It must be kept in mind, however, that I use the word "demand" in a somewhat different sense from economists usually. They mean by it "the quantity of a thing sold." I mean by it "the force of the buyer's capable intention to buy." In good English, a person's "demand" signifies, not what he gets, but what he asks for. Economists also do not notice that objects are not valued by absolute bulk or weight, but by such bulk and weight as is necessary to bring them into use. They say, for instance, that water bears no price in the market. It is true that a cupful does not, but a lake does; just as a handful of dust does not, but an acre does. And were it possible to make even the possession of the cupful or handful permanent (_i.e._, to find a place for them), the earth and sea would be bought up by handfuls and cupfuls. It would be waste of time to pursue these fallacies farther; we will seek for a true definition. Much store has been set for centuries upon the use of our English classical education. It were to be wished that our well-educated merchants recalled to mind always this much of their Latin schooling,--that the nominative of _valorem_ (a word already sufficiently familiar to them) is _valor_; a word which, therefore, ought to be familiar to them. _Valor_, from _valere_, to be well, or strong ([Greek: hugiainô]);--strong, _in_ life (if a man), or valiant; strong, _for_ life (if a thing), or valuable. To be "valuable," therefore, is to "avail towards life." A truly valuable or availing thing is that which leads to life with its whole strength. In proportion as it does not lead to life, or as its strength is broken, it is less valuable; in proportion as it leads away from life, it is unvaluable or malignant. The value of a thing, therefore, is independent of opinion, and of quantity. Think what you will of it, gain how much you may of it, the value of the thing itself is neither greater nor less. For ever it avails, or avails not; no estimate can raise, no disdain depress, the power which it holds from the Maker of things and of men. The real science of political economy, which has yet to be distinguished from the bastard science, as medicine from witchcraft, and astronomy from astrology, is that which teaches nations to desire and labour for the things that lead to life; and which teaches them to scorn and destroy the things that lead to destruction. And if, in a state of infancy, they suppose indifferent things, such as excrescences of shellfish, and pieces of blue and red stone, to be valuable, and spend large measure of the labour which ought to be employed for the extension and ennobling of life, in diving or digging for them, and cutting them into various shapes,--or if, in the same state of infancy, they imagine precious and beneficent things, such as air, light, and cleanliness, to be valueless,--or if, finally, they imagine the conditions of their own existence, by which alone they can truly possess or use anything, such, for instance, as peace, trust, and love, to be prudently exchangeable, when the market offers, for gold, iron, or excrescences of shells--the great and only science of Political Economy teaches them, in all these cases, what is vanity, and what substance; and how the service of Death, the Lord of Waste, and of eternal emptiness, differs from the service of Wisdom, the Lady of Saving, and of eternal fulness; she who has said, "I will cause those that love me to inherit SUBSTANCE; and I will FILL their treasures." The "Lady of Saving," in a profounder sense than that of the savings' bank, though that is a good one: Madonna della Salute,--Lady of Health--which, though commonly spoken of as if separate from wealth, is indeed a part of wealth. This word, "wealth," it will be remembered, is the next we have to define. "To be wealthy," says Mr. Mill, is "to have a large stock of useful articles." I accept this definition. Only let us perfectly understand it. My opponents often lament my not giving them enough logic: I fear I must at present use a little more than they will like; but this business of Political Economy is no light one, and we must allow no loose terms in it. We have, therefore, to ascertain in the above definition, first, what is the meaning of "having," or the nature of Possession. Then, what is the meaning of "useful," or the nature of Utility. And first of possession. At the crossing of the transepts of Milan Cathedral has lain, for three hundred years, the embalmed body of St. Carlo Borromeo. It holds a golden crosier, and has a cross of emeralds on its breast. Admitting the crosier and emeralds to be useful articles, is the body to be considered as "having" them? Do they, in the politico-economical sense of property, belong to it? If not, and if we may, therefore, conclude generally that a dead body cannot possess property, what degree and period of animation in the body will render possession possible? As thus: lately in a wreck of a Californian ship, one of the passengers fastened a belt about him with two hundred pounds of gold in it, with which he was found afterwards at the bottom. Now, as he was sinking--had he the gold? or had the gold him?[51] [51] Compare George Herbert, _The Church Porch_, Stanza 28. And if, instead of sinking him in the sea by its weight, the gold had struck him on the forehead, and thereby caused incurable disease--suppose palsy or insanity,--would the gold in that case have been more a "possession" than in the first? Without pressing the inquiry up through instances of gradually increasing vital power over the gold (which I will, however, give, if they are asked for), I presume the reader will see that possession, or "having," is not an absolute, but a gradated, power; and consists not only in the quantity or nature of the thing possessed, but also (and in a greater degree) in its suitableness to the person possessing it, and in his vital power to use it. And our definition of Wealth, expanded, becomes: "The possession of useful articles, _which we can use_." This is a very serious change. For wealth, instead of depending merely on a "have," is thus seen to depend on a "can." Gladiator's death, on a "habet"; but soldier's victory, and state's salvation, on a "quo plurimum posset." (Liv. VII. 6.) And what we reasoned of only as accumulation of material, is seen to demand also accumulation of capacity. So much for our verb. Next for our adjective. What is the meaning of "useful?" The inquiry is closely connected with the last. For what is capable of use in the hands of some persons, is capable, in the hands of others, of the opposite of use, called commonly, "from-use," or "ab-use." And it depends on the person, much more than on the article, whether its usefulness or ab-usefulness will be the quality developed in it. Thus, wine, which the Greeks, in their Bacchus, made, rightly, the type of all passion, and which, when used, "cheereth god and man" (that is to say, strengthens both the divine life, or reasoning power, and the earthly, or carnal power, of man); yet, when abused, becomes "Dionusos," hurtful especially to the divine part of man, or reason. And again, the body itself, being equally liable to use and to abuse, and, when rightly disciplined, serviceable to the State, both for war and labour;--but when not disciplined, or abused, valueless to the State, and capable only of continuing the private or single existence of the individual (and that but feebly)--the Greeks called such a body an "idiotic" or "private" body, from their word signifying a person employed in no way directly useful to the State: whence, finally, our "idiot," meaning a person entirely occupied with his own concerns. Hence, it follows, that if a thing is to be useful, it must be not only of an availing nature, but in availing hands. Or, in accurate terms, usefulness is value in the hands of the valiant; so that this science of wealth being, as we have just seen, when regarded as the science of Accumulation, accumulative of capacity as well as of material,--when regarded as the science of Distribution, is distribution not absolute, but discriminate; not of every thing to every man, but of the right thing to the right man. A difficult science, dependent on more than arithmetic. Wealth, therefore, is "THE POSSESSION OF THE VALUABLE BY THE VALIANT;" and in considering it as a power existing in a nation, the two elements, the value of the thing, and the valour of its possessor, must be estimated together. Whence it appears that many of the persons commonly considered wealthy, are in reality no more wealthy than the locks of their own strong boxes are; they being inherently and eternally incapable of wealth; and operating for the nation, in an economical point of view, either as pools of dead water, and eddies in a stream (which, so long as the stream flows, are useless, or serve only to drown people, but may become of importance in a state of stagnation, should the stream dry); or else, as dams in a river, of which the ultimate service depends not on the dam, but the miller; or else, as mere accidental stays and impediments, acting, not as wealth, but (for we ought to have a correspondent term) as "illth," causing various devastation and trouble around them in all directions; or lastly, act not at all, but are merely animated conditions of delay (no use being possible of anything they have until they are dead), in which last condition they are nevertheless often useful _as_ delays, and "impedimenta," if a nation is apt to move too fast. This being so, the difficulty of the true science of Political Economy lies not merely in the need of developing manly character to deal with material value, but in the fact, that while the manly character and material value only form wealth by their conjunction, they have nevertheless a mutually destructive operation on each other. For the manly character is apt to ignore, or even cast away, the material value:--whence that of Pope:-- "Sure, of qualities demanding praise More go to ruin fortunes, than to raise." And on the other hand, the material value is apt to undermine the manly character; so that it must be our work, in the issue, to examine what evidence there is of the effect of wealth on the minds of its possessors; also, what kind of person it is who usually sets himself to obtain wealth, and succeeds in doing so; and whether the world owes more gratitude to rich or to poor men, either for their moral influence upon it, or for chief goods, discoveries, and practical advancements. I may, however, anticipate future conclusions so far as to state that in a community regulated only by laws of demand and supply, but protected from open violence, the persons who become rich are, generally speaking, industrious, resolute, proud, covetous, prompt, methodical, sensible, unimaginative, insensitive, and ignorant. The persons who remain poor are the entirely foolish, the entirely wise,[52] the idle, the reckless, the humble, the thoughtful, the dull, the imaginative, the sensitive, the well-informed, the improvident, the irregularly and impulsively wicked, the clumsy knave, the open thief, and the entirely merciful, just, and godly person. [52] "[Greek: ho Zeus dêpou penetai.]"--_Arist. Plut._ 582. It would but weaken the grand words to lean on the preceding ones:--"[Greek: hoti tou Ploutou parecho beltionas andras, kai ten gnomen, kai ten idean.]" Thus far then of wealth. Next, we have to ascertain the nature of PRICE; that is to say, of exchange value, and its expression by currencies. Note first, of exchange, there can be no _profit_ in it. It is only in labour there can be profit--that is to say a "making in advance," or "making in favour of" (from proficio). In exchange, there is only advantage, _i.e._, a bringing of vantage or power to the exchanging persons. Thus, one man, by sowing and reaping, turns one measure of corn into two measures. That is Profit. Another by digging and forging, turns one spade into two spades. That is Profit. But the man who has two measures of corn wants sometimes to dig; and the man who has two spades wants sometimes to eat:--They exchange the gained grain for the gained tool; and both are the better for the exchange; but though there is much advantage in the transaction, there is no profit. Nothing is constructed or produced. Only that which had been before constructed is given to the person by whom it can be used. If labour is necessary to effect the exchange, that labour is in reality involved in the production, and, like all other labour, bears profit. Whatever number of men are concerned in the manufacture, or in the conveyance, have share in the profit; but neither the manufacture nor the conveyance are the exchange, and in the exchange itself there is no profit. There may, however, be acquisition, which is a very different thing. If, in the exchange, one man is able to give what cost him little labour for what has cost the other much, he "acquires" a certain quantity of the produce of the other's labour. And precisely what he acquires, the other loses. In mercantile language, the person who thus acquires is commonly said to have "made a profit;" and I believe that many of our merchants are seriously under the impression that it is possible for everybody, somehow, to make a profit in this manner. Whereas, by the unfortunate constitution of the world we live in, the laws both of matter and motion have quite rigorously forbidden universal acquisition of this kind. Profit, or material gain, is attainable only by construction or by discovery; not by exchange. Whenever material gain follows exchange, for every _plus_ there is a precisely equal _minus_. Unhappily for the progress of the science of Political Economy, the plus quantities, or--if I may be allowed to coin an awkward plural--the pluses, make a very positive and venerable appearance in the world, so that every one is eager to learn the science which produces results so magnificent; whereas the minuses have, on the other hand, a tendency to retire into back streets, and other places of shade,--or even to get themselves wholly and finally put out of sight in graves: which renders the algebra of this science peculiar, and difficultly legible; a large number of its negative signs being written by the account-keeper in a kind of red ink, which starvation thins, and makes strangely pale, or even quite invisible ink, for the present. The science of Exchange, or, as I hear it has been proposed to call it, of "Catallactics," considered as one of gain, is, therefore, simply nugatory; but considered as one of acquisition, it is a very curious science, differing in its data and basis from every other science known. Thus:--If I can exchange a needle with a savage for a diamond, my power of doing so depends either on the savage's ignorance of social arrangements in Europe, or on his want of power to take advantage of them, by selling the diamond to any one else for more needles. If, farther, I make the bargain as completely advantageous to myself as possible, by giving to the savage a needle with no eye in it (reaching, thus, a sufficiently satisfactory type of the perfect operation of catallactic science), the advantage to me in the entire transaction depends wholly upon the ignorance, powerlessness, or heedlessness of the person dealt with. Do away with these, and catallactic advantage becomes impossible. So far, therefore as the science of exchange relates to the advantage of one of the exchanging persons only, it is founded on the ignorance or incapacity of the opposite person. Where these vanish, it also vanishes. It is therefore a science founded on nescience, and an art founded on artlessness. But all other sciences and arts, except this, have for their object the doing away with their opposite nescience and artlessness. _This_ science, alone of sciences, must, by all available means, promulgate and prolong its opposite nescience; otherwise the science itself is impossible. It is, therefore, peculiarly and alone, the science of darkness; probably a bastard science--not by any means a _divina scientia_, but one begotten of another father, that father who, advising his children to turn stones into bread, is himself employed in turning bread into stones, and who, if you ask a fish of him (fish not being producible on his estate), can but give you a serpent. The general law, then, respecting just or economical exchange, is simply this:--There must be advantage on both sides (or if only advantage on one, at least no disadvantage on the other) to the persons exchanging; and just payment for his time, intelligence, and labour, to any intermediate person effecting the transaction (commonly called a merchant): and whatever advantage there is on either side, and whatever pay is given to the intermediate person, should be thoroughly known to all concerned. All attempt at concealment implies some practice of the opposite, or undivine science, founded on nescience. Whence another saying of the Jew merchant's--"As a nail between the stone joints, so doth sin stick fast between buying and selling." Which peculiar riveting of stone and timber, in men's dealing with each other, is again set forth in the house which was to be destroyed--timber and stones together--when Zechariah's roll (more probably "curved sword") flew over it: "the curse that goeth forth over all the earth upon every one that stealeth and holdeth himself guiltless," instantly followed by the vision of the Great Measure;--the measure "of the injustice of them in all the earth" ([Greek: autê hê adikia autôn en pasê tê gê]), with the weight of lead for its lid, and the woman, the spirit of wickedness, within it;--that is to say, Wickedness hidden by Dulness, and formalized, outwardly, into ponderously established cruelty. "It shall be set upon its own base in the land on Babel."[53] [53] Zech. v. 11. See note on the passage, at pp. 191-2. I have hitherto carefully restricted myself, in speaking of exchange, to the use of the term "advantage;" but that term includes two ideas: the advantage, namely, of getting what we _need_, and that of getting what we _wish for_. Three-fourths of the demands existing in the world are romantic; founded on visions, idealisms, hopes, and affections; and the regulation of the purse is, in its essence, regulation of the imagination and the heart. Hence, the right discussion of the nature of price is a very high metaphysical and psychical problem; sometimes to be solved only in a passionate manner, as by David in his counting the price of the water of the well by the gate of Bethlehem; but its first conditions are the following:--The price of anything is the quantity of labour given by the person desiring it, in order to obtain possession of it. This price depends on four variable quantities. _A_. The quantity of wish the purchaser has for the thing; opposed to [Greek: a], the quantity of wish the seller has to keep it. _B_. The quantity of labour the purchaser can afford, to obtain the thing; opposed to [Greek: b], the quantity of labour the seller can afford, to keep it. These quantities are operative only in excess; _i.e._, the quantity of wish (_A_) means the quantity of wish for this thing, above wish for other things; and the quantity of work (_B_) means the quantity which can be spared to get this thing from the quantity needed to get other things. Phenomena of price, therefore, are intensely complex, curious, and interesting--too complex, however, to be examined yet; every one of them, when traced far enough, showing itself at last as a part of the bargain of the Poor of the Flock (or "flock of slaughter"), "If ye think good, give ME my price, and if not, forbear"--Zech. xi. 12; but as the price of everything is to be calculated finally in labour, it is necessary to define the nature of that standard. Labour is the contest of the life of man with an opposite:--the term "life" including his intellect, soul, and physical power, contending with question, difficulty, trial, or material force. Labour is of a higher or lower order, as it includes more or fewer of the elements of life: and labour of good quality, in any kind, includes always as much intellect and feeling as will fully and harmoniously regulate the physical force. In speaking of the value and price of labour, it is necessary always to understand labour of a given rank and quality, as we should speak of gold or silver of a given standard. Bad (that is, heartless, inexperienced, or senseless) labour cannot be valued; it is like gold of uncertain alloy, or flawed iron.[54] [54] Labour which is entirely good of its kind, that is to say, effective, or efficient, the Greeks called "weighable," or [Greek: axios], translated usually "worthy," and because thus substantial and true, they called its price [Greek: timê], the "honourable estimate" of it (honorarium): this word being founded on their conception of true labour as a divine thing, to be honoured with the kind of honour given to the gods; whereas the price of false labour, or of that which led away from life, was to be, not honour, but vengeance; for which they reserved another word, attributing the exaction of such price to a peculiar goddess called Tisiphone, the "requiter (or quittance-taker) of death;" a person versed in the highest branches of arithmetic, and punctual in her habits; with whom accounts current have been opened also in modern days. The quality and kind of labour being given, its value, like that of all other valuable things, is invariable. But the quantity of it which must be given for other things is variable: and in estimating this variation, the price of other things must always be counted by the quantity of labour; not the price of labour by the quantity of other things. Thus, if we want to plant an apple sapling in rocky ground, it may take two hours' work; in soft ground, perhaps only half an hour. Grant the soil equally good for the tree in each case. Then the value of the sapling planted by two hours' work is nowise greater than that of the sapling planted in half an hour. One will bear no more fruit than the other. Also, one half-hour of work is as valuable as another half-hour; nevertheless the one sapling has cost four such pieces of work, the other only one. Now the proper statement of this fact is, not that the labour on the hard ground is cheaper than on the soft; but that the tree is dearer. The exchange value may, or may not, afterwards depend on this fact. If other people have plenty of soft ground to plant in, they will take no cognizance of our two hours' labour, in the price they will offer for the plant on the rock. And if, through want of sufficient botanical science, we have planted an upas-tree instead of an apple, the exchange value will be a negative quantity; still less proportionate to the labour expended. What is commonly called cheapness of labour, signifies, therefore, in reality, that many obstacles have to be overcome by it; so that much labour is required to produce a small result. But this should never be spoken of as cheapness of labour, but as dearness of the object wrought for. It would be just as rational to say that walking was cheap, because we had ten miles to walk home to our dinner, as that labour was cheap, because we had to work ten hours to earn it. The last word which we have to define is "Production." I have hitherto spoken of all labour as profitable; because it is impossible to consider under one head the quality or value of labour, and its aim. But labour of the best quality may be various in aim. It may be either constructive ("gathering," from con and struo), as agriculture; nugatory, as jewel-cutting; or destructive ("scattering," from de and struo), as war. It is not, however, always easy to prove labour, apparently nugatory, to be actually so;[55] generally, the formula holds good, "he that gathereth not, scattereth;" thus, the jeweller's art is probably very harmful in its ministering to a clumsy and inelegant pride. So that, finally, I believe nearly all labour may be shortly divided into positive and negative labour: positive, that which produces life; negative, that which produces death; the most directly negative labour being murder, and the most directly positive, the bearing and rearing of children: so that in the precise degree in which murder is hateful, on the negative side of idleness, in that exact degree child-rearing is admirable, on the positive side of idleness. For which reason, and because of the honour that there is in rearing[56] children, while the wife is said to be as the vine (for cheering), the children are as the olive-branch, for praise; nor for praise only, but for peace (because large families can only be reared in times of peace): though since, in their spreading and voyaging in various directions, they distribute strength, they are, to the home strength, as arrows in the hand of the giant--striking here and there, far away. [55] The most accurately nugatory labour is, perhaps, that of which not enough is given to answer a purpose effectually, and which, therefore, has all to be done over again. Also, labour which fails of effect through non-cooperation. The curé of a little village near Bellinzona, to whom I had expressed wonder that the peasants allowed the Ticino to flood their fields, told me that they would not join to build an effectual embankment high up the valley, because everybody said "that would help his neighbours as much as himself." So every proprietor built a bit of low embankment about his own field; and the Ticino, as soon as it had a mind, swept away and swallowed all up together. [56] Observe, I say, "rearing," not "begetting." The praise is in the seventh season, not in [Greek: sporêtos], nor in [Greek: phytalia], but in [Greek: opôra]. It is strange that men always praise enthusiastically any person who, by a momentary exertion, saves a life; but praise very hesitatingly a person who, by exertion and self-denial prolonged through years, creates one. We give the crown "ob civem servatum,"--why not "ob civem natum"? Born, I mean, to the full, in soul as well as body. England has oak enough, I think, for both chaplets. Labour being thus various in its result, the prosperity of any nation is in exact proportion to the quantity of labour which it spends in obtaining and employing means of life. Observe,--I say, obtaining and employing; that is to say, not merely wisely producing, but wisely distributing and consuming. Economists usually speak as if there were no good in consumption absolute.[57] So far from this being so, consumption absolute is the end, crown, and perfection of production; and wise consumption is a far more difficult art than wise production. Twenty people can gain money for one who can use it; and the vital question, for individual and for nation, is, never "how much do they make?" but "to what purpose do they spend?" [57] When Mr. Mill speaks of productive consumption, he only means consumption which results in increase of capital, or material wealth. See I. iii. 4, and I. iii. 5. The reader may, perhaps, have been surprised at the slight reference I have hitherto made to "capital," and its functions. It is here the place to define them. Capital signifies "head, or source, or root material"--it is material by which some derivative or secondary good is produced. It is only capital proper (caput vivum, not caput mortuum) when it is thus producing something different from itself. It is a root, which does not enter into vital function till it produces something else than a root; namely, fruit. That fruit will in time again produce roots; and so all living capital issues in reproduction of capital; but capital which produces nothing but capital is only root producing root; bulb issuing in bulb, never in tulip; seed issuing in seed, never in bread. The Political Economy of Europe has hitherto devoted itself wholly to the multiplication, or (less even) the aggregation, of bulbs. It never saw, nor conceived such a thing as a tulip. Nay, boiled bulbs they might have been--glass bulbs--Prince Rupert's drops, consummated in powder (well, if it were glass-powder and not gunpowder), for any end or meaning the economists had in defining the laws of aggregation. We will try and get a clearer notion of them. The best and simplest general type of capital is a well-made ploughshare. Now, if that ploughshare did nothing but beget other ploughshares, in a polypous manner,--however the great cluster of polypous plough might glitter in the sun, it would have lost its function of capital. It becomes true capital only by another kind of splendour,--when it is seen "splendescere sulco," to grow bright in the furrow; rather with diminution of its substance, than addition, by the noble friction. And the true home question, to every capitalist and to every nation, is not, "how many ploughs have you?" but, "where are your furrows?" not--"how quickly will this capital reproduce itself?"--but, "what will it do during reproduction?" What substance will it furnish, good for life? what work construct, protective of life? if none, its own reproduction is useless--if worse than none (for capital may destroy life as well as support it), its own reproduction is worse than useless; it is merely an advance from Tisiphone, on mortgage--not a profit by any means. Not a profit, as the ancients truly saw, and showed in the type of Ixion;--for capital is the head, or fountain head, of wealth--the "well-head" of wealth, as the clouds are the well-heads of rain: but when clouds are without water, and only beget clouds, they issue in wrath at last, instead of rain, and in lightning instead of harvest; whence Ixion is said first to have invited his guests to a banquet, and then made them fall into a pit filled with fire; which is the type of the temptation of riches issuing in imprisoned torment,--torment in a pit (as also Demas' silver mine), after which, to show the rage of riches passing from lust of pleasure to lust of power, yet power not truly understood, Ixion is said to have desired Juno, and instead, embracing a cloud (or phantasm), to have begotten the Centaurs; the power of mere wealth being, in itself, as the embrace of a shadow,--comfortless (so also "Ephraim feedeth on wind and followeth after the east wind"; or "that which is not"--Prov. xxiii. 5; and again Dante's Geryon, the type of avaricious fraud, as he flies, gathers the _air_ up with retractile claws,--"l'aer a se raccolse"[58]), but in its offspring, a mingling of the brutal with the human nature: human in sagacity--using both intellect and arrow; but brutal in its body and hoof, for consuming, and trampling down. For which sin Ixion is at last bound upon a wheel--fiery and toothed, and rolling perpetually in the air;--the type of human labour when selfish and fruitless (kept far into the middle ages in their wheel of fortune); the wheel which has in it no breath or spirit, but is whirled by chance only; whereas of all true work the Ezekiel vision is true, that the Spirit of the living creature is in the wheels, and where the angels go, the wheels go by them; but move no otherwise. [58] So also in the vision of the women bearing the ephah, before quoted, "the wind was in their wings," not wings "of a stork," as in our version; but "_milvi_," of a kite, in the Vulgate, or perhaps more accurately still in the Septuagint, "hoopoe," a bird connected typically with the power of riches by many traditions, of which that of its petition for a crest of gold is perhaps the most interesting. The "Birds" of Aristophanes, in which its part is principal, is full of them; note especially the "fortification of the air with baked bricks, like Babylon," l. 550; and, again, compare the Plutus of Dante, who (to show the influence of riches in destroying the reason) is the only one of the powers of the Inferno who cannot speak intelligibly; and also the cowardliest; he is not merely quelled or restrained, but literally "collapses" at a word; the sudden and helpless operation of mercantile panic being all told in the brief metaphor, "as the sails, swollen with the wind, fall, when the mast breaks." This being the real nature of capital, it follows that there are two kinds of true production, always going on in an active State; one of seed, and one of food; or production for the Ground, and for the Mouth; both of which are by covetous persons thought to be production only for the granary; whereas the function of the granary is but intermediate and conservative, fulfilled in distribution; else it ends in nothing but mildew, and nourishment of rats and worms. And since production for the Ground is only useful with future hope of harvest, all _essential_ production is for the Mouth; and is finally measured by the mouth; hence, as I said above, consumption is the crown of production; and the wealth of a nation is only to be estimated by what it consumes. The want of any clear sight of this fact is the capital error, issuing in rich interest and revenue of error among the political economists. Their minds are continually set on money-gain, not on mouth-gain; and they fall into every sort of net and snare, dazzled by the coin-glitter as birds by the fowler's glass; or rather (for there is not much else like birds in them) they are like children trying to jump on the heads of their own shadows; the money-gain being only the shadow of the true gain, which is humanity. The final object of political economy, therefore, is to get good method of consumption, and great quantity of consumption: in other words, to use everything, and to use it nobly; whether it be substance, service, or service perfecting substance. The most curious error in Mr. Mill's entire work (provided for him originally by Ricardo) is his endeavour to distinguish between direct and indirect service, and consequent assertion that a demand for commodities is not demand for labour (I. v. 9, _et seq._). He distinguishes between labourers employed to lay out pleasure grounds, and to manufacture velvet; declaring that it makes material difference to the labouring classes in which of these two ways a capitalist spends his money; because the employment of the gardeners is a demand for labour, but the purchase of velvet is not.[59] Error colossal as well as strange. It will, indeed, make a difference to the labourer whether we bid him swing his scythe in the spring winds, or drive the loom in pestilential air; but, so far as his pocket is concerned, it makes to him absolutely no difference whether we order him to make green velvet, with seed and a scythe, or red velvet, with silk and scissors. Neither does it anywise concern him whether, when the velvet is made, we consume it by walking on it, or wearing it, so long as our consumption of it is wholly selfish. But if our consumption is to be in any wise unselfish, not only our mode of consuming the articles we require interests him, but also the _kind_ of article we require with a view to consumption. As thus (returning for a moment to Mr. Mill's great hardware theory[60]): it matters, so far as the labourer's immediate profit is concerned, not an iron filing whether I employ him in growing a peach, or forging a bombshell; but my probable mode of consumption of those articles matters seriously. Admit that it is to be in both cases "unselfish," and the difference, to him, is final, whether when his child is ill, I walk into his cottage and give it the peach, or drop the shell down his chimney, and blow his roof off. [59] The value of raw material, which has, indeed, to be deducted from the price of the labour, is not contemplated in the passages referred to, Mr. Mill having fallen into the mistake solely by pursuing the collateral results of the payment of wages to middlemen. He says:--"The consumer does not, with his own funds, pay the weaver for his day's work." Pardon me; the consumer of the velvet pays the weaver with his own funds as much as he pays the gardener. He pays, probably, an intermediate ship-owner, velvet merchant, and shopman; pays carriage money, shop rent, damage money, time money, and care money; all these are above and beside the velvet price (just as the wages of a head gardener would be above the grass price); but the velvet is as much produced by the consumer's capital, though he does not pay for it till six months after production, as the grass is produced by his capital, though he does not pay the man who mowed and rolled it on Monday, till Saturday afternoon. I do not know if Mr. Mill's conclusion--"the capital cannot be dispensed with, the purchasers can"--has yet been reduced to practice in the City on any large scale. [60] Which, observe, is the precise opposite of the one under examination. The hardware theory required us to discharge our gardeners and engage manufacturers; the velvet theory requires us to discharge our manufacturers and engage gardeners. The worst of it, for the peasant, is, that the capitalist's consumption of the peach is apt to be selfish, and of the shell, distributive;[61] but, in all cases, this is the broad and general fact, that on due catallactic commercial principles, _somebody's_ roof must go off in fulfilment of the bomb's destiny. You may grow for your neighbour, at your liking, grapes or grapeshot; he will also, catallactically, grow grapes or grapeshot for you, and you will each reap what you have sown. [61] It is one very awful form of the operation of wealth in Europe that it is entirely capitalists' wealth which supports unjust wars. Just wars do not need so much money to support them; for most of the men who wage such, wage them gratis; but for an unjust war, men's bodies and souls have both to be bought; and the best tools of war for them besides; which makes such war costly to the maximum; not to speak of the cost of base fear, and angry suspicion, between nations which have not grace nor honesty enough in all their multitudes to buy an hour's peace of mind with: as, at present, France and England, purchasing of each other ten millions sterling worth of consternation annually (a remarkably light crop, half thorns and half aspen leaves,--sown, reaped, and granaried by "the science" of the modern political economist, teaching covetousness instead of truth). And all unjust war being supportable, if not by pillage of the enemy, only by loans from capitalists, these loans are repaid by subsequent taxation of the people, who appear to have no will in the matter, the capitalists' will being the primary root of the war; but its real root is the covetousness of the whole nation, rendering it incapable of faith, frankness, or justice, and bringing about, therefore, in due time, his own separate loss and punishment to each person. It is, therefore, the manner and issue of consumption which are the real tests of production. Production does not consist in things laboriously made, but in things serviceably consumable; and the question for the nation is not how much labour it employs, but how much life it produces. For as consumption is the end and aim of production, so life is the end and aim of consumption. I left this question to the reader's thought two months ago, choosing rather that he should work it out for himself than have it sharply stated to him. But now, the ground being sufficiently broken (and the details into which the several questions, here opened, must lead us, being too complex for discussion in the pages of a periodical, so that I must pursue them elsewhere), I desire, in closing the series of introductory papers, to leave this one great fact clearly stated. THERE IS NO WEALTH BUT LIFE. Life, including all its powers of love, of joy, and of admiration. That country is the richest which nourishes the greatest number of noble and happy human beings; that man is richest who, having perfected the functions of his own life to the utmost, has also the widest helpful influence, both personal and by means of his possessions, over the lives of others. A strange political economy; the only one, nevertheless, that ever was or can be: all political economy founded on self-interest[62] being but the fulfilment of that which once brought schism into the Policy of angels, and ruin into the Economy of Heaven. [62] "In all reasoning about prices, the proviso must be understood, 'supposing all parties to take care of their own interest.'"--Mill, III. i. 5. "The greatest number of human beings noble and happy." But is the nobleness consistent with the number? Yes, not only consistent with it, but essential to it. The maximum of life can only be reached by the maximum of virtue. In this respect the law of human population differs wholly from that of animal life. The multiplication of animals is checked only by want of food, and by the hostility of races; the population of the gnat is restrained by the hunger of the swallow, and that of the swallow by the scarcity of gnats. Man, considered as an animal, is indeed limited by the same laws: hunger, or plague, or war, are the necessary and only restraints upon his increase,--effectual restraints hitherto,--his principal study having been how most swiftly to destroy himself, or ravage his dwelling-places, and his highest skill directed to give range to the famine, seed to the plague, and sway to the sword. But, considered as other than an animal, his increase is not limited by these laws. It is limited only by the limits of his courage and his love. Both of these _have_ their bounds; and ought to have: his race has its bounds also; but these have not yet been reached, nor will be reached for ages. In all the ranges of human thought I know none so melancholy as the speculations of political economists on the population question. It is proposed to better the condition of the labourer by giving him higher wages. "Nay," says the economist, "if you raise his wages, he will either drag people down to the same point of misery at which you found him, or drink your wages away." He will. I know it. Who gave him this will? Suppose it were your own son of whom you spoke, declaring to me that you dared not take him into your firm, nor even give him his just labourer's wages, because if you did, he would die of drunkenness, and leave half a score of children to the parish. "Who gave your son these dispositions?"--I should inquire. Has he them by inheritance or by education? By one or other they _must_ come; and as in him, so also in the poor. Either these poor are of a race essentially different from ours, and unredeemable (which, however often implied, I have heard none yet openly say), or else by such care as we have ourselves received, we may make them continent and sober as ourselves--wise and dispassionate as we are--models arduous of imitation. "But," it is answered, "they cannot receive education." Why not? That is precisely the point at issue. Charitable persons suppose the worst fault of the rich is to refuse the people meat; and the people cry for their meat, kept back by fraud, to the Lord of Multitudes.[63] Alas! it is not meat of which the refusal is cruelest, or to which the claim is validest. The life is more than the meat. The rich not only refuse food to the poor; they refuse wisdom; they refuse virtue; they refuse salvation. Ye sheep without shepherd, it is not the pasture that has been shut from you, but the presence. Meat! perhaps your right to that may be pleadable; but other rights have to be pleaded first. Claim your crumbs from the table, if you will; but claim them as children, not as dogs; claim your right to be fed, but claim more loudly your right to be holy, perfect, and pure. [63] James v. 4. Observe, in these statements I am not taking up, nor countenancing one whit, the common socialist idea of division of property; division of property is its destruction; and with it the destruction of all hope, all industry, and all justice: it is simply chaos--a chaos towards which the believers in modern political economy are fast tending, and from which I am striving to save them. The rich man does not keep back meat from the poor by retaining his riches; but by basely using them. Riches are a form of strength; and a strong man does not injure others by keeping his strength, but by using it injuriously. The socialist, seeing a strong man oppress a weak one, cries out--"Break the strong man's arms"; but I say, "Teach him to use them to better purpose." The fortitude and intelligence which acquire riches are intended, by the Giver of both, not to scatter, nor to give away, but to employ those riches in the service of mankind; in other words, in the redemption of the erring and aid of the weak--that is to say, there is first to be the work to gain money; then the Sabbath of use for it--the Sabbath, whose law is, not to lose life, but to save. It is continually the fault or the folly of the poor that they are poor, as it is usually a child's fault if it falls into a pond, and a cripple's weakness that slips at a crossing; nevertheless, most passers-by would pull the child out, or help up the cripple. Put it at the worst, that all the poor of the world are but disobedient children, or careless cripples, and that all rich people are wise and strong, and you will see at once that neither is the socialist right in desiring to make everybody poor, powerless, and foolish as he is himself, nor the rich man right in leaving the children in the mire. Strange words to be used of working people: "What! holy; without any long robes nor anointing oils; these rough-jacketed, rough-worded persons set to nameless and dishonoured service? Perfect!--these, with dim eyes and cramped limbs, and slowly wakening minds? Pure!--these, with sensual desire and grovelling thought; foul of body, and coarse of soul?" It may be so; nevertheless, such as they are, they are the holiest, perfectest, purest persons the earth can at present show. They may be what you have said; but if so, they yet are holier than we, who have left them thus. But what can be done for them? Who can clothe--who teach--who restrain their multitudes? What end can there be for them at last, but to consume one another? I hope for another end, though not, indeed, from any of the three remedies for over-population commonly suggested by economists. These three are, in brief--Colonization; Bringing in of waste lands; or Discouragement of Marriage. The first and second of these expedients merely evade or delay the question. It will, indeed, be long before the world has been all colonized, and its deserts all brought under cultivation. But the radical question is not how much habitable land is in the world, but how many human beings ought to be maintained on a given space of habitable land. Observe, I say, _ought_ to be, not how many _can_ be. Ricardo, with his usual inaccuracy, defines what he calls the "natural rate of wages" as "that which will maintain the labourer." Maintain him! yes; but how?--the question was instantly thus asked of me by a working girl, to whom I read the passage. I will amplify her question for her. "Maintain him, how?" As, first, to what length of life? Out of a given number of fed persons how many are to be old--how many young; that is to say, will you arrange their maintenance so as to kill them early--say at thirty or thirty-five on the average, including deaths of weakly or ill-fed children?--or so as to enable them to live out a natural life? You will feed a greater number, in the first case,[64] by rapidity of succession; probably a happier number in the second: which does Mr. Ricardo mean to be their natural state, and to which state belongs the natural rate of wages? [64] The quantity of life is the same in both cases; but it is differently allotted. Again: A piece of land which will only support ten idle, ignorant, and improvident persons, will support thirty or forty intelligent and industrious ones. Which of these is their natural state, and to which of them belongs the natural rate of wages? Again: If a piece of land support forty persons in industrious ignorance; and if, tired of this ignorance, they set apart ten of their number to study the properties of cones, and the sizes of stars; the labour of these ten, being withdrawn from the ground, must either tend to the increase of food in some transitional manner, or the persons set apart for sidereal and conic purposes must starve, or some one else starve instead of them. What is, therefore, the natural rate of wages of the scientific persons, and how does this rate relate to, or measure, their reverted or transitional productiveness? Again: If the ground maintains, at first, forty labourers in a peaceable and pious state of mind, but they become in a few years so quarrelsome and impious that they have to set apart five, to meditate upon and settle their disputes; ten, armed to the teeth with costly instruments, to enforce the decisions; and five to remind everybody in an eloquent manner of the existence of a God;--what will be the result upon the general power of production, and what is the "natural rate of wages" of the meditative, muscular, and oracular labourers? Leaving these questions to be discussed, or waived, at their pleasure, by Mr. Ricardo's followers, I proceed to state the main facts bearing on that probable future of the labouring classes which has been partially glanced at by Mr. Mill. That chapter and the preceding one differ from the common writing of political economists in admitting some value in the aspect of nature, and expressing regret at the probability of the destruction of natural scenery. But we may spare our anxieties, on this head. Men can neither drink steam, nor eat stone. The maximum of population on a given space of land implies also the relative maximum of edible vegetable, whether for men or cattle; it implies a maximum of pure air; and of pure water. Therefore: a maximum of wood, to transmute the air, and of sloping ground, protected by herbage from the extreme heat of the sun, to feed the streams. All England may, if it so chooses, become one manufacturing town; and Englishmen, sacrificing themselves to the good of general humanity, may live diminished lives in the midst of noise, of darkness, and of deadly exhalation. But the world cannot become a factory, nor a mine. No amount of ingenuity will ever make iron digestible by the million, nor substitute hydrogen for wine. Neither the avarice nor the rage of men will ever feed them, and however the apple of Sodom and the grape of Gomorrah may spread their table for a time with dainties of ashes, and nectar of asps,--so long as men live by bread, the far away valleys must laugh as they are covered with the gold of God, and the shouts of His happy multitudes ring round the winepress and the well. Nor need our more sentimental economists fear the too wide spread of the formalities of a mechanical agriculture. The presence of a wise population implies the search for felicity as well as for food; nor can any population reach its maximum but through that wisdom which "rejoices" in the habitable parts of the earth. The desert has its appointed place and work; the eternal engine, whose beam is the earth's axle, whose beat is its year, and whose breath is its ocean, will still divide imperiously to their desert kingdoms, bound with unfurrowable rock, and swept by unarrested sand, their powers of frost and fire: but the zones and lands between, habitable, will be loveliest in habitation. The desire of the heart is also the light of the eyes. No scene is continually and untiringly loved, but one rich by joyful human labour; smooth in field; fair in garden; full in orchard; trim, sweet, and frequent in homestead; ringing with voices of vivid existence. No air is sweet that is silent; it is only sweet when full of low currents of under sound--triplets of birds, and murmur and chirp of insects, and deep-toned words of men, and wayward trebles of childhood. As the art of life is learned, it will be found at last that all lovely things are also necessary:--the wild flower by the wayside, as well as the tended corn; and the wild birds and creatures of the forest, as well as the tended cattle; because man doth not live by bread only, but also by the desert manna; by every wondrous word and unknowable work of God. Happy, in that he knew them not, nor did his fathers know; and that round about him reaches yet into the infinite, the amazement of his existence. Note, finally, that all effectual advancement towards this true felicity of the human race must be by individual, not public effort. Certain general measures may aid, certain revised laws guide, such advancement; but the measure and law which have first to be determined are those of each man's home. We continually hear it recommended by sagacious people to complaining neighbours (usually less well placed in the world than themselves), that they should "remain content in the station in which Providence has placed them." There are perhaps some circumstances of life in which Providence has no intention that people _should_ be content. Nevertheless, the maxim is on the whole a good one; but it is peculiarly for home use. That your neighbour should, or should not, remain content with _his_ position, is not your business; but it is very much your business to remain content with your own. What is chiefly needed in England at the present day is to show the quantity of pleasure that may be obtained by a consistent, well-administered competence, modest, confessed, and laborious. We need examples of people who, leaving Heaven to decide whether they are to rise in the world, decide for themselves that they will be happy in it, and have resolved to seek--not greater wealth, but simpler pleasure; not higher fortune, but deeper felicity; making the first of possessions, self-possession; and honouring themselves in the harmless pride and calm pursuits of peace. Of which lowly peace it is written that "justice and peace have kissed each other;" and that the fruit of justice is "sown in peace of them that make peace"; not "peace-makers" in the common understanding--reconcilers of quarrels; (though that function also follows on the greater one;) but peace-Creators; Givers of Calm. Which you cannot give, unless you first gain; nor is this gain one which will follow assuredly on any course of business, commonly so called. No form of gain is less probable, business being (as is shown in the language of all nations--[Greek: pôlein] from [Greek: pelô], [Greek: prasis] from [Greek: peraô], venire, vendre, and venal, from venio, etc.) essentially restless--and probably contentious;--having a raven-like mind to the motion to and fro, as to the carrion food; whereas the olive-feeding and bearing birds look for rest for their feet: thus it is said of Wisdom that she "hath builded her house, and hewn out her seven pillars;" and even when, though apt to wait long at the doorposts, she has to leave her house and go abroad, her paths are peace also. For us, at all events, her work must begin at the entry of the doors: all true economy is "Law of the house." Strive to make that law strict, simple, generous: waste nothing, and grudge nothing. Care in nowise to make more of money, but care to make much of it; remembering always the great, palpable, inevitable fact--the rule and root of all economy--that what one person has, another cannot have; and that every atom of substance, of whatever kind, used or consumed, is so much human life spent; which, if it issue in the saving present life, or gaining more, is well spent, but if not, is either so much life prevented, or so much slain. In all buying, consider, first, what condition of existence you cause in the producers of what you buy; secondly, whether the sum you have paid is just to the producer, and in due proportion lodged in his hands;[65] thirdly, to how much clear use, for food, knowledge, or joy, this that you have bought can be put; and fourthly, to whom and in what way it can be most speedily and serviceably distributed: in all dealings whatsoever insisting on entire openness and stern fulfilment; and in all doings, on perfection and loveliness of accomplishment; especially on fineness and purity of all marketable commodity: watching at the same time for all ways of gaining, or teaching, powers of simple pleasure; and of showing "hoson en asphodelph geg honeiar"--the sum of enjoyment depending not on the quantity of things tasted, but on the vivacity and patience of taste. [65] The proper offices of middlemen, namely, overseers (or authoritative workmen), conveyancers (merchants, sailors, retail dealers, etc.), and order-takers (persons employed to receive directions from the consumer), must, of course, be examined before I can enter farther into the question of just payment of the first producer. But I have not spoken of them in these introductory papers, because the evils attendant on the abuse of such intermediate functions result not from any alleged principle of modern political economy, but from private carelessness or iniquity. And if, on due and honest thought over these things, it seems that the kind of existence to which men are now summoned by every plea of pity and claim of right, may, for some time at least, not be a luxurious one:--consider whether, even, supposing it guiltless, luxury would be desired by any of us, if we saw clearly at our sides the suffering which accompanies it in the world. Luxury is indeed possible in the future--innocent and exquisite: luxury for all, and by the help of all; but luxury at present can only be enjoyed by the ignorant; the cruelest man living could not sit at his feast, unless he sat blindfold. Raise the veil boldly; face the light; and if, as yet, the light of the eye can only be through tears, and the light of the body through sackcloth, go thou forth weeping, bearing precious seed, until the time come, and the kingdom, when Christ's gift of bread, and bequest of peace shall be Unto this last as unto thee; and when, for earth's severed multitudes of the wicked and the weary, there shall be holier reconciliation than that of the narrow home, and calm economy, where the Wicked cease--not from trouble, but from troubling--and the Weary are at rest. ESSAYS ON POLITICAL ECONOMY: CONTRIBUTED TO "FRASER'S MAGAZINE" IN 1862 AND 1863, BEING A SEQUEL TO PAPERS WHICH APPEARED IN THE "CORNHILL MAGAZINE," UNDER THE TITLE OF "UNTO THIS LAST." I. MAINTENANCE OF LIFE; WEALTH, MONEY, AND RICHES. As domestic economy regulates the acts and habits of a household, political economy regulates those of a society or State, with reference to its maintenance. Political economy is neither an art nor a science,[66] but a system of conduct and legislature, founded on the sciences, directing the arts, and impossible, except under certain conditions of moral culture. By the "maintenance" of a State is to be understood the support of its population in healthy and happy life; and the increase of their numbers, so far as that increase is consistent with their happiness. It is not the object of political economy to increase the numbers of a nation at the cost of common health or comfort; nor to increase indefinitely the comfort of individuals, by sacrifice of surrounding lives, or possibilities of life. [66] The science which in modern days had been called Political Economy is in reality nothing more than the investigation of the phenomena of commercial operations. It has no connexion with political economy, as understood and treated of by the great thinkers of past ages; and as long as it is allowed to pass under the same name, every word written by those thinkers--and chiefly the words of Plato, Xenophon, Cicero, and Bacon--must be either misunderstood or misapplied. The reader must not, therefore, be surprised at the care and insistence with which I have retained the literal and earliest sense of all important terms used in these papers; for a word is usually well made at the time it is first wanted; its youngest meaning has in it the full strength of its youth; subsequent senses are commonly warped or weakened; and as a misused word always is liable to involve an obscured thought, and all careful thinkers, either on this or any other subject, are sure to have used their words accurately, the first condition, in order to be able to avail ourselves of their sayings at all, is a firm definition of terms. The assumption which lies at the root of nearly all erroneous reasoning on political economy--namely, that its object is to accumulate money or exchangeable property--may be shown in few words to be without foundation. For no economist would admit national economy to be legitimate which proposed to itself only the building of a pyramid of gold. He would declare the gold to be wasted, were it to remain in the monumental form, and would say it ought to be employed. But to what end? Either it must be used only to gain more gold, and build a larger pyramid, or to some purpose other than the gaining of gold. And this other purpose, however at first apprehended, will be found to resolve itself finally into the service of man--that is to say, the extension, defence, or comfort of his life. The golden pyramid may perhaps be providently built, perhaps improvidently; but, at all events, the wisdom or folly of the accumulation can only be determined by our having first clearly stated the aim of all economy, namely, the extension of life. If the accumulation of money, or of exchangeable property, were a certain means of extending existence, it would be useless, in discussing economical questions, to fix our attention upon the more distant object--life--instead of the immediate one--money. But it is not so. Money may sometimes be accumulated at the cost of life, or by limitations of it; that is to say, either by hastening the deaths of men, or preventing their births. It is therefore necessary to keep clearly in view the ultimate object of economy, and to determine the expediency of minor operations with reference to that ulterior end. It has been just stated that the object of political economy is the continuance not only of life, but of healthy and happy life. But all true happiness is both a consequence and cause of life; it is a sign of its vigour, and means of its continuance. All true suffering is in like manner a consequence and cause of death. I shall therefore, in future, use the word "Life" singly: but let it be understood to include in its signification the happiness and power of the entire human nature, body and soul. That human nature, as its Creator made it, and maintains it wherever His laws are observed, is entirely harmonious. No physical error can be more profound, no moral error more dangerous than that involved in the monkish doctrine of the opposition of body to soul. No soul can be perfect in an imperfect body; no body perfect without perfect soul. Every right action and true thought sets the seal of its beauty on person and face; every wrong action and foul thought its seal of distortion; and the various aspects of humanity might be read as plainly as a printed history, were it not that the impressions are so complex that it must always in some cases--and, in the present state of our knowledge, in all cases--be impossible to decipher them completely. Nevertheless, the face of a consistently just, and of a consistently unjust person, may always be rightly discerned at a glance; and if the qualities are continued by descent through a generation or two, there arises a complete distinction of race. Both moral and physical qualities are communicated by descent, far more than they can be developed by education (though both may be destroyed for want of education), and there is as yet no ascertained limit to the nobleness of person and mind which the human creature may attain, by persevering observance of the laws of God respecting its birth and training. We must therefore yet farther define the aim of political economy to be "the multiplication of human life at the highest standard." It might at first seem questionable whether we should endeavour to maintain a small number of persons of the highest type of beauty and intelligence, or a larger number of an inferior class. But I shall be able to show in the sequel, that the way to maintain the largest number is first to aim at the highest standard. Determine the noblest type of man, and aim simply at maintaining the largest possible number of persons of that class, and it will be found that the largest possible number of every healthy subordinate class must necessarily be produced also. The perfect type of manhood, as just stated, involves the perfections (whatever we may hereafter determine these to be) of his body, affections, and intelligence. The material things, therefore, which it is the object of political economy to produce and use (or accumulate for use), are things which serve either to sustain and comfort the body, or exercise rightly the affections and form the intelligence.[67] Whatever truly serves either of these purposes is "useful" to man, wholesome, healthful, helpful, or holy. By seeking such things, man prolongs and increases his life upon the earth. [67] It may be observed, in anticipation of some of our future results, that while some conditions of the affections are aimed at by the economist as final, others are necessary to him as his own instruments: as he obtains them in greater or less degree his own farther work becomes more or less possible. Such, for instance, are the fortifying virtues, which the wisest men of all time have, with more or less distinctness, arranged under the general heads of Prudence, or Discretion (the spirit which discerns and adopts rightly); Justice (the spirit which rules and divides rightly); Fortitude (the spirit which persists and endures rightly); and Temperance (the spirit which stops and refuses rightly); or in shorter terms still, the virtues which teach how to consist, assist, persist, and desist. These outermost virtues are not only the means of protecting and prolonging life itself, but they are the chief guards or sources of the material means of life, and are the visible governing powers and princes of economy. Thus (reserving detailed statements for the sequel) precisely according to the number of just men in a nation, is their power of avoiding either intestine or foreign war. All disputes may be peaceably settled, if a sufficient number of persons have been trained to submit to the principles of justice. The necessity for war is in direct ratio to the number of unjust persons who are incapable of determining a quarrel but by violence. Whether the injustice take the form of the desire of dominion, or of refusal to submit to it, or of lust of territory, or lust of money, or of mere irregular passion and wanton will, the result is economically the same;--loss of the quantity of power and life consumed in repressing the injustice, as well as of that requiring to be repressed, added to the material and moral destruction caused by the fact of war. The early civil wars of England, and the existing war in America, are curious examples--these under monarchical, this under republican institutions--of the results of the want of education of large masses of nations in principles of justice. This latter war, especially, may perhaps at least serve for some visible, or if that be impossible (for the Greeks told us that Plutus was blind, as Dante that he was speechless), some feelable proof that true political economy is an ethical, and by no means a commercial business. The Americans imagined themselves to know somewhat of money-making; bowed low before their Dollar, expecting Divine help from it; more than potent--even omnipotent. Yet all the while this apparently tangible, was indeed an imaginary Deity;--and had they shown the substance of him to any true economist, or even true mineralogist, they would have been told, long years ago,--"Alas, gentlemen, this that you are gaining is not gold,--not a particle of it. It is yellow, and glittering, and like enough to the real metal,--but see--it is brittle, cat-gold, 'iron firestone.' Out of this, heap it as high as you will, you will get so much steel and brimstone--nothing else; and in a year or two, when (had you known a little of right economy) you might have had quiet roof-trees over your heads, and a fair account at your banker's, you shall instead have to sleep a-field, under red tapestries, costliest, yet comfortless; and at your banker's find deficit at compound interest." But the mere dread or distrust resulting from the want of inner virtues of Faith and Charity among nations, is often no less costly than war itself. The fear which France and England have of each other costs each nation about fifteen millions sterling annually, besides various paralyses of commerce; that sum being spent in the manufacture of means of destruction instead of means of production. There is no more reason in the nature of things that France and England should be hostile to each other than that England and Scotland should be, or Lancashire and Yorkshire; and the reciprocal terrors of the opposite sides of the English Channel are neither more necessary, more economical, nor more virtuous than the old riding and reiving on opposite flanks of the Cheviots, or than England's own weaving for herself of crowns of thorn from the stems of her Red and White Roses. On the other hand, whatever does not serve either of these purposes,--much more whatever counteracts them,--is in like manner useless to man, unwholesome, unhelpful, or unholy; and by seeking such things man shortens and diminishes his life upon the earth. And neither with respect to things useful or useless can man's estimate of them alter their nature. Certain substances being good for his food, and others noxious to him, what he thinks or wishes respecting them can neither change their nature, nor prevent their power. If he eats corn, he will live; if nightshade, he will die. If he produce or make good and beautiful things, they will "recreate" him (note the solemnity and weight of the word); if bad and ugly things, they will "corrupt" or break in pieces--that is, in the exact degree of their power, kill him. For every hour of labour, however enthusiastic or well intended, which he spends for that which is not bread, so much possibility of life is lost to him. His fancies, likings, beliefs, however brilliant, eager, or obstinate, are of no avail if they are set on a false object. Of all that he has laboured for, the eternal law of heaven and earth measures out to him for reward, to the utmost atom, that part which he ought to have laboured for, and withdraws from him (or enforces on him, it may be) inexorably that part which he ought not to have laboured for. The dust and chaff are all, to the last speck, winnowed away, and on his summer threshing-floor stands his heap of corn; little or much, not according to his labour, but to his discretion. No "commercial arrangements," no painting of surfaces nor alloying of substances, will avail him a pennyweight. Nature asks of him calmly and inevitably, What have you found, or formed--the right thing or the wrong? By the right thing you shall live; by the wrong you shall die. To thoughtless persons it seems otherwise. The world looks to them as if they could cozen it out of some ways and means of life. But they cannot cozen IT; they can only cozen their neighbours. The world is not to be cheated of a grain; not so much as a breath of its air can be drawn surreptitiously. For every piece of wise work done, so much life is granted; for every piece of foolish work, nothing; for every piece of wicked work, so much death. This is as sure as the courses of day and night. But when the means of life are once produced, men, by their various struggles and industries of accumulation or exchange, may variously gather, waste, restrain, or distribute them; necessitating, in proportion to the waste or restraint, accurately so much more death. The rate and range of additional death is measured by the rate and range of waste, and is inevitable;--the only question (determined mostly by fraud in peace, and force in war) is, Who is to die, and how? Such being the everlasting law of human existence, the essential work of the political economist is to determine what are in reality useful and life-giving things, and by what degrees and kinds of labour they are attainable and distributable. This investigation divides itself under three great heads--first, of Wealth; secondly, of Money; and thirdly, of Riches. These terms are often used as synonymous, but they signify entirely different things. "Wealth," consists of things in themselves valuable; "Money," of documentary claims to the possession of such things; and "Riches" is a relative term, expressing the magnitude of the possessions of one person or society as compared with those of other persons or societies. The study of Wealth is a province of natural science:--it deals with the essential properties of things. The study of Money is a province of commercial science:--it deals with conditions of engagement and exchange. The study of Riches is a province of moral science:--it deals with the due relations of men to each other in regard of material possessions; and with the just laws of their association for purposes of labour. I shall in this paper shortly sketch out the range of subjects which will come before us as we follow these three branches of inquiry. SECTION I.--WEALTH. Wealth, it has been said, consists of things essentially valuable. We now, therefore, need a definition of "value." Value signifies the strength or "availing" of anything towards the sustaining of life, and is always twofold; that is to say, primarily, INTRINSIC, and, secondarily, EFFECTUAL. The reader must, by anticipation, be warned against confusing value with cost, or with price. Value is the life-giving power of anything; cost, the quantity of labour required to produce it; price, the quantity of labour which its possessor will take in exchange for it. Cost and price are commercial conditions, to be studied under the head of Money. Intrinsic value is the absolute power of anything to support life. A sheaf of wheat of given quality and weight has in it a measurable power of sustaining the substance of the body; a cubic foot of pure air, a fixed power of sustaining its warmth; and a cluster of flowers of given beauty, a fixed power of enlivening or animating the senses and heart. It does not in the least affect the intrinsic value of the wheat, the air, or the flowers, that men refuse or despise them. Used or not, their own power is in them, and that particular power is in nothing else. But in order that this value of theirs may become effectual, a certain state is necessary in the recipient of it. The digesting, the breathing, and perceiving functions must be perfect in the human creature before the food, air, or flowers can become their full value to it. The production of effectual value, therefore, always involves two needs; first, the production of a thing essentially useful; then the production of the capacity to use it. Where the intrinsic value and acceptant capacity come together there is EFFECTUAL value, or wealth. Where there is either no intrinsic value, or no acceptant capacity, there is no effectual value; that is to say, no wealth. A horse is no wealth to us if we cannot ride, nor a picture if we cannot see, nor can any noble thing be wealth, except to a noble person. As the aptness of the user increases, the effectual value of the thing used increases; and in its entirety can co-exist only with perfect skill of use, or harmony of nature. The effectual value of a given quantity of any commodity existing in the world at any moment is therefore a mathematical function of the capacity existing in the human race to enjoy it. Let its intrinsic value be represented by _x_, and the recipient faculty by _y_; its effectual value is _x y_, in which the sum varies as either co-efficient varies, is increased by either's increase,[68] and cancelled by either's absence. [68] With this somewhat strange and ungeometrical limitation, however, which, here expressed for the moment in the briefest terms, we must afterwards trace in detail--that _x y_ may be indefinitely increased by the increase of _y_ only; but not by the increase of _x_, unless _y_ increases also in a fixed proportion. Valuable material things may be conveniently referred to five heads:-- 1. Land, with an associated air, water, and organisms. 2. Houses, furniture, and instruments. 3. Stored or prepared food and medicine, and articles of bodily luxury, including clothing. 4. Books. 5. Works of art. We shall enter into separate inquiry as to the conditions of value under each of these heads. The following sketch of the entire subject may be useful for future reference:-- 1. Land. Its value is twofold-- A. As producing food and mechanical power. B. As an object of sight and thought, producing intellectual power. A. Its value, as a means of producing food and mechanical power, varies with its form (as mountain or plain), with its substance (in soil or mineral contents), and with its climate. All these conditions of intrinsic value, in order to give effectual value, must be known and complied with by the men who have to deal with it; but at any given time, or place, the intrinsic value is fixed; such and such a piece of land, with its associated lakes and seas, rightly treated in surface and substance, can produce precisely so much food and power, and no more. Its surface treatment (agriculture) and substance treatment (practical geology and chemistry), are the first roots of economical science. By surface treatment, however, I mean more than agriculture as commonly understood; I mean land and sea culture;--dominion over both the fixed and the flowing fields;--perfect acquaintance with the laws of climate, and of vegetable and animal growth in the given tracts of earth or ocean, and of their relations regulating especially the production of those articles of food which, being in each particular spot producible in the highest perfection, will bring the best price in commercial exchanges. B. The second element of value in land is its beauty, united with such conditions of space and form as are necessary for exercise, or pleasant to the eye, associated with vital organism. Land of the highest value in these respects is that lying in temperate climates, and boldly varied in form; removed from unhealthy or dangerous influences (as of miasm or volcano); and capable of sustaining a rich fauna and flora. Such land, carefully tended by the hand of man, so far as to remove from it unsightlinesses and evidences of decay; guarded from violence, and inhabited, under man's affectionate protection, by every kind of living creature that can occupy it in peace, forms the most precious "property" that human beings can possess. The determination of the degree in which these two elements of value can be united in land, or in which either element must, or should, in particular cases, be sacrificed to the other, forms the most important branch of economical inquiry respecting preferences of things. 2. Buildings, furniture, and instruments. The value of buildings consists--A, in permanent strength, with convenience of form, of size, and of position; so as to render employment peaceful, social intercourse easy, temperature and air healthy. The advisable or possible magnitude of cities and mode of their distribution in squares, streets, courts, etc., the relative value of sites of land, and the modes of structure which are healthiest and most permanent, have to be studied under this head. B. The value of buildings consists, secondarily, in historical association and architectural beauty, of which we have to examine the influence on manners and life. The value of instruments consists-- A. In their power of shortening labour, or otherwise accomplishing (as ships) what human strength unaided could not. The kinds of work which are severally best accomplished by hand or by machine;--the effect of machinery in gathering and multiplying population, and its influence on the minds and bodies of such population; together with the conceivable uses of machinery on a colossal scale in accomplishing mighty and useful works, hitherto unthought of, such as the deepening of large river channels;--changing the surface of mountainous districts;--irrigating tracts of desert in the torrid zone;--breaking up, and thus rendering capable of quicker fusion edges of ice in the northern and southern Arctic seas, etc., so rendering parts of the earth habitable which hitherto have not been so, are to be studied under this head. B. The value of instruments is, secondarily, in their aid to abstract sciences. The degree in which the multiplication of such instruments should be encouraged, so as to make them, if large, easy of access to numbers (as costly telescopes), or so cheap as that they might, in a serviceable form, become a common part of the furniture of households, is to be considered under this head. 3. Food, medicine, and articles of luxury. Under this head we shall have to examine the possible methods of obtaining pure and nourishing food in such security and equality of supply as to avoid both waste and famine; then the economy of medicine and just range of sanitary law; finally, the economy of luxury, partly an aesthetic and partly an ethical question. 4. Books. The value of these consists-- A. In their power of preserving and communicating the knowledge of facts. B. In their power of exciting vital or noble emotion and intellectual action. They have also their corresponding negative powers of disguising and effacing the memory of facts, and killing the noble emotions, or exciting base ones. Under these two heads we have to consider the economical and educational value, positive and negative, of literature;--the means of producing and educating good authors, and the means and advisability of rendering good books generally accessible, and directing the reader's choice to them. 5. Works of art. The value of these is of the same nature as that of books, but the laws of their production and possible modes of distribution are very different, and require separate examination. SECTION II.--MONEY. Under this head, we shall have to examine the laws of currency and exchange; of which I will note here the first principles. Money has been inaccurately spoken of as merely a means of circulation. It is, on the contrary, an expression of right. It is not wealth, being the sign[69] of the relative quantities of it, to which, at a given time, persons or societies are entitled. [69] Always, and necessarily, an imperfect sign; but capable of approximate accuracy if rightly ordered. If all the money in the world, notes and gold, were destroyed in an instant, it would leave the world neither richer nor poorer than it was. But it would leave the individual inhabitants of it in different relations. Money is, therefore, correspondent in its nature to the title-deed of an estate. Though the deed be burned, the estate still exists, but the right to it has become disputable. The worth of money remains unchanged, as long as the proportion of the quantity of existing money to the quantity of existing wealth, or available labour which it professes to represent, remains unchanged. If the wealth increases, but not the money, the worth of the money increases; if the money increases, but not the wealth, the worth of the money diminishes. Money, therefore, cannot be arbitrarily multiplied, any more than title-deeds can. So long as the existing wealth or available labour is not fully represented by the currency, the currency may be increased without diminution of the assigned worth of its pieces. But when the existing wealth, or available labour, is once fully represented, every piece of money thrown into circulation diminishes the worth of every other existing piece, in the proportion it bears to the number of them, provided the new piece be received with equal credit; if not, the depreciation of worth takes place exclusively in the new piece, according to the inferiority of its credit. When, however, new money, composed of some substance of supposed intrinsic value (as of gold), is brought into the market, or when new notes are issued which are supposed to be deserving of credit, the desire to obtain money will, under certain circumstances, stimulate industry; an additional quantity of wealth is immediately produced, and if this be in proportion to the new claims advanced, the value of the existing currency is undepreciated. If the stimulus given be so great as to produce more goods than are proportioned to the additional coinage, the worth of the existing currency will be raised. Arbitrary control and issues of currency affect the production of wealth, by acting on the hopes and fears of men; and are, under certain circumstances, wise. But the issue of additional currency to meet the exigencies of immediate expense, is merely one of the disguised forms of borrowing or taxing. It is, however, in the present low state of economical knowledge, often possible for Governments to venture on an issue of currency, when they could not venture on an additional loan or tax, because the real operation of such issue is not understood by the people, and the pressure of it is irregularly distributed, and with an unperceived gradation. Finally, the use of substances of intrinsic value as the materials of a currency, is a barbarism;--a remnant of the conditions of barter, which alone can render commerce possible among savage nations. It is, however, still necessary, partly as a mechanical check on arbitrary issues; partly as a means of exchanges with foreign nations. In proportion to the extension of civilization, and increase of trustworthiness in Governments, it will cease. So long as it exists, the phenomena of the cost and price of the articles used for currency, are mingled with those of currency itself, in an almost inextricable manner; and the worth of money in the market is affected by multitudinous accidental circumstances, which have been traced, with more or less success, by writers on commercial operations; but with these variations the true political economist has no more to do than an engineer fortifying a harbour of refuge against Atlantic tide, has to concern himself with the cries or quarrels of children who dig pools with their fingers for its ebbing currents among the sand. SECTION III.--RICHES. According to the various industry, capacity, good fortune, and desires of men, they obtain greater or smaller share of, and claim upon, the wealth of the world. The inequalities between these shares, always in some degree just and necessary, may be either restrained by law (or circumstance) within certain limits; or may increase indefinitely. Where no moral or legal restraint is put upon the exercise of the will and intellect of the stronger, shrewder, or more covetous men, these differences become ultimately enormous. But as soon as they become so distinct in their extremes as that, on one side, there shall be manifest redundance of possession, and on the other manifest pressure of need,--the terms "riches" and "poverty" are used to express the opposite states; being contrary only in the manner of the terms "warmth" and "cold"; which neither of them imply an actual degree, but only a relation to other degrees, of temperature. Respecting riches, the economist has to inquire, first, into the advisable modes of their collection; secondly, into the advisable modes of their administration. Respecting the collection of national riches, he has to inquire, first, whether he is justified in calling the nation rich; if the quantity of money it possesses relatively to that possessed by other nations be large, irrespectively of the manner of its distribution. Or does the mode of distribution in any wise affect the nature of the riches? Thus, if the king alone be rich--suppose Croesus or Mausolus--are the Lydians and Carians therefore a rich nation? Or if one or two slave-masters be rich, and the nation be otherwise composed of slaves, is it to be called a rich nation? For if not, and the ideas of a certain mode of distribution or operation in the riches, and of a certain degree of freedom in the people, enter into our idea of riches as attributed to a people, we shall have to define the degree of fluency or circulative character which is essential to their vitality; and the degree of independence of action required in their possessors. Questions which look as if they would take time in answering. And farther. Since there are two modes in which the inequality, which is indeed the condition and constituent of riches, may be established--namely, by increase of possession on the one side, and by decrease of it on the other--we have to inquire, with respect to any given state of riches, precisely in what manner the correlative poverty was produced; that is to say, whether by being surpassed only, or being depressed, what are the advantages, or the contrary, conceivable in the depression. For instance, it being one of the commonest advantages of being rich to entertain a number of servants, we have to inquire, on the one side, what economical process produced the poverty of the persons who serve him; and what advantage each (on his own side) derives from the result. These being the main questions touching the collection of riches, the next, or last, part of the inquiry is into their administration. They have in the main three great economical powers which require separate examination: namely, the powers of selection, direction, and provision. A. Their power of SELECTION relates to things of which the supply is limited (as the supply of best things is always). When it becomes matter of question to whom such things are to belong, the richest person has necessarily the first choice, unless some arbitrary mode of distribution be otherwise determined upon. The business of the economist is to show how this choice may be a Wise one. B. Their power of DIRECTION arises out of the necessary relation of rich men to poor, which ultimately, in one way or another, involves the direction of, or authority over, the labour of the poor; and this nearly as much over their mental as their bodily labour. The business of the economist is to show how this direction may be a Just one. C. Their power of PROVISION or "preparatory sight" (for pro-accumulation is by no means necessarily pro-vision), is dependent upon their redundance; which may of course by active persons be made available in preparation for future work or future profit; in which function riches have generally received the name of capital; that is to say, of head- or source-material. The business of the economist is to show how this provision may be a Distant one. The examination of these three functions of riches will embrace every final problem of political economy;--and, above, or before all, this curious and vital problem,--whether, since the wholesome action of riches in these three functions will depend (it appears) on the Wisdom, Justice, and Far-sightedness of the holders; and it is by no means to be assumed that persons primarily rich, must therefore be just and wise,--it may not be ultimately possible so, or somewhat so, to arrange matters, as that persons primarily just and wise, should therefore be rich. Such being the general plan of the inquiry before us, I shall not limit myself to any consecutive following of it, having hardly any good hope of being able to complete so laborious a work as it must prove to me; but from time to time, as I have leisure, shall endeavour to carry forward this part or that, as may be immediately possible; indicating always with accuracy the place which the particular essay will or should take in the completed system. II. NATURE OF WEALTH, VARIATIONS OF VALUE, THE NATIONAL STORE, NATURE OF LABOUR, VALUE AND PRICE, THE CURRENCY. The last paper having consisted of little more than definition of terms, I purpose, in this, to expand and illustrate the given definitions, so as to avoid confusion in their use when we enter into the detail of our subject. The view which has been taken of the nature of wealth, namely, that it consists in an intrinsic value developed by a vital power, is directly opposed to two nearly universal conceptions of wealth. In the assertion that value is primarily intrinsic, it opposes the idea that anything which is an object of desire to numbers, and is limited in quantity, may be called, or virtually become, wealth. And in the assertion that value is secondarily dependent upon power in the possessor, it opposes the idea that wealth consists of things exchangeable at rated prices. Before going farther, we will make these two positions clearer. First. All wealth is intrinsic, and is not constituted by the judgment of men. This is easily seen in the case of things affecting the body; we know that no force of fantasy will make stones nourishing, or poison innocent; but it is less apparent in things affecting the mind. We are easily--perhaps willingly--misled by the appearance of beneficial results obtained by industries addressed wholly to the gratification of fanciful desire; and apt to suppose that whatever is widely coveted, dearly bought, and pleasurable in possession, must be included in our definition of wealth. It is the more difficult to quit ourselves of this error because many things which are true wealth in moderate use, yet become false wealth in immoderate; and many things are mixed of good and evil,--as, mostly, books and works of art,--out of which one person will get the good, and another the evil; so that it seems as if there were no fixed good or evil in the things themselves, but only in the view taken, and use made of them. But that is not so. The evil and good are fixed in essence and in proportion. They are separable by instinct and judgment, but not interchangeable; and in things in which evil depends upon excess, the point of excess, though indefinable, is fixed; and the power of the thing is on the hither side for good, and on the farther side for evil. And in all cases this power is inherent, not dependent on opinion or choice. Our thoughts of things neither make, nor mar their eternal force; nor--which is the most serious point for future consideration--can they prevent the effect of it upon ourselves. Therefore, the object of special analysis of wealth into which we have presently to enter will be not so much to enumerate what is serviceable, as to distinguish what is destructive; and to show that it is inevitably destructive; that to receive pleasure from an evil thing is not to escape from, or alter the evil of it, but to be altered by it; that is, to suffer from it to the utmost, having our own nature, in that degree, made evil also. And it will be shown farther that, through whatever length of time or subtleties of connexion the harm is accomplished (being also less or more according to the fineness and worth of the humanity on which it is wrought), still, nothing but harm ever comes of a bad thing. So that, finally, wealth is not the accidental object of a morbid desire, but the constant object of a legitimate one.[70] By the fury of ignorance, and fitfulness of caprice, large interests may be continually attached to things unserviceable or hurtful; if their nature could be altered by our passions, the science of Political Economy would be but as the weighing of clouds, and the portioning out of shadows. But of ignorance there is no science; and of caprice no law. Their disturbing forces interfere with the operations of economy, but have nothing in common with them; the calm arbiter of national destiny regards only essential power for good in all it accumulates, and alike disdains the wanderings of imagination and the thirsts of disease. [70] Few passages of the Book which at least some part of the nations at present most advanced in civilization accept as an expression of final truth, have been more distorted than those bearing on Idolatry. For the idolatry there denounced is neither sculpture, nor veneration of sculpture. It is simply the substitution of an "Eidolon," phantasm, or imagination of Good, for that which is real and enduring; from the Highest Living Good, which gives life, to the lowest material good which ministers to it. The Creator, and the things created, which He is said to have "seen good" in creating, are in this their eternal goodness always called Helpful or Holy: and the sweep and range of idolatry extend to the rejection of all or any of these, "calling evil good, or good evil,--putting bitter for sweet, and sweet for bitter," so betraying the first of all Loyalties, to the fixed Law of life, and with resolute opposite loyalty serving our own imagination of good, which is the law, not of the dwelling, but of the Grave (otherwise called the law of error; or "mark missing," which we translate law of "Sin"), these "two masters," between whose services we have to choose, being otherwise distinguished as God and "Mammon," which Mammon, though we narrowly take it as the power of money only, is in truth the great evil spirit of false and fond desire, or "Covetousness, which is Idolatry." So that Iconoclasm--image or likeness-breaking--is easy; but an idol cannot be broken--it must be forsaken, and this is not so easy, either in resolution or persuasion. For men may readily be convinced of the weakness of an image, but not of the emptiness of a phantasm. Secondly. The assertion that wealth is not only intrinsic, but dependent, in order to become effectual, on a given degree of vital power in its possessor, is opposed to another popular view of wealth;--namely, that though it may always be constituted by caprice, it is, when so constituted, a substantial thing, of which given quantities may be counted as existing here, or there, and exchangeable at rated prices. In this view there are three errors. The first and chief is the overlooking the fact that all exchangeableness of commodity, or effective demand for it, depends on the sum of capacity for its use existing, here or elsewhere. The book we cannot read, or picture we take no delight in, may indeed be called part of our wealth, in so far as we have power of exchanging either for something we like better. But our power of effecting such exchange, and yet more, of effecting it to advantage, depends absolutely on the number of accessible persons who can understand the book, or enjoy the painting, and who will dispute the possession of them. Thus the actual worth of either, even to us, depends no less on their essential goodness than on the capacity consisting somewhere for the perception of it; and it is vain in any completed system of production to think of obtaining one without the other. So that, though the great political economist knows that co-existence of capacity for use with temporary possession cannot be always secured, the final fact, on which he bases all action and administration, is that, in the whole nation, or group of nations, he has to deal with, for every grain of intrinsic value produced he must with exactest chemistry produce its twin grain of governing capacity, or in the degrees of his failure he has no wealth. Nature's challenge to us is in earnest, as the Assyrian's mock, "I will give you two thousand horses, if thou be able on thy part to set riders upon them." Bavieca's paces are brave, if the Cid backs him; but woe to us, if we take the dust of capacity, wearing the armour of it, for capacity itself, for so all procession, however goodly in the show of it, is to the tomb. The second error in this popular view of wealth is that, in estimating property which we cannot use as wealth, because it is exchangeable, we in reality confuse wealth with money. The land we have no skill to cultivate, the book which is sealed to us, or dress which is superfluous, may indeed be exchangeable, but as such are nothing more than a cumbrous form of bank-note, of doubtful and slow convertibility. As long as we retain possession of them, we merely keep our bank-notes in the shape of gravel or clay, of book leaves, or of embroidered tissue. Circumstances may perhaps render such forms the safest, or a certain complacency may attach to the exhibition of them;--into both these advantages we shall inquire afterwards; I wish the reader only to observe here, that exchangeable property which we cannot use is, to us personally, merely one of the forms of money, not of wealth. The third error in the popular view is the confusion of guardianship with possession; the real state of men of property being, too commonly that of curators, not possessors of wealth. For a man's power of Use, Administration, Ostentation, Destruction, or Bequest; and possession is in use only, which for each man is sternly limited; so that such things, and so much of them, are well for him, or Wealth; and more of them, or any other things, are ill for him, or Illth. Plunged to the lips in Orinoco, he shall drink to his thirst measure,--more, at his peril; with a thousand oxen on his lands, he shall eat to his hunger measure,--more, at his peril. He cannot live in two houses at once; a few bales of silk or wool will suffice for the fabric of all the clothes he can ever wear, and a few books will probably hold all the furniture good for his brain.[71] Beyond these, in the best of us but narrow, capacities, we have but the power of administering, or if for harm, mal-administering, wealth (that is to say, distributing, lending, or increasing it);--of exhibiting it (as in magnificence of retinue or furniture), of destroying, or, finally, of bequeathing it. And with multitudes of rich men, administration degenerates into curatorship; they merely hold their property in charge, as Trustees, for the benefit of some person or persons to whom it is to be delivered upon their death; and the position, explained in clear terms, would hardly seem a covetable one. What would be the probable decision of a youth on his entrance into life, to whom the career hoped for him was proposed in terms such as these: "You must work unremittingly, and with your utmost intelligence, during all your available years; you will thus accumulate wealth to a large amount; but you must touch none of it, beyond what is needful for your support. Whatever sums you may gain beyond those required for your decent and moderate maintenance shall be properly taken care of, and on your death-bed you shall have the power of determining to whom they shall belong, or to what purposes be applied?" [71] I reserve, until the completion and collection of these papers, any support by the authority of other writers of the statements made in them; were, indeed, such authorities wisely sought for and shown, there would be no occasion for my writing at all. Even in the scattered passages referring to this subject in three books of Carlyle's:--"Sartor Resartus"; "Past and Present"; and the "Latter-Day Pamphlets"; all has been said that needs to be said, and far better than I shall ever say it again. But the habit of the public mind at the present is to require everything to be uttered diffusely, loudly, and seven times over, before it will listen; and it has exclaimed against these papers of mine, as if they contained things daring and new, when there is not one assertion in them of which the truth has not been for ages known to the wisest, and proclaimed by the most eloquent of men. It will be a far greater pleasure to me hereafter, to collect their words than add to mine; Horace's clear rendering of the substance of the preceding passages in the text may be found room for at once:-- Si quis emat citharas, emptas comportet in unum, Nec studio citharae, nec Musae deditus ulli; Si scalpra et formas, non sutor; nautica vela, Aversus mercaturis: delirus et amens Undique dicatur merito. Quî discrepat istis, Qui nummos aurumque recondit, nescius uti Compositis, metuensque velut contingere sacrum? With which it is perhaps desirable also to give Xenophon's statement, it being clearer than any English one can be, owing to the power of the general Greek term for wealth, "useable things":-- [Greek: Tauta ara onta, tô men epistamenô chrêsthai autôn hekastois chrêmata esti, tô de mê epistamenô, ou chrêmata; hôsper ge auloi tô men epistamenô axiôs logou aulein chrêmata eisi, tô de mê epistamenô ouden mallon ê achrêstoi lithoi, ei mê apsdidoito ge autous. * * * Mê pôloumenoi men gar ou chrêmata eisin hoi auloi; (ouden gar chrêsimoi eisi) pôloumenoi de chrêmata; Pros tauta d' ho Sôkratês eipen, ên epistêtai ge pôlein. Ei de pôloin hau pros touton hos mê epistêtai chrêsthai, oude pôloumenoi eisi chrêmata.] The labour of life, under such conditions, would probably be neither zealous nor cheerful; yet the only difference between this position and that of the ordinary capitalist is the power which the latter delights in supposing himself to possess, and which is attributed to him by others, of spending his money at any moment. This pleasure, taken in the imagination of power to part with that which we have no intention of parting with, is one of the most curious though commonest forms of Eidolon, or Phantasm of Wealth. But the political economist has nothing to do with this idealism, and looks only to the practical issue of it,--namely, that the holder of wealth, in such temper, may be regarded simply as a mechanical means of collection; or as a money-chest with a slit in it,[72] set in the public thoroughfare;--chest of which only Death has the key, and probably Chance the distribution of contents. In his function of lender (which, however, is one of administration, not use, as far as he is himself concerned), the capitalist takes, indeed, a more interesting aspect; but even in that function, his relations with the state are apt to degenerate into a mechanism for the convenient contraction of debt;--a function the more mischievous, because a nation invariably appeases its conscience with respect to an unjustifiable expense by meeting it with borrowed funds,--expresses its repentance of a foolish piece of business by letting its tradesmen wait for their money,--and always leaves its descendants to pay for the work which will be of the least service to them.[73] [72] The orifice being not merely of a receptant, but of a suctional character. Among the types of human virtue and vice presented grotesquely by the lower animals, perhaps none is more curiously definite that that of avarice in the Cephalopod, a creature which has a purse for a body; a hawk's beak for a mouth; suckers for feet and hands; and whose house is its own skeleton. [73] It would be well if a somewhat dogged conviction could be enforced on nations as on individuals, that, with few exceptions, what they cannot at present pay for, they should not at present have. Quit of these three sources of misconception, the reader will have little farther difficulty in apprehending the real nature of Effectual value. He may, however, at first not without surprise, perceive the consequences involved in the acceptance of our definition. For if the actual existence of wealth be dependent on the power of its possessor, it follows that the sum of wealth held by the nation, instead of being constant or calculable, varies hourly, nay, momentarily, with the number and character of its holders; and that in changing hands, it changes in quantity. And farther, since the worth of the currency is proportioned to the sum of material wealth which it represents, if the sum of the wealth changes, the worth of the currency changes. And thus both the sum of the property, and power of the currency, of the State, vary momentarily, as the character and number of the holders. And not only so, but a different rate and manner of variation is caused by the character of the holders of different kinds of wealth. The transitions of value caused by the character of the holders of land differ in mode from those caused by character in holders of works of art; and these again from those caused by character in holders of machinery or other working capital. But we cannot examine these special phenomena of any kind of wealth until we have a clear idea of the way in which true currency expresses them; and of the resulting modes in which the cost and price of any article are related to its value. To obtain this we must approach the subject in its first elements. Let us suppose a national store of wealth, real or imaginary (that is to say, composed of material things either useful, or believed to be so), presided over by a Government,[74] and that every workman, having produced any article involving labour in its production, and for which he has no immediate use, brings it to add to this store, receiving, from the Government, in exchange an order either for the return of the thing itself, or of its equivalent in other things,[75] such as he may choose out of the store at any time when he needs them. Now, supposing that the labourer speedily uses this general order, or, in common language, "spends the money," he has neither changed the circumstances of the nation nor his own, except in so far as he may have produced useful and consumed useless articles, or vice versa. But if he does not use, or uses in part only, the order he receives, and lays aside some portion of it; and thus every day bringing his contribution to the national store, lays by some percentage of the order received in exchange for it, he increases the national wealth daily by as much as he does not use of the received order, and to the same amount accumulates a monetary claim on the Government. It is of course always in his power, as it is his legal right, to bring forward this accumulation of claim, and at once to consume, to destroy, or distribute, the sum of his wealth. Supposing he never does so, but dies, leaving his claim to others, he has enriched the State during his life by the quantity of wealth over which that claim extends, or has, in other words, rendered so much additional life possible in the State, of which additional life he bequeaths the immediate possibility to those whom he invests with his claim, he would distribute this possibility of life among the nation at large. [74] The reader is to include here in the idea of "Government," any branch of the Executive, or even any body of private persons, entrusted with the practical management of public interests unconnected directly with their own personal ones. In theoretical discussions of legislative interference with political economy, it is usually and of course unnecessarily, assumed that Government must be always of that form and force in which we have been accustomed to see it;--that its abuses can never be less, nor its wisdom greater, nor its powers more numerous. But, practically, the custom in most civilized countries is, for every man to deprecate the interference of Government as long as things tell for his personal advantage, and to call for it when they cease to do so. The request of the Manchester Economists to be supplied with cotton by the Government (the system of supply and demand having, for the time, fallen sorrowfully short of the expectations of scientific persons from it), is an interesting case in point. It were to be wished that less wide and bitter suffering (suffering, too, of the innocent) had been needed to force the nation, or some part of it, to ask itself why a body of men, already confessedly capable of managing matters both military and divine, should not be permitted, or even requested at need to provide in some wise for sustenance as well as for defence, and secure, if it might be (and it might, I think, even the rather be), purity of bodily ailment, as well as of religious conviction? Why, having made many roads for the passage of armies, they may not make a few for the conveyance of food; and after organizing, with applause, various schemes of spiritual instruction for the Public, organize, moreover, some methods of bodily nourishment for them? Or is the soul so much less trustworthy in its instincts than the stomach, that legislation is necessary for the one, but inconvenient to the other? There is a strange fallacy running at this time through all talk about free trade. It is continually assumed that every kind of Government interference takes away liberty of trade. Whereas liberty is lost only when interference hinders, not when it helps. You do not take away a man's freedom by showing him his road--nor by making it smoother for him (not that it is always desirable to do so, but it may be); nor even by fencing it for him, if there is an open ditch at the side of it. The real mode in which protection interferes with liberty, and the real evil of it, is not in its "protecting" one person, but in its hindering another; a form of interference which invariably does most mischief to the person it is intended to serve, which the Northern Americans are about discomfortably to discover, unless they think better of it. There is also a ludicrous confusion in many persons' minds between protection and encouragement; they differ materially. "Protection" is saying to the commercial schoolboy, "Nobody shall hit you." "Encouragement," is saying to him, "That's the way to hit." [75] The question of equivalence (namely, how much wine a man is to receive in return for so much corn, or how much coal in return for so much iron) is a quite separate one, which we will examine presently. For the time let it be assumed that this equivalence has been determined, and that the Government order in exchange for a fixed weight of any article (called, suppose, _a_), is either for the return of that weight of the article itself, or of another fixed weight of the article _b_, or another of the article _c_, and so on. We hitherto consider the Government itself as simply a conservative power, taking charge of the wealth entrusted to it. But a Government may be far other than a conservative power. It may be on the one hand constructive, on the other destructive. If a constructive, or improving power, using all the wealth entrusted to it to the best advantage, the nation is enriched in root and branch at once, and the Government is enabled for every order presented, to return a quantity of wealth greater than the order was written for, according to the fructification obtained in the interim.[76] [76] The reader must be warned in advance that the conditions here supposed have nothing to do with the "interest" of money commonly so called. This ability may be either concealed, in which case the currency does not completely represent the wealth of the country, or it may be manifested by the continual payment of the excess of value on each order, in which case there is (irrespectively, observe, of collateral results afterwards to be examined) a perpetual rise in the worth of the currency, that is to say, a fall in the price of all articles represented by it. But if the Government be destructive, or a consuming power, it becomes unable to return the value received on the presentation of the order. This inability may either (A), be concealed by meeting demands to the full, until it issue in bankruptcy, or in some form of national debt;--or (B), it may be concealed during oscillatory movements between destructiveness and productiveness, which result on the whole in stability;--or (C), it may be manifested by the consistent return of less than value received on each presented order, in which case there is a consistent fall in the worth of the currency, or rise in the price of the things represented by it. Now, if for this conception of a central Government, we substitute that of another body of persons occupied in industrial pursuits, of whom each adds in his private capacity to the common store: so that the store itself, instead of remaining a public property of ascertainable quantity, for the guardianship of which a body of public men are responsible, becomes disseminated private property, each man giving in exchange for any article received from another, a general order for its equivalent in whatever other article the claimant may desire (such general order being payable by any member of the society in whose possession the demanded article may be found), we at once obtain an approximation to the actual condition of a civilized mercantile community from which approximation we might easily proceed into still completer analysis. I purpose, however, to arrive at every result by the gradual expansion of the simpler conception; but I wish the reader to observe, in the meantime, that both the social conditions thus supposed (and I will by anticipation say also all possible social conditions) agree in two great points; namely, in the primal importance of the supposed national store or stock, and in its destructibility or improvability by the holders of it. I. Observe that in both conditions, that of central Government-holding, and diffused private-holding, the quantity of stock is of the same national moment. In the one case, indeed, its amount may be known by examination of the persons to whom it is confided; in the other it cannot be known but by exposing the private affairs of every individual. But, known or unknown, its significance is the same under each condition. The riches of the nation consist in the abundance, and their wealth depends on the nature of this store. II. In the second place, both conditions (and all other possible ones) agree in the destructibility or improvability of the store by its holders. Whether in private hands, or under Government charge, the national store may be daily consumed, or daily enlarged, by its possessors; and while the currency remains apparently unaltered, the property it represents may diminish or increase. The first question, then, which we have to put under our simple conception of central Government, namely, "What store has it?" is one of equal importance, whatever may be the constitution of the State; while the second question--namely, "Who are the holders of the store?"--involves the discussion of the constitution of the State itself. The first inquiry resolves itself into three heads: 1. What is the nature of the store? 2. What is its quantity in relation to the population? 3. What is its quantity in relation to the currency? The second inquiry, into two: 1. Who are the Holders of the store, and in what proportions? 2. Who are the Claimants of the store (that is to say, the holders of the currency), and in what proportions? We will examine the range of the first three questions in the present paper; of the two following, in the sequel. Question First. What is the nature of the store? Has the nation hitherto worked for and gathered the right thing or the wrong? On that issue rest the possibilities of its life. For example, let us imagine a society, of no great extent, occupied in procuring and laying up store of corn, wine, wool, silk, and other such preservable materials of food and clothing; and that it has a currency representing them. Imagine farther, that on days of festivity, the society, discovering itself to derive satisfaction from pyrotechnics, gradually turns its attention more and more to the manufacture of gunpowder; so that an increasing number of labourers, giving what time they can spare to this branch of industry, bring increasing quantities of combustibles into the store, and use the general orders received in exchange to obtain such wine, wool, or corn as they may have need of. The currency remains the same, and represents precisely the same amount of material in the store, and of labour spent in producing it. But the corn and wine gradually vanish, and in their place, as gradually, appear sulphur and saltpetre; till at last, the labourers who have consumed corn and supplied nitre, presenting on a festal morning some of their currency to obtain materials for the feast, discover that no amount of currency will command anything Festive, except Fire. The supply of rockets is unlimited, but that of food limited in a quite final manner; and the whole currency in the hands of the society represents an infinite power of detonation, but none of existence. The statement, caricatured as it may seem, is only exaggerated in assuming the persistence of the folly to extremity, unchecked, as in reality it would be, by the gradual rise in price of food. But it falls short of the actual facts of human life in expression of the depth and intensity of the folly itself. For a great part (the reader would not believe how great until he saw the statistics in detail) of the most earnest and ingenious industry of the world is spent in producing munitions of war; gathering that is to say the materials, not of festive, but of consuming fire; filling its stores with all power of the instruments of pain, and all affluence of the ministries of death. It was no true Trionfo della Morte which men have seen and feared (sometimes scarcely feared) so long;--wherein he brought them rest from their labours. We see and share another and higher form of his triumph now. Task-master instead of Releaser, he rules the dust of the arena no less than of the tomb; and, content once in the grave whither man went, to make his works cease and his devices to vanish,--now, in the busy city and on the serviceable sea, makes his work to increase, and his devices to multiply. To this doubled loss, or negative power of labour, spent in producing means of destruction, we have to add in our estimate of the consequences of human folly, whatever more insidious waste of toil there is in the production of unnecessary luxury. Such and such an occupation (it is said) supports so many labourers, because so many obtain wages in following it; but it is never considered that unless there be a supporting power in the product of the occupation, the wages given to one man are merely withdrawn from another. We cannot say of any trade that it maintains such and such a number of persons, unless we know how and where the money, now spent in the purchase of its produce, would have been spent, if that produce had not been manufactured. The purchasing funds truly support a number of people in making This; but (probably) leave unsupported an equal number who are making, or could have made That. The manufacturers of small watches thrive in Geneva;--it is well;--but where would the money spent on small watches have gone, had there been no small watches to buy? If the so frequently uttered aphorism of mercantile economy--"labour is limited by capital"--were true, this question would be a definite one. But it is untrue; and that widely. Out of a given quantity of wages, more or less labour is to be had, according to the quantity of will with which we can inspire the workman; and the true limit of labour is only in the limit of this moral stimulus of the will, and the bodily power. In an ultimate, but entirely practical sense, labour is limited by capital, as it is by matter--that is to say, where there is no material, there can be no work--but in the practical sense, labour is limited only by the great original capital[77] of Head, Heart, and Hand. Even in the most artificial relations of commerce, it is to capital as fire to fuel: out of so much fuel you shall have so much fire--not in proportion to the mass of combustibles, but to the force of wind that fans and water that quenches; and the appliance of both. And labour is furthered, as conflagration is, not so much by added fuel, as by admitted air. [77] The aphorism, being hurried English for "labour is limited by want of capital," involves also awkward English in its denial, which cannot be helped. For which reasons, I had to insert, above, the qualifying "probably"; for it can never be said positively that the purchase money, or wages fund of any trade is withdrawn from some other trade. The object itself may be the stimulus of the production of the money which buys it; that is to say, the work by which the purchaser obtained the means of buying it would not have been done by him, unless he had wanted that particular thing. And the production of any article not intrinsically (nor in the process of manufacture) injurious, is useful, if the desire of it causes productive labour in other directions. In the national store, therefore, the presence of things intrinsically valueless does not imply an entirely correlative absence of things valuable. We cannot be certain that all the labour spent on vanity has been diverted from reality, and that for every bad thing produced, a precious thing has been lost. In great measure, the vain things represent the results of roused indolence; they have been carved, as toys, in extra time; and, if they had not been made, nothing else would have been made. Even to munitions of war this principle applies; they partly represent the work of men who, if they had not made spears, would never have made pruning-hooks, and who are incapable of any activities but those of contest. Thus, then, finally, the nature of the store has to be considered under two main lights, the one, that of its immediate and actual utility; the other, that of the past national character which it signifies by its production, and future character which it must develop by its uses. And the issue of this investigation will be to show us that Economy does not depend merely on principles of "demand and supply," but primarily on what is demanded, and what is supplied. Question Second. What is the quantity of the store in relation to the population? It follows from what has been already stated that the accurate form in which this question has to be put is--"What quantity of each article composing the store exists in proportion to the real need for it by the population?" But we shall for the time assume, in order to keep all our terms at the simplest, that the store is wholly composed of useful articles, and accurately proportioned to the several needs of them. Now it does not follow, because the store is large in proportion to the number of people, that the people must be in comfort, nor because it is small, that they must be in distress. An active and economical race always produces more than it requires, and lives (if it is permitted to do so) in competence on the produce of its daily labour. The quantity of its store, great or small, is therefore in many respects indifferent to it, and cannot be inferred by its aspect. Similarly an inactive and wasteful population, which cannot live by its daily labour, but is dependent, partly or wholly, on consumption of its store, may be (by various difficulties hereafter to be examined, in realization of getting at such store) retained in a state of abject distress, though its possessions may be immense. But the results always involved in the magnitude of store are, the commercial power of the nation, its security, and its mental character. Its commercial power, in that according to the quantity of its store, may be the extent of its dealings; its security, in that according to the quantity of its store are its means of sudden exertion or sustained endurance; and its character, in that certain conditions of civilization cannot be attained without permanent and continually accumulating store, of great intrinsic value, and of peculiar nature. Now, seeing that these three advantages arise from largeness of store in proportion to population, the question arises immediately, "Given the store--is the nation enriched by diminution of its numbers? Are a successful national speculation and a pestilence, economically the same thing?" This is in part a sophistical question; such as it would be to ask whether a man was richer when struck by disease which must limit his life within a predicable period than he was when in health. He is enabled to enlarge his current expenses, and has for all purposes a larger sum at his immediate disposal (for, given the fortune, the shorter the life the larger the annuity); yet no man considers himself richer because he is condemned by his physician. The logical reply is that, since Wealth is by definition only the means of life, a nation cannot be enriched by its own mortality. Or in shorter words, the life is more than the meat; and existence itself more wealth than the means of existence. Whence, of two nations who have equal store, the more numerous is to be considered the richer, provided the type of the inhabitant be as high (for, though the relative bulk of their store be less, its relative efficiency, or the amount of effectual wealth, must be greater). But if the type of the population be deteriorated by increase of its numbers, we have evidence of poverty in its worst influence; and then, to determine whether the nation in its total may still be justifiably esteemed rich, we must set or weigh the number of the poor against that of the rich. To effect which piece of scalework, it is of course necessary to determine, first, who are poor and who are rich; nor this only, but also how poor and how rich they are! Which will prove a curious thermometrical investigation; for we shall have to do for gold and for silver what we have done for quicksilver--determine, namely, their freezing-point, their zero, their temperate and fever-heat points; finally, their vaporescent point, at which riches, sometimes explosively, as lately in America, "make to themselves wings";--and correspondently the number of degrees below zero at which poverty, ceasing to brace with any wholesome cold, burns to the bone. For the performance of these operations, in the strictest sense scientific, we will first look to the existing so-called "science" of Political Economy; we will ask it to define for us the comparatively and superlatively rich, and the comparatively and superlatively poor; and on its own terms--if any terms it can pronounce--examine, in our prosperous England, how many rich and how many poor people there are; and whether the quantity and intensity of the poverty is indeed so overbalanced by the quantity and intensity of wealth, that we may permit ourselves a luxurious blindness to it, and call ourselves, complacently, a rich country. And if we find no clear definition in the existing science, we will endeavour for ourselves to fix the true degrees of the Plutonic scale, and to apply them. Question Third. What is the quantity of the store in relation to the Currency? We have seen that the real worth of the currency, so far as dependent on its relation to the magnitude of the store, may vary within certain limits, without affecting its worth in exchange. The diminution or increase of the represented wealth may be unperceived, and the currency may be taken either for more or less than it is truly worth. Usually, it is taken for more; and its power in exchange, or credit-power, is thus increased (or retained) up to a given strain upon its relation to existing wealth. This credit-power is of chief importance in the thoughts, because most sharply present to the experience, of a mercantile community; but the conditions of its stability[78] and all other relations of the currency to the material store are entirely simple in principle, if not in action. Far other than simple are the relations of the currency to that "available labour" which by our definition (p. 219) it also represents. For this relation is involved not only with that of the magnitude of the store to the number, but with that of the magnitude of the store to the mind, of the population. Its proportion to their number, and the resulting worth of currency, are calculable; but its proportion to their will for labour is not. The worth of the piece of money which claims a given quantity of the store, is, in exchange, less or greater according to the facility of obtaining the same quantity of the same thing without having recourse to the store. In other words, it depends on the immediate Cost and Price of the thing. We must now, therefore, complete the definition of these terms. [78] These are nearly all briefly represented by the image used for the force of money by Dante, of mast and sail,-- "Quali dal vento be gonfiate vele Caggiono avvolte, poi chè l'alber fiacca Tal cadde a terra la fiera crudele." The image may be followed out, like all of Dante's, into as close detail as the reader chooses. Thus the stress of the sail must be proportioned to the strength of mast, and it is only in unforeseen danger that a skilful seaman ever carries all the canvas his spars will bear: states of mercantile languor are like the flap of the sail in a calm,--of mercantile precaution, like taking in reefs; and the mercantile ruin is instant on the breaking of the mast. All cost and price are counted in Labour. We must know first, therefore, what is to be counted as Labour. I have already defined labour to be the Contest of the life of man with an opposite.[79] Literally, it is the quantity of "Lapse," loss, or failure of human life caused by any effort. It is usually confused with effort itself, or the application of power (opera); but there is much effort which is merely a mode of recreation, or of pleasure. The most beautiful actions of the human body and the highest results of the human intelligence, are conditions, or achievements, of quite unlaborious, nay, of recreative, effort. But labour is the suffering in effort. It is the negative quantity, or quantity of de-feat which has to be counted against every Feat, and of de-fect which has to be counted against every Fact, or Deed of men. In brief, it is "that quantity of our toils which we die in." [79] That is to say, its only price is its return. Compare "Unto This Last," p. 162 and what follows. We might, therefore, à priori, conjecture (as we shall ultimately find) that it cannot be bought, nor sold. Everything else is bought and sold for Labour, but labour itself cannot be bought nor sold for anything, being priceless.[80] The idea that it is a commodity to be bought or sold, is the alpha and omega of Politico-Economic fallacy. [80] The object of Political Economy is not to buy, nor to sell labour,--but to spare it. Every attempt to buy or sell it is, in the outcome, ineffectual;--so far as successful, it is not sale, but Betrayal; and the purchase money is a part of that typical thirty pieces which bought, first the greatest of labours, and afterwards the burial field of the Stranger; for this purchase-money, being in its very smallness or vileness the exactly measured opposite of "vilis annona amicorum," makes all men strangers to each other. This being the nature of labour, the "Cost" of anything is the quantity of labour necessary to obtain it;--the quantity for which, or at which, it "stands" (constat). It is literally the "Constancy" of the thing;--you shall win it--move it--come at it--for no less than this. Cost is measured and measurable only in "labor," not in "opera."[81] It does not matter how much power a thing needs to produce it; it matters only how much distress. Generally the more power it requires, the less the distress; so that the noblest works of man cost less than the meanest. [81] Cicero's distinction, "sordidi quæstus, quorum operæ, non quorum artes emuntur," admirable in principle, is inaccurate in expression, because Cicero did not practically know how much operative dexterity is necessary in all the higher arts; but the cost of this dexterity is incalculable. Be it great or small, the "cost" of the mere authority and perfectness of touch in a hammerstroke of Donatello's, or a pencil touch of Correggio's, is inestimable by any ordinary arithmetic. (The best masters themselves usually estimate it at sums varying from two to three or four shillings a day, with wine or soup extra.) True labour, or spending of life, is either of the body, in fatigue or pain, of the temper or heart (as in perseverance of search for things,--patience in waiting for them,--fortitude or degradation in suffering for them, and the like), or of the intellect. All these kinds of labour are supposed to be included in the general term, and the quantity of labour is then expressed by the time it lasts. So that a unit of labour is "an hour's work" or a day's work, as we may determine.[82] [82] Only observe, as some labour is more destructive of life than other labour, the hour or day of the more destructive toil is supposed to include proportionate rest. Though men do not, or cannot, usually take such rest, except in death. Cost, like value, is both intrinsic and effectual. Intrinsic cost is that of getting the thing in the right way; effectual cost is that of getting the thing in the way we set about it. But intrinsic cannot be made a subject of analytical investigation, being only partially discoverable, and that by long experience. Effectual cost is all that the political economist can deal with; that is to say, the cost of the thing under existing circumstances and by known processes. Cost (irrespectively of any question of demand or supply) varies with the quantity of the thing wanted, and with the number of persons who work for it. It is easy to get a little of some things, but difficult to get much; it is impossible to get some things with few hands, but easy to get them with many. The cost and value of things, however difficult to determine accurately, are thus both dependent on ascertainable physical circumstances.[83] [83] There is, therefore, observe, no such thing as cheapness (in the common use of that term), without some error or injustice. A thing is said to be cheap, not because it is common, but because it is supposed to be sold under its worth. Everything has its proper and true worth at any given time, in relation to everything else; and at that worth should be bought and sold. If sold under it, it is cheap to the buyer by exactly so much as the seller loses, and no more. Putrid meat, at twopence a pound, is not "cheaper" than wholesome meat at sevenpence a pound; it is probably much dearer; but if, by watching your opportunity, you can get the wholesome meat for sixpence a pound, it is cheaper to you by a penny, which you have gained, and the seller has lost. The present rage for cheapness is either, therefore, simply and literally, a rage for badness of all commodities, or it is an attempt to find persons whose necessities will force them to let you have more than you should for your money. It is quite easy to produce such persons, and in large numbers; for the more distress there is in a nation, the more cheapness of this sort you can obtain, and your boasted cheapness is thus merely a measure of the extent of your national distress. There is, indeed, a condition of apparent cheapness, which we confuse, in practice and in reasoning, with the other; namely, the real reduction in cost of articles by right application of labour. But in this case the article is only cheap with reference to its former price, the so-called cheapness is only our expression for the sensation of contrast between its former and existing prices. So soon as the new methods of producing the article are established, it ceases to be esteemed either cheap or dear, at the new price, as at the old one, and is felt to be cheap only when accident enables it to be purchased beneath this new value. And it is to no advantage to produce the article more easily, except as it enables you to multiply your population. Cheapness of this kind is merely the discovery that more men can be maintained on the same ground; and the question, how many you will maintain in proportion to your means, remains exactly in the same terms that it did before. A form of immediate cheapness results, however, in many cases, without distress, from the labour of a population where food is redundant, or where the labour by which the food is produced leaves much idle time on their hands, which may be applied to the production of "cheap" articles. All such phenomena indicate to the political economist places where the labour is unbalanced. In the first case, the just balance is to be effected by taking labourers from the spot where the pressure exists, and sending them to that where food is redundant. In the second, the cheapness is a local accident, advantageous to the local purchaser, disadvantageous to the local producer. It is one of the first duties of commerce to extend the market and thus give the local producer his full advantage. Cheapness caused by natural accidents of harvest, weather, etc., is always counterbalanced, in due time, by natural scarcity similarly caused. It is the part of wise Government, and healthy commerce, so to provide in times and places of plenty for times and places of dearth, as that there shall never be waste, nor famine. Cheapness caused by gluts of the market is merely a disease of clumsy and wanton commerce. But their price is dependent on the human will. Such and such a thing is demonstrably good for so much. And it may demonstrably be bad for so much. But it remains questionable, and in all manner of ways questionable, whether I choose to give so much.[84] [84] Price has already been defined (pp. 214, 215) to be the quantity of labour which the possessor of a thing is willing to take for it. It is best to consider the price to be that fixed by the possessor, because the possessor has absolute power of refusing sale, while the purchaser has no absolute power of compelling it; but the effectual or market price is that at which their estimates coincide. This choice is always a relative one. It is a choice to give a price for this, rather than for that;--a resolution to have the thing, if getting it does not involve the loss of a better thing. Price depends, therefore, not only on the cost of the commodity itself, but on its relation to the cost of every other attainable thing. Farther. The power of choice is also a relative one. It depends not merely on our own estimate of the thing, but on everybody else's estimate; therefore on the number and force of the will of the concurrent buyers, and on the existing quantity of the thing in proportion to that number and force. Hence the price of anything depends on four variables.[85] 1. Its cost. 2. Its attainable quantity at that cost. 3. The number and power of the persons who want it. 4. The estimate they have formed of its desirableness. (Its value only affects its price so far as it is contemplated in this estimate; perhaps, therefore, not at all.) [85] The two first of these variables are included in the _x_, and the two last in the _y_, of the formula given at p. 162 of "Unto This Last," and the four are the radical conditions which regulate the price of things on first production; in their price in exchange, the third and fourth of these divide each into two others, forming the Four which are stated at p. 186 of "Unto This Last." Now, in order to show the manner in which price is expressed in terms of a currency, we must assume these four quantities to be known, and the "estimate of desirableness," commonly called the Demand, to be certain. We will take the number of persons at the lowest. Let A and B be two labourers who "demand," that is to say, have resolved to labour for, two articles, _a_ and _b_. Their demand for these articles (if the reader likes better, he may say their need) is to be absolute, existence depending on the getting these two things. Suppose, for instance, that they are bread and fuel in a cold country, and let _a_ represent the least quantity of bread, and _b_ the least quantity of fuel, which will support a man's life for a day. Let _a_ be producible by an hour's labour but _b_ only by two hours' labour; then the cost of _a_ is one hour, and of _b_ two (cost, by our definition, being expressible in terms of time). If, therefore, each man worked both for his corn and fuel, each would have to work three hours a day. But they divide the labour for its greater ease.[86] Then if A works three hours, he produces 3_a_, which is one _a_ more than both the men want. And if B works three hours, he produces only 1-1/2_b_, or half of _b_ less than both want. But if A works three hours and B six, A has 3_a_, and B has 3_b_, a maintenance in the right proportion for both for a day and a half; so that each might take a half a day's rest. But as B has worked double time, the whole of this day's rest belongs in equity to him. Therefore, the just exchange should be, A, giving two _a_ for one _b_, has one _a_ and one _b_;--maintenance for a day. B, giving one _b_ for two _a_, has two _a_ and two _b_;--maintenance for two days. [86] This "greater ease" ought to be allowed for by a diminution in the times of the divided work; but as the proportion of times would remain the same, I do not introduce this unnecessary complexity into the calculation. But B cannot rest on the second day, or A would be left without the article which B produces. Nor is there any means of making the exchange just, unless a third labourer is called in. Then one workman, A, produces _a_, and two, B and C, produce _b_;--A, working three hours, has three _a_;--B, three hours, 1-1/2_b_;--C, three hours, 1-1/2_b_. B and C each give half of _b_ for _a_, and all have their equal daily maintenance for equal daily work. To carry the example a single step farther, let three articles, _a_, _b_, and _c_, be needed. Let _a_ need one hour's work, _b_ two, and _c_ four; then the day's work must be seven hours, and one man in a day's work can make 7_a_, or 3-1/2_b_, or 1-3/4_c_. Therefore one A works for _a_, producing 7_a_; two B's work for _b_, producing 7_b_; four C's work for _c_, producing 7_c_. A has six _a_ to spare, and gives two _a_ for one _b_, and four _a_ for one _c_. Each B has 2-1/2_b_ to spare, and gives 1/2_b_ for one _a_, and two _b_ for one _c_. Each C has 3/4 of _c_ to spare, and gives 1/2_c_ for one _b_, and 1/4 of _c_ for one _a_. And all have their day's maintenance. Generally, therefore, it follows that, if the demand is constant,[87] the relative prices of things are as their costs, or as the quantities of labour involved in production. [87] Compare "Unto This Last," p. 177, et seq. Then, in order to express their prices in terms of a currency, we have only to put the currency into the form of orders for a certain quantity of any given article (with us it is in the form of orders for gold), and all quantities of other articles are priced by the relation they bear to the article which the currency claims. But the worth of the currency itself is not in the slightest degree founded more on the worth of the article for which the gold is exchangeable. It is just as accurate to say, "So many pounds are worth an acre of land," as "An acre of land is worth so many pounds." The worth of gold, of land, of houses, and of food, and of all other things, depends at any moment on the existing quantities and relative demands for all and each; and a change in the worth of, or demand for, any one, involves an instantaneously correspondent change in the worth, and demand for, all the rest--a change as inevitable and as accurately balanced (though often in its process as untraceable) as the change in volume of the outflowing river from some vast lake, caused by change in the volume of the inflowing streams, though no eye can trace, no instrument detect motion either on its surface, or in the depth. Thus, then, the real working power or worth of the currency is founded on the entire sum of the relative estimates formed by the population of its possessions; a change in this estimate in any direction (and therefore every change in the national character), instantly alters the value of money, in its second great function of commanding labour. But we must always carefully and sternly distinguish between this worth of currency, dependent on the conceived or appreciated value of what it represents, and the worth of it, dependent on the existence of what it represents. A currency is true or false, in proportion to the security with which it gives claim to the possession of land, house, horse, or picture; but a currency is strong or weak, worth much or worth little, in proportion to the degree of estimate in which the nation holds the house, horse, or picture which is claimed. Thus the power of the English currency has been, till of late, largely based on the national estimate of horses and of wine: so that a man might always give any price to furnish choicely his stable, or his cellar, and receive public approval therefor: but if he gave the same sum to furnish his library, he was called mad, or a Bibliomaniac. And although he might lose his fortune by his horses, and his health or life by his cellar, and rarely lost either by his books, he was yet never called a Hippomaniac nor an Oinomaniac; but only Bibliomaniac, because the current worth of money was understood to be legitimately founded on cattle and wine, but not on literature. The prices lately given at sales for pictures and MSS. indicate some tendency to change in the national character in this respect, so that the worth of the currency may even come in time to rest, in an acknowledged manner, somewhat on the state and keeping of the Bedford missal, as well as on the health of Caractacus or Blink Bonny; and old pictures be considered property, no less than old port. They might have been so before now, but it is more difficult to choose the one than the other. Now, observe, all these sources of variation in the power of the currency exist wholly irrespective of the influences of vice, indolence, and improvidence. We have hitherto supposed, throughout the analysis, every professing labourer to labour honestly, heartily, and in harmony with his fellows. We have now to bring farther into the calculation the effects of relative industry, honour, and forethought, and thus to follow out the bearings of our second inquiry: Who are the holders of the Store and Currency, and in what proportions? This, however, we must reserve for our next paper,--noticing here only that, however distinct the several branches of the subject are, radically, they are so interwoven in their issues that we cannot rightly treat any one, till we have taken cognisance of all. Thus the quantity of the currency in proportion to number of population is materially influenced by the number of the holders in proportion to the non-holders; and this again by the number of holders of goods. For as, by definition, the currency is a claim to goods which are not possessed, its quantity indicates the number of claimants in proportion to the number of holders; and the force and complexity of claim. For if the claims be not complex, currency as a means of exchange may be very small in quantity. A sells some corn to B, receiving a promise from B to pay in cattle, which A then hands over to C, to get some wine. C in due time claims the cattle from B; and B takes back his promise. These exchanges have, or might have been, all effected with a single coin or promise; and the proportion of the currency to the store would in such circumstances indicate only the circulating vitality of it--that is to say, the quantity and convenient divisibility of that part of the store which the habits of the nation keep in circulation. If a cattle-breeder is content to live with his household chiefly on meat and milk, and does not want rich furniture, or jewels, or books,--if a wine- and corn-grower maintains himself and his men chiefly on grapes and bread;--if the wives and daughters of families weave and spin the clothing of the household, and the nation, as a whole, remains content with the produce of its own soil and the work of its own hands, it has little occasion for circulating media. It pledges and promises little and seldom; exchanges only so far as exchange is necessary for life. The store belongs to the people in whose hands it is found, and money is little needed either as an expression of right, or practical means of division and exchange. But in proportion as the habits of the nation become complex and fantastic (and they may be both, without therefore being civilized), its circulating medium must increase in proportion to its store. If everyone wants a little of everything,--if food must be of many kinds, and dress of many fashions,--if multitudes live by work which, ministering to fancy, has its pay measured by fancy, so that large prices will be given by one person for what is valueless to another,--if there are great inequalities of knowledge, causing great inequalities of estimate,--and finally, and worst of all, if the currency itself, from its largeness, and the power which the possession of it implies, becomes the sole object of desire with large numbers of the nation, so that the holding of it is disputed among them as the main object of life:--in each and all these cases, the currency enlarges in proportion to the store, and, as a means of exchange and division, as a bond of right, and as an expression of passion, plays a more and more important part in the nation's dealings, character, and life. Against which part, when, as a bond of Right, it becomes too conspicuous and too burdensome, the popular voice is apt to be raised in a violent and irrational manner, leading to revolution instead of remedy. Whereas all possibility of Economy depends on the clear assertion and maintenance of this bond of right, however burdensome. The first necessity of all economical government is to secure the unquestioned and unquestionable working of the great law of Property--that a man who works for a thing shall be allowed to get it, keep it, and consume it, in peace; and that he who does not eat his cake to-day, shall be seen, without grudging, to have his cake to-morrow. This, I say, is the first point to be secured by social law; without this, no political advance, nay, no political existence, is in any sort possible. Whatever evil, luxury, iniquity, may seem to result from it, this is nevertheless the first of all Equities; and to the enforcement of this, by law and by police-truncheon, the nation must always primarily set its mind--that the cupboard door may have a firm lock to it, and no man's dinner be carried off by the mob, on its way home from the baker's. Which, thus fearlessly asserting, we shall endeavour in the next paper to consider how far it may be practicable for the mob itself, also, in due breadth of dish, to have dinners to carry home. III. THE CURRENCY-HOLDERS AND STORE-HOLDERS. THE DISEASE OF DESIRE. It will be seen by reference to the last paper that our present task is to examine the relation of holders of store to holders of currency; and of both to those who hold neither. In order to do this, we must determine on which side we are to place substances such as gold, commonly known as bases of currency. By aid of previous definitions the reader will now be able to understand closer statements than have yet been possible. The currency of any country consists of every document acknowledging debt which is transferable in the country. This transferableness depends upon its intelligibility and credit. Its intelligibility depends chiefly on the difficulty of forging anything like it;--its credit much on national character, but ultimately always on the existence of substantial means of meeting its demand. As the degrees of transferableness are variable (some documents passing only in certain places, and others passing, if at all, for less than their inscribed value), both the mass and, so to speak, fluidity, of the currency, are variable. True or perfect currency flows freely, like a pure stream; it becomes sluggish or stagnant in proportion to the quantity of less transferable matter which mixes with it, adding to its bulk, but diminishing its purity. Substances of intrinsic value, such as gold, mingle also with the currency, and increase, while they modify, its power; these are carried by it as stones are carried by a torrent, sometimes momentarily impeding, sometimes concentrating its force, but not affecting its purity. These substances of intrinsic value may be also stamped or signed so as to become acknowledgments of debt, and then become, so far as they operate independently of their intrinsic value, part of the real currency. Deferring consideration of minor forms of currency, consisting of documents bearing private signature, we will examine the principle of legally authorized or national currency. This, in its perfect condition, is a form of public acknowledgment of debt, so regulated and divided that any person presenting a commodity of tried worth in the public market, shall, if he please, receive in exchange for it a document giving him claim for the return of its equivalent, (1) in any place, (2) at any time, and (3) in any kind. When currency is quite healthy and vital, the persons entrusted with its management are always able to give on demand either-- A. The assigning document for the assigned quantity of goods. Or, B. The assigned quantity of goods for the assigning document. If they cannot give document for goods, the national exchange is at fault. If they cannot give goods for document, the national credit is at fault. The nature and power of the document are therefore to be examined under the three relations which it bears to Place, Time, and Kind. 1. It gives claim to the return of equivalent wealth in any Place. Its use in this function is to save carriage, so that parting with a bushel of corn in London, we may receive an order for a bushel of corn for the Antipodes, or elsewhere. To be perfect in this use, the substance of currency must be to the maximum portable, credible, and intelligible. Its non-acceptance or discredit results always from some form of ignorance or dishonour: so far as such interruptions rise out of differences in denomination, there is no ground for their continuance among civilized nations. It may be convenient in one country to use chiefly copper for coinage, in another silver, and in another gold,--reckoning accordingly in centimes, francs, or sequins; but that a French franc should be different in weight from an English shilling, and an Austrian zwanziger vary in weight and alloy from both, is wanton loss of commercial power. 2. It gives claim to the return of equivalent wealth at any Time. In this second use, currency is the exponent of accumulation: it renders the laying up of store at the command of individuals unlimitedly possible;--whereas, but for its intervention, all gathering would be confined within certain limits by the bulk of poverty, or by its decay, or the difficulty of its guardianship. "I will pull down my barns and build greater" cannot be a daily saying; and all material investment is enlargement of care. The national currency transfers the guardianship of the store to many; and preserves to the original producer the right of re-entering on its possession at any future period. 3. It gives claim (practical, though not legal) to the return of equivalent wealth in any Kind. It is a transferable right, not merely to this or that, but to anything; and its power in this function is proportioned to the range of choice. If you give a child an apple or a toy, you give him a determinate pleasure, but if you give him a penny, an indeterminate one, proportioned to the range of selection offered by the shops in the village. The power of the world's currency is similarly in proportion to the openness of the world's fair, and commonly enhanced by the brilliancy of external aspect, rather than solidity of its wares. We have said that the currency consists of orders for equivalent goods. If equivalent, their quality must be guaranteed. The kinds of goods chosen for specific claim must, therefore, be capable of test, while, also, that a store may be kept in hand to meet the call of the currency, smallness of bulk, with great relative value, is desirable; and indestructibility, over at least a certain period, essential. Such indestructibility and facility of being tested are united in gold; its intrinsic value is great, and its imaginary value is greater; so that, partly through indolence, partly through necessity and want of organization, most nations have agreed to take gold for the only basis of their currencies;--with this grave disadvantage, that its portability enabling the metal to become an active part of the medium of exchange, the stream of the currency itself becomes opaque with gold--half currency and half commodity, in unison of functions which partly neutralize, partly enhance each other's force. They partly neutralize, since in so far as the gold is commodity, it is bad currency, because liable to sale; and in so far as it is currency, it is bad commodity, because its exchange value interferes with its practical use. Especially its employment in the higher branches of the arts becomes unsafe on account of its liability to be melted down for exchange. Again. They partly enhance, since in so far as the gold has acknowledged intrinsic value, it is good currency, because everywhere acceptable; and in so far as it has legal exchangeable value, its worth as a commodity is increased. We want no gold in the form of dust or crystal; but we seek for it coined because in that form it will pay baker and butcher. And this worth in exchange not only absorbs a large quantity in that use,[88] but greatly increases the effect on the imagination of the quantity used in the arts. Thus, in brief, the force of the functions is increased, but their precision blunted, by their unison. [88] The waste of labour in obtaining the gold, though it cannot be estimated by help of any existing data, may be understood in its bearing on entire economy by supposing it limited to transactions between two persons. If two farmers in Australia have been exchanging corn and cattle with each other for years, keeping their accounts of reciprocal debt in any simple way, the sum of the possessions of either would not be diminished, though the part of it which was lent or borrowed were only reckoned by marks on a stone, or notches on a tree; and the one counted himself accordingly, so many scratches, or so many notches, better than the other. But it would soon be seriously diminished if, discovering gold in their fields, each resolved only to accept golden counters for a reckoning; and accordingly, whenever he wanted a sack of corn or a cow, was obliged to go and wash sand for a week before he could get the means of giving a receipt for them. These inconveniences, however, attach to gold as a basis of currency on account of its portability and preciousness. But a far greater inconvenience attaches to it as the only legal basis of currency. Imagine gold to be only attainable in masses weighing several pounds each, and its value, like that of a malachite or marble, proportioned to its largeness of bulk;--it could not then get itself confused with the currency in daily use, but it might still remain as its basis; and this second inconvenience would still affect it, namely, that its significance as an expression of debt, varies, as that of every other article would, with the popular estimate of its desirableness, and with the quantity offered in the market. My power of obtaining other goods for gold depends always on the strength of public passion for gold, and on the limitation of its quantity, so that when either of two things happen--that the world esteems gold less, or finds it more easily,--my right of claim is in that degree effaced; and it has been even gravely maintained that a discovery of a mountain of gold would cancel the National Debt; in other words, that men may be paid for what costs much in what costs nothing. Now, if it is true that there is little chance of sudden convulsion in this respect, the world will not rapidly increase in wisdom so as to despise gold, and perhaps may even desire it more eagerly the more easily it is obtained; nevertheless the right of debt ought not to rest on a basis of imagination; nor should the frame of a national currency vibrate with every miser's panic and every merchant's imprudence. There are two methods of avoiding this insecurity, which would have been fallen upon long ago if, instead of calculating the conditions of the supply of gold, men had only considered how the world might live and manage its affairs without gold at all.[89] One is to base the currency on substances of truer intrinsic value; the other, to base it on several substances instead of one. If I can only claim gold, the discovery of a continent of cornfields need not trouble me. If, however, I wish to exchange my bread for other things, a good harvest will for the time limit my power in this respect; but if I can claim either bread, iron, or silk at pleasure, the standard of value has three feet instead of one, and will be proportionally firm. Thus, ultimately the steadiness of currency depends upon the breadth of its base; but the difficulty of organization increasing with this breadth, the discovery of the condition at once safest and most convenient[90] can only be by long analysis which must for the present be deferred. Gold or silver[91] may always be retained in limited use, as a luxury of coinage and questionless standard, of one weight and alloy among nations, varying only in the die. The purity of coinage when metallic, is closely indicative of the honesty of the system of revenue, and even of the general dignity of the State.[92] [89] It is difficult to estimate the curious futility of discussions such as that which lately occupied a section of the British Association, on the absorption of gold, while no one can produce even the simplest of the data necessary for the inquiry. To take the first occurring one,--What means have we of ascertaining the weight of gold employed this year in the toilettes of the women of Europe (not to speak of Asia); and, supposing it known, what means of conjecturing the weight by which, next year, their fancies, and the changes of style among their jewellers, will diminish or increase it? [90] See, in Pope's epistle to Lord Bathurst, his sketch of the difficulties and uses of a currency literally "pecuniary"-- "His Grace will game--to White's a bull he led," etc. [91] Perhaps both; perhaps silver only. It may be found expedient ultimately to leave gold free for use in the arts. As a means of reckoning, the standard might be, and in some cases has already been, entirely ideal.--See Mill's "Political Economy," book iii., chap. 7, at beginning. [92] The purity of the drachma and sequin were not without significance of the state of intellect, art, and policy, both in Athens and Venice;--a fact first impressed upon me ten years ago, when, in daguerreotypes of Venetian architecture, I found no purchasable gold pure enough to gild them with, but that of the old Venetian sequin. Whatever the article or articles may be which the national currency promises to pay, a premium on that article indicates bankruptcy of the Government in that proportion, the division of the assets being restrained only by the remaining confidence of the holders of notes in the return of prosperity to the firm. Incontrovertible currencies, those of forced acceptance, or of unlimited issue, are merely various modes of disguising taxation, and delaying its pressure, until it is too late to interfere with its causes. To do away with the possibility of such disguise would have been among the first results of a true economical science, had any such existed; but there have been too many motives for the concealment, so long as it could by any artifices be maintained, to permit hitherto even the founding of such a science. And, indeed, it is only through evil conduct, wilfully persisted in, that there is any embarrassment either in the theory or the working of currency. No exchequer is ever embarrassed, nor is any financial question difficult of solution, when people keep their practice honest, and their heads cool. But when Governments lose all office of pilotage, protection, scrutiny, and witness; and live only in magnificence of proclaimed larceny, effulgent mendacity, and polished mendicity; or when the people choosing Speculation (the S usual redundant in the spelling) instead of Toil, pursue no dishonesty with chastisement, that each may with impunity take his dishonest turn; and enlarge their lust of wealth through ignorance of its use, making their harlot of the dust, and setting Earth, the Mother, at the mercy of Earth, the Destroyer, so that she has to seek in hell the children she left playing in the meadows,--there are no tricks of financial terminology that will save them; all signature and mintage do but magnify the ruin they retard; and even the riches that remain, stagnant or current, change only from the slime of Avernus to the sand of Phlegethon;--quicksand at the embouchure;--land fluently recommended by recent auctioneers as "eligible for building leases." Finally, then, the power of true currency is fourfold. 1. Credit power. Its worth in exchange, dependent on public opinion of the stability and honesty of the issuer. 2. Real worth. Supposing the gold, or whatever else the currency expressly promises, to be required from the issuer, for all his notes; and that the call cannot be met in full. Then the actual worth of the document (whatever its credit power) would be, and its actual worth at any moment is to be defined as being, what the division of the assets of the issuer, and his subsequent will work, would produce for it. 3. The exchange power of its base. Granting that we can get five pounds in gold for our note, it remains a question how much of other things we can get for five pounds in gold. The more of other things exist, and the less gold, the greater this power. 4. The power over labour, exercised by the given quantity of the base, or of the things to be got for it. The question in this case is, how much work, and (question of questions) whose work, is to be had for the food which five pounds will buy. This depends on the number of the population; on their gifts, and on their dispositions, with which, down to their slightest humours and up to their strongest impulses, the power of the currency varies; and in this last of its ranges,--the range of passion, price, or praise (converso in pretium Deo), is at once least, and greatest. Such being the main conditions of national currency, we proceed to examine those of the total currency, under the broad definition, "transferable acknowledgment of debt";[93] among the many forms of which there are in effect only two, distinctly opposed; namely, the acknowledgments of debts which will be paid, and of debts which will not. Documents, whether in whole or part, of bad debt, being to those of good debt as bad money to bullion, we put for the present these forms of imposture aside (as in analysing a metal we should wash it clear of dross), and then range, in their exact quantities, the true currency of the country on one side, and the store or property of the country on the other. We place gold, and all such substances, on the side of documents, as far as they operate by signature;--on the side of store as far as they operate by value. Then the currency represents the quantity of debt in the country, and the store the quantity of its possession. The ownership of all the property is divided between the holders of currency and holders of store, and whatever the claiming value of the currency is at any moment, that value is to be deducted from the riches of the store-holders, the deduction being practically made in the payment of rent for houses and lands, of interest on stock, and in other ways to be hereafter examined. [93] Under which term, observe, we include all documents of debt which, being honest, might be transferable, though they practically are not transferred; while we exclude all documents which are in reality worthless, though in fact transferred temporarily as bad money is. The document of honest debt, not transferred, is merely to paper currency as gold withdrawn from circulation is to that of bullion. Much confusion has crept into the reasoning on this subject from the idea that withdrawal from circulation is a definable state, whereas it is a gradated state, and indefinable. The sovereign in my pocket is withdrawn from circulation as long as I choose to keep it there. It is no otherwise withdrawn if I bury it, nor even if I choose to make it, and others, into a golden cup, and drink out of them; since a rise in the price of the wine, or of other things, may at any time cause me to melt the cup and throw it back into currency; and the bullion operates on the prices of the things in the market as directly, though not as forcibly, while it is in the form of a cup, as it does in the form of a sovereign. No calculation can be founded on my humour in any ease. If I like to handle rouleaus, and therefore keep a quantity of gold, to play with, in the form of jointed basaltic columns, it is all one in its effect on the market as if I kept it in the form of twisted filigree, or steadily amicus lamnæ, beat the narrow gold pieces into broad ones, and dined off them. The probability is greater that I break the rouleau than that I melt the plate; but the increased probability is not calculable. Thus, documents are only withdrawn from the currency when cancelled, and bullion when it is so effectually lost as that the probability of finding it is no greater than that of finding new gold in the mine. At present I wish only to note the broad relations of the two great classes--the currency-holders and store-holders.[94] Of course they are partly united, most monied men having possessions of land or other goods; but they are separate in their nature and functions. The currency-holders as a class regulate the demand for labour, and the store-holders the laws of it; the currency-holders determine what shall be produced, and the store-holders the conditions of its production. Farther, as true currency represents by definition debts which will be paid, it represents either the debtor's wealth, or his ability and willingness; that is to say, either wealth existing in his hands transferred to him by the creditor, or wealth which, as he is at some time surely to return it, he is either increasing, or, if diminishing, has the will and strength to reproduce. A sound currency, therefore, as by its increase it represents enlarging debt, represents also enlarging means; but in this curious way, that a certain quantity of it marks the deficiency of the wealth of the country from what it would have been if that currency had not existed.[95] In this respect it is like the detritus of a mountain; assume that it lies at a fixed angle, and the more the detritus, the larger must be the mountain; but it would have been larger still, had there been none. [94] They are (up to the amount of the currency) simply creditors and debtors--the commercial types of the two great sects of humanity which those words describe; for debt and credit are of course merely the mercantile forms of the words "duty" and "creed," which give the central ideas: only it is more accurate to say "faith" than "creed," because creed has been applied carelessly to mere forms of words. Duty properly signifies whatever in substance or act one person owes to another, and faith the other's trust in his rendering it. The French "devoir" and "foi" are fuller and clearer words than ours; for, faith being the passive of fact, foi comes straight through fides from fio; and the French keep the group of words formed from the infinitive--fieri, "se fier," "se défier," "défiance," and the grand following "défi." Our English "affiance," "defiance," "confidence," "diffidence," retain accurate meanings; but our "faithful" has become obscure, from being used for "faithworthy," as well as "full of faith." "His name that sat on him was called Faithful and True." Trust is the passive of true saying, as faith is the passive of due doing; and the right learning of these etymologies, which are in the strictest sense only to be learned "by heart," is of considerably more importance to the youth of a nation than its reading and ciphering. [95] For example, suppose an active peasant, having got his ground into good order and built himself a comfortable house, finding still time on his hands, sees one of his neighbours little able to work, and ill lodged, and offers to build him also a house, and to put his land in order, on condition of receiving for a given period rent for the building and tithe of the fruits. The offer is accepted, and a document given promissory of rent and tithe. This note is money. It can only be good money if the man who has incurred the debt so far recovers his strength as to be able to take advantage of the help he has received, and meet the demand of the note; if he lets his house fall to ruin, and his field to waste, his promissory note will soon be valueless: but the existence of the note at all is a consequence of his not having worked so stoutly as the other. Let him gain as much as to be able to pay back the entire debt; the note is cancelled and we have two rich store-holders and no currency. Finally, though, as above stated, every man possessing money has usually also some property beyond what is necessary for his immediate wants, and men possessing property usually also hold currency beyond what is necessary for their immediate exchanges, it mainly determines the class to which they belong, whether in their eyes the money is an adjunct of the property, or the property of the money. In the first case, the holder's pleasure is in his possessions, and in his money subordinately, as the means of bettering or adding to them. In the second, his pleasure is in his money, and in his possessions only as representing it. In the first case, the money is as an atmosphere surrounding the wealth, rising from it and raining back upon it; but in the second, it is a deluge, with the wealth floating, and for the most part perishing in it. The shortest distinction between the men is that the one wishes always to buy and the other to sell. Such being the great relations of the classes, their several characters are of the highest importance to the nation; for on the character of the store-holders depends the preservation, display, and serviceableness of its wealth;--on that of the currency-holders its nature, and in great part its distribution; and on both its production. The store-holders are either constructive, or neutral, or destructive; and in subsequent papers we shall, with respect to every kind of wealth, examine the relative power of the store-holder for its improvement or destruction; and we shall then find it to be of incomparably greater importance to the nation in whose hands the thing is put, than how much of it is got; and that the character of the holders may be conjectured by the quality of the store, for such and such a thing; nor only asks for it, but if to be bettered, betters it: so that possession and possessor reciprocally act on each other through the entire sum of national possession. The base nation asking for base things sinks daily to deeper vileness of nature and of use; while the noble nation, asking for noble things, rises daily into diviner eminence in both; the tendency to degradation being surely marked by [Greek: ataxia], carelessness as to the hands in which things are put, competition for the acquisition of them, disorderliness in accumulation, inaccuracy in reckoning, and bluntness in conception as to the entire nature of possession. Now, the currency-holders always increase in number and influence in proportion to the bluntness of nature and clumsiness of the store-holders; for the less use people can make of things the more they tire of them, and want to change them for something else, and all frequency of change increases the quantity and power of currency; while the large currency-holder himself is essentially a person who never has been able to make up his mind as to what he will have, and proceeds, therefore, in vague collection and aggregation, with more and more infuriate passion, urged by complacency in progress, and pride in conquest. While, however, there is this obscurity in the nature of possession of currency, there is a charm in the absoluteness of it, which is to some people very enticing. In the enjoyment of real property others must partly share. The groom has some enjoyment of the stud, and the gardener of the garden; but the money is, or seems shut up; it is wholly enviable. No one else can have part in any complacencies arising from it. The power of arithmetical comparison is also a great thing to unimaginative people. They know always they are so much better than they were, in money; so much better than others, in money; wit cannot be so compared, nor character. My neighbour cannot be convinced I am wiser than he is, but he can that I am worth so much more; and the universality of the conviction is no less flattering than its clearness. Only a few can understand, none measure, superiorities in other things; but everybody can understand money, and count it. Now, these various temptations to accumulation would be politically harmless, if what was vainly accumulated had any fair chance of being wisely spent. For as accumulation cannot go on for ever, but must some day end in its reverse--if this reverse were indeed a beneficial distribution and use, as irrigation from reservoir, the fever of gathering, though perilous to the gatherer, might be serviceable to the community. But it constantly happens (so constantly, that it may be stated as a political law having few exceptions), that what is unreasonably gathered is also unreasonably spent by the persons into whose hands it finally falls. Very frequently it is spent in war, or else in stupefying luxury, twice hurtful, both in being indulged by the rich and witnessed by the poor. So that the _mal tener_ and _mal dare_ are as correlative as complementary colours; and the circulation of wealth, which ought to be soft, steady, strong, far-sweeping, and full of warmth, like the Gulf Stream, being narrowed into an eddy, and concentrated on a point, changes into the alternate suction and surrender of Charybdis. Which is, indeed, I doubt not, the true meaning of that marvellous fable, "infinite," as Bacon said of it, "in matter of meditation."[96] [96] It is a strange habit of wise humanity to speak in enigmas only, so that the highest truths and usefullest laws must be hunted for through whole picture-galleries of dreams, which to the vulgar seem dreams only. Thus Homer, the Greek tragedians, Plato, Dante, Chaucer, Shakespeare, and Goethe, have hidden all that is chiefly serviceable in their work, and in all the various literature they absorbed and re-embodied, under types which have rendered it quite useless to the multitude. What is worse, the two primal declarers of moral discovery, Homer and Plato, are partly at issue; for Plato's logical power quenched his imagination, and he became incapable of understanding the purely imaginative element either in poetry or painting; he therefore somewhat overrates the pure discipline of passionate art in song and music, and misses that of meditative art. There is, however, a deeper reason for his distrust of Homer. His love of justice, and reverently religious nature made him dread as death, every form of fallacy; but chiefly, fallacy respecting the world to come (his own myths being only symbolic exponents of a rational hope). We shall perhaps now every day discover more clearly how right Plato was in this, and feel ourselves more and more wonderstruck that men such as Homer and Dante (and, in an inferior sphere, Milton), not to speak of the great sculptors and painters of every age, have permitted themselves, though full of all nobleness and wisdom, to coin idle imaginations of the mysteries of eternity, and mould the faiths of the families of the earth by the courses of their own vague and visionary arts: while the indisputable truths respecting human life and duty, respecting which they all have but one voice, lie hidden behind these veils of phantasy, unsought and often unsuspected. I will gather carefully, out of Dante and Homer, what of this kind bears on our subject, in its due place; the first broad intention of their symbols may be sketched at once. The rewards of a worthy use of riches, subordinate to other ends, are shown by Dante in the fifth and sixth orbs of Paradise; for the punishment of their unworthy use, three places are assigned; one for the avaricious and prodigal whose souls are lost ("Hell": Canto 7); one for the avaricious and prodigal whose souls are capable of purification ("Purgatory": Canto 19); and one for the usurers, of whom none can be redeemed ("Hell": Canto 17). The first group, the largest in all hell (gente piu che altrove troppa), meet in contrary currents, as the waves of Charybdis, casting weights at each other from opposite sides. This weariness of contention is the chief element of their torture; so marked by the beautiful lines, beginning, Or puoi, figliuol, etc. (but the usurers, who made their money inactively, sit on the sand, equally without rest, however, "Di qua, di la soccorrien," etc.). For it is not avarice but contention for riches, leading to this double misuse of them, which, in Dante's sight, is the unredeemable sin. The place of its punishment is guarded by Plutus, "the great enemy," and "la fièra crudele," a spirit quite different from the Greek Plutus, who, though old and blind, is not cruel, and is curable, so as to become far-sighted ([Greek: hou typhlos all' oxy blepôn]--Plato's epithets in first book of the Laws). Still more does this Dantesque type differ from the resplendent Plutus of Goethe in the second part of "Faust," who is the personified power of wealth for good or evil; not the passion for wealth; and again from the Plutus of Spenser, who is the passion of mere aggregation. Dante's Plutus is specially and definitely the spirit of Contention and Competition, or Evil Commerce; and because, as I showed in my last paper, this kind of commerce "makes all men strangers," his speech is unintelligible, and no single soul of all those ruined by him has recognizable features. (La sconescente vita-- Ad ogni conoscenza or li fa bruni). On the other hand, the redeemable sins of avarice and prodigality are, in Dante's sight, those which are without deliberate or calculated operation. The lust, or lavishness, of riches can be purged, so long as there has been no servile consistency of dispute and competition for them. The sin is spoken of as that of degradation by the love of earth; it is purified by deeper humiliation--the souls crawl on their bellies; their chant, "my soul cleaveth unto the dust." But the spirits here condemned are all recognizable, and even the worst examples of the thirst for gold, which they are compelled to tell the histories of during the night, are of men swept by the passion of avarice into violent crime, but not sold to its steady work. The precept given to each of these spirits for its deliverance is--Turn thine eyes to the lucre (lure) which the Eternal King rolls with the mighty wheels: otherwise, the wheels of the "Greater Fortune," of which the constellation is ascending when Dante's dream begins. Compare George Herbert,-- "Lift up thy head; Take stars for money; stars, not to be told By any art, yet to be purchased." And Plato's notable sentence in the third book of "Polity":--"Tell them they have divine gold and silver in their souls for ever; that they need no money stamped of men--neither may they otherwise than impiously mingle the gathering of the divine with the mortal treasure, for through that which the law of the multitude has coined, endless crimes have been done and suffered; but in theirs is neither pollution nor sorrow." At the entrance of this place of punishment an evil spirit is seen by Dante, quite other than the "Gran Nemico." The great enemy is obeyed knowingly and willingly; but this spirit--feminine--and called a Siren--is the "Deceitfulness of riches," [Greek: apatê ploutou] of the gospels, winning obedience by guile. This is the Idol of Riches, made doubly phantasmal by Dante's seeing her in a dream. She is lovely to look upon, and enchants by her sweet singing, but her womb is loathsome. Now, Dante does not call her one of the Sirens carelessly, any more than he speaks of Charybdis carelessly, and though he had only got at the meaning of the Homeric fable through Virgil's obscure tradition of it, the clue he has given us is quite enough. Bacon's interpretation, "the Sirens, or pleasures," which has become universal since his time, is opposed alike to Plato's meaning and Homer's. The Sirens are not pleasures, but Desires: in the Odyssey they are the phantoms of vain desire; but in Plato's vision of Destiny, phantoms of constant Desire; singing each a different note on the circles of the distaff of Necessity, but forming one harmony, to which the three great Fates put words. Dante, however, adopted the Homeric conception of them, which was that they were demons of the Imagination, not carnal (desire of the eyes; not lust of the flesh); therefore said to be daughters of the Muses. Yet not of the muses, heavenly or historical, but of the muse of pleasure; and they are at first winged, because even vain hope excites and helps when first formed; but afterwards, contending for the possession of the imagination with the muses themselves, they are deprived of their wings, and thus we are to distinguish the Siren power from the Power of Circe, who is no daughter of the muses, but of the strong elements, Sun and Sea; her power is that of frank and full vital pleasure, which, if governed and watched, nourishes men; but, unwatched, and having no "moly," bitterness or delay mixed with it, turns men into beasts, but does not slay them, leaves them, on the contrary, power of revival. She is herself indeed an Enchantress;--pure Animal life; transforming--or degrading--but always wonderful (she puts the stores on board the ship invisibly, and is gone again, like a ghost); even the wild beasts rejoice and are softened around her cave; to men, she gives no rich feast, nothing but pure and right nourishment,--Pramnian wine, cheese and flour; that is corn, milk, and wine, the three great sustainers of life--it is their own fault if these make swine of them; and swine are chosen merely as the type of consumption; as Plato's [Greek: huôn polis] in the second book of the "Polity," and perhaps chosen by Homer with a deeper knowledge of the likeness of nourishment, and internal form of body. "Et quel est, s'il vous plaît, cet audacieux animal qui se permet d'être bâti au dedans comme une jolie petite fille?" "Hélas! chère enfant, j'ai honte de le nommer, et il ne foudra pas m'en vouloir. C'est ... c'est le cochon. Ce n'est pas précisément flatteur pour vous; mais nous en sommes tous là, et si cela vous contrarie par trop, il faut aller vous plaindre au bon Dieu qui a voulu que les choses fussent arrangées ainsï: seulement le cochon, qui ne pense qu' à manger, a l'estomac bien plus vaste que nous, et c'est toujours une consolation." ("Histoire d'une Bouchée de Pain," Lettre ix.) But the deadly Sirens are all things opposed to the Circean power. They promise pleasure, but never give it. They nourish in no wise; but slay by slow death. And whereas they corrupt the heart and the head, instead of merely betraying the senses, there is no recovery from their power; they do not tear nor snatch, like Scylla, but the men who have listened to them are poisoned, and waste away. Note that the Sirens' field is covered, not merely with the bones, but with the skins of those who have been consumed there. They address themselves, in the part of the song which Homer gives, not to the passions of Ulysses, but to his vanity, and the only man who ever came within hearing of them, and escaped untempted, was Orpheus, who silenced the vain imaginations by singing the praises of the gods. It is, then, one of these Sirens whom Dante takes as the phantasm or deceitfulness of riches; but note further, that she says it was her song that deceived Ulysses. Look back to Dante's account of Ulysses' death, and we find it was not the love of money, but pride of knowledge, that betrayed him; whence we get the clue to Dante's complete meaning: that the souls whose love of wealth is pardonable have been first deceived into pursuit of it by a dream of its higher uses, or by ambition. His Siren is therefore the Philotimé of Spenser, daughter of Mammon-- "Whom all that folk with such contention Do flock about, my deare, my daughter is-- Honour and dignitie from her alone Derived are." By comparing Spenser's entire account of this Philotimé with Dante's of the Wealth-Siren, we shall get at the full meaning of both poets; but that of Homer lies hidden much more deeply. For his Sirens are indefinite, and they are desires of any evil thing; power of wealth is not specially indicated by him, until, escaping the harmonious danger of imagination, Ulysses has to choose between two practical ways of life, indicated by the two rocks of Scylla and Charybdis. The monsters that haunt them are quite distinct from the rocks themselves, which, having many other subordinate significations, are in the main Labour and Idleness, or getting and spending; each with its attendant monster, or betraying demon. The rock of gaining has its summit in the clouds, invisible and not to be climbed; that of spending is low, but marked by the cursed fig-tree, which has leaves but no fruit. We know the type elsewhere; and there is a curious lateral allusion to it by Dante when Jacopo di Sant' Andrea, who had ruined himself by profusion and committed suicide, scatters the leaves of the bush of Lotto degli Agli, endeavouring to hide himself among them. We shall hereafter examine the type completely; here I will only give an approximate rendering of Homer's words, which have been obscured more by translation than even by tradition-- "They are overhanging rocks. The great waves of blue water break round them; and the blessed Gods call them the Wanderers. "By one of them no winged thing can pass--not even the wild doves that bring ambrosia to their father Jove--but the smooth rock seizes its sacrifice of them." (Not even ambrosia to be had without Labour. The word is peculiar--as a part of anything offered for sacrifice; especially used of heave-offering.) "It reaches the wide heaven with its top, and a dark-blue cloud rests on it, and never passes; neither does the clear sky hold it in summer nor in harvest. Nor can any man climb it--not if he had twenty feet and hands, for it is smooth as though it were hewn. "And in the midst of it is a cave which is turned the way of hell. And therein dwells Scylla, whining for prey: her cry, indeed, is no louder than that of a newly-born whelp: but she herself is an awful thing--nor can any creature see her face and be glad; no, though it were a god that rose against her. For she has twelve feet, all fore-feet, and six necks, and terrible heads on them; and each has three rows of teeth, full of black death. "But the opposite rock is lower than this, though but a bow-shot distant; and upon it there is a great fig-tree, full of leaves; and under it the terrible Charybdis sucks it down, and thrice casts it up again; be not thou there when she sucks down, for Neptune himself could not save thee." The reader will find the meaning of these types gradually elicited as we proceed. This disease of desire having especial relation to the great art of Exchange, or Commerce, we must, in order to complete our code of first principles, shortly state the nature and limits of that art. As the currency conveys right of choice out of many things in exchange for one, so Commerce is the agency by which the power of choice is obtained; and countries producing only timber can obtain for their timber silk and gold; or, naturally producing only jewels and frankincense, can obtain for them cattle and corn. In this function commerce is of more importance to a country in proportion to the limitations of its products and the restlessness of its fancy;--generally of greater importance towards Northern latitudes. Commerce is necessary, however, not only to exchange local products, but local skill. Labour requiring the agency of fire can only be given abundantly in cold countries; labour requiring suppleness of body and sensitiveness of touch only in warm ones; labour involving accurate vivacity of thought only in temperate ones; while peculiar imaginative actions are produced by extremes of heat and cold, and of light and darkness. The production of great art is limited to climates warm enough to admit of repose in the open air, and cool enough to render such repose delightful. Minor variations in modes of skill distinguish every locality. The labour which at any place is easiest, is in that place cheapest; and it becomes often desirable that products raised in one country should be wrought in another. Hence have arisen discussions on "International values," which will be one day remembered as highly curious exercises of the human mind. For it will be discovered, in due course of tide and time, that international value is regulated just as inter-provincial or inter-parishional value is. Coals and hops are exchanged between Northumberland and Kent on absolutely the same principles as iron and wine between Lancashire and Spain. The greater breadth of an arm of the sea increases the cost, but does not modify the principle of exchange; and a bargain written in two languages will have no other economical results than a bargain written in one. The distances of nations are measured not by seas, but by ignorances; and their divisions determined, not by dialects, but by enmities. Of course, a system of international values may always be constructed if we assume a relation of moral law to physical geography; as, for instance, that it is right to cheat across a river, though not across a road; or across a lake, though not across a river; or over a mountain, though not across a lake, etc.:--again, a system of such values may be constructed by assuming similar relations of taxation to physical geography; as, for instance, that an article should be taxed in crossing a river, but not in crossing a road; or in being carried over a mountain, but not over a ferry, etc.: such positions are indeed not easily maintained when once put in logical form; but one law of international value is maintainable in any form; namely, that the farther your neighbour lives from you, and the less he understands you, the more you are bound to be true in your dealings with him; because your power over him is greater in proportion to his ignorance, and his remedy more difficult in proportion to his distance. I have just said the breadth of sea increases the cost of exchange. Exchange or commerce, as such, is always costly; the sum of the value of the goods being diminished by the cost of their conveyance, and by the maintenance of the persons employed in it. So that it is only when there is advantage to both producers (in getting the one thing for the other), greater than the loss in conveyance, that the exchange is expedient. And it is only justly conducted when the porters kept by the producers (commonly called merchants) look only for pay, and not for profit. For in just commerce there are but three parties--the two persons or societies exchanging and the agent or agents of exchange: the value of the things to be exchanged is known by both the exchangers, and each receives equivalent value, neither gaining nor losing (for whatever one gains the other loses). The intermediate agent is paid an equal and known percentage by both, partly for labour in conveyance, partly for care, knowledge, and risk; every attempt at concealment of the amount of the pay indicates either effort on the part of the agent to obtain exorbitant percentage, or effort on the part of the exchangers to refuse him a just one. But for the most part it is the first, namely, the effort on the part of the merchant to obtain larger profit (so called) by buying cheap and selling dear. Some part, indeed, of this larger gain is deserved, and might be openly demanded, because it is the reward of the merchant's knowledge, and foresight of probable necessity; but the greater part of such gain is unjust; and unjust in this most fatal way, that it depends first on keeping the exchangers ignorant of the exchange value of the articles, and secondly, on taking advantage of the buyer's need and the seller's poverty. It is, therefore, one of the essential, and quite the most fatal, forms of usury; for usury means merely taking an exorbitant sum for the use of anything, and it is no matter whether the exorbitance is on loan or exchange, in rent or in price--the essence of the usury being that it is obtained by advantage of opportunity or necessity, and not as due reward for labour. All the great thinkers, therefore, have held it to be unnatural and impious, in so far as it feeds on the distress of others, or their folly.[97] Nevertheless attempts to repress it by law (in other words, to regulate prices by law so far as their variations depend on iniquity, and not on nature) must for ever be ineffective; though Plato, Bacon, and the First Napoleon--all three of them men who knew somewhat more of humanity than the "British merchant" usually does--tried their hands at it, and have left some (probably) good moderative forms of law, which we will examine in their place. But the only final check upon it must be radical purifying of the national character, for being, as Bacon calls it, "concessum propter duritiem cordis," it is to be done away with by touching the heart only; not, however, without medicinal law--as in the case of the other permission, "propter duritiem." But in this, more than in anything (though much in all, and though in this he would not himself allow of their application, for his own laws against usury are sharp enough), Plato's words are true in the fourth book of the "Polity," that neither drugs, nor charms, nor burnings, will touch a deep-lying political sore, any more than a deep bodily one; but only right and utter change of constitution; and that "they do but lose their labour who think that by any tricks of law they can get the better of these mischiefs of intercourse, and see not that they hew at a Hydra." [97] Hence Dante's companionship of Cahors, Inf., canto xi., supported by the view taken of the matter throughout the middle ages, in common with the Greeks. And indeed this Hydra seems so unslayable, and sin sticks so fast between the joinings of the stones of buying and selling, that "to trade" in things, or literally "cross-give" them, has warped itself, by the instinct of nations, into their worst word for fraud; for, because in trade there cannot but be trust, and it seems also that there cannot but also be injury in answer to it, what is merely fraud between enemies becomes treachery among friends: and "trader," "traditor," and "traitor" are but the same word. For which simplicity of language there is more reason than at first appears; for as in true commerce there is no "profit," so in true commerce there is no "sale." The idea of sale is that of an interchange between enemies respectively endeavouring to get the better of one another; but commerce is an exchange between friends; and there is no desire but that it should be just, any more than there would be between members of the same family. The moment there is a bargain over the pottage, the family relation is dissolved;--typically "the days of mourning for my father are at hand." Whereupon follows the resolve "then will I slay my brother." This inhumanity of mercenary commerce is the more notable because it is a fulfilment of the law that the corruption of the best is the worst. For as, taking the body natural for symbol of the body politic, the governing and forming powers may be likened to the brain and the labouring to the limbs, the mercantile, presiding over circulation and communication of things in changed utilities is symbolized by the heart; which, if it harden, all is lost. And this is the ultimate lesson which the leader of English intellect meant for us (a lesson, indeed, not all his own, but part of the old wisdom of humanity), in the tale of the "Merchant of Venice"; in which the true and incorrupt merchant,--kind and free, beyond every other Shakespearian conception of men,--is opposed to the corrupted merchant, or usurer; the lesson being deepened by the expression of the strange hatred which the corrupted merchant bears to the pure one, mixed with intense scorn-- "This is the fool that lent out money gratis; look to him, jailor," (as to lunatic no less than criminal); the enmity, observe, having its symbolism literally carried out by being aimed straight at the heart, and finally foiled by a literal appeal to the great moral law that flesh and blood cannot be weighed, enforced by "Portia" ("Portion"), the type of divine Fortune,[98] found, not in gold, nor in silver, but in lead, that is to say, in endurance and patience, not in splendour; and finally taught by her lips also, declaring, instead of the law and quality of "merces," the greater law and quality of mercy, which is not strained, but drops as the rain, blessing him that gives and him that takes. And observe that this "mercy" is not the mean "Misericordia," but the mighty "Gratia," answered by Gratitude (observe Shylock's leaning on the, to him detestable, word gratis, and compare the relation of Grace to Equity given in the second chapter of the second book of the "Memorabilia"); that is to say, it is the gracious or loving, instead of the strained, or competing manner, of doing things, answered, not only with "merces" or pay, but with "merci," or thanks. And this is indeed the meaning of the great benediction, "Grace, mercy, and peace," for there can be no peace without grace (not even by help of rifled cannon),[99] nor even without triplicity of graciousness, for the Greeks, who began with but one Grace, had to open their scheme into three before they had done. [98] Shakespeare would certainly never have chosen this name had he been forced to retain the Roman spelling. Like Perdita, "lost lady," or "Cordelia," "heart-lady," Portia is "fortune-lady." The two great relative groups of words, Fortune, fero, and fors--Portio, porto, and pars (with the lateral branch, op-portune, im-portune, opportunity, etc.), are of deep and intrinsic significance; their various senses of bringing, abstracting, and sustaining, being all centralized by the wheel (which bears and moves at once), or still better, the ball (spera) of Fortune,--"Volve sua spera, e beata si gode:" the motive power of this wheel distinguishing its goddess from the fixed majesty of Necessitas with her iron nails; or [Greek: anankê], with her pillar of fire and iridescent orbits, fixed at the centre. Portus and porta, and gate in its connexion with gain, form another interesting branch group; and Mors, the concentration of delaying, is always to be remembered with Fors, the concentration of bringing and bearing, passing on into Fortis and Fortitude. [99] Out of whose mouths, indeed, no peace was ever promulgated, but only equipoise of panic, highly tremulous on the edge in changes in the wind. With the usual tendency of long-repeated thought to take the surface for the deep, we have conceived their goddesses as if they only gave loveliness to gesture; whereas their true function is to give graciousness to deed, the other loveliness arising naturally out of that. In which function Charis becomes Charitas[100] and has a name and praise even greater than that of Faith or truth, for these may be maintained sullenly and proudly; but Charis[101] is in her countenance always gladdening (Aglaia), and in her service instant and humble; and the true wife of Vulcan, or Labour. And it is not until her sincerity of function is lost, and her mere beauty contemplated, instead of her patience, that she is born again of the foam flake, and becomes Aphrodité; then only capable of joining herself to War and to the enmities of men, instead of to Labour and their services. Therefore the fable of Mars and Venus is, chosen by Homer, picturing himself as Demodocus, to sing at the games in the Court of Alcinous. Phæacia is the Homeric island of Atlantis; an image of noble and wise government, concealed, how slightly! merely by the change of a short vowel for a long one in the name of its queen; yet misunderstood by all later writers, even by Horace in his "pinguis, Phæaxque," etc. That fable expresses the perpetual error of men, thinking that grace and dignity can only be reached by the soldier, and never by the artizan; so that commerce and the useful arts have had the honour and beauty taken away, and only the Fraud[102] and Pain left to them, with the lucre. Which is, indeed, one great reason of the continual blundering about the offices of government with respect to commerce. The higher classes are ashamed to deal with it; and though ready enough to fight for (or occasionally against) the people,--to preach to them,--or judge them, will not break bread for them; the refined upper servant who has willingly looked after the burnishing of the armoury and ordering of the library, not liking to set foot into the larder. [100] The reader must not think that any care can be misspent in tracing the connexion and power of the words which we have to use in the sequel. Not only does all soundness of reasoning depend on the work thus done in the outset, but we may sometimes gain more by insistence on the expression of a truth, than by much wordless thinking about it; for to strive to express it clearly is often to detect it thoroughly; and education, even as regards thought, nearly sums itself in making men economise their words, and understand them. Nor is it possible to estimate the harm that has been done, in matters of higher speculation and conduct, by loose verbiage, though we may guess at it by observing the dislike which people show to having anything about their religion said to them in simple words, because then they understand it. Thus congregations meet weekly to invoke the influence of a Spirit of Life and Truth; yet if any part of that character were intelligibly expressed to them by the formulas of the service, they would be offended. Suppose, for instance, in the closing benediction, the clergyman were to give its vital significance to the word "Holy," and were to say, "the Fellowship of the Helpful and Honest Ghost be with you, and remain with you always," what would be the horror of many, first, at the irreverence of so intelligible an expression, and, secondly, at the discomfortable entry of the suspicion that (while throughout the commercial dealings of the week they had denied the propriety of Help, and possibility of Honesty) the Person whose company they had been asking to be blessed with could have no fellowship with knaves. [101] As Charis becomes Charitas [see next page], the word "Cher," or "Dear," passes from Shylock's sense of it (to buy cheap and sell dear) into Antonio's sense of it: emphasized with the final i in tender "Cheri," and hushed to English calmness in our noble "Cherish." [102] While I have traced the finer and higher laws of this matter for those whom they concern, I have also to note the material law--vulgarly expressed in the proverb, "Honesty is the best policy." That proverb is indeed wholly inapplicable to matters of private interest. It is not true that honesty, as far as material gain is concerned, profits individuals. A clever and cruel knave will, in a mixed society, always be richer than an honest person can be. But Honesty is the best "policy," if policy means practice of State. For fraud gains nothing in a State. It only enables the knaves in it to live at the expense of honest people; while there is for every act of fraud, however small, a loss of wealth to the community. Whatever the fraudulent person gains, some other person loses, as fraud produces nothing; and there is, besides, the loss of the time and thought spent in accomplishing the fraud; and of the strength otherwise obtainable by mutual help (not to speak of the fevers of anxiety and jealousy in the blood, which are a heavy physical loss, as I will show in due time). Practically, when the nation is deeply corrupt, cheat answers to cheat, every one is in turn imposed upon, and there is to the body politic the dead loss of ingenuity, together with the incalculable mischief of the injury to each defrauded person, producing collateral effect unexpectedly. My neighbour sells me bad meat: I sell him in return flawed iron. We neither of us get one atom of pecuniary advantage on the whole transaction, but we both suffer unexpected inconvenience;--my men get scurvy, and his cattle-truck runs off the rails. Farther still. As Charis becomes Charitas on the one side, she becomes--better still--Chara, Joy, on the other; or rather this is her very mother's milk and the beauty of her childhood; for God brings no enduring Love, nor any other good, out of pain, nor out of contention; but out of joy and harmony.[103] And in this sense, human and divine, music and gladness, and the measures of both, come into her name; and Cher becomes full-vowelled Cheer, and Cheerful; and Chara, companioned, opens into Choir and Choral. [103] "[Greek: ta men houn alla zôa ouk echein aisthêsin tôn en tais kinêsesi taxeôn oude ataxiôn, hoi dê rhuthmos onoma kai harmonia hêmin de ous eipomen tous theous] [Apollo, the Muses, and Bacchus--the grave Bacchus, that is---ruling the choir of age; or Bacchus restraining; 'sæva _tene_, cum Berecyntio cornu, tympana,' etc.] [Greek: sunchoreutas dedosthai, toutous einai kai tous dedôkotas tên enruthmon te kai henarmonion aisthêsin meth' êdonês ... chorous te ônomakenai para tês charas emphyton unoma.]"--"Laws," book ii. And lastly. As Grace passes into Freedom of action, Charis becomes Eleutheria, or liberality; a form of liberty quite curiously and intensely different from the thing usually understood by "Liberty" in modern language; indeed, much more like what some people would call slavery; for a Greek always understood, primarily, by liberty, deliverance from the law of his own passions (or from what the Christian writers call bondage of corruption), and this a complete liberty: not having to resist the passion, but making it fawn upon, and follow him--(this may be again partly the meaning of the fawning beasts about the Circean cave; so, again, George Herbert-- Correct thy passion's spite; Then may the beasts draw thee to happy light)-- not being merely safe from the Siren, but also unbound from the mast. And it is only in such generosity that any man becomes capable of so governing others as to take true part in any system of national economy. Nor is there any other eternal distinction between the upper and lower classes than this form of liberty, Eleutheria, or benignity, in the one, and its opposite of slavery, Douleia, or malignity, in the other; the separation of these two orders of men, and the firm government of the lower by the higher, being the first conditions of possible wealth and economy in any state,--the Gods giving it no greater gift than the power to discern its freemen, and "malignum spernere vulgus." The examination of this form of Charis must, therefore, lead us into the discussion of the principles of government in general, and especially of that of the poor by the rich, discovering how the Graciousness joined with the Greatness, or Love with Majestas, is the true Dei Gratia, or Divine Right, of every form and manner of King; _i.e._, specifically, of the thrones, dominations, princedoms, virtues, and powers of the earth;--of the thrones, stable, or "ruling," literally right-doing powers ("rex eris, recte si facies:") of the dominations, lordly, edifying, dominant, and harmonious powers; chiefly domestic, over the "built thing," domus, or house; and inherently twofold, Dominus and Domina; Lord and Lady: of the Princedoms, pre-eminent, incipient, creative, and demonstrative powers; thus poetic and mercantile, in the "princeps carmen deduxisse" and the merchant-prince: of the Virtues or Courages; militant, guiding, or Ducal powers; and finally of the Strengths and Forces pure; magistral powers, of the more over the less, and the forceful and free over the weak and servile elements of life. Subject enough for the next paper involving "economical" principles of some importance, of which, for theme, here is a sentence, which I do not care to translate, for it would sound harsh in English, though, truly, it is one of the tenderest ever uttered by man; which may be meditated over, or rather through, in the meanwhile, by any one who will take the pains:-- [Greek: Arh oun, hôsper hippos tô anepistêmoni men encheirounti de chrêsthai zêmia estin, houtô kai adelphos hotan tis autô mê epistamenos encheirê chrêsthai, zêmia esti?] IV. LAWS AND GOVERNMENTS: LABOUR AND RICHES. It remains, in order to complete the series of our definitions, that we examine the general conditions of government, and fix the sense in which we are to use, in future, the terms applied to them. The government of a state consists in its customs, laws, and councils, and their enforcements. I.--CUSTOMS. As one person primarily differs from another by fineness of nature, and secondarily, by fineness of training, so also, a polite nation differs from a savage one, first by the refinement of its nature, and secondly by the delicacy of its customs. In the completeness, or accomplishment of custom, which is the nation's self-government, there are three stages--first, fineness in method of doing or of being;--called the manner or moral of acts: secondly, firmness in holding such method after adoption, so that it shall become a habit in the character: _i.e._, a constant "having" or "behaving"; and, lastly, practice, or ethical power in performance and endurance, which is the skill following on habit, and the ease reached by frequency of right doing. The sensibility of the nation is indicated by the fineness of its customs; its courage, patience, and temperance by its persistence in them. By sensibility I mean its natural perception of beauty, fitness, and rightness; or of what is lovely, decent, and just: faculties dependent much on race, and the primal signs of fine breeding in man; but cultivable also by education, and necessary perishing without it. True education has, indeed, no other function than the development of these faculties, and of the relative will. It has been the great error of modern intelligence to mistake science for education. You do not educate a man by telling him what he knew not, but by making him what he was not. And making him what he will remain for ever: for no wash of weeds will bring back the faded purple. And in that dyeing there are two processes--first, the cleansing and wringing out, which is the baptism with water; and then the infusing of the blue and scarlet colours, gentleness and justice, which is the baptism with fire. The customs and manners of a sensitive and highly-trained race are always vital: that is to say, they are orderly manifestations of intense life (like the habitual action of the fingers of a musician). The customs and manners of a vile and rude race, on the contrary, are conditions of decay: they are not, properly speaking, habits, but incrustations; not restraints, or forms, of life; but gangrenes;--noisome, and the beginnings of death. And generally, so far as custom attaches itself to indolence instead of action, and to prejudice instead of perception, it takes this deadly character, so that thus "Custom hangs upon us with a weight Heavy as frost, and deep almost as life." This power and depth are, however, just what give value to custom, when it works with life, instead of against it. The high ethical training, of a nation being threefold, of body, heart, and practice (compare the statement in the preface to "Unto This Last"), involves exquisiteness in all its perceptions of circumstance,--all its occupations of thought. It implies perfect Grace, Pitifulness, and Peace; it is irreconcilably inconsistent with filthy or mechanical employments,--with the desire of money,--and with mental states of anxiety, jealousy, and indifference to pain. The present insensibility of the upper classes of Europe to the aspects of suffering, uncleanness, and crime, binds them not only into one responsibility with the sin, but into one dishonour with the foulness, which rot at their thresholds. The crimes daily recorded in the police courts of London and Paris (and much more those which are unrecorded) are a disgrace to the whole body politic;[104] they are, as in the body natural, stains of disease on a face of delicate skin, making the delicacy itself frightful. Similarly, the filth and poverty permitted or ignored in the midst of us are as dishonourable to the whole social body, as in the body natural it is to wash the face, but leave the hands and feet foul. Christ's way is the only true one: begin at the feet; the face will take care of itself. Yet, since necessarily, in the frame of a nation, nothing but the head can be of gold, and the feet, for the work they have to do, must be part of iron, part of clay;--foul or mechanical work is always reduced by a noble race to the minimum in quantity; and, even then, performed and endured, not without sense of degradation, as a fine temper is wounded by the sight of the lower offices of the body. The highest conditions of human society reached hitherto, have cast such work to slaves;--supposing slavery of a politically defined kind to be done away with, mechanical and foul employment must in all highly-organized states take the aspect either of punishment or probation. All criminals should at once be set to the most dangerous and painful forms of it, especially to work in mines and at furnaces,[105] so as to relieve the innocent population as far as possible: of merely rough (not mechanical) manual labour, especially agricultural, a large portion should be done by the upper classes;--bodily health, and sufficient contrast and repose for the mental functions, being unattainable without it; what necessarily inferior labour remains to be done, as especially in manufactures, should, and always will, when the relations of society are reverent and harmonious, fall to the lot of those who, for the time, are fit for nothing better. For as, whatever the perfectness of the educational system, there must remain infinite differences between the natures and capacities of men; and these differing natures are generally rangeable under the two qualities of lordly (or tending towards rule, construction, and harmony) and servile (or tending towards misrule, destruction, and discord); and, since the lordly part is only in a state of profitableness while ruling, and the servile only in a state of redeemableness while serving, the whole health of the state depends on the manifest separation of these two elements of its mind: for, if the servile part be not separated and rendered visible in service, it mixes with and corrupts the entire body of the state; and if the lordly part be not distinguished, and set to rule, it is crushed and lost, being turned to no account, so that the rarest qualities of the nation are all given to it in vain.[106] The effecting of which distinction is the first object, as we shall see presently, of national councils. [104] "The ordinary brute, who flourishes in the very centre of ornate life, tells us of unknown depths on the verge of which we totter, being bound to thank our stars every day we live that there is not a general outbreak and a revolt from the yoke of civilization."--_Times_ leader, Dec. 25th, 1862. Admitting that our stars are to be thanked for our safety, whom are we to thank for the danger? [105] Our politicians, even the best of them, regard only the distress caused by the failure of mechanical labour. The degradation caused by its excess is a far more serious subject of thought, and of future fear. I shall examine this part of our subject at length hereafter. There can hardly be any doubt, at present, cast on the truth of the above passages, as all the great thinkers are unanimous on the matter. Plato's words are terrific in their scorn and pity whenever he touches on the mechanical arts. He calls the men employed in them not even human,--but partially and diminutively human, "[Greek: anthrôpiskoi]," and opposes such work to noble occupations, not merely as prison is opposed to freedom, but as a convict's dishonoured prison is to the temple (escape from them being like that of a criminal to the sanctuary), and the destruction caused by them being of soul no less than body.--Rep., vi. 9. Compare "Laws," v. 11. Xenophon dwells on the evil of occupations at the furnace (root of [Greek: banausos]), and especially their "[Greek: ascholia], want of leisure"--Econ. i. 4. (Modern England, with all its pride of education, has lost that first sense of the word "school," and till it recover that it will find no other rightly.) His word for the harm to the soul is to "break" it, as we say of the heart.--Econ. i. 6. And herein also is the root of the scorn, otherwise apparently most strange and cruel, with which Homer, Dante, and Shakespeare always speak of the populace; for it is entirely true that in great states the lower orders are low by nature as well as by task, being precisely that part of the commonwealth which has been thrust down for its coarseness or unworthiness (by coarseness I mean especially insensibility and irreverence; the "profane" of Horace); and when this ceases to be so, and the corruption and the profanity are in the higher instead of the lower orders, there arises, first, helpless confusion; then, if the lower classes deserve power, ensues swift revolution, and they get it: but if neither the populace nor their rulers deserve it, there follows mere darkness and dissolution, till, out of the putrid elements, some new capacity of order rises, like grass on a grave; if not, there is no more hope, nor shadow of turning, for that nation. Atropos has her way with it. So that the law of national health is like that of a great lake or sea, in perfect but slow circulation, letting the dregs fall continually to the lowest place, and the clear water rise; yet so as that there shall be no neglect of the lower orders, but perfect supervision and sympathy, so that if one member suffer, all members shall suffer with it. [106] "[Greek: oligês, kai allôs gignomenês.]" The bitter sentence never was so true as at this day. II.--LAWS. These are the definitions and bonds of custom, or, of what the nation desires should become custom. Law is either archic[107] (of direction), meristic (of division), or critic (of judgment). Archic law is that of appointment and precept: it defines what is and is not to be done. Meristic law is that of balance and distribution: it defines what is and is not to be possessed. Critic law is that of discernment and award: it defines what is and is not to be suffered. [107] Thetic, or Thesmic, would perhaps be a better term than Archic; but liable to be confused with some which we shall want relating to Theoria. The administrators of the three great divisions of law are severally Archons, Merists, and Dicasts. The Archons are the true princes, or beginners of things; or leaders (as of an orchestra); the Merists are properly the Domini, or Lords (law-words) of houses and nations; the Dicasts properly the judges, and that with Olympian justice, which reaches to heaven and hell. The violation of archic law is [Greek: hamartia] (error) [Greek: ponêria] (failure), [Greek: plêmmeleia] (discord). The violation of meristic law is [Greek: anomia] (iniquity). The violation of critic law is [Greek: adikia] (injury). Iniquity is central generic term; for all law is _fatal_; it is the division to men of their fate; as the fold of their pasture, it is [Greek: nomos]; as the assigning of their portion, [Greek: moira]. If we choose to class the laws of precept and distribution under the general head of "statutes," all law is simply either of statute or judgment; that is, first, the establishment of ordinance, and, secondly, the assignment of the reward or penalty due to its observance or violation. To some extent these two forms of law must be associated, and, with every ordinance, the penalty of disobedience to it be also determined. But since the degrees and guilt of disobedience vary, the determination of due reward and punishment must be modified by discernment of special fact, which is peculiarly the office of the judge, as distinguished from that of the lawgiver and lawsustainer, or king; not but that the two offices are always theoretically and, in early stages, or limited numbers, of society, are often practically, united in the same person or persons. Also, it is necessary to keep clearly in view the distinction between these two kinds of law, because the possible range of law is wider in proportion to their separation. There are many points of conduct respecting which the nation may wisely express its will by a written precept or resolve; yet not enforce it by penalty; and the expedient degree of penalty is always quite a separate consideration from the expedience of the statute, for the statute may often be better enforced by mercy than severity, and is also easier in bearing, and less likely to be abrogated. Farther, laws of precept have reference especially to youth, and concern themselves with training; but laws of judgment to manhood, and concern themselves with remedy and reward. There is a highly curious feeling in the English mind against educational law; we think no man's liberty should be interfered with till he has done irrevocable wrong; whereas it is then just too late for the only gracious and kingly interference, which is to hinder him from doing it. Make your educational laws strict, and your criminal ones may be gentle; but, leave youth its liberty, and you will have to dig dungeons for age. And it is good for a man that he wear the yoke in his youth; for the yoke of youth, if you know how to hold it, may be of silken thread; and there is sweet chime of silver bells at that bridle rein; but, for the captivity of age, you must forge the iron fetter, and cast the passing bell. Since no law can be in a final or true sense established, but by right (all unjust laws involving the ultimate necessity of their own abrogation), the law-sustaining power in so far as it is Royal, or "right doing";--in so far, that is, as it rules, not mis-rules, and orders, not dis-orders, the things submitted to it. Throned on this rock of justice, the kingly power becomes established and establishing, "[Greek: theios]," or divine, and, therefore, it is literally true that no ruler can err, so long as he is a ruler, or [Greek: archôn oudeis hamartanei tote hotan archôn ê] (perverted by careless thought, which has cost the world somewhat, into "the king can do no wrong"). Which is a divine right of kings indeed, and quite unassailable, so long as the terms of it are "God and my Right," and not "Satan and my Wrong," which is apt, in some coinages, to appear on the reverse of the die, under a good lens. Meristic law, or that of tenure of property, first determines what every individual possesses by right, and secures it to him; and what he possesses by wrong, and deprives him of it. But it has a far higher provisory function: it determines what every man should possess, and puts it within his reach on due conditions; and what he should not possess, and puts this out of his reach conclusively. Every article of human wealth has certain conditions attached to its merited possession, which, when they are unobserved, possession becomes rapine. The object of meristic law is not only to secure every man his rightful share (the share, that is, which he has worked for, produced, or received by gift from a rightful owner), but to enforce the due conditions of possession, as far as law may conveniently reach; for instance, that land shall not be wantonly allowed to run to waste, that streams shall not be poisoned by the persons through whose properties they pass, nor air be rendered unwholesome beyond given limits. Laws of this kind exist already in rudimentary degree, but needing large development; the just laws respecting the possession of works of art have not hitherto been so much as conceived, and the daily loss of national wealth, and of its use, in this respect, is quite incalculable.[108] While, finally, in certain conditions of a nation's progress, laws limiting accumulation of property may be found expedient. [108] These laws need revision quite as much respecting property in national as in private hands. For instance: the public are under a vague impression, that because they have paid for the contents of the British Museum, every one has an equal right to see and to handle them. But the public have similarly paid for the contents of Woolwich Arsenal; yet do not expect free access to it, or handling of its contents. The British Museum is neither a free circulating library, nor a free school; it is a place for the safe preservation, and exhibition on due occasion, of unique books, unique objects of natural history, and unique works of art; its books can no more be used by everybody than its coins can be handled, or its statues cast. Free libraries there ought to be in every quarter of London, with large and complete reading-rooms attached; so also free educational institutions should be open in every quarter of London, all day long and till late at night, well lighted, well catalogued, and rich in contents both of art and natural history. But neither the British Museum nor National Gallery are schools; they are treasuries; and both should be severely restricted in access and in use. Unless some order is taken, and that soon, in the MSS. department of the Museum (Sir Frederic Madden was complaining of this to me only the other day), the best MSS. in the collection will be destroyed, irretrievably, by the careless and continual handling to which they are now subjected. Critic law determines questions of injury, and assigns due rewards and punishments to conduct.[109] [109] Two curious economical questions arise laterally with respect to this branch of law, namely, the cost of crime and the cost of judgment. The cost of crime is endured by nations ignorantly, not being clearly stated in their budgets; the cost of judgment patiently (provided only it can be had pure for the money), because the science, or perhaps we ought rather to say the art, of law, is felt to found a noble profession, and discipline; so that civilized nations are usually glad that a number of persons should be supported by funds devoted to disputation and analysis. But it has not yet been calculated what the practical value might have been, in other directions, of the intelligence now occupied in deciding, through courses of years, what might have been decided as justly, had the date of judgment been fixed, in as many hours. Imagine one half of the funds which any great nation devotes to dispute by law, applied to the determination of physical questions in medicine, agriculture, and theoretic science; and calculate the probable results within the next ten years. I say nothing yet, of the more deadly, more lamentable loss, involved in the use of purchased instead of personal justice,--[Greek: epaktô par' allôn--aporia' oikeiôn]. Therefore, in order to true analysis of it, we must understand the real meaning of this word "injury." We commonly understand by it any kind of harm done by one man to another; but we do not define the idea of harm; sometimes we limit it to the harm which the sufferer is conscious of, whereas much the worst injuries are those he is unconscious of; and, at other times, we limit the idea to violence, or restraint, whereas much the worse forms of injury are to be accomplished by carelessness, and the withdrawal of restraint. "Injury" is, then, simply the refusal, or violation of any man's right or claim upon his fellows: which claim, much talked of in modern times, under the term "right," is mainly resolvable into two branches: a man's claim not to be hindered from doing what he should; and his claim to be hindered from doing what he should not; these two forms of hindrance being intensified by reward, or help and fortune, or Fors on one side, and punishment, impediment, and even final arrest, or Mors, on the other. Now, in order to a man's obtaining these two rights, it is clearly needful that the worth of him should be approximately known; as well as the want of worth, which has, unhappily, been usually the principal subject of study for critic law, careful hitherto only to mark degrees of de-merit, instead of merit;--assigning, indeed, to the deficiencies (not always, alas! even to these) just fine, diminution, or (with the broad vowels) damnation; but to the efficiencies, on the other side, which are by much the more interesting, as well as the only profitable part of its subject, assigning in any clear way neither measurement nor aid. Now, it is in this higher and perfect function of critic law, enabling as well as disabling, that it becomes truly kingly or basilican, instead of Draconic (what Providence gave the great, old, wrathful legislator his name?); that is, it becomes the law of man and of life, instead of the law of the worm and of death--both of these laws being set in everlasting poise one against another, and the enforcement of both being the eternal function of the lawgiver, and true claim of every living soul: such claim being indeed as straight and earnest to be mercifully hindered, and even, if need be, abolished, when longer existence means only deeper destruction, as to be mercifully helped and recreated when longer existence and new creation mean nobler life. So that what we vulgarly term reward and punishment will be found to resolve themselves mainly into help and hindrance, and these again will issue naturally from true recognition of deserving, and the just reverence and just wrath which follow instinctively on such recognition. I say "follow," but in reality they are the recognition. Reverence is but the perceiving of the thing in its entire truth: truth reverted is truth revered (vereor and veritas having clearly the same root), so that Goethe is for once, and for a wonder, wrong in that part of the noble scheme of education in "Wilhelm Meister," in which he says that reverence is not innate, and must be taught. Reverence is as instinctive as anger;--both of them instant on true vision: it is sight and understanding that we have to teach, and these are reverence. Make a man perceive worth, and in its reflection he sees his own relative unworth, and worships thereupon inevitably, not with stiff courtesy, but rejoicingly, passionately, and, best of all, restfully: for the inner capacity of awe and love is infinite in man; and when his eyes are once opened to the sight of beauty and honour, it is with him as with a lover, who, falling at his mistress's feet, would cast himself through the earth, if it might be, to fall lower, and find a deeper and humbler place. And the common insolences and petulances of the people, and their talk of equality, are not irreverence in them in the least, but mere blindness, stupefaction, and fog in the brains,[110] which pass away in the degree that they are raised and purified: the first sign of which raising is, that they gain some power of discerning, and some patience in submitting to their true counsellors and governors; the modes of such discernment forming the real "constitution" of the state, and not the titles or offices of the discerned person; for it is no matter, save in degree of mischief, to what office a man is appointed, if he cannot fulfil it. And this brings us to the third division of our subject. [110] Compare Chaucer's "villany" (clownishness). "Full foul and chorlishe seemed she, And eke villanous for to be, And little coulde of norture To worship any creature." III.--GOVERNMENT BY COUNCIL. This is the determination, by living authority, of the national conduct to be observed under existing circumstances; and the modification or enlargement, abrogation or enforcement, of the code of national law according to present needs or purposes. This government is necessarily always by Council, for though the authority of it may be vested in one person, that person cannot form any opinion on a matter of public interest but by (voluntarily or involuntarily) submitting himself to the influence of others. This government is always twofold--visible and invisible. The visible government is that which nominally carries on the national business; determines its foreign relations, raises taxes, levies soldiers, fights battles, or directs that they be fought, and otherwise becomes the exponent of the national fortune. The invisible government is that exercised by all energetic and intelligent men, each in his sphere, regulating the inner will and secret ways of the people, essentially forming its character, and preparing its fate. Visible governments are the toys of some nations, the diseases of others, the harness of some, the burdens of the more, the necessity of all. Sometimes their career is quite distinct from that of the people, and to write it, as the national history, is as if one should number the accidents which befall a man's weapons and wardrobe, and call the list his biography. Nevertheless a truly noble and wise nation necessarily has a noble and wise visible government, for its wisdom issues in that conclusively. "Not out of the oak, nor out of the rock, but out of the temper of man, is his polity:" where the temper inclines, it inclines as Samson by his pillar, and draws all down with it. Visible governments are, in their agencies, capable of three pure forms, and of no more than three. They are either monarchies, where the authority is vested in one person; oligarchies, when it is vested in a minority; or democracies, when vested in a majority. But these three forms are not only, in practice, variously limited and combined, but capable of infinite difference in character and use, receiving specific names according to their variations; which names, being nowise agreed upon, nor consistently used, either in thought or writing, no man can at present tell, in speaking of any kind of government, whether he is understood, nor in hearing whether he understands. Thus we usually call a just government by one person a monarchy, and an unjust or cruel one, a tyranny; this might be reasonable if it had reference to the divinity of true government; but to limit the term "oligarchy" to government by a few rich people, and to call government by a few wise or noble people "aristocracies," is evidently absurd, unless it were proved that rich people never could be wise, or noble people rich; and farther absurd because there are other distinctions in character, as well as riches or wisdom (greater purity of race, or strength of purpose, for instance), which may give the power of government to the few. So that if we had to give names to every group or kind of minority, we should have verbiage enough. But there is one right name--"oligarchy." So also the terms "republic" and "democracy" are confused, especially in modern use; and both of them are liable to every sort of misconception. A republic means, properly, a polity in which the state, with its all, is at every man's service, and every man, with his all, at the state's service (people are apt to lose sight of the last condition); but its government may nevertheless be oligarchic (consular, or decemviral, for instance), or monarchic (dictatorial). But a democracy means a state in which the government rests directly with the majority of the citizens. And both these conditions have been judged only by such accidents and aspects of them as each of us has had experience of; and sometimes both have been confused with anarchy, as it is the fashion at present to talk of the "failure of republican institutions in America," when there has never yet been in America any such thing as an institution; neither any such thing as a res-publica, but only a multitudinous res-privata; every man for himself. It is not republicanism which fails now in America; it is your model science of political economy, brought to its perfect practice. There you may see competition, and the "law of demand and supply" (especially in paper), in beautiful and unhindered operation.[111] Lust of wealth, and trust in it; vulgar faith in magnitude and multitude, instead of nobleness; besides that faith natural to backwoodsmen,--"lucum ligna,"--perpetual self-contemplation, issuing in passionate vanity: total ignorance of the finer and higher arts, and of all that they teach and bestow;[112] and the discontent of energetic minds unoccupied, frantic with hope of uncomprehended change, and progress they know not whither;[113] these are the things that they have "failed" with in America; and yet not altogether failed--it is not collapse, but collision; the greatest railroad accident on record, with fire caught from the furnace, and Catiline's quenching "non aquá, sed ruinâ." But I see not, in any of our talk of them, justice enough done to their erratic strength of purpose, nor any estimate taken of the strength of endurance of domestic sorrow in what their women and children suppose a righteous cause. And out of that endurance and suffering, its own fruit will be born with time; and Carlyle's prophecy of them (June, 1850), as it has now come true in the first clause, will in the last. America too will find that caucuses, division-lists, stump-oratory and speeches to Buncombe will _not_ carry men to the immortal gods; that the Washington Congress, and constitutional battle of Kilkenny cats is, there as here, naught for such objects; quite incompetent for such; and, in fine, that said sublime constitutional arrangement will require to be (with terrible throes, and travail such as few expect yet) remodelled, abridged, extended, suppressed; torn asunder, put together again;--not without heroic labour, and effort quite other than that of the Stump-Orator and the Revival Preacher, one day! [111] "Supply-and-demand,--alas! For what noble work was there ever any audible 'demand' in that poor sense?" ("Past and Present"). Nay, the demand is not loud even for ignoble work. See "Average earnings of Betty Taylor," in _Times_, of 4th February, of this year [1863]: "Worked from Monday morning at 8 a.m., to Friday night at 5.30 p.m., for 1_s._ 5-1/2_d._"--Laissez faire. [112] See Bacon's note in the "Advancement of Learning," on "didicisse fideliter artes" (but indeed the accent had need be upon "fideliter"). "It taketh away vain admiration of anything, which is the root of all weakness: for all things are admired either because they are new, or because they are great," etc. [113] Ames, by report of Waldo Emerson, expressed the popular security wisely, saying, "that a monarchy is a merchantman, which sails well, but will sometimes strike on a rock, and go to the bottom; whilst a republic is a raft, which would never sink, but then your feet are always in the water." Yes, and when the four winds (your only pilots) steer competitively from the four corners, [Greek: hôs d' hot' opôrinos Boreês phoreêsin akanthas], perhaps the wiser mariner may wish for keel and wheel again. Understand, then, once for all, that no form of government, provided it be a government at all, is, as such, either to be condemned or praised, or contested for in anywise but by fools. But all forms of government are good just so far as they attain this one vital necessity of policy--that the wise and kind, few or many, shall govern the unwise and unkind; and they are evil so far as they miss of this or reverse it. Nor does the form in any case signify one whit, but its firmness and adaptation to the need; for if there be many foolish persons in a state, and few wise, then it is good that the few govern; and if there be many wise and few foolish, then it is good that many govern; and if many be wise, yet one wiser, then it is good that one should govern; and so on. Thus, we may have "the ants' republic, and the realm of bees," both good in their kind; one for groping, and the other for building; and nobler still, for flying, the Ducal monarchy of those "Intelligent of seasons, that set forth The aery caravan, high over seas." Nor need we want examples, among the inferior creatures, of dissoluteness, as well as resoluteness in, government. I once saw democracy finely illustrated by the beetles of North Switzerland, who, by universal suffrage, and elytric acclamation, one May twilight, carried it that they would fly over the Lake of Zug; and flew short, to the great disfigurement of the Lake of Zug--[Greek: Kantharou limên]--over some leagues square, and to the close of the Cockchafer democracy for that year. The old fable of the frogs and the stork finely touches one form of tyranny; but truth will touch it more nearly than fable, for tyranny is not complete when it is only over the idle, but when it is over the laborious and the blind. This description of pelicans and climbing perch which I find quoted in one of our popular natural histories, out of Sir Emerson Tennent's "Ceylon," comes as near as may be to the true image of the thing:-- Heavy rains came on, and as we stood on the high ground, we observed a pelican on the margin of the shallow pool gorging himself; our people went towards him, and raised a cry of "Fish! fish!" We hurried down, and found numbers of fish struggling upward through the grass, in the rills formed by the trickling of the rain. There was scarcely water to cover them, but nevertheless they made rapid progress up the bank, on which our followers collected about two baskets of them. They were forcing their way up the knoll, and had they not been interrupted, first by the pelican, and afterwards by ourselves, they would in a few minutes have gained the highest point, and descended on the other side into a pool which formed another portion of the tank. In going this distance, however, they must have used muscular exertion enough to have taken them half a mile on level ground; for at these places all the cattle and wild animals of the neighbourhood had latterly come to drink, so that the surface was everywhere indented with footmarks, in addition to the cracks in the surrounding baked mud, into which the fish tumbled in their progress. In those holes which were deep, and the sides perpendicular, they remained to die, and were carried off by kites and crows. But whether governments be bad or good, one general disadvantage seems to attach to them in modern times--that they are all costly. This, however, is not essentially the fault of the governments. If nations choose to play at war, they will always find their governments willing to lead the game, and soon coming under that term of Aristophanes, "[Greek: kapêloi aspidôn]," shield-sellers. And when ([Greek: pêm' epipêmati]) the shields take the form of iron ships, with apparatus "for defence against liquid fire"--as I see by latest accounts they are now arranging the decks in English dockyards,--they become costly biers enough for the grey convoy of chief-mourner waves, wreathed with funereal foam, to bear back the dead upon; the massy shoulders of those corpse-bearers being intended for quite other work, and to bear the living, if we would let them. Nor have we the least right to complain of our governments being expensive so long as we set the government to do precisely the work which brings no return. If our present doctrines of political economy be just, let us trust them to the utmost; take that war business out of the government's hands, and test therein the principles of supply and demand. Let our future sieges of Sebastopol be done by contract--no capture, no pay--(I am prepared to admit that things might go better so); and let us sell the commands of our prospective battles, with our vicarages, to the lowest bidder; so may we have cheap victories and divinity. On the other hand, if we have so much suspicion of our science that we dare not trust it on military or spiritual business, it would be but reasonable to try whether some authoritative handling may not prosper in matters utilitarian. If we were to set our governments to do useful things instead of mischievous, possibly even the apparatus might in time come to be less costly! The machine, applied to the building of the house, might perhaps pay, when it seems not to pay, applied to pulling it down. If we made in our dockyards ships to carry timber and coals, instead of cannon, and with provision for brightening of domestic solid culinary fire, instead of for the averting of hostile liquid fire, it might have some effect on the taxes? Or if the iron bottoms were to bring us home nothing better than ivory and peacocks, instead of martial glory, we might at least have gayer suppers, and doors of the right material for dreams after them. Or suppose that we tried the experiment on land instead of water carriage; already the government, not unapproved, carries letters and parcels for us; larger packages may in time follow:--parcels;--even general merchandise? Why not, at last, ourselves? Had the money spent in local mistakes and vain private litigation, on the railroads of England, been laid out, instead, under proper government restraint, on really useful railroad work, and had no absurd expense been incurred in ornamenting stations, we might already have had,--what ultimately will be found we must have,--quadruple rails, two for passengers, and two for traffic, on every great line; and we might have been carried in swift safety, and watched and warded by well-paid pointsmen, for half the present fares. "[Greek: hô Dêmidion, horas ta lagô' ha soi pherô]?" Suppose it should turn out, finally, that a true government set to true work, instead of being a costly engine, was a paying one? that your government, rightly organized, instead of itself subsisting by an income tax, would produce its subjects some subsistence in the shape of an income dividend!--police and judges duly paid besides, only with less work than the state at present provides for them. A true government set to true work!--Not easily imagined, still less obtained, but not beyond human hope or ingenuity. Only you will have to alter your election systems somewhat, first. Not by universal suffrage, nor by votes purchasable with beer, is such government to be had. That is to say, not by universal equal suffrage. Every man upwards of twenty, who had been convicted of no legal crime, should have his say in this matter; but afterwards a louder voice, as he grows older, and approves himself wiser. If he has one vote at twenty, he should have two at thirty, four at forty, and ten at fifty. For every one vote which he has with an income of a hundred a year, he should have ten with an income of a thousand (provided you first see to it that wealth is, as nature intended it to be, the reward of sagacity and industry,--not of good luck in a scramble or a lottery.) For every one vote which he had as subordinate in any business, he should have two when he became a master; and every office and authority nationally bestowed, inferring trustworthiness and intellect, should have its known proportional number of votes attached to it. But into the detail and working of a true system in these matters we cannot now enter; we are concerned as yet with definitions only, and statements of first principles, which will be established now sufficiently for our purposes when we have examined the nature of that form of government last on the list in the previous paper,--the purely "Magistral," exciting at present its full share of public notice, under its ambiguous title of "slavery." I have not, however, been able to ascertain in definite terms, from the declaimers against slavery, what they understand by it. If they mean only the imprisonment or compulsion being in many cases highly expedient, slavery, so defined, would be no evil in itself, but only in its abuse; that is, when men are slaves, who should not be, or masters, who should not be, or under conditions which should not be. It is not, for instance, a necessary condition of slavery, nor a desirable one, that parents should be separated from children, or husbands from wives; but the institution of war, against which people declaim with less violence, effects such separations--not unfrequently in a higher permanent manner. To press a sailor, seize a white youth by conscription for a soldier, or carry off a black one for a labourer, may all be right, or all wrong, according to needs and circumstances. It is wrong to scourge a man unnecessarily. So it is to shoot him. Both must be done on occasion; and it is better and kinder to flog a man to his work, than to leave him idle till he robs, and flog him afterwards. The essential thing for all creatures is to be made to do right; how they are made to do it--by pleasant promises, or hard necessities, pathetic oratory, or the whip, is comparatively immaterial. To be deceived is perhaps as incompatible with human dignity as to be whipped, and I suspect the last instrument to be not the worst, for the help of many individuals. The Jewish nation throve under it, in the hand of a monarch reputed not unwise; it is only the change of whip for scorpion which is expedient, and yet that change is as likely to come to pass on the side of licence as of law; for the true scorpion whips are those of the nation's pleasant vices, which are to it as St. John's locusts--crown on the head, ravin in the mouth, and sting in the tail. If it will not bear the rule of Athena and her brother, who shepherd without smiting ([Greek: ou plêgê nemontes]), Athena at last calls no more in the corners of the streets; and then follows the rule of Tisiphone, who smites without shepherding. If, however, slavery, instead of absolute compulsion, is meant the purchase, by money, of the right of compulsion, such purchase is necessarily made whenever a portion of any territory is transferred, for money, from one monarch to another: which has happened frequently enough in history, without its being supposed that the inhabitants of the districts so transferred became their slaves. In this, as in the former case, the dispute seems about the fashion of the thing rather than the fact of it. There are two rocks in mid-sea, on each of which, neglected equally by instructive and commercial powers, a handful of inhabitants live as they may. Two merchants bid for the two properties, but not in the same terms. One bids for the people, buys them, and sets them to work, under pain of scourge; the other bids for the rock, buys it, and throws the inhabitants into the sea. The former is the American, the latter the English method, of slavery; much is to be said for, and something against, both, which I hope to say in due time and place. If, however, slavery mean not merely the purchase of the right of compulsion, but the purchase of the body and soul of the creature itself for money, it is not, I think, among the black races that purchases of this kind are most extensively made, or that separate souls of a fine make fetch the highest price. This branch of the inquiry we shall have occasion also to follow out at some length; for in the worst instance of the "[Greek: Biôn prasis]" we are apt to get only Pyrrhon's answer--[Greek: ti phês?--epriamên se? Adêlon]. The fact is that slavery is not a political institution at all, but an inherent, natural, and eternal inheritance of a large portion of the human race--to whom the more you give of their own will, the more slaves they will make themselves. In common parlance, we idly confuse captivity with slavery, and are always thinking of the difference between pine-trunks and cowslip bells, or between carrying wood and clothes-stealing, instead of noting the far more serious differences between Ariel and Caliban, and the means by which practically that difference may be brought about.[114] [114] The passage of Plato, referred to in note p. 280, in its context, respecting the slave who, well dressed and washed, aspires to the hand of his master's daughter, corresponds curiously to the attack of Caliban on Prospero's cell, and there is an undercurrent of meaning throughout, in the "Tempest" as well as in the "Merchant of Venice"; referring in this case to government, as in that to commerce. Miranda ("the wonderful," so addressed first by Ferdinand, "Oh, you wonder!") corresponds to Homer's Arete: Ariel and Caliban are respectively the spirits of freedom and mechanical labour. Prospero ("for hope"), a true governor, opposed to Sycorax, the mother of slavery, her name, "Swine-raven," indicating at once brutality and deathfulness; hence the line--"As wicked dew as e'er my mother brushed, with raven's feather,"--etc. For all dreams of Shakespeare, as those of true and strong men must be, are "[Greek: phantasmata theia, kai skiai tôn ontôn]," phantasms of God, and shadows of things that are. We hardly tell our children, willingly, a fable with no purport in it; yet we think God sends His best messengers only to say fairy tales to us, all fondness and emptiness. The "Tempest" is just like a grotesque in a rich missal, "clasped where paynims pray." Ariel is the spirit of true liberty, in early stages of human society oppressed by ignorance and wild tyranny; venting groans as fast as mill-wheels strike; in shipwreck of states, fearful; so that "all but mariners plunge in the brine, and quit the vessel, then all afire with me," yet having in itself the will and sweetness of truest peace, whence that is especially called "Ariel's" song, "Come unto these yellow sands"--(fenceless, and countless--changing with the sweep of the sea--"vaga arena." Compare Horace's opposition of the sea-sand to the dust of the grave: "numero carentis"--"exigui;" and again compare "animo rotundum percurrisse" with "put a girdle round the earth")--"and then take hands: court'sied when you have, and kiss'd,--the wild waves whist:" (mind it is "courtesia," not "curtsey") and read "quiet" for "whist" if you want the full sense. Then may you indeed foot it featly, and sweet spirits bear the burden for you--with watch in the night, and call in early morning. The power of liberty in elemental transformation follows--"Full fathom five thy father lies, of his bones are coral made." Then, giving rest after labour, it "fetches dew from the still-vex'd Bermoothes, and, with a charm joined to their suffered labour, leaves men asleep." Snatching away the feast of the cruel, it seems to them as a harpy, followed by the utterly vile, who cannot see it in any shape, but to whom it is the picture of nobody, it still gives shrill harmony to their false and mocking catch, "Thought is free," but leads them into briars and foul places, and at last hollas the hounds upon them. Minister of fate against the great criminal, it joins itself with the "incensed seas and shores"--the sword that layeth at it cannot hold, and may, "with bemocked-at stabs as soon kill the still-closing waters, as diminish one dowle that's in my plume." As the guide and aid of true love, it is always called by Prospero "fine" (the French "fine"--not the English), or "delicate"--another long note would be needed to explain all the meaning in this word. Lastly, its work done, and war, it resolves itself to the elements. The intense significance of the last song, "Where the bee sucks," I will examine in its due place. The types of slavery in Caliban are more palpable, and need not be dwelt on now: though I will notice them also, severally, in their proper places;--the heart of his slavery is in his worship: "That's a brave god, and bears celestial liquor." But, in illustration of the sense in which the Latin "benignus" and "malignus," are to be coupled with Eleutheria and Douleia, not that Caliban's torment is always the physical reflection of his own nature--"cramps" and "side-stitches that shall pen thy breath up"--"thou shalt be pinched as thick as honeycomb:" the whole nature of slavery being one cramp and cretinous contraction. Fancy this of Ariel! You may fetter him, but yet set no mark on him; you may put him to hard work and far journey, but you cannot give him a cramp. Of Shakespeare's names I will afterwards speak at more length: they are curiously--often barbarously--mixed out of various traditions and languages. Three of the clearest in meaning have been already noticed. Desdemona, "[Greek: dysdaimonia]," "miserable fortune," is also plain enough. Othello is, I believe, "the careful"; all the calamity of the tragedy arising from the single flaw and error in his magnificently collected strength. Ophelia, "serviceableness," the true lost wife of Hamlet, is marked as having a Greek name by that last word of her, where her gentle preciousness is opposed to the uselessness of the churlish clergy--"A ministering angel shall my sister be when thou liest howling." Hamlet is, I believe, connected in some way with "homely," the entire event of the tragedy turning on betrayal of home duty. Hermione ([Greek: herma]), "pillar-like" ([Greek: hê eidos eche chrysês Aphroditês]). Titania ([Greek: titênê]), "the queen;" Benedict and Beatrice, "blessed and blessing;" Valentine and Proteus, enduring (or strong) (valens) and changeful. Iago and Iachimo have evidently the same root--probably the Spanish Iago, Jacob, "the supplanter." Leonatus, and other such names are interpreted, or played with, in the plays themselves. For the interpretation of Sycorax, and reference to her raven's feather, I am indebted to Mr. John R. Wise. I should dwell, even in these prefatory papers, at somewhat more length on this matter, had not all I would say, been said (already in vain) by Carlyle, in the first of the "Latter-Day Pamphlets," which I commend to the reader's gravest reading: together with that as much neglected, and still more immediately needed, on model prisons, and with the great chapter on "Permanence" (fifth of the last section of "Past and Present"), which sums, what is known, and foreshadows,--or rather fore-lights, all that is to be learned, of National Discipline. I have only here farther to examine the nature of one world-wide and everlasting form of slavery, wholesome in use, deadly in abuse--the service of the rich by the poor. As in all previous discussions of our subject, we must study this relation in its simplest elements in order to reach its first principles. The simplest state of it is, then, this:[115] a wise and provident person works much, consumes little, and lays by store; an improvident person works little, consumes all the produce, and lays by no store. Accident interrupts the daily work, or renders it less productive; the idle person must then starve, or be supported by the provident one,--who, having him thus at his mercy, may either refuse to maintain him altogether, or, which will evidently be more to his own interest, say to him, "I will maintain you, indeed, but you shall now work hard, instead of indolently, and instead of being allowed to lay by what you save, as you might have done, had you remained independent, I will take all the surplus. You would not lay it up yourself; it is wholly your own fault that has thrown you into my power, and I will force you to work, or starve; yet you shall have no profit, only your daily bread." This mode of treatment has now become so universal that it is supposed the only natural--nay, the only possible one; and the market wages are calmly defined by economists as "the sum which will maintain the labourer." [115] In the present general examination I concede so much to ordinary economists as to ignore all innocent poverty. I assume poverty to be always criminal; the conceivable exceptions we will examine afterwards. The power of the provident person to do this is only checked by the correlative power of some neighbour of similarly frugal habits, who says to the labourer--"I will give you a little more than my provident friend:--come and work for me." The power of the provident over the improvident depends thus primarily on their relative numbers; secondarily, on the modes of agreement of the adverse parties with each other. The level of wages is a variable function of the number of provident and idle persons in the world, of the enmity between them as classes, and of the agreement between those of the same class. It depends, from beginning to end, on moral conditions. Supposing the rich to be entirely selfish, it is always for their interest that the poor should be as numerous as they can employ and restrain. For, granting the entire population no larger than the ground can easily maintain,--that the classes are stringently divided,--and that there is sense or strength of hand enough with the rich to secure obedience; then, if nine-tenths of a nation are poor, the remaining tenth have the service of nine persons each;[116] but, if eight-tenths are poor, only of four each; if seven-tenths are poor, of two and a third each; but, practically if the rich strive always to obtain more power over the poor, instead of to raise them,--and if, on the other hand, the poor become continually more vicious and numerous, through neglect and oppression--though the range of the power of the rich increases, its tenure becomes less secure; until, at last, the measure of iniquity being full, revolution, civil war, or the subjection of the state to a healthier or stronger one, closes the moral corruption and industrial disease. [116] I say nothing yet of the quality of the servants, which, nevertheless, is the gist of the business. Will you have Paul Veronese to paint your ceiling, or the plumber from over the way? Both will work for the same money; Paul, if anything, a little cheaper of the two, if you keep him in good humour; only you have to discern him first, which will need eyes. It is rare, however, that things come to this extremity. Kind persons among the rich, and wise among the poor, modify the connexion of the classes: the efforts made to raise and relieve on the one side, and the success and honest toil on the other, bind and blend the orders of society into the confused tissue of half-felt obligation, sullenly-rendered obedience, and variously-directed, or mis-directed, toil, which form the warp of daily life. But this great law rules all the wild design of the weaving; that success (while society is guided by laws of competition) signifies always so much victory over your neighbour as to obtain the direction of his work, and to take the profits of it. This is the real source of all great riches. No man can become largely rich by his personal toil.[117] The work of his own hands, wisely directed, will indeed always maintain himself and his family, and make fitting provision for his age. But it is only by the discovery of some method of taxing the labour of others that he can become opulent. Every increase of his capital enables him to extend this taxation more widely; that is, to invest larger funds in the maintenance of his labourers--to direct, accordingly, vaster and yet vaster masses of labour; and to appropriate its profits. There is much confusion of idea on the subject of this appropriation. It is, of course, the interest of the employer to disguise it from the persons employed; and for his own comfort and complacency he often desires no less to disguise it from himself. And it is matter of much doubt with me, how far the foolish arguments used habitually on this subject are indeed the honest expressions of foolish convictions,--or rather (as I am sometimes forced to conclude from the irritation with which they are advanced) are resolutely dishonest, wilful sophisms, arranged so as to mask to the last moment the real state of economy, and future duties of men. By taking a simple example, and working it thoroughly out, the subject may be rescued from all but determined misconception. [117] By his heart he may; but only when its produce, or the sight or hearing of it, becomes a subject of dispute, so as to enable the artist to tax the labour of multitudes highly, in exchange for his own. Let us imagine a society of peasants, living on a river-shore, exposed to destructive inundation at somewhat extended intervals; and that each peasant possesses of this good, but imperilled ground, more than he needs to cultivate for immediate subsistence. We will assume farther (and with too great probability of justice) that the greater part of them indolently keep in tillage just as much land as supplies them with daily food;--that they leave their children idle and untaught; and take no precautions against the rise of the stream. But one of them (we will say only one, for the sake of greater clearness) cultivates carefully all the ground of his estate; makes his children work hard and healthily; uses his spare time and theirs in building a rampart against the river; and at the end of some years has in his storehouses large reserves of food and clothing, and in his stables a well-tended breed of cattle. The torrent rises at last--sweeps away the harvests and many of the cottages of the careless peasantry, and leaves them destitute. They naturally come for help to the provident one, whose fields are unwasted and whose granaries are full. He has the right to refuse it them; no one disputes his right. But he will probably not refuse it; it is not his interest to do so, even were he entirely selfish and cruel. The only question with him will be on what terms his aid is to be granted. Clearly not on terms of mere charity. To maintain his neighbours in idleness would be his ruin and theirs. He will require work from them in exchange for their maintenance; and whether in kindness or cruelty, all the work they can give. Not now the three or four hours they were wont to spend on their own land, but the eight or ten hours they ought to have spent. But how will he apply this labour? The men are now his slaves--nothing less. On pain of starvation, he can force them to work in the manner and to the end he chooses. And it is by his wisdom in this choice that the worthiness of his mastership is proved, or its unworthiness. Evidently he must first set them to bank out the water in some temporary way, and to get their ground cleansed and resown; else, in any case, their continued maintenance will be impossible. That done, and while he has still to feed them, suppose he makes them raise a secure rampart for their own ground against all future flood, and rebuild their houses in safer places, with the best material they can find; being allowed time out of their working hours to fetch such material from a distance. And for the food and clothing advanced, he takes security in land that as much shall be returned at a convenient period. At the end of a few years, we may conceive this security redeemed, and the debt paid. The prudent peasant has sustained no loss; but is no richer than he was, and has had all his trouble for nothing. But he has enriched his neighbours materially; bettered their houses, secured their land, and rendered them, in worldly matters, equal to himself. In all true and final sense, he has been throughout their lord and king. We will next trace his probable line of conduct, presuming his object to be exclusively the increase of his own fortune. After roughly recovering and cleansing the ground, he allows the ruined peasantry only to build huts upon it, such as he thinks protective enough from the weather to keep them in working health. The rest of their time he occupies first in pulling down and rebuilding on a magnificent scale his own house, and in adding large dependencies to it. This done, he follows the example of the first great Hebrew financier, and in exchange for his continued supply of corn, buys as much of his neighbours! land, as he thinks he can superintend the management of; and makes the former owners securely embank and protect the ceded portion. By this arrangement he leaves to a certain number of the peasantry only as much ground as will just maintain them in their existing numbers: as the population increases, he takes the extra hands, who cannot be maintained on the narrow estates, for his own servants; employs some to cultivate the ground he has bought, giving them of its produce merely enough for subsistence; with the surplus, which, under his energetic and careful superintendence, will be large, he supports a train of servants for state, and a body of workmen, whom he educates in ornamental arts. He now can splendidly decorate his house, lay out its grounds magnificently, and richly supply his table, and that of his household and retinue. And thus, without any abuse of right, we should find established all the phenomena of poverty and riches, which (it is supposed necessarily) accompany modern civilization. In one part of the district, we should have unhealthy land, miserable dwellings and half-starved poor; in another, a well-ordered estate, well-fed servants, and refined conditions of highly-educated and luxurious life. I have put the two cases in simplicity, and to some extremity. But though in more complex and qualified operation, all the relations of society are but the expansion of these two typical sequences of conduct and result. I do not say, observe, that the first procedure is entirely right; still less, that the second is wholly wrong. Servants and artists, and splendour of habitation and retinue, have all their use, propriety and office. I only wish the reader to understand clearly what they cost; that the condition of having them is the subjection to you of a certain number of imprudent or unfortunate persons (or, it may be, more fortunate than their master), over whose destinies you exercise a boundless control. "Riches" mean eternally and essentially this; and may heaven send at last a time when those words of our best-reputed economist shall be true, and we shall indeed "all know what it is to be rich;" that is to be slave-master over farthest earth, and over all ways and thoughts of men. Every operative you employ is your true servant: distant or near, subject to your immediate orders, or ministering to your widely-communicated caprice--for the pay he stipulates, or the price he tempts,--all are alike under this great dominion of the gold. The milliner who makes the dress is as much a servant (more so, in that she uses more intelligence in the service) as the maid who puts it on; the carpenter who smoothes the door, as the footman who opens it; the tradesmen who supply the table, as the labourers and sailors who supply the tradesmen. Why speak of these lower services? Painters and singers (whether of note or rhyme), jesters and story-tellers, moralists, historians, priests--so far as these, in any degree, paint, or sing, or tell their tale, or charm their charm, or "perform" their rite, for pay, in so far they are all slaves; abject utterly, if the service be for pay only; abject less and less in proportion to the degrees of love and wisdom which enter into their duty, or can enter into it, according as their function is to do the bidding and the work of a man;--or to amuse, tempt, and deceive a child. There may be thus, and, to a certain extent, there always is, a government of the rich by the poor, as of the poor by the rich; but the latter is the prevailing and necessary one, and it consists, observe, of two distinct functions,--the collection of the profits of labour from those who would have misused them, and the administration of those profits for the service either of the same person in future, or of others; or, as is more frequently the case in modern times, for the service of the collector himself. The examination of these various modes of collection and use of riches will form the third branch of our future inquiries; but the key to the whole subject lies in the clear understanding of the difference between selfish and unselfish expenditure. It is not easy, by any course of reasoning, to enforce this on the generally unwilling hearer; yet the definition of unselfish expenditure is brief and simple. It is expenditure which if you are a capitalist, does not pay you, but pays somebody else; and if you are a consumer, does not please you, but pleases somebody else. Take one special instance, in further illustration of the general type given above. I did not invent that type, but spoke of a real river, and of real peasantry, the languid and sickly race which inhabits, or haunts--for they are often more like spectres than living men--the thorny desolation on the banks of the Arve. Some years ago, a society formed at Geneva offered to embank the river, for the ground which would have been recovered by the operation; but the offer was refused by the (then Sardinian) government. The capitalists saw that this expenditure would have "paid," if the ground saved from the river was to be theirs. But if when the offer that had this aspect of profit was refused, they had nevertheless persisted in the plan and, merely taking security for the return of their outlay, lent the funds for the work, and thus saved a whole race of human souls from perishing in a pestiferous fen (as, I presume, some among them would, at personal risk, have dragged any one drowning creature out of the current of the stream, and not expected payment therefor), such expenditure would have precisely corresponded to the use of his power made, in the first instance, by our supposed richest peasant--it would have been the king's, of grace, instead of the usurer's, for gain. "Impossible, absurd, Utopian!" exclaim nine-tenths of the few readers whom these words may find. No, good reader, this is not Utopian: but I will tell you what would have seemed, if we had not seen it, Utopian on the side of evil instead of good: that ever men should have come to value their money so much more than their lives, that if you call upon them to become soldiers, and take chance of bullet, for their pride's sake, they will do it gaily, without thinking twice; but if you ask them for their country's sake to spend a hundred pounds without security of getting back a hundred-and-five[118] they will laugh in your face. [118] I have not hitherto touched on the subject of interest of money; it is too complex; and must be reserved for its proper place in the body of the work. (I should be glad if a writer, who sent me some valuable notes on this subject, and asked me to return a letter which I still keep at his service, would send me his address.) The definition of interest (apart from compensation for risk) is, "the exponent of the comfort of accomplished labour, separated from its power;" the power being what is lent: and the French economists who have maintained the entire illegality of interest are wrong; yet by no means so curiously or wildly wrong as the English and French ones opposed to them, whose opinions have been collected by Dr. Whewell at page 41 of his Lectures; it never seeming to occur to the mind of the compiler any more than to the writers whom he quotes, that it is quite possible, and even (according to Jewish proverb) prudent, for men to hoard, as ants and mice do, for use, not usury; and lay by something for winter nights, in the expectation of rather sharing than lending the scrapings. My Savoyard squirrels would pass a pleasant time of it under the snow-laden pine-branches, if they always declined to economize because no one would pay them interest on nuts. Not but that also this game of life-giving-and-taking is, in the end, somewhat more costly than other forms of play might be. Rifle practice is, indeed, a not unhealthy pastime, and a feather on the top of the head is a pleasing appendage; but while learning the stops and fingering of the sweet instrument, does no one ever calculate the cost of an overture? What melody does Tityrus meditate on his tenderly spiral pipe? The leaden seed of it, broad cast, true conical "Dents de Lion" seed--needing leas allowance for the wind than is usual with that kind of herb--what crop are you likely to have of it? Suppose, instead of this volunteer marching and countermarching, you were to do a little volunteer ploughing and counterploughing? It is more difficult to do it straight: the dust of the earth, so disturbed, is more grateful than for merely rhythmic footsteps. Golden cups, also, given for good ploughing would be more suitable in colour (ruby glass, for the wine which "giveth his colour" on the ground, as well as in the cup, might be fitter for the rifle prize in the ladies' hands); or, conceive a little volunteer exercise with the spade, other than such as is needed for moat and breastwork, or even for the burial of the fruit of the leaden avena-seed, subject to the shrill Lemures' criticism-- "Wer hat das Haus so schlecht gebaut?" If you were to embank Lincolnshire now,--more stoutly against the sea? or strip the peat of Solway, or plant Plinlimmon moors with larch--then, in due hour of year, some amateur reaping and threshing? "Nay, we reap and thresh by steam in these advanced days." I know it, my wise and economical friends. The stout arms God gave you to win your bread by, you would fain shoot your neighbours--and God's sweet singers--with;[119] then you invoke the friends to your farm-service, and-- "When young and old come forth to play On a sulphurous holiday, Tell how the darling goblin sweat (His feast of cinders duly set), And belching night, where breathed the morn. His shadowy flail hath threshed the corn That ten day-labourers could not end." But we will press the example closer. On a green knoll above that plain of the Arve, between Cluses and Bonneville, there was, in the year 1860, a cottage, inhabited by a well-doing family--man and wife, three children, and the grandmother. I call it a cottage but, in truth, it was a large chimney on the ground, wide at the bottom (so that the family might live round the fire), with one broken window in it, and an unclosing door. The family, I say, was "well-doing," at least, it was hopeful and cheerful; the wife healthy, the children, for Savoyards, pretty and active, but the husband threatened with decline, from exposure under the cliffs of the Mont Vergi by day, and to draughts between every plank of his chimney in the frosty nights. "Why could he not plaster the chinks?" asks the practical reader. For the same reason that your child cannot wash its face and hands till you have washed them many a day for it, and will not wash them when it can, till you force it. [119] Compare Chaucer's feeling respecting birds (from Canace's falcon, to the nightingale, singing "Domine labia "--to the Lord of Love) with the usual modern British sentiments on this subject. Or even Cowley's:-- "What prince's choir of music can excel That which within this shade does dwell. To which we nothing pay, or give, They, like all other poets, live Without reward, or thanks for their obliging pains! 'Tis well if they became not prey." Yes; it is better than well; particularly since the seed sown by the wayside has been protected by the peculiar appropriation of part of the church rates in our country parishes. See the remonstrance from a "Country Parson," in the _Times_ of June 4th (or 5th; the letter is dated June 3rd, 1862):--"I have heard at a vestry meeting a good deal of higgling over a few shillings' outlay in cleaning the church; but I have never heard any dissatisfaction expressed on account of the part of the rate which is invested in fifty or 100 dozens of birds' heads." I passed this cottage often in my walks, had its window and door mended, sometimes mended also a little the meal of sour bread and broth, and generally got kind greeting and smile from the face of young or old; which greeting, this year, narrowed itself into the half-recognizing stare of the elder child and the old woman's tears; for the father and mother were both dead,--one of sickness, the other of sorrow. It happened that I passed not alone, but with a companion, a practised English joiner, who, while these people were dying of cold, had been employed from six in the morning to six of the evening for two months, in fitting the panels without nails, of a single door in a large house in London. Three days of his work taken, at the right time, from the oak panels, and applied to the larch timbers, would have saved these Savoyards' lives. He would have been maintained equally (I suppose him equally paid for his work by the owner of the greater house, only the work not consumed selfishly on his own walls;) and the two peasants, and eventually, probably their children, saved. There are, therefore, let me finally enforce and leave with the reader this broad conclusion,--three things to be considered in employing any poor person. It is not enough to give him employment. You must employ him first to produce useful things; secondly, of the several (suppose equally useful) things he can equally well produce, you must set him to make that which will cause him to lead the healthiest life; lastly, of the things produced, it remains a question of wisdom and conscience how much you are to take yourself, and how much to leave to others. A large quantity, remember, unless you destroy it, must always be so left at one time or another; the only questions you have to decide are, not what you will give, and what you will keep, but when, and how, and to whom, you will give. The natural law of human life is, of course, that in youth a man shall labour and lay by store for his old age, and when age comes, should use what he has laid by, gradually slackening his toil, and allowing himself more frank use of his store, taking care always to leave himself as much as will surely suffice for him beyond any possible length of life. What he has gained, or by tranquil and unanxious toil, continues to gain, more than is enough for his own need, he ought so to administer, while he yet lives, as to see the good of it again beginning in other hands; for thus he has himself the greatest sum of pleasure from it, and faithfully uses his sagacity in its control. Whereas most men, it appears, dislike the sight of their fortunes going out into service again, and say to themselves,--"I can indeed nowise prevent this money from falling at last into the hands of others, nor hinder the good of it, such as it is, from becoming theirs, not mine; but at least let a merciful death save me from being a witness of their satisfaction; and may God so far be gracious to me as to let no good come of any of this money of mine before my eyes." Supposing this feeling unconquerable, the safest way of rationally indulging it would be for the capitalist at once to spend all his fortune on himself, which might actually, in many cases, be quite the rightest as well as the pleasantest thing to do, if he had just tastes and worthy passions. But, whether for himself only, or through the hands and for the sake of others also, the law of wise life is, that the maker of the money should also be the spender of it, and spend it, approximately, all, before he dies; so that his true ambition as an economist should be, to die, not as rich, but as poor, as possible, calculating the ebb tide of possession in true and calm proportion to the ebb tide of life. Which law, checking the wing of accumulative desire in the mid-volley,[120] and leading to peace of possession and fulness of fruition in old age, is also wholesome in that by the freedom of gift, together with present help and counsel, it at once endears and dignifies age in the sight of youth, which then no longer strips the bodies of the dead, but receives the grace of the living. Its chief use would (or will be, for men are indeed capable of attaining to this much use for their reason), that some temperance and measure will be put to the acquisitiveness of commerce.[121] For as things stand, a man holds it his duty to be temperate in his food, and of his body, but for no duty to be temperate in his riches, and of his mind. He sees that he ought not to waste his youth and his flesh for luxury; but he will waste his age, and his soul, for money, and think it no wrong, nor the delirium tremens of the intellect any evil. But the law of life is, that a man should fix the sum he desires to make annually, as the food he desires to eat daily; and stay when he has reached the limit, refusing increase of business, and leaving it to others, so obtaining due freedom of time for better thoughts. How the gluttony of business is punished, a bill of health for the principals of the richest city houses, issued annually, would show in a sufficiently impressive manner. [120] [Greek: kai penian hêgoumenous heinai mê to tên ousian elattô poiein, alla to tên aplêstian pleiô.]--"Laws," v. 8. Read the context and compare. "He who spends for all that is noble, and gains by nothing but what is just, will hardly be notably wealthy, or distressfully poor."--"Laws," v. 42. [121] The fury of modern trade arises chiefly out of the possibility of making sudden fortune by largeness of transaction, and accident of discovery or contrivance. I have no doubt that the final interest of every nation is to check the action of these commercial lotteries. But speculation absolute, unconnected with commercial effort, is an unmitigated evil in a state, and the root of countless evils beside. I know, of course, that these statements will be received by the modern merchant, as an active Border rider of the sixteenth century would have heard of its being proper for men of the Marches to get their living by the spade instead of the spur. But my business is only to state veracities and necessities; I neither look for the acceptance of the one, nor promise anything for the nearness of the other. Near or distant, the day will assuredly come when the merchants of a state shall be its true "ministers of exchange," its porters, in the double sense of carriers and gate-keepers, bringing all lands into frank and faithful communication, and knowing for their master of guild, Hermes the herald, instead of Mercury the gain-guarder. And now, finally, for immediate rule to whom it concerns. The distress of any population means that they need food, houseroom, clothes, and fuel. You can never, therefore, be wrong in employing any labourer to produce food, houseroom, clothes, or fuel: but you are always wrong if you employ him to produce nothing (for then some other labourer must be worked double time to feed him); and you are generally wrong, at present, if you employ him (unless he can do nothing else) to produce works of art, or luxuries; because modern art is mostly on a false basis, and modern luxury is criminally great.[122] [122] It is especially necessary that the reader should keep his mind fixed on the methods of consumption and destruction, as the true sources of national poverty. Men are apt to watch rather the exchanges in a state than its damages; but the exchanges are only of importance so far as they bring about these last. A large number of the purchases made by the richer classes are mere forms of interchange of unused property, wholly without effect on national prosperity. It matters nothing to the state, whether if a china pipkin be rated as worth a hundred pounds, A has the pipkin, and B the pounds, or A the pounds and B the pipkin. But if the pipkin is pretty, and A or B breaks it, there is national loss; not otherwise. So again, when the loss has really taken place, no shifting of the shoulders that bear it will do away with the fact of it. There is an intensely ludicrous notion in the public mind respecting the abolishment of debt by denying it. When a debt is denied, the lender loses instead of the borrower, that is all; the loss is precisely, accurately, everlastingly the same. The Americans borrow money to spend in blowing up their own houses. They deny their debt; by one third already, gold being at fifty premium; and will probably deny it wholly. That merely means that the holders of the notes are to be the losers instead of the issuers. The quantity of loss is precisely equal, and irrevocable; it is the quantity of human industry spent in explosion, plus the quantity of goods exploded. Honour only decides who shall pay the sum lost, not whether it is to be paid or not. Paid it must be and to the uttermost farthing. The way to produce more food is mainly to bring in fresh ground, and increase facilities of carriage;--to break rock, exchange earth, drain the moist, and water the dry, to mend roads, and build harbours of refuge. Taxation thus spent will annihilate taxation, but spent in war, it annihilates revenue. The way to produce houseroom is to apply your force first to the humbler dwellings. When your bricklayers are out of employ, do not build splendid new streets, but better the old ones: send your paviours and slaters to the poorest villages, and see that your poor are healthily lodged before you try your hand on stately architecture. You will find its stateliness rise better under the trowel afterwards; and we do not yet build so well as that we need hasten to display our skill to future ages. Had the labour which has decorated the Houses of Parliament filled, instead, rents in walls and roofs throughout the county of Middlesex; and our deputies met to talk within massive walls that would have needed no stucco for five hundred years,--the decoration might have been better afterwards, and the talk now. And touching even our highly conscientious church building, it may be well to remember that in the best days of church plans, their masons called themselves "logeurs du bon Dieu;" and that since, according to the most trusted reports, God spends a good deal of His time in cottages as well as in churches, He might perhaps like to be a little better lodged there also. The way to get more clothes is,--not necessarily, to get more cotton. There were words written twenty years ago which would have saved many of us some shivering had they been minded in time. Shall we read them? "The Continental people, it would seem, are 'importing our machinery, beginning to spin cotton and manufacture for themselves, to cut us out of this market and then out of that!' Sad news indeed; but irremediable;--by no means. The saddest news is, that we should find our National Existence, as I sometimes hear it said, depend on selling manufactured cotton at a farthing an ell cheaper than any other People. A most narrow stand for a great Nation to base itself on! A stand which, with all the Corn-Law Abrogations conceivable, I do not think will be capable of enduring. "My friends, suppose we quitted that stand; suppose we came honestly down from it and said: 'This is our minimum cotton-prices. We care not, for the present, to make cotton any cheaper. Do you, if it seem so blessed to you, make cotton cheaper. Fill your lungs with cotton-fuzz, your hearts with copperas-fumes, with rage and mutiny; become ye the general gnomes of Europe, slaves of the lamp!' I admire a Nation which fancies it will die if it do not undersell all other Nations, to the end of the world. Brothers, we will cease to _under_sell them; we will be content to _equal_-sell them; to be happy selling equally with them! I do not see the use of underselling them. Cotton-cloth is already two-pence a yard or lower; and yet bare backs were never more numerous among us. Let inventive men cease to spend their existence incessantly contriving how cotton can be made cheaper; and try to invent, a little, how cotton at its present cheapness could be somewhat justlier divided among us. Let inventive men consider, Whether the Secret of this Universe, and of Man's Life there, does, after all, as we rashly fancy it, consist in making money?... With a Hell which means--'Failing to make money,' I do not think there is any Heaven possible that would suit one well; nor so much as an Earth that can be habitable long! In brief, all this Mammon-Gospel of Supply-and-demand, Competition, Laissez-faire, and Devil take the hindmost" (foremost, is it not, rather, Mr. Carlyle?) "begins to be one of the shabbiest Gospels ever preached." (In the matter of clothes, decidedly.) The way to produce more fuel is first to make your coal mines safer, by sinking more shafts; then set all your convicts to work in them, and if, as is to be hoped, you succeed in diminishing the supply of that sort of labourer, consider what means there may be, first of growing forest where its growth will improve climate; then of splintering the forests which now make continents of fruitful land pathless and poisonous, into faggots for fire;--so gaining at once dominion sunwards and icewards. Your steam power has been given you (you will find eventually) for work such as that; and not for excursion trains, to give the labourer a moment's breath, at the peril of his breath for ever, from amidst the cities which you have crushed into masses of corruption. When you know how to build cities, and how to rule them, you will be able to breathe in their streets, and the "excursion" will be the afternoon's walk or game in the fields round them. Long ago, Claudian's peasant of Verona knew, and we must yet learn, in his fashion, the difference between via and vita. But nothing of this work will pay. No; no more than it pays to dust your rooms or wash your doorsteps. It will pay; not at first in currency, but in that which is the end and the source of currency,--in life (and in currency richly afterwards). It will pay in that which is more than life,--in "God's first creature, which was light," whose true price has not yet been reckoned in any currency, and yet into the image of which all wealth, one way or other, must be cast. For your riches must either as the lightning, which, "begot but in a cloud, Though shining bright, and speaking loud, Whilst it begins, concludes its violent race, And, where it gilds, it wounds the place;" or else as the lightning of the sacred sign, which shines from one part of the heaven to the other. There is no other choice; you must either take dust for deity, spectre for possession, fettered dream for life, and for epitaph, this reversed verse of the great Hebrew hymn of economy (Psalm cxii.):--"He hath gathered together, he hath stripped the poor, his iniquity remaineth for ever." Or else, having the sun for justice to shine on you, and the sincere substance of good in your possession, and the pure law and liberty of life within you, leave men to write this better legend over your grave: "He hath dispersed abroad. He hath given to the poor. His righteousness remaineth for ever." * * * * * The present paper completes the definitions necessary for future service. The next in order will be the first chapter of the body of the work. These introductory essays are as yet in imperfect form; I suffer them to appear, though they were not intended for immediate publication, for the sake of such chance service as may be found in them. [Here the author indicated certain corrections, which have been carried out in this edition. He then went on to say that the note on Charis (p. 274) required a word or two in further illustration, as follows:--] The derivation of words is like that of rivers: there is one real source, usually small, unlikely, and difficult to find, far up among the hills; then, as the word flows on and comes into service, it takes in the force of other words from other sources, and becomes itself quite another word--even more than one word, after the junction--a word as it were of many waters, sometimes both sweet and bitter. Thus the whole force of our English "charity" depends on the guttural in "Charis" getting confused with the "c" of the Latin "carus;" thenceforward throughout the middle ages, the two ideas ran on together, and both got confused with St. Paul's [Greek: agapê], which expresses a different idea in all sorts of ways; our "charity," having not only brought in the entirely foreign sense of almsgiving, but lost the essential sense of contentment, and lost much more in getting too far away from the "charis," of the final Gospel benedictions. For truly it is fine Christianity we have come to, which professing to expect the perpetual grace of its Founder, has not itself grace enough to save it from overreaching its friends in sixpenny bargains; and which, supplicating evening and morning the forgiveness of its own debts, goes forth in the daytime to take its fellow-servants by the throat, saying--not "Pay me that thou owest," but "Pay me that thou owest me not." Not but that we sometimes wear Ophelia's rue with a difference, and call it, "Herb o' grace o' Sundays," taking consolation out of the offertory with--"Look, what he layeth out, it shall be paid him again." Comfortable words, indeed, and good to set against the old royalty of Largesse-- "Whose moste joie was, I wis, When that she gave, and said, 'Have this.'" Again: the first root of the word faith being far away in----(compare my note on this force of it in "Modern Painters," vol. v., p. 255), the Latins, as proved by Cicero's derivation of the word, got their "facio," also involved in the idea; and so the word, and the world with it, gradually lose themselves in an arachnoid web of disputation concerning faith and works, no one ever taking the pains to limit the meaning of the term: which in earliest Scriptural use is as nearly as possible our English "obedience." Then the Latin "fides," a quite different word, alternately active and passive in different uses, runs into "foi;" "facere," through "ficare," into "fier," at the end of words; and "fidere," into "fier" absolute; and out of this endless reticulation of thought and word rise still more finely reticulated theories concerning salvation by faith--the things which the populace expected to be saved from, being indeed carved for them in a very graphic manner in their cathedral porches, but the things they were expected to believe being carved for them not so clearly. Lastly I debated with myself whether to make the note on Homer longer by examining the typical meaning of the shipwreck of Ulysses, and his escape from Charybdis by help of her fig-tree; but as I should have had to go on to the lovely myth of Leucothea's veil, and did not care to spoil this by a hurried account of it, I left it for future examination; and three days after the paper was published, observed that the reviewers, with their usual useful ingenuity, were endeavouring to throw the whole subject back into confusion by dwelling on the single (as they imagined) oversight. I omitted also a note on the sense of the word [Greek: lygron], with respect to the pharmacy of Circe, and herb-fields of Helen (compare its use in Odyssey, xvii. 473, etc.), which would further have illustrated the nature of the Circean power. But, not to be led too far into the subtleness of these myths, respecting them all I have but this to say: Even in very simple parables, it is not always easy to attach indisputable meaning to every part of them. I recollect some years ago, throwing an assembly of learned persons who had met to delight themselves with interpretations of the parable of the prodigal son (interpretations which had up to that moment gone very smoothly) into high indignation, by inadvertently asking who the prodigal son was, and what was to be learned by his example. The leading divine of the company (still one of our great popular preachers) at last explained to me that the unprodigal son was a lay figure, put in for dramatic effect, to make the story prettier, and that no note was to be taken of him. Without, however, admitting that Homer put in the last escape of Ulysses merely to make his story prettier, this is nevertheless true of all Greek myths, that they have many opposite lights and shades: they are as changeful as opal and, like opal, usually have one colour by reflected, and another by transmitted, light. But they are true jewels for all that, and full of noble enchantment for those who can use them; for those who cannot, I am content to repeat the words I wrote four years ago, in the appendix to the "Two Paths"-- "The entire purpose of a great thinker may be difficult to fathom, and we may be over and over again more or less mistaken in guessing at his meaning; but the real, profound, nay, quite bottomless and unredeemable mistake, is the fool's thought, that he had no meaning." LONDON: WARD, LOCK & CO., LIMITED. * * * * * Transcriber's note: 1. Text in italics is enclosed by underscores (_italics_). 2. Footnotes have been renumbered and moved from the middle of the paragraph to the closest paragraph break. 3. The original text includes Greek characters. For this text version these letters have been replaced with transliterations. For example, [Greek: b] represents greek letter beta. 4. Certain words use an oe ligature in the original. 5. Mixed fractions are indicated with a hyphen and forward slash. For example, 3-1/2 indicates three and a half. 6. Obvious misprints and punctuation errors have been silently corrected in this text version. 7. Other than the changes listed above, printer's inconsistencies in hyphenation and ligature usage have been retained. 
31159	----	ESSENTIALS OF ECONOMIC THEORY _AS APPLIED TO MODERN PROBLEMS OF INDUSTRY AND PUBLIC POLICY_ BY JOHN BATES CLARK PROFESSOR OF POLITICAL ECONOMY IN COLUMBIA UNIVERSITY AUTHOR OF "THE DISTRIBUTION OF WEALTH," "THE PHILOSOPHY OF WEALTH," "THE PROBLEM OF MONOPOLY," ETC. New York THE MACMILLAN COMPANY 1915 _All rights reserved_ COPYRIGHT, 1907, BY THE MACMILLAN COMPANY. Set up and electrotyped. Published October, 1907. Reprinted July, 1909; July, 1915. PREFACE In a work on the "Distribution of Wealth," which was published in 1899, I expressed an intention of offering later to my readers a volume on "Economic Dynamics, or The Laws of Industrial Progress." Though eight years have since passed, that purpose is still unexecuted, and it has become apparent that any adequate treatment of Economic Dynamics will require more than one volume of the size of the present one. In the meanwhile it is possible to offer a brief and provisional statement of the more general laws of progress. Industrial society is going through an evolution which is transforming its structure and all its activities. Four general changes are going on within the producing organization, and the resultant of them, under favorable conditions, should be an enrichment in which all classes would share. Population is increasing, capital is accumulating, technical methods are improving, and the organization of productive establishments is perfecting itself; while over against these changes in industry is an evolution in the wants of the individual consumer, whom industry has to serve. The nature, the causes, and the effects of these changes are among the subjects treated in this volume. The Political Economy of the century following the publication of the "Wealth of Nations" dealt more with static problems than with dynamic ones. It sought to obtain laws which fixed the "natural" prices of goods and those which, in a like way, governed the natural wages of labor and the interest on capital. This term _natural_ as thus used, was equivalent to static. If the laws of value, wages, and interest had at this time been correctly stated, they would have furnished standards to which, in the absence of all change and disturbance, actual values, wages, and interest would ultimately have conformed. The economic theory of this time succeeded in formulating, correctly or otherwise, principles of economic statics and a fragment or two of a science of economic dynamics, although the distinction between the two divisions of the science was not clearly before the writers' eyes. The law of population contained in the work of Malthus is the only systematic statement then made of a general law of economic change. Though histories of wages, prices, etc., furnished some material for a science of Economic Dynamics, none of them attained the dignity of a presentation of law or merited a place in Economic Theory. Students of Political Economy were at that date scarcely awakened to the perception of laws of dynamics, and still less were they conscious of the need of a systematic statement of them. A modest beginning in the way of formulating such laws the present work endeavors to make. The first fact which becomes apparent when economic progress is studied, is that static laws have a general application and are as efficient in a society which is undergoing rapid transformation as in one that is altogether changeless. Water in a tranquil pool is affected by static forces. Let a quantity of other water rush in and there are superinduced on these forces others which are highly dynamic. The original forces are as strongly operative as ever, and if the inflow were to stop, would again reduce the surface to a level. The laws of hydrostatics affect the waters in the rapids of Niagara as truly as they do those in a tranquil pool; but in the rapids a further set of forces is also operative. In the work referred to, issued in 1899, an effort was made to isolate the phenomena of Economic Statics and to attain the laws which govern them. Necessarily this study made a certain impression of unreality, since it put out of sight changes which are actually going on and are the conspicuous fact of modern life. It assumed the conditions of a world without any such movement and endeavored to formulate laws which, in such a condition, would fix standards of value, wages, interest, etc. It put actual changes out of sight, intentionally and heroically, but with a full recognition of the fact that they are actually taking place and must in due time be introduced and studied. We live in what is _par excellence_ an age of progress, and it is in part for the sake of perceiving the laws of progress that we first disentangle from them the laws of rest and make a separate study of these. The world from which change is excluded is unreal, but the _static laws_ which can be most clearly discerned by mentally creating such a world have reality. Every day's transactions are governed by them as truly as a physical element like water in active movement is affected by forces which, if they acted alone, would bring it to a state of permanent rest. The first purpose, therefore, of the present work is to show the presence and dominance in the real world of the forces described in the earlier work. It brings static laws into view and endeavors to show how they act at any one particular stage of industrial evolution. Even while changes are examined, the fact is perceived that there are steadily at work forces which, if changes should cease, would make society conform to a certain imaginary static model and makes wages and interest also conform to static standards. Another purpose of the work is to examine seriatim the effects of different changes, to gauge the probability of their continuance, and to determine the resultant of all of them acting together. It is important to know under what conditions changes proceed at a normal rate, and when the standard of wages rises as it naturally should. As the actual rate of wages pursues its rising standard, but lags somewhat behind it, it is necessary to know what determines the interval between the two, and when the interval is normal. What is called "economic friction" is the cause of this interval and is an element that is amenable to law. There is to be studied, not only the friction which obstructs the action of natural forces, but positive perversions of the forces themselves. Of these the chief is monopoly; and its influence, its growth, the sources of its power, and its prospect of continuance have to be determined. The actual tendencies of the economic system are against it, and so--if we except a few monopolies created for special ends--are both the spirit and the letter of the civil law. In a country in which law held complete sway, all objectionable monopolies would be held in repression. In order to see how much economic forces can be made to do in this direction, the present work discusses railroads and their charges, and some of the practices of great industrial corporations, and tries to determine what type of measures a government should take in dealing with these powerful agents. In connection with monopoly and with the conditions of economic progress a study is made of trade unions, strikes, boycotts, and the arbitration of disputes between employers and employed, and also of the policy of the state in connection with them, and with money and protective duties. It is my belief that students should become acquainted with the laws of Economic Dynamics, and that they can approach the study of them advantageously only after a study of Economic Statics. The present work is in a form which, as is hoped, will make it available for use in class rooms, not as a substitute for elementary text-books, but as supplementary to them. It omits a large part of what such books contain, presents what they do not contain, and tries to be of service to those who wish for more than a single introductory volume can offer. An essential part of the theory of wages here stated was presented in a paper read before the American Economic Association, in December, 1888, and published in a monograph of the American Economic Association in March, 1889; and other parts of this theory were issued at intervals following that date. The theory of value was published in the _New Englander_ for July, 1881. I had not then chanced to see the early statements of the principle of marginal appraisal contained in the works of Von Thünen and Jevons, and did not consciously borrow anything from their writings, but I gladly render to them the credit that is their due. I do not fear that I shall be supposed to have borrowed other parts of the general theory here offered. The theory of capital here stated was first presented in a monograph of the American Economic Association for May, 1888, and the discussion of money of which the present work gives a summary, in articles in the _Political Science Quarterly_ for September, 1895, and for June and September, 1896. The discussion of the relation of protective duties to monopoly appeared in the same quarterly for September, 1904. The author should, perhaps, apologize for the fewness of the citations from other works which this volume contains. The richness of the recent literature of Economic Theory, especially in America, would have made it necessary to use much space if the resemblances and the contrasts presented by points in this volume, and corresponding points in other volumes, had been noted. Worthy of special attention, if citations had been given, would have been the writings of Professors Irving Fisher, Simon N. Patten, and Frank A. Fetter of this country, and Professor Friedrich von Wieser of Prague, who have worked in various parts of the same field in which the studies here offered belong, and also those of Minister Eugen von Böhm-Bawerk of Vienna, who has treated some of the same themes in a strongly contrasted way. If merited attention were paid to the works of Hadley, Taussig, Carver, Seligman, Giddings, Seager, Walker, and a host of eminent foreign scholars, a large part of the space in the book would have to be thus preëmpted. I desire most gratefully to acknowledge the assistance which in the preparation of this book I have received from my colleague, Professor H. L. Moore of Columbia University, from my son, Mr. John Maurice Clark, Fellow in Economics in Columbia University, and from my former colleague, Professor A. S. Johnson of the University of Nebraska. Besides reading the manuscript and offering valuable suggestions, Professor Johnson has kindly taken upon himself the reading of the proof. JOHN BATES CLARK. CONTENTS CHAPTER PAGE I. WEALTH AND ITS ORIGIN 1 II. VARIETIES OF ECONOMIC GOODS 20 III. THE MEASURE OF CONSUMERS' WEALTH 39 IV. THE SOCIALIZATION OF INDUSTRY 59 V. PRODUCTION A SYNTHESIS; DISTRIBUTION AN ANALYSIS 74 VI. VALUE AND ITS RELATION TO DIFFERENT INCOMES 92 VII. NORMAL VALUE 114 VIII. WAGES 127 IX. THE LAW OF INTEREST 146 X. RENT 159 XI. LAND AND ARTIFICIAL INSTRUMENTS 174 XII. ECONOMIC DYNAMICS 195 XIII. THE LIMITS OF AN ECONOMIC SOCIETY 210 XIV. EFFECTS OF DYNAMIC INFLUENCES WITHIN THE LIMITED ECONOMIC SOCIETY 229 XV. PERPETUAL CHANGE OF THE SOCIAL STRUCTURE 244 XVI. EFFECT OF IMPROVEMENTS IN METHODS OF PRODUCTION 256 XVII. FURTHER INFLUENCES WHICH REDUCE THE HARDSHIPS ENTAILED BY DYNAMIC CHANGES 282 XVIII. CAPITAL AS AFFECTED BY CHANGES OF METHOD 301 XIX. THE LAW OF POPULATION 321 XX. THE LAW OF ACCUMULATION OF CAPITAL 339 XXI. CONDITIONS INSURING PROGRESS IN METHOD AND ORGANIZATION 358 XXII. INFLUENCES WHICH PERVERT THE FORCES OF PROGRESS 372 XXIII. GENERAL ECONOMIC LAWS AFFECTING TRANSPORTATION 396 XXIV. THE FOREGOING PRINCIPLES APPLIED TO THE RAILROAD PROBLEM 416 XXV. ORGANIZATION OF LABOR 451 XXVI. THE BASIS OF WAGES AS FIXED BY ARBITRATION 470 XXVII. BOYCOTTS AND THE LIMITING OF PRODUCTS 503 XXVIII. PROTECTION AND MONOPOLY 517 XXIX. LEADING FACTS CONCERNING MONEY 538 XXX. SUMMARY OF CONCLUSIONS 555 INDEX 563 ESSENTIALS OF ECONOMIC THEORY CHAPTER I WEALTH AND ITS ORIGIN The creation and the use of wealth are everywhere governed by natural laws, and these, as discovered and stated, constitute the science of Economics. Some of them come into operation only when men live in more or less civilized societies and work in an organized way, while others are operative wherever men work at all. Every man who lives must have something that can be called wealth, and, unless it is given to him, he must do something in order to get it. A solitary hunter, living in a cave, eating the flesh of animals and clothing himself in their skins, would create wealth and use it; but he would not take part in a social kind of industry. What he does could not be described as a bit of "social," "national," or "political" economy. Yet the gaining of his living would be an economic operation and would involve a creating and using of wealth. A statement of the laws governing the processes by which such a man makes the earth yield to him means of support and comfort would constitute a Science of the Economy of Isolated Life, which is a part of the general Science of Economics. _Primitive Capital._--If an isolated man hunts with good implements, he gets more game than he would have done if he had not used some of his time in making such implements. It pays such a man to interrupt his hunting long enough to make a spear or a bow and arrows. This amounts to saying that it is an advantage to him to become, in a simple way, a capitalist as well as a laborer; for the primitive implements of the chase are forms of _productive_ wealth, or capital. Moreover, if he possesses foresight, he will keep enough food within reach to tide him over periods when game is not to be had, and such a store is another form of capital. _The Field of General Economics._--The economy of a man who works only for himself is subject to laws that are based on his own nature and the character of his material environment. Because he is what he is and because nature is what it is there is a certain way in which he must proceed, if he will live at all, and there are certain conditions which must exist, if he is to live well. The inherent productive power of labor and of capital is of vital concern to him, since he is both a laborer and a capitalist; but he is in no way interested in what we commonly call the relations of labor and capital, since that expression always suggests the dealings of one class of men, who labor, with another class, who own or control productive wealth. The study of such relations takes us at once into the domain of _Social_ Economy; but we can study certain universal laws of wealth without at all entering that domain. When we speak of the power that resides in a bow and arrow, we refer to a truth of _General_ Economics and one which illustrates the inherent power of capital, though we may be far from thinking of lenders and borrowers in a modern "money market" or of dealings of any one class of men with any other. _The Field of Social Economics._--The moment that we begin to examine economic relations that different classes of men sustain to each other, we enter the realm of _Social_ Economics; and we do this whenever we study modern business dealings. Even our hunter would take part in a social economy if he began to sell some of his game; and from that time on his income would depend, not wholly on his relation to material nature, but partly on his relation to other men. A good market for his game would come to be of the greatest importance to him; and a market for anything implies a social method of securing wealth. _Fundamental Facts Common to Primitive Life and Social Life._--The relations which men sustain to each other in civilized industry are thrown into the foreground in the science of Social or "Political" Economy.[1] It is an organized system of industry in which we are engaged, and it is that which we care most to understand. Until recently we have had a far less satisfactory understanding of the social element in industry--that is, of the relations that men who are producing wealth sustain to each other--than we have had of such general facts as a primitive producer needs to know. We have had, for example, much information concerning the materials which the earth contains and the way to make them useful. We have had a practical knowledge of what wealth is and of the mode of creating it, and we have been able to identify it as we have seen it either in the raw or the finished state. We have known what labor is, how it proceeds and what helps it needs to enable it to make clothing, to prepare food, etc. We have not known as much about the way in which the modern market for such products is regulated, and how a modern tailor or baker shares gains with the man who employs him and provides him with materials and tools, and the main purpose of studying Economics is to get an understanding of such social facts; but this cannot be done without first bringing before the mind the more general facts concerning the inherent nature of wealth itself and of the activities that are always necessary--in uncivilized life as well as in civilized--for creating and using it. [1] Past usage renders the somewhat misleading term _Political Economy_ more available than the more accurately descriptive term _Social Economics_, as the title of the science which treats of the creation and use of wealth by an organized society. Either title implies the existence of such an organization, but the word _political_ calls attention to the fact that it is under a government. The fact that, in a study of wealth, is most important is that the exchanges of products which spontaneously take place create an industrial society whose activities, going on as they do under a government, constitute the subject of the studies which are properly indicated by the traditional term, Political Economy. Government as such is not the subject of those studies. _General Facts First in the Natural Order of Study._--The primitive and general facts concerning industry, which, in a broad sense, is the creating of wealth, need to be known before the social facts can profitably be studied; and a statement of the principles of Political Economy should therefore begin by presenting a body of truth which is independent of politics and sociology and so general that it is illustrated even in that simplest of all conditions, in which no market exists and every man makes by his own labor all the goods that he uses. The wealth of a Crusoe, that of a solitary Esquimau, and that of a pygmy in equatorial Africa have laws as well as that of a European or American employer or bondholder. The qualities in matter which make a share of it important for promoting the welfare of its possessor can be detected in the simplest commodities that are anywhere used. All kinds of industrial products have a common origin. Labor and capital act together in making a birch canoe as truly as they do in producing a transatlantic liner; and the productive power of each of these two agents is everywhere governed by certain general laws. Before ascertaining what is true of wealth when capital has become complex and when laborers have become specialists, each producing one particular part of one product and securing many finished goods in exchange for it, it is well to state some facts relating to wealth which are so general that they appear in all stages of civilization. _The Nature of Wealth._--The old English word _weal_ describes a condition of life. It is the state of being "well off," or of having one's wants amply supplied. Well-being in a broad sense of the term may depend largely on a man's state of health, his temperament, his conscience, or his relation to his friends; but the weal that is so secured is not described as a state of wealth. That depends on the possession of useful and material things, and the rich man has more of them than other men. The term _wealth_, which originally signified the state of being rich, afterwards came to be applied to the things which make a man rich, and it is thus that the term is used in the science of Economics. _What Things constitute Wealth._--It is clear that useful things, like air, which are at hand in unlimited quantity, do not make any one rich in this comparative sense, for they benefit all alike; and, in so far as they are concerned, all men are on the same level of welfare. Moreover, since they are so abundant as to shower benefits everywhere in profusion, the quantity of them that a man has at his disposal may be lost or thrown away with entire impunity. He would only have to help himself again from the abounding supply which nature thrusts on him in order to be as well off as he was before. A bucketful of water on the shore of Lake Superior is of no importance to the man who has it. If it were spilled on the sand, the man would have only to dip up another bucketful, with an expenditure of effort that would be too small to take account of. If, however, fresh water were scarce, every bucketful would have its importance, and the loss of that quantity would make a distinct impression on the man's well-being. Whenever each particular part of the supply has this power to make a possessor better off than he would be without it, the substance is a form of wealth. The quality of being _specifically_ important is, therefore, the essential attribute of all the concrete forms of wealth. Sand by the seashore does not have any specific importance, since it is so abundant that the gain or loss of a wheelbarrow load would not make a man better off or worse off; but a pile of sand by the side of an unfinished building has this quality. There every barrow load is of consequence, for the available quantity is so small that diminutions reduce and additions increase the wealth of the possessor. Sand on the shore has the inherent power to help make mortar, and water in Lake Superior has the power to quench thirst, but neither of them has the attribute which would make it a form of wealth, namely, specific importance. Particular parts of the supply may be lost with impunity. _Varieties of Utility._--We have used the term _importance_, rather than usefulness or utility, to describe the quality which, if it exists in every particular bit of a substance, makes it all a form of wealth. With due care we may use the term _utility_. In a way even a cup of water dipped by a fisherman from the lake is useful, for it renders a service. Though the man might lose it and be no poorer, he cannot say that the thing has no utility of any kind. He can say that it has no importance. What it has we may call _absolute_ utility, or the power to do for a man something which he wishes to have done. When the fisherman is thirsty the water will do him good. It has an absolute service-rendering power; and yet this cupful makes the owner no better off than he would be without it, since the service which it is capable of rendering would be rendered whether the man had it or not. Absolute utility in an article is the power to render any service whatever, regardless of the question whether it would be rendered equally well if the article were absent. If conditions were such that the man would have to go thirsty in case he spilled his cupful of water, then this little supply would have what we may term _effective_ utility, and this means that the presence of the particular bit is a positive element in conducing to the man's welfare. Usable things have absolute utility even when they are superabundant, but they have effective utility only when the quantity of them is so limited that every particular bit of it is of some importance. Absolute utility and limitation of supply insure to them this quality; and this principle holds true in the economy of the most primitive state as well as in that of a civilized one. _The Origin of Wealth._--Some of the things that have this kind[2] of utility have been given to man by nature. She has furnished some materials that are useful and has not furnished them in quantities sufficient to prevent them from being _specifically_ important. On account of the comparatively niggardly way in which she has doled them out to man, every bit of the supply has a power to benefit him; and if he gains some portions, he goes upward in the scale of well-being, and if he loses some, he goes downward. Wild fruits and fruit trees come in this category; and a savage who should build his hut in a small grove of banana trees, if he could keep other people out of it, would be, by so much, better off than they. The grove and its fruits would constitute their owner's wealth. [2] The term _final_ utility is used with much the same significance as specific importance. It is the utility of the last and least important part of the supply, and the use of the term requires us to think of the supply as offered to users unit by unit till the whole amount is in their hands. The first unit, when it stands alone, is more important than any later one will be. The second is of less consequence, and the last is the least important of all. When, however, all have been supplied and are together available for use, one is as important as another. Each one has an effective utility which is measured by the service rendered by the last one. The term _specific_ indicates that we measure the importance of the supply of an article not in its entirety, but bit by bit, while the term _effective_ is the antithesis of _absolute_ and means that each bit of the supply not only renders an absolute service, but renders one which would not be gratuitously rendered by some other part of the supply in case this portion were removed or destroyed. We do not here think of the supply as built up from nothing to its present size bit by bit, but look at it as it stands and measure the importance of any particular quantity. When we speak of final utility, we think of a series of "increments" supplied one after another, and in this case the successive increments become less and less important, since, after some have been supplied, the want of the kind of good that they represent is less keenly felt. The conception of the series of units is merely a means of isolating one unit from a total number and obtaining a mental measurement of its importance which corresponds with the effective importance of any unit in the entire quantity. _Land an Original Form of Wealth._--Land is the original gift of nature to humanity, and wherever there are people enough to make the possession of a particular piece of it important, it becomes a form of wealth. It can be valueless only when population is very sparse; and then an increase in the number of people dwelling on it gives to it early the attribute of specific importance. The land that is accessible to a growing population cannot long be superabundant. _Forms of Wealth produced by Labor._--Few useful goods are presented to man by nature in a finished state, and it is therefore necessary for man to exert himself in order to get the goods that he needs in the condition in which he can use them. He must make raw substances more useful than they naturally are, and as he does this the things become partly products of his labor. Of course the supply of them is limited, since labor is so. _Labor a Wealth Creator._--Labor is a wealth-creating effort, and there is no labor that is successful in attaining its purpose that does not help to bring into a serviceable condition something that can be identified as an economic good or a form of wealth. Some effort, indeed, fails in what it attempts to do and therefore produces nothing. We may build a machine that will not work, or make a product that no one wants; but labor that attains a rational purpose is always economically productive. _Protective Labor and the Attribute it imparts to Useful Matter._--Labor may be classed according to the particular result that it accomplishes. In saying that the banana grove in our illustration is wealth to the savage who resides in it, we had to insert the proviso that he is able to keep other persons out of it. Exclusive possession or ownership is necessary in order that things may continue to be effectively useful to any particular person or persons. If they are superabundant, as we have seen, no part of the supply is important; but it is also true that if they are scarce and a man is not able to keep any of them, they will not serve him. In order that an economic good may be effective, it must be appropriable, and where claimants are numerous and lawless it may take much of the owner's time and effort to keep the article in his possession. The savage must personally protect his goods, and to some extent the civilized man must do so; for however well policed a city may be, it will not do to leave purses or portable goods by the wayside. Protective labor is necessary in all stages of social advancement. In civilized life, indeed, we delegate much of it to a special class of persons,--policemen, judges, lawyers, and legislators,--and this is the most fundamental division of labor that civilization entails; but the work has to be done in any stage of social evolution. Crusoe's goods would have been worth nothing to him if he could not have kept them from the savages who, in time, appeared on his island; and they would have been worth little if he had been forced to spend most of his time in guarding them. Appropriability is, therefore, a further essential attribute of the things which can make particular men richer by reason of their presence. When such things are actually brought into ownership, their utilities become available, as they would not otherwise be. Effort expended in protecting property is wealth-creating, since it causes those service-rendering powers which otherwise would be only potential in goods to become active. In other words, it gives to things which are otherwise in a condition to be effectively useful a further quality which they require in order that they may actually promote an owner's well-being. _Industrial Labor._--Industrial labor is the antithesis of protective labor, and it invariably changes the qualities of material objects in such a way as to make them useful; that is to say, it directly creates utilities.[3] These utilities are of different kinds, and the labor may be classified according to the kind it creates. [3] The term _create_ is here used in a somewhat loose sense and does not imply that the man originates matter or even that he always transforms it without calling in, as an aid, the forces of nature. The farmer must depend on vital forces in soil and air in order to raise a crop. What he and other laborers do is to cause the product in some way to come into existence, and he and they may in this sense be said to create the products which would not appear without them. _Elementary Utility._--An elementary utility is created when a substance is either dug out of the ground, as is done in mining, or when it is secured through the vital forces of the earth, as is done in agriculture. Hunting, fishing, and stock raising should be classed with agriculture, since they use the resources of animate nature to secure for mankind new raw products on which labor will confer further useful qualities. This utility has to be created by men in every stage of industrial development, from that of a tropical savage to that of men in the most advanced civilization.[4] [4] The distinction between elementary utility and others does not need to be applied with the utmost strictness, for mining creates form utility by breaking up masses of ore, and place utility by making them accessible. Agriculture shapes its products and moves them to places of storage. It is convenient in practice to adhere to the more general classification suggested in the text. _Form Utility._--A form utility is created when a raw material is fashioned into a new shape, subdivided, or combined with other materials, as is done in manufacturing and, in a certain way, in commerce. Buying goods in bulk and selling them in small quantities is the creating of form utilities and makes an addition to total wealth. Oil in small cans is worth far more for consumption than it would be if each consumer were forced to buy a tankful. Sugar is worth more to a consumer when it is doled out to him in paper sacks than it would be if it were to be had only in hogsheads. Merchants are not mere exchangers, for they make positive additions to the utility of goods. In primitive life no such class exists; and yet form utilities of every kind are created, since men make for themselves the goods that they use and adapt them in shape and in quantity to their current needs. _Place Utility._--Carrying things to places where they become more useful creates place utilities. In primitive life men do their own carrying; but in civilized states the common carrier does most of it, and so imparts place utility to matter on the most extensive scale. All useful transportation creates this quality, which is a general attribute of wealth; and the operation of so moving matter as to create place utility is one of the general functions of labor.[5] [5] In a way all kinds of production may be analyzed into the moving of matter. In cutting up raw materials a manufacturer moves waste portions away from those that are to be utilized, while combining materials, of course, moves them toward each other. Neither of these operations creates place utility. This quality consists in a relation, not between some materials and others, but between goods and the persons who are to use them. Bringing things to us from a distance changes their local relation to us, and in this is the essence of place utility, and every article that we use must have acquired this quality. The service-rendering power which it possesses is only potential until it reaches a place where the power can be exercised. _Time Utility._--There is, moreover, a kind of utility which depends on the existence of a good at the time when it is needed. Ice in the warm season, a plow in the spring or the fall, a pleasure boat in summer, and anything which, by the aid of capital, is presented to a user when he needs it, illustrate this quality. We may call it time utility, and creating it is a function of capital. We shall see how capital assists in the production of the other utilities; but the creation of time utility it accomplishes without assistance. _Executive and Directive Labor._--Labor involves the whole man, physical, mental, and moral. No labor is so simple that it is not better done when intelligence is used in the performance of it. The savage's hut, his canoe, his bows and arrows, etc., vary in their efficiency and value, not merely according to the time and muscular effort spent in making them, but also according to the efficiency of the thought by which those efforts are guided. There is here the germ of the difference between the executive labor of the modern employee and the directive labor of the manager. Yet no manager directs in more than a general way the muscular movements of his subordinates, and their own intelligence must still be trusted to do much of the directing. The mental labor that guides and controls the physical is universal in industry, but becomes more and more a distinct and dominant factor as civilization increases. _Fidelity as affecting the Productivity of Labor._--The fact that all workmen are largely their own directors brings fidelity into the foreground as an element in determining men's earning power; but this element counts for much more in the civilized state than it does in the primitive one, for here fidelity in directive laborers of the highest type is most important and difficult to secure. One of the greatest problems of modern business is how to make directors and executive officers of corporations faithful to the stockholders who employ them. In the primitive state these problems do not arise. When a man is working for himself, mere interest largely takes the place of fidelity. If to-day any one secures a good house of his own to live in, it is because he employs contractors, overseers, and artisans all of whom are, in the main, faithful to his interests and see that the work of building is properly done. A savage looks after his own interests as his personal work proceeds; and yet even in his case there is the germ of that enthronement of character in the supreme place which is the prominent feature of highly organized industry. In building a hut to shelter his family, a savage puts into his work conscience and affection as well as muscular effort; and when the mother of the family does this work, the altruistic element in it is still more conspicuous. As society becomes highly organized the importance of the moral element in all labor increases till the further progress, or even the existence, of the social order may be said to depend on it. In the world of business there is now distrust and turmoil, and revolutions are feared, because of the unfaithfulness of a class of men to trusts committed to them.[6] [6] On the ground of convenience, we may classify labor as physical or mental, according as the work of muscle or of brain is especially prominent. Digging a ditch requires more than an average amount of strength and not even an average amount of intelligence, and it is, therefore, physical labor rather than mental; while writing a brief or arguing a case in court requires much power of thought and only a small amount of muscular strength, and is typically mental labor. Managing an estate for an absent owner is more largely a moral function, since the value of the service depends chiefly on the fidelity of the man who renders it; but physical and intellectual labor are also involved. These three types of personal effort are exerted wherever wealth is created. _The Requisites of Production._--If we start with nothing but the earth in its natural state, inhabited by empty-handed men, and seek to know what is necessary in order that some wealth may be created, we find that nothing is absolutely necessary except labor. By working for a few minutes it is possible to get something that will minister directly to wants. Yet if men begin operations in a state of such poverty that they have only their bare hands to apply to the elements about them, they do not commonly get the usable goods immediately. If a savage wants fish and makes the rudest net with which to catch them, he makes what is a _capital good_. This is wanted only for the sake of the consumers' wealth which it will help to produce. The end in view has all the while been fish; but the man works first on an instrument for catching them. He makes the net by mere labor, but he catches the fish by means of labor and the net. Without such instruments to aid in production a dense population could not live at all, and a very sparse one could live only in a meager and precarious way. If the instruments are artificially made, or if they are furnished by nature in limited amounts, they are forms of wealth, or goods; but as their function is not to minister directly to consumers' wants, but to help in making things which do this, we distinguish them by the name "producers' goods" or "capital goods." In contrast with them those commodities which directly minister to wants may be called "consumers' goods." _The Production of Intermediate Goods._--All economic goods are means to an end. Wealth is always mediate. It is usually a connecting link between man's labor and the satisfaction of his wants. Man, the worker, first spends himself on nature, and then nature in turn spends itself on him. In production nature is the recipient, but in consumption the recipient is man. This is saying that man serves himself by means of some element in nature which, under his manipulation, becomes a form of wealth. He thrusts a bit of natural matter between himself as a producer and himself as a consumer. All kinds of wealth, then, stand in an intermediate position between original labor and the gratification that ultimately results from it. Some goods, however, are means in the special sense of standing between labor and other goods. Instruments help to make consumers' goods and these add to man's pleasure. Using a tool is not generally agreeable. The tool stands not only between the effort and the gratification that will ultimately follow, but between the effort and the further material good that will directly produce gratification. The hatchet intervenes between the labor that makes it and the firewood it will cut, while the wood acts directly on the man and keeps him warm. Capital goods are in this special sense mediate. They are not wanted for their own sake, but for the sake of something else that is directly useful.[7] [7] For an elaboration of the conception of mediate goods the reader is referred to Von Böhm-Bawerk's work on "Positive Theory of Capital" and to John Rae's work on "The Sociological Theory of Capital." _All Labor immediately Productive of Wealth._--When a savage abandons the plan of fishing from the shore and gives his labor for a fortnight to making a canoe with which to fish more effectively, he interposes an interval of time between his labor and its ultimate fruits, the consumers' goods. There is no such interval between the labor and the kind of wealth that it first creates, namely, the canoe. This immediate product of labor is itself a form of wealth and at once rewards the laborer, since it is what he needs, though he does not need it for consumption. Industry always pays as it goes and tolerates no hiatus between labor and wealth in some form. _Organized Industry immediately Productive of Consumers' Goods._--If one man were keeping the stock of canoes of a few fishermen in repair and taking as his pay a share of each day's catch, he would not have to wait for his food any longer than the fishermen themselves. This mode of conducting the industry, however, involves organization. If each fisherman had to make his first canoe, it would be necessary for him to wait for fish; but as soon as a stock of canoes has been obtained and a special set of men assigned to the work of keeping this stock intact in number and quality, that necessity entirely ceases. Five men may do nothing but fish while a sixth keeps their stock of canoes intact by repairing old ones left on the shore and making new ones to replace such as are beyond repairing. Fishing and boat building may go on simultaneously, and all the men may go share and share in each day's catch.[8] This is a type of what goes on in modern industry, where a complex stock of capital goods always exists and is kept intact by the action of a class of persons who share the returns that come from using the stock. None of these persons has to wait for food, although some of them devote themselves exclusively to the production of tools. This fact shows that the necessity for waiting, as well as working, wherever instruments are in the process of manufacture, is not among the universal phenomena of economics, and that it is not present in that organized industry which we chiefly study. Such a permanent stock of capital goods as the fishing community of our illustration possesses would enable it to get its food, the fish, day by day, by working in different ways and using the permanent stock. If we call this permanent supply of canoes, etc., _capital_, it is, _in a causal way_, mediate wealth, though it is not so in point of time. Some labor is spent each day on it, and itself creates each day some consumers' wealth. These two operations go on simultaneously, and the men who work to maintain the stock and those who use it get their returns together. In very primitive life the work spent on capital goods and that spent on consumers' goods are not always synchronous, but organization and the acquiring of a permanent fund of capital make them so. Work to-day and you eat to-day food that is a consequence of the working. In point of time the canoe makers are fed as promptly as the fishermen, and this fact is duplicated in every part of the industrial system. We shall later see more fully what this signifies, but it is clear that any study of this phenomenon--the synchronizing of labor and its reward--takes us out of the field of Universal Economics, since it does not appear in the industry of primitive beginnings, but is the fruit of organization.[9] [8] One man might be employed in guarding canoes and fish against theft, which is doing protective rather than industrial labor; and economic forces would tend to give him a share as large as each of the others receives, provided, of course, that the men are of equal capacity as workers. [9] The conception of capital goods as always putting enjoyments into the future has crept into economic science because in certain illustrations taken from primitive life they seem to have that effect. We shall see that they do not have it at all in _static_ social industry, and that they have it only in a limited way in _dynamic_ social industry, or that which is carried on by a society undergoing organic change. CHAPTER II VARIETIES OF ECONOMIC GOODS _Passive Capital Goods._--Labor spends itself on materials, and these, in their rawest state, are furnished by nature herself. They "ripen" as the work goes on. Every touch that is put on them imparts to them more of the utility which is the essence of wealth. They are technically "goods," or concrete forms of wealth, from the moment when they begin to acquire this utility, though for a time they are in an unfinished state. The function of materials, raw or partly finished, in the physical operation of industry is a passive one, since they receive utility and do not impart it. The iron is passive under the blows of the blacksmith's hammer; leather is passive under the action of the shoemaker's sewing machine; a log is passive under the action of the lumberman's saw, etc. The materials which are thus receiving utilities under the producers' manipulations constitute a distinct variety of capital goods, while the implements which help to impart the utilities constitute another variety, and both kinds are present in all stages of industrial evolution. Savages use raw materials and tools for fashioning them. _Active Capital Goods._--The hammer which fashions the iron, the awl which pierces the leather, and the saw that cuts the log into boards have an active function to perform. They do not receive utilities, but impart them. They manipulate other things and are not themselves manipulated; and except as unavoidable wear and tear injure or destroy them, they are not themselves at all changed by the processes in which they take part. They are the workman's active assistants in the attacks that he makes on the resisting elements of nature. Passive instruments, then, and active ones--things which receive utility, as industry goes on, and those which impart utility--constitute the two generic kinds of capital goods. What is commonly called "circulating capital" is a permanent stock of passive capital goods; and, in like manner, what is usually known as "fixed capital" is such a stock of capital goods of the active kind. The materials and the unfinished goods that are scattered through a modern mill and receiving utility are what the manufacturer would at this moment identify if he were asked to point out the things in which he has circulating capital invested; while the mill, the machinery, the land, etc., which are imparting utility, are what he can point to as now constituting his fixed capital. At a later time there will be other goods of both kinds in his possession, and these will at that time embody the two kinds of capital. While a primitive man would have little occasion to use the term _capital goods_, he would possess both varieties of the goods which the term denotes. _Varieties of Active Capital Goods._--Mere hand tools act as armatures attached to the person of the worker, and they enable him effectively to attack resisting substances. The hammer fortifies the blacksmith's hand against the injuries it would suffer if he delivered blows with his fist, and it multiplies the efficiency of the blows. Machines, however, substitute themselves for the person of the worker and carry the tool through its movements. A steam hammer, so called, is an engine that gets power from a boiler and wields an armature, which is the real hammer, much as a smith would do it, though with far greater force and effect. Machines do rapidly and accurately what a manual laborer would, without them, have to do slowly and imperfectly, by carrying the armature in his own hand and moving it by his own muscular strength. Tools and machines impart "form utility" to materials. Vehicles which carry goods impart "place utility" to them by putting them where they are more useful than they would be elsewhere. Buildings protect goods and workers alike, and enable the operation of transforming them to go on successfully. They also make it possible to store goods at a time when they are not needed and take them out for use when they are needed. In doing this, buildings help to impart "time utility" to the merchandise that is put into them by keeping them intact till the time comes when they will be useful. Tools, machines, reservoirs of water, canals, roadways, buildings, and even land itself are active capital goods, and are, for that reason, component elements of that part of the permanent productive fund which is known as fixed capital. They aid workers in their efforts to bring materials into usable shapes, and this is as true of the hole in the earth in which a savage stores provisions as it is of a fireproof warehouse in a modern city. _Materials which are at first Passive and later pass into the Active State._--The hammer itself has to be made out of raw material, and, while it is in the making, the material that enters into it is as passive as anything else. While the ore is smelting and while the steel is forging, the future hammer is in a preliminary stage of its existence and is discharging a passive function. When it is completely finished, its period of activity begins, and from this time on it helps to manipulate other things. The materials which enter into consumers' goods go through no such transition. The leather remains passive till, in the form of a pair of shoes, it clothes its user's feet; and at this point it ceases to be a capital good at all. The steel of the hammer is first a passive good and later an active one. _The Use of Capital Goods Universal._--There is no doubt that capital goods are used in the most primitive industry. Implements existed in times too remote for tracing; and even if they had not been used, raw material would have been indispensable. People living in an economic stage so ultraprimitive as to use no mediate goods whatever could sustain life only by plucking wild fruit or gathering fish or other food stuff by hand, and so long as they could do this their industry might conceivably consist in getting consumers' goods by labor only. The rudest pick, shovel, or ax and the simplest hunting implement are early types of what, in "capitalistic production," is represented by mills with their intricate machines, ships, railroads, and the like. Primitive industry has capital but is not highly capitalistic, since labor and a little capital in simple forms are all that it requires. These primitive capital goods are still essential. _Capital._--It might seem that we have already described the nature of capital, but we have not. We have described the kinds of goods of which it consists. A sharp distinction is to be drawn between two ways of treating capital goods, and only one of these ways affords a treatment of capital properly so called. To attain that concept we must think of goods as in some way constituting a stock which abides as long as the business continues. And yet the things themselves separately considered do not abide. Goods are perishable things; no one lasts forever, and some last only a very short time. Raw materials best serve their purpose when they are quickly transformed into usable goods and taken out of the category of productive instruments. Tools may last longer, but they ultimately wear out and have to be replaced. _How Capital Goods Originate and Perish._--If you watch a particular mediate good of the passive kind, say wood in a growing tree, you see it beginning its career as an absolutely raw material, and then under the hand of labor, aided by tools, receiving utility till it takes its final form in some article for a consumer's use, say a dining table. Little labor is applied to it during the first stage of the process, that in which the tree is guarded and allowed to grow to a size that fits it for conversion into lumber; but the cutting, carrying, sawing, and fashioning are done by labor and tools, and under their manipulations the wood "ripens" in the economic sense--that is, it becomes quite fit for consumption. It is ready to serve a consumer as a table, and, when this service begins, the wood that up to this point has been a passive capital good, constantly receiving utilities, will cease to be a capital good at all and begin slowly to wear out in the service of its owner.[1] [1] In the economic sense consumption is the utilization rather than the destruction of the thing consumed, though many things go rapidly to destruction in the process. Food is destroyed in the moment of using; clothing perishes more slowly by use, and furniture and dwellings more slowly still. Some things that go gradually to destruction during the process of utilization do not perish the more rapidly because of it. A vase, a statue, or a picture is consumed, in the economic sense, by a person's act of looking at it and getting pleasure from it; but this does not hasten its deterioration except as keeping such an ornament where it can be seen exposes it to deterioration or accident. Climbing a hill to get a view "consumes" the hill in a true sense, and looking from the summit over a wide stretch of picturesque country even consumes--that is, utilizes--the landscape; and certainly this act does not injure the thing utilized. The general fact, however, that goods for final use are, as a rule, injured or destroyed either by the act of consumption or by the exposures that are incidental to it, justifies the use of this term to express the receiving of a service from the usable article. It is a process in which the commodity acts on men's sensibilities and, as a general rule, exhausts itself while so doing. It is worth remembering that this exhaustion of the good is not the essential part of consumption. On the man's side that consists in deriving benefits from the good, while on the side of the good itself it consists in conferring benefit on the man--in doing him good and not in doing itself harm. _The Transition of Goods from one State to Another._--The beginning of its service in the purchaser's dining room takes the wood of the table out of the category of producers' goods; but there is some raw material that is never destined to emerge from that category and enter another. Its last state of existence as a good will be that in which it is embodied, not in an article for consumers' use, but in an active tool. Our tree might have furnished some of its wood for a wheelbarrow, and if so, that part of it would have been a capital good until it ceased to be an economic good at all. If we watch it as it grows toward its economic maturity, we see it sawed, planed, and otherwise fashioned under the laborer's hand, and maintaining during all this time its passive attitude, just as does the wood that is destined to constitute a table. When the wheelbarrow is completed, it does not, like the table, begin to minister directly to consumers' wants, but begins actively to aid some laborer in a further productive operation. It carries mortar to the wall of an unfinished building and is thus taken out of the list of passive goods--recipients of utility--and is ranged with other active tools which impart utility. The same thing is true of the steel that is destined to compose the head of a modern woodman's ax or the stone that is in process of fashioning into the rude hatchet of some primitive savage. As raw or partly wrought material it is a passive capital good; later it becomes an instrument of the active sort. _The Ultimate Perishability of all Kinds of Goods artificially Made._--In the end both kinds of material will cease to be capital goods. The raw stuff that goes into food, clothing, furnishings, or the like will become consumers' goods, while the raw material of tools will, in its final form, the tools themselves, have one more lease of life as capital goods. In the end, however, as wheelbarrows, axes, hatchets, and the whole long list of active implements are used up, they cease to be capital goods because they cease to be economic goods at all. They are as truly ordained to be ultimately used up as are food and clothing, and this is true of the most durable things that are artificially made. Walls, roadways, bridges, and buildings slowly deteriorate till the time comes when for productive purposes their room is worth more than their company. _Why the Perishability of Capital Goods does not put Capital out of Existence._--Perishability is the most striking trait of capital goods. Each particular one comes and goes, but there is always a stock of them on hand; for when one is on the point of going, another is ready to take its place and keep up the succession. New tools replace old tools; new materials replace those that are finished and withdrawn, and so it comes about that a stock of such things abides forever. Not one of the individual instruments is permanent, for each one only does its part in keeping up an endless procession. It is the procession that is always there--a moving series of individual goods, not one of which has more than a transient economic career. Each one helps to keep up the supply of permanent capital just as each man, taking his turn in an endless succession of laborers, serves during his brief life to keep up the permanent force of laboring humanity. Men come and go, but "labor"--a mass of working humanity--abides; and so capital goods come and go, but a stock of them abides, kept up by perpetual replacement. We may trace the career of any single instrument from a beginning to an end; but we may, on the other hand, cease to look at any instruments that we single out and identify and look rather at the procession of them; and if we do this, we look at a body which never wastes away, though the things that compose it are, separately considered, forever wasting. There are many kinds of transient things which, by the same process of renewal, constitute permanent entities. Composing a human body at this moment are certain tissues that can be separately identified; and if we watch any one of them, we shall see it going in a short time to destruction. Yet the body lasts while life continues. Indeed, the evidence of the life itself is the discarding and replacing of the tissues. A living body is a durable thing, though the particular tissues that at any one time compose it are not so. In a like way drops of water make a river, and this is a permanent thing, however rapidly its composition changes. The waterfall that drives the machinery of a mill is permanent, though no particular particle of water remains in it for more than a moment. Society is permanent, though the men who compose it are short-lived. In an exactly similar way a body of capital goods is maintained as a perpetual instrumentality of production. _This is capital properly so called._ It is, as it were, a quasi-living body, perpetuated by the constant replacement of the component parts, which are destroyed as its normal activities go on. _The Difference between Capital Goods and Capital Summarized._--The distinction between capital goods, on the one hand, and capital, on the other, is, then, like that between particular tissues and a living body, or like that between particular particles of water in the river and the river that flows forever. We can single out and watch certain drops of the water as they flow from a spring, and we can trace them through their brief careers, and say truly that the river is composed of fickle and transient stuff; but we cannot say that the river is transient. That is perpetuated by the renewing of the supply of water as the original drops disappear. We can mentally watch a particular man, as he enters the social force of workmen, labors for a time, and drops out of the line, and can see that society is composed of transient material; but society itself is an abiding thing. So we can study a particular bit of ore or wool or leather or a particular hammer or spindle or sewing machine, and in those cases we shall be studying capital goods and finding how perishable they are; but we shall also see that a stock of them always abides as the capital of economic society. We can cease to look at individual things and study the permanent fund of productive wealth, which is made up of goods like ore, wool, leather, hammers, spindles, and sewing machines. The identity of the things which make up this stock is forever changing. The same list of things we shall never find in the stock on any two dates, but a supply of similar things forever abides. _Capital is this permanent fund of productive goods, the identity of whose component elements is forever changing. Capital goods are the shifting component parts of this permanent aggregate._ They are the particular instruments that, each during its own brief economic lifetime, take their places in the endless procession of things which in its entirety is an abiding productive agent--the co-worker of labor and its perpetual assistant in creating consumers' wealth. _The Business Man's View of Capital._--It is as such an abiding entity that a business man regards capital. He describes it nearly always as a sum of money. Thus the capital of a manufacturer is "a million dollars" because a stock of instruments worth that amount is kept intact in his possession. It is not allowed to waste away, however much the constituent parts of it may shift. The waste and renewal which business entails leave the equivalent of the million dollars always on hand, though never in the literal shape of money. A stock of shifting goods always worth a million dollars is, by a figure of speech, described as a million dollars "invested in the goods."[2] [2] We here put out of sight all questions connected with the changing purchasing power of money. This is, in ordinary times, the business man's habit. He considers his capital intact if the number of dollars invested originally in his business still appears on his inventory as representing the net surplus of his assets over his liabilities. If a currency were undergoing rapid inflation, a fixed amount of invested money would represent a shrinking stock of capital goods. This stock would last always, but would grow smaller by a true standard of measurement. All that we are at present interested in knowing is that practical usage treats capital as a permanent fund of productive wealth, and most conveniently describes it as a fixed amount of money "invested" in goods of a productive kind. What is thought of as "money" abides. Of course the practical man does not regard it as actually composed of currency. _The Chief Attribute of Capital._--A chief attribute of capital, properly so called, is permanence. If a man's productive fund does not last, he is impoverished. The farmer keeps on hand a more or less constant supply of the implements he has to use. He takes a part of the proceeds of the sale of his crops, puts it into the shape of implements and materials, and in this way keeps an amount of them on hand as the auxiliary capital of agriculture. Particular goods are not constant, but the sum of money or quantum of wealth "invested" in the moving procession of them is so. At any one instant the capital is composed of particular instruments which can be sought out and identified, but at no two instants are the goods the same. _The Reasons for describing Capital as a Sum of Money._--This fact explains the general practice of describing capital in terms of money. The manufacturer just referred to will speak of his capital as "a million dollars" and consider that sum as a "permanent investment" because he knows that while the goods that now represent that value will soon pass from him, the "dollars"--that is, the value which is equivalent to the dollars--will abide. There is, moreover, no failure on his part to discriminate between his capital and literal money, for he knows in what his productive fund consists, and is fully aware that only the minutest part of it is in the shape of actual currency. Instruments of production compose the fund, but the dollars serve to describe it. They indicate the amount and the abiding quality of it, since they describe what he has invested or embodied in the shifting things and can, by a fair sale, get out of them. _Why Abstract Terms are used in popularly describing Capital._--In certain connections money is, in unintelligent thinking, confused with real capital in ways that we should guard against. In avoiding such errors we need to be even more careful that we do not miss the truth that is at the basis of the common mode of describing capital. A permanent fund that is spoken of as a million dollars invested in a business does not suggest to any one a literal pile of a million silver or paper dollars or of a hundred thousand gold eagles. It suggests what is actually in the business, a procession of things each of which comes into the man's possession and then leaves him, and helps him to keep the constant stock of goods that at any time is a potential million of dollars. A permanent body of any kind, if it is made up of shifting tissues, is commonly described by the use of an abstract term. A waterfall, made as it is of rapidly changing drops of water, is spoken of as a "water power," since the power is the abiding thing. An endless series of living human beings is described as "humanity," since that remains through all personal changes. An endless series of workingmen is described as "labor," and we study the "wages of labor," the "relations of labor to capital," etc., because these are permanent relations. Men come and go, but labor continues and is the source of a permanent income. It is actually the fact that in speaking of the "labor problem" or the "relation of capital and labor" we usually think of "labor in the abstract," as we might term it; but this is very far from implying that we consider a series of generations of actual workingmen as an abstraction. We may, using terms in a like way, speak of the problem of interest as concerning "capital in the abstract"; but this is far from meaning that we consider an endless series of material instruments of industry an abstraction. We describe these real things by the use of an abstract term, just as we describe a thousand other realities. A "fund," a "value," a "permanent quantum of wealth," is capital; but with the abstract notion the mind always merges the thought of the concrete entity. It is the tools of industry that, in their endless march, come into and go out of the industrial field that we think of even when we use the abstract term. This term, however, saves us from the danger of thinking merely of particular tools that we can identify and trace to their final destruction when we form the concept of capital. _The Importance of discriminating between the Concept of Capital Goods and that of Capital._--Very great is the importance of keeping sharply distinct the two concepts of productive wealth of which one is described by the term _capital goods_ and the other by the term _capital_. In the one case we think of a particular thing which we identify, keep in mind, and watch as it goes through its transformations, does its final work, and perishes. The brilliant studies of Professor Böhm-Bawerk are based on the idea that such a tracing of the biography of a particular instrument is the true way to solve the problem of interest. Yet the very term _interest_ itself suggests the existence of what we have defined as permanent capital--an abiding fund or sum of wealth that every year yields as an income a certain percentage of itself. The "hundred dollars" yields five dollars; that is, the fund yields a twentieth of the amount which, amid all the changes of its constituent parts, it continues to embody. It is true, indeed, that a study of _all_ capital goods which have existed or will exist, with due attention to their relations to each other, would reveal the fact that they maintain such an endless procession as has been here described, and it would thus bring before the mind such a concept of capital as the business man has and describes by the monetary form of expression. By making a synthetic study of capital goods in general, and not separate studies of particular goods as they come and go, we can obtain a grand resultant of the action of all of them, which is nothing less than permanent capital doing its continuous work. Such a comprehensive study of capital goods, if it is carried far enough, becomes a study of the abiding entity, capital. Allowing ourselves, however, to put the abiding entity out of sight and merely to trace the origin, growth, and productive action of separate instruments of production would be disastrous. The undying body in which the particular things are tissues absolutely needs to come into view. The very mention of a problem of interest--of the percentage of itself that a fund of a given amount can annually earn--puts before us at once the permanent entity, capital, and the problems relating to it.[3] [3] Consumers' goods may be regarded in the two distinct ways in which it is necessary to regard capital goods. We may look at particular articles for consumption, as they begin their careers by ministering to their owners' needs, and follow them as they wear out and finally perish. This gives a conception of them which is analogous to the conception of capital goods rather than to that of capital. On the other hand, we may look at the permanent stock of usable articles, which is maintained by the constant coming of new ones to replace those which are worn out, and in this way we get a conception of _permanent consumers' wealth_. The flow of finished goods from the shops to the users offsetting the concurrent destruction of such articles in the users' hands, has the effect of maintaining a permanent fund of consumers' wealth consisting of perishable goods the identity of which is always changing; and this fund is analogous to permanent capital as we have defined it. Professor C. A. Tuttle has advocated the use of the generic term _wealth_ to denote the two continuing funds which we have here termed, on the one hand, capital, and, on the other hand, the permanent stock of consumers' wealth. We have preferred to use the term _wealth_ in a sense that is generic enough to include both capital and capital goods, and both the permanent stock of consumers' goods and the particular articles that, in turn, compose it. Wealth consists of effectively useful concrete things regarded either as particular articles that can be identified and watched till they perish in the using, or as an abiding stock of articles of this genus, each one of which has in itself only a transient existence. See an article on "The Wealth Concept," by Professor Charles A. Tuttle, in the _Annals of the American Academy of Political and Social Science_, for April, 1891, and other articles by the same author. _Labor as a Permanent Entity._--The term _labor_ is sometimes used to describe a permanent aggregation of laborers no one of whom lives and works through more than a brief period. Labor is thus analogous to capital and laborers to capital goods. A permanent working force is composed of perishable beings as a permanent producing fund is composed of perishable goods. Both are commonly described by the use of abstract terms, but both are in reality concrete things; and actually to reduce either to a mere abstraction would be to put a material entity out of existence. We instinctively speak of a value--a given number of dollars--in describing a man's capital, but it is dollars "invested in" productive instruments; and we instinctively speak of labor when we mean an abiding force of workingmen. Neither capital nor labor is like an immaterial soul that can live apart from its body. Each consists of a permanent body with a shifting composition. A permanent sum, on the one hand, a permanent amount of working energy, on the other, are always present, but they are in goods and men respectively. Each may well be described by the use of an abstract term, and in practical life it commonly is so; but it is a concrete reality. _Peculiarity of Land as a Capital Good._--One reservation needs to be made when we call capital goods perishable. If we include land under this term, we must make it an exception to the rule of destructibility. It is the only thing that does not go out of existence in the using. It is not a produced good at all and does not stand, like other goods, in an intermediate position between labor and the gratification that labor is intended to produce. Work did not create it and using will not end it. It will be called, in our study, a capital good, for it is a form of wealth which produces other wealth. It enters into the permanent productive fund that society is using. _Differences between Land and Other Capital Goods Important in Economic Dynamics._--It is in a later part of the study which deals with economic changes--the part which we shall call Economic Dynamics--that the differences between land and artificially made goods become prominent, and these differences will receive due emphasis in their proper place. In studying the law which would govern economic society if no essential economic changes were taking place,--in reducing society, as it were, to a static state,--we find that there is a certain set of characteristics which land shares with those capital goods which are the products of human industry. In static studies it is best to group the productive instruments which men make with the one unmade good which nature furnishes and to recognize that together they embody the permanent fund of productive wealth.[4] [4] What is commonly termed land contains elements which perish in the using. Such are deposits of coal, ores, or oil, and those ingredients of loam which are exhausted by tillage. Such elements of the soil are not land in the economic sense. How they should be regarded will be shown in a later chapter. _Mobility an Attribute of Capital._--Even in a static society capital would be permanent, while particular capital goods would be perishable. In dynamic studies another quality of capital, as distinguished from capital goods, comes into the foreground, namely, mobility. It is the power to move without loss from one industry to another. Goods cannot be thus moved with any freedom. A loom cannot be taken out of a woolen mill and made to do duty in a carpenter's shop, nor can a circular saw be made available in weaving. When the loom wears out and needs replacement, it is in the owner's power to procure either another loom or a circular saw, and if he chooses the latter alternative, he causes capital to move into the woodworking business. A whaling ship would not be useful as a cotton mill; but much capital that was once invested in the whale fishery of New England has since found its way into manufacturing. The transfer can often be made without waste. If the earnings of an instrument have sufficed to replace it with another that is like it, they may suffice for producing an instrument that is unlike it. Waste, if it occurs, results from a failure of the original instrument to earn the fund for replacement. Capital which thus abides but passes from one employment to another is a body the identity and the character of whose component parts change. The transfer of capital from one industry to another is a dynamic phenomenon which is later to be considered. What is here important is the fact that it is in the main accomplished without entailing transfers of capital goods. An instrument wears itself out in one industry, and instead of being succeeded by a like instrument in the same industry, it is succeeded by one of a different kind which is used in a different branch of production. Goods have not moved from one branch to another, but capital has done so. _How Capital itself may be Destroyed._--When we speak of capital as permanent, we mean that using does not destroy it as it destroys the tissues of which it is composed. Fires, earthquakes, and business disasters put parts of it out of existence and affect the volume of the fund as a whole; but production itself leaves it intact. It is this very production which destroys capital goods and makes it necessary to replace them. CHAPTER III THE MEASURE OF CONSUMERS' WEALTH In all stages of social development the economic motives that actuate men remain essentially the same. All men seek to get as much net service from material wealth as they can. The more wealth they have, other things remaining the same, the better off they are, and the more personal sacrifice they are compelled to undergo in the securing of the wealth, the worse off they are. Some of the benefit received is neutralized by the sacrifice incurred; but there is a net surplus of gains not thus canceled by sacrifices, and the generic motive which may properly be called economic is the desire to make this surplus large. Except in a perfectly isolated individual life, there is opportunity for ethical motives to affect men's economic actions. Altruism has a place in any _social_ system of economics, and so have the sense of justice and the positive compulsion of the law. Altruism does its largest work in causing men to give away wealth after they have acquired it, but conscience and the law powerfully affect their actions in acquiring it. These are forces of which Social Economics has to take account; but the more egoistic motive, desire to secure the largest net benefit from the wealth-creating process, is one of the premises of any economic science. This involves a general pursuit of wealth; but men seek the wealth for a certain personal effect which comes from the use of it, and they measure it, when attained, by means of this subjective effect. _How Specific Utilities are Measured._--As the essential quality of wealth is specific effective utility, we measure wealth by estimating the amount of this quality, and it is always a consumer who must make the measurement. He must discover the importance to himself of a small quantity of a particular commodity. The hunter must find out how much worse off he would be if he were to lose a small part of his supply of game and endure some hunger as a consequence. In doing this he gets the measure of the effective utility of any like quantity of game, since any one specific part of his supply is as important as any other and no more so. The estimate of the importance of such a supply of food material has to be made in this specific way, by taking the amount on hand piece by piece, and not by gauging the importance of the whole of it at once. _Value the Measure of Specific Effective Utility._--If any consumer will estimate the importance to himself of a single unit of goods of a certain kind, and multiply the measure so gained by the number of units he is appraising, he will make a measurement of the value of the total amount. _Values not based on the Importance of the Total Supply of Goods._--It is essential that the consumer, in determining the value of a kind of goods, should not estimate the importance of the supply in its entirety, since that would give an exaggerated measure. Measurements of value are always made specifically, and single units of the supply of goods are appraised apart from the remainder. The total utility of atmospheric air is infinite, since the loss of the whole of it would mean the total destruction of animal life; but the specific utility and the value of air is _nil_, since no one limited part of the supply has any practical importance. A roomful of it might be destroyed with impunity. So the cereal crops of the world, taken as a whole, have almost infinite importance, since their destruction would result in universal famine; but each bushel of grain has an importance that is relatively small. The loss of it would impose no serious hardship upon the average consumer, since he could easily replace it. The value of the crop is determined by the importance of one bushel taken separately and by the number of the bushels. If we estimate the importance of one unit of the supply of anything, express the result of the estimate in a number, and then multiply this by the number of units in the supply, we express the _value_ of this total amount. The _total utility_ of it, on the other hand, is measured by the benefit which we get from the supply in its entirety, or by the difference between the state we are in when we have it all and that to which we should be reduced if we lost it all and were unable to replace it. To measure any such total utility we contrast, in imagination, our condition with the full supply on hand and a condition of total and hopeless privation, in so far as these goods and similar ones are concerned. _This Method of measuring Wealth Universal._--These principles apply as well to the economy of a solitary islander of the Crusoe type as they do to that of a civilized society. A Crusoe does not need to measure values for purposes of exchange, but he has other reasons for measuring them. It is for his interest to use his own labor economically, and to that end he should not put too much of it into one occupation and too little into another. When, by reason of a large store of wheat on hand, the specific importance of it is small,--or, if we use a common expression, when the utility of the "final increment" of it, which a man might secure by making an addition to his supply, is small,--he should divert his labor to raising goats or building huts, where the utility of the increment of product to be gained is, for the time, greater. The solitary man thus well illustrates the act of the society which, in its own peculiar way, sends labor from one department of industry where the "final utility" of its product is small to another where it is larger. It is all done by measuring the specific importance of goods.[1] [1] For extended discussions of the relations of utility and value the reader is referred to the works of Jevons, Menger, Von Wieser, Von Böhm-Bawerk, and Walras. A study of "effective" utility and its relations to value, by the writer of the present treatise, is contained in the _New Englander_ for July, 1881. _The Utility of Producers' Goods._--Consumers' goods have a direct utility, which is a power immediately to serve a consumer. Instruments of production, on the other hand, have indirect utility, since all that they are good for is to help produce things that render the immediate service. They have _productivity_, and this has to be measured in determining their value. What we need to know about hoes and shovels, hammers and anvils, spindles and looms, etc., is how much power they have to create the goods that we want for consumption. Here again the measurement has to be made in the specific way. The capital goods have to be taken unit by unit if their value for productive purposes is to be rightly gauged. A part of a supply of potatoes is traceable to the hoes that dig them; but in valuing the hoes we do not try to find out how much worse off we should be if we had no hoes at all. We endeavor simply to ascertain how badly the loss of one hoe would affect us or how much good the restoration of it would do us. This truth, like the foregoing ones, has a universal application in economics; for primitive men as well as civilized ones must estimate the specific productivity of the tools that they use, and make hoes, shovels, or axes according as the procuring of a single tool of one kind becomes more important than procuring one of another kind. Indeed, the measuring of the utility has to be done, as we shall soon see, in a way that is even more specific than this; for the man has to determine not only how many hoes he will make, but how good he shall make them. The quality of each tool has to be determined in a manner that we must hereafter examine with care. The earning power of capital is, as we shall later see, governed by a specific power of productivity which resides in capital goods. _Cost and Utility._--A ripe consumers' good, in exhausting itself on man, benefits him; but during the period in which it is being prepared for use, when it is receiving utilities at the hands of successive producers, it has an opposite relation to the men who handle it. In making the material useful a man confines and tires himself. He is willing to do it if the reward that he expects will more than pay for the sacrifice, but not otherwise. Moreover, this sacrifice itself has to be estimated specifically in a way that is akin to the method of measuring utilities which determines the values of goods. It is necessary for a man to gauge the sacrifice which is entailed on him, not by his labor as a whole, but by a specific part of it. He finds himself in the evening feeling the fatigue and the sense of confinement which the day of labor has imposed and asks himself how much it would burden him to work a little longer. If what he can get by this means pays for the extra sacrifice involved in thus getting it, he will work for the few minutes, but otherwise he will not. His objection to a few minutes of additional work measures what we may call the specific disutility of labor; and men, whether they be primitive or civilized, are forever making such measurements. They consider how much it will cost them to add slightly to the length of their working day or how much it will benefit them to shorten it. In this way they measure the _specific disutility_ of labor rather than the _total disutility_ of it, since they do not gauge the relief that it would afford to cease working altogether. _The Increasing Cost of Successive Periods of Labor._--It is easy to work when one is not tired, and the first hour or two of labor may even afford a pleasure that largely offsets the burden that it entails; but it is hard to work when one is tired and painfully conscious of the confinement of the shop. Adding anything to the length of a working day imposes on a man the necessity of working at the time when the burden is greatest; and shortening his day, for a like reason, relieves him of some of his most costly toil. _The Natural Length of the Working Day._--Any laborer, as his work goes on, hour after hour, is certain to reach a point at which it is unprofitable to go farther. However greatly he may need more goods, he will not need them as much as he needs rest and change. It may be that he has worked twelve hours, and that, by working longer, he can improve his wardrobe, his food, or his furnishings; but if he has a tolerable supply of such things, he will hardly choose to add to it by staying in the shop when his strength has been exhausted and he is eager to reach his home. _Specific Cost at its Maximum a Measure of Specific Utility._--Two very important principles are at work whenever a man is performing labor in order to create wealth. The more consumers' wealth he gets, the less important to him are the successive units of it, and the more do these successive units cost him. The tenth hour of labor adds to his supply of food, but this addition is not as important as the supplies that were already on hand. If we divide the supply into tenths and let the man produce a tenth in each successive hour, the first tenth, which rescues him from starvation, is the most important, while the last tenth, which comes nearest to glutting his appetite, is least important. This last increment, however, is produced by the greatest sacrifice, for it is gained by making the working day ten hours long instead of nine. [Illustration] Let the hours of the working day be counted along the line _AD_, and let us suppose that a man gets unit after unit of consumers' wealth, as he works hour after hour, and the units grow less and less important. The first and most important we may measure by the vertical line _AB_. The second is worth less, the third still less, and the last one is worth only the amount _CD_. This means that the successive units of what we may call general commodity for personal use have declined in utility along the curve _BC_. On the other hand, as the man's labor has been prolonged, it has grown more and more wearying and irksome. The sacrifice that it involved at first was almost nothing, but the sacrifice of the succeeding hours has increased until, in the last hour, it amounts to the quantity expressed by _CD_.[2] As the man has continued to work, the onerousness of working has increased along the ascending line _AC_ until the point has been reached where it is so great that it is barely compensated by the fruits of the labor. The man will then work no longer. If he were to do so, his sacrifice would become still larger and his reward still less. Up to this point it is profitable to work, for every hour of labor has brought him something so useful that it has more than paid for whatever sacrifice he has made in order to get it. Beyond this point this is not the case. The line _CD_ represents the cost of labor at its maximum, and it is this which acts as a measure of effective utility and value. [2] If we should try to describe all the possibilities in the case, we should take account of the fact that a man may get a positive pleasure from his first hour or two of labor and construct a figure thus to express this fact:-- [Illustration] _AC_ is the curve representing the sacrifice entailed by successive hours of labor. [Illustration] In like manner we should have to recognize the fact that the utility of some kinds of goods may not reach a maximum with the first increment, and should construct a utility curve to express this fact. _BC_ here represents the increase and the following decrease in the specific utility of the supply of an article of this kind. _The Coincident Measure of Cost and Utility._--It now appears that the line _CD_ signifies two different things. It measures the utility of the last unit of the man's consumers' wealth, and it also measures the sacrifice that he has incurred in order to get it. These are opposing influences, but are equally strong. The one, of itself, makes man better off, while the other, of itself alone, makes him worse off. At the last instant of the working day they neutralize each other, though in all the earlier periods the utility secured is greater than the sacrifice incurred and the net gain thus secured has kept the man working. _The Point at which Utility and Disutility are mutually Neutralizing._--At a certain test point, then, production acts on man in such a way as exactly to offset the effect experienced from the consuming of the product. Man, as a consumer, has to measure a beneficial effect on himself, and, as a producer, he has to measure an unpleasant effect. He finds how much he is benefited by the last unit of wealth which he gets for personal use, and also how much he is burdened by the last bit of labor that he performs. If this sacrifice just offsets the benefit derived from the final consumption, it is the best unit for measuring all kinds of utilities. A man secures by means of this final and most costly labor a variety of things, for if he works up to this point every day in the year, he will have at his disposal, say, a hundred hours of labor in excess of what he would have had if he had worked a third of an hour less each day. The product of this extra labor will be taken in the shape of goods that are also extra, or additional to whatever he would otherwise have secured. They will represent special comforts and luxuries of many kinds. The values of these goods may be measured and compared by means of the quantity of labor that the man has thought it worth while to perform in order to get them. If he values one of them highly enough to think it worth while to work for an extra period of twenty minutes at the end of a day in order to get it, it may be said to have one unit of value; and if he is anxious enough to get something else by doing this on two successive days, this second article may be said to have two units of value. The savage who, by working for an extra hour, makes some improvement in his canoe, and by doing the same thing on another day makes some improvement in his food, establishes thereby the fact that he values these two additional bits of consumers' wealth equally. If he uses ten hours of the same costly kind of labor in making an addition to his hut, he proves that he values that gain ten times as highly as he does either of the others. Establishing values by means of such final costs is a process that goes on in every stage of social evolution. _Unlike Results of Creating Wealth and Using it Summarized._--Wealth, then, affects a man as a consumer in one way and the same man as a producer in an opposite way. In the one case the effects are favorable, and in the other they are unfavorable. At a certain test point the two effects may be equally strong as motives to action, and so may be said to be equivalent. The man is impelled to work by his desire for a final unit of wealth, and he is deterred from it by his aversion for the final unit of labor which he will have to incur if he secures the benefit. If he performs the labor and gets the benefit, he neither gains nor loses as the net result of this particular part of his labor, though from all other parts of his labor he gets a net surplus of benefit. It is natural to measure all such economic gains in terms of sacrifices incurred at the test point where these are greatest. This is the labor one would have to incur in order to add the means of gratification to his previous supply of consumers' goods. _Minimum Gains offset Maximum Pains._--Running through and through the economic process are these two different measuring operations. Man is forever estimating the amount of harm that wealth does him when he is in the act of producing it, and the amount of good it does him when he consumes it; and there is always to be found a point where the two amounts are equal. It is the point at which gains are smallest and sacrifices greatest. It is at this point that men measure values in primitive life and in civilized life. How in the intricate life of a modern society the measuring is done we shall in due time see; for the present it is enough that we perceive the universality of the law according to which value is best measured by the disutility of the labor which is most costly to the worker. Organized societies do something which is tantamount to this. It is as though the whole social organism were an individual counting the sacrifices of his most costly labor and getting therefrom a unit for comparing the effective utilities of different goods. _How Primitive Man tests Value._--It is a mistake to suppose that what is essential in value depends on the existence of an actual market in which things are exchanged for each other. In a market, it is true, values are established and their amounts are expressed in ways that cannot be adopted in primitive life. When we buy a thing, we help to fix the value of it and of other things which are like it. The mere ratios in which things exchange for each other in a market are, however, by no means the essence of value itself. That is something deeper and is one of the universal phenomena of wealth. Value, as we have said, is the measure of the effective utility of things, a kind of measure that every one is frequently compelled to employ, whether he is making goods for himself or buying them from others. A producer who has the option of making different things for himself needs to know what variety of goods can be increased in supply with the greatest advantage to himself as a consumer. Adding to the supply of any one of them is getting a "final" or "marginal" unit of consumers' wealth. It is something that is needed less than the things that were already on hand. Without making such a comparison of the importance of marginal units of different commodities he cannot use his resources in the way that will do him the most good.[3] [3] [Illustration] The terms _marginal_ and _final_ mean essentially the same thing, but the modes of conceiving it differ. When utilities are thought of as supplied one after another, the last is the least important. We may represent a man's enlarging gratifications, not by such a mere series of quantitative increments, but by an enlarging area. We may draw a series of concentric circles, beginning with the smallest, and let this central area inclose the most necessary forms of consumers' wealth. When we draw a second and larger circle, we inclose between it and the first one a zone which includes those forms which come next in importance. By continuing to draw circles we reach an outermost one which bounds a zone in which are included the least important of the consumer's acquisitions. These are the things which he gets with his costliest increment of labor, and the things which lie beyond the circle last drawn would not pay for the sacrifice which acquiring them would cost. In the accompanying figure the fifth zone includes these "marginal" forms of wealth. _How Isolated Men measure Final Utility._--If a cave dweller possesses a store of one hundred measures of nuts, he measures the final utility and the value of this store in the manner which we have described. If he were to be deprived of the whole stock, he might starve, but this fact does not afford the basis of the value which he puts on the nuts. He measures the importance of this consumers' wealth specifically. He tests the effect of losing one measure and no more, and finds that he could lose the single measure without suffering greatly. The difference between having an appetite fully satiated and having it very nearly so is not serious. [Illustration] Let _AD_ represent the savage's total supply of food. _AB_ will represent the utility of the first unit; _CD_ of the hundredth. If we supply the food unit by unit, the utility of the successive increments will decline along the curve _BC_. When the man has a hundred units of food, no one unit of it is worth any more than the last one, since if any one were taken away, the last one could be put in the place of it. The _total absolute utility_ of the food is measured by the area _ABCD_, but the total _value_ will be represented by the rectangle _ADCE_. The area _EBC_ measures the surplus of utility contained in the earlier units in the series. _The Motive for measuring Values in Primitive Life._--Even the cave dweller would have to measure values, and would thus have to apply the principle of final utility, because he would need to spend his limited productive energies in the way that would do him the most good. When he is nearly satiated with food, he needs other things more than he does food stuffs. If he has secured so much of one product that any additional amount that he may get by an hour's labor would be of less use to him than what he could get of some other product by the same amount of labor, it is important for him to change his occupation and produce that thing of which an additional unit--which will perhaps be the final unit of this more desirable article--has the higher degree of usefulness. _Final Utility and Labor Cost._--On the supposition that a small store of roots and nuts were incapable of being replaced by any amount of effort and that no other food were to be had, the utility of it would be indefinitely great, since the man's life would depend on this one increment of food alone. A man would value that life-sustaining good for what it would do for him and without any reference to the amount of work he had performed in order to get it, or to the amount he would have to perform in order to get another store like it. On the supposition that by labor the man could replace this essential supply, the effective utility of it would be gauged by the sacrifice he would have to make in order to replace it. The effective utility of any unit of a good that an hour's labor will produce can never be more than enough to offset the disutility of a marginal or final hour of labor; and thus even a single unit of replaceable food stuff, even when it stands alone and constitutes the whole supply, is valued according to the cost of getting another one like it. A man will prize it according to his dread of the sacrifice involved in getting the duplicate. If he gets this by adding an hour of labor to his day's work, this fact is an evidence that the importance of the original supply of the food is measured and expressed by this personal cost of replacement; and as any similar quantity in a large supply of food can be duplicated by the same amount of labor, it appears that, by a standard based on cost, the _effective_ utilities of all units are equal, that of each one is measured by the "disutility" of an hour's labor and that of the whole supply is this amount multiplied by the number of units that this supply contains.[4] [4] [Illustration] Although we may use the terms _final utility_ and _effective utility_ in a way that makes them nearly interchangeable, it is clear that the qualities for which the two terms stand are by no means identical, and that effective utility must be studied in any complete analysis of value. In distinguishing final utility we assume that the units of the supply of goods of a particular kind are furnished one by one, and we measure the absolute utility of each unit. The line _AB_ measures the _absolute_ utility of the first unit supplied. This measurement does not take any account of the cost of replacing this unit, for it does not recognize the possibility of replacing it. What is estimated is the absolute importance of the service which this first unit of the article renders, on the supposition that, if this first increment of the supply were wanting, the service would not be rendered at all. It is, in like manner, the absolute utility of the successive increments supplied which declines along the curve _BC_. _DC_ measures the _absolute_ utility of the final increment, and the area _ABCD_ the total absolute utility of the supply. If the goods can be reproduced by labor, the total effective utility is less, since it is measured, as we have seen, by the amount of sacrifice which the replacing of one lost unit would entail multiplied by the number of units in the supply. It is the amount expressed by the area _AECD_ which is the amount of the value of the goods, since measure of effective utility and value are the same, both in the case of a single unit and in that of a total supply. We have discovered two reasons why the effective utility of any one of the earlier units is equal to the absolute utility of the final one. The first reason is that, if any one of them were lost, the final one would be put in the place of it and the consumer would suffer no loss except what would be entailed by going without the last unit. The second reason is that if the consumer should lose any one of the earlier units, he could replace it by the same amount of labor that would replace the final one. We have seen that the line _DC_ of the figure expresses not only the absolute utility of the final unit of goods, but the disutility of the labor of reproducing it or of reproducing any other unit. The cost of replacing the whole supply is expressed by the area _AECD_, on the supposition that the units are replaced, one at a time, by means of labor performed at the end of several working days when the sacrifice is greatest. Total value is thus quantitatively equivalent to total _effective sacrifice of replacement_, as well as to total effective utility. If, by adding a brief period to the length of one working day, a man can make good the loss of one unit of the goods, by adding the same period to the length of a number of working days, he can make good the loss of the total supply. For simplicity we assume that the man's physical condition remains unchanged, and that an extra hour of labor at the end of any one day costs him as much as it would at the end of any other. _How Primitive Man measures the Productivity of Labor and Capital._--There is a truth relating to producers' wealth that resembles the truth that we have just stated with regard to consumers' wealth. The more consumers' goods of one kind a man has, the less is the value that any one of them has to him. The more producers' goods of a given kind a man has, the less is the efficiency that any particular one of them possesses as an aid to labor. The last bit of bread serves the man himself in a less important way than does the first, inasmuch as it gratifies a want that is less intense; and the last implement of a given kind--the last hatchet or spade or arrow--helps him less in his productive operations than did the first one. On the one hand, we have the law of the diminishing utility of successive units of consumers' goods, and on the other hand, we have a parallel law of the diminishing productivity of successive increments of producers' goods. _The Necessity for measuring the Productive Powers of Capital Goods even in Primitive Life._--Now, it is necessary for every producer, though living in the simplest possible manner, to measure in some way the efficiency of the last unit of each kind of productive instrument that he uses. He has, let us say, a certain number of hatchets and of arrows, and he can produce one hatchet with the same amount of labor that would produce an arrow. Now, if a hatchet will do more good than an arrow, he will direct his energies to the making of the hatchet. It is important that any producer should bring the final units of the different parts of his equipment to a certain uniformity of producing power. He must not go on adding to the stock of implement No. 1 when implement No. 2, which could be had by the same expenditure of labor, would do more good; nor must he add to the stock of either of these after he has acquired such a supply of them that the first unit of implement No. 3 would be of greater importance. Measuring the efficiency of producers' goods is necessary in the case of every one who creates wealth at all, and such measurements reveal the fact that the more producers' goods of one kind a man has, the less is the productive power that resides in one of them.[5] [5] The law of diminishing returns of successive units of _capital goods_ is based on the same principle as the law of diminishing returns of _capital_, but it is not identical with it. We shall see, in due time, how a permanent fund of producers' wealth actually grows and why each new unit, as it adds itself to the fund, creates a smaller income than did its predecessor. _The Foregoing Truths Universal._--All the general facts which have been thus far stated hold true wherever wealth is produced. They do not presuppose the facts of a division of labor and a system of exchanges, and they do not even require that there should be any social organization. Men in the most primitive tribes and even men living in Crusoe-like isolation would create wealth by labor aided by capital. The essence of that wealth would be effective utility, and the measure of this, which is value, would be made in the specific way that we have described. The varieties of capital, the distinction between capital and capital goods, and the law of diminishing productivity of such goods would appear in the most primitive economics as well as in the most advanced. These are by no means all of the facts and principles which are thus of universal application. They are merely a few of the more important and may serve as a foundation or a "Grundlegung," for further study. If we should extend our list of general and basic truths, it would quickly appear that the incomes that have been treated as rent and the various surplus gains which are analogous to rent are universal economic phenomena which it would be not illogical to discuss in the preliminary part of this treatise. What has been stated, however, concerning the laws of diminishing productivity of successive units of producers' wealth, concerning the diminishing utility of successive units of consumers' wealth, and also concerning the increasing burdensomeness of continuous hours of labor, presents the essential principles on which all rents and quasi-rents rest. It is best to study the applications of these principles as they are made in a civilized state. _Universal Economic Truths independent of the Special Facts of Sociology._--This first division of economic science borrows none of its premises from sociology, for the truths which compose it would abide if there were no society in existence. Basic facts it takes from Physics, Biology, Psychology, Chemistry, etc. Facts concerning man, nature, and the relation between them are material for it, but relations between man and man come into view only in the later divisions. There, indeed, they do come into the very foreground with results which immeasurably enrich the science. What we may call the socialization of the economic process we shall have next before us, and we shall find it full of critical problems involving the future well-being of humanity. Industry is carried on by a social organism in which men are atomic parts and to which nature has given a constitution with laws of action and development. We have first to study the nature of this industrial organism and the mode in which it would act if it were not subject to any constitutional change; and later we must study it in its process of growth. The economic action of a society which is undergoing no organic changes is the subject of Social Economic Statics, while such changes with their causes and effects constitute the subject of the science of Social Economic Dynamics. CHAPTER IV THE SOCIALIZATION OF INDUSTRY We have now before us a few principles of so general a kind that they apply to the economy of the most primitive state as well as to that of the most advanced. It is not necessary that men should live in any particular relation to each other, in order that, in creating and consuming wealth, they should exemplify these principles. They would do this even though they never came into touch with each other, but lived, as best they could, each man on his solitary farm. Laws of this general kind result from man's relation to nature, and not at all from the relation of different men to each other. Let a man keep wholly aloof from other men, apply his labor directly to nature, and he can produce wealth of the various kinds that we have described. He can secure food, clothing, and other things for his own use, and he can make tools to help him in securing them. He will appraise the consumers' goods according to the law of what has been called _final utility_ or, in another view, effective specific utility, and he will also test the comparative usefulness of his various tools by an appeal to the law of final or specific productivity. _Social Economy the Chief Subject of Study._--We care most to know how an organized society produces and uses its wealth, and in making this inquiry we encounter at once phenomena that are not universal. The civilized society creates its wealth coöperatively, by the joint action of its various members; that is, it proceeds by means of a division of labor and an exchanging of products. Moreover, it has, in some way, to share the sum total of its gains among its various members. It has to apportion labor among different occupations for the sake of collective production, which is a grand synthetic operation whereby each man puts something into a common total which is the income of all society. It has, further, to divide the grand total into shares for its different members--an analytical operation in which each man takes something out of the aggregate for his personal use. This is distribution in the narrower sense of that term--the apportionment among the members of a civilized society of the fruits of production. In the wider sense the term also includes the apportionment of the sacrifices incurred in the joint production. Distribution, as thus defined, is the element that appears in economic life in consequence of social organization. This is a secondary element, indeed; for man, nature and their relations and interactions are the primary facts, and the relations of men to each other come logically after these. Social organization, however, is so transforming in its effects as to reduce to small proportions the amount of attention it is worth our while to devote to the economy of the primitive types of life. It is necessary to make some study of that economy, for it is thus that we place before ourselves the fact that there are universal economic laws and perceive distinctly the nature of some of the more important of them. _Facts Peculiar to Socialized Industry._--The term _Political Economy_ denotes a science of industry[1] as thus socialized, for it is a science of the wealth which is produced in an organized way by the people of a more or less civilized state. The general truths which we have thus far stated apply to such an economy, indeed, but they also apply to the wealth-creating and wealth-consuming processes of uncivilized peoples, and even of isolated individuals who have no dealings with each other. They are truths of Economics in the unrestricted sense, and we have now to study the special truths of _Political_ Economy. When production goes on by division of labor, as when one man works at one occupation and another at another, phenomena appear that do not appear in more primitive life; and still others appear when, within each occupation, there is a division of functions between the laborer and the capitalist, as is the case whenever one set of men furnish tools of production and another set do the work. The special laws of this highly developed economic system require far more extended study than do those more general laws which are common to it and simpler systems. We now continue to recognize the universal and basic truths which have been stated in the foregoing chapters and proceed to the study of the special principles which apply only to organized economic life. [1] We use this term in a broad sense, including agriculture and commerce as well as manufacturing. _Specialized Production the Means of Diversified Consumption._--As the kinds of goods that we individually make become fewer, the things which we get and use become more numerous and varied--such is the law of economic specialization. Society as a whole produces an infinite variety of things, and the individual member of it secures for himself goods of very many kinds. The typical modern worker is, in his production, a very narrow specialist, but in his consumption he is far less a specialist than was the rude hunter who was able to enjoy only the few goods which he himself produced. The modern worker's tastes are omnivorous, for he has developed an immense variety of wants and, through social organization, he has acquired the means of satisfying many of them. _The Position of Individuals in the Producing Organism._--When we say that production has been socialized, we mean something very far-reaching. We mean that an organization has grown up in which men are members or parts of members, and that this great organization has undertaken to do the productive work for all the individuals that compose it. For the first time we now recognize a sociological fact among the premises of economic science. When men, whose predecessors may have lived in isolated families or in a society organized for defense or for the mere pleasures of association, now develop a truly economic society, the individual depends on other individuals as well as on nature for the supply of his wants. Economic independence gives way to interdependence, because the fortune of each man is largely dependent, not merely on his own efforts, but on the relations which he sustains to other men. Simple laws of nature still largely control his income, but social laws also have a certain control over it. _Exchanges in their Primitive Stage._--The exchanging of products is, of course, the process with which the organization begins, and this process is introduced by easy and natural stages. The man who at first makes everything for himself develops a particular aptitude for making some one thing; and, though he may still continue to make most things for himself, he finds it advantageous to barter off a part of the supply of the one article for the making of which he is especially well fitted. He seeks out a neighbor whose special aptitude lies in a different direction and who has a surplus of some other article. It may be that one is a successful fisherman and the other is, by preference, a maker of clothing, and that they can get a mutual benefit by an exchange of food for raiment.[2] [2] If we were giving a history of the division of labor, we should have to record the effects of differences of climate and of agricultural and mineral resources in occasioning, at an early period, a territorial division of labor. We are here describing the division of labor which occurs within a society and in consequence of what may be called social economic causes. _The Intermediate Type of Exchanges and the Final One._--In the next stage a man becomes wholly a specialist, making one kind of product only and bartering it away for others. It might seem, at the first glance, that differentiation has now done its full work; but it is very far from having done so. Making one complete good for consumption is still a complex operation, which can advantageously be subdivided in such a way that one man produces a raw material while another works it up into a useful shape. A gain may be made by a further division of the manufacturing process, whereby the first worker makes only the rawest material, another fashions it somewhat, a third carries the process farther, and a fourth or a still later one completes it. In modern industry the material must often pass through very many hands before it is ready to be made over to the consumer. Each man in the series puts a touch on it and passes it on to his successor. A´´´ A´´ A´ A A´´´ is an article of consumers' wealth and A is the rawest material that enters into it. A´ is this material somewhat transformed; A´´ is the same material after it has received the second transformation and needs only a final touch to convert it into A´´´, in which state it will be ready for the consumer's use. We have here a symbol of what is actually taking place in the industry of the world. Cattle are grazing on western ranches; hides are tanning in the woods of Pennsylvania; leather is going through the many changes that fashion it into shoes in the mills of Brockton; shoes are arranged on the shelves of retailers in New York in readiness for the people who are to wear them. These are stages in the making of a single product, and a thousand different products are coming into existence in a like way. _A Representation of the Groups, or Specific Industries, which compose Economic Society._--If we put beside the series of A's a series of B's and one of C's, we have a much simplified representation of what is actually taking place. There are, in reality, a myriad of different things which almost every consumer uses, and every one of them is made by a series of productive operations like the one we have described. The very fact that there are so many of them that it is hopeless to try to represent them all in the table makes it desirable to illustrate the principle by tabulating only a few and to assume that these few are all that there are. For the purposes that we have in mind it is entirely safe to suppose that a series of A's, one of B's, and one of C's represent all the consumers' goods that society uses. What we wish to ascertain is how the different series work together to furnish an income for each member of society. _The Organization Spontaneous._--Laborers can go where they will, and yet they are in some way brought into an orderly relation to each other, being placed in certain proportions in different industries. Capitalists also are free to invest their funds as they will, and yet there is a certain amount that is naturally devoted to each branch of business. How this apportionment takes place we can most readily ascertain by creating such an imaginary and very much simplified society as this table furnishes. A´´´ B´´´ C´´´ A´´ B´´ C´´ A´ B´ C´ A B C The series of A's, which we have already studied, represents one kind of raw material ripening into a finished product. B represents a second kind of raw material, which, like the A, is produced by its own set of workers and is then passed on to a second, who transform it into B´--a partly finished product. These then pass it on, as the corresponding set of men passed on the A´. They hand it over to a set of workmen who change it into B´´, a nearly completed product, and these hand it over to men at B´´´, who, by giving the final fashioning, bring it into the form of a finished consumers' good. The C's represent another general group of workers who transform the raw material, C, into the finished product, C´´´. _Industrial Groups and Subgroups._--Each of these more general bodies of workmen and employers, such as the entire series of A's, we may call an industrial group, and the divisions within each of them, such as A´ or A´´, we may term subgroups. The product of a group is a complete article, while that of a subgroup is not a complete article nor any part of an article that can be taken bodily from it. Yet it is a distinguishable element in the article. The product of the shoe factory is certainly not complete shoes, for the owners of the factory buy leather which has already passed through the hands of tanners; and the tanners themselves bought it in the shape of raw hides, which were furnished by still earlier producers. What the shoe factory has done is to impart a new utility to dressed leather by transforming it into shoes. It would be impossible ever to get that utility out again, or to point to any one part of the shoe as the only part that contains it. What the factory has really made is therefore a utility--a distinguishable quality which pervades a concrete thing. It makes the difference between the leather and the shoes. What the tanner has created is, in like manner, another utility, which makes the difference between raw hides and leather. Groups, then, in their entirety produce whole articles for direct use, while subgroups produce distinguishable utilities which are embodied in such articles. The sum total of all the different utilities constitutes the article. It is a complex of useful qualities held together by the fact that they are attached to the same original matter. _Proportionate Production._--All the subgroups working together in an orderly way not only produce the consumers' wealth that society needs, but produce the different kinds of consumers' goods in nicely adjusted proportions. Unless the general order of the group system is disturbed, there is a normal amount of A´´´ put on the market and also normal amounts of B´´´ and C´´´. This result is attained by influences that run through the productive organism and bring about an adjustment of the comparative amounts of labor in the different occupations. If competition worked quite freely, this adjustment would be so nice that no military apportionment of forces among different brigades, regiments, etc., made consciously and by the most intelligent commanding officer, could surpass the perfection of it. There would be also an equally fine adjustment of the comparative amounts of capital devoted to different industries. In the actual productive organism each man goes where he will--capitalist, laborer, and employer of capital and labor alike. Each man acts in this respect as though there were no such thing as coercion, and as though he might, with unchecked freedom, do solely what is good in his own sight. By reason of the fact that all are seeking to produce what they can in order that they may get what they can, there comes into operation an organic law which brings the groups and subgroups into a delicate balance, in point of size and output, whereby the grand total of force that society commands is prevented from making too much of one product and too little of another, and is made to do its utmost in getting a large sum total of wealth for the benefit of its various members. _What the "Division of Labor" Involves._--This is the real signification of what it has been common to call the division of labor. It is the socialization of labor, or the gathering of isolated laborers into a great organism that, entirely without coercion, determines in some way what each one shall do, and not only makes the product of the whole a myriadfold greater than without any organization it could be, but causes this product to take certain well-adjusted shapes which, as we shall later see, serve consumers better than they could be served by products in misadjusted proportions. _Capital as well as Labor Apportioned._--As we have said, there is a corresponding division of capital or an assignment of different parts of the total fund to different employments; and this is made in the same way as is the division of labor and results in an equally nice adjustment. Each bit of capital, like each workman, becomes, as it were, a specialist. It may take the shape of an instrument which is capable of performing only its one service, like the loom, which is capable of doing nothing except weaving; but even if the tool is somewhat adaptable, like a hammer which can be used in several trades, it is, as it were, stationed in one trade and held, by economic influences, at that one point in the system. The house carpenter keeps his hammer though the cabinet maker could use it. Each bit of capital helps to create a particular utility, and the number of units of the fund that each subgroup contains is, as we shall see, so arranged as to enable the fund as a whole to do its utmost for the general good. It is all without the use of force, since each bit of capital does what its owner pleases to have it do. _A Government Presupposed._--Of course there must be a government over it all. Such a method of producing wealth could never continue unless property were secure and unless it were made so without much effort on the part of its owners. A blacksmith who should have at one moment to use his hammer as a tool and at another to wield it as a weapon of defense could make but poor headway, and a society in which such a state of things existed in various trades would be too anarchic to permit the elaborate division of trades which is the key to success in industry. The most noticeable fact about organized production is that man is forever letting go the thing he has made or helped to make and allowing it to pass out of sight and reach without losing or greatly imperiling his title to the amount of wealth it represents. He casts his bread on the waters, but they bring him a return for it. Under these circumstances it is impossible for him to protect his product as the savage protects his tools, his clothing, and his hut. What a modern worker makes passes into the hands of other men and gets completely out of the maker's direct personal control. If he wanted it again, he could never find it; and if he could find it, it would be in a new shape and other men would have claims upon it. The man who has sold some hides that in the end have become shoes can hardly identify his product on the shelves of retail shoe dealers all over the country, or perhaps all over the world. If by a miracle he could find the particular bits of leather that in their raw stage he himself has furnished, they would be in new and far more valuable forms than they were when he had possession of them. The shoes contain utilities which the man who furnished the hides cannot claim to have created. They have been changed and improved by elements contributed by many other persons, such as manufacturers, carriers, merchants, etc., and he could never carry away the concrete thing that he himself produced without carrying with it other men's property. _The Surrendering of Goods and the Retention of Values Features of Social Industry._--Socialization of industry means, then, that individuals forego all effort to retain their own concrete products, but that they retain certain parts of the value of the products to which they have made contributions. The value of A´´´ when it is sold is claimed by men at A´´´, A´´, A´, and A according to some principle. The values of B´´´ and C´´´ can be followed until they reach the pockets of the men who have contributed their several shares to the making of these things. All this requires a government and a well-developed system of laws and courts for the protection of property, including the protection of it in the form of a claim to a value that is embodied in things which have gone beyond the maker's reach. Property here takes a refined form which requires that the man should forego all desire to keep the literal thing he has made and should make it his aim to retain the value of it in some other form. It is a comparatively simple matter to guard a concrete article which a man has in his possession, though even that requires some energy on the part of the police force and is never quite perfectly accomplished; but it is a far more difficult matter to enforce a claim that a man has against other men, in consequence of some utility that has been created by him but has gone away from him and mingled with utilities created by many other persons in a product that the man will never see. It is the problem of guaranteeing to the shoemaker the due return for the stitches he has put into shoes when the shoes themselves have gone to buyers and wearers in every quarter of the land and many quarters of the globe. _Groups under a Socialistic State._--In _political_ economy as distinct from _general_ economy we take one premise from sociology and another from politics. We assume that society exists and that it has taken on a political character, by establishing laws with courts to interpret them and officials to enforce them. We do not, however, assume that the direction of industrial affairs is in the hands of such officials. In the main industry is organized in a spontaneous way. Men choose such occupations as they like, and when there are too many of them in one group and too few in another, the rewards naturally increase in the group where a larger force is needed, and this lures men in that direction. In a socialistic society such adjustments would be made under the direction of the state. Officials would have to decide when more workers are needed in the A series and less in the B series and would have to use either inducements or some kind of compulsion in order to move them from the one group to the other. What we actually have to deal with is a society that shapes itself by the free acts of individuals, and we have to see how, in this way, it organizes itself for production and divides among different claimants the product that, by the joint action of all of them, it creates. _Gains from the Organization of Industry._--The advantages of the division of labor consist in an increase in the quantity of products and in an improvement in their quality, and the quantitative gain is almost beyond computing. The advantage appears mainly in the middle and upper subgroups of the series, which transform the materials, rather than in the lower subgroups, which produce them; and yet there is a gain everywhere from such organization. A man produces far more when he performs the same operation many times than when he goes through a whole series of unlike operations. Moreover, he can perform the single operation far more accurately and can thus attain a more perfect result. He can learn his minute trade more easily than he could a complex one. Where unusual strength or skill is required, the work may be given to persons who have the requisite quality so that a good product can be insured, and none of the labor of these superior workers will need to be wasted on work which inferior labor can perfectly well perform. _Improvement in the Forms of Capital._--The greatest of all the advantages that come from this division and subdivision of wealth-creating processes comes in the way of applying machinery. A machine is a hopeless specialist and can, as a rule, put only a single minute touch on the material submitted to it; and the introduction of machines differentiates capital in a way that is parallel to the minute subdivision of labor. If the machine is to work at all economically, it must put its touch quickly on one after another of a series of articles, as they are submitted to it in uninterrupted succession. If only one kind of machine were employed in the making of shoes--if, for instance, the sewing of the uppers to the soles were done on sewing machines, even though all the rest were done by hand--it would be natural and almost necessary to have one class of workers to prepare the uppers, another to prepare the soles, and a third to sew them together by aid of the machine. When the several stages of the process are thus given over to different classes of workers, the situation is ripe for the application of more machines, and inventors readily devise apparatus that will perform one or another minute part of the manufacturing process. In the end most branches of manufacture take such shapes that the raw material is intrusted to a series of machines and passes from one to another by a nearly continuous movement, till it emerges from the hands of these automata as complete as any manipulation can make it and ready for the merchants who will convey it to their customers. _Economy of Capital._--There is an economy of capital involved in the fact that instruments can be used thus continuously. A worker does not have to have several sets of tools, many of which would be idle the greater part of the time, as would be the case if the man performed several unlike operations; but the greatest economy comes from the energy, rapidity, and accuracy with which the new instruments act. The tools are far more efficient than they could be if human muscles furnished the power and eyes and nerves supplied the deftness and accuracy that the making of the goods requires. Automata which men set working excel hand tools with men wielding them by a greater ratio than can be calculated. CHAPTER V PRODUCTION A SYNTHESIS; DISTRIBUTION AN ANALYSIS The essential fact about production, as it is carried on by all society, is that it is a synthetic operation, by which a grand total is made up by the contributions of different industries. There is a corresponding fact about the production which is carried on within a particular line of business, or, as we should express it, within a particular subgroup; for within the subgroup there are laborers, on the one hand, and capitalists, on the other, helping each other to make a joint product. In our table A´´´, B´´´, and C´´´ are the goods of which the social income is composed. Subgroups, such as A, A´, etc., help to make this grand total of finished goods; but in A, A´, and all the other subdivisions there are laborers and capitalists working together. Farming, mining, cotton spinning, shoemaking, building, and a myriad of other occupations all work together to create an aggregate of goods which constitute the social income. In each of these branches of business there are men and working appliances contributing each a part to the quota that this branch furnishes. _Distribution as an Analysis._--The essential fact about distribution is that it is an analysis. It reverses the synthetic operation step by step, resolving the grand total produced by society into shares corresponding with the amounts contributed by the specific industries, such as mining, cotton spinning, shoemaking, etc. The men who own and work the mines do not keep the ore they secure, nor do they wish to keep it. The ore goes into a stock of goods for the general use of society, and it constitutes a definite addition to the value of that stock. As ore it is transmuted into a myriad of forms, merged with other materials and lost; but the amount that it adds to the total product of society is definite. It is a certain definable quantity of wealth, and that quantity of wealth the producers of the ore should get for themselves. Distribution further resolves the share of each particular industry into final portions for the use of the laborers and capitalists in that industry; and these correspond with the amounts which these laborers and capitalists contribute. The result of distribution is to fix the rate of wages, the rate of interest, and the amount of the profits of employers, if such profits exist; and the general thesis which is here advanced and remains to be proved is that, if society were without changes and disturbances, if competition were absolutely free, and if labor and capital were so mobile that the slightest inducement would cause them to pass from one branch of business to another,[1] there would be no true profits[2] in any business, and labor and capital would create and get the whole social income. Moreover, each laborer and each capitalist would get the amount of his personal contribution to this sum total. Amid all the complications of society the modern worker would be in a position akin to that of the solitary hunter in a primitive forest--his income would be essentially of his own making and would include all that he makes. He would not, like the primitive man, get the literal things that he fashions, but he would get the _amount of wealth_ that he creates--the value of the literal products which take shape under his hand. [1] It will be seen that we here assume for the process known as competition a degree of perfection which it does not attain in actual life. This process would be absolutely free if labor could and would instantly abandon one industry and enter another whenever it appeared that it could create an increased product by so doing, and if capital also moved with the same promptness on the smallest inducement. In actual life there is friction to be overcome in the making of such transfers, and this constitutes one of the subjects of the theory of Economic Dynamics and will in later chapters be fully considered. Whenever either labor or capital thus moves to a new place in the group system, it becomes an active competitor of the labor or capital that was already there. We need a definition of the competing process. In the case of producing agents it consists in a rivalry in selling. The laborer who moves from A´ of the table that, in the preceding chapter, has been used to represent organized industry to B´, offers for sale, as some would say, his service, or more accurately, the product which his labor can create. The purchasers are the employers in the subgroup B´, and in order to induce them to accept the new labor it is necessary to offer it at a rate of pay which will make it worth their while to take it. If the workers already in this division of the field are getting just what they are worth, a larger force cannot be employed at the same rate of wages, because, for a reason that will later appear, the new labor cannot offer for sale as large a product as an equal amount of the labor that is already there. If the transfer to B´ were made, the new labor would have to accept lower pay than the old has been getting, and the old labor would be forced to accept a cut in its rate of pay or be supplanted by the new. A rate sufficiently low would insure the employment of all. If the labor formerly in this subgroup has been getting less than it is worth, there will ensue a competition among employers who desire to realize, each for himself, the margin of profit which can be made by getting additional labor, and this will either raise the pay of the men already in this subgroup or call new men into it, or do both. In any case it will, in the absence of all trace of monopoly on the side of the employers, end by giving to the men what they are worth. It is, in fact, such a bidding for new labor by employers in any branch of business that moves labor from point to point in the industrial system. The _entrepreneur_ is the agent in the case, profits are the lure, and competition--rivalry in buying--is the means; and competition is, as we use terms, absolutely free whenever it is certain that the smallest margin of net profit will set it working and draw labor or capital to the profit-yielding point. There is competition among the _entrepreneurs_ at A´´´ in selling this finished product to the consuming public, and among different purchasers in buying it. Whenever the price of A´´´ is so high that the whole output of it cannot be sold, each vender tries to supplant others and insure a sale of his own product rather than that of any one else. Competition here is overt and active. When all can be sold at the current price, finding a market for one vender's supply does not require that he win away another's customers, and although the different sellers continue to be rivals and each would welcome an increase of patronage made at others' cost, no one is forced to underbid others in order to continue to sell his accustomed output. Competition is here quiescent, since actual underbidding and the luring away of rivals' customers do not take place. When _entrepreneurs_ who are not now in the subgroup A´´´ are ready to enter it and to become rivals of those already there whenever any profit is to be had by such a course, their competition is not actual but potential; and yet it is a real influence and serves to deter producers already in the field from establishing such a price for their product that the possible competitors will become real and active ones. These three influences may conceivably act without obstruction or may be hindered and deprived of much of their power. In actual life they are subjected to hindrances, and whether they shall hereafter insure a certain approximation to the general state which a perfectly free competition would insure or whether the economic condition of the world shall be permitted to drift far from that normal state, depends on the success which governments will have in reducing or removing the hindrances. [2] In this treatise the term _profits_ will be used to designate the net increase which may remain in employers' hands after paying the wages of labor of every kind and interest on all capital used. The term _gross profits_ describes a sum made up of this net profit and interest on the capital. _Standards of Wages and Interest._--This accurate correspondence between men's incomes and their contributions to the general earnings of society would exist only in the absence of certain changes and disturbances which it will be our aim, in the latter part of this work, to study. These changes give to society the quality that we shall term _dynamic_, and we shall examine them at length. What can, however, be asserted in advance is that the rates of wages and interest which would prevail if the changes and disturbances were entirely absent constitute standards toward which, in spite of all the changes that are going on, actual wages and interest are continually tending. How nearly in practice the earnings of labor and capital approximate the ideal rates which perfect competition would establish is a question which it is not necessary at this point to raise. We have to define the standard rates and show that fundamental forces impel the actual rates toward them. The waters of a pond have an ideal level toward which they tend under the action of gravity; and though a gale were to force them to one end of the pond and cause the surface there to stand much higher than the surface at the other end, the standard level would be unaffected and the steady force of gravity would all the while be drawing the actual surface toward it. In our study of Economic Dynamics we shall encounter influences which act like the gale in the illustration, but at present we are studying what is more akin to gravity--a fundamental and steady force drawing wages and interest toward certain definable levels. In our present study of Economic Statics we must seek to discover how these standards are fixed, in the midst of the overturnings which industrial society undergoes. A´´´ B´´´ C´´´ H´´´ A´´ B´´ C´´ H´´ A´ B´ C´ H´ A B C H We have already represented, in a highly simplified form, the synthesis by which the goods which make up the income of society are produced. A, B, and C represent different raw materials, and they are changed by a series of transmutations into A´´´, B´´´, and C´´´, which stand for all the consumers' goods that the society uses. They represent food, clothing, furnishings, vehicles, and countless means of comfort and pleasure. _The Making of Active Instruments of Production._--It is necessary always to have and use a stock of tools, machines, buildings, and other active instruments of production; and as these wear out in the using, it is necessary that there should be persons who occupy themselves in keeping the stock replenished. Under a system of division of labor there would be special industries devoted to the making of new appliances of production to take the place of those which are worn out and discarded, and also to make repairs on those which are still in use. For illustration, we may let the symbol H´´´ represent all active capital goods that the society uses, the various raw materials which enter into such active goods being represented by H and the partly made instruments by H´ and H´´. If the stock of appliances is not growing larger, just enough of the articles H´´´ are made to replace the discarded ones. No producer gets new machinery, but every one keeps his stock intact. _The Simplified Representation Correct in Principle._--We have now a very simple representation of what actually goes on under the name of the division of labor, and yet the representation is in essential points accurate. In reality a very detailed and minute division and subdivision of industries takes place and the varieties of goods produced are innumerable. Society, as a whole, is making the most highly composite product that can be conceived; namely, consumers' wealth in its countless forms. Each of the grand divisions of society--the general groups that we have represented by the series of A's or of B's--makes a complete article; but even that is in its own way far more composite than the symbol indicates, for it is apt to contain several kinds of raw material and to be made up of a large number of distinct utilities, each of which has its own set of producers. This complexity of the process of production does not change the principle of distribution, by which the product is virtually analyzed into its component elements and the value of each element is assigned to those who create it. This principle can be clearly represented by assuming that each subgroup has one distinct utility to create and that it takes only four of these to make an A´´´, a B´´´ or a C´´´. _A Synthesis within Each Subgroup._--There is within each subgroup a synthesis going on, and this also may be complex. Labor and capital dig ore from the ground--an unusually simple process; and yet there are several distinct operations to be performed before the ore is ready for smelting. When it comes to fashioning the metal into useful shapes, the operations become very numerous and require many subordinate trades even for the making of one product. How many mechanical operations go to the making of a bicycle, an automobile, or a steam yacht? Too many to be represented in any table, but not enough to change at all the principle according to which those who help to make one of these composite products are paid according to their contributions to it. We may consider that all the work that is done in one kind of mill creates one utility. Though there are many subtrades in making a shoe and many more in making a watch, we may proceed as though there were only one transformation of the raw material required in each case. We may let the division between the contiguous subgroups be made commercially rather than merely mechanically, and regard the establishments that buy material and sell it in a more highly wrought condition as moving it forward by one stage on the road to completion, however many changes they may have made in it in the different departments of their several mills. The difference between shoes, on the one hand, and the leather and findings of which they are made, on the other, thus passes for one utility. A manufacturer of shoes puts his leather and findings through many operations before he has shoes for sale; but it is convenient to call all that the manufacturer imparts to these raw elements before he makes them over in their new form to the merchant, one subproduct. _Further Complexities which may be Disregarded._--One man may be in several of the general groups. It is possible, for example, that he may furnish raw materials which enter into more than one finished article. Iron is so extensively used that it goes into more products than can easily be counted. The man who digs iron ore contributes to the making of bridges, rails, locomotives, buildings, machines, ships, and tools in indefinite number and variety. The price of each of the articles into which any of this material goes contains in itself the price of that part of the raw material which goes into it. There is steel in a ship, and the maker of that part of the output of raw steel which goes into a ship gets his pay from the price of the vessel; and so with the crude metal which goes into a bridge, a building, an engine, etc. What the producer of a material gets from each source tends, under perfectly free competition, to equal in amount what he contributes toward the value of the corresponding article. In terms of our table a miner may furnish ore from which iron is taken for the making of both A´´´ and B´´´; and if so, when the distributive process analyzes these products into their elements, the value of what he has in each case contributed will fall to him. He will be paid according to the help he has afforded in the making of the A´´´ and the B´´´, and this fact does not change in principle the manner in which the income of society is divided. If the man helped to make only one thing, he would get a part of the price of that one thing; but if he helps to make several, he will get a part of the price of each of them. Each group has one grand function to perform, such as the making of an A´´´, and if the man helps in more than one, and is paid accordingly, his total pay is according to the amount he produces in all the different functions he performs, and the principle of distribution works as perfectly as it would if the man were confined to the single subgroup A. For simplicity we assume that he is so. _The Functions of Capitalist, Laborer, and Entrepreneur often performed by One Person._--One person may perform several functions, not only by contributing to the products of several groups, but by contributing in more than one way to the product of one subgroup. He may, for example, both labor and furnish capital, and he may, further, perform a special coördinating function which is not labor, in the technical sense, and scarcely involves any continuous personal activity at all, but is essential for rendering labor and capital productive. What this function is we shall presently see. We shall term it the function of the _entrepreneur_, using this term in an unusually strict way. We shall keep this function quite distinct from the work of the superintendent or manager of a business. _How Much the Term "Labor" Covers._--We include under the term _labor_ all effort expended in a routine way in carrying on business. The overseers in the shops, the bookkeepers, clerks, secretaries, treasurers, agents, and, in short, all who perform any of the labor of management for which they get or can get salaries are laborers in the comprehensive sense in which we use the word. It comes about that the employer usually labors; for he does the highest and most responsible work in his own mill or shop. It is not, however, in his capacity as _entrepreneur_, or "_undertaker_," that he labors; for, as the _entrepreneur_, properly speaking, he employs and pays for all the work that receives a stipend. He may employ himself, indeed, and set aside a stated sum to pay his own salary; but this means that in his capacity as _entrepreneur_ he needs a good manager and hires himself to act in that capacity. Scrupulous fidelity is the most important quality that a manager can possess, and the employer can always trust himself to possess it so long as it is his own interests that he controls. _Entrepreneur and Capitalist._--In the same way we include in the capital of an establishment whatever invested funds the employer himself supplies, as well as what he hires from others. Here again a man is likely to serve in more than one capacity, for as an _entrepreneur_ he hires capital and as a capitalist he lets it out for hire, so that in the one capacity he hires capital from himself acting in the other capacity. The man "puts money" into his own business and gets interest for the use of it. _The Different Functions of the Same Man distinguished in Business._--This distinction between the different functions that one person may perform is not a mere refinement of theory, but is something that is recognized in business and has great practical importance. In a corporation officials who are also stockholders receive salaries that are usually reckoned on the basis of the amount that they could get in the market if they were to enter the employment of other corporations and do the same kind of work they are now doing. Favoritism may give them considerably more than this amount, but even then this amount is the basis of the calculation which fixes their stipend. If they are paid more than their work is worth to their own corporations, what they get is something besides wages or any other normal and legitimate income. If they accept for their time less than they are worth, they make a donation to the corporation. Neither filching something for nothing out of the returns of the corporation, nor giving it a gratuity, is to be here assumed as existent, since we are not dealing with the phenomena of quasi-plunder or eccentric benevolence. The character of wages of management, as the reward for a high grade of labor, is recognized in business life, and the salary of the manager, whether he is a stockholder or not, is usually expressed in a definite sum of money and is gauged, crudely or accurately, according to his value as a servant of the company. _Dividends often Composite._--In like manner it is important in the bookkeeping of a company to ascertain how much of the return to the stockholders is merely interest on the capital they have themselves invested and how much is true profit, or the net gain which is over and above interest. In business life a distinction is pretty clearly maintained between the three kinds of income that have been described; namely, the reward of labor in all its forms, the reward of capital, going to whoever furnishes it, and the reward of a coördinating function, or the function of hiring both labor and capital and getting whatever their joint product is worth above the cost of the elements which enter into it. This essentially commercial margin of returns from production above all costs of production is profits in the strict sense and would be nonexistent in an absolutely static industry. It comes into existence in consequence of the changes with which social Economic Dynamics deals. _Three Incomes entirely Distinct._--Wages, interest, and profits, then, are the three incomes that we shall distinguish. We shall keep profits completely separated from the wages of any kind of labor and from the interest on any kind of capital. This income falls to the _entrepreneur_, otherwise called the undertaker, or the employer and coördinator of labor and capital, and it comes only when the product of the operations carried on in his establishment exceeds all wages and all interest that he has to pay. _How a Man could be an Entrepreneur Only._--If a man should hire all the capital that he needs in a business and also all the labor, including the labor of every man in the office force, and reside thereafter in a distant country, holding no consultations with his managers, whatever income he might get would be purely an _entrepreneur's_ profit. It would not be interest--for that amount would have to be paid to the men who had loaned the capital--and it would not be wages--for they would have to be made over to the men actually doing the work. The absent _entrepreneur_ would be, in the eye of the law, the purchaser of all the elements which go into the product, since all the purchases are made in his name. The managers are only his agents, and when they buy raw materials or supplies for the mill, they buy them for him and by his authority, and he is under the obligation to pay for them. Moreover paying wages is, in reality, buying the share which labor contributes to the product of the mill. The workmen have a natural right to the value which their work, _of itself and aside from the aid furnished by others_, imparts to the material that is put into their hands, and when they sell their labor, they are really selling their part of the product of the mill. In like manner paying interest is buying the share which capital contributes to the product. The owners of the capital have an original right to what the machines, the tools, the buildings, the land, and the raw materials, of themselves _and apart from other contributions_, put into the joint product. In reality they sell this share for a consideration in the form of interest. In a static state labor and capital together create the whole product of the mill; wages and interest are the prices that they get for their several contributions, and the _entrepreneur_ pays these purchase prices and by virtue of this becomes the owner of the whole product. Having the product, he sells it in the market for what he can get. If this were more than the cost to him of all the elements that have gone into it, he would have a net profit remaining. It would be a remainder accruing to the owner and seller of the product after the costs of getting a title to it have been defrayed. Whether the absent _entrepreneur_ of our illustration gets anything from his business or not depends on the question whether such a remainder of returns above costs is afforded. _Profits Nil in a Static Society._--We shall see that if labor and capital can move about in the system of groups so freely that each agent is as productive in one place as it is in another, there will be no product anywhere in excess of wages and interest. Labor and capital then create and claim for themselves the whole output of their industries. When the _entrepreneur_ has given them their shares, by paying wages and interest, and has paid for raw materials, he has nothing left. In actual business competition is often sharp enough to prevent men from getting more than interest on their capital and a fair return for the labor they spend in directing their business; and pure theory here assumes that competition is always and everywhere sharp enough to do this. It is ideally efficient. Labor and capital are ideally mobile and ready to flow at once to the points where any net profits can be made. Such a condition implies that society is in a _static_ state, and we shall see what this condition is. It implies an absence of organic change in society. The great collective producer does not alter either its form or its mode of producing wealth. Industry goes on, indeed, but it goes on in a changeless way. Reserving the full description of this state for a later chapter, we note here that the adjustment which would theoretically bring a society to such a state would preclude all gains for its _entrepreneurs_.[3] [3] The preceding paragraphs may seem to show that if an _entrepreneur_ ever gets an income, he does it by wresting from labor and capital a part of their products. We shall see that in _dynamic industry_ there is a normal way in which he may get an income without taking anything from the incomes that labor and capital would get if he did not perform his part. His return may come from the result of an enabling act which he performs, whereby both the labor and the capital of a particular subgroup become more productive than other labor and capital are and more so than they would be if the _entrepreneur's_ enabling act were not performed. _The Merging of Functions Desirable._--The uniting in one person of the functions of capitalist, laborer, and _entrepreneur_ contributed much to the productivity of the small-shop system of former days. The man who had a few thousand dollars invested in a little shop and employed a few men to assist him got three different kinds of income, and the sum of the three was larger than anything he could have secured if he had been only a laborer or only a small capitalist and _entrepreneur_. He worked harder and more intelligently than a hired superintendent would have done; he was led to be cautious because his own capital was risked in his business, and yet he was spurred to enterprise by the fact that when, by virtue of the influences which we call _dynamic_, profits were made, he got them. Even in the largest corporations the same conditions contribute to success, and it is best that managers should be owners of some part of the capital which they handle and receivers of some portion of the profits which they try to secure for their companies. Where competition is sharp, companies directed by their owners may supplant those of which the direction is given over to hired managers. The growth of corporations does, however, tend to put salaried men more and more into controlling positions and to reduce the power of the body of stockholders, who perform a joint function as capitalists and _entrepreneurs_. In itself this tends to reduce profits and detracts from the advantages which the incorporation of a business offers. _Distribution primarily Functional rather than Personal._--Where men get incomes that are composed of wages, interest, and profits, economic science should, in the first instance, tell us how the rates of wages and interest and the amount of profits are determined. A study of the static laws of distribution concerns itself with the reward of labor as such, and the reward of capital as such, while a study of dynamics takes account of pure profits. When we know what the rates of wages and interest are, we can tell what any capitalist-manager should have by knowing how much capital he furnishes and how much and how well he works as a manager. If the business is yielding a net profit, over and above the interest on its capital, we can tell what part of this net income any one stockholder will get--in the form of a rate of dividends in excess of the rate of interest--if we know how much of the common stock of the company he owns. His personal income depends on the incomes attaching to the functions he performs. The science of distribution should tell us primarily, not what any man personally gets as a total income and how well off he is as compared with other men, but in what way the wages of his labor, the interest on his capital, and the return for the _entrepreneur's_ function are fixed. In technical terms this is saying that distribution is primarily _functional_ and not personal. Certain forces assign certain rewards to different functions which are involved in the creating of wealth, and the science of distribution tells us how these forces work--tells us, in short, how wages, interest, and true profits are, in and of themselves, determined. If any man works and gets wages, that part of his income will be determined by the wages law. If he furnishes capital, a second part of his income will be determined by the interest law. If he also coördinates labor and capital, whatever he may thus gain is determined by the law of profit. Economic science has to ascertain and state what these three laws are, though in its static division it has only to account for two of them. _Costs as well as Gains Apportioned._--The term _distribution_, as commonly used, denotes a division of the gains of industry; but as we have said, there are sacrifices which have to be borne in getting the gains, and these also have to be shared. Wealth benefits men in the using, but puts burdens upon them in the making; and when all society does the making, it has to apportion, in some way, not only the benefits but the burdens. We shall take account of these sacrifices because of the relation that they bear to the gains. They act as an ultimate check on production. Men would go on producing indefinitely if the operation cost them nothing, since it would always be agreeable to have a further income; but they necessarily encounter pains and sacrifices that, sooner, or later, bring the enlargement of their incomes to an end. Much that is of importance occurs at that critical point where the sacrifices of production put an end to the extension of it. It is the positive fruits of production that we have first to consider; and what in this connection we wish first to know is how wages and interest are determined when industry is carried on in a social way and under a system of competition. We shall find that these incomes are always tending toward standards which they would reach if society were in the state which we have described as static. How they are forced away from their standards by the changes and disturbances of actual life, and how the standards themselves change with social development, will be the subject of the latter part of this treatise. CHAPTER VI VALUE AND ITS RELATION TO DIFFERENT INCOMES Functional distribution controls personal incomes since each man who gets, in a normal way, any income at all performs one or more productive functions, and his total income is the sum of the returns for these several functions. Moreover under such a condition of ideally perfect competition as we have assumed each of these functions is rewarded according to the product that it creates; and each man accordingly is paid an amount that equals the total product which he personally creates. Men's products, even in the disturbed conditions of actual life, set the _standards_ to which their returns tend to conform, though they vary from them in ways that we shall not fail to notice. _Group Distribution._--The grand total of the social income has to go through a preliminary division before it is shared by laborers, capitalists, and _entrepreneurs_. In each industry the pay of all these functionaries comes from the selling price of the commercial article that they coöperate in making. The price of shoes pays all shoemakers, whether what they contribute to the manufacturing is labor, capital, or mere coördination; and it also pays ranchmen and tanners for what they contribute in the shape of leather, raw and dressed. If the price of shoes should rise, there would be a larger income for the group whose activities create them. So if woolen clothing were to become dearer, there would be more money for the group that makes it, and this would include those who raise sheep and those who convert wool into cloth, as well as the garment makers themselves. The question, what members of a group would get the benefit of a rise in the price of its product, is one that must be discussed in connection with economic dynamics, and we shall find, when we reach this part of the subject, that it is _entrepreneurs'_ gains which come largely from sources like this. We have already seen that, in a static condition and with prices, wages, and interest immovably held at rates to which perfectly free competition would bring them, _entrepreneurs_ as such would get _nil_, and the whole price of every article would be distributed among the laborers and the capitalists who make it. The proof of this will appear when we have examined the process by which the values of goods are adjusted, and this will help to prepare the way for a study of the sources of net profits, which are an all-important feature of actual business. Society is honest or dishonest according as this _entrepreneurs'_ income is gained in one way or in another; and it is not too much to say that before the court of last resort, the body of the people, no system of business will be allowed permanently to stand unless the basic principle of it tends to eliminate dishonest profits. A chief purpose of static studies is to afford a means of testing the legitimacy of the incomes that come to _entrepreneurs_. _Market Price._--The old phrase _supply and demand_ describes the process by which the market price of anything is determined. The total mercantile stock of goods of a particular kind at any one time on hand is, of course, an exact quantity, and the law of "market value," when these words are used in a restricted and technical sense, determines the price at which this predetermined amount can be sold. _How a Normal Supply is Determined._--This present stock, however, was brought into existence by producers who looked forward to the time when they could probably sell it at a certain price; and the higher this anticipated return for the article, the more of it they were induced to make. The price, which to-day depends on the quantity on hand, acted in advance as a lure to bring that quantity into existence, and among the different articles which men can produce, they are forever singling out for increased production those things which offer the strongest lures--that is, the things that sell for the largest amounts as compared with the cost of making them. The ultimate tendency of all this is a certain adjustment of the relative supplies of different commodities. It is that adjustment which brings all prices to a level determined by cost. _Natural Value._--This tendency toward cost prices--those which afford to the producers wages for all their labor but no true _entrepreneurs'_ profit--establishes a further law, that of "natural value," and this it is that fixes the standard to which, in the long run, market values, as adjusted by supply and demand, tend to conform. A market value is natural or unnatural according as it does or does not conform to a certain standard, and this ultimate standard itself is the cost of producing the several kinds of goods. What the term _cost_ in this connection really means we must later see; but for the present we may take the common and practical view that it is the amount of money that an _entrepreneur_ must pay out in order to bring the article into existence. If there were very little wheat in the granaries of the world, demand acting on this limited supply would determine the selling price of it, and this price would be high as compared with the cost of raising this grain. It would also be higher than the selling prices of other things which are produced by the same expenditure of labor and capital that has to be made in raising the wheat. The market price would, for the time being, be unnatural and would in due time be brought down; but this would have to be done by the raising of more wheat. In other words, though the selling price of a small supply of wheat may be _normal for that amount_, the amount supplied is itself abnormally small, and in view of that fact the resulting price is too high to be allowed to continue. As a permanent price it would not be natural. The quantity supplied tends to increase till the market price conforms to the cost of raising the wheat. We have to see, first, how demand fixes the price of a definite amount of anything which is offered for sale and, later, how the quantity offered is controlled. _How Prices are Determined._--It is certain that if, in a given market, we increase the quantity of goods that are to be sold, we lower the price,[1] while, if we diminish the quantity, we raise the price. That is the commercial fact and it furnishes a beginning for a theory of value. [1] The term _market_, as used in this discussion, means a local area within which goods of given kinds are bought and sold; and for different purposes we may make the area small or large. For some purposes it is necessary to take a "world market" into consideration, while for others it is desirable to include only that part of the world within which competition is very active and within which also goods and persons move freely and cheaply from place to place. A single country like the United States affords a market large enough to illustrate the laws of value, though one must always keep in view the relation of this circumscribed area to its environment. How local areas may, in a scientific way, be delimited and isolated for purposes of study will appear in a later chapter. Let us suppose that we have a fixed quantity of goods on hand, that all must be sold, and that no one knows at the outset what price they will bring. There might conceivably go on an inverted kind of auctioning process, in which the sellers at the outset would ask a high rate, sell a few of their goods, and then gradually reduce the price till the last article should be sold. At each reduction of the price the "effectual demand," so-called, would increase. This means that the people who want the article are actually willing to take and pay for larger quantities the lower the price falls. Mere desire does not influence the market, but an "effectual demand" means a desire and a tender of the money that is asked for the goods. It is, in short, an actual purchase and the amount of it becomes larger as the price goes down. People who did not buy the article before now add it to the list of goods that they take for use, and the people who were already taking a certain quantity of it now take more. _Equation of Supply and Effective Demand._--If this effective demand, or amount of goods actually bought and paid for, becomes steadily larger the lower the price becomes, it is clear that, however large the total supply may be, it can all be sold by making the price low enough. It was once thought that this is all we need to know of prices current or market values. At some selling rate or other the quantity actually offered will come to equal the quantity that is actually bought. This is the equation of demand and supply. The quantity offered is here supposed to be fixed and to include all of the article that is in dealers' hands and that has to be sold; and the price, starting at a high rate, is supposed to go down till the sale of the entire quantity is effected. _Varying Demand and Price._--The facts that have just been stated account only in a partial way for the adjustment of market price. One who wishes to trace phenomena to their causes cannot help asking why demand and supply insure the selling of a given amount of goods at one rate rather than at another. If apples are offering at two dollars a barrel, why is it that, in a particular local market, one thousand barrels and no more can, at that rate, be sold? We can readily see that at one dollar a barrel more could be sold than at two, and that at three less would be sold. But why is it that, at two dollars, the definite number of one thousand barrels is the amount that is taken and paid for? Why is the equation of demand and supply established at exactly that price? _Demand and Final Utility._--We come nearer to the cause that acts in adjusting the price of apples when we say that they sell at two dollars a barrel because that sum expresses their "final utility." This means that, if such an auctioning process as we have described were resorted to, the last barrel of apples which would be sold would have to the buyer an amount of utility just equal to that of the final unit of any other article that could have been had for the same money. The auctioning, however, would cause different barrels of apples to sell at different prices, whereas there is something in the working of competition which causes all of them to sell at the same price. It is necessary to see, first, how the price of the "final" one is adjusted and, secondly, how that fixes the price of all the others. _The Law of Diminishing Utility._--We revert here to one of those general laws of economics that we have already stated and see it acting under the conditions of distinctly social life. Goods of a given kind have less and less utility, per unit, the more the user has of them. If you offer him apples in increased quantity, he will value the first part of the supply highly, but will attach less value to the later parts. When the desire for this fruit is fairly well satisfied, he will find other articles of more importance. At the price of two dollars a barrel it is just worth his while to buy a final barrel of them. That quantity, as added to his winter's supply, will give him two dollars' worth of benefit. This means that it will do him as much good as anything else which he can get for the same amount of money. _The Equalization of Final Utilities._--Two dollars spent in adding to his previous stock of other things will do the man in the illustration the same amount of good that he can get from a final barrel of apples, and no more. In the case of goods which are all alike and of which consumers are always glad to use an additional amount, prices tend to adjust themselves in such a way that a final unit of any one which the consumer buys with a dollar is worth just as much to him as a final unit of any other article he buys with that amount. The last dollar paid for apples is as remunerative, in the way of pleasure and benefit secured, as is the last dollar used to improve his wardrobe, to add something to his stock of furniture, to buy tickets to the theater, etc. Apples have, as it were, to compete with clothing, furniture, and amusements for the consumer's favor, and if the vender charges more for them than do the venders of other things having the same power to give pleasure, some of the apples will remain unsold; for though customers will always give as much as they would have to pay for other things of equal final utility, they will not give more. _The Prices of All Increments of Supply Equal._--A consumer always gets a net surplus of benefit from the early increments of the goods he consumes. If the last barrel of apples is worth two dollars,--or, what is the same thing, if the last barrel has in it an amount of utility equal to the final utility of other things that two dollars will buy,--the first barrel has a larger utility; and yet it costs no more than the last one. The sellers of apples, if they expect to dispose of all that they have, must at the outset fix the price at such a point that the very last increment of the supply will successfully compete with other articles for the favor of purchasers. Competition forces them to sell the whole amount so cheaply that the least important part of it may be as important to the purchaser of that part as the corresponding and least important part of the supply of other things. Nothing but a monopoly of the entire available stock would enable them to carry out the auctioning plan and offer the stock piecemeal, so as to get a higher price for the parts offered early. Even then buyers who should perceive the fact that a large part of the stock remained in reserve and that it must ultimately be sold would be able, by delaying their purchases, to get the benefit of a later and lower rate, so that the monopoly itself would be only partially successful in its policy. In the absence of a monopoly venders are compelled to sell all articles of one kind and quality at one price. The man who should fix a higher price on his portion of the supply would be passed by in favor of other sellers who were disposing of their final increments, and his business would quietly drift away from him. _There cannot be two prices for one commodity in the same market_ at the same time. This fact is fundamental. Even the monopoly is able to get different prices for different parts of its output only by offering them at different times; and competing producers cannot do this. They are forced to keep the price of all they offer at a level that expresses its final utility. _The Law of Value affected by the Difficulty of using Two Similar Goods at Once._--There are two imperfections in the common statement of this law of final utility which need to be removed in order that the theory of value, which is based on the law, may be true and useful. The first lies in the assumption that people buy completed articles, such as coats, tables, vehicles, watches, etc., in regular series of units, adding to their stock coat after coat, watch after watch, etc., all just alike, till the utility of the last one becomes so small that it is better to buy other things. On this supposition the price of the whole supply of any such thing corresponds with the utility of the last one in the consumer's series. This fairly well describes the case of commodities like apples, of which men consume now more and now less per day or per week and are always glad to increase the amount they use. Of most kinds of consumers' goods a person wants at one time one unit and no more, and a second unit, if he has to use it himself within the same time in which he uses the first, would be an incumbrance. Its utility would be a negative quantity. Two quite similar coats would never be bought by the same person if he had only his own needs in view and must use both coats through the same period. The first unit of his supply is, for this period, also the last. _The Law of Value affected by the Fact that the Final Unit of a Good is usually a Complex of Unlike Utilities._--The second imperfection consists in the assumption that in measuring the utility of such a unit the consumer estimates the importance to himself of the article taken in its entirety. In the case of the apples of our illustration the difficulty is not obvious. A man, as we have just noticed, may increase or diminish his consumption of this fruit; the first few apples that he uses will give him more pleasure than a second similar quantity, and the price of apples in the market may actually depend on the utility of the final peck of apples that each of the customers consumes in a season. In other words, there is, in this instance, a probability that the goods, although supplied at once, may be appraised as if they were offered in a regular series and that the law of final utility, in its common and simple form of statement, may in this particular apply to the case. The second difficulty, however, remains, and even in the case of such goods as apples renders the common statement somewhat inaccurate, while in the case of most kinds of consumers' goods the inaccuracy is glaring. If the price of fine watches corresponded with the utility of the last one that a consumer uses, it would be many times greater than it is. Rather than go without watches altogether many a man would pay one thousand dollars for one for which he actually gives a hundred; and, moreover, this watch may be the "final" one in his case. The utility of the last overcoat that a man uses in the winter may be such that, if he could have it on no other condition, he would readily give five hundred dollars for it instead of fifty. _How Unlike Services may be rendered by One Good at the Same Time._--What people want of any useful thing is an effect in themselves,--a pleasure or a benefit which they expect to get,--and apart from this subjective result they would not want the thing at all. The power to confer a particular benefit is a utility. Men buy goods solely for their utilities, and they measure these service-rendering powers in the things offered to them and pay for them accordingly. Now, it happens that articles often combine in themselves a considerable number of different utilities, or service-rendering powers, and that in buying an article the man pays for them all. It is as though four or five different servants, each having his own specialty, were to offer themselves for hire and invite an employer to consider what each one could do for him. In buying an article which will serve him in several ways, a man appraises all the unlike services that the article will render. He secures several services at once, as he would do if he hired, in a body, several actual servants. The same thing would happen if, instead of hiring human servants with different aptitudes, one should buy different commodities each of which is, in reality, an inanimate servant, able, in its own way, to do something useful or agreeable for the purchaser. We could bunch a lot of these goods and buy them collectively. Venders of the goods could tie them together in bundles and offer them thus for sale. If the different goods were also sold separately in the market, they would command in the bundles the same prices that they would command when sold each by itself, and a bundle would bring the sum of the several prices of its component articles. _In just this way in which an aggregate of different goods would get its valuation does any one article which is made up of different utilities get its rating. The utilities are appraised separately._ In buying an article which is a composite of different utilities, we virtually employ a company of servants who have different specialties and insist on being hired all together or not at all. _How the Normal Price of a Bundle of Unlike Goods would be Fixed._--We have now to see how the action of the market analyzes an article and puts a price on the several utilities which compose it. The market does this in exactly the same way in which it would appraise a bundle of dissimilar articles which had to be sold separately, and we will therefore trace the operation by which a package containing the commodities A, B, C, and D would get its value in an actual market. _How the Normal Price of a Single Good in a Bundle of Unlike Goods would be Fixed._--Let us see how a bundle made up of commodities A, B, C, and D would get its value in the market. We will suppose that these articles are here named in the order of their importance, and that A has the highest utility, since it renders the most important service, and that D has the least. It may be that the article A has a utility rated at one hundred dollars in a particular man's esteem. He would give one hundred dollars for it rather than do without it altogether. The service, then, that one article of this kind can render is expressed by the sum one hundred dollars. Article B taken separately may be worth fifty dollars, since it may render such services that the man would give fifty dollars rather than be without it. A third article, C, may in the same way be valued at twenty dollars and a fourth at ten. Now, if a man has to buy the whole bundle, must he pay one hundred dollars plus fifty plus twenty plus ten, or one hundred and eighty for the whole? This does not by any means follow. The first article may be sold separately at a price far below one hundred dollars. There may be so large a supply of it that, in order to find a market for it all, the makers must take ten dollars for it. This fixes the market price of that amount of this commodity at ten dollars. If we now glance beyond the question of the "market price" of the goods and consider their more permanent or "normal price," the inquiry requires us to do more than ascertain why a definite quantity of the goods offered at a certain time sells for a certain amount. An appeal to the law of final utility answers that question. To know, however, why the permanent price is what it is, we have to know what fixes the permanent supply, and we discover that the cost of making the goods is here a dominant influence. For the present we assume that this cost does not change, since such changes are a subject for the dynamic studies which will come later. The present fact is that production has been carried to such a point that no more of these goods can be sold at the cost price, and there the enlargement of the output has stopped; the supply has at some time in the past reached this normal point and now remains there. Ten dollars represents the final utility of the article, and this sum is what it costs to make it. If it could be sold for any more than that, competition would bring new producers into this business and would impel those already in it to enlarge their production till the price would stand at the normal or cost level of ten dollars. _The Consumers' Surplus._--In every such case there are men who would give much more for the article rather than be without it, and we have supposed that some one would pay a hundred dollars for this commodity if he could not otherwise obtain it. Ninety dollars, then, measures what we may call his _consumers' surplus_, or the clear benefit he gets from buying at its market price an article that is worth to him so much more. This comes about by the fact that the makers of article A, in order to sell the amount of goods that competition has impelled them to make, must accept the offers of persons who can consistently give only ten dollars for it. These are relatively poor persons, and as the sum of ten dollars expended on other articles would benefit them as much as ten dollars spent on this one, it is a "final" purchase, or a final increment of their consumers' wealth. In order to get it they sacrifice, in some other form, a benefit as great as the one they get from acquiring this commodity and receive, therefore, no consumers' surplus from it. These are the men whose demand helps to fix the price of the article A, and the willingness of other persons to give more does not make it bring any more. The rich men, who stand ready to pay a hundred dollars, if necessary, are gainers by letting poorer men fix this price. It is by catching the patronage of these poorer men that the makers can dispose of their large output, and in doing this they have to bring the price down to ten dollars. _The Function of a Special Class of Marginal Purchasers of Each Article._--In like manner there is a class of "marginal purchasers" of the article B, or the persons who pay for it so much that they get no net benefit or consumers' surplus from the purchase. If they did not buy this article, they could get something else that would do them as much good for the same outlay. It costs, let us say, only ten dollars in the making, and enough of these articles are made and offered for sale at that price to supply all customers who are attracted by the offer. The men who would pay more for it do not count. Each of the other articles in the bundle, when it is offered separately and at the cost price which competition establishes, represents a final utility to some one class of purchasers. Competition has made the whole supply so large that, in order to dispose of it, venders must attract the particular class who will take it at the ten-dollar rate. This class is in the strategic position of market-price makers for this one thing. They are the last class to whom the producers can afford to cater. If each of the five articles in the bundle costs the makers ten dollars, and if so many of each are made that they just supply the needs of the classes that will buy them at ten dollars apiece, the price of all five, when sold separately, will be fifty dollars. Most of the purchasers of each article would give more than ten for it if they had to, but some would not do so, and the producers cater to the needs of these marginal persons. _How the Prices of the Goods are fixed when they are sold in Various Combinations._--How do these articles get their valuation when they are tied in bundles containing all five of them and the bundles are sold unbroken? In essentially the same way as when sold separately. Article A, we will suppose, is one of the necessaries of life and is to be had by itself in the market. Article B represents a comfort, and C and D are luxuries. The bundles are so made that A and B are often sold together; as are also A, B, and C; and A, B, C, and D. A purchaser may have at his option the first only, the first and the second combined, the first three, or all four. Article A, when it stands alone, can be had at the natural or cost price and in quantity sufficient to supply the wants of all classes of buyers from the highest down to the class which will take it at ten dollars--the cost of making it--but at no higher price. Any one can have the A either alone or tied to other articles at this price. One who buys A and B in combination will pay for article A only the same price that it commands when sold separately; and since he buys B, the utility of which is less than that of A, at ten dollars, it is clear that he gets A for less than it is worth to him, but the ten dollars may be all he would give for the B. This man is not the marginal purchaser of A, for in buying it he realizes a consumers' surplus; but for the article B, which is tied to it, he may pay all that it is worth to him. For that he is a marginal purchaser, and as such he gets no consumers' surplus out of it. What he pays for B will just suffice to buy something else which is equally important to him. The price of this bundle of two articles is ultimately determined by the cost of the two components, which is twenty dollars, and enough of each component is made and offered in the market to supply the wants of a class of persons who will barely decide to take it at the cost rate. The class that hesitates at taking A will not consider B, but the class that hesitates at taking B gets a clear benefit from buying A at the price that expresses the utility of A to a poorer class of persons. _How Different Classes of Purchasers coöperate in this Price Making._--The rule of one price for one article of course holds, and the man who would have a clear and decisive motive for buying the A for more than ten dollars, if he had to do so, gets the benefit of two facts: first, that it costs only that amount in the producing, and secondly, that competition makes the supply of it so large that it is brought within the reach of those persons who value it at only ten dollars. It takes two different classes of purchasers to fix the price of this package of two articles, and their ratings fix it at twenty dollars. Exactly the same influences regulate the price of the bundle which includes A, B, and C. Men who buy C can afford to have a luxury, and therefore, if they had had to do so, would have given more than they do give for the articles of necessity and comfort. If the price of A and B were higher than it is, they would still buy these two things, but they would not raise their bids for C, since for this they are marginal purchasers. This commodity is therefore sold at the price that will just induce this class of persons to add it to their list of consumers' goods. There is a further class in whose list of purchases D is marginal, while A, B, and C yield a consumers' surplus in the form of an uncompensated personal benefit. _Different Utilities in an Article appraised as are Different Goods in a Package._--It is an actual fact that most commodities are like these packages of unlike articles. They are bundles of unlike utilities, and the market actually finds a way to analyze composite things and put a separate price on each utility. It may seem very theoretical to say that a concrete thing, like a watch, a coat, a dining table, or a roast fowl, is made up of such abstract things as utilities and that each of these has its separate price; yet such is actually the fact, and if goods were not valued in the market in this way, the prices of all articles of comfort and luxury would be very much higher than they are. A man pays seventy-five dollars for an overcoat, but if he could not get the service that the coat as a whole renders without paying five hundred dollars for it, he would pay it; for otherwise he could hardly get through a winter. No man who buys an overcoat worth seventy-five dollars would refuse to pay more if that were the necessary condition of having an overcoat at all. The garment as a whole is far from being a "marginal utility" to any one; and yet there is something in it that is so. This element is like the article D in the fourth bundle referred to in our illustration. There is a particular utility in the composite good for which the man pays all that it is worth to him; and he would go without that utility if the seller charged more than he does. The most important service that the coat renders is that of keeping the man warm; but a very cheap garment would render that service, and six dollars will buy such a garment. The man does not need to pay more than six dollars for that one service. The supply of cheap coats is such that the final one must be offered for six dollars in order to induce certain poor purchasers to buy it, and that, moreover, is all that it costs to make it. No one, therefore, is obliged to pay more than six dollars for something that will keep him warm, however much such a service may be worth to him. Coats of another grade have a second utility combined with this one, since they are made of better cloth and are more comely in appearance. Utilities of an æsthetic kind are combined with the crude qualities represented by the cheapest coats. The supply of coats of this grade is such that they must be offered for twenty dollars in order to induce some one to take the final or marginal one. What does this mean? It means that this purchaser will pay fourteen dollars and no more in order to have the second utility, consisting in comeliness, added to the first utility, capacity to keep him warm. This man would give more than twenty dollars rather than go uncloaked; for it is plain that, if he will pay fourteen dollars for comeliness, he will give more than six for warmth. Probably he would pay one hundred dollars for the article if he had to, and in getting it for twenty he gets a large consumers' surplus. This is because he secures the first utility (1) for less than it is worth to him, (2) for just what it costs in the making, and (3) for just what it is worth to the poorer purchasers. He is willing to pay only fourteen dollars for the comeliness, which is the second utility that the garment contains, and he is therefore a marginal purchaser of this second utility. It costs only the sum of fourteen dollars to add the second utility to the first, and enough coats of the second grade are made to catch the patronage of the class of buyers who will give so much and no more for it. They are the persons whose demand figures in adjusting the market price of this second utility. Competing producers of coats cause the supply of those of the second grade to be so large that they could not all be sold unless the second utility were offered for fourteen dollars. This makes the price of the entire coat twenty dollars as the result of catering in a detailed way to the demand of two different classes of buyers. In exactly the same way the price of the third grade is fixed at forty dollars and that of the still higher grade at seventy-five. In the third grade there is a utility which it costs twenty dollars to add to those possessed by garments of the second grade, and this is added to enough of them to supply all persons who will pay twenty dollars or more for it. These coats are made of more highly finished goods and have better linings, and this gives them the third utility which the market appraises at its cost, which is twenty dollars. The men who buy the forty dollar coats get a surplus of benefit in securing the first two of the utilities that are embodied in them, since for these they pay less than they would pay if they had to; but they get no surplus over the cost of the third utility. It is to secure their custom that the vender must sell it for twenty dollars. In a like manner a coat of the next grade, which is a more fashionable garment, sells for seventy-five dollars because it has a fourth utility which costs another sum of thirty-five dollars and, to the marginal buyers, is worth that amount. These men get a surplus from buying the first three utilities at what they cost their producers and what they are worth to poorer purchasers. It appears, then, that a seventy-five dollar coat is a bundle of distinct elements, or utilities, each of which has its separate cost and is sold at that cost price to a particular marginal class of purchasers. Each element is valued exactly as if it were in itself a complete article tied in this case to others, but also offered separately in the market. Persons of one class are final purchasers of the first utility when it is offered at its cost, six dollars. Another class, in a like manner, helps to set the price of the second utility at fourteen, and still other classes figure in the adjustment of the prices of the third and fourth utilities. These cost the manufacturers twenty dollars and thirty-five dollars respectively, and competition insures the making of enough of them to catch the patronage of those who will pay just these amounts. Members of one class act as marginal purchasers in price making in the case of one utility only. The concurrent action of all of them results in setting the price of the best coat at eighty dollars. It is a very practical fact that the rates at which all fine articles sell in the market are fixed in this way. Such articles contain utilities unlike each other. They have power to render services of varying degrees of importance, and each of the several services gets its normal valuation when producers make enough to supply the want of a particular group of persons to whom it is a marginal service and who are willing to pay only what it costs. They would go without that one service if they had to pay more for it. _This Method of Valuation Applicable to All Commodities of High Grade._--Illustrations of this principle might be multiplied indefinitely. A fine watch tells the time of day, but something that would do that could be had for a dollar, and that is all that this fundamental element in the fine watch sells for. It takes a series of purchasers bidding on the higher utilities of the fine watch to make it sell for five hundred dollars. The man who buys such a watch would give, perhaps, ten thousand for it rather than be without a watch altogether, but he is saved from the necessity of doing so by the fact that poorer customers have done the appraising in the case of all the more fundamental qualities which the watch possesses. So long as an Ingersoll "dollar watch" will tell the time of day, no one will pay more than a dollar for exactly that same service rendered by any watch whatever; and the same thing is true of other services. Social in a very concrete and literal sense is the operation of fixing prices. Only the simplest and cheapest things that are sold in the market at all bring just what they are worth to the buyers, and all articles of higher grade offer to all who buy them a surplus of service not offset by what is paid for them. If we rule out the cheapest and poorest grades of articles, we find all others affording a "consumers' surplus."[2] [2] It will be seen that to a man who buys the seventy-five dollar coat that article in its entirety is the final one of its kind which he will buy. He does not want a second coat exactly like the first. The same thing is true of the man who buys the five hundred dollar watch, since he does not think of buying more than one. In each case the first unit of the article bought is the last one, and it contains utilities which are worth more than they cost. It contains one utility only which is marginal in the true sense of affording no surplus of gain above cost. This utility stands on the boundary line where consumers' surpluses stop. CHAPTER VII NORMAL VALUE _Natural Supply._--We have attained a law of market value, which determines the price at which a given amount of any commodity will sell, and have taken a quick glance at the influence which fixes the amount that is offered and thus furnishes a natural standard to which the market value tends to conform. At any one moment the amount which is supplied is an exact quantity, and if it all has to be sold, it will bring a price which is fixed by the final utility of that amount of the commodity. If the quantity offered for sale should become greater or less, the final utility and the price would change. Final utility controls the immediate selling price, and if that is above the cost of production, a margin of gain is afforded which appeals to producers, sets competition working, and brings the quantity made up to the full amount which can be sold at cost. The amount of the supply itself is therefore not a matter of chance or caprice. It is natural that a certain quantity of each article should be supplied, and that the price should hover about the level which the final utility of that quantity of the good fixes. "Natural" or "normal" price is, in this view, the market price of a natural quantity. _Cost as a Standard of Normal Price._--It is commonly and correctly stated that the normal price of anything is that which just covers the cost of producing it. Cost in this case is the total amount of money that the _entrepreneur_ pays out in order to bring the commodity into existence. He buys raw materials and pays for all the labor and capital that transform them into a new and saleable shape. If he can make a net profit, he does so; but competition tends to adjust the quantity produced and the consequent price in such a way that he can make no net profit. What he gets for the article will then reimburse him for his total outlay, but it will do no more. Since the quantity produced is normal when it brings the market price to this level of cost, it appears that the cost is the ultimate standard in the case. The quantity supplied varies till it causes the market price just to cover the cost; and so long as the quantity supplied is thus natural, other influences remaining the same, the price is so. This states the cost of production in terms of money paid by an _entrepreneur_ and the returns from the operation as money received by him; but there is a more philosophical way of conceiving the law of cost, and to this we shall soon recur. _Elements of Cost._--Whatever the _entrepreneur_ has to pay for in the production of an article is of course an element in its monetary cost to him. If he does not begin the making of it by drawing his raw materials from what nature freely furnishes, he must pay some one for the raw material. He must also pay for the labor, and this is equivalent to buying the fraction of the article that is produced by labor; for the laborer, as we have seen, is the producer of a certain fractional share of the article and the natural owner of that share, and when he agrees to let his labor for hire, what he really does is to sell out his individual interest in the forthcoming product of the industry in which he is about to engage. When a workman in a shoe factory agrees to work for two dollars and a half a day, he really contracts to sell every day for that amount a certain quantity of shoes. The leather is one element which enters into the finished shoes, and therefore the entire shoe is not really made in the factory; but of the part which is there made, namely, the utility that results from transforming the leather into shoes, one part is made by labor and another by capital. The _entrepreneur_ has to buy both of these if he is to acquire a valid title to the product and have a right to sell it. These costs are therefore "purchase money" paid for undivided shares of goods. _Labor of Management._--It usually happens that an _entrepreneur_, or employer of labor and capital, performs some labor himself; and we have already noted the reason for this in the fact that the kind of labor that he performs is so important that the fate of the business often depends on it. He may manage the business so well as to make it succeed or so ill as to make it fail. He pays himself for this labor when he draws a salary for his services. As an _entrepreneur_ he treats his own labor as he does that of any one else and buys the fraction of the product of his business that his own labor of management has created. In this he illustrates the general law that all payments of wages are payments of the purchase of a certain quantity of product. Though the owner's own contribution to the product is not always mentioned in terms in the accounting, that is what his salary is paid for, though it is spoken of as a payment for his "time," or his labor. _The Capitalist as the Vender of a Share in a Product._--Capital, as we have seen, also contributes a definite share toward the total amount of every product in the making of which it coöperates. Labor does not do all the transforming of leather into shoes which is done in the factory, since machines, fuel, etc., help; and we shall later find that there is a way of determining how much of the product the help so given creates. It adds a certain amount to what labor can claim as its own special product, and the man who owns the capital becomes the lawful claimant for this additional share. When he agrees to let his capital work for an employer, he virtually sells to the employer the undivided share of the product--shoes or what not--that the capital really creates. The furnisher of productive instruments, like the furnisher of labor, is a vender, and the _entrepreneur_ is a buyer. _Entrepreneur and Capitalist._--As was stated in an earlier chapter, an actual employer nearly always furnishes some of the capital that he uses. If he did not do so, he would have difficulty in borrowing more, since banks or other lenders do not loan to empty-handed men. It is clear that what the employer gets in return for such capital as he may put into the business is in reality a payment for a contribution which that particular part of the capital makes to the product. Since each bit of capital in an establishment contributes something toward the creating of the product, the employer's own capital has the same right to the value of its contributary share as has the capital of any one else. What the employer-capitalist gets for capital the employer, pure and simple, pays. As the furnisher of instruments the man is a vender of the product of these instruments, while as an _entrepreneur_ proper he is the buyer. He must purchase the product of his own capital just as he purchased the product of his own labor. In paying, therefore, wages for all labor, including what he performs himself, interest on all capital, including his own, and the price of raw materials, he gets something which, if competition does a perfect work, he has to sell for what he gives for it. The shoes, when he sells them, tend, under active competition, to yield only what has been paid for them in the making and, in a perfectly static state, would actually yield no net profit. All the _entrepreneur's_ costs, therefore, resolve themselves into purchase money paid, his receipts are money accruing from sales; and under ideally free competition the two sums total are equal. _The Entrepreneur's Proper Function not Labor of Management._--In some theoretical discussions the management of a business figures as the principal function of the _entrepreneur_, and all or nearly all of the reward that comes to him is represented as coming in the shape of a reward for a responsible kind of labor that calls great abilities into requisition. But it is very clear that, whether he personally performs any labor or not, the employer has a distinctly mercantile function to perform; and this in itself is totally unlike the work of overseeing the mill, the shop, or the salesroom. He acquires a title to the whole product by paying for the contributions which labor and producers of raw material separately make toward it, and then parts with the product; and if he gets any more than he has paid out, he makes a profit. When industry is in what we have termed a dynamic state, such a difference between the value of the product and the cost of the elements that go into it is continually appearing, and that, too, largely in consequence of causes over which, as a mere manager, the employer has no control. A profit so gained cannot be wages of management. It is a purely commercial gain, or a difference between what is paid for something and what is received for it. _Mercantile Profit._--It is best, therefore, to distinguish in some perfectly clear way between that function of the _entrepreneur_, which consists in buying and selling, and any work that he may find it best to do in the way of superintending the business. At the cost of using the term _entrepreneur_ in a stricter sense than the one customarily attached to it, we will make this word describe the purely mercantile functionary who pays for the elements of a product and then sells the product. The reason for the very division between gains from this source and gains from management we shall soon appreciate, for we shall see that competition tends to reduce one of these incomes to nothing, but tends to perpetuate the other and to make the amount of it conform to a positive standard. The _entrepreneur_, as we shall use the term, is neither the manager nor the capitalist, and when we have occasion to speak of either of these functionaries, we shall call him by his own distinctive name; though we know perfectly well that, in actual business, it is desirable and often quite essential that the same one who acts as an _entrepreneur_ should also put into the business some labor as well as some capital. A man who performs two unlike functions, buying and selling, on the one hand, and managing the business, on the other, serves in two capacities that are clearly distinguished from each other; while if he furnishes any of the capital, he adds to these a third capacity entitling him to the value of the product of his capital. As a manager he directly aids in producing goods, and he gets pay for so doing from his other self, the _entrepreneur_, who acquires the title to the goods; as a capitalist he has another legitimate claim upon himself as _entrepreneur_. _These Distinctions recognized in Practical Accounting._--That this is no bit of mere theoretical subtlety is proved by the fact that the bookkeeping of nearly all establishments distinguishes between these two incomes by actually putting an appraisal on the work the employer does and paying a salary for it. A man may be a large owner of stock in a corporation and yet receive a salary that is fixed by an estimate of what an equally useful man could be hired for. If personal influence secures more for him than this, the excess is taken from the pockets of the stockholders, and the amount of it is accounted for in a way that does not fall within the scope of pure economic law. _How "Natural" Prices exclude Entrepreneur's Profits._--The old and correct view is that the tendency of competition is to make things sell for enough to cover all costs, as we have defined them, and no more. Under a different phraseology this is what Ricardo and others have rightly claimed. They were unconsciously explaining what would happen in a static state, for if society were actually in this state, the goods that come out of the factory would be worth just enough to reimburse the owner for all the outlays that can be called costs. If they sell for more than this, there is to be had from the business an income that costs nothing. It is a net profit above all claims based on personal labor or on the aid furnished by capital, and it furnishes an incentive for enlarging the business, and labor and capital are therefore drawn into it. _Entrepreneurs_ bring them and for a time make a profit by this means; but as their presence increases the output of goods that are here made, it brings down the price till there is no inducement to move any more labor and capital in this direction. _The Significance of a Natural Adjustment of Different Industries._--The "natural" state of general industry is that in which each particular branch of it is in the no-profit state. It is as though laborers and capitalists in a shoe factory took all the shoes that it turns out, sold them in a market, paid for the raw material out of the proceeds, and kept the remainder, dividing it between themselves in proportions which corresponded with the amounts they had severally contributed toward the making of this product; and as though the laborers in cotton mills and iron foundries received the goods there made and dealt with them in a like manner. It is as though in every branch of business the whole product were turned over in kind to the furnishers of labor and capital. _The Entrepreneur a Passive Functionary under Static Conditions._--Purely passive is the function of the _entrepreneur_ under static conditions. In so far as any effect on his income is concerned he might as well reside in a foreign land as in the one where his business is located, provided always that the management were unaffected. When the same man is both _entrepreneur_ and manager, the absence of the first of these functionaries would mean the absence also of the second, and that would cause trouble; but the purely mercantile operation of getting a title to a product and then surrendering it can be carried on as well in one place as in another. The _entrepreneur_ in his capacity of buyer and seller does not even do the work which purchases and sales involve. That is commonly done by agents. Some of it, of course, may be done by the responsible manager himself, and if that person is also the _entrepreneur_, it follows that he does a part of the commercial labor of his business. In this, however, he goes beyond his function as _entrepreneur_. In that capacity he does, as we have said, no labor of any kind. Sales and purchases are made in his name, but he does none of the work that leads up to them.[1] [1] The holders of common stock in a corporation are always _entrepreneurs_, and they are also capitalists if the stock represents any real capital actually paid in. If the bonds and the preferred stock represent all the real capital that there is, any dividends that may be paid on the common stock are a pure _entrepreneur's_ profit. If, on the other hand, the stock all represents money actually put into the business, the dividends on it contain an element of net profit if they exceed simple interest on the capital and insurance against the risks that are not guarded against by actual insurance policies. If the rate of simple interest is four per cent, and the value of the unavoidable risk is one per cent, then a dividend of six per cent contains a pure _entrepreneur's_ profit of one per cent. In dynamic conditions such a return is often to be expected, and we shall soon study the conditions that afford it. In the present study we do not need to consider risks, inasmuch as the greater part of them arise from dynamic causes; that is, from the changes and disturbances to which the business world is subject. An invention promises greatly to cheapen the production of some article and, for a time, to insure large returns for the men who first utilize it. A capitalist may be willing to take a risk for the sake of sharing this gain; but in time both the risk and the gain will vanish. The capacity of the new appliances will have to be tested, a market for their output found, etc. A small remainder of risk is still entailed upon the capitalist if he leaves his money in this business. The death of the managing partner, the defaulting of payments for goods sold, the chances of unwise or dishonest conduct on the part of clerks or overseers, always impend over a business, but these dangers are at a minimum when the man who is at the head of the force of managers has capital of his own in the business. Risks are at a static level only when they are thus reduced; and for our present purpose it is best to consider that competition has eliminated the establishments where any recklessness has been shown in the management, and that the unavoidable remainder of risk resolves itself, nearly enough for practical purposes, into a _deduction from the product_ which the surviving establishments turn out in a long period of time. A small percentage of their annual gains, set aside for meeting unavoidable losses, will make good these losses as they occur and leave the businesses in a condition in which they can yield as a steady return to owners of stock, to lenders of further capital, and to laborers all of their real product. _How the Entrepreneur contributes to Production under Dynamic Conditions._--In a dynamic state the _entrepreneur_ emerges from this passive position. He makes the supreme decisions which now and again lead to changes in the business. "Shall we adopt this new machine?" "Shall we make this new product?" "Shall we enter this new market?" are questions which are referred to him, and on the decisions he reaches depends the prospects of profit for the business. This activity is not ordinary labor, but in a true sense it is a productive activity, since it results in placing labor and capital where they can produce more than they have done and more than they could do were it not for the enabling act of the _entrepreneur_ which places them on a vantage ground of superiority. This subject will be discussed in a later chapter and in connection with other phases of economic dynamics. _Values at a Static Level only when Entrepreneurs' Gains are Nil._--Any net profit on an _entrepreneur's_ part means that his product is selling for more than the elements of it have cost him. But this is a condition which, if labor and capital are as mobile as the static hypothesis requires that they should be, will cause this _entrepreneur_ and others to move labor and capital into his industry, thus increasing its output and lowering the selling price of its product. If there is no such action going on, it shows that the _entrepreneurs_ have no incentive for taking it. _Values at a Static Level only when the Gains of Labor in the Different Industries are Equalized._--If labor is creating more in one subgroup than in others, as it often is in a dynamic condition, that fact means that some _entrepreneurs_ are making a profit, and, according to the principle stated in the preceding paragraph, this means that values are not at their static or "natural" level. If, owing to new methods or to some other cause, a given amount of labor[2] in the subgroup that produced the A´´´ of our table creates an amount of that product which sells for more than the B´´´ or the C´´´ which labor of like quantity makes, then the manufacturers of A´´´ would obviously get a margin of profit. They would not be obliged to pay for labor any more than the market rate, and that, as we shall see, cannot exceed what labor produces in the groups B´´´ and C´´´. In A´´´ the labor creates more and the employer pockets the difference. In saying this we assume one fact which we undertake later to prove; namely, that there is a definite amount of each product which can be attributed to labor alone as its producer. Capital and labor work together, but each is, in effect, the creator of a certain fraction of their joint product. [2] In measuring labor we, of course, take account of the quality of the men who perform it, and the work of a skillful man is counted as more units of labor than that of an unskillful one. _Values Static only when the Gains of Capital in Different Industries are Equalized._--If capital is creating more in one industry than in another, there is a margin of profit for the _entrepreneurs_ in the exceptionally productive industry. They pay as interest on the capital they use only the market rate, which is what equal amounts of capital can produce and get elsewhere. If they produce more in the one group, the _entrepreneurs_ there can pocket the excess as they did in the case of the product of labor. We assume that there is everywhere a definite product that can be attributed to capital alone. _Values Normal when Moneys paid out by Entrepreneurs equal Moneys Received._--In the preceding paragraphs we have spoken of exchange values as being static under certain conditions, but we might have expressed the essential fact by saying that prices are static under these conditions since the money a product brings is a true expression of its value. If A´´´ sells for as many dollars as does B´´´, the two things exchange for each other. In like manner the product of labor and that of capital may be expressed in terms of money, since the quantities of goods which they respectively make sell for certain sums. Wages and interest are nearly always conceived in terms of money. The commercial mode of computing costs of production and returns from production is to translate them into moneys paid by _entrepreneurs_ and moneys received. _Costs of Production as related to Static Incomes._--What to an _entrepreneur_ are costs are to workmen and capitalists incomes. The one pays out wages and interest, and the others get them; and these two sums are normal when together they equal the prices received for goods produced. The _entrepreneur_ is the universal paymaster, and in a static condition all incomes come from his hand. CHAPTER VIII WAGES _The Equilibrium of Industrial Groups._--The different industrial groups are in equilibrium when they attract labor and capital equally, and that occurs when these agents produce as much per unit employed in one group as in another. Such equalized productivity is the bottom fact of a static condition, and equalized pay follows from it. Wages and interest tend to be uniform in all the groups. Efficient labor, of course, gets in any employment more than inefficient; but labor of a given grade gets in all the groups that make up industrial society a uniform rate of pay, and nothing is to be gained by any capitalist or by any laborer by moving from one employment to another. They all therefore stay where they are, not because they cannot move freely if they wish to do so, but because no inducement to move is offered to them. This is a condition of perfect mobility without motion--of atoms ready to move at a touch without the touch that would move them. The paradox indeed holds that it is the ideally perfect mobility which has existed in the past which positively excludes motion in the present. At some time in the past labor and capital have gone from group to group till they have brought about an adjustment in which they have no incentive for moving farther. The surface of a pool of water is kept tranquil, not because the water is not perfectly fluid, but because, in spite of the fact that it can flow with entire freedom in any direction if it is impelled more in that direction than in any other, each particle of it is impelled equally in all directions. It is the perfect equilibrium that keeps the particles from changing their places, and fluidity has caused the equilibrium. In like manner when labor and capital can create and get just as much in one place as in another, they are attracted as strongly in one direction as in another and therefore do not move. A young man of average capacity, who is deliberating upon the choice of an occupation, will find that he can do as well in a cotton mill as he can in a shoe factory, a machine shop, a lumber mill, a flouring mill, or any other industrial establishment requiring his particular grade of capacity. This is the picture of a perfectly static industrial condition. Economic science has to account for values, wages, and interest as they would be in such a condition, however impossible it is that society should ever reach exactly such a state. The values, wages, and interest in a real market are forever tending toward the rates that would be established if the static condition were realized. _The Sign of a Static State._--The sign of the existence of a static condition is, therefore, that labor and capital, though they are perfectly free to move from one employment to another and would actually do so on the slightest inducement, still do not move. They stay where they are because they cannot find places where they can produce the slightest amount in excess of what they now produce, and no employer will anywhere offer any excess above the prevailing rate of pay. _Profits and the Movements they induce the Sign of a Dynamic State._--_Entrepreneur's_ profits, when they exist, mean that this equilibrium is disturbed, and when it is so, mobility of labor and capital affords the guaranty that a new equilibrium will be established if no further disturbances follow. As we have said, profits attract labor and capital, increase the output of those goods which yield the profit, and reduce the prices of them to the no-profit level. Workmen and capitalists then get from the _entrepreneur_ as wages and interest all that he gets from the public as the price of his goods, except what he pays for raw materials.[1] In other words, the employer sells his goods at cost. [1] The _entrepreneur_ of A´ of our table must buy the A in order to impart to it that utility which is his own particular contribution. He pays as wages and interest all that he gets for this contribution. The true product of the _entrepreneur_ is not the entire price of the A´, but is the difference between that and the price of the A. The entire amount received for the A´ resolves itself into wages, interest, and cost of A; but as a rule the price of A resolves itself practically into wages and interest only, and when it does so, all that is paid for the A´ ultimately takes these forms. The same is then true of the finished product A´´´. The entire price of it is ultimately resolvable into wages and interest; and in speaking of the product of an entire group we do not need to make any reservation for raw materials. The case in which this statement requires qualification is that in which the material in its rawest state still has value, as is the case with ore and mineral oil contained in the earth but not a true part of land in the economic sense, since they are exhausted in the using. The price of a product into which these elements enter includes something that represents the value which they have _in situ_ and before any labor has been expended on them. It is true even in these cases that the value of the product is measured in terms of wages and interest, provided that the exhaustible elements such as ore, oil, etc., are capable of being replenished, or provided that an effective substitute for them is in process of production by means of labor and capital. The natural raw material is then worth what the artificial substitute costs in terms of capital and labor, and the finished product which contains some of the natural material sells for the amount which the finished product costs, which is made altogether by labor and capital applied to valueless elements in nature. _How Costs are Determined._--The early studies of "natural" values, or values which conform to costs of production, were unconscious and imperfect attempts to attain the laws of value in a static state. In such a state costs resolve themselves into wages and interest, and the conception of such a static state is therefore not complete unless we know how wages and interest themselves are determined. What we have already said implies that they fluctuate about certain standards, just as do the prices of goods, and that they would remain at these standards if society were reduced to a static condition. _Significance of Static Law in a Dynamic State._--An actual society is undergoing constant disturbances. It is very far from being static; and yet values of goods, on the one hand, and the earnings of labor and capital, on the other, hover within a certain distance of the standards which would be realized if the society became static. In spite of active dynamic movements the general returns of labor and capital can never range so far from these theoretical amounts that the distance from them cannot in some way be measured and accounted for. The sea, when gales are blowing and tides are rising and falling, is anything but a static object, and yet it keeps a general level in spite of storms and tides, and the surface of it as a whole is surprisingly near to the ideal mathematical surface that would be presented if all disturbances were to cease. In like manner there are certain influences that are disturbing the economic equilibrium just as storms and tidal waves disturb the equilibrium of the sea. We cannot actually stop these influences any more than we can stay the winds and the lunar attraction; but we can create an imaginary static state for scientific purposes, just as a physicist by a process of calculation can create a hypothetical static condition of the sea and discover the level from which heights and depths should be measured. No more than the economist can he actually bring the subject he is dealing with to a motionless condition. The economic ocean will defy any modern Canute who may try to stop its movements; but it is necessary to know what shape and level it would take if this were done. _Influences that disturb the Static Equilibrium._--The influences that disturb the economic equilibrium are, in general, five. The population of the world increases, and this is one influence which prevents values, wages, and interest from subsiding to perfectly "natural" standards. Capital is increasing, and this influence also acts as a disturbing factor. The methods of producing things change, and the changes have a very powerful effect in preventing the attainment of a static equilibrium. New modes of organizing different industries are coming into vogue, and this causes a further disturbance of the economic adjustment. The wants of men are by no means fixed; they change, multiply, and act on the economic condition of society in a way that affects the static adjustment. Even physical nature undergoes change, and the perishable part of the earth does so in a disquieting way. We are using up much of our natural inheritance. As the effect of this appears chiefly in forcing us to change our processes of production, we shall, for convenience, limit our study to the five changes here enumerated. _Movement Inevitable in the Dynamic State._--These influences reveal their presence by making labor and capital more productive in some places than they are in others, and by causing them ever and anon to move from places of less productiveness to places where gains are greater. As we have said, this moving of labor and capital to and fro is, like currents in the sea, a sign of a dynamic condition. As in the static state these agents would not thus move, however fluid and mobile they might be, so in a dynamic state they are bound to move, because their earning powers do not remain long exactly equal in any two employments, and they go now hither and now yon, as, in the changeful system, openings for increased gains present themselves. If commodities were everywhere selling at cost prices and if wages and interest were everywhere normal and uniform, labor and capital would not move to and fro, and this would be a proof that dynamic influences were absent. _How an Imaginary Static Society is Created._--If we wish to discover to what standard the values of goods, on the one hand, and the rewards of labor and capital, on the other, continually tend to conform, we must create an imaginary society in which population neither increases nor diminishes, in which capital is fixed in amount, in which the method of making goods does not change, in which the mode of organizing industry continues without alteration, and in which the wants of consumers never vary in number, in kind, or in intensity. _Costs of Production in a Static State._--We have said that in such a static state the prices of different products are just high enough to cover the wages and interest which are generally paid. There are uniform or all-around rates of pay for labor and for capital, and every man who hires workmen or gets loans from a bank has to pay them. In the real world, full as it is of disturbances, and given over as it is to forces of change and progress, we find that values, wages, and interest are in general surprisingly near to these standards. In a particular business products may for a time sell for enough to afford a large surplus above prevailing wages and interest, and business as a whole may, for a time, yield some such surplus; but in the absence of monopolistic privileges no one business yields a large surplus for a long time, and still less does business as a whole do so, though profits may always be found somewhere within the system. _The Final Productivity of Labor._--If we assume that the capital of society is a fixed amount, we may perform an imaginary experiment which will show how much labor really produces. We may set men at work, a few at a time, until they are all employed, and we may measure the product of each of the detachments. We should make the different sections of the working force as similar to each other as it is possible to make them and call each section a unit of labor. If there were ten such divisions and if the quantity of capital were sufficient to equip them all on the scale on which laborers are at present actually equipped, it is clear that this amount of capital, when it was lavished on one single section, must have supplied it with instruments of production in nearly inconceivable profusion. What we should to-day regard as a fair complement of capital for a thousand men would nearly glut the wants of a hundred, and yet it is thinkable that it should take such forms that they would be able to use it. _Productivity of the First Unit of Labor._--We will set at work one section which we have called one unit of labor and will put into the hands of its members the whole capital which is designed ultimately to equip the ten sections. It is very clear that the forms that this capital will take cannot be the same that it will have to take when the entire working force is using it. Indeed, we shall have to tax our ingenuity to devise ways in which one unit of labor can utilize the capital that will ultimately be used by ten. The tools and machines will have to be few in number but very costly and perfect. We shall have to resort to every device that will make a machine nearly automatic and cause it to exact very little attention from the person who tends it. The buildings will have to be of the most substantial and durable kind. We shall have to spend money without stint wherever the spending of it will make labor more productive than it would otherwise be. If we do this, however, the product of the labor and its equipment will be a very large one. The industry will succeed in turning out indefinitely more goods than a modern industry actually does, and the reason for it will be that the workmen have capital placed in their hands in unparalleled profusion. _The Product of the Second Unit of Labor._--We will now introduce a second unit of labor, by doubling the number of workers, without changing the amount of the capital. We must, of course, change the forms of the capital, or it cannot be advantageously used by the larger working force. The buildings will have to be larger, and if they are to be erected with about the same amount of capital as was formerly used, they must be built in a cheaper way. Tools of every sort must be more numerous, and this larger number of tools, if it is to represent the same investment of capital that the former number embodied, must also be simpler and cheaper. The whole equipment of _capital goods_ will have to undergo a complete transmutation; but the essential thing is that the amount of the capital should not be changed. _A Provisional Mode of Measuring Capital._--In measuring the amount of the capital we are obliged to use a unit of cost, and in the illustration we have assumed that the cost can be measured in dollars. The productive fund consisted at the outset of a certain number of dollars invested in productive operations. This is only a provisional mode of measuring it. The money spent really represents sacrifice incurred, and we shall find that the only kind of sacrifice that is available for measuring the cost of goods of any kind is that which is incurred by labor. Ultimate measurements of wealth in all its forms have to be made in terms of labor. Such measurements have presented difficulties, and the attempt to make them has led to serious fallacies. We shall see, in due time, how these fallacies can be avoided. _The Law of Diminishing Productivity._--Under these conditions the second unit of labor will add something to the amount that was produced by the first unit, but it will not cause the product to become double what it was. It could not do that unless the capital also were doubled. Each unit of labor is now coöperating with one half of the original capital, and the total product is less than it would have been if the new labor, on entering the field, had brought with it as full an equipment of productive instruments as was possessed by the labor that preceded it. Adding to the industry a second unit of labor without adding anything to the capital makes the total product somewhat larger, but falls short of doubling it. If we credit to this second unit of labor what it adds to the product that was created before it came into the field, we shall find that it is a certain positive amount, but obviously less than the total product which was realized by the first unit _and all the capital_. It is even less than a half of the product of the two units using all the capital. Perhaps the first unit of labor, when it used all the capital, created ten units of product; while the two units of labor, using this same original amount of capital, produce sixteen units of product. The clear addition to the original product which is caused by the added labor of the second squad of workmen is only six units, while a half of the total product after the addition to the labor has been made is eight. This figure represents the amount we may attribute to one unit of labor and a half of the total capital, while six represent what is _causally_ due to one unit of bare labor only. With all the capital and one unit of labor we get ten units of product, while the addition of one unit of bare labor brings the total amount up to sixteen. Six units find the cause of their existence in the presence of the second unit of labor, and the second unit therefore shows, as compared with the first, a diminished productivity. _Product of the Third Unit of Labor._--We will now introduce a third unit of labor, leaving the amount of capital still unchanged, but again altering the forms of it so as to adapt them to the needs of a still larger working force. We will make the buildings larger and therefore, of necessity, cheaper in their forms and materials. We will make the tools and machines more numerous and simple, and will do everything that is necessary in order to make the fixed amount of capital--the fund amounting to a given number of "dollars"--embody itself in the number and the kinds of capital goods that are requisite in order to supply three times the original number of workmen. The third unit of labor now adds something to the product realized by the first two, but the addition is smaller than it was in the case of the second unit. _Products of a Series of Units of Labor._--If we continue this process till we have ten units of labor, employing the same amount of capital as was formerly used by one, we shall find that each unit as it begins to work adds less to the previous product than did the unit which preceded it, and that the tenth unit adds the least of all. Care must be taken not to confound the addition that is made to the product in consequence of the additional working force with the amount which, after the enlargement of the force, is created by the last unit of labor _and its pro rata share of the capital_. When the tenth unit of labor is working, it is using a tenth of the capital and the two together create a tenth of the product. This is more than the amount which is _added_ to the product by the advent of the tenth unit of labor. That addition is merely the difference between the product of all the capital and nine units of labor and that of all the capital and ten units of labor. This extra product can be attributed entirely to the increment of labor. It is also carefully to be noted that when the units are all working together, their products are equal and the particular one which happened to arrive last is not less productive than the others. Each one of them is _now_ less productive than each one of the force of nine _was under the earlier conditions_. In like manner each unit of the nine is less productive than was, in the still earlier period, each unit of the force of eight. At any one period, all units produce the same amount. At any one period, then, what any one unit of labor produces by the aid of its _pro rata_ share of the capital is a larger amount than what each can be regarded as producing by itself. Though one of ten units creates, with the aid of a tenth of the capital, a tenth of the product, of itself it creates less; for we can only regard as its own product what it adds to the product that was creating before it arrived on the scene. It is the bare product of a unit of labor alone that we are seeking to distinguish from other elements in the general output of the industry, and that consists in the difference between what nine units of labor and all the capital can produce, and what ten units of labor and all the capital can produce. We will consider the amount of capital fixed and let the amount of labor increase along the line _AE_, and we will let the product of successive units of labor be measured by the vertical distance from the points on the line _AE_ to the descending curve _CD_. _AC_ is the product of the first unit of labor. The product of later units is measured by lines to the right of _AC_ and parallel with it, which grow shorter as the number of units increases. _ED_ is the product of the last unit. In each case we impute to an increment of labor whatever amount of product its presence adds to that which was created before. _Summary of Essential Facts._--The facts that are to be remembered then are: first, that the capital remains fixed in amount, though the forms of it change as the number of units of labor increases; secondly, that that which we call the product of a unit of labor is what that unit, coming into the field without any capital, can add to the product of the labor and capital that were there before; and thirdly, that this specific product of labor grows smaller as the amount of labor grows larger, rendering the product of the last unit the smallest of all. When the tenth and last unit is working, each one of the nine earlier units is, of itself, producing no more than does the final one, though it formerly produced more because of the larger quota of capital with which it was formerly supplied. [Illustration] _The Test of Final Productivity._--There are now at work ten units of capital and ten of labor, and we cannot go through the process of building up the working force from the beginning. How, then, do we measure the true product of a single unit of labor? By withdrawing that unit, letting the industry go on by the aid of all the capital and one unit of labor the less. Whatever one of the ten units of labor we take away we leave only nine working. If the forms of the capital change so as to allow the nine units to use it advantageously, the product will not be reduced to nine tenths of its former size, but it will still be reduced; and the amount of the diminution measures the amount of product that can be attributed to one unit of bare labor. Or we may add a certain number of workmen to a social force already at work, making no change in the amount of the capital,--though changing its forms,--and see how much additional product we get. That also is a test of final productivity. It gives the same measurement as does the experiment of taking away the little detachment of men and seeing how much the product shrinks. By either process we measure an amount that is attributable altogether to bare labor and not to capital. The whole area _BCD_ in the diagram is an amount of product that is attributable to capital and not to labor. It represents the total surplus produced by labor and capital over the amount that can be traced to the labor alone. The product of all the capital and all the labor minus ten times the product of a single unit of labor is the amount that is attributable to the productive fund only. The area _ABDE_ represents this amount. The last unit of labor creates the amount _DE_ and the number of units is represented by the amount _AE_. All of them are now equally productive and what all create, as apart from what capital creates, is the amount _ABDE_. _Only the Final Part of this Mode of gathering a Working Force practically resorted To._--The process of building up the working force from a single unit is imaginary. In practical life we see the process only in its final stage. _Entrepreneurs_ do continually have to test the effect of making their working forces a little larger or a little smaller, and in so doing they test the final productivity of labor; and this is all that is necessary. Tracing the process of building up the force of labor unit by unit reveals a law which is important, namely, that of the diminishing productivity of single units of labor as the number of units increases. If we crowd the world full of people but do not proportionately multiply working appliances of every kind, we shall make labor poorer. _Why a Detachment of Laborers rather than One Man is treated as a Unit of Labor._--In making up the force of workers we might have treated each individual as a unit; but we have preferred to call a detachment a unit in order that the symmetry of the force might be preserved. Even though we were studying only a single mill it would have its departments, and it would be desirable that, when we enlarge the force of men, we should be able without difficulty to give to each part of the mill its fair share of the new laborers. If it were a shoe factory, we should need to add lasters, welters, sewers of uppers, etc., in a certain proportionate way, in order that one part of the mill might not get ahead of another and pile up unfinished products faster than they could be taken and completed. In the last analysis the law applies to the industry of all society. The final unit in the case consists of shoemakers, cotton spinners, builders, foundrymen, miners, cultivators, etc., and of men of all subtrades included in the general callings. As the composite detachments come into the field, they apportion themselves among all the occupations that are represented, and that too in nicely adjusted proportions. We shall see in due time how this adjustment of the several shares of the social force of laborers is practically made. _The Law of Final Productivity Applicable to the Labor of Society._--The law of final productivity applies to every mill, shop, or mine separately considered. If its capital remains fixed in amount, units of labor produce less and less as they become more numerous. The product of any unit at any one time may be measured by taking it away and seeing how much the output of the establishment is reduced. The law, however, applies to all the mills, shops, mines, etc., considered as a social complex of working establishments. As the working society grows larger without growing richer in the aggregate, the power of labor to produce goods of all kinds grows less. At any one time this producing power is measured by taking away from every working establishment a number of its operatives and ascertaining how much less is produced after the withdrawal. Such a test on the social scale is never made consciously. Each employer can test in an approximate way the effect of reducing his own force, and the effect of gradually enlarging it, and there are influences at work which result in enlarging one industry when others are enlarged and in causing the final productivity of labor to be uniform in all. A shoe manufacturer can tell, in a general way, how much an extra man or two will be worth to him. It is possible to ascertain by experience about what number of shoes that additional labor will, in a year, add to the output of the shoe factory or the number of tons of steel it will add to the present annual output of a furnace. When these products vary in the case of different shops, the men are called to the points where the apparent additions are largest, and the constant tendency is toward a level of productive power. The building up of an imaginary force from the beginning presents, in a clear and emphatic way, the fact that the specific productivity of labor grows less as, other things remaining the same, workers become more numerous. We should know on _a priori_ grounds that this must be the fact; but we can verify it by observation and statistical inquiry. Where men are numerous and land and tools are scarce, labor is comparatively unproductive; and it is highly productive where land and tools are plentiful. There is no doubt that crowding the world full of people, without providing the world with capital in a proportionate way, would impoverish everybody whose income depends on labor. _The Law of Wages._--Even though labor creates the amount _ABDE_, it is not yet perfectly clear that it will be able to get that amount. For aught we now know the _entrepreneur_ may keep some of it, and for aught we know he may keep some of the quantity _BCD_ which is distinctly the product of capital. Let us see whether he can in reality withhold any part of _ABDE_, which is the product of labor. [Illustration] _Wages under Perfect Competition._--In the static state that we have assumed, competition works without let or hindrance. It does not work thus in the actual world, and we shall in due time take account of the obstacles it encounters; but what we are now studying is the standards to which such competition as there is--and it is in reality very active--is tending to make wages conform. We want to know what would happen in case this competition encountered no hindrance at all. This would require that a workman should be able to set employers bidding against each other for his services just as actively as an employer can make laborers bid against each other in selling their services. If this were the case, every unit of labor could get what it produces, no more and no less. Even a single man, offering himself to one employer after another, would virtually carry in his hands a potential product for sale. His coming to any man's mill would mean more goods turned out in a year by the mill; and if one employer would not pay him for them at their market value, another one would. The final unit of social labor can get, under perfectly free competition, the value of whatever things that labor, considered apart from capital, brings into existence. Moreover, each unit of labor by itself alone now produces, as we have seen, the same amount of commodity as the final unit, and can get the price of it. Now that they are all working together each one of them can place itself in the position of the final unit by leaving its present employment and offering its services elsewhere. _Wages regarded as Prices of Fractional Products adjusted by Perfect Competition._--Under the hypothesis of perfect competition, as the term has been used in our discussion, the venders of goods can get their market values. These values are fixed by the final utility law. Free competition means, then, not only that any average laborer who offers himself for hire virtually carries in his hands a potential but definite product for sale, but that he may confidently offer it at the price that is fixed by its final utility. Like other venders, the laborer can get the true value of his product and he can get no more. In an ideally perfect society organized on the competitive plan a man would be as dependent on his own productive power as he would be if he were alone in a wilderness. His pay would be his product; but that would be indefinitely larger than it could be in a wilderness or in any primitive state. The capital of other men and the organization that they maintain enable a worker to create and get far more than he could if he lived alone, even though, like Crusoe, he were monarch of his whole environment. It would be a losing bargain for the worker to surrender the product of mere labor in a state of civilization in exchange for what both labor and capital create in a state of savagery. CHAPTER IX THE LAW OF INTEREST The product of the final unit of labor--an amount which in practice is measured without any tracing of the previous growth of the working force--sets the standard of the rate of wages. We have now to see that the rate of interest has a similar basis; and yet it is worth while to build up, wholly in imagination, a fund of capital, just as we have made up the force of laborers, increment by increment. This will have the incidental effect of illustrating another way in which wages may be determined. _Interest as a Residual Amount._--The area _BCD_ in our former figure represents the difference between the total product of an industry and the wages paid to laborers. If there is no net profit accruing to the _entrepreneur_, this area must represent interest. It is what is left for the capitalist on the supposition that he and the laborer together get all that there is. If the goods sell for what they cost, this must be the fact, and the amount represented by _BCD_ has thus to go to capital, since, by a rule of exclusion, it cannot go to the _entrepreneur_ nor to the laborer. The mill and its contents earn for their operator nothing but simple interest on the money they have cost. Paying the laborers discharges the first claim on the product, and there then remains only enough of the product to pay the remaining claim, that of capital. The question still remains to be answered, how the capitalist, if he is a different person from the _entrepreneur_, or operator of the mill, can make this functionary pay over to him all that he has in his hands after paying the wages of labor. _The Importance of the Residuum._--The above reasoning does not satisfactorily show what influence the capitalist can use to make the _entrepreneur_ pay over to him the entire amount of the residuum. It shows that after paying wages the _entrepreneur_ will have a certain amount left, but it is not thus far clear how the capitalist can get it from him. The fact that the laborers get only the amount represented by _ABDE_ and that the whole amount is _ACDE_ does, however, at least show that the _entrepreneur_ has the amount _BCD_ left in his hands, and that he is _able_ to pay this amount to the capitalist if by any appeal to competition the capitalist is able to make him do it. _Interest not determined Residually._--The fact is that the interest on capital is fixed exactly as are the wages of labor. We will let another figure represent the entire product of the same amount of labor and the same amount of capital that were represented in the former case. We will assume that there is at the outset a complete force of laborers, and that no men are added to it or taken from it; but we will gradually introduce units of capital instead of units of labor as in the former case. The amount of capital is now represented by the line _A´E´_ and the product of the first unit of it by the line _A´C´_. The product of the successive units declines along the curve _C´D´_. The final unit of capital then brings into existence the amount of wealth represented by _E´D´_. As every other unit now produces the same amount, the capital as a whole creates the quantity represented by _A´B´D´E´_ and every unit of it makes its own separate contribution to that amount. In this we have simply applied to capital and its earnings the principle we formerly applied to labor and its earnings. [Illustration] _General Form of the Law of Final Productivity._--This principle is the law of final productivity, one of those universal principles which govern economic life in all its stages of evolution. Either one of the two agents of industry, used in increasing quantities in connection with a fixed amount of the other agent, is subject to a law of diminishing returns. The final unit of the increasing agent produces less than did the earlier units in the series. This does not mean that at any one time one unit produces less than another, for at any one time all are equally productive. It means that the tenth unit produces less than the ninth did _when there were only nine in use_, and that the ninth unit formerly produced less than the eighth did in that still earlier stage of the process _in which there were only eight in use, etc._ If the productive wealth of the United States were only five hundred dollars per capita instead of more than twice that amount, interest would be higher than it is, because the productive power of every dollar's worth of capital would be more than the productive power of each dollar's worth is now; and, on the other hand, if we continue to pile up fortunes, great and small, till there are in the country two thousand dollars for every man, woman, and child of the population, interest will fall, because the productive power of a dollar's worth will become less than it now is. _How Competition fixes Interest._--We can now see how it is that the capitalist can make the _entrepreneur_ pay over to him the amount left in his hands after paying wages. Every unit of capital that any one offers for hire has a productive power. It can call into existence a certain amount of goods. The offer of it to any _entrepreneur_ is virtually an offer of a fresh supply of the kinds of goods which he is making for sale. Loaning ten thousand dollars to a woolen manufacturer is really selling him the amount of cloth that ten thousand dollars put into his equipment will bring into existence. Loaning a hundred thousand dollars to the manufacturer of steel, so as to enable him in some way to perfect his equipment, is virtually selling him the number of additional tons of steel, ingots, or rails that he can make by virtue of this accession to his plant. _The Significance of Free Competition._--Now, the tender of capital may be made to any _entrepreneur_ in a particular industry, and the existence of free competition between these _entrepreneurs_ implies that a lender of capital can get from one or another of them the whole value of the product that this capital is able to create. A unit of capital in the steel business can produce _n_ tons of steel in a year, and if one employer will not pay the price of _n_ tons for the loan of it, another will. This, indeed, implies an absolutely free competition; but that is the condition of the problem we have first to solve. When we know what ideally active competition will do, we can measure the effects of the obstructions that, in practice, competition actually encounters. _Competition for Capital among Different Industries._--The capitalist can invoke the aid of competition outside of the limits of one particular business. He may offer his loan to steel makers, to woolen manufacturers, cotton spinners, silk weavers, shoemakers, etc. Within each one of these industries perfect competition between the different employers will give him the value of the product which, in that business, his capital is able to create. If, however, what in this way he offers to men in one occupation is worth more than what he offers to men in another line,--if capital is worth more to steel makers than it is to cotton spinners,--he will find a market for his capital in the former industry; and this process of seeking out the employment in which capital is the more productive and there bestowing the loans of capital, will go on until every such local excess of productive power is removed and capital can produce as much wealth in one business as it can in another. Everywhere capital will then be both producing and receiving the same amount, and general interest will everywhere be determined by the final productivity principle acting all through the business world. _When Interest as Directly Determined equals Interest as Residually Measured._--The area _BCD_ of the first figure measures what the _entrepreneur_ has left after paying wages. This amount and no more he can pay as interest, and he will pay it if he has to. The area _A´B´D´E´_ of the second figure represents what he must pay as interest; and we can now see that, if competition is perfectly free, this amount equals the amount _BCD_ of the first figure. If, after paying wages, there is any more left in the _entrepreneur's_ hands than competition compels him to pay out as interest, he is realizing a net profit; he is selling his goods for more than they cost him, and this, as we saw at the outset, is a condition that under perfect competition cannot continue. The natural price of goods is the cost price. If the market price of anything is in excess of cost, _entrepreneurs_ receive a profit, and in order to do more business and make a larger aggregate of such profit they bring new labor and capital into their industry. The increased output lowers prices, and the excess of gain is thus taken from the _entrepreneur_. If _BCD_ is smaller than _A´B´D´E´_, the _entrepreneur_ incurs a loss and will curtail his business and let some labor and capital go where they can produce more. Taking this remainder of income from the _entrepreneur_ by means of an addition to the output of goods and a reduction of the price of them does not annihilate the income, but bestows it on other recipients; for the reduction in price which destroys an employer's profit can come only in a way that benefits consumers. It means that enlarged production of which we have just spoken, which scatters more goods throughout the community and insures an addition to the real incomes of both laborers and permanent investors. _Effect of Perfect Mobility of Labor and Capital._--Perfect mobility of labor and capital insures that the residuum in the _entrepreneur's_ hands after wages are paid shall all be made over to the capitalist. We encounter here again the static law that, with competition working without let or hindrance, the _entrepreneur_ as such can keep nothing for himself; though if he is also a worker he will get wages, and if he is also a capitalist he will get interest. His business will pay wages on all kinds of labor, including that of management, and interest on all capital, including his own. A net gain above all this it will not afford, and whatever the _entrepreneur_ has left after paying wages he will have to use in paying interest, and _vice versa_. Laborers and owners of capital have, as it were, to take each others' leavings. Such is the situation in an ideally static condition, though we shall see how it is changed in actual and progressive society. The area _BCD_ of the first figure is, under static conditions, exactly equal to the area _A´B´D´E´_ of the second figure, because _ACDE_ represents the whole product, _BCD_ in the first figure represents all that is left of it after wages, measured by _ABDE_, are paid; and we know by evidence both theoretical and practical that the capitalist, whose share is directly expressed by _A´B´D´E´_ of the second figure, can claim and get the whole of this amount. _Wages as a Residuum._--It is clear that the same reasoning applies to wages. In the second figure they are represented as a residuum. The area _B´C´D´_ represents what the _entrepreneur_ has left after paying interest, and nobody can get this amount but the wage earner. The reason, however, why the wage earner can get it is that free competition will give him the amount _ABDE_ of the first figure, and this, under perfectly static conditions, must equal _B´C´D´_ of the second. Under perfect competition the _entrepreneur_ cannot have any of the amount _B´C´D´_ left in his hands after meeting the claims that the wage earner makes on him. On the other hand, he must have enough left to pay interest, since otherwise he would be incurring a loss, and that could not fail to force him and others who are in the same situation to contract their operations or go out of business. If the output of goods is reduced, either by the retirement of some employers or the curtailment of product by all, the price of what continues to be sold will be raised to the point at which wages and interest can be paid. _Wages and Interest both adjusted at Social Margins of Production._--It is to be noted that wages and interest are fixed at the social margin of production, which means that they equal what labor and capital respectively can produce by adding themselves to the forces already at work in the general field of employment. In making the supposition that, owing to some disturbing fact, a particular _entrepreneur_ has not enough after paying wages to pay interest, we assume that the rate of interest is fixed, in this way, in the general field and not merely in his establishment. If _B´C´D´_ were larger than _ABDE_, the _entrepreneur_ would be selling goods for more than cost and realizing a net profit, which he cannot do in a static state; but a pure profit is not only possible but actual in a dynamic state. In actual business total returns represented by _ACDE_ amount to more than the sum represented by _ABDE_ (wages) plus _A´B´D´E´_ (interest). There are conditions that in practical life are continually bringing this to pass in different lines of business, though not in all of them at once. The real world is dynamic and therefore the true net profit, or the share of the _entrepreneur_ in the strict sense of the term, is a positive quantity. This income is always determined residually. It is a remainder and nothing else. It is what is left when wages and interest are paid out of the general product. To the _entrepreneur_ comes the price of the products that an industry creates. Out of this he pays wages and interest, and very often he has something remaining. There is no way of determining this profit except as a remainder. The return from the sale of the product is a positive amount fixed by the final utility principle. Wages and interest are positive amounts, and each of them is fixed by the final productivity principle. The difference between the first amount and the sum of the two others is profit, and it is never determined in any other way than by subtracting outgoes from a gross income. It is the only share in distribution that is so determined. _Entrepreneur's_ profits and residual income are synonymous terms. In the static state no such residual income exists, but from a dynamic society it is never absent. Every _entrepreneur_ makes some profits or losses, and in society as a whole the profits greatly predominate. _Summary of Facts concerning a Static Adjustment of Wages._--We know then that in any industry wages and interest absorb the whole product, because any deviation from that rule in a particular group is corrected in the way above mentioned. Moreover, general wages and interest, as determined by the law of final productivity, must equal those incomes when they are determined residually. The area of the rectangular portion of one of the foregoing figures must equal the area of the three-sided part of the other. The question arises why all _entrepreneurs_ might not get a uniform profit at once. This would not lure any labor or capital from one group or subgroup to another. If, after paying wages and interest at market rates, the _entrepreneurs_ in each industry have anything left, the entire labor and capital are producing more than they get and there is an inducement to managers and capitalists to withdraw from their present employers and become _entrepreneurs_ on their own account. Such an _entrepreneur_ entering the field, drawing marginal labor and capital away from the _entrepreneurs_ who are already there and combining them in a new establishment, can make them produce more than he will have to pay them and pocket the difference. If such a condition were realized, there would be a gain in starting new enterprises, since luring away marginal agents and combining them in new establishments would always be profitable. When we introduce into the problem dynamic elements we shall see that centralization, which makes shops larger instead of smaller, makes industries more productive, and that what happens when net profits appear is more often the enlarging of one establishment than the creation of new ones. _Entrepreneurs_ in the large establishments can afford to resist the effort made by others to lure away any of the labor or capital which they are employing, and they will do this for the sake of retaining their profits. They can do it by bidding against each other, in case any of them are making additions to their mills or shops, and also by bidding against any new employers who may appear. Perfect competition requires that this bidding for labor and capital shall continue up to the profit-annihilating point. Here, as elsewhere in the purely static part of the discussion, we have to make assumptions that are rigorously theoretical and put out of view in a remorseless way disturbing elements which appear in real life. The static state requires that all _entrepreneurs_ who survive the sharp tests of competition should have equally productive establishments, which means that they should all be able to get the same amount of product from a given amount of labor and capital. The actual fact is that differences of productive power still survive. There are some small establishments which, within the little spheres in which they act, are as productive as large ones; but there are also some which are struggling hopelessly against large rivals in the general market and are destined erelong to give up the contest. In other words, the centralizing and leveling effects of competition are approximated but never completely realized in actual life. A fact that it is well to note is that the test of final productivity is inaccurately made when unduly large amounts of labor and capital are made the basis of the measurement. Take away, for instance, a quarter of the working force, estimate the reduction of the product which this withdrawal occasions, and attribute this loss entirely to the labor which has been taken away, and you estimate it too highly. With so large a section of the labor withdrawn the capital would work at a disadvantage, and a part of the reduction of the product would be due to this fact. If we should take away all the labor, the capital would be completely paralyzed, and the product would become _nil_. It would obviously be inaccurate to say that the whole product is attributable to the labor, on the ground that withdrawing the labor annihilates it all. With any large part of the labor treated as a single unit, the loss of product occasioned by a withdrawal of such a unit is more than can be accurately imputed to it as its specific product. The smaller the increments or units are made, the less important is this element of inaccuracy, and it becomes a wholly negligible quantity when they become very small. A study of the forms of the productivity curves will show that if we take as the increment of labor used in making the test only a tenth of the whole force, we exaggerate the product imputable to it by a very minute fraction, say by less than a one-hundredth part; and if we take a hundredth of the labor as a final unit, we exaggerate the product that is solely attributable to it by an amount so minute that it is of no consequence in practice or in any theory that tries to be applicable to practice. A question may be raised as to whether we are correct in saying that the _entrepreneur's_ profit is residual, in view of the fact that the entire product of a business is at the mercy of the management, so that a bad manager may reduce it or a good one may increase it. It may be further claimed that that part of the management of a business which consists in making the most far-reaching decisions cannot safely be intrusted to a salaried superintendent or other paid official and must get its returns, if at all, in the form of profits. Even in this case the gains are secured by making the gross return, which is the minuend in the case, large, leaving the two subtrahends, wages and interest, unchanged, and thus creating a remainder or residuum. We shall later see to what extent _entrepreneurs_ do in fact create the profits that come to them. The complete static conception of society requires that no _entrepreneur_ should be left in the field who cannot continue indefinitely to hold his own against the competition of his rivals, and this requires essential equality of productive power on the part of all of them. It is not necessary, however, that all should operate upon an equal scale of magnitude, for an interesting feature of modern life is the need of many small productive establishments that cater to local demands and to wants which, without being local, call for only a few articles of a kind. Repairs, small orders, and peculiar orders are executed more cheaply in small establishments, and they survive under the very rule of essential equality of productive power which static conditions require. For catering to the general market and producing staple goods the large establishment has a decisive advantage, and this insures the centralization which is the marked feature of recent industrial life. CHAPTER X RENT _The Term "Rent" as Historically Used._--The word _rent_ has a striking history. The science of political economy first took shape in a country in which direct employers of labor were not, as a rule, the owners of much land. Farmers, merchants, and many manufacturers hired land and furnished only the auxiliary capital which was necessary in order to utilize it. In a practical way the earnings of land were thus separated from those of capital in other forms, since they went to a different class of persons; and in the thought of the people the charges made for the use of mere ground came to constitute a unique kind of income. If, during the last century, the land in England had been a highly mercantile commodity, and if it had been the common practice of _entrepreneurs_ not to hire it but to buy and own it, as they bought and owned all other industrial instruments, there is little probability that land would have been considered, either in practical thought or in science, as a thing to be as broadly distinguished as it has been from all other capital goods. A business man would have measured his permanent fund of capital in pounds sterling and would have included in the amount whatever he had invested in land. As in America any representation of the capital of a corporation includes the sums invested in every productive way, and this includes the value of all land that the company holds, so in England, under a similar system of conducting business, any statement of the amount of a particular business capital would have included the whole of the productive wealth embarked in the enterprise; and in any statement of the forms of it there would have appeared, besides a list of all tools, buildings, unfinished goods, and the like, a schedule of the prices of land that the company owned and used. In "putting capital into his business" a man might buy land, in "withdrawing his capital" he might sell it; and the land in the interim would be the obvious embodiment of this part of his fund. The fact, then, that land was owned by one class of persons and let to another for hire, and that the lessees were the _entrepreneurs_ or users of it, caused practical thought and speech to put land in a class by itself. _The Origin of the Theory of Rent._--Scientific thought powerfully strengthened this tendency. At a very early date a formula was attained for measuring the rent of land, while no satisfactory formula was, then or for a long time afterward, discovered for measuring the amount of interest. Men contented themselves with saying that the rate of interest depends on demand and supply. In the case of the rent of land the same thing might have been said, but here such a statement was not mentally satisfying, and investigators tried to ascertain why demand and supply so act as to fix the income that land yields at a certain definable amount. _The Traditional Formula for Rent._--The formula which has long been accepted as measuring the rent of a piece of land, though it bears the name of Ricardo, grew into shape under the hands of several earlier writers. In its best form of statement this principle asserts that "the rent of a piece of land is the product that can be realized by applying labor and capital to it, minus the product that can be realized by applying the same amount of labor and capital to land of the poorest grade that is in cultivation at all." The quantity of the poorest land must be left indefinite, and all that the given amount of labor and capital can economically utilize must be left at their disposal. It would not do to say that the rent of _an acre_ of good land equals its product less that of _an acre_ of the poorest land in cultivation tilled with the same expenditure of labor and capital. If we should select a bit of wheat land in England tilled at a large outlay in the way of work, fertilizers, drains, etc., and try the experiment of putting the same amount of labor and capital on a piece of equal size in the remotest part of Canada, we should find that, so far from securing wheat enough to pay the bills that we should incur in the way of wages and interest, we should not have enough to help us greatly in the defraying of these costs, and the cultivation of this piece of land would be a losing venture. Instead of being no-rent land, yielding merely wages and interest for the labor and capital used in connection with it, it would be minus-rent land, deducting something from the earnings which the agents combined with it might elsewhere secure. In order to utilize such land at all, one must till it in what is termed an extensive rather than an intensive way, putting a small amount rather than a large amount of work and expenditure on it. By tilling ten acres of a remote and sterile farm with as much labor and other outlay as a very good acre of land in England receives, one can perhaps get enough to pay the required wages and interest. In general no-rent land is commonly utilized in an extensive way and very good land in an intensive way; and in stating the old formula for rent we need to be careful to make it mean that the rent of the good piece is its total product less the product that can be had by taking from the good piece the labor and capital it now absorbs and setting them at work on a piece of the poorest land which is enough larger than the good one to enable us to secure a crop which will be worth just the amount of wages and interest we must pay. The larger size of the poor piece of land is an essential condition. _Real Significance of Rent Formula._--It will be seen that this formula amounts to saying that the rent of land is what the land itself adds to the marginal product of labor and capital. Put a certain amount of labor and capital on a piece of land of good quality, and you get a certain amount of product. Withdraw the land from the combination, and you force the labor and capital to become marginal increments of these agents. They must go elsewhere and get what they can. One alternative that is open to them is that of seeking out land of a grade so poor that it has not been previously utilized and doing what they can to get a product out of it. Whatever they can make such land yield is, in an economic sense, wholly their own product. There is an indefinite quantity of this kind of land to be had, and wherever labor and capital utilize any part of it, they can have all that they produce. Now if we subtract what they there create from what was created when they were working on the good land, we have the rent of that land. _Rent as a Product Imputable to Land._--The difference between what the labor and capital produce at the margin of cultivation of land and what they can produce on good land, or land that lies within the margin, is clearly attributable to the qualities of the land itself. Given _X_ units of labor and _Y_ units of capital, combine with them no land except such as is too poor to have been previously utilized, and you get a certain product. It is the product of the labor and capital using something which is free to any one. Now put a piece of good land into the combination; to the _X_ units of labor and _Y_ units of capital add a piece of productive land and see what you can create. We do this by taking these units of labor and capital away from the worthless marginal land and setting them to tilling that which is of the better quality. The product is of course larger than they got before, and the difference measures what the land itself adds to the output of the other agents in the combination. The true conception of rent is that of the specific addition which land makes to the product of other agents used in connection with it. There are various ways of measuring this addition, but the method just used will at least show that the presence of the good land is the cause of the excess of product which given amounts of labor and capital secure over what they could create on land of the poorest quality. _Rent as a Differential Product._--In the early statements of the rent law it was not said that the rent of a piece of land is the product specifically attributable to it. If it had been, the chances are large that a much broader and more scientific use of the rent formula would have resulted. The law of rent, as it was actually stated, made it consist of a differential amount. It was what a given amount of labor and capital would produce under one set of conditions minus what they would produce under another. Since it is the presence or the absence of the productive land which makes the only difference between the two conditions, rent, even as it is thus defined, is really the amount of product specifically attributable to the land. It is what is created when the land is used in excess of what would be created if it were not used and if the coöperating agents did the best they could without it. We may use, as the most general formula for the rent of land, the contribution which land itself makes to the product of social industry. If we use the same method in measuring the rent of land which we used in measuring the wages of labor and the returns of capital, we shall represent the rent of a given piece of land as the sum of a series of differential amounts. In the accompanying figure the vertical belts bounded by lines rising from the letters _A_, _B_, _C_, etc., represent the products realized by applying successive increments of labor and capital to a given piece of land; and the horizontal lines running toward the left from _A´_, _B´_, _C´_, etc., separate the wages and interest from the amounts that are successively added to rent. When one composite unit of labor and capital is working, its product and its pay is measured by the belt between the line _AA´_ and the line _NN´_. A second composite unit produces the amount represented by the area between _AA´_ and _BB´_, and that is the amount which each unit separately considered will produce and get as its pay. This leaves the area between the horizontal line running from _B´_ and the section of the descending curve as the rent of the land. A third unit of labor and capital produces what is represented by the area between _BB´_ and _CC´_, and this becomes the standard of pay for all units, leaving the enlarged area above the horizontal line at _C´_ as rent. In the end there are ten units of labor and capital. Their total earnings are expressed by the area of the rectangle below the horizontal line running from _J´_, and the sum of all the areas above that line is rent. [Illustration] _The Intensive Margin of Cultivation._--The extensive margin of cultivation is the land that is adjacent to an imaginary boundary line separating the grades of land that are good enough to be used from those that are too poor to be used. There is, however, what may be called the intensive margin of cultivation. A given bit of land is said to be cultivated more and more intensively when more and more labor and capital are used on it. Land is subject to what is called the law of diminishing returns. _Law of Diminishing Returns._--The more labor and capital you employ on a given piece of land, the less you will get as a product for each unit of these agents. What the last unit of labor adds to the antecedent output is less than was added by any of the other units, and the same is true of the last unit of capital. As we continue the process of enlarging the working force and adding to the working appliances, we reach a point at which it is better to cease putting new men with their equipment at work on this piece of land and to set them working on a bit of land so poor that it was not formerly utilized at all. We may assume here that what a man needs, in the way of auxiliary capital, goes with him, whether he joins a force that is working on good land or migrates to a less productive region. He will go if it will pay him to do it. In this way we make a sort of dual unit of labor and capital and apply a series of such units to land. _Ground Capital and Auxiliary Capital Distinguished._--Land itself is a component part of the permanent fund of productive wealth to which we have given the generic name _capital_. It differs from other capital goods in that it does not wear out and require renewing. Working appliances, however, as they wear out and are replaced, constitute a permanent fund of auxiliary capital, and we shall apply this term to the abiding stock of such instruments except in connections in which the adjective is not needed, because it is clear that the land, or ground capital, cannot be referred to. In dynamic studies the distinction between land and auxiliary capital becomes very important. _How the Intensive Margin locates the Extensive One._--The labor and the auxiliary capital that betake themselves to new land of the inferior quality represent an overflow from the better land. As long as men can do as well by staying where they are as they can by migrating to new regions, where inferior lands are to be had, they will stay; but when they incur a loss by staying, they move. What a laborer can create by securing the use of an equipment and adding himself to the force that is at work on some good farm, can be approximately estimated; and if there is somewhere a piece of land not thus far used to which he can remove, and if, by going to work upon it, he can create any more than he created while working on the older farm and taking his products as his pay, he will till that poor piece. But neither he nor any one else will till a piece that is still less productive. If any one were to set himself working on land of still poorer quality, he would lose and not gain by the change, since there he would produce even less than he can when he is the last man set working on the good piece. _To what Extent the Movement of Labor and that of Capital are Interdependent._--The early statements of the law of rent did not usually define the intensive margin of cultivation in connection with labor and capital separately, but spoke of these two agents as employed together upon land in quantities increasing up to a limit beyond which both labor and capital would best be employed elsewhere. The supposition that labor and capital go thus together from one grade of land to another is only approximately accurate. If we consider one man and five hundred dollars' worth of productive wealth as a dual unit of labor and capital, and add such units, one after another, to the forces at work on a tract of good land, we shall reach a point at which it will not be profitable to increase the amount of one of the agents, while it will still be profitable to increase the amount of the other. It will perhaps not pay to use any more capital, but it may still pay to add to the number of workers. On land that is tilled more and more intensively, labor and capital are not tied together in fixed proportions in such a way that, when there is more of one of them used, there is _proportionately_ more of the other. Moreover, when a unit of one of them abandons a piece of land and goes elsewhere, there is no probability that exactly one unit of the other will do the same. There is, indeed, no such thing as a dual unit of labor and capital that can be thought of as moving to and fro among different employments till it finds the point at which, as a dual unit, it can create its largest product. These two agents so locate themselves that a final unit of each one, separately considered, produces as much where it is as it can produce anywhere else. It is, however, to be noted that the amount of labor that can profitably be employed on a piece of land grows larger the more capital there is employed in connection with it. An acre of land and a thousand dollars' worth of auxiliary funds can enable more men to get good returns than can an acre combined with a fund of five hundred dollars. Conversely, the more men there are working on the area, the more auxiliary capital it pays to use there. If there are five men working on a small field it may be that a thousand dollars may be well invested in aiding them, while with only one man it would not pay to use so large an amount. The capital and the labor, as it were, attract each other. Additional capital attracts further labor, and _vice versa_, till a condition is reached in which neither of them can so well be used on that particular piece of land as it can elsewhere. Each one has then been used on this area up to its own intensive-marginal limit. So also when one of these agents betakes itself to marginal land, it attracts the other agent thither. When there are ten men on the poorest piece of land in a locality, it is possible to make a considerable amount of capital at that point pay the return generally prevailing, whereas only a small amount would pay it if there were only five men working. With a thousand dollars invested on that land more laborers will be lured thither by the prospect of fair returns than would be lured thither if there were only half as much capital. The general apportionment of both agents tends to be such that a unit of either is as well off on one piece of land as on another, and each is as well off at the extensive margin of cultivation of land as it is on the intensive margin. _Labor and Capital combined in Varying Amounts._--The amount of capital that is combined with a unit of labor is not often the same on good land as it is on poor. The proportions in which labor and capital will be combined on the marginal field will be almost certain to vary from those in which they were combined in the better field from which they came. It may be that they leave industries in which an average man uses an equipment worth a thousand dollars. When they reach the margin of cultivation, capital may be so scarce that the thousand dollars will not stay in the hands of the one man but will divide itself among several. _The General Law of the Extension of the Margin of Cultivation._--Sometimes, when labor moves to new land that is now at the margin, it takes its new equipment with it; but such land is not always tilled by independent settlers. Employing farmers may set men working on it and pay them all that they produce; and the farmers may furnish the men with capital of their own or borrow capital for them to use. In either case a static condition requires the equalizing of the productivity of labor at the intensive margin with that of labor at the extensive margin; and it requires a similar leveling of the productivity of capital at the two margins. When this leveling has taken place in both cases, the all-around marginal product of labor fixes the rate of wages, and that of capital fixes the rate of interest. What a man creates on the good land and with the adequate capital, or on poor land with proportionate capital,--in any occupation on land of either grade,--determines the pay that he and other men can get. It constitutes in itself the wages of labor. In so far as the overflow of labor and capital into any one limited region of marginal land is concerned, the full statement is this: that the margin of utilization of land will be extended to the point at which a unit of labor, _using as much of the marginal land as it is economical to use, and such amount of auxiliary capital as is economical to combine with this unit of labor and the land it occupies, will create a product equal to the wages of the unit of labor as they are determined by the product it created when it was employed on the good land and in connection with the full equipment of auxiliary capital_. _The Rent of a Fund of Capital._--We saw that one unit of labor employed in connection with a given amount of capital produces more than does a second; that the second produces more than the third; and that, if we continue to supply units one at a time, the last unit in the series produces the least of all. Wages are fixed by the amount that one unit of labor produces when the working force is complete, and that is what is contributed to the general product by the unit of labor which comes last in the imaginary series by which the force is built up. Owing to the more favorable conditions under which, in their time, the earlier units worked, they were able to produce surpluses above the amount produced by the last one. When they entered the field they were supplied with excessive amounts of capital. The first one had the whole fund coöperating with it, till it had to share it with the second; and after that each had a half of it till they had to share evenly with a third, etc. We have seen that all the surpluses appearing in connection with the earlier units are attributable in reality to capital. The area _BCD_ (page 139) represents the amount by which the presence of an excess of capital increases the products attributable to the earlier units of labor. It represents the sum of all the differences between the products of the earlier units and the product of that final one which in the end sets the standard of productivity of labor. It might be called the rent of the fund of capital. It is composed of a sum of differences exactly like those which constitute the rent of a piece of land. _The Rent of a Permanent Force of Labor._--In the figure on page 148, the working force was supposed to be fixed in amount, the capital increasing by increments, or as some earlier economists would have said, by "doses" along the line _A´E´_. The last unit of capital produces the amount _D´E´_, and all the capital produces _A´B´D´E´_, while products of the earlier units of capital, as they come successively into the field and are used by an excessively large labor force, are represented by the area _B´C´D´_. Here this area represents what may be called the rent of the force of labor, since it is a sum of surpluses that, again, are entirely akin to those that constitute the rent of a piece of land. _A Question of Nomenclature._--It may be an open question, as a matter of mere nomenclature, whether these surpluses which are thus traceable to a permanent fund of capital, on the one hand, and to a permanent force of labor, on the other, can with advantage be called rents. In this treatise we do not think it best to employ that nomenclature. What is not uncertain is that these gains are measurable by the same formula that measures the rent of a piece of land. If the essential thing about rent were that it is a material product and consists of a sum of differential quantities, these incomes certainly would be rents. Popular thought, however, attaches another meaning to this term, and we therefore limit ourselves to saying that these differential incomes or surpluses may be determined in amount by the principle of rent. They can be described and measured exactly as the Ricardians described the income of landlords.[1] [1] The term _rent_ has even been applied to surpluses of a psychological kind. Certain gains that men get consist purely in pleasures or in reduced pains or sacrifices, and a few writers have applied to such subjective gains the term _rent_. If a man buys a barrel of flour for five dollars and gets out of it a service that is a hundred times as great as he could get from some other article which he buys for the same amount, this surplus of pleasure may be called, by a figure of speech, "consumers' rent"; and if the essence of rent were the fact that it can be made to take the form of a surplus or difference, the name would be well chosen, though there is danger that by this use of the term science may divorce itself from practical thought and life. If we take all the barrels of flour that a man uses in ten years, there is one which is marginal, because it is worth to the man only enough to offset the sacrifice he incurs in getting it. All the others are worth more. We can arrange them in a scale in the order of their importance, the most necessary one coming first and the least important one last; and we can compare the service which each one renders with that rendered by the last, and measure the surplus of good which each one does to the user. There is here in operation a law of diminishing subjective returns. Early units consumed afford more pleasure than do later ones. There results a series of surplus gains, and the sum of all these surpluses makes a total of net benefit,--is a gain that is not offset by a compensatory sacrifice. The last barrel of flour on the list is worth just what it costs, and all the others are worth more. They give the consumer a surplus of satisfaction for which he pays nothing. The sum of the excesses of service rendered by all the earlier barrels constitutes what has been called the consumers' rent, realized in this case from the entire supply of flour used by the man. In the manner in which it is conceived and measured this gain has a kinship to genuine rent. This surplus is an effect on a man himself. It is not anything outward or tangible. It exists only in the man's sensations, and is as far as possible from being a concrete income in material form traceable to some particular agent. It can be measured and described in ways that are quite akin to the manner in which the product of land is measured and described. Each consists of the sum of a series of surpluses or differential amounts, and each, moreover, represents a gain which is not offset by any corresponding subjective cost. The rent of land must be paid by an _entrepreneur_ and is a cost in the same sense in which wages and interest are so; but the owner of the land did not create it by personal effort or sacrifice. Analogies between the product of land, or rent, and the special gains of consumers from the more important parts of their consumption do exist, but they are overbalanced by essential differences; and it is better to use the term _rent_ only in describing the specific contribution to the material product of industry which a concrete and material agent makes. CHAPTER XI LAND AND ARTIFICIAL INSTRUMENTS One may hire many things besides land and pay what is commonly called rent for them. No one would think of calling by any other term the amount paid for the use of a building, a room in a building, or the furniture in the room. All these things yield rent to their owners; and if the intuitions which govern the common use of terms are to be trusted, the income derived from such things and that derived from land have some essential qualities in common. Every such income is paid for the use of some concrete instrument, and is measured, not by a percentage on the value of the instrument, but by a lump sum--a certain number of dollars per month or per year. _The Mode of Calculating the Rent of Concrete Instruments._--Now the rent of such instruments of production, whether artificial or not, can be measured in exactly the same way in which the rent of land is measured. We saw that there are two margins of utilization of land, an extensive and an intensive one, and that the product of labor and capital at either of these margins may be used as a basis for computing the surpluses which constitute the rent of the land. The landlord gets from a good field what it produces minus what the labor and capital that are used on this field would produce if they were used on the poorest land in cultivation; or, what is the same thing, he gets from the field what it produces minus what this labor and capital would produce if they were set working somewhere on the intensive margin of cultivation. Take the men out of this field, add them in small detachments to the men who are already cultivating other fields, in order that such fields may be tilled a little more intensively, and measure the product which the laborers create when they are so placed. Withdraw also the capital from the field, add it, in small amounts, to the capital that is working elsewhere, and measure its specific product. The sum of these two specific products is the same amount that is arrived at by using the former standard. This labor and capital, formerly used on the good field, scattered as they now are among the users of other good land, will create the same amount that they would have created if they had been employed on the poorest land in cultivation. This amount is, as it were, what they produce by their own unaided power; and whatever is produced in excess of this amount when a good field comes to their assistance is the rent of that field, for it is the contribution which the field makes to the joint production. Total product of land, labor and auxiliary capital minus the product created by the labor and auxiliary capital when these agents are put in marginal positions equals the rent of the land. _The Rent of an Instrument measured from the Intensive Margin._--We can measure the product of any instrument in this way. If it is a ship, it takes labor to sail it and requires a considerable amount of auxiliary capital. We must fill the bunkers with coal, stock the steward's department with provisions, furnish and light the staterooms and the saloons, and provide cordage and a wide variety of other ship stores. All this labor and all this capital we could take out of the ship and use elsewhere. We could convert them into marginal labor and capital. We could divide them among the owners of other ships where they would be used in a way that would make these other ships somewhat more efficient and cause each of them to earn a little more than it now earns. Whatever the labor and capital could, in this way, produce furnishes the basis for computing the rent of the ship. Subtract it from the total joint product of labor, capital, and ship, and you have what the vessel separately earns. _The Mode of Testing the Productive Power of a Ship._--Put the labor and capital into the ship and set it doing its proper work of carrying freight and passengers, and you cause a certain product to be created. The steamship company gets an aggregate amount for the service it renders by means of the labor, the auxiliary capital, and the ship. A certain smaller amount would be realized if the labor and the auxiliary capital were taken out of the ship, distributed, and used in the way we have just described. The difference between the two amounts is the rent of the ship, or its particular contribution to the general product. This gives us a formula for computing the rent, not only of land, but of buildings, tools, machines, vehicles, and every other concrete instrument of production. The formula, indeed, is so general that it enables us to compute the earnings of any agent whatsoever. _The rent of any such agent is what it adds to the marginal product of labor and capital used in connection with it._ _No-rent Instruments._--The majority of instruments that are in use add something to the marginal product of the labor and capital used in connection with them. Some add more and some add less, according to their several qualities. As a rule, any tool of trade produces most when it is new and less and less as it grows older. In the end it is discarded because it has so deteriorated that it no longer adds anything to the marginal product of the labor and capital that are used in connection with it. A wagon has become so rickety that it no longer pays to furnish a horse, a harness, and a driver for it. The capital and labor that these represent would earn as much if they were detached from the old vehicle and added to the equipment of some person who has a stock of good ones. The rent of this old wagon is nothing. As in the case of the poorest land in cultivation, it is a matter of indifference whether certain amounts of labor and capital are used in connection with it, or whether they are withdrawn and employed elsewhere. This poor vehicle, like the poor land, may be used without positive loss; but if it is so used, nobody gets any income from it. It has no power to enter in a really productive way into combination with labor and capital, for it cannot so combine with them as to add anything to those marginal products which the labor and capital could create if they remained detached from it. _The Universality of the Test of Rent._--This test, whether an instrument can or cannot add something to the marginal product of labor and capital, may be universally used. It may be applied to everything that is made as an aid to labor. There are no-rent buildings, locomotives, cars, tracks, ships, wagons, furnaces, engines, boilers, and, in short, instruments of every description that figure in production. Combine any one of them with labor and capital and see what you get out of the combination; then take the labor and capital away and see what they will produce as marginal labor and capital; and the difference between the two amounts, whatever it is, is the rent of the instrument. If the difference is _nil_, the instrument is at the point of being abandoned.[1] [1] Whether such an instrument should or should not be called a capital good is a question of mere nomenclature; but in this treatise we consider that every part of what we term capital produces an income, and therefore a no-rent instrument is not a capital-constituting good--otherwise termed a capital good. _True Capital rather than Capital Goods moved in Making such Tests of Productivity._--In applying these tests with scientific accuracy we should take away the true _capital_ used in connection with a rent-paying instrument and use it as marginal capital elsewhere, rather than take away the particular concrete thing in which that capital is now embodied. In the case of the ship the accurate test is made, not by taking stores, etc., bodily out of it and putting them into other ships, but by letting the stores first earn what they can where they are, converting the earnings into money, and, when the stores are completely used up, spending the money to procure marginal additions to the outfit provided for the other ships. _One Difference between Land and Artificial Capital Goods._--In the case of land a particular area is marginal or no-rent land, and, in a static state, it remains so. Any particular ship, wagon, engine, or other made tool begins its career as a rent payer and ends it as a no-rent instrument. If we watch the whole social stock of instruments of production, we shall see the no-rent points not fixed in location, but shifting from place to place. Now this machine, now another, and now still another reaches the unproductive state and is supplanted by instruments of similar kind that are new and efficient. _Original Elements in the Soil._--The real difference between the rent of a piece of land and that of a building, machine, vehicle, or any similar instrument arises from the fact that the land is not going to destruction and the artificial instrument is. There are elements in what is commonly called land that wear out as do the tools that are used in tilling it, but these elements are not land in the economic sense. Land, as Ricardo long ago said, consists in the "original and indestructible powers of the soil." He singles out certain constituent elements of every farm, forest, building site, or other piece of what is called land in ordinary usage, and gives to this new concept the name _land_ in an economic sense. These so-called "powers" are original elements because man does not make them; they are provided altogether by nature, and the only way in which man may be said to impart any productive power to them is by putting them into combinations in which they can produce. When men settle upon what has been vacant land, they bring the land into combination with labor, and when they break up the land for tillage and put buildings on it, they combine it with artificial capital. By means of these combinations land acquires productive power; but physically considered, it is altogether a natural product. _Indestructible Elements in the Soil._--Land in the economic sense is indestructible because the natural effect of use is not to destroy it. This does not mean that it is not physically possible to destroy land to the extent of making it forever impracticable to use it in the ways in which land is commonly utilized. Nature may do this by sinking it beneath the ocean, and man can, if he will, do something akin to this; but he does not naturally destroy what is truly land in the using. It is impossible to use a plow, a spade, or a reaping machine without injuring it and, in the end, wearing it out. It is also impossible to draw the nutritive constituents out of the superficial loam and convert them into crops without exhausting the supply of these sources of fertility and so spoiling that which is commonly called the land, though it is not so in the economic sense. What is really land in this sense is not affected. Nitrates and phosphoric acid that lie in the topmost stratum of the soil are among the destructible instruments of agriculture. The supply of them has to be renewed, if cultivation is continued, and they are therefore in the class with the plows, spades, and reaping machines which also wear out. But whatever there is in the soil that suffers no deterioration from any amount of use is the land with which political economy has to deal. _The Gross and the Net Rent of Land Identical._--As land does not wear out and require renewal, all that it adds to the products of the labor and capital that are used in connection with it may be taken by the landlord as an income without reducing the amount of his property. Whatever land produces at all is a net addition to the general income of society. _Net Rent of Artificial Instruments Smaller than Gross Rent._--It is not safe, on the other hand, for the owner of buildings, tools, or live stock to take for his own consumption all that these produce. If he were to use up their gross produce as he gets it, he would find, in due time, that a considerable part of his property had vanished. Such instruments wear out and become worthless, and if no part of what they produce is set aside as a sinking fund with which to purchase other instruments to take their places, one whole genus of capital must go altogether out of existence. _Artificial Instruments Self-replacing._--What actually happens is that these instruments create enough wealth to pay for their own successors, and that, too, besides paying a net return, which, regarded in one way, is interest. If you compute the whole product of one of these instruments by the Ricardian formula which we have examined, the amount of it will be whatever the instrument, during its entire career, adds to the product of the labor and of the capital that are used in connection with it; and that includes the fund for renewal that has just been described, the amount, namely, which the owners must set aside for repairing the instrument and finally purchasing another. As the instrument itself provides this sinking fund, it may be said to create, in an indirect way, its own successor. The ship earns, over and above the net income which is interest on its cost, enough to keep itself seaworthy so long as it sails and, in the end, to build another ship. The locomotive, the furnace, the loom, the sewing machine, the printing press, etc., all pay for and thus indirectly produce their own successors. _The Net Rent of a Permanent Series of Similar Instruments._--The first charge on the product of any instrument of this kind is the amount necessary for replenishing the waste of it and for providing a successor when this original instrument shall have been wholly worn out. In like manner, the first charge on the successor is providing a similar fund, and so on indefinitely. A part of the productive power of every one in an endless series of similar instruments is devoted to this type of reproduction. The series maintains itself and yields an income besides; and that remainder of its gross rent which is left after waste of tissue is repaired is available as a net income for the owner. This net remainder constitutes an interest on the owner's capital. He possesses a permanent fund of productive wealth embodied in the endless series of these perishable instruments, and _the series taken as a self-perpetuating whole_ yields nothing but this interest. Each instrument, separately considered, yields interest and a sinking fund; but the sinking fund is not available as an income, since it must take shape as another instrument which serves to keep the series intact. What the first instrument creates in addition to the sinking fund is its contribution to interest, and what each instrument creates above what is required for virtual self-perpetuation is also interest. _Interest and Net Rent Identical._--We may therefore reduce interest to the form of a net rent by calculating the gross rent afforded by each instrument in such a series and by ascertaining how much of this merely repairs waste and how much is true income. As interest is usually expressed in the form of a percentage, we may reduce the net rent to this form by comparing it with the cost of the first instrument, which is the amount originally invested. The series of instruments will yield a net return every year. We can compute the gross return of each instrument according to the Ricardian formula for measuring the product of the land. It will diminish from year to year and will ultimately vanish. We can add the several annual gross earnings of the instrument during its economic lifetime in the form of an absolute sum, which is the total rent of the instrument. From this we can deduct the cost of replacing this worn-out capital good, and the remainder will be the net rent of the instrument. We can, in a like way, get the net rent of all the following instruments in the series for a long period, add these net rents together, and get the true net earnings of the series for the time covered by the calculation. If this chances to be ten years we may compare a tenth of this total, or the earnings of the series for one average year, with the cost of the first instrument,--which is the capitalist's original investment,--and we shall thus get the fraction which represents the annual rate of interest on that investment. Perhaps in an average year the series has earned, above what is required to repair waste, five hundredths of what the first instrument cost. That is, then, the rate of interest that the series as a whole, or the permanent capital, is yielding. The whole procession of instruments in which permanent capital is invested creates every year this fraction of its own value, over and above the sum that is needed to offset the wear and tear of an average year's use.[2] [2] If the fund for replacing a costly capital good, such as a ship or a building, were allowed to accumulate for a term of years before being spent, the parts of it remaining on hand for some time would earn interest for their owner, and in his bookkeeping this would figure as reducing the amount he must save from the product of the ship or the building in order to replace it. This does not affect the general law of self-replacement, for the ship or building really produces what results from this compounding. _General Interest as Rent._--If you compute the net income of all tools, machines, and other like things in the world, add the amounts, and get the grand total of them all, you have the entire income from this part of the capital of the world in the form of net rent. If then you compute the value of all this class of instruments and see how large a part of this value the net rent is, you translate this total rent into the form of interest, and therefore net rent and interest are the same income regarded in two different ways.[3] [3] In computing both of these values for comparison one should use a labor-cost standard, and we shall later see under what limitations such a standard may legitimately be used. _Stocks of Made Instruments graded in Quality as is Land._--It is necessary to notice the fact that the permanent series of tools, buildings, and other active capital goods shows forever the same gradations of quality that are found in the case of land. There are always to be found some instruments which are producing a large amount--that is, they are adding a large amount to the product of the labor and the further capital that are combined with them in production. A given amount of labor and capital creates much more wealth when working with a machine of the highest class than it would if distributed in marginal positions; and this is equivalent to saying that such an instrument is itself highly productive. Other instruments are to be found which are creating less, and there is never wanting a grade of no-rent instruments which are adding nothing to the marginal product of the other agents. It would be as well for the labor that used them if it should drop them and add itself to the force which is working with good instruments. Any one manufactured instrument begins its career as a maximum-rent instrument and ends it as a no-rent one. The ship is at its best when it starts on its first voyage, and the mill is at its best in the first year of its running. Each instrument goes gradually downward in the scale till it reaches a stage in which it really produces nothing, since it adds nothing to what would be produced without it. The _permanent series_ of instruments never thus deteriorates. All the depreciation of particular things is made good by the repairing and the replenishing which go on. In the series as a whole there are forever present grade number one, grade number two, grade number three, etc., exactly as in the case of land. If we wish, we can reckon the income that is to be gotten from each part of the series according to the old-time formula that is familiarly used in the case of land, "What labor and capital create by the use of this piece of ground in excess of what they would create if they were applied to the poorest land in use." For a grade of land read a grade of the self-perpetuating series of artificial instruments, and it will appear that each grade above the poorest yields, with the labor and capital that are combined with it, a surplus above what this labor and this capital could create if they were combined with the poorest grade in the permanent series. _Different Modes of Destroying and Replenishing Stocks of Capital Goods of the Two General Classes._--The process of keeping up a stock of tools of trade is unlike the process of keeping intact a stock of materials and unfinished goods, because the modes in which the two kinds of capital goods deteriorate and perish are unlike. In the case of the raw materials that gradually ripen into articles for consumption and which we have called passive capital goods, the waste of tissues that takes place is quite unlike that which takes place in the case of active capital goods, the tools and implements that are used in the process. The raw material acquires value through the whole process, and in the end it gives itself, with all its acquired value, into the hands of the consumer. In a static state such goods embody the whole income of society, including the products of all labor and of all capital. _A´´´_ _A´´_ _A´_ _A_ The series of _A_'s represents the process of creating consumers' goods from the rawest material. The _A´´´_ as taken away for consumption represents, as it were, the wasting tissue of passive capital goods; and it contains in itself the wages of all the labor in this series of subgroups, the interest on all the capital there used, and, in addition to these, the sinking fund that is necessary in order to keep the active capital intact. Some of the articles of the kind _A´´´_ will have to be given over to the men who keep the tools, buildings, etc., in repair and replace them when they are worn out. The whole force of the industry of this group expends itself simply in making good the loss that the withdrawal of the _A´´´_ for use occasions. It does, in short, nothing but replace the perpetually wasting tissue of the _A_'s. All industry, except that of the makers of active instruments, may be considered in the light of an operation, the aim of which is to keep the stock of passive capital goods intact, or, what is the same thing, to keep the fund of circulating capital undiminished. Whoever puts anything into this fund enables it to overflow and to furnish an income without suffering any diminution. The sole purpose of such capital is to overflow, that is, to suffer, at one and the same time, a loss and a replenishment which neutralizes the loss. It exists for nothing else except to ripen into consumers' wealth. Nevertheless, though the ripened _A_'s are perpetually consumed, the _series_ of _A_'s is abiding capital, is entitled to its share of interest, and is certain to get it. A part of the perpetual flow of _A´´´_'s is this interest. As the whole income of the society consists in _A´´´_'s, a certain number of the _A´´´_'s that are withdrawn for consumption go to capitalists as interest on the permanent fund which is kept in existence in the form of _A_, _A´_, _A´´_, and _A´´´_. A certain other part of the outflow of _A´´´_'s goes also to capitalists as interest on that other permanent fund which is maintained in the form of tools, machines, and buildings, such as must everywhere be used in the series. A third part of the flow of _A´´´_'s is wages of labor in this group; and a final portion is what we have called the sinking fund, the amount that is given over as an income to the producers in another group, not here represented, who keep the stock of buildings, tools, etc., intact. These four withdrawals of income constitute the process by which the stock of passive goods is depleted, and the grand resultant of all industry is to atone for that depletion. _Labor and the Obtaining of its Product, in Static Industry, Synchronous._--One function of the permanent series of _A_'s is to enable labor everywhere to get its virtual product without waiting, and that too in the form in which it needs it for use. The labor that converts _A´´_ into _A´´´_ supplies the waste of tissue that takes place at that end of the line by withdrawal of an _A´´´_. The labor that turns _A´_ into _A´´_ replaces the waste that takes place at that point when an earlier _A´´_ becomes an _A´´´_. The labor at _A´_ replaces the waste at that point, and that at _A_ replaces the waste at still another point. They are all at work keeping the stock of _A_'s unimpaired, and one of them does as much toward keeping up the perpetual flow of _A´´´_'s as any other. If we pump water in at one end of a full reservoir, we instantly cause it to overflow at the other end; and every worker in such a series as we have described may be thought of as putting something into the permanent reservoir of capital and so causing a corresponding overflow. He gets his reward day by day as the work proceeds. Wherever a laborer may be in such a series, his work creates a ripened product as it goes on. He has not to wait for it. His work and its fruit are synchronous. _Differences between Land and Made Instruments Apparent in Dynamic Conditions._--A point that has great theoretical interest is the nature of the difference between land and other productive instruments. In a static society the difference would be comparatively unimportant, but it is brought into prominence by the changes which constitute a dynamic state. The static hypothesis requires that capital should not increase or diminish in quantity, and that it should not change its forms. The equipment of every mill and of every ship is kept unimpaired but not enlarged or improved. There is a fixed number of spindles in the cotton mill, of lathes in the machine shop, of sewing machines in the shoe factory, etc., and this fact removes the most striking difference which, in a dynamic society, actually distinguishes land from other things. Land, in the economic sense, does not increase in quantity, however changeful and progressive a society may be. The chief distinguishing mark of land--that of being fixed in amount--separates it from other things only in a dynamic state and because of the action of the forces which produce organic changes. These are subjects to be studied in the dynamic division of economic theory. _A Distinguishing Mark of Land which appears in a Static State of Industry._--In a static state there remains this difference between a piece of ground and a building, a tool, or any other instrument: the ground is not artificially made and does not perish in the using; while the building or the tool or other appliance is so made and does so perish. It must in wearing itself out create in the indirect way which we have described its own successor. The engine must, by a part of its product, pay the men who will make another engine and so perpetuate the series of engines. This makes it necessary for the owner of the engine to save some of its gross rent to pay for depreciation and renewal, while he can safely use the whole rent of land. _This Mark of Distinction not Applicable when Land is contrasted with a Permanent Stock of Capital Goods._--If we look, not at one particular instrument, but at an entire series of them,--if we take into view, not only the engine which is now driving the mill, but also the one that will succeed it, and again the one which will succeed that second engine, and so on forever,--this difference between land and the artificial instrumentality vanishes. _The series of engines, like land itself, yields only a net rent._ The remainder of its gross product is not a true rent at all, since any one of the engines creating it has to consume it on itself and cannot give it to the owner as an income. This remainder pays certain men for keeping the series of engines intact, and what is given to them as pay for their services cannot accrue to any one as an income from the series of instruments so maintained. It is the earnings of the corps of maintenance created by their own labor and capital. What the series of engines yields over and above what it expends in maintaining itself it gives to its owners as an income. This is their net return and they can use it without trenching on their property. The analogy between the returns from land and those from a self-perpetuating series of made capital goods is in this particular complete. _The Source of the Fund for Repairs and Renewals._--The fund for repairs and renewals must, of course, like the net income itself, be furnished by instruments that are above the no-rent grade. A machine will naturally be used as long as it pays anything whatever, and during the latter part of its career it usually produces less than mere interest on its cost. So long as the labor and the auxiliary capital that are combined with the instrument produce by its aid any more than they would produce if they were withdrawn from it and added, as marginal increments, to the labor and capital that are working in connection with good instruments, they will continue to use the machine and they will abandon it only when it ceases to pay anything whatever. Out of the total amount it produces before reaching this point of abandonment comes the amount that is needed as an offset for the cost of providing a new machine. _Incorrectness of a Common Statement concerning Rent and Price._--This brings into view a striking fallacy of what has been current economic theory. It has been customary to claim that the rent of land "is not an element in price," although the interest on capital is such an element. The rent of land is the net product of land; and if interest be kept distinct from it, this income is the net product of a permanent stock of capital goods. The relations of these two component parts of the constant output of goods to the prices of the goods are identical. _Proof of the Incorrectness of the Current Statement concerning Rent and Price._--The vague form of the current statement concerning rent and price is responsible for much confusion of thought on that subject. What the statement would mean is that the price of wheat is not affected by the great contributions to the supply of it which good lands are making. These contributions are the rent in its original form. The rent of wheat land is wheat, that of cotton land is cotton, that of mill sites is manufactured goods, etc. That money is used in payments made to landlords changes nothing that is essential. To say that such contributions to the supply of particular commodities are not an element in determining the prices of them, would be as unreasonable as to make the same assertion concerning other parts of the supply. Quite as logically might it be asserted that other components in the supply do not affect prices--that the amount of wheat which is attributable to harvesting machinery or the amount of calico which is imputable to looms has no influence in the market values of these articles. _Why the Produce due to Good Land prevents Prices from greatly Rising._--If the use of good wheat land were merely discontinued, the supply of wheat would of course be not only lessened, but reduced almost to nothing, and a famine price would at once result. If, now, an attempt were made to make good the shortage of the supply of this cereal by tilling lands which are now at the margin of cultivation, it would at once appear that not enough of such land exists to enable us to accomplish the purpose, and it would be necessary to push the margin outward and till poorer and poorer soils, at a greatly enlarging cost. We should grub out worse thickets, drain worse swamps, terrace more discouraging hillsides, irrigate more remote and barren deserts, etc. All this would mean a greater cost of production of wheat and a higher price for it in the market. It would also mean another thing. The extending of the margin of cultivation which makes it include poorer grades of land causes that part of the area now tilled which does not command any rent to yield one. After the margin should have been greatly extended and finally located in a region where getting anything out of the soil would require a struggle, it would appear that all of the lands newly annexed to the cultivated area except the last and poorest would command a rent. All but those on the new margin would add a definite quota to the supply of wheat, and this contribution would be their rent. Entering into the supply, it would of course count in the adjustment of price. _What can reasonably be conceded concerning Rent and Price._--There is another possible meaning of the phrase "Rent is not an element in price"; and, whether it was clearly in the minds of those early economists who made the assertion or not, it is what their argument proves. The _payment_ of rent by tenants to landlords has no effect on the market value of the produce. "Food would not become cheaper," says Professor Fawcett, "even if land were made rent free." There would be the same need of food stuffs as before, and the tillage of lands would be pushed to the present margin, where the yield is smallest. The cost, in labor and capital, of that marginal part of the supply of food which has come from these poorest lands would continue to be what it has been heretofore. The farmers would, of course, get from the good lands the same surplus that they get at present; but the fact that land had been made rent free would enable them to keep it. This surplus is, of course, rent, and transferring it from landlords to tenants does not affect prices. So much of the doctrine formerly current is true; and it would have forestalled much confused thought as well as much controversy if the statement concerning rent and price had made it clear that any rent in its original form is an element in the supply of produce, and the existence of it helps to determine prices, while the payments made by tenants to landlords do not affect them. If these payments should cease and the tenants should retain the rent, prices would continue to be what they now are.[4] [4] The claim that rent is not an element in price making might be made in the case of artificial instruments of production as reasonably as it can be made in the case of land. If it means that the _existence_ of the rent has no effect on price, it is wholly incorrect in both cases. The statement may be so changed as to tell what is true concerning the rent of land, and it will then also tell the truth about the product of the artificial instruments, which is interest in its original form. These statements may be made in parallel columns, and one will be as true as the other and no truer. A needed part of the supply A needed part of the supply of wheat is grown on marginal of woolen cloth is woven on land. marginal looms. The price of the wheat must The price of the cloth must pay for the labor and capital pay for the labor and capital used on this land. that, in the woolen manufacture, are combined with these looms. The price of wheat raised on The price of cloth woven good land is the same as that on good looms is the same as of wheat raised on the marginal that of equally good cloth zone, and it affords a surplus woven on marginal ones, and above wages and interest paid it affords a net surplus above by farmers for labor and the cost of maintaining the capital used in the tilling stock of looms and the of the good land. wages and interest paid by manufacturers for further capital used in connection with the good looms. The existence of this surplus The existence of this surplus in its original form, that in its original form, that of wheat, affects the supply of cloth, affects the supply and the price of that product. and the price of this product. The fact that farmers pay The fact that _entrepreneurs_ landlords for this surplus pay capitalists for this has no effect on the price surplus has no effect on the of wheat. price of cloth. The more important facts concerning rent have reference to the original form of it, namely, a product in kind. Whatever constitutes a part of the supply of anything affects the price of it. The surplus afforded by good looms is an element in the supply of cloth, and that afforded by good land is an element in the supply of wheat. They make these two supplies larger than they would otherwise be, and of course they are of cardinal importance in determining price. The rent of anything is an element in the supply of some kind of goods, and the annihilation of it would reduce the supply and raise the price of product in which, in its first estate, it consists. CHAPTER XII ECONOMIC DYNAMICS _The Efficiency of Static Forces in Dynamic Societies._--The static state which has thus far been kept in view is a hypothetical one, for there is no actual society which is not changing its form and the character of its activities. Five organic changes, which we shall soon study, are going on in every economic society; and yet the striking fact is that, in spite of this, a civilized society usually has, at each particular date, a shape that conforms in some degree to the one which, under the conditions existing at that date, the static forces acting alone would give to it. It is even true that, as long as competition is free, the most active societies conform most closely to their static models. If we could check the five radical changes that are going on in a society that is very full of energy,--if, as it were, we could stop such an organism midway in its career of rapid growth and let it lapse into a stationary condition,--the shape that it would take would be not radically unlike the one which it had when we interposed the check on its progress. Taking on the theoretically static form would not strikingly alter its actual shape. The actual form of a highly dynamic society hovers relatively near to its static model though it never conforms to it. In the case of sluggish societies this would not be true; for if in one of them we stopped the forces of growth and waited long enough to let the static influences produce their full effects, the shape to which they would bring the organism would be very different from the one which it actually had when its slow progress was brought to a stop. Most efficient in the most changeful societies are forces which, if they were acting by themselves alone, would produce a changeless state. The reasons for this will later appear. _Differences between Static Forms of Society at Different Dates._--A highly dynamic condition, then, is one in which the economic organism changes rapidly and yet, at any time in the course of its changes, is relatively near to a certain static model. It is clear, therefore, that it cannot, at different periods, conform even approximately to one single model. If the forces of change which in 1800 were impelling the industrial society of America to a forward movement had been suppressed, and if competition had been ideally free and active, that society would before long have settled into the shape then required by the forces which, in the preceding chapters, we have described. Some labor would have moved from certain occupations to others and gained by the change; and this movement of labor would have ended by making the productive power and the pay of a unit of this agent uniform in all the different subgroups of the system. Capital would have so apportioned itself as to level out inequalities in its earning power. The profits of _entrepreneurs_ would have been equalized by becoming in all cases _nil_, and the best available methods of production would everywhere be found surviving and bestowing their entire fruits on laborers and capitalists. All this is involved in saying that the static model, the form of which was determined by the conditions of 1800, would have been realized. This would have been brought about by suppressing at that date the forces which cause organic change and by giving to competition a perfectly unobstructed field. If we had done this in 1900, instead of at the earlier date, economic society would, in a like way, have conformed to the shape required by the conditions of 1900; and this would have been very different from the shape which the static forces would have given to society a century earlier. There is an ideal static shape for every period, and no two of these static shapes are alike. _Differences between the Actual Shape of Society and the Static One at Any One Time._--The actual shape of society at any one time is not the static model of that time; but it tends to conform to it, and in a very dynamic society is more nearly like it than it would be in one in which the forces of change are less active. With all the transforming influences to which American industrial society is subject, it to-day conforms more closely to a normal form than do the more conservative societies of Europe and far more closely than do the sluggish societies of Asia. A viscous liquid in a vessel may show a surface that is far from level; but a highly fluid substance will come nearly to a level, even though we shake the vessel containing it vigorously enough to create waves on the surface and currents throughout the whole mass. This is a fair representation of a society in a highly dynamic condition. Its very activities tend to bring it nearer to its static model than it would be if its constituent materials were not fluid and if it were never agitated. The static shape itself, though it is never completely copied in the actual shape of society, is for scientific purposes a reality. There are powerful influences tending to force the industrial organization at every point to conform to it. The level of the sea is a reality, though the motion of the waters never subsides sufficiently to make their surface accurately conform to it. As vigorously agitated, the water shows a surface that is nearer to the ideal level than would an ocean of mud, tar, or other sluggishly flowing stuff. The winds throw up waves a few feet high, but the fluidity keeps the general surface surprisingly level; and so civilized society, made as it is of fluid material kept in vigorous agitation, finds, as it were, its level easily. If in any year we could and should stop the dynamic disturbances, the economic society would assume the static shape which the conditions of that year called for as readily as the sea would find its normal level if winds and tides should completely cease. Static influences that draw society forever toward its natural form are always fundamental, and progress has no tendency to suppress them. _Competition a Cause of Rapid Changes in the Standard Shape of Society and of a Quick Conformity of the Actual Shape to the Standard One._--The competition which is active enough to change the standard shape of society rapidly--that, for example, which spurs on mechanical invention and causes a large profit to be realized in a particular subgroup--has also the effect of calling labor and capital quickly to the point at which the profit appears, and, in the absence of any monopoly, reduces this profit to _nil_ and restores, in so far as this cause of disturbance goes, the equilibrium of the groups. Under the influence of active competition a particular group frequently undergoes quick changes which call for more labor and capital, but it gets them quickly; and, as has just been said, the standard shape of a society which is in this highly fluid condition does not differ so much from the actual shape as does that of a society the movements of which are sluggish. The standard shape is like the hare that moves quickly and irregularly; while the actual shape is like the pursuing hound, which moves equally quickly, follows closely all turns of the course, and, if the game were to stop moving, would in short order close on it. _The Equalization of the Productive Power of Labor and of Capital in the Different Subgroups._--We have seen that in a static state labor and capital do not move from subgroup to subgroup in the system, and that this absence of flow in a fluid body is not brought about by monopoly or by any approach to it. That, indeed, would obstruct transfers of the producing agents from point to point; but monopoly is a thing most rigorously excluded by the static hypothesis. At every point we have assumed that the power to move is absolute, while only the motive is lacking. The equalization of the productive power of labor in the various subgroups precludes the migration of labor, and a like equalization precludes a migration of capital. _Equalization of Productive Powers within the Subgroups._--Not merely must each unit of labor or of capital be able to create as much wealth in one subgroup as in another, but within the subgroup--the specific industry--each unit must be able to create as much under one employer within the industry as under another. The different _entrepreneurs_ must compete with each other on terms of equality, and no one of them must be able to wrest from a rival any part of the rival's patronage. So long as one competitor has an advantage over another in his mode of creating a product, there is no equilibrium within the subgroup. The more efficient user of labor and capital is able to draw away labor and capital from the less efficient one, and the self-seeking impulse which is at the basis of competition impels him to do it. The producer who works at the greater advantage is foreordained to underbid and supplant the one who works under more unfavorable conditions. That a static state may exist and that the movements of labor and capital from point to point may be precluded, every competitor within a subgroup must be able to keep his business intact, hold his customers, and retain in his employment all the labor and the capital that he has. _Equality of Size of Productive Establishments not Necessary._--Size is, as we shall see, an element of efficiency, and the great establishment often sells goods for less than it would cost a small one to make them. The small manufacturer often finds that he would best become a mere merchant, buying some of the products of the great mill and selling them to his customers, rather than continue making similar goods. In the general market an approach to equality of size is usually necessary in order that competitors may be on even terms. This does not preclude the survival of many small establishments. The local retailers have an advantage over great department stores in the filling of small orders. When one has to buy what costs a dollar it does not pay to spend a dime in car-fares, and waste a dollar's worth of time in order to secure the thing for ninety cents. Weariness to customers is here the element that gives to the small producer his advantage and enables him to keep that part of the business which comes in the form of many small orders; but small producers often have other advantages than those which depend on location. In a shop which is more like that of a craftsman of three centuries ago than it is like the great furniture factory, a cabinetmaker can make a single chair of a special pattern more cheaply than the great manufacturer can afford to do it. The great shop requires that there should be many articles of a kind turned out by its elaborate machines in order that the owner should get the benefit of their rapid and unerring action. There will long be at work hand presses much like those used by Benjamin Franklin, besides the complicated automata which do the bulk of our printing, because for printing a dozen copies of anything the lever press is the cheaper. There will be shoemakers who not only mend shoes but occasionally make them for customers who want other than standard kinds; and local tailors are sure to survive. Only in the general market and in the making of standard goods is size essential to success. _A Considerable Number of Competitors Assumed._--The most striking phenomenon of our time is the consolidation of independent establishments by the forming of what are usually called trusts; and this and all the approaches to it are precluded by the static hypothesis. There is a question whether, after competition has reduced the establishments in one subgroup to a half dozen or less, they would not, even without forming a trust, act as a quasi-monopoly. This question we have at the proper point fully to discuss, but here it is necessary to assume that nothing which creates even a quasi-monopoly exists. We shall find that competition usually would, in fact, survive and be extremely effective among as few as five or six competitors, till they formed some sort of union with each other. To avoid all uncertainty we assume that in the static state in which values, wages, and interest are natural and in which each subgroup has its perfectly normal share of labor and capital, there are competitors enough in each occupation to preclude all question as to the continuance of an active rivalry. _Static Values and Prices._--The equilibrium referred to requires that all values should stand at their static levels, which means that the prices of goods should be the "cost prices" of the older economists. The _entrepreneur_ should make no net profit on the goods he is producing. The wages of labor must be productivity wages, since each man must get the amount of wealth that he brings into existence. Interest on capital needs, in like manner, to be productivity interest, and each unit of capital must get the amount it creates. Moreover, the prices of goods, as expressed in money, must be accurate representations of the comparative values of goods. All these features mark the static state; but the most obvious mark of distinction is the absence of movement from group to group. We shall see that values are ultimately measured in marginal labor, and as the value of money is measured in the same way, it follows that the price of each article, as expressed in money, is in a static state a correct expression of the comparative amount of labor that will make it. And the entire relation of commodities to each other and to labor can be expressed by the medium of currency. If a unit of labor produces gold enough to make an eagle, and if any commodity sells for ten dollars, it will be safe to infer that it is also produced by one unit of labor. If one commodity sells for ten dollars and another for five dollars, the former is the product of twice as many units of marginal labor as is the latter. This remains true only while currency continues to be in its normal state and all other static adjustments continue complete. _Influences that disturb the Static Equilibrium._--It might seem that the influences that disturb such a static equilibrium are too numerous to be described; and yet these changes may be classed under five general types:-- 1. _Growth of Population._--The supply of labor is increasing, and this fact of itself calls for continual readjustment of the group system. 2. _Increase of Capital._--The amount of capital is increasing, and this change also disturbs the static equilibrium and calls for a rearrangement. As far as wages and interest are concerned, the effect of this latter change is the opposite of that which follows an increase in the amount of labor. When people become more numerous, other things remaining equal, their individual earning capacity becomes smaller. The increase of capital reduces the earning power of each unit of the supply of it and depresses the rate of interest; but it raises the rate of wages, for it causes labor itself to act more efficiently. It is to be noted, indeed, that when new laborers enter society they become consumers as well as producers, and this affects the utility and the value of goods. When more people use a given amount of consumers' wealth, values, measured in ultimate units of utility or disutility, rise. An increase of capital does not directly neutralize this effect, since it does not change the number of consumers; but it multiplies commodities and brings down their utilities and their values. The rise of "subjective" values which follows an influx of laborers is an indication of diminished wealth per capita, and the reduction of values which follows an influx of capital is a sign of increased wealth per capita. 3. _Changes of Method._--Changes take place in the methods of production. New processes are devised, improved machines are invented, cheap motive powers are utilized, and cheap and available raw materials are discovered, and these changes continually disturb the static state. There are certain to be improvements on the older methods of production, for a law of the survival of the fittest insures this. Under competition the process that, with a given amount of labor and capital, turns out a larger product inevitably displaces one that turns out less. The employer who is using the better method undersells those who use inferior ones, and forces them either to improve their own methods or to go out of business. Working humanity as a whole is therefore making a constant gain in producing power, as man's appliances equip him more and more effectively for his conflict with nature and enable him to subjugate it more rapidly and thoroughly. It would seem that they ought to have only good effects on wages, and in the long run they invariably do have such effects. In the absence of improvements there would be little hope for the future of wage earners. The immediate effects of improvements upon individual workers, as we shall see, are not always unqualifiedly good, but the essential effect is the general and permanent one, and the character of this has been attested by past experience too fully to be in doubt. In improvements in production lies the hope of laboring humanity. Nearly the whole earning power of the labor of the present day is the result of improvements that have taken place in the past, though these gains have not been secured without causing local and temporary hardships. If in the future the wages of labor are doubled or quadrupled, as the result of a series of improvements beginning now and extending to a remote period, this progress cannot be secured for nothing. The costs will be less than those attending improvements of the past, but they will be real. The most important fact is that they tend to become fewer and smaller and that the gains immeasurably exceed them. 4. _Changes in Organization._--There are changes in the mode of organizing the establishments in which commodities are produced, and so far as these occur under a régime of active competition, they also are improvements and give added power of production. The mills and shops become larger and relatively fewer. There is a great centralizing movement going on, since the large shop undersells and suppresses the smaller one, and combinations unite many great shops under one management. The effect of this, when it takes place in a perfectly normal way, is akin to that of improvements of method. It benefits society as a whole somewhat at the cost of individual members of the body, and it causes wages to rise by adding continually to the wealth-creating power of the men who earn them. We shall see that when consolidations repress competition their effect is far from being thus wholly beneficial, and that not only are particular persons injured by them, but the community as a whole has a serious bill of charges to bring against them. The securing of the gains that come by consolidation without such evils is an end the realization of which will tax the statesmanship of the future. 5. _Changes in Consumers' Wants._--The wants of consumers are changing. They are growing more numerous as well as more refined and intellectual. This expansion of desires follows the general increase of productive power, since every one already wants some things that he cannot procure, and all society has a fringe of ungratified wants just beyond the limit of actual gratification. Even if all these wants that are now near the point of actual satisfaction were to be satisfied, the desires would at once project themselves farther. The mere increase in earning power without any special education enlarges the want scale, but intellectual and moral growth coöperates with it in that direction and calls latent wants into an active state. More and more eagerly do men seek things for which the desire was formerly dormant. Changes of this kind affect values, cause labor and capital to move from group to group, and thus cause society as a whole to produce less of some things and more of others. They sometimes cause wholly new groups to appear, and draw workers and equipment from the old ones. [Illustration] _Advantage of Diversity of Wants._--One very marked effect of the diversification of wants is to increase the aggregate utility of a mass of commodity produced with a given expenditure of labor. Measure the whole wealth available for consumption on the basis of the labor that it takes to create it, and it will appear that it has more utility and is worth more to society in consequence of this evolution that is going on in the nature of the individual consumer. A given amount of labor benefits most the men whose wants are of the most varied character. If _A_, _B_, and _C_ are three commodities, and if their several utilities decline, as successive units of them are given to a consumer, along the curves descending from the letters _A_, _B_, and _C_ of the diagram, it is clear that the man whose consumption is confined to the commodity A gets less benefit from three units of wealth than does the man who consumes _A_, _B_, and _C_. The utility of the first unit of _A_ is measured by the vertical line from _A_ to the line _DE_, that of the second by the line from _A´_ to _DE_, and that of the third by the line from _A´´_ to _DE_. The utility of the first unit of _B_ is measured by the distance from _B_ to the line _DE_ and exceeds that of the second unit of _A_ by the difference between the lengths of those lines. In like manner the utility of _C_ exceeds that of the third unit of _A_ by the difference between the length of the line descending from C and that of the one descending from _A´´_. The declining utility of the income of the man who satisfies three wants is represented by the slowly descending curve _ABC_, while the diminishing utility of the income of the man who satisfies only one want declines along the sharply descending curve _A_, _A´_, _A´´_.[1] [1] For studies of the effect of diversified wants, see S. N. Patten, "Consumption of Wealth." It will be seen that account must be taken first of the natural expansion of the want which comes from an increase of productive power, and second of the changes in the quality of the wants to be gratified, which sometimes go ahead of any change in the productive system and call for new kinds of commodities. _Changes in Static Standards._--The grand resultant of all the changes that are going on in the more highly civilized countries is a continual rise, not only in actual wages but in the theoretical standard of wages. The static or "natural" rate of pay for labor to-day is higher than it was fifty years ago and lower than it will naturally be fifty years hence. Removing all disturbing influences and letting society settle to-day into a perfectly static condition would reveal the theoretical standard of present wages. Doing the same thing after a lapse of fifty years would show what would then be the natural or standard rate; and this would be higher than the present one. Not only would the actual pay of labor have risen, but the standard to which it tends to conform would have become higher after every interval. The actual rate of wages at any one time varies from the standard; but as both rise from decade to decade, the actual rate hovers all the while within a certain distance of the standard one. _Effects on Values._--In the same way the values of goods measured in labor will in general be declining values. At no one time will actual market prices accurately express the amounts of marginal labor that are required for producing different articles, but they will approximately express this. Articles will sell in the market for about enough to pay for the labor that, when used as marginal labor, suffices to produce them; and as this amount of labor put into a given article grows less and less, the prices of the goods will actually pay for fewer and fewer days' labor. The standard price of anything will be the amount of money that is needed to pay for the labor of making it, provided always that we are careful to use only empty-handed labor in applying the test and that we put that labor in the marginal position, as described in Chapters IV and V, and so disentangle the product that is attributable to it from that which is imputable to capital. If wages, as paid in money, remain stationary, normal prices will decline and actual prices will hover about them in their downward course, so that goods will actually buy smaller and smaller amounts of labor, or, what is the same thing, labor will secure as its pay more and more goods.[2] [2] In measuring the cost of goods in labor, in Chapters IV and V, we disentangled from the amount of goods which is the joint product of labor and capital, the part which is attributable to labor only. The mode of doing this is there more fully stated. The old and crude method of using a labor standard of value--which assumes that the product of a unit of labor _aided by capital_ will always buy the product of another unit of labor _aided by capital_--we must take _all pains_ to avoid. In connection with the cost in labor of different articles it is to be remembered that in agriculture the effect of improvements of method may not always suffice to counteract the working of the so-called law of diminishing returns, which insures, with agricultural science in a given state of advancement, smaller products per capita when there are more men on a given area. That this influence should preponderate over that of improved processes requires that population should increase with a degree of rapidity which may or may not be maintained. CHAPTER XIII THE LIMITS OF AN ECONOMIC SOCIETY When we try to establish a standard to which wages generally tend to conform, the question arises how much of the earth we have in view. Is there a rate at which the pay of labor in Europe, Asia, Africa, Australia, and America tends to settle and remain? Is there a common rate of interest that is normal in all these grand divisions, and are there also general standards of value for goods which govern their prices in all the markets of the world? If there are no such standards having universal validity, are there any that are valid within single geographical divisions? On what principle can we divide the earth into sections for economic purposes? These are some of the questions which must be answered if a theory of distribution is to have any definiteness of meaning, and they arise whenever we try to establish a static standard of any kind. If we talk about natural wages, we must know in how much of the world they are natural. The questions become even more urgent when we try to solve dynamic problems. We shall have to determine the effects of an influx of labor into the economic society we are studying; but does this mean an increase of population in the world as a whole? Does an influx of capital have a similar comprehensive meaning, and does an improvement in the method of producing some commodity mean a change in the mode of making it in every part of the world where it is produced at all? We need to know how extensive the society is whose activities we are examining. _Characteristics of an Economic Society._--We have said that there are natural rates of wages, etc., within some area, which we have regarded as containing an economic society, and we have treated this social organism much as though it were as isolated and self-contained as would be an inaccessible island with its population. It has one general market where values are fixed. A farmer within the area covered by our studies produces wheat for the whole society, and in one way or another, every person within the area is a bidder for it. A shoemaker makes shoes and a weaver makes cloth to offer to everybody. Each part of the organism ministers to the whole and is ministered to by the whole. Competition is ideally free and in a sense is universal. The general system of groups made up of the A's, the B's, the C's, and the H's of our table illustrates the manner in which this complete and self-contained society is organized. In the static state there is one standard of wages for all these groups and their subdivisions and one equally general standard of interest. The price of a commodity, barring some allowance for cost of carrying it, is uniform everywhere. A reduced price for _A´´´M_ in any part of the area where this society dwells would set men bidding for it from every quarter of that area and would thus bring the local prices to uniformity. So a high rate of pay for labor in one part would at once lure men from every other part and reduce the high pay to the standard generally prevailing. The picture is that of a social body having a large geographical extension and yet intensely sensitive at every point to economic influences. Prices, wages, and interest everywhere respond at once to an influence that originates in any part of the extended area. In technical terms this means that there is perfect mobility of labor and capital within the group system represented by the table, and that this involves equally perfect mobility as between parts of the area that the groups inhabit. Men move from one section of the country to another in response to an economic inducement as readily as they do from the group _A_ to the group _B_. _Barriers which divide the World into Economic Sections._--Now it is clear that in the actual world changing one's place of abode is difficult, and even sending capital from place to place is somewhat so. Inequalities of earning power are not leveled out by a quick migration of laborers from China to Europe or to America. In their methods of production the different regions are not brought to a uniformity, for there is machine labor here and hand labor there; and it is vain to expect that machines will quickly become universal and that the practical arts in America, Africa, and Asia will be rendered uniform by such a quick adoption of the most efficient processes as economic law, in the absence of friction, requires. _Boundaries of the Society which is here Studied._--If we take the world as a whole into the circle covered by our studies, we find that labor, compared with other economic elements, decidedly lacks fluidity and does not easily move. So far from being like water, which flows readily and finds its level quickly, it is more like tar or other viscous stuff, which flows slowly and is long in leveling out local irregularities in its surface. In the world as a whole there are regions crowded with people and other regions nearly unpeopled, and long will it be before some of these differences will be much reduced. Many centuries, indeed, must pass before they are entirely removed. If, however, we take the most active part of the world,--western Europe, most of North America, Japan, and the more fully settled parts of Australia,--labor will show a degree of mobility that makes it more like the water of the illustration, and capital within this active center of industrial operations will be more fluid still. Prices here tend toward certain general standards, and processes of production and methods of organizing the forces which do the producing work tend strongly toward uniformity. The best processes and the best forms of organization tend generally to survive. There are imperative reasons for studying the economy of this highly civilized region, the center of the economic activities of the world, apart from that of the more undeveloped regions.[1] [1] This is far from implying that economic laws do not work in the excluded outer area or that no effects are produced within the central area by causes that originate in the outer zone. How these things take place we shall later see. _The Need of a Rule by which a Part of the World may be Treated as an Economic Society._--This involves finding a way by which we can treat a limited part of the world much as though it were, for our purposes, the whole of it. In essential ways the economic center that we have described does act somewhat as if it were an organism complete in itself. We must draw a boundary line about the area of active movement, of lively interchanges, and of general sensitiveness to economic influences, thus separating it from the broader zone of sluggish movement of capital and population, of slow response to economic stimuli, and of generally backward conditions. _Freedom of Movement as a Test._--In Europe, America, and the other advanced regions goods are carried from place to place so easily and quickly that there is a tendency toward uniform prices; and such local differences of price as exist in the case of any commodity do not much exceed the cost of getting it carried from one place to another, though in the cost of moving it there must often be reckoned the toll which a government takes at the customhouse. Capital moves freely, and there is a certain approach to a general level of interest, though here also local differences of course survive. The obstacle to the moving of capital from one place to another, if the owner does not go with it, is occasioned mainly by the risk it encounters and by a virtual bill for insurance. With allowance for this cost, rates of interest in the region we have described tend toward a general level. Though labor migrates more slowly than capital, it moves far more rapidly within the economic center than in the outer zones. Processes of production are not brought to a complete uniformity within the center, but they tend powerfully toward it; for while obstructions exist, they surely and not always slowly yield. With due regard for such differences of method as those existing between the European ways of making products and the American ways, we may say that the tendency toward the general survival of the best methods is too strong to allow any important differences to be permanent. Everywhere, in short, within the central area there is a strong tendency to conform to economic standards in the matter of prices, wages, interest, industrial processes, and forms of economic organization. The standards are what we have defined as the static ones. If we should stop progress and all disturbing influences and wait long enough, we should see values, wages, interest, etc., take a static level throughout the vast area. This, however, would require that migrations should go on till all inducement to move from place to place should have ceased to exist. Population would then have distributed itself over the land in the most advantageous way, and no body of people would be better off than any other by reason of the location of their abode. A long period would be needed to bring about this adjustment even within the circumscribed area where influences that make for change are very active and where obstacles are far smaller than they are in the uncivilized regions. _Essential Density of Population._--A perfectly static state requires, not a perfectly equal distribution of population, but such a distribution that there is no reason for further migrating. The power of the soil to feed its inhabitants varies with its fertility. Where the land is highly productive a dense population may live easily; whereas on a sterile soil even a sparse population may find natural resources too meager, and men may move to places which are more thickly peopled and yet may gain by the change. Moreover, such occupations as manufacturing and commerce require, of course, a far larger population on a given area than does any form of agriculture. Some regions are so undesirable as dwelling places that it takes an exceptional economic reward to induce men to live there. The static state is one in which, all these things being considered, there is no reason for changing the place of one's abode. This implies more nearly equal density per unit of natural resources than equal density per unit of mere area. Inequality of advantage due to location is what is leveled out, and doing this does not require nor permit that population should everywhere be equally dense per square mile or per acre. _Effect of Differences of Occupation._--Regions given over to agriculture naturally sustain more people than those devoted to grazing, and those which are devoted to manufacturing sustain more than either. In countries in which, as in Great Britain, manufacturing is so disproportionately developed that products must be largely exported, while food must be largely imported, given areas sustain more inhabitants than they do in any agricultural or grazing region and more than they do in any region where grazing and tillage, on the one hand, and manufacturing, on the other, are well balanced. In mills and shops auxiliary capital so abounds as to take the place of the abundant land that is available in the other cases for making labor fruitful, and in villages and cities labor does not overtax the resources of the soil any more than it does on farms. It has area enough to live and to work on and tools and materials enough to work with. In a generally crowded country, the resort to commerce and manufacturing relieves the pressure on the land, cities abound, and an abundance of capital averts the danger of a disastrous overcrowding. _An approximately Static Distribution of Population._--The apportionment of population among the different sections of a country may be nearly normal, while migration may still go on from that country as a whole to remote parts of the general area which we include in our present study. There may be small reason for moving from one part of Germany to another and large reason for going from Germany to America. This larger movement occupies a long time, while certain other adjustments may be made more quickly. Within Germany and within the United States labor may be well apportioned among the different occupations. There may be in each country about the right comparative numbers of cotton spinners, iron workers, gardeners, wheat raisers, etc.; or in other words, the distribution of labor among the industrial groups may be approximately normal both within the one country and within the other. It may further be true that the division of occupations between the two countries in their entirety is about what, in the conditions now prevailing, economic law calls for. There are certain industries which now have their habitats in Germany and certain others that have their habitats in the United States, and this arrangement is partly due to the comparative density of the two populations. Because there are so many persons per square mile of land in Germany there is there a certain preponderance of manufacturing, and there are in America less manufacturing and relatively more agriculture. In that remote time when the relative density of the two populations shall become static, America will have reason to increase the comparative amount of the manufacturing and thus put herself in this particular more nearly on a plane with Germany. This occupation has its normal abode in regions of comparatively dense population, and a gain in comparative density means an increase in the amount of productive energy devoted to it. The place for the mill is where the land is crowded, and the better place for the work of tillage is where it is not so.[2] [2] It will appear that manufacturing reacts on the density of population, first, by retarding emigration from the thickly populated country as a whole; and secondly, by causing local movements within the country, whereby cities and villages grow, and relieve what would otherwise be an excess of labor in agricultural regions. _How an Unnatural Distribution of Population may be Treated._--So long as the slow movement of population from country to country remains incomplete, the ultimate division of occupations between the countries can never be completely static. It is therefore with a division that is only approximately static that we have first to deal, and this is realized _when in view of the comparative density of population in the different regions which now exists_ occupations are naturally apportioned. The base line _AD_ of this figure stands for the part of the world in which economic law works rapidly and encounters comparatively few obstructions; and the extension of the line represents the lands outside of this region in which the laws are sluggish in their action. It is as though this base line were a section of a vast surface including both civilized and primitive states. _AB_ represents the smallest population per unit of land of a given quality within the central area, and _DC_ represents the largest, while the ascending line _BC_ shows the gradations of essential density in the peopling of different parts of it. At the point A the pressure of the population on the resources of the soil is least, while at the point _D_ it is at its greatest. At the point _A_ a man can get much out of the soil as the return for his own bare labor, while at _D_ he can get comparatively little; and at intervening points on the base a man gets more than he does at _D_ and less than he does at _A_. His gains measured in bushels of wheat, etc., vary inversely as the density of the population and so decrease from the left of the figure toward the right till the point _D_ is reached. The occupations of the different localities are determined by these facts. [Illustration] _How Occupations vary with Differences of Land Crowding._--Crowding the arable land causes labor to flow naturally to manufacturing occupations, since in these it is not so greatly handicapped in comparison with the labor of more sparsely peopled regions. In a cotton mill in Manchester a man may contribute as many yards per day toward the product of the mill as he would in a mill in Fall River; but on an English farm one man's labor does not create as much produce as it does on an American farm. The large amount of available land per man in America has a great effect on the amount that a man can produce by tilling it, but it has very little effect on the amount of the cotton goods that his presence and labor in the mill insure. In raising crops, therefore, the Englishman is at a more serious disadvantage in comparison with the American. The fact is expressed in a practical way by saying that the English labor is cheaper and is therefore more available for making things that are exported to the distant markets of the world than is labor of the same kind in America; but the reason for this cheapness is primarily the land crowding, which reduces the productive power of a final unit of labor in the former country. Because the man cannot get for himself many bushels of wheat per annum by working on land he can afford to work in a mill at a rate corresponding with the value of the produce he could secure as a cultivator.[3] [3] In this connection see the discussion of the principles of international trade in J. S. Mill's "Principles of Political Economy," Book III, Chapter XVI. _General Differences between the Condition of Densely Peopled Regions and that of Sparsely Peopled Ones._--In a very general way it may be said that the comparative amount of manufacturing should naturally vary directly with density of population, and that the comparative amount of agriculture should vary inversely to it. In computing density due regard must, as has been indicated, be paid to the quality of the land as well as the area, since a number of inhabitants which would unduly congest a sterile agricultural region can be well maintained on a fertile one. In the accompanying figure the line _AD_ inclosed by the vertical lines represents the part of the earth which we have called central, and the left side of it is the part of this area which has the sparsest population, while the right side is that which has the densest. The rising line _BC_ represents the varying density of the population in different parts of the broad area we regard as general economic society, the dotted line _EF_ may be taken as expressing the increase in the part of the labor and capital of the country devoted to manufacturing as population becomes denser, _AE_ measures the proportionate number of persons engaged in manufacturing in the region of sparsest population, and _DF_ measures the comparative number in the region most densely peopled. [Illustration] _AG_ and _DH_ represent the numbers engaged in agriculture in the two regions, and the descent of the line _GH_ represents the predominance of agriculture in the sparsely populated part and the subordination of it in the part that is densely populated. If we assume that capital in the different types of employment varies as does labor, the descent of this line toward the right means a decline in the fraction of the whole force of labor and of the whole fund of capital devoted to cultivating the soil; while the upward trend of _EF_ means the enlarging proportion of labor and capital devoted to manufacturing as we pass from a region of sparse population to regions more and more crowded. The wavy character of the two dotted lines is designed to express the fact that local conditions other than mere density of population favor the one type of occupation rather than the other; and moreover, nothing in the figure is intended to mean that the increase in manufacturing and the comparative decrease in tillage from the left of the diagram to the right are in any exact numerical proportion to the increase in the density of population. The figure as a whole rudely represents the fact that an approximation to the static distribution of population insures an approximation to a static apportionment of occupations within the described area and indicates the general nature of that apportionment. _How Cost of Production and Cost of Acquisition are Equalized._--The costs of moving goods from place to place--including in these costs commercial charges and duties imposed by governments--are the cause of most of the manufacturing that is done in the region represented by the left side of the diagram, except the production of such articles for immediate or local consumption as are necessarily made at or near the places where they are used.[4] Tailoring, blacksmithing, carpentering, general repairing, etc., would always be done in that region, but many kinds of staple goods capable of being transported would, in the absence of duties on imports, be made chiefly in the region of dense population and cheap labor. [4] There can be no large area from which manufacturing is excluded. The rural hamlet has its blacksmith, wheelwright, and carpenter, its sawmills and gristmills; and manufacturers of sashes, doors, furniture, and many implements abound where agriculture is the general industry. Special advantages for production insure the introduction of other industries, and the advantages of being near to customers is enough to maintain many of them. Repairing must, of course, be done everywhere, and in making some articles for local use it is best that the artisan should be where the customer can always reach him. A large cost of transportation favors local industries, a high degree of productivity in agriculture has an unfavorable influence, and a protective tariff on manufactures reduces the returns from agriculture and favors manufacturing industry. The general rule for determining whether a branch of manufacturing can survive in the area of abundant land and well-paid labor is as follows: it can do so if the cost of making the article which this branch of business is devoted to producing is as low as the cost of acquiring it by exchange. The cost may in both cases be reduced to bare labor and the rule will then stand thus: if ten days' labor will make the article and if nine will make something that can be exchanged for it--_i.e._ if all the costs of the exchange can be covered and the thing can be brought from abroad for a total expenditure of nine days' labor instead of ten--the manufacturing of that article will not survive. In a region of abundant land and well-paid labor it is chiefly the tolls which governments exact which make it as costly an operation to get the manufactured products by producing other things to barter for them as it is to make them directly. Density of population, overworking of land, meagerness of returns to agricultural labor--these are the conditions that primarily fix the habitat of most kinds of manufacturing. In the case of particular products these influences may be overcome by the presence in limited parts of the sparsely settled area of exceptional natural advantages for production. Natural gas, special ores, particular kinds of lumber, etc., may draw some branches of manufacturing to the region of fertile land and high wages; but as the comparison which we are making is the most general one which it is possible to make we are safe in our assertion that, in the main, manufacturing processes tend, in the absence of exceptional influences, to concentrate themselves in the region of dense population and of meager earning power of labor. _The Approximate Static Adjustment of Prices._--In the main, and with tariffs as they are, the price of raw products is somewhat lower at the left of the figure, while that of highly wrought merchandise is markedly lower at the right of it; and with the comparative density of population as it is and with no change of commercial policy on the part of governments, this condition may be expected to continue. It is an approximately static adjustment of prices. Purchasing manufactured goods in Europe will long be profitable if they can be passed duty free through the customhouse, while food will be somewhat cheaper in America. [Illustration] _Static Wages and Interest._--As has been said, the wages of labor are comparatively low at the right and high at the left of the figure, while interest varies in the two regions in the same way. It is lower in the crowded area. This is not because of the presence of many men, for this influence alone would tend to sustain the productive power of capital and the consequent rate of interest, and in fact the interest on capital in Europe would be lower than it is if the population there were sparser. The rate which prevails is fixed by the productive power of a very large fund of artificial capital utilized by a large population meagerly supplied with land. This last item is decisive in the case and is a primary cause of low interest. The full statement of these facts, made in graphic form, shows an ascending line of density of population, as we proceed from left to right, an ascending line of price for raw produce, a descending line of price for highly wrought merchandise, and descending lines for wages and interest. All these lines represent the facts in a broadly general way. They deal with averages and not with particular rates. The labor whose earning power descends along the line numbered 5 is of many kinds, and the produce of which the average values vary along the lines numbered 2 and 4 is of many varieties. The rate of ascent or descent of the lines has no especial quantitative significance, and it is therefore not implied in the figure that wages decline more rapidly than the other factors. Moreover, it is such large areas as those of England, Germany, France, or the Mississippi Valley, including both cities and rural lands, that we have in mind when we speak of the density of population as ascending along the line numbered 1. Anywhere we expect to find cities containing more persons to the acre than rural districts. The purpose of the figure is to enable us to take in at a glance five different adjustments that in the main are to be regarded as approximately static within the great region described as the economic center of the world.[5] [5] The law of the distribution of occupations over the area represented by the diagram would, if it were more fully developed, present an amplification of the law of International Trade stated in Mill's "Political Economy," according to which countries naturally produce, not only the things for the making of which they have the greatest absolute advantage, but those for which they have the greatest relative advantage. [Illustration] _Slow Change of the Foregoing Adjustments._--The line which represents the comparative density of population is of course slowly changing position as migration goes on from the older centers of population to more newly occupied regions. If the present distribution of population be represented by the line numbered 1, the distribution a hundred years hence may be represented by the dotted line numbered 2, and that which will exist after five hundred years shall have passed may be represented by the dotted line numbered 3. Even within the economic center the comparative density of population in different divisions is therefore not to be treated as strictly permanent, and it is not to be treated as in any sense permanent when we are forecasting effects that will be realized several centuries hence. For a problem involving a score or two of years the general conditions we have described may be treated as, in the main, abiding.[6] [6] The reason for confining attention to the central zone is partly, as we have stated, because here only do we get a quick response to an economic influence. Overproduction of any article quickly lowers the value of it throughout the area, and a mass of unemployed laborers affects wages throughout the area more speedily than it does in the great environing zone. This, however, is only one reason for this limitation of the scope of our immediate study. A serious fact is that, if we include the entire world, we cannot establish, in the way we have proposed, the natural standards toward which values, wages, and interest are tending. It will be recalled that in the static division of this treatise we have attained a "natural" standard of wages by assuming that all dynamic changes were to cease and that labor and capital were to move to and fro in the system of industrial groups till each of these agents produced as much in one subgroup as in another. A computation of this kind might, within a limited area, be made periodically, say once in ten years, and if this were done it would give a series of static standards of wages. Now these standards become higher as time advances. The static rate of pay for labor is, as a rule, higher at any one date than was the standard for a date ten years earlier, and lower than will be that for a date ten years later. The normal rate of pay about which actual wages fluctuate is a rising one. Now, if we introduce in imagination an absolutely static state for the world at large, we shall have to assume that growth of the general population and increase of the aggregate capital both cease, and that inventions and new coördinations are no longer made. We must then wait long enough to allow static distribution of industries to be made over the whole world and to let each industry find its absolute habitat. This would involve causing methods of producing any commodity to be unified the world over. Hand labor in the Orient would have to give way to machine production, as it has done in Western lands. For a strictly static adjustment indeed even the density of population in the different sections would have to be brought to a virtual equality. While this nearly interminable process was going on, it would be needful that such dynamic changes as inventions and discoveries bring in their train should be absolutely precluded. Stop making new kinds of machinery and wait for centuries to allow a static adjustment to be made over the whole earth--such would be the order. Now, such a test as this would show falling wages in the more favored parts of the earth, whereas the facts show rising wages. The influx of population from the East, unrelieved by a corresponding influx of new capital and by more fruitful methods of production, would cause the earnings of an American laborer to fall, and we should, on the basis of such a test, conclude that his wages in the long run are destined to become lower in consequence of the movement of the vast populations that now congest great Asiatic countries. We should have vitiated the problem by holding the growth of capital and the progress of invention in abeyance. This may be done within a limited area without giving a false result, because there adjustments are more rapid, and waiting for them does not involve the long-continued paralysis of the powers that make for greater wealth for laboring humanity. Apply the test of the static state to the economic center, and it will give a generally true result; but it will give a false one if it be applied to the world as a whole. The merely static adjustment of the world would take more centuries than we care to reckon, and no truth that we are seeking is revealed by assuming that for such a period the forces of progress are brought to a standstill. CHAPTER XIV EFFECTS OF DYNAMIC INFLUENCES WITHIN THE LIMITED ECONOMIC SOCIETY _How the General Unification of Methods of Production Calls at First for an Increased Exportation of Capital from the Central Area and Checks the Immigration of Laborers._--A study of the causes of the interchanges which take place between the economic center and its environment shows that the movement of goods, the diffusion of modern methods of making goods, and the movements of capital and labor across the border of the economic society we are studying are interdependent. Opening a field for a profitable export trade increases the productivity of labor at home and tends to attract immigration. On the other hand, establishing in the outer zone a market for the products of the center prepares the way for introducing modern manufactures into the more densely peopled parts of the outer area. The company that sells cotton goods to the Chinese or the Hindoos will find that there is more to be made by utilizing the cheap labor of those peoples for making the goods by efficient machinery. Commerce tends to diffuse a knowledge of the most economical processes of manufacturing, and this interposes a certain stay on migrations of labor toward the center. It will in time help to retain Chinamen in China and Hindoos in India. It does, however, cause a movement of capital from the center outward, followed in time by a creation of wealth in the outer zone for proprietors residing within the center. The Englishman draws dividends from investments in many lands not within the field covered by the present studies. In so far as he reinvests them, as capital, in those lands, they supply a need that, without them, would have to be supplied by a new exportation of capital from the home country, and they therefore tend to check such exportation. In so far as the dividends are brought home they directly neutralize a certain amount of exportation of capital. _Effects experienced within Economic Society from Interchanges with the Environing Area._--The introduction of improved methods of production within the central area usually calls for an expenditure of capital there, and this is largely furnished from the net profits from previous economies in production, and will, in its turn, furnish net profits that will convert themselves into the capital needed for applying future inventions. The study of the causes of an increase of capital, as well as of each of the generic changes that are going on within the center we defer for later chapters; but at present we need to know that the changes going on within what we define as economic society are affected by the intercourse which that society maintains with its environment. Immigration across the outer boundary of the general division enhances the rapidity of growth of the population within it, while emigration reduces it. Exporting capital in itself reduces the rate of accumulation at home, and importing increases it. Introducing into foreign regions economical methods in use at home, modifies the trade which goes on between the great areas, and there is a perpetual rivalry between the direct and the indirect process of obtaining goods at home. When a unit of labor can directly make more of _A´´´_ than it can procure by making _A_ and exchanging it abroad for _A´´´_, the manufacture of _A´´´_ is legitimate and profitable, but when the unit of labor can procure more of _A´´´_ by the indirect process in which an exchange with a foreign region intervenes, static law requires that this indirect process be resorted to. We should make _A_ and buy _A´´´_ in order to get the most of the latter commodity. This is the essence of the time-honored argument for freedom of trade, but the conclusion to which it leads is modified by a consideration of further dynamic influences which will, in due time, be presented. _How we may get Valid Results by Studying only a Part of the World._--It is entirely possible to study by themselves the activities of such a part of the world, and we will therefore draw a line of demarcation about the countries which constitute the economic center of it, and thus include an area within which economic causes produce speedy effects. Each part of this area quickly responds to influences that originate in any other part. If the steel mills in America make radical improvements in their machinery, this change should, in the absence of a strong monopoly, affect the price of rails in England, Germany, etc. Within the central region wages and interest tend toward uniformity, though, as we have seen, they do not attain it. Across the boundary which separates this center from the outer zone, economic influences act in a more feeble way and are unable to bring rates of wages and interest even to an approximate equality. Western Europe, America, and whatever regions are in very close connection with them, we treat as a society, with the remainder of the world as its environment. This center trades with the environing region, sends some capital and labor thither, and draws some of each thence to the home countries. Willingly or otherwise, it instructs the people of the outer region in modern methods of industry, and thus causes what we may regard as a slow annexation of a part of the outer zone to the economic center and a modification of the character of industries at home and abroad. The principal movement of labor is in an inward direction, and from our point of view it is immigration not into one country merely but into all economic society. The predominant movement of capital has been outward. _Mode of Studying Interchanges between Center and Environing Zone._--All these movements have to be recognized in a study of the economic life of the central society. How, for example, is commerce with undeveloped regions to be regarded if we have the center only in view? It is simply one of two possible ways of getting goods. The people of the center can make a commodity that they use, or they can make something to send into the outlying countries in exchange for it. In the latter case they acquire it indirectly rather than directly, but they acquire it by their own industry in the one case as well as in the other. _Natural Selection of Modes of procuring Usable Goods._--Under natural influences, as we have said, men select the most economical way to get what they use, or--what is the same thing--they select the mode of utilizing their own labor and capital that will give them the largest return in goods. There is competition between different methods of directly making goods, and the best method survives. The man with a good machine undersells the man with a poor one; this latter producer must improve his equipment, or fail, and appliances thus tend toward a maximum of efficiency. In like manner there is competition between the direct and the indirect mode of obtaining goods. The man who, by using a certain amount of labor for a week in making steel for exportation, can obtain in exchange fifteen yards of silk, can undersell and drive from the field the man who, by using the same amount of labor for a week in silk making, can produce ten yards of silk. The importer naturally supplants the manufacturer when, by bartering with foreigners the product of a given amount of labor, he can get from them more than can be produced at home by the same amount of labor. The manufacturers naturally survive when direct production gives the larger returns. In our studies of the economy of the society that is most advanced and central, we may treat whatever is imported as, in an indirect way, produced. In a sense the activities of that society are nearly self-contained since, by the direct or the indirect method, the people produce within their own boundaries the most of what they consume. In doing so they naturally use with a maximum of economy the forces at their command, and resort to traffic when that is profitable. _Mode of Treating the Exportation of Capital._--Capital is moving across the boundary mainly in an outward direction. This fact, standing alone, would be equivalent to a mere retarding of the rate of increase of capital within the economic center; but the exported capital, as it is used outside of the exporting society, produces an income for owners living within it. The income comes in kind, since it takes the form of goods which are an addition to those imported in the course of ordinary exchanges. This tribute paid to capitalists within the industrial center comes chiefly in the form of consumers' goods, the receiving of which does not entail the producing of something to send away in exchange for them. The material agent which creates the imported goods remains outside of the society, and sends its product into the society with no offset. The fact of such an income coming from beyond the pale of an economic society has compelled us to qualify the statement that the economy of the society is self-contained, for there is a small part of its income which is not created within its borders. This comes about by the exportation of capital and the importation of some of its products. _Effects of Drawing Interest from Investments beyond the Social Boundary._--Not all of these are consumers' goods. Some capital goods are imported and, moreover, many consumers' goods are passed over to the group called _HH´´´_ in our table,--the one that makes active instruments of production,--and in this indirect way the earnings of capital invested abroad add to the amount of capital at home. In the long run the exportation of funds for permanent investment may, by its other and more indirect effects, increase the supply of them at home. The literal fact in each year is that what is exported is itself a reduction of the amount that would otherwise be added to the home supply, but that the income accruing from what has been exported in earlier years makes an addition to what is in this year accumulated at home. Primarily, the exportation of capital is to be treated as causing a modification of the rate of accumulation of capital and, in a long term of years, an increase of the rate. _Movements of Labor._--Laborers cross the boundary in both directions, but inducements favor the inward movement. In the absence of positive obstacles the denser populations of Asia could overflow into America with a startling rapidity. Such a movement, on whatever scale it occurs, is to be treated as causing an acceleration of the rate of increase of the population within the center. Whatever results arise from growth of population within are emphasized by immigration. _The Assimilation of Economic Methods and Forms of Organization._--People without the center are borrowing from it the newer and more efficient methods of production. Already Asiatics are making some things by machinery, and when they shall do it more generally there will take place changes that will be very revolutionary in their own economic life and will react on the life of the center itself. Learning to use a thousand and one machines will rend China and disturb Europe and America. In general, better appliances and a more efficient organization will make it possible for Asia to create for herself, and ultimately export much that she now imports, and this will react on the character of the industries of America and Europe. We shall somewhat modify our industries in order to get the benefit of new openings for commerce, and some of the things which we now directly produce we may find it more profitable to get by exchange, which is indirect production. On the other hand, some foreign products which we now get with great economy of labor, because the goods we exchange for them are scarce and dear in the countries that receive them, we shall get on less favorable terms, because the goods we now send to the foreign lands will have become there more abundant and cheap. In general, we must regard the opening of a profitable avenue for trade as we should the invention of a new machine, the discovery of a better electrical transmitter, or the utilizing of a cheaper motive power. It gives us more goods as the fruit of a given expenditure of labor and capital and affords a profit which, as we shall see, comes first to _entrepreneurs_ and later to laborers and capitalists within the pale. Ultimately, those living beyond the pale will get a share of this gain. _Summary of Facts concerning the Economic Center._--We may, then, regard a certain limited part of the world as a society in itself. It is modified by its environment, but, in an important sense, it has a self-contained life. The economic changes which go on within it can be grouped under the five generic heads: increase in the amount of labor, increase in the quantity of capital, improvement of method, improvement in organization, and changes in the wants of the individual consumers. _The Geographical Boundaries of Society not Fixed._--The boundaries of this central area are not fixed. As relations between the center and the part of the outer zone which is nearest to it become more and more intimate, the adjacent region takes on the character of the center. It is, in an economic way, assimilated to it; and in this way the center may be regarded as annexing to itself belt after belt of the environing world. Ultimately it will doubtless annex the whole of it; and for this reason, even though we confine our studies to the center, we shall establish a system of economic laws which will apply, in the end, to all the world. This indeed is not the only way in which the economic life of the outer area comes into the economist's purview, for he can study it for itself. This zone has its peculiar life, which is a distant reflection of the life of the center. It is a type of economic activity in which all the primary forces work, but in which friction abounds and adjustments are made with extreme slowness. For the present, what interests us is the life of the center itself, and in studying this we take account of the influence of the environment. The effects of these influences are first seen in changes in the rate at which the five general dynamic movements go on within the center. The grand resultant is more rapid progress within the center. _What is involved in a Full Study of the Relative Density of Populations._--A full treatment of the subject of the comparative density of population in different places would include an extended study of the kinds of industry which find their natural homes in densely peopled countries and of those which flourish in sparsely peopled ones, and a much more detailed tracing than it is possible here to undertake of those changes in the character of industries everywhere which result from a leveling out of differences in population. Clearly, if all America were to become as crowded with inhabitants as are Holland and Belgium we should develop industries of a different type from those that we now have, and the change would be in the direction of producing relatively more form utilities and relatively less of the elementary utilities. Labor and capital would move from the subgroups which in our table we have called _A_, _B_, and _C_ toward _A´´´_, _B´´´_, and _C´´´_. We should spend more of our energy in making finished goods and less in getting raw materials. I shall note in a very general way the changes in social industry caused by increase of population without looking forward to that remote time when the density of population shall be equalized. _Why an Approximately Static Adjustment of Industries within the Central Area permits Unequal Density of Population in Different Parts of It._--We exclude from view the ultimate static adjustment of the whole world, and content ourselves with an approximate adjustment within society as we have defined it. Even within this limit there are inequalities in the density of population which it would require a very long time to remove, and a perfectly static state cannot be reached till they are leveled out. The selection of industries in Texas and in Belgium cannot be, in the ultimate sense, natural till population in these two regions is so adjusted that there is no longer an economic motive for migrating from the one to the other. If, in order to determine what an absolutely static condition for the central society would be, we were to apply the rule of imagining all new dynamic influences precluded and of allowing time enough to elapse to bring about a normal apportionment of population within that limited area, we should encounter a measure of the same difficulty which confronted us when we proposed to attain a similar static state for the entire world, though the trouble would be less serious in degree. In waiting long enough for population to distribute itself naturally, we cut off influences that, within that period, will affect production and distribution far more than the change in population will affect them. In so far as Texas or any newly occupied region is concerned, the changes thus precluded are those which would have tended to reverse the effect of the redistribution of population. Migrations from Belgium to Texas, if extensive and long continued, would reduce the productive power of labor in Texas; while the dynamic changes which will actually go on within any such period will increase the productive power of that labor, and it is not certain whether the one or the other influence will predominate. For the United States as a whole it is probable that progress in the useful arts will more than offset the influx of new laborers and give to wages a rising trend. If, however, we establish the natural standard of wages by cutting off such progress and letting the influx of labor continue, the test would give a standard lower than the present one,--a false, as well as a discouraging result. The resultant of all the changes we are about to study will probably give to the future pay of labor in America a rising trend. _How Industries adapt themselves to Unequal Density of Population._--In view of this fact it is necessary to recognize a proximate rather than an ultimate static state as that toward which the adjustments now going on are immediately tending. We will treat the unequal density of population within our economic society as something which will last, not forever, but so long that it will not be removed or appreciably affected within the period required for the other adjustments that we are studying. Given a population that is dense in Belgium and sparse in Texas, and competition will cause the industries to take on the types which they would have and retain if that difference in density were destined to be permanent. The type toward which the economic life of both regions is tending is thus a proximate rather than an ultimate one. Each region will, in the near future, be of the type toward which influences which do not involve an equalization of population are impelling it. We get the true direction of the change that is going on in the earning power of labor and in the shape of the industrial organism in both regions by recognizing the fact that the differences in the density of their populations will continue through the period which we are considering. [Illustration] If the line _BC_ represents the productive power of a unit of labor in a region which is sparsely peopled, and the line _B´C´_ represents the productive power of a unit of labor in a densely peopled region, we may assume that _AC_ and _A´C´_, which are equal to each other, represent the product of a unit in either locality when, general progress being precluded, the difference in the density of population should have been leveled out. Move people at once and in a wholesale manner till there is nothing to be gained by further moving them,--let pressure of population on the land be fully equalized,--and you may be supposed to create a condition of uniform productive power for laborers of a given grade in the entire region. The horizontal line _AA´_, which is everywhere the same distance above the line _CC´_, represents the universal level of the productivity of labor in such a theoretical condition. The line _BB´_ represents the actual and different levels of the natural earnings of labor in the different regions. Assuming that all other static adjustments are made, but that the equalization of population has not taken place, labor will earn the amount _BC_ in one place and the amount _B´C´_ in another. Somewhere it will earn an amount represented by the vertical line descending from _D_ and somewhere that expressed by the line descending from _F_, while there will be places where the earnings of labor are measured by the line descending from _E_, which is the amount that labor would everywhere create and get if the population could be quickly made normal in all regions. The standard of wages for the whole of the great region, largely European and American, which constitutes the economic center of the world, shows varying levels in different countries and parts of countries, and the actual rates in every place fluctuate about this proximately normal standard for that place, the standard rate in one locality being higher than that of another. The line _A´B´_ exceeds in length the line _AB_, and this expresses the fact that equalizing the pressure of population on the land in different regions adds more to the productivity of labor in the region now crowded than it deducts from that of labor in regions now sparsely peopled. The overcrowding does greater and greater harm the further it is carried, and therefore taking away a surplus of people from a region which has suffered greatly from overcrowding affords a relief which more than offsets what is lost in other places by a moderate increase of population. Moreover, the fact has to be recognized that at present there are ten square miles of sparse population for one that is very densely peopled, and reducing all to an equality would add only slightly to the number of inhabitants of the regions that now contain few of them.[1] [1] Exceptional local conditions may make an influx of population for a time a cause of greater productivity rather than of less. The general and permanent effects are otherwise, and it is on these that the present argument rests. [Illustration] If the line _BB´_ represents the unequal level of _natural_ wages in different localities, on the assumption that populations remain unequal, the undulating curve _DD´_ which crosses and recrosses the line _BB´_ represents actual local rates fluctuating about the standard ones. _How a Static Adjustment for the World is a Dynamic Influence within a Limited Part of It._--Commodities are, by traffic, crossing the social boundary in both directions, and with the goods there go and come influences that affect the economic life of the central society. Methods and modes of organizing business are taught by each region to the other, though most of the teaching is done by the people of the center and most of the learning by those of the environment. All this affects the center and falls within our study. It has dynamic effects within the center, though it is only a part of a static adjustment for the world as a whole. If the grand bank of Newfoundland were to subside to the level of the middle of the Atlantic, there would be a great rush of water toward the place that the banks now occupy, but this would be only what is required in bringing the general level of the sea to an equilibrium. It would be essentially a static phenomenon, but for the region of the banks it would be dynamic in the highest degree. A rush of population from China to America would be a change tending to establish an equilibrium of population in the world, but it would be a startling bit of dynamics for America. Teaching the Chinese all the mechanical arts that we know would be creating an equilibrium of another sort, in which methods would be similar in the two countries; but for China itself this acquiring of practical arts would be dynamics acting on a vast scale. What is a static adjustment for the world is a dynamic change for parts of the world, and all such changes that can occur within the area of economic society proper and within the period we can wisely include in our study we need to take into account. Changes in population, wealth, method, and organization must be studied, however they may originate. CHAPTER XV PERPETUAL CHANGE OF THE SOCIAL STRUCTURE _Perpetual Change of the Social Structure._--We confine ourselves to that economic society _par excellence_ which we have called the industrial center of the world. In this region economic influences are forever changing the very structure of the society itself. They move labor from place to place in the system and they transfer capital to and fro in the same way. If we think of our table of groups and subgroups as representing the whole of this great industrial world, we must think of labor and capital as in a perpetual flow from subgroup to subgroup, making some industries larger and others smaller by reason of every such movement. The great force of labor and the fund of capital are like restless seas whose currents carry the water composing them now hither and now yon as the direction and force of the moving influences change. _Movements of Labor within the Group System caused by Increasing Population._--If the population were to increase while the amount of capital and the mode of using it remained the same, the effect would be a downward movement of both labor and capital in the series of subgroups by which we represent industrial society. Labor and capital would tend to desert the subgroups _A´´´_, _B´´´_, and _C´´´_ in our table and to move to _A_, _B_, and _C_:-- _A´´´_ _B´´´_ _C´´´_ _A´´_ _B´´_ _C´´_ _A´_ _B´_ _C´_ _A_ _B_ _C_ _Causes of Downward Flow of Labor in the Group System._--A larger population means, of course, not merely an increase in the amount of labor performed, but also an increase in the number of consumers. It means more mouths to feed and more bodies to clothe. It entails also, according to principles that we have already studied, a lower earning power and a lower rate of pay for labor. This means that simple food, cheap clothing, inexpensive houses, furnishings, etc., constitute a larger element in the consumers' wealth of society than they have heretofore done. Society uses fewer luxuries and more necessaries, and the necessaries of life are products in which raw materials predominate and costly form utilities are wanting. This makes a heavier draft upon the land than does the production of highly wrought articles of the same value. Luxurious articles are fashioned with a great amount of artisan's or artist's labor and a relatively small amount of the labor of cultivators and miners. The subgroups _A_, _B_, and _C_ are the ones that furnish the rawest materials, and it is they, therefore, that receive the largest portions of the new labor that enters the field. _How Economic Friction works to the Disadvantage of Immigrants._--Unless capital grows more rapidly than population, there is a certain friction to be overcome in obtaining places for new laborers. If they come largely as immigrants, they are crowded at the points of disembarkation and are then scattered over a large territory. They may have to gain employment by offering to _entrepreneurs_ some inducement to take them. If capital has not increased, and the _entrepreneurs_ are in no special need of new men, they will take them only at a rate of pay which is low enough to afford of itself a slight margin of profit. If the capital has already grown larger and the new men are needed, the situation favors them, and their pay is likely to be as high as it was before, or higher. _The Effect of Increasing Capital._--The growth of capital has an opposite effect. It means a lower rate of interest, though it means more interest in the aggregate, since it insures a larger fund on which the interest is received. The rate does not decline as rapidly as the amount of the fund increases, and this insures a larger gross income from the fund; and it also insures larger individual incomes for many persons. There is, then, a large number of people who are in a position to make their consumption more luxurious, and this causes an upward movement of labor and capital in the group system. More workers will be needed in the subgroups _A´´´_, _B´´´_, and _C´´´_, where raw materials receive the finishing touches, and also in the other subgroups above the lowest tier. It is to these subgroups that a large portion of the new capital itself will come, and the labor will come with it. Larger incomes, more luxury, more labor spent in elaborating goods as compared with that required for procuring crude materials,--such is the order. _Effect of an Increase of Both Labor and Capital._--It is clear that a certain increase of capital might practically neutralize the increase of population, in so far as the movements thus far considered are concerned, and a greater increase of capital would reverse the original downward movement caused by the increase of labor and result in a permanent upward movement toward the subgroups _A´´´_, _B´´´_, and _C´´´_. In this case the men occupy themselves more and more in making the higher form utilities. They make finer clothing, costlier furniture, etc., and the new production requires proportionately less raw material than did the old. This is the supposition which corresponds to the actual facts. Capital is increasing faster than labor, and consumption is growing relatively more luxurious; dwellings, furnishings, equipage, clothing, and food are improving in quality more than they are increasing in quantity. Goods of high cost are predominating more and more, and the subgroups that produce them are getting larger shares of both labor and capital. Population drifts locally toward centers of manufacturing and commerce. It moves toward cities and villages in order to get into the subgroups which have there their principal abodes. The growth of cities is the visible sign of an upward movement of labor in the subgroup series. _A Change in the Relative Size of General Groups._--If all the steady movements of labor and capital were stated, it would appear that a relative increase in the amount of labor, as compared with the amount of capital, would enlarge the three general groups, _AA´´´_, _BB´´´_, and _CC´´´_, and reduce the comparative size of the general group _HH´´´_, which maintains the fund of capital by making good the waste of active instruments. Gain in capital estimated per capita would cause relatively more of the labor and more of the fund of capital to betake itself to the group _HH´´´_. The movement toward the upper subgroups which is actually going on is attended by a drift toward this general group. An increase of luxurious consumption and an enlargement of the permanent stock of capital goods go together. _Regularity and Slowness of Movements caused by Changes in the Amounts of Labor and Capital._--The important fact about the movements thus far traced is that they are steady and slow. They do not often call for taking out of one part of the system mature men who have been trained to work there. They are movements of _labor_ which do not, in the main, involve any considerable moving of _laborers_ from group to group. The sons of the men in the subgroup A do not all succeed to their fathers' occupations, but many of them enter _A´_, _A´´_, and _A´´´_, so that labor moves from the lowest subgroup to higher ones. Such a transfer of labor entails few hardships for any one, and in general it is to be said that all the movements of labor and capital which are occasioned by quantitative changes in the supply of these agents are of this comparatively painless and frictionless kind. About changes caused by new methods of production there is a different story to tell. The transformation of the world does not go on without some disquieting results, however inspiring is the remote outlook which they afford. The irregularity of the general movement, the fact that it goes by forward impulses followed by partial halts, is a further serious fact. Hard times present their grave problems, and we need to know whether it is necessary that dynamics--the natural and forward movement of the industrial system--should produce them. This problem is for later consideration. _Movements caused by Changes in the Processes of Production._--Mechanical inventions are typical movers of labor and capital--constant disturbers of what would otherwise be a comparatively tranquil state. Dynamos for generating electricity and devices for conducting it to great distances from its sources have done much to rearrange the society of a score of years ago, as economical steam engines had done at an earlier date. Every device that "saves labor" calls for a _rearrangement of labor_ in the system of organized industry. In a perfectly static condition there would be, as we have seen, a standard shape for all society, which means a normal apportionment of labor and capital among the producing groups and subgroups and also among the local divisions of the general area. The elements would subside to a state of equilibrium and become motionless, as water finds its level and becomes still in a sheltered pool. The body of fluid takes its standard shape and retains it, so long as no disturbing force appears. Now, society would have such a standard shape and would require, in the absence of dynamic changes, a relatively short time in order to conform more or less closely to it, if it were not for the unnatural apportionment of population in different parts of the area that the society inhabits and the obstacles which wholesale migrations encounter. For the solution of problems of the present and the near future we must accept as a standard the quasi-static adjustment of the population and the consequent quasi-static selection of industries in the different local divisions of the broad area--the arrangement that we have described as locating an excess of manufacturing in the more densely peopled areas and an excess of agriculture in the more sparsely settled ones. With this qualification it may be said that there is a standard apportionment of labor and capital among the producing groups, and that these agents gravitate powerfully and even rapidly toward it. If there were a certain amount of labor and capital at _A_, a certain amount at _B_, and so throughout the system, this standard shape would be attained, and the elements would not move, except as a very slow movement would be caused by changes in the comparative density of population of different regions.[1] This standard shape would long remain nearly fixed if it were not for the appearance of the dynamic influences which are so active within the area we are studying. [1] It is obvious that capital as well as population is distributed with uneven density over the territory occupied by society; but the movement of capital is less obstructed than that of a great body of people, and moreover it is chiefly the fact that the people are not dispersed over the area in a natural way which creates the chief obstacle to the moving of capital. It goes easily when it accompanies a migration of laborers. _Alternations in the Direction of Movements caused by Improved Methods._--In a dynamic state this standard shape itself--the approximately static one--is forever changing. At one time, for example, conditions exist which call for a certain amount of labor at _A_, another amount at _B_, etc. A little later these respective quantities at _A_, _B_, etc., are no longer the natural or standard quantities; for something has occurred that calls for less labor at _A_, more at _B_, etc. If _A_ represents wheat farming, the amount of labor that it required when grain was gathered with sickles is more than is necessary when it is gathered with self-binding reapers, always provided that there has been no increase in population, which would require an increase in the food supply. The society therefore will not be in what has now become its standard shape till men have been moved from the wheat-raising subgroup to others. If the invention of the reaper were not followed by any others and if no other disturbing changes took place, labor would move from the one group, distribute itself among others, and bring the system to a new equilibrium; but it has not time to do this. It begins to move in the way that the new condition occasioned by the introduction of the reaping machine impels it to move; but before the transfer is at all complete there is a new invention somewhere else in the system that starts a movement in some other direction. Before the labor from _A_ is duly distributed in _B_, _C_, etc., there is an invention in _B_ which starts some of it toward other points. _Why Movements are Perpetual as well as Changeful._--Such improvements are perpetual, and the dynamic society is not for an instant at rest. If the disturbing causes would cease, the elements of the social body would find their abiding place; and the important fact is that at any one instant there is such a resting place for each laborer and each bit of capital in the whole system. As we have seen, the men and the productive funds would go to these points but for the fact that before they have time to reach them new disturbances occur that call them in new directions. Again and again the same thing occurs, and there is no opportunity for placing labor and capital at exactly the points to which recent changes call them before still further improvements begin to call them elsewhere. _Why Technical Changes are more disturbing than a General Influx or Efflux of Population._--When the moving of labor is gradual, it is effected, not so much by transferring particular men from one occupation to another, as by diverting the young men who are about entering the field of employment to the places where labor is most needed. When the son of a shoemaker, instead of learning his father's trade, becomes a carpenter, no _laborer_ has abandoned an accustomed occupation and betaken himself to another; but _labor_ has gone from the shoemaking trade to that of carpentering. A man often stays where he is to the end of his life, although during that life labor has moved freely out of his occupation to others. If we represent the facts by a diagram, they will stand thus:-- A B C D 50 40 70 100 Natural and actual apportionment of labor in 1850. 45 35>-->90 90 Natural apportionment after change of ----------^ ^---- method in 1850. 47 38 80 95 Apportionment in 1855 when the movement initiated in 1850 is partially completed. 52 41<---65 102 Natural apportionment in 1855, with ^---------- ----^ movements then initiated. _A_, _B_, _C_, and _D_ represent different occupations or subgroups in the table we have before used. At one date a static adjustment called for fifty units of labor at _A_, forty at _B_, seventy at _C_, and one hundred at _D_. A half decade later, after improvements had taken place at _A_, _B_, and _D_, static forces, if they were allowed to have their full effect, would leave only forty-five men at _A_, and thirty-five at _B_, but they would place ninety at _C_ and at _D_. The first movements that would tend to bring this about are in the direction indicated by the dotted lines. The transfers are made, not by forcing men from _A_, _B_, and _D_ to _C_, but chiefly by diverting to _C_ young laborers who would otherwise have gone to _A_, _B_, and _D_ to replace men who are leaving in these groups. Now, before the transfers are completed something happens that calls for a different movement. Let us say that only three units of labor have as yet gone from _A_ to _C_ instead of five, leaving forty-seven at _A_; only two have gone from _B_, leaving thirty-eight; and only five have gone from _D_, leaving ninety-five at that point. Eighty would then be at _C_, and the static adjustment would not have been perfectly attained. It is at this point that a new change of conditions occurs, which calls for fifty-two units at _A_, forty-one at _B_, sixty-five at _C_, and a hundred and two at _D_. _C_ now contributes something to _A_ and _B_, but it gives more to _D_; and the fluctuations go on forever. Particular men may, more often than otherwise, stay in their places, since the incoming stream of new labor, by going where it is needed, may suffice to make the adjustments, in so far as they are gradually made; but labor, in the sense of the quantum of energy embodied in a succession of generations of men, is never at rest. It is a veritable Wandering Jew for restlessness and in a perpetual quest of places where it can remain. Moreover, there are to be taken into account changes so sudden that they thrust particular workers from one group to another. _A Perpetual Effort to conform to a Standard Shape which is itself Changing._--We think, then, of society as striving toward an endless series of ideal shapes, never reaching any one of them and never holding for any length of time any one actual shape. One movement is not completed before another begins, and at no one time is the labor apportioned among the groups exactly in the proportions that static law calls for. Men are vitally interested to know what they have to hope for or to fear from this perpetual necessity that some labor should move from point to point. _Questions concerning the Effects of these Transformations._--These changes of shape involve costs as well as benefits. The gains are permanent and the costs are transient, but are not for that reason unimportant. They may fall on persons who do not get the full measure of the offsetting gains. What we wish to know about any economic change is how it will affect humanity, and especially working humanity. Will it make laboring men better off or worse off? If it benefits them in the end, will it impose on them an immediate hardship? Will it even make certain ones pay heavily for a gain that is shared by all classes? Are there some who are thus the especial martyrs of progress, suffering for the general good? _Natural Transformations of Society increase its Productive Power._--There is no doubt that the changes of shape through which the social organism is going cause it to grow in strength and efficiency. More and more power to produce is coming, as we have seen, in consequence of these transmutations. They always involve shifting _labor_ about within the organization and often involve shifting laborers, taking some of them out of the subgroups in which they are now working and putting them into others, something that cannot be done without cost. _Immediate Effects of Labor Saving._--Inventing a machine that can do the work of twenty men will cause some of the twenty to be discharged. They feel the burden of finding new places, and if they are skilled workmen and their trade is no longer worth practicing, they lose all the advantage they have enjoyed from special skill in their occupations. Do they themselves get any adequate offset for this, or does society as a whole divide the benefit in such a way that those who pay nearly the whole cost get only their minute part of the gain? Is there unfair dealing inherent in progress in the economic arts, and must we justify the movement only on the ground of utility, though knowing that a moralist would condemn it? These are some of the general questions that are to be decided by a study of this phase of economic dynamics. We need to know both what the movement will in the end do for humanity and what it will at once do for particular workmen.[2] In addition to ascertaining what the ultimate results of the movement will be, we need to trace, with as much accuracy as is possible, the effects of the disturbances that are involved in generally beneficent changes. [2] Our study may lead to a moral verdict without being itself an ethical study; we limit the inquiry to questions of fact, but perceive that some of the facts are of such a kind that they must lead a reader to condemn or approve the social economic system. CHAPTER XVI EFFECT OF IMPROVEMENTS IN METHODS OF PRODUCTION _Displacement of Labor and Capital by Inventions._--Inventions are "labor-saving." Employers are engaged in a race with each other in reducing the outlays involved in producing goods, and a common way of doing this is to devise machinery that will do what laborers have heretofore done. The same thing is accomplished by developing cheap sources of motive power or introducing new commodities which are good substitutes for dearer ones. Mechanical automata have at a thousand points taken labor out of human hands; electricity, which is "harnessing Niagara," may at some time harness waves and winds and make them turn the literal wheels of mechanical progress. Such things, by causing a given amount of labor to produce a larger amount of consumers' wealth, are product multipliers; but this is the same thing as saying that they yield a given product at the cost of less labor, and as we more commonly see their effect in this light, we call them labor savers. _Why Labor Saving is not always and everywhere Welcomed._--To an offhand view it would seem that product multiplying is the greatest blessing that, in an economic way, can come to humanity; and if general and permanent effects be considered, it is so. The solitary hunter who has to catch and club his game would get unqualified benefit from the possession of a bow and arrows; the fisherman would get the same benefit from a canoe, the cultivator of the soil from a spade, etc. Society in its entirety is an isolated being and derives similar gains from engines, looms, furnaces, steamships, railroads, telegraphs, etc. Yet there are persons within the great social organism to whom the benefit _from one special improvement_ may be small and the cost great. There are none who are not better off because of _all improvements_ past and present. _The General Demand for Labor not Lessened._--It is a matter of common experience that new machines are labor displacers. At its introduction an economical device often forces some men to seek new occupations, but it never reduces the general demand for labor. As progress closes one field of employment it opens others, and it has come about that after a century and a quarter of brilliant invention and of rapid and general substitution of machine work for hand work, there is no larger proportion of the laboring population in idleness now than there was at the beginning of the period. _A Voluntary Reduction of Toil Desirable and Probable._--A full study of the effects of technical progress will show that there is never a reduction of the general field for employment in consequence of it. There is an increase of pay, and this causes a certain unwillingness to work for as many hours as men formerly worked; and there is also a change in the nature of the operations that labor performs, which tends in the direction of more comfort and less painful toil. For the famous statement of J. S. Mill that "It is questionable if all the mechanical inventions yet made have lightened the day's toil of any human being" we may safely substitute, "It is the natural tendency of useful inventions to lighten the toil of workers and to give them, withal, a greater reward for their work." Mechanical progress is the largest single ground for hope for the future of laboring humanity, and by its effects, direct and indirect, it has already insured a great alleviation of toil, with an increase in its rewards. It has helped to counteract the world crowding that for a century has gone on and the diminishing returns from agriculture which the crowding entails. Inventions may make disturbances, and their better effects may be temporarily and locally counteracted; but a society where competition rules is sure to secure the benefits in the end and does, in fact, secure them in greater and greater measure as the years go by. Such are some of the theses which research will justify. _Facts concerning Disturbances incidental to Progress._--We have first to take account of the disturbances. They are prominent in economic discussion and constitute the subject of one of the grave indictments brought against the system of competitive industry. They have actually caused great hardships in the past, as skilled handicraftsmen have seen machines come into use which, for rapidity and accuracy of work, excel the best results that long apprenticeships formerly gave. Now that machinery has possession of most of the field, there is no longer the former opportunity for displacing hand workers; but the remainder of hardships incidental to progress is not to be overlooked. This part of the dynamic movement involves present local sacrifices for the sake of future general gains. Here, therefore, there are developed antagonisms of interest which may hinder progress and, if they were extensive enough, might conceivably throw a doubt over the future of the working class. While there is no great disposition to question the ultimate benefit which mechanical progress insures, there is some uncertainty as to the process by which this benefit is extended to workers and there is a struggle to avoid the immediate cost. There is, in some quarters, a disposition to rate the cost so highly as to draw the inference that we need to adopt a socialistic plan of living for the sake of enabling workers to avoid the hardships and secure the benefits of "labor saving." It will appear, however, if we grasp the essential facts of what we may call the dynamics of method, that the tendency of it is to reduce the burdens which progress entails, and to diffuse a large share of the benefits of it among the working class. It will further appear that the socialistic plan of organizing industry would at least throw a doubt over the progress itself. Nothing, on the whole, puts the future of industry conducted on the competitive plan in a more optimistic light than the fact of the progress in productive methods which it insures. It is the strongest guaranty of a "good time coming," in which all humanity will rejoice when it comes and should rejoice by anticipation. _The Law that insures the Survival of Beneficial Processes Only._--It is self-evident that wherever there is a saving of labor needed to make a given amount and kind of product, there is an increase in the possible product that is created by the aid of a given amount of labor. If workers themselves get a share of the gains, this fact will show itself through that beneficent shortening of the working day to which we have alluded. The men will be unwilling to stand the weariness and the confinement of working through too many hours and will be inclined to take more holidays and vacations; all of which, when it comes about in a natural way, is an indication that the industrial organism as a whole has put its hand on a new and powerful lever and is enriching its members by means of it. It does, however, have to change the character of its work, and this means that some labor has to be transferred from one subgroup to another. The laborer displaced by an invention at a particular point continues to be wanted somewhere. When he and others have found their new employments, the good result appears,--the increase and improvement of goods produced,--and society as a whole then gets the benefit which would come to an isolated worker who, without remitting his labor, finds his appliances growing better and the fruits of his labor growing larger. The collective body gets a greater income than before, and the workers share in the gain. _Importance of the New Forms which the Social Income Takes._--This increasing income takes the form in which society now requires it, and it is this which brings about the readjustment of labor--or the changes in the amounts of labor used in particular subgroups--which have caused hardship in the past. _Nature of the Incidental Evils to be Dreaded._--The problem we have to face is a danger that labor may be displaced either (1) from the particular point within a productive establishment at which it is now working, or (2) from the productive establishment as a whole, or (3) from a subgroup, or (4) from the general group of which the subgroup is a part. Out of industrial society in its entirety it cannot thus be forced. There is a case in which the men whose crafts are supplanted by machines may all stay where they are and operate the machines; but that involves forcing other men to change their occupations. There are more cases in which these men may stay in the mill or shop that employs them, but not in the same department of it. There are still more cases in which they may stay in their original subgroups, and in a majority of cases they may stay in their general groups. In every instance there are places for them in the working society. _Local Expulsions of Labor._--When a single employer who is one of many competitors in an industry adopts an important labor-saving device, it may be possible for him to keep all his men employed and to let the improvement show itself wholly as a means of increasing the output. He may secure a machine which will do what twenty men formerly did. If it were possible to cut the uppers of a dozen shoes by the quick stroke of a single die, the machine that carried this armature would do the work of perhaps twelve knives handled by that number of skillful workmen. If the original number of men were retained in the cutting department, and if each of them were furnished with the new appliance, it would mean that twelve times as many uppers would be cut as were cut before the change was made. There would, of course, be no use in trying to do so much cutting of uppers for shoes, without doing twelve times as much sewing, welting, making soles and heels, etc., and to secure all this at once would require a twelve-fold enlargement of the manufacturer's plant. This is too much to secure at once. The manufacturer might perhaps double the output of his mill and nearly double the number of his employees, but that would require only two of the twelve cutters he formerly had. The new workers would be in parts of the mill other than the one where the great saving of labor was effected. Ten men would be removed from the cutting department, and the two left there would cut, by the aid of the new machines, twice as many uppers as the whole number cut before, and that would require the furnishing of a double number of all other parts of the shoes and a double working force to make them. The ten men liberated from the cutting department would be available for this purpose, and new ones would be brought in and set sewing, pegging, lasting, welting, etc. Within a single establishment, therefore, a radical saving of labor at one point usually involves some shifting of labor from that point to others, though it may increase the total number employed in the establishment which secures the economical device. _The Effect on a Subgroup of an Improvement by One Entrepreneur._--If an employer who has this experience is one of a hundred in the shoemaking industry and the only one who secures the cutting machine, the market will receive as large an increase of the product as would be involved by multiplying the output of his mill by two, without requiring that the price should be more than slightly reduced. An improvement which is monopolized for a time by a single _entrepreneur_ seldom renders it necessary to reduce the aggregate of the labor in his employment. Far more often it makes it for his interest to increase the number and to put new labor in every part of the plant where no improvement in method has been made. It is often the fact, however, that labor has to abandon other establishments in this subgroup, and enough of it may do so to cause the amount in the entire subgroup to become somewhat smaller by reason of an improvement. In the case of a single employer there is a bare possibility that no one should be moved, in consequence of an economical invention, even from one part of the mill to another. The manufacturer of our illustration might even keep his twelve cutters at work after the introduction of the machines referred to and do twelve times as much cutting, provided that he could quickly increase his output of finished shoes to twelvefold its former amount. There are practical reasons why he could almost never do this; but if he actually did it, he might, by some reduction in the price of shoes, find a market for this increased product. If the reduction of price were great, some competitors would probably go at once out of the business; but it is never the policy of a successful producer to make unnecessary haste in reducing prices, and, as a rule, the reduction is gradual. The increase of product from the very efficient mill must cause a certain reduction in the rate at which it sells its goods, and this is apt to force manufacturers who are particularly ill equipped and cannot keep pace with the rate of improvement which their enterprising competitor establishes to go out of business. They thus relieve the market of so much of the product as they have contributed and make a place for the increased output of the newly equipped mill. In such a case the total output from the subgroup is not very greatly increased, and the price of the product does not need to be greatly reduced. _Standard Prices fixed by Cost in the most Economical Establishment._--It is a vitally important fact, as we shall soon see, that the price of an article is, in a dynamic society, always tending toward the cost of making it, not in the most inefficient establishment, where it is produced "at the greatest disadvantage," but in the most efficient one of all. The ultimate effect of any great improvement is naturally to close the shops of _all employers who do not adopt it or get an equivalent advantage of some kind_. Ultimately the whole subgroup will be in the state of efficiency it would have reached if the improvement had been adopted by every _entrepreneur_ on its first appearance. _The Effect of an Improvement in Production which is quickly adopted by a Whole Subgroup._--When an improvement is immediately adopted, not by one employer merely, but by all employers in a subgroup, it is likely to cause a quicker displacement of labor from the subgroup as a whole. A very economical machine introduced by its inventor or manufacturer and quickly adopted by all employers at _A´´_ would nearly always force a certain number of laborers to leave that industry and find employment elsewhere, if it were not for one commercial fact, namely, the reduction in the price of the product and the consequent enlargement of the demand for it. _How Labor may be displaced from a General Group._--The amount of _A´_ that can be created depends on the amount of _A_ that can be furnished as material to be transformed into _A´_, and also on the amount of _A´_ that will be taken for conversion into _A´´_. This again depends on the amount of _A´´_ that will be accepted by employers at _A´´´_ and sold in this last form to the consuming public. If the market for _A´´´_ cannot be much increased by a moderate reduction of the price of it, some labor may have to go into the group of _B_'s or _C_'s; and in any case there must be new labor in _A_, _A´´_, and _A´´´_ if the product of _A´_ is increased. We can now measure the difference between the effect of the adoption of an improvement first by one employer and much later by others, and that of the quick adoption of it by all. In this latter case there is not much delay in increasing the output of the goods, and the market for them does not have time to grow larger because of the growth in the numbers and the wealth of the community. Unless the present market will take an enlarged quantity of the finished goods without requiring that the price should go below the new cost of making them, some labor will have to leave the general group. _How Patents may Cause an Increased Displacement of Laborers._--What we often see is the nearly simultaneous adoption of a labor-saving device by all leading employers in one industry. Something like this takes place when the makers of a valuable machine retain the patent on it in their own hands, and press the sale of it on all the producers who have use for it. In this case, however, the makers usually put the price of the machine at a figure that, while it affords an inducement to buy it, does not reduce the cost of the goods that it helps to make enough to cause a great increase in the demand for them. The owners of the patent on the new appliance charge for it "what the traffic will bear"; and until the patent runs out, the users of the machine have to sell their goods almost at as high prices as before. If the machine enables one man to do the work of a dozen, eleven men must find other things to do. They could find them in their own industry if the product of it were enlarged in consequence of the use of the machine; but if the high price of the patented machine prevents this, they must go elsewhere. When the patent runs out, there is likely to be a considerable enlargement of the industry, and how important this fact is we shall soon see. _How Improvements which call Labor to a Particular Establishment may displace Labor from a Group._--Another typical case is afforded when some one employer has for a time the exclusive use of a labor-saving device, and pushes his production to the utmost in order to get the full benefit from it. Here are seen the more characteristic effects of such an improvement. It _draws labor to_ the employer who for the time being monopolizes the new instrument of production, but it _turns labor from_ the subgroup of which this employer is a member. He enlarges his output and in time this reduces the price of the product. In the field there are marginal mills, or those so antiquated, ill situated, or badly run that, with their product selling at the former price, they could barely hold their own; and now that the price is reduced, they lose money by running. They have to cease operating, and this makes practicable a further enlargement of the product of the efficient mill. Much labor goes thither, but some part of that which leaves the abandoned mills betakes itself to other subgroups. Not often, indeed, does it have to go to other general groups. The cheap transformation of the material _A_ into _A´_ enlarges the market for _A´_ and calls for more labor at _A_, and it involves more at _A´´_ and _A´´´_. If the change of method had been gradual, the growth of the social demand for _A´´´_ would probably have precluded the need of sending any labor out of the entire group of _A_'s. Even a rapid change often sends labor out of one subgroup into other subgroups of that series rather than into other general groups. An improvement that should reduce the cost of converting leather into shoes would, by the sale of the shoes, call for more leather, more cattle, more appliances, more tanning, and larger buildings for shoe factories, furnished with more shoemaking machinery and greater motive power, even though the particular machines which were improved by the invention had become so much more efficient that no more of them were needed. This depends on the extent to which a certain reduction of cost of a product enlarges the market for it. _Principles Governing the Enlargement of the Effectual Demand for One Commodity._--In determining how much a reduction of the price of a single article will at once enlarge the market for it, there are two things to be considered, namely, the elasticity of the want itself to which the article caters, and the extent to which an article catering to a particular want may be substituted for other articles designed to satisfy the same one. The desire for jewels and other articles of personal adornment is very expansive, and a fall in the price of any one article of this kind causes a relatively large increase in the consumption of it. Since the want to which a costly ornament caters is thus elastic, the cheapening of all articles that cater to this want would enlarge the consumption of all of them. The cheapening of a particular one of these articles, if there were in the market many others of the same general kind, would cause that one to be extensively used in preference to the others. By an enlargement of the total amount of decorative articles used and by a relative favoring of a particular one of them at the cost of others, the sale of that one would be doubly increased. Cheaper diamonds might mean an increased use of them without any large reduction in the use of other gems; but if many other gems happened to be available for the purposes subserved by the diamonds the use of these others would be curtailed and that of diamonds would be disproportionately increased. _The Value of Goods as affected by the Existence of Castes._--One of the reasons why the market for jewels is thus elastic is the fact that they serve as badges of caste, as only something of large cost can do. If, therefore, all gems were to become much cheaper, two things would happen: (1) relatively poor people would buy some of them--partly in lieu of imitations and of cheaper real jewels; and (2) rich people would have to buy more and costlier ones than were formerly needed, in order to retain their positions in the social gradations. This principle affects the consumption of a wide range of articles, the possession of which seems, outwardly at least, to stamp the owners as belonging in a certain stratum of society. It increases the demand for fine clothing, furnishings, and equipage, multiplies social functions, and induces participation in all manner of costly diversions. The elasticity of the market for luxurious goods is, in general, greatly increased by the action of this motive. The cheapening of them causes them to be consumed by the lower classes and renders the use of greater quantities or higher qualities of them a social necessity for the higher classes.[1] [1] It is also true that an entire variety of gems or other things of this genus might, by mere cheapness, be branded as too common to be used by the very wealthy, except for new and inferior modes of adornment. We shall soon see that a reduction in the cost of any one article usually causes the use of it to trench on that of all manner of things which are on the margin of consumption and are not similarly cheapened. _Changes of Cost of Different Goods Never Uniform._--The cost of all articles is never reduced at the same time, and it is impossible that all of them should remain in the same order of desirability in the estimation of purchasers. Many things, however, are often cheapened at the same time, though in different degrees. Whatever furnishes a very common raw material at a lower cost than has prevailed, as did the invention of the Bessemer process of steel making, makes everything into which that material enters cheaper. By reducing the cost of railroads and engines, cars and steamships, the Bessemer process indirectly lowered the prices of goods that have to be carried, which means practically everything. A cheap motive power acts in the same way and lowers the costs of producing an unlimited number of goods. Even in the case of such general improvements as this the reductions of price are not uniform. Some goods are affected more than others. Cheap steel lessens the cost of bridges more than it does that of dwelling houses, and in the case of many improvements the effect is confined to a limited class of products, if not to a single one. _How the Disturbing Effect of a Single Improvement is Limited._--In the case of consumers' goods improvements are going on so nearly incessantly and at so many points that the effect is much the same as if every invention cheapened most of them at once. Harmful disturbances are reduced to minute dimensions by the multiplying of the changes, each of which, if it occurred alone, would produce a hurtful effect. Many inventions cancel one another's unfavorable effects in a way that we shall later examine. What we now have to do is to isolate a single productive change and see whether there are forces working to reduce its own independent power to create incidental disturbance. What limits the power of a single new and economical process to eject laborers from their accustomed places of employment? This question cannot here be answered in detail, but a brief statement will cover the general principles involved. Obviously the displacement varies inversely with the extent to which increased cheapness enlarges the consumption of the article affected. If by making one thousand men produce as much of the commodity as two thousand formerly produced, you so reduce costs as to double the consumption of the article, you keep all the men who formerly made it in their accustomed places of employment. The elasticity of the want itself to which the article caters is one of the two elements that determine the increase in the consumption of it; but when this increase is due to an extensive substitution of this article for others in the purchasing lists of the consuming public, the result is greatly to reduce the displacement of labor which the new and economical method of production entails. Such substitutions are very general and are a large factor in rescuing men from the hardship of being forced out of the employments they are used to. _On what an Enlarging Market for Tools and Raw Materials Depends._--The market for raw materials and tools depends on that for consumers' goods in their completed state. If _A_, the raw material, _enters only into A´´´_, it can be sold in increasing quantities only as _A´´´_ is thus sold. The chief fact about tools and materials is that they may contribute to a large number of completed goods, and the significance of this fact we shall soon see. The ultimate power to find a market for all products of the lower subgroups depends on finding one for the products of the uppermost ones--the _A´´´_, _B´´´_, and _C´´´_ of our table. The laws which govern the market for finished goods of declining cost have first to be studied. _The Effect of Substituting one Consumers' Good for Others._--Reducing the cost of everything would cause an absolute increase in the consumption of everything; but reducing the cost of a single thing always causes, as we have seen, a _relative_ increase in the consumption of that one product. While the demand for other articles may not grow absolutely less, it becomes relatively less because of the comparative cheapness of the one product.[2] [2] It is worth noticing (1) that uniformly reducing the cost of everything would cause _comparative_ changes in consumption. Anything which should take away a quarter of the cost of every article in the entire list of social products would increase the consumption of some articles more than it would increase that of others. There is an extremely theoretical case in which there might even be a lessening of the effectual demand for a few things because a uniform reduction of twenty-five per cent would cause other things to be extensively substituted for them. This thinkable possibility is not practically important. A detailed study would show (2) that a reduction in the cost of any single article in the entire list of social products causes an increase in the consumption of commodities in general. As an isolated man who has had to work hard for mere food and content himself with a few comforts and no luxuries will indulge in luxuries when food production becomes much easier, so society as an organic whole will increase its indulgences all along the line whenever the work of getting any one thing is reduced and some working time is thus liberated. A substitution of one article for another in the lists of goods used by the public is a universal phenomenon attending an improvement which affects the production of one article only. When the cost of _A´´´_ causes it to stand just outside of the purchase limit of a large class of persons, a moderate reduction in the cost of it will make it a more desirable subject of purchase than the articles which have stood just within that limit, and it will be bought instead of one or more of these things. The securing of new customers for a finished product by means of a fall in the price of it is largely brought about by such substitutions. When the new article is added to a consumer's list, the one which has stood as his marginal or least desirable purchase is taken off from it. It is the _relative_ desirability of buying one or the other of these articles that influences a buyer in his decision between them, and that cannot fail to be changed by anything that lowers the cost of one, leaving that of the other unchanged. If the cost of a unit of each of ten articles be represented by the lines falling from the letters _A_, _B_, _C_, etc., to the base of the figure, a considerable fall in the cost of _A_ would put it below the cost of each of the other articles represented. If in the case of a large class of persons who did not formerly buy any of the _A_ it is as desirable as any of these goods, it will take its place as the most desirable subject of purchase instead of the least desirable. Those whose available means enabled them to acquire all the articles from _J_ to _B_ inclusive, but did not suffice for _A_, will now take the _A_ and omit the _B_. Those whose acquisitions stopped with _C_ will substitute _A_ for that article, and in general every buyer of any of these things who has not heretofore acquired _A_ will now put this in the place of the one which it was least worth while to acquire. [Illustration] _Substitutions caused by a Cheapening of one Utility in an Article which is a Composite of Several._--When different goods cost unlike amounts but are objects of equally strong desires, only one of them is a marginal purchase, and the others afford a personal gain to the consumer which is not offset by a cost. We have seen that this rule applies to the different utilities in a single good. In the case of every article several grades of which are sold, there is one component element or one utility which is worth to the buyer exactly what it costs, while the others afford a consumers' surplus. If the letters in the diagram represent, not whole articles, but utilities in articles, as discussed in Chapter VI, it will accurately express the essential facts. In such cases, which are very numerous, it is only necessary to reduce the price of the one utility which is now just worth its cost in order to induce more consumers to buy the grade containing this utility, instead of a lower grade of the same thing. In doing this, they forego the purchase of something else altogether, or content themselves with a lower grade of that other commodity. If jeweled watch cases should become cheaper, some persons would substitute them for plain cases and would forego buying, say, pictures which were just within their purchase limit, or would content themselves with cheaper pictures. This taking of one thing within the margin of consumption and discarding others is far less frequently done than is the taking of a lower grade of one kind of goods for the sake of securing a higher grade of another. _Why Substitutions reduce the Displacements of Labor._--The question will, indeed, arise why the burden caused by the change may not be merely transferred to men in industries the products of which are displaced by the substitution. Something of this kind would occur if, in consequence of the cheapening of one article, any one other were generally discarded. The important fact is that it is not any one thing, but a wide range of things which are consumed in smaller quantities in consequence of the change; and the effect on the makers of any one of them is small. If a thousand men begin to buy the _A´´´_ of the table we have frequently used, some of them will forego _B´´´_, some _C´´´_, and so on through the list; and the market for no one of these things will be much affected. Moreover, the nearly universal fact is that a man who begins to buy one article that he never before used will save the price of it by contenting himself with a slightly cheaper quality of a number of others. He will give up a dozen utilities in as many entire commodities in order to be able to buy the one entire commodity that he adds to his purchasing list. The reduction of demand is so extensively subdivided that it causes relatively few displacements of labor. _Substitution a Prominent Cause of Varying Sales of Goods._--Substitution is, then, the general rule whenever the cheapening of a commodity wins new purchasers of it. This practice is not indeed universal in the case of those who formerly consumed these goods. Former purchasers of an article which has become cheaper may make no change except to buy more of it or a better quality of it for the same amount which they have been accustomed to spend for the inferior quality. They are not then obliged to economize in any other direction, and the change does not trench on their consumption of other goods. On the other hand, it is sometimes the case that they continue to use the original amount of the article that has become cheaper and use the liberated means of purchase--the "money," as it would ordinarily be termed--in buying other goods. The cheapening of _A´´´_ thus even enlarges the demand for _B´´´_, _C´´´_, etc. There are thus two cases in which a reduction in the cost of one thing would not decrease the use of other things. _Substitution More General in the Case of New Consumers._--The substitution of a cheapened article for others is the dominant fact in the case of new consumers of such an article, while an increased consumption of other things sometimes occurs in the case of old consumers. This does not have as large commercial effects as the other change. If we produce cheaper shoes, we make it easier to acquire good ones, and those who formerly contented themselves with an inferior kind take a better one. That means that they add to their purchase lists the higher utility which is present in the one grade and absent in the other. They buy a new element in goods rather than more of those goods, and while they may not always change their consumption of articles of other kinds they more frequently do so. Those who begin to use something which formerly they went without altogether usually give up the use of some good or some quality in it, or get on with a smaller quantity of it in order to make the new indulgence practicable. The man who, when bicycles became cheap, bought the first one he ever owned probably gave up some other gratification. _How the Sale of Goods which wear out in the Using increases as the Price Falls._--When goods deteriorate as they grow older, users have to buy new ones often if they are not willing to use those which are worn out and inferior. If we want always to wear clothes of good quality, we refrain from wearing a suit too long. We discard many things when they have somewhat deteriorated, and this forces us to buy, in a term of years, a larger number of them than we should otherwise do. We discard carpets and upholstery early when they are so cheap that we can afford to do so. We thus improve our goods qualitatively by adding to them quantitatively. _Substitutions a Protection for Labor against Undue Displacements._--Now, not only are the substitutions we have cited of commercial importance, but they act in the direction of retaining labor in a group where "labor saving" has been effected. They help to prevent this process from being equivalent to labor expelling in so far as either a general group or a subgroup is concerned, since they increase the social demand for the products of the group in question and cause a relative diminution of the demand for other things. Quite evidently there is, for these reasons, the more need for labor within this group and less need of it elsewhere. Cheap shoes may thus never mean fewer shoemakers and cheap watches may not ever mean fewer watchmakers. _Substitutions of One Capital Good for Others._--It is not merely in the realm of consumption that the demand for a particular good may increase greatly in consequence of cheapness. The same thing happens in the realm of production, but here the substitution of one thing for others is an even more prominent cause of the increased use of the particular commodity. Aluminum and copper are rivals as carriers of electrical power, with the advantage at present somewhat in favor of copper. As soon as the cost of making aluminum shall be reduced by a moderate fraction it will become the cheaper material for such uses and, unless there is a fall in the price of copper, will thrust itself into use for trolley wires and other conductors of electricity. The possession of an enormous market by the one or the other material depends on their relative costs, and these may easily so change as to transfer most of the demand from the one material to the other. A further fall in the cost of aluminum would make it available for sheathing the hulls of ships and would bring it into general use for many household implements, while a sufficient fall would make it a leading building material and give it a limitless market for the framing and finishing of substantial structures. In these various uses it would substitute itself, not only for copper, but for steel, stone, wood and other materials, and the change would be extensive enough to give it an enormous market without requiring a correspondingly great reduction in its cost. Lowering the cost of aluminum by a third might, by merely making it the favorite carrier of electricity, multiply the present use of it by ten, and lowering it by two thirds might multiply the present use of it by a hundred. If this should take place, saving labor would be anything rather than expelling it from its position in the aluminum-making group. When less labor came to be needed for making a ton of the metal, more labor would be used in the industry that makes it. So long as the substitution caused by the cheapening of aluminum affected copper only it might be a serious matter for the producers of copper; but when it came to replacing in some degree steel, stone, brick, wood, and other materials, the effect would be so diffused and subdivided as to create small disturbances in any one of these industries. _Effects of Reduced Cost of Materials which already enter into Many Finished Products._--In the case of aluminum the prospect of a greatly increased market brings with it the probability that it may come to be a component element of products into which it does not at present to a great extent enter. Such things as steel, stone, and wood already constitute important components of more articles than can be counted, and there is no great prospect that they will enter into a much greater variety of products. In the case of these materials there is a prospect that cheapness will show itself in reduced costs of the finished goods that are made of them, and that these finished goods will be used in greater quantities without substituting themselves for other things in so drastic a way as that which we have described in the case of aluminum. A reduction in the cost of steel would indeed bring about a substitution of that material for others at every point where the steel and something else are now on a plane in desirability. The type of building that now is made with plain brick walls and wooden floors, because that cheap mode of building enables it to earn a slightly larger interest on its cost, would often be made with a steel frame and concrete floors. At every such marginal point steel would gain somewhat on its rivals in the extent to which it would be used; but in addition to this enlargement of the market for it by substitution, one might count on an increase in the use of it because of an increase in the use of very many things that are already made of it. Some of these cater to highly elastic wants, and persons who use a quantity of them may be induced to use more without discarding anything else. Such an absolute enlargement of consumption is highly probable in the case of any material that enters into a vast number of products, and this, together with the enlargements that come by substitution, may suffice to create a great demand for the raw material and call for as much labor in the subgroup that makes it as was used before the improvement was made. In the case of the raw materials of industry the resources for gaining an increased market by substitution are:-- (1) The substitution of the material for others in uses different from those in which it is now employed; (2) The substitution of it for other materials in the marginal parts of its present field, where it is already nearly as available as other things; (3) The substitution of the finished consumers' goods made of it for other consumers' goods. In addition to all these there is the direct increase in the use of finished goods wholly or partly made of the material by persons who do not, for this reason, discard any other goods. This statement places the different influences in the order of their relative efficiency in the majority of cases in which they act. _Effects of cheapening Tools of Industry._--What is true of a raw material which enters into many completed products is true of the tools of industry which are used for many purposes. A turning lathe, a planing machine, or a circular saw helps to make a large number of products, and the assertions we have made concerning steel, stone, or wood apply to it. As it becomes cheaper it gains an enlargement of its market by a combination of the four influences just enumerated. It is brought into new uses, is employed more in its present marginal uses, and is required in greater quantity because its products are substituted for other things and are also required in greater amounts independently of these substitutions. _Cheap Motive Forces._--Motive power is so nearly universal in its applications that developing a cheap source of it is much like improving the method of producing everything and securing a universal increase of products. We shall see why such a general enlargement of the output of all the shops creates no displacements of labor which entail hardships. If the power is used more in the upper subgroups than in the lower ones,--if it is more frequently available for fashioning raw materials than for producing them through agriculture or mining,--the development of it checks in some degree the drift of labor from the lower subgroups toward the upper ones, which has been referred to in an earlier chapter. Utilizing the power of Niagara, that of Alpine torrents and other unused streams, that of the waves of the sea, and that which has long slumbered in the culm heaps of coal mines, will give increased facility for producing nearly everything; and though the amount of the enlargement of output will vary in different cases and some effect on the movements of labor will be produced, few serious hardships will result, and a majority of the persons who will suffer from these changes at all will get an offsetting benefit from the enlarging productiveness of industry. CHAPTER XVII FURTHER INFLUENCES WHICH REDUCE THE HARDSHIPS ENTAILED BY DYNAMIC CHANGES In the absence of an unusually great increase in the consumption of an article the improvement which reduces the cost of it tends to displace labor. The first thing that will occur to any one who looks for influences which mitigate this evil is the fact that economical changes are going on at nearly all points in the system, and that this cancels out most of the displacing influence. If something sends men from the group _A_ to groups _B_ and _C_, while something else sends them from the group _B_ to groups _A_ and _C_, and still another influence impels men from _C_ to _A_ and _B_, there is likely to be very little actual moving. A question will in such a case arise as to whether the three movements may not expel labor from all the groups and remand them to a state of idleness. History is clear in the answer it gives to this question; such a result has not occurred, and at the end of a century of brilliant mechanical progress the amount of enforced idleness is not greater than it was at the outset. It remains to show that economic law precludes a universal displacement and insures laborers for all time against being at the mercy of an industrial system which has nowhere any need of their services. Productive devices widely introduced mean great and general gains and comparatively little cost. They mean what on their face they ought to mean, more comforts and less toil for everybody. Before studying this influence--the reciprocal action of improvements scattered through the general economic system--we have to determine the action of one or two other influences which also lessen the disturbances which progress causes. One can see that the quick adoption of an economical device in every shop of a subgroup, at a time when all other industries are in a stationary state, would usually expel some labor from that one. If consumers should, on a large scale, substitute the product of this subgroup for that of others, it might save the situation; but the general fact is that the consumption of the cheapened product must increase in a ratio that is greater than the ratio representing the saving of labor used in making it, in order to prevent displacement of labor. If we get on with two thirds of the labor which the making of the commodity out of raw materials formerly required, we do not save two thirds of the total expense of making the finished article; and yet to retain all the labor that is now in the business we must sell one and a half times the former number of the goods produced.[1] [1] The mathematical problem stands thus: If all the subgroups of the _A_ series have the same amounts of labor and a machine enables a half of the force now in _A´´_ to do all that is required in transmuting the usual supply of _A´_ into the usual amount of _A´´_, then some of the labor in _A´´_ would in most cases betake itself to entirely different industries. The superfluous labor at _A´´_ would amount to an eighth of all the labor required for the complete creation of _A´´´_. If wages constituted the only cost which the _entrepreneur_ must defray, the price of _A´´´_ would be reduced to seven eighths of the former price, and this might, in the case of some goods, enlarge the demand to eight sevenths of its former amount and so keep all the labor in the general group. Since there are outlays to be met besides wages, this reducing of wages by an eighth would not usually reduce total cost by more than about a twelfth, and even if price quickly went down to eleven twelfths of its former amount, it would be too much to expect that the consumption of the _A´´´_ should increase by a seventh, except in cases in which this amount of reduction of price caused _A´´´_ to take the place of _B´´´_, _C´´´_, etc., in the purchase lists of many consumers. The enlargement of consumption would have to take place in a ratio greater than that which represents the saving in cost. Costing eleven twelfths as much as before, the article must sell eight sevenths as freely--which is possible only when it thrusts itself extensively into the place of other consumers' goods. Even then some labor would have to move from _A´´_ to other subgroups of the series. One half of the amount of labor formerly at _A´´_ does the whole work formerly done there, and to keep it all at work at that point would require that the output from the whole group be doubled. Saving one twelfth in cost could not well insure selling double the amount of goods. In this view improvements would have a threatening look, though their ultimate effect would still appear as beneficial as ever, were it not for the fact that the disturbances that result from them are made to be relatively small by the influences we are studying. _Counteracting Influences._--The importance of a gradual introduction of an improvement rather than a rapid one lies in the fact that it permits these influences to do their work and often to render the actual moving of laborers even from their subgroup unnecessary. Time is the salvation of the laborer menaced by an impending displacement from his field. When we see what is the grand resultant of all the dynamic influences we are studying, we shall see how this neutralizing and canceling of the labor-expelling force takes place. But for them one isolated change would tend to expel labor from its subgroup and would nearly always send it away from the point within an establishment where the new device is introduced. It usually attracts labor to this establishment and away from the inefficient or marginal ones. A gradual adoption of the improvement allows time not only for a general increase in the size and the wealth of the community, but for other influences which act more quickly and in practice make it nearly always unnecessary to reduce the total amount of labor in an industry which produces an article in permanent demand. Statistics may be confidently appealed to in support of this general statement. _The Dynamic Law of Price and its Effects._--We briefly noted in passing that the price of a product the making of which is subject to repeated improvements naturally tends toward the cost of it in the establishment having the latest method and the greatest facilities for production. The natural price at any time is the cost of that part of the supply which is created at the greatest advantage, and not the cost of the part produced at the greatest disadvantage, as an old formula expressed it. It is the mill that makes the goods most cheaply which is enlarging its product and bringing the price down toward its level of cost; as soon as other establishments get possession of the improvement they help forward the process, and as they get still better appliances they help in carrying the price to still newer and lower standards. _The Cause of the Coincidence of Maximum Cost and Price._--At any one moment, it is true, there are ill-located, ill-equipped, or ill-managed mills that are making nothing and are likely soon to be abandoned. They are the marginal mills we have spoken of, and the goods that they make cost all that purchasers will give for them. This insures a coincidence of the price of the goods with the cost of making them in such a mill, but this is merely an incident in the process of eliminating the inefficient establishments from the field. In the mill which happens at this date to be the one about to be crowded out the cost of the goods equals the selling price of them and will exceed it as soon as the price goes to a lower point. This cost happens transiently to coincide with the price, but does not _regulate_ it. It is the outlay that the best mill incurs that does that, since it sets the standard toward which the price is made to tend.[2] [2] IMPROVEMENTS AND PRICES UNDER COMPETITION The figure represents a subgroup in which five producers, _a_, _b_, _c_, _d_, and _e_, are operating. Later, a new establishment _f_, is introduced. The upper dark line represents the price of a unit of the product, and the lower dark line the cost of making a unit in the establishment which is for the time the most efficient. The dotted lines represent the respective costs of production in the different mills, ranging from _a_, the most efficient, to _e_, which can barely hold its own. What the figure represents as happening is as follows:-- _b_ first makes an improvement which lowers his cost of production, as shown by the descending dotted line. This enables him to increase his output, and so has its effect on the price, which descends. Now, producer _e_ was already selling goods at cost, but he is not at once driven out of the business. Instead, even though he cannot earn full interest on the original cost of his fixed establishment, he will continue to run as long as he can make his plant earn anything at all. The result is a virtual reduction of the capitalized value of the plant (the interest on which is an item of cost), and this is what is represented by the descent of the dotted line which represents _e_'s cost of production. The situation is now represented by the series of points,--_b´_, _a´_, _c´_, etc., representing at their second stage the differing levels of cost in the case of different producers. [Illustration] The next thing that happens is an improvement made by _a_, causing his cost of production to fall below that of _b_. The resulting fall in price now finally drives _e_ out of business; he can no longer earn anything at all on his fixed plant. We may assume that producers _a_, _b_, and _c_, who have been making profits, have enlarged their productive capacity enough to supply the market fully without _e_'s contribution. _d_ is now in the same position in which _e_ was at the preceding stage,--earning nothing on his fixed establishment and barely induced to remain in the business. The next occurrence represented is the opening of a new, large, and very efficient mill by _f_. The effect is like that of improvements, but more violent. The fall in price drives both _d_ and _c_ out of business. _b_ is now on the margin, but saves himself from loss by a second improvement, which makes him again the most efficient producer. And so the process goes on _ad infinitum_. This figure illustrates the fact that, while at any time the price of a good roughly equals the cost of it to the least efficient producers, still this cost does not _govern_ the price. The ruling factor is the cost in the most efficient mill, toward which the price tends; and all that the cost in the least efficient mill determines is how long that mill shall continue running. In order that the claim here made--that price equals cost in the establishment which is about to be crowded out of the field--may hold good it is necessary to define terms with some care. In a typical case an employer who is destined soon to close out his business has, perhaps, an antiquated mill, which itself pays nothing, but enables its owner to use circulating capital and labor in a way that affords interest on that capital and wages for the labor. No interest on the cost of the antiquated mill is chargeable to the business unless the site and the building can be sold for a new purpose. If they have completely lost all productive power, they are not, as we use terms, capital goods at all; and in that case the only interest which the _entrepreneur_ should reckon as a cost is that which accrues on other capital used in connection with the worthless mill. If the site and the building have some value for another purpose, and if the machinery has some value as junk, then whatever the owner can get by disposing of the plant constitutes a sum the interest on which constitutes a cost of producing goods in this mill. It is a sum which the plant owner foregoes as long as he refrains from selling the plant. He can afford to use it in production as long as the price of the product covers the cost as thus defined, but must stop when it ceases to do so. _The Importance of Delay in the Closing of Marginal Establishments._--Now, this process looks as if, by the closing of mills that are distanced in the race of improvement, labor must be forced out of the subgroup. So it would be if the reducing of the price to its new static level were an instantaneous operation and the inferior mills were, in the same instantaneous fashion, compelled to close their doors. These, however, are gradual operations, and before they can possibly produce their full effects, influences will have been set working which will counteract the expelling tendency. We have cited as such an influence the general growth of society in numbers, wealth, and consuming power, making it possible for a group, when an economical change has taken place, to produce and sell more goods than before and to keep its accustomed force of labor in order to do so. There are certain more specific influences which have a similar effect and render it as unnecessary as it is useless to attempt to resist the course of improvement. _Centralization of Business an Effect of Progress._--From the facts here cited it appears that conservatism of the kind that resists all changes condemns an _entrepreneur_ to destruction. He must keep in a moving procession in order to survive. As the essential thing which is changing is the price-making cost of goods, the _entrepreneur_ must see to it that in his establishment cost declines. While this does not necessarily mean that every such establishment needs forever to grow larger, since there are local conditions in which relatively small shops may be economical enough to survive, yet those which cater to the general market and directly encounter the competition of the great producing establishments must, as a general rule, have the advantages of great size in their favor, or sooner or later be crowded out of the field. Many of the smaller ones fall by the wayside, and the business they have done passes to their already large rivals. Wherein the advantages of the great shop lie and how one that is of less than a maximum size may survive in spite of them, are points for later consideration. _How Displaced Labor is Replaced._--When men are actually forced to leave an industry,--say the subgroup _A´_,--they find themselves, in the search for employment, in the same position as a body of newly arrived immigrants in quest of work. Men of either class must offer themselves at a rate that will induce employers to take them. If much new capital has lately been created, it is naturally possible for the men to get employment without having to overcome serious friction or to reduce their demands in the way of pay. In the absence of such additions to the capital, they might possibly have to offer some inducement to employers, in order to overcome their reluctance to make changes in their shops. We shall see in due time, however, that where improvements are well distributed through the industrial society and have their natural effect, they tend to increase the general demand for labor at the original rate of pay. _Effects of a Series of Improvements confined to One Industry contrasted with those of Improvements diffused through the Groups._--A continuous series of radical improvements, all originating at one point, would tend of themselves to cause a series of expulsions of labor from that point, and the mere increase of population and wealth might not so fully counteract this tendency as to prevent a positive exodus of labor from the occupation affected. A merely relative reduction of labor in this occupation would not cause much hardship, since it would only mean that other industries were attracting the greater number of young laborers entering the field and gradually getting a larger and larger part of the whole working population. If men actually in _A´_ can stay there, no one is injured; but too great a concentration of improvements at this point might drive some of them away. Such concentration is the opposite of the general rule. Improvements do not confine themselves to one point or to a few points, but originate at very many, and this fact neutralizes their labor-expelling tendency and might reduce it practically to _nil_. If labor could be made more efficient in every group of the whole system, the result would be to increase the quantity of every kind of goods. Making more of one's own product is acquiring power to buy more of the products of others; and enlarging the general output of goods tends thus to increase the demand for all kinds of goods as well as the supply. If you make clothes and I provide food, and we exchange products, but do not satisfy each other's wants to the point of repletion, it is well for both of us that you should become able to make more clothes and I to furnish more food. We can then go on with our original occupations and both live better. In this there is involved no displacement of labor at all; and neither would there need to be any disturbance caused by multiplying in well-adjusted proportions the output of each group and subgroup in the system of industry. Where formerly a unit of _A´´´_ was exchanged for one of _B´´´_ or _C´´´_, there are now two units of _A´´´_ given for two of either _B´´´_ or _C´´´_, and every one has more things to consume than he formerly had.[3] [3] It will be seen that the maintenance of the present exchange ratios between _A´´´_, _B´´´_, _C´´´_, etc., when costs of all of them are reducing, would require that these costs be reduced in exactly the same degree in each case, and that the quantities sold at the new cost prices should be increased in unequal degrees, so as to bring the different prices to cost levels. The demand for one article is more elastic than is the demand for another. A slight increase in the supply of _A´´´_ may cause a large reduction of the selling price, while it may require a great addition to the supply of _B´´´_ to produce this effect. There must, therefore, be some changes in the relative quantities of labor in the different subgroups, even though there has been an equal amount of "labor saving" or cost reducing in all of them. This change is so slight in amount as compared with what would be caused by improvements confined to one subgroup, that it is effected with relatively little hardship and mainly by disposing the constant inflow of new labor at the points where it is needed. _Labor attracted toward a Subgroup as a Result of Improvements which are made Elsewhere._--The fact that the demand of consumers for different goods is not uniformly elastic has to be taken into account. There are two distinct kinds of movements in the group system, brought about by improvements in method. Each improvement in and of itself has, as a rule, a labor-expelling effect, but this effect is partly neutralized by general growth in consumption and still more by improvements occurring elsewhere. Labor that is thrown out of the _A_ group would naturally go to group _B_, _C_, etc.; but if, as we have just seen, similar influences tend to expel labor from the _B_ group and the _C_ group, the labor may, for the most part, stay where it is, with the result that more of _A´´´_, _B´´´_, and _C´´´_ is offered to consumers. _The increased output of one group is itself a means of retaining labor in other groups_, even though, thanks to mere methods, that involves making more of every other kind of commodity. _The Supply of One Kind of Goods Equivalent to a Demand for Others._--There should be no difficulty in interpreting, in this connection, the traditional statement that "the supply of one kind of goods constitutes a demand for another." An increment of _A´´´_ and one of _B´´´_ coming into existence together supply wants common to their two sets of producers and both groups can gain by exchanging such portions of their respective products as they do not retain for their own use. If _A´´´_ and _B´´´_ were the only consumers' goods used, a part of the excess of each would be distributed among the members of the group producing it, and the remainder would be given in exchange for some of the other kind of goods, also for distribution among the members of the first-named group. This is what actually happens when a multitude of articles for consumption are produced in increasing quantities. _Effect of an Increase of Individual Incomes on the Character of Goods Consumed._--Such an increase of the productive power of a group means, of course, an increase of individual incomes, and it causes men, as we have seen, to consume better things rather than more of them. There is a certain merely quantitative enlargement of every one's consumption of goods of a given kind, every one using more of _A´´´_ than he used before; but the greatest change shows itself in the quality of what he uses. Every man buys and consumes better articles of the _A´´´_ kind, as well as of other kinds. His food, his clothing, etc., are all prepared in a more elaborate way, and he has more of what we call form utility which results from the fashioning of things, and relatively less of the elementary utility which inheres in the raw material. There is somewhat more of raw material and very much more form utility in the goods he demands for personal consumption. This requires that labor should move upward in the group system, and that more of it than before should betake itself to those subgroups where the fashioning of the raw material is done and where the finishing touches are applied to goods. The effect of the constant improvement of all processes of production, therefore, so far as the effect on labor is concerned, is akin to the effect of an addition to capital, in that it moves labor upward in the subgroup series. It puts more labor into mills and shops which make articles of comfort and luxury. _The Nature of the Movements actually caused by Improvements._--This upward movement cannot go on as smoothly and with as little disturbance as that which is caused by the increase of capital. Whenever a greater gain is made at one point than is made at another, an influence is set working which, of itself, tends to send labor from the one point to the other. The slowness with which the change of method proceeds affords the time that is necessary for the protection of labor in the first-named group, since little movement takes place before the effects of improvements made in the second group begin to be felt. If in 1906 an improvement is made which, in the course of five years, would cause some labor to move from the subgroup _A_´´´ to the subgroup _B_´´´, and in 1907 a corresponding improvement is made in the latter industry, the equilibrium is restored before enough disturbance has taken place to require any absolute reduction of labor in _A´´´_. The facts are (1) that new laborers as they enter the field are drawn more to the upper subgroups than to the lower ones,--to the _A´´´_ and the _B´´´_ rather than to the _A_ and the _B_ of the two series,--and that in moving upward they are drawn at first more strongly toward _B´´´_ and later more strongly toward _A´´´_. This is the nearly constant fact in industry and is the grand resultant of all the forces we have described--an upward flow that is continuous but does not follow strictly vertical lines. As young men--the sons of workers in _A_, _B_, _C_, and _D_, who might otherwise have remained in their fathers' occupation--move to the subgroups that stand higher in the several series, they first go in larger number toward _B´´´_ than toward _A´´´_, and later in larger number toward _A´´´_. There is a wavy movement toward the right and then toward the left in the steady flow of labor from the groups that create the raw material to those that impart to these materials the form utilities which they need to fit them for service. An actual lessening of the number of workers in an entire group in consequence of an improvement in the method of production is practically unknown, and even a positive lessening of the number in a subgroup is exceedingly rare. _Apparent Exceptions to the Rule._--Exceptions to this rule which are rather apparent than real will occur to every one. The discovery of a great supply of mineral oil put an end to the use of whale oil for illuminating purposes, though it allowed the whale fishery to survive on a reduced scale and produce oil for other purposes, in so far as the rawest material, the whales themselves, were not exterminated. The exhaustion of a supply of raw material was here a dominant fact, and the effects it produced may be again expected when mineral oil shall, in turn, become scarce. Men will move out of the subgroup producing the crude oil, as nature forces them to do so, but their movement cannot be referred merely to improvement in the mode of extracting the oil or transporting and refining it. The fact which illustrates the rule we have stated is that while mineral oil drove whale oil out of the field as an illuminant, this did not reduce the number of men in the general group which produces illuminating oil. More men were set working in the oil fields than ceased working on the whaling ships. A new raw material was used in creating a similar finished product, and as the general industry which made this product grew larger rather than smaller, the total demand for labor in oil production was not lessened. This does not prove that old sailors did not suffer from the change. Young sailors could go to the oil fields or elsewhere, but men who were not adaptable could not do so, and the hardship thus entailed is not to be overlooked. We are, however, forming a judgment of movements which pervade a vast industrial system, and we need most to know what is their grand resultant. If that were a general displacement of labor, causing increasing idleness and suffering, the system that involved this result would stand condemned. The general resultant is the opposite of this. _A Drift of Labor toward Certain General Groups._--We have just noticed that movements of labor in the group system, caused by improvements in method, consist mainly in an upward flow of labor, accompanied by irregular lateral movements, the labor drifting to the right or the left as it is more strongly attracted now to one point and now to another on the same horizontal plane. The general mass of it swerves now to the right and now to the left in its general ascending course, though none may be actually expelled. This description of the drift of labor is too general even to describe all the permanent currents. Some entire groups produce only or chiefly luxurious goods, and to those there is the same drift of labor as there is to the upper subgroups of the general series. If there be a group of _D_'s making an article which only the well-to-do can afford to use, it will swell in size and in the volume of its output from the same causes--improved methods and general enrichment--which cause _A´´´_, _B´´´_, and _C´´´_ to outgrow _A_, _B_, and _C_. _Displacements of Mature Laborers naturally tending to Diminish._--When an improvement is made in one of the upper subgroups while the general flow of labor is toward these groups, the effect is not usually to lessen the absolute number of workers in the upper subgroup where the improvement has been made, but merely to prevent it from getting a _pro rata_ share of the labor that is moving upward toward this tier of subgroups from the lower ones. The change in the apportionment of the social laboring force between the upper subgroups and the lower ones is made gradually, without violent transfers of particular men from point to point, and merely by directing to the upper subgroups a disproportionate number of young workers who are selecting their fields of employment. In general, _labor_ moves from point to point in the system without requiring many _particular laborers_ to do so. As actual loss of places by persons of mature age is the chief evil connected with changes in methods of production, it is a most welcome fact that the influence which we are studying tends naturally to reduce the extent of it. _The Discarding of Aged Laborers mainly caused by a Further Influence._--Quite apart from a demand for less labor at a particular point in the system, there may occur a discharging of men merely because of age and a substituting of younger men. In establishments where the pace is a rapid one men have thus to give place to young successors at an earlier age than the one at which men give place in other employments. The effect of some machinery is to improve the chances of old men, while that of other machinery is to reduce them. A lightening of toil and a shortening of the working day preserve men's powers and enable them to retain employment longer. _The Natural Tendency perverted by Monopoly._--When hardships come on a large scale in consequence of a discharging of workers, they are chiefly due to an abnormal influence which now shows itself in ugly and disquieting ways throughout the industrial system, that, namely, of monopoly. Reducing forces for the sake of curtailing production and raising prices is what does the mischief. This influence undoes at many points the beneficent effects of free competition and causes grave hardships to particular workers while affording no compensating gain to the consuming public. It portends evil for society as a whole as well as for the working classes, on which its hand may be heavily laid. In a perfectly natural system, in which competition would do all that pure theory at the outset of this study has assumed that it will do, the evil entailed by local improvements would be relatively small and the diffused benefits enormous. In proportion as the movement approaches steadiness and as gains are made, not by radical changes, now here, now there, and now elsewhere, with long intervals between them, but by smaller economies made nearly everywhere and in very quick succession, the cause of the hardship is reduced. There is less of violent expulsion of labor from its fields and more of a gradual drifting of _labor_ rather than particular laborers from the subgroups that create elementary products to those which fashion them into fine and costly shapes. There is small hardship in the natural selection by new laborers of the employments where they are most needed, and there is often little in a transfer of a person who has tended a machine of one kind to a machine of a different kind. Instances there still are of manual skill brought to naught by the invention of a mechanical automaton that does the work more rapidly and accurately than the hand of man can do it; and the worker who possesses this skill must usually, in such cases, content himself with an employment where his more general aptitudes may stand him in good stead and insure him at least an average rate of pay. The special aptitude which he had for performing one operation counts for nothing; and this happens when men who have worked in one department of a mill have to accept work in other departments of the same mill or in other employments. _A Workman's Specific Loss as compared with his Share of a Social Gain._--The test question in cases like these is whether the man is helped or harmed by the general effect of improvements, including not only the one which has caused him to change his occupation, but all others which have taken place since he began working. To this question there can be but one answer: in the course of a lifetime the balance is in favor of progress _even in the case of the average victim of the movement_, and it is overwhelmingly so in the case of others. What a man sacrifices when he is transferred from one machine to another is usually more than offset in a term of years by what he gains in consequence of the general increase in the producing power of labor. At the time of the displacement he suffers, but by its constant increase in wealth and productivity society more than atones for the injury. The goods that emerge from the mills are multiplied; the share falling to labor, as that share is determined by the test of final productivity, grows steadily larger; and the men who have never served a long apprenticeship at anything, but have learned their present trades quickly and can learn new ones as quickly, are producing and getting far more than they could possibly get under a régime of skilled manual labor or of inferior machinery, and far more also than their successors will get hereafter if, by any calamity, mechanical inventions shall cease to be introduced and other product multipliers shall be barred from the field. The hope of working humanity lies mainly in the continuance of the changes which give it a forever enlarging command over nature. Some classes might live comfortably without this, but for the worker it affords the main ground of hope for increasing comfort and a coming time of general abundance. CHAPTER XVIII CAPITAL AS AFFECTED BY CHANGES OF METHOD _Labor Saving and Capital Concentrating._--There is a common impression that whatever saves labor usually requires an increase of capital in the industry where the economy is secured, and this impression is justified by the experience of the century following the invention of the steam engine and the early textile machinery. Hand spinning and weaving require small amounts of fixed capital, while the mills in which spinning and weaving are done by steam or water power require a great deal. Fortunately in any long period this capital comes as abundantly as it is needed from the profits of the very business that calls for it and does not reduce the capital of other industries. The profit of one year furnishes the new instruments required in the next; but the immediate effect of substituting a costly machine for hand labor is to concentrate capital, or to call it from places to which it would otherwise go. _The Liberation of Capital by Invention._--For a long period it was the general rule that a mechanical invention at first called capital to the point at which it was applied, although it afterward created new capital and sent it away to make more than good the draft it originally made. This rule is no longer universally applicable. When an invention cheapens capital goods, it liberates capital. It is clear that a hundred and twenty-five years ago there was small chance that an invention would liberate very much capital by reducing the cost of making tools, buildings, rails, machinery, etc., since there were so few of them to cheapen. Now that machines are at hand in myriad forms the chance is large that an invention will substitute for many of them others of less costly construction. It will in these cases cause less capital to be required per machine than was formerly needed. _Simplifying the Forms of Machinery and Cheapening the Materials of It._--The history of invention shows that the early machines sometimes took cumbersome and expensive forms, for which simple and cheaper forms were later substituted. Much simplifying of mechanical appliances is all the while going on, and this, of course, liberates some capital. Making instruments of any kind out of cheaper materials has the same effect that anything has which reduces the cost of constructing the instruments. Bessemer steel has made rails, bridges, ships, buildings, steam boilers, and a vast number of mechanical tools and appliances less costly than they were, and so has liberated some of the capital which such things formerly embodied. After one of the machines of the costlier type has earned the fund on which its owner relies for replacing it as it is worn out, it appears that a part of this fund will suffice for procuring a perfectly good substitute for it, and the remainder may be used for procuring other appliances of production. _A´´´_ _B´´´_ _C´´´_ _H´´´_ _A´´_ _B´´_ _C´´_ _H´´_ _A´_ _B´_ _C´_ _H´_ _A_ _B_ _C_ _H_ _Cheapening the Process of Making Instruments._--If we recur to the table which represents the groups of the industrial system, we shall see that improvements of method in the general group _H-H´´´_ have the effect of liberating capital in the other groups and subgroups. _H´´´_ is the comprehensive symbol that represents active instruments of all kinds. It is engines and boilers, looms and spindles, lathes and planers, rails, cars, bridges, tunnels, canals, ships, buildings, and all the myriad instruments which actively aid man in making the things he wants for consumption. New methods at _H-H´´´_ make the supply of all these things cheaper, which means that the labor and capital of the group _H-H´´´_ which would have been required for replacing the instruments used in the other groups will more than suffice for that purpose, and a part of their time may be given to making machinery, etc., not formerly used. This amounts to liberating a part of the fixed capital in the three groups producing _A´´´_, _B´´´_, and _C´´´_, although the free capital that is thus gained may in part be used in furnishing additional appliances for use in these same groups. _Local Concentration of Capital which causes a General Liberation of It._--In such a case the new method used at _H´´´_ may, at its introduction, require more capital than was formerly used at that point in the system. Building Bessemer converters was a costly operation, though the output of cheap steel afterward saved far more capital than the converters required. The power canals of Niagara cost something, but the products created by means of them are cheapening many tools of industry; and like effects follow most applications of electricity for utilizing waterfalls and carrying to great distances the power which they generate. They follow on a considerable scale as the culm of coal mines is economically burned and made to generate steam and drive dynamos. All cheapening of transportation, besides making consumers' goods cheaper, has the same effect on producers' goods, and by this means liberates capital. It causes a single productive appliance to cost less than it otherwise would cost and renders available for other purposes a part of the outlay that was formerly required for replacing it at the end of its industrial career. _Effect of Speeding Machinery._--Increasing the speed of a machine is a capital-liberating operation, since it enables a certain number of machines to do the work of a larger number. Running spindles and looms rapidly, while it requires fewer laborers for a given amount of product, requires fewer spindles and looms also. _Cases in which Liberated Capital remains partly in the Same Industry in which it has been Used._--A distinction has carefully to be made between causing less capital to be used _per unit_ of physical product, and causing less to be used in a particular occupation without regard to the amount of the product. If we cheapen the operation of cloth making, we shall increase the consumption of cloth, and in this way we may draw new capital into this business, even though we can build and equip a mill of a given capacity more cheaply than before. In this case we have liberated capital in this business and at once reëmployed it at the same point. If we use as many looms as before, the more rapid running calls for more spindles to furnish yarn, and the new spindles require larger engines and boilers, or more water wheels, wheel pits, and reservoirs, to furnish power. Enlarging a business in this way usually calls for an enlarged general capital _in the industry_, though it calls for less capital for a given output; and the striking fact is that this effect may be realized by means of devices which actually save capital at particular points in the industry. If, after power looms were introduced, some inventive genius had made them cost only a quarter as much as on their first introduction they had cost, the profits of the business would have been increased and, in time, far more capital in the shape of spinning machinery, engines, etc., would have been required than had formerly been used in those forms. With general growth of population and wealth the increased consumption of cloth calls, in the end, for more capital in the form of the looms themselves. _General Consumption as affected by a Specific Increase of Productive Power._--Consumption in the generic--the use of consumers' goods of every kind--grows as the power to make the good increases; but a point that is of great importance is that any _specific_ increase of productive power brings about a _general_ increase of consumption. It brings about a greater all-round creating and using of commodity. If we can hereafter make the _A´´´_ of our table with the expenditure of half as much labor and capital as we have heretofore used in creating it, the liberated agents of production become available for making whatever is most needed, and they will, in fact, be used for increasing the supply of all three types of consumers' goods represented in the table. They will give us more of _A´´´_, _B´´´_, and _C´´´_ in quantities adjusted by the laws of value. The outcome of this is that an economy in making _A´´´_ actually gives us more of _A´´´_, _B´´´_, and _C´´´_. We become larger consumers of everything because of the cheapening of anything which enters into our list of articles for personal use. This presents a further aspect of the process of moving labor and capital from group to group, in which the possibility of hardship for particular persons inheres. The conclusion to which a fair weighing of the effects of mechanical progress has already led us is that there are very few, even of the workers who suffer displacements of this kind, who do not during their lives gain far more than they lose by general progress; and the effects of cheapening capital goods at one point, and so liberating capital for use at other points, increases this beneficent effect. The special costs of making the new kinds of machinery have been large in the earlier stages of the process, but have afterward grown smaller; and as machinery has come into general use the liberating of capital by the cheapening of the machines has become a more and more important factor. Some of the capital liberated at _A_ goes to assist labor in furnishing the additional amount of _B´´´_ and _C´´´_ which enlarged consumption requires. _Hardships entailed on Capitalists by Progress._--As the old handicrafts have now been largely supplanted by machinery, and the hardship that continuing progress entails on laborers is greatly reduced, there is involved in progress a new burden which falls altogether on the capitalist employer. The machine itself is often a hopeless specialist. It can do one minute thing and that only, and when a new and better device appears for doing that one thing, the machine has to go, and not to some new employment, but to the junk heap. There is thus taking place a considerable waste of capital in consequence of mechanical and other progress. As there have come into use marine boilers made of steel and capable of standing a very high pressure, the low-pressure boilers of former days have become useless. With the advent of triple expansion cylinders, twin screws, and better and larger hulls, ships of the old type lost their value; and similar things are occurring in every line of production. A new mill is built and equipped with the best machinery known at the date of its building; but before a year has gone by all the machines in one department are so antiquated that it is best to throw them out. Indeed, a quick throwing away of instruments which have barely begun to do their work is often a secret of the success of an enterprising manager; but it entails a destruction of capital. What is easily to be seen is (1) that a single change of that kind makes an immediate draft on the general fund of available social capital; and (2) that this draft, as a rule, is soon repaid with increase. Machinery that is nearly new is thrown away when it appears that another kind soon will earn enough to make good the waste thus entailed, and the paradox is in the fact that the _entrepreneur_ who quickly destroys capital really saves it, while he who, by using the old appliances, tries to hold on to the capital loses it, since he sacrifices profits from which more would have come. Running his antiquated engine, the unenterprising man has to content himself with small returns and, in the meanwhile, sees his actual productive fund dwindling by the deterioration of the old equipment. _The Offset for Capital destroyed by Changes of Method._--What has happened in such a case to the enterprising man is a loss of personal capital. What he has just paid for the supplanted instruments has gone for nothing. His financial status is improved rather than injured because of the prospective profits which the new appliances will earn. What has happened to the man who keeps the old machinery is a partial or total loss of whatever he has lately put into it, not offset by such profits. By keeping his capital goods he is losing his capital without having his rival's assured prospect of regaining it. Whether the gains made by those who promptly discard antiquated appliances offset the wastes suffered by those who hold on to them too long, is a question that requires more space than can here be allotted to it; but the following facts determine the answer:-- (1) Instruments naturally at any one date are of an average age equal to about half their working duration. (2) Discarding all of one kind at any one date would involve drawing on the fund of social capital for about one half of the amount needed to replace these instruments. (3) Very few are at once discarded on the invention of the improved types. (4) Nothing but a fall in the price of the product created by the aid of these old machines can prevent them from earning the remainder of the fund required for replacing them. If they do this, they prevent any positive destruction of capital which many inventions cause. (5) When only one _entrepreneur_ introduces the new appliance, his production is usually increased, but not to an extent that causes a quick fall in price. This affords to the users of old appliances whose plants are not already at the final point of inefficiency a chance to continue accumulating the fund for replacement. The profits of the user of the better appliance are meanwhile accruing. (6) When all _entrepreneurs_ introduce the new appliance at once they do so--provided that their act is intelligent--because the saving effected in the cost of production makes the change advantageous in spite of the waste entailed. They expect an all-round net profit during the period before the price of the product falls to its new level, and they expect that this will give them more than is required for interest, cost of future replacement of the superior instruments, and the deficit in the accounts caused by the early discarding of the superseded appliances. (7) Without treating this prospective profit inhering in the new appliance as capital, we must regard it as affording an assurance that new capital will soon appear. There are great gains to be made by using the new appliances, and some of these will add themselves to the permanent fund of productive wealth. (8) The cost of the new appliances may be defrayed by their owner's earlier accumulations or by loans. In either case they come out of a social fund that is created mainly by the appliances which in a preceding period have yielded special gains. The machine of to-day is paid for from the available surplus created by the machine of an earlier day, and a series of inventions enlarges the social fund of capital in spite of all wastes by which it is attended. [Illustration] The effect that a series of improvements has on the amount of social capital, if we measure the fund solely on the basis of the cost of the capital goods which embody it, may be represented thus:--The horizontal line measures time and is graduated in years from one to ten. The distance of the point above this base represents the amount of capital as estimated in units of cost, in the possession of the society at the time a particular improvement is made, and would remain unchanged if society were static. The level of the line _AB_ represents what, under such a condition, would be the capital of a decade. The curved line _AB´_, dipping below _AB_ and then rising above it, expresses the fact that a single important improvement first trenches on the amount of capital in use, and soon makes good the deduction and makes a positive addition. It raises the sum total of capital to the level of the latter part of the line _AB´_. The curved line _A´B´´_, first falling below _A´B´_ and then rising above it, expresses the fact that a second improvement, made a year or two after the first one, makes a reduction of the amount of capital as determined by the first improvement, and later adds more than enough to make good this reduction. A third improvement, at the end of two or three further years, has the effect expressed by the line _A´´B´´´_; that is, it first reduces the fund below the level at which at that time it would otherwise have stood,--but by no means to the level at which it stood when the series of improvements began,--and later carries it above the line expressing the highest level it would, without this improvement, have attained. In so far as these three improvements affect the level of the social capital for the ten-year period, it stands at the level indicated by the line _AA´A´´B´´´_, and no later improvement, even at the time of its introduction, does more than to make a small reduction of the increment of capital accruing from the products of the earlier improvements. A series of economical changes means a perpetual increase of the social capital as well as a perpetual improvement in the mode of applying labor. The increments of capital due to the earlier changes are far more than is required by the introduction of any later one. _The Impossibility of Reducing Capital by too Rapid Progress._--There is a theoretical question whether this series might be too rapid to permit this result. If the interval were a month instead of several years, and if the amount of capital put into the new appliances were the same that, in the figure, they are represented as requiring, the effect would be to make twelve deductions from the amount of the social capital in the course of a year, which would carry it some distance below its original level, _while in this one year_ there would have been no time for the profits to accrue in order to restore and add to the fund. In the next year and the following ones this would follow, and the effect, in the course of ten years, would be to carry the social capital to a still higher level than the one it reaches in consequence of the slower succession of economical changes. Increasing the rapidity of productive inventions only multiplies the additions made to the social capital. We may summarize the chief facts concerning technical progress as follows:-- (1) Progress may throw particular men out of their present employment, but cannot destroy the social demand for their labor. Somewhere in society there is a place for them. (2) If improvements were long confined to one subgroup, they might send labor into other subgroups and even into other general groups. Occurring as they do at nearly all parts of the system, they very seldom require an absolute diminution of the amount of labor in a subgroup, and practically never cause such a reduction in a general group. (3) The gradual introduction of an improvement is important, since it affords time for an increase in the social demand for the product which is thus cheapened and for introducing at many other points improvements which neutralize, in a large degree, the labor-expelling effect of the first improvement. (4) Technical gains are the largest source of additions to the total amount of the social capital. The constant influx of new capital facilitates the placing of laborers at the points where they are needed. (5) The fact that elementary utilities which are produced by agriculture cater to a less elastic demand than do the form utilities which are the product of manufacturing occupations, has caused labor to move slowly from the lowest subgroups of the various series to the upper ones, as the productive power of labor in agriculture has increased. (6) This movement is so gradual that it can be accomplished almost entirely by devoting to the industries constituting the upper subgroups an enlarged share of new laborers as they enter the field in quest of employment. Young men drift from the farm to the village and the city. (7) In addition to the upward flow of labor in the series of subgroups there are some lateral movements, or transfers from group to group, to be taken into account. The fact that improvements are widely diffused and that there is a succession of them at each point makes it possible to make these lateral movements of labor in the same way in which the movement within the groups is accomplished; namely, by putting the new men who are entering the field of employment in the places where they are most needed. (8) These facts do not always prevent particular men from losing the special benefit that skilled handicrafts have insured to them, since a machine, to the running of which they are compelled to betake themselves, may often be as well tended by persons who have never learned such a handicraft. (9) The loss thus entailed on craftsmen was very large during the original process of supplanting hand labor by machinery, but bids fair to be relatively small hereafter, since fewer men go through long and costly apprenticeships, and since the operator of one machine can usually learn to operate another with little waste of time. (10) Such injuries as particular men now suffer from the introduction of economical devices are, as a rule, more than atoned for even to these men by the greater productivity of social labor, as it is applied in new ways, and by the greater abundance of social capital. These gains are the result of improvements made in the earlier periods, and they benefit every one who labors. (11) The new capital created by productive inventions is an essential cause of the continuing gain of the working class. (12) While most inventions at first draw capital from the social fund to the point where they are applied, many of them soon liberate capital by cheapening particular appliances of production, and nearly all of them, by means of the profits they insure, ultimately add to the social capital. _The Vital Importance of Continued Improvement._--Intelligent study will make it clear to every one that any assertion that machinery is the enemy of labor is not merely erroneous, it is a contradiction of the most striking and important fact connected with general progress. The gains of labor during the past century, which have been partly due to the occupation of areas of new land, have been largely due to the mechanical inventions and technical discoveries which have put the forces of nature so largely at man's disposal. These forces have worked for all society, indeed, but they have worked largely for the men who labor, whether in the factory, in the shop, on the railroad, or on the farm. Their effects are all-pervasive, since they signify an increase in the productive power of that final unit of social labor on which wages generally depend. General riches have been and must continue to be generally beneficent. As an isolated man working, Crusoe-like, for himself alone, gains by every technical discovery he can make and by everything he can add to his stock of productive appliances, so society, the great and isolated organism which is the tenant of our planet, reaps a benefit by every improvement it can make, and the forces of distribution see to it that this benefit is carried through and through the system and made to improve the condition of the most humble members. Since the great areas of new land are no longer available as a future resource, the hope of labor during the coming centuries, under any form of industrial organization, whether it be competitive or socialistic, rests on the prospect of continued technical gains,--an unending succession of calls on the exhaustless serving power of nature. _The Effect of Changes in the Relative Amounts of Labor and Capital._--The law of wages, as stated in an early chapter of this work, makes it evident that an increase of population, while the social fund of capital remains the same, would reduce the product of marginal labor and therefore the rate of wages. In every establishment into which more workmen should come, while its capital remained the same in amount, the power of an individual worker to produce goods would be lessened. Moreover, any influx of laborers into the society as a whole would be attended by a diffusion of them among all the groups and subgroups, so that the power of an individual laborer to create any kind of goods would be reduced. This means that labor has lost some of its power to create _commodity_, which is the concrete name for general wealth, and its wages fall accordingly. An influx of capital without any change in the number of laborers would have the opposite effect. It would add to the productive power of marginal labor. As the new capital should diffuse itself through the producing organism it would enlarge the product of workers everywhere. The wages of labor depend in part on a numerical ratio between units of capital and units of labor, as they coöperate in production; and the change in the ratio which enlarging capital causes improves the condition of the working people. The capital also diffuses itself throughout the system, every subgroup gets a share of it, and labor everywhere responds to this influence and produces more than before. In a change in this ratio--in a gain of _per capita_ wealth in productive forms--lies one influence which has a great power over human destiny and is one main cause of weal or woe for coming generations. Method as it improves is related in two ways to this critical change in the ratio of capital to population. It is a prominent cause of the increase of capital. What men make by juggling with values and putting taxes on other men adds nothing to the aggregate wealth; but what they make by improved methods of production causes a net addition to it. The improvement in method also directly reënforces the influence of enlarging capital, by infusing productivity into labor and increasing its returns. _The Resultant of the Five Dynamic Changes acting Together._--So long as the increase of capital more than offsets the increase of population, the ultimate result of all five of the general changes which characterize a dynamic state is to increase the well-being of laborers. The movement of labor from point to point in the system of industrial groups is a necessary means of securing the largest gain for society as a whole and of diffusing the benefit among all members. It is wage earners who are most numerous and most needy, and the greatest benefit which can be credited to any economic influence is that which takes the shape of a rise in wages. Moreover, an upward trend in the rate of pay is of far greater importance than the level of the rate at any one time. A system that should afford high present wages would stand condemned if it precluded all chance of higher ones hereafter; while a system that should begin with a low rate and afford a guaranty that it should grow higher each year to the end of time would have the most important merit which any system could possess. The outlook it would afford for humanity would far outweigh a measure of hardship imposed on the present generation. A present purgatory with dynamic capabilities must in the end excel any earthly paradise which is held fast in a stationary state. We may represent the resultant of the actual growth of population and of capital by the following figure:-- [Illustration] Measuring time by decades along the horizontal base line and the rate of wages at the beginning of a century by the line _AB_, we represent the increase in the pay of labor which would be brought about by an increase of capital not counteracted by any other influence by the dotted line _BC_, and the reduction which would be caused by an increase of population by the dotted line _BE_. The line _BD_ describes the resultant effect of these two changes acting together, on the supposition that during the latter part of the century the growth of population is somewhat retarded and that the increase of capital is the predominating influence. We may further represent the change in the rate of wages which is caused by improvements in method and organization by lines rising above the one which expresses the trend of wages as it is affected only by an increase of capital and of population. [Illustration] _AF_ measures time as before and _AB_ the rate of pay at the beginning of the century. The dotted line _BE_ represents the rise in wages due to the increase of capital, as it more than counteracts the growth of population. The rise of the line _BD_ above _BC_ represents the additional increase in wages which is brought about by improvements of method, and finally, the rise of _BC_ above _BD_ expresses the further addition to the pay of labor which comes by reason of improved organization. The uppermost line _BC_ describes the resultant of all the dynamic changes on the supposition that they act in a natural way. It will be seen that _BC_ at first rises above _BD_ rapidly and later runs nearly parallel with it. This expresses the fact that while gains insured by organization may continue for a long period, the amount of them does not greatly increase after a fairly efficient type of organization has been secured. On the other hand, the fact that _BD_ rises above _BE_ by a wider and wider interval expresses the fact that gains which come from technical improvements may increase for an indefinitely long time. _The Rate of Interest contrasted with the Absolute Amount of it; this Amount Increasing._--The changes which make wages rise cause interest to fall and there would seem to be a partial offset for the general gain; but the chief cause of a declining _rate_ of interest is an increase of the _total amount_ of capital. The size of the income which comes to the capitalists as a class from their entire invested wealth grows larger wherever the amount of the fund increases more rapidly than the rate of interest falls. A million dollars yielding four per cent gives a larger income than a half million yielding five or six. It is a condition such as this which we have described in outline, and it enables the holders of investments to receive a constantly increasing total return, although the percentage yielded by a given amount invested grows continually smaller. _The Conditions of Increasing Future Well-being._--The realization of this resultant of all dynamic forces requires that the rate of growth of population should be subject to a natural check, that the increase of capital should not be unduly retarded, that technical improvements should go on, and that the organization which is effected should be of the kind which makes for efficiency but not for monopoly. Competition must be kept alive. In altered ways, indeed, the essential power of it must forever dominate the industrial system, as it will do if the state shall do its duty and not otherwise. A dynamic society requires a dynamic government whose enlarging functions are shaped by economic conditions. CHAPTER XIX THE LAW OF POPULATION Since the optimistic conclusion reached in the preceding chapter is contingent on an increase of wealth which is not neutralized by an increase of population, it remains to be seen whether the population tends to grow at a rate that gives reason to fear such a neutralizing. Does progress in method and in wealth tend to stimulate that enlarging of the number of working people which, in so far as they are concerned, would bring progress to an end? Is the dynamic movement self-retarding and will it necessarily halt? The answer to this question depends, in part, on the law of population. _The Malthusian Law._--We need first to know whether the growth of population is subject to a law, and if so, whether this law insures the maintenance of the present rate of increase or a retarding of it. The law of population formulated by Malthus at the beginning of the last century is the single extensive and important contribution to economic dynamics made by the early economists. It was based more upon statistics and less on _a priori_ reasoning than were most of the classical doctrines. Even now the statement as made by Malthus requires in form no extensive supplementing, and yet the change which is required is sufficient to reverse completely the original conclusion of the teaching. Malthusianism constituted the especially "dismal" element in the early political economy, and yet, as stated by its author, it revealed the possibility of a comfortable future for the working class. One might look with cheerfulness on every threatening influence it described if he could be sure that the so-called "standard of living" on which everything depends would rise. The difficulty lay in the fact that the teaching afforded no evidence that it would thus rise. The common impression of readers was that it was destined to remain stationary and that too at a low level. The workmen of Malthus's time were not accustomed to getting much more than the barest subsistence, and not many economists expected that they would get much more, even though the world generally should make gains. _The Popular Inference from the Malthusian Law._--If we state the conclusion which most people drew from the Malthusian law in its simple and dismal form it is this: Whenever wages rise, population quickly increases, and this increase carries the rate of pay down to its former level. The earnings of labor depend upon the number of laborers; a lessening of the number of workers raises their earnings and an increase depresses them; and therefore, if every rise in pay brings about a quick increase of population, labor can never hold its gains; every rise is the cause of a subsequent fall. _Malthus's Qualification of his Statement._--As we have said, Malthus so qualified his statement that he did not positively assert that this would describe the experience of the future; the fall in pay that should follow the increase of numbers might not always be as great as the original rise, and when a later rise should occur the fall following it might be less than this second rise. In some way workers might insist upon a higher standard of living after each one of their periodical gains. _Why this Qualification is not Sufficient._--The mere fact that the standard of living may conceivably rise does not do much to render the outlook cheerful, unless we can find some good ground for supposing that it will rise and that economic causes will make it do so. We should not depend too much on the slow changes that education may effect, or base our law on anything that presupposes an improvement in human nature. We need to see that in a purely economic way progress makes further progress easier and surer and that the gains of the working class are not self-annihilating but self-perpetuating. We may venture the assertion that such is the fact: that when workers make a gain in their rate of pay they are, as a rule, likely to make a further gain rather than loss. While there must be minor fluctuations of wages, the natural and probable effect of economic law is to make the general rate tend steadily upward, and nothing can stop the rise but perversion of the system. Monopoly may do it, or bad government, or extensive wars, or anarchy growing out of a struggle of classes; but every one of these things, not excepting monopoly, would naturally be temporary, and even in spite of them, the upward trend in the earning power of labor should assert itself. Instead of being hopelessly sunk by a weight that it cannot throw off, the labor of the future bids fair to be buoyed up by an influence that is irrepressible. _Refutations of Malthusianism._--The Malthusian law of population has been so frequently "refuted" as to prove its vitality. It is in the main as firmly impressed in the belief of scientific men as it ever was, and some of the arguments which have been relied upon to overthrow it require only to be stated in order to be discarded. One of these is the claim that the statement of the law is untrue because, during the century in which the American continent, Australia, parts of Africa, and great areas elsewhere were in process of occupation, mankind has not actually pressed on the limits of subsistence. No intelligent view regards that fact as constituting anything but an illustration of the Malthusian law. A vast addition to the available land of the world would, of course, defer the time of land crowding and the disastrous results which were expected from it, but with the steady growth of population the stay of the evil influence would be only temporary. _An Objection based on a Higher Standard of Living._--The second objection is also an illustration rather than a refutation of the Malthusian doctrine; it asserts that the standard of living is now higher than it was, and the population does not increase fast enough to force workers to lower it. Malthus's entire conclusion hung upon an _if_. The rate of pay conformed to a standard, and if that standard were low, wages would be so; while if it were higher, wages would be higher also. _The Real Issue concerning the Doctrine of Population._--There is a real incompleteness in all such statements. Does the standard of living itself tend to rise with the rise of wages and to remain above its former level? When men make gains can they hold them, or, at any rate, some part of them, or must they fall back to the level at which they started? And this amounts to asking whether, after a rise in pay, there is time enough before a fall might otherwise be expected to allow the force of habit to operate, to accustom the men to a better mode of living and forestall the conduct that would bring them down to their old position. The standard of living, of course, will affect wages only by controlling the number of laborers, and the discouragement due to Malthusianism lies in the fact that it seems to say that the number of workers is foreordained to increase so quickly, after a rise in wages, as to bring them to their old level. Whether it does or does not do this is a question of fact, and the answer is a very clear one. The higher standards actually have come from the higher pay, and they have had time to establish themselves. Subsistence wages have given place to wages that provided comforts, and these again to rates that provided greater comforts and modest luxuries; and the progress has continued so long that, if habit has any power whatever, there is afforded even by the Malthusian law itself a guarantee that earnings will not fall to their former level nor nearly to it. _A Radical Change in Theory._--Progress is self-perpetuating. Instead of insuring a retrogression, it causes further progress. The man who has advanced from the position in which he earned a bare subsistence to one in which he earns comforts is, for that very reason, likely to advance farther and to obtain the modest luxuries which appear on a well-paid workman's budget. "To him that hath shall be given," and that by the direct action of economic law. This is a radical departure from the Malthusian conclusion. _Three Possible Conditions for the Wage-earning Class._--Workers are in one of three possible conditions:-- (1) They may have a fixed standard and a very low one. Whenever they get more than this standard requires, they may marry early, rear large families, and see their children sink to their own original condition. (2) They may have a fixed standard, but a higher one. They may be unwilling to marry early on the least they can possibly live on, but may do so as soon as their pay affords a modicum of comfort. (3) They may have a progressive standard. There may be something dynamic in their psychology, and it may become a mental necessity for them to live better and better with advancing years, and to place their children in a higher status than they themselves ever obtained. _A Historical Fact._--The manner in which Malthus was actually interpreted was as much due to the condition of workers in his day as to anything which he himself said. It was small comfort to know that, under the law of population, wages might conceivably become higher and remain so because of a higher standard of living, provided the higher standard was never attained. Facts for a long time were discouraging. In due time they changed for the better. The opening of vast areas of new land made its influence felt. It raised the pay of labor faster than the growth of population was able to bring it down. This had the effect of establishing, not only a higher standard, but a rising standard, and as one generation succeeded another it became habituated to a better mode of living than had been possible before. It was the sheer force of the new land supplemented by new capital and new methods of industry that accomplished this. It pushed wages upward, in spite of everything that would in itself have pulled them down. _A Retarded Growth of Population._--If Malthusianism, as most people understood it, were true, population should increase most rapidly during this period of great prosperity, and should do its best to neutralize the effect of new lands, new capital, and new methods. In some places the increase has been abnormally rapid, and in a local way this has had its effect; but if we include in our view the whole of what we have defined as civilized industrial society, the rate of growth has not become more rapid, but has rather become slower during this period. In one prosperous country, namely, France, population has become practically stationary. Even in America, a country formerly of most rapid growth, the increase, apart from immigration, has been much slower than it was during the first half of the nineteenth century. The growth of population, then, may proceed more slowly or come to a halt, even while wealth and earning powers are increasing. If this is so, a further accumulation of capital and further improvements in method will not have to struggle against the effects of more rapidly growing numbers, and their effects will become more marked as the decades pass. There will be a weaker and weaker influence against these forces which fructify labor and they will go on indefinitely, endowing working humanity with more and more productive power and with greater accumulations of positive wealth. Home owning, savings bank deposits, invested capital, and comfortable living may be more and more common among men who depend for their income mainly upon the labor of their hands. Is this more than a possibility? Is there an economic law that in any way guarantees it? Can we even say that general wealth will, without much doubt, redound to the permanent well-being of the working class, and that the more there is of this prosperity, the less there is of danger that they will throw it away by any conduct of their own? The answer to these questions is to be found in a third historical fact. _The Birth Rate Small among the Upper Classes in Society._--In most countries it is the well-to-do classes that have small families and the poor that have large ones. It is from the interpretation of this fact that we can derive a most important modification of the Malthusian law. It is the voluntary conduct of different classes which determines whether the birth rate shall be large or small; and the fact is that in the case of the rich it is small, in the case of the poor it is comparatively large, while in the case of a certain middle class, composed of small employers, salaried men, professional men, and a multitude of highly paid workers, it is neither very large nor very small, but moderate. In a general way the birth rate varies inversely as the earning power of the classes in the case, though the amounts of the variations do not correspond to each other with any arithmetical exactness. If one class earns half as much per capita as another, it does not follow that the families belonging to this class will have twice as many children. They do, on the average, have more children. There is, then, at least an encouraging probability that promoting many men from the third class to the middle class would cause them to conform to the habit of the class they joined. This class is at present largely composed of persons who have risen from the lowest of the classes, and any future change by which the third class becomes smaller and the second larger would doubtless retard the average birth rate of the whole society. _Motives for the Conduct of the Different Classes._--History and present fact are again enlightening in that they reveal the chief motive that determines the rapidity of the increase of the population. When children become self-supporting from an early age, the burden resting on the father when he has a comparatively small number of them is as large as it ever will be. If they can earn all they cost when they reach the age of ten, the maintenance of the children will cost as much when the oldest child has reached that age as it will cost at any later time. Even though one were added to the family every year or two, one would graduate from the position of dependence every year or two, and the number constantly on the father's hands for support would probably not exceed five or six, however large the total number might become. The large number of children in families of early New England and the large number of them in French Canadian families at a recent date were due to the fact that land was abundant, expenses were small, and a boy of ten years working on the land could put into the family store as much as his maintenance took out of it. The food problem was not grave in those primitive places and times, and neither were the problems of clothing, housing, and educating. It is in this last item that the key to a change of the condition lay, for the time came when more educating was required, when the burden of maintaining children continued longer, and a condition of self-support was reached at no such early date as it had been in rural colonies. _The Effect of Endowing Children with Education and with Property._--When children need to be thoroughly educated, the burden of maintaining a family of course increases. An unduly large family means the lowering of the present standard of living for all and a lowering of the future standard for the children. With most workmen it is not possible either to endow many children with property or to educate them in an elaborate way. The fear, therefore, of losing present comforts for the family as a whole and the fear of losing caste by seeing the family drop, at a later date, into a lower social class, are arguments against large families. _Why Economic Progress perpetuates Itself._--The economic motive which causes progress to perpetuate itself and to bring about more and more progress is the determined resistence to a fall from a social status. The family must not lose caste. It must not sacrifice any of the absolute comforts to which it is accustomed, particularly when so doing entails a degradation. Such is human nature that the unwillingness to give up something to which one is accustomed is a far stronger spur to action than the ambition to get something to which one is not accustomed; and a social rank once attained is not surrendered without a struggle. A tenacious maintenance of status is the motive which figures most prominently in controlling the growth of population and the increase of capital. The rich maintain the status of the family by means of invested wealth, the poor do it by education, and members of the middle class do it by a combination of the two. _Status maintained by Education._--In case of wage earners the need of educating children and the advantages that flow from it overbalance the need of bequeathing to them property; and yet the need of bequeathing property of some kind is a powerful motive also. It is important to enable them to procure the tools of some handicraft, or to secure themselves against dangers from sickness or accident. Moreover, it is not altogether technical education which counts in this way. Culture in itself is a means, not only of direct enjoyment, but of maintaining a social rank. The well-informed person accomplishes directly what a well-to-do person accomplishes indirectly, in that he gets direct pleasures from life which other people cannot get, and he enjoys consideration of others and has influence with them as an uninformed person cannot. The need, therefore, of educating children for the sake of making them good producers and the need of doing it for the purpose of making them good consumers and of enabling them to make the most of what they produce works against too rapid an increase of numbers. _The Effect of Factory Legislation._--These motives are powerfully strengthened when they are reënforced by public opinion and positive law. The ambition of workers to secure laws which will forbid the employment of children under the age of sixteen is, in this view, a reasonable wish and one that if carried out would tend to promote the welfare of future generations. It is doubtless true that this is not the sole motive, and some weight must be accorded to the desire to reduce the amount of available labor, and to protect adults who tend machines from the competition of children who could do it as well or better. There is, however, an undefined feeling in the laborers' minds that when children all work from an early age the wages of the whole family somehow become low, and that it takes all of them to do for the family what the parents might do under a different condition. The Malthusian law shows how, in the long run, this is brought about. The increased strength of the demand for factory laws and compulsory education is a positive proof of the growth of the motives which put a check on population. _Absolute Status and Relative Status both Involved._--The absolute comfort a family may enjoy and its social position are both at stake, and we need not trouble ourselves by asking whether the comparative motive--the need of keeping pace with others in the march of improvement--will cease to act if a whole community advances together. We saw at the outset that this motive acts powerfully on a superior class, which has before its eyes a lower class into whose rank some of its members may possibly drop. The lowest class must always be present, however a community may advance, and a well-to-do worker will always dread falling into it. If it should grow smaller and smaller in number, and if the second of the three classes we are speaking of should grow larger, the dread of falling from the one to the other would not disappear. The relative status--that which appeals to caste feeling and the desire for the consideration of others--would continue to be influential, as well as the desire for positive comforts; and the motive that depends on comparisons might even be at its strongest when the lowest class should so dwindle that few would be left in it except cripples, the aged, or the feeble-minded. An efficient worker would struggle harder to keep his family out of such a class than to keep it out of one which would have upon it only the ordinary stigma of poverty. _Checks more Effective as Wealth Increases._--It is clear that the dominant motives which restrain the growth of population act more powerfully on the well-to-do classes than on the poor. The need of invested wealth, the need of education, the determination to adhere to a social standard of comfort and to avoid losing caste, are stronger in the members of the higher classes than in those of the lower ones, and become more dominant in the community as more and more of its members belong to the upper and the middle classes. _Immediate Causes of a Slow Increase of Population._--The economic motive for a slow growth of population can produce its effect only as it leads to some line of conduct which insures that result. Means must be adopted for attaining the end desired, and when one looks at some of the means which are actually resorted to, he is apt to get the impression that an indispensable economic result is in some danger of being attained by an intolerable moral delinquency. Must the society of the future purchase its comforts at the cost of its character? Clearly not if the _must_ in the case is interpreted literally. A low birth rate may be secured, not at the cost of virtue, but by a self-discipline that is quite in harmony with virtue and is certain to give to it a virile character which it loses when men put little restraint on their impulses. Late marriages for men stand as the legitimate effect of the desire to sustain a high standard of living and to transmit it to descendants; and late marriages for women stand first among the normal causes of a retarded growth of population. Moreover, the same moral strength which induces men to defer marriage dictates a considerate and prudent conduct after it, and prevents unduly large families without entailing the moral injury which reckless conduct involves. On the other hand, there may be an indefinite postponement of marriage by classes that lack moral stamina and readily lapse into vice. There are vicious measures, not here to be named in detail, which keep down the number of births or increase the number of deaths, mostly prenatal, though the infanticide of earlier times is not extinct. By strength and also by weakness, by virtue and also by vice, is the economic mandate which limits the rate of growth of population carried out. A limit of growth must be imposed if mankind is to make the most of itself or of the resources of its environment. There is no great doubt that it will be so imposed, and the great issue is between the two ways of doing it; namely, that which brutalizes men and depraves them morally and physically, and that which places them on a high moral level. _Moral Losses attending Civilization._--There is little doubt that vice has made gains which reduce in a disastrous way the otherwise favorable results of increasing wealth. The "hastening ills" that are said to attend accumulating wealth and decaying manhood have come in a disquieting degree and forced us to qualify the happy conclusions to which a study of purely economic tendencies leads. The evil is not confined to the realm of family relations, but pervades politics, "high finance," and a large part of the domain of social pleasures. The richer world is the more sybaritic--self-indulgent and intolerant of many moral restraints; and if one expects to preserve an unquestioning trust in the future, he must find a way in which the economic gains which he hopes for can be made without a casting away of the moral standards which are indispensable. The greatest possible achievement in this direction would be an abandonment of vicious restraints on population and a general increase of the forethought and the self-command which even now constitute the principal reliance for holding the birth rate within prudent limits. _The Working of Malthusianism in Short Periods as Contrasted with an Opposite Tendency in Long Ones._--There is little doubt that by a long course of technical improvement, increasing capital, and rising wages, the laboring class of the more prosperous countries have become accustomed to a standard of living that is generally well sustained and in most of these countries tends to rise. There is also little uncertainty that a retarded growth of population has contributed somewhat to this result. One of the facts which Malthus observed is consistent with this general tendency. Even though the trend of the line which represents the standard of living be steadily upward, the rise of actual wages may proceed unevenly, by quick forward movements and pauses or halts, as the general state of business is flourishing or depressed. In "booming" times wages rise and in hard times they fall, though the upward movements are greater than the downward ones and the total result is a gain. Now, such a quick rise in wages is followed by an increase in the number of marriages and a quick fall is followed by a reduction of the number. The birth rate is somewhat higher in the good times than it is in the bad times. Young men who have a standard of income which they need to attain before taking on themselves the care of wife and children find themselves suddenly in the receipt of such an income and marry accordingly. There is not time for the standard itself materially to change before this quick increase of marriages takes place, and the general result of this uneven advance of the general prosperity may be expressed by the following figure:-- [Illustration] The line _AC_ measures time in decades and indicates, by the figures ranging from 1 to 10, the passing of a century. _AB_ represents the rate of wages which, on the average, are needed for maintaining the standard of living at the beginning of the century; and _CD_ measures the amount that is necessary at the end. The dotted line which crosses and recrosses the line _BD_ describes the actual pay of labor, ranging now above the standard rate and now below it. Whenever wages rise above the standard, the birth rate is somewhat quickened, and whenever they fall below it, it is retarded; but the increase in the rate does not suffice to bring the pay actually down to its former level. The descent of the dotted line is not equal to the rise, and through the century the earnings of labor fluctuate about a standard which grows continually higher. The pessimistic conclusion afforded by the Malthusian law in its untenable form requires (1) that the standard of living should be stationary and low, and (2) that wages should fluctuate about this low standard. In this view the facts would be described by the following figure:-- [Illustration] _AC_ measures a century, as before, by decades, and the height of _BD_ above _BC_ measures the standard of living prevailing through this time. The dotted line crossing and recrossing _BD_ expresses the fact that wages sometimes rise above the fixed standard and are quickly carried to it and then below it by a rapid increase in the number of the laborers. _Members of the Upper Classes not Secure against the Action of the Malthusian Law if a Great Lower Class is Subject to It._--It is clear that if the workers are to be protected from the depressing effect which follows a too rapid increase of population, the Malthusian law in its drastic form must not operate in the case of the lowest of the three classes, so long as that is a numerous class. A restrained growth in the case of the upper two classes would not suffice to protect them if the lowest class greatly outnumbered them, and if it also showed a rapid increase in number whenever the pay of its members rose. The young workers belonging to this class would find their way in sufficient numbers into the second class to reduce the wages of its members to a level that would approximate the standard of the lowest class. Under proper conditions this does not happen; for the drastic action of the Malthusian law does not take place in the case of the third class as a whole, but only in the case of a small stratum within it. _Countries similarly exposed to Dangers from Other Countries._--Something of this kind is true of a number of countries which are in close communication with each other. If a rise of pay gave a great impetus to growth of population in Europe, and if this carried the pay down to its original level or a lower one, emigration would be quickened; and although the natural growth in America might be slower, the American worker might not be adequately protected. The influx of foreigners might more than offset the slowness of the natural growth of population in America itself. The most important illustration of this principle is afforded by the new connection which America is forming with the Asiatic nations across the Pacific. CHAPTER XX THE LAW OF ACCUMULATION OF CAPITAL Adam Smith and many others have noticed that the growth of capital varies with the intelligence and the foresight of a population. It should therefore increase in rapidity as intelligence increases. A high valuation of the future is a mark of intelligence, and there is no reason why an entirely rational being should value a benefit accruing to himself in the future any less than he does a benefit accruing at once. Perfectly rational estimates of present and future, if there are no influences affecting the choice except these mere differences in time, mean that the two stand at par. It was once supposed that the disposition to save from one's present income varies directly as the rate of interest of the capital which is thus accrued, and in the main this is still regarded as a nearly self-evident proposition. Abstinence imposes a present cost on anybody that practices it. Whosoever saves a dollar misses the gratification which that dollar might bring. He may regard that sacrifice as fixed. It causes him to go without his marginal gratification, whatever that may be. If interest for a year amounts to twenty-five cents, the man has at the end of the year one dollar and twenty-five cents, with which to do whatever he may choose. He may spend it, if he will, and get all the gratification that a dollar and a quarter can bring. If interest stands at five per cent per annum, his abstinence will bring him only one dollar and five cents a year, and that, or whatever he can get by means of it, is a smaller benefit than the one he could get for one dollar and a quarter. If it is barely worth while to go without something now in order to have a dollar and five cents in the future, it is more than worth while to do it in order to have a dollar and a quarter at the same future date. If a man is induced to save only a dollar, for the sake of having a dollar and five cents at the end of the year, why should he not save two dollars, in order to have two dollars and a half at that time? Why should not the amount of his present privation increase, when the surplus of benefit he can gain by it at a future date grows greater? Such is the reasoning, and it seems entirely plausible, if we assume that what the man loses is the gratification he might have by spending his dollar, and that what he gains is the benefit of spending it and its accumulation of interest at the end of the year. The assumption is that the man proposes at a certain future date to spend the principal or the capital which he acquires by saving in the present, together with whatever it may have earned as interest; that he measures the personal benefit which he can get by this spending, and finds the larger benefit better worth a fixed sacrifice in the present than a small one. _The Actual Purpose of Abstinence._--Most capital is saved with no expectation of ever spending the principal. The motive is a perpetual income, which the capital will earn. What the man appraises in his own mind is not the personal benefit he can get by spending a dollar and five cents at the end of the year; it is the benefit that will come from spending five cents at the end of the first year, another five cents at the end of a second, and a more or less similar amount at the end of every year that shall follow. It is a perpetual income, and as the man's life is limited, the greater part of it must accrue to others than himself. The satisfaction which he will get from it near the close of his own life comes altogether from the prospect of passing the principal unimpaired to others and in assuring to them and to their successors the perpetual income which the foundation yields. Even on this basis it might be supposed that a large perpetual income would offer a greater inducement to save than a small one, and therefore that the amount of saving would be greater when the rate of interest was higher. This would be true if the importance of the perpetual income could be estimated in this simple way by the mere amount of it. _Conditions affecting the Importance of a Future Income._--The importance of a future income may be large because of the prospective helplessness or poverty of the one who expects to enjoy it. A workman may save at a great present cost to himself in order to provide for old age or sickness, in which case the income from the savings, and often the savings themselves, would be the means of averting a great calamity. To make one's self secure against privation in the future is worth more than to add to one's comforts in the present. If a certain minimum amount were needed to avert starvation at the end of a man's life, he should secure that amount at all hazards, however much that may trench on his present comforts. Now, as the amount which he can have at the end of his life depends largely on the rate of interest which his savings will earn, during such time as they may remain in a productive shape, it will take more positive abstinence on his part to keep himself from starvation when the rate of interest is low than it will when the rate is high. If there were no interest at all, he would have to put by from his income his entire old-age fund. If the rate were a hundred per cent per annum, taking a very small part of the fund out of the income of his active years would suffice, since the fund itself would earn the remainder. Is the income which is provided for the future to be treated as a variable amount in addition to some other income, or is it to be regarded as a fixed amount, which is needed for some definite purpose? On the answer to this question depends the entire issue as to whether a low rate of interest or a high one affords the larger incentive for saving. _Future Incomes More or Less Fixed usually Needed._--Recent writers have called attention to the fact that in many cases saving has the providing of a definite future income in view. The owner of a landed estate, who intends to leave it to a son, may try to provide from his rents an endowment which will save from want or from an unhappy approach to want his daughters and his younger sons. He might accomplish this, indeed, without any present saving by putting rent charges or mortgages upon his land, but that would trench on the income which his heir can derive from it. It would reduce the establishment which the heir can maintain and cause him to fall out of the class to which his father has belonged. Rather than do this, the present owner will usually reduce the present standard of living of the entire family and try to make sure that its future standard shall not fall below the one thus established. It seems better to maintain the somewhat lower standard through a series of generations than to make the present mode of living more luxurious at the cost of unclassing one's self and one's heirs at a later date. _This Fact heretofore Underestimated._--To the writers who have cited this familiar fact it appears to require merely a partial amendment of the general proposition that a high rate of interest insures more saving than a low one, and the inference which one naturally draws from this supposed fact is that growing wealth, as is still supposed, reduces the incentive for the accumulation of more wealth. Such an accumulation is an essential part of general progress and is practically necessary for sustaining the rate of wages. Here, then, if this supposition is true, we might see an important influence tending to bring progress to a standstill. Great wealth as the result of progress, a reduced motive for acquiring still further wealth, a retarding of progress--such would be the sequence. Dynamics would thus be, in a very important respect, self-retarding if not self-halting. _Future Standards of Living the Important Element._--The actual fact, as we may venture to affirm, is that the standards of living which need to be maintained in the future are the all-important element in the case. To the laboring man it is necessary to avoid starvation or the workhouse; to the well-paid artisan it seems necessary to do this and to make for his children a provision which will keep them in the same class with himself. To the capitalist who by successful business has raised himself above the artisan class it seems necessary to keep his children above the rank from which he has lifted the family; and the same principle applies to all the wealthier classes. The tenacity with which a man holds to a station in life outweighs his desire to add to his own present luxuries, and his ambition to keep his children in a certain station far outweighs his desire to add to their present luxuries. _The Importance of Future Standards not affected by the Fact that Men differ in Altruism._--This does not at all raise the question how many people care as much for their children as they do for themselves. That is not the principle at issue. _In so far as men do care for their children_ the end they seek for them is to enable them to avoid what seems like a disaster, rather than to make positive gains in the way of comfortable living. Even in the case of those who have little altruism, such provision as they make for descendants is inspired by the desire to keep them within a certain class more than by any computation of how many comforts or luxuries a surplus income of any amount might give them. Whatever provision for children a selfish or dull person makes is dictated by the same motive that incites him to make provision for his own future, and in both cases it is chiefly the maintenance of a standard that he usually has in mind. _The Principle not invalidated by the Fact that Forethought is often Weak._--All the motives for saving may be unduly weak. The man may care far less for the future than he should do, and may make an unreasonably small provision for it. Incapacity to estimate the importance of this provision, as well as the degree of selfishness which excludes the exercise of self-denial for the benefit of others, are not the only reasons for this disregard of the future. There is an optimism which is natural; and a religious faith which bids one not to take unduly anxious thought for the morrow may occasionally be carried to the harmful length of justifying a neglect of coming years and their needs. An intelligent trust in Providence, however, incites a man to do his own full duty, and it is the better men who do the most to avert future evils from their families. The principle that we are maintaining applies as completely in the cases of those who make small provision for the future as it does in any others. In the majority of cases whatever they do save is set aside chiefly for the maintenance of some standard of living by those who get the benefit of it; and to maintain any standard whatever, whether high or low, requires a larger fortune when interest is low than it does when interest is high. _Forethought limited in the Length of Time it Covers._--There is little danger that we make any mistake in ascribing to the dread of falling below a standard of living more influence on the accumulation of capital than any other motive exerts. This will be clearer if we look at the actual manner in which present and future are estimated and compared. The fact is not that most people care unduly little for all future benefits as compared with present ones, as it is that they throw off responsibility for all the future beyond a limited period. The perspective does not reduce the size of remote objects unduly as often as it cuts off the view of them altogether. In looking through coming years a man is subject to a certain economic myopia. One might compare what he sees with what a man sees in a foggy atmosphere, if it were not for the fact that the view of comparatively near objects is clear. It is as though a circle of fog surrounded him and cut off somewhat abruptly the view of everything that was far away. For a short distance the man sees everything with comparative clearness, but the limitless spaces that lie beyond he sees not at all. We have seen that the amount of abstinence he will practice now for the sake of what he or others will gain later varies as he is rational or foolish, unselfish or selfish, and it is also true that the length of his outlook into the future varies in the same way. There are all gradations of far-sightedness among those who create capital; but even comparatively near-sighted ones usually provide for the maintenance of some standard or other during the period that falls within their range of vision, and this requires that they should save more when interest is low than they do when interest is high. _Marginal Capitalists._--In this connection, however, it is to be noted that economic myopia may go to the extreme length of making men nearly indifferent to all future standards. In this case they constitute an exception to the general rule, since whatever they save, if they save at all, is likely to be more when interest is high than when it is low. They are marginal capitalists, who are not influenced by any benefits except immediate ones and only inquire how much an investment will, from the day when it is made, add to their own incomes. The higher rate is then the greater lure. Moreover, other capitalists, who are influenced mainly by regard for future standards of living, are somewhat affected by the immediate benefit which marginal savers have exclusively in view. To the extent that they are so, the higher the rate of their immediate returns, the more strongly are they impelled to "abstain" and accumulate. The essential fact is that marginal capitalists are few numerically, and their savings count for little as they enter into the general fund, and that most capitalists, including nearly all who save great amounts, do it chiefly from a desire to maintain themselves and their descendants on an established level of living. In the main the social motives for saving are those we have described. _Enjoyment largely Teleological._--There is a special reason why a rational man, if offered an enjoyment now or later, at his option, is quite likely to take it later. Enjoyment is mainly teleological. It consists in a conscious approach to a desirable end. The knowledge that one's efforts to attain a desired goal are successful and that the good thing is really coming, sheds a light on the present. Indeed, it is anticipation and memory which prolong any enjoyment, and of these anticipation is the more effective. The knowledge that one is at a certain time to sail for a foreign tour confers before the sailing an enjoyment which is often more than a foretaste. It often rivals the pleasure that is consciously taken in the trip itself. A man may be happy for years in the prospect of a business success or a prospect of election to a public office, and many years of hard labor in scientific investigation may be illuminated by the expectation of the ultimate discovery and its consequences. There is a good reason why even an average man, as well as a wise one, will wish to distribute his expenditures over the different periods of his life, and to give a preference to the future whenever that is necessary in order to enable him to hold through his earlier years the comfortable assurance that his later ones are well provided for. [Illustration] If the line _AB_ represents by its distance above _CD_ a fixed standard of living during a period of ten years, the highly rational man will prefer to take something from the enjoyments of the first five and bestow them on the second five. The consciousness of improvement, of the fact that every year will bring a new enjoyment never before experienced, makes the whole life brighter than it could be with any other disposition of the available means of pleasure. The man's standard of living during the whole ten-year period will be represented by the rising dotted line _EF_. _The Effect of Robbing the Future._--If a man pursued the opposite course, of taking something from the future to add to the desirableness of the present, thus establishing a falling standard of living, he would have to relinquish every year something to which he was accustomed, which would cause him a keen pain. The very excessive gains of the present would thus become sources of unhappiness at a later period, while the anticipation of the later unhappinesses would throw a shadow over the present. The men who in spite of all this live recklessly and waste their present substance do so, not so much because they undervalue so much of the future as falls within their purview, as because they are so extremely short-sighted that over nearly all of the future they have practically no vision at all. _The Actual Conduct of a very Reasonable Man._--The real fact in the case of a reasonable man is represented by the following figure:-- [Illustration] Line _EF_ measures fifty years and line _FG_ another fifty. The heavy line _AB_, rising toward the right, represents the rising standard of living which the man's reason makes him maintain during the period over which his vision is clear, while the dotted line _BC_ represents the standard for which, in an imperfect way, he makes provision during the next fifty years. Over later periods his vision does not extend at all. It loses clearness after the point _B_ is passed, and in the same proportion it loses influence over the man's conduct. He therefore reconciles himself to whatever standard may prevail, even though it were a stationary one during the latter part of the time. Very seldom, however, would the man consciously lower the standard even during this later period. _The Effect of Limited Vision on the Valuation of a Perpetual Income._--This failure of vision, or economic myopia, accounts for the fact that the infinite series of payments of interest that a sum of invested capital will earn do not overbalance, in the man's estimate, the principal which he must refrain from spending in order to get them. If interest is at five per cent, abstaining from using a hundred dollars for present pleasure will put into the man's hands, in twenty years, a sum equal to the principal, in twenty years more another like sum, and so on _ad infinitum_. The man who considers whether he shall save a hundred dollars or spend it might be said to be comparing the importance of a hundred present dollars with that of an infinite number of future ones. In his consciousness the number is not infinite, because his vision does not extend over much of the future. The fact of most importance, as determining whether low interest causes small savings, is that in weighing the importance of the dollars which will be used during the period over which his vision ranges the average man is influenced by a desire to maintain some standard of living, which involves the more saving, the lower the rate of interest. _The Action of the Motive for Saving on Minds of Varying Degrees of Reasonableness._--Not only the man who looks a little way forward, but the man so constituted that he can content himself with a falling standard, is impelled to save more if interest is low than he is if interest is high, so long as he deems it necessary to maintain any standard at all; but much importance still attaches to the question whether the standard which the man hopes to maintain is a rising, a stationary, or a falling one. The average man, indeed, does hope to maintain at least a stationary standard during so much of the future as he cares much about. This mode of distributing pleasures appears in matters both small and great. In taking a walk for pleasure one is more likely to go up a rising grade first and descend afterward than he is to go down at first and afterward bear the fatigue of climbing. While there may be those who would rather play in the forenoon and work in the afternoon, when the choice is presented at the beginning of the day, there are certainly more among the classes that society depends on for capital who would put the work in the forenoon and the pleasure in the afternoon or evening. If a man were taking a canoeing trip on a swiftly flowing stream, he would paddle his boat up the stream and then come down with the current, rather than let it float down with the current and then paddle it back. If it be thought that this is true of only a specially rational mind, one may say that the capitalist class represents men who in this respect are more than ordinarily rational. They are generous, foresighted, and in their relation to descendants affectionate. The men who really do the saving for society have more to make them think and act in the intelligent way we have described than do ordinary men. The miser, the paragon of abstinence, can hardly be said to be the man who thinks too much of future enjoyments, for he contemplates no such enjoyments that call for spending money, for he never means to spend it. He is an abnormal type and fortunately a rare one. With him there is a standard of _possessions_ to be maintained, rather than one of enjoyments, and it is always a rising standard, since he cares for nothing so much as to see his possessions increasing. To make them increase at any given rate when the direct earnings of capital are small requires severer abstinence than it would if the capital yielded a larger return. _The Effect of an Increase in the Number of Persons who seek to maintain a Rising Standard of Living._--While it is true that even the half-evolved intellects that care little for coming years do, if they care for them at all, find themselves impelled to save more capital when interest is small than they do when it is large; it is also true that minds of a high order save more than minds of a low one. In order to live during one's latter years just out of danger of the workhouse, one does not need to trench deeply on the comforts and pleasures which he is able to enjoy during the greater part of his life; but if he is determined to live to the end of his days as well as he has done at any time and to help his children to do the same, he must practice a severer self-denial and accumulate a larger fund. Still sharper becomes the abstinence and still greater the accumulated fund where men provide for a future mode of living that shall surpass the present one. The importance of this fact lies in this: the condition which brings with it a low rate of interest does so because of the great number of men who do thus value a future standard of living that shall be at least stationary if not positively rising. The growing size of the social capital implies a more general appreciation of the importance of future well-being. Because men's economic psychology has become what it is and because it is still changing for the better there is a second reason for expecting that the accumulation of capital will not hereafter be retarded. We make here no extravagant claim as to the number of persons in a community who take the more rational views as to present and future. The number of each class is what it is; but facts show that the maintenance of some standard is the most efficient motive for saving in the case of each one of them, and that low interest therefore calls for large accumulations. They do show that the number who take the more rational views is a growing class, that they accumulate more than other classes, and that every addition to their relative number makes for more rapid accumulation within the society of which they are members. Two decisive reasons, then, exist for thinking that the growth of capital will never end or check further growth. There are still further facts, however, which have a bearing on this problem. _The Importance of the Character of the Increases which are the Largest Sources of Accumulation._--If one has a doubt whether the large sums which enter into the capital which is steadily accumulating are saved under the influence of a desire to maintain a standard, this doubt will be removed by a consideration of the source from which great accumulations come. They come most largely from the net profits of the _entrepreneur_. Next to that they come from the earnings of what must be classed as labor, though much of it is labor of a special and very superior sort. The salary which the head of a corporation receives, the fees that its lawyers get, the fees that come to eminent surgeons or engineers, are all payments for labor; and these, taken together with the earnings of well-paid artisans, successful farmers, and very many others, constitute the second contribution to accumulating capital. Savings from simple interest itself constitute the third contribution.[1] [1] Gains which come from holding land which rises in value more rapidly than the interest on the price of it accumulates, is to be rated as part of net _entrepreneur's_ profits. Now, of these sources of income, net profits and the wages of superior labor are transient, and the profits are particularly so. The man whose mill earns fifty per cent in a particular year would be foolish in the last degree if he used all that as income. That would mean brief and riotous enjoyment, followed by a most painful fall from the standard so established. He will naturally spend some part of the phenomenal dividend and lay aside enough of it to afford a guarantee that his future income will not fall below the present one. The man who during the best years of his working life enjoys a salary or professional fees amounting to a hundred thousand dollars a year would be almost equally foolish if he were to spend it all as he earns it, leaving his family unprovided for and his own later years exposed to the pains of sharp retrenchment. Transient incomes suggest to every one who has any degree of reason the need of establishing and maintaining some future standard of living, and of investing enough to accomplish this. This is more true, of course, when the rate of interest is low. _The Importance of the Need of Enlarging a Business._--There is a special reason why legitimate business profits are morally certain to be to a large extent laid aside for investment. The man would say that he "needs them in his business." They come at a time when there is an inducement to enlarge the scale of his profitable operations. The man who is getting a dividend of fifty per cent per annum must make hay while the sun shines, and he can do it by doubling the capacity of his mill. What he makes and what he can borrow he uses for an increase of his output, which it is important to secure during the profitable time. All this means a quick increase of the total capital in existence. The profits of a monopoly are not transient, but are likely to be both long-continued and large, and it might seem that they would constitute a larger source of addition to capital than those profits which come from technical improvement. There are several reasons why this is not the fact. In the first place, what we are discussing is the addition that profits make to the total capital of society, rather than to the capital of any one person or corporation. The monopoly makes its gains by taking something from the pockets of the general public, and in so far it reduces the power of the general public to save. It might be alleged, however, that since a monopoly reduces wages and interest, adds to profits, and creates enormous incomes for a few persons, it really diverts income from a myriad of persons who would save very little of it, and puts it into the pockets of a few persons who are likely to save a great deal of it. This might conceivably add to the capital of society were it not for the fact that the more secure and regular gains of monopolies are made the basis of large capitalization. A company that earns twenty-five per cent of its real capital per annum may have its stock diluted with four parts of water and pay only five per cent in dividends on its capitalization. This looks like interest and is apt to be treated as such by those who receive it. It is, therefore, not a more favorable income from which to make accumulations of capital than is the interest on real capital. The sudden gains which promoters and manipulators of consolidated companies make are, indeed, transient gains and may be largely added to capital. The introduction of a régime of monopoly may insure a period of much saving by the class that profits by it; but the later career of the monopoly is unfavorable to the growth of capital. _The Special Effect of a Prospective Fall in the Rate of Interest._--If interest which continues steadily at a low rate affords an especially strong incentive for saving, it follows that a falling rate, one that begins low and steadily becomes lower, affords a still stronger one. The average rate during the years of the future for which a prudent man makes provision is made, of course, lower than it would be if the rate were stationary. This influence is probably not as effective as it would be if the remote future were included in the view of those who are securing capital. On account of the near-sightedness to which attention has been called, a rate of interest that begins at four per cent and falls very slowly to three and a half presents to those who have this defective vision the same incentive to saving as one that begins at four per cent and remains steadily at that figure. What is true, however, is that a falling rate is to be expected, that this fact acts as a stimulus for saving in the case of the more far-sighted classes, and that the number of persons in these classes is increasing. In so far as the increase of capital is concerned society is secure against the danger of reaching a stationary state. Progress in wealth will not build a barrier against itself by stinting the resources on which hereafter labor must rely. When we examine the sources from which capital mainly comes, we shall further test the probability that the instrumentalities which add productive power to human effort will increase through the longest period that science needs to take account of.[2] [2] For a somewhat similar view of the effect of a fall of interest on the accumulation of capital, see Webb's "Industrial Democracy," Vol. II, pp. 610-632. CHAPTER XXI CONDITIONS INSURING PROGRESS IN METHOD AND ORGANIZATION _The Possibility of a Law of Technical Progress._--It might seem that inventions were not subject to any influence that can be described under the head of a law. Genius certainly follows its own devices, and inventive power that has in it any touch of genius may be supposed to do the same. It is, however, a fact of experience that some circumstances favor and increase the actual exercise of this faculty, while other influences deter it. Moreover, what is important is not merely the making of inventions, but the introduction of such of them as are valuable into the productive operations of the world. Some influences favor this and others oppose it, and it is entirely possible to recognize the conditions in which economies of production rapidly take place in the actual industry of different countries. Technical progress has been particularly rapid in the United States, though in this respect Germany has in recent years been a strong rival, and ever since the introduction of steam engines and textile machinery, England has continued to make a brilliant record. France, Belgium, and a number of other countries of Europe have developed an industry that is in a high degree dynamic, and Japan is now in the lists and giving promise of holding her own against the best of her competitors. The question arises whether it is something in the people, or something in their natural and commercial environment, which makes differences between their several rates of progress. _Inventive Abilities widely Diffused._--In so far as originating important changes is concerned, mental alertness and scientific training without doubt have a large effect. Some races have by nature more of the inventive quality than others, but within the circle of nations that we include in our purview no one has any approach to a monopoly of this quality. Any people that can make discoveries in physical science can make practical inventions, and will certainly do so if they are under a large incentive to do it. Moreover, alertness in discovering and duplicating the inventions of others is as important in actual business as originating new devices. At present it is a known fact that the Germans not only invent machinery, but quickly learn to make and to use machinery that originates elsewhere and demonstrates its value in reducing the cost of the production; and the remote Japanese have not only surpassed all others in the quick adoption of economic methods that have originated in Western countries, but have put their own touch upon them and revealed the existence of an inventive faculty that is likely to make them worthy rivals of Occidental races. _The Importance of Inducements to make and use Inventions._--Granted a wide diffusion of inventive ability, the actual amount of really useful inventing that is done must depend on the inducement that is offered. Will an economical device bring an adequate return to the man who discovers it and to the man who introduces it into productive operations? If it will, we may expect that a brilliant succession of such devices will come into use, and that the power of mankind to bend the elements of nature to its service will rapidly increase. _The Usefulness of a Temporary Monopoly of a New Device for Production._--If an invention became public property the moment that it was made, there would be small profit accruing to any one from the use of it and smaller ones from making it. Why should one _entrepreneur_ incur the cost and the risk of experimenting with a new machine if another can look on, ascertain whether the device works well or not, and duplicate it if it is successful? Under such conditions the man who watches others, avoids their losses, and shares their gains is the one who makes money; and the system which gave a man no control over the use of his inventions would result in a rivalry in waiting for others rather than an effort to distance others in originating improvements. This fact affords a justification for one variety of monopoly. The inventor in any civilized state is given an exclusive right to make and sell an economical appliance for a term of years that is long enough to pay him for perfecting it and to pay others for introducing it. Patents stimulate improvement, and the general practice of the nations indicates their recognition of this fact. They all give to the inventor a temporary monopoly of the new appliance he devises, but this monopoly differs from others in this essential fact: the man is allowed to have an exclusive control of something which otherwise might not and often would not have come into existence at all. If it would not,--if the patented article is something which society without a patent system would not have secured at all,--the inventor's monopoly hurts nobody. It is as though in some magical way he had caused springs of water to flow in the desert or loam to cover barren mountains or fertile islands to rise from the bottom of the sea. His gains consist in something which no one loses, even while he enjoys them, and at the expiration of his patent they are diffused freely throughout society. _Possible Abuses of the Patent System._--It is of course true that a patent may often be granted for something that would have been invented in any case, and patents which are granted are sometimes made too broad, and so cover a large number of appliances for accomplishing the same thing. In these cases the public is somewhat the loser; but for the reasons about to be given this loss is far more than offset by the gain which the system of patents brings with it. The gains of the inventor cannot extend much beyond the period covered by his patent, unless some further and less legitimate monopoly arises. If the use of an important machine builds up a great corporation which afterward, by virtue of its size, is able to club off competitors that would like to enter its field, the public pays more than it should for what it gets; and yet even in these cases it almost never pays more than it gets. The benefit it derives is simply less cheap than it ought to be. Much of the power of the telephone monopoly has been extended beyond the duration of its most important patent, and that patent was in its day broader than it should have been; and yet there never was a time when the use of the telephone in facilitating business, and in saving time and trouble in a myriad of ways, did not far outweigh the total cost which the users of telephones incurred. As we shall soon see, important inventions invariably confer some benefit on the public at the start. The owner of the new device must find a market for his products, and must offer them on terms which will make it for the interest of the public to use them largely. _The Effect of Competition in Causing Improvements to Multiply._--Competition insures a large number of inventors and offers to each of them a large inducement to use his gifts and opportunities. A great corporation may employ salaried inventors and, because of its great capital and large income, it may experiment with inventions with far less risk to itself than an inventor usually takes. When large corporations compete actively with one another, the employment of salaried inventors is very profitable to them; and improvements in production go on more rapidly than they are likely to do after these firms consolidate with each other and cease to feel the spur which the danger of being distanced in a race affords. It is a fact of observation, and not merely an inference, that monopolies are not as enterprising as competing companies. _Effects of Monopoly on the Spirit of Enterprise._--In monopolies, theoretically, there is the same inducement to adopt inventions as in the case of competing firms, excepting always the motive of self-preservation. The monopoly can make money by improvements as competing firms would do. A perfectly intelligent monopoly, with disinterested management, would adopt an improvement offered to it as promptly as any competing firm, if the sole motive were profit. There is no reason why an intelligent monopoly should hold on to antiquated machinery, when modern machinery would enable it to stand the cost of introduction and make a net improvement besides. A competing producer gains an advantage over his rivals by discarding old machinery and adopting new at exactly the right time, neither too late nor too early. The true point of abandonment of the old machine, as we have already seen, is reached when the labor and capital that now work in connection with it can make a shade more by casting it off and making a combination of a better kind; and this rule applies to monopolies as well as to competitors. At just the point where a competitor can gain an advantage over rivals by modernizing his appliances, the monopoly can make money by doing so. An important fact is that the monopoly has as a motive the making of profits for its stockholders. Not only is that a less powerful motive than self-preservation, but it appeals largely to persons who are not themselves in control of the business. Absentee ownership is the chief disability of the monopoly. Managers may have other interests than those of large dividend making, and in such cases a monopoly is apt to wait too long before changing its appliances. It needs to be in no hurry to buy a new invention, and it can make delay and tire out a patentee, in order to make good terms with him; and this practice affords little encouragement to the independent inventor. On the whole, a genuine and perfectly secure monopoly would mean a certain degree of stagnation where progress until now has been rapid. _Why the Public depends on Competition for Securing its Share of Benefit from Improvements._--Another question is whether the two systems, that of competition, on the one hand, and monopoly, on the other, confer equal benefits on the public by virtue of the improvements they make. Competition does this with the greatest rapidity. As we have seen, it transforms the net profits due to economies into increments of gain for capitalists and laborers throughout all society. The wages of to-day are chiefly the transformed profits of yesterday and of an indefinite series of earlier yesterdays. The man who is now making the profits is increasing his output, supplanting less efficient rivals, and giving consumers the benefit of his newly attained efficiency in the shape of lower prices of goods. In practice rivals take turns in leading the procession; now one has the most economical method, now another, and again another; and the great residual claimant, the public, very shortly gathers all gains into its capacious pouch and keeps them forever. Would a secure monopoly do something like this? Far from it. It would be governed at every step by the rule of maximum net profits for itself. Its output would not be carried beyond the point at which the fall in price begins really to be costly. The lowering of the price enlarges the market for the monopoly's product and up to a certain point increases its net gains. Beyond that point it lessens them. [Illustration] Now, even the interest of the monopoly itself would lead it to give the public some benefit from every economy that it makes. This is because the amount of output that will yield a maximum of profit at a certain cost of production is not the same that will yield the maximum of net profit when the cost is lower. Every fall in cost makes it for the interest of the monopoly to enlarge its output somewhat, but by no means as much as competing producers would enlarge theirs. It will always hold the price well above the level of cost. In the accompanying figure distance along the line _AK_ represents the amount of goods produced, while vertical distance above the line measures costs of production, as well as selling prices, and the descending curve _FJ_ represents the fall of prices which takes place as the output of the goods is increased. Now, when the cost of production stands at the level of the line _CI_, the amount of output that will yield the largest amount of net profit is the amount represented by the length of the line _AM_. That amount of product can be sold at the price represented by the line _MG_. The gross return from the sale will be expressed by the area of the rectangle _AEGM_, and the area _CEGN_, which falls above the line of cost, _CI_, is net profits. They are larger than they would be if the line _MG_ were moved either to the right or to the left, _i.e._, if the amount of production were made either larger or smaller. Now, if the cost of production falls to the level of the line _BJ_, it will be best to increase the output from _AM_ to _AL_. The whole return will then be represented by the rectangle _ADHL_, and the area _BDHO_ represents profits, with the cost at the new and lower level. These are somewhat larger than they would be if the output continued to be only the amount _AM_. Under free competition the price would fall to the line _BJ_, the net profits would disappear, and the public would have the full benefit of the improvement in production. _The Purpose of the System of Patents._--Patents are a legal device for promoting improvements, and they accomplish this by invoking the principle of monopoly which in itself is hostile to improvement. They do not as a rule create the exclusive privilege of producing a kind of consumers' goods, but they give to their holders exclusive use of some instrumentality or some process of making them. The patentee is not the only one who can reach a goal,--the production of a certain article,--but he is the only one who can reach it by a particular path. A patented machine for welting shoes stops no one from making shoes, but it forces every one who would make them, except the patentee or his assigns, to resort to a less economical process. _Patents Limited in Duration indispensable as Dynamic Agents._--If an inventor had no such protection, the advantage he could derive would be practically _nil_, and there would be no incentive whatever for making ventures except the pleasure of achievement or the honor that might accrue from it. In the case of poor inventors this would be cold comfort in view of the time and outlay which most inventions require. Not only on _a priori_ grounds, but on grounds of actual experience and universal practice, we may say that patents are an indispensable part of a dynamic system of industry. It is also important that the monopoly of method which the patent gives should be of limited duration. If the method is a good one and the profit from using it is large, the seventeen years during which in our own country a patent may run affords, not only an adequate reward for the inventor, but an incentive to a myriad of other inventors to emulate him and try to duplicate his success. Ingenious brains, which are everywhere at work, usually prevent the owners of a particular patent from keeping any decisive advantage over competitors during the whole period of seventeen years. Long before the expiration of that time some device of a different sort may enable a rival to create the same product with more than equal economy, and the leadership in production then passes to this rival, to remain with him till a still further device effects a still larger economy and carries the leadership elsewhere. That alternation in leadership which we have described and illustrated takes place largely in consequence of our system of patents; and yet every particular patent affords a quasi-monopoly to its holder. The endless succession of them insures a wide diffusion of advantages. At the expiration of each patent, even if it has not been supplanted by a later and more valuable one, the public gets the benefit of the full economy it insures, and wherever an unexpired patent is supplanted by a new one, the public gets this benefit much earlier. Cost of production tends rapidly downward, and the public is the permanent beneficiary. _Patents as a Means of Curtailing Monopolies._--While a patent may sometimes sustain a powerful monopoly it may also afford the best means of breaking one up. Often have small producers, by the use of patented machinery, trenched steadily on the business of great combinations, till they themselves became great producers, secure in the possession of a large field and abundant profit. Moreover, in the case of a patent which builds up a monopoly and continues for the full seventeen years of its duration unsupplanted by any rival device, the public is likely to get more benefit than the patentee, or even the company which uses his invention. In widening the market for its product the company must constantly cater to new circles of marginal consumers, and must give to all but the marginal ones an increasing benefit that is in excess of what it costs them. Probably few patents have been issued in America which illustrate the unfavorable features of the system more completely than did the Bell telephone patent, which gave to a single company during a long period a monopoly of the telephone business; and yet there are few men of affairs who do not perceive that, in the saving of time which the telephone effected and in the acceleration of business which it caused, they gained from the outset more than they lost in the shape of high fees. Something of the same kind is true of the users of domestic telephones; for though they may cost more than they should, they do their share toward placing those who use them on a higher level of comfort. _The Law of Survival of Efficient Organization._--In broad outlines we have depicted the conditions which favor technical progress. There is a law of survival which, when competition rules, eliminates poor methods and introduces better ones in endless succession. Under a régime of secure monopoly this law of survival scarcely operates, though desire for gain causes a progress which is less rapid and sure. The same may be said of changes in organization, in so far as that means a coördinating of the labor and the capital within an establishment. When the manager of a mill so marshals his forces as to get a much larger product per man and per dollar of invested capital than a rival can do, he has that rival at his mercy and can absorb his business and drive him from the field. In order to survive, any producer must keep pace with the aggressive and growing ones among his rivals in the march of improvement, whether it comes by improved tools of trade or improved generalship in the handling of men and tools. Quite as remorseless as the law of survival of good technical methods is the law of survival of efficient organization, and so long as the organization is limited to the forces under the control of single and competing _entrepreneurs_, what we have said about the advance in methods applies to it. It is a beneficent process for society, though its future scope is more restricted than is that of technical improvement, since the marshaling of forces in an establishment may be carried so near to perfection that there is a limit on further gains. Moreover organization, in the end, ceases to confine itself to the working forces of single _entrepreneurs_, but often continues till it brings rival producers into a union. _The Extension of Organization to Entire Subgroups._--Both of these modes of progress cause establishments to grow larger, and the ultimate effect of this is to give over the market for goods of any one kind to a few establishments which are enormously large and on something like a uniform plane of efficiency. Then the organizing tendency takes a baleful cast as the creator of "trusts" and the extinguisher of rivalries that have insured progress. When monster-like corporations once start a competitive strife with each other, it is very fierce and very costly for themselves; and this affords an inducement for taking that final step in organization which brings competition to an end. That is organization of a different kind, and the effects of it are very unlike those of the coördinating process which goes on within the several establishments. In this, its final stage, the organizing tendency brings a whole subgroup into union, and undoes much of the good it accomplished in its earlier stage, when it was perfecting the individual establishments within the subgroup. While the earlier process makes the supply of goods of a certain kind larger and cheaper, the final one makes it smaller and dearer; and while the earlier process scatters benefits among consumers, the final one imposes a tax on consumers in the shape of higher prices for merchandise. Yet the union that is formed between the shops is, in a way, the natural sequel to the preliminary organization which took place within them and helped to make them few and large. Trusts are a product of economic dynamics, and we shall study them in due time. The organization we have here in view is the earlier one which takes place within the several establishments. It obeys a law of survival in which competition is the impelling force, though it leads to a condition in which an effort is made to bring competition to an end. This earlier organization is most beneficent in its general and permanent effects; and what has been said of the results of progress in the technique of production may, with a change of terms, be said again of progress in the art of coördinating the agents employed. It is a source of temporary gain for _entrepreneurs_ and of permanent gains for laborers and capitalists. It adds to the grand total of the social product and leaves this to be distributed in accordance with the principle which, in the absence of untoward influences, would treat the producers fairly--that which tends to give to each producer a share more or less equivalent to his contribution. In its nature and in its results it is the opposite of that other type of organization which seeks to bring competitive rivalry to an end, and in so far as it succeeds divorces men's contributions to the social product from the shares that they draw from it. CHAPTER XXII INFLUENCES WHICH PERVERT THE FORCES OF PROGRESS Thus far we have been dealing with what we have called natural forces. The phenomena which we have studied have not been caused by any conscious and purposeful action of the people as a whole. They have not been brought about by the power of governments nor by anything which savors of what is called collectivism. Individuals have done what they would, seeking to promote their own interests under conditions of great freedom, and the effect has been a system of social industry which is highly productive, progressive, and generally honest. Production has constantly increased, and the product has been shared under the influence of a law which, if freedom were quite complete and competition perfect, would give to each producer what he contributes to the aggregate output of the great social workshop. We have claimed that, in the world as it is, influenced by a great number of disturbing forces, these fundamental laws still act and tend to bring about the condition of productiveness, progress, and honesty which is their natural result. If the actual condition falls short of this, the fact is mainly due to curtailments of freedom and interferences with the competition which is the result of freedom. _Influences which retard Static Adjustments._--Throughout the study we have paid due attention to those ordinary elements of "economic friction" which all theoretical writers have recognized and which practical writers have put quite in the foreground; and we have discovered that, while they are influences to be taken account of in any statement of principles, they in no wise invalidate principles themselves. For the most part they are influences which retard those movements which bring about static adjustments. An invention cheapens the production of some article and at once the natural or static standard of its price falls; but the actual price goes down more slowly, and in the interim the producer who has the efficient method gathers in the fruit of it as a profit. The retarding influence is a fact that should be as fully recognized in a statement of the law of profit as any other. The existence of it is an element in the theory of _entrepreneur's_ profit. Improvements which reduce the cost of goods enhance the product of labor, and this sets a higher standard for wages than the one that has thus far ruled; but a delay occurs before the pay of workmen rises to the new standard. Adjustments have to be made which require time, and these are as obviously elements that must be incorporated into an economic theory as any with which it has to deal. _Influences which resist Dynamic Movements._--If there is anything which, without impairing the motive powers of economic progress, puts an obstacle in the way of the movement, it has to be treated like one of these elements of friction to which we have just referred. In our discussion of the growth of population, the increase of wealth, the improvement of method, etc., we have paid attention to resisting forces as well as others, and have tried to determine what is the resultant of all of them. The forces of resistance have their place in a statement of dynamic laws. _An Influence that perverts the Forces of Progress._--We have to deal, not only with such retarding influences, but with a positive perversion of the force that makes for progress. Everywhere we have perceived that competition--the healthful rivalry in serving the public--is essential in order that the best methods and the most effective organization should be selected for survival, and that industry should show a perpetual increase in productive power. In our study of the question whether improved method and improved organization tend to promote or to check further improvement, we have found that these beneficent changes are naturally self-perpetuating, so long as the universal spring of progress, competition, continues. A proviso has perforce been inserted into our optimistic forecast as to the economic future of the world--if nothing suppresses competition, progress will continue forever. _Monopoly and Economic Progress._--The very antithesis of competition is monopoly, and it is this which, according to the common view, has already seated itself in the places of greatest economic power. "Competition is excellent, but dead," said a socialist in a recent discussion; and the statement expresses what many believe. There is in many quarters an impression that monopoly will dominate the economic life of the twentieth century as competition has dominated that of the nineteenth. If the impression is true, farewell to the progress which in the past century has been so rapid and inspiring. The dazzling visions of the future which technical gains have excited must be changed to an anticipation as dismal as anything ever suggested by the Political Economy of the classical days--that of a power of repression checking the upward movement of humanity and in the end forcing it downward. No description could exaggerate the evil which is in store for a society given hopelessly over to a régime of private monopoly. Under this comprehensive name we shall group the most important of the agencies which not merely resist, but positively vitiate, the action of natural economic law. Monopoly checks progress in production and infuses into distribution an element of robbery. It perverts the forces which tend to secure to individuals all that they produce. It makes prices and wages abnormal and distorts the form of the industrial mechanism. In the study of this perverting influence we shall include an inquiry as to the means of removing it and restoring industry to its normal condition. We shall find that this can be done--that competition can be liberated, though the liberation can be accomplished only by difficult action on the part of the state. _The comparatively Narrow Field of Present Action by the State._--Economic theory has always recognized the existence and the restraining action of the civil law, which has prohibited many things which the selfishness of individuals would have prompted them to do. Certain officers of the state constitute, as we saw in an early chapter, one generic class of laborers, one of whose functions it is to retain in a state of appropriation things on which other men have conferred utility--that is, to protect property, and so to coöperate in the creation of wealth. In a few directions they render services which private employers might render in a less effective way. The state, through its special servants, educates children and youth, guards the public health, encourages inventions, stimulates certain kinds of production, collects statistics, carries letters and parcels, provides currency, improves rivers and harbors, preserves forests, constructs reservoirs for irrigation, and digs canals and tunnels for transportation. In these ways and in others it enters the field of positive production; but in the main it leaves that field to be occupied by private employers of labor and capital. Business is still individualistic, since those who initiate enterprises and control them are either natural persons or those artificial and legal persons, the corporations. _The Growing Field of Action by Corporations._--Until recently there has been comparatively little production in the hands of corporations great enough to be exempt from the same economic laws which apply to a blacksmith, a carpenter, or a tailor. Individual enterprise and generally free competition have prevailed. The state has not checked them and the great aggregations of capital to which we give the name "trusts" have not, in this earlier period, been present in force enough to check them. The field for business enterprise has been open to individuals, partnerships, and corporations; they have entered it fearlessly, and a free-for-all competition has resulted. This free action is in process of being repressed by chartered bodies of capitalists, the great corporations, whom the law still treats somewhat as though in its collective entirety each one were an individual. They are building up a semi-public power--a quasi-state within the general state--and besides vitiating the action of economic laws, are perverting governments. They trench on the freedom on which economic laws are postulated and on civic freedom also. _How Corporations pervert the Action of Economic Laws._--Whatever interferes with individual enterprise interferes with the action of the laws of value, wages, and interest, and distorts the very structure of society. Prices do not conform to the standards of cost, wages do not conform to the standard of final productivity of labor, and interest does not conform to the marginal product of capital. The system of industrial groups and subgroups is thrown out of balance by putting too much labor and capital at certain points and too little at others. Profits become, not altogether a temporary premium for improvement,--the reward for giving to humanity a dynamic impulse,--but partly the spoils of men whose influence is hostile to progress. Under a régime of trusts the outlook for the future of labor is clouded, since the rate of technical progress is not what it would be under the spontaneous action of many competitors. The gain in productive power which the strenuous race for perfection insures is retarded, and may conceivably be brought to a standstill, by the advent of corporations largely exempt from such competition. There is threatened a blight on the future of labor, since the standard of wages, set by the productivity of labor, does not rise as it should, and the actual rate of wages lags behind the standard by an unnaturally long interval. There is too much difference between what labor produces and what it ought to produce, and there is an abnormally great difference between what it actually produces and what it gets. _The Fields for Monopolies of Different Kinds._--Monopoly is thus a general perverter of the industrial system; but there are two kinds of monopoly, of which only one stands condemned upon its face as the enemy of humanity. For a state monopoly there is always something to be said. Even socialism--the ownership of all capital, and the management of all industry by governments--is making in these days a plea for itself that wins many adherents, and the demand that a few particular industries be socialized appeals to many more. The municipal ownership of lighting plants, street railways and the like, and the ownership of railroads, telegraph lines, and some mines by the state are insistently demanded and may possibly be secured. We can fairly assume that, within the period of time that falls within the purview of this work, general socialism will not be introduced. In a few limited fields the people may accept governmental monopolies, but private monopolies are the thing we have chiefly to deal with; and it is to them, if they remain unchecked, that we shall have to attribute a disastrous change in that generally honest and progressive system of industry which has evolved under the spur of private enterprise. _Two Modes of Approaching a Monopolistic Condition._--The approach to monopoly may be extensive or intensive. A fairly complete monopoly may be established in some part of the industrial field, and the area of its operations may then be extended. Smelters of iron and steel, after attaining an exclusive possession of their original fields of production, may become carriers, producers of ore, makers of wire, plate, and structural steel, and builders of ships, bridges, etc. On the other hand, a great corporation may have, at the outset, but little monopolistic power, and it may then acquire more and more of it within the original field of its operations. It may at first make competition difficult and crush a few of its rivals, and then, as its power increases, it may make competition nearly impossible in the greater part of its field and drive away nearly all the rivals who remain. It is necessary to form a more accurate idea than the one which is commonly prevalent of what actual monopolies are, of what they really do, of what they would do if they were quite free to work their will, and of what they will do, on the other hand, if they are effectively controlled by the sovereign state. Regulation of monopolies we must have; that is not a debatable question. The sovereignty of the state will be preserved in industry and elsewhere, and it is perfectly safe to assert that only by new and untried modes of asserting that sovereignty can industry hereafter be in any sense natural, rewarding labor as it should, insuring progress, and holding before the eyes of all classes the prospect of a bright and assured future. We are dependent on action by the state for results and prospects which we formerly secured without it; but though we are forced to ride roughshod over _laissez-faire_ theories, we do so in order to gain the end which those theories had in view, namely, a system actuated by the vivifying power of competition, with all that that signifies of present and future good. _The Nature of a True Monopoly._--The exclusive privilege of making and selling a product is a monopoly in its completest form. This means, not only that there is only one establishment which is actually creating the product, but there is only one which is able to do so. This one can produce as much or as little as it pleases, and it can raise the price of what it sells without having in view any other consideration than its own interest. _The Possibility of the Form of Monopoly without the Power of It._--A business, however, may have the form of a monopoly, but not its genuine power. It may consolidate into one great corporation all the producers of an article who send their goods into a general market, and if no rivals of this corporation then appear, the public is forced to buy from it whatever it needs of the particular kind of goods which it makes. Consumers of _A´´´_ of our table may find that they can get none of it except from a single company. Yet the price may conceivably be a normal one. It may stand not much above the cost of production to the monopoly itself. If it does so, it is because a higher price would invite competition. The great company prefers to sell all the goods that are required at a moderate price rather than to invite rivals into its territory. This is a monopoly in form but not in fact, for it is shorn of its injurious power; and the thing that holds it firmly in check is _potential competition_. The fact that a rival _can_ appear and _will_ appear if the price goes above the reasonable level at which it stands, induces the corporation to produce goods enough to keep the price at that level. Under such a nearly ideal condition the public would get the full benefit of the economy which very large production gives, notwithstanding that no actual competition would go on. Prices would still hover near the low level of cost. The most economical state conceivable is one in which, in many lines of business, a single great corporation should produce all the goods and sell them at a price so slightly above their cost as to afford no incentive to any other producer to come into the field. Since the first trusts were formed the efficiency of potential competition has been so constantly displayed that there is no danger that this regulator of prices will ever be disregarded. Trusts have learned by experience that too great an increase in the prices of their products "builds mills." It causes new producers who were only potentially in the field actually to come into it and to begin to make goods. To forestall this, the trusts have learned to pursue a more conservative policy and to content themselves with smaller additions to the prices of their wares. If it were not for this regulative work of the potential competitor, we should have a régime of monopoly with its unendurable evils; and if, on the other hand, the regulator were as efficient as it should be, we should have a natural system in which complete freedom would rule. The limitless difference between these conditions measures the importance of potential competition.[1] [1] For an early statement of this principle the reader is referred to the chapter on "The Persistence of Competition," by Professor F. H. Giddings, in a work entitled "The Modern Distributive Process," written jointly by Professor Giddings and the present writer. This chapter first appeared as an article in the _Political Science Quarterly_ for 1887. _Cost of Production in Independent Mills a Standard of Price._--A consolidated company will ultimately have a real but small advantage over a rival in the cost of producing and selling its goods; but at present the advantage is often with the rival. His plant is often superior to many of those operated by the trust. When the combination brings its mills to a maximum of efficiency and then reaps _the further advantage which consolidation itself insures_, it will be able to make a small profit while selling goods at what they cost in the mills of its rival. This cost which a potential competitor will incur if he actually comes into the field sets the natural standard of price in the new régime of seeming monopoly; and it will be seen that if this natural price really ruled, the monopoly would have only a formal existence. It would be shorn of its power to tax the public. _Partial Monopolies now Common._--What we have is neither the complete monopoly nor the merely formal one, but one that has power enough to work injury and to be a menace to industry and politics. If it long perverts industry, it will be because it perverts politics--because it baffles the people in their effort to make and enforce laws which would keep the power of competition alive. In terms of our table the subgroups are coming to resemble single overgrown corporations. Each of them, where this movement is in progress, is tending toward a state where it will have a single _entrepreneur_--one of those overgrown corporations which resemble monopolies and are commonly termed so. Complete monopolies, as we have said, they are not; and yet, on the other hand, they are by no means without monopolistic power. They are held somewhat in check by the potential competition we have referred to, but the check works imperfectly. At some points it restrains the corporations quite closely and gives an approach to the ideal results, in which the consolidation is very productive but not at all oppressive; while elsewhere the check has very little power, oppression prevails, and if anything holds the exactions of the corporation within bounds, it is a respect for the ultimate power of the government and an inkling of what the people may do if they are provoked to drastic action. _Two Policies open to the State._--The alternatives which are open to us are, in this view, reduced to two. Consolidation itself is inevitable. If, in any great department of production, it creates a true monopoly which cannot be otherwise controlled, the demand that the business be taken over by the government and worked for the benefit of the public will become irresistible. If it does not become a true monopoly, the business may remain in private hands. Inevitable consolidation with a choice between governmental production and private production is offered to us. We are at liberty to select the latter only if potential competition shall be made to be a satisfactory regulator of the action of the great corporations. _The Future Dependent on Keeping the Field open for Competitors._--Potential competition, on which, as it would seem, most of what is good in the present economic system depends, has also the fate of the future in its hands. Existing evils will decrease or increase according as this regulator shall work well or ill. Yet it is equally true that the government has the future in its hands, for the potential competition will be weak if the government shall do nothing to strengthen it. It is, indeed, working now, and has been working during the score of years in which great trusts have grown up; but the effects of its work have been unequal in different cases, and it is safe to say that, in the field as a whole, its efficiency has, of late, somewhat declined. With a further decline, if it shall come, prices will further rise, wages will fall, and progress will be retarded. The natural character of the dynamic movement is at stake and the continuance of so much of it as now survives and the restoration of what has been lost depend on state action. _The Impossibility of a Laissez-faire Policy._--Great indeed is the contrast between the present condition and one in which the government had little to do but to let industry alone. Letting free competitors alone was once desirable, but leaving monopolies quite to themselves is not to be thought of. It would, indeed, lead straight to socialism, under which the government would lay hands on business in so radical a way as to remove the private _entrepreneurs_ altogether. If we should try to do nothing and persist too long in the attempt, we might find ourselves, in the end, forced to do everything. What is of the utmost importance is the kind of new work the government is called on to do. It is chiefly the work of a sovereign and not that of a producer. It is the work of a law-giving power, which declares what may and what may not be done in the field of business enterprise. It is also the work of a law-enforcing power, which makes sure that its decrees are something more than pious wishes or assertions of what is abstractly right. All of this is in harmony with the old conception of the state as the protector of property and the preserver of freedom. The people's interests, which the monopoly threatens, have to be guarded. The right of every private competitor of a trust to enter a field of business and to call on the law for protection whenever he is in danger of being unfairly clubbed out of it, is what the state has to preserve. It is only protecting property in more subtle and difficult ways than those in which the state has always protected it. The official who restrains the plundering monopoly, preserves honest wealth, and keeps open the field for independent enterprise does on a grand scale something that is akin to the work of the watchman who patrols the street to preserve order and arrest burglars. _A Possible Field for Production by the State._--There is a possibility that in a few lines of production the American government may so far follow the route marked out by European states as to own plants and even operate them, and may do so _in the interest of general competition_. It may construct a few canals, with the special view to controlling charges made by railroads. It may own coal mines and either operate them or control the mode of operating them, for the purpose of curbing the exactions of monopolistic owners and securing a continuous supply of fuel. It may even own some railroads for the sake of making its control of freight charges more complete. Such actions as these may be slightly anomalous, since they break away from the policy of always regulating and never owning; nevertheless, they are a part of a general policy of regulation and a means of escape from a policy of ownership. The selling of coal by the state may help to keep independent manufacturing alive, and carrying by the state may do so in a more marked way. If so, these measures have a generally anti-socialistic effect, since they obstruct that growth of private monopoly which is the leading cause of the growth of socialism. _Evils within the Modern Corporation._--The great corporation brings with it some internal evils which might exist even if it never obtained a monopoly of its field. In this class are the injuries done by officers of the corporation to the owners of it, the stockholders. A typical plundering director has even more to answer for by reason of what he does to his own shareholders than because of what he and the corporation may succeed in doing to the public. In the actual amount of evil done, the robbing of shareholders is less important than the taxing of consumers and the depressing of wages, which occur when the effort to establish a monopoly is successful; but in the amount of iniquity and essential meanness which it implies on the part of those who practice it, it takes the first rank, and its effect in perverting the economic system cannot be overlooked. The director who buys property to unload upon his own corporation at a great advance on its cost, or who alternately depresses the business of his corporation and then restores it, in order that he may profit by the fall and the rise of the stock, not only does that which ought to confine his future labors to such as he could perform in a penitentiary, but does much to vitiate the action of the economic law which, if it worked in perfection, would give to the private capitalist a return conformable to the marginal product of the capital he owns. A sound industry requires that the state should protect property where this duty is now grossly neglected. If more publicity will help to do this,--if lighting street lamps on a moral slum will end some of the more despicable acts committed by men who hold other men's property in trust,--sound economics will depend in part on this measure, but it depends in part on more positive ones. The investment of capital is discouraged and an important part of the dynamic movement is hindered wherever shareholders are made insecure; and therefore the entire relation of directors to those whose property they hold in trust needs to be supervised with far more strictness than has ever been attempted under American law. When invested capital shall be quite out of the range of buccaneers' actions, it will produce more, increase more rapidly, and the better do its part toward maintaining the wages of labor. _Perversions of the Economic System by the Action of Promoters._--The state will be carrying out its established policy if it shall effectively control the action of promoters in their relation to prospective investors. The man who is invited to become a stockholder has a right to know the facts on which the value of the property offered to him depends. How many plants does the consolidated corporation own? How much did they cost? What is their present state of efficiency? What have been their earnings during recent years? Concerning these things and others which go to make up a correct estimate of the value of what the promoter is selling, the purchaser needs full and trustworthy information, and an obvious function of the law is to see that he gets it. That such action would guard investors' personal rights is, of course, a reason for taking it; but the reason that here appeals to us is the fact that it would remove a second perversion of the economic system, accelerate the increase of capital, and help in securing a distribution of wealth which would be more nearly in accordance with natural law. _Perversions of the System caused by the Action of Corporations in their Entirety._--More directly within the domain of pure economics is the relation between the typical great corporation and the majority of the public which is wholly outside of it. In the common mind this relation also often appears as that of plunderers and plundered, and what it often has actually been, is a relation between corporations which have exacted a certain tribute and a body of consumers which has had to pay the tribute. Bound up with this general relation between the manufacturing corporation and the consuming public is one between it and producers of raw material which it buys and with laborers whom it hires. In this last relation what is endangered is the normal rate of pay, present and future. The type of measure which protects consumers protects the other parties who are affected by the great corporation's policy. Workers are safe and producers of raw materials are measurably so if the power of competition in the making and selling of the goods is kept alive. If we prevent the trust from taking tribute from the purchasing public, we shall by the same means prevent it from oppressing laborers and farmers. _Why the Business of a Monopoly should never be regarded as a Private Interest._--The people are already putting behind them and ought to put completely out of sight and mind the idea that the business of a monopoly is a private enterprise which its officers have a right to manage as they please. A corporation becomes a public functionary from the time when it puts so many of its rivals out of the field that the people are dependent on it. As well might the waiter who brings food to the table claim that the act is purely his own affair and that the customers and the manager have no right of interference, however well or ill the customers may be served, as a combination of packers might claim that any important detail of their business concerns them only. The illustration is a weak one; for in the case of a trust which controls a product that is needed by the public, it is the full majesty of the people as a whole which is in danger of being set at naught. Such a company is a public servant in all essential particulars, and although it is allowed to retain a certain autonomy in the exercise of its function, that autonomy does not go to the length of liberty to wrong the public or any part of it. The preservation of a sound industrial system requires that governments shall forestall injuries which the interests of the monopolistic corporation impels it to inflict. No discontinuance of essential services, no stinting of them, and no demand for extortionate returns for them can be tolerated without a perversion of the economic system. The natural laws we have presented will work imperfectly if, for example, the danger of a coal famine shall forever impend over the public or if this fuel shall be held at an extortionate price. Workmen, indeed, have a larger stake than have others in the maintenance of a fair field for competing producers and an open market for labor, but other classes feel the vitiating of the industrial system which occurs when the fair field and the open market are absent. _Why the Motive which once favored Non-interference in Industry by the State now favors Interference._--We have said that what is needed is vigorous action by the state in keeping alive the force on which the adherents of a _laissez-faire_ policy rested their hope of justice and prosperity. These fruits of a natural development have always depended on competition, and they still depend on it, though its power will have to be exerted in a new way. This requires a special action by the state; but in taking such action the government is conforming its policy to the essential part of the _laissez-faire_ doctrine. It lays hands on industry to-day for the very reason which yesterday compelled it to keep them off--the necessity of preserving a beneficent rivalry in the domain of production. _America the Birthplace of Consolidated Corporations._--Consolidations of the kind that require vigorous treatment by the state have their special home in America. They have taken on a number of forms, but are coming more and more into the most efficient form they have ever assumed, that of the corporation. The holding company is the successor of the former trust. The method of union by which stockholders in several corporations surrendered their certificates of stock to a body of trustees and received in return for them what were called trust certificates, has been abandoned, and the readiness with which this has been done has been due to the fact that there are better modes of accomplishing the purpose in view. A new corporation can be formed, and, thanks to those small states which thrive by issuing letters of marque, it can be endowed with very extensive powers. It can, of course, buy or lease mills, furnaces, etc., but what it can most easily do is to own a controlling portion of the common stock of the companies which own the plants. The holding company has a sinister perfection in its mode of giving to a minority of capital the control over a majority. It is possible that the actual capital of the original corporation may be mainly a borrowed fund and may be represented by an issue of bonds, while the stockholders may have contributed little to the cost of their plants and their working capital; and yet this common stock may confer on its owners the control of the entire business. The corporation that buys a bare majority of this common stock may have an absolute power over the producing plants and their operations. If the holding company should secure much of its own capital by an issue of bonds, the amount which its own stockholders would have to contribute would be only a minute fraction of the capital placed in their hands, and yet it might insure to them the control of a domain that is nothing less than an industrial empire, if indeed they are not themselves obliged to surrender the government of it to an innermost circle composed of directors. _Earlier Forms of Union._--There are forms of union which are less complete than this and have been widely adopted. There was the original compact among rival producers to maintain fixed prices for their goods. It was a promise which every party in the transaction was bound in honor to keep, but impelled by interest to break; and it was morally certain to be broken. There was this same contract to maintain prices strengthened by a corresponding contract to hold the output of every plant within definite limits. If this second promise were kept, the first would be so, since the motive for cutting the price agreed upon was always the securing of large sales, and this was impossible without a correspondingly large production; but security was needed for the fulfillment of the second promise. This security was in due time afforded, and there was perfected a form of union which was a favorite one, since it did not merge and extinguish the original corporations, but allowed them to conduct their business as before, though with a restricted output and with prices dictated by the combinations. As a rule each of the companies paid a fine into the treasury of the pool if it produced more than the amount allotted to it, and received a bonus or subsidy if it produced less. This form has more of kinship with the _Kartel_ of Germany than the other American forms, and it might have continued to prevail in our country if the law had treated it with toleration. It leaves the power of competition less impaired than does the consolidated corporation, of which the laws are more tolerant. By repressing those unions which can be easily defined and treated as monopolies we have called into being others which are far more monopolistic and dangerous. The economic principles on which the regulation of all such consolidations rests apply especially to the closer unions which take the corporate shape. To the extent that other forms of union have any monopolistic power the same principles apply also to them; but we shall see why it is that the pools which the law forbids have little of this power and the corporations have much of it. _The Condition which precludes True Monopoly._--A monopoly grows up when a company keeps such perfect guard over its economic field that new rivals cannot enter without exposing themselves to peril. As we have seen, it is not always necessary that the rival company should be formed. It is enough that it should be able to be formed and to enter the field with safety. In that case it will actually appear if an inducement is offered. Such an inducement is always afforded when the trust puts an unnaturally high price on its product--a price above that standard set by the cost of production which would rule in a normal market. _Specific Means of Repressing Competition._--In practice a condition is created in which the new competitors are reluctant to appear; for the consolidated company has dangerous weapons with which it can assail them. It can often secure specially low rates for the transportation of its products, and this is sometimes enough to make the competitor's prospect hopeless. Further, the "trust"--with or without the aid offered by the special and low freight charges--can enter the particular corner of the field where a small rival is operating, sell goods for less than they cost, and drive off the rival, while maintaining itself by the high prices it exacts everywhere else. Again, it may reduce the price of one variety of goods, which a particular competitor is making, and crush him, while it makes a profit on all other varieties of goods. Still again, it may resort to the "factor's agreement," by refusing to sell at the usual wholesalers' rate any of its own products to a merchant who handles products of its rivals. If some of its goods are of a kind that the merchant must have, this measure brings him to terms, causes him to refuse to handle independent products, and makes it difficult for the rival producer to reach the public with his tender of goods. The trust can organize special corporations for making war on competitors while itself evading responsibility. A bogus company which, in an aggravated case, is a rogue's alias for a parent corporation, may be formed for the purpose of more safely doing various kinds of predatory work. _The Economic Necessity of Doing what is legally Difficult._--From the point of view of an economic theorist it is enough to show that the practices which cut off the potential competitor from a safe entrance into the field of production so pervert the economic system as to hold in abeyance its most fundamental force, that of competition. They vitiate the action of every law which depends on competition. Value, wages, interest, profits, and the very structure of society feel the perverting effect of this repression of the force that under normal conditions serves to adjust them. From a practical point of view it is enough to show that the existence of such practices--if the monopolies that grow out of them shall continue and increase--present to the people the alternative of accepting an economic state which is unendurable, or accomplishing, in a legal way, what many already pronounce impossible. For the purpose of this treatise it suffices to point to the fact that few attempts worth mentioning have been made to suppress any of these practices except the first--that of favoritism in connection with freight charges--and that in the case of this practice only a beginning of serious effort has been made. While there is some excuse for abandoning a purpose when long and determined effort to execute it has failed, there is no possible excuse for concluding, _in advance of such effort_, that a systematic policy which gives a promise of saving us from an intolerable outcome is impracticable. All the props of monopoly should be taken away and not one merely, and before this shall be tried radical measures will not be in order. Socialism will not be fairly before the people's parliament till it shall come as the only escape from a condition of private monopoly. What economic law clearly shows is that monopoly will not come if the practices on which it depends shall be suppressed, and the people may be trusted to determine whether the suppression is or is not possible. That they may decide this question the issue that depends on it must be brought before them; and all that falls within the sphere of the economist is the stating of the effects of monopoly, the causes of its existence, and the public action that if taken will remove these causes. The preservation of a normal system of industry and a normal division of its products requires the suppression of all those practices of great corporations on which their monopolistic power depends. CHAPTER XXIII GENERAL ECONOMIC LAWS AFFECTING TRANSPORTATION Of all the various clubs used by trusts for attacking rivals and driving them from the field, the first in order is the one which depends on getting special rates for transportation. Railroads develop monopolies within their own sphere and also contribute greatly to the development of monopolies elsewhere. The second fact is the more important, but both require attention. By reason of its special connection with producers' monopolies does the function of the common carrier have much to do in deciding the question whether an economic revolution is or is not impending. It is safe to say that it is imminent as a possibility and will become probable if the favoritism shown by carriers to great shippers is not effectually repressed. _How the Consolidation of Railroads makes the Repression of Favoritism Easy._--It is also safe to say that such repression will be easy if the consolidation of railroads themselves shall actually go to the utmost possible length. With all lines under one central control and earnings entirely pooled, there would be no motive for granting special favors to any shipper except as it might come through a corrupt relation between the shipper and some officials of the railroads. To the carrying corporation the giving of a rebate would merely mean a surrendering of some possible profits. With railroads consolidated the threat of the great shipper to divert his freight from one line to another would lose all its effectiveness, and the interests of the stockholders in the general carrying company would demand high rates from all. The law forbidding rebates and all other forms of favoritism would assist the railroad company in carrying out its own policy, and would be obeyed with the readiness with which an order to pocket an increased gain is naturally complied with. _A Danger which becomes greater as Discriminations become Fewer._--This reveals the fact that the consolidation which makes the suppressing of discriminations easy will make an all-round advance of rates possible, in so far as merely economic influences are concerned. Nothing but the power of the state itself can prevent this; and while the consolidation that would be perfect enough to stop discriminations has not yet taken place, enough of consolidation has been secured to cause some advance in the general scale of freight charges and to threaten much more. It already rests with the government to avert this second evil. Monopolies extending throughout the field of production would mean a demand for socialism which could hardly be resisted; and even a few monopolies in industry assisted by a great one in transportation would mean much the same thing. _General Economic Principles governing Transportation._--With a view to determining the bearing which transportation has on the problem of economic freedom, and thus on the prospect of avoiding the alternative of state socialism, we need to state the essential principles in the theory of railway transportation. The fact that makes a vast amount of carrying necessary is that agriculture is subject to a law of diminishing returns, while manufacture obeys an opposite law. In tilling the soil labor and capital yield less and less as more and more of them are used in a given area; and therefore both of these agents need to extend themselves widely over the land in order to use it economically. In the production of staple crops which can be freely carried across sea and continent, the natural tendency is to scatter a rural population with some approach to evenness over all the land available for such crops. Market gardening requires less land per man and the areas devoted to it are much more densely peopled; but even within this department of agriculture the law holds true that too much labor and capital must not be bestowed upon an acre of ground. In a general way agriculture diffuses population, while manufacturing concentrates it. This latter work is done most economically in great establishments. _The Law of Diminishing Returns from Land not restricted to that used in Agriculture._--It is commonly said that manufacturing is unlike agriculture in that it is subject to a law of increasing returns; but this statement is true only when its terms are carefully interpreted. The diminishing returns from agriculture and the increasing returns from manufacturing are not two opposite effects from the same cause. There is, indeed, a logical anomaly in contrasting them with each other. In agriculture we get smaller and smaller results per unit of labor and capital when we overwork a piece of ground of a given size by putting more and more labor and capital on it. The trouble here is that land, on the one hand, and labor and capital, on the other, are not combined in advantageous proportions; and exactly the same effect is produced by the same cause in manufacturing. One can overtax a mill site by confining larger and larger amounts of capital within a given area. If the site is so small that the building has to be carried far into the air and supplied with walls strong enough to resist the jar of machinery on many floors, manufacturing becomes a far less economical operation than it would be if the site were larger and the mill lower. The gain from centralizing the manufacturing process comes in part from the increased size of the particular establishments; but that requires that every part of the plants, land included, should be increased. As the whole of an establishment becomes larger its product becomes cheaper; but, in the enlargement, there should be no undue stinting in the amount of land used. In both agriculture and manufacturing, then, there is a loss of productive power when areas of land are disproportionately small, as compared with amounts of labor and artificial capital; but in the realm of manufacturing large establishments under single _entrepreneurs combining the agents of production in the right proportion increase the productive power of men and instruments_ as they do not in agriculture. Great farms show no such economy as great mills. _Basis of the Law of Increasing Returns in Manufacturing._--There would be some increase of returns in manufacturing from making the establishments large even if the work were done by hand; but by far the greater part of the advantage is due to machinery. The invention of the steam engine was the beginning of it, and that of textile machinery afforded a quick continuation of the revolutionary change. In nearly all lines of production, outside of agriculture, machinery is far too elaborate to be used in household industry. One may say that the transformation of the world into one enormous farm dotted over with great workshops, with all the social and political changes which that involves, was brewing in the tea-kettle which the boy Watt is said to have watched, as the lid was raised by puffs of steam and the possibility of a steam engine suggested itself. The mechanical force of steam began at once to centralize manufacturing. That made increased transporting necessary, and it was not long before the same element, steam, provided the means of this extensive transportation. It is necessary, of course, to carry the products of the farm to the mill, and also to carry manufactured goods back to the farm; and neither of these things would have been required on any large scale under a system of household industry. The economy which leads to this lies altogether in the greater cheapness of the manufacturing. The difference between the cost of fashioning materials in the home and that of doing it in the mill is so large that it would have brought about the building of mills and the creation of manufacturing centers, with the carrying which it involves, if neither railroads nor steamboats had come into being. The growth of factory villages had made some headway at a time when no elaborate machinery existed; but if that condition had continued, manufacturing centers would have been smaller, more numerous, and more scattered than they have been. It is the cheapness of carrying by railroads and steamships which has made it possible to get the fullest benefit from the so-called law of increasing returns in manufacturing. _Mining as related to Transportation._--Mining is a process which has to be local, because ores and coal are furnished by nature in a local way; and one might mention this as a second cause of extensive transportation. A great part of the carrying so occasioned depends, indeed, on the growth of the manufacturing centers, since mills and furnaces need great quantities of fuel. A means of heating private dwellings, of cooking food, etc., might conceivably be supplied in a local way, by the growth of forests; but the fuel needed for the centers of manufacturing and commerce has to come from distant points. The law of increasing returns in manufacturing, then, and natural location of mines are the most generic causes of transportation. The system which has resulted gives to everybody more and better food, as well as more and better goods of every kind, than he could possibly have had if the primitive system of local manufacturing had continued. The cheapness with which form utility is created in the mill and place utility on the railroad are the two causes which are at work. _The Rivalry between Producers of Form Utility and Producers of Form and Place Utilities._--In the technical language of economics, there has been a contest in efficiency between that creating of form utility which is done when goods are made in households or in small villages, and that joint process of creating form and place utility which consists in making goods at central points and carrying them to the widely scattered homes of consumers. The latter process, involving as it does the necessity of creating two utilities instead of one, is now by far the cheaper. _The Ultimate Limit of Charges for Transportation._--Charges for transportation have as one extreme limit the difference between the cost of making goods at one point and the cost of making them at another. This rule is applicable, of course, only to those numerous cases in which it is physically possible to create the goods at both points. If they can be made at point A for ten dollars, by using five days' labor, and at point B for twenty dollars, by using ten days' labor, ten dollars would furnish the extreme limit of a possible charge for carrying them from A to B. In a certain number of cases the actual charge approximates this extreme limit. With a mill in A, working with much economy, and a number of household workshops in B producing with less economy, the product of the large mill may invade the territory supplied by the little workshops, and the carrier may receive in return for transportation about as much as the difference between the two costs of production. With a great mill at A and a small one at B, the same thing may happen. [Illustration: C | | COMPETITIVE | CARRYING BY | HIGHWAY v A------------------------>B ] _Narrower Limits usually Applicable._--In by far the larger number of cases such a difference between costs is more than the carrier can get. Usually there is some alternative mode of procuring goods at B which does not involve actually making them on the spot at a serious disadvantage. It may be possible to convey them to B from a third locality, C, where they are made in an advantageous way. If this carrying is done by some process in which competition rules,--if, for instance, C is not far from B, so that goods can be carried thither by drays,--the cost of making the goods in C plus the natural or competitive cost of conveying them to B will together make up the natural cost of procuring them in this latter locality. The difference between that and the cost of making them in the great center which we have called A will constitute the limit of the freight charge from that city to B; and even though between these two points the carrier has a monopoly of the traffic, he can get no more.[1] [1] For a case in which a railroad can get the entire difference between the cost of goods at the point from which it carries them and their cost at the place of delivery, but voluntarily refrains from doing so, see the note at the end of this chapter. _Other Applications of the Same Rule._--This rule applies even where goods made in C have to be carried great distances, provided the carrying is done in some competitive way, at a low rate based on cost. Consumers in B may have the option of bringing the goods by water, along the coast or across an ocean, at a rate that makes the cost of procuring them at B not much above the cost of making them at A. If so, this small difference of costs represents all that any carrier can get for moving them from A to B, and though this carrying may be done by a railroad which has a monopoly of its route, its service will command no higher rate than the one which is thus naturally set for it. The rate is governed by costs, though not by costs incurred by the railroad. Whenever competition rules, the returns for any productive function tend to conform to costs, and we here suppose that it does so rule (1) in the making of goods at A, and (2) in the procuring of the goods by some alternative method at B. The difference between these costs sets the maximum limit of the freight charge between A and B, and this may exceed the cost of this service and leave a profit for the carrier who uses this route. _Freight Charges and Value._--The return for a productive operation of any kind whatsoever is directly based on the value which it imparts to something; and in the case of carrying, the value is measured by the amount of "place utility" which the carrying creates. This is merely one application of a universal law. What the goods are worth where they are consumed, less what they are worth where they are made, equals what can be had for moving them from the one point to the other. Freight charges are gauged by the principle of "value of service," but so also are the charges for making the goods. When things are produced and used at the same place, the producer's returns equal the value of his product, and this is fixed by the principle of final utility. It is, however, a truism of economics that this value itself tends under competition to conform to the cost of creating it. In our illustration the manufacturing returns are fixed by the value of service and also by the cost of service, and so are the returns for transporting the goods from C to B; but the returns for carrying them from A to B, where monopoly prevails, are not governed by the cost of service but by costs elsewhere incurred. _Freight Charges and Cost._--The law of costs as well as the law of value holds good, in general, in connection with transportation. Competition in this department tends to bring values created to a certain equality per unit of cost and to reward the labor and capital which are used in carrying as well as they are rewarded elsewhere, and not better. If our table of industrial groups were elaborated, there would be between A and A´, as well as between A´ and A´´, and between adjacent subgroups throughout the chart, a symbol which should represent the work done by the carrier; and the fact would appear that naturally this work is neither favored nor injured in the apportionment of rewards. Free competition, if it existed in perfection everywhere, would be a perfectly undiscriminating distributor of earnings, and would apportion all returns according to costs. A´´´ A´´ A´ A _Variations of Freight Charges from Static Standards._--Place values are not an exception to the general rule of value; and yet freight charges actually remain at a greater distance from the standards furnished by the direct costs of carrying than do the returns for other services from corresponding standards. There is an approach to monopoly in this department, and, when direct competition exists, it is a more imperfect process here than it is elsewhere. Moreover, the costs which here figure as an element in the adjustment of freight charges are of a peculiar kind, which, although not unknown in other departments of production, have nowhere else so great influence and importance. The study of railroads and their charges is baffling, not because the economic forces do not here work at all, but because here they encounter a resistance which is exceptionally strong and persistent. The quasi-monopoly which elsewhere continues only briefly lasts long in this department of production; but it is subject to the same principles which everywhere rule. _The Modes of Approaching the Study of Freight Charges._--In studying freight charges we may, if we choose, start with the intricate tariffs of railroads, as they now stand, and try to find some principle which, if applied, would bring order out of the mass of capricious and inconsistent rates. Such a rule will ultimately be needed, but it can best be obtained by examining at the outset the transportation which is done by simple means and under active competition. It will be found (1) that basic principles apply to all transportation whether it be by railroad or by simpler means; (2) that in the early development of every system of common carrying the action of these principles is disturbed; (3) that in the case of the more primitive systems the disturbances are soon overcome, but that they continue longer and produce far greater effects in the case of railroads; (4) that one important influence of this kind tends naturally to disappear, while another continues and calls for regulation by the state; and (5) that this regulation needs to be based on natural tendencies and to conform to the laws which, when competition rules, govern the returns of all classes of producers. _A Typical Instance of Partial Monopoly in Transportation._--We may now trace the development out of a purely competitive condition of a simple instance of what is usually termed monopoly, though in a rigorous use of terms it can hardly be so called. It is a monopoly the power of which is limited. So long as goods made at A are carried to B by some primitive method which insures the presence of competing carriers, the returns for carrying will tend only to cover costs. By a normal adjustment the price of the goods at A only repays the costs of making them, and if these and the carrying charge amount to less than the costs of making the goods at C and transporting them to B, none of them will come to B in this latter way. Makers at A and carriers on the route from there to B will possess the market, and the place value which the goods acquire when taken to B will be fixed directly by the costs of carrying. It is when there is no effective competition on the route between A and B, while there is free competition in making the goods both at A and at C, and also in carrying them from C to B, that a typical case of a partial monopoly is presented. [Illustration: C | | COMPETITIVE | CARRYING | v A------------------------------->B MONOPOLISTIC CARRYING ] The price of the goods at A is a definite amount fixed by competition between producers, and the price at B is also a definite amount fixed by competition between different makers at C and between different carriers between C and B. The difference between these amounts sets the limit of the charge for carrying from A to B; but in that operation there is, for a brief period, no effective competition. For simplicity let us say that this carrying is at first done by a single wagon owned by its driver, and that his charge for the service he renders nearly equals the difference between the cost of making the goods at A and that of obtaining them at B from some alternative source. This lone and honest driver is thus illustrating the practice of the modern railroad, in that he is "charging what the traffic will bear." The goods he transports have one natural value at A and another at B. These two values are determined separately and in ways that are quite independent of the carrier and his policy. When he begins to do his work, he charges an amount which about equals the difference between the two values. _The Impossibility of Long-continued Profits in the Case of Primitive Carriers._--With the growth of traffic direct competition will soon appear. A second wagon will be put on the route and then more, and the strife for freight will bring down the charges to the level of cost. For a brief season a favored drayman was able to get nearly the entire difference between the value of the goods at the point where they are made and their value at the point where they are used, _as these two values were determined by independent causes with which he had nothing to do_. Now, he and his rivals can, indeed, get the difference between the value of the goods at the one point and their value at the other; but this difference is now directly determined by the carrying charge. That charge, again, is determined by the cost of rendering the service. There was a brief interval when the value of the service and the cost of it were different amounts; but now they coincide. We shall see that the essential difference between carrying by primitive means and carrying by railroad is in the fact that in the latter case the period when value and cost are different is greatly prolonged. _The Appearance of a More Efficient Competitor._--With the growth of traffic a sailing vessel comes into use on a route connecting A with B, and the cost of thus conveying goods is less than that of conveying them over the roadway. The charge made by the sailing vessel is lower than that made by the teamsters, and the goods are thus delivered at B cheaply enough both to attract to the water route all carrying from A and to put an end to all carrying from C. The former carriers between B and C lose their business, and the makers at C lose some part of theirs, in the same way that any producer loses the traffic when he is underbid by rivals. The public is the gainer to the extent of the reduction which takes place in the cost of the goods as delivered to consumers in the market at B; nevertheless, the situation still involves a limited monopoly. The sailing vessel now has no effective rival, and can charge "what the traffic will bear," and that is very nearly the cost of conveying the goods by wagons. The advent of the vessel has benefited the public; yet it is regarded as constituting a new monopoly, and the benefit which the public gets is less than it will get when a really effective competitor of the sailing craft makes its appearance. [Illustration: C | . ABANDONED | ROUTE . | . | v A - - - - - - - - - - - - - - ->B \ ABANDONED ROUTE / \ / \____ / \___ __________/ \____/ WATER ROUTE USED ] _A Principle governing Charges by Unequal Competitors._--The principle which, in this instance, governs the freight charges is one which is active in all departments of production. We have seen that a maker of goods who has just acquired a monopoly of a superior method may, for a time, charge what the goods cost as made by inferior processes. If the manufacturer has some patented machinery which effects a great economy, he is not at once obliged to govern his prices by what the goods cost in his own mill, but may charge about what they would cost if they were made by the inferior machinery which he formerly used. This is what they still cost in the mills of certain rivals, and it thus appears that competition of a sort fixes his price for the goods he creates, but it is the competition of less capable producers and fails to benefit the public as the rivalry of equals would do. If there is evil in such a monopoly as this, it is not because the public is injured by the advent of the cheaper method. The improvement usually begins to confer benefit on consumers at the moment of its arrival, through the effort of the efficient producer to secure traffic. It causes the prices to go down, though the fall is at first only a slight one, and the consumer's case against the monopoly of method is on the ground of his failure to receive a further benefit. He will get that further benefit whenever a producer who can compete on even terms with the one who now commands the field shall make his appearance. _Unequal Competition Typical of Carriers._--Our recent illustration represents a similar condition in carrying. The public gets a slight gain from the advent of a sailing vessel; but it fails to get the further benefit that the advent of a second vessel will ultimately bring. For a time the freight charge stands nearly at what teamsters have charged. For cheaper rates the public must wait for the advent of another vessel. _The Cause of the Partial Monopoly in Carrying._--There is nothing to prevent a second schooner from being put on this route, if the returns to be expected should warrant it. At the outset the new vessel would get only about a half of the amount of traffic enjoyed by the first, and the rates would probably be reduced by the competition between the two. Until the returns of the first vessel become large it has no rivalry to fear, but it is clear that its monopoly is held by a very precarious tenure. It is not likely long to enjoy the benefit of any charges which yield much profit. The growth of traffic will in due time bring the competing vessel, and the rule of returns that only cover costs will again assert itself. The owner of the first sailing craft has been able for a time to charge "the value of the service" he has rendered, as that value was determined independently of his own action; but now this value itself depends on his action and that of rival carriers using the same route, and it adjusts itself at the level of cost. _The Effect of partly Unused Vessels for Carrying._--The case illustrates another principle which is equally general. The _entrepreneur_ whose capacity for producing is only partially utilized may often take some orders at less than it costs to fill them, as cost is usually understood, and he will still be the gainer. In manufacturing as well as in carrying there are "fixed charges"; there are costs which stand at a definite amount which is independent of the volume of traffic, while other costs increase as the volume grows. These are the "variable costs," and they have to be further classified, since some of them do not increase as rapidly as the business grows, while others increase with the same rapidity as does the business. The makers of sewing machines, typewriters, reapers, and mowers, and indeed machinery generally, can usually increase their product without correspondingly increasing their outlay. They can make goods and sell them in a foreign market at rates which would injure and might even ruin them if they were applied to the sales made in their own country. This fact is most obvious when the manufacturer's machinery is not all kept running or when it all runs only a part of the time. Increasing the output is then a particularly cheap operation. When a carrier's facilities are partially unused--when a ship carries a cargo in one direction and returns in ballast, or when it sails on both trips with its hold only half full--it is ready to carry additional goods at a low rate provided that this policy will not demoralize its existing business. In our illustration we have assumed that some merchandise is made at A and consumed at B, but it may well be that goods of some sort are produced at B and consumed at A. There may be stone quarries at B and there may be need of stone for paving or building at A, and the vessel may carry a return cargo of this kind at any rate which does not greatly exceed the mere cost of loading and unloading it and be better off for so doing. If the entire difference between the cost of the stone at B and the cost of producing it at A from some other source is a very slight one, the amount of it still represents all that the ship can get for carrying the stone. The utmost that the traffic will bear is this difference in costs; and yet the business will be accepted, for the return exceeds the merely variable costs which it entails. The fixed charges, the interest on the cost of the vessel, and the outlay for maintaining it do not need to be paid in any part from the returns of this extra business. They are already provided for. If instead of returning from B with a hold quite empty, the vessel made both voyages with a hold only half full, the result would be similar. It would then be in a position to make a low bid for further freight in both directions. If this entails no cutting of the rates for carrying the original goods, the vessel can take further goods with advantage at any rate above the merely variable costs. _Production which is Advantageous though it does not repay all Costs._--There are two general conditions under which it is advantageous, both in making goods and in carrying them, to extend production, though the further returns which are in this way gained do not cover all costs. First, the producer must have an unused capacity for making or carrying goods. In such a case it is possible to make or carry an _increment_ of goods without entailing on himself an increment of cost that is proportionate to the amount carried. In his bookkeeping his original business is charged with costs amounting to a certain sum per unit of goods produced or carried. His further business is charged with a smaller outlay per unit. Secondly, it must be possible to demand separate and independent returns for the different increments of goods, so that cutting the rate charged for one part of the traffic does not entail cutting the rate charged for the other. In the case of a manufacturer this is secured, either by carrying some goods to a remote and entirely independent market, or by producing some new kind of goods the low price of which will have no effect on the sales or the prices of the other kinds. In the case of the carrier it is accomplished in a variety of similar ways. He can take return cargoes at a low rate. If he stops at different ports along his route he can charge less for goods landed at certain ports than for those landed at others. He can classify his freight and carry some of it at a rate at which he could not afford to carry the whole. With the growth of traffic, however, this condition tends to disappear. Its existence requires that the carrier should have facilities only partially used. As the ship acquires fuller and fuller cargoes, it ceases to be advantageous to fill the hold with goods which pay lower rates than others; just as a mill, which may have run for a time partly on goods that yield a large return and partly on those which yield a small one, gradually discards the making of the cheaper goods as the demand for the dearer kind increases. The vessel which can get full cargoes of profitable merchandise will cease to devote any space to what is less profitable. In the end the ship in our illustration will be transporting in both directions all the first-class freight it can take, and will accept neither the stone nor the merchandise consigned to ports to which it can be carried only at the cheap rates. _Result of Effective Competition throughout the Carrier's Route._--The condition just described--that of full cargoes of profitable goods--inevitably attracts a rival vessel, and the ordinary effects of competition then begin to show themselves. The vessels pursue the same route, cater to the same traffic, and if they try to get business from each other, bring down their charges. The warfare may even bring them to reduce the rates to the level at which only variable costs are covered--a policy that, if persisted in, would bankrupt them both; and here, as well as in the case of railroads, there is a powerful motive for combining and ending the war. It usually causes a merely tacit agreement to "live and let live"--a concurrent refraining from the fatal extreme of competition. The reductions, as made, have to be general and to apply to all parts of the traffic, and unless each part of the freight carried earns a _pro rata_ share of the fixed charges incurred in the business, the traffic is carried at a loss. On the supposition which we have made--that the special and comparatively unprofitable increment of carrying was discontinued as soon as the first vessel could use its entire cargo space in transporting goods of a high class--the arrival of the second vessel may cause the less profitable carrying to be resumed, since there will not be enough of the better sort to afford two full cargoes. Moreover, a normal kind of competition will stop short of the warfare which drives both rivals into bankruptcy, and will leave the rates at a level at which the receipts of each carrier cover all his outlays.[2] [2] A full discussion of the limits of freight charges would take account of the fact that "what the traffic will bear" is an elastic amount. An infant industry will bear less than a mature one; and moreover, a rate that it will bear without being taxed out of existence may be sufficient to stunt its growth. A railroad may be interested in hastening its growth. When goods have one cost at A and another at B, a railroad company may carry them from the one point to the other for less than the difference between the costs because it wishes the industry at A to grow and furnish freight. Farmers who are introducing a new crop in a section of country remote from a market may be encouraged by a rate for carrying which leaves them a margin of profit. It is when a branch of production has more nearly reached its natural dimensions that the charge for carrying its product tends to approach its highest limit. CHAPTER XXIV THE FOREGOING PRINCIPLES APPLIED TO THE RAILROAD PROBLEM _Simple Cases of Charging "What the Traffic will Bear."_--The value of a study of primitive carriers and their policy lies in the fact that it illustrates principles which apply to transportation by a complicated system of railroads, although in this latter case they are not easily discerned. Imperfect competition is what exists in the department of carrying. So long as a railroad is without any rival it may, in some cases, charge for moving goods from one point to another about as much as the cost of making them at the latter point exceeds the cost at the former. This is the simplest case of charging what the traffic will bear. Or, again, the situation may be dominated by producers at a third point who can make goods and get them carried to the place we may term the market for less than the cost of making them directly in this latter place. In such a case the road may demand nearly the amount by which the cost of making the goods at an accessible third point and moving them to the one which is their market exceeds the cost of making them in the place first named; and this is a slightly less simple case of charging what the traffic will bear. It is appropriating the difference between two natural values neither of which the railroad itself fixes. _Charges based on Various Kinds of Cost._--The charges of the railroad may be limited by the competition of inferior carriers who use its own route, such as teamsters whose wagons use a public highway running parallel to its own track. Here charges are based on costs, but not on those which the railroad incurs. They are the costs which the teamsters incur; and if the railroad has much business, its own costs are less and it makes a profit. The charges may be based on costs incurred by more economical carriers, like owners of ships, and in such a case the rate which the railroad can get may be less than its own costs, if these are figured in the simple way of dividing a total outlay by a total number of units of freight transported. The rate is based on the shipowners' costs, and these are so low as to bankrupt the railroad if it should reduce all its charges to such a level. It reduces them thus only on the particular route where competition by water is encountered, and keeps them elsewhere at the higher level. In the case of shipments by rail over such routes "what the traffic will bear" is determined by the low charges established by the ships; and this means that it is determined by a certain definite cost of carrying goods between the very points which the railroad connects. _The Exceptional Importance of Fixed Charges in the Case of Railroads._--The railroad, in the case just noticed, carries its rates below costs, as these are computed in a simple way, but keeps the lowest of them somewhat above the variable costs which we have defined; and there appears the important fact that the fixed costs incurred by the railroad form an unprecedentedly large part of its total expenses. The interest on the outlay it makes for roadbed, track, bridges, tunnels, terminals, etc., is something for which there is no fair parallel in the case of wagons or ships. This is the first unique fact concerning railroads and their policy; and the second is that they continue very long in that intermediate state which we have illustrated by the ship which had only a partial cargo and was impelled to take some traffic at a special and low rate. For many years the railroad only partially utilizes its plant; and so long as that is the case its natural policy is one of drastic discrimination between different portions of its business. A third great point of difference between the railroad and other carriers appears if, while its capacity is still only partially utilized, it encounters the direct rivalry of other railroads that are eager for business; competition then takes a shape which impels the participants irresistibly into some kind of combination. The union may be tacit or formal, and it may depend on personal relations or on some merging of corporations; but toward something that will make the rival lines act concurrently and with mutual toleration the situation impels them with unique force. The general features of railroad rates, then, are-- (1) Some charges based on the difference between the natural value of merchandise at the point of origin and its value at the point of delivery, as this latter value is determined by causes independent of the rates charged for transportation between the two points; (2) The adjustment of other charges according to costs incurred by independent carriers operating between the same points; (3) The exceptional importance of the railroad's "fixed costs" and the drastically discriminating rates to which this leads; (4) The irresistible motive for combination where direct competition appears between railroads connecting the same points. We speak of the condition of railroads as an intermediate state because it is one out of which a natural development takes other carriers when their capacity for service is fully utilized. The same cause--a complete utilization of the plants--would have a like effect in the case of railroads; but the cause is so slow in coming into full operation that few persons think of it as affecting the problem at all. The problem of freight charges on railroads is usually regarded as if the intermediate state were destined to be perpetual. It is, however, entirely true that a full utilization of the plants of railroads would tend to take them out of this state. If the increase of business came after a combination had been effected, it would tend to put a stop to the sharp discriminations to which the eager quest for traffic has led. Different shippers could more easily secure equally favorable treatment. Freight of a low grade would be less desired, since the space it would require might otherwise be available for business of a more profitable kind, and the rates on such freight would rise. The increased traffic would make it possible to earn large dividends without increasing charges on the lower grades of freight, and while greatly reducing the charges on the higher grades; but no economic force would be available for securing this adjustment. The state, by positive regulation, might secure it and might bring the earnings and the charges of the railroads more or less nearly to the normal standards which prevail where competition rules; but if competition were here to begin, it would result quite otherwise. It would restore the old condition of partially utilized cars, track, etc., and cause a new strife for traffic, which would cause some freight to be taken at very low rates, but would lead to inevitable consolidation and higher charges. In general industry competition tends so to adjust prices as to yield interest on capital, wages for all varieties of labor, including labor of management, and nothing more, and this is the outcome elsewhere demanded by a growth of business coupled with a theoretically normal and perfect action of competition; but the peculiarities of competition between railways do not bring about the evolution which would give this result. Combination is effected long before the returns from the total traffic are made normal and before the returns from different parts of it are brought into their legitimate relation to each other. After the union of rival companies, railroads continue to be in that intermediate state in which the effect of an unused capacity for carrying has its natural effect in charges which discriminate widely between different localities and between different kinds of freight. The railroad traffic does, indeed, begin to follow the course which we have illustrated in the case of transportation by water. It takes a few steps in that direction, but further progress is then stopped by combinations. The fundamental laws of economics still apply. The static standard of freight charges exists, and one can form some idea of what actual charges would be if the forces which elsewhere tend to bring prices to their theoretical standards could here operate unhindered. The hindrances, however, are such as definitely to preclude such a result. The rates do not become in a true sense normal. Even under such active competition as at times exists they do not become so, while without competition they never tend to become so. It would, however, be a gross mistake to assume that static standards have no application whatever to railway transportation. The whole subject is most easily understood when those standards are first defined and the baffling influences which prevent actual rates from conforming to them are then separately studied. There are influences which bring the various charges of railroads within a certain definable distance of normal standards. [Illustration: C | . ABANDONED | ROUTE . | . | RAILROAD v A------------------------------>B \ / \ / \____ / \___ __________/ \____/ WATER ROUTE ] The situation of railroads we take as we find it--one of complete consolidation in case of many roads, and of harmonious action, or quasi-consolidation, in the case of others. In general their charges are fixed by the place value they create, as that value is established by influences other than the charges themselves. It might seem that the charge for carrying fixes the place value. Whatever a railroad demands for carrying goods from A to B measures the enhanced value which they get in the moving; but if they would have possessed at B the same value that they now have, even though the railroad had not existed at all, it is evident that it is this value minus the value of the goods at A which fixes the charges for carrying, rather than that these charges fix the place value. We have seen in very simple and general cases how this principle works, and have now very briefly to trace the working of it in the case of a system of railroads. The special method of reckoning costs to which we have referred is an important element in the process. _"Costing" comparatively Simple in the Bookkeeping of Competing Producers._--In the study of ordinary industries we have encountered conditions which render the bookkeeping of a producer simple and cause him to charge all his costs, in a _pro rata_ fashion, to his entire product. If his goods and those of his rivals are of one kind and are sold in a single market, a cut in the price of any one portion of the product involves a corresponding cut on the entire output. It is not possible to single out any particular increment for a reduction of price and leave the rate unchanged on the remainder. Where products are of different kinds it is possible to make a classification of them so as to get a large profit on some, a small one on others, and none at all on still others. When competition has not done its full work, something of this kind happens in many departments of business. A condition of unequal gain from different portions of an output lingers long after some effects of competition have been realized. In the end, however, it must yield if competition itself does its complete work, and whenever we adhere heroically to the hypothesis of the static state, we preclude this inequality of charges. Rivals who contend with each other for profitable business bring the prices of the goods which afford the most gain to such a level that a mill which makes this type of goods will pay no more in proportion to its capital than one which makes other types. The total cost of production, fixed and variable alike, would at that time, as we have seen, be barely covered, and might correctly be apportioned in a _pro rata_ manner among all parts of the product. _The Effect of Increasing Business on Comparative Charges._--Competition of this perfect kind does not exist in manufacturing and is far from existing in the department of carrying, and it is important to know whether with growing business and greatly tempered rivalry there is any tendency toward the equalization of charges and the simplifying of the mode of reckoning costs. When a mill has more orders than it can fill, those it wishes to be rid of are the ones which yield the smallest profit. They encumber the mill and prevent the filling of more profitable orders; and the natural mode of reducing the amount of this undesirable part of the output is to raise the charges on it. This comes about without much aid from competition, for when all producers find their capacity overtaxed, they have no motive for contending sharply for business. Underbidding has for its purpose attracting business from rivals and is an irrational operation when all have orders enough and to spare. Competition is largely in abeyance when the business any one can have is overabundant. _These Principles Applicable to Carrying._--What we here assert concerning goods manufactured by independent mills would be true of goods carried by independent vessels, if they plied between the same two ports with no intermediate stops. If their capacity should at any time be overtaxed, they would not reduce the charges on higher grades, but they would raise them on the lower grades, and the classification of freight would lose some of its significance. The lowering of the charges on the high grades of freight would come when the profits of the business should attract new carriers, who would naturally seek for the traffic that paid the best, till all kinds paid about alike. The mode of reckoning costs might then become simple--a _pro rata_ division of total outlays among all parts of the business. _The Condition of Uniform Costing never realized upon Railroads._--Not a single one of the essential conditions of equalized charges and uniform costing is now realized upon railroads, and there is only one of them that is approximated. Separate markets for different parts of the traffic are provided by the nature of the business. Every point to which goods are conveyed furnishes such a distinct market, and the service of carrying goods to it is paid for by a distinct set of customers. It follows, therefore, that some rates can be cut without affecting others, and they regularly are so. The second condition, that of bringing the carrying capacity of railroads into the fullest possible use, is attainable, but it is very remote. At times there is a congestion of freight and, in general, the capacity of existing plants is more nearly used than it heretofore has been; but by an addition to the rolling stock they could carry more than they do and the additional traffic would cost far less than the portion already carried. Moreover, with no addition to the rolling stock, very considerable enlargements of traffic could at many points be made. Thirdly, competition between railroads is not at present effective enough to bring about a reduction of the higher charges and make returns and costs simple. Combination takes place long before the discriminating charges are abandoned. Low-grade freight continues to be carried side by side with the high-grade which pays better. Charges to terminal points continue to be low, while charges to intermediate points are high. In a sense one may say that a tendency to discontinue these practices exists, but it is a tendency that is so effectually resisted that its natural results are only in small part realized. If a dam is built across a reservoir, holding the waters on one side ten feet above those on the other, one may say that the waters have a tendency to reach a uniform level, since the power of gravity is exercised in that direction; but the dam baffles the tendency. And so in railroad operations something interferes which checks the force of competition or removes it altogether, long before the discriminations in freight charges are removed or very much reduced. _An Intermediate State made relatively Permanent._--As we have said, the condition of traffic on railroads is analogous to what in the case of manufacturers and primitive carriers would be regarded as a transitional state soon to be left behind; but in the case of railroads it is relatively permanent. It is the condition in which certain natural economic forces are working vigorously, and, if they were not counteracted by other forces, would end by making natural adjustments and establishing normal rates for the carrier as well as the manufacturer. In this intermediate state the natural forces are counteracted and the adjustments are never made, and what we have to study is the degree in which they are approximated. [Illustration: C | | | HIGHWAY | | A--------------------------------B RAILROAD ] _A Simple Case of Special Costing Applied to Certain Traffic._--We will suppose A and B are connected by a railroad, while C and B are connected by a highway over which transportation proceeds by the primitive means of horses and wagons. It is like one of the cases we have already stated, with the exception of the fact that the carrier over the longer route is a railroad. The limit of what the railroad can get is the natural difference between the cost of making the goods at A and the combined costs of making them at C and carrying them to B. This definitely limits the railroad charges. Whatever difference of cost there is the railroad can get if it chooses, and barring any deduction it may make in order to induce production at A and make traffic for itself, it will get it. The rate which is fixed for the railroad may be sufficient to cover the total costs chargeable to this portion of its traffic on the simple and _pro rata_ plan of costing, or on the other hand, it may cover only a portion of the fixed costs or no portion at all. This means that the standard which is set by the differing values of the goods at A and at B may or may not yield a profit to the railroad. If it is so slight as not to cover even the variable costs of carrying the goods, the railroad will not carry them, and the supply will be allowed to come from C rather than from A. If it covers more than these variable costs, the road will accept and carry the goods. If the traffic affords any appreciable margin above the variable costs, it will be the policy of the railroad to make its charges low enough to attract the traffic, and this will slightly reduce the place value of the goods at B and bring it below the cost of procuring them from C. The railroad will thus secure the whole traffic to the exclusion of that which came from C. If the costs of making the goods at A and C are alike, then the charge for carrying from A to B will be just enough below the total costs of carrying in wagons from C to B to stop the carrying over this shorter route and appropriate the whole business; but this charge may not cover total costs of carrying from A. It may yield only a slight margin above the variable costs attaching to this part of the railroad's business. It thus appears that this carrier can with advantage accept the freight at a rate that by a perfectly normal bookkeeping is below cost, while the teamsters on the road from C cannot do this. [Illustration: C | | | RAILROAD | | A--------------------------------B RAILROAD ] _A Second Case in which Carrying is done for Any Amount above Variable Cost._--Let us now suppose there is a railroad from C to B as well as one from A to B. There is now competition between makers at A and carriers from A to B, on the one hand, and makers at C and carriers from C to B, on the other hand; and whichever of these quasi-partnerships delivers the goods at B at the cheaper rate gets the whole traffic. By the terms of our supposition the makers in both places are offering goods at cost, and any cutting of rates that is to be done must be done by the carriers. To reduce the prices of the goods at the mills in either locality would put some of them out of business. We will assume that there is no consolidation and no other means of concurrent action between the railroads, and that the whole traffic will thus go to the route over which the lower rates are made. For simplicity we will still adhere to the supposition of equal costs for manufacturing and of unequal costs for carrying. As the charge for carrying goes down, one or the other of the railroads will reach the point where the variable costs of this traffic are barely covered, while on the other line they are more than covered. Where rivalry is not tempered in any way whatever, the charge made by competing roads falls to a level at which returns only cover the variable costs incurred by one of the competitors, though it may return somewhat more in the case of the other. _How Fixed Costs are Met._--This implies, indeed, that the fixed charges of both roads must somehow be met by the returns from other traffic; and this supposition is in accordance with the facts. A freight war may temporarily carry rates to a level where some traffic does not cover variable costs and where total traffic falls short of covering total costs. Such a situation cannot long continue, and the natural adjustment, under active competition, is one at which rates on the traffic for which the two lines are contending are just below the variable costs incurred by one line but above those incurred by the other. There is nothing to prevent the stronger railroad from thus reducing its rates, attracting to itself the whole of the traffic, and putting an end to the rivalry of the other line. This would mean bankruptcy for that line unless it had other sources of income. _The Effects of Bankruptcy on Costs._--Bankruptcy means a scaling down of the fixed charges of the railroad to such a point that the total traffic can meet them; but it does not enable the company to reacquire business that will not yield enough to cover variable costs. Adhering to the supposition that there is no mutual understanding, no pool, and no other approach to consolidation between the rival lines, we may safely say that the general rule which elsewhere governs rates holds true here. Two roads actively competing for identically the same traffic tend to bring charges to a level at which the variable charges entailed by this traffic on the one route are not quite met and the traffic passes to the other line.[1] [1] If we wish to vary our supposition that the cost of making the goods at A and at C is the same, we have a modification of the case we have stated. If it is much cheaper to make them at A, the railroad that carries these goods from there to B may charge more for carrying than does the one that delivers the goods made at C. It is possible that the difference between the costs of making at the different points may tell decisively in favor of the longer route, and it may be the railroad from C to B that first reaches, in its charges, the level of variable costs and sees its traffic handed over to its rival. [Illustration: C | | | RAILROAD | | RAILROAD | A-------------------------------B \ / \ / \____ / \___ __________/ \____/ WATER ROUTE ] _A Principle governing Competition between Railroads and Carriers by Sea._--In a third case there may be between A and B a railroad and a water route also, while between C and B there is a railroad only. On the supposition we have made,--that competition between carriers by water has done its full work,--the charge for carrying anything by water from A to B must be sufficient to cover a _pro rata_ part of the total costs. That may be sufficient to cover the merely variable costs entailed on the railroad, or it may not. If it does not, the railroad will not take any portion of the business except what it may take by reason of the greater speed with which it can transport the goods. If, however, the total costs of carrying by water exceed by a tolerable margin the merely variable costs of carrying by land, the railroad will be able to take the traffic. If this traffic goes to the water route, the charge made by the railroad from C to B is adjusted by a simple rule. This railroad can get the natural difference between the cost of the goods at C and the cost of similar ones made at A and carried by water to B. If the railroad gets the traffic between A and B, and the water route is abandoned, the case becomes the same as that which we have already considered,--the transporting is done at a rate which prevents one of the lines from covering its merely variable costs and secures all the traffic for the other line. The carrying from A to B goes by land or by water according as the variable costs, in the one case, or the _pro rata_ share of total costs, in the other, are the less; and nothing can be carried from C to B unless it can be delivered at B at a price as low as that of goods made at A and transported at the rate just described. If the costs of making at A and C are equal and there are the three carriers seeking traffic, as assumed, the result naturally is to give all the business to the one who will bid the lowest for it. Either railroad will bid as low as the variable costs which the traffic occasions; while the owners of ships will bid no lower than the rate which covers costs of both kinds.[2] [2] If carriers by water are in that intermediate state in which their capacity is only partially used, they also may offer to take some traffic for an amount which only covers variable costs; but this condition does not naturally become in their case semipermanent, as it does in the case of railroads. [Illustration: RAILROAD _____ __________________/ \ / \_ __/ \___ A __ __ B \ / \ / \____ / \___________________/ RAILROAD ] _The Case of Railroads having Common Terminal Points._--In the fourth case there are, besides the other carriers, two railroads between A and B which compete for the traffic at these terminal points, but not at intermediate ones. Their facilities for through traffic are alike. The local traffic on the different lines is unlike, since it is affected by the character of the regions through which the railroads pass; but the charges made for local traffic are governed by the comparatively simple principles which we first stated. In contending for freight to way stations we may say that the railroad has to compete with wagons upon the highway, but with nothing more efficient. The charges for local freight may therefore be extremely high, while, if the railroads are really competing as vigorously as pure theory requires, and if the normal results of competition are completely realized, the rate which can be maintained between A and B for any articles carried will be no higher than those which cover the variable costs entailed on the route which is the less economical of the two. The line to which this test assigns the traffic between A and B must then stand the further tests we have described--those involved in contending for business with carriers using respectively the water route and the railroad from C to B. _A Condition leading to a Reduction of Fixed Costs._--It is safe to assume that one of the two railroads from A to B has more local traffic than the other. It may be that even with this advantage its total returns of all kinds may fall short of covering its total outlays. In that case the total returns of any less favorable route must fall still further short of the amount necessary for covering all outlays; and if we adhere to the assumption that neither consolidation nor anything resembling it takes place, we have a case in which both railroads must undergo reorganization. The fixed charges of the better route must be scaled down and the creditors of this railroad must accept the loss, while on the other route the fixed charges must be reduced still more and the creditors must suffer a larger loss. It goes without saying that the prospect of such a calamity means consolidation. It is evident what alternative competitors face in cases in which heroic competition goes on to the bitter end. As a rule this is an unrealized alternative. The mere prospect of the calamity connected with it is bad enough to put an end to the independent action of the different railroads. With the facilities for combination which now exist a far smaller inducement suffices to bring this about. [Illustration: RAILROAD ___________________________________ A ___________________________________ B RAILROAD ] _The Case of Railroads whose Entire Routes are Parallel._--We have to consider only one more typical case in order to have before us a sufficient number to establish the general principles which govern the charges for the carrying of freight by railroads. Variations innumerable might be stated; and, indeed, the experience of the railroad system of this country affords the variations and reveals the results which follow from the conditions they create. The railroads may be strictly parallel lines, pursuing the same route and competing for local traffic as well as for through traffic. If the case we lately examined insures consolidation,--and indeed all of the cases we have stated impel the companies powerfully toward it,--this last case makes assurance doubly sure. Strictly parallel railroads competing for traffic over their entire routes and neither uniting nor showing any of the approaches to union would be an impossibility. Persistent competition would then mean reducing all charges to the level fixed by variable costs, which would leave no revenue whatever to cover fixed costs, and would send the companies into a bankruptcy from which even reorganizations could not relieve them, since they could not annihilate all the fixed costs. _A Case of Arrested Development._--It is clear that, in the entire policy of railroads, the fact that their capacity has never been fully used plays a highly important part. It makes the distinction between fixed costs and variable ones a leading element in the adjustment of charges. With the capacity of railroads completely used, as is that of a ship which carries a full cargo at every voyage, the distinction would lose most of its importance. More business would then require an addition to every part of the plant and would thus entail new fixed costs which would have to be charged against the new business. As the traffic of any railroad grows toward its maximum, the cost which each separate addition to it entails grows larger and larger. When cars are few and are only half filled, an increment of traffic entails a very small increment of expense. When the cars are filled and new freight requires the purchase of more of them, the cost of this addition to the traffic becomes greater. When further additions to the freight carried require additions to trackage, yard room, storage room, etc., they cost far more than the earlier additions; and new increments of freight come, in the end, to cost very nearly as much per unit as the general body of the previous traffic when all outlays were charged against it. The railroad approaches the condition of the full ships referred to, in which further cargoes require further ships, with all the outlays which this implies. The distinction between different kinds of costing is gradually obliterated, and railroads steadily draw nearer to that ultimate state which other carriers more quickly approach, in which each part of the freight carried must bear its share of the total costs entailed. Long before that state is reached, however, combination ensues, and the movement of freight charges toward their static standard is arrested. [Illustration: C | | | HIGHWAY | | RAILROAD | A-------------------------------B \ / \ / \____ / \___ __________/ \____/ WATER ROUTE ] _The Standard of Freight Charges under a Régime of Monopoly._--A consolidation so complete that it would merge all rival lines under a single board of control and pool all their earnings would restore the early condition described in connection with one of our illustrations--that of the single railroad between A and B, having only sailing vessels and wagons as rivals. It is able to charge what the traffic will bear in a simple and literal sense. The consolidated lines can, if they choose, get for each bit of carrying the difference between the value of goods at the point where they are taken and their value at the point where they are delivered. These values are approximately what they would be if no railroad existed. The carrying done by the railroad itself does not enter into the making of them. The natural value of a commodity at A is what it costs to make it there, and the value at B is either the cost of making it at B, or that of making it at C and carrying it in wagons to B, or that of making it at A and carrying it by water to B. In any case there is a natural and simple process of fixing the costs both at A and at B, and the difference between them is the limit up to which the railroad can push its charges if it will. Where the business which furnishes the freight is not fully developed, the railroad may moderate its charges for the sake of letting it grow larger. The hope of increased traffic in the future may cause a reduction of demands in the present. We shall see what other influences may keep the charges below their possible level; but the natural difference between two local values of goods is the basis of the charge for carrying them from one point to the other. Consolidated lines, if they had as perfect a monopoly of carrying by railroad as has the single line in our illustration, would base their charges on this simple principle, though for a number of reasons they might not take all that the principle would allow. _How Imperfect Consolidation Works._--Imperfect consolidation, when it follows a period of sharp competition, has to deal with obstacles which prevent a complete carrying out of this policy. Many rates have become far lower than the rule of monopoly would make them, and there are difficulties in the way of raising them. A weak combination of parallel lines may keep its charges within bounds, partly from a fear that larger ones may afford too great an incentive to secret rate cutting and may so break up the union, and partly from a respect for what the people may do if the exactions of the railroads become too great. The more complete forms of consolidation have not the former of these dangers to fear; and if, without being restrained by the state, their charges continue moderate, it is mainly due to the fact that other lines less firmly consolidated are unable safely to make a radical advance of rates, and that this often prevents such a course in the case of lines which would otherwise be able to take it. _Limits on the Charges of a System of strongly Consolidated Lines._--This means that where a great system of railroads occupying the whole of a vast territory is so firmly consolidated as to have a complete monopoly of carrying by rail within the area, it is still affected in indirect ways by the possible rivalry of lines altogether outside of its territory. An excessive charge on freight from Chicago to New York might induce carrying by rail from Chicago to Norfolk and thence by water to New York. It might cause grain, flour, etc., to be shipped to Europe from Southern ports rather than from those on the Atlantic coast. These cases and others do not fall under principles essentially different from those already stated, but they call for the application of the same principles in complex conditions which our study is too brief to cover. There is a supposable case in which nearly all that could be secured by any railroad connecting Chicago with the Atlantic coast, even though every line in the territory between them were the property of one corporation, would be the variable cost of carrying goods over a line running to a port on the Gulf of Mexico. Reflection will easily show how the principles already stated apply to this case and others. _Effects of a General and Strong Consolidation._--With all the lines in this country and Canada in a strong consolidation, the advance of rates to, or well toward, the limit set by the principle of natural place value created would inevitably come unless the power of the state should in some way prevent it. The railroads would be able to get the difference between the cost of goods at A, in the illustrative case, and the cost of making or procuring them at B without using the connecting line of railroad. When the appeal to the state is only imminent,--when the power of the government is not yet exercised, but impends over every railroad that establishes unreasonable charges,--the rates may be held in a fair degree of restraint. A wholesome respect for the _possibilities_ of lawmaking here takes the place of actual statutes. A respect for the law appears in advance of its enactment and may amount to submitting rates in an imperfect and irregular way to the approval of the state. This effect, when it is realized, is to be credited in part to laws which will never be enacted. The merely potential law--that which the people will probably demand if they are greatly provoked, but not otherwise--may be a stronger deterrent than the prospect of more moderate legislation. In general a considerable part of the economic lawmaking of the future will undoubtedly be called out by demands for action that is too violent to be taken except under great provocation. The dread of the extreme penalty insures a cautious policy in increasing charges which have been established under a transient régime of competition. Partial monopolies adhering to rates many of which were established under the pressure of competition--such are the railroad systems of America. The existing condition shows some of the effects of competition which has ceased and of legislation which has not taken place. As the combinations shall become greater and stronger, the situation everywhere will become more and more akin to that which existed in a local way when a single line of railroad had no effective competition, and the charges which the traffic would bear were fixed in the way we have described and absorbed the place value which the carrying created. It is a method which exposes the public to an extortion which, though not unlimited, is unendurably great. Consolidation, therefore, means the control of rates by the state; but it is essential that this control be exercised with due regard for the economic principles which rule in this department of industry. Thus only can there be secured the results of a natural system unperverted by monopoly. The principles which a study of simple cases suffices to establish are as follows:-- 1. Freight charges are essentially a variety of price. They express the exchange value of place utility. 2. The static standards or norms toward which these prices tend are fixed in the same way as are other static standards of value,--by a rule of cost,--though in the case of railroads the working of this rule is exceptional. 3. When carrying is done by simple means and by competing carriers, the ultimate basis of charges is the cost of the carrying; and this is estimated in the simple way in which, under perfectly free competition, the cost of making commodities is estimated. The total outlay is charged against the total product. 4. A single railroad between one point and another, when it is not affected by the rivalry of any other railroad, can get for its service the difference between the cost of goods at the place where they are made and the cost at the point of delivery, on the supposition that they would either be made at this point or carried thither by more primitive means. Under such a partial monopoly the costs incurred by the railroad itself do not directly set the standard of its charges, but other costs do so. 5. In this case the so-called variable costs incurred by the railroad furnish a minimum limit below which its charges cannot go, but to which they tend to go in the case of traffic which cannot otherwise be secured. 6. This place value which the railroad can confer on the goods is small (1) when the cost of making the goods at their place of departure is not much less than that of making them at their place of destination, or (2) when it is not much less than the cost of obtaining them from a third point, or (3) when it is possible to carry them from the place of their origin to their destination by water or by any other cheap means of transportation. 7. Variable costs are positive additions to the total outlays previously incurred by a railroad, and they result from adding a definite amount to its previous traffic. They are less than proportionate parts of total costs, including interest, some part of operating expenses, cost of maintenance of roadway, etc. 8. The comparative smallness of the variable costs is chiefly due to the fact that the carrying capacity of railroads is only partially used. These costs become relatively larger as traffic increases, and would practically coincide with proportionate shares of total costs if the traffic should reach its absolute maximum. 9. If the place value above defined is large enough to cover the variable costs attaching to certain traffic and afford any surplus whatever, the railroad usually takes this traffic. 10. On the business which it gets the charges vary widely and, as it appears, capriciously, but they are at bottom governed by the economic principle stated--that of place value as established in ways in which the charges of the railroad itself do not figure. 11. Competing railroads tend to bring rates downward toward a minimum which is fixed by the merely variable costs of the carrying as done by one or more of the railroads themselves. 12. The competition between railroads is arrested while they are not using their full capacity, while the merely variable costs of an increment of traffic are still abnormally low, and while many rates are so. 13. Railroads which compete for freight between terminal points are strongly impelled toward consolidation; and those which compete along their entire lines are forced to resort to it. 14. Consolidation in its more imperfect forms tends to establish rates that are abnormally high, but this tendency is somewhat checked by the danger that the combination may be broken by a desire to foster business in a section of country and by the indirect influence of lines outside of the territory controlled by the consolidated roads. 15. In its stronger and more extended forms consolidation leaves the people with no adequate safeguard against extortionate charges except as this is furnished by the intervention of the state; and this needs to be effected with an intelligent regard for the natural forces which are at work amid the seemingly capricious irregularities in the present system of charges. _The Aim of Regulation by the State._--An aim of a government, in all of its economic policy, is to insure the best use of the national resources, and this can often be done by keeping alive free competition. Where the rivalry of producers is active, a law of survival guarantees that the more economical method of producing an article shall displace the inferior one. When the choice lies between using a quantity of free and disposable labor in making goods in a certain market and using it in making them elsewhere and carrying them to the market, the alternative which gives society the most that it can get by any use of its productive resources is the one that is spontaneously selected. _How an Extortionate Local Charge may sometimes be reduced without Injury to a Railroad._--A low charge for freight carried from A to B coupled with an extortionate one from A´ to B might preclude making the goods at A´, though they can be made there at excellent advantage and the interests of society will soon require that they be so. This situation can exist only so long as traffic is slight between A and A´ and greater between A´ and B. The growth of traffic over the former section of the route will make it desirable for the railroad to raise its rate over that portion. If, under compulsion or otherwise, it reduces the rate from A´ to B sufficiently to permit the production of the goods at A´, it will gain a profitable traffic between A´ and B at the cost of giving up a relatively unprofitable one between A and B. [Illustration: A---------------------------B A´ ] _Variable Costs a Proper Basis for Some Charges._--It makes for general economy to pay respect to the distinction between fixed and variable costs and let much freight be carried for anything it will yield above the variable ones. If ten units of labor are required for making an article at B and only five at A, and if a railroad between these points, whose capacity is not fully utilized, can carry the article from A to B with an expenditure of two additional units of labor, then society can best get the goods for use at B by spending these seven units in the making and carrying. It would take ten units to make them at B, and to society itself there is a saving of three units from making them at A and carrying them at a special rate to B. Till the railroad is more fully used for other purposes this source of economy will continue. Though the rates charged for this freight would bankrupt the railroad if they were applied to its entire traffic, it is best for the railroad to take this special bit of carrying at any rate exceeding the wages of the two units of labor; and for the time being this is the best way to use some of the social resources, since it gives at the point of delivery and use more goods for a given outlay than could have been had in any other way. _Why Consumers may suffer while Particular Producers may be Favored._--It will be seen that this principle affords an inducement for making a special classification of certain goods and carrying them for less than merchandise of a generally similar kind is carried for. It is a policy of "making traffic" which costs little and is worth more than it costs both to the carrier and to society. This incentive for reducing charges does not operate as strongly in the case of goods carried to consumers who are forced to live on the route. They are held there by the general causes mentioned at the beginning of the preceding chapter, and must pay the tax which the railroad imposes on them. The only limit on this tax is the possibility of otherwise procuring the goods or of moving out of the territory. The ultimate possibility that population may not grow under a régime of extortion and that both freight traffic and passenger traffic may be held within small limits imposes some check on the railroad's exactions. The company may find it worth while to foster to some extent the growth of population; and to favor producers of certain goods in order to induce them to locate their establishments on its line, and the result of this may be good for society; but there is no way of securing a general good from the heavy tax on the rest of the traffic unless this has been necessary to insure the existence of the railroad itself. In that case there may be a temporary necessity for it, which will disappear as traffic grows. _The Policy of the State in Dealing with Low Charges based on Variable Costs._--The interest of railroads which have a monopoly of their routes is to advance the rates on through traffic. We have noticed a possible case in which some equalization of charges by occasional reductions of local rates takes place. An increase of charges over long routes not made necessary by any pressure of business which overtaxes the railroad's carrying power would of course be injurious. Moreover, carrying full loads does not constitute such an overtaxing as calls for the higher rates. There are times when present supplies of cars and engines may not be able to move more freight than they do; but in that case more of them are called for. Only when the point is reached at which providing for this through traffic in addition to the local freight entails additions to the permanent plant and involves costs that exceed the return from the through business, is it justifiable, in the interest of social efficiency, to advance such charges. In preventing such an advance under other conditions a government helps to secure an approach to a natural economy and a maximum of production. _When, in the Interest of General Productivity, a Reduction of Local Charges is called for._--We saw that carriers of a primitive kind competing with each other would put every charge, local or otherwise, on a basis of its proportionate share of total costs. The traffic as a whole would return enough to cover all the outlays, and each part of it would yield its share. This is the ideal of effectiveness for railroads, as well as for ships and wagons. The attainment of the ideal without a regulation of charges by the state is never to be expected. One feature of this normal condition is that, where no special improvements have recently been made, total returns should just equal total costs, in the sense in which terms are used in static theory--that sense in which all interest charges and all expenses of management figure among the costs. No net profit for the _entrepreneur_, but full interest for the capitalist and full wages for all varieties of labor, is the rule that gives the static measure of normal returns. If a state shall slowly reduce the charges for local freight, while holding unchanged those for through traffic,--all the while allowing the total returns of the railroads to cover what we have defined as total costs,--it will do all it can toward securing an approximation to the condition which affords the largest product of social industry. It will help to make the resources of the people do their utmost in yielding an income. Total returns covering all costs, a reduction of those charges on local traffic which have prevented industries from springing up at intermediate points between favored centers, a gradual increase of local production without any positive repression of production elsewhere--such are some features of the general change which the future should bring and which only the power of the state can make it bring. _How the State may secure what Competition secures in Other Fields._--In general industry the rivalry of entrepreneurs carries prices to a level fixed by costs, but in transportation the rivalry has so largely disappeared as to prevent such an outcome. The state cannot restore much of the vanished rivalry and would cause an unnatural condition if it did so. We have seen toward what an abnormal level of costs a sharp "freight war" carries rates. What the state can do is something which an instinctive judgment of the people is impelling it to do; namely, to adjust rates directly and bring them gradually toward the standard to which competition, if it were working as it elsewhere works, would automatically bring them, namely, that at which wages and interest are fully covered. A surplus above these outlays could always be temporarily secured wherever a special economy had been effected, and the source of legitimate profit would be open to carriers as it is to producers generally. How much should be reckoned as interest depends on the question how the capital itself is estimated, and here again the instinct of the people has been correct. It will not accept as a measure of true capital the market value of all the stocks and bonds the railroad has issued. The quotations of the market make the total values of the stocks and bonds equal a capitalization of its total earnings, and these may include a profit due to monopoly. If a state were to figure the capital in this way, and then so adjust rates as to allow ordinary interest on the sum thus computed, it would merely leave total returns as they are. It might change comparative charges, but not the sum total of all of them. _How Capital should be Estimated._--In that static condition in which, as we have shown, capital is as productive in one subgroup as in another, the capital is first measured by the cost of the goods that, in the inception of the industry, embody it, and in static studies this cost is regarded as constant. Returns from different outlays are equalized, and a dollar invested in one kind of business then yields as much in a year as a dollar in any other. In a dynamic state the cost standard still prevails, and as the tools of production become cheaper, in terms of labor, it takes more of them to represent the same amount of capital that was originally invested. What it would at any time cost to duplicate every item in the equipment of a business measures the capital it uses. Nothing but a failure of competition in the case of railroads prevents the application of this standard to them. Monopoly makes earnings more or less independent of sums invested and causes purchasers to buy stock at rates that are independent of costs of plant and equipment and are fixed by earnings themselves. _The Process of Estimating Capital on the Basis of Cost._--If we undertake here to do by public authority what competition elsewhere tends to do, we shall have to restore the standard based, not on the original cost of the railroad's substantial property, but on the cost of getting another that would be equal to it in working efficiency. The plant is worth what it would naturally cost to duplicate it; and an average rate of interest on that sum is the natural return from it. There are ethical claims which are entitled to respect and which preclude any sudden reduction of the value of a railroad's properties; and, moreover, the end in view can be attained in a way that will not necessarily take anything from the absolute amount which they are now worth. If the amount of dividends remains fixed, the increase in the actual value of the plant itself will bring these dividends into the proper ratio to it. The land that the companies use is becoming more valuable. Measured by what it would cost to duplicate it, it represents a larger and larger amount on the companies' inventories. If the equipment also is enlarged as traffic grows, the entire sum on which interest and dividends are computed becomes continually larger. If the interest and dividends earned by the plants now in existence remain fixed in absolute amount, they will become a smaller and smaller percentage of the real capital of the companies. Merely letting railroads earn the amount that they do at present would bring the net incomes after some years to the same rate--the same percentage of invested capital--that the income from other capital represents. New plants and enlargements of old ones should be allowed to earn enough to furnish an incentive for providing them as fast as the needs of the public require it. _How Insuring a Fixed Amount of Total Earnings would affect the Rates charged for Freight._--It goes without saying that the general increase of traffic, while the freight charges remain the same, increases the net earnings of the carrying companies. Therefore the policy of keeping the net earnings at a fixed total amount would mean a reduction of rates for freight and passenger service. We do not here raise the question how much reduction will be required for the purpose in view--that of transferring to the people at large whatever now constitutes a genuine monopoly profit. In the case of some lines there is, it is safe to say, no such profit, and it will be impossible to tell how much of it elsewhere exists till some careful appraisal of plants and equipments, on the basis of the cost of duplicating them, shall have been made. What we need to know is that, by the aid of such an appraisal, the state can, if it will, secure in the department of carrying the result which is automatically secured elsewhere, namely, the prevalence of charges which afford normal returns on invested capital as well as wages for every kind of labor. _Elements of the Problem not included in a merely Economic Study._--It will not fail to occur to any reader that in making the present study of railroads a very general and purely economic one we leave out of account some facts of great importance. We take no account of corruption within the corporations which do the carrying, nor of corruption in the relation between them and the officials of the state. Stockholders within the corporation are likely to have their interests betrayed by those who are appointed to take charge of them, and citizens of the state are likely to have their greater interests betrayed, in a like manner, by their appointed custodians. We cannot here discuss the various plans by which directors plunder their own corporations, nor the ways in which public officials betray the people. All of these abuses are disturbing influences in the economic system; and all of them interfere with the adjustment which gives the highest productive efficiency, and contribute a full share toward putting the social order in danger. All are, however, so obviously criminal, if they are judged by the spirit of the law,--not to say by the letter of it,--that it is better to leave the discussion of the mode of suppressing them to legal and political science. _A Practical Mode of Insuring an Approach to Normal Rates for Transportation._--When competition rules, it enlarges the supply of a dear article till the price of it is normal, and it increases the capital in a profitable business till its earnings become so. In the case of railroads this does not automatically take place, but the result of it all--adequate service and normal charges for it--can be directly secured by the state. Charges that have been made reasonable by competition may be left as they are, and those that are disproportionately high may be gradually lowered. The growth of traffic may be trusted to keep the total earnings of the companies' present plants at the amount at which they now stand, in spite of these reductions of rates; and enlargements of the plants may be permitted to earn further sums which will attract capital and keep the service abreast of the public need. All this will require expert skill of a very high order. For the purpose of the present work it is enough to say that such a course as this is the only one which will insure in transportation the results which competition elsewhere yields. It will secure both rates and service which the civil law calls "reasonable" and economic law calls "natural." CHAPTER XXV ORGANIZATION OF LABOR What an economist wishes first to know concerning the organization of labor is whether it is a natural phenomenon which should be welcomed and left to itself. Does it help to establish wages on the basis of the productivity of labor, and does it do it without much reducing that productivity? We shall find that it works both well and ill in these particulars and needs close study and careful regulation. What laborers themselves ask concerning the organization of men of their class is simply what power it has to raise their own wages; and we shall shortly find that it has a certain power when it does not invoke the principle of monopoly and a much larger power when it does so. We shall find that the benefit from mere organization may be extended to the great majority of laborers, while that which depends on monopoly is confined to relatively few and involves an injury to the remainder. _The Static Standard of Wages of Unorganized Labor._--In that static state toward which society is always tending, and in which the normal standard of wages is completely realized, men are supposed to get all that they produce. The law of marginal productivity of labor works, as it were, _in vacuo_, and gives an ideally perfect result. Every unit of labor receives what a marginal unit produces. _Actual Pay of Unorganized Labor._--A static assumption excludes enforced idleness on the part of able-bodied men. The changes which throw such men out of employment are not taking place, and there is no reserve of efficient but idle labor. In the actual state, which is highly dynamic, such a supply of unemployed labor is always at hand, and it is neither possible nor normal that it should be altogether absent. The well-being of workers requires that progress should go on, and it cannot do so without causing some temporary displacements of laborers. Though no individual were long out of employment,--though a particular man were in this condition only briefly and during the period occupied by a transit from one occupation to another,--there would always be in the general market some unemployed men. If we throw out of account those who are idle because of personal disabilities, it will remain true that really efficient men can nearly always be had, if only a few are at one time needed. The presence of even a few men able to do good work and not able to get employment is often sufficient to make individual bargaining work unfairly to the laborer. When the employing of one man is in question, the employer has other alternatives, and the man may not have them. The employer may much more readily set men bidding against each other for a vacant place than any of the men can set employers bidding against each other for an idle man. This strategic inequality between the parties in the wage contract becomes greater as the supply of unemployed men becomes larger. At some times and places it may force the pay of many workmen downward toward a minimum set by what the unemployed will consent to take. _The Effect of Local Organization._--Organization means collective bargaining and tends to equalize the strategic positions of men and employers. Where an entire force of workers must be dealt with at a time, the employer has not the alternative ready to his hand which he would have if he had only to employ a single one. If his employees strike, he cannot at once secure another force large and efficient enough to meet his needs. If his men allow their places one by one to be filled, the strike will be disastrous to them, indeed, but it will also be a misfortune for the employer. His new force will be inferior to his old one, first, because many of the new men will be personally inferior to the old ones, and secondly, because as a body they lack effective training and will not work together as efficiently as did the old force. He can afford to pay for the disciplined workers the amount that the new force will produce with two plus marks attached--one representing the superior personal quality of the former employees and the other representing the value of discipline. In other words, he can afford to make two distinct additions to the amount that unemployed men are worth to him in order to retain his old employees. This is on the supposition that it is possible to gather from the force of idle men enough to operate a single establishment. Without organization and by means of individual bargaining, wages are drawn downward toward the level set by what idle men will accept, which may be less than they will produce after they receive employment and will surely be less than they will produce after they have developed their full efficiency. With organization which is local only, and with collective bargaining that goes only to the extent of adjusting the pay of men in one establishment, this pay comes nearer to the standard set by the productivity of labor than it would if bargains were individually made. The employer balances in his mind the value of a new and raw force and the value of a selected and disciplined force, measures the difference between these values, and will often pay a rate that is between the two amounts and under average conditions is likely to approach the larger of them. _Wages as adjusted by a General Organization of Labor in a Subgroup._--Where organization goes to the length of uniting all the employees in a particular industry or subgroup, the situation is unlike the foregoing in an important particular. No quick filling of the places which the men may vacate with altogether new workers is possible. The employers are not so situated that they can compare the old force with a new one, measure the difference in their values, and govern their conduct accordingly. The training of an entirely new force is indeed a remote possibility, if the business can wait for it, but it can seldom do this; and a strike that runs through a subgroup presents to employers the alternative of winning the workers by concessions or allowing their business to stop. If it stops, it becomes a question of endurance between the employer and the employees, in which the employer has the advantage so long as the public does not interfere. We shall recur to this condition when we study the effectiveness of strikes and boycotts under various conditions. Under all three of the conditions we have just described, the static standard of wages--the final productivity of social labor--still exists; and the actual pay of labor tends toward it, but differs from it by varying amounts, according as labor is unorganized, locally organized, or organized throughout a subgroup. In the first case the worker may get materially less than the standard amount; in the second case he may get something closely approaching it; and in the third case, for reasons to which we shall later give attention, he may be able to get the full amount and somewhat more. A particular employment which is strongly organized and which makes the utmost use of its organization is often able to carry the pay of its employees to a level that is distinctly above that set by the productive power of _marginal social_ labor. Nevertheless, the amount of this overplus which the favored worker gets is limited, and the standard fixed by marginal productivity is one on which the pay of these workers and of all others depends, though it may not coincide with it. _The Power of a Universal Organization of Labor._--In the days when the wages fund theory held sway it was believed that organization could not materially advance the interests of labor as a whole, since it could not add anything to the fund which was destined in any case to be divided among the laborers. Now that another theory of wages is generally held, it is still clear that what organization can do for the entire working class is limited. By no possibility can it insure a rate of pay that will permanently exceed the product of labor, since employers would then be interested in reducing the number of their workmen and so raising their product _per capita_ to the level of their pay. This would result in a large force of idle laborers, whose competition would have its depressing effect on the labor market. Up to the natural limit set by the specific product of labor a universal organization might successfully carry its demands. Moreover, this result would require no use of force--no "slugging" of non-unionists, since there would be none to be slugged. The mere fact of a universal organization maintaining discipline and preventing breaks within its own ranks would suffice for the end in view--the maintenance of pay that should conform to its natural standard. The supposition of a universal organization of labor has at present only a theoretical interest. What society has to deal with is an organization that includes a small minority of workers and is composed of separate unions which are endeavoring each to promote the interests of the men of its own craft. It is a type of organization which, instead of uniting all workers, makes the sharpest division between those in the unions and those outside of them, and creates a lesser opposition between the different unions themselves. _Organized Labor and Monopoly._--Actual trade unions do not always rely upon mere collective bargaining. They sometimes aim to secure a partial monopoly of their fields of labor; and as it is impossible to do this if unemployed men or men from other fields of employment are free to enter their territory, they must be kept out of it. They can only be kept out by some use of force, and coercion applied by the workers in a well-paid field to the men who seek to enter it during a strike is a part of the strategy of trade unions. _The Ground on which the Use of Force is Justified._--Organized laborers claim a right of tenure of their positions; they claim to own them much as a man, by right of prior occupation, owns a homestead. They claim the same right to repel intruders from their field of employment that a man has to drive interlopers from his grounds. "Thou shalt not take another man's job" is a recognized commandment on which they claim the right to act. _The Mode of Justifying the Use of the Force in Guarding Vacated Positions._--Coercion is a comprehensive term and does not always involve personal assault. What it inflicts on the recalcitrant may range all the way from social opprobrium and boycotting to literal striking, maiming, or killing. In every case it involves some injury and is contrary to the spirit of the law, unless the right of tenure can be fully established. If the employer has no right to turn off his men and take new ones, and if the new ones have no right to come at his invitation, there is a rude analogy between the effort of the non-union men to get the places and an effort to get away a man's farm. It is a matter of course that the employer may rightfully discharge men who prove worthless and fail to render the service which is contracted for. The question is whether he has the right to dismiss them when they will render the service only on what seem to him exorbitant terms. On this point the verdict of his own reason is extremely clear. To offer to render the service only on exorbitant terms has the same effect as to offer an inferior service on the original terms, and the right of tenure which the workingmen claim, if it exists at all, is contingent on the rendering of effective service on reasonable terms. On the supposition that they have owned their places at all they seem to their employer to have forfeited them when they have insisted on too high wages. On this point, however, the men's reason may give an opposite verdict, though it is based on the same principle. To them the terms they insist on may appear reasonable, and they then think that, because they are so, their ownership of their positions is valid and that other claimants are usurpers. Both parties in the dispute base their contentions on the supposed reasonableness of the terms they demand. _The Necessity for Knowing what Terms are Reasonable._--A momentous question both for society and for the working people is whether there is any way of ascertaining what terms are reasonable and securing conformity to them. What we shall find is that it is possible to keep in view the natural standard of wages, as in an early chapter we have defined it, and that it is possible, in the midst of the struggle of massed capital with massed labor, to secure a certain degree of conformity to this standard. It is possible so to shape the system that a wide difference between actual pay and standard pay will not exist, and that wages will everywhere tend toward their natural levels, as they did under that earlier régime before either the capital or the labor of a subgroup acted collectively. _The Attitude of the Community toward Striking Laborers._--So long as a local community sympathizes with the worker's dread of competition and tolerates his claim of ownership of his position, it does not utterly condemn and repress every use of force in asserting his claim. The local public is partly composed of friends or neighbors of the striking worker and is reluctant to interfere with the worker's effort to defend what he considers his property--that is, his right of employment in a business to which he is accustomed. The community sympathizes with his fear of the hardship which may result when employers freely utilize idle labor as a means of defeating strikes. On the other hand, even a local community realizes that much toleration of force means anarchy. If the violence is not resisted or repressed, the strikers acquire a monopoly that is not dependent on the justice of their claims. The whole question of reasonableness in the terms demanded is forcibly set aside, and the pay that is established becomes, not whatever a calm verdict of disinterested persons would approve, but what workers by brute force can get. Even a local public is unwilling to see the social order completely subverted and mob rule substituted, and it usually interferes when violence goes to that length; but in its unwillingness completely to repress disorder, on the one hand, or to leave it wholly unopposed, on the other, a local government pursues a wavering policy, now repressing anarchy and again leaving it to gather headway. It seldom affords full protection to the non-union men who work during a strike. Moreover, it is the habit of state governments not to interfere with local affairs until the public peace is endangered, and therefore not until the coercion of free laborers has gone to great lengths. The federal government only intervenes in great emergencies. Non-union men working during a strike are left largely in the hands of the local community, which often tolerates enough of violence to give to strikers a measure of monopolistic power. The wavering policy of the local community in regard to preserving the peace expresses a corresponding mental wavering. The public obeys no clear principle of action in this connection and merely allows some "slugging" when it sympathizes with strikers, but not, as a rule, when it does not. We have to see whether this rule has in it any germ of a legitimate policy. _The Sole Mode of Escape._--The sympathy in the case depends, as we have seen, on the off-hand impression of the people as to the reasonableness of the strikers' demands; and for such an impression there may or may not be an adequate ground. It is evident that no authoritative verdict has in these cases been pronounced. The only escape from the intolerable situation which is thus created is by testing the equity of the laborer's demands and adjudicating his claim to a tenure of his position. The possible method of doing this we will presently examine. It is clear in advance that what is to be done is to determine what pay is reasonable. The worker cannot rightfully retain the ownership of his job if he does not work properly; and he cannot so retain it if he works properly and claims exorbitant pay. Fair dealing between employer and employed must be attained if his tenure is even tacitly recognized. The worker who accepts a rate of pay that is pronounced reasonable may safely be confirmed in his place and protected from any persecution on the part of his employers. The worker who refuses a rate which some competent authority has pronounced reasonable thereby forfeits his right of tenure in a definitive way. His place is clearly the property of whoever will take it, and the state is bound so completely to preserve order as to make a new worker perfectly secure from injury. This means that it must do intelligently and thoroughly what a local community weakly tries to do when it lets strikers guard their positions if it sympathizes with their cause, and represses such attempts when it does not. The sympathy needs to be crystallized into a clear verdict as to the rightfulness or wrongfulness of the rate of pay demanded, and the local toleration of violence in cases where the men's demands appear just needs to become an open and frank assertion of their right to employment on the terms demanded; while the tardy repression of the violence in cases in which the demands seem unjust needs to become a prompt and complete repression of it. _The Preservation of the Mobility of Labor Indispensable._--Any use of force, anything, however slight, that deprives labor of its mobility, destroys the condition on which the law of wages is predicated. A perfectly free flow of labor from point to point in the industrial system is essential to a static state, and to any approximate conformity of actual wages to the static standard in a dynamic state. The plan which divides labor into sections and arrays one part of the force against another makes realization of natural wages impossible. While all differences of pay which correspond to differences of productive power are normal, those which are based on a monopolizing of fields of labor by some and the exclusion of others are abnormal. They cause the rich fields to be surrounded by impassable walls and force the bulk of the population to work on the outer and poorer areas. _The Wide Range of Difference between the Pay of Different Classes of Laborers under Trade Unions._--The possible range of the rise of pay which monopoly may insure for certain laborers is far greater than that which any action can secure for labor as a whole. Mere collective bargaining makes some difference, indeed, but where there is no attempt to exclude from a favored field workers of the poorly paid class, the range of difference is not great. To double the pay of laborers of every class would require more than the entire income of society, and yet it is possible for a few workers to make as large a gain as this. Some organizations without monopoly may keep the actual pay of labor somewhat near to its theoretical standard. With monopoly they may carry it far above the standard set by the marginal productivity of social labor. _The Differing Efficiency of Organization as used against Different Classes of Employers._--When employers are acting independently, a trade union which deals with them one at a time may very easily bring the pay of its members up to a certain average standard. A strike against a single producer may be very disastrous for him, since it may cause him to lose his customers. If the general state of business is good, he will pay all that he can rather than see business drift away from him, but what he can pay is somewhat strictly limited. He cannot safely give more than what is given by most of his competitors. Organization in such a case is a good equalizer of pay, and as its power is used against different employers successively, it suffices to raise general pay toward or to a standard set by the productivity of the labor. Moreover, as a rule, it can accomplish this without any appeal to violence. A modest and reasonable demand enforced by a wholly peaceable strike is likely to be conceded. _The Power of a Strike against All Entrepreneurs in a Subgroup._--A strike against employers in an entire subgroup may gain more for the workmen, but the more ambitious effort encounters stronger resistance. The employers, we assume, are competing still and have not the power which a monopoly would give them to raise the prices of their products. Nevertheless, they can concede somewhat more when they act together than one of them could concede separately. A concurrent raising of prices is entirely possible without any positive combination of the producers who follow such a course. Moreover, the strike itself, if it continues for any length of time, creates a scarcity of the products and a rise of prices. Though the employers in the end may concede what their workers demand, or some part of it, the settlement may not cost them anything, since the advance in prices may enable them to take all that they give their men out of the pockets of the public. The strike by a trade union against competing employers has as one ground of early success the employers' distrust of each other. The danger is that as soon as prices become at all firm, one or another of the employers may quickly make terms with his men in order to seize the opportunity for new business. For this very reason, however, the range of possible gains from a strike running through a whole subgroup is smaller than it would be if the employers were organized, so that all of them could safely wait for a larger rise of prices before making terms with their men. The possible increase of pay without a combination on the employers' side is distinctly larger than any which a strike against a single employer can usually secure. _The Power of a Strike against a Union of Employers._--Still keeping the supposition that there is no coercion invoked and that strikes are quite orderly, we find that they may gain more when employers are consolidated than when they are not so, but that they are likely to encounter still greater resistance. The demand--"Pay us more and charge it to the public"--may be conceded, and probably will be so if the employers dread the hostility of their own men and the action of the state in enforcing a resumption of business. If they have no such dread, their power to resist a strike is much greater by reason of consolidation. They can safely hold out long if the public will let them do it. No one of them is in any danger of seeing others take his customers. Their hold upon their constituency is secure, and their power to tax the constituency and make it pay for whatever a strike may cost is very great. A strike under such circumstances may win much for the men or it may win nothing whatever, and the difference between these results is mainly determined by the attitude of the people. If the government will hold its hands and let the producers work their will, they may (1) allow the strike to run for a time, concede something to their men, and raise prices enough to recoup themselves with a surplus; or else (2) they may let the strike run longer, till the men are tired out, take them back without concessions, and still put the same tax on the public as in the other case. _Effectiveness of Coercion as used against Non-union Men._--As a peaceful strike has different possibilities according as it is used against a single producer, a body of competing producers, or a consolidation of producers, so coercion employed against independent workers has correspondingly different effects in the three cases. When it is used in the case of a strike of the first class, it enables the men to carry their point more quickly, but does not materially increase the amount they can gain. If the independent producer is unable to run his mill till he makes terms with his original workers, he will be in greater haste to make terms, but the amount he can yield is limited almost as closely as before by the prevailing rate of pay. In the case of a strike of the second class which runs through a subgroup in which producers are still without union, coercion adds greatly to what the men may gain. It may fix and enforce a rate of pay which all employers must give, and circumstances will compel them to charge it to the public in whole or in part. The marginal producers who have no net profits must charge the whole advance to the public or go out of business, and the result may be that some of them may go out. The advance in the rate of pay conceded by others may come partly out of their own profits and partly out of consumers' pockets. With employers in a great consolidation the possible advance of wages is at its maximum. The employers are in a position to charge to the public all that they give to the men, and more. If the state allows them to do it, they may thrive by repeated strikes. Whether their men thrive or not depends on their power to bar other labor from their field and to live without work long enough to induce their employers to yield. The effect of coercion on the wages of non-union laborers means a lowering of their pay. It confines them to the less productive field which is open to them. ------- 1. _______ Wages of union labor which monopolizes its field and deals with competing employers. ------- 2. _________________ Wages obtainable by union without monopoly approximating the natural rate. 3. ----------------- Level of pay with no unions in the field. 4. _________ Wages of non-union labor excluded from the more productive fields. 5. _________________ Base from which wages are measured. The height of lines 1, 2, 3, and 4, above the base line 5, measures wages, and the length of the lines rudely indicates the numbers of workmen in different classes. The dotted lines above and below line 1 represent what union labor which maintains by force a monopoly of its field may be able to get from employers who are in a combination. It may be more than competing employers would give or it may be less. For men in strong unions who have _carte blanche_ to defend their fields, the policy of leaving other labor to its fate is overwhelmingly the more profitable. With a choice between gaining a hundred per cent in wages for ourselves or ten per cent for working humanity, self-interest speaks decisively in favor of the former alternative. In connection with the actual dealings of workmen with their employers the following are the principal facts:-- 1. When labor makes its bargain with employers without organization on its own side, the parties in the transaction are not on equal terms and wages are unduly depressed. The individual laborer offers what he is forced to sell, and the employer is not forced to buy. Delay may mean privation for the one party and no great inconvenience or loss for the other. If there are within reach a body of necessitous men out of employment and available for filling the positions for which individual laborers are applying, the applicants are at a fatal disadvantage. 2. Collective bargaining is a partial remedy for this disability and brings the pay of labor closer to its normal standard than, under individual bargaining, it could possibly be, but does not, of itself, enable one class of laborers to raise themselves to a position which is very much above that of a majority of the others. It gives to no class of workers any monopoly of their field or any power to tax the public or oppress men who are unorganized. It is a normal and democratic measure. 3. Many actual trade unions do not depend upon mere collective bargaining, but aim to secure a special gain through a partial monopoly of their several fields of labor. Their policy is exclusive in that it tries to limit the number of men who are admitted to the unions and to prevent non-union men from working at the craft. 4. In the establishing of such control of fields of labor some force is employed in order to bar from the fields men who would gladly enter them. "Slugging" is a frequent part of the strategy used when strikes are pending, and this elastic term covers a wide range of deterrent arguments. Whatever goes beyond a verbal demand or insult to the man or his family and involves any use of physical force is included in the meaning of the term, and the action ranges from small injuries to the clubbings which maim and kill. Moreover, social ostracism is to be rated as tantamount to force as a means of preventing a free movement of labor. 5. When the resort to force is defended, it is on the ground that the organized laborers have a right of tenure of their positions and that they may vacate them and still hold them as quasi-property. One man should not "take another man's job" even after the other man has left it. Acting on this claim, union laborers treat men who attempt to occupy the vacated places much as a man would treat intruders on his land or in his house. It is, as is claimed, a case in which a man must be his own policeman and protect his property. 6. The public sympathizes with the worker's dread of the competition which he encounters when unemployed men are gathered from near and far and set working in strikers' positions. It even tolerates, in a way, his claim of quasi-ownership of his position, and though it condemns the violence with which he enforces the claim, it does not summarily repress the violence. It is without a well-defined policy and often weakly permits disorders to grow into anarchy which only troops can quell. Local governments are often reluctant to lay vigorous hands on "sluggers," even when to do so would forestall the necessity for severer measures. This is due to an instinctive feeling that hardship and injustice may result from allowing employers to utilize a reserve of idle labor as a means of depressing their employees' wages and defeating strikes. 7. It is realized, on the other hand, that giving to violence a free rein means an amount of anarchy which no state can tolerate, that non-union laborers have, under the law, a claim to protection, and that allowing strikers to drive them from the field is permitting a monopoly to be established by crime. 8. The reluctance promptly to repress violence, on the one hand, or to leave it unopposed, on the other, expresses a mental wavering, since the state perceives and follows no clear principle in this connection. It has neither defined the nature and extent of laborers' rights nor provided for any orderly process for securing them. 9. The only escape from this situation is by arbitration. It is necessary to adjudicate the laborer's demand for wages and to legalize his tenure of place on condition that he shall accept a just rate of pay. The state is bound to ascertain and declare what rate is just, to confirm the workers in their positions when they accept it, and to cause them to forfeit their right of tenure if they refuse it. If the workers thus forfeit their claim, their positions are clearly open to whoever will take them, and the state is bound to protect the men who do this. Such appears to be the present situation, and an essential feature of it is the need of ascertaining on what principle a court of arbitration should proceed in determining what rate of pay is just. CHAPTER XXVI THE BASIS OF WAGES AS FIXED BY ARBITRATION The state needs an authoritative mode of determining what rate of pay is "reasonable." This duty is often imposed on boards of arbitration, for whose guidance no definite principle of justice has as yet been prescribed. Such a board has to depend on its own intuitions. It approaches its difficult work, having no legal rule for reaching a decision, and yet compelled, if possible, to reach one which will actually settle the dispute referred to it and enable production to go on. It must try, in the verdict it pronounces, to satisfy its own sense of equity. What such a tribunal has, in most cases, actually done has been to make compromises, and this has measurably accomplished both of these ends. A verdict that "splits the difference" between the men's demand and their employers' is most likely to cause work to be resumed; and on the ground that each party is probably claiming too much, and that justice lies between the claims, it insures a rude approach to fairness. This action has caused unfavorable criticism of the whole system of arbitration, on the ground that it abandons the effort to reach absolute justice and tries chiefly to end the quarrel on any terms, and also that by giving strikers a part of what they demand, it encourages them to strike again and secure more. We have to see whether a court can do better than this and whether such a crude procedure has tended at all toward putting wages on a normal basis. _Why a Court cannot reduce Wages in Favored Fields to the Rate prevailing at the Margin of Employment._--A tribunal of arbitration, which has to deal with consolidated capital and organized labor, acts in a field where both profits and wages are higher than they are in most departments of industry. Should a court then take as its standard of just wages what unorganized labor gets when it works for independent employers? That would usually level the pay of the class of laborers it is dealing with to the standard set by a much more poorly paid class. Should the court, on the other hand, take as the just rate the one that generally prevails where employers are organized in trusts and workmen in exclusive unions? That would be legalizing the result of monopoly. The court, in such a case, knows that the profits of the business are increased by the employers' monopoly and wages by the workmen's; and yet it will not pull down the rate of pay to the level prevailing where no combinations exist. On the other hand, to legalize any high rate of wages, which is made possible only by a double monopoly, would seem to be equally unjust. _The Power of Monopolistic Trade Unions under Different Conditions._--Arbitrators have to deal with trade unions which appeal to some kind of force in defending their right of possession of a field of labor. They make their own demands, strike, and compel rivals to stay out of the positions they vacate. When this policy is tolerated, they secure an exceptionally high rate of pay. We may represent the product of labor and its pay in the different occupations by the accompanying diagram. [Illustration] The heavy line _AA´_ represents, by its height at different points above the base line _EE´_, the product that is specifically imputable to labor in different employments. The part of the figure where the line is far above _EE´_ represents the condition where, on the employers' side, monopolies are established; while on the right of the figure, where the line has descended and is slowly approaching the base, the condition is represented in which employers are competing with each other, and many of them are selling their products at prices that only cover the cost of creating them. A unit of labor working for a monopoly creates as large a physical product as it does elsewhere. It turns out as many tons of steel or cases of cloth, etc., as though no monopoly existed, and the price of the goods is high because less labor is employed than would be employed under competition and fewer goods are produced. The actual product of the unit of labor, as measured in dollars, is enhanced by the employers' monopoly. _BB´_ represents, by its varying distance above _EE´_, what organized labor can get under the different conditions. On the left it forces the trusts to share gains with it, and gets a high rate of pay; while on the right, where employers are not in combination and there are no such great gains to draw on, it gets less, although at the extreme right it gets all that it produces. _DD´_ represents what unorganized labor can get under the different conditions, and it is usually somewhat more where trusts employ it than it is elsewhere. The dotted line _CC´_ represents the product of labor as it would be if it were equalized in the different fields. _The Parties interested in a Dispute in which Both Labor and Capital are Organized._--We can best deal with the problem of the adjustment of wages by arbitration if we approach it in a region where organization is strong, both on the side of labor and on that of capital, and disturbances of the natural system are greatest. The struggle that here goes on is, in a way, triangular. Organized labor contends against its own employers, on the one hand, and against unorganized labor, on the other; and the part which develops the greatest bitterness of feeling and the most violence is the strife between labor and labor--between the trade unionists who strike and the men who attempt to occupy their positions. The union is more tolerant of the employer's action in driving a hard bargain than it is of the "scab's" action in "taking another man's job." _The Public a Fourth Party in the Case._--The three parties just named--employers, organized employees, and applicants for places--are not the only parties whom the dispute affects. The public has a vital relation to it, and in a true sense its interest and rights are supreme. The public has a right to demand that production should not be interrupted, and that the supply of necessary articles should not be cut off; and it is in line with this demand that arbitrators seek first for an award that the contending parties will be willing to accept. _Two Issues needing Settlement._--In the immediate contest over the adjustment of pay, the three parties first named are the ones primarily involved. In discharging its duty as the preserver of justice, the court finds two issues which need to be settled rightly. The dispute between _entrepreneurs_ and workmen must be rightly adjusted, and the issue between the workmen and other labor must be so. The power of the state cannot properly be used (1) to force from employers more than they can afford to give, or (2) to exclude from any field of employment free laborers who are able and willing to do the required work. Arbitrators make their awards with an eye to conditions within the business and to the state of the labor market. Instinctively an arbitrator, in trying to satisfy his sense of justice, thinks first of the amount that the business yields. The men must not take the whole income from the business, leaving to the _entrepreneur_ nothing wherewith to meet the claim for interest. Without doing this, however, they may ask for much more than other laborers will accept, and the question arises whether this should be conceded to them. In merely putting the relation of workmen to employers on a proper footing, the tribunal may leave the relation of the strikers to other workmen as unsatisfactory as it has been. It appears that the tribunal of arbitration cannot by one act settle the two issues that are presented to it. If it gives to the men what seems like a fair share of the product of the business which employs them, it gives more than most workers get and more than the law of final productivity of labor would afford. Yet without a ruthless cutting down of the pay of favored laborers it cannot apply the standard of final social productivity of labor. If it applies this standard and cuts down the men's actual pay, they will refuse to abide by the decision; and if it tries to obtain a power of compulsion and make the men accept its decisions, they will try--probably successfully--to defeat the attempt. A system of compulsory arbitration that should go to the length of forcibly equalizing the wages paid to men of like ability in different occupations, would not be tolerated in a democratic community. _The Difficulty of Applying the Test of Final Productivity._--The law of final productivity works most efficiently when it works automatically, as it does when competing employers make the best bargains they can with locally organized laborers. The results, then, approach the theoretical standard, though they do not entirely coincide with it. The law, however, cannot be rigorously applied by a tribunal which is fixing a rate of pay by its own conscious act. How can the judges directly ascertain how much a final increment of social labor produces? Employers, indeed, do make such tests. An estimate of how much a few additional laborers would add to the product of a business often has, in some way, to be made, and employers manage to make it; but subsequent experience is necessary for verifying their judgment. A rule of pay, governed by marginal productivity, results from the action spontaneously taken by a myriad of employers, who enlarge their working forces when they find that they gain thereby, and reduce them when they lose. Of course no court could do anything of this kind. No department of industry will turn itself into a laboratory for testing the productive power of labor. It is clear that the procedure must be much simpler and cruder; and a vital question is whether a board of arbitration, proceeding as it must do, is under any influence that impels it to render decisions which, in any degree, conform to the theoretical standard of pay. Does the economic law of wages operate at all when civil law steps in to the extent of creating any tribunal of arbitration? We shall see. _The Necessity for Some Standard on which Arbitrators may base Awards._--When a board of arbitration tries to do anything more than to end a quarrel, it must seek for some principle of justice. If it is dealing with a favored class of laborers, it finds two extreme limits between which its awards must fall, namely (1) the product which the business yields in excess of simple interest on the capital, and (2) the wages that unorganized laborers may offer to accept. It is possible that the workmen may demand the former amount and the employers may offer the latter; and if so, compromising is a rule-of-thumb mode of doing justice. In the case of a strong union and a highly profitable business the employers may offer more than the minimum amount, and the award that is a compromise between the terms of the contending parties will then be well above that which is a fair mean between the possible extremes; yet it does not appear that it really conforms to any ethical principle. _Average Wages as a Standard._--Another possible basis of an award is the average rate of wages prevailing; but it has no claim as a standard of exact justice and is very far from being workable. Wages vary from a very high rate to a very low one; and the highest rate is that which prevails where a trade union which is strong enough to keep men out of its field of employment deals with a trust which is strong enough to keep rival producers out of its field of business. Under such conditions shall a court average this rate and a very low one, and reason that a mean thus arrived at is a legitimate standard of pay or one that would be realized if no monopolies existed? There is no evidence that this is the accurate fact, and there is every evidence that a verdict attained in this way would be rejected. It would cut down the pay that the favored workers have been getting, not to mention denying them the increase they are striking for. On the other hand, the lowest rates prevail where no permanent organizations exist; and if a strike should arise here, should the tribunal take an average rate of pay as its standard? That would greatly increase the rate that prevails in the region where it is acting, and would give the men more than most of their employers could afford. It would discard the necessary rule of keeping within the limit of what an industry can pay without seeing many of its shops and mills closed. Yet a court which refused to raise the pay of the lowest class at all would seem to accept the bad results of monopoly; for it would ratify the hard arrangements which workers who are excluded from the better fields are forced to accept. _A Court of Arbitration not the Agency for Rectifying General Evils due to Monopoly._--It will be seen that the difficulty we discover in the way of a wholly satisfactory action by the court is caused by a tacit demand that it shall undo the results of monopoly itself. We instinctively say to ourselves that the court must insist on doing ultimate justice, and that all rates perverted by monopoly are unjust. The arbitrators should pull down the high rates, raise the low ones, and create such an approach to uniformity as would be realized if labor were as perfectly mobile as a static assumption requires. To do this would give some laborers much less than their employers can afford to pay and less than they often do pay; while it would be giving to others more than their employers can pay without bankrupting themselves. If such levelling is to be done, it must be done by some other agency than a board of arbitration. _The Attitude of the Public toward a Strike by Employees of a Monopoly._--If we turn from a formal tribunal to the court of public opinion, we find a like state of affairs. There is no danger whatever that the public will justify cutting down the wages now received by men in the employment of a monopoly to a much lower level. That in itself would not right the wrongs of the poorly paid workers or those of the public itself. The employer would go on getting high prices for his products and would pocket the new gain which the reduction of wages gave him. If a great corporation is now taxing the public, even those who suffer would rather see the proceeds of the grab shared with the men than see it all held by the employing corporation. It is, indeed, true that if a tribunal were to give the men an _increased_ share of what the monopoly is getting, the employing company would try to recoup itself from the public by raising prices still higher; and, if it were to give a reduced share, the company might enlarge its business and make its prices a shade lower. Giving to the men a share of the grab made by their employer does indirectly cause a certain increase of the injury done to others, and withdrawing a share might slightly lessen the injury. The public would rather see the higher wages paid, and take some chance of this minor and indirect injury, than see the employing company pocket all that it exacts from the public. _Monopoly Prices as affected by an Increase of Wages._--Arbitration often authorizes a rate of pay based on the profits of an employers' monopoly; and yet a tribunal of this kind must not, and will not, make itself the accomplice of any monopoly by making its position more secure. The policy of every public institution must, and will, be designed to help make an end of every such outlaw that now has a foothold in the field of business. Yet any plan which would force a monopolistic employer to give to his men an increased share of the "grab" which he makes from the pockets of consumers tends to increase the amount of the grab if the employer is entirely secure in his position. A monopoly that is thus safe from interference tries to put the price of each of its products at the point where the largest net revenue is afforded. If distance along the line _AG_ measures the supply of a commodity and vertical distance from it measures price, _DF_ will be the price curve of a commodity, as it is offered in increasing amounts. _AD_ will be the price when one unit is offered, and _GF_ will be the price when the full amount represented by the line _AG_ is produced. The price will then stand at the cost of producing the article. When a monopoly is firmly established, it will seek to get the largest net profit that can be had, and a consistent execution of the plan would reduce the output from the amount measured by _AG_ to that measured by _AH_. The price would then become _HE_ and the net profit the amount of the area _EB_. If wages are so raised that the cost becomes _G´F´_, the net profit becomes _EB´_. This profit can be increased by further reducing the product to the amount _AH´_, putting the price at _H´E´_, and the net profit _E´B´_, which is larger than _EB´_. If an independent producer can employ non-union labor and create the goods at the cost _GF_, and market them without reducing the price much below the level indicated by _H´E´_, he can make on each unit of product a profit nearly equal to _I´E´_. This fact makes the monopoly cautious about raising its price to the level _H´E´_. A tribunal of arbitration may somewhat raise wages without fearing such an increase of prices. By a crude and instinctive judgment the court will hit upon some level of wages which falls well within the limit of what the monopoly can pay and is above the amount which marginal social labor gets. [Illustration] _The Probable Result of a Strike as a Standard for an Award._--Let us see what would happen if a board of arbitration should abandon all effort to level out the general inequalities in wages, and try chiefly to end quarrels and avert long-continued strikes. With this in view it might aim to give the men whatever they would be likely to gain by means of the strike. In a true sense this mode of procedure is more nearly scientific than either of the others. Any tribunal of voluntary arbitration will aim to content both parties sufficiently to prevent an interruption of business. The men may consent to take somewhat less than they hope to get by a successful strike; and the employers may be willing to pay somewhat more than they would at the end of a successful lockout. The probable outcome of the struggle may be differently estimated by the contending parties, and if so, an actual struggle will end by making employers pay more and the workmen take less than they had severally expected to do. If this amount can be awarded at the outset and the struggle precluded, all parties will be gainers by the continuance of business, unless the employers desire a strike for the sake of making their products scarce and dear. _When the Probable Results of a Strike afford an Unfair Standard of Wages._--Where monopolies exist and trade unions rely on violence in carrying their point, it would not be fair to establish a permanent rule of wages based on the amounts that strikes so conducted secure. Such strikes depend for success on the violent exclusion of non-union men; and actually to give permanence to rates so gained would be to fasten on the majority of workers the disabilities under which they now labor, and to perpetuate the gains of a twofold monopoly. On the other hand, if the court should make its award conform to the probable result of a strike which should be general in the trade, but should not resort to any violence, the procedure would be natural and would base itself, in an unconscious way, on the true standard of wages. Such a general strike, by its mere magnitude, would preclude the possibility of any immediate filling of the vacated places by men at the time out of employment; and yet the fact that non-union men were not forcibly kept out of the trade would be an all-important feature of the situation. If, when no strikes were pending, men could gain admission to this field, there would be no true monopoly on the men's side. The rule of giving, by arbitration, what a strike would secure would remove the chance of cutting down the rate to that which prevails in the more ill-paid employments, and would insure to the men the rate that marginal workers in actual employment get plus the two additional amounts spoken of at the beginning of the preceding chapter. The marginal product of labor plus an amount for personal superiority plus an amount for good organization would be the standard to which wages in favored employments would conform; and it is as nearly normal as any practicable standard would be. A free application of it would reduce the wages of unions that thrive by the use of force and would be opposed by such unions. If it were adopted, there is a prospect that the awards would be rejected by the men until hard experience should teach them to relinquish gains secured by violence. Yet a tribunal that should adopt this standard would allow workmen to retain every advantage that organization can afford without a violation of the criminal law. Its guide in making awards would be the pay which the best unions lawfully get in trades akin to the one in whose case they were acting. In dealing with a union which is not a true monopoly and does not depend on force, arbitrators may safely award what an actual strike would probably secure, and the simple plan of compromising gives an approximation to this amount. What the men will accept and the employers will give is about what a strike would extort. Where a monopoly of the field of labor exists and force is used to protect it, a compromise which anticipates the probable result of a strike concedes what could not otherwise be lawfully secured, and we have to see whether this is a plan that a board of arbitration can properly adopt. _Arbitration as affected by Employers' Monopolies._--We confine our attention, for the present, to arbitration that has no power of coercion behind it. A board may be formed which is compelled by statute to investigate quarrels and announce fair terms of settlement, but the contending parties may be allowed to do as they please about accepting the awards. The most difficult case with which such a tribunal would have to deal is that in which the employer has a monopoly of a department of production, and a trade union has an exclusive possession of its field of labor. The mere removal of the employer's monopoly would so greatly simplify the situation as to leave no ground for serious difficulty. With that out of the way,--with potential competition doing the perfect work that under good laws and good policing it ought to do,--the pay of laborers in other employments would be somewhat higher, and extortionate profits would be altogether absent. Profits based on special economy would exist, as they should, but those which are filched unjustly from any one's pocket would not exist. There would be likely to be, in most of the subgroups, independent employers efficient enough to hold their positions, but without any means of getting abnormal gains. These would be marginal employers in their several subgroups, and their returns would range about that static level at which the wages of labor and the interest on capital would absorb them all. An award based on what such employers could pay would express what other employers would naturally pay, and it would be all that the subgroup as a whole could concede without ruining some of its members, but it would allow others to make something by special economies in production. Productivity profits they would get and no others, and these it is in every way expedient that they should be allowed to enjoy. Suppressing employers' monopolies would remove much of the difficulty connected with arbitration, and putting an end to violence on the men's part would remove almost all the remainder. With monopolies in the field it is quite otherwise. Their gains are not of the kind that it is for the interest of the public to let them keep. The public claims these sums on grounds of equity and expediency. It is a perverted distribution that gives them to their present recipients; and this fact threatens to involve more and more the processes of production themselves. Centralization, without monopoly, increases the product of industry; but the monopolistic feature that often attends it partially paralyzes the producing forces, and must be gotten rid of before there can be a normal income to divide and a normal way of dividing it. _The court of arbitration itself cannot get rid of it_, and it would do harm if it should try to do so. Drastically to cut down wages that have been raised by the power of monopoly would injure some workmen without materially helping others, and it would benefit chiefly the monopolistic employers. Such a policy would bring the entire system of arbitration to an end; for it is partly a fear that arbitration would not leave to favorably situated unions as much as they can now get by strikes and boycotts that prevents the system from coming into vogue. The state can end the monopoly, but it must do it by other measures than installing courts of arbitration. In the interim--long or short, as the case may be--before these measures will have their effect, it is necessary to proceed on a plan of securing by awards something like what would result from actual trials of strength. The effects of adjudication will not, in this interim, be ideal, but it is necessary to accept this fact and struggle the harder to obtain conditions that will improve them. _Abnormal Conditions which Arbitrators must Accept._--Crude force of one sort or another would sometimes give to organized labor twice or thrice as much as free labor can earn at the social margin of production, and the public approaches the problem of adjustment while this condition exists. It may be that a trust has crushed competition, made large gains for itself, and made it possible to pay employees at a high rate; while, on the other hand, a trade union has made itself strong, put pressure on the employers, excluded free laborers, and secured a share of the monopolistic spoils. Arbitrators, then, whenever a strike is pending, may divide the spoils as a strike would do, between masters and men. This will leave a few workers in possession of a rich field and many hungry ones outside of it; and we have asserted that the board should confirm the workmen's tenure of place on the sole condition that they accept a rate of pay which it shall authorize. In this case the arbitrators authorize a high rate, while needy men stand ready to take a lower one. They confirm wages based on the profits of monopoly, but look to the state as the power which will get them out of their anomalous position, by making an end of monopoly. _Why Sharing a "Grab" already made is not an Aggravation of the Evil._--While plunder is to be had, it is at least by one point fairer that workers should have a share of it than that employers should have it all. We have said that the court of arbitration finds two issues needing settlement, namely, the relation of employers and employed within the business, and that of laborers outside of this department of industry to those within it. Only one of these issues is it capable of settling, and it is by a true instinct and not merely from expediency that arbitrators permit workmen to share in some degree the gains of the monopoly that employs them. This is legitimate, however, only on the condition that, by further measures, the gains of monopoly be reduced. _How Arbitration will be facilitated by the Suppression of Monopolies._--In studying monopolies we discovered that the prices of their goods do not entirely part company with their natural standards, even when governments do not at all interfere with them. Potential competition keeps these prices from rising above the standard of cost by more than a certain margin. We shall see that if governments do nothing in the way of controlling the contests over wages, the rates that these yield will not be wholly unnatural. They will be held within a certain distance from the standards. If too high wages are exacted, the barriers will be broken down and competing laborers will come into the favored fields. The potential competition of idle men hangs as a menace over the heads of the too exacting trade unionists, and enforces a measure of prudence in the wages demanded. If the unions ask too much and strike in order to get it, the competition which is now latent will become active, other men will take the vacated places, and the struggle of force will begin. Slugging may ensue and may go to the limit of a weak government's toleration. The more complete is the exclusion of free labor, the higher is the rate which organized labor secures; but this rate always falls within a certain distance of the normal one, as that is fixed by the final productivity of social labor. Even the pay secured by violent strikes is, as we have already shown, _governed by_ the law of final productivity, though it does not _coincide with_ that rate. Actual pay and standard pay are like a vessel and a tug attached to each other by a hawser, which allows one to drift far from the other but does not let them part company. In the long run the tug takes the tow with it. Even the wages which a trust gives to a fighting union--wages paid by a monopoly to a monopoly--are governed by the law of final productivity, since there is a limit on what the trust can extort from the public, and there is a limit on what the union can extort from the trust. Potential competition, by limiting both the producing corporation and the trade union, vindicates the natural law of wages, though its results are made inexact by monopoly. _How Potential Competition affects Organized Labor._--We have seen that potential competition keeps within limits the prices of goods made by trusts. If they become too high, new mills are built. In a like way potential competition puts a check on the wages a strong union can secure; for if these are too far above the level of non-union men's pay, such men will find their way into the business. Open shops will be established, either by the present employers or by new ones. There will be much to be gained by an independent shop manned by non-union labor, and the danger of this makes a trade union more conservative than it would otherwise be. The chief potentiality in the case is that of the new and independent shop, and if the way is open for this to appear, the range of difference between the pay of favored laborers and that of others is greatly reduced. The trade union may be able to carry its point and keep free labor from its field, so long as it has only its own employers to deal with; but if new employers will appear whenever there is an inducement to do so, the case is quite otherwise. The new mills make the greater gains if they are manned by non-union men. With the field open for all producers, the danger of free shops with free men will impend always over the union that demands too much for its members. This is now true even where consolidated companies exist, and it would be doubly true if there were no such companies. The rivalries which would then appear would keep wages, as well as prices, near to their natural standards. In the absence of monopolies on the part of employers, and of "slugging" on the part of workmen, arbitrators may accept as standards what the actual dealings of employers and employed yield. In most cases they will ratify no wrong by doing so. The court may act as it now does and announce a rate based on a mere compromise or on the probable result of a strike. If the men accept the award, let them keep their places; but if not, let the positions be open to whoever will take them, and let the state repress every form of violence that would interfere with their doing so. The sentiment of even a local community will sustain such a maintenance of order. _The Case of Trades not affected by the Potential Competition of Non-union Men with New Employers._--Building trades are peculiarly situated in that their products have to be made in the locality where they will stay, and no competition from labor living at a distance is to be feared. If the local unions can protect their field by force, they can establish a high rate of pay, even though the employers have no unions. Arbitration that merely gives what a strike will yield will here deviate greatly from the natural standard of wages. Labor in mining is somewhat similarly situated, and so is labor in transportation. In these, and in some other fields, new men do not weaken the position of strikers unless they are brought to the places where the strikers have been working; and that exposes them to assault. It is in the making of portable goods for a general market that the new and independent shop manned by non-union laborers is an important factor. It is easy to answer the question whether, in such fields, the board of arbitration should confirm the workmen's tenure of place while his pay is sustained by force. All slugging is inherently criminal and should be always and everywhere repressed. In the cases that we first examined, a safe course would be to hold it in repression, announce a rate of pay based on what a strike would then yield, and trust to other measures for destroying monopoly on the capitalist's side. The chief danger of violence begins when the men reject the award and others take their places, and at this point the fact of arbitration will make the duty of the state easier though hardly clearer. The case of such trades as building and mining differs from the others only in the fact that there is not present the check that is elsewhere afforded by the danger of new mills, and the pay secured by crude force is high. To announce a rate based on the result of a strike, _if slugging is to be permitted during the strike_, is to accept, for the moment, what violence will secure; and nothing will remove this feature of the adjudication but a manful assertion of sovereignty by the state and a complete ending of the tolerance now accorded to anarchy. By no means, however, does this deprive union men of the advantage that organization gives them. They may be secured in the possession of every advantage which collective bargaining, without violence, can secure. Great numbers enlisted in a union will give to it a prospect of success in enforcing any reasonable demand. Voluntary arbitration, that aims to preclude a strike, will have to respect this fact of organization and give the men about what a legitimate strike would yield. As a rule, this will result in compromises of opposing claims, and if violence is not in sight as a resource, the compromises will fall near to the natural standard of wages. _Why Conciliation is preferred to Arbitration._--Both among organized laborers and corporate employers there is a dread of state action for the positive adjustment of wages. There is a preference for conciliation over any kind of arbitration, and there is a preference for voluntary arbitration over that which has any trace of authority behind it. For tribunals which have full coercive power, most employers and strongly organized laborers have an insurmountable repugnance. If such tribunals were introduced, it would be against their strongest opposition, which is saying that a measure designed to secure industrial peace would have to be put into operation while the parties directly interested in it opposed it with might and main. The reasons for this attitude are not difficult to discover. Conciliation aims solely to secure internal peace in a department of industry. To avert strikes or reduce their duration is all that it can do and all that the parties directly interested wish to have it do. From the point of view of employers and employed in a highly profitable industry, the averting of strikes is enough to aim at, and even the public sometimes accepts this easy-going view and thinks that everything desirable is gained merely by averting strife or ending it when it occurs. Uninterrupted production--the saving of the great wastes that strikes entail--does, indeed, promote the public welfare. When conciliation does this, it indirectly does something for the public. The essential thing about conciliation, then, is that it does not consciously try to do anything but to make the two parties in the dispute over wages contented enough to go on producing. A board which aims only to do this is careful not to introduce any one who represents an outside interest. The procedure must be kept "within the family." As is often said, "those who understand the business" must settle disputes within it. What is really desired is that only those who are _interested in_ the business should have anything to say about it, and there is a dread of giving representation, either to the general public or to independent labor. Moreover, when the defects of conciliation are spoken of, what is mentioned is the uncertainty as to its working, the probability that in many cases it will not bring the disputants to an agreement and cause production to go on. There is no dread of the rates of pay that it yields. There is practically no dread on any one's part of what happens when employers and employed are contented because they jointly thrive at the expense of the public. Rather than have production stopped, the public is often willing to let a dispute be settled on almost any terms, though the result may be to let some men thrive at the expense of consumers and of other laborers. There is a monopolistic grab the sharing of which makes both parties better off than are men of their class elsewhere. Singular as it may seem, even this attitude of the public is justifiable. It is entirely right not only to welcome conciliation where it can be made to work, but to try it as often as possible before resorting to arbitration. _Rates resulting from Conciliation not Unlike those resulting from Strikes._--The results of collective bargaining, with conciliation in cases of dispute, come within a certain distance of those which would be gained by a perfectly natural adjustment of wages. All that we have said about the relation of wages adjusted by strikes to their natural standards applies here; potential competition generally keeps the actual rate within a certain distance of the natural one, though a monopoly may make the distance unduly great. If potential competition works feebly on the employers' side,--if independent producers are slow to appear even when the price of a product is very high,--there is a large profit in the industry for some one; and if potential competition works feebly on the side of labor,--if workmen can safely strike with little fear that independent laborers will dare to take their places,--the men can secure a fair-sized share of this profit. A strong trade union working for a strong monopoly gets wages that exceed the standard rate by the largest obtainable margin; and yet, as we have said, even this excess has limits, and adjusting disputes by conciliation does not alter those limits. The rates agreed upon are still governed by the standard rate to the same extent as under the régime of strikes. The strike and the lockout become potential, but they impend as possibilities and do their work. The board of conciliation knows that they will occur unless their probable results are anticipated and forestalled by the decision. The board cannot do otherwise, therefore, than to restrict the actual strikes. Wages then become the natural rate with a plus mark, and may be said to be adjusted in a way that at the bottom is natural, though it works under vitiating influences. _Why Voluntary Arbitration does more than Conciliation._--Voluntary arbitration is an advance over mere conciliation in point of effectiveness. It departs somewhat from the plan of confining the action to the family, since it introduces some other parties as arbitrators and thus invites some recognition of outside interests. Nevertheless its actual working involves little change in principle, and its results do not greatly vary from those attained by conciliation. When we speak of arbitration as voluntary, what we usually mean is that acceptance of the award is in no way enforced. Either party may accept it or refuse it, but it may be that both parties acting together cannot prevent the investigation; and the economic law of wages acts best when this is the case. How such voluntary arbitration is provided for,--whether it is established by free contract between employers and employed, or by statute,--is not in this connection of importance. The one thing that is important is that no compulsion is applied to either party to force him to accept the award. _A Moral Compulsion due to Voluntary Arbitration._--A certain moral force is, indeed, necessarily behind the award of such a tribunal. It informs the public what fair-minded men regard as a reasonable adjustment of the dispute, and forces any one who refuses to accept such a decision to go on record as claiming more than is presumably just. This tends to alienate public sympathy, and to forfeit the aid which sympathy insures. Moreover, where voluntary arbitration is established by a contract between parties,--where, for example, masters and men agree that during a term of years disputes that cannot otherwise be settled shall be referred to a tribunal constituted in some prescribed way,--the decision of the tribunal is made by the contract to be especially binding. _Why Mere Compromises lead to Fair Results._--A merely compromising policy, such as the one which has often been sharply criticised, involves an approximation to what strikes would yield; and this, as we have seen, gives results which, in a rude way, are controlled by economic law. A fact of the greatest importance is that the awards made by boards of arbitration with merely voluntary power are not compromises between mere demands of the two parties; they are between _genuine ultimata_. When the court is called in, the employer has offered a rate of pay and stands ready to close his mill if it is not accepted; and the men have offered to take a certain rate and are ready to strike if the rate is not given. The essential fact in the case is that neither of these rates usually varies by more than a certain amount from the natural level of wages. There is every difference between a demand put forward for strategic purposes and a real ultimatum. If workmen knew that a court would simply make an even division between their own demand and their employer's offer, then men who were getting two dollars a day might ask for four in the hope that the arbitrators might give them three. Even if no such expectations were entertained, it is certain that both parties would exaggerate their claims; workers would demand more and employers offer less than they expected in the end to agree upon. When, however, the demands are not made in this way for the sake of impressing the tribunal, but are known to be genuine ultimata, the case is quite different. The workers will actually go on a strike if their demands are not conceded, and they will certainly have to do this if they make their figures extravagant. The employer will close his mill if his offer is not accepted, and he will have to do it if his offer is absurdly low. Very much is involved in the fact that an actual severing of the relation between employers and employed impends over them as a possibility. _The Chief Advantage of Arbitration over Conciliation._--We are now in a position to measure the real difference between conciliation and voluntary arbitration. If a strike comes after nothing has been tried except conciliation, there is often nothing to prevent the strikers from resorting to all the devices which are available for guarding their tenure of place--in other words, for keeping "scabs" out of the field. The local community is in its usual position of uncertainty as to the equities of the case, and is likely to show its usual hesitancy in giving to the new laborers the complete protection which the laws enjoin. There is the customary dread of the effect of letting a strike-breaking force have full sway and the opportunity for disciplining the former workmen into submission. The chance that the resulting rate of pay may be too low to do justice to the laborers remains before the eyes of the local community, and has the effect to which we have earlier called attention--that of taking much of the vigor out of the official arm when violence occurs. How is it when a tribunal of arbitration has studied the case and announced a decision? Though the workmen may be as free to strike as ever, such an action would put them at a fatal disadvantage. The arbitration has given to the public a basis for a judgment as to the equities of the dispute. If the tribunal is one which commands respect, a refusal to abide by its decision puts the men _prima facie_ in the wrong. If they strike now, they reject a rate which is authoritatively pronounced just. Even this they have the privilege of doing if they so desire; but if they go farther and forcibly prevent other men from accepting the equitable rate and doing the work, they forfeit their right of tenure; and it would be a strangely constituted public which, under such circumstances, would let them use fists, missiles, or clubs in defending it. There may be an agreement between employers and employed to submit to impartial arbitration such disputes as are not otherwise settled; and when this has been actually done and a decision has been reached, it is made by the contract to be too binding to be lightly disregarded. If it is still disregarded and if violence is resorted to, the forfeiture of public sympathy is so complete that there is little danger that violence will be winked at. The action of such a tribunal may be nearly as effective as that of one which has full coercive power. _Why Compulsory Arbitration is less Certain to give a Just Award._--Arbitration by a court that has full compulsion behind it does not theoretically need to satisfy the contending parties. If it can fine or otherwise coerce the party that refuses to accept its mandate, and thus insure a forced compliance with its orders, it is conceivable that it might announce rates of pay entirely at variance with prevailing ones. It might announce arbitrary rates or make a bold effort to discover and introduce those which should coincide with the ultimate natural standards--which would mean a relentless reducing of some rates and a raising of others. In a democratic country, however, such a court would have to satisfy the contestants and the public or forfeit its existence, and the only mode of insuring its continuance would be a more conservative policy and a respecting of the _status quo_. It might appeal to the probable result of violent contests somewhat less than a purely voluntary tribunal might do, since it might venture to give offense to employers or to workmen, and trust to the support of the general public; but in the main it would have to let the existing rates of wages continue with no radical change. Even though it were able by some statistical test to discover the natural rates of wages, it could not be bold enough rigorously to apply them without forfeiting its existence. Under any system, then, whether it be crude contention, conciliation, voluntary arbitration, or compulsory arbitration, the rates fixed by the present half-savage process would be allowed to rule till the process itself should be freed from the perversion that monopoly causes. Inequalities of pay would be tempered in different degrees by the various tribunals, but the existing rates in each employment would continue to furnish a basis of adjustment. _The Most Available Plan of Arbitration._--Since there is little prospect that compulsory arbitration will give rates of wages which will differ materially from those secured by arbitration of the voluntary sort, the latter kind has the preference, so long as it is able actually to prevent the strikes and lockouts which, at present, are so wasteful and disorganizing. To accomplish this, there is available a kind of arbitration which is voluntary, but has behind it enough authority to make actual strikes very rare. By this plan the state recognizes for an interim the laborers' tenure of place, on condition that they continue working during the time occupied by the adjustment. If they stop working before a decision is announced, they forfeit their tenure of positions. When the tribunal announces a decision as to the terms on which labor shall go on, the force already working has the option of retaining the positions or abandoning them; but if they elect to leave them, it must be with the understanding that their departure is definitive and their right to tenure surrendered. The state then uses its utmost power in protecting men who may occupy the vacated places. The mere prospect of this outcome will be enough, and the shifting of the force will not have actually to be made, since the right of tenure is too valuable to be forfeited. The system requires that prompt action be had whenever a strike or a lockout is impending, but it enforces decisions only by imposing on workmen who choose to be recalcitrant the penalty of forfeiting the right of ownership of positions, the claim to which they esteem so highly that they are ready literally to fight in defense of it. _A Mode of Dealing with Rebellious Employers._--An employer might refuse to accept the result of an arbitration. In view of the strong pressure that public opinion would exert after the decision should have been rendered, frequent refusals are not probable. If, however, the employer should reject an award, the logic of the case would require that he lose his tenure of place as the men do for a like offense; and the only way to accomplish this is to throw him out of his business connections. The tenure which an _entrepreneur_ most values consists in his relation to his customers; and if the state should see to it that the goods he makes could always be had from some other source, the _entrepreneur_ would be unlikely to close his mills. How the state shall keep the sources of supply open will become an important question if it shall appear that producers do defy the public opinion and reject the court's awards.[1] [1] If the employer were a corporation possessing a monopoly of its department of production, it would be difficult quickly to open such new sources of supply as would be requisite; but a temporary reduction of import duties would often go far in this direction. And a measure which would insure the running of the plant under a temporary receivership would, of course, do it. _The Practical Working of the Arbitration Proposed._--Let us see how such a system of arbitration as is here described would work in the case in which, as we have supposed, a strong trade union is dealing with a monopolistic employer. At the outset all violence on the men's side is ruled out. No assaulting, maiming, or killing of so-called "scabs" is tolerated, and, moreover, the first temptation to this is removed by the act of the state in recognizing for an interval the men's tenure of place. There are no strike breakers to be attacked. While proceedings of arbitration are pending, the obnoxious class is out of sight, and all the places are transiently reserved for their original holders. The court has submitted to it two possible rates of pay, one demanded by the men and the other offered by the employers. It may confirm either of these rates or any rate that is intermediate between them, and it is likely to pursue the latter course. In any case, it announces a rate, the one which to it appears to be fair and is more likely to be so than the one claimed by either of the parties. "This is a just rate," declares the tribunal to the men; "you may take it or leave it, but if you leave it a certain thing will happen,--workmen who refuse it will forfeit all claim upon their positions." Workmen will not often refuse the award, and the pressure of public opinion makes it improbable that the employer will do so. Coupled with arbitration and an essential part of the system is a policy which shall remove the danger of monopoly. In its perfectly secure form monopoly as yet scarcely exists, but what does exist is a great number of partial monopolies able to handle competitors roughly and extort profits from the people. Directly connected with the adjustment of wages is the disarming of such monopolies. The preventing of strikes may often be accomplished without this, but the insuring of just wages requires it. With a solution of the problem of monopoly in view, all other needs of the situation might well be met by arbitration without compulsory power. We may now tabulate our conclusions. 1. In the making of the wages contract the individual laborer is at a disadvantage. He has something which he must sell and which his employer is not obliged to take, since he can reject single men with impunity. 2. A period of idleness may increase this disability to any extent. The vender of anything which must be sold at once is like a starving man pawning his coat--he must take whatever is offered. 3. Collective bargaining enables men to withhold, for a time, something which is of importance to an employer. He cannot let them all go with impunity. 4. A strike is a contest of endurance; and if it continues until the men are exhausted, they are collectively in the position of the hungry individual seller, who is at the buyer's mercy. The wages they then take may be far below the natural standard. 5. If their places are filled at once by men who are already thus necessitous, the resulting rate may be equally below the natural standard. 6. The power of the union often depends on its use of force in keeping the needy out of its field. 7. The rate of pay gained where compulsion is freely and successfully practiced is above the normal rate. 8. Conciliation does little in the way of changing the results which are realized without it, but it lessens the frequency of strikes. 9. Arbitration by a court, which must make a decision but cannot enforce it--by a court which confirms the workmen's tenure of place while action is pending and declares it forfeited if the men reject its decree,--such arbitration would secure a closer conformity to the normal standard of wages than any other action. It would establish rates which give the workmen the benefit of every legitimate advantage from collective bargaining. 10. Arbitration by a court which is compelled to act, and can enforce its decision, may deviate in a particular case from the rate of pay which strikes would yield; but if the deviation is frequent and great, it will induce a rebellion against the system of compulsory arbitration. The rate under this system cannot differ greatly from the result secured with no arbitration at all. The chief value of all the foregoing modes of settling disputes lies in their prevention of costly interruptions of business. They may reduce the number of strikes and prevent much waste and suffering. 11. A mode of procedure which aims chiefly to end strikes usually depends on making compromises between opposing claims. This secures an approach to a reasonable adjustment, as between employers and employed, but does not affect the differences between the wages of different classes of laborers. 12. In order that any mode of adjusting wages may give fair comparative rates, monopolies must be repressed; and this can only be accomplished by measures which are independent of tribunals of arbitration. CHAPTER XXVII BOYCOTTS AND THE LIMITING OF PRODUCTS When free from the taint of monopoly, trade unions, as has been shown, help rather than hinder the natural forces of distribution. Collective bargaining is normal, but barring men from a field of employment is not so. Connected with this undemocratic policy are certain practices which aim to benefit some laborers at the cost of others, and thus tend to pervert the distributive process. _Restrictions on the Number of Members in a Trade Union._--If a trade union were altogether a private organization, it might properly control the number of its own members. Before it is formed all members of the craft it represents are, of course, non-union workers, and the aim of the founders is to "unionize the trade"--that is, to enlist, in the membership of the body, as large a proportion as is possible of the men already working in the subgroup which the union represents. From that time on it can fix its own standard of admission, and allow its membership to increase slowly or rapidly as its interests may seem to dictate. _How a too Narrow Policy defeats its Own End._--Very narrow restrictions, while they keep men out of the union, attract them to the trade itself. An extreme scarcity of union labor and the high pay it signifies causes the establishment of new mills or shops run altogether by non-union men. If these mills and shops are successful, the union may later admit their employees to membership; and a series of successful efforts to produce goods by the aid of unorganized labor thus interferes with the exclusive policy of unions. The number of their members grows in spite of efforts to the contrary. _Free Admission to a Trade Equivalent to Free Admission to a Union._--We may recognize as one of the principles in the case that free admission to the craft itself involves free admission to the union. When once men are successfully practicing the trade, the union is eager to include them, though it enlarges its own membership by the process. _How a Government might prevent a Monopoly of Labor._--It is entirely possible that a government might require trade unions to incorporate themselves, and might include in the charter a clause requiring the free admission of qualified members, subject only to such dues as the reasonable needs of the union might require. That is not an immediate probability, but the end in view can be attained by making membership in the trade itself practically free--which means protecting from violence the men who practice it without joining the union. This is not difficult where a mill in an isolated place is run altogether by independent labor, and it is natural that the unions should endeavor, in other ways than the crudely illegal ones, to prevent the successful running of such mills. If they run with success, their employees will have to be attracted into the unions. A measure designed to impede the running of non-union mills is the boycott. It is a measure which does not involve force and which is yet of not a little value to workers. _The Nature and Varieties of the Boycott._--A boycott is a concurrent refusal to use or handle certain articles. In its original or negative form, the boycott enjoins upon workers that they shall let certain specified articles alone. If they are completed goods, they must not buy them for consumption; and if they are raw materials, or goods in the making, they must not do any work upon them or upon any product into which they enter. They may thus boycott the mantels of a dwelling house and refuse to put them in position, or, in case they have been put in position by other workmen, they may, as an extreme measure, refuse to do further work on the house until they are taken out. A producers' boycott, such as this, falls in quite a different category from the direct consumers' boycott, or the refusal to use a completed article. When a raw material is put under the ban, workers strike if an employer insists on using it. If the cause of the boycott is some disagreement between the maker of the raw material and his workmen, the measure amounts to the threat of a sympathetic strike in aid of the aggrieved workers. If the cause is the fact that the materials were made in a non-union shop, the men who thus made them have no grievance, but the union in the trade to which these men belong has one. It consists in the mere fact that the non-union men are working at the trade at all and that their employer is finding a market for their product. Workers in other trades are called on to aid this union by a sympathetic strike, either threatened or actually put into effect. Such a boycott as this may therefore be described as amounting to a potential or actual sympathetic strike somewhat strategically planned. If the strike actually comes, it may assist the men in whose cause it is undertaken; and the principles which govern such a boycott are those which govern strikes of the sympathetic kind. _Direct Consumers' Boycotts economically Legitimate._--The other type of boycott is a concurrent refusal to buy and use certain consumers' goods. Legally it has been treated as a conspiracy to injure a business, but the prohibition has lost its effectiveness, as legal requirements generally do when they are not in harmony with economic principles. Of late there has been little disposition to enforce the law against boycotting, and none whatever to enforce the law when the boycott carries its point by taking a positive instead of a negative form. The trade-label movement enjoins on men to bestow their patronage altogether on employers included within a certain list, and this involves withdrawing it from others; but the terms of the actual agreement between the workers involve the direct bestowing of a benefit and only inferentially the inflicting of an injury. The men do not, in terms, conspire to injure a particular person's business, but do band themselves together to help certain other persons' business. Economic theory has little use for this technical distinction. It is favorable rather than otherwise to every sort of direct consumers' boycott, and is particularly favorable to the trade-label movement. This movement may powerfully assist workers in obtaining normal rates of pay, and it will not help them to get much more. _The Ground of the Legitimacy of the Boycott._--An individual has a right to bestow his patronage where he pleases, and it is essential to the action of economic law that he should freely use this right. The whole fabric of economic society, the action of demand and supply, the laws of price, wages, etc., rest on this basis. Modern conditions require that large bodies of individuals should be able concurrently to exercise a similar right,--that organized labor should bestow its collective patronage where it wishes. This can be done, of course, only by controlling individual members, for the trade union does not buy consumers' goods collectively. If it can thus control its members, it can use in promoting its cause the extensive patronage at its disposal. _Unfavorable Features of the Indirect Boycott._--The boycott we have thus far had in view is a direct confining of union laborers' patronage to union-made goods. Why this is a thing to be encouraged we shall presently see. What we have said in favor of it does not apply to boycotting merchants on all their traffic because they deal in certain goods. If a brand of soap is proscribed, the workers are justified in concurrently refusing to use that variety; but it is not equally legitimate to prevent a merchant, whose function it is to serve the public, from selling this soap to the customers who want it. To refuse to buy anything whatsoever from a merchant because he keeps in his stock a prohibited article, and sells it to a different set of customers, is interfering, in an unwarranted way, with the freedom of the merchant and of the other customers. Indirect consumers' boycotts have little to commend them, but those of the direct kind have very much. _The Merits of the Trade-label Movement._--This appears most clearly in connection with the trade-label movement. As a result of this movement union laborers will, as is hoped, buy only union-made goods. The existence of such a movement in itself implies that there are goods of the same sort to be had which are not made by union labor. The shop that is run by the aid of independent labor is the cause of the existence of the union label. If all the labor in a group were organized, the label would have no significance. At present the trade unions offer to an employer a certain amount of patronage as a return for limiting himself to union men, and so long as the cost of making his goods is not much increased, the inducement may be sufficient to make him do it. _The Movement as affected by Extravagant Demands on Employers._--Unduly high wages mean, of course, unduly high prices. Without here taking account of the "ca'-canny" policy, which aims to make labor inefficient, extravagant wages for efficient labor increase the cost of goods. This opens the way, as we have seen, for the free shop and the labor which is willing to sell its product at a cheaper rate. If union labor then firmly resolves to buy only the goods with the label, it proposes a heroic measure of self-taxation. _Trade Labels and the Quality of Goods._--The experience of the trade-label movement thus far has been, that in some instances the label vouches for prices which are high, if quality be considered, or for a quality which is poor if the prices are the current ones. Instead of telling the purchaser that the shoes, hats, cigars, etc., which bear the label are surely the best that can be had for the money, the labels are more apt to tell him that the goods are poorer than others which can be had. In some instances this is not the case, and the union-made articles are as good and as cheap as others. When the label stands for a high price or a poor quality, the union fails to control its members and especially its members' wives. Having the meager pay of a week to invest, the wife needs to use it where it will do the most for the family. There is so strong an inducement to buy goods which are really cheap and good that the trade-label movement fails whenever loyalty to it means very much of self-taxation. _The Object Lesson of the Consumers' Boycott._--Organized labor gives itself a costly and impressive object lesson when it tries to force all men of its class to buy the dearer of two similar articles. What this shows is that the demands of unions must be limited, and that for the highest success they must be so limited that there shall be no decisive advantage given to an employer who has a non-union shop. A marked difference in costs of production will cause the free shop to grow and the union shop to shrink. A certain moderate difference in wages there may be, provided always that the union labor is highly efficient; but more than such a difference there cannot safely be. If the trade-label movement should be generally successful, that fact would prove that the demands of trade unions were kept within reasonable limits. _The Policy of Restricting the Product of Labor._--It is a part of the policy of trade unions to limit the intensity of labor. The term "ca'-canny" means working at an easy-going pace, which is one of the methods adopted in order to make work for an excessive number of men. For some of this the motive is to avoid an undue strain on the workers. If the employer selects "pacemakers," who have exceptional ability and endurance, and tries to bring other laborers to their standard, then the rule of the trade union, which forbids doing more than a certain amount of work in a day, becomes a remedy for a real evil--the excessive nervous wear of too strenuous labor. This, however, by no means proves that the policy as carried out is a good one. Beyond the relief that comes when undue speeding of machinery and driving of workers is repressed, it will be impossible to prove that in the long run there is any good whatsoever in it, and the evil in it is obvious and deplorable. _"Making Work" as related to Technical Progress._--The policy reverses the effects of progress. That which has caused the return to labor to grow steadily larger is labor saving or product multiplying, and labor making and product reducing are the antithesis of this. Enlarging the product of labor has caused the standard of pay to go steadily upward and the actual rate to follow it; and the prospect of a future and perpetual rise in the laborers' standard of living depends almost entirely on a continuance of this product-multiplying process. A single man maintaining himself in isolation would gain by everything that made his efforts fruitful, and society, as a whole, is like such an isolated man. It gains by means of every effective tool that is devised and by every bit of added efficiency in the hands that wield it. _Reversing the Effect of Progress._--It follows that undoing such an improvement and going back to earlier and less productive methods would reverse the effect of the improvement, which is higher pay for all; it is restoring the condition in which the product of labor and its pay were lower. The "ca'-canny" policy--the arbitrary limiting of what a man is allowed to do--has this effect. It aims to secure a reduction of output, not by enforcing the use of inferior tools, but by enforcing the inferior use of the customary tools. The effect, in the long run, is, and must be, to take something out of the laborers' pockets. _The Effect of the Work-making Policy under a Régime of Strong Trade Unions._--It is, of course, only a strong trade union that can enforce such a policy as this. Making one's own work worth but little offers a large inducement to an employer to hire some one else if he can. Within limits, the powerful union may prevent him from doing this, and if for the time being society is patient and tolerant of anarchy,--if it allows men who are willing to work well in a given field to be forcibly excluded from it by men who are determined to work ill,--the policy may be carried to disastrous lengths. _How Static Law thwarts the Work-making Policy._--Even strong unions, as we have seen, succeed in maintaining only a limited difference of pay between their trade and others. The effort to maintain an excessive premium on labor of any kind defeats itself by inducing free labor to break over the barrier that is erected against it. The same thing happens when we reduce the productive power of organized labor. If, at a time when the premium that union labor bears above the non-union kind is at a maximum, the policy of restricting products is introduced, it so increases the inducement to depend on an independent working force that there is no resisting it. The palisade which union labor has built about its field gives way, and other labor comes freely in. If the ca'-canny policy makes it necessary to pay ten men for doing five men's work, the union itself will have to give place to the independent men. No single good word can be said for the ultimate effect of the policy as carried beyond the moderate limit required by hygiene. Up to the point at which it will avert undue pressure upon workers, stop disastrous driving and the early disabling of men, the effect is so good as amply to justify the reduction of product and pay which the policy occasions. Beyond that there is nothing whatever to be said for it, and if it shall become a general and settled policy of trade unions, it will be a clog upon progress and mean a permanent loss for every class of laborers. Notwithstanding all this, it must be true that some motive which can appeal to reasonable beings impels workers to this policy. No plan of action, as general as this, can be sustained unless some one, at least transiently, gains by it. Workers have a tremendous stake in the success of any plan of action they adopt, and they have every motive for coming to a right conclusion concerning it. They are in the way of getting object lessons from every mistaken policy, as its pernicious effects become apparent, even though some local and transient good effects also become evident. It is not difficult to see what it has been that has appealed to so many laborers and induced them voluntarily to reduce the value of their labor. _A Common Argument against Product Restricting._--What is commonly said of the policy is that it is based on the idea that there is a definite amount of work of each kind to be done, and that if a man does half as much as he could do, twice as many men will be employed to do the whole amount. Nobody who thinks at all actually believes that the amount of work of a given kind is fixed, no matter how much is charged for it. If workers on buildings charged from five to ten dollars a day, there would be fewer houses erected than would be erected if they charged three dollars; and the same thing is true everywhere. The amount of labor to be done in any field of employment varies constantly with changes of cost, and making labor more costly in a particular department reduces the amount of its product that can be sold. A trade union often finds that there are too many workers in its field to be constantly employed at the rate of pay it establishes. The result is partially idle labor; the men work intermittently, and though the high wages they get for a part of their time may compensate them for idle days or weeks, the idleness which is the effect of the oversupply is inevitable. A given number of workers in the group which makes A´´´ when the wages are three dollars a day becomes an excessive number when the wages are five, and even if the high wages do not attract men from without and make the absolute number of workers greater than before, employment is not constant. The ca'-canny policy is a transient remedy for this. It is an effort to avoid the necessity for partial idleness and for the transferring of laborers to other occupations. All the labor may, for a time, remain in its present field if it will afflict itself with a partial paralysis. For a while the demand for the product of the labor will be sufficient to give more constant employment. Time is required for the full effect of the product-limiting policy to show itself in a falling off of the consumption of the goods whose cost is thus increased. When it comes the evil effect of the policy will appear. If a union were strong enough to keep a monopoly of its field, in spite of the greater efficiency of laborers that are free to work in a normal way, it would be strong enough to maintain much higher pay for its own members if it limited the number of them and encouraged them to work efficiently. The strongest conceivable union must lose by substituting the plan of paralyzing labor for that of restricting the number of laborers. The union may choose to take the benefit of its monopolistic power by keeping an unnecessarily large number of men in constant employment, rather than by getting high wages for efficient work; but in that case any union but one the strength of which is maintained in some unnatural way is likely to come to grief by the great preference it creates for non-union labor. The independent shop will get the better men at the lower rate of wages, and its products will occupy the market. The popularity of the plan of work making is the effect of looking for benefits which are transient rather than permanent. If it were carried in many trades as far as it already is in some, it would probably neutralize, even for those who resort to it, much of the benefit of organization, and work still greater injury to others.[1] [1] It will be seen that whether the policy is successful in giving employment to the partially idle or fails to do so depends on the amount of reduction in the sale of the goods which the increased cost of making them entails; and if the market is highly sensitive to increased cost, the policy may fail in securing even a transient increase of employment. _The Eight-hour Movement as a Work-making Policy._--The effort to reduce the hours of labor to eight per day has in it so much that is altogether beneficent that it is not to be put in the same category with the ca'-canny plan of working. And yet one leading argument in favor of this reducing of the number of hours of work is identical with that by which a reduction of the amount accomplished in an hour is defended. The purpose is to make work and secure the employment of more workers. What has been said of the other mode of work making applies here. Reducing the length of the working day cuts down the product that workers create and the amount that they get. In the main the loss of product is probably offset by the gain in rest and enjoyment; but the loss of product, taken by itself alone, is an evil, and nothing can make it otherwise. If the hours were further reduced, the loss would be more apparent and the gain from rest and leisure would be less. _One Sound Argument in Favor of the Greater Productivity of the Eight-hour Day._--There is one reason why the eight-hour day may in a series of generations prove more permanently productive than a longer one. It may preserve the laborers' physical vigor and enable them to keep their employment to a later period in life. The dead line of sixty might be obliterated. If what we wanted were to get the utmost we could out of a man in a single day, we should do it by making him work for twenty-four hours; after that, for another twenty-four hours, he would be worth very little. If we expected to make him work for a week, we should probably shorten the day to eighteen hours. If we expected to employ him for a month and then to throw him aside, we might possibly get a maximum product by making him work fourteen hours. If we wanted him for a year only, possibly a day of twelve hours would insure the utmost he could do. In a decade he could do more in a ten-hour day, and in a working lifetime he could probably do more in eight. Forty or fifty years of continuous work would tell less on his powers and on the amount and quality of his product. _The Connection between the Restriction of Products and the Trade-label Movement._--Very important is the bearing of these facts concerning the restriction of laborers' products and the trade-label movement. If that movement should become more general and effective, it would bring home to all who should take part in it the effects of the labor-paralyzing policy. The faithful trade unionist would find himself paying a full share of the bill which that policy entails on the public. Ordinary customers can avoid the product whose cost is enhanced by the trade-union rules; but the unionist must take it and must make himself and his class the chief subjects of the tax which enhanced prices impose. It may well be that the pernicious quality of the general work-making policy will become so evident in any case that it will be abandoned; and this would be made sure by a rule that should actually make union labor the chief purchaser of union goods. Ca'-canny would then mean self-taxation on a scale that no arguments could make popular. CHAPTER XXVIII PROTECTION AND MONOPOLY The more serious perversions of the economic system which we have encountered have all been traceable to some working of the principle of monopoly, and it is important to know whether any established policy of governments lends force to this evil influence. Import duties were established in America for the purpose of protecting industries as such, and a vital question now is whether they have now begun to protect monopolies within the industries. _A Supposed Conflict between Theory and Practice._--There was a time when theorists and practical men seemed to be in hopeless disagreement concerning the entire subject of protection. In the view of the practical man an economist was a person who, in his study, had reached certain conclusions which were equally unanswerable in themselves and irreconcilable with the facts. The expression most commonly heard in this connection was that "theory and practice do not agree." The doctrinarians were, in those days, unusually harmonious among themselves, for there were comparatively few who made a vigorous defense of protection on grounds of economic principle. The practical world was less harmonious, since the views of different parts of it were colored by differing interests; but the fact that science did not fall into self-contradiction was encouraging. It was possible for the uncompromising free-trader to think and to say that fundamental principles were all on his side, and that the protectionist had nothing in his favor except transient disturbances that interfered with the perfect working of the principles. _Static Theory in Favor of Free Trade._--Now, the business world conceded too much to the free-trader when it said that he had theory altogether in his favor. What he could truthfully claim, and what the world could safely admit, was that he had static theory in his favor. Static theory deals with a world which is free, not only from friction and disturbance, but also from those elements of change and progress which are the marked features of actual life. Stop all the changes that are taking place in the industrial life of the world; put an end to inventions and improvements in business organization; let there be no moving of population to and fro, and no increase of the aggregate population of the world; further, let there be no addition to the wealth of the world and no change in its forms,--and you will have the static state described in the early part of this treatise. Men would go on making things to the end of time, using identically the same methods that are now in vogue and getting identically the same results, and in such an imaginary world there would be no possibility of answering the contention of the general body of economists of a generation ago. Free trade would be the only rational policy, and it could be defended upon the simple ground on which division of labor in the case of individuals is defended. One man has an aptitude for making shoes, another for making watches, another for painting pictures, and so on; and each one of them can gain far more by devoting himself to his specialty and bartering off the product of it than he can by trying to make everything for himself. Nations have their special aptitudes and should follow them, and make all they can out of them; and the nation which has special facilities for producing cotton, or wheat, or petroleum, or gold and silver bullion should devote itself to its specialties, barter off the results, and get all manner of goods in return. _Wastes from Protection reduced by the Fact of Diversified Resources._--It is true, indeed, that a great nation like our own makes a much better jack-of-all-trades than an individual can make. It is far more probable that the nation as a whole can produce without much waste all the things it wants to use than that any individual can do so. If we have all climates from the tropical to the arctic, all soils, and a full list of mineral deposits, why should it pay us to confine ourselves to the making of only a few things in order to barter them off for others? Why should we not, with our wide range of resources, make everything? Undoubtedly we can make almost everything if we insist upon doing it; but there are still some things that other countries can make and sell to us on such terms that we can do better by buying them than by producing them ourselves. We can raise tea in the United States, but it pays us better to make something else and barter it off for tea. A day's labor spent in raising cotton to send away in exchange gives us more tea than a day's labor spent in producing the latter article directly. In a static condition we should have found in what fields it is most profitable to employ our energies. We should be directly making things that it would pay us best to make, and we should be indirectly making the other things; that is, we should be producing articles to send off in exchange for those other things. Wherever an indirect way of acquiring a thing had proved most profitable, we should have adopted that method, and we should always adhere to it. Anything that forced us to make directly something which we could secure in greater abundance by bestowing the labor that would make it on making something else, would turn our energies in a comparatively unproductive direction. It would inflict on us a waste and a loss--and there are such wastes and losses inherent in the operation of the principle of protection, and there is no contending against the argument that demonstrates their existence. Protection and a certain distortion of the productive system, a certain misdirection of energy, are synonymous. _The Argument for Protection Dynamic._--Now an intelligent argument in favor of protection begins at this point. It accepts the whole static argument in favor of free trade, and its own assertion begins with a "nevertheless." It claims that in spite of what is thus conceded, protection is justifiable, since, in the end, it will pay, notwithstanding the wastes that attend it. The argument for protection is entirely a dynamic one. It is based on the fact of progress and admits that it could make no case for itself under the conditions of a static state. If every country had certain special facilities for producing particular things, and if its state in this respect were destined to remain forever unchanged, it could, to the end of time, make itself richer by depending for many things on its neighbors than it could by depending for those things immediately on itself. The fact is, however, that a nation like our own abounds in undeveloped and even unknown resources which, when brought to the light, may take precedence of many of those which are known and utilized. If our country from end to end were like Cape Nome, and as rich in gold as the richest part of that remote region, and if it were certain that the deposits of gold would never be exhausted and would employ the whole energy of our people, it is clear that we should have one staple occupation and should depend upon the rest of the world for almost every sort of portable commodity. We should be stopped from manufacturing by the great productivity of labor in placer mining. So long as men could make ten dollars a day by washing out gold from the sands, there would be no use in setting them at work making two dollars a day as weavers or shoemakers or what not. By buying our cloth with gold dust we could get far more of it than we could if we took the men out of the mine and set them to making the stuff itself. But--and here is the proviso that makes the supposition correspond with the fact--if, besides the placers, we had deep mines of other metals than gold, if we had oil and lumber and loam of every variety, and if we had people with undeveloped mechanical aptitudes, it might be that we should do well to develop these latent energies even in a wasteful way. The condition that would fully establish the similarity between the supposed case and the actual one is that the placer deposits should be, as placers are, sure to be exhausted by continued working, and that producing other things than gold should tend to become, with time, a more and more fruitful process. We can justify the attitude of the country that taxes itself at an early date for the sake of testing and developing the latent aptitudes of its land and its people. At the outset it will thereby sustain a loss, because at the outset it can gain more goods by the indirect method of exchange than it can by production; but there may easily come a time when it can gain more by the direct method. If we learn to make things more economically than we could originally make them, if we hit upon cheap sources of motive power and of raw material, and especially if we devise machinery that works rapidly and accurately and greatly multiplies the product of a man's working day, we shall reach a condition in which, instead of a loss incidental to the early years of manufacturing, we shall have an increasing gain that will continue to the end of time. It may be, further, that without protection and the burdensome tax which it did undoubtedly impose upon us, we should have had to wait far too long for this gain to accrue and should have sacrificed the benefits that come from a long interval of diversified and fruitful industry. In short, the static argument for free trade is unanswerable and the dynamic argument for protection, when intelligently stated, is equally so. The two arguments do not meet and refute each other, but are mutually consistent. It is possible to ridicule the argument for protection under the name of the "infant industry" argument, and it is possible for the policy it upholds to continue long after this argument has ceased to be valid. The overgrown infant will have sacrificed his claim for coddling, but that will not prove that there was never a time when he needed it. _The Policy demanded in View of Facts Static and Dynamic._--Now, there is an argument for tariff reduction which accepts both the static argument for free trade and the dynamic argument for protection. In fact, it bases itself on the protectionist's modern and intelligent claim. To advance in any form the infant industry argument is to admit that the policy advocated is temporary. Protective duties are, in fact, self-testing. They reveal in their very working whether they were originally justifiable or not. The ground on which they were imposed is that they would develop latent resources--that they would enable labor to produce as much by making a class of articles formerly produced in foreign countries as it could produce by engaging in industries already established and exchanging their products for the former articles. If that time should come, the industry that had to grow up originally under the protection of a duty would become so fruitful that it could dispense with the duty. Taxes of this kind tend to become inoperative, provided always that the latent resources for economical production really exist. Some years ago a man who had retired from the business of making spool silk remarked that, in his judgment, a duty of three per cent on imported silk of this kind would enable the American mills to hold full possession of their own market. The difference between what it cost the foreigner to make the silk and what it cost the American to make it was, as he thought, not over three per cent. If he was right in his estimate, almost all of the actual duty might have been abolished without crushing the American manufacturer. Americans had developed a sufficient aptitude for making spool silk to be able to get nearly as much of it by turning their labor in that direction as they could by turning their labor in any other direction and exchanging the product for foreign silk. We must originally have lost much by forcing ourselves directly to make the silk, for, at the outset, we could not make it as economically as we could make an article which we could exchange for it. At the time of which we are speaking we could make it with almost no waste, and the case illustrates a general fact with regard to duties upon articles in the making of which we are originally at a disadvantage but are afterward at no disadvantage at all. When our original disadvantage has been quite overcome, the duty becomes inoperative. Whether we keep it or throw it off will make no difference to the American manufacturer or to the American consumer--_provided always that competition is free and active_. If it is not so, there is a very different story to tell. _Importance of Changes in the Relative Productivity of Different Industries._--Instead of getting from the soil gold dust to barter for merchandise, we have been getting a product that is not so greatly unlike it. For grains of gold read kernels of wheat, and the statement will tell what a large portion of our country has produced and exported. The productivity of wheat raising has made it uneconomical, in certain extensive regions, to engage in other occupations; but as the fertility of the wheat lands has declined, and as the productive power of labor in other directions has increased, we have reached a point at which it is just as natural to make things for which we formerly bartered wheat as it is to produce the grain itself. The decline in the fertility of agricultural lands and the increase in the productive power of labor devoted to making steel appear to have made the manufacturer of the latter article as independent as is the raiser of cereals. Originally it was necessary to protect iron and steel industries from competition in order to secure the establishment of them at an early day. Now it is apparently not necessary to continue the protection. Labor in making steel will give us as many tons of it in a year as the same labor would give us if spent in the raising of wheat to be exchanged for foreign steel. The duty on steel, if this is the case, has become inoperative, in the sense that it no longer acts to save from destruction the steel-making industry. It is perniciously operative in another direction, for it is an essential protector of a quasi-monopoly in the industry; and this illustrates what often happens in cases in which the infant industry argument proves to be well grounded. The argument predicts for the newly established industry a great future development and a time of ultimate independence. Protection undertakes to nurse it through its period of helplessness and dependence into a time when it can stand on its own feet and maintain itself against rivals. If that period comes,--and the history of the United States shows that in many cases it has come,--you can throw off the entire duty, if you will, and, unless the price of the article has been artificially sustained by something besides the duty, our manufacturers will not lose possession of their market. An essential condition of realizing the happy predictions of the protectionists is that competition among American producers should be unimpeded. If that were so, goods would, as they said, be sold, in the end, at prices fixed by the costs of production, including the normal rate of interest on the capital employed. Manufacturers may originally get large profits, as an offset for such risks as they take in doing pioneer work; but afterward they will get interest on their capital and a good personal return for directing their business, but nothing more. If they sell goods at prices which yield only such returns as this, they will, when the industry is on its feet, sell them as cheaply as the foreigner would do. The high duty, if it still continues, may make it doubly difficult for the foreigner to come into our market; but with goods selling at natural cost or cost prices he would not come into it in any case, and the duty might be abolished with entire impunity. There are, indeed, some questions which arise as to occasional unloading of extensive stocks in foreign markets, and protection has been called for to prevent the foreigner from making America his "dumping ground." This process works in both ways: the American can dump his surplus products into foreign territory as well as the foreigner can into American territory. Not much attention need be paid to this particular phase of the subject. Conservatism will probably suffice, for a long time, to retain in force a somewhat higher duty than is called for on general grounds. In the main the fact is as stated: if the protected infant has the capacity for growth that was attributed to him when the course of nursing, coddling, training, and patient waiting was entered upon, he will announce that fact after a term of years by showing his inherent strength and proving that these fostering practices are no longer necessary. They are then needed only to aid a _monopolistic power within the industry_. _The Protection of Industries distinguished from the Protection of Monopolies._--It appears, then, that duties have two distinct functions. One is to protect from foreign competition an industry as such--to shield every producer, whether he is working independently or in a pool or trust. The other function is to protect a trust in the industry--to enable a great combination working within the limits of the United States to keep that great field to itself and still charge abnormally high prices for its products. In fact, a distinguishable part of a duty usually performs the former of these functions, and another distinguishable part performs the latter. If the natural price of an article is based on the cost of making it in the United States, and if that is twenty per cent higher than the cost in a foreign country, a duty of twenty per cent will place the American product and the foreign product on an equality. The American maker will not be driven from his market until he begins to charge an abnormally high price. If he does that, the foreigner will come in. Suppose, then, that the duty is forty per cent. Twenty per cent may be needed to enable the American manufacturer to hold his own as against the foreigner. Provided he exacts from consumers of his goods only the natural returns which business yields, year in and year out, he can sell all that his mills produce with no danger that the foreigner will supplant him. The other twenty per cent of duty enables him to add a monopolistic profit to his prices. He can raise them by about that amount above what is natural before the foreigner will begin to make him trouble. We have seen what ways the trust has of stifling competition within the limits of our own country. There are the favors which it is able to get from the railroads, and there is the practice of selling its goods in some one locality at a cut-throat rate whenever a competitor appears in that locality. There is the so-called factors' agreement, which often forces merchants to buy goods of a certain class exclusively from the trust. By these means and others the trust makes it perilous to build a mill for the purpose of competing with it. If, indeed, it makes its prices very high, some bold adventurer will build such a mill and take the chances that this entails; but if the trust stops short of offering such a tempting lure in the way of high prices, it can keep the field to itself. If the extra duty of twenty per cent--the unnecessary portion of the whole duty of forty per cent--did not exist, nothing of this sort would be possible. The trust would have to sell at a normal price in order to keep out the foreigner, and so would its independent competitor. Both the combination and its rivals could make their goods and sell them in security. The industry, as such, is protected by the duty of twenty per cent, and it is the additional duty which is the protector of monopoly--the enabling cause of the grab which the trust can make from the pockets of the consuming public. In practice one would not try to make the figures quite as exact as is implied in the statement that just twenty per cent of duty is needed to protect the industry as such from the foreigner, and that just another twenty per cent acts as a maker of a monopolistic price. It would be impracticable to fix the duty in such a way as exactly to meet the need of protection. Owing to fluctuations in values, the duty might be made slightly higher than is necessary under normal conditions. All these things would have to be considered by a competent tariff commission. The figures we here use are illustrative only; but the principle is as clear as anything in economics. Protecting an industry, as such, is one thing; it means that Americans shall be enabled to hold possession of their market, provided they charge prices for their goods which yield a fair profit only. Protecting a monopoly in the industry is another thing; it means that foreign competition is to be cut off even when the American producer charges unnatural prices. It means that the trust shall be enabled to sell a portion of its goods abroad at one price and the remainder at home at a much higher price. It means that the trust is to be shielded from all competition, except that which may come from audacious rivals at home who are willing to brave the perils of entering the American field provided that the prices which here rule afford profit enough to justify the risk. _A Limit beyond which a Duty becomes a Supporter of Monopolies._--This line of cleavage runs through the greater part of the duties which this country now imposes on foreign articles; and the fact reveals the scientific rule for tariff reduction. Up to a certain point, according to the traditional American view, the duty may do good. It may be protecting an industry that is not quite an infant and yet has not grown to its full stature nor attained to its full competing power. Whatever may be claimed as to what ought to be done with this portion of the duty, there is no doubt what will be done; it will be retained, and the American people will wait with such patience as they may for the coming of the time when the industry will be independent of all such aid. Beyond this point a protective duty becomes a trust builder _par excellence_. _Most Duties Compounds of Good and Evil._--There are some industries which are fully matured. The duties which were imposed to shield them during their infancy are no longer necessary for that purpose. The amount of protection that in these cases is necessary to keep the American market for the American product is _nil_. The sole effect of duties on the products of such industries is to encourage monopoly. At the other extreme there are a few industries which have not gravitated into the control of monopolies and which need much of the protection that they have in order to hold their present fields. If they really are infants and not dwarfs,--if they have the capacity to grow to full stature and independence,--the policy of the people will undoubtedly be to let them keep, for a considerable time, all the protection that they now enjoy. The number of such industries as this is comparatively small. In the case of the great majority of our duties there is one part that protects the industry as such and another part that protects the monopoly within it. Throw off the whole duty, and you expose the independent rivals of the trust, as well as the trust itself, to a foreign competition which they are hardly able to bear; but if you throw off a part of the duty,--the part which serves to create the monopoly,--you do not destroy and probably do not hurt the independent producer. His position now is abnormal and perilous. He may be continuing solely by grace of a power that could crush him any day if it would, and its power to crush him is due to the great gains which its position as a monopoly affords. When it wishes to crush a local rival, it can enter his territory and, within that area, sell goods for less than it costs to make them; and, while pursuing this cut-throat policy, it can still make money, because it is getting high prices in the other parts of its extensive territory. With no such great general returns to draw on as a war fund, the trust would have to compete with its rivals on terms which would be at least more nearly even than they now are. It would still have weapons which it could employ against competitors, and its capacity for fighting unfairly would not be exhausted. Without further action on the part of lawmakers the position of a small rival of a trust might be unnaturally dangerous; but an essential point is that one means which the trust adopts in order to crush him depends on the existence of great profits in most of its territory; and these would not exist if it were not for the unnecessary and abnormal part of the duty. The trust wants its duty, and it wants the whole of it. It is the perennial defender of the policy which is termed "standing pat." It values the monopoly-making part according to the measure of the profits which that part brings into its coffers. The trust is powerful, as we do not need to be told, and it will find ways of thwarting tariff reduction as it does other anti-trust legislation. Drastic laws forced through legislatures or Congress during ebullitions of popular wrath--laws which demand so much in the way of trust breaking that they will never be enforced and never ought to be--have not, thus far, been prevented. Such "bulls against the comet" have been issued frequently enough, but serious legislation, based on sound principles, will encounter graver difficulties. There are difficulties before our people even where they see clearly what they want and are trying to get it; but where they do not see what they want, the case is hopeless. The trust-making part of protective duties has an effect about which there is no uncertainty, and if the American people discover this fact, they will not have reached their goal, but the laborious route that leads to it will at least lie distinctly before them. _The Policy demanded in the Interest of Progress._--The general facts which have here been cited call for the abolition of a certain part of the existing duties and the retention of another part, and they make the division between the two parts clear at least in principle. We want to keep one part of a duty whenever it protects an industry which is not yet mature but is on its way toward maturity. We want the industry because it is progressive in its wealth-creating power and will, one day, make an important addition to our national income. It is a dynamic agent--a factor in the progress we are making toward the unrealized goal of universal comfort. We do not want the other part of the duty, first, because we do not want monopoly. Any feature of our industrial system which is convicted of being simply a monopoly-building element is condemned by that fact to extinction, if the power of the people suffices to destroy it. Does this mean that the consolidations themselves are thus condemned? Do we not want great corporations with vast capitals? Assuredly we want them, for the sake of their economy and of their capacity for greater economy. With the element of monopoly taken out of them, they will become dynamic agents and contributors to general progress. The part of the protective tariff which we need to get rid of is the part that helps decisively to put the element of monopoly into them; and in that connection the worst charge that has to be brought against this part of the duties remains to be stated. _Protection and Progress._--Monopoly acts squarely against the continuance of that very progress which the tariff was designed to create. The entire defense of protection has rested on the dynamic argument, and the sole justification of the tax which protection originally imposed is the fact that it has given us industries which have, in themselves, the power to become more and more productive. It would be hard to deny that much of this increase in productive power, which the originators of the protective system anticipated, has been practically realized. The manufactures which have been carried through a period of weakness have actually developed competing strength. We have acquired the power to make things far more cheaply than any one could formerly make them, and the cheapening process still goes on. Our manufacturing centers are alive with machinery, much of which is of our own devising. Thanks to the progressive character of these industries, the waste which attended the introduction of them has been largely atoned for. On dynamic grounds, and solely on those grounds, has the policy of protection fairly well vindicated itself. And now we have come to the point where that saving element in the protective system is in danger of vanishing. Indeed, the excessive part of the protective tariff now acts positively to check the progress that it once initiated, for monopoly is hostile to that progress. The whole force of the argument based on mechanical invention and the development of latent aptitudes in our people now holds as against the monopoly-building part of the tariff. Keep that portion of a duty which is not needed to save an independent producer from foreign competition, which is needed only to enable the trust to charge an abnormal price and still keep the foreigner out of our markets, and you build up a monopoly which is unfavorable to continued improvement in the productive arts. Competition is the assured guarantee of all such progress. It causes a race of improvement in which eager rivals strive with each other to see who can get the best result from a day's labor. It puts the producer where he must be enterprising or drop out of the race. He must invent machines and processes, or adopt them as others discover them. He must organize, explore markets, and study consumers' wants. He must keep abreast of a rapidly moving procession if he expects to continue long to be a producer at all. _The Effect on Progress of Consolidation without Monopoly._--Does a monopoly live under any such forward pressure? Certainly not. It may make some improvements, for it can gain wealth by so doing; but it is not forced to make them or perish. Here we encounter a wide distinction that is in danger of being overlooked. A vast corporation that is not a true monopoly may be eminently progressive. If it still has to fear rivals, actual or potential, it is under the same kind of pressure that acts upon the independent producer--pressure to economize labor. It may be able to make even greater progress than a smaller corporation could make, for it may be able to hire ingenious men to devise new appliances, and it may be able to test them without greatly trenching on its income by such experiments. When it gets a successful machine, it may introduce it at once into many mills. Consolidation without monopoly is favorable to progress. With the element of monopoly infused into it, a great consolidation frees itself from the necessity for progress, and both experience and _a priori_ reasoning are against the conclusion that, under such a régime, actual progress will be rapid. The secure monopoly may stagnate with impunity, and the reason why many corporations which have looked like monopolies have not actually stagnated is that their positions have not been thus secure. They have had some actual rivals and many potential ones. The part of the protective system which tends to make them more secure in their monopolistic position strikes at the most vital part of the industrial system, the progress within it, the element which adds daily to man's power to create wealth and enables the world to sustain an increasing population in an increasing degree of comfort. True monopoly means stagnation, oppression, and what has been called a new feudalism, while consolidation without monopoly means progress, freedom, and a constant approach to industrial democracy. One of the essential means of securing this latter result is the retention of so much protection as is needed to keep American ingenuity and organizing power alive and active, while abolishing that excess of it which fosters monopoly and does away with the necessity for exercising these traits. There will be disagreement as to the point at which the dividing line should, in particular cases, be drawn; a protected interest will claim a duty of fifty per cent where twenty would amply suffice and where every excess above this would be pernicious. There should, however, be no serious disagreement as to what we want--progress and the repression of monopoly which bars progress; and there should be little disagreement as to the principle to be followed in making a protective system contribute to these ends. It must assuredly not bar out the foreigner when the American trust has put its prices at an extortionate level and is using its power to crush all rivalry at home. The good effect and the evil effect of an excessive duty are quite distinct in principle, and the task that is before us is to make them so in practice. It is to abolish the monopoly-building part of the protective system. The whole question of the relation of the tariff to monopoly presents debatable points, some of which cannot here be discussed. It is by no means claimed that an unnaturally high tariff is the sole means of sustaining monopolies, or that the reduction of it would leave nothing more to be done. A great corporation, as has already been said, possesses special means of waging a predatory war against local rivals, and its monopolistic power depends on these as well as on the tariff. With the foreigner forced off the field the trust can use with terrible effect these means of attack on local rivals. It is true, as we have seen, that its monopolistic power might be greatly reduced, without touching the tariff, by taking from it its command of freight rates and thus destroying its power to undersell rivals by means of the special rebates which it now receives; and its power for evil might be reduced still more by taking from it its privilege of cutting prices on its own goods in one locality while charging elsewhere the high prices which the exclusion of the foreigner enables it to get. Regulating trusts by these means only and without any change in the protective system would require, on the part of the people, a long and hard struggle. It would require heroic persistence in a course of difficult administration. Success will come more quickly and easily if, while keeping a normal amount of protection, we abolish the abnormal part of it. The other measures for controlling trusts harmonize with this one and will work more effectively if they are used in combination with it. Together with this one they remove a barrier against progress and set in action a force that promotes it. Without going into any intricacies one can see that, with the tariff at a normal level, the success of the trust in making money will depend on its efficiency as a producer; and the same will be true of its independent rivals. Again and again it will then happen that new rivals will appear, whose mills are far more efficient than many which the trust operates. They may even be more efficient than the best of the mills of the great combination. American producers and foreigners will be in eager rivalry with each other in seeking out means of reducing costs or--what is the same thing--increasing the product of a day's labor. Under the conditions here supposed, the trust will not be able to exterminate a really efficient competitor, and it will feel the stimulus of his rivalry in a way that will force it to be alert and enterprising in seeking and using new devices for economical production. The trust and its American competitor will alike feel the stimulus of the foreigner's efforts to surpass them both in methods of efficient production; and the outcome of it all will be a greater degree of progress--a more dynamic industrial world--than there is any hope of realizing while foreigners are excluded from our markets even when prices are there extortionate. Prices will be extortionate so long as the trusts are checked only by local rivals and are allowed to club these rivals into submissiveness. Keeping the foreigner away by competing fairly with him is what we should desire; but barring him forcibly out, even when prices mount to extravagant levels, helps to fasten on this country the various evils which are included under the ill-omened term _monopoly_; and among the worst of these evils are a weakening of dynamic energy and a reduction of progress. CHAPTER XXIX LEADING FACTS CONCERNING MONEY _Dynamic Qualities of Money._--The question concerning money which, for the purposes of the present treatise, it is most important to answer is whether general prosperity can be increased or impaired by manipulating the volume of it. Is money a dynamic agent, and can it be so regulated as to induce economic progress? These questions require careful answers. _Accepted Facts concerning Money._--We may accept without argument the conclusion that both theory and experience have reached concerning the superiority of gold and silver over other materials of which a currency can be made. They possess the universally recognized utility which makes them everywhere in demand. They have the "imperishability," the "portability," and the "divisibility" which are needed, and when made into coins, they have the "cognizability" by which they can, more readily than many other things, be identified and distinguished from cheap imitations. There remain to be settled the questions whether an expanding volume of currency is necessary for prosperity, and whether the expansion can better be secured by using two metals than it can by using one. _Effects of Free Coinage._--It is evident that when a government coins without charge all the gold and silver that are brought to it for that purpose, either metal will be worth about as much in the form of bullion as it is in the form of coin. If, for uses in the arts, an ounce of gold is worth more than the number of dollars that can be made of it, the coining of this metal will temporarily cease and some coins already made will be melted. Moreover, where both of the precious metals are used as money, neither of them can long be worth in a coin much more than is the bullion contained in the less valuable of the two. If a gold dollar will buy more silver than is needed to make a silver dollar, because of the higher value of the bullion in the former coin, silver will be bought and taken to the mint for coinage, while gold dollars will be melted. The gold will go farther in the way of paying debts when it is in this way exchanged for silver money. _The Effects of Inflation of Currency on Prices._--We are citing a further accepted fact when we say that, other things being equal, enlarging the volume of currency in use raises the prices of goods. By what particular mechanism this is brought about we do not here inquire. Not everything that is claimed under the head of a "quantity theory of money" is generally believed, but there will be little disposition anywhere to deny that, if no other dynamic movement should take place, adding fifty per cent to the volume of metallic money in circulation would make prices higher than they were before the addition. _Rising Prices and Business Profits._--If we assert, further, that permanently rising prices mean prosperity,--profits for the _entrepreneur_ and a brisk demand for labor and capital,--we assert what, in the practical world, is too generally accepted. Sound theory and current belief are at variance on this point, and the current opinion appears at first glance to have the facts on its side. Periods of rising prices have actually been periods of prosperity. It is considered hard for either a merchant or a manufacturer "to do business on a falling market," and easy to make money on a rising one. This impression is entirely correct in so far as it concerns those fluctuations of price which occur suddenly and continue only briefly. What it is of great importance to know is whether a steady rise of prices which should continue permanently would mean permanent profits for the _entrepreneur_; and it can be asserted without hesitation that it would not do so if the final productivity theory of interest is sound, that is, if capital commands in the market a rate of interest which corresponds to the amount that the marginal increment of it will actually produce. _The Rate of Expansion of Currency distinguished from the Absolute Amount of Increase._--The extent to which any currency is capable of raising prices by a continued expansion depends, not on the absolute amount of that expansion, but on the percentage of enlargement that takes place within a given time. Moreover, a given percentage of increase _per annum_ may be maintained as well by one metal as by two. If the gold and the silver money of the world were each increased by one per cent a year, prices would have the same trend under a currency made of one metal as under a currency made of both. If, on the other hand, all the currencies were based on gold only, a change to a bimetallic system would at once make a single great enlargement of the volume of money; but after this the rate of enlargement would be no greater than it was under the single standard. _In the transition_ from a gold to a bimetallic currency, we should get rapidly rising prices; after the change had been completed, we should have a currency expanding as before at the one per cent rate. If the volume of business were to increase at the rate of two per cent a year, while other influences affecting prices were to remain unchanged, the currency would not expand as rapidly as the demand for it, and prices would not only fall, but would fall at the same rate as if only one metal had been used. Use ten metals instead of two,--make coins of tin, platinum, copper, nickel, etc.,--and if the grand composite still insures the one per cent rate of general increase of metallic money, prices will vary as they would have varied with a currency of gold alone. Wholly transitional, under such circumstances, is the rise in prices secured by the adoption of bimetallism. It is gained by adding to the stock of gold now used for ultimate payments an existing stock of silver. _Why Metallic Currency of Any Kind gains, in the Long Run, in Purchasing Power._--In the long run, almost any metallic coin of a fixed weight will gain in its purchasing power. Silver would do this as well as gold; and so would a composite coinage made of ten metals. The law of diminishing returns applies to mining as well as to agriculture. The more silver you want, the deeper you must dig for it, and the more refractory ores you must smelt. The transmuting of a raw metal into finished articles becomes a cheaper and cheaper process; but the extracting of the metal itself becomes dearer. A larger and larger fraction of the labor that is spent in making wares of silver, of gold, of copper, or of tin must be spent in getting the crude material out of the earth. There are improvements in mining, as there are in other industries, and there are large improvements in smelting; but in spite of this the continual working of more difficult mines and of more difficult ores makes the getting of the crude material, in the long run, relatively costly. Since a coin consists chiefly of raw metal, we may therefore count on having before us a régime of falling prices, whatever metallic currency we adopt. The rate of the fall and the degree of steadiness in it will be greater with some metals than with others. The variations in the value of gold are, on the whole, comparatively steady. This metal fluctuates in amount and in cost, but the changes are less sudden than in the case of most others. _The Steadiness of the Change in the Purchasing Power of Money the Important Fact._--A second fact to be noted is that the best currency is one the purchasing power of which shall change, if at all, at a comparatively uniform rate. This fact is of paramount consequence, and the verification of it will repay any amount of study. It is not the rapidity with which gold gains in purchasing power, but the steadiness of the gain from year to year that determines whether it is the best money that can be had by the business world. A _change in the rate_ of increase in the purchasing power of the coinage metal has a really disturbing effect; a steady and calculable appreciation does not. There exists in some acute minds what I venture to call a delusion about the effect on business classes of an advance in the purchasing power of gold that proceeds for a long time at a uniform rate. Conceding the prospect of a decided gain in the value of this metal, we may deny absolutely that, if _it is steady_, it plays into the hands of creditors, burdens the _entrepreneur_, blights enterprise, or has any of the effects that certain men whom we are bound to respect have claimed for it. Irregular changes of value would, indeed, produce these results. Let gold gain three per cent in value this year, one per cent next year, and four per cent in the year following, and injurious things will happen; but let it gain even as much as three per cent each year for a century, and at the test points in business life there will ensue the essential effects that would have followed if it had not gained at all. This means that with a steadily appreciating currency the things will happen that make for prosperity. The debtor will get justice, enterprise will be safe, and wages will gain while industry gains. The _entrepreneur_, in whose behalf bad counsel has lately been given, will best do his strategic work, not with that currency which varies in value the least, but with that which varies most uniformly. If it appears that gold is likely to appreciate more than silver, and to appreciate more steadily, it is decidedly the better metal. It is not inflation on which the _entrepreneur_ permanently thrives, nor is it contraction through which, in the long run, he suffers; it is changes in the rate of inflation or of contraction that produce marked and damaging effects at the critical points of business life. _Loan Interest as related to the Increase of Real Capital._--How does a slow and steady appreciation of any metallic currency affect the relations of business classes? Does it rob borrowers and enrich lenders? Does it favor the consumers by giving falling prices, and hurt producers in the same degree? Does it tax enterprise and paralyze the nerves of business? The answer is an emphatic _No_. Steadiness in the rate of appreciation of money is the salvation of business. Not by one iota can such a slow and steady movement, in itself alone, rob the borrowing class. This is a sweeping claim; let us examine it. It has been shown that true interest is governed by the marginal productivity of capital. As the utility of the final increment of a commodity fixes the price that a seller can get for his whole supply, so the productive power of the final unit of capital expresses what the owner of capital can get by lending his entire supply. This earning capacity expresses itself in a percentage of the capital itself. If the final unit can create a twentieth of itself in a year, any unit can get for its owner about that amount. In assuming that capital earns a twentieth of itself in a year, we may use a commodity standard of measurement. A grocer's capital of twenty barrels of sugar may become twenty-one barrels, and his flour and his tea increase in a like proportion. In the simplest illustration that could be given of a capital earning five per cent a year, we should assume that each kind of productive instrument in a man's possession increases in quantity, during the year, by that amount. If he be a manufacturer, his mill becomes a hundred and five feet long, instead of a hundred feet. It contains twenty-one sets of woolen machinery, instead of twenty. The flow of water that furnishes power becomes by five per cent more copious; and the stock of goods, raw, unfinished, and finished, becomes larger by the same amount. Of course, such a symmetrical enlargement of all kinds of goods could never actually take place, for some things increase in quantity more than others. The illustration shows, however, what fixes the rate of interest: it is the self-increasing power of a miscellany of real capital. If the mill, the machinery, the stock, grow in quantity at the five per cent rate, that is the natural rate of interest on loans of real capital. The lender gives to the borrower twenty units of "commodity" and gets back twenty-one. If marginal social capital, consisting of commodity and measured in some way in units of kind, has the power to add to itself in a year one unit for every twenty, lenders will claim about that amount, and borrowers will pay it. _How the Increase of a Miscellany of Goods has to be Computed._--How does the real earning capacity of capital in concrete forms reveal itself? How does the grocer know that he can make five per cent with the final unit of capital that he borrows? Not by the fact that each lot of twenty barrels of sugar gains one barrel, that each lot of twenty pounds of tea gains one pound, and so on. If there were to be such a symmetrical all-around increase in the commodities in the man's possession, his shelves, counters, bins, tanks, would have to enlarge themselves in the same ratio. In the case of a manufacturer the mill would have to elongate itself by one foot for every twenty, as in the foregoing illustration, and the machinery and all the stock would have to grow in the same proportion. The land and the water power would have to enlarge themselves by the same constant fraction. Of course, such a thing does not take place. The general amount of capital goods of every kind enlarges; but the enlargement is in practice computed in monetary value, and in no other way. The whole outfit becomes worth more than it was. The increase in monetary value gauges the claims of the capitalist. If the stock of goods has grown generally larger, and if prices have fallen, the claim of the capitalist will fall short of equaling the actual increase of the merchandise. The increase in goods of different kinds is, of course, unsymmetrical. If the man is a manufacturer, his mill and his water power have probably not increased. He may have some more machinery, and he has more raw materials and more goods, finished or unfinished, than he had when he took his last inventory. If he has not more goods of these kinds, he has something that represents them; and the effect on his fortunes is as if the mill had stretched itself, and as if the machines and other capital had multiplied, all in the same ratio. The man figures his gains in real wealth by the use of money. At the end of the year he makes a list of all his goods, attaches prices to them, and sees what the value of the stock has become by the year's business. He compares the total value in money of the goods on hand in January, 1907, with that of the stock of January, 1906. If he has bought and sold for cash only, and if during the year he has drawn for his maintenance only what he has earned by labor, the excess of value on hand at the beginning of the year 1907 informs him what his capital has earned during the preceding twelve months. _The Effect of Changes of Price on the Claims of Capitalists._--If prices have remained stable, the earnings of the capital as expressed in money will accurately correspond with the earnings as computed in commodity. It is as if the five per cent increase of the sugar and the flour of our first illustration, or of the mill and the machinery of the second, had taken place. It could then, by a sale, be converted into a five per cent increase in money. By selling the stock at its market value the merchant could realize five per cent more than the original stock cost him. If money has gained one per cent in its purchasing power, or if prices at the end of the year are by so much lower, the inventory will show, in terms of money, only a four per cent gain. Now, the real increase of concrete capital is still five per cent, and that, by the law of interest, is what the capitalist can claim in commodities. This claim is met by an actual payment in money of four per cent. Give to the capitalist, in January, 1896, a dollar and four cents for every dollar he has loaned in January, 1895, and you enable him to command a hundred and five units of commodity for every one hundred that he commanded at the earlier date.[1] You give him by a reduced monetary payment what is equivalent to the real increase of capital. [1] There is a slight compounding here to be taken into account. If commodity has gained five per cent, while prices have lost one per cent, the capital as measured in money has increased by three and ninety-five one-hundredths per cent instead of exactly four. _Practical Differences between Real Interest and the Increase of Real Capital._--It is the increase of capital in kind that fixes the rate of loan interest. Care must be taken not to claim for this part of the adjustment any unerring accuracy; for the marginal productivity law does not work without friction. With real capital creating five and a half per cent, the lender might get only five. When, however, the play of forces that fixes real interest has had its way and has determined that, in commodity, capital shall secure for its owners five per cent a year, that amount is unerringly conveyed to them by the monetary payments that follow. If, by paying four per cent as interest, the merchant, in the illustrative case, makes over to the lender of capital that part of the increase of goods that by the law of interest falls to him, four per cent is the rate that the loan in money will bring. This is on the supposition that the change in the purchasing power of money is perfectly steady. If it is unsteady, effects will follow that are of much consequence. Changes in the purchasing power of a currency produce an effect on the rate of interest on loans of "money." If, with a currency of perfectly stable value, the interest on loans is five per cent, corresponding to the earnings of real capital, then a gain in the purchasing power of the currency of one per cent a year has the effect of reducing nominal interest practically to four per cent. The debtor then really pays and the creditor really gets the same percentage as before of the actual capital loaned. The borrower, the _entrepreneur_ in the case, finds at the end of the year that he has more commodities by five one-hundredths than he had. He must pay the equivalent of this to the lender. With money of stable purchasing power it takes five new dollars for every hundred to do it; but with money that gains in its power to buy goods at the rate of one per cent a year it takes only four. The rate of interest on loans is, in the long run, reduced by an amount that accurately corresponds with the appreciation of the monetary metal _wherever the appreciation is steady_. This law works with a precision that is unusual in the case of economic laws. Loan interest varies more or less from the marginal earnings of capital; but interest as paid in money accurately expresses interest as determined in kind by the play of economic forces. _Conscious Forecasts not necessary for Insuring the Adjustment of Loan Interest to Changing Prices._--It is possible that, where this subject has been considered, the impression may prevail that this reduction in the nominal rate of interest is the result of foresight on the part of borrower and lender. According to that view, both parties look forward to the time when the loan will be paid. The borrower sees that, although by means of his business he may have at the end of a year five per cent more of commodity in his possession, prices will probably have fallen so as to enable him to realize in money only four per cent. On the other hand, the creditor will see that with four per cent more in money he can, if he will, buy with his principal and interest five per cent more than he virtually loaned in commodity. He is satisfied with this increase; and, moreover, he is forced to adopt it, since the natural increase of real capital will not enable a borrower to pay more. The _entrepreneur_ will stop borrowing if more is demanded. The whole adjustment is supposed to rest on a forecast made by the contracting parties and a speculative calculation as to the trend of prices. Now, while men do indeed consider the future, the adjustment that is actually made does not call for foresight. No conscious forward glance is necessarily involved therein. It is made by a process that works more unerringly than any joint calculation about the coming conditions could possibly do. The interest on a loan that is to run through a period in the near future is based on the rate that capital is now producing. The evidence as to what that rate is must be furnished by the experience of the immediate past. It takes much experience, of course, accurately to determine how much the marginal unit of capital for the year 1895 has been worth to the men who have used it. This, however, has to be ascertained as best it can. It takes strategy on the part of both borrowers and lenders to make the loan rate correspond to the marginal earnings. Here there is a chance for economic friction and for variations from the theoretical standard, and the loan rate will sometimes exceed it; but in the long run the deviations will offset each other. In any case, the experience of 1906 fixes, with or without variations, the loan rate for 1907. The earnings revealed by the experience of 1906 may be theoretically computed either in money or in commodity. Let us say they have been five per cent in real wealth, but by reason of the fall in prices they have been only four per cent in money. That, then, is the rate for a loan that is to run through 1907. If prices continue to fall at the rate now prevailing, the loan rate in money will correspond to the marginal earnings of capital for the latter year as accurately as it does for the former year. Bargain-making strategy, the "higgling of the market," may yield an imperfect result, and the lender of real or commodity capital may or may not get the exact real earnings of marginal capital of the same kind. _In translating the earnings of real capital for the earlier or test year into terms of money, the appreciation of the coins has unerringly entered as an element._ If the same rate of appreciation is continued through the following year, no deviation of the loan rate from the earnings of capital can result from this cause. Whatever deviation there is results from the other causes just noted. In commercial terms a man borrows "money," and, by using it in his business, produces "money." He does this, however, by converting the currency into merchandise, and then reconverting this into currency. He gives to the lender approximately what the "marginal" part of the loan produces. If this adjustment is inexact, the lender will get less or more than the actual earnings of such capital. With money gaining in its purchasing power at a uniform rate, the adjustment is as exact as it would have been with money of stable value. The appreciation works unerringly in translating earnings measured in goods into smaller earnings measured in money. The loan rate approximates the earnings. _Effects of Changes in the Rate of Appreciation._--What happens if the rate of appreciation changes? What if gold gains two per cent in value, instead of one, during the second of the periods? The capitalist will then clearly be a gainer, and the _entrepreneur_ will be a loser. Getting five per cent in commodity as before, the business man, by reason of falling prices, will realize only about three per cent in money. His contract, based on the experience of an earlier year, makes him pay four per cent, and he loses one. Every acceleration of the rate of increase in the purchasing power of money plays into the hands of lenders. Every retarding of that rate plays into the hands of borrowers. If in 1907 the _entrepreneur_ gets a three per cent rate on what he borrows, as based on the experience of 1906, and if the fall in prices is reduced during that later year to one per cent, the borrower will make a clear gain of one per cent; and this will recoup him for his loss in the earlier period. Moreover, after a long period of steady prices, the beginnings of a downward trend do not instantly affect the loan rate of interest. A period must elapse sufficient to establish the fact of this downward trend, and to enable the struggles of lenders and borrowers to overcome habit in fixing a new rate that will correspond to the new earning power of monetary capital. These facts explain what at times looks like a failure of the loan market fully to take account of the fall of prices during a given interval. What that market really does is to base the interest paid in one interval on the business experience of another. _Opposite Reasons for Favoring Gold as a Basis of Currency._--What, then, is our practical conclusion? Gold has surprised the world by its increase and by the rise in prices by which this change has been attended. The interest on loans has risen as the conditions required that it should do; but the rise in interest has lagged somewhat behind the rise in prices. The enlarged output of the precious metal has been comparatively sudden, and it has been this fact which has played into the hands of _entrepreneurs_ and, for a brief interval, entailed some loss on lenders. When the adjustment of loan interest to the rising prices shall be fully made, neither of these parties will gain at the other's expense so long as the rise shall continue at the prevalent rate; but if the rise should cease as quickly as it began, it would be _entrepreneurs_ who would lose and lenders who would gain. Loans running at rates fixed when prices were rising would be paid by an amount of money which would buy more commodity than the business would afford. With a reduction of the output of gold there will come a demand for some measure of inflation in order that rising prices may forever continue. Adding silver to the currency would, as we have seen, accomplish this purpose only temporarily. In the long run this metal is bound to appreciate like gold. Using paper money would have a temporary effect and would be a more dangerous measure. Waiting for a short time for a new adjustment of loan interest to the trend of prices would be the only rational course. Will the further fall of prices rob the _entrepreneurs_? They must pay only the rate of interest that capital earns. If that is five per cent, five they must pay, so long as prices are stable. With prices falling by one per cent a year, they will have to pay only four. Will the fall check business and make men afraid to buy stocks of goods? They can carry stocks as cheaply with a four per cent rate of interest and declining prices as they can with a five per cent rate and stable prices. Will it blight enterprise by making men afraid to build mills, railroads, etc.? Here again the loan rate of interest comes to the rescue of the projectors. If they can float their bonds and notes at a lower rate, they can build with impunity. Steadiness is the vital quality in currency. Let its purchasing power be either unchanging or steadily changing in either direction, and justice will be done and business will thrive. If a metal fluctuates greatly in its rate of increase in value, it is a poor coinage metal, even though the average rate of gain be slow; if it gains slowly and steadily, it is almost an ideally good one. What would be the effect of any practical measure of inflation? If we use as money available for all debts the present stock of silver in the world, we make one large addition to the volume of money now available. We start an inflation that cannot continue by the use of silver alone. In the hope of perpetuating the rise in prices we may follow the silver with paper. By the action of the principle that we have stated we shall thus make the interest on loans higher, and every man who buys a farm or a house while the inflation continues will pay a high rate of interest on an enlarged purchase price. When we are forced to stop the paper issues, as in the end we must be, the price of the land, etc., will fall, and the rate of interest on new loans will fall also. The price of all produce will go down, and the purchasers of property will struggle again, as in the years following the Civil War men had to struggle, with a fixed debt, a fixed rate of interest, and falling prices. The early _post bellum_ days will be reproduced. Entering on a policy of inflation would therefore be inviting men again to suffer what those suffered whose hard experience is so frequently depicted in Populistic literature. Conceding all that is claimed as to the evil that comes from buying or mortgaging real property while the volume of money is increasing and paying the debt so incurred while that volume is relatively contracting, one must see that a policy of inflation would end by inflicting exactly that evil on new victims, unless a method can be invented by which the inflation can continue forever. Far better will it be to endure the transient evil which a slow change in the supply of gold will bring. Retaining gold through all its minor variations will mean all the prosperity and all the justice that any monetary system can insure. If we shall ever abandon this metal, experience will make us wise enough to return to it; but we shall have paid a high price for the wisdom. CHAPTER XXX SUMMARY OF CONCLUSIONS Perpetual change is the conspicuous fact of modern life. So revolutionary are the alterations which a few decades make in the industrial world as to raise the question whether there are economic laws which retain their validity for any length of time. If there are not, we have one economic science now, and shall have a different one ten years hence and a widely dissimilar one a century later. Of Descriptive Economics this is true, since it changes with the world it describes; but it is not true of Economic Theory. There are certain principles which are equally valid in all times and places. They were true in the beginnings of industry, are true now, and will remain so as long as men shall create and use wealth. They are not made antiquated either by technical progress or by social evolution. We have at the outset stated some of these truths. They have reference to man, to his natural environment, and to the interactions of the two, and they do not depend on the relations of man to man. We have also stated other economic truths which apply only to man in a social state. They are not universal, but are so general that they are exemplified in the economic life of every society, from the most primitive to the most highly civilized. They are the principles of Social Economic Statics, and in order to have them distinctly before us we have created in imagination a society which is changeless in size, in form, and in mode of economic action. In such a condition the wages of labor would remain fixed, as would also the interest on capital. Wages and interest would absorb the whole product of social industry; for the static condition, as we have thus created it, excludes profits of the _entrepreneur_. In broad outline this describes the condition toward which certain economic forces are continually impelling the actual world. There is at each period a standard shape and mode of action to which static laws acting by themselves would bring economic society. This social norm, however, is not the same at any two periods. The static laws remain unchanged, but they act in changing conditions, and if they were left alone and undisturbed, would give one result in 1907 and another in 2007. The changes which a century will bring should make society larger and richer, the mode of production more effective, and the returns for all classes greater. The laws which set the standard of wages and interest will remain the same, but if the tendencies now at work have their natural effect, all these incomes will be larger. It is as though great quantities of water were rushing into a lake and causing disturbances and upheavals of the surface. If the inflow should now stop, the surface would subside to a general level. If the inflow should recommence, go on for a hundred years, and then stop, the surface would again subside to a level, but it would be higher than the former one. Yet _the laws of equilibrium which produced the first static level would be identically the same as those which produced the second_. Social Economic Statics is a body of principles which act in every stage of civilization and draw society at every separate period toward a static norm, though they do not at any two periods draw it toward the same norm. They make actual society hover forever about a changing standard shape. The laws which govern progress--which cause the social norm to take a different character from decade to decade, and cause actual society to hover near it in its changes--are the subject of Social Economic Dynamics. We have made a study of the more general economic changes which affect the social structure, and they stand in this order:-- (1) Increase of population, involving increase in the supply of labor. (2) Increase in the stock of productive wealth. (3) Improvements in method. (4) Improvements in organization. All these things affect the productive power of society, and correlated with them and standing over against them is a fifth type of change, which affects consumers' wants and determines how productive power shall be used. We have examined each single change by itself and have then endeavored to combine them and get the grand resultant of all. Beginning with the increase of population, we have traced its effects on wages, on interest, and on the values of goods. We have made a similar study of the growth of capital, the progress of technical method, and the organization of industry. The variation of economic society from its static standard offers a problem for solution, and in this connection the type of change in which the most serious evils inhere is that which discards old technical methods and ushers in new ones. The question whether these evils are destined to increase or to diminish we have answered conditionally on the basis of past experience and present tendencies. If competition continues and labor retains its mobility, the evils will naturally grow less. The grand resultant of all the forces of progress is an upward movement in the standard of economic life gained, not without cost, but at a diminishing cost. A vital question is that of the continuance of the movements now in progress. Do any of them tend to bring themselves to a halt? Is any change on which we rely for the hopeful outlook we have taken self-terminating? We have found that the growth of population tends to go on more slowly as the world becomes crowded, while the motives for an increase of productive wealth grow stronger rather than weaker. Technical progress gives no hint of coming to an end, and improvements in organization may go on indefinitely, though they will naturally go on more slowly as the modes of marshaling the agents of production are brought nearer to perfection. Knowledge of the causes of economic change is at best incomplete, and enlarging it by the statistical method of study will be a chief work for the economists of the future. Analytical study points distinctly to a coming time of increased comfort for working humanity. Progress gives no sign of being self-terminating, so long as the force which has been the mainspring of it, namely, competition, shall continue to act. The suspicious element in the general dynamic movement is progress in organization. That which we have primarily studied is the marshaling of forces for mere production--the creation of efficient mills, shops, railroads, etc. This, however, carries with it a tendency to create large mills, shops, and railroad systems, and, in the end, to combine those which begin as rivals in a consolidation in which their rivalry with each other ceases. This means a danger of monopoly, and is the gravest menace which hangs over the future of economic society. If anything should definitely end competition, it would check invention, pervert distribution, and lead to evils from which only state socialism would offer a way of escape. Monopoly is not a mere bit of friction which interferes with the perfect working of economic laws. It is a definite perversion of the laws themselves. It is one thing to obstruct a force and another to supplant it and introduce a different one; and that is what monopoly would do. We have inquired whether it is necessary to let monopoly have its way, and have been able to answer the question with a decided _No_. It grows up in consequence of certain practices which an efficient government can stop. Favoritism in the charges for carrying goods is one of these practices. Railroads have become both monopolies and builders of other monopolies. Certain principles, which we have briefly outlined, govern their policy, and the natural outcome of their working is consolidation. This creates the necessity for a type of public action which is new in America--the regulation of freight charges. Akin to this is the necessity for keeping alive competition in the field of general industry by an effective prohibition of various measures by which the great corporations are able to destroy it. The dynamic element in economic life depends on competition, which at important points is vanishing, but can, by the power of the state, be restored and preserved, in a new form, indeed, but in all needed vigor. With that accomplished we can enjoy the full productive effect of consolidation without sacrificing the progress which the older type of industry insured. The organization of labor, its motives, its measures, and its tendencies,--including a tendency toward monopoly,--we have examined. Through all the wastes and disturbances which the struggle over wages occasions we have discovered a certain action of natural economic law, and have seen what type of measures, on the part of the state, will remove impediments in the way of that law and enable it to act in greater perfection. Connected with the dynamic movement on which the future of society depends are the policies of the government in connection with currency and with protective duties. Here, less action, rather than more, is demanded on the part of the state. While no renewal of a _laissez-faire_ policy is possible, a reduction of the duties which now play into the hands of monopoly is distinctly called for. In connection with currency a greater trust in nature and a smaller reliance on governments will give the best results. Our studies have included, not the activities of the whole world, but those of that central part of it which is highly sensitive to economic influences. The whole producing mechanism here responds comparatively quickly to any force which makes for change. This society _par excellence_ is extending its boundaries and annexing successive belts of outlying territory; and as this shall go on, it must bring the world as a whole more and more nearly into the shape of a single economic organism. The relations of the central society to the unannexed zones are attaining transcendent importance, and a fuller treatment of Economic Dynamics than is possible within the limits of the present work would give much space to such subjects as the transformation of Asia and the resulting changes in the economic life of Europe and America. Here again the conscious action of the people determines the economic outcome. In the main we can still leave the natural forces of industry to work automatically; but we have passed the point where we can safely leave to self-regulation the charges of the common carrier, the conduct of monopolistic corporations, or certain parts of the policy of organized labor. Foreign relations are, of course, a subject for public control, and they are coming to affect in a most intimate way our own economic life. Everywhere our future is put into our own hands and will develop the better the more we know of economic laws and the more energy we show in applying them. The surrendering of industries generally to the state may be avoided, and the essential features of the system of business which evolution has created may be preserved; but to keep this system free from unendurable evils will require, on the part of the people, a rare combination of intelligence and determination. It will require a public policy that shall neither be hampered by prejudice nor incited by ebullitions of popular feeling, but shall be guided through a course of difficult action by a knowledge of economic law. INDEX Abstinence, 339 _et seq._ Accumulation, the law of, Ch. XX. Altruism, 39. Arbitration, 469, Ch. XXVI; as affected by monopoly, 483 _et seq._; compulsory, 489-490, 497-498, 502; voluntary, 493 _et seq._ Birth rate, as affected by economic conditions, 328 _et seq._ Böhm-Bawerk, 17 note, 33. Boycott, Ch. XXVII. Ca'-canny, 509 _et seq._ Capital, 19, 24-26, 31-33; as affected by improvements in method, Ch. XVIII; as originating in profits, 230, 301; contrasted with capital goods, 28-34; exportation of, 230-235; ground and auxiliary, 166; mobility of, 37-38, 127-128, 151-152; primitive, 1-2; rent of, 170-171; sources of, 353 _et seq._; waste of, 307 _et seq._ Capital, accumulation of, Ch. XX; as affected by monopoly, 355-357; as affected by standards of living, 342 _et seq._ Capital, effects of increase of, 203-204; economic structure of society, 246-248; on interest, 319-320; on wages, 316 _et seq._ Capital goods, 16, 17, 19 note; active, 20 _et seq._; active and passive, 186-187; contrasted with capital, 28-34; passive, 20 _et seq._ Capitalist, 84-85, 117. Capitalization of railways, proper basis of, 445-449. Caste, effect on increase of population, 332; effect on values, 268. Centralization of production, 200-201, 289. Collective bargaining, 467 _et seq._ Combination, railway, 419 _et seq._, 433 _et seq._ Commerce, effect on diffusion of methods, 229; effect on emigration and immigration, 229-230. Competition, 67, 75-77, note; 143-150, 198 _et seq._; effect on inventions, 362 _et seq._; effect on labor organizations, 488-490; in transportation, 406, 419-420, 428 _et seq._; relation to progress, 533-534. Competition of markets, effect on railway charges, 403 _et seq._ Competition, potential, as a regulator of monopolies, 380 _et seq._ Conciliation, 490 _et seq._ Consolidation, 382-383, 390 _et seq._, 534 _et seq._, 558-559; effect on strikes, 464 _et seq._; of railways, 396-397, 419 _et seq._ Consumers' goods, 25-26, 34. Consumers' rent, 172 note, 173. Consumers' surplus, 105. Consumption, 24-25, note; as affected by improvements in methods, 273-274; by increased productive power, 305-306; by increase of individual incomes, 292; diversification of, 62-63, 206-207. Corporations, 376 _et seq._ Cost, 130; contrasted with utility, 43-44; elements of, 115-116; fixed and variable, 412 _et seq._; in static state, 132-133; law of increasing, 44-47; lowest, as determinant of standard price, 263-264; measurement of, 47-49, 209; relation to final utility, 53-54; relation to incomes, 126; relation to price, 114-115; specific, 45. Demand and supply, 93-94, 96. Demand, reciprocal, 292. Demand, relation to final utility, 97. Diminishing productivity, 148-149; of labor, 134 _et seq._ Diminishing returns, 56; in agriculture, 165-166, 398 _et seq._; in manufactures, 398-399. Diminishing utility, law of, 98. Distribution, 60; contrasted with production, Ch. V; functional and personal, 89-91; group, 92-93. Division of labor, 61 _et seq._ "Dumping," 526. Dynamic influences, 130-132, 195 _et seq._ Dynamics, Ch. XII. Economics, 1 _et seq._, 61. Education, effect on increase of population, 330-331. Effective utility, 8 note, 54 note. Eight-hour movement, 514-516. _Entrepreneur_, 83 _et seq._; 117 _et seq._; 153 _et seq._; in dynamic state, 123-124; in static state, 121-122. Exchange, 63-64. Factory legislation, effect on increase of population, 331-332. Final productivity, 139 _et seq._, 156-157. Final utility, 8 note, 51 note, 54 note, 98-99; relation to cost, 53-54; relation to demand, 97. Free coinage, 538-539. Free trade, arguments for, 231, 518-519. Friction, economic, 373. Future, undervaluation of, 345 _et seq._ Giddings, F. H., 381. Government ownership, 378, 383-385. Groups, economic, 64 _et seq._ Immigrants, disadvantages of, 245 _et seq._ Improvements in methods, 204, 212; as source of new capital, 230; effect on capital, Ch. XVIII; effect on labor, 312 _et seq._; effect on quality of goods, 273-274; in backward regions, 235-236. Increasing returns, 398-401. Inflation, effects of, 539 _et seq._ Interest, 85, Ch. IX; as affected by changes in the value of money, 543 _et seq._; as affected by increase of capital, 319-320; rate of, effect on the accumulation of capital, 339 _et seq._; real and loan, 547 _et seq._; relation to rent, 182-184; static, 224-225. Inventions, 204, Chs. XVI, XVII; as affected by competition, 362 _et seq._; as affected by monopoly, 362 _et seq._; conditions giving rise to, Ch. XXI; effect on capital, Ch. XVIII; on economic structure of society, 249 _et seq._; on labor, 254-255; effects of a series of, 290 _et seq._ Kartel, 392. Labor, 35; as a measure of cost, 209; as affected by improvements in method, 312 _et seq._; classification of, 13-15; definition of, 9-10, 82-85; diminishing productivity of, 134 _et seq._; division of, 61 _et seq._; managerial, 116-117; mobility of, 127-128, 133-134; monopoly, 471 _et seq._, 504; productivity of, 17-18, 133 _et seq._; protective, 10-11; rent of, 171-172. Labor organization, Ch. XXV. Labor-saving devices, Chs. XVI, XVII; effect on economic structure of society, 249 _et seq._; effect on labor, 254-255. _Laissez-faire_, 384-385, 390. Land, 9, 36-37, Ch. XI; contrasted with artificial capital goods, 178-179, 188-190. Machinery, 72-73. Malthus, 321 _et seq._ Margin of cultivation, 165 _et seq._ Marginal utility, 51 note. Market, 95 note. Market price, 93-94. Mill, J. S., 220 note, 257. Money, 29-30; Ch. XXIX. Monopoly, 201, 559-560; as affected by patents, 367-368; as limiting employment, 297-298; effect on accumulation, 355-357; on inventions, 362-363; on progress, Ch. XXII; on standard of living, 323; government ownership of, 378, 383-385; in transportation, 435 _et seq._; inventor's, 360 _et seq._; labor, 456, 462, 467, 471 _et seq._, 504; nature of, 380; public character of, 389; relation to arbitration, 483 _et seq._; relation to protection, 525 _et seq._; relation to railway discrimination, 396-397; restricted by potential competition, 380 _et seq._ Monopoly price, as affected by increase of wages, 479-480. Organization of industry, 205, 318-319, 368 _et seq._ Organization of labor, Ch. XXV. Paper Money, 552-554. Patents, 265-266; abuse of, 361; as a means of curbing monopolies, 367-368; justification, 360-361. Patten, S. N., 207 note. Political Economy, 3 note, 61. Pool, 392. Population, as affected by factory legislation, 331; as affected by increase of wealth, 333; as affected by rise of wages, 335 _et seq._; distribution of, 215 _et seq._; effect of increase of, 203, 244 _et seq._, 315 _et seq._; law of, Ch. XIX. Population, density of, 215-216; effect on industry, 237 _et seq._; effect on wages, 241-243. Population, increase of, as affected by caste, 332; by education, 330-331; by standard of living, 324 _et seq._ Price, 97; as affected by inflation, 539 _et seq._; determination of, 93-96; equalization of, 98-100; market, 93-94; monopoly, 479-480; normal, 114, 120-121; of complex goods, 100 _et seq._; relation to cost, 114; standard, determined by lowest cost, 263-264, 285-288; static, 202-203, 224. Production, contrasted with distribution, Ch. V; requisites of, 15-16. Productivity, 42-43; as basis for arbitration awards, 475 _et seq._; final, 139 _et seq._, 148-149, 157; measurement of, 55-60. Profit, 77 note, 85 _et seq._, 119-122 note, 129 note, 373; as affected by inflation, 539 _et seq._; as source of capital, 301, 354-355; in static state, 87. Protection, Ch. XXVIII, 560; argument for, 520 _et seq._; relation to monopoly, 525 _et seq._ Rae, John, 17 note. Railway capitalization, proper basis of, 446-450. Railway charges, Ch. XXIV; as affected by competition of markets, 403 _et seq._; limits of, 403 _et seq._; state regulation of, 439 _et seq._ Railway consolidation, 396-397, 419 _et seq._ Railway discriminations, as creating monopolies, 393-394, 396, 420 _et seq._ Rent, Ch. X; as differential product, 163-165; as product of land, 162-163; consumers', 172-173 note; gross and net, 180-183; of capital, 170-171; of concrete instruments, 174-177; of labor, 171-172; relation to interest, 182-184; relation to price, 191-194; traditional formula, 160-162; universality of principle, 177-178. Ricardo, 121, 160, 179. Risk, 122, 123 note, 214. Social Economics, 3 note, 61. Socialism, 378, 384-386, 395, 397. Socialistic state, group organization in, 71. Specific utility, 8 note. Standard of living, 322 et seq., 342 _et seq._ Static state, 132-133. Strike, sympathetic, 505. Strikes, effectiveness under varying conditions, 462 _et seq._ Substitution, 267 _et seq._ Supply and demand, 93-97. Supply, normal, 114. Surplus, consumers', 105. Tariff, relation to trusts, 528 _et seq._ Trade union, power of, under varying conditions, 462 _et seq._; restriction of membership, 503-504; restriction of output, 509 _et seq._ Transportation, Chs. XXIII, XXIV; as affected by diminishing returns in agriculture, 398 _et seq._; monopoly in, 435 _et seq._ Trusts, 201, 369-371, 391-392; as affected by railway discriminations, 393-394; methods of stifling competition, 394-395, 527-528; relation to tariff, 528 _et seq._ Tuttle, C. A., 34 note. Union label, 506 _et seq._ Utility, absolute, 54 note; contrasted with cost, 43-44; diminishing, 98; effective, 54 note; elementary, 11-12; final, 51 note, 54 note, 97-98; form, 12; marginal, 51 note; measurement of, 40 _et seq._; of producers' goods, 42-43; place, 12-13; varieties of, 7-8. Value, 40-42, 99-101; affected by caste, 268; in primitive conditions, 50-51; natural, 94-95; normal, Ch. VII; of complex goods, 100 _et seq._; static, 124-125, 202-203. Value of service principle, 405 _et seq._ Violence in labor disputes, 457 _et seq._ Wages, Ch. VIII, 85, 86; as affected by improved methods, 299-300; as affected by improved organization of industry, 318-319; as affected by increase of capital, 316 _et seq._; as affected by inferior bargaining power of labor, 452; as affected by organization of labor, Ch. XXV; increase of, effect on monopoly price, 479-480; law of, 143 _et seq._; rise of, effect on monopoly, 335 _et seq._; static, 224-225. "Waiting," 187-188. Wants, changes in, 206; elasticity of, relation to improvements in methods, 267 _et seq._ Wealth, 5-9; increase of, effect on population, 333. Webb, Sidney & Beatrice, 357. Printed in the United States of America. By JOHN BATES CLARK _Professor of Political Economy, Columbia University_ The Distribution of Wealth A Theory of Wages, Interest, and Profits _Cloth, 8vo, 445 pp., $3.00_ "It is not too much to say that the publication of Professor Clark's book marks an epoch in the history of economic thought in the United States. Its inspirations, its illustrations, even its independence of the opinions of others, are American; but its originality, the brilliancy of its reasoning, and its completeness deserve and will surely obtain for it a place in the world literature."--HENRY R. SEAGER, in the _Annals of the American Academy_. "Professor Clark's book deserves more attention from general readers than they are accustomed to bestow upon works on abstract economics. It is, indeed, a book written by an economist for economists, but its style, its clear and basic thought, illuminates a subject which the thinking public continually discusses."--_The Outlook_. 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360	----	WHAT IS PROPERTY? AN INQUIRY INTO THE PRINCIPLE OF RIGHT AND OF GOVERNMENT By P. J. Proudhon CONTENTS. P. J. PROUDHON: HIS LIFE AND HIS WORKS PREFACE FIRST MEMOIR CHAPTER I. METHOD PURSUED IN THIS WORK.--THE IDEA OF A REVOLUTION CHAPTER II. PROPERTY CONSIDERED AS A NATURAL RIGHT.--OCCUPATION AND CIVIL LAW AS EFFICIENT BASES OF PROPERTY.--DEFINITIONS % 1. Property as a Natural Right. % 2. Occupation as the Title to Property. % 3. Civil Law as the Foundation and Sanction of Property. CHAPTER III. LABOR AS THE EFFICIENT CAUSE OF THE DOMAIN OF PROPERTY % 1. The Land cannot be appropriated. % 2. Universal Consent no Justification of Property. % 3. Prescription gives no Title to Property. % 4. Labor.--That Labor has no Inherent Power to appropriate Natural Wealth. % 5. That Labor leads to Equality of Property. % 6. That in Society all Wages are Equal. % 7. That Inequality of Powers is the Necessary Condition of Equality of Fortunes. % 8. That, from the stand-point of Justice, Labor destroys Property. CHAPTER IV. THAT PROPERTY IS IMPOSSIBLE DEMONSTRATION. AXIOM. Property is the Right of Increase claimed by the Proprietor over any thing which he has stamped as his own. FIRST PROPOSITION. Property is Impossible, because it demands Something for Nothing. SECOND PROPOSITION. Property is Impossible, because, wherever it exists, Production costs more than it is worth. THIRD PROPOSITION. Property is Impossible, because, with a given Capital, Production is proportional to Labor, not to Property. FOURTH PROPOSITION. Property is Impossible, because it is Homicide. FIFTH PROPOSITION. Property is Impossible, because, if it exists, Society devours itself. Appendix to the Fifth Proposition. SIXTH PROPOSITION. Property is Impossible, because it is the Mother of Tyranny. SEVENTH PROPOSITION. Property is Impossible, because, in consuming its Receipts, it loses them; in hoarding them, it nullifies them; and, in using them as Capital, it turns them against Production. EIGHTH PROPOSITION. Property is Impossible, because its Power of Accumulation is infinite, and is exercised only over Finite Quantities. NINTH PROPOSITION Property is Impossible, because it is powerless against Property. TENTH PROPOSITION. Property is Impossible, because it is the Negation of Equality. CHAPTER V. PSYCHOLOGICAL EXPOSITION OF THE IDEA OF JUSTICE AND IN JUSTICE, AND A DETERMINATION OF THE PRINCIPLE OF GOVERNMENT AND OF RIGHT. PART 1. % 1. Of the Moral Sense in Man and the Animals. % 2. Of the First and Second Degrees of Sociability. % 3. Of the Third Degree of Sociability. PART I 1. % 1. Of the Causes of our Mistakes. The Origin of Property. % 2. Characteristics of Communism and of Property. % 3. Determination of the Third Form of Society. Conclusion. SECOND MEMOIR LETTER TO M. BLANQUI ON PROPERTY P. J. PROUDHON: HIS LIFE AND HIS WORKS. The correspondence [1] of P. J. Proudhon, the first volumes of which we publish to-day, has been collected since his death by the faithful and intelligent labors of his daughter, aided by a few friends. It was incomplete when submitted to Sainte Beuve, but the portion with which the illustrious academician became acquainted was sufficient to allow him to estimate it as a whole with that soundness of judgment which characterized him as a literary critic. He would, however, caution readers against accepting the biographer's interpretation of the author's views as in any sense authoritative; advising them, rather, to await the publication of the remainder of Proudhon's writings, that they may form an opinion for themselves.--Translator. In an important work, which his habitual readers certainly have not forgotten, although death did not allow him to finish it, Sainte Beuve thus judges the correspondence of the great publicist:-- "The letters of Proudhon, even outside the circle of his particular friends, will always be of value; we can always learn something from them, and here is the proper place to determine the general character of his correspondence. "It has always been large, especially since he became so celebrated; and, to tell the truth, I am persuaded that, in the future, the correspondence of Proudhon will be his principal, vital work, and that most of his books will be only accessory to and corroborative of this. At any rate, his books can be well understood only by the aid of his letters and the continual explanations which he makes to those who consult him in their doubt, and request him to define more clearly his position. "There are, among celebrated people, many methods of correspondence. There are those to whom letter-writing is a bore, and who, assailed with questions and compliments, reply in the greatest haste, solely that the job may be over with, and who return politeness for politeness, mingling it with more or less wit. This kind of correspondence, though coming from celebrated people, is insignificant and unworthy of collection and classification. "After those who write letters in performance of a disagreeable duty, and almost side by side with them in point of insignificance, I should put those who write in a manner wholly external, wholly superficial, devoted only to flattery, lavishing praise like gold, without counting it; and those also who weigh every word, who reply formally and pompously, with a view to fine phrases and effects. They exchange words only, and choose them solely for their brilliancy and show. You think it is you, individually, to whom they speak; but they are addressing themselves in your person to the four corners of Europe. Such letters are empty, and teach as nothing but theatrical execution and the favorite pose of their writers. "I will not class among the latter the more prudent and sagacious authors who, when writing to individuals, keep one eye on posterity. We know that many who pursue this method have written long, finished, charming, flattering, and tolerably natural letters. Beranger furnishes us with the best example of this class. "Proudhon, however, is a man of entirely different nature and habits. In writing, he thinks of nothing but his idea and the person whom he addresses: ad rem et ad hominem. A man of conviction and doctrine, to write does not weary him; to be questioned does not annoy him. When approached, he cares only to know that your motive is not one of futile curiosity, but the love of truth; he assumes you to be serious, he replies, he examines your objections, sometimes verbally, sometimes in writing; for, as he remarks, 'if there be some points which correspondence can never settle, but which can be made clear by conversation in two minutes, at other times just the opposite is the case: an objection clearly stated in writing, a doubt well expressed, which elicits a direct and positive reply, helps things along more than ten hours of oral intercourse!' In writing to you he does not hesitate to treat the subject anew; he unfolds to you the foundation and superstructure of his thought: rarely does he confess himself defeated--it is not his way; he holds to his position, but admits the breaks, the variations, in short, the EVOLUTION of his mind. The history of his mind is in his letters; there it must be sought. "Proudhon, whoever addresses him, is always ready; he quits the page of the book on which he is at work to answer you with the same pen, and that without losing patience, without getting confused, without sparing or complaining of his ink; he is a public man, devoted to the propagation of his idea by all methods, and the best method, with him, is always the present one, the latest one. His very handwriting, bold, uniform, legible, even in the most tiresome passages, betrays no haste, no hurry to finish. Each line is accurate: nothing is left to chance; the punctuation, very correct and a little emphatic and decided, indicates with precision and delicate distinction all the links in the chain of his argument. He is devoted entirely to you, to his business and yours, while writing to you, and never to anything else. All the letters of his which I have seen are serious: not one is commonplace. "But at the same time he is not at all artistic or affected; he does not CONSTRUCT his letters, he does not revise them, he spends no time in reading them over; we have a first draught, excellent and clear, a jet from the fountain-head, but that is all. The new arguments, which he discovers in support of his ideas and which opposition suggests to him, are an agreeable surprise, and shed a light which we should vainly search for even in his works. His correspondence differs essentially from his books, in that it gives you no uneasiness; it places you in the very heart of the man, explains him to you, and leaves you with an impression of moral esteem and almost of intellectual security. We feel his sincerity. I know of no one to whom he can be more fitly compared in this respect than George Sand, whose correspondence is large, and at the same time full of sincerity. His role and his nature correspond. If he is writing to a young man who unbosoms himself to him in sceptical anxiety, to a young woman who asks him to decide delicate questions of conduct for her, his letter takes the form of a short moral essay, of a father-confessor's advice. Has he perchance attended the theatre (a rare thing for him) to witness one of Ponsart's comedies, or a drama of Charles Edmond's, he feels bound to give an account of his impressions to the friend to whom he is indebted for this pleasure, and his letter becomes a literary and philosophical criticism, full of sense, and like no other. His familiarity is suited to his correspondent; he affects no rudeness. The terms of civility or affection which he employs towards his correspondents are sober, measured, appropriate to each, and honest in their simplicity and cordiality. When he speaks of morals and the family, he seems at times like the patriarchs of the Bible. His command of language is complete, and he never fails to avail himself of it. Now and then a coarse word, a few personalities, too bitter and quite unjust or injurious, will have to be suppressed in printing; time, however, as it passes away, permits many things and renders them inoffensive. Am I right in saying that Proudhon's correspondence, always substantial, will one day be the most accessible and attractive portion of his works?" Almost the whole of Proudhon's real biography is included in his correspondence. Up to 1837, the date of the first letter which we have been able to collect, his life, narrated by Sainte Beuve, from whom we make numerous extracts, may be summed up in a few pages. Pierre Joseph Proudhon was born on the 15th of January, 1809, in a suburb of Besancon, called Mouillere. His father and mother were employed in the great brewery belonging to M. Renaud. His father, though a cousin of the jurist Proudhon, the celebrated professor in the faculty of Dijon, was a journeyman brewer. His mother, a genuine peasant, was a common servant. She was an orderly person of great good sense; and, as they who knew her say, a superior woman of HEROIC character,--to use the expression of the venerable M. Weiss, the librarian at Besancon. She it was especially that Proudhon resembled: she and his grandfather Tournesi, the soldier peasant of whom his mother told him, and whose courageous deeds he has described in his work on "Justice." Proudhon, who always felt a great veneration for his mother Catharine, gave her name to the elder of his daughters. In 1814, when Besancon was blockaded, Mouillere, which stood in front of the walls of the town, was destroyed in the defence of the place; and Proudhon's father established a cooper's shop in a suburb of Battant, called Vignerons. Very honest, but simple-minded and short-sighted, this cooper, the father of five children, of whom Pierre Joseph was the eldest, passed his life in poverty. At eight years of age, Proudhon either made himself useful in the house, or tended the cattle out of doors. No one should fail to read that beautiful and precious page of his work on "Justice," in which he describes the rural sports which he enjoyed when a neatherd. At the age of twelve, he was a cellar-boy in an inn. This, however, did not prevent him from studying. His mother was greatly aided by M. Renaud, the former owner of the brewery, who had at that time retired from business, and was engaged in the education of his children. Proudhon entered school as a day-scholar in the sixth class. He was necessarily irregular in his attendance; domestic cares and restraints sometimes kept him from his classes. He succeeded nevertheless in his studies; he showed great perseverance. His family were so poor that they could not afford to furnish him with books; he was obliged to borrow them from his comrades, and copy the text of his lessons. He has himself told us that he was obliged to leave his wooden shoes outside the door, that he might not disturb the classes with his noise; and that, having no hat, he went to school bareheaded. One day, towards the close of his studies, on returning from the distribution of the prizes, loaded with crowns, he found nothing to eat in the house. "In his eagerness for labor and his thirst for knowledge, Proudhon," says Sainte Beuve, "was not content with the instruction of his teachers. From his twelfth to his fourteenth year, he was a constant frequenter of the town library. One curiosity led to another, and he called for book after book, sometimes eight or ten at one sitting. The learned librarian, the friend and almost the brother of Charles Nodier, M. Weiss, approached him one day, and said, smiling, 'But, my little friend, what do you wish to do with all these books?' The child raised his head, eyed his questioner, and replied: 'What's that to you?' And the good M. Weiss remembers it to this day." Forced to earn his living, Proudhon could not continue his studies. He entered a printing-office in Besancon as a proof-reader. Becoming, soon after, a compositor, he made a tour of France in this capacity. At Toulon, where he found himself without money and without work, he had a scene with the mayor, which he describes in his work on "Justice." Sainte Beuve says that, after his tour of France, his service book being filled with good certificates, Proudhon was promoted to the position of foreman. But he does not tell us, for the reason that he had no knowledge of a letter written by Fallot, of which we never heard until six months since, that the printer at that time contemplated quitting his trade in order to become a teacher. Towards 1829, Fallot, who was a little older than Proudhon, and who, after having obtained the Suard pension in 1832, died in his twenty-ninth year, while filling the position of assistant librarian at the Institute, was charged, Protestant though he was, with the revisal of a "Life of the Saints," which was published at Besancon. The book was in Latin, and Fallot added some notes which also were in Latin. "But," says Sainte Beuve, "it happened that some errors escaped his attention, which Proudhon, then proof-reader in the printing office, did not fail to point out to him. Surprised at finding so good a Latin scholar in a workshop, he desired to make his acquaintance; and soon there sprung up between them a most earnest and intimate friendship: a friendship of the intellect and of the heart." Addressed to a printer between twenty-two and twenty-three years of age, and predicting in formal terms his future fame, Fallot's letter seems to us so interesting that we do not hesitate to reproduce it entire. "PARIS, December 5, 1831. "MY DEAR PROUDHON,--YOU have a right to be surprised at, and even dissatisfied with, my long delay in replying to your kind letter; I will tell you the cause of it. It became necessary to forward an account of your ideas to M. J. de Gray; to hear his objections, to reply to them, and to await his definitive response, which reached me but a short time ago; for M. J. is a sort of financial king, who takes no pains to be punctual in dealing with poor devils like ourselves. I, too, am careless in matters of business; I sometimes push my negligence even to disorder, and the metaphysical musings which continually occupy my mind, added to the amusements of Paris, render me the most incapable man in the world for conducting a negotiation with despatch. "I have M. Jobard's decision; here it is: In his judgment, you are too learned and clever for his children; he fears that you could not accommodate your mind and character to the childish notions common to their age and station. In short, he is what the world calls a good father; that is, he wants to spoil his children, and, in order to do this easily, he thinks fit to retain his present instructor, who is not very learned, but who takes part in their games and joyous sports with wonderful facility, who points out the letters of the alphabet to the little girl, who takes the little boys to mass, and who, no less obliging than the worthy Abbe P. of our acquaintance, would readily dance for Madame's amusement. Such a profession would not suit you, you who have a free, proud, and manly soul: you are refused; let us dismiss the matter from our minds. Perhaps another time my solicitude will be less unfortunate. I can only ask your pardon for having thought of thus disposing of you almost without consulting you. I find my excuse in the motives which guided me; I had in view your well-being and advancement in the ways of this world. "I see in your letter, my comrade, through its brilliant witticisms and beneath the frank and artless gayety with which you have sprinkled it, a tinge of sadness and despondency which pains me. You are unhappy, my friend: your present situation does not suit you; you cannot remain in it, it was not made for you, it is beneath you; you ought, by all means, to leave it, before its injurious influence begins to affect your faculties, and before you become settled, as they say, in the ways of your profession, were it possible that such a thing could ever happen, which I flatly deny. You are unhappy; you have not yet entered upon the path which Nature has marked out for you. But, faint-hearted soul, is that a cause for despondency? Ought you to feel discouraged? Struggle, morbleu, struggle persistently, and you will triumph. J. J. Rousseau groped about for forty years before his genius was revealed to him. You are not J. J Rousseau; but listen: I know not whether I should have divined the author of "Emile" when he was twenty years of age, supposing that I had been his contemporary, and had enjoyed the honor of his acquaintance. But I have known you, I have loved you, I have divined your future, if I may venture to say so; for the first time in my life, I am going to risk a prophecy. Keep this letter, read it again fifteen or twenty years hence, perhaps twenty-five, and if at that time the prediction which I am about to make has not been fulfilled, burn it as a piece of folly out of charity and respect for my memory. This is my prediction: you will be, Proudhon, in spite of yourself, inevitably, by the fact of your destiny, a writer, an author; you will be a philosopher; you will be one of the lights of the century, and your name will occupy a place in the annals of the nineteenth century, like those of Gassendi, Descartes, Malebranche, and Bacon in the seventeenth, and those of Diderot, Montesquieu, Helvetius. Locke, Hume, and Holbach in the eighteenth. Such will be your lot! Do now what you will, set type in a printing-office, bring up children, bury yourself in deep seclusion, seek obscure and lonely villages, it is all one to me; you cannot escape your destiny; you cannot divest yourself of your noblest feature, that active, strong, and inquiring mind, with which you are endowed; your place in the world has been appointed, and it cannot remain empty. Go where you please, I expect you in Paris, talking philosophy and the doctrines of Plato; you will have to come, whether you want to or not. I, who say this to you, must feel very sure of it in order to be willing to put it upon paper, since, without reward for my prophetic skill,--to which, I assure you, I make not the slightest claim,--I run the risk of passing for a hare-brained fellow, in case I prove to be mistaken: he plays a bold game who risks his good sense upon his cards, in return for the very trifling and insignificant merit of having divined a young man's future. "When I say that I expect you in Paris, I use only a proverbial phrase which you must not allow to mislead you as to my projects and plans. To reside in Paris is disagreeable to me, very much so; and when this fine-art fever which possesses me has left me, I shall abandon the place without regret to seek a more peaceful residence in a provincial town, provided always the town shall afford me the means of living, bread, a bed, books, rest, and solitude. How I miss, my good Proudhon, that dark, obscure, smoky chamber in which I dwelt in Besancon, and where we spent so many pleasant hours in the discussion of philosophy! Do you remember it? But that is now far away. Will that happy time ever return? Shall we one day meet again? Here my life is restless, uncertain, precarious, and, what is worse, indolent, illiterate, and vagrant. I do no work, I live in idleness, I ramble about; I do not read, I no longer study; my books are forsaken; now and then I glance over a few metaphysical works, and after a days walk through dirty, filthy, crowded streets. I lie down with empty head and tired body, to repeat the performance on the following day. What is the object of these walks, you will ask. I make visits, my friend; I hold interviews with stupid people. Then a fit of curiosity seizes me, the least inquisitive of beings: there are museums, libraries, assemblies, churches, palaces, gardens, and theatres to visit. I am fond of pictures, fond of music, fond of sculpture; all these are beautiful and good, but they cannot appease hunger, nor take the place of my pleasant readings of Bailly, Hume, and Tennemann, which I used to enjoy by my fireside when I was able to read. "But enough of complaints. Do not allow this letter to affect you too much, and do not think that I give way to dejection or despondency; no, I am a fatalist, and I believe in my star. I do not know yet what my calling is, nor for what branch of polite literature I am best fitted; I do not even know whether I am, or ever shall be, fitted for any: but what matters it? I suffer, I labor, I dream, I enjoy, I think; and, in a word, when my last hour strikes, I shall have lived. "Proudhon, I love you, I esteem you; and, believe me, these are not mere phrases. What interest could I have in flattering and praising a poor printer? Are you rich, that you may pay for courtiers? Have you a sumptuous table, a dashing wife, and gold to scatter, in order to attract them to your suite? Have you the glory, honors, credit, which would render your acquaintance pleasing to their vanity and pride? No; you are poor, obscure, abandoned; but, poor, obscure, and abandoned, you have a friend, and a friend who knows all the obligations which that word imposes upon honorable people, when they venture to assume it. That friend is myself: put me to the test. "GUSTAVE FALLOT." It appears from this letter that if, at this period, Proudhon had already exhibited to the eyes of a clairvoyant friend his genius for research and investigation, it was in the direction of philosophical, rather than of economical and social, questions. Having become foreman in the house of Gauthier & Co., who carried on a large printing establishment at Besancon, he corrected the proofs of ecclesiastical writers, the Fathers of the Church. As they were printing a Bible, a Vulgate, he was led to compare the Latin with the original Hebrew. "In this way," says Sainte Beuve, "he learned Hebrew by himself, and, as everything was connected in his mind, he was led to the study of comparative philology. As the house of Gauthier published many works on Church history and theology, he came also to acquire, through this desire of his to investigate everything, an extensive knowledge of theology, which afterwards caused misinformed persons to think that he had been in an ecclesiastical seminary." Towards 1836, Proudhon left the house of Gauthier, and, in company with an associate, established a small printing-office in Besancon. His contribution to the partnership consisted, not so much in capital, as in his knowledge of the trade. His partner committing suicide in 1838, Proudhon was obliged to wind up the business, an operation which he did not accomplish as quickly and as easily as he hoped. He was then urged by his friends to enter the ranks of the competitors for the Suard pension. This pension consisted of an income of fifteen hundred francs bequeathed to the Academy of Besancon by Madame Suard, the widow of the academician, to be given once in three years to the young man residing in the department of Doubs, a bachelor of letters or of science, and not possessing a fortune, whom the Academy of Besancon SHOULD DEEM BEST FITTED FOR A LITERARY OR SCIENTIFIC CAREER, OR FOR THE STUDY OF LAW OR OF MEDICINE. The first to win the Suard pension was Gustave Fallot. Mauvais, who was a distinguished astronomer in the Academy of Sciences, was the second. Proudhon aspired to be the third. To qualify himself, he had to be received as a bachelor of letters, and was obliged to write a letter to the Academy of Besancon. In a phrase of this letter, the terms of which he had to modify, though he absolutely refused to change its spirit, Proudhon expressed his firm resolve to labor for the amelioration of the condition of his brothers, the working-men. The only thing which he had then published was an "Essay on General Grammar," which appeared without the author's signature. While reprinting, at Besancon, the "Primitive Elements of Languages, Discovered by the Comparison of Hebrew roots with those of the Latin and French," by the Abbe Bergier, Proudhon had enlarged the edition of his "Essay on General Grammar." The date of the edition, 1837, proves that he did not at that time think of competing for the Suard pension. In this work, which continued and completed that of the Abbe Bergier, Proudhon adopted the same point of view, that of Moses and of Biblical tradition. Two years later, in February, 1839, being already in possession of the Suard pension, he addressed to the Institute, as a competitor for the Volney prize, a memoir entitled: "Studies in Grammatical Classification and the Derivation of some French words." It was his first work, revised and presented in another form. Four memoirs only were sent to the Institute, none of which gained the prize. Two honorable mentions were granted, one of them to memoir No. 4; that is, to P. J. Proudhon, printer at Besancon. The judges were MM. Amedde Jaubert, Reinaud, and Burnouf. "The committee," said the report presented at the annual meeting of the five academies on Thursday, May 2, 1839, "has paid especial attention to manuscripts No. 1 and No. 4. Still, it does not feel able to grant the prize to either of these works, because they do not appear to be sufficiently elaborated. The committee, which finds in No. 4 some ingenious analyses, particularly in regard to the mechanism of the Hebrew language, regrets that the author has resorted to hazardous conjectures, and has sometimes forgotten the special recommendation of the committee to pursue the experimental and comparative method." Proudhon remembered this. He attended the lectures of Eugene Burnouf, and, as soon as he became acquainted with the labors and discoveries of Bopp and his successors, he definitively abandoned an hypothesis which had been condemned by the Academy of Inscriptions and Belles-lettres. He then sold, for the value of the paper, the remaining copies of the "Essay" published by him in 1837. In 1850, they were still lying in a grocer's back-shop. A neighboring publisher then placed the edition on the market, with the attractive name of Proudhon upon it. A lawsuit ensued, in which the author was beaten. His enemies, and at that time there were many of them, would have been glad to have proved him a renegade and a recanter. Proudhon, in his work on "Justice," gives some interesting details of this lawsuit. In possession of the Suard pension, Proudhon took part in the contest proposed by the Academy of Besancon on the question of the utility of the celebration of Sunday. His memoir obtained honorable mention, together with a medal which was awarded him, in open session, on the 24th of August, 1839. The reporter of the committee, the Abbe Doney, since made Bishop of Montauban, called attention to the unquestionable superiority of his talent. "But," says Sainte Beuve, "he reproached him with having adopted dangerous theories, and with having touched upon questions of practical politics and social organization, where upright intentions and zeal for the public welfare cannot justify rash solutions." Was it policy, we mean prudence, which induced Proudhon to screen his ideas of equality behind the Mosaic law? Sainte Beuve, like many others, seems to think so. But we remember perfectly well that, having asked Proudhon, in August, 1848, if he did not consider himself indebted in some respects to his fellow-countryman, Charles Fourier, we received from him the following reply: "I have certainly read Fourier, and have spoken of him more than once in my works; but, upon the whole, I do not think that I owe anything to him. My real masters, those who have caused fertile ideas to spring up in my mind, are three in number: first, the Bible; next, Adam Smith; and last, Hegel." Freely confessed in the "Celebration of Sunday," the influence of the Bible on Proudhon is no less manifest in his first memoir on property. Proudhon undoubtedly brought to this work many ideas of his own; but is not the very foundation of ancient Jewish law to be found in its condemnation of usurious interest and its denial of the right of personal appropriation of land? The first memoir on property appeared in 1840, under the title, "What is Property? or an Inquiry into the Principle of Right and of Government." Proudhon dedicated it, in a letter which served as the preface, to the Academy of Besancon. The latter, finding itself brought to trial by its pensioner, took the affair to heart, and evoked it, says Sainte Beuve, with all possible haste. The pension narrowly escaped being immediately withdrawn from the bold defender of the principle of equality of conditions. M. Vivien, then Minister of Justice, who was earnestly solicited to prosecute the author, wished first to obtain the opinion of the economist, Blanqui, a member of the Academy of Moral and Political Sciences. Proudhon having presented to this academy a copy of his book, M. Blanqui was appointed to review it. This review, though it opposed Proudhon's views, shielded him. Treated as a savant by M. Blanqui, the author was not prosecuted. He was always grateful to MM. Blanqui and Vivien for their handsome conduct in the matter. M. Blanqui's review, which was partially reproduced by "Le Moniteur," on the 7th of September, 1840, naturally led Proudhon to address to him, in the form of a letter, his second memoir on property, which appeared in April, 1841. Proudhon had endeavored, in his first memoir, to demonstrate that the pursuit of equality of conditions is the true principle of right and of government. In the "Letter to M. Blanqui," he passes in review the numerous and varied methods by which this principle gradually becomes realized in all societies, especially in modern society. In 1842, a third memoir appeared, entitled, "A Notice to Proprietors, or a Letter to M. Victor Considerant, Editor of 'La Phalange,' in Reply to a Defence of Property." Here the influence of Adam Smith manifested itself, and was frankly admitted. Did not Adam Smith find, in the principle of equality, the first of all the laws which govern wages? There are other laws, undoubtedly; but Proudhon considers them all as springing from the principle of property, as he defined it in his first memoir. Thus, in humanity, there are two principles,--one which leads us to equality, another which separates us from it. By the former, we treat each other as associates; by the latter, as strangers, not to say enemies. This distinction, which is constantly met with throughout the three memoirs, contained already, in germ, the idea which gave birth to the "System of Economical Contradictions," which appeared in 1846, the idea of antinomy or contre-loi. The "Notice to Proprietors" was seized by the magistrates of Besancon; and Proudhon was summoned to appear before the assizes of Doubs within a week. He read his written defence to the jurors in person, and was acquitted. The jury, like M. Blanqui, viewed him only as a philosopher, an inquirer, a savant. In 1843, Proudhon published the "Creation of Order in Humanity," a large volume, which does not deal exclusively with questions of social economy. Religion, philosophy, method, certainty, logic, and dialectics are treated at considerable length. Released from his printing-office on the 1st of March of the same year, Proudhon had to look for a chance to earn his living. Messrs. Gauthier Bros., carriers by water between Mulhouse and Lyons, the eldest of whom was Proudhon's companion in childhood, conceived the happy thought of employing him, of utilizing his ability in their business, and in settling the numerous points of difficulty which daily arose. Besides the large number of accounts which his new duties required him to make out, and which retarded the publication of the "System of Economical Contradictions," until October, 1846, we ought to mention a work, which, before it appeared in pamphlet form, was published in the "Revue des Economistes,"--"Competition between Railroads and Navigable Ways." "Le Miserere, or the Repentance of a King," which he published in March, 1845, in the "Revue Independante," during that Lenten season when Lacordaire was preaching in Lyons, proves that, though devoting himself with ardor to the study of economical problems, Proudhon had not lost his interest in questions of religious history. Among his writings on these questions, which he was unfortunately obliged to leave unfinished, we may mention a nearly completed history of the early Christian heresies, and of the struggle of Christianity against Caesarism. We have said that, in 1848, Proudhon recognized three masters. Having no knowledge of the German language, he could not have read the works of Hegel, which at that time had not been translated into French. It was Charles Grun, a German, who had come to France to study the various philosophical and socialistic systems, who gave him the substance of the Hegelian ideas. During the winter of 1844-45, Charles Grun had some long conversations with Proudhon, which determined, very decisively, not the ideas, which belonged exclusively to the bisontin thinker, but the form of the important work on which he labored after 1843, and which was published in 1846 by Guillaumin. Hegel's great idea, which Proudhon appropriated, and which he demonstrates with wonderful ability in the "System of Economical Contradictions," is as follows: Antinomy, that is, the existence of two laws or tendencies which are opposed to each other, is possible, not only with two different things, but with one and the same thing. Considered in their thesis, that is, in the law or tendency which created them, all the economical categories are rational,--competition, monopoly, the balance of trade, and property, as well as the division of labor, machinery, taxation, and credit. But, like communism and population, all these categories are antinomical; all are opposed, not only to each other, but to themselves. All is opposition, and disorder is born of this system of opposition. Hence, the sub-title of the work,--"Philosophy of Misery." No category can be suppressed; the opposition, antinomy, or contre-tendance, which exists in each of them, cannot be suppressed. Where, then, lies the solution of the social problem? Influenced by the Hegelian ideas, Proudhon began to look for it in a superior synthesis, which should reconcile the thesis and antithesis. Afterwards, while at work upon his book on "Justice," he saw that the antinomical terms do not cancel each other, any more than the opposite poles of an electric pile destroy each other; that they are the procreative cause of motion, life, and progress; that the problem is to discover, not their fusion, which would be death, but their equilibrium,--an equilibrium for ever unstable, varying with the development of society. On the cover of the "System of Economical Contradictions," Proudhon announced, as soon to appear, his "Solution of the Social Problem." This work, upon which he was engaged when the Revolution of 1848 broke out, had to be cut up into pamphlets and newspaper articles. The two pamphlets, which he published in March, 1848, before he became editor of "Le Representant du Peuple," bear the same title,--"Solution of the Social Problem." The first, which is mainly a criticism of the early acts of the provisional government, is notable from the fact that in it Proudhon, in advance of all others, energetically opposed the establishment of national workshops. The second, "Organization of Credit and Circulation," sums up in a few pages his idea of economical progress: a gradual reduction of interest, profit, rent, taxes, and wages. All progress hitherto has been made in this manner; in this manner it must continue to be made. Those workingmen who favor a nominal increase of wages are, unconsciously following a back-track, opposed to all their interests. After having published in "Le Representant du Peuple," the statutes of the Bank of Exchange,--a bank which was to make no profits, since it was to have no stockholders, and which, consequently, was to discount commercial paper with out interest, charging only a commission sufficient to defray its running expenses,--Proudhon endeavored, in a number of articles, to explain its mechanism and necessity. These articles have been collected in one volume, under the double title, "Resume of the Social Question; Bank of Exchange." His other articles, those which up to December, 1848, were inspired by the progress of events, have been collected in another volume,--"Revolutionary Ideas." Almost unknown in March, 1848, and struck off in April from the list of candidates for the Constituent Assembly by the delegation of workingmen which sat at the Luxembourg, Proudhon had but a very small number of votes at the general elections of April. At the complementary elections, which were held in the early days of June, he was elected in Paris by seventy-seven thousand votes. After the fatal days of June, he published an article on le terme, which caused the first suspension of "Le Representant du Peuple." It was at that time that he introduced a bill into the Assembly, which, being referred to the Committee on the Finances, drew forth, first, the report of M. Thiers, and then the speech which Proudhon delivered, on the 31st of July, in reply to this report. "Le Representant du Peuple," reappearing a few days later, he wrote, a propos of the law requiring journals to give bonds, his famous article on "The Malthusians" (August 10, 1848). Ten days afterwards, "Le Representant du Peuple," again suspended, definitively ceased to appear. "Le Peuple," of which he was the editor-in-chief, and the first number of which was issued in the early part of September, appeared weekly at first, for want of sufficient bonds; it afterwards appeared daily, with a double number once a week. Before "Le Peuple" had obtained its first bond, Proudhon published a remarkable pamphlet on the "Right to Labor,"--a right which he denied in the form in which it was then affirmed. It was during the same period that he proposed, at the Poissonniere banquet, his Toast to the Revolution. Proudhon, who had been asked to preside at the banquet, refused, and proposed in his stead, first, Ledru-Rollin, and then, in view of the reluctance of the organizers of the banquet, the illustrious president of the party of the Mountain, Lamennais. It was evidently his intention to induce the representatives of the Extreme Left to proclaim at last with him the Democratic and Social Republic. Lamennais being accepted by the organizers, the Mountain promised to be present at the banquet. The night before, all seemed right, when General Cavaignac replaced Minister Senart by Minister Dufaure-Vivien. The Mountain, questioning the government, proposed a vote of confidence in the old minister, and, tacitly, of want of confidence in the new. Proudhon abstained from voting on this proposition. The Mountain declared that it would not attend the banquet, if Proudhon was to be present. Five Montagnards, Mathieu of Drome at their head, went to the temporary office of "Le Peuple" to notify him of this. "Citizen Proudhon," said they to the organizers in his presence, "in abstaining from voting to-day on the proposition of the Mountain, has betrayed the Republican cause." Proudhon, vehemently questioned, began his defence by recalling, on the one hand, the treatment which he had received from the dismissed minister; and, on the other, the impartial conduct displayed towards him in 1840 by M. Vivien, the new minister. He then attacked the Mountain by telling its delegates that it sought only a pretext, and that really, in spite of its professions of Socialism in private conversation, whether with him or with the organizers of the banquet, it had not the courage to publicly declare itself Socialist. On the following day, in his Toast to the Revolution, a toast which was filled with allusions to the exciting scene of the night before, Proudhon commenced his struggle against the Mountain. His duel with Felix Pyat was one of the episodes of this struggle, which became less bitter on Proudhon's side after the Mountain finally decided to publicly proclaim the Democratic and Social Republic. The campaign for the election of a President of the Republic had just begun. Proudhon made a very sharp attack on the candidacy of Louis Bonaparte in a pamphlet which is regarded as one of his literary chefs-d'oeuvre: the "Pamphlet on the Presidency." An opponent of this institution, against which he had voted in the Constituent Assembly, he at first decided to take no part in the campaign. But soon seeing that he was thus increasing the chances of Louis Bonaparte, and that if, as was not at all probable, the latter should not obtain an absolute majority of the votes, the Assembly would not fail to elect General Cavaignac, he espoused, for the sake of form, the candidacy of Raspail, who was supported by his friends in the Socialist Committee. Charles Delescluze, the editor-in-chief of "La Revolution Democratique et Sociale," who could not forgive him for having preferred Raspail to Ledru-Rollin, the candidate of the Mountain, attacked him on the day after the election with a violence which overstepped all bounds. At first, Proudhon had the wisdom to refrain from answering him. At length, driven to an extremity, he became aggressive himself, and Delescluze sent him his seconds. This time, Proudhon positively refused to fight; he would not have fought with Felix Pyat, had not his courage been called in question. On the 25th of January, 1849, Proudhon, rising from a sick bed, saw that the existence of the Constituent Assembly was endangered by the coalition of the monarchical parties with Louis Bonaparte, who was already planning his coup d'Etat. He did not hesitate to openly attack the man who had just received five millions of votes. He wanted to break the idol; he succeeded only in getting prosecuted and condemned himself. The prosecution demanded against him was authorized by a majority of the Constituent Assembly, in spite of the speech which he delivered on that occasion. Declared guilty by the jury, he was sentenced, in March, 1849, to three years' imprisonment and the payment of a fine of ten thousand francs. Proudhon had not abandoned for a single moment his project of a Bank of Exchange, which was to operate without capital with a sufficient number of merchants and manufacturers for adherents. This bank, which he then called the Bank of the People, and around which he wished to gather the numerous working-people's associations which had been formed since the 24th of February, 1848, had already obtained a certain number of subscribers and adherents, the latter to the number of thirty-seven thousand. It was about to commence operations, when Proudhon's sentence forced him to choose between imprisonment and exile. He did not hesitate to abandon his project and return the money to the subscribers. He explained the motives which led him to this decision in an article in "Le Peuple." Having fled to Belgium, he remained there but a few days, going thence to Paris, under an assumed name, to conceal himself in a house in the Rue de Chabrol. From his hiding-place he sent articles almost every day, signed and unsigned, to "Le Peuple." In the evening, dressed in a blouse, he went to some secluded spot to take the air. Soon, emboldened by habit, he risked an evening promenade upon the Boulevards, and afterwards carried his imprudence so far as to take a stroll by daylight in the neighborhood of the Gare du Nord. It was not long before he was recognized by the police, who arrested him on the 6th of June, 1849, in the Rue du Faubourg-Poissonniere. Taken to the office of the prefect of police, then to Sainte-Pelagie, he was in the Conciergerie on the day of the 13th of June, 1849, which ended with the violent suppression of "Le Peuple." He then began to write the "Confessions of a Revolutionist," published towards the end of the year. He had been again transferred to Sainte-Pelagie, when he married, in December, 1849, Mlle. Euphrasie Piegard, a young working girl whose hand he had requested in 1847. Madame Proudhon bore him four daughters, of whom but two, Catherine and Stephanie, survived their father. Stephanie died in 1873. In October, 1849, "Le Peuple" was replaced by a new journal, "La Voix du Peuple," which Proudhon edited from his prison cell. In it were published his discussions with Pierre Leroux and Bastiat. The political articles which he sent to "La Voix du Peuple" so displeased the government finally, that it transferred him to Doullens, where he was secretly confined for some time. Afterwards taken back to Paris, to appear before the assizes of the Seine in reference to an article in "La Voix du Peuple," he was defended by M. Cremieux and acquitted. From the Conciergerie he went again to Sainte-Pelagie, where he ended his three years in prison on the 6th of June, 1852. "La Voix du Peuple," suppressed before the promulgation of the law of the 31st of May, had been replaced by a weekly sheet, "Le Peuple" of 1850. Established by the aid of the principal members of the Mountain, this journal soon met with the fate of its predecessors. In 1851, several months before the coup d'Etat, Proudhon published the "General Idea of the Revolution of the Nineteenth Century," in which, after having shown the logical series of unitary governments,--from monarchy, which is the first term, to the direct government of the people, which is the last,--he opposes the ideal of an-archy or self-government to the communistic or governmental ideal. At this period, the Socialist party, discouraged by the elections of 1849, which resulted in a greater conservative triumph than those of 1848, and justly angry with the national representative body which had just passed the law of the 31st of May, 1850, demanded direct legislation and direct government. Proudhon, who did not want, at any price, the plebiscitary system which he had good reason to regard as destructive of liberty, did not hesitate to point out, to those of his friends who expected every thing from direct legislation, one of the antinomies of universal suffrage. In so far as it is an institution intended to achieve, for the benefit of the greatest number, the social reforms to which landed suffrage is opposed, universal suffrage is powerless; especially if it pretends to legislate or govern directly. For, until the social reforms are accomplished, the greatest number is of necessity the least enlightened, and consequently the least capable of understanding and effecting reforms. In regard to the antinomy, pointed out by him, of liberty and government,--whether the latter be monarchic, aristocratic, or democratic in form,--Proudhon, whose chief desire was to preserve liberty, naturally sought the solution in the free contract. But though the free contract may be a practical solution of purely economical questions, it cannot be made use of in politics. Proudhon recognized this ten years later, when his beautiful study on "War and Peace" led him to find in the FEDERATIVE PRINCIPLE the exact equilibrium of liberty and government. "The Social Revolution Demonstrated by the Coup d' Etat" appeared in 1852, a few months after his release from prison. At that time, terror prevailed to such an extent that no one was willing to publish his book without express permission from the government. He succeeded in obtaining this permission by writing to Louis Bonaparte a letter which he published at the same time with the work. The latter being offered for sale, Proudhon was warned that he would not be allowed to publish any more books of the same character. At that time he entertained the idea of writing a universal history entitled "Chronos." This project was never fulfilled. Already the father of two children, and about to be presented with a third, Proudhon was obliged to devise some immediate means of gaining a living; he resumed his labors, and published, at first anonymously, the "Manual of a Speculator in the Stock-Exchange." Later, in 1857, after having completed the work, he did not hesitate to sign it, acknowledging in the preface his indebtedness to his collaborator, G. Duchene. Meantime, he vainly sought permission to establish a journal, or review. This permission was steadily refused him. The imperial government always suspected him after the publication of the "Social Revolution Demonstrated by the Coup d'Etat." Towards the end of 1853, Proudhon issued in Belgium a pamphlet entitled "The Philosophy of Progress." Entirely inoffensive as it was, this pamphlet, which he endeavored to send into France, was seized on the frontier. Proudhon's complaints were of no avail. The empire gave grants after grants to large companies. A financial society, having asked for the grant of a railroad in the east of France, employed Proudhon to write several memoirs in support of this demand. The grant was given to another company. The author was offered an indemnity as compensation, to be paid (as was customary in such cases) by the company which received the grant. It is needless to say that Proudhon would accept nothing. Then, wishing to explain to the public, as well as to the government, the end which he had in view, he published the work entitled "Reforms to be Effected in the Management of Railroads." Towards the end of 1854, Proudhon had already begun his book on "Justice," when he had a violent attack of cholera, from which he recovered with great difficulty. Ever afterwards his health was delicate. At last, on the 22d of April, 1858, he published, in three large volumes, the important work upon which he had labored since 1854. This work had two titles: the first, "Justice in the Revolution and in the Church;" the second, "New Principles of Practical Philosophy, addressed to His Highness Monseigneur Mathieu, Cardinal-Archbishop of Besancon." On the 27th of April, when there had scarcely been time to read the work, an order was issued by the magistrate for its seizure; on the 28th the seizure was effected. To this first act of the magistracy, the author of the incriminated book replied on the 11th of May in a strongly-motived petition, demanding a revision of the concordat of 1802; or, in other words, a new adjustment of the relations between Church and State. At bottom, this petition was but the logical consequence of the work itself. An edition of a thousand copies being published on the 17th of May, the "Petition to the Senate" was regarded by the public prosecutor as an aggravation of the offence or offences discovered in the body of the work to which it was an appendix, and was seized in its turn on the 23d. On the first of June, the author appealed to the Senate in a second "Petition," which was deposited with the first in the office of the Secretary of the Assembly, the guardian and guarantee, according to the constitution of 1852, of the principles of '89. On the 2d of June, the two processes being united, Proudhon appeared at the bar with his publisher, the printer of the book, and the printer of the petition, to receive the sentence of the police magistrate, which condemned him to three years' imprisonment, a fine of four thousand francs, and the suppression of his work. It is needless to say that the publisher and printers were also condemned by the sixth chamber. Proudhon lodged an appeal; he wrote a memoir which the law of 1819, in the absence of which he would have been liable to a new prosecution, gave him the power to publish previous to the hearing. Having decided to make use of the means which the law permitted, he urged in vain the printers who were prosecuted with him to lend him their aid. He then demanded of Attorney-General Chaix d'Est Ange a statement to the effect that the twenty-third article of the law of the 17th of May, 1819, allows a written defence, and that a printer runs no risk in printing it. The attorney-general flatly refused. Proudhon then started for Belgium, where he printed his defence, which could not, of course, cross the French frontier. This memoir is entitled to rank with the best of Beaumarchais's; it is entitled: "Justice prosecuted by the Church; An Appeal from the Sentence passed upon P. J. Proudhon by the Police Magistrate of the Seine, on the 2d of June, 1858." A very close discussion of the grounds of the judgment of the sixth chamber, it was at the same time an excellent resume of his great work. Once in Belgium, Proudhon did not fail to remain there. In 1859, after the general amnesty which followed the Italian war, he at first thought himself included in it. But the imperial government, consulted by his friends, notified him that, in its opinion, and in spite of the contrary advice of M. Faustin Helie, his condemnation was not of a political character. Proudhon, thus classed by the government with the authors of immoral works, thought it beneath his dignity to protest, and waited patiently for the advent of 1863 to allow him to return to France. In Belgium, where he was not slow in forming new friendships, he published in 1859-60, in separate parts, a new edition of his great work on "Justice." Each number contained, in addition to the original text carefully reviewed and corrected, numerous explanatory notes and some "Tidings of the Revolution." In these tidings, which form a sort of review of the progress of ideas in Europe, Proudhon sorrowfully asserts that, after having for a long time marched at the head of the progressive nations, France has become, without appearing to suspect it, the most retrogressive of nations; and he considers her more than once as seriously threatened with moral death. The Italian war led him to write a new work, which he published in 1861, entitled "War and Peace." This work, in which, running counter to a multitude of ideas accepted until then without examination, he pronounced for the first time against the restoration of an aristocratic and priestly Poland, and against the establishment of a unitary government in Italy, created for him a multitude of enemies. Most of his friends, disconcerted by his categorical affirmation of a right of force, notified him that they decidedly disapproved of his new publication. "You see," triumphantly cried those whom he had always combated, "this man is only a sophist." Led by his previous studies to test every thing by the question of right, Proudhon asks, in his "War and Peace," whether there is a real right of which war is the vindication, and victory the demonstration. This right, which he roughly calls the right of the strongest or the right of force, and which is, after all, only the right of the most worthy to the preference in certain definite cases, exists, says Proudhon, independently of war. It cannot be legitimately vindicated except where necessity clearly demands the subordination of one will to another, and within the limits in which it exists; that is, without ever involving the enslavement of one by the other. Among nations, the right of the majority, which is only a corollary of the right of force, is as unacceptable as universal monarchy. Hence, until equilibrium is established and recognized between States or national forces, there must be war. War, says Proudhon, is not always necessary to determine which side is the strongest; and he has no trouble in proving this by examples drawn from the family, the workshop, and elsewhere. Passing then to the study of war, he proves that it by no means corresponds in practice to that which it ought to be according to his theory of the right of force. The systematic horrors of war naturally lead him to seek a cause for it other than the vindication of this right; and then only does the economist take it upon himself to denounce this cause to those who, like himself, want peace. The necessity of finding abroad a compensation for the misery resulting in every nation from the absence of economical equilibrium, is, according to Proudhon, the ever real, though ever concealed, cause of war. The pages devoted to this demonstration and to his theory of poverty, which he clearly distinguishes from misery and pauperism, shed entirely new light upon the philosophy of history. As for the author's conclusion, it is a very simple one. Since the treaty of Westphalia, and especially since the treaties of 1815, equilibrium has been the international law of Europe. It remains now, not to destroy it, but, while maintaining it, to labor peacefully, in every nation protected by it, for the equilibrium of economical forces. The last line of the book, evidently written to check imperial ambition, is: "Humanity wants no more war." In 1861, after Garibaldi's expedition and the battle of Castelfidardo, Proudhon immediately saw that the establishment of Italian unity would be a severe blow to European equilibrium. It was chiefly in order to maintain this equilibrium that he pronounced so energetically in favor of Italian federation, even though it should be at first only a federation of monarchs. In vain was it objected that, in being established by France, Italian unity would break European equilibrium in our favor. Proudhon, appealing to history, showed that every State which breaks the equilibrium in its own favor only causes the other States to combine against it, and thereby diminishes its influence and power. He added that, nations being essentially selfish, Italy would not fail, when opportunity offered, to place her interest above her gratitude. To maintain European equilibrium by diminishing great States and multiplying small ones; to unite the latter in organized federations, not for attack, but for defence; and with these federations, which, if they were not republican already, would quickly become so, to hold in check the great military monarchies,--such, in the beginning of 1861, was the political programme of Proudhon. The object of the federations, he said, will be to guarantee, as far as possible, the beneficent reign of peace; and they will have the further effect of securing in every nation the triumph of liberty over despotism. Where the largest unitary State is, there liberty is in the greatest danger; further, if this State be democratic, despotism without the counterpoise of majorities is to be feared. With the federation, it is not so. The universal suffrage of the federal State is checked by the universal suffrage of the federated States; and the latter is offset in its turn by PROPERTY, the stronghold of liberty, which it tends, not to destroy, but to balance with the institutions of MUTUALISM. All these ideas, and many others which were only hinted at in his work on "War and Peace," were developed by Proudhon in his subsequent publications, one of which has for its motto, "Reforms always, Utopias never." The thinker had evidently finished his evolution. The Council of State of the canton of Vaud having offered prizes for essays on the question of taxation, previously discussed at a congress held at Lausanne, Proudhon entered the ranks and carried off the first prize. His memoir was published in 1861 under the title of "The Theory of Taxation." About the same time, he wrote at Brussels, in "L'Office de Publicite," some remarkable articles on the question of literary property, which was discussed at a congress held in Belgium, These articles must not be confounded with "Literary Majorats," a more complete work on the same subject, which was published in 1863, soon after his return to France. Arbitrarily excepted from the amnesty in 1859, Proudhon was pardoned two years later by a special act. He did not wish to take advantage of this favor, and seemed resolved to remain in Belgium until the 2d of June, 1863, the time when he was to acquire the privilege of prescription, when an absurd and ridiculous riot, excited in Brussels by an article published by him on federation and unity in Italy, induced him to hasten his return to France. Stones were thrown against the house in which he lived, in the Faubourg d'Ixelles. After having placed his wife and daughters in safety among his friends at Brussels, he arrived in Paris in September, 1862, and published there, "Federation and Italian Unity," a pamphlet which naturally commences with the article which served as a pretext for the rioters in Brussels. Among the works begun by Proudhon while in Belgium, which death did not allow him to finish, we ought to mention a "History of Poland," which will be published later; and, "The Theory of Property," which appeared in 1865, before "The Gospels Annotated," and after the volume entitled "The Principle of Art and its Social Destiny." The publications of Proudhon, in 1863, were: 1. "Literary Majorats: An Examination of a Bill having for its object the Creation of a Perpetual Monopoly for the Benefit of Authors, Inventors, and Artists;" 2. "The Federative Principle and the Necessity of Re-establishing the Revolutionary party;" 3. "The Sworn Democrats and the Refractories;" 4. "Whether the Treaties of 1815 have ceased to exist? Acts of the Future Congress." The disease which was destined to kill him grew worse and worse; but Proudhon labored constantly!... A series of articles, published in 1864 in "Le Messager de Paris," have been collected in a pamphlet under the title of "New Observations on Italian Unity." He hoped to publish during the same year his work on "The Political Capacity of the Working Classes," but was unable to write the last chapter.... He grew weaker continually. His doctor prescribed rest. In the month of August he went to Franche-Comte, where he spent a month. Having returned to Paris, he resumed his labor with difficulty.... From the month of December onwards, the heart disease made rapid progress; the oppression became insupportable, his legs were swollen, and he could not sleep.... On the 19th of January, 1865, he died, towards two o'clock in the morning, in the arms of his wife, his sister-in-law, and the friend who writes these lines.... The publication of his correspondence, to which his daughter Catherine is faithfully devoted, will tend, no doubt, to increase his reputation as a thinker, as a writer, and as an honest man. J. A. LANGLOIS. PREFACE. The following letter served as a preface to the first edition of this memoir:-- "To the Members of the Academy of Besancon "PARIS, June 30, 1840. "GENTLEMEN,--In the course of your debate of the 9th of May, 1833, in regard to the triennial pension established by Madame Suard, you expressed the following wish:-- "'The Academy requests the titulary to present it annually, during the first fortnight in July, with a succinct and logical statement of the various studies which he has pursued during the year which has just expired.' "I now propose, gentlemen, to discharge this duty. "When I solicited your votes, I boldly avowed my intention to bend my efforts to the discovery of some means of AMELIORATING THE PHYSICAL, MORAL, AND INTELLECTUAL CONDITION OF THE MERE NUMEROUS AND POORER CLASSES. This idea, foreign as it may have seemed to the object of my candidacy, you received favorably; and, by the precious distinction with which it has been your pleasure to honor me, you changed this formal offer into an inviolable and sacred obligation. Thenceforth I understood with how worthy and honorable a society I had to deal: my regard for its enlightenment, my recognition of its benefits, my enthusiasm for its glory, were unbounded. "Convinced at once that, in order to break loose from the beaten paths of opinions and systems, it was necessary to proceed in my study of man and society by scientific methods, and in a rigorous manner, I devoted one year to philology and grammar; linguistics, or the natural history of speech, being, of all the sciences, that which was best suited to the character of my mind, seemed to bear the closest relation to the researches which I was about to commence. A treatise, written at this period upon one of the most interesting questions of comparative grammar,[2] if it did not reveal the astonishing success, at least bore witness to the thoroughness, of my labors. "Since that time, metaphysics and moral science have been my only studies; my perception of the fact that these sciences, though badly defined as to their object and not confined to their sphere, are, like the natural sciences, susceptible of demonstration and certainty, has already rewarded my efforts. "But, gentlemen, of all the masters whom I have followed, to none do I owe so much as to you. Your co-operation, your programmes, your instructions, in agreement with my secret wishes and most cherished hopes, have at no time failed to enlighten me and to point out my road; this memoir on property is the child of your thought. "In 1838, the Academy of Besancon proposed the following question: TO WHAT CAUSES MUST WE ATTRIBUTE THE CONTINUALLY INCREASING NUMBER OF SUICIDES, AND WHAT ARE THE PROPER MEANS FOR ARRESTING THE EFFECTS OF THIS MORAL CONTAGION? "Thereby it asked, in less general terms, what was the cause of the social evil, and what was its remedy? You admitted that yourselves, gentlemen when your committee reported that the competitors had enumerated with exactness the immediate and particular causes of suicide, as well as the means of preventing each of them; but that from this enumeration, chronicled with more or less skill, no positive information had been gained, either as to the primary cause of the evil, or as to its remedy. "In 1839, your programme, always original and varied in its academical expression, became more exact. The investigations of 1838 had pointed out, as the causes or rather as the symptoms of the social malady, the neglect of the principles of religion and morality, the desire for wealth, the passion for enjoyment, and political disturbances. All these data were embodied by you in a single proposition: _THE UTILITY OF THE CELEBRATION OF SUNDAY AS REGARDS HYGIENE, MORALITY, AND SOCIAL AND POLITICAL RELATION_. "In a Christian tongue you asked, gentlemen, what was the true system of society. A competitor [3] dared to maintain, and believed that he had proved, that the institution of a day of rest at weekly intervals is inseparably bound up with a political system based on the equality of conditions; that without equality this institution is an anomaly and an impossibility: that equality alone can revive this ancient and mysterious keeping of the seventh day. This argument did not meet with your approbation, since, without denying the relation pointed out by the competitor, you judged, and rightly gentlemen, that the principle of equality of conditions not being demonstrated, the ideas of the author were nothing more than hypotheses. "Finally, gentlemen, this fundamental principle of equality you presented for competition in the following terms: THE ECONOMICAL AND MORAL CONSEQUENCES IN FRANCE UP TO THE PRESENT TIME, AND THOSE WHICH SEEM LIKELY TO APPEAR IN FUTURE, OF THE LAW CONCERNING THE EQUAL DIVISION OF HEREDITARY PROPERTY BETWEEN THE CHILDREN. "Instead of confining one to common places without breadth or significance, it seems to me that your question should be developed as follows:-- "If the law has been able to render the right of heredity common to all the children of one father, can it not render it equal for all his grandchildren and great-grandchildren? "If the law no longer heeds the age of any member of the family, can it not, by the right of heredity, cease to heed it in the race, in the tribe, in the nation? "Can equality, by the right of succession, be preserved between citizens, as well as between cousins and brothers? In a word, can the principle of succession become a principle of equality? "To sum up all these ideas in one inclusive question: What is the principle of heredity? What are the foundations of inequality? What is property? "Such, gentlemen, is the object of the memoir that I offer you to day. "If I have rightly grasped the object of your thought; if I succeed in bringing to light a truth which is indisputable, but, from causes which I am bold enough to claim to have explained, has always been misunderstood; if by an infallible method of investigation, I establish the dogma of equality of conditions; if I determine the principle of civil law, the essence of justice, and the form of society; if I annihilate property forever,--to you, gentlemen, will redound all the glory, for it is to your aid and your inspiration that I owe it. "My purpose in this work is the application of method to the problems of philosophy; every other intention is foreign to and even abusive of it. "I have spoken lightly of jurisprudence: I had the right; but I should be unjust did I not distinguish between this pretended science and the men who practise it. Devoted to studies both laborious and severe, entitled in all respects to the esteem of their fellow-citizens by their knowledge and eloquence our legists deserve but one reproach, that of an excessive deference to arbitrary laws. "I have been pitiless in my criticism of the economists: for them I confess that, in general, I have no liking. The arrogance and the emptiness of their writings, their impertinent pride and their unwarranted blunders, have disgusted me. Whoever, knowing them, pardons them, may read them. "I have severely blamed the learned Christian Church: it was my duty. This blame results from the facts which I call attention to: why has the Church decreed concerning things which it does not understand? The Church has erred in dogma and in morals; physics and mathematics testify against her. It may be wrong for me to say it, but surely it is unfortunate for Christianity that it is true. To restore religion, gentlemen, it is necessary to condemn the Church. "Perhaps you will regret, gentlemen, that, in giving all my attention to method and evidence, I have too much neglected form and style: in vain should I have tried to do better. Literary hope and faith I have none. The nineteenth century is, in my eyes, a genesic era, in which new principles are elaborated, but in which nothing that is written shall endure. That is the reason, in my opinion, why, among so many men of talent, France to-day counts not one great writer. In a society like ours, to seek for literary glory seems to me an anachronism. Of what use is it to invoke an ancient sibyl when a muse is on the eve of birth? Pitiable actors in a tragedy nearing its end, that which it behooves us to do is to precipitate the catastrophe. The most deserving among us is he who plays best this part. Well, I no longer aspire to this sad success! "Why should I not confess it, gentlemen? I have aspired to your suffrages and sought the title of your pensioner, hating all which exists and full of projects for its destruction; I shall finish this investigation in a spirit of calm and philosophical resignation. I have derived more peace from the knowledge of the truth, than anger from the feeling of oppression; and the most precious fruit that I could wish to gather from this memoir would be the inspiration of my readers with that tranquillity of soul which arises from the clear perception of evil and its cause, and which is much more powerful than passion and enthusiasm. My hatred of privilege and human authority was unbounded; perhaps at times I have been guilty, in my indignation, of confounding persons and things; at present I can only despise and complain; to cease to hate I only needed to know. "It is for you now, gentlemen, whose mission and character are the proclamation of the truth, it is for you to instruct the people, and to tell them for what they ought to hope and what they ought to fear. The people, incapable as yet of sound judgment as to what is best for them, applaud indiscriminately the most opposite ideas, provided that in them they get a taste of flattery: to them the laws of thought are like the confines of the possible; to-day they can no more distinguish between a savant and a sophist, than formerly they could tell a physician from a sorcerer. 'Inconsiderately accepting, gathering together, and accumulating everything that is new, regarding all reports as true and indubitable, at the breath or ring of novelty they assemble like bees at the sound of a basin.' [4] "May you, gentlemen, desire equality as I myself desire it; may you, for the eternal happiness of our country, become its propagators and its heralds; may I be the last of your pensioners! Of all the wishes that I can frame, that, gentlemen, is the most worthy of you and the most honorable for me. "I am, with the profoundest respect and the most earnest gratitude, "Your pensioner, "P. J. PROUDHON." Two months after the receipt of this letter, the Academy, in its debate of August 24th, replied to the address of its pensioner by a note, the text of which I give below:-- "A member calls the attention of the Academy to a pamphlet, published last June by the titulary of the Suard pension, entitled, "What is property?" and dedicated by the author to the Academy. He is of the opinion that the society owes it to justice, to example, and to its own dignity, to publicly disavow all responsibility for the anti-social doctrines contained in this publication. In consequence he demands: "1. That the Academy disavow and condemn, in the most formal manner, the work of the Suard pensioner, as having been published without its assent, and as attributing to it opinions diametrically opposed to the principles of each of its members; "2. That the pensioner be charged, in case he should publish a second edition of his book, to omit the dedication; "3. That this judgment of the Academy be placed upon the records. "These three propositions, put to vote, are adopted." After this ludicrous decree, which its authors thought to render powerful by giving it the form of a contradiction, I can only beg the reader not to measure the intelligence of my compatriots by that of our Academy. While my patrons in the social and political sciences were fulminating anathemas against my brochure, a man, who was a stranger to Franche-Comte, who did not know me, who might even have regarded himself as personally attacked by the too sharp judgment which I had passed upon the economists, a publicist as learned as he was modest, loved by the people whose sorrows he felt, honored by the power which he sought to enlighten without flattering or disgracing it, M. Blanqui--member of the Institute, professor of political economy, defender of property--took up my defence before his associates and before the ministry, and saved me from the blows of a justice which is always blind, because it is always ignorant. It seems to me that the reader will peruse with pleasure the letter which M. Blanqui did me the honor to write to me upon the publication of my second memoir, a letter as honorable to its author as it is flattering to him to whom it is addressed. "PARIS, May 1, 1841. "MONSIEUR,--I hasten to thank you for forwarding to me your second memoir upon property. I have read it with all the interest that an acquaintance with the first would naturally inspire. I am very glad that you have modified somewhat the rudeness of form which gave to a work of such gravity the manner and appearance of a pamphlet; for you quite frightened me, sir, and your talent was needed to reassure me in regard to your intentions. One does not expend so much real knowledge with the purpose of inflaming his country. This proposition, now coming into notice--PROPERTY IS ROBBERY!--was of a nature to repel from your book even those serious minds who do not judge by appearances, had you persisted in maintaining it in its rude simplicity. But if you have softened the form, you are none the less faithful to the ground-work of your doctrines; and although you have done me the honor to give me a share in this perilous teaching, I cannot accept a partnership which, as far as talent goes, would surely be a credit to me, but which would compromise me in all other respects. "I agree with you in one thing only; namely, that all kinds of property get too frequently abused in this world. But I do not reason from the abuse to the abolition,--an heroic remedy too much like death, which cures all evils. I will go farther: I will confess that, of all abuses, the most hateful to me are those of property; but once more, there is a remedy for this evil without violating it, all the more without destroying it. If the present laws allow abuse, we can reconstruct them. Our civil code is not the Koran; it is not wrong to examine it. Change, then, the laws which govern the use of property, but be sparing of anathemas; for, logically, where is the honest man whose hands are entirely clean? Do you think that one can be a robber without knowing it, without wishing it, without suspecting it? Do you not admit that society in its present state, like every man, has in its constitution all kinds of virtues and vices inherited from our ancestors? Is property, then, in your eyes a thing so simple and so abstract that you can re-knead and equalize it, if I may so speak, in your metaphysical mill? One who has said as many excellent and practical things as occur in these two beautiful and paradoxical improvisations of yours cannot be a pure and unwavering utopist. You are too well acquainted with the economical and academical phraseology to play with the hard words of revolutions. I believe, then, that you have handled property as Rousseau, eighty years ago, handled letters, with a magnificent and poetical display of wit and knowledge. Such, at least, is my opinion. "That is what I said to the Institute at the time when I presented my report upon your book. I knew that they wished to proceed against you in the courts; you perhaps do not know by how narrow a chance I succeeded in preventing them. [5] What chagrin I should always have felt, if the king's counsel, that is to say, the intellectual executioner, had followed in my very tracks to attack your book and annoy your person! I actually passed two terrible nights, and I succeeded in restraining the secular arm only by showing that your book was an academical dissertation, and not the manifesto of an incendiary. Your style is too lofty ever to be of service to the madmen who in discussing the gravest questions of our social order, use paving-stones as their weapons. But see to it, sir, that ere long they do not come, in spite of you, to seek for ammunition in this formidable arsenal, and that your vigorous metaphysics falls not into the hands of some sophist of the market-place, who might discuss the question in the presence of a starving audience: we should have pillage for conclusion and peroration. "I feel as deeply as you, sir, the abuses which you point out; but I have so great an affection for order,--not that common and strait-laced order with which the police are satisfied, but the majestic and imposing order of human societies,--that I sometimes find myself embarrassed in attacking certain abuses. I like to rebuild with one hand when I am compelled to destroy with the other. In pruning an old tree, we guard against destruction of the buds and fruit. You know that as well as any one. You are a wise and learned man; you have a thoughtful mind. The terms by which you characterize the fanatics of our day are strong enough to reassure the most suspicious imaginations as to your intentions; but you conclude in favor of the abolition of property! You wish to abolish the most powerful motor of the human mind; you attack the paternal sentiment in its sweetest illusions; with one word you arrest the formation of capital, and we build henceforth upon the sand instead of on a rock. That I cannot agree to; and for that reason I have criticised your book, so full of beautiful pages, so brilliant with knowledge and fervor! "I wish, sir, that my impaired health would permit me to examine with you, page by page, the memoir which you have done me the honor to address to me publicly and personally; I think I could offer some important criticisms. For the moment, I must content myself with thanking you for the kind words in which you have seen fit to speak of me. We each possess the merit of sincerity; I desire also the merit of prudence. You know how deep-seated is the disease under which the working-people are suffering; I know how many noble hearts beat under those rude garments, and I feel an irresistible and fraternal sympathy with the thousands of brave people who rise early in the morning to labor, to pay their taxes, and to make our country strong. I try to serve and enlighten them, whereas some endeavor to mislead them. You have not written directly for them. You have issued two magnificent manifestoes, the second more guarded than the first; issue a third more guarded than the second, and you will take high rank in science, whose first precept is calmness and impartiality. "Farewell, sir! No man's esteem for another can exceed mine for you. "BLANQUI." I should certainly take some exceptions to this noble and eloquent letter; but I confess that I am more inclined to realize the prediction with which it terminates than to augment needlessly the number of my antagonists. So much controversy fatigues and wearies me. The intelligence expended in the warfare of words is like that employed in battle: it is intelligence wasted. M. Blanqui acknowledges that property is abused in many harmful ways; I call PROPERTY the sum these abuses exclusively. To each of us property seems a polygon whose angles need knocking off; but, the operation performed, M. Blanqui maintains that the figure will still be a polygon (an hypothesis admitted in mathematics, although not proven), while I consider that this figure will be a circle. Honest people can at least understand one another. For the rest, I allow that, in the present state of the question, the mind may legitimately hesitate before deciding in favor of the abolition of property. To gain the victory for one's cause, it does not suffice simply to overthrow a principle generally recognized, which has the indisputable merit of systematically recapitulating our political theories; it is also necessary to establish the opposite principle, and to formulate the system which must proceed from it. Still further, it is necessary to show the method by which the new system will satisfy all the moral and political needs which induced the establishment of the first. On the following conditions, then, of subsequent evidence, depends the correctness of my preceding arguments:-- The discovery of a system of absolute equality in which all existing institutions, save property, or the sum of the abuses of property, not only may find a place, but may themselves serve as instruments of equality: individual liberty, the division of power, the public ministry, the jury system, administrative and judicial organization, the unity and completeness of instruction, marriage, the family, heredity in direct and collateral succession, the right of sale and exchange, the right to make a will, and even birthright,--a system which, better than property, guarantees the formation of capital and keeps up the courage of all; which, from a superior point of view, explains, corrects, and completes the theories of association hitherto proposed, from Plato and Pythagoras to Babeuf, Saint Simon, and Fourier; a system, finally, which, serving as a means of transition, is immediately applicable. A work so vast requires, I am aware, the united efforts of twenty Montesquieus; nevertheless, if it is not given to a single man to finish, a single one can commence, the enterprise. The road that he shall traverse will suffice to show the end and assure the result. WHAT IS PROPERTY? OR, AN INQUIRY INTO THE PRINCIPLE OF RIGHT AND OF GOVERNMENT. FIRST MEMOIR. _Adversus hostem aeterna auctertas esto._ Against the enemy, revendication is eternal. LAW OF THE TWELVE TABLES. CHAPTER I. METHOD PURSUED IN THIS WORK.--THE IDEA OF A REVOLUTION. If I were asked to answer the following question: WHAT IS SLAVERY? and I should answer in one word, IT IS MURDER, my meaning would be understood at once. No extended argument would be required to show that the power to take from a man his thought, his will, his personality, is a power of life and death; and that to enslave a man is to kill him. Why, then, to this other question: WHAT IS PROPERTY! may I not likewise answer, IT IS ROBBERY, without the certainty of being misunderstood; the second proposition being no other than a transformation of the first? I undertake to discuss the vital principle of our government and our institutions, property: I am in my right. I may be mistaken in the conclusion which shall result from my investigations: I am in my right. I think best to place the last thought of my book first: still am I in my right. Such an author teaches that property is a civil right, born of occupation and sanctioned by law; another maintains that it is a natural right, originating in labor,--and both of these doctrines, totally opposed as they may seem, are encouraged and applauded. I contend that neither labor, nor occupation, nor law, can create property; that it is an effect without a cause: am I censurable? But murmurs arise! PROPERTY IS ROBBERY! That is the war-cry of '93! That is the signal of revolutions! Reader, calm yourself: I am no agent of discord, no firebrand of sedition. I anticipate history by a few days; I disclose a truth whose development we may try in vain to arrest; I write the preamble of our future constitution. This proposition which seems to you blasphemous--PROPERTY IS ROBBERY--would, if our prejudices allowed us to consider it, be recognized as the lightning-rod to shield us from the coming thunderbolt; but too many interests stand in the way!... Alas! philosophy will not change the course of events: destiny will fulfill itself regardless of prophecy. Besides, must not justice be done and our education be finished? PROPERTY IS ROBBERY!... What a revolution in human ideas! PROPRIETOR and ROBBER have been at all times expressions as contradictory as the beings whom they designate are hostile; all languages have perpetuated this opposition. On what authority, then, do you venture to attack universal consent, and give the lie to the human race? Who are you, that you should question the judgment of the nations and the ages? Of what consequence to you, reader, is my obscure individuality? I live, like you, in a century in which reason submits only to fact and to evidence. My name, like yours, is TRUTH-SEEKER. [6] My mission is written in these words of the law: SPEAK WITHOUT HATRED AND WITHOUT FEAR; TELL THAT WHICH THOU KNOWEST! The work of our race is to build the temple of science, and this science includes man and Nature. Now, truth reveals itself to all; to-day to Newton and Pascal, tomorrow to the herdsman in the valley and the journeyman in the shop. Each one contributes his stone to the edifice; and, his task accomplished, disappears. Eternity precedes us, eternity follows us: between two infinites, of what account is one poor mortal that the century should inquire about him? Disregard then, reader, my title and my character, and attend only to my arguments. It is in accordance with universal consent that I undertake to correct universal error; from the OPINION of the human race I appeal to its FAITH. Have the courage to follow me; and, if your will is untrammelled, if your conscience is free, if your mind can unite two propositions and deduce a third therefrom, my ideas will inevitably become yours. In beginning by giving you my last word, it was my purpose to warn you, not to defy you; for I am certain that, if you read me, you will be compelled to assent. The things of which I am to speak are so simple and clear that you will be astonished at not having perceived them before, and you will say: "I have neglected to think." Others offer you the spectacle of genius wresting Nature's secrets from her, and unfolding before you her sublime messages; you will find here only a series of experiments upon JUSTICE and RIGHT a sort of verification of the weights and measures of your conscience. The operations shall be conducted under your very eyes; and you shall weigh the result. Nevertheless, I build no system. I ask an end to privilege, the abolition of slavery, equality of rights, and the reign of law. Justice, nothing else; that is the alpha and omega of my argument: to others I leave the business of governing the world. One day I asked myself: Why is there so much sorrow and misery in society? Must man always be wretched? And not satisfied with the explanations given by the reformers,--these attributing the general distress to governmental cowardice and incapacity, those to conspirators and emeutes, still others to ignorance and general corruption,--and weary of the interminable quarrels of the tribune and the press, I sought to fathom the matter myself. I have consulted the masters of science; I have read a hundred volumes of philosophy, law, political economy, and history: would to God that I had lived in a century in which so much reading had been useless! I have made every effort to obtain exact information, comparing doctrines, replying to objections, continually constructing equations and reductions from arguments, and weighing thousands of syllogisms in the scales of the most rigorous logic. In this laborious work, I have collected many interesting facts which I shall share with my friends and the public as soon as I have leisure. But I must say that I recognized at once that we had never understood the meaning of these words, so common and yet so sacred: JUSTICE, EQUITY, LIBERTY; that concerning each of these principles our ideas have been utterly obscure; and, in fact, that this ignorance was the sole cause, both of the poverty that devours us, and of all the calamities that have ever afflicted the human race. My mind was frightened by this strange result: I doubted my reason. What! said I, that which eye has not seen, nor ear heard, nor insight penetrated, you have discovered! Wretch, mistake not the visions of your diseased brain for the truths of science! Do you not know (great philosophers have said so) that in points of practical morality universal error is a contradiction? I resolved then to test my arguments; and in entering upon this new labor I sought an answer to the following questions: Is it possible that humanity can have been so long and so universally mistaken in the application of moral principles? How and why could it be mistaken? How can its error, being universal, be capable of correction? These questions, on the solution of which depended the certainty of my conclusions, offered no lengthy resistance to analysis. It will be seen, in chapter V. of this work, that in morals, as in all other branches of knowledge, the gravest errors are the dogmas of science; that, even in works of justice, to be mistaken is a privilege which ennobles man; and that whatever philosophical merit may attach to me is infinitely small. To name a thing is easy: the difficulty is to discern it before its appearance. In giving expression to the last stage of an idea,--an idea which permeates all minds, which to-morrow will be proclaimed by another if I fail to announce it to-day,--I can claim no merit save that of priority of utterance. Do we eulogize the man who first perceives the dawn? Yes: all men believe and repeat that equality of conditions is identical with equality of rights; that PROPERTY and ROBBERY are synonymous terms; that every social advantage accorded, or rather usurped, in the name of superior talent or service, is iniquity and extortion. All men in their hearts, I say, bear witness to these truths; they need only to be made to understand it. Before entering directly upon the question before me, I must say a word of the road that I shall traverse. When Pascal approached a geometrical problem, he invented a method of solution; to solve a problem in philosophy a method is equally necessary. Well, by how much do the problems of which philosophy treats surpass in the gravity of their results those discussed by geometry! How much more imperatively, then, do they demand for their solution a profound and rigorous analysis! It is a fact placed for ever beyond doubt, say the modern psychologists, that every perception received by the mind is determined by certain general laws which govern the mind; is moulded, so to speak, in certain types pre-existing in our understanding, and which constitutes its original condition. Hence, say they, if the mind has no innate IDEAS, it has at least innate FORMS. Thus, for example, every phenomenon is of necessity conceived by us as happening in TIME and SPACE,--that compels us to infer a CAUSE of its occurrence; every thing which exists implies the ideas of SUBSTANCE, MODE, RELATION, NUMBER, &C.; in a word, we form no idea which is not related to some one of the general principles of reason, independent of which nothing exists. These axioms of the understanding, add the psychologists, these fundamental types, by which all our judgments and ideas are inevitably shaped, and which our sensations serve only to illuminate, are known in the schools as CATEGORIES. Their primordial existence in the mind is to-day demonstrated; they need only to be systematized and catalogued. Aristotle recognized ten; Kant increased the number to fifteen; M. Cousin has reduced it to three, to two, to one; and the indisputable glory of this professor will be due to the fact that, if he has not discovered the true theory of categories, he has, at least, seen more clearly than any one else the vast importance of this question,--the greatest and perhaps the only one with which metaphysics has to deal. I confess that I disbelieve in the innateness, not only of IDEAS, but also of FORMS or LAWS of our understanding; and I hold the metaphysics of Reid and Kant to be still farther removed from the truth than that of Aristotle. However, as I do not wish to enter here into a discussion of the mind, a task which would demand much labor and be of no interest to the public, I shall admit the hypothesis that our most general and most necessary ideas--such as time, space, substance, and cause--exist originally in the mind; or, at least, are derived immediately from its constitution. But it is a psychological fact none the less true, and one to which the philosophers have paid too little attention, that habit, like a second nature, has the power of fixing in the mind new categorical forms derived from the appearances which impress us, and by them usually stripped of objective reality, but whose influence over our judgments is no less predetermining than that of the original categories. Hence we reason by the ETERNAL and ABSOLUTE laws of our mind, and at the same time by the secondary rules, ordinarily faulty, which are suggested to us by imperfect observation. This is the most fecund source of false prejudices, and the permanent and often invincible cause of a multitude of errors. The bias resulting from these prejudices is so strong that often, even when we are fighting against a principle which our mind thinks false, which is repugnant to our reason, and which our conscience disapproves, we defend it without knowing it, we reason in accordance with it, and we obey it while attacking it. Enclosed within a circle, our mind revolves about itself, until a new observation, creating within us new ideas, brings to view an external principle which delivers us from the phantom by which our imagination is possessed. Thus, we know to-day that, by the laws of a universal magnetism whose cause is still unknown, two bodies (no obstacle intervening) tend to unite by an accelerated impelling force which we call GRAVITATION. It is gravitation which causes unsupported bodies to fall to the ground, which gives them weight, and which fastens us to the earth on which we live. Ignorance of this cause was the sole obstacle which prevented the ancients from believing in the antipodes. "Can you not see," said St. Augustine after Lactantius, "that, if there were men under our feet, their heads would point downward, and that they would fall into the sky?" The bishop of Hippo, who thought the earth flat because it appeared so to the eye, supposed in consequence that, if we should connect by straight lines the zenith with the nadir in different places, these lines would be parallel with each other; and in the direction of these lines he traced every movement from above to below. Thence he naturally concluded that the stars were rolling torches set in the vault of the sky; that, if left to themselves, they would fall to the earth in a shower of fire; that the earth was one vast plain, forming the lower portion of the world, &c. If he had been asked by what the world itself was sustained, he would have answered that he did not know, but that to God nothing is impossible. Such were the ideas of St. Augustine in regard to space and movement, ideas fixed within him by a prejudice derived from an appearance, and which had become with him a general and categorical rule of judgment. Of the reason why bodies fall his mind knew nothing; he could only say that a body falls because it falls. With us the idea of a fall is more complex: to the general ideas of space and movement which it implies, we add that of attraction or direction towards a centre, which gives us the higher idea of cause. But if physics has fully corrected our judgment in this respect, we still make use of the prejudice of St. Augustine; and when we say that a thing has FALLEN, we do not mean simply and in general that there has been an effect of gravitation, but specially and in particular that it is towards the earth, and FROM ABOVE TO BELOW, that this movement has taken place. Our mind is enlightened in vain; the imagination prevails, and our language remains forever incorrigible. To DESCEND FROM HEAVEN is as incorrect an expression as to MOUNT TO HEAVEN; and yet this expression will live as long as men use language. All these phrases--FROM ABOVE TO BELOW; TO DESCEND FROM HEAVEN; TO FALL FROM THE CLOUDS, &C.--are henceforth harmless, because we know how to rectify them in practice; but let us deign to consider for a moment how much they have retarded the progress of science. If, indeed, it be a matter of little importance to statistics, mechanics, hydrodynamics, and ballistics, that the true cause of the fall of bodies should be known, and that our ideas of the general movements in space should be exact, it is quite otherwise when we undertake to explain the system of the universe, the cause of tides, the shape of the earth, and its position in the heavens: to understand these things we must leave the circle of appearances. In all ages there have been ingenious mechanicians, excellent architects, skilful artillerymen: any error, into which it was possible for them to fall in regard to the rotundity of the earth and gravitation, in no wise retarded the development of their art; the solidity of their buildings and accuracy of their aim was not affected by it. But sooner or later they were forced to grapple with phenomena, which the supposed parallelism of all perpendiculars erected from the earth's surface rendered inexplicable: then also commenced a struggle between the prejudices, which for centuries had sufficed in daily practice, and the unprecedented opinions which the testimony of the eyes seemed to contradict. Thus, on the one hand, the falsest judgments, whether based on isolated facts or only on appearances, always embrace some truths whose sphere, whether large or small, affords room for a certain number of inferences, beyond which we fall into absurdity. The ideas of St. Augustine, for example, contained the following truths: that bodies fall towards the earth, that they fall in a straight line, that either the sun or the earth moves, that either the sky or the earth turns, &c. These general facts always have been true; our science has added nothing to them. But, on the other hand, it being necessary to account for every thing, we are obliged to seek for principles more and more comprehensive: that is why we have had to abandon successively, first the opinion that the world was flat, then the theory which regards it as the stationary centre of the universe, &c. If we pass now from physical nature to the moral world, we still find ourselves subject to the same deceptions of appearance, to the same influences of spontaneity and habit. But the distinguishing feature of this second division of our knowledge is, on the one hand, the good or the evil which we derive from our opinions; and, on the other, the obstinacy with which we defend the prejudice which is tormenting and killing us. Whatever theory we embrace in regard to the shape of the earth and the cause of its weight, the physics of the globe does not suffer; and, as for us, our social economy can derive therefrom neither profit nor damage. But it is in us and through us that the laws of our moral nature work; now, these laws cannot be executed without our deliberate aid, and, consequently, unless we know them. If, then, our science of moral laws is false, it is evident that, while desiring our own good, we are accomplishing our own evil; if it is only incomplete, it may suffice for a time for our social progress, but in the long run it will lead us into a wrong road, and will finally precipitate us into an abyss of calamities. Then it is that we need to exercise our highest judgments; and, be it said to our glory, they are never found wanting: but then also commences a furious struggle between old prejudices and new ideas. Days of conflagration and anguish! We are told of the time when, with the same beliefs, with the same institutions, all the world seemed happy: why complain of these beliefs; why banish these institutions? We are slow to admit that that happy age served the precise purpose of developing the principle of evil which lay dormant in society; we accuse men and gods, the powers of earth and the forces of Nature. Instead of seeking the cause of the evil in his mind and heart, man blames his masters, his rivals, his neighbors, and himself; nations arm themselves, and slay and exterminate each other, until equilibrium is restored by the vast depopulation, and peace again arises from the ashes of the combatants. So loath is humanity to touch the customs of its ancestors, and to change the laws framed by the founders of communities, and confirmed by the faithful observance of the ages. _Nihil motum ex antiquo probabile est_: Distrust all innovations, wrote Titus Livius. Undoubtedly it would be better were man not compelled to change: but what! because he is born ignorant, because he exists only on condition of gradual self-instruction, must he abjure the light, abdicate his reason, and abandon himself to fortune? Perfect health is better than convalescence: should the sick man, therefore, refuse to be cured? Reform, reform! cried, ages since, John the Baptist and Jesus Christ. Reform, reform! cried our fathers, fifty years ago; and for a long time to come we shall shout, Reform, reform! Seeing the misery of my age, I said to myself: Among the principles that support society, there is one which it does not understand, which its ignorance has vitiated, and which causes all the evil that exists. This principle is the most ancient of all; for it is a characteristic of revolutions to tear down the most modern principles, and to respect those of long-standing. Now the evil by which we suffer is anterior to all revolutions. This principle, impaired by our ignorance, is honored and cherished; for if it were not cherished it would harm nobody, it would be without influence. But this principle, right in its purpose, but misunderstood: this principle, as old as humanity, what is it? Can it be religion? All men believe in God: this dogma belongs at once to their conscience and their mind. To humanity God is a fact as primitive, an idea as inevitable, a principle as necessary as are the categorical ideas of cause, substance, time, and space to our understanding. God is proven to us by the conscience prior to any inference of the mind; just as the sun is proven to us by the testimony of the senses prior to all the arguments of physics. We discover phenomena and laws by observation and experience; only this deeper sense reveals to us existence. Humanity believes that God is; but, in believing in God, what does it believe? In a word, what is God? The nature of this notion of Divinity,--this primitive, universal notion, born in the race,--the human mind has not yet fathomed. At each step that we take in our investigation of Nature and of causes, the idea of God is extended and exalted; the farther science advances, the more God seems to grow and broaden. Anthropomorphism and idolatry constituted of necessity the faith of the mind in its youth, the theology of infancy and poesy. A harmless error, if they had not endeavored to make it a rule of conduct, and if they had been wise enough to respect the liberty of thought. But having made God in his own image, man wished to appropriate him still farther; not satisfied with disfiguring the Almighty, he treated him as his patrimony, his goods, his possessions. God, pictured in monstrous forms, became throughout the world the property of man and of the State. Such was the origin of the corruption of morals by religion, and the source of pious feuds and holy wars. Thank Heaven! we have learned to allow every one his own beliefs; we seek for moral laws outside the pale of religion. Instead of legislating as to the nature and attributes of God, the dogmas of theology, and the destiny of our souls, we wisely wait for science to tell us what to reject and what to accept. God, soul, religion,--eternal objects of our unwearied thought and our most fatal aberrations, terrible problems whose solution, for ever attempted, for ever remains unaccomplished,--concerning all these questions we may still be mistaken, but at least our error is harmless. With liberty in religion, and the separation of the spiritual from the temporal power, the influence of religious ideas upon the progress of society is purely negative; no law, no political or civil institution being founded on religion. Neglect of duties imposed by religion may increase the general corruption, but it is not the primary cause; it is only an auxiliary or result. It is universally admitted, and especially in the matter which now engages our attention, that the cause of the inequality of conditions among men--of pauperism, of universal misery, and of governmental embarrassments--can no longer be traced to religion: we must go farther back, and dig still deeper. But what is there in man older and deeper than the religious sentiment? There is man himself; that is, volition and conscience, free-will and law, eternally antagonistic. Man is at war with himself: why? "Man," say the theologians, "transgressed in the beginning; our race is guilty of an ancient offence. For this transgression humanity has fallen; error and ignorance have become its sustenance. Read history, you will find universal proof of this necessity for evil in the permanent misery of nations. Man suffers and always will suffer; his disease is hereditary and constitutional. Use palliatives, employ emollients; there is no remedy." Nor is this argument peculiar to the theologians; we find it expressed in equivalent language in the philosophical writings of the materialists, believers in infinite perfectibility. Destutt de Tracy teaches formally that poverty, crime, and war are the inevitable conditions of our social state; necessary evils, against which it would be folly to revolt. So, call it NECESSITY OF EVIL or ORIGINAL DEPRAVITY, it is at bottom the same philosophy. "The first man transgressed." If the votaries of the Bible interpreted it faithfully, they would say: MAN ORIGINALLY TRANSGRESSED, that is, made a mistake; for TO TRANSGRESS, TO FAIL, TO MAKE A MISTAKE, all mean the same thing. "The consequences of Adam's transgression are inherited by the race; the first is ignorance." Truly, the race, like the individual, is born ignorant; but, in regard to a multitude of questions, even in the moral and political spheres, this ignorance of the race has been dispelled: who says that it will not depart altogether? Mankind makes continual progress toward truth, and light ever triumphs over darkness. Our disease is not, then, absolutely incurable, and the theory of the theologians is worse than inadequate; it is ridiculous, since it is reducible to this tautology: "Man errs, because he errs." While the true statement is this: "Man errs, because he learns." Now, if man arrives at a knowledge of all that he needs to know, it is reasonable to believe that, ceasing to err, he will cease to suffer. But if we question the doctors as to this law, said to be engraved upon the heart of man, we shall immediately see that they dispute about a matter of which they know nothing; that, concerning the most important questions, there are almost as many opinions as authors; that we find no two agreeing as to the best form of government, the principle of authority, and the nature of right; that all sail hap-hazard upon a shoreless and bottomless sea, abandoned to the guidance of their private opinions which they modestly take to be right reason. And, in view of this medley of contradictory opinions, we say: "The object of our investigations is the law, the determination of the social principle. Now, the politicians, that is, the social scientists, do not understand each other; then the error lies in themselves; and, as every error has a reality for its object, we must look in their books to find the truth which they have unconsciously deposited there." Now, of what do the lawyers and the publicists treat? Of JUSTICE, EQUITY, LIBERTY, NATURAL LAW, CIVIL LAWS, &c. But what is justice? What is its principle, its character, its formula? To this question our doctors evidently have no reply; for otherwise their science, starting with a principle clear and well defined, would quit the region of probabilities, and all disputes would end. What is justice? The theologians answer: "All justice comes from God." That is true; but we know no more than before. The philosophers ought to be better informed: they have argued so much about justice and injustice! Unhappily, an examination proves that their knowledge amounts to nothing, and that with them--as with the savages whose every prayer to the sun is simply _O! O!_--it is a cry of admiration, love, and enthusiasm; but who does not know that the sun attaches little meaning to the interjection O! That is exactly our position toward the philosophers in regard to justice. Justice, they say, is a DAUGHTER OF HEAVEN; A LIGHT WHICH ILLUMINES EVERY MAN THAT COMES INTO THE WORLD; THE MOST BEAUTIFUL PREROGATIVE OF OUR NATURE; THAT WHICH DISTINGUISHES US FROM THE BEASTS AND LIKENS US TO GOD--and a thousand other similar things. What, I ask, does this pious litany amount to? To the prayer of the savages: O! All the most reasonable teachings of human wisdom concerning justice are summed up in that famous adage: DO UNTO OTHERS THAT WHICH YOU WOULD THAT OTHERS SHOULD DO UNTO YOU; DO NOT UNTO OTHERS THAT WHICH YOU WOULD NOT THAT OTHERS SHOULD DO UNTO YOU. But this rule of moral practice is unscientific: what have I a right to wish that others should do or not do to me? It is of no use to tell me that my duty is equal to my right, unless I am told at the same time what my right is. Let us try to arrive at something more precise and positive. Justice is the central star which governs societies, the pole around which the political world revolves, the principle and the regulator of all transactions. Nothing takes place between men save in the name of RIGHT; nothing without the invocation of justice. Justice is not the work of the law: on the contrary, the law is only a declaration and application of JUSTICE in all circumstances where men are liable to come in contact. If, then, the idea that we form of justice and right were ill-defined, if it were imperfect or even false, it is clear that all our legislative applications would be wrong, our institutions vicious, our politics erroneous: consequently there would be disorder and social chaos. This hypothesis of the perversion of justice in our minds, and, as a necessary result, in our acts, becomes a demonstrated fact when it is shown that the opinions of men have not borne a constant relation to the notion of justice and its applications; that at different periods they have undergone modifications: in a word, that there has been progress in ideas. Now, that is what history proves by the most overwhelming testimony. Eighteen Hundred years ago, the world, under the rule of the Caesars, exhausted itself in slavery, superstition, and voluptuousness. The people--intoxicated and, as it were, stupefied by their long-continued orgies--had lost the very notion of right and duty: war and dissipation by turns swept them away; usury and the labor of machines (that is of slaves), by depriving them of the means of subsistence, hindered them from continuing the species. Barbarism sprang up again, in a hideous form, from this mass of corruption, and spread like a devouring leprosy over the depopulated provinces. The wise foresaw the downfall of the empire, but could devise no remedy. What could they think indeed? To save this old society it would have been necessary to change the objects of public esteem and veneration, and to abolish the rights affirmed by a justice purely secular; they said: "Rome has conquered through her politics and her gods; any change in theology and public opinion would be folly and sacrilege. Rome, merciful toward conquered nations, though binding them in chains, spared their lives; slaves are the most fertile source of her wealth; freedom of the nations would be the negation of her rights and the ruin of her finances. Rome, in fact, enveloped in the pleasures and gorged with the spoils of the universe, is kept alive by victory and government; her luxury and her pleasures are the price of her conquests: she can neither abdicate nor dispossess herself." Thus Rome had the facts and the law on her side. Her pretensions were justified by universal custom and the law of nations. Her institutions were based upon idolatry in religion, slavery in the State, and epicurism in private life; to touch those was to shake society to its foundations, and, to use our modern expression, to open the abyss of revolutions. So the idea occurred to no one; and yet humanity was dying in blood and luxury. All at once a man appeared, calling himself The Word of God. It is not known to this day who he was, whence he came, nor what suggested to him his ideas. He went about proclaiming everywhere that the end of the existing society was at hand, that the world was about to experience a new birth; that the priests were vipers, the lawyers ignoramuses, and the philosophers hypocrites and liars; that master and slave were equals, that usury and every thing akin to it was robbery, that proprietors and idlers would one day burn, while the poor and pure in heart would find a haven of peace. This man--The Word of God--was denounced and arrested as a public enemy by the priests and the lawyers, who well understood how to induce the people to demand his death. But this judicial murder, though it put the finishing stroke to their crimes, did not destroy the doctrinal seeds which The Word of God had sown. After his death, his original disciples travelled about in all directions, preaching what they called the GOOD NEWS, creating in their turn millions of missionaries; and, when their task seemed to be accomplished, dying by the sword of Roman justice. This persistent agitation, the war of the executioners and martyrs, lasted nearly three centuries, ending in the conversion of the world. Idolatry was destroyed, slavery abolished, dissolution made room for a more austere morality, and the contempt for wealth was sometimes pushed almost to privation. Society was saved by the negation of its own principles, by a revolution in its religion, and by violation of its most sacred rights. In this revolution, the idea of justice spread to an extent that had not before been dreamed of, never to return to its original limits. Heretofore justice had existed only for the masters; [7] it then commenced to exist for the slaves. Nevertheless, the new religion at that time had borne by no means all its fruits. There was a perceptible improvement of the public morals, and a partial release from oppression; but, other than that, the SEEDS SOWN BY THE SON OF MAN, having fallen into idolatrous hearts, had produced nothing save innumerable discords and a quasi-poetical mythology. Instead of developing into their practical consequences the principles of morality and government taught by The Word of God, his followers busied themselves in speculations as to his birth, his origin, his person, and his actions; they discussed his parables, and from the conflict of the most extravagant opinions upon unanswerable questions and texts which no one understood, was born THEOLOGY,--which may be defined as the SCIENCE OF THE INFINITELY ABSURD. The truth of CHRISTIANITY did not survive the age of the apostles; the GOSPEL, commented upon and symbolized by the Greeks and Latins, loaded with pagan fables, became literally a mass of contradictions; and to this day the reign of the INFALLIBLE CHURCH has been a long era of darkness. It is said that the GATES OF HELL will not always prevail, that THE WORD OF GOD will return, and that one day men will know truth and justice; but that will be the death of Greek and Roman Catholicism, just as in the light of science disappeared the caprices of opinion. The monsters which the successors of the apostles were bent on destroying, frightened for a moment, reappeared gradually, thanks to the crazy fanaticism, and sometimes the deliberate connivance, of priests and theologians. The history of the enfranchisement of the French communes offers constantly the spectacle of the ideas of justice and liberty spreading among the people, in spite of the combined efforts of kings, nobles, and clergy. In the year 1789 of the Christian era, the French nation, divided by caste, poor and oppressed, struggled in the triple net of royal absolutism, the tyranny of nobles and parliaments, and priestly intolerance. There was the right of the king and the right of the priest, the right of the patrician and the right of the plebeian; there were the privileges of birth, province, communes, corporations, and trades; and, at the bottom of all, violence, immorality, and misery. For some time they talked of reformation; those who apparently desired it most favoring it only for their own profit, and the people who were to be the gainers expecting little and saying nothing. For a long time these poor people, either from distrust, incredulity, or despair, hesitated to ask for their rights: it is said that the habit of serving had taken the courage away from those old communes, which in the middle ages were so bold. Finally a book appeared, summing up the whole matter in these two propositions: WHAT IS THE THIRD ESTATE?--NOTHING. WHAT OUGHT IT TO BE?--EVERY THING. Some one added by way of comment: WHAT IS THE KING?--THE SERVANT OF THE PEOPLE. This was a sudden revelation: the veil was torn aside, a thick bandage fell from all eyes. The people commenced to reason thus:-- If the king is our servant, he ought to report to us; If he ought to report to us, he is subject to control; If he can be controlled, he is responsible; If he is responsible, he is punishable; If he is punishable, he ought to be punished according to his merits; If he ought to be punished according to his merits, he can be punished with death. Five years after the publication of the brochure of Sieyes, the third estate was every thing; the king, the nobility, the clergy, were no more. In 1793, the nation, without stopping at the constitutional fiction of the inviolability of the sovereign, conducted Louis XVI. to the scaffold; in 1830, it accompanied Charles X. to Cherbourg. In each case, it may have erred, in fact, in its judgment of the offence; but, in right, the logic which led to its action was irreproachable. The people, in punishing their sovereign, did precisely that which the government of July was so severely censured for failing to do when it refused to execute Louis Bonaparte after the affair of Strasburg: they struck the true culprit. It was an application of the common law, a solemn decree of justice enforcing the penal laws. [8] The spirit which gave rise to the movement of '89 was a spirit of negation; that, of itself, proves that the order of things which was substituted for the old system was not methodical or well-considered; that, born of anger and hatred, it could not have the effect of a science based on observation and study; that its foundations, in a word, were not derived from a profound knowledge of the laws of Nature and society. Thus the people found that the republic, among the so-called new institutions, was acting on the very principles against which they had fought, and was swayed by all the prejudices which they had intended to destroy. We congratulate ourselves, with inconsiderate enthusiasm, on the glorious French Revolution, the regeneration of 1789, the great changes that have been effected, and the reversion of institutions: a delusion, a delusion! When our ideas on any subject, material, intellectual, or social, undergo a thorough change in consequence of new observations, I call that movement of the mind REVOLUTION. If the ideas are simply extended or modified, there is only PROGRESS. Thus the system of Ptolemy was a step in astronomical progress, that of Copernicus was a revolution. So, in 1789, there was struggle and progress; revolution there was none. An examination of the reforms which were attempted proves this. The nation, so long a victim of monarchical selfishness, thought to deliver itself for ever by declaring that it alone was sovereign. But what was monarchy? The sovereignty of one man. What is democracy? The sovereignty of the nation, or, rather, of the national majority. But it is, in both cases, the sovereignty of man instead of the sovereignty of the law, the sovereignty of the will instead of the sovereignty of the reason; in one word, the passions instead of justice. Undoubtedly, when a nation passes from the monarchical to the democratic state, there is progress, because in multiplying the sovereigns we increase the opportunities of the reason to substitute itself for the will; but in reality there is no revolution in the government, since the principle remains the same. Now, we have the proof to-day that, with the most perfect democracy, we cannot be free. [9] Nor is that all. The nation-king cannot exercise its sovereignty itself; it is obliged to delegate it to agents: this is constantly reiterated by those who seek to win its favor. Be these agents five, ten, one hundred, or a thousand, of what consequence is the number; and what matters the name? It is always the government of man, the rule of will and caprice. I ask what this pretended revolution has revolutionized? We know, too, how this sovereignty was exercised; first by the Convention, then by the Directory, afterwards confiscated by the Consul. As for the Emperor, the strong man so much adored and mourned by the nation, he never wanted to be dependent on it; but, as if intending to set its sovereignty at defiance, he dared to demand its suffrage: that is, its abdication, the abdication of this inalienable sovereignty; and he obtained it. But what is sovereignty? It is, they say, the POWER TO MAKE LAW. [10] Another absurdity, a relic of despotism. The nation had long seen kings issuing their commands in this form: FOR SUCH IS OUR PLEASURE; it wished to taste in its turn the pleasure of making laws. For fifty years it has brought them forth by myriads; always, be it understood, through the agency of representatives. The play is far from ended. The definition of sovereignty was derived from the definition of the law. The law, they said, is THE EXPRESSION OF THE WILL OF THE SOVEREIGN: then, under a monarchy, the law is the expression of the will of the king; in a republic, the law is the expression of the will of the people. Aside from the difference in the number of wills, the two systems are exactly identical: both share the same error, namely, that the law is the expression of a will; it ought to be the expression of a fact. Moreover they followed good leaders: they took the citizen of Geneva for their prophet, and the contrat social for their Koran. Bias and prejudice are apparent in all the phrases of the new legislators. The nation had suffered from a multitude of exclusions and privileges; its representatives issued the following declaration: ALL MEN ARE EQUAL BY NATURE AND BEFORE THE LAW; an ambiguous and redundant declaration. MEN ARE EQUAL BY NATURE: does that mean that they are equal in size, beauty, talents, and virtue? No; they meant, then, political and civil equality. Then it would have been sufficient to have said: ALL MEN ARE EQUAL BEFORE THE LAW. But what is equality before the law? Neither the constitution of 1790, nor that of '93, nor the granted charter, nor the accepted charter, have defined it accurately. All imply an inequality in fortune and station incompatible with even a shadow of equality in rights. In this respect it may be said that all our constitutions have been faithful expressions of the popular will: I am going, to prove it. Formerly the people were excluded from civil and military offices; it was considered a wonder when the following high-sounding article was inserted in the Declaration of Rights: "All citizens are equally eligible to office; free nations know no qualifications in their choice of officers save virtues and talents." They certainly ought to have admired so beautiful an idea: they admired a piece of nonsense. Why! the sovereign people, legislators, and reformers, see in public offices, to speak plainly, only opportunities for pecuniary advancement. And, because it regards them as a source of profit, it decrees the eligibility of citizens. For of what use would this precaution be, if there were nothing to gain by it? No one would think of ordaining that none but astronomers and geographers should be pilots, nor of prohibiting stutterers from acting at the theatre and the opera. The nation was still aping the kings: like them it wished to award the lucrative positions to its friends and flatterers. Unfortunately, and this last feature completes the resemblance, the nation did not control the list of livings; that was in the hands of its agents and representatives. They, on the other hand, took care not to thwart the will of their gracious sovereign. This edifying article of the Declaration of Rights, retained in the charters of 1814 and 1830, implies several kinds of civil inequality; that is, of inequality before the law: inequality of station, since the public functions are sought only for the consideration and emoluments which they bring; inequality of wealth, since, if it had been desired to equalize fortunes, public service would have been regarded as a duty, not as a reward; inequality of privilege, the law not stating what it means by TALENTS and VIRTUES. Under the empire, virtue and talent consisted simply in military bravery and devotion to the emperor; that was shown when Napoleon created his nobility, and attempted to connect it with the ancients. To-day, the man who pays taxes to the amount of two hundred francs is virtuous; the talented man is the honest pickpocket: such truths as these are accounted trivial. The people finally legalized property. God forgive them, for they knew not what they did! For fifty years they have suffered for their miserable folly. But how came the people, whose voice, they tell us, is the voice of God, and whose conscience is infallible,--how came the people to err? How happens it that, when seeking liberty and equality, they fell back into privilege and slavery? Always through copying the ancient regime. Formerly, the nobility and the clergy contributed towards the expenses of the State only by voluntary aid and gratuitous gift; their property could not be seized even for debt,--while the plebeian, overwhelmed by taxes and statute-labor, was continually tormented, now by the king's tax-gatherers, now by those of the nobles and clergy. He whose possessions were subject to mortmain could neither bequeath nor inherit property; he was treated like the animals, whose services and offspring belong to their master by right of accession. The people wanted the conditions of OWNERSHIP to be alike for all; they thought that every one should ENJOY AND FREELY DISPOSE OF HIS POSSESSIONS HIS INCOME AND THE FRUIT OF HIS LABOR AND INDUSTRY. The people did not invent property; but as they had not the same privileges in regard to it, which the nobles and clergy possessed, they decreed that the right should be exercised by all under the same conditions. The more obnoxious forms of property--statute-labor, mortmain, maitrise, and exclusion from public office--have disappeared; the conditions of its enjoyment have been modified: the principle still remains the same. There has been progress in the regulation of the right; there has been no revolution. These, then, are the three fundamental principles of modern society, established one after another by the movements of 1789 and 1830: 1. SOVEREIGNTY OF THE HUMAN WILL; in short, DESPOTISM. 2. INEQUALITY OF WEALTH AND RANK. 3. PROPERTY--above JUSTICE, always invoked as the guardian angel of sovereigns, nobles, and proprietors; JUSTICE, the general, primitive, categorical law of all society. We must ascertain whether the ideas of DESPOTISM, CIVIL INEQUALITY and PROPERTY, are in harmony with the primitive notion of JUSTICE, and necessarily follow from it,--assuming various forms according to the condition, position, and relation of persons; or whether they are not rather the illegitimate result of a confusion of different things, a fatal association of ideas. And since justice deals especially with the questions of government, the condition of persons, and the possession of things, we must ascertain under what conditions, judging by universal opinion and the progress of the human mind, government is just, the condition of citizens is just, and the possession of things is just; then, striking out every thing which fails to meet these conditions, the result will at once tell us what legitimate government is, what the legitimate condition of citizens is, and what the legitimate possession of things is; and finally, as the last result of the analysis, what JUSTICE is. Is the authority of man over man just? Everybody answers, "No; the authority of man is only the authority of the law, which ought to be justice and truth." The private will counts for nothing in government, which consists, first, in discovering truth and justice in order to make the law; and, second, in superintending the execution of this law. I do not now inquire whether our constitutional form of government satisfies these conditions; whether, for example, the will of the ministry never influences the declaration and interpretation of the law; or whether our deputies, in their debates, are more intent on conquering by argument than by force of numbers: it is enough for me that my definition of a good government is allowed to be correct. This idea is exact. Yet we see that nothing seems more just to the Oriental nations than the despotism of their sovereigns; that, with the ancients and in the opinion of the philosophers themselves, slavery was just; that in the middle ages the nobles, the priests, and the bishops felt justified in holding slaves; that Louis XIV. thought that he was right when he said, "The State! I am the State;" and that Napoleon deemed it a crime for the State to oppose his will. The idea of justice, then, applied to sovereignty and government, has not always been what it is to-day; it has gone on developing and shaping itself by degrees, until it has arrived at its present state. But has it reached its last phase? I think not: only, as the last obstacle to be overcome arises from the institution of property which we have kept intact, in order to finish the reform in government and consummate the revolution, this very institution we must attack. Is political and civil inequality just? Some say yes; others no. To the first I would reply that, when the people abolished all privileges of birth and caste, they did it, in all probability, because it was for their advantage; why then do they favor the privileges of fortune more than those of rank and race? Because, say they, political inequality is a result of property; and without property society is impossible: thus the question just raised becomes a question of property. To the second I content myself with this remark: If you wish to enjoy political equality, abolish property; otherwise, why do you complain? Is property just? Everybody answers without hesitation, "Yes, property is just." I say everybody, for up to the present time no one who thoroughly understood the meaning of his words has answered no. For it is no easy thing to reply understandingly to such a question; only time and experience can furnish an answer. Now, this answer is given; it is for us to understand it. I undertake to prove it. We are to proceed with the demonstration in the following order:-- I. We dispute not at all, we refute nobody, we deny nothing; we accept as sound all the arguments alleged in favor of property, and confine ourselves to a search for its principle, in order that we may then ascertain whether this principle is faithfully expressed by property. In fact, property being defensible on no ground save that of justice, the idea, or at least the intention, of justice must of necessity underlie all the arguments that have been made in defence of property; and, as on the other hand the right of property is only exercised over those things which can be appreciated by the senses, justice, secretly objectifying itself, so to speak, must take the shape of an algebraic formula. By this method of investigation, we soon see that every argument which has been invented in behalf of property, WHATEVER IT MAY BE, always and of necessity leads to equality; that is, to the negation of property. The first part covers two chapters: one treating of occupation, the foundation of our right; the other, of labor and talent, considered as causes of property and social inequality. The first of these chapters will prove that the right of occupation OBSTRUCTS property; the second that the right of labor DESTROYS it. II. Property, then, being of necessity conceived as existing only in connection with equality, it remains to find out why, in spite of this necessity of logic, equality does not exist. This new investigation also covers two chapters: in the first, considering the fact of property in itself, we inquire whether this fact is real, whether it exists, whether it is possible; for it would imply a contradiction, were these two opposite forms of society, equality and inequality, both possible. Then we discover, singularly enough, that property may indeed manifest itself accidentally; but that, as an institution and principle, it is mathematically impossible. So that the axiom of the school--ab actu ad posse valet consecutio: from the actual to the possible the inference is good--is given the lie as far as property is concerned. Finally, in the last chapter, calling psychology to our aid, and probing man's nature to the bottom, we shall disclose the principle of JUSTICE--its formula and character; we shall state with precision the organic law of society; we shall explain the origin of property, the causes of its establishment, its long life, and its approaching death; we shall definitively establish its identity with robbery. And, after having shown that these three prejudices--THE SOVEREIGNTY OF MAN, THE INEQUALITY OF CONDITIONS, AND PROPERTY--are one and the same; that they may be taken for each other, and are reciprocally convertible,--we shall have no trouble in inferring therefrom, by the principle of contradiction, the basis of government and right. There our investigations will end, reserving the right to continue them in future works. The importance of the subject which engages our attention is recognized by all minds. "Property," says M. Hennequin, "is the creative and conservative principle of civil society. Property is one of those basic institutions, new theories concerning which cannot be presented too soon; for it must not be forgotten, and the publicist and statesman must know, that on the answer to the question whether property is the principle or the result of social order, whether it is to be considered as a cause or an effect, depends all morality, and, consequently, all the authority of human institutions." These words are a challenge to all men of hope and faith; but, although the cause of equality is a noble one, no one has yet picked up the gauntlet thrown down by the advocates of property; no one has been courageous enough to enter upon the struggle. The spurious learning of haughty jurisprudence, and the absurd aphorisms of a political economy controlled by property have puzzled the most generous minds; it is a sort of password among the most influential friends of liberty and the interests of the people that EQUALITY IS A CHIMERA! So many false theories and meaningless analogies influence minds otherwise keen, but which are unconsciously controlled by popular prejudice. Equality advances every day--fit aequalitas. Soldiers of liberty, shall we desert our flag in the hour of triumph? A defender of equality, I shall speak without bitterness and without anger; with the independence becoming a philosopher, with the courage and firmness of a free man. May I, in this momentous struggle, carry into all hearts the light with which I am filled; and show, by the success of my argument, that equality failed to conquer by the sword only that it might conquer by the pen! CHAPTER II. PROPERTY CONSIDERED AS A NATURAL RIGHT PROPERTY CONSIDERED AS A NATURAL RIGHT.--OCCUPATION AND CIVIL LAW AS EFFICIENT BASES OF PROPERTY. DEFINITIONS. The Roman law defined property as the right to use and abuse one's own within the limits of the law--jus utendi et abutendi re sua, quatenus juris ratio patitur. A justification of the word ABUSE has been attempted, on the ground that it signifies, not senseless and immoral abuse, but only absolute domain. Vain distinction! invented as an excuse for property, and powerless against the frenzy of possession, which it neither prevents nor represses. The proprietor may, if he chooses, allow his crops to rot under foot; sow his field with salt; milk his cows on the sand; change his vineyard into a desert, and use his vegetable-garden as a park: do these things constitute abuse, or not? In the matter of property, use and abuse are necessarily indistinguishable. According to the Declaration of Rights, published as a preface to the Constitution of '93, property is "the right to enjoy and dispose at will of one's goods, one's income, and the fruit of one's labor and industry." Code Napoleon, article 544: "Property is the right to enjoy and dispose of things in the most absolute manner, provided we do not overstep the limits prescribed by the laws and regulations." These two definitions do not differ from that of the Roman law: all give the proprietor an absolute right over a thing; and as for the restriction imposed by the code,--PROVIDED WE DO NOT OVERSTEP THE LIMITS PRESCRIBED BY THE LAWS AND REGULATIONS,--its object is not to limit property, but to prevent the domain of one proprietor from interfering with that of another. That is a confirmation of the principle, not a limitation of it. There are different kinds of property: 1. Property pure and simple, the dominant and seigniorial power over a thing; or, as they term it, NAKED PROPERTY. 2. POSSESSION. "Possession," says Duranton, "is a matter of fact, not of right." Toullier: "Property is a right, a legal power; possession is a fact." The tenant, the farmer, the commandite, the usufructuary, are possessors; the owner who lets and lends for use, the heir who is to come into possession on the death of a usufructuary, are proprietors. If I may venture the comparison: a lover is a possessor, a husband is a proprietor. This double definition of property--domain and possession--is of the highest importance; and it must be clearly understood, in order to comprehend what is to follow. From the distinction between possession and property arise two sorts of rights: the jus in re, the right in a thing, the right by which I may reclaim the property which I have acquired, in whatever hands I find it; and the jus ad rem, the right TO a thing, which gives me a claim to become a proprietor. Thus the right of the partners to a marriage over each other's person is the jus in re; that of two who are betrothed is only the jus ad rem. In the first, possession and property are united; the second includes only naked property. With me who, as a laborer, have a right to the possession of the products of Nature and my own industry,--and who, as a proletaire, enjoy none of them,--it is by virtue of the jus ad rem that I demand admittance to the jus in re. This distinction between the jus in re and the jus ad rem is the basis of the famous distinction between possessoire and petitoire,--actual categories of jurisprudence, the whole of which is included within their vast boundaries. Petitoire refers to every thing relating to property; possessoire to that relating to possession. In writing this memoir against property, I bring against universal society an action petitoire: I prove that those who do not possess to-day are proprietors by the same title as those who do possess; but, instead of inferring therefrom that property should be shared by all, I demand, in the name of general security, its entire abolition. If I fail to win my case, there is nothing left for us (the proletarian class and myself) but to cut our throats: we can ask nothing more from the justice of nations; for, as the code of procedure (art 26) tells us in its energetic style, THE PLAINTIFF WHO HAS BEEN NON-SUITED IN AN ACTION PETITOIRE, IS DEBARRED THEREBY FROM BRINGING AN ACTION POSSESSOIRE. If, on the contrary, I gain the case, we must then commence an action possessoire, that we may be reinstated in the enjoyment of the wealth of which we are deprived by property. I hope that we shall not be forced to that extremity; but these two actions cannot be prosecuted at once, such a course being prohibited by the same code of procedure. Before going to the heart of the question, it will not be useless to offer a few preliminary remarks. % 1.--Property as a Natural Right. The Declaration of Rights has placed property in its list of the natural and inalienable rights of man, four in all: LIBERTY, EQUALITY, PROPERTY, SECURITY. What rule did the legislators of '93 follow in compiling this list? None. They laid down principles, just as they discussed sovereignty and the laws; from a general point of view, and according to their own opinion. They did every thing in their own blind way. If we can believe Toullier: "The absolute rights can be reduced to three: SECURITY, LIBERTY, PROPERTY." Equality is eliminated by the Rennes professor; why? Is it because LIBERTY implies it, or because property prohibits it? On this point the author of "Droit Civil Explique" is silent: it has not even occurred to him that the matter is under discussion. Nevertheless, if we compare these three or four rights with each other, we find that property bears no resemblance whatever to the others; that for the majority of citizens it exists only potentially, and as a dormant faculty without exercise; that for the others, who do enjoy it, it is susceptible of certain transactions and modifications which do not harmonize with the idea of a natural right; that, in practice, governments, tribunals, and laws do not respect it; and finally that everybody, spontaneously and with one voice, regards it as chimerical. Liberty is inviolable. I can neither sell nor alienate my liberty; every contract, every condition of a contract, which has in view the alienation or suspension of liberty, is null: the slave, when he plants his foot upon the soil of liberty, at that moment becomes a free man. When society seizes a malefactor and deprives him of his liberty, it is a case of legitimate defence: whoever violates the social compact by the commission of a crime declares himself a public enemy; in attacking the liberty of others, he compels them to take away his own. Liberty is the original condition of man; to renounce liberty is to renounce the nature of man: after that, how could we perform the acts of man? Likewise, equality before the law suffers neither restriction nor exception. All Frenchmen are equally eligible to office: consequently, in the presence of this equality, condition and family have, in many cases, no influence upon choice. The poorest citizen can obtain judgment in the courts against one occupying the most exalted station. Let the millionaire, Ahab, build a chateau upon the vineyard of Naboth: the court will have the power, according to the circumstances, to order the destruction of the chateau, though it has cost millions; and to force the trespasser to restore the vineyard to its original state, and pay the damages. The law wishes all property, that has been legitimately acquired, to be kept inviolate without regard to value, and without respect for persons. The charter demands, it is true, for the exercise of certain political rights, certain conditions of fortune and capacity; but all publicists know that the legislator's intention was not to establish a privilege, but to take security. Provided the conditions fixed by law are complied with, every citizen may be an elector, and every elector eligible. The right, once acquired, is the same for all; the law compares neither persons nor votes. I do not ask now whether this system is the best; it is enough that, in the opinion of the charter and in the eyes of every one, equality before the law is absolute, and, like liberty, admits of no compromise. It is the same with the right of security. Society promises its members no half-way protection, no sham defence; it binds itself to them as they bind themselves to it. It does not say to them, "I will shield you, provided it costs me nothing; I will protect you, if I run no risks thereby." It says, "I will defend you against everybody; I will save and avenge you, or perish myself." The whole strength of the State is at the service of each citizen; the obligation which binds them together is absolute. How different with property! Worshipped by all, it is acknowledged by none: laws, morals, customs, public and private conscience, all plot its death and ruin. To meet the expenses of government, which has armies to support, tasks to perform, and officers to pay, taxes are needed. Let all contribute to these expenses: nothing more just. But why should the rich pay more than the poor? That is just, they say, because they possess more. I confess that such justice is beyond my comprehension. Why are taxes paid? To protect all in the exercise of their natural rights--liberty, equality, security, and property; to maintain order in the State; to furnish the public with useful and pleasant conveniences. Now, does it cost more to defend the rich man's life and liberty than the poor man's? Who, in time of invasion, famine, or plague, causes more trouble,--the large proprietor who escapes the evil without the assistance of the State, or the laborer who sits in his cottage unprotected from danger? Is public order endangered more by the worthy citizen, or by the artisan and journeyman? Why, the police have more to fear from a few hundred laborers, out of work, than from two hundred thousand electors! Does the man of large income appreciate more keenly than the poor man national festivities, clean streets, and beautiful monuments? Why, he prefers his country-seat to all the popular pleasures; and when he wants to enjoy himself, he does not wait for the greased pole! One of two things is true: either the proportional tax affords greater security to the larger tax-payers, or else it is a wrong. Because, if property is a natural right, as the Declaration of '93 declares, all that belongs to me by virtue of this right is as sacred as my person; it is my blood, my life, myself: whoever touches it offends the apple of my eye. My income of one hundred thousand francs is as inviolable as the grisette's daily wage of seventy-five centimes; her attic is no more sacred than my suite of apartments. The tax is not levied in proportion to strength, size, or skill: no more should it be levied in proportion to property. If, then, the State takes more from me, let it give me more in return, or cease to talk of equality of rights; for otherwise, society is established, not to defend property, but to destroy it. The State, through the proportional tax, becomes the chief of robbers; the State sets the example of systematic pillage: the State should be brought to the bar of justice at the head of those hideous brigands, that execrable mob which it now kills from motives of professional jealousy. But, they say, the courts and the police force are established to restrain this mob; government is a company, not exactly for insurance, for it does not insure, but for vengeance and repression. The premium which this company exacts, the tax, is divided in proportion to property; that is, in proportion to the trouble which each piece of property occasions the avengers and repressers paid by the government. This is any thing but the absolute and inalienable right of property. Under this system the poor and the rich distrust, and make war upon, each other. But what is the object of the war? Property. So that property is necessarily accompanied by war upon property. The liberty and security of the rich do not suffer from the liberty and security of the poor; far from that, they mutually strengthen and sustain each other. The rich man's right of property, on the contrary, has to be continually defended against the poor man's desire for property. What a contradiction! In England they have a poor-rate: they wish me to pay this tax. But what relation exists between my natural and inalienable right of property and the hunger from which ten million wretched people are suffering? When religion commands us to assist our fellows, it speaks in the name of charity, not in the name of law. The obligation of benevolence, imposed upon me by Christian morality, cannot be imposed upon me as a political tax for the benefit of any person or poor-house. I will give alms when I see fit to do so, when the sufferings of others excite in me that sympathy of which philosophers talk, and in which I do not believe: I will not be forced to bestow them. No one is obliged to do more than comply with this injunction: IN THE EXERCISE OF YOUR OWN RIGHTS DO NOT ENCROACH UPON THE RIGHTS OF ANOTHER; an injunction which is the exact definition of liberty. Now, my possessions are my own; no one has a claim upon them: I object to the placing of the third theological virtue in the order of the day. Everybody, in France, demands the conversion of the five per cent. bonds; they demand thereby the complete sacrifice of one species of property. They have the right to do it, if public necessity requires it; but where is the just indemnity promised by the charter? Not only does none exist, but this indemnity is not even possible; for, if the indemnity were equal to the property sacrificed, the conversion would be useless. The State occupies the same position to-day toward the bondholders that the city of Calais did, when besieged by Edward III, toward its notables. The English conqueror consented to spare its inhabitants, provided it would surrender to him its most distinguished citizens to do with as he pleased. Eustache and several others offered themselves; it was noble in them, and our ministers should recommend their example to the bondholders. But had the city the right to surrender them? Assuredly not. The right to security is absolute; the country can require no one to sacrifice himself. The soldier standing guard within the enemy's range is no exception to this rule. Wherever a citizen stands guard, the country stands guard with him: to-day it is the turn of the one, to-morrow of the other. When danger and devotion are common, flight is parricide. No one has the right to flee from danger; no one can serve as a scapegoat. The maxim of Caiaphas--IT IS RIGHT THAT A MAN SHOULD DIE FOR HIS NATION--is that of the populace and of tyrants; the two extremes of social degradation. It is said that all perpetual annuities are essentially redeemable. This maxim of civil law, applied to the State, is good for those who wish to return to the natural equality of labor and wealth; but, from the point of view of the proprietor, and in the mouth of conversionists, it is the language of bankrupts. The State is not only a borrower, it is an insurer and guardian of property; granting the best of security, it assures the most inviolable possession. How, then, can it force open the hands of its creditors, who have confidence in it, and then talk to them of public order and security of property? The State, in such an operation, is not a debtor who discharges his debt; it is a stock-company which allures its stockholders into a trap, and there, contrary to its authentic promise, exacts from them twenty, thirty, or forty per cent. of the interest on their capital. That is not all. The State is a university of citizens joined together under a common law by an act of society. This act secures all in the possession of their property; guarantees to one his field, to another his vineyard, to a third his rents, and to the bondholder, who might have bought real estate but who preferred to come to the assistance of the treasury, his bonds. The State cannot demand, without offering an equivalent, the sacrifice of an acre of the field or a corner of the vineyard; still less can it lower rents: why should it have the right to diminish the interest on bonds? This right could not justly exist, unless the bondholder could invest his funds elsewhere to equal advantage; but being confined to the State, where can he find a place to invest them, since the cause of conversion, that is, the power to borrow to better advantage, lies in the State? That is why a government, based on the principle of property, cannot redeem its annuities without the consent of their holders. The money deposited with the republic is property which it has no right to touch while other kinds of property are respected; to force their redemption is to violate the social contract, and outlaw the bondholders. The whole controversy as to the conversion of bonds finally reduces itself to this:-- QUESTION. Is it just to reduce to misery forty-five thousand families who derive an income from their bonds of one hundred francs or less? ANSWER. Is it just to compel seven or eight millions of tax-payers to pay a tax of five francs, when they should pay only three? It is clear, in the first place, that the reply is in reality no reply; but, to make the wrong more apparent, let us change it thus: Is it just to endanger the lives of one hundred thousand men, when we can save them by surrendering one hundred heads to the enemy? Reader, decide! All this is clearly understood by the defenders of the present system. Yet, nevertheless, sooner or later, the conversion will be effected and property be violated, because no other course is possible; because property, regarded as a right, and not being a right, must of right perish; because the force of events, the laws of conscience, and physical and mathematical necessity must, in the end, destroy this illusion of our minds. To sum up: liberty is an absolute right, because it is to man what impenetrability is to matter,--a sine qua non of existence; equality is an absolute right, because without equality there is no society; security is an absolute right, because in the eyes of every man his own liberty and life are as precious as another's. These three rights are absolute; that is, susceptible of neither increase nor diminution; because in society each associate receives as much as he gives,--liberty for liberty, equality for equality, security for security, body for body, soul for soul, in life and in death. But property, in its derivative sense, and by the definitions of law, is a right outside of society; for it is clear that, if the wealth of each was social wealth, the conditions would be equal for all, and it would be a contradiction to say: PROPERTY IS A MAN'S RIGHT TO DISPOSE AT WILL OF SOCIAL PROPERTY. Then if we are associated for the sake of liberty, equality, and security, we are not associated for the sake of property; then if property is a NATURAL right, this natural right is not SOCIAL, but ANTI-SOCIAL. Property and society are utterly irreconcilable institutions. It is as impossible to associate two proprietors as to join two magnets by their opposite poles. Either society must perish, or it must destroy property. If property is a natural, absolute, imprescriptible, and inalienable right, why, in all ages, has there been so much speculation as to its origin?--for this is one of its distinguishing characteristics. The origin of a natural right! Good God! who ever inquired into the origin of the rights of liberty, security, or equality? They exist by the same right that we exist; they are born with us, they live and die with us. With property it is very different, indeed. By law, property can exist without a proprietor, like a quality without a subject. It exists for the human being who as yet is not, and for the octogenarian who is no more. And yet, in spite of these wonderful prerogatives which savor of the eternal and the infinite, they have never found the origin of property; the doctors still disagree. On one point only are they in harmony: namely, that the validity of the right of property depends upon the authenticity of its origin. But this harmony is their condemnation. Why have they acknowledged the right before settling the question of origin? Certain classes do not relish investigation into the pretended titles to property, and its fabulous and perhaps scandalous history. They wish to hold to this proposition: that property is a fact; that it always has been, and always will be. With that proposition the savant Proudhon [11] commenced his "Treatise on the Right of Usufruct," regarding the origin of property as a useless question. Perhaps I would subscribe to this doctrine, believing it inspired by a commendable love of peace, were all my fellow-citizens in comfortable circumstances; but, no! I will not subscribe to it. The titles on which they pretend to base the right of property are two in number: OCCUPATION and LABOR. I shall examine them successively, under all their aspects and in detail; and I remind the reader that, to whatever authority we appeal, I shall prove beyond a doubt that property, to be just and possible, must necessarily have equality for its condition. % 2.--Occupation, as the Title to Property. It is remarkable that, at those meetings of the State Council at which the Code was discussed, no controversy arose as to the origin and principle of property. All the articles of Vol. II., Book 2, concerning property and the right of accession, were passed without opposition or amendment. Bonaparte, who on other questions had given his legists so much trouble, had nothing to say about property. Be not surprised at it: in the eyes of that man, the most selfish and wilful person that ever lived, property was the first of rights, just as submission to authority was the most holy of duties. The right of OCCUPATION, or of the FIRST OCCUPANT, is that which results from the actual, physical, real possession of a thing. I occupy a piece of land; the presumption is, that I am the proprietor, until the contrary is proved. We know that originally such a right cannot be legitimate unless it is reciprocal; the jurists say as much. Cicero compares the earth to a vast theatre: _Quemadmodum theatrum cum commune sit, recte tamen dici potest ejus esse eum locum quem quisque occuparit_. This passage is all that ancient philosophy has to say about the origin of property. The theatre, says Cicero, is common to all; nevertheless, the place that each one occupies is called HIS OWN; that is, it is a place POSSESSED, not a place APPROPRIATED. This comparison annihilates property; moreover, it implies equality. Can I, in a theatre, occupy at the same time one place in the pit, another in the boxes, and a third in the gallery? Not unless I have three bodies, like Geryon, or can exist in different places at the same time, as is related of the magician Apollonius. According to Cicero, no one has a right to more than he needs: such is the true interpretation of his famous axiom--_suum quidque cujusque sit_, to each one that which belongs to him--an axiom that has been strangely applied. That which belongs to each is not that which each MAY possess, but that which each HAS A RIGHT to possess. Now, what have we a right to possess? That which is required for our labor and consumption; Cicero's comparison of the earth to a theatre proves it. According to that, each one may take what place he will, may beautify and adorn it, if he can; it is allowable: but he must never allow himself to overstep the limit which separates him from another. The doctrine of Cicero leads directly to equality; for, occupation being pure toleration, if the toleration is mutual (and it cannot be otherwise) the possessions are equal. Grotius rushes into history; but what kind of reasoning is that which seeks the origin of a right, said to be natural, elsewhere than in Nature? This is the method of the ancients: the fact exists, then it is necessary, then it is just, then its antecedents are just also. Nevertheless, let us look into it. "Originally, all things were common and undivided; they were the property of all." Let us go no farther. Grotius tells us how this original communism came to an end through ambition and cupidity; how the age of gold was followed by the age of iron, &c. So that property rested first on war and conquest, then on treaties and agreements. But either these treaties and agreements distributed wealth equally, as did the original communism (the only method of distribution with which the barbarians were acquainted, and the only form of justice of which they could conceive; and then the question of origin assumes this form: how did equality afterwards disappear?)--or else these treaties and agreements were forced by the strong upon the weak, and in that case they are null; the tacit consent of posterity does not make them valid, and we live in a permanent condition of iniquity and fraud. We never can conceive how the equality of conditions, having once existed, could afterwards have passed away. What was the cause of such degeneration? The instincts of the animals are unchangeable, as well as the differences of species; to suppose original equality in human society is to admit by implication that the present inequality is a degeneration from the nature of this society,--a thing which the defenders of property cannot explain. But I infer therefrom that, if Providence placed the first human beings in a condition of equality, it was an indication of its desires, a model that it wished them to realize in other forms; just as the religious sentiment, which it planted in their hearts, has developed and manifested itself in various ways. Man has but one nature, constant and unalterable: he pursues it through instinct, he wanders from it through reflection, he returns to it through judgment; who shall say that we are not returning now? According to Grotius, man has abandoned equality; according to me, he will yet return to it. How came he to abandon it? Why will he return to it? These are questions for future consideration. Reid writes as follows:-- "The right of property is not innate, but acquired. It is not grounded upon the constitution of man, but upon his actions. Writers on jurisprudence have explained its origin in a manner that may satisfy every man of common understanding. "The earth is given to men in common for the purposes of life, by the bounty of Heaven. But to divide it, and appropriate one part of its produce to one, another part to another, must be the work of men who have power and understanding given them, by which every man may accommodate himself, WITHOUT HURT TO ANY OTHER. "This common right of every man to what the earth produces, before it be occupied and appropriated by others, was, by ancient moralists, very properly compared to the right which every citizen had to the public theatre, where every man that came might occupy an empty seat, and thereby acquire a right to it while the entertainment lasted; but no man had a right to dispossess another. "The earth is a great theatre, furnished by the Almighty, with perfect wisdom and goodness, for the entertainment and employment of all mankind. Here every man has a right to accommodate himself as a spectator, and to perform his part as an actor; but without hurt to others." Consequences of Reid's doctrine. 1. That the portion which each one appropriates may wrong no one, it must be equal to the quotient of the total amount of property to be shared, divided by the number of those who are to share it; 2. The number of places being of necessity equal at all times to that of the spectators, no spectator can occupy two places, nor can any actor play several parts; 3. Whenever a spectator comes in or goes out, the places of all contract or enlarge correspondingly: for, says Reid, "THE RIGHT OF PROPERTY IS NOT INNATE, BUT ACQUIRED;" consequently, it is not absolute; consequently, the occupancy on which it is based, being a conditional fact, cannot endow this right with a stability which it does not possess itself. This seems to have been the thought of the Edinburgh professor when he added:-- "A right to life implies a right to the necessary means of life; and that justice, which forbids the taking away the life of an innocent man, forbids no less the taking from him the necessary means of life. He has the same right to defend the one as the other. To hinder another man's innocent labor, or to deprive him of the fruit of it, is an injustice of the same kind, and has the same effect as to put him in fetters or in prison, and is equally a just object of resentment." Thus the chief of the Scotch school, without considering at all the inequality of skill or labor, posits a priori the equality of the means of labor, abandoning thereafter to each laborer the care of his own person, after the eternal axiom: WHOSO DOES WELL, SHALL FARE WELL. The philosopher Reid is lacking, not in knowledge of the principle, but in courage to pursue it to its ultimate. If the right of life is equal, the right of labor is equal, and so is the right of occupancy. Would it not be criminal, were some islanders to repulse, in the name of property, the unfortunate victims of a shipwreck struggling to reach the shore? The very idea of such cruelty sickens the imagination. The proprietor, like Robinson Crusoe on his island, wards off with pike and musket the proletaire washed overboard by the wave of civilization, and seeking to gain a foothold upon the rocks of property. "Give me work!" cries he with all his might to the proprietor: "don't drive me away, I will work for you at any price." "I do not need your services," replies the proprietor, showing the end of his pike or the barrel of his gun. "Lower my rent at least." "I need my income to live upon." "How can I pay you, when I can get no work?" "That is your business." Then the unfortunate proletaire abandons himself to the waves; or, if he attempts to land upon the shore of property, the proprietor takes aim, and kills him. We have just listened to a spiritualist; we will now question a materialist, then an eclectic: and having completed the circle of philosophy, we will turn next to law. According to Destutt de Tracy, property is a necessity of our nature. That this necessity involves unpleasant consequences, it would be folly to deny. But these consequences are necessary evils which do not invalidate the principle; so that it is as unreasonable to rebel against property on account of the abuses which it generates, as to complain of life because it is sure to end in death. This brutal and pitiless philosophy promises at least frank and close reasoning. Let us see if it keeps its promise. "We talk very gravely about the conditions of property,... as if it was our province to decide what constitutes property.... It would seem, to hear certain philosophers and legislators, that at a certain moment, spontaneously and without cause, people began to use the words THINE and MINE; and that they might have, or ought to have, dispensed with them. But THINE and MINE were never invented." A philosopher yourself, you are too realistic. THINE and MINE do not necessarily refer to self, as they do when I say your philosophy, and my equality; for your philosophy is you philosophizing, and my equality is I professing equality. THINE and MINE oftener indicate a relation,--YOUR country, YOUR parish, YOUR tailor, YOUR milkmaid; MY chamber, MY seat at the theatre, MY company and MY battalion in the National Guard. In the former sense, we may sometimes say MY labor, MY skill, MY virtue; never MY grandeur nor MY majesty: in the latter sense only, MY field, MY house, MY vineyard, MY capital,--precisely as the banker's clerk says MY cash-box. In short, THINE and MINE are signs and expressions of personal, but equal, rights; applied to things outside of us, they indicate possession, function, use, not property. It does not seem possible, but, nevertheless, I shall prove, by quotations, that the whole theory of our author is based upon this paltry equivocation. "Prior to all covenants, men are, not exactly, as Hobbes says, in a state of HOSTILITY, but of ESTRANGEMENT. In this state, justice and injustice are unknown; the rights of one bear no relation to the rights of another. All have as many rights as needs, and all feel it their duty to satisfy those needs by any means at their command." Grant it; whether true or false, it matters not. Destutt de Tracy cannot escape equality. On this theory, men, while in a state of ESTRANGEMENT, are under no obligations to each other; they all have the right to satisfy their needs without regard to the needs of others, and consequently the right to exercise their power over Nature, each according to his strength and ability. That involves the greatest inequality of wealth. Inequality of conditions, then, is the characteristic feature of estrangement or barbarism: the exact opposite of Rousseau's idea. But let us look farther:-- "Restrictions of these rights and this duty commence at the time when covenants, either implied or expressed, are agreed upon. Then appears for the first time justice and injustice; that is, the balance between the rights of one and the rights of another, which up to that time were necessarily equal." Listen: RIGHTS WERE EQUAL; that means that each individual had the right to SATISFY HIS NEEDS WITHOUT REFERENCE TO THE NEEDS OF OTHERS. In other words, that all had the right to injure each other; that there was no right save force and cunning. They injured each other, not only by war and pillage, but also by usurpation and appropriation. Now, in order to abolish this equal right to use force and stratagem,--this equal right to do evil, the sole source of the inequality of benefits and injuries,--they commenced to make COVENANTS EITHER IMPLIED OR EXPRESSED, and established a balance. Then these agreements and this balance were intended to secure to all equal comfort; then, by the law of contradictions, if isolation is the principle of inequality, society must produce equality. The social balance is the equalization of the strong and the weak; for, while they are not equals, they are strangers; they can form no associations,--they live as enemies. Then, if inequality of conditions is a necessary evil, so is isolation, for society and inequality are incompatible with each other. Then, if society is the true condition of man's existence, so is equality also. This conclusion cannot be avoided. This being so, how is it that, ever since the establishment of this balance, inequality has been on the increase? How is it that justice and isolation always accompany each other? Destutt de Tracy shall reply:-- "NEEDS and MEANS, RIGHTS and DUTIES, are products of the will. If man willed nothing, these would not exist. But to have needs and means, rights and duties, is to HAVE, to POSSESS, something. They are so many kinds of property, using the word in its most general sense: they are things which belong to us." Shameful equivocation, not justified by the necessity for generalization! The word PROPERTY has two meanings: 1. It designates the quality which makes a thing what it is; the attribute which is peculiar to it, and especially distinguishes it. We use it in this sense when we say THE PROPERTIES OF THE TRIANGLE or of NUMBERS; THE PROPERTY OF THE MAGNET, &c. 2. It expresses the right of absolute control over a thing by a free and intelligent being. It is used in this sense by writers on jurisprudence. Thus, in the phrase, IRON ACQUIRES THE PROPERTY OF A MAGNET, the word PROPERTY does not convey the same idea that it does in this one: _I HAVE ACQUIRED THIS MAGNET AS MY PROPERTY_. To tell a poor man that he HAS property because he HAS arms and legs,--that the hunger from which he suffers, and his power to sleep in the open air are his property,--is to play upon words, and to add insult to injury. "The sole basis of the idea of property is the idea of personality. As soon as property is born at all, it is born, of necessity, in all its fulness. As soon as an individual knows HIMSELF,--his moral personality, his capacities of enjoyment, suffering, and action,--he necessarily sees also that this SELF is exclusive proprietor of the body in which it dwells, its organs, their powers, faculties, &c.... Inasmuch as artificial and conventional property exists, there must be natural property also; for nothing can exist in art without its counterpart in Nature." We ought to admire the honesty and judgment of philosophers! Man has properties; that is, in the first acceptation of the term, faculties. He has property; that is, in its second acceptation, the right of domain. He has, then, the property of the property of being proprietor. How ashamed I should be to notice such foolishness, were I here considering only the authority of Destutt de Tracy! But the entire human race, since the origination of society and language, when metaphysics and dialectics were first born, has been guilty of this puerile confusion of thought. All which man could call his own was identified in his mind with his person. He considered it as his property, his wealth; a part of himself, a member of his body, a faculty of his mind. The possession of things was likened to property in the powers of the body and mind; and on this false analogy was based the right of property,--THE IMITATION OF NATURE BY ART, as Destutt de Tracy so elegantly puts it. But why did not this ideologist perceive that man is not proprietor even of his own faculties? Man has powers, attributes, capacities; they are given him by Nature that he may live, learn, and love: he does not own them, but has only the use of them; and he can make no use of them that does not harmonize with Nature's laws. If he had absolute mastery over his faculties, he could avoid hunger and cold; he could eat unstintedly, and walk through fire; he could move mountains, walk a hundred leagues in a minute, cure without medicines and by the sole force of his will, and could make himself immortal. He could say, "I wish to produce," and his tasks would be finished with the words; he could say. "I wish to know," and he would know; "I love," and he would enjoy. What then? Man is not master of himself, but may be of his surroundings. Let him use the wealth of Nature, since he can live only by its use; but let him abandon his pretensions to the title of proprietor, and remember that he is called so only metaphorically. To sum up: Destutt de Tracy classes together the external PRODUCTIONS of nature and art, and the POWERS or FACULTIES of man, making both of them species of property; and upon this equivocation he hopes to establish, so firmly that it can never be disturbed, the right of property. But of these different kinds of property some are INNATE, as memory, imagination, strength, and beauty; while others are ACQUIRED, as land, water, and forests. In the state of Nature or isolation, the strongest and most skilful (that is, those best provided with innate property) stand the best chance of obtaining acquired property. Now, it is to prevent this encroachment and the war which results therefrom, that a balance (justice) has been employed, and covenants (implied or expressed) agreed upon: it is to correct, as far as possible, inequality of innate property by equality of acquired property. As long as the division remains unequal, so long the partners remain enemies; and it is the purpose of the covenants to reform this state of things. Thus we have, on the one hand, isolation, inequality, enmity, war, robbery, murder; on the other, society, equality, fraternity, peace, and love. Choose between them! M. Joseph Dutens--a physician, engineer, and geometrician, but a very poor legist, and no philosopher at all--is the author of a "Philosophy of Political Economy," in which he felt it his duty to break lances in behalf of property. His reasoning seems to be borrowed from Destutt de Tracy. He commences with this definition of property, worthy of Sganarelle: "Property is the right by which a thing is one's own." Literally translated: Property is the right of property. After getting entangled a few times on the subjects of will, liberty, and personality; after having distinguished between IMMATERIAL-NATURAL property, and MATERIAL-NATURAL property, a distinction similar to Destutt de Tracy's of innate and acquired property,--M. Joseph Dutens concludes with these two general propositions: 1. Property is a natural and inalienable right of every man; 2. Inequality of property is a necessary result of Nature,--which propositions are convertible into a simpler one: All men have an equal right of unequal property. He rebukes M. de Sismondi for having taught that landed property has no other basis than law and conventionality; and he says himself, speaking of the respect which people feel for property, that "their good sense reveals to them the nature of the ORIGINAL CONTRACT made between society and proprietors." He confounds property with possession, communism with equality, the just with the natural, and the natural with the possible. Now he takes these different ideas to be equivalents; now he seems to distinguish between them, so much so that it would be infinitely easier to refute him than to understand him. Attracted first by the title of the work, "Philosophy of Political Economy," I have found, among the author's obscurities, only the most ordinary ideas. For that reason I will not speak of him. M. Cousin, in his "Moral Philosophy," page 15, teaches that all morality, all laws, all rights are given to man with this injunction: "FREE BEING, REMAIN FREE." Bravo! master; I wish to remain free if I can. He continues:-- "Our principle is true; it is good, it is social. Do not fear to push it to its ultimate. "1. If the human person is sacred, its whole nature is sacred; and particularly its interior actions, its feelings, its thoughts, its voluntary decisions. This accounts for the respect due to philosophy, religion, the arts industry, commerce, and to all the results of liberty. I say respect, not simply toleration; for we do not tolerate a right, we respect it." I bow my head before this philosophy. "2. My liberty, which is sacred, needs for its objective action an instrument which we call the body: the body participates then in the sacredness of liberty; it is then inviolable. This is the basis of the principle of individual liberty. "3. My liberty needs, for its objective action, material to work upon; in other words, property or a thing. This thing or property naturally participates then in the inviolability of my person. For instance, I take possession of an object which has become necessary and useful in the outward manifestation of my liberty. I say, 'This object is mine since it belongs to no one else; consequently, I possess it legitimately.' So the legitimacy of possession rests on two conditions. First, I possess only as a free being. Suppress free activity, you destroy my power to labor. Now it is only by labor that I can use this property or thing, and it is only by using it that I possess it. Free activity is then the principle of the right of property. But that alone does not legitimate possession. All men are free; all can use property by labor. Does that mean that all men have a right to all property? Not at all. To possess legitimately, I must not only labor and produce in my capacity of a free being, but I must also be the first to occupy the property. In short, if labor and production are the principle of the right of property, the fact of first occupancy is its indispensable condition. "4. I possess legitimately: then I have the right to use my property as I see fit. I have also the right to give it away. I have also the right to bequeath it; for if I decide to make a donation, my decision is as valid after my death as during my life." In fact, to become a proprietor, in M. Cousin's opinion, one must take possession by occupation and labor. I maintain that the element of time must be considered also; for if the first occupants have occupied every thing, what are the new comers to do? What will become of them, having an instrument with which to work, but no material to work upon? Must they devour each other? A terrible extremity, unforeseen by philosophical prudence; for the reason that great geniuses neglect little things. Notice also that M. Cousin says that neither occupation nor labor, taken separately, can legitimate the right of property; and that it is born only from the union of the two. This is one of M. Cousin's eclectic turns, which he, more than any one else, should take pains to avoid. Instead of proceeding by the method of analysis, comparison, elimination, and reduction (the only means of discovering the truth amid the various forms of thought and whimsical opinions), he jumbles all systems together, and then, declaring each both right and wrong, exclaims: "There you have the truth." But, adhering to my promise, I will not refute him. I will only prove, by all the arguments with which he justifies the right of property, the principle of equality which kills it. As I have already said, my sole intent is this: to show at the bottom of all these positions that inevitable major, EQUALITY; hoping hereafter to show that the principle of property vitiates the very elements of economical, moral, and governmental science, thus leading it in the wrong direction. Well, is it not true, from M. Cousin's point of view, that, if the liberty of man is sacred, it is equally sacred in all individuals; that, if it needs property for its objective action, that is, for its life, the appropriation of material is equally necessary for all; that, if I wish to be respected in my right of appropriation, I must respect others in theirs; and, consequently, that though, in the sphere of the infinite, a person's power of appropriation is limited only by himself, in the sphere of the finite this same power is limited by the mathematical relation between the number of persons and the space which they occupy? Does it not follow that if one individual cannot prevent another--his fellow-man--from appropriating an amount of material equal to his own, no more can he prevent individuals yet to come; because, while individuality passes away, universality persists, and eternal laws cannot be determined by a partial view of their manifestations? Must we not conclude, therefore, that whenever a person is born, the others must crowd closer together; and, by reciprocity of obligation, that if the new comer is afterwards to become an heir, the right of succession does not give him the right of accumulation, but only the right of choice? I have followed M. Cousin so far as to imitate his style, and I am ashamed of it. Do we need such high-sounding terms, such sonorous phrases, to say such simple things? Man needs to labor in order to live; consequently, he needs tools to work with and materials to work upon. His need to produce constitutes his right to produce. Now, this right is guaranteed him by his fellows, with whom he makes an agreement to that effect. One hundred thousand men settle in a large country like France with no inhabitants: each man has a right to 1/100,000 of the land. If the number of possessors increases, each one's portion diminishes in consequence; so that, if the number of inhabitants rises to thirty-four millions, each one will have a right only to 1/34,000,000. Now, so regulate the police system and the government, labor, exchange, inheritance, &c., that the means of labor shall be shared by all equally, and that each individual shall be free; and then society will be perfect. Of all the defenders of property, M. Cousin has gone the farthest. He has maintained against the economists that labor does not establish the right of property unless preceded by occupation, and against the jurists that the civil law can determine and apply a natural right, but cannot create it. In fact, it is not sufficient to say, "The right of property is demonstrated by the existence of property; the function of the civil law is purely declaratory." To say that, is to confess that there is no reply to those who question the legitimacy of the fact itself. Every right must be justifiable in itself, or by some antecedent right; property is no exception. For this reason, M. Cousin has sought to base it upon the SANCTITY of the human personality, and the act by which the will assimilates a thing. "Once touched by man," says one of M. Cousin's disciples, "things receive from him a character which transforms and humanizes them." I confess, for my part, that I have no faith in this magic, and that I know of nothing less holy than the will of man. But this theory, fragile as it seems to psychology as well as jurisprudence, is nevertheless more philosophical and profound than those theories which are based upon labor or the authority of the law. Now, we have just seen to what this theory of which we are speaking leads,--to the equality implied in the terms of its statement. But perhaps philosophy views things from too lofty a standpoint, and is not sufficiently practical; perhaps from the exalted summit of speculation men seem so small to the metaphysician that he cannot distinguish between them; perhaps, indeed, the equality of conditions is one of those principles which are very true and sublime as generalities, but which it would be ridiculous and even dangerous to attempt to rigorously apply to the customs of life and to social transactions. Undoubtedly, this is a case which calls for imitation of the wise reserve of moralists and jurists, who warn us against carrying things to extremes, and who advise us to suspect every definition; because there is not one, they say, which cannot be utterly destroyed by developing its disastrous results--_Omnis definitio in jure civili periculosa est: parum est enim ut non subverti possit_. Equality of conditions,--a terrible dogma in the ears of the proprietor, a consoling truth at the poor-man's sick-bed, a frightful reality under the knife of the anatomist,--equality of conditions, established in the political, civil, and industrial spheres, is only an alluring impossibility, an inviting bait, a satanic delusion. It is never my intention to surprise my reader. I detest, as I do death, the man who employs subterfuge in his words and conduct. From the first page of this book, I have expressed myself so plainly and decidedly that all can see the tendency of my thought and hopes; and they will do me the justice to say, that it would be difficult to exhibit more frankness and more boldness at the same time. I do not hesitate to declare that the time is not far distant when this reserve, now so much admired in philosophers--this happy medium so strongly recommended by professors of moral and political science--will be regarded as the disgraceful feature of a science without principle, and as the seal of its reprobation. In legislation and morals, as well as in geometry, axioms are absolute, definitions are certain; and all the results of a principle are to be accepted, provided they are logically deduced. Deplorable pride! We know nothing of our nature, and we charge our blunders to it; and, in a fit of unaffected ignorance, cry out, "The truth is in doubt, the best definition defines nothing!" We shall know some time whether this distressing uncertainty of jurisprudence arises from the nature of its investigations, or from our prejudices; whether, to explain social phenomena, it is not enough to change our hypothesis, as did Copernicus when he reversed the system of Ptolemy. But what will be said when I show, as I soon shall, that this same jurisprudence continually tries to base property upon equality? What reply can be made? % 3.--Civil Law as the Foundation and Sanction of Property. Pothier seems to think that property, like royalty, exists by divine right. He traces back its origin to God himself--ab Jove principium. He begins in this way:-- "God is the absolute ruler of the universe and all that it contains: _Domini est terra et plenitudo ejus, orbis et universi qui habitant in eo_. For the human race he has created the earth and all its creatures, and has given it a control over them subordinate only to his own. 'Thou madest him to have dominion over the works of thy hands; thou hast put all things under his feet,' says the Psalmist. God accompanied this gift with these words, addressed to our first parents after the creation: 'Be fruitful, and multiply and replenish the earth,'" &c. After this magnificent introduction, who would refuse to believe the human race to be an immense family living in brotherly union, and under the protection of a venerable father? But, heavens! are brothers enemies? Are fathers unnatural, and children prodigal? GOD GAVE THE EARTH TO THE HUMAN RACE: why then have I received none? HE HAS PUT ALL THINGS UNDER MY FEET,--and I have not where to lay my head! MULTIPLY, he tells us through his interpreter, Pothier. Ah, learned Pothier! that is as easy to do as to say; but you must give moss to the bird for its nest. "The human race having multiplied, men divided among themselves the earth and most of the things upon it; that which fell to each, from that time exclusively belonged to him. That was the origin of the right of property." Say, rather, the right of possession. Men lived in a state of communism; whether positive or negative it matters little. Then there was no property, not even private possession. The genesis and growth of possession gradually forcing people to labor for their support, they agreed either formally or tacitly,--it makes no difference which,--that the laborer should be sole proprietor of the fruit of his labor; that is, they simply declared the fact that thereafter none could live without working. It necessarily followed that, to obtain equality of products, there must be equality of labor; and that, to obtain equality of labor, there must be equality of facilities for labor. Whoever without labor got possession, by force or by strategy, of another's means of subsistence, destroyed equality, and placed himself above or outside of the law. Whoever monopolized the means of production on the ground of greater industry, also destroyed equality. Equality being then the expression of right, whoever violated it was UNJUST. Thus, labor gives birth to private possession; the right in a thing--jus in re. But in what thing? Evidently IN THE PRODUCT, not IN THE SOIL. So the Arabs have always understood it; and so, according to Caesar and Tacitus, the Germans formerly held. "The Arabs," says M. de Sismondi, "who admit a man's property in the flocks which he has raised, do not refuse the crop to him who planted the seed; but they do not see why another, his equal, should not have a right to plant in his turn. The inequality which results from the pretended right of the first occupant seems to them to be based on no principle of justice; and when all the land falls into the hands of a certain number of inhabitants, there results a monopoly in their favor against the rest of the nation, to which they do not wish to submit." Well, they have shared the land. I admit that therefrom results a more powerful organization of labor; and that this method of distribution, fixed and durable, is advantageous to production: but how could this division give to each a transferable right of property in a thing to which all had an inalienable right of possession? In the terms of jurisprudence, this metamorphosis from possessor to proprietor is legally impossible; it implies in the jurisdiction of the courts the union of possessoire and petitoire; and the mutual concessions of those who share the land are nothing less than traffic in natural rights. The original cultivators of the land, who were also the original makers of the law, were not as learned as our legislators, I admit; and had they been, they could not have done worse: they did not foresee the consequences of the transformation of the right of private possession into the right of absolute property. But why have not those, who in later times have established the distinction between jus in re and jus ad rem, applied it to the principle of property itself? Let me call the attention of the writers on jurisprudence to their own maxims. The right of property, provided it can have a cause, can have but one--_Dominium non potest nisi ex una causa contingere_. I can possess by several titles; I can become proprietor by only one--_Non ut ex pluribus causis idem nobis deberi potest, ita ex pluribus causis idem potest nostrum esse_. The field which I have cleared, which I cultivate, on which I have built my house, which supports myself, my family, and my livestock, I can possess: 1st. As the original occupant; 2d. As a laborer; 3d. By virtue of the social contract which assigns it to me as my share. But none of these titles confer upon me the right of property. For, if I attempt to base it upon occupancy, society can reply, "I am the original occupant." If I appeal to my labor, it will say, "It is only on that condition that you possess." If I speak of agreements, it will respond, "These agreements establish only your right of use." Such, however, are the only titles which proprietors advance. They never have been able to discover any others. Indeed, every right--it is Pothier who says it--supposes a producing cause in the person who enjoys it; but in man who lives and dies, in this son of earth who passes away like a shadow, there exists, with respect to external things, only titles of possession, not one title of property. Why, then, has society recognized a right injurious to itself, where there is no producing cause? Why, in according possession, has it also conceded property? Why has the law sanctioned this abuse of power? The German Ancillon replies thus:-- "Some philosophers pretend that man, in employing his forces upon a natural object,--say a field or a tree,--acquires a right only to the improvements which he makes, to the form which he gives to the object, not to the object itself. Useless distinction! If the form could be separated from the object, perhaps there would be room for question; but as this is almost always impossible, the application of man's strength to the different parts of the visible world is the foundation of the right of property, the primary origin of riches." Vain pretext! If the form cannot be separated from the object, nor property from possession, possession must be shared; in any case, society reserves the right to fix the conditions of property. Let us suppose that an appropriated farm yields a gross income of ten thousand francs; and, as very seldom happens, that this farm cannot be divided. Let us suppose farther that, by economical calculation, the annual expenses of a family are three thousand francs: the possessor of this farm should be obliged to guard his reputation as a good father of a family, by paying to society ten thousand francs,--less the total costs of cultivation, and the three thousand francs required for the maintenance of his family. This payment is not rent, it is an indemnity. What sort of justice is it, then, which makes such laws as this:-- "Whereas, since labor so changes the form of a thing that the form and substance cannot be separated without destroying the thing itself, either society must be disinherited, or the laborer must lose the fruit of his labor; and "Whereas, in every other case, property in raw material would give a title to added improvements, minus their cost; and whereas, in this instance, property in improvements ought to give a title to the principal; "Therefore, the right of appropriation by labor shall never be admitted against individuals, but only against society." In such a way do legislators always reason in regard to property. The law is intended to protect men's mutual rights,--that is, the rights of each against each, and each against all; and, as if a proportion could exist with less than four terms, the law-makers always disregard the latter. As long as man is opposed to man, property offsets property, and the two forces balance each other; as soon as man is isolated, that is, opposed to the society which he himself represents, jurisprudence is at fault: Themis has lost one scale of her balance. Listen to the professor of Rennes, the learned Toullier:-- "How could this claim, made valid by occupation, become stable and permanent property, which might continue to stand, and which might be reclaimed after the first occupant had relinquished possession? "Agriculture was a natural consequence of the multiplication of the human race, and agriculture, in its turn, favors population, and necessitates the establishment of permanent property; for who would take the trouble to plough and sow, if he were not certain that he would reap?" To satisfy the husbandman, it was sufficient to guarantee him possession of his crop; admit even that he should have been protected in his right of occupation of land, as long as he remained its cultivator. That was all that he had a right to expect; that was all that the advance of civilization demanded. But property, property! the right of escheat over lands which one neither occupies nor cultivates,--who had authority to grant it? who pretended to have it? "Agriculture alone was not sufficient to establish permanent property; positive laws were needed, and magistrates to execute them; in a word, the civil State was needed. "The multiplication of the human race had rendered agriculture necessary; the need of securing to the cultivator the fruit of his labor made permanent property necessary, and also laws for its protection. So we are indebted to property for the creation of the civil State." Yes, of our civil State, as you have made it; a State which, at first, was despotism, then monarchy, then aristocracy, today democracy, and always tyranny. "Without the ties of property it never would have been possible to subordinate men to the wholesome yoke of the law; and without permanent property the earth would have remained a vast forest. Let us admit, then, with the most careful writers, that if transient property, or the right of preference resulting from occupation, existed prior to the establishment of civil society, permanent property, as we know it to-day, is the work of civil law. It is the civil law which holds that, when once acquired, property can be lost only by the action of the proprietor, and that it exists even after the proprietor has relinquished possession of the thing, and it has fallen into the hands of a third party. "Thus property and possession, which originally were confounded, became through the civil law two distinct and independent things; two things which, in the language of the law, have nothing whatever in common. In this we see what a wonderful change has been effected in property, and to what an extent Nature has been altered by the civil laws." Thus the law, in establishing property, has not been the expression of a psychological fact, the development of a natural law, the application of a moral principle. It has literally CREATED a right outside of its own province. It has realized an abstraction, a metaphor, a fiction; and that without deigning to look at the consequences, without considering the disadvantages, without inquiring whether it was right or wrong. It has sanctioned selfishness; it has indorsed monstrous pretensions; it has received with favor impious vows, as if it were able to fill up a bottomless pit, and to satiate hell! Blind law; the law of the ignorant man; a law which is not a law; the voice of discord, deceit, and blood! This it is which, continually revived, reinstated, rejuvenated, restored, re-enforced--as the palladium of society--has troubled the consciences of the people, has obscured the minds of the masters, and has induced all the catastrophes which have befallen nations. This it is which Christianity has condemned, but which its ignorant ministers deify; who have as little desire to study Nature and man, as ability to read their Scriptures. But, indeed, what guide did the law follow in creating the domain of property? What principle directed it? What was its standard? Would you believe it? It was equality. Agriculture was the foundation of territorial possession, and the original cause of property. It was of no use to secure to the farmer the fruit of his labor, unless the means of production were at the same time secured to him. To fortify the weak against the invasion of the strong, to suppress spoliation and fraud, the necessity was felt of establishing between possessors permanent lines of division, insuperable obstacles. Every year saw the people multiply, and the cupidity of the husbandman increase: it was thought best to put a bridle on ambition by setting boundaries which ambition would in vain attempt to overstep. Thus the soil came to be appropriated through need of the equality which is essential to public security and peaceable possession. Undoubtedly the division was never geographically equal; a multitude of rights, some founded in Nature, but wrongly interpreted and still more wrongly applied, inheritance, gift, and exchange; others, like the privileges of birth and position, the illegitimate creations of ignorance and brute force,--all operated to prevent absolute equality. But, nevertheless, the principle remained the same: equality had sanctioned possession; equality sanctioned property. The husbandman needed each year a field to sow; what more convenient and simple arrangement for the barbarians,--instead of indulging in annual quarrels and fights, instead of continually moving their houses, furniture, and families from spot to spot,--than to assign to each individual a fixed and inalienable estate? It was not right that the soldier, on returning from an expedition, should find himself dispossessed on account of the services which he had just rendered to his country; his estate ought to be restored to him. It became, therefore, customary to retain property by intent alone--_nudo animo;_ it could be sacrificed only with the consent and by the action of the proprietor. It was necessary that the equality in the division should be kept up from one generation to another, without a new distribution of the land upon the death of each family; it appeared therefore natural and just that children and parents, according to the degree of relationship which they bore to the deceased, should be the heirs of their ancestors. Thence came, in the first place, the feudal and patriarchal custom of recognizing only one heir; then, by a quite contrary application of the principle of equality, the admission of all the children to a share in their father's estate, and, very recently also among us, the definitive abolition of the right of primogeniture. But what is there in common between these rude outlines of instinctive organization and the true social science? How could these men, who never had the faintest idea of statistics, valuation, or political economy, furnish us with principles of legislation? "The law," says a modern writer on jurisprudence, "is the expression of a social want, the declaration of a fact: the legislator does not make it, he declares it. 'This definition is not exact. The law is a method by which social wants must be satisfied; the people do not vote it, the legislator does not express it: the savant discovers and formulates it." But in fact, the law, according to M. Ch. Comte, who has devoted half a volume to its definition, was in the beginning only the EXPRESSION OF A WANT, and the indication of the means of supplying it; and up to this time it has been nothing else. The legists--with mechanical fidelity, full of obstinacy, enemies of philosophy, buried in literalities--have always mistaken for the last word of science that which was only the inconsiderate aspiration of men who, to be sure, were well-meaning, but wanting in foresight. They did not foresee, these old founders of the domain of property, that the perpetual and absolute right to retain one's estate,--a right which seemed to them equitable, because it was common,--involves the right to transfer, sell, give, gain, and lose it; that it tends, consequently, to nothing less than the destruction of that equality which they established it to maintain. And though they should have foreseen it, they disregarded it; the present want occupied their whole attention, and, as ordinarily happens in such cases, the disadvantages were at first scarcely perceptible, and they passed unnoticed. They did not foresee, these ingenuous legislators, that if property is retainable by intent alone--_nudo animo_--it carries with it the right to let, to lease, to loan at interest, to profit by exchange, to settle annuities, and to levy a tax on a field which intent reserves, while the body is busy elsewhere. They did not foresee, these fathers of our jurisprudence, that, if the right of inheritance is any thing other than Nature's method of preserving equality of wealth, families will soon become victims of the most disastrous exclusions; and society, pierced to the heart by one of its most sacred principles, will come to its death through opulence and misery. [12] Under whatever form of government we live, it can always be said that _le mort saisit le vif;_ that is, that inheritance and succession will last for ever, whoever may be the recognized heir. But the St. Simonians wish the heir to be designated by the magistrate; others wish him to be chosen by the deceased, or assumed by the law to be so chosen: the essential point is that Nature's wish be satisfied, so far as the law of equality allows. To-day the real controller of inheritance is chance or caprice; now, in matters of legislation, chance and caprice cannot be accepted as guides. It is for the purpose of avoiding the manifold disturbances which follow in the wake of chance that Nature, after having created us equal, suggests to us the principle of heredity; which serves as a voice by which society asks us to choose, from among all our brothers, him whom we judge best fitted to complete our unfinished work. They did not foresee.... But why need I go farther? The consequences are plain enough, and this is not the time to criticise the whole Code. The history of property among the ancient nations is, then, simply a matter of research and curiosity. It is a rule of jurisprudence that the fact does not substantiate the right. Now, property is no exception to this rule: then the universal recognition of the right of property does not legitimate the right of property. Man is mistaken as to the constitution of society, the nature of right, and the application of justice; just as he was mistaken regarding the cause of meteors and the movement of the heavenly bodies. His old opinions cannot be taken for articles of faith. Of what consequence is it to us that the Indian race was divided into four classes; that, on the banks of the Nile and the Ganges, blood and position formerly determined the distribution of the land; that the Greeks and Romans placed property under the protection of the gods; that they accompanied with religious ceremonies the work of partitioning the land and appraising their goods? The variety of the forms of privilege does not sanction injustice. The faith of Jupiter, the proprietor, [13] proves no more against the equality of citizens, than do the mysteries of Venus, the wanton, against conjugal chastity. The authority of the human race is of no effect as evidence in favor of the right of property, because this right, resting of necessity upon equality, contradicts its principle; the decision of the religions which have sanctioned it is of no effect, because in all ages the priest has submitted to the prince, and the gods have always spoken as the politicians desired; the social advantages, attributed to property, cannot be cited in its behalf, because they all spring from the principle of equality of possession. What means, then, this dithyramb upon property? "The right of property is the most important of human institutions."... Yes; as monarchy is the most glorious. "The original cause of man's prosperity upon earth." Because justice was supposed to be its principle. "Property became the legitimate end of his ambition, the hope of his existence, the shelter of his family; in a word, the corner-stone of the domestic dwelling, of communities, and of the political State." Possession alone produced all that. "Eternal principle,--" Property is eternal, like every negation,-- "Of all social and civil institutions." For that reason, every institution and every law based on property will perish. "It is a boon as precious as liberty." For the rich proprietor. "In fact, the cause of the cultivation of the habitable earth." If the cultivator ceased to be a tenant, would the land be worse cared for? "The guarantee and the morality of labor." Under the regime of property, labor is not a condition, but a privilege. "The application of justice." What is justice without equality of fortunes? A balance with false weights. "All morality,--" A famished stomach knows no morality,-- "All public order,--" Certainly, the preservation of property,-- "Rest on the right of property." [14] Corner-stone of all which is, stumbling-block of all which ought to be,--such is property. To sum up and conclude:-- Not only does occupation lead to equality, it PREVENTS property. For, since every man, from the fact of his existence, has the right of occupation, and, in order to live, must have material for cultivation on which he may labor; and since, on the other hand, the number of occupants varies continually with the births and deaths,--it follows that the quantity of material which each laborer may claim varies with the number of occupants; consequently, that occupation is always subordinate to population. Finally, that, inasmuch as possession, in right, can never remain fixed, it is impossible, in fact, that it can ever become property. Every occupant is, then, necessarily a possessor or usufructuary,--a function which excludes proprietorship. Now, this is the right of the usufructuary: he is responsible for the thing entrusted to him; he must use it in conformity with general utility, with a view to its preservation and development; he has no power to transform it, to diminish it, or to change its nature; he cannot so divide the usufruct that another shall perform the labor while he receives the product. In a word, the usufructuary is under the supervision of society, submitted to the condition of labor and the law of equality. Thus is annihilated the Roman definition of property--THE RIGHT OF USE AND ABUSE--an immorality born of violence, the most monstrous pretension that the civil laws ever sanctioned. Man receives his usufruct from the hands of society, which alone is the permanent possessor. The individual passes away, society is deathless. What a profound disgust fills my soul while discussing such simple truths! Do we doubt these things to-day? Will it be necessary to again take arms for their triumph? And can force, in default of reason, alone introduce them into our laws? ALL HAVE AN EQUAL RIGHT OF OCCUPANCY. THE AMOUNT OCCUPIED BEING MEASURED, NOT BY THE WILL, BUT BY THE VARIABLE CONDITIONS OF SPACE AND NUMBER, PROPERTY CANNOT EXIST. This no code has ever expressed; this no constitution can admit! These are axioms which the civil law and the law of nations deny!..... But I hear the exclamations of the partisans of another system: "Labor, labor! that is the basis of property!" Reader, do not be deceived. This new basis of property is worse than the first, and I shall soon have to ask your pardon for having demonstrated things clearer, and refuted pretensions more unjust, than any which we have yet considered. CHAPTER III. LABOR AS THE EFFICIENT CAUSE OF THE DOMAIN OF PROPERTY. Nearly all the modern writers on jurisprudence, taking their cue from the economists, have abandoned the theory of first occupancy as a too dangerous one, and have adopted that which regards property as born of labor. In this they are deluded; they reason in a circle. To labor it is necessary to occupy, says M. Cousin. Consequently, I have added in my turn, all having an equal right of occupancy, to labor it is necessary to submit to equality. "The rich," exclaims Jean Jacques, "have the arrogance to say, 'I built this wall; I earned this land by my labor.' Who set you the tasks? we may reply, and by what right do you demand payment from us for labor which we did not impose upon you?" All sophistry falls to the ground in the presence of this argument. But the partisans of labor do not see that their system is an absolute contradiction of the Code, all the articles and provisions of which suppose property to be based upon the fact of first occupancy. If labor, through the appropriation which results from it, alone gives birth to property, the Civil Code lies, the charter is a falsehood, our whole social system is a violation of right. To this conclusion shall we come, at the end of the discussion which is to occupy our attention in this chapter and the following one, both as to the right of labor and the fact of property. We shall see, on the one hand, our legislation in opposition to itself; and, on the other hand, our new jurisprudence in opposition both to its own principle and to our legislation. I have asserted that the system which bases property upon labor implies, no less than that which bases it upon occupation, the equality of fortunes; and the reader must be impatient to learn how I propose to deduce this law of equality from the inequality of skill and faculties: directly his curiosity shall be satisfied. But it is proper that I should call his attention for a moment to this remarkable feature of the process; to wit, the substitution of labor for occupation as the principle of property; and that I should pass rapidly in review some of the prejudices to which proprietors are accustomed to appeal, which legislation has sanctioned, and which the system of labor completely overthrows. Reader, were you ever present at the examination of a criminal? Have you watched his tricks, his turns, his evasions, his distinctions, his equivocations? Beaten, all his assertions overthrown, pursued like a fallow deer by the in exorable judge, tracked from hypothesis to hypothesis,--he makes a statement, he corrects it, retracts it, contradicts it, he exhausts all the tricks of dialectics, more subtle, more ingenious a thousand times than he who invented the seventy-two forms of the syllogism. So acts the proprietor when called upon to defend his right. At first he refuses to reply, he exclaims, he threatens, he defies; then, forced to accept the discussion, he arms himself with chicanery, he surrounds himself with formidable artillery,--crossing his fire, opposing one by one and all together occupation, possession, limitation, covenants, immemorial custom, and universal consent. Conquered on this ground, the proprietor, like a wounded boar, turns on his pursuers. "I have done more than occupy," he cries with terrible emotion; "I have labored, produced, improved, transformed, CREATED. This house, these fields, these trees are the work of my hands; I changed these brambles into a vineyard, and this bush into a fig-tree; and to-day I reap the harvest of my labors. I have enriched the soil with my sweat; I have paid those men who, had they not had the work which I gave them, would have died of hunger. No one shared with me the trouble and expense; no one shall share with me the benefits." You have labored, proprietor! why then do you speak of original occupancy? What, were you not sure of your right, or did you hope to deceive men, and make justice an illusion? Make haste, then, to acquaint us with your mode of defence, for the judgment will be final; and you know it to be a question of restitution. You have labored! but what is there in common between the labor which duty compels you to perform, and the appropriation of things in which there is a common interest? Do you not know that domain over the soil, like that over air and light, cannot be lost by prescription? You have labored! have you never made others labor? Why, then, have they lost in laboring for you what you have gained in not laboring for them? You have labored! very well; but let us see the results of your labor. We will count, weigh, and measure them. It will be the judgment of Balthasar; for I swear by balance, level, and square, that if you have appropriated another's labor in any way whatsoever, you shall restore it every stroke. Thus, the principle of occupation is abandoned; no longer is it said, "The land belongs to him who first gets possession of it." Property, forced into its first intrenchment, repudiates its old adage; justice, ashamed, retracts her maxims, and sorrow lowers her bandage over her blushing cheeks. And it was but yesterday that this progress in social philosophy began: fifty centuries required for the extirpation of a lie! During this lamentable period, how many usurpations have been sanctioned, how many invasions glorified, how many conquests celebrated! The absent dispossessed, the poor banished, the hungry excluded by wealth, which is so ready and bold in action! Jealousies and wars, incendiarism and bloodshed, among the nations! But henceforth, thanks to the age and its spirit, it is to be admitted that the earth is not a prize to be won in a race; in the absence of any other obstacle, there is a place for everybody under the sun. Each one may harness his goat to the bearn, drive his cattle to pasture, sow a corner of a field, and bake his bread by his own fireside. But, no; each one cannot do these things. I hear it proclaimed on all sides, "Glory to labor and industry! to each according to his capacity; to each capacity according to its results!" And I see three-fourths of the human race again despoiled, the labor of a few being a scourge to the labor of the rest. "The problem is solved," exclaims M. Hennequin. "Property, the daughter of labor, can be enjoyed at present and in the future only under the protection of the laws. It has its origin in natural law; it derives its power from civil law; and from the union of these two ideas, LABOR and PROTECTION, positive legislation results."... Ah! THE PROBLEM IS SOLVED! PROPERTY IS THE DAUGHTER OF LABOR! What, then, is the right of accession, and the right of succession, and the right of donation, &c., if not the right to become a proprietor by simple occupancy? What are your laws concerning the age of majority, emancipation, guardianship, and interdiction, if not the various conditions by which he who is already a laborer gains or loses the right of occupancy; that is, property? Being unable, at this time, to enter upon a detailed discussion of the Code, I shall content myself with examining the three arguments oftenest resorted to in support of property. 1. APPROPRIATION, or the formation of property by possession; 2. THE CONSENT OF MANKIND; 3. PRESCRIPTION. I shall then inquire into the effects of labor upon the relative condition of the laborers and upon property. % 1.--The Land cannot be Appropriated. "It would seem that lands capable of cultivation ought to be regarded as natural wealth, since they are not of human creation, but Nature's gratuitous gift to man; but inasmuch as this wealth is not fugitive, like the air and water,--inasmuch as a field is a fixed and limited space which certain men have been able to appropriate, to the exclusion of all others who in their turn have consented to this appropriation,--the land, which was a natural and gratuitous gift, has become social wealth, for the use of which we ought to pay."--SAY: POLITICAL ECONOMY. Was I wrong in saying, at the beginning of this chapter, that the economists are the very worst authorities in matters of legislation and philosophy? It is the FATHER of this class of men who clearly states the question, How can the supplies of Nature, the wealth created by Providence, become private property? and who replies by so gross an equivocation that we scarcely know which the author lacks, sense or honesty. What, I ask, has the fixed and solid nature of the earth to do with the right of appropriation? I can understand that a thing LIMITED and STATIONARY, like the land, offers greater chances for appropriation than the water or the sunshine; that it is easier to exercise the right of domain over the soil than over the atmosphere: but we are not dealing with the difficulty of the thing, and Say confounds the right with the possibility. We do not ask why the earth has been appropriated to a greater extent than the sea and the air; we want to know by what right man has appropriated wealth WHICH HE DID NOT CREATE, AND WHICH NATURE GAVE TO HIM GRATUITOUSLY. Say, then, did not solve the question which he asked. But if he had solved it, if the explanation which he has given us were as satisfactory as it is illogical, we should know no better than before who has a right to exact payment for the use of the soil, of this wealth which is not man's handiwork. Who is entitled to the rent of the land? The producer of the land, without doubt. Who made the land? God. Then, proprietor, retire! But the creator of the land does not sell it: he gives it; and, in giving it, he is no respecter of persons. Why, then, are some of his children regarded as legitimate, while others are treated as bastards? If the equality of shares was an original right, why is the inequality of conditions a posthumous right? Say gives us to understand that if the air and the water were not of a FUGITIVE nature, they would have been appropriated. Let me observe in passing that this is more than an hypothesis; it is a reality. Men have appropriated the air and the water, I will not say as often as they could, but as often as they have been allowed to. The Portuguese, having discovered the route to India by the Cape of Good Hope, pretended to have the sole right to that route; and Grotius, consulted in regard to this matter by the Dutch who refused to recognize this right, wrote expressly for this occasion his treatise on the "Freedom of the Seas," to prove that the sea is not liable to appropriation. The right to hunt and fish used always to be confined to lords and proprietors; to-day it is leased by the government and communes to whoever can pay the license-fee and the rent. To regulate hunting and fishing is an excellent idea, but to make it a subject of sale is to create a monopoly of air and water. What is a passport? A universal recommendation of the traveller's person; a certificate of security for himself and his property. The treasury, whose nature it is to spoil the best things, has made the passport a means of espionage and a tax. Is not this a sale of the right to travel? Finally, it is permissible neither to draw water from a spring situated in another's grounds without the permission of the proprietor, because by the right of accession the spring belongs to the possessor of the soil, if there is no other claim; nor to pass a day on his premises without paying a tax; nor to look at a court, a garden, or an orchard, without the consent of the proprietor; nor to stroll in a park or an enclosure against the owner's will: every one is allowed to shut himself up and to fence himself in. All these prohibitions are so many positive interdictions, not only of the land, but of the air and water. We who belong to the proletaire class: property excommunicates us! _Terra, et aqua, et aere, et igne interdicti sumus_. Men could not appropriate the most fixed of all the elements without appropriating the three others; since, by French and Roman law, property in the surface carries with it property from zenith to nadir--_Cujus est solum, ejus est usque ad caelum_. Now, if the use of water, air, and fire excludes property, so does the use of the soil. This chain of reasoning seems to have been presented by M. Ch. Comte, in his "Treatise on Property," chap. 5. "If a man should be deprived of air for a few moments only, he would cease to exist, and a partial deprivation would cause him severe suffering; a partial or complete deprivation of food would produce like effects upon him though less suddenly; it would be the same, at least in certain climates! were he deprived of all clothing and shelter.... To sustain life, then, man needs continually to appropriate many different things. But these things do not exist in like proportions. Some, such as the light of the stars, the atmosphere of the earth, the water composing the seas and oceans, exist in such large quantities that men cannot perceive any sensible increase or diminution; each one can appropriate as much as his needs require without detracting from the enjoyment of others, without causing them the least harm. Things of this sort are, so to speak, the common property of the human race; the only duty imposed upon each individual in this regard is that of infringing not at all upon the rights of others." Let us complete the argument of M. Ch. Comte. A man who should be prohibited from walking in the highways, from resting in the fields, from taking shelter in caves, from lighting fires, from picking berries, from gathering herbs and boiling them in a bit of baked clay,--such a man could not live. Consequently the earth--like water, air, and light--is a primary object of necessity which each has a right to use freely, without infringing another's right. Why, then, is the earth appropriated? M. Ch. Comte's reply is a curious one. Say pretends that it is because it is not FUGITIVE; M. Ch. Comte assures us that it is because it is not INFINITE. The land is limited in amount. Then, according to M. Ch. Comte, it ought to be appropriated. It would seem, on the contrary, that he ought to say, Then it ought not to be appropriated. Because, no matter how large a quantity of air or light any one appropriates, no one is damaged thereby; there always remains enough for all. With the soil, it is very different. Lay hold who will, or who can, of the sun's rays, the passing breeze, or the sea's billows; he has my consent, and my pardon for his bad intentions. But let any living man dare to change his right of territorial possession into the right of property, and I will declare war upon him, and wage it to the death! M. Ch. Comte's argument disproves his position. "Among the things necessary to the preservation of life," he says, "there are some which exist in such large quantities that they are inexhaustible; others which exist in lesser quantities, and can satisfy the wants of only a certain number of persons. The former are called COMMON, the latter PRIVATE." This reasoning is not strictly logical. Water, air, and light are COMMON things, not because they are INEXHAUSTIBLE, but because they are INDISPENSABLE; and so indispensable that for that very reason Nature has created them in quantities almost infinite, in order that their plentifulness might prevent their appropriation. Likewise the land is indispensable to our existence,--consequently a common thing, consequently insusceptible of appropriation; but land is much scarcer than the other elements, therefore its use must be regulated, not for the profit of a few, but in the interest and for the security of all. In a word, equality of rights is proved by equality of needs. Now, equality of rights, in the case of a commodity which is limited in amount, can be realized only by equality of possession. An agrarian law underlies M. Ch. Comte's arguments. From whatever point we view this question of property--provided we go to the bottom of it--we reach equality. I will not insist farther on the distinction between things which can, and things which cannot, be appropriated. On this point, economists and legists talk worse than nonsense. The Civil Code, after having defined property, says nothing about susceptibility of appropriation; and if it speaks of things which are in THE MARKET, it always does so without enumerating or describing them. However, light is not wanting. There are some few maxims such as these: _Ad reges potestas omnium pertinet, ad singulos proprietas; Omnia rex imperio possidet, singula dominio_. Social sovereignty opposed to private property!--might not that be called a prophecy of equality, a republican oracle? Examples crowd upon us: once the possessions of the church, the estates of the crown, the fiefs of the nobility were inalienable and imprescriptible. If, instead of abolishing this privilege, the Constituent had extended it to every individual; if it had declared that the right of labor, like liberty, can never be forfeited,--at that moment the revolution would have been consummated, and we could now devote ourselves to improvement in other directions. % 2.--Universal Consent no Justification of Property. In the extract from Say, quoted above, it is not clear whether the author means to base the right of property on the stationary character of the soil, or on the consent which he thinks all men have granted to this appropriation. His language is such that it may mean either of these things, or both at once; which entitles us to assume that the author intended to say, "The right of property resulting originally from the exercise of the will, the stability of the soil permitted it to be applied to the land, and universal consent has since sanctioned this application." However that may be, can men legitimate property by mutual consent? I say, no. Such a contract, though drafted by Grotius, Montesquieu, and J. J. Rousseau, though signed by the whole human race, would be null in the eyes of justice, and an act to enforce it would be illegal. Man can no more give up labor than liberty. Now, to recognize the right of territorial property is to give up labor, since it is to relinquish the means of labor; it is to traffic in a natural right, and divest ourselves of manhood. But I wish that this consent, of which so much is made, had been given, either tacitly or formally. What would have been the result? Evidently, the surrenders would have been reciprocal; no right would have been abandoned without the receipt of an equivalent in exchange. We thus come back to equality again,--the sine qua non of appropriation; so that, after having justified property by universal consent, that is, by equality, we are obliged to justify the inequality of conditions by property. Never shall we extricate ourselves from this dilemma. Indeed, if, in the terms of the social compact, property has equality for its condition, at the moment when equality ceases to exist, the compact is broken and all property becomes usurpation. We gain nothing, then, by this pretended consent of mankind. % 3.--Prescription Gives No Title to Property. The right of property was the origin of evil on the earth, the first link in the long chain of crimes and misfortunes which the human race has endured since its birth. The delusion of prescription is the fatal charm thrown over the intellect, the death sentence breathed into the conscience, to arrest man's progress towards truth, and bolster up the worship of error. The Code defines prescription thus: "The process of gaining and losing through the lapse of time." In applying this definition to ideas and beliefs, we may use the word PRESCRIPTION to denote the everlasting prejudice in favor of old superstitions, whatever be their object; the opposition, often furious and bloody, with which new light has always been received, and which makes the sage a martyr. Not a principle, not a discovery, not a generous thought but has met, at its entrance into the world, with a formidable barrier of preconceived opinions, seeming like a conspiracy of all old prejudices. Prescriptions against reason, prescriptions against facts, prescriptions against every truth hitherto unknown,--that is the sum and substance of the _statu quo_ philosophy, the watchword of conservatives throughout the centuries. When the evangelical reform was broached to the world, there was prescription in favor of violence, debauchery, and selfishness; when Galileo, Descartes, Pascal, and their disciples reconstructed philosophy and the sciences, there was prescription in favor of the Aristotelian philosophy; when our fathers of '89 demanded liberty and equality, there was prescription in favor of tyranny and privilege. "There always have been proprietors and there always will be:" it is with this profound utterance, the final effort of selfishness dying in its last ditch, that the friends of social inequality hope to repel the attacks of their adversaries; thinking undoubtedly that ideas, like property, can be lost by prescription. Enlightened to-day by the triumphal march of science, taught by the most glorious successes to question our own opinions, we receive with favor and applause the observer of Nature, who, by a thousand experiments based upon the most profound analysis, pursues a new principle, a law hitherto undiscovered. We take care to repel no idea, no fact, under the pretext that abler men than ourselves lived in former days, who did not notice the same phenomena, nor grasp the same analogies. Why do we not preserve a like attitude towards political and philosophical questions? Why this ridiculous mania for affirming that every thing has been said, which means that we know all about mental and moral science? Why is the proverb, THERE IS NOTHING NEW UNDER THE SUN, applied exclusively to metaphysical investigations? Because we still study philosophy with the imagination, instead of by observation and method; because fancy and will are universally regarded as judges, in the place of arguments and facts,--it has been impossible to this day to distinguish the charlatan from the philosopher, the savant from the impostor. Since the days of Solomon and Pythagoras, imagination has been exhausted in guessing out social and psychological laws; all systems have been proposed. Looked at in this light, it is probably true that EVERY THING HAS BEEN SAID; but it is no less true that EVERY THING REMAINS TO BE PROVED. In politics (to take only this branch of philosophy), in politics every one is governed in his choice of party by his passion and his interests; the mind is submitted to the impositions of the will,--there is no knowledge, there is not even a shadow of certainty. In this way, general ignorance produces general tyranny; and while liberty of thought is written in the charter, slavery of thought, under the name of MAJORITY RULE, is decreed by the charter. In order to confine myself to the civil prescription of which the Code speaks, I shall refrain from beginning a discussion upon this worn-out objection brought forward by proprietors; it would be too tiresome and declamatory. Everybody knows that there are rights which cannot be prescribed; and, as for those things which can be gained through the lapse of time, no one is ignorant of the fact that prescription requires certain conditions, the omission of one of which renders it null. If it is true, for example, that the proprietor's possession has been CIVIL, PUBLIC, PEACEABLE, and UNINTERRUPTED, it is none the less true that it is not based on a just title; since the only titles which it can show--occupation and labor--prove as much for the proletaire who demands, as for the proprietor who defends. Further, this possession is DISHONEST, since it is founded on a violation of right, which prevents prescription, according to the saying of St. Paul--_Nunquam in usucapionibus juris error possessori prodest_. The violation of right lies either in the fact that the holder possesses as proprietor, while he should possess only as usufructuary; or in the fact that he has purchased a thing which no one had a right to transfer or sell. Another reason why prescription cannot be adduced in favor of property (a reason borrowed from jurisprudence) is that the right to possess real estate is a part of a universal right which has never been totally destroyed even at the most critical periods; and the proletaire, in order to regain the power to exercise it fully, has only to prove that he has always exercised it in part. He, for example, who has the universal right to possess, give, exchange, loan, let, sell, transform, or destroy a thing, preserves the integrity of this right by the sole act of loaning, though he has never shown his authority in any other manner. Likewise we shall see that EQUALITY OF POSSESSIONS, EQUALITY OF RIGHTS, LIBERTY, WILL, PERSONALITY, are so many identical expressions of one and the same idea,--the RIGHT OF PRESERVATION and DEVELOPMENT; in a word, the right of life, against which there can be no prescription until the human race has vanished from the face of the earth. Finally, as to the time required for prescription, it would be superfluous to show that the right of property in general cannot be acquired by simple possession for ten, twenty, a hundred, a thousand, or one hundred thousand years; and that, so long as there exists a human head capable of understanding and combating the right of property, this right will never be prescribed. For principles of jurisprudence and axioms of reason are different from accidental and contingent facts. One man's possession can prescribe against another man's possession; but just as the possessor cannot prescribe against himself, so reason has always the faculty of change and reformation. Past error is not binding on the future. Reason is always the same eternal force. The institution of property, the work of ignorant reason, may be abrogated by a more enlightened reason. Consequently, property cannot be established by prescription. This is so certain and so true, that on it rests the maxim that in the matter of prescription a violation of right goes for nothing. But I should be recreant to my method, and the reader would have the right to accuse me of charlatanism and bad faith, if I had nothing further to advance concerning prescription. I showed, in the first place, that appropriation of land is illegal; and that, supposing it to be legal, it must be accompanied by equality of property. I have shown, in the second place, that universal consent proves nothing in favor of property; and that, if it proves any thing, it proves equality of property. I have yet to show that prescription, if admissible at all, presupposes equality of property. This demonstration will be neither long nor difficult. I need only to call attention to the reasons why prescription was introduced. "Prescription," says Dunod, "seems repugnant to natural equity, which permits no one either to deprive another of his possessions without his knowledge and consent, or to enrich himself at another's expense. But as it might often happen, in the absence of prescription, that one who had honestly earned would be ousted after long possession; and even that he who had received a thing from its rightful owner, or who had been legitimately relieved from all obligations, would, on losing his title, be liable to be dispossessed or subjected again,--the public welfare demanded that a term should be fixed, after the expiration of which no one should be allowed to disturb actual possessors, or reassert rights too long neglected.... The civil law, in regulating prescription, has aimed, then, only to perfect natural law, and to supplement the law of nations; and as it is founded on the public good, which should always be considered before individual welfare,--_bono publico usucapio introducta est_,--it should be regarded with favor, provided the conditions required by the law are fulfilled." Toullier, in his "Civil Law," says: "In order that the question of proprietorship may not remain too long unsettled, and thereby injure the public welfare, disturbing the peace of families and the stability of social transactions, the law has fixed a time when all claims shall be cancelled, and possession shall regain its ancient prerogative through its transformation into property." Cassiodorus said of property, that it was the only safe harbor in which to seek shelter from the tempests of chicanery and the gales of avarice--_Hic unus inter humanas pro cellas portus, quem si homines fervida voluntate praeterierint; in undosis semper jurgiis errabunt_. Thus, in the opinion of the authors, prescription is a means of preserving public order; a restoration in certain cases of the original mode of acquiring property; a fiction of the civil law which derives all its force from the necessity of settling differences which otherwise would never end. For, as Grotius says, time has no power to produce effects; all things happen in time, but nothing is done by time. Prescription, or the right of acquisition through the lapse of time, is, therefore, a fiction of the law, conventionally adopted. But all property necessarily originated in prescription, or, as the Latins say, in _usucapion;_ that is, in continued possession. I ask, then, in the first place, how possession can become property by the lapse of time? Continue possession as long as you wish, continue it for years and for centuries, you never can give duration--which of itself creates nothing, changes nothing, modifies nothing--the power to change the usufructuary into a proprietor. Let the civil law secure against chance-comers the honest possessor who has held his position for many years,--that only confirms a right already respected; and prescription, applied in this way, simply means that possession which has continued for twenty, thirty, or a hundred years shall be retained by the occupant. But when the law declares that the lapse of time changes possessor into proprietor, it supposes that a right can be created without a producing cause; it unwarrantably alters the character of the subject; it legislates on a matter not open to legislation; it exceeds its own powers. Public order and private security ask only that possession shall be protected. Why has the law created property? Prescription was simply security for the future; why has the law made it a matter of privilege? Thus the origin of prescription is identical with that of property itself; and since the latter can legitimate itself only when accompanied by equality, prescription is but another of the thousand forms which the necessity of maintaining this precious equality has taken. And this is no vain induction, no far-fetched inference. The proof is written in all the codes. And, indeed, if all nations, through their instinct of justice and their conservative nature, have recognized the utility and the necessity of prescription; and if their design has been to guard thereby the interests of the possessor,--could they not do something for the absent citizen, separated from his family and his country by commerce, war, or captivity, and in no position to exercise his right of possession? No. Also, at the same time that prescription was introduced into the laws, it was admitted that property is preserved by intent alone,--_nudo animo_. Now, if property is preserved by intent alone, if it can be lost only by the action of the proprietor, what can be the use of prescription? How does the law dare to presume that the proprietor, who preserves by intent alone, intended to abandon that which he has allowed to be prescribed? What lapse of time can warrant such a conjecture; and by what right does the law punish the absence of the proprietor by depriving him of his goods? What then! we found but a moment since that prescription and property were identical; and now we find that they are mutually destructive! Grotius, who perceived this difficulty, replied so singularly that his words deserve to be quoted: _Bene sperandum de hominibus, ac propterea non putandum eos hoc esse animo ut, rei caducae causa, hominem alterum velint in perpetuo peccato versari, quo d evitari saepe non poterit sine tali derelictione_. "Where is the man," he says, "with so unchristian a soul that, for a trifle, he would perpetuate the trespass of a possessor, which would inevitably be the result if he did not consent to abandon his right?" By the Eternal! I am that man. Though a million proprietors should burn for it in hell, I lay the blame on them for depriving me of my portion of this world's goods. To this powerful consideration Grotius rejoins, that it is better to abandon a disputed right than to go to law, disturb the peace of nations, and stir up the flames of civil war. I accept, if you wish it, this argument, provided you indemnify me. But if this indemnity is refused me, what do I, a proletaire, care for the tranquillity and security of the rich? I care as little for PUBLIC ORDER as for the proprietor's safety. I ask to live a laborer; otherwise I will die a warrior. Whichever way we turn, we shall come to the conclusion that prescription is a contradiction of property; or rather that prescription and property are two forms of the same principle, but two forms which serve to correct each other; and ancient and modern jurisprudence did not make the least of its blunders in pretending to reconcile them. Indeed, if we see in the institution of property only a desire to secure to each individual his share of the soil and his right to labor; in the distinction between naked property and possession only an asylum for absentees, orphans, and all who do not know, or cannot maintain, their rights; in prescription only a means, either of defence against unjust pretensions and encroachments, or of settlement of the differences caused by the removal of possessors,--we shall recognize in these various forms of human justice the spontaneous efforts of the mind to come to the aid of the social instinct; we shall see in this protection of all rights the sentiment of equality, a constant levelling tendency. And, looking deeper, we shall find in the very exaggeration of these principles the confirmation of our doctrine; because, if equality of conditions and universal association are not soon realized, it will be owing to the obstacle thrown for the time in the way of the common sense of the people by the stupidity of legislators and judges; and also to the fact that, while society in its original state was illuminated with a flash of truth, the early speculations of its leaders could bring forth nothing but darkness. After the first covenants, after the first draughts of laws and constitutions, which were the expression of man's primary needs, the legislator's duty was to reform the errors of legislation; to complete that which was defective; to harmonize, by superior definitions, those things which seemed to conflict. Instead of that, they halted at the literal meaning of the laws, content to play the subordinate part of commentators and scholiasts. Taking the inspirations of the human mind, at that time necessarily weak and faulty, for axioms of eternal and unquestionable truth,--influenced by public opinion, enslaved by the popular religion,--they have invariably started with the principle (following in this respect the example of the theologians) that that is infallibly true which has been admitted by all persons, in all places, and at all times--_quod ab omnibus, quod ubique, quod semper;_ as if a general but spontaneous opinion was any thing more than an indication of the truth. Let us not be deceived: the opinion of all nations may serve to authenticate the perception of a fact, the vague sentiment of a law; it can teach us nothing about either fact or law. The consent of mankind is an indication of Nature; not, as Cicero says, a law of Nature. Under the indication is hidden the truth, which faith can believe, but only thought can know. Such has been the constant progress of the human mind in regard to physical phenomena and the creations of genius: how can it be otherwise with the facts of conscience and the rules of human conduct? % 4.--Labor--That Labor Has No Inherent Power to Appropriate Natural Wealth. We shall show by the maxims of political economy and law, that is, by the authorities recognized by property,-- 1. That labor has no inherent power to appropriate natural wealth. 2. That, if we admit that labor has this power, we are led directly to equality of property,--whatever the kind of labor, however scarce the product, or unequal the ability of the laborers. 3. That, in the order of justice, labor DESTROYS property. Following the example of our opponents, and that we may leave no obstacles in the path, let us examine the question in the strongest possible light. M. Ch. Comte says, in his "Treatise on Property:"-- "France, considered as a nation, has a territory which is her own." France, as an individuality, possesses a territory which she cultivates; it is not her property. Nations are related to each other as individuals are: they are commoners and workers; it is an abuse of language to call them proprietors. The right of use and abuse belongs no more to nations than to men; and the time will come when a war waged for the purpose of checking a nation in its abuse of the soil will be regarded as a holy war. Thus, M. Ch. Comte--who undertakes to explain how property comes into existence, and who starts with the supposition that a nation is a proprietor--falls into that error known as BEGGING THE QUESTION; a mistake which vitiates his whole argument. If the reader thinks it is pushing logic too far to question a nation's right of property in the territory which it possesses, I will simply remind him of the fact that at all ages the results of the fictitious right of national property have been pretensions to suzerainty, tributes, monarchical privileges, statute-labor, quotas of men and money, supplies of merchandise, &c.; ending finally in refusals to pay taxes, insurrections, wars, and depopulations. "Scattered through this territory are extended tracts of land, which have not been converted into individual property. These lands, which consist mainly of forests, belong to the whole population, and the government, which receives the revenues, uses or ought to use them in the interest of all." OUGHT TO USE is well said: a lie is avoided thereby. "Let them be offered for sale...." Why offered for sale? Who has a right to sell them? Even were the nation proprietor, can the generation of to-day dispossess the generation of to-morrow? The nation, in its function of usufructuary, possesses them; the government rules, superintends, and protects them. If it also granted lands, it could grant only their use; it has no right to sell them or transfer them in any way whatever. Not being a proprietor, how can it transmit property? "Suppose some industrious man buys a portion, a large swamp for example. This would be no usurpation, since the public would receive the exact value through the hands of the government, and would be as rich after the sale as before." How ridiculous! What! because a prodigal, imprudent, incompetent official sells the State's possessions, while I, a ward of the State,--I who have neither an advisory nor a deliberative voice in the State councils,--while I am allowed to make no opposition to the sale, this sale is right and legal! The guardians of the nation waste its substance, and it has no redress! I have received, you tell me, through the hands of the government my share of the proceeds of the sale: but, in the first place, I did not wish to sell; and, had I wished to, I could not have sold. I had not the right. And then I do not see that I am benefited by the sale. My guardians have dressed up some soldiers, repaired an old fortress, erected in their pride some costly but worthless monument,--then they have exploded some fireworks and set up a greased pole! What does all that amount to in comparison with my loss? The purchaser draws boundaries, fences himself in, and says, "This is mine; each one by himself, each one for himself." Here, then, is a piece of land upon which, henceforth, no one has a right to step, save the proprietor and his friends; which can benefit nobody, save the proprietor and his servants. Let these sales multiply, and soon the people--who have been neither able nor willing to sell, and who have received none of the proceeds of the sale--will have nowhere to rest, no place of shelter, no ground to till. They will die of hunger at the proprietor's door, on the edge of that property which was their birthright; and the proprietor, watching them die, will exclaim, "So perish idlers and vagrants!" To reconcile us to the proprietor's usurpation, M. Ch. Comte assumes the lands to be of little value at the time of sale. "The importance of these usurpations should not be exaggerated: they should be measured by the number of men which the occupied land would support, and by the means which it would furnish them. "It is evident, for instance, that if a piece of land which is worth to-day one thousand francs was worth only five centimes when it was usurped, we really lose only the value of five centimes. A square league of earth would be hardly sufficient to support a savage in distress; to-day it supplies one thousand persons with the means of existence. Nine hundred and ninety-nine parts of this land is the legitimate property of the possessors; only one-thousandth of the value has been usurped." A peasant admitted one day, at confession, that he had destroyed a document which declared him a debtor to the amount of three hundred francs. Said the father confessor, "You must return these three hundred francs." "No," replied the peasant, "I will return a penny to pay for the paper." M. Ch. Comte's logic resembles this peasant's honesty. The soil has not only an integrant and actual value, it has also a potential value,--a value of the future,--which depends on our ability to make it valuable, and to employ it in our work. Destroy a bill of exchange, a promissory note, an annuity deed,--as a paper you destroy almost no value at all; but with this paper you destroy your title, and, in losing your title, you deprive yourself of your goods. Destroy the land, or, what is the same thing, sell it,--you not only transfer one, two, or several crops, but you annihilate all the products that you could derive from it; you and your children and your children's children. When M. Ch. Comte, the apostle of property and the eulogist of labor, supposes an alienation of the soil on the part of the government, we must not think that he does so without reason and for no purpose; it is a necessary part of his position. As he rejected the theory of occupancy, and as he knew, moreover, that labor could not constitute the right in the absence of a previous permission to occupy, he was obliged to connect this permission with the authority of the government, which means that property is based upon the sovereignty of the people; in other words, upon universal consent. This theory we have already considered. To say that property is the daughter of labor, and then to give labor material on which to exercise itself, is, if I am not mistaken, to reason in a circle. Contradictions will result from it. "A piece of land of a certain size produces food enough to supply a man for one day. If the possessor, through his labor, discovers some method of making it produce enough for two days, he doubles its value. This new value is his work, his creation: it is taken from nobody; it is his property." I maintain that the possessor is paid for his trouble and industry in his doubled crop, but that he acquires no right to the land. "Let the laborer have the fruits of his labor." Very good; but I do not understand that property in products carries with it property in raw material. Does the skill of the fisherman, who on the same coast can catch more fish than his fellows, make him proprietor of the fishing-grounds? Can the expertness of a hunter ever be regarded as a property-title to a game-forest? The analogy is perfect,--the industrious cultivator finds the reward of his industry in the abundancy and superiority of his crop. If he has made improvements in the soil, he has the possessor's right of preference. Never, under any circumstances, can he be allowed to claim a property-title to the soil which he cultivates, on the ground of his skill as a cultivator. To change possession into property, something is needed besides labor, without which a man would cease to be proprietor as soon as he ceased to be a laborer. Now, the law bases property upon immemorial, unquestionable possession; that is, prescription. Labor is only the sensible sign, the physical act, by which occupation is manifested. If, then, the cultivator remains proprietor after he has ceased to labor and produce; if his possession, first conceded, then tolerated, finally becomes inalienable,--it happens by permission of the civil law, and by virtue of the principle of occupancy. So true is this, that there is not a bill of sale, not a farm lease, not an annuity, but implies it. I will quote only one example. How do we measure the value of land? By its product. If a piece of land yields one thousand francs, we say that at five per cent. it is worth twenty thousand francs; at four per cent. twenty-five thousand francs, &c.; which means, in other words, that in twenty or twenty-five years' time the purchaser would recover in full the amount originally paid for the land. If, then, after a certain length of time, the price of a piece of land has been wholly recovered, why does the purchaser continue to be proprietor? Because of the right of occupancy, in the absence of which every sale would be a redemption. The theory of appropriation by labor is, then, a contradiction of the Code; and when the partisans of this theory pretend to explain the laws thereby, they contradict themselves. "If men succeed in fertilizing land hitherto unproductive, or even death-producing, like certain swamps, they create thereby property in all its completeness." What good does it do to magnify an expression, and play with equivocations, as if we expected to change the reality thereby? THEY CREATE PROPERTY IN ALL ITS COMPLETENESS. You mean that they create a productive capacity which formerly did not exist; but this capacity cannot be created without material to support it. The substance of the soil remains the same; only its qualities and modifications are changed. Man has created every thing--every thing save the material itself. Now, I maintain that this material he can only possess and use, on condition of permanent labor,--granting, for the time being, his right of property in things which he has produced. This, then, is the first point settled: property in product, if we grant so much, does not carry with it property in the means of production; that seems to me to need no further demonstration. There is no difference between the soldier who possesses his arms, the mason who possesses the materials committed to his care, the fisherman who possesses the water, the hunter who possesses the fields and forests, and the cultivator who possesses the lands: all, if you say so, are proprietors of their products--not one is proprietor of the means of production. The right to product is exclusive--jus in re; the right to means is common--jus ad rem. % 5.--That Labor leads to Equality of Property. Admit, however, that labor gives a right of property in material. Why is not this principle universal? Why is the benefit of this pretended law confined to a few and denied to the mass of laborers? A philosopher, arguing that all animals sprang up formerly out of the earth warmed by the rays of the sun, almost like mushrooms, on being asked why the earth no longer yielded crops of that nature, replied: "Because it is old, and has lost its fertility." Has labor, once so fecund, likewise become sterile? Why does the tenant no longer acquire through his labor the land which was formerly acquired by the labor of the proprietor? "Because," they say, "it is already appropriated." That is no answer. A farm yields fifty bushels per hectare; the skill and labor of the tenant double this product: the increase is created by the tenant. Suppose the owner, in a spirit of moderation rarely met with, does not go to the extent of absorbing this product by raising the rent, but allows the cultivator to enjoy the results of his labor; even then justice is not satisfied. The tenant, by improving the land, has imparted a new value to the property; he, therefore, has a right to a part of the property. If the farm was originally worth one hundred thousand francs, and if by the labor of the tenant its value has risen to one hundred and fifty thousand francs, the tenant, who produced this extra value, is the legitimate proprietor of one-third of the farm. M. Ch. Comte could not have pronounced this doctrine false, for it was he who said:-- "Men who increase the fertility of the earth are no less useful to their fellow-men, than if they should create new land." Why, then, is not this rule applicable to the man who improves the land, as well as to him who clears it? The labor of the former makes the land worth one; that of the latter makes it worth two: both create equal values. Why not accord to both equal property? I defy any one to refute this argument, without again falling back on the right of first occupancy. "But," it will be said, "even if your wish should be granted, property would not be distributed much more evenly than now. Land does not go on increasing in value for ever; after two or three seasons it attains its maximum fertility. That which is added by the agricultural art results rather from the progress of science and the diffusion of knowledge, than from the skill of the cultivator. Consequently, the addition of a few laborers to the mass of proprietors would be no argument against property." This discussion would, indeed, prove a well-nigh useless one, if our labors culminated in simply extending land-privilege and industrial monopoly; in emancipating only a few hundred laborers out of the millions of proletaires. But this also is a misconception of our real thought, and does but prove the general lack of intelligence and logic. If the laborer, who adds to the value of a thing, has a right of property in it, he who maintains this value acquires the same right. For what is maintenance? It is incessant addition,--continuous creation. What is it to cultivate? It is to give the soil its value every year; it is, by annually renewed creation, to prevent the diminution or destruction of the value of a piece of land. Admitting, then, that property is rational and legitimate,--admitting that rent is equitable and just,--I say that he who cultivates acquires property by as good a title as he who clears, or he who improves; and that every time a tenant pays his rent, he obtains a fraction of property in the land entrusted to his care, the denominator of which is equal to the proportion of rent paid. Unless you admit this, you fall into absolutism and tyranny; you recognize class privileges; you sanction slavery. Whoever labors becomes a proprietor--this is an inevitable deduction from the acknowledged principles of political economy and jurisprudence. And when I say proprietor, I do not mean simply (as do our hypocritical economists) proprietor of his allowance, his salary, his wages,--I mean proprietor of the value which he creates, and by which the master alone profits. As all this relates to the theory of wages and of the distribution of products,--and as this matter never has been even partially cleared up,--I ask permission to insist on it: this discussion will not be useless to the work in hand. Many persons talk of admitting working-people to a share in the products and profits; but in their minds this participation is pure benevolence: they have never shown--perhaps never suspected--that it was a natural, necessary right, inherent in labor, and inseparable from the function of producer, even in the lowest forms of his work. This is my proposition: THE LABORER RETAINS, EVEN AFTER HE HAS RECEIVED HIS WAGES, A NATURAL RIGHT OF PROPERTY IN THE THING WHICH HE HAS PRODUCED. I again quote M. Ch. Comte:-- "Some laborers are employed in draining marshes, in cutting down trees and brushwood,--in a word, in cleaning up the soil. They increase the value, they make the amount of property larger; they are paid for the value which they add in the form of food and daily wages: it then becomes the property of the capitalist." The price is not sufficient: the labor of the workers has created a value; now this value is their property. But they have neither sold nor exchanged it; and you, capitalist, you have not earned it. That you should have a partial right to the whole, in return for the materials that you have furnished and the provisions that you have supplied, is perfectly just. You contributed to the production, you ought to share in the enjoyment. But your right does not annihilate that of the laborers, who, in spite of you, have been your colleagues in the work of production. Why do you talk of wages? The money with which you pay the wages of the laborers remunerates them for only a few years of the perpetual possession which they have abandoned to you. Wages is the cost of the daily maintenance and refreshment of the laborer. You are wrong in calling it the price of a sale. The workingman has sold nothing; he knows neither his right, nor the extent of the concession which he has made to you, nor the meaning of the contract which you pretend to have made with him. On his side, utter ignorance; on yours, error and surprise, not to say deceit and fraud. Let us make this clearer by another and more striking example. No one is ignorant of the difficulties that are met with in the conversion of untilled land into arable and productive land. These difficulties are so great, that usually an isolated man would perish before he could put the soil in a condition to yield him even the most meagre living. To that end are needed the united and combined efforts of society, and all the resources of industry. M. Ch. Comte quotes on this subject numerous and well-authenticated facts, little thinking that he is amassing testimony against his own system. Let us suppose that a colony of twenty or thirty families establishes itself in a wild district, covered with underbrush and forests; and from which, by agreement, the natives consent to withdraw. Each one of these families possesses a moderate but sufficient amount of capital, of such a nature as a colonist would be apt to choose,--animals, seeds, tools, and a little money and food. The land having been divided, each one settles himself as comfortably as possible, and begins to clear away the portion allotted to him. But after a few weeks of fatigue, such as they never before have known, of inconceivable suffering, of ruinous and almost useless labor, our colonists begin to complain of their trade; their condition seems hard to them; they curse their sad existence. Suddenly, one of the shrewdest among them kills a pig, cures a part of the meat; and, resolved to sacrifice the rest of his provisions, goes to find his companions in misery. "Friends," he begins in a very benevolent tone, "how much trouble it costs you to do a little work and live uncomfortably! A fortnight of labor has reduced you to your last extremity!... Let us make an arrangement by which you shall all profit. I offer you provisions and wine: you shall get so much every day; we will work together, and, zounds! my friends, we will be happy and contented!" Would it be possible for empty stomachs to resist such an invitation? The hungriest of them follow the treacherous tempter. They go to work; the charm of society, emulation, joy, and mutual assistance double their strength; the work can be seen to advance. Singing and laughing, they subdue Nature. In a short time, the soil is thoroughly changed; the mellowed earth waits only for the seed. That done, the proprietor pays his laborers, who, on going away, return him their thanks, and grieve that the happy days which they have spent with him are over. Others follow this example, always with the same success. Then, these installed, the rest disperse,--each one returns to his grubbing. But, while grubbing, it is necessary to live. While they have been clearing away for their neighbor, they have done no clearing for themselves. One year's seed-time and harvest is already gone. They had calculated that in lending their labor they could not but gain, since they would save their own provisions; and, while living better, would get still more money. False calculation! they have created for another the means wherewith to produce, and have created nothing for themselves. The difficulties of clearing remain the same; their clothing wears out, their provisions give out; soon their purse becomes empty for the profit of the individual for whom they have worked, and who alone can furnish the provisions which they need, since he alone is in a position to produce them. Then, when the poor grubber has exhausted his resources, the man with the provisions (like the wolf in the fable, who scents his victim from afar) again comes forward. One he offers to employ again by the day; from another he offers to buy at a favorable price a piece of his bad land, which is not, and never can be, of any use to him: that is, he uses the labor of one man to cultivate the field of another for his own benefit. So that at the end of twenty years, of thirty individuals originally equal in point of wealth, five or six have become proprietors of the whole district, while the rest have been philanthropically dispossessed! In this century of bourgeoisie morality, in which I have had the honor to be born, the moral sense is so debased that I should not be at all surprised if I were asked, by many a worthy proprietor, what I see in this that is unjust and illegitimate? Debased creature! galvanized corpse! how can I expect to convince you, if you cannot tell robbery when I show it to you? A man, by soft and insinuating words, discovers the secret of taxing others that he may establish himself; then, once enriched by their united efforts, he refuses, on the very conditions which he himself dictated, to advance the well-being of those who made his fortune for him: and you ask how such conduct is fraudulent! Under the pretext that he has paid his laborers, that he owes them nothing more, that he has nothing to gain by putting himself at the service of others, while his own occupations claim his attention,--he refuses, I say, to aid others in getting a foothold, as he was aided in getting his own; and when, in the impotence of their isolation, these poor laborers are compelled to sell their birthright, he--this ungrateful proprietor, this knavish upstart--stands ready to put the finishing touch to their deprivation and their ruin. And you think that just? Take care! I read in your startled countenance the reproach of a guilty conscience, much more clearly than the innocent astonishment of involuntary ignorance. "The capitalist," they say, "has paid the laborers their DAILY WAGES." To be accurate, it must be said that the capitalist has paid as many times one day's wage as he has employed laborers each day,--which is not at all the same thing. For he has paid nothing for that immense power which results from the union and harmony of laborers, and the convergence and simultaneousness of their efforts. Two hundred grenadiers stood the obelisk of Luxor upon its base in a few hours; do you suppose that one man could have accomplished the same task in two hundred days? Nevertheless, on the books of the capitalist, the amount of wages paid would have been the same. Well, a desert to prepare for cultivation, a house to build, a factory to run,--all these are obelisks to erect, mountains to move. The smallest fortune, the most insignificant establishment, the setting in motion of the lowest industry, demand the concurrence of so many different kinds of labor and skill, that one man could not possibly execute the whole of them. It is astonishing that the economists never have called attention to this fact. Strike a balance, then, between the capitalist's receipts and his payments. The laborer needs a salary which will enable him to live while he works; for unless he consumes, he cannot produce. Whoever employs a man owes him maintenance and support, or wages enough to procure the same. That is the first thing to be done in all production. I admit, for the moment, that in this respect the capitalist has discharged his duty. It is necessary that the laborer should find in his production, in addition to his present support, a guarantee of his future support; otherwise the source of production would dry up, and his productive capacity would become exhausted: in other words, the labor accomplished must give birth perpetually to new labor--such is the universal law of reproduction. In this way, the proprietor of a farm finds: 1. In his crops, means, not only of supporting himself and his family, but of maintaining and improving his capital, of feeding his live-stock--in a word, means of new labor and continual reproduction; 2. In his ownership of a productive agency, a permanent basis of cultivation and labor. But he who lends his services,--what is his basis of cultivation? The proprietor's presumed need of him, and the unwarranted supposition that he wishes to employ him. Just as the commoner once held his land by the munificence and condescension of the lord, so to-day the working-man holds his labor by the condescension and necessities of the master and proprietor: that is what is called possession by a precarious [15] title. But this precarious condition is an injustice, for it implies an inequality in the bargain. The laborer's wages exceed but little his running expenses, and do not assure him wages for to-morrow; while the capitalist finds in the instrument produced by the laborer a pledge of independence and security for the future. Now, this reproductive leaven--this eternal germ of life, this preparation of the land and manufacture of implements for production--constitutes the debt of the capitalist to the producer, which he never pays; and it is this fraudulent denial which causes the poverty of the laborer, the luxury of idleness, and the inequality of conditions. This it is, above all other things, which has been so fitly named the exploitation of man by man. One of three things must be done. Either the laborer must be given a portion of the product in addition to his wages; or the employer must render the laborer an equivalent in productive service; or else he must pledge himself to employ him for ever. Division of the product, reciprocity of service, or guarantee of perpetual labor,--from the adoption of one of these courses the capitalist cannot escape. But it is evident that he cannot satisfy the second and third of these conditions--he can neither put himself at the service of the thousands of working-men, who, directly or indirectly, have aided him in establishing himself, nor employ them all for ever. He has no other course left him, then, but a division of the property. But if the property is divided, all conditions will be equal--there will be no more large capitalists or large proprietors. Consequently, when M. Ch. Comte--following out his hypothesis--shows us his capitalist acquiring one after another the products of his employees' labor, he sinks deeper and deeper into the mire; and, as his argument does not change, our reply of course remains the same. "Other laborers are employed in building: some quarry the stone, others transport it, others cut it, and still others put it in place. Each of them adds a certain value to the material which passes through his hands; and this value, the product of his labor, is his property. He sells it, as fast as he creates it, to the proprietor of the building, who pays him for it in food and wages." _Divide et impera_--divide, and you shall command; divide, and you shall grow rich; divide, and you shall deceive men, you shall daze their minds, you shall mock at justice! Separate laborers from each other, perhaps each one's daily wage exceeds the value of each individual's product; but that is not the question under consideration. A force of one thousand men working twenty days has been paid the same wages that one would be paid for working fifty-five years; but this force of one thousand has done in twenty days what a single man could not have accomplished, though he had labored for a million centuries. Is the exchange an equitable one? Once more, no; when you have paid all the individual forces, the collective force still remains to be paid. Consequently, there remains always a right of collective property which you have not acquired, and which you enjoy unjustly. Admit that twenty days' wages suffice to feed, lodge, and clothe this multitude for twenty days: thrown out of employment at the end of that time, what will become of them, if, as fast as they create, they abandon their creations to the proprietors who will soon discharge them? While the proprietor, firm in his position (thanks to the aid of all the laborers), dwells in security, and fears no lack of labor or bread, the laborer's only dependence is upon the benevolence of this same proprietor, to whom he has sold and surrendered his liberty. If, then, the proprietor, shielding himself behind his comfort and his rights, refuses to employ the laborer, how can the laborer live? He has ploughed an excellent field, and cannot sow it; he has built an elegant and commodious house, and cannot live in it; he has produced all, and can enjoy nothing. Labor leads us to equality. Every step that we take brings us nearer to it; and if laborers had equal strength, diligence, and industry, clearly their fortunes would be equal also. Indeed, if, as is pretended,--and as we have admitted,--the laborer is proprietor of the value which he creates, it follows:-- 1. That the laborer acquires at the expense of the idle proprietor; 2. That all production being necessarily collective, the laborer is entitled to a share of the products and profits commensurate with his labor; 3. That all accumulated capital being social property, no one can be its exclusive proprietor. These inferences are unavoidable; these alone would suffice to revolutionize our whole economical system, and change our institutions and our laws. Why do the very persons, who laid down this principle, now refuse to be guided by it? Why do the Says, the Comtes, the Hennequins, and others--after having said that property is born of labor--seek to fix it by occupation and prescription? But let us leave these sophists to their contradictions and blindness. The good sense of the people will do justice to their equivocations. Let us make haste to enlighten it, and show it the true path. Equality approaches; already between it and us but a short distance intervenes: to-morrow even this distance will have been traversed. % 6.--That in Society all Wages are Equal. When the St. Simonians, the Fourierists, and, in general, all who in our day are connected with social economy and reform, inscribe upon their banner,-- "TO EACH ACCORDING TO HIS CAPACITY, TO EACH CAPACITY ACCORDING TO ITS RESULTS" (St. Simon); "TO EACH ACCORDING TO HIS CAPITAL, HIS LABOR, AND HIS SKILL" (Fourier),-- they mean--although they do not say so in so many words--that the products of Nature procured by labor and industry are a reward, a palm, a crown offered to all kinds of preeminence and superiority. They regard the land as an immense arena in which prizes are contended for,--no longer, it is true, with lances and swords, by force and by treachery; but by acquired wealth, by knowledge, talent, and by virtue itself. In a word, they mean--and everybody agrees with them--that the greatest capacity is entitled to the greatest reward; and, to use the mercantile phraseology,--which has, at least, the merit of being straightforward,--that salaries must be governed by capacity and its results. The disciples of these two self-styled reformers cannot deny that such is their thought; for, in doing so, they would contradict their official interpretations, and would destroy the unity of their systems. Furthermore, such a denial on their part is not to be feared. The two sects glory in laying down as a principle inequality of conditions,--reasoning from Nature, who, they say, intended the inequality of capacities. They boast only of one thing; namely, that their political system is so perfect, that the social inequalities always correspond with the natural inequalities. They no more trouble themselves to inquire whether inequality of conditions--I mean of salaries--is possible, than they do to fix a measure of capacity.[1] [1] In St. Simon's system, the St.-Simonian priest determines the capacity of each by virtue of his pontifical infallibility, in imitation of the Roman Church: in Fourier's, the ranks and merits are decided by vote, in imitation of the constitutional regime. Clearly, the great man is an object of ridicule to the reader; he did not mean to tell his secret. "To each according to his capacity, to each capacity according to its results." "To each according to his capital, his labor, and his skill." Since the death of St. Simon and Fourier, not one among their numerous disciples has attempted to give to the public a scientific demonstration of this grand maxim; and I would wager a hundred to one that no Fourierist even suspects that this biform aphorism is susceptible of two interpretations. "To each according to his capacity, to each capacity according to its results." "To each according to his capital, his labor, and his skill." This proposition, taken, as they say, _in sensu obvio_--in the sense usually attributed to it--is false, absurd, unjust, contradictory, hostile to liberty, friendly to tyranny, anti-social, and was unluckily framed under the express influence of the property idea. And, first, CAPITAL must be crossed off the list of elements which are entitled to a reward. The Fourierists--as far as I have been able to learn from a few of their pamphlets--deny the right of occupancy, and recognize no basis of property save labor. Starting with a like premise, they would have seen--had they reasoned upon the matter--that capital is a source of production to its proprietor only by virtue of the right of occupancy, and that this production is therefore illegitimate. Indeed, if labor is the sole basis of property, I cease to be proprietor of my field as soon as I receive rent for it from another. This we have shown beyond all cavil. It is the same with all capital; so that to put capital in an enterprise, is, by the law's decision, to exchange it for an equivalent sum in products. I will not enter again upon this now useless discussion, since I propose, in the following chapter, to exhaust the subject of PRODUCTION BY CAPITAL. Thus, capital can be exchanged, but cannot be a source of income. LABOR and SKILL remain; or, as St. Simon puts it, RESULTS and CAPACITIES. I will examine them successively. Should wages be governed by labor? In other words, is it just that he who does the most should get the most? I beg the reader to pay the closest attention to this point. To solve the problem with one stroke, we have only to ask ourselves the following question: "Is labor a CONDITION or a STRUGGLE?" The reply seems plain. God said to man, "In the sweat of thy face shalt thou eat bread,"--that is, thou shalt produce thy own bread: with more or less ease, according to thy skill in directing and combining thy efforts, thou shalt labor. God did not say, "Thou shalt quarrel with thy neighbor for thy bread;" but, "Thou shalt labor by the side of thy neighbor, and ye shall dwell together in harmony." Let us develop the meaning of this law, the extreme simplicity of which renders it liable to misconstruction. In labor, two things must be noticed and distinguished: ASSOCIATION and AVAILABLE MATERIAL. In so far as laborers are associated, they are equal; and it involves a contradiction to say that one should be paid more than another. For, as the product of one laborer can be paid for only in the product of another laborer, if the two products are unequal, the remainder--or the difference between the greater and the smaller--will not be acquired by society; and, therefore, not being exchanged, will not affect the equality of wages. There will result, it is true, in favor of the stronger laborer a natural inequality, but not a social inequality; no one having suffered by his strength and productive energy. In a word, society exchanges only equal products--that is, rewards no labor save that performed for her benefit; consequently, she pays all laborers equally: with what they produce outside of her sphere she has no more to do, than with the difference in their voices and their hair. I seem to be positing the principle of inequality: the reverse of this is the truth. The total amount of labor which can be performed for society (that is, of labor susceptible of exchange), being, within a given space, as much greater as the laborers are more numerous, and as the task assigned to each is less in magnitude,--it follows that natural inequality neutralizes itself in proportion as association extends, and as the quantity of consumable values produced thereby increases. So that in society the only thing which could bring back the inequality of labor would be the right of occupancy,--the right of property. Now, suppose that this daily social task consists in the ploughing, hoeing, or reaping of two square decameters, and that the average time required to accomplish it is seven hours: one laborer will finish it in six hours, another will require eight; the majority, however, will work seven. But provided each one furnishes the quantity of labor demanded of him, whatever be the time he employs, they are entitled to equal wages. Shall the laborer who is capable of finishing his task in six hours have the right, on the ground of superior strength and activity, to usurp the task of the less skilful laborer, and thus rob him of his labor and bread? Who dares maintain such a proposition? He who finishes before the others may rest, if he chooses; he may devote himself to useful exercise and labors for the maintenance of his strength, and the culture of his mind, and the pleasure of his life. This he can do without injury to any one: but let him confine himself to services which affect him solely. Vigor, genius, diligence, and all the personal advantages which result therefrom, are the work of Nature and, to a certain extent, of the individual; society awards them the esteem which they merit: but the wages which it pays them is measured, not by their power, but by their production. Now, the product of each is limited by the right of all. If the soil were infinite in extent, and the amount of available material were exhaustless, even then we could not accept this maxim,--TO EACH ACCORDING TO HIS LABOR. And why? Because society, I repeat, whatever be the number of its subjects, is forced to pay them all the same wages, since she pays them only in their own products. Only, on the hypothesis just made, inasmuch as the strong cannot be prevented from using all their advantages, the inconveniences of natural inequality would reappear in the very bosom of social equality. But the land, considering the productive power of its inhabitants and their ability to multiply, is very limited; further, by the immense variety of products and the extreme division of labor, the social task is made easy of accomplishment. Now, through this limitation of things producible, and through the ease of producing them, the law of absolute equality takes effect. Yes, life is a struggle. But this struggle is not between man and man--it is between man and Nature; and it is each one's duty to take his share in it. If, in the struggle, the strong come to the aid of the weak, their kindness deserves praise and love; but their aid must be accepted as a free gift,--not imposed by force, nor offered at a price. All have the same career before them, neither too long nor too difficult; whoever finishes it finds his reward at the end: it is not necessary to get there first. In printing-offices, where the laborers usually work by the job, the compositor receives so much per thousand letters set; the pressman so much per thousand sheets printed. There, as elsewhere, inequalities of talent and skill are to be found. When there is no prospect of dull times (for printing and typesetting, like all other trades, sometimes come to a stand-still), every one is free to work his hardest, and exert his faculties to the utmost: he who does more gets more; he who does less gets less. When business slackens, compositors and pressmen divide up their labor; all monopolists are detested as no better than robbers or traitors. There is a philosophy in the action of these printers, to which neither economists nor legists have ever risen. If our legislators had introduced into their codes the principle of distributive justice which governs printing-offices; if they had observed the popular instincts,--not for the sake of servile imitation, but in order to reform and generalize them,--long ere this liberty and equality would have been established on an immovable basis, and we should not now be disputing about the right of property and the necessity of social distinctions. It has been calculated that if labor were equally shared by the whole number of able-bodied individuals, the average working-day of each individual, in France, would not exceed five hours. This being so, how can we presume to talk of the inequality of laborers? It is the LABOR of Robert Macaire that causes inequality. The principle, TO EACH ACCORDING TO HIS LABOR, interpreted to mean, WHO WORKS MOST SHOULD RECEIVE MOST, is based, therefore, on two palpable errors: one, an error in economy, that in the labor of society tasks must necessarily be unequal; the other, an error in physics, that there is no limit to the amount of producible things. "But," it will be said, "suppose there are some people who wish to perform only half of their task?"... Is that very embarrassing? Probably they are satisfied with half of their salary. Paid according to the labor that they had performed, of what could they complain? and what injury would they do to others? In this sense, it is fair to apply the maxim,--TO EACH ACCORDING TO HIS RESULTS. It is the law of equality itself. Further, numerous difficulties, relative to the police system and the organization of industry, might be raised here. I will reply to them all with this one sentence,--that they must all be solved by the principle of equality. Thus, some one might observe, "Here is a task which cannot be postponed without detriment to production. Ought society to suffer from the negligence of a few? and will she not venture--out of respect for the right of labor--to assure with her own hands the product which they refuse her? In such a case, to whom will the salary belong?" To society; who will be allowed to perform the labor, either herself, or through her representatives, but always in such a way that the general equality shall never be violated, and that only the idler shall be punished for his idleness. Further, if society may not use excessive severity towards her lazy members, she has a right, in self-defence, to guard against abuses. But every industry needs--they will add--leaders, instructors, superintendents, &c. Will these be engaged in the general task? No; since their task is to lead, instruct, and superintend. But they must be chosen from the laborers by the laborers themselves, and must fulfil the conditions of eligibility. It is the same with all public functions, whether of administration or instruction. Then, article first of the universal constitution will be:-- "The limited quantity of available material proves the necessity of dividing the labor among the whole number of laborers. The capacity, given to all, of accomplishing a social task,--that is, an equal task,--and the impossibility of paying one laborer save in the products of another, justify the equality of wages." % 7.--That Inequality of Powers is the Necessary Condition of Equality of Fortunes. It is objected,--and this objection constitutes the second part of the St. Simonian, and the third part of the Fourierstic, maxims,-- "That all kinds of labor cannot be executed with equal ease. Some require great superiority of skill and intelligence; and on this superiority is based the price. The artist, the savant, the poet, the statesman, are esteemed only because of their excellence; and this excellence destroys all similitude between them and other men: in the presence of these heights of science and genius the law of equality disappears. Now, if equality is not absolute, there is no equality. From the poet we descend to the novelist; from the sculptor to the stonecutter; from the architect to the mason; from the chemist to the cook, &c. Capacities are classified and subdivided into orders, genera, and species. The extremes of talent are connected by intermediate talents. Humanity is a vast hierarchy, in which the individual estimates himself by comparison, and fixes his price by the value placed upon his product by the public." This objection always has seemed a formidable one. It is the stumbling-block of the economists, as well as of the defenders of equality. It has led the former into egregious blunders, and has caused the latter to utter incredible platitudes. Gracchus Babeuf wished all superiority to be STRINGENTLY REPRESSED, and even PERSECUTED AS A SOCIAL CALAMITY. To establish his communistic edifice, he lowered all citizens to the stature of the smallest. Ignorant eclectics have been known to object to the inequality of knowledge, and I should not be surprised if some one should yet rebel against the inequality of virtue. Aristotle was banished, Socrates drank the hemlock, Epaminondas was called to account, for having proved superior in intelligence and virtue to some dissolute and foolish demagogues. Such follies will be re-enacted, so long as the inequality of fortunes justifies a populace, blinded and oppressed by the wealthy, in fearing the elevation of new tyrants to power. Nothing seems more unnatural than that which we examine too closely, and often nothing seems less like the truth than the truth itself. On the other hand, according to J. J. Rousseau, "it takes a great deal of philosophy to enable us to observe once what we see every day;" and, according to d'Alembert, "the ordinary truths of life make but little impression on men, unless their attention is especially called to them." The father of the school of economists (Say), from whom I borrow these two quotations, might have profited by them; but he who laughs at the blind should wear spectacles, and he who notices him is near-sighted. Strange! that which has frightened so many minds is not, after all, an objection to equality--it is the very condition on which equality exists!... Natural inequality the condition of equality of fortunes!... What a paradox!... I repeat my assertion, that no one may think I have blundered--inequality of powers is the sine qua non of equality of fortunes. There are two things to be considered in society--FUNCTIONS and RELATIONS. I. FUNCTIONS. Every laborer is supposed to be capable of performing the task assigned to him; or, to use a common expression, "every workman must know his trade." The workman equal to his work,--there is an equation between functionary and function. In society, functions are not alike; there must be, then, different capacities. Further,--certain functions demand greater intelligence and powers; then there are people of superior mind and talent. For the performance of work necessarily involves a workman: from the need springs the idea, and the idea makes the producer. We only know what our senses long for and our intelligence demands; we have no keen desire for things of which we cannot conceive, and the greater our powers of conception, the greater our capabilities of production. Thus, functions arising from needs, needs from desires, and desires from spontaneous perception and imagination, the same intelligence which imagines can also produce; consequently, no labor is superior to the laborer. In a word, if the function calls out the functionary, it is because the functionary exists before the function. Let us admire Nature's economy. With regard to these various needs which she has given us, and which the isolated man cannot satisfy unaided, Nature has granted to the race a power refused to the individual. This gives rise to the principle of the DIVISION OF LABOR,--a principle founded on the SPECIALITY OF VOCATIONS. The satisfaction of some needs demands of man continual creation; while others can, by the labor of a single individual, be satisfied for millions of men through thousands of centuries. For example, the need of clothing and food requires perpetual reproduction; while a knowledge of the system of the universe may be acquired for ever by two or three highly-gifted men. The perpetual current of rivers supports our commerce, and runs our machinery; but the sun, alone in the midst of space, gives light to the whole world. Nature, who might create Platos and Virgils, Newtons and Cuviers, as she creates husbandmen and shepherds, does not see fit to do so; choosing rather to proportion the rarity of genius to the duration of its products, and to balance the number of capacities by the competency of each one of them. I do not inquire here whether the distance which separates one man from another, in point of talent and intelligence, arises from the deplorable condition of civilization, nor whether that which is now called the INEQUALITY OF POWERS would be in an ideal society any thing more than a DIVERSITY OF POWERS. I take the worst view of the matter; and, that I may not be accused of tergiversation and evasion of difficulties, I acknowledge all the inequalities that any one can desire. [16] Certain philosophers, in love with the levelling idea, maintain that all minds are equal, and that all differences are the result of education. I am no believer, I confess, in this doctrine; which, even if it were true, would lead to a result directly opposite to that desired. For, if capacities are equal, whatever be the degree of their power (as no one can be coerced), there are functions deemed coarse, low, and degrading, which deserve higher pay,--a result no less repugnant to equality than to the principle, TO EACH CAPACITY ACCORDING TO ITS RESULTS. Give me, on the contrary, a society in which every kind of talent bears a proper numerical relation to the needs of the society, and which demands from each producer only that which his special function requires him to produce; and, without impairing in the least the hierarchy of functions, I will deduce the equality of fortunes. This is my second point. II. RELATIONS. In considering the element of labor, I have shown that in the same class of productive services, the capacity to perform a social task being possessed by all, no inequality of reward can be based upon an inequality of individual powers. However, it is but fair to say that certain capacities seem quite incapable of certain services; so that, if human industry were entirely confined to one class of products, numerous incapacities would arise, and, consequently, the greatest social inequality. But every body sees, without any hint from me, that the variety of industries avoids this difficulty; so clear is this that I shall not stop to discuss it. We have only to prove, then, that functions are equal to each other; just as laborers, who perform the same function, are equal to each other. Property makes man a eunuch, and then reproaches him for being nothing but dry wood, a decaying tree. Are you astonished that I refuse to genius, to knowledge, to courage,--in a word, to all the excellences admired by the world,--the homage of dignities, the distinctions of power and wealth? It is not I who refuse it: it is economy, it is justice, it is liberty. Liberty! for the first time in this discussion I appeal to her. Let her rise in her own defence, and achieve her victory. Every transaction ending in an exchange of products or services may be designated as a COMMERCIAL OPERATION. Whoever says commerce, says exchange of equal values; for, if the values are not equal, and the injured party perceives it, he will not consent to the exchange, and there will be no commerce. Commerce exists only among free men. Transactions may be effected between other people by violence or fraud, but there is no commerce. A free man is one who enjoys the use of his reason and his faculties; who is neither blinded by passion, nor hindered or driven by oppression, nor deceived by erroneous opinions. So, in every exchange, there is a moral obligation that neither of the contracting parties shall gain at the expense of the other; that is, that, to be legitimate and true, commerce must be exempt from all inequality. This is the first condition of commerce. Its second condition is, that it be voluntary; that is, that the parties act freely and openly. I define, then, commerce or exchange as an act of society. The negro who sells his wife for a knife, his children for some bits of glass, and finally himself for a bottle of brandy, is not free. The dealer in human flesh, with whom he negotiates, is not his associate; he is his enemy. The civilized laborer who bakes a loaf that he may eat a slice of bread, who builds a palace that he may sleep in a stable, who weaves rich fabrics that he may dress in rags, who produces every thing that he may dispense with every thing,--is not free. His employer, not becoming his associate in the exchange of salaries or services which takes place between them, is his enemy. The soldier who serves his country through fear instead of through love is not free; his comrades and his officers, the ministers or organs of military justice, are all his enemies. The peasant who hires land, the manufacturer who borrows capital, the tax-payer who pays tolls, duties, patent and license fees, personal and property taxes, &c., and the deputy who votes for them,--all act neither intelligently nor freely. Their enemies are the proprietors, the capitalists, the government. Give men liberty, enlighten their minds that they may know the meaning of their contracts, and you will see the most perfect equality in exchanges without regard to superiority of talent and knowledge; and you will admit that in commercial affairs, that is, in the sphere of society, the word superiority is void of sense. Let Homer sing his verse. I listen to this sublime genius in comparison with whom I, a simple herdsman, an humble farmer, am as nothing. What, indeed,--if product is to be compared with product,--are my cheeses and my beans in the presence of his "Iliad"? But, if Homer wishes to take from me all that I possess, and make me his slave in return for his inimitable poem, I will give up the pleasure of his lays, and dismiss him. I can do without his "Iliad," and wait, if necessary, for the "AEneid." Homer cannot live twenty-four hours without my products. Let him accept, then, the little that I have to offer; and then his muse may instruct, encourage, and console me. "What! do you say that such should be the condition of one who sings of gods and men? Alms, with the humiliation and suffering which they bring with them!--what barbarous generosity!"... Do not get excited, I beg of you. Property makes of a poet either a Croesus or a beggar; only equality knows how to honor and to praise him. What is its duty? To regulate the right of the singer and the duty of the listener. Now, notice this point, which is a very important one in the solution of this question: both are free, the one to sell, the other to buy. Henceforth their respective pretensions go for nothing; and the estimate, whether fair or unfair, that they place, the one upon his verse, the other upon his liberality, can have no influence upon the conditions of the contract. We must no longer, in making our bargains, weigh talent; we must consider products only. In order that the bard of Achilles may get his due reward, he must first make himself wanted: that done, the exchange of his verse for a fee of any kind, being a free act, must be at the same time a just act; that is, the poet's fee must be equal to his product. Now, what is the value of this product? Let us suppose, in the first place, that this "Iliad"--this chef-d' oeuvre that is to be equitably rewarded--is really above price, that we do not know how to appraise it. If the public, who are free to purchase it, refuse to do so, it is clear that, the poem being unexchangeable, its intrinsic value will not be diminished; but that its exchangeable value, or its productive utility, will be reduced to zero, will be nothing at all. Then we must seek the amount of wages to be paid between infinity on the one hand and nothing on the other, at an equal distance from each, since all rights and liberties are entitled to equal respect; in other words, it is not the intrinsic value, but the relative value, of the thing sold that needs to be fixed. The question grows simpler: what is this relative value? To what reward does a poem like the "Iliad" entitle its author? The first business of political economy, after fixing its definitions, was the solution of this problem; now, not only has it not been solved, but it has been declared insoluble. According to the economists, the relative or exchangeable value of things cannot be absolutely determined; it necessarily varies. "The value of a thing," says Say, "is a positive quantity, but only for a given moment. It is its nature to perpetually vary, to change from one point to another. Nothing can fix it absolutely, because it is based on needs and means of production which vary with every moment. These variations complicate economical phenomena, and often render them very difficult of observation and solution. I know no remedy for this; it is not in our power to change the nature of things." Elsewhere Say says, and repeats, that value being based on utility, and utility depending entirely on our needs, whims, customs, &c., value is as variable as opinion. Now, political economy being the science of values, of their production, distribution, exchange, and consumption,--if exchangeable value cannot be absolutely determined, how is political economy possible? How can it be a science? How can two economists look each other in the face without laughing? How dare they insult metaphysicians and psychologists? What! that fool of a Descartes imagined that philosophy needed an immovable base--an _aliquid inconcussum_--on which the edifice of science might be built, and he was simple enough to search for it! And the Hermes of economy, Trismegistus Say, devoting half a volume to the amplification of that solemn text, _political economy is a science_, has the courage to affirm immediately afterwards that this science cannot determine its object,--which is equivalent to saying that it is without a principle or foundation! He does not know, then, the illustrious Say, the nature of a science; or rather, he knows nothing of the subject which he discusses. Say's example has borne its fruits. Political economy, as it exists at present, resembles ontology: discussing effects and causes, it knows nothing, explains nothing, decides nothing. The ideas honored with the name of economic laws are nothing more than a few trifling generalities, to which the economists thought to give an appearance of depth by clothing them in high-sounding words. As for the attempts that have been made by the economists to solve social problems, all that can be said of them is, that, if a glimmer of sense occasionally appears in their lucubrations, they immediately fall back into absurdity. For twenty-five years political economy, like a heavy fog, has weighed upon France, checking the efforts of the mind, and setting limits to liberty. Has every creation of industry a venal, absolute, unchangeable, and consequently legitimate and true value?--Yes. Can every product of man be exchanged for some other product of man?--Yes, again. How many nails is a pair of shoes worth? If we can solve this appalling problem, we shall have the key of the social system for which humanity has been searching for six thousand years. In the presence of this problem, the economist recoils confused; the peasant who can neither read nor write replies without hesitation: "As many as can be made in the same time, and with the same expense." The absolute value of a thing, then, is its cost in time and expense. How much is a diamond worth which costs only the labor of picking it up?--Nothing; it is not a product of man. How much will it be worth when cut and mounted?--The time and expense which it has cost the laborer. Why, then, is it sold at so high a price?--Because men are not free. Society must regulate the exchange and distribution of the rarest things, as it does that of the most common ones, in such a way that each may share in the enjoyment of them. What, then, is that value which is based upon opinion?--Delusion, injustice, and robbery. By this rule, it is easy to reconcile every body. If the mean term, which we are searching for, between an infinite value and no value at all is expressed in the case of every product, by the amount of time and expense which the product cost, a poem which has cost its author thirty years of labor and an outlay of ten thousand francs in journeys, books, &c., must be paid for by the ordinary wages received by a laborer during thirty years, PLUS ten thousand francs indemnity for expense incurred. Suppose the whole amount to be fifty thousand francs; if the society which gets the benefit of the production include a million of men, my share of the debt is five centimes. This gives rise to a few observations. 1. The same product, at different times and in different places, may cost more or less of time and outlay; in this view, it is true that value is a variable quantity. But this variation is not that of the economists, who place in their list of the causes of the variation of values, not only the means of production, but taste, caprice, fashion, and opinion. In short, the true value of a thing is invariable in its algebraic expression, although it may vary in its monetary expression. 2. The price of every product in demand should be its cost in time and outlay--neither more nor less: every product not in demand is a loss to the producer--a commercial non-value. 3. The ignorance of the principle of evaluation, and the difficulty under many circumstances of applying it, is the source of commercial fraud, and one of the most potent causes of the inequality of fortunes. 4. To reward certain industries and pay for certain products, a society is needed which corresponds in size with the rarity of talents, the costliness of the products, and the variety of the arts and sciences. If, for example, a society of fifty farmers can support a schoolmaster, it requires one hundred for a shoemaker, one hundred and fifty for a blacksmith, two hundred for a tailor, &c. If the number of farmers rises to one thousand, ten thousand, one hundred thousand, &c., as fast as their number increases, that of the functionaries which are earliest required must increase in the same proportion; so that the highest functions become possible only in the most powerful societies. [17] That is the peculiar feature of capacities; the character of genius, the seal of its glory, cannot arise and develop itself, except in the bosom of a great nation. But this physiological condition, necessary to the existence of genius, adds nothing to its social rights: far from that,--the delay in its appearance proves that, in economical and civil affairs, the loftiest intelligence must submit to the equality of possessions; an equality which is anterior to it, and of which it constitutes the crown. This is severe on our pride, but it is an inexorable truth. And here psychology comes to the aid of social economy, giving us to understand that talent and material recompense have no common measure; that, in this respect, the condition of all producers is equal: consequently, that all comparison between them, and all distinction in fortunes, is impossible. _ _In fact, every work coming from the hands of man--compared with the raw material of which it is composed--is beyond price. In this respect, the distance is as great between a pair of wooden shoes and the trunk of a walnut-tree, as between a statue by Scopas and a block of marble. The genius of the simplest mechanic exerts as much influence over the materials which he uses, as does the mind of a Newton over the inert spheres whose distances, volumes, and revolutions he calculates. You ask for talent and genius a corresponding degree of honor and reward. Fix for me the value of a wood-cutter's talent, and I will fix that of Homer. If any thing can reward intelligence, it is intelligence itself. That is what happens, when various classes of producers pay to each other a reciprocal tribute of admiration and praise. But if they contemplate an exchange of products with a view to satisfying mutual needs, this exchange must be effected in accordance with a system of economy which is indifferent to considerations of talent and genius, and whose laws are deduced, not from vague and meaningless admiration, but from a just balance between DEBIT and CREDIT; in short, from commercial accounts. Now, that no one may imagine that the liberty of buying and selling is the sole basis of the equality of wages, and that society's sole protection against superiority of talent lies in a certain force of inertia which has nothing in common with right, I shall proceed to explain why all capacities are entitled to the same reward, and why a corresponding difference in wages would be an injustice. I shall prove that the obligation to stoop to the social level is inherent in talent; and on this very superiority of genius I will found the equality of fortunes. I have just given the negative argument in favor of rewarding all capacities alike; I will now give the direct and positive argument. Listen, first, to the economist: it is always pleasant to see how he reasons, and how he understands justice. Without him, moreover, without his amusing blunders and his wonderful arguments, we should learn nothing. Equality, so odious to the economist, owes every thing to political economy. "When the parents of a physician [the text says a lawyer, which is not so good an example] have expended on his education forty thousand francs, this sum may be regarded as so much capital invested in his head. It is therefore permissible to consider it as yielding an annual income of four thousand francs. If the physician earns thirty thousand, there remains an income of twenty-six thousand francs due to the personal talents given him by Nature. This natural capital, then, if we assume ten per cent. as the rate of interest, amounts to two hundred and sixty thousand francs; and the capital given him by his parents, in defraying the expenses of his education, to forty thousand francs. The union of these two kinds of capital constitutes his fortune."--Say: Complete Course, &c. Say divides the fortune of the physician into two parts: one is composed of the capital which went to pay for his education, the other represents his personal talents. This division is just; it is in conformity with the nature of things; it is universally admitted; it serves as the major premise of that grand argument which establishes the inequality of capacities. I accept this premise without qualification; let us look at the consequences. 1. Say CREDITS the physician with forty thousand francs,--the cost of his education. This amount should be entered upon the DEBIT side of the account. For, although this expense was incurred for him, it was not incurred by him. Then, instead of appropriating these forty thousand francs, the physician should add them to the price of his product, and repay them to those who are entitled to them. Notice, further, that Say speaks of INCOME instead of REIMBURSEMENT; reasoning on the false principle of the productivity of capital. The expense of educating a talent is a debt contracted by this talent. From the very fact of its existence, it becomes a debtor to an amount equal to the cost of its production. This is so true and simple that, if the education of some one child in a family has cost double or triple that of its brothers, the latter are entitled to a proportional amount of the property previous to its division. There is no difficulty about this in the case of guardianship, when the estate is administered in the name of the minors. 2. That which I have just said of the obligation incurred by talent of repaying the cost of its education does not embarrass the economist. The man of talent, he says, inheriting from his family, inherits among other things a claim to the forty thousand francs which his education costs; and he becomes, in consequence, its proprietor. But this is to abandon the right of talent, and to fall back upon the right of occupancy; which again calls up all the questions asked in Chapter II. What is the right of occupancy? what is inheritance? Is the right of succession a right of accumulation or only a right of choice? how did the physician's father get his fortune? was he a proprietor, or only a usufructuary? If he was rich, let him account for his wealth; if he was poor, how could he incur so large an expense? If he received aid, what right had he to use that aid to the disadvantage of his benefactors, &c.? 3. "There remains an income of twenty-six thousand francs due to the personal talents given him by Nature." (Say,--as above quoted.) Reasoning from this premise, Say concludes that our physician's talent is equivalent to a capital of two hundred and sixty thousand francs. This skilful calculator mistakes a consequence for a principle. The talent must not be measured by the gain, but rather the gain by the talent; for it may happen, that, notwithstanding his merit, the physician in question will gain nothing at all, in which case will it be necessary to conclude that his talent or fortune is equivalent to zero? To such a result, however, would Say's reasoning lead; a result which is clearly absurd. Now, it is impossible to place a money value on any talent whatsoever, since talent and money have no common measure. On what plausible ground can it be maintained that a physician should be paid two, three, or a hundred times as much as a peasant? An unavoidable difficulty, which has never been solved save by avarice, necessity, and oppression. It is not thus that the right of talent should be determined. But how is it to be determined? 4. I say, first, that the physician must be treated with as much favor as any other producer, that he must not be placed below the level of others. This I will not stop to prove. But I add that neither must he be lifted above that level; because his talent is collective property for which he did not pay, and for which he is ever in debt. Just as the creation of every instrument of production is the result of collective force, so also are a man's talent and knowledge the product of universal intelligence and of general knowledge slowly accumulated by a number of masters, and through the aid of many inferior industries. When the physician has paid for his teachers, his books, his diplomas, and all the other items of his educational expenses, he has no more paid for his talent than the capitalist pays for his house and land when he gives his employees their wages. The man of talent has contributed to the production in himself of a useful instrument. He has, then, a share in its possession; he is not its proprietor. There exist side by side in him a free laborer and an accumulated social capital. As a laborer, he is charged with the use of an instrument, with the superintendence of a machine; namely, his capacity. As capital, he is not his own master; he uses himself, not for his own benefit, but for that of others. Even if talent did not find in its own excellence a reward for the sacrifices which it costs, still would it be easier to find reasons for lowering its reward than for raising it above the common level. Every producer receives an education; every laborer is a talent, a capacity,--that is, a piece of collective property. But all talents are not equally costly. It takes but few teachers, but few years, and but little study, to make a farmer or a mechanic: the generative effort and--if I may venture to use such language--the period of social gestation are proportional to the loftiness of the capacity. But while the physician, the poet, the artist, and the savant produce but little, and that slowly, the productions of the farmer are much less uncertain, and do not require so long a time. Whatever be then the capacity of a man,--when this capacity is once created,--it does not belong to him. Like the material fashioned by an industrious hand, it had the power of BECOMING, and society has given it BEING. Shall the vase say to the potter, "I am that I am, and I owe you nothing"? The artist, the savant, and the poet find their just recompense in the permission that society gives them to devote themselves exclusively to science and to art: so that in reality they do not labor for themselves, but for society, which creates them, and requires of them no other duty. Society can, if need be, do without prose and verse, music and painting, and the knowledge of the movements of the moon and stars; but it cannot live a single day without food and shelter. Undoubtedly, man does not live by bread alone; he must, also (according to the Gospel), LIVE BY THE WORD OF GOD; that is, he must love the good and do it, know and admire the beautiful, and study the marvels of Nature. But in order to cultivate his mind, he must first take care of his body,--the latter duty is as necessary as the former is noble. If it is glorious to charm and instruct men, it is honorable as well to feed them. When, then, society--faithful to the principle of the division of labor--intrusts a work of art or of science to one of its members, allowing him to abandon ordinary labor, it owes him an indemnity for all which it prevents him from producing industrially; but it owes him nothing more. If he should demand more, society should, by refusing his services, annihilate his pretensions. Forced, then, in order to live, to devote himself to labor repugnant to his nature, the man of genius would feel his weakness, and would live the most distasteful of lives. They tell of a celebrated singer who demanded of the Empress of Russia (Catherine II) twenty thousand roubles for his services: "That is more than I give my field-marshals," said Catherine. "Your majesty," replied the other, "has only to make singers of her field-marshals." If France (more powerful than Catherine II) should say to Mademoiselle Rachel, "You must act for one hundred louis, or else spin cotton;" to M. Duprez, "You must sing for two thousand four hundred francs, or else work in the vineyard,"--do you think that the actress Rachel, and the singer Duprez, would abandon the stage? If they did, they would be the first to repent it. Mademoiselle Rachel receives, they say, sixty thousand francs annually from the Comedie-Francaise. For a talent like hers, it is a slight fee. Why not one hundred thousand francs, two hundred thousand francs? Why! not a civil list? What meanness! Are we really guilty of chaffering with an artist like Mademoiselle Rachel? It is said, in reply, that the managers of the theatre cannot give more without incurring a loss; that they admit the superior talent of their young associate; but that, in fixing her salary, they have been compelled to take the account of the company's receipts and expenses into consideration also. That is just, but it only confirms what I have said; namely, that an artist's talent may be infinite, but that its mercenary claims are necessarily limited,--on the one hand, by its usefulness to the society which rewards it; on the other, by the resources of this society: in other words, that the demand of the seller is balanced by the right of the buyer. Mademoiselle Rachel, they say, brings to the treasury of the Theatre-Francais more than sixty thousand francs. I admit it; but then I blame the theatre. From whom does the Theatre-Francais take this money? From some curious people who are perfectly free. Yes; but the workingmen, the lessees, the tenants, those who borrow by pawning their possessions, from whom these curious people recover all that they pay to the theatre,--are they free? And when the better part of their products are consumed by others at the play, do you assure me that their families are not in want? Until the French people, reflecting on the salaries paid to all artists, savants, and public functionaries, have plainly expressed their wish and judgment as to the matter, the salaries of Mademoiselle Rachel and all her fellow-artists will be a compulsory tax extorted by violence, to reward pride, and support libertinism. It is because we are neither free nor sufficiently enlightened, that we submit to be cheated in our bargains; that the laborer pays the duties levied by the prestige of power and the selfishness of talent upon the curiosity of the idle, and that we are perpetually scandalized by these monstrous inequalities which are encouraged and applauded by public opinion. The whole nation, and the nation only, pays its authors, its savants, its artists, its officials, whatever be the hands through which their salaries pass. On what basis should it pay them? On the basis of equality. I have proved it by estimating the value of talent. I shall confirm it in the following chapter, by proving the impossibility of all social inequality. What have we shown so far? Things so simple that really they seem silly:-- That, as the traveller does not appropriate the route which he traverses, so the farmer does not appropriate the field which he sows; That if, nevertheless, by reason of his industry, a laborer may appropriate the material which he employs, every employer of material becomes, by the same title, a proprietor; That all capital, whether material or mental, being the result of collective labor, is, in consequence, collective property; That the strong have no right to encroach upon the labor of the weak, nor the shrewd to take advantage of the credulity of the simple; Finally, that no one can be forced to buy that which he does not want, still less to pay for that which he has not bought; and, consequently, that the exchangeable value of a product, being measured neither by the opinion of the buyer nor that of the seller, but by the amount of time and outlay which it has cost, the property of each always remains the same. Are not these very simple truths? Well, as simple as they seem to you, reader, you shall yet see others which surpass them in dullness and simplicity. For our course is the reverse of that of the geometricians: with them, the farther they advance, the more difficult their problems become; we, on the contrary, after having commenced with the most abstruse propositions, shall end with the axioms. But I must close this chapter with an exposition of one of those startling truths which never have been dreamed of by legists or economists. % 8.--That, from the Stand-point of Justice, Labor destroys Property. This proposition is the logical result of the two preceding sections, which we have just summed up. The isolated man can supply but a very small portion of his wants; all his power lies in association, and in the intelligent combination of universal effort. The division and co-operation of labor multiply the quantity and the variety of products; the individuality of functions improves their quality. There is not a man, then, but lives upon the products of several thousand different industries; not a laborer but receives from society at large the things which he consumes, and, with these, the power to reproduce. Who, indeed, would venture the assertion, "I produce, by my own effort, all that I consume; I need the aid of no one else"? The farmer, whom the early economists regarded as the only real producer--the farmer, housed, furnished, clothed, fed, and assisted by the mason, the carpenter, the tailor, the miller, the baker, the butcher, the grocer, the blacksmith, &c.,--the farmer, I say, can he boast that he produces by his own unaided effort? The various articles of consumption are given to each by all; consequently, the production of each involves the production of all. One product cannot exist without another; an isolated industry is an impossible thing. What would be the harvest of the farmer, if others did not manufacture for him barns, wagons, ploughs, clothes, &c.? Where would be the savant without the publisher; the printer without the typecaster and the machinist; and these, in their turn, without a multitude of other industries?... Let us not prolong this catalogue--so easy to extend--lest we be accused of uttering commonplaces. All industries are united by mutual relations in a single group; all productions do reciprocal service as means and end; all varieties of talent are but a series of changes from the inferior to the superior. Now, this undisputed and indisputable fact of the general participation in every species of product makes all individual productions common; so that every product, coming from the hands of the producer, is mortgaged in advance by society. The producer himself is entitled to only that portion of his product, which is expressed by a fraction whose denominator is equal to the number of individuals of which society is composed. It is true that in return this same producer has a share in all the products of others, so that he has a claim upon all, just as all have a claim upon him; but is it not clear that this reciprocity of mortgages, far from authorizing property, destroys even possession? The laborer is not even possessor of his product; scarcely has he finished it, when society claims it. "But," it will be answered, "even if that is so--even if the product does not belong to the producer--still society gives each laborer an equivalent for his product; and this equivalent, this salary, this reward, this allowance, becomes his property. Do you deny that this property is legitimate? And if the laborer, instead of consuming his entire wages, chooses to economize,--who dare question his right to do so?" The laborer is not even proprietor of the price of his labor, and cannot absolutely control its disposition. Let us not be blinded by a spurious justice. That which is given the laborer in exchange for his product is not given him as a reward for past labor, but to provide for and secure future labor. We consume before we produce. The laborer may say at the end of the day, "I have paid yesterday's expenses; to-morrow I shall pay those of today." At every moment of his life, the member of society is in debt; he dies with the debt unpaid:--how is it possible for him to accumulate? They talk of economy--it is the proprietor's hobby. Under a system of equality, all economy which does not aim at subsequent reproduction or enjoyment is impossible--why? Because the thing saved, since it cannot be converted into capital, has no object, and is without a FINAL CAUSE. This will be explained more fully in the next chapter. To conclude:-- The laborer, in his relation to society, is a debtor who of necessity dies insolvent. The proprietor is an unfaithful guardian who denies the receipt of the deposit committed to his care, and wishes to be paid for his guardianship down to the last day. Lest the principles just set forth may appear to certain readers too metaphysical, I shall reproduce them in a more concrete form, intelligible to the dullest brains, and pregnant with the most important consequences. Hitherto, I have considered property as a power of EXCLUSION; hereafter, I shall examine it as a power of INVASION. CHAPTER IV. THAT PROPERTY IS IMPOSSIBLE. The last resort of proprietors,--the overwhelming argument whose invincible potency reassures them,--is that, in their opinion, equality of conditions is impossible. "Equality of conditions is a chimera," they cry with a knowing air; "distribute wealth equally to-day--to-morrow this equality will have vanished." To this hackneyed objection, which they repeat everywhere with the most marvellous assurance, they never fail to add the following comment, as a sort of GLORY BE TO THE FATHER: "If all men were equal, nobody would work." This anthem is sung with variations. "If all were masters, nobody would obey." "If nobody were rich, who would employ the poor?" And, "If nobody were poor, who would labor for the rich?" But let us have done with invective--we have better arguments at our command. If I show that property itself is impossible--that it is property which is a contradiction, a chimera, a utopia; and if I show it no longer by metaphysics and jurisprudence, but by figures, equations, and calculations,--imagine the fright of the astounded proprietor! And you, reader; what do you think of the retort? Numbers govern the world--mundum regunt numeri. This proverb applies as aptly to the moral and political, as to the sidereal and molecular, world. The elements of justice are identical with those of algebra; legislation and government are simply the arts of classifying and balancing powers; all jurisprudence falls within the rules of arithmetic. This chapter and the next will serve to lay the foundations of this extraordinary doctrine. Then will be unfolded to the reader's vision an immense and novel career; then shall we commence to see in numerical relations the synthetic unity of philosophy and the sciences; and, filled with admiration and enthusiasm for this profound and majestic simplicity of Nature, we shall shout with the apostle: "Yes, the Eternal has made all things by number, weight, and measure!" We shall understand not only that equality of conditions is possible, but that all else is impossible; that this seeming impossibility which we charge upon it arises from the fact that we always think of it in connection either with the proprietary or the communistic regime,--political systems equally irreconcilable with human nature. We shall see finally that equality is constantly being realized without our knowledge, even at the very moment when we are pronouncing it incapable of realization; that the time draws near when, without any effort or even wish of ours, we shall have it universally established; that with it, in it, and by it, the natural and true political order must make itself manifest. It has been said, in speaking of the blindness and obstinacy of the passions, that, if man had any thing to gain by denying the truths of arithmetic, he would find some means of unsettling their certainty: here is an opportunity to try this curious experiment. I attack property, no longer with its own maxims, but with arithmetic. Let the proprietors prepare to verify my figures; for, if unfortunately for them the figures prove accurate, the proprietors are lost. In proving the impossibility of property, I complete the proof of its injustice. In fact,-- That which is JUST must be USEFUL; That which is useful must be TRUE; That which is true must be POSSIBLE; Therefore, every thing which is impossible is untrue, useless, unjust. Then,--a priori,--we may judge of the justice of any thing by its possibility; so that if the thing were absolutely impossible, it would be absolutely unjust. PROPERTY IS PHYSICALLY AND MATHEMATICALLY IMPOSSIBLE. DEMONSTRATION. AXIOM.--Property is the Right of Increase claimed by the Proprietor over any thing which he has stamped as his own. This proposition is purely an axiom, because,-- 1. It is not a definition, since it does not express all that is included in the right of property--the right of sale, of exchange, of gift; the right to transform, to alter, to consume, to destroy, to use and abuse, &c. All these rights are so many different powers of property, which we may consider separately; but which we disregard here, that we may devote all our attention to this single one,--the right of increase. 2. It is universally admitted. No one can deny it without denying the facts, without being instantly belied by universal custom. 3. It is self-evident, since property is always accompanied (either actually or potentially) by the fact which this axiom expresses; and through this fact, mainly, property manifests, establishes, and asserts itself. 4. Finally, its negation involves a contradiction. The right of increase is really an inherent right, so essential a part of property, that, in its absence, property is null and void. OBSERVATIONS.--Increase receives different names according to the thing by which it is yielded: if by land, FARM-RENT; if by houses and furniture, RENT; if by life-investments, REVENUE; if by money, INTEREST; if by exchange, ADVANTAGE, GAIN, PROFIT (three things which must not be confounded with the wages or legitimate price of labor). Increase--a sort of royal prerogative, of tangible and consumable homage--is due to the proprietor on account of his nominal and metaphysical occupancy. His seal is set upon the thing; that is enough to prevent any one else from occupying it without HIS permission. This permission to use his things the proprietor may, if he chooses, freely grant. Commonly he sells it. This sale is really a stellionate and an extortion; but by the legal fiction of the right of property, this same sale, severely punished, we know not why, in other cases, is a source of profit and value to the proprietor. The amount demanded by the proprietor, in payment for this permission, is expressed in monetary terms by the dividend which the supposed product yields in nature. So that, by the right of increase, the proprietor reaps and does not plough; gleans and does not till; consumes and does not produce; enjoys and does not labor. Very different from the idols of the Psalmist are the gods of property: the former had hands and felt not; the latter, on the contrary, _manus habent et palpabunt_. _ _The right of increase is conferred in a very mysterious and supernatural manner. The inauguration of a proprietor is accompanied by the awful ceremonies of an ancient initiation. First, comes the CONSECRATION of the article; a consecration which makes known to all that they must offer up a suitable sacrifice to the proprietor, whenever they wish, by his permission obtained and signed, to use his article. Second, comes the ANATHEMA, which prohibits--except on the conditions aforesaid--all persons from touching the article, even in the proprietor's absence; and pronounces every violator of property sacrilegious, infamous, amenable to the secular power, and deserving of being handed over to it. Finally, the DEDICATION, which enables the proprietor or patron saint--the god chosen to watch over the article--to inhabit it mentally, like a divinity in his sanctuary. By means of this dedication, the substance of the article--so to speak--becomes converted into the person of the proprietor, who is regarded as ever present in its form. This is exactly the doctrine of the writers on jurisprudence. "Property," says Toullier, "is a MORAL QUALITY inherent in a thing; AN ACTUAL BOND which fastens it to the proprietor, and which cannot be broken save by his act." Locke humbly doubted whether God could make matter INTELLIGENT. Toullier asserts that the proprietor renders it MORAL. How much does he lack of being a God? These are by no means exaggerations. PROPERTY IS THE RIGHT OF INCREASE; that is, the power to produce without labor. Now, to produce without labor is to make something from nothing; in short, to create. Surely it is no more difficult to do this than to moralize matter. The jurists are right, then, in applying to proprietors this passage from the Scriptures,--_Ego dixi: Dii estis et filii Excelsi omnes_,--"I have said, Ye are gods; and all of you are children of the Most High." PROPERTY IS THE RIGHT OF INCREASE. To us this axiom shall be like the name of the beast in the Apocalypse,--a name in which is hidden the complete explanation of the whole mystery of this beast. It was known that he who should solve the mystery of this name would obtain a knowledge of the whole prophecy, and would succeed in mastering the beast. Well! by the most careful interpretation of our axiom we shall kill the sphinx of property. Starting from this eminently characteristic fact--the RIGHT OF INCREASE--we shall pursue the old serpent through his coils; we shall count the murderous entwinings of this frightful taenia, whose head, with its thousand suckers, is always hidden from the sword of its most violent enemies, though abandoning to them immense fragments of its body. It requires something more than courage to subdue this monster. It was written that it should not die until a proletaire, armed with a magic wand, had fought with it. COROLLARIES.--1. THE AMOUNT OF INCREASE IS PROPORTIONAL TO THE THING INCREASED. Whatever be the rate of interest,--whether it rise to three, five, or ten per cent., or fall to one-half, one-fourth, one-tenth,--it does not matter; the law of increase remains the same. The law is as follows:-- All capital--the cash value of which can be estimated--may be considered as a term in an arithmetical series which progresses in the ratio of one hundred, and the revenue yielded by this capital as the corresponding term of another arithmetical series which progresses in a ratio equal to the rate of interest. Thus, a capital of five hundred francs being the fifth term of the arithmetical progression whose ratio is one hundred, its revenue at three per cent. will be indicated by the fifth term of the arithmetical progression whose ratio is three:-- 100 . 200 . 300 . 400 . 500. 3 . 6 . 9 . 12 . 15. An acquaintance with this sort of LOGARITHMS--tables of which, calculated to a very high degree, are possessed by proprietors--will give us the key to the most puzzling problems, and cause us to experience a series of surprises. By this LOGARITHMIC theory of the right of increase, a piece of property, together with its income, may be defined as A NUMBER WHOSE LOGARITHM IS EQUAL TO THE SUM OF ITS UNITS DIVIDED BY ONE HUNDRED, AND MULTIPLIED BY THE RATE OF INTEREST. For instance; a house valued at one hundred thousand francs, and leased at five per cent., yields a revenue of five thousand francs, according to the formula 100,000 x 5 / 100 = five thousand. Vice versa, a piece of land which yields, at two and a half per cent., a revenue of three thousand francs is worth one hundred and twenty thousand francs, according to this other formula; 3,000 x 100/ 2 1/2 = one hundred and twenty thousand. In the first case, the ratio of the progression which marks the increase of interest is five; in the second, it is two and a half. OBSERVATION.--The forms of increase known as farm-rent, income, and interest are paid annually; rent is paid by the week, the month, or the year; profits and gains are paid at the time of exchange. Thus, the amount of increase is proportional both to the thing increased, and the time during which it increases; in other words, usury grows like a cancer--_foenus serpit sicut cancer_. 2. THE INCREASE PAID TO THE PROPRIETOR BY THE OCCUPANT IS A DEAD LOSS TO THE LATTER. For if the proprietor owed, in exchange for the increase which he receives, some thing more than the permission which he grants, his right of property would not be perfect--he would not possess _jure optimo, jure perfecto;_ that is, he would not be in reality a proprietor. Then, all which passes from the hands of the occupant into those of the proprietor in the name of increase, and as the price of the permission to occupy, is a permanent gain for the latter, and a dead loss and annihilation for the former; to whom none of it will return, save in the forms of gift, alms, wages paid for his services, or the price of merchandise which he has delivered. In a word, increase perishes so far as the borrower is concerned; or to use the more energetic Latin phrase,--_res perit solventi_. 3. THE RIGHT OF INCREASE OPPRESSES THE PROPRIETOR AS WELL AS THE STRANGER. The master of a thing, as its proprietor, levies a tax for the use of his property upon himself as its possessor, equal to that which he would receive from a third party; so that capital bears interest in the hands of the capitalist, as well as in those of the borrower and the commandite. If, indeed, rather than accept a rent of five hundred francs for my apartment, I prefer to occupy and enjoy it, it is clear that I shall become my own debtor for a rent equal to that which I deny myself. This principle is universally practised in business, and is regarded as an axiom by the economists. Manufacturers, also, who have the advantage of being proprietors of their floating capital, although they owe no interest to any one, in calculating their profits subtract from them, not only their running expenses and the wages of their employees, but also the interest on their capital. For the same reason, money-lenders retain in their own possession as little money as possible; for, since all capital necessarily bears interest, if this interest is supplied by no one, it comes out of the capital, which is to that extent diminished. Thus, by the right of increase, capital eats itself up. This is, doubtless, the idea that Papinius intended to convey in the phrase, as elegant as it is forcible--_Foenus mordet solidam_. I beg pardon for using Latin so frequently in discussing this subject; it is an homage which I pay to the most usurious nation that ever existed. FIRST PROPOSITION. Property is impossible, because it demands Something for Nothing. The discussion of this proposition covers the same ground as that of the origin of farm-rent, which is so much debated by the economists. When I read the writings of the greater part of these men, I cannot avoid a feeling of contempt mingled with anger, in view of this mass of nonsense, in which the detestable vies with the absurd. It would be a repetition of the story of the elephant in the moon, were it not for the atrocity of the consequences. To seek a rational and legitimate origin of that which is, and ever must be, only robbery, extortion, and plunder--that must be the height of the proprietor's folly; the last degree of bedevilment into which minds, otherwise judicious, can be thrown by the perversity of selfishness. "A farmer," says Say, "is a wheat manufacturer who, among other tools which serve him in modifying the material from which he makes the wheat, employs one large tool, which we call a field. If he is not the proprietor of the field, if he is only a tenant, he pays the proprietor for the productive service of this tool. The tenant is reimbursed by the purchaser, the latter by another, until the product reaches the consumer; who redeems the first payment, PLUS all the others, by means of which the product has at last come into his hands." Let us lay aside the subsequent payments by which the product reaches the consumer, and, for the present, pay attention only to the first one of all,--the rent paid to the proprietor by the tenant. On what ground, we ask, is the proprietor entitled to this rent? According to Ricardo, MacCulloch, and Mill, farm-rent, properly speaking, is simply the EXCESS OF THE PRODUCT OF THE MOST FERTILE LAND OVER THAT OF LANDS OF AN INFERIOR QUALITY; so that farm-rent is not demanded for the former until the increase of population renders necessary the cultivation of the latter. It is difficult to see any sense in this. How can a right to the land be based upon a difference in the quality of the land? How can varieties of soil engender a principle of legislation and politics? This reasoning is either so subtle, or so stupid, that the more I think of it, the more bewildered I become. Suppose two pieces of land of equal area; the one, A, capable of supporting ten thousand inhabitants; the other, B, capable of supporting nine thousand only: when, owing to an increase in their number, the inhabitants of A shall be forced to cultivate B, the landed proprietors of A will exact from their tenants in A a rent proportional to the difference between ten and nine. So say, I think, Ricardo, MacCulloch, and Mill. But if A supports as many inhabitants as it can contain,--that is, if the inhabitants of A, by our hypothesis, have only just enough land to keep them alive,--how can they pay farm-rent? If they had gone no farther than to say that the difference in land has OCCASIONED farm-rent, instead of CAUSED it, this observation would have taught us a valuable lesson; namely, that farm-rent grew out of a desire for equality. Indeed, if all men have an equal right to the possession of good land, no one can be forced to cultivate bad land without indemnification. Farm-rent--according to Ricardo, MacCulloch, and Mill--would then have been a compensation for loss and hardship. This system of practical equality is a bad one, no doubt; but it sprang from good intentions. What argument can Ricardo, MacCulloch, and Mill develop therefrom in favor of property? Their theory turns against themselves, and strangles them. Malthus thinks that farm-rent has its source in the power possessed by land of producing more than is necessary to supply the wants of the men who cultivate it. I would ask Malthus why successful labor should entitle the idle to a portion of the products? But the worthy Malthus is mistaken in regard to the fact. Yes; land has the power of producing more than is needed by those who cultivate it, if by CULTIVATORS is meant tenants only. The tailor also makes more clothes than he wears, and the cabinet-maker more furniture than he uses. But, since the various professions imply and sustain one another, not only the farmer, but the followers of all arts and trades--even to the doctor and the school-teacher--are, and ought to be, regarded as CULTIVATORS OF THE LAND. Malthus bases farm-rent upon the principle of commerce. Now, the fundamental law of commerce being equivalence of the products exchanged, any thing which destroys this equivalence violates the law. There is an error in the estimate which needs to be corrected. Buchanan--a commentator on Smith--regarded farm-rent as the result of a monopoly, and maintained that labor alone is productive. Consequently, he thought that, without this monopoly, products would rise in price; and he found no basis for farm-rent save in the civil law. This opinion is a corollary of that which makes the civil law the basis of property. But why has the civil law--which ought to be the written expression of justice--authorized this monopoly? Whoever says monopoly, necessarily excludes justice. Now, to say that farm-rent is a monopoly sanctioned by the law, is to say that injustice is based on justice,--a contradiction in terms. Say answers Buchanan, that the proprietor is not a monopolist, because a monopolist "is one who does not increase the utility of the merchandise which passes through his hands." How much does the proprietor increase the utility of his tenant's products? Has he ploughed, sowed, reaped, mowed, winnowed, weeded? These are the processes by which the tenant and his employees increase the utility of the material which they consume for the purpose of reproduction. "The landed proprietor increases the utility of products by means of his implement, the land. This implement receives in one state, and returns in another the materials of which wheat is composed. The action of the land is a chemical process, which so modifies the material that it multiplies it by destroying it. The soil is then a producer of utility; and when it [the soil?] asks its pay in the form of profit, or farm rent, for its proprietor, it at the same time gives something to the consumer in exchange for the amount which the consumer pays it. It gives him a produced utility; and it is the production of this utility which warrants us in calling land productive, as well as labor." Let us clear up this matter. The blacksmith who manufactures for the farmer implements of husbandry, the wheelwright who makes him a cart, the mason who builds his barn, the carpenter, the basket-maker, &c.,--all of whom contribute to agricultural production by the tools which they provide,--are producers of utility; consequently, they are entitled to a part of the products. "Undoubtedly," says Say; "but the land also is an implement whose service must be paid for, then...." I admit that the land is an implement; but who made it? Did the proprietor? Did he--by the efficacious virtue of the right of property, by this MORAL QUALITY infused into the soil--endow it with vigor and fertility? Exactly there lies the monopoly of the proprietor; in the fact that, though he did not make the implement, he asks pay for its use. When the Creator shall present himself and claim farm-rent, we will consider the matter with him; or even when the proprietor--his pretended representative--shall exhibit his power-of-attorney. "The proprietor's service," adds Say, "is easy, I admit." It is a frank confession. "But we cannot disregard it. Without property, one farmer would contend with another for the possession of a field without a proprietor, and the field would remain uncultivated...." Then the proprietor's business is to reconcile farmers by robbing them. O logic! O justice! O the marvellous wisdom of economists! The proprietor, if they are right, is like Perrin-Dandin who, when summoned by two travellers to settle a dispute about an oyster, opened it, gobbled it, and said to them:-- "The Court awards you each a shell." Could any thing worse be said of property? Will Say tell us why the same farmers, who, if there were no proprietors, would contend with each other for possession of the soil, do not contend to-day with the proprietors for this possession? Obviously, because they think them legitimate possessors, and because their respect for even an imaginary right exceeds their avarice. I proved, in Chapter II., that possession is sufficient, without property, to maintain social order. Would it be more difficult, then, to reconcile possessors without masters than tenants controlled by proprietors? Would laboring men, who respect--much to their own detriment--the pretended rights of the idler, violate the natural rights of the producer and the manufacturer? What! if the husbandman forfeited his right to the land as soon as he ceased to occupy it, would he become more covetous? And would the impossibility of demanding increase, of taxing another's labor, be a source of quarrels and law-suits? The economists use singular logic. But we are not yet through. Admit that the proprietor is the legitimate master of the land. "The land is an instrument of production," they say. That is true. But when, changing the noun into an adjective, they alter the phrase, thus, "The land is a productive instrument," they make a wicked blunder. According to Quesnay and the early economists, all production comes from the land. Smith, Ricardo, and de Tracy, on the contrary, say that labor is the sole agent of production. Say, and most of his successors, teach that BOTH land AND labor AND capital are productive. The latter constitute the eclectic school of political economy. The truth is, that NEITHER land NOR labor NOR capital is productive. Production results from the co-operation of these three equally necessary elements, which, taken separately, are equally sterile. Political economy, indeed, treats of the production, distribution, and consumption of wealth or values. But of what values? Of the values produced by human industry; that is, of the changes made in matter by man, that he may appropriate it to his own use, and not at all of Nature's spontaneous productions. Man's labor consists in a simple laying on of hands. When he has taken that trouble, he has produced a value. Until then, the salt of the sea, the water of the springs, the grass of the fields, and the trees of the forests are to him as if they were not. The sea, without the fisherman and his line, supplies no fish. The forest, without the wood-cutter and his axe, furnishes neither fuel nor timber. The meadow, without the mower, yields neither hay nor aftermath. Nature is a vast mass of material to be cultivated and converted into products; but Nature produces nothing for herself: in the economical sense, her products, in their relation to man, are not yet products. Capital, tools, and machinery are likewise unproductive. The hammer and the anvil, without the blacksmith and the iron, do not forge. The mill, without the miller and the grain, does not grind, &c. Bring tools and raw material together; place a plough and some seed on fertile soil; enter a smithy, light the fire, and shut up the shop,--you will produce nothing. The following remark was made by an economist who possessed more good sense than most of his fellows: "Say credits capital with an active part unwarranted by its nature; left to itself, it is an idle tool." (J. Droz: Political Economy.) Finally, labor and capital together, when unfortunately combined, produce nothing. Plough a sandy desert, beat the water of the rivers, pass type through a sieve,--you will get neither wheat, nor fish, nor books. Your trouble will be as fruitless as was the immense labor of the army of Xerxes; who, as Herodotus says, with his three million soldiers, scourged the Hellespont for twenty-four hours, as a punishment for having broken and scattered the pontoon bridge which the great king had thrown across it. Tools and capital, land and labor, considered individually and abstractly, are not, literally speaking, productive. The proprietor who asks to be rewarded for the use of a tool, or the productive power of his land, takes for granted, then, that which is radically false; namely, that capital produces by its own effort,--and, in taking pay for this imaginary product, he literally receives something for nothing. OBJECTION.--But if the blacksmith, the wheelwright, all manufacturers in short, have a right to the products in return for the implements which they furnish; and if land is an implement of production,--why does not this implement entitle its proprietor, be his claim real or imaginary, to a portion of the products; as in the case of the manufacturers of ploughs and wagons? REPLY.--Here we touch the heart of the question, the mystery of property; which we must clear up, if we would understand any thing of the strange effects of the right of increase. He who manufactures or repairs the farmer's tools receives the price ONCE, either at the time of delivery, or in several payments; and when this price is once paid to the manufacturer, the tools which he has delivered belong to him no more. Never does he claim double payment for the same tool, or the same job of repairs. If he annually shares in the products of the farmer, it is owing to the fact that he annually makes something for the farmer. The proprietor, on the contrary, does not yield his implement; eternally he is paid for it, eternally he keeps it. In fact, the rent received by the proprietor is not intended to defray the expense of maintaining and repairing the implement; this expense is charged to the borrower, and does not concern the proprietor except as he is interested in the preservation of the article. If he takes it upon himself to attend to the repairs, he takes care that the money which he expends for this purpose is repaid. This rent does not represent the product of the implement, since of itself the implement produces nothing; we have just proved this, and we shall prove it more clearly still by its consequences. Finally, this rent does not represent the participation of the proprietor in the production; since this participation could consist, like that of the blacksmith and the wheelwright, only in the surrender of the whole or a part of his implement, in which case he would cease to be its proprietor, which would involve a contradiction of the idea of property. Then, between the proprietor and his tenant there is no exchange either of values or services; then, as our axiom says, farm-rent is real increase,--an extortion based solely upon fraud and violence on the one hand, and weakness and ignorance upon the other. PRODUCTS say the economists, ARE BOUGHT ONLY BY PRODUCTS. This maxim is property's condemnation. The proprietor, producing neither by his own labor nor by his implement, and receiving products in exchange for nothing, is either a parasite or a thief. Then, if property can exist only as a right, property is impossible. COROLLARIES.--1. The republican constitution of 1793, which defined property as "the right to enjoy the fruit of one's labor," was grossly mistaken. It should have said, "Property is the right to enjoy and dispose at will of another's goods,--the fruit of another's industry and labor." 2. Every possessor of lands, houses, furniture, machinery, tools, money, &c., who lends a thing for a price exceeding the cost of repairs (the repairs being charged to the lender, and representing products which he exchanges for other products), is guilty of swindling and extortion. In short, all rent received (nominally as damages, but really as payment for a loan) is an act of property,--a robbery. HISTORICAL COMMENT.--The tax which a victorious nation levies upon a conquered nation is genuine farm-rent. The seigniorial rights abolished by the Revolution of 1789,--tithes, mortmain, statute-labor, &c.,--were different forms of the rights of property; and they who under the titles of nobles, seigneurs, prebendaries, &c. enjoyed these rights, were neither more nor less than proprietors. To defend property to-day is to condemn the Revolution. SECOND PROPOSITION. Property is impossible because wherever it exists Production costs more than it is worth. The preceding proposition was legislative in its nature; this one is economical. It serves to prove that property, which originates in violence, results in waste. "Production," says Say, "is exchange on a large scale. To render the exchange productive the value of the whole amount of service must be balanced by the value of the product. If this condition is not complied with, the exchange is unequal; the producer gives more than he receives." Now, value being necessarily based upon utility, it follows that every useless product is necessarily valueless,--that it cannot be exchanged; and, consequently, that it cannot be given in payment for productive services. Then, though production may equal consumption, it never can exceed it; for there is no real production save where there is a production of utility, and there is no utility save where there is a possibility of consumption. Thus, so much of every product as is rendered by excessive abundance inconsumable, becomes useless, valueless, unexchangeable,--consequently, unfit to be given in payment for any thing whatever, and is no longer a product. Consumption, on the other hand, to be legitimate,--to be true consumption,--must be reproductive of utility; for, if it is unproductive, the products which it destroys are cancelled values--things produced at a pure loss; a state of things which causes products to depreciate in value. Man has the power to destroy, but he consumes only that which he reproduces. Under a right system of economy, there is then an equation between production and consumption. These points established, let us suppose a community of one thousand families, enclosed in a territory of a given circumference, and deprived of foreign intercourse. Let this community represent the human race, which, scattered over the face of the earth, is really isolated. In fact, the difference between a community and the human race being only a numerical one, the economical results will be absolutely the same in each case. Suppose, then, that these thousand families, devoting themselves exclusively to wheat-culture, are obliged to pay to one hundred individuals, chosen from the mass, an annual revenue of ten per cent. on their product. It is clear that, in such a case, the right of increase is equivalent to a tax levied in advance upon social production. Of what use is this tax? It cannot be levied to supply the community with provisions, for between that and farm-rent there is nothing in common; nor to pay for services and products,--for the proprietors, laboring like the others, have labored only for themselves. Finally, this tax is of no use to its recipients who, having harvested wheat enough for their own consumption, and not being able in a society without commerce and manufactures to procure any thing else in exchange for it, thereby lose the advantage of their income. In such a society, one-tenth of the product being inconsumable, one-tenth of the labor goes unpaid--production costs more than it is worth. Now, change three hundred of our wheat-producers into artisans of all kinds: one hundred gardeners and wine-growers, sixty shoemakers and tailors, fifty carpenters and blacksmiths, eighty of various professions, and, that nothing may be lacking, seven school-masters, one mayor, one judge, and one priest; each industry furnishes the whole community with its special product. Now, the total production being one thousand, each laborer's consumption is one; namely, wheat, meat, and grain, 0.7; wine and vegetables, 0.1; shoes and clothing, 0.06; iron-work and furniture, 0.05; sundries, 0.08; instruction, 0.007; administration, 0.002; mass, 0.001, Total 1. But the community owes a revenue of ten per cent.; and it matters little whether the farmers alone pay it, or all the laborers are responsible for it,--the result is the same. The farmer raises the price of his products in proportion to his share of the debt; the other laborers follow his example. Then, after some fluctuations, equilibrium is established, and all pay nearly the same amount of the revenue. It would be a grave error to assume that in a nation none but farmers pay farm-rent--the whole nation pays it. I say, then, that by this tax of ten per cent. each laborer's consumption is reduced as follows: wheat, 0.63; wine and vegetables, 0.09; clothing and shoes, 0.054; furniture and iron-work, 0.045; other products, 0.072; schooling, 0.0063; administration, 0.0018; mass, 0.0009. Total 0.9. The laborer has produced 1; he consumes only 0.9. He loses, then, one-tenth of the price of his labor; his production still costs more than it is worth. On the other hand, the tenth received by the proprietors is no less a waste; for, being laborers themselves, they, like the others, possess in the nine-tenths of their product the wherewithal to live: they want for nothing. Why should they wish their proportion of bread, wine, meat, clothes, shelter, &c., to be doubled, if they can neither consume nor exchange them? Then farm-rent, with them as with the rest of the laborers, is a waste, and perishes in their hands. Extend the hypothesis, increase the number and variety of the products, you still have the same result. Hitherto, we have considered the proprietor as taking part in the production, not only (as Say says) by the use of his instrument, but in an effective manner and by the labor of his hands. Now, it is easy to see that, under such circumstances, property will never exist. What happens? The proprietor--an essentially libidinous animal, without virtue or shame--is not satisfied with an orderly and disciplined life. He loves property, because it enables him to do at leisure what he pleases and when he pleases. Having obtained the means of life, he gives himself up to trivialities and indolence; he enjoys, he fritters away his time, he goes in quest of curiosities and novel sensations. Property--to enjoy itself--has to abandon ordinary life, and busy itself in luxurious occupations and unclean enjoyments. Instead of giving up a farm-rent, which is perishing in their hands, and thus lightening the labor of the community, our hundred proprietors prefer to rest. In consequence of this withdrawal,--the absolute production being diminished by one hundred, while the consumption remains the same,--production and consumption seem to balance. But, in the first place, since the proprietors no longer labor, their consumption is, according to economical principles, unproductive; consequently, the previous condition of the community--when the labor of one hundred was rewarded by no products--is superseded by one in which the products of one hundred are consumed without labor. The deficit is always the same, whichever the column of the account in which it is expressed. Either the maxims of political economy are false, or else property, which contradicts them, is impossible. The economists--regarding all unproductive consumption as an evil, as a robbery of the human race--never fail to exhort proprietors to moderation, labor, and economy; they preach to them the necessity of making themselves useful, of remunerating production for that which they receive from it; they launch the most terrible curses against luxury and laziness. Very beautiful morality, surely; it is a pity that it lacks common sense. The proprietor who labors, or, as the economists say, WHO MAKES HIMSELF USEFUL, is paid for this labor and utility; is he, therefore, any the less idle as concerns the property which he does not use, and from which he receives an income? His condition, whatever he may do, is an unproductive and FELONIOUS one; he cannot cease to waste and destroy without ceasing to be a proprietor. But this is only the least of the evils which property engenders. Society has to maintain some idle people, whether or no. It will always have the blind, the maimed, the insane, and the idiotic. It can easily support a few sluggards. At this point, the impossibilities thicken and become complicated. THIRD PROPOSITION. Property is impossible, because, with a given capital, Production is proportional to labor, not to property. To pay a farm-rent of one hundred at the rate of ten per cent. of the product, the product must be one thousand; that the product may be one thousand, a force of one thousand laborers is needed. It follows, that in granting a furlough, as we have just done, to our one hundred laborer-proprietors, all of whom had an equal right to lead the life of men of income,--we have placed ourselves in a position where we are unable to pay their revenues. In fact, the productive power, which at first was one thousand, being now but nine hundred, the production is also reduced to nine hundred, one-tenth of which is ninety. Either, then, ten proprietors out of the one hundred cannot be paid,--provided the remaining ninety are to get the whole amount of their farm-rent,--or else all must consent to a decrease of ten per cent. For it is not for the laborer, who has been wanting in no particular, who has produced as in the past, to suffer by the withdrawal of the proprietor. The latter must take the consequences of his own idleness. But, then, the proprietor becomes poorer for the very reason that he wishes to enjoy; by exercising his right, he loses it; so that property seems to decrease and vanish in proportion as we try to lay hold of it,--the more we pursue it, the more it eludes our grasp. What sort of a right is that which is governed by numerical relations, and which an arithmetical calculation can destroy? The laborer-proprietor received, first, as laborer, 0.9 in wages; second, as proprietor, 1 in farm-rent. He said to himself, "My farm-rent is sufficient; I have enough and to spare without my labor." And thus it is that the income upon which he calculated gets diminished by one-tenth,--he at the same time not even suspecting the cause of this diminution. By taking part in the production, he was himself the creator of this tenth which has vanished; and while he thought to labor only for himself, he unwittingly suffered a loss in exchanging his products, by which he was made to pay to himself one-tenth of his own farm-rent. Like every one else, he produced 1, and received but 0.9 If, instead of nine hundred laborers, there had been but five hundred, the whole amount of farm-rent would have been reduced to fifty; if there had been but one hundred, it would have fallen to ten. We may posit, then, the following axiom as a law of proprietary economy: INCREASE MUST DIMINISH AS THE NUMBER OF IDLERS AUGMENTS. _ _This first result will lead us to another more surprising still. Its effect is to deliver us at one blow from all the evils of property, without abolishing it, without wronging proprietors, and by a highly conservative process. We have just proved that, if the farm-rent in a community of one thousand laborers is one hundred, that of nine hundred would be ninety, that of eight hundred, eighty, that of one hundred, ten, &c. So that, in a community where there was but one laborer, the farm-rent would be but 0.1; no matter how great the extent and value of the land appropriated. Therefore, WITH A GIVEN LANDED CAPITAL, PRODUCTION IS PROPORTIONAL TO LABOR, NOT TO PROPERTY. Guided by this principle, let us try to ascertain the maximum increase of all property whatever. What is, essentially, a farm-lease? It is a contract by which the proprietor yields to a tenant possession of his land, in consideration of a portion of that which it yields him, the proprietor. If, in consequence of an increase in his household, the tenant becomes ten times as strong as the proprietor, he will produce ten times as much. Would the proprietor in such a case be justified in raising the farm-rent tenfold? His right is not, The more you produce, the more I demand. It is, The more I sacrifice, the more I demand. The increase in the tenant's household, the number of hands at his disposal, the resources of his industry,--all these serve to increase production, but bear no relation to the proprietor. His claims are to be measured by his own productive capacity, not that of others. Property is the right of increase, not a poll-tax. How could a man, hardly capable of cultivating even a few acres by himself, demand of a community, on the ground of its use of ten thousand acres of his property, ten thousand times as much as he is incapable of producing from one acre? Why should the price of a loan be governed by the skill and strength of the borrower, rather than by the utility sacrificed by the proprietor? We must recognize, then, this second economical law: INCREASE IS MEASURED BY A FRACTION OF THE PROPRIETORS PRODUCTION. Now, this production, what is it? In other words, What can the lord and master of a piece of land justly claim to have sacrificed in lending it to a tenant? The productive capacity of a proprietor, like that of any laborer, being one, the product which he sacrifices in surrendering his land is also one. If, then, the rate of increase is ten per cent., the maximum increase is 0.1. But we have seen that, whenever a proprietor withdraws from production, the amount of products is lessened by 1. Then the increase which accrues to him, being equal to 0.1 while he remains among the laborers, will be equal after his withdrawal, by the law of the decrease of farm-rent, to 0.09. Thus we are led to this final formula: THE MAXIMUM INCOME OF A PROPRIETOR IS EQUAL TO THE SQUARE ROOT OF THE PRODUCT OF ONE LABORER (some number being agreed upon to express this product). THE DIMINUTION WHICH THIS INCOME SUFFERS, IF THE PROPRIETOR IS IDLE, IS EQUAL TO A FRACTION WHOSE NUMERATOR IS 1, AND WHOSE DENOMINATOR IS THE NUMBER WHICH EXPRESSES THE PRODUCT. Thus the maximum income of an idle proprietor, or of one who labors in his own behalf outside of the community, figured at ten per cent. on an average production of one thousand francs per laborer, would be ninety francs. If, then, there are in France one million proprietors with an income of one thousand francs each, which they consume unproductively, instead of the one thousand millions which are paid them annually, they are entitled in strict justice, and by the most accurate calculation, to ninety millions only. It is something of a reduction, to take nine hundred and ten millions from the burdens which weigh so heavily upon the laboring class! Nevertheless, the account is not finished, and the laborer is still ignorant of the full extent of his rights. What is the right of increase when confined within just limits? A recognition of the right of occupancy. But since all have an equal right of occupancy, every man is by the same title a proprietor. Every man has a right to an income equal to a fraction of his product. If, then, the laborer is obliged by the right of property to pay a rent to the proprietor, the proprietor is obliged by the same right to pay the same amount of rent to the laborer; and, since their rights balance each other, the difference between them is zero. _Scholium_.--If farm-rent is only a fraction of the supposed product of the proprietor, whatever the amount and value of the property, the same is true in the case of a large number of small and distinct proprietors. For, although one man may use the property of each separately, he cannot use the property of all at the same time. To sum up. The right of increase, which can exist only within very narrow limits, defined by the laws of production, is annihilated by the right of occupancy. Now, without the right of increase, there is no property. Then property is impossible. FOURTH PROPOSITION. Property is impossible, because it is Homicide. If the right of increase could be subjected to the laws of reason and justice, it would be reduced to an indemnity or reward whose MAXIMUM never could exceed, for a single laborer, a certain fraction of that which he is capable of producing. This we have just shown. But why should the right of increase--let us not fear to call it by its right name, the right of robbery--be governed by reason, with which it has nothing in common? The proprietor is not content with the increase allotted him by good sense and the nature of things: he demands ten times, a hundred times, a thousand times, a million times as much. By his own labor, his property would yield him a product equal only to one; and he demands of society, no longer a right proportional to his productive capacity, but a per capita tax. He taxes his fellows in proportion to their strength, their number, and their industry. A son is born to a farmer. "Good!" says the proprietor; "one more chance for increase!" By what process has farm-rent been thus changed into a poll-tax? Why have our jurists and our theologians failed, with all their shrewdness, to check the extension of the right of increase? The proprietor, having estimated from his own productive capacity the number of laborers which his property will accommodate, divides it into as many portions, and says: "Each one shall yield me revenue." To increase his income, he has only to divide his property. Instead of reckoning the interest due him on his labor, he reckons it on his capital; and, by this substitution, the same property, which in the hands of its owner is capable of yielding only one, is worth to him ten, a hundred, a thousand, a million. Consequently, he has only to hold himself in readiness to register the names of the laborers who apply to him--his task consists in drafting leases and receipts. Not satisfied with the lightness of his duties, the proprietor does not intend to bear even the deficit resulting from his idleness; he throws it upon the shoulders of the producer, of whom he always demands the same reward. When the farm-rent of a piece of land is once raised to its highest point, the proprietor never lowers it; high prices, the scarcity of labor, the disadvantages of the season, even pestilence itself, have no effect upon him--why should he suffer from hard times when he does not labor? Here commences a new series of phenomena. Say--who reasons with marvellous clearness whenever he assails taxation, but who is blind to the fact that the proprietor, as well as the tax-gatherer, steals from the tenant, and in the same manner--says in his second letter to Malthus:-- "If the collector of taxes and those who employ him consume one-sixth of the products, they thereby compel the producers to feed, clothe, and support themselves on five-sixths of what they produce. They admit this, but say at the same time that it is possible for each one to live on five-sixths of what he produces. "I admit that, if they insist upon it; but I ask if they believe that the producer would live as well, in case they demanded of him, instead of one-sixth, two-sixths, or one-third, of their products? No; but he would still live. Then I ask whether he would still live, in case they should rob him of two-thirds,... then three-quarters? But I hear no reply." If the master of the French economists had been less blinded by his proprietary prejudices, he would have seen that farm-rent has precisely the same effect. Take a family of peasants composed of six persons,--father, mother, and four children,--living in the country, and cultivating a small piece of ground. Let us suppose that by hard labor they manage, as the saying is, to make both ends meet; that, having lodged, warmed, clothed, and fed themselves, they are clear of debt, but have laid up nothing. Taking the years together, they contrive to live. If the year is prosperous, the father drinks a little more wine, the daughters buy themselves a dress, the sons a hat; they eat a little cheese, and, occasionally, some meat. I say that these people are on the road to wreck and ruin. For, by the third corollary of our axiom, they owe to themselves the interest on their own capital. Estimating this capital at only eight thousand francs at two and a half per cent., there is an annual interest of two hundred francs to be paid. If, then, these two hundred francs, instead of being subtracted from the gross product to be saved and capitalized, are consumed, there is an annual deficit of two hundred francs in the family assets; so that at the end of forty years these good people, without suspecting it, will have eaten up their property and become bankrupt! This result seems ridiculous--it is a sad reality. The conscription comes. What is the conscription? An act of property exercised over families by the government without warning--a robbery of men and money. The peasants do not like to part with their sons,--in that I do not think them wrong. It is hard for a young man of twenty to gain any thing by life in the barracks; unless he is depraved, he detests it. You can generally judge of a soldier's morality by his hatred of his uniform. Unfortunate wretches or worthless scamps,--such is the make-up of the French army. This ought not to be the case,--but so it is. Question a hundred thousand men, and not one will contradict my assertion. Our peasant, in redeeming his two conscripted sons, expends four thousand francs, which he borrows for that purpose; the interest on this, at five per cent., is two hundred francs;--a sum equal to that referred to above. If, up to this time, the production of the family, constantly balanced by its consumption, has been one thousand two hundred francs, or two hundred francs per persons--in order to pay this interest, either the six laborers must produce as much as seven, or must consume as little as five. Curtail consumption they cannot--how can they curtail necessity? To produce more is impossible; they can work neither harder nor longer. Shall they take a middle course, and consume five and a half while producing six and a half? They would soon find that with the stomach there is no compromise--that beyond a certain degree of abstinence it is impossible to go--that strict necessity can be curtailed but little without injury to the health; and, as for increasing the product,--there comes a storm, a drought, an epizootic, and all the hopes of the farmer are dashed. In short, the rent will not be paid, the interest will accumulate, the farm will be seized, and the possessor ejected. Thus a family, which lived in prosperity while it abstained from exercising the right of property, falls into misery as soon as the exercise of this right becomes a necessity. Property requires of the husbandman the double power of enlarging his land, and fertilizing it by a simple command. While a man is simply possessor of the land, he finds in it means of subsistence; as soon as he pretends to proprietorship, it suffices him no longer. Being able to produce only that which he consumes, the fruit of his labor is his recompense for his trouble--nothing is left for the instrument. Required to pay what he cannot produce,--such is the condition of the tenant after the proprietor has retired from social production in order to speculate upon the labor of others by new methods. Let us now return to our first hypothesis. The nine hundred laborers, sure that their future production will equal that of the past, are quite surprised, after paying their farm-rent, to find themselves poorer by one-tenth than they were the previous year. In fact, this tenth--which was formerly produced and paid by the proprietor-laborer who then took part in the production, and paid part of the--public expenses--now has not been produced, and has been paid. It must then have been taken from the producer's consumption. To choke this inexplicable deficit, the laborer borrows, confident of his intention and ability to return,--a confidence which is shaken the following year by a new loan, PLUS the interest on the first. From whom does he borrow? From the proprietor. The proprietor lends his surplus to the laborer; and this surplus, which he ought to return, becomes--being lent at interest--a new source of profit to him. Then debts increase indefinitely; the proprietor makes advances to the producer who never returns them; and the latter, constantly robbed and constantly borrowing from the robbers, ends in bankruptcy, defrauded of all that he had. Suppose that the proprietor--who needs his tenant to furnish him with an income--then releases him from his debts. He will thus do a very benevolent deed, which will procure for him a recommendation in the curate's prayers; while the poor tenant, overwhelmed by this unstinted charity, and taught by his catechism to pray for his benefactors, will promise to redouble his energy, and suffer new hardships that he may discharge his debt to so kind a master. This time he takes precautionary measures; he raises the price of grains. The manufacturer does the same with his products. The reaction comes, and, after some fluctuation, the farm-rent--which the tenant thought to put upon the manufacturer's shoulders--becomes nearly balanced. So that, while he is congratulating himself upon his success, he finds himself again impoverished, but to an extent somewhat smaller than before. For the rise having been general, the proprietor suffers with the rest; so that the laborers, instead of being poorer by one-tenth, lose only nine-hundredths. But always it is a debt which necessitates a loan, the payment of interest, economy, and fasting. Fasting for the nine-hundredths which ought not to be paid, and are paid; fasting for the redemption of debts; fasting to pay the interest on them. Let the crop fail, and the fasting becomes starvation. They say, "IT IS NECESSARY TO WORK MORE." That means, obviously, that IT IS NECESSARY TO PRODUCE MORE. By what conditions is production effected? By the combined action of labor, capital, and land. As for the labor, the tenant undertakes to furnish it; but capital is formed only by economy. Now, if the tenant could accumulate any thing, he would pay his debts. But granting that he has plenty of capital, of what use would it be to him if the extent of the land which he cultivates always remained the same? He needs to enlarge his farm. Will it be said, finally, that he must work harder and to better advantage? But, in our estimation of farm-rent, we have assumed the highest possible average of production. Were it not the highest, the proprietor would increase the farm-rent. Is not this the way in which the large landed proprietors have gradually raised their rents, as fast as they have ascertained by the increase in population and the development of industry how much society can produce from their property? The proprietor is a foreigner to society; but, like the vulture, his eyes fixed upon his prey, he holds himself ready to pounce upon and devour it. The facts to which we have called attention, in a community of one thousand persons, are reproduced on a large scale in every nation and wherever human beings live, but with infinite variations and in innumerable forms, which it is no part of my intention to describe. In fine, property--after having robbed the laborer by usury--murders him slowly by starvation. Now, without robbery and murder, property cannot exist; with robbery and murder, it soon dies for want of support. Therefore it is impossible. FIFTH PROPOSITION. Property is impossible, because, if it exists, Society devours itself. When the ass is too heavily loaded, he lies down; man always moves on. Upon this indomitable courage, the proprietor--well knowing that it exists--bases his hopes of speculation. The free laborer produces ten; for me, thinks the proprietor, he will produce twelve. Indeed,--before consenting to the confiscation of his fields, before bidding farewell to the paternal roof,--the peasant, whose story we have just told, makes a desperate effort; he leases new land; he will sow one-third more; and, taking half of this new product for himself, he will harvest an additional sixth, and thereby pay his rent. What an evil! To add one-sixth to his production, the farmer must add, not one-sixth, but two-sixths to his labor. At such a price, he pays a farm-rent which in God's eyes he does not owe. The tenant's example is followed by the manufacturer. The former tills more land, and dispossesses his neighbors; the latter lowers the price of his merchandise, and endeavors to monopolize its manufacture and sale, and to crush out his competitors. To satisfy property, the laborer must first produce beyond his needs. Then, he must produce beyond his strength; for, by the withdrawal of laborers who become proprietors, the one always follows from the other. But to produce beyond his strength and needs, he must invade the production of another, and consequently diminish the number of producers. Thus the proprietor--after having lessened production by stepping outside--lessens it still further by encouraging the monopoly of labor. Let us calculate it. The laborer's deficit, after paying his rent, being, as we have seen, one-tenth, he tries to increase his production by this amount. He sees no way of accomplishing this save by increasing his labor: this also he does. The discontent of the proprietors who have not received the full amount of their rent; the advantageous offers and promises made them by other farmers, whom they suppose more diligent, more industrious, and more reliable; the secret plots and intrigues,--all these give rise to a movement for the re-division of labor, and the elimination of a certain number of producers. Out of nine hundred, ninety will be ejected, that the production of the others may be increased one-tenth. But will the total product be increased? Not in the least: there will be eight hundred and ten laborers producing as nine hundred, while, to accomplish their purpose, they would have to produce as one thousand. Now, it having been proved that farm-rent is proportional to the landed capital instead of to labor, and that it never diminishes, the debts must continue as in the past, while the labor has increased. Here, then, we have a society which is continually decimating itself, and which would destroy itself, did not the periodical occurrence of failures, bankruptcies, and political and economical catastrophes re-establish equilibrium, and distract attention from the real causes of the universal distress. The monopoly of land and capital is followed by economical processes which also result in throwing laborers out of employment. Interest being a constant burden upon the shoulders of the farmer and the manufacturer, they exclaim, each speaking for himself, "I should have the means wherewith to pay my rent and interest, had I not to pay so many hands." Then those admirable inventions, intended to assure the easy and speedy performance of labor, become so many infernal machines which kill laborers by thousands. "A few years ago, the Countess of Strafford ejected fifteen thousand persons from her estate, who, as tenants, added to its value. This act of private administration was repeated in 1820, by another large Scotch proprietor, towards six hundred tenants and their families."--Tissot: on Suicide and Revolt. _ _The author whom I quote, and who has written eloquent words concerning the revolutionary spirit which prevails in modern society, does not say whether he would have disapproved of a revolt on the part of these exiles. For myself, I avow boldly that in my eyes it would have been the first of rights, and the holiest of duties; and all that I desire to-day is that my profession of faith be understood. Society devours itself,--1. By the violent and periodical sacrifice of laborers: this we have just seen, and shall see again; 2. By the stoppage of the producer's consumption caused by property. These two modes of suicide are at first simultaneous; but soon the first is given additional force by the second, famine uniting with usury to render labor at once more necessary and more scarce. By the principles of commerce and political economy, that an industrial enterprise may be successful, its product must furnish,--1. The interest on the capital employed; 2. Means for the preservation of this capital; 3. The wages of all the employees and contractors. Further, as large a profit as possible must be realized. The financial shrewdness and rapacity of property is worthy of admiration. Each different name which increase takes affords the proprietor an opportunity to receive it,--1. In the form of interest; 2. In the form of profit. For, it says, a part of the income derived from manufactures consists of interest on the capital employed. If one hundred thousand francs have been invested in a manufacturing enterprise, and in a year's time five thousand francs have been received therefrom in addition to the expenses, there has been no profit, but only interest on the capital. Now, the proprietor is not a man to labor for nothing. Like the lion in the fable, he gets paid in each of his capacities; so that, after he has been served, nothing is left for his associates. _Ego primam tollo, nominor quia leo. Secundam quia sum fortis tribuctis mihi. Tum quia plus valeo, me sequetur tertia. Malo adficietur, si quis quartam tetigerit._ I know nothing prettier than this fable. "I am the contractor. I take the first share. I am the laborer, I take the second. I am the capitalist, I take the third. I am the proprietor, I take the whole." In four lines, Phaedrus has summed up all the forms of property. I say that this interest, all the more then this profit, is impossible. What are laborers in relation to each other? So many members of a large industrial society, to each of whom is assigned a certain portion of the general production, by the principle of the division of labor and functions. Suppose, first, that this society is composed of but three individuals,--a cattle-raiser, a tanner, and a shoemaker. The social industry, then, is that of shoemaking. If I should ask what ought to be each producer's share of the social product, the first schoolboy whom I should meet would answer, by a rule of commerce and association, that it should be one-third. But it is not our duty here to balance the rights of laborers conventionally associated: we have to prove that, whether associated or not, our three workers are obliged to act as if they were; that, whether they will or no, they are associated by the force of things, by mathematical necessity. Three processes are required in the manufacture of shoes,--the rearing of cattle, the preparation of their hides, and the cutting and sewing. If the hide, on leaving the farmer's stable, is worth one, it is worth two on leaving the tanner's pit, and three on leaving the shoemaker's shop. Each laborer has produced a portion of the utility; so that, by adding all these portions together, we get the value of the article. To obtain any quantity whatever of this article, each producer must pay, then, first for his own labor, and second for the labor of the other producers. Thus, to obtain as many shoes as can be made from ten hides, the farmer will give thirty raw hides, and the tanner twenty tanned hides. For, the shoes that are made from ten hides are worth thirty raw hides, in consequence of the extra labor bestowed upon them; just as twenty tanned hides are worth thirty raw hides, on account of the tanner's labor. But if the shoemaker demands thirty-three in the farmer's product, or twenty-two in the tanner's, for ten in his own, there will be no exchange; for, if there were, the farmer and the tanner, after having paid the shoemaker ten for his labor, would have to pay eleven for that which they had themselves sold for ten,--which, of course, would be impossible. [18] Well, this is precisely what happens whenever an emolument of any kind is received; be it called revenue, farm-rent, interest, or profit. In the little community of which we are speaking, if the shoemaker--in order to procure tools, buy a stock of leather, and support himself until he receives something from his investment--borrows money at interest, it is clear that to pay this interest he will have to make a profit off the tanner and the farmer. But as this profit is impossible unless fraud is used, the interest will fall back upon the shoulders of the unfortunate shoemaker, and ruin him. I have imagined a case of unnatural simplicity. There is no human society but sustains more than three vocations. The most uncivilized society supports numerous industries; to-day, the number of industrial functions (I mean by industrial functions all useful functions) exceeds, perhaps, a thousand. However numerous the occupations, the economic law remains the same,--THAT THE PRODUCER MAY LIVE, HIS WAGES MUST REPURCHASE HIS PRODUCT. _ _The economists cannot be ignorant of this rudimentary principle of their pretended science: why, then, do they so obstinately defend property, and inequality of wages, and the legitimacy of usury, and the honesty of profit,--all of which contradict the economic law, and make exchange impossible? A contractor pays one hundred thousand francs for raw material, fifty thousand francs in wages, and then expects to receive a product of two hundred thousand francs,--that is, expects to make a profit on the material and on the labor of his employees; but if the laborers and the purveyor of the material cannot, with their combined wages, repurchase that which they have produced for the contractor, how can they live? I will develop my question. Here details become necessary. If the workingman receives for his labor an average of three francs per day, his employer (in order to gain any thing beyond his own salary, if only interest on his capital) must sell the day's labor of his employee, in the form of merchandise, for more than three francs. The workingman cannot, then, repurchase that which he has produced for his master. It is thus with all trades whatsoever. The tailor, the hatter, the cabinet-maker, the blacksmith, the tanner, the mason, the jeweller, the printer, the clerk, &c., even to the farmer and wine-grower, cannot repurchase their products; since, producing for a master who in one form or another makes a profit, they are obliged to pay more for their own labor than they get for it. In France, twenty millions of laborers, engaged in all the branches of science, art, and industry, produce every thing which is useful to man. Their annual wages amount, it is estimated to twenty thousand millions; but, in consequence of the right of property, and the multifarious forms of increase, premiums, tithes, interests, fines, profits, farm-rents, house-rents, revenues, emoluments of every nature and description, their products are estimated by the proprietors and employers at twenty-five thousand millions. What does that signify? That the laborers, who are obliged to repurchase these products in order to live, must either pay five for that which they produced for four, or fast one day in five. If there is an economist in France able to show that this calculation is false, I summon him to appear; and I promise to retract all that I have wrongfully and wickedly uttered in my attacks upon property. Let us now look at the results of this profit. If the wages of the workingmen were the same in all pursuits, the deficit caused by the proprietor's tax would be felt equally everywhere; but also the cause of the evil would be so apparent, that it would soon be discovered and suppressed. But, as there is the same inequality of wages (from that of the scavenger up to that of the minister of state) as of property, robbery continually rebounds from the stronger to the weaker; so that, since the laborer finds his hardships increase as he descends in the social scale, the lowest class of people are literally stripped naked and eaten alive by the others. The laboring people can buy neither the cloth which they weave, nor the furniture which they manufacture, nor the metal which they forge, nor the jewels which they cut, nor the prints which they engrave. They can procure neither the wheat which they plant, nor the wine which they grow, nor the flesh of the animals which they raise. They are allowed neither to dwell in the houses which they build, nor to attend the plays which their labor supports, nor to enjoy the rest which their body requires. And why? Because the right of increase does not permit these things to be sold at the cost-price, which is all that laborers can afford to pay. On the signs of those magnificent warehouses which he in his poverty admires, the laborer reads in large letters: "This is thy work, and thou shalt not have it." _Sic vos non vobis_! Every manufacturer who employs one thousand laborers, and gains from them daily one sou each, is slowly pushing them into a state of misery. Every man who makes a profit has entered into a conspiracy with famine. But the whole nation has not even this labor, by means of which property starves it. And why? Because the workers are forced by the insufficiency of their wages to monopolize labor; and because, before being destroyed by dearth, they destroy each other by competition. Let us pursue this truth no further. If the laborer's wages will not purchase his product, it follows that the product is not made for the producer. For whom, then, is it intended? For the richer consumer; that is, for only a fraction of society. But when the whole society labors, it produces for the whole society. If, then, only a part of society consumes, sooner or later a part of society will be idle. Now, idleness is death, as well for the laborer as for the proprietor. This conclusion is inevitable. The most distressing spectacle imaginable is the sight of producers resisting and struggling against this mathematical necessity, this power of figures to which their prejudices blind them. If one hundred thousand printers can furnish reading-matter enough for thirty-four millions of men, and if the price of books is so high that only one-third of that number can afford to buy them, it is clear that these one hundred thousand printers will produce three times as much as the booksellers can sell. That the products of the laborers may never exceed the demands of the consumers, the laborers must either rest two days out of three, or, separating into three groups, relieve each other three times a week, month, or quarter; that is, during two-thirds of their life they must not live. But industry, under the influence of property, does not proceed with such regularity. It endeavors to produce a great deal in a short time, because the greater the amount of products, and the shorter the time of production, the less each product costs. As soon as a demand begins to be felt, the factories fill up, and everybody goes to work. Then business is lively, and both governors and governed rejoice. But the more they work to-day, the more idle will they be hereafter; the more they laugh, the more they shall weep. Under the rule of property, the flowers of industry are woven into none but funeral wreaths. The laborer digs his own grave. If the factory stops running, the manufacturer has to pay interest on his capital the same as before. He naturally tries, then, to continue production by lessening expenses. Then comes the lowering of wages; the introduction of machinery; the employment of women and children to do the work of men; bad workmen, and wretched work. They still produce, because the decreased cost creates a larger market; but they do not produce long, because, the cheapness being due to the quantity and rapidity of production, the productive power tends more than ever to outstrip consumption. It is when laborers, whose wages are scarcely sufficient to support them from one day to another, are thrown out of work, that the consequences of the principle of property become most frightful. They have not been able to economize, they have made no savings, they have accumulated no capital whatever to support them even one day more. Today the factory is closed. To-morrow the people starve in the streets. Day after tomorrow they will either die in the hospital, or eat in the jail. And still new misfortunes come to complicate this terrible situation. In consequence of the cessation of business, and the extreme cheapness of merchandise, the manufacturer finds it impossible to pay the interest on his borrowed capital; whereupon his frightened creditors hasten to withdraw their funds. Production is suspended, and labor comes to a standstill. Then people are astonished to see capital desert commerce, and throw itself upon the Stock Exchange; and I once heard M. Blanqui bitterly lamenting the blind ignorance of capitalists. The cause of this movement of capital is very simple; but for that very reason an economist could not understand it, or rather must not explain it. The cause lies solely in COMPETITION. I mean by competition, not only the rivalry between two parties engaged in the same business, but the general and simultaneous effort of all kinds of business to get ahead of each other. This effort is to-day so strong, that the price of merchandise scarcely covers the cost of production and distribution; so that, the wages of all laborers being lessened, nothing remains, not even interest for the capitalists. The primary cause of commercial and industrial stagnations is, then, interest on capital,--that interest which the ancients with one accord branded with the name of usury, whenever it was paid for the use of money, but which they did not dare to condemn in the forms of house-rent, farm-rent, or profit: as if the nature of the thing lent could ever warrant a charge for the lending; that is, robbery. In proportion to the increase received by the capitalist will be the frequency and intensity of commercial crises,--the first being given, we always can determine the two others; and vice versa. Do you wish to know the regulator of a society? Ascertain the amount of active capital; that is, the capital bearing interest, and the legal rate of this interest. The course of events will be a series of overturns, whose number and violence will be proportional to the activity of capital. In 1839, the number of failures in Paris alone was one thousand and sixty-four. This proportion was kept up in the early months of 1840; and, as I write these lines, the crisis is not yet ended. It is said, further, that the number of houses which have wound up their business is greater than the number of declared failures. By this flood, we may judge of the waterspout's power of suction. The decimation of society is now imperceptible and permanent, now periodical and violent; it depends upon the course which property takes. In a country where the property is pretty evenly distributed, and where little business is done,--the rights and claims of each being balanced by those of others,--the power of invasion is destroyed. There--it may be truly said--property does not exist, since the right of increase is scarcely exercised at all. The condition of the laborers--as regards security of life--is almost the same as if absolute equality prevailed among them. They are deprived of all the advantages of full and free association, but their existence is not endangered in the least. With the exception of a few isolated victims of the right of property--of this misfortune whose primary cause no one perceives--the society appears to rest calmly in the bosom of this sort of equality. But have a care; it is balanced on the edge of a sword: at the slightest shock, it will fall and meet with death! Ordinarily, the whirlpool of property localizes itself. On the one hand, farm-rent stops at a certain point; on the other, in consequence of competition and over-production, the price of manufactured goods does not rise,--so that the condition of the peasant varies but little, and depends mainly on the seasons. The devouring action of property bears, then, principally upon business. We commonly say COMMERCIAL CRISES, not AGRICULTURAL CRISES; because, while the farmer is eaten up slowly by the right of increase, the manufacturer is swallowed at a single mouthful. This leads to the cessation of business, the destruction of fortunes, and the inactivity of the working people; who die one after another on the highways, and in the hospitals, prisons, and galleys. To sum up this proposition:-- Property sells products to the laborer for more than it pays him for them; therefore it is impossible. APPENDIX TO THE FIFTH PROPOSITION. I. Certain reformers, and even the most of the publicists--who, though belonging to no particular school, busy themselves in devising means for the amelioration of the lot of the poorer and more numerous class--lay much stress now-a-days on a better organization of labor. The disciples of Fourier, especially, never stop shouting, "ON TO THE PHALANX!" declaiming in the same breath against the foolishness and absurdity of other sects. They consist of half-a-dozen incomparable geniuses who have discovered that FIVE AND FOUR MAKE NINE; TAKE TWO AWAY, AND NINE REMAIN,--and who weep over the blindness of France, who refuses to believe in this astonishing arithmetic.[1] [1] Fourier, having to multiply a whole number by a fraction, never failed, they say, to obtain a product much greater than the multiplicand. He affirmed that under his system of harmony the mercury would solidify when the temperature was above zero. He might as well have said that the Harmonians would make burning ice. I once asked an intelligent phalansterian what he thought of such physics. "I do not know," he answered; "but I believe." And yet the same man disbelieved in the doctrine of the Real Presence. In fact, the Fourierists proclaim themselves, on the one hand, defenders of property, of the right of increase, which they have thus formulated: TO EACH ACCORDING TO HIS CAPITAL, HIS LABOR, AND HIS SKILL. On the other hand, they wish the workingman to come into the enjoyment of all the wealth of society; that is,--abridging the expression,--into the undivided enjoyment of his own product. Is not this like saying to the workingman, "Labor, you shall have three francs per day; you shall live on fifty-five sous; you shall give the rest to the proprietor, and thus you will consume three francs"? If the above speech is not an exact epitome of Charles Fourier's system, I will subscribe to the whole phalansterian folly with a pen dipped in my own blood. Of what use is it to reform industry and agriculture,--of what use, indeed, to labor at all,--if property is maintained, and labor can never meet its expenses? Without the abolition of property, the organization of labor is neither more nor less than a delusion. If production should be quadrupled,--a thing which does not seem to me at all impossible,--it would be labor lost: if the additional product was not consumed, it would be of no value, and the proprietor would decline to receive it as interest; if it was consumed, all the disadvantages of property would reappear. It must be confessed that the theory of passional attraction is gravely at fault in this particular, and that Fourier, when he tried to harmonize the PASSION for property,--a bad passion, whatever he may say to the contrary,--blocked his own chariot-wheels. The absurdity of the phalansterian economy is so gross, that many people suspect Fourier, in spite of all the homage paid by him to proprietors, of having been a secret enemy of property. This opinion might be supported by plausible arguments; still it is not mine. Charlatanism was too important a part for such a man to play, and sincerity too insignificant a one. I would rather think Fourier ignorant (which is generally admitted) than disingenuous. As for his disciples, before they can formulate any opinion of their own, they must declare once for all, unequivocally and with no mental reservation, whether they mean to maintain property or not, and what they mean by their famous motto,--"To each according to his capital, his labor, and his skill." II. But, some half-converted proprietor will observe, "Would it not be possible, by suppressing the bank, incomes, farm-rent, house-rent, usury of all kinds, and finally property itself, to proportion products to capacities? That was St. Simon's idea; it was also Fourier's; it is the desire of the human conscience; and no decent person would dare maintain that a minister of state should live no better than a peasant." O Midas! your ears are long! What! will you never understand that disparity of wages and the right of increase are one and the same? Certainly, St. Simon, Fourier, and their respective flocks committed a serious blunder in attempting to unite, the one, inequality and communism; the other, inequality and property: but you, a man of figures, a man of economy,--you, who know by heart your LOGARITHMIC tables,--how can you make so stupid a mistake? Does not political economy itself teach you that the product of a man, whatever be his individual capacity, is never worth more than his labor, and that a man's labor is worth no more than his consumption? You remind me of that great constitution-framer, poor Pinheiro-Ferreira, the Sieyes of the nineteenth century, who, dividing the citizens of a nation into twelve classes,--or, if you prefer, into twelve grades,--assigned to some a salary of one hundred thousand francs each; to others, eighty thousand; then twenty-five thousand, fifteen thousand, ten thousand, &c., down to one thousand five hundred, and one thousand francs, the minimum allowance of a citizen. Pinheiro loved distinctions, and could no more conceive of a State without great dignitaries than of an army without drum-majors; and as he also loved, or thought he loved, liberty, equality, and fraternity, he combined the good and the evil of our old society in an eclectic philosophy which he embodied in a constitution. Excellent Pinheiro! Liberty even to passive submission, fraternity even to identity of language, equality even in the jury-box and at the guillotine,--such was his ideal republic. Unappreciated genius, of whom the present century was unworthy, but whom the future will avenge! Listen, proprietor. Inequality of talent exists in fact; in right it is not admissible, it goes for nothing, it is not thought of. One Newton in a century is equal to thirty millions of men; the psychologist admires the rarity of so fine a genius, the legislator sees only the rarity of the function. Now, rarity of function bestows no privilege upon the functionary; and that for several reasons, all equally forcible. 1. Rarity of genius was not, in the Creator's design, a motive to compel society to go down on its knees before the man of superior talents, but a providential means for the performance of all functions to the greatest advantage of all. 2. Talent is a creation of society rather than a gift of Nature; it is an accumulated capital, of which the receiver is only the guardian. Without society,--without the education and powerful assistance which it furnishes,--the finest nature would be inferior to the most ordinary capacities in the very respect in which it ought to shine. The more extensive a man's knowledge, the more luxuriant his imagination, the more versatile his talent,--the more costly has his education been, the more remarkable and numerous were his teachers and his models, and the greater is his debt. The farmer produces from the time that he leaves his cradle until he enters his grave: the fruits of art and science are late and scarce; frequently the tree dies before the fruit ripens. Society, in cultivating talent, makes a sacrifice to hope. 3. Capacities have no common standard of comparison: the conditions of development being equal, inequality of talent is simply speciality of talent. 4. Inequality of wages, like the right of increase, is economically impossible. Take the most favorable case,--that where each laborer has furnished his maximum production; that there may be an equitable distribution of products, the share of each must be equal to the quotient of the total production divided by the number of laborers. This done, what remains wherewith to pay the higher wages? Nothing whatever. Will it be said that all laborers should be taxed? But, then, their consumption will not be equal to their production, their wages will not pay for their productive service, they will not be able to repurchase their product, and we shall once more be afflicted with all the calamities of property. I do not speak of the injustice done to the defrauded laborer, of rivalry, of excited ambition, and burning hatred,--these may all be important considerations, but they do not hit the point. On the one hand, each laborer's task being short and easy, and the means for its successful accomplishment being equal in all cases, how could there be large and small producers? On the other hand, all functions being equal, either on account of the actual equivalence of talents and capacities, or on account of social co-operation, how could a functionary claim a salary proportional to the worth of his genius? But, what do I say? In equality wages are always proportional to talents. What is the economical meaning of wages? The reproductive consumption of the laborer. The very act by which the laborer produces constitutes, then, this consumption, exactly equal to his production, of which we are speaking. When the astronomer produces observations, the poet verses, or the savant experiments, they consume instruments, books, travels, &c., &c.; now, if society supplies this consumption, what more can the astronomer, the savant, or the poet demand? We must conclude, then, that in equality, and only in equality, St. Simon's adage--TO EACH ACCORDING TO HIS CAPACITY TO EACH CAPACITY ACCORDING TO ITS RESULTS--finds its full and complete application. III. The great evil--the horrible and ever-present evil--arising from property, is that, while property exists, population, however reduced, is, and always must be, over-abundant. Complaints have been made in all ages of the excess of population; in all ages property has been embarrassed by the presence of pauperism, not perceiving that it caused it. Further,--nothing is more curious than the diversity of the plans proposed for its extermination. Their atrocity is equalled only by their absurdity. The ancients made a practice of abandoning their children. The wholesale and retail slaughter of slaves, civil and foreign wars, also lent their aid. In Rome (where property held full sway), these three means were employed so effectively, and for so long a time, that finally the empire found itself without inhabitants. When the barbarians arrived, nobody was to be found; the fields were no longer cultivated; grass grew in the streets of the Italian cities. In China, from time immemorial, upon famine alone has devolved the task of sweeping away the poor. The people living almost exclusively upon rice, if an accident causes the crop to fail, in a few days hunger kills the inhabitants by myriads; and the Chinese historian records in the annals of the empire, that in such a year of such an emperor twenty, thirty, fifty, one hundred thousand inhabitants died of starvation. Then they bury the dead, and recommence the production of children until another famine leads to the same result. Such appears to have been, in all ages, the Confucian economy. I borrow the following facts from a modern economist:-- "Since the fourteenth and fifteenth centuries, England has been preyed upon by pauperism. At that time beggars were punished by law." Nevertheless, she had not one-fourth as large a population as she has to-day. "Edward prohibits alms-giving, on pain of imprisonment.... The laws of 1547 and 1656 prescribe a like punishment, in case of a second offence. Elizabeth orders that each parish shall support its own paupers. But what is a pauper? Charles II. decides that an UNDISPUTED residence of forty days constitutes a settlement in a parish; but, if disputed, the new-comer is forced to pack off. James II. modifies this decision, which is again modified by William. In the midst of trials, reports, and modifications, pauperism increases, and the workingman languishes and dies. "The poor-tax in 1774 exceeded forty millions of francs; in 1783-4-5, it averaged fifty-three millions; 1813, more than a hundred and eighty-seven millions five hundred thousand francs; 1816, two hundred and fifty millions; in 1817, it is estimated at three hundred and seventeen millions. "In 1821, the number of paupers enrolled upon the parish lists was estimated at four millions, nearly one-third of the population. "FRANCE. In 1544, Francis I. establishes a compulsory tax in behalf of the poor. In 1566 and 1586, the same principle is applied to the whole kingdom. "Under Louis XIV., forty thousand paupers infested the capital [as many in proportion as to-day]. Mendicity was punished severely. In 1740, the Parliament of Paris re-establishes within its own jurisdiction the compulsory assessment. "The Constituent Assembly, frightened at the extent of the evil and the difficulty of curing it, ordains the _statu quo_. "The Convention proclaims assistance of the poor to be a NATIONAL DEBT. Its law remains unexecuted. "Napoleon also wishes to remedy the evil: his idea is imprisonment. 'In that way,' said he, 'I shall protect the rich from the importunity of beggars, and shall relieve them of the disgusting sight of abject poverty.'" O wonderful man! From these facts, which I might multiply still farther, two things are to be inferred,--the one, that pauperism is independent of population; the other, that all attempts hitherto made at its extermination have proved abortive. Catholicism founds hospitals and convents, and commands charity; that is, she encourages mendicity. That is the extent of her insight as voiced by her priests. The secular power of Christian nations now orders taxes on the rich, now banishment and imprisonment for the poor; that is, on the one hand, violation of the right of property, and, on the other, civil death and murder. The modern economists--thinking that pauperism is caused by the excess of population, exclusively--have devoted themselves to devising checks. Some wish to prohibit the poor from marrying; thus,--having denounced religious celibacy,--they propose compulsory celibacy, which will inevitably become licentious celibacy. Others do not approve this method, which they deem too violent; and which, they say, deprives the poor man of THE ONLY PLEASURE WHICH HE KNOWS IN THIS WORLD. They would simply recommend him to be PRUDENT. This opinion is held by Malthus, Sismondi, Say, Droz, Duchatel, &c. But if the poor are to be PRUDENT, the rich must set the example. Why should the marriageable age of the latter be fixed at eighteen years, while that of the former is postponed until thirty? Again, they would do well to explain clearly what they mean by this matrimonial prudence which they so urgently recommend to the laborer; for here equivocation is especially dangerous, and I suspect that the economists are not thoroughly understood. "Some half-enlightened ecclesiastics are alarmed when they hear prudence in marriage advised; they fear that the divine injunction--INCREASE AND MULTIPLY--is to be set aside. To be logical, they must anathematize bachelors." (J. Droz: Political Economy.) M. Droz is too honest a man, and too little of a theologian, to see why these casuists are so alarmed; and this chaste ignorance is the very best evidence of the purity of his heart. Religion never has encouraged early marriages; and the kind of PRUDENCE which it condemns is that described in this Latin sentence from Sanchez,--_An licet ob metum liberorum semen extra vas ejicere_? Destutt de Tracy seems to dislike prudence in either form. He says: "I confess that I no more share the desire of the moralists to diminish and restrain our pleasures, than that of the politicians to increase our procreative powers, and accelerate reproduction." He believes, then, that we should love and marry when and as we please. Widespread misery results from love and marriage, but this our philosopher does not heed. True to the dogma of the necessity of evil, to evil he looks for the solution of all problems. He adds: "The multiplication of men continuing in all classes of society, the surplus members of the upper classes are supported by the lower classes, and those of the latter are destroyed by poverty." This philosophy has few avowed partisans; but it has over every other the indisputable advantage of demonstration in practice. Not long since France heard it advocated in the Chamber of Deputies, in the course of the discussion on the electoral reform,--POVERTY WILL ALWAYS EXIST. That is the political aphorism with which the minister of state ground to powder the arguments of M. Arago. POVERTY WILL ALWAYS EXIST! Yes, so long as property does. The Fourierists--INVENTORS of so many marvellous contrivances--could not, in this field, belie their character. They invented four methods of checking increase of population at will. 1. THE VIGOR OF WOMEN. On this point they are contradicted by experience; for, although vigorous women may be less likely to conceive, nevertheless they give birth to the healthiest children; so that the advantage of maternity is on their side. 2. INTEGRAL EXERCISE, or the equal development of all the physical powers. If this development is equal, how is the power of reproduction lessened? 3. THE GASTRONOMIC REGIME; or, in plain English, the philosophy of the belly. The Fourierists say, that abundance of rich food renders women sterile; just as too much sap--while enhancing the beauty of flowers--destroys their reproductive capacity. But the analogy is a false one. Flowers become sterile when the stamens--or male organs--are changed into petals, as may be seen by inspecting a rose; and when through excessive dampness the pollen loses its fertilizing power. Then,--in order that the gastronomic regime may produce the results claimed for it,--not only must the females be fattened, but the males must be rendered impotent. 4. PHANEROGAMIC MORALITY, or public concubinage. I know not why the phalansterians use Greek words to convey ideas which can be expressed so clearly in French. This method--like the preceding one--is copied from civilized customs. Fourier, himself, cites the example of prostitutes as a proof. Now we have no certain knowledge yet of the facts which he quotes. So states Parent Duchatelet in his work on "Prostitution." From all the information which I have been able to gather, I find that all the remedies for pauperism and fecundity--sanctioned by universal practice, philosophy, political economy, and the latest reformers--may be summed up in the following list: masturbation, onanism, [19] sodomy, tribadie, polyandry, [20] prostitution, castration, continence, abortion, and infanticide. [21] All these methods being proved inadequate, there remains proscription. Unfortunately, proscription, while decreasing the number of the poor, increases their proportion. If the interest charged by the proprietor upon the product is equal only to one-twentieth of the product (by law it is equal to one-twentieth of the capital), it follows that twenty laborers produce for nineteen only; because there is one among them, called proprietor, who eats the share of two. Suppose that the twentieth laborer--the poor one--is killed: the production of the following year will be diminished one-twentieth; consequently the nineteenth will have to yield his portion, and perish. For, since it is not one-twentieth of the product of nineteen which must be paid to the proprietor, but one-twentieth of the product of twenty (see third proposition), each surviving laborer must sacrifice one-twentieth PLUS one four-hundredth of his product; in other words, one man out of nineteen must be killed. Therefore, while property exists, the more poor people we kill, the more there are born in proportion. Malthus, who proved so clearly that population increases in geometrical progression, while production increases only in arithmetical progression, did not notice this PAUPERIZING power of property. Had he observed this, he would have understood that, before trying to check reproduction, the right of increase should be abolished; because, wherever that right is tolerated, there are always too many inhabitants, whatever the extent or fertility of the soil. It will be asked, perhaps, how I would maintain a balance between population and production; for sooner or later this problem must be solved. The reader will pardon me, if I do not give my method here. For, in my opinion, it is useless to say a thing unless we prove it. Now, to explain my method fully would require no less than a formal treatise. It is a thing so simple and so vast, so common and so extraordinary, so true and so misunderstood, so sacred and so profane, that to name it without developing and proving it would serve only to excite contempt and incredulity. One thing at a time. Let us establish equality, and this remedy will soon appear; for truths follow each other, just as crimes and errors do. SIXTH PROPOSITION. Property is impossible, because it is the Mother of Tyranny. What is government? Government is public economy, the supreme administrative power over public works and national possessions. Now, the nation is like a vast society in which all the citizens are stockholders. Each one has a deliberative voice in the assembly; and, if the shares are equal, has one vote at his disposal. But, under the regime of property, there is great inequality between the shares of the stockholders; therefore, one may have several hundred votes, while another has only one. If, for example, I enjoy an income of one million; that is, if I am the proprietor of a fortune of thirty or forty millions well invested, and if this fortune constitutes 1/30000 of the national capital,--it is clear that the public administration of my property would form 1/30000 of the duties of the government; and, if the nation had a population of thirty-four millions, that I should have as many votes as one thousand one hundred and thirty-three simple stockholders. Thus, when M. Arago demands the right of suffrage for all members of the National Guard, he is perfectly right; since every citizen is enrolled for at least one national share, which entitles him to one vote. But the illustrious orator ought at the same time to demand that each elector shall have as many votes as he has shares; as is the case in commercial associations. For to do otherwise is to pretend that the nation has a right to dispose of the property of individuals without consulting them; which is contrary to the right of property. In a country where property exists, equality of electoral rights is a violation of property. Now, if each citizen's sovereignty must and ought to be proportional to his property, it follows that the small stock holders are at the mercy of the larger ones; who will, as soon as they choose, make slaves of the former, marry them at pleasure, take from them their wives, castrate their sons, prostitute their daughters, throw the aged to the sharks,--and finally will be forced to serve themselves in the same way, unless they prefer to tax themselves for the support of their servants. In such a condition is Great Britain to-day. John Bull--caring little for liberty, equality, or dignity--prefers to serve and beg. But you, bonhomme Jacques? Property is incompatible with political and civil equality; then property is impossible. HISTORICAL COMMENTS.--1. When the vote of the third estate was doubled by the States-General of 1789, property was grossly violated. The nobility and the clergy possessed three-fourths of the soil of France; they should have controlled three-fourths of the votes in the national representation. To double the vote of the third estate was just, it is said, since the people paid nearly all the taxes. This argument would be sound, if there were nothing to be voted upon but taxes. But it was a question at that time of reforming the government and the constitution; consequently, the doubling of the vote of the third estate was a usurpation, and an attack on property. 2. If the present representatives of the radical opposition should come into power, they would work a reform by which every National Guard should be an elector, and every elector eligible for office,--an attack on property. They would lower the rate of interest on public funds,--an attack on property. They would, in the interest of the public, pass laws to regulate the exportation of cattle and wheat,--an attack on property. They would alter the assessment of taxes,--an attack on property. They would educate the people gratuitously,--a conspiracy against property. They would organize labor; that is, they would guarantee labor to the workingman, and give him a share in the profits,--the abolition of property. Now, these same radicals are zealous defenders of property,--a radical proof that they know not what they do, nor what they wish. 3. Since property is the grand cause of privilege and despotism, the form of the republican oath should be changed. Instead of, "I swear hatred to royalty," henceforth the new member of a secret society should say, "I swear hatred to property." SEVENTH PROPOSITION. _Property is impossible, because, in consuming its Receipts, it loses them; in hoarding them, it nullifies them; and in using them as Capital, it turns them against Production_. I. If, with the economists, we consider the laborer as a living machine, we must regard the wages paid to him as the amount necessary to support this machine, and keep it in repair. The head of a manufacturing establishment--who employs laborers at three, five, ten, and fifteen francs per day, and who charges twenty francs for his superintendence--does not regard his disbursements as losses, because he knows they will return to him in the form of products. Consequently, LABOR and REPRODUCTIVE CONSUMPTION are identical. What is the proprietor? He is a machine which does not work; or, which working for its own pleasure, and only when it sees fit, produces nothing. What is it to consume as a proprietor? It is to consume without working, to consume without reproducing. For, once more, that which the proprietor consumes as a laborer comes back to him; he does not give his labor in exchange for his property, since, if he did, he would thereby cease to be a proprietor. In consuming as a laborer, the proprietor gains, or at least does not lose, since he recovers that which he consumes; in consuming as a proprietor, he impoverishes himself. To enjoy property, then, it is necessary to destroy it; to be a real proprietor, one must cease to be a proprietor. The laborer who consumes his wages is a machine which destroys and reproduces; the proprietor who consumes his income is a bottomless gulf,--sand which we water, a stone which we sow. So true is this, that the proprietor--neither wishing nor knowing how to produce, and perceiving that as fast as he uses his property he destroys it for ever--has taken the precaution to make some one produce in his place. That is what political economy, speaking in the name of eternal justice, calls PRODUCING BY HIS CAPITAL,--PRODUCING BY HIS TOOLS. And that is what ought to be called PRODUCING BY A SLAVE--PRODUCING AS A THIEF AND AS A TYRANT. He, the proprietor, produce!... The robber might say, as well: "I produce." The consumption of the proprietor has been styled luxury, in opposition to USEFUL consumption. From what has just been said, we see that great luxury can prevail in a nation which is not rich,--that poverty even increases with luxury, and vice versa. The economists (so much credit must be given them, at least) have caused such a horror of luxury, that to-day a very large number of proprietors--not to say almost all--ashamed of their idleness--labor, economize, and capitalize. They have jumped from the frying-pan into the fire. I cannot repeat it too often: the proprietor who thinks to deserve his income by working, and who receives wages for his labor, is a functionary who gets paid twice; that is the only difference between an idle proprietor and a laboring proprietor. By his labor, the proprietor produces his wages only--not his income. And since his condition enables him to engage in the most lucrative pursuits, it may be said that the proprietor's labor harms society more than it helps it. Whatever the proprietor does, the consumption of his income is an actual loss, which his salaried functions neither repair nor justify; and which would annihilate property, were it not continually replenished by outside production. II. Then, the proprietor who consumes annihilates the product: he does much worse if he lays it up. The things which he lays by pass into another world; nothing more is seen of them, not even the _caput mortuum_,--the smoke. If we had some means of transportation by which to travel to the moon, and if the proprietors should be seized with a sudden fancy to carry their savings thither, at the end of a certain time our terraqueous planet would be transported by them to its satellite! The proprietor who lays up products will neither allow others to enjoy them, nor enjoy them himself; for him there is neither possession nor property. Like the miser, he broods over his treasures: he does not use them. He may feast his eyes upon them; he may lie down with them; he may sleep with them in his arms: all very fine, but coins do not breed coins. No real property without enjoyment; no enjoyment without consumption; no consumption without loss of property,--such is the inflexible necessity to which God's judgment compels the proprietor to bend. A curse upon property! III. The proprietor who, instead of consuming his income, uses it as capital, turns it against production, and thereby makes it impossible for him to exercise his right. For the more he increases the amount of interest to be paid upon it, the more he is compelled to diminish wages. Now, the more he diminishes wages,--that is, the less he devotes to the maintenance and repair of the machines,--the more he diminishes the quantity of labor; and with the quantity of labor the quantity of product, and with the quantity of product the very source of his income. This is clearly shown by the following example:-- Take an estate consisting of arable land, meadows, and vineyards, containing the dwellings of the owner and the tenant; and worth, together with the farming implements, one hundred thousand francs, the rate of increase being three per cent. If, instead of consuming his revenue, the proprietor uses it, not in enlarging but in beautifying his estate, can he annually demand of his tenant an additional ninety francs on account of the three thousand francs which he has thus added to his capital? Certainly not; for on such conditions the tenant, though producing no more than before, would soon be obliged to labor for nothing,--what do I say? to actually suffer loss in order to hold his lease. In fact, revenue can increase only as productive soil increases: it is useless to build walls of marble, and work with plows of gold. But, since it is impossible to go on acquiring for ever, to add estate to estate, to CONTINUE ONE'S POSSESSIONS, as the Latins said; and since, moreover, the proprietor always has means wherewith to capitalize,--it follows that the exercise of his right finally becomes impossible. Well, in spite of this impossibility, property capitalizes, and in capitalizing increases its revenue; and, without stopping to look at the particular cases which occur in commerce, manufacturing operations, and banking, I will cite a graver fact,--one which directly affects all citizens. I mean the indefinite increase of the budget. The taxes increase every year. It would be difficult to tell in which department of the government the expenses increase; for who can boast of any knowledge as to the budget? On this point, the ablest financiers continually disagree. What is to be thought, I ask, of the science of government, when its professors cannot understand one another's figures? Whatever be the immediate causes of this growth of the budget, it is certain that taxation increases at a rate which causes everybody to despair. Everybody sees it, everybody acknowledges it; but nobody seems to understand the primary cause.[1] Now, I say that it cannot be otherwise,--that it is necessary and inevitable. [1] "The financial situation of the English government was shown up in the House of Lords during the session of January 23. It is not an encouraging one. For several years the expenses have exceeded the receipts, and the Minister has been able to re-establish the balance only by loans renewed annually. The combined deficits of the years 1838 and 1839 amount to forty-seven million five hundred thousand francs. In 1840, the excess of expenses over receipts is expected to be twenty-two million five hundred thousand francs. Attention was called to these figures by Lord Ripon. Lord Melbourne replied: 'The noble earl unhappily was right in declaring that the public expenses continually increase, and with him I must say that there is no room for hope that they can be diminished or met in any way.'"--National: January 26, 1840. A nation is the tenant of a rich proprietor called the GOVERNMENT, to whom it pays, for the use of the soil, a farm-rent called a tax. Whenever the government makes war, loses or gains a battle, changes the outfit of its army, erects a monu-ment, digs a canal, opens a road, or builds a railway, it borrows money, on which the tax-payers pay interest; that is, the government, without adding to its productive capacity, increases its active capital,--in a word, capitalizes after the manner of the proprietor of whom I have just spoken. Now, when a governmental loan is once contracted, and the interest is once stipulated, the budget cannot be reduced. For, to accomplish that, either the capitalists must relinquish their interest, which would involve an abandonment of property; or the government must go into bankruptcy, which would be a fraudulent denial of the political principle; or it must pay the debt, which would require another loan; or it must reduce expenses, which is impossible, since the loan was contracted for the sole reason that the ordinary receipts were insufficient; or the money expended by the government must be reproductive, which requires an increase of productive capacity,--a condition excluded by our hypothesis; or, finally, the tax-payers must submit to a new tax in order to pay the debt,--an impossible thing. For, if this new tax were levied upon all citizens alike, half, or even more, of the citizens would be unable to pay it; if the rich had to bear the whole, it would be a forced contribution,--an invasion of property. Long financial experience has shown that the method of loans, though exceedingly dangerous, is much surer, more convenient, and less costly than any other method; consequently the government borrows,--that is, goes on capitalizing,--and increases the budget. Then, a budget, instead of ever diminishing, must necessarily and continually increase. It is astonishing that the economists, with all their learning, have failed to perceive a fact so simple and so evident. If they have perceived it, why have they neglected to condemn it? HISTORICAL COMMENT.--Much interest is felt at present in a financial operation which is expected to result in a reduction of the budget. It is proposed to change the present rate of increase, five per cent. Laying aside the politico-legal question to deal only with the financial question,--is it not true that, when five per cent. is changed to four per cent., it will then be necessary, for the same reasons, to change four to three; then three to two, then two to one, and finally to sweep away increase altogether? But that would be the advent of equality of conditions and the abolition of property. Now it seems to me, that an intelligent nation should voluntarily meet an inevitable revolution half way, instead of suffering itself to be dragged after the car of inflexible necessity. EIGHTH PROPOSITION. Property is impossible, because its power of Accumulation is infinite, and is exercised only over finite quantities. If men, living in equality, should grant to one of their number the exclusive right of property; and this sole proprietor should lend one hundred francs to the human race at compound interest, payable to his descendants twenty-four generations hence,--at the end of six hundred years this sum of one hundred francs, at five per cent., would amount to 107,854,010,777,600 francs; two thousand six hundred and ninety-six and one-third times the capital of France (supposing her capital to be 40,000,000,000), or more than twenty times the value of the terrestrial globe! Suppose that a man, in the reign of St. Louis, had borrowed one hundred francs, and had refused,--he and his heirs after him,--to return it. Even though it were known that the said heirs were not the rightful possessors, and that prescription had been interrupted always at the right moment,--nevertheless, by our laws, the last heir would be obliged to return the one hundred francs with interest, and interest on the interest; which in all would amount, as we have seen, to nearly one hundred and eight thousand billions. Every day, fortunes are growing in our midst much more rapidly than this. The preceding example supposed the interest equal to one-twentieth of the capital,--it often equals one-tenth, one-fifth, one-half of the capital; and sometimes the capital itself. The Fourierists--irreconcilable enemies of equality, whose partisans they regard as SHARKS--intend, by quadrupling production, to satisfy all the demands of capital, labor, and skill. But, should production be multiplied by four, ten, or even one hundred, property would soon absorb, by its power of accumulation and the effects of its capitalization, both products and capital, and the land, and even the laborers. Is the phalanstery to be prohibited from capitalizing and lending at interest? Let it explain, then, what it means by property. I will carry these calculations no farther. They are capable of infinite variation, upon which it would be puerile for me to insist. I only ask by what standard judges, called upon to decide a suit for possession, fix the interest? And, developing the question, I ask,-- Did the legislator, in introducing into the Republic the principle of property, weigh all the consequences? Did he know the law of the possible? If he knew it, why is it not in the Code? Why is so much latitude allowed to the proprietor in accumulating property and charging interest,--to the judge in recognizing and fixing the domain of property,--to the State in its power to levy new taxes continually? At what point is the nation justified in repudiating the budget, the tenant his farm-rent, and the manufacturer the interest on his capital? How far may the idler take advantage of the laborer? Where does the right of spoliation begin, and where does it end? When may the producer say to the proprietor, "I owe you nothing more"? When is property satisfied? When must it cease to steal? If the legislator did know the law of the possible, and disregarded it, what must be thought of his justice? If he did not know it, what must be thought of his wisdom? Either wicked or foolish, how can we recognize his authority? If our charters and our codes are based upon an absurd hypothesis, what is taught in the law-schools? What does a judgment of the Court of Appeal amount to? About what do our Chambers deliberate? What is POLITICS? What is our definition of a STATESMAN? What is the meaning of JURISPRUDENCE? Should we not rather say JURISIGNORANCE? If all our institutions are based upon an error in calculation, does it not follow that these institutions are so many shams? And if the entire social structure is built upon this absolute impossibility of property, is it not true that the government under which we live is a chimera, and our present society a utopia? NINTH PROPOSITION. Property is impossible, because it is powerless against Property. I. By the third corollary of our axiom, interest tells against the proprietor as well as the stranger. This economical principle is universally admitted. Nothing simpler at first blush; yet, nothing more absurd, more contradictory in terms, or more absolutely impossible. The manufacturer, it is said, pays himself the rent on his house and capital. HE PAYS HIMSELF; that is, he gets paid by the public who buy his products. For, suppose the manufacturer, who seems to make this profit on his property, wishes also to make it on his merchandise, can he then pay himself one franc for that which cost him ninety centimes, and make money by the operation? No: such a transaction would transfer the merchant's money from his right hand to his left, but without any profit whatever. Now, that which is true of a single individual trading with himself is true also of the whole business world. Form a chain of ten, fifteen, twenty producers; as many as you wish. If the producer A makes a profit out of the producer B. B's loss must, according to economical principles, be made up by C, C's by D; and so on through to Z. But by whom will Z be paid for the loss caused him by the profit charged by A in the beginning? BY THE CONSUMER, replies Say. Contemptible equivocation! Is this consumer any other, then, than A, B. C, D, &c., or Z? By whom will Z be paid? If he is paid by A, no one makes a profit; consequently, there is no property. If, on the contrary, Z bears the burden himself, he ceases to be a member of society; since it refuses him the right of property and profit, which it grants to the other associates. Since, then, a nation, like universal humanity, is a vast industrial association which cannot act outside of itself, it is clear that no man can enrich himself without impoverishing another. For, in order that the right of property, the right of increase, may be respected in the case of A, it must be denied to Z; thus we see how equality of rights, separated from equality of conditions, may be a truth. The iniquity of political economy in this respect is flagrant. "When I, a manufacturer, purchase the labor of a workingman, I do not include his wages in the net product of my business; on the contrary, I deduct them. But the workingman includes them in his net product.... "(Say: Political Economy.) That means that all which the workingman gains is NET PRODUCT; but that only that part of the manufacturer's gains is NET PRODUCT, which remains after deducting his wages. But why is the right of profit confined to the manufacturer? Why is this right, which is at bottom the right of property itself, denied to the workingman? In the terms of economical science, the workingman is capital. Now, all capital, beyond the cost of its maintenance and repair, must bear interest. This the proprietor takes care to get, both for his capital and for himself. Why is the workingman prohibited from charging a like interest for his capital, which is himself? Property, then, is inequality of rights; for, if it were not inequality of rights, it would be equality of goods,--in other words, it would not exist. Now, the charter guarantees to all equality of rights. Then, by the charter, property is impossible. II. Is A, the proprietor of an estate, entitled by the fact of his proprietorship to take possession of the field belonging to B. his neighbor? "No," reply the proprietors; "but what has that to do with the right of property?" That I shall show you by a series of similar propositions. Has C, a hatter, the right to force D, his neighbor and also a hatter, to close his shop, and cease his business? Not the least in the world. But C wishes to make a profit of one franc on every hat, while D is content with fifty centimes. It is evident that D's moderation is injurious to C's extravagant claims. Has the latter a right to prevent D from selling? Certainly not. Since D is at liberty to sell his hats fifty centimes cheaper than C if he chooses, C in his turn is free to reduce his price one franc. Now, D is poor, while C is rich; so that at the end of two or three years D is ruined by this intolerable competition, and C has complete control of the market. Can the proprietor D get any redress from the proprietor C? Can he bring a suit against him to recover his business and property? No; for D could have done the same thing, had he been the richer of the two. On the same ground, the large proprietor A may say to the small proprietor B: "Sell me your field, otherwise you shall not sell your wheat,"--and that without doing him the least wrong, or giving him ground for complaint. So that A can devour B if he likes, for the very reason that A is stronger than B. Consequently, it is not the right of property which enables A and C to rob B and D, but the right of might. By the right of property, neither the two neighbors A and B, nor the two merchants C and D, could harm each other. They could neither dispossess nor destroy one another, nor gain at one another's expense. The power of invasion lies in superior strength. But it is superior strength also which enables the manufacturer to reduce the wages of his employees, and the rich merchant and well-stocked proprietor to sell their products for what they please. The manufacturer says to the laborer, "You are as free to go elsewhere with your services as I am to receive them. I offer you so much." The merchant says to the customer, "Take it or leave it; you are master of your money, as I am of my goods. I want so much." Who will yield? The weaker. Therefore, without force, property is powerless against property, since without force it has no power to increase; therefore, without force, property is null and void. HISTORICAL COMMENT.--The struggle between colonial and native sugars furnishes us a striking example of this impossibility of property. Leave these two industries to themselves, and the native manufacturer will be ruined by the colonist. To maintain the beet-root, the cane must be taxed: to protect the property of the one, it is necessary to injure the property of the other. The most remarkable feature of this business is precisely that to which the least attention is paid; namely, that, in one way or another, property has to be violated. Impose on each industry a proportional tax, so as to preserve a balance in the market, and you create a MAXIMUM PRICE,--you attack property in two ways. On the one hand, your tax interferes with the liberty of trade; on the other, it does not recognize equality of proprietors. Indemnify the beet-root, you violate the property of the tax-payer. Cultivate the two varieties of sugar at the nation's expense, just as different varieties of tobacco are cultivated,--you abolish one species of property. This last course would be the simpler and better one; but, to induce the nations to adopt it, requires such a co-operation of able minds and generous hearts as is at present out of the question. Competition, sometimes called liberty of trade,--in a word, property in exchange,--will be for a long time the basis of our commercial legislation; which, from the economical point of view, embraces all civil laws and all government. Now, what is competition? A duel in a closed field, where arms are the test of right. "Who is the liar,--the accused or the accuser?" said our barbarous ancestors. "Let them fight it out," replied the still more barbarous judge; "the stronger is right." Which of us two shall sell spices to our neighbor? "Let each offer them for sale," cries the economist; "the sharper, or the more cunning, is the more honest man, and the better merchant." Such is the exact spirit of the Code Napoleon. TENTH PROPOSITION. Property is impossible, because it is the Negation of equality. The development of this proposition will be the resume of the preceding ones. 1. It is a principle of economical justice, that PRODUCTS ARE BOUGHT ONLY BY PRODUCTS. Property, being capable of defence only on the ground that it produces utility, is, since it produces nothing, for ever condemned. 2. It is an economical law, that LABOR MUST BE BALANCED BY PRODUCT. It is a fact that, with property, production costs more than it is worth. 3. Another economical law: THE CAPITAL BEING GIVEN, PRODUCTION IS MEASURED, NOT BY THE AMOUNT OF CAPITAL, BUT BY PRODUCTIVE CAPACITY. Property, requiring income to be always proportional to capital without regard to labor, does not recognize this relation of equality between effect and cause. 4 and 5. Like the insect which spins its silk, the laborer never produces for himself alone. Property, demanding a double product and unable to obtain it, robs the laborer, and kills him. 6. Nature has given to every man but one mind, one heart, one will. Property, granting to one individual a plurality of votes, supposes him to have a plurality of minds. 7. All consumption which is not reproductive of utility is destruction. Property, whether it consumes or hoards or capitalizes, is productive of INUTILITY,--the cause of sterility and death. 8. The satisfaction of a natural right always gives rise to an equation; in other words, the right to a thing is necessarily balanced by the possession of the thing. Thus, between the right to liberty and the condition of a free man there is a balance, an equation; between the right to be a father and paternity, an equation; between the right to security and the social guarantee, an equation. But between the right of increase and the receipt of this increase there is never an equation; for every new increase carries with it the right to another, the latter to a third, and so on for ever. Property, never being able to accomplish its object, is a right against Nature and against reason. 9. Finally, property is not self-existent. An extraneous cause--either FORCE or FRAUD--is necessary to its life and action. In other words, property is not equal to property: it is a negation--a delusion--NOTHING. CHAPTER V. PSYCHOLOGICAL EXPOSITION OF THE IDEA OF JUSTICE PSYCHOLOGICAL EXPOSITION OF THE IDEA OF JUSTICE AND INJUSTICE, AND A DETERMINATION OF THE PRINCIPLE OF GOVERNMENT AND OF RIGHT. Property is impossible; equality does not exist. We hate the former, and yet wish to possess it; the latter rules all our thoughts, yet we know not how to reach it. Who will explain this profound antagonism between our conscience and our will? Who will point out the causes of this pernicious error, which has become the most sacred principle of justice and society? I am bold enough to undertake the task, and I hope to succeed. But before explaining why man has violated justice, it is necessary to determine what justice is. PART FIRST. % 1.--Of the Moral Sense in Man and the Animals. The philosophers have endeavored often to locate the line which separates man's intelligence from that of the brutes; and, according to their general custom, they gave utterance to much foolishness before resolving upon the only course possible for them to take,--observation. It was reserved for an unpretending savant--who perhaps did not pride himself on his philosophy--to put an end to the interminable controversy by a simple distinction; but one of those luminous distinctions which are worth more than systems. Frederic Cuvier separated INSTINCT from INTELLIGENCE. But, as yet, no one has proposed this question:-- IS THE DIFFERENCE BETWEEN MAN'S MORAL SENSE AND THAT OF THE BRUTE A DIFFERENCE IN KIND OR ONLY IN DEGREE? If, hitherto, any one had dared to maintain the latter alternative, his arguments would have seemed scandalous, blasphemous, and offensive to morality and religion. The ecclesiastical and secular tribunals would have condemned him with one voice. And, mark the style in which they would have branded the immoral paradox! "Conscience,"--they would have cried,--"conscience, man's chief glory, was given to him exclusively; the notion of justice and injustice, of merit and demerit, is his noble privilege; to man, alone,--the lord of creation,--belongs the sublime power to resist his worldly propensities, to choose between good and evil, and to bring himself more and more into the resemblance of God through liberty and justice.... No; the holy image of virtue was never graven save on the heart of man." Words full of feeling, but void of sense. Man is a rational and social animal--{GREEK ' c g}--said Aristotle. This definition is worth more than all which have been given since. I do not except even M. de Bonald's celebrated definition,--MAN IS AN INTELLECT SERVED BY ORGANS--a definition which has the double fault of explaining the known by the unknown; that is, the living being by the intellect; and of neglecting man's essential quality,--animality. Man, then, is an animal living in society. Society means the sum total of relationships; in short, system. Now, all systems exist only on certain conditions. What, then, are the conditions, the LAWS, of human society? What are the RIGHTS of men with respect to each other; what is JUSTICE? It amounts to nothing to say,--with the philosophers of various schools,--"It is a divine instinct, an immortal and heavenly voice, a guide given us by Nature, a light revealed unto every man on coming into the world, a law engraved upon our hearts; it is the voice of conscience, the dictum of reason, the inspiration of sentiment, the penchant of feeling; it is the love of self in others; it is enlightened self-interest; or else it is an innate idea, the imperative command of applied reason, which has its source in the concepts of pure reason; it is a passional attraction," &c., &c. This may be as true as it seems beautiful; but it is utterly meaningless. Though we should prolong this litany through ten pages (it has been filtered through a thousand volumes), we should be no nearer to the solution of the question. "Justice is public utility," says Aristotle. That is true, but it is a tautology. "The principle that the public welfare ought to be the object of the legislator"--says M. Ch. Comte in his "Treatise on Legislation"--"cannot be overthrown. But legislation is advanced no farther by its announcement and demonstration, than is medicine when it is said that it is the business of physicians to cure the sick." Let us take another course. RUGHT is the sum total of the principles which govern society. Justice, in man, is the respect and observation of those principles. To practise justice is to obey the social instinct; to do an act of justice is to do a social act. If, then, we watch the conduct of men towards each other under different circumstances, it will be easy for us to distinguish between the presence and absence of society; from the result we may inductively infer the law. Let us commence with the simplest and least doubtful cases. The mother, who protects her son at the peril of her life, and sacrifices every thing to his support, is in society with him--she is a good mother. She, on the contrary, who abandons her child, is unfaithful to the social instinct,--maternal love being one of its many features; she is an unnatural mother. If I plunge into the water to rescue a drowning man, I am his brother, his associate; if, instead of aiding him, I sink him, I am his enemy, his murderer. Whoever bestows alms treats the poor man as his associate; not thoroughly, it is true, but only in respect to the amount which he shares with him. Whoever takes by force or stratagem that which is not the product of his labor, destroys his social character--he is a brigand. The Samaritan who relieves the traveller lying by the wayside, dresses his wounds, comforts him, and supplies him with money, thereby declares himself his associate--his neighbor; the priest, who passes by on the other side, remains unassociated, and is his enemy. In all these cases, man is moved by an internal attraction towards his fellow, by a secret sympathy which causes him to love, congratulate, and condole; so that, to resist this attraction, his will must struggle against his nature. But in these respects there is no decided difference between man and the animals. With them, as long as the weakness of their young endears them to their mothers,--in a word, associates them with their mothers,--the latter protect the former, at the peril of their lives, with a courage which reminds us of our heroes dying for their country. Certain species unite for hunting purposes, seek each other, call each other (a poet would say invite each other), to share their prey; in danger they aid, protect, and warn each other. The elephant knows how to help his companion out of the ditch into which the latter has fallen. Cows form a circle, with their horns outward and their calves in the centre, in order to repel the attacks of wolves. Horses and pigs, on hearing a cry of distress from one of their number, rush to the spot whence it comes. What descriptions I might give of their marriages, the tenderness of the males towards the females, and the fidelity of their loves! Let us add, however,--to be entirely just--that these touching demonstrations of society, fraternity, and love of neighbor, do not prevent the animals from quarrelling, fighting, and outrageously abusing one another while gaining their livelihood and showing their gallantry; the resemblance between them and ourselves is perfect. The social instinct, in man and beast, exists to a greater or less degree--its nature is the same. Man has the greater need of association, and employs it more; the animal seems better able to endure isolation. In man, social needs are more imperative and complex; in the beast, they seem less intense, less diversified, less regretted. Society, in a word, aims, in the case of man, at the preservation of the race and the individual; with the animals, its object is more exclusively the preservation of the race. As yet, we have met with no claim which man can make for himself alone. The social instinct and the moral sense he shares with the brutes; and when he thinks to become god-like by a few acts of charity, justice, and devotion, he does not perceive that in so acting he simply obeys an instinct wholly animal in its nature. As we are good, loving, tender, just, so we are passionate, greedy, lewd, and vindictive; that is, we are like the beasts. Our highest virtues appear, in the last analysis, as blind, impulsive instincts. What subjects for canonization and apotheosis! There is, however, a difference between us two-handed bipeds and other living creatures--what is it? A student of philosophy would hasten to reply: "This difference lies in the fact that we are conscious of our social faculty, while the animals are unconscious of theirs--in the fact that while we reflect and reason upon the operation of our social instinct, the animals do nothing of the kind." I will go farther. It is by our reflective and reasoning powers, with which we seem to be exclusively endowed, that we know that it is injurious, first to others and then to ourselves, to resist the social instinct which governs us, and which we call JUSTICE. It is our reason which teaches us that the selfish man, the robber, the murderer--in a word, the traitor to society--sins against Nature, and is guilty with respect to others and himself, when he does wrong wilfully. Finally, it is our social sentiment on the one hand, and our reason on the other, which cause us to think that beings such as we should take the responsibility of their acts. Such is the principle of remorse, revenge, and penal justice. But this proves only an intellectual diversity between the animals and man, not at all an affectional one; for, although we reason upon our relations with our fellows, we likewise reason upon our most trivial actions,--such as drinking, eating, choosing a wife, or selecting a dwelling-place. We reason upon things earthly and things heavenly; there is nothing to which our reasoning powers are not applicable. Now, just as the knowledge of external phenomena, which we acquire, has no influence upon their causes and laws, so reflection, by illuminating our instinct, enlightens us as to our sentient nature, but does not alter its character; it tells us what our morality is, but neither changes nor modifies it. Our dissatisfaction with ourselves after doing wrong, the indignation which we feel at the sight of injustice, the idea of deserved punishment and due remuneration, are effects of reflection, and not immediate effects of instinct and emotion. Our appreciation (I do not say exclusive appreciation, for the animals also realize that they have done wrong, and are indignant when one of their number is attacked, but), our infinitely superior appreciation of our social duties, our knowledge of good and evil, does not establish, as regards morality, any vital difference between man and the beasts. % 2.--Of the first and second degrees of Sociability. I insist upon the fact, which I have just pointed out, as one of the most important facts of anthropology. The sympathetic attraction, which causes us to associate, is, by reason of its blind, unruly nature, always governed by temporary impulse, without regard to higher rights, and without distinction of merit or priority. The bastard dog follows indifferently all who call it; the suckling child regards every man as its father and every woman as its nurse; every living creature, when deprived of the society of animals of its species, seeks companionship in its solitude. This fundamental characteristic of the social instinct renders intolerable and even hateful the friendship of frivolous persons, liable to be infatuated with every new face, accommodating to all whether good or bad, and ready to sacrifice, for a passing liaison, the oldest and most honorable affections. The fault of such beings is not in the heart--it is in the judgment. Sociability, in this degree, is a sort of magnetism awakened in us by the contemplation of a being similar to ourselves, but which never goes beyond the person who feels it; it may be reciprocated, but not communicated. Love, benevolence, pity, sympathy, call it what you will, there is nothing in it which deserves esteem,--nothing which lifts man above the beast. The second degree of sociability is justice, which may be defined as the RECOGNITION OF THE EQUALITY BETWEEN ANOTHER'S PERSONALITY AND OUR OWN. The sentiment of justice we share with the animals; we alone can form an exact idea of it; but our idea, as has been said already, does not change its nature. We shall soon see how man rises to a third degree of sociability which the animals are incapable of reaching. But I must first prove by metaphysics that SOCIETY, JUSTICE, and EQUALITY, are three equivalent terms,--three expressions meaning the same thing,--whose mutual conversion is always allowable. If, amid the confusion of a shipwreck, having escaped in a boat with some provisions, I see a man struggling with the waves, am I bound to go to his assistance? Yes, I am bound under penalty of being adjudged guilty of murder and treason against society. But am I also bound to share with him my provisions? To settle this question, we must change the phraseology. If society is binding on the boat, is it also binding on the provisions? Undoubtedly. The duty of an associate is absolute. Man's occupancy succeeds his social nature, and is subordinate to it; possession can become exclusive only when permission to occupy is granted to all alike. That which in this instance obscures our duty is our power of foresight, which, causing us to fear an eventual danger, impels us to usurpation, and makes us robbers and murderers. Animals do not calculate the duty of instinct any more than the disadvantages resulting to those who exercise it; it would be strange if the intellect of man--the most sociable of animals--should lead him to disobey the law. He betrays society who attempts to use it only for his own advantage; better that God should deprive us of prudence, if it is to serve as the tool of our selfishness. "What!" you will say, "must I share my bread, the bread which I have earned and which belongs to me, with the stranger whom I do not know; whom I may never see again, and who, perhaps, will reward me with ingratitude? If we had earned this bread together, if this man had done something to obtain it, he might demand his share, since his co-operation would entitle him to it; but as it is, what claim has he on me? We have not produced together--we shall not eat together." The fallacy in this argument lies in the false supposition, that each producer is not necessarily associated with every other producer. When two or more individuals have regularly organized a society,--when the contracts have been agreed upon, drafted, and signed,--there is no difficulty about the future. Everybody knows that when two men associate--for instance--in order to fish, if one of them catches no fish, he is none the less entitled to those caught by his associate. If two merchants form a partnership, while the partnership lasts, the profits and losses are divided between them; since each produces, not for himself, but for the society: when the time of distribution arrives, it is not the producer who is considered, but the associate. That is why the slave, to whom the planter gives straw and rice; and the civilized laborer, to whom the capitalist pays a salary which is always too small,--not being associated with their employers, although producing with them,--are disregarded when the product is divided. Thus, the horse who draws our coaches, and the ox who draws our carts produce with us, but are not associated with us; we take their product, but do not share it with them. The animals and laborers whom we employ hold the same relation to us. Whatever we do for them, we do, not from a sense of justice, but out of pure benevolence. [22] But is it possible that we are not all associated? Let us call to mind what was said in the last two chapters, That even though we do not want to be associated, the force of things, the necessity of consumption, the laws of production, and the mathematical principle of exchange combine to associate us. There is but a single exception to this rule,--that of the proprietor, who, producing by his right of increase, is not associated with any one, and consequently is not obliged to share his product with any one; just as no one else is bound to share with him. With the exception of the proprietor, we labor for each other; we can do nothing by ourselves unaided by others, and we continually exchange products and services with each other. If these are not social acts, what are they? Now, neither a commercial, nor an industrial, nor an agricultural association can be conceived of in the absence of equality; equality is its sine qua non. So that, in all matters which concern this association, to violate society is to violate justice and equality. Apply this principle to humanity at large. After what has been said, I assume that the reader has sufficient insight to enable him to dispense with any aid of mine. By this principle, the man who takes possession of a field, and says, "This field is mine," will not be unjust so long as every one else has an equal right of possession; nor will he be unjust, if, wishing to change his location, he exchanges this field for an equivalent. But if, putting another in his place, he says to him, "Work for me while I rest," he then becomes unjust, unassociated, UNEQUAL. He is a proprietor. Reciprocally, the sluggard, or the rake, who, without performing any social task, enjoys like others--and often more than others--the products of society, should be proceeded against as a thief and a parasite. We owe it to ourselves to give him nothing; but, since he must live, to put him under supervision, and compel him to labor. Sociability is the attraction felt by sentient beings for each other. Justice is this same attraction, accompanied by thought and knowledge. But under what general concept, in what category of the understanding, is justice placed? In the category of equal quantities. Hence, the ancient definition of justice--_Justum aequale est, injustum inaequale_. What is it, then, to practise justice? It is to give equal wealth to each, on condition of equal labor. It is to act socially. Our selfishness may complain; there is no escape from evidence and necessity. What is the right of occupancy? It is a natural method of dividing the earth, by reducing each laborer's share as fast as new laborers present themselves. This right disappears if the public interest requires it; which, being the social interest, is also that of the occupant. What is the right of labor? It is the right to obtain one's share of wealth by fulfilling the required conditions. It is the right of society, the right of equality. Justice, which is the product of the combination of an idea and an instinct, manifests itself in man as soon as he is capable of feeling, and of forming ideas. Consequently, it has been regarded as an innate and original sentiment; but this opinion is logically and chronologically false. But justice, by its composition hybrid--if I may use the term,--justice, born of emotion and intellect combined, seems to me one of the strongest proofs of the unity and simplicity of the ego; the organism being no more capable of producing such a mixture by itself, than are the combined senses of hearing and sight of forming a binary sense, half auditory and half visual. This double nature of justice gives us the definitive basis of all the demonstrations in Chapters II., III., and IV. On the one hand, the idea of JUSTICE being identical with that of society, and society necessarily implying equality, equality must underlie all the sophisms invented in defence of property; for, since property can be defended only as a just and social institution, and property being inequality, in order to prove that property is in harmony with society, it must be shown that injustice is justice, and that inequality is equality,--a contradiction in terms. On the other hand, since the idea of equality--the second element of justice--has its source in the mathematical proportions of things; and since property, or the unequal distribution of wealth among laborers, destroys the necessary balance between labor, production, and consumption,--property must be impossible. All men, then, are associated; all are entitled to the same justice; all are equal. Does it follow that the preferences of love and friendship are unjust? This requires explanation. I have already supposed the case of a man in peril, I being in a position to help him. Now, I suppose myself appealed to at the same time by two men exposed to danger. Am I not allowed--am I not commanded even--to rush first to the aid of him who is endeared to me by ties of blood, friendship, acquaintance, or esteem, at the risk of leaving the other to perish? Yes. And why? Because within universal society there exist for each of us as many special societies as there are individuals; and we are bound, by the principle of sociability itself, to fulfil the obligations which these impose upon us, according to the intimacy of our relations with them. Therefore we must give our father, mother, children, friends, relatives, &c., the preference over all others. But in what consists this preference? A judge has a case to decide, in which one of the parties is his friend, and the other his enemy. Should he, in this instance, prefer his INTIMATE ASSOCIATE to his DISTANT ASSOCIATE; and decide the case in favor of his friend, in spite of evidence to the contrary? No: for, if he should favor his friend's injustice, he would become his accomplice in his violation of the social compact; he would form with him a sort of conspiracy against the social body. Preference should be shown only in personal matters, such as love, esteem, confidence, or intimacy, when all cannot be considered at once. Thus, in case of fire, a father would save his own child before thinking of his neighbor's; but the recognition of a right not being an optional matter with a judge, he is not at liberty to favor one person to the detriment of another. The theory of these special societies--which are formed concentrically, so to speak, by each of us inside of the main body--gives the key to all the problems which arise from the opposition and conflict of the different varieties of social duty,--problems upon which the ancient tragedies are based. The justice practised among animals is, in a certain degree, negative. With the exception of protecting their young, hunting and plundering in troops, uniting for common defence and sometimes for individual assistance, it consists more in prevention than in action. A sick animal who cannot arise from the ground, or an imprudent one who has fallen over a precipice, receives neither medicine nor nourishment. If he cannot cure himself, nor relieve himself of his trouble, his life is in danger: he will neither be cared for in bed, nor fed in a prison. Their neglect of their fellows arises as much from the weakness of their intellect as from their lack of resources. Still, the degrees of intimacy common among men are not unknown to the animals. They have friendships of habit and of choice; friendships neighborly, and friendships parental. In comparison with us, they have feeble memories, sluggish feelings, and are almost destitute of intelligence; but the identity of these faculties is preserved to some extent, and our superiority in this respect arises entirely from our understanding. It is our strength of memory and penetration of judgment which enable us to multiply and combine the acts which our social instinct impels us to perform, and which teaches us how to render them more effective, and how to distribute them justly. The beasts who live in society practise justice, but are ignorant of its nature, and do not reason upon it; they obey their instinct without thought or philosophy. They know not how to unite the social sentiment with the idea of equality, which they do not possess; this idea being an abstract one. We, on the contrary, starting with the principle that society implies equality, can, by our reasoning faculty, understand and agree with each other in settling our rights; we have even used our judgment to a great extent. But in all this our conscience plays a small part, as is proved by the fact that the idea of RIGHT--of which we catch a glimpse in certain animals who approach nearer than any others to our standard of intelligence--seems to grow, from the low level at which it stands in savages, to the lofty height which it reaches in a Plato or a Franklin. If we trace the development of the moral sense in individuals, and the progress of laws in nations, we shall be convinced that the ideas of justice and legislative perfection are always proportional to intelligence. The notion of justice--which has been regarded by some philosophers as simple--is then, in reality, complex. It springs from the social instinct on the one hand, and the idea of equality on the other; just as the notion of guilt arises from the feeling that justice has been violated, and from the idea of free-will. In conclusion, instinct is not modified by acquaintance with its nature; and the facts of society, which we have thus far observed, occur among beasts as well as men. We know the meaning of justice; in other words, of sociability viewed from the standpoint of equality. We have met with nothing which separates us from the animals. % 3.--Of the third degree of Sociability. The reader, perhaps, has not forgotten what was said in the third chapter concerning the division of labor and the speciality of talents. The sum total of the talents and capacities of the race is always the same, and their nature is always similar. We are all born poets, mathematicians, philosophers, artists, artisans, or farmers, but we are not born equally endowed; and between one man and another in society, or between one faculty and another in the same individual, there is an infinite difference. This difference of degree in the same faculties, this predominance of talent in certain directions, is, we have said, the very foundation of our society. Intelligence and natural genius have been distributed by Nature so economically, and yet so liberally, that in society there is no danger of either a surplus or a scarcity of special talents; and that each laborer, by devoting himself to his function, may always attain to the degree of proficiency necessary to enable him to benefit by the labors and discoveries of his fellows. Owing to this simple and wise precaution of Nature, the laborer is not isolated by his task. He communicates with his fellows through the mind, before he is united with them in heart; so that with him love is born of intelligence. It is not so with societies of animals. In every species, the aptitudes of all the individuals--though very limited--are equal in number and (when they are not the result of instinct) in intensity. Each one does as well as all the others what all the others do; provides his food, avoids the enemy, burrows in the earth, builds a nest, &c. No animal, when free and healthy, expects or requires the aid of his neighbor; who, in his turn, is equally independent. Associated animals live side by side without any intellectual intercourse or intimate communication,--all doing the same things, having nothing to learn or to remember; they see, feel, and come in contact with each other, but never penetrate each other. Man continually exchanges with man ideas and feelings, products and services. Every discovery and act in society is necessary to him. But of this immense quantity of products and ideas, that which each one has to produce and acquire for himself is but an atom in the sun. Man would not be man were it not for society, and society is supported by the balance and harmony of the powers which compose it. Society, among the animals, is SIMPLE; with man it is COMPLEX. Man is associated with man by the same instinct which associates animal with animal; but man is associated differently from the animal, and it is this difference in association which constitutes the difference in morality. I have proved,--at too great length, perhaps,--both by the spirit of the laws which regard property as the basis of society, and by political economy, that inequality of conditions is justified neither by priority of occupation nor superiority of talent, service, industry, and capacity. But, although equality of conditions is a necessary consequence of natural right, of liberty, of the laws of production, of the capacity of physical nature, and of the principle of society itself,--it does not prevent the social sentiment from stepping over the boundaries of DEBT and CREDIT. The fields of benevolence and love extend far beyond; and when economy has adjusted its balance, the mind begins to benefit by its own justice, and the heart expands in the boundlessness of its affection. The social sentiment then takes on a new character, which varies with different persons. In the strong, it becomes the pleasure of generosity; among equals, frank and cordial friendship; in the weak, the pleasure of admiration and gratitude. The man who is superior in strength, skill, or courage, knows that he owes all that he is to society, without which he could not exist. He knows that, in treating him precisely as it does the lowest of its members, society discharges its whole duty towards him. But he does not underrate his faculties; he is no less conscious of his power and greatness; and it is this voluntary reverence which he pays to humanity, this avowal that he is but an instrument of Nature,--who is alone worthy of glory and worship,--it is, I say, this simultaneous confession of the heart and the mind, this genuine adoration of the Great Being, that distinguishes and elevates man, and lifts him to a degree of social morality to which the beast is powerless to attain. Hercules destroying the monsters and punishing brigands for the safety of Greece, Orpheus teaching the rough and wild Pelasgians,--neither of them putting a price upon their services,--there we see the noblest creations of poetry, the loftiest expression of justice and virtue. The joys of self-sacrifice are ineffable. If I were to compare human society to the old Greek tragedies, I should say that the phalanx of noble minds and lofty souls dances the strophe, and the humble multitude the antistrophe. Burdened with painful and disagreeable tasks, but rendered omnipotent by their number and the harmonic arrangement of their functions, the latter execute what the others plan. Guided by them, they owe them nothing; they honor them, however, and lavish upon them praise and approbation. Gratitude fills people with adoration and enthusiasm. But equality delights my heart. Benevolence degenerates into tyranny, and admiration into servility. Friendship is the daughter of equality. O my friends! may I live in your midst without emulation, and without glory; let equality bring us together, and fate assign us our places. May I die without knowing to whom among you I owe the most esteem! Friendship is precious to the hearts of the children of men. Generosity, gratitude (I mean here only that gratitude which is born of admiration of a superior power), and friendship are three distinct shades of a single sentiment which I will call equite, or SOCIAL PROPORTIONALITY. [23] Equite does not change justice: but, always taking equite for the base, it superadds esteem, and thereby forms in man a third degree of sociability. Equite makes it at once our duty and our pleasure to aid the weak who have need of us, and to make them our equals; to pay to the strong a just tribute of gratitude and honor, without enslaving ourselves to them; to cherish our neighbors, friends, and equals, for that which we receive from them, even by right of exchange. Equite is sociability raised to its ideal by reason and justice; its commonest manifestation is URBANITY or POLITENESS, which, among certain nations, sums up in a single word nearly all the social duties. It is the just distribution of social sympathy and universal love. Now, this feeling is unknown among the beasts, who love and cling to each other, and show their preferences, but who cannot conceive of esteem, and who are incapable of generosity, admiration, or politeness. This feeling does not spring from intelligence, which calculates, computes, and balances, but does not love; which sees, but does not feel. As justice is the product of social instinct and reflection combined, so equite is a product of justice and taste combined--that is, of our powers of judging and of idealizing. This product--the third and last degree of human sociability--is determined by our complex mode of association; in which inequality, or rather the divergence of faculties, and the speciality of functions--tending of themselves to isolate laborers--demand a more active sociability. That is why the force which oppresses while protecting is execrable; why the silly ignorance which views with the same eye the marvels of art, and the products of the rudest industry, excites unutterable contempt; why proud mediocrity, which glories in saying, "I have paid you--I owe you nothing," is especially odious. SOCIABILITY, JUSTICE, EQUITE--such, in its triplicity, is the exact definition of the instinctive faculty which leads us into communication with our fellows, and whose physical manifestation is expressed by the formula: EQUALITY IN NATURAL WEALTH, AND THE PRODUCTS OF LABOR. These three degrees of sociability support and imply each other. Equite cannot exist without justice; society without justice is a solecism. If, in order to reward talent, I take from one to give to another, in unjustly stripping the first, I do not esteem his talent as I ought; if, in society, I award more to myself than to my associate, we are not really associated. Justice is sociability as manifested in the division of material things, susceptible of weight and measure; equite is justice accompanied by admiration and esteem,--things which cannot be measured. From this several inferences may be drawn. 1. Though we are free to grant our esteem to one more than to another, and in all possible degrees, yet we should give no one more than his proportion of the common wealth; because the duty of justice, being imposed upon us before that of equite, must always take precedence of it. The woman honored by the ancients, who, when forced by a tyrant to choose between the death of her brother and that of her husband, sacrificed the latter on the ground that she could find another husband but not another brother,--that woman, I say, in obeying her sense of equite, failed in point of justice, and did a bad deed, because conjugal association is a closer relation than fraternal association, and because the life of our neighbor is not our property. By the same principle, inequality of wages cannot be admitted by law on the ground of inequality of talents; because the just distribution of wealth is the function of economy,--not of enthusiasm. Finally, as regards donations, wills, and inheritance, society, careful both of the personal affections and its own rights, must never permit love and partiality to destroy justice. And, though it is pleasant to think that the son, who has been long associated with his father in business, is more capable than any one else of carrying it on; and that the citizen, who is surprised in the midst of his task by death, is best fitted, in consequence of his natural taste for his occupation, to designate his successor; and though the heir should be allowed the right of choice in case of more than one inheritance,--nevertheless, society can tolerate no concentration of capital and industry for the benefit of a single man, no monopoly of labor, no encroachment. [24] "Suppose that some spoils, taken from the enemy, and equal to twelve, are to be divided between Achilles and Ajax. If the two persons were equal, their respective shares would be arithmetically equal: Achilles would have six, Ajax six. And if we should carry out this arithmetical equality, Thersites would be entitled to as much as Achilles, which would be unjust in the extreme. To avoid this injustice, the worth of the persons should be estimated, and the spoils divided accordingly. Suppose that the worth of Achilles is double that of Ajax: the former's share is eight, the latter four. There is no arithmetical equality, but a proportional equality. It is this comparison of merits, rationum, that Aristotle calls distributive justice. It is a geometrical proportion."--Toullier: French Law according to the Code. Are Achilles and Ajax associated, or are they not? Settle that, and you settle the whole question. If Achilles and Ajax, instead of being associated, are themselves in the service of Agamemnon who pays them, there is no objection to Aristotle's method. The slave-owner, who controls his slaves, may give a double allowance of brandy to him who does double work. That is the law of despotism; the right of slavery. But if Achilles and Ajax are associated, they are equals. What matters it that Achilles has a strength of four, while that of Ajax is only two? The latter may always answer that he is free; that if Achilles has a strength of four, five could kill him; finally, that in doing personal service he incurs as great a risk as Achilles. The same argument applies to Thersites. If he is unable to fight, let him be cook, purveyor, or butler. If he is good for nothing, put him in the hospital. In no case wrong him, or impose upon him laws. Man must live in one of two states: either in society, or out of it. In society, conditions are necessarily equal, except in the degree of esteem and consideration which each one may receive. Out of society, man is so much raw material, a capitalized tool, and often an incommodious and useless piece of furniture. 2. Equite, justice, and society, can exist only between individuals of the same species. They form no part of the relations of different races to each other,--for instance, of the wolf to the goat, of the goat to man, of man to God, much less of God to man. The attribution of justice, equity, and love to the Supreme Being is pure anthropomorphism; and the adjectives just, merciful, pitiful, and the like, should be stricken from our litanies. God can be regarded as just, equitable, and good, only to another God. Now, God has no associate; consequently, he cannot experience social affections,--such as goodness, equite, and justice. Is the shepherd said to be just to his sheep and his dogs? No: and if he saw fit to shear as much wool from a lamb six months old, as from a ram of two years; or, if he required as much work from a young dog as from an old one,--they would say, not that he was unjust, but that he was foolish. Between man and beast there is no society, though there may be affection. Man loves the animals as THINGS,--as SENTIENT THINGS, if you will,--but not as PERSONS. Philosophy, after having eliminated from the idea of God the passions ascribed to him by superstition, will then be obliged to eliminate also the virtues which our liberal piety awards to him. [25] The rights of woman and her relations with man are yet to be determined Matrimonial legislation, like civil legislation, is a matter for the future to settle. If God should come down to earth, and dwell among us, we could not love him unless he became like us; nor give him any thing unless he produced something; nor listen to him unless he proved us mistaken; nor worship him unless he manifested his power. All the laws of our nature, affectional, economical, and intellectual, would prevent us from treating him as we treat our fellow-men,--that is, according to reason, justice, and equite. I infer from this that, if God should wish ever to put himself into immediate communication with man, he would have to become a man. Now, if kings are images of God, and executors of his will, they cannot receive love, wealth, obedience, and glory from us, unless they consent to labor and associate with us--produce as much as they consume, reason with their subjects, and do wonderful things. Still more; if, as some pretend, kings are public functionaries, the love which is due them is measured by their personal amiability; our obligation to obey them, by the wisdom of their commands; and their civil list, by the total social production divided by the number of citizens. Thus, jurisprudence, political economy, and psychology agree in admitting the law of equality. Right and duty--the due reward of talent and labor--the outbursts of love and enthusiasm,--all are regulated in advance by an invariable standard; all depend upon number and balance. Equality of conditions is the law of society, and universal solidarity is the ratification of this law. Equality of conditions has never been realized, thanks to our passions and our ignorance; but our opposition to this law has made it all the more a necessity. To that fact history bears perpetual testimony, and the course of events reveals it to us. Society advances from equation to equation. To the eyes of the economist, the revolutions of empires seem now like the reduction of algebraical quantities, which are inter-deducible; now like the discovery of unknown quantities, induced by the inevitable influence of time. Figures are the providence of history. Undoubtedly there are other elements in human progress; but in the multitude of hidden causes which agitate nations, there is none more powerful or constant, none less obscure, than the periodical explosions of the proletariat against property. Property, acting by exclusion and encroachment, while population was increasing, has been the life-principle and definitive cause of all revolutions. Religious wars, and wars of conquest, when they have stopped short of the extermination of races, have been only accidental disturbances, soon repaired by the mathematical progression of the life of nations. The downfall and death of societies are due to the power of accumulation possessed by property. In the middle ages, take Florence,--a republic of merchants and brokers, always rent by its well-known factions, the Guelphs and Ghibellines, who were, after all, only the people and the proprietors fighting against each other,--Florence, ruled by bankers, and borne down at last by the weight of her debts; [26] in ancient times, take Rome, preyed upon from its birth by usury, flourishing, nevertheless, as long as the known world furnished its terrible proletaires with LABOR stained with blood by civil war at every interval of rest, and dying of exhaustion when the people lost, together with their former energy, their last spark of moral sense; Carthage, a commercial and financial city, continually divided by internal competition; Tyre, Sidon, Jerusalem, Nineveh, Babylon, ruined, in turn, by commercial rivalry and, as we now express it, by panics in the market,--do not these famous examples show clearly enough the fate which awaits modern nations, unless the people, unless France, with a sudden burst of her powerful voice, proclaims in thunder-tones the abolition of the regime of property? Here my task should end. I have proved the right of the poor; I have shown the usurpation of the rich. I demand justice; it is not my business to execute the sentence. If it should be argued--in order to prolong for a few years an illegitimate privilege--that it is not enough to demonstrate equality, that it is necessary also to organize it, and above all to establish it peacefully, I might reply: The welfare of the oppressed is of more importance than official composure. Equality of conditions is a natural law upon which public economy and jurisprudence are based. The right to labor, and the principle of equal distribution of wealth, cannot give way to the anxieties of power. It is not for the proletaire to reconcile the contradictions of the codes, still less to suffer for the errors of the government. On the contrary, it is the duty of the civil and administrative power to reconstruct itself on the basis of political equality. An evil, when known, should be condemned and destroyed. The legislator cannot plead ignorance as an excuse for upholding a glaring iniquity. Restitution should not be delayed. Justice, justice! recognition of right! reinstatement of the proletaire!--when these results are accomplished, then, judges and consuls, you may attend to your police, and provide a government for the Republic! For the rest, I do not think that a single one of my readers accuses me of knowing how to destroy, but of not knowing how to construct. In demonstrating the principle of equality, I have laid the foundation of the social structure I have done more. I have given an example of the true method of solving political and legislative problems. Of the science itself, I confess that I know nothing more than its principle; and I know of no one at present who can boast of having penetrated deeper. Many people cry, "Come to me, and I will teach you the truth!" These people mistake for the truth their cherished opinion and ardent conviction, which is usually any thing but the truth. The science of society--like all human sciences--will be for ever incomplete. The depth and variety of the questions which it embraces are infinite. We hardly know the A B C of this science, as is proved by the fact that we have not yet emerged from the period of systems, and have not ceased to put the authority of the majority in the place of facts. A certain philological society decided linguistic questions by a plurality of votes. Our parliamentary debates--were their results less pernicious--would be even more ridiculous. The task of the true publicist, in the age in which we live, is to close the mouths of quacks and charlatans, and to teach the public to demand demonstrations, instead of being contented with symbols and programmes. Before talking of the science itself, it is necessary to ascertain its object, and discover its method and principle. The ground must be cleared of the prejudices which encumber it. Such is the mission of the nineteenth century. For my part, I have sworn fidelity to my work of demolition, and I will not cease to pursue the truth through the ruins and rubbish. I hate to see a thing half done; and it will be believed without any assurance of mine, that, having dared to raise my hand against the Holy Ark, I shall not rest contented with the removal of the cover. The mysteries of the sanctuary of iniquity must be unveiled, the tables of the old alliance broken, and all the objects of the ancient faith thrown in a heap to the swine. A charter has been given to us,--a resume of political science, the monument of twenty legislatures. A code has been written,--the pride of a conqueror, and the summary of ancient wisdom. Well! of this charter and this code not one article shall be left standing upon another! The time has come for the wise to choose their course, and prepare for reconstruction. But, since a destroyed error necessarily implies a counter-truth, I will not finish this treatise without solving the first problem of political science,--that which receives the attention of all minds. WHEN PROPERTY IS ABOLISHED, WHAT WILL BE THE FORM OF SOCIETY! WILL IT BE COMMUNISM? PART SECOND. % 1.--Of the Causes of our Mistakes. The Origin of Property. The true form of human society cannot be determined until the following question has been solved:-- Property not being our natural condition, how did it gain a foothold? Why has the social instinct, so trustworthy among the animals, erred in the case of man? Why is man, who was born for society, not yet associated? I have said that human society is COMPLEX in its nature. Though this expression is inaccurate, the fact to which it refers is none the less true; namely, the classification of talents and capacities. But who does not see that these talents and capacities, owing to their infinite variety, give rise to an infinite variety of wills, and that the character, the inclinations, and--if I may venture to use the expression--the form of the ego, are necessarily changed; so that in the order of liberty, as in the order of intelligence, there are as many types as individuals, as many characters as heads, whose tastes, fancies, and propensities, being modified by dissimilar ideas, must necessarily conflict? Man, by his nature and his instinct, is predestined to society; but his personality, ever varying, is adverse to it. In societies of animals, all the members do exactly the same things. The same genius directs them; the same will animates them. A society of beasts is a collection of atoms, round, hooked, cubical, or triangular, but always perfectly identical. These personalities do not vary, and we might say that a single ego governs them all. The labors which animals perform, whether alone or in society, are exact reproductions of their character. Just as the swarm of bees is composed of individual bees, alike in nature and equal in value, so the honeycomb is formed of individual cells, constantly and invariably repeated. But man's intelligence, fitted for his social destiny and his personal needs, is of a very different composition, and therefore gives rise to a wonderful variety of human wills. In the bee, the will is constant and uniform, because the instinct which guides it is invariable, and constitutes the animal's whole life and nature. In man, talent varies, and the mind wavers; consequently, his will is multiform and vague. He seeks society, but dislikes constraint and monotony; he is an imitator, but fond of his own ideas, and passionately in love with his works. If, like the bees, every man were born possessed of talent, perfect knowledge of certain kinds, and, in a word, an innate acquaintance with the functions he has to perform, but destitute of reflective and reasoning faculties, society would organize itself. We should see one man plowing a field, another building houses; this one forging metals, that one cutting clothes; and still others storing the products, and superintending their distribution. Each one, without inquiring as to the object of his labor, and without troubling himself about the extent of his task, would obey orders, bring his product, receive his salary, and would then rest for a time; keeping meanwhile no accounts, envious of nobody, and satisfied with the distributor, who never would be unjust to any one. Kings would govern, but would not reign; for to reign is to be a _proprietor a l'engrais_, as Bonaparte said: and having no commands to give, since all would be at their posts, they would serve rather as rallying centres than as authorities or counsellors. It would be a state of ordered communism, but not a society entered into deliberately and freely. But man acquires skill only by observation and experiment. He reflects, then, since to observe and experiment is to reflect; he reasons, since he cannot help reasoning. In reflecting, he becomes deluded; in reasoning, he makes mistakes, and, thinking himself right, persists in them. He is wedded to his opinions; he esteems himself, and despises others. Consequently, he isolates himself; for he could not submit to the majority without renouncing his will and his reason,--that is, without disowning himself, which is impossible. And this isolation, this intellectual egotism, this individuality of opinion, lasts until the truth is demonstrated to him by observation and experience. A final illustration will make these facts still clearer. If to the blind but convergent and harmonious instincts of a swarm of bees should be suddenly added reflection and judgment, the little society could not long exist. In the first place, the bees would not fail to try some new industrial process; for instance, that of making their cells round or square. All sorts of systems and inventions would be tried, until long experience, aided by geometry, should show them that the hexagonal shape is the best. Then insurrections would occur. The drones would be told to provide for themselves, and the queens to labor; jealousy would spread among the laborers; discords would burst forth; soon each one would want to produce on his own account; and finally the hive would be abandoned, and the bees would perish. Evil would be introduced into the honey-producing republic by the power of reflection,--the very faculty which ought to constitute its glory. Thus, moral evil, or, in this case, disorder in society, is naturally explained by our power of reflection. The mother of poverty, crime, insurrection, and war was inequality of conditions; which was the daughter of property, which was born of selfishness, which was engendered by private opinion, which descended in a direct line from the autocracy of reason. Man, in his infancy, is neither criminal nor barbarous, but ignorant and inexperienced. Endowed with imperious instincts which are under the control of his reasoning faculty, at first he reflects but little, and reasons inaccurately; then, benefiting by his mistakes, he rectifies his ideas, and perfects his reason. In the first place, it is the savage sacrificing all his possessions for a trinket, and then repenting and weeping; it is Esau selling his birthright for a mess of pottage, and afterwards wishing to cancel the bargain; it is the civilized workman laboring in insecurity, and continually demanding that his wages be increased, neither he nor his employer understanding that, in the absence of equality, any salary, however large, is always insufficient. Then it is Naboth dying to defend his inheritance; Cato tearing out his entrails that he might not be enslaved; Socrates drinking the fatal cup in defence of liberty of thought; it is the third estate of '89 reclaiming its liberty: soon it will be the people demanding equality of wages and an equal division of the means of production. Man is born a social being,--that is, he seeks equality and justice in all his relations, but he loves independence and praise. The difficulty of satisfying these various desires at the same time is the primary cause of the despotism of the will, and the appropriation which results from it. On the other hand, man always needs a market for his products; unable to compare values of different kinds, he is satisfied to judge approximately, according to his passion and caprice; and he engages in dishonest commerce, which always results in wealth and poverty. Thus, the greatest evils which man suffers arise from the misuse of his social nature, of this same justice of which he is so proud, and which he applies with such deplorable ignorance. The practice of justice is a science which, when once discovered and diffused, will sooner or later put an end to social disorder, by teaching us our rights and duties. This progressive and painful education of our instinct, this slow and imperceptible transformation of our spontaneous perceptions into deliberate knowledge, does not take place among the animals, whose instincts remain fixed, and never become enlightened. "According to Frederic Cuvier, who has so clearly distinguished between instinct and intelligence in animals, 'instinct is a natural and inherent faculty, like feeling, irritability, or intelligence. The wolf and the fox who recognize the traps in which they have been caught, and who avoid them; the dog and the horse, who understand the meaning of several of our words, and who obey us,--thereby show _intelligence_. The dog who hides the remains of his dinner, the bee who constructs his cell, the bird who builds his nest, act only from _instinct_. Even man has instincts: it is a special instinct which leads the new-born child to suck. But, in man, almost every thing is accomplished by intelligence; and intelligence supplements instinct. The opposite is true of animals: their instinct is given them as a supplement to their intelligence.'"--Flourens: Analytical Summary of the Observations of F. Cuvier. "We can form a clear idea of instinct only by admitting that animals have in their _sensorium_, images or innate and constant sensations, which influence their actions in the same manner that ordinary and accidental sensations commonly do. It is a sort of dream, or vision, which always follows them and in all which relates to instinct they may be regarded as somnambulists."--F. Cuvier: Introduction to the Animal Kingdom. Intelligence and instinct being common, then, though in different degrees, to animals and man, what is the distinguishing characteristic of the latter? According to F. Cuvier, it is REFLECTION OR THE POWER OF INTELLECTUALLY CONSIDERING OUR OWN MODIFICATIONS BY A SURVEY OF OURSELVES. This lacks clearness, and requires an explanation. If we grant intelligence to animals, we must also grant them, in some degree, reflection; for, the first cannot exist without the second, as F. Cuvier himself has proved by numerous examples. But notice that the learned observer defines the kind of reflection which distinguishes us from the animals as the POWER OF CONSIDERING OUR OWN MODIFICATIONS. This I shall endeavour to interpret, by developing to the best of my ability the laconism of the philosophical naturalist. The intelligence acquired by animals never modifies the operations which they perform by instinct: it is given them only as a provision against unexpected accidents which might disturb these operations. In man, on the contrary, instinctive action is constantly changing into deliberate action. Thus, man is social by instinct, and is every day becoming social by reflection and choice. At first, he formed his words by instinct;[1] he was a poet by inspiration: to-day, he makes grammar a science, and poetry an art. His conception of God and a future life is spontaneous and instinctive, and his expressions of this conception have been, by turns, monstrous, eccentric, beautiful, comforting, and terrible. All these different creeds, at which the frivolous irreligion of the eighteenth century mocked, are modes of expression of the religious sentiment. Some day, man will explain to himself the character of the God whom he believes in, and the nature of that other world to which his soul aspires. [1] "The problem of the origin of language is solved by the distinction made by Frederic Cuvier between instinct and intelligence. Language is not a premeditated, arbitrary, or conventional device; nor is it communicated or revealed to us by God. Language is an instinctive and unpremeditated creation of man, as the hive is of the bee. In this sense, it may be said that language is not the work of man, since it is not the work of his mind. Further, the mechanism of language seems more wonderful and ingenious when it is not regarded as the result of reflection. This fact is one of the most curious and indisputable which philology has observed. See, among other works, a Latin essay by F. G. Bergmann (Strasbourg, 1839), in which the learned author explains how the phonetic germ is born of sensation; how language passes through three successive stages of development; why man, endowed at birth with the instinctive faculty of creating a language, loses this faculty as fast as his mind develops; and that the study of languages is real natural history,--in fact, a science. France possesses to-day several philologists of the first rank, endowed with rare talents and deep philosophic insight,--modest savants developing a science almost without the knowledge of the public; devoting themselves to studies which are scornfully looked down upon, and seeming to shun applause as much as others seek it." All that he does from instinct man despises; or, if he admires it, it is as Nature's work, not as his own. This explains the obscurity which surrounds the names of early inventors; it explains also our indifference to religious matters, and the ridicule heaped upon religious customs. Man esteems only the products of reflection and of reason. The most wonderful works of instinct are, in his eyes, only lucky GOD-SENDS; he reserves the name DISCOVERY--I had almost said creation--for the works of intelligence. Instinct is the source of passion and enthusiasm; it is intelligence which causes crime and virtue. In developing his intelligence, man makes use of not only his own observations, but also those of others. He keeps an account of his experience, and preserves the record; so that the race, as well as the individual, becomes more and more intelligent. The animals do not transmit their knowledge; that which each individual accumulates dies with him. It is not enough, then, to say that we are distinguished from the animals by reflection, unless we mean thereby the CONSTANT TENDENCY OF OUR INSTINCT TO BECOME INTELLIGENCE. While man is governed by instinct, he is unconscious of his acts. He never would deceive himself, and never would be troubled by errors, evils, and disorder, if, like the animals, instinct were his only guide. But the Creator has endowed us with reflection, to the end that our instinct might become intelligence; and since this reflection and resulting knowledge pass through various stages, it happens that in the beginning our instinct is opposed, rather than guided, by reflection; consequently, that our power of thought leads us to act in opposition to our nature and our end; that, deceiving ourselves, we do and suffer evil, until instinct which points us towards good, and reflection which makes us stumble into evil, are replaced by the science of good and evil, which invariably causes us to seek the one and avoid the other. Thus, evil--or error and its consequences--is the firstborn son of the union of two opposing faculties, instinct and reflection; good, or truth, must inevitably be the second child. Or, to again employ the figure, evil is the product of incest between adverse powers; good will sooner or later be the legitimate child of their holy and mysterious union. Property, born of the reasoning faculty, intrenches itself behind comparisons. But, just as reflection and reason are subsequent to spontaneity, observation to sensation, and experience to instinct, so property is subsequent to communism. Communism--or association in a simple form--is the necessary object and original aspiration of the social nature, the spontaneous movement by which it manifests and establishes itself. It is the first phase of human civilization. In this state of society,--which the jurists have called NEGATIVE COMMUNISM--man draws near to man, and shares with him the fruits of the field and the milk and flesh of animals. Little by little this communism--negative as long as man does not produce--tends to become positive and organic through the development of labor and industry. But it is then that the sovereignty of thought, and the terrible faculty of reasoning logically or illogically, teach man that, if equality is the sine qua non of society, communism is the first species of slavery. To express this idea by an Hegelian formula, I will say: Communism--the first expression of the social nature--is the first term of social development,--the THESIS; property, the reverse of communism, is the second term,--the ANTITHESIS. When we have discovered the third term, the SYNTHESIS, we shall have the required solution. Now, this synthesis necessarily results from the correction of the thesis by the antithesis. Therefore it is necessary, by a final examination of their characteristics, to eliminate those features which are hostile to sociability. The union of the two remainders will give us the true form of human association. % 2.--Characteristics of Communism and of Property. I. I ought not to conceal the fact that property and communism have been considered always the only possible forms of society. This deplorable error has been the life of property. The disadvantages of communism are so obvious that its critics never have needed to employ much eloquence to thoroughly disgust men with it. The irreparability of the injustice which it causes, the violence which it does to attractions and repulsions, the yoke of iron which it fastens upon the will, the moral torture to which it subjects the conscience, the debilitating effect which it has upon society; and, to sum it all up, the pious and stupid uniformity which it enforces upon the free, active, reasoning, unsubmissive personality of man, have shocked common sense, and condemned communism by an irrevocable decree. The authorities and examples cited in its favor disprove it. The communistic republic of Plato involved slavery; that of Lycurgus employed Helots, whose duty it was to produce for their masters, thus enabling the latter to devote themselves exclusively to athletic sports and to war. Even J. J. Rousseau--confounding communism and equality--has said somewhere that, without slavery, he did not think equality of conditions possible. The communities of the early Church did not last the first century out, and soon degenerated into monasteries. In those of the Jesuits of Paraguay, the condition of the blacks is said by all travellers to be as miserable as that of slaves; and it is a fact that the good Fathers were obliged to surround themselves with ditches and walls to prevent their new converts from escaping. The followers of Baboeuf--guided by a lofty horror of property rather than by any definite belief--were ruined by exaggeration of their principles; the St. Simonians, lumping communism and inequality, passed away like a masquerade. The greatest danger to which society is exposed to-day is that of another shipwreck on this rock. Singularly enough, systematic communism--the deliberate negation of property--is conceived under the direct influence of the proprietary prejudice; and property is the basis of all communistic theories. The members of a community, it is true, have no private property; but the community is proprietor, and proprietor not only of the goods, but of the persons and wills. In consequence of this principle of absolute property, labor, which should be only a condition imposed upon man by Nature, becomes in all communities a human commandment, and therefore odious. Passive obedience, irreconcilable with a reflecting will, is strictly enforced. Fidelity to regulations, which are always defective, however wise they may be thought, allows of no complaint. Life, talent, and all the human faculties are the property of the State, which has the right to use them as it pleases for the common good. Private associations are sternly prohibited, in spite of the likes and dislikes of different natures, because to tolerate them would be to introduce small communities within the large one, and consequently private property; the strong work for the weak, although this ought to be left to benevolence, and not enforced, advised, or enjoined; the industrious work for the lazy, although this is unjust; the clever work for the foolish, although this is absurd; and, finally, man--casting aside his personality, his spontaneity, his genius, and his affections--humbly annihilates himself at the feet of the majestic and inflexible Commune! Communism is inequality, but not as property is. Property is the exploitation of the weak by the strong. Communism is the exploitation of the strong by the weak. In property, inequality of conditions is the result of force, under whatever name it be disguised: physical and mental force; force of events, chance, FORTUNE; force of accumulated property, &c. In communism, inequality springs from placing mediocrity on a level with excellence. This damaging equation is repellent to the conscience, and causes merit to complain; for, although it may be the duty of the strong to aid the weak, they prefer to do it out of generosity,--they never will endure a comparison. Give them equal opportunities of labor, and equal wages, but never allow their jealousy to be awakened by mutual suspicion of unfaithfulness in the performance of the common task. Communism is oppression and slavery. Man is very willing to obey the law of duty, serve his country, and oblige his friends; but he wishes to labor when he pleases, where he pleases, and as much as he pleases. He wishes to dispose of his own time, to be governed only by necessity, to choose his friendships, his recreation, and his discipline; to act from judgment, not by command; to sacrifice himself through selfishness, not through servile obligation. Communism is essentially opposed to the free exercise of our faculties, to our noblest desires, to our deepest feelings. Any plan which could be devised for reconciling it with the demands of the individual reason and will would end only in changing the thing while preserving the name. Now, if we are honest truth-seekers, we shall avoid disputes about words. Thus, communism violates the sovereignty of the conscience, and equality: the first, by restricting spontaneity of mind and heart, and freedom of thought and action; the second, by placing labor and laziness, skill and stupidity, and even vice and virtue on an equality in point of comfort. For the rest, if property is impossible on account of the desire to accumulate, communism would soon become so through the desire to shirk. II. Property, in its turn, violates equality by the rights of exclusion and increase, and freedom by despotism. The former effect of property having been sufficiently developed in the last three chapters, I will content myself here with establishing by a final comparison, its perfect identity with robbery. The Latin words for robber are _fur_ and _latro;_ the former taken from the Greek {GREEK m }, from {GREEK m }, Latin _fero_, I carry away; the latter from {GREEK 'i }, I play the part of a brigand, which is derived from {GREEK i }, Latin _lateo_, I conceal myself. The Greeks have also {GREEK ncg }, from {GREEK ncg }, I filch, whose radical consonants are the same as those of {GREEK ' cg }, I cover, I conceal. Thus, in these languages, the idea of a robber is that of a man who conceals, carries away, or diverts, in any manner whatever, a thing which does not belong to him. The Hebrews expressed the same idea by the word _gannab_,--robber,--from the verb _ganab_, which means to put away, to turn aside: _lo thi-gnob (Decalogue: Eighth Commandment_), thou shalt not steal,--that is, thou shalt not hold back, thou shalt not put away any thing for thyself. That is the act of a man who, on entering into a society into which he agrees to bring all that he has, secretly reserves a portion, as did the celebrated disciple Ananias. The etymology of the French verb _voler_ is still more significant. _Voler_, or _faire la vole_ (from the Latin _vola_, palm of the hand), means to take all the tricks in a game of ombre; so that _le voleur_, the robber, is the capitalist who takes all, who gets the lion's share. Probably this verb _voler_ had its origin in the professional slang of thieves, whence it has passed into common use, and, consequently into the phraseology of the law. Robbery is committed in a variety of ways, which have been very cleverly distinguished and classified by legislators according to their heinousness or merit, to the end that some robbers may be honored, while others are punished. We rob,--1. By murder on the highway; 2. Alone, or in a band; 3. By breaking into buildings, or scaling walls; 4. By abstraction; 5. By fraudulent bankruptcy; 6. By forgery of the handwriting of public officials or private individuals; 7. By manufacture of counterfeit money. This species includes all robbers who practise their profession with no other aid than force and open fraud. Bandits, brigands, pirates, rovers by land and sea,--these names were gloried in by the ancient heroes, who thought their profession as noble as it was lucrative. Nimrod, Theseus, Jason and his Argonauts; Jephthah, David, Cacus, Romulus, Clovis and all his Merovingian descendants; Robert Guiscard, Tancred de Hauteville, Bohemond, and most of the Norman heroes,--were brigands and robbers. The heroic character of the robber is expressed in this line from Horace, in reference to Achilles,-- _"Jura neget sibi nata, nihil non arroget armis_," [27] and by this sentence from the dying words of Jacob (Gen. xlviii.), which the Jews apply to David, and the Christians to their Christ: _Manus ejus contra omnes_. In our day, the robber--the warrior of the ancients--is pursued with the utmost vigor. His profession, in the language of the code, entails ignominious and corporal penalties, from imprisonment to the scaffold. A sad change in opinions here below! We rob,--8. By cheating; 9. By swindling; 10. By abuse of trust; 11. By games and lotteries. This second species was encouraged by the laws of Lycurgus, in order to sharpen the wits of the young. It is the kind practised by Ulysses, Solon, and Sinon; by the ancient and modern Jews, from Jacob down to Deutz; and by the Bohemians, the Arabs, and all savage tribes. Under Louis XIII. and Louis XIV., it was not considered dishonorable to cheat at play. To do so was a part of the game; and many worthy people did not scruple to correct the caprice of Fortune by dexterous jugglery. To-day even, and in all countries, it is thought a mark of merit among peasants, merchants, and shopkeepers to KNOW HOW TO MAKE A BARGAIN,--that is, to deceive one's man. This is so universally accepted, that the cheated party takes no offence. It is known with what reluctance our government resolved upon the abolition of lotteries. It felt that it was dealing a stab thereby at property. The pickpocket, the blackleg, and the charlatan make especial use of their dexterity of hand, their subtlety of mind, the magic power of their eloquence, and their great fertility of invention. Sometimes they offer bait to cupidity. Therefore the penal code--which much prefers intelligence to muscular vigor--has made, of the four varieties mentioned above, a second category, liable only to correctional, not to Ignominious, punishments. Let them now accuse the law of being materialistic and atheistic. We rob,--12. By usury. This species of robbery, so odious and so severely punished since the publication of the Gospel, is the connecting link between forbidden and authorized robbery. Owing to its ambiguous nature, it has given rise to a multitude of contradictions in the laws and in morals,--contradictions which have been very cleverly turned to account by lawyers, financiers, and merchants. Thus the usurer, who lends on mortgage at ten, twelve, and fifteen per cent., is heavily fined when detected; while the banker, who receives the same interest (not, it is true, upon a loan, but in the way of exchange or discount,--that is, of sale), is protected by royal privilege. But the distinction between the banker and the usurer is a purely nominal one. Like the usurer, who lends on property, real or personal, the banker lends on business paper; like the usurer, he takes his interest in advance; like the usurer, he can recover from the borrower if the property is destroyed (that is, if the note is not redeemed),--a circumstance which makes him a money-lender, not a money-seller. But the banker lends for a short time only, while the usurer's loan may be for one, two, three, or more years. Now, a difference in the duration of the loan, or the form of the act, does not alter the nature of the transaction. As for the capitalists who invest their money, either with the State or in commercial operations, at three, four, and five per cent.,--that is, who lend on usury at a little lower rate than the bankers and usurers,--they are the flower of society, the cream of honesty! Moderation in robbery is the height of virtue! [28] But what, then, is usury? Nothing is more amusing than to see these INSTRUCTORS OF NATIONS hesitate between the authority of the Gospel, which, they say, NEVER CAN HAVE SPOKEN IN VAIN, and the authority of economical demonstrations. Nothing, to my mind, is more creditable to the Gospel than this old infidelity of its pretended teachers. Salmasius, having assimilated interest to rent, was REFUTED by Grotius, Pufendorf, Burlamaqui, Wolf, and Heineccius; and, what is more curious still, Salmasius ADMITTED HIS ERROR. Instead of inferring from this doctrine of Salmasius that all increase is illegitimate, and proceeding straight on to the demonstration of Gospel equality, they arrived at just the opposite conclusion; namely, that since everybody acknowledges that rent is permissible, if we allow that interest does not differ from rent, there is nothing left which can be called usury, and, consequently, that the commandment of Jesus Christ is an ILLUSION, and amounts to NOTHING, which is an impious conclusion. If this memoir had appeared in the time of Bossuet, that great theologian would have PROVED by scripture, the fathers, traditions, councils, and popes, that property exists by Divine right, while usury is an invention of the devil; and the heretical work would have been burned, and the author imprisoned. We rob,--13. By farm-rent, house-rent, and leases of all kinds. The author of the "Provincial Letters" entertained the honest Christians of the seventeenth century at the expense of Escobar, the Jesuit, and the contract Mohatra. "The contract Mohatra," said Escobar, "is a contract by which goods are bought, at a high price and on credit, to be again sold at the same moment to the same person, cash down, and at a lower price." Escobar found a way to justify this kind of usury. Pascal and all the Jansenists laughed at him. But what would the satirical Pascal, the learned Nicole, and the invincible Arnaud have said, if Father Antoine Escobar de Valladolid had answered them thus: "A lease is a contract by which real estate is bought, at a high price and on credit, to be again sold, at the expiration of a certain time, to the same person, at a lower price; only, to simplify the transaction, the buyer is content to pay the difference between the first sale and the second. Either deny the identity of the lease and the contract Mohatra, and then I will annihilate you in a moment; or, if you admit the similarity, admit also the soundness of my doctrine: otherwise you proscribe both interest and rent at one blow"? In reply to this overwhelming argument of the Jesuit, the sire of Montalte would have sounded the tocsin, and would have shouted that society was in peril,--that the Jesuits were sapping its very foundations. We rob,--14. By commerce, when the profit of the merchant exceeds his legitimate salary. Everybody knows the definition of commerce--THE ART OF BUYING FOR THREE FRANCS THAT WHICH IS WORTH SIX, AND OF SELLING FOR SIX THAT WHICH IS WORTH THREE. Between commerce thus defined and _vol a l'americaine_, the only difference is in the relative proportion of the values exchanged,--in short, in the amount of the profit. We rob,--15. By making profit on our product, by accepting sinecures, and by exacting exorbitant wages. The farmer, who sells a certain amount of corn to the consumer, and who during the measurement thrusts his hand into the bushel and takes out a handful of grains, robs; the professor, whose lectures are paid for by the State, and who through the intervention of a bookseller sells them to the public a second time, robs; the sinecurist, who receives an enormous product in exchange for his vanity, robs; the functionary, the laborer, whatever he may be, who produces only one and gets paid four, one hundred, or one thousand, robs; the publisher of this book, and I, its author,--we rob, by charging for it twice as much as it is worth. In recapitulation:-- Justice, after passing through the state of negative communism, called by the ancient poets the AGE OF GOLD, commences as the right of the strongest. In a society which is trying to organize itself, inequality of faculties calls up the idea of merit; equite suggests the plan of proportioning not only esteem, but also material comforts, to personal merit; and since the highest and almost the only merit then recognized is physical strength, the strongest, {GREEK ' eg }, and consequently the best, {GREEK ' eg }, is entitled to the largest share; and if it is refused him, he very naturally takes it by force. From this to the assumption of the right of property in all things, it is but one step. Such was justice in the heroic age, preserved, at least by tradition, among the Greeks and Romans down to the last days of their republics. Plato, in the "Gorgias," introduces a character named Callicles, who spiritedly defends the right of the strongest, which Socrates, the advocate of equality, {GREEK g e }, seriously refutes. It is related of the great Pompey, that he blushed easily, and, nevertheless, these words once escaped his lips: "Why should I respect the laws, when I have arms in my hand?" This shows him to have been a man in whom the moral sense and ambition were struggling for the mastery, and who sought to justify his violence by the motto of the hero and the brigand. From the right of the strongest springs the exploitation of man by man, or bondage; usury, or the tribute levied upon the conquered by the conqueror; and the whole numerous family of taxes, duties, monarchical prerogatives, house-rents, farm-rents, &c.; in one word,--property. Force was followed by artifice, the second manifestation of justice, which was detested by the ancient heroes, who, not excelling in that direction, were heavy losers by it. Force was still employed, but mental force instead of physical. Skill in deceiving an enemy by treacherous propositions seemed deserving of reward; nevertheless, the strong always prided themselves upon their honesty. In those days, oaths were observed and promises kept according to the letter rather than the spirit: _Uti lingua nuncupassit, ita jus esto_,--"As the tongue has spoken, so must the right be," says the law of the Twelve Tables. Artifice, or rather perfidy, was the main element in the politics of ancient Rome. Among other examples, Vico cites the following, also quoted by Montesquieu: The Romans had guaranteed to the Carthaginians the preservation of their goods and their CITY,--intentionally using the word civitas, that is, the society, the State; the Carthaginians, on the contrary, understood them to mean the material city, urbs, and accordingly began to rebuild their walls. They were immediately attacked on account of their violation of the treaty, by the Romans, who, acting upon the old heroic idea of right, did not imagine that, in taking advantage of an equivocation to surprise their enemies, they were waging unjust war. From artifice sprang the profits of manufactures, commerce, and banking, mercantile frauds, and pretensions which are honored with the beautiful names of TALENT and GENIUS, but which ought to be regarded as the last degree of knavery and deception; and, finally, all sorts of social inequalities. In those forms of robbery which are prohibited by law, force and artifice are employed alone and undisguised; in the authorized forms, they conceal themselves within a useful product, which they use as a tool to plunder their victim. The direct use of violence and stratagem was early and universally condemned; but no nation has yet got rid of that kind of robbery which acts through talent, labor, and possession, and which is the source of all the dilemmas of casuistry and the innumerable contradictions of jurisprudence. The right of force and the right of artifice--glorified by the rhapsodists in the poems of the "Iliad" and the "Odyssey"--inspired the legislation of the Greeks and Romans, from which they passed into our morals and codes. Christianity has not changed at all. The Gospel should not be blamed, because the priests, as stupid as the legists, have been unable either to expound or to understand it. The ignorance of councils and popes upon all questions of morality is equal to that of the market-place and the money-changers; and it is this utter ignorance of right, justice, and society, which is killing the Church, and discrediting its teachings for ever. The infidelity of the Roman church and other Christian churches is flagrant; all have disregarded the precept of Jesus; all have erred in moral and doctrinal points; all are guilty of teaching false and absurd dogmas, which lead straight to wickedness and murder. Let it ask pardon of God and men,--this church which called itself infallible, and which has grown so corrupt in morals; let its reformed sisters humble themselves,... and the people, undeceived, but still religious and merciful, will begin to think. [29] One of the main causes of Ireland's poverty to-day is the immense revenues of the English clergy. So heretics and orthodox--Protestants and Papists--cannot reproach each other. All have strayed from the path of justice; all have disobeyed the eighth commandment of the Decalogue: "Thou shalt not steal." The development of right has followed the same order, in its various expressions, that property has in its forms. Every where we see justice driving robbery before it and confining it within narrower and narrower limits. Hitherto the victories of justice over injustice, and of equality over inequality, have been won by instinct and the simple force of things; but the final triumph of our social nature will be due to our reason, or else we shall fall back into feudal chaos. Either this glorious height is reserved for our intelligence, or this miserable depth for our baseness. The second effect of property is despotism. Now, since despotism is inseparably connected with the idea of legitimate authority, in explaining the natural causes of the first, the principle of the second will appear. What is to be the form of government in the future? hear some of my younger readers reply: "Why, how can you ask such a question? "You are a republican." "A republican! Yes; but that word specifies nothing. _Res publica;_ that is, the public thing. Now, whoever is interested in public affairs--no matter under what form of government--may call himself a republican. Even kings are republicans."-- "Well! you are a democrat?"--"No."--"What! you would have a monarchy."--"No."--"A constitutionalist?"--"God forbid!"--"You are then an aristocrat?"--"Not at all."--"You want a mixed government?"--"Still less."--"What are you, then?"--"I am an anarchist." "Oh! I understand you; you speak satirically. This is a hit at the government."--"By no means. I have just given you my serious and well-considered profession of faith. Although a firm friend of order, I am (in the full force of the term) an anarchist. Listen to me." In all species of sociable animals, "the weakness of the young is the principle of their obedience to the old," who are strong; and from habit, which is a kind of conscience with them, the power remains with the oldest, although he finally becomes the weakest. Whenever the society is under the control of a chief, this chief is almost always the oldest of the troop. I say almost always, because the established order may be disturbed by violent outbreaks. Then the authority passes to another; and, having been re-established by force, it is again maintained by habit. Wild horses go in herds: they have a chief who marches at their head, whom they confidently follow, and who gives the signal for flight or battle. "The sheep which we have raised follows us, but it follows in company with the flock in the midst of which it was born. It regards man AS THE CHIEF OF ITS FLOCK.... Man is regarded by domestic animals as a member of their society. All that he has to do is to get himself accepted by them as an associate: he soon becomes their chief, in consequence of his superior intelligence. He does not, then, change the NATURAL CONDITION of these animals, as Buffon has said. On the contrary, he uses this natural condition to his own advantage; in other words, he finds SOCIABLE animals, and renders them DOMESTIC by becoming their associate and chief. Thus, the DOMESTICITY of animals is only a special condition, a simple modification, a definitive consequence of their SOCIABILITY. All domestic animals are by nature sociable animals."...--Flourens: Summary of the Observations of F. Cuvier. Sociable animals follow their chief by INSTINCT; but take notice of the fact (which F. Cuvier omitted to state), that the function of the chief is altogether one of INTELLIGENCE. The chief does not teach the others to associate, to unite under his lead, to reproduce their kind, to take to flight, or to defend themselves. Concerning each of these particulars, his subordinates are as well informed as he. But it is the chief who, by his accumulated experience, provides against accidents; he it is whose private intelligence supplements, in difficult situations, the general instinct; he it is who deliberates, decides, and leads; he it is, in short, whose enlightened prudence regulates the public routine for the greatest good of all. Man (naturally a sociable being) naturally follows a chief. Originally, the chief is the father, the patriarch, the elder; in other words, the good and wise man, whose functions, consequently, are exclusively of a reflective and intellectual nature. The human race--like all other races of sociable animals--has its instincts, its innate faculties, its general ideas, and its categories of sentiment and reason. Its chiefs, legislators, or kings have devised nothing, supposed nothing, imagined nothing. They have only guided society by their accumulated experience, always however in conformity with opinions and beliefs. Those philosophers who (carrying into morals and into history their gloomy and factious whims) affirm that the human race had originally neither chiefs nor kings, know nothing of the nature of man. Royalty, and absolute royalty, is--as truly and more truly than democracy--a primitive form of government. Perceiving that, in the remotest ages, crowns and kingships were worn by heroes, brigands, and knight-errants, they confound the two things,--royalty and despotism. But royalty dates from the creation of man; it existed in the age of negative communism. Ancient heroism (and the despotism which it engendered) commenced only with the first manifestation of the idea of justice; that is, with the reign of force. As soon as the strongest, in the comparison of merits, was decided to be the best, the oldest had to abandon his position, and royalty became despotic. The spontaneous, instinctive, and--so to speak--physiological origin of royalty gives it, in the beginning, a superhuman character. The nations connected it with the gods, from whom they said the first kings descended. This notion was the origin of the divine genealogies of royal families, the incarnations of gods, and the messianic fables. From it sprang the doctrine of divine right, which is still championed by a few singular characters. Royalty was at first elective, because--at a time when man produced but little and possessed nothing--property was too weak to establish the principle of heredity, and secure to the son the throne of his father; but as soon as fields were cleared, and cities built, each function was, like every thing else, appropriated, and hereditary kingships and priesthoods were the result. The principle of heredity was carried into even the most ordinary professions,--a circumstance which led to class distinctions, pride of station, and abjection of the common people, and which confirms my assertion, concerning the principle of patrimonial succession, that it is a method suggested by Nature of filling vacancies in business, and completing unfinished tasks. From time to time, ambition caused usurpers, or SUPPLANTERS of kings, to start up; and, in consequence, some were called kings by right, or legitimate kings, and others TYRANTS. But we must not let these names deceive us. There have been execrable kings, and very tolerable tyrants. Royalty may always be good, when it is the only possible form of government; legitimate it is never. Neither heredity, nor election, nor universal suffrage, nor the excellence of the sovereign, nor the consecration of religion and of time, can make royalty legitimate. Whatever form it takes,--monarchic, oligarchic, or democratic,--royalty, or the government of man by man, is illegitimate and absurd. Man, in order to procure as speedily as possible the most thorough satisfaction of his wants, seeks RULE. In the beginning, this rule is to him living, visible, and tangible. It is his father, his master, his king. The more ignorant man is, the more obedient he is, and the more absolute is his confidence in his guide. But, it being a law of man's nature to conform to rule,--that is, to discover it by his powers of reflection and reason,--man reasons upon the commands of his chiefs. Now, such reasoning as that is a protest against authority,--a beginning of disobedience. At the moment that man inquires into the motives which govern the will of his sovereign,--at that moment man revolts. If he obeys no longer because the king commands, but because the king demonstrates the wisdom of his commands, it may be said that henceforth he will recognize no authority, and that he has become his own king. Unhappy he who shall dare to command him, and shall offer, as his authority, only the vote of the majority; for, sooner or later, the minority will become the majority, and this imprudent despot will be overthrown, and all his laws annihilated. In proportion as society becomes enlightened, royal authority diminishes. That is a fact to which all history bears witness. At the birth of nations, men reflect and reason in vain. Without methods, without principles, not knowing how to use their reason, they cannot judge of the justice of their conclusions. Then the authority of kings is immense, no knowledge having been acquired with which to contradict it. But, little by little, experience produces habits, which develop into customs; then the customs are formulated in maxims, laid down as principles,--in short, transformed into laws, to which the king, the living law, has to bow. There comes a time when customs and laws are so numerous that the will of the prince is, so to speak, entwined by the public will; and that, on taking the crown, he is obliged to swear that he will govern in conformity with established customs and usages; and that he is but the executive power of a society whose laws are made independently of him. Up to this point, all is done instinctively, and, as it were, unconsciously; but see where this movement must end. By means of self-instruction and the acquisition of ideas, man finally acquires the idea of SCIENCE,--that is, of a system of knowledge in harmony with the reality of things, and inferred from observation. He searches for the science, or the system, of inanimate bodies,--the system of organic bodies, the system of the human mind, and the system of the universe: why should he not also search for the system of society? But, having reached this height, he comprehends that political truth, or the science of politics, exists quite independently of the will of sovereigns, the opinion of majorities, and popular beliefs,--that kings, ministers, magistrates, and nations, as wills, have no connection with the science, and are worthy of no consideration. He comprehends, at the same time, that, if man is born a sociable being, the authority of his father over him ceases on the day when, his mind being formed and his education finished, he becomes the associate of his father; that his true chief and his king is the demonstrated truth; that politics is a science, not a stratagem; and that the function of the legislator is reduced, in the last analysis, to the methodical search for truth. Thus, in a given society, the authority of man over man is inversely proportional to the stage of intellectual development which that society has reached; and the probable duration of that authority can be calculated from the more or less general desire for a true government,--that is, for a scientific government. And just as the right of force and the right of artifice retreat before the steady advance of justice, and must finally be extinguished in equality, so the sovereignty of the will yields to the sovereignty of the reason, and must at last be lost in scientific socialism. Property and royalty have been crumbling to pieces ever since the world began. As man seeks justice in equality, so society seeks order in anarchy. ANARCHY,--the absence of a master, of a sovereign, [30]--such is the form of government to which we are every day approximating, and which our accustomed habit of taking man for our rule, and his will for law, leads us to regard as the height of disorder and the expression of chaos. The story is told, that a citizen of Paris in the seventeenth century having heard it said that in Venice there was no king, the good man could not recover from his astonishment, and nearly died from laughter at the mere mention of so ridiculous a thing. So strong is our prejudice. As long as we live, we want a chief or chiefs; and at this very moment I hold in my hand a brochure, whose author--a zealous communist--dreams, like a second Marat, of the dictatorship. The most advanced among us are those who wish the greatest possible number of sovereigns,--their most ardent wish is for the royalty of the National Guard. Soon, undoubtedly, some one, jealous of the citizen militia, will say, "Everybody is king." But, when he has spoken, I will say, in my turn, "Nobody is king; we are, whether we will or no, associated." Every question of domestic politics must be decided by departmental statistics; every question of foreign politics is an affair of international statistics. The science of government rightly belongs to one of the sections of the Academy of Sciences, whose permanent secretary is necessarily prime minister; and, since every citizen may address a memoir to the Academy, every citizen is a legislator. But, as the opinion of no one is of any value until its truth has been proven, no one can substitute his will for reason,--nobody is king. All questions of legislation and politics are matters of science, not of opinion. The legislative power belongs only to the reason, methodically recognized and demonstrated. To attribute to any power whatever the right of veto or of sanction, is the last degree of tyranny. Justice and legality are two things as independent of our approval as is mathematical truth. To compel, they need only to be known; to be known, they need only to be considered and studied. What, then, is the nation, if it is not the sovereign,--if it is not the source of the legislative power? The nation is the guardian of the law--the nation is the EXECUTIVE POWER. Every citizen may assert: "This is true; that is just;" but his opinion controls no one but himself. That the truth which he proclaims may become a law, it must be recognized. Now, what is it to recognize a law? It is to verify a mathematical or a metaphysical calculation; it is to repeat an experiment, to observe a phenomenon, to establish a fact. Only the nation has the right to say, "Be it known and decreed." I confess that this is an overturning of received ideas, and that I seem to be attempting to revolutionize our political system; but I beg the reader to consider that, having begun with a paradox, I must, if I reason correctly, meet with paradoxes at every step, and must end with paradoxes. For the rest, I do not see how the liberty of citizens would be endangered by entrusting to their hands, instead of the pen of the legislator, the sword of the law. The executive power, belonging properly to the will, cannot be confided to too many proxies. That is the true sovereignty of the nation. [31] The proprietor, the robber, the hero, the sovereign--for all these titles are synonymous--imposes his will as law, and suffers neither contradiction nor control; that is, he pretends to be the legislative and the executive power at once. Accordingly, the substitution of the scientific and true law for the royal will is accomplished only by a terrible struggle; and this constant substitution is, after property, the most potent element in history, the most prolific source of political disturbances. Examples are too numerous and too striking to require enumeration. Now, property necessarily engenders despotism,--the government of caprice, the reign of libidinous pleasure. That is so clearly the essence of property that, to be convinced of it, one need but remember what it is, and observe what happens around him. Property is the right to USE and ABUSE. If, then, government is economy,--if its object is production and consumption, and the distribution of labor and products,--how is government possible while property exists? And if goods are property, why should not the proprietors be kings, and despotic kings--kings in proportion to their _facultes bonitaires_? And if each proprietor is sovereign lord within the sphere of his property, absolute king throughout his own domain, how could a government of proprietors be any thing but chaos and confusion? % 3.--Determination of the third form of Society. Conclusion. Then, no government, no public economy, no administration, is possible, which is based upon property. Communism seeks EQUALITY and LAW. Property, born of the sovereignty of the reason, and the sense of personal merit, wishes above all things INDEPENDENCE and PROPORTIONALITY. But communism, mistaking uniformity for law, and levelism for equality, becomes tyrannical and unjust. Property, by its despotism and encroachments, soon proves itself oppressive and anti-social. The objects of communism and property are good--their results are bad. And why? Because both are exclusive, and each disregards two elements of society. Communism rejects independence and proportionality; property does not satisfy equality and law. Now, if we imagine a society based upon these four principles,--equality, law, independence, and proportionality,--we find:-- 1. That EQUALITY, consisting only in EQUALITY OF CONDITIONS, that is, OF MEANS, and not in EQUALITY OF COMFORT,--which it is the business of the laborers to achieve for themselves, when provided with equal means,--in no way violates justice and equite. 2. That LAW, resulting from the knowledge of facts, and consequently based upon necessity itself, never clashes with independence. 3. That individual INDEPENDENCE, or the autonomy of the private reason, originating in the difference in talents and capacities, can exist without danger within the limits of the law. 4. That PROPORTIONALITY, being admitted only in the sphere of intelligence and sentiment, and not as regards material objects, may be observed without violating justice or social equality. This third form of society, the synthesis of communism and property, we will call LIBERTY. [32] In determining the nature of liberty, we do not unite communism and property indiscriminately; such a process would be absurd eclecticism. We search by analysis for those elements in each which are true, and in harmony with the laws of Nature and society, disregarding the rest altogether; and the result gives us an adequate expression of the natural form of human society,--in one word, liberty. Liberty is equality, because liberty exists only in society; and in the absence of equality there is no society. Liberty is anarchy, because it does not admit the government of the will, but only the authority of the law; that is, of necessity. Liberty is infinite variety, because it respects all wills within the limits of the law. Liberty is proportionality, because it allows the utmost latitude to the ambition for merit, and the emulation of glory. We can now say, in the words of M. Cousin: "Our principle is true; it is good, it is social; let us not fear to push it to its ultimate." Man's social nature becoming JUSTICE through reflection, EQUITE through the classification of capacities, and having LIBERTY for its formula, is the true basis of morality,--the principle and regulator of all our actions. This is the universal motor, which philosophy is searching for, which religion strengthens, which egotism supplants, and whose place pure reason never can fill. DUTY and RIGHT are born of NEED, which, when considered in connection with others, is a RIGHT, and when considered in connection with ourselves, a DUTY. We need to eat and sleep. It is our right to procure those things which are necessary to rest and nourishment. It is our duty to use them when Nature requires it. We need to labor in order to live. To do so is both our right and our duty. We need to love our wives and children. It is our duty to protect and support them. It is our right to be loved in preference to all others. Conjugal fidelity is justice. Adultery is high treason against society. We need to exchange our products for other products. It is our right that this exchange should be one of equivalents; and since we consume before we produce, it would be our duty, if we could control the matter, to see to it that our last product shall follow our last consumption. Suicide is fraudulent bankruptcy. We need to live our lives according to the dictates of our reason. It is our right to maintain our freedom. It is our duty to respect that of others. We need to be appreciated by our fellows. It is our duty to deserve their praise. It is our right to be judged by our works. Liberty is not opposed to the rights of succession and bequest. It contents itself with preventing violations of equality. "Choose," it tells us, "between two legacies, but do not take them both." All our legislation concerning transmissions, entailments, adoptions, and, if I may venture to use such a word, COADJUTORERIES, requires remodelling. Liberty favors emulation, instead of destroying it. In social equality, emulation consists in accomplishing under like conditions; it is its own reward. No one suffers by the victory. Liberty applauds self-sacrifice, and honors it with its votes, but it can dispense with it. Justice alone suffices to maintain the social equilibrium. Self-sacrifice is an act of supererogation. Happy, however, the man who can say, "I sacrifice myself." [33] Liberty is essentially an organizing force. To insure equality between men and peace among nations, agriculture and industry, and the centres of education, business, and storage, must be distributed according to the climate and the geographical position of the country, the nature of the products, the character and natural talents of the inhabitants, &c., in proportions so just, so wise, so harmonious, that in no place shall there ever be either an excess or a lack of population, consumption, and products. There commences the science of public and private right, the true political economy. It is for the writers on jurisprudence, henceforth unembarrassed by the false principle of property, to describe the new laws, and bring peace upon earth. Knowledge and genius they do not lack; the foundation is now laid for them. [34] I have accomplished my task; property is conquered, never again to arise. Wherever this work is read and discussed, there will be deposited the germ of death to property; there, sooner or later, privilege and servitude will disappear, and the despotism of will will give place to the reign of reason. What sophisms, indeed, what prejudices (however obstinate) can stand before the simplicity of the following propositions:-- I. Individual POSSESSION [35] is the condition of social life; five thousand years of property demonstrate it. PROPERTY is the suicide of society. Possession is a right; property is against right. Suppress property while maintaining possession, and, by this simple modification of the principle, you will revolutionize law, government, economy, and institutions; you will drive evil from the face of the earth. II. All having an equal right of occupancy, possession varies with the number of possessors; property cannot establish itself. III. The effect of labor being the same for all, property is lost in the common prosperity. IV. All human labor being the result of collective force, all property becomes, in consequence, collective and unitary. To speak more exactly, labor destroys property. V. Every capacity for labor being, like every instrument of labor, an accumulated capital, and a collective property, inequality of wages and fortunes (on the ground of inequality of capacities) is, therefore, injustice and robbery. VI. The necessary conditions of commerce are the liberty of the contracting parties and the equivalence of the products exchanged. Now, value being expressed by the amount of time and outlay which each product costs, and liberty being inviolable, the wages of laborers (like their rights and duties) should be equal. VII. Products are bought only by products. Now, the condition of all exchange being equivalence of products, profit is impossible and unjust. Observe this elementary principle of economy, and pauperism, luxury, oppression, vice, crime, and hunger will disappear from our midst. VIII. Men are associated by the physical and mathematical law of production, before they are voluntarily associated by choice. Therefore, equality of conditions is demanded by justice; that is, by strict social law: esteem, friendship, gratitude, admiration, all fall within the domain of EQUITABLE or PROPORTIONAL law only. IX. Free association, liberty--whose sole function is to maintain equality in the means of production and equivalence in exchanges--is the only possible, the only just, the only true form of society. X. Politics is the science of liberty. The government of man by man (under whatever name it be disguised) is oppression. Society finds its highest perfection in the union of order with anarchy. The old civilization has run its race; a new sun is rising, and will soon renew the face of the earth. Let the present generation perish, let the old prevaricators die in the desert! the holy earth shall not cover their bones. Young man, exasperated by the corruption of the age, and absorbed in your zeal for justice!--if your country is dear to you, and if you have the interests of humanity at heart, have the courage to espouse the cause of liberty! Cast off your old selfishness, and plunge into the rising flood of popular equality! There your regenerate soul will acquire new life and vigor; your enervated genius will recover unconquerable energy; and your heart, perhaps already withered, will be rejuvenated! Every thing will wear a different look to your illuminated vision; new sentiments will engender new ideas within you; religion, morality, poetry, art, language will appear before you in nobler and fairer forms; and thenceforth, sure of your faith, and thoughtfully enthusiastic, you will hail the dawn of universal regeneration! And you, sad victims of an odious law!--you, whom a jesting world despoils and outrages!--you, whose labor has always been fruitless, and whose rest has been without hope,--take courage! your tears are numbered! The fathers have sown in affliction, the children shall reap in rejoicings! O God of liberty! God of equality! Thou who didst place in my heart the sentiment of justice, before my reason could comprehend it, hear my ardent prayer! Thou hast dictated all that I have written; Thou hast shaped my thought; Thou hast directed my studies; Thou hast weaned my mind from curiosity and my heart from attachment, that I might publish Thy truth to the master and the slave. I have spoken with what force and talent Thou hast given me: it is Thine to finish the work. Thou knowest whether I seek my welfare or Thy glory, O God of liberty! Ah! perish my memory, and let humanity be free! Let me see from my obscurity the people at last instructed; let noble teachers enlighten them; let generous spirits guide them! Abridge, if possible, the time of our trial; stifle pride and avarice in equality; annihilate this love of glory which enslaves us; teach these poor children that in the bosom of liberty there are neither heroes nor great men! Inspire the powerful man, the rich man, him whose name my lips shall never pronounce in Thy presence, with a horror of his crimes; let him be the first to apply for admission to the redeemed society; let the promptness of his repentance be the ground of his forgiveness! Then, great and small, wise and foolish, rich and poor, will unite in an ineffable fraternity; and, singing in unison a new hymn, will rebuild Thy altar, O God of liberty and equality! END OF FIRST MEMOIR. WHAT IS PROPERTY? SECOND MEMOIR A LETTER TO M. BLANQUI. SECOND MEMOIR. PARIS, April 1, 1841. MONSIEUR,-- Before resuming my "Inquiries into Government and Property," it is fitting, for the satisfaction of some worthy people, and also in the interest of order, that I should make to you a plain, straightforward explanation. In a much-governed State, no one would be allowed to attack the external form of the society, and the groundwork of its institutions, until he had established his right to do so,--first, by his morality; second, by his capacity; and, third, by the purity of his intentions. Any one who, wishing to publish a treatise upon the constitution of the country, could not satisfy this threefold condition, would be obliged to procure the endorsement of a responsible patron possessing the requisite qualifications. But we Frenchmen have the liberty of the press. This grand right--the sword of thought, which elevates the virtuous citizen to the rank of legislator, and makes the malicious citizen an agent of discord--frees us from all preliminary responsibility to the law; but it does not release us from our internal obligation to render a public account of our sentiments and thoughts. I have used, in all its fulness, and concerning an important question, the right which the charter grants us. I come to-day, sir, to submit my conscience to your judgment, and my feeble insight to your discriminating reason. You have criticised in a kindly spirit--I had almost said with partiality for the writer--a work which teaches a doctrine that you thought it your duty to condemn. "The Academy of Moral and Political Sciences," said you in your report, "can accept the conclusions of the author only as far as it likes." I venture to hope, sir, that, after you have read this letter, if your prudence still restrains you, your fairness will induce you to do me justice. MEN, EQUAL IN THE DIGNITY OF THEIR PERSONS AND EQUAL BEFORE THE LAW, SHOULD BE EQUAL IN THEIR CONDITIONS,--such is the thesis which I maintained and developed in a memoir bearing the title, "What is Property? or, An Inquiry into the Principle of Right and of Government." The idea of social equality, even in individual fortunes, has in all ages besieged, like a vague presentiment, the human imagination. Poets have sung of it in their hymns; philosophers have dreamed of it in their Utopias; priests teach it, but only for the spiritual world. The people, governed by it, never have had faith in it; and the civil power is never more disturbed than by the fables of the age of gold and the reign of Astrea. A year ago, however, this idea received a scientific demonstration, which has not yet been satisfactorily answered, and, permit me to add, never will be. This demonstration, owing to its slightly impassioned style, its method of reasoning,--which was so at variance with that employed by the generally recognized authorities,--and the importance and novelty of its conclusions, was of a nature to cause some alarm; and might have been dangerous, had it not been--as you, sir, so well said--a sealed letter, so far as the general public was concerned, addressed only to men of intelligence. I was glad to see that through its metaphysical dress you recognized the wise foresight of the author; and I thank you for it. May God grant that my intentions, which are wholly peaceful, may never be charged upon me as treasonable! Like a stone thrown into a mass of serpents, the First Memoir on Property excited intense animosity, and aroused the passions of many. But, while some wished the author and his work to be publicly denounced, others found in them simply the solution of the fundamental problems of society; a few even basing evil speculations upon the new light which they had obtained. It was not to be expected that a system of inductions abstractly gathered together, and still more abstractly expressed, would be understood with equal accuracy in its ensemble and in each of its parts. To find the law of equality, no longer in charity and self-sacrifice (which are not binding in their nature), but in justice; to base equality of functions upon equality of persons; to determine the absolute principle of exchange; to neutralize the inequality of individual faculties by collective force; to establish an equation between property and robbery; to change the law of succession without destroying the principle; to maintain the human personality in a system of absolute association, and to save liberty from the chains of communism; to synthetize the monarchical and democratic forms of government; to reverse the division of powers; to give the executive power to the nation, and to make legislation a positive, fixed, and absolute science,--what a series of paradoxes! what a string of delusions! if I may not say, what a chain of truths! But it is not my purpose here to pass upon the theory of the right of possession. I discuss no dogmas. My only object is to justify my views, and to show that, in writing as I did, I not only exercised a right, but performed a duty. Yes, I have attacked property, and shall attack it again; but, sir, before demanding that I shall make the amende honorable for having obeyed my conscience and spoken the exact truth, condescend, I beg of you, to cast a glance at the events which are happening around us; look at our deputies, our magistrates, our philosophers, our ministers, our professors, and our publicists; examine their methods of dealing with the matter of property; count up with me the restrictions placed upon it every day in the name of the public welfare; measure the breaches already made; estimate those which society thinks of making hereafter; add the ideas concerning property held by all theories in common; interrogate history, and then tell me what will be left, half a century hence, of this old right of property; and, thus perceiving that I have so many accomplices, you will immediately declare me innocent. What is the law of expropriation on the ground of public utility, which everybody favors, and which is even thought too lenient? [36] A flagrant violation of the right of property. Society indemnifies, it is said, the dispossessed proprietor; but does it return to him the traditional associations, the poetic charm, and the family pride which accompany property? Naboth, and the miller of Sans-Souci, would have protested against French law, as they protested against the caprice of their kings. "It is the field of our fathers," they would have cried, "and we will not sell it!" Among the ancients, the refusal of the individual limited the powers of the State. The Roman law bowed to the will of the citizen, and an emperor--Commodus, if I remember rightly--abandoned the project of enlarging the forum out of respect for the rights of the occupants who refused to abdicate. Property is a real right, _jus_ _in re_,--a right inherent in the thing, and whose principle lies in the external manifestation of man's will. Man leaves his imprint, stamps his character, upon the objects of his handiwork. This plastic force of man, as the modern jurists say, is the seal which, set upon matter, makes it holy. Whoever lays hands upon it, against the proprietor's will, does violence to the latter's personality. And yet, when an administrative committee saw fit to declare that public utility required it, property had to give way to the general will. Soon, in the name of public utility, methods of cultivation and conditions of enjoyment will be prescribed; inspectors of agriculture and manufactures will be appointed; property will be taken away from unskilful hands, and entrusted to laborers who are more deserving of it; and a general superintendence of production will be established. It is not two years since I saw a proprietor destroy a forest more than five hundred acres in extent. If public utility had interfered, that forest--the only one for miles around--would still be standing. But, it is said, expropriation on the ground of public utility is only an exception which confirms the principle, and bears testimony in favor of the right. Very well; but from this exception we will pass to another, from that to a third, and so on from exceptions to exceptions, until we have reduced the rule to a pure abstraction. How many supporters do you think, sir, can be claimed for the project of the conversion of the public funds? I venture to say that everybody favors it, except the fund-holders. Now, this so-called conversion is an extensive expropriation, and in this case with no indemnity whatever. The public funds are so much real estate, the income from which the proprietor counts upon with perfect safety, and which owes its value to the tacit promise of the government to pay interest upon it at the established rate, until the fund-holder applies for redemption. For, if the income is liable to diminution, it is less profitable than house-rent or farm-rent, whose rates may rise or fall according to the fluctuations in the market; and in that case, what inducement has the capitalist to invest his money in the State? When, then, you force the fund-holder to submit to a diminution of interest, you make him bankrupt to the extent of the diminution; and since, in consequence of the conversion, an equally profitable investment becomes impossible, you depreciate his property. That such a measure may be justly executed, it must be generalized; that is, the law which provides for it must decree also that interest on sums lent on deposit or on mortgage throughout the realm, as well as house and farm-rents, shall be reduced to three per cent. This simultaneous reduction of all kinds of income would be not a whit more difficult to accomplish than the proposed conversion; and, further, it would offer the advantage of forestalling at one blow all objections to it, at the same time that it would insure a just assessment of the land-tax. See! If at the moment of conversion a piece of real estate yields an income of one thousand francs, after the new law takes effect it will yield only six hundred francs. Now, allowing the tax to be an aliquot part--one-fourth for example--of the income derived from each piece of property, it is clear on the one hand that the proprietor would not, in order to lighten his share of the tax, underestimate the value of his property; since, house and farm-rents being fixed by the value of the capital, and the latter being measured by the tax, to depreciate his real estate would be to reduce his revenue. On the other hand, it is equally evident that the same proprietors could not overestimate the value of their property, in order to increase their incomes beyond the limits of the law, since the tenants and farmers, with their old leases in their hands, would enter a protest. Such, sir, must be the result sooner or later of the conversion which has been so long demanded; otherwise, the financial operation of which we are speaking would be a crying injustice, unless intended as a stepping-stone. This last motive seems the most plausible one; for in spite of the clamors of interested parties, and the flagrant violation of certain rights, the public conscience is bound to fulfil its desire, and is no more affected when charged with attacking property, than when listening to the complaints of the bondholders. In this case, instinctive justice belies legal justice. Who has not heard of the inextricable confusion into which the Chamber of Deputies was thrown last year, while discussing the question of colonial and native sugars? Did they leave these two industries to themselves? The native manufacturer was ruined by the colonist. To maintain the beet-root, the cane had to be taxed. To protect the property of the one, it became necessary to violate the property of the other. The most remarkable feature of this business was precisely that to which the least attention was paid; namely, that, in one way or another, property had to be violated. Did they impose on each industry a proportional tax, so as to preserve a balance in the market? They created a maximum PRICE for each variety of sugar; and, as this maximum PRICE was not the same, they attacked property in two ways,--on the one hand, interfering with the liberty of trade; on the other, disregarding the equality of proprietors. Did they suppress the beet-root by granting an indemnity to the manufacturer? They sacrificed the property of the tax-payer. Finally, did they prefer to cultivate the two varieties of sugar at the nation's expense, just as different varieties of tobacco are cultivated? They abolished, so far as the sugar industry was concerned, the right of property. This last course, being the most social, would have been certainly the best; but, if property is the necessary basis of civilization, how is this deep-seated antagonism to be explained? [37] Not satisfied with the power of dispossessing a citizen on the ground of public utility, they want also to dispossess him on the ground of PRIVATE UTILITY. For a long time, a revision of the law concerning mortgages was clamored for; a process was demanded, in behalf of all kinds of credit and in the interest of even the debtors themselves, which would render the expropriation of real estate as prompt, as easy, and as effective as that which follows a commercial protest. The Chamber of Deputies, in the early part of this year, 1841, discussed this project, and the law was passed almost unanimously. There is nothing more just, nothing more reasonable, nothing more philosophical apparently, than the motives which gave rise to this reform. I. Formerly, the small proprietor whose obligation had arrived at maturity, and who found himself unable to meet it, had to employ all that he had left, after being released from his debt, in defraying the legal costs. Henceforth, the promptness of expropriation will save him from total ruin. 2. The difficulties in the way of payment arrested credit, and prevented the employment of capital in agricultural enterprises. This cause of distrust no longer existing, capitalists will find new markets, agriculture will rapidly develop, and farmers will be the first to enjoy the benefit of the new law. 3. Finally, it was iniquitous and absurd, that, on account of a protested note, a poor manufacturer should see in twenty-four hours his business arrested, his labor suspended, his merchandise seized, his machinery sold at auction, and finally himself led off to prison, while two years were sometimes necessary to expropriate the most miserable piece of real estate. These arguments, and others besides, you clearly stated, sir, in your first lectures of this academic year. But, when stating these excellent arguments, did you ask yourself, sir, whither would tend such a transformation of our system of mortgages?... To monetize, if I may say so, landed property; to accumulate it within portfolios; to separate the laborer from the soil, man from Nature; to make him a wanderer over the face of the earth; to eradicate from his heart every trace of family feeling, national pride, and love of country; to isolate him more and more; to render him indifferent to all around him; to concentrate his love upon one object,--money; and, finally, by the dishonest practices of usury, to monopolize the land to the profit of a financial aristocracy,--a worthy auxiliary of that industrial feudality whose pernicious influence we begin to feel so bitterly. Thus, little by little, the subordination of the laborer to the idler, the restoration of abolished castes, and the distinction between patrician and plebeian, would be effected; thus, thanks to the new privileges granted to the property of the capitalists, that of the small and intermediate proprietors would gradually disappear, and with it the whole class of free and honest laborers. This certainly is not my plan for the abolition of property. Far from mobilizing the soil, I would, if possible, immobilize even the functions of pure intelligence, so that society might be the fulfilment of the intentions of Nature, who gave us our first possession, the land. For, if the instrument or capital of production is the mark of the laborer, it is also his pedestal, his support, his country, and, as the Psalmist says, THE PLACE OF HIS ACTIVITY AND HIS REST. [38] Let us examine more closely still the inevitable and approaching result of the last law concerning judicial sales and mortgages. Under the system of competition which is killing us, and whose necessary expression is a plundering and tyrannical government, the farmer will need always capital in order to repair his losses, and will be forced to contract loans. Always depending upon the future for the payment of his debts, he will be deceived in his hope, and surprised by maturity. For what is there more prompt, more unexpected, more abbreviatory of space and time, than the maturity of an obligation? I address this question to all whom this pitiless Nemesis pursues, and even troubles in their dreams. Now, under the new law, the expropriation of a debtor will be effected a hundred times more rapidly; then, also, spoliation will be a hundred times surer, and the free laborer will pass a hundred times sooner from his present condition to that of a serf attached to the soil. Formerly, the length of time required to effect the seizure curbed the usurer's avidity, gave the borrower an opportunity to recover himself, and gave rise to a transaction between him and his creditor which might result finally in a complete release. Now, the debtor's sentence is irrevocable: he has but a few days of grace. And what advantages are promised by this law as an offset to this sword of Damocles, suspended by a single hair over the head of the unfortunate husbandman? The expenses of seizure will be much less, it is said; but will the interest on the borrowed capital be less exorbitant? For, after all, it is interest which impoverishes the peasant and leads to his expropriation. That the law may be in harmony with its principle, that it may be truly inspired by that spirit of justice for which it is commended, it must--while facilitating expropriation--lower the legal price of money. Otherwise, the reform concerning mortgages is but a trap set for small proprietors,--a legislative trick. Lower interest on money! But, as we have just seen, that is to limit property. Here, sir, you shall make your own defence. More than once, in your learned lectures, I have heard you deplore the precipitancy of the Chambers, who, without previous study and without profound knowledge of the subject, voted almost unanimously to maintain the statutes and privileges of the Bank. Now these privileges, these statutes, this vote of the Chambers, mean simply this,--that the market price of specie, at five or six per cent., is not too high, and that the conditions of exchange, discount, and circulation, which generally double this interest, are none too severe. So the government thinks. M. Blanqui--a professor of political economy, paid by the State--maintains the contrary, and pretends to demonstrate, by decisive arguments, the necessity of a reform. Who, then, best understands the interests of property,--the State, or M. Blanqui? If specie could be borrowed at half the present rate, the revenues from all sorts of property would soon be reduced one-half also. For example: when it costs less to build a house than to hire one, when it is cheaper to clear a field than to procure one already cleared, competition inevitably leads to a reduction of house and farm-rents, since the surest way to depreciate active capital is to increase its amount. But it is a law of political economy that an increase of production augments the mass of available capital, consequently tends to raise wages, and finally to annihilate interest. Then, proprietors are interested in maintaining the statutes and privileges of the Bank; then, a reform in this matter would compromise the right of increase; then, the peers and deputies are better informed than Professor Blanqui. But these same deputies,--so jealous of their privileges whenever the equalizing effects of a reform are within their intellectual horizon,--what did they do a few days before they passed the law concerning judicial sales? They formed a conspiracy against property! Their law to regulate the labor of children in factories will, without doubt, prevent the manufacturer from compelling a child to labor more than so many hours a day; but it will not force him to increase the pay of the child, nor that of its father. To-day, in the interest of health, we diminish the subsistence of the poor; to-morrow it will be necessary to protect them by fixing their MINIMUM wages. But to fix their minimum wages is to compel the proprietor, is to force the master to accept his workman as an associate, which interferes with freedom and makes mutual insurance obligatory. Once entered upon this path, we never shall stop. Little by little the government will become manufacturer, commission-merchant, and retail dealer. It will be the sole proprietor. Why, at all epochs, have the ministers of State been so reluctant to meddle with the question of wages? Why have they always refused to interfere between the master and the workman? Because they knew the touchy and jealous nature of property, and, regarding it as the principle of all civilization, felt that to meddle with it would be to unsettle the very foundations of society. Sad condition of the proprietary regime,--one of inability to exercise charity without violating justice! [39] And, sir, this fatal consequence which necessity forces upon the State is no mere imagination. Even now the legislative power is asked, no longer simply to regulate the government of factories, but to create factories itself. Listen to the millions of voices shouting on all hands for THE ORGANISATION OF LABOR, THE CREATION OF NATIONAL WORKSHOPS! The whole laboring class is agitated: it has its journals, organs, and representatives. To guarantee labor to the workingman, to balance production with sale, to harmonize industrial proprietors, it advocates to-day--as a sovereign remedy--one sole head, one national wardenship, one huge manufacturing company. For, sir, all this is included in the idea of national workshops. On this subject I wish to quote, as proof, the views of an illustrious economist, a brilliant mind, a progressive intellect, an enthusiastic soul, a true patriot, and yet an official defender of the right of property. [40] The honorable professor of the Conservatory proposes then,-- 1. TO CHECK THE CONTINUAL EMIGRATION OF LABORERS FROM THE COUNTRY INTO THE CITIES. But, to keep the peasant in his village, his residence there must be made endurable: to be just to all, the proletaire of the country must be treated as well as the proletaire of the city. Reform is needed, then, on farms as well as in factories; and, when the government enters the workshop, the government must seize the plough! What becomes, during this progressive invasion, of independent cultivation, exclusive domain, property? 2. TO FIX FOR EACH PROFESSION A MODERATE SALARY, VARYING WITH TIME AND PLACE AND BASED UPON CERTAIN DATA. The object of this measure would be to secure to laborers their subsistence, and to proprietors their profits, while obliging the latter to sacrifice from motives of prudence, if for no other reason, a portion of their income. Now, I say, that this portion, in the long run, would swell until at last there would be an equality of enjoyment between the proletaire and the proprietor. For, as we have had occasion to remark several times already, the interest of the capitalist--in other words the increase of the idler--tends, on account of the power of labor, the multiplication of products and exchanges, to continually diminish, and, by constant reduction, to disappear. So that, in the society proposed by M. Blanqui, equality would not be realized at first, but would exist potentially; since property, though outwardly seeming to be industrial feudality, being no longer a principle of exclusion and encroachment, but only a privilege of division, would not be slow, thanks to the intellectual and political emancipation of the proletariat, in passing into absolute equality,--as absolute at least as any thing can be on this earth. I omit, for the sake of brevity, the numerous considerations which the professor adduces in support of what he calls, too modestly in my opinion, his Utopia. They would serve only to prove beyond all question that, of all the charlatans of radicalism who fatigue the public ear, no one approaches, for depth and clearness of thought, the audacious M. Blanqui. 3. NATIONAL WORKSHOPS SHOULD BE IN OPERATION ONLY DURING PERIODS OF STAGNATION IN ORDINARY INDUSTRIES; AT SUCH TIMES THEY SHOULD BE OPENED AS VAST OUTLETS TO THE FLOOD OF THE LABORING POPULATION. But, sir, the stoppage of private industry is the result of over-production, and insufficient markets. If, then, production continues in the national workshops, how will the crisis be terminated? Undoubtedly, by the general depreciation of merchandise, and, in the last analysis, by the conversion of private workshops into national workshops. On the other hand, the government will need capital with which to pay its workmen; now, how will this capital be obtained? By taxation. And upon what will the tax be levied? Upon property. Then you will have proprietary industry sustaining against itself, and at its own expense, another industry with which it cannot compete. What, think you, will become, in this fatal circle, of the possibility of profit,--in a word, of property? Thank Heaven! equality of conditions is taught in the public schools; let us fear revolutions no longer. The most implacable enemy of property could not, if he wished to destroy it, go to work in a wiser and more effective way. Courage, then, ministers, deputies, economists! make haste to seize this glorious initiative; let the watchwords of equality, uttered from the heights of science and power, be repeated in the midst of the people; let them thrill the breasts of the proletaires, and carry dismay into the ranks of the last representatives of privilege! The tendency of society in favor of compelling proprietors to support national workshops and public manufactories is so strong that for several years, under the name of ELECTORAL REFORM, it has been exclusively the question of the day. What is, after all, this electoral reform which the people grasp at, as if it were a bait, and which so many ambitious persons either call for or denounce? It is the acknowledgment of the right of the masses to a voice in the assessment of taxes, and the making of the laws; which laws, aiming always at the protection of material interests, affect, in a greater or less degree, all questions of taxation or wages. Now the people, instructed long since by their journals, their dramas, [41] and their songs, [42] know to-day that taxation, to be equitably divided, must be graduated, and must be borne mainly by the rich,--that it must be levied upon luxuries, &c. And be sure that the people, once in the majority in the Chamber, will not fail to apply these lessons. Already we have a minister of public works. National workshops will follow; and soon, as a consequence, the excess of the proprietor's revenue over the workingman's wages will be swallowed up in the coffers of the laborers of the State. Do you not see that in this way property is gradually reduced, as nobility was formerly, to a nominal title, to a distinction purely honorary in its nature? Either the electoral reform will fail to accomplish that which is hoped from it, and will disappoint its innumerable partisans, or else it will inevitably result in a transformation of the absolute right under which we live into a right of possession; that is, that while, at present, property makes the elector, after this reform is accomplished, the citizen, the producer will be the possessor. [43] Consequently, the radicals are right in saying that the electoral reform is in their eyes only a means; but, when they are silent as to the end, they show either profound ignorance, or useless dissimulation. There should be no secrets or reservations from peoples and powers. He disgraces himself and fails in respect for his fellows, who, in publishing his opinions, employs evasion and cunning. Before the people act, they need to know the whole truth. Unhappy he who shall dare to trifle with them! For the people are credulous, but they are strong. Let us tell them, then, that this reform which is proposed is only a means,--a means often tried, and hitherto without effect,--but that the logical object of the electoral reform is equality of fortunes; and that this equality itself is only a new means having in view the superior and definitive object of the salvation of society, the restoration of morals and religion, and the revival of poetry and art. This assertion of M. Rossi is not borne out by history. Property is the cause of the electoral right, not as a PRESUMPTION OF CAPACITY,--an idea which never prevailed until lately, and which is extremely absurd,--but as a GUARANTEE OF DEVOTION TO THE ESTABLISHED ORDER. The electoral body is a league of those interested in the maintenance of property, against those not interested. There are thousands of documents, even official documents, to prove this, if necessary. For the rest, the present system is only a continuation of the municipal system, which, in the middle ages, sprang up in connection with feudalism,--an oppressive, mischief-making system, full of petty passions and base intrigues. It would be an abuse of the reader's patience to insist further upon the tendency of our time towards equality. There are, moreover, so many people who denounce the present age, that nothing is gained by exposing to their view the popular, scientific, and representative tendencies of the nation. Prompt to recognize the accuracy of the inferences drawn from observation, they confine themselves to a general censure of the facts, and an absolute denial of their legitimacy. "What wonder," they say, "that this atmosphere of equality intoxicates us, considering all that has been said and done during the past ten years!... Do you not see that society is dissolving, that a spirit of infatuation is carrying us away? All these hopes of regeneration are but forebodings of death; your songs of triumph are like the prayers of the departing, your trumpet peals announce the baptism of a dying man. Civilization is falling in ruin: _Imus, imus, praecipites_!" Such people deny God. I might content myself with the reply that the spirit of 1830 was the result of the maintenance of the violated charter; that this charter arose from the Revolution of '89; that '89 implies the States-General's right of remonstrance, and the enfranchisement of the communes; that the communes suppose feudalism, which in its turn supposes invasion, Roman law, Christianity, &c. But it is necessary to look further. We must penetrate to the very heart of ancient institutions, plunge into the social depths, and uncover this indestructible leaven of equality which the God of justice breathed into our souls, and which manifests itself in all our works. Labor is man's contemporary; it is a duty, since it is a condition of existence: "In the sweat of thy face shalt thou eat bread." It is more than a duty, it is a mission: "God put the man into the garden to dress it." I add that labor is the cause and means of equality. Cast away upon a desert island two men: one large, strong, and active; the other weak, timid, and domestic. The latter will die of hunger; while the other, a skilful hunter, an expert fisherman, and an indefatigable husbandman, will overstock himself with provisions. What greater inequality, in this state of Nature so dear to the heart of Jean Jacques, could be imagined! But let these two men meet and associate themselves: the second immediately attends to the cooking, takes charge of the household affairs, and sees to the provisions, beds, and clothes; provided the stronger does not abuse his superiority by enslaving and ill-treating his companion, their social condition will be perfectly equal. Thus, through exchange of services, the inequalities of Nature neutralize each other, talents associate, and forces balance. Violence and inertia are found only among the poor and the aristocratic. And in that lies the philosophy of political economy, the mystery of human brotherhood. _Hic est sapientia_. Let us pass from the hypothetical state of pure Nature into civilization. The proprietor of the soil, who produces, I will suppose with the economists, by lending his instrument, receives at the foundation of a society so many bushels of grain for each acre of arable land. As long as labor is weak, and the variety of its products small, the proprietor is powerful in comparison with the laborers; he has ten times, one hundred times, the portion of an honest man. But let labor, by multiplying its inventions, multiply its enjoyments and wants, and the proprietor, if he wishes to enjoy the new products, will be obliged to reduce his income every day; and since the first products tend rather to depreciate than to rise in value,--in consequence of the continual addition of the new ones, which may be regarded as supplements of the first ones,--it follows that the idle proprietor grows poor as fast as public prosperity increases. "Incomes" (I like to quote you, sir, because it is impossible to give too good an authority for these elementary principles of economy, and because I cannot express them better myself), "incomes," you have said, "tend to disappear as capital increases. He who possesses to-day an income of twenty thousand pounds is not nearly as rich as he who possessed the same amount fifty years ago. The time is coming when all property will be a burden to the idle, and will necessarily pass into the hands of the able and industrious. [44]..." In order to live as a proprietor, or to consume without producing, it is necessary, then, to live upon the labor of another; in other words, it is necessary to kill the laborer. It is upon this principle that proprietors of those varieties of capital which are of primary necessity increase their farm-rents as fast as industry develops, much more careful of their privileges in that respect, than those economists who, in order to strengthen property, advocate a reduction of interest. But the crime is unavailing: labor and production increase; soon the proprietor will be forced to labor, and then property is lost. The proprietor is a man who, having absolute control of an instrument of production, claims the right to enjoy the product of the instrument without using it himself. To this end he lends it; and we have just seen that from this loan the laborer derives a power of exchange, which sooner or later will destroy the right of increase. In the first place, the proprietor is obliged to allow the laborer a portion of the product, for without it the laborer could not live. Soon the latter, through the development of his industry, finds a means of regaining the greater portion of that which he gives to the proprietor; so that at last, the objects of enjoyment increasing continually, while the income of the idler remains the same, the proprietor, having exhausted his resources, begins to think of going to work himself. Then the victory of the producer is certain. Labor commences to tip the balance towards its own side, and commerce leads to equilibrium. Man's instinct cannot err; as, in liberty, exchange of functions leads inevitably to equality among men, so commerce--or exchange of products, which is identical with exchange of functions--is a new cause of equality. As long as the proprietor does not labor, however small his income, he enjoys a privilege; the laborer's welfare may be equal to his, but equality of conditions does not exist. But as soon as the proprietor becomes a producer,--since he can exchange his special product only with his tenant or his _commandite_,--sooner or later this tenant, this _exploited_ man, if violence is not done him, will make a profit out of the proprietor, and will oblige him to restore--in the exchange of their respective products--the interest on his capital. So that, balancing one injustice by another, the contracting parties will be equal. Labor and exchange, when liberty prevails, lead, then, to equality of fortunes; mutuality of services neutralizes privilege. That is why despots in all ages and countries have assumed control of commerce; they wished to prevent the labor of their subjects from becoming an obstacle to the rapacity of tyrants. Up to this point, all takes place in the natural order; there is no premeditation, no artifice. The whole proceeding is governed by the laws of necessity alone. Proprietors and laborers act only in obedience to their wants. Thus, the exercise of the right of increase, the art of robbing the producer, depends--during this first period of civilization--upon physical violence, murder, and war. But at this point a gigantic and complicated conspiracy is hatched against the capitalists. The weapon of the EXPLOITERS is met by the EXPLOITED with the instrument of commerce,--a marvellous invention, denounced at its origin by the moralists who favored property, but inspired without doubt by the genius of labor, by the Minerva of the proletaires. The principal cause of the evil lay in the accumulation and immobility of capital of all sorts,--an immobility which prevented labor, enslaved and subalternized by haughty idleness, from ever acquiring it. The necessity was felt of dividing and mobilizing wealth, of rendering it portable, of making it pass from the hands of the possessor into those of the worker. Labor invented MONEY. Afterwards, this invention was revived and developed by the BILL OF EXCHANGE and the BANK. For all these things are substantially the same, and proceed from the same mind. The first man who conceived the idea of representing a value by a shell, a precious stone, or a certain weight of metal, was the real inventor of the Bank. What is a piece of money, in fact? It is a bill of exchange written upon solid and durable material, and carrying with it its own redemption. By this means, oppressed equality was enabled to laugh at the efforts of the proprietors, and the balance of justice was adjusted for the first time in the tradesman's shop. The trap was cunningly set, and accomplished its purpose so thoroughly that in idle hands money became only dissolving wealth, a false symbol, a shadow of riches. An excellent economist and profound philosopher was that miser who took as his motto, "WHEN A GUINEA IS EXCHANGED, IT EVAPORATES." So it may be said, "When real estate is converted into money, it is lost." This explains the constant fact of history, that the nobles--the unproductive proprietors of the soil--have every where been dispossessed by industrial and commercial plebeians. Such was especially the case in the formation of the Italian republics, born, during the middle ages, of the impoverishment of the seigniors. I will not pursue the interesting considerations which this matter suggests; I could only repeat the testimony of historians, and present economical demonstrations in an altered form. The greatest enemy of the landed and industrial aristocracy to-day, the incessant promoter of equality of fortunes, is the BANKER. Through him immense plains are divided, mountains change their positions, forests are grown upon the public squares, one hemisphere produces for another, and every corner of the globe has its usufructuaries. By means of the Bank new wealth is continually created, the use of which (soon becoming indispensable to selfishness) wrests the dormant capital from the hands of the jealous proprietor. The banker is at once the most potent creator of wealth, and the main distributor of the products of art and Nature. And yet, by the strangest antinomy, this same banker is the most relentless collector of profits, increase, and usury ever inspired by the demon of property. The importance of the services which he renders leads us to endure, though not without complaint, the taxes which he imposes. Nevertheless, since nothing can avoid its providential mission, since nothing which exists can escape the end for which it exists the banker (the modern Croesus) must some day become the restorer of equality. And following in your footsteps, sir, I have already given the reason; namely, that profit decreases as capital multiplies, since an increase of capital--calling for more laborers, without whom it remains unproductive--always causes an increase of wages. Whence it follows that the Bank, to-day the suction-pump of wealth, is destined to become the steward of the human race. The phrase EQUALITY OF FORTUNES chafes people, as if it referred to a condition of the other world, unknown here below. There are some persons, radicals as well as moderates, whom the very mention of this idea fills with indignation. Let, then, these silly aristocrats abolish mercantile societies and insurance companies, which are founded by prudence for mutual assistance. For all these social facts, so spontaneous and free from all levelling intentions, are the legitimate fruits of the instinct of equality. When the legislator makes a law, properly speaking he does not MAKE it,--he does not CREATE it: he DESCRIBES it. In legislating upon the moral, civil, and political relations of citizens, he does not express an arbitrary notion: he states the general idea,--the higher principle which governs the matter which he is considering; in a word, he is the proclaimer, not the inventor, of the law. So, when two or more men form among themselves, by synallagmatic contract, an industrial or an insurance association, they recognize that their interests, formerly isolated by a false spirit of selfishness and independence, are firmly connected by their inner natures, and by the mutuality of their relations. They do not really bind themselves by an act of their private will: they swear to conform henceforth to a previously existing social law hitherto disregarded by them. And this is proved by the fact that these same men, could they avoid association, would not associate. Before they can be induced to unite their interests, they must acquire full knowledge of the dangers of competition and isolation; hence the experience of evil is the only thing which leads them into society. Now I say that, to establish equality among men, it is only necessary to generalize the principle upon which insurance, agricultural, and commercial associations are based. I say that competition, isolation of interests, monopoly, privilege, accumulation of capital, exclusive enjoyment, subordination of functions, individual production, the right of profit or increase, the exploitation of man by man, and, to sum up all these species under one head, that PROPERTY is the principal cause of misery and crime. And, for having arrived at this offensive and anti-proprietary conclusion, I am an abhorred monster; radicals and conservatives alike point me out as a fit subject for prosecution; the academies shower their censures upon me; the most worthy people regard me as mad; and those are excessively tolerant who content themselves with the assertion that I am a fool. Oh, unhappy the writer who publishes the truth otherwise than as a performance of a duty! If he has counted upon the applause of the crowd; if he has supposed that avarice and self-interest would forget themselves in admiration of him; if he has neglected to encase himself within three thicknesses of brass,--he will fail, as he ought, in his selfish undertaking. The unjust criticisms, the sad disappointments, the despair of his mistaken ambition, will kill him. But, if I am no longer permitted to express my own personal opinion concerning this interesting question of social equilibrium, let me, at least, make known the thought of my masters, and develop the doctrines advocated in the name of the government. It never has been my intention, sir, in spite of the vigorous censure which you, in behalf of your academy, have pronounced upon the doctrine of equality of fortunes, to contradict and cope with you. In listening to you, I have felt my inferiority too keenly to permit me to enter upon such a discussion. And then,--if it must be said,--however different your language is from mine, we believe in the same principles; you share all my opinions. I do not mean to insinuate thereby, sir, that you have (to use the phraseology of the schools) an ESOTERIC and an EXOTERIC doctrine,--that, secretly believing in equality, you defend property only from motives of prudence and by command. I am not rash enough to regard you as my colleague in my revolutionary projects; and I esteem you too highly, moreover, to suspect you of dissimulation. I only mean that the truths which methodical investigation and laborious metaphysical speculation have painfully demonstrated to me, a profound acquaintance with political economy and a long experience reveal to you. While I have reached my belief in equality by long reflection, and almost in spite of my desires, you hold yours, sir, with all the zeal of faith,--with all the spontaneity of genius. That is why your course of lectures at the Conservatory is a perpetual war upon property and inequality of fortunes; that is why your most learned investigations, your most ingenious analyses, and your innumerable observations always conclude in a formula of progress and equality; that is why, finally, you are never more admired and applauded than at those moments of inspiration when, borne upon the wings of science, you ascend to those lofty truths which cause plebeian hearts to beat with enthusiasm, and which chill with horror men whose intentions are evil. How many times, from the place where I eagerly drank in your eloquent words, have I inwardly thanked Heaven for exempting you from the judgment passed by St. Paul upon the philosophers of his time,--"They have known the truth, and have not made it known"! How many times have I rejoiced at finding my own justification in each of your discourses! No, no; I neither wish nor ask for any thing which you do not teach yourself. I appeal to your numerous audience; let it belie me if, in commenting upon you, I pervert your meaning. A disciple of Say, what in your eyes is more anti-social than the custom-houses; or, as you correctly call them, the barriers erected by monopoly between nations? What is more annoying, more unjust, or more absurd, than this prohibitory system which compels us to pay forty sous in France for that which in England or Belgium would bring us but fifteen? It is the custom-house, you once said, [45] which arrests the development of civilization by preventing the specialization of industries; it is the custom-house which enriches a hundred monopolists by impoverishing millions of citizens; it is the custom-house which produces famine in the midst of abundance, which makes labor sterile by prohibiting exchange, and which stifles production in a mortal embrace. It is the custom-house which renders nations jealous of, and hostile to, each other; four-fifths of the wars of all ages were caused originally by the custom-house. And then, at the highest pitch of your enthusiasm, you shouted: "Yes, if to put an end to this hateful system, it should become necessary for me to shed the last drop of my blood, I would joyfully spring into the gap, asking only time enough to give thanks to God for having judged me worthy of martyrdom!" And, at that solemn moment, I said to myself: "Place in every department of France such a professor as that, and the revolution is avoided." But, sir, by this magnificent theory of liberty of commerce you render military glory impossible,--you leave nothing for diplomacy to do; you even take away the desire for conquest, while abolishing profit altogether. What matters it, indeed, who restores Constantinople, Alexandria, and Saint Jean d'Acre, if the Syrians, Egyptians, and Turks are free to choose their masters; free to exchange their products with whom they please? Why should Europe get into such a turmoil over this petty Sultan and his old Pasha, if it is only a question whether we or the English shall civilize the Orient,--shall instruct Egypt and Syria in the European arts, and shall teach them to construct machines, dig canals, and build railroads? For, if to national independence free trade is added, the foreign influence of these two countries is thereafter exerted only through a voluntary relationship of producer to producer, or apprentice to journeyman. Alone among European powers, France cheerfully accepted the task of civilizing the Orient, and began an invasion which was quite apostolic in its character,--so joyful and high-minded do noble thoughts render our nation! But diplomatic rivalry, national selfishness, English avarice, and Russian ambition stood in her way. To consummate a long-meditated usurpation, it was necessary to crush a too generous ally: the robbers of the Holy Alliance formed a league against dauntless and blameless France. Consequently, at the news of this famous treaty, there arose among us a chorus of curses upon the principle of property, which at that time was acting under the hypocritical formulas of the old political system. The last hour of property seemed to have struck by the side of Syria; from the Alps to the ocean, from the Rhine to the Pyrenees, the popular conscience was aroused. All France sang songs of war, and the coalition turned pale at the sound of these shuddering cries: "War upon the autocrat, who wishes to be proprietor of the old world! War upon the English perjurer, the devourer of India, the poisoner of China, the tyrant of Ireland, and the eternal enemy of France! War upon the allies who have conspired against liberty and equality! War! war! war upon property!" By the counsel of Providence the emancipation of the nations is postponed. France is to conquer, not by arms, but by example. Universal reason does not yet understand this grand equation, which, commencing with the abolition of slavery, and advancing over the ruins of aristocracies and thrones, must end in equality of rights and fortunes; but the day is not far off when the knowledge of this truth will be as common as that of equality of origin. Already it seems to be understood that the Oriental question is only a question of custom-houses. Is it, then, so difficult for public opinion to generalize this idea, and to comprehend, finally, that if the suppression of custom-houses involves the abolition of national property, it involves also, as a consequence, the abolition of individual property? In fact, if we suppress the custom-houses, the alliance of the nations is declared by that very act; their solidarity is recognized, and their equality proclaimed. If we suppress the custom-houses, the principle of association will not be slow in reaching from the State to the province, from the province to the city, and from the city to the workshop. But, then, what becomes of the privileges of authors and artists? Of what use are the patents for invention, imagination, amelioration, and improvement? When our deputies write a law of literary property by the side of a law which opens a large breach in the custom-house they contradict themselves, indeed, and pull down with one hand what they build up with the other. Without the custom-house, literary property does not exist, and the hopes of our starving authors are frustrated. For, certainly you do not expect, with the good man Fourier, that literary property will exercise itself in China to the profit of a French writer; and that an ode of Lamartine, sold by privilege all over the world, will bring in millions to its author! The poet's work is peculiar to the climate in which he lives; every where else the reproduction of his works, having no market value, should be frank and free. But what! will it be necessary for nations to put themselves under mutual surveillance for the sake of verses, statues, and elixirs? We shall always have, then, an excise, a city-toll, rights of entrance and transit, custom-houses finally; and then, as a reaction against privilege, smuggling. Smuggling! That word reminds me of one of the most horrible forms of property. "Smuggling," you have said, sir, [46] "is an offence of political creation; it is the exercise of natural liberty, defined as a crime in certain cases by the will of the sovereign. The smuggler is a gallant man,--a man of spirit, who gaily busies himself in procuring for his neighbor, at a very low price, a jewel, a shawl, or any other object of necessity or luxury, which domestic monopoly renders excessively dear." Then, to a very poetical monograph of the smuggler, you add this dismal conclusion,--that the smuggler belongs to the family of Mandrin, and that the galleys should be his home! But, sir, you have not called attention to the horrible exploitation which is carried on in this way in the name of property. It is said,--and I give this report only as an hypothesis and an illustration, for I do not believe it,--it is said that the present minister of finances owes his fortune to smuggling. M. Humann, of Strasbourg, sent out of France, it is said, enormous quantities of sugar, for which he received the bounty on exportation promised by the State; then, smuggling this sugar back again, he exported it anew, receiving the bounty on exportation a second time, and so on. Notice, sir, that I do not state this as a fact; I give it only as it is told, not endorsing or even believing it. My sole design is to fix the idea in the mind by an example. If I believed that a minister had committed such a crime, that is, if I had personal and authentic knowledge that he had, I would denounce M. Humann, the minister of finances, to the Chamber of Deputies, and would loudly demand his expulsion from the ministry. But that which is undoubtedly false of M. Humann is true of many others, as rich and no less honorable than he. Smuggling, organized on a large scale by the eaters of human flesh, is carried on to the profit of a few pashas at the risk and peril of their imprudent victims. The inactive proprietor offers his merchandise for sale; the actual smuggler risks his liberty, his honor, and his life. If success crowns the enterprise, the courageous servant gets paid for his journey; the profit goes to the coward. If fortune or treachery delivers the instrument of this execrable traffic into the hands of the custom-house officer, the master-smuggler suffers a loss which a more fortunate voyage will soon repair. The agent, pronounced a scoundrel, is thrown into prison in company with robbers; while his glorious patron, a juror, elector, deputy, or minister, makes laws concerning expropriation, monopoly, and custom-houses! I promised, at the beginning of this letter, that no attack on property should escape my pen, my only object being to justify myself before the public by a general recrimination. But I could not refrain from branding so odious a mode of exploitation, and I trust that this short digression will be pardoned. Property does not avenge, I hope, the injuries which smuggling suffers. The conspiracy against property is general; it is flagrant; it takes possession of all minds, and inspires all our laws; it lies at the bottom of all theories. Here the proletaire pursues property in the street, there the legislator lays an interdict upon it; now, a professor of political economy or of industrial legislation, [47] paid to defend it, undermines it with redoubled blows; at another--time, an academy calls it in question, [48] or inquires as to the progress of its demolition. [49] To-day there is not an idea, not an opinion, not a sect, which does not dream of muzzling property. None confess it, because none are yet conscious of it; there are too few minds capable of grasping spontaneously this ensemble of causes and effects, of principles and consequences, by which I try to demonstrate the approaching disappearance of property; on the other hand, the ideas that are generally formed of this right are too divergent and too loosely determined to allow an admission, so soon, of the contrary theory. Thus, in the middle and lower ranks of literature and philosophy, no less than among the common people, it is thought that, when property is abolished, no one will be able to enjoy the fruit of his labor; that no one will have any thing peculiar to himself, and that tyrannical communism will be established on the ruins of family and liberty!--chimeras, which are to support for a little while longer the cause of privilege. But, before determining precisely the idea of property, before seeking amid the contradictions of systems for the common element which must form the basis of the new right, let us cast a rapid glance at the changes which, at the various periods of history, property has undergone. The political forms of nations are the expression of their beliefs. The mobility of these forms, their modification and their destruction, are solemn experiences which show us the value of ideas, and gradually eliminate from the infinite variety of customs the absolute, eternal, and immutable truth. Now, we shall see that every political institution tends, necessarily, and on pain of death, to equalize conditions; that every where and always equality of fortunes (like equality of rights) has been the social aim, whether the plebeian classes have endeavored to rise to political power by means of property, or whether--rulers already--they have used political power to overthrow property. We shall see, in short, by the progress of society, that the consummation of justice lies in the extinction of individual domain. For the sake of brevity, I will disregard the testimony of ecclesiastical history and Christian theology: this subject deserves a separate treatise, and I propose hereafter to return to it. Moses and Jesus Christ proscribed, under the names of usury and inequality, [50] all sorts of profit and increase. The church itself, in its purest teachings, has always condemned property; and when I attacked, not only the authority of the church, but also its infidelity to justice, I did it to the glory of religion. I wanted to provoke a peremptory reply, and to pave the way for Christianity's triumph, in spite of the innumerable attacks of which it is at present the object. I hoped that an apologist would arise forthwith, and, taking his stand upon the Scriptures, the Fathers, the canons, and the councils and constitutions of the Popes, would demonstrate that the church always has maintained the doctrine of equality, and would attribute to temporary necessity the contradictions of its discipline. Such a labor would serve the cause of religion as well as that of equality. We must know, sooner or later, whether Christianity is to be regenerated in the church or out of it, and whether this church accepts the reproaches cast upon it of hatred to liberty and antipathy to progress. Until then we will suspend judgment, and content ourselves with placing before the clergy the teachings of history. When Lycurgus undertook to make laws for Sparta, in what condition did he find this republic? On this point all historians agree. The people and the nobles were at war. The city was in a confused state, and divided by two parties,--the party of the poor, and the party of the rich. Hardly escaped from the barbarism of the heroic ages, society was rapidly declining. The proletariat made war upon property, which, in its turn, oppressed the proletariat. What did Lycurgus do? His first measure was one of general security, at the very idea of which our legislators would tremble. He abolished all debts; then, employing by turns persuasion and force, he induced the nobles to renounce their privileges, and re-established equality. Lycurgus, in a word, hunted property out of Lacedaemon, seeing no other way to harmonize liberty, equality, and law. I certainly should not wish France to follow the example of Sparta; but it is remarkable that the most ancient of Greek legislators, thoroughly acquainted with the nature and needs of the people, more capable than any one else of appreciating the legitimacy of the obligations which he, in the exercise of his absolute authority, cancelled; who had compared the legislative systems of his time, and whose wisdom an oracle had proclaimed,--it is remarkable, I say, that Lycurgus should have judged the right of property incompatible with free institutions, and should have thought it his duty to preface his legislation by a coup d'etat which destroyed all distinctions of fortune. Lycurgus understood perfectly that the luxury, the love of enjoyments, and the inequality of fortunes, which property engenders, are the bane of society; unfortunately the means which he employed to preserve his republic were suggested to him by false notions of political economy, and by a superficial knowledge of the human heart. Accordingly, property, which this legislator wrongly confounded with wealth, reentered the city together with the swarm of evils which he was endeavoring to banish; and this time Sparta was hopelessly corrupted. "The introduction of wealth," says M. Pastoret, "was one of the principal causes of the misfortunes which they experienced. Against these, however, the laws had taken extraordinary precautions, the best among which was the inculcation of morals which tended to suppress desire." The best of all precautions would have been the anticipation of desire by satisfaction. Possession is the sovereign remedy for cupidity, a remedy which would have been the less perilous to Sparta because fortunes there were almost equal, and conditions were nearly alike. As a general thing, fasting and abstinence are bad teachers of moderation. "There was a law," says M. Pastoret again, "to prohibit the rich from wearing better clothing than the poor, from eating more delicate food, and from owning elegant furniture, vases, carpets, fine houses," &c. Lycurgus hoped, then, to maintain equality by rendering wealth useless. How much wiser he would have been if, in accordance with his military discipline, he had organized industry and taught the people to procure by their own labor the things which he tried in vain to deprive them of. In that case, enjoying happy thoughts and pleasant feelings, the citizen would have known no other desire than that with which the legislator endeavored to inspire him,--love of honor and glory, the triumphs of talent and virtue. "Gold and all kinds of ornaments were forbidden the women." Absurd. After the death of Lycurgus, his institutions became corrupted; and four centuries before the Christian era not a vestige remained of the former simplicity. Luxury and the thirst for gold were early developed among the Spartans in a degree as intense as might have been expected from their enforced poverty and their inexperience in the arts. Historians have accused Pausanias, Lysander, Agesilaus, and others of having corrupted the morals of their country by the introduction of wealth obtained in war. It is a slander. The morals of the Spartans necessarily grew corrupt as soon as the Lacedaemonian poverty came in contact with Persian luxury and Athenian elegance. Lycurgus, then, made a fatal mistake in attempting to inspire generosity and modesty by enforcing vain and proud simplicity. "Lycurgus was not frightened at idleness! A Lacedemonian, happening to be in Athens (where idleness was forbidden) during the punishment of a citizen who had been found guilty, asked to see the Athenian thus condemned for having exercised the rights of a free man.... It was one of the principles of Lycurguss, acted upon for several centuries, that free men should not follow lucrative professions.... The women disdained domestic labor; they did not spin their wool themselves, as did the other Greeks [they did not, then, read Homer!]; they left their slaves to make their clothing for them."--Pastoret: History of Legislation. Could any thing be more contradictory? Lycurgus proscribed property among the citizens, and founded the means of subsistence on the worst form of property,--on property obtained by force. What wonder, after that, that a lazy city, where no industry was carried on, became a den of avarice? The Spartans succumbed the more easily to the allurements of luxury and Asiatic voluptuousness, being placed entirely at their mercy by their own coarseness. The same thing happened to the Romans, when military success took them out of Italy,--a thing which the author of the prosopopoeia of Fabricius could not explain. It is not the cultivation of the arts which corrupts morals, but their degradation, induced by inactive and luxurious opulence. The instinct of property is to make the industry of Daedalus, as well as the talent of Phidias, subservient to its own fantastic whims and disgraceful pleasures. Property, not wealth, ruined the Spartans. When Solon appeared, the anarchy caused by property was at its height in the Athenian republic. "The inhabitants of Attica were divided among themselves as to the form of government. Those who lived on the mountains (the poor) preferred the popular form; those of the plain (the middle class), the oligarchs; those by the sea coast, a mixture of oligarchy and democracy. Other dissensions were arising from the inequality of fortunes. The mutual antagonism of the rich and poor had become so violent, that the one-man power seemed the only safe-guard against the revolution with which the republic was threatened." (Pastoret: History of Legislation.) Quarrels between the rich and the poor, which seldom occur in monarchies, because a well established power suppresses dissensions, seem to be the life of popular governments. Aristotle had noticed this. The oppression of wealth submitted to agrarian laws, or to excessive taxation; the hatred of the lower classes for the upper class, which is exposed always to libellous charges made in hopes of confiscation,--these were the features of the Athenian government which were especially revolting to Aristotle, and which caused him to favor a limited monarchy. Aristotle, if he had lived in our day, would have supported the constitutional government. But, with all deference to the Stagirite, a government which sacrifices the life of the proletaire to that of the proprietor is quite as irrational as one which supports the former by robbing the latter; neither of them deserve the support of a free man, much less of a philosopher. Solon followed the example of Lycurgus. He celebrated his legislative inauguration by the abolition of debts,--that is, by bankruptcy. In other words, Solon wound up the governmental machine for a longer or shorter time depending upon the rate of interest. Consequently, when the spring relaxed and the chain became unwound, the republic had either to perish, or to recover itself by a second bankruptcy. This singular policy was pursued by all the ancients. After the captivity of Babylon, Nehemiah, the chief of the Jewish nation, abolished debts; Lycurgus abolished debts; Solon abolished debts; the Roman people, after the expulsion of the kings until the accession of the Caesars, struggled with the Senate for the abolition of debts. Afterwards, towards the end of the republic, and long after the establishment of the empire, agriculture being abandoned, and the provinces becoming depopulated in consequence of the excessive rates of interest, the emperors freely granted the lands to whoever would cultivate them,--that is, they abolished debts. No one, except Lycurgus, who went to the other extreme, ever perceived that the great point was, not to release debtors by a coup d'etat, but to prevent the contraction of debts in future. On the contrary, the most democratic governments were always exclusively based upon individual property; so that the social element of all these republics was war between the citizens. Solon decreed that a census should be taken of all fortunes, regulated political rights by the result, granted to the larger proprietors more influence, established the balance of powers,--in a word, inserted in the constitution the most active leaven of discord; as if, instead of a legislator chosen by the people, he had been their greatest enemy. Is it not, indeed, the height of imprudence to grant equality of political rights to men of unequal conditions? If a manufacturer, uniting all his workmen in a joint-stock company, should give to each of them a consultative and deliberative voice,--that is, should make all of them masters,--would this equality of mastership secure continued inequality of wages? That is the whole political system of Solon, reduced to its simplest expression. "In giving property a just preponderance," says M. Pastoret, "Solon repaired, as far as he was able, his first official act,--the abolition of debts.... He thought he owed it to public peace to make this great sacrifice of acquired rights and natural equity. But the violation of individual property and written contracts is a bad preface to a public code." In fact, such violations are always cruelly punished. In '89 and '93, the possessions of the nobility and the clergy were confiscated, the clever proletaires were enriched; and to-day the latter, having become aristocrats, are making us pay dearly for our fathers' robbery. What, therefore, is to be done now? It is not for us to violate right, but to restore it. Now, it would be a violation of justice to dispossess some and endow others, and then stop there. We must gradually lower the rate of interest, organize industry, associate laborers and their functions, and take a census of the large fortunes, not for the purpose of granting privileges, but that we may effect their redemption by settling a life-annuity upon their proprietors. We must apply on a large scale the principle of collective production, give the State eminent domain over all capital! make each producer responsible, abolish the custom-house, and transform every profession and trade into a public function. Thereby large fortunes will vanish without confiscation or violence; individual possession will establish itself, without communism, under the inspection of the republic; and equality of conditions will no longer depend simply on the will of citizens. Of the authors who have written upon the Romans, Bossuet and Montesquieu occupy prominent positions in the first rank; the first being generally regarded as the father of the philosophy of history, and the second as the most profound writer upon law and politics. Nevertheless, it could be shown that these two great writers, each of them imbued with the prejudices of their century and their cloth, have left the question of the causes of the rise and fall of the Romans precisely where they found it. Bossuet is admirable as long as he confines himself to description: witness, among other passages, the picture which he has given us of Greece before the Persian War, and which seems to have inspired "Telemachus;" the parallel between Athens and Sparta, drawn twenty times since Bossuet; the description of the character and morals of the ancient Romans; and, finally, the sublime peroration which ends the "Discourse on Universal History." But when the famous historian deals with causes, his philosophy is at fault. "The tribunes always favored the division of captured lands, or the proceeds of their sale, among the citizens. The Senate steadfastly opposed those laws which were damaging to the State, and wanted the price of lands to be awarded to the public treasury." Thus, according to Bossuet, the first and greatest wrong of civil wars was inflicted upon the people, who, dying of hunger, demanded that the lands, which they had shed their blood to conquer, should be given to them for cultivation. The patricians, who bought them to deliver to their slaves, had more regard for justice and the public interests. How little affects the opinions of men! If the roles of Cicero and the Gracchi had been inverted, Bossuet, whose sympathies were aroused by the eloquence of the great orator more than by the clamors of the tribunes, would have viewed the agrarian laws in quite a different light. He then would have understood that the interest of the treasury was only a pretext; that, when the captured lands were put up at auction, the patricians hastened to buy them, in order to profit by the revenues from them,--certain, moreover, that the price paid would come back to them sooner or later, in exchange either for supplies furnished by them to the republic, or for the subsistence of the multitude, who could buy only of them, and whose services at one time, and poverty at another, were rewarded by the State. For a State does not hoard; on the contrary, the public funds always return to the people. If, then, a certain number of men are the sole dealers in articles of primary necessity, it follows that the public treasury, in passing and repassing through their hands, deposits and accumulates real property there. When Menenius related to the people his fable of the limbs and the stomach, if any one had remarked to this story-teller that the stomach freely gives to the limbs the nourishment which it freely receives, but that the patricians gave to the plebeians only for cash, and lent to them only at usury, he undoubtedly would have silenced the wily senator, and saved the people from a great imposition. The Conscript Fathers were fathers only of their own line. As for the common people, they were regarded as an impure race, exploitable, taxable, and workable at the discretion and mercy of their masters. As a general thing, Bossuet shows little regard for the people. His monarchical and theological instincts know nothing but authority, obedience, and alms-giving, under the name of charity. This unfortunate disposition constantly leads him to mistake symptoms for causes; and his depth, which is so much admired, is borrowed from his authors, and amounts to very little, after all. When he says, for instance, that "the dissensions in the republic, and finally its fall, were caused by the jealousies of its citizens, and their love of liberty carried to an extreme and intolerable extent," are we not tempted to ask him what caused those JEALOUSIES?--what inspired the people with that LOVE OF LIBERTY, EXTREME AND INTOLERABLE? It would be useless to reply, The corruption of morals; the disregard for the ancient poverty; the debaucheries, luxury, and class jealousies; the seditious character of the Gracchi, &c. Why did the morals become corrupt, and whence arose those eternal dissensions between the patricians and the plebeians? In Rome, as in all other places, the dissension between the rich and the poor was not caused directly by the desire for wealth (people, as a general thing, do not covet that which they deem it illegitimate to acquire), but by a natural instinct of the plebeians, which led them to seek the cause of their adversity in the constitution of the republic. So we are doing to-day; instead of altering our public economy, we demand an electoral reform. The Roman people wished to return to the social compact; they asked for reforms, and demanded a revision of the laws, and a creation of new magistracies. The patricians, who had nothing to complain of, opposed every innovation. Wealth always has been conservative. Nevertheless, the people overcame the resistance of the Senate; the electoral right was greatly extended; the privileges of the plebeians were increased,--they had their representatives, their tribunes, and their consuls; but, notwithstanding these reforms, the republic could not be saved. When all political expedients had been exhausted, when civil war had depleted the population, when the Caesars had thrown their bloody mantle over the cancer which was consuming the empire,--inasmuch as accumulated property always was respected, and since the fire never stopped, the nation had to perish in the flames. The imperial power was a compromise which protected the property of the rich, and nourished the proletaires with wheat from Africa and Sicily: a double error, which destroyed the aristocrats by plethora and the commoners by famine. At last there was but one real proprietor left,--the emperor,--whose dependent, flatterer, parasite, or slave, each citizen became; and when this proprietor was ruined, those who gathered the crumbs from under his table, and laughed when he cracked his jokes, perished also. Montesquieu succeeded no better than Bossuet in fathoming the causes of the Roman decline; indeed, it may be said that the president has only developed the ideas of the bishop. If the Romans had been more moderate in their conquests, more just to their allies, more humane to the vanquished; if the nobles had been less covetous, the emperors less lawless, the people less violent, and all classes less corrupt; if... &c.,--perhaps the dignity of the empire might have been preserved, and Rome might have retained the sceptre of the world! That is all that can be gathered from the teachings of Montesquieu. But the truth of history does not lie there; the destinies of the world are not dependent upon such trivial causes. The passions of men, like the contingencies of time and the varieties of climate, serve to maintain the forces which move humanity and produce all historical changes; but they do not explain them. The grain of sand of which Pascal speaks would have caused the death of one man only, had not prior action ordered the events of which this death was the precursor. Montesquieu has read extensively; he knows Roman history thoroughly, is perfectly well acquainted with the people of whom he speaks, and sees very clearly why they were able to conquer their rivals and govern the world. While reading him we admire the Romans, but we do not like them; we witness their triumphs without pleasure, and we watch their fall without sorrow. Montesquieu's work, like the works of all French writers, is skilfully composed,--spirited, witty, and filled with wise observations. He pleases, interests, instructs, but leads to little reflection; he does not conquer by depth of thought; he does not exalt the mind by elevated reason or earnest feeling. In vain should we search his writings for knowledge of antiquity, the character of primitive society, or a description of the heroic ages, whose morals and prejudices lived until the last days of the republic. Vico, painting the Romans with their horrible traits, represents them as excusable, because he shows that all their conduct was governed by preexisting ideas and customs, and that they were informed, so to speak, by a superior genius of which they were unconscious; in Montesquieu, the Roman atrocity revolts, but is not explained. Therefore, as a writer, Montesquieu brings greater credit upon French literature; as a philosopher, Vico bears away the palm. Originally, property in Rome was national, not private. Numa was the first to establish individual property by distributing the lands captured by Romulus. What was the dividend of this distribution effected by Numa? What conditions were imposed upon individuals, what powers reserved to the State? None whatever. Inequality of fortunes, absolute abdication by the republic of its right of eminent domain over the property of citizens,--such were the first results of the division of Numa, who justly may be regarded as the originator of Roman revolutions. He it was who instituted the worship of the god Terminus,--the guardian of private possession, and one of the most ancient gods of Italy. It was Numa who placed property under the protection of Jupiter; who, in imitation of the Etrurians, wished to make priests of the land-surveyors; who invented a liturgy for cadastral operations, and ceremonies of consecration for the marking of boundaries,--who, in short, made a religion of property. [51] All these fancies would have been more beneficial than dangerous, if the holy king had not forgotten one essential thing; namely, to fix the amount that each citizen could possess, and on what conditions he could possess it. For, since it is the essence of property to continually increase by accession and profit, and since the lender will take advantage of every opportunity to apply this principle inherent in property, it follows that properties tend, by means of their natural energy and the religious respect which protects them, to absorb each other, and fortunes to increase or diminish to an indefinite extent,--a process which necessarily results in the ruin of the people, and the fall of the republic. Roman history is but the development of this law. Scarcely had the Tarquins been banished from Rome and the monarchy abolished, when quarrels commenced between the orders. In the year 494 B.C., the secession of the commonalty to the Mons Sacer led to the establishment of the tribunate. Of what did the plebeians complain? That they were poor, exhausted by the interest which they paid to the proprietors,--_foeneratoribus;_ that the republic, administered for the benefit of the nobles, did nothing for the people; that, delivered over to the mercy of their creditors, who could sell them and their children, and having neither hearth nor home, they were refused the means of subsistence, while the rate of interest was kept at its highest point, &c. For five centuries, the sole policy of the Senate was to evade these just complaints; and, notwithstanding the energy of the tribunes, notwithstanding the eloquence of the Gracchi, the violence of Marius, and the triumph of Caesar, this execrable policy succeeded only too well. The Senate always temporized; the measures proposed by the tribunes might be good, but they were inopportune. It admitted that something should be done; but first it was necessary that the people should resume the performance of their duties, because the Senate could not yield to violence, and force must be employed only by the law. If the people--out of respect for legality--took this beautiful advice, the Senate conjured up a difficulty; the reform was postponed, and that was the end of it. On the contrary, if the demands of the proletaires became too pressing, it declared a foreign war, and neighboring nations were deprived of their liberty, to maintain the Roman aristocracy. But the toils of war were only a halt for the plebeians in their onward march towards pauperism. The lands confiscated from the conquered nations were immediately added to the domain of the State, to the ager publicus; and, as such, cultivated for the benefit of the treasury; or, as was more often the case, they were sold at auction. None of them were granted to the proletaires, who, unlike the patricians and knights, were not supplied by the victory with the means of buying them. War never enriched the soldier; the extensive plundering has been done always by the generals. The vans of Augereau, and of twenty others, are famous in our armies; but no one ever heard of a private getting rich. Nothing was more common in Rome than charges of peculation, extortion, embezzlement, and brigandage, carried on in the provinces at the head of armies, and in other public capacities. All these charges were quieted by intrigue, bribery of the judges, or desistance of the accuser. The culprit was allowed always in the end to enjoy his spoils in peace; his son was only the more respected on account of his father's crimes. And, in fact, it could not be otherwise. What would become of us, if every deputy, peer, or public functionary should be called upon to show his title to his fortune! "The patricians arrogated the exclusive enjoyment of the ager publicus; and, like the feudal seigniors, granted some portions of their lands to their dependants,--a wholly precarious concession, revocable at the will of the grantor. The plebeians, on the contrary, were entitled to the enjoyment of only a little pasture-land left to them in common: an utterly unjust state of things, since, in consequence of it, taxation--_census_--weighed more heavily upon the poor than upon the rich. The patrician, in fact, always exempted himself from the tithe which he owed as the price and as the acknowledgment of the concession of domain; and, on the other hand, paid no taxes on his POSSESSIONS, if, as there is good reason to believe, only citizens' property was taxed."--Laboulaye: History of Property. In order thoroughly to understand the preceding quotation, we must know that the estates of CITIZENS--that is, estates independent of the public domain, whether they were obtained in the division of Numa, or had since been sold by the questors--were alone regarded as PROPERTY; upon these a tax, or _cense_, was imposed. On the contrary, the estates obtained by concessions of the public domain, of the ager publicus (for which a light rent was paid), were called POSSESSIONS. Thus, among the Romans, there was a RIGHT OF PROPERTY and a RIGHT OF POSSESSION regulating the administration of all estates. Now, what did the proletaires wish? That the jus possessionis--the simple right of possession--should be extended to them at the expense, as is evident, not of private property, but of the public domain,--agri publici. The proletaires, in short, demanded that they should be tenants of the land which they had conquered. This demand, the patricians in their avarice never would accede to. Buying as much of this land as they could, they afterwards found means of obtaining the rest as POSSESSIONS. Upon this land they employed their slaves. The people, who could not buy, on account of the competition of the rich, nor hire, because--cultivating with their own hands--they could not promise a rent equal to the revenue which the land would yield when cultivated by slaves, were always deprived of possession and property. Civil wars relieved, to some extent, the sufferings of the multitude. "The people enrolled themselves under the banners of the ambitious, in order to obtain by force that which the law refused them,--property. A colony was the reward of a victorious legion. But it was no longer the ager publicus only; it was all Italy that lay at the mercy of the legions. The ager publicus disappeared almost entirely,... but the cause of the evil--accumulated property--became more potent than ever." (Laboulaye: History of Property.) The author whom I quote does not tell us why this division of territory which followed civil wars did not arrest the encroachments of accumulated property; the omission is easily supplied. Land is not the only requisite for cultivation; a working-stock is also necessary,--animals, tools, harnesses, a house, an advance, &c. Where did the colonists, discharged by the dictator who rewarded them, obtain these things? From the purse of the usurers; that is, of the patricians, to whom all these lands finally returned, in consequence of the rapid increase of usury, and the seizure of estates. Sallust, in his account of the conspiracy of Catiline, tells us of this fact. The conspirators were old soldiers of Sylla, who, as a reward for their services, had received from him lands in Cisalpine Gaul, Tuscany, and other parts of the peninsula Less than twenty years had elapsed since these colonists, free of debt, had left the service and commenced farming; and already they were crippled by usury, and almost ruined. The poverty caused by the exactions of creditors was the life of this conspiracy which well-nigh inflamed all Italy, and which, with a worthier chief and fairer means, possibly would have succeeded. In Rome, the mass of the people were favorable to the conspirators--_cuncta plebes Catilinae incepta probabat;_ the allies were weary of the patricians' robberies; deputies from the Allobroges (the Savoyards) had come to Rome to appeal to the Senate in behalf of their fellow-citizens involved in debt; in short, the complaint against the large proprietors was universal. "We call men and gods to witness," said the soldiers of Catiline, who were Roman citizens with not a slave among them, "that we have taken arms neither against the country, nor to attack any one, but in defence of our lives and liberties. Wretched, poor, most of us deprived of country, all of us of fame and fortune, by the violence and cruelty of usurers, we have no rights, no property, no liberty." [52] The bad reputation of Catiline, and his atrocious designs, the imprudence of his accomplices, the treason of several, the strategy of Cicero, the angry outbursts of Cato, and the terror of the Senate, baffled this enterprise, which, in furnishing a precedent for expeditions against the rich, would perhaps have saved the republic, and given peace to the world. But Rome could not evade her destiny; the end of her expiations had not come. A nation never was known to anticipate its punishment by a sudden and unexpected conversion. Now, the long-continued crimes of the Eternal City could not be atoned for by the massacre of a few hundred patricians. Catiline came to stay divine vengeance; therefore his conspiracy failed. The encroachment of large proprietors upon small proprietors, by the aid of usury, farm-rent, and profits of all sorts, was common throughout the empire. The most honest citizens invested their money at high rates of interest. [53] Cato, Cicero, Brutus, all the stoics so noted for their frugality, _viri frugi_,--Seneca, the teacher of virtue,--levied enormous taxes in the provinces, under the name of usury; and it is something remarkable, that the last defenders of the republic, the proud Pompeys, were all usurious aristocrats, and oppressors of the poor. But the battle of Pharsalus, having killed men only, without touching institutions, the encroachments of the large domains became every day more active. Ever since the birth of Christianity, the Fathers have opposed this invasion with all their might. Their writings are filled with burning curses upon this crime of usury, of which Christians are not always innocent. St. Cyprian complains of certain bishops of his time, who, absorbed in disgraceful stock-jobbing operations, abandoned their churches, and went about the provinces appropriating lands by artifice and fraud, while lending money and piling up interests upon interests. [54] Why, in the midst of this passion for accumulation, did not the possession of the public land, like private property, become concentrated in a few hands? By law, the domain of the State was inalienable, and consequently possession was always revocable; but the edict of the praetor continued it indefinitely, so that finally the possessions of the patricians were transformed into absolute property, though the name, possessions, was still applied to them. This conversion, instigated by senatorial avarice; owed its accomplishment to the most deplorable and indiscreet policy. If, in the time of Tiberius Gracchus, who wished to limit each citizen's possession of the ager publicus to five hundred acres, the amount of this possession had been fixed at as much as one family could cultivate, and granted on the express condition that the possessor should cultivate it himself, and should lease it to no one, the empire never would have been desolated by large estates; and possession, instead of increasing property, would have absorbed it. On what, then, depended the establishment and maintenance of equality in conditions and fortunes? On a more equitable division of the ager publicus, a wiser distribution of the right of possession. I insist upon this point, which is of the utmost importance, because it gives us an opportunity to examine the history of this individual possession, of which I said so much in my first memoir, and which so few of my readers seem to have understood. The Roman republic--having, as it did, the power to dispose absolutely of its territory, and to impose conditions upon possessors--was nearer to liberty and equality than any nation has been since. If the Senate had been intelligent and just,--if, at the time of the retreat to the Mons Sacer, instead of the ridiculous farce enacted by Menenius Agrippa, a solemn renunciation of the right to acquire had been made by each citizen on attaining his share of possessions,--the republic, based upon equality of possessions and the duty of labor, would not, in attaining its wealth, have degenerated in morals; Fabricius would have enjoyed the arts without controlling artists; and the conquests of the ancient Romans would have been the means of spreading civilization, instead of the series of murders and robberies that they were. But property, having unlimited power to amass and to lease, was daily increased by the addition of new possessions. From the time of Nero, six individuals were the sole proprietors of one-half of Roman Africa. In the fifth century, the wealthy families had incomes of no less than two millions: some possessed as many as twenty thousand slaves. All the authors who have written upon the causes of the fall of the Roman republic concur. M. Giraud of Aix [55] quotes the testimony of Cicero, Seneca, Plutarch, Olympiodorus, and Photius. Under Vespasian and Titus, Pliny, the naturalist, exclaimed: "Large estates have ruined Italy, and are ruining the provinces." But it never has been understood that the extension of property was effected then, as it is to-day, under the aegis of the law, and by virtue of the constitution. When the Senate sold captured lands at auction, it was in the interest of the treasury and of public welfare. When the patricians bought up possessions and property, they realized the purpose of the Senate's decrees; when they lent at high rates of interest, they took advantage of a legal privilege. "Property," said the lender, "is the right to enjoy even to the extent of abuse, _jus utendi et abutendi_; that is, the right to lend at interest,--to lease, to acquire, and then to lease and lend again." But property is also the right to exchange, to transfer, and to sell. If, then, the social condition is such that the proprietor, ruined by usury, may be compelled to sell his possession, the means of his subsistence, he will sell it; and, thanks to the law, accumulated property--devouring and anthropophagous property--will be established.[56] The immediate and secondary cause of the decline of the Romans was, then, the internal dissensions between the two orders of the republic,--the patricians and the plebeians,--dissensions which gave rise to civil wars, proscriptions, and loss of liberty, and finally led to the empire; but the primary and mediate cause of their decline was the establishment by Numa of the institution of property. I end with an extract from a work which I have quoted several times already, and which has recently received a prize from the Academy of Moral and Political Sciences:-- "The concentration of property," says M. Laboulaye, "while causing extreme poverty, forced the emperors to feed and amuse the people, that they might forget their misery. _Panem et circenses:_ that was the Roman law in regard to the poor; a dire and perhaps a necessary evil wherever a landed aristocracy exists. "To feed these hungry mouths, grain was brought from Africa and the provinces, and distributed gratuitously among the needy. In the time of Caesar, three hundred and twenty thousand people were thus fed. Augustus saw that such a measure led directly to the destruction of husbandry; but to abolish these distributions was to put a weapon within the reach of the first aspirant for power. "The emperor shrank at the thought. "While grain was gratuitous, agriculture was impossible. Tillage gave way to pasturage, another cause of depopulation, even among slaves. "Finally, luxury, carried further and further every day, covered the soil of Italy with elegant villas, which occupied whole cantons. Gardens and groves replaced the fields, and the free population fled to the towns. Husbandry disappeared almost entirely, and with husbandry the husbandman. Africa furnished the wheat, and Greece the wine. Tiberius complained bitterly of this evil, which placed the lives of the Roman people at the mercy of the winds and waves: that was his anxiety. One day later, and three hundred thousand starving men walked the streets of Rome: that was a revolution. "This decline of Italy and the provinces did not stop. After the reign of Nero, depopulation commenced in towns as noted as Antium and Tarentum. Under the reign of Pertinax, there was so much desert land that the emperor abandoned it, even that which belonged to the treasury, to whoever would cultivate it, besides exempting the farmers from taxation for a period of ten years. Senators were compelled to invest one-third of their fortunes in real estate in Italy; but this measure served only to increase the evil which they wished to cure. To force the rich to possess in Italy was to increase the large estates which had ruined the country. And must I say, finally, that Aurelian wished to send the captives into the desert lands of Etruria, and that Valentinian was forced to settle the Alamanni on the fertile banks of the Po?" If the reader, in running through this book, should complain of meeting with nothing but quotations from other works, extracts from journals and public lectures, comments upon laws, and interpretations of them, I would remind him that the very object of this memoir is to establish the conformity of my opinion concerning property with that universally held; that, far from aiming at a paradox, it has been my main study to follow the advice of the world; and, finally, that my sole pretension is to clearly formulate the general belief. I cannot repeat it too often,--and I confess it with pride,--I teach absolutely nothing that is new; and I should regard the doctrine which I advocate as radically erroneous, if a single witness should testify against it. Let us now trace the revolutions in property among the Barbarians. As long as the German tribes dwelt in their forests, it did not occur to them to divide and appropriate the soil. The land was held in common: each individual could plow, sow, and reap. But, when the empire was once invaded, they bethought themselves of sharing the land, just as they shared spoils after a victory. "Hence," says M. Laboulaye, "the expressions _sortes Burgundiorum Gothorum_ and {GREEK, ' k }; hence the German words _allod_, allodium, and _loos_, lot, which are used in all modern languages to designate the gifts of chance." Allodial property, at least with the mass of coparceners, was originally held, then, in equal shares; for all of the prizes were equal, or, at least, equivalent. This property, like that of the Romans, was wholly individual, independent, exclusive, transferable, and consequently susceptible of accumulation and invasion. But, instead of its being, as was the case among the Romans, the large estate which, through increase and usury, subordinated and absorbed the small one, among the Barbarians--fonder of war than of wealth, more eager to dispose of persons than to appropriate things--it was the warrior who, through superiority of arms, enslaved his adversary. The Roman wanted matter; the Barbarian wanted man. Consequently, in the feudal ages, rents were almost nothing,--simply a hare, a partridge, a pie, a few pints of wine brought by a little girl, or a Maypole set up within the suzerain's reach. In return, the vassal or incumbent had to follow the seignior to battle (a thing which happened almost every day), and equip and feed himself at his own expense. "This spirit of the German tribes--this spirit of companionship and association--governed the territory as it governed individuals. The lands, like the men, were secured to a chief or seignior by a bond of mutual protection and fidelity. This subjection was the labor of the German epoch which gave birth to feudalism. By fair means or foul, every proprietor who could not be a chief was forced to be a vassal." (Laboulaye: History of Property.) By fair means or foul, every mechanic who cannot be a master has to be a journeyman; every proprietor who is not an invader will be invaded; every producer who cannot, by the exploitation of other men, furnish products at less than their proper value, will lose his labor. Corporations and masterships, which are hated so bitterly, but which will reappear if we are not careful, are the necessary results of the principle of competition which is inherent in property; their organization was patterned formerly after that of the feudal hierarchy, which was the result of the subordination of men and possessions. The times which paved the way for the advent of feudalism and the reappearance of large proprietors were times of carnage and the most frightful anarchy. Never before had murder and violence made such havoc with the human race. The tenth century, among others, if my memory serves me rightly, was called the CENTURY OF IRON. His property, his life, and the honor of his wife and children always in danger the small proprietor made haste to do homage to his seignior, and to bestow something on the church of his freehold, that he might receive protection and security. "Both facts and laws bear witness that from the sixth to the tenth century the proprietors of small freeholds were gradually plundered, or reduced by the encroachments of large proprietors and counts to the condition of either vassals or tributaries. The Capitularies are full of repressive provisions; but the incessant reiteration of these threats only shows the perseverance of the evil and the impotency of the government. Oppression, moreover, varies but little in its methods. The complaints of the free proprietors, and the groans of the plebeians at the time of the Gracchi, were one and the same. It is said that, whenever a poor man refused to give his estate to the bishop, the curate, the count, the judge, or the centurion, these immediately sought an opportunity to ruin him. They made him serve in the army until, completely ruined, he was induced, by fair means or foul, to give up his freehold."--Laboulaye: History of Property. How many small proprietors and manufacturers have not been ruined by large ones through chicanery, law-suits, and competition? Strategy, violence, and usury,--such are the proprietor's methods of plundering the laborer. Thus we see property, at all ages and in all its forms, oscillating by virtue of its principle between two opposite terms,--extreme division and extreme accumulation. Property, at its first term, is almost null. Reduced to personal exploitation, it is property only potentially. At its second term, it exists in its perfection; then it is truly property. When property is widely distributed, society thrives, progresses, grows, and rises quickly to the zenith of its power. Thus, the Jews, after leaving Babylon with Esdras and Nehemiah, soon became richer and more powerful than they had been under their kings. Sparta was in a strong and prosperous condition during the two or three centuries which followed the death of Lycurgus. The best days of Athens were those of the Persian war; Rome, whose inhabitants were divided from the beginning into two classes,--the exploiters and the exploited,--knew no such thing as peace. When property is concentrated, society, abusing itself, polluted, so to speak, grows corrupt, wears itself out--how shall I express this horrible idea?--plunges into long-continued and fatal luxury. When feudalism was established, society had to die of the same disease which killed it under the Caesars,--I mean accumulated property. But humanity, created for an immortal destiny, is deathless; the revolutions which disturb it are purifying crises, invariably followed by more vigorous health. In the fifth century, the invasion of the Barbarians partially restored the world to a state of natural equality. In the twelfth century, a new spirit pervading all society gave the slave his rights, and through justice breathed new life into the heart of nations. It has been said, and often repeated, that Christianity regenerated the world. That is true; but it seems to me that there is a mistake in the date. Christianity had no influence upon Roman society; when the Barbarians came, that society had disappeared. For such is God's curse upon property; every political organization based upon the exploitation of man, shall perish: slave-labor is death to the race of tyrants. The patrician families became extinct, as the feudal families did, and as all aristocracies must. It was in the middle ages, when a reactionary movement was beginning to secretly undermine accumulated property, that the influence of Christianity was first exercised to its full extent. The destruction of feudalism, the conversion of the serf into the commoner, the emancipation of the communes, and the admission of the Third Estate to political power, were deeds accomplished by Christianity exclusively. I say Christianity, not ecclesiasticism; for the priests and bishops were themselves large proprietors, and as such often persecuted the villeins. Without the Christianity of the middle ages, the existence of modern society could not be explained, and would not be possible. The truth of this assertion is shown by the very facts which M. Laboulaye quotes, although this author inclines to the opposite opinion. [57] Now, we did not commence to love God and to think of our salvation until after the promulgation of the Gospel. 1. Slavery among the Romans.--"The Roman slave was, in the eyes of the law, only a thing,--no more than an ox or a horse. He had neither property, family, nor personality; he was defenceless against his master's cruelty, folly, or cupidity. 'Sell your oxen that are past use,' said Cato, 'sell your calves, your lambs, your wool, your hides, your old ploughs, your old iron, your old slave, and your sick slave, and all that is of no use to you.' When no market could be found for the slaves that were worn out by sickness or old age, they were abandoned to starvation. Claudius was the first defender of this shameful practice." "Discharge your old workman," says the economist of the proprietary school; "turn off that sick domestic, that toothless and worn-out servant. Put away the unserviceable beauty; to the hospital with the useless mouths!" "The condition of these wretched beings improved but little under the emperors; and the best that can be said of the goodness of Antoninus is that he prohibited intolerable cruelty, as an ABUSE OF PROPERTY. _Expedit enim reipublicae ne quis re re sua male utatur_, says Gaius. "As soon as the Church met in council, it launched an anathema against the masters who had exercised over their slaves this terrible right of life and death. Were not the slaves, thanks to the right of sanctuary and to their poverty, the dearest proteges of religion? Constantine, who embodied in the laws the grand ideas of Christianity, valued the life of a slave as highly as that of a freeman, and declared the master, who had intentionally brought death upon his slave, guilty of murder. Between this law and that of Antoninus there is a complete revolution in moral ideas: the slave was a thing; religion has made him a man." Note the last words: "Between the law of the Gospel and that of Antoninus there is a complete revolution in moral ideas: the slave was a thing; religion has made him a man." The moral revolution which transformed the slave into a citizen was effected, then, by Christianity before the Barbarians set foot upon the soil of the empire. We have only to trace the progress of this MORAL revolution in the PERSONNEL of society. "But," M. Laboulaye rightly says, "it did not change the condition of men in a moment, any more than that of things; between slavery and liberty there was an abyss which could not be filled in a day; the transitional step was servitude." Now, what was servitude? In what did it differ from Roman slavery, and whence came this difference? Let the same author answer. 2. Of servitude.--"I see, in the lord's manor, slaves charged with domestic duties. Some are employed in the personal service of the master; others are charged with household cares. The women spin the wool; the men grind the grain, make the bread, or practise, in the interest of the seignior, what little they know of the industrial arts. The master punishes them when he chooses, kills them with impunity, and sells them and theirs like so many cattle. The slave has no personality, and consequently no _wehrgeld_ [59] peculiar to himself: he is a thing. The _wehrgeld_ belongs to the master as a compensation for the loss of his property. Whether the slave is killed or stolen, the indemnity does not change, for the injury is the same; but the indemnity increases or diminishes according to the value of the serf. In all these particulars Germanic slavery and Roman servitude are alike." This similarity is worthy of notice. Slavery is always the same, whether in a Roman villa or on a Barbarian farm. The man, like the ox and the ass, is a part of the live-stock; a price is set upon his head; he is a tool without a conscience, a chattel without personality, an impeccable, irresponsible being, who has neither rights nor duties. Why did his condition improve? "In good season..." [when?] "the serf began to be regarded as a man; and, as such, the law of the Visigoths, under the influence of Christian ideas, punished with fine or banishment any one who maimed or killed him." Always Christianity, always religion, though we should like to speak of the laws only. Did the philanthropy of the Visigoths make its first appearance before or after the preaching of the Gospel? This point must be cleared up. "After the conquest, the serfs were scattered over the large estates of the Barbarians, each having his house, his lot, and his peculium, in return for which he paid rent and performed service. They were rarely separated from their homes when their land was sold; they and all that they had became the property of the purchaser. The law favored this realization of the serf, in not allowing him to be sold out of the country." What inspired this law, destructive not only of slavery, but of property itself? For, if the master cannot drive from his domain the slave whom he has once established there, it follows that the slave is proprietor, as well as the master. "The Barbarians," again says M. Laboulaye, "were the first to recognize the slave's rights of family and property,--two rights which are incompatible with slavery." But was this recognition the necessary result of the mode of servitude in vogue among the Germanic nations previous to their conversion to Christianity, or was it the immediate effect of that spirit of justice infused with religion, by which the seignior was forced to respect in the serf a soul equal to his own, a brother in Jesus Christ, purified by the same baptism, and redeemed by the same sacrifice of the Son of God in the form of man? For we must not close our eyes to the fact that, though the Barbarian morals and the ignorance and carelessness of the seigniors, who busied themselves mainly with wars and battles, paying little or no attention to agriculture, may have been great aids in the emancipation of the serfs, still the vital principle of this emancipation was essentially Christian. Suppose that the Barbarians had remained Pagans in the midst of a Pagan world. As they did not change the Gospel, so they would not have changed the polytheistic customs; slavery would have remained what it was; they would have continued to kill the slaves who were desirous of liberty, family, and property; whole nations would have been reduced to the condition of Helots; nothing would have changed upon the terrestrial stage, except the actors. The Barbarians were less selfish, less imperious, less dissolute, and less cruel than the Romans. Such was the nature upon which, after the fall of the empire and the renovation of society, Christianity was to act. But this nature, grounded as in former times upon slavery and war, would, by its own energy, have produced nothing but war and slavery. "GRADUALLY the serfs obtained the privilege of being judged by the same standard as their masters...." When, how, and by what title did they obtain this privilege? "GRADUALLY their duties were regulated." Whence came the regulations? Who had the authority to introduce them? "The master took a part of the labor of the serf,--three days, for instance,--and left the rest to him. As for Sunday, that belonged to God." And what established Sunday, if not religion? Whence I infer, that the same power which took it upon itself to suspend hostilities and to lighten the duties of the serf was also that which regulated the judiciary and created a sort of law for the slave. But this law itself, on what did it bear?--what was its principle?--what was the philosophy of the councils and popes with reference to this matter? The reply to all these questions, coming from me alone, would be distrusted. The authority of M. Laboulaye shall give credence to my words. This holy philosophy, to which the slaves were indebted for every thing, this invocation of the Gospel, was an anathema against property. The proprietors of small freeholds, that is, the freemen of the middle class, had fallen, in consequence of the tyranny of the nobles, into a worse condition than that of the tenants and serfs. "The expenses of war weighed less heavily upon the serf than upon the freeman; and, as for legal protection, the seigniorial court, where the serf was judged by his peers, was far preferable to the cantonal assembly. It was better to have a noble for a seignior than for a judge." So it is better to-day to have a man of large capital for an associate than for a rival. The honest tenant--the laborer who earns weekly a moderate but constant salary--is more to be envied than the independent but small farmer, or the poor licensed mechanic. At that time, all were either seigniors or serfs, oppressors or oppressed. "Then, under the protection of convents, or of the seigniorial turret, new societies were formed, which silently spread over the soil made fertile by their hands, and which derived their power from the annihilation of the free classes whom they enlisted in their behalf. As tenants, these men acquired, from generation to generation, sacred rights over the soil which they cultivated in the interest of lazy and pillaging masters. As fast as the social tempest abated, it became necessary to respect the union and heritage of these villeins, who by their labor had truly prescribed the soil for their own profit." I ask how prescription could take effect where a contrary title and possession already existed? M. Laboulaye is a lawyer. Where, then, did he ever see the labor of the slave and the cultivation by the tenant prescribe the soil for their own profit, to the detriment of a recognized master daily acting as a proprietor? Let us not disguise matters. As fast as the tenants and the serfs grew rich, they wished to be independent and free; they commenced to associate, unfurl their municipal banners, raise belfries, fortify their towns, and refuse to pay their seigniorial dues. In doing these things they were perfectly right; for, in fact, their condition was intolerable. But in law--I mean in Roman and Napoleonic law--their refusal to obey and pay tribute to their masters was illegitimate. Now, this imperceptible usurpation of property by the commonalty was inspired by religion. The seignior had attached the serf to the soil; religion granted the serf rights over the soil. The seignior imposed duties upon the serf; religion fixed their limits. The seignior could kill the serf with impunity, could deprive him of his wife, violate his daughter, pillage his house, and rob him of his savings; religion checked his invasions: it excommunicated the seignior. Religion was the real cause of the ruin of feudal property. Why should it not be bold enough to-day to resolutely condemn capitalistic property? Since the middle ages, there has been no change in social economy except in its forms; its relations remain unaltered. The only result of the emancipation of the serfs was that property changed hands; or, rather, that new proprietors were created. Sooner or later the extension of privilege, far from curing the evil, was to operate to the disadvantage of the plebeians. Nevertheless, the new social organization did not meet with the same end in all places. In Lombardy, for example, where the people rapidly growing rich through commerce and industry soon conquered the authorities, even to the exclusion of the nobles,--first, the nobility became poor and degraded, and were forced, in order to live and maintain their credit, to gain admission to the guilds; then, the ordinary subalternization of property leading to inequality of fortunes, to wealth and poverty, to jealousies and hatreds, the cities passed rapidly from the rankest democracy under the yoke of a few ambitious leaders. Such was the fate of most of the Lombardic cities,--Genoa, Florence, Bologna, Milan, Pisa, &c,.--which afterwards changed rulers frequently, but which have never since risen in favor of liberty. The people can easily escape from the tyranny of despots, but they do not know how to throw off the effects of their own despotism; just as we avoid the assassin's steel, while we succumb to a constitutional malady. As soon as a nation becomes proprietor, either it must perish, or a foreign invasion must force it again to begin its evolutionary round. [59] "The communes once organized, the kings treated them as superior vassals. Now, just as the under vassal had no communication with the king except through the direct vassal, so also the commoners could enter no complaints except through the commune. "Like causes produce like effects. Each commune became a small and separate State, governed by a few citizens, who sought to extend their authority over the others; who, in their turn, revenged themselves upon the unfortunate inhabitants who had not the right of citizenship. Feudalism in unemancipated countries, and oligarchy in the communes, made nearly the same ravages. There were sub-associations, fraternities, tradesmen's associations in the communes, and colleges in the universities. The oppression was so great, that it was no rare thing to see the inhabitants of a commune demanding its suppression...."--Meyer: Judicial Institutions of Europe. In France, the Revolution was much more gradual. The communes, in taking refuge under the protection of the kings, had found them masters rather than protectors. Their liberty had long since been lost, or, rather, their emancipation had been suspended, when feudalism received its death-blow at the hand of Richelieu. Then liberty halted; the prince of the feudatories held sole and undivided sway. The nobles, the clergy, the commoners, the parliaments, every thing in short except a few seeming privileges, were controlled by the king; who, like his early predecessors, consumed regularly, and nearly always in advance, the revenues of his domain,--and that domain was France. Finally, '89 arrived; liberty resumed its march; a century and a half had been required to wear out the last form of feudal property,--monarchy. The French Revolution may be defined as _the substitution of real right for personal right;_ that is to say, in the days of feudalism, the value of property depended upon the standing of the proprietor, while, after the Revolution, the regard for the man was proportional to his property. Now, we have seen from what has been said in the preceding pages, that this recognition of the right of laborers had been the constant aim of the serfs and communes, the secret motive of their efforts. The movement of '89 was only the last stage of that long insurrection. But it seems to me that we have not paid sufficient attention to the fact that the Revolution of 1789, instigated by the same causes, animated by the same spirit, triumphing by the same struggles, was consummated in Italy four centuries ago. Italy was the first to sound the signal of war against feudalism; France has followed; Spain and England are beginning to move; the rest still sleep. If a grand example should be given to the world, the day of trial would be much abridged. Note the following summary of the revolutions of property, from the days of the Roman Empire down to the present time:-- 1. Fifth century.--Barbarian invasions; division of the lands of the empire into independent portions or freeholds. 2. From the fifth to the eighth century.--Gradual concentration of freeholds, or transformation of the small freeholds into fiefs, feuds, tenures, &c. Large properties, small possessions. Charlemagne (771-814) decrees that all freeholds are dependent upon the king of France. 3. From the eighth to the tenth century.--The relation between the crown and the superior dependents is broken; the latter becoming freeholders, while the smaller dependents cease to recognize the king, and adhere to the nearest suzerain. Feudal system. 4. Twelfth century.--Movement of the serfs towards liberty; emancipation of the communes. 5. Thirteenth century.--Abolition of personal right, and of the feudal system in Italy. Italian Republics. 6. Seventeenth century.--Abolition of feudalism in France during Richelieu's ministry. Despotism. 7. 1789.--Abolition of all privileges of birth, caste, provinces, and corporations; equality of persons and of rights. French democracy. 8. 1830.--The principle of concentration inherent in individual property is REMARKED. Development of the idea of association. The more we reflect upon this series of transformations and changes, the more clearly we see that they were necessary in their principle, in their manifestations, and in their result. It was necessary that inexperienced conquerors, eager for liberty, should divide the Roman Empire into a multitude of estates, as free and independent as themselves. It was necessary that these men, who liked war even better than liberty, should submit to their leaders; and, as the freehold represented the man, that property should violate property. It was necessary that, under the rule of a nobility always idle when not fighting, there should grow up a body of laborers, who, by the power of production, and by the division and circulation of wealth, would gradually gain control over commerce, industry, and a portion of the land, and who, having become rich, would aspire to power and authority also. It was necessary, finally, that liberty and equality of rights having been achieved, and individual property still existing, attended by robbery, poverty, social inequality, and oppression, there should be an inquiry into the cause of this evil, and an idea of universal association formed, whereby, on condition of labor, all interests should be protected and consolidated. "Evil, when carried too far," says a learned jurist, "cures itself; and the political innovation which aims to increase the power of the State, finally succumbs to the effects of its own work. The Germans, to secure their independence, chose chiefs; and soon they were oppressed by their kings and noblemen. The monarchs surrounded themselves with volunteers, in order to control the freemen; and they found themselves dependent upon their proud vassals. The _missi dominici_ were sent into the provinces to maintain the power of the emperors, and to protect the people from the oppressions of the noblemen; and not only did they usurp the imperial power to a great extent, but they dealt more severely with the inhabitants. The freemen became vassals, in order to get rid of military service and court duty; and they were immediately involved in all the personal quarrels of their seigniors, and compelled to do jury duty in their courts.... The kings protected the cities and the communes, in the hope of freeing them from the yoke of the grand vassals, and of rendering their own power more absolute; and those same communes have, in several European countries, procured the establishment of a constitutional power, are now holding royalty in check, and are giving rise to a universal desire for political reform."--Meyer: Judicial Institutions of Europe. In recapitulation. What was feudalism? A confederation of the grand seign iors against the villeins, and against the king. [60] What is constitutional government? A confederation of the bourgeoisie against the laborers, and against the king. [61] How did feudalism end? In the union of the communes and the royal authority. How will the bourgeoisie aristocracy end? In the union of the proletariat and the sovereign power. What was the immediate result of the struggle of the communes and the king against the seigniors? The monarchical unity of Louis XIV. What will be the result of the struggle of the proletariat and the sovereign power combined against the bourgeoisie? The absolute unity of the nation and the government. It remains to be seen whether the nation, one and supreme, will be represented in its executive and central power by ONE, by FIVE, by ONE HUNDRED, or ONE THOUSAND; that is, it remains to be seen, whether the royalty of the barricades intends to maintain itself by the people, or without the people, and whether Louis Philippe wishes his reign to be the most famous in all history. I have made this statement as brief, but at the same time as accurate as I could, neglecting facts and details, that I might give the more attention to the economical relations of society. For the study of history is like the study of the human organism; just as the latter has its system, its organs, and its functions, which can be treated separately, so the former has its ensemble, its instruments, and its causes. Of course I do not pretend that the principle of property is a complete resume of all the social forces; but, as in that wonderful machine which we call our body, the harmony of the whole allows us to draw a general conclusion from the consideration of a single function or organ, so, in discussing historical causes, I have been able to reason with absolute accuracy from a single order of facts, certain as I was of the perfect correlation which exists between this special order and universal history. As is the property of a nation, so is its family, its marriage, its religion, its civil and military organization, and its legislative and judicial institutions. History, viewed from this standpoint, is a grand and sublime psychological study. Well, sir, in writing against property, have I done more than quote the language of history? I have said to modern society,--the daughter and heiress of all preceding societies,--_Age guod agis:_ complete the task which for six thousand years you have been executing under the inspiration and by the command of God; hasten to finish your journey; turn neither to the right nor the left, but follow the road which lies before you. You seek reason, law, unity, and discipline; but hereafter you can find them only by stripping off the veils of your infancy, and ceasing to follow instinct as a guide. Awaken your sleeping conscience; open your eyes to the pure light of reflection and science; behold the phantom which troubled your dreams, and so long kept you in a state of unutterable anguish. Know thyself, O long-deluded society[1] know thy enemy!... And I have denounced property. We often hear the defenders of the right of domain quote in defence of their views the testimony of nations and ages. We can judge, from what has just been said, how far this historical argument conforms to the real facts and the conclusions of science. To complete this apology, I must examine the various theories. Neither politics, nor legislation, nor history, can be explained and understood, without a positive theory which defines their elements, and discovers their laws; in short, without a philosophy. Now, the two principal schools, which to this day divide the attention of the world, do not satisfy this condition. The first, essentially PRACTICAL in its character, confined to a statement of facts, and buried in learning, cares very little by what laws humanity develops itself. To it these laws are the secret of the Almighty, which no one can fathom without a commission from on high. In applying the facts of history to government, this school does not reason; it does not anticipate; it makes no comparison of the past with the present, in order to predict the future. In its opinion, the lessons of experience teach us only to repeat old errors, and its whole philosophy consists in perpetually retracing the tracks of antiquity, instead of going straight ahead forever in the direction in which they point. The second school may be called either FATALISTIC or PANTHEISTIC. To it the movements of empires and the revolutions of humanity are the manifestations, the incarnations, of the Almighty. The human race, identified with the divine essence, wheels in a circle of appearances, informations, and destructions, which necessarily excludes the idea of absolute truth, and destroys providence and liberty. Corresponding to these two schools of history, there are two schools of jurisprudence, similarly opposed, and possessed of the same peculiarities. 1. The practical and conventional school, to which the law is always a creation of the legislator, an expression of his will, a privilege which he condescends to grant,--in short, a gratuitous affirmation to be regarded as judicious and legitimate, no matter what it declares. 2. The fatalistic and pantheistic school, sometimes called the historical school, which opposes the despotism of the first, and maintains that law, like literature and religion, is always the expression of society,--its manifestation, its form, the external realization of its mobile spirit and its ever-changing inspirations. Each of these schools, denying the absolute, rejects thereby all positive and a priori philosophy. Now, it is evident that the theories of these two schools, whatever view we take of them, are utterly unsatisfactory: for, opposed, they form no dilemma,--that is, if one is false, it does not follow that the other is true; and, united, they do not constitute the truth, since they disregard the absolute, without which there is no truth. They are respectively a THESIS and an ANTITHESIS. There remains to be found, then, a SYNTHESIS, which, predicating the absolute, justifies the will of the legislator, explains the variations of the law, annihilates the theory of the circular movement of humanity, and demonstrates its progress. The legists, by the very nature of their studies and in spite of their obstinate prejudices, have been led irresistibly to suspect that the absolute in the science of law is not as chimerical as is commonly supposed; and this suspicion arose from their comparison of the various relations which legislators have been called upon to regulate. M. Laboulaye, the laureate of the Institute, begins his "History of Property" with these words:-- "While the law of contract, which regulates only the mutual interests of men, has not varied for centuries (except in certain forms which relate more to the proof than to the character of the obligation), the civil law of property, which regulates the mutual relations of citizens, has undergone several radical changes, and has kept pace in its variations with all the vicissitudes of society. The law of contract, which holds essentially to those principles of eternal justice which are engraven upon the depths of the human heart, is the immutable element of jurisprudence, and, in a certain sense, its philosophy. Property, on the contrary, is the variable element of jurisprudence, its history, its policy." Marvellous! There is in law, and consequently in politics, something variable and something invariable. The invariable element is obligation, the bond of justice, duty; the variable element is property,--that is, the external form of law, the subject-matter of the contract. Whence it follows that the law can modify, change, reform, and judge property. Reconcile that, if you can, with the idea of an eternal, absolute, permanent, and indefectible right. However, M. Laboulaye is in perfect accord with himself when he adds, "Possession of the soil rests solely upon force until society takes it in hand, and espouses the cause of the possessor;" [62] and, a little farther, "The right of property is not natural, but social. The laws not only protect property: they give it birth," &c. Now, that which the law has made the law can unmake; especially since, according to M. Laboulaye,--an avowed partisan of the historical or pantheistic school,--the law is not absolute, is not an idea, but a form. But why is it that property is variable, and, unlike obligation, incapable of definition and settlement? Before affirming, somewhat boldly without doubt, that in right there are no absolute principles (the most dangerous, most immoral, most tyrannical--in a word, most anti-social--assertion imaginable), it was proper that the right of property should be subjected to a thorough examination, in order to put in evidence its variable, arbitrary, and contingent elements, and those which are eternal, legitimate, and absolute; then, this operation performed, it became easy to account for the laws, and to correct all the codes. Now, this examination of property I claim to have made, and in the fullest detail; but, either from the public's lack of interest in an unrecommended and unattractive pamphlet, or--which is more probable--from the weakness of exposition and want of genius which characterize the work, the First Memoir on Property passed unnoticed; scarcely would a few communists, having turned its leaves, deign to brand it with their disapprobation. You alone, sir, in spite of the disfavor which I showed for your economical predecessors in too severe a criticism of them,--you alone have judged me justly; and although I cannot accept, at least literally, your first judgment, yet it is to you alone that I appeal from a decision too equivocal to be regarded as final. It not being my intention to enter at present into a discussion of principles, I shall content myself with estimating, from the point of view of this simple and intelligible absolute, the theories of property which our generation has produced. The most exact idea of property is given us by the Roman law, faithfully followed in this particular by the ancient legists. It is the absolute, exclusive, autocratic domain of a man over a thing,--a domain which begins by USUCAPTION, is maintained by POSSESSION, and finally, by the aid of PRESCRIPTION, finds its sanction in the civil law; a domain which so identifies the man with the thing, that the proprietor can say, "He who uses my field, virtually compels me to labor for him; therefore he owes me compensation." I pass in silence the secondary modes by which property can be acquired,--_tradition, sale, exchange, inheritance_, &c.,--which have nothing in common with the origin of property. Accordingly, Pothier said THE DOMAIN OF PROPERTY, and not simply PROPERTY. And the most learned writers on jurisprudence--in imitation of the Roman praetor who recognized a RIGHT OF PROPERTY and a RIGHT OF POSSESSION--have carefully distinguished between the DOMAIN and the right of USUFRUCT, USE, and HABITATION, which, reduced to its natural limits, is the very expression of justice; and which is, in my opinion, to supplant domanial property, and finally form the basis of all jurisprudence. But, sir, admire the clumsiness of systems, or rather the fatality of logic! While the Roman law and all the savants inspired by it teach that property in its origin is the right of first occupancy sanctioned by law, the modern legists, dissatisfied with this brutal definition, claim that property is based upon LABOR. Immediately they infer that he who no longer labors, but makes another labor in his stead, loses his right to the earnings of the latter. It is by virtue of this principle that the serfs of the middle ages claimed a legal right to property, and consequently to the enjoyment of political rights; that the clergy were despoiled in '89 of their immense estates, and were granted a pension in exchange; that at the restoration the liberal deputies opposed the indemnity of one billion francs. "The nation," said they, "has acquired by twenty-five years of labor and possession the property which the emigrants forfeited by abandonment and long idleness: why should the nobles be treated with more favor than the priests?" [63] This position is quite in harmony with my principles, and I heartily applaud the indignation of M. Lerminier; but I do not know that a proprietor was ever deprived of his property because UNWORTHY; and as reasonable, social, and even useful as the thing may seem, it is quite contrary to the uses and customs of property. All usurpations, not born of war, have been caused and supported by labor. All modern history proves this, from the end of the Roman empire down to the present day. And as if to give a sort of legal sanction to these usurpations, the doctrine of labor, subversive of property, is professed at great length in the Roman law under the name of PRESCRIPTION. The man who cultivates, it has been said, makes the land his own; consequently, no more property. This was clearly seen by the old jurists, who have not failed to denounce this novelty; while on the other hand the young school hoots at the absurdity of the first-occupant theory. Others have presented themselves, pretending to reconcile the two opinions by uniting them. They have failed, like all the _juste-milieux_ of the world, and are laughed at for their eclecticism. At present, the alarm is in the camp of the old doctrine; from all sides pour IN DEFENCES OF PROPERTY, STUDIES REGARDING PROPERTY, THEORIES OF PROPERTY, each one of which, giving the lie to the rest, inflicts a fresh wound upon property. Consider, indeed, the inextricable embarrassments, the contradictions, the absurdities, the incredible nonsense, in which the bold defenders of property so lightly involve themselves. I choose the eclectics, because, those killed, the others cannot survive. M. Troplong, jurist, passes for a philosopher in the eyes of the editors of "Le Droit." I tell the gentlemen of "Le Droit" that, in the judgment of philosophers, M. Troplong is only an advocate; and I prove my assertion. M. Troplong is a defender of progress. "The words of the code," says he, "are fruitful sap with which the classic works of the eighteenth century overflow. To wish to suppress them... is to violate the law of progress, and to forget that a science which moves is a science which grows." [64] Now, the only mutable and progressive portion of law, as we have already seen, is that which concerns property. If, then, you ask what reforms are to be introduced into the right of property? M. Troplong makes no reply; what progress is to be hoped for? no reply; what is to be the destiny of property in case of universal association? no reply; what is the absolute and what the contingent, what the true and what the false, in property? no reply. M. Troplong favors quiescence and _in statu quo_ in regard to property. What could be more unphilosophical in a progressive philosopher? Nevertheless, M. Troplong has thought about these things. "There are," he says, "many weak points and antiquated ideas in the doctrines of modern authors concerning property: witness the works of MM. Toullier and Duranton." The doctrine of M. Troplong promises, then, strong points, advanced and progressive ideas. Let us see; let us examine:-- "Man, placed in the presence of matter, is conscious of a power over it, which has been given to him to satisfy the needs of his being. King of inanimate or unintelligent nature, he feels that he has a right to modify it, govern it, and fit it for his use. There it is, the subject of property, which is legitimate only when exercised over things, never when over persons." M. Troplong is so little of a philosopher, that he does not even know the import of the philosophical terms which he makes a show of using. He says of matter that it is the SUBJECT of property; he should have said the OBJECT. M. Troplong uses the language of the anatomists, who apply the term SUBJECT to the human matter used in their experiments. This error of our author is repeated farther on: "Liberty, which overcomes matter, the subject of property, &c." The SUBJECT of property is man; its OBJECT is matter. But even this is but a slight mortification; directly we shall have some crucifixions. Thus, according to the passage just quoted, it is in the conscience and personality of man that the principle of property must be sought. Is there any thing new in this doctrine? Apparently it never has occurred to those who, since the days of Cicero and Aristotle, and earlier, have maintained that THINGS BELONG TO THE FIRST OCCUPANT, that occupation may be exercised by beings devoid of conscience and personality. The human personality, though it may be the principle or the subject of property, as matter is the object, is not the CONDITION. Now, it is this condition which we most need to know. So far, M. Troplong tells us no more than his masters, and the figures with which he adorns his style add nothing to the old idea. Property, then, implies three terms: The subject, the object, and the condition. There is no difficulty in regard to the first two terms. As to the third, the condition of property down to this day, for the Greek as for the Barbarian, has been that of first occupancy. What now would you have it, progressive doctor? "When man lays hands for the first time upon an object without a master, he performs an act which, among individuals, is of the greatest importance. The thing thus seized and occupied participates, so to speak, in the personality of him who holds it. It becomes sacred, like himself. It is impossible to take it without doing violence to his liberty, or to remove it without rashly invading his person. Diogenes did but express this truth of intuition, when he said: 'Stand out of my light!'" Very good! but would the prince of cynics, the very personal and very haughty Diogenes, have had the right to charge another cynic, as rent for this same place in the sunshine, a bone for twenty-four hours of possession? It is that which constitutes the proprietor; it is that which you fail to justify. In reasoning from the human personality and individuality to the right of property, you unconsciously construct a syllogism in which the conclusion includes more than the premises, contrary to the rules laid down by Aristotle. The individuality of the human person proves INDIVIDUAL POSSESSION, originally called _proprietas_, in opposition to collective possession, _communio_. It gives birth to the distinction between THINE and MINE, true signs of equality, not, by any means, of subordination. "From equivocation to equivocation," says M. Michelet, [65] "property would crawl to the end of the world; man could not limit it, were not he himself its limit. Where they clash, there will be its frontier." In short, individuality of being destroys the hypothesis of communism, but it does not for that reason give birth to domain,--that domain by virtue of which the holder of a thing exercises over the person who takes his place a right of prestation and suzerainty, that has always been identified with property itself. Further, that he whose legitimately acquired possession injures nobody cannot be nonsuited without flagrant injustice, is a truth, not of INTUITION, as M. Troplong says, but of INWARD SENSATION, [66] which has nothing to do with property. M. Troplong admits, then, occupancy as a condition of property. In that, he is in accord with the Roman law, in accord with MM. Toullier and Duranton; but in his opinion this condition is not the only one, and it is in this particular that his doctrine goes beyond theirs. "But, however exclusive the right arising from sole occupancy, does it not become still more so, when man has moulded matter by his labor; when he has deposited in it a portion of himself, re-creating it by his industry, and setting upon it the seal of his intelligence and activity? Of all conquests, that is the most legitimate, for it is the price of labor. "He who should deprive a man of the thing thus remodelled, thus humanized, would invade the man himself, and would inflict the deepest wounds upon his liberty." I pass over the very beautiful explanations in which M. Troplong, discussing labor and industry, displays the whole wealth of his eloquence. M. Troplong is not only a philosopher, he is an orator, an artist. HE ABOUNDS WITH APPEALS TO THE CONSCIENCE AND THE PASSIONS. I might make sad work of his rhetoric, should I undertake to dissect it; but I confine myself for the present to his philosophy. If M. Troplong had only known how to think and reflect, before abandoning the original fact of occupancy and plunging into the theory of labor, he would have asked himself: "What is it to occupy?" And he would have discovered that OCCUPANCY is only a generic term by which all modes of possession are expressed,--seizure, station, immanence, habitation, cultivation, use, consumption, &c.; that labor, consequently, is but one of a thousand forms of occupancy. He would have understood, finally, that the right of possession which is born of labor is governed by the same general laws as that which results from the simple seizure of things. What kind of a legist is he who declaims when he ought to reason, who continually mistakes his metaphors for legal axioms, and who does not so much as know how to obtain a universal by induction, and form a category? If labor is identical with occupancy, the only benefit which it secures to the laborer is the right of individual possession of the object of his labor; if it differs from occupancy, it gives birth to a right equal only to itself,--that is, a right which begins, continues, and ends, with the labor of the occupant. It is for this reason, in the words of the law, that one cannot acquire a just title to a thing by labor alone. He must also hold it for a year and a day, in order to be regarded as its possessor; and possess it twenty or thirty years, in order to become its proprietor. These preliminaries established, M. Troplong's whole structure falls of its own weight, and the inferences, which he attempts to draw, vanish. "Property once acquired by occupation and labor, it naturally preserves itself, not only by the same means, but also by the refusal of the holder to abdicate; for from the very fact that it has risen to the height of a right, it is its nature to perpetuate itself and to last for an indefinite period.... Rights, considered from an ideal point of view, are imperishable and eternal; and time, which affects only the contingent, can no more disturb them than it can injure God himself." It is astonishing that our author, in speaking of the IDEAL, TIME, and ETERNITY, did not work into his sentence the DIVINE WINGS of Plato,--so fashionable to-day in philosophical works. With the exception of falsehood, I hate nonsense more than any thing else in the world. PROPERTY ONCE ACQUIRED! Good, if it is acquired; but, as it is not acquired, it cannot be preserved. RIGHTS ARE ETERNAL! Yes, in the sight of God, like the archetypal ideas of the Platonists. But, on the earth, rights exist only in the presence of a subject, an object, and a condition. Take away one of these three things, and rights no longer exist. Thus, individual possession ceases at the death of the subject, upon the destruction of the object, or in case of exchange or abandonment. Let us admit, however, with M. Troplong, that property is an absolute and eternal right, which cannot be destroyed save by the deed and at the will of the proprietor. What are the consequences which immediately follow from this position? To show the justice and utility of prescription, M. Troplong supposes the case of a bona fide possessor whom a proprietor, long since forgotten or even unknown, is attempting to eject from his possession. "At the start, the error of the possessor was excusable but not irreparable. Pursuing its course and growing old by degrees, it has so completely clothed itself in the colors of truth, it has spoken so loudly the language of right, it has involved so many confiding interests, that it fairly may be asked whether it would not cause greater confusion to go back to the reality than to sanction the fictions which it (an error, without doubt) has sown on its way? Well, yes; it must be confessed, without hesitation, that the remedy would prove worse than the disease, and that its application would lead to the most outrageous injustice." How long since utility became a principle of law? When the Athenians, by the advice of Aristides, rejected a proposition eminently advantageous to their republic, but also utterly unjust, they showed finer moral perception and greater clearness of intellect than M. Troplong. Property is an eternal right, independent of time, indestructible except by the act and at the will of the proprietor; and here this right is taken from the proprietor, and on what ground? Good God! on the ground of ABSENCE! Is it not true that legists are governed by caprice in giving and taking away rights? When it pleases these gentlemen, idleness, unworthiness, or absence can invalidate a right which, under quite similar circumstances, labor, residence, and virtue are inadequate to obtain. Do not be astonished that legists reject the absolute. Their good pleasure is law, and their disordered imaginations are the real cause of the EVOLUTIONS in jurisprudence. "If the nominal proprietor should plead ignorance, his claim would be none the more valid. Indeed, his ignorance might arise from inexcusable carelessness, etc." What! in order to legitimate dispossession through prescription, you suppose faults in the proprietor! You blame his absence,--which may have been involuntary; his neglect,--not knowing what caused it; his carelessness,--a gratuitous supposition of your own! It is absurd. One very simple observation suffices to annihilate this theory. Society, which, they tell us, makes an exception in the interest of order in favor of the possessor as against the old proprietor, owes the latter an indemnity; since the privilege of prescription is nothing but expropriation for the sake of public utility. But here is something stronger:-- "In society a place cannot remain vacant with impunity. A new man arises in place of the old one who disappears or goes away; he brings here his existence, becomes entirely absorbed, and devotes himself to this post which he finds abandoned. Shall the deserter, then, dispute the honor of the victory with the soldier who fights with the sweat standing on his brow, and bears the burden of the day, in behalf of a cause which he deems just?" When the tongue of an advocate once gets in motion, who can tell where it will stop? M. Troplong admits and justifies usurpation in case of the ABSENCE of the proprietor, and on a mere presumption of his CARELESSNESS. But when the neglect is authenticated; when the abandonment is solemnly and voluntarily set forth in a contract in the presence of a magistrate; when the proprietor dares to say, "I cease to labor, but I still claim a share of the product,"--then the absentee's right of property is protected; the usurpation of the possessor would be criminal; farm-rent is the reward of idleness. Where is, I do not say the consistency, but, the honesty of this law? Prescription is a result of the civil law, a creation of the legislator. Why has not the legislator fixed the conditions differently?--why, instead of twenty and thirty years, is not a single year sufficient to prescribe?--why are not voluntary absence and confessed idleness as good grounds for dispossession as involuntary absence, ignorance, or apathy? But in vain should we ask M. Troplong, the philosopher, to tell us the ground of prescription. Concerning the code, M. Troplong does not reason. "The interpreter," he says, "must take things as they are, society as it exists, laws as they are made: that is the only sensible starting-point." Well, then, write no more books; cease to reproach your predecessors--who, like you, have aimed only at interpretation of the law--for having remained in the rear; talk no more of philosophy and progress, for the lie sticks in your throat. M. Troplong denies the reality of the right of possession; he denies that possession has ever existed as a principle of society; and he quotes M. de Savigny, who holds precisely the opposite position, and whom he is content to leave unanswered. At one time, M. Troplong asserts that possession and property are CONTEMPORANEOUS, and that they exist AT THE SAME TIME, which implies that the RIGHT of property is based on the FACT of possession,--a conclusion which is evidently absurd; at another, he denies that possession HAD ANY HISTORICAL EXISTENCE PRIOR TO PROPERTY,--an assertion which is contradicted by the customs of many nations which cultivate the land without appropriating it; by the Roman law, which distinguished so clearly between POSSESSION and PROPERTY; and by our code itself, which makes possession for twenty or thirty years the condition of property. Finally, M. Troplong goes so far as to maintain that the Roman maxim, _Nihil comune habet proprietas cum possessione_--which contains so striking an allusion to the possession of the _ager publicus_, and which, sooner or later, will be again accepted without qualification--expresses in French law only a judicial axiom, a simple rule forbidding the union of an _action possessoire_ with an _action petitoire_,--an opinion as retrogressive as it is unphilosophical. In treating of _actions possessoires_, M. Troplong is so unfortunate or awkward that he mutilates economy through failure to grasp its meaning "Just as property," he writes, "gave rise to the action for revendication, so possession--the _jus possessionis_--was the cause of possessory interdicts.... There were two kinds of interdicts,--the interdict _recuperandae possessionis_, and the interdict _retinendae possessionis_,--which correspond to our _complainte en cas de saisine et nouvelete_. There is also a third,--_adipiscendae possessionis_,--of which the Roman law-books speak in connection with the two others. But, in reality, this interdict is not possessory: for he who wishes to acquire possession by this means does not possess, and has not possessed; and yet acquired possession is the condition of possessory interdicts." Why is not an action to acquire possession equally conceivable with an action to be reinstated in possession? When the Roman plebeians demanded a division of the conquered territory; when the proletaires of Lyons took for their motto, _Vivre en travaillant, ou mourir en combattant_ (to live working, or die fighting); when the most enlightened of the modern economists claim for every man the right to labor and to live,--they only propose this interdict, _adipiscendae possessionis_, which embarrasses M. Troplong so seriously. And what is my object in pleading against property, if not to obtain possession? How is it that M. Troplong--the legist, the orator, the philosopher--does not see that logically this interdict must be admitted, since it is the necessary complement of the two others, and the three united form an indivisible trinity,--to RECOVER, to MAINTAIN, to ACQUIRE? To break this series is to create a blank, destroy the natural synthesis of things, and follow the example of the geometrician who tried to conceive of a solid with only two dimensions. But it is not astonishing that M. Troplong rejects the third class of _actions possessoires_, when we consider that he rejects possession itself. He is so completely controlled by his prejudices in this respect, that he is unconsciously led, not to unite (that would be horrible in his eyes), but to identify the _action possessoire_ with the _action petitoire_. This could be easily proved, were it not too tedious to plunge into these metaphysical obscurities. As an interpreter of the law, M. Troplong is no more successful than as a philosopher. One specimen of his skill in this direction, and I am done with him:-- Code of Civil Procedure, Art. 23: "_Actions possessoires_ are only when commenced within the year of trouble by those who have held possession for at least a year by an irrevocable title." M. Troplong's comments:-- "Ought we to maintain--as Duparc, Poullain, and Lanjuinais would have us--the rule _spoliatus ante omnia restituendus_, when an individual, who is neither proprietor nor annual possessor, is expelled by a third party, who has no right to the estate? I think not. Art. 23 of the Code is general: it absolutely requires that the plaintiff in _actions possessoires_ shall have been in peaceable possession for a year at least. That is the invariable principle: it can in no case be modified. And why should it be set aside? The plaintiff had no seisin; he had no privileged possession; he had only a temporary occupancy, insufficient to warrant in his favor the presumption of property, which renders the annual possession so valuable. Well! this _ae facto_ occupancy he has lost; another is invested with it: possession is in the hands of this new-comer. Now, is not this a case for the application of the principle, _In_ _pari causa possesser potior habetur_? Should not the actual possessor be preferred to the evicted possessor? Can he not meet the complaint of his adversary by saying to him: 'Prove that you were an annual possessor before me, for you are the plaintiff. As far as I am concerned, it is not for me to tell you how I possess, nor how long I have possessed. _Possideo quia possideo_. I have no other reply, no other defence. When you have shown that your action is admissible, then we will see whether you are entitled to lift the veil which hides the origin of my possession.'" And this is what is honored with the name of jurisprudence and philosophy,--the restoration of force. What! when I have "moulded matter by my labor" [I quote M. Troplong]; when I have "deposited in it a portion of myself" [M. Troplong]; when I have "re-created it by my industry, and set upon it the seal of my intelligence" [M. Troplong],--on the ground that I have not possessed it for a year, a stranger may dispossess me, and the law offers me no protection! And if M. Troplong is my judge, M. Troplong will condemn me! And if I resist my adversary,--if, for this bit of mud which I may call MY FIELD, and of which they wish to rob me, a war breaks out between the two competitors,--the legislator will gravely wait until the stronger, having killed the other, has had possession for a year! No, no, Monsieur Troplong! you do not understand the words of the law; for I prefer to call in question your intelligence rather than the justice of the legislator. You are mistaken in your application of the principle, _In pari causa possessor potior habetur:_ the actuality of possession here refers to him who possessed at the time when the difficulty arose, not to him who possesses at the time of the complaint. And when the code prohibits the reception of _actions possessoires_, in cases where the possession is not of a year's duration, it simply means that if, before a year has elapsed, the holder relinquishes possession, and ceases actually to occupy _in propria persona_, he cannot avail himself of an _action possessoire_ against his successor. In a word, the code treats possession of less than a year as it ought to treat all possession, however long it has existed,--that is, the condition of property ought to be, not merely seisin for a year, but perpetual seisin. I will not pursue this analysis farther. When an author bases two volumes of quibbles on foundations so uncertain, it may be boldly declared that his work, whatever the amount of learning displayed in it, is a mess of nonsense unworthy a critic's attention. At this point, sir, I seem to hear you reproaching me for this conceited dogmatism, this lawless arrogance, which respects nothing, claims a monopoly of justice and good sense, and assumes to put in the pillory any one who dares to maintain an opinion contrary to its own. This fault, they tell me, more odious than any other in an author, was too prominent a characteristic of my First Memoir, and I should do well to correct it. It is important to the success of my defence, that I should vindicate myself from this reproach; and since, while perceiving in myself other faults of a different character, I still adhere in this particular to my disputatious style, it is right that I should give my reasons for my conduct. I act, not from inclination, but from necessity. I say, then, that I treat my authors as I do for two reasons: a REASON OF RIGHT, and a REASON OF INTENTION; both peremptory. 1. Reason of right. When I preach equality of fortunes, I do not advance an opinion more or less probable, a utopia more or less ingenious, an idea conceived within my brain by means of imagination only. I lay down an absolute truth, concerning which hesitation is impossible, modesty superfluous, and doubt ridiculous. But, do you ask, what assures me that that which I utter is true? What assures me, sir? The logical and metaphysical processes which I use, the correctness of which I have demonstrated by a priori reasoning; the fact that I possess an infallible method of investigation and verification with which my authors are unacquainted; and finally, the fact that for all matters relating to property and justice I have found a formula which explains all legislative variations, and furnishes a key for all problems. Now, is there so much as a shadow of method in M. Toullier, M. Troplong, and this swarm of insipid commentators, almost as devoid of reason and moral sense as the code itself? Do you give the name of method to an alphabetical, chronological, analogical, or merely nominal classification of subjects? Do you give the name of method to these lists of paragraphs gathered under an arbitrary head, these sophistical vagaries, this mass of contradictory quotations and opinions, this nauseous style, this spasmodic rhetoric, models of which are so common at the bar, though seldom found elsewhere? Do you take for philosophy this twaddle, this intolerable pettifoggery adorned with a few scholastic trimmings? No, no! a writer who respects himself, never will consent to enter the balance with these manipulators of law, misnamed JURISTS; and for my part I object to a comparison. 2. Reason of intention. As far as I am permitted to divulge this secret, I am a conspirator in an immense revolution, terrible to charlatans and despots, to all exploiters of the poor and credulous, to all salaried idlers, dealers in political panaceas and parables, tyrants in a word of thought and of opinion. I labor to stir up the reason of individuals to insurrection against the reason of authorities. According to the laws of the society of which I am a member, all the evils which afflict humanity arise from faith in external teachings and submission to authority. And not to go outside of our own century, is it not true, for instance, that France is plundered, scoffed at, and tyrannized over, because she speaks in masses, and not by heads? The French people are penned up in three or four flocks, receiving their signal from a chief, responding to the voice of a leader, and thinking just as he says. A certain journal, it is said, has fifty thousand subscribers; assuming six readers to every subscriber, we have three hundred thousand sheep browsing and bleating at the same cratch. Apply this calculation to the whole periodical press, and you find that, in our free and intelligent France, there are two millions of creatures receiving every morning from the journals spiritual pasturage. Two millions! In other words, the entire nation allows a score of little fellows to lead it by the nose. By no means, sir, do I deny to journalists talent, science, love of truth, patriotism, and what you please. They are very worthy and intelligent people, whom I undoubtedly should wish to resemble, had I the honor to know them. That of which I complain, and that which has made me a conspirator, is that, instead of enlightening us, these gentlemen command us, impose upon us articles of faith, and that without demonstration or verification. When, for example, I ask why these fortifications of Paris, which, in former times, under the influence of certain prejudices, and by means of a concurrence of extraordinary circumstances supposed for the sake of the argument to have existed, may perhaps have served to protect us, but which it is doubtful whether our descendants will ever use,--when I ask, I say, on what grounds they assimilate the future to a hypothetical past, they reply that M. Thiers, who has a great mind, has written upon this subject a report of admirable elegance and marvellous clearness. At this I become angry, and reply that M. Thiers does not know what he is talking about. Why, having wanted no detached forts seven years ago, do we want them to-day? "Oh! damn it," they say, "the difference is great; the first forts were too near to us; with these we cannot be bombarded." You cannot be bombarded; but you can be blockaded, and will be, if you stir. What! to obtain blockade forts from the Parisians, it has sufficed to prejudice them against bombardment forts! And they thought to outwit the government! Oh, the sovereignty of the people!... "Damn it! M. Thiers, who is wiser than you, says that it would be absurd to suppose a government making war upon citizens, and maintaining itself by force and in spite of the will of the people. That would be absurd!" Perhaps so: such a thing has happened more than once, and may happen again. Besides, when despotism is strong, it appears almost legitimate. However that may be, they lied in 1833, and they lie again in 1841,--those who threaten us with the bomb-shell. And then, if M. Thiers is so well assured of the intentions of the government, why does he not wish the forts to be built before the circuit is extended? Why this air of suspicion of the government, unless an intrigue has been planned between the government and M. Thiers? "Damn it! we do not wish to be again invaded. If Paris had been fortified in 1815, Napoleon would not have been conquered!" But I tell you that Napoleon was not conquered, but sold; and that if, in 1815, Paris had had fortifications, it would have been with them as with the thirty thousand men of Grouchy, who were misled during the battle. It is still easier to surrender forts than to lead soldiers. Would the selfish and the cowardly ever lack reasons for yielding to the enemy? "But do you not see that the absolutist courts are provoked at our fortifications?--a proof that they do not think as you do." You believe that; and, for my part, I believe that in reality they are quite at ease about the matter; and, if they appear to tease our ministers, they do so only to give the latter an opportunity to decline. The absolutist courts are always on better terms with our constitutional monarchy, than our monarchy with us. Does not M. Guizot say that France needs to be defended within as well as without? Within! against whom? Against France. O Parisians! it is but six months since you demanded war, and now you want only barricades. Why should the allies fear your doctrines, when you cannot even control yourselves?... How could you sustain a siege, when you weep over the absence of an actress? "But, finally, do you not understand that, by the rules of modern warfare, the capital of a country is always the objective point of its assailants? Suppose our army defeated on the Rhine, France invaded, and defenceless Paris falling into the hands of the enemy. It would be the death of the administrative power; without a head it could not live. The capital taken, the nation must submit. What do you say to that?" The reply is very simple. Why is society constituted in such a way that the destiny of the country depends upon the safety of the capital? Why, in case our territory be invaded and Paris besieged, cannot the legislative, executive, and military powers act outside of Paris? Why this localization of all the vital forces of France?... Do not cry out upon decentralization. This hackneyed reproach would discredit only your own intelligence and sincerity. It is not a question of decentralization; it is your political fetichism which I attack. Why should the national unity be attached to a certain place, to certain functionaries, to certain bayonets? Why should the Place Maubert and the Palace of the Tuileries be the palladium of France? Now let me make an hypothesis. Suppose it were written in the charter, "In case the country be again invaded, and Paris forced to surrender, the government being annihilated and the national assembly dissolved, the electoral colleges shall reassemble spontaneously and without other official notice, for the purpose of appointing new deputies, who shall organize a provisional government at Orleans. "If Orleans succumbs, the government shall reconstruct itself in the same way at Lyons; then at Bordeaux, then at Bayonne, until all France be captured or the enemy driven from the land. For the government may perish, but the nation never dies. The king, the peers, and the deputies massacred, VIVE LA FRANCE!" Do you not think that such an addition to the charter would be a better safeguard for the liberty and integrity of the country than walls and bastions around Paris? Well, then! do henceforth for administration, industry, science, literature, and art that which the charter ought to prescribe for the central government and common defence. Instead of endeavoring to render Paris impregnable, try rather to render the loss of Paris an insignificant matter. Instead of accumulating about one point academies, faculties, schools, and political, administrative, and judicial centres; instead of arresting intellectual development and weakening public spirit in the provinces by this fatal agglomeration,--can you not, without destroying unity, distribute social functions among places as well as among persons? Such a system--in allowing each province to participate in political power and action, and in balancing industry, intelligence, and strength in all parts of the country--would equally secure, against enemies at home and enemies abroad, the liberty of the people and the stability of the government. Discriminate, then, between the centralization of functions and the concentration of organs; between political unity and its material symbol. "Oh! that is plausible; but it is impossible!"--which means that the city of Paris does not intend to surrender its privileges, and that there it is still a question of property. Idle talk! The country, in a state of panic which has been cleverly worked upon, has asked for fortifications. I dare to affirm that it has abdicated its sovereignty. All parties are to blame for this suicide,--the conservatives, by their acquiescence in the plans of the government; the friends of the dynasty, because they wish no opposition to that which pleases them, and because a popular revolution would annihilate them; the democrats, because they hope to rule in their turn. [67] That which all rejoice at having obtained is a means of future repression. As for the defence of the country, they are not troubled about that. The idea of tyranny dwells in the minds of all, and brings together into one conspiracy all forms of selfishness. We wish the regeneration of society, but we subordinate this desire to our ideas and convenience. That our approaching marriage may take place, that our business may succeed, that our opinions may triumph, we postpone reform. Intolerance and selfishness lead us to put fetters upon liberty; and, because we cannot wish all that God wishes, we would, if it rested with us, stay the course of destiny rather than sacrifice our own interests and self-love. Is not this an instance where the words of Solomon apply,--"_L'iniquite a menti a elle-meme_"? It is said that on this question of the fortification of Paris the staff of "Le National" are not agreed. This would prove, if proof were needed, that a journal may blunder and falsify, without entitling any one to accuse its editors. A journal is a metaphysical being, for which no one is really responsible, and which owes its existence solely to mutual concessions. This idea ought to frighten those worthy citizens who, because they borrow their opinions from a journal, imagine that they belong to a political party, and who have not the faintest suspicion that they are really without a head. For this reason, sir, I have enlisted in a desperate war against every form of authority over the multitude. Advance sentinel of the proletariat, I cross bayonets with the celebrities of the day, as well as with spies and charlatans. Well, when I am fighting with an illustrious adversary, must I stop at the end of every phrase, like an orator in the tribune, to say "the learned author," "the eloquent writer," "the profound publicist," and a hundred other platitudes with which it is fashionable to mock people? These civilities seem to me no less insulting to the man attacked than dishonorable to the aggressor. But when, rebuking an author, I say to him, "Citizen, your doctrine is absurd, and, if to prove my assertion is an offence against you, I am guilty of it," immediately the listener opens his ears; he is all attention; and, if I do not succeed in convincing him, at least I give his thought an impulse, and set him the wholesome example of doubt and free examination. Then do not think, sir, that, in tripping up the philosophy of your very learned and very estimable confrere, M. Troplong, I fail to appreciate his talent as a writer (in my opinion, he has too much for a jurist); nor his knowledge, though it is too closely confined to the letter of the law, and the reading of old books. In these particulars, M. Troplong offends on the side of excess rather than deficiency. Further, do not believe that I am actuated by any personal animosity towards him, or that I have the slightest desire to wound his self-love. I know M. Troplong only by his "Treatise on Prescription," which I wish he had not written; and as for my critics, neither M. Troplong, nor any of those whose opinion I value, will ever read me. Once more, my only object is to prove, as far as I am able, to this unhappy French nation, that those who make the laws, as well as those who interpret them, are not infallible organs of general, impersonal, and absolute reason. I had resolved to submit to a systematic criticism the semi-official defence of the right of property recently put forth by M. Wolowski, your colleague at the Conservatory. With this view, I had commenced to collect the documents necessary for each of his lectures, but, soon perceiving that the ideas of the professor were incoherent, that his arguments contradicted each other, that one affirmation was sure to be overthrown by another, and that in M. Wolowski's lucubrations the good was always mingled with the bad, and being by nature a little suspicious, it suddenly occurred to me that M. Wolowski was an advocate of equality in disguise, thrown in spite of himself into the position in which the patriarch Jacob pictures one of his sons,--_inter duas clitellas_, between two stools, as the proverb says. In more parliamentary language, I saw clearly that M. Wolowski was placed between his profound convictions on the one hand and his official duties on the other, and that, in order to maintain his position, he had to assume a certain slant. Then I experienced great pain at seeing the reserve, the circumlocution, the figures, and the irony to which a professor of legislation, whose duty it is to teach dogmas with clearness and precision, was forced to resort; and I fell to cursing the society in which an honest man is not allowed to say frankly what he thinks. Never, sir, have you conceived of such torture: I seemed to be witnessing the martyrdom of a mind. I am going to give you an idea of these astonishing meetings, or rather of these scenes of sorrow. Monday, Nov. 20, 1840.--The professor declares, in brief,--1. That the right of property is not founded upon occupation, but upon the impress of man; 2. That every man has a natural and inalienable right to the use of matter. Now, if matter can be appropriated, and if, notwithstanding, all men retain an inalienable right to the use of this matter, what is property?--and if matter can be appropriated only by labor, how long is this appropriation to continue?--questions that will confuse and confound all jurists whatsoever. Then M. Wolowski cites his authorities. Great God! what witnesses he brings forward! First, M. Troplong, the great metaphysician, whom we have discussed; then, M. Louis Blanc, editor of the "Revue du Progres," who came near being tried by jury for publishing his "Organization of Labor," and who escaped from the clutches of the public prosecutor only by a juggler's trick; [68] Corinne,--I mean Madame de Stael,--who, in an ode, making a poetical comparison of the land with the waves, of the furrow of a plough with the wake of a vessel, says "that property exists only where man has left his trace," which makes property dependent upon the solidity of the elements; Rousseau, the apostle of liberty and equality, but who, according to M. Wolowski, attacked property only AS A JOKE, and in order to point a paradox; Robespierre, who prohibited a division of the land, because he regarded such a measure as a rejuvenescence of property, and who, while awaiting the definitive organization of the republic, placed all property in the care?? of the people,--that is, transferred the right of eminent domain from the individual to society; Babeuf, who wanted property for the nation, and communism for the citizens; M. Considerant, who favors a division of landed property into shares,--that is, who wishes to render property nominal and fictitious: the whole being intermingled with jokes and witticisms (intended undoubtedly to lead people away from the HORNETS' NESTS) at the expense of the adversaries of the right of property! November 26.--M. Wolowski supposes this objection: Land, like water, air, and light, is necessary to life, therefore it cannot be appropriated; and he replies: The importance of landed property diminishes as the power of industry increases. Good! this importance DIMINISHES, but it does not DISAPPEAR; and this, of itself, shows landed property to be illegitimate. Here M. Wolowski pretends to think that the opponents of property refer only to property in land, while they merely take it as a term of comparison; and, in showing with wonderful clearness the absurdity of the position in which he places them, he finds a way of drawing the attention of his hearers to another subject without being false to the truth which it is his office to contradict. "Property," says M. Wolowski, "is that which distinguishes man from the animals." That may be; but are we to regard this as a compliment or a satire? "Mahomet," says M. Wolowski, "decreed property." And so did Genghis Khan, and Tamerlane, and all the ravagers of nations. What sort of legislators were they? "Property has been in existence ever since the origin of the human race." Yes, and so has slavery, and despotism also; and likewise polygamy and idolatry. But what does this antiquity show? The members of the Council of the State--M. Portalis at their head--did not raise, in their discussion of the Code, the question of the legitimacy of property. "Their silence," says M. Wolowski, "is a precedent in favor of this right." I may regard this reply as personally addressed to me, since the observation belongs to me. I reply, "As long as an opinion is universally admitted, the universality of belief serves of itself as argument and proof. When this same opinion is attacked, the former faith proves nothing; we must resort to reason. Ignorance, however old and pardonable it may be, never outweighs reason." Property has its abuses, M. Wolowski confesses. "But," he says, "these abuses gradually disappear. To-day their cause is known. They all arise from a false theory of property. In principle, property is inviolable, but it can and must be checked and disciplined." Such are the conclusions of the professor. When one thus remains in the clouds, he need not fear to equivocate. Nevertheless, I would like him to define these ABUSES of property, to show their cause, to explain this true theory from which no abuse is to spring; in short, to tell me how, without destroying property, it can be governed for the greatest good of all. "Our civil code," says M. Wolowski, in speaking of this subject, "leaves much to be desired." I think it leaves every thing undone. Finally, M. Wolowski opposes, on the one hand, the concentration of capital, and the absorption which results therefrom; and, on the other, he objects to the extreme division of the land. Now I think that I have demonstrated in my First Memoir, that large accumulation and minute division are the first two terms of an economical trinity,--a THESIS and an ANTITHESIS. But, while M. Wolowski says nothing of the third term, the SYNTHESIS, and thus leaves the inference in suspense, I have shown that this third term is ASSOCIATION, which is the annihilation of property. November 30.--LITERARY PROPERTY. M. Wolowski grants that it is just to recognize the rights of talent (which is not in the least hostile to equality); but he seriously objects to perpetual and absolute property in the works of genius, to the profit of the authors' heirs. His main argument is, that society has a right of collective production over every creation of the mind. Now, it is precisely this principle of collective power that I developed in my "Inquiries into Property and Government," and on which I have established the complete edifice of a new social organization. M. Wolowski is, as far as I know, the first jurist who has made a legislative application of this economical law. Only, while I have extended the principle of collective power to every sort of product, M. Wolowski, more prudent than it is my nature to be, confines it to neutral ground. So, that that which I am bold enough to say of the whole, he is contented to affirm of a part, leaving the intelligent hearer to fill up the void for himself. However, his arguments are keen and close. One feels that the professor, finding himself more at ease with one aspect of property, has given the rein to his intellect, and is rushing on towards liberty. 1. Absolute literary property would hinder the activity of other men, and obstruct the development of humanity. It would be the death of progress; it would be suicide. What would have happened if the first inventions,--the plough, the level, the saw, &c.,--had been appropriated? Such is the first proposition of M. Wolowski. I reply: Absolute property in land and tools hinders human activity, and obstructs progress and the free development of man. What happened in Rome, and in all the ancient nations? What occurred in the middle ages? What do we see to-day in England, in consequence of absolute property in the sources of production? The suicide of humanity. 2. Real and personal property is in harmony with the social interest. In consequence of literary property, social and individual interests are perpetually in conflict. The statement of this proposition contains a rhetorical figure, common with those who do not enjoy full and complete liberty of speech. This figure is the _anti-phrasis_ or _contre-verite_. It consists, according to Dumarsais and the best humanists, in saying one thing while meaning another. M. Wolowski's proposition, naturally expressed, would read as follows: "Just as real and personal property is essentially hostile to society, so, in consequence of literary property, social and individual interests are perpetually in conflict." 3. M. de Montalembert, in the Chamber of Peers, vehemently protested against the assimilation of authors to inventors of machinery; an assimilation which he claimed to be injurious to the former. M. Wolowski replies, that the rights of authors, without machinery, would be nil; that, without paper-mills, type foundries, and printing-offices, there could be no sale of verse and prose; that many a mechanical invention,--the compass, for instance, the telescope, or the steam-engine,--is quite as valuable as a book. Prior to M. Montalembert, M. Charles Comte had laughed at the inference in favor of mechanical inventions, which logical minds never fail to draw from the privileges granted to authors. "He," says M. Comte, "who first conceived and executed the idea of transforming a piece of wood into a pair of sabots, or an animal's hide into a pair of sandals, would thereby have acquired an exclusive right to make shoes for the human race!" Undoubtedly, under the system of property. For, in fact, this pair of sabots, over which you make so merry, is the creation of the shoemaker, the work of his genius, the expression of his thought; to him it is his poem, quite as much as "Le Roi s'amuse," is M. Victor Hugo's drama. Justice for all alike. If you refuse a patent to a perfecter of boots, refuse also a privilege to a maker of rhymes. 4. That which gives importance to a book is a fact external to the author and his work. Without the intelligence of society, without its development, and a certain community of ideas, passions, and interests between it and the authors, the works of the latter would be worth nothing. The exchangeable value of a book is due even more to the SOCIAL CONDITION than to the talent displayed in it. Indeed, it seems as if I were copying my own words. This proposition of M. Wolowski contains a special expression of a general and absolute idea, one of the strongest and most conclusive against the right of property. Why do artists, like mechanics, find the means to live? Because society has made the fine arts, like the rudest industries, objects of consumption and exchange, governed consequently by all the laws of commerce and political economy. Now, the first of these laws is the equipoise of functions; that is, the equality of associates. 5. M. Wolowski indulges in sarcasm against the petitioners for literary property. "There are authors," he says, "who crave the privileges of authors, and who for that purpose point out the power of the melodrama. They speak of the niece of Corneille, begging at the door of a theatre which the works of her uncle had enriched.... To satisfy the avarice of literary people, it would be necessary to create literary majorats, and make a whole code of exceptions." I like this virtuous irony. But M. Wolowski has by no means exhausted the difficulties which the question involves. And first, is it just that MM. Cousin, Guizot, Villemain, Damiron, and company, paid by the State for delivering lectures, should be paid a second time through the booksellers?--that I, who have the right to report their lectures, should not have the right to print them? Is it just that MM. Noel and Chapsal, overseers of the University, should use their influence in selling their selections from literature to the youth whose studies they are instructed to superintend in consideration of a salary? And, if that is not just, is it not proper to refuse literary property to every author holding public offices, and receiving pensions or sinecures? Again, shall the privilege of the author extend to irreligious and immoral works, calculated only to corrupt the heart, and obscure the understanding? To grant this privilege is to sanction immorality by law; to refuse it is to censure the author. And since it is impossible, in the present imperfect state of society, to prevent all violations of the moral law, it will be necessary to open a license-office for books as well as morals. But, then, three-fourths of our literary people will be obliged to register; and, recognized thenceforth on their own declaration as PROSTITUTES, they will necessarily belong to the public. We pay toll to the prostitute; we do not endow her. Finally, shall plagiarism be classed with forgery? If you reply "Yes," you appropriate in advance all the subjects of which books treat; if you say "No," you leave the whole matter to the decision of the judge. Except in the case of a clandestine reprint, how will he distinguish forgery from quotation, imitation, plagiarism, or even coincidence? A savant spends two years in calculating a table of logarithms to nine or ten decimals. He prints it. A fortnight after his book is selling at half-price; it is impossible to tell whether this result is due to forgery or competition. What shall the court do? In case of doubt, shall it award the property to the first occupant? As well decide the question by lot. These, however, are trifling considerations; but do we see that, in granting a perpetual privilege to authors and their heirs, we really strike a fatal blow at their interests? We think to make booksellers dependent upon authors,--a delusion. The booksellers will unite against works, and their proprietors. Against works, by refusing to push their sale, by replacing them with poor imitations, by reproducing them in a hundred indirect ways; and no one knows how far the science of plagiarism, and skilful imitation may be carried. Against proprietors. Are we ignorant of the fact, that a demand for a dozen copies enables a bookseller to sell a thousand; that with an edition of five hundred he can supply a kingdom for thirty years? What will the poor authors do in the presence of this omnipotent union of booksellers? I will tell them what they will do. They will enter the employ of those whom they now treat as pirates; and, to secure an advantage, they will become wage laborers. A fit reward for ignoble avarice, and insatiable pride. [69] Contradictions of contradictions! "Genius is the great leveller of the world," cries M. de Lamartine; "then genius should be a proprietor. Literary property is the fortune of democracy." This unfortunate poet thinks himself profound when he is only puffed up. His eloquence consists solely in coupling ideas which clash with each other: ROUND SQUARE, DARK SUN, FALLEN ANGEL, PRIEST and LOVE, THOUGHT and POETRY, GUNIUS {???}, and FORTUNE, LEVELING and PROPERTY. Let us tell him, in reply, that his mind is a dark luminary; that each of his discourses is a disordered harmony; and that all his successes, whether in verse or prose, are due to the use of the extraordinary in the treatment of the most ordinary subjects. "Le National," in reply to the report of M. Lamartine, endeavors to prove that literary property is of quite a different nature from landed property; as if the nature of the right of property depended on the object to which it is applied, and not on the mode of its exercise and the condition of its existence. But the main object of "Le National" is to please a class of proprietors whom an extension of the right of property vexes: that is why "Le National" opposes literary property. Will it tell us, once for all, whether it is for equality or against it? 6. OBJECTION.--Property in occupied land passes to the heirs of the occupant. "Why," say the authors, "should not the work of genius pass in like manner to the heirs of the man of genius?" M. Wolowski's reply: "Because the labor of the first occupant is continued by his heirs, while the heirs of an author neither change nor add to his works. In landed property, the continuance of labor explains the continuance of the right." Yes, when the labor is continued; but if the labor is not continued, the right ceases. Thus is the right of possession, founded on personal labor, recognized by M. Wolowski. M. Wolowski decides in favor of granting to authors property in their works for a certain number of years, dating from the day of their first publication. The succeeding lectures on patents on inventions were no less instructive, although intermingled with shocking contradictions inserted with a view to make the useful truths more palatable. The necessity for brevity compels me to terminate this examination here, not without regret. Thus, of two eclectic jurists, who attempt a defence of property, one is entangled in a set of dogmas without principle or method, and is constantly talking nonsense; and the other designedly abandons the cause of property, in order to present under the same name the theory of individual possession. Was I wrong in claiming that confusion reigned among legists, and ought I to be legally prosecuted for having said that their science henceforth stood convicted of falsehood, its glory eclipsed? The ordinary resources of the law no longer sufficing, philosophy, political economy, and the framers of systems have been consulted. All the oracles appealed to have been discouraging. The philosophers are no clearer to-day than at the time of the eclectic efflorescence; nevertheless, through their mystical apothegms, we can distinguish the words PROGRESS, UNITY, ASSOCIATION, SOLIDARITY, FRATERNITY, which are certainly not reassuring to proprietors. One of these philosophers, M. Pierre Leroux, has written two large books, in which he claims to show by all religious, legislative, and philosophical systems that, since men are responsible to each other, equality of conditions is the final law of society. It is true that this philosopher admits a kind of property; but as he leaves us to imagine what property would become in presence of equality, we may boldly class him with the opponents of the right of increase. I must here declare freely--in order that I may not be suspected of secret connivance, which is foreign to my nature--that M. Leroux has my full sympathy. Not that I am a believer in his quasi-Pythagorean philosophy (upon this subject I should have more than one observation to submit to him, provided a veteran covered with stripes would not despise the remarks of a conscript); not that I feel bound to this author by any special consideration for his opposition to property. In my opinion, M. Leroux could, and even ought to, state his position more explicitly and logically. But I like, I admire, in M. Leroux, the antagonist of our philosophical demigods, the demolisher of usurped reputations, the pitiless critic of every thing that is respected because of its antiquity. Such is the reason for my high esteem of M. Leroux; such would be the principle of the only literary association which, in this century of coteries, I should care to form. We need men who, like M. Leroux, call in question social principles,--not to diffuse doubt concerning them, but to make them doubly sure; men who excite the mind by bold negations, and make the conscience tremble by doctrines of annihilation. Where is the man who does not shudder on hearing M. Leroux exclaim, "There is neither a paradise nor a hell; the wicked will not be punished, nor the good rewarded. Mortals! cease to hope and fear; you revolve in a circle of appearances; humanity is an immortal tree, whose branches, withering one after another, feed with their debris the root which is always young!" Where is the man who, on hearing this desolate confession of faith, does not demand with terror, "Is it then true that I am only an aggregate of elements organized by an unknown force, an idea realized for a few moments, a form which passes and disappears? Is it true that my mind is only a harmony, and my soul a vortex? What is the ego? what is God? what is the sanction of society?" In former times, M. Leroux would have been regarded as a great culprit, worthy only (like Vanini) of death and universal execration. To-day, M. Leroux is fulfilling a mission of salvation, for which, whatever he may say, he will be rewarded. Like those gloomy invalids who are always talking of their approaching death, and who faint when the doctor's opinion confirms their pretence, our materialistic society is agitated and loses countenance while listening to this startling decree of the philosopher, "Thou shalt die!" Honor then to M. Leroux, who has revealed to us the cowardice of the Epicureans; to M. Leroux, who renders new philosophical solutions necessary! Honor to the anti-eclectic, to the apostle of equality! In his work on "Humanity," M. Leroux commences by positing the necessity of property: "You wish to abolish property; but do you not see that thereby you would annihilate man and even the name of man?... You wish to abolish property; but could you live without a body? I will not tell you that it is necessary to support this body;... I will tell you that this body is itself a species of property." In order clearly to understand the doctrine of M. Leroux, it must be borne in mind that there are three necessary and primitive forms of society,--communism, property, and that which to-day we properly call association. M. Leroux rejects in the first place communism, and combats it with all his might. Man is a personal and free being, and therefore needs a sphere of independence and individual activity. M. Leroux emphasizes this in adding: "You wish neither family, nor country, nor property; therefore no more fathers, no more sons, no more brothers. Here you are, related to no being in time, and therefore without a name; here you are, alone in the midst of a billion of men who to-day inhabit the earth. How do you expect me to distinguish you in space in the midst of this multitude?" If man is indistinguishable, he is nothing. Now, he can be distinguished, individualized, only through a devotion of certain things to his use,--such as his body, his faculties, and the tools which he uses. "Hence," says M. Leroux, "the necessity of appropriation;" in short, property. But property on what condition? Here M. Leroux, after having condemned communism, denounces in its turn the right of domain. His whole doctrine can be summed up in this single proposition,--_Man may be made by property a slave or a despot by turns_. That posited, if we ask M. Leroux to tell us under what system of property man will be neither a slave nor a despot, but free, just, and a citizen, M. Leroux replies in the third volume of his work on "Humanity:"-- "There are three ways of destroying man's communion with his fellows and with the universe:... 1. By separating man in time; 2. by separating him in space; 3. by dividing the land, or, in general terms, the instruments of production; by attaching men to things, by subordinating man to property, by making man a proprietor." This language, it must be confessed, savors a little too strongly of the metaphysical heights which the author frequents, and of the school of M. Cousin. Nevertheless, it can be seen, clearly enough it seems to me, that M. Leroux opposes the exclusive appropriation of the instruments of production; only he calls this non-appropriation of the instruments of production a NEW METHOD of establishing property, while I, in accordance with all precedent, call it a destruction of property. In fact, without the appropriation of instruments, property is nothing. "Hitherto, we have confined ourselves to pointing out and combating the despotic features of property, by considering property alone. We have failed to see that the despotism of property is a correlative of the division of the human race;... that property, instead of being organized in such a way as to facilitate the unlimited communion of man with his fellows and with the universe, has been, on the contrary, turned against this communion." Let us translate this into commercial phraseology. In order to destroy despotism and the inequality of conditions, men must cease from competition and must associate their interests. Let employer and employed (now enemies and rivals) become associates. Now, ask any manufacturer, merchant, or capitalist, whether he would consider himself a proprietor if he were to share his revenue and profits with this mass of wage-laborers whom it is proposed to make his associates. "Family, property, and country are finite things, which ought to be organized with a view to the infinite. For man is a finite being, who aspires to the infinite. To him, absolute finiteness is evil. The infinite is his aim, the indefinite his right." Few of my readers would understand these hierophantic words, were I to leave them unexplained. M. Leroux means, by this magnificent formula, that humanity is a single immense society, which, in its collective unity, represents the infinite; that every nation, every tribe, every commune, and every citizen are, in different degrees, fragments or finite members of the infinite society, the evil in which results solely from individualism and privilege,--in other words, from the subordination of the infinite to the finite; finally, that, to attain humanity's end and aim, each part has a right to an indefinitely progressive development. "All the evils which afflict the human race arise from caste. The family is a blessing; the family caste (the nobility) is an evil. Country is a blessing; the country caste (supreme, domineering, conquering) is an evil; property (individual possession) is a blessing; the property caste (the domain of property of Pothier, Toullier, Troplong, &c.) is an evil." Thus, according to M. Leroux, there is property and property,--the one good, the other bad. Now, as it is proper to call different things by different names, if we keep the name "property" for the former, we must call the latter robbery, rapine, brigandage. If, on the contrary, we reserve the name "property" for the latter, we must designate the former by the term POSSESSION, or some other equivalent; otherwise we should be troubled with an unpleasant synonymy. What a blessing it would be if philosophers, daring for once to say all that they think, would speak the language of ordinary mortals! Nations and rulers would derive much greater profit from their lectures, and, applying the same names to the same ideas, would come, perhaps, to understand each other. I boldly declare that, in regard to property, I hold no other opinion than that of M. Leroux; but, if I should adopt the style of the philosopher, and repeat after him, "Property is a blessing, but the property caste--the _statu quo_ of property--is an evil," I should be extolled as a genius by all the bachelors who write for the reviews. [70] If, on the contrary, I prefer the classic language of Rome and the civil code, and say accordingly, "Possession is a blessing, but property is robbery," immediately the aforesaid bachelors raise a hue and cry against the monster, and the judge threatens me. Oh, the power of language! "Le National," on the other hand, has laughed at M. Leroux and his ideas on property, charging him with TAUTOLOGY and CHILDISHNESS. "Le National" does not wish to understand. Is it necessary to remind this journal that it has no right to deride a dogmatic philosopher, because it is without a doctrine itself? From its foundation, "Le National" has been a nursery of intriguers and renegades. From time to time it takes care to warn its readers. Instead of lamenting over all its defections, the democratic sheet would do better to lay the blame on itself, and confess the shallowness of its theories. When will this organ of popular interests and the electoral reform cease to hire sceptics and spread doubt? I will wager, without going further, that M. Leon Durocher, the critic of M. Leroux, is an anonymous or pseudonymous editor of some bourgeois, or even aristocratic, journal. The economists, questioned in their turn, propose to associate capital and labor. You know, sir, what that means. If we follow out the doctrine, we soon find that it ends in an absorption of property, not by the community, but by a general and indissoluble commandite, so that the condition of the proprietor would differ from that of the workingman only in receiving larger wages. This system, with some peculiar additions and embellishments, is the idea of the phalanstery. But it is clear that, if inequality of conditions is one of the attributes of property, it is not the whole of property. That which makes property a DELIGHTFUL THING, as some philosopher (I know not who) has said, is the power to dispose at will, not only of one's own goods, but of their specific nature; to use them at pleasure; to confine and enclose them; to excommunicate mankind, as M. Pierre Leroux says; in short, to make such use of them as passion, interest, or even caprice, may suggest. What is the possession of money, a share in an agricultural or industrial enterprise, or a government-bond coupon, in comparison with the infinite charm of being master of one's house and grounds, under one's vine and fig-tree? "_Beati possidentes_!" says an author quoted by M. Troplong. Seriously, can that be applied to a man of income, who has no other possession under the sun than the market, and in his pocket his money? As well maintain that a trough is a coward. A nice method of reform! They never cease to condemn the thirst for gold, and the growing individualism of the century; and yet, most inconceivable of contradictions, they prepare to turn all kinds of property into one,--property in coin. I must say something further of a theory of property lately put forth with some ado: I mean the theory of M. Considerant. The Fourierists are not men who examine a doctrine in order to ascertain whether it conflicts with their system. On the contrary, it is their custom to exult and sing songs of triumph whenever an adversary passes without perceiving or noticing them. These gentlemen want direct refutations, in order that, if they are beaten, they may have, at least, the selfish consolation of having been spoken of. Well, let their wish be gratified. M. Considerant makes the most lofty pretensions to logic. His method of procedure is always that of MAJOR, MINOR, AND CONCLUSION. He would willingly write upon his hat, "_Argumentator in barbara_." But M. Considerant is too intelligent and quick-witted to be a good logician, as is proved by the fact that he appears to have taken the syllogism for logic. The syllogism, as everybody knows who is interested in philosophical curiosities, is the first and perpetual sophism of the human mind,--the favorite tool of falsehood, the stumbling-block of science, the advocate of crime. The syllogism has produced all the evils which the fabulist so eloquently condemned, and has done nothing good or useful: it is as devoid of truth as of justice. We might apply to it these words of Scripture: "_Celui qui met en lui sa confiance, perira_." Consequently, the best philosophers long since condemned it; so that now none but the enemies of reason wish to make the syllogism its weapon. M. Considerant, then, has built his theory of property upon a syllogism. Would he be disposed to stake the system of Fourier upon his arguments, as I am ready to risk the whole doctrine of equality upon my refutation of that system? Such a duel would be quite in keeping with the warlike and chivalric tastes of M. Considerant, and the public would profit by it; for, one of the two adversaries falling, no more would be said about him, and there would be one grumbler less in the world. The theory of M. Considerant has this remarkable feature, that, in attempting to satisfy at the same time the claims of both laborers and proprietors, it infringes alike upon the rights of the former and the privileges of the latter. In the first place, the author lays it down as a principle: "1. That the use of the land belongs to each member of the race; that it is a natural and imprescriptible right, similar in all respects to the right to the air and the sunshine. 2. That the right to labor is equally fundamental, natural, and imprescriptible." I have shown that the recognition of this double right would be the death of property. I denounce M. Considerant to the proprietors! But M. Considerant maintains that the right to labor creates the right of property, and this is the way he reasons:-- Major Premise.--"Every man legitimately possesses the thing which his labor, his skill,--or, in more general terms, his action,--has created." To which M. Considerant adds, by way of comment: "Indeed, the land not having been created by man, it follows from the fundamental principle of property, that the land, being given to the race in common, can in no wise be the exclusive and legitimate property of such and such individuals, who were not the creators of this value." If I am not mistaken, there is no one to whom this proposition, at first sight and in its entirety, does not seem utterly irrefutable. Reader, distrust the syllogism. First, I observe that the words LEGITIMATELY POSSESSES signify to the author's mind is _LEGITIMATE PROPRIETOR;_ otherwise the argument, being intended to prove the legitimacy of property, would have no meaning. I might here raise the question of the difference between property and possession, and call upon M. Considerant, before going further, to define the one and the other; but I pass on. This first proposition is doubly false. 1. In that it asserts the act of CREATION to be the only basis of property. 2. In that it regards this act as sufficient in all cases to authorize the right of property. And, in the first place, if man may be proprietor of the game which he does not create, but which he KILLS; of the fruits which he does not create, but which he GATHERS; of the vegetables which he does not create, but which he PLANTS; of the animals which he does not create, but which he REARS,--it is conceivable that men may in like manner become proprietors of the land which they do not create, but which they clear and fertilize. The act of creation, then, is not NECESSARY to the acquisition of the right of property. I say further, that this act alone is not always sufficient, and I prove it by the second premise of M. Considerant:-- Minor Premise.--"Suppose that on an isolated island, on the soil of a nation, or over the whole face of the earth (the extent of the scene of action does not affect our judgment of the facts), a generation of human beings devotes itself for the first time to industry, agriculture, manufactures, &c. This generation, by its labor, intelligence, and activity, creates products, develops values which did not exist on the uncultivated land. Is it not perfectly clear that the property of this industrious generation will stand on a basis of right, if the value or wealth produced by the activity of all be distributed among the producers, according to each one's assistance in the creation of the general wealth? That is unquestionable." That is quite questionable. For this value or wealth, PRODUCED BY THE ACTIVITY OF ALL, is by the very fact of its creation COLLECTIVE wealth, the use of which, like that of the land, may be divided, but which as property remains UNDIVIDED. And why this undivided ownership? Because the society which creates is itself indivisible,--a permanent unit, incapable of reduction to fractions. And it is this unity of society which makes the land common property, and which, as M. Considerant says, renders its use imprescriptible in the case of every individual. Suppose, indeed, that at a given time the soil should be equally divided; the very next moment this division, if it allowed the right of property, would become illegitimate. Should there be the slightest irregularity in the method of transfer, men, members of society, imprescriptible possessors of the land, might be deprived at one blow of property, possession, and the means of production. In short, property in capital is indivisible, and consequently inalienable, not necessarily when the capital is UNCREATED, but when it is COMMON or COLLECTIVE. I confirm this theory against M. Considerant, by the third term of his syllogism:-- Conclusion.--"The results of the labor performed by this generation are divisible into two classes, between which it is important clearly to distinguish. The first class includes the products of the soil which belong to this first generation in its usufructuary capacity, augmented, improved and refined by its labor and industry. These products consist either of objects of consumption or instruments of labor. It is clear that these products are the legitimate property of those who have created them by their activity.... Second class.--Not only has this generation created the products just mentioned (objects of consumption and instruments of labor), but it has also added to the original value of the soil by cultivation, by the erection of buildings, by all the labor producing permanent results, which it has performed. This additional value evidently constitutes a product--a value created by the activity of the first generation; and if, BY ANY MEANS WHATEVER, the ownership of this value be distributed among the members of society equitably,--that is, in proportion to the labor which each has performed,--each will legitimately possess the portion which he receives. He may then dispose of this legitimate and private property as he sees fit,--exchange it, give it away, or transfer it; and no other individual, or collection of other individuals,--that is, society,--can lay any claim to these values." Thus, by the distribution of collective capital, to the use of which each associate, either in his own right or in right of his authors, has an imprescriptible and undivided title, there will be in the phalanstery, as in the France of 1841, the poor and the rich; some men who, to live in luxury, have only, as Figaro says, to take the trouble to be born, and others for whom the fortune of life is but an opportunity for long-continued poverty; idlers with large incomes, and workers whose fortune is always in the future; some privileged by birth and caste, and others pariahs whose sole civil and political rights are THE RIGHT TO LABOR, AND THE RIGHT TO LAND. For we must not be deceived; in the phalanstery every thing will be as it is to-day, an object of property,--machines, inventions, thought, books, the products of art, of agriculture, and of industry; animals, houses, fences, vineyards, pastures, forests, fields,--every thing, in short, except the UNCULTIVATED LAND. Now, would you like to know what uncultivated land is worth, according to the advocates of property? "A square league hardly suffices for the support of a savage," says M. Charles Comte. Estimating the wretched subsistence of this savage at three hundred francs per year, we find that the square league necessary to his life is, relatively to him, faithfully represented by a rent of fifteen francs. In France there are twenty-eight thousand square leagues, the total rent of which, by this estimate, would be four hundred and twenty thousand francs, which, when divided among nearly thirty-four millions of people, would give each an INCOME OF A CENTIME AND A QUARTER. That is the new right which the great genius of Fourier has invented IN BEHALF OF THE FRENCH PEOPLE, and with which his first disciple hopes to reform the world. I denounce M. Considerant to the proletariat! If the theory of M. Considerant would at least really guarantee this property which he cherishes so jealously, I might pardon him the flaws in his syllogism, certainly the best one he ever made in his life. But, no: that which M. Considerant takes for property is only a privilege of extra pay. In Fourier's system, neither the created capital nor the increased value of the soil are divided and appropriated in any effective manner: the instruments of labor, whether created or not, remain in the hands of the phalanx; the pretended proprietor can touch only the income. He is permitted neither to realize his share of the stock, nor to possess it exclusively, nor to administer it, whatever it be. The cashier throws him his dividend; and then, proprietor, eat the whole if you can! The system of Fourier would not suit the proprietors, since it takes away the most delightful feature of property,--the free disposition of one's goods. It would please the communists no better, since it involves unequal conditions. It is repugnant to the friends of free association and equality, in consequence of its tendency to wipe out human character and individuality by suppressing possession, family, and country,--the threefold expression of the human personality. Of all our active publicists, none seem to me more fertile in resources, richer in imagination, more luxuriant and varied in style, than M. Considerant. Nevertheless, I doubt if he will undertake to reestablish his theory of property. If he has this courage, this is what I would say to him: "Before writing your reply, consider well your plan of action; do not scour the country; have recourse to none of your ordinary expedients; no complaints of civilization; no sarcasms upon equality; no glorification of the phalanstery. Leave Fourier and the departed in peace, and endeavor only to re-adjust the pieces of your syllogism. To this end, you ought, first, to analyze closely each proposition of your adversary; second, to show the error, either by a direct refutation, or by proving the converse; third, to oppose argument to argument, so that, objection and reply meeting face to face, the stronger may break down the weaker, and shiver it to atoms. By that method only can you boast of having conquered, and compel me to regard you as an honest reasoner, and a good artillery-man." I should have no excuse for tarrying longer with these phalansterian crotchets, if the obligation which I have imposed upon myself of making a clean sweep, and the necessity of vindicating my dignity as a writer, did not prevent me from passing in silence the reproach uttered against me by a correspondent of "La Phalange." "We have seen but lately," says this journalist, [71] "that M. Proudhon, enthusiast as he has been for the science created by Fourier, is, or will be, an enthusiast for any thing else whatsoever." If ever sectarians had the right to reproach another for changes in his beliefs, this right certainly does not belong to the disciples of Fourier, who are always so eager to administer the phalansterian baptism to the deserters of all parties. But why regard it as a crime, if they are sincere? Of what consequence is the constancy or inconstancy of an individual to the truth which is always the same? It is better to enlighten men's minds than to teach them to be obstinate in their prejudices. Do we not know that man is frail and fickle, that his heart is full of delusions, and that his lips are a distillery of falsehood? _Omnis homo meudax_. Whether we will or no, we all serve for a time as instruments of this truth, whose kingdom comes every day. God alone is immutable, because he is eternal. That is the reply which, as a general rule, an honest man is entitled always to make, and which I ought perhaps to be content to offer as an excuse; for I am no better than my fathers. But, in a century of doubt and apostasy like ours, when it is of importance to set the small and the weak an example of strength and honesty of utterance, I must not suffer my character as a public assailant of property to be dishonored. I must render an account of my old opinions. Examining myself, therefore, upon this charge of Fourierism, and endeavoring to refresh my memory, I find that, having been connected with the Fourierists in my studies and my friendships, it is possible that, without knowing it, I have been one of Fourier's partisans. Jerome Lalande placed Napoleon and Jesus Christ in his catalogue of atheists. The Fourierists resemble this astronomer: if a man happens to find fault with the existing civilization, and to admit the truth of a few of their criticisms, they straightway enlist him, willy-nilly, in their school. Nevertheless, I do not deny that I have been a Fourierist; for, since they say it, of course it may be so. But, sir, that of which my ex-associates are ignorant, and which doubtless will astonish you, is that I have been many other things,--in religion, by turns a Protestant, a Papist, an Arian and Semi-Arian, a Manichean, a Gnostic, an Adamite even and a Pre-Adamite, a Sceptic, a Pelagian, a Socinian, an Anti-Trinitarian, and a Neo-Christian; [72] in philosophy and politics, an Idealist, a Pantheist, a Platonist, a Cartesian, an Eclectic (that is, a sort of _juste-milieu_), a Monarchist, an Aristocrat, a Constitutionalist, a follower of Babeuf, and a Communist. I have wandered through a whole encyclopaedia of systems. Do you think it surprising, sir, that, among them all, I was for a short time a Fourierist? For my part, I am not at all surprised, although at present I have no recollection of it. One thing is sure,--that my superstition and credulity reached their height at the very period of my life which my critics reproachfully assign as the date of my Fourieristic beliefs. Now I hold quite other views. My mind no longer admits that which is demonstrated by syllogisms, analogies, or metaphors, which are the methods of the phalanstery, but demands a process of generalization and induction which excludes error. Of my past OPINIONSS I retain absolutely none. I have acquired some KNOWLEDGE. I no longer BELIEVE. I either KNOW, or am IGNORANT. In a word, in seeking for the reason of things, I saw that I was a RATIONALIST. Undoubtedly, it would have been simpler to begin where I have ended. But then, if such is the law of the human mind; if all society, for six thousand years, has done nothing but fall into error; if all mankind are still buried in the darkness of faith, deceived by their prejudices and passions, guided only by the instinct of their leaders; if my accusers, themselves, are not free from sectarianism (for they call themselves FOURIERISTS),--am I alone inexcusable for having, in my inner self, at the secret tribunal of my conscience, begun anew the journey of our poor humanity? I would by no means, then, deny my errors; but, sir, that which distinguishes me from those who rush into print is the fact that, though my thoughts have varied much, my writings do not vary. To-day, even, and on a multitude of questions, I am beset by a thousand extravagant and contradictory opinions; but my opinions I do not print, for the public has nothing to do with them. Before addressing my fellow-men, I wait until light breaks in upon the chaos of my ideas, in order that what I may say may be, not the whole truth (no man can know that), but nothing but the truth. This singular disposition of my mind to first identify itself with a system in order to better understand it, and then to reflect upon it in order to test its legitimacy, is the very thing which disgusted me with Fourier, and ruined in my esteem the societary school. To be a faithful Fourierist, in fact, one must abandon his reason and accept every thing from a master,--doctrine, interpretation, and application. M. Considerant, whose excessive intolerance anathematizes all who do not abide by his sovereign decisions, has no other conception of Fourierism. Has he not been appointed Fourier's vicar on earth and pope of a Church which, unfortunately for its apostles, will never be of this world? Passive belief is the theological virtue of all sectarians, especially of the Fourierists. Now, this is what happened to me. While trying to demonstrate by argument the religion of which I had become a follower in studying Fourier, I suddenly perceived that by reasoning I was becoming incredulous; that on each article of the creed my reason and my faith were at variance, and that my six weeks' labor was wholly lost. I saw that the Fourierists--in spite of their inexhaustible gabble, and their extravagant pretension to decide in all things--were neither savants, nor logicians, nor even believers; that they were SCIENTIFIC QUACKS, who were led more by their self-love than their conscience to labor for the triumph of their sect, and to whom all means were good that would reach that end. I then understood why to the Epicureans they promised women, wine, music, and a sea of luxury; to the rigorists, maintenance of marriage, purity of morals, and temperance; to laborers, high wages; to proprietors, large incomes; to philosophers, solutions the secret of which Fourier alone possessed; to priests, a costly religion and magnificent festivals; to savants, knowledge of an unimaginable nature; to each, indeed, that which he most desired. In the beginning, this seemed to me droll; in the end, I regarded it as the height of impudence. No, sir; no one yet knows of the foolishness and infamy which the phalansterian system contains. That is a subject which I mean to treat as soon as I have balanced my accounts with property. [73] It is rumored that the Fourierists think of leaving France and going to the new world to found a phalanstery. When a house threatens to fall, the rats scamper away; that is because they are rats. Men do better; they rebuild it. Not long since, the St. Simonians, despairing of their country which paid no heed to them, proudly shook the dust from their feet, and started for the Orient to fight the battle of free woman. Pride, wilfulness, mad selfishness! True charity, like true faith, does not worry, never despairs; it seeks neither its own glory, nor its interest, nor empire; it does every thing for all, speaks with indulgence to the reason and the will, and desires to conquer only by persuasion and sacrifice. Remain in France, Fourierists, if the progress of humanity is the only thing which you have at heart! There is more to do here than in the new world. Otherwise, go! you are nothing but liars and hypocrites! The foregoing statement by no means embraces all the political elements, all the opinions and tendencies, which threaten the future of property; but it ought to satisfy any one who knows how to classify facts, and to deduce their law or the idea which governs them. Existing society seems abandoned to the demon of falsehood and discord; and it is this sad sight which grieves so deeply many distinguished minds who lived too long in a former age to be able to understand ours. Now, while the short-sighted spectator begins to despair of humanity, and, distracted and cursing that of which he is ignorant, plunges into scepticism and fatalism, the true observer, certain of the spirit which governs the world, seeks to comprehend and fathom Providence. The memoir on "Property," published last year by the pensioner of the Academy of Besancon, is simply a study of this nature. The time has come for me to relate the history of this unlucky treatise, which has already caused me so much chagrin, and made me so unpopular; but which was on my part so involuntary and unpremeditated, that I would dare to affirm that there is not an economist, not a philosopher, not a jurist, who is not a hundred times guiltier than I. There is something so singular in the way in which I was led to attack property, that if, on hearing my sad story, you persist, sir, in your blame, I hope at least you will be forced to pity me. I never have pretended to be a great politician; far from that, I always have felt for controversies of a political nature the greatest aversion; and if, in my "Essay on Property," I have sometimes ridiculed our politicians, believe, sir, that I was governed much less by my pride in the little that I know, than by my vivid consciousness of their ignorance and excessive vanity. Relying more on Providence than on men; not suspecting at first that politics, like every other science, contained an absolute truth; agreeing equally well with Bossuet and Jean Jacques,--I accepted with resignation my share of human misery, and contented myself with praying to God for good deputies, upright ministers, and an honest king. By taste as well as by discretion and lack of confidence in my powers, I was slowly pursuing some commonplace studies in philology, mingled with a little metaphysics, when I suddenly fell upon the greatest problem that ever has occupied philosophical minds: I mean the criterion of certainty. Those of my readers who are unacquainted with the philosophical terminology will be glad to be told in a few words what this criterion is, which plays so great a part in my work. The criterion of certainty, according to the philosophers, will be, when discovered, an infallible method of establishing the truth of an opinion, a judgment, a theory, or a system, in nearly the same way as gold is recognized by the touchstone, as iron approaches the magnet, or, better still, as we verify a mathematical operation by applying the PROOF. TIME has hitherto served as a sort of criterion for society. Thus, the primitive men--having observed that they were not all equal in strength, beauty, and labor--judged, and rightly, that certain ones among them were called by nature to the performance of simple and common functions; but they concluded, and this is where their error lay, that these same individuals of duller intellect, more restricted genius, and weaker personality, were predestined to SERVE the others; that is, to labor while the latter rested, and to have no other will than theirs: and from this idea of a natural subordination among men sprang domesticity, which, voluntarily accepted at first, was imperceptibly converted into horrible slavery. Time, making this error more palpable, has brought about justice. Nations have learned at their own cost that the subjection of man to man is a false idea, an erroneous theory, pernicious alike to master and to slave. And yet such a social system has stood several thousand years, and has been defended by celebrated philosophers; even to-day, under somewhat mitigated forms, sophists of every description uphold and extol it. But experience is bringing it to an end. Time, then, is the criterion of societies; thus looked at, history is the demonstration of the errors of humanity by the argument _reductio ad absurdum_. Now, the criterion sought for by metaphysicians would have the advantage of discriminating at once between the true and the false in every opinion; so that in politics, religion, and morals, for example, the true and the useful being immediately recognized, we should no longer need to await the sorrowful experience of time. Evidently such a secret would be death to the sophists,--that cursed brood, who, under different names, excite the curiosity of nations, and, owing to the difficulty of separating the truth from the error in their artistically woven theories, lead them into fatal ventures, disturb their peace, and fill them with such extraordinary prejudice. Up to this day, the criterion of certainty remains a mystery; this is owing to the multitude of criteria that have been successively proposed. Some have taken for an absolute and definite criterion the testimony of the senses; others intuition; these evidence; those argument. M. Lamennais affirms that there is no other criterion than universal reason. Before him, M. de Bonald thought he had discovered it in language. Quite recently, M. Buchez has proposed morality; and, to harmonize them all, the eclectics have said that it was absurd to seek for an absolute criterion, since there were as many criteria as special orders of knowledge. Of all these hypotheses it may be observed, That the testimony of the senses is not a criterion, because the senses, relating us only to phenomena, furnish us with no ideas; that intuition needs external confirmation or objective certainty; that evidence requires proof, and argument verification; that universal reason has been wrong many a time; that language serves equally well to express the true or the false; that morality, like all the rest, needs demonstration and rule; and finally, that the eclectic idea is the least reasonable of all, since it is of no use to say that there are several criteria if we cannot point out one. I very much fear that it will be with the criterion as with the philosopher's stone; that it will finally be abandoned, not only as insolvable, but as chimerical. Consequently, I entertain no hopes of having found it; nevertheless, I am not sure that some one more skilful will not discover it. Be it as it may with regard to a criterion or criteria, there are methods of demonstration which, when applied to certain subjects, may lead to the discovery of unknown truths, bring to light relations hitherto unsuspected, and lift a paradox to the highest degree of certainty. In such a case, it is not by its novelty, nor even by its content, that a system should be judged, but by its method. The critic, then, should follow the example of the Supreme Court, which, in the cases which come before it, never examines the facts, but only the form of procedure. Now, what is the form of procedure? A method. I then looked to see what philosophy, in the absence of a criterion, had accomplished by the aid of special methods, and I must say that I could not discover--in spite of the loudly-proclaimed pretensions of some--that it had produced any thing of real value; and, at last, wearied with the philosophical twaddle, I resolved to make a new search for the criterion. I confess it, to my shame, this folly lasted for two years, and I am not yet entirely rid of it. It was like seeking a needle in a haystack. I might have learned Chinese or Arabic in the time that I have lost in considering and reconsidering syllogisms, in rising to the summit of an induction as to the top of a ladder, in inserting a proposition between the horns of a dilemma, in decomposing, distinguishing, separating, denying, affirming, admitting, as if I could pass abstractions through a sieve. I selected justice as the subject-matter of my experiments. Finally, after a thousand decompositions, recompositions, and double compositions, I found at the bottom of my analytical crucible, not the criterion of certainty, but a metaphysico-economico-political treatise, whose conclusions were such that I did not care to present them in a more artistic or, if you will, more intelligible form. The effect which this work produced upon all classes of minds gave me an idea of the spirit of our age, and did not cause me to regret the prudent and scientific obscurity of my style. How happens it that to-day I am obliged to defend my intentions, when my conduct bears the evident impress of such lofty morality? You have read my work, sir, and you know the gist of my tedious and scholastic lucubrations. Considering the revolutions of humanity, the vicissitudes of empires, the transformations of property, and the innumerable forms of justice and of right, I asked, "Are the evils which afflict us inherent in our condition as men, or do they arise only from an error? This inequality of fortunes which all admit to be the cause of society's embarrassments, is it, as some assert, the effect of Nature; or, in the division of the products of labor and the soil, may there not have been some error in calculation? Does each laborer receive all that is due him, and only that which is due him? In short, in the present conditions of labor, wages, and exchange, is no one wronged?--are the accounts well kept?--is the social balance accurate?" Then I commenced a most laborious investigation. It was necessary to arrange informal notes, to discuss contradictory titles, to reply to captious allegations, to refute absurd pretensions, and to describe fictitious debts, dishonest transactions, and fraudulent accounts. In order to triumph over quibblers, I had to deny the authority of custom, to examine the arguments of legislators, and to oppose science with science itself. Finally, all these operations completed, I had to give a judicial decision. I therefore declared, my hand upon my heart, before God and men, that the causes of social inequality are three in number: 1. GRATUITOUS APPROPRIATION OF COLLECTIVE WEALTH; 2. INEQUALITY IN EXCHANGE; 3. THE RIGHT OF PROFIT OR INCREASE. And since this threefold method of extortion is the very essence of the domain of property, I denied the legitimacy of property, and proclaimed its identity with robbery. That is my only offence. I have reasoned upon property; I have searched for the criterion of justice; I have demonstrated, not the possibility, but the necessity, of equality of fortunes; I have allowed myself no attack upon persons, no assault upon the government, of which I, more than any one else, am a provisional adherent. If I have sometimes used the word PROPRIETOR, I have used it as the abstract name of a metaphysical being, whose reality breathes in every individual,--not alone in a privileged few. Nevertheless, I acknowledge--for I wish my confession to be sincere--that the general tone of my book has been bitterly censured. They complain of an atmosphere of passion and invective unworthy of an honest man, and quite out of place in the treatment of so grave a subject. If this reproach is well founded (which it is impossible for me either to deny or admit, because in my own cause I cannot be judge),--if, I say, I deserve this charge, I can only humble myself and acknowledge myself guilty of an involuntary wrong; the only excuse that I could offer being of such a nature that it ought not to be communicated to the public. All that I can say is, that I understand better than any one how the anger which injustice causes may render an author harsh and violent in his criticisms. When, after twenty years of labor, a man still finds himself on the brink of starvation, and then suddenly discovers in an equivocation, an error in calculation, the cause of the evil which torments him in common with so many millions of his fellows, he can scarcely restrain a cry of sorrow and dismay. But, sir, though pride be offended by my rudeness, it is not to pride that I apologize, but to the proletaires, to the simple-minded, whom I perhaps have scandalized. My angry dialectics may have produced a bad effect on some peaceable minds. Some poor workingman--more affected by my sarcasm than by the strength of my arguments--may, perhaps, have concluded that property is the result of a perpetual Machiavelianism on the part of the governors against the governed,--a deplorable error of which my book itself is the best refutation. I devoted two chapters to showing how property springs from human personality and the comparison of individuals. Then I explained its perpetual limitation; and, following out the same idea, I predicted its approaching disappearance. How, then, could the editors of the "Revue Democratique," after having borrowed from me nearly the whole substance of their economical articles, dare to say: "The holders of the soil, and other productive capital, are more or less wilful accomplices in a vast robbery, they being the exclusive receivers and sharers of the stolen goods"? The proprietors WILFULLY guilty of the crime of robbery! Never did that homicidal phrase escape my pen; never did my heart conceive the frightful thought. Thank Heaven! I know not how to calumniate my kind; and I have too strong a desire to seek for the reason of things to be willing to believe in criminal conspiracies. The millionnaire is no more tainted by property than the journeyman who works for thirty sous per day. On both sides the error is equal, as well as the intention. The effect is also the same, though positive in the former, and negative in the latter. I accused property; I did not denounce the proprietors, which would have been absurd: and I am sorry that there are among us wills so perverse and minds so shattered that they care for only so much of the truth as will aid them in their evil designs. Such is the only regret which I feel on account of my indignation, which, though expressed perhaps too bitterly, was at least honest, and legitimate in its source. However, what did I do in this essay which I voluntarily submitted to the Academy of Moral Sciences? Seeking a fixed axiom amid social uncertainties, I traced back to one fundamental question all the secondary questions over which, at present, so keen and diversified a conflict is raging This question was the right of property. Then, comparing all existing theories with each other, and extracting from them that which is common to them all, I endeavored to discover that element in the idea of property which is necessary, immutable, and absolute; and asserted, after authentic verification, that this idea is reducible to that of INDIVIDUAL AND TRANSMISSIBLE POSSESSION; SUSCEPTIBLE OF EXCHANGE, BUT NOT OF ALIENATION; FOUNDED ON LABOR, AND NOT ON FICTITIOUS OCCUPANCY, OR IDLE CAPRICE. I said, further, that this idea was the result of our revolutionary movements,--the culminating point towards which all opinions, gradually divesting themselves of their contradictory elements, converge. And I tried to demonstrate this by the spirit of the laws, by political economy, by psychology and history. A Father of the Church, finishing a learned exposition of the Catholic doctrine, cried, in the enthusiasm of his faith, _"Domine, si error est, a te decepti sumus_ (if my religion is false, God is to blame)." I, as well as this theologian, can say, "If equality is a fable, God, through whom we act and think and are; God, who governs society by eternal laws, who rewards just nations, and punishes proprietors,--God alone is the author of evil; God has lied. The fault lies not with me." But, if I am mistaken in my inferences, I should be shown my error, and led out of it. It is surely worth the trouble, and I think I deserve this honor. There is no ground for proscription. For, in the words of that member of the Convention who did not like the guillotine, _to kill is not to reply_. Until then, I persist in regarding my work as useful, social, full of instruction for public officials,--worthy, in short, of reward and encouragement. For there is one truth of which I am profoundly convinced,--nations live by absolute ideas, not by approximate and partial conceptions; therefore, men are needed who define principles, or at least test them in the fire of controversy. Such is the law,--the idea first, the pure idea, the understanding of the laws of God, the theory: practice follows with slow steps, cautious, attentive to the succession of events; sure to seize, towards this eternal meridian, the indications of supreme reason. The co-operation of theory and practice produces in humanity the realization of order,--the absolute truth. [74] All of us, as long as we live, are called, each in proportion to his strength, to this sublime work. The only duty which it imposes upon us is to refrain from appropriating the truth to ourselves, either by concealing it, or by accommodating it to the temper of the century, or by using it for our own interests. This principle of conscience, so grand and so simple, has always been present in my thought. Consider, in fact, sir, that which I might have done, but did not wish to do. I reason on the most honorable hypothesis. What hindered me from concealing, for some years to come, the abstract theory of the equality of fortunes, and, at the same time, from criticising constitutions and codes; from showing the absolute and the contingent, the immutable and the ephemeral, the eternal and the transitory, in laws present and past; from constructing a new system of legislation, and establishing on a solid foundation this social edifice, ever destroyed and as often rebuilt? Might I not, taking up the definitions of casuists, have clearly shown the cause of their contradictions and uncertainties, and supplied, at the same time, the inadequacies of their conclusions? Might I not have confirmed this labor by a vast historical exposition, in which the principle of exclusion, and of the accumulation of property, the appropriation of collective wealth, and the radical vice in exchanges, would have figured as the constant causes of tyranny, war, and revolution? "It should have been done," you say. Do not doubt, sir, that such a task would have required more patience than genius. With the principles of social economy which I have analyzed, I would have had only to break the ground, and follow the furrow. The critic of laws finds nothing more difficult than to determine justice: the labor alone would have been longer. Oh, if I had pursued this glittering prospect, and, like the man of the burning bush, with inspired countenance and deep and solemn voice, had presented myself some day with new tables, there would have been found fools to admire, boobies to applaud, and cowards to offer me the dictatorship; for, in the way of popular infatuations, nothing is impossible. But, sir, after this monument of insolence and pride, what should I have deserved in your opinion, at the tribunal of God, and in the judgment of free men? Death, sir, and eternal reprobation! I therefore spoke the truth as soon as I saw it, waiting only long enough to give it proper expression. I pointed out error in order that each might reform himself, and render his labors more useful. I announced the existence of a new political element, in order that my associates in reform, developing it in concert, might arrive more promptly at that unity of principles which alone can assure to society a better day. I expected to receive, if not for my book, at least for my commendable conduct, a small republican ovation. And, behold! journalists denounce me, academicians curse me, political adventurers (great God!) think to make themselves tolerable by protesting that they are not like me! I give the formula by which the whole social edifice may be scientifically reconstructed, and the strongest minds reproach me for being able only to destroy. The rest despise me, because I am unknown. When the "Essay on Property" fell into the reformatory camp, some asked: "Who has spoken? Is it Arago? Is it Lamennais? Michel de Bourges or Garnier-Pages?" And when they heard the name of a new man: "We do not know him," they would reply. Thus, the monopoly of thought, property in reason, oppresses the proletariat as well as the _bourgeoisie_. The worship of the infamous prevails even on the steps of the tabernacle. But what am I saying? May evil befall me, if I blame the poor creatures! Oh! let us not despise those generous souls, who in the excitement of their patriotism are always prompt to identify the voice of their chiefs with the truth. Let us encourage rather their simple credulity, enlighten complacently and tenderly their precious sincerity, and reserve our shafts for those vain-glorious spirits who are always admiring their genius, and, in different tongues, caressing the people in order to govern them. These considerations alone oblige me to reply to the strange and superficial conclusions of the "Journal du Peuple" (issue of Oct. 11, 1840), on the question of property. I leave, therefore, the journalist to address myself only to his readers. I hope that the self-love of the writer will not be offended, if, in the presence of the masses, I ignore an individual. You say, proletaires of the "Peuple," "For the very reason that men and things exist, there always will be men who will possess things; nothing, therefore, can destroy property." In speaking thus, you unconsciously argue exactly after the manner of M. Cousin, who always reasons from _possession_ to PROPERTY. This coincidence, however, does not surprise me. M. Cousin is a philosopher of much mind, and you, proletaires, have still more. Certainly it is honorable, even for a philosopher, to be your companion in error. Originally, the word PROPERTY was synonymous with PROPER or INDIVIDUAL POSSESSION. It designated each individual's special right to the use of a thing. But when this right of use, inert (if I may say so) as it was with regard to the other usufructuaries, became active and paramount,--that is, when the usufructuary converted his right to personally use the thing into the right to use it by his neighbor's labor,--then property changed its nature, and its idea became complex. The legists knew this very well, but instead of opposing, as they ought, this accumulation of profits, they accepted and sanctioned the whole. And as the right of farm-rent necessarily implies the right of use,--in other words, as the right to cultivate land by the labor of a slave supposes one's power to cultivate it himself, according to the principle that the greater includes the less,--the name property was reserved to designate this double right, and that of possession was adopted to designate the right of use. Whence property came to be called the perfect right, the right of domain, the eminent right, the heroic or _quiritaire_ right,--in Latin, _jus perfectum, jus optimum, jus quiritarium, jus dominii_,--while possession became assimilated to farm-rent. Now, that individual possession exists of right, or, better, from natural necessity, all philosophers admit, and can easily e demonstrated; but when, in imitation of M. Cousin, we assume it to be the basis of the domain of property, we fall into the sophism called _sophisma amphiboliae vel ambiguitatis_, which consists in changing the meaning by a verbal equivocation. People often think themselves very profound, because, by the aid of expressions of extreme generality, they appear to rise to the height of absolute ideas, and thus deceive inexperienced minds; and, what is worse, this is commonly called EXAMINING ABSTRACTIONS. But the abstraction formed by the comparison of identical facts is one thing, while that which is deduced from different acceptations of the same term is quite another. The first gives the universal idea, the axiom, the law; the second indicates the order of generation of ideas. All our errors arise from the constant confusion of these two kinds of abstractions. In this particular, languages and philosophies are alike deficient. The less common an idiom is, and the more obscure its terms, the more prolific is it as a source of error: a philosopher is sophistical in proportion to his ignorance of any method of neutralizing this imperfection in language. If the art of correcting the errors of speech by scientific methods is ever discovered, then philosophy will have found its criterion of certainty. Now, then, the difference between property and possession being well established, and it being settled that the former, for the reasons which I have just given, must necessarily disappear, is it best, for the slight advantage of restoring an etymology, to retain the word PROPERTY? My opinion is that it would be very unwise to do so, and I will tell why. I quote from the "Journal du Peuple:"-- "To the legislative power belongs the right to regulate property, to prescribe the conditions of acquiring, possessing, and transmitting it... It cannot be denied that inheritance, assessment, commerce, industry, labor, and wages require the most important modifications." You wish, proletaires, to REGULATE PROPERTY; that is, you wish to destroy it and reduce it to the right of possession. For to regulate property without the consent of the proprietors is to deny the right OF DOMAIN; to associate employees with proprietors is to destroy the EMINENT right; to suppress or even reduce farm-rent, house-rent, revenue, and increase generally, is to annihilate PERFECT property. Why, then, while laboring with such laudable enthusiasm for the establishment of equality, should you retain an expression whose equivocal meaning will always be an obstacle in the way of your success? There you have the first reason--a wholly philosophical one--for rejecting not only the thing, but the name, property. Here now is the political, the highest reason. Every social revolution--M. Cousin will tell you--is effected only by the realization of an idea, either political, moral, or religious. When Alexander conquered Asia, his idea was to avenge Greek liberty against the insults of Oriental despotism; when Marius and Caesar overthrew the Roman patricians, their idea was to give bread to the people; when Christianity revolutionized the world, its idea was to emancipate mankind, and to substitute the worship of one God for the deities of Epicurus and Homer; when France rose in '89, her idea was liberty and equality before the law. There has been no true revolution, says M. Cousin, with out its idea; so that where an idea does not exist, or even fails of a formal expression, revolution is impossible. There are mobs, conspirators, rioters, regicides. There are no revolutionists. Society, devoid of ideas, twists and tosses about, and dies in the midst of its fruitless labor. Nevertheless, you all feel that a revolution is to come, and that you alone can accomplish it. What, then, is the idea which governs you, proletaires of the nineteenth century?--for really I cannot call you revolutionists. What do you think?--what do you believe?--what do you want? Be guarded in your reply. I have read faithfully your favorite journals, your most esteemed authors. I find everywhere only vain and puerile _entites_; nowhere do I discover an idea. I will explain the meaning of this word _entite_,--new, without doubt, to most of you. By _entite_ is generally understood a substance which the imagination grasps, but which is incognizable by the senses and the reason. Thus the SOPORIFIC POWER of opium, of which Sganarelle speaks, and the PECCANT HUMORS of ancient medicine, are _entites_. The _entite_ is the support of those who do not wish to confess their ignorance. It is incomprehensible; or, as St. Paul says, the _argumentum non apparentium_. In philosophy, the _entite_ is often only a repetition of words which add nothing to the thought. For example, when M. Pierre Leroux--who says so many excellent things, but who is too fond, in my opinion, of his Platonic formulas--assures us that the evils of humanity are due to our IGNORANCE OF LIFE, M. Pierre Leroux utters an _entite;_ for it is evident that if we are evil it is because we do not know how to live; but the knowledge of this fact is of no value to us. When M. Edgar Quinet declares that France suffers and declines because there is an ANTAGONISM of men and of interests, he declares an _entite;_ for the problem is to discover the cause of this antagonism. When M. Lamennais, in thunder tones, preaches self-sacrifice and love, he proclaims two _entites_; for we need to know on what conditions self-sacrifice and love can spring up and exist. So also, proletaires, when you talk of LIBERTY, PROGRESS, and THE SOVEREIGNTY OF THE PEOPLE, you make of these naturally intelligible things so many _entites_ in space: for, on the one hand, we need a new definition of liberty, since that of '89 no longer suffices; and, on the other, we must know in what direction society should proceed in order to be in progress. As for the sovereignty of the people, that is a grosser _entite_ than the sovereignty of reason; it is the _entite_ of _entites_. In fact, since sovereignty can no more be conceived of outside of the people than outside of reason, it remains to be ascertained who, among the people, shall exercise the sovereignty; and, among so many minds, which shall be the sovereigns. To say that the people should elect their representatives is to say that the people should recognize their sovereigns, which does not remove the difficulty at all. But suppose that, equal by birth, equal before the law, equal in personality, equal in social functions, you wish also to be equal in conditions. Suppose that, perceiving all the mutual relations of men, whether they produce or exchange or consume, to be relations of commutative justice,--in a word, social relations; suppose, I say, that, perceiving this, you wish to give this natural society a legal existence, and to establish the fact by law,-- I say that then you need a clear, positive, and exact expression of your whole idea,--that is, an expression which states at once the principle, the means, and the end; and I add that that expression is ASSOCIATION. And since the association of the human race dates, at least rightfully, from the beginning of the world, and has gradually established and perfected itself by successively divesting itself of its negative elements, slavery, nobility, despotism, aristocracy, and feudalism,--I say that, to eliminate the last negation of society, to formulate the last revolutionary idea, you must change your old rallying-cries, NO MORE ABSOLUTISM, NO MORE NOBILITY, NO MORE SLAVES! into that of NO MORE PROPERTY!... But I know what astonishes you, poor souls, blasted by the wind of poverty, and crushed by your patrons' pride: it is EQUALITY, whose consequences frighten you. How, you have said in your journal,--how can we "dream of a level which, being unnatural, is therefore unjust? How shall we pay the day's labor of a Cormenin or a Lamennais?" Plebeians, listen! When, after the battle of Salamis, the Athenians assembled to award the prizes for courage, after the ballots had been collected, it was found that each combatant had one vote for the first prize, and Themistocles all the votes for the second. The people of Minerva were crowned by their own hands. Truly heroic souls! all were worthy of the olive-branch, since all had ventured to claim it for themselves. Antiquity praised this sublime spirit. Learn, proletaires, to esteem yourselves, and to respect your dignity. You wish to be free, and you know not how to be citizens. Now, whoever says "citizens" necessarily says equals. If I should call myself Lamennais or Cormenin, and some journal, speaking of me, should burst forth with these hyperboles, INCOMPARABLE GENIUS, SUPERIOR MIND, CONSUMMATE VIRTUE, NOBLE CHARACTER, I should not like it, and should complain,--first, because such eulogies are never deserved; and, second, because they furnish a bad example. But I wish, in order to reconcile you to equality, to measure for you the greatest literary personage of our century. Do not accuse me of envy, proletaires, if I, a defender of equality, estimate at their proper value talents which are universally admired, and which I, better than any one, know how to recognize. A dwarf can always measure a giant: all that he needs is a yardstick. You have seen the pretentious announcements of "L'Esquisse d'une Philosophie," and you have admired the work on trust; for either you have not read it, or, if you have, you are incapable of judging it. Acquaint yourselves, then, with this speculation more brilliant than sound; and, while admiring the enthusiasm of the author, cease to pity those useful labors which only habit and the great number of the persons engaged in them render contemptible. I shall be brief; for, notwithstanding the importance of the subject and the genius of the author, what I have to say is of but little moment. M. Lamennais starts with the existence of God. How does he demonstrate it? By Cicero's argument,--that is, by the consent of the human race. There is nothing new in that. We have still to find out whether the belief of the human race is legitimate; or, as Kant says, whether our subjective certainty of the existence of God corresponds with the objective truth. This, however, does not trouble M. Lamennais. He says that, if the human race believes, it is because it has a reason for believing. Then, having pronounced the name of God, M. Lamennais sings a hymn; and that is his demonstration! This first hypothesis admitted, M. Lamennais follows it with a second; namely, that there are three persons in God. But, while Christianity teaches the dogma of the Trinity only on the authority of revelation, M. Lamennais pretends to arrive at it by the sole force of argument; and he does not perceive that his pretended demonstration is, from beginning to end, anthropomorphism,--that is, an ascription of the faculties of the human mind and the powers of nature to the Divine substance. New songs, new hymns! God and the Trinity thus DEMONSTRATED, the philosopher passes to the creation,--a third hypothesis, in which M. Lamennais, always eloquent, varied, and sublime, DEMONSTRATES that God made the world neither of nothing, nor of something, nor of himself; that he was free in creating, but that nevertheless he could not but create; that there is in matter a matter which is not matter; that the archetypal ideas of the world are separated from each other, in the Divine mind, by a division which is obscure and unintelligible, and yet substantial and real, which involves intelligibility, &c. We meet with like contradictions concerning the origin of evil. To explain this problem,--one of the profoundest in philosophy,--M. Lamennais at one time denies evil, at another makes God the author of evil, and at still another seeks outside of God a first cause which is not God,--an amalgam of _entites_ more or less incoherent, borrowed from Plato, Proclus, Spinoza, I might say even from all philosophers. Having thus established his trinity of hypotheses, M. Lamennais deduces therefrom, by a badly connected chain of analogies, his whole philosophy. And it is here especially that we notice the syncretism which is peculiar to him. The theory of M. Lamennais embraces all systems, and supports all opinions. Are you a materialist? Suppress, as useless _entites_, the three persons in God; then, starting directly from heat, light, and electro-magnetism,--which, according to the author, are the three original fluids, the three primary external manifestations of Will, Intelligence, and Love,--you have a materialistic and atheistic cosmogony. On the contrary, are you wedded to spiritualism? With the theory of the immateriality of the body, you are able to see everywhere nothing but spirits. Finally, if you incline to pantheism, you will be satisfied by M. Lamennais, who formally teaches that the world is not an EMANATION from Divinity,--which is pure pantheism,--but a FLOW of Divinity. I do not pretend, however, to deny that "L'Esquisse" contains some excellent things; but, by the author's declaration, these things are not original with him; it is the system which is his. That is undoubtedly the reason why M. Lamennais speaks so contemptuously of his predecessors in philosophy, and disdains to quote his originals. He thinks that, since "L'Esquisse" contains all true philosophy, the world will lose nothing when the names and works of the old philosophers perish. M. Lamennais, who renders glory to God in beautiful songs, does not know how as well to render justice to his fellows. His fatal fault is this appropriation of knowledge, which the theologians call the PHILOSOPHICAL SIN, or the SIN AGAINST THE HOLY GHOST--a sin which will not damn you, proletaires, nor me either. In short, "L'Esquisse," judged as a system, and divested of all which its author borrows from previous systems, is a commonplace work, whose method consists in constantly explaining the known by the unknown, and in giving entites for abstractions, and tautologies for proofs. Its whole theodicy is a work not of genius but of imagination, a patching up of neo-Platonic ideas. The psychological portion amounts to nothing, M. Lamennais openly ridiculing labors of this character, without which, however, metaphysics is impossible. The book, which treats of logic and its methods, is weak, vague, and shallow. Finally, we find in the physical and physiological speculations which M. Lamennais deduces from his trinitarian cosmogony grave errors, the preconceived design of accommodating facts to theory, and the substitution in almost every case of hypothesis for reality. The third volume on industry and art is the most interesting to read, and the best. It is true that M. Lamennais can boast of nothing but his style. As a philosopher, he has added not a single idea to those which existed before him. Why, then, this excessive mediocrity of M. Lamennais considered as a thinker, a mediocrity which disclosed itself at the time of the publication of the "Essai sur l'Indifference!"? It is because (remember this well, proletaires!) Nature makes no man truly complete, and because the development of certain faculties almost always excludes an equal development of the opposite faculties; it is because M. Lamennais is preeminently a poet, a man of feeling and sentiment. Look at his style,--exuberant, sonorous, picturesque, vehement, full of exaggeration and invective,--and hold it for certain that no man possessed of such a style was ever a true metaphysician. This wealth of expression and illustration, which everybody admires, becomes in M Lamennais the incurable cause of his philosophical impotence. His flow of language, and his sensitive nature misleading his imagination, he thinks that he is reasoning when he is only repeating himself, and readily takes a description for a logical deduction. Hence his horror of positive ideas, his feeble powers of analysis, his pronounced taste for indefinite analogies, verbal abstractions, hypothetical generalities, in short, all sorts of entites. Further, the entire life of M. Lamennais is conclusive proof of his anti-philosophical genius. Devout even to mysticism, an ardent ultramontane, an intolerant theocrat, he at first feels the double influence of the religious reaction and the literary theories which marked the beginning of this century, and falls back to the middle ages and Gregory VII.; then, suddenly becoming a progressive Christian and a democrat, he gradually leans towards rationalism, and finally falls into deism. At present, everybody waits at the trap-door. As for me, though I would not swear to it, I am inclined to think that M. Lamennais, already taken with scepticism, will die in a state of indifference. He owes to individual reason and methodical doubt this expiation of his early essays. It has been pretended that M. Lamennais, preaching now a theocracy, now universal democracy, has been always consistent; that, under different names, he has sought invariably one and the same thing,--unity. Pitiful excuse for an author surprised in the very act of contradiction! What would be thought of a man who, by turns a servant of despotism under Louis XVI, a demagogue with Robespierre, a courtier of the Emperor, a bigot during fifteen years of the Restoration, a conservative since 1830, should dare to say that he ever had wished for but one thing,--public order? Would he be regarded as any the less a renegade from all parties? Public order, unity, the world's welfare, social harmony, the union of the nations,--concerning each of these things there is no possible difference of opinion. Everybody wishes them; the character of the publicist depends only upon the means by which he proposes to arrive at them. But why look to M. Lamennais for a steadfastness of opinion, which he himself repudiates? Has he not said, "The mind has no law; that which I believe to-day, I did not believe yesterday; I do not know that I shall believe it to-morrow"? No; there is no real superiority among men, since all talents and capacities are combined never in one individual. This man has the power of thought, that one imagination and style, still another industrial and commercial capacity. By our very nature and education, we possess only special aptitudes which are limited and confined, and which become consequently more necessary as they gain in depth and strength. Capacities are to each other as functions and persons; who would dare to classify them in ranks? The finest genius is, by the laws of his existence and development, the most dependent upon the society which creates him. Who would dare to make a god of the glorious child? "It is not strength which makes the man," said a Hercules of the market-place to the admiring crowd; "it is character." That man, who had only his muscles, held force in contempt. The lesson is a good one, proletaires; we should profit by it. It is not talent (which is also a force), it is not knowledge, it is not beauty which makes the man. It is heart, courage, will, virtue. Now, if we are equal in that which makes us men, how can the accidental distribution of secondary faculties detract from our manhood? Remember that privilege is naturally and inevitably the lot of the weak; and do not be misled by the fame which accompanies certain talents whose greatest merit consists in their rarity, and a long and toilsome apprenticeship. It is easier for M. Lamennais to recite a philippic, or sing a humanitarian ode after the Platonic fashion, than to discover a single useful truth; it is easier for an economist to apply the laws of production and distribution than to write ten lines in the style of M. Lamennais; it is easier for both to speak than to act. You, then, who put your hands to the work, who alone truly create, why do you wish me to admit your inferiority? But, what am I saying? Yes, you are inferior, for you lack virtue and will! Ready for labor and for battle, you have, when liberty and equality are in question, neither courage nor character! In the preface to his pamphlet on "Le Pays et le Gouvernement," as well as in his defence before the jury, M. Lamennais frankly declared himself an advocate of property. Out of regard for the author and his misfortune, I shall abstain from characterizing this declaration, and from examining these two sorrowful performances. M. Lamennais seems to be only the tool of a quasi-radical party, which flatters him in order to use him, without respect for a glorious, but hence forth powerless, old age. What means this profession of faith? From the first number of "L'Avenir" to "L'Esquisse d'une Philosophie," M. Lamennais always favors equality, association, and even a sort of vague and indefinite communism. M. Lamennais, in recognizing the right of property, gives the lie to his past career, and renounces his most generous tendencies. Can it, then, be true that in this man, who has been too roughly treated, but who is also too easily flattered, strength of talent has already outlived strength of will? It is said that M. Lamennais has rejected the offers of several of his friends to try to procure for him a commutation of his sentence. M. Lamennais prefers to serve out his time. May not this affectation of a false stoicism come from the same source as his recognition of the right of property? The Huron, when taken prisoner, hurls insults and threats at his conqueror,--that is the heroism of the savage; the martyr prays for his executioners, and is willing to receive from them his life,--that is the heroism of the Christian. Why has the apostle of love become an apostle of anger and revenge? Has, then, the translator of "L'Imitation" forgotten that he who offends charity cannot honor virtue? Galileo, retracting on his knees before the tribunal of the inquisition his heresy in regard to the movement of the earth, and recovering at that price his liberty, seems to me a hundred times grander than M. Lamennais. What! if we suffer for truth and justice, must we, in retaliation, thrust our persecutors outside the pale of human society; and, when sentenced to an unjust punishment, must we decline exemption if it is offered to us, because it pleases a few base satellites to call it a pardon? Such is not the wisdom of Christianity. But I forgot that in the presence of M. Lamennais this name is no longer pronounced. May the prophet of "L'Avenir" be soon restored to liberty and his friends; but, above all, may he henceforth derive his inspiration only from his genius and his heart! O proletaires, proletaires! how long are you to be victimized by this spirit of revenge and implacable hatred which your false friends kindle, and which, perhaps, has done more harm to the development of reformatory ideas than the corruption, ignorance, and malice of the government? Believe me, at the present time everybody is to blame. In fact, in intention, or in example, all are found wanting; and you have no right to accuse any one. The king himself (God forgive me! I do not like to justify a king),--the king himself is, like his predecessors, only the personification of an idea, and an idea, proletaires, which possesses you yet. His greatest wrong consists in wishing for its complete realization, while you wish it realized only partially,--consequently, in being logical in his government; while you, in your complaints, are not at all so. You clamor for a second regicide. He that is without sin among you,--let him cast at the prince of property the first stone! How successful you would have been if, in order to influence men, you had appealed to the self-love of men,--if, in order to alter the constitution and the law, you had placed yourselves within the constitution and the law! Fifty thousand laws, they say, make up our political and civil codes. Of these fifty thousand laws, twenty-five thousand are for you, twenty-five thousand against you. Is it not clear that your duty is to oppose the former to the latter, and thus, by the argument of contradiction, drive privilege into its last ditch? This method of action is henceforth the only useful one, being the only moral and rational one. For my part, if I had the ear of this nation, to which I am attached by birth and predilection, with no intention of playing the leading part in the future republic, I would instruct the laboring masses to conquer property through institutions and judicial pleadings; to seek auxiliaries and accomplices in the highest ranks of society, and to ruin all privileged classes by taking advantage of their common desire for power and popularity. The petition for the electoral reform has already received two hundred thousand signatures, and the illustrious Arago threatens us with a million. Surely, that will be well done; but from this million of citizens, who are as willing to vote for an emperor as for equality, could we not select ten thousand signatures--I mean bona fide signatures--whose authors can read, write, cipher, and even think a little, and whom we could invite, after due perusal and verbal explanation, to sign such a petition as the following:-- "TO HIS EXCELLENCY THE MINISTER OF THE INTERIOR:-- "MONSIEUR LE MINISTRE,--On the day when a royal ordinance, decreeing the establishment of model national workshops, shall appear in the 'Moniteur,' the undersigned, to the number of TEN THOUSAND, will repair to the Palace of the Tuileries, and there, with all the power of their lungs, will shout, 'Long live Louis Philippe!' "On the day when the 'Moniteur' shall inform the public that this petition is refused, the undersigned, to the number of TEN THOUSAND, will say secretly in their hearts, 'Down with Louis Philippe!'" If I am not mistaken, such a petition would have some effect. [75] The pleasure of a popular ovation would be well worth the sacrifice of a few millions. They sow so much to reap unpopularity! Then, if the nation, its hopes of 1830 restored, should feel it its duty to keep its promise,--and it would keep it, for the word of the nation is, like that of God, sacred,--if, I say, the nation, reconciled by this act with the public-spirited monarchy, should bear to the foot of the throne its cheers and its vows, and should at that solemn moment choose me to speak in its name, the following would be the substance of my speech:-- "SIRE,--This is what the nation wishes to say to your Majesty:-- "O King! you see what it costs to gain the applause of the citizens. Would you like us henceforth to take for our motto: 'Let us help the King, the King will help us'? Do you wish the people to cry: 'THE KING AND THE FRENCH NATION'? Then abandon these grasping bankers, these quarrelsome lawyers, these miserable bourgeois, these infamous writers, these dishonored men. All these, Sire, hate you, and continue to support you only because they fear us. Finish the work of our kings; wipe out aristocracy and privilege; consult with these faithful proletaires, with the nation, which alone can honor a sovereign and sincerely shout, 'Long live the king!'" The rest of what I have to say, sir, is for you alone; others would not understand me. You are, I perceive, a republican as well as an economist, and your patriotism revolts at the very idea of addressing to the authorities a petition in which the government of Louis Philippe should be tacitly recognized. "National workshops! it were well to have such institutions established," you think; "but patriotic hearts never will accept them from an aristocratic ministry, nor by the courtesy of a king." Already, undoubtedly, your old prejudices have returned, and you now regard me only as a sophist, as ready to flatter the powers that be as to dishonor, by pushing them to an extreme, the principles of equality and universal fraternity. What shall I say to you?... That I should so lightly compromise the future of my theories, either this clever sophistry which is attributed to me must be at bottom a very trifling affair, or else my convictions must be so firm that they deprive me of free-will. But, not to insist further on the necessity of a compromise between the executive power and the people, it seems to me, sir, that, in doubting my patriotism, you reason very capriciously, and that your judgments are exceedingly rash. You, sir, ostensibly defending government and property, are allowed to be a republican, reformer, phalansterian, any thing you wish; I, on the contrary, demanding distinctly enough a slight reform in public economy, am foreordained a conservative, and likewise a friend of the dynasty. I cannot explain myself more clearly. So firm a believer am I in the philosophy of accomplished facts and the _statu quo_ of governmental forms that, instead of destroying that which exists and beginning over again the past, I prefer to render every thing legitimate by correcting it. It is true that the corrections which I propose, though respecting the form, tend to finally change the nature of the things corrected. Who denies it? But it is precisely that which constitutes my system of _statu quo_. I make no war upon symbols, figures, or phantoms. I respect scarecrows, and bow before bugbears. I ask, on the one hand, that property be left as it is, but that interest on all kinds of capital be gradually lowered and finally abolished; on the other hand, that the charter be maintained in its present shape, but that method be introduced into administration and politics. That is all. Nevertheless, submitting to all that is, though not satisfied with it, I endeavor to conform to the established order, and to render unto Caesar the things that are Caesar's. Is it thought, for instance, that I love property?... Very well; I am myself a proprietor and do homage to the right of increase, as is proved by the fact that I have creditors to whom I faithfully pay, every year, a large amount of interest. The same with politics. Since we are a monarchy, I would cry, "LONG LIVE THE KING," rather than suffer death; which does not prevent me, however, from demanding that the irremovable, inviolable, and hereditary representative of the nation shall act with the proletaires against the privileged classes; in a word, that the king shall become the leader of the radical party. Thereby we proletaires would gain every thing; and I am sure that, at this price, Louis Philippe might secure to his family the perpetual presidency of the republic. And this is why I think so. If there existed in France but one great functional inequality, the duty of the functionary being, from one end of the year to the other, to hold full court of savants, artists, soldiers, deputies, inspectors, &c., it is evident that the expenses of the presidency then would be the national expenses; and that, through the reversion of the civil list to the mass of consumers, the great inequality of which I speak would form an exact equation with the whole nation. Of this no economist needs a demonstration. Consequently, there would be no more fear of cliques, courtiers, and appanages, since no new inequality could be established. The king, as king, would have friends (unheard-of thing), but no family. His relatives or kinsmen,--_agnats et cognats_,--if they were fools, would be nothing to him; and in no case, with the exception of the heir apparent, would they have, even in court, more privileges than others. No more nepotism, no more favor, no more baseness. No one would go to court save when duty required, or when called by an honorable distinction; and as all conditions would be equal and all functions equally honored, there would be no other emulation than that of merit and virtue. I wish the king of the French could say without shame, "My brother the gardener, my sister-in-law the milk-maid, my son the prince-royal, and my son the blacksmith." His daughter might well be an artist. That would be beautiful, sir; that would be royal; no one but a buffoon could fail to understand it. In this way, I have come to think that the forms of royalty may be made to harmonize with the requirements of equality, and have given a monarchical form to my republican spirit. I have seen that France contains by no means as many democrats as is generally supposed, and I have compromised with the monarchy. I do not say, however, that, if France wanted a republic, I could not accommodate myself equally well, and perhaps better. By nature, I hate all signs of distinction, crosses of honor, gold lace, liveries, costumes, honorary titles, &c., and, above all, parades. If I had my way, no general should be distinguished from a soldier, nor a peer of France from a peasant. Why have I never taken part in a review? for I am happy to say, sir, that I am a national guard; I have nothing else in the world but that. Because the review is always held at a place which I do not like, and because they have fools for officers whom I am compelled to obey. You see,--and this is not the best of my history,--that, in spite of my conservative opinions, my life is a perpetual sacrifice to the republic. Nevertheless, I doubt if such simplicity would be agreeable to French vanity, to that inordinate love of distinction and flattery which makes our nation the most frivolous in the world. M. Lamartine, in his grand "Meditation on Bonaparte," calls the French A NATION OF BRUTUSES. We are merely a nation of Narcissuses. Previous to '89, we had the aristocracy of blood; then every bourgeois looked down upon the commonalty, and wished to be a nobleman. Afterwards, distinction was based on wealth, and the bourgeoisie jealous of the nobility, and proud of their money, used 1830 to promote, not liberty by any means, but the aristocracy of wealth. When, through the force of events, and the natural laws of society, for the development of which France offers such free play, equality shall be established in functions and fortunes, then the beaux and the belles, the savants and the artists, will form new classes. There is a universal and innate desire in this Gallic country for fame and glory. We must have distinctions, be they what they may,--nobility, wealth, talent, beauty, or dress. I suspect MM. Arage and Garnier-Pages of having aristocratic manners, and I picture to myself our great journalists, in their columns so friendly to the people, administering rough kicks to the compositors in their printing offices. "This man," once said "Le National" in speaking of Carrel, "whom we had proclaimed FIRST CONSUL!... Is it not true that the monarchical principle still lives in the hearts of our democrats, and that they want universal suffrage in order to make themselves kings? Since "Le National" prides itself on holding more fixed opinions than "Le Journal des Debats," I presume that, Armand Carrel being dead, M. Armand Marrast is now first consul, and M. Garnier-Pages second consul. In every thing the deputy must give way to the journalist. I do not speak of M. Arago, whom I believe to be, in spite of calumny, too learned for the consulship. Be it so. Though we have consuls, our position is not much altered. I am ready to yield my share of sovereignty to MM. Armand Marrast and Garnier-Pages, the appointed consuls, provided they will swear on entering upon the duties of their office, to abolish property and not be haughty. Forever promises! Forever oaths! Why should the people trust in tribunes, when kings perjure themselves? Alas! truth and honesty are no longer, as in the days of King John, in the mouth of princes. A whole senate has been convicted of felony, and, the interest of the governors always being, for some mysterious reason, opposed to the interest of the governed, parliaments follow each other while the nation dies of hunger. No, no! No more protectors, no more emperors, no more consuls. Better manage our affairs ourselves than through agents. Better associate our industries than beg from monopolies; and, since the republic cannot dispense with virtues, we should labor for our reform. This, therefore, is my line of conduct. I preach emancipation to the proletaires; association to the laborers; equality to the wealthy. I push forward the revolution by all means in my power,--the tongue, the pen, the press, by action, and example. My life is a continual apostleship. Yes, I am a reformer; I say it as I think it, in good faith, and that I may be no longer reproached for my vanity. I wish to convert the world. Very likely this fancy springs from an enthusiastic pride which may have turned to delirium; but it will be admitted at least that I have plenty of company, and that my madness is not monomania. At the present day, everybody wishes to be reckoned among the lunatics of Beranger. To say nothing of the Babeufs, the Marats, and the Robespierres, who swarm in our streets and workshops, all the great reformers of antiquity live again in the most illustrious personages of our time. One is Jesus Christ, another Moses, a third Mahomet; this is Orpheus, that Plato, or Pythagoras. Gregory VII., himself, has risen from the grave together with the evangelists and the apostles; and it may turn out that even I am that slave who, having escaped from his master's house, was forthwith made a bishop and a reformer by St. Paul. As for the virgins and holy women, they are expected daily; at present, we have only Aspasias and courtesans. Now, as in all diseases, the diagnostic varies according to the temperament, so my madness has its peculiar aspects and distinguishing characteristic. Reformers, as a general thing, are jealous of their role; they suffer no rivals, they want no partners; they have disciples, but no co-laborers. It is my desire, on the contrary, to communicate my enthusiasm, and to make it, as far as I can, epidemic. I wish that all were, like myself, reformers, in order that there might be no more sects; and that Christs, Anti-Christs, and false Christs might be forced to understand and agree with each other. Again, every reformer is a magician, or at least desires to become one. Thus Moses, Jesus Christ, and the apostles, proved their mission by miracles. Mahomet ridiculed miracles after having endeavored to perform them. Fourier, more cunning, promises us wonders when the globe shall be covered with phalansteries. For myself, I have as great a horror of miracles as of authorities, and aim only at logic. That is why I continually search after the criterion of certainty. I work for the reformation of ideas. Little matters it that they find me dry and austere. I mean to conquer by a bold struggle, or die in the attempt; and whoever shall come to the defence of property, I swear that I will force him to argue like M. Considerant, or philosophize like M. Troplong. Finally,--and it is here that I differ most from my compeers,--I do not believe it necessary, in order to reach equality, to turn every thing topsy-turvy. To maintain that nothing but an overturn can lead to reform is, in my judgment, to construct a syllogism, and to look for the truth in the regions of the unknown. Now, I am for generalization, induction, and progress. I regard general disappropriation as impossible: attacked from that point, the problem of universal association seems to me insolvable. Property is like the dragon which Hercules killed: to destroy it, it must be taken, not by the head, but by the tail,--that is, by profit and interest. I stop. I have said enough to satisfy any one who can read and understand. The surest way by which the government can baffle intrigues and break up parties is to take possession of science, and point out to the nation, at an already appreciable distance, the rising oriflamme of equality; to say to those politicians of the tribune and the press, for whose fruitless quarrels we pay so dearly, "You are rushing forward, blind as you are, to the abolition of property; but the government marches with its eyes open. You hasten the future by unprincipled and insincere controversy; but the government, which knows this future, leads you thither by a happy and peaceful transition. The present generation will not pass away before France, the guide and model of civilized nations, has regained her rank and legitimate influence." But, alas! the government itself,--who shall enlighten it? Who can induce it to accept this doctrine of equality, whose terrible but decisive formula the most generous minds hardly dare to acknowledge?... I feel my whole being tremble when I think that the testimony of three men--yes, of three men who make it their business to teach and define--would suffice to give full play to public opinion, to change beliefs, and to fix destinies. Will not the three men be found?... May we hope, or not? What must we think of those who govern us? In the world of sorrow in which the proletaire moves, and where nothing is known of the intentions of power, it must be said that despair prevails. But you, sir,--you, who by function belong to the official world; you, in whom the people recognize one of their noblest friends, and property its most prudent adversary,--what say you of our deputies, our ministers, our king? Do you believe that the authorities are friendly to us? Then let the government declare its position; let it print its profession of faith in equality, and I am dumb. Otherwise, I shall continue the war; and the more obstinacy and malice is shown, the oftener will I redouble my energy and audacity. I have said before, and I repeat it,--I have sworn, not on the dagger and the death's-head, amid the horrors of a catacomb, and in the presence of men besmeared with blood; but I have sworn on my conscience to pursue property, to grant it neither peace nor truce, until I see it everywhere execrated. I have not yet published half the things that I have to say concerning the right of domain, nor the best things. Let the knights of property, if there are any who fight otherwise than by retreating, be prepared every day for a new demonstration and accusation; let them enter the arena armed with reason and knowledge, not wrapped up in sophisms, for justice will be done. "To become enlightened, we must have liberty. That alone suffices; but it must be the liberty to use the reason in regard to all public matters. "And yet we hear on every hand authorities of all kinds and degrees crying: 'Do not reason!' "If a distinction is wanted, here is one:-- "The PUBLIC use of the reason always should be free, but the PRIVATE use ought always to be rigidly restricted. By public use, I mean the scientific, literary use; by private, that which may be taken advantage of by civil officials and public functionaries. Since the governmental machinery must be kept in motion, in order to preserve unity and attain our object, we must not reason; we must obey. But the same individual who is bound, from this point of view, to passive obedience, has the right to speak in his capacity of citizen and scholar. He can make an appeal to the public, submit to it his observations on events which occur around him and in the ranks above him, taking care, however, to avoid offences which are punishable. "Reason, then, as much as you like; only, obey."--Kant: Fragment on the Liberty of Thought and of the Press. Tissot's Translation. These words of the great philosopher outline for me my duty. I have delayed the reprint of the work entitled "What is Property?" in order that I might lift the discussion to the philosophical height from which ridiculous clamor has dragged it down; and that, by a new presentation of the question, I might dissipate the fears of good citizens. I now reenter upon the public use of my reason, and give truth full swing. The second edition of the First Memoir on Property will immediately follow the publication of this letter. Before issuing any thing further, I shall await the observations of my critics, and the co-operation of the friends of the people and of equality. Hitherto, I have spoken in my own name, and on my own personal responsibility. It was my duty. I was endeavoring to call attention to principles which antiquity could not discover, because it knew nothing of the science which reveals them,--political economy. I have, then, testified as to FACTS; in short, I have been a WITNESS. Now my role changes. It remains for me to deduce the practical consequences of the facts proclaimed. The position of PUBLIC PROSECUTOR is the only one which I am henceforth fitted to fill, and I shall sum up the case in the name of the PEOPLE. I am, sir, with all the consideration that I owe to your talent and your character, Your very humble and most obedient servant, P. J. PROUDHON, Pensioner of the Academy of Besancon. P.S. During the session of April 2, the Chamber of Deputies rejected, by a very large majority, the literary-property bill, BECAUSE IT DID NOT UNDERSTAND IT. Nevertheless, literary property is only a special form of the right of property, which everybody claims to understand. Let us hope that this legislative precedent will not be fruitless for the cause of equality. The consequence of the vote of the Chamber is the abolition of capitalistic property,--property incomprehensible, contradictory, impossible, and absurd. FOOTNOTES: [Footnote 1: In the French edition of Proudhon's works, the above sketch of his life is prefixed to the first volume of his correspondence, but the translator prefers to insert it here as the best method of introducing the author to the American public.] [Footnote 2: "An Inquiry into Grammatical Classifications." By P. J. Proudhon. A treatise which received honorable mention from the Academy of Inscriptions, May 4, 1839. Out of print.] [Footnote 3: "The Utility of the Celebration of Sunday," &c. By P. J. Proudhon. Besancon, 1839, 12mo; 2d edition, Paris, 1841, 18mo.] [Footnote 4: Charron, on "Wisdom," Chapter xviii.] [Footnote 5: M. Vivien, Minister of Justice, before commencing proceedings against the "Memoir upon Property," asked the opinion of M. Blanqui; and it was on the strength of the observations of this honorable academician that he spared a book which had already excited the indignation of the magistrates. M. Vivien is not the only official to whom I have been indebted, since my first publication, for assistance and protection; but such generosity in the political arena is so rare that one may acknowledge it graciously and freely. I have always thought, for my part, that bad institutions made bad magistrates; just as the cowardice and hypocrisy of certain bodies results solely from the spirit which governs them. Why, for instance, in spite of the virtues and talents for which they are so noted, are the academies generally centres of intellectual repression, stupidity, and base intrigue? That question ought to be proposed by an academy: there would be no lack of competitors.] [Footnote 6: In Greek, {GREEK e ncg } examiner; a philosopher whose business is to seek the truth.] [Footnote 7: Religion, laws, marriage, were the privileges of freemen, and, in the beginning, of nobles only. Dii majorum gentium--gods of the patrician families; jus gentium--right of nations; that is, of families or nobles. The slave and the plebeian had no families; their children were treated as the offspring of animals. BEASTS they were born, BEASTS they must live.] [Footnote 8: If the chief of the executive power is responsible, so must the deputies be also. It is astonishing that this idea has never occurred to any one; it might be made the subject of an interesting essay. But I declare that I would not, for all the world, maintain it; the people are yet much too logical for me to furnish them with arguments.] [Footnote 9: See De Tocqueville, "Democracy in the United States;" and Michel Chevalier, "Letters on North America." Plutarch tells us, "Life of Pericles," that in Athens honest people were obliged to conceal themselves while studying, fearing they would be regarded as aspirants for office.] [Footnote 10: "Sovereignty," according to Toullier, "is human omnipotence." A materialistic definition: if sovereignty is any thing, it is a RIGHT not a FORCE or a faculty. And what is human omnipotence?] [Footnote 11: The Proudhon here referred to is J. B. V. Proudhon; a distinguished French jurist, and distant relative of the Translator.] [Footnote 12: Here, especially, the simplicity of our ancestors appears in all its rudeness. After having made first cousins heirs, where there were no legitimate children, they could not so divide the property between two different branches as to prevent the simultaneous existence of extreme wealth and extreme poverty in the same family. For example:-- James, dying, leaves two sons, Peter and John, heirs of his fortune: James's property is divided equally between them. But Peter has only one daughter, while John, his brother, leaves six sons. It is clear that, to be true to the principle of equality, and at the same time to that of heredity, the two estates must be divided in seven equal portions among the children of Peter and John; for otherwise a stranger might marry Peter's daughter, and by this alliance half of the property of James, the grandfather, would be transferred to another family, which is contrary to the principle of heredity. Furthermore, John's children would be poor on account of their number, while their cousin, being an only child, would be rich, which is contrary to the principle of equality. If we extend this combined application of two principles apparently opposed to each other, we shall become convinced that the right of succession, which is assailed with so little wisdom in our day, is no obstacle to the maintenance of equality.] [Footnote 13: _Zeus klesios_.] [Footnote 14: Giraud, "Investigations into the Right of Property among the Romans."] [Footnote 15: Precarious, from precor, "I pray;" because the act of concession expressly signified that the lord, in answer to the prayers of his men or slaves, had granted them permission to labor.] [Footnote 16: I cannot conceive how any one dares to justify the inequality of conditions, by pointing to the base inclinations and propensities of certain men. Whence comes this shameful degradation of heart and mind to which so many fall victims, if not from the misery and abjection into which property plunges them?] [Footnote 17: How many citizens are needed to support a professor of philosophy?--Thirty-five millions. How many for an economist?--Two billions. And for a literary man, who is neither a savant, nor an artist, nor a philosopher, nor an economist, and who writes newspaper novels?--None.] [Footnote 18: There is an error in the author's calculation here; but the translator, feeling sure that the reader will understand Proudhon's meaning, prefers not to alter his figures.--Translator.] [Footnote 19: _Hoc inter se differunt onanismus et manuspratio, nempe quod haec a solitario exercetur, ille autem a duobus reciprocatur, masculo scilicet et faemina. Porro foedam hanc onanismi venerem ludentes uxoria mariti habent nunc omnigm suavissimam_] [Footnote 20: Polyandry,--plurality of husbands.] [Footnote 21: Infanticide has just been publicly advocated in England, in a pamphlet written by a disciple of Malthus. He proposes an ANNUAL MASSACRE OF THE INNOCENTS in all families containing more children than the law allows; and he asks that a magnificent cemetery, adorned with statues, groves, fountains, and flowers, be set apart as a special burying-place for the superfluous children. Mothers would resort to this delightful spot to dream of the happiness of these little angels, and would return, quite comforted, to give birth to others, to be buried in their turn.] [Footnote 22: To perform an act of benevolence towards one's neighbor is called, in Hebrew, to do justice; in Greek, to take compassion or pity ({GREEK n n f e },from which is derived the French _aumone_); in Latin, to perform an act of love or charity; in French, give alms. We can trace the degradation of this principle through these various expressions: the first signifies duty; the second only sympathy; the third, affection, a matter of choice, not an obligation; the fourth, caprice.] [Footnote 23: I mean here by equite what the Latins called humanitas,-- that is, the kind of sociability which is peculiar to man. Humanity, gentle and courteous to all, knows how to distinguish ranks, virtues, and capacities without injury to any.] [Footnote 24: Justice and equite never have been understood.] [Footnote 25: Between woman and man there may exist love, passion, ties of custom, and the like; but there is no real society. Man and woman are not companions. The difference of the sexes places a barrier between them, like that placed between animals by a difference of race. Consequently, far from advocating what is now called the emancipation of woman, I should incline, rather, if there were no other alternative, to exclude her from society.] [Footnote 26: "The strong-box of Cosmo de Medici was the grave of Florentine liberty," said M. Michelet to the College of France.] [Footnote 27: "My right is my lance and my buckler." General de Brossard said, like Achilles: "I get wine, gold, and women with my lance and my buckler."] [Footnote 28: It would be interesting and profitable to review the authors who have written on usury, or, to use the gentler expression which some prefer, lendingat interest. The theologians always have opposed usury; but, since they have admitted always the legitimacy of rent, and since rent is evidently identical with interest, they have lost themselves in a labyrinth of subtle distinctions, and have finally reached a pass where they do not know what to think of usury. The Church--the teacher of morality, so jealous and so proud of the purity of her doctrine--has always been ignorant of the real nature of property and usury. She even has proclaimed through her pontiffs the most deplorable errors. _Non potest mutuum_, said Benedict XIV., _locationi ullo pacto comparari_. "Rent," says Bossuet, "is as far from usury as heaven is from the earth." How, on{sic} such a doctrine, condemn lending at interest? how justify the Gospel, which expressly forbids usury? The difficulty of theologians is a very serious one. Unable to refute the economical demonstrations, which rightly assimilate interest to rent, they no longer dare to condemn interest, and they can say only that there must be such a thing as usury, since the Gospel forbids it.] [Footnote 29: "I preach the Gospel, I live by the Gospel," said the Apostle; meaning thereby that he lived by his labor. The Catholic clergy prefer to live by property. The struggles in the communes of the middle ages between the priests and bishops and the large proprietors and seigneurs are famous. The papal excommunications fulminated in defence of ecclesiastical revenues are no less so. Even to-day, the official organs of the Gallican clergy still maintain that the pay received by the clergy is not a salary, but an indemnity for goods of which they were once proprietors, and which were taken from them in '89 by the Third Estate. The clergy prefer to live by the right of increase rather than by labor.] [Footnote 30: The meaning ordinarily attached to the word "anarchy" is absence of principle, absence of rule; consequently, it has been regarded as synonymous with "disorder."] [Footnote 31: If such ideas are ever forced into the minds of the people, it will be by representative government and the tyranny of talkers. Once science, thought, and speech were characterized by the same expression. To designate a thoughtful and a learned man, they said, "a man quick to speak and powerful in discourse." For a long time, speech has been abstractly distinguished from science and reason. Gradually, this abstraction is becoming realized, as the logicians say, in society; so that we have to-day savants of many kinds who talk but little, and TALKERS who are not even savants in the science of speech. Thus a philosopher is no longer a savant: he is a talker. Legislators and poets were once profound and sublime characters: now they are talkers. A talker is a sonorous bell, whom the least shock suffices to set in perpetual motion. With the talker, the flow of speech is always directly proportional to the poverty of thought. Talkers govern the world; they stun us, they bore us, they worry us, they suck our blood, and laugh at us. As for the savants, they keep silence: if they wish to say a word, they are cut short. Let them write.] [Footnote 32: _libertas, librare, libratio, libra_,--liberty, to liberate, libration, balance (pound),--words which have a common derivation. Liberty is the balance of rights and duties. To make a man free is to balance him with others,--that is, to put him or their level.] [Footnote 33: In a monthly publication, the first number of which has just appeared under the name of "L'Egalitaire," self-sacrifice is laid down as a principle of equality. This is a confusion of ideas. Self- sacrifice, taken alone, is the last degree of inequality. To seek equality in self-sacrifice is to confess that equality is against nature. Equality must be based upon justice, upon strict right, upon the principles invoked by the proprietor himself; otherwise it will never exist. Self-sacrifice is superior to justice; but it cannot be imposed as law, because it is of such a nature as to admit of no reward. It is, indeed, desirable that everybody shall recognize the necessity of self- sacrifice, and the idea of "L'Egalitaire" is an excellent example. Unfortunately, it can have no effect. What would you reply, indeed, to a man who should say to you, "I do not want to sacrifice myself"? Is he to be compelled to do so? When self-sacrifice is forced, it becomes oppression, slavery, the exploitation of man by man. Thus have the proletaires sacrificed themselves to property.] [Footnote 34: The disciples of Fourier have long seemed to me the most advanced of all modern socialists, and almost the only ones worthy of the name. If they had understood the nature of their task, spoken to the people, awakened their sympathies, and kept silence when they did not understand; if they had made less extravagant pretensions, and had shown more respect for public intelligence,--perhaps the reform would now, thanks to them, be in progress. But why are these earnest reformers continually bowing to power and wealth,--that is, to all that is anti- reformatory? How, in a thinking age, can they fail to see that the world must be converted by DEMONSTRATION, not by myths and allegories? Why do they, the deadly enemies of civilization, borrow from it, nevertheless, its most pernicious fruits,--property, inequality of fortune and rank, gluttony, concubinage, prostitution, what do I know? theurgy, magic, and sorcery? Why these endless denunciations of morality, metaphysics, and psychology, when the abuse of these sciences, which they do not understand, constitutes their whole system? Why this mania for deifying a man whose principal merit consisted in talking nonsense about things whose names, even, he did not know, in the strongest language ever put upon paper? Whoever admits the infallibility of a man becomes thereby incapable of instructing others. Whoever denies his own reason will soon proscribe free thought. The phalansterians would not fail to do it if they had the power. Let them condescend to reason, let them proceed systematically, let them give us demonstrations instead of revelations, and we will listen willingly. Then let them organize manufactures, agriculture, and commerce; let them make labor attractive, and the most humble functions honorable, and our praise shall be theirs. Above all, let them throw off that Illuminism which gives them the appearance of impostors or dupes, rather than believers and apostles.] [Footnote 35: Individual possession is no obstacle to extensive cultivation and unity of exploitation. If I have not spoken of the drawbacks arising from small estates, it is because I thought it useless to repeat what so many others have said, and what by this time all the world must know. But I am surprised that the economists, who have so clearly shown the disadvantages of spade-husbandry, have failed to see that it is caused entirely by property; above all, that they have not perceived that their plan for mobilizing the soil is a first step towards the abolition of property.] [Footnote 36: In the Chamber of Deputies, during the session of the fifth of January, 1841, M. Dufaure moved to renew the expropriation bill, on the ground of public utility.] [Footnote 37: "What is Property?" Chap. IV., Ninth Proposition.] [Footnote 38: _Tu cognovisti sessionem meam et resurrectionem meam_. Psalm 139.] [Footnote 39: The emperor Nicholas has just compelled all the manufacturers in his empire to maintain, at their own expense, within their establishments, small hospitals for the reception of sick workmen,--the number of beds in each being proportional to the number of laborers in the factory. "You profit by man's labor," the Czar could have said to his proprietors; "you shall be responsible for man's life." M. Blanqui has said that such a measure could not succeed in France. It would be an attack upon property,--a thing hardly conceivable even in Russia, Scythia, or among the Cossacks; but among us, the oldest sons of civilization!... I fear very much that this quality of age may prove in the end a mark of decrepitude.] [Footnote 40: Course of M. Blanqui. Lecture of Nov. 27,1840.] [Footnote 41: In "Mazaniello," the Neapolitan fisherman demands, amid the applause of the galleries, that a tax be levied upon luxuries.] [Footnote 42: _Seme le champ, proletaire; C'est l l'oisif qui recoltera_.] [Footnote 43: "In some countries, the enjoyment of certain political rights depends upon the amount of property. But, in these same countries, property is expressive, rather than attributive, of the qualifications necessary to the exercise of these rights. It is rather a conjectural proof than the cause of these qualifications."--Rossi: Treatise on Penal Law.] [Footnote 44: Lecture of December 22.] [Footnote 45: Lecture of Jan. 15, 1841.] [Footnote 46: Lecture of Jan. 15, 1841.] [Footnote 47: MM. Blanqui and Wolowski.] [Footnote 48: Subject proposed by the Fourth Class of the Institute, the Academy of Moral and Political Sciences: "What would be the effect upon the working-class of the organization of labor, according to the modern ideas of association?"] [Footnote 49: Subject proposed by the Academy of Besancon: "The economical and moral consequences in France, up to the present time, and those which seem likely to appear in future, of the law concerning the equal division of hereditary property between the children."] [Footnote 50: {GREEK, ?n n '},--greater property. The Vulgate translates it avaritia.] [Footnote 51: Similar or analogous customs have existed among all nations. Consult, among other works, "Origin of French Law," by M. Michelet; and "Antiquities of German Law," by Grimm.] [Footnote 52: _Dees hominesque testamur, nos arma neque contra patriam cepisse neque quo periculum aliis faceremus, sed uti corpora nostra ab injuria tuta forent, qui miseri, egentes, violentia atque crudelitate foeneraterum, plerique patriae, sed omncsfarna atque fortunis expertes sumus; neque cuiquam nostrum licuit, more majorum, lege uti, neque, amisso patrimonio, libferum corpus habere._--Sallus: Bellum Catilinarium.] [Footnote 53: Fifty, sixty, and eighty per cent.--Course of M. Blanqui.] [Footnote 54: _Episcopi plurimi, quos et hortamento esse oportet caeteris et exemplo, divina prouratione contempta, procuratores rerum saeularium fieri, derelicta cathedra, plebe leserta, per alienas provincias oberrantes, negotiationis quaestuosae nundinas au uucu-, pari, esurientibus in ecclesia fratribus habere argentum largitur velle, fundos insidi.sis fraudibus rapere, usuris multiplicantibus faenus augere._--Cyprian: De Lapsis. {--NOTE: what does this refer to? This is at bottom of pg 341 in MS} In this passage, St. Cyprian alludes to lending on mortgages and to compound interest.] [Footnote 55: "Inquiries concerning Property among the Romans."] [Footnote 56: "Its acquisitive nature works rapidly in the sleep of the law. It is ready, at the word, to absorb every thing. Witness the famous equivocation about the ox-hide which, when cut up into thongs, was large enough to enclose the site of Carthage.... The legend has reappeared several times since Dido.... Such is the love of man for the land. Limited by tombs, measured by the members of the human body, by the thumb, the foot, and the arm, it harmonizes, as far as possible, with the very proportions of man. Nor is he satisfied yet: he calls Heaven to witness that it is his; he tries to or his land, to give it the form of heaven.... In his titanic intoxication, he describes property in the very terms which he employs in describing the Almighty--_fundus_ _optimus maximus_.... He shall make it his couch, and they shall be separated no more,--{GREEK, ' nf g h g g."}--Michelet:Origin of French Law.] [Footnote 57: M. Guizot denies that Christianity alone is entitled to the glory of the abolition of slavery. "To this end," he says, "many causes were necessary,--the evolution of other ideas and other principles of civilization." So general an assertion cannot be refuted. Some of these ideas and causes should have been pointed out, that we might judge whether their source was not wholly Christian, or whether at least the Christian spirit had not penetrated and thus fructified them. Most of the emancipation charters begin with these words: "For the love of God and the salvation of my soul."] [Footnote 58: _Weregild_,--the fine paid for the murder of a man. So much for a count, so much for a baron, so much for a freeman, so much for a priest; for a slave, nothing. His value was restored to the proprietor.] [Footnote 59: The spirit of despotism and monopoly which animated the communes has not escaped the attention of historians. "The formation of the commoners' associations," says Meyer, "did not spring from the true spirit of liberty, but from the desire for exemption from the charges of the seigniors, from individual interests, and jealousy of the welfare of others.... Each commune or corporation opposed the creation of every other; and this spirit increased to such an extent that the King of England, Henry V., having established a university at Caen, in 1432, the city and university of Paris opposed the registration of the edict."] [Footnote 60: Feudalism was, in spirit and in its providential destiny, a long protest of the human personality against the monkish communism with which Europe, in the middle ages, was overrun. After the orgies of Pagan selfishness, society--carried to the opposite extreme by the Christian religion--risked its life by unlimited self-denial and absolute indifference to the pleasures of the world. Feudalism was the balance-weight which saved Europe from the combined influence of the religious communities and the Manlchean sects which had sprung up since the fourth century under different names and in different countries. Modern civilization is indebted to feudalism for the definitive establishment of the person, of marriage, of the family, and of country. (See, on this subject, Guizot, "History of Civilization in Europe.")] [Footnote 61: This was made evident in July, 1830, and the years which followed it, when the electoral bourgeoisie effected a revolution in order to get control over the king, and suppressed the emeutes in order to restrain the people. The bourgeoisie, through the jury, the magistracy, its position in the army, and its municipal despotism, governs both royalty and the people. It is the bourgeoisie which, more than any other class, is conservative and retrogressive. It is the bourgeoisie which makes and unmakes ministries. It is the bourgeoisie which has destroyed the influence of the Upper Chamber, and which will dethrone the King whenever he shall become unsatisfactory to it. It is to please the bourgeoisie that royalty makes itself unpopular. It is the bourgeoisie which is troubled at the hopes of the people, and which hinders reform. The journals of the bourgeoisie are the ones which preach morality and religion to us, while reserving scepticism and indifference for themselves; which attack personal government, and favor the denial of the electoral privilege to those who have no property. The bourgeoisie will accept any thing rather than the emancipation of the proletariat. As soon as it thinks its privileges threatened, it will unite with royalty; and who does not know that at this very moment these two antagonists have suspended their quarrels?... It has been a question of property.] [Footnote 62: The same opinion was recently expressed from the tribune by one of our most honorable Deputies, M. Gauguier. "Nature," said he, "has not endowed man with landed property." Changing the adjective LANDED, which designates only a species into CAPITALISTIC, which denotes the genus,--M. Gauguier made an egalitaire profession of faith.] [Footnote 63: A professor of comparative legislation, M. Lerminier, has gone still farther. He has dared to say that the nation took from the clergy all their possessions, not because of IDLENESS, but because of UNWORTHINESS. "You have civilized the world," cries this apostle of equality, speaking to the priests; "and for that reason your possessions were given you. In your hands they were at once an instrument and a reward. But you do not now deserve them, for you long since ceased to civilize any thing whatever...."] [Footnote 64: "Treatise on Prescription."] [Footnote 65: "Origin of French Law."] [Footnote 66: To honor one's parents, to be grateful to one's benefactors, to neither kill nor steal,--truths of inward sensation. To obey God rather than men, to render to each that which is his; the whole is greater than a part, a straight line is the shortest road from one point to another,--truths of intuition. All are a priori but the first are felt by the conscience, and imply only a simple act of the soul; the second are perceived by the reason, and imply comparison and relation. In short, the former are sentiments, the latter are ideas.] [Footnote 67: Armand Carrel would have favored the fortification of the capital. "Le National" has said, again and again, placing the name of its old editor by the side of the names of Napoleon and Vauban. What signifies this exhumation of an anti-popular politician? It signifies that Armand Carrel wished to make government an individual and irremovable, but elective, property, and that he wished this property to be elected, not by the people, but by the army. The political system of Carrel was simply a reorganization of the pretorian guards. Carrel also hated the _pequins_. That which he deplored in the revolution of July was not, they say, the insurrection of the people, but the victory of the people over the soldiers. That is the reason why Carrel, after 1830, would never support the patriots. "Do you answer me with a few regiments?" he asked. Armand Carrel regarded the army--the military power--as the basis of law and government. This man undoubtedly had a moral sense within him, but he surely had no sense of justice. Were he still in this world, I declare it boldly, liberty would have no greater enemy than Carrel.] [Footnote 68: In a very short article, which was read by M. Wolowski, M. Louis Blanc declares, in substance, that he is not a communist (which I easily believe); that one must be a fool to attack property (but he does not say why); and that it is very necessary to guard against confounding property with its abuses. When Voltaire overthrew Christianity, he repeatedly avowed that he had no spite against religion, but only against its abuses.] [Footnote 69: The property fever is at its height among writers and artists, and it is curious to see the complacency with which our legislators and men of letters cherish this devouring passion. An artist sells a picture, and then, the merchandise delivered, assumes to prevent the purchaser from selling engravings, under the pretext that he, the painter, in selling the original, has not sold his DESIGN. A dispute arises between the amateur and the artist in regard to both the fact and the law. M. Villemain, the Minister of Public Instruction, being consulted as to this particular case, finds that the painter is right; only the property in the design should have been specially reserved in the contract: so that, in reality, M. Villemain recognizes in the artist a power to surrender his work and prevent its communication; thus contradicting the legal axiom, One CANNOT GIVE AND KEEP AT THE SAME TIME. A strange reasoner is M. Villemain! An ambiguous principle leads to a false conclusion. Instead of rejecting the principle, M. Villemain hastens to admit the conclusion. With him the _reductio ad absurdum_ is a convincing argument. Thus he is made official defender of literary property, sure of being understood and sustained by a set of loafers, the disgrace of literature and the plague of public morals. Why, then, does M. Villemain feel so strong an interest in setting himself up as the chief of the literary classes, in playing for their benefit the role of Trissotin in the councils of the State, and in becoming the accomplice and associate of a band of profligates,--_soi-disant_ men of letters,--who for more than ten years have labored with such deplorable success to ruin public spirit, and corrupt the heart by warping the mind?] [Footnote 70: M. Leroux has been highly praised in a review for having defended property. I do not know whether the industrious encyclopedist is pleased with the praise, but I know very well that in his place I should mourn for reason and for truth.] [Footnote 71: "Impartial," of Besancon.] [Footnote 72: The Arians deny the divinity of Christ. The Semi-Arians differ from the Arians only by a few subtle distinctions. M. Pierre Leroux, who regards Jesus as a man, but claims that the Spirit of God was infused into him, is a true Semi-Arian. The Manicheans admit two co-existent and eternal principles,--God and matter, spirit and flesh, light and darkness, good and evil; but, unlike the Phalansterians, who pretend to reconcile the two, the Manicheans make war upon matter, and labor with all their might for the destruction of the flesh, by condemning marriage and forbidding reproduction,--which does not prevent them, however, from indulging in all the carnal pleasures which the intensest lust can conceive of. In this last particular, the tendency of the Fourieristic morality is quite Manichean. The Gnostics do not differ from the early Christians. As their name indicates, they regarded themselves as inspired. Fourier, who held peculiar ideas concerning the visions of somnambulists, and who believed in the possibility of developing the magnetic power to such an extent as to enable us to commune with invisible beings, might, if he were living, pass also for a Gnostic. The Adamites attend mass entirely naked, from motives of chastity. Jean Jacques Rousseau, who took the sleep of the senses for chastity, and who saw in modesty only a refinement of pleasure, inclined towards Adamism. I know such a sect, whose members usually celebrate their mysteries in the costume of Venus coming from the bath. The Pre-Adamites believe that men existed before the first man. I once met a Pre-Adamite. True, he was deaf and a Fourierist. The Pelagians deny grace, and attribute all the merit of good works to liberty. The Fourierists, who teach that man's nature and passions are good, are reversed Pelagians; they give all to grace, and nothing to liberty. The Socinians, deists in all other respects, admit an original revelation. Many people are Socinians to-day, who do not suspect it, and who regard their opinions as new. The Neo-Christians are those simpletons who admire Christianity because it has produced bells and cathedrals. Base in soul, corrupt in heart, dissolute in mind and senses, the Neo-Christians seek especially after the external form, and admire religion, as they love women, for its physical beauty. They believe in a coming revelation, as well as a transfiguration of Catholicism. They will sing masses at the grand spectacle in the phalanstery.] [Footnote 73: It should be understood that the above refers only to the moral and political doctrines of Fourier,--doctrines which, like all philosophical and religious systems, have their root and _raison d'existence_ in society itself, and for this reason deserve to be examined. The peculiar speculations of Fourier and his sect concerning cosmogony, geology, natural history, physiology, and psychology, I leave to the attention of those who would think it their duty to seriously refute the fables of Blue Beard and the Ass's Skin.] [Footnote 74: A writer for the radical press, M. Louis Raybaud, said, in the preface to his "Studies of Contemporary Reformers:" "Who does not know that morality is relative? Aside from a few grand sentiments which are strikingly instinctive, the measure of human acts varies with nations and climates, and only civilization--the progressive education of the race--can lead to a universal morality.... The absolute escapes our contingent and finite nature; the absolute is the secret of God." God keep from evil M. Louis Raybaud! But I cannot help remarking that all political apostates begin by the negation of the absolute, which is really the negation of truth. What can a writer, who professes scepticism, have in common with radical views? What has he to say to his readers? What judgment is he entitled to pass upon contemporary reformers? M. Raybaud thought it would seem wise to repeat an old impertinence of the legist, and that may serve him for an excuse. We all have these weaknesses. But I am surprised that a man of so much intelligence as M. Raybaud, who STUDIES SYSTEMS, fails to see the very thing he ought first to recognize,--namely, that systems are the progress of the mind towards the absolute.] [Footnote 75: The electoral reform, it is continually asserted, is not an END, but a MEANS. Undoubtedly; but what, then, is the end? Why not furnish an unequivocal explanation of its object? How can the people choose their representatives, unless they know in advance the purpose for which they choose them, and the object of the commission which they entrust to them? But, it is said, the very business of those chosen by the people is to find out the object of the reform. That is a quibble. What is to hinder these persons, who are to be elected in future, from first seeking for this object, and then, when they have found it, from communicating it to the people? The reformers have well said, that, while the object of the electoral reform remains in the least indefinite, it will be only a means of transferring power from the hands of petty tyrants to the hands of other tyrants. We know already how a nation may be oppressed by being led to believe that it is obeying only its own laws. The history of universal suffrage, among all nations, is the history of the restrictions of liberty by and in the name of the multitude. Still, if the electoral reform, in its present shape, were rational, practical, acceptable to clean consciences and upright minds, perhaps one might be excused, though ignorant of its object, for supporting it. But, no; the text of the petition determines nothing, makes no distinctions, requires no conditions, no guarantee; it establishes the right without the duty. "Every Frenchman is a voter, and eligible to office." As well say: "Every bayonet is intelligent, every savage is civilized, every slave is free." In its vague generality, the reformatory petition is the weakest of abstractions, or the highest form of political treason. Consequently, the enlightened patriots distrust and despise each other. The most radical writer of the time,--he whose economical and social theories are, without comparison, the most advanced,--M. Leroux, has taken a bold stand against universal suffrage and democratic government, and has written an exceedingly keen criticism of J. J. Rousseau. That is undoubtedly the reason why M. Leroux is no longer the philosopher of "Le National." That journal, like Napoleon, does not like men of ideas. Nevertheless, "Le National" ought to know that he who fights against ideas will perish by ideas.] 
39949	----	images of public domain material from the Google Print project.) THE PLACE OF SCIENCE IN MODERN CIVILISATION BOOKS BY THORSTEIN VEBLEN THE THEORY OF THE LEISURE CLASS THE THEORY OF BUSINESS ENTERPRISE THE INSTINCT OF WORKMANSHIP IMPERIAL GERMANY AND THE INDUSTRIAL REVOLUTION THE NATURE OF PEACE AND THE TERMS OF ITS PERPETUATION THE HIGHER LEARNING IN AMERICA THE VESTED INTERESTS AND THE STATE OF THE INDUSTRIAL ARTS THE PLACE OF SCIENCE IN MODERN CIVILISATION THE PLACE OF SCIENCE IN MODERN CIVILISATION AND OTHER ESSAYS _by_ THORSTEIN VEBLEN _New York_ B. W. HUEBSCH _Mcmxix_ COPYRIGHT, 1919 BY B. W. HUEBSCH PRINTED IN THE UNITED STATES OF AMERICA PUBLISHER'S NOTE These essays are here reprinted from various periodicals, running over a period of about twenty years. The selection is due to Messrs. Leon Ardzrooni, Wesley C. Mitchell and Walter W. Stewart. It is unlikely that more than a few public libraries possess files so complete as to give access to all of these essays, and even if the magazines were readily obtainable at libraries they would almost certainly have to be read in those institutions. The nature of the material, its timeliness (Mr. Veblen deals with ideas in such a manner as to give the date of composition a secondary importance), and the fact that it would otherwise be lost to all save diligent excavators, explain its preservation in this form. The courtesy of the periodicals in which the papers first appeared, in permitting their reproduction, is gratefully acknowledged. CONTENTS PAGE THE PLACE OF SCIENCE IN MODERN CIVILISATION 1 THE EVOLUTION OF THE SCIENTIFIC POINT OF VIEW 32 WHY IS ECONOMICS NOT AN EVOLUTIONARY SCIENCE? 56 THE PRECONCEPTIONS OF ECONOMIC SCIENCE. I. 82 " " " " " II. 114 " " " " " III. 148 PROFESSOR CLARK'S ECONOMICS 180 THE LIMITATIONS OF MARGINAL UTILITY 231 GUSTAV SCHMOLLER'S ECONOMICS 252 INDUSTRIAL AND PECUNIARY EMPLOYMENTS 279 ON THE NATURE OF CAPITAL. I. 324 " " " " " II. 352 SOME NEGLECTED POINTS IN THE THEORY OF SOCIALISM 387 THE SOCIALIST ECONOMICS OF KARL MARX. I. 409 " " " " " " II. 431 THE MUTATION THEORY AND THE BLOND RACE 457 THE BLOND RACE AND THE ARYAN CULTURE 477 AN EARLY EXPERIMENT IN TRUSTS 497 THE PLACE OF SCIENCE IN MODERN CIVILISATION[1] It is commonly held that modern Christendom is superior to any and all other systems of civilised life. Other ages and other cultural regions are by contrast spoken of as lower, or more archaic, or less mature. The claim is that the modern culture is superior on the whole, not that it is the best or highest in all respects and at every point. It has, in fact, not an all-around superiority, but a superiority within a closely limited range of intellectual activities, while outside this range many other civilisations surpass that of the modern occidental peoples. But the peculiar excellence of the modern culture is of such a nature as to give it a decisive practical advantage over all other cultural schemes that have gone before or that have come into competition with it. It has proved itself fit to survive in a struggle for existence as against those civilisations which differ from it in respect of its distinctive traits. Modern civilisation is peculiarly matter-of-fact. It contains many elements that are not of this character, but these other elements do not belong exclusively or characteristically to it. The modern civilised peoples are in a peculiar degree capable of an impersonal, dispassionate insight into the material facts with which mankind has to deal. The apex of cultural growth is at this point. Compared with this trait the rest of what is comprised in the cultural scheme is adventitious, or at the best it is a by-product of this hard-headed apprehension of facts. This quality may be a matter of habit or of racial endowment, or it may be an outcome of both; but whatever be the explanation of its prevalence, the immediate consequence is much the same for the growth of civilisation. A civilisation which is dominated by this matter-of-fact insight must prevail against any cultural scheme that lacks this element. This characteristic of western civilisation comes to a head in modern science, and it finds its highest material expression in the technology of the machine industry. In these things modern culture is creative and self-sufficient; and these being given, the rest of what may seem characteristic in western civilisation follows by easy consequence. The cultural structure clusters about this body of matter-of-fact knowledge as its substantial core. Whatever is not consonant with these opaque creations of science is an intrusive feature in the modern scheme, borrowed or standing over from the barbarian past. Other ages and other peoples excel in other things and are known by other virtues. In creative art, as well as in critical taste, the faltering talent of Christendom can at the best follow the lead of the ancient Greeks and the Chinese. In deft workmanship the handicraftsmen of the middle Orient, as well as of the Far East, stand on a level securely above the highest European achievement, old or new. In myth-making, folklore, and occult symbolism many of the lower barbarians have achieved things beyond what the latter-day priests and poets know how to propose. In metaphysical insight and dialectical versatility many orientals, as well as the Schoolmen of the Middle Ages, easily surpass the highest reaches of the New Thought and the Higher Criticism. In a shrewd sense of the religious verities, as well as in an unsparing faith in devout observances, the people of India or Thibet, or even the mediæval Christians, are past-masters in comparison even with the select of the faith of modern times. In political finesse, as well as in unreasoning, brute loyalty, more than one of the ancient peoples give evidence of a capacity to which no modern civilised nation may aspire. In warlike malevolence and abandon, the hosts of Islam, the Sioux Indian, and the "heathen of the northern sea" have set the mark above the reach of the most strenuous civilised warlord. To modern civilised men, especially in their intervals of sober reflection, all these things that distinguish the barbarian civilisations seem of dubious value and are required to show cause why they should not be slighted. It is not so with the knowledge of facts. The making of states and dynasties, the founding of families, the prosecution of feuds, the propagation of creeds and the creation of sects, the accumulation of fortunes, the consumption of superfluities--these have all in their time been felt to justify themselves as an end of endeavor; but in the eyes of modern civilised men all these things seem futile in comparison with the achievements of science. They dwindle in men's esteem as time passes, while the achievements of science are held higher as time passes. This is the one secure holding-ground of latter-day conviction, that "the increase and diffusion of knowledge among men" is indefeasibly right and good. When seen in such perspective as will clear it of the trivial perplexities of workday life, this proposition is not questioned within the horizon of the western culture, and no other cultural ideal holds a similar unquestioned place in the convictions of civilised mankind. On any large question which is to be disposed of for good and all the final appeal is by common consent taken to the scientist. The solution offered in the name of science is decisive so long as it is not set aside by a still more searching scientific inquiry. This state of things may not be altogether fortunate, but such is the fact. There are other, older grounds of finality that may conceivably be better, nobler, worthier, more profound, more beautiful. It might conceivably be preferable, as a matter of cultural ideals, to leave the last word with the lawyer, the duelist, the priest, the moralist, or the college of heraldry. In past times people have been content to leave their weightiest questions to the decision of some one or other of these tribunals, and, it cannot be denied, with very happy results in those respects that were then looked to with the greatest solicitude. But whatever the common-sense of earlier generations may have held in this respect, modern common-sense holds that the scientist's answer is the only ultimately true one. In the last resort enlightened common-sense sticks by the opaque truth and refuses to go behind the returns given by the tangible facts. _Quasi lignum vitae in paradiso Dei, et quasi lucerna fulgoris in domo Domini_, such is the place of science in modern civilisation. This latterday faith in matter-of-fact knowledge may be well grounded or it may not. It has come about that men assign it this high place, perhaps idolatrously, perhaps to the detriment of the best and most intimate interests of the race. There is room for much more than a vague doubt that this cult of science is not altogether a wholesome growth--that the unmitigated quest of knowledge, of this matter-of-fact kind, makes for race-deterioration and discomfort on the whole, both in its immediate effects upon the spiritual life of mankind, and in the material consequences that follow from a great advance in matter-of-fact knowledge. But we are not here concerned with the merits of the case. The question here is: How has this cult of science arisen? What are its cultural antecedents? How far is it in consonance with hereditary human nature? and, What is the nature of its hold on the convictions of civilised men? * * * * * In dealing with pedagogical problems and the theory of education, current psychology is nearly at one in saying that all learning is of a "pragmatic" character; that knowledge is inchoate action inchoately directed to an end; that all knowledge is "functional"; that it is of the nature of use. This, of course, is only a corollary under the main postulate of the latter-day psychologists, whose catchword is that The Idea is essentially active. There is no need of quarreling with this "pragmatic" school of psychologists. Their aphorism may not contain the whole truth, perhaps, but at least it goes nearer to the heart of the epistemological problem than any earlier formulation. It may confidently be said to do so because, for one thing, its argument meets the requirements of modern science. It is such a concept as matter-of-fact science can make effective use of; it is drawn in terms which are, in the last analysis, of an impersonal, not to say tropismatic, character; such as is demanded by science, with its insistence on opaque cause and effect. While knowledge is construed in teleological terms, in terms of personal interest and attention, this teleological aptitude is itself reducible to a product of unteleological natural selection. The teleological bent of intelligence is an hereditary trait settled upon the race by the selective action of forces that look to no end. The foundations of pragmatic intelligence are not pragmatic, nor even personal or sensible. This impersonal character of intelligence is, of course, most evident on the lower levels of life. If we follow Mr. Loeb, e.g., in his inquiries into the psychology of that life that lies below the threshold of intelligence, what we meet with is an aimless but unwavering motor response to stimulus.[2] The response is of the nature of motor impulse, and in so far it is "pragmatic," if that term may fairly be applied to so rudimentary a phase of sensibility. The responding organism may be called an "agent" in so far. It is only by a figure of speech that these terms are made to apply to tropismatic reactions. Higher in the scale of sensibility and nervous complication instincts work to a somewhat similar outcome. On the human plane, intelligence (the selective effect of inhibitive complication) may throw the response into the form of a reasoned line of conduct looking to an outcome that shall be expedient for the agent. This is naïve pragmatism of the developed kind. There is no longer a question but that the responding organism is an "agent" and that his intelligent response to stimulus is of a teleological character. But that is not all. The inhibitive nervous complication may also detach another chain of response to the given stimulus, which does not spend itself in a line of motor conduct and does not fall into a system of uses. Pragmatically speaking, this outlying chain of response is unintended and irrelevant. Except in urgent cases, such an idle response seems commonly to be present as a subsidiary phenomenon. If credence is given to the view that intelligence is, in its elements, of the nature of an inhibitive selection, it seems necessary to assume some such chain of idle and irrelevant response to account for the further course of the elements eliminated in giving the motor response the character of a reasoned line of conduct. So that associated with the pragmatic attention there is found more or less of an irrelevant attention, or idle curiosity. This is more particularly the case where a higher range of intelligence is present. This idle curiosity is, perhaps, closely related to the aptitude for play, observed both in man and in the lower animals.[3] The aptitude for play, as well as the functioning of idle curiosity, seems peculiarly lively in the young, whose aptitude for sustained pragmatism is at the same time relatively vague and unreliable. This idle curiosity formulates its response to stimulus, not in terms of an expedient line of conduct, nor even necessarily in a chain of motor activity, but in terms of the sequence of activities going on in the observed phenomena. The "interpretation" of the facts under the guidance of this idle curiosity may take the form of anthropomorphic or animistic explanations of the "conduct" of the objects observed. The interpretation of the facts takes a dramatic form. The facts are conceived in an animistic way, and a pragmatic animus is imputed to them. Their behavior is construed as a reasoned procedure on their part looking to the advantage of these animistically conceived objects, or looking to the achievement of some end which these objects are conceived to have at heart for reasons of their own. Among the savage and lower barbarian peoples there is commonly current a large body of knowledge organised in this way into myths and legends, which need have no pragmatic value for the learner of them and no intended bearing on his conduct of practical affairs. They may come to have a practical value imputed to them as a ground of superstitious observances, but they may also not.[4] All students of the lower cultures are aware of the dramatic character of the myths current among these peoples, and they are also aware that, particularly among the peaceable communities, the great body of mythical lore is of an idle kind, as having very little intended bearing on the practical conduct of those who believe in these myth-dramas. The myths on the one hand, and the workday knowledge of uses, materials, appliances, and expedients on the other hand, may be nearly independent of one another. Such is the case in an especial degree among those peoples who are prevailingly of a peaceable habit of life, among whom the myths have not in any great measure been canonised into precedents of divine malevolence. The lower barbarian's knowledge of the phenomena of nature, in so far as they are made the subject of deliberate speculation and are organised into a consistent body, is of the nature of life-histories. This body of knowledge is in the main organised under the guidance of an idle curiosity. In so far as it is systematised under the canons of curiosity rather than of expediency, the test of truth applied throughout this body of barbarian knowledge is the test of dramatic consistency. In addition to their dramatic cosmology and folk legends, it is needless to say, these peoples have also a considerable body of worldly wisdom in a more or less systematic form. In this the test of validity is usefulness.[5] The pragmatic knowledge of the early days differs scarcely at all in character from that of the maturest phases of culture. Its highest achievements in the direction of systematic formulation consist of didactic exhortations to thrift, prudence, equanimity, and shrewd management--a body of maxims of expedient conduct. In this field there is scarcely a degree of advance from Confucius to Samuel Smiles. Under the guidance of the idle curiosity, on the other hand, there has been a continued advance toward a more and more comprehensive system of knowledge. With the advance in intelligence and experience there come closer observation and more detailed analysis of facts.[6] The dramatisation of the sequence of phenomena may then fall into somewhat less personal, less anthropomorphic formulations of the processes observed; but at no stage of its growth--at least at no stage hitherto reached--does the output of this work of the idle curiosity lose its dramatic character. Comprehensive generalisations are made and cosmologies are built up, but always in dramatic form. General principles of explanation are settled on, which in the earlier days of theoretical speculation seem invariably to run back to the broad vital principle of generation. Procreation, birth, growth, and decay constitute the cycle of postulates within which the dramatised processes of natural phenomena run their course. Creation is procreation in these archaic theoretical systems, and causation is gestation and birth. The archaic cosmological schemes of Greece, India, Japan, China, Polynesia, and America, all run to the same general effect on this head.[7] The like seems true for the Elohistic elements in the Hebrew scriptures. Throughout this biological speculation there is present, obscurely in the background, the tacit recognition of a material causation, such as conditions the vulgar operations of workday life from hour to hour. But this causal relation between vulgar work and product is vaguely taken for granted and not made a principle for comprehensive generalisations. It is overlooked as a trivial matter of course. The higher generalisations take their color from the broader features of the current scheme of life. The habits of thought that rule in the working-out of a system of knowledge are such as are fostered by the more impressive affairs of life, by the institutional structure under which the community lives. So long as the ruling institutions are those of blood-relationship, descent, and clannish discrimination, so long the canons of knowledge are of the same complexion. When presently a transformation is made in the scheme of culture from peaceable life with sporadic predation to a settled scheme of predaceous life, involving mastery and servitude, gradations of privilege and honor, coercion and personal dependence, then the scheme of knowledge undergoes an analogous change. The predaceous, or higher barbarian, culture is, for the present purpose, peculiar in that it is ruled by an accentuated pragmatism. The institutions of this cultural phase are conventionalised relations of force and fraud. The questions of life are questions of expedient conduct as carried on under the current relations of mastery and subservience. The habitual distinctions are distinctions of personal force, advantage, precedence, and authority. A shrewd adaptation to this system of graded dignity and servitude becomes a matter of life and death, and men learn to think in these terms as ultimate and definitive. The system of knowledge, even in so far as its motives are of a dispassionate or idle kind, falls into the like terms, because such are the habits of thought and the standards of discrimination enforced by daily life.[8] The theoretical work of such a cultural era, as, for instance, the Middle Ages, still takes the general shape of dramatisation, but the postulates of the dramaturgic theories and the tests of theoretic validity are no longer the same as before the scheme of graded servitude came to occupy the field. The canons which guide the work of the idle curiosity are no longer those of generation, blood-relationship, and homely life, but rather those of graded dignity, authenticity, and dependence. The higher generalisations take on a new complexion, it may be without formally discarding the older articles of belief. The cosmologies of these higher barbarians are cast in terms of a feudalistic hierarchy of agents and elements, and the causal nexus between phenomena is conceived animistically after the manner of sympathetic magic. The laws that are sought to be discovered in the natural universe are sought in terms of authoritative enactment. The relation in which the deity, or deities, are conceived to stand to facts is no longer the relation of progenitor, so much as that of suzerainty. Natural laws are corollaries under the arbitrary rules of status imposed on the natural universe by an all-powerful Providence with a view to the maintenance of his own prestige. The science that grows in such a spiritual environment is of the class represented by alchemy and astrology, in which the imputed degree of nobility and prepotency of the objects and the symbolic force of their names are looked to for an explanation of what takes place. The theoretical output of the Schoolmen has necessarily an accentuated pragmatic complexion, since the whole cultural scheme under which they lived and worked was of a strenuously pragmatic character. The current concepts of things were then drawn in terms of expediency, personal force, exploit, prescriptive authority, and the like, and this range of concepts was by force of habit employed in the correlation of facts for purposes of knowledge even where no immediate practical use of the knowledge so gained was had in view. At the same time a very large proportion of the scholastic researches and speculations aimed directly at rules of expedient conduct, whether it took the form of a philosophy of life under temporal law and custom, or of a scheme of salvation under the decrees of an autocratic Providence. A naïve apprehension of the dictum that all knowledge is pragmatic would find more satisfactory corroboration in the intellectual output of scholasticism than in any system of knowledge of an older or a later date. With the advent of modern times a change comes over the nature of the inquiries and formulations worked out under the guidance of the idle curiosity--which from this epoch is often spoken of as the scientific spirit. The change in question is closely correlated with an analogous change in institutions and habits of life, particularly with the changes which the modern era brings in industry and in the economic organisation of society. It is doubtful whether the characteristic intellectual interests and teachings of the new era can properly be spoken of as less "pragmatic," as that term is sometimes understood, than those of the scholastic times; but they are of another kind, being conditioned by a different cultural and industrial situation.[9] In the life of the new era conceptions of authentic rank and differential dignity have grown weaker in practical affairs, and notions of preferential reality and authentic tradition similarly count for less in the new science. The forces at work in the external world are conceived in a less animistic manner, although anthropomorphism still prevails, at least to the degree required in order to give a dramatic interpretation of the sequence of phenomena. The changes in the cultural situation which seem to have had the most serious consequences for the methods and animus of scientific inquiry are those changes that took place in the field of industry. Industry in early modern times is a fact of relatively greater preponderance, more of a tone-giving factor, than it was under the régime of feudal status. It is the characteristic trait of the modern culture, very much as exploit and fealty were the characteristic cultural traits of the earlier time. This early-modern industry is, in an obvious and convincing degree, a matter of workmanship. The same has not been true in the same degree either before or since. The workman, more or less skilled and with more or less specialised efficiency, was the central figure in the cultural situation of the time; and so the concepts of the scientists came to be drawn in the image of the workman. The dramatisations of the sequence of external phenomena worked out under the impulse of the idle curiosity were then conceived in terms of workmanship. Workmanship gradually supplanted differential dignity as the authoritative canon of scientific truth, even on the higher levels of speculation and research. This, of course, amounts to saying in other words that the law of cause and effect was given the first place, as contrasted with dialectical consistency and authentic tradition. But this early-modern law of cause and effect--the law of efficient causes--is of an anthropomorphic kind. "Like causes produce like effects," in much the same sense as the skilled workman's product is like the workman; "nothing is found in the effect that was not contained in the cause," in much the same manner. These dicta are, of course, older than modern science, but it is only in the early days of modern science that they come to rule the field with an unquestioned sway and to push the higher grounds of dialectical validity to one side. They invade even the highest and most recondite fields of speculation, so that at the approach to the transition from the early-modern to the late-modern period, in the eighteenth century, they determine the outcome even in the counsels of the theologians. The deity, from having been in mediæval times primarily a suzerain concerned with the maintenance of his own prestige, becomes primarily a creator engaged in the workmanlike occupation of making things useful for man. His relation to man and the natural universe is no longer primarily that of a progenitor, as it is in the lower barbarian culture, but rather that of a talented mechanic. The "natural laws" which the scientists of that era make so much of are no longer decrees of a preternatural legislative authority, but rather details of the workshop specifications handed down by the master-craftsman for the guidance of handicraftsmen working out his designs. In the eighteenth-century science these natural laws are laws specifying the sequence of cause and effect, and will bear characterisation as a dramatic interpretation of the activity of the causes at work, and these causes are conceived in a quasi-personal manner. In later modern times the formulations of causal sequence grow more impersonal and more objective, more matter-of-fact; but the imputation of activity to the observed objects never ceases, and even in the latest and maturest formulations of scientific research the dramatic tone is not wholly lost. The causes at work are conceived in a highly impersonal way, but hitherto no science (except ostensibly mathematics) has been content to do its theoretical work in terms of inert magnitude alone. Activity continues to be imputed to the phenomena with which science deals; and activity is, of course, not a fact of observation, but is imputed to the phenomena by the observer.[10] This is, also of course, denied by those who insist on a purely mathematical formulation of scientific theories, but the denial is maintained only at the cost of consistency. Those eminent authorities who speak for a colorless mathematical formulation invariably and necessarily fall back on the (essentially metaphysical) preconception of causation as soon as they go into the actual work of scientific inquiry.[11] Since the machine technology has made great advances, during the nineteenth century, and has become a cultural force of wide-reaching consequence, the formulations of science have made another move in the direction of impersonal matter-of-fact. The machine process has displaced the workman as the archetype in whose image causation is conceived by the scientific investigators. The dramatic interpretation of natural phenomena has thereby become less anthropomorphic; it no longer constructs the life-history of a cause working to produce a given effect--after the manner of a skilled workman producing a piece of wrought goods--but it constructs the life-history of a process in which the distinction between cause and effect need scarcely be observed in an itemised and specific way, but in which the run of causation unfolds itself in an unbroken sequence of cumulative change. By contrast with the pragmatic formulations of worldly wisdom these latter-day theories of the scientists appear highly opaque, impersonal, and matter-of-fact; but taken by themselves they must be admitted still to show the constraint of the dramatic prepossessions that once guided the savage myth-makers. In so far as touches the aims and the animus of scientific inquiry, as seen from the point of view of the scientist, it is a wholly fortuitous and insubstantial coincidence that much of the knowledge gained under machine-made canons of research can be turned to practical account. Much of this knowledge is useful, or may be made so, by applying it to the control of the processes in which natural forces are engaged. This employment of scientific knowledge for useful ends is technology, in the broad sense in which the term includes, besides the machine industry proper, such branches of practice as engineering, agriculture, medicine, sanitation, and economic reforms. The reason why scientific theories can be turned to account for these practical ends is not that these ends are included in the scope of scientific inquiry. These useful purposes lie outside the scientist's interest. It is not that he aims, or can aim, at technological improvements. His inquiry is as "idle" as that of the Pueblo myth-maker. But the canons of validity under whose guidance he works are those imposed by the modern technology, through habituation to its requirements; and therefore his results are available for the technological purpose. His canons of validity are made for him by the cultural situation; they are habits of thought imposed on him by the scheme of life current in the community in which he lives; and under modern conditions this scheme of life is largely machine-made. In the modern culture, industry, industrial processes, and industrial products have progressively gained upon humanity, until these creations of man's ingenuity have latterly come to take the dominant place in the cultural scheme; and it is not too much to say that they have become the chief force in shaping men's daily life, and therefore the chief factor in shaping men's habits of thought. Hence men have learned to think in the terms in which the technological processes act. This is particularly true of those men who by virtue of a peculiarly strong susceptibility in this direction become addicted to that habit of matter-of-fact inquiry that constitutes scientific research. Modern technology makes use of the same range of concepts, thinks in the same terms, and applies the same tests of validity as modern science. In both, the terms of standardisation, validity, and finality are always terms of impersonal sequence, not terms of human nature or of preternatural agencies. Hence the easy copartnership between the two. Science and technology play into one another's hands. The processes of nature with which science deals and which technology turns to account, the sequence of changes in the external world, animate and inanimate, run in terms of brute causation, as do the theories of science. These processes take no thought of human expediency or inexpediency. To make use of them they must be taken as they are, opaque and unsympathetic. Technology, therefore, has come to proceed on an interpretation of these phenomena in mechanical terms, not in terms of imputed personality nor even of workmanship. Modern science, deriving its concepts from the same source, carries on its inquiries and states its conclusions in terms of the same objective character as those employed by the mechanical engineer. So it has come about, through the progressive change of the ruling habits of thought in the community, that the theories of science have progressively diverged from the formulations of pragmatism, ever since the modern era set in. From an organisation of knowledge on the basis of imputed personal or animistic propensity the theory has changed its base to an imputation of brute activity only, and this latter is conceived in an increasingly matter-of-fact manner; until, latterly, the pragmatic range of knowledge and the scientific are more widely out of touch than ever, differing not only in aim, but in matter as well. In both domains knowledge runs in terms of activity, but it is on the one hand knowledge of what had best be done, and on the other hand knowledge of what takes place; on the one hand knowledge of ways and means, on the other hand knowledge without any ulterior purpose. The latter range of knowledge may serve the ends of the former, but the converse does not hold true. These two divergent ranges of inquiry are to be found together in all phases of human culture. What distinguishes the present phase is that the discrepancy between the two is now wider than ever before. The present is nowise distinguished above other cultural eras by any exceptional urgency or acumen in the search for pragmatic expedients. Neither is it safe to assert that the present excels all other civilisations in the volume or the workmanship of that body of knowledge that is to be credited to the idle curiosity. What distinguishes the present in these premises is (1) that the primacy in the cultural scheme has passed from pragmatism to a disinterested inquiry whose motive is idle curiosity, and (2) that in the domain of the latter the making of myths and legends in terms of imputed personality, as well as the construction of dialectical systems in terms of differential reality, has yielded the first place to the making of theories in terms of matter-of-fact sequence.[12] Pragmatism creates nothing but maxims of expedient conduct. Science creates nothing but theories.[13] It knows nothing of policy or utility, of better or worse. None of all that is comprised in what is to-day accounted scientific knowledge. Wisdom and proficiency of the pragmatic sort does not contribute to the advance of a knowledge of fact. It has only an incidental bearing on scientific research, and its bearing is chiefly that of inhibition and misdirection. Wherever canons of expediency are intruded into or are attempted to be incorporated in the inquiry, the consequence is an unhappy one for science, however happy it may be for some other purpose extraneous to science. The mental attitude of worldly wisdom is at cross-purposes with the disinterested scientific spirit, and the pursuit of it induces an intellectual bias that is incompatible with scientific insight. Its intellectual output is a body of shrewd rules of conduct, in great part designed to take advantage of human infirmity. Its habitual terms of standardisation and validity are terms of human nature, of human preference, prejudice, aspiration, endeavor, and disability, and the habit of mind that goes with it is such as is consonant with these terms. No doubt, the all-pervading pragmatic animus of the older and non-European civilisations has had more than anything else to do with their relatively slight and slow advance in scientific knowledge. In the modern scheme of knowledge it holds true, in a similar manner and with analogous effect, that training in divinity, in law, and in the related branches of diplomacy, business tactics, military affairs, and political theory, is alien to the skeptical scientific spirit and subversive of it. The modern scheme of culture comprises a large body of worldly wisdom, as well as of science. This pragmatic lore stands over against science with something of a jealous reserve. The pragmatists value themselves somewhat on being useful as well as being efficient for good and evil. They feel the inherent antagonism between themselves and the scientists, and look with some doubt on the latter as being merely decorative triflers, although they sometimes borrow the prestige of the name of science--as is only good and well, since it is of the essence of worldly wisdom to borrow anything that can be turned to account. The reasoning in these fields turns about questions of personal advantage of one kind or another, and the merits of the claims canvassed in these discussions are decided on grounds of authenticity. Personal claims make up the subject of the inquiry, and these claims are construed and decided in terms of precedent and choice, use and wont, prescriptive authority, and the like. The higher reaches of generalisation in these pragmatic inquiries are of the nature of deductions from authentic tradition, and the training in this class of reasoning gives discrimination in respect of authenticity and expediency. The resulting habit of mind is a bias for substituting dialectical distinctions and decisions _de jure_ in the place of explanations _de facto_. The so-called "sciences" associated with these pragmatic disciplines, such as jurisprudence, political science, and the like, are a taxonomy of credenda. Of this character was the greater part of the "science" cultivated by the Schoolmen, and large remnants of the same kind of authentic convictions are, of course, still found among the tenets of the scientists, particularly in the social sciences, and no small solicitude is still given to their cultivation. Substantially the same value as that of the temporal pragmatic inquiries belongs also, of course, to the "science" of divinity. Here the questions to which an answer is sought, as well as the aim and method of inquiry, are of the same pragmatic character, although the argument runs on a higher plane of personality, and seeks a solution in terms of a remoter and more metaphysical expediency. * * * * * In the light of what has been said above, the questions recur: How far is the scientific quest of matter-of-fact knowledge consonant with the inherited intellectual aptitudes and propensities of the normal man? and, What foothold has science in the modern culture? The former is a question of the temperamental heritage of civilised mankind, and therefore it is in large part a question of the circumstances which have in the past selectively shaped the human nature of civilised mankind. Under the barbarian culture, as well as on the lower levels of what is currently called civilised life, the dominant note has been that of competitive expediency for the individual or the group, great or small, in an avowed struggle for the means of life. Such is still the ideal of the politician and business man, as well as of other classes whose habits of life lead them to cling to the inherited barbarian traditions. The upper-barbarian and lower-civilised culture, as has already been indicated, is pragmatic, with a thoroughness that nearly bars out any non-pragmatic ideal of life or of knowledge. Where this tradition is strong there is but a precarious chance for any consistent effort to formulate knowledge in other terms than those drawn from the prevalent relations of personal mastery and subservience and the ideals of personal gain. During the Dark and Middle Ages, for instance, it is true in the main that any movement of thought not controlled by considerations of expediency and conventions of status are to be found only in the obscure depths of vulgar life, among those neglected elements of the population that lived below the reach of the active class struggle. What there is surviving of this vulgar, non-pragmatic intellectual output takes the form of legends and folk-tales, often embroidered on the authentic documents of the Faith. These are less alien to the latest and highest culture of Christendom than are the dogmatic, dialectical, and chivalric productions that occupied the attention of the upper classes in mediæval times. It may seem a curious paradox that the latest and most perfect flower of the western civilisation is more nearly akin to the spiritual life of the serfs and villeins than it is to that of the grange or the abbey. The courtly life and the chivalric habits of thought of that past phase of culture have left as nearly no trace in the cultural scheme of later modern times as could well be. Even the romancers who ostensibly rehearse the phenomena of chivalry, unavoidably make their knights and ladies speak the language and the sentiments of the slums of that time, tempered with certain schematised modern reflections and speculations. The gallantries, the genteel inanities and devout imbecilities of mediæval high-life would be insufferable even to the meanest and most romantic modern intelligence. So that in a later, less barbarian age the precarious remnants of folklore that have come down through that vulgar channel--half savage and more than half pagan--are treasured as containing the largest spiritual gains which the barbarian ages of Europe have to offer. The sway of barbarian pragmatism has, everywhere in the western world, been relatively brief and relatively light; the only exceptions would be found in certain parts of the Mediterranean seaboard. But wherever the barbarian culture has been sufficiently long-lived and unmitigated to work out a thoroughly selective effect in the human material subjected to it, there the pragmatic animus may be expected to have become supreme and to inhibit all movement in the direction of scientific inquiry and eliminate all effective aptitude for other than worldly wisdom. What the selective consequences of such a protracted régime of pragmatism would be for the temper of the race may be seen in the human flotsam left by the great civilisations of antiquity, such as Egypt, India, and Persia. Science is not at home among these leavings of barbarism. In these instances of its long and unmitigated dominion the barbarian culture has selectively worked out a temperamental bias and a scheme of life from which objective, matter-of-fact knowledge is virtually excluded in favor of pragmatism, secular and religious. But for the greater part of the race, at least for the greater part of civilised mankind, the régime of the mature barbarian culture has been of relatively short duration, and has had a correspondingly superficial and transient selective effect. It has not had force and time to eliminate certain elements of human nature handed down from an earlier phase of life, which are not in full consonance with the barbarian animus or with the demands of the pragmatic scheme of thought. The barbarian-pragmatic habit of mind, therefore, is not properly speaking a temperamental trait of the civilised peoples, except possibly within certain class limits (as, _e.g._, the German nobility). It is rather a tradition, and it does not constitute so tenacious a bias as to make head against the strongly materialistic drift of modern conditions and set aside that increasingly urgent resort to matter-of-fact conceptions that makes for the primacy of science. Civilised mankind does not in any great measure take back atavistically to the upper-barbarian habit of mind. Barbarism covers too small a segment of the life-history of the race to have given an enduring temperamental result. The unmitigated discipline of the higher barbarism in Europe fell on a relatively small proportion of the population, and in the course of time this select element of the population was crossed and blended with the blood of the lower elements whose life always continued to run in the ruts of savagery rather than in those of the high-strung, finished barbarian culture that gave rise to the chivalric scheme of life. Of the several phases of human culture the most protracted, and the one which has counted for most in shaping the abiding traits of the race, is unquestionably that of savagery. With savagery, for the purpose in hand, is to be classed that lower, relatively peaceable barbarism that is not characterised by wide and sharp class discrepancies or by an unremitting endeavor of one individual or group to get the better of another. Even under the full-grown barbarian culture--as, for instance, during the Middle Ages--the habits of life and the spiritual interests of the great body of the population continue in large measure to bear the character of savagery. The savage phase of culture accounts for by far the greater portion of the life-history of mankind, particularly if the lower barbarism and the vulgar life of later barbarism be counted in with savagery, as in a measure they properly should. This is particularly true of those racial elements that have entered into the composition of the leading peoples of Christendom. The savage culture is characterised by the relative absence of pragmatism from the higher generalisations of its knowledge and beliefs. As has been noted above, its theoretical creations are chiefly of the nature of mythology shading off into folklore. This genial spinning of apocryphal yarns is, at its best, an amiably inefficient formulation of experiences and observations in terms of something like a life-history of the phenomena observed. It has, on the one hand, little value, and little purpose, in the way of pragmatic expediency, and so it is not closely akin to the pragmatic-barbarian scheme of life; while, on the other hand, it is also ineffectual as a systematic knowledge of matter-of-fact. It is a quest of knowledge, perhaps of systematic knowledge, and it is carried on under the incentive of the idle curiosity. In this respect it falls in the same class with the civilised man's science; but it seeks knowledge not in terms of opaque matter-of-fact, but in terms of some sort of spiritual life imputed to the facts. It is romantic and Hegelian rather than realistic and Darwinian. The logical necessities of its scheme of thought are necessities of spiritual consistency rather than of quantitative equivalence. It is like science in that it has no ulterior motive beyond the idle craving for a systematic correlation of data; but it is unlike science in that its standardisation and correlation of data run in terms of the free play of imputed personal initiative rather than in terms of the constraint of objective cause and effect. By force of the protracted selective discipline of this past phase of culture, the human nature of civilised mankind is still substantially the human nature of savage man. The ancient equipment of congenital aptitudes and propensities stands over substantially unchanged, though overlaid with barbarian traditions and conventionalities and readjusted by habituation to the exigencies of civilised life. In a measure, therefore, but by no means altogether, scientific inquiry is native to civilised man with his savage heritage, since scientific inquiry proceeds on the same general motive of idle curiosity as guided the savage myth-makers, though it makes use of concepts and standards in great measure alien to the myth-makers' habit of mind. The ancient human predilection for discovering a dramatic play of passion and intrigue in the phenomena of nature still asserts itself. In the most advanced communities, and even among the adepts of modern science, there comes up persistently the revulsion of the native savage against the inhumanly dispassionate sweep of the scientific quest, as well as against the inhumanly ruthless fabric of technological processes that have come out of this search for matter-of-fact knowledge. Very often the savage need of a spiritual interpretation (dramatisation) of phenomena breaks through the crust of acquired materialistic habits of thought, to find such refuge as may be had in articles of faith seized on and held by sheer force of instinctive conviction. Science and its creations are more or less uncanny, more or less alien, to that fashion of craving for knowledge that by ancient inheritance animates mankind. Furtively or by an overt breach of consistency, men still seek comfort in marvelous articles of savage-born lore, which contradict the truths of that modern science whose dominion they dare not question, but whose findings at the same time go beyond the breaking point of their jungle-fed spiritual sensibilities. The ancient ruts of savage thought and conviction are smooth and easy; but however sweet and indispensable the archaic ways of thinking may be to the civilised man's peace of mind, yet such is the binding force of matter-of-fact analysis and inference under modern conditions that the findings of science are not questioned on the whole. The name of science is after all a word to conjure with. So much so that the name and the mannerisms, at least, if nothing more of science, have invaded all fields of learning and have even overrun territory that belongs to the enemy. So there are "sciences" of theology, law, and medicine, as has already been noted above. And there are such things as Christian Science, and "scientific" astrology, palmistry, and the like. But within the field of learning proper there is a similar predilection for an air of scientific acumen and precision where science does not belong. So that even that large range of knowledge that has to do with general information rather than with theory--what is loosely termed scholarship--tends strongly to take on the name and forms of theoretical statement. However decided the contrast between these branches of knowledge on the one hand, and science properly so called on the other hand, yet even the classical learning, and the humanities generally, fall in with this predilection more and more with each succeeding generation of students. The students of literature, for instance, are more and more prone to substitute critical analysis and linguistic speculation, as the end of their endeavors, in the place of that discipline of taste and that cultivated sense of literary form and literary feeling that must always remain the chief end of literary training, as distinct from philology and the social sciences. There is, of course, no intention to question the legitimacy of a science of philology or of the analytical study of literature as a fact in cultural history, but these things do not constitute training in literary taste, nor can they take the place of it. The effect of this straining after scientific formulations in a field alien to the scientific spirit is as curious as it is wasteful. Scientifically speaking, these quasi-scientific inquiries necessarily begin nowhere and end in the same place; while in point of cultural gain they commonly come to nothing better than spiritual abnegation. But these blindfold endeavors to conform to the canons of science serve to show how wide and unmitigated the sway of science is in the modern community. Scholarship--that is to say an intimate and systematic familiarity with past cultural achievements--still holds its place in the scheme of learning, in spite of the unadvised efforts of the short-sighted to blend it with the work of science, for it affords play for the ancient genial propensities that ruled men's quest of knowledge before the coming of science or of the outspoken pragmatic barbarism. Its place may not be so large in proportion to the entire field of learning as it was before the scientific era got fully under way. But there is no intrinsic antagonism between science and scholarship, as there is between pragmatic training and scientific inquiry. Modern scholarship shares with modern science the quality of not being pragmatic in its aim. Like science it has no ulterior end. It may be difficult here and there to draw the line between science and scholarship, and it may even more be unnecessary to draw such a line; yet while the two ranges of discipline belong together in many ways, and while there are many points of contact and sympathy between the two; while the two together make up the modern scheme of learning; yet there is no need of confounding the one with the other, nor can the one do the work of the other. The scheme of learning has changed in such manner as to give science the more commanding place, but the scholar's domain has not thereby been invaded, nor has it suffered contraction at the hands of science, whatever may be said of the weak-kneed abnegation of some whose place, if they have one, is in the field of scholarship rather than of science. * * * * * All that has been said above has of course nothing to say as to the intrinsic merits of this quest of matter-of-fact knowledge. In point of fact, science gives its tone to modern culture. One may approve or one may deprecate the fact that this opaque, materialistic interpretation of things pervades modern thinking. That is a question of taste, about which there is no disputing. The prevalence of this matter-of-fact inquiry is a feature of modern culture, and the attitude which critics take toward this phenomenon is chiefly significant as indicating how far their own habit of mind coincides with the enlightened common-sense of civilised mankind. It shows in what degree they are abreast of the advance of culture. Those in whom the savage predilection or the barbarian tradition is stronger than their habituation to civilised life will find that this dominant factor of modern life is perverse, if not calamitous; those whose habits of thought have been fully shaped by the machine process and scientific inquiry are likely to find it good. The modern western culture, with its core of matter-of-fact knowledge, may be better or worse than some other cultural scheme, such as the classic Greek, the mediæval Christian, the Hindu, or the Pueblo Indian. Seen in certain lights, tested by certain standards, it is doubtless better; by other standards, worse. But the fact remains that the current cultural scheme, in its maturest growth, is of that complexion; its characteristic force lies in this matter-of-fact insight; its highest discipline and its maturest aspirations are these. In point of fact, the sober common-sense of civilised mankind accepts no other end of endeavor as self-sufficient and ultimate. That such is the case seems to be due chiefly to the ubiquitous presence of the machine technology and its creations in the life of modern communities. And so long as the machine process continues to hold its dominant place as a disciplinary factor in modern culture, so long must the spiritual and intellectual life of this cultural era maintain the character which the machine process gives it. But while the scientist's spirit and his achievements stir an unqualified admiration in modern men, and while his discoveries carry conviction as nothing else does, it does not follow that the manner of man which this quest of knowledge produces or requires comes near answering to the current ideal of manhood, or that his conclusions are felt to be as good and beautiful as they are true. The ideal man, and the ideal of human life, even in the apprehension of those who most rejoice in the advances of science, is neither the finikin skeptic in the laboratory nor the animated slide-rule. The quest of science is relatively new. It is a cultural factor not comprised, in anything like its modern force, among those circumstances whose selective action in the far past has given to the race the human nature which it now has. The race reached the human plane with little of this searching knowledge of facts; and throughout the greater part of its life-history on the human plane it has been accustomed to make its higher generalisations and to formulate its larger principles of life in other terms than those of passionless matter-of-fact. This manner of knowledge has occupied an increasing share of men's attention in the past, since it bears in a decisive way upon the minor affairs of workday life; but it has never until now been put in the first place, as the dominant note of human culture. The normal man, such as his inheritance has made him, has therefore good cause to be restive under its dominion. FOOTNOTES: [1] Reprinted by permission from _The American Journal of Sociology_, Vol. XI, March, 1906. [2] Jacques Loeb, _Heliotropismus der Thiere_, and _Comparative Psychology and Physiology of the Brain_. [3] Cf. Gross, _Spiele der Thiere_, chap. 2 (esp. pp. 65-76), and chap. 5; _The Play of Man_, Part III, sec. 3; Spencer, _Principles of Psychology_, secs. 533-35. [4] The myths and legendary lore of the Eskimo, the Pueblo Indians, and some tribes of the northwest coast afford good instances of such idle creations. Cf. various _Reports_ of the Bureau of American Ethnology; also, e.g., Tylor, _Primitive Culture_, esp. the chapters on "Mythology" and "Animism." [5] "Pragmatic" is here used in a more restricted sense than the distinctively pragmatic school of modern psychologists would commonly assign the term. "Pragmatic," "teleological," and the like terms have been extended to cover imputation of purpose as well as conversion to use. It is not intended to criticise this ambiguous use of terms, nor to correct it; but the terms are here used only in the latter sense, which alone belongs to them by force of early usage and etymology. "Pragmatic" knowledge, therefore, is such as is designed to serve an expedient end for the knower, and is here contrasted with the imputation of expedient conduct to the facts observed. The reason for preserving this distinction is simply the present need of a simple term by which to mark the distinction between worldly wisdom and idle learning. [6] Cf. Ward, _Pure Sociology_, esp. pp. 437-48. [7] Cf., e.g., Tylor, _Primitive Culture_, chap. 8. [8] Cf. James, _Psychology_, chap. 9, esp. sec. 5. [9] As currently employed, the term "pragmatic" is made to cover both conduct looking to the agent's preferential advantage, expedient conduct, and workmanship directed to the production of things that may or may not be of advantage to the agent. If the term be taken in the latter meaning, the culture of modern times is no less "pragmatic" than that of the Middle Ages. It is here intended to be used in the former sense. [10] Epistemologically speaking, activity is imputed to phenomena for the purpose of organising them into a dramatically consistent system. [11] Cf., e.g., Karl Pearson, _Grammar of Science_, and compare his ideal of inert magnitudes as set forth in his exposition with his actual work as shown in chaps. 9, 10, and 12, and more particularly in his discussions of "Mother Right" and related topics in _The Chances of Death_. [12] Cf. James, _Psychology_, Vol. II, chap. 28, pp. 633-71, esp. p. 640 note. [13] Cf. Ward, _Principles of Psychology_, pp. 439-43. THE EVOLUTION OF THE SCIENTIFIC POINT OF VIEW[1] A discussion of the scientific point of view which avowedly proceeds from this point of view itself has necessarily the appearance of an argument in a circle; and such in great part is the character of what here follows. It is in large part an attempt to explain the scientific point of view in terms of itself, but not altogether. This inquiry does not presume to deal with the origin or the legitimation of the postulates of science, but only with the growth of the habitual use of these postulates, and the manner of using them. The point of inquiry is the changes which have taken place in the secondary postulates involved in the scientific point of view--in great part a question of the progressive redistribution of emphasis among the preconceptions under whose guidance successive generations of scientists have gone to their work. * * * * * The sciences which are in any peculiar sense modern take as an (unavowed) postulate the fact of consecutive change. Their inquiry always centers upon some manner of process. This notion of process about which the researches of modern science cluster, is a notion of a sequence, or complex, of consecutive change in which the _nexus_ of the sequence, that by virtue of which the change inquired into is consecutive, is the relation of cause and effect. The consecution, moreover, runs in terms of persistence of quantity or of force. In so far as the science is of a modern complexion, in so far as it is not of the nature of taxonomy simply, the inquiry converges upon a matter of process; and it comes to rest, provisionally, when it has disposed of its facts in terms of process. But modern scientific inquiry in any case comes to rest only provisionally; because its prime postulate is that of consecutive change, and consecutive change can, of course, not come to rest except provisionally. By its own nature the inquiry cannot reach a final term in any direction. So it is something of a homiletical commonplace to say that the outcome of any serious research can only be to make two questions grow where one question grew before. Such is necessarily the case because the postulate of the scientist is that things change consecutively. It is an unproven and unprovable postulate--that is to say, it is a metaphysical preconception--but it gives the outcome that every goal of research is necessarily a point of departure; every term is transitional.[2] A hundred years ago, or even fifty years ago, scientific men were not in the habit of looking at the matter in this way. At least it did not then seem a matter of course, lying in the nature of things, that scientific inquiry could not reach a final term in any direction. To-day it is a matter of course, and will be so avowed without argument. Stated in the broadest terms, this is the substantial outcome of that nineteenth-century movement in science with which the name of Darwin is associated as a catch-word. This use of Darwin's name does not imply that this epoch of science is mainly Darwin's work. What merit may belong to Darwin, specifically, in these premises, is a question which need not detain the argument. He may, by way of creative initiative, have had more or less to do with shaping the course of things scientific. Or, if you choose, his voice may even be taken as only one of the noises which the wheels of civilisation make when they go round. But by scientifically colloquial usage we have come to speak of pre-Darwinian and post-Darwinian science, and to appreciate that there is a significant difference in the point of view between the scientific era which preceded and that which followed the epoch to which his name belongs. Before that epoch the animus of a science was, on the whole, the animus of taxonomy; the consistent end of scientific inquiry was definition and classification,--as it still continues to be in such fields of science as have not been affected by the modern notion of consecutive change. The scientists of that era looked to a final term, a consummation of the changes which provoked their inquiry, as well as to a first beginning of the matters with which their researches were concerned. The questions of science were directed to the problem, essentially classificatory, of how things had been in the presumed primordial stable equilibrium out of which they, putatively, had come, and how they should be in the definitive state of settlement into which things were to fall as the outcome of the play of forces which intervened between this primordial and the definitive stable equilibrium. To the pre-Darwinian taxonomists the center of interest and attention, to which all scientific inquiry must legitimately converge, was the body of natural laws governing phenomena under the rule of causation. These natural laws were of the nature of rules of the game of causation. They formulated the immutable relations in which things "naturally" stood to one another before causal disturbance took place between them, the orderly unfolding of the complement of causes involved in the transition over this interval of transient activity, and the settled relations that would supervene when the disturbance had passed and the transition from cause to effect had been consummated,--the emphasis falling on the consummation. The characteristic feature by which post-Darwinian science is contrasted with what went before is a new distribution of emphasis, whereby the process of causation, the interval of instability and transition between initial cause and definitive effect, has come to take the first place in the inquiry; instead of that consummation in which causal effect was once presumed to come to rest. This change of the point of view was, of course, not abrupt or catastrophic. But it has latterly gone so far that modern science is becoming substantially a theory of the process of consecutive change, which is taken as a sequence of cumulative change, realized to be self-continuing or self-propagating and to have no final term. Questions of a primordial beginning and a definitive outcome have fallen into abeyance within the modern sciences, and such questions are in a fair way to lose all claim to consideration at the hands of the scientists. Modern science is ceasing to occupy itself with the natural laws--the codified rules of the game of causation--and is concerning itself wholly with what has taken place and what is taking place. * * * * * Rightly seen from this ultra-modern point of view, this modern science and this point of view which it affects are, of course, a feature of the current cultural situation,--of the process of life as it runs along under our eyes. So also, when seen from this scientific point of view, it is a matter of course that any marked cultural era will have its own characteristic attitude and animus toward matters of knowledge, will bring under inquiry such questions of knowledge as lie within its peculiar range of interest, and will seek answers to these questions only in terms that are consonant with the habits of thought current at the time. That is to say, science and the scientific point of view will vary characteristically in response to those variations in the prevalent habits of thought which constitute the sequence of cultural development; the current science and the current scientific point of view, the knowledge sought and the manner of seeking it, are a product of the cultural growth. Perhaps it would all be better characterised as a by-product of the cultured growth. * * * * * This question of a scientific point of view, of a particular attitude and animus in matters of knowledge, is a question of the formation of habits of thought; and habits of thought are an outcome of habits of life. A scientific point of view is a consensus of habits of thought current in the community, and the scientist is constrained to believe that this consensus is formed in response to a more or less consistent discipline of habituation to which the community is subjected, and that the consensus can extend only so far and maintain its force only so long as the discipline of habituation exercised by the circumstances of life enforces it and backs it up. The scheme of life, within which lies the scheme of knowledge, is a consensus of habits in the individuals which make up the community. The individual subjected to habituation is each a single individual agent, and whatever affects him in any one line of activity, therefore, necessarily affects him in some degree in all his various activities. The cultural scheme of any community is a complex of the habits of life and of thought prevalent among the members of the community. It makes up a more or less congruous and balanced whole, and carries within it a more or less consistent habitual attitude toward matters of knowledge--more or less consistent according as the community's cultural scheme is more or less congruous throughout the body of the population; and this in its turn is in the main a question of how nearly uniform or consonant are the circumstances of experience and tradition to which the several classes and members of the community are subject. So, then, the change which has come over the scientific point of view between pre-Darwinian and post-Darwinian times is to be explained, at least in great part, by the changing circumstances of life, and therefore of habituation, among the people of Christendom during the life-history of modern science. But the growth of a scientific point of view begins farther back than modern Christendom, and a record of its growth would be a record of the growth of human culture. Modern science demands a genetic account of the phenomena with which it deals, and a genetic inquiry into the scientific point of view necessarily will have to make up its account with the earlier phases of cultural growth. A life-history of human culture is a large topic, not to be attempted here even in the sketchiest outline. The most that can be attempted is a hasty review of certain scattered questions and salient points in this life-history. * * * * * In what manner and with what effect the idle curiosity of mankind first began to tame the facts thrown in its way, far back in the night of time, and to break them in under a scheme of habitual interpretation; what may have been the earliest norms of systematic knowledge, such as would serve the curiosity of the earliest generations of men in a way analogous to the service rendered the curiosity of later generations by scientific inquiry--all that is, of course, a matter of long-range conjecture, more or less wild, which cannot be gone into here. But among such peoples of the lower cultures as have been consistently observed, norms of knowledge and schemes for its systematization are always found. These norms and systems of knowledge are naïve and crude, perhaps, but there is fair ground for presuming that out of the like norms and systems in the remoter ages of our own antecedents have grown up the systems of knowledge cultivated by the peoples of history and by their representatives now living. It is not unusual to say that the primitive systems of knowledge are constructed on animistic lines; that animistic sequence is the rule to which the facts are broken in. This seems to be true, if "animism" be construed in a sufficiently naïve and inchoate sense. But this is not the whole case. In their higher generalisations, in what Powell calls their "sophiology," it appears that the primitive peoples are guided by animistic norms; they make up their cosmological schemes, and the like, in terms of personal or quasi-personal activity, and the whole is thrown into something of a dramatic form. Through the early cosmological lore runs a dramatic consistency which imputes something in the way of initiative and propensity to the phenomena that are to be accounted for. But this dramatisation of the facts, the accounting for phenomena in terms of spiritual or quasi-spiritual initiative, is by no means the whole case of primitive men's systematic knowledge of facts. Their theories are not all of the nature of dramatic legend, myth, or animistic life-history, although the broader and more picturesque generalisations may take that form. There always runs along by the side of these dramaturgic life-histories, and underlying them, an obscure system of generalisations in terms of matter-of-fact. The system of matter-of-fact generalisations, or theories, is obscurer than the dramatic generalisations only in the sense that it is left in the background as being less picturesque and of less vital interest, not in the sense of being less familiar, less adequately apprehended, or less secure. The peoples of the lower cultures "know" that the broad scheme of things is to be explained in terms of creation, perhaps of procreation, gestation, birth, growth, life and initiative; and these matters engross the attention and stimulate speculation. But they know equally well the matter of fact that water will run down hill, that two stones are heavier than one of them, that an edge-tool will cut softer substances, that two things may be tied together with a string, that a pointed stick may be stuck in the ground, and the like. There is no range of knowledge that is held more securely by any people than such matters of fact; and these are generalisations from experience; they are theoretical knowledge, and they are a matter of course. They underlie the dramatical generalisations of the broad scheme of things, and are so employed in the speculations of the myth-makers and the learned. It may be that the exceptional efficiency of a given edge-tool, _e.g._, will be accounted for on animistic or quasi-personal grounds,--grounds of magical efficacy; but it is the exceptional behavior of such a tool that calls for explanation on the higher ground of animistic potency, not its work-day performance of common work. So also if an edge-tool should fail to do what is expected of it as a matter of course, its failure may require an explanation in other terms than matter-of-fact. But all that only serves to bring into evidence the fact that a scheme of generalisations in terms of matter-of-fact is securely held and is made use of as a sufficient and ultimate explanation of the more familiar phenomena of experience. These commonplace matter-of-fact generalisations are not questioned and do not clash with the higher scheme of things. All this may seem like taking pains about trivialities. But the data with which any scientific inquiry has to do are trivialities in some other bearing than that one in which they are of account. In all succeeding phases of culture, developmentally subsequent to the primitive phase supposed above, there is found a similar or analogous division of knowledge between a higher range of theoretical explanations of phenomena, an ornate scheme of things, on the one hand, and such an obscure range of matter-of-fact generalisations as is here spoken of, on the other hand. And the evolution of the scientific point of view is a matter of the shifting fortunes which have in the course of cultural growth overtaken the one and the other of these two divergent methods of apprehending and systematising the facts of experience. The historians of human culture have, no doubt justly, commonly dealt with the mutations that have occurred on the higher levels of intellectual enterprise, in the more ambitious, more picturesque, and less secure of these two contrasted ranges of theoretical knowledge; while the lower range of generalisations, which has to do with work-day experience, has in great part been passed over with scant ceremony as lying outside the current of ideas, and as belonging rather among the things which engage the attention than among the modes, expedients and creations of this attention itself. There is good reason for this relative neglect of the work-day matters of fact. It is on the higher levels of speculative generalisation that the impressive mutations in the development of thought have taken place, and that the shifting of points of view and the clashing of convictions have drawn men into controversy and analysis of their ideas and have given rise to schools of thought. The matter-of-fact generalisations have met with relatively few adventures and have afforded little scope for intellectual initiative and profoundly picturesque speculation. On the higher levels speculation is freer, the creative spirit has some scope, because its excursions are not so immediately and harshly checked by material facts. In these speculative ranges of knowledge it is possible to form and to maintain habits of thought which shall be consistent with themselves and with the habit of mind and run of tradition prevalent in the community at the time, though not thereby consistent with the material actualities of life in the community. Yet this range of speculative generalisation, which makes up the higher learning of the barbarian culture, is also controlled, checked, and guided by the community's habits of life; it, too, is an integral part of the scheme of life and is an outcome of the habituation enforced by experience. But it does not rest immediately on men's dealings with the refractory phenomena of brute creation, nor is it guided, undisguised and directly, by the habitual material (industrial) occupations. The fabric of institutions intervenes between the material exigencies of life and the speculative scheme of things. The higher theoretical knowledge, that body of tenets which rises to the dignity of a philosophical or scientific system, in the early culture, is a complex of habits of thought which reflect the habits of life embodied in the institutional structure of society; while the lower, matter-of-fact generalisations of work-day efficiency--the trivial matters of course--reflect the workmanlike habits of life enforced by the commonplace material exigencies under which men live. The distinction is analogous, and indeed, closely related, to the distinction between "intangible" and "tangible" assets. And the institutions are more flexible, they involve or admit a larger margin of error, or of tolerance, than the material exigencies. The latter are systematised into what economists have called "the state of the industrial arts," which enforce a somewhat rigorous standardisation of whatever knowledge falls within their scope; whereas the institutional scheme is a matter of law and custom, politics and religion, taste and morals, on all of which matters men have opinions and convictions, and on which all men "have a right to their own opinions." The scheme of institutions is also not necessarily uniform throughout the several classes of society; and the same institution (as, _e.g._, slavery, ownership, or royalty) does not impinge with the same effect on all parties touched by it. The discipline of any institution of servitude, _e.g._, is not the same for the master as for the serf, etc. If there is a considerable institutional discrepancy between an upper and a lower class in the community, leading to divergent lines of habitual interest or discipline; if by force of the cultural scheme the institutions of society are chiefly in the keeping of one class, whose attention is then largely engrossed with the maintenance of the scheme of law and order; while the workmanlike activities are chiefly in the hands of another class, in whose apprehension the maintenance of law and order is at the best a wearisome tribulation, there is likely to be a similarly considerable divergence or discrepancy between the speculative knowledge, cultivated primarily by the upper class, and the work-day knowledge which is primarily in the keeping of the lower class. Such, in particular, will be the case if the community is organised on a coercive plan, with well-marked ruling and subject classes. The important and interesting institutions in such a case, those institutions which fill a large angle in men's vision and carry a great force of authenticity, are the institutions of coercive control, differential authority and subjection, personal dignity and consequence; and the speculative generalisations, the institutions of the realm of knowledge, are created in the image of these social institutions of status and personal force, and fall into a scheme drawn after the plan of the code of honor. The work-day generalisations, which emerge from the state of the industrial arts, concomitantly fall into a deeper obscurity, answering to the depth of indignity to which workmanlike efficiency sinks under such a cultural scheme; and they can touch and check the current speculative knowledge only remotely and incidentally. Under such a bifurcate scheme of culture, with its concomitant two-cleft systematisation of knowledge, "reality" is likely to be widely dissociated from fact--that is to say, the realities and verities which are accepted as authentic and convincing on the plane of speculative generalisation; while science has no show--that is to say, science in that modern sense of the term which implies a close contact, if not a coincidence, of reality with fact. Whereas, if the institutional fabric, the community's scheme of life, changes in such a manner as to throw the work-day experience into the foreground of attention and to center the habitual interest of the people on the immediate material relations of men to the brute actualities, then the interval between the speculative realm of knowledge, on the one hand, and the work-day generalisations of fact, on the other hand, is likely to lessen, and the two ranges of knowledge are likely to converge more or less effectually upon a common ground. When the growth of culture falls into such lines, these two methods and norms of theoretical formulation may presently come to further and fortify one another, and something in the way of science has at least a chance to arise. * * * * * On this view there is a degree of interdependence between the cultural situation and the state of theoretical inquiry. To illustrate this interdependence, or the concomitance between the cultural scheme and the character of theoretical speculation, it may be in place to call to mind certain concomitant variations of a general character which occur in the lower cultures between the scheme of life and the scheme of knowledge. In this tentative and fragmentary presentation of evidence there is nothing novel to be brought forward; still less is there anything to be offered which carries the weight of authority. On the lower levels of culture, even more decidedly than on the higher, the speculative systematisation of knowledge is prone to take the form of theology (mythology) and cosmology. This theological and cosmological lore serves the savage and barbaric peoples as a theoretical account of the scheme of things, and its characteristic traits vary in response to the variations of the institutional scheme under which the community lives. In a prevailingly peaceable agricultural community, such, _e.g._, as the more peaceable Pueblo Indians or the more settled Indians of the Middle West, there is little coercive authority, few and slight class distinctions involving superiority and inferiority; property rights are few, slight and unstable; relationship is likely to be counted in the female line. In such a culture the cosmological lore is likely to offer explanations of the scheme of things in terms of generation or germination and growth. Creation by fiat is not obtrusively or characteristically present. The laws of nature bear the character of an habitual behavior of things, rather than that of an authoritative code of ordinances imposed by an overruling providence. The theology is likely to be polytheistic in an extreme degree and in an extremely loose sense of the term, embodying relatively little of the suzerainty of God. The relation of the deities to mankind is likely to be that of consanguinity, and as if to emphasise the peaceable, non-coercive character of the divine order of things, the deities are, in the main, very apt to be females. The matters of interest dealt with in the cosmological theories are chiefly matters of the livelihood of the people, the growth and care of the crops, and the promotion of industrial ways and means. With these phenomena of the peaceable culture may be contrasted the order of things found among a predatory pastoral people--and pastoral peoples tend strongly to take on a predatory cultural scheme. Such a people will adopt male deities, in the main, and will impute to them a coercive, imperious, arbitrary animus and a degree of princely dignity. They will also tend strongly to a monotheistic, patriarchal scheme of divine government; to explain things in terms of creative fiat; and to a belief in the control of the natural universe by rules imposed by divine ordinance. The matters of prime consequence in this theology are matters of the servile relation of man to God, rather than the details of the quest of a livelihood. The emphasis falls on the glory of God rather than on the good of man. The Hebrew scriptures, particularly the Jahvistic elements, show such a scheme of pastoral cultural and predatory theoretical generalisations. The learning cultivated on the lower levels of culture might be gone into at some length if space and time permitted, but even what has been said may serve to show, in the most general way, what are the characteristic marks of this savage and barbarian lore. A similarly summary characterisation of a cultural situation nearer home will bear more directly on the immediate topic of inquiry. The learning of mediæval Christendom shows such a concomitance between the scheme of knowledge and the scheme of institutions, somewhat analogous to the barbaric Hebrew situation. The mediæval scheme of institutions was of a coercive, authoritative character, essentially a scheme of graded mastery and graded servitude, in which a code of honor and a bill of differential dignity held the most important place. The theology of that time was of a like character. It was a monotheistic, or rather a monarchical system, and of a despotic complexion. The cosmological scheme was drawn in terms of fiat; and the natural philosophy was occupied, in the main and in its most solemn endeavors, with the corollaries to be subsumed under the divine fiat. When the philosophical speculation dealt with facts it aimed to interpret them into systematic consistency with the glory of God and the divine purpose. The "realities" of the scholastic lore were spiritual, quasi-personal, intangible, and fell into a scale of differential dignity and prepotency. Matter-of-fact knowledge and work-day information were not then fit topics of dignified inquiry. The interval, or discrepancy, between reality and actuality was fairly wide. Throughout that era, of course, work-day knowledge also continually increased in volume and consistency; technological proficiency was gaining; the effective control of natural processes was growing larger and more secure; showing that matter-of-fact theories drawn from experience were being extended and were made increasing use of. But all this went on in the field of industry; the matter-of-fact theories were accepted as substantial and ultimate only for the purposes of industry, only as technological maxims, and were beneath the dignity of science. With the transition to modern times industry comes into the foreground in the west-European scheme of life, and the institutions of European civilisation fall into a more intimate relation with the exigencies of industry and technology. The technological range of habituation progressively counts for more in the cultural complex, and the discrepancy between the technological discipline and the discipline of law and order under the institutions then in force grows progressively less. The institutions of law and order take on a more impersonal, less coercive character. Differential dignity and invidious discriminations between classes gradually lose force. The industry which so comes into the foreground and so affects the scheme of institutions is peculiar in that its most obvious and characteristic trait is the workmanlike initiative and efficiency of the individual handicraftsman and the individual enterprise of the petty trader. The technology which embodies the theoretical substance of this industry is a technology of workmanship, in which the salient factors are personal skill, force and diligence. Such a technology, running as it does in great part on personal initiative, capacity, and application, approaches nearer to the commonplace features of the institutional fabric than many another technological system might; and its disciplinary effects in some considerable measure blend with those of the institutional discipline. The two lines of habituation, in the great era of handicraft and petty trade, even came to coalesce and fortify one another; as in the organisation of the craft gilds and of the industrial towns. Industrial life and usage came to intrude creatively into the cultural scheme on the one hand and into the scheme of authentic knowledge on the other hand. So the body of matter-of-fact knowledge, in modern times, is more and more drawn into the compass of theoretical inquiry; and theoretical inquiry takes on more and more of the animus and method of technological generalisation. But the matter-of-fact elements so drawn in are construed in terms of workmanlike initiative and efficiency, as required by the technological preconceptions of the era of handicraft. In this way, it may be conceived, modern science comes into the field under the cloak of technology and gradually encroaches on the domain of authentic theory previously held by other, higher, nobler, more profound, more spiritual, more intangible conceptions and systems of knowledge. In this early phase of modern science its central norm and universal solvent is the concept of workmanlike initiative and efficiency. This is the new organon. Whatever is to be explained must be reduced to this notation and explained in these terms; otherwise the inquiry does not come to rest. But when the requirements of this notation in terms of workmanship have been duly fulfilled the inquiry does come to rest. By the early decades of the nineteenth century, with a passable degree of thoroughness, other grounds of validity and other interpretations of phenomena, other vouchers for truth and reality, had been eliminated from the quest of authentic knowledge and from the terms in which theoretical results were conceived or expressed. The new organon had made good its pretensions. In this movement to establish the hegemony of workmanlike efficiency--under the style and title of the "law of causation," or of "efficient cause"--in the realm of knowledge, the English-speaking communities took the lead after the earlier scientific onset of the south-European communities had gone up in the smoke of war, politics and religion during the great era of state-making. The ground of this British lead in science is apparently the same as that of the British lead in technology which came to a head in the Industrial Revolution; and these two associated episodes of European civilisation are apparently both traceable to the relatively peaceable run of life, and so of habituation, in the English-speaking communities, as contrasted with the communities of the continent.[3] Along with the habits of thought peculiar to the technology of handicraft, modern science also took over and assimilated much of the institutional preconceptions of the era of handicraft and petty trade. The "natural laws," with the formulation of which this early modern science is occupied, are the rules governing natural "uniformities of sequence"; and they punctiliously formulate the due procedure of any given cause creatively working out the achievement of a given effect, very much as the craft rules sagaciously specified the due routine for turning out a staple article of merchantable goods. But these "natural laws" of science are also felt to have something of that integrity and prescriptive moral force that belongs to the principles of the system of "natural rights" which the era of handicraft has contributed to the institutional scheme of later times. The natural laws were not only held to be true to fact, but they were also felt to be right and good. They were looked upon as intrinsically meritorious and beneficent, and were held to carry a sanction of their own. This habit of uncritically imputing merit and equity to the "natural laws" of science continued in force through much of the nineteenth century; very much as the habitual acceptance of the principles of "natural rights" has held on by force of tradition long after the exigencies of experience out of which these "rights" sprang ceased to shape men's habits of life.[4] This traditional attitude of submissive approval toward the "natural laws" of science has not yet been wholly lost, even among the scientists of the passing generation, many of whom have uncritically invested these "laws" with a prescriptive rectitude and excellence; but so far, at least, has this animus progressed toward disuse that it is now chiefly a matter for expatiation in the pulpit, the accredited vent for the exudation of effete matter from the cultural organism. The traditions of the handicraft technology lasted over as a commonplace habit of thought in science long after that technology had ceased to be the decisive element in the industrial situation; while a new technology, with its inculcation of new habits of thought, new preconceptions, gradually made its way among the remnants of the old, altering them, blending with them, and little by little superseding them. The new technological departure, which made its first great epoch in the so-called industrial revolution, in the technological ascendancy of the machine-process, brought a new and characteristic discipline into the cultural situation. The beginnings of the machine-era lie far back, no doubt; but it is only of late, during the past century at the most, that the machine-process can be said to have come into the dominant place in the technological scheme; and it is only later still that its discipline has, even in great part, remodeled the current preconceptions as to the substantial nature of what goes on in the current of phenomena whose changes excite the scientific curiosity. It is only relatively very lately, whether in technological work or in scientific inquiry, that men have fallen into the habit of thinking in terms of process rather than in terms of the workmanlike efficiency of a given cause working to a given effect. These machine-made preconceptions of modern science, being habits of thought induced by the machine technology in industry and in daily life, have of course first and most consistently affected the character of those sciences whose subject matter lies nearest to the technological field of the machine-process; and in these material sciences the shifting to the machine-made point of view has been relatively very consistent, giving a highly impersonal interpretation of phenomena in terms of consecutive change, and leaving little of the ancient preconceptions of differential reality or creative causation. In such a science as physics or chemistry, _e.g._, we are threatened with the disappearance or dissipation of all stable and efficient substances; their place being supplied, or their phenomena being theoretically explained, by appeal to unremitting processes of inconceivably high-pitched consecutive change. In the sciences which lie farther afield from the technological domain, and which, therefore, in point of habituation, are remoter from the center of disturbance, the effect of the machine discipline may even yet be scarcely appreciable. In such lore as ethics, _e.g._, or political theory, or even economics, much of the norms of the régime of handicraft still stands over; and very much of the institutional preconceptions of natural rights, associated with the régime of handicraft in point of genesis, growth and content, is not only still intact in this field of inquiry, but it can scarcely even be claimed that there is ground for serious apprehension of its prospective obsolescence. Indeed, something even more ancient than handicraft and natural rights may be found surviving in good vigor in this "moral" field of inquiry, where tests of authenticity and reality are still sought and found by those who cultivate these lines of inquiry that lie beyond the immediate sweep of the machine's discipline. Even the evolutionary process of cumulative causation as conceived by the adepts of these sciences is infused with a preternatural, beneficent trend; so that "evolution" is conceived to mean amelioration or "improvement." The metaphysics of the machine technology has not yet wholly, perhaps not mainly, superseded the metaphysics of the code of honor in those lines of inquiry that have to do with human initiative and aspiration. Whether such a shifting of the point of view in these sciences shall ever be effected is still an open question. Here there still are spiritual verities which transcend the sweep of consecutive change. That is to say, there are still current habits of thought which definitively predispose their bearers to bring their inquiries to rest on grounds of differential reality and invidious merit. FOOTNOTES: [1] Read before the Kosmos Club, at the University of California, May 4, 1908. Reprinted by permission from the _University of California Chronicle_, Vol. X, No. 4. [2] It is by no means unusual for modern scientists to deny the truth of this characterization, so far as regards this alleged recourse to the concept of causation. They deny that such a concept--of efficiency, activity, and the like--enters, or can legitimately enter, into their work, whether as an instrument of research or as a means or guide to theoretical formulation. They even deny the substantial continuity of the sequence of changes that excite their scientific attention. This attitude seems particularly to commend itself to those who by preference attend to the mathematical formulations of theory and who are chiefly occupied with proving up and working out details of the system of theory which have previously been left unsettled or uncovered. The concept of causation is recognized to be a metaphysical postulate, a matter of imputation, not of observation; whereas it is claimed that scientific inquiry neither does nor can legitimately, nor, indeed, currently, make use of a postulate more metaphysical than the concept of an idle concomitance of variation, such as is adequately expressed in terms of mathematical function. The contention seems sound, to the extent that the materials--essentially statistical materials--with which scientific inquiry is occupied are of this non-committal character, and that the mathematical formulations of theory include no further element than that of idle variation. Such is necessarily the case because causation is a fact of imputation, not of observation, and so cannot be included among the data; and because nothing further than non-committal variation can be expressed in mathematical terms. A bare notation of quantity can convey nothing further. If it were the intention to claim only that the conclusions of the scientists are, or should be, as a matter of conservative caution, overtly stated in terms of function alone, then the contention might well be allowed. Causal sequence, efficiency or continuity is, of course, a matter of metaphysical imputation. It is not a fact of observation, and cannot be asserted of the facts of observation except as a trait imputed to them. It is so imputed, by scientists and others, as a matter of logical necessity, as a basis of a systematic knowledge of the facts of observation. Beyond this, in their exercise of scientific initiative, as well as in the norms which guide the systematisation of scientific results, the contention will not be made good--at least not for the current phase of scientific knowledge. The claim, indeed, carries its own refutation. In making such a claim, both in rejecting the imputation of metaphysical postulates and in defending their position against their critics, the arguments put forward by the scientists run in causal terms. For the polemical purposes, where their antagonists are to be scientifically confuted, the defenders of the non-committal postulate of concomitance find that postulate inadequate. They are not content, in this precarious conjuncture, simply to attest a relation of idle quantitative concomitance (mathematical function) between the allegations of their critics, on the one hand, and their own controversial exposition of these matters on the other hand. They argue that they do not "make use of" such a postulate as "efficiency," whereas they claim to "make use of" the concept of function. But "make use of" is not a notion of functional variation but of causal efficiency in a somewhat gross and highly anthropomorphic form. The relation between their own thinking and the "principles" which they "apply" or the experiments and calculations which they "institute" in their "search" for facts, is not held to be of this non-committal kind. It will not be claimed that the shrewd insight and the bold initiative of a man eminent in the empirical sciences bear no more efficient or consequential a relation than that of mathematical function to the ingenious experiments by which he tests his hypotheses and extends the secure bounds of human knowledge. Least of all is the masterly experimentalist himself in a position to deny that his intelligence counts for something more efficient than idle concomitance in such a case. The connection between his premises, hypotheses, and experiments, on the one hand, and his theoretical results, on the other hand, is not felt to be of the nature of mathematical function. Consistently adhered to, the principle of "function" or concomitant variation precludes recourse to experiment, hypotheses or inquiry--indeed, it precludes "recourse" to anything whatever. Its notation does not comprise anything so anthropomorphic. The case is illustrated by the latter-day history of theoretical physics. Of the sciences which affect a non-committal attitude in respect of the concept of efficiency and which claim to get along with the notion of mathematical function alone, physics is the most outspoken and the one in which the claim has the best _prima facie_ validity. At the same time, latter-day physicists, for a hundred years or more, have been much occupied with explaining how phenomena which to all appearance involve action at a distance do not involve action at a distance at all. The greater theoretical achievements of physics during the past century lie within the sweep of this (metaphysical) principle that action at a distance does not take place, that apparent action at a distance must be explained by effective contact, through a continuum, or by a material transference. But this principle is nothing better than an unreasoning repugnance on the part of the physicists to admitting action at a distance. The requirement of a continuum involves a gross form of the concept of efficient causation. The "functional" concept, concomitant variation, requires no contact and no continuum. Concomitance at a distance is quite as simple and convincing a notion as concomitance within contact or by the intervention of a continuum, if not more so. What stands in the way of its acceptance is the irrepressible anthropomorphism of the physicists. And yet the great achievements of physics are due to the initiative of men animated with this anthropomorphic repugnance to the notion of concomitant variation at a distance. All the generalisations on undulatory motion and translation belong here. The latter-day researches in light, electrical transmission, the theory of ions, together with what is known of the obscure and late-found radiations and emanations, are to be credited to the same metaphysical preconception, which is never absent in any "scientific" inquiry in the field of physical science. It is only the "occult" and "Christian" "Sciences" that can dispense with this metaphysical postulate and take recourse to "absent treatment." [3] A broad exception may perhaps be taken at this point, to the effect that this sketch of the growth of the scientific animus overlooks the science of the Ancients. The scientific achievements of classical antiquity are a less obscure topic to-day than ever before during modern times, and the more there is known of them the larger is the credit given them. But it is to be noted that, (_a_) the relatively large and free growth of scientific inquiry in classical antiquity is to be found in the relatively peaceable and industrial Greek communities (with an industrial culture of unknown pre-Hellenic antiquity), and (_b_) that the sciences best and chiefly cultivated were those which rest on a mathematical basis, if not mathematical sciences in the simpler sense of the term. Now, mathematics occupies a singular place among the sciences, in that it is, in its pure form, a logical discipline simply; its subject matter being the logic of quantity, and its researches being of the nature of an analysis of the intellect's modes of dealing with matters of quantity. Its generalisations are generalisations of logical procedure, which are tested and verified by immediate self-observation. Such a science is in a peculiar degree, but only in a peculiar degree, independent of the detail-discipline of daily life, whether technological or institutional; and, given the propensity--the intellectual enterprise, or "idle curiosity"--to go into speculation in such a field, the results can scarcely vary in a manner to make the variants inconsistent among themselves; nor need the state of institutions or the state of the industrial arts seriously color or distort such analytical work in such a field. Mathematics is peculiarly independent of cultural circumstances, since it deals analytically with mankind's native gifts of logic, not with the ephemeral traits acquired by habituation. [4] "Natural laws," which are held to be not only correct formulations of the sequence of cause and effect in a given situation but also meritoriously right and equitable rules governing the run of events, necessarily impute to the facts and events in question a tendency to a good and equitable, if not beneficent, consummation; since it is necessarily the consummation, the effect considered as an accomplished outcome, that is to be adjudged good and equitable, if anything. Hence these "natural laws," as traditionally conceived, are laws governing the accomplishment of an end--that is to say, laws as to how a sequence of cause and effect comes to rest in a final term. WHY IS ECONOMICS NOT AN EVOLUTIONARY SCIENCE?[1] M. G. De Lapouge recently said, "Anthropology is destined to revolutionise the political and the social sciences as radically as bacteriology has revolutionised the science of medicine."[2] In so far as he speaks of economics, the eminent anthropologist is not alone in his conviction that the science stands in need of rehabilitation. His words convey a rebuke and an admonition, and in both respects he speaks the sense of many scientists in his own and related lines of inquiry. It may be taken as the consensus of those men who are doing the serious work of modern anthropology, ethnology, and psychology, as well as of those in the biological sciences proper, that economics is helplessly behind the times, and unable to handle its subject-matter in a way to entitle it to standing as a modern science. The other political and social sciences come in for their share of this obloquy, and perhaps on equally cogent grounds. Nor are the economists themselves buoyantly indifferent to the rebuke. Probably no economist to-day has either the hardihood or the inclination to say that the science has now reached a definitive formulation, either in the detail of results or as regards the fundamental features of theory. The nearest recent approach to such a position on the part of an economist of accredited standing is perhaps to be found in Professor Marshall's Cambridge address of a year and a half ago.[3] But these utterances are so far from the jaunty confidence shown by the classical economists of half a century ago that what most forcibly strikes the reader of Professor Marshall's address is the exceeding modesty and the uncalled-for humility of the spokesman for the "old generation." With the economists who are most attentively looked to for guidance, uncertainty as to the definitive value of what has been and is being done, and as to what we may, with effect, take to next, is so common as to suggest that indecision is a meritorious work. Even the Historical School, who made their innovation with so much home-grown applause some time back, have been unable to settle down contentedly to the pace which they set themselves. The men of the sciences that are proud to own themselves "modern" find fault with the economists for being still content to occupy themselves with repairing a structure and doctrines and maxims resting on natural rights, utilitarianism, and administrative expediency. This aspersion is not altogether merited, but is near enough to the mark to carry a sting. These modern sciences are evolutionary sciences, and their adepts contemplate that characteristic of their work with some complacency. Economics is not an evolutionary science--by the confession of its spokesmen; and the economists turn their eyes with something of envy and some sense of baffled emulation to these rivals that make broad their phylacteries with the legend, "Up to date." Precisely wherein the social and political sciences, including economics, fall short of being evolutionary sciences, is not so plain. At least, it has not been satisfactorily pointed out by their critics. Their successful rivals in this matter--the sciences that deal with human nature among the rest--claim as their substantial distinction that they are realistic: they deal with facts. But economics, too, is realistic in this sense: it deals with facts, often in the most painstaking way, and latterly with an increasingly strenuous insistence on the sole efficacy of data. But this "realism" does not make economics an evolutionary science. The insistence on data could scarcely be carried to a higher pitch than it was carried by the first generation of the Historical School; and yet no economics is farther from being an evolutionary science than the received economics of the Historical School. The whole broad range of erudition and research that engaged the energies of that school commonly falls short of being science, in that, when consistent, they have contented themselves with an enumeration of data and a narrative account of industrial development, and have not presumed to offer a theory of anything or to elaborate their results into a consistent body of knowledge. Any evolutionary science, on the other hand, is a close-knit body of theory. It is a theory of a process, of an unfolding sequence. But here, again, economics seems to meet the test in a fair measure, without satisfying its critics that its credentials are good. It must be admitted, _e.g._, that J. S. Mill's doctrines of production, distribution, and exchange, are a theory of certain economic processes, and that he deals in a consistent and effective fashion with the sequences of fact that make up his subject-matter. So, also, Cairnes's discussion of normal value, of the rate of wages, and of international trade, are excellent instances of a theoretical handling of economic processes of sequence and the orderly unfolding development of fact. But an attempt to cite Mill and Cairnes as exponents of an evolutionary economics will produce no better effect than perplexity, and not a great deal of that. Very much of monetary theory might be cited to the same purpose and with the like effect. Something similar is true even of late writers who have avowed some penchant for the evolutionary point of view; as, _e.g._, Professor Hadley,--to cite a work of unquestioned merit and unusual reach. Measurably, he keeps the word of promise to the ear; but any one who may cite his _Economics_ as having brought political economy into line as an evolutionary science will convince neither himself nor his interlocutor. Something to the like effect may fairly be said of the published work of that later English strain of economists represented by Professors Cunningham and Ashley, and Mr. Cannan, to name but a few of the more eminent figures in the group. Of the achievements of the classical economists, recent and living, the science may justly be proud; but they fall short of the evolutionist's standard of adequacy, not in failing to offer a theory of a process or of a developmental relation, but through conceiving their theory in terms alien to the evolutionist's habits of thought. The difference between the evolutionary and the pre-evolutionary sciences lies not in the insistence on facts. There was a great and fruitful activity in the natural sciences in collecting and collating facts before these sciences took on the character which marks them as evolutionary. Nor does the difference lie in the absence of efforts to formulate and explain schemes of process, sequence, growth, and development in the pre-evolutionary days. Efforts of this kind abounded, in number and diversity; and many schemes of development, of great subtlety and beauty, gained a vogue both as theories of organic and inorganic development and as schemes of the life history of nations and societies. It will not even hold true that our elders overlooked the presence of cause and effect in formulating their theories and reducing their data to a body of knowledge. But the terms which were accepted as the definitive terms of knowledge were in some degree different in the early days from what they are now. The terms of thought in which the investigators of some two or three generations back definitively formulated their knowledge of facts, in their last analyses, were different in kind from the terms in which the modern evolutionist is content to formulate his results. The analysis does not run back to the same ground, or appeal to the same standard of finality or adequacy, in the one case as in the other. The difference is a difference of spiritual attitude or point of view in the two contrasted generations of scientists. To put the matter in other words, it is a difference in the basis of valuation of the facts for the scientific purpose, or in the interest from which the facts are appreciated. With the earlier as with the later generation the basis of valuation of the facts handled is, in matters of detail, the causal relation which is apprehended to subsist between them. This is true to the greatest extent for the natural sciences. But in their handling of the more comprehensive schemes of sequence and relation--in their definitive formulation of the results--the two generations differ. The modern scientist is unwilling to depart from the test of causal relation or quantitative sequence. When he asks the question, Why? he insists on an answer in terms of cause and effect. He wants to reduce his solution of all problems to terms of the conservation of energy or the persistence of quantity. This is his last recourse. And this last recourse has in our time been made available for the handling of schemes of development and theories of a comprehensive process by the notion of a cumulative causation. The great deserts of the evolutionist leaders--if they have great deserts as leaders--lie, on the one hand, in their refusal to go back of the colorless sequence of phenomena and seek higher ground for their ultimate syntheses, and, on the other hand, in their having shown how this colorless impersonal sequence of cause and effect can be made use of for theory proper, by virtue of its cumulative character. For the earlier natural scientists, as for the classical economists, this ground of cause and effect is not definitive. Their sense of truth and substantiality is not satisfied with a formulation of mechanical sequence. The ultimate term in their systematisation of knowledge is a "natural law." This natural law is felt to exercise some sort of a coercive surveillance over the sequence of events, and to give a spiritual stability and consistence to the causal relation at any given juncture. To meet the high classical requirement, a sequence--and a developmental process especially--must be apprehended in terms of a consistent propensity tending to some spiritually legitimate end. When facts and events have been reduced to these terms of fundamental truth and have been made to square with the requirements of definitive normality, the investigator rests his case. Any causal sequence which is apprehended to traverse the imputed propensity in events is a "disturbing factor." Logical congruity with the apprehended propensity is, in this view, adequate ground of procedure in building up a scheme of knowledge or of development. The objective point of the efforts of the scientists working under the guidance of this classical tradition, is to formulate knowledge in terms of absolute truth; and this absolute truth is a spiritual fact. It means a coincidence of facts with the deliverances of an enlightened and deliberate common sense. The development and the attenuation of this preconception of normality or of a propensity in events might be traced in detail from primitive animism down through the elaborate discipline of faith and metaphysics, overruling Providence, order of nature, natural rights, natural law, underlying principles. But all that may be necessary here is to point out that, by descent and by psychological content, this constraining normality is of a spiritual kind. It is for the scientific purpose an imputation of spiritual coherence to the facts dealt with. The question of interest is how this preconception of normality has fared at the hands of modern science, and how it has come to be superseded in the intellectual primacy by the latter-day preconception of a non-spiritual sequence. This question is of interest because its answer may throw light on the question as to what chance there is for the indefinite persistence of this archaic habit of thought in the methods of economic science. * * * * * Under primitive conditions, men stand in immediate personal contact with the material facts of the environment; and the force and discretion of the individual in shaping the facts of the environment count obviously, and to all appearance solely, in working out the conditions of life. There is little of impersonal or mechanical sequence visible to primitive men in their every-day life; and what there is of this kind in the processes of brute nature about them is in large part inexplicable and passes for inscrutable. It is accepted as malignant or beneficent, and is construed in the terms of personality that are familiar to all men at first hand,--the terms known to all men by first-hand knowledge of their own acts. The inscrutable movements of the seasons and of the natural forces are apprehended as actions guided by discretion, will power, or propensity looking to an end, much as human actions are. The processes of inanimate nature are agencies whose habits of life are to be learned, and who are to be coerced, outwitted, circumvented, and turned to account, much as the beasts are. At the same time the community is small, and the human contact of the individual is not wide. Neither the industrial life nor the non-industrial social life forces upon men's attention the ruthless impersonal sweep of events that no man can withstand or deflect, such as becomes visible in the more complex and comprehensive life process of the larger community of a later day. There is nothing decisive to hinder men's knowledge of facts and events being formulated in terms of personality--in terms of habit and propensity and will power. As time goes on and as the situation departs from this archaic character,--where it does depart from it,--the circumstances which condition men's systematisation of facts change in such a way as to throw the impersonal character of the sequence of events more and more into the foreground. The penalties for failure to apprehend facts in dispassionate terms fall surer and swifter. The sweep of events is forced home more consistently on men's minds. The guiding hand of a spiritual agency or a propensity in events becomes less readily traceable as men's knowledge of things grows ampler and more searching. In modern times, and particularly in the industrial countries, this coercive guidance of men's habits of thought in the realistic direction has been especially pronounced; and the effect shows itself in a somewhat reluctant but cumulative departure from the archaic point of view. The departure is most visible and has gone farthest in those homely branches of knowledge that have to do immediately with modern mechanical processes, such as engineering designs and technological contrivances generally. Of the sciences, those have wandered farthest on this way (of integration or disintegration, according as one may choose to view it) that have to do with mechanical sequence and process; and those have best and longest retained the archaic point of view intact which--like the moral, social, or spiritual sciences--have to do with process and sequence that is less tangible, less traceable by the use of the senses, and that therefore less immediately forces upon the attention the phenomenon of sequence as contrasted with that of propensity. There is no abrupt transition from the pre-evolutionary to the post-evolutionary standpoint. Even in those natural sciences which deal with the processes of life and the evolutionary sequence of events the concept of dispassionate cumulative causation has often and effectively been helped out by the notion that there is in all this some sort of a meliorative trend that exercises a constraining guidance over the course of causes and effects. The faith in this meliorative trend as a concept useful to the science has gradually weakened, and it has repeatedly been disavowed; but it can scarcely be said to have yet disappeared from the field. The process of change in the point of view, or in the terms of definitive formulation of knowledge, is a gradual one; and all the sciences have shared, though in an unequal degree, in the change that is going forward. Economics is not an exception to the rule, but it still shows too many reminiscences of the "natural" and the "normal," of "verities" and "tendencies," of "controlling principles" and "disturbing causes" to be classed as an evolutionary science. This history of the science shows a long and devious course of disintegrating animism,--from the days of the scholastic writers, who discussed usury from the point of view of its relation to the divine suzerainty, to the Physiocrats, who rested their case on an "_ordre naturel_" and a "_loi naturelle_" that decides what is substantially true and, in a general way, guides the course of events by the constraint of logical congruence. There has been something of a change from Adam Smith, whose recourse in perplexity was to the guidance of "an unseen hand," to Mill and Cairnes, who formulated the laws of "natural" wages and "normal" value, and the former of whom was so well content with his work as to say, "Happily, there is nothing in the laws of Value which remains for the present or any future writer to clear up: the theory of the subject is complete."[4] But the difference between the earlier and the later point of view is a difference of degree rather than of kind. The standpoint of the classical economists, in their higher or definitive syntheses and generalisations, may not inaptly be called the standpoint of ceremonial adequacy. The ultimate laws and principles which they formulated were laws of the normal or the natural, according to a preconception regarding the ends to which, in the nature of things, all things tend. In effect, this preconception imputes to things a tendency to work out what the instructed common sense of the time accepts as the adequate or worthy end of human effort. It is a projection of the accepted ideal of conduct. This ideal of conduct is made to serve as a canon of truth, to the extent that the investigator contents himself with an appeal to its legitimation for premises that run back of the facts with which he is immediately dealing, for the "controlling principles" that are conceived intangibly to underlie the process discussed, and for the "tendencies" that run beyond the situation as it lies before him. As instances of the use of this ceremonial canon of knowledge may be cited the "conjectural history" that plays so large a part in the classical treatment of economic institutions, such as the normalized accounts of the beginnings of barter in the transactions of the putative hunter, fisherman, and boat-builder, or the man with the plane and the two planks, or the two men with the basket of apples and the basket of nuts.[5] Of a similar import is the characterisation of money as "the great wheel of circulation"[6] or as "the medium of exchange." Money is here discussed in terms of the end which, "in the normal case," it should work out according to the given writer's ideal of economic life, rather than in terms of causal relation. With later writers especially, this terminology is no doubt to be commonly taken as a convenient use of metaphor, in which the concept of normality and propensity to an end has reached an extreme attenuation. But it is precisely in this use of figurative terms for the formulation of theory that the classical normality still lives its attenuated life in modern economics; and it is this facile recourse to inscrutable figures of speech as the ultimate terms of theory that has saved the economists from being dragooned into the ranks of modern science. The metaphors are effective, both in their homiletical use and as a labor-saving device,--more effective than their user designs them to be. By their use the theorist is enabled serenely to enjoin himself from following out an elusive train of causal sequence. He is also enabled, without misgivings, to construct a theory of such an institution as money or wages or land-ownership without descending to a consideration of the living items concerned, except for convenient corroboration of his normalised scheme of symptoms. By this method the theory of an institution or a phase of life may be stated in conventionalised terms of the apparatus whereby life is carried on, the apparatus being invested with a tendency to an equilibrium at the normal, and the theory being a formulation of the conditions under which this putative equilibrium supervenes. In this way we have come into the usufruct of a cost-of-production theory of value which is pungently reminiscent of the time when Nature abhorred a vacuum. The ways and means and the mechanical structure of industry are formulated in a conventionalised nomenclature, and the observed motions of this mechanical apparatus are then reduced to a normalised scheme of relations. The scheme so arrived at is spiritually binding on the behavior of the phenomena contemplated. With this normalised scheme as a guide, the permutations of a given segment of the apparatus are worked out according to the values assigned the several items and features comprised in the calculation; and a ceremonially consistent formula is constructed to cover that much of the industrial field. This is the deductive method. The formula is then tested by comparison with observed permutations, by the polariscopic use of the "normal case"; and the results arrived at are thus authenticated by induction. Features of the process that do not lend themselves to interpretation in the terms of the formula are abnormal cases and are due to disturbing causes. In all this the agencies or forces causally at work in the economic life process are neatly avoided. The outcome of the method, at its best, is a body of logically consistent propositions concerning the normal relations of things--a system of economic taxonomy. At its worst, it is a body of maxims for the conduct of business and a polemical discussion of disputed points of policy. In all this, economic science is living over again in its turn the experiences which the natural sciences passed through some time back. In the natural sciences the work of the taxonomist was and continues to be of great value, but the scientists grew restless under the régime of symmetry and system-making. They took to asking why, and so shifted their inquiries from the structure of the coral reefs to the structure and habits of life of the polyp that lives in and by them. In the science of plants, systematic botany has not ceased to be of service; but the stress of investigation and discussion among the botanists to-day falls on the biological value of any given feature of structure, function, or tissue rather than on its taxonomic bearing. All the talk about cytoplasm, centrosomes, and karyokinetic process, means that the inquiry now looks consistently to the life process, and aims to explain it in terms of cumulative causation. What may be done in economic science of the taxonomic kind is shown at its best in Cairnes's work, where the method is well conceived and the results effectively formulated and applied. Cairnes handles the theory of the normal case in economic life with a master hand. In his discussion the metaphysics of propensity and tendencies no longer avowedly rules the formulation of theory, nor is the inscrutable meliorative trend of a harmony of interests confidently appealed to as an engine of definitive use in giving legitimacy to the economic situation at a given time. There is less of an exercise of faith in Cairnes's economic discussions than in those of the writers that went before him. The definitive terms of the formulation are still the terms of normality and natural law, but the metaphysics underlying this appeal to normality is so far removed from the ancient ground of the beneficent "order of nature" as to have become at least nominally impersonal and to proceed without a constant regard to the humanitarian bearing of the "tendencies" which it formulates. The metaphysics has been attenuated to something approaching in colorlessness the naturalist's conception of natural law. It is a natural law which, in the guise of "controlling principles," exercises a constraining surveillance over the trend of things; but it is no longer conceived to exercise its constraint in the interest of certain ulterior human purposes. The element of beneficence has been well-nigh eliminated, and the system is formulated in terms of the system itself. Economics as it left Cairnes's hand, so far as his theoretical work is concerned, comes near being taxonomy for taxonomy's sake. No equally capable writer has come as near making economics the ideal "dismal" science as Cairnes in his discussion of pure theory. In the days of the early classical writers economics had a vital interest for the laymen of the time, because it formulated the common sense metaphysics of the time in its application to a department of human life. But in the hands of the later classical writers the science lost much of its charm in this regard. It was no longer a definition and authentication of the deliverances of current common sense as to what ought to come to pass; and it, therefore, in large measure lost the support of the people out of doors, who were unable to take an interest in what did not concern them; and it was also out of touch with that realistic or evolutionary habit of mind which got under way about the middle of the century in the natural sciences. It was neither vitally metaphysical nor matter-of-fact, and it found comfort with very few outside of its own ranks. Only for those who by the fortunate accident of birth or education have been able to conserve the taxonomic animus has the science during the last third of a century continued to be of absorbing interest. The result has been that from the time when the taxonomic structure stood forth as a completed whole in its symmetry and stability the economists themselves, beginning with Cairnes, have been growing restive under its discipline of stability, and have made many efforts, more or less sustained, to galvanise it into movement. At the hands of the writers of the classical line these excursions have chiefly aimed at a more complete and comprehensive taxonomic scheme of permutations; while the historical departure threw away the taxonomic ideal without getting rid of the preconceptions on which it is based; and the later Austrian group struck out on a theory of process, but presently came to a full stop because the process about which they busied themselves was not, in their apprehension of it, a cumulative or unfolding sequence. * * * * * But what does all this signify? If we are getting restless under the taxonomy of a monocotyledonous wage doctrine and a cryptogamic theory of interest, with involute, loculicidal, tomentous and moniliform variants, what is the cytoplasm, centrosome, or karyokinetic process to which we may turn, and in which we may find surcease from the metaphysics of normality and controlling principles? What are we going to do about it? The question is rather, What are we doing about it? There is the economic life process still in great measure awaiting theoretical formulation. The active material in which the economic process goes on is the human material of the industrial community. For the purpose of economic science the process of cumulative change that is to be accounted for is the sequence of change in the methods of doing things,--the methods of dealing with the material means of life. What has been done in the way of inquiry into this economic life process? The ways and means of turning material objects and circumstances to account lie before the investigator at any given point of time in the form of mechanical contrivances and arrangements for compassing certain mechanical ends. It has therefore been easy to accept these ways and means as items of inert matter having a given mechanical structure and thereby serving the material ends of man. As such, they have been scheduled and graded by the economists under the head of capital, this capital being conceived as a mass of material objects serviceable for human use. This is well enough for the purposes of taxonomy; but it is not an effective method of conceiving the matter for the purpose of a theory of the developmental process. For the latter purpose, when taken as items in a process of cumulative change or as items in the scheme of life, these productive goods are facts of human knowledge, skill, and predilection; that is to say, they are, substantially, prevalent habits of thought, and it is as such that they enter into the process of industrial development. The physical properties of the materials accessible to man are constants: it is the human agent that changes,--his insight and his appreciation of what these things can be used for is what develops. The accumulation of goods already on hand conditions his handling and utilisation of the materials offered, but even on this side--the "limitation of industry by capital"--the limitation imposed is on what men can do and on the methods of doing it. The changes that take place in the mechanical contrivances are an expression of changes in the human factor. Changes in the material facts breed further change only through the human factor. It is in the human material that the continuity of development is to be looked for; and it is here, therefore, that the motor forces of the process of economic development must be studied if they are to be studied in action at all. Economic action must be the subject-matter of the science if the science is to fall into line as an evolutionary science. Nothing new has been said in all this. But the fact is all the more significant for being a familiar fact. It is a fact recognised by common consent throughout much of the later economic discussion, and this current recognition of the fact is a long step towards centering discussion and inquiry upon it. If economics is to follow the lead or the analogy of the other sciences that have to do with a life process, the way is plain so far as regards the general direction in which the move will be made. The economists of the classical trend have made no serious attempt to depart from the standpoint of taxonomy and make their science a genetic account of the economic life process. As has just been said, much the same is true for the Historical School. The latter have attempted an account of developmental sequence, but they have followed the lines of pre-Darwinian speculations on development rather than lines which modern science would recognise as evolutionary. They have given a narrative survey of phenomena, not a genetic account of an unfolding process. In this work they have, no doubt, achieved results of permanent value; but the results achieved are scarcely to be classed as economic theory. On the other hand, the Austrians and their precursors and their coadjutors in the value discussion have taken up a detached portion of economic theory, and have inquired with great nicety into the process by which the phenomena within their limited field are worked out. The entire discussion of marginal utility and subjective value as the outcome of a valuation process must be taken as a genetic study of this range of facts. But here, again, nothing further has come of the inquiry, so far as regards a rehabilitation of economic theory as a whole. Accepting Menger as their spokesman on this head, it must be said that the Austrians have on the whole showed themselves unable to break with the classical tradition that economics is a taxonomic science. The reason for the Austrian failure seems to lie in a faulty conception of human nature,--faulty for the present purpose, however adequate it may be for any other. In all the received formulations of economic theory, whether at the hands of English economists or those of the Continent, the human material with which the inquiry is concerned is conceived in hedonistic terms; that is to say, in terms of a passive and substantially inert and immutably given human nature. The psychological and anthropological preconceptions of the economists have been those which were accepted by the psychological and social sciences some generations ago. The hedonistic conception of man is that of a lightning calculator of pleasures and pains, who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli that shift him about the area, but leave him intact. He has neither antecedent nor consequent. He is an isolated, definitive human datum, in stable equilibrium except for the buffets of the impinging forces that displace him in one direction or another. Self-imposed in elemental space, he spins symmetrically about his own spiritual axis until the parallelogram of forces bears down upon him, whereupon he follows the line of the resultant. When the force of the impact is spent, he comes to rest, a self-contained globule of desire as before. Spiritually, the hedonistic man is not a prime mover. He is not the seat of a process of living, except in the sense that he is subject to a series of permutations enforced upon him by circumstances external and alien to him. The later psychology, reënforced by modern anthropological research, gives a different conception of human nature. According to this conception, it is the characteristic of man to do something, not simply to suffer pleasures and pains through the impact of suitable forces. He is not simply a bundle of desires that are to be saturated by being placed in the path of the forces of the environment, but rather a coherent structure of propensities and habits which seeks realisation and expression in an unfolding activity. According to this view, human activity, and economic activity among the rest, is not apprehended as something incidental to the process of saturating given desires. The activity is itself the substantial fact of the process, and the desires under whose guidance the action takes place are circumstances of temperament which determine the specific direction in which the activity will unfold itself in the given case. These circumstances of temperament are ultimate and definitive for the individual who acts under them, so far as regards his attitude as agent in the particular action in which he is engaged. But, in the view of the science, they are elements of the existing frame of mind of the agent, and are the outcome of his antecedents and his life up to the point at which he stands. They are the products of his hereditary traits and his past experience, cumulatively wrought out under a given body of traditions, conventionalities, and material circumstances; and they afford the point of departure for the next step in the process. The economic life history of the individual is a cumulative process of adaptation of means to ends that cumulatively change as the process goes on, both the agent and his environment being at any point the outcome of the last process. His methods of life to-day are enforced upon him by his habits of life carried over from yesterday and by the circumstances left as the mechanical residue of the life of yesterday. What is true of the individual in this respect is true of the group in which he lives. All economic change is a change in the economic community,--a change in the community's methods of turning material things to account. The change is always in the last resort a change in habits of thought. This is true even of changes in the mechanical processes of industry. A given contrivance for effecting certain material ends becomes a circumstance which affects the further growth of habits of thought--habitual methods of procedure--and so becomes a point of departure for further development of the methods of compassing the ends sought and for the further variation of ends that are sought to be compassed. In all this flux there is no definitively adequate method of life and no definitive or absolutely worthy end of action, so far as concerns the science which sets out to formulate a theory of the process of economic life. What remains as a hard and fast residue is the fact of activity directed to an objective end. Economic action is teleological, in the sense that men always and everywhere seek to do something. What, in specific detail, they seek, is not to be answered except by a scrutiny of the details of their activity; but, so long as we have to do with their life as members of the economic community, there remains the generic fact that their life is an unfolding activity of a teleological kind. It may or may not be a teleological process in the sense that it tends or should tend to any end that is conceived to be worthy or adequate by the inquirer or by the consensus of inquirers. Whether it is or is not, is a question with which the present inquiry is not concerned; and it is also a question of which an evolutionary economics need take no account. The question of a tendency in events can evidently not come up except on the ground of some preconception or prepossession on the part of the person looking for the tendency. In order to search for a tendency, we must be possessed of some notion of a definitive end to be sought, or some notion as to what is the legitimate trend of events. The notion of a legitimate trend in a course of events is an extra-evolutionary preconception, and lies outside the scope of an inquiry into the causal sequence in any process. The evolutionary point of view, therefore, leaves no place for a formulation of natural laws in terms of definitive normality, whether in economics or in any other branch of inquiry. Neither does it leave room for that other question of normality, What should be the end of the developmental process under discussion? The economic life history of any community is its life history in so far as it is shaped by men's interest in the material means of life. This economic interest has counted for much in shaping the cultural growth of all communities. Primarily and most obviously, it has guided the formation, the cumulative growth, of that range of conventionalities and methods of life that are currently recognized as economic institutions; but the same interest has also pervaded the community's life and its cultural growth at points where the resulting structural features are not chiefly and most immediately of an economic bearing. The economic interest goes with men through life, and it goes with the race throughout its process of cultural development. It affects the cultural structure at all points, so that all institutions may be said to be in some measure economic institutions. This is necessarily the case, since the base of action--the point of departure--at any step in the process is the entire organic complex of habits of thought that have been shaped by the past process. The economic interest does not act in isolation, for it is but one of several vaguely isolable interests on which the complex of teleological activity carried out by the individual proceeds. The individual is but a single agent in each case; and he enters into each successive action as a whole, although the specific end sought in a given action may be sought avowedly on the basis of a particular interest; as _e.g._, the economic, æsthetic, sexual, humanitarian, devotional interests. Since each of these passably isolable interests is a propensity of the organic agent man, with his complex of habits of thought, the expression of each is affected by habits of life formed under the guidance of all the rest. There is, therefore, no neatly isolable range of cultural phenomena that can be rigorously set apart under the head of economic institutions, although a category of "economic institutions" may be of service as a convenient caption, comprising those institutions in which the economic interest most immediately and consistently finds expression, and which most immediately and with the least limitation are of an economic bearing. From what has been said it appears that an evolutionary economics must be the theory of a process of cultural growth as determined by the economic interest, a theory of a cumulative sequence of economic institutions stated in terms of the process itself. Except for the want of space to do here what should be done in some detail if it is done at all, many efforts by the later economists in this direction might be cited to show the trend of economic discussion in this direction. There is not a little evidence to this effect, and much of the work done must be rated as effective work for this purpose. Much of the work of the Historical School, for instance, and that of its later exponents especially, is too noteworthy to be passed over in silence, even with all due regard to the limitations of space. We are now ready to return to the question why economics is not an evolutionary science. It is necessarily the aim of such an economics to trace the cumulative working-out of the economic interest in the cultural sequence. It must be a theory of the economic life process of the race or the community. The economists have accepted the hedonistic preconceptions concerning human nature and human action, and the conception of the economic interest which a hedonistic psychology gives does not afford material for a theory of the development of human nature. Under hedonism the economic interest is not conceived in terms of action. It is therefore not readily apprehended or appreciated in terms of a cumulative growth of habits of thought, and does not provoke, even if it did lend itself to, treatment by the evolutionary method. At the same time the anthropological preconceptions current in that common-sense apprehension of human nature to which economists have habitually turned has not enforced the formulation of human nature in terms of a cumulative growth of habits of life. These received anthropological preconceptions are such as have made possible the normalized conjectural accounts of primitive barter with which all economic readers are familiar, and the no less normalized conventional derivation of landed property and its rent, or the sociologico-philosophical discussions of the "function" of this or that class in the life of society or of the nation. The premises and the point of view required for an evolutionary economics have been wanting. The economists have not had the materials for such a science ready to their hand, and the provocation to strike out in such a direction has been absent. Even if it has been possible at any time to turn to the evolutionary line of speculation in economics, the possibility of a departure is not enough to bring it about. So long as the habitual view taken of a given range of facts is of the taxonomic kind and the material lends itself to treatment by that method, the taxonomic method is the easiest, gives the most gratifying immediate results, and best fits into the accepted body of knowledge of the range of facts in question. This has been the situation in economics. The other sciences of its group have likewise been a body of taxonomic discipline, and departures from the accredited method have lain under the odium of being meretricious innovations. The well-worn paths are easy to follow and lead into good company. Advance along them visibly furthers the accredited work which the science has in hand. Divergence from the paths means tentative work, which is necessarily slow and fragmentary and of uncertain value. It is only when the methods of the science and the syntheses resulting from their use come to be out of line with habits of thought that prevail in other matters that the scientist grows restive under the guidance of the received methods and standpoints, and seeks a way out. Like other men, the economist is an individual with but one intelligence. He is a creature of habits and propensities given through the antecedents, hereditary and cultural, of which he is an outcome; and the habits of thought formed in any one line of experience affect his thinking in any other. Methods of observation and of handling facts that are familiar through habitual use in the general range of knowledge, gradually assert themselves in any given special range of knowledge. They may be accepted slowly and with reluctance where their acceptance involves innovation; but, if they have the continued backing of the general body of experience, it is only a question of time when they shall come into dominance in the special field. The intellectual attitude and the method of correlation enforced upon us in the apprehension and assimilation of facts in the more elementary ranges of knowledge that have to do with brute facts assert themselves also when the attention is directed to those phenomena of the life process with which economics has to do; and the range of facts which are habitually handled by other methods than that in traditional vogue in economics has now become so large and so insistently present at every turn that we are left restless, if the new body of facts cannot be handled according to the method of mental procedure which is in this way becoming habitual. In the general body of knowledge in modern times the facts are apprehended in terms of causal sequence. This is especially true of that knowledge of brute facts which is shaped by the exigencies of the modern mechanical industry. To men thoroughly imbued with this matter-of-fact habit of mind the laws and theorems of economics, and of the other sciences that treat of the normal course of things, have a character of "unreality" and futility that bars out any serious interest in their discussion. The laws and theorems are "unreal" to them because they are not to be apprehended in the terms which these men make use of in handling the facts with which they are perforce habitually occupied. The same matter-of-fact spiritual attitude and mode of procedure have now made their way well up into the higher levels of scientific knowledge, even in the sciences which deal in a more elementary way with the same human material that makes the subject-matter of economics, and the economists themselves are beginning to feel the unreality of their theorems about "normal" cases. Provided the practical exigencies of modern industrial life continue of the same character as they now are, and so continue to enforce the impersonal method of knowledge, it is only a question of time when that (substantially animistic) habit of mind which proceeds on the notion of a definitive normality shall be displaced in the field of economic inquiry by that (substantially materialistic) habit of mind which seeks a comprehension of facts in terms of a cumulative sequence. The later method of apprehending and assimilating facts and handling them for the purposes of knowledge may be better or worse, more or less worthy or adequate, than the earlier; it may be of greater or less ceremonial or æsthetic effect; we may be moved to regret the incursion of underbred habits of thought into the scholar's domain. But all that is beside the present point. Under the stress of modern technological exigencies, men's every-day habits of thought are falling into the lines that in the sciences constitute the evolutionary method; and knowledge which proceeds on a higher, more archaic plane is becoming alien and meaningless to them. The social and political sciences must follow the drift, for they are already caught in it. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, vol. xii, July, 1898. [2] "The Fundamental Laws of Anthropo-sociology," _Journal of Political Economy_, December, 1897, p. 54. The same paper, in substance, appears in the _Rivista Italiana di Sociologia_ for November, 1897. [3] "The Old Generation of Economists and the New," _Quarterly Journal of Economics_, January, 1897, p. 133. [4] _Political Economy_, Book III, chap. i. [5] Marshall, _Principles of Economics_ (2d ed.), Book V, chap. ii, p. 395, note. [6] Adam Smith, _Wealth of Nations_ (Bohn ed.), Book II, chap. ii, p. 289. THE PRECONCEPTIONS OF ECONOMIC SCIENCE[1] I In an earlier paper[2] the view has been expressed that the economics handed down by the great writers of a past generation is substantially a taxonomic science. A view of much the same purport, so far as concerns the point here immediately in question, is presented in an admirably lucid and cogent way by Professor Clark in a recent number of this journal.[3] There is no wish hereby to burden Professor Clark with a putative sponsorship of any ungraceful or questionable generalisations reached in working outward from this main position, but expression may not be denied the comfort which his unintended authentication of the main position affords. It is true, Professor Clark does not speak of taxonomy, but employs the term "statics," which is perhaps better suited to his immediate purpose. Nevertheless, in spite of the high authority given the term "statics," in this connection, through its use by Professor Clark and by other writers eminent in the science, it is fairly to be questioned whether the term can legitimately be used to characterize the received economic theories. The word is borrowed from the jargon of physics, where it is used to designate the theory of bodies at rest or of forces in equilibrium. But there is much in the received economic theories to which the analogy of bodies at rest or of forces in equilibrium will not apply. It is perhaps not too much to say that those articles of economic theory that do not lend themselves to this analogy make up the major portion of the received doctrines. So, for instance, it seems scarcely to the point to speak of the statics of production, exchange, consumption, circulation. There are, no doubt, appreciable elements in the theory of these several processes that may fairly be characterized as statical features of the theory; but the doctrines handed down are after all, in the main, theories of the process discussed under each head, and the theory of a process does not belong in statics. The epithet "statical" would, for instance, have to be wrenched somewhat ungently to make it apply to Quesnay's classic _Tableau Économique_ or to the great body of Physiocratic speculations that take their rise from it The like is true for Books II. and III. of Adam Smith's _Wealth of Nations_, as also for considerable portions of Ricardo's work, or, to come down to the present generation, for much of Marshall's _Principles_, and for such a modern discussion as Smart's _Studies in Economics_, as well as for the fruitful activity of the Austrians and of the later representatives of the Historical School. But to return from this terminological digression. While economic science in the remoter past of its history has been mainly of a taxonomic character, later writers of all schools show something of a divergence from the taxonomic line and an inclination to make the science a genetic account of the economic life process, sometimes even without an ulterior view to the taxonomic value of the results obtained. This divergence from the ancient canons of theoretical formulation is to be taken as an episode of the movement that is going forward in latter-day science generally; and the progressive change which thus affects the ideals and the objective point of the modern sciences seems in its turn to be an expression of that matter-of-fact habit of mind which the prosy but exacting exigencies of life in a modern industrial community breed in men exposed to their unmitigated impact. In speaking of this matter-of-fact character of the modern sciences it has been broadly characterized as "evolutionary"; and the evolutionary method and the evolutionary ideals have been placed in antithesis to the taxonomic methods and ideals of pre-evolutionary days. But the characteristic attitude, aims, and ideals which are so designated here are by no means peculiar to the group of sciences that are professedly occupied with a process of development, taking that term in its most widely accepted meaning. The latter-day inorganic sciences are in this respect like the organic. They occupy themselves with "dynamic" relations and sequences. The question which they ask is always, What takes place next, and why? Given a situation wrought out by the forces under inquiry, what follows as the consequence of the situation so wrought out? or what follows upon the accession of a further element of force? Even in so non-evolutionary a science as inorganic chemistry the inquiry consistently runs on a process, an active sequence, and the value of the resulting situation as a point of departure for the next step in an interminable cumulative sequence. The last step in the chemist's experimental inquiry into any substance is, What comes of the substance determined? What will it do? What will it lead to, when it is made the point of departure in further chemical action? There is no ultimate term, and no definitive solution except in terms of further action. The theory worked out is always a theory of a genetic succession of phenomena, and the relations determined and elaborated into a body of doctrine are always genetic relations. In modern chemistry no cognisance is taken of the honorific bearing of reactions or molecular formulæ. The modern chemist, as contrasted with his ancient congener, knows nothing of the worth, elegance, or cogency of the relations that may subsist between the particles of matter with which he busies himself, for any other than the genetic purpose. The spiritual element and the elements of worth and propensity no longer count. Alchemic symbolism and the hierarchical glamour and virtue that once hedged about the nobler and more potent elements and reagents are almost altogether a departed glory of the science. Even the modest imputation of propensity involved in the construction of a scheme of coercive normality, for the putative guidance of reactions, finds little countenance with the later adepts of chemical science. The science has outlived that phase of its development at which the taxonomic feature was the dominant one. In the modern sciences, of which chemistry is one, there has been a gradual shifting of the point of view from which the phenomena which the science treats of are apprehended and passed upon; and to the historian of chemical science this shifting of the point of view must be a factor of great weight in the development of chemical knowledge. Something of a like nature is true for economic science; and it is the aim here to present, in outline, some of the successive phases that have passed over the spiritual attitude of the adepts of the science, and to point out the manner in which the transition from one point of view to the next has been made. * * * * * As has been suggested in the paper already referred to, the characteristic spiritual attitude or point of view of a given generation or group of economists is shown not so much in their detail work as in their higher syntheses--the terms of their definitive formulations--the grounds of their final valuation of the facts handled for purpose of theory. This line of recondite inquiry into the spiritual past and antecedents of the science has not often been pursued seriously or with singleness of purpose, perhaps because it is, after all, of but slight consequence to the practical efficiency of the present-day science. Still, not a little substantial work has been done towards this end by such writers as Hasbach, Oncken, Bonar, Cannan, and Marshall. And much that is to the purpose is also due to writers outside of economics, for the aims of economic speculation have never been insulated from the work going forward in other lines of inquiry. As would necessarily be the case, the point of view of economists has always been in large part the point of view of the enlightened common sense of their time. The spiritual attitude of a given generation of economists is therefore in good part a special outgrowth of the ideals and preconceptions current in the world about them. So, for instance, it is quite the conventional thing to say that the speculations of the Physiocrats were dominated and shaped by the preconception of Natural Rights. Account has been taken of the effect of natural-rights preconceptions upon the Physiocratic schemes of policy and economic reform as well as upon the details of their doctrines.[4] But little has been said of the significance of these preconceptions for the lower courses of the Physiocrats' theoretical structure. And yet that habit of mind to which the natural-rights view is wholesome and adequate is answerable both for the point of departure and for the objective point of the Physiocratic theories, both for the range of facts to which they turned and for the terms in which they were content to formulate their knowledge of the facts which they handled. The failure of their critics to place themselves at the Physiocratic point of view has led to much destructive criticism of their work; whereas, when seen through Physiocratic eyes, such doctrines as those of the net product and of the barrenness of the artisan class appear to be substantially true. The speculations of the Physiocrats are commonly accounted the first articulate and comprehensive presentation of economic theory that is in line with later theoretical work. The Physiocratic point of view may, therefore, well be taken as the point of departure in an attempt to trace that shifting of aims and norms of procedure that comes into view in the work of later economists when compared with earlier writers. Physiocratic economics is a theory of the working-out of the Law of Nature (_loi naturelle_) in its economic bearing, and this Law of Nature is a very simple matter. Les lois naturelles sont ou physiques ou morales. On entend ici, par loi physique, _le cours réglé de tout évènement physique de l'ordre naturel, évidemment le plus avantageux au genre humain_. On entend ici, par loi morale, _la règle de toute action humaine de l'ordre morale, conforme à l'ordre physique évidemment le plus avantageux au genre humain_. Ces lois forment ensemble ce qu'on appelle la _loi naturelle_. Tous les hommes et toutes les puissances humaines doivent être soumis à ces lois souveraines, instituées par l'Être-Suprême: elles sont immuables et irréfragables, et les meilleures lois possible.[5] The settled course of material facts tending beneficently to the highest welfare of the human race,--this is the final term in the Physiocratic speculations. This is the touchstone of substantiality. Conformity to these "immutable and unerring" laws of nature is the test of economic truth. The laws are immutable and unerring, but that does not mean that they rule the course of events with a blind fatality that admits of no exception and no divergence from the direct line. Human nature may, through infirmity or perversity, willfully break over the beneficent trend of the laws of nature; but to the Physiocrat's sense of the matter the laws are none the less immutable and irrefragable on that account. They are not empirical generalisations on the course of phenomena, like the law of falling bodies or of the angle of reflection; although many of the details of their action are to be determined only by observation and experience, helped out, of course, by interpretation of the facts of observation under the light of reason. So, for instance, Turgot, in his _Réflections_, empirically works out a doctrine of the reasonable course of development through which wealth is accumulated and reaches the existing state of unequal distribution; so also his doctrines of interest and of money. The immutable natural laws are rather of the nature of canons of conduct governing nature than generalisations of mechanical sequence, although in a general way the phenomena of mechanical sequence are details of the conduct of nature working according to these canons of conduct. The great law of the order of nature is of the character of a propensity working to an end, to the accomplishment of a purpose. The processes of nature working under the quasi-spiritual stress of this immanent propensity may be characterised as nature's habits of life. Not that nature is conscious of its travail, and knows and desires the worthy end of its endeavors; but for all that there is a quasi-spiritual nexus between antecedent and consequent in the scheme of operation in which nature is engaged. Nature is not uneasy about interruptions of its course or occasional deflections from the direct line through an untoward conjunction of mechanical causes, nor does the validity of the great overruling law suffer through such an episode. The introduction of a mere mechanically effective causal factor cannot thwart the course of Nature from reaching the goal to which she animistically tends. Nothing can thwart this teleological propensity of nature except counter-activity or divergent activity of a similarly teleological kind. Men can break over the law, and have short-sightedly and willfully done so; for men are also agents who guide their actions by an end to be achieved. Human conduct is activity of the same kind--on the same plane of spiritual reality or competency--as the course of Nature, and it may therefore traverse the latter. The remedy for this short-sighted traffic of misguided human nature is enlightenment,--"instruction publique et privée des lois de l'ordre naturel."[6] The nature in terms of which all knowledge of phenomena--for the present purpose economic phenomena--is to be finally synthesised is, therefore, substantially of a quasi-spiritual or animistic character. The laws of nature are in the last resort teleological: they are of the nature of a propensity. The substantial fact in all the sequences of nature is the end to which the sequence naturally tends, not the brute fact of mechanical compulsion or causally effective forces. Economic theory is accordingly the theory (1) of how the efficient causes of the _ordre naturel_ work in an orderly unfolding sequence, guided by the underlying natural laws--the propensity immanent in nature to establish the highest well-being of mankind, and (2) of the conditions imposed upon human conduct by these natural laws in order to reach the ordained goal of supreme human welfare. The conditions so imposed on human conduct are as definitive as the laws and the order by force of which they are imposed; and the theoretical conclusions reached, when these laws and this order are known, are therefore expressions of absolute economic truth. Such conclusions are an expression of reality, but not necessarily of fact. Now, the objective end of this propensity that determines the course of nature is human well-being. But economic speculation has to do with the workings of nature only so far as regards the _ordre physique_. And the laws of nature in the _ordre physique_, working through mechanical sequence, can only work out the physical well-being of man, not necessarily the spiritual. This propensity to the physical well-being of man is therefore the law of nature to which economic science must bring its generalisations, and this law of physical beneficence is the substantial ground of economic truth. Wanting this, all our speculations are vain; but having its authentication they are definitive. The great, typical function, to which all the other functioning of nature is incidental if not subsidiary, is accordingly that of the alimentation, nutrition of mankind. In so far, and only in so far as the physical processes contribute to human sustenance and fullness of life, can they, therefore, further the great work of nature. Whatever processes contribute to human sustenance by adding to the material available for human assimilation and nutrition, by increasing the substance disposable for human comfort, therefore count towards the substantial end. All other processes, however serviceable in other than this physiological respect, lack the substance of economic reality. Accordingly, human industry is productive, economically speaking, if it heightens the effectiveness of the natural processes out of which the material of human sustenance emerges; otherwise not. The test of productivity, of economic reality in material facts, is the increase of nutritive material. Whatever employment of time or effort does not afford an increase of such material is unproductive, however profitable it may be to the person employed, and however useful or indispensable it may be to the community. The type of such productive industry is the husbandman's employment, which yields a substantial (nutritive) gain. The artisan's work may be useful to the community and profitable to himself, but its economic effect does not extend beyond an alteration of the form in which the material afforded by nature already lies at hand. It is formally productive only, not really productive. It bears no part in the creative or generative work of nature; and therefore it lacks the character of economic substantiality. It does not enhance nature's output of vital force. The artisan's labors, therefore, yield no net product, whereas the husbandman's labors do. Whatever constitutes a material increment of this output of vital force is wealth, and nothing else is. The theory of value contained in this position has not to do with value according to men's appraisement of the valuable article. Given items of wealth may have assigned to them certain relative values at which they exchange, and these conventional values may differ more or less widely from the natural or intrinsic value of the goods in question; but all that is beside the substantial point. The point in question is not the degree of predilection shown by certain individuals or bodies of men for certain goods. That is a matter of caprice and convention, and it does not directly touch the substantial ground of the economic life. The question of value is a question of the extent to which the given item of wealth forwards the end of nature's unfolding process. It is valuable, intrinsically and really, in so far as it avails the great work which nature has in hand. Nature, then, is the final term in the Physiocratic speculations. Nature works by impulse and in an unfolding process, under the stress of a propensity to the accomplishment of a given end. This propensity, taken as the final cause that is operative in any situation, furnishes the basis on which to coördinate all our knowledge of those efficient causes through which Nature works to her ends. For the purpose of economic theory proper, this is the ultimate ground of reality to which our quest of economic truth must penetrate. But back of Nature and her works there is, in the Physiocratic scheme of the universe, the Creator, by whose all-wise and benevolent power the order of nature has been established in all the strength and beauty of its inviolate and immutable perfection. But the Physiocratic conception of the Creator is essentially a deistic one: he stands apart from the course of nature which he has established, and keeps his hands off. In the last resort, of course, "Dieu seul est producteur. Les hommes travaillent, receuillent, économisent, conservent; mais _économiser_ n'est pas _produire_."[7] But this last resort does not bring the Creator into economic theory as a fact to be counted with in formulating economic laws. He serves a homiletical purpose in the Physiocratic speculations rather than fills an office essential to the theory. He comes within the purview of the theory by way of authentication rather than as a subject of inquiry or a term in the formulation of economic knowledge. The Physiocratic God can scarcely be said to be an economic fact, but it is otherwise with that Nature whose ways and means constitute the subject-matter of the Physiocratic inquiry. When this natural system of the Physiocratic speculation is looked at from the side of the psychology of the investigators, or from that of the logical premises employed, it is immediately recognised as essentially animistic. It runs consistently on animistic ground; but it is animism of a high grade,--highly integrated and enlightened, but, after all, retaining very much of that primitive force and naïveté which characterise the animistic explanations of phenomena in vogue among the untroubled barbarians. It is not the disjected animism of the vulgar, who see a willful propensity--often a willful perversity--in given objects or situations to work towards a given outcome, good or bad. It is not the gambler's haphazard sense of fortuitous necessity or the housewife's belief in lucky days, numbers or phases of the moon. The Physiocrat's animism rests on a broader outlook, and does not proceed by such an immediately impulsive imputation of propensity. The teleological element--the element of propensity--is conceived in a large way, unified and harmonised, as a comprehensive order of nature as a whole. But it vindicates its standing as a true animism by never becoming fatalistic and never being confused or confounded with the sequence of cause and effect. It has reached the last stage of integration and definition, beyond which the way lies downward from the high, quasi-spiritual ground of animism to the tamer levels of normality and causal uniformities. There is already discernible a tone of dispassionate and colorless "tendency" about the Physiocratic animism, such as to suggest a wavering towards the side of normality. This is especially visible in such writers as the half-protestant Turgot. In his discussion of the development of farming, for instance, Turgot speaks almost entirely of human motives and the material conditions under which the growth takes place. There is little metaphysics in it, and that little does not express the law of nature in an adequate form. But, after all has been said, it remains true that the Physiocrat's sense of substantiality is not satisfied until he reaches the animistic ground; and it remains true also that the arguments of their opponents made little impression on the Physiocrats so long as they were directed to other than this animistic ground of their doctrine. This is true in great measure even of Turgot, as witness his controversy with Hume. Whatever criticism is directed against them on other grounds is met with impatience, as being inconsequential, if not disingenuous.[8] To an historian of economic theory the source and the line of derivation whereby this precise form of the order-of-nature preconception reached the Physiocrats are of first-rate importance; but it is scarcely a question to be taken up here,--in part because it is too large a question to be handled here, in part because it has met with adequate treatment at more competent hands,[9] and in part because it is somewhat beside the immediate point under discussion. This point is the logical, or perhaps better the psychological, value of the Physiocrats' preconception, as a factor in shaping their point of view and the terms of their definitive formulation of economic knowledge. For this purpose it may be sufficient to point out that the preconception in question belongs to the generation in which the Physiocrats lived, and that it is the guiding norm of all serious thought that found ready assimilation into the common-sense views of that time. It is the characteristic and controlling feature of what may be called the common-sense metaphysics of the eighteenth century, especially so far as concerns the enlightened French community. It is to be noted as a point bearing more immediately on the question in hand that this imputation of final causes to the course of phenomena expresses a spiritual attitude which has prevailed, one might almost say, always and everywhere, but which reached its finest, most effective development, and found its most finished expression, in the eighteenth-century metaphysics. It is nothing recondite; for it meets us at every turn, as a matter of course, in the vulgar thinking of to-day,--in the pulpit and in the market place,--although it is not so ingenuous, nor does it so unquestionedly hold the primacy in the thinking of any class to-day as it once did. It meets us likewise, with but little change of features, at all past stages of culture, late or early. Indeed, it is the most generic feature of human thinking, so far as regards a theoretical or speculative formulation of knowledge. Accordingly, it seems scarcely necessary to trace the lineage of this characteristic preconception of the era of enlightenment, through specific channels, back to the ancient philosophers or jurists of the empire. Some of the specific forms of its expression--as, for instance, the doctrine of Natural Rights--are no doubt traceable through mediæval channels to the teachings of the ancients; but there is no need of going over the brook for water, and tracing back to specific teachings the main features of that habit of mind or spiritual attitude of which the doctrines of Natural Rights and the Order of Nature are specific elaborations only. This dominant habit of mind came to the generation of the Physiocrats on the broad ground of group inheritance, not by lineal devolution from any one of the great thinkers of past ages who had thrown its deliverances into a similarly competent form for the use of his own generation. * * * * * In leaving the Physiocratic discipline and the immediate sphere of Physiocratic influence for British ground, we are met by the figure of Hume. Here, also, it will be impracticable to go into details as to the remoter line of derivation of the specific point of view that we come upon on making the transition, for reasons similar to those already given as excuse for passing over the similar question with regard to the Physiocratic point of view. Hume is, of course, not primarily an economist; but that placid unbeliever is none the less a large item in any inventory of eighteenth-century economic thought. Hume was not gifted with a facile acceptance of the group inheritance that made the habit of mind of his generation. Indeed, he was gifted with an alert, though somewhat histrionic, skepticism touching everything that was well received. It is his office to prove all things, though not necessarily to hold fast that which is good. Aside from the strain of affectation discernible in Hume's skepticism, he may be taken as an accentuated expression of that characteristic bent which distinguishes British thinking in his time from the thinking of the Continent, and more particularly of the French. There is in Hume, and in the British community, an insistence on the prosy, not to say the seamy, side of human affairs. He is not content with formulating his knowledge of things in terms of what ought to be or in terms of the objective point of the course of things. He is not even content with adding to the teleological account of phenomena a chain of empirical, narrative generalisations as to the usual course of things. He insists, in season and out of season, on an exhibition of the efficient causes engaged in any sequence of phenomena; and he is skeptical--irreverently skeptical--as to the need or the use of any formulation of knowledge that outruns the reach of his own matter-of-fact, step-by-step argument from cause to effect. In short, he is too modern to be wholly intelligible to those of his contemporaries who are most neatly abreast of their time. He out-Britishes the British; and, in his footsore quest for a perfectly tame explanation of things, he finds little comfort, and indeed scant courtesy, at the hands of his own generation. He is not in sufficiently naïve accord with the range of preconceptions then in vogue. But, while Hume may be an accentuated expression of a national characteristic, he is not therefore an untrue expression of this phase of British eighteenth-century thinking. The peculiarity of point of view and of method for which he stands has sometimes been called the critical attitude, sometimes the inductive method, sometimes the materialistic or mechanical, and again, though less aptly, the historical method. Its characteristic is an insistence on matter of fact. This matter-of-fact animus that meets any historian of economic doctrine on his introduction to British economics is a large, but not the largest, feature of the British scheme of early economic thought. It strikes the attention because it stands in contrast with the relative absence of this feature in the contemporary speculations of the Continent. The most potent, most formative habit of thought concerned in the early development of economic teaching on British ground is best seen in the broader generalisations of Adam Smith, and this more potent factor in Smith is a bent that is substantially identical with that which gives consistency to the speculations of the Physiocrats. In Adam Smith the two are happily combined, not to say blended; but the animistic habit still holds the primacy, with the matter-of-fact as a subsidiary though powerful factor. He is said to have combined deduction with induction. The relatively great prominence given the latter marks the line of divergence of British from French economics, not the line of coincidence; and on this account it may not be out of place to look more narrowly into the circumstances to which the emergence of this relatively greater penchant for a matter-of-fact explanation of things in the British community is due. To explain the characteristic animus for which Hume stands, on grounds that might appeal to Hume, we should have to inquire into the peculiar circumstances--ultimately material circumstances--that have gone to shape the habitual view of things within the British community, and that so have acted to differentiate the British preconceptions from the French, or from the general range of preconceptions prevalent on the Continent. These peculiar formative circumstances are no doubt to some extent racial peculiarities; but the racial complexion of the British community is not widely different from the French, and especially not widely different from certain other Continental communities which are for the present purpose roughly classed with the French. Race difference can therefore not wholly, nor indeed for the greater part, account for the cultural difference of which this difference in preconceptions is an outcome. Through its cumulative effect on institutions the race difference must be held to have had a considerable effect on the habit of mind of the community; but, if the race difference is in this way taken as the remoter ground of an institutional peculiarity, which in its turn has shaped prevalent habits of thought, then the attention may be directed to the proximate causes, the concrete circumstances, through which this race difference has acted, in conjunction with other ulterior circumstances, to work out the psychological phenomena observed. Race differences, it may be remarked, do not so nearly coincide with national lines of demarcation as differences in the point of view from which things are habitually apprehended or differences in the standards according to which facts are rated. If the element of race difference be not allowed definitive weight in discussing national peculiarities that underlie the deliverances of common sense, neither can these national peculiarities be confidently traced to a national difference in the transmitted learning that enters into the common-sense view of things. So far as concerns the concrete facts embodied in the learning of the various nations within the European culture, these nations make up but a single community. What divergence is visible does not touch the character of the positive information with which the learning of the various nations is occupied. Divergence is visible in the higher syntheses, the methods of handling the material of knowledge, the basis of valuation of the facts taken up, rather than in the material of knowledge. But this divergence must be set down to a cultural difference, a difference of point of view, not to a difference in inherited information. When a given body of information passes the national frontiers it acquires a new complexion, a new national, cultural physiognomy. It is this cultural physiognomy of learning that is here under inquiry, and a comparison of early French economics (the Physiocrats) with early British economics (Adam Smith) is here entered upon merely with a view to making out what significance this cultural physiognomy of the science has for the past progress of economic speculation. The broad features of economic speculation, as it stood at the period under consideration, may be briefly summed up, disregarding the element of policy, or expediency, which is common to both groups of economists, and attending to their theoretical work alone. With the Physiocrats, as with Adam Smith, there are two main points of view from which economic phenomena are treated: (_a_) the matter-of-fact point of view or preconception, which yields a discussion of causal sequences and correlations; and (_b_) what, for want of a more expressive word, is here called the animistic point of view or preconception, which yields a discussion of teleological sequences and correlations,--a discussion of the function of this and that "organ," of the legitimacy of this or the other range of facts. The former preconception is allowed a larger scope in the British than in the French economics: there is more of "induction" in the British. The latter preconception is present in both, and is the definitive element in both; but the animistic element is more colorless in the British, it is less constantly in evidence, and less able to stand alone without the support of arguments from cause to effect. Still, the animistic element is the controlling factor in the higher syntheses of both; and for both alike it affords the definitive ground on which the argument finally comes to rest. In neither group of thinkers is the sense of substantiality appeased until this quasi-spiritual ground, given by the natural propensity of the course of events, is reached. But the propensity in events, the natural or normal course of things, as appealed to by the British speculators, suggests less of an imputation of will-power, or personal force, to the propensity in question. It may be added, as has already been said in another place, that the tacit imputation of will-power or spiritual consistency to the natural or normal course of events has progressively weakened in the later course of economic speculation, so that in this respect, the British economists of the eighteenth century may be said to represent a later phase of economic inquiry than the Physiocrats. * * * * * Unfortunately, but unavoidably, if this question as to the cultural shifting of the point of view in economic science is taken up from the side of the causes to which the shifting is traceable, it will take the discussion back to ground on which an economist must at best feel himself to be but a raw layman, with all a layman's limitations and ineptitude, and with the certainty of doing badly what might be done well by more competent hands. But, with a reliance on charity where charity is most needed, it is necessary to recite summarily what seems to be the psychological bearing of certain cultural facts. A cursory acquaintance with any of the more archaic phases of human culture enforces the recognition of this fact,--that the habit of construing the phenomena of the inanimate world in animistic terms prevails pretty much universally on these lower levels. Inanimate phenomena are apprehended to work out a propensity to an end; the movements of the elements are construed in terms of quasi-personal force. So much is well authenticated by the observations on which anthropologists and ethnologists draw for their materials. This animistic habit, it may be said, seems to be more effectual and far-reaching among those primitive communities that lead a predatory life. But along with this feature of archaic methods of thought or of knowledge, the picturesqueness of which has drawn the attention of all observers, there goes a second feature, no less important for the purpose in hand, though less obtrusive. The latter is of less interest to the men who have to do with the theory of cultural development, because it is a matter of course. This second feature of archaic thought is the habit of also apprehending facts in non-animistic, or impersonal, terms. The imputation of propensity in no case extends to all the mechanical facts in the case. There is always a substratum of matter of fact, which is the outcome of an habitual imputation of causal sequence, or, perhaps better, an imputation of mechanical continuity, if a new term be permitted. The agent, thing, fact, event, or phenomenon, to which propensity, will-power, or purpose, is imputed, is always apprehended to act in an environment which is accepted as spiritually inert. There are always opaque facts as well as self-directing agents. Any agent acts through means which lend themselves to his use on other grounds than that of spiritual compulsion, although spiritual compulsion may be a large feature in any given case. The same features of human thinking, the same two complementary methods of correlating facts and handling them for the purposes of knowledge, are similarly in constant evidence in the daily life of men in our own community. The question is, in great part, which of the two bears the greater part in shaping human knowledge at any given time and within any given range of knowledge or of facts. Other features of the growth of knowledge, which are remoter from the point under inquiry, may be of no less consequence to a comprehensive theory of the development of culture and of thought; but it is of course out of the question here to go farther afield. The present inquiry will have enough to do with these two. No other features are correlative with these, and these merit discussion on account of their intimate bearing on the point of view of economics. The point of interest with respect to these two correlative and complementary habits of thought is the question of how they have fared under the changing exigencies of human culture; in what manner they come, under given cultural circumstances, to share the field of knowledge between them; what is the relative part of each in the composite point of view in which the two habits of thought express themselves at any given cultural stage. The animistic preconception enforces the apprehension of phenomena in terms generically identical with the terms of personality or individuality. As a certain modern group of psychologists would say, it imputes to objects and sequences an element of habit and attention similar in kind, though not necessarily in degree, to the like spiritual attitude present in the activities of a personal agent. The matter-of-fact preconception, on the other hand, enforces a handling of facts without imputation of personal force or attention, but with an imputation of mechanical continuity, substantially the preconception which has reached a formulation at the hands of scientists under the name of conservation of energy or persistence of quantity. Some appreciable resort to the latter method of knowledge is unavoidable at any cultural stage, for it is indispensable to all industrial efficiency. All technological processes and all mechanical contrivances rest, psychologically speaking, on this ground. This habit of thought is a selectively necessary consequence of industrial life, and, indeed, of all human experience in making use of the material means of life. It should therefore follow that, in a general way, the higher the culture, the greater the share of the mechanical preconception in shaping human thought and knowledge, since, in a general way, the stage of culture attained depends on the efficiency of industry. The rule, while it does not hold with anything like extreme generality, must be admitted to hold to a good extent; and to that extent it should hold also that, by a selective adaptation of men's habits of thought to the exigencies of those cultural phases that have actually supervened, the mechanical method of knowledge should have gained in scope and range. Something of the sort is borne out by observation. A further consideration enforces the like view. As the community increases in size, the range of observation of the individuals in the community also increases; and continually wider and more far-reaching sequences of a mechanical kind have to be taken account of. Men have to adapt their own motives to industrial processes that are not safely to be construed in terms of propensity, predilection, or passion. Life in an advanced industrial community does not tolerate a neglect of mechanical fact; for the mechanical sequences through which men, at an appreciable degree of culture, work out their livelihood, are no respecters of persons or of will-power. Still, on all but the higher industrial stages, the coercive discipline of industrial life, and of the scheme of life that inculcates regard for the mechanical facts of industry, is greatly mitigated by the largely haphazard character of industry, and by the great extent to which man continues to be the prime mover in industry. So long as industrial efficiency is chiefly a matter of the handicraftsman's skill, dexterity, and diligence, the attention of men in looking to the industrial process is met by the figure of the workman, as the chief and characteristic factor; and thereby it comes to run on the personal element in industry. But, with or without mitigation, the scheme of life which men perforce adopt under exigencies of an advanced industrial situation shapes their habits of thought on the side of their behavior, and thereby shapes their habits of thought to some extent for all purposes. Each individual is but a single complex of habits of thought, and the same psychical mechanism that expresses itself in one direction as conduct expresses itself in another direction as knowledge. The habits of thought formed in the one connection, in response to stimuli that call for a response in terms of conduct, must, therefore, have their effect when the same individual comes to respond to stimuli that call for a response in terms of knowledge. The scheme of thought or of knowledge is in good part a reverberation of the scheme of life. So that, after all has been said, it remains true that with the growth of industrial organization and efficiency there must, by selection and by adaptation, supervene a greater resort to the mechanical or dispassionate method of apprehending facts. But the industrial side of life is not the whole of it, nor does the scheme of life in vogue in any community or at any cultural stage comprise industrial conduct alone. The social, civic, military, and religious interests come in for their share of attention, and between them they commonly take up by far the larger share of it. Especially is this true so far as concerns those classes among whom we commonly look for a cultivation of knowledge for knowledge's sake. The discipline which these several interests exert does not commonly coincide with the training given by industry. So the religious interest, with its canons of truth and of right living, runs exclusively on personal relations and the adaptation of conduct to the predilections of a superior personal agent. The weight of its discipline, therefore, falls wholly on the animistic side. It acts to heighten our appreciation of the spiritual bearing of phenomena and to discountenance a matter-of-fact apprehension of things. The skeptic of the type of Hume has never been in good repute with those who stand closest to the accepted religious truths. The bearing of this side of our culture upon the development of economics is shown by what the mediæval scholars had to say on economic topics. The disciplinary effects of other phases of life, outside of the industrial and the religious, is not so simple a matter; but the discussion here approaches nearer to the point of immediate inquiry,--namely, the cultural situation in the eighteenth century, and its relation to economic speculation,--and this ground of interest in the question may help to relieve the topic of the tedium that of right belongs to it. In the remoter past of which we have records, and even in the more recent past, Occidental man, as well as man elsewhere, has eminently been a respecter of persons. Wherever the warlike activity has been a large feature of the community's life, much of human conduct in society has proceeded on a regard for personal force. The scheme of life has been a scheme of personal aggression and subservience, partly in the naïve form, partly conventionalised in a system of status. The discipline of social life for the present purpose, in so far as its canons of conduct rest on this element of personal force in the unconventionalised form, plainly tends to the formation of a habit of apprehending and coördinating facts from the animistic point of view. So far as we have to do with life under a system of status, the like remains true, but with a difference. The régime of status inculcates an unremitting and very nice discrimination and observance of distinctions of personal superiority and inferiority. To the criterion of personal force, or will-power, taken in its immediate bearing on conduct, is added the criterion of personal excellence-in-general, regardless of the first-hand potency of the given person as an agent. This criterion of conduct requires a constant and painstaking imputation of personal value, regardless of fact. The discrimination enjoined by the canons of status proceeds on an invidious comparison of persons in respect of worth, value, potency, virtue, which must, for the present purpose, be taken as putative. The greater or less personal value assigned a given individual or a given class under the canons of status is not assigned on the ground of visible efficiency, but on the ground of a dogmatic allegation accepted on the strength of an uncontradicted categorical affirmation simply. The canons of status hold their ground by force of preëmption. Where distinctions of status are based on a putative worth transmitted by descent from honorable antecedents, the sequence of transmission to which appeal is taken as the arbiter of honor is of a putative and animistic character rather than a visible mechanical continuity. The habit of accepting as final what is prescriptively right in the affairs of life has as its reflex in the affairs of knowledge the formula, _Quid ab omnibus, quid ubique creditur credendum est_. Even this meager account of the scheme of life that characterises a régime of status should serve to indicate what is its disciplinary effect in shaping habits of thought, and therefore in shaping the habitual criteria of knowledge and of reality. A culture whose institutions are a framework of invidious comparisons implies, or rather involves and comprises, a scheme of knowledge whose definitive standards of truth and substantiality are of an animistic character; and, the more undividedly the canons of status and ceremonial honor govern the conduct of the community, the greater the facility with which the sequence of cause and effect is made to yield before the higher claims of a spiritual sequence or guidance in the course of events. Men consistently trained to an unremitting discrimination of honor, worth, and personal force in their daily conduct, and to whom these criteria afford the definitive ground of sufficiency in coördinating facts for the purposes of life, will not be satisfied to fall short of the like definitive ground of sufficiency when they come to coördinate facts for the purposes of knowledge simply. The habits formed in unfolding his activity in one direction, under the impulse of a given interest, assert themselves when the individual comes to unfold his activity in any other direction, under the impulse of any other interest. If his last resort and highest criterion of truth in conduct is afforded by the element of personal force and invidious comparison, his sense of substantiality or truth in the quest of knowledge will be satisfied only when a like definitive ground of animistic force and invidious comparison is reached. But when such ground is reached he rests content and pushes the inquiry no farther. In his practical life he has acquired the habit of resting his case on an authentic deliverance as to what is absolutely right. This absolutely right and good final term in conduct has the character of finality only when conduct is construed in a ceremonial sense; that is to say, only when life is conceived as a scheme of conformity to a purpose outside and beyond the process of living. Under the régime of status this ceremonial finality is found in the concept of worth or honor. In the religious domain it is the concept of virtue, sanctity, or tabu. Merit lies in what one is, not in what one does. The habit of appeal to ceremonial finality, formed in the school of status, goes with the individual in his quest of knowledge, as a dependence upon a similarly authentic norm of absolute truth,--a similar seeking of a final term outside and beyond the range of knowledge. The discipline of social and civic life under a régime of status, then, reënforces the discipline of the religious life; and the outcome of the resulting habituation is that the canons of knowledge are cast in the animistic mold and converge to a ground of absolute truth, and this absolute truth is of a ceremonial nature. Its subject-matter is a reality regardless of fact. The outcome, for science, of the religious and social life of the civilisation of status, in Occidental culture, was a structure of quasi-spiritual appreciations and explanations, of which astrology, alchemy, and mediæval theology and metaphysics are competent, though somewhat one-sided, exponents. Throughout the range of this early learning the ground of correlation of phenomena is in part the supposed relative potency of the facts correlated; but it is also in part a scheme of status, in which facts are scheduled according to a hierarchical gradation of worth or merit, having only a ceremonial relation to the observed phenomena. Some elements (some metals, for instance) are noble, others base; some planets, on grounds of ceremonial efficacy, have a sinister influence, others a beneficent one; and it is a matter of serious consequence whether they are in the ascendant, and so on. The body of learning through which the discipline of animism and invidious comparison transmitted its effects to the science of economics was what is known as natural theology, natural rights, moral philosophy, and natural law. These several disciplines or bodies of knowledge had wandered far from the naïve animistic standpoint at the time when economic science emerged, and much the same is true as regards the time of the emergence of other modern sciences. But the discipline which makes for an animistic formulation of knowledge continued to hold the primacy in modern culture, although its dominion was never altogether undivided or unmitigated. Occidental culture has long been largely an industrial culture; and, as already pointed out, the discipline of industry, and of life in an industrial community, does not favor the animistic preconception. This is especially true as regards industry which makes large use of mechanical contrivances. The difference in these respects between Occidental industry and science, on the one hand, and the industry and science of other cultural regions, on the other hand, is worth noting in this connection. The result has been that the sciences, as that word is understood in later usage, have come forward gradually, and in a certain rough parallelism with the development of industrial processes and industrial organisation. It is possible to hold that both modern industry (of the mechanical sort) and modern science center about the region of the North Sea. It is still more palpably true that within this general area the sciences, in the recent past, show a family likeness to the civil and social institutions of the communities in which they have been cultivated, this being true to the greatest extent of the higher or speculative sciences; that is, in that range of knowledge in which the animistic preconception can chiefly and most effectively find application. There is, for instance, in the eighteenth century a perceptible parallelism between the divergent character of British and Continental culture and institutions, on the one hand, and the dissimilar aims of British and Continental speculation, on the other hand. Something has already been said of the difference in preconceptions between the French and the British economists of the eighteenth century. It remains to point out the correlative cultural difference between the two communities, to which it is conceived that the difference in scientific animus is in great measure due. It is, of course, only the general features, the general attitude of the speculators, that can be credited to the difference in culture. Differences of detail in the specific doctrines held could be explained only on a much more detailed analysis than can be entered on here, and after taking account of facts which cannot here be even allowed for in detail. Aside from the greater resort to mechanical contrivances and the larger scale of organisation in British industry, the further cultural peculiarities of the British community run in the same general direction. British religious life and beliefs had less of the element of fealty--personal or discretionary mastery and subservience--and more of a tone of fatalism. The civil institutions of the British had not the same rich personal content as those of the French. The British subject owned allegiance to an impersonal law rather than to the person of a superior. Relatively, it may be said that the sense of status, as a coercive factor, was in abeyance in the British community. Even in the warlike enterprise of the British community a similar characteristic is traceable. Warfare is, of course, a matter of personal assertion. Warlike communities and classes are necessarily given to construing facts in terms of personal force and personal ends. They are always superstitious. They are great sticklers for rank and precedent, and zealously cultivate those distinctions and ceremonial observances in which a system of status expresses itself. But, while warlike enterprise has by no means been absent from the British scheme of life, the geographical and strategic isolation of the British community has given a characteristic turn to their military relations. In recent times British warlike operations have been conducted abroad. The military class has consequently in great measure been segregated out from the body of the community, and the ideals and prejudices of the class have not been transfused through the general body with the same facility and effect that they might otherwise have had. The British community at home has seen the campaign in great part from the standpoint of the "sinews of war." The outcome of all these national peculiarities of circumstance and culture has been that a different scheme of life has been current in the British community from what has prevailed on the Continent. There has resulted the formation of a different body of habits of thought and a different animus in their handling of facts. The preconception of causal sequence has been allowed larger scope in the correlation of facts for purposes of knowledge; and, where the animistic preconception has been resorted to, as it always has in the profounder reaches of learning, it has commonly been an animism of a tamer kind. Taking Adam Smith as an exponent of this British attitude in theoretical knowledge, it is to be noted that, while he formulates his knowledge in terms of a propensity (natural laws) working teleologically to an end, the end or objective point which controls the formulation has not the same rich content of vital human interest or advantage as is met with in the Physiocratic speculations. There is perceptibly less of an imperious tone in Adam Smith's natural laws than in those of the contemporary French economists. It is true, he sums up the institutions with which he deals in terms of the ends which they should subserve, rather than in terms of the exigencies and habits of life out of which they have arisen; but he does not with the same tone of finality appeal to the end subserved as a final cause through whose coercive guidance the complex of phenomena is kept to its appointed task. Under his hands the restraining, compelling agency retires farther into the background, and appeal is taken to it neither so directly nor on so slight provocation. But Adam Smith is too large a figure to be disposed of in a couple of concluding paragraphs. At the same time his work and the bent which he gave to economic speculation are so intimately bound up with the aims and bias that characterise economics in its next stage of development that he is best dealt with as the point of departure for the Classical School rather than merely as a British counterpart of Physiocracy. Adam Smith will accordingly be considered in immediate connection with the bias of the classical school and the incursion of utilitarianism into economics. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, vol. xiii, Jan., 1899. [2] "Why is Economics not an Evolutionary Science?" _Quarterly Journal of Economics_, July, 1898. [3] "The Future of Economic Theory," _ibid._, October, 1898. [4] See, for instance, Hasbach, _Allgemeine philosophische Grundlagen der von François Quesnay und Adam Smith begründeten politischen Oekonomie_. [5] Quesnay, _Droit Naturel_, ch. v. (Ed. Daire, _Physiocrates_, pp. 52-53). [6] Quesnay, _Droit Naturel_, ch. v (Ed. Daire, _Physiocrates_, p. 53). [7] Dupont de Nemours, _Correspondance avec J.-B. Say_ (Ed. Daire, _Physiocrates_, première partie, p. 399). [8] See, for instance, the concluding chapters of La Rivière's _Ordre Naturel des Sociétés Politiques_. [9] E.g., Hasbach, _loc. cit._; Bonar, _Philosophy and Political Economy_, Book II; Ritchie, _Natural Rights_. THE PRECONCEPTIONS OF ECONOMIC SCIENCE[1] II Adam Smith's animistic bent asserts itself more plainly and more effectually in the general trend and aim of his discussion than in the details of theory. "Adam Smith's _Wealth of Nations_ is, in fact, so far as it has one single purpose, a vindication of the unconscious law present in the separate actions of men when these actions are directed by a certain strong personal motive."[2] Both in the _Theory of the Moral Sentiments_ and in the _Wealth of Nations_ there are many passages that testify to his abiding conviction that there is a wholesome trend in the natural course of things, and the characteristically optimistic tone in which he speaks for natural liberty is but an expression of this conviction. An extreme resort to this animistic ground occurs in his plea for freedom of investment.[3] In the proposition that men are "led by an invisible hand," Smith does not fall back on a meddling Providence who is to set human affairs straight when they are in danger of going askew. He conceives the Creator to be very continent in the matter of interference with the natural course of things. The Creator has established the natural order to serve the ends of human welfare; and he has very nicely adjusted the efficient causes comprised in the natural order, including human aims and motives, to this work that they are to accomplish. The guidance of the invisible hand takes place not by way of interposition, but through a comprehensive scheme of contrivances established from the beginning. For the purpose of economic theory, man is conceived to be consistently self-seeking; but this economic man is a part of the mechanism of nature, and his self-seeking traffic is but a means whereby, in the natural course of things, the general welfare is worked out. The scheme as a whole is guided by the end to be reached, but the sequence of events through which the end is reached is a causal sequence which is not broken into episodically. The benevolent work of guidance was performed in first establishing an ingenious mechanism of forces and motives capable of accomplishing an ordained result, and nothing beyond the enduring constraint of an established trend remains to enforce the divine purpose in the resulting natural course of things. The sequence of events, including human motives and human conduct, is a causal sequence; but it is also something more, or, rather, there is also another element of continuity besides that of brute cause and effect, present even in the step-by-step process whereby the natural course of things reaches its final term. The presence of such a quasi-spiritual or non-causal element is evident from two (alleged) facts. (1) The course of things may be deflected from the direct line of approach to that consummate human welfare which is its legitimate end. The natural trend of things may be overborne by an untoward conjuncture of causes. There is a distinction, often distressingly actual and persistent, between the legitimate and the observed course of things. If "natural," in Adam Smith's use, meant necessary, in the sense of causally determined, no divergence of events from the natural or legitimate course of things would be possible. If the mechanism of nature, including man, were a mechanically competent contrivance for achieving the great artificer's design, there could be no such episodes of blundering and perverse departure from the direct path as Adam Smith finds in nearly all existing arrangements. Institutional facts would then be "natural."[4] (2) When things have gone wrong, they will right themselves if interference with the natural course ceases; whereas, in the case of a causal sequence simply, the mere cessation of interference will not leave the outcome the same as if no interference had taken place. This recuperative power of nature is of an extra-mechanical character. The continuity of sequence by force of which the natural course of things prevails is, therefore, not of the nature of cause and effect, since it bridges intervals and interruptions in the causal sequence.[5] Adam Smith's use of the term "real" in statements of theory--as, for example, "real value," "real price"[6]--is evidence to this effect. "Natural" commonly has the same meaning as "real" in this connection.[7] Both "natural" and "real" are placed in contrast with the actual; and, in Adam Smith's apprehension, both have a substantiality different from and superior to facts. The view involves a distinction between reality and fact, which survives in a weakened form in the theories of "normal" prices, wages, profits, costs, in Adam Smith's successors. This animistic prepossession seems to pervade the earlier of his two monumental works in a greater degree than the later. In the _Moral Sentiments_ recourse is had to the teleological ground of the natural order more freely and with perceptibly greater insistence. There seems to be reason for holding that the animistic preconception weakened or, at any rate, fell more into the background as his later work of speculation and investigation proceeded. The change shows itself also in some details of his economic theory, as first set forth in the _Lectures_, and afterwards more fully developed in the _Wealth of Nations_. So, for instance, in the earlier presentation of the matter, "the division of labor is the immediate cause of opulence"; and this division of labor, which is the chief condition of economic well-being, "flows from a direct propensity in human nature for one man to barter with another."[8] The "propensity" in question is here appealed to as a natural endowment immediately given to man with a view to the welfare of human society, and without any attempt at further explanation of how man has come by it. No causal explanation of its presence or character is offered. But the corresponding passage of the _Wealth of Nations_ handles the question more cautiously.[9] Other parallel passages might be compared, with much the same effect. The guiding hand has withdrawn farther from the range of human vision. However, these and other like filial expressions of a devout optimism need, perhaps, not be taken as integral features of Adam Smith's economic theory, or as seriously affecting the character of his work as an economist. They are the expression of his general philosophical and theological views, and are significant for the present purpose chiefly as evidences of an animistic and optimistic bent. They go to show what is Adam Smith's accepted ground of finality,--the ground to which all his speculations on human affairs converge; but they do not in any great degree show the teleological bias guiding his formulation of economic theory in detail. The effective working of the teleological bias is best seen in Smith's more detailed handling of economic phenomena--in his discussion of what may loosely be called economic institutions--and in the criteria and principles of procedure by which he is guided in incorporating these features of economic life into the general structure of his theory. A fair instance, though perhaps not the most telling one, is the discussion of the "real and nominal price," and of the "natural and market price" of commodities, already referred to above.[10] The "real" price of commodities is their value in terms of human life. At this point Smith differs from the Physiocrats, with whom the ultimate terms of value are afforded by human sustenance taken as a product of the functioning of brute nature; the cause of the difference being that the Physiocrats conceived the natural order which works towards the material well-being of man to comprise the non-human environment only, whereas Adam Smith includes man in this concept of the natural order, and, indeed, makes him the central figure in the process of production. With the Physiocrats, production is the work of nature: with Adam Smith, it is the work of man and nature, with man in the foreground. In Adam Smith, therefore, labor is the final term in valuation. This "real" value of commodities is the value imputed to them by the economist under the stress of his teleological preconception. It has little, if any, place in the course of economic events, and no bearing on human affairs, apart from the sentimental influence which such a preconception in favor of a "real value" in things may exert upon men's notions of what is the good and equitable course to pursue in their transactions. It is impossible to gauge this real value of goods; it cannot be measured or expressed in concrete terms. Still, if labor exchanges for a varying quantity of goods, "it is their value which varies, not that of the labor which purchases them."[11] The values which practically attach to goods in men's handling of them are conceived to be determined without regard to the real value which Adam Smith imputes to the goods; but, for all that, the substantial fact with respect to these market values is their presumed approximation to the real values teleologically imputed to the goods under the guidance of inviolate natural laws. The real, or natural, value of articles has no causal relation to the value at which they exchange. The discussion of how values are determined in practice runs on the motives of the buyers and sellers, and the relative advantage enjoyed by the parties to the transaction.[12] It is a discussion of a process of valuation, quite unrelated to the "real," or "natural," price of things, and quite unrelated to the grounds on which things are held to come by their real, or natural, price; and yet, when the complex process of valuation has been traced out in terms of human motives and the exigencies of the market, Adam Smith feels that he has only cleared the ground. He then turns to the serious business of accounting for value and price theoretically, and making the ascertained facts articulate with his teleological theory of economic life.[13] The occurrence of the words "ordinary" and "average" in this connection need not be taken too seriously. The context makes it plain that the equality which commonly subsists between the ordinary or average rates, and the natural rates, is a matter of coincidence, not of identity. Not only are there temporary deviations, but there may be a permanent divergence between the ordinary and the natural price of a commodity; as in case of a monopoly or of produce grown under peculiar circumstances of soil or climate.[14] The natural price coincides with the price fixed by competition, because competition means the unimpeded play of those efficient forces through which the nicely adjusted mechanism of nature works out the design to accomplish which it was contrived. The natural price is reached through the free interplay of the factors of production, and it is itself an outcome of production. Nature, including the human factor, works to turn out the goods; and the natural value of the goods is their appraisement from the standpoint of this productive process of nature. Natural value is a category of production: whereas, notoriously exchange value or market price is a category of distribution. And Adam Smith's theoretical handling of market price aims to show how the factors of human predilection and human wants at work in the higgling of the market bring about a result in passable consonance with the natural laws that are conceived to govern production. The natural price is a composite result of the blending of the three "component parts of the price of commodities,"--the natural wages of laborer, the natural profits of stock, and the natural rent of land; and each of these three components is in its turn the measure of the productive effect of the factor to which it pertains. The further discussion of these shares in distribution aims to account for the facts of distribution on the ground of the productivity of the factors which are held to share the product between them. That is to say, Adam Smith's preconception of a productive natural process as the basis of his economic theory dominates his aims and procedure, when he comes to deal with phenomena that cannot be stated in terms of production. The causal sequence in the process of distribution is, by Adam Smith's own showing, unrelated to the causal sequence in the process of production; but, since the latter is the substantial fact, as viewed from the standpoint of a teleological natural order, the former must be stated in terms of the latter before Adam Smith's sense of substantiality, or "reality," is satisfied. Something of the same kind is, of course, visible in the Physiocrats and in Cantillon. It amounts to an extension of the natural-rights preconception to economic theory. Adam Smith's discussion of distribution as a function of productivity might be traced in detail through his handling of Wages, Profits, and Rent; but, since the aim here is a brief characterisation only, and not an exposition, no farther pursuit of this point seems feasible. It may, however, be worth while to point out another line of influence along which the dominance of the teleological preconception shows itself in Adam Smith. This is the normalisation of data, in order to bring them into consonance with an orderly course of approach to the putative natural end of economic life and development. The result of this normalisation of data is, on the one hand, the use of what James Steuart calls "conjectural history" in dealing with past phases of economic life, and, on the other hand, a statement of present-day phenomena in terms of what legitimately ought to be according to the God-given end of life rather than in terms of unconstrued observation. Account is taken of the facts (supposed or observed) ostensibly in terms of causal sequence, but the imputed causal sequence is construed to run on lines of teleological legitimacy. A familiar instance of this "conjectural history," in a highly and effectively normalized form, is the account of "that early and rude state of society which precedes both the accumulation of stock and the appropriation of land."[15] It is needless at this day to point out that this "early and rude state," in which "the whole produce of labor belongs to the laborer," is altogether a figment. The whole narrative, from the putative origin down, is not only supposititious, but it is merely a schematic presentation of what should have been the course of past development, in order to lead up to that ideal economic situation which would satisfy Adam Smith's preconception.[16] As the narrative comes nearer the region of known latter-day facts, the normalisation of the data becomes more difficult and receives more detailed attention; but the change in method is a change of degree rather than of kind. In the "early and rude state" the coincidence of the "natural" and the actual course of events is immediate and undisturbed, there being no refractory data at hand; but in the later stages and in the present situation, where refractory facts abound, the coördination is difficult, and the coincidence can be shown only by a free abstraction from phenomena that are irrelevant to the teleological trend and by a laborious interpretation of the rest. The facts of modern life are intricate, and lend themselves to statement in the terms of the theory only after they have been subjected to a "higher criticism." The chapter "Of the Origin and Use of Money"[17] is an elegantly normalised account of the origin and nature of an economic institution, and Adam Smith's further discussion of money runs on the same lines. The origin of money is stated in terms of the purpose which money should legitimately serve in such a community as Adam Smith considered right and good, not in terms of the motives and exigencies which have resulted in the use of money and in the gradual rise of the existing method of payment and accounts. Money is "the great wheel of circulation," which effects the transfer of goods in process of production and the distribution of the finished goods to the consumers. It is an organ of the economic commonwealth rather than an expedient of accounting and a conventional repository of wealth. It is perhaps superfluous to remark that to the "plain man," who is not concerned with the "natural course of things" in a consummate _Geldwirtschaft_, the money that passes his hand is not a "great wheel of circulation." To the Samoyed, for instance, the reindeer which serves him as unit of value is wealth in the most concrete and tangible form. Much the same is true of coin, or even of bank-notes, in the apprehension of unsophisticated people among ourselves to-day. And yet it is in terms of the habits and conditions of life of these "plain people" that the development of money will have to be accounted for if it is to be stated in terms of cause and effect. * * * * * The few scattered passages already cited may serve to illustrate how Adam Smith's animistic or teleological bent shapes the general structure of his theory and gives it consistency. The principle of definitive formulation in Adam Smith's economic knowledge is afforded by a putative purpose that does not at any point enter causally into the economic life process which he seeks to know. This formative or normative purpose or end is not freely conceived to enter as an efficient agent in the events discussed, or to be in any way consciously present in the process. It can scarcely be taken as an animistic agency engaged in the process. It sanctions the course of things, and gives legitimacy and substance to the sequence of events, so far as this sequence may be made to square with the requirements of the imputed end. It has therefore a ceremonial or symbolical force only, and lends the discussion a ceremonial competency; although with economists who have been in passable agreement with Adam Smith as regards the legitimate end of economic life this ceremonial consistency, or consistency _de jure_ has for many purposes been accepted as the formulation of a causal continuity in the phenomena that have been interpreted in its terms. Elucidations of what normally ought to happen, as a matter of ceremonial necessity, have in this way come to pass for an account of matters of fact. But, as has already been pointed out, there is much more to Adam Smith's exposition of theory than a formulation of what ought to be. Much of the advance he achieved over his predecessors consists in a larger and more painstaking scrutiny of facts, and a more consistent tracing out of causal continuity in the facts handled. No doubt, his superiority over the Physiocrats, that characteristic of his work by virtue of which it superseded theirs in the farther growth of economic science, lies to some extent in his recourse to a different, more modern ground of normality,--a ground more in consonance with the body of preconceptions that have had the vogue in later generations. It is a shifting of the point of view from which the facts are handled; but it comes in great part to a substitution of a new body of preconceptions for the old, or a new adaptation of the old ground of finality, rather than an elimination of all metaphysical or animistic norms of valuation. With Adam Smith, as with the Physiocrats, the fundamental question, the answer to which affords the point of departure and the norm of procedure, is a question of substantiality or economic "reality." With both, the answer to this question is given naïvely, as a deliverance of common sense. Neither is disturbed by doubts as to this deliverance of common sense or by any need of scrutinising it. To the Physiocrats this substantial ground of economic reality is the nutritive process of Nature. To Adam Smith it is Labor. His reality has the advantage of being the deliverance of the common sense of a more modern community, and one that has maintained itself in force more widely and in better consonance with the facts of latter-day industry. The Physiocrats owe their preconception of the productiveness of nature to the habits of thought of a community in whose economic life the dominant phenomenon was the owner of agricultural land. Adam Smith owes his preconception in favor of labor to a community in which the obtrusive economic feature of the immediate past was handicraft and agriculture, with commerce as a scarcely secondary phenomenon. So far as Adam Smith's economic theories are a tracing out of the causal sequence in economic phenomena, they are worked out in terms given by these two main directions of activity,--human effort directed to the shaping of the material means of life, and human effort and discretion directed to a pecuniary gain. The former is the great, substantial productive force: the latter is not immediately, or proximately, productive.[18] Adam Smith still has too lively a sense of the nutritive purpose of the order of nature freely to extend the concept of productiveness to any activity that does not yield a material increase of the creature comforts. His instinctive appreciation of the substantial virtue of whatever effectually furthers nutrition, even leads him into the concession that "in agriculture nature labors along with man," although the general tenor of his argument is that the productive force with which the economist always has to count is human labor. This recognised substantiality of labor as productive is, as has already been remarked, accountable for his effort to reduce to terms of productive labor such a category of distribution as exchange value. With but slight qualification, it will hold that, in the causal sequence which Adam Smith traces out in his economic theories proper (contained in the first three books of the _Wealth of Nations_), the causally efficient factor is conceived to be human nature in these two relations,--of productive efficiency and pecuniary gain through exchange. Pecuniary gain--gain in the material means of life through barter--furnishes the motive force to the economic activity of the individual; although productive efficiency is the legitimate, normal end of the community's economic life. To such an extent does this concept of man's seeking his ends through "truck, barter, and exchange" pervade Adam Smith's treatment of economic processes that he even states production in its terms, and says that "labor was the first price, the original purchase-money, that was paid for all things."[19] The human nature engaged in this pecuniary traffic is conceived in somewhat hedonistic terms, and the motives and movements of men are normalised to fit the requirements of a hedonistically conceived order of nature. Men are very much alike in their native aptitudes and propensities;[20] and, so far as economic theory need take account of these aptitudes and propensities, they are aptitudes for the production of the "necessaries and conveniences of life," and propensities to secure as great a share of these creature comforts as may be. Adam Smith's conception of normal human nature--that is to say, the human factor which enters causally in the process which economic theory discusses--comes, on the whole, to this: Men exert their force and skill in a mechanical process of production, and their pecuniary sagacity in a competitive process of distribution, with a view to individual gain in the material means of life. These material means are sought in order to the satisfaction of men's natural wants through their consumption. It is true, much else enters into men's endeavors in the struggle for wealth, as Adam Smith points out; but this consumption comprises the legitimate range of incentives, and a theory which concerns itself with the natural course of things need take but incidental account of what does not come legitimately in the natural course. In point of fact, there are appreciable "actual," though scarcely "real," departures from this rule. They are spurious and insubstantial departures, and do not properly come within the purview of the stricter theory. And, since human nature is strikingly uniform, in Adam Smith's apprehension, both the efforts put forth and the consumptive effect accomplished may be put in quantitative terms and treated algebraically, with the result that the entire range of phenomena comprised under the head of consumption need be but incidentally considered; and the theory of production and distribution is complete when the goods or the values have been traced to their disappearance in the hands of their ultimate owners. The reflex effect of consumption upon production and distribution is, on the whole, quantitative only. Adam Smith's preconception of a normal teleological order of procedure in the natural course, therefore, affects not only those features of theory where he is avowedly concerned with building up a normal scheme of the economic process. Through his normalising the chief causal factor engaged in the process, it affects also his arguments from cause to effect.[21] What makes this latter feature worth particular attention is the fact that his successors carried this normalisation farther, and employed it with less frequent reference to the mitigating exceptions which Adam Smith notices by the way. The reason for that farther and more consistent normalisation of human nature which gives us the "economic man" at the hands of Adam Smith's successors lies, in great part, in the utilitarian philosophy that entered in force and in consummate form at about the turning of the century. Some credit in the work of normalisation is due also to the farther supersession of handicraft by the "capitalistic" industry that came in at the same time and in pretty close relation with the utilitarian views. * * * * * After Adam Smith's day, economics fell into profane hands. Apart from Malthus, who, of all the greater economists, stands nearest to Adam Smith on such metaphysical heads as have an immediate bearing upon the premises of economic science, the next generation do not approach their subject from the point of view of a divinely instituted order; nor do they discuss human interests with that gently optimistic spirit of submission that belongs to the economist who goes to his work with the fear of God before his eyes. Even with Malthus the recourse to the divinely sanctioned order of nature is somewhat sparing and temperate. But it is significant for the later course of economic theory that, while Malthus may well be accounted the truest continuer of Adam Smith, it was the undevout utilitarians that became the spokesmen of the science after Adam Smith's time. There is no wide breach between Adam Smith and the utilitarians, either in details of doctrine or in the concrete conclusions arrived at as regards questions of policy. On these heads Adam Smith might well be classed as a moderate utilitarian, particularly so far as regards his economic work. Malthus has still more of a utilitarian air,--so much so, indeed, that he is not infrequently spoken of as a utilitarian. This view, convincingly set forth by Mr. Bonar,[22] is no doubt well borne out by a detailed scrutiny of Malthus's economic doctrines. His humanitarian bias is evident throughout, and his weakness for considerations of expediency is the great blemish of his scientific work. But, for all that, in order to an appreciation of the change that came over classical economics with the rise of Benthamism, it is necessary to note that the agreement in this matter between Adam Smith and the disciples of Bentham, and less decidedly that between Malthus and the latter, is a coincidence of conclusions rather than an identity of preconceptions.[23] With Adam Smith the ultimate ground of economic reality is the design of God, the teleological order; and his utilitarian generalisations, as well as the hedonistic character of his economic man, are but methods of the working out of this natural order, not the substantial and self-legitimating ground. Shifty as Malthus's metaphysics are, much the same is to be said for him.[24] Of the utilitarians proper the converse is true, although here, again, there is by no means utter consistency. The substantial economic ground is pleasure and pain: the teleological order (even the design of God, where that is admitted) is the method of its working-out. It may be unnecessary here to go into the farther implications, psychological and ethical, which this preconception of the utilitarians involves. And even this much may seem a taking of excessive pains with a distinction that marks no tangible difference. But a reading of the classical doctrines, with something of this metaphysics of political economy in mind, will show how, and in great part why, the later economists of the classical line diverged from Adam Smith's tenets in the early years of the century, until it has been necessary to interpret Adam Smith somewhat shrewdly in order to save him from heresy. The post-Bentham economics is substantially a theory of value. This is altogether the dominant feature of the body of doctrines; the rest follows from, or is adapted to, this central discipline. The doctrine of value is of very great importance also in Adam Smith; but Adam Smith's economics is a theory of the production and apportionment of the material means of life.[25] With Adam Smith, value is discussed from the point of view of production. With the utilitarians, production is discussed from the point of view of value. The former makes value an outcome of the process of production: the latter make production the outcome of a valuation process. The point of departure with Adam Smith is the "productive power of labor."[26] With Ricardo it is a pecuniary problem concerned in the distribution of ownership;[27] but the classical writers are followers of Adam Smith, and improve upon and correct the results arrived at by him, and the difference of point of view, therefore, becomes evident in their divergence from him, and the different distribution of emphasis, rather than in a new and antagonistic departure. The reason for this shifting of the center of gravity from production to valuation lies, proximately, in Bentham's revision of the "principles" of morals. Bentham's philosophical position is, of course, not a self-explanatory phenomenon, nor does the effect of Benthamism extend only to those who are avowed followers of Bentham; for Bentham is the exponent of a cultural change that affects the habits of thought of the entire community. The immediate point of Bentham's work, as affecting the habits of thought of the educated community, is the substitution of hedonism (utility) in place of achievement of purpose, as a ground of legitimacy and a guide in the normalisation of knowledge. Its effect is most patent in speculations on morals, where it inculcates determinism. Its close connection with determinism in ethics points the way to what may be expected of its working in economics. In both cases the result is that human action is construed in terms of the causal forces of the environment, the human agent being, at the best, taken as a mechanism of commutation, through the workings of which the sensuous effects wrought by the impinging forces of the environment are, by an enforced process of valuation, transmuted without quantitative discrepancy into moral or economic conduct, as the case may be. In ethics and economics alike the subject-matter of the theory is this valuation process that expresses itself in conduct, resulting, in the case of economic conduct, in the pursuit of the greatest gain or least sacrifice. Metaphysically or cosmologically considered, the human nature into the motions of which hedonistic ethics and economics inquire is an intermediate term in a causal sequence, of which the initial and the terminal members are sensuous impressions and the details of conduct. This intermediate term conveys the sensuous impulse without loss of force to its eventuation in conduct. For the purpose of the valuation process through which the impulse is so conveyed, human nature may, therefore, be accepted as uniform; and the theory of the valuation process may be formulated quantitatively, in terms of the material forces affecting the human sensory and of their equivalents in the resulting activity. In the language of economics, the theory of value may be stated in terms of the consumable goods that afford the incentive to effort and the expenditure undergone in order to procure them. Between these two there subsists a necessary equality; but the magnitudes between which the equality subsists are hedonistic magnitudes, not magnitudes of kinetic energy nor of vital force, for the terms handled are sensuous terms. It is true, since human nature is substantially uniform, passive, and unalterable in respect of men's capacity for sensuous affection, there may also be presumed to subsist a substantial equality between the psychological effect to be wrought by the consumption of goods, on the one side, and the resulting expenditure of kinetic or vital force, on the other side; but such an equality is, after all, of the nature of a coincidence, although there should be a strong presumption in favor of its prevailing on an average and in the common run of cases. Hedonism, however, does not postulate uniformity between men except in the respect of sensuous cause and effect. The theory of value which hedonism gives is, therefore, a theory of cost in terms of discomfort. By virtue of the hedonistic equilibrium reached through the valuation process, the sacrifice or expenditure of sensuous reality involved in acquisition is the equivalent of the sensuous gain secured. An alternative statement might perhaps be made, to the effect that the measure of the value of goods is not the sacrifice or discomfort undergone, but the sensuous gain that accrues from the acquisition of the goods; but this is plainly only an alternative statement, and there are special reasons in the economic life of the time why the statement in terms of cost, rather than in terms of "utility," should commend itself to the earlier classical economists. On comparing the utilitarian doctrine of value with earlier theories, then, the case stands somewhat as follows. The Physiocrats and Adam Smith contemplate value as a measure of the productive force that realises itself in the valuable article. With the Physiocrats this productive force is the "anabolism" of Nature (to resort to a physiological term): with Adam Smith it is chiefly human labor directed to heightening the serviceability of the materials with which it is occupied. Production causes value in either case. The post-Bentham economics contemplates value as a measure of, or as measured by, the irksomeness of the effort involved in procuring the valuable goods. As Mr. E. C. K. Gonner has admirably pointed out,[28] Ricardo--and the like holds true of classical economics generally--makes cost the foundation of value, not its cause. This resting of value on cost takes place through a valuation. Any one who will read Adam Smith's theoretical exposition to as good purpose as Mr. Gonner has read Ricardo will scarcely fail to find that the converse is true in Adam Smith's case. But the causal relation of cost to value holds only as regards "natural" or "real" value in Adam Smith's doctrine. As regards market price, Adam Smith's theory does not differ greatly from that of Ricardo on this head. He does not overlook the valuation process by which market price is adjusted and the course of investment is guided, and his discussion of this process runs in terms that should be acceptable to any hedonist. * * * * * The shifting of the point of view that comes into economics with the acceptance of utilitarian ethics and its correlate, the associationist psychology, is in great part a shifting to the ground of causal sequence as contrasted with that of serviceability to a preconceived end. This is indicated even by the main fact already cited,--that the utilitarian economists make exchange value the central feature of their theories, rather than the conduciveness of industry to the community's material welfare. Hedonistic exchange value is the outcome of a valuation process enforced by the apprehended pleasure-giving capacities of the items valued. And in the utilitarian theories of production, arrived at from the standpoint so given by exchange value, the conduciveness to welfare is not the objective point of the argument. This objective point is rather the bearing of productive enterprise upon the individual fortunes of the agents engaged, or upon the fortunes of the several distinguishable classes of beneficiaries comprised in the industrial community; for the great immediate bearing of exchange values upon the life of the collectivity is their bearing upon the distribution of wealth. Value is a category of distribution. The result is that, as is well shown by Mr. Cannan's discussion,[29] the theories of production offered by the classical economists have been sensibly scant, and have been carried out with a constant view to the doctrines on distribution. An incidental but telling demonstration of the same facts is given, by Professor Bücher;[30] and in illustration may be cited Torrens's _Essay on the Production of Wealth_, which is to a good extent occupied with discussions of value and distribution. The classical theories of production have been theories of the production of "wealth"; and "wealth," in classical usage, consists of material things having exchange value. During the vogue of the classical economics the accepted characteristic by which "wealth" has been defined has been its amenability to ownership. Neither in Adam Smith nor in the Physiocrats is this amenability to ownership made so much of, nor is it in a similar degree accepted as a definite mark of the subject-matter of the science. As their hedonistic preconception would require, then, it is to the pecuniary side of life that the classical economists give their most serious attention, and it is the pecuniary bearing of any given phenomenon or of any institution that commonly shapes the issue of the argument. The causal sequence about which the discussion centers is a process of pecuniary valuation. It runs on distribution, ownership, acquisition, gain, investment, exchange.[31] In this way the doctrines on production come to take a pecuniary coloring; as is seen in a less degree also in Adam Smith, and even in the Physiocrats, although these earlier economists very rarely, if ever, lose touch with the concept of generic serviceability as the characteristic feature of production. The tradition derived from Adam Smith, which made productivity and serviceability the substantial features of economic life, was not abruptly put aside by his successors, though the emphasis was differently distributed by them in following out the line of investigation to which the tradition pointed the way. In the classical economics the ideas of production and of acquisition are not commonly held apart, and very much of what passes for a theory of production is occupied with phenomena of investment and acquisition. Torrens's _Essay_ is a case in point, though by no means an extreme case. This is as it should be; for to the consistent hedonist the sole motive force concerned in the industrial process is the self-regarding motive of pecuniary gain, and industrial activity is but an intermediate term between the expenditure or discomfort undergone and the pecuniary gain sought. Whether the end and outcome is an invidious gain for the individual (in contrast with or at the cost of his neighbors), or an enhancement of the facility of human life on the whole, is altogether a by-question in any discussion of the range of incentives by which men are prompted to their work or the direction which their efforts take. The serviceability of the given line of activity, for the life purposes of the community or for one's neighbors, "is not of the essence of this contract." These features of serviceability come into the account chiefly as affecting the vendibility of what the given individual has to offer in seeking gain through a bargain.[32] In hedonistic theory the substantial end of economic life is individual gain; and for this purpose production and acquisition may be taken as fairly coincident, if not identical. Moreover, society, in the utilitarian philosophy, is the algebraic sum of the individuals; and the interest of the society is the sum of the interests of the individuals. It follows by easy consequence, whether strictly true or not, that the sum of individual gains is the gain of the society, and that, in serving his own interest in the way of acquisition, the individual serves the collective interest of the community. Productivity or serviceability is, therefore, to be presumed of any occupation or enterprise that looks to a pecuniary gain; and so, by a roundabout path, we get back to the ancient conclusion of Adam Smith, that the remuneration of classes or persons engaged in industry coincides with their productive contribution to the output of services and consumable goods. A felicitous illustration of the working of this hedonistic norm in classical economic doctrine is afforded by the theory of the wages of superintendence,--an element in distribution which is not much more than suggested in Adam Smith, but which receives ampler and more painstaking attention as the classical body of doctrines reaches a fuller development. The "wages of superintendence" are the gains due to pecuniary management. They are the gains that come to the director of the "business,"--not those that go to the director of the mechanical process or to the foreman of the shop. The latter are wages simply. This distinction is not altogether clear in the earlier writers, but it is clearly enough contained in the fuller development of the theory. The undertaker's work is the management of investment. It is altogether of a pecuniary character, and its proximate aim is "the main chance." If it leads, indirectly, to an enhancement of serviceability or a heightened aggregate output of consumable goods, that is a fortuitous circumstance incident to that heightened vendibility on which the investor's gain depends. Yet the classical doctrine says frankly that the wages of superintendence are the remuneration of superior productivity,[33] and the classical theory of production is in good part a doctrine of investment in which the identity of production and pecuniary gain is taken for granted. The substitution of investment in the place of industry as the central and substantial fact in the process of production is due not to the acceptance of hedonism simply, but rather to the conjunction of hedonism with an economic situation of which the investment of capital and its management for gain was the most obvious feature. The situation which shaped the common-sense apprehension of economic facts at the time was what has since been called a capitalistic system, in which pecuniary enterprise and the phenomena of the market were the dominant and tone-giving facts. But this economic situation was also the chief ground for the vogue of hedonism in economics; so that hedonistic economics may be taken as an interpretation of human nature in terms of the market-place. The market and the "business world," to which the business man in his pursuit of gain was required to adapt his motives, had by this time grown so large that the course of business events was beyond the control of any one person; and at the same time those far-reaching organisations of invested wealth which have latterly come to prevail and to coerce the market were not then in the foreground. The course of market events took its passionless way without traceable relation or deference to any man's convenience and without traceable guidance towards an ulterior end. Man's part in this pecuniary world was to respond with alacrity to the situation, and so adapt his vendible effects to the shifting demand as to realise something in the outcome. What he gained in his traffic was gained without loss to those with whom he dealt, for they paid no more than the goods were worth to them. One man's gain need not be another's loss; and, if it is not, then it is net gain to the community. Among the striking remoter effects of the hedonistic preconception, and its working out in terms of pecuniary gain, is the classical failure to discriminate between capital as investment and capital as industrial appliances. This is, of course, closely related to the point already spoken of. The appliances of industry further the production of goods, therefore capital (invested wealth) is productive; and the rate of its average remuneration marks the degree of its productiveness.[34] The most obvious fact limiting the pecuniary gain secured by means of invested wealth is the sum invested. Therefore, capital limits the productiveness of industry; and the chief and indispensable condition to an advance in material well-being is the accumulation of invested wealth. In discussing the conditions of industrial improvement, it is usual to assume that "the state of the arts remains unchanged," which is, for all purposes but that of a doctrine of profits per cent., an exclusion of the main fact. Investments may, further, be transferred from one enterprise to another. Therefore, and in that degree, the means of production are "mobile." * * * * * Under the hands of the great utilitarian writers, therefore, political economy is developed into a science of wealth, taking that term in the pecuniary sense, as things amenable to ownership. The course of things in economic life is treated as a sequence of pecuniary events, and economic theory becomes a theory of what should happen in that consummate situation where the permutation of pecuniary magnitudes takes place without disturbance and without retardation. In this consummate situation the pecuniary motive has its perfect work, and guides all the acts of economic man in a guileless, colorless, unswerving quest of the greatest gain at the least sacrifice. Of course, this perfect competitive system, with its untainted "economic man," is a feat of the scientific imagination, and is not intended as a competent expression of fact. It is an expedient of abstract reasoning; and its avowed competency extends only to the abstract principles, the fundamental laws of the science, which hold only so far as the abstraction holds. But, as happens in such cases, having once been accepted and assimilated as real, though perhaps not as actual, it becomes an effective constituent in the inquirer's habits of thought, and goes to shape his knowledge of facts. It comes to serve as a norm of substantiality or legitimacy; and facts in some degree fall under its constraint, as is exemplified by many allegations regarding the "tendency" of things. To this consummation, which Senior speaks of as "the natural state of man,"[35] human development tends by force of the hedonistic character of human nature; and in terms of its approximation to this natural state, therefore, the immature actual situation had best be stated. The pure theory, the "hypothetical science" of Cairnes, "traces the phenomena of the production and distribution of wealth up to their causes, in the principles of human nature and the laws and events--physical, political, and social--of the external world."[36] But since the principles of human nature that give the outcome in men's economic conduct, so far as it touches the production and distribution of wealth, are but the simple and constant sequence of hedonistic cause and effect, the element of human nature may fairly be eliminated from the problem, with great gain in simplicity and expedition. Human nature being eliminated, as being a constant intermediate term, and all institutional features of the situation being also eliminated (as being similar constants under that natural or consummate pecuniary _régime_ with which the pure theory is concerned), the laws of the phenomena of wealth may be formulated in terms of the remaining factors. These factors are the vendible items that men handle in these processes of production and distribution; and economic laws come, therefore, to be expressions of the algebraic relations subsisting between the various elements of wealth and investment,--capital, labor, land, supply and demand of one and the other, profits, interest, wages. Even such items as credit and population become dissociated from the personal factor, and figure in the computation as elemental factors acting and reacting though a permutation of values over the heads of the good people whose welfare they are working out. * * * * * To sum up: the classical economics, having primarily to do with the pecuniary side of life, is a theory of a process of valuation. But since the human nature at whose hands and for whose behoof the valuation takes place is simple and constant in its reaction to pecuniary stimulus, and since no other feature of human nature is legitimately present in economic phenomena than this reaction to pecuniary stimulus, the valuer concerned in the matter is to be overlooked or eliminated; and the theory of the valuation process then becomes a theory of the pecuniary interaction of the facts valued. It is a theory of valuation with the element of valuation left out,--a theory of life stated in terms of the normal paraphernalia of life. In the preconceptions with which classical economics set out were comprised the remnants of natural rights and of the order of nature, infused with that peculiarly mechanical natural theology that made its way into popular vogue on British ground during the eighteenth century and was reduced to a neutral tone by the British penchant for the commonplace--stronger at this time than at any earlier period. The reason for this growing penchant for the commonplace, for the explanation of things in causal terms, lies partly in the growing resort to mechanical processes and mechanical prime movers in industry, partly in the (consequent) continued decline of the aristocracy and the priesthood, and partly in the growing density of population and the consequent greater specialisation and wider organisation of trade and business. The spread of the discipline of the natural sciences, largely incident to the mechanical industry, counts in the same direction; and obscurer factors in modern culture may have had their share. The animistic preconception was not lost, but it lost tone; and it partly fell into abeyance, particularly so far as regards its avowal. It is visible chiefly in the unavowed readiness of the classical writers to accept as imminent and definitive any possible outcome which the writer's habit or temperament inclined him to accept as right and good. Hence the visible inclination of classical economists to a doctrine of the harmony of interests, and their somewhat uncircumspect readiness to state their generalisations in terms of what ought to happen according to the ideal requirements of that consummate _Geldwirtschaft_ to which men "are impelled by the provisions of nature."[37] By virtue of their hedonistic preconceptions, their habituation to the ways of a pecuniary culture, and their unavowed animistic faith that nature is in the right, the classical economists knew that the consummation to which, in the nature of things, all things tend, is the frictionless and beneficent competitive system. This competitive ideal, therefore, affords the normal, and conformity to its requirements affords the test of absolute economic truth. The standpoint so gained selectively guides the attention of the classical writers in their observation and apprehension of facts, and they come to see evidence of conformity or approach to the normal in the most unlikely places. Their observation is, in great part, interpretative, as observation commonly is. What is peculiar to the classical economists in this respect is their particular norm of procedure in the work of interpretation. And, by virtue of having achieved a standpoint of absolute economic normality, they became a "deductive" school, so called, in spite of the patent fact that they were pretty consistently employed with an inquiry into the causal sequence of economic phenomena. The generalisation of observed facts becomes a normalisation of them, a statement of the phenomena in terms of their coincidence with, or divergence from, that normal tendency that makes for the actualisation of the absolute economic reality. This absolute or definitive ground of economic legitimacy lies beyond the causal sequence in which the observed phenomena are conceived to be interlinked. It is related to the concrete facts neither as cause nor as effect in any such way that the causal relation may be traced in a concrete instance. It has little causally to do either with the "mental" or with the "physical" data with which the classical economist is avowedly employed. Its relation to the process under discussion is that of an extraneous--that is to say, a ceremonial--legitimation. The body of knowledge gained by its help and under its guidance is, therefore, a taxonomic science. So, by way of a concluding illustration, it may be pointed out that money, for instance, is normalised in terms of the legitimate economic tendency. It becomes a measure of value and a medium of exchange. It has become primarily an instrument of pecuniary commutation, instead of being, as under the earlier normalisation of Adam Smith, primarily a great wheel of circulation for the diffusion of consumable goods. The terms in which the laws of money, as of the other phenomena of pecuniary life, are formulated, are terms which connote its normal function in the life history of objective values as they live and move and have their being in the consummate pecuniary situation of the "natural" state. To a similar work of normalisation we owe those creatures of the myth-maker, the quantity theory and the wages-fund. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, Vol. XIII, July. 1899. [2] Bonar, _Philosophy and Political Economy_, pp. 177, 178. [3] "Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society.... By directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." _Wealth of Nations_, Book IV, chap. ii. [4] The discrepancy between the actual, causally determined situation and the divinely intended consummation is the metaphysical ground of all that inculcation of morality and enlightened policy that makes up so large a part of Adam Smith's work. The like, of course, holds true for all moralists and reformers who proceed on the assumption of a providential order. [5] "In the political body, however, the wisdom of nature has fortunately made ample provision for remedying many of the bad effects of the folly and injustice of man; in the same manner as it has done in the natural body, for remedying those of his sloth and intemperance." _Wealth of Nations_, Book IV, chap. ix. [6] _E.g._, "the real measure of the exchangeable value of all commodities." _Wealth of Nations_, Book I, chap, v, and repeatedly in the like connection. [7] _E.g._, Book I, chap. vii: "When the price of any commodity is neither more nor less than what is sufficient to pay the rent of the land, the wages of the labor, and the profits of the stock employed in raising, preparing, and bringing it to market, according to their _natural_ rates, the commodity is then sold for what may be called its _natural_ price." "The actual price at which any commodity is commonly sold is called its market price. It may be either above, or below or exactly the same with its natural price." [8] _Lectures of Adam Smith_ (Ed. Cannan, 1896), p. 169. [9] "This division of labor, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility,--the propensity to truck, barter, and exchange one thing for another. Whether this propensity be one of those original principles in human nature of which no further account can be given, or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech, it belongs not to our present subject to inquire." _Wealth of Nations_, Book I, chap. ii. [10] _Wealth of Nations_, Book I, chaps, v.-vii. [11] _Wealth of Nations_, Book I, chap. v. [12] As, _e.g._, the entire discussion of the determination of Wages, Profits and Rent, in Book I, chaps, viii.-xi. [13] "There is in every society or neighborhood an ordinary or average rate both of wages and profit in every different employment of labor and stock. This rate is naturally regulated, ... partly by the general circumstances of the society.... There is, likewise, in every society or neighborhood an ordinary or average rate of rent, which is regulated, too.... These ordinary or average rates may be called the natural rates of wages, profit, and rent, at the time and place in which they commonly prevail. When the price of any commodity is neither more nor less than what is sufficient to pay the rent of the land, the wages of the labor, and the profits of the stock employed in raising, preparing, and bringing it to market, according to their natural rates, the commodity is then sold for what may be called its natural price." _Wealth of Nations_, Book I, chap. vii. [14] "Such commodities may continue for whole centuries together to be sold at this high price; and that part of it which resolves itself into the rent of land is, in this case, the part which is generally paid above its natural rate." Book I, chap. vii. [15] _Wealth of Nations_, Book I, chap, vi; also chap. viii. [16] For an instance of how these early phases of industrial development appear, when not seen in the light of Adam Smith's preconception, see, among others, Bücher, _Entstchung der Volkswirtschaft_. [17] Book I, chap. iv. [18] See _Wealth of Nations_, Book II, chap. v, "Of the Different Employment of Capitals." [19] _Wealth of Nations_, Book I, chap. v. See also the plea for free trade, Book IV, chap. ii: "But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or, rather, is precisely the same thing with that exchangeable value." [20] "The difference of natural talents in different men is in reality much less than we are aware of." _Wealth of Nations_, Book I, chap. ii. [21] "Mit diesen philosophischen Ueberzeugungen tritt nun Adam Smith an die Welt der Enfahrung heran, und es ergiebt sich ihm die Richtigkeit der Principien. Der Reiz der Smith'schen Schriften beruht zum grossen Teile darauf, dass Smith die Principien in so innige Verbindung mit dem Thatsächlichen gebracht. Hie und da werden dann auch die Principien, was durch diese Verbindung veranlasst wird, an ihren Spitzen etwas abgeschliffen, ihre allzuscharfe Ausprägung dadurch vermieden. Nichtsdestoweniger aber bleiben sie stets die leitenden Grundgedanken." Richard Zeyss, _Adam Smith und der Eigennutz_ (Tübingen, 1889), p. 110. [22] See, _e.g._, _Malthus and his Work_, especially Book III, as also the chapter on Malthus in _Philosophy and Political Economy_, Book III, Modern Philosophy: Utilitarian Economics, chap. i, "Malthus." [23] Ricardo is here taken as a utilitarian of the Benthamite color, although he cannot be classed as a disciple of Bentham. His hedonism is but the uncritically accepted metaphysics comprised in the common sense of his time, and his substantial coincidence with Bentham goes to show how well diffused the hedonist preconception was at the time. [24] _Cf._ Bonar, _Malthus and his Work_, pp. 323-336. [25] His work is an inquiry into "the Nature and Causes of the Wealth of Nations." [26] "The annual labor of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consist always either in the immediate produce of that labor or in what is purchased with that produce from other nations." _Wealth of Nations_, "Introduction and Plan," opening paragraph. [27] "The produce of the earth--all that is derived from its surface by the united application of labor, machinery, and capital--is divided among three classes of the community.... To determine the laws which regulate this distribution, is the principal problem of political economy." _Political Economy_, Preface. [28] In the introductory essay to his edition of Ricardo's _Political Economy_. See, _e.g._, paragraphs 9 and 24. [29] _Theories of Production and Distribution_, 1776-1848. [30] _Entstehung der Volkswirtschaft_ (second edition). _Cf._ especially chaps. ii, iii, vi, and vii. [31] "Even if we put aside all questions which involve a consideration of the effects of industrial institutions in modifying the habits and character of the classes of the community, ... that enough still remains to constitute a separate science, the mere enumeration of the chief terms of economics--wealth, value, exchange, credit, money, capital, and commodity--will suffice to show." Shirres, _Analysis of the Ideas of Economics_ (London, 1893), pp. 8 and 9. [32] "If a commodity were in no way useful, ... it would be destitute of exchangeable value; ... (but), possessing utility, commodities derive their exchangeable value from two sources," etc. Ricardo, _Political Economy_, chap, i, sect. I. [33] _Cf._, for instance, Senior, _Political Economy_ (London, 1872), particularly pp. 88, 89, and 130-135, where the wages of superintendence are, somewhat reluctantly, classed under profits; and the work of superintendence is thereupon conceived as being, immediately or remotely, an exercise of "abstinence" and a productive work. The illustration of the bill-broker is particularly apt. The like view of the wages of superintendence is an article of theory with more than one of the later descendants of the classical line. [34] _Cf._ Böhm-Bawerk, _Capital and Interest_, Books II and IV, as well as the Introduction and chaps. iv and v of Book I. Böhm-Bawerk's discussion bears less immediately on the present point than the similarity of the terms employed would suggest. [35] _Political Economy_, p. 87. [36] _Character and Logical Method of Political Economy_ (New York, 1875), p. 71. Cairnes may not be altogether representative of the high tide of classicism, but his characterisation of the science is none the less to the point. [37] Senior, _Political Economy_, p. 87. THE PRECONCEPTIONS OF ECONOMIC SCIENCE[1] III In what has already been said, it has appeared that the changes which have supervened in the preconceptions of the earlier economists constitute a somewhat orderly succession. The feature of chief interest in this development has been a gradual change in the received grounds of finality to which the successive generations of economists have brought their theoretical output, on which they have been content to rest their conclusions, and beyond which they have not been moved to push their analysis of events or their scrutiny of phenomena. There has been a fairly unbroken sequence of development in what may be called the canons of economic reality; or, to put it in other words, there has been a precession of the point of view from which facts have been handled and valued for the purpose of economic science. The notion which has in its time prevailed so widely, that there is in the sequence of events a consistent trend which it is the office of the science to ascertain and turn to account,--this notion may be well founded or not. But that there is something of such a consistent trend in the sequence of the canons of knowledge under whose guidance the scientist works is not only a generalisation from the past course of things, but lies in the nature of the case; for the canons of knowledge are of the nature of habits of thought, and habit does not break with the past, nor do the hereditary aptitudes that find expression in habit vary gratuitously with the mere lapse of time. What is true in this respect, for instance, in the domain of law and institutions is true, likewise, in the domain of science. What men have learned to accept as good and definitive for the guidance of conduct and of human relations remains true and definitive and unimpeachable until the exigencies of a later, altered situation enforce a variation from the norms and canons of the past, and so give rise to a modification of the habits of thought that decide what is, for the time, right in human conduct. So in science the ancient ground of finality remains a good and valid test of scientific truth until the altered exigencies of later life enforce habits of thought that are not wholly in consonance with the received notions as to what constitutes the ultimate, self-legitimating term--the substantial reality--to which knowledge in any given case must penetrate. This ultimate term or ground of knowledge is always of a metaphysical character. It is something in the way of a preconception, accepted uncritically, but applied in criticism and demonstration of all else with which the science is concerned. So soon as it comes to be criticised, it is in a way to be superseded by a new, more or less altered formulation; for criticism of it means that it is no longer fit to survive unaltered in the altered complex of habits of thought to which it is called upon to serve as fundamental principle. It is subject to natural selection and selective adaptation, as are other conventions. The underlying metaphysics of scientific research and purpose, therefore, changes gradually and, of course, incompletely, much as is the case with the metaphysics underlying the common law and the schedule of civil rights. As in the legal framework the now avowedly useless and meaningless preconceptions of status and caste and precedent are even yet at the most metamorphosed and obsolescent rather than overpassed,--witness the facts of inheritance, vested interests, the outlawry of debts through lapse of time, the competence of the State to coerce individuals into support of a given policy,--so in the science the living generation has not seen an abrupt and traceless disappearance of the metaphysics that fixed the point of view of the early classical political economy. This is true even for those groups of economists who have most incontinently protested against the absurdity of the classical doctrines and methods. In Professor Marshall's words, "There has been no real breach of continuity in the development of the science." But, while there has been no breach, there has none the less been change,--more far-reaching change than some of us are glad to recognise; for who would not be glad to read his own modern views into the convincing words of the great masters? Seen through modern eyes and without effort to turn past gains to modern account, the metaphysical or preconceptional furniture of political economy as it stood about the middle of this century may come to look quite curious. The two main canons of truth on which the science proceeded, and with which the inquiry is here concerned, were: (_a_) a hedonistic-associational psychology, and (_b_) an uncritical conviction that there is a meliorative trend in the course of events, apart from the conscious ends of the individual members of the community. This axiom of a meliorative developmental trend fell into shape as a belief in an organic or quasi-organic (physiological)[2] life process on the part of the economic community or of the nation; and this belief carried with it something of a constraining sense of self-realising cycles of growth, maturity and decay in the life history of nations or communities. Neglecting what may for the immediate purpose be negligible in this outline of fundamental tenets, it will bear the following construction. (_a_) On the ground of the hedonistic or associational psychology, all spiritual continuity and any consequent teleological trend is tacitly denied so far as regards individual conduct, where the later psychology, and the sciences which build on this later psychology, insist upon and find such a teleological trend at every turn. (_b_) Such a spiritual or quasi-spiritual continuity and teleological trend is uncritically affirmed as regards the non-human sequence or the sequence of events in the affairs of collective life, where the modern sciences diligently assert that nothing of the kind is discernible, or that, if it is discernible, its recognition is beside the point, so far as concerns the purposes of the science. This position, here outlined with as little qualification as may be admissible, embodies the general metaphysical ground of that classical political economy that affords the point of departure for Mill and Cairnes, and also for Jevons. And what is to be said of Mill and Cairnes in this connection will apply to the later course of the science, though with a gradually lessening force. By the middle of the century the psychological premises of the science are no longer so neat and succinct as they were in the days of Bentham and James Mill. At J. S. Mill's hands, for instance, the naïvely quantitative hedonism of Bentham is being supplanted by a sophisticated hedonism, which makes much of an assumed qualitative divergence between the different kinds of pleasures that afford the motives of conduct. This revision of hedonistic dogma, of course, means a departure from the strict hedonistic ground. Correlated with this advance more closely in the substance of the change than in the assignable dates, is a concomitant improvement--at least, set forth as an improvement--upon the received associational psychology, whereby "similarity" is brought in to supplement "contiguity" as a ground of connection between ideas. This change is well shown in the work of J. S. Mill and Bain. In spite of all the ingenuity spent in maintaining the associational legitimacy of this new article of theory, it remains a patent innovation and a departure from the ancient standpoint. As is true of the improved hedonism, so it is true of the new theory of association that it is no longer able to construe the process which it discusses as a purely mechanical process, a concatenation of items simply. Similarity of impressions implies a comparison of impressions by the mind in which the association takes place, and thereby it implies some degree of constructive work on the part of the perceiving subject. The perceiver is thereby construed to be an agent in the work of perception; therefore, he must be possessed of a point of view and an end dominating the perceptive process. To perceive the similarity, he must be guided by an interest in the outcome, and must "attend." The like applies to the introduction of qualitative distinctions into the hedonistic theory of conduct. Apperception in the one case and discretion in the other cease to be the mere registration of a simple and personally uncolored sequence of permutations enforced by the factors of the external world. There is implied a spiritual--that is to say, active--"teleological" continuity of process on the part of the perceiving or of the discretionary agent, as the case may be. It is on the ground of their departure from the stricter hedonistic premises that Mill and, after him, Cairnes are able, for instance, to offer their improvement upon the earlier doctrine of cost of production as determining value. Since it is conceived that the motives which guide men in their choice of employments and of domicile differ from man to man and from class to class, not only in degree, but in kind, and since varying antecedents, of heredity and of habit, variously influence men in their choice of a manner of life, therefore the mere quantitative pecuniary stimulus cannot be depended on to decide the outcome without recourse. There are determinable variations in the alacrity with which different classes or communities respond to the pecuniary stimulus; and in so far as this condition prevails, the classes or communities in question are non-competing. Between such non-competing groups the norm that determines values is not the unmitigated norm of cost of production taken absolutely, but only taken relatively. The formula of cost of production is therefore modified into a formula of reciprocal demand. This revision of the cost-of-production doctrine is extended only sparingly, and the emphasis is thrown on the pecuniary circumstances on which depend the formation and maintenance of non-competing groups. Consistency with the earlier teaching is carefully maintained, so far as may be; but extra-pecuniary factors are, after all, even if reluctantly, admitted into the body of the theory. So also, since there are higher and lower motives, higher and lower pleasures,--as well as motives differing in degree,--it follows that an unguided response even to the mere quantitative pecuniary stimuli may take different directions, and so may result in activities of widely differing outcome. Since activities set up in this way through appeal to higher and lower motives are no longer conceived to represent simply a mechanically adequate effect of the stimuli, working under the control of natural laws that tend to one beneficent consummation, therefore the outcome of activity set up even by the normal pecuniary stimuli may take a form that may or may not be serviceable to the community. Hence _laissez-faire_ ceases to be a sure remedy for the ills of society. Human interests are still conceived normally to be at one; but the detail of individual conduct need not, therefore, necessarily serve these generic human interests.[3] Therefore, other inducements than the unmitigated impact of pecuniary exigencies may be necessary to bring about a coincidence of class or individual endeavor with the interests of the community. It becomes incumbent on the advocate of _laissez-faire_ to "prove his minor premise." It is no longer self-evident that: "Interests left to themselves tend to harmonious combinations, and to the progressive preponderance of the general good."[4] The natural-rights preconception begins to fall away as soon as the hedonistic mechanics have been seriously tampered with. Fact and right cease to coincide, because the individual in whom the rights are conceived to inhere has come to be something more than the field of intersection of natural forces that work out in human conduct. The mechanics of natural liberty--that assumed constitution of things by force of which the free hedonistic play of the laws of nature across the open field of individual choice is sure to reach the right outcome--is the hedonistic psychology; and the passing of the doctrine of natural rights and natural liberty, whether as a premise or as a dogma, therefore coincides with the passing of that mechanics of conduct on the validity of which the theoretical acceptance of the dogma depends. It is, therefore, something more than a coincidence that the half-century which has seen the disintegration of the hedonistic faith and of the associational psychology has also seen the dissipation, in scientific speculations, of the concomitant faith in natural rights and in that benign order of nature of which the natural-rights dogma is a corollary. It is, of course, not hereby intended to say that the later psychological views and premises imply a less close dependence of conduct on environment than do the earlier ones. Indeed, the reverse may well be held to be true. The pervading characteristic of later thinking is the constant recourse to a detailed analysis of phenomena in causal terms. The modern catchword, in the present connection, is "response to stimulus"; but the manner in which this response is conceived has changed. The fact, and ultimately the amplitude, at least in great part, of the reaction to stimulus, is conditioned by the forces in impact; but the constitution of the organism, as well as its attitude at the moment of impact, in great part decides what will serve as a stimulus, as well as what the manner and direction of the response will be. The later psychology is biological, as contrasted with the metaphysical psychology of hedonism. It does not conceive the organism as a causal hiatus. The causal sequence in the "reflex arc" is, no doubt, continuous; but the continuity is not, as formerly, conceived in terms of spiritual substance transmitting a shock: it is conceived in terms of the life activity of the organism. Human conduct, taken as the reaction of such an organism under stimulus, may be stated in terms of tropism, involving, of course, a very close-knit causal sequence between the impact and the response, but at the same time imputing to the organism a habit of life and a self-directing and selective attention in meeting the complex of forces that make up its environment. The selective play of this tropismatic complex that constitutes the organism's habit of life under the impact of the forces of the environment counts as discretion. So far, therefore, as it is to be placed in contrast with the hedonistic phase of the older psychological doctrines, the characteristic feature of the newer conception is the recognition of a selectively self-directing life process in the agent. While hedonism seeks the causal determinant of conduct in the (probable) outcome of action, the later conception seeks this determinant in the complex of propensities that constitutes man a functioning agent, that is to say, a personality. Instead of pleasure ultimately determining what human conduct shall be, the tropismatic propensities that eventuate in conduct ultimately determine what shall be pleasurable. For the purpose in hand, the consequence of the transition to the altered conception of human nature and its relation to the environment is that the newer view formulates conduct in terms of personality, whereas the earlier view was content to formulate it in terms of its provocation and its by-product. Therefore, for the sake of brevity, the older preconceptions of the science are here spoken of as construing human nature in inert terms, as contrasted with the newer, which construes it in terms of functioning. It has already appeared above that the second great article of the metaphysics of classical political economy--the belief in a meliorative trend or a benign order of nature--is closely connected with the hedonistic conception of human nature; but this connection is more intimate and organic than appears from what has been said above. The two are so related as to stand or fall together, for the latter is but the obverse of the former. The doctrine of a trend in events imputes purpose to the sequence of events; that is, it invests this sequence with a discretionary, teleological character, which asserts itself in a constraint over all the steps in the sequence by which the supposed objective point is reached. But discretion touching a given end must be single, and must alone cover all the acts by which the end is to be reached. Therefore, no discretion resides in the intermediate terms through which the end is worked out. Therefore, man being such an intermediate term, discretion cannot be imputed to him without violating the supposition. Therefore, given an indefeasible meliorative trend in events, man is but a mechanical intermediary in the sequence. It is as such a mechanical intermediate term that the stricter hedonism construes human nature.[5] Accordingly, when more of teleological activity came to be imputed to man, less was thereby allowed to the complex of events. Or it may be put in the converse form: When less of a teleological continuity came to be imputed to the course of events, more was thereby imputed to man's life process. The latter form of statement probably suggests the direction in which the causal relation runs, more nearly than the former. The change whereby the two metaphysical premises in question have lost their earlier force and symmetry, therefore, amounts to a (partial) shifting of the seat of putative personality from inanimate phenomena to man. It may be mentioned in passing, as a detail lying perhaps afield, yet not devoid of significance for latter-day economic speculation, that this elimination of personality, and so of teleological content, from the sequence of events, and its increasing imputation to the conduct of the human agent, is incident to a growing resort to an apprehension of phenomena in terms of process rather than in terms of outcome, as was the habit in earlier schemes of knowledge. On this account the categories employed are, in a gradually increasing degree, categories of process,--"dynamic" categories. But categories of process applied to conduct, to discretionary action, are teleological categories: whereas categories of process applied in the case of a sequence where the members of the sequence are not conceived to be charged with discretion, are, by the force of this conception itself, non-teleological, quantitative categories. The continuity comprised in the concept of process as applied to conduct is consequently a spiritual, teleological continuity: whereas the concept of process under the second head, the non-teleological sequence, comprises a continuity of a quantitative, causal kind, substantially the conservation of energy. In its turn the growing resort to categories of process in the formulation of knowledge is probably due to the epistemological discipline of modern mechanical industry, the technological exigencies of which enforce a constant recourse to the apprehension of phenomena in terms of process, differing therein from the earlier forms of industry, which neither obtruded visible mechanical process so constantly upon the apprehension nor so imperatively demanded an articulate recognition of continuity in the processes actually involved. The contrast in this respect is still more pronounced between the discipline of modern life in an industrial community and the discipline of life under the conventions of status and exploit that formerly prevailed. To return to the benign order of nature, or the meliorative trend,--its passing, as an article of economic faith, was not due to criticism leveled against it by the later classical economists on grounds of its epistemological incongruity. It was tried on its merits, as an alleged account of facts; and the weight of evidence went against it. The belief in a self-realising trend had no sooner reached a competent and exhaustive statement--_e.g._, at Bastiat's hands, as a dogma of the harmony of interests specifically applicable to the details of economic life--than it began to lose ground. With his usual concision and incisiveness, Cairnes completed the destruction of Bastiat's special dogma, and put it forever beyond a rehearing. But Cairnes is not a destructive critic of the classical political economy, at least not in intention: he is an interpreter and continuer--perhaps altogether the clearest and truest continuer--of the classical teaching. While he confuted Bastiat and discredited Bastiat's peculiar dogma, he did not thereby put the order of nature bodily out of the science. He qualified and improved it, very much as Mill qualified and improved the tenets of the hedonistic psychology. As Mill and the ethical speculation of his generation threw more of personality into the hedonistic psychology, so Cairnes and the speculators on scientific method (such as Mill and Jevons) attenuated the imputation of personality or teleological content to the process of material cause and effect. The work is of course, by no means, an achievement of Cairnes alone; but he is, perhaps, the best exponent of this advance in economic theory. In Cairnes's redaction this foundation of the science became the concept of a colorless normality. It was in Cairnes's time the fashion for speculators in other fields than the physical sciences to look to those sciences for guidance in method and for legitimation of the ideals of scientific theory which they were at work to realize. More than that, the large and fruitful achievements of the physical sciences had so far taken men's attention captive as to give an almost instinctive predilection for the methods that had approved themselves in that field. The ways of thinking which had on this ground become familiar to all scholars occupied with any scientific inquiry, had permeated their thinking on any subject whatever. This is eminently true of British thinking. It had come to be a commonplace of the physical sciences that "natural laws" are of the nature of empirical generalisations simply, or even of the nature of arithmetical averages. Even the underlying preconception of the modern physical sciences--the law of the conservation of energy, or persistence of quantity--was claimed to be an empirical generalisation, arrived at inductively and verified by experiment. It is true the alleged proof of the law took the whole conclusion for granted at the start, and used it constantly as a tacit axiom at every step in the argument which was to establish its truth; but that fact serves rather to emphasise than to call in question the abiding faith which these empiricists had in the sole efficacy of empirical generalisation. Had they been able overtly to admit any other than an associational origin of knowledge, they would have seen the impossibility of accounting on the mechanical grounds of association for the premise on which all experience of mechanical fact rests. That any other than a mechanical origin should be assigned to experience, or that any other than a so-conceived empirical ground was to be admitted for any general principle, was incompatible with the prejudices of men trained in the school of the associational psychology, however widely they perforce departed from this ideal in practice. Nothing of the nature of a personal element was to be admitted into these fundamental empirical generalisations; and nothing, therefore, of the nature of a discretionary or teleological movement was to be comprised in the generalisations to be accepted as "natural laws." Natural laws must in no degree be imbued with personality, must say nothing of an ulterior end; but for all that they remained "laws" of the sequences subsumed under them. So far is the reduction to colorless terms carried by Mill, for instance, that he formulates the natural laws as empirically ascertained sequences simply, even excluding or avoiding all imputation of causal continuity, as that term is commonly understood by the unsophisticated. In Mill's ideal no more of organic connection or continuity between the members of a sequence is implied in subsuming them under a law of causal relationship than is given by the ampersand. He is busied with dynamic sequences, but he persistently confines himself to static terms. Under the guidance of the associational psychology, therefore, the extreme of discontinuity in the deliverances of inductive research is aimed at by those economists--Mill and Cairnes being taken as typical--whose names have been associated with deductive methods in modern science. With a fine sense of truth they saw that the notion of causal continuity, as a premise of scientific generalisation, is an essentially metaphysical postulate; and they avoided its treacherous ground by denying it, and construing causal sequence to mean a uniformity of coexistences and successions simply. But, since a strict uniformity is nowhere to be observed at first hand in the phenomena with which the investigator is occupied, it has to be found by a laborious interpretation of the phenomena and a diligent abstraction and allowance for disturbing circumstances, whatever may be the meaning of a disturbing circumstance where causal continuity is denied. In this work of interpretation and expurgation the investigator proceeds on a conviction of the orderliness of the natural sequence. "Natura non facit saltum": a maxim which has no meaning within the stricter limits of the associational theory of knowledge. Before anything can be said as to the orderliness of the sequence, a point of view must be chosen by the speculator, with respect to which the sequence in question does or does not fulfill this condition of orderliness; that is to say, with respect to which it is a sequence. The endeavor to avoid all metaphysical premises fails here as everywhere. The associationists, to whom economics owes its transition from the older classical phase to the modern or quasi-classical, chose as their guiding point of view the metaphysical postulate of congruity,--in substance, the "similarity" of the associationist theory of knowledge. This must be called their _proton pseudos_, if associationism pure and simple is to be accepted. The notion of congruity works out in laws of resemblance and equivalence, in both of which it is plain to the modern psychologist that a metaphysical ground of truth, antecedent to and controlling empirical data, is assumed. But the use of the postulate of congruence as a test of scientific truth has the merit of avoiding all open dealing with an imputed substantiality of the data handled, such as would be involved in the overt use of the concept of causation. The data are congruous among themselves, as items of knowledge; and they may therefore be handled in a logical synthesis and concatenation on the basis of this congruence alone, without committing the scientist to an imputation of a kinetic or motor relation between them. The metaphysics of process is thereby avoided, in appearance. The sequences are uniform or consistent with one another, taken as articles of theoretical synthesis simply; and so they become elements of a system or discipline of knowledge in which the test of theoretical truth is the congruence of the system with its premises. In all this there is a high-wrought appearance of matter-of-fact, and all metaphysical subreption of a non-empirical or non-mechanical standard of reality or substantiality is avoided in appearance. The generalisations which make up such a system of knowledge are, in this way, stated in terms of the system itself; and when a competent formulation of the alleged uniformities has been so made in terms of their congruity or equivalence with the prime postulates of the system, the work of theoretical inquiry is done. The concrete premises from which proceeds the systematic knowledge of this generation of economists are certain very concise assumptions concerning human nature, and certain slightly less concise generalisations of physical fact,[6] presumed to be mechanically empirical generalisations. These postulates afford the standard of normality. Whatever situation or course of events can be shown to express these postulates without mitigation is normal; and wherever a departure from this normal course of things occurs, it is due to disturbing causes,--that is to say, to causes not comprised in the main premises of the science,--and such departures are to be taken account of by way of qualification. Such departures and such qualification are constantly present in the facts to be handled by the science; but, being not congruous with the underlying postulates, they have no place in the body of the science. The laws of the science, that which makes up the economist's theoretical knowledge, are laws of the normal case. The normal case does not occur in concrete fact. These laws are, therefore, in Cairnes's terminology, "hypothetical" truths; and the science is a "hypothetical" science. They apply to concrete facts only as the facts are interpreted and abstracted from, in the light of the underlying postulates. The science is, therefore, a theory of the normal case, a discussion of the concrete facts of life in respect of their degree of approximation to the normal case. That is to say, it is a taxonomic science. Of course, in the work actually done by these economists this standpoint of rigorous normality is not consistently maintained; nor is the unsophisticated imputation of causality to the facts under discussion consistently avoided. The associationist postulate, that causal sequence means empirical uniformity simply, is in great measure forgotten when the subject-matter of the science is handled in detail. Especially is it true that in Mill the dry light of normality is greatly relieved by a strong common sense. But the great truths or laws of the science remain hypothetical laws; and the test of scientific reality is congruence with the hypothetical laws, not coincidence with matter-of-fact events. The earlier, more archaic metaphysics of the science, which saw in the orderly correlation and sequence of events a constraining guidance of an extra-causal, teleological kind, in this way becomes a metaphysics of normality which asserts no extra-causal constraint over events, but contents itself with establishing correlations, equivalencies, homologies, and theories concerning the conditions of an economic equilibrium. The movement, the process of economic life, is not overlooked, and it may even be said that it is not neglected; but the pure theory, in its final deliverances, deals not with the dynamics, but with the statics of the case. The concrete subject-matter of the science is, of course, the process of economic life,--that is unavoidably the case,--and in so far the discussion must be accepted as work bearing on the dynamics of the phenomena discussed; but even then it remains true that the aim of this work in dynamics is a determination and taxis of the outcome of the process under discussion rather than a theory of the process as such. The process is rated in terms of the equilibrium to which it tends or should tend, not conversely. The outcome of the process, taken in its relation of equivalence within the system, is the point at which the inquiry comes to rest. It is not primarily the point of departure for an inquiry into what may follow. The science treats of a balanced system rather than of a proliferation. In this lies its characteristic difference from the later evolutionary sciences. It is this characteristic bent of the science that leads its spokesman, Cairnes, to turn so kindly to chemistry rather than to the organic sciences, when he seeks an analogy to economics among the physical sciences.[7] What Cairnes has in mind in his appeal to chemistry is, of course, the received, extremely taxonomic (systematic) chemistry of his own time, not the tentatively genetic theories of a slightly later day. * * * * * It may seem that in the characterisation just offered of the standpoint of normality in economics there is too strong an implication of colorlessness and impartiality. The objection holds as regards much of the work of the modern economists of the classical line. It will hold true even as to much of Cairnes's work; but it cannot be admitted as regards Cairnes's ideal of scientific aim and methods. The economists whose theories Cairnes received and developed, assuredly did not pursue the discussion of the normal case with an utterly dispassionate animus. They had still enough of the older teleological metaphysics left to give color to the accusation brought against them that they were advocates of _laissez-faire_. The preconception of the utilitarians,--in substance the natural-rights preconception,--that unrestrained human conduct will result in the greatest human happiness, retains so much of its force in Cairnes's time as is implied in the then current assumption that what is normal is also right. The economists, and Cairnes among them, not only are concerned to find out what is normal and to determine what consummation answers to the normal, but they also are at pains to approve that consummation. It is this somewhat uncritical and often unavowed identification of the normal with the right that gives colorable ground for the widespread vulgar prejudice, to which Cairnes draws attention,[8] that political economy "sanctions" one social arrangement and "condemns" another. And it is against this uncritical identification of two essentially unrelated principles or categories that Cairnes's essay on "Political Economy and Laissez-faire," and in good part also that on Bastiat, are directed. But, while this is one of the many points at which Cairnes has substantially advanced the ideals of the science, his own concluding argument shows him to have been but half-way emancipated from the prejudice, even while most effectively combating it.[9] It is needless to point out that the like prejudice is still present in good vigor in many later economists who have had the full benefit of Cairnes's teachings on this head.[10] Considerable as Cairnes's achievement in this matter undoubtedly was, it effected a mitigation rather than an elimination of the untenable metaphysics against which he contended. The advance in the general point of view from animistic teleology to taxonomy is shown in a curiously succinct manner in a parenthetical clause of Cairnes's in the chapter on Normal Value.[11] With his acceptance of the later point of view involved in the use of the new term, Cairnes becomes the interpreter of the received theoretical results. The received positions are not subjected to a destructive criticism. The aim is to complete them where they fall short and to cut off what may be needless or what may run beyond the safe ground of scientific generalisation. In his work of redaction, Cairnes does not avow--probably he is not sensible of--any substantial shifting of the point of view or any change in the accepted ground of theoretic reality. But his advance to an unteleological taxonomy none the less changes the scope and aim of his theoretical discussion. The discussion of Normal Value may be taken in illustration. Cairnes is not content to find (with Adam Smith) that value will "naturally" coincide with or be measured by cost of production, or even (with Mill) that cost of production must, in the long run, "necessarily" determine value. "This ... is to take a much too limited view of the range of this phenomenon."[12] He is concerned to determine not only this general tendency of values to a normal, but all those characteristic circumstances as well which condition this tendency and which determine the normal to which values tend. His inquiry pursues the phenomena of value in a normal economic system rather than the manner and rate of approach of value relations to a teleologically or hedonistically defensible consummation. It therefore becomes an exhaustive but very discriminating analysis of the circumstances that bear upon market values, with a view to determine what circumstances are normally present; that is to say, what circumstances conditioning value are commonly effective and at the same time in consonance with the premises of economic theory. These effective conditions, in so far as they are not counted anomalous and, therefore, to be set aside in the theoretical discussion, are the circumstances under which a hedonistic valuation process in any modern industrial community is held perforce to take place,--the circumstances which are held to enforce a recognition and rating of the pleasure-bearing capacity of facts. They are not, as under the earlier cost-of-production doctrines, the circumstances which determine the magnitude of the forces spent in the production of the valuable article. Therefore, the normal (natural) value is no longer (as with Adam Smith, and even to some extent with his classical successors) the primary or initial fact in value theory, the substantial fact of which the market value is an approximate expression and by which the latter is controlled. The argument does not, as formerly, set out from that expenditure of personal force which was once conceived to constitute the substantial value of goods, and then construe market value to be an approximate and uncertain expression of this substantial fact. The direction in which the argument runs is rather the reverse of this. The point of departure is taken from the range of market values and the process of bargaining by which these values are determined. This latter is taken to be a process of discrimination between various kinds and degrees of discomfort, and the average or consistent outcome of such a process of bargaining constitutes normal value. It is only by virtue of a presumed equivalence between the discomfort undergone and the concomitant expenditure, whether of labor or of wealth, that the normal value so determined is conceived to be an expression of the productive force that goes into the creation of the valuable goods. Cost being only in uncertain equivalence with sacrifice or discomfort, as between different persons, the factor of cost falls into the background; and the process of bargaining, which is in the foreground, being a process of valuation, a balancing of individual demand and supply, it follows that a law of reciprocal demand comes in to supplant the law of cost. In all this the proximate causes at work in the determination of values are plainly taken account of more adequately than in earlier cost-of-production doctrines; but they are taken account of with a view to explaining the mutual adjustment and interrelation of elements in a system rather than to explain either a developmental sequence or the working out of a foreordained end. This revision of the cost-of-production doctrine, whereby it takes the form of a law of reciprocal demand, is in good part effected by a consistent reduction of cost to terms of sacrifice,--a reduction more consistently carried through by Cairnes than it had been by earlier hedonists, and extended by Cairnes's successors with even more far-reaching results. By this step the doctrine of cost is not only brought into closer accord with the neo-hedonistic premises, in that it in a greater degree throws the stress upon the factor of personal discrimination, but it also gives the doctrine a more general bearing upon economic conduct and increases its serviceability as a comprehensive principle for the classification of economic phenomena. In the further elaboration of the hedonistic theory of value at the hands of Jevons and the Austrians the same principle of sacrifice comes to serve as the chief ground of procedure. * * * * * Of the foundations of later theory, in so far as the postulates of later economists differ characteristically from those of Mill and Cairnes, little can be said in this place. Nothing but the very general features of the later development can be taken up; and even these general features of the existing theoretic situation can not be handled with the same confidence as the corresponding features of a past phase of speculation. With respect to writers of the present or the more recent past the work of natural selection, as between variants of scientific aim and animus and between more or less divergent points of view, has not yet taken effect; and it would be over-hazardous to attempt an anticipation of the results of the selection that lies in great part yet in the future. As regards the directions of theoretical work suggested by the names of Professor Marshall, Mr. Cannan, Professor Clark, Mr. Pierson, Professor Loria, Professor Schmoller, the Austrian group,--no off-hand decision is admissible as between these candidates for the honor, or, better, for the work, of continuing the main current of economic speculation and inquiry. No attempt will here be made even to pass a verdict on the relative claims of the recognised two or three main "schools" of theory, beyond the somewhat obvious finding that, for the purpose in hand, the so-called Austrian school is scarcely distinguishable from the neo-classical, unless it be in the different distribution of emphasis. The divergence between the modernised classical views, on the one hand, and the historical and Marxist schools, on the other hand, is wider,--so much so, indeed, as to bar out a consideration of the postulates of the latter under the same head of inquiry with the former. The inquiry, therefore, confines itself to the one line standing most obviously in unbroken continuity with that body of classical economics whose life history has been traced in outline above. And, even for this phase of modernised classical economics, it seems necessary to limit discussion, for the present, to a single strain, selected as standing peculiarly close to the classical source, at the same time that it shows unmistakable adaptation to the later habits of thought and methods of knowledge. For this later development in the classical line of political economy, Mr. Keynes's book may fairly be taken as the maturest exposition of the aims and ideals of the science; while Professor Marshall excellently exemplifies the best work that is being done under the guidance of the classical antecedents. As, after a lapse of a dozen or fifteen years from Cairnes's days of full conviction, Mr. Keynes interprets the aims of modern economic science, it has less of the "hypothetical" character assigned it by Cairnes; that is to say, it confines its inquiry less closely to the ascertainment of the normal case and the interpretative subsumption of facts under the normal. It takes fuller account of the genesis and developmental continuity of all features of modern economic life, gives more and closer attention to institutions and their history. This is, no doubt, due, in part at least, to impulse received from German economists; and in so far it also reflects the peculiarly vague and bewildered attitude of protest that characterises the earlier expositions of the historical school. To the same essentially extraneous source is traceable the theoretic blur embodied in Mr. Keynes's attitude of tolerance towards the conception of economics as a "normative" science having to do with "economic ideals," or an "applied economics" having to do with "economic precepts."[13] An inchoate departure from the consistent taxonomic ideals shows itself in the tentative resort to historical and genetic formulations, as well as in Mr. Keynes's pervading inclination to define the scope of the science, not by exclusion of what are conceived to be non-economic phenomena, but by disclosing a point of view from which all phenomena are seen to be economic facts. The science comes to be characterised not by the delimitation of a range of facts, as in Cairnes,[14] but as an inquiry into the bearing which all facts have upon men's economic activity. It is no longer that certain phenomena belong within the science, but rather that the science is concerned with any and all phenomena as seen from the point of view of the economic interest. Mr. Keynes does not go fully to the length which this last proposition indicates. He finds[15] that political economy "treats of the phenomena arising out of the economic activities of mankind in society"; but, while the discussion by which he leads up to this definition might be construed to say that all the activities of mankind in society have an economic bearing, and should therefore come within the view of the science, Mr. Keynes does not carry out his elucidation of the matter to that broad conclusion. Neither can it be said that modern political economy has, in practice, taken on the scope and character which this extreme position would assign it. The passage from which the above citation is taken is highly significant also in another and related bearing, and it is at the same time highly characteristic of the most effective modernised classical economics. The subject-matter of the science has come to be the "economic activities" of mankind, and the phenomena in which these activities manifest themselves. So Professor Marshall's work, for instance, is, in aim, even if not always in achievement, a theoretical handling of human activity in its economic bearing,--an inquiry into the multiform phases and ramifications of that process of valuation of the material means of life by virtue of which man is an economic agent. And still it remains an inquiry directed to the determination of the conditions of an equilibrium of activities and a quiescent normal situation. It is not in any eminent degree an inquiry into cultural or institutional development as affected by economic exigencies or by the economic interest of the men whose activities are analysed and portrayed. Any sympathetic reader of Professor Marshall's great work--and that must mean every reader--comes away with a sense of swift and smooth movement and interaction of parts; but it is the movement of a consummately conceived and self-balanced mechanism, not that of a cumulatively unfolding process or an institutional adaptation to cumulatively unfolding exigencies. The taxonomic bearing is, after all, the dominant feature. It is significant of the same point that even in his discussion of such vitally dynamic features of the economic process as the differential effectiveness of different laborers or of different industrial plants, as well as of the differential advantages of consumers, Professor Marshall resorts to an adaptation of so essentially taxonomic a category as the received concept of rent. Rent is a pecuniary category, a category of income, which is essentially a final term, not a category of the motor term, work or interest.[16] It is not a factor or a feature of the process of industrial life, but a phenomenon of the pecuniary situation which emerges from this process under given conventional circumstances. However far-reaching and various the employment of the rent concept in economic theory has been, it has through all permutations remained, what it was to begin with, a rubric in the classification of incomes. It is a pecuniary, not an industrial category. In so far as resort is had to the rent concept in the formulation of a theory of the industrial process,--as in Professor Marshall's work,--it comes to a statement of the process in terms of its residue. Let it not seem presumptuous to say that, great and permanent as is the value of Professor Marshall's exposition of quasi-rents and the like, the endeavor which it involves to present in terms of a concluded system what is of the nature of a fluent process has made the exposition unduly bulky, unwieldy, and inconsequent. There is a curious reminiscence of the perfect taxonomic day in Mr. Keynes's characterisation of political economy as a "positive science," "the sole province of which is to establish economic uniformities";[17] and, in this resort to the associationist expedient of defining a natural law as a "uniformity," Mr. Keynes is also borne out by Professor Marshall.[18] But this and other survivals of the taxonomic terminology, or even of the taxonomic canons of procedure, do not hinder the economists of the modern school from doing effective work of a character that must be rated as genetic rather than taxonomic. Professor Marshall's work in economics is not unlike that of Asa Gray in botany, who, while working in great part within the lines of "systematic botany" and adhering to its terminology, and on the whole also to its point of view, very materially furthered the advance of the science outside the scope of taxonomy. Professor Marshall shows an aspiration to treat economic life as a development; and, at least superficially, much of his work bears the appearance of being a discussion of this kind. In this endeavor his work is typical of what is aimed at by many of the later economists. The aim shows itself with a persistent recurrence in his _Principles_. His chosen maxim is, "Natura non facit saltum,"--a maxim that might well serve to designate the prevailing attitude of modern economists towards questions of economic development as well as towards questions of classification or of economic policy. His insistence on the continuity of development and of the economic structure of communities is a characteristic of the best work along the later line of classical political economy. All this gives an air of evolutionism to the work. Indeed, the work of the neo-classical economics might be compared, probably without offending any of its adepts, with that of the early generation of Darwinians, though such a comparison might somewhat shrewdly have to avoid any but superficial features. Economists of the present day are commonly evolutionists, in a general way. They commonly accept, as other men do, the general results of the evolutionary speculation in those directions in which the evolutionary method has made its way. But the habit of handling by evolutionist methods the facts with which their own science is concerned has made its way among the economists to but a very uncertain degree. The prime postulate of evolutionary science, the preconception constantly underlying the inquiry, is the notion of a cumulative causal sequence; and writers on economics are in the habit of recognising that the phenomena with which they are occupied are subject to such a law of development. Expressions of assent to this proposition abound. But the economists have not worked out or hit upon a method by which the inquiry in economics may consistently be conducted under the guidance of this postulate. Taking Professor Marshall as exponent, it appears that, while the formulations of economic theory are not conceived to be arrived at by way of an inquiry into the developmental variation of economic institutions and the like, the theorems arrived at are held, and no doubt legitimately, to apply to the past,[19] and with due reserve also to the future, phases of the development. But these theorems apply to the various phases of the development not as accounting for the developmental sequence, but as limiting the range of variation. They say little, if anything, as to the order of succession, as to the derivation and the outcome of any given phase, or as to the causal relation of one phase of any given economic convention or scheme of relations to any other. They indicate the conditions of survival to which any innovation is subject, supposing the innovation to have taken place, not the conditions of variational growth. The economic laws, the "statements of uniformity," are therefore, when construed in an evolutionary bearing, theorems concerning the superior or the inferior limit of persistent innovations, as the case may be.[20] It is only in this negative, selective bearing that the current economic laws are held to be laws of developmental continuity; and it should be added that they have hitherto found but relatively scant application at the hands of the economists, even for this purpose. Again, as applied to economic activities under a given situation, as laws governing activities in equilibrium, the economic laws are, in the main, laws of the limits within which economic action of a given purpose runs. They are theorems as to the limits which the economic (commonly the pecuniary) interest imposes upon the range of activities to which the other life interests of men incite, rather than theorems as to the manner and degree in which the economic interest creatively shapes the general scheme of life. In great part they formulate the normal inhibitory effect of economic exigencies rather than the cumulative modification and diversification of human activities through the economic interest, by initiating and guiding habits of life and of thought. This, of course, does not go to say that economists are at all slow to credit the economic exigencies with a large share in the growth of culture; but, while claims of this kind are large and recurrent, it remains true that the laws which make up the framework of economic doctrine are, when construed as generalisations of causal relation, laws of conservation and selection, not of genesis and proliferation. The truth of this, which is but a commonplace generalisation, might be shown in detail with respect to such fundamental theorems as the laws of rent, of profits, of wages, of the increasing or diminishing returns of industry, of population, of competitive prices, of cost of production. In consonance with this quasi-evolutionary tone of the neo-classical political economy, or as an expression of it, comes the further clarified sense that nowadays attaches to the terms "normal" and economic "laws." The laws have gained in colorlessness, until it can no longer be said that the concept of normality implies approval of the phenomena to which it is applied.[21] They are in an increasing degree laws of conduct, though they still continue to formulate conduct in hedonistic terms; that is to say, conduct is construed in terms of its sensuous effect, not in terms of its teleological content. The light of the science is a drier light than it was, but it continues to be shed upon the accessories of human action rather than upon the process itself. The categories employed for the purpose of knowing this economic conduct with which the scientists occupy themselves are not the categories under which the men at whose hands the action takes place themselves apprehend their own action at the instant of acting. Therefore, economic conduct still continues to be somewhat mysterious to the economists; and they are forced to content themselves with adumbrations whenever the discussion touches this central, substantial fact. All this, of course, is intended to convey no dispraise of the work done, nor in any way to disparage the theories which the passing generation of economists have elaborated, or the really great and admirable body of knowledge which they have brought under the hand of the science; but only to indicate the direction in which the inquiry in its later phases--not always with full consciousness--is shifting as regards its categories and its point of view. The discipline of life in a modern community, particularly the industrial life, strongly reënforced by the modern sciences, has divested our knowledge of non-human phenomena of that fullness of self-directing life that was once imputed to them, and has reduced this knowledge to terms of opaque causal sequence. It has thereby narrowed the range of discretionary, teleological action to the human agent alone; and so it is compelling our knowledge of human conduct, in so far as it is distinguished from the non-human, to fall into teleological terms. Foot-pounds, calories, geometrically progressive procreation, and doses of capital, have not been supplanted by the equally uncouth denominations of habits, propensities, aptitudes, and conventions, nor does there seem to be any probability that they will be; but the discussion which continues to run in terms of the former class of concepts is in an increasing degree seeking support in concepts of the latter class. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_. Vol. XIV, Feb., 1900. [2] So, _e.g._, Roscher, Comte, the early socialists, J. S. Mill, and later Spencer, Schaeffle, Wagner. [3] "Let us not confound the statement that _human_ interests are at one with the statement that _class_ interests are at one. The latter I believe to be as false as the former is true.... But accepting the major premises of the syllogism, that the interests of human beings are fundamentally the same, how as to the minor?--how as to the assumption that people know their interests in the sense in which they are identical with the interests of others, and that they spontaneously follow them _in this sense_?"--Cairnes, Essays in Political Economy (London, 1873), p. 245. This question cannot consistently be asked by an adherent of the stricter hedonism. [4] Bastiat, quoted by Cairnes, _Essays_, p. 319. [5] It may be remarked, by the way, that the use of the differential calculus and similar mathematical expedients in the discussion of marginal utility and the like, proceeds on this psychological ground, and that the theoretical results so arrived at are valid to the full extent only if this hedonistic psychology is accepted. [6] See, _e.g._, Cairnes, _Character and Logical Method_ (New York), p. 71. [7] _Character and Logical Method_, p. 62. [8] _Essays in Political Economy_, pp. 260-264. [9] See especially _Essays_, pp. 263, 264. [10] It may be interesting to point out that the like identification of the categories of normality and right gives the dominant note of Mr. Spencer's ethical and social philosophy, and that later economists of the classical line are prone to be Spencerians. [11] "Normal value (called by Adam Smith and Ricardo 'natural value,' and by Mill 'necessary value,' but best expressed, it seems to me, by the term which I have used)." _Leading Principles_ (New York), p. 45. [12] _Leading Principles_, p. 45. [13] _Scope and Method of Political Economy_ (London, 1891), chaps. i and ii. [14] _Character and Logical Method_; _e.g._, Lecture II, especially pp. 53, 54, and 71. [15] _Scope and Method of Political Economy_, chap. iii, particularly p. 97. [16] "Interest" is, of course, here used in the sense which it has in modern psychological discussion. [17] _Scope and Method of Political Economy_, p. 46. [18] _Principles of Economics_, Vol. I, Book I, chap, vi, sect. 6, especially p. 105 (3d edition). [19] See, _e.g._, Professor Marshall's "Reply" to Professor Cunningham in the _Economic Journal_ for 1892, pp. 508-113. [20] This is well illustrated by what Professor Marshall says of the Ricardian law of rent in his "Reply," cited above. [21] See, _e.g._, Marshall, _Principles_, Book I, chap, vi, sect. 6, pp. 105-108. The like dispassionateness is visible in most other modern writers on theory; as, _e.g._, Clark, Cannan, and the Austrians. PROFESSOR CLARK'S ECONOMICS[1] For some time past economists have been looking with lively anticipation for such a comprehensive statement of Mr. Clark's doctrines as is now offered. The leading purpose of the present volume[2] is "to offer a brief and provisional statement of the more general laws of progress"; although it also comprises a more abridged restatement of the laws of "Economic Statics" already set forth in fuller form in his _Distribution of Wealth_. Though brief, this treatise is to be taken as systematically complete, as including in due correlation all the "essentials" of Mr. Clark's theoretical system. As such, its publication is an event of unusual interest and consequence. Mr. Clark's position among this generation of economists is a notable and commanding one. No serious student of economic theory will, or can afford to, forego a pretty full acquaintance with his development of doctrines. Nor will any such student avoid being greatly influenced by the position which Mr. Clark takes on any point of theory on which he may speak, and many look confidently to him for guidance where it is most needed. Very few of those interested in modern theory are under no obligations to him. He has, at the same time, in a singular degree the gift of engaging the affections as well as the attention of students in his field. Yet the critic is required to speak impersonally of Mr. Clark's work as a phase of current economic theory. In more than one respect Mr. Clark's position among economists recalls the great figures in the science a hundred years ago. There is the same rigid grasp of the principles, the "essentials," out of which the broad theorems of the system follow in due sequence and correlation; and like the leaders of the classical era, while Mr. Clark is always a theoretician, never to be diverted into an inconsistent makeshift, he is moved by an alert and sympathetic interest in current practical problems. While his aim is a theoretical one, it is always with a view to the theory of current affairs; and his speculations are animated with a large sympathy and an aggressive interest in the amelioration of the lot of man. His relation to the ancient adepts of the science, however, is something more substantial than a resemblance only. He is, by spiritual consanguinity, a representative of that classical school of thought that dominated the science through the better part of the nineteenth century. This is peculiarly true of Mr. Clark, as contrasted with many of those contemporaries who have fought for the marginal-utility doctrines. Unlike these spokesmen of the Austrian wing, he has had the insight and courage to see the continuity between the classical position and his own, even where he advocates drastic changes in the classical body of doctrines. And although his system of theory embodies substantially all that the consensus of theorists approves in the Austrian contributions to the science, yet he has arrived at his position on these heads not under the guidance of the Austrian school, but, avowedly, by an unbroken development out of the position given by the older generation of economists.[3] Again, in the matter of the psychological postulates of the science, he accepts a hedonism as simple, unaffected, and uncritical as that of Jevons or of James Mill. In this respect his work is as true to the canons of the classical school as the best work of the theoreticians of the Austrian observance. There is the like unhesitating appeal to the calculus of pleasure and pain as the indefeasible ground of action and solvent of perplexities, and there is the like readiness to reduce all phenomena to terms of a "normal," or "natural," scheme of life constructed on the basis of this hedonistic calculus. Even in the ready recourse to "conjectural history," to use Steuart's phrase, Mr. Clark's work is at one with both the early classical and the late (Jevons-Austrian) marginal-utility school. It has the virtues of both, coupled with the graver shortcomings of both. But, as his view exceeds theirs in breadth and generosity, so his system of theory is a more competent expression of current economic science than what is offered by the spokesmen of the Jevons-Austrian wing. It is as such, as a competent and consistent system of current economic theory, that it is here intended to discuss Mr. Clark's work, not as a body of doctrines peculiar to Mr. Clark or divergent from the main current. * * * * * Since hedonism came to rule economic science, the science has been in the main a theory of distribution,--distribution of ownership and of income. This is true both of the classical school and of those theorists who have taken an attitude of ostensible antagonism to the classical school. The exceptions to the rule are late and comparatively few, and they are not found among the economists who accept the hedonistic postulate as their point of departure. And, consistently with the spirit of hedonism, this theory of distribution has centered about a doctrine of exchange value (or price) and has worked out its scheme of (normal) distribution in terms of (normal) price. The normal economic community, upon which theoretical interest has converged, is a business community, which centers about the market, and whose scheme of life is a scheme of profit and loss. Even when some considerable attention is ostensibly devoted to theories of consumption and production, in these systems of doctrine the theories are constructed in terms of ownership, price, and acquisition, and so reduce themselves in substance to doctrines of distributive acquisition.[4] In this respect Mr. Clark's work is true to the received canons. The "Essentials of Economic Theory" are the essentials of the hedonistic theory of distribution, with sundry reflections on related topics. The scope of Mr. Clark's economics, indeed, is even more closely limited by concepts of distribution than many others, since he persistently analyses production in terms of value, and value is a concept of distribution. * * * * * As Mr. Clark justly observes (p. 4), "The primitive and general facts concerning industry ... need to be known before the social facts can profitably be studied." In these early pages of the treatise, as in other works of its class, there is repeated reference to that more primitive and simple scheme of economic life out of which the modern complex scheme has developed, and it is repeatedly indicated that in order to an understanding of the play of forces in the more advanced stages of economic development and complication, it is necessary to apprehend these forces in their unsophisticated form as they work out in the simple scheme prevalent on the plane of primitive life. Indeed, to a reader not well acquainted with Mr. Clark's scope and method of economic theorising, these early pages would suggest that he is preparing for something in the way of a genetic study,--a study of economic institutions approached from the side of their origins. It looks as if the intended line of approach to the modern situation might be such as an evolutionist would choose, who would set out with showing what forces are at work in the primitive economic community, and then trace the cumulative growth and complication of these factors as they presently take form in the institutions of a later phase of the development. Such, however, is not Mr. Clark's intention. The effect of his recourse to "primitive life" is simply to throw into the foreground, in a highly unreal perspective, those features which lend themselves to interpretation in terms of the normalised competitive system. The best excuse that can be offered for these excursions into "primitive life" is that they have substantially nothing to do with the main argument of the book, being of the nature of harmless and graceful misinformation. In the primitive economic situation--that is to say, in savagery and the lower barbarism--there is, of course, no "solitary hunter," living either in a cave or otherwise, and there is no man who "makes by his own labor all the goods that he uses," etc. It is, in effect, a highly meretricious misrepresentation to speak in this connection of "the economy of a man who works only for himself," and say that "the inherent productive power of labor and capital is of vital concern to him," because such a presentation of the matter overlooks the main facts in the case in order to put the emphasis on a feature which is of negligible consequence. There is no reasonable doubt but that, at least since mankind reached the human plane, the economic unit has been not a "solitary hunter," but a community of some kind; in which, by the way, women seem in the early stages to have been the most consequential factor instead of the man who works for himself. The "capital" possessed by such a community--as, _e.g._, a band of California "Digger" Indians--was a negligible quantity, more valuable to a collector of curios than to any one else, and the loss of which to the "Digger" squaws would mean very little. What was of "vital concern" to them, indeed, what the life of the group depended on absolutely, was the accumulated wisdom of the squaws, the technology of their economic situation.[5] The loss of the basket, digging-stick, and mortar, simply as physical objects, would have signified little, but the conceivable loss of the squaw's knowledge of the soil and seasons, of food and fiber plants, and of mechanical expedients, would have meant the present dispersal and starvation of the community. This may seem like taking Mr. Clark to task for an inconsequential gap in his general information on Digger Indians, Eskimos, and palæolithic society at large. But the point raised is not of negligible consequence for economic theory, particularly not for any theory of "economic dynamics" that turns in great part about questions of capital and its uses at different stages of economic development. In the primitive culture the quantity and the value of mechanical appliances is relatively slight; and whether the group is actually possessed of more or less of such appliances at a given time is not a question of first-rate importance. The loss of these objects--tangible assets--would entail a transient inconvenience. But the accumulated, habitual knowledge of the ways and means involved in the production and use of these appliances is the outcome of long experience and experimentation; and, given this body of commonplace technological information, the acquisition and employment of the suitable apparatus is easily arranged. The great body of commonplace knowledge made use of in industry is the product and heritage of the group. In its essentials it is known by common notoriety, and the "capital goods" needed for putting this commonplace technological knowledge to use are a slight matter,--practically within the reach of every one. Under these circumstances the ownership of "capital-goods" has no great significance, and, as a practical fact, interest and wages are unknown, and the "earning power of capital" is not seen to be "governed by a specific power of productivity which resides in capital-goods." But the situation changes, presently, by what is called an advance "in the industrial arts." The "capital" required to put the commonplace knowledge to effect grows larger, and so its acquisition becomes an increasingly difficult matter. Through "difficulty of attainment" in adequate quantities, the apparatus and its ownership become a matter of consequence; increasingly so, until presently the equipment required for an effective pursuit of industry comes to be greater than the common man can hope to acquire in a lifetime. The commonplace knowledge of ways and means, the accumulated experience of mankind, is still transmitted in and by the body of the community at large; but, for practical purposes, the advanced "state of the industrial arts" has enabled the owners of goods to corner the wisdom of the ancients and the accumulated experience of the race. Hence "capital," as it stands at that phase of the institution's growth contemplated by Mr. Clark. The "natural" system of free competition, or, as it was once called, "the obvious and simple system of natural liberty," is accordingly a phase of the development of the institution of capital; and its claim to immutable dominion is evidently as good as the like claim of any other phase of cultural growth. The equity, or "natural justice," claimed for it is evidently just and equitable only in so far as the conventions of ownership on which it rests continue to be a secure integral part of the institutional furniture of the community; that is to say, so long as these conventions are part and parcel of the habits of thought of the community; that is to say, so long as these things are currently held to be just and equitable. This normalised present, or "natural," state of Mr. Clark, is, as near as may be, Senior's "Natural State of Man,"--the hypothetically perfect competitive system; and economic theory consists in the definition and classification of the phenomena of economic life in terms of this hypothetical competitive system. Taken by itself, Mr. Clark's dealing with the past development might be passed over with slight comment, except for its negative significance, since it has no theoretical connection with the present, or even with the "natural" state in which the phenomena of economic life are assumed to arrange themselves in a stable, normal scheme. But his dealings with the future, and with the present in so far as the present situation is conceived to comprise "dynamic" factors, is of substantially the same kind. With Senior's "natural state of man" as the base-line of normality in things economic, questions of present and future development are treated as questions of departure from the normal, aberrations and excesses which the theory does not aim even to account for. What is offered in place of theoretical inquiry when these "positive perversions of the natural forces themselves" are taken up (_e.g._, in chapters xxii.-xxix.) is an exposition of the corrections that must be made to bring the situation back to the normal static state, and solicitous advice as to what measures are to be taken with a view to this beneficent end. The problem presented to Mr. Clark by the current phenomena of economic development is: how can it be stopped? or, failing that, how can it be guided and minimised? Nowhere is there a sustained inquiry into the dynamic character of the changes that have brought the present (deplorable) situation to pass, nor into the nature and trend of the forces at work in the development that is going forward in this situation. None of this is covered by Mr. Clark's use of the word "dynamic." All that it covers in the way of theory (chapters xii.-xxi.) is a speculative inquiry as to how the equilibrium reëstablished itself when one or more of the quantities involved increases or decreases. Other than quantitive changes are not noticed, except as provocations to homiletic discourse. Not even the causes and the scope of the quantitive changes that may take place in the variables are allowed to fall within the scope of the theory of economic dynamics. So much of the volume, then, and of the system of doctrines of which the volume is an exposition, as is comprised in the later eight chapters (pp. 372-554), is an exposition of grievances and remedies, with only sporadic intrusions of theoretical matter, and does not properly constitute a part of the theory, whether static or dynamic. There is no intention here to take exception to Mr. Clark's outspoken attitude of disapproval toward certain features of the current business situation or to quarrel with the remedial measures which he thinks proper and necessary. This phase of his work is spoken of here rather to call attention to the temperate but uncompromising tone of Mr. Clark's writings as a spokesman for the competitive system, considered as an element in the Order of Nature, and to note the fact that this is not economic theory.[6] The theoretical section specifically scheduled as Economic Dynamics (chapters xii.-xxi.), on the other hand, is properly to be included under the caption of Statics. As already remarked above, it presents a theory of equilibrium between variables. Mr. Clark is, indeed, barred out by his premises from any but a statical development of theory. To realise the substantially statical character of his Dynamics, it is only necessary to turn to his chapter xii. (Economic Dynamics). "A highly dynamic condition, then, is one in which the economic organism changes rapidly and yet, at any time in the course of its changes, is relatively near to a certain static model" (p. 196). "The actual shape of society at any one time is not the static model of that time; but it tends to conform to it; and in a very dynamic society is more nearly like it than it would be in one in which the forces of change are less active" (p. 197). The more "dynamic" the society, the nearer it is to the static model; until in an ideally dynamic society, with a frictionless competitive system, to use Mr. Clark's figure, the static state would be attained, except for an increase in size,--that is to say, the ideally perfect "dynamic" state would coincide with the "static" state. Mr. Clark's conception of a dynamic state reduces itself to a conception of an imperfectly static state, but in such a sense that the more highly and truly "dynamic" condition is thereby the nearer to a static condition. Neither the static nor the dynamic state, in Mr. Clark's view, it should be remarked, is a state of quiescence. Both are states of more or less intense activity, the essential difference being that in the static state the activity goes on in perfection, without lag, leak, or friction; the movement of parts being so perfect as not to disturb the equilibrium. The static state is the more "dynamic" of the two. The "dynamic" condition is essentially a deranged static condition: whereas the static state is the absolute perfect, "natural" taxonomic norm of competitive life. This dynamic-static state may vary in respect of the magnitude of the several factors which hold one another in equilibrium, but these are none other than quantitive variations. The changes which Mr. Clark discusses under the head of dynamics are all of this character,--changes in absolute or relative magnitude of the several factors comprised in the equation. * * * * * But, not to quarrel with Mr. Clark's use of the terms "static" and "dynamic," it is in place to inquire into the merits of this class of economic science apart from any adventitious shortcomings. For such an inquiry Mr. Clark's work offers peculiar advantages. It is lucid, concise, and unequivocal, with no temporising euphemisms and no politic affectations of sentiment. Mr. Clark's premises, and therewith the aim of his inquiry, are the standard ones of the classical English school (including the Jevons-Austrian wing). This school of economics stands on the pre-evolutionary ground of normality and "natural law," which the great body of theoretical science occupied in the early nineteenth century. It is like the other theoretical sciences that grew out of the rationalistic and humanitarian conceptions of the eighteenth century in that its theoretical aim is taxonomy--definition and classification--with the purpose of subsuming its data under a rational scheme of categories which are presumed to make up the Order of Nature. This Order of Nature, or realm of Natural Law, is not the actual run of material facts, but the facts so interpreted as to meet the needs of the taxonomist in point of taste, logical consistency, and sense of justice. The question of the truth and adequacy of the categories is a question as to the consensus of taste and predilection among the taxonomists; _i.e._, they are an expression of trained human nature touching the matter of what ought to be. The facts so interpreted make up the "normal," or "natural," scheme of things, with which the theorist has to do. His task is to bring facts within the framework of this scheme of "natural" categories. Coupled with this scientific purpose of the taxonomic economist is the pragmatic purpose of finding and advocating the expedient course of policy. On this latter head, again, Mr. Clark is true to the animus of the school. The classical school, including Mr. Clark and his contemporary associates in the science, is hedonistic and utilitarian,--hedonistic in its theory and utilitarian in its pragmatic ideals and endeavors. The hedonistic postulates on which this line of economic theory is built up are of a statical scope and character, and nothing but statical theory (taxonomy) comes out of their development.[7] These postulates, and the theorems drawn from them, take account of none but quantitive variations, and quantitive variation alone does not give rise to cumulative change, which proceeds on changes in kind. Economics of the line represented at its best by Mr. Clark has never entered this field of cumulative change. It does not approach questions of the class which occupy the modern sciences,--that is to say, questions of genesis, growth, variation, process (in short, questions of a dynamic import),--but confines its interest to the definition and classification of a mechanically limited range of phenomena. Like other taxonomic sciences, hedonistic economics does not, and cannot, deal with phenomena of growth except so far as growth is taken in the quantitative sense of a variation in magnitude, bulk, mass, number, frequency. In its work of taxonomy this economics has consistently bound itself, as Mr. Clark does, by distinctions of a mechanical, statistical nature, and has drawn its categories of classification on those grounds. Concretely, it is confined, in substance, to the determination of and refinements upon the concepts of land, labor, and capital, as handed down by the great economists of the classical era, and the correlate concepts of rent, wages, interest and profits. Solicitously, with a painfully meticulous circumspection, the normal, mechanical metes and bounds of these several concepts are worked out, the touchstone of the absolute truth aimed at being the hedonistic calculus. The facts of use and wont are not of the essence of this mechanical refinement. These several categories are mutually exclusive categories, mechanically speaking. The circumstance that the phenomena covered by them are not mechanical facts is not allowed to disturb the pursuit of mechanical distinctions among them. They nowhere overlap, and at the same time between them they cover all the facts with which this economic taxonomy is concerned. Indeed, they are in logical consistency, required to cover them. They are hedonistically "natural" categories of such taxonomic force that their elemental lines of cleavage run through the facts of any given economic situation, regardless of use and wont, even where the situation does not permit these lines of cleavage to be seen by men and recognised by use and wont; so that, _e.g._, a gang of Aleutian Islanders slushing about in the wrack and surf with rakes and magical incantations for the capture of shell-fish are held, in point of taxonomic reality, to be engaged on a feat of hedonistic equilibration in rent, wages, and interest. And that is all there is to it. Indeed, for economic theory of this kind, that is all there is to any economic situation. The hedonistic magnitudes vary from one situation to another, but, except for variations in the arithmetical details of the hedonistic balance, all situations are, in point of economic theory, substantially alike.[8] Taking this unfaltering taxonomy on its own recognisances, let us follow the trail somewhat more into the arithmetical details, as it leads along the narrow ridge of rational calculation, above the tree-tops, on the levels of clear sunlight and moonshine. For the purpose in hand--to bring out the character of this current economic science as a working theory of current facts, and more particularly "as applied to modern problems of industry and public policy" (title-page)--the sequence to be observed in questioning the several sections into which the theoretical structure falls is not essential. The structure of classical theory is familiar to all students, and Mr. Clark's redaction offers no serious departure from the conventional lines. Such divergence from conventional lines as may occur is a matter of details, commonly of improvements in detail; and the revisions of detail do not stand in such an organic relation to one another, nor do they support and strengthen one another in such a manner, as to suggest anything like a revolutionary trend or a breaking away from the conventional lines. So as regards Mr. Clark's doctrine of Capital. It does not differ substantially from the doctrines which are gaining currency at the hands of such writers as Mr. Fisher or Mr. Fetter; although there are certain formal distinctions peculiar to Mr. Clark's exposition of the "Capital Concept." But these peculiarities are peculiarities of the method of arriving at the concept rather than peculiarities substantial to the concept itself. The main discussion of the nature of capital is contained in chapter ii. (Varieties of Economic Goods). The conception of capital here set forth is of fundamental consequence to the system, partly because of the important place assigned capital in this system of theory, partly because of the importance which the conception of capital must have in any theory that is to deal with problems of the current (capitalistic) situation. Several classes of capital-goods are enumerated, but it appears that in Mr. Clark's apprehension--at variance with Mr. Fisher's view--persons are not to be included among the items of capital. It is also clear from the run of the argument, though not explicitly stated, that only material, tangible, mechanically definable articles of wealth go to make up capital. In current usage, in the business community, "capital" is a pecuniary concept, of course, and is not definable in mechanical terms; but Mr. Clark, true to the hedonistic taxonomy, sticks by the test of mechanical demarcation and draws the lines of his category on physical grounds; whereby it happens that any pecuniary conception of capital is out of the question. Intangible assets, or immaterial wealth, have no place in the theory; and Mr. Clark is exceptionally subtle and consistent in avoiding such modern notions. One gets the impression that such a notion as intangible assets is conceived to be too chimerical to merit attention, even by way of protest or refutation. Here, as elsewhere in Mr. Clark's writings, much is made of the doctrine that the two facts of "capital" and "capital-goods" are conceptually distinct, though substantially identical. The two terms cover virtually the same facts as would be covered by the terms "pecuniary capital" and "industrial equipment." They are for all ordinary purposes coincident with Mr. Fisher's terms, "capital value" and "capital," although Mr. Clark might enter a technical protest against identifying his categories with those employed by Mr. Fisher.[9] "Capital is this permanent fund of productive goods, the identity of whose component elements is forever changing. Capital-goods are the shifting component parts of this permanent aggregate" (p. 29). Mr. Clark admits (pp. 29-33) that capital is colloquially spoken and thought of in terms of value, but he insists that in point of substantial fact the working concept of capital is (should be) that of "a fund of productive goods," considered as an "abiding entity." The phrase itself, "a fund of productive goods," is a curiously confusing mixture of pecuniary and mechanical terms, though the pecuniary expression, "a fund," is probably to be taken in this connection as a permissible metaphor. This conception of capital, as a physically "abiding entity" constituted by the succession of productive goods that make up the industrial equipment, breaks down in Mr. Clark's own use of it when he comes (pp. 37-38) to speak of the mobility of capital; that is to say, so soon as he makes use of it. A single illustration of this will have to suffice, though there are several points in his argument where the frailty of the conception is patent enough. "The transfer of capital from one industry to another is a dynamic phenomenon which is later to be considered. What is here important is the fact that it is in the main accomplished without entailing transfers of capital-goods. An instrument wears itself out in one industry, and instead of being succeeded by a like instrument in the same industry, it is succeeded by one of a different kind which is used in a different branch of production" (p. 38),--illustrated on the preceding page by a shifting of investment from a whaling-ship to a cotton-mill. In all this it is plain that the "transfer of capital" contemplated is a shifting of investment, and that it is, as indeed Mr. Clark indicates, not a matter of the mechanical shifting of physical bodies from one industry to the other. To speak of a transfer of "capital" which does not involve a transfer of "capital-goods" is a contradiction of the main position, that "capital" is made up of "capital-goods." The continuum in which the "abiding entity" of capital resides is a continuity of ownership, not a physical fact. The continuity, in fact, is of an immaterial nature, a matter of legal rights, of contract, of purchase and sale. Just why this patent state of the case is overlooked, as it somewhat elaborately is, is not easily seen. But it is plain that, if the concept of capital were elaborated from observation of current business practice, it would be found that "capital" is a pecuniary fact, not a mechanical one; that it is an outcome of a valuation, depending immediately on the state of mind of the valuers; and that the specific marks of capital, by which it is distinguishable from other facts, are of an immaterial character. This would, of course, lead, directly, to the admission of intangible assets; and this, in turn, would upset the law of the "natural" remuneration of labor and capital to which Mr. Clark's argument looks forward from the start. It would also bring in the "unnatural" phenomena of monopoly as a normal outgrowth of business enterprise. There is a further logical discrepancy avoided by resorting to the alleged facts of primitive industry, when there was no capital, for the elements out of which to construct a capital concept, instead of going to the current business situation. In a hedonistic-utilitarian scheme of economic doctrine, such as Mr. Clark's, only physically productive agencies can be admitted as efficient factors in production or as legitimate claimants to a share in distribution. Hence capital, one of the prime factors in production and the central claimant in the current scheme of distribution, must be defined in physical terms and delimited by mechanical distinctions. This is necessary for reasons which appear in the succeeding chapter, on The Measure of Consumers' Wealth. On the same page (38), and elsewhere, it is remarked that "business disasters" destroy capital in part. The destruction in question is a matter of values; that is to say, a lowering of valuation, not in any appreciable degree a destruction of material goods. Taken as a physical aggregate, capital does not appreciably decrease through business disasters, but, taken as a fact of ownership and counted in standard units of value, it decreases; there is a destruction of values and a shifting of ownership, a loss of ownership perhaps; but these are pecuniary phenomena, of an immaterial character, and so do not directly affect the material aggregate of the industrial equipment. Similarly, the discussion (pp. 301-314) of how changes of method, as, _e.g._, labor-saving devices, "liberate capital," and at times "destroy" capital, is intelligible only on the admission that "capital" here is a matter of values owned by investors and is not employed as a synonym for industrial appliances. The appliances in question are neither liberated nor destroyed in the changes contemplated. And it will not do to say that the aggregate of "productive goods" suffers a diminution by a substitution of devices which increases its aggregate productiveness, as is implied, _e.g._, by the passage on page 307,[10] if Mr. Clark's definition of capital is strictly adhered to. This very singular passage (pp. 306-311, under the captions, Hardships entailed on Capitalists by Progress, and the Offset for Capital destroyed by Changes of Method) implies that the aggregate of appliances of production is decreased by a change which increases the aggregate of these articles in that respect (productivity) by virtue of which they are counted in the aggregate. The argument will hold good if "productive goods" are rated by bulk, weight, number, or some such irrelevant test, instead of by their productivity or by their consequent capitalised value. On such a showing it should be proper to say that the polishing of plowshares before they are sent out from the factory diminishes the amount of capital embodied in plowshares by as much as the weight or bulk of the waste material removed from the shares in polishing them. Several things may be said of the facts discussed in this passage. There is, presumably, a decrease, in bulk, weight, or number, of the appliances that make up the industrial equipment at the time when such a technological change as is contemplated takes place. This change, presumably, increases the productive efficiency of the equipment as a whole, and so may be said without hesitation to increase the equipment as a factor of production, while it may decrease it, considered as a mechanical magnitude. The owners of the obsolete or obsolescent appliances presumably suffer a diminution of their capital, whether they discard the obsolete appliances or not. The owners of the new appliances, or rather those who own and are able to capitalise the new technological expedients, presumably gain a corresponding advantage, which may take the form of an increase of the effective capitalisation of their outfit, as would then be shown by an increased market value of their plant. The largest theoretical outcome of the supposed changes, for an economist not bound by Mr. Clark's conception of capital, should be the generalisation that industrial capital--capital considered as a productive agent--is substantially a capitalisation of technological expedients, and that a given capital invested in industrial equipment is measured by the portion of technological expedients whose usufruct the investment appropriates. It would accordingly appear that the substantial core of all capital is immaterial wealth, and that the material objects which are formally the subject of the capitalist's ownership are, by comparison, a transient and adventitious matter. But if such a view were accepted, even with extreme reservations, Mr. Clark's scheme of the "natural" distribution of incomes between capital and labor would "go up in the air," as the colloquial phrase has it. It would be extremely difficult to determine what share of the value of the joint product of capital and labor should, under a rule of "natural" equity, go to the capitalist as an equitable return for his monopolisation of a given portion of the intangible assets of the community at large.[11] The returns actually accruing to him under competitive conditions would be a measure of the differential advantage held by him by virtue of his having become legally seized of the material contrivances by which the technological achievements of the community are put into effect. Yet, if in this way capital were apprehended as "an historical category," as Rodbertus would say, there is at least the comfort in it all that it should leave a free field for Mr. Clark's measures of repression as applied to the discretionary management of capital by the makers of trusts. And yet, again, this comforting reflection is coupled with the ugly accompaniment that by the same move the field would be left equally free of moral obstructions to the extreme proposals of the socialists. A safe and sane course for the quietist in these premises should apparently be to discard the equivocal doctrines of the passage (pp. 306-311) from which this train of questions arises, and hold fast to the received dogma, however unworkable, that "capital" is a congeries of physical objects with no ramifications or complications of an immaterial kind, and to avoid all recourse to the concept of value, or price, in discussing matters of modern business. * * * * * The center of interest and of theoretical force and validity in Mr. Clark's work is his law of "natural" distribution. Upon this law hangs very much of the rest, if not substantially the whole structure of theory. To this law of distribution the earlier portions of the theoretical development look forward, and this the succeeding portions of the treatise take as their point of departure. The law of "natural" distribution says that any productive agent "naturally" gets what it produces. Under ideally free competitive conditions--such as prevail in the "static" state, and to which the current situation approximates--each unit of each productive factor unavoidably gets the amount of wealth which it creates,--its "virtual product," as it is sometimes expressed. This law rests, for its theoretical validity, on the doctrine of "final productivity," set forth in full in the _Distribution of Wealth_, and more concisely in the _Essentials_[12]--"one of those universal principles which govern economic life in all its stages of evolution."[13] In combination with a given amount of capital, it is held, each succeeding unit of added labor adds a less than proportionate increment to the product. The total product created by the labor so engaged is at the same time the distributive share received by such labor as wages; and it equals the increment of product added by the "final" unit of labor, multiplied by the number of such units engaged. The law of "natural" interest is the same as this law of wages, with a change of terms. The product of each unit of labor or capital being measured by the product of the "final" unit, each gets the amount of its own product. In all of this the argument runs in terms of value; but it is Mr. Clark's view, backed by an elaborate exposition of the grounds of his contention,[14] that the use of these terms of value is merely a matter of convenience for the argument, and that the conclusions so reached--the equality so established between productivity and remuneration--may be converted to terms of goods, or "effective utility," without abating their validity. Without recourse to some such common denominator as value the outcome of the argument would, as Mr. Clark indicates, be something resembling the Ricardian law of differential rent instead of a law drawn in homogeneous terms of "final productivity"; and the law of "natural" distribution would then, at the best, fall short of a general formula. But the recourse to terms of value does not, as Mr. Clark recognises, dispose of the question without more ado. It smooths the way for the argument, but, unaided, it leaves it nugatory. According to Hudibras, "The value of a thing Is just as much as it will bring," and the later refinements on the theory of value have not set aside this dictum of the ancient authority. It answers no pertinent question of equity to say that the wages paid for labor are as much as it will bring. And Mr. Clark's chapter (xxiv.) on "The Unit for Measuring Industrial Agents and their Products" is designed to show how this tautological statement in terms of market value converts itself, under competitive conditions, into a competent formula of distributive justice. It does not conduce to intelligibility to say that the wages of labor are just and fair because they are all that is paid to labor as wages. What further value Mr. Clark's extended discussion of this matter may have will lie in his exposition of how competition converts the proposition that "the value of a thing is just as much as it will bring" into the proposition that "the market rate of wages (or interest) gives to labor (or capital) the full product of labor (or capital)." In following up the theory at this critical point, it is necessary to resort to the fuller statement of the _Distribution of Wealth_,[15] the point being not so adequately covered in the _Essentials_. Consistently hedonistic, Mr. Clark recognises that his law of natural justice must be reduced to elementary hedonistic terms, if it is to make good its claim to stand as a fundamental principle of theory. In hedonistic theory, production of course means the production of utilities, and utility is of course utility to the consumer.[16] A product is such by virtue of and to the amount of the utility which it has for a consumer. This utility of the goods is measured, as value, by the sacrifice (disutility) which the consumer is willing to undergo in order to get the utility which the consumption of the goods yields him. The unit and measure of productive labor is in the last analysis also a unit of disutility; but it is disutility to the productive laborer, not to the consumer. The balance which establishes itself under competitive conditions is a compound balance, being a balance between the utility of the goods to the consumer and the disutility (cost) which he is willing to undergo for it, on the one hand, and, on the other hand, a balance between the disutility of the unit of labor and the utility for which the laborer is willing to undergo this disutility. It is evident, and admitted, that there can be no balance, and no commensurability, between the laborer's disutility (pain) in producing the goods and the consumer's utility (pleasure) in consuming them, inasmuch as these two hedonistic phenomena lie each within the consciousness of a distinct person. There is, in fact, no continuity of nervous tissue over the interval between consumer and producer, and a direct comparison, equilibrium, equality, or discrepancy in respect of pleasure and pain can, of course, not be sought except within each self-balanced individual complex of nervous tissue.[17] The wages of labor (_i.e._, the utility of the goods received by the laborer) is not equal to the disutility undergone by him, except in the sense that he is competitively willing to accept it; nor are these wages equal to the utility got by the consumer of the goods, except in the sense that he is competitively willing to pay them. This point is covered by the current diagrammatic arguments of marginal-utility theory as to the determination of competitive prices. But, while the wages are not equal to or directly comparable with the disutility of the productive labor engaged, they are, in Mr. Clark's view, equal to the "productive efficiency" of that labor.[18] "Efficiency in a worker is, in reality, power to draw out labor on the part of society. It is capacity to offer that for which society will work in return." By the mediation of market price, under competitive conditions, it is held, the laborer gets, in his wages, a valid claim on the labor of other men (society) as large as they are competitively willing to allow him for the services for which he is paid his wages. The equitable balance between work and pay contemplated by the "natural" law is a balance between wages and "efficiency," as above defined; that is to say, between the wages of labor and the capacity of labor to get wages. So far, the whole matter might evidently have been left as Bastiat left it. It amounts to saying that the laborer gets what he is willing to accept and the consumers give what they are willing to pay. And this is true, of course, whether competition prevails or not. What makes this arrangement just and right under competitive conditions, in Mr. Clark's view, lies in his further doctrine that under such conditions of unobstructed competition the prices of goods, and therefore the wages of labor, are determined, within the scope of the given market, by a quasi-consensus of all the parties in interest. There is of course no formal consensus, but what there is of the kind is implied in the fact that bargains are made, and this is taken as an appraisement by "society" at large. The (quasi-) consensus of buyers is held to embody the righteous (quasi-) appraisement of society in the premises, and the resulting rate of wages is therefore a (quasi-) just return to the laborer.[19] "Each man accordingly is paid an amount that equals the total product that he personally creates."[20] If competitive conditions are in any degree disturbed, the equitable balance of prices and wages is disturbed by that much. All this holds true for the interest of capital, with a change of terms. The equity and binding force of this finding is evidently bound up with that common-sense presumption on which it rests; namely, that it is right and good that all men should get what they can without force or fraud and without disturbing existing property relations. It springs from this presumption, and, whether in point of equity or of expediency, it rises no higher than its source. It does not touch questions of equity beyond this, nor does it touch questions of the expediency or probable advent of any contemplated change in the existing conventions as to rights of ownership and initiative. It affords a basis for those who believe in the old order--without which belief this whole structure of opinions collapses--to argue questions of wages and profits in a manner convincing to themselves, and to confirm in the faith those who already believe in the old order. But it is not easy to see that some hundreds of pages of apparatus should be required to find one's way back to these time-worn commonplaces of Manchester. In effect, this law of "natural" distribution says that whatever men acquire without force or fraud under competitive conditions is their equitable due, no more and no less, assuming that the competitive system, with its underlying institution of ownership, is equitable and "natural." In point of economic theory the law appears on examination to be of slight consequence, but it merits further attention for the gravity of its purport. It is offered as a definitive law of equitable distribution comprised in a system of hedonistic economics which is in the main a theory of distributive acquisition only. It is worth while to compare the law with its setting, with a view to seeing how its broad declarations of economic justice shows up in contrast with the elements out of which it is constructed and among which it lies. Among the notable chapters of the _Essentials_ is one (vi.) on Value and its Relation to Different Incomes, which is not only a very substantial section of Mr. Clark's economic theory, but at the same time a type of the achievements of the latter-day hedonistic school. Certain features of this chapter alone can be taken up here. The rest may be equally worthy the student's attention, but it is the intention here not to go into the general substance of the theory of marginal utility and value, to which the chapter is devoted, but to confine attention to such elements of it as bear somewhat directly on the question of equitable distribution already spoken of. Among these latter is the doctrine of the "consumer's surplus,"--virtually the same as what is spoken of by other writers as "consumer's rent."[21] "Consumer's surplus" is the surplus of utility (pleasure) derived by the consumer of goods above the (pain) cost of the goods to him. This is held to be a very generally prevalent phenomenon. Indeed, it is held to be all but universally present in the field of consumption. It might, in fact, be effectively argued that even Mr. Clark's admitted exception[22] is very doubtfully to be allowed, on his own showing. Correlated with this element of utility on the consumer's side is a similar volume of disutility on the producer's side, which may be called "producer's abatement," or "producer's rent": it is the amount of disutility by which the disutility-cost of a given article to any given producer (laborer) falls short of (or conceivably exceeds) the disutility incurred by the marginal producer. Marginal buyers or consumers and marginal sellers or producers are relatively few: the great body on both sides come in for something in the way of a "surplus" of utility or disutility. All this bears on the law of "natural" wages and interest as follows, taking that law of just remuneration at Mr. Clark's rating of it. The law works out through the mediation of price. Price is determined, competitively, by marginal producers or sellers and marginal consumers or purchasers: the latter alone on the one side get the precise price-equivalent of the disutility incurred by them, and the latter alone on the other side pay the full price-equivalent of the utilities derived by them from the goods purchased.[23] Hence the competitive price--covering competitive wages and interest--does not reflect the consensus of all parties concerned as to the "effective utility" of the goods, on the one hand, or as to their effective (disutility) cost, on the other hand. It reflects instead, if anything of this kind, the valuations which the marginal unfortunates on each side concede under stress of competition; and it leaves on each side of the bargain relation an uncovered "surplus," which marks the (variable) interval by which price fails to cover "effective utility." The excess utility--and the conceivable excess cost--does not appear in the market transactions that mediate between consumer and producer.[24] In the balance, therefore, which establishes itself in terms of value between the social utility of the product and the remuneration of the producer's "efficiency," the margin of utility represented by the aggregate "consumer's surplus" and like elements is not accounted for. It follows, when the argument is in this way reduced to its hedonistic elements, that no man "is paid an amount that equals the amount of the total product that he personally creates." Supposing the marginal-utility (final-utility) theories of objective value to be true, there is no consensus, actual or constructive, as to the "effective utility" of the goods produced: there is no "social" decision in the case beyond what may be implied in the readiness of buyers to profit as much as may be by the necessities of the marginal buyer and seller. It appears that there is warrant, within these premises, for the formula: Remuneration <> than Product. Only by an infinitesimal chance would it hold true in any given case that, hedonistically, Remuneration = Product; and, if it should ever happen to be true, there would be no finding it out. The (hedonistic) discrepancy which so appears between remuneration and product affects both wages and interest in the same manner, but there is some (hedonistic) ground in Mr. Clark's doctrines for holding that the discrepancy does not strike both in the same degree. There is indeed no warrant for holding that there is anything like an equable distribution of this discrepancy among the several industries or the several industrial concerns; but there appears to be some warrant, on Mr. Clark's argument, for thinking that the discrepancy is perhaps slighter in those branches of industry which produce the prime necessaries of life.[25] This point of doctrine throws also a faint (metaphysical) light on a, possibly generic, discrepancy between the remuneration of capitalists and that of laborers: the latter are, relatively, more addicted to consuming the necessaries of life, and it may be that they thereby gain less in the way of a consumer's surplus. All the analysis and reasoning here set forth has an air of undue tenuity; but in extenuation of this fault it should be noted that this reasoning is made up of such matter as goes to make up the theory under review, and the fault, therefore, is not to be charged to the critic. The manner of argument required to meet this theory of the "natural law of final productivity" on its own ground is itself a sufficiently tedious proof of the futility of the whole matter in dispute. Yet it seems necessary to beg further indulgence for more of the same kind. As a needed excuse, it may be added that what immediately follows bears on Mr. Clark's application of the law of "natural distribution" to modern problems of industry and public policy, in the matter of curbing monopolies. * * * * * Accepting, again, Mr. Clark's general postulates--the postulates of current hedonistic economics--and applying the fundamental concepts, instead of their corollaries, to his scheme of final productivity, it can be shown to fail on grounds even more tenuous and hedonistically more fundamental than those already passed in review. In all final-utility (marginal-utility) theory it is of the essence of the scheme of things that successive increments of a "good" have progressively less than proportionate utility. In fact, the coefficient of decrease of utility is greater than the coefficient of increase of the stock of goods. The solitary "first loaf" is exorbitantly useful. As more loaves are successively added to the stock, the utility of each grows small by degrees and incontinently less, until, in the end, the state of the "marginal" or "final" loaf is, in respect of utility, shameful to relate. So, with a change of phrase, it fares with successive increments of a given productive factor--labor or capital--in Mr. Clark's scheme of final productivity. And so, of course, it also fares with the utility of successive increments of product created by successively adding unit after unit to the complement of a given productive factor engaged in the case. If we attend to this matter of final productivity in consistently hedonistic terms, a curious result appears. A larger complement of the productive agent, counted by weight and tale, will, it is commonly held, create a larger output of goods, counted by weight and tale;[26] but these are not hedonistic terms and should not be allowed to cloud the argument. In the hedonistic scheme the magnitude of goods, in all the dimensions to be taken account of, is measured in terms of utility, which is a different matter from weight and tale. It is by virtue of their utility that they are "goods," not by virtue of their physical dimensions, number and the like; and utility is a matter of the production of pleasure and the prevention of pain. Hedonistically speaking, the amount of the goods, the magnitude of the output, is the quantity of utility derivable from their consumption; and the utility per unit decreases faster than the number of units increases.[27] It follows that in the typical or undifferentiated case an increase of the number of units beyond a certain critical point entails a decrease of the "total effective utility" of the supply.[28] This critical point seems ordinarily to be very near the point of departure of the curve of declining utility, perhaps it frequently coincides with the latter. On the curve of declining final utility, at any point whose tangent cuts the axis of ordinates at an angle of less than 45 degrees, an increase of the number of units entails a decrease of the "total effective utility of the supply,"[29] so that a gain in physical productivity is a loss as counted in "total effective utility." Hedonistically, therefore, the productivity in such a case diminishes, not only relatively to the (physical) magnitude of the productive agents, but absolutely. This critical point, of maximum "total effective utility," is, if the practice of shrewd business men is at all significant, commonly somewhat short of the point of maximum physical productivity, at least in modern industry and in a modern community. The "total effective utility" may commonly be increased by decreasing the output of goods. The "total effective utility" of wages may often be increased by decreasing the amount (value) of the wages per man, particularly if such a decrease is accompanied by a rise in the price of articles to be bought with the wages. Hedonistically speaking, it is evident that the point of maximum net productivity is the point at which a perfectly shrewd business management of a perfect monopoly would limit the supply; and the point of maximum (hedonistic) remuneration (wages and interest) is the point which such a management would fix on in dealing with a wholly free, perfectly competitive supply of labor and capital. Such a monopolistic state of things, it is true, would not answer to Mr. Clark's ideal. Each man would not be "paid an amount that equals the amount of the total product that he personally creates," but he would commonly be paid an amount that (hedonistically, in point of "effective utility") exceeds what he personally creates, because of the high final utility of what he receives. This is easily proven. Under the monopolistic conditions supposed, the laborers would, it is safe to assume, not be fully employed all the time; that is to say, they would be willing to work some more in order to get some more articles of consumption; that is to say, the articles of consumption which their wages offer them have so high a utility as to afford them a consumer's surplus,--the articles are worth more than they cost:[30] Q. E. D. The initiated may fairly doubt the soundness of the chain of argument by which these heterodox theoretical results are derived from Mr. Clark's hedonistic postulates, more particularly since the adepts of the school, including Mr. Clark, are not accustomed to draw conclusions to this effect from these premises. Yet the argument proceeds according to the rules of marginal-utility permutations. In view of this scarcely avoidable doubt, it may be permitted, even at the risk of some tedium, to show how the facts of every-day life bear out this unexpected turn of the law of natural distribution, as briefly traced above. The principle involved is well and widely accepted. The familiar practical maxim of "charging what the traffic will bear" rests on a principle of this kind, and affords one of the readiest practical illustrations of the working of the hedonistic calculus. The principle involved is that a larger aggregate return (value) may be had by raising the return per unit to such a point as to somewhat curtail the demand. In practice it is recognised, in other words, that there is a critical point at which the value obtainable per unit, multiplied by the number of units that will be taken off at that price, will give the largest net aggregate result (in value to the seller) obtainable under the given conditions. A calculus involving the same principle is, of course, the guiding consideration in all monopolistic buying and selling; but a moment's reflection will show that it is, in fact, the ruling principle in all commercial transactions and, indeed, in all business. The maxim of "charging what the traffic will bear" is only a special formulation of the generic principle of business enterprise. Business initiative, the function of the entrepreneur (business man) is comprehended under this principle taken in its most general sense.[31] In business the buyer, it is held by the theorists, bids up to the point of greatest obtainable advantage to himself under the conditions prevailing, and the seller similarly bids down to the point of greatest obtainable net aggregate gain. For the trader (business man, entrepreneur) doing business in the open (competitive) market or for the business concern with a partial or limited monopoly, the critical point above referred to is, of course, reached at a lower point on the curve of price than would be the case under a perfect and unlimited monopoly, such as was supposed above; but the principle of charging what the traffic will bear remains intact, although the traffic will not bear the same in the one case as in the other. Now, in the theories based on marginal (or "final") utility, value is an expression or measure of "effective utility"--or whatever equivalent term may be preferred. In operating on values, therefore, under the rule of charging what the traffic will bear, the sellers of a monopolised supply, _e.g._, must operate through the valuations of the buyers; that is to say, they must influence the final utility of the goods or services to such effect that the "total effective utility" of the limited supply to the consumers will be greater than would be the "total effective utility" of a larger supply, which is the point in question. The emphasis falls still more strongly on this illustration of the hedonistic calculus, if it is called to mind that in the common run of such limitations of supply by a monopolistic business management the management would be able to increase the supply at a progressively declining cost beyond the critical point by virtue of the well-known principle of increasing returns from industry. It is also to be added that, since the monopolistic business gets its enhanced return from the margin by which the "total effective utility" of the limited supply exceeds that of a supply not so limited, and since there is to be deducted from this margin the costs of monopolistic management in addition to other costs, therefore the enhancement of the "total effective utility" of the goods to the consumer in the case must be appreciably larger than the resulting net gains to the monopoly. By a bold metaphor--a metaphor sufficiently bold to take it out of the region of legitimate figures of speech--the gains that come to enterprising business concerns by such monopolistic enhancement of the "total effective utility" of their products are spoken of as "robbery," "extortion," "plunder"; but the theoretical complexion of the case should not be overlooked by the hedonistic theorist in the heat of outraged sentiment. The monopolist is only pushing the principle of all business enterprise (free competition) to its logical conclusion; and, in point of hedonistic theory, such monopolistic gains are to be accounted the "natural" remuneration of the monopolist for his "productive" service to the community in enhancing their enjoyment per unit of consumable goods to such point as to swell their net aggregate enjoyment to a maximum. This intricate web of hedonistic calculations might be pursued further, with the result of showing that, while the consumers of the monopolised supply of goods are gainers by virtue of the enhanced "total effective utility" of the goods, the monopolists who bring about this result do so in great part at their own cost, counting cost in terms of a reduction of "total effective utility." By injudiciously increasing their own share of goods, they lower the marginal and effective utility of their wealth to such a point as, probably, to entail a considerable (hedonistic) privation in the shrinkage of their enjoyment per unit. But it is not the custom of economists, nor does Mr. Clark depart from this custom, to dwell on the hardships of the monopolists. This much may be added, however, that this hedonistically consistent exposition of the "natural law of final productivity" shows it to be "one of those universal principles which govern economic life in all its stages of evolution," even when that evolution enters the phase of monopolistic business enterprise,--granting always the sufficiency of the hedonistic postulates from which the law is derived. Further, the considerations reviewed above go to show that, on two counts, Mr. Clark's crusade against monopoly in the later portion of his treatise is out of touch with the larger theoretical speculations of the earlier portions: (_a_) it runs counter to the hedonistic law of "natural" distribution; and (_b_) the monopolistic business against which Mr. Clark speaks is but the higher and more perfect development of that competitive business enterprise which he wishes to reinstate,--competitive business, so called, being incipiently monopolistic enterprise. Apart from this theoretical bearing, the measures which Mr. Clark advocates for the repression of monopoly, under the head of applications "to modern problems of industry and public policy," may be good economic policy or they may not,--they are the expression of a sound common sense, an unvitiated solicitude for the welfare of mankind, and a wide information as to the facts of the situation. The merits of this policy of repression, as such, cannot be discussed here. On the other hand, the relation of this policy to the theoretical groundwork of the treatise needs also not be discussed here, inasmuch as it has substantially no relation to the theory. In this later portion of the volume Mr. Clark does not lean on doctrines of "final utility," "final productivity," or, indeed, on hedonistic economics at large. He speaks eloquently for the material and cultural interests of the community, and the references to his law of "natural distribution" might be cut bodily out of the discussion without lessening the cogency of his appeal or exposing any weakness in his position. Indeed, it is by no means certain that such an excision would not strengthen his appeal to men's sense of justice by eliminating irrelevant matter. Certain points in this later portion of the volume, however, where the argument is at variance with specific articles of theory professed by Mr. Clark, may be taken up, mainly to elucidate the weakness of his theoretical position at the points in question. He recognises with more than the current degree of freedom that the growth and practicability of monopolies under modern conditions is chiefly due to the negotiability of securities representing capital, coupled with the joint-stock character of modern business concerns.[32] These features of the modern (capitalistic) business situation enable a sufficiently few men to control a section of the community sufficiently large to make an effective monopoly. The most effective known form of organisation for purposes of monopoly, according to Mr. Clark, is that of the holding company, and the ordinary corporation follows it closely in effectiveness in this respect. The monopolistic control is effected by means of the vendible securities covering the capital engaged. To meet the specifications of Mr. Clark's theory of capital, these vendible securities--as _e.g._, the securities (common stock) of a holding company--should be simply the formal evidence of the ownership of certain productive goods and the like. Yet, by his own showing, the ownership of a share of productive goods proportionate to the face value, or the market value, of the securities is by no means the chief consequence of such an issue of securities.[33] One of the consequences, and for the purposes of Mr. Clark's argument the gravest consequence, of the employment of such securities, is the dissociation of ownership from the control of the industrial equipment, whereby the owners of certain securities, which stand in certain immaterial, technical relations to certain other securities, are enabled arbitrarily to control the use of the industrial equipment covered by the latter. These are facts of the modern organisation of capital, affecting the productivity of the industrial equipment and its serviceability both to its owners and to the community. They are facts, though not physically tangible objects; and they have an effect on the serviceability of industry no less decisive than the effect which any group of physically tangible objects of equal market value have. They are, moreover, facts which are bought and sold in the purchase and sale of these securities, as, _e.g._, the common stock of a holding company. They have a value, and therefore they have a "total effective utility." In short, these facts are intangible assets, which are the most consequential element in modern capital, but which have no existence in the theory of capital by which Mr. Clark aims to deal with "modern problems of industry." Yet, when he comes to deal with these problems, it is, of necessity, these intangible assets that immediately engage his attention. These intangible assets are an outgrowth of the freedom of contract under the conditions imposed by the machine industry; yet Mr. Clark proposes to suppress this category of intangible assets without prejudice to freedom of contract or to the machine industry, apparently without having taken thought of the lesson which he rehearses (pp. 390-391) from the introduction of the holding company, with its "sinister perfection," to take the place of the (less efficient) "trust" when the latter was dealt with somewhat as it is now proposed to deal with the holding company. One is tempted to remark that a more naïve apprehension of the facts of modern capital would have afforded a more competent realisation of the problems of monopoly. * * * * * It appears from what has just been said of Mr. Clark's "natural" distribution and of his dealing with the problems of modern industry that the logic of hedonism is of no avail for the theory of business affairs. Yet it is held, perhaps justly, that the hedonistic interpretation may be of great avail in analysing the industrial functions of the community, in their broad, generic character, even if it should not serve so well for the intricate details of the modern business situation. It may be at least a serviceable hypothesis for the outlines of economic theory, for the first approximations to the "economic laws" sought by taxonomists. To be serviceable for this purpose, the hypothesis need perhaps not be true to fact, at least not in the final details of the community's life or without material qualification;[34] but it must at least have that ghost of actuality that is implied in consistency with its own corollaries and ramifications. As has been suggested in an earlier paragraph, it is characteristic of hedonistic economics that the large and central element in its theoretical structure is the doctrine of distribution. Consumption being taken for granted as a quantitive matter simply,--essentially a matter of an insatiable appetite,--economics becomes a theory of acquisition; production is, theoretically, a process of acquisition, and distribution a process of distributive acquisition. The theory of production is drawn in terms of the gains to be acquired by production; and under competitive conditions this means necessarily the acquisition of a distributive share of what is available. The rest of what the facts of productive industry include, as, _e.g._, the facts of workmanship or the " state of the industrial arts," gets but a scant and perfunctory attention. Those matters are not of the theoretical essence of the scheme. Mr. Clark's general theory of production does not differ substantially from that commonly professed by the marginal-utility school. It is a theory of competitive acquisition. An inquiry into the principles of his doctrine, therefore, as they appear, _e.g._, in the early chapters of the _Essentials_, is, in effect, an inquiry into the competence of the main theorems of modern hedonistic economics. "All men seek to get as much net service from material wealth as they can." "Some of the benefit received is neutralised by the sacrifice incurred; but there is a net surplus of gains not thus canceled by sacrifices, and the generic motive which may properly be called economic is the desire to make this surplus large."[35] It is of the essence of the scheme that the acquisitive activities of mankind afford a net balance of pleasure. It is out of this net balance, presumably, that "the consumer's surpluses" arise, or it is in this that they merge. This optimistic conviction is a matter of presumption, of course; but it is universally held to be true by hedonistic economists, particularly by those who cultivate the doctrines of marginal utility. It is not questioned and not proven. It seems to be a surviving remnant of the eighteenth-century faith in a benevolent Order of Nature; that is to say, it is a rationalistic metaphysical postulate. It may be true or not, as matter of fact; but it is a postulate of the school, and its optimistic bias runs like a red thread through all the web of argument that envelops the "normal" competitive system. A surplus of gain is normal to the theoretical scheme. The next great theorem of this theory of acquisition is at cross-purposes with this one. Men get useful goods only at the cost of producing them, and production is irksome, painful, as has been recounted above. They go on producing utilities until, at the margin, the last increment of utility in the product is balanced by the concomitant increment of disutility in the way of irksome productive effort,--labor or abstinence. At the margin, pleasure-gain is balanced by pain-cost. But the "effective utility" of the total product is measured by that of the final unit; the effective utility of the whole is given by the number of units of product multiplied by the effective utility of the final unit; while the effective disutility (pain-cost) of the whole is similarly measured by the pain-cost of the final unit. The "total effective utility" of the producer's product equals the "total effective disutility" of his pains of acquisition. Hence there is no net surplus of utility in the outcome. The corrective objection is ready to hand,[36] that, while the balance of utility and disutility holds at the margin, it does not hold for the earlier units of the product, these earlier units having a larger utility and a lower cost, and so leaving a large net surplus of utility, which gradually declines as the margin is approached. But this attempted correction evades the hedonistic test. It shifts the ground from the calculus to the objects which provoke the calculation. Utility is a psychological matter, a matter of pleasurable appreciation, just as disutility, conversely, is a matter of painful appreciation. The individual who is held to count the costs and the gain in this hedonistic calculus is, by supposition, a highly reasonable person. He counts the cost to him as an individual against the gain to him as an individual. He looks before and after, and sizes the whole thing up in a reasonable course of conduct. The "absolute utility" would exceed the "effective utility" only on the supposition that the "producer" is an unreflecting sensory apparatus, such as the beasts of the field are supposed to be, devoid of that gift of appraisement and calculation which is the hypothetical hedonist's only human trait. There might on such a supposition--if the producer were an intelligent sensitive organism simply--emerge an excess of total pleasure over total pain, but there could then be no talk of utility or of disutility, since these terms imply intelligent reflection, and they are employed because they do so. The hedonistic producer looks to his own cost and gain, as an intelligent pleasure-seeker whose consciousness compasses the contrasted elements as wholes. He does not contrast the balance of pain and pleasure in the morning with the balance of pain and pleasure in the afternoon, and say that there is so much to the good because he was not so tired in the morning. Indeed, by hypothesis, the pleasure to be derived from the consumption of the product is a future, or expected, pleasure, and can be said to be present, at the point of time at which a given unit of pain-cost is incurred, only in anticipation; and it cannot be said that the anticipated pleasure attaching to a unit of product which emerges from the effort of the producer during the relatively painless first hour's work exceeds the anticipated pleasure attaching to a similar unit emerging from the second hour's work. Mr. Clark has, in effect, explained this matter in substantially the same way in another connection (_e.g._, p. 42), where he shows that the magnitude on which the question of utility and cost hinges is the "total effective utility," and that the "total absolute utility" is a matter not of what hedonistically is, in respect of utility as an outcome of production, but of what might have been under different circumstances. An equally unprofitable result may be reached from the same point of departure along a different line of argument. Granting that increments of product should be measured, in respect of utility, by comparison with the disutility of the concomitant increment of cost, then the diagrammatic arguments commonly employed are inadequate, in that the diagrams are necessarily drawn in two dimensions only,--length and breadth: whereas they should be drawn in three dimensions, so as to take account of the intensity of application as well as of its duration.[37] Apparently, the exigencies of graphic representation, fortified by the presumption that there always emerges a surplus of utility, have led marginal-utility theorists, in effect, to overlook this matter of intensity of application. When this element is brought in with the same freedom as the other two dimensions engaged, the argument will, in hedonistic consistency, run somewhat as follows,--the run of the facts being what it may. The producer, setting out on this irksome business, and beginning with the production of the exorbitantly useful initial unit of product, will, by hedonistic necessity, apply himself to the task with a correspondingly extravagant intensity, the irksomeness (disutility) of which necessarily rises to such a pitch as to leave no excess of utility in this initial unit of product above the concomitant disutility of the initial unit of productive effort.[38] As the utility of subsequent units of product progressively declines, so will the producer's intensity of irksome application concomitantly decline, maintaining a nice balance between utility and disutility throughout. There is, therefore, no excess of "absolute utility" above "effective utility" at any point on the curve, and no excess of "total absolute utility" above "total effective utility" of the product as a whole, nor above the "total absolute disutility" or the "total effective disutility" of the pain-cost. A transient evasion of this outcome may perhaps be sought by saying that the producer will act wisely, as a good hedonist should, and save his energies during the earlier moments of the productive period in order to get the best aggregate result from his day's labor, instead of spending himself in ill-advised excesses at the outset. Such seems to be the fact of the matter, so far as the facts wear a hedonistic complexion; but this correction simply throws the argument back on the previous position and concedes the force of what was there claimed. It amounts to saying that, instead of appreciating each successive unit of product in isolated contrast with its concomitant unit of irksome productive effort, the producer, being human, wisely looks forward to his total product and rates it by contrast with his total pain-cost. Whereupon, as before, no net surplus of utility emerges, under the rule which says that irksome production of utilities goes on until utility and disutility balance. But this revision of "final productivity" has further consequences for the optimistic doctrines of hedonism. Evidently, by a somewhat similar line of argument the "consumer's surplus" will be made to disappear, even as this that may be called the "producer's surplus" has disappeared. Production being acquisition, and the consumer's cost being cost of acquisition, the argument above should apply to the consumer's case without abatement. On considering this matter in terms of the hedonistically responsive individual concerned, with a view to determining whether there is, in his calculus of utilities and costs, any margin of uncovered utilities left over after he has incurred all the disutilities that are worth while to him,--instead of proceeding on a comparison between the pleasure-giving capacity of a given article and the market price of the article, all such alleged differential advantages within the scope of a single sensory are seen to be nothing better than an illusory diffractive effect due to a faulty instrument. But the trouble does not end here. The equality: pain-cost = pleasure-gain, is not a competent formula. It should be: pain-cost incurred = pleasure-gain anticipated. And between these two formulas lies the old adage, "there's many a slip 'twixt the cup and the lip." In an appreciable proportion of ventures, endeavors, and enterprises, men's expectations of pleasure-gain are in some degree disappointed,--through miscalculation, through disserviceable secondary effects of their productive efforts, by "the act of God," by "fire, flood, and pestilence." In the nature of things these discrepancies fall out on the side of loss more frequently than on that of gain. After all allowance has been made for what may be called serviceable errors, there remains a margin of disserviceable error, so that pain-cost > eventual pleasure-gain = anticipated pleasure-gain--_n._ Hence, in general, pain-cost > pleasure-gain. Hence it appears that, in the nature of things, men's pains of production are underpaid by that much; although it may, of course, be held that the nature of things at this point is not "natural" or "normal." To this it may be objected that the risk is discounted. Insurance is a practical discounting of risk; but insurance is resorted to only to cover risk that is appreciated by the person exposed to it, and it is such risks as are not appreciated by those who incur them that are chiefly in question here. And it may be added that insurance has hitherto not availed to equalise and distribute the chances of success and failure. Business gains--entrepreneur's gains, the rewards of initiative and enterprise--come out of this uncovered margin of adventure, and the losses of initiative and enterprise are to be set down to the same account. In some measure this element of initiative and enterprise enters into all economic endeavor. And it is not unusual for economists to remark that the volume of unsuccessful or only partly successful enterprise is very large. There are some lines of enterprise that are, as one might say, extra hazardous, in which the average falls out habitually on the wrong side of the account. Typical of this class is the production of the precious metals, particularly as conducted under that régime of free competition for which Mr. Clark speaks. It has been the opinion, quite advisedly, of such economists of the classic age of competition as J. S. Mill and Cairnes, _e.g._, that the world's supply of the precious metals has been got at an average or total cost exceeding their value by several fold. The producers, under free competition at least, are over-sanguine of results. But, in strict consistency, the hedonistic theory of human conduct does not allow men to be guided in their calculation of cost and gain, when they have to do with the precious metals, by different norms from those which rule their conduct in the general quest of gain. The visible difference in this respect between the production of the precious metals and production generally should be due to the larger proportions and greater notoriety of the risks in this field rather than to a difference in the manner of response to the stimulus of expected gain. The canons of hedonistic calculus permit none but a quantitative difference in the response. What happens in the production of the precious metals is typical of what happens in a measure and more obscurely throughout the field of productive effort. Instead of a surplus of utility of product above the disutility of acquisition, therefore, there emerges an average or aggregate net hedonistic deficit. On a consistent marginal-utility theory, all production is a losing game. The fact that Nature keeps the bank, it appears, does not take the hedonistic game of production out of the general category known of old to that class of sanguine hedonistic calculators whose day-dreams are filled with safe and sane schemes for breaking the bank. "Hope springs eternal in the human breast." Men are congenitally over-sanguine, it appears; and the production of utilities is, mathematically speaking, a function of the pig-headed optimism of mankind. It turns out that the laws of (human) nature malevolently grind out vexation for men instead of benevolently furthering the greatest happiness of the greatest number. The sooner the whole traffic ceases, the better,--the smaller will be the net balance of pain. The great hedonistic Law of Nature turns out to be simply the curse of Adam, backed by the even more sinister curse of Eve. * * * * * The remark was made in an earlier paragraph that Mr. Clark's theories have substantially no relation to his practical proposals. This broad declaration requires an equally broad qualification. While the positions reached in his theoretical development count for nothing in making or fortifying the positions taken on "problems of modern industry and public policy," the two phases of the discussion--the theoretical and the pragmatic--are the outgrowth of the same range of preconceptions and run back to the same metaphysical ground. The present canvass of items in the doctrinal system has already far overpassed reasonable limits, and it is out of the question here to pursue the exfoliation of ideas through Mr. Clark's discussion of public questions, even in the fragmentary fashion in which scattered items of the theoretical portion of his treatise have been passed in review. But a broad and rudely drawn characterisation may yet be permissible. This latter portion of the volume has the general complexion of a Bill of Rights. This is said, of course, with no intention of imputing a fault. It implies that the scope and method of the discussion is governed by the preconception that there is one right and beautiful definitive scheme of economic life, "to which the whole creation tends." Whenever and in so far as current phenomena depart or diverge from this definitive "natural" scheme or from the straight and narrow path that leads to its consummation, there is a grievance to be remedied by putting the wheels back into the rut. The future, such as it ought to be,--the only normally possible, natural future scheme of life,--is known by the light of this preconception; and men have an indefeasible right to the installation and maintenance of those specific economic relations, expedients, institutions, which this "natural" scheme comprises, and to no others. The consummation is presumed to dominate the course of things which is presumed to lead up to the consummation. The measures of redress whereby the economic Order of Nature is to renew its youth are simple, direct, and short-sighted, as becomes the proposals of pre-Darwinian hedonism, which is not troubled about the exuberant uncertainties of cumulative change. No doubt presents itself but that the community's code of right and equity in economic matters will remain unchanged under changing conditions of economic life. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, Vol. XXII, Feb., 1908. [2] _The Essentials of Economic Theory, as Applied to Modern Problems of Industry and Public Policy._ By John Bates Clark. New York: The Macmillan Company. 1907. [3] _Cf._, _e.g. The Distribution of Wealth_, p. 376, note. [4] See, _e.g._, J. S. Mill, _Political Economy_, Book I; Marshall, _Principles of Economics_, Vol. I, Books II-V. [5] _Cf._, _e.g._, such an account as Barrows, _Ethno-botany of the Coahuilla Indians_. [6] What would be the scientific rating of the work of a botanist who should spend his energy in devising ways and means to neutralize the ecological variability of plants, or of a physiologist who conceived it the end of his scientific endeavors to rehabilitate the vermiform appendix or the pineal eye, or to denounce and penalize the imitative coloring of the Viceroy butterfly? What scientific interest would attach to the matter if Mr. Loeb, _e.g._, should devote a few score pages to canvassing the moral responsibilities incurred by him in his parental relation to his parthenogenetically developed sea-urchin eggs? Those phenomena which Mr. Clark characterizes as "positive perversions" may be distasteful and troublesome, perhaps, but "the economic necessity of doing what is legally difficult" is not of the "essentials of theory." [7] It is a notable fact that even the genius of Herbert Spencer could extract nothing but taxonomy from his hedonistic postulates; _e.g._, _his Social Statics_. Spencer is both evolutionist and hedonist, but it is only by recourse to other factors, alien to the rational hedonistic scheme, such as habit, delusions, use and disuse, sporadic variation, environmental forces, that he is able to achieve anything in the way of genetic science, since it is only by this recourse that he is enabled to enter the field of cumulative change within which the modern post-Darwinian sciences live and move and have their being. [8] "The capital-goods have to be taken unit by unit if their value for productive purposes is to be rightly gauged. A part of a supply of potatoes is traceable to the hoes that dig them.... We endeavor simply to ascertain how badly the loss of one hoe would affect us or how much good the restoration of it would do us. This truth, like the foregoing ones, has a universal application in economics; for primitive men as well as civilized ones must estimate the specific productivity of the tools that they use," etc. Page 43. [9] _Cf._ a criticism of Mr. Fisher's conception in the _Political Science Quarterly_ for February, 1908. [10] "The machine itself is often a hopeless specialist. It can do one minute thing and that only, and when a new and better device appears for doing that one thing, the machine has to go, and not to some new employment, but to the junk heap. There is thus taking place a considerable waste of capital in consequence of mechanical and other progress." "Indeed, a quick throwing away of instruments which have barely begun to do their work is often the secret of the success of an enterprising manager, but it entails a destruction of capital." [11] The position of the laborer and his wages, in this light, would not be substantially different from that of the capitalist and his interest. Labor is no more possible, as a fact of industry, without the community's accumulated technological knowledge than is the use of "productive goods." [12] _Cf. Distribution of Wealth_, chaps, xii, xiii, vii, viii; _Essentials_, chaps, v-x. [13] _Essentials_, p. 158. [14] _Distribution_, chap. xxiv. [15] Chap. xxiv. [16] _Essentials_, p. 40. [17] Among modern economic hedonists, including Mr. Clark, there stands over from the better days of the order of nature a presumption, disavowed, but often decisive, that the sensational response to the like mechanical impact of the stimulating body is the same in different individuals. But, while this presumption stands ever in the background, and helps to many important conclusions, as in the case under discussion, few modern hedonists would question the statement in the text. [18] _Distribution_, p. 394. [19] In Mr. Clark's discussion, elsewhere, the "quasi"-character of the productive share of the laborer is indicated by saying that it is the product "imputed" or "imputable" to him. [20] _Essentials_, p. 92. Et si sensus deficit, ad firmandum cor sincerum sola fides sufficit. [21] See pp. 102-113; also p. 172, note. [22] "The cheapest and poorest grades of articles." Page 113. [23] See p. 113. [24] The disappearance, and the method of disappearance, of such elements of differential utility and disutility occupies a very important place in all marginal-utility ("final-utility") theories of market value, or "objective value." [25] "Only the simplest and cheapest things that are sold in the market at all bring just what they are worth to the buyers." Page 113. [26] It is, _e.g._, open to serious question whether Mr. Clark's curves of final productivity (pp. 139, 148), showing a declining output per unit in response to an increase of one of the complementary agents of production, will fit the common run of industry in case the output be counted by weight and tale. In many cases they will, no doubt; in many other cases they will not. But this is no criticism of the curves in question, since they do not, or at least should not, purport to represent the product in such terms, but in terms of utility. [27] To resort to an approximation after the manner of Malthus, if the supply of goods be supposed to increase by arithmetical progression, their final utility may be said concomitantly to decrease by geometrical progression. [28] _Cf. Essentials_, chap. iii, especially pp. 40-41. [29] The current marginal-utility diagrams are not of much use in this connection, because the angle of the tangent with the axis of ordinates, at any point, is largely a matter of the draftsman's taste. The abscissa and the ordinate do not measure commensurable units. The units on the abscissa are units of frequency, while those on the ordinate are units of amplitude; and the greater or less segment of line allowed per unit on either axis is a matter of independently arbitrary choice. Yet the proposition in the text remains true,--as true as hedonistic propositions commonly are. The magnitude of the angle of the tangent with the axis of ordinates decides whether the total (hedonistic) productivity at a given point in the curve increases or decreases with a (mechanical) increase of the productive agent,--no student at all familiar with marginal-utility arguments will question that patent fact. But the angle of the tangent depends on the fancy of the draftsman,--no one possessed of the elemental mathematical notions will question that equally patent fact. [30] A similar line of argument has been followed up by Mr. Clark for capital and interest, in a different connection. See _Essentials_, pp. 340-345, 356. [31] _Cf. Essentials_, pp. 83-90, 118-120. [32] _Cf._ chap. xxii, especially pp. 378-392. [33] _Cf._ p. 391. [34] _Cf. Essentials_, p. 39. [35] _Essentials_, p. 39. [36] _Cf. Essentials_, chap. iii, especially pp. 51-56. [37] This difficulty is recognized by the current marginal-utility arguments, and an allowance for intensity is made or presumed. But the allowance admitted is invariably insufficient. It might be said to be insufficient by hypothesis, since it is by hypothesis too small to offset the factor which it is admitted to modify. [38] The limit to which the intensity rises is a margin of the same kind as that which limits the duration. This supposition, that the intensity of application necessarily rises to such a pitch that its disutility overtakes and offsets the utility of the product, may be objected to as a bit of puerile absurdity; but it is a long time since puerility or absurdity has been a bar to any supposition in arguments on marginal utility. THE LIMITATIONS OF MARGINAL UTILITY[1] The limitations of the marginal-utility economics are sharp and characteristic. It is from first to last a doctrine of value, and in point of form and method it is a theory of valuation. The whole system, therefore, lies within the theoretical field of distribution, and it has but a secondary bearing on any other economic phenomena than those of distribution--the term being taken in its accepted sense of pecuniary distribution, or distribution in point of ownership. Now and again an attempt is made to extend the use of the principle of marginal utility beyond this range, so as to apply it to questions of production, but hitherto without sensible effect, and necessarily so. The most ingenious and the most promising of such attempts have been those of Mr. Clark, whose work marks the extreme range of endeavor and the extreme degree of success in so seeking to turn a postulate of distribution to account for a theory of production. But the outcome has been a doctrine of the production of values, and value, in Mr. Clark's as in other utility systems, is a matter of valuation; which throws the whole excursion back into the field of distribution. Similarly, as regards attempts to make use of this principle in an analysis of the phenomena of consumption, the best results arrived at are some formulation of the pecuniary distribution of consumption goods. Within this limited range marginal-utility theory is of a wholly statical character. It offers no theory of a movement of any kind, being occupied with the adjustment of values to a given situation. Of this, again, no more convincing illustration need be had than is afforded by the work of Mr. Clark, which is not excelled in point of earnestness, perseverance, or insight. For all their use of the term "dynamic," neither Mr. Clark nor any of his associates in this line of research have yet contributed anything at all appreciable to a theory of genesis, growth, sequence, change, process, or the like, in economic life. They have had something to say as to the bearing which given economic changes, accepted as premises, may have on valuation, and so on distribution; but as to the causes of change or the unfolding sequence of the phenomena of economic life they have had nothing to say hitherto; nor can they, since their theory is not drawn in causal terms but in terms of teleology. In all this the marginal-utility school is substantially at one with the classical economics of the nineteenth century, the difference between the two being that the former is confined within narrower limits and sticks more consistently to its teleological premises. Both are teleological, and neither can consistently admit arguments from cause to effect in the formulation of their main articles of theory. Neither can deal theoretically with phenomena of change, but at the most only with rational adjustment to change which may be supposed to have supervened. To the modern scientist the phenomena of growth and change are the most obtrusive and most consequential facts observable in economic life. For an understanding of modern economic life the technological advance of the past two centuries--_e.g._, the growth of the industrial arts--is of the first importance; but marginal-utility theory does not bear on this matter, nor does this matter bear on marginal-utility theory. As a means of theoretically accounting for this technological movement in the past or in the present, or even as a means of formally, technically stating it as an element in the current economic situation, that doctrine and all its works are altogether idle. The like is true for the sequence of change that is going forward in the pecuniary relations of modern life; the hedonistic postulate and its propositions of differential utility neither have served nor can serve an inquiry into these phenomena of growth, although the whole body of marginal-utility economics lies within the range of these pecuniary phenomena. It has nothing to say to the growth of business usages and expedients or to the concomitant changes in the principles of conduct which govern the pecuniary relations of men, which condition and are conditioned by these altered relations of business life or which bring them to pass. It is characteristic of the school that wherever an element of the cultural fabric, an institution or any institutional phenomenon, is involved in the facts with which the theory is occupied, such institutional facts are taken for granted, denied, or explained away. If it is a question of price, there is offered an explanation of how exchanges may take place with such effect as to leave money and price out of the account. If it is a question of credit, the effect of credit extension on business traffic is left on one side and there is an explanation of how the borrower and lender coöperate to smooth out their respective income streams of consumable goods or sensations of consumption. The failure of the school in this respect is consistent and comprehensive. And yet these economists are lacking neither in intelligence nor in information. They are, indeed, to be credited, commonly, with a wide range of information and an exact control of materials, as well as with a very alert interest in what is going on; and apart from their theoretical pronouncements the members of the school habitually profess the sanest and most intelligent views of current practical questions, even when these questions touch matters of institutional growth and decay. The infirmity of this theoretical scheme lies in its postulates, which confine the inquiry to generalisations of the teleological or "deductive" order. These postulates, together with the point of view and logical method that follow from them, the marginal-utility school shares with other economists of the classical line--for this school is but a branch or derivative of the English classical economists of the nineteenth century. The substantial difference between this school and the generality of classical economists lies mainly in the fact that in the marginal-utility economics the common postulates are more consistently adhered to at the same time that they are more neatly defined and their limitations are more adequately realized. Both the classical school in general and its specialized variant, the marginal-utility school, in particular, take as their common point of departure the traditional psychology of the early nineteenth-century hedonists, which is accepted as a matter of course or of common notoriety and is held quite uncritically. The central and well-defined tenet so held is that of the hedonistic calculus. Under the guidance of this tenet and of the other psychological conceptions associated and consonant with it, human conduct is conceived of and interpreted as a rational response to the exigencies of the situation in which mankind is placed; as regards economic conduct it is such a rational and unprejudiced response to the stimulus of anticipated pleasure and pain--being, typically and in the main, a response to the promptings of anticipated pleasure, for the hedonists of the nineteenth century and of the marginal-utility school are in the main of an optimistic temper.[2] Mankind is, on the whole and normally, (conceived to be) clearsighted and farsighted in its appreciation of future sensuous gains and losses, although there may be some (inconsiderable) difference between men in this respect. Men's activities differ, therefore, (inconsiderably) in respect of the alertness of the response and the nicety of adjustment of irksome pain-cost to apprehended future sensuous gain; but, on the whole, no other ground or line or guidance of conduct than this rationalistic calculus falls properly within the cognizance of the economic hedonists. Such a theory can take account of conduct only in so far as it is rational conduct, guided by deliberate and exhaustively intelligent choice--wise adaptation to the demands of the main chance. The external circumstances which condition conduct are variable, of course, and so they will have a varying effect upon conduct; but their variation is, in effect, construed to be of such a character only as to vary the degree of strain to which the human agent is subject by contact with these external circumstances. The cultural elements involved in the theoretical scheme, elements that are of the nature of institutions, human relations governed by use and wont in whatever kind and connection, are not subject to inquiry but are taken for granted as pre-existing in a finished, typical form and as making up a normal and definitive economic situation, under which and in terms of which human intercourse is necessarily carried on. This cultural situation comprises a few large and simple articles of institutional furniture, together with their logical implications or corollaries; but it includes nothing of the consequences or effects caused by these institutional elements. The cultural elements so tacitly postulated as immutable conditions precedent to economic life are ownership and free contract, together with such other features of the scheme of natural rights as are implied in the exercise of these. These cultural products are, for the purpose of the theory, conceived to be given a priori in unmitigated force. They are part of the nature of things; so that there is no need of accounting for them or inquiring into them, as to how they have come to be such as they are, or how and why they have changed and are changing, or what effect all this may have on the relations of men who live by or under this cultural situation. Evidently the acceptance of these immutable premises, tacitly, because uncritically and as a matter of course, by hedonistic economics gives the science a distinctive character and places it in contrast with other sciences whose premises are of a different order. As has already been indicated, the premises in question, so far as they are peculiar to the hedonistic economics, are (_a_) a certain institutional situation, the substantial feature of which is the natural right of ownership, and (_b_) the hedonistic calculus. The distinctive character given to this system of theory by these postulates and by the point of view resulting from their acceptance may be summed up broadly and concisely in saying that the theory is confined to the ground of sufficient reason instead of proceeding on the ground of efficient cause. The contrary is true of modern science, generally (except mathematics), particularly of such sciences as have to do with the phenomena of life and growth. The difference may seem trivial. It is serious only in its consequences. The two methods of inference--from sufficient reason and from efficient cause--are out of touch with one another and there is no transition from one to the other: no method of converting the procedure or the results of the one into those of the other. The immediate consequence is that the resulting economic theory is of a teleological character--"deductive" or "a priori" as it is often called--instead of being drawn in terms of cause and effect. The relation sought by this theory among the facts with which it is occupied is the control exercised by future (apprehended) events over present conduct. Current phenomena are dealt with as conditioned by their future consequences; and in strict marginal-utility theory they can be dealt with only in respect of their control of the present by consideration of the future. Such a (logical) relation of control or guidance between the future and the present of course involves an exercise of intelligence, a taking thought, and hence an intelligent agent through whose discriminating forethought the apprehended future may affect the current course of events; unless, indeed, one were to admit something in the way of a providential order of nature or some occult line of stress of the nature of sympathetic magic. Barring magical and providential elements, the relation of sufficient reason runs by way of the interested discrimination, the forethought, of an agent who takes thought of the future and guides his present activity by regard for this future. The relation of sufficient reason runs only from the (apprehended) future into the present, and it is solely of an intellectual, subjective, personal, teleological character and force; while the relation of cause and effect runs only in the contrary direction, and it is solely of an objective, impersonal, materialistic character and force. The modern scheme of knowledge, on the whole, rests, for its definitive ground, on the relation of cause and effect; the relation of sufficient reason being admitted only provisionally and as a proximate factor in the analysis, always with the unambiguous reservation that the analysis must ultimately come to rest in terms of cause and effect. The merits of this scientific animus, of course, do not concern the present argument. Now, it happens that the relation of sufficient reason enters very substantially into human conduct. It is this element of discriminating forethought that distinguishes human conduct from brute behavior. And since the economist's subject of inquiry is this human conduct, that relation necessarily comes in for a large share of his attention in any theoretical formulation of economic phenomena, whether hedonistic or otherwise. But while modern science at large has made the causal relation the sole ultimate ground of theoretical formulation; and while the other sciences that deal with human life admit the relation of sufficient reason as a proximate, supplementary, or intermediate ground, subsidiary, and subservient to the argument from cause to effect; economics has had the misfortune--as seen from the scientific point of view--to let the former supplant the latter. It is, of course, true that human conduct is distinguished from other natural phenomena by the human faculty for taking thought, and any science that has to do with human conduct must face the patent fact that the details of such conduct consequently fall into the teleological form; but it is the peculiarity of the hedonistic economics that by force of its postulates its attention is confined to this teleological bearing of conduct alone. It deals with this conduct only in so far as it may be construed in rationalistic, teleological terms of calculation and choice. But it is at the same time no less true that human conduct, economic or otherwise, is subject to the sequence of cause and effect, by force of such elements as habituation and conventional requirements. But facts of this order, which are to modern science of graver interest than the teleological details of conduct, necessarily fall outside the attention of the hedonistic economist, because they cannot be construed in terms of sufficient reason, such as his postulates demand, or be fitted into a scheme of teleological doctrines. There is, therefore, no call to impugn these premises of the marginal-utility economics within their field. They commend themselves to all serious and uncritical persons at the first glance. They are principles of action which underlie the current, business-like scheme of economic life, and as such, as practical grounds of conduct, they are not to be called in question without questioning the existing law and order. As a matter of course, men order their lives by these principles and, practically, entertain no question of their stability and finality. That is what is meant by calling them institutions; they are settled habits of thought common to the generality of men. But it would be mere absentmindedness in any student of civilization therefore to admit that these or any other human institutions have this stability which is currently imputed to them or that they are in this way intrinsic to the nature of things. The acceptance by the economists of these or other institutional elements as given and immutable limits their inquiry in a particular and decisive way. It shuts off the inquiry at the point where the modern scientific interest sets in. The institutions in question are no doubt good for their purpose as institutions, but they are not good as premises for a scientific inquiry into the nature, origin, growth, and effects of these institutions and of the mutations which they undergo and which they bring to pass in the community's scheme of life. To any modern scientist interested in economic phenomena, the chain of cause and effect in which any given phase of human culture is involved, as well as the cumulative changes wrought in the fabric of human conduct itself by the habitual activity of mankind, are matters of more engrossing and more abiding interest than the method of inference by which an individual is presumed invariably to balance pleasure and pain under given conditions that are presumed to be normal and invariable. The former are questions of the life-history of the race or the community, questions of cultural growth and of the fortunes of generations; while the latter is a question of individual casuistry in the face of a given situation that may arise in the course of this cultural growth. The former bear on the continuity and mutations of that scheme of conduct whereby mankind deals with its material means of life; the latter, if it is conceived in hedonistic terms, concerns a disconnected episode in the sensuous experience of an individual member of such a community. In so far as modern science inquires into the phenomena of life, whether inanimate, brute, or human, it is occupied about questions of genesis and cumulative change, and it converges upon a theoretical formulation in the shape of a life-history drawn in causal terms. In so far as it is a science in the current sense of the term, any science, such as economics, which has to do with human conduct, becomes a genetic inquiry into the human scheme of life; and where, as in economics, the subject of inquiry is the conduct of man in his dealings with the material means of life, the science is necessarily an inquiry into the life-history of material civilization, on a more or less extended or restricted plan. Not that the economist's inquiry isolates material civilization from all other phases and bearings of human culture, and so studies the motions of an abstractly conceived "economic man." On the contrary, no theoretical inquiry into this material civilization that shall be at all adequate to any scientific purpose can be carried out without taking this material civilization in its causal, that is to say, its genetic, relations to other phases and bearings of the cultural complex; without studying it as it is wrought upon by other lines of cultural growth and as working its effects in these other lines. But in so far as the inquiry is economic science, specifically, the attention will converge upon the scheme of material life and will take in other phases of civilization only in their correlation with the scheme of material civilization. Like all human culture this material civilization is a scheme of institutions--institutional fabric and institutional growth. But institutions are an outgrowth of habit. The growth of culture is a cumulative sequence of habituation, and the ways and means of it are the habitual response of human nature to exigencies that vary incontinently, cumulatively, but with something of a consistent sequence in the cumulative variations that so go forward,--incontinently, because each new move creates a new situation which induces a further new variation in the habitual manner of response; cumulatively, because each new situation is a variation of what has gone before it and embodies as causal factors all that has been effected by what went before; consistently, because the underlying traits of human nature (propensities, aptitudes, and what not) by force of which the response takes place, and on the ground of which the habituation takes effect, remain substantially unchanged. Evidently an economic inquiry which occupies itself exclusively with the movements of this consistent, elemental human nature under given, stable institutional conditions--such as is the case with the current hedonistic economics--can reach statical results alone; since it makes abstraction from those elements that make for anything but a statical result. On the other hand an adequate theory of economic conduct, even for statical purposes, cannot be drawn in terms of the individual simply--as is the case in the marginal-utility economics--because it cannot be drawn in terms of the underlying traits of human nature simply; since the response that goes to make up human conduct takes place under institutional norms and only under stimuli that have an institutional bearing; for the situation that provokes and inhibits action in any given case is itself in great part of institutional, cultural derivation. Then, too, the phenomena of human life occur only as phenomena of the life of a group or community: only under stimuli due to contact with the group and only under the (habitual) control exercised by canons of conduct imposed by the group's scheme of life. Not only is the individual's conduct hedged about and directed by his habitual relations to his fellows in the group, but these relations, being of an institutional character, vary as the institutional scheme varies. The wants and desires, the end and aim, the ways and means, the amplitude and drift of the individual's conduct are functions of an institutional variable that is of a highly complex and wholly unstable character. The growth and mutations of the institutional fabric are an outcome of the conduct of the individual members of the group, since it is out of the experience of the individuals, through the habituation of individuals, that institutions arise; and it is in this same experience that these institutions act to direct and define the aims and end of conduct. It is, of course, on individuals that the system of institutions imposes those conventional standards, ideals, and canons of conduct that make up the community's scheme of life. Scientific inquiry in this field, therefore, must deal with individual conduct and must formulate its theoretical results in terms of individual conduct. But such an inquiry can serve the purposes of a genetic theory only if and in so far as this individual conduct is attended to in those respects in which it counts toward habituation, and so toward change (or stability) of the institutional fabric, on the one hand, and in those respects in which it is prompted and guided by the received institutional conceptions and ideals on the other hand. The postulates of marginal utility, and the hedonistic preconceptions generally, fail at this point in that they confine the attention to such bearings of economic conduct as are conceived not to be conditioned by habitual standards and ideals and to have no effect in the way of habituation. They disregard or abstract from the causal sequence of propensity and habituation in economic life and exclude from theoretical inquiry all such interest in the facts of cultural growth, in order to attend to those features of the case that are conceived to be idle in this respect. All such facts of institutional force and growth are put on one side as not being germane to pure theory; they are to be taken account of, if at all, by afterthought, by a more or less vague and general allowance for inconsequential disturbances due to occasional human infirmity. Certain institutional phenomena, it is true, are comprised among the premises of the hedonists, as has been noted above; but they are included as postulates a priori. So the institution of ownership is taken into the inquiry not as a factor of growth or an element subject to change, but as one of the primordial and immutable facts of the order of nature, underlying the hedonistic calculus. Property, ownership, is presumed as the basis of hedonistic discrimination and it is conceived to be given in its finished (nineteenth-century) scope and force. There is no thought either of a conceivable growth of this definitive nineteenth-century institution out of a cruder past or of any conceivable cumulative change in the scope and force of ownership in the present or future. Nor is it conceived that the presence of this institutional element in men's economic relations in any degree affects or disguises the hedonistic calculus, or that its pecuniary conceptions and standards in any degree standardize, color, mitigate, or divert the hedonistic calculator from the direct and unhampered quest of the net sensuous gain. While the institution of property is included in this way among the postulates of the theory, and is even presumed to be ever-present in the economic situation, it is allowed to have no force in shaping economic conduct, which is conceived to run its course to its hedonistic outcome as if no such institutional factor intervened between the impulse and its realization. The institution of property, together with all the range of pecuniary conceptions that belong under it and that cluster about it, are presumed to give rise to no habitual or conventional canons of conduct or standards of valuation, no proximate ends, ideals, or aspirations. All pecuniary notions arising from ownership are treated simply as expedients of computation which mediate between the pain-cost and the pleasure-gain of hedonistic choice, without lag, leak, or friction; they are conceived simply as the immutably correct, God-given notation of the hedonistic calculus. The modern economic situation is a business situation, in that economic activity of all kinds is commonly controlled by business considerations. The exigencies of modern life are commonly pecuniary exigencies. That is to say they are exigencies of the ownership of property. Productive efficiency and distributive gain are both rated in terms of price. Business considerations are considerations of price, and pecuniary exigencies of whatever kind in the modern communities are exigencies of price. The current economic situation is a price system. Economic institutions in the modern civilized scheme of life are (prevailingly) institutions of the price system. The accountancy to which all phenomena of modern economic life are amenable is an accountancy in terms of price; and by the current convention there is no other recognized scheme of accountancy, no other rating, either in law or in fact, to which the facts of modern life are held amenable. Indeed, so great and pervading a force has this habit (institution) of pecuniary accountancy become that it extends, often as a matter of course, to many facts which properly have no pecuniary bearing and no pecuniary magnitude, as, _e.g._, works of art, science, scholarship, and religion. More or less freely and fully, the price system dominates the current commonsense in its appreciation and rating of these non-pecuniary ramifications of modern culture; and this in spite of the fact that, on reflection, all men of normal intelligence will freely admit that these matters lie outside the scope of pecuniary valuation. Current popular taste and the popular sense of merit and demerit are notoriously affected in some degree by pecuniary considerations. It is a matter of common notoriety, not to be denied or explained away, that pecuniary ("commercial ") tests and standards are habitually made use of outside of commercial interests proper. Precious stones, it is admitted, even by hedonistic economists, are more esteemed than they would be if they were more plentiful and cheaper. A wealthy person meets with more consideration and enjoys a larger measure of good repute than would fall to the share of the same person with the same habit of mind and body and the same record of good and evil deeds if he were poorer. It may well be that this current "commercialisation" of taste and appreciation has been overstated by superficial and hasty critics of contemporary life, but it will not be denied that there is a modicum of truth in the allegation. Whatever substance it has, much or little, is due to carrying over into other fields of interest the habitual conceptions induced by dealing with and thinking of pecuniary matters. These "commercial" conceptions of merit and demerit are derived from business experience. The pecuniary tests and standards so applied outside of business transactions and relations are not reducible to sensuous terms of pleasure and pain. Indeed, it may, _e.g._, be true, as is commonly believed, that the contemplation of a wealthy neighbor's pecuniary superiority yields painful rather than pleasurable sensations as an immediate result; but it is equally true that such a wealthy neighbor is, on the whole, more highly regarded and more considerately treated than another neighbor who differs from the former only in being less enviable in respect of wealth. It is the institution of property that gives rise to these habitual grounds of discrimination, and in modern times, when wealth is counted in terms of money, it is in terms of money value that these tests and standards of pecuniary excellence are applied. This much will be admitted. Pecuniary institutions induce pecuniary habits of thought which affect men's discrimination outside of pecuniary matters; but the hedonistic interpretation alleges that such pecuniary habits of thought do not affect men's discrimination in pecuniary matters. Although the institutional scheme of the price system visibly dominates the modern community's thinking in matters that lie outside the economic interest, the hedonistic economists insist, in effect, that this institutional scheme must be accounted of no effect within that range of activity to which it owes its genesis, growth, and persistence. The phenomena of business, which are peculiarly and uniformly phenomena of price, are in the scheme of the hedonistic theory reduced to non-pecuniary hedonistic terms and the theoretical formulation is carried out as if pecuniary conceptions had no force within the traffic in which such conceptions originate. It is admitted that preoccupation with commercial interests has "commercialised" the rest of modern life, but the "commercialisation" of commerce is not admitted. Business transactions and computations in pecuniary terms, such as loans, discounts, and capitalisation, are without hesitation or abatement converted into terms of hedonistic utility, and conversely. It may be needless to take exception to such conversion from pecuniary into sensuous terms, for the theoretical purpose for which it is habitually made; although, if need were, it might not be excessively difficult to show that the whole hedonistic basis of such a conversion is a psychological misconception. But it is to the remoter theoretical consequences of such a conversion that exception is to be taken. In making the conversion abstraction is made from whatever elements do not lend themselves to its terms; which amounts to abstracting from precisely those elements of business that have an institutional force and that therefore would lend themselves to scientific inquiry of the modern kind--those (institutional) elements whose analysis might contribute to an understanding of modern business and of the life of the modern business community as contrasted with the assumed primordial hedonistic calculus. The point may perhaps be made clearer. Money and the habitual resort to its use are conceived to be simply the ways and means by which consumable goods are acquired, and therefore simply a convenient method by which to procure the pleasurable sensations of consumption; these latter being in hedonistic theory the sole and overt end of all economic endeavor. Money values have therefore no other significance than that of purchasing power over consumable goods, and money is simply an expedient of computation. Investment, credit extensions, loans of all kinds and degrees, with payment of interest and the rest, are likewise taken simply as intermediate steps between the pleasurable sensations of consumption and the efforts induced by the anticipation of these sensations, other bearings of the case being disregarded. The balance being kept in terms of the hedonistic consumption, no disturbance arises in this pecuniary traffic so long as the extreme terms of this extended hedonistic equation--pain-cost and pleasure-gain--are not altered, what lies between these extreme terms being merely algebraic notation employed for convenience of accountancy. But such is not the run of the facts in modern business. Variations of capitalization, _e.g._, occur without its being practicable to refer them to visibly equivalent variations either in the state of the industrial arts or in the sensations of consumption. Credit extensions tend to inflation of credit, rising prices, overstocking of markets, etc., likewise without a visible or securely traceable correlation in the state of the industrial arts or in the pleasures of consumption; that is to say, without a visible basis in those material elements to which the hedonistic theory reduces all economic phenomena. Hence the run of the facts, in so far, must be thrown out of the theoretical formulation. The hedonistically presumed final purchase of consumable goods is habitually not contemplated in the pursuit of business enterprise. Business men habitually aspire to accumulate wealth in excess of the limits of practicable consumption, and the wealth so accumulated is not intended to be converted by a final transaction of purchase into consumable goods or sensations of consumption. Such commonplace facts as these, together with the endless web of business detail of a like pecuniary character, do not in hedonistic theory raise a question as to how these conventional aims, ideals, aspirations, and standards have come into force or how they affect the scheme of life in business or outside of it; they do not raise those questions because such questions cannot be answered in the terms which the hedonistic economists are content to use, or, indeed, which their premises permit them to use. The question which arises is how to explain the facts away: how theoretically to neutralize them so that they will not have to appear in the theory, which can then be drawn in direct and unambiguous terms of rational hedonistic calculation. They are explained away as being aberrations due to oversight or lapse of memory on the part of business men, or to some failure of logic or insight. Or they are construed and interpreted into the rationalistic terms of the hedonistic calculus by resort to an ambiguous use of the hedonistic concepts. So that the whole "money economy," with all the machinery of credit and the rest, disappears in a tissue of metaphors to reappear theoretically expurgated, sterilized, and simplified into a "refined system of barter," culminating in a net aggregate maximum of pleasurable sensations of consumption. But since it is in just this unhedonistic, unrationalistic pecuniary traffic that the tissue of business life consists; since it is this peculiar conventionalism of aims and standards that differentiates the life of the modern business community from any conceivable earlier or cruder phase of economic life; since it is in this tissue of pecuniary intercourse and pecuniary concepts, ideals, expedients, and aspirations that the conjunctures of business life arise and run their course of felicity and devastation; since it is here that those institutional changes take place which distinguish one phase or era of the business community's life from any other; since the growth and change of these habitual, conventional elements make the growth and character of any business era or business community; any theory of business which sets these elements aside or explains them away misses the main facts which it has gone out to seek. Life and its conjunctures and institutions being of this complexion, however much that state of the case may be deprecated, a theoretical account of the phenomena of this life must be drawn in these terms in which the phenomena occur. It is not simply that the hedonistic interpretation of modern economic phenomena is inadequate or misleading; if the phenomena are subjected to the hedonistic interpretation in the theoretical analysis they disappear from the theory; and if they would bear the interpretation in fact they would disappear in fact. If, in fact, all the conventional relations and principles of pecuniary intercourse were subject to such a perpetual rationalized, calculating revision, so that each article of usage, appreciation, or procedure must approve itself _de novo_ on hedonistic grounds of sensuous expediency to all concerned at every move, it is not conceivable that the institutional fabric would last over night. FOOTNOTES: [1] Reprinted by permission from the _Journal of Political Economy_, Vol. XVII, No. 9 November 1909. [2] The conduct of mankind differs from that of the brutes in being determined by anticipated sensations of pleasure and pain, instead of actual sensations. Hereby, in so far, human conduct is taken out of the sequence of cause and effect and falls instead under the rule of sufficient reason. By virtue of this rational faculty in man the connection between stimulus and response is teleological instead of causal. The reason for assigning the first and decisive place to pleasure, rather than to pain, in the determination of human conduct, appears to be the (tacit) acceptance of that optimistic doctrine of a beneficent order of nature which the nineteenth century inherited from the eighteenth. GUSTAV SCHMOLLER'S ECONOMICS[1] Professor Schmoller's _Grundriss_[2] is an event of the first importance in economic literature. It appears from later advices that the second and concluding volume of the work is hardly to be looked for at as early a date as the author's expressions in his preface had led us to anticipate. What lies before Professor Schmoller's readers, therefore, in this first volume of the _Outlines_ is but one-half of the compendious statement which he here purposes making of his theoretical position and of his views and exemplification of the scope and method of economic science. It may accordingly seem adventurous to attempt a characterisation of his economic system on the basis of this avowedly incomplete statement. And yet such an endeavor is not altogether gratuitous, nor need it in any great measure proceed on hypothetical grounds. The introduction comprised in the present volume sketches the author's aim in an outline sufficiently full to afford a convincing view of the "system" of science for which he speaks; and the two books by which the introduction is followed show Professor Schmoller's method of inquiry consistently carried out, as well as the reach and nature of the theoretical conclusions which he considers to lie within the competency of economic science. And with regard to an economist who is so much of an innovator,--not to say so much of an iconoclast,--and whose work touches the foundations of the science so intimately and profoundly, the interest of his critics and associates must, at least for the present, center chiefly about these questions as to the scope and nature assigned to the theory by his discussion, as to the range and character of the material of which he makes use, and as to the methods of inquiry which his sagacity and experience commend. So, therefore, while the _Outlines_ is yet incomplete, considered as a compendium of details of doctrine, the work in its unfinished state need not thereby be an inadequate expression of Professor Schmoller's relation to economic science. Herewith for the first time economic readers are put in possession of a fully advised deliverance on economic science at large as seen and cultivated by that modernised historical school of which Professor Schmoller is the authoritative exponent. Valuable and characteristic as his earlier discussions on the scope and method of the science are, they are but preliminary studies and tentative formulations as compared with this maturer work, which not only avows itself a definitive formulation, but has about it an air of finality perceptible at every turn. But this comes near saying that it embodies the sole comprehensive working-out of the scientific aims of the historical school. Discussions partially covering the field, monographs and sketches there are in great number, showing the manner of economic theory that was to be looked for as an outcome of the "historical diversion." Some of these, especially some of the later ones, are extremely valuable in the results they offer, as well as significant of the trend which the science is taking under the hands of the German students.[3] But a comprehensive work, aiming to formulate a body of economic theory on the basis afforded by the "historical method," has not hitherto been seriously attempted. To the broad statement just made exception might perhaps be taken in favor of Schaeffle's half-forgotten work of the seventies, together possibly with several other less notable and less consistent endeavors of a similar kind, dating back to the early decades of the school. Probably none of the younger generation of economists would be tempted to cite Roscher's work as invalidating such a statement as the one made above. Although time has been allowed for the acceptance and authentication of these endeavors of the earlier historical economists in the direction of a system of economic theory,--that is to say, of an economic science,--they have failed of authentication at the hands of the students of the science; and there seems no reason to regard this failure as less than definitive. During the last two decades the historical school has branched into two main directions of growth, somewhat divergent, so that broad general statements regarding the historical economists can be less confidently made to-day than perhaps at any earlier time. Now, as regards the more conservative branch, the historical economists of the stricter observance,--these modern continuers of what may be called the elder line of the historical school can scarcely be said to cultivate a science at all, their aim being not theoretical work. Assuredly, the work of this elder line, of which Professor Wagner is the unquestioned head, is by no means idle. It is work of a sufficiently important and valuable order, perhaps it is indispensable to the task which the science has in hand, but, broadly speaking, it need not be counted with in so far as it touches directly upon economic theory. This elder line of German economics, in its numerous modern representatives, shows both insight and impartiality; but as regards economic theory their work bears the character of eclecticism rather than that of a constructive advance. Frequent and peremptory as their utterances commonly are on points of doctrine, it is only very rarely that these utterances embody theoretical views arrived at or verified by the economists who make them or by such methods of inquiry as are characteristic of these economists. Where these expressions of doctrine are not of the nature of maxims of expediency, they are, as is well known, commonly borrowed somewhat uncritically from classical sources. Of constructive scientific work--that is to say, of theory--this elder line of German economics is innocent; nor does there seem to be any prospect of an eventual output of theory on the part of that branch of the historical school, unless they should unexpectedly take advice, and make the scope, and therefore the method, of their inquiry something more than historical in the sense in which that term is currently accepted. The historical economics of the conservative kind seems to be a barren field in the theoretical respect. So that whatever characteristic articles of general theory the historical school may enrich the science with are to be looked for at the hands of those men who, like Professor Schmoller, have departed from the strict observance of the historical method. A peculiar interest, therefore, attaches to his work as the best accepted and most authoritative spokesman of that branch of historical economics which professes to cultivate theoretical inquiry. It serves to show in what manner and degree this more scientific wing of the historical school have outgrown the original "historical" standpoint and range of conceptions, and how they have passed from a distrust of all economic theory to an eager quest of theoretical formulations that shall cover all phenomena of economic life to better purpose than the body of doctrine received from the classical writers and more in consonance with the canons of contemporary science at large. That this should have been the outcome of the half-century of development through which the school has now passed might well seem unexpected, if not incredible, to any who saw the beginning of that divergence within the school, a generation ago, out of which this modernised, theoretical historical economics has arisen. Professor Schmoller entered the field early, in the sixties, as a protestant against the aims and ideals then in vogue in economics. His protest ran not only against the methods and results of the classical writers, but also against the views professed by the leaders of the historical school, both as regards the scope of the science and as regards the character of the laws or generalisations sought by the science. His early work, in so far as he was at variance with his colleagues, was chiefly critical; and there is no good evidence that he then had a clear conception of the character of that constructive work to which it has been his persistent aim to turn the science. Hence he came to figure in common repute as an iconoclast and an extreme exponent of the historical school, in that he was held practically to deny the feasibility of a scientific treatment of economic matters and to aim at confining economics to narrative, statistics, and description. This iconoclastic or critical phase of his economic discussion is now past, and with it the uncertainty as to the trend and outcome of his scientific activity. To understand the significance of the diversion created by Professor Schmoller as regards the scope and method of economics, it is necessary, very briefly, to indicate the position occupied by that early generation of historical economists from which his teaching diverged, and more particularly those points of the older canon at which he has come to differ characteristically from the views previously in vogue. As regards the situation in which the historical school, as exemplified by its leaders, was then placed, it is, of course, something of a commonplace that by the end of its first twenty years of endeavor in the reform of economic science the school had, in point of systematic results, scarcely got beyond preliminaries. And even these preliminaries were not in all respects obviously to the purpose. A new and wider scope had been indicated for economic inquiry, as well as a new aim and method for theoretical discussion. But the new ideals of theoretical advance, as well as the ways and means indicated for their attainment, still had mainly a speculative interest. Nothing substantial had been done towards the realisation of the former or the _mise en oeuvre_ of the latter. The historical economists can scarcely be said at that time to have put their hand to the new engines which they professed to house in their workshop. Apart from polemics and speculation concerning ideals, the serious interest and endeavors of the school had up to that time been in the field of history rather than in that of economics, except so far as the adepts of the new school continued in a fragmentary way to inculcate and, in some slight and uncertain degree, to elaborate the dogmas of the classical writers whom they sought to discredit. The character of historical economics at the time when Professor Schmoller entered on his work of criticism and revision is fairly shown by Roscher's writings. Whatever may be thought to-day of Roscher's rank as an economist, in contrast with Knies and Hildebrand, it will scarcely be questioned that at the close of the first quarter-century of the life history of the historical school it was Roscher's conception of the scope and method of economics that found the widest acceptance and that best expressed the animus of that body of students who professed to cultivate economics by the historical method. For the purpose in hand Roscher's views may, therefore, be taken as typical, all the more readily since for the very general purpose here intended there are no serious discrepancies between Roscher and his two illustrious contemporaries. The chief difference is that Roscher is more naïve and more specific. He has also left a more considerable volume of results achieved by the professed use of his method. Roscher's professed method was what he calls the "historico-physiological" method. This he contrasts with the "philosophical" or "idealistic" method. But his air of depreciation as regards "philosophical" methods in economics must not be taken to mean that Roscher's own economic speculations were devoid of all philosophical or metaphysical basis. It only means that his philosophical postulates were different from those of the economists whom he discredits, and that they were regarded by him as self-evident. As must necessarily be the case with a writer who had neither a special aptitude for nor special training in philosophical inquiries, Roscher's metaphysical postulates are, of course, chiefly tacit. They are the common-sense, commonplace metaphysics afloat in educated German circles in the time of Roscher's youth,--during the period when his growth and education gave him his outlook on life and knowledge and laid the basis of his intellectual habits; which means that these postulates belong to what Höffding has called the "Romantic" school of thought, and are of a Hegelian complexion. Roscher being not a professed philosophical student, it is neither easy nor safe to particularise closely as regards his fundamental metaphysical tenets; but, as near as so specific an identification of his philosophical outlook is practicable, he must be classed with the Hegelian "Right." But since the Hegelian metaphysics had in Roscher's youth an unbroken vogue in reputable German circles, especially in those ultra-reputable circles within which lay the gentlemanly life and human contact of Roscher, the postulates afforded by the Hegelian metaphysics were accepted simply as a matter of course, and were not recognised as metaphysical at all. And in this his metaphysical affiliation Roscher is fairly typical of the early historical school of economics. The Hegelian metaphysics, in so far as bears upon the matter in hand, is a metaphysics of a self-realising life process. This life process, which is the central and substantial fact of the universe, is of a spiritual nature,--"spiritual," of course, being here not contrasted with "material." The life process is essentially active, self-determining, and unfolds by inner necessity,--by necessity of its own substantially active nature. The course of culture, in this view, is an unfolding (exfoliation) of the human spirit; and the task which economic science has in hand is to determine the laws of this cultural exfoliation in its economic aspect. But the laws of the cultural development with which the social sciences, in the Hegelian view, have to do are at one with the laws of the processes of the universe at large; and, more immediately, they are at one with the laws of the life process at large. For the universe at large is itself a self-unfolding life process, substantially of a spiritual character, of which the economic life process which occupies the interest of the economist is but a phase and an aspect. Now, the course of the processes of unfolding life in organic nature has been fairly well ascertained by the students of natural history and the like; and this, in the nature of the case, must afford a clew to the laws of cultural development, in its economic as well as in any other of its aspects or bearings,--the laws of life in the universe being all substantially spiritual and substantially at one. So we arrive at a physiological conception of culture after the analogy of the ascertained physiological processes seen in the biological domain. It is conceived to be physiological after the Hegelian manner of conceiving a physiological process, which is, however, not the same as the modern scientific conception of a physiological process.[4] Since this quasi-physiological process of cultural development is conceived to be an unfolding of the self-realising human spirit, whose life history it is, it is of the nature of the case that the cultural process should run through a certain sequence of phases--a certain life history prescribed by the nature of the active, unfolding spiritual substance. The sequence is determined on the whole, as regards the general features of the development, by the nature of life on the human plane. The history of cultural growth and decline necessarily repeats itself, since it is substantially the same human spirit that seeks to realise itself in every comprehensive sequence of cultural development, and since this human spirit is the only factor in the case that has substantial force. In its generic features the history of past cultural cycles is, therefore, the history of the future. Hence the importance, not to say the sole efficacy for economic science, of an historical scrutiny of culture. A well-authenticated sequence of cultural phenomena in the history of the past is conceived to have much the same binding force for the sequence of cultural phenomena in the future as a "natural law," as the term has been understood in physics or physiology, is conceived to have as regards the course of phenomena in the life history of the human body; for the onward cultural course of the human spirit, actively unfolding by inner necessity, is an organic process, following logically from the nature of this self-realising spirit. If the process is conceived to meet with obstacles or varying conditions, it adapts itself to the circumstances in any given case, and it then goes on along the line of its own logical bent until it eventuates in the consummation given by its own nature. The environment, in this view, if it is not to be conceived simply as a function of the spiritual force at work, is, at the most, of subsidiary and transient consequence only. Environmental conditions can at best give rise to minor perturbations; they do not initiate a cumulative sequence which can profoundly affect the outcome or the ulterior course of the cultural process. Hence the sole, or almost sole, importance of historical inquiry in determining the laws of cultural development, economic or other. The working conception which this romantic-historical school had of economic life, therefore, is, in its way, a conception of development, or evolution; but it is not to be confused with Darwinism or Spencerianism. Inquiry into the cultural development under the guidance of such preconceptions as these has led to generalisations, more or less arbitrary, regarding uniformities of sequence in phenomena, while the causes which determine the course of events, and which make the uniformity or variation of the sequence, have received but scant attention. The "natural laws" found by this means are necessarily of the nature of empiricism, colored by the bias or ideals of the investigator. The outcome is a body of aphoristic wisdom, perhaps beautiful and valuable after its kind, but quite fatuous when measured by the standards and aims of modern science. As is well known, no substantial theoretical gain was made along this romantic-historical line of inquiry and speculation, for the reason, apparently, that there are no cultural laws of the kind aimed at, beyond the unprecise generalities that are sufficiently familiar beforehand to all passably intelligent adults. * * * * * It has seemed necessary to offer this much in characterisation of that "historical" aim and method which afforded a point of departure for Professor Schmoller's work of revision. When he first raised his protest against the prevailing ideals and methods, as being ill-advised and not thorough-going, he does not seem himself to have been entirely free from this Romantic, or Hegelian, bias. There is evidence to the contrary in his early writings.[5] It cannot even be said that his later theoretical work does not show something of the same animus, as, _e.g._, when he assumes that there is a meliorative trend in the course of cultural events.[6] What has differentiated his work from that of the group of writers which has above been called the elder line of historical economics is the weakness or relative absence of this bias in his theoretical work. Particularly, he has refused to bring his researches in the field of theory definitely to rest on ground given by the Hegelian, or Romantic, school of thought. He was from the first unwilling to accept classificatory statements of uniformity or of normality as an adequate answer to questions of scientific theory. He does not commonly deny the truth or the importance of the empirical generalisations aimed at by the early historical economists. Indeed, he makes much of them and has been notoriously urgent for a full survey of historical data and a painstaking digestion of materials with a view to a comprehensive work of empirical generalisation. As is well known, in his earlier work of criticism and methodological controversy he was led to contend that for at least one generation economists must be content to spend their energies on descriptive work of this kind; and he thereby earned the reputation of aiming to reduce economics to a descriptive knowledge of details and to confine its method to the Baconian ground of generalisation by simple enumeration. But this exhaustive historical scrutiny and description of detail has always, in Professor Schmoller's view, been preliminary to an eventual theory of economic life. The survey of details and the empirical generalisations reached by its help are useful for the scientific purpose only as they serve the end of an eventual formulation of the laws of causation that work out in the process of economic life. The ulterior question, to which all else is subsidiary, is a question of the causes at work rather than a question of the historical uniformities observable in the sequence of phenomena. The scrutiny of historical details serves this end by defining the scope and character of the several factors causally at work in the growth of culture, and, what is of more immediate consequence, as they are at work in the shaping of the economic activities and the economic aims of men engaged in this unfolding cultural process as it lies before the investigator in the existing situation. In the preliminary work, then, of defining and characterising the causes or factors of economic life, historical investigation plays a large, if not the largest, part; but it is by no means the sole line of inquiry to which recourse is had for this purpose. Nor, it may be added, is this the sole use of historical inquiry. To the like end a comparative study of the climatic, geographical, and geological features of the community's environment is drawn into the inquiry; and more particularly there is a careful study of ethnographic parallels and a scrutiny of the psychological foundations of culture and the psychological factors involved in cultural change. Hence it appears that Professor Schmoller's work differs from that of the elder line of historical economics in respect of the scope and character of the preliminaries of economic theory no less than in the ulterior aim which he assigns the science. It is only by giving a very broad meaning to the term that this latest development of the science can be called an "historical" economics. It is Darwinian rather than Hegelian, although with the earmarks of Hegelian affiliation visible now and again; and it is "historical" only in a sense similar to that in which a Darwinian account of the evolution of economic institutions might be called historical. For the distinguishing characteristic of Professor Schmoller's work, that wherein it differs from the earlier work of the economists of his general class, is that it aims at a Darwinistic account of the origin, growth, persistence, and variation of institutions, in so far as these institutions have to do with the economic aspect of life either as cause or as effect. In much of what he has to say, he is at one with his contemporaries and predecessors within the historical school; and he shows at many points both the excellences and weaknesses due to his "historical" antecedents. But his striking and characteristic merits lie in the direction of a post-Darwinian, causal theory of the origin and growth of species in institutions. In this line of theoretical inquiry Professor Schmoller is not alone, nor does he, perhaps, go so far or with such singleness of purpose in this direction as some others do at given points; but the seniority belongs to him, and he is also in the lead as regards the comprehensiveness of his work. * * * * * But to return to the _Grundriss_, to which recourse must be had to substantiate the characterisation here offered. The entire work as projected comprises an Introduction and four Books, of which the introduction and the first two books are contained in the volume already published. The two books yet to be published, in a second volume, promise to be of a length corresponding to the first two. The present volume should accordingly contain approximately three-fifths of the whole, counted by bulk. The scheme of the work is as follows: An Introduction (pp. 1-124) treats of (1) the Concept of Economics, (2) the Psychical, Ethical (or Conventional, _sittliche_), and Legal Foundations of Economic Life and of Culture, and (3) the Literature and Method of the Science. This is followed by Book I. (pp. 125-228) on Land, Population, and the Industrial Arts, considered as collective phenomena and factors in economic life, and Book II. (pp. 229-457), on the Constitution of Economic Society, its chief organs and the causal factors to which they are due. Books III. and IV. are to deal with the Circulation of Goods and the Distribution of Income, and to give a genetic account of the Development of Economic Society. The course outlined differs noticeably from what has been customary in treatises on economics. The point of departure is a comprehensive general survey of the factors which enter into the growth of culture, with special reference to their economic bearing. This survey runs chiefly on psychological and ethnographic ground, historical inquiry in the stricter sense being relatively scant and obviously of secondary consequence. It is followed up with a more detailed and searching discussion of the factors engaged in the economic process in any given situation. The factors, or "collective phenomena," in question are not the time-honored Land, Labor, and Capital, but rather population, material environment, and technological conditions. Here, too, the discussion has to do with ethnographic rather than with properly historical material. The question of population concerns not the numerical force of laborers, but rather the diversity of race characteristics and the bearing of race endowment upon the growth of economic institutions. The discussion of the material environment, again, has relatively little to say of the fertility of the soil, and gives much attention to diversities of climate, geographical situation, and geological and biological conditions. And this first book closes with a survey of the growth of technological knowledge and the industrial arts. In all this the significant innovation lies not so much in the character of the details. They are for the most part commonplace enough as details of the sciences from which they are borrowed. They are shrewdly chosen and handled in such a way as to bring out their bearing upon the ulterior questions about which the economist's interest centers; but there is, as might be expected, little attempt to go back of the returns given by specialists in the several lines of research that are laid under contribution. But the significance of it all lies rather in the fact that material of this kind should have been drawn upon for a foundation for economic theory, and that it should have seemed necessary to Professor Schmoller to make this introductory survey so comprehensive and so painstaking as it is. Its meaning is that these features of human nature and these forces of nature and circumstances of environment are the agencies out of whose interaction the economic situation has arisen by a cumulative process of change, and that it is this cumulative process of development, and its complex and unstable outcome, that are to be the economist's subject-matter. The theoretical outcome for which such a foundation is prepared is necessarily of a genetic kind. It necessarily seeks to know and explain the structure and functions of economic society in terms of how and why they have come to be what they are, not, as so many economic writers have explained them, in terms of what they are good for and what they ought to be. It means, in other words, a deliberate attempt to substitute an inquiry into the efficient causes of economic life in the place of empirical generalisations, on the one hand, and speculations as to the eternal fitness of things, on the other hand. It follows from the nature of the case that an economics of this genetic character, working on grounds of the kind indicated, comprises nothing in the way of advice or admonition, no maxims of expediency, and no economic, political, or cultural creed. How nearly Professor Schmoller conforms to this canon of continence is another question. The above indicates the scope of such doctrines as are consistently derivable from the premises with which the work under review starts out, not the scope of its writer's speculations on economic matters. The second book, by the help of prehistoric and ethnographic material as well as history, deals with the evolution of the methods of social organisation,--the growth of institutions in so far as this growth shapes or is shaped by the exigencies of economic life. The "organs," or social-economic institutions, whose life history is passed in review are: the family; the methods of settlement and domicile, in town and country; the political units of control and administration; differentiation of functions between industrial and other classes and groups; ownership, its growth and distribution; social classes and associations; business enterprise, industrial organisations and corporations. As regards the singleness of purpose with which Professor Schmoller has carried out the scheme of economic theory for which he has sketched the outlines and pointed the way, it is not possible to speak with the same confidence as of his preliminary work. It goes without saying that this further work of elaboration is excellent after its kind; and this excellence, which was to be looked for at Professor Schmoller's hands, may easily divert the reader's attention from the shortcomings of the work in respect of kind rather than of quality. Now, while a broad generalisation on this head may be hazardous and is to be taken with a large margin, still, with due allowance, the following generalisation will probably stand, so far as regards this first volume. So long as the author is occupied with the life-history of institutions down to contemporary developments, so long his discussion proceeds by the dry light of the scientific interest, simply, as the term "scientific" is understood among the modern adepts of the natural sciences; but so soon as he comes to close quarters with the situation of to-day, and reaches the point where a dispassionate analysis and exposition of the causal complex at work in contemporary institutional changes should begin, so soon the scientific light breaks up into all the colors of the rainbow, and the author becomes an eager and eloquent counselor, and argues the question of what ought to be and what modern society must do to be saved. The argument at this point loses the character of a genetic explanation of phenomena, and takes on the character of appeal and admonition, urged on grounds of expediency, of morality, of good taste, of hygiene, of political ends, and even of religion. All this, of course, is what we are used to in the common run of writers of the historical school; but those students whose interest centers in the science rather than in the ways and means of maintaining the received cultural forms of German society have long fancied they had ground to hope for something more to the purpose when Professor Schmoller came to put forth his great systematic work. Brilliant and no doubt valuable in its way and for its end, this digression into homiletics and reformatory advice means that the argument is running into the sands just at the stage where the science can least afford it. It is precisely at this point, where men of less years and breadth and weight would find it difficult to hold tenaciously to the course of cause and effect through the maze of jarring interests and sentiments that make up the contemporary situation,--it is precisely at this point that a genetic theory of economic life most needs the guidance of the firm, trained, dispassionate hand of the master. And at this point his guidance all but fails us. What has just been said applies generally to Professor Schmoller's treatment of contemporary economic development, and it should be added that it applies at nearly all points with more or less of qualification. But the qualifications required are not large enough to belie the general characterisation just offered. It would be asking too large an indulgence to follow the point up in this place through all the discussions of the volume that fairly come under this criticism. The most that may be done is to point for illustration to the handling which two or three of the social-economic "organs" receive. So, for instance, Book II. opens with an account of the family and its place and function in the structure of economic society. The discussion proceeds along the beaten paths of ethnographic research, with repeated and well-directed recourse to the psychological knowledge that Professor Schmoller always has well in hand. Coming down into recent times, the discussion still proceeds to show how the large economic changes of late mediæval and early modern times acted to break down the patriarchal régime of the earlier culture; but at the same time there comes into sight (pp. 245-249) a bias in favor of the recent as against the earlier form of the household. The author is no longer content to show the exigencies which set the earlier patriarchal household aside in favor of the modified patriarchal household of more recent times. He also offers reasons why the later, modified form is intrinsically the more desirable; reasons, it should perhaps be said, which may be well taken, but which are beside the point so far as regards a scientific explanation of the changes under discussion. The closing paragraphs of the section (91) dwell with a kindly insistence on the many elements of strength and beauty possessed by the form of household organisation handed down from the past generation to the present. The facts herewith recited by the author are, no doubt, of weight, and must be duly taken account of by any economist who ventures on a genetic discussion of the present situation and the changing fortunes of the received household. But Professor Schmoller has failed even to point out in what manner these elements of strength and beauty have in the recent past or may in the present and immediate future causally affect the fortunes of the institution. The failure to turn the material in question to scientific account becomes almost culpable in Professor Schmoller, since there are few, if any, who are in so favorable a position to outline the argument which a theoretical account of the situation at this point must take. Plainly, as shown by Professor Schmoller's argument, economic exigencies are working an incessant cumulative change in the form of organisation of the modern household; but he has done little towards pointing out in what manner and with what effect these exigencies come into play. Neither has he gone at all into the converse question, equally grave as a question of economic theory, of how the persistence, even though qualified, of the patriarchal family has modified and is modifying economic structure and function at other points and qualifying or accentuating the very exigencies themselves to which the changes wrought in the institution are to be traced. Plainly, too, the strength and beauty of the traditionally received form of the household--that is to say, the habits of life and of complacency which are bound up with this household--are elements of importance in the modern situation as affects the degree of persistence and the direction of change which this institution shows under modern circumstances. They are psychological facts, facts of habit and propensity and spiritual fitness, the efficiency of which as live forces making for survival or variation is in this connection probably second to that of no other factors that could be named. We had, therefore, almost a right to expect that Professor Schmoller's profound and comprehensive erudition in the fields of psychology and cultural growth should turn these facts to better ends than a preachment concerning an intrinsically desirable consummation. Regarding the present visible disintegration of the family, and the closely related "woman question," Professor Schmoller's observations are of much the same texture. He notes the growing disinclination to the old-fashioned family life on the part of the working population, and shows that there are certain economic causes for this growth or deterioration of sentiment. What he has to offer is made up of the commonplaces of latter-day social-economic discussion, and is charged with a strong undertone of deprecation. What the trend of the causes at work to alter or fortify this body of sentiment may be, counts for very little in what he says on the present movement or on the immediate future of the institution. The best he has to offer on the "woman question" is an off-hand reference of the ground of sentiment on which it rests to a recrudescence of the eighteenth century spirit of _égalité_. This notion of the equality of the sexes he refutes in graceful and affecting terms, and he pleads for the unbroken preservation of woman's sphere and man's primacy; as if the matter of superiority or inferiority between the sexes could conceivably be anything more than a conventional outcome of the habits of life imposed upon the community by the circumstances under which they live. How it has come to pass that under the economic exigencies of the past the physical and temperamental diversity between the sexes has been conventionally construed into a superiority of the man and an inferiority of the woman,--on this head he has no more to say or to suggest than on the correlate question of why this conventional interpretation of the facts has latterly not been holding its ancient ground. The discussion of the family and of the relation of the sexes, in modern culture, is marked throughout by unwillingness or inability to penetrate behind the barrier of conventional finality. The discussion of the family just cited occupies the opening chapter of Book II. For a further instance of Professor Schmoller's handling of a modern economic problem, reference may be had to the closing chapter of Book I., on the "Development of Technological Expedients and its Economic Significance," but more particularly the sections (84-86) on the modern machine industry (pp. 211-228). In this discussion, also, the point of interest is the attention given to the latter-day phenomena of machine industry, and the author's method and animus in dealing with them. There is (pp. 211-218) a condensed and competent presentation of the main characteristics of the modern "machine age," followed (pp. 218-228) by a critical discussion of its cultural value. The customary eulogy, but with more than the customary discrimination, is given to the advantages of the régime of the machine in point of economy, creature comforts, and intellectual sweep; and it is pointed out how the régime of the machine has brought about a redistribution of wealth and of population and a reorganisation and redistribution of social and economic structures and functions. It is pointed out (p. 223) that the gravest social effect of the machine industry has been the creation of a large class of wage laborers. The material circumstances into which this class has been thrown, particularly in point of physical comfort, are dealt with in a sober and discriminating way; and it is shown (p. 224) that in the days of its fuller development the machine's régime has evolved a class of trained laborers who not only live in comfort, but are sound and strong in mind and body. But with the citation of these facts the pursuit of the chain of cause and effect in this modern machine situation comes to an end. The remainder of the space given to the subject is occupied with extremely sane and well-advised criticism, moral and æsthetic, and indications of what the proper ideals and ends of endeavor should be. Professor Schmoller misses the opportunity he here has of dealing with this material in a scientific spirit and with some valuable results for economic theory. He could, it is not too bold to assume, have sketched for us an effective method and line of research to be pursued, for instance, in following up the scientific question of what may be the cultural, spiritual effects of the machine's régime upon this large body of trained workmen, and what this body of trained workmen in its turn counts for as a factor in shaping the institutional growth of the present and the economic and cultural situation of to-morrow. Work of this kind, there is reason to believe, Professor Schmoller could have done with better effect than any of his colleagues in the science; for he is, as already noticed above, possessed of the necessary qualifications in the way of psychological training, broad knowledge of the play of cause and effect in cultural growth, and an ability to take a scientific point of view. Instead of this he harks back again to the dreary homiletical waste of the traditional _Historismus_. It seems as if a topic which he deals with as an objective matter so long as it lies outside the sphere of every-day humanitarian and social solicitude, becomes a matter to be passed upon by conventional standards of taste, dignity, morality, and the like, so soon as it comes within the sweep of latter-day German sentiment. This habit of treating a given problem from these various and shifting points of view at times gives a kaleidoscopic effect that is not without interest. So in the matter of the technically trained working population in the machine industry, to which reference has already been made, something of an odd confusion appears when expressions taken from diverse phases of the discussion are brought side by side. He speaks of this class at one point (p. 224) as "sound, strong, spiritually and morally advancing," superior in all these virtues to the working classes of other times and places. At another point (pp. 250-253) he speaks of the same popular element, under the designation of "socialists," as perverse, degenerate, and reactionary. This latter characterisation may be substantially correct, but it proceeds on grounds of taste and predilection, not on grounds of scientifically determinable cause and effect. And the two characterisations apply to the same elements of population; for the substantial core and tone-giving factor of the radical socialistic element in the German community is, notoriously, just this technically trained population of the industrial towns where the discipline of the machine industry has been at work with least mitigation. The only other fairly isolable element of a radical socialistic complexion is found among the students of modern science. Now, further, in his speculations on the relation of technological knowledge to the advance of culture, Professor Schmoller points out (_e.g._, p. 226) that a high degree of culture connotes, on the whole, a high degree of technological efficiency, and conversely. In this connection he makes use of the terms _Halbkulturvölker_ and _Ganskulturvölker_ to designate different degrees of cultural maturity. It is curious to reflect, in the light of what he has to say on these several heads, that if the socialistically affected, technically trained population of the industrial towns, together with the radical-socialistic men of science, were abstracted from the German population, leaving substantially the peasantry, the slums, and the aristocracy great and small, the resulting German community would unquestionably have to be classed as a _Halbkulturvölk_ in Professor Schmoller's scheme. Whereas the elements abstracted, if taken by themselves, would as unquestionably be classed among the _Ganskulturvölker_. In conclusion, one may turn to the concluding chapter (Book II., Chapter vii.) of the present volume for a final illustration of Professor Schmoller's method and animus in handling a modern economic problem. All the more so as this chapter on business enterprise better sustains that scientific attitude which the introductory outline leads the reader to look for throughout. It shows how modern business enterprise is in the main an outgrowth of commercial activity, as also that it has retained the commercial spirit down to the present. The motive force of business enterprise is the self-seeking quest of dividends; but Professor Schmoller shows, with more dispassionate insight than many economists, that this self-seeking motive is hemmed in and guided at all points in the course of its development by considerations and conventions that are not of a primarily self-seeking kind. He is not content to point to the beneficent working of a harmony of interests, but sketches the play of forces whereby a self-seeking business traffic has come to serve the interests of the community. Business enterprise has gradually emerged and come into its present central and dominant position in the community's industry as a concomitant of the growth of individual ownership and pecuniary discretion in modern life. It is therefore a phase of the modern cultural situation; and its survival and the direction of its further growth are therefore conditioned by the exigencies of the modern cultural situation. What this modern cultural situation is and what are the forces, essentially psychological, which shape the further growth of the situation, no one is better fitted to discuss than Professor Schmoller; and he has also given valuable indications (pp. 428-457) of what these factors are and how the inquiry into their working must be conducted. But even here, where a dispassionate tracing-out of the sequence of cause and effect should be easier to undertake, because less readily blurred with sentiment, than in the case, _e.g._, of the family, the work of tracing the developmental sequence tapers off into advice and admonition proceeding on the assumption that the stage now reached is, or at least should be, final. The attention in the later pages diverges from the process of growth and its conditioning circumstances, to the desirability of maintaining the good results attained and to the ways and means of holding fast that which is good in the outcome already achieved. The question to which an answer is sought in discussing the present phase of the development is not a question as to what is taking place as respects the institution of business enterprise, but rather a question as to what form should be given to an optimistic policy of fostering business enterprise and turning it to account for the common good. At this point, as elsewhere, though perhaps in a less degree than elsewhere, the existing form of the institution is accepted as a finality. All this is disappointing in view of the fact that at no other point do modern economic institutions bear less of an air of finality than in the forms and conventions of business organisations and relations. As Professor Schmoller remarks (p. 455), the scope and character of business undertakings necessarily conform to the circumstances of the time, not to any logical scheme of development from small to great or from simple to complex. So also, one might be tempted to say, the expediency and the chance of ultimate survival of business enterprise is itself an open question, to be answered by a scrutiny of the forces that make for its survival or alteration, not by advice as to the best method of sustaining and controlling it. * * * * * What has here been said in criticism of Professor Schmoller's work, particularly as regards his departure from the path of scientific research in dealing with present-day phenomena, may, of course, have to be qualified, if not entirely set aside, when his work is completed with the promised genetic survey of modern institutions to be set forth in the concluding fourth book. Perhaps it may even be said that there is fair hope, on general grounds, of such a consummation; but the present volume does not afford ground for a confident expectation of this kind. It is perhaps needless, perhaps gratuitous, to add that the strictures offered indicate, after all, but relatively slight shortcomings in a work of the first magnitude. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, Vol. XVI, Nov., 1901. [2] _Grundriss der allgemeinen Volkswirtschaftslehre_. Erster Teil. Leipzig, 1900. [3] _E.g._, K. Bücher's _Entstehung der Volkswirtschaft_, and _Arbeit und Rythmus_; R. Hildebrand's _Recht und Sitte_; Knapp's _Grundherrschaft und Rittergut_; Ehrenberg's _Zeitalter der Fugger_; R. Mucke's various works. [4] A physiological conception of society, or of the community, had been employed before,--_e.g._, by the Physiocrats,--and such a concept was reached also by English speculators--_e.g._, Herbert Spencer--during Roscher's lifetime; but these physiological conceptions of society are reached by a different line of approach from that which led up to the late-Hegelian physiological or biological conception of human culture as a spiritual structure and process. The outcome is also a different one, both as regards the use made of the analogy and as regards the theoretical results reached by its aid. It may be remarked, by the way, that neo-Hegelianism, of the "Left," likewise gave rise to a theory of a self-determining cultural exfoliation; namely, the so-called "Materialistic Conception of History" of the Marxian socialists. This Marxian conception, too, had much of a physiological air; but Marx and his coadjutors had an advantage over Roscher and his following, in that they were to a greater extent schooled in the Hegelian philosophy, instead of being uncritical receptacles of the Romantic commonplaces left by Hegelianism as a residue in popular thought. They were therefore more fully conscious of the bearing of their postulates and less naïve in their assumptions of self-sufficiency. [5] _E.g._, in his controversy with Treitschke. See _Grundfragen der Socialpolitik und der Volkswirtschaftslehre_, particularly pp. 24, 25. [6] _E.g._, _Grundriss_, pp. 225, 409, 411. INDUSTRIAL AND PECUNIARY EMPLOYMENTS[1] For purposes of economic theory, the various activities of men and things about which economists busy themselves were classified by the early writers according to a scheme which has remained substantially unchanged, if not unquestioned, since their time. This scheme is the classical three-fold division of the factors of production under Land, Labor, and Capital. The theoretical aim of the economists in discussing these factors and the activities for which they stand has not remained the same throughout the course of economic discussion, and the three-fold division has not always lent itself with facility to new points of view and new purposes of theory, but the writers who have shaped later theory have, on the whole, not laid violent hands on the sacred formula. These facts must inspire the utmost reserve and circumspection in any one who is moved to propose even a subsidiary distinction of another kind between economic activities or agents. The terminology and the conceptual furniture of economics are complex and parti-colored enough without gratuitous innovation. It is accordingly not the aim of this paper to set aside the time-honored classification of factors, or even to formulate an iconoclastic amendment, but rather to indicate how and why this classification has proved inadequate for certain purposes of theory which were not contemplated by the men who elaborated it. To this end a bit of preface may be in place as regards the aims which led to its formulation and the uses which the three-fold classification originally served. * * * * * The economists of the late eighteenth and early nineteenth centuries were believers in a Providential order, or an order of Nature. How they came by this belief need not occupy us here; neither need we raise a question as to whether their conviction of its truth was well or ill grounded. The Providential order or order of Nature is conceived to work in an effective and just way toward the end to which it tends; and in the economic field this objective end is the material welfare of mankind. The science of that time set itself the task of interpreting the facts with which it dealt, in terms of this natural order. The material circumstances which condition men's life fall within the scope of this natural order of the universe, and as members of the universal scheme of things men fall under the constraining guidance of the laws of Nature, who does all things well. As regards their purely theoretical work, the early economists are occupied with bringing the facts of economic life under natural laws conceived somewhat after the manner indicated; and when the facts handled have been fully interpreted in the light of this fundamental postulate the theoretical work of the scientist is felt to have been successfully done. The economic laws aimed at and formulated under the guidance of this preconception are laws of what takes place "naturally" or "normally," and it is of the essence of things so conceived that in the natural or normal course there is no wasted or misdirected effort. The standpoint is given by the material interest of mankind, or, more concretely, of the community or "society" in which the economist is placed; the resulting economic theory is formulated as an analysis of the "natural" course of the life of the community, the ultimate theoretical postulate of which might, not unfairly, be stated as in some sort a law of the conservation of economic energy. When the course of things runs off naturally or normally, in accord with the exigencies of human welfare and the constraining laws of nature, economic income and outgo balance one another. The natural forces at play in the economic field may increase indefinitely through accretions brought in under man's dominion and through the natural increase of mankind, and, indeed, it is of the nature of things that an orderly progress of this kind should take place; but within the economic organism, as within the larger organism of the universe, there prevails an equivalence of expenditure and returns, an equilibrium of flux and reflux, which is not broken over in the normal course of things. So it is, by implication, assumed that the product which results from any given industrial process or operation is, in some sense or in some unspecified respect, the equivalent of the expenditure of forces, or of the effort, or what not, that has gone into the process out of which the product emerges. This theorem of equivalence is the postulate which lies at the root of the classical theory of distribution, but it manifestly does not admit of proof--or of disproof either, for that matter; since neither the economic forces which go into the process nor the product which emerges are, in the economic respect, of such a tangible character as to admit of quantitative determination. They are in fact incommensurable magnitudes. To this last remark the answer may conceivably present itself that the equivalence in question is an equivalence in utility or in exchange value, and that the quantitative determination of the various items in terms of exchange value or of utility is, theoretically, not impossible; but when it is called to mind that the forces or factors which go to the production of a given product take their utility or exchange value from that of the product, it will easily be seen that the expedient will not serve. The equivalence between the aggregate factors of production in any given case and their product remains a dogmatic postulate whose validity cannot be demonstrated in any terms that will not reduce the whole proposition to an aimless fatuity, or to metaphysical grounds which have now been given up. The point of view from which the early, and even the later classical, economists discussed economic life was that of "the society" taken as a collective whole and conceived as an organic unit. Economic theory sought out and formulated the laws of the normal life of the social organism, as it is conceived to work out in that natural course whereby the material welfare of society is attained. The details of economic life are construed, for purposes of general theory, in terms of their subservience to the aims imputed to the collective life process. Those features of detail which will bear construction as links in the process whereby the collective welfare is furthered, are magnified and brought into the foreground, while such features as will not bear this construction are treated as minor disturbances. Such a procedure is manifestly legitimate and expedient in a theoretical inquiry whose aim is to determine the laws of health of the social organism and the normal functions of this organism in a state of health. The social organism is, in this theory, handled as an individual endowed with a consistent life purpose and something of an intelligent apprehension of what means will serve the ends which it seeks. With these collective ends the interests of the individual members are conceived to be fundamentally at one; and, while men may not see that their own individual interests coincide with those of the social organism, yet, since men are members of the comprehensive organism of nature and consequently subject to beneficent natural law, the ulterior trend of unrestrained individual action is, on the whole, in the right direction. The details of individual economic conduct and its consequences are of interest to such a general theory chiefly as they further or disturb the beneficent "natural" course. But if the aims and methods of individual conduct were of minor importance in such an economic theory, that is not the case as regards individual rights. The early political economy was not simply a formulation of the natural course of economic phenomena, but it embodied an insistence on what is called "natural liberty." Whether this insistence on natural liberty is to be traced to utilitarianism or to a less specific faith in natural rights, the outcome for the purpose in hand is substantially the same. To avoid going too far afield, it may serve the turn to say that the law of economic equivalence, or conservation of economic energy, was, in early economics, backed by this second corollary of the order of nature, the closely related postulate of natural rights. The classical doctrine of distribution rests on both of these, and it is consequently not only a doctrine of what must normally take place as regards the course of life of society at large, but it also formulates what ought of right to take place as regards the remuneration for work and the distribution of wealth among men. Under the resulting natural-economic law of equivalence and equity, it is held that the several participants or factors in the economic process severally get the equivalent of the productive force which they expend. They severally get as much as they produce; and conversely, in the normal case they severally produce as much as they get. In the earlier formulations, as, for example, in the authoritative formulation of Adam Smith, there is no clear or consistent pronouncement as regards the terms in which this equivalence between production and remuneration runs. With the later, classical economists, who had the benefit of a developed utilitarian philosophy, it seems to be somewhat consistently conceived in terms of an ill-defined serviceability. With some later writers it is an equivalence of exchange values; but as this latter reduces itself to tautology, it need scarcely be taken seriously. When we are told in the later political economy that the several agents or factors in production normally earn what they get, it is perhaps fairly to be construed as a claim that the economic service rendered the community by any one of the agents in production equals the service received by the agent in return. In terms of serviceability, then, if not in terms of productive force,[2] the individual agent, or at least the class or group of agents to which the individual belongs, normally gets as much as he contributes and contributes as much as he gets. This applies to all those employments or occupations which are ordinarily carried on in any community, throughout the aggregate of men's dealings with the material means of life. All activity which touches industry comes in under this law of equivalence and equity. Now, to a theorist whose aim is to find the laws governing the economic life of a social organism, and who for this purpose conceives the economic community as a unit, the features of economic life which are of particular consequence are those which show the correlation of efforts and the solidarity of interests. For this purpose, such activities and such interests as do not fit into the scheme of solidarity contemplated are of minor importance, and are rather to be explained away or construed into subservience to the scheme of solidarity than to be incorporated at their face value into the theoretical structure. Of this nature are what are here to be spoken of under the term "pecuniary employments," and the fortune which these pecuniary employments have met at the hands of classical economic theory is such as is outlined in the last sentence. In a theory proceeding on the premise of economic solidarity, the important bearing of any activity that is taken up and accounted for, is its bearing upon the furtherance of the collective life process. Viewed from the standpoint of the collective interest, the economic process is rated primarily as a process for the provision of the aggregate material means of life. As a late representative of the classical school expresses it: "Production, in fact, embraces every economic operation except consumption."[3] It is this aggregate productivity, and the bearing of all details upon the aggregate productivity, that constantly occupies the attention of the classical economists. What partially diverts their attention from this central and ubiquitous interest, is their persistent lapse into natural-rights morality. The result is that acquisition is treated as a sub-head under production, and effort directed to acquisition is construed in terms of production. The pecuniary activities of men, efforts directed to acquisition and operations incident to the acquisition or tenure of wealth, are treated as incidental to the distribution to each of his particular proportion in the production of goods. Pecuniary activities, in short, are handled as incidental features of the process of social production and consumption, as details incident to the method whereby the social interests are served, instead of being dealt with as the controlling factor about which the modern economic process turns. Apart from the metaphysical tenets indicated above as influencing them, there are, of course, reasons of economic history for the procedure of the early economists in so relegating the pecuniary activities to the background of economic theory. In the days of Adam Smith, for instance, economic life still bore much of the character of what Professor Schmoller calls _Stadtwirtschaft_. This was the case to some extent in practice, but still more decidedly in tradition. To a greater extent than has since been the case, households produced goods for their own consumption, without the intervention of sale; and handicraftsmen still produced for consumption by their customers, without the intervention of a market. In a considerable measure, the conditions which the Austrian marginal-utility theory supposes, of a producing seller and a consuming buyer, actually prevailed. It may not be true that in Adam Smith's time the business operations, the bargain and sale of goods, were, in general, obviously subservient to their production and consumption, but it comes nearer being true at that time than at any time since then. And the tradition having once been put into form and authenticated by Adam Smith, that such was the place of pecuniary transactions in economic theory, this tradition has lasted on in the face of later and further changes. Under the shadow of this tradition the pecuniary employments are still dealt with as auxiliary to the process of production, and the gains from such employments are still explained as being due to a productive effect imputed to them. According to ancient prescription, then, all normal, legitimate economic activities carried on in a well regulated community serve a materially useful end, and so far as they are lucrative they are so by virtue of and in proportion to a productive effect imputed to them. But in the situation as it exists at any time there are activities and classes of persons which are indispensable to the community, or which are at least unavoidably present in modern economic life, and which draw some income from the aggregate product, at the same time that these activities are not patently productive of goods and can not well be classed as industrial, in any but a highly sophisticated sense. Some of these activities, which are concerned with economic matters but are not patently of an industrial character, are integral features of modern economic life, and must therefore be classed as normal; for the existing situation, apart from a few minor discrepancies, is particularly normal in the apprehension of present-day economists. Now, the law of economic equivalence and equity says that those who normally receive in income must perforce serve some productive end; and, since the existing organization of society is conceived to be eminently normal, it becomes imperative to find some ground on which to impute industrial productivity to those classes and employments which do not at first view appear to be industrial at all. Hence there is commonly visible in the classical political economy, ancient and modern, a strong inclination to make the schedule of industrially productive employments very comprehensive; so that a good deal of ingenuity has been spent in economically justifying their presence by specifying the productive effect of such non-industrial factors as the courts, the army, the police, the clergy, the schoolmaster, the physician, the opera singer. But these non-economic employments are not so much to the point in the present inquiry; the point being employments which are unmistakably economic, but not industrial in the naïve sense of the word industry, and which yield an income. Adam Smith analysed the process of industry in which he found the community of his time engaged, and found the three classes of agents or factors: Land, Labor, and Capital (stock). The productive factors engaged being thus determined, the norm of natural-economic equivalence and equity already referred to above, indicated what would be the natural sharers in the product. Later economists have shown great reserve about departing from this three-fold division of factors, with its correlated three-fold division of sharers of remuneration; apparently because they have retained an instinctive, indefeasible trust in the law of economic equivalence which underlies it. But circumstances have compelled the tentative intrusion of a fourth class of agent and income. The undertaker and his income presently came to be so large and ubiquitous figures in economic life that their presence could not be overlooked by the most normalising economist. The undertaker's activity has been interpolated in the scheme of productive factors, as a peculiar and fundamentally distinctive kind of labor, with the function of coördinating and directing industrial processes. Similarly, his income has been interpolated in the scheme of distribution, as a peculiar kind of wages, proportioned to the heightened productivity given the industrial process by his work.[4] His work is discussed in expositions of the theory of production. In discussions of his functions and his income the point of the argument is, how and in what degree does his activity increase the output of goods, or how and in what degree does it save wealth to the community. Beyond his effect in enhancing the effective volume of the aggregate wealth the undertaker receives but scant attention, apparently for the reason that so soon as that point has been disposed of the presence of the undertaker and his income has been reconciled with the tacitly accepted natural law of equivalence between productive service and remuneration. The normal balance has been established, and the undertaker's function has been justified and subsumed under the ancient law that Nature does all things well and equitably. This holds true of the political economy of our grandfathers. But this aim and method of handling the phenomena of life for theoretical ends, of course, did not go out of vogue abruptly in the days of our grandfathers.[5] There is a large sufficiency of the like aim and animus in the theoretical discussions of a later time; but specifically to cite and analyse the evidence of its presence would be laborious, nor would it conduce to the general peace of mind. Some motion towards a further revision of the scheme is to be seen in the attention which has latterly been given to the function and the profits of that peculiar class of undertakers whom we call speculators. But even on this head the argument is apt to turn on the question of how the services which the speculator is conceived to render the community are to be construed into an equivalent of his gains.[6] The difficulty of interpretation encountered at this point is considerable, partly because it is not quite plain whether the speculators as a class come out of their transactions with a net gain or with a net loss. A systematic net loss, or a no-profits balance, would, on the theory of equivalence, mean that the class which gets this loss or doubtful gain is of no service to the community; yet we are, out of the past, committed to the view that the speculator is useful--indeed economically indispensable--and shall therefore have his reward. In the discussions given to the speculator and his function some thought is commonly given to the question of the "legitimacy" of the speculator's traffic. The legitimate speculator is held to earn his gain by services of an economic kind rendered the community. The recourse to this epithet, "legitimate," is chiefly of interest as showing that the tacit postulate of a natural order is still in force. Legitimate are such speculative dealings as are, by the theorist, conceived to serve the ends of the community, while illegitimate speculation is that which is conceived to be disserviceable to the community. The theoretical difficulty about the speculator and his gains (or losses) is that the speculator _ex professo_ is quite without interest in or connection with any given industrial enterprise or any industrial plant. He is, industrially speaking, without visible means of support. He may stake his risks on the gain or on the loss of the community with equal chances of success, and he may shift from one side to the other without winking. The speculator may be treated as an extreme case of undertaker, who deals exclusively with the business side of economic life rather than with the industrial side. But he differs in this respect from the common run of business men in degree rather than in kind. His traffic is a pecuniary traffic, and it touches industry only remotely and uncertainly; while the business man as commonly conceived is more or less immediately interested in the successful operation of some concrete industrial plant. But since the undertaker first broke into economic theory, some change has also taken place as regards the immediacy of the relations of the common run of undertakers to the mechanical facts of the industries in which they are interested. Half a century ago it was still possible to construe the average business manager in industry as an agent occupied with the superintendence of the mechanical processes involved in the production of goods or services. But in the later development the connection between the business manager and the mechanical processes has, on an average, grown more remote; so much so, that his superintendence of the plant or of the processes is frequently visible only to the scientific imagination. That activity by virtue of which the undertaker is classed as such makes him a businessman, not a mechanic or foreman of the shop. His superintendence is a superintendence of the pecuniary affairs of the concern, rather than of the industrial plant; especially is this true in the higher development of the modern captain of industry. As regards the nature of the employment which characterises the undertaker, it is possible to distinguish him from the men who are mechanically engaged in the production of goods, and to say that his employment is of a business or pecuniary kind, while theirs is of an industrial or mechanical kind. It is not possible to draw a similar distinction between the undertaker who is in charge of a given industrial concern, and the business man who is in business but is not interested in the production of goods or services. As regards the character of employment, then, the line falls not between legitimate and illegitimate pecuniary transactions, but between business and industry. The distinction between business and industry has, of course, been possible from the beginning of economic theory, and, indeed, the distinction has from time to time temporarily been made in the contrast frequently pointed out between the proximate interest of the business man and the ulterior interest of society at large. What appears to have hindered the reception of the distinction into economic doctrine, is the constraining presence of a belief in an order of Nature and the habit of conceiving the economic community as an organism. The point of view given by these postulates has made such a distinction between employments not only useless, but even disserviceable for the ends to which theory has been directed. But the fact has come to be gradually more and more patent that there are constantly, normally present in modern economic life an important range of activities and classes of persons who work for an income but of whom it cannot be said that they, either proximately or remotely, apply themselves to the production of goods. Their services, proximate or remote, to society are often of quite a problematical character. They are ubiquitous, and it will scarcely do to say that they are anomalous, for they are of ancient prescription, they are within the law and within the pale of popular morals. Of these strictly economic activities that are lucrative without necessarily being serviceable to the community, the greater part are to be classed as "business." Perhaps the largest and most obvious illustration of these legitimate business employments is afforded by the speculators in securities. By way of further illustration may be mentioned the extensive and varied business of real-estate men (land-agents) engaged in the purchase and sale of property for speculative gain or for a commission; so, also, the closely related business of promoters and boomers of other than real-estate ventures; as also attorneys, brokers, bankers, and the like, although the work performed by these latter will more obviously bear interpretation in terms of social serviceability. The traffic of these business men shades off insensibly from that of the _bona fide_ speculator who has no ulterior end of industrial efficiency to serve, to that of the captain of industry or entrepreneur as conventionally set forth in the economic manuals. The characteristic in which these business employments resemble one another, and in which they differ from the mechanical occupations as well as from other non-economic employments, is that they are concerned primarily with the phenomena of value--with exchange or market values and with purchase and sale--and only indirectly and secondarily, if at all, with mechanical processes. What holds the interest and guides and shifts the attention of men within these employments is the main chance. These activities begin and end within what may broadly be called "the higgling of the market." Of the industrial employments, in the stricter sense, it may be said, on the other hand, that they begin and end outside the higgling of the market. Their proximate aim and effect is the shaping and guiding of material things and processes. Broadly, they may be said to be primarily occupied with the phenomena of material serviceability, rather than with those of exchange value. They are taken up with phenomena which make the subject matter of Physics and the other material sciences. The business man enters the economic life process from the pecuniary side, and so far as he works an effect in industry he works it through the pecuniary dispositions which he makes. He takes thought most immediately of men's convictions regarding market values; and his efforts as a business man are directed to the apprehension, and commonly also to the influencing of men's beliefs regarding market values. The objective point of business is the diversion of purchase and sale into some particular channel, commonly involving a diversion from other channels. The laborer and the man engaged in directing industrial processes, on the other hand, enter the economic process from the material side; in their characteristic work they take thought most immediately of mechanical effects, and their attention is directed to turning men and things to account for the compassing of some material end. The ulterior aim, and the ulterior effect, of these industrial employments may be some pecuniary result; work of this class commonly results in an enhancement, or at least an alteration, of market values. Conversely, business activity may, and in a majority of cases it perhaps does, effect an enhancement of the aggregate material wealth of the community, or the aggregate serviceability of the means at hand; but such an industrial outcome is by no means bound to follow from the nature of the business man's work. From what has just been said it appears that, if we retain the classical division of economic theory into Production, Distribution, and Consumption, the pecuniary employments do not properly fall under the first of these divisions, Production, if that term is to retain the meaning commonly assigned to it. In an earlier and less specialised organisation of economic life, particularly, the undertaker frequently performs the work of a foreman or a technological expert, as well as the work of business management. Hence in most discussions of his work and his theoretical relations his occupation is treated as a composite one. The technological side of his composite occupation has even given a name to his gains (wages of superintendence), as if the undertaker were primarily a master-workman. The distinction at this point has been drawn between classes of persons instead of between classes of employments; with the result that the evident necessity of discussing his technological employment under production has given countenance to the endeavor to dispose of the undertaker's business activity under the same head. This endeavor has, of course, not wholly succeeded. In the later development, the specialisation of work in the economic field has at this point progressed so far, and the undertaker now in many cases comes so near being occupied with business affairs alone, to the exclusion of technological direction and supervision, that, with this object lesson before us, we no longer have the same difficulty in drawing a distinction between business and industrial employments. And even in the earlier days of the doctrines, when the aim was to dispose of the undertaker's work under the theoretical head of Production, the business side of his work persistently obtruded itself for discussion in the books and chapters given to Distribution and Exchange. The course taken by the later theoretical discussion of the entrepreneur, leaves no question but that the characteristic fact about his work is that he is a business man, occupied with pecuniary affairs. Such pecuniary employments, of which the purely fiscal or financiering forms of business are typical, are nearly all and nearly throughout, conditioned by the institution of property or ownership--an institution which, as John Stuart Mill remarks, belongs entirely within the theoretical realm of Distribution. Ownership, no doubt, has its effect upon productive industry, and, indeed, its effect upon industry is very large, both in scope and range, even if we should not be prepared to go the length of saying that it fundamentally conditions all industry; but ownership is not itself primarily or immediately a contrivance for production. Ownership directly touches the results of industry, and only indirectly the methods and processes of industry. If the institution of property be compared with such another feature of our culture, for instance, as the domestication of plants or the smelting of iron, the meaning of what has just been said may seem clearer. So much then of the business man's activity as is conditioned by the institution of property, is not to be classed, in economic theory, as productive or industrial activity at all. Its objective point is an alteration of the distribution of wealth. His business is, essentially, to sell and buy--sell in order to buy cheaper, buy in order to sell dearer.[7] It may or may not, indirectly, and in a sense incidentally, result in enhanced production. The business man may be equally successful in his enterprise, and he may be equally well remunerated, whether his activity does or does not enrich the community. Immediately and directly, so long as it is confined to the pecuniary or business sphere, his activity is incapable of enriching or impoverishing the community as a whole except, after the fashion conceived by the mercantilists, through his dealings with men of other communities. The circulation and distribution of goods incidental to the business man's traffic is commonly, though not always or in the nature of the case, serviceable to the community; but the distribution of goods is a mechanical, not a pecuniary transaction, and it is not the objective point of business nor its invariable outcome. From the point of view of business, the distribution or circulation of goods is a means of gain, not an end sought. It is true, industry is closely conditioned by business. In a modern community, the business man finally decides what may be done in industry, or at least in the greater number and the more conspicuous branches of industry. This is particularly true of those branches that are currently thought of as peculiarly modern. Under existing circumstances of ownership, the discretion in economic matters, industrial or otherwise, ultimately rests in the hands of the business men. It is their business to have to do with property, and property means the discretionary control of wealth. In point of character, scope and growth, industrial processes and plants adapt themselves to the exigencies of the market, wherever there is a developed market, and the exigencies of the market are pecuniary exigencies. The business man, through his pecuniary dispositions, enforces his choice of what industrial processes shall be in use. He can, of course, not create or initiate methods or aims for industry; if he does so he steps out of the business sphere into the material domain of industry. But he can decide whether and which of the known processes and industrial arts shall be practiced, and to what extent. Industry must be conducted to suit the business man in his quest for gain; which is not the same as saying that it must be conducted to suit the needs or the convenience of the community at large. Ever since the institution of property was definitely installed, and in proportion as purchase and sale has been practiced, some approach has been made to a comprehensive system of control of industry by pecuniary transactions and for pecuniary ends, and the industrial organisation is nearer such a consummation now than it ever has been. For the great body of modern industry the final term of the sequence is not the production of the goods but their sale; the endeavor is not so much to fit the goods for use as for sale. It is well known that there are many lines of industry in which the cost of marketing the goods equals the cost of making and transporting them. Any industrial venture which falls short in meeting the pecuniary exigencies of the market declines and yields ground to others that meet them with better effect. Hence shrewd business management is a requisite to success in any industry that is carried on within the scope of the market. Pecuniary failure carries with it industrial failure, whatever may be the cause to which the pecuniary failure is due--whether it be inferiority of the goods produced, lack of salesmanlike tact, popular prejudice, scanty or ill-devised advertising, excessive truthfulness, or what not. In this way industrial results are closely dependent upon the presence of business ability; but the cause of this dependence of industry upon business in a given case is to be sought in the fact that other rival ventures have the backing of shrewd business management, rather than in any help which business management in the aggregate affords to the aggregate industry of the community. Shrewd and farsighted business management is a requisite of survival in the competitive pecuniary struggle in which the several industrial concerns are engaged, because shrewd and farsighted business management abounds and is employed by all the competitors. The ground of survival in the selective process is fitness for pecuniary gain, not fitness for serviceability at large. Pecuniary management is of an emulative character and gives, primarily, relative success only. If the change were equitably distributed, an increase or decrease of the aggregate or average business ability in the community need not immediately affect the industrial efficiency or the material welfare of the community. The like can not be said with respect to the aggregate or average industrial capacity of the men at work. The latter are, on the whole, occupied with production of goods; the business men, on the other hand, are occupied with the acquisition of them. Theoreticians who are given to looking beneath the facts and to contemplating the profounder philosophical meaning of life speak of the function of the undertaker as being the guidance and coördination of industrial processes with a view to economies of production. No doubt, the remoter effect of business transactions often is such coördination and economy, and, no doubt also, the undertaker has such economy in view and is stimulated to his maneuvers of combination by the knowledge that certain economies of this kind are feasible and will inure to his gain if the proper business arrangements can be effected. But it is practicable to class even this indirect furthering of industry by the undertaker as a permissive guidance only. The men in industry must first create the mechanical possibility of such new and more economical methods and arrangements, before the undertaker sees the chance, makes the necessary business arrangements, and gives directions that the more effective working arrangements be adopted. It is notorious, and it is a matter upon which men dilate, that the wide and comprehensive consolidations and coördinations of industry, which often add so greatly to its effectiveness, take place at the initiative of the business men who are in control. It should be added that the fact of their being in control precludes such coördination from being effected except by their advice and consent. And it should also be added, in order to a passably complete account of the undertaker's function, that he not only can and does effect economising coördinations of a large scope, but he also can and does at times inhibit the process of consolidation and coördination. It happens so frequently that it might fairly be said to be the common run that business interests and undertaker's maneuvers delay consolidation, combination, coördination, for some appreciable time after they have become patently advisable on industrial grounds. The industrial advisability or practicability is not the decisive point. Industrial advisability must wait on the eventual convergence of jarring pecuniary interests and on the strategical moves of business men playing for position. Which of these two offices of the business man in modern industry, the furthering or the inhibitory, has the more serious or more far-reaching consequences is, on the whole, somewhat problematical. The furtherance of coördination by the modern captain of industry bulks large in our vision, in great part because the process of widening coördination is of a cumulative character. After a given step in coördination and combination has been taken, the next step takes place on the basis of the resulting situation. Industry, that is to say the working force engaged in industry, has a chance to develop new and larger possibilities to be taken further advantage of. In this way each successive move in the enhancement of the efficiency of industrial processes, or in the widening of coördination in industrial processes, pushes the captain of industry to a further concession, making possible a still farther industrial growth. But as regards the undertaker's inhibitory dealings with industrial coördination the visible outcome is not so striking. The visible outcome is simply that nothing of the kind then takes place in the premises. The potential cumulative sequence is cut off at the start, and so it does not figure in our appraisement of the disadvantage incurred. The loss does not commonly take the more obtrusive form of an absolute retreat, but only that of a failure to advance where the industrial situation admits of an advance. It is, of course, impracticable to foot up and compare gain and loss in such a case, where the losses, being of the nature of inhibited growth, cannot be ascertained. But since the industrial serviceability of the captain of industry is, on the whole, of a problematical complexion, it should be advisable for a cautious economic theory not to rest its discussion of him on his serviceability.[8] It appears, then, as all economists are no doubt aware, that there is in modern society a considerable range of activities, which are not only normally present, but which constitute the vital core of our economic system; which are not directly concerned with production, but which are nevertheless lucrative. Indeed, the group comprises most of the highly remunerative employments in modern economic life. The gains from these employments must plainly be accounted for on other grounds than their productivity, since they need have no productivity. But it is not only as regards the pecuniary employments that productivity and remuneration are constitutionally out of touch. It seems plain, from what has already been said, that the like is true for the remuneration gained in the industrial employments. Most wages, particularly those paid in the industrial employments proper, as contrasted with those paid for domestic or personal service, are paid on account of pecuniary serviceability to the employer, not on grounds of material serviceability to mankind at large. The product is valued, sought and paid for on account of and in some proportion to its vendibility, not for more recondite reasons of ulterior human welfare at large. It results that there is no warrant, in general theory, for claiming that the work of highly paid persons (more particularly that of highly paid business men) is of greater substantial use to the community than that of the less highly paid. At the same time, the reverse could, of course, also not be claimed. Wages, resting on a pecuniary basis, afford no consistent indication of the relative productivity of the recipients, except in comparisons between persons or classes whose products are identical except in amount,--that is to say, where a resort to wages as an index of productivity would be of no use anyway.[9] * * * * * A result of the acceptance of the theoretical distinction here attempted between industrial and pecuniary employments and an effective recognition of the pecuniary basis of the modern economic organisation would be to dissociate the two ideas of productivity and remuneration. In mathematical language, remuneration could no longer be conceived and handled as a "function" of productivity,--unless productivity be taken to mean pecuniary serviceability to the person who pays the remuneration. In modern life remuneration is, in the last analysis, uniformly obtained by virtue of an agreement between individuals who commonly proceed on their own interest in point of pecuniary gain. The remuneration may, therefore, be said to be a "function" of the pecuniary service rendered the person who grants the remuneration; but what is pecuniarily serviceable to the individual who exercises the discretion in the matter need not be productive of material gain to the community as a whole. Nor does the algebraic sum of individual pecuniary gains measure the aggregate serviceability of the activities for which the gains are got. In a community organized, as modern communities are, on a pecuniary basis, the discretion in economic matters rests with the individuals, in severalty; and the aggregate of discrete individual interests nowise expresses the collective interest. Expressions constantly recur in economic discussions which imply that the transactions discussed are carried out for the sake of the collective good or at the initiative of the social organism, or that "society" rewards so and so for their services. Such expressions are commonly of the nature of figures of speech and are serviceable for homiletical rather than for scientific use. They serve to express their user's faith in a beneficent order of nature, rather than to convey or to formulate information in regard to facts. Of course, it is still possible consistently to hold that there is a natural equivalence between work and its reward, that remuneration is naturally, or normally, or in the long run, proportioned to the material service rendered the community by the recipient; but that proposition will hold true only if "natural" or "normal" be taken in such a sense as to admit of our saying that the natural does not coincide with the actual; and it must be recognised that such a doctrine of the "natural" apportionment of wealth or of income disregards the efficient facts of the case. Apart from effects of this kind in the way of equitable arrangements traceable to grounds of sentiment, the only recourse which modern science would afford the champion of a doctrine of natural distribution, in the sense indicated, would be a doctrine of natural selection; according to which all disserviceable or unproductive, wasteful employments would, perforce, be weeded out as being incompatible with the continued life of any community that tolerated them. But such a selective elimination of unserviceable or wasteful employments would presume the following two conditions, neither of which need prevail: (1) It must be assumed that the disposable margin between the aggregate productivity of industry and the aggregate necessary consumption is so narrow as to admit of no appreciable waste of energy or of goods; (2) it must be assumed that no deterioration of the condition of society in the economic respect does or can "naturally" take place. As to the former of these two assumptions, it is to be said that in a very poor community, and under exceptionally hard economic circumstances, the margin of production may be as narrow as the theory would require. Something approaching this state of things may be found, for instance, among some Eskimo tribes. But in a modern industrial community--where the margin of admissible waste probably always exceeds fifty per cent, of the output of goods--the facts make no approach to the hypothesis. The second assumed condition is, of course, the old-fashioned assumption of a beneficent, providential order or meliorative trend in human affairs. As such, it needs no argument at this day. Instances are not far to seek of communities in which economic deterioration has taken place while the system of distribution, both of income and of accumulated wealth, has remained on a pecuniary basis. * * * * * To return to the main drift of the argument. The pecuniary employments have to do with wealth in point of ownership, with market values, with transactions of exchange, purchase and sale, bargaining for the purpose of pecuniary gain. These employments make up the characteristic occupations of business men, and the gains of business are derived from successful endeavors of the pecuniary kind. These business employments are the characteristic activity (constitute the "function") of what are in theory called undertakers. The dispositions which undertakers, _qua_ business men, make are pecuniary dispositions--whatever industrial sequel they may or may not have--and are carried out with a view to pecuniary gain. The wealth of which they have the discretionary disposal may or may not be in the form of "production goods"; but in whatever form the wealth in question is conceived to exist, it is handled by the undertakers in terms of values and is disposed of by them in the pecuniary respect. When, as may happen, the undertaker steps down from the pecuniary plane and directs the mechanical handling and functioning of "production goods," he becomes for the time a foreman. The undertaker, if his business venture is of the industrial kind, of course takes cognizance of the aptness of a given industrial method or process for his purpose, and he has to choose between different industrial processes in which to invest his values; but his work as undertaker, simply, is the investment and shifting of the values under his hand from the less to the more gainful point of investment. When the investment takes the form of material means of industry, or industrial plant, the sequel of a given business transaction is commonly some particular use of such means; and when such industrial use follows, it commonly takes place at the hands of other men than the undertaker, although it takes place within limits imposed by the pecuniary exigencies of which the undertaker takes cognizance. Wealth turned to account in the way of investment or business management may or may not, in consequence, be turned to account, materially, for industrial effect. Wealth, values, so employed for pecuniary ends is capital in the business sense of the word.[10] Wealth, material means of industry, physically employed for industrial ends is capital in the industrial sense. Theory, therefore, would require that care be taken to distinguish between capital as a pecuniary category, and capital as an industrial category, if the term capital is retained to cover the two concepts.[11] The distinction here made substantially coincides with a distinction which many late writers have arrived at from a different point of approach and have, with varying success, made use of under different terms.[12] A further corollary touching capital may be pointed out. The gains derived from the handling of capital in the pecuniary respect have no immediate relation, stand in no necessary relation of proportion, to the productive effect compassed by the industrial use of the material means over which the undertaker may dispose; although the gains have a relation of dependence to the effects achieved in point of vendibility. But vendibility need not, even approximately, coincide with serviceability, except serviceability be construed in terms of marginal utility or some related conception, in which case the outcome is a tautology. Where, as in the case commonly assumed by economists as typical, the investing undertaker seeks his gain through the production and sale of some useful article, it is commonly also assumed that his effort is directed to the most economical production of as large and serviceable a product as may be, or at least it is assumed that such production is the outcome of his endeavors in the natural course of things. This account of the aim and outcome of business enterprise may be natural, but it does not describe the facts. The facts being, of course, that the undertaker in such a case seeks to produce economically as vendible a product as may be. In the common run vendibility depends in great part on the serviceability of the goods, but it depends also on several other circumstances; and to that highly variable, but nearly always considerable extent to which vendibility depends on other circumstances than the material serviceability of the goods, the pecuniary management of capital must be held not to serve the ends of production. Neither immediately, in his purely pecuniary traffic, nor indirectly, in the business guidance of industry through his pecuniary traffic, therefore, can the undertaker's dealings with his pecuniary capital be accounted a productive occupation, nor can the gains of capital be taken to mark or to measure the productivity due to the investment. The "cost of production" of goods in the case contemplated is to an appreciable, but indeterminable, extent a cost of production of vendibility--an outcome which is often of doubtful service to the body of consumers, and which often counts in the aggregate as waste. The material serviceability of the means employed in industry, that is to say the functioning of industrial capital in the service of the community at large, stands in no necessary or consistent relation to the gainfulness of capital in the pecuniary respect. Productivity can accordingly not be predicated of pecuniary capital. It follows that productivity theories of interest should be as difficult to maintain as productivity theories of the gains of the pecuniary employments, the two resting on the same grounds. It is, further, to be remarked that pecuniary capital and industrial capital do not coincide in respect of the concrete things comprised under each. From this and from the considerations already indicated above, it follows that the magnitude of pecuniary capital may vary independently of variations in the magnitude of industrial capital--not indefinitely, perhaps, but within a range which, in its nature, is indeterminate. Pecuniary capital is a matter of market values, while industrial capital is, in the last analysis, a matter of mechanical efficiency, or rather of mechanical effects not reducible to a common measure or a collective magnitude. So far as the latter may be spoken of as a homogenous aggregate--itself a doubtful point at best--the two categories of capital are disparate magnitudes, which can be mediated only through a process of valuation conditioned by other circumstances besides the mechanical efficiency of the material means valued. Market values being a psychological outcome, it follows that pecuniary capital, an aggregate of market values, may vary in magnitude with a freedom which gives the whole an air of caprice,--such as psychological phenomena, particularly the psychological phenomena of crowds, frequently present, and such as becomes strikingly noticeable in times of panic or of speculative inflation. On the other hand, industrial capital, being a matter of mechanical contrivances and adaptation, cannot similarly vary through a revision of valuations. If it is taken as an aggregate, it is a physical magnitude, and as such it does not alter its complexion or its mechanical efficiency in response to the greater or less degree of appreciation with which it is viewed. Capital pecuniarily considered rests on a basis of subjective value; capital industrially considered rests on material circumstances reducible to objective terms of mechanical, chemical and physiological effect. The point has frequently been noted that it is impossible to get at the aggregate social (industrial) capital by adding up the several items of individual (pecuniary) capital. A reason for this, apart from variations in the market values of given material means of production, is that pecuniary capital comprises not only material things but also conventional facts, psychological phenomena not related in any rigid way to material means of production,--as _e.g._, good will, fashions, customs, prestige, effrontery, personal credit. Whatever ownership touches, and whatever affords ground for pecuniary discretion, may be turned to account for pecuniary gain and may therefore be comprised in the aggregate of pecuniary capital. Ownership, the basis of pecuniary capital, being itself a conventional fact, that is to say a matter of habits of thought, it is intelligible that phenomena of convention and opinion should figure in an inventory of pecuniary capital; whereas, industrial capital being of a mechanical character, conventional circumstances do not affect it--except as the future production of material means to replace the existing outfit may be guided by convention--and items having but a conventional existence are, therefore, not comprised in its aggregate. The disparity between pecuniary and industrial capital, therefore, is something more than a matter of an arbitrarily chosen point of view, as some recent discussions of the capital concept would have us believe; just as the difference between the pecuniary and the industrial employments, which are occupied with the one or the other category of capital, means something more than the same thing under different aspects. * * * * * But the distinction here attempted has a farther bearing, beyond the possible correction of a given point in the theory of distribution. Modern economic science is to an increasing extent concerning itself with the question of what men do and how and why they do it, as contrasted with the older question of how Nature, working through human nature, maintains a favorable balance in the output of goods. Neither the practical questions of our generation, nor the pressing theoretical questions of the science, run on the adequacy or equity of the share that goes to any class in the normal case. The questions are rather such realistic ones as these: Why do we, now and again, have hard times and unemployment in the midst of excellent resources, high efficiency and plenty of unmet wants? Why is one-half our consumable product contrived for consumption that yields no material benefit? Why are large coördinations of industry, which greatly reduce cost of production, a cause of perplexity and alarm? Why is the family disintegrating among the industrial classes, at the same time that the wherewithal to maintain it is easier to compass? Why are large and increasing portions of the community penniless in spite of a scale of remuneration which is very appreciably above the subsistence minimum? Why is there a widespread disaffection among the intelligent workmen who ought to know better? These and the like questions, being questions of fact, are not to be answered on the grounds of normal equivalence. Perhaps it might better be said that they have so often been answered on those grounds, without any approach to disposing of them, that the outlook for help in that direction has ceased to have a serious meaning. These are, to borrow Professor Clark's phrase, questions to be answered on dynamic, not on static grounds. They are questions of conduct and sentiment, and so far as their solution is looked for at the hands of economists it must be looked for along the line of the bearing which economic life has upon the growth of sentiment and canons of conduct. That is to say, they are questions of the bearing of economic life upon the cultural changes that are going forward. For the present it is the vogue to hold that economic life, broadly, conditions the rest of social organization or the constitution of society. This vogue of the proposition will serve as excuse from going into an examination of the grounds on which it may be justified, as it is scarcely necessary to persuade any economist that it has substantial merits even if he may not accept it in an unqualified form. What the Marxists have named the "Materialistic Conception of History" is assented to with less and less qualification by those who make the growth of culture their subject of inquiry. This materialistic conception says that institutions are shaped by economic conditions; but, as it left the hands of the Marxists, and as it still functions in the hands of many who knew not Marx, it has very little to say regarding the efficient force, the channels, or the methods by which the economic situation is conceived to have its effect upon institutions. What answer the early Marxists gave to this question, of how the economic situation shapes institutions, was to the effect that the causal connection lies through a selfish, calculating class interest. But, while class interest may count for much in the outcome, this answer is plainly not a competent one, since, for one thing, institutions by no means change with the alacrity which the sole efficiency of a reasoned class interest would require. Without discrediting the claim that class interest counts for something in the shaping of institutions, and to avoid getting entangled in preliminaries, it may be said that institutions are of the nature of prevalent habits of thought, and that therefore the force which shapes institutions is the force or forces which shape the habits of thought prevalent in the community. But habits of thought are the outcome of habits of life. Whether it is intentionally directed to the education of the individual or not, the discipline of daily life acts to alter or reënforce the received habits of thought, and so acts to alter or fortify the received institutions under which men live. And the direction in which, on the whole, the alteration proceeds is conditioned by the trend of the discipline of daily life. The point here immediately at issue is the divergent trend of this discipline in those occupations which are prevailingly of an industrial character, as contrasted with those which are prevailingly of a pecuniary character. So far as regards the different cultural outcome to be looked for on the basis of the present economic situation as contrasted with the past, therefore, the question immediately in hand is as to the greater or less degree in which occupations are differentiated into industrial and pecuniary in the present as compared with the past. The characteristic feature which is currently held to differentiate the existing economic situation from that out of which the present has developed, or out of which it is emerging, is the prevalence of the machine industry with the consequent larger and more highly specialised organisation of the market and of the industrial force and plant. As has been pointed out above, and as is well enough known from the current discussions of the economists, industrial life is organised on a pecuniary basis and managed from the pecuniary side. This, of course, is true in a degree both of the present and of the nearer past, back at least as far as the Middle Ages. But the larger scope of organisations in modern industry means that the pecuniary management has been gradually passing into the hands of a relatively decreasing class, whose contact with the industrial classes proper grows continually less immediate. The distinction between employments above spoken of is in an increasing degree coming to coincide with a differentiation of occupations and of economic classes. Some degree of such specialisation and differentiation there has, of course, been, one might almost say, always. But in our time, in many branches of industry, the specialisation has been carried so far that large bodies of the working population have but an incidental contact with the business side of the enterprise, while a minority have little if any other concern with the enterprise than its pecuniary management. This was not true, _e.g._, at the time when the undertaker was still salesman, purchasing agent, business manager, foreman of the shop, and master workman. Still less was it true in the days of the self-sufficing manor or household, or in the days of the closed town industry. Neither is it true in our time of what we call the backward or old-fashioned industries. These latter have not been and are not organised on a large scale, with a consistent division of labor between the owners and business managers on the one side and the operative employees on the other. Our standing illustrations of this less highly organised class of industries are the surviving handicrafts and the common run of farming as carried on by relatively small proprietors. In that earlier phase of economic life, out of which the modern situation has gradually grown, all the men engaged had to be constantly on their guard, in a pecuniary sense, and were constantly disciplined in the husbanding of their means and in the driving of bargains,--as is still true, _e.g._, of the American farmer. The like was formerly true also of the consumer, in his purchases, to a greater extent than at present. A good share of the daily attention of those who were engaged in the handicrafts was still perforce given to the pecuniary or business side of their trade. But for that great body of industry which is conventionally recognised as eminently modern, specialisation of function has gone so far as, in great measure, to exempt the operative employees from taking thought of pecuniary matters. Now, as to the bearing of all this upon cultural changes that are in progress or in the outlook. Leaving the "backward," relatively unspecialised, industries on one side, as being of an equivocal character for the point in hand and as not differing characteristically from the corresponding industries in the past so far as regards their disciplinary value; modern occupations may, for the sake of the argument, be broadly distinguished, as economic employments have been distinguished above, into business and industrial. The modern industrial and the modern business occupations are fairly comparable as regards the degree of intelligence required in both, if it be borne in mind that the former occupations comprise the highly trained technological experts and engineers as well as the highly skilled mechanics. The two classes of occupations differ in that the men in the pecuniary occupations work within the lines and under the guidance of the great institution of ownership, with its ramifications of custom, prerogative, and legal right; whereas those in the industrial occupations are, in their work, relatively free from the constraint of this conventional norm of truth and validity. It is, of course, not true that the work of the latter class lies outside the reach of the institution of ownership; but it is true that, in the heat and strain of the work, when the agent's powers and attention are fully taken up with the work which he has in hand, that of which he has perforce to take cognisance is not conventional law, but the conditions impersonally imposed by the nature of material things. This is the meaning of the current commonplace that the required close and continuous application of the operative in mechanical industry bars him out of all chance for an all-around development of the cultural graces and amenities. It is the periods of close attention and hard work that seem to count for most in the formation of habits of thought. An _a priori_ argument as to what cultural effects should naturally follow from such a difference in discipline between occupations, past and present, would probably not be convincing, as _a priori_ arguments from half-authenticated premises commonly are not. And the experiments along this line which later economic developments have so far exhibited have been neither neat enough, comprehensive enough, nor long continued enough to give definite results. Still, there is something to be said under this latter head, even if this something may turn out to be somewhat familiar. It is, _e.g._ a commonplace of current vulgar discussions of existing economic questions, that the classes engaged in the modern mechanical or factory industries are improvident and apparently incompetent to take care of the pecuniary details of their own life. In this indictment may well be included not only factory hands, but the general class of highly skilled mechanics, inventors, technological experts. The rule does not hold in any hard and fast way, but there seems to be a substantial ground of truth in the indictment in this general form. This will be evident on comparison of the present factory population with the class of handicraftsmen of the older culture whom they have displaced, as also on comparison with the farming population of the present time, especially the small proprietors of this and other countries. The inferiority which is currently conceded to the modern industrial classes in this respect is not due to scantier opportunities for saving, whether they are compared with the earlier handicraftsmen or with the modern farmer or peasant. This phenomenon is commonly discussed in terms which impute to the improvident industrial classes something in the way of total depravity, and there is much preaching of thrift and steady habits. But the preaching of thrift and self-help, unremitting as it is, is not producing an appreciable effect. The trouble seems to run deeper than exhortation can reach. It seems to be of the nature of habit rather than of reasoned conviction. Other causes may be present and may be competent partially to explain the improvidence of these classes; but the inquiry is at least a pertinent one; how far the absence of property and thrift among them may be traceable to the relative absence of pecuniary training in the discipline of their daily life. If, as the general lie of the subject would indicate, this peculiar pecuniary situation of the industrial classes is in any degree due to comprehensive disciplinary causes, there is material in it for an interesting economic inquiry. The surmise that the trouble with the industrial class is something of this character is strengthened by another feature of modern vulgar life, to which attention is directed as a further, and, for the present, a concluding illustration of the character of the questions that are touched by the distinction here spoken for. The most insidious and most alarming malady, as well as the most perplexing and unprecedented, that threatens the modern social and political structure is what is vaguely called socialism. The point of danger to the social structure, and at the same time the substantial core of the socialistic disaffection, is a growing disloyalty to the institution of property, aided and abetted as it is by a similarly growing lack of deference and affection for other conventional features of social structure. The classes affected by socialistic vagaries are not consistently averse to a competent organisation and control of society, particularly not in the economic respect, but they are averse to organisation and control on conventional lines. The sense of solidarity does not seem to be either defective or in abeyance, but the ground of solidarity is new and unexpected. What their constructive ideals may be need not concern nor detain us; they are vague and inconsistent and for the most part negative. Their disaffection has been set down to discontent with their lot by comparison with others, and to a mistaken view of their own interests; and much and futile effort has been spent in showing them the error of their ways of thinking. But what the experience of the past suggests that we should expect under the guidance of such motives and reasoning as these would be a demand for a redistribution of property, a reconstitution of the conventions of ownership on such new lines as the apprehended interests of these classes would seem to dictate. But such is not the trend of socialistic thinking, which contemplates rather the elimination of the institution of property. To the socialists property or ownership does not seem inevitable or inherent in the nature of things; to those who criticise and admonish them it commonly does. Compare them in this respect with other classes who have been moved by hardship or discontent, whether well or ill advised, to put forth denunciations and demands for radical economic changes; as _e.g._, the American farmers in their several movements, of grangerism, populism, and the like. These have been loud enough in their denunciations and complaints, and they have been accused of being socialistic in their demand for a virtual redistribution of property. They have not felt the justice of the accusation, however, and it is to be noted that their demands have consistently run on a rehabilitation of property on some new basis of distribution, and have been uniformly put forth with the avowed purpose of bettering the claimants in point of ownership. Ownership, property "honestly" acquired, has been sacred to the rural malcontents, here and elsewhere; what they have aspired to do has been to remedy what they have conceived to be certain abuses under the institution, without questioning the institution itself. Not so with the socialists, either in this country or elsewhere. Now, the spread of socialistic sentiment shows a curious tendency to affect those classes particularly who are habitually employed in the specialised industrial occupations, and are thereby in great part exempt from the intellectual discipline of pecuniary management. Among these men, who by the circumstances of their daily life are brought to do their serious and habitual thinking in other than pecuniary terms, it looks as if the ownership preconception were becoming obsolescent through disuse. It is the industrial population, in the modern sense, and particularly the more intelligent and skilled men employed in the mechanical industries, that are most seriously and widely affected. With exceptions both ways, but with a generality that is not to be denied, the socialistic disaffection spreads through the industrial towns, chiefly and most potently among the better classes of operatives in the mechanical employments; whereas the relatively indigent and unintelligent regions and classes, which the differentiation between pecuniary and industrial occupations has not reached, are relatively free from it. In like manner the upper and middle classes, whose employments are of a pecuniary character, if any, are also not seriously affected; and when avowed socialistic sentiment is met with among these upper and middle classes it commonly turns out to be merely a humanitarian aspiration for a more "equitable" redistribution of wealth--a readjustment of ownership under some new and improved method of control--not a contemplation of the traceless disappearance of ownership. Socialism, in the sense in which the word connotes a subversion of the economic foundations of modern culture, appears to be found only sporadically and uncertainly outside the limits, in time and space, of the discipline exercised by the modern mechanical, non-pecuniary occupations. This state of the case need of course not be due solely to the disciplinary effects of the industrial employments, nor even solely to effects traceable to those employments whether in the way of disciplinary results, selective development, or what not. Other factors, particularly factors of an ethnic character, seem to coöperate to the result indicated; but, so far as evidence bearing on the point is yet in hand and has been analysed, it indicates that this differentiation of occupations is a necessary requisite to the growth of a consistent body of socialistic sentiment; and the indication is also that wherever this differentiation prevails in such a degree of accentuation and affects such considerable and compact bodies of people as to afford ground for a consistent growth of common sentiment, a result is some form of iconoclastic socialism. The differentiation may of course have a selective as well as a disciplinary effect upon the population affected, and an off-hand separation of these two modes of influence can of course not be made. In any case, the two modes of influence seem to converge to the outcome indicated; and, for the present purpose of illustration simply, the tracing out of the two strands of sequence in the case neither can nor need be undertaken. By force of this differentiation, in one way and another, the industrial classes are learning to think in terms of material cause and effect, to the neglect of prescription and conventional grounds of validity; just as, in a faintly incipient way, the economists are also learning to do in their discussion of the life of these classes. The resulting decay of the popular sense of conventional validity of course extends to other matters than the pecuniary conventions alone, with the outcome that the socialistically affected industrial classes are pretty uniformly affected with an effortless iconoclasm in other directions as well. For the discipline to which their work and habits of life subject them gives not so much a training away from the pecuniary conventions, specifically, as a positive and somewhat unmitigated training in methods of observation and inference proceeding on grounds alien to all conventional validity. But the practical experiment going on in the specialisation of discipline, in the respect contemplated, appears still to be near its beginning, and the growth of aberrant views and habits of thought due to the peculiar disciplinary trend of this late and unprecedented specialisation of occupations has not yet had time to work itself clear. The effects of the like one-sided discipline are similarly visible in the highly irregular, conventionally indefensible attitude of the industrial classes in the current labor and wage disputes, not of an avowedly socialistic aim. So also as regards the departure from the ancient norm in such non-economic, or secondarily economic matters as the family relation and responsibility, where the disintegration of conventionalities in the industrial towns is said to threaten the foundations of domestic life and morality; and again as regards the growing inability of men trained to materialistic, industrial habits of thought to appreciate, or even to apprehend, the meaning of religious appeals and consolations that proceed on the old-fashioned conventional or metaphysical grounds of validity. But these and other like directions in which the cultural effects of the modern specialisation of occupations, whether in industry or in business, may be traceable can not be followed up here. FOOTNOTES: [1] Reprinted by permission from _Publications of the American Economic Association_, series 3, Vol. II. [2] Some late writers, as, _e.g._, J. B. Clark, apparently must be held to conceive the equivalence in terms of productive force rather than of serviceability; or, perhaps, in terms of serviceability on one side of the equation and productive force on the other. [3] J. B. Clark, _The Distribution of Wealth_, p. 20. [4] The undertaker gets an income; therefore he must produce goods. But human activity directed to the production of goods is labor; therefore the undertaker is a particular kind of laborer. There is, of course, some dissent from this position. [5] The change which has supervened as regards the habitual resort to a natural law of equivalence is in large part a change with respect to the degree of immediacy and "reality" imputed to this law, and to a still greater extent a change in the degree of overtness with which it is avowed. [6] See, _e.g._, a paper by H. C. Emery in the _Papers and Proceedings of the Twelfth Annual Meeting_ of the American Economic Association, on "The Place of the Speculator in the Theory of Distribution," and more particularly the discussion following the paper. [7] _Cf. e.g._, Marx, _Capital_, especially bk. I, ch. IV. [8] It is not hereby intended to depreciate the services rendered the community by the captain of industry in his management of business. Such services are no doubt rendered and are also no doubt of substantial value. Still less is it the intention to decry the pecuniary incentive as a motive to thrift and diligence. It may well be that the pecuniary traffic which we call business is the most effective method of conducting the industrial policy of the community; not only the most effective that has been contrived, but perhaps the best that can be contrived. But that is a matter of surmise and opinion. In a matter of opinion on a point that can not be verified, a reasonable course is to say that the majority are presumably in the right. But all that is beside the point. However probable or reasonable such a view may be, it can find no lodgment in modern scientific theory, except as a corollary of secondary importance. Nor can scientific theory build upon the ground it may be conceived to afford. Policy may so build, but science can not. Scientific theory is a formulation of the laws of phenomena in terms of the efficient forces at work in the sequence of phenomena. So long as (under the old dispensation of the order of nature) the animistically conceived natural laws, with their God-given objective end, were considered to exercise a constraining guidance over the course of events whereof they were claimed to be laws, so long it was legitimate scientific procedure for economists to formulate their theory in terms of these laws of the natural course; because so long they were speaking in terms of what was, to them, the efficient forces at work. But so soon as these natural laws were reduced to the plane of colorless empirical generalization as to what commonly happens, while the efficient forces at work are conceived to be of quite another cast, so soon must theory abandon the ground of the natural course, sterile for modern scientific purposes, and shift to the ground of the causal sequence, where alone it will have to do with the forces at work as they are conceived in our time. The generalisations regarding the normal course, as "normal" has been defined in economics since J. S. Mill, are not of the nature of theory, but only rule-of-thumb. And the talk about the "function" of this and that factor of production, etc., in terms of the collective life purpose, goes to the same limbo; since the collective life purpose is no longer avowedly conceived to cut any figure in the every-day guidance of economic activities or the shaping of economic results. The doctrine of the social-economic function of the undertaker may for the present purpose be illustrated by a supposititious parallel from Physics. It is an easy generalisation, which will scarcely be questioned, that, in practice, pendulums commonly vibrate in a plane approximately parallel with the nearest wall of the clock-case in which they are placed. The normality of this parallelism is fortified by the further observation that the vibrations are also commonly in a plane parallel with the nearest wall of the room; and when it is further called to mind that the balance which serves the purpose of a pendulum in watches similarly vibrates in a plane parallel with the walls of its case, the absolute normality of the whole arrangement is placed beyond question. It is true, the parallelism is not claimed to be related to the working of the pendulum, except as a matter of fortuitous convenience; but it should be manifest from the generality of the occurrence that in the normal case, in the absence of disturbing causes, and in the long run, all pendulums will "naturally" tend to swing in a plane faultlessly parallel with the nearest wall. The use which has been made of the "organic concept," in economics and in social science at large, is fairly comparable with this supposititious argument concerning the pendulum. [9] Since the ground of payment of wages is the vendibility of the product, and since the ground of a difference in wages is the different vendibility of the product acquired through the purchase of the labor for which the wages are paid, it follows that wherever the difference in vendibility rests on a difference in the magnitude of the product alone, there wages should be somewhat in proportion to the magnitude of the product. [10] All wealth so used is capital, but it does not follow that all pecuniary capital is social wealth. [11] In current theory the term capital is used in these two senses; while in business usage it is employed pretty consistently in the former sense alone. The current ambiguity in the term capital has often been adverted to by economists, and there may be need of a revision of the terminology at this point; but this paper is not concerned with that question. [12] Professor Fetter, in a recent paper (_Quarterly Journal of Economics_, November, 1900) is, perhaps, the writer who has gone the farthest in this direction in the definition of the capital concept. Professor Fetter wishes to confine the term capital to pecuniary capital, or rather to such pecuniary capital as is based on the ownership of material goods. The wisdom of such a terminological expedient is, of course, not in question here. ON THE NATURE OF CAPITAL[1] I. THE PRODUCTIVITY OF CAPITAL GOODS It has been usual in expositions of economic theory to speak of capital as an array of "productive goods." What is immediately had in mind in this expression, as well as in the equivalent "capital goods," is the industrial equipment, primarily the mechanical appliances employed in the processes of industry. When the productive efficiency of these and of other subsidiary classes of capital goods is subjected to further analysis, it is not unusual to trace it back to the productive labor of the workmen, the labor of the individual workman being the ultimate productive factor in the commonly accepted systems of theory. The current theories of production, as also those of distribution, are drawn in individualistic terms, particularly when these theories are based on hedonistic premises, as they commonly are. Now, whatever may or may not be true for human conduct in some other bearing, in the economic respect man has never lived an isolated, self-sufficient life as an individual, either actually or potentially. Humanly speaking, such a thing is impossible. Neither an individual person nor a single household, nor a single line of descent, can maintain its life in isolation. Economically speaking, this is the characteristic trait of humanity that separates mankind from the other animals. The life-history of the race has been a life-history of human communities, of more or less considerable size, with more or less of group solidarity, and with more or less of cultural continuity over successive generations. The phenomena of human life occur only in this form. This continuity, congruity, or coherence of the group, is of an immaterial character. It is a matter of knowledge, usage, habits of life and habits of thought, not a matter of mechanical continuity or contact, or even of consanguinity. Wherever a human community is met with, as, _e.g._, among any of the peoples of the lower cultures, it is found in possession of something in the way of a body of technological knowledge,--knowledge serviceable and requisite to the quest of a livelihood, comprising at least such elementary acquirements as language, the use of fire, of a cutting edge, of a pointed stick, of some tool for piercing, of some form of cord, thong, or fiber, together with some skill in the making of knots and lashings. Coördinate with this knowledge of ways and means, there is also uniformly present some matter-of-fact knowledge of the physical behavior of the materials with which men have to deal in the quest of a livelihood, beyond what any one individual has learned or can learn by his own experience alone. This information and proficiency in the ways and means of life vests in the group at large; and, apart from accretions borrowed from other groups, it is the product of the given group, though not produced by any single generation. It may be called the immaterial equipment, or, by a license of speech, the intangible assets[2] of the community; and, in the early days at least, this is far and away the most important and consequential category of the community's assets or equipment. Without access to such a common stock of immaterial equipment no individual and no fraction of the community can make a living, much less make an advance. Such a stock of knowledge and practice is perhaps held loosely and informally; but it is held as a common stock, pervasively, by the group as a body, in its corporate capacity, as one might say; and it is transmitted and augmented in and by the group, however loose and haphazard the transmission may be conceived to be, not by individuals and in single lines of inheritance. The requisite knowledge and proficiency of ways and means is a product, perhaps a by-product, of the life of the community at large; and it can also be maintained and retained only by the community at large. Whatever may be true for the unsearchable prehistoric phases of the life-history of the race, it appears to be true for the most primitive human groups and phases of which there is available information that the mass of technological knowledge possessed by any community, and necessary to its maintenance and to the maintenance of each of its members or subgroups, is too large a burden for any one individual or any single line of descent to carry. This holds true, of course, all the more rigorously and consistently, the more advanced the "state of the industrial arts" may be. But it seems to hold true with a generality that is fairly startling, that whenever a given cultural community is broken up or suffers a serious diminution of numbers, its technological heritage deteriorates and dwindles, even though it may have been apparently meager enough before. On the other hand, it seems to hold true with a similar uniformity that, when an individual member or a fraction of a community on what we call a lower stage of economic development is drawn away and trained and instructed in the ways of a larger and more efficient technology, and is then thrown back into his home community, such an individual or fraction proves unable to make head against the technological bent of the community at large or even to create a serious diversion. Slight, perhaps transient, and gradually effective technological consequences may result from such an experiment; but they become effective by diffusion and assimilation through the body of the community, not in any marked degree in the way of an exceptional efficiency on the part of the individual or fraction which has been subjected to exceptional training. And inheritance in technological matters runs not in the channels of consanguinity, but in those of tradition and habituation, which are necessarily as wide as the scheme of life of the community. Even in a relatively small and primitive community the mass of detail comprised in its knowledge and practice of ways and means is large,--too large for any one individual or household to become competently expert in it all; and its ramifications are extensive and diverse, at the same time that all these ramifications bear, directly or indirectly, on the life and work of each member of the community. Neither the standard and routine of living nor the daily work of any individual in the community would remain the same after the introduction of an appreciable change, for good or ill, in any branch of the community's equipment of technological expedients. If the community grows larger, to the dimensions of a modern civilised people, and this immaterial equipment grows proportionately great and various, then it will become increasingly difficult to trace the connection between any given change in technological detail and the fortunes of any given obscure member of the community. But it is at least safe to say that an increase in the volume and complexity of the body of technological knowledge and practice does not progressively emancipate the life and work of the individual from its dominion. The complement of technological knowledge so held, used, and transmitted in the life of the community is, of course, made up out of the experience of individuals. Experience, experimentation, habit, knowledge, initiative, are phenomena of individual life, and it is necessarily from this source that the community's common stock is all derived. The possibility of its growth lies in the feasibility of accumulating knowledge gained by individual experience and initiative, and therefore it lies in the feasibility of one individual's learning from the experience of another. But the initiative and technological enterprise of individuals, such, _e.g._, as shows itself in inventions and discoveries of more and better ways and means, proceeds on and enlarges the accumulated wisdom of the past. Individual initiative has no chance except on the ground afforded by the common stock, and the achievements of such initiative are of no effect except as accretions to the common stock. And the invention or discovery so achieved always embodies so much of what is already given that the creative contribution of the inventor or discoverer is trivial by comparison. In any known phase of culture this common stock of intangible, technological equipment is relatively large and complex,--_i.e._, relatively to the capacity of any individual member to create or to use it; and the history of its growth and use is the history of the development of material civilisation. It is a knowledge of ways and means, and is embodied in the material contrivances and processes by means of which the members of the community make their living. Only by such means does technological efficiency go into effect. These "material contrivances" ("capital goods," material equipment) are such things as tools, vessels, vehicles, raw materials, buildings, ditches, and the like, including the land in use; but they include also, and through the greater part of the early development chiefly, the useful minerals, plants, and animals. To say that these minerals, plants, and animals are useful--in other words, that they are economic goods--means that they have been brought within the sweep of the community's knowledge of ways and means. In the relatively early stages of primitive culture the useful plants and minerals are, no doubt, made use of in a wild state, as, _e.g._, fish and timber have continued to be used. Yet in so far as they are useful they are unmistakably to be counted in among the material equipment ("tangible assets") of the community. The case is well illustrated by the relation of the Plains Indians to the buffalo, and by the northwest coast Indians to the salmon, on the one hand, and by the use of a wild flora by such communities as the Coahuilla Indians,[3] the Australian blacks, or the Andamanese, on the other hand. But with the current of time, experience, and initiative, domesticated (that is to say improved) plants and animals come to take the first place. We have then such "technological expedients" in the first rank as the many species and varieties of domestic animals, and more particularly still the various grains, fruits, root-crops, and the like, virtually all of which were created by man for human use; or perhaps a more scrupulously veracious account would say that they were in the main created by the women, through long ages of workmanlike selection and cultivation. These things, of course, are useful because men have learned their use, and their use, so far as it has been learned, has been learned by protracted and voluminous experience and experimentation, proceeding at each step on the accumulated achievements of the past. Other things, which may in time come to exceed these in usefulness are still useless, economically non-existent, on the early levels of culture, because of what men in that time have not yet learned. * * * * * While this immaterial equipment of industry, the intangible assets of the community, have apparently always been relatively very considerable and are always mainly in the keeping of the community at large, the material equipment, the tangible assets, on the other hand, have, in the early stages (say the earlier 90 per cent.) of the life-history of human culture, been relatively slight, and have apparently been held somewhat loosely by individuals or household groups. This material equipment is relatively very slight in the earlier phases of technological development, and the tenure by which it is held is apparently vague and uncertain. At a relatively primitive phase of the development, and under ordinary conditions of climate and surroundings, the possession of the concrete articles ("capital goods") needed to turn the commonplace knowledge of ways and means to account is a matter of slight consequence,--contrary to the view commonly spoken for by the economists of the classical line. Given the commonplace technological knowledge and the commonplace training,--and these are given by common notoriety and the habituation of daily life,--the acquisition, construction, or usufruct of the slender material equipment needed arranges itself almost as a matter of course, more particularly where this material equipment does not include a stock of domestic animals or a plantation of domesticated trees and vegetables. Under given circumstances a relatively primitive technological scheme may involve some large items of material equipment, as the buffalo pens (_piskun_) of the Blackfoot Indians or the salmon weirs of the river Indians of the northwest coast. Such items of material equipment are then likely to be held and worked collectively, either by the community at large or by subgroups of a considerable size. Under ordinary, more generally prevalent conditions, it appears that even after a relatively great advance has been made in the cultivation of crops the requisite industrial equipment is not a matter of serious concern, particularly so aside from the tilled ground and the cultivated trees, as is indicated by the singularly loose and inconsequential notions of ownership prevalent among peoples occupying such a stage of culture. A primitive stage of communism is not known. But as the common stock of technological knowledge increases in volume, range, and efficiency, the material equipment whereby this knowledge of ways and means is put into effect grows greater, more considerable relatively to the capacity of the individual. And so soon, or in so far, as the technological development falls into such shape as to require a relatively large unit of material equipment for the effective pursuit of industry, or such as otherwise to make the possession of the requisite material equipment a matter of consequence, so as seriously to handicap the individuals who are without these material means, and to place the current possessors of such equipment at a marked advantage, then the strong arm intervenes, property rights apparently begin to fall into definite shape, the principles of ownership gather force and consistency, and men begin to accumulate capital goods and take measures to make them secure. An appreciable advance in the industrial arts is commonly followed or accompanied by an increase of population. The difficulty of procuring a livelihood may be no greater after such an increase; it may even be less; but there results a relative curtailment of the available area and raw materials, and commonly also an increased accessibility of the several portions of the community. A wide-reaching control becomes easier. At the same time a larger unit of material equipment is needed for the effective pursuit of industry. As this situation develops, it becomes worth while--this is to say, it becomes feasible--for the individual with the strong arm to engross, or "corner," the usufruct of the commonplace knowledge of ways and means by taking over such of the requisite material as may be relatively scarce and relatively indispensable for procuring a livelihood under the current state of the industrial arts.[4] Circumstances of space and numbers prevent escape from the new technological situation. The commonplace knowledge of ways and means cannot be turned to account, under the new conditions, without a material equipment adapted to the then current state of the industrial arts; and such a suitable material equipment is no longer a slight matter, to be compassed by workmanlike initiative and application. _Beati possidentes._ The emphasis of the technological situation, as one might say, may fall now on one line of material items, now on another, according as the exigencies of climate, topography, flora and fauna, density of population, and the like, may decide. So also, under the rule of the same exigencies, the early growth of property rights and of the principles (habits of thought) of ownership may settle on one or another line of material items, according as one or another affords the strategic advantage for engrossing the current technological efficiency of the community. Should the technological situation, the state of the industrial arts, be such as to throw the strategic emphasis on manual labor, on workmanlike skill and application, and if at the same time the growth of population has made land relatively scarce, or hostile contact with other communities has made it impracticable for members of the community to range freely over outlying tracts, then it would be expected that the growth of ownership should take the direction primarily of slavery, or of some equivalent form of servitude, so effecting a naïve and direct monopolistic control of the current knowledge of ways and means.[5] Whereas if the development has taken such a turn, and the community is so placed as to make the quest of a livelihood a matter of the natural increase of flocks and herds, then it should reasonably be expected that these items of equipment will be the chief and primary subject of property rights. In point of fact, it appears that a pastoral culture commonly involves also some degree of servitude, along with the ownership of flocks and herds. Under different circumstances the mechanical appliances of industry, or the tillable land, might come into the position of strategic advantage, and might come in for the foremost place in men's consideration as objects of ownership. The evidence afforded by the known (relatively) primitive cultures and communities seems to indicate that slaves and cattle have in this way come into the primacy as objects of ownership at an earlier period in the growth of material civilisation than land or the mechanical appliances. And it seems similarly evident--more so, indeed--that land has on the whole preceded the mechanical equipment as the stronghold of ownership and the means of engrossing the community's industrial efficiency. It is not until a late period in the life-history of material civilisation that ownership of the industrial equipment, in the narrower sense in which that phrase is commonly employed, comes to be the dominant and typical method of engrossing the immaterial equipment. Indeed, it is a consummation which has been reached only a very few times even partially, and only once with such a degree of finality as to leave the fact indisputable. If it may be said, loosely, that mastery through the ownership of slaves, cattle, or land comes on in force only after the economic development has run through some nine-tenths of its course hitherto, then it may be said likewise that some ninety-nine one-hundredths of this course of development had been completed before the ownership of the mechanical equipment came into undisputed primacy as the basis of pecuniary dominion. So late an innovation, indeed, is this modern institution of "capitalism,"--the predominant ownership of industrial capital as we know it,--and yet so intimate a fact is it in our familiar scheme of life, that we have some difficulty in seeing it in perspective at all, and we find ourselves hesitating between denying its existence, on the one hand, and affirming it to be a fact of nature antecedent to all human institutions, on the other hand. In so speaking of the ownership of industrial equipment as being an institution for cornering the community's intangible assets, there is conveyed an unavoidably implied, though unintended, note of condemnation. Such an implication of merit or demerit is an untoward circumstance in any theoretical inquiry. Any sentimental bias, whether of approval or disapproval, aroused by such an implied censure, must unavoidably hamper the dispassionate pursuit of the argument. To mitigate the effect of this jarring note as far as may be, therefore, it will be expedient to turn back for a moment to other, more primitive and remoter forms of the institution,--as slavery and landed wealth,--and so reach the modern facts of industrial capital by a roundabout and gradual approach. These ancient institutions of ownership, slavery and landed wealth, are matters of history. Considered as dominant factors in the community's scheme of life, their record is completed; and it needs no argument to enforce the proposition that it is a record of economic dominion by the owners of the slaves or the land, as the case may be. The effect of slavery in its best day, and of landed wealth in mediæval and early modern times, was to make the community's industrial efficiency serve the needs of the slave-owners in the one case and of the land-owners in the other. The effect of these institutions in this respect is not questioned now, except in such sporadic and apologetical fashion as need not detain the argument. But the fact that such was the direct and immediate effect of these institutions of ownership in their time by no means involves the instant condemnation of the institutions in question. It is quite possible to argue that slavery and landed wealth, each in its due time and due cultural setting, have served the amelioration of the lot of man and the advance of human culture. What these arguments may be that aim to show the merits of slavery and landed wealth as a means of cultural advance does not concern the present inquiry, neither do the merits of the case in which the arguments are offered. The matter is referred to here to call to mind that any similar theoretical outcome of an analysis of the productivity of "capital goods" need not be admitted to touch the merits of the case in controversy between the socialistic critics of capitalism and the spokesmen of law and order. The nature of landed wealth, in point of economic theory, especially as regards its productivity, has been sifted with the most jealous precautions and the most tenacious logic during the past century; and any economic student can easily review the course of the argument whereby that line of economic theory has been run to earth. It is only necessary here to shift the point of view slightly to bring the whole argument concerning the rent of land to bear on the present question. Rent is of the nature of a differential gain, resting on a differential advantage in point of productivity of the industry employed upon or about it. This differential advantage attaching to a given parcel of land may be a differential as against another parcel or as against industry applied apart from land. The differential advantage attaching to agricultural land--_e.g._, as against industry at large--rests on certain broad peculiarities of the technological situation. Among them are such peculiarities as these: the human species, or the fraction of it concerned in the case, is numerous, relatively to the extent of its habitat; the methods of getting a living, as hitherto elaborated, the ways and means of life, make use of certain crop-plants and certain domestic animals. Apart from such conditions, taken for granted in arguments concerning agricultural rent, there could manifestly be no differential advantage attaching to land, and no production of rent. With increased command of methods of transportation, the agricultural lands of England, _e.g._, and of Europe at large, declined in value, not because these lands became less fertile, but because an equivalent result could more advantageously be got by a new method. So, again, the flint- and amber-bearing regions that are now Danish and Swedish territory about the waters at the entrance to the Baltic were in the neolithic culture of northern Europe the most favored and valuable lands within that cultural region. But, with the coming of the metals and the relative decline of the amber trade, they began to fall behind in the scale of productivity and preference. So also in later time, with the rise of "industry" and the growth of the technology of communication, urban property has gained, as contrasted with rural property, and land placed in an advantageous position relatively to shipping and railroads has acquired a value and a "productiveness" which could not be claimed for it apart from these modern technological expedients. The argument of the single-tax advocates and other economists as to the "unearned increment" is sufficiently familiar, but its ulterior implications have not commonly been recognised. The unearned increment, it is held, is produced by the growth of the community in numbers and in the industrial arts. The contention seems to be sound, and is commonly accepted; but it has commonly been overlooked that the argument involves the ulterior conclusion that all land values and land productivity, including the "original and indestructible powers of the soil," are a function of the "state of the industrial art." It is only within the given technological situation, the current scheme of ways and means, that any parcel of land has such productive powers as it has. It is, in other words, useful only because, and in so far, and in such manner, as men have learned to make use of it. This is what brings it into the category of "land," economically speaking. And the preferential position of the landlord as a claimant of the "net product" consists in his legal right to decide whether, how far, and on what terms men shall put this technological scheme into effect in those features of it which involve the use of his parcel of land. * * * * * All this argument concerning the unearned increment may be carried over, with scarcely a change of phrase, to the case of "capital goods." The Danish flint supply was of first-rate economic consequence, for a thousand years or so, during the stone age; and the polished-flint utensils of that time were then "capital goods" of inestimable importance to civilisation, and were possessed of a "productivity" so serious that the life of mankind in that world may be said to have been balanced on the fine-ground edge of those magnificent polished-flint axes. All that lasted through its technological era. The flint supply and the mechanical expedients and "capital goods," whereby it was turned to account, were valuable and productive then, but neither before nor after that time. Under a changed technological situation the capital goods of that time have become museum exhibits, and their place in human economy has been taken by technological expedients which embody another "state of the industrial arts," the outcome of later and different phases of human experience. Like the polished-flint ax, the metal utensils which gradually displaced it and its like in the economy of the Occidental culture were the product of long experience and the gradual learning of ways and means. The steel ax, as well as the flint ax, embodies the same ancient technological expedient of a cutting edge, as well as the use of a helve and the efficiency due to the weight of the tool. And in the case of the one or the other, when seen in historical perspective and looked at from the point of view of the community at large, the knowledge of ways and means embodied in the utensils was the serious and consequential matter. The construction or acquisition of the concrete "capital goods" was simply an easy consequence. It "cost nothing but labor," as Thomas Mun would say. Yet it might be argued that each concrete article of "capital goods" was the product of some one man's labor, and, as such, its productivity, when put to use, was but the indirect, ulterior, deferred productiveness of the maker's labor. But the maker's productivity in the case was but a function of the immaterial technological equipment at his command, and that in its turn was the slow spiritual distillate of the community's time-long experience and initiative. To the individual producer or owner, to whom the community's accumulated stock of immaterial equipment was open by common notoriety, the cost of the concrete material goods would be the effort involved in making or getting them and in making good his claim to them. To his neighbor who had made or acquired no such parcel of "productive goods," but to whom the resources of the community, material and immaterial, were open on the same easy terms, the matter would look very much the same. He would have no grievance, nor would he have occasion to seek one. Yet, as a resource in the maintenance of the community's life and a factor in the advance of material civilisation, the whole matter would have a different meaning. So long, or rather in so far, as the "capital goods" required to meet the technological demands of the time were slight enough to be compassed by the common man with reasonable diligence and proficiency, so long the draft upon the common stock of immaterial assets by any one would be no hindrance to any other, and no differential advantage or disadvantage would emerge. The economic situation would answer passably to the classical theory of a free competitive system,--"the obvious and simple system of natural liberty," which rests on the presumption of equal opportunity. In a roughly approximate way, such a situation supervened in the industrial life of western Europe on the transition from mediæval to modern times, when handicraft and "industrial" enterprise superseded landed wealth as the chief economic factor. Within the "industrial system," as distinct from the privileged non-industrial classes, a man with a modicum of diligence, initiative, and thrift might make his way in a tolerable fashion without special advantages in the way of prescriptive right or accumulated means. The principle of equal opportunity was, no doubt, met only in a very rough and dubious fashion; but so favorable became the conditions in this respect that men came to persuade themselves in the course of the eighteenth century that a substantially equitable allotment of opportunities would result from the abrogation of all prerogatives other than the ownership of goods. But so precarious and transient was this approximation to a technologically feasible system of equal opportunity that, while the liberal movement which converged upon this great economic reform was still gathering head, the technological situation was already outgrowing the possibility of such a scheme of reform. After the Industrial Revolution came on, it was no longer true, even in the roughly approximate way in which it might have been true some time earlier, that equality before the law, barring property rights, would mean equal opportunity. In the leading, aggressive industries which were beginning to set the pace for all that economic system that centered about the market, the unit of industrial equipment, as required by the new technological era, was larger than one man could compass by his own efforts with the free use of the commonplace knowledge of ways and means. And the growth of business enterprise progressively made the position of the small, old-fashioned producer more precarious. But the speculative theoreticians of that time still saw the phenomena of current economic life in the light of the handicraft traditions and of the preconceptions of natural rights associated with that system, and still looked to the ideal of "natural liberty" as the goal of economic development and the end of economic reform. They were ruled by the principles (habits of thought) which had arisen out of an earlier situation, so effectually as not to see that the rule of equal opportunity which they aimed to establish was already technologically obsolete.[6] During the hundred years and more of this ascendancy of the natural-rights theories in economic science, the growth of technological knowledge has unremittingly gone forward, and concomitantly the large-scale industry has grown great and progressively dominated the field. This large-scale industrial régime is what the socialists, and some others, call "capitalism." "Capitalism," as so used, is not a neat and rigid technical term, but it is definite enough to be useful for many purposes. On its technological side the characteristic trait of this capitalism is that the current pursuit of industry requires a larger unit of material equipment than one individual can compass by his own labor, and larger than one person can make use of alone. So soon as the capitalist régime, in this sense, comes in, it ceases to be true that the owner of the industrial equipment (or the controller of it) in any given case is or may be the producer of it, in any naïve sense of "production." He is under the necessity of acquiring its ownership or control by some other expedient than that of industrially productive work. The pursuit of industry requires an accumulation of wealth, and, barring force, fraud, and inheritance, the method of acquiring such an accumulation of wealth is necessarily some form of bargaining; that is to say, some form of business enterprise. Wealth is accumulated, within the industrial field, from the gains of business; that is to say, from the gains of advantageous bargaining.[7] Taking the situation by and large, looking to the body of business enterprise as a whole, the advantageous bargaining from which gains accrue and from which, therefore, accumulations of capital are derived, is necessarily, in the last analysis, a bargaining between those who own (or control) industrial wealth and those whose work turns this wealth to account in productive industry. This bargaining for hire--commonly a wage agreement--is conducted under the rule of free contract, and is concluded according to the play of demand and supply, as has been well set forth by many writers. On this technological view of capital, as here spoken for, the relations between the two parties to the bargain, the capitalist-employer and the working class, stand as follows. More or less rigorously, the technological situation enforces a certain scale and method in the various lines of industry.[8] The industry can, in effect, be carried on only by recourse to the technologically requisite scale and method, and this requires a material equipment of a certain (large) magnitude; while material equipment of this required magnitude is held exclusively by the capitalist-employer, and is _de facto_ beyond the reach of the common man. A corresponding body of immaterial equipment--knowledge and practice of ways and means--is likewise requisite, under the rule of the same technological exigencies. This immaterial equipment is in part drawn on in the making of the material equipment held by the capitalist-employers, in part in the use to be made of this material equipment in the further processes of industry. This body of immaterial equipment so drawn on in any line of industry is, relatively, still larger, being, on any exhaustive analysis, virtually the whole body of industrial experience accumulated by the community up to date. A free draft on this common stock of technological wisdom must be had both in the construction and in the subsequent use of the material equipment; although no one person can master, or himself employ, more than an inconsiderable fraction of the immaterial equipment so drawn on for the installation or operation of any given block of the material equipment. The owner of the material equipment, the capitalist-employer, is, in the typical case, not possessed of any appreciable fraction of the immaterial equipment necessarily drawn on in the construction and subsequent use of the material equipment owned (controlled) by him. His knowledge and training, so far as it enters into the question, is a knowledge of business, not of industry.[9] The slight technological proficiency which he has or needs for his business ends is of a general character, wholly superficial and impracticable in point of workmanlike efficiency; nor is it turned to account in actual workmanship. He therefore "needs in his business" the service of persons who have a competent working mastery of this immaterial technological equipment, and it is with such persons that his bargains for hire are made. By and large, the measure of their serviceability for his ends is the measure of their technological competency. No workman not possessed of some fractional mastery of the technological requirements is employed,--imbeciles are useless in proportion to their imbecility; and even unskilled and "unintelligent" workmen, so called, are of relatively little use, although they may be possessed of a proficiency in the commonplace industrial details such as would bulk large in absolute magnitude. The "common laborer" is, in fact, a highly trained and widely proficient workman when contrasted with the conceivable human blank supposed to have drawn on the community for nothing but his physique. In the hands of these workmen--the industrial community, the bearers of the immaterial, technological equipment--the capital goods owned by the capitalist become a "means of production." Without them, or in the hands of men who do not know their use, the goods in question would be simply raw materials, somewhat deranged and impaired through having been given the form which now makes them "capital goods." The more proficient the workmen in their mastery of the technological expedients involved, and the greater the facility with which they are able to put these expedients into effect, the more productive will be the processes in which the workmen turn the employer's capital goods to account. So, also, the more competent the work of "superintendence," the foreman-like oversight and correlation of the work in respect of kind, speed, volume, the more will it count in the aggregate of productive efficiency. But this work of correlation is a function of the foreman's mastery of the technological situation at large and his facility in proportioning one process of industry to the requirements and effects of another. Without this due and sagacious correlation of the processes of industry, and their current adaptation to the demands of the industrial situation at large, the material equipment engaged would have but slight efficiency and would count for but little in the way of capital goods. The efficiency of the control exercised by the master-workman, engineer, superintendent, or whatever term may be used to designate the technological expert who controls and correlates the productive processes,--this workmanlike efficiency determines how far the given material equipment is effectually to be rated as "capital goods." Through all this functioning of the workman and the foreman the capitalist's business ends are ever in the background, and the degree of success that attends his business endeavors depends, other things equal, on the efficiency with which these technologists carry on the processes of industry in which he has invested. His working arrangements with these workmen, the bearers of the immaterial equipment engaged, enables the capitalist to turn the processes for which his capital goods are adapted to account for his own profit, but at the cost of such a deduction from the aggregate product of these processes as the workmen may be able to demand in return for their work. The amount of this deduction is determined by the competitive bidding of other capitalists who may have use for the same lines of technological efficiency, in the manner set forth by writers on wages. With the conceivable consolidation of all material assets under one business management, so as to eliminate competitive bidding between employers, it is plain that the resulting business concern would command the undivided forces of the technological situation, with such deduction as is involved in the livelihood of the working population. This livelihood would in such a case be reduced to the most economical footing, as seen from the standpoint of the employer. And the employer (capitalist) would be the _de facto_ owner of the community's aggregate knowledge of ways and means, except so far as this body of immaterial equipment serves also the housekeeping routine of the working population. How nearly the current economic situation may approach to this finished state is a matter of opinion. There is also place for a broad question whether the conditions are more or less favorable to the working population under the existing business régime, involving competitive bidding between the several business concerns, than they would be in case a comprehensive business consolidation had eliminated competition and placed the ownership of the material assets on a footing of unqualified monopoly. Nothing but vague surmises can apparently be offered in answer to these questions. But as bearing on the question of monopoly and the use of the community's immaterial equipment it is to be kept in mind that the technological situation as it stands to-day does not admit of a complete monopolisation of the community's technological expedients, even if a complete monopolisation of the existing aggregate of material property were effected. There is still current a large body of industrial processes to which the large-scale methods do not apply and which do not presume such a large unit of material equipment or involve such rigorous correlation with the large-scale industry as to take them out of the range of discretionary use by persons not possessed of appreciable material wealth. Typical of such lines of work, hitherto not amenable to monopolisation, are the details of housekeeping routine alluded to above. It is, in fact, still possible for an appreciable fraction of the population to "pick up a living," more or less precarious, without recourse to the large-scale processes that are controlled by the owners of the material assets. This somewhat precarious margin of free recourse to the commonplace knowledge of ways and means appears to be what stands in the way of a neater adjustment of wages to the "minimum of subsistence" and the virtual ownership of the immaterial equipment by the owners of the material equipment. It follows from what has been said that all tangible[10] assets owe their productivity and their value to the immaterial industrial expedients which they embody or which their ownership enables their owner to engross. These immaterial industrial expedients are necessarily a product of the community, the immaterial residue of the community's experience, past and present; which has no existence apart from the community's life, and can be transmitted only in the keeping of the community at large. It may be objected by those who make much of the productivity of capital that tangible capital goods on hand are themselves of value and have a specific productive efficiency, if not apart from the industrial processes in which they serve, then at least as a prerequisite to these processes, and therefore a material condition-precedent standing in a causal relation to the industrial product. But these material goods are themselves a product of the past exercise of technological knowledge, and so back to the beginning. What there is involved in the material equipment, which is not of this immaterial, spiritual nature, and so what is not an immaterial residue of the community's experience, is the raw material out of which the industrial appliances are constructed, with the stress falling wholly on the "raw." The point is illustrated by what happens to a mechanical contrivance which goes out of date because of a technological advance and is displaced by a new contrivance embodying a new process. Such a contrivance "goes to the junk-heap," as the phrase has it. The specific technological expedient which it embodies ceases to be effective in industry, in competition with "improved methods." It ceases to be an immaterial asset. When it is in this way eliminated, the material repository of it ceases to have value as capital. It ceases to be a material asset. "The original and indestructible powers" of the material constituents of capital goods, to adapt Ricardo's phrase, do not make these constituents capital goods; nor, indeed, do these original and indestructible powers of themselves bring the objects in question into the category of economic goods at all. The raw materials--land, minerals, and the like--may, of course, be valuable property, and may be counted among the assets of a business. But the value which they so have is a function of the anticipated use to which they may be put, and that is a function of the technological situation under which it is anticipated that they will be useful. * * * * * All this may seem to undervalue or perhaps to overlook the physical facts of industry and the physical nature of commodities. There is, of course, no call to understate the importance of material goods or of manual labor. The goods about which this inquiry turns are the products of trained labor working on the available materials; but the labor has to be trained, in the large sense, in order to be labor, and the materials have to be available in order to be materials of industry. And both the trained efficiency of the labor and the availability of the material objects engaged are a function of the "state of the industrial arts." Yet the state of the industrial arts is dependent on the traits of human nature, physical, intellectual, and spiritual, and on the character of the material environment. It is out of these elements that the human technology is made up; and this technology is efficient only as it meets with the suitable material conditions and is worked out, practically, in the material forces required. The brute forces of the human animal are an indispensable factor in industry, as are likewise the physical characteristics of the material objects with which industry deals. And it seems bootless to ask how much of the products of industry or of its productivity is to be imputed to these brute forces, human and non-human, as contrasted with the specifically human factors that make technological efficiency. Nor is it necessary to go into questions of that import here, since the inquiry here turns on the productive relation of capital to industry; that is to say, the relation of the material equipment and its ownership to men's dealings with the physical environment in which the race is placed. The question of capital goods (including that of their ownership and therefore including the question of investment) is a question of how mankind as a species of intelligent animals deals with the brute forces at its disposal. It is a question of how the human agent deals with his means of life, not of how the forces of the environment deal with man. Questions of the latter class belong under the head of Ecology, a branch of the biological sciences dealing with the adaptive variability of plants and animals. Economic inquiry would belong under that category if the human response to the forces of the environment were instinctive and variational only, including nothing in the way of a technology. But in that case there would be no question of capital goods, or of capital, or of labor. Such questions do not arise in relation to the non-human animals. In an inquiry into the productivity of labor some perplexity might be met with as to the share or the place of the brute forces of the human organism in the theory of production; but in relation to capital that question does not arise, except so far as these forces are involved in the production of the capital goods. As a parenthesis, more or less germane to the present inquiry into capital, it may be remarked that an analysis of the productive powers of labor would apparently take account of the brute energies of mankind (nervous and muscular energies) as material forces placed at the disposal of man by circumstances largely beyond human control, and in great part not theoretically dissimilar to the like nervous and muscular forces afforded by the domestic animals. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, Vol. XXII, Aug., 1908. [2] "Assets" is, of course, not to be taken literally in this connection. The term properly covers a pecuniary concept, not an industrial (technological) one, and it connotes ownership as well as value; and it will be used in this literal sense when, in a later article, ownership and investment come into the discussion. In the present connection it is used figuratively, for want of a better term, to convey the connotation of value and serviceability without thereby implying ownership. [3] Barrows. [4] Motives of exploit and emulation, no doubt, play a serious part in bringing on the practice of ownership and in establishing the principles on which it rests; but this play of motives and the concomitant growth of institutions cannot be taken up here. _Cf._ _The Theory of the Leisure Class_, chaps. i, ii, iii. [5] _Cf._ H. Nieboer, _Slavery as an Industrial System_, chap. iv, sect. 12. [6] For a more extended discussion of this point see the _Quarterly Journal of Economics_, July, 1899, "The Preconceptions of Economic Science"; also _The Theory of Business Enterprise_, chap. iv, especially pp. 70-82. [7] Marx holds that the "primitive accumulation" from which capitalism takes its rise is a matter of force and fraud (_Capital_, Book I, chap. xxiv.). Sombart holds the source to have been landed wealth (_Moderne Kapitalismus_, Book II, Part II, especially chap. xii). Ehrenberg and other critics of Sombart incline to the view that the most important source was usury and the petty trade (_Zeitalter der Fugger_, chaps. i, ii). [8] The phrase "more or less" covers a certain margin of tolerance in respect of scale and method, which may be very appreciably wider in some lines of industry than in others, and which cannot be more adequately defined or described here within such space as could reasonably be allowed. The requirement of scale and method is enforced by competition. The force and reach of this competitive adjustment can also not be dealt with here, but the familiar current acceptance of the fact will dispense with details. [9] _Cf._ _Theory of Business Enterprise_, chap. iii. [10] "Tangible assets" is here taken to signify serviceable capital goods considered as valuable possessions yielding income to their owner. ON THE NATURE OF CAPITAL[1] II. INVESTMENT, INTANGIBLE ASSETS, AND THE PECUNIARY MAGNATE What has been said in the earlier section of this paper[2] applies to "capital goods," so called, and it is intended to apply to these in their character of "productive goods" rather than in their character of "capital"; that is to say, what is had in mind is the industrial, or technological, efficiency and subservience of the material means of production, rather than the pecuniary use and effect of invested wealth. The inquiry has dealt with the industrial equipment as "plant" rather than as "assets." In the course of this inquiry it has appeared that out of the profitable engrossing of the community's industrial efficiency through control of the material equipment there arises the practice of investment, which has further consequences that merit more detailed attention. Investment is a pecuniary transaction, and its aim is pecuniary gain,--gain in terms of value and ownership. Invested wealth is capital, a pecuniary magnitude, measured in terms of value and determined in respect of its magnitude by a valuation which proceeds on an appraisement of the gain expected from the ownership of this invested wealth. In modern business practice, capital is distinguished into two coördinate categories of assets, tangible and intangible. "Tangible assets" is here taken to designate pecuniarily serviceable capital goods, considered as a valuable possession yielding an income to their owner. Such goods, material items of wealth, are "assets" to the amount of their capitalisable value, which may be more or less closely related to their industrial serviceability as productive goods. "Intangible assets" are immaterial items of wealth, immaterial facts owned, valued, and capitalised on an appraisement of the gain to be derived from their possession. These are also assets to the amount of their capitalisable value, which has commonly little, if any, relation to the industrial serviceability of these items of wealth considered as factors of production. * * * * * Before going into the matter of intangible assets, it is necessary to speak further of the consequences which investment--and hence capitalisation--has for the use and serviceability of (material) capital goods. It has commonly been assumed by economists, without much scrutiny, that the gains which accrue from invested wealth are derived from and (roughly) measured by the productivity of the industrial process in which the items of wealth so invested are employed, productivity being counted in some terms of material serviceability to the community, conduciveness to the livelihood, comfort, or consumptive needs of the community. In the course of the present inquiry it has appeared that the gainfulness of such invested wealth (tangible assets) is due to a more or less extensive engrossing of the community's industrial efficiency. The aggregate gains of the aggregate material capital accrue from the community's industrial activity, and bear some relation to the productive capacity of the industrial traffic so engrossed. But it will be noted that there is no warrant in the analysis of these phenomena as here set forth for alleging that the gains of investment bear a relation of equality or proportion to the material serviceability of the capital goods, as rated in terms of effectual usefulness to the community. Given capital goods, tangible assets, may owe their pecuniary serviceability to their owner, and so their value, to other things than their serviceability to the community; although the gains of investment in the aggregate are drawn from the aggregate material productivity of the community's industry. The ownership of the material equipment gives the owner not only the right of use over the community's immaterial equipment, but also the right of abuse and of neglect or inhibition. This power of inhibition may be made to afford an income, as well as the power to serve; and whatever will yield an income may be capitalised and become an item of wealth to its possessor. Under modern conditions of investment it happens not infrequently that it becomes pecuniarily expedient for the owner of the material equipment to curtail or retard the processes of industry,--"restraint of trade." The motive in all such cases of retardation is the pecuniary expediency of the measure for the owner (controller) of capital,--expediency in terms of income from investment, not expediency in terms of serviceability to the community at large or to any fraction of the community except the owner (manager). Except for the exigencies of investment, _i.e._, exigencies of pecuniary gain to the investor, phenomena of this character would have no place in the industrial system. They invariably come of the endeavors of business men to secure a pecuniary gain or to avoid a pecuniary loss. More frequently, perhaps, manoeuvers of inhibition--advised idleness of plant--in industry aim to effect a saving or avoid a waste than to procure an increase of gain; but the saving to be effected and the waste to be avoided are always pecuniary saving to the owner and pecuniary waste in the matter of ownership, not a saving of goods to the community or a prevention of wasteful consumption or wasteful expenditure of effort and resources on the part of the community. Pecuniary--that is to say, differential--advantage to the capitalist-manager has, under the régime of investment, taken precedence of economic advantage to the community; or rather, the differential advantage of ownership is alone regarded in the conduct of industry under this system. Business practices which inhibit industrial efficiency and curtail the industrial output are too well known to need particular enumeration. Nor is it necessary to cite evidence to show that such inhibition and curtailment are resorted to from motives of pecuniary expediency. But an illustrative example or two will make the theoretical point clearer, and perhaps more plainly bring out the wholly pecuniary grounds of such business procedure. The most comprehensive principle involved in this class of business management is that of raising prices, and so increasing the net gains of business, by limiting the supply, or "charging what the traffic will bear." Of a similar effect, for the point here in question, are the obstructive tactics designed to hinder the full efficiency of a business rival. These phenomena lie along the line of division between tangible and intangible assets. Successful strategy of this kind may, by force of custom, legislation, or the "freezing-out" of rival concerns, pass into settled conditions of differential advantage for the given business concern, which so may be capitalised as an item of intangible assets and take their place in the business community as articles of invested wealth. But, aside from such capitalisation of inefficiency, it is at least an equally consequential fact that the processes of productive industry are governed in detail by the exigencies of investment, and therefore by the quest of gain as counted in terms of price, which leads to the dependence of production on the course of prices. So that, under the régime of capital, the community is unable to turn its knowledge of ways and means to account for a livelihood except at such seasons and in so far as the course of prices affords a differential advantage to the owners of the material equipment. The question of advantageous--which commonly means rising--prices for the owners (managers) of the capital goods is made to decide the question of livelihood for the rest of the community. The recurrence of hard times, unemployment, and the rest of that familiar range of phenomena, goes to show how effectual is the inhibition of industry exercised by the ownership of capital under the price system.[3] So also as regards the discretionary abuse of the community's industrial efficiency vested in the owner of the material equipment. Disserviceability may be capitalised as readily as serviceability, and the ownership of the capital goods affords a discretionary power of misdirecting the industrial processes and perverting[4] industrial efficiency, as well as of inhibiting or curtailing industrial processes and their output, while the outcome may still be profitable to the owner of the capital goods. There is a large volume of capital goods whose value lies in their turning the technological inheritance to the injury of mankind. Such are, _e.g._, naval and military establishments, together with the docks, arsenals, schools, and manufactories of arms, ammunition, and naval and military stores, that supplement and supply such establishments. These armaments and the like are, of course, public and quasi-public enterprises, under the current régime, with somewhat disputable relations to the system of current business enterprise. But it is no far-fetched interpretation to say that they are, in great part, a material equipment for the maintenance of law and order, and so enable the owners of capital goods with immunity to inhibit or pervert the industrial processes when the exigencies of business profits make it expedient; that they are, further, a means--more or less ineffectual, it is true--for extending and protecting trade, and so serve the differential advantage of business men at the cost of the community; and that they are also in large part a material equipment set apart for the diversion of a livelihood from the community at large to the military, naval, diplomatic, and other official classes. These establishments may in any case be taken as illustrating how items of material equipment may be devoted to and may be valued for the use of the technological expedients for the damage and discomfort of mankind, without sensible offset or abatement. Typical of a class of investments which derive profits from capital goods devoted to uses that are altogether dubious, with a large presumption of net detriment, are such establishments as race-tracks, saloons, gambling-houses, and houses of prostitution.[5] Some spokesmen of the "non-Christian tribes" might wish to include churches under the same category, but the consensus of opinion in modern communities inclines to look on churches as serviceable, on the whole; and it may be as well not to attempt to assign them a specific place in the scheme of serviceable and disserviceable use of invested wealth. There is, further, a large field of business, employing much capital goods and many technological processes, whose profits come from products in which serviceability and disserviceability are mingled with waste in the most varying proportions. Such are the production of goods of fashion, disingenuous proprietary articles, sophisticated household supplies, newspapers and advertising enterprise. In the degree in which business of this class draws its profits from wasteful practices, spurious goods, illusions and delusions, skilled mendacity, and the like, the capital goods engaged must be said to owe their capitalisable value to a perverse use of the technological expedients employed. These wasteful or disserviceable uses of capital goods have been cited, not as implying that the technological proficiency embodied in these goods or brought into effect in their use, intrinsically has a disserviceable bearing, nor that investment in these things, and business enterprise in the management of them, need aim at disserviceability, but only to bring out certain minor points of theory, obvious but commonly overlooked: (_a_) technological proficiency is not of itself and intrinsically serviceable or disserviceable to mankind,--it is only a means of efficiency for good or ill; (_b_) the enterprising use of capital goods by their businesslike owner aims not at serviceability to the community, but only at serviceability to the owner; (_c_) under the price system--under the rule of pecuniary standards and management--circumstances make it advisable for the business man at times to mismanage the processes of industry, in the sense that it is expedient for his pecuniary gain to inhibit, curtail, or misdirect industry, and so turn the community's technological proficiency to the community's detriment. These somewhat commonplace points of theory are of no great weight in themselves, but they are of consequence for any theory of business or of life under the rules of the price system, and they have an immediate bearing here on the question of intangible assets. * * * * * At the risk of some tedium it is necessary to the theory of intangible assets to pursue this analysis and piecing together of commonplaces somewhat farther. As has already been remarked, "assets" is a pecuniary concept, not a technological one; a concept of business, not of industry. Assets are capital, and tangible assets are items of material equipment and the like, considered as available for capitalisation. The tangibility of tangible assets is a matter of the materiality of the items of wealth of which they are made up, while they are assets to the amount of their value. Capital goods, which typically make up the category of tangible assets, are capital goods by virtue of their technological serviceability, but they are capital in the measure, not of their technological serviceability, but in the measure of the income which they may yield to their owner. The like is, of course, true of intangible assets, which are likewise capital, or assets, in the measure of their income-yielding capacity. Their intangibility is a matter of the immateriality of the items of wealth--objects of ownership--of which they are made up, but their character and magnitude as assets is a matter of the gainfulness to their owner of the processes which their ownership enables him to engross. The facts so engrossed, in the case of intangible assets, are not of a technological or industrial character; and herein lies the substantial disparity between tangible and intangible assets. Mankind has other dealings with the material means of life, besides those covered by the community's technological proficiency. These other dealings have to do with the use, distribution, and consumption of the goods procured by the employment of the community's technological proficiency, and are carried out under working arrangements of an institutional character,--use and wont, law and custom. The principles and practice of the distribution of wealth vary with the changes in technology and with the other cultural changes that are going forward; but it is probably safe to assume that the principles of apportionment,--that is to say, the consensus of habitual opinion as to what is right and good in the distribution of the product,--these principles and the concomitant methods of carrying them out in practice have always been such as to give one person or group or class something of a settled preference above another. Something of this kind, something in the way of a conventionally arranged differential advantage in the apportionment of the common livelihood, is to be found in all cultures and communities that have been observed at all carefully; and it is perhaps needless to remark that in the higher cultures such economic preferences, privileges, prerogatives, differential advantages and disadvantages, are numerous and varied, and that they make up an intricate fabric of economic institutions. Indeed, peculiarities of class difference in some such respect are among the most striking and decisive features that distinguish one cultural era from another. In all phases of material civilisation these preferential advantages are sought and valued. Classes or groups which are in a position to make good a claim to such differential advantages commonly come, in due course, to put forward such claims; as, _e.g._, the priesthood, the princely and ruling class, the men as contrasted with the women, the adults as against minors, the able-bodied as against the infirm. Principles (habits of thought) countenancing some form of class or personal preference in the distribution of income are to be found incorporated in the moral code of all known civilisations and embodied in some form of institution. Such items of immaterial wealth are of a differential character, in that the advantage of those who secure the preference is the disadvantage of those who do not; and it may be mentioned in passing, that such a differential advantage inuring to any one class or person commonly carries a more than equal disadvantage to some other class or person or to the community at large.[6] When property rights fall into definite shape and the price system comes in, and more particularly when the practice of investment arises and business enterprise comes into vogue, such differential advantages take on something of the character of intangible assets. They come to have a pecuniary value and rating, whether they are transferable or not; and if they are transferable, if they can be sold and delivered, they become assets in a fairly clear and full sense of that term. Such immaterial wealth, preferential benefits of the nature of intangible assets, may be a matter of usage simply, as the vogue of a given public house, or of a given tradesman, or of a given brand of consumable goods; or may be a matter of arrogation, as the King's Customs in early times, or the once notorious Sound Dues, or the closing of public highways by large land-owners; or of contractual concession, as the freedom of a city or a guild, or a franchise in the Hanseatic League or in the Associated Press; or of government concession, whether on the basis of a bargain or otherwise, as the many trade monopolies of early modern times, or a corporation charter, or a railway franchise, or letters of marque, or letters patent; or of statutory creation, as trade protection by import, export, or excise duties or navigation laws; or of conventionalised superstitious punctilio, as the creation of a demand for wax by the devoutly obligatory consumption of consecrated tapers, or the similar devout consumption of and demand for fish during Lent. Under the régime of investment and business enterprise these and the like differential benefits may turn to the business advantage of a given class, group, or concern, and in such an event the resulting differential business advantage in the pursuit of gain becomes an asset, capitalised on the basis of its income-yielding capacity, and possibly vendible under the cover of a corporation security (as, _e.g._, common stock), or even under the usual form of private sale (as, _e.g._, the appraised good-will of a business concern). But the régime of business enterprise has not only taken over various forms of institutional privileges and prerogatives out of the past: it also gives rise to new kinds of differential advantage and capitalises them into intangible assets. These are all (or virtually all) of one kind, in that their common aim and common basis of value and capitalisation is a preferentially advantageous sale. Naturally so, since the end of all business endeavor, in the last analysis, is an advantageous sale. The commonest and typical kind of such intangible assets is "good-will," so called,--a term which has come to cover a great variety of differential business advantages, but which in the original business usage of it meant the customary resort of a clientèle to the concern so possessed of the good-will. It seems originally to have implied a kindly sentiment of trust and esteem on the part of a customer, but as the term is now used it has lost this sentimental content. In the broad and loose sense in which it is now currently employed it is extended to cover such special advantages as inure to a monopoly or a combination of business concerns through its power to limit or engross the supply of a given line of goods or services. So long as such a special advantage is not specifically protected by special legislation or by a due legal instrument,--as in the case of a franchise or a patent right,--it is likely to be spoken of loosely as "good-will." The results of the analysis may be summed up to show the degree of coincidence and the distinctions between the two categories of assets: (_a_) the value (that is to say, the amount) of given assets, whether tangible or intangible, is the capitalised (or capitalisable) value of the given articles of wealth, rated on the basis of their income-yielding capacity to their owner; (_b_) in the case of tangible assets there is a presumption that the objects of wealth involved have some (at least potential) serviceability at large, since they serve a materially productive work, and there is therefore a presumption, more or less well founded, that their value represents, though it by no means measures, an item of serviceability at large; (_c_) in the case of intangible assets there is no presumption that the objects of wealth involved have any serviceability at large, since they serve no materially productive work, but only a differential advantage to the owner in the distribution of the industrial product;[7] (_d_) given tangible assets may be disserviceable to the community,--a given material equipment may owe its value as capital to a disserviceable use, though in the aggregate or on an average the body of tangible assets are (presumptively) serviceable; (_e_) given intangible assets may be indifferent in respect of serviceability at large, though in the aggregate, or on an average, intangible assets are (presumably) disserviceable to the community. On this showing it would appear that the substantial difference between tangible and intangible assets lies in the different character of the immaterial facts which are turned to pecuniary account in the one case and in the other. The former, in effect, capitalise such fraction of the technological proficiency of the community as the ownership of the capital goods involved enables the owner to engross. The latter capitalise such habits of life, of a non-technological character,--settled by usage, convention, arrogation, legislative action, or what not,--as will effect a differential advantage to the concern to which the assets in question appertain. The former owe their existence and magnitude to the usufruct of technological expedients involved in the industrial process proper; while the latter are in like manner due to the usufruct of what may be called the interstitial correlations and adjustments both within the industrial system and between industry proper and the market, in so far as these relations are of a pecuniary rather than a technological character. Much the same distinction may be put in other words, so as to bring the expression nearer the current popular apprehension of the matter, by saying that tangible assets, commonly so called, capitalise the processes of production, while intangible assets, so called, capitalise certain expedients and processes of acquisition, not productive of wealth, but affecting only its distribution. Formulated in either way, the distinction seems not to be an altogether hard-and-fast one, as will immediately appear if it is called to mind that intangible assets may be converted into tangible assets, and conversely, as the exigencies of business may decide. Yet, while the two categories of assets stand in such close relation to one another as this state of things presumes, it is still evident from the same state of things that they are not to be confounded with one another. Taking "good-will" as typical of the category of "intangible assets," as being the most widely prevalent and at the same time the farthest removed in its characteristics from the range of "tangible assets," some slight further discussion of it may serve to bring out the difference between the two categories of assets and at the same time to enforce their essential congruity as assets as well as the substantial connection between them. In the earlier days of the concept, in the period of growth to which it owes its name, when good-will was coming into recognition as a factor affecting assets, it was apparently looked on habitually as an adventitious differential advantage accruing spontaneously to the business concern to which it appertained; an immaterial by-product of the concern's conduct of business,--commonly presumed to be an adventitious blessing incident to an upright and humane course of business life. Poor Richard would express this sense of the matter in the saying that "honesty is the best policy." But presently, no doubt, some thought would be taken of the acquirement of good-will, and some effort would be expended by the wise business man in that behalf. Goods would be given a more elegant finish for the sake of a readier sale, beyond what would conduce to their brute serviceability simply; smooth-spoken and obsequious salesmen and solicitors, gifted with a tactful effrontery, have come to be preferred to others, who, without these merits, may be possessed of all the diligence, dexterity, and muscular force required in their trade; something is expended on convincing, not to say vain-glorious, show-windows that shall promise something more than one would like to commit one's self to in words; itinerant agents, and the like, are employed at some expense to secure a clientèle; much thought and substance is spent on advertising of many kinds. This last-named item may be taken as typical of the present stage of growth in the production or generation of good-will, and therefore in the creation of intangible assets. Advertising has come to be an important branch of business enterprise by itself, and it employs a large and varied array of material appliances and processes (tangible assets). Investment is made in certain material items (productive goods), such as printed matter, billboards, and the like, with a view to creating a certain body of good-will. The precise magnitude of the product may not be foreseen, but, if sagaciously made, such investment rarely fails of the effect aimed at--unless a business rival with even greater sagacity should out-manoeuver and offset these endeavors with a superior array of appliances (productive goods) and workmen for the generation of good-will. The product aimed at, commonly with effect, is good-will,--an intangible asset,--which may be considered to have been generated by converting certain tangible assets into this intangible; or it may be considered as an industrial product, the output of certain industrial processes in which the given items of material equipment are employed and give effect to the requisite technological proficiency. Whichever view be taken of the causal relation between the material equipment and processes employed, on the one hand, and the output of good-will, on the other hand, the result is substantially the same for the purpose in hand. The ulterior end of the advertising is, it may be said, the sale of an increased quantity of the advertised articles, at an increased net gain; which would mean an increased value of the material items offered for sale; which, in turn, is the same as saying an increase of tangible assets. It may be assumed without debate that the end of business endeavor is a gain in final terms of tangible values. But this ulterior end is, in the case of advertising enterprise, to be gained only by the intermediate step of a production of an immaterial item of good-will, an intangible asset. So the case in illustration shows not only the conversion of tangible assets (material capital goods, such as printed matter) into intangible wealth, or, if that formula be preferred, the production of immaterial wealth by the productive use of material wealth, but also, conversely, in the second step of the process, it shows the conversion of intangible assets into tangible wealth (enhanced value of vendible goods), or, if the expression seems preferable, the production of tangible assets by the use of intangible wealth. This creation of tangible wealth out of intangible assets is seen perhaps at its neatest in the enhancement of land values by the endeavors of interested parties. Real estate is, of course, a tangible asset of the most authentic tangibility, and it is an asset to the amount of its value, which is determined, say, by the figures at which the real estate in question is currently bought and sold. This is the current value of the real estate, and therefore its current actual magnitude as a tangible asset. The value of the real estate might also be computed by capitalising its rental value; but, where the current market value does not coincide with the capitalised rental value, the former must, according to business conceptions, be accepted as the actual value. In many parts of this country, perhaps in most, but particularly in the Western States and in the neighborhood of flourishing towns, these two methods of rating the pecuniary magnitude of real estate will habitually not coincide. Due allowance, often very considerable, being made, the capitalised rental value of the land may be taken as measuring its current serviceability as an item of material equipment; while the amount by which the market value of the land exceeds its capitalised rental value may be taken as the product, the tangible residue, of an intangible asset of the nature of good-will, turned to account, or "productively employed," in behalf of this parcel of land.[8] Some of the lands of California may be taken as a very good, though perhaps not an extreme, example of such a creation of real estate by spiritual instrumentalities. It is probably well within the mark to say that some of these lands owe not more than one-half their current market value to their current serviceability as an instrument of production or use. The excess may be attributable to illusions touching the chances of future sale, to anticipation of a prospective enhanced usefulness, and the like; but all these are immaterial factors, of the nature of good-will. Like other assets, these lands are capitalised on the basis of the anticipated income from them, part of which income is anticipated from profitable sales to persons who, it is hoped, will be persuaded to take a very sanguine view of the land situation, while part of it may be due to over-sanguine anticipations of usefulness generated by the advertising matter and the efforts of the land agents directed to what is called "developing the country." To any one preoccupied with the conceit that "capital" means "capital goods" such a conversion of intangible into tangible goods, or such a generation of intangible assets by the productive use of tangible assets, might be something of a puzzle. If "assets" were a physical concept, covering a range of physical things, instead of a pecuniary concept, such conversion of tangible into intangible assets, and conversely, would be a case of transubstantiation. But there is nothing miraculous in the matter. "Assets" are a pecuniary magnitude, and belong among the facts of investment. Except in relation to investment the items of wealth involved are not assets. In other words, assets are a matter of capitalisation, which is a special case of valuation; and the question of tangibility or intangibility as regards a given parcel of assets is a question of what article or class of articles the valuation shall attach to or be imputed to. If, _e.g._, the fact to which value is imputed in the valuation is the habitual demand for a given article of merchandise, or the habitual resort of a given group of customers to a particular shop or merchant, or a monopolistic control or limitation of price and supply, then the resulting item of assets will be "intangible," since the object to which the capitalised value in question is imputed is an immaterial object. If the fact which is by imputation made the bearer of the capitalised value is a material object, as, _e.g._, the merchantable goods of which the supply is arbitrarily limited or the price arbitrarily fixed, or if it is the material means of supplying such goods, then the capitalised value in question is a case of tangible assets. The value involved is, like all value, a matter of imputation, and as assets it is a matter of capitalisation; but capitalisation is an appraisement of a pecuniary "income-stream" in terms of the vendible objects to the ownership of which the income is assumed to inure. To what object the capitalised value of the "income-stream" shall be imputed is a question of what object of ownership secures to the owner an effectual claim on this "income-stream "; that is to say, it is a question of what object of ownership the strategic advantages is assumed to attach to, which is a question of the play of business exigencies in the given case. The "income-stream" in question is a pecuniary income-stream, and is in the last resort traceable to transactions of sale. Within the confines of business--and therefore within the scope of capital, investments, assets, and the like business concepts--transactions of purchase and sale are the final terms of any analysis. But beyond these confines, comprehending and conditioning the business system, lie the material facts of the community's work and livelihood. In the final transaction of sale the merchantable goods are valued by the consumer, not as assets, but as livelihood;[9] and in the last analysis and long run it is to some such transaction that all business imputations of value and capitalistic appraisement of assets must have regard and by which they must finally be checked. Dissociated from the facts of work and livelihood, therefore, assets cease to be assets; but this does not preclude their relation to these facts of work and livelihood being at times somewhat remote and loose. Without recourse, immediately or remotely, to certain material facts of industrial process and equipment, assets would not yield earnings; that is to say, wholly disjoined from these material facts, they would in effect not be assets. This is true for both tangible and intangible assets, although the relation of the assets to the material facts of industry is not the same in the two cases. The case of tangible assets needs no argument. Intangible assets, such as patent right or monopolistic control, are likewise of no effect except in effectual contact with industrial facts. The patent right becomes effective for the purpose only in the material working of the innovation covered by it; and monopolistic control is a source of gain only in so far as it effectually modifies or divides the supply of goods. In the light of these considerations it seems feasible to indicate both the congruence and the distinction between the two categories of assets a little more narrowly than was done above. Both are assets,--that is to say, both are values determined by a capitalisation of anticipated income-yielding capacity; both depend for their income-yielding capacity on the preferential use of certain immaterial factors; both depend for their efficiency on the use of certain material objects; both may increase or decrease, as assets, apart from any increase or decrease of the material objects involved. The tangible assets capitalise the preferential use of technological, industrial expedients,--expedients of production, dealing with the facts of brute nature under the laws of physical cause and effect,--this preferential use being secured by the ownership of material articles employed in the processes in which these expedients are put into effect. The intangible assets capitalise the preferential use of certain facts of human nature--habits, propensities, beliefs, aspirations, necessities--to be dealt with under the psychological laws of human motivation; this preferential use being secured by custom, as in the case of old-fashioned good-will, by legal assignment, as in patent or copyright, by ownership of the instruments of production, as in the case of industrial monopolies.[10] * * * * * Intangible assets are capital as well as tangible assets; that is to say, they are items of capitalised wealth. Both categories of assets, therefore, represent expected "income-streams" which are of such definite character as to admit of their being rated in set terms per cent. per time unit; although the expected income need not therefore be anticipated to come in an even flow or to be distributed in any equable manner over a period of time. The income-streams to be so rated and capitalised are associated in such a manner with some external fact (impersonal to their claimant), whether material or immaterial, as to permit their being traced or attributed to an income-yielding capacity on the part of this external fact, to which their valuation as a whole may be imputed and which may then be capitalised as an item of wealth yielding this income-stream. Income-streams which do not meet these requirements do not give rise to assets in the accepted sense of the term, and so do not swell the volume of capitalised wealth. There are income-streams which do not meet the necessary specifications of capitalisable wealth; and in modern business traffic, particularly, there are large and secure sources of income that are in this way not capitalisable and yet yield a legitimate business income. Such are, indeed, to be rated among the most consequential factors in the current business situation. Under the guidance of traditions carried over from a more primitive business situation, it has been usual to speak of income-streams derived in such a manner as "wages of superintendence," or "undertaker's wages," or "entrepreneur's profits," or, latterly, as "profits" simply and specifically. Such phenomena of this class as are of consequence in business are commonly accounted for, theoretically, under this head; and the effort so to account for them is to be taken as, at least, a laudable endeavor to avoid an undue multiplication of technical terms and categories.[11] Yet the most striking phenomena of this class, and the most consequential for modern business and industry, both in respect of their magnitude and in respect of the pecuniary dominion and discretion which they represent, cannot well be accounted undertaker's gains, in the ordinary sense of that term. The great gains of the great industrial financiers or of the great "interests," _e.g._, do not answer the description of undertaker's gains, in that they do not accrue to the captain of industry on the basis of his "managerial ability" alone, apart from his wealth or out of relation to his wealth; and yet it is not safe to say that such gains (which are over and above ordinary returns on his investments) accrue on the ground of the requisite amount of wealth alone, apart from the exercise of a large business direction on the part of the owner of such wealth, or on the part of his agent to whom discretion has been delegated. Administrative, or strategic, discretion and activity must necessarily be present in the case: otherwise, the income in question would rightly be rated as income from capital simply. The captain of industry, the pecuniary magnate, is normally in receipt of income in excess of the ordinary rate per cent. on investment; but apart from his large holdings he is not in a position to get these large gains. Dissociated from his large holdings, he is not a large captain of industry; but it is not the size of his holdings alone that determines what the gains of the pecuniary magnate in modern industry shall be. Gains of the kind and magnitude that currently come to this class of business men come only on condition that the owner (or his agent) shall exercise a similarly large discretion and control in the affairs of the business community; but the magnitude of the gains, as well as of the discretion and control exercised, is somewhat definitely conditioned by the magnitude of the wealth which gives effect to this discretion. The disposition of pecuniary forces in such matters may be well seen in the work and remuneration of any coalition of "interests," such as the modern business community has become familiar with. The "interests" in such a case are of a personal character,--they are "interested parties,"--and the sagacity, experience, and animus of these various interested parties counts in the outcome, both as regards the aggregate gains of the coalition and as regards the distribution of these gains among the several parties in interest; but the weight of any given "interest" in a coalition or "system" is more nearly proportioned to the wealth controlled by the given "interest," and to the strategic position of such wealth, than to any personal talents or proficiency of the "interested party." The talents and proficiency involved are not the main facts. Indeed, the movements of such a "system," and of the several component "interests," are largely a matter of artless routine, in which the greatest ingenuity and initiative engaged in the premises are commonly exercised by the legal counsel working for a fee. A dispassionate student of the current business traffic, who is not overawed by round numbers, will be more impressed by the ease and simplicity of the manoeuvers that lead to large pecuniary results in the higher business finance than by any evidence of preëminent sagacity and initiative among the pecuniary magnates. One need only call to mind the simple and obvious way in which the promoters of the Steel Corporation were magnificently checkmated by the financiers of the Carnegie "interest," when that great and reluctant corporation was floated, or the pettyfogging tactics of Standard Oil in its later career. In extenuation of their visible lack of initiative and insight it may not be ungraceful to call to mind that many of the discretionary heads of the great "interests" are men of advanced years, and that in the nature of the case the pecuniary magnates of the present generation must commonly be men of a somewhat advanced age; and it is only during the present generation that the existing situation has arisen, with its characteristic opportunities and demands. To take their present foremost rank in the new business finance which is here under inquiry, they have had to accumulate the great wealth on which alone their discretionary control of business affairs rests, and their best vigor has been spent in this work of preparation; so that they have commonly attained the requisite strategic position only after they had outlived their "years of discretion." But there is no intention here to depreciate the work of the pecuniary magnates or the spokesmen of the great "interests." The matter has been referred to only as it bears on this category of capitalistic income which accrues on other grounds than the "earning-capacity" of the assets involved, and which still cannot be imputed to the "earning-capacity" of these business men apart from these assets. The case is evidently not one of "wages of superintendence" or "undertaker's profits"; but it is as evidently not a case of the earning-capacity of the assets. The proof of the latter point is quite as easy as of the former. If the gains of the "system" or of its constituent "interests" and magnates were imputable to the earning-capacity of the assets involved,--in any accepted sense of "earnings,"--then it would immediately follow that these assets would be recapitalised on the basis of these extraordinary earnings, and that the income derived in this class of traffic should reappear as interest or dividends on the capital so increased to correspond with the increased earnings. But such recapitalisation takes place only to a relatively very limited extent, and the question then bears on the income which is not so accounted for in the recapitalisation. The gains of this class of traffic are, of course, themselves capitalised,--for the most part they accrue in the capitalised form, as issues of securities and the like; but the sources of this income are not capitalised as such. The (large) accumulated wealth, or assets, which gives weight to the movements of the "interests" and magnates in question, and which affords the ground for the discretionary control of business affairs exercised by them, are, for the most part at least, invested in ordinary business ventures, in the form of corporation securities and the like, and are there earning dividends or interest at current rates; and these assets are valued in the market (and thereby capitalised) on the basis of their current earnings in the various enterprises in which they are so invested. But their being so invested in profitable business enterprises does not in the least hinder their usefulness in the hands of the magnates as a basis or means of carrying on the large and highly profitable transactions of the higher industrial finance. To impute these gains to these assets as "earnings," therefore, would be to count the assets twice as capital, or rather to count them over and over. An additional perplexity in endeavoring to handle gains of this class theoretically as earnings, in the ordinary sense, arises from the fact that they stand in no definable time relation to their underlying assets. They have no definable "time-shape," as Mr. Fisher might put it.[12] Such gains are timeless, in the sense that the time relation does not count in any substantial manner or in any sensible degree in their determination.[13] * * * * * In a more painstaking statement of this point of theory it would be necessary to note that these gains are "timeless," in the sense indicated, in so far as the enterprise from which they accrue is dissociated from the technological circumstances and processes of industry, and only in so far. Technological (industrial) procedure, being of the nature of physical causation, is subject to the time relation under which causal sequence runs. This is the basis of such discussions of capital and interest as those of Böhm-Bawerk, and of Fisher. But business traffic, as distinguished from the processes of industry, being not immediately concerned with the technological process, is also not immediately or uniformly subject to the time relation involved in the causal sequence of the technological process. Business traffic is subject to the time relation because and in so far as it depends upon and follows up the processes of production. The commonplace or old-fashioned business enterprise, the competitive system of investment in industrial business simply, commonly rests pretty directly on the due sequence of the industrial processes in which the investments of such enterprise are placed. Such enterprise, as conceived by the current theories of capital, does business at first hand in the industrial efficiency of the community, which is conditioned by the time relation of the causal sequence, and which is, indeed, in great measure a function of the time consumed in the technological processes. Therefore, the gains, as well as the transactions, of such enterprise are also commonly somewhat closely conditioned by the like time relation, and they typically emerge under the form of a per-cent. per time unit; that is to say, as a function of the lapse of time. Yet the business transactions themselves are not a matter of the lapse of time. Time is not of the essence of the case. The magnitude of a pecuniary transaction is not a function of the time consumed in concluding it, nor are the gains which accrue from the transaction. In business enterprise on the higher plane, which is here under inquiry, the relation of the transactions, and of their gains, to the consecution of the technological processes remotely underlying them is distant, loose, and uncertain, so that the time element here does not obtrude itself: rather, it somewhat obviously falls into abeyance, marking the degree of its remoteness. Yet this phase of business enterprise, like any other, of course takes place in time; and, it is also to be remarked, the volume of the traffic and the gains derived from it are, no doubt, somewhat closely conditioned in the long run by the time relation which dominates that technological (industrial) efficiency on which this enterprise, too, ultimately and indirectly rests and from which in the last resort its gains are finally drawn, however remotely and indirectly. An analysis of these phenomena on lines similar to those which have been followed in the discussion of assets above is not without difficulty, nor can it fairly be expected to yield any but tentative and provisional results. The matter has received so little attention from economic theoreticians that even significant mistakes in this connection are of very rare occurrence.[14] The cause of this scant attention to these matters lies, no doubt, in the relative novelty of the facts in question. The facts may be roughly drawn together under the caption "Traffic in Vendible Capital"; although that term serves rather as a comprehensive designation of the class of business enterprise from which these gains accrue than as an adequate characterisation of the play of forces involved.[15] Traffic in vendible capital has not been unknown in the past, but it is only recently that it has come into the foreground as the most important line of business enterprise. Such it now is, in that it is in this traffic that the ultimate initiative and discretion in business are now to be found. It is at the same time the most gainful of business enterprise, not only in absolute terms, but relatively to the magnitude of the assets involved as well. One reason for this superior gainfulness is the fact that the assets involved in this traffic are at the same time engaged as assets to their full extent in ordinary business, so that the peculiar gains of this traffic are of the nature of a bonus above the earnings of the invested wealth. "It is like finding money." As was said above, the method, or the ways and means, characteristic of this superior business enterprise is a traffic in vendible capital. The wealth gained in this field is commonly in the capitalised form, and constitutes in each transaction, or "deal," a deduction or abstraction from the capitalised wealth of the business community in favor of the magnates or "interests" to whom the gains accrue. Its proximate aim is a transfer of capitalised wealth from other capitalists to those who so gain. This transfer or abstraction of capitalised wealth from the former owners is commonly effected by an augmentation of the nominal capital, based on a (transient) advantage inuring to the particular concerns whose capitalisation is so augmented.[16] Any such increase of the community's aggregate capitalisation, without a corresponding increase of the material wealth on which the capitalisation is based, involves, of course, in effect a redistribution of the aggregate capitalised wealth; and in this redistribution the great financiers are in a position to gain. The gains in question, it will be seen, come out of the business community, out of invested wealth, and only remotely and indirectly out of the community at large from which the business community draws its income. These gains, therefore, are a tax on commonplace business enterprise, in much the same manner and with much the like effects as the gains of commonplace business (ordinary profits and interest) are a tax on industry.[17] In a manner analogous to the old-fashioned capitalist-employer's engrossing of the industrial community's technological efficiency does the modern pecuniary magnate engross the business community's capitalistic efficiency. This capitalistic efficiency lies in the capitalist-employer's ability--by force of the ownership of the material equipment--to induce the industrial community, through suitable bargaining, to turn over to the owner of the material equipment the excess of the product above the industrial community's livelihood. The fortunes of the capitalist-employer are closely dependent on the run of the market,--the conjunctures of advantageous purchase and sale; and it is his constant endeavor to create or gain for himself some peculiar degree of advantage in the market, in the way of monopoly, good-will, legalised privilege, and the like,--something in the way of intangible assets. But the pecuniary magnate, in the measure in which he truly answers to the concept, is superior to the market on which the capitalist-employer depends, and can make or mar its conjunctures of advantageous purchase and sale of goods; that is to say, he is in a position to make or mar any peculiar advantage possessed by the given capitalist-employer who comes in his way. He does this by force of his large holdings of capital at large, the weight of which he can shift from one point of investment to another as the relative efficiency--earning-capacity--of one and another line of investment may make it expedient; and at each move of this kind, in so far as it is effective for his ends, he cuts into and assimilates a fraction of the invested wealth involved, in that he cuts into and sequesters a fraction of the capital's earning-capacity in the given line. That is to say, in the measure in which he is a pecuniary magnate, and not simply a capitalist-employer, he engrosses the capitalistic efficiency of invested wealth; he turns to his own account the capitalist-employer's effectual engrossing of the community's industrial efficiency. He engrosses the community's pecuniary initiative and proficiency. In the measure, therefore, in which this relatively new-found serviceability of extraordinarily large wealth is effective for its peculiar business function, the old-fashioned capitalist-employer loses his discretionary initiative and becomes a mediator, an instrumentality of extraction and transmission, a collector and conveyer of revenue from the community at large to the pecuniary magnate, who, in the ideal case, should leave him only such an allowance out of the gross earnings collected and transmitted as will induce him to continue in business. To the community at large, whose industrial efficiency is already virtually engrossed by the capitalist-employer's ownership and control of the material equipment, this later step in the evolution of the economic situation should apparently not be a matter of substantial consequence or a matter for sentimental disturbance. On the face of it, it should appear to have little more than a speculative interest for those classes of the community who do not derive an income from investments; particularly not for the working classes, who own nothing to speak of and whose only dependence is their technological efficiency, which has virtually ceased to be their own. But such is not the current state of sentiment. This inchoate new phase of capitalism, this business enterprise on the higher plane, is in fact viewed with the most lively apprehension. In a maze of consternation and solicitude the boldest, wisest, most public-spirited, most illustrious gentlemen of our time are spending their manhood in an endeavor to make the hen continue sitting on the nest after the chickens are out of the shell. The modern community is imbued with business principles--of the old dispensation. By precept and example, men have learned that the business interests (of the authentic superannuated scale and kind) are the palladium of our civilisation, as Mr. Dooley would say; and it is felt that any disturbance of the existing pecuniary dominion of the capitalist-employer--as contrasted with the pecuniary magnate--would involve the well-being of the community in one common agony of desolation. The merits of this perturbation, or of the remedies proposed for saving the pecuniary life of the old-fashioned capitalist-employer, of course do not concern the present inquiry; but the matter has been referred to here as evidence that the pecuniary magnate's work, and the dominion which his extraordinarily large wealth gives him, are, in effect, substantially a new phase of the economic development, and that these phenomena are distastefully unfamiliar and are felt to be consequential enough to threaten the received institutional structure. That is to say, it is felt to be a new phase of business enterprise,--distasteful to those who stand to lose by it. The basis of this business enterprise on the higher plane is capital-at-large, as distinguished from capital invested in a given line of industrial enterprise, and it becomes effective when wealth has accumulated in holdings sufficiently large to give the holder (or combination of holders, the "system") a controlling weight in any group or ramification of business interests into which he may throw his weight by judicious investment (or by underwriting and the like). The pecuniary magnate must be able effectually to engross the pecuniary initiative and the business opportunities on which such a section or ramification of the business community depends for its ordinary gains. How large a proportion of the business community's capital is needed for such an effectual engrossing of its capitalistic efficiency, in any given bearing, is a question that cannot be answered in anything like absolute terms, or even in relative terms of a satisfactorily definite kind. It is, of course, evident that a relatively large disposable body of capital is needed for such a purpose; and it is also evident, from the current facts of business, that the body of capital so disposed of need not amount to a majority, or anything near a majority, of the investments involved,--at least not at the present relatively inchoate phase of this larger business enterprise. The larger the holdings of the magnate, the more effectual and expeditious will be his work of absorbing the holdings of the smaller capitalist-employer, and the more precipitately will the latter yield his assets to the new claimant. Evidently, this work of the pecuniary magnate bears a great resemblance to the creation of intangible assets under the ordinary competitive system. This is, no doubt, the point of its nearest relation to the current capitalistic enterprise. But, as has already been indicated above, it cannot be said that the magnate's peculiar work is the creation of intangible, or other assets, although there is commonly some recapitalisation involved in his manoeuvers, and although his gains commonly come as assets, _i.e._, in the capitalised form. Nor can it, as has also been indicated above, be said that the wealth which serves him as the means of his peculiar enterprise stands in the relation of assets to this enterprise or to the gains in question, since this wealth already stands in an exhaustive relation as assets to some corporate enterprise in ordinary business and to the corresponding items of interest and dividends. It may, of course, be contended that the present state of things on this higher plane of enterprise is transient and transitional only, and that in the settled condition which may conceivably supervene, the magnate's relation to business at large will be capitalised in some form of intangible assets, after the manner in which the monopoly advantage of an ordinary "trust" is now capitalised. But this is at the best only a surmise, guided by inapplicable generalisations drawn from a past situation in which this higher enterprise has not engrossed the pecuniary initiative and played the ruling part. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, Vol. XXIII, Nov., 1908. [2] See this Journal for August, 1908. [3] For the connection between prices and prosperity, hard times, unemployment, etc., see _The Theory of Business Enterprise_, chap. vii (pp. 185-252, especially 196-212). [4] By "perversion" is here meant such disposition of the industrial forces as entails a net waste or detriment to the community's livelihood. [5] Should the connection at this point with the main argument of the paper as set forth in the earlier section seem doubtful or obscure, it may be called to mind that these dubious enterprises in dissipation are cases of investment for a profit, and that the "capital goods" engaged are invested wealth yielding an income, but that they yield an income only on the fulfillment of two conditions: (_a_) the possession and employment of these capital goods enables their holder to turn to account the common stock of technological proficiency, in those bearings in which it may be of use in his enterprise; and (_b_) the limited amount of wealth available for the purpose enables their holder to "engross" the usufruct of such a fraction of the common stock of technological proficiency, in the degree determined by this limitation of the amount available. In so far, these enterprises are like any other industrial enterprise; but beyond this they have the peculiarity that they do not, or need not, even ostensibly, turn the current knowledge and use of ways and means to "productive" account for the community at large, but simply take their stand on the (institutionally sacred) "accomplished fact" of invested wealth. They have less of the fog of apology about them than the common run of business enterprise. [6] This statement may not seem clear without indicating in a more concrete manner some terms in which to measure the relative differential advantage and disadvantage which so emerge in such a case of prerogative or privilege. Where, as in the earlier, non-pecuniary phases of culture, no price test is applicable, the statement in the text may be taken to mean that the differential disadvantage at the cost of which the differential benefit in question is gained is greater than the beneficiary would be willing to undergo in order to procure this benefit. [7] A doubt has been offered as to the applicability of this characterization to such intangible assets as a patent right and other items of the same class. The doubt seems to arise from a misapprehension of the analysis and of its intention. It should be remarked that there is no intention to condemn or disapprove any of the items here spoken of as intangible assets. The patent right may be justifiable or it may not: there is no call to discuss that question here. Other intangible assets are in the same case in this respect. Further, as to the character of a patent right considered as an asset. The invention or innovation covered by the patent right is a contribution to the common stock of technological proficiency. It may be (immediately) serviceable to the community at large, or it may not;--_e.g._, a cash register, a bank-check punch, a streetcar fare register; a burglar-proof safe, and the like are of no immediate service to the community at large, but serve only a pecuniary use to their users. But, whether the innovation is useful or not, the patent right, as an asset, has no (immediate) usefulness at large, since its essence is the restriction of the usufruct of the innovation to the patentee. Immediately and directly the patent right must be considered a detriment to the community at large, since its purport is to prevent the community from making use of the patented innovation, whatever may be its ulterior beneficial effects or its ethical justification. [8] Neither as a physical magnitude ("land") nor as a pecuniary magnitude ("real estate") is the capitalised land in question an item of "good-will"; but its value as real estate--_i.e._, its magnitude as an asset--is in part a product of the "good-will" (illusions and the like) worked up in its behalf and turned to account, by the land agent. The real estate is a tangible asset, an item of material wealth, while the "good-will" to which in part it owes its magnitude as an item of wealth is an intangible asset, an item of immaterial wealth. [9] "Livelihood" is, of course, here taken in a loose sense, not as denoting the means of subsistence simply or even the means of physical comfort, but as signifying that the purchases in question are made with a view to the consumptive use of the goods rather than with a view to their use for a profit. [10] The instruments of production so monopolised are, of course, tangible assets, but the ownership of such means of production in amount sufficient to enable the owner to monopolise or control the market, whether for purchase (as of materials or labor) or for sale (as of marketable goods or services), gives rise to a differential business advantage which is to be classed as intangible assets. [11] One writer even goes so far in the endeavor to bring the facts within the scope of the staple concepts of theory at this point as to rate the persons concerned in such a case as "capital," after having satisfied himself that such income-streams are traceable to a personal source.--See Fisher, _Nature of Capital and Income_, chap. v. [12] _Cf._ Fisher, _Rate of Interest_, chap. vi. [13] This conclusion is reached, _e.g._, by Mr. G. P. Watkins (_The Growth of Large Fortunes_, chap. iii, sec. 10), although through a curious etymological misapprehension he rejects the term "timeless" as not available. [14] Even Mr. Watkins (as cited above), _e.g._, is led by a superficial generalisation to class these gains as "speculative," and so to excuse himself from a closer acquaintance with their character and with the bearings of the class of business enterprise out of which they arise. [15] _Cf._ _Theory of Business Enterprise_, chap, v, pp. 119-130; chap. vi, pp. 162-174. [16] _Cf._ _Theory of Business Enterprise_, footnote on pp. 169-170. [17] As should be evident from the run of the argument in the earlier portions of this paper, the use of the words "tax," "deduction," "abstraction," in this connection, is not to be taken as implying approval or disapproval of the phenomena so characterised. The words are used for want of better terms to indicate the source of business gains, and objectively to characterise the relation of give-and-take between industry and ordinary capitalistic business, on the one hand, and between ordinary business and this business enterprise on the higher plane, on the other hand. SOME NEGLECTED POINTS IN THE THEORY OF SOCIALISM[1] The immediate occasion for the writing of this paper was given by the publication of Mr. Spencer's essay, "From Freedom to Bondage";[2] although it is not altogether a criticism of that essay. It is not my purpose to controvert the position taken by Mr. Spencer as regards the present feasibility of any socialist scheme. The paper is mainly a suggestion, offered in the spirit of the disciple, with respect to a point not adequately covered by Mr. Spencer's discussion, and which has received but very scanty attention at the hands of any other writer on either side of the socialist controversy. This main point is as to an economic ground, as a matter of fact, for the existing unrest that finds expression in the demands of socialist agitators. I quote from Mr. Spencer's essay a sentence which does fair justice, so far as it goes, to the position taken by agitators: "In presence of obvious improvements, joined with that increase of longevity, which even alone yields conclusive proof of general amelioration, it is proclaimed, with increasing vehemence, that things are so bad that society must be pulled to pieces and reorganised on another plan." The most obtrusive feature of the change demanded by the advocates of socialism is governmental control of the industrial activities of society--the nationalisation of industry. There is also, just at present, a distinct movement in practice, towards a more extended control of industry by the government, as Mr. Spencer has pointed out. This movement strengthens the position of the advocates of a complete nationalisation of industry, by making it appear that the logic of events is on their side. In America at least, this movement in the direction of a broader assertion of the paramount claims of the community, and an extension of corporate action on part of the community in industrial matters, has not generally been connected with or based on an adherence to socialistic dogmas. This is perhaps truer of the recent past than of the immediate present. The motive of the movement has been, in large part, the expediency of each particular step taken. Municipal supervision, and, possibly, complete municipal control, has come to be a necessity in the case of such industries--mostly of recent growth--as elementary education, street-lighting, water-supply, etc. Opinions differ widely as to how far the community should take into its own hands such industries as concern the common welfare, but the growth of sentiment may fairly be said to favor a wider scope of governmental control. But the necessity of some supervision in the interest of the public extends to industries which are not simply of municipal importance. The modern development of industry and of the industrial organisation of society makes it increasingly necessary that certain industries--often spoken of as "natural monopolies"--should be treated as being of a semi-public character. And through the action of the same forces a constantly increasing number of occupations are developing into the form of "natural monopolies." The motive of the movement towards corporate action on the part of the community--State control of industry--has been largely that of industrial expediency. But another motive has gone with this one, and has grown more prominent as the popular demands in this direction have gathered wider support and taken more definite form. The injustice, the inequality, of the existing system, so far as concerns these natural monopolies especially, are made much of. There is a distinct unrest abroad, a discontent with things as they are, and the cry of injustice is the expression of this more or less widely prevalent discontent. This discontent is the truly socialistic element in the situation. It is easy to make too much of this popular unrest. The clamor of the agitators might be taken to indicate a wider prevalence and a greater acuteness of popular discontent than actually exists; but after all due allowance is made for exaggeration on the part of those interested in the agitation, there can still be no doubt of the presence of a chronic feeling of dissatisfaction with the working of the existing industrial system, and a growth of popular sentiment in favor of a leveling policy. The economic ground of this popular feeling must be found, if we wish to understand the significance, for our industrial system, of the movement to which it supplies the motive. If its causes shall appear to be of a transient character, there is little reason to apprehend a permanent or radical change of our industrial system as the outcome of the agitation; while if this popular sentiment is found to be the outgrowth of any of the essential features of the existing social system, the chances of its ultimately working a radical change in the system will be much greater. The explanation offered by Mr. Spencer, that the popular unrest is due essentially to a feeling of _ennui_--to a desire for a change of posture on part of the social body, is assuredly not to be summarily rejected; but the analogy will hardly serve to explain the sentiment away. This may be a cause, but it can hardly be accepted as a sufficient cause. Socialist agitators urge that the existing system is necessarily wasteful and industrially inefficient. That may be granted, but it does not serve to explain the popular discontent, because the popular opinion, in which the discontent resides, does notoriously not favor that view. They further urge that the existing system is unjust, in that it gives an advantage to one man over another. That contention may also be true, but it is in itself no explanation, for it is true only if it be granted that the institutions which make this advantage of one man over another possible are unjust, and that is begging the question. This last contention is, however, not so far out of line with popular sentiment. The advantage complained of lies, under modern conditions, in the possession of property, and there is a feeling abroad that the existing order of things affords an undue advantage to property, especially to owners of property whose possessions rise much above a certain rather indefinite average. This feeling of injured justice is not always distinguishable from envy; but it is, at any rate, a factor that works towards a leveling policy. With it goes a feeling of slighted manhood, which works in the same direction. Both these elements are to a great extent of a subjective origin. They express themselves in the general, objective form, but it is safe to say that on the average they spring from a consciousness of disadvantage and slight suffered by the person expressing them, and by persons whom he classes with himself. No flippancy is intended in saying that the rich are not so generally alive to the necessity of any leveling policy as are people of slender means. Any question as to the legitimacy of the dissatisfaction, on moral grounds, or even on grounds of expediency, is not very much to the point; the question is as to its scope and its chances of persistence. The modern industrial system is based on the institution of private property under free competition, and it cannot be claimed that these institutions have heretofore worked to the detriment of the material interests of the average member of society. The ground of discontent cannot lie in a disadvantageous comparison of the present with the past, so far as material interests are concerned. It is notorious, and, practically, none of the agitators deny, that the system of industrial competition, based on private property, has brought about, or has at least co-existed with, the most rapid advance in average wealth and industrial efficiency that the world has seen. Especially can it fairly be claimed that the result of the last few decades of our industrial development has been to increase greatly the creature comforts within the reach of the average human being. And, decidedly, the result has been an amelioration of the lot of the less favored in a relatively greater degree than that of those economically more fortunate. The claim that the system of competition has proved itself an engine for making the rich richer and the poor poorer has the fascination of epigram; but if its meaning is that the lot of the average, of the masses of humanity in civilised life, is worse to-day, as measured in the means of livelihood, than it was twenty, or fifty, or a hundred years ago, then it is farcical. The cause of discontent must be sought elsewhere than in any increased difficulty in obtaining the means of subsistence or of comfort. But there is a sense in which the aphorism is true, and in it lies at least a partial explanation of the unrest which our conservative people so greatly deprecate. The existing system has not made, and does not tend to make, the industrious poor poorer as measured absolutely in means of livelihood; but it does tend to make them relatively poorer, in their own eyes, as measured in terms of comparative economic importance, and, curious as it may seem at first sight, that is what seems to count. It is not the abjectly poor that are oftenest heard protesting; and when a protest is heard in their behalf it is through spokesmen who are from outside their own class, and who are not delegated to speak for them. They are not a negligible element in the situation, but the unrest which is ground for solicitude does not owe its importance to them. The protest comes from those who do not habitually, or of necessity, suffer physical privation. The qualification "of necessity," is to be noticed. There is a not inconsiderable amount of physical privation suffered by many people in this country, which is not physically necessary. The cause is very often that what might be the means of comfort is diverted to the purpose of maintaining a decent appearance, or even a show of luxury. Man as we find him to-day has much regard to his good fame--to his standing in the esteem of his fellowmen. This characteristic he always has had, and no doubt always will have. This regard for reputation may take the noble form of a striving after a good name; but the existing organisation of society does not in any way preëminently foster that line of development. Regard for one's reputation means, in the average of cases, emulation. It is a striving to be, and more immediately to be thought to be, better than one's neighbor. Now, modern society, the society in which competition without prescription is predominant, is preëminently an industrial, economic society, and it is industrial--economic--excellence that most readily attracts the approving regard of that society. Integrity and personal worth will, of course, count for something, now as always; but in the case of a person of moderate pretentions and opportunities, such as the average of us are, one's reputation for excellence in this direction does not penetrate far enough into the very wide environment to which a person is exposed in modern society to satisfy even a very modest craving for respectability. To sustain one's dignity--and to sustain one's self-respect--under the eyes of people who are not socially one's immediate neighbors, it is necessary to display the token of economic worth, which practically coincides pretty closely with economic success. A person may be well-born and virtuous, but those attributes will not bring respect to the bearer from people who are not aware of his possessing them, and these are ninety-nine out of every one hundred that one meets. Conversely, by the way, knavery and vulgarity in any person are not reprobated by people who know nothing of the person's shortcomings in those respects. In our fundamentally industrial society a person should be economically successful, if he would enjoy the esteem of his fellowmen. When we say that a man is "worth" so many dollars, the expression does not convey the idea that moral or other personal excellence is to be measured in terms of money, but it does very distinctly convey the idea that the fact of his possessing many dollars is very much to his credit. And, except in cases of extraordinary excellence, efficiency in any direction which is not immediately of industrial importance, and does not redound to a person's economic benefit, is not of great value as a means of respectability. Economic success is in our day the most widely accepted as well as the most readily ascertainable measure of esteem. All this will hold with still greater force of a generation which is born into a world already encrusted with this habit of a mind. But there is a further, secondary stage in the development of this economic emulation. It is not enough to possess the talisman of industrial success. In order that it may mend one's good fame efficiently, it is necessary to display it. One does not "make much of a showing" in the eyes of the large majority of the people whom one meets with, except by unremitting demonstration of ability to pay. That is practically the only means which the average of us have of impressing our respectability on the many to whom we are personally unknown, but whose transient good opinion we would so gladly enjoy. So it comes about that the appearance of success is very much to be desired, and is even in many cases preferred to the substance. We all know how nearly indispensable it is to afford whatever expenditure other people with whom we class ourselves can afford, and also that it is desirable to afford a little something more than others. This element of human nature has much to do with the "standard of living." And it is of a very elastic nature, capable of an indefinite extension. After making proper allowance for individual exceptions and for the action of prudential restraints, it may be said, in a general way, that this emulation in expenditure stands ever ready to absorb any margin of income that remains after ordinary physical wants and comforts have been provided for, and, further, that it presently becomes as hard to give up that part of one's habitual "standard of living" which is due to the struggle for respectability, as it is to give up many physical comforts. In a general way, the need of expenditure in this direction grows as fast as the means of satisfying it, and, in the long run, a large expenditure comes no nearer satisfying the desire than a smaller one. It comes about through the working of this principle that even the creature comforts, which are in themselves desirable, and, it may even be, requisite to a life on a passably satisfactory plane, acquire a value as a means of respectability quite independent of, and out of proportion to, their simple utility as a means of livelihood. As we are all aware, the chief element of value in many articles of apparel is not their efficiency for protecting the body, but for protecting the wearer's respectability; and that not only in the eyes of one's neighbors but even in one's own eyes. Indeed, it happens not very rarely that a person chooses to go ill-clad in order to be well dressed. Much more than half the value of what is worn by the American people may confidently be put down to the element of "dress," rather than to that of "clothing." And the chief motive of dress is emulation--"economic emulation." The like is true, though perhaps in a less degree, of what goes to food and shelter. This misdirection of effort through the cravings of human vanity is of course not anything new, nor is "economic emulation" a modern fact. The modern system of industry has not invented emulation, nor has even this particular form of emulation originated under that system. But the system of free competition has accentuated this form of emulation, both by exalting the industrial activity of man above the rank which it held under more primitive forms of social organisation, and by in great measure cutting off other forms of emulation from the chance of efficiently ministering to the craving for a good fame. Speaking generally and from the standpoint of the average man, the modern industrial organization of society has practically narrowed the scope of emulation to this one line; and at the same time it has made the means of sustenance and comfort so much easier to obtain as very materially to widen the margin of human exertion that can be devoted to purposes of emulation. Further, by increasing the freedom of movement of the individual and widening the environment to which the individual is exposed--increasing the number of persons before whose eyes each one carries on his life, and, _pari passu_, decreasing the chances which such persons have of awarding their esteem on any other basis than that of immediate appearances, it has increased the relative efficiency of the economic means of winning respect through a show of expenditure for personal comforts. It is not probable that further advance in the same direction will lead to a different result in the immediate future; and it is the _immediate_ future we have to deal with. A further advance in the efficiency of our industry, and a further widening of the human environment to which the individual is exposed, should logically render emulation in this direction more intense. There are, indeed, certain considerations to be set off against this tendency, but they are mostly factors of slow action, and are hardly of sufficient consequence to reverse the general rule. On the whole, other things remaining the same, it must be admitted that, within wide limits, the easier the conditions of physical life for modern civilised man become, and the wider the horizon of each and the extent of the personal contact of each with his fellowmen, and the greater the opportunity of each to compare notes with his fellows, the greater will be the preponderance of economic success as a means of emulation, and the greater the straining after economic respectability. Inasmuch as the aim of emulation is not any absolute degree of comfort or of excellence, no advance in the average well-being of the community can end the struggle or lessen the strain. A general amelioration cannot quiet the unrest whose source is the craving of everybody to compare favorably with his neighbor. Human nature being what it is, the struggle of each to possess more than his neighbor is inseparable from the institution of private property. And also, human nature being what it is, one who possesses less will, on the average, be jealous of the one who possesses more; and "more" means not more than the average share, but more than the share of the person who makes the comparison. The criterion of complacency is, largely, the _de facto_ possession or enjoyment; and the present growth of sentiment among the body of the people--who possess less--favors, in a vague way, a readjustment adverse to the interests of those who possess more, and adverse to the possibility of legitimately possessing or enjoying "more"; that is to say, the growth of sentiment favors a socialistic movement. The outcome of modern industrial development has been, so far as concerns the present purpose, to intensify emulation and the jealousy that goes with emulation, and to focus the emulation and the jealousy on the possession and enjoyment of material goods. The ground of the unrest with which we are concerned is, very largely, jealousy,--envy, if you choose; and the ground of this particular form of jealousy, that makes for socialism, is to be found in the institution of private property. With private property, under modern conditions, this jealousy and unrest are unavoidable. The corner-stone of the modern industrial system is the institution of private property. That institution is also the objective point of all attacks upon the existing system of competitive industry, whether open or covert, whether directed against the system as a whole or against any special feature of it. It is, moreover, the ultimate ground--and, under modern conditions, necessarily so--of the unrest and discontent whose proximate cause is the struggle for economic respectability. The inference seems to be that, human nature being what it is, there can be no peace from this--it must be admitted--ignoble form of emulation, or from the discontent that goes with it, this side of the abolition of private property. Whether a larger measure of peace is in store for us after that event shall have come to pass, is of course not a matter to be counted on, nor is the question immediately to the point. This economic emulation is of course not the sole motive, nor the most important feature, of modern industrial life; although it is in the foreground, and it pervades the structure of modern society more thoroughly perhaps than any other equally powerful moral factor. It would be rash to predict that socialism will be the inevitable outcome of a continued development of this emulation and the discontent which it fosters, and it is by no means the purpose of this paper to insist on such an inference. The most that can be claimed is that this emulation is one of the causes, if not the chief cause, of the existing unrest and dissatisfaction with things as they are; that this unrest is inseparable from the existing system of industrial organisation; and that the growth of popular sentiment under the influence of these conditions is necessarily adverse to the institution of private property, and therefore adverse to the existing industrial system of free competition. * * * * * The emulation to which attention has been called in the preceding section of this paper is not only a fact of importance to an understanding of the unrest that is urging us towards an untried path in social development, but it has also a bearing on the question of the practicability of any scheme for the complete nationalisation of industry. Modern industry has developed to such a degree of efficiency as to make the struggle of subsistence alone, under average conditions, relatively easy, as compared with the state of the case a few generations ago. As I have labored to show, the modern competitive system has at the same time given the spirit of emulation such a direction that the attainment of subsistence and comfort no longer fixes, even approximately, the limit of the required aggregate labor on the part of the community. Under modern conditions the struggle for existence has, in a very appreciable degree, been transformed into a struggle to keep up appearances. The ultimate ground of this struggle to keep up appearance by otherwise unnecessary expenditure, is the institution of private property. Under a régime which should allow no inequality of acquisition or of income, this form of emulation, which is due to the possibility of such inequality, would also tend to become obsolete. With the abolition of private property, the characteristic of human nature which now finds its exercise in this form of emulation, should logically find exercise in other, perhaps nobler and socially more serviceable, activities; it is at any rate not easy to imagine it running into any line of action more futile or less worthy of human effort. Supposing the standard of comfort of the community to remain approximately at its present average, the abolition of the struggle to keep up economic appearances would very considerably lessen the aggregate amount of labor required for the support of the community. How great a saving of labor might be effected is not easy to say. I believe it is within the mark to suppose that the struggle to keep up appearances is chargeable, directly and indirectly, with one-half the aggregate labor, and abstinence from labor--for the standard of respectability requires us to shun labor as well as to enjoy the fruits of it--on part of the American people. This does not mean that the same community, under a system not allowing private property, could make its way with half the labor we now put forth; but it means something more or less nearly approaching that. Any one who has not seen our modern social life from this point of view will find the claim absurdly extravagant, but the startling character of the proposition will wear off with longer and closer attention to this aspect of the facts of everyday life. But the question of the exact amount of waste due to this factor is immaterial. It will not be denied that is is a fact of considerable magnitude, and that is all that the argument requires. It is accordingly competent for the advocates of the nationalisation of industry and property to claim that even if their scheme of organisation should prove less effective for production of goods than the present, as measured absolutely in terms of the aggregate output of our industry, yet the community might readily be maintained at the present average standard of comfort. The required aggregate output of the nation's industry would be considerably less than at present, and there would therefore be less necessity for that close and strenuous industrial organisation and discipline of the members of society under the new régime, whose evils unfriendly critics are apt to magnify. The chances of practicability for the scheme should logically be considerably increased by this lessening of the necessity for severe application. The less irksome and exacting the new régime, the less chance of a reversion to the earlier system. Under such a social order, where common labor would no longer be a mark of peculiar economic necessity and consequent low economic rank on part of the laborer, it is even conceivable that labor might practically come to assume that character of nobility in the eyes of society at large, which it now sometimes assumes in the speculations of the well-to-do, in their complacent moods. Much has sometimes been made of this possibility by socialist speculators, but the inference has something of a utopian look, and no one, certainly, is entitled to build institutions for the coming social order on this dubious ground. What there seems to be ground for claiming is that a society which has reached our present degree of industrial efficiency would not go into the Socialist or Nationalist state with as many chances of failure as a community whose industrial development is still at the stage at which strenuous labor on the part of nearly all members is barely sufficient to make both ends meet. In Mr. Spencer's essay, in conformity with the line of argument of his "Principles of Sociology," it is pointed out that, as the result of constantly operative social forces, all social systems, as regards the form of organisation, fall into the one or the other of Sir Henry Maine's two classes--the system of status or the system of contract. In accordance with this generalisation it is concluded that whenever the modern system of contract or free competition shall be displaced, it will necessarily be replaced by the only other known system--that of status; the type of which is the military organisation, or, also, a hierarchy, or a bureaucracy. It is something after the fashion of the industrial organisation of ancient Peru that Mr. Spencer pictures as the inevitable sequel of the demise of the existing competitive system. Voluntary coöperation can be replaced only by compulsory coöperation, which is identified with the system of status and defined as the subjection of man to his fellow-man. Now, at least as a matter of speculation, this is not the only alternative. These two systems, of status, or prescription, and of contract, or competition, have divided the field of social organisation between them in some proportion or other in the past. Mr. Spencer has shown that, very generally, where human progress in its advanced stages has worked towards the amelioration of the lot of the average member of society, the movement has been away from the system of status and towards the system of contract. But there is at least one, if not more than one exception to the rule, as concerns the recent past. The latest development of the industrial organisation among civilised nations--perhaps in an especial degree in the case of the American people--has not been entirely a continuation of the approach to a régime of free contract. It is also, to say the least, very doubtful if the movement has been towards a régime of status, in the sense in which Sir Henry Maine uses the term. This is especially evident in the case of the great industries which we call "natural monopolies"; and it is to be added that the present tendency is for a continually increasing proportion of the industrial activities of the community to fall into the category of "natural monopolies." No revolution has been achieved; the system of competition has not been discarded, but the course of industrial development is not in the direction of an extension of that system at all points; nor does the principle of status always replace that of competition wherever the latter fails. The classification of methods of social organisation under the two heads of status or of contract, is not logically exhaustive. There is nothing in the meaning of the terms employed which will compel us to say that whenever man escapes from the control of his fellow man, under a system of status, he thereby falls into a system of free contract. There is a conceivable escape from the dilemma, and it is this conceivable, though perhaps impracticable, escape from both these systems that the socialist agitator wishes to effect. An acquaintance with the aims and position of the more advanced and consistent advocates of a new departure leaves no doubt but that the principles of contract and of status, both, are in substance familiar to their thoughts--though often in a vague and inadequate form--and that they distinctly repudiate both. This is perhaps less true of those who take the socialist position mainly on ethical grounds. As bearing on this point it may be remarked that while the industrial system, in the case of all communities with whose history we are acquainted, has always in the past been organised according to a scheme of status or of contract, or of the two combined in some proportion, yet the social organisation has not in all cases developed along the same lines, so far as concerns such social functions as are not primarily industrial. Especially is this true of the later stages in the development of those communities whose institutions we are accustomed to contemplate with the most complacency, _e.g._, the case of the English-speaking peoples. The whole system of modern constitutional government in its latest developed forms, in theory at least, and, in a measure, in practice, does not fall under the head of either contract or status. It is the analogy of modern constitutional government through an impersonal law and impersonal institutions, that comes nearest doing justice to the vague notions of our socialist propagandists. It is true, some of the most noted among them are fond of the analogy of the military organisation, as a striking illustration of one feature of the system they advocate, but that must after all be taken as an _obiter dictum_. Further, as to the manner of the evolution of existing institutions and their relation to the two systems spoken of. So far as concerns the communities which have figured largely in the civilised world, the political organisation has had its origin in a military system of government. So, also, has the industrial organisation. But while the development of industry, during its gradual escape from the military system of status, has been, at least until lately, in the direction of a system of free contract, the development of the political organisation, so far as it has escaped from the régime of status, has not been in that direction. The system of status is a system of subjection to personal authority,--of prescription and class distinctions, and privileges and immunities; the system of constitutional government, especially as seen at its best among a people of democratic traditions and habits of mind, is a system of subjection to the will of the social organism, as expressed in an impersonal law. This difference between the system of status and the "constitutional system" expresses a large part of the meaning of the boasted free institutions of the English-speaking people. Here, subjection is not to the person of the public functionary, but to the powers vested in him. This has, of course, something of the ring of latter-day popular rhetoric, but it is after all felt to be true, not only speculatively, but in some measure also in practice. The right of eminent domain and the power to tax, as interpreted under modern constitutional forms, indicate something of the direction of development of the political functions of society at a point where they touch the province of the industrial system. It is along the line indicated by these and kindred facts that the socialists are advancing; and it is along this line that the later developments made necessary by the exigencies of industry under modern conditions are also moving. The aim of the propagandists is to sink the industrial community in the political community; or perhaps better, to identify the two organisations; but always with insistence on the necessity of making the political organisation, in some further developed form, the ruling and only one in the outcome. Distinctly, the system of contract is to be done away with; and equally distinctly, no system of status is to take its place. All this is pretty vague, and of a negative character, but it would quickly pass the limits of legitimate inference from the accepted doctrines of the socialists if it should attempt to be anything more. It does not have much to say as to the practicability of any socialist scheme. As a matter of speculation, there seems to be an escape from the dilemma insisted on by Mr. Spencer. We may conceivably have nationalism without status and without contract. In theory, both principles are entirely obnoxious to that system. The practical question, as to whether modern society affords the materials out of which an industrial structure can be erected on a system different from either of these, is a problem of constructive social engineering which calls for a consideration of details far too comprehensive to be entered on here. Still, in view of the past course of development of character and institutions on the part of the people to which we belong, it is perhaps not extravagant to claim that no form of organisation which should necessarily eventuate in a thorough-going system of status could endure among us. The inference from this proposition may be, either that a near approach to nationalisation of industry would involve a régime of status, a bureaucracy, which would be unendurable, and which would therefore drive us back to the present system before it had been entirely abandoned; or that the nationalisation would be achieved with such a measure of success, in conformity with the requirements of our type of character, as would make it preferable to what we had left behind. In either case the ground for alarm does not seem so serious as is sometimes imagined. A reversion to the system of free competition, after it had been in large part discarded, would no doubt be a matter of great practical difficulty, and the experiment which should demonstrate the necessity of such a step might involve great waste and suffering, and might seriously retard the advance of the race toward something better than our present condition; but neither a permanent deterioration of human society, nor a huge catastrophe, is to be confidently counted on as the outcome of the movement toward nationalisation, even if it should prove necessary for society to retrace its steps. It is conceivable that the application of what may be called the "constitutional method" to the organisation of industry--for that is essentially what the advocates of Nationalisation demand--would result in a course of development analogous to what has taken place in the case of the political organisation under modern constitutional forms. Modern constitutional government--the system of modern free institutions--is by no means an unqualified success, in the sense of securing to each the rights and immunities which in theory are guaranteed to him. Our modern republics have hardly given us a foretaste of that political millennium whereof they proclaim the fruition. The average human nature is as yet by no means entirely fit for self-government according to the "constitutional method." Shortcomings are visible at every turn. These shortcomings are grave enough to furnish serious arguments against the practicability of our free institutions. On the continent of Europe the belief seems to be at present in the ascendant that man must yet, for a long time, remain under the tutelage of absolutism before he shall be fit to organise himself into an autonomous political body. The belief is not altogether irrational. Just how great must be the advance of society and just what must be the character of the advance, preliminary to its advantageously assuming the autonomous--republican--form of political organisation, must be admitted to be an open question. Whether we, or any people, have yet reached the required stage of the advance is also questioned by many. But the partial success which has attended the movement in this direction, among the English-speaking people for example, goes very far towards proving that the point in the development of human character at which the constitutional method may be advantageously adopted in the political field, lies far this side the point at which human nature shall have become completely adapted for that method. That is to say, it does not seem necessary, as regards the functions of society which we are accustomed to call political, to be entirely ready for nationalisation before entering upon it. How far the analogy of this will hold when applied to the industrial organisation of society is difficult to say, but some significance the analogy must be admitted to possess. Certainly, the fact that constitutional government--the nationalisation of political functions--seems to have been a move in the right direction is not to be taken as proof of the advisability of forthwith nationalising the industrial functions. At the same time this fact does afford ground for the claim that a movement in this direction may prove itself in some degree advantageous, even if it takes place at a stage in the development of human nature at which mankind is still far from being entirely fit for the duties which the new system shall impose. The question, therefore, is not whether we have reached the perfection of character which would be necessary in order to a perfect working of the scheme of nationalisation of industry, but whether we have reached such a degree of development as would make an imperfect working of the scheme possible. FOOTNOTES: [1] Reprinted by permission from the _Annals of American Academy of Political and Social Science_, Vol. II, 1892. [2] Introductory paper of _A Plea for Liberty_; edited by Thomas Mackay. THE SOCIALIST ECONOMICS OF KARL MARX AND HIS FOLLOWERS[1] I. THE THEORIES OF KARL MARX The system of doctrines worked out by Marx is characterised by a certain boldness of conception and a great logical consistency. Taken in detail, the constituent elements of the system are neither novel nor iconoclastic, nor does Marx at any point claim to have discovered previously hidden facts or to have invented recondite formulations of facts already known; but the system as a whole has an air of originality and initiative such as is rarely met with among the sciences that deal with any phase of human culture. How much of this distinctive character the Marxian system owes to the personal traits of its creator is not easy to say, but what marks it off from all other systems of economic theory is not a matter of personal idiosyncrasy. It differs characteristically from all systems of theory that had preceded it, both in its premises and in its aims. The (hostile) critics of Marx have not sufficiently appreciated the radical character of his departure in both of these respects, and have, therefore, commonly lost themselves in a tangled scrutiny of supposedly abstruse details; whereas those writers who have been in sympathy with his teachings have too commonly been disciples bent on exegesis and on confirming their fellow-disciples in the faith. Except as a whole and except in the light of its postulates and aims, the Marxian system is not only not tenable, but it is not even intelligible. A discussion of a given isolated feature of the system (such as the theory of value) from the point of view of classical economics (such as that offered by Böhm-Bawerk) is as futile as a discussion of solids in terms of two dimensions. Neither as regards his postulates and preconceptions nor as regards the aim of his inquiry is Marx's position an altogether single-minded one. In neither respect does his position come of a single line of antecedents. He is of no single school of philosophy, nor are his ideals those of any single group of speculators living before his time. For this reason he takes his place as an originator of a school of thought as well as the leader of a movement looking to a practical end. As to the motives which drive him and the aspirations which guide him, in destructive criticism and in creative speculation alike, he is primarily a theoretician busied with the analysis of economic phenomena and their organisation into a consistent and faithful system of scientific knowledge; but he is, at the same time, consistently and tenaciously alert to the bearing which each step in the progress of his theoretical work has upon the propaganda. His work has, therefore, an air of bias, such as belongs to an advocate's argument; but it is not, therefore, to be assumed, nor indeed to be credited, that his propagandist aims have in any substantial way deflected his inquiry or his speculations from the faithful pursuit of scientific truth. His socialistic bias may color his polemics, but his logical grasp is too neat and firm to admit of any bias, other than that of his metaphysical preconceptions, affecting his theoretical work. There is no system of economic theory more logical than that of Marx. No member of the system, no single article of doctrine, is fairly to be understood, criticised, or defended except as an articulate member of the whole and in the light of the preconceptions and postulates which afford the point of departure and the controlling norm of the whole. As regards these preconceptions and postulates, Marx draws on two distinct lines of antecedents,--the Materialistic Hegelianism and the English system of Natural Rights. By his earlier training he is an adept in the Hegelian method of speculation and inoculated with the metaphysics of development underlying the Hegelian system. By his later training he is an expert in the system of Natural Rights and Natural Liberty, ingrained in his ideals of life and held inviolate throughout. He does not take a critical attitude toward the underlying principles of Natural Rights. Even his Hegelian preconceptions of development never carry him the length of questioning the fundamental principles of that system. He is only more ruthlessly consistent in working out their content than his natural-rights antagonists in the liberal-classical school. His polemics run against the specific tenets of the liberal school, but they run wholly on the ground afforded by the premises of that school. The ideals of his propaganda are natural-rights ideals, but his theory of the working out of these ideals in the course of history rests on the Hegelian metaphysics of development, and his method of speculation and construction of theory is given by the Hegelian dialectic. * * * * * What first and most vividly centered interest on Marx and his speculations was his relation to the revolutionary socialistic movement; and it is those features of his doctrines which bear immediately on the propaganda that still continue to hold the attention of the greater number of his critics. Chief among these doctrines, in the apprehension of his critics, is the theory of value, with its corollaries: (_a_) the doctrines of the exploitation of labor by capital; and (_b_) the laborer's claim to the whole product of his labor. Avowedly, Marx traces his doctrine of labor-value to Ricardo, and through him to the classical economists.[2] The laborer's claim to the whole product of labor, which is pretty constantly implied, though not frequently avowed by Marx, he has in all probability taken from English writers of the early nineteenth century,[3] more particularly from William Thompson. These doctrines are, on their face, nothing but a development of the conceptions of natural rights which then pervaded English speculation and afforded the metaphysical ground of the liberal movement. The more formidable critics of the Marxian socialism have made much of these doctrinal elements that further the propaganda, and have, by laying the stress on these, diverted attention from other elements that are of more vital consequence to the system as a body of theory. Their exclusive interest in this side of "scientific socialism" has even led them to deny the Marxian system all substantial originality, and make it a (doubtfully legitimate) offshoot of English Liberalism and natural rights.[4] But this is one-sided criticism. It may hold as against certain tenets of the so-called "scientific socialism," but it is not altogether to the point as regards the Marxian system of theory. Even the Marxian theory of value, surplus value, and exploitation, is not simply the doctrine of William Thompson, transcribed and sophisticated in a forbidding terminology, however great the superficial resemblance and however large Marx's unacknowledged debt to Thompson may be on these heads. For many details and for much of his animus Marx may be indebted to the Utilitarians; but, after all, his system of theory, taken as a whole, lies within the frontiers of neo-Hegelianism, and even the details are worked out in accord with the preconceptions of that school of thought and have taken on the complexion that would properly belong to them on that ground. It is, therefore, not by an itemised scrutiny of the details of doctrine and by tracing their pedigree in detail that a fair conception of Marx and his contribution to economics may be reached, but rather by following him from his own point of departure out into the ramifications of his theory, and so overlooking the whole in the prospective which the lapse of time now affords us, but which he could not himself attain, since he was too near to his own work to see why he went about it as he did. * * * * * The comprehensive system of Marxism is comprised within the scheme of the Materialistic Conception of History.[5] This materialistic conception is essentially Hegelian,[6] although it belongs with the Hegelian Left, and its immediate affiliation is with Feuerbach, not with the direct line of Hegelian orthodoxy. The chief point of interest here, in identifying the materialistic conception with Hegelianism, is that this identification throws it immediately and uncompromisingly into contrast with Darwinism and the post-Darwinian conceptions of evolution. Even if a plausible English pedigree should be worked out for this Materialistic Conception, or "Scientific Socialism," as has been attempted, it remains none the less true that the conception with which Marx went to his work was a transmuted framework of Hegelian dialectic.[7] Roughly, Hegelian materialism differs from Hegelian orthodoxy by inverting the main logical sequence, not by discarding the logic or resorting to new tests of truth or finality. One might say, though perhaps with excessive crudity, that, where Hegel pronounces his dictum, _Das Denken ist das Sein_, the materialists, particularly Marx and Engels, would say _Das Sein macht das Denken_. But in both cases some sort of a creative primacy is assigned to one or the other member of the complex, and in neither case is the relation between the two members a causal relation. In the materialistic conception man's spiritual life--what man thinks--is a reflex of what he is in the material respect, very much in the same fashion as the orthodox Hegelian would make the material world a reflex of the spirit. In both, the dominant norm of speculation and formulation of theory is the conception of movement, development, evolution, progress; and in both the movement is conceived necessarily to take place by the method of conflict or struggle. The movement is of the nature of progress,--gradual advance toward a goal, toward the realisation in explicit form of all that is implicit in the substantial activity involved in the movement. The movement is, further, self-conditioned and self-acting: it is an unfolding by inner necessity. The struggle which constitutes the method of movement or evolution is, in the Hegelian system proper, the struggle of the spirit for self-realisation by the process of the well-known three-phase dialectic. In the materialistic conception of history this dialectical movement becomes the class struggle of the Marxian system. The class struggle is conceived to be "material," but the term "material" is in this connection used in a metaphorical sense. It does not mean mechanical or physical, or even physiological, but economic. It is material in the sense that it is a struggle between classes for the material means of life. "The materialistic conception of history proceeds on the principle that production and, next to production, the exchange of its products is the groundwork of every social order."[8] The social order takes its form through the class struggle, and the character of the class struggle at any given phase of the unfolding development of society is determined by "the prevailing mode of economic production and exchange." The dialectic of the movement of social progress, therefore, moves on the spiritual plane of human desire and passion, not on the (literally) material plane of mechanical and physiological stress, on which the developmental process of brute creation unfolds itself. It is a sublimated materialism, sublimated by the dominating presence of the conscious human spirit; but it is conditioned by the material facts of the production of the means of life.[9] The ultimately active forces involved in the process of unfolding social life are (apparently) the material agencies engaged in the mechanics of production; but the dialectic of the process--the class struggle--runs its course only among and in terms of the secondary (epigenetic) forces of human consciousness engaged in the valuation of the material products of industry. A consistently materialistic conception, consistently adhering to a materialistic interpretation of the process of development as well as of the facts involved in the process, could scarcely avoid making its putative dialectic struggle a mere unconscious and irrelevant conflict of the brute material forces. This would have amounted to an interpretation in terms of opaque cause and effect, without recourse to the concept of a conscious class struggle, and it might have led to a concept of evolution similar to the unteleological Darwinian concept of natural selection. It could scarcely have led to the Marxian notion of a conscious class struggle as the one necessary method of social progress, though it might conceivably, by the aid of empirical generalisation, have led to a scheme of social process in which a class struggle would be included as an incidental though perhaps highly efficient factor.[10] It would have led, as Darwinism has, to a concept of a process of cumulative change in social structure and function; but this process, being essentially a cumulative sequence of causation, opaque and unteleological, could not, without an infusion of pious fancy by the speculator, be asserted to involve progress as distinct from retrogression or to tend to a "realisation" or "self-realisation" of the human spirit or of anything else. Neither could it conceivably be asserted to lead up to a final term, a goal to which all lines of the process should converge and beyond which the process would not go, such as the assumed goal of the Marxian process of class struggle, which is conceived to cease in the classless economic structure of the socialistic final term. In Darwinism there is no such final or perfect term, and no definitive equilibrium. The disparity between Marxism and Darwinism, as well as the disparity within the Marxian system between the range of material facts that are conceived to be the fundamental forces of the process, on the one hand, and the range of spiritual facts within which the dialectic movement proceeds,--this disparity is shown in the character assigned the class struggle by Marx and Engels. The struggle is asserted to be a conscious one, and proceeds on a recognition by the competing classes of their mutually incompatible interests with regard to the material means of life. The class struggle proceeds on motives of interest, and a recognition of class interest can, of course, be reached only by reflection on the facts of the case. There is, therefore, not even a direct causal connection between the material forces in the case and the choice of a given interested line of conduct. The attitude of the interested party does not result from the material forces so immediately as to place it within the relation of direct cause and effect, nor even with such a degree of intimacy as to admit of its being classed as a tropismatic, or even instinctive, response to the impact of the material force in question. The sequence of reflection, and the consequent choice of sides to a quarrel, run entirely alongside of a range of material facts concerned. A further characteristic of the doctrine of class struggle requires mention. While the concept is not Darwinian, it is also not legitimately Hegelian, whether of the Right or the Left. It is of a utilitarian origin and of English pedigree, and it belongs to Marx by virtue of his having borrowed its elements from the system of self-interest. It is in fact a piece of hedonism, and is related to Bentham rather than to Hegel. It proceeds on the grounds of the hedonistic calculus, which is equally foreign to the Hegelian notion of an unfolding process and to the post-Darwinian notions of cumulative causation. As regards the tenability of the doctrine, apart from the question of its derivation and its compatibility with the neo-Hegelian postulates, it is to be added that it is quite out of harmony with the later results of psychological inquiry,--just as is true of the use made of the hedonistic calculus by the classical (Austrian) economics. * * * * * Within the domain covered by the materialistic conception, that is to say within the domain of unfolding human culture, which is the field of Marxian speculation at large, Marx has more particularly devoted his efforts to an analysis and theoretical formulation of the present situation,--the current phase of the process, the capitalistic system. And, since the prevailing mode of the production of goods determines the institutional, intellectual, and spiritual life of the epoch, by determining the form and method of the current class struggle, the discussion necessarily begins with the theory of "capitalistic production," or production as carried on under the capitalistic system.[11] Under the capitalistic system, that is to say under the system of modern business traffic, production is a production of commodities, merchantable goods, with a view to the price to be obtained for them in the market. The great fact on which all industry under this system hinges is the price of marketable goods. Therefore it is at this point that Marx strikes into the system of capitalistic production, and therefore the theory of value becomes the dominant feature of his economics and the point of departure for the whole analysis, in all its voluminous ramifications.[12] It is scarcely worth while to question what serves as the beginning of wisdom in the current criticisms of Marx; namely, that he offers no adequate proof of his labor-value theory.[13] It is even safe to go farther, and say that he offers no proof of it. The feint which occupies the opening paragraphs of the _Kapital_ and the corresponding passages of _Zur Kritik_, etc., is not to be taken seriously as an attempt to prove his position on this head by the ordinary recourse to argument. It is rather a self-satisfied superior's playful mystification of those readers (critics) whose limited powers do not enable them to see that his proposition is self-evident. Taken on the Hegelian (neo-Hegelian) ground, and seen in the light of the general materialistic conception, the proposition that value = labor-cost is self-evident, not to say tautological. Seen in any other light, it has no particular force. In the Hegelian scheme of things the only substantial reality is the unfolding life of the spirit. In the neo-Hegelian scheme, as embodied in the materialistic conception, this reality is translated into terms of the unfolding (material) life of man in society.[14] In so far as the goods are products of industry, they are the output of this unfolding life of man, a material residue embodying a given fraction of this forceful life-process. In this life-process lies all substantial reality, and all finally valid relations of quantivalence between the products of this life-process must run in its terms. The life-process, which, when it takes the specific form of an expenditure of labor power, goes to produce goods, is a process of material forces, the spiritual or mental features of the life-process and of labor being only its insubstantial reflex. It is consequently only in the material changes wrought by this expenditure of labor power that the metaphysical substance of life--labor power--can be embodied; but in these changes of material fact it cannot but be embodied, since these are the end to which it is directed. This balance between goods in respect of their magnitude as output of human labor holds good indefeasibly, in point of the metaphysical reality of the life-process, whatever superficial (phenomenal) variations from this norm may occur in men's dealings with the goods under the stress of the strategy of self-interest. Such is the value of the goods in reality; they are equivalents of one another in the proportion in which they partake of this substantial quality, although their true ratio of equivalence may never come to an adequate expression in the transactions involved in the distribution of the goods. This real or true value of the goods is a fact of production, and holds true under all systems and methods of production, whereas the exchange value (the "phenomenal form" of the real value) is a fact of distribution, and expresses the real value more or less adequately according as the scheme of distribution in force at the given time conforms more or less closely to the equities given by production. If the output of industry were distributed to the productive agents strictly in proportion to their shares in production, the exchange value of the goods would be presumed to conform to their real value. But, under the current, capitalistic system, distribution is not in any sensible degree based on the equities of production, and the exchange value of goods under this system can therefore express their real value only with a very rough, and in the main fortuitous, approximation. Under a socialistic régime, where the laborer would get the full product of his labor, or where the whole system of ownership, and consequently the system of distribution, would lapse, values would reach a true expression, if any. Under the capitalistic system the determination of exchange value is a matter of competitive profit-making, and exchange values therefore depart erratically and incontinently from the proportions that would legitimately be given them by the real values whose only expression they are. Marx's critics commonly identify the concept of "value" with that of "exchange value,"[15] and show that the theory of "value" does not square with the run of the facts of price under the existing system of distribution, piously hoping thereby to have refuted the Marxian doctrine; whereas, of course, they have for the most part not touched it. The misapprehension of the critics may be due to a (possibly intentional) oracular obscurity on the part of Marx. Whether by his fault or their own, their refutations have hitherto been quite inconclusive. Marx's severest stricture on the iniquities of the capitalistic system is that contained by implication in his development of the manner in which actual exchange value of goods systematically diverges from their real (labor-cost) value. Herein, indeed, lies not only the inherent iniquity of the existing system, but also its fateful infirmity, according to Marx. The theory of value, then, is _contained in_ the main postulates of the Marxian system rather than derived from them. Marx identifies this doctrine, in its elements, with the labor-value theory of Ricardo,[16] but the relationship between the two is that of a superficial coincidence in their main propositions rather than a substantial identity of theoretic contents. In Ricardo's theory the source and measure of value is sought in the effort and sacrifice undergone by the producer, consistently, on the whole, with the Benthamite-utilitarian position to which Ricardo somewhat loosely and uncritically adhered. The decisive fact about labor, that quality by virtue of which it is assumed to be the final term in the theory of production, is its irksomeness. Such is of course not the case in the labor-value theory of Marx, to whom the question of the irksomeness of labor is quite irrelevant, so far as regards the relation between labor and production. The substantial diversity or incompatibility of the two theories shows itself directly when each is employed by its creator in the further analysis of economic phenomena. Since with Ricardo the crucial point is the degree of irksomeness of labor, which serves as a measure both of the labor expended and the value produced, and since in Ricardo's utilitarian philosophy there is no more vital fact underlying this irksomeness, therefore no surplus-value theory follows from the main position. The productiveness of labor is not cumulative, in its own working; and the Ricardian economics goes on to seek the cumulative productiveness of industry in the functioning of the products of labor when employed in further production and in the irksomeness of the capitalist's abstinence. From which duly follows the general position of classical economics on the theory of production. With Marx, on the other hand, the labor power expended in production being itself a product and having a substantial value corresponding to its own labor-cost, the value of the labor power expended and the value of the product created by its expenditure need not be the same. They are not the same, by supposition, as they would be in any hedonistic interpretation of the facts. Hence a discrepancy arises between the value of the labor power expended in production and the value of the product created, and this discrepancy is covered by the concept of surplus value. Under the capitalistic system, wages being the value (price) of the labor power consumed in industry, it follows that the surplus product of their labor cannot go to the laborers, but becomes the profits of capital and the source of its accumulation and increase. From the fact that wages are measured by the value of labor power rather than by the (greater) value of the product of labor, it follows also that the laborers are unable to buy the whole product of their labor, and so that the capitalists are unable to sell the whole product of industry continuously at its full value, whence arise difficulties of the gravest nature in the capitalistic system, in the way of overproduction and the like. But the gravest outcome of this systematic discrepancy between the value of labor power and the value of its product is the accumulation of capital out of unpaid labor, and the effect of this accumulation on the laboring population. The law of accumulation, with its corollary, the doctrine of the industrial reserve army, is the final term and the objective point of Marx's theory of capitalist production, just as the theory of labor value is his point of departure.[17] While the theory of value and surplus value are Marx's explanation of the possibility of existence of the capitalistic system, the law of the accumulation of capital is his exposition of the causes which must lead to the collapse of that system and of the manner in which the collapse will come. And since Marx is, always and everywhere, a socialist agitator as well as a theoretical economist, it may be said without hesitation that the law of accumulation is the climax of his great work, from whatever point of view it is looked at, whether as an economic theorem or as a tenet of socialistic doctrine. The law of capitalistic accumulation may be paraphrased as follows:[18] Wages being the (approximately exact) value of the labor power bought in the wage contract; the price of the product being the (similarly approximate) value of the goods produced; and since the value of the product exceeds that of the labor power by a given amount (surplus value), which by force of the wage contract passes into the possession of the capitalist and is by him in part laid by as savings and added to the capital already in hand, it follows (_a_) that, other things equal, the larger the surplus value, the more rapid the increase of capital; and, also (_b_), that the greater the increase of capital relatively to the labor force employed, the more productive the labor employed and the larger the surplus product available for accumulation. The process of accumulation, therefore, is evidently a cumulative one; and, also evidently, the increase added to capital is an unearned increment drawn from the unpaid surplus product of labor. But with an appreciable increase of the aggregate capital a change takes place in its technological composition, whereby the "constant" capital (equipment and raw materials) increases disproportionately as compared with the "variable" capital (wages fund). "Labor-saving devices" are used to a greater extent than before, and labor is saved. A larger proportion of the expenses of production goes for the purchase of equipment and raw materials, and a smaller proportion--though perhaps an absolutely increased amount--goes for the purchase of labor power. Less labor is needed relatively to the aggregate capital employed as well as relatively to the quantity of goods produced. Hence some portion of the increasing labor supply will not be wanted, and an "industrial reserve army," a "surplus labor population," an army of unemployed, comes into existence. This reserve grows relatively larger as the accumulation of capital proceeds and as technological improvements consequently gain ground; so that there result two divergent cumulative changes in the situation,--antagonistic, but due to the same set of forces and, therefore, inseparable: capital increases, and the number of unemployed laborers (relatively) increases also. This divergence between the amount of capital and output, on the one hand, and the amount received by laborers as wages, on the other hand, has an incidental consequence of some importance. The purchasing power of the laborers, represented by their wages, being the largest part of the demand for consumable goods, and being at the same time, in the nature of the case, progressively less adequate for the purchase of the product, represented by the price of the goods produced, it follows that the market is progressively more subject to glut from overproduction, and hence to commercial crises and depression. It has been argued, as if it were a direct inference from Marx's position, that this maladjustment between production and markets, due to the laborer not getting the full product of his labor, leads directly to the breakdown of the capitalistic system, and so by its own force will bring on the socialistic consummation. Such is not Marx's position, however, although crises and depression play an important part in the course of development that is to lead up to socialism. In Marx's theory, socialism is to come by way of a conscious class movement on the part of the propertyless laborers, who will act advisedly on their own interest and force the revolutionary movement for their own gain. But crises and depression will have a large share in bringing the laborers to a frame of mind suitable for such a move. Given a growing aggregate capital, as indicated above, and a concomitant reserve of unemployed laborers growing at a still higher rate, as is involved in Marx's position, this body of unemployed labor can be, and will be, used by the capitalists to depress wages, in order to increase profits. Logically, it follows that, the farther and faster capital accumulates, the larger will be the reserve of unemployed, both absolutely and relatively to the work to be done, and the more severe will be the pressure acting to reduce wages and lower the standard of living, and the deeper will be the degradation and misery of the working class and the more precipitately will their condition decline to a still lower depth. Every period of depression, with its increased body of unemployed labor seeking work, will act to hasten and accentuate the depression of wages, until there is no warrant even for holding that wages will, on an average, be kept up to the subsistence minimum.[19] Marx, indeed, is explicit to the effect that such will be the case,--that wages will decline below the subsistence minimum; and he cites English conditions of child labor, misery, and degeneration to substantiate his views.[20] When this has gone far enough, when capitalist production comes near enough to occupying the whole field of industry and has depressed the condition of its laborers sufficiently to make them an effective majority of the community with nothing to lose, then, having taken advice together, they will move, by legal or extra-legal means, by absorbing the state or by subverting it, to establish the social revolution. Socialism is to come through class antagonism due to the absence of all property interests from the laboring class, coupled with a generally prevalent misery so profound as to involve some degree of physical degeneration. This misery is to be brought about by the heightened productivity of labor due to an increased accumulation of capital and large improvements in the industrial arts; which in turn is caused by the fact that under a system of private enterprise with hired labor the laborer does not get the whole product of his labor; which, again, is only saying in other words that private ownership of capital goods enables the capitalist to appropriate and accumulate the surplus product of labor. As to what the régime is to be which the social revolution will bring in, Marx has nothing particular to say, beyond the general thesis that there will be no private ownership, at least not of the means of production. * * * * * Such are the outlines of the Marxian system of socialism. In all that has been said so far no recourse is had to the second and third volumes of _Kapital_. Nor is it necessary to resort to these two volumes for the general theory of socialism. They add nothing essential, although many of the details of the processes concerned in the working out of the capitalist scheme are treated with greater fullness, and the analysis is carried out with great consistency and with admirable results. For economic theory at large these further two volumes are important enough, but an inquiry into their contents in that connection is not called for here. Nothing much need be said as to the tenability of this theory. In its essentials, or at least in its characteristic elements, it has for the most part been given up by latter-day socialist writers. The number of those who hold to it without essential deviation is growing gradually smaller. Such is necessarily the case, and for more than one reason. The facts are not bearing it out on certain critical points, such as the doctrine of increasing misery; and the Hegelian philosophical postulates, without which the Marxism of Marx is groundless, are for the most part forgotten by the dogmatists of to-day. Darwinism has largely supplanted Hegelianism in their habits of thought. The particular point at which the theory is most fragile, considered simply as a theory of social growth, is its implied doctrine of population,--implied in the doctrine of a growing reserve of unemployed workmen. The doctrine of the reserve of unemployed labor involves as a postulate that population will increase anyway, without reference to current or prospective means of life. The empirical facts give at least a very persuasive apparent support to the view expressed by Marx, that misery is, or has hitherto been, no hindrance to the propagation of the race; but they afford no conclusive evidence in support of a thesis to the effect that the number of laborers must increase independently of an increase of the means of life. No one since Darwin would have the hardihood to say that the increase of the human species is not conditioned by the means of living. But all that does not really touch Marx's position. To Marx, the neo-Hegelian, history, including the economic development, is the life-history of the human species; and the main fact in this life-history, particularly in the economic aspect of it, is the growing volume of human life. This, in a manner of speaking, is the base-line of the whole analysis of the process of economic life, including the phase of capitalist production with the rest. The growth of population is the first principle, the most substantial, most material factor in this process of economic life, so long as it is a process of growth, of unfolding, of exfoliation, and not a phase of decrepitude and decay. Had Marx found that his analysis led him to a view adverse to this position, he would logically have held that the capitalist system is the mortal agony of the race and the manner of its taking off. Such a conclusion is precluded by his Hegelian point of departure, according to which the goal of the life-history of the race in a large way controls the course of that life-history in all its phases, including the phase of capitalism. This goal or end, which controls the process of human development, is the complete realisation of life in all its fullness, and the realisation is to be reached by a process analogous to the three-phase dialectic, of thesis, antithesis, and synthesis, into which scheme the capitalist system, with its overflowing measure of misery and degradation, fits as the last and most dreadful phase of antithesis. Marx, as a Hegelian,--that is to say, a romantic philosopher,--is necessarily an optimist, and the evil (antithetical element) in life is to him a logically necessary evil, as the antithesis is a necessary phase of the dialectic; and it is a means to the consummation, as the antithesis is a means to the synthesis. FOOTNOTES: [1] The substance of lectures before students in Harvard University in April, 1906. Reprinted by permission from _The Quarterly Journal of Economics_, Vol. XX, Aug., 1906 [2] _Cf._ _Critique of Political Economy_, chap. i, "Notes on the History of the Theory of Commodities," pp. 56-73 (English translation, New York, 1904). [3] See Menger, _Right to the Whole Produce of Labor_, sections iii-v and viii-ix, and Foxwell's admirable Introduction to Menger. [4] See Menger and Foxwell, as above, and Schaeffle, _Quintessence of Socialism_, and _The Impossibility of Social Democracy_. [5] See Engels, _The Development of Socialism from Utopia to Science_, especially section ii and the opening paragraphs of section iii; also the preface of _Zur Kritik der politischen Oekonomie_. [6] See Engels, as above, and also his _Feuerbach: The Roots of Socialist Philosophy_ (translation, Chicago, Kerr & Co., 1903). [7] See _e.g._, Seligman, _The Economic Interpretation of History_, Part I. [8] Engels, _Development of Socialism_, beginning of section iii. [9] _Cf._, on this point, Max Adler, "Kausalität und Teleologie im Streite um die Wissenschaft" (included in _Marx-Studien_, edited by Adler and Hilfendirg, vol. i), particularly section xi; _cf._ also Ludwig Stein, _Die soziale Frage im Lichte der Philosophie_, whom Adler criticises and claims to have refuted. [10] _Cf._ Adler, as above. [11] It may be noted, by way of caution to readers familiar with the terms only as employed by the classical (English and Austrian) economists, that in Marxian usage "capitalistic production" means production of goods for the market by hired labor under the direction of employers who own (or control) the means of production and are engaged in industry for the sake of a profit. "Capital" is wealth (primarily funds) so employed. In these and other related points of terminological usage Marx is, of course, much more closely in touch with colloquial usage than those economists of the classical line who make capital signify "the products of past industry used as aids to further production." With Marx "Capitalism" implies certain relations of ownership, no less than the "productive use" which is alone insisted on by so many later economists in defining the term. [12] In the sense that the theory of value affords the point of departure and the fundamental concepts out of which the further theory of the workings of capitalism is constructed,--in this sense, and in this sense only, is the theory of value the central doctrine and the critical tenet of Marxism. It does not follow that the Marxist doctrine of an irresistible drift towards a socialistic consummation hangs on the defensibility of the labor-value theory, nor even that the general structure of the Marxist economics would collapse if translated into other terms than those of this doctrine of labor-value. _Cf_. Böhm-Bawerk, _Karl Marx and the Close of his System_; and, on the other hand, Franz Oppenheimer, _Das Grundgesetz der Marx'schen Gesellschaftslehre_; and Rudolf Goldscheid, _Verelendungs- oder Meliorationstheorie_. [13] _Cf._, _e.g._, Böhm-Bawerk, as above; Georg Adler, _Grundlagen der Karl Marx'schen Kritik_. [14] In much the same way, and with an analogous effect on their theoretical work, in the preconceptions of the classical (including the Austrian) economists, the balance of pleasure and pain is taken to be the ultimate reality in terms of which all economic theory must be stated and to terms of which all phenomena should finally be reduced in any definitive analysis of economic life. It is not the present purpose to inquire whether the one of these uncritical assumptions is in any degree more meritorious or more serviceable than the other. [15] Böhm-Bawerk, _Capital and Interest_, Book VI, chap, iii; also _Karl Marx and the Close of his System_, particularly chap. iv; Adler, _Grundlagen_, chaps. ii. and iii. [16] _Cf._ _Kapital_, vol. i, chap. xv, p. 486 (4th ed.). See also notes 9 and 16 to chap. i of the same volume, where Marx discusses the labor-value doctrines of Adam Smith and an earlier (anonymous) English writer, and compares them with his own. Similar comparisons with the early--classical--value theories recur from time to time in the later portions of _Kapital_. [17] Oppenheimer (_Das Grundgesetz der Marx'schen Gesellschaftslehre_) is right in making the theory of accumulation the central element in the doctrines of Marxist socialism, but it does not follow, as Oppenheimer contends, that this doctrine is the keystone of Marx's economic theories. It follows logically from the theory of surplus value, as indicated above, and rests on that theory in such a way that it would fail (in the form in which it is held by Marx) with the failure of the doctrine of surplus value. [18] See _Kapital_, vol. i, chap. xxiii. [19] The "subsistence minimum" is here taken in the sense used by Marx and the classical economists, as meaning what is necessary to keep up the supply of labor at its current rate of efficiency. [20] See _Kapital_, vol. i, chap, xxiii, sections 4 and 5. THE SOCIALIST ECONOMICS OF KARL MARX AND HIS FOLLOWERS[1] II. THE LATER MARXISM Marx worked out his system of theory in the main during the third quarter of the nineteenth century. He came to the work from the standpoint given him by his early training in German thought, such as the most advanced and aggressive German thinking was through the middle period of the century, and he added to this German standpoint the further premises given him by an exceptionally close contact with and alert observation of the English situation. The result is that he brings to his theoretical work a twofold line of premises, or rather of preconceptions. By early training he is a neo-Hegelian, and from this German source he derives his peculiar formulation of the Materialistic Theory of History. By later experience he acquired the point of view of that Liberal-Utilitarian school which dominated English thought through the greater part of his active life. To this experience he owes (probably) the somewhat pronounced individualistic preconceptions on which the doctrines of the Full Product of Labor and the Exploitation of Labor are based. These two not altogether compatible lines of doctrine found their way together into the tenets of scientific[2] socialism, and gives its characteristic Marxian features to the body of socialist economics. The socialism that inspires hopes and fears to-day is of the school of Marx. No one is seriously apprehensive of any other so-called socialistic movement, and no one is seriously concerned to criticise or refute the doctrines set forth by any other school of "socialists." It may be that the socialists of the Marxist observance are not always or at all points in consonance with the best accepted body of Marxist doctrine. Those who make up the body of the movement may not always be familiar with the details--perhaps not even with the general features--of the Marxian scheme of economics; but with such consistency as may fairly be looked for in any popular movement, the socialists of all countries gravitate toward the theoretical position of the avowed Marxism. In proportion as the movement in any given community grows in mass, maturity, and conscious purpose, it unavoidably takes on a more consistently Marxian complexion. It is not the Marxism of Marx, but the materialism of Darwin, which the socialists of to-day have adopted. The Marxist socialists of Germany have the lead, and the socialists of other countries largely take their cue from the German leaders. The authentic spokesmen of the current international socialism are avowed Marxists. Exceptions to that rule are very few. On the whole, the substantial truth of the Marxist doctrines is not seriously questioned within the lines of the socialists, though there may be some appreciable divergence as to what the true Marxist position is on one point and another. Much and eager controversy circles about questions of that class. The keepers of the socialist doctrines are passably agreed as to the main position and the general principles. Indeed, so secure is this current agreement on the general principles that a very lively controversy on matters of detail may go on without risk of disturbing the general position. This general position is avowedly Marxism. But it is not precisely the position held by Karl Marx. It has been modernised, adapted, filled out, in response to exigencies of a later date than those which conditioned the original formulation of the theories. It is, of course, not admitted by the followers of Marx that any substantial change or departure from the original position has taken place. They are somewhat jealously orthodox, and are impatient of any suggested "improvements" on the Marxist position, as witness the heat engendered in the "revisionist" controversy of a few years back. But the jealous protests of the followers of Marx do not alter the fact that Marxism has undergone some substantial change since it left the hands of its creator. Now and then a more or less consistent disciple of Marx will avow a need of adapting the received doctrines to circumstances that have arisen later than the formulation of the doctrines; and amendments, qualifications, and extensions, with this need in view, have been offered from time to time. But more pervasive though unavowed changes have come in the teachings of Marxism by way of interpretation and an unintended shifting of the point of view. Virtually, the whole of the younger generation of socialist writers shows such a growth. A citation of personal instances would be quite futile. * * * * * It is the testimony of his friends as well as of his writings that the theoretical position of Marx, both as regards his standpoint and as regards his main tenets, fell into a definitive shape relatively early, and that his later work was substantially a working out of what was contained in the position taken at the outset of his career.[3] By the latter half of the forties, if not by the middle of the forties, Marx and Engels had found the outlook on human life which came to serve as the point of departure and the guide for their subsequent development of theory. Such is the view of the matter expressed by Engels during the later years of his life.[4] The position taken by the two great leaders, and held by them substantially intact, was a variant of neo-Hegelianism, as has been indicated in an earlier section of this paper.[5] But neo-Hegelianism was short-lived, particularly considered as a standpoint for scientific theory. The whole romantic school of thought, comprising neo-Hegelianism with the rest, began to go to pieces very soon after it had reached an approach to maturity, and its disintegration proceeded with exceptional speed, so that the close of the third quarter of the century saw the virtual end of it as a vital factor in the development of human knowledge. In the realm of theory, primarily of course in the material sciences, the new era belongs not to romantic philosophy, but to the evolutionists of the school of Darwin. Some few great figures, of course, stood over from the earlier days, but it turns out in the sequel that they have served mainly to mark the rate and degree in which the method of scientific knowledge has left them behind. Such were Virchow and Max Müller, and such, in economic science, were the great figures of the Historical School, and such, in a degree, were also Marx and Engels. The later generation of socialists, the spokesmen and adherents of Marxism during the closing quarter of the century, belong to the new generation, and see the phenomena of human life under the new light. The materialistic conception in their handling of it takes on the color of the time in which they lived, even while they retain the phraseology of the generation that went before them.[6] The difference between the romantic school of thought, to which Marx belonged, and the school of the evolutionists into whose hands the system has fallen,--or perhaps, better, is falling,--is great and pervading, though it may not show a staring superficial difference at any one point,--at least not yet. The discrepancy between the two is likely to appear more palpable and more sweeping when the new method of knowledge has been applied with fuller realisation of its reach and its requirement in that domain of knowledge that once belonged to the neo-Hegelian Marxism. The supplanting of the one by the other has been taking place slowly, gently, in large measure unavowedly, by a sort of precession of the point of view from which men size up the facts and reduce them to intelligible order. The neo-Hegelian, romantic, Marxian standpoint was wholly personal, whereas the evolutionistic--it may be called Darwinian--standpoint is wholly impersonal. The continuity sought in the facts of observation and imputed to them by the earlier school of theory was a continuity of a personal kind,--a continuity of reason and consequently of logic. The facts were construed to take such a course as could be established by an appeal to reason between intelligent and fair-minded men. They were supposed to fall into a sequence of logical consistency. The romantic (Marxian) sequence of theory is essentially an intellectual sequence, and it is therefore of a teleological character. The logical trend of it can be argued out. That is to say, it tends to a goal. On the other hand, in the Darwinian scheme of thought, the continuity sought in and imputed to the facts is a continuity of cause and effect. It is a scheme of blindly cumulative causation, in which there is no trend, no final term, no consummation. The sequence is controlled by nothing but the _vis a tergo_ of brute causation, and is essentially mechanical. The neo-Hegelian (Marxian) scheme of development is drawn in the image of the struggling ambitious human spirit: that of Darwinian evolution is of the nature of a mechanical process.[7] What difference, now, does it make if the materialistic conception is translated from the romantic concepts of Marx into the mechanical concepts of Darwinism? It distorts every feature of the system in some degree, and throws a shadow of doubt on every conclusion that once seemed secure.[8] The first principle of the Marxian scheme is the concept covered by the term "Materialistic," to the effect that the exigencies of the material means of life control the conduct of men in society throughout, and thereby indefeasibly guide the growth of institutions and shape every shifting trait of human culture. This control of the life of society by the material exigencies takes effect through men's taking thought of material (economic) advantages and disadvantages, and choosing that which will yield the fuller material measure of life. When the materialistic conception passes under the Darwinian norm, of cumulative causation, it happens, first, that this initial principle itself is reduced to the rank of a habit of thought induced in the speculator who depends on its light, by the circumstances of his life, in the way of hereditary bent, occupation, tradition, education, climate, food supply, and the like. But under the Darwinian norm the question of whether and how far material exigencies control human conduct and cultural growth becomes a question of the share which these material exigencies have in shaping men's habits of thought, _i.e._, their ideals and aspirations, their sense of the true, the beautiful, and the good. Whether and how far these traits of human culture and the institutional structure built out of them are the outgrowth of material (economic) exigencies becomes a question of what kind and degree of efficiency belongs to the economic exigencies among the complex of circumstances that conduce to the formation of habits. It is no longer a question of whether material exigencies rationally should guide men's conduct, but whether, as a matter of brute causation, they do induce such habits of thought in men as the economic interpretation presumes, and whether in the last analysis economic exigencies alone are, directly or indirectly, effective in shaping human habits of thought. Tentatively and by way of approximation some such formulation as that outlined in the last paragraph is apparently what Bernstein and others of the "revisionists" have been seeking in certain of their speculations,[9] and, sitting austere and sufficient on a dry shoal up stream, Kautsky has uncomprehendingly been addressing them advice and admonition which they do not understand.[10] The more intelligent and enterprising among the idealist wing--where intellectual enterprise is not a particularly obvious trait--have been struggling to speak for the view that the forces of the environment may effectually reach men's spiritual life through other avenues than the calculus of the main chance, and so may give rise to habitual ideals and aspirations independent of, and possibly alien to, that calculus.[11] So, again, as to the doctrine of the class struggle. In the Marxian scheme of dialectical evolution the development which is in this way held to be controlled by the material exigencies must, it is held, proceed by the method of the class struggle. This class struggle is held to be inevitable, and is held inevitably to lead at each revolutionary epoch to a more efficient adjustment of human industry to human uses, because, when a large proportion of the community find themselves ill served by the current economic arrangements, they take thought, band together, and enforce a readjustment more equitable and more advantageous to them. So long as differences of economic advantage prevail, there will be a divergence of interests between those more advantageously placed and those less advantageously placed. The members of society will take sides as this line of cleavage indicated by their several economic interests may decide. Class solidarity will arise on the basis of this class interest, and a struggle between the two classes so marked off against each other will set in,--a struggle which, in the logic of the situation, can end only when the previously less fortunate class gains the ascendancy,--and so must the class struggle proceed until it shall have put an end to that diversity of economic interest on which the class struggle rests. All this is logically consistent and convincing, but it proceeds on the ground of reasoned conduct, calculus of advantage, not on the ground of cause and effect. The class struggle so conceived should always and everywhere tend unremittingly toward the socialistic consummation, and should reach that consummation in the end, whatever obstructions or diversions might retard the sequence of development along the way. Such is the notion of it embodied in the system of Marx. Such, however, is not the showing of history. Not all nations or civilisations have advanced unremittingly toward a socialistic consummation, in which all divergence of economic interest has lapsed or would lapse. Those nations and civilisations which have decayed and failed, as nearly all known nations and civilisations have done, illustrate the point that, however reasonable and logical the advance by means of the class struggle may be, it is by no means inevitable. Under the Darwinian norm it must be held that men's reasoning is largely controlled by other than logical, intellectual forces; that the conclusion reached by public or class opinion is as much, or more, a matter of sentiment than of logical inference; and that the sentiment which animates men, singly or collectively, is as much, or more, an outcome of habit and native propensity as of calculated material interest. There is, for instance, no warrant in the Darwinian scheme of things for asserting _a priori_ that the class interest of the working class will bring them to take a stand against the propertied class. It may as well be that their training in subservience to their employers will bring them again to realise the equity and excellence of the established system of subjection and unequal distribution of wealth. Again, no one, for instance, can tell to-day what will be the outcome of the present situation in Europe and America. It may be that the working classes will go forward along the line of the socialistic ideals and enforce a new deal, in which there shall be no economic class discrepancies, no international animosity, no dynastic politics. But then it may also, so far as can be foreseen, equally well happen that the working class, with the rest of the community in Germany, England, or America, will be led by the habit of loyalty and by their sportsmanlike propensities to lend themselves enthusiastically to the game of dynastic politics, which alone their sportsmanlike rulers consider worth while. It is quite impossible on Darwinian ground to foretell whether the "proletariat" will go on to establish the socialistic revolution or turn aside again, and sink their force in the broad sands of patriotism. It is a question of habit and native propensity and of the range of stimuli to which the proletariat are exposed and are to be exposed, and what may be the outcome is not a matter of logical consistency, but of response to stimulus. So, then, since Darwinian concepts have begun to dominate the thinking of the Marxists, doubts have now and again come to assert themselves both as to the inevitableness of the irrepressible class struggle and to its sole efficacy. Anything like a violent class struggle, a seizure of power by force, is more and more consistently deprecated. For resort to force, it is felt, brings in its train coercive control with all its apparatus of prerogative, mastery, and subservience.[12] So, again, the Marxian doctrine of progressive proletarian distress, the so-called _Verelendungstheorie_, which stands pat on the romantic ground of the original Marxism, has fallen into abeyance, if not into disrepute, since the Darwinian conceptions have come to prevail. As a matter of reasoned procedure, on the ground of enlightened material interest alone, it should be a tenable position that increasing misery, increasing in degree and in volume, should be the outcome of the present system of ownership, and should at the same time result in a well-advised and well-consolidated working-class movement that would replace the present system by a scheme more advantageous to the majority. But so soon as the question is approached on the Darwinian ground of cause and effect, and is analysed in terms of habit and of response to stimulus, the doctrine that progressive misery must effect a socialistic revolution becomes dubious, and very shortly untenable. Experience, the experience of history, teaches that abject misery carries with it deterioration and abject subjection. The theory of progressive distress fits convincingly into the scheme of the Hegelian three-phase dialectic. It stands for the antithesis that is to be merged in the ulterior synthesis; but it has no particular force on the ground of an argument from cause to effect.[13] It fares not much better with the Marxian theory of value and its corollaries and dependent doctrines when Darwinian concepts are brought in to replace the romantic elements out of which it is built up. Its foundation is the metaphysical equality between the volume of human life force productively spent in the making of goods and the magnitude of these goods considered as human products. The question of such an equality has no meaning in terms of cause and effect, nor does it bear in any intelligible way upon the Darwinian question of the fitness of any given system of production or distribution. In any evolutionary system of economics the central question touching the efficiency and fitness of any given system of production is necessarily the question as to the excess of serviceability in the product over the cost of production.[14] It is in such an excess of serviceability over cost that the chance of survival lies for any system of production, in so far as the question of survival is a question of production, and this matter comes into the speculation of Marx only indirectly or incidentally, and leads to nothing in his argument. And, as bearing on the Marxian doctrines of exploitation, there is on Darwinian ground no place for a natural right to the full product of labor. What can be argued in that connection on the ground of cause and effect simply is the question as to what scheme of distribution will help or hinder the survival of a given people or a given civilisation.[15] But these questions of abstruse theory need not be pursued, since they count, after all, but relatively little among the working tenets of the movement. Little need be done by the Marxists to work out or to adapt the Marxian system of value theory, since it has but slight bearing on the main question,--the question of the trend towards socialism and of its chances of success. It is conceivable that a competent theory of value dealing with the excess of serviceability over cost, on the one hand, and with the discrepancy between price and serviceability, on the other hand, would have a substantial bearing upon the advisability of the present as against the socialistic régime, and would go far to clear up the notions of both socialists and conservatives as to the nature of the points in dispute between them. But the socialists have not moved in the direction of this problem, and they have the excuse that their critics have suggested neither a question nor a solution to a question along any such line. None of the value theorists have so far offered anything that could be called good, bad, or indifferent in this connection, and the socialists are as innocent as the rest. Economics, indeed, has not at this point yet begun to take on a modern tone, unless the current neglect of value theory by the socialists be taken as a negative symptom of advance, indicating that they at least recognise the futility of the received problems and solutions, even if they are not ready to make a positive move. * * * * * The shifting of the current point of view, from romantic philosophy to matter-of-fact, has affected the attitude of the Marxists towards the several articles of theory more than it has induced an avowed alteration or a substitution of new elements of theory for the old. It is always possible to make one's peace with a new standpoint by new interpretations and a shrewd use of figures of speech, so far as the theoretical formulation is concerned, and something of this kind has taken place in the case of Marxism; but when, as in the case of Marxism, the formulations of theory are drafted into practical use, substantial changes of appreciable magnitude are apt to show themselves in a changed attitude towards practical questions. The Marxists have had to face certain practical problems, especially problems of party tactics, and the substantial changes wrought in their theoretical outlook have come into evidence here. The real gravity of the changes that have overtaken Marxism would scarcely be seen by a scrutiny of the formal professions of the Marxists alone. But the exigencies of a changing situation have provoked readjustments of the received doctrinal position, and the shifting of the philosophical standpoint and postulates has come into evidence as marking the limits of change in their professions which the socialistic doctrinaires could allow themselves. The changes comprised in the cultural movement that lies between the middle and the close of the nineteenth century are great and grave, at least as seen from so near a standpoint as the present day, and it is safe to say that, in whatever historical perspective they may be seen, they must, in some respects, always assert themselves as unprecedented. So far as concerns the present topic, there are three main lines of change that have converged upon the Marxist system of doctrines, and have led to its latter-day modification and growth. One of these--the change in the postulates of knowledge, in the metaphysical foundations of theory--has been spoken of already, and its bearing on the growth of socialist theory has been indicated in certain of its general features. But, among the circumstances that have conditioned the growth of the system, the most obvious is the fact that since Marx's time his doctrines have come to serve as the platform of a political movement, and so have been exposed to the stress of practical party politics dealing with a new and changing situation. At the same time the industrial (economic) situation to which the doctrines are held to apply--of which they are the theoretical formulation--has also in important respects changed its character from what it was when Marx first formulated his views. These several lines of cultural change affecting the growth of Marxism cannot be held apart in so distinct a manner as to appraise the work of each separately. They belong inextricably together, as do the effects wrought by them in the system. In practical politics the Social Democrats have had to make up their account with the labor movement, the agricultural population, and the imperialistic policy. On each of these heads the preconceived programme of Marxism has come in conflict with the run of events, and on each head it has been necessary to deal shrewdly and adapt the principles to the facts of the time. The adaptation to circumstances has not been altogether of the nature of compromise, although here and there the spirit of compromise and conciliation is visible enough. A conciliatory party policy may, of course, impose an adaptation of form and color upon the party principles, without thereby seriously affecting the substance of the principles themselves; but the need of a conciliatory policy may, even more, provoke a substantial change of attitude toward practical questions in a case where a shifting of the theoretical point of view makes room for a substantial change. Apart from all merely tactical expedients, the experience of the past thirty years has led the German Marxists to see the facts of the labor situation in a new light, and has induced them to attach an altered meaning to the accepted formulations of doctrine. The facts have not freely lent themselves to the scheme of the Marxist system, but the scheme has taken on such a new meaning as would be consistent with the facts. The untroubled Marxian economics, such as it finds expression in the _Kapital_ and earlier documents of the theory, has no place and no use for a trade-union movement, or, indeed, for any similar non-political organisation among the working class, and the attitude of the Social-Democratic leaders of opinion in the early days of the party's history was accordingly hostile to any such movement,[16]--as much so, indeed, as the loyal adherents of the classical political economy. That was before the modern industrial era had got under way in Germany, and therefore before the German socialistic doctrinaires had learned by experience what the development of industry was to bring with it. It was also before the modern scientific postulates had begun to disintegrate the neo-Hegelian preconceptions as to the logical sequence in the development of institutions. In Germany, as elsewhere, the growth of the capitalistic system presently brought on trade-unionism; that is to say, it brought on an organised attempt on the part of the workmen to deal with the questions of capitalistic production and distribution by business methods, to settle the problems of working-class employment and livelihood by a system of non-political, businesslike bargains. But the great point of all socialist aspiration and endeavor is the abolition of all business and all bargaining, and, accordingly, the Social Democrats were heartily out of sympathy with the unions and their endeavors to make business terms with the capitalist system, and make life tolerable for the workmen under that system. But the union movement grew to be so serious a feature of the situation that the socialists found themselves obliged to deal with unions, since they could not deal with the workmen over the heads of the unions. The Social Democrats, and therefore the Marxian theorists, had to deal with a situation which included the union movement, and this movement was bent on improving the workman's conditions of life from day to day. Therefore it was necessary to figure out how the union movement could and must further the socialistic advance; to work into the body of doctrines a theory of how the unions belong in the course of economic development that leads up to socialism, and to reconcile the unionist efforts at improvement with the ends of Social Democracy. Not only were the unions seeking improvement by unsocialistic methods, but the level of comfort among the working classes was in some respects advancing, apparently as a result of these union efforts. Both the huckstering animus of the workmen in their unionist policy and the possible amelioration of working-class conditions had to be incorporated into the socialistic platform and into the Marxist theory of economic development. The Marxist theory of progressive misery and degradation has, accordingly, fallen into the background, and a large proportion of the Marxists have already come to see the whole question of working-class deterioration in some such apologetic light as is shed upon it by Goldscheid in his _Verelendungs-oder Meliorationstheorie_. It is now not an unusual thing for orthodox Marxists to hold that the improvement of the conditions of the working classes is a necessary condition to the advance of the socialistic cause, and that the unionist efforts at amelioration must be furthered as a means toward the socialistic consummation. It is recognised that the socialistic revolution must be carried through not by an anæmic working class under the pressure of abject privation, but by a body of full-blooded workingmen gradually gaining strength from improved conditions of life. Instead of the revolution being worked out by the leverage of desperate misery, every improvement in working-class conditions is to be counted as a gain for the revolutionary forces. This is a good Darwinism, but it does not belong in the neo-Hegelian Marxism. Perhaps the sorest experience of the Marxist doctrinaires has been with the agricultural population. Notoriously, the people of the open country have not taken kindly to socialism. No propaganda and no changes in the economic situation have won the sympathy of the peasant farmers for the socialistic revolution. Notoriously, too, the large-scale industry has not invaded the agricultural field, or expropriated the small proprietors, in anything like the degree expected by the Marxist doctrinaires of a generation ago. It is contained in the theoretical system of Marx that, as modern industrial and business methods gain ground, the small proprietor farmers will be reduced to the ranks of the wage-proletariat, and that, as this process of conversion goes on, in the course of time the class interest of the agricultural population will throw them into the movement side by side with the other wage-workmen.[17] But at this point the facts have hitherto not come out in consonance with the Marxist theory. And the efforts of the Social Democrats to convert the peasant population to socialism have been practically unrewarded. So it has come about that the political leaders and the keepers of the doctrines have, tardily and reluctantly, come to see the facts of the agrarian situation in a new light, and to give a new phrasing to the articles of Marxian theory that touch on the fortunes of the peasant farmer. It is no longer held that either the small properties of the peasant farmer must be absorbed into larger properties, and then taken over by the State, or that they must be taken over by the State directly, when the socialistic revolution is established. On the contrary, it is now coming to be held that the peasant proprietors will not be disturbed in their holdings by the great change. The great change is to deal with capitalistic enterprise, and the peasant farming is not properly "capitalistic." It is a system of production in which the producer normally gets only the product of his own labor. Indeed, under the current régime of markets and credit relations, the small agricultural producer, it is held, gets less than the product of his own labor, since the capitalistic business enterprises with which he has to deal are always able to take advantage of him. So it has become part of the overt doctrine of socialists that as regards the peasant farmer it will be the consistent aim of the movement to secure him in the untroubled enjoyment of his holding, and free him from the vexatious exactions of his creditors and the ruinous business traffic in which he is now perforce involved. According to the revised code, made possible by recourse to Darwinian concepts of evolution instead of the Hegelian three-phase dialectic, therefore, and contrary to the earlier prognostications of Marx, it is no longer held that agricultural industry must go through the capitalistic mill; and it is hoped that under the revised code it may be possible to enlist the interest and sympathy of this obstinately conservative element for the revolutionary cause. The change in the official socialist position on the agricultural question has come about only lately, and is scarcely yet complete, and there is no knowing what degree of success it may meet with either as a matter of party tactics or as a feature of the socialistic theory of economic development. All discussions of party policy, and of theory so far as bears on policy, take up the question; and nearly all authoritative spokesmen of socialism have modified their views in the course of time on this point. The socialism of Karl Marx is characteristically inclined to peaceable measures and disinclined to a coercive government and belligerent politics. It is, or at least it was, strongly averse to international jealousy and patriotic animosity, and has taken a stand against armaments, wars, and dynastic aggrandisement. At the time of the French-Prussian war the official organisation of Marxism, the International, went so far in its advocacy of peace as to urge the soldiery on both sides to refuse to fight. After the campaign had warmed the blood of the two nations, this advocacy of peace made the International odious in the eyes of both French and Germans. War begets patriotism, and the socialists fell under the reproach of not being sufficiently patriotic. After the conclusion of the war the Socialistic Workingmen's Party of Germany sinned against the German patriotic sentiment in a similar way and with similarly grave results. Since the foundation of the empire and of the Social-Democratic party, the socialists and their doctrines have passed through a further experience of a similar kind, but on a larger scale and more protracted. The government has gradually strengthened its autocratic position at home, increased its warlike equipment, and enlarged its pretensions in international politics, until what would have seemed absurdly impossible a generation ago is now submitted to by the German people, not only with a good grace, but with enthusiasm. During all this time that part of the population that has adhered to the socialist ideals has also grown gradually more patriotic and more loyal, and the leaders and keepers of socialist opinion have shared in the growth of chauvinism with the rest of the German people. But at no time have the socialists been able to keep abreast of the general upward movement in this respect. They have not attained the pitch of reckless loyalty that animates the conservative German patriots, although it is probably safe to say that the Social Democrats of to-day are as good and headlong patriots as the conservative Germans were a generation ago. During all this period of the new era of German political life the socialists have been freely accused of disloyalty to the national ambition, of placing their international aspirations above the ambition of imperial aggrandisement. The socialist spokesmen have been continually on the defensive. They set out with a round opposition to any considerable military establishment, and have more and more apologetically continued to oppose any "undue" extension of the warlike establishments and the warlike policy. But with the passage of time and the habituation to warlike politics and military discipline, the infection of jingoism has gradually permeated the body of Social Democrats, until they have now reached such a pitch of enthusiastic loyalty as they would not patiently hear a truthful characterisation of. The spokesmen now are concerned to show that, while they still stand for international socialism, consonant with their ancient position, they stand for national aggrandisement first and for international comity second. The relative importance of the national and the international ideals in German socialist professions has been reversed since the seventies.[18] The leaders are busy with interpretation of their earlier formulations. They have come to excite themselves over nebulous distinctions between patriotism and jingoism. The Social Democrats have come to be German patriots first and socialists second, which comes to saying that they are a political party working for the maintenance of the existing order, with modifications. They are no longer a party of revolution, but of reform, though the measure of reform which they demand greatly exceeds the Hohenzollern limit of tolerance. They are now as much, if not more, in touch with the ideas of English liberalism than with those of revolutionary Marxism. The material and tactical exigencies that have grown out of changes in the industrial system and in the political situation, then, have brought on far-reaching changes of adaptation in the position of the socialists. The change may not be extremely large at any one point, so far as regards the specific articles of the programme, but, taken as a whole, the resulting modification of the socialistic position is a very substantial one. The process of change is, of course, not yet completed,--whether or not it ever will be,--but it is already evident that what is taking place is not so much a change in amount or degree of conviction on certain given points as a change in kind,--a change in the current socialistic habit of mind. The factional discrepancies of theory that have occupied the socialists of Germany for some years past are evidence that the conclusion, even a provisional conclusion, of the shifting of their standpoint has not been reached. It is even hazardous to guess which way the drift is setting. It is only evident that the past standpoint, the standpoint of neo-Hegelian Marxism, cannot be regained,--it is a forgotten standpoint. For the immediate present the drift of sentiment, at least among the educated, seems to set toward a position resembling that of the National Socials and the Rev. Mr. Naumann; that is to say, imperialistic liberalism. Should the conditions, political, social, and economic, which to-day are chiefly effective in shaping the habits of thought among the German people, continue substantially unchanged and continue to be the chief determining causes, it need surprise no one to find German socialism gradually changing into a somewhat characterless imperialistic democracy. The imperial policy seems in a fair way to get the better of revolutionary socialism, not by repressing it, but by force of the discipline in imperialistic ways of thinking to which it subjects all classes of the population. How far a similar process of sterilisation is under way, or is likely to overtake the socialist movement in other countries, is an obscure question to which the German object-lesson affords no certain answer. FOOTNOTES: [1] Reprinted by permission from _The Quarterly Journal of Economics_, Vol. XXI, Feb., 1907. [2] "Scientific" is here used in the half-technical sense which by usage it often has in this connection, designating the theories of Marx and his followers. [3] There is, indeed, a remarkable consistency, amounting substantially to an invariability of position, in Marx's writing, from the _Communist Manifesto_ to the last volume of the _Capital_. The only portion of the great _Manifesto_ which became antiquated, in the apprehension of its creators, is the polemics addressed to the "Philosophical" socialists of the forties and the illustrative material taken from contemporary politics. The main position and the more important articles of theory--the materialistic conception, the doctrine of class struggle, the theory of value and surplus value, of increasing distress, of the reserve army, of the capitalistic collapse--are to be found in the _Critique of Political Economy_ (1859), and much of them in the _Misery of Philosophy_ (1847), together with the masterful method of analysis and construction which he employed throughout his theoretical work. [4] _Cf._ Engels, _Feuerbach_ (English translation, Chicago, 1903), especially Part IV, and various papers published in the _Neue Zeit_; also the preface to the _Communist Manifesto_ written in 1888; also the preface to volume ii. of _Capital_, where Engels argues the question of Marx's priority in connection with the leading theoretical principles of his system. [5] _Cf._ _Feuerbach_, as above; _The Development of Socialism from Utopia to Science_, especially sections ii and iii. [6] Such a socialist as Anton Menger, _e.g._, comes into the neo-Marxian school from without, from the field of modern scientific inquiry, and shows, at least virtually, no Hegelian color, whether in the scope of his inquiry, in his method, or in the theoretical work which he puts forth. It should be added that his _Neue Staatslehre_, and _Neue Sittenlehre_ are the first socialistic constructive work of substantial value as a contribution to knowledge, outside of economic theory proper, that has appeared since Lassalle. The efforts of Engels (_Ursprung der Familie_) and Bebel (_Die Frau_) would scarcely be taken seriously as scientific monographs even by hot-headed socialists if it were not for the lack of anything better. Menger's work is not Marxism, whereas Engels's and Bebel's work of this class is practically without value or originality. The unfitness of the Marxian postulates and methods for the purposes of modern science shows itself in the sweeping barrenness of socialistic literature all along that line of inquiry into the evolution of institutions for the promotion of which the materialistic dialectic was invented. [7] This contrast holds between the original Marxism of Marx and the scope and method of modern science; but it does not, therefore, hold between the latter-day Marxists--who are largely imbued with post-Darwinian concepts--and the non-Marxian scientists. Even Engels, in his latter-day formulation of Marxism, is strongly affected with the notions of post-Darwinian science, and reads Darwinism into Hegel and Marx with a good deal of _naïveté_. (See his _Feuerbach_, especially pp. 93-98 of the English translation.) So, also, the serious but scarcely quite consistent qualifications of the materialistic conception offered by Engels in the letters printed in the _Sozialistische Akademiker_, 1895. [8] The fact that the theoretical structures of Marx collapse when their elements are converted into the terms of modern science should of itself be sufficient proof that those structures were not built by their maker out of such elements as modern science habitually makes use of. Marx was neither ignorant, imbecile, nor disingenuous, and his work must be construed from such a point of view and in terms of such elements as will enable his results to stand substantially sound and convincing. [9] Cf. _Voraussetzungen des Sozialismus_, especially the first two (critical) chapters. Bernstein's reverent attitude toward Marx and Engels, as well as his somewhat old-fashioned conception of the scope and method of science, gives his discussion an air of much greater consonance with the orthodox Marxism than it really has. In his later expressions this consonance and conciliatory animus show up more strongly rather than otherwise. (See _Socialism and Science_, including the special preface written for the French edition.) That which was to Marx and Engels the point of departure and the guiding norm--the Hegelian dialectic--is to Bernstein a mistake from which scientific socialism must free itself. He says, _e.g._ (_Voraussetzungen_, end of ch. iv.), "The great things achieved by Marx and Engels they have achieved not by the help of the Hegelian dialectic, but in spite of it." The number of the "revisionists" is very considerable, and they are plainly gaining ground as against the Marxists of the older line of orthodoxy. They are by no means agreed among themselves as to details, but they belong together by virtue of their endeavor to so construe (and amend) the Marxian system as to bring it into consonance with the current scientific point of view. One should rather say points of view, since the revisionists' endeavors are not all directed to bringing the received views in under a single point of view. There are two main directions of movement among the revisionists: (_a_) those who, like Bernstein, Conrad Schmidt, Tugan-Baranowski, Labriola, Ferri, aim to bring Marxism abreast of the standpoint of modern science, essentially Darwinists; and (_b_) those who aim to return to some footing on the level of the romantic philosophy. The best type and the strongest of the latter class are the neo-Kantians, embodying that spirit of revulsion to romantic norms of theory that makes up the philosophical side of the reactionary movement fostered by the discipline of German imperialism. (See K. Vorländer, _Die neukantische Bewegung im Sozialismus_.) Except that he is not officially inscribed in the socialist calendar, Sombart might be cited as a particularly effective revisionist, so far as concerns the point of modernising Marxism and putting the modernised materialistic conception to work. [10] _Cf._ the files of the _Neue Zeit_, particularly during the controversy with Bernstein, and _Bernstein und das Sozialdemokratische Programm_. [11] The "idealist" socialists are even more in evidence outside of Germany. They may fairly be said to be in the ascendant in France, and they are a very strong and free-spoken contingent of the socialist movement in America. They do not commonly speak the language either of science or of philosophy, but, so far as their contentions may be construed from the standpoint of modern science, their drift seems to be something of the kind indicated above. At the same time the spokesmen of this scattering and shifting group stand for a variety of opinions and aspirations that cannot be classified under Marxism, Darwinism, or any other system of theory. At the margin they shade off into theology and the creeds. [12] Throughout the revisionist literature in Germany there is a visible softening of the traits of the doctrine of the class struggle, and the like shows itself in the programmes of the party. Outside of Germany the doctrinaire insistence on this tenet is weakening even more decidedly. The opportunist politicians, with strong aspirations, but with relatively few and ill-defined theoretical preconceptions, are gaining ground. [13] _Cf._ Bernstein, _Die heutige Sozialdemokratie in Theorie und Praxis_, an answer to Brunhuber, _Die heutige Sozialdemokratie_, which should be consulted in the same connection: Goldscheid, _Verelendungs- oder Meliorationstheorie_; also Sombart, _Sozialismus und soziale Bewegung_, 5th edition, pp. 86-89. [14] Accordingly, in later Marxian handling of the questions of exploitation and accumulation, the attention is centered on the "surplus product" rather than on the "surplus value." It is also currently held that the doctrines and practical consequences which Marx derived from the theory of surplus value would remain substantially well founded, even if the theory of surplus value was given up. These secondary doctrines could be saved--at the cost of orthodoxy--by putting a theory of surplus product in the place of the theory of surplus value, as in effect is done by Bernstein (_Socialdemokratie in Theorie und Praxis_, sec. 5. Also various of the essays included in _Zur Geschichte und Theorie des Sozialismus_). [15] The "right to the full product of labor" and the Marxian theory of exploitation associated with that principle has fallen into the background, except as a campaign cry designed to stir the emotions of the working class. Even as a campaign cry it has not the prominence, nor apparently the efficacy, which it once had. The tenet is better preserved, in fact, among the "idealists", who draw for their antecedents on the French Revolution and the English philosophy of natural rights, than among the latter-day Marxists. [16] It is, of course, well known that even in the transactions and pronounciamentos of the International a good word is repeatedly said for the trade-unions, and both the Gotha and the Erfurt programmes speak in favor of labor organisations, and put forth demands designed to further the trade-union endeavors. But it is equally well known that these expressions were in good part perfunctory, and that the substantial motive behind them was the politic wish of the socialists to conciliate the unionists, and make use of the unions for the propaganda. The early expressions of sympathy with the unionist cause were made for an ulterior purpose. Later on, in the nineties, there comes a change in the attitude of the socialist leaders toward the unions. [17] _Cf._ _Kapital_, vol. i, ch. xiii, sect 10. [18] _Cf._ Kautsky, _Erfurter Programm_, ch. v, sect. 13; Bernstein, _Voraussetzungen_, ch. iv, sect. e. THE MUTATION THEORY AND THE BLOND RACE[1] The theories of racial development by mutation, associated with the name of Mendel, when they come to be freely applied to man, must greatly change the complexion of many currently debated questions of race--as to origins, migrations, dispersion, chronology, cultural derivation and sequence. In some respects the new theories should simplify current problems of ethnology, and they may even dispense with many analyses and speculations that have seemed of great moment in the past. The main postulate of the Mendelian theories--the stability of type--has already done much service in anthropological science, being commonly assumed as a matter of course in arguments dealing with the derivation and dispersion of races and peoples. It is only by force of this assumption that ethnologists are able to identify any given racial stock over intervals of space or time, and so to trace the racial affinities of any given people. Question has been entertained from time to time as to the racial fixity of given physical traits--as, _e.g._, stature, the cephalic indices, or hair and eye color--but on the whole these and other standard marks of race are still accepted as secure grounds of identification.[2] Indeed, without some such assumption any ethnological inquiry must degenerate into mere wool-gathering. But along with this, essentially Mendelian, postulate of the stability of types, ethnologists have at the same time habitually accepted the incompatible Darwinian doctrine that racial types vary incontinently after a progressive fashion, arising through insensible cumulative variations and passing into new specific forms by the same method, under the Darwinian rule of the selective survival of slight and unstable (non-typical) variations. The effect of these two incongruous premises has been to leave discussions of race derivation somewhat at loose ends wherever the two postulates cross one another. If it be assumed, or granted, that racial types are stable, it follows as a matter of course that these types or races have not arisen by the cumulative acquirement of unstable non-specific traits, but must have originated by mutation or by some analogous method, and this view must then find its way into anthropology as into the other biological sciences. When such a step is taken an extensive revision of questions of race will be unavoidable, and an appreciable divergence may then be looked for among speculations on the mutational affinities of the several races and cultures. Among matters so awaiting revision are certain broad questions of derivation and ethnography touching the blond race or races of Europe. Much attention, and indeed much sentiment, has been spent on this general topic. The questions involved are many and diverse, and many of them have been subject of animated controversy, without definitive conclusions. The mutation theories, of course, have immediately to do with the facts of biological derivation alone, but when the facts are reviewed in the light of these theories it will be found that questions of cultural origins and relationship are necessarily drawn into the inquiry. In particular, an inquiry into the derivation and distribution of the blond stock will so intimately involve questions of the Aryan speech and institutions as to be left incomplete without a somewhat detailed attention to this latter range of questions. So much so that an inquiry into the advent and early fortunes of the blond stock in Europe will fall, by convenience, under two distinct but closely related captions: The Origin of the Blond Type, and The Derivation of the Aryan Culture. * * * * * (a) It is held, on the one hand, that there is but a single blond race, type or stock (Keane, Lapouge, Sergi), and on the other hand that there are several such races or types, more or less distinct but presumably related (Deniker, Beddoe, and other, especially British, ethnologists). (b) There is no good body of evidence going to establish a great antiquity for the blond stock, and there are indications, though perhaps inconclusive, that the blond strain, including all the blond types, is of relatively late date--unless a Berber (Kabyle) blond race is to be accepted in a more unequivocal manner than hitherto. (c) Neither is there anything like convincing evidence that this blond strain has come from outside of Europe--except, again, for the equivocal Kabyle--or that any blond race has ever been widely or permanently distributed outside of its present European habitat, (d) The blond race is not found unmixed. In point of pedigree all individuals showing the blond traits are hybrids, and the greater number of them show their mixed blood in their physical traits. (e) There is no community, large or small, made up exclusively of blonds, or nearly so, and there is no good evidence available that such an all-blond or virtually all-blond community ever has existed, either in historic or prehistoric times. The race appears never to have lived in isolation. (f) It occurs in several (perhaps hybrid) variants--unless these variants are to be taken (with Deniker) as several distinct races, (g) Counting the dolicho-blond as the original type of the race, its nearest apparent relative among the races of mankind is the Mediterranean (of Sergi), at least in point of physical traits. At the same time the blond race, or at least the dolicho-blond type, has never since neolithic times, so far as known, extensively and permanently lived in contact with the Mediterranean. (h) The various (national) ramifications of the blond stock--or rather the various racial mixtures into which an appreciable blond element enters--are all, and to all appearance have always been, of Aryan ("Indo-European," "Indo-Germanic") speech--with the equivocal exception of the Kabyle. (i) Yet far the greater number and variety (national and linguistic) of men who use the Aryan speech are not prevailingly blond, or even appreciably mixed with blond. (j) The blond race, or the peoples with an appreciable blond admixture, and particularly the communities in which the dolicho-blond element prevails, show little or none of the peculiarly Aryan institutions--understanding by that phrase not the known institutions of the ancient Germanic peoples, but that range of institutions said by competent philologists to be reflected in the primitive Aryan speech. (k) These considerations raise the presumption that the blond race was not originally of Aryan speech or of Aryan culture, and they also suggest (l) that the Mediterranean, the nearest apparent relative of the dolicho-blond, was likewise not originally Aryan. * * * * * Accepting the mutation theory, then, for the purpose in hand, and leaving any questions of Aryanism on one side for the present, a canvass of the situation so outlined may be offered in such bold, crude and summary terms as should be admissible in an analysis which aims to be tentative and provisional only. It may be conceived that the dolichocephalic blond originated as a mutant of the Mediterranean type (which it greatly resembles in its scheme of biometric measurements[3]) probably some time after that race had effected a permanent lodgment on the continent of Europe. The Mediterranean stock may be held (Sergi and Keane) to have come into Europe from Africa,[4] whatever its remoter derivation may have been. It is, of course, not impossible that the mutation which gave rise to the dolicho-blond may have occurred before the parent stock left Africa, or rather before it was shut out of Africa by the submergence of the land connection across Sicily, but the probabilities seem to be against such a view. The conditions would appear to have been less favorable to a mutation of this kind in the African habitat of the parent stock than in Europe, and less favorable in Europe during earlier quaternary time than toward the close of the glacial period. The causes which give rise to a variation of type have always been sufficiently obscure, whether the origin of species be conceived after the Darwinian or the Mendelian fashion, and the mutation theories have hitherto afforded little light on that question. Yet the Mendelian postulate that the type is stable except for such a mutation as shall establish a new type raises at least the presumption that such a mutation will take place only under exceptional circumstances, that is to say, under circumstances so substantially different from what the type is best adapted to as to subject it to some degree of physiological strain. It is to be presumed that no mutation will supervene so long as the conditions of life do not vary materially from what they have been during the previous uneventful life-history of the type. Such is the presumption apparently involved in the theory and such is also the suggestion afforded by the few experimental cases of observed mutation, as, _e.g._, those studied by De Vries. A considerable climatic change, such as would seriously alter the conditions of life either directly or through its effect on the food supply, might be conceived to bring on a mutating state in the race; or the like effect might be induced by a profound cultural change, particularly any such change in the industrial arts as would radically affect the material conditions of life. These considerations, mainly speculative it is true, suggest that the dolicho-blond mutant could presumably have emerged only at a time when the parent stock was exposed to notably novel conditions of life, such as would be presumed (with De Vries) to tend to throw the stock into a specifically unstable (mutating) state; at the same time these novel conditions of life must also have been specifically of such a nature as to favor the survival and multiplication of this particular human type. The climatic tolerance of the dolicho-blond, _e.g._, is known to be exceptionally narrow. Now, it is not known, indeed there is no reason to presume, that the Mediterranean race was exposed to such variations of climate or of culture before it entered Europe as might be expected to induce a mutating state in the stock, and at the same time a mutant gifted with the peculiar climatic intolerance of the dolicho-blond would scarcely have survived under the conditions offered by northern Africa in late quaternary time. But the required conditions are had later on in Europe, after the Mediterranean was securely at home in that continent. The whole episode may be conceived to have run off somewhat in the following manner. The Mediterranean race is held to have entered Europe in force during quaternary time, presumably after the quaternary period was well advanced, most likely during the last genial, interglacial period. This race then brought the neolithic culture, but without the domestic animals (or plants?) that are a characteristic feature of the later neolithic age, and it encountered at least the remnants of an older, palaeolithic population. This older European population was made up of several racial stocks, some of which still persist as obscure and minor elements in the later peoples of Europe. The (geologic) date to be assigned this intrusion of the Mediterranean race into Europe is of course not, and can perhaps never be, determined with any degree of nicety or confidence. But there is a probability that it coincides with the recession of the ice-sheet, following one or another of the severer periods of glaciations, that occurred before the submergence of the land connection between Europe and Africa, over Gibraltar, Sicily, and perhaps Crete. How late in quaternary time the final submergence of the Mediterranean basin occurred is still a matter of surmise; the intrusion of the Mediterranean race into Europe appears, on archaeological evidence, to have occurred in late quaternary time, and in the end this archaeological evidence may help to decide the geologic date of the severance of Europe from Africa. The Mediterranean race seems to have spread easily over the habitable surface of Europe and shortly to have grown numerous and taken rank as the chief racial element in the neolithic population; which argues that no very considerable older population occupied the European continent at the time of the Mediterranean invasion; which in turn implies that the fairly large (Magdalenian) population of the close of the palaeolithic age was in great part destroyed or expelled by the climatic changes that coincided with or immediately preceded the advent of the Mediterranean race. The known characteristics of the Magdalenian culture indicate a technology, a situation and perhaps a race, somewhat closely paralleled by the Eskimo;[5] which argues that the climatic situation before which this Magdalenian race and culture gave way would have been that of a genial interglacial period rather than a period of glaciation. During this genial (perhaps sub-tropical) inter-glacial period immediately preceding the last great glaciation the Magdalenian stock would presumably find Europe climatically untenable, judging by analogy with the Eskimo; whereas the Mediterranean stock should have found it an eminently favorable habitat, for this race has always succeeded best in a warm-temperate climate. Both the extensive northward range of the early neolithic (Mediterranean) settlements and the total disappearance of the Magdalenian culture from the European continent point to a climatic situation in Europe more favorable to the former race and more unwholesome for the latter than the conditions known to have prevailed at any time since the last interglacial period, especially in the higher latitudes. The indications would seem to be that the whole of Europe, even the Baltic and Arctic seaboards, became climatically so fully impossible for the Magdalenian race during this interglacial period as to result in its extinction or definitive expulsion; for when, in recent times, climatically suitable conditions return, on the Arctic seaboard, the culture which takes the place that should have been occupied by the Magdalenian is the Finnic (Lapp)--a culture unrelated to the Magdalenian either in race or technology, although of much the same cultural level and dealing with a material environment of much the same character. And this genial interval that was fatal to the Magdalenian was, by just so much, favorable to the Mediterranean race. But glacial conditions presently returned, though with less severity than the next preceding glacial period; and roughly coincident with the close of the genial interval in Europe the land connection with Africa was cut off by submergence, shutting off retreat to the south. How far communication with Asia may have been interrupted during the subsequent cold period, by the local glaciation of the Caucasus, Elburz and Armenian highlands, is for the present apparently not to be determined, although it is to be presumed that the outlet to the east would at least be seriously obstructed during the glaciation. There would then be left available for occupation, mainly by the Mediterranean race, central and southern Europe together with the islands, notably Sicily and Crete, left over as remnants of the earlier continuous land between Europe and Africa. The southern extensions of the mainland, and more particularly the islands, would still afford a favorable place for the Mediterranean race and its cultural growth. So that the early phases of the great Cretan (Aegean) civilisation are presumably to be assigned to this period that is covered by the last advance of the ice in northern Europe. But the greater portion of the land area so left accessible to the Mediterranean race, in central or even in southern Europe, would have been under glacial or sub-glacial climatic conditions. For this race, essentially native to a warm climate, this situation on the European mainland would be sufficiently novel and trying, particularly throughout that ice-fringed range of country where they would be exposed to such cold and damp as this race has never easily tolerated. The situation so outlined would afford such a condition of physiological strain as might be conceived to throw the stock into a specifically unstable state and so bring on a phase of mutation. At the same time this situation, climatic and technological, would be notably favorable to the survival and propagation of a type gifted with all the peculiar capacities and limitations of the dolicho-blond; so that any mutant showing the traits characteristic of that type would then have had an eminently favorable chance of survival. Indeed, it is doubtful, in the present state of the available evidence, whether such a type of man could have survived in Europe from or over any period of quaternary time prior to the last period of glaciation. The last preceding interglacial period appears to have been of a sufficiently genial (perhaps sub-tropical) character throughout Europe to have definitively eliminated the Magdalenian race and culture, and a variation of climate in the genial sense sufficiently pronounced to make Europe absolutely untenable for the Magdalenian--presumed to be something of a counterpart to the Eskimo both in race and culture--should probably have reached the limit of tolerance for the dolicho-blond as well. The latter is doubtless not as intolerant of a genial--warm-temperate--climate as the former, but the dolicho-blond after all stands much nearer to the Eskimo in this matter of climatic tolerance than to either of the two chief European stocks with which it is associated. Apparently no racial stock with a climatic tolerance approximately like that of the Eskimo, the Magdalenian, or the current races of the Arctic seaboard, survived over the last inter-glacial period; and if the dolicho-blond is conceived to have lived through that period it would appear to have been by a precariously narrow margin. So that, on one ground and another, the mutation out of which the dolicho-blond has arisen is presumably to be assigned to the latest period of glaciation in Europe, and with some probability to the time when the latest glaciation was at its maximum, and to the region where glacial and seaboard influences combined to give that racial type a differential advantage over all others. This dolicho-blond mutation may, of course, have occurred only once, in a single individual, but it should seem more probable, in the light of De Vries' experiments, that the mutation will have been repeated in the same specific form in several individuals in the same general locality and in the same general period of time. Indeed, it would seem highly probable that several typically distinct mutations will have occurred, repeatedly, at roughly the same period and in the same region, giving rise to several new types, some of which, including the dolicho-blond, will have survived. Many, presumably the greater number, of these mutant types will have disappeared, selectively, being unfit to survive under those sub-glacial seaboard conditions that were eminently favorable to the dolicho-blond; while other mutants arising out of the same mutating period and adapted to climatic conditions of a more continental character, suitable to more of a continental habitat, less humid, at a higher altitude and with a wider seasonal variation of temperature, may have survived in the regions farther inland, particularly eastward of the selectively defined habitat of the dolicho-blond. These latter may have given rise to several blond races, such as are spoken for by Deniker[6] and certain British ethnologists. The same period of mutation may well have given rise also to one or more brunet types, some of which may have survived. But if any new brunet type has come up within a period so recent as this implies, the fact has not been noted or surmised hitherto--unless the brunet races spoken for by Deniker are to be accepted as typically distinct and referred to such an origin. The evidence for the brunet stocks has not been canvassed with a question of this kind in view. These stocks have not been subject of such eager controversy as the dolicho-blond, and the attention given them has been correspondingly less. The case of the blond is unique in respect of the attention spent on questions of its derivation and prehistory, and it is also singular in respect of the facility with which it can be isolated for the purposes of such an inquiry. This large and persistent attention, from all sorts of ethnologists, has brought the evidence bearing on the dolicho-blond into such shape as to permit more confident generalisations regarding that race than any other. In any case the number of mutant individuals, whether of one or of several specific types, will have been very few as compared with the numbers of the parent stock from which they diverged, even if they may have been somewhat numerous as counted absolutely, and the survivors whose offspring produced a permanent effect on the European peoples will have been fewer still. It results that these surviving mutants will not have been isolated from the parent stock, and so could not breed in isolation, but must forthwith be crossed on the parent stock and could therefore yield none but hybrid offspring. From the outset, therefore, the community or communities in which the blond mutants were propagated would be made up of a mixture of blond and brunet, with the brunet greatly preponderating. It may be added that in all probability there were also present in this community from the start one or more minor brunet elements besides the predominant Mediterranean, and that at least shortly after the close of the glacial period the new brachycephalic brunet (Alpine) race comes into the case; so that the chances favor an early and persistent crossing of the dolicho-blond with more than one brunet type, and hence they favor complications and confusion of types from the start. It follows that, in point of pedigree, according to this view there neither is nor ever has been a pure-bred dolicho-blond individual since the putative original mutant with which the type came in. But under the Mendelian rule of hybrids it is none the less to be expected that, in the course of time and of climatically selective breeding, individuals (perhaps in appreciable numbers) will have come up from time to time showing the type characters unmixed and unweakened, and effectively pure-bred in point of heredity. Indeed, such individuals, effectively pure-bred or tending to the establishment of a pure line, will probably have emerged somewhat frequently under conditions favorable to the pure type. The selective action of the conditions of life in the habitat most favorable to the propagation of the dolicho-blond has worked in a rough and uncertain way toward the establishment, in parts of the Baltic and North Sea region, of communities made up prevailingly of blonds. Yet none of these communities most favorably placed for a selective breeding in the direction of a pure dolicho-blond population have gone far enough in that direction to allow it safely to be said that the composite population of any such given locality is more than half blond. Placed as it is in a community of nations made up of a hybrid mixture of several racial stocks there is probably no way at present of reaching a convincing demonstration of the typical originality of this dolicho-blond mutant, as contrasted with the other blond types with which it is associated in the European population; but certain general considerations go decidedly, perhaps decisively, to enforce such a view: (a) This type shows such a pervasive resemblance to a single one of the known older and more widely distributed types of man (the Mediterranean) as to suggest descent by mutation from this one rather than derivation by crossing of any two or more known types. The like can not be said of the other blond types, all and several of which may plausibly be explained as hybrids of known types. They have the appearance of blends, or rather of biometrical compromises, between two or more existing varieties of man. Whereas it does not seem feasible to explain the dolicho-blond as such a blend or compromise between any known racial types. (b) The dolicho-blond occurs, in a way, centrally to the other blond types, giving them a suggestive look of being ramifications of the blond stock, by hybridisation, into regions not wholly suited to the typical blond. The like can scarcely be said for any of the other European types or races. The most plausible exception would be Deniker's East-European or Oriental race, Beddoe's Saxon, which stands in a somewhat analogous spacial relation to the other blond types. But this brachycephalic blond is not subject to the same sharp climatic limitations that hedge about the dolicho-blond; it occurs apparently with equally secure viability within the littoral home area of the dolicho-blond and in continental situations where conditions of altitude and genial climate would bar the latter from permanent settlement. The ancient and conventionally accepted center of diffusion of blondness in Europe lies within the seaboard region bordering on the south Baltic, the North Sea and the narrow waters of the Scandinavian peninsulas. Probably, if this broad central area of diffusion were to be narrowed down to a particular spot, the consensus of opinion as to where the narrower area of characteristic blondness is to be looked for, would converge on the lands immediately about the narrow Scandinavian waters. This would seem to hold true for historic and for prehistoric times alike. This region is at the same time, by common consent, the peculiar home of the dolicho-blond, rather than of any other blond type. (c) The well known but little discussed climatic limitation of the blond race applies particularly to the dolicho-blond, and only in a pronouncedly slighter degree to the other blond types. The dolicho-blond is subject to a strict regional limitation, the other blond types to a much less definite and wider limitation of the same kind. Hence these others are distributed somewhat widely, over regions often remote and climatically different from the home area of the dolicho-blond, giving them the appearance of being dispersed outward from this home area as hybrid extensions of the central and typical blond stock. A further and equally characteristic feature of this selective localisation of the dolicho-blond race is the fact that while this race does not succeed permanently outside the seaboard region of the south Baltic and North Sea, there is no similar selective bar against other races intruding into this region. Although the dolicho-blond perhaps succeeds better within its home area than any other competing stock or type, yet several other types of man succeed so well within the same region as to hold it, and apparently always to have held it, in joint tenancy with the dolicho-blond. A close relationship, amounting to varietal identity, of the Kabyle with the dolicho-blond has been spoken for by Keane and by other ethnologists. But the very different climatic tolerance of the two races should put such an identity out of the question. The Kabyle lives and thrives best, where his permanent home area has always been, in a high and dry country, sufficiently remote from the sea to make it a continental rather than a littoral habitat. The dolicho-blond, according to all available evidence, can live in the long run only in a seaboard habitat, damp and cool, at a high latitude and low altitude. There is no known instance of this race having gone out from its home area on the northern seaboard into such a region as that inhabited by the Kabyle and having survived for an appreciable number of generations. That this type of man should have come from Mauritania, where it could apparently not live under the conditions known to have prevailed there in the recent or the remoter past, would seem to be a biologic impossibility. Hitherto, when the dolicho-blond has migrated into such or a similar habitat it has not adapted itself to the new climatic requirements but has presently disappeared off the face of the land. Indeed, the experiment has been tried in Mauritanian territory. If the Kabyle blond is to be correlated with those of Europe, it will in all probability have to be assigned an independent origin, to be derived from an earlier mutation of the same Mediterranean stock to which the dolicho-blond is to be traced. Questions of race in Europe are greatly obscured by the prevalence of hybrid types having more or less fixity and being more or less distinctly localised. The existing European peoples are hybrid mixtures of two or more racial stocks. The further fact is sufficiently obvious, though it has received less critical attention than might be, that these several hybrid populations have in the course of time given rise to a number of distinct national and local types, differing characteristically from one another and having acquired a degree of permanence, such as to simulate racial characters and show well marked national and local traits in point of physiognomy and temperament. Presumably, these national and local types of physique and temperament are hybrid types that have been selectively bred into these characteristic forms in adaptation to the peculiar circumstances of environment and culture under which each particular local population is required to live, and that have been so fixed (provisionally) by selective breeding of the hybrid material subject to such locally uniform conditions--except so far as the local characters in question are of the nature of habits and are themselves therefore to be classed as an institutional element rather than as characteristics of race. It is evident that under the Mendelian law of hybridisation the range of favorable, or viable, variations in any hybrid population must be very large--much larger than the range of fluctuating (non-typical) variations obtainable under any circumstances in a pure-bred race. It also follows from these same laws of hybridisation that by virtue of the mutual exclusiveness of allelomorphic characters or groups of characters it is possible selectively to obtain an effectually "pure line" of hybrids combining characters drawn from each of the two or more parent stocks engaged, and that such a composite pure line may selectively be brought to a provisional fixity[7] in any such hybrid population. And under conditions favorable to a type endowed with any given hybrid combination of characters so worked out the given hybrid type (composite pure line) may function in the racial mixture in which it is so placed very much as an actual racial type would behave under analogous circumstances; so that, _e.g._, under continued intercrossing such a hybrid population would tend cumulatively to breed true to this provisionally stable hybrid type, rather than to the actual racial type represented by any one of the parent stocks of which the hybrid population is ultimately made up, unless the local conditions should selectively favor one or another of these ultimate racial types. Evidently, too, the number of such provisionally stable composite pure lines that may be drawn from any hybrid mixture of two or more parent stocks must be very considerable--indeed virtually unlimited; so that on this ground there should be room for any conceivable number of provisionally stable national or local types of physique and temperament, limited only by the number of characteristically distinguishable local environments or situations that might each selectively act to characterise and establish a locally characteristic composite pure line; each answering to the selective exigencies of the habitat and cultural environment in which it is placed, and each responding to these exigencies in much the same fashion as would an actual racial type--provided only that this provisionally stable composite pure line is not crossed on pure-bred individuals of either of the parent stocks from which it is drawn, pure-bred in respect of the allelomorphic characters which give the hybrid type its typical traits. When the hybrid type is so crossed back on one or other of its parent stocks it should be expected to break down; but in so slow-breeding a species as man, with so large a complement of unit characters (some 4000 it has been estimated), it will be difficult to decide empirically which of the two lines--the hybrid or the parent stock--proves itself in the offspring effectively to be a racial type; that is to say, which of the two (or more) proves to be an ultimately stable type arisen by a Mendelian mutation, and which is a provisionally stable composite pure line selectively derived from a cross. The inquiry at this point, therefore, will apparently have to content itself with arguments of probability drawn from the varying behavior of the existing hybrid types under diverse conditions of life. Such general consideration of the behavior of the blond types of Europe, other than the dolicho-blond, and more particularly consideration of their viability under divergent climatic conditions, should apparently incline to the view that they are hybrid types, of the nature of provisionally stable composite pure lines. So far, therefore, as the evidence has yet been canvassed, it seems probable on the whole that the dolicho-blond is the only survivor from among the several mutants that may have arisen out of this presumed mutating period; that the other existing blond types, as well as certain brunets, are derivatives of the hybrid offspring of the dolicho-blond crossed on the parent Mediterranean stock or on other brunet stocks with which the race has been in contact early or late; and that several of these hybrid lines have in the course of time selectively been established as provisionally stable types (composite pure lines), breakable only by a fresh cross with one or other of the parent types from which the hybrid line sprang, according to the Mendelian rule.[8] All these considerations may not be convincing, but they are at least suggestive to the effect that if originality is to be claimed for any one of the blond types or stocks it can best be claimed for the dolicho-blond, while the other blond types may better be accounted for as the outcome of the crossing of this stock on one or another of the brunet stocks of Europe. FOOTNOTES: [1] Reprinted by permission from _The Journal of Race Development_, Vol. III, No. 4. [2] _Cf._, however, W. Ridgeway, "The Application of Zoölogical Laws to Man," _Report, British Association for Advancement of Science_ (Dublin), 1908. [3] _Cf._ Sergi, _The Mediterranean Race_, ch. xi, xiii. [4] Sergi, _Arii e Italici_; Keane, _Man Past and Present_, ch. xii. [5] _Cf._ W. J. Sollas, "Palaeolithic Races and their Modern Representatives," _Science Progress_, vol. iv, 1909-1910. [6] _The Races of Mankind_; and "Les six races composant la population de l'Europe," _Journal Anth. Inst._, 1906. [7] Illustrated by the various pure breeds or "races" of domestic animals. [8] Mr. R. B. Bean's discussion of Deniker's "Six Races," _e.g._, goes far to show that such is probably the standing of the blond types, other than the dolicho-blond, among these six races of Europe; although such is not the conclusion to which Mr. Bean comes. _Philippine Journal of Science_, September, 1909. THE BLOND RACE AND THE ARYAN CULTURE[1] It has been argued in an earlier paper[2] that the blond type or types of man (presumably the dolichocephalic blond) arose by mutation from the Mediterranean stock during the last period of severe glaciation in Europe. This would place the emergence of this racial type roughly coincident with the beginning of the European neolithic; the evidence going presumptively to show that the neolithic technology came into Europe with the Mediterranean race, at or about the same time with that race, and that the mutation which gave rise to the dolicho-blond took place after the Mediterranean race was securely settled in Europe. Since this blond mutant made good its survival under the circumstances into which it so was thrown it should presumably be suited by native endowment to the industrial and climatic conditions that prevailed through the early phases of the neolithic age in Europe; that is to say, it would be a type of man selectively adapted to the technological situation characteristic of the early neolithic but lacking as yet the domestic animals (and crop-plants?) that presently give much of its character to that culture. Beginning, then, with the period of the last severe glaciation, and starting with this technological equipment, those portions of the European population that contained an appreciable and increasing admixture of the blond may be conceived to have ranged across the breadth of Europe, particularly in the lowlands, in the belt of damp and cool country that fringed the ice, and to have followed the receding ice-sheet northward when the general climate of Europe began to take on its present character with the returning warmth and dryness. By force of the strict climatic limitation to which this type is subject, the blond element, and more particularly the dolicho-blond, will presently have disappeared by selective elimination from the population of those regions from which the ice-sheet and its fringe of cool and humid climate had receded. The cool and humid belt suited to the propagation of the blond mutant (and its blond hybrids) would shift northward and shorten down to the seaboard as the glacial conditions in which it had originated presently ceased. So that presently, when Europe finally lost its ice-sheet, the blond race and its characteristic hybrids would be found confined nearly within the bounds which have marked its permanent extension in historic times. These limits have, no doubt, fluctuated somewhat in response to secular variations of climate; but on the whole they appear to have been singularly permanent and singularly rigid. Apparently after the dolicho-blond had come to occupy the restricted habitat which the stock has since continued to hold on the northern seaboard of Europe, toward the close of what is known in Danish chronology as the "older stone age," the early stock of domestic animals appear to have been introduced into Europe from Asia; the like statement will hold more doubtfully for the older staple crop plants, with the reservation that their introduction appears to antedate that of the domestic animals. At least some such date seems indicated by their first appearance in Denmark late in the period of the "kitchen middens." Virtually all of these essential elements of their material civilisation appear to have come to the blond-hybrid communities settled on the narrow Scandinavian waters, as to the rest of Europe, from Turkestan. This holds true at least for the domestic animals as a whole, the possible exceptions among the early introductions being not of great importance. Some of the early crop plants may well have come from what is now Mesopotamian or Persian territory, and may conceivably have reached western Europe appreciably earlier, without affecting the present argument. If the European horse had been domesticated in palæolithic times, as appears at least extremely probable, that technological gain appears to have been lost before the close of the palæolithic age; perhaps along with the extinction of the European horse. These new elements of technological equipment, the crop plants and animals, greatly affected the character of the neolithic culture in Europe; visibly so as regards the region presumably occupied by the dolicho-blond,--or the blond-hybrid peoples. On the material side of the community's life they would bring change direct and immediate, altering the whole scheme of ways and means and shifting the pursuit of a livelihood to new lines; and on the immaterial side their effect would be scarcely less important, in that the new ways and means and the new manner of life requisite and induced by their use would bring on certain new institutional features suitable to a system of mixed farming. Whatever may have been the manner of their introduction, whether they were transmitted peaceably by insensible diffusion from group to group or were carried in with a high hand by a new intrusive population that overran the country and imposed its own cultural scheme upon the Europeans along with the new ways and means of life,--in any case these new cultural elements will have spread over the face of Europe somewhat gradually and will have reached the blond-hybrid communities in their remote corner of the continent only after an appreciable lapse of time. Yet, it is to be noted, it is after all relatively early in neolithic times that certain of the domestic plants and animals first come into evidence in the Scandinavian region. The crop plants appear to have come in earlier than the domestic animals, being perhaps brought in by the peoples of the Mediterranean race at their first occupation of Europe in late quaternary time. With tillage necessarily goes a sedentary manner of life. So that at their first introduction the domestic animals were intruded into a system of husbandry carried on by a population living in settled communities, and drawing their livelihood in great part from the tilled ground but also in part from the sea and from the game-bearing forests that covered much of the country at that time. It was into such a situation that the domestic animals were intruded on their first coming into Europe,--particularly into the seaboard region of north Europe. On the open ranges of western and central Asia, from which these domestic animals came, and even in the hill country of that general region, the peoples that draw their livelihood from cattle and sheep are commonly of a nomadic habit of life, in the sense that the requirements of forage for their herds and flocks hold them to an unremitting round of seasonal migration. It results that, except in the broken hill country, these peoples habitually make use of movable habitations, live in camps rather than in settled, sedentary communities. Certain peculiar institutional arrangements also result from this nomadic manner of life associated with the care of flocks and herds on a large scale. But on their introduction into Europe the domestic animals appear on the whole not to have supplanted tillage and given rise to such a nomadic-pastoral scheme of life, exclusively given to cattle raising, but rather to have fallen into a system of mixed farming which combined tillage with a sedentary or quasi-sedentary grazing industry. Such particularly appears to have been the case in the seaboard region of the north, where there is no evidence of tillage having been displaced by a nomadic grazing industry. Indeed, the small-scale and broken topography of this European region has never admitted a large-scale cattle industry, such as has prevailed on the wide Asiatic ranges. An exception, at least partial and circumscribed, may perhaps be found in the large plains of the extreme Southeast and in the Danube valley; and it appears also that grazing, after the sedentary fashion, took precedence of tillage in prehistoric Ireland as well as here and there in the hilly countries of southern and central Europe. Such an introduction of tillage and grazing would mean a revolutionary change in the technology of the European stone age, and a technological revolution of this kind will unavoidably bring on something of a radical change in the scheme of institutions under which the community lives; primarily in the institutions governing the details of its economic life, but secondarily also in its domestic and civil relations. When such a change comes about through the intrusion of new material factors the presumption should be that the range of institutions already associated with these material factors in their earlier home will greatly influence the resulting new growth of institutions in the new situation, even if circumstances may not permit these alien institutions to be brought in and put into effect with the scope and force which they may have had in the culture out of which they have come. Some assimilation is to be looked for even if circumstances will not permit the adoption of the full scheme of institutions, and the institutions originally associated with the intrusive technology will be found surviving with least loss or qualification in those portions of the invaded territory where the invaders have settled in force, and particularly where conditions have permitted them to retain something of their earlier manner of life. The bringers of these new elements of culture, material and immaterial, had acquired what they brought with them on the open sheep and cattle ranges of the central-Asiatic plains and uplands,--as is held to be the unequivocal testimony of the Aryan speech, and as is borne out by the latest explorations in that region. These later explorations indicate west-central Turkestan as the probable center of the domestication and diffusion of the animals, if not also of the crop plants, that have stocked Europe. Of what race these bearers of the new technology and culture may have been, and just what they brought into Europe, is all a matter of inference and surmise. It was once usual to infer, as a ready matter of course, that these immigrant pastoral nomads from the Asiatic uplands were "Aryans," "Indo-Europeans," "Indo-Germans," of a predominantly blond physique. But what has been said above as well as in the earlier paper referred to comes near excluding the possibility of these invaders being blonds, or more specifically the dolicho-blond. It is, of course, conceivable, with Keane (if his speculations on this head are to be taken seriously), that a fragment of the alleged blond race from Mauretania may have wandered off into Turkestan by way of the Levant, and so may there have acquired the habits of a pastoral life, together with the Aryan speech and institutions, and may then presently have carried these cultural factors into Europe and imposed them on the European population, blond and brunet. But such speculations, which once were allowable though idle, have latterly been put out of all question, at least for the present, by the recent Pumpelly explorations in Turkestan. It is, for climatic reasons, extremely improbable that any blond stock should have inhabited any region of the central-Asiatic plains or uplands long enough to acquire the pastoral habits of life and the concomitant Aryan speech and institutions, and it is fairly certain that the dolicho-blond could not have survived for that length of time under the requisite conditions of climate and topography. It is similarly quite out of the question that the dolicho-blond, arising as a mutant type late in quaternary time, should have created the Aryan speech and culture in Europe, since neither the archæological evidence nor the known facts of climate and topography permit the hypothesis that a pastoral-nomadic culture of home growth has ever prevailed in Europe on a scale approaching that required for such a result. And there is but little more possibility that the bringers of the new (Aryan) culture should have been of the Mediterranean race; although the explorations referred to make it nearly certain that the communities which domesticated the pastoral animals (and perhaps the crop-plants) in Turkestan were of that race. The Mediterranean race originally is Hamitic, not Aryan, it is held by men competent to speak on that matter, and the known (presumably) Mediterranean prehistoric settlements in Turkestan, at Anau, are moreover obviously the settlements of a notably sedentary people following a characteristically peaceable mode of life. The population of these settlements might of course conceivably have presently acquired the nomadic and predatory habits reflected by the Aryan speech and institutions, but there is no evidence of such an episode at Anau, where the finds show an uninterrupted peaceable and sedentary occupation of the sites throughout the period that could come in question. The population of the settlements at Anau could scarcely have made such a cultural innovation, involving the adoption of an alien language, except under the pressure of conquest by an invading people; which would involve the subjection of the peaceable communities of Anau and the incorporation of their inhabitants as slaves or as a servile class in the predatory organisation of their masters. The Mediterranean people of Anau could accordingly have had a hand in carrying this pastoral-predatory (Aryan) culture into the West only as a subsidiary racial element in a migratory community made up primarily of another racial stock. This leaves the probability that an Asiatic stock, without previous settled sedentary habits of life, acquired the domesticated animals from the sedentary and peaceable communities of Anau, or from some similar village (pueblo) or villages of western Turkestan, and then through a (moderately) long experience of nomadic pastoral life acquired also the predatory habits and institutions that commonly go with a pastoral life on a large scale. These cultural traits they acquired in such a degree of elaboration and maturity as is implied by the primitive Aryan (or, better, proto-Aryan) speech, including a more or less well developed patriarchal system; so that they would presently become a militant and migratory community somewhat after the later-known Tatar fashion, and so made their way westward as a self-sufficient migratory host and carried the new material culture into Europe together with the alien Aryan speech. It is at the same time almost unavoidable that in such an event this migratory host would have carried with them into the West an appreciable servile contingent made up primarily of enslaved captives from the peaceable agricultural settlements of the Mediterranean race, which had originally supplied them with their stock of domestic animals. Along with these new technological elements and the changes of law and custom which their adoption would bring on, there will also have come in the new language that was designed to describe these new ways and means of life and was adapted to express the habits of thought which the new ways and means bred in the peoples that adopted them. The immigrant pastoral (proto-Aryan) language and the pastoral (patriarchal and predatory) law and custom will in some degree have been bound up with the technological ways and means out of which they arose, and they would be expected to have reached and affected the various communities of Europe in somewhat the same time and the same measure in which these material facts of the pastoral life made their way among these peoples. In the course of the diffusion of these cultural elements, material and immaterial, among the European communities the language and in a less degree the domestic and civil usages and ideals bred by the habits of the pastoral life might of course come to be dissociated from their material or technological basis and might so be adopted by remoter peoples who never acquired any large measure of the material culture of those pastoral nomads whose manner of life had once given rise to these immaterial features of Aryan civilisation. * * * * * Certain considerations going to support this far-flung line of conjectural history may be set out more in detail: (a) The Aryan civilisation is of the pastoral type, with such institutions, usages and preconceptions as a large-scale pastoral organisation commonly involves. Such is said by competent philologists to be the evidence of the primitive Aryan speech. It is substantially a servile organisation under patriarchal rule, or, if the expression be preferred, a militant or predatory organisation; these alternative phrases describe the same facts from different points of view. It is characterised by a well-defined system of property rights, a somewhat pronounced subjection of women and children, and a masterful religious system tending strongly to monotheism. A pastoral culture on the broad plains and uplands of a continental region, such as west-central Asia, will necessarily fall into some such shape, because of the necessity of an alert and mobile readiness for offense and defense and the consequent need of soldierly discipline. Insubordination, which is the substance of free institutions, is incompatible with a prosperous pastoral-nomadic mode of life. When worked out with any degree of maturity and consistency the pastoral-nomadic culture that has to do with sheep and cattle appears always to have been a predatory, and therefore a servile culture, particularly when drawn on the large scale imposed by the topography of the central-Asiatic plains, and reënforced with the use of the horse. (The reindeer nomads of the arctic seaboard may appear to be an exception, at least in a degree, but they are a special case, admitting a particular explanation, and their case does not affect the argument for the Aryan civilisation.) The characteristic and pervasive human relation in such a culture is that of master and servant, and the social (domestic and civil) structure is an organisation of graded servitude, in which no one is his own master but the overlord, even nominally. The family is patriarchal, women and children are in strict tutelage, and discretion vests in the male head alone. If the group grows large its civil institutions are of a like coercive character, it commonly shows a rigorous tribal organisation, and in the end, with the help of warlike experience, it almost unavoidably becomes a despotic monarchy. It has not been unusual to speak of the popular institutions of Germanic paganism--typified, _e.g._, by the Scandinavian usages of local self-government in pagan times--as being typically Aryan institutions, but that is a misnomer due to uncritical generalisation guided by a chauvinistic bias. These ancient north-European usages are plainly alien to the culture reflected by the primitive Aryan Speech, if we are to accept the consensus of the philological ethnologists to the effect that the people who used the primitive Aryan speech must have been a community of pastoral nomads inhabiting the plains and uplands of a continental region. That many of these philological ethnologists also hold to the view that these Aryans were north-European pagan blonds may raise a personal question of consistency but does not otherwise touch the present argument. (b) A racial stock that has ever been of first-rate consequence in the ethnology of Europe (the Alpine, brachycephalic brunet, the _homo alpinus_ of the Linnean scheme) comes into Europe at this general period, from Asia; and this race is held to have presently made itself at home, if not dominant, throughout middle Europe, where it has in historic times unquestionably been the dominant racial element. (c) The pastoral-nomadic institutions spoken of above appear to have best made their way in those regions of Europe where this brachycephalic brunet stock has been present in some force if not as a dominant racial factor. The evidence is perhaps not conclusive, but there is at least a strong line of suggestion afforded by the distribution of the patriarchal type of institutions within Europe, including the tribal and gentile organisation. There is a rough concomitance between the distribution of these cultural elements presumably derived from an Aryan source on the one hand, and the distribution past or present of the brachycephalic brunet type on the other hand. The regions where this line of institutions are known to have prevailed in early times are, in the main, regions in which the Alpine racial type is also known to have been present in force, as, _e.g._, in the classic Greek and Roman republics. At the same time a gentile organisation seems also to have been associated from the outset with the Mediterranean racial stock and may well have been comprised in the institutional furniture of that race as it stood before the advent of the Alpine stock; but the drift of later inquiry and speculation on this head appears to support the view that this Mediterranean gentile system was of a matrilinear character, such as is found in many extant agricultural communities of the lower barbarian culture, rather than of a patriarchal kind, such as characterises the pastoral nomads. The northern blond communities alone appear, on the available evidence, to have had no gentile or tribal institutions, whether matrilinear or patriarchal. The classic Greek and Roman communities appear originally to have been of the Mediterranean race and to have always retained a broad substratum of the Mediterranean stock as the largest racial element in their population, but the Alpine stock was also largely represented in these communities at the period when their tribal and gentile institutions are known to have counted for much, as, indeed, it has continued ever since. Apart from these communities of the Mediterranean seaboard, the peoples of the Keltic culture appear to have had the tribal and gentile system, together with the patriarchal family, in more fully developed form than it is to be found in Europe at large. The peoples of Keltic speech are currently believed by ethnologists to have originally been of a blond type, although opinions are not altogether at one on that head,--the tall, perhaps red-haired, brachycephalic blond, the "Saxon" of Beddoe, the "Oriental" of Deniker. But this blond type is perhaps best accounted for as a hybrid of the dolicho-blond crossed on the Alpine brachycephalic brunet. Some such view of its derivation is fortified by what is known of the prehistory and the peculiar features of the early Keltic culture. This culture differs in some respects radically from that of the dolicho-blond communities, and it bears more of a resemblance to the culture of such a brunet group of peoples as the early historic communities of upper and middle Italy. If the view is to be accepted which is coming into currency latterly, that the Keltic is to be affiliated with the culture of Hallstatt and La Tène, such affiliation will greatly increase the probability that it is to be counted as a culture strongly influenced if not dominated by the Alpine stock. The Hallstatt culture, lying in the valley of the Danube and its upper affluents, lay in the presumed westward path of immigration of the Alpine stock; its human remains are of a mixed character, showing a strong admixture of the brachycephalic brunet type; and it gives evidence of cultural gains due to outside influence in advance of the adjacent regions of Europe. This Keltic culture, then, as known to history and prehistory, runs broadly across middle Europe along the belt where blond and brunet elements meet and blend; and it has some of the features of that predatory-pastoral culture reflected by the primitive Aryan speech, in freer development, or in better preservation, than the adjacent cultural regions to the north; at the same time the peoples of this Keltic culture show more of affiliation to or admixture with the brachycephalic brunet than the other blond-hybrid peoples do. On the other hand the communities of dolicho-blond hybrids on the shores of the narrow Scandinavian waters, remote from the centers of the Alpine culture, show little of the institutions peculiar to a pastoral people. These dolicho-blond hybrids of the North come into history at a later date, but with a better preserved and more adequately recorded paganism than the other barbarians of Europe. The late-pagan Germanic-Scandinavian culture affords the best available instance of archaic dolicho-blond institutions, if not the sole instance; and it is to be noted that among these peoples the patriarchal system is weak and vague,--women are not in perpetual tutelage, the discretion of the male head of the household is not despotic nor even unquestioned, children are not held under paternal discretion beyond adult age, the patrimony is held to no clan liabilities and is readily divisible on inheritance, and so forth. Neither is there any serious evidence of a tribal or gentile system among these peoples, early or late, nor are any of them, excepting the late and special instance of the Icelandic colony, known ever to have been wholly or mainly of pastoral habits; indeed, they are known to have been without the pastoral animals until some time in the neolithic period. The only dissenting evidence on these heads is that of the Latin writers, substantially Cæsar and Tacitus, whose testimony is doubtless to be thrown out as incompetent in view of the fact that it is supported neither by circumstantial evidence nor by later and more authentic records. In speaking of "tribes" among the Germanic hordes these Latin writers are plainly construing Germanic facts in Roman terms, very much as the Spanish writers of a later day construed Mexican and Peruvian facts in mediæval-feudalistic terms,--to the lasting confusion of the historians; whereas in enlarging on the pastoral habits of the Germanic communities they go entirely on data taken from bodies of people on the move and organised for raiding, or recently and provisionally settled upon a subject population presumably of Keltic derivation or of other alien origin and inhabiting the broad lands of middle Europe remote from the permanent habitat of the dolicho-blond. Great freedom of assumption has been used and much ingenuity has been spent in imputing a tribal system to the early Germanic peoples, but apart from the sophisticated testimony of these classical writers there is no evidence for it. The nearest approach to a tribal or a gentile organisation within this culture is the "kin" which counts for something in early Germanic law and custom; but the kin is far from being a gens or clan, and it will be found to have more of the force of a clan organisation the farther it has strayed from the Scandinavian center of diffusion of the dolicho-blond and the more protracted the warlike discipline to which the wandering host has been exposed. All these properly Aryan institutions are weakest or most notably wanting where the blond is most indubitably in evidence. Taking early Europe as a whole, it will appear that among the European peoples at large institutions of the character reflected in the primitive Aryan speech and implied in the pastoral-nomadic life evidenced by the same speech are relatively weak, ill-defined or wanting, arguing that Europe was never fully Aryanised. And the peculiar geographical and ethnic distribution of this Aryanism of institutions argues further that the dolicho-blond culture of the Scandinavian region was less profoundly affected by the Aryan invasion than any other equally well known section of Europe. What is known of this primitive Aryan culture, material, domestic, civil and religious, through the Sanskrit and other early Asiatic sources, may convincingly be contrasted with what is found in early Europe. These Asiatic records, which are our sole dependence for a competent characterisation of the Aryan culture, shows it to have resembled the culture of the early Hebrews or that of the pastoral Turanians more closely than it resembles the early European culture at large, and greatly more than it resembles the known culture of the early communities of dolicho-blond hybrids. (d) Scarcely more conclusive, but equally suggestive, is the evidence from the religious institutions of the Aryanised Europeans. As would be expected in any predatory civilisation, such as the pastoral-nomadic cultures typically are, the Aryan religious system is said to have leaned strongly toward a despotic monarchical form, a hierarchically graded polytheism, culminating in a despotic monotheism. There is little of all this to be found in early pagan Europe. The nearest well-known approach to anything of the kind is the late-Greek scheme of Olympian divinities with Zeus as a doubtful suzerain,--known through latter-day investigations to have been superimposed on an earlier cult of a very different character. The Keltic (Druidical) system is little known, but it is perhaps not beyond legitimate conjecture, on the scant evidence available, that this system had rather more of the predatory, monarchical-despotic cast than the better known pagan cults of Europe. The Germanic paganism, as indicated by the late Scandinavian--which alone is known in any appreciable degree--was a lax polytheism which imputed little if any coercive power to the highest god, and which was not taken so very seriously anyway by the "worshipers,"--if Snorri's virtually exclusive account is to be accepted without sophistication. The evidence accorded by the religious cults of Europe yields little that is conclusive, beyond throwing the whole loose-jointed, proliferous European paganism out of touch with anything that can reasonably be called Aryan. And this in spite of the fact that all the available evidence is derived from the European cults as they stood after having been exposed to long centuries of Aryanisation. So that it may well be held that such systematisation of myths and observances as these European cults give evidence of, and going in the direction of a despotic monotheism, is to be traced to the influence of the intrusive culture of the Aryan or Aryanised invaders,--as is fairly plain in the instance of the Olympians. (e) That the languages of early Europe, so far as known, belong almost universally to the Aryan family may seem an insurmountable obstacle to the view here spoken for. But the difficulties of the case are not appreciably lessened by so varying the hypothesis as to impute the Aryan speech to the dolicho-blond, or to any blond stock, as its original bearer. Indeed, the difficulties are increased by such an hypothesis, since the Aryan-speaking peoples of early times, as of later times, have in the main been communities made up of brunets without evidence of a blond admixture, not to speak of an exclusively blond people. (There is no evidence of the existence of an all-blond people anywhere, early or late.) The early European situation, so far as known, offers no exceptional obstacles to the diffusion of an intrusive language. Certain mass movements of population, or rather mass movements of communities shifting their ground by secular progression, are known to have taken place, as, _e.g._, in the case of the Hallstatt-La Tène-Keltic culture moving westward on the whole as it gained ground and spread by shifting and ramification outward from its first-known seat in the upper Danube valley. All the while, as this secular movement of growth, ramification and advance was going on, the Hallstatt-La Tène-Keltic peoples continued to maintain extensive trade relations with the Mediterranean seaboard and the Ægean on the one side and reaching the North-Sea littoral on the other side. In all probability it is by trade relations of this kind--chiefly, no doubt, through trade carried on by itinerant merchants--that the new speech made its way among the barbarians of Europe; and it is no far-fetched inference that it made its way, in the North at least, as a trade jargon. All this accords with what is going on at present under analogous circumstances. The superior merit by force of which such a new speech would make its way need be nothing more substantial than a relatively crude syntax and phonetics--such as furthers the dissemination of English to-day in the form of Chinook jargon, Pidgin English, and Beach la Mar. Such traits, which might in some other light seem blemishes, facilitate the mutilation of such a language into a graceless but practicable trade jargon. With jargons as with coins the poorer (simpler) drives out the better (subtler and more complex). A second, and perhaps the chief, point of superiority by virtue of which a given language makes its way as the dominant factor in such a trade jargon, is the fact that it is the native language of the people who carry on the trade for whose behoof the jargon is contrived. The traders, coming in contact with many men, of varied speech, and carrying their varied stock of trade goods, will impose their own names for the articles bartered and so contribute that much to the jargon vocabulary,--and a jargon is at its inception little more than a vocabulary. The traders at the same time are likely to belong to the people possessed of the more efficient technology, since it is the superior technology that commonly affords them their opportunity for advantageous trade; hence the new or intrusive words, being the names of new or intrusive facts, will in so far find their way unhindered into current speech and further the displacement of the indigenous language by the jargon. Such a jargon at the outset is little else than a vocabulary comprising names for the most common objects and the most tangible relations. On this simple but practicable framework new varieties of speech will develop, diversified locally according to the kind and quantity of materials and linguistic tradition contributed by the various languages which it supplants or absorbs. In so putting forward the conjecture that the several forms of Aryan speech have arisen out of trade jargons that have run back to a common source in the language of an intrusive proto-Aryan people, and developing into widely diversified local and ethnic variants according as the mutilated proto-Aryan speech (vocabulary) fell into the hands of one or another of the indigenous barbarian peoples,--in this suggestion there is after all nothing substantially novel beyond giving a collective name to facts already well accepted by the philologists. Working backward analytically step by step from the mature results given in the known Aryan languages they have discovered and divulged--with what prolixity need not be alluded to here--that in their beginnings these several idioms were little else than crude vocabularies covering the commonest objects and most tangible relations, and that by time-long use and wont the uncouth strings of vocables whereby the beginners of these languages sought to express themselves have been worked down through a stupendously elaborate fabric of prefixes, infixes and suffixes, etc., etc., to the tactically and phonetically unexceptionable inflected languages of the Aryan family as they stood at their classical best. And what is true of the European languages should apparently hold with but slight modification for the Asiatic members of the family. These European idioms are commonly said to be, on the whole, less true to the pattern of the inferentially known primitive Aryan than are its best Asiatic representatives; as would be expected in case the latter were an outgrowth of jargons lying nearer the center of diffusion of the proto-Aryan speech and technology. As regards the special case of the early north-European communities of dolicho-blond hybrids, the trade between the Baltic and Danish waters on the one hand and the Danube valley, Adriatic and Ægean on the other hand is known to have been continued and voluminous during the neolithic and bronze ages,--as counted by the Scandinavian chronology. In the course of this traffic, extending over many centuries and complicated as it seems to have been with a large infiltration of the brachycephalic brunet type, much might come to pass in the way of linguistic substitution and growth. FOOTNOTES: [1] Reprinted by permission from _The University of Missouri Bulletin_, Science Series, vol. ii, No. 3. [2] "The Mutation Theory and the Blond Race," in _The Journal of Race Development_, April, 1913. AN EARLY EXPERIMENT IN TRUSTS[1] According to Much,[2] following in the main the views of Penka, Wilser, De Lapouge, Sophus Müller, Andreas Hansen, and other spokesmen of the later theories touching Aryan origins, the area of characterisation of the West-European culture, as well as of that dolicho-blond racial stock that bears this culture, is the region bordering on the North Sea and the Baltic, and its center of diffusion is to be sought on the southern shores of the Baltic. This region is in a manner, then, the primary focus of that culture of enterprise that has reshaped the scheme of life for mankind during the Christian era. Its spirit of enterprise and adventure has carried this race to a degree of material success that is without example in history, whether in point of the extent or of the scope of its achievements. Up to the present the culminating achievement of this enterprise is dominion in business, and its most finished instrument is the quasi-voluntary coalition of forces known as a Trust. In its method and outward form this enterprise of the Indo-germanic racial stock has varied with the passage of time and the change of circumstances; but in its spirit and objective end it has maintained a singularly consistent character through all the mutations of name and external circumstance that have passed over it in the course of history. In its earlier, more elemental expression this enterprise takes the form of raiding, by land and sea. A shrewd interpretation might, without particular violence to the facts, find a coalition of forces of the kind which is later known as a Trust in the Barbarian raids spoken of as the _Völkerwanderung_. Such an interpretation would seem remote, however, and not particularly apt. The beginnings of a _bona fide_ trust enterprise are of a more businesslike character and have left a record more amenable to the tests of accountancy. A trust, as that term is colloquially understood, is a business organisation. Now, the line of enterprise, of indigenous growth in the north-European cultural region, which first falls into settled shape as an orderly, organised business is the traffic of those seafaring men of the North known to fame as the Vikings. And it is in this traffic, so far as the records show, that a trust, with all essential features, is first organised. The term "viking" covers, somewhat euphemistically, two main facts: piracy and slave-trade. Without both of these lines of business the traffic could not be maintained in the long run; and both, but more particularly the latter, presume, as an indispensable condition to their successful prosecution, a regular market and an assured demand for the output. It is a traffic in which, in order to get the best results, a relatively large initial investment must be sunk, and the period of turnover--the "period of production"--is necessarily of some duration; the risk is also considerable. Further, certain technological prerequisites must be met, in the way particularly of shipbuilding, navigation, and the manufacture of weapons; an adequate accumulation of capital goods must be had, coupled with a sagacious spirit of adventure; there must also be an available supply of labor. There appears to have been a concurrence of all these circumstances, together with favorable market conditions, in the south-Baltic region from about the sixth century onward; the circumstances apparently growing gradually more favorable through the succeeding four centuries. The viking trade appears to have grown up gradually on the Baltic seaboard, as well as in the Sound country and throughout the fjord region of Norway, as a by-occupation of the farming population. Its beginnings are earlier than any records, so that the earliest traditions speak of it as an institution well understood and fully legitimate. The well-to-do freehold farmers, including some who laid claim to the rank of _jarl_, seem to have found it an agreeable and honorable diversion, as well as a lucrative employment for their surplus wealth and labor supply. From such sporadic and occasional beginnings it passed presently into an independently organised and self-sustaining line of business enterprise, and in the course of time it attained a settled business routine and a defined code of professional ethics. Syndication, of a loose form, had begun as early as the oldest accounts extant, but it is evident from the way in which the matter is spoken of that combination had not at that date--say, about the beginning of the ninth century--long been the common practice. It was not then a matter of course. The early combinations were relatively small and transient. They took the form of "gentlemen's agreements," pools, working arrangements, division of territory, etc., rather than hard and fast syndicates. In those early days a combine would be formed for a season between two or more capitalist-undertakers, for the most part employing their own capital only, without recourse to credit; although credit arrangements occur quite early, but are not very common in the earlier recorded phases of the trade. Such a loose combine, say about the middle of the ninth century, might comprise from two to a dozen boats. What may be called the normal unit in the trade at that time was a boat of perhaps thirty tons' burden, with an effective crew of some eighty men. Boats and crews gradually increase both in size and efficiency for a century and a half after that time. Syndication, of an increasingly close texture and increasingly permanent effect, appears to have rapidly grown in favor through the ninth and tenth centuries. The reasons for this movement of coalition are plain. The volume of the trade, as well as its territorial extension, increased uninterruptedly. The technique of the trade was gradually improved, and the equipment and management were improved and reduced to standard forms. The tonnage employed at any given time can, of course, not be ascertained with anything like a confident approximation; but its steady increase is unmistakable. Year by year the boats and crews increase in average size as well as in number, until by the middle of the tenth century the number of men and ships engaged, as well as the volume of capital invested in the trade, are probably larger than the corresponding figures for any other form of lucrative enterprise at that time. It is, at that time, altogether the best-organised line of enterprise in the West-European region in respect of its business management, and the most efficient and progressive in respect of its equipment and technology. At a conservative guess, the aggregate number of ships engaged about the middle of the tenth century must have appreciably exceeded six hundred, and may have reached one thousand; with crews which had also grown gradually larger until they may by this time have averaged 150 or 200 men. There was consequently what would in modern phrase be called an "overproduction" of piratical craft--overinvestment in the viking trade and consequent cut-throat competition. The various coalitions came into violent conflict, and many of them went under, with great resultant loss of capital, impoverishment of well-to-do families, hardship and demoralisation of the entire trade. Added to these untoward conditions within the trade was the open disfavor of the crown, in each of the three Scandinavian kingdoms. The traffic had long passed out of the stage at which it had offered a lucrative opening for farmers' sons who were tired of the farm and eager to find excitement, reputation, and creature comforts in that wider human contact and busier life for which the tedium of the farm had sharpened their appetites. The larger capitalists alone could succeed as organisers or directors of a viking concern under the changed conditions. The common run of well-to-do farmers had neither the tangible assets nor the "good-will" requisite to the successful promotion of a new company of freebooters. At the best, their sons could enter the business only as employees and with but a very uncertain outlook to speedy promotion to an executive position. On the other hand, as the trade became better organised in stronger hands, with a larger equipment, and as the competition within the trade grew more severe, the blackmail from which much of the profits of the trade was drawn grew more excessive and more uncertain, both as to its amount and as to the manner and incidents with which it was levied. As competition grew severe and the small vikings practically disappeared, and as the demoralisation that goes with cut-throat competition set in, the livelihood of the common people, at whose expense the vikings lived, grew progressively more precarious, and even their domestic peace and household industry grew insecure. Popular sentiment was running strongly against the whole traffic. So much so, indeed, as to threaten the tenure of courts and sovereigns if the popular hardship incident to the continuance of the trade were not abated. The politicians, therefore, made a strenuous show of effort to regulate, or even to repress, the viking organisations. Outright and indiscriminate repression was scarcely a feasible remedy, certainly not an agreeable one. The viking companies were a source of strength to the country, both in that they might be drawn on for support in case of war and in that they brought funds into the country. The remedy to which the politicians turned, by preference, therefore, was a regulation of the companies in such a manner as to let "the foreigners pay the tax," to adapt a modern phrase. If the freebooters of a given state could be induced, by stringent regulations, to prey upon the people of the neighboring states, and particularly if they worked at cross-purposes with similar companies of freebooters domiciled in such neighboring states, it was then plain to the sagacious politicians of those days that the companies might be more of a blessing than a curse. On trial it was found that this policy of control gave at the best but very dubious results, and consequently the repressive hand of the authorities perforce fell with increasingly rigorous pressure on the viking organisations, particularly on the smaller ones which were scarcely of national importance. The competition in the trade was too severe to admit of a consistent avoidance of excesses and irregularities on the part of the vikings, and these irregularities obliged the authorities to interfere. Under these circumstances it is plain that no viking combine could hope to prosper in the long run unless it were strong enough to take an international position and to maintain a practical monopoly of the trade. "International" in these premises means within the Scandinavian countries. In the days of its finest development the viking trade was domiciled in the Scandinavian countries, almost exclusively. This means the two Scandinavian peninsulas, with Iceland, the Faroes, Orkneys, Hebrides, and the Scandinavian portions of Scotland. To this, for completeness of statement, is to be added a stretch of Wendish seaboard on the south of the Baltic and a negligible patch of German territory. The trade, so far as regards its home offices, to use a modern phrase, gathered in the main about two chief centers: the Orkneys and the south end of the Baltic. Outlying regions, such as the Norwegian fjord country and the Hebrides, are by no means negligible, but the two regions named above are after all the chief seats of the traffic; and of these two centers the Baltic--chiefly Danish--region is in many respects the more notable. Its viking traffic is better, more regularly organised, is carried on with a more evident sense of a solidarity of interests and a more consistent view to a long-term prosperity. As one might say, looking at the matter from the modern standpoint, it has more of a look of stability and conservative management, such as belongs to an investment business, and has less of a speculative air, than the trade that centers in the western isles. Perhaps it is just on this account, because of its greater stability of interests and more conservative animus, that the traffic of this region responds with greater alacrity to the pressure of excessive competition and political interference, and so enters on a policy of larger and closer coalition. It may be added that many of the great captains of adventure in this region are men of good family and substantial standing in the community. As may often happen in a like conjuncture, when the irksomeness of this competitive situation in the Baltic was fast becoming intolerable, there arose a man of far-seeing sagacity and settled principles, of executive ability and businesslike integrity, who saw the needs of the hour and the available remedy, and who saw at the same glance his own opportunity of gain. This man was Pálnatoki, the descendant of an honorable line of country gentlemen in the island of Funen, whose family had from time immemorial borne an active and prudent part in the trade, and had been well seen at court and in society. He was a man of mature experience, with a large investment in the traffic, and with a body of "good-will" that gave him perhaps his most decisive advantage. During the reign of Harald Gormsson, about the middle of the tenth century, Pálnatoki seems to have cast about for a basis on which to promote an international coalition of vikings, such as would put an end to headlong competition in the trade and would at the same time be placed above the accidents of national politics. To this end it was necessary to find a neutral ground on which to establish the home office of the concern. Such a mediæval-Scandinavian New Jersey was the Wendish kingdom at the south of the Baltic. Jómsborg (on the island of Wollin, at the mouth of the Oder) seems to have been a resort of vikings before Pálnatoki organised his company there and strengthened the harbor, which may have been fortified by those who held it before him. Here the new company was incorporated under a special franchise from the Wendish crown, with the stipulation that it was to do business only outside the Wendish territories. The tangible assets of the corporation were the harbor and fortified town of Jómsborg, together with the ships and other equipment of such vikings as were admitted to fellowship; its intangible assets were its franchise and the good-will of the promoter and the underlying companies. Its by-laws were very strict, both as to the discipline of the personnel and as to the distribution of earnings. The promoter, who was the first president of the corporation, was given extreme powers for the enforcement of the by-laws, and throughout his long incumbency of office he exercised his powers with the greatest discretion and with a most salutary effect. This neutral, international corporation of piracy rapidly won a great prestige. In modern phrase, its intangible assets grew rapidly larger. Backed by the competitive pressure which the new corporation was able to bring upon the smaller companies and syndicates, this prestige of the Jómsvikings brought a steady run of applications for admission into the trust. The trust's policy was substantially the same as has since become familiar in other lines of enterprise, with the difference that in those early days the competitive struggle took a less sophisticated form. Outstanding syndicates and private firms were given the alternative of submission to the trust's terms or retirement from the traffic. There was great hardship among the outstanding concerns, especially among that large proportion of them that were unable to meet the scale of requirements imposed on applicants for admission into the trust. The qualifications both as to equipment and personnel were extremely strict, so that a large percentage of the applicants were excluded; and the unfortunates who failed of admission found themselves in a doubtful position that grew more precarious with every year that passed. Practically, such concerns were either frozen out of the business or forced into a liquidation which permanently wound up their affairs and terminated their corporate existence. The accounts extant are of course not reliable in minute details, being not strictly contemporary, nor are they cast in such modern terms as would give an easy comparison with present-day facts. The chief documents in the case are _Jómsvikingasaga_, _Saxo Grammaticus_, _Heimskringla_, and _Olafssaga Tryggvasonar_; but nearly the whole of the saga literature bears on the development of the viking trade, and characteristic references to the Jómsviking trust occur throughout. The evidence afforded by these accounts converges to the conclusion that toward the close of the tenth century the trust stood in a high state of prosperity and was in a position virtually to dictate the course of the traffic for all that portion of the viking trade that centered in the Baltic. Its prestige and influence were strong wherever the traffic extended, even in the region of the western isles and in the fjord country of Norway. It had even come to be a factor of first-rate consequence in international politics, and its power was feared and courted by those two sovereigns who established the Danish rule in England, as well as by their Swedish, Norwegian, and Russian contemporaries. It is probably not an overstatement to say that the Danish conquest of England would not have been practicable except for the alliance of the trust with Svend, which enabled him to turn his attention from the complications of Scandinavian politics to his English interests. The extent of the trust's material equipment at the height of its prosperity is a matter of surmise rather than of statistical information. Some notion of its strength may be gathered from the statement that the fortified harbor of Jómsborg included within its castellated sea-wall an inclosed basin capable of floating three hundred ships at anchor. In the great raid against the kingdom of Norway, whose failure inaugurated the disintegration of the trust, the number of ships sent out is variously given by different authorities. The _Jómsvikingasaga_ says that they numbered one long hundred. This fleet, however, was made up of craft selected from among the ships that were under the immediate command of four of the great captains of adventure. The fleet, as it lay in the Sound before the final selection, is said to have numbered 185, but the context shows that this fleet was but a fraction of the aggregate Jómsviking tonnage. Of this disastrous expedition but a fraction returned; yet various later expeditions of the Jómsvikings are mentioned in which some scores of their ships took part. The trust having become an international power, it undertook to shape the destiny of nations and dynasties, and it broke under the strain. It, or its directors, took a contract to bring Norway into subjection to the Danish crown. Partly through untoward accidents, partly through miscalculation and hurried preparations, it failed in this undertaking, which brought the affairs of the trust to a spectacular crisis. From this disaster it never recovered. With the opening of the eleventh century the viking trust fell into abeyance, and in a few years it disappeared from the field. There are several good reasons for its failure. On the death of its founder the management had passed into the hands of Sigvaldi, a man of less sagacity and less integrity as well as of more unprincipled personal ambition, and somewhat given to flighty ventures in the field of politics. It was Sigvaldi's overweening personal ambition that committed the corporation to the ill-advised expedition against Norway. The trust, moreover, being supreme within its field, the discipline grew lax and its exactions grew arbitrary, sometimes going to unprovoked excesses. As one might say, too little thought was given to "economies of production," and the charges were pushed beyond "what the traffic would bear." But for all that, in spite of its meddling in politics, and in spite of jobbery and corruption in its management, the trust still had a fair outlook for continued success, except that the bottom dropped out of the trade. For better or worse, the slave-trade in the north of Europe collapsed on the introduction of Christianity, at least so far as regards the trade in Christians; and without a slave market the viking enterprise had no chance of reasonable earnings. At the same time, the risk and hardships of the traffic--the "cost of production"--grew heavier as the countries to the south became better able to defend their shores. The passenger traffic failed almost entirely, and the goods traffic was in a disorganised and unprofitable state. The costs were fast becoming prohibitive, even to men so enterprising and necessitous as the Norwegian freebooters. The situation changed in such a way as to leave the trust out. Some show of corporate existence was still maintained for a short period after the trust's great crisis, but there was an end of discipline and authoritative control. The minor concerns and private establishments that had once formed part of the trust continued in the trade on an independent footing, but with decreasing regularity and with diminishing strength. As the equipment wore out it was not replaced, and the trade lapsed. The great captains of the industry, like Sigvaldi, Thorkel Haraldson, Sigurd Kápa, and Vagn Akason, turned their holdings to the service of the dynastic politics which were then engaging the attention of the northern countries. Much of this body of enterprise and wealth was exhausted in working out the imperialistic schemes of expansion of Svend and Knut the Great; and what was left over shared the fortunes of the other available forces of the Scandinavian countries, being dissipated in political dissensions, extortionate government organisations, and the establishment of a church and a nobility. FOOTNOTES: [1] Reprinted by permission from _The Journal of Political Economy_, Vol. XII, March, 1904. [2] MATTHAEUS MUCH, _Die Heimat der Indogermanen_. THE END 
40077	----	THE PRINCIPLES OF ECONOMICS WITH APPLICATIONS TO PRACTICAL PROBLEMS BY FRANK A. FETTER, PH.D. PROFESSOR OF POLITICAL ECONOMY AND FINANCE, CORNELL UNIVERSITY NEW YORK THE CENTURY CO. 1904 Copyright, 1904, by THE CENTURY CO. THE DEVINNE PRESS TO THE STUDENTS OF THREE UNIVERSITIES --INDIANA, STANFORD, AND CORNELL-- FOR WHOM, WITH WHOM, AND BY WHOSE AID THIS BOOK CAME TO BE WRITTEN CONTENTS PART I PAGE THE VALUE OF MATERIAL THINGS 1-169 DIVISION A--WANTS AND PRESENT GOODS CHAPTER 1 THE NATURE AND PURPOSE OF POLITICAL ECONOMY: NAME AND DEFINITION; PLACE OF ECONOMICS AMONG THE SOCIAL SCIENCES; THE RELATION OF ECONOMICS TO PRACTICAL AFFAIRS 3 2 ECONOMIC MOTIVES: MATERIAL WANTS, THE PRIMARY ECONOMIC MOTIVES; DESIRES FOR NON-MATERIAL ENDS, AS SECONDARY ECONOMIC MOTIVES 9 3 WEALTH AND WELFARE: THE RELATION OF MEN AND MATERIAL THINGS TO ECONOMIC WELFARE; SOME IMPORTANT ECONOMIC CONCEPTS CONNECTED WITH WEALTH AND WELFARE 15 4 THE NATURE OF DEMAND: THE COMPARISON OF GOODS IN MAN'S THOUGHT; DEMAND FOR GOODS GROWS OUT OF SUBJECTIVE COMPARISONS 21 5 EXCHANGE IN A MARKET: EXCHANGE OF GOODS RESULTING FROM DEMAND; BARTER UNDER SIMPLE CONDITIONS; PRICE IN A MARKET 30 6 PSYCHIC INCOME: INCOME AS A FLOW OF GOODS; INCOME AS A SERIES OF GRATIFICATIONS 39 DIVISION B--WEALTH AND RENT 7 WEALTH AND ITS DIRECT USES: THE GRADES OF RELATION OF INDIRECT GOODS TO GRATIFICATION; CONDITIONS OF ECONOMIC WEALTH 46 8 THE RENTING CONTRACT: NATURE AND DEFINITION OF RENT; THE HISTORY OF CONTRACT RENT AND CHANGES IN IT 53 9 THE LAW OF DIMINISHING RETURNS: DEFINITION OF THE CONCEPT OF (ECONOMIC) DIMINISHING RETURNS; OTHER MEANINGS OF THE PHRASE "DIMINISHING RETURNS"; DEVELOPMENT OF THE CONCEPT OF DIMINISHING RETURNS 61 10 THE THEORY OF RENT: THE MARKET VALUE OF THE USUFRUCT: DIFFERENTIAL ADVANTAGES IN CONSUMPTION GOODS; DIFFERENTIAL ADVANTAGES IN INDIRECT GOODS 73 11 REPAIR, DEPRECIATION, AND DESTRUCTION OF WEALTH: RELATION TO ITS SALE AND RENT: REPAIR OF RENT-BEARING AGENTS; DEPRECIATION IN RENT-EARNING POWER OF AGENTS KEPT IN REPAIR; DESTRUCTION OF NATURAL STORES OF MATERIAL 81 12 INCREASE OF RENT-BEARERS AND OF RENTS: EFFORTS OF MEN TO INCREASE PRODUCTS AND RENT-BEARERS; EFFECTS OF SOCIAL CHANGES IN RAISING THE RENTS OF INDIRECT AGENTS 90 DIVISION C--CAPITALIZATION AND TIME-VALUE 13 MONEY AS A TOOL IN EXCHANGE: ORIGIN OF THE USE OF MONEY; NATURE OF THE USE OF MONEY; THE VALUE OF TYPICAL MONEY 98 14 THE MONEY ECONOMY AND THE CONCEPT OF CAPITAL: THE BARTER ECONOMY AND ITS DECLINE; THE CONCEPT OF CAPITAL IN MODERN BUSINESS 108 15 THE CAPITALIZATION OF ALL FORMS OF RENT: THE PURCHASE OF RENT-CHARGES AS AN EXAMPLE OF CAPITALIZATION; CAPITALIZATION INVOLVED IN THE EVALUATING OF INDIRECT AGENTS; THE INCREASING ROLE OF CAPITALIZATION IN MODERN INDUSTRY 118 16 INTEREST ON MONEY LOANS: VARIOUS FORMS OF CONTRACT INTEREST; THE MOTIVE FOR PAYING INTEREST 131 17 THE THEORY OF TIME-VALUE: DEFINITION AND SCOPE OF TIME-VALUE; THE ADJUSTMENT OF THE RATE OF TIME-DISCOUNT 141 18 RELATIVELY FIXED AND RELATIVELY INCREASABLE FORMS OF CAPITAL: HOW VARIOUS FORMS OF CAPITAL MAY BE INCREASED; SOCIAL SIGNIFICANCE OF THESE DIFFERENCES 152 19 SAVING AND PRODUCTION AS AFFECTED BY THE RATE OF INTEREST: SAVING AS AFFECTED BY THE INTEREST RATE; CONDITIONS FAVORABLE TO SAVING; INFLUENCE OF THE INTEREST RATE ON METHODS OF PRODUCTION 159 PART II THE VALUE OF HUMAN SERVICES 171-355 DIVISION A--LABOR AND WAGES 20 LABOR AND CLASSES OF LABORERS: RELATION OF LABOR TO WEALTH; VARIETIES OF TALENTS AND OF ABILITIES IN MEN 173 21 THE SUPPLY OF LABOR: WHAT IS A DOCTRINE OF POPULATION? POPULATION IN HUMAN SOCIETY; CURRENT ASPECT OF THE POPULATION PROBLEM 184 22 CONDITIONS FOR EFFICIENT LABOR: OBJECTIVE PHYSICAL CONDITIONS; SOCIAL CONDITIONS FAVORING EFFICIENCY; DIVISION OF LABOR 195 23 THE LAW OF WAGES: NATURE OF WAGES AND THE WAGES PROBLEM; THE DIFFERENT MODES OF EARNING WAGES; WAGES AS EXEMPLIFYING THE GENERAL LAW OF VALUE 205 24 THE RELATION OF LABOR TO VALUE: RELATION OF RENT TO WAGES, RELATION OF TIME-VALUE TO WAGES; THE RELATION OF LABOR TO VALUE 215 25 THE WAGE SYSTEM AND ITS RESULTS: SYSTEMS OF LABOR; THE WAGE SYSTEM AS IT IS; PROGRESS OF THE MASSES UNDER THE WAGE SYSTEM 226 26 MACHINERY AND LABOR: EXTENT OF THE USE OF MACHINERY; EFFECT OF MACHINERY ON THE WELFARE AND WAGES OF THE MASSES 236 27 TRADE-UNIONS: THE OBJECTS OF TRADE-UNIONS; THE METHODS OF TRADE-UNIONS; COMBINATION AND WAGES 245 DIVISION B--ENTERPRISE AND PROFITS 28 PRODUCTION AND THE COMBINATION OF THE FACTORS: THE NATURE OF PRODUCTION; COMBINATION OF THE FACTORS 257 29 BUSINESS ORGANIZATION AND THE ENTERPRISER'S FUNCTION: THE DIRECTION OF INDUSTRY; QUALITIES OF A BUSINESS ORGANIZER; THE SELECTION OF ABILITY 265 30 COST OF PRODUCTION: COST OF PRODUCTION FROM THE ENTERPRISER'S POINT OF VIEW; COST OF PRODUCTION FROM THE ECONOMIST'S STANDPOINT 273 31 THE LAW OF PROFITS: MEANING OF TERMS; THE TYPICAL ENTERPRISER'S SERVICES REVIEWED; STATEMENT OF THE LAW OF PROFITS 282 32 PROFIT-SHARING, PRODUCERS' AND CONSUMERS' COÖPERATION: PROFIT-SHARING; PRODUCERS' COÖPERATION; CONSUMERS' COÖPERATION 292 33 MONOPOLY PROFITS: NATURE OF MONOPOLY; KINDS OF MONOPOLY; THE FIXING OF A MONOPOLY PRICE 302 34 GROWTH OF TRUSTS AND COMBINATIONS IN THE UNITED STATES: GROWTH OF LARGE INDUSTRY IN THE UNITED STATES; ADVANTAGES OF LARGE PRODUCTION; CAUSES OF INDUSTRIAL COMBINATIONS 312 35 EFFECT OF TRUSTS ON PRICES: HOW TRUSTS MIGHT AFFECT PRICES; HOW TRUSTS HAVE AFFECTED PRICES 323 36 GAMBLING, SPECULATION, AND PROMOTERS' PROFITS: GAMBLING VS. INSURANCE; THE SPECULATOR AS A RISK TAKER; PROMOTER'S AND TRUSTEE'S PROFITS 333 37 CRISES AND INDUSTRIAL DEPRESSIONS: DEFINITION AND DESCRIPTION OF CRISES; CRISES IN THE NINETEENTH CENTURY; VARIOUS EXPLANATIONS OF CRISES 345 PART III THE SOCIAL ASPECTS OF VALUE 357-563 DIVISION A--RELATION OF PRIVATE INCOME TO SOCIAL WELFARE 38 PRIVATE PROPERTY AND INHERITANCE: IMPERSONAL AND PERSONAL SHARES OF INCOME; THE ORIGIN OF PRIVATE PROPERTY; LIMITATIONS OF THE RIGHT OF PRIVATE PROPERTY 359 39 INCOME AND SOCIAL SERVICE: INCOME FROM PROPERTY; INCOME FROM PERSONAL SERVICES 370 40 WASTE AND LUXURY: WASTE OF WEALTH; LUXURY 381 41 REACTION OF CONSUMPTION ON PRODUCTION: REACTION UPON MATERIAL PRODUCTIVE AGENTS; REACTION UPON THE EFFICIENCY OF THE WORKERS; EFFECTS ON THE ABIDING WELFARE OF THE CONSUMER 392 42 DISTRIBUTION OF THE SOCIAL INCOME: THE NATURE OF PERSONAL DISTRIBUTION; METHODS OF PERSONAL DISTRIBUTION 402 43 SURVEY OF THE THEORY OF VALUE: REVIEW OF THE PLAN FOLLOWED; RELATION OF VALUE THEORIES TO SOCIAL REFORMS; INTERRELATION OF ECONOMIC AGENTS 412 DIVISION B--RELATION OF THE STATE TO INDUSTRY 44 FREE COMPETITION AND STATE ACTION: COMPETITION AND CUSTOM; ECONOMIC HARMONY THROUGH COMPETITION; SOCIAL LIMITING OF COMPETITION 422 45 USE, COINAGE, AND VALUE OF MONEY: THE PRECIOUS METALS AS MONEY; THE QUANTITY THEORY OF MONEY 431 46 TOKEN COINAGE AND GOVERNMENT PAPER MONEY: LIGHT-WEIGHT COINS; PAPER MONEY EXPERIMENTS; THEORIES OF POLITICAL MONEY 443 47 THE STANDARD OF DEFERRED PAYMENTS: FUNCTION OF THE STANDARD; INTERNATIONAL BIMETALLISM; THE FREE-SILVER MOVEMENT IN AMERICA 453 48 BANKING AND CREDIT: FUNCTIONS OF A BANK; TYPICAL BANK MONEY; BANKS OF THE UNITED STATES TO-DAY 462 49 TAXATION IN ITS RELATION TO VALUE: PURPOSES OF TAXATION; FORMS OF TAXATION; PRINCIPLES AND PRACTICE 471 50 THE GENERAL THEORY OF INTERNATIONAL TRADE: INTERNATIONAL TRADE AS A CASE OF EXCHANGE; THEORY OF FOREIGN EXCHANGES OF MONEY; REAL BENEFITS OF FOREIGN TRADE 480 51 THE PROTECTIVE TARIFF: THE NATURE AND CLAIMS OF PROTECTION; THE REASONABLE MEASURE OF JUSTIFICATION OF PROTECTION; VALUES AS AFFECTED BY PROTECTION 491 52 OTHER PROTECTIVE SOCIAL AND LABOR LEGISLATION: SOCIAL LEGISLATION; LABOR LEGISLATION 504 53 PUBLIC OWNERSHIP OF INDUSTRY: EXAMPLES OF PUBLIC OWNERSHIP; ECONOMIC ASPECTS OF PUBLIC OWNERSHIP 514 54 RAILROADS AND INDUSTRY: TRANSPORTATION AS A FORM OF PRODUCTION; THE RAILROAD AS A CARRIER; DISCRIMINATION IN RATES ON RAILROADS 525 55 THE PUBLIC NATURE OF RAILROADS: PUBLIC PRIVILEGES OF RAILROAD CORPORATIONS; POLITICAL AND ECONOMIC POWER OF RAILROAD MANAGERS; COMMISSIONS TO CONTROL RAILROADS 534 56 PUBLIC POLICY AS TO CONTROL OF INDUSTRY: STATE REGULATION OF CORPORATE INDUSTRY; DIFFICULTIES OF PUBLIC CONTROL OF INDUSTRY; TREND OF POLICY AS TO PUBLIC INDUSTRIAL ACTIVITY 544 57 FUTURE TREND OF VALUES: PAST AND PRESENT OF ECONOMIC SOCIETY; THE ECONOMIC FUTURE OF SOCIETY 555 QUESTIONS AND CRITICAL NOTES 565 INDEX 595 PREFACE This book had its beginning ten years ago in a series of brief discussions supplementing a text used in the class-room. Their purpose was to amend certain theoretical views even then generally questioned by economists, and to present most recent opinions on some other questions. These critical comments evolved into a course of lectures following an original outline, and were at length reduced to manuscript in the form of a stenographic report made from day to day in the class-room. The propositions printed in italics were dictated to the class, to give the key-note to the main divisions of the argument. Repeated revisions have shortened the text, cut out many digressions and illustrations, and remedied many of the faults both of thought and of expression; but no effort has been made to conceal or alter the original and essential character of the simple, informal, class-room talks by teacher to student. To this origin are traceable many conversational phrases and local illustrations, and the occasional use of the personal form of address. The lectures, at the outset, sought to give merely a summary of widely accepted economic theory, not to offer any contribution to the subject. While they were in progress, however, special studies in the evolution of the economic concepts were pursued, and the manuscript of a book on that more special subject was carried well toward completion. That work, which it is hoped some time to complete, was, for several reasons, put aside while the present text was preparing for publication. The economic theories of the present transition period show many discordant elements, yet the author felt that his attempt to unify the statement of principles, in an elementary text explaining modern problems, and consistent in its various parts, helped to reveal to him both difficulties and possible solutions in the more special theoretical field. The unforeseen outcome of these varied studies is an elementary text embodying a new conception of the theory of distribution, an outline of which will be found in Chapter Forty-three. It is, in brief, a consistently subjective analysis of the relations of goods to wants, in place of the admixture of objective and subjective distinctions found in the traditional conceptions of rent, interest, and price. The beginning of the systematic study of economics, like the first steps in a language, is difficult because of the entire strangeness of the thought, and it is not to be hoped that any pedagogic device can do away with the need of strenuous thinking by the student. The aim, however, in the development of this theory of distribution, has been to proceed by gradual steps, as in a series of geometrical propositions, from the simple and familiar acts and experiences of the individual's every-day life, through the more complex relations, to the most complex, practical, economic problems of the day. The hope has long been entertained by economists that a conception of the whole problem of value would be attained that would coördinate and unify the various "laws,"--those of rent, wages, interest, etc. This solution has here been sought by a development of recent theories, the unit of the complex problem of value being the simplest, immediate, temporary gratification. Possibly some teachers will observe and regret the almost entire absence of critical discussions of controverted points in theory, which make up so large a part of some of the older texts. The more positive manner of presentation has been purposely adopted, and only such reference is made to conflicting views as is needed to guard the student against misunderstanding in his further reading. The author would not have it thought that he doubts the disciplinary value of economic theory or its scientific worth for more advanced students, for, on the contrary, he believes in it, perhaps to an extreme degree; but, for his own part, he has become convinced of the unwisdom of carrying on these subtle controversies in classes of beginners. The inherent difficulties of the subject are great enough, without the creation of new ones. The fifty-seven chapters represent the work of the typical college course in elementary economics, allowing two chapters a week, and a third meeting weekly for review and for the discussion of questions, exercises, and reports. The subject is so large that the text is, in many places, hardly more than a suggestive outline. In class-room work it should be supplemented by other sources of information, such as personal observation by the students (many of the questions following the text serving to stimulate the attention); visits to local industries; interchange of opinions; examples given by the teacher; study and discussion, in the light of the principles stated in the text, of some such problems as are suggested in the appended list of questions; collateral reading; the preparation of exercises and the use of statistical material from the census, labor reports, etc.; history and description of industries; history of the growth of economic ideas. Suggestions, from teachers, of changes that will make the text more useful in their classes, will be thankfully received by the author. Lack of space makes it impossible to mention by name the many sources to which the writer is indebted. Special acknowledgment, however, is gratefully made to C. H. Hull, of Cornell University; to E. W. Kemmerer, now of the Philippine Treasury Department, and to U. G. Weatherly, of Indiana University, who have read large portions of the manuscript, and have made many valuable suggestions; to W. M. Daniels, of Princeton University, who has read every page of the copy, and to whom are due the greatest obligations for his numerous and able criticisms both of the argument and of the expression; to R. C. Brooks, now of Swarthmore College, for a number of the questions in the appended list, and for helpful comments given while the course was developing; and to R. F. Hoxie and to A. C. Muhse, whose thoughtful reading of the proof has eliminated many errors. For the defects remaining, not these friendly critics, but the author alone, should be held accountable. No book on economics can to-day satisfy everybody--"Or even anybody," adds a friend. But with this book may go the hope that what has been written with love of truth and of democracy may serve, in its small way, both to further sound economic reasoning and to extend among American citizens a better understanding of the economic problems set for this generation to solve. FRANK A. FETTER. Ithaca, N. Y., August, 1904. THE PRINCIPLES OF ECONOMICS PART I DIVISION A--WANTS AND PRESENT GOODS CHAPTER I THE NATURE AND PURPOSE OF POLITICAL ECONOMY § I. NAME AND DEFINITION [Sidenote: Verbal definition of economics] 1. _Economics, or political economy, may be defined, briefly, as the study of men earning a living; or, more fully, as the study of the material world and of the activities and mutual relations of men, so far as all these are the objective conditions to gratifying desires._ To define, means to mark off the limits of a subject, to tell what questions are or are not included within it. The ideas of most persons on this subject are vague, yet it would be very desirable if the student could approach this study with an exact understanding of the nature of the questions with which it deals. Until a subject has been studied, however, a definition in mere words cannot greatly aid in marking it off clearly in our thought. The essential thing for the student is to see clearly the central purpose of the study, not to decide at once all of the puzzling cases. [Sidenote: Natural sciences deal with material things] 2. _A definition that suggests clear and familiar thoughts to the student seem at first much more difficult to get in any social science than in the natural sciences._ These deal with concrete, material things which we are accustomed to see, handle, and measure. If a mere child is told that botany is a study in which he may learn about flowers, trees, and plants, the answer is fairly satisfying, for he at once thinks of many things of that kind. When, in like manner zoölogy is defined as the study of animals, or geology as the study of rocks and the earth, the words call up memories of many familiar objects. Even so difficult and foreign-looking a word as ichthyology seems to be made clear by the statement that it is the name of the study in which one learns about fish. It is true that there may be some misunderstanding as to the way in which these subjects are studied, for botany is not in the main to teach how to cultivate plants in the garden, nor ichthyology how to catch fish or to propagate them in a pond. But the main purpose of these studies is clear at the outset from these simple definitions. Indeed, as the study is pursued, and knowledge widens to take in the manifold and various forms of life, the boundaries of the special sciences become not more but less sharp and definite. [Sidenote: Economics studies some social acts and relations] Political economy, on the other hand, as one of the social sciences, which deal with men and their relations in society, seems to be a very much more complex thought to get hold of. We are tempted to say that it deals with less familiar things; but the truth may be, as a thoughtful friend suggests, that the simple social acts and relations are more familiar to our thought than are lions, palm-trees, or even horses. Every hour in the streets or stores, one may witness thousands of acts, such as bargains, labor, payments, that are the subject-matter of economic science. Their very familiarity may cause men to overlook their deeper meaning. Many other definitions have been given of political economy. It has been called the science of wealth, or the science of exchanges. Evidently there are various ways in which wealth may be considered or exchanges made. The particular aspects that are dealt with in political economy will be made clear by considering two other questions, the place of economics among the social sciences and the relation of economics to practical affairs. § II. PLACE OF ECONOMICS AMONG THE SOCIAL SCIENCES [Sidenote: Economics contrasted with the natural sciences] 1. _Political economy, as one of the social sciences, may be contrasted with the natural sciences, which deal with material things and their mutual relations, while it deals with one aspect of men's life in society, namely, the earning of a living, or the use of wealth._ It is true that political economy also has to do with plants and animals and the earth--in fact, with all of those things which are the subject-matter of the natural sciences; but it has to do with them only in so far as they are related to man's welfare and affect his estimate of the value of things; only in so far as they are related to the one central subject of economic interest, the earning of a living. [Sidenote: Character of the social sciences] 2. _The social sciences deal with men and their relations with each other._ The word "social" comes from the Latin socius, meaning a fellow, comrade, companion, associate. As men living together have to do with each other in a great many different ways, and enter into a great many different relations, there arise a great many different social problems. Each of the social sciences attempts to study man in some one important aspect--that is, to view these relations from some one standpoint. Man's acts, his life, and his motives are so complex that it is not surprising that there has been less definiteness in the thought of the social sciences, and that they have advanced less rapidly toward exactness in their conclusions, than have the natural sciences. This complexity also explains the discouragement of the beginner in the early lessons in this subject. Usually the greatest difficulties appear in the first few weeks of its study. The thought is more abstract than in natural science; it requires a different, I will not say higher, kind of ability than does mathematics. But little by little the strangeness of the language and ideas disappears; the bare definitions become clothed with the facts of observation and recalled experiences; and soon the "economic" acts and relations of men in society come to be as real and as interesting to the student as are the materials in the natural world about him--often, indeed, more interesting. [Sidenote: Economics, politics, law, and ethics] 3. _Political economy is related to all the other social sciences, it being the study of certain of men's relations, while politics, law, and ethics have to do with other relations or with relations under a different aspect._ Politics treats of the form and working of government and is mainly concerned with the question of power or control of the individual's actions and liberty. Law treats of the precepts and regulations in accordance with which the actions of men are limited by the state, and the contracts into which they have seen fit to enter are interpreted. Ethics treats the question of right or wrong, studies the moral aspects of men's acts and relations. The attempt just made to distinguish between the fields occupied by the various social sciences betrays at once the fundamental unity existing among them. The acts of men are closely related in their lives, but they may be looked at from different sides. The central thought in economics is the business relation, the relation of men in exchanging their services or material wealth. In pursuing economic inquiries we come into contact with political, legal, and ethical considerations, all of which must be recognized before a final practical answer can be given to any question. Nevertheless the province of economics is limited. It is because of the feebleness of our mental power that we divide and subdivide these complex questions and try to answer certain parts before we seek to answer the whole. When we attempt this final and more difficult task, we should rise to the standpoint of the social philosopher. § III. THE RELATION OF ECONOMICS TO PRACTICAL AFFAIRS [Sidenote: Economics is first a science] 1. _The ideal of political economy here set forth is that it should be a science, a search for truth, a systematized body of knowledge, arriving at a statement of the laws to which economic actions conform._ It is not the advocacy of any particular policy or idea, but if it arrives at any conclusions, any truths, these cannot fail to affect the practical action of men. [Sidenote: But it touches many practical interests] Political economy, because defined as the science of wealth, has been described by some as a gospel of Mammon. It is hardly necessary to refute such a misconception. Political economy is not the science of wealth-getting for the individual. Its study is not primarily for the selfish ends and interest of the individual. (Certainly some of its lessons may be of practical value to men in active business) for many economic "principles" are but the general statement of those ideas that have been approved by the experience of business men, of statesmen, and of the masses of men. Some of its lessons must have educational value in practical business, for political economy is not dreamed out by the closet philosopher, but more and more it is the attempt to describe the interests and the action of the practical world in which men must live. Many men are working together to develop its study--those who collect statistics and facts bearing on all kinds of practical affairs, and those who search through the records of the past for illustrations of experiments and experiences that may help us in our life to-day. [Sidenote: Economic study needed in a democracy] 2. _But, in the main, the study of political economy is a social study for social ends and not a selfish study for individual advantage._ The name political economy was first suggested in France when the government was monarchical and despotic in the extreme. As domestic economy indicates a set of rules or principles to guide wisely the action of the housekeeper or the owner of an estate, so political economy was first thought of as a set of rules or principles to guide the king and his counselors in the control of the state. The term has continued to bear something of that suggestion in it, though of late the term "economics," as being broader and less likely to be confused with politics, has very generally come into use. But in the degree in which unlimited monarchy has given way to the rule of the people, the conception of political economy has been modified. In a democracy there is need for a general diffusion of knowledge. The power now rests not with the king and a few counselors, but in the last resort with the people, and therefore the people must be acquainted with the experience of the past, must have all possible systematic knowledge to enlighten public policy and to guide legislation. [Sidenote: Is of growing interest and influence] Moreover, with the growth of the modern state, with the interest increasing importance of business, and of industrial and commercial interests, as compared with changes of dynasty or the personal rivalries of rulers, economic questions have grown in relative importance. In our own country, particularly since the subjects of slavery and of States' rights ceased to absorb the attention of our people, economic questions have pushed rapidly into the foreground. Indeed, it has of late been more clearly seen that many of the older political questions, such as the American Revolution and slavery, formerly discussed almost entirely in their political and constitutional aspects, were at bottom questions of economic rivalry and of economic welfare. The remarkable increase in the attention given to this study in colleges and universities in the last twenty years is but the index of the greatly increased interest and attention felt in it by citizens generally. To sum up, it may be said that in the study of political economy we are seeking the reason, connection, and relations in the great multitude of acts arising out of the dependence of desires on the world of things and men. CHAPTER 2 ECONOMIC MOTIVES § I. MATERIAL WANTS, THE PRIMARY ECONOMIC MOTIVES [Sidenote: Feeling urges to economic actions] 1. _A logical explanation of industry must begin with a discussion of the nature of wants, for the purpose of industry is to gratify wants._ An economic want may be defined as a feeling of incompleteness, because of the lack of a part of the outer world or of some change in it. Often the question asked when one first sees a moving trolley car or automobile or bicycle is: What makes it go? The first question to ask in the part of the study of economic society here undertaken is: What is its motive force? Without an answer to that question one cannot hope to understand the ceaseless and varied activities of men occupied in the making of a living. The question merits long and careful study, but the general answer is so simple that it seems almost self-evident: The motive force in economics is found in the feelings of men. It is men's desire to make use of men and things about them which calls forth all the manifold phenomena studied in economics. [Sidenote: Animal species shaped by their environment] 2. _Wants among animals depend on the environment; that is to say, the utmost that creatures of a lower order than man can do is to take things as they find them._ The imagination and intelligence of animals are not developed enough to lead them to desire much beyond that which is ordinarily to be obtained. And so the environment shapes and affects the animal. The fish is fitted to live in the water and thrives there, and we must believe, enjoys living there. The horse and the cow like best the food of the fields, and so each species of animal, in order to survive in the severe struggle for existence, has been forced to fit itself to the conditions in which it lives. After the animal has been thus fitted, its desire is for those things normally to be found in its surroundings. So different animals desire or want different things, but always it is the environment that determines the want, and not the want that determines the environment. [Sidenote: Simple wants of primitive men] 3. _In simpler human societies, wants are mostly confined to physical necessities; that is, in the earlier stages of society, man's wants are very much like those of the animals._ Man bends his energies to securing the things necessary to survival. He feels the pangs of hunger and he strives to secure food. He feels the need of companionship, for it is only through association and mutual help that men, so weak as compared with many kinds of animals, are able to resist the enemies which beset them. He needs clothing to protect him against the harsher climates of the lands to which he moves. For the same purpose, to protect himself against the cold and rain, he needs a shelter, a cave, a wigwam, or a hut; for a house is but a larger dress. [Sidenote: Manifold wants in civilized society] 4. _In human society, wants develop and transform the world._ In the rudest societies of which there is any record, savages are found with wants developed in a great number of directions beyond the wants of any animals. Man is not a passive victim of circumstances; his wants are not determined solely by his environment; his desires soar beyond the things about him. As men become more the masters of circumstances, their desires anticipate mere physical wants; they seek a more varied food of finer flavor and more delicately prepared. Dress is not limited by physical comfort, for one of the earliest of the esthetic wants to develop is the love of personal ornament. The rude hut or communal lodge to protect against rain and cold becomes a home. Out of the earlier rude companionship develop the noblest sentiments of friendship and family life. Seeking to gratify the senses and the love of action, men develop esthetic tastes, the love of the beautiful in sound, in form, in taste, in color, in motion. And finally, as the imagination and intellect develop, there grow up the various forms of intellectual pleasures--the love of reading, of study, of travel, and of thought. The various wants of man are sometimes classified as necessities, comforts, and luxuries, but all economists take care to emphasize that these terms have only relative meanings which, in the rapidly changing conditions of modern life, are changing constantly. The comforts of one generation, or of one country, become the necessities in another; and luxuries becoming comforts, are looked upon finally as necessities. And as the desires grow, they more and more alter the world. Man has changed the face of the earth; he has affected its climate, its fertility, its beauty, because, either for better or for worse, his desires have impressed themselves upon the world about him. [Sidenote: Wants must precede wealth] 5. _In human society the growth of wants is necessary to progress._ From the earliest times teachers of morals have argued for simplicity of life and against the development of refinements. We do not now raise the moral question, but there is no doubt that the economic effect of developing wants is in the main to impel to greater effort. They are the mainspring of economic progress. In recent discussion of the control of the tropics, the too great contentedness of tropical peoples has been brought out prominently. Some one has said that if a colony of New England school-teachers and Presbyterian deacons should settle in the tropics, their descendants would, in a single generation, be wearing breech-clouts and going to cock-fights on Sunday. Certain it is that the energy and ambition of the temperate zone are hard to maintain in warmer lands. The negro's content with hard conditions, so often counted as a virtue, is one of the difficulties in the way of solving the race problem in our South to-day. Booker T. Washington, and others who are laboring for the elevation of the American negroes, would try first to make them discontented with the one-room cabins, in which hundreds of thousands of families live. If only the desire for a two- or three-room cabin can be aroused, experience shows that family life and industrial qualities may be improved in many other ways. [Sidenote: But impossible hopes lessen gratifications] Not only in America, but in most civilized lands to-day, is seen a rapid growth of wants in the working-classes. The incomes and the standard of living have become increasing, but not so fast as have the desires of the working-classes. Regret has been expressed by some that the workers of Europe are becoming "declassed." Increasing wages, it is said, bring not welfare, but unhappiness, to the complaining masses. If discontent with one's lot goes beyond a moderate degree, if it is more than the desire to better one's lot by personal efforts, if it becomes an unhappy longing for the impossible, then indeed it may be a misfortune. But a moderate ambition to better one's condition is the "divine discontent" absolutely indispensable if energy and enterprise are to be called into being. [Sidenote: Wants grow refined as wealth advances] It is a suggestive fact that civilized man, equipped with all of the inventions and the advantages of science, spends more hours of effort in gaining a livelihood than does the savage with his almost unaided hands. Activity is dependent not on bare physical necessity, but on developed wants--in the economic sense of the term. Such social institutions as property and inheritance owe their origin and their justification to their average effect on the motives to activity. If society is to develop, if progress is to continue, human wants--not of the grosser sort, but ever more refined--must continue to emerge and urge men to action. § II. DESIRES FOR NON-MATERIAL ENDS, AS SECONDARY ECONOMIC MOTIVES [Sidenote: The real man in economics] 1. _The spiritual nature of man must not be ignored in economic reasoning._ There has been much and just criticism of the earlier writers and of their conclusions because so little account was taken by them of any but the motive of self-interest in economic affairs. Generally it was assumed that men knew their own interest, and sought in a very unsympathetic way those things which would gratify their material wants. Thus man in economic reasoning was made an abstraction, differing from real men in his lack of manifold spiritual and social elements. [Sidenote: Desires for the non-material may become economic motives] 2. _The main classes of non-material wants that are secondarily economic are fear of temporal punishment; sentiments of moral and religious duty; pride, honor, and fear of disgrace; and pleasure in work for itself, for social approval, or for a social result._ The first is best illustrated by slavery, where the slave is not impelled to seek wealth for his own welfare, but is driven by punishment to perform the task. The object is to create within the mind of the slave a motive that will take the place of the ordinary economic motive. The feeling of religious or moral duty leads men to act often in direct opposition to the usual economic motive. The taboo is faithfully observed by the members of a savage tribe who suffer as a result the severest hardships. A religious injunction prevents the use of food that would save from starvation. Pride, either of family or of calling; the soldier's honor leading him to sacrifice not only his future but his life; the love of social approval, holding men to the most disagreeable tasks--these illustrate how strongly social sentiments oppose the narrower motive of immediate self-interest as generally thought of. Pleasure in work for work's sake, and pride in the result, may act as motives quite as strong in some cases as desire for the product that can be used. And even where this does not change the kind of work done, it comes in to influence the interest and earnestness with which the work is performed. [Sidenote: Economists must overlook no influence on value] 3. _Whatever motive in man's complex nature makes him desire things more or less, becomes for the time, and in so far, an economic motive._ These various social and spiritual motives sometimes work positively, in the direction of magnifying man's desire for things; sometimes negatively, to diminish it. If we are to understand economic action, we must take men as they are. A religious motive that leads men to refrain from the eating of meat or to eat fish in preference on certain days, is a fact which the economist has but to accept, for it is sure to affect the value of meat and fish at that place and time. Moral convictions, whatever be their origin, whether due to the teaching of parents, to unconscious influences, or to native temperament, may be quite as effective as the pangs of hunger in determining what men desire. Therefore, while these various motives are primarily social or moral or religious, they may be said to be secondarily economic motives, and they may become in certain cases the most important influences of which the economist must take account. CHAPTER 3 WEALTH AND WELFARE § I. THE RELATION OF MEN AND MATERIAL THINGS TO ECONOMIC WELFARE [Sidenote: Man is the center of economic reasoning] 1. _The gratifying of economic wants depends on things outside of the man who feels the wants._ Man is to himself the center of the world. He groups things and estimates things with reference to their bearing on his desires, be these what are called selfish or unselfish. If we were discussing the economics of an inferior species of animals, things would be grouped in a very different way. But economics being the study of man's welfare, everything must be judged from his standpoint, and things are or are not of economic importance according as they have relation to his wants and satisfactions. Things needful for any of the lower animals are spoken of as "ministering to welfare" in the economic sense only in case these animals are useful to men. Examples are the mulberry-tree on which the silkworm feeds, the flower visited by the honey-bee. In the same view some men are seen to minister to the welfare of other men and therefore bear the same relation for the moment to the welfare of the others as do material things. In any case we study man's welfare as affected by the world which surrounds him. [Sidenote: Physical nature is an unchangeable fact] 2. _Material things and natural forces differ in kind and nature._ This is an axiom which we must take as a basis for reasoning in economics. Things have certain physical qualities quite apart from any action or influence of man. They are operated on by mechanical laws; the force of gravitation causes them to fall at a certain rate under given conditions. They differ in specific gravity, reflect the rays of light, absorb or transmit heat. All these things are for man ultimate physical facts, but unless he knows these facts he cannot take full advantage of the favorable qualities of things or weigh properly their importance to his welfare. Things differ in a multitude of ways in their chemical qualities. Niter, charcoal, and saltpeter, combined in certain proportions, give certain reactions; different combinations give various results. Solids combine to form gases, and liquids unite to form solids, and these qualities and reactions of material things are for man ultimate truths of chemistry. Likewise many things have certain physiological effects. Sunshine acts on living bodies, whether plant, animal, or man, in certain ways. Some plants are nourishing to man, others are poisonous. If man were not on the earth, things would have the same physical and chemical qualities, mechanical laws would be the same as at present so far as we can conclude. Man cannot change the nature of things; but he can acquaint himself with that nature and then put the things into the relations where a given result will follow. [Sidenote: But economics has to do with psychological effects] 3. _As a result of these differences, things have different relations to wants._ These various qualities, physical, chemical, physiological, are important in an economic sense only as they produce psychological effects, that is, as they affect the feelings and judgments of men. We come to some general thoughts which it will be well to define. [Sidenote: Some definitions] Gratification is the feeling that results when a want has been met. Feelings are hard to define in words; the best definition is found in the experience of each individual. We can only say, therefore, that gratification is the attainment of desire, the fulfilment of wants. The word that has usually been employed in this sense in economic discussion is "satisfaction"; but by its derivation and general usage satisfaction means "the complete or full gratification" of a desire, and this meaning is quite inconsistent with the thought in many connections in which the word is used. We shall therefore prefer here the word gratification, and its corresponding verb, gratify. Wealth is the collective term for those things which are felt to be related to the gratification of wants. The word is applied in economic discussion to any part of those things, no matter how small. We shall have occasion later to define and discuss this term more fully. Welfare, in an immediate or narrow sense, is the same as gratification of the moment; in a broader sense, it means the abiding condition of well-being. We have here a distinction very much like that often made between pleasure and happiness. If we think of only the present moment, welfare is the absence of pain, and the presence of the pleasureable feeling; but if we consider a longer period in a man's life or his entire lifetime, it is seen that many things that afford a momentary gratification do not minister to his ultimate, or abiding, welfare. Moralists and philosophers often have dwelt on this contrast. The difference is illustrated by the thoughtlessness and impulsiveness of a child or savage as contrasted with the more rational life of those with foresight and patience. [Sidenote: Economics first studies wealth] Wealth, in the general economic sense, is judged with reference to gratification rather than with reference to abiding welfare. It is the first duty of the economist not to preach what should be, but to understand things as they are. He must, in studying the problem of value, recognize any motive that leads men to attach importance to acts and things. He will therefore take account of abiding welfare and of immediate gratification to exactly the degree that men in general do, and the sad fact is that the present impulse rules a large part of the acts of men. Whether tobacco or alcohol or morphine minister to the abiding happiness of those who use them does not alter the immediate fact that here and now they are sought and an importance is attached to them because of their power to gratify an immediate desire. [Sidenote: Then wealth and welfare] 5. _In studying the question of social prosperity, however, we must rise to the standpoint of the social philosopher and consider the more abiding effects of wealth._ Wants may be developed and made rational, and the permanent prosperity of a community depends upon this result. Any species of animal that continued regularly to enjoy that which weakens the health and strength would become extinct. Any society or individual that continues to derive gratification, to seek its pleasure, in ways that do not, on the average, minister to permanent welfare, sinks in the struggle of life and gives way to those men or nations that have a sounder and healthier adjustment of wants and welfare. We touch here, therefore, on the edge of the great problems of morals, and while we must recognize the contrast that often exists in the life of any particular man between his "pleasures" and his health and happiness, we see that there is a reason why, on the whole, and in the long run, these two cannot remain far apart. The old proverbs, "Be virtuous and you will be happy," "Honesty is the best policy," and "Virtue is its own reward," have a sound basis in the age-long experience of the world. Cynics or jesters may easily disprove these truths in a multitude of particular cases. [Sidenote: Freemen are not economic wealth] 6. _Wealth does not include such personal qualities as honesty, integrity, good health._ Some economists speak of these as "internal goods," but it is far better not to speak of free men or of their qualities as wealth. Many difficulties arise from such a use of the term in practical discussion. One of the most important of all distinctions to maintain in economics is that between material things and men. Only in the case of human slavery may persons be counted as economic wealth. It is a different thing, however, to consider human services as wealth of an ephemeral kind at the moment they are rendered. We are, thus merely recognizing that men may bear at the given moment the same relation to our wants as do material things. § II. SOME IMPORTANT ECONOMIC CONCEPTS CONNECTED WITH WEALTH AND WELFARE [Sidenote: Popular meaning of useful] 1. _Utility, in its broadest usage, is the general capability that things have of ministering to human well being._ The term is evidently one without any scientific precision. It expresses only a general or average impression that we have in reference to the relation of a class of goods to human wants. Every one would agree to the statement that "water is useful," thinking of the fact that it is indispensable to life and that it ministers to life in a multitude of ways. But what of water in one's cellar, water soaking one's clothes on a cold day, water breaking through the walls of a mountain reservoir and carrying death and destruction in its path? The poison that is doing what we at the moment desire, we call useful; that doing what we would prevent, we call harmful. Noxious weeds become "useful" by the discovery of some new process by which they can be worked into other forms, though they may still continue to be noxious in many a farmer's fields. The utility of anything, therefore, is seen to be of a relative and limited nature. The term "utility" in popular speech is very inexact. It can be employed in economic discussion only when carefully modified and defined. [Sidenote: Kinds of goods] 2. _Goods consist of all those things objective to the user which have a beneficial relation to human wants._ They fall into several classes. We may first distinguish between free and economic goods. Free goods are things that exist in superfluity, that is, in quantities sufficient not only to gratify, but to satisfy all the wants that may depend on them. Economic goods are things so limited in quantity that all of the wants to which they could minister are not satisfied. The whole thought of economy begins with scarcity; indeed, even the conception of free goods is hardly possible until some limitation of wants is experienced. Practical economics is the study of the best way to employ things to secure the highest amount of gratification. The problem itself arises out of the fact that many things are used up before all wants dependent on them are completely satisfied. A distinction is often made between consumption and production goods, or it may be better to say immediate and intermediate goods. Consumption goods are those things which are immediately at the point of gratifying man's desires. Production goods are those things which are not yet ready to gratify desires; some of them, being merely means of securing consumption goods, never will themselves immediately gratify desire. [Sidenote: Value is utility given precision] 3. _Value, in the narrow personal sense, may be defined as the importance attributed to a good by a man._ The vagueness and inexactness of the word "utility," or the word "good," disappears when we reach the word "value." It is not a usual relation or a vague degree of benefit sometimes present and sometimes absent, but it refers to a particular thing, person, time, and condition. Value is in the closest relation with wants, and in this narrow sense depends on the individual's estimate. From the meeting and comparison of the estimates of individuals, arise market values or prices, which are the central object of study in economics. CHAPTER 4 THE NATURE OF DEMAND § I. THE COMPARISON OF GOODS IN MAN'S THOUGHT [Sidenote: Wants and goods must be constantly adjusted] 1. _As wants differ in kind and degree, so goods differ in their power to gratify wants._ This general and simple statement unites the leading thoughts of the two chapters preceding. Confirmation of its truth may be found in observation and experience. The purpose of this chapter is to show how, starting from the general nature of wants and the nature of goods, we can arrive at an explanation of the exchange of goods. Recognizing the simple but fundamental fact stated at the opening of this paragraph, an exchange may be seen to be a rational and a logical result when men are living together in society. [Sidenote: Ripe and unripe goods] 2. _Immediately enjoyable goods are the first objective things whose value is to be explained._ Goods come into relation with wants in a multitude of ways. Some things will not gratify a want until after the lapse of a long time, as ice cut in December and stored for summer use. Other things will never themselves directly gratify a want, but will be of help in getting things that do; such are the young fruit trees planted in the orchard, and the hammer that will be used to drive nails in a house that will shelter men. Still other things are gratifying wants at this moment, or are ready for use and will be used up in a very short time; examples of such are the food on the table and in the pantry, and the cigar in the pocket. All these things are called goods, because of their beneficial relation to man's desires, but the relation is very immediate in some cases, very remote in others. The value of all goods is to be explained, but the explanation will be more or less complex according to the directness or indirectness of their relation with wants. As it is the power of goods to gratify wants that alone causes value to be attributed to them, those goods which are ripest, which are ready to gratify wants, are nearest to the source of an explanation. The value of unripe enjoyments must be traced to some expected gratification as its cause or basis. In order to attack the difficulties one by one we will, therefore, in the following discussion, deal first with this class of ripe, consumable goods, as food, personal services, enjoyments of any sort that are immediately available. The explanation of these cases of value must precede that of cases in which the relation to wants is less obvious and direct. [Sidenote: The law of diminishing utility] 3. _As the amount of any good increases, after a certain point the gratification that the added portions afford decreases._ This is called the law of the diminishing utility of goods or of the decreasing gratification afforded by goods. The reason for the truth of this proposition is found in the very nature of man and his nervous organization. Any stimulus to the nerves, however pleasant at first, becomes painful when long continued or increased unduly. The trumpet too distant at first for the ear to distinguish its notes, may swell to pleasing tones as it approaches, until at length its volume and its din may become absolutely painful. If we were to express the degree of gratification by a curve, we should see the curve rising gradually to a maximum, and then falling somewhat suddenly and becoming a negative quantity, when pain, not pleasure, resulted. The same change could be illustrated by any sensation or by any of men's activities. The proposition must be understood as applying to the gratification resulting from each added portion of the sensation. There is a maximum point in the gratification afforded by any nerve-stimulus. A man coming in from the winter's storm and holding out his hands before the fire, feels an intense pleasure in the grateful warmth; a few moments later, the same heat becomes unpleasant. In winter we wish for a moderation of the temperature; on the sultry days of summer, we think of a cool breeze as the most to be desired of all things. Whether the temperature rises or falls, there is a point beyond which the change is no longer an addition to, but a subtraction from, pleasure. A man, however hungry at first, may be made miserable if forced to eat beyond his capacity. Each added portion of the good consumed contributes to the gratification up to a certain point. The sum of these pleasurable sensations may be called the total gratification, which finally reaches satisfaction or fullness. Then begins what may be called in algebraic phrase a "negative gratification" which, if it becomes large enough, will make the total gratification a negative quantity. Each added portion, dose or increment beyond a certain point reduces thus the welfare of the user. One may have too much of a good thing. [Sidenote: The marginal utility] 4. _Marginal utility is the gratification afforded by the added portion of the good._ The marginal dose, increment, or portion is that which may be logically considered as coming last in the case of any good or group of goods divisible into small parts. In considering the strict theory of the case, in order to get at the principle involved, the doses may be spoken of as infinitesimally small. The marginal utility expresses the importance that men attach to one unit of this kind of goods under the particular circumstances at the moment existing, and not under certain conceivable conditions which do not in fact exist or need to be taken into account by the persons affected. The marginal unit of a homogeneous supply cannot be considered to have a greater utility than any other unit at the moment, and therefore the product of the marginal utility by the number of units, gives the total measure of importance of the supply then and there, and this is the value. The value of goods, as has been indicated, is the measure of the dependence felt by men on a portion of the outer world, as the condition of gratifying their wants. From the very nature of wants, which reside in feelings, a dependence that is not felt, a relation between things and gratification that is not recognized, can have no influence on value. Now, it is at this margin of supply that dependence is felt. Men do not concern themselves about that which they have in superfluity--unless, indeed, the excess causes them some discomfort. It is well that they do not, for a wise direction of effort can only take place when men think mainly of their need of things that they want, and want most, and direct their efforts toward securing them. [Sidenote: From marginal utility to value] The diminishing utility of successive portions (doses or increments, as they are called) may be represented by a curve of utility. [Illustration: _Scale of Supply_] The diagram is constructed on the hypothesis that a tenth unit of a certain good would have a utility expressed as 36; a fifteenth unit of 30, etc., and that the value of the whole supply is estimated according to these marginal units. Of course if the conditions were that "all or none" was to be taken, the result would be different. Unit of Supply Marginal Utility Value of Whole Supply 10 36 360 15 30 450 20 25 500 30 19 570 40 15 600 50 10 500 60 5 300 This diagram is frequently used, and it is important to guard against some misunderstandings. The marginal unit of any given supply--for example, ten units--is not any particular unit, it is any one of the ten units. In the presence of nine units of the good the person or persons find all the various wants that are dependent on that good gratified to such a degree that the tenth unit has an importance expressed by 36. But as this last or marginal unit of supply may be used for any of the purposes, the importance of each and every unit likewise will be expressed by 36. Any one of the units, when once present is, in a logical sense, a marginal unit. When, however, it is a question of increasing the supply, some one unit may properly be looked upon as marginal. The dependence felt by men on the whole group is the product of the units by the marginal utility. As the number of units increases, the marginal utility decreases, until at length it may reach zero, and the total value would be nothing. A point of maximum value evidently will be found somewhere between the two extremes. [Sidenote: Only one marginal utility at one moment] Note carefully that on the one diagram are represented a large number of marginal utilities which never exist at one and the same moment. At any one moment there is a given number of units and there is but one marginal utility, and this is the same for each of the units. It is quite erroneous to say that when there are 30 units the utility of the tenth unit is 36; of the twentieth, 25; of the thirtieth, 19. It is equally incorrect to say that when there are 60 units the "total utility" is equal to the area between the right angle and the curve a-g, while the value is equal to the rectangle below and to the left of the point g. The curve from a-g but marks the height of marginal utilities that have no existence when the supply is 30. The "total utility," often spoken of in this connection, if it has any existence certainly cannot be calculated. The diagram must be understood as representing indicatively at any given moment but one marginal utility, the same for every unit of like goods. The other perpendicular lines are expressed in the conditional mood; they are what the marginal utility would be were the numbers of units different. [Sidenote: Changing feelings changes utility] 5. _Since goods possess utility only as they gratify wants, it follows that if wants change, the utility changes._ Utility does not rest unchanging in the goods as something "intrinsic," but it depends on the relation of goods to men. This truth, unrecognized for many centuries, is now seen to be fundamental to the whole problem of value. The portions of a good added later do not appeal to the same man as the earlier portions. The man has been changed by what he has enjoyed. In changing his feelings, goods have also changed his wants. Hence, the added portions of the good are changed in respect to their utility or power to gratify a man's wants. Though physically and chemically, _i.e._, in every material way, they are exactly like the earlier portions, they cannot have the same want-gratifying power until he again changes, for they are not in the presence of the same feelings. Wants are constantly shifting; different kinds of goods are compared in man's thought and arranged on a scale at every moment according to their felt utility. An increase in the amount of a good will drop the marginal utility of the added portions down the scale of usefulness for the next moment. When we rise in the morning, we want our breakfast; the breakfast eaten, another breakfast does not appeal to us. Our tasks done, we take a boat-ride or go golfing; then, appetite returning, we are tempted to our dinner. And thus from hour to hour wants are gratified, are altered and are shifted, until, wearied with the day's labor and pastimes, we go to rest. In a well-ordered life, in an advanced economic society, the means for gratifying our wants as they arise are provided in advance. The changing series of desires is met by a changing series of goods. Life has been defined as a constant adjustment of inner relations to outer conditions. Economic life is therefore like physical life, a constant adjustment; and this adjustment of goods but reflects the shifting and adjustment of feelings. [Sidenote: Choice is constantly shifting] 6. _The substitution of goods in men's thought is the shifting of the choice from a good that does not give the highest gratification economically possible at the time, to another good that does._ The shifting that takes place on the scale of gratification makes it necessary for man to shift constantly his choice of goods. This again is the problem of "economy." Waste results when goods continue to be used to secure a lower degree of gratification, if they might be used to secure a higher. The change of choice may be because of a change in the man, or because of a change in the quality or the quantity of the goods; or because of a change in the ratio at which the goods can be secured. § II. DEMAND FOR GOODS GROWS OUT OF SUBJECTIVE COMPARISONS [Sidenote: Desire may become demand] 1. _Demand is desire for goods united with the power to give something in exchange._ An example frequently given to show the difference between desire and demand is the hungry boy looking longingly at the sweetmeats in the confectioner's window. He represents desire, but not until the kind-hearted gentleman gives him a nickel does he represent effective demand. Desire, therefore, must be united with power to give something in exchange before it can be called demand. It must be for something that is attainable; yearning for something beyond reach, sighing for the moon, is desire that never can become effective demand. [Sidenote: Demand the Social expression of shifting choice] 2. _Demand is the social aspect of the individual man's comparison of utilities._ It is the expression of the man's wish to substitute some of his goods for some one else's goods in order to get a higher satisfaction. This comparison is often made between two goods owned in different quantities. When men are constantly comparing things in their own possession, it is a short step to compare their goods with their neighbor's. Demand for consumption goods is thus the manifestation of the man's desire to redistribute his enjoyments. In demand for goods men virtually say: "Part of what I have I am ready to give for part of what you have." The strength of their desire is expressed by the amount of their offer. When he makes this comparison and this offer, man enters into a social, economic relation with his fellows. [Sidenote: The limit of the exchanger's demand] 3. _The law of individual demand is: The trader will reduce his stock of a particular good to the point where its marginal utility equals that of the alternative goods._ The greater the divergence in his estimates of the marginal utilities of two goods, the more ready is he to trade the lower utility for the higher one. Exchange is but the effort to adjust goods to wants in the best way. The less useful (marginally viewed) is traded for the more useful. The greater the difference, in the one trader's judgment, between the marginal utilities of the two goods, the greater is the maladjustment, and the greater, therefore, is the motive to seek readjustment by means of exchange. As the quantity of the good parted with declines, its marginal utility increases; and as more of the other good is acquired, its marginal utility declines. The marginal utility of the two exchangeable units must come to equilibrium in the individual's judgment. At this point demand ceases, not because an additional unit of the one good could afford no gratification, but because it would afford less gratification than the other good in which demand must be expressed to be effectual. [Sidenote: The Demand curve] 4. _Demand thus varies at different ratios of exchange between goods, and may be expressed graphically by a demand curve._ This would show for any one man the decline of the marginal utility of each added portion of a good, and these individual demand curves may be united into a demand curve for a group of men. The demand curve expresses graphically what a man would be willing to pay at each particular stage in the increase of goods. We have here come to the very threshold of the subject of markets and exchange. [Sidenote: Elasticity of demand] 5. _Elasticity of demand, in the case of any good, expresses the degree in which a change in its ratio to other goods will increase the demand._ Elasticity varies for different classes of men according to their wealth and to the cost of the goods. If strawberries are a dollar a box in the city market, a slight fall in the price, say to seventy-five cents, will increase the demand but slightly. But if the price is fifteen cents and falls to ten, the increase in the demand will be marked, for the number of consumers to whom a difference of five cents is important is then very great. The demand for the staples is comparatively inelastic. A certain amount of simple food is necessary to support life; an increase in its price will not quickly check the demand. On the other hand, if the price of staple foods falls, no very great increase will take place in the demand. CHAPTER 5 EXCHANGE IN A MARKET § I. EXCHANGE OF GOODS RESULTING FROM DEMAND [Sidenote: Reciprocal demand becomes exchange] 1. _Exchange in the usual economic sense is the transfer of two goods by two owners, each of whom deems the good taken more than a value-equivalent for the one given._ The comparison of goods that has been discussed above is a kind of exchange. When a person chooses one thing rather than another, one form of gratification may be said to be mentally exchanged for another. This is exchange in that person's mind, or subjective exchange. But the word "exchange" as usually employed means an exchange of goods between persons. It is objective exchange, and when the word is used without modification, it is to be understood in the objective sense. In the last chapter were analyzed the motives of the individual man. Robinson Crusoe on his desert island would in very many ways be acted upon by the same motives in reference to economic goods that men are in society. Yet, it is exchange in society and the complicated problems arising from this transfer of goods from person to person that constitute nearly the whole of the subject-matter of political economy. Exchange is seen to arise out of the differences in the situations of men with reference to goods. The different subjective valuations give rise to demand, and demand leads to exchange. In early societies differences in natural products were the most usual causes of exchange. Salt, though so essential to life, is found in few places. The metals early became indispensable for weapons of defense or for the chase, and were sought far and wide. Rare shells, feathers, jewels, and the precious metals appealed in early times to a universal desire for ornament. Products like these are the objects of a rude sort of exchange in the first simple efforts made to adjust possessions to wants. Within the tribe, differences in the skill and ability of men to produce arrow heads or weapons or ornaments, bring about the exchange of goods. [Sidenote: Mutual advantage in exchange] 2. _The advantage of exchange consists in the raising of the want-gratifying power of goods to both parties._ It generally was assumed by medieval thinkers that if one party to an exchange gained, the other must lose. The mistaken idea prevailed that value is something fixed in the good, and unchangeable. Where the exchange is voluntary (and only that kind is here being considered), it is mutual advantages which make the exchange rational. Many false conclusions on practical questions still result from a failure to grasp this simple truth. It follows from this that the act of exchange is itself useful, for goods having a small importance to men are given a higher importance by being brought into better relations with wants. Merchants, peddlers, traders, and common carriers of all sorts, therefore, are adding to the utility of goods. This idea has been only slowly apprehended, but is now one of the least disputed propositions in economics. [Sidenote: Demand is supply in another aspect] 3. _Barter is the exchange of goods without the use of money._ Either one of the goods traded in cases of barter may be considered as sold, and either one as bought, according as the matter is looked at from the standpoint of the one or the other party to the exchange. Demand, therefore, is supply, and supply is demand when the point of view is shifted from one party to another. The fisherman's demand for venison is expressed in terms of fish; the hunter's demand for fish is expressed in terms of venison. But to the fisherman the venison is the supply offered to him. The term "marginal utility" of a good, therefore, does not refer merely to the demand of the consumer; for it expresses by a single phrase the idea both of demand and of supply. The utility of the goods composing the supply is expressed in terms of the goods that represent demand and vice versa. The only way in which man can give definite, concrete, numerical expression to his desire for goods is to state it in terms of other goods. In expressing numerically, in terms of other objects, an estimate of the utility of an apple, a horse or a house, one inevitably gives expression to a ratio of exchange; demand for one good is the offer of another good. § II. BARTER UNDER SIMPLE CONDITIONS [Sidenote: In isolated exchange the price is not economically fixed] 1. _In isolated exchange, where only two traders engage in barter, their estimates give respectively the upper and the lower figures of the ratio at which the trade can take place._ Let us recall the fact that a difference in the _relative_ estimates that men place on goods is the first essential of exchange. Those estimates may be expressed in a ratio; we may say that A will give four apples for one orange, would be glad to give fewer, but will not give more; while B will give one orange for three apples, would be glad to get more apples, but will not take fewer. The outside limits of the ratio at which the exchange must take place will, therefore, be one orange for three or four apples. A, seller of apples, offers 4 (or fewer) apples for 1 orange. B, buyer of apples, demands 3 (or more) apples for 1 orange. There is, in entirely isolated exchange, therefore, a lack of definiteness in the price, much depending on what Adam Smith called the "higgling of the market." In the old-time American horse trade much depended on "bluff"; in such cases it was as important to be able to judge character as to judge horses. A thorough analysis of the trade, however, would probably show that the bargain is concluded at a point which exactly balances the hopes of gain and fears of loss of one of the parties. [Sidenote: Competitive bidding narrows the limits of price] 2. _Where one-sided competition exists, the ratio of the exchange will be somewhere between the estimates of the two buyers most eager for the last portion offered_. By competition is here meant the independent seeking of the same thing at one time by two or more persons. Where there is one market price paid by a number of buyers, it may be that no two of the subjective estimates are alike; the exchange value may differ from all of their estimates, and yet must correspond closely to two. Auction sales well illustrate the principle. If there is one ax to be sold and ten possible buyers for an ax, and there is no combination among them, the bidding will go on until the estimate of the buyer next to the most eager, has been reached. The most eager buyer can then secure the ax by bidding just a little above his next competitor. But if there are ten axes and ten buyers who know that there will be ten axes offered, the more eager buyers will refuse to bid much above the less eager ones. A shrewd auctioneer, therefore, often conceals the fact that there is more than one of an article, and having sold it off, brings out a second or a third one of the same kind, thus keeping the buyers in ignorance of the supply and getting somewhere near the estimate of the most eager buyer in each case. Advertisements of "a limited supply," "the last chance," "positively the last appearance," are meant to stimulate the demand of the patrons, and to lead them to buy at once. In general, therefore, where competition exists on one side, price is fixed with greater definiteness than in isolated exchange. Not so much depends on shrewd bargaining, on bluff, or on the stubbornness of an individual. Far more depends on forces outside the control of any one man. The bidders are impelled by self-interest to outbid their competitors, and thus the limits within which the market price must fall are narrowly fixed. [Sidenote: Buyers fix price of perishable goods] If things already brought to market must be sold at any price that can be secured, the buyers may be said to fix the price. This does not mean that they can buy it for any sum that they wish, but it means that when each one is trying to get it as cheap as possible, their bids finally determine how much it will sell for. In such cases, therefore, the competition is for the moment one-sided. If a part of the supply can be withdrawn and kept without great loss, this will be done if the price is low. Strawberries, fish, and meat may be sold Saturday night at any price that will secure purchasers, but every thing that can be kept with little or no depreciation will be withheld from sale for a time. It may even be of advantage to the seller to destroy a part of the supply, when the increased price of the smaller amount will give a larger total. [Sidenote: The margin of advantage and the marginal pair] 3. _Where two-sided competition exists, the bidding goes on until a price is reached where the least eager seller and the least eager buyer have the narrowest possible motive to exchange_. As the market ratio varies from those in the minds of the individuals when they come to the market, there is left a considerable margin to some and a very small one to others. This difference between the market value and the ratio of exchange at which any given individual would continue to exchange for the good may be called the _margin of advantage_. Moreover, the buyers will have a margin and the sellers a margin, and as that margin narrows there is less and less motive to continue the exchange until, finally, the margin disappearing, the buyer or seller, withdrawing from the market, ceases to be an exchanger, at least for that particular part of the goods. The least eager buyer and the least eager seller may be called the _marginal pair_. They are the buyer and the seller respectively having the narrowest margin of advantage. Their outside estimates are nearest to the market ratio. If the market ratio shifts slightly in either direction, one of them will drop out of the exchange. It is evident that a buyer who is taking ten units may be on the margin with reference to the tenth unit, and yet may continue to be one of the most eager buyers to secure one unit. Thus, the marginal buyer is to be thought of as that person who, logically considered, is the least eager, or on the margin, with reference to a particular unit of supply, however eager he may be with reference to any other unit of supply. It would be well to recall here the discussion of the nature of wants and the variation in the intensity of demand. [Illustration: _Units of Goods_] [Sidenote: Market values built on individual estimates] 4. _Market values are built up on subjective valuations._ The idea of market values, therefore, is that of the want-gratifying power of goods as expressed in terms of other goods, where there are various buyers and sellers. They are not an average of the subjective valuations, nor are they made up of the extremes. They correspond closely with the subjective estimates of two of the exchangers. The other parties to the exchange are willing to accept the market ratio, for it offers them more inducements than it does to either one of the marginal pair. § III. PRICE IN A MARKET [Sidenote: One price in a market] 1. _A market is a body of buyers and sellers in such close business relations that the actual price conforms closely to the valuation of the marginal pair._ The word "price" which we have used, may be defined as value expressed in terms of some commonly exchanged commodity. The term is used more broadly of anything given in exchange. The very terms of this definition imply that there can be but one price in a market. This is a somewhat abstract but a useful economic proposition. Very often within sound of each other's voices traders are paying different prices for a good. On the occasion of a break in the stock-market, excited traders within ten feet of each other make bids that differ by thousands of dollars. Retail and wholesale merchants may be purchasing goods in the same room at the same time at very different prices. But within a group of buyers and sellers where competition is approximately complete, price is fixed with some degree of exactness. The more nearly the actual conditions approach to the ideal of a market, the less are prices fixed by higgling, and the more impersonal they become, the buyers and sellers being compelled to adjust their bids to the needs of the market, and not being able to vary them greatly one way or the other. [Sidenote: The earlier markets] 2. _Markets are steadily widening through the improvement of means of communication and transportation._ The earliest markets were established on the borders between tribes, villages or nations as a common ground where strangers met to trade. At such markets were brought together from sparsely settled districts a comparatively large number of merchants and customers. Buyers had the opportunity of wide selection both in kind and quality, and the sellers found a large body of customers gathered at one point. Throughout the Middle Ages purchases were made by the more prosperous husbandmen in great quantities once a year at the fairs or markets. As both the buyers and sellers came from widely separated places, there was, in most respects, no combination, and the conditions of a competitive market were present. [Sidenote: The growth of markets] The number of buyers and sellers that can constitute a single market is limited both directly and indirectly by the means of transportation. A dense population cannot usually be maintained without easy means of transportation to bring in a large supply of food, and to carry back manufactured goods great distances. The remarkable growth in the means of commerce since the application of steam to water traffic, and the invention of the railroad, have made it possible for goods to be gathered from most distant points. A market implies a common understanding among traders. Modern means of communication such as newspapers, post-offices, telegraph and cable, trade bulletins, commercial travelers, the consular service, and many forms of special agencies, are diffusing information widely. As a result of these changes, there has been a widening of the village-market to the markets of the province, of the nation, and finally of the world. While a part of every one's purchases continues to be made in the neighborhood, a greater and greater portion of the total business is done by traders who are widely separated and who are indeed members of the world market. Various articles produced in the same locality may seek different markets. The market for wheat may be in Liverpool, while that for fruit and eggs is in the village near the farm-house. If a given product of any community is sold in different markets, the net prices secured must be very nearly equal. [Sidenote: The conceptions normal and market price] 3. _Normal price is spoken of in contrast to market price when the actual market price results from exceptional circumstances and probably will not be maintained._ The term "normal price," much used in economic discussion, is the price which, apart from exceptional conditions, is expected to prevail, and to which actual prices seem constantly striving to adjust themselves. As actual prices are nearly always either more or less than so-called normal price, and only momentarily ever correspond with it, the term "normal" would appear to be something of a misnomer. Moreover, as the circumstances of production change, this normal price itself is altered so that what is normal one day may be quite abnormal the next. The thought of "normal price" is an abstract one, but despite the inaptness of the word it is not without some practical validity. In determining whether he shall continue to produce certain goods, the business man is practically guided by his view of normal price. An example of departure from normal price as above defined, is found in the price of food when an expected ship has failed to arrive at a port with its cargo of grain. A scarcity amounting almost to famine might thus exist in a seaboard city, and the market price would rise; but as this would be due to an accident and would afford a larger gain than usual to those who happened to have a supply of grain, men would say that the market price was above the normal price. The arrival of the expected ship would cause the market price to return to the normal. [Sidenote: Review of the argument] In review, we see that the market value of goods grows out of the different personal estimates made by men. Market value itself being a complex and difficult problem, it can be mastered only by dividing it. First, therefore, must be studied the more general and obvious motives of men, the nature of wants and their effects on man's subjective estimates. The same simple motives that influence the subjective valuations made by individual men, may be traced to the conditions of the complicated market. It is their workings that are seen in the obscurest problems of market price. CHAPTER 6 PSYCHIC INCOME § I. INCOME AS A FLOW OF GOODS [Sidenote: The recurrence of wants] 1. _Satisfaction and gratification being only temporary conditions, economic wants appear in more or less regularly recurring series._ Impressions are short lived, sensations are temporary, wants that have been satisfied recur. Wants recur for the same reason that they first arose. No impression on the nerves or on the senses is lasting. Man's senses were developed for the purpose of bringing him into relation with the outer world, of enabling him to survive in his struggle with the forces of nature. So, when a good has been enjoyed, the utility to that person of that thing or service for that particular moment, falls, it may be even to zero. To keep wants satisfied is impossible; we cannot do next year's reading or next week's eating now; we cannot live the life of to-morrow. The best results in reading or eating come from taking the right amount day by day. But it is a need in the life of men that wants should recur after a time, otherwise there would be no motive for action. [Sidenote: Series of wants and series of goods] 2. _The economic ideal is that this series of recurring wants should be met by a corresponding series of goods._ It is evident that if a series or succession of goods varies, at different times, moments, and conditions, in its power to gratify wants, the closer the correspondence between the two series, that of wants and that of goods, the greater will be the total of gratification. We may liken man's life to a journey in which the supplies of food are gotten at the stations. If any one of these supplies fails, the traveler suffers the pangs of hunger, and if two or three supplies are at one point, they do not serve the needs of man so well as if distributed along the way. This constant inflow of goods is one of the fundamental needs of life. The savage dimly understands this need. Even the birds and the beasts adjust their lives to it either by travel or by toil. The spring and autumn migrations to new feeding grounds are the attempts of the bird to gratify this series of wants as they arise. The ant, the bee, and the squirrel anticipate, and work to fill their storehouses against the days of need. [Sidenote: Social and private incomes] 3. _Objective income consists of the additional sums of goods acquired by individuals or by society during the income period._ The term national or social income may be contrasted with individual or private income in the objective sense. The nature of the acquisition of objective incomes may, in some cases, be different if viewed from the social and individual standpoints. Society, as a whole, may be said to acquire income only when goods are produced; individuals may acquire income by gift, bequest, theft, or other modes of transfer from other individuals. In many cases the two kinds of income, however, agree, the objective income of society being the algebraic sum of the goods acquired or parted with by all the individuals. We should not understand that either social or private objective incomes include only material goods, for many utilities and labor services that never take on a material or money expression are included in either case. Indeed, we are close here to the conception of psychic income which is to be developed more fully. [Sidenote: Money income] Income of money is not often the same as income of things. Usually many of these subtler utilities are overlooked and omitted from the recognized money income. In this day the use of money is so common that we are sometimes led to ignore the value of things to which the money expression is not given. The money income is merely the money expression of the value of currently acquired goods, and it is the only medium through which such varied sources of gratification can be compared. [Sidenote: Gross and net income] 4. _Income in the logical sense must be a net addition, but the term gross income is not without popular and practical meaning._ Gross income is sometimes spoken of in the sense of total receipts, as the total of goods secured; net income is the remainder after deducting expenditures and after replacing the goods employed to secure the income. In order to produce some goods technically, men make use of other goods. While they are storing up a supply of wood or coal it may be looked upon as the income, but they may burn it to help grow hothouse plants. While they gather flowers with one hand, they destroy fuel with the other. Only the net increase in value can be accounted income in the second period. The goods that come into a man's possession in any period are of many sorts: to get some he has destroyed many previously existing goods; while to get others he has not needed to use up the accumulations of the past or to mortgage the future. The one kind is gross, the other net income. [Sidenote: Wealth and income] 5. _An income of consumption goods is a part of wealth, but not the whole of it._ The consumption goods, the "present goods" at the moment available, are the essential part of wealth for the moment's enjoyment. The only essential and immediate conditions of a series of gratifications is a regular series of consumption goods. But many things existing which could be used to secure a gratification are not in fact treated as consumption goods. A crop of corn is not all income. In a time of famine it could be used, but seed-corn was saved from last year, and some must be kept for next year. This is a part of wealth, but not of "present goods" as we understand the term. [Sidenote: Some goods never can become enjoyable goods] Further, in the economic world there is much wealth that never can gratify any want directly; many forms of wealth never can be consumption goods. It is true that everything called wealth is expected to contribute sooner or later in some way to the sum of gratifications. It is for that reason it is called wealth. It is, however, a mere figure of speech to say indirect want-gratifiers become want-gratifying goods. For example, the engine transporting a load of coal is indirectly gratifying wants; if it is transporting a train-load of passengers, the gratification is direct. A machine making cloth for next year is gratifying wants only in a metaphorical sense. A field used to produce food is not a direct want-gratifier until it is transformed into a residence site, a playground, or a tennis-court. It is necessary therefore to recognize the distinction between present and future incomes. The value of the mass of wealth in possession and yielding income, rests in large part upon its power of contributing to income in some future period. Thus, any durable good may be looked upon as embodying a series of incomes ranging from present to future in varying degrees. This will be fully considered under the subject of capital. [Sidenote: Income from wealth and from labor] 6. _Incomes are called funded or unfunded according to the sources from which they are derived._ Funded income arises from the possession of wealth or of claims on wealth, such as lands, railroad stocks, government bonds, etc. The income is "funded" because it corresponds to an abiding fund of wealth. The income arising from current labor is unfunded, because there is no permanent fund of accumulated wealth corresponding to it. The idea of regularity connected with funded income is not essential to the idea of income in general, _i.e._, we cannot refuse to call a thing income because it occurs only this year. If it is part of the sum of goods that flows in, that is newly available for the man's use, it is income. But funded income is the more abiding, for income from wages stops when the man dies or fails to perform his work, while the income from wealth continues after he ceases to be active. Thus, families with equal incomes may differ greatly in wealth, the one depending entirely on salaries, the other on rents. § II. INCOME AS A SERIES OF GRATIFICATIONS [Sidenote: Gratification the test of psychic income] [Sidenote: All sources of income are productive] 1. _The value of consumption goods is derived from the pleasurable psychic impressions which they aid to produce, and these psychic effects constitute the psychic income._ The objective income is sometimes called the "real" income, but certainly it is not income in the most essential sense. Things outside of men cannot be feelings, they can only call out or occasion feeling, and it is the attainment of pleasurable conditions in mind or soul that is the aim of all economic activity. Material income and immaterial income are both related to and reducible to psychic income. Some portions at least of the objective incomes of goods are continually by use becoming subjective incomes of enjoyment. Men talk of material income as consisting of bushels of wheat, head of cattle, etc., and of immaterial income as the uses that durable goods yield directly or that men perform for each other, _e.g._, those of the singer, physician, teacher, judge--all services that do not take on material form. There was a long-standing dispute in economic literature regarding the difference between productive and unproductive labor. Productive labor was said to be that which embodied itself in abiding material form. The distinction led to some peculiar puzzles and paradoxes. The bartender mixing drinks, adds to the value of those ingredients; in a minute that value is dissipated. According to the distinction in question, he is a productive laborer because his services are embodied in material form, whereas the lecturer is regarded as an unproductive laborer because the results of his labor are not embodied in material form. But whether or not the service has for a moment embodied itself in material form is of no essential economic import. The presence of the waiter is as essential to the well-served dinner as are the polished silver and china, or as the well-cooked food. The distinction in question is not now made by economists, all labor that contributes to value being regarded as productive. But a similar distinction is inconsistently preserved by many writers in the case of material things. A building used as a factory is called productive, but used by the owner as a dwelling it is called unproductive because the service it renders does not appear in material form. But the use of the house, or that of land for a school ground or campus, secures a certain gratification, an immaterial good. Consistency requires that the services of men and the use of material things be judged by their psychic results, the question whether the service takes on a material or an immaterial form being disregarded. [Sidenote: All wealth is logically related to psychic income] 2. _Only those things and actions that are in some causal relation to gratifications can have value to man._ This proposition of theory is demonstrated every hour in practical life. The business man always is trying to trace a causal relation between things that do not and cannot themselves directly satisfy wants, and things that do. The vineyard has no value to Tantalus, unable to reach its fruit. A captive, chained to a rock, attaches value only to the things within his reach. Men living in savagery and ignorance starve amid the possibilities of plenty. Chained by their ignorance and improvidence to a little spot of earth, they do not see clearly, either in time or space, the economic relations about them. [Sidenote: Values of things distant in time] 3. _Man's foresight and knowledge enable him to think of many periods at once, and thus his felt dependence on goods extends over a series of future productive agents._ In order to simplify the problem, we have spoken of the economic man as living only in and for the moment. If he had no more knowledge, memory, or imagination than is necessary to compare goods here, only present goods could have value to him. Even the higher animals, and much more the savages, rise above that level of improvidence. With increased intelligence the economic life of man expands, and he attaches importance to things which at the present moment have not, and cannot have, the slightest influence on his immediate gratification. The extension of man's view works a momentous change in his economic estimates. Of the thousands of forms of matter in the world, only a comparatively few ever will make an immediate gratifying impression on man's senses. But many of them are so connected in his thought by chains of association with pleasures or uses, that almost instinctively and most intensely he attaches an importance to them. In most cases it would require close thought to see that the service attributed directly to them was but a reflection of that performed by some other good. Thus, more and more, the estimates placed by men on goods come to depend on knowledge and foresight, and not on immediate impressions and feelings. [Sidenote: Goods related in varying degrees to psychic income] 4. _Things are causally related in varying degrees to the psychic income, and have value only as their relation is known and felt._ The explanation of value is not complete till value has been traced back to its source in gratification. Often the complex nature of the problem is ignored. If one discusses the trading of a bushel of grain, to be used by a hungry man for food, for a sheep to be kept for breeding, or for wool to be made into cloth next year, he may overlook the difference in the grade of wants compared. In this case, a gratification of the present moment is compared with a gratification of a very different kind at a future time. The problem involved is complex because of differences in time, in place, and in the nature of the want-gratifiers. The student should endeavor to reduce the problem of value to its simplest form by considering first the exchange, at the present moment, of immediately enjoyable goods. The logical starting-point in the theory of value is in those goods that are in closest touch with feeling, and on this basis may be built up an explanation of values in which reason and forethought have a greater part. Starting from the proposition that psychic income is the foundation of all values, we shall go on, however, to trace causes that give value to all the physical agents, and to the most indirect of want-gratifiers. DIVISION B--WEALTH AND RENT CHAPTER 7 WEALTH AND ITS INDIRECT USES § I. THE GRADES OF RELATION OF INDIRECT GOODS TO GRATIFICATION [Sidenote: Technical rank of agents] 1. _Goods may be ranked according to their technical relation to wants._ The technical rank of goods (sometimes spoken of as the degree of roundaboutness of the process) signifies the number of steps or processes that intervene between the agent used and the desired form. If one wishing the hickory-nut hanging above his head must first pick up a stick to throw at it, the nut is removed one step from desire. But even among savages the processes are much more complicated. The Indian with a crude knife fashions his bow and arrow, fastens the flint and cord which represent still other processes of industry, and shoots the bird which satisfies his hunger. In modern conditions the relations are vastly more complicated; only at the end of a long series do men arrive at the thing which gratifies their wants. [Sidenote: Time relations of goods to wants] 2. _Goods may be ranked by their relation to wants in time._ The relation in respect to time is measured by the period that must elapse before the utility of an agent results in, is converted into, gratification. No agent or influence intervening, a thing may yet be removed a long way from gratification. A tree may not be fitted to bear fruit for ten years to come. Meantime, there are many other possible uses for the tree: it may be used for fuel, or to make a canoe with which to catch fish, or to follow some other indirect method of production. Evidently the technical and time relations of goods are very different. The number of steps has no necessary relation to the time. A number of technical steps may be taken in half an hour, or a process of a single technical step may last a year. In the mechanic arts the technical relations are of primary significance, but in economics the time relations are mainly to be considered. 3. _Economic goods may be classified as immediately enjoyable goods and durable agents._ Enjoyable goods are goods in a final form, producing gratification or just ready to give gratification the next moment, as the cool draft of air made by a fan on a hot day, the cup of coffee steaming on the table. [Sidenote: Enjoyable goods and durable agents] Many goods of just the same form as the foregoing may not be affording current gratification (except that afforded by thrift and forethought), but are kept because later they will gratify a more intense want or gratify a want better. Apples and potatoes are kept in a cellar so that their use is distributed throughout the winter; cider and wine are kept till they get a quality that appeals more to the palate. Coal, wood, and stocks of goods, are thus kept in the form of enjoyable goods, destined to be physically destroyed when at length they yield a gratification. Evidently they must be storing up meantime a certain additional utility, for otherwise there would be no reason why they should be kept for the future. Such goods as these are sometimes called unripened consumption goods, but until ripened they bear in part the character of durable agents. Abiding sources of economic enjoyments are called durable agents. The inhabited house is a source of continued gratification in each moment's shelter it affords; but, further, it is the durable source of a series of future uses, as yet unripened. The hammer, the hoe, the tree, the field may all be considered as agents to secure consumption goods. Some of these are but one step removed from direct gratification, as the hoe helping the gardener to get food for his own use. Other agents are bound by many technical links to the ultimate gratification. [Sidenote: Degrees of durableness] 4. _This classification of goods is abstract, in that it is a classification, not of concrete goods, but of qualities shared in some degree by nearly all goods._ Most goods unite in some degree both characters, but in varying measure. This is, therefore, a continuity classification, the varying classes of goods grading from those whose durableness is zero (just at the moment of consumption) to those most durable, which yield an endless series of uses or products. Yet the classification is practical, corresponding as it does with thoughts which men have in the use of goods. By repairs and other methods goods become, and are looked upon as, durable sources of a series of uses. It is to be noted further that the enjoyable goods pass over into psychic income, that is, they are the stream of objective utilities that is each moment detaching itself as income from the great mass of wealth. The durable goods are those utilities which for the time remain, not yet ripened or ready to be converted into psychic income. § II. CONDITIONS OF ECONOMIC WEALTH [Sidenote: Income as affected by climatic conditions] 1. _The bounty and variety of the natural supply of indirect goods in the material world are the prime conditions of a bountiful income to society._ The effect of climate on the supply of goods available for man is complex. Climate is itself a direct source of gratification. As temperature must be adjusted to man's need, climate satisfies wants directly. Health, energy, the beauty of noonday woods and of sunlit clouds are conditioned on the favor of nature. Climate affects, further, the supply of material economic goods. All the earlier civilizations arose in warmer countries. But, after man had gained a certain mastery over the obstacles of nature, he was able to soften the harsher features of climate, and with better shelter and clothing, with better stocks of winter food and fuel, the more favorable features of the temperate zone could be utilized. So civilization moved northward from Egypt and India to Greece and Rome, to northern Europe and America. [Sidenote: By natural resources] Soil conditions for vegetable life determine first the amount and kind of animal life. Animal life from one point of view is a parasite, living on the vegetable; it is only the vegetable that has power to assimilate most inorganic compounds. Water being a need of plant life, the amount of rainfall is one of the most important conditions of industry. Man, therefore, depends on the resources of the soil directly or indirectly; a fertile soil furnishes him either directly a supply of vegetable food, or indirectly a supply of animal food. Natural supplies of metals, of coal, and of timber are important consumption goods, but they are also indirectly the condition for a vast variety of other goods. The industry that could exist without iron, copper, and coal would be of a very low grade. [Sidenote: By flora and fauna] The variety of flora and fauna, and their fitness for man's needs, largely condition the possible production. If, in the course of evolution, it had chanced that wheat and corn, the horse and the cow, had been crowded out in the struggle for existence, we should have had a very different civilization. The possibilities of civilization in Peru, and those of all the Indians on the American continent, were limited for lack of domestic animals. Animals that are fit for domestication are a necessary intermediate agent by aid of which man can appropriate and turn to his use the fertile qualities of the soil. Not content with the material world about him, even when it is at its best, man alters it in many ways. He enriches the soil, improves the varieties of animals, he even in some slight degree affects the climate, and by the use of a multitude of artificial bits of matter called tools, works profound changes in the world in which he lives. [Sidenote: By motion and energy] 2. _A large part of the utility of goods is conditioned on motion and energy._ It has been said that man's power in production is limited to moving things. The outer world is to man the sole source of motive forces. He can bring things together and they produce the result. Further, it may be said that nearly every kind of utility is conditioned on motion. It is man's aim to secure a constant inflow of goods. To secure this either he must move to get the goods, or he must cause goods to move toward him. The law of "conservation of energy" helps to explain economic action; the supply of energy in the universe cannot be increased or diminished, but may take on new forms. So a limited supply in man's control may take on various forms and so have different effects on gratifications. One and the same source of energy may be converted into the different forms of heat, light, motion, electricity, etc. But there must be some source. Man's desire is directed to getting force at the right place and in the right degree. If light or heat is too intense, it causes pain; the glare of the sun blinds instead of giving keener vision. A moderate force applied to any of the senses gives the maximum clearness or pleasure. Man is constantly endeavoring to secure forces from the outer world and to adjust motion so that it will directly or indirectly best serve his purposes. [Sidenote: By food, animals, and fuel] 3. _Among the main sources of power used by men are food, domestic animals, and fuel._ In eating food man stores up force in his own body. When he draws the bow he puts force into it to lie latent until liberated at the right moment. There must be a source of energy likewise that mental action may go on, and the power of sunbeams, stored for a time in food, is liberated in the processes of thought. This first natural mode of liberating energy within their own bodies does not satisfy the growing needs and aims of men. Such a mode is "labor," which becomes at times painful and distasteful. In the earliest societies known, some sorts of domestic animals are found supplementing man's efforts and acting upon the material world to alter it for man. The dog joining in the chase guards his master's safety, and helps to bear his burdens. The draft-beast in the field turns the heavy soil, and aids in the final harvest. The trained elephant does the work of twenty men piling logs, loading ships, or carrying burdens. Man further increases his control over the material world by making other men do his bidding. Domestic slavery, where wife or child serves the father of the family, or chattel slavery, where the vanquished toils for the victor, are all but universal in early communities. Such a method of increasing one's control over the forces of the world requires only superior strength, no special intelligence in mechanics, and is thus one of the first crude devices in a primitive civilization. Fuel has been, up to the present time, perhaps the most important source of energy. Fire in the hands of savage man gave him dominion over the forests and over the metals. In this age of steam the liberation of the energy of the sun, stored up in coal in ages past, is still the indispensable condition of our developed industry. [Sidenote: By the energy in wind and flowing water] 4. _The greatest and most exhaustless reservoirs of power for man's use are in wind and water._ While the supply of fuel is being used at a progressive rate and will soon approach exhaustion, there are elsewhere exhaustless stores of energy awaiting man's command. To make use of the wind for sailing a boat, only the simplest arrangements are needed; a windmill fixed at one place requires more ingenuity and machinery. The energy of the wind is derived from the sun and will last until the sun loses its heat. If some means can be found for equalizing the flow and for storing the power of the wind, it may yet become a great agency of industry. The force of falling water, long used in a petty way by the old water-mills, is just beginning to be employed on a large scale at such points as Niagara. Where fuel is high, as on the Pacific coast, wave motors have been successfully used in a small way, but wave motion is too irregular to serve well the needs for power. But the constant motion of the tides offers, at some favored points, a source of power that will remain as long as the earth revolves upon its axis. [Sidenote: By the intelligent utilization of all these agencies] 5. _Man studies and compares the durable goods that give him command over enjoyable goods, and attaches value to them._ Thus energy is found dissipating itself throughout the world in ways useless to man, and in places where it cannot serve his purposes. As man grows in power of control over nature, he seeks to apply these forces in forms and at places he has selected. If he can arm himself with the energies of mine and torrent, he can react with giant strength on the material world. He ceases to accept passively its conditions, and to live on its grudging gifts; he becomes its fashioner, in a sense its creator. His intelligence and his wants are most important factors determining what the form of the physical world about him shall be. But all the efforts of men in the most developed economy cannot make to disappear the differences in the quality of goods and agents. Desirable goods to consume are limited in quantity, and they vary in quality; hence they have value and some higher than others. Likewise, durable material agents and sources of power are limited in number and vary in convenience of location and efficiency. As men seek to gratify their desires, they attach importance to these agents of power. Each is valued for its service or its series of services. When anything is seen to contain a series of uses, it becomes a rent-bearer, and the economic problem of rent arises, one step more complex than the problem of valuing simple consumption goods. CHAPTER 8 THE RENTING CONTRACT § I. NATURE AND DEFINITION OF RENT [Sidenote: Temporary use and permanent possession of agents] 1. _The temporary use of materials and power and their sources is necessary to bring most enjoyable goods into being._ Indirect goods have value solely because they help to get direct goods. The apple-tree is valued because it bears fruit, and the orchard because the trees give promise of yielding a succession of crops for years to come. There are thus two problems of value in connection with durable goods: that of the value of a temporary use for a brief period, as for a year; and that of the value of a thing itself, the use-bearer, for a long series of years or in perpetuity. To explain what fixes the value of the temporary use is the problem of rent; to explain what determines the value of long-continued use or of permanent control and ownership of a use-bearer is the problem of capitalization. [Sidenote: Origin of the term rent] 2. _The term rent is used in a number of senses, which must be carefully distinguished._ The original meaning of rent was any regular income or revenue arising from wealth. The word comes from the low Latin _renta_ from _renda_, in turn from _redditus_, that which is given, yielded or given back, or _rendita_, that which is given or returned. The French _rendre_ (English render), to give or return that which belongs to one, is used very early. Chaucer used "rente" as an income. "Cattle had he enough and rente," cattle probably meaning property (chattels), and rente income. Rental is a collective term for a number of rents. The total yield of an estate was called its rental or rent-roll, and a list of the various sources of income, including all payments from tenants in money, produce or services, constituted its rental. [Sidenote: Popular and special meaning of rent] 3. _The popular meaning of rent is the amount paid for the use of material things which must be returned to the owners after the time of use agreed upon._ We speak of the rent of a house, boat, etc., using the word as a synonym for hire. In the European languages the word is used more frequently in that sense. In the French _la rente_ means the income from any kind of property; but corporate securities and national bonds came particularly to be called _les rentes_, because they are a form of investment yielding a permanent income. The one who has a perpetual income from bonds or rents is called a _rentier_. In German the term _Rente_ is used more broadly than in English, as an income of any sort, _Grundrente_ meaning the rent of land, and _Capitalrente_ the income usually in England called interest. A restricted meaning has long been applied by economists to the word: the income yielded by lands, etc. This was put in contrast with interest for money and capital, and with wages of labor. This meaning is now being abandoned by economic students. A wider meaning recently given to the word by many economists turns on the supposed relation of some portions of price to cost of production. Thus, frequent use is made of the expressions: consumer's rent, producer's rent, buyer's rent, seller's rent, etc. In the well-founded opinion of some recent critics this usage rests on a mistaken reasoning. However, in the midst of this wide variety of usage the student must be forewarned and alert. Doubtless agreement will at length be arrived at. Meantime, no economist can dictate what meaning is to be attached to the term, but one may suggest the definition that seems to him most expedient. Throughout this work we shall endeavor to use the term rent uniformly and consistently as it is now to be defined. [Sidenote: The essence of rent] 4. _The essential thought in rent, as we shall use it, is that it is the value of the usufruct as distinguished from the value of the use-bearer or thing itself._ The meaning of usufruct is the use of the fruits, or in legal phrase: "the right of using and enjoying the income of an estate or other thing belonging to another, without impairing the substance." The obvious fact is that fruits can be eaten without destroying the tree, the harvest gathered without destroying the field. By a metaphor the word in legal discussion is applied to the use of any product, and we shall employ it, as in common speech, in reference to one's own goods as well as to the goods of another. [Sidenote: Rented agents are looked upon as durable] The qualities whose use gives value are not usually indestructible, but they are treated as undestroyed. There is a famous phrase used by Ricardo, "rent is paid for the original and indestructible qualities of the soil." He said "indestructible," but the word is not apt. There are many qualities in the fertile field that _must_ be destroyed when it is used. Every economist since Ricardo's time has recognized this, and many excuses for the inaccuracy have been given. After every harvest, the field is less serviceable than before, and if it is to be of the same grade of efficiency, the fertile elements must be restored. We cannot assert that Ricardo meant _undestroyed_, for he was not quite clear on the question. But it is evident that one can count as true income only that part of the value of product that remains after full repairs have been made. It is only by a fiction that most indirect agents can be regarded as indestructible. Things yielding rent are not indestructible, but generally they are preserved undestroyed. [Sidenote: True rent a net income] 5. _A distinction must be made between gross and net, or true and false rent._ Before the usufruct is estimated, allowance must be made for repairs, depreciation, and for various expenses which absorb a good portion of the gross product. When this allowance has been made, the income may be considered as a net sum not due to the sale, or to the using up of any part of the thing rented. This is the essential thought in typical rent--that it is the value of the surplus, or net product, of an economic agent leaving the agent itself unimpaired in efficiency. The total product is sometimes called the "gross rent," but economic rent is "net rent." This thought is made clearer by the following discussion. § II. THE HISTORY OF CONTRACT RENT AND CHANGES IN IT [Sidenote: Economic and contract rent distinguished] 1. _Economic rent (likewise called natural, competitive, and sometimes rack rent) is to be distinguished from contract rent._ Economic rent is the market value of the usufruct, and contract rent is the amount a man pays for the use of wealth by virtue of an existing agreement. The one is impersonal or economic; the other is personal or legal, being fixed by agreements between persons. The rents usually spoken of are contract rents. The two diverge more or less. If the contract has been lately made the two will be nearly the same. Contracts of long standing often bind the tenant or borrower to pay either more or less than the present competitive price. If, after a time, the value of the use is greater than the contract rent, the tenant is fortunate in having his lease. But he is the loser if he is bound by lease or agreement to pay rent in a locality where land has become less valuable. Economic and contract rent usually diverge also because of the agreement that the owner, or lender, keep up the repairs and pay the taxes. Here it is simply the difference between gross and net rent. Custom may prevent the owner from charging all the usufruct of the agent is worth. If the contract rent is less than the economic rent, evidently the borrower enjoys a part of the usufruct, without charge, and to that degree is in the position of an owner. The usufruct in this case is divided between the two parties. Such instances were numerous in the Middle Ages in the renting of land, and still are found in many countries. Contract rent is based on economic rent and tends to conform to it whenever there is competition. The existence of economic rent is the basis of the agreement to pay contract rent. Prospective hirers of agents forecast what the use will be worth to them and make their bids accordingly. [Sidenote: The renting contract for the use of wealth] 2. _The renting contract is the agreement of a borrower to pay for the use of a thing and, at the end of the time, to restore it in good condition or pay for its complete repair._ In practical business it is necessary to have definite agreements to prevent disputes. Some provide that one party, some that the other party, shall keep up repairs. The form of the renting contract is observed by men in estimating the uses of their own wealth where no contract exists. If they count the gross product of an agent as rent, it is bad bookkeeping. In many cases it is necessary, therefore, to follow the form of the renting contract in order to determine the net yield of indirect goods. [Sidenote: The renting contract in the middle Ages] 3. _In early stages of industry the use of nearly all wealth is estimated under the renting contract._ In the lower stages of culture, in hunting, fishing, or nomadic pastoral tribes, land is not recognized as wealth to be exchanged or owned. But at a later stage, as in the Middle Ages in Europe, land and the things pertaining to it, as ditches, houses, mills, cattle, stock, and the few simple implements, constituted the larger portion of the wealth. Land was granted to the tenant or serf in return for services. The contract was pretty strictly drawn and all items were specified. It was not hard to hold the tenant to his contract to keep the land in about the same condition. There was a certain rotation of crops; the tenant was obliged to keep his stock up to standard; and, moreover, he had a certain interest in the land because his contract rent (as explained above) was less than the economic rent. The landlord, therefore, could count pretty surely on the undiminished power of his land and stock from one year to another. At that time, truck and barter were the common modes of exchange, and rents were paid in products and services, not in money. The fruits of the soil were consumed on the spot instead of being sold as now. Land was rarely, if ever, sold outright, so that there was no occasion to estimate its total selling value. It was thought of as a place on which to live and as a source of livelihood. Its yearly use was all that was subject to contract, sale, and exchange. Not the land itself but a _rent charge_ on the land was sold, the term rent charge meaning an annual sum payable out of the yield of an estate. Many medieval estates were so tied up by legal conditions that they could not be sold outright; all that the owner could do was to sell or mortgage the annual rental. Thus, in the Middle Ages, it was all but universal to look upon most indirect agents as exchangeable only under the renting contract, as subject to renting but not to complete transfer and sale. [Sidenote: The renting contract not convenient in commerce] 4. _As industry developed, the renting contract remained almost wholly confined to cases of renting lands and houses._ The materials and appliances needed for manufacture and commerce are so manifold and varying in quality that the rent-form of contract is very cumbersome and difficult for exchangers to enforce. If a merchant about to embark on a trading journey wished to rent a ship and a stock of goods, the renting contract became most difficult to interpret. He must agree to repay the loan in goods of the same kind and quality as those received, a contract most difficult to execute, and giving occasion to costly tests and countless disagreements. It was much easier for the merchant to get his loan under the interest contract, _i.e._, a money loan, with which to buy the goods. With the growth of industry and commerce, wealth increased in towns, taking many forms, as those of ships, wagons, tools, and stocks of goods, that could not conveniently be rented. [Sidenote: The thought of it remains associated with a rural economy] In England, the country which developed its industrial system earliest, the idea of rent, therefore, gradually became disassociated almost entirely from the use or hire of any wealth but land and real property. Because in the Middle Ages rent was associated almost entirely with natural resources, they being the only important forms of wealth which men rented from others, there was fostered the idea that the essential mark of rent is the connection with natural resources. It is a simple example of the association of ideas. In the transfer or loan of movable goods, the rent contract was quite overshadowed by the other form of contract, that of a money loan. According to this explanation the essential and primary difference between renting wealth and borrowing money at interest is not in the kind of wealth whose use is thus temporarily transferred, but in the nature of the contract. But as forms of wealth differ in their fitness for transfer under the two forms of contract, there goes on a competition between them, as a result of which each becomes associated with certain groups of goods. In the Middle Ages the renting contract was the dominant form, but it has been progressively displaced by loans in the money form, and its importance is still declining. [Sidenote: Renting contracts most used with land] 5. _The main forms of wealth whose usufruct is still sold under long renting contracts are land and its more durable improvements._ In England farms are let under long leases, a very common form being the thirty-year lease. Under the old, almost fixed, conditions in agriculture such a lease was equitable, but when prices are rapidly changing and when new methods are being introduced, it gives rise to great hardships. About twenty-five years ago, the great fall in the price of agricultural products brought ruin to many of the tenant farmers. The land troubles in Ireland have been largely about tenants' improvements. When the lease expired, the landlord could appropriate all the improvements that the tenant had made. In America farms are let usually on shares, and from year to year, but the plan of a money rent is increasingly followed. The difficulty of getting an equitable arrangement between landlord and tenant is recognized by all. The landlord must make the proper repairs or see that they are made; he must specify in the contract whether the products can be taken away or are to be fed on the place so that the soil may not be impoverished, and he must provide for the purchase of other fertilizers. On the other hand, the tenant under the renting contract has little motive for improvement, and many occasions for discontent. So in America, far more than in the older countries, land changes hands by sale, the purchaser going into debt for it, giving his note and paying interest on the loan rather than rent for the farm. [Sidenote: But many other goods are rented] Many less durable goods are rented for brief periods. Carriages are rented for the day, bicycles by the week or month. Sewing-machines, boats, guns, tents, and even diamond engagement rings, yield their joys under the renting contract. People frequently hesitate between the renting and the purchase of a piano, and in some cases renting is the more convenient and desirable way of securing its use. The purchase of a dress-coat or of a masquerade-suit to be worn but once, involves for some an excessive and needless sacrifice. For a moderate sum its temporary use may be had, and it is then returned, little the worse for wear, to the accommodating clothier. [Sidenote: Economic rent much wider than the renting contract] A final word of caution may be given. Economic rent is not confined to the cases of contract rent. It exists in every case where a more or less durable agent yields a use that is scarce and desirable. The owner who uses a thing himself gets the advantage in the product as clearly as if he collected rent from a borrower. Houses lived in by the owners, house furnishings, clothing, books, all scarce and durable agents, are yielding rents in this logical sense. To the economist, therefore, the problem of economic rent, as one of the grand divisions of the problem of value, remains of undiminished importance, for in these unceasing streams of uses emanating from our environment, is found the basis for the value of all durable wealth. CHAPTER 9 THE LAW OF DIMINISHING RETURNS § I. DEFINITION OF THE CONCEPT OF (ECONOMIC) DIMINISHING RETURNS [Sidenote: Economic agents contain uses to be obtained only with progressive difficulty] 1. _The phrase "diminishing returns of industrial agents" is the expression of the fact that there is an elastic limit to the utility any indirect good can afford within a given time._ Successive attempts to get additional services from a thing are usually in part successful, but each additional service is gained with more difficulty, or a smaller added service is gained for an equal expenditure of materials or effort. A book stands many hours untouched on the shelves of the library; but if, as often happens, two or more persons wish to use it at the same hour, time and energy are wasted. The book has a potential use during the twenty-four hours, but all this can be secured only at the cost of the greatest inconvenience. The greatest net uses, therefore, are seen to be to the first user and in the first hour, for these uses cost the least time and trouble. If the members of a family will take turns, one chair will serve for all of them; but if all are to be able to sit down together, a chair must be provided for each. Often it will happen that only one chair is in use, the other nine chairs being valued only for their potential uses. I knew two young men who owned a dress-coat in partnership, and as they had different evenings free from business all went well until both were invited to a reception which both were very eager to attend. [Sidenote: This is true of all classes of agents] Illustrations of this principle may be drawn from every class of durable goods. The example generally given is that of a field used for agriculture. It was long ago seen that a larger crop could usually be obtained on the same area, only with greater effort or expenditure; but this fact has been thought to be peculiar to the use of land. The examples given above have been purposely chosen from very different fields, to show that the truth is a general one: a good that affords a given service can be made to increase that service, ordinarily, only on condition that men put forth greater effort, or sacrifice more goods. The decreased utility is most clearly seen in the diminished effect which other agents produce when used in connection with the thing. When several are trying to use the same book, and are wasting time trying to get it, we often say their study hours are less fruitful because of the poor library facilities. Again, we speak either of the diminished returns of the field, or of the labor applied to the field. Either the particular thing is said to show diminished returns or the other coöperating agents are said to show them. [Sidenote: Decreasing technical effectiveness of material things] 2. _As the agents used in connection with a fixed amount of any other agent (for mechanical, chemical, physiological, psychological, and other purposes) increase, their objective effectiveness after a given point decreases._ Objective or technical effectiveness means effectiveness independent of the thought or estimate of men. It is not the effectiveness to produce a feeling in men, but to produce results on the material world. In a mechanism, if one part is increased without increasing the other parts, a point is reached where it does not add to the result. If in the building of a bridge the weight of the floor is increased beyond a certain point, the rest of the bridge being left unchanged, the bridge is weakened instead of strengthened. If the weight of the iron in the framework is increased beyond a certain point without strengthening the piers, the structure is weakened. If the pier is greatly enlarged, the bridge may not be weakened, but there is an utter waste of material and effort, and perhaps the main purpose of the bridge is defeated by the damming up of the stream. A bicycle frame, like a chain, is no stronger than its weakest part. If the strength of all parts of the wheel and frame is in equal proportion to the strain they must bear, added weight to any single part weakens the whole machine. The development of the modern type of bicycle, by many experiments, is a good example of the adjustment of materials according to the principle of technical efficiency. A variation of the same principle is seen in chemical combinations. Exact proportions of materials must be used to get a certain result. Increase of one ingredient will not increase the desired product. Either the added part is rejected, does not enter at all into the compound, or it unites to form another and different product. That the same principle holds good of the psychological effects of things, we have already fully recognized in discussing wants and marginal utility. A given amount of a good will affect the senses in a pleasurable way, but an increase in the amount will not cause a proportional addition to pleasure of sight, sound, or smell. On the contrary, such an increase may defeat the object entirely. Here we are at the threshold of the economic problem, for we have touched on "feeling." [Sidenote: Economic diminishing returns relate to value] 3. _The idea of economic diminishing returns arises when man recognizes these technical facts and their relation to gratification, in his use of a limited supply of indirect agents._ All economy begins with scarcity. The varying effects produced by different agents therefore require to be studied or the sum or direct goods of enjoyment will not be as great as is possible. Waste will take place. A bridge will have its maximum use with a minimum outlay when the parts are in a certain proportion. Beyond that point, the increase of any part may add something to the usefulness of the bridge, but the agents must be taken from some other and greater use. The thought of economic diminishing returns always has reference to value. If a particular kind and amount of a certain material is used in varying combinations with other agents, the value of the added product will not always be in the same proportion to the value of the added agent. The bridge-builder must consider not only what the added material will add to strength, but what it will cost, and whether the result will justify this expense. So the economic problem of diminishing returns is more complicated than the mechanical one, for it contains not only the technical but other factors. [Sidenote: The marginal utility in goods] If the value of the product increases less rapidly than the cost of the agents successively added to secure it, a point must at length be reached where the value of the added agents and of the additional product just balance; this is called the point of marginal utility. If a certain value in labor, fertilizer, or material, be applied to an acre of land, it may be more than recovered in the value of the product. Further applications give a product increased not in equal proportion to the former yield, and so on till the value of the last-added agent just balances that of the added product. This is the best adjustment possible, and beyond this point there will be a deficit in value. Just where the equilibrium is found at any time is the margin of cultivation. The term "cultivation" is taken from agriculture but must be understood in the broader sense of utilization, as the principle is not confined to the case of land or agriculture, but applies as well to the use of furniture, books, clothing, horses, or any other indirect agents. [Sidenote: Meaning of intensive margin of utilization] [Sidenote: The extensive margin of utilization] 4. _There are two margins, the intensive and the extensive._ The margin of utilization in the case of a single piece of wealth is called the intensive margin. Any form of indirect wealth, anything kept to use, may be considered as containing a series of uses. Using one thing more and more while uniting other things with it, is using it more intensively. Getting more use out of the book by effort, out of the farm by applying more fertilizer, out of the house by putting more people into it, is intensive utilization. The earlier uses come easily, naturally; the later ones are gotten with increasing difficulty. When a number of agents are of different qualities, the point between the one last used and the next unused is the extensive margin of utilization. The best agents that are available are naturally used first, but as they are more intensively used there is increasing inconvenience. Then recourse must be made to the inferior agents, whose first uses, however, are greater than the later, intensive uses, of the better grades. When the step is made to the use of agents that were before unused because inferior, it is extending the margin of utilization. The intensive margin of use is in the particular thing; the extensive margin of use lies outside of this. [Illustration: _Extensive Grades of Uses_] The relation of the two margins may be shown in a simple diagram. Let the better grades of indirect agents be represented by longer rectangles, the upper parts of which represent the more accessible, more easily secured utilities. Each agent consists of many strata of uses. The best uses are grades a, b, and c, in M; but after M has been utilized intensively down to d, N will begin to be utilized at its highest point. When utilization goes down to f, O comes into use, and so on. Therefore it will be seen that until the intensive margin takes in d, M is on the extreme margin of utilization, and N is just outside it; when the intensive margin falls to g and h, P is inside the extensive margin, and Q is just outside. [Sidenote: Equilibrium of the two margins] The marginal utility or effectiveness of added agents tends to be equal on the intensive and the extensive margins. This is simply a case of the substitution of goods in the use of indirect agents. If the value of the added product in the use of a particular good decreases, a point finally is reached where it is better to transfer the outlay to another agent, to change from intensive to extensive utilization, to go over to the use of another field or of another machine not so good. The effectiveness of the labor or capital that men have to apply is being compared constantly in the two cases, and to the extent that this comparison is perfect the effectiveness of the agents tends to be equal on the margin in the two applications. § II. OTHER MEANINGS OF THE PHRASE "DIMINISHING RETURNS" [Sidenote: Does not mean declining prosperity] 1. _The phrase diminishing returns is sometimes taken as meaning merely a decrease in prosperity._ Many ideas are connected with this phrase. It is not self-explanatory. It suggests various thoughts according to context and these have not failed to give rise to different uses. The student must be cautious if he is to think clearly about it. If population declines, or industry changes from one place to another, or from one kind of goods to another, it is sometimes said that returns are diminishing in the deserted district. [Sidenote: Nor exhaustion of the soil] 2. _A more common misuse of the term is to apply it to the exhaustion of the soil._ If the soil of a district has been robbed of its fertile qualities and smaller crops are raised than was the case fifty years before, it is said to be a case of of the increased difficulty in the extraction of natural stores in mining. The veins near the surface being mined first, later the galleries must be cut deeper and greater expense incurred to get the stores. But the conditions here are very different from those we have considered under diminishing returns. Mines are used not under the renting contract, but under the royalty contract, which permits and contemplates a progressive using up of the limited stores of natural resources. [Sidenote: Fallacious contract between manufacture and agriculture] [Sidenote: All industries if limited as to one factor, as area, show diminishing returns] 3. _Manufactures are often said to show increasing returns in contrast with agriculture as an industry of decreasing returns._ There is here an inconsistent shifting of thought. Agriculture is thought of as limited to a certain area of ground, whereon evidently diminishing returns will take place. But the fixed limit of ground-space is not thought of in connection with manufactures. Taking the same view of manufactures, commerce, education, etc., that is, assuming each industry to be confined to limited area of ground, each is seen to be subject to diminishing returns. Some ground-space is one of the essentials to carry on any business. If the attempt is made to accumulate a large library in one small room, a point is reached where much energy is wasted in trying to find the books. In a university the psychical product, education, may be limited by the need of space. The school-room, laboratory, or college class-room could be used at midnight, it is true, but not conveniently; and as students increase, buildings must be added. The same is true of any industry. We cannot conveniently increase the business of a lumber-yard without a larger yard-space, or of a factory without a larger floor-space. But the added space may be gotten by spreading horizontally or piling up perpendicularly. A ten-story building on an acre lot represents ten acres of floor-space. Putting up higher buildings is an expansion in area by the more intensive utilization of the land. Devices like elevators, and more compact appliances, make possible an increasing business in manufacture, trade, or commerce upon the same area of land. All industries, if looked at consistently from this standpoint, are subject to the same condition, though it is true this will make itself felt in varying degrees in different lines of industry. In agriculture some similar devices are possible by the use of greenhouses, but it is true that in it, on account of the need of sun, light, and air, the limits of space are more quickly felt, and are less elastic than in most other industries. The difference, however, is one of degree, and not of kind. Higher factories, larger stores, enable manufacturers to adapt themselves to the law as applied to the surface of land, but not to escape its operations. Neither the law of gravitation nor the law of diminishing returns is violated or broken when materials are lifted to build the upper stories. Both "laws" are at work, even when the building is rising from the ground. Men are merely adapting their conduct to the conditions imposed by gravitation and diminishing returns. [Sidenote: Confused with the question of large production] Manufactures usually are thought of as enlarging by increase of the amount of capital employed, without limitation as to the area covered. But even here a limit is reached in the amount of capital that can be employed at any one location because of the difficulty of widening the market. The question, however, is one of the advantages of large production with large capital, not of the increasing use of a limited area of land. If manufactures and agriculture are to be compared with reference to their economic nature, it is essential to clear thinking that both be looked at with reference to the same conditions, and from the same point of view. [Sidenote: Technical confused with historical diminishing returns] 4. _Technical diminishing returns are often confused with historical diminishing returns._ The principle of technical diminishing returns is that at any given moment the uses obtainable from any indirect agent cannot be indefinitely increased without increasing difficulty. Historical diminishing returns occur when, in fact, human effort is less bountifully rewarded in a later period than in an earlier one. If to-day a day's labor in agriculture produced less than fifty years ago, historical diminishing returns would have occurred. In fact, labor is more bountifully rewarded in agriculture than fifty years ago, yet it is true to-day that there are few fields or appliances which, if used more intensively with the prevailing prices of labor and material, would not show a diminishing return to the additional capital applied. Therefore, in the historical sense, increasing returns have prevailed, yet at every moment it has been necessary to apply resources under the guidance of the principle of diminishing returns. § III. DEVELOPMENT OF THE CONCEPT OF DIMINISHING RETURNS [Sidenote: Recognition of diminishing returns to land] 1. _The law of "diminishing returns" was first recognized and expressed with reference to the use of land in agriculture._ There are several evident reasons why this occurred. It is obvious to every farmer and gardener that he cannot indefinitely increase his crop, that two men cannot always produce twice as much as one man, and that in general the product does not always vary in proportion to the labor and materials applied. Moreover, the food supply is a fundamental factor in industry and in the welfare of states. The limit to the supply of food on a given area, cultivated by a given method, early appeared and became a serious practical problem. The circumstances in Europe in the eighteenth century drew attention to the subject. Population was increasing, and the pressure for food was strong. While all the forms of industry most common in cities were increasing, and the wealth of the cities was growing, poverty was increasing among the peasantry. Especially was this true in England during the Napoleonic wars, 1793-1815, owing to exceptional conditions. The food-supply from abroad was cut off, and when the English farmers, tempted by the high prices, took poorer land into cultivation, and sought to get larger crops from their older fields, a great object-lesson was presented on the principle of diminishing returns in agriculture. [Sidenote: This confused with historical diminishing returns] 2. _This truth of diminishing returns in agriculture was confused with the thought of historical diminishing returns._ Circumstances of the time led to the belief that because of lack of food misery must continue among the masses of men. It was thought inevitable that the population would continue to increase and food become more scarce. The idea of diminishing returns became thus a prophecy of what would happen, a social philosophy, that affected the thought of men on every practical social question. [Sidenote: The principle applies to land in all of its uses] 3. _The application of the principle of diminishing returns was soon broadened to include land in other than agricultural uses._ This was a natural and inevitable extension of the thought. It was evident that an unlimited use could not be made of a limited area of land, in any industry whatever. There is no explanation of rent of business sites, residences, lots, wharves, waterfalls, etc., unless account is taken of diminishing returns. If it were possible to do an unlimited amount of business upon a limited area of land, it would never get more scarce and could never rise in value. The idea of diminishing returns came properly, therefore, to be applied to land in all its uses. It is true, however, that the relatively large areas needed in agriculture make the phenomenon of diminishing returns much more striking in it than in most other industries. [Sidenote: And to all indirect agents] 4. "Diminishing returns" should be broadly applied to all wealth having indirect uses. The argument for this view may take both a negative and a positive form. Why should we say that the principle applies to land and not to cases of other industrial agents? Why in the case of a waterfall and not in the case of the water-wheel? Why in the case of the field and not in the case of the trees in the field? Are they not all scarce and desirable goods yielding a limited supply of uses? Positively it can be argued that the concept of diminishing returns is indispensable to a reasonable explanation of the value of any indirect agents. Anything that could afford an infinite series of uses at once would be an infinite supply. If an infinite number of uses could be gotten out of one hammer in all places at once, it would pound all the nails in the world. One wagon, one acre of land, one ax, one book of each kind, would serve for all men, and duplicates would be valueless. But in the case of every material thing there is a limit of convenient and economic use. [Sidenote: Diminishing returns related to diminishing gratification] 5. _Diminishing returns of indirect agents is a special case of the universal law of the diminishing utility of goods._ Diminishing returns have to do with indirect goods, while diminishing gratification has to do with direct or consumption goods. They are two species or aspects of the same general principle. If the supply of certain indirect agents is increased, thereby increasing consumption goods, the utility of the indirect agents per unit diminishes. In such a case a diminishing return is the reflection, back to the indirect good, of the diminishing utility of the direct goods it helps to secure. Any indirect agent, added to a fixed amount of other agents with which it is technically used, is credited with a diminished utility, just as an additional supply of enjoyable goods, coming to meet a fixed demand, falls in value. The concept of technical diminishing returns has reference to a limited period of time. Though a definite agent may have bound up in it a long series of uses, these cannot be secured at the moment. If a rent-bearer, such as a fruit-tree, were permanent, and men could wait through eternity for its yield, they would get an infinite yield of fruit. But in any finite period, there can be only a limited yield. [Sidenote: The basal law of economics] The concept of diminishing returns is one aspect of the great economic law of proportionality, that is, it is one expression of the fundamental, axiomatic truth, that there is a best or proper adjustment of means and ends. It is, therefore, the central and essential thought in political economy. On it depend all important conclusions with reference to the value of indirect goods. Out of it grow the important economic theories of rent and capitalization. CHAPTER 10 THE THEORY OF RENT: THE MARKET VALUE OF THE USUFRUCT § I. DIFFERENTIAL ADVANTAGES IN CONSUMPTION GOODS [Sidenote: Connection between gratification, rents, and value of wealth] 1. _Both rent and the value of durable wealth are based on the value of the fruits or products yielded by the wealth._ Gratification, afforded directly or indirectly, is the basis of all values. The relation of most kinds of wealth to wants is indirect; but gratification thus afforded indirectly is none the less the basis on which the usufruct of wealth is estimated. Men find the logical or causal connection between direct goods, or final product, and indirect goods, or agents. To explain the value of the durable wealth, or rent-bearer, a still farther step in thought must be taken. The value of the rent-bearer is based on the series of rents which it affords. To explain how these rents are added to give the value of the indirect agents is the task of a theory of capitalization. This being the relation, a change in the value of the product changes the rent, and this in turn changes the value of the rent-bearer. The theory of rent, therefore, has to begin with a review of the valuation of enjoyable goods. [Sidenote: Effect of scarcity on utility of uniform goods] 2. _In a group of consumption goods, all of the same quality, the marginal utility declines as the quantity increases._ If the quantity of an article capable of ministering to man's wants is very limited, its value is high. If the supply of something of uniform quality, for which there is no substitute, is scanty, the value is estimated without reference to any other grade. If a fishing tribe caught very few fish, but these were all equally good, and if no other food were to be had, fish would have a high ratio of exchange with every other kind of goods. If the quantity increases, the value of each unit of the whole supply falls, as the importance attributed to its parts declines. If an Indian hunting-party met with unusual success, the value of buffalo meat declined. If there is a remarkable potato crop, potatoes fall in value. [Sidenote: Relation of different grades of consumption goods] 3. _In a series of consumption goods of different qualities, the lower grades acquire value only as scarcity increases in the higher grades._ If difference in quality between two grades of apples is marked and there is a superabundant supply of the best grade, no importance is attached to the poorer. But if the better grade becomes scarce, the appetite for the poorer grade increases, and finally it, too, will be consumed. In some years the small, knotty apples are allowed to rot on the ground; in other years they are gathered and are sold at good prices. But if there is an abrupt difference in quality, and hence in the marginal utility of the two grades, the value of the better goods may rise considerably before there is any recourse to the poorer. If the differences in quality are very slight, the presence of the lower grades has the effect of limiting the increase of value of the higher grades. Practically in almost all kinds of goods there are gradations in quality. Complete uniformity is of the rarest occurrence. When did one ever see a basket of peaches that were all of the same size, ripeness, color, flavor, and perfection? If the step from the higher to the lower grade is very slight, resort is immediately made to the next lower grade, some of which is substituted for the higher. There is an independent reason for the value of each grade of goods; each grade would have value if there were none of the other, but they mutually affect each other's value when they exist, side by side, in the same market. The marginal utility of each is lessened by the presence of the other. And thus, two or ten grades constitute for many purposes a single supply as they shade into each other or are merged by substitution. [Illustration: _Grades of Consumption Goods by Quality_] [Sidenote: Free goods are on the margin of utilization] 4. _Goods of the lowest grades, having no marginal utility, are free goods._ This is a simple truth, but it has important bearings. There may be said to be an "extensive margin of utilization" of many consumption goods. The poorer grades of apples, rotting on the ground, the multitudes of waste things not valued, are on the margin of utilization. When a lower grade is used, the margin is extended. The value of goods is measured upward from the margin of utilization, but this is simply to say that their value is measured from zero upward. Likewise, there is an intensive marginal utility in consumption goods. As the better grade of apples becomes more scarce, they will be used more sparingly and kept to satisfy only the intenser wants. The superiority of some consumption goods, either in quantity or quality, often is exactly analogous to the "differential advantage" spoken of by economists in the case of productive agents. The differential advantage of the highest grade over the grade of free goods, whose value is zero, evidently is the whole value of the highest grade. § II. DIFFERENTIAL ADVANTAGES IN INDIRECT GOODS [Sidenote: Differential advantage of agents in the quality of their products] 1. _Rent varies with the quality of the products yielded by agents, other things being equal._ Let us take first a simple case where the agent is the sole condition of the product. If there is but one tree bearing a certain luscious fruit, or but one spring yielding a mineral water, the rent of the tree or spring being equal to the value of the products must vary as the quality of the products varies. If two or more trees are standing side by side, they will be compared with regard to the difference in the quality of their fruits. If two fields differ in quality, greater importance will be attached to the field capable of producing the better grade or variety of fruit or product. A peculiar mineral quality in the soil may impart to wine a choice flavor that can at once be recognized by experts; while other fields, distant but a few rods, cannot by any effort be made to produce wine of the same rare quality. There is said to be a marked difference in the success of vineyards lying only a short distance apart on the shores of the larger lakes of New York. Nearness to the water moderates the temperature, often prevents frosts, and hence insures the ripening and quality of the fruit. In the Santa Clara valley, as in other parts of California, there is a frostless belt, sharply marked off from the lands where it is unsafe to attempt to cultivate the delicate orange-tree and other semi-tropical plants. In manifold ways differences in geological formation affect the use of land and the success of many industries. On one side of a little creek is limestone land, on the other shale, the limestone producing a crop larger and of better quality. When the peculiar nature of the one field is found to be the cause of the exceptional quality of its fruits, the difference in value is attributed to it. [Sidenote: The lower grade limits the value of the higher grade] If there is but one grade of agent, it is, of course, valued without reference to any lower grade. The effect of the presence of lower grades of agents is to lower the value of the higher, inasmuch as the lower grades are substituted for the higher. There may be at first enough of the higher grade of agents to produce all the fruit wanted of the better quality. If, then, there is an increasing demand, and the additional yield can be secured only with greater effort, the value of the product will rise. The presence of poorer grades, however, checks that rise, because use can be shifted to them. The value of grade one is not high because grades two, three, and four, which are worse than it, are available, but because they are not of better quality than they are. Poor as they are, their presence reduces somewhat the intensity of demand for the best grade. Indirect agents, therefore, are seen to be subject to just the same comparisons, substitutions, and estimates, when their value is considered, as are direct consumption goods. [Sidenote: Differential advantage of agents in the amount of their products] 2. _The rents of two agents differ as do the quantities of goods yielded by them, other things being equal._ In the case just considered, the quantity remained the same while the quality differed; now is to be considered the case where the quantity differs while the quality remains the same. It is possible that one grade of agents is "poorer" because it produces less fruit, not fruit of poorer quality. Consider first the static problem. If both agents yield fruits exactly alike, the value of equal units at the same place and time must be equal, and the usufructs would vary in just proportion with the quantity of product. Now consider the dynamic problem. If the desire for that fruit increases, rent would grow as scarcity became more felt. The agents yielding, under the prevailing conditions, the largest product, would first be used; later, the poorer agents. The possibility of resorting to the poorer agents would keep the better from rising so high. [Illustration: _Grades of Agents by amount of Product of Uniform Quality_] [Sidenote: Complementary agents unite to form a product] 3. _When two agents are necessary to secure a product, the value attributed to each is influenced by competing uses._ The thought of one agent independently producing a certain product is far too simple to correspond with reality. Two or more agents unite to produce a single product, and each agent at the same time can be used for acquiring other products. Complex as the problem appears, it is solved according to the principle of marginal utility at every moment in every market. The different uses, figuratively speaking, bid for an agent, and thus its marginal utility is determined just as is the price of a good by the bidding of buyers. Indeed, it is the bidding of buyers, indirectly. The more urgent the use, the higher the bid. The felt importance is reflected from the consumption goods that are sought, to the agent that will aid to get them. Two or more agents that are mutually needed for the acquiring of a product are complementary goods. A complementary agent may be either other material agents or labor. [Sidenote: Complementary agents used intensively show diminishing returns] When labor is applied to an agent, either to improve the Quality or to increase the quantity, it is subject to the law of diminishing returns. In the effort to increase the quantity of products, labor is applied first more intensively to the better agents. If it meets with resistance, if returns diminish, it is transferred to any of the poorer agents that have in them uses of as high grade as those still in the better agent. The superior effectiveness of the earlier over the later units of the added agent is called the "differential advantage" of the two fixed agents. The result of a day's labor applied to a field may be represented by 100, a second day's labor by 90 (it being only ninety per cent, as effectual), a third day's labor by 75; but it is more usual to say that the first field produces 10 more than the second and 25 more than the third, the second 15 more than the third. To the agent fixed in supply is attributed the difference in the effectiveness of the agent that is applied. [Sidenote: The relentless extensive margin of agents] 4. _The marginal uses of indirect goods are free uses._ Here again is noted the close parallelism in the process of evaluating direct and indirect goods. There is an extensive margin in the use of an indirect agent, a point in the gradation from the better to the poorer agents where the materials and forces are left unused and have no value. Land beyond that point is free. Outworn goods in manifold forms, old pictures, old machines, having no longer charms even for a rummage sale, form a no-rent margin of wealth. On every hand a great multitude of things unused and worthless differ by only a shade from things that still are used and valued. Every rubbish-heap, rag-bag, junk-shop, and garret contains things once prized, now lingering on the margin of utilization. There is also in agents an intensive margin, beyond which are certain unexploited uses in the things that we already have. This is a more subtle thought, but it has been already discussed in connection with diminishing returns. These potential uses in agents, uses which in the existing conditions lie outside the margin of utilization, of course have no value. We have noted that there is an equilibrium between these two margins. Rent is measured from a zero point of utility either in a good, or in other poorer grades of goods. A corollary of this proposition is that there is a limit to the rental that anything can yield under any given condition. Below the present margin of utility of any goods there exist great quantities of free goods, unused goods, or unexploited uses. It is only uses above this margin that yield rent. Rent is the difference between the value of the better grades and the value of the free goods. It is therefore due to the limitation in the supply of indirect agents of the better quality, or to the scarcity of the more effective uses in those agents. [Sidenote: Restatement of rent, economic and contract] [Sidenote: Economic rent is primary] 5. _Rent may be redefined as the value of the scarce uses of wealth within a given period._ Rent is the felt importance of the usufructs of agents in securing gratification. It is measured by the marginal utility of any particular grade of agents in securing products. These definitions and the discussion throughout this chapter applies to economic rather than to contract rent. In fixing and agreeing on contract rent, men are seeking to estimate the importance of indirect goods, the importance that an agent will have in getting a product. They are bidding for the use of things, and what they bid is contract rent. Contract rent is based on the existence of economic rent. Economic rent does not depend on contract rent, but on the differences in the effectiveness of agents to secure a given product. If there were not differences in the product, and no limits to the supply of indirect agents, rent could not exist; it would be inconceivable. But these differences existing, economic rent inevitably arises, for men cannot keep from attaching value to the things that affect their desires. Contract rent in turn appears wherever the use of wealth becomes an object of exchange and agreement between men in a free society. CHAPTER 11 REPAIR, DEPRECIATION, AND DESTRUCTION OF WEALTH: RELATION TO ITS SALE AND RENT § I. REPAIR OF RENT-BEARING AGENTS [Sidenote: The necessity of repairing nearly all economic agents] 1. _The continued rent of indirect agents is dependent on the continual repair of certain parts necessary for their efficiency._ All earthly things wear out or decay. Whenever man's hand is withheld, nature takes possession of his work, regardless of his purposes. Dust gathers on unused clothes, and moths burrow in them. Shut up a house, and windows are shattered, roofs leak, and vermin swarm. To close a factory is to hasten the time when buildings and machinery will be piled upon the rubbish heap. The most magnificent and solid works of man have crumbled under the finger of time. The earth is strewn with ruins of gigantic engineering works, aqueducts, canals, temples, and monuments, whose restoration would be no less a task than was their first building. Everywhere vigilance and repairs are the conditions of continued uses of wealth. Some works of nature, such as waterfalls, may appear to have a continued use without repair, but they bear rent only when used with other things that must be constantly mended. A certain amount of labor on the banks of the mill-stream, and certain repairs on the dam, the water-wheel, and the gates are necessary. By a fiction in business contracts the waterfall may be dealt with apart from those conditions to its use, and may be rented, as a field is, with the agreement that the tenant keep up the repairs. The efficiency of land as mere standing-room usually does not seem to be dependent on repairs. But here again the land yields rent in connection with other rent-bearing agents (such as houses and other agents above ground), which must be repaired. Standing-room on land is not a complete indirect agent; it is but one of the conditions for carrying on an industry, and even it often requires repairs to make it usable. Ranging from these extreme cases of stableness and durability, indirect agents vary to the extremes of fragility and ephemeralness. [Sidenote: The fertile lands of large regions have lost their usefulness] 2. _Most of the qualities that contribute to make land fertile in agriculture being destructible, the constant repair of tilled land is necessary to its continued fertility._ If any things could be said to be indestructible, they would be some of the works of nature. In a sense, all matter is indestructible. Man cannot annihilate it, he can simply change its condition. But in economic discussion it is the value of things that is being considered, and from this point of view everything is in some degree destructible. The effects of bad husbandry are everywhere apparent, and in many regions fertile fields have been physically and economically destroyed. In Asia, lands that once supported millions, perhaps hundreds of millions, of population are now deserts. Egypt, for a time reduced to a semi-desert condition, has only in the past century been restored to a certain extent by the use of new methods and a return to the old ones. Many of the areas that were the granaries of Rome can now hardly support a sparse, half-starving population. The lands, or at any rate, the elements that gave them value, have been destroyed. [Sidenote: Wearing out of some American lands] Even in young America may be seen the effect of a failure to keep land in repair. As the new rich lands of the West were opened up, the old lands in the East were allowed to wear out, and many of them were abandoned. On the new lands in turn the same methods were followed, using up the first rich store of fertility with no attempt to keep up the quality of the soil. This may have been the best policy for the time; it would not have been economical to employ Old World methods of intensive husbandry when such rich extensive areas were being opened up. But the process was one destructive of natural resources. As settlement moved westward, great forests fell in ashes, and the soil was robbed of the fertile elements which it had taken centuries for nature to store up. [Sidenote: Wearing out of the parts the railroad] 3. _The machinery and appliances used in transportation and manufacturing are all perishable in varying degrees._ Take as an example the great agency for transportation, the railway. The roadbed, which is but the natural soil excavated or filled to a better grade, is the most permanent part; yet every frost weakens, every rain undermines, a portion of it. Earthquake, landslide, and flood fill up the ditches, or tear down the embankments. Constant work is needed to keep it fit and safe for use. Above this is the track, slightly less permanent, more frequently changed. The ties rot, and even the rails of steel must be at times replaced. The rolling-stock is still less durable, and the different parts vary in length of life. It is said that the wheel-tires are renewed four times, the boiler three times, and the paint seven times, before a locomotive is entirely worn out. The oil used in the wheel, which is a necessary part of the running machine, has to be applied every day. [Sidenote: Depreciation of manufacturing appliances] There is a great difference in the length of life of manufacturing appliances. The building is fairly durable; yet an average depreciation-rate of one and one half per cent. a year must be allowed to offset a reduction in its value of over fifty per cent, in thirty years. Machinery differs greatly in durability; well-made, substantial machinery depreciates about five per cent. yearly. The engines and boilers depreciate more rapidly than the running gear; the loose tools have to be replaced every second to fourth year; while the materials consumed in the industry must be repaired and replaced at every repetition of the process of manufacture. If a factory is to be maintained in its efficiency in accordance with the terms of the renting contract, and is to continue its renting power, everything about it must be from time to time repaired and replaced. [Sidenote: Neglect of repairs often has evil effects] 4. _Neglect or postponement of repairs must cause a falling off of the rent-earning power._ The neglect of repairs may have different results in the factory. The neglect of one kind simply reduces present rental while not preventing the future restoration of the plant to its full efficiency. If certain necessary tools wear out and are not replaced, the factory as a whole will be less efficient. Each part of the entire outfit being needed in due proportion, the loss in rental will correspond not merely to the lost efficiency of the missing tools, but to the crippled efficiency of the remaining appliances. Failure to apply seed to the land causes the land as a whole to be useless for that year's crop. In other cases, neglect of repairs increases the expenses of repairs and cuts off future rental. The adages, "A stitch in time saves nine," and "An ounce of prevention is worth a pound of cure," must be acted upon in every industry. The neglect to repair a roof causes damage to an amount many times the cost of a new roof. Failure to replace a bolt costing five cents may result in the rack and ruin of a machine worth many dollars. A handful of earth on a dike may save a whole country from destruction. [Sidenote: But sometimes is economical] Neglect of repairs may be economical, however, when outer conditions have first reduced the demand for the agent and consequently the rental. When the line of travel changes, it does not pay to keep an old hotel up to the same state of repair as when it had a great patronage. Old factories sometimes may better be allowed to depreciate while the price of repairs is invested in more prosperous industries. In a declining neighborhood the houses fall into decay, the owners seeing that "it would not pay" to keep them up. § II. DEPRECIATION IN RENT-EARNING POWER OF AGENTS KEPT IN REPAIR [Sidenote: Repairs can not always prevent ultimate decay of agents] 1. _Even where repairs are thoroughly kept up and present rent is undiminished, future rents may be decreasing because of natural decay._ Changes go on in the substance of things which cannot be prevented by any attention to repairs. The wood in a framework will decay, the metals crystallize. There is also an unpreventable wear of parts that cannot be replaced without replacing the whole machine. It is the aim of the modern manufacturers to make machines like the wonderful one-horse shay, every part of equal durability. The development in America of the system of "interchangable parts" has greatly simplified and cheapened repairs, and has lengthened the working life of machines; nevertheless their lot is the scrap-heap at last. This general depreciation appears to be nearly avoided in large factories where there is serial replacement of the parts, but occasionally some invention or some improvement of process necessitates an almost completely new equipment. An old man once said to me: "I have lived in this house forty years: it was well built, has been repainted regularly, has never been allowed to leak a drop, and it is as good as it ever was. I see no reason why it could not be kept to eternity if always kept in repair." But the same could not be said of the house now. In general, there is finally a termination of the rent-earning power of wealth, and the whole has to be replaced. [Sidenote: Technical changes destroy the uses of agents] 2. _A change in inventions and processes may reduce the rent of agents, independently of their material condition._ Rent is dependent on the indirect relation of things to wants; that relation may be changed if some other agent is found fitted to serve these wants more directly. Not only do the materials of houses change, but fashion and engineering skill change, making the old mansions cheerless and inconvenient, and affecting their rent-earning power. At every moment, in a progressive society, many rent-earning agents are being thrown out of use. The machinery in flour-mills has been almost completely changed, parts of it repeatedly, while the roller process has been substituted for the old millstones. Water-power, because of its uncertainty, has been replaced in many places by steam-power, and in many places steam-power in turn, has been rivaled by water-power since the improvements in the generation and transmission of electricity. A change in the process of making paper threw out of use much machinery that was only in part saved by its removal and adaptation to the making of coarser grades of paper. Many minor inventions in the iron industry, still more the invention of the Bessemer process, threw out of use great numbers of the old appliances. [Sidenote: Industrial circumstances affect the uses of agents] 3. _A change in the outer conditions that give occasion to the use of agents may cause depreciation._ The exhaustion of materials on which machinery is employed may reduce its usefulness. A sawmill located in the midst of a forest has a high-earning power while the forest lasts, but when the forest is cut off the mill itself declines in value. Unless it can be removed to another forest and thus have its earning power renewed, it will have the value only of scrap-iron; it has become an indirect agent in the wrong place. Oil-boring machinery where a rich supply of oil is found has a high rental for a time, but when the oil-fields give out the machinery falls in value, being worth more or less than the cost of transporting it according as the next oil-field is near or far. Changes in fashions, calling for different kinds of products, cause a depreciation in the value of the old agents. Coarse salt, evaporated by the sun, was used by our fathers, but the finer product of the steam process is driving out the product of the old solar plants. As homespun went out of use, much machinery still in good physical condition was cast aside. Changes in transportation work revolutions in industrial methods. Many prosperous small forges on the country roads of Pennsylvania became valueless after the building of the railroads. New forges were built at favored points where materials and products could be shipped by rail. [Sidenote: Various grades of efficiency in rent-bearers] 4. _The agents employed in any industry range from the more efficient, high rent, down to the less efficient, low rent, grades in a more or less regular series._ It follows that as these changes are going on, the place of agents on the scale of efficiency is constantly shifting. The various agents represent all grades of efficiency. One depreciates, possibly is restored later and takes a high place, and again depreciates until finally it is thrown out of use. One loom embodies the latest improvements and corresponds to the most fertile field; another can still be made to yield a little rent; the use of a third results in certain loss. A great mass of no-rent agents lie just below the margin of utilization in every industry. Some of these are permanently abandoned; some will be taken back into use when business conditions improve. When the iron industry is dull, many forges are out of blast; but when iron is again in demand, there is a gradual taking up of the abandoned forges, factories, and machines as they are brought within the margin of profitable utilization. Many agents not actually earning a rent, may become rent-earning through a change in business conditions. § III. DESTRUCTION OF NATURAL STORES OF MATERIALS [Sidenote: Destruction of the American forests] 1. _A large part of industry is now conducted without regard to the preservation of the source of income._ A striking example of this is the use, or rather the destruction, of the American forests. In the last century the demand for lumber grew rapidly both on account of domestic needs and of the needs of the older countries. Great quantities of wood have been used and still greater quantities wasted, trees being girdled, the ground burned over, the timber destroyed in any way that would clear the soil--timber which to-day would be of far more value than is the cleared land on which it stood. Considering present needs and conditions, the labor seems to have been worse than wasted. [Sidenote: Effects on value of timber] The direct effect of this destruction of the supply has been the increase in the value of timber. To the settlers much of the timber was worse than useless; they paid and labored to get rid of it; now the supplies of lumber must be sought on the very margins of our territory: Florida, Maine, northern Michigan and Wisconsin, Washington, and Oregon. The supplies in Washington and Oregon are almost unavailable in the Eastern states on account of the cost of transportation. Professor Marsh, thirty years ago, strikingly characterized the policy that has been pursued: "We are breaking up the foundation timbers and the wainscoting of the house in which we live in order to boil our mess of pottage." [Sidenote: Physical effects] The indirect effects of these changes are fully as great as the direct ones. Forests greatly affect climate, temperature, and soil; they influence the humidity. They equalize the flow of streams, moderate floods, and by preventing the washing down of the rich soil, keep the mountain sides from becoming bare and sterile rocks. So, within the last two decades, the people in America have begun to think of forestry. Its purpose is to restore the forests to the condition of permanent rent-earners, to make the mountains yield not a temporary supply, but a perpetual crop of timber. [Sidenote: Possible exhaustion of the coal-supply] 2. _The extraction of coal and other mineral deposits reduces for future generations a supply already limited._ The coal deposits in the earth have only recently been drawn upon. A small city like Ithaca probably uses to-day a greater quantity of coal than was used in all Europe two centuries ago. The large deposits of coal and their early development in England long gave a great advantage to English industry over that of other countries. In England, however, has first been felt the fear of the exhaustion of the coal-supply. Professor Jevons, in 1861, sounded the note of alarm; he prophesied that because the coal deposits of America were many times as great as those of England, industrial supremacy must inevitably pass to America. Already the supremacy in coal and iron production has passed to America, and that in textiles soon will come. In England the accessible supply of coal is limited, deeper shafts must be sunk, and the coal gotten with greater difficulty and at greater expense. Coal has risen in price in England within the last few years, and will continue to rise in the future. The coal deposits of America are thirty-seven times as great as those of England, but even these will soon be exhausted. And yet on the part of all except the coal trust, there appears in America a thoughtless disregard for the future. Supplies of copper, iron, and lead in favored positions are likewise limited, and are being rapidly centered in the hands of great companies. The increasing demand for these products insures a steadily rising income from their annual use. The value of the mines, being based on the series of incomes they will yield, may increase while their unused treasures dwindle in quantity. [Sidenote: Many natural resources are being rapidly exhausted] 3. _The exhaustion of natural stores of material is due to civilization, but it threatens to put an end to industrial progress._ The savage does not go deep enough to use up permanently the world in which he lives. He uses the fruits that he finds, and those fruits are, almost without exception, renewed the next year. The only mines that were worked out in ancient times were gold and silver mines, while the mines of useful metals were touched but lightly. Within the last century the earth's crust has been exploited with startling rapidity. Scientific knowledge and mechanical improvement have combined to unlock the storehouses of the geologic ages. At the ever-increasing rate of their use, many important materials must be exhausted in the not far distant future. While it is probable that substitutes will be discovered for many of them, the outlook in some directions has little promise. To treat terminable incomes, exhaustible sources of supply, as permanent sources of income, leads alike to unsound theory and to reckless practice. CHAPTER 12 INCREASE OF RENT-BEARERS AND OF RENTS § I. EFFORTS OF MEN TO INCREASE PRODUCTS AND RENT-BEARERS [Sidenote: Desire for better agents impels men to improvements] 1. _While man destroys some agents of production he multiplies many others._ We have noted many kinds of depreciation, destruction, and wearing out of wealth; but the normal thing in a healthy society is an increase, on the whole, of rent-bearers. The increase of rents is due to two causes: changes in the agents by which they become more efficient technically, or more numerous; and changes taking place outside of the agents, affecting the utility of the products. The first of these will be considered in this section. The increase of the efficiency of agents is usually the aim of the individual producer, and thus is brought about an increase of the stock of wealth. In some cases, however, improvements such as the dredging of harbors or as the protecting of forests, are made by men collectively through the agency of governments. Somewhere, however, the desire for these changes must arise in the minds of individuals. Increase of most things involves "cost" or sacrifice, in the psychological sense; that is, man must strive, perhaps suffer, to get a certain result. This end, therefore, must be in itself desirable, and social organization must be such as to present a motive to the men to make the needed effort. [Sidenote: Improvements by adaptation of natural resources] 2. _Rent-bearers may be increased in quantity and improved in quality by the adaptation of natural resources to man's purposes._ To get food, men use the tracts of land that under the conditions give the largest product. Other tracts less fertile, or for some reason less available, are ditched, tiled, and diked, and fertilizers are carried up steep hillsides to make a soil upon the very crags. In commerce and transportation, new ways are opened by canals, railroads, and tunnels. An isthmian canal will raise the efficiency of ships plying between New York and San Francisco, enabling them to carry a greater amount of freight within a year. The tolls will represent to the users an expenditure only partially offsetting the increased efficiency of the agents of transportation. By the building of wharves, the dredging of harbors, and by many other methods, indirect agents are constantly growing in number and efficiency. [Sidenote: Machinery is an adaptation of natural resources] 3. _Rent-bearers may be increased by inventions and improvements that make machines stronger, quicker, and better._ This proposition is not logically different from the preceding. A machine is an arrangement of material things through which force may be indirectly applied to move matter. No fast line divides machinery as regards form, purpose, or cause of value, from the artificially improved natural agents that we have been discussing. Just as a field is drained, plowed, and cultivated to fit it better to yield a crop, so is the iron ore shaped into a form called a machine, better fitted to cut, carve, and weave as man wills. Machines are merely adaptations of natural resources. [Sidenote: Bettering quality of agents] Increase in machinery may be either in quality or quantity. The two causes have in most cases the same result. If the quality or efficiency of looms is doubled, it is as if their number had grown in like proportion. In its economic function the beast of burden may not illogically be classed with inanimate machines. The horses in America have been remarkably improved of recent years by the importation of thoroughbred stock from Europe. Ten or fifteen years ago the number of horses in the United States was found to have decreased, and there was much comment on this evidence of a declining industry. It was not at once recognized that there was embodied in horse-flesh more horse-power than ever before, as a single Norman horse has the strength of several Mexican mustangs. Numbers alone are not the measure of efficiency. [Sidenote: Increasing number and better grouping of agents] 4. _The increase of wealth and the betterment of environment go on as well through the increase in the number of appliances and through their improved arrangement, as through changes in their kind._ A machine is an adjustment of various natural agents to each other so as to make a more efficient agent, and machines in turn may be adjusted as parts of a larger system of production. The ideal of the modern factory system is so to arrange the machinery that no bit of material will make an unnecessary motion. The log, once started through the mill, is carried automatically from one machine to another until it emerges as a roll of paper or as a box of tooth-picks, ready for use. In an American watch-factory one man tends twelve or fifteen automatic machines. A small brass rod is fed automatically to the machine; a piece is cut off, is picked up by a human-like metal hand; is put into a lathe, and shifted or held firmly while it goes through fifteen or twenty processes; and then is dropped into a box where it is ready for the "assembling" of the watch. As the machinery improves, factories making allied products are grouped to make a system still more efficient. As the number of agents increases they are distributed so as to be where most useful to the owner. A man having two umbrellas keeps one at his office and the other at home; a student having two books of the same kind keeps one at his room and the other at the university; a farmer having two hoes keeps one at the barn and the other in a distant field, and by this distribution the agents are increased in efficiency. [Sidenote: A larger and better environment] The aim of a progressive society is to enlarge the environment, and constantly to adapt it better to the service of wants. This is done largely by mechanical agents, which capture the natural forces of the world, put them into the right place at the right time, and make them do the right thing, or which group and relate the materials of the world in the right ways. Some of the groupings in the chemical and physical world that do not fit man's purposes may be made to do so. The world in this way becomes more and more a great workshop, better and better adjusted to man's wants. [Sidenote: Increasing some rent-bearers reduces the rents of others] 5. _The betterment of the environment of society in some directions reduces the rent of other parts._ The wish of the individual is to raise his own rent-bearers in efficiency, but in doing that he affects the agents owned and controlled by others. The ideal from a social standpoint is to increase not rent but the welfare of society, and this is not always the ideal of individuals seeking their own interest. However, as the efficiency of some agents rises, it becomes unnecessary and unprofitable to use the less fertile fields; they cease to be rent-bearers, and the rent of the richer fields falls under the influence of the new supply of products. Some inventions suddenly increase the efficiency of free goods to such a degree that the less efficient rented agents are thrown out of use, and the margin of utilization is moved to a higher plane than it was on before. Improved types of machinery more or less rapidly displace the older, less efficient types, which, therefore, more or less completely lose their rent-bearing power long before they are physically worn out. When improvements in agriculture that are applicable to a considerable area of land take place, and the product thus is increased and cheapened, the poorer land is abandoned. Inventions and improvements thus gradually becoming common property, increase the free goods and free uses not bearing rent and open to every one. One who improves the quality of a machine or the economy of a process may thus unintentionally injure some of the owners of low-rent agents, while unintentionally increasing the welfare of the mass of men for whom the margin of utilization is thus lifted. § II. EFFECTS OF SOCIAL CHANGES IN RAISING THE RENTS OF INDIRECT AGENTS [Sidenote: Effect of decrease of the competing agents] 1. _Changes in the number and kind of competing resources may raise the rents of particular agents._ Rents may increase without increase in the quantity or number of a particular group of agents or without change in their technical efficiency. As changes in the conditions of society may reduce rents, so other changes may increase them. Agents of the same kind may diminish in number, either absolutely or relatively. If some of the competing machines are destroyed, the rents of the machines that remain rise, while if new supplies are found, either in nature or by improved industrial processes, the rents of the older agents fall. [Sidenote: Effect of new uses for agents] 2. _The discovery of new uses for agents or for their products raises their rents._ Farm land of the poorest kind often is found to contain valuable mineral deposits. Such a lucky find has lifted the mortgage from a farm in eastern Pennsylvania, from which, in two or three years, has been taken feldspar exceeding in value the agricultural products of the same land in the last fifty years. The discovery of building stone, coal, natural gas, or oil land may make the annual rent (or royalty) of land tenfold its former total value. Fitness to produce nettles is not ordinarily a virtue in land, but the discovery that certain fields produce a superior quality of the nettle used for heckling cloth, causes them to take on a new value. A mineral spring, because of the supposed or proved healing properties of its waters, may be as good as a mine to the owner. Peculiar fitness for the cultivation of celery may convert marsh land into a substantial source of income. Social changes are constantly causing agents to shift from lower to higher uses. As population grows and groups about new industries, farm land is used for residence lots, and in turn for business purposes. Rents therefore rise, and this rise is reflected in the higher selling value of the land. If a new demand arises for the product of any machine, its rent rises, although it may continue to turn out the same product as measured by number or quantity. For, if consumers increase, a given supply of agents becomes relatively smaller than before. [Sidenote: Sudden variations in demand] 3. _A rise in rents due to social changes may be relatively permanent or temporary._ Business conditions sometimes change quickly. An urgent demand for special machinery raises quickly its rent and value. It is said that lace machinery is sometimes thrown out of use for several years, until a sudden renewal of the demand for lace causes the rental to equal, in two years, more than the original cost. At such times the value of factories increases greatly, but after a few years of prosperity business again collapses. Such prosperous periods are the opportunity of the business man and of the promoter to sell the factory at its highest price. Machinery adapted only for a special product will not sell as readily when less needed for its special use, as that which, like a turning-lathe, can be used for many purposes; but the more special the appliances needed for a certain product, the higher, more abnormal will be their temporary value when they are suddenly needed. Land near the site of an exposition takes on a very great value and again falls after the exposition is over. During the Boer War horses and mules rose in price in the United States on account of British purchases. [Sidenote: Cause efforts to increase the supply of agents] A rise in the value of any agent at once causes an attempt to duplicate it or to find a substitute for it; this attempt, if successful, puts a check or sets a limit to the rise. In this search for new devices the man who can see most quickly and clearly has a key to wealth. Some kinds of agents, as rare minerals or tools that can be produced only by highly skilled labor, cannot be increased rapidly in number and remain high in price for a long period; and favorably located building sites illustrate the same principle. In some cases, it is true, the demand may be due to some temporary cause, as in a period of unsound land speculation, but usually the growing value of location is due to a steady and abiding change in population or business. [Sidenote: Franchises guard the growing rents from the influence of substitution] 4. _Such public utilities as are guarded from competition by franchises, often rise in rental with increase in population._ The leading classes of public utilities referred to are waterworks, gas-works, street-railways, ferries, and wharves. This evidently is only a special illustration of the principle just stated, where it is not easy to find a substitute for certain agents. Public franchises entitle the owners to special, sometimes exclusive, privileges, and protect them legally from competition. Not all franchises are valuable; many street-railways are unfortunate ventures, the earnings being insufficient to pay expenses, to say nothing of interest on the investment. But when they pay greatly, their high value is due to the impossibility of competition. The cars, mules, dynamos, steam-engines, and other agents combined to furnish transportation, have a special earning power because other similar agents are forbidden to be used in that market. [Sidenote: Various kinds of "unearned increments"] 5. _Industry abounds with cases of unearned increments of value due to accidental and social causes raising the rents of wealth._ The term unearned increment may be defined as an increase in rents (or value) of agents, due to something other than the efforts or merits of the owner; in fact, it is that of which we have been speaking. In some cases powerful or wealthy men can bring about social changes in entirely legitimate ways. The owner of a large factory, moving it into the country, may buy up surrounding land and found a city, converting pasture lands and corn-fields into valuable building lots. Again, social changes are produced immorally, if not illegitimately, when wealthy men or influential politicians cause laws to be passed which inure to their advantage but which may ruin many other citizens. [Sidenote: Also many chances of loss] In most cases, however, social changes are impersonally caused. The individual owner who profits by them is powerless to affect the result. He can only adapt his conduct in some measure so as to reap an advantage. He can strive to increase the number and quality and to get control of such agents as he foresees will yield higher rents. In making such a forecast there is chance of loss as well as of gain. The term "unearned increment" has been frequently used in recent years. It is often assumed to be a peculiar thing, sharply in contrast to other changes in value. The foregoing hasty review may serve to suggest how manifold and complex are the instances of it, and what an important part it plays in modern industry. DIVISION C--CAPITALIZATION AND TIME-VALUE CHAPTER 13 MONEY AS A TOOL IN EXCHANGE § I. ORIGIN OF THE USE OF MONEY [Sidenote: The consideration of money can no longer be postponed] 1. _The exchange of goods by barter is extremely difficult in most cases._ Thus far we have not considered the subject of money and have so far as possible avoided even the use of the term. Value in economics does not depend on money, and is not necessarily connected with it. Things can be compared in their utility, their importance to our welfare can be estimated, without the use of money. Many problems of economics can be discussed pretty thoroughly and solved without the use of the word money or any term of similar meaning. But to-day it is impossible to go very far in the discussion of economic questions without using the concept of money, which is interwoven with every practical and theoretical problem in economics. We have delayed to the farthest limit the formal recognition of the subject; but we are now approaching the question of capital and interest, and it is no longer possible to avoid a preliminary consideration of the money concept. [Sidenote: Exact measurement of utilities is not possible without some medium of exchange] In considering the problem of exchange of consumption goods, we have assumed that it is possible to weigh small differences in the marginal utility of goods, and that such differences have influence on exchange. Now in exchange by barter such a small estimate is impossible. In barter things are exchanged directly for each other in kind. If the two things do not chance to coincide in value, the exchange cannot be completed. An equivalent must be found, or a multiple, if the marginal utility of two goods is to be equalized for either party by exchange. As in most cases this adjustment must be very incomplete, many exchanges that otherwise would be advantageous cannot take place. In the earlier stages of development, this careful estimate of value is not found. Children do not make it. The typical trade of the small boy is a "trade even"; Johnny exchanges his gingerbread for Jimmie's jack-knife. It marks an epoch in the industrial development of the boy when he begins to keep store with pins, and no longer trades candy for apples, but both for pins, which have become the medium of exchange in his boy world. He then can express values in much more exact terms. In our society most children begin early to grow familiar with this conception; but travelers find some savage tribes still in the earlier childish stage of development, unable to grasp the thought of a general medium of exchange. When, through lack of a medium of exchange, there is a failure to adjust utilities, there is a loss of the possible advantage in each defeated exchange. There is a further waste of time and of vain efforts to find something that will be accepted in exchange, and the loss offsets a large part of the gain even when the barter is effected. [Sidenote: Money is found to serve as a general medium of exchange] 2. _Some kind of enjoyable good in general use comes to be money, that is, to be accepted as a medium of exchange._ The difficulties just mentioned are met by the use of a medium of exchange. A medium of exchange is simply one kind of wealth which is taken, not for itself, but to pass along, in the belief that it will enable the taker to gratify his wants and distribute his purchasing power in a more effective way. Money is an "invention" in that it is a means of exchange that came into use independently in a great number of communities. It is not an invention in the sense of a mechanical device suddenly hit upon, but rather in the sense of a social custom that grows as its convenience is tested by practice. Money is used, in some degree, everywhere except in the most primitive tribes. Historically viewed, the money first used in any community is seen in every case to be a commodity capable of giving immediate gratification, a direct good in immediate use. It then gradually comes to be used as money, which is an indirect agent. Still later, when the money habit is well established, a kind of material having no utility except as a medium of exchange may come to be used. [Sidenote: Qualities of the primitive money] 3. _Money in its origin is that good which best unites the qualities that make it easy to sell, to carry, to know, to keep, to divide, and unite._ It is evident that if some one commodity is gradually to take on this use as a medium of exchange there will be a choice; some things will be better fitted than others. First, this thing must have the quality of salability, or marketability. In the channels of exchange it is taken not because it is wanted for itself, but because it will help to get something else that is wanted. To be sure of a ready sale in a primitive community it must, however, be something that is generally desired. Food and clothing, which supply the fundamental physical needs, are the most generally used and desired of all goods. But they do not have the second quality of a good money material, that of great value in small bulk, transportability. Food is bulky. The carrying of a venison or of a bag of wheat on one's back a short distance requires an effort as great as that for the procuring of the food. Furs, however, have this quality in a high measure, united with other qualities of money, as is shown by their general use in the exchanges of northern tribes. Thirdly, a thing must be recognizable; counterfeits must be easily avoided, and the quality must be easy to test: this is the quality of cognizability. The love of ornament is universal in human societies, and gives value to many materials combining in a high degree the qualities thus far named. Fourthly, the money material, when taken in exchange, must remain without loss of quality, perhaps for long periods, until it can be exchanged again. Food does not answer to this requirement, being organic and perishable. But some of the metals, having value in small bulk, salability, cognizability, and durability, step by step displaced other forms of money. Finally, money must be made of a material easy to divide and unite. It is a great convenience in small transactions to be able to represent a fractional value by a small coin. The money material thus, likewise, is easily shifted to and from its money use. It is a very poor money that has not this quality, yet a thing may serve for money in larger transactions without it. Cattle, slaves, and land have been thus used, although they answer in a very rough way these fundamental requirements of the money material. [Sidenote: Industrial changes affect the convenience of certain money forms] 4. _The changing material and industrial conditions of society change the kind of money that is used._ The money use, as has just been shown, is a resultant of a number of different motives in men. Things that have the highest claim to fitness for money with a people at one stage of development would have a low claim at another. As each of these stages is passed, the thing used as money either increases or decreases in its fitness. The final choice depends on the resultant of all the advantages. The use of a material may become more general or less so. Shells used for ornament in poor communities cease to be so used in a higher state of advancement, and thus their salability ceases. Furs, used at some stage of development as money in all northern climes, cease to be generally marketable when the fur-bearing animals are nearly killed off and the fur trade declines. Tobacco was at one time in Virginia a great staple. Merchants were always ready to take it, and its market price was known by all; but as it ceased to be the almost exclusive product of the province, it lost the knowableness and marketability it had before. In agricultural and pastoral communities where every one had a share in the pasture, cattle were a fairly convenient form of money, but to-day would be a most inconvenient one; a city merchant exchanging goods for Poland China pigs and Texas steers would envy the proverbial owner of a white elephant. [Sidenote: The proved fitness of gold and silver as money] The value of the money material may fall so greatly as a result of greater production, as in the case of iron, tin, copper, that it becomes unsuitable. Again, as wealth grows, as exchanges increase, as the use of money develops, as commerce extends to more distant lands, the heavier, less precious metals fail to serve the money need, especially in the larger transactions. Thus, in a sense, different commodities compete, each trying to prove its fitness to be a medium of exchange; but only one, or two, or three at the most, can at one time hold such a place. Silver and gold, step by step, often making little progress in a century, have displaced other commodities, and are the staple and dominant forms of money in the world to-day. Every community has witnessed some stage of this evolution. Now nations are divided into two great groups, silver- and gold-using, in accordance with the metals they use as standards. The gold-using countries are the most advanced industrially, requiring the most valuable money metal. Many countries have passed in the last century from the silver to the gold standard, and in an intermediate period have tried to use both standards. The Asiatic and South American countries mainly use silver, while most of those in North America and Europe use gold. While industrial changes thus affect the choice of money, in turn money reacts upon the other industrial conditions. If a new and more convenient material is found, or the value of the money metal changes to a degree that affects the generalness of its use, industry is greatly affected. The discovery of mines in America brought into Europe, in the sixteenth century, a great supply of the precious metals, and this change in the use of money reacted powerfully on industry. Money being itself one of the most important of the industrial conditions, is affected by and in turn affects all others. § II. NATURE OF THE USE OF MONEY [Sidenote: Money is an indirect agent, a tool to effect exchanges] 1. _Money in all its money uses is an indirect agent, to be judged just as other indirect agents are._ The key to this section is the thought that the function of money is to serve as an indirect agent. Money is often, by a figure of speech, called a tool. Literally a tool is a bit of material which, taken in the hand, is used to apply force to other things, to shape them or move them. Figuratively, this is just what money does. A man takes it in his hand not to get enjoyment out of it, but to apply force, to move something, and that which he moves is the other commodity. Adam Smith aptly likened money to the road and wagons that transport goods, thus gratifying wants by putting things into a more convenient place. Money is only one of a multitude of forms of wealth. It is not even the most "valuable"; it has value just as other indirect agents have. The loss caused by taking away an indirect agent entirely is greater than the benefit usually attributed to it. Its utility in the extremest conditions is greater than its marginal utility under ordinary conditions. Food is not credited in the market with enormous value, but if starvation threatened, all else would be given for food. In a like manner, each individual values money according to the importance of the marginal service it renders, but the marginal service is far from measuring the loss that would be caused by the entire disuse of money. In a society without money, industrial processes would be very different, and exchange would be hampered in almost inconceivable ways. It is true, therefore, that money is an economic factor of high importance, but it is not so indispensable as many other factors to which far less value is attributed. [Sidenote: Why a poor community lacks money] A poor community has little money because it cannot afford more; it gets along with less money than is convenient just as it gets along with fewer indirect agents of every other kind than it could use. Pioneers in a poor community where the average wealth is low, cannot afford to keep a large number of wagons, plows, good roads, or school-houses. If the community were wealthy enough it would have more of these and of other things, and great as is the convenience of money, poorer communities have to do with little of it. It is, therefore, a confusion of cause and effect for poor communities to imagine that their poverty is due to lack of money. [Sidenote: The use of money as a common denominator] 2. _Out of its use as a medium of exchange comes the use of money as a common denominator of values._ Money serves as a "common denominator," for, as all other things can be expressed in terms of money, through it the value of other things can be compared. The other things can be expressed in money because they are constantly exchanged for it. All things being compared with money, can in turn be compared with each other. Some consider this service as a common denominator to be the primary and most important function of money. Sometimes a money of account is found, which is not in use as a medium of exchange. Cattle and slaves have served as money of account while not used as a medium of exchange in larger transactions. Money of account is used, as the shilling in New York, which for a century has not been in use at all as a medium of exchange. It is, however, only apparently a denominator of value; the shilling represents five fourths of ten cents. The actual standard is the dollar; the shilling is only a habitual form of speech and is mentally reduced to terms of the money in use. A decimal system is a great convenience in the use of money as a common denominator, but not indispensable. It is a striking fact that England, until a few years ago the greatest industrial nation, still uses a money unit requiring cumbrous calculations. [Sidenote: Money used as a storehouse for saving.] 3. _Other uses of money are as a storehouse of saving and as a standard of deferred payments. These uses grow out of those before mentioned._ The standard of deferred payments is the unit of value in which debts are agreed to be paid later. It is evidently most convenient, and therefore almost inevitable, that the common denominator in which all values are expressed from day to day should continue to be taken as the value unit when the completion of the exchange is delayed a day, a month, or a year. This will be more fully discussed at a later stage of our study. The use of money as a storehouse of saving was more common formerly than it is now, when better ways than the hoarding of money are found for "laying up for a rainy day." In some measure, however, money is hourly serving this use, which is still an important one. Money kept to be used to-morrow or five years hence is a storehouse of value for twenty-four hours or for five years. In either case it is being kept to complete at a later time its use as a medium of exchange. A thing ceases to be money, logically viewed, the moment its owner keeps it without the purpose that it shall be spent ultimately. The typical miser is a man who has lost his reason as regards the money use. Money must be deemed, therefore, to perform the same essential service as a storehouse of saving that it does as a medium of exchange. In either case it is to be kept only to the moment when it will afford the maximum of pleasure. § III. THE VALUE OF TYPICAL MONEY [Sidenote: The money use is added to other uses] 1. _The money use, historically considered, is a new use added to a good, and increases the demand for that good._ The history of any particular kind of money may be traced back to a point where it was not money, since which the money use has been added gradually to the other uses. The value of the material later to become money is determined, as is that of any good, according to its marginal utility in all possible applications. No new theory is required to explain the value of this same commodity as it gradually acquires the added use of a medium of exchange. The new use influences demand for the thing just as do the other uses. What is here said must be understood as applying to typical money, which is at the same time a commodity having other uses. Other things that are not typical money come later to be used as money, under legal regulations. [Sidenote: The other uses continue, slightly modified by the money use] 2. _A good that comes to be used as money continues to have a commodity use along with the money use._ When a thing is wanted for some quality that gives immediate gratification to the user, the explanation of its value is simple. Ornaments, shells, feathers, food can be seen to have a direct want-gratifying power. The money use is one that works no physical or visible change in goods, and to many minds it appears so different from other utilities that it remains quite mysterious and incomprehensible. To persons accustomed to thinking on problems of value, this case appears to be no more difficult than that of anything else having two or more uses. Cows are used for milk, for meat, and as beasts of burden. Each of these uses is logically independent as a cause of value, yet all are mutually related, the values of cattle being determined by the consideration of all their uses united into one scale of diminishing utility. [Sidenote: Money yields a series of rents which are the basis of its value] 3. _The uses of money make it a rent-bearing form of wealth._ The rent that money yields is in the form of convenience and economy. This is sometimes rendered directly as psychic income, as in enabling the traveler to buy his dinner, for the money thus yields gratification just as does the carriage in which he rides. One may go for a day to the seashore without a parasol and suffer from heat, or without money and suffer from hunger. In every case where money is retained for a time in possession, there is expected from it a usufruct as great as, or greater than, can be secured from anything else for which it can be exchanged. This usufruct is a net surplus, or income, yielded by a sum of money undiminished in amount up to the moment it is spent, but meantime increasing in the gratification it will help to secure. In many cases in practical business money yields gratification only indirectly, as the objective contract rent received as interest for borrowed money in business uses, or as economic rent when the use of money in business enables one to secure a larger income. Because money yields a rent men make the sacrifice involved in keeping a stock of it on hand. On this rent is based that part of the value of money that is derived from its money use. As the use of money as a standard of deferred payment, or basis of commercial obligations, does not require that it be owned by the parties writing the contract, this use of money is a free good, a sort of social by-product of the medium of exchange. When money is in use in a community, any person may draw up contracts in terms of money, borrowing and lending, buying and selling wealth, later to be repaid in other wealth or services expressed in the circulating medium. [Sidenote: The general use of money is characteristic of this age] 4. _Money may be defined as a generally accepted material means of payment and medium of exchange._ This, its primary and essential function, may appear to be less important as new modes of balancing accounts of wealth are devised. But its functions as a common denominator of values and as a standard of deferred payment are increasingly important in an advancing society. It is this expression of the value of all other things in terms of money which may well be deemed the essential characteristic of the capitalistic age. In earlier periods wealth was thought of and expressed in concrete terms; now it is expressed in money. The general use of money affects men's ways of looking at wealth and speaking of it. Without appreciating the nature and function of money, it is impossible to grasp the significance of capital in modern industry, the consideration of which we are now to enter upon. CHAPTER 14 THE MONEY ECONOMY AND THE CONCEPT OF CAPITAL § I. THE BARTER ECONOMY AND ITS DECLINE [Sidenote: Various points of view of the students regarding money] 1. _The use of money prevails in very different degrees in various parts of the United States._ The members of this class, representing nearly every state and territory in the Union, have lived amid very diverse industrial conditions. Some know best the country where conditions are similar to those of a hundred years ago; some, the villages where may be seen the handicrafts and the small general store. Others know better the cities with their varied industries; while doubtless still others, through family relations, know of the methods of great wholesale business, perhaps even of the larger commerce and foreign trade. Methods differ in the different lines of business, and according as a man is a farmer, a merchant, or a banker, he has different ideas as to the use of money and of the part it plays in modern industry. You come to this study with different experiences and preconceptions; as a result every statement produces a somewhat different impression on each of you. This is true in general of the statements made in political economy; but it is most strikingly true in the discussions of money. A city boy rarely sees a case of barter; whereas in many parts of the West and Southwest, and in the mountainous districts of the East, a large part of the business is carried on in this way. Town and city in New York state differ in this respect, but hardly more than do the rural districts of the different sections of our country. Banks are very numerous in the East, are few in the Northwest, and still fewer in the South. Men can understand each other better in a discussion if they are conscious of the fact that they do not instinctively take the same point of view. [Sidenote: Countries differ in their use of money] 2. _The extent to which, on an average, money is used in different countries of the world, differs widely._ Statements in political economy must be guarded; few of them can be taken as universally true. As the different parts of one country may be contrasted, so may the different countries. The use of money in Siberia would be much less than that in Moscow and St. Petersburg, and again the average use in Western Russia is doubtless less than that in Austria. In Austria the money use is less developed than in Germany. While there is now little difference between Germany and France in this respect, France for a long time was the more developed industrially and made greater use of money. There is greater use of money in the cities of the outlying countries than in the rural districts. In the cities of Mexico banks and credit agencies are employed as in the American cities. The rural districts are more backward and make far less use of money than is the case in the United States. The great ports of China are provided with all the facilities of modern banking. In the great cities of India one can get a bank draft that will be paid in any part of the world. But go a very little way out of the cities of China and India, and conditions greatly change; money is far less used and principally as a storehouse of saving. [Sidenote: Slight use of money in the Middle Ages] 3. _In a historical view the European nations are seen to begin with a barter economy and to pass through great changes as regards the use of money._ Here the view shifts from a comparison of different nations at the same moment to a comparison of the same nation through a period of centuries. To understand, even in a measure, what is about them men must know out of what it grows. In the early Middle Ages money was used chiefly in cities, and there only to a limited extent. Almost universally a "barter economy" prevailed, or, as it has been called, a "natural economy," a term taken from the German "Naturalien," which means natural products, enjoyable things, as opposed to money. Natural economy, therefore, means that condition of society in which things are exchanged in kind. In the Middle Ages land was the great and dominant form of wealth. The prince himself was dependent on land for his income. The conquering chief or invader took possession of the land and parceled it out to his followers, and they in turn to their vassals. The income of the rulers was in the form of "Naturalien" (wheat, chickens, eggs), the kind and amount of which was fixed by contract or by immemorial usage. The landlord had land as his wealth and income-getter; the tenant received the use of the land in payment for his labor. [Sidenote: Land, the main form of wealth, was rented without the use of money] The condition of the serf appears to have been, under these circumstances, inevitably connected with the "barter economy" as applied to the renting of land. A farm cannot be moved, and in medieval conditions its products mainly had to be used on the spot. If the serf was to use and enjoy the land, he had to stay upon it. Having no money he had to pay in labor or in products, for its usufruct. In those times the powerful man, politically, was also a wealthy man whose wealth consisted of landed estates. Between the landlord and the serf existed a lasting relation, inherited rather than voluntary, but similar in its conditions to the renting contract. The villein had the use of the stock, pastures, fields, woodlands, provided he kept them undiminished and undestroyed to transmit to his children. Under such conditions there was great fixity of economic relations. While in some respects this was a happy condition, it had its disadvantages. The renting contract, in connection with a fixed rotation of crops and some communal modes of cultivation, hindered improvements. The more intelligent cultivator could not change his methods for the better. It may be seen not only that the use of money on a medieval manor was slight, but that the conditions for the growth of the money habit were most unfavorable. The terms of agricultural contracts, the modes of speech, the habits and thought of the mass of the people, were therefore determined by the conditions of the barter economy. A change in these respects was slowly worked by forces originating outside, in a very different industrial environment. [Sidenote: Contrast between city wealth and feudal estates in the Middle Ages] 4. _With the growth of cities developed a new class of wealthy men and a new view of wealth._ The student of history knows of the conflict that grew up during the Middle Ages between the cities and the landed aristocracy. It found its cause in economic conditions. There were obvious differences between the wealth of the feudal landlords, and the wealth that grew up in cities. One must be used mostly on the spot, the other can be moved. The fruits of one are perishable for the most part; the fruits of the other can be kept for a longer period. The methods of agriculture are exceptionally stable; production by handicraftsmen is dependent on the peculiar skill of the workman, giving greater room for invention and a premium on skill. The one industry may be carried on by servile labor; the other can be efficiently followed only by free workers having the ambition to excel. [Sidenote: Money thus more used in city trade] The use of money grew up in the city. The density of population made it easy, the growth of wealth made it possible, and the nature of the exchanges made it necessary. Whereas the relation of landlord and serf under the renting contract continues from year to year, the relation of the buyer and seller of shoes, hats, etc., in the city, is temporary, these things forming only a part of man's economic needs. Barter with a particular individual is much more inconvenient if exchange is only occasional than where the contract is a continuing one, and there is an annual balancing and settlement of accounts. So, as city industry and commerce grew the use of money increased, both in small neighborhood trade and in the larger transactions with distant countries; and thus the business methods of the cities grew into sharper contrast with those of the rural districts. [Sidenote: Money loaned and borrowed in cities] 5. _The loan and hire of wealth in medieval cities came to be expressed as a money loan._ The loan of money and of other wealth expressed in terms of money, began in the cities. The use of money and the expression of the value of things in terms of money was common there throughout the Middle Ages. Moreover, as the movable forms of wealth multiplied, the agreement to return borrowed wealth in kind became impossible in cities; the loan in terms of money became the only practicable thing. A merchant embarking on a trading expedition must have such a number and variety of goods, that he finds it both very difficult to rent them and wasteful in time to enumerate them and return them in like kind. It therefore became usual to make a loan either of the things expressed in terms of money, or of money with which to buy the things, thereby reducing to a single, simple, easily interpreted contract, the indebtedness which the borrowing of a thousand different things occasioned. [Sidenote: The medieval opposition to loans at interest] Such a contract differed not in economic purpose, but only in form and terms of obligation, from the renting of wealth. The church writers, however, got much confused in regard to the nature of money loans. They did not see that it was _things_ which the merchant wished to borrow. They did not see that the money loan was simply a more convenient mode of transferring the use of wealth from one person to another. The moralists and lawmakers of that day said: Money is unfruitful, therefore taking interest for it is robbery. We cannot follow here the controversy as to the justice of interest on money which involved other ideas than those mentioned, but even to the present time traces of the old fallacy may be seen more or less plainly in the economic theory as well of conservative writers as of the socialistic opponents of interest. The principal sum expressed in the loan contract was called the capital sum, from _caput_, head, and the amount paid for its use was first called usury, money for the use. How the word interest came to take its place, and the word usury came to mean _excessive_ interest is one of the most interesting chapters in economic history. The term capital then came to be connected with city wealth, with movable forms of wealth, with things supposed to be peculiarly "the product of labor"; and interest was assumed to be connected only with this capital. The term rent on the other hand was connected especially with the use of land. The connection was a historical accident, but it has had an important influence on economic theory. [Sidenote: Rivalry of the commercial and landholding classes in Europe] 6. _The owners of city wealth and of country landed estates often were opposed as well in social and political as in economic affairs._ The practical economic questions of the Middle Ages and the practical political questions largely turned on these two groups of interests. The men of wealth in the cities, the merchants and manufacturers, often were found opposed to the landed aristocracy. This social division between the commercial and agricultural classes doubtless helped to strengthen the prejudgment as to the nature of the two kinds of wealth. Indeed, in view of the situation, it may have been in a measure justifiable and expedient to contrast the thought of city wealth, which has come to be called capital, with that of landed wealth. But even if it were, it is now misleading and erroneous to continue the use of such concepts in a new country and in our modern conditions. [Sidenote: Land continues to be rented while city wealth is borrowed in money form] Indeed, for centuries the sharper features of the contrast have been steadily softened. The money economy of the city gradually spread to the rural districts, but never entirely displaced barter, which lingers everywhere. Important steps toward a money economy were the commuting of forced or customary labor of the serfs into a money payment to the lord, and at the same time the substitution of money payments for payments in kind (use of lands, specified goods, etc.) to the peasants. Thus arose a free peasant class receiving wages. But land continued to be rented and landed estates to be hereditary throughout Europe. As they did not pass from hand to hand as a commercial or marketable form of wealth, their value was rarely, if ever, expressed in terms of money and as a ratio to the rent they bore. The result was the fixing of the erroneous idea that agricultural wealth is essentially different in the character of its service and yield from wealth used in manufactures. One phase of the error was the idea held by the physiocratic writers and by Adam Smith that in agriculture "nature labors along with man," while in manufacture "nature does nothing, man does all." This view was corrected by later critics (Buchanan, Ricardo, and others), but the main portion of the fallacy persisted in the supposed contrast between the characters of the services performed by natural resources and by artificially produced wealth. § II. THE CONCEPT OF CAPITAL IN MODERN BUSINESS [Sidenote: Extension of the use of the money loan and of the capital concept] 1. _The development of the use of money and credit has led to the expression of the value of all indirect agents, without distinction, in terms of money._ This is a capitalistic age. The development of a class of money-lenders has led to a transfer of all sorts of wealth from owners to users by means of money. As in medieval Europe city wealth was bought and sold, and measured and expressed, so in twentieth century America are the farm, the waterfall, and the mine. Every purchase with money owned or borrowed is to-day called an investment of capital. To invest means to clothe, and an investment of capital is clothing money in any kind of wealth, whether it be a ship, a factory, or a farm. Interest on money is the contractual form in which more and more the use of wealth is paid for. The borrower does not ask the wealthy man to buy for him a factory and to rent it to him. It is not impossible for the transaction to take that form; but in practice it is inconvenient. The capital concept, the expression of wealth in the form of money, spreads over almost the whole face of the economic world. In promissory notes, mortgages, capital stock, bonds, and many other forms, are expressed the obligations of borrowers bound to pay regularly a sum called interest for the use of the multifarious wealth they have chosen to employ. [Sidenote: Definition of capital] 2. _Capital to-day may be defined as economic wealth expressed in terms of the general unit of value._ In economic discussion new conditions must be recognized and an attempt made to adapt definitions to the language and needs of practical life. By this definition, capital, at any given moment of time, includes all economic goods in existence, when they are thought of in terms of their value. But things have different durations, some are parts of the capital of the world only for an instant, others for a week, a month, or years. Most capital is composed of things durable in a large degree. It has been seen above that there is no reason for keeping things unless they will increase in value, that is, unless a rental is logically attributable to them. Everything kept for a day, a month, a year, is kept because thus it will continually give off uses or by accumulating them it will become more useful. Hence, when interest is defined as the payment for the use of capital, it is connected with all wealth that is expressed in the capital form. In practical business and in theoretical discussion this is the idea of capital that alone can be consistently followed. Capital is the value equivalent of a sum of money "invested," "clothed" in forms of wealth purchased and exchanged. Wealth has become fluid in modern times; it was crystallized in medieval times. Under the new conditions, wealth, expressed in the mobile form of capital, flows into the most distant corners of the industrial world. [Sidenote: Distinction between money and capital] 3. _Capital must not be identified with money although it is expressed in terms of money._ While money and capital are not identical, neither are they opposite or mutually contradictory. Money is but one species of the genus capital. It is a particularly durable form when industry as a whole is considered, a particularly fleeting form in the individual's possession, and a particularly important, though not necessarily the most important, form in its social significance. The things composing capital are concrete things, scarce forms of wealth, some of which are yielding gratification at the present moment, or are destined to do so at some future moment; others of which are not themselves giving direct gratification, but are indirect agents for the gratifying of wants. To this latter group belongs money. The caution contained in this proposition may appear to some to be superfluous, but it is most needed. The mind is so prone to identify things that are expressed currently by the same words. The ease with which money and capital are thus confused has led to various popular fallacies on practical economic questions. [Sidenote: Contractual interest and rent involve a difference of business procedure] 4. _Renting wealth and borrowing capital have the same economic purpose, but the capital contract presents certain peculiar features._ In the interest contract for the loan of capital the interest always is and must be expressed in money; the capital sum must be expressed as value; and the interest rate expresses the relation between these two values. In each of these features the interest contract is in contrast with the renting contract. While the rent itself may or may not be expressed in terms of money, the value of the rented wealth is not so expressed, and there is no rent-rate expressing the relation between the two values. [Sidenote: The wealth concept and the capital concept contrasted] As here presented, the essence of the capital concept is in the mode or form of expression of wealth, not in the physical nature, the origin of its value, or any peculiarity in the kind of wealth; the content of the concept is limited only by man's thought of wealth, every good becoming capital when it is capitalized, that is, when the totality of its uses is expressed as a present sum of values. The difference between the wealth concept and the capital concept is therefore subjective, not objective; it is a difference in the mode of man's thought regarding wealth. The rent contract and the interest contract are modes of borrowing and lending which reflect this difference of conception. In their effort to express more exactly to themselves and to others the relative felt importance of their environment, men take in turn different points of view, and use different modes of expression. The most developed and exact of these devices for the social expression of valuations, which became possible only with a money economy and widened markets, is the capital concept, whose nature has been analyzed here. [Sidenote: The capital concept now prevalent] Summarizing the thought of this chapter, it may be said that the capital concept has gradually developed with industry, and is now the most widely prevailing mode of expressing the quantity of wealth. It is used in the discussion of all the most important problems of modern industry. The questions of income from wealth, of trusts and corporations, nearly all that is most notable in the development of modern industry, require the use of the capital concept. Yet (returning to the thought with which this chapter started) in many of the outlying districts other modes of looking upon wealth are employed. References to modern industry must be understood usually as applying to the most developed capitalistic conditions. CHAPTER 15 THE CAPITALIZATION OF ALL FORMS OF RENT § I. THE PURCHASE OF RENT-CHARGES AS AN EXAMPLE OF CAPITALIZATION [Sidenote: The nature and sale of rent-charges] 1. _From the twelfth to the sixteenth centuries the sale and purchase of rent-charges was the most general form of borrowing and lending wealth._ A rent-charge in the Middle Ages was a definite income that was to be paid out of the rents of an estate, business house, manor, etc. The property was said to be "charged" with the payment of that income, and some estates were passed on for generations from father to son charged with a certain rent. It was thus possible for the owner of money to buy a rent-charge, either one that had been created a generation before, or a new one created by some landowner for the especial purpose of borrowing money to go on a crusade or of improving his estate or of investing in other business. The transaction took this form: the purchaser of the rent-charge paid a sum of money, called the capital sum, and obtained in return a rent-paper entitling him to receive permanently a given income. The house or land was security for the debt. The seller gave up the right to the rent as it came in year by year, and received in return a capital sum in hand. Generally he had the right to repay the sum whenever he wished and thus extinguish the rent-charge. Logically viewed, the purchaser bought an equitable part of the income, therefore an equitable part of that rent-bearing wealth. In effect it was just like a loan except that the purchaser of the rent-charge could not demand the repayment of his money. He could, however, sell the rent-charge when he wished to get his capital out. Gradually it became usual to sell and transfer rent-papers just as is done to-day with mortgages and bonds. Rent-papers thus came in the fifteenth century to be negotiable paper in somewhat general use. There was a rise and fall of the value of the rent-paper with changes in the demand for investment in rent-charges or with changes in the security. [Sidenote: Rent-charges were a convenient investment in medieval cities] 2. _The sale of rent-charges grew out of an industrial need of the exchange of safe permanent incomes for larger sums of wealth._ The custom of the purchase of rent-charges grew up in the cities. The increasing wealth of cities, the growth of commerce and enterprise, caused rent-charges to be sold by the owners of houses and real estate in the cities, and the custom spread to the country. It is an instance of the way income became more fluid in the cities during the Middle Ages. This kind of loan contrasted strikingly in the Middle Ages with those loans made commonly by reckless kings, prodigal nobles, and distressed peasants to secure consumption goods. Merchants needed large amounts of wealth for their growing enterprises, and they felt that if they could get a capital sum down they could make it earn more than the rent-charge. A perpetual income of one hundred units was therefore exchanged for a sum at the moment of twenty or twenty-five times that amount. As the wealth of the cities increased, there were some men who wished to retire from active business, and there were widows and children with property which they could not manage directly. Such persons either could not afford to take the risks of active business, or could not judge of them, and they formed a class of lenders or investors seeking some safe income. Between the two classes of active merchants and capitalist lenders, each of whom saw his own advantage and followed it, the practice of buying and selling rent-charges thus grew up. [Sidenote: Rent-charges were not forbidden by the church] The practice was allowed by the church, though interest and the lending of money were forbidden. The loan was substantially a loan of capital and the rent-charge was substantially interest, but in the eyes of the church moralists there was a marked difference, in that the obligation to the purchaser of the rent-charge was secured by a permanent and substantial form of wealth, and the contract usually was favorable to the borrowers. In its origin the practice was not merely an evasion of the law against usury, but a convenient form of contract. It doubtless came, however, to be used as a means of evading the law of the church against usury, and thus became an entering wedge for the general use of money loans. [Sidenote: The market value of rent-charges reflects the exchange ratio between present and future money incomes] 3. _Rent-charges had a market-value, varying with time and place, and expressed as a number of years' purchase of the rent-charge._ The sellers of rent-charges were influenced by many motives: a lord wished to build a castle, or go on a crusade; a farmer wished to improve his estate; a merchant wished to embark on larger ventures. Opportunities thus opened in the cities for men of wealth to get a fixed income for a payment of ready money. In the cities, the buyers seeking a fixed income would bid down, or bid up, the value of the rent-charges, which thus came to have a quotable market value. In time, greater and greater amounts were paid by the investors in return for the guarantee of a given income. In rural districts the value of the charges was low, that is, the capital sum was but ten or twelve times the value of the annual rent-charge; while in the cities it rose to twenty and even twenty-five times the annual rent-charge. A memento of this practice, probably, is the manner in which the price paid for land is spoken of still in England and the continental countries in a phrase quite unfamiliar to American ears, as a certain number of "years' purchase." If an estate is sold for twenty times the annual net rental it is said to be sold at twenty "years' purchase." This does not mean that the rental for twenty years only is sold, but that the rental _in perpetuity_ is sold for twenty times the annual rent; that is, the land is sold outright for twenty years' rent paid at once. The estate is looked upon primarily as yielding a fixed income; the value of the permanent possession of the estate is thought of as a certain number of times the value of the income secured. "Years' purchase" means, therefore, the length of time required for the income to amount to the purchasing price. This attains the thought of the present value of the estate, or capital sum in it, though the capital sum is thought of as a multiple of the income, instead of the income being calculated as a percentage of the capital value. Now at the rate of "ten years' purchase" an investment of money in land affords an annual interest of ten per cent., as each year the rental is one tenth of the original investment; twelve years' purchase yields eight and one third per cent., twenty years' purchase, five per cent., and twenty-five years' purchase, four per cent. Increase in the number of years' purchase corresponds to a decrease in the rate of interest which the original investment of money, the capital sum, is expected to yield. This is equally true whether the investment be in the legal form of a purchase of the fee-simple of land, or in that of the purchase of a rent-charge. We are brought to this conclusion: that the present value of the rents in perpetuity, of any given wealth, is the capital value of the wealth; and that the reciprocal of the number of years' purchase is the rate of interest that an investment is expected to yield. [Sidenote: Purchase and sale of rent-charges gives way to more modern contracts] 4. _The sale of rent-charges has gradually given place to the modern form of money loan._ The conditions of the contract in the sale of rent-charges were gradually changed for greater convenience. When the purchaser (the lender) was given the right to require repayment of the capital sum at the end of a specified time, the transaction was brought still closer to an ordinary loan. In this form, the sale of rent-charges is still found in southern Germany, but the greater simplicity of the money loan, and of the sale outright, has led to the almost total disuse of the older form of transaction. The purchase of rent-charges was long looked upon as a very different thing from the loan of money, but to modern eyes it is not, and the old distinctions between the moralities of the two kinds of income appear now mainly quibbles, justified in a slight degree by certain social facts of the time. The rise of industry led to different ideas on the lending of money; the prejudice against it weakened in large classes of the population, especially in Protestant countries, and its use rapidly spread. Not until 1830 did a decision of Rome remove all disapproval on the part of the church. Rent-charges are instructive now as showing the mode in which rents began to be capitalized in earlier centuries. § II. CAPITALIZATION INVOLVED IN THE EVALUATING OF INDIRECT AGENTS [Sidenote: The capital value of durable wealth is the sum of its expected rents] 1. _The buying of any indirect agent is practically the purchasing of a "rent-charge."_ To account rationally for the market value of anything, its importance must be traced back to "gratification." We have examined and accepted the proposition that if a good is not affording enjoyment at the present moment it is kept because it will yield a rent until it is used. If it is never to afford direct enjoyment, if it is never to mature physically into the class of enjoyable goods, the explanation for its value must be found in the fact that it is capable of yielding a series of rents of enjoyable goods. In the last analysis the value of anything must be found in its power of affording psychic income, a series of psychic rents. Now when such a durable income is bought outright, what is the basis on which its value is estimated? What other than the rents it will afford? Exactly as did the purchasers of a medieval rent-charge, the buyer of the durable wealth pays a definite sum in return for the right to enjoy a series of future rents. As was the case with rent-charges, however, the amount paid will be less than the full matured value of the rents. A long series, even a perpetual series, may be exchanged for no more than ten, twenty, or twenty-five annual rents. While therefore the selling value of the good is the sum of the values of the rents, it evidently is that sum discounted. Immediately, when we have reached this point in the reasoning, our proposition must suggest itself as self-evidently true in this form: the value of any good is the sum of the entire series of rents it contains, discounted, at _some_ rate, to their present worth. What determines the rate of discount is a question that will call later for a fuller explanation. [Sidenote: Capital value is not primary] 2. _There are two modes of approach to the problem of interest: one from the side of income (rents); the other, from the side of the bearer (capital)._ The rate of interest expresses a relation between two values, the value of the income and the value of the sum loaned, whether it consists of money or of other wealth expressed in terms of money; But which of these values is primary in a study of the causes of value? Which is the base from which the other is derived by multiplying at the rate expressing their ratio? The answer to this question cannot be a matter of indifference to the economic theorist. Universally heretofore the study of interest has been approached from the side of capital. A capital sum was said to be invested and to earn a certain interest, that is, per cent., of that sum. The usage of speaking of the investment of capital as a sum given, and of "interest on capital" predisposes the mind to this view. [Sidenote: Expected rents are primary, and capital value is the "years' purchase"] But the approach from the side of income has been shown to be in some important cases the historical origin of the rate of interest, and we need but reconsider reasoning that has gone before to see that this is the logical order in all cases. Rent, or income, is a link in the chain of value, connecting gratification or psychic income, consumption goods, rent or usufruct value, and finally capital value. To one keeping in mind the logical cause of value, it becomes inconceivable that capital value could precede income, a view possible only when a fragment of the problem is seen. This being true, the mere mention of a capital sum implies the interest problem, and assumes the interest rate. The capital is of that amount because the anticipated incomes, discounted at some rate, equal that sum. The capital sum is a certain number of years' purchase of the series of rents which can be secured by the use of wealth in various industries. The owner of a number of dollars (or of an amount of other wealth expressed in dollars) has open to him various investments. The value of any wealth is due to the possibility of deriving incomes from it. If, however, the expected income fails to be realized, the capital loses its value, or it is revalued on the basis of the new rents. The investment is then said to be a losing one. Thus, at each stage in the valuation of capital, before it is invested and at every moment thereafter when the valuation is readjusted to the rents realized or expected, rents are logically primary, the source from which the capital sum is derived. [Sidenote: The rate of capitalization of rents is not fixed merely in commerce] 3. _The capitalization of comparatively safe permanent incomes from real estate contains within itself all the factors for the independent determination of the interest rate, and is not to be explained merely by reference to "the prevailing rate of interest" in other investments._ The value of land usually is explained simply as the capitalizing of its rents at "the prevailing rate of interest." The rate is assumed to be fixed by conditions in manufacturing and commerce, and if five per cent, can be gotten there the capitalist would never buy land unless investment in it were made equally attractive. The cause of the rate thus is supposed to rest outside the transaction itself, the exchange of land for other capital seeking investment. The economic student is safe in assuming always that explanations of this sort are fallacious. The cause of value in any one exchange or any one industry is not thus to be juggled and shifted into another industry. It is true that the values of goods are so wonderfully interrelated by substitution that as the price of fresh beef will affect that of salt mackerel, so the capitalization rate of machinery affects that of land; but the influence is not from one side only, it is mutual. When anything has value, it must have in itself an independent cause of value. [Sidenote: The exchange of any present and future rents results in a rate of time discount] It can not be otherwise in the particular problem of value called capitalization. The first task of scientific study is to state clearly the nature of the problem. In this case it is seen to be the exchange of a present sum of wealth for a series of future rents. Whenever there are income-bearers and buyers and sellers of them, there are the conditions required for the determination of the market rate at which those future incomes shall be discounted. Manufactures and commerce have no peculiar relation to this process. By a flight of scientific imagination we might assume that the stock of indirect agents in the world consisted only of natural food producers, and that this stock and its yield were absolutely unchangeable by man's will or efforts. Each man in such case would have to stand with hands tied, and take the fruits as they matured. Even in such a case there would be capitalization and a rate of discount on future rents. The fruit-tree (that is, the whole future series of fruits) would bear a certain relation to one year's yield; the field would bear a certain relation to its crop. Wherever there are buyers and sellers of more or less durable agents of it matters not what kind or origin, there are present the elements and causes for the fixing of a rate of time discount. [Sidenote: Capitalization of a perpetual uniform series of rents;] 4. _In practical business may be seen innumerable instances of the capitalization of both permanent and limited series of incomes._ The simplest case is the capitalization of an unvarying and supposedly perpetual series of rents. Whatever the rate of time discount prevailing, rents infinitely distant become infinitesimally small when discount is compounded. The present rent is worth most, next year's less, and so on in a decreasing series. [Sidenote: Of a probably increasing series of rents;] But social changes alter rental values, and so far as these changes are foreseen, these anticipated or expected rents are made the basis for present capitalization. Investors and owners alike may foresee that a piece of land used only for agriculture will, within a few years, be taken up for city lots, or will be needed for a factory or as the site of a railroad station. The capitalized value would not in this case be based upon a series of uniform rents each of the amount yielded annually now, but on the progressive series expected. In some cases the physical output of an agent may decline while the price of the product increases. Modern foresters foresee that the selling price of the timber will be greater twenty-five years from now than it is to-day, and they therefore estimate the rental value of the forest on the basis of the future price, thus justifying expenditure that would be unwise if present prices were to continue. [Sidenote: And of a declining or fluctuating series of rents] Again the expected series of incomes may be declining, as the royalties (not typical rents) secured from mines. If the income is expected steadily to fall, and to disappear at the end of the twenty-fifth year, the value of the mine would be the capitalized sum of a limited and degressive series of incomes. [Sidenote: Mode of fixing the rate of time discount in practical business] Every exchange of a durable agent involves an estimate, rough and imperfect it may be, of that agent's future. The practical men, however, who are thus fixing the "capital value" of goods, are usually only dimly conscious of the logical nature of the process. In fact the process goes on in a way much less analytical and conscious, much more empirical, than this analysis would indicate. Most men simply buy as cheap as they can the agents which at the price they believe will add most to their income. The future changes are only roughly, not accurately estimated. The shrewd bargainer is the one who foresees more clearly than his fellows the complex changes to come. Other men blindly follow. The ability and the inability to foresee such changes make men rich and poor. In all this bidding for capital the logical basis of the value is the series of rents. When the agent is bought outright, the very concluding of the bargain fixes a relation between the expected value of the income and the value of the capital invested. In other words, the exchange of durable agents virtually wraps up in them a net income, which it is expected will unfold year by year when rents mature and are secured. At the moment of the investment, the expected rents are expressed as a percentage of the capital sum. § III. THE INCREASING ROLE OF CAPITALIZATION IN MODERN INDUSTRY [Sidenote: As exchange increases capitalization of goods becomes more usual] 1. _Where a system of exchange is highly developed, things are looked upon as capital yielding an objective income rather than as wealth yielding immediate means of enjoyment._ In the old organization of industry most men got most of their living from the things they raised or made. At the present time goods are gotten in the most indirect ways; men seek wealth because it will yield them an objective or money income, knowing that if they can get the income, they can get other things by exchange. In business to-day, wherever there is a rental, it is capitalized, has a market value, is bought and sold. Men compete in the purchase of income-yielding agents. There is a continual contest in judgment among investors to secure the largest rent for the smallest outlay. On the other hand, the owners of any rental strive to secure the largest capitalization for it that they can. In this market for capital it is money rents that are exchanged as an indirect means of arriving at gratifications. [Sidenote: Various kinds of corporation securities put expected incomes in salable form] 2. _The issue of capital stock is the putting of the incomes of wealth into marketable form._ Stock companies, or corporations, are business enterprises which issue stock, or certificates of a share in their wealth and income. Doubtless the convenience of the sale and transfer of invested capital by the use of stock, has been one of several reasons for the large increase of this form of organization during the past century. Originally the stock of a company taken collectively represented all the capital invested, and each share entitled the owner to a given portion of the total income earned. The shares were issued in regular denominations in terms of money, and this amount expressed on the face of the stock remained fixed. But as a business proves more or less profitable, the value of a share of its income rises and falls regardless of the original amount of stock issued. At once there is a divergence between the nominal or face value and the market value of the stock. The nominal value is relatively permanent, the same year after year; it may increase by further issues, but rarely is it decreased. But when stock is the only form of claim on the earnings that is issued, the fluctuations of the market value of the stock record the real value of the business, that is, the capital value of the rents it is expected to yield. But in present practice there are several forms (of which stock is but one) in which an investor may buy a share in the earnings of a business. Bonds usually do not give their owner a vote in the management or make him in the technical legal sense a part owner in the business. Bonds representing money loaned to a company, and entitling their holder to regular interest payments, are nearest in form to the medieval rent-charge. Next stands preferred stock, which entitles the owners to share first in the dividends, if there are any; and finally the common stock, which gets a share only when the other claims are satisfied. By the multiplication and further variation of these readily salable claims on industrial incomes, the needs and desires of investors are met more fully and with greater precision. [Sidenote: Any continuing income can be capitalized] 3. _Men seek to convert into marketable capital any increase of income in their wealth or business._ A man who invests a given capital sum in machines, buildings, and materials buys them, as others do, at prices that represent their usual, or market, earning power. If he succeeds exceptionally in his business, he makes the capital earn more than the rents on which it was capitalized. The same material wealth becomes worth more because of the reputation of his products, and therefore the trade-mark and good-will of the business can be capitalized. In this sense a good name can be sold, and is at least as much to be desired, even in a mercenary age, as great riches. Likewise, social changes, new needs, the growth of population, increase the net income of wealth, or the rents of a business. The basis of capital value is income, and whatever be its cause, political or economic, material income can and will be capitalized and added to the market value of the privilege, wealth, or industry on which the income is conditioned. [Sidenote: The capitalizing of franchises for public-service corporations] Notable cases of this sort arise in connection with public franchises. If a street-railway or a gas-company is given the exclusive right to operate in a given locality, any income above average interest on the investment is capitalized either in the higher price of the stock or in additional stock issued without the addition of any material to the plant. If the franchise is unlimited, the income may be capitalized as practically perpetual; if the franchise is limited, and is to expire in thirty or forty years, only the limited series of privileged incomes can ordinarily be capitalized. When, however, the managers are able to exert influence enough to have the franchise extended, and the investors believe in the skill of the managers and perhaps in their power to bribe the legislators, the value of the stock continues higher than it could usually be under a limited franchise. Such circumstances becloud the question whether the exceptional income arising under the franchise should go to the public or to the company. Granted, however, that the company is entitled to the income, the burden of proof is on those who object to the capitalizing of the income as is done in every other business. [Sidenote: Some difficulties in the capitalization of corporate incomes] 4. _The manipulation of dividends and the resulting changes in capitalization open up great opportunities for the dishonest increase of private fortunes._ A great change in the market value of stock is made by a comparatively small change in the income it regularly affords, for if the prevailing rate of interest on money loans is five per cent., each dollar of dividends is capitalized at $20. It might seem that the dividend would be declared if earned, otherwise not. The matter is not so simple and impersonal, however. The control of corporations is vested in the hands of a small group of directors who have both the opportunity and the temptation to withhold dividends when they are earned, to pay them with borrowed money if unearned, and in either case to keep the stockholders and the public in ignorance of the real condition and earning power of the business. The stocks can, by this manipulation of dividends, be made a lottery for the legitimate investor, a trap for the unwary, and a source of unrighteous gain by men recreant to their trusts. In this way it may be seen that an earning power not known to bidders in the market does not enter into capitalization; a fictitious earning power, however, is capitalized so long as the investors continue to be deceived. Instances of this kind present problems not only of private morality, but of the preservation of free industrial institutions. The solution of these problems would perhaps be hastened if the a economic nature of capitalization were more clearly understood. Capital value in modern industry is everywhere the expression of the serial rents of wealth, discounted at a prevailing rate of time discount. CHAPTER 16 INTEREST ON MONEY LOANS § I. VARIOUS FORMS OF CONTRACT INTEREST [Sidenote: Distinction between contract interest and time-value] 1. _Interest, the amount paid according to contract by one person to another for credit given in terms of money, is but one expression of a larger problem, that of the difference in present worth of goods at two periods of time._ This larger problem appears under several forms: first, as a difference in value, due to time, where there is no money expression (to be considered in the following chapter); second, in discount on a money loan for a short, definite time; third, in a long-time money loan at a fixed rate of interest; fourth, in a credit loan--that is, the sale of the thing on credit in terms of money. The last three cases involve interest more or less clearly. Time-discount, as will be more fully explained, is the basis of interest. The interest may be greater or less than the time-discount in the goods, owing to miscalculation on the part of the borrower or to an unforeseen change in the conditions. Men bid for the use of wealth with the intention of repaying it at some future time, and the interest they agree to pay is based on their estimate of the discount of future rents, which they think is involved in the present valuations of the goods. Time-discount is involved in goods, however, in numberless cases where there is no contract interest. Even a Robinson Crusoe must recognize in his consumption goods and in his various indirect agents differences in value at different periods of time, of which he must take account. [Sidenote: Risk and expenses to the money-lender] 2. _Gross interest must be distinguished from net interest._ The forms of wealth yielding incomes are so mutable, and are used under such complicated conditions, that both in theoretical discussion and in practice much care is needed to distinguish between the yield attributable to the income-bearer, and that attributable to other wealth or services used in connection with it. That the sum paid as interest on a loan contains other elements is recognized constantly in practice. As in the case of contract-rent allowance must be made for repairs and depreciation, so in the case of contract-interest allowance must be made for risk, or the average loss occurring in the industry. Money loaned in hazardous ventures must yield a higher rate of interest. Likewise capital used by the owner in a hazardous venture must frequently earn very high returns (not all logically interest) to offset the losses that are likely to occur. The lender must also, in estimating net interest, count the cost of placing, supervising, and collecting the loan. A pawnbroker lends only small sums and spends much time and effort to keep at interest a moderate capital. Five thousand dollars loaned in sums averaging ten dollars represents five hundred transactions, and yet if placed at five per cent, it yields but two hundred and fifty dollars a year. While, therefore, the borrower of a small sum estimates the economic interest (or anticipated gain in income) even higher than the oppressively high contract-interest he may be forced to pay, the lender must credit a large part of the gross interest to the labor he expends in carrying on the business. [Sidenote: Short-time loans by discounting of commercial paper] 3. _The most usual form of short-time loan is that made by a bank or broker to business men on security of commercial paper._ By commercial paper is meant promissory notes given by customers of the merchants, bills of lading for goods that have been shipped to their customers, and various other evidences of indebtedness that may be offered the banks for discount. When goods have been sold on time (as thirty, sixty, or ninety days) the seller has the choice between letting the time expire and collecting the bills direct from the customers, and discounting the bills for ready money at the bank. According to the conditions and needs of the particular business, either method may be chosen. In most industries there is need for larger capital at the seasons when the product is put upon the market. The merchant or manufacturer plans his business in the expectation of an average rate of discount at such times, and if it chances that the discount rates are abnormally high, he has no choice but to go on borrowing and paying the high interest out of the expected profits of his business. This risk of a change in the interest rate is one of many chances he has to run. [Sidenote: Long-time loans by purchase of mortgages, bonds, and stocks] 4. _Most debts in modern times are outstanding for a term of years and represent the lender's purchase of a claim on the earnings of some productive enterprise._ The simplest forms of long-time loans are those made on the security of real estate, which is mortgaged to the lender for the term of the debt. Usually the debtor is obliged to pay the interest either annually or semi-annually, and often, but not always, is permitted to reduce the principal by partial payments. These real-estate mortgages rest on the security of the particular mortgaged wealth, and, unlike most short-time loans in bank, are not personal obligations resting on the general credit of the borrower. Most other long-time debts share this character of being non-personal; if payment is defaulted, only the particular wealth can be sold for payment, not the general wealth of the borrower. Corporation bonds, issued by railroads and other large stock companies, have increased greatly in number in recent years. They yield an income fixed in advance, and are secured usually by mortgage on the entire property of the corporation issuing them. The income of some special kinds of "preferred stocks" is so guaranteed as to make them for investors substantially the same as bonds. Another large class of long-time loans are those made by national, state, and local governments. Tens of billions of dollars of public debts are now outstanding, held by private investors in every walk of life. The contract in the case of each kind of these loans provides for a fixed term after which the borrower must repay or renew, and for a fixed rate on the nominal or par value of the loan. Nearly all the securities (bonds, certificates, evidences of indebtedness) are salable at a market rate. It is therefore the income that is fixed, the selling price (or capital value) fluctuating above or below the nominal sum except just at the moment when it is payable. The long-time loan thus is very similar in its economic character to the old-time rent-charge. [Sidenote: The cost of credit to the improvident buyer] 5. _The sale of goods on credit is a mode of lending and involves interest in a disguised form._ In some cases merchants will not sell cheaper for cash than for credit, for fear of offending their main body of credit customers; but this is exceptional, as there are good reasons why such a difference should be made. The credit sale usually involves interest, and often at a very high rate. In many stores there are two appreciably different prices, one for "slow pay," the other for "spot cash." If a bill paid at the end of the month is five per cent. more than the cash price, the difference is equal to sixty per cent. per annum for the privilege of postponing payment. Such a rate of interest is paid only by the improvident, but that is a large class ranging from factory workers to college students. The cash discounts allowed by merchants clearly express the time difference. On fifty to one hundred dollars of outstanding bills, many perfectly honest persons are paying interest at the rate of seventy-five per cent. per annum. The merchant is forced to make this difference because he must seek not only to earn interest on the capital thus invested, but to recover the costs of bookkeeping and collections, and the risk and loss of unpaid bills. The discounts allowed by manufacturers and wholesale houses measure in the same way the difference between cash and credit sales. Not unusual is a discount of "six per cent, in ten days, five per cent, in thirty, or sixty net." The buyer allowing his bills to run for two months (six per cent, for sixty days) pays thirty-six per cent, per annum for the use of that money. The difference is so great that it is impossible to carry on in this way a large business against strong competition. Such purchases on credit frequently are made, however, by dealers in small towns. [Sidenote: Evasion of legal rate of interest] 6. _Interest is often concealed under other forms which increase the apparent rate._ This fact is well shown in the ways by which usury laws fixing the legal rate of interest are evaded. A simple method is for the lender to charge a commission for making the loan, or, if it is a bank, to charge for a pretended cost of exchange to bring the money from some other city. Sometimes the borrower is required to keep larger deposits with the bank than he voluntarily would. Needing $5000, he is compelled to borrow $10,000 and to pay interest on twice as much as he is permitted to use. Again the borrower, in periods of unusual demand for money, is forced to make a long loan instead of a short one. When a one month's loan at ten per cent, would meet his need, he is forced to borrow for twelve months at six per cent., during ten months of which time four or five per cent, is the prevailing rate. In these and other ways the real rate, or burden of the loan, is made different from that which is expressed. § II. THE MOTIVE FOR PAYING INTEREST [Sidenote: Money borrowed to buy consumption goods] 1. _Interest for loans to obtain consumption goods is paid because they are felt to have greater importance at the moment than an equal amount (either of goods or of money) will have in the future._ A sudden stress of misfortune may impart to a thing at the moment far more than its usual value. One standing face to face with starvation cannot be worse off a year hence; often there is good ground to hope that if the present misfortune can be relieved, the future better fortune will make it possible to repay a loan with interest. In other cases, the object of a loan of consumption goods is to increase the future earning-power of the borrower. When the student borrows money that represents to him food, clothing, text-books, tuition, and other expenses incidental to a course in college, the expenditure is intended to increase the effectiveness of the worker. When he borrows he has little earning-power, but with that faith in himself which makes the young American so interesting, he pictures himself four years later, sheepskin in hand, drawing a munificent salary with which he can easily satisfy the most exacting Shylock. Such an expenditure is sometimes called "an investment of capital," but it should be called a consumption loan--nevertheless in many cases a loan wisely made. To call this an investment of capital is to confuse man, the end of production, with material means. Sometimes this higher estimate of the present good is unwise, viewed in the light of wider experience. Goods that meet momentary desire make an exaggerated appeal to untrained minds. The child, the spendthrift, the savage, cannot properly estimate the relative values of present and future. The improvident sometimes lightly agree to pay an exorbitant interest for an immediate consumption loan, making a ruinous difference between present and future gratifications. [Sidenote: Money borrowed to buy indirect agents] 2. _Interest on indirect agents is paid as a more or less indirect means of securing gratification._ This can be clearly seen when durable agents are hired that produce gratification directly. A carriage bought with borrowed capital and used for the pleasure of the borrower is expected to afford a utility greater than that to be gotten by the amount of the interest in any other way. A spade bought with borrowed capital and used to cultivate the owner's garden is expected to add products of greater value than the interest. But how is it in case the agent is used to gratify persons other than the owner? The music-teacher who buys a piano on credit expects to increase his earnings by a sum greater than the interest he has to pay. If the addition to his earnings exceeds the interest charge, it is because he has found a use for the borrowed capital greater than that on the basis of which it was capitalized in the market. The amount of the interest is secured through the pleasures and services the piano affords to the patrons of the teacher. In the most complex cases of the borrowing and use of indirect agents, there is ultimately this same basis for the interest: enjoyment afforded by the use of capital in the particular period. To the borrower, what the capital makes possible is an addition to his income as great as, or greater than, the prevailing interest. Most loans in our society are now of this sort. Money is borrowed to invest in business, to get better machinery or a larger stock; with this capital is secured a better or larger product, and the product finally being sold at a profit, the business man is at a point where he can satisfy his wants without encroaching on his capital. Logically, therefore, the consumer of the product pays the interest in the price, and the final consumer's enjoyment must be deemed the logical source of the money interest. The borrower's motive for paying interest on these indirect goods evidently is his hope of profit through realizing a greater money rent than he has contracted to pay for their use. [Sidenote: The special case of money borrowed to pay debts] 3. _The money market in which short-time loans are made is peculiar in that the money frequently is borrowed to pay debts, not for investment._ In beginning the discussion of interest, it always is remarked that it is not money, but capital, that is borrowed and loaned. This caution against the superficial errors that so easily beset the popular discussion of interest is much needed, but it is well to note a peculiar case which is apparently in contradiction to this statement. The usual method by which money is loaned in the great industrial centers is called discount, which is the exchange of a certain sum of money for a note or other credit paper of a larger amount, the interest thus being taken out in advance. Much borrowing in the form of discount is for the same purpose as other borrowing--to acquire control of more productive agents, to embark on new enterprises. The peculiarity of the discount money-market is that an unusual number of loans are made to meet contracts that have already been made. There is always a great mass of outstanding obligations, and merchants are compelled to renew these loans on penalty of bankruptcy. This market for short-time loans is not connected closely with the general market for loanable capital. When the need is for ready money, other concrete capital cannot flow in to meet it. This special money demand, therefore, in time of greater or less stress, may fluctuate rapidly, and the interest rate be temporarily higher or lower than the rate on long-time loans. This case is similar to that where two markets, as a retail and a wholesale one, exist side by side, but slowly exerting a mutual influence. [Sidenote: Productive borrowers seek a profit on their investments] 4. _In the long-time money loan the money generally is borrowed first merely as a medium of exchange to get control of indirect agents._ The borrower of a long-time money loan for productive purposes is always seeking to gain by investing the money in wealth that will yield an income larger than the interest he must pay. The borrower, therefore, invests in view of the rate of interest, of the market price of the goods in which he plans to invest, and of the probable chances for earning profits in the business. This case, where certain goods whose price is known are approximately selected before the money is borrowed for investment, is the type of loan to be kept most usually in mind in economic discussion. Evidently the price of these goods, to control which is the real object of the loan, is merely the sum of the expected rents they will yield, capitalized at the prevailing rate of time-discount. The borrower expects either to make these particular goods earn rents larger than those on the basis of which they have been capitalized, or to transfer them to an economy where goods are capitalized at a higher rate than he is paying. The income yielded by these goods, if the borrower's expectation is fulfilled, is but the difference between present and future rents that has been wrapped up in their capitalization. As time elapses and the rents emerge in wisely chosen investments, the borrower has a surplus large enough to pay the contract interest. It appears, therefore, that the motive of the borrower is to get control of future rents at prices that already involve, in their capitalization, a rate of discount somewhat greater than the interest he contracts to pay. [Sidenote: The developed market for money loans] 5. _The rate of contract interest on money loans is adjusted at each moment in the money market by the bidding for money loans._ This is a true statement only if it is understood in a somewhat superficial sense. No error connected with interest is, however, more crude than the view that the interest rate is in any broad sense due to the quantity of money. Some loans are made apart from the general market, by private agreement between borrower and lender; but in nearly every such case the rate agreed upon is seen to be closely related to that of the general market to which either borrower or lender can resort if he wishes. The greater number of borrowers and lenders of money have a range of choice in their bargaining. The interest rate in modern developed money markets is that rate which brings to equilibrium the demand for money loans and the money capital available within the period. If the ready, loanable money in private hands, in banks, in insurance-company reserves, &c., increases, a lower rate must be offered to borrowers; if the supply decreases, a higher rate will be quoted. In the one case, more men borrow; in the other, fewer borrow and more seek to lend. Thus a rate results, but a rate that is closely connected with larger set of facts--those, indeed, which determine in the long run the rate of capitalization in the community. [Sidenote: Every person is a buyer or a seller of present goods] 6. _The individual must adjust his business dealings to the market rate of interest._ The market rate is fixed by the bidding of individuals, and every one has something to do with fixing it. In a multitude of minutely small ways, as present and future goods are compared by men, the rate of interest is affected positively or negatively. But for practical purposes the individual, counting for little in the midst of millions, must look upon the interest rate as beyond his influence. Therefore, while the rate is determined by each to some degree, all that any one does is to buy or sell present goods, borrow or lend capital, use up or save wealth, according as his own estimate of time-value is less or more than the market rate. In fact, the estimates of individuals diverge constantly from the market rate, but are brought into harmony by their actions with reference both to money loans and to the use and valuation of the various forms of wealth. A Robinson Crusoe working on his island and valuing future goods relatively to present goods higher than before, consumes less; or, valuing them lower, consumes more. The business man who values indirect agents above the market rate borrows, and if he miscalculates and fails to make them earn the expected rent, he loses. In this experimental way many other acts are influenced by the prevailing interest rate and in turn affect it, thus aiding to formulate society's estimate of the value of present as compared with future rents. CHAPTER 17 THE THEORY OF TIME-VALUE § I. DEFINITION AND SCOPE OF TIME-VALUE [Sidenote: The simplest cases of time-value] 1. _Time-value is the difference between the values of things at different times._ Things differ in value according to form, place, quality of goods, and according to the feelings of men, and--not least important factor--according to time. The simplest and clearest case of time-value is the difference noticeable in the same thing at different moments. Is this good worth more now or next week? Shall this apple be eaten now or next winter? These questions can be answered only after comparing the marginal utilities which differ according to the varying conditions of the two periods. All the other cases of time-value can, by the practical device of substituting other goods of equivalent value, be reduced to the typical case of comparison of the same thing at different times. The comparison may be between very similar things, the one consumed being replaced by a duplicate. An apple borrowed now may be returned next year in the form of one of the same size and quality. The essential thing in this comparison is not physical identity, but equivalence in size, sort, and quality at the two periods. This is borrowing under the renting contract. [Sidenote: Time-value in the case of different kinds of gratifications] But two or more quite different things may be expressed in terms of another thing and so be made comparable. Money becomes the value-unit through which different things may be reduced to the same terms for comparison. With this mode of expressing the value-equivalence of various goods, the interest contract first becomes possible, money (the standard of deferred payments) being the thing exchanged (possibly only in name) at two periods of time. What is really compared are various gratifications which may be produced by very different material things or services. In its last analysis comparison of values at different periods of time must be a comparison of psychic incomes, of two sums of gratification. The comparison of the value of a bushel of apples with that of a barrel of potatoes or a suit of clothes at the same moment appears simple enough. When all are expressed in terms of money, the comparison of each with its value-equivalent at a later date becomes easy. The simplicity and obviousness of time-value in the case of money loans at interest led men at first to recognize that phase of the problem exclusively, and later the term "interest," not without much confusion of thought, was given a wider significance. Let us now see how large a part of the whole problem of time-value is outside of the money loan. [Sidenote: Time-value is involved in capitalization of land] 2. _The problem of time-value is quite separable from the concepts of money and capital, though usually connected with them in practice and theory._ It is true that the problem of time-value was first clearly recognized in connection with money and a formally expressed capital sum. Misled by this fact, and taking a very narrow view, writers seventy-five years ago recognized but dimly the problem of time-value in connection with the valuation of the incomes derived from land. It is true, as has been shown above, that the mere putting of an estimate on a durable good such as land involves the process of capitalization, which in turn implies a comparison of the values of the rents expected at different periods. Diminishing returns in the use of agents involves a loss of time to secure the usufructs emerging. The relation of these facts was not clearly seen until of late. The phenomenon of time-value as above defined may be seen to be broader even than that of capitalization. The difference in the value of the successive rents of wealth must have been recognized and in some degree measured before there was any conscious calculation of capital value. Differences in value due to time are everywhere. The problem of time-value often is present where money is not even spoken of or thought of. Money no more causes this time-difference in value than balances cause weight. [Sidenote: Time-value is taken account of in the keeping up of repairs] 3. _The problem of time-value is involved in repairs and depreciation, and in the use of consumption goods._ It is possible, as we have seen, to increase the sum available for present needs, and to encroach upon the future by postponing repairs on intermediate goods. The balancing of the cost of repairs against the future income is a never-ending task in practical business. One making repairs must purchase the needed materials and labor at a capitalization determined by their expected earning-power in other industries. If the repairs in question will not ensure an annual saving as great as this expected rent, they will not be made. When an industry is declining, it may, for the sake of putting the capital into a better business, be good policy to let the machinery fall into bad repair. The problem of time-value is involved in the application of one's energy to repairing one's own possessions. It is a thought of wide bearings that numberless minor decisions in every petty business involve, if they are correctly made, a measuring of the rate of capitalization. [Sidenote: And in the choice of enjoyments] As will be more fully shown in discussing the relation of the prevailing rate of interest to saving, the recognition of time-value is implied in the use men make of consumption goods, in their postponement of enjoyment, in their storing of goods for future use. The varying gratifications yielded by consumption goods, and their values in different conditions cannot be explained without taking account of differences in time. Wherever there can be a choice in the time at which, and consequently in the conditions under which, a thing can be used, there is a choice presented between the different values. Time-value is present even in a period during which no goods continue to exist, as when a good is consumed at a moment of greater need, to be replaced at a time when less valuable. If an apple is borrowed on the promise to return an apple and a peach at the end of a year, the peach represents the time-difference in value but in the meantime there has been no apple in existence. It is only in a figurative sense that it may be said that interest is paid on that "capital." Interest is paid because of a difference in want-gratifying power, but during the interval there is no material capital. [Sidenote: Prodigality and vice involve a high discount of future happiness] 4. _The problem of time-value is involved in much foolish pleasure, in prodigality, and in vice._ Economics touches frequently on the borders of ethics. If there were to be formulated an economics of personal conduct, it surely would give a large place to the comparison between present and future pleasures. Forethought, or prudence, is the virtue of recognizing not only future dangers to be avoided, but the greater future joys to be gained in exchange for present pleasures. The reckless and the prodigal underestimate the future and barter all to gratify the moment's impulse. The drinker exchanges the hopes of worthy life for the exhilaration of the spree. Indulgence in social pleasures, if secured at the price of lost sleep, weakened health, and debauched character, are loans from the future made by youthful prodigals at usurious interest. If no one ever paid more than a moderate rate of interest for the gratification of his present whims and impulses, most hospitals, drug-stores, and medical colleges would close, and half, if not all, the prisons would be empty. Indeed, time difference in value is a universal phenomenon of life and conduct. Contract interest is but one phenomenal form of time-value, and this in turn is but one phase of value. This section may serve to suggest how much more varied and pervasive the fact of time-value is than has usually been recognized in popular or economic discussion of the subject of interest. § II. THE ADJUSTMENT OF THE RATE OF TIME-DISCOUNT [Sidenote: The exchange value of present and future goods] 1. _The fixing of the discount on future goods is, in its essentials, like the fixing of the market price of consumption goods._ This problem appears to be one of the most difficult in economic theory; but reduced to its simplest terms, it is an aspect of exchange value, and its ultimate explanation must be found in a comparison of psychic incomes. There must be noted the conditions of demand and supply, the interplay and final equilibrium of the two forces. The declining and marginal utility to the two parties to exchange must be carefully analyzed. One who can do these things is prepared to find the answer to the problem of time-value. Whenever a group of buyers and sellers meet, a ratio of exchange commonly will be arrived at. The ratio of exchange between buyers and sellers of present and future rents likewise is fixed at the estimates of a "marginal pair," at which point the amount offered and taken comes to equilibrium, for at that point no motive exists for any one to change sides. [Sidenote: The peculiar nature of the exchange in the case of time-value] [Sidenote: Several reasons why this is not easily recognized] 2. _Time-value as the premium rate on present goods is unlike the ordinary market price, of goods only in the special nature of the utilities exchanged._ The one peculiar need in the theory of this subject is a clear understanding on this point. The goods exchanged, or compared, are direct and indirect goods, or present and future goods, or, more generally speaking, two goods or groups of goods unequally distant in time from present enjoyment. What are sold in a case such as capitalization, involving an estimate of time-value, are present goods or gratifications; what are bought are future gratifications, or indirect agents which stand for, typify, or make possible, future gratifications. Practically every man in a market acts on the knowledge of what the exchange of direct and indirect goods means; yet abstractly stated, the thought seems at first difficult. In valuing any durable good, the theory of time-value is implied. Every time a machine, a house, a book, a field, is bought, the distinction between direct and indirect goods is acted upon, for a choice has been made between present enjoyment and future provision. Anything that endures is an indirect good and implies in its valuation a premium rate on present goods. The real nature of the exchange in time-valuation is made unclear by the uncertainty of life, leading men to work on to provide against possibility of mishaps; for the most part the world's treasures never afford to their temporary owners the gratification that they typify, or could give. The nature of this exchange is made unclear also by habit, under the influence of which the exchange in so many cases is not carefully thought out, is not the result of a close comparison of the utilities of goods in present and future moments. The real nature of this exchange is made unclear by the indirect, or induced, gratification derived from wealth. Wealth gives to its owner power, prestige, the esteem of his fellows, and pride in evidences of success and growing prosperity. Its very possession creates a new need and imparts to it another utility, that of insuring against the misery of a declining fortune one who has enjoyed wealth and power. Men make the greatest efforts up to the last moment of life to retain wealth that they will enjoy only in this subtle and indirect way. Thus every motive that leads men to postpone present enjoyment makes them bidders for indirect agents and for future goods, and helps to determine the market rate of premium on the present, and of discount on the future. [Sidenote: The scarcity of present gratifications] 3. _There being a limited number of indirect agents, their limited powers in a given period limit the supply of present goods._ The principle is familiar that value is always connected with relative scarcity. Now the desire for the present goods is indefinitely large. If the right kind and quality could be had at will, an enormously greater amount of present goods would be used. But the present goods are dependent on indirect agents. The psychic income of a civilized community is dependent on a favorable and extremely refined environment: houses, libraries, theaters, the agencies of travel, as well as the sources supplying the more material needs. These indirect agents, even in the richest community, are limited in variety, in quality, and in number. [Sidenote: The total of future uses in vastly greater] But if indirect agents could produce an indefinitely large product at any given moment, the supply of present goods could be indefinitely increased. The supply of utilities, therefore, is limited by "diminishing returns" in the use of agents, making their maximum yield depend upon the lapse of time. The uses any given material can yield in a limited period have an absolute limit: an acre of land with the most perfect cultivation cannot feed the world; but remove the limit of time, wait an eternity, and the acre would yield an infinite crop. The economic return of a given agent in a given period is reached much sooner than the technical return. If agents are forced to yield more bountifully, it is at the sacrifice of utilities in other agents, and a point of maximum net yield is found in any given period. Here also the lapse of time is the condition of the increase of the net utilities derivable from limited agents. [Sidenote: The choice open to the investor of money] 4. _The rate of capitalization of income and the rate of contract interest on money capital tend to unite into a single market rate._ A person wishing to exchange present goods or income for future goods may buy an income-bearer at its capitalized value, or he may create a new rent-bearer. Having saved a sum of money, either he may purchase a factory known to be profitable; or he may hire the services of men and unite them with materials and machinery to create a new industry or a new form of income-bearer; or he may loan his money to others to make either kind of purchase. In any one of the three cases it is evident that capitalization (that is, the discounting of future rents in goods) is the primary and important fact making possible the emergence of a surplus, or net yield, over and above the value of the capital. The expected uses contained not only in whole industrial establishments, but in the particular materials and agents united to form new agents, are purchased at their capitalized value; that is, the future uses have been discounted and have entered into the price of the goods as less than they will be when realized as actual rents. This is the crucial point in the theory either of contract interest or of time value; for to explain the rate of interest as due to the process of "producing" capital agents out of other materials, is to beg the question involved. The surplus yielded by capital above its cost is but the realization of a net income made possible by the discounting of future rents. [Sidenote: The choice open to the borrower of wealth] A person wishing to make an exchange of the opposite kind to that described may sell his wealth for money; he may exchange for present enjoyable goods his income at its capitalized value; or he may use up what he has, let it depreciate, fail to make repairs, convert it to various consumption purposes, and thus invade his earning power. When the interest rate is five per cent., the sacrifice of any unit of regular income permits the spending of twenty times that amount for present enjoyment. The advantages of these various methods tend to equilibrium. If the owners of developed productive agents hold them at too high a capitalized value, investors will apply their efforts and savings to duplicating these forms of wealth. If, in turn, any of the minor factors, as materials or uses of goods, are overvalued (overcapitalized) it will appear ultimately in a check in the demand for them at these prices, and in a reduction in the demand for money loans. As it is possible for any investor and for any borrower to choose among these investments and loans, there is practically but one rate, the rate which expresses the general ratio of exchange between present and future income. Owners and investors take the line of least resistance, get the most they can for their money, and choose whatever form is most advantageous. The interrelations between the various interest rates are therefore close and constant. The market rate of interest thus extends over all forms of wealth and pervades every phase of business. The value of every durable agent is fixed with reference to a prevailing interest rate, through the discounting to their present worth of all the incomes it is believed to contain. [Sidenote: A sacrifice sale involves a high rate of interest] 5. _Where goods are sold at forced sale or sacrifice, it is equivalent to a contract loan at a high rate of interest._ Market values being dependent upon market conditions, the offer of goods at a given moment may not find the usual or normal number of buyers or the usual demand. Just such conditions are most likely to exist at the times when business men feel an unusual need of money. Two courses are open to them in this emergency, either to borrow the money at a very high rate of interest, holding the goods for better prices, or to sell the goods under the unfavorable conditions. The end of both courses is the same--to get ready money; and the methods are not essentially unlike--the exchange of greater future values for present values. The sacrifice sale thus reveals the merchant's high estimate of the interest rate. The purchaser of some kinds of property in times of depression is securing them at a lower capitalization than they will later have. The rise in value may be foreseen as well by seller as by buyer, but the low capitalization reflects the high interest rate temporarily obtaining. A. T. Stewart is said to have laid the foundation of his fortune when, being out of debt himself, he bought up the bankrupt stocks of his competitors in a great financial panic. The high contract interest at such times is but the reflection of the high premium on present purchasing power. Here then is another mode in which the prevailing rate of interest on money loans is kept in close harmony with the rate of time valuation. [Sidenote: Interrelations of the money interest rate and of time-discount] 6. _The rate of contract interest on safe long-time loans registers pretty nearly the prevailing rate of time-discount in the community._ There are of course different capital markets, and the estimates put upon next year's income as compared with this year's is very different in Montana, New York, and London. Because of the friction in the transfer of investments from one locality to another, these differences may persist indefinitely; but within each capital market the interest on any particular loan must, for reasons readily seen, tend to conform pretty closely to the prevailing rate. Various groups of men living in the same community have, however, varying estimates of time-value. The increase of safe long-time bonds issued by strong corporations and by wealthy nations as, for example, the New York Central Railroad, and the government of Great Britain, gives a large number of choice investments where the element of risk is almost entirely absent. Various agencies have developed for making the loans, that is, for bringing the borrower and lender together with the minimum of trouble and expense. Other efficient, but somewhat more costly, agencies for bringing together the owners of loanable capital and men wishing to use capital are savings-banks, building and loan associations, insurance companies issuing endowment policies, and mortgage-investment companies of many kinds. While on the one side of the bidding are thousands of lenders offering to exchange ready money for assured incomes, on the other are thousand of borrowers offering to exchange the promise of assured incomes for ready money. If either of these classes got far out of touch with the prevailing rate of capitalization, to which all the valuations are adjusted, that class would lose greatly. [Sidenote: Relations between the concepts of rent, interest, and time-value] 7. _All the net usufructs actually yielded by wealth are rents; economic time-discount is never a realized income; it is merely a calculation form, or anticipation of the difference between present and future gratifications._ There has been much discussion as to what should be the relations in thought between rent and interest. Space permits here only an indication of the view on this question involved in the foregoing treatment. Rent, as the term is here applied, includes all the net productivity attributable to the ownership and use of capital, whether the yield be in economic form (in an increment of value) or in contractual form. Even contract money-interest must be looked upon as a species of the genus contract rent, the peculiarity in the money loan being merely that the thing which it is agreed to return is a certain number of units of the standard money. The term "interest," first applied in the Middle Ages to a payment for the use of a money loan, came to be used more broadly by the earlier economists as the income attributable to those goods which generally were bought and sold in terms of money. In other words, interest was supposed (though erroneously) to be uniquely connected with the particular production instruments to which the term capital was narrowly and mistakenly confined. Still more to add to the confusion, the term interest was about this same time identified with the broad problem of time-value. The terminology has remained ever since in this stage of arrested development. Our suggestion is to retain the word interest in its original meaning, still almost universal in business circles, of a contractual payment on money loans, applying the term time-value (for lack of a better word) to the subtler economic problem. [Sidenote: Rent and time-value are essentially different phrases of the value problem] Time-value is here understood to be that all-pervading difference in the values of uses and gratifications of wealth at different points of time. A comparison of the value of momently appearing uses of wealth is the rent problem. Here are, therefore, very different aspects of the value problem. The rent conception is earlier grasped by men, is nearer in point of logic; the concept of time-value has only recently been clearly recognized. If men lived only in the moment, they would be concerned only with rent; living in the future also, they are constantly regulating their acts with reference to time-value. CHAPTER 18 RELATIVELY FIXED AND RELATIVELY INCREASABLE FORMS OF CAPITAL § I. HOW VARIOUS FORMS OF CAPITAL MAY BE INCREASED [Sidenote: The older and the modern way of viewing wealth] 1. _Men seek to increase income by increasing capital._ Men may strive to increase their rents without expressing the rent-bearer in terms of capital. Peasant owners and small proprietors, toiling fondly on their little estates, seeking steadily a larger crop, a larger income, accomplish wonders in bringing waste land to a high state of cultivation. Working on the soil that is at once their livelihood and their home, they do not consciously reckon the value of the labor they are putting upon it. No money can buy that which to them is beyond price. But, in our money economy, efforts are largely directed toward the increase of the capital sum. Investment takes the form of putting in a sum of money in the hope of getting an income bearing a certain relation to it. The first thought is of the value of the wealth invested, which has been carefully measured and expressed in dollars and cents. Wealth looked at in the older way was valued for what it did immediately for its owner, for its concrete fruits; looked at in the modern way, it is valued as a marketable income-bearer readily convertible into a multitude of other forms. Thus investments come to be thought of in terms of general purchasing power, from which it is expected to realize an income of a given percentage. [Sidenote: Free goods of unlimited supply] [Sidenote: Beginning of scarcity of common materials] 2. _There are some classes of goods that can be increased without any noticeable increase in difficulty._ The extremest examples are undiminished goods such as air, sea-water, the water of large rivers. These are free goods because, however much is used, the supply is immediately renewed. But they are undiminished only in a relative sense and in reference to present need. The water in the Western rivers long flowed on, undiminished by the uses made of it. But progressing civilization required more water for cities, for mining, and for irrigation, and now states and corporations are going to law over these formerly undiminished free goods. Some kinds of goods are produced from such very common materials that it might seem possible, by the substitution of agents, to produce an unlimited supply. How can bricks be limited in number, being made as they are from one of the commonest materials on the earth's surface? But the largest clay banks are limited in size; a large proportion of the places where bricks are needed are not near a supply of clay of good quality; and after a brick-yard has been used for a time there is increasing difficulty in getting out the material. While, therefore, bricks are scarce and hard to get from the outset in some places, the scarcity grows more marked in many places at first well supplied. If materials are scarce in any degree, their continued use for one purpose increases their scarcity in all other uses. Economic goods are goods having value; value implies scarcity, and an increasing demand means inevitably a higher value at some point. This is true of clay, stone, water, and the commonest kinds of labor. [Sidenote: No scarce goods can be indefinitely increased] It has long been customary for economists to talk of economic goods that could be increased indefinitely (meaning infinitely or, in any event, without any limit ever appreciable to man) without any increase in the cost or scarcity. This class of goods was considered to be very large. There is no such class of economic goods; it is evidently impossible that there should be. If they are already "scarce," increasing demand must make them scarcer. There are, however, some goods that practically can be increased with so little difficulty that their limitation is not of great social importance. Progress, population, prosperity, are not primarily conditioned on their amount; limitation will be felt far earlier elsewhere. They are at one end of the scale; they are the relatively increasable goods. [Sidenote: The products of land are increased at a given time and place at increasing cost] 3. _There is a large class of goods whose increase is seen to be gained with increasing difficulty._ This is seen most clearly in the diminishing returns from land. In the attempt to get some food-products in greater quantity from a given area at a given time, increasing difficulty is met with at once. This attempt continued for a series of years results in historical diminishing returns, as was strikingly illustrated in English experience during the Napoleonic wars, when wheat rose in value because of the greater difficulty of producing the larger supply needed. Some replenishing agents will restore themselves if given time; the forest will grow up if left untouched by man; the field will recover its fertile quality if allowed to lie fallow. But this self-replenishing of agents is a slow process, and time is costly. Man therefore tries in other ways to force more uses out of goods, until checked by the increasing difficulty. The goods subject to "the law of increasing cost," as it was called formerly, were considered to be a peculiar class comprising only a small portion of wealth. But it can now be seen that the law may apply ultimately, though in differing degrees, to every kind of economic goods. Indeed, the principle just discussed is no more than one phase of the law of economic diminishing returns, which has a universal application to the realm of values. [Sidenote: Agents most nearly fixed in amount are somewhat increasable] 4. _There is a class of goods, natural agents and stores of materials which appears to be relatively fixed in quantity or which is increasable only with much difficulty._ The first part of this proposition expresses mildly the thought that long obtained among economists: it was said that the supply of certain things was absolutely fixed, the chief of these being land used for agriculture. The idea as held by Malthus and Ricardo was modified by John Stuart Mill in somewhat inconsistent ways. Land, it was said, is a thing which "man cannot make," therefore its supply is fixed. The second part of the opening proposition expresses the view here held: the supply of no important class of goods is absolutely fixed, in any reasonable sense. Most, if not all, belong to the class that is increasable, although it may be with much difficulty. Even when the exact thing cannot be duplicated, as a bust by an ancient sculptor or an autograph of a dead author, many substitutes serving the same or closely related wants, affect and limit the demand, and thus increase the supply. Men cannot, it is true, increase the stores of copper in the earth, but they devise new processes to extract it from ores before worthless, and invent methods of procuring aluminium, which yields some of the same utilities as copper. Even the supply of land, as is shown elsewhere, is constantly changing. Thus all kinds of wealth can be increased in some degree; many kinds in the course of time are very greatly increased with little or no direct effort, but the supply of all alike can be secured in larger amount at any given moment only at the cost of increasing difficulty. § II. SOCIAL SIGNIFICANCE OF THESE DIFFERENCES [Sidenote: Physical amount vs. economic supply] 1. _Not the fixity of the physical amount of agents, but the economic supply is significant._ There is danger of confusion between these two ideas. The statement that "land" cannot be created and that therefore "the supply is fixed" involves a fallacy. The word supply means the amount that is available at the moment or during the period spoken of. The land in Greenland is not, and probably never can be, a part of the supply of land in England. The land in America for centuries was not, but now has become, for some purposes, a part of the supply in the same market as the land of England. The question of importance in economic discussion is not whether the physical material can be brought into existence, but whether the economic "supply" can be increased. The existence of coal-mines in Venus or Mars is of no economic importance to us, but coal-mines on the earth, yet undiscovered, present a potential supply that at any moment may be realized. [Sidenote: Discovery enlarges the supply of natural resources] 2. _Discovery of new lands and of new natural deposits continually enlarges the economic supply of the agents most nearly fixed in physical amount._ This proposition states a historical fact. Any explanation of the economic occurrences of the last five centuries or of the immediate future, that ignores this fact of the increasing supply of many kinds of land and natural resources in the markets of the civilized world, must lead to false conclusions. The rate of this movement has been more rapid in the past century than theretofore, and perhaps more rapid than it will be henceforward; but that this development will continue in large measure and for a long period, is not open to question. Undeveloped areas will be opened to the world, and new geologic realms will be explored. Yet the notion criticized above is found in all the older text-books. The idea arose in England in the first quarter of the nineteenth century when land and food were rapidly rising in price, and it has vitiated a large part of both the economic theory and the practical conclusions on this subject. [Sidenote: The effective supply grows by invention] 3. _Invention, including new modes of transportation and new processes, increases the economic supply of most scarce goods and provides substitutes for the others._ Some inventions increase economic supply by making available the uses in goods that were before unavailable. Subsoil ploughing annexes to agricultural land new layers of soil that are just as important as new acres added to the surface. If land could be used three times as deep, it would be as good for many purposes as if it were of three times the extent. New trade routes and new means of transportation add to the supplies available in the older countries as effectively as if their areas were increased. The building of railroads in western America had an effect on English rents identical in nature with that which would have been produced had an equal area of somewhat less fertile land touching England, risen out of the ocean. Every country in Europe has repeatedly felt the shock of these great economic changes which have compelled the recapitalization on a lower plane, of nearly all kinds of their landed wealth. Where the same agents have not been multiplied, substitutes have been found that are just as effective in meeting the economic need. It is the result, the gratification, that man seeks: any particular good is but the means to an end. [Sidenote: Production of land by physical change] 4. _Increasing wealth and new labor make possible the increase of the agents that appear most nearly fixed in supply._ When the need arises men turn to new enterprises. The reclaiming of land in Holland is a striking but far from isolated example. Among the larger undertakings of this kind are the draining of the Haarlem Lake in 1840-58, by which 40,000 acres of rich land were made available, and the draining of the Zuyder Zee, which is adding 1,300,000 acres. Though there have been many minor undertakings of the kind, the area reclaimed is relatively small compared with the whole area of the land in the world used for agricultural purposes. There are still great areas of fens, swamps, and marshlands, such as those on the Jersey coast in this country, which with moderate effort could be reclaimed. While the possibility must be recognized, the increase of the area of available agricultural land by means of such physical changes is relatively small. [Sidenote: And by the work of pioneers] The work of the pioneer, as a producer of a supply of land, is, however, of the greatest importance. The pioneer annexes new areas to the economic world and to the market in which he has lived. This is recognized of late by writers that perhaps do not fully mark its significance to economic theory. The work of the explorer and prospector is that of a producer of mineral resources, and daily market quotations reflect the changes in "the supply" of these natural stores. [Sidenote: Successive utilization of various grades of agents] 5. _Limitation of the supply appears first in the better qualities, and efforts to increase wealth are then directed to making available the poorer grades._ Great quantities of the poorer grades of wealth, even of those things that are relatively fixed in supply, lie unused. Great areas on the edge of civilization still await the pioneer, the prospector, and the miner. Here is a source of wealth and a field for enterprise. The growth of society may cause some of the poorer agents in time to become the best. When men crossed the ocean to settle on Manhattan Island, it was a wilderness; but the growth of commerce has caused the land in New York city to become more valuable than that in London. Changes are still in progress, for of late the smaller ports to the south have increased their trade at a more rapid pace than New York has. [Sidenote: Goods ranged on a scale of increasableness] The difference in increasableness of the various forms of wealth is of importance in considering various social questions such as the effects of an increase of population, and the kinds of taxation most equitable and most favorable to the progress of society. Account must be taken of the fact that the number of bricks can be increased more easily than the amount of land; but there must not be overlooked the possibility of increase in any of these forms of wealth, nor the limits to the increase of any one of them. When one wishes to save or increase wealth, he turns to these great unappropriated fields, unused things or things imperfectly used, and tries to convert them into effective agents. The different forms of wealth may be ranged on a scale according to the ease with which they can be increased by effort. They may therefore be classed as relatively fixed and relatively increasable. Some natural resources belong at one end, and some at the other end of this scale. No hard and fast line divides the different kinds of goods, but the difference in degree of increasableness is a fact of great social importance, affecting the direction in which industry can and must progress. CHAPTER 19 SAVING AND PRODUCTION AS AFFECTED BY THE RATE OF INTEREST § I. SAVING AS AFFECTED BY THE INTEREST RATE [Sidenote: The interest rate traces the division between present and future gratifications] 1. _In the case of consumption goods, present marginal uses are often less than future uses as judged at the present._ The proposition that future goods sometimes have a greater instead of a less value than present goods may at first seem to deny the general fact of economic interest, which is a premium on present over future goods. The contradiction is only apparent, however, and the proposition is merely a proper interpretation of the theory of interest. The assertion that present goods have greater value than future goods, as we have accepted it, requires two explanations. First, it means that this difference exists when the two are judged and compared _at the present moment_. The future use when it matures may be much greater than the present use; indeed, the very existence of interest depends upon this surplus of value arising by the lapse of time in the future use. Secondly, the proposition does not mean that every concrete good, or every use of the goods, is worth more in the present than in the future; it means merely that the demand for present goods preponderates so that a market rate in favor of present possession prevails. In a great many cases a particular good may have a greater value to be kept for the future than to be used at present, in which case it is kept, or it is exchanged for something else having a higher value in the present. But this preference of the future over the present cannot pass a moderate limit without condemning the person to present misery, and at length to death. On the other hand the excessive preference of present over future would lead to the using up and wearing out of wealth, to the present enjoyment of every possible resource, on the penalty of future misery. Evidently somewhere between these two extremes there must be, in each economy, a ratio of exchange between present and future, which in fact is the interest rate. This rate applied to utilities traces through each good a line analagous to the isothermal line on the map, marking off a zone of utilities for the present and other zones for each period of the future. There is thus a close relation between saving and the rate of time-discount. [Sidenote: The less necessary goods are the ones saved] [Illustration: Present VALUE line] Let us illustrate by the case of fruit stored in the cellar for future use. In the fall after the appetite for apples has been gratified up to a certain point, there still remains a large stock which affords less gratification if consumed at once than if kept for a time. Thus wood, food, and clothing are stored in the summer for the winter's need. Even the animals act on this principle. Squirrels, bees, and ants store up in the season of superfluity for the season of scarcity. The animals recognize with their feeble intelligence or by instinct, that a time will come when these consumption goods will represent greater importance to their welfare than they do at the moment. It results from the nature of wants and the principle of diminishing utility that in many cases some portion of a large supply of present goods must be worth less now than at a future time. This part, the marginal, less necessary part, will be left for a future time, and it is to this part that our opening proposition refers. This is roughly illustrated by the diagram. Things that cannot be kept, perishable goods, do not permit of this comparison. But if goods that can be kept continue to be used after utility has fallen down the scale, their high value for the future is cast away. Man lives not alone in the present but, in a far greater measure than do any animals, he lives in the future also. His economic life and his economic judgment comprehend a great number of periods at once. With the aid of memory and imagination he forecasts the future, and compares it with the present. The diminishing utility of goods, therefore, is modified by this fact that a thing has want-gratifying power at different periods. Before man uses goods for an inferior purpose he will ask whether, if they are kept for the future, they will not gratify a greater want. [Sidenote: The less valuable rise in value with the lapse of time] 2. _The gradual rise of a consumption good with the lapse of time from the lower to the higher degree of gratification is the rent it yields._ The difference in value of present and future rents is expressed by the discount of the future use when it is capitalized at any earlier moment, and emerges in the rise in value as the thing approaches to the time when it can render the later use. Next year the unit whose use is deferred will afford as much gratification as the earlier units do now, and more than if used at the present moment. The importance of any present utility is compared with its importance a year later, plus interest at a rate which expresses the limit to which future uses are discounted. Anything that makes men feel more the importance of future uses causes them to value those uses more. But the pressure of present want is such that a present use of a lower order competes with a future use of a higher order. Only goods of a lower order, nearer the margin, are reserved for the future. But just as the possibility of using a thing for several different purposes at present causes it to be valued more highly than if it had but one use, so the possibility of reserving to the future a portion of a stock imparts to every unit a higher marginal utility. [Sidenote: Interest is the equalizer of time values] 3. _The saving of present goods for future use is encouraged by the motive of gaining the interest._ Many consumption goods grow into higher uses in the hands of the owner, whether he uses them for himself or not. Ice may be stored in midwinter when it is all but a free good and a little labor serves to fill the ice-house. Kept until the summer months, the ice rises in value as the desire for it grows. Likewise the higher price secured by the owner of a thing kept for sale to others, reflects the change in utility, and affords practically a rent which is the motive for investing capital in that business. Any saver or abstainer puts aside present wants only when the future good, with the addition of time-value or of money interest, appears as large as the present good. Interest is therefore the equalizer of the value of things in different periods. Put into the scale of judgment when present and future are compared, it helps to balance the disparity in the gratifications given by economic goods in different periods of time. [Sidenote: Saving increases and improves economic agents] 4. _The postponement of present wants results in bettering the economic environment for the future._ Economic environment means simply the economic conditions in which men live, the stock of wealth, the supply of useful things with which they are surrounded. This betterment may be only temporary, only for the immediate future. Like the busy bee or the prudent ant, one may in summer store the cellar with consumption goods to be consumed the following winter. But often there is a more lasting way of improving the economic environment by converting savings into durable indirect agents. The accumulation of wealth that will yield its fruits only after years of growth is the record, so to speak, of the successful competition of forethought with present desires. It means that the two periods have presented their respective claims and that men have decided in favor of the future. Saving thus lifts society from poverty to wealth by the progressive enlargement of the sources of future utilities. [Sidenote: The kinds of abstinence] 5. _Abstinence is the faculty of mind that enables present wants to be subordinated to future wants._ Abstinence may be considered as a quality, or faculty, of the mind, or as an act resulting from that quality. There is little danger of confusion in this usage, but it is well to note the distinction and the fact that the former is the primary meaning. Abstinence expresses an act of the will, a choice made by man. It is the guardian of the future, so to speak, against the greediness of the present. For convenience we may speak of conservative abstinence as that which keeps men from using up or invading their present stock of resources, and of cumulative abstinence as that which impels them to add to that stock. There is no sharp dividing line, no abrupt break, between these two, yet on the whole they differ. There is a quality of mind very like the inertia or momentum of physical matter. The inertia of mind makes men resist stubbornly the reduction of wealth and of inherited social position; but it requires a more positive quality of mind to add to wealth at the cost of present sacrifice. Abstinence is embodied in individuals, never elsewhere, and is found in most varying degrees of strength. Upon it depends the growth and betterment of man's environment. § II. CONDITIONS FAVORABLE TO SAVING [Sidenote: Political insecurity discourages saving] 1. _Political security and domestic order are essential to the development of saving._ As saving results from a comparison of the future with the present, any lack of certainty regarding the future decreases the appeal it makes. Men employ roughly the theory of probabilities in this matter, and count a utility only half as much when there is but one chance in two of enjoying it. In countries where there are constant revolutions and border wars, as in Africa and South America, and in lands where brigandage is common, as in Italy, Macedonia, and Bulgaria, the motive for saving is cut in two. Oppressive and irregular taxation kills the motives of providence, and decreases the appeal made by the future. While the miserable subjects of the state live from hand to mouth, the very sources of the public revenue disappear. Improvidence grows upon such a people into a prevailing national custom; ambition is wanting; industry is the sport of chance; economic order and economic prosperity are impossible. [Sidenote: Influence of private property on saving] 2. _Social institutions that give a motive to the individual are essential to saving._ Among these institutions the most important are the family and, closely connected with it, the institution of private property which, in its ideal manifestation, places the responsibility for economic welfare on the individual or the family. Through it the state says to men: "Save if you will; the wealth and its fruits shall be yours. But if you spend and consume all you can, you alone will suffer the consequences." It is true that the institution of private property never is found in an ideal form. Dishonest public officials weaken and defeat its benefits. Every propertyless family marks a failure in its purpose. Private property is a favorite object of attack by social reformers, but it never can be safely abolished in a civilized state until some other incentive is provided, equally effective to make men subordinate present desires to future welfare. Unless the mass of men can be greatly changed, property creates the only motive that can induce saving regularly and on a large scale. It diffuses responsibility for present consumption. It multiplies the motives for abstinence and thus increases the welfare of all economic society. [Sidenote: Safe and paying investments encourage saving] 3. _Opportunity for the investment of small savings favors a spirit of abstinence._ The institution of small property, peasant proprietorship, worked powerfully in this direction in many parts of Europe, and the same effects have resulted in America from the wide diffusion of property in land. If the decline in the number of small independent farmers has somewhat weakened this influence in America, in other ways other agencies are effectively performing the same functions. Savings-banks, penny banks, building and loan associations, penny-provident funds, and other convenient means of investing small sums, encourage men to reduce their tobacco bills, their candy bills, their saloon bills, and to lay aside for the winter's coal, for the children's education, for houses, for business investments, or for old age. Probably no one thing has given a greater stimulus to saving than has the development of insurance and the endowment policies in connection with it. While the great modern corporations have destroyed many of the small business enterprises into which so much of the saving of the past was put, at the same time the increase of negotiable paper, of loans, and of stock in joint-stock companies, has opened up other large fields for investors. [Sidenote: Changing interest rate in relation to saving] 4. _Variations in the rate of discount of the future react upon the spirit of saving in various ways._ This very general proposition requires more detailed discussion. In general, a high rate of interest gives a large motive to save, for as the discount on the future is large, so is the reward for waiting. But this favoring motive may be offset by other unfavorable conditions, and is, in fact, wherever the high rate continues. In countries backward economically, where war, brigandage, and political oppression prevail, the rate of interest is frequently ten and twelve per cent. on the best secured loans. A high interest rate does not of itself insure a high degree of cumulative abstinence; it is only one of several factors. But in a new and favored country like America, a high rate of interest is a strong stimulus to saving. Again, interest may fall while saving continues at the same or a greater pace. Ordinarily a fall from six per cent. to five, giving men a smaller motive for abstinence, would be expected to cause less saving, yet this is not always the case. Custom and example help to fix a habit of saving in individuals and cause them to continue saving at a lower rate of interest. With the growth of wealth, the prevailing ideas as to the amount needed for a competence change, impelling to greater saving. The tendency, however, of a fall in the rate of interest is to weaken, and that of a rise of the rate, other things being equal, is to strengthen the motive to save. But the influence of the interest rate on saving is relative to the character of men. § III. INFLUENCE OF THE INTEREST RATE ON METHODS OF PRODUCTION [Sidenote: Saving permits improvement of agents] 1. _The individual saver is enabled to improve the agents that he uses._ The simplest case is presented when means of enjoyment are improved and made more durable. If Crusoe on his island spends less time and fewer resources on gratifying his immediate wants, he may improve the quality of his clothing and the convenience of his house and furniture. By thus putting his consumption goods into durable instead of temporary forms, he will increase eventually the sum of utilities enjoyed. Again, abstinence permits the tools of the laborer to be made more convenient. If the farmer spends less time in the garden and he and his family live on plainer food, while he makes a plow, mends a rake, and builds a shed, he will be enabled thereafter to gather a greater crop with less effort. [Sidenote: Saving of consumption goods for exchange] 2. _Consumption goods, when saved, may be exchanged for services, and these may be used to create durable agents._ Various ways are open to one wishing to increase his stock of durable agents. He may forego seeking immediate enjoyments while he makes durable agents himself. Or he may make and save a stock of consumption goods, a surplus supply for the future, and exchange it for durable agents. Finally, one who has accumulated consumption goods can always exchange them for the services of those seeking subsistence and enjoyment; and thus in control of a labor force, he can direct it toward the production of new forms of productive agents. [Sidenote: Money savings are converted into other wealth] 3. _In modern industry, saving frequently takes the form of money, which is then loaned to productive borrowers._ This is the typical form of saving in modern industry. As it is more and more the case that income takes first the form of money, saving most conveniently takes the money form. The clerk on a salary of $60 a month spends $50 and saves $10 which he lends to a neighbor or deposits in a savings-bank. The borrower is thus empowered to increase his stock of productive agents in the measure that the lender has limited his consumption. The complexity of the process by which money saving becomes embodied through a money loan in new productive agents should not blind to its real nature. The money is saved as a means to the exchange of present goods for future income. Money even in our day is occasionally stored away for future use under hearthstones or in old stockings and hollow trees, but this is a primitive and wasteful method, involving the loss of all the additional rents that its exchange and investment would yield. If the money saved by the thrifty saver is loaned to a thriftless borrower, wealth is not increased, but merely changes hands. The prodigal mortgaging his wealth, spending the money, and living beyond his income, absorbs the savings of the other. One saves and adds to wealth, the other consumes it. There is no net increase of goods, but two individuals have shifted positions; each has gotten his reward of growing affluence or penury. The "normal" end, however, of savings and loans is productive. The borrower, in getting control of purchasing power, aims to put a new machine where it will be useful, to remove obstacles, and to make economic agents more effective. Along the border-land of industry the active and alert borrower seeks out opportunities to make new agents earn a rental, and having found the opening, turns to the money market for the means to profit by it. [Sidenote: Lower interest means higher capitalization] 4. _A fall in the rate of interest normally accompanies an increase in the mass, efficiency, and valuation of durable economic agents._ A lower rate of interest means a higher capitalization of all incomes. It is not that either can be called the cause of the other; rather both are aspects of the same thing, the interest rate merely registering the change in capitalization. If the rate of interest has been five per cent., an income of $100 has been capitalized at $2000. When the rate falls to four per cent. the income is recapitalized at $2500. All along the line of investment there is an increase in the value of the durable economic agents. [Sidenote: And more complex industrial processes] [Sidenote: It encourages the increase of fixed charges to reduce cost of operation] Another phase of the change is the greater complexity of the processes of industry. Production becomes technically more complex when interest falls. Rental, product, and present goods, bear a smaller ratio to the value of capital, and therefore it becomes advantageous to apply newly formed capital to uses which before did not justify the investment. Where formerly the utility of a second tool did not justify its making, now it can be made to earn the smaller rental needed to balance its capital value. One form, therefore, which the change takes, is a multiplication of the tools already used. Things are placed wherever most convenient. Another form this change takes is the putting of new links into the chain of technical production. Cost of operation constantly is compared with fixed charges, the interest with the capital investment. Expensive improvements on railroads, the straightening of curves, the tunneling of mountains, the reducing of grades, the replacement of lighter by heavier rails, have been made possible by a fall in the rate of interest. A fall in the rate of interest disturbs the equilibrium that has been arrived at, between the cost of operation, the amount paid for wages, coal, etc., and the income on permanent investment. If the rate of interest has been five per cent. and falls to four per cent. many permanent improvements before unwise become economical. One thousand dollars paid annually in wages then balanced an interest charge on a capital investment of $20,000; now it balances the interest charge on $25,000. It becomes a paying thing for the railroad to abandon or throw aside an enormous capital represented by the old, less perfect roadbed, and build a new one alongside of it. The changes of this kind one sees in traveling on the great and progressive railroads, reflect in part the growth of traffic, but in part also a change of the interest rate, making it a net saving to increase the capital investment in order to reduce the cost of operation per unit of traffic. [Sidenote: Diffused benefits of saving] The benefits of saving viewed broadly are not confined to the owner of the wealth saved, but are diffused throughout society, in the degree that they increase and improve the industrial environment, and thus raise the efficiency of production. Such a change works the same results as would a magical increase in the fertility of the soil, an improvement in the richness and accessibility of natural mineral stores, or in the quantity and quality of artificial appliances. PART II THE VALUE OF HUMAN SERVICES DIVISION A--LABOR AND WAGES CHAPTER 20 LABOR AND CLASSES OF LABORERS § I. RELATION OF LABOR TO WEALTH [Sidenote: Work and play defined and distinguished] 1. _Labor is any human effort having an aim or purpose outside of itself._ It is difficult to define satisfactorily the term labor. No definition will quite mark off all the cases. The efforts put forth by men may be classified according as they are pleasant in themselves, and according as they have separable useful results. These two factors combine to form four groups of actions. Effort Objective result sought Name of action 1. Pleasurable Not useful Play 2. Pleasurable Useful Labor 3. Painful Useful Labor 4. Painful Not useful No special name The fourth combination is not found in rational life, for no motive exists to do a painful act for a useless result. Let us consider the other three. [Sidenote: Play] The first group comprises most of the sports, games, and pastimes found in every land and time. In the mere putting forth of the powers of mind and muscle there is a joy felt by children and men of all races, and this is heightened by companionship, emulation, and even by a spice of danger. Play is not dependent on a useful objective result later to be enjoyed, but, like beauty, is its own excuse for being. The tired student goes out-of-doors to bat the tennis-ball, making no change in the material world, except to wear out his shoes and to lose the ball, but finding that hour rich in the joy of life. If properly chosen, play strengthens and vivifies both soul and body, leaving an afterglow of health and happiness. The choice of sports and temperance in their pursuit are among the surest tests of wisdom in men and in societies. A love of vigorous play no less than the power of sustained work, marks the dominant and progressive peoples of the earth. [Sidenote: Labor as pleasure] Acts in the second group give pleasure and at the same time leave an objective result. The hunter gets more pleasure if he returns with well-filled bags of game, but the distinction between the sportsman and the "pot-hunter" is not hard to find. The one has his joy in the sport, the other in the material results of the sport. This kind of action presents some puzzling cases, but in general must be classed as labor, since labor is to be judged by the objective economic results rather than by the pleasure of the act itself. [Sidenote: Labor as sacrifice] In a third class are the acts that are painful in themselves, that are done unwillingly, but that leave a pleasurable result. Unfortunately a large part of the actions of men are of this class, which to most minds is the typical labor. [Sidenote: Joy in work is the ideal] There is thus labor that is pleasurable in itself and labor that is painful though it leads to a desirable result. The social ideal clearly is that all human labor should be made pleasurable. Social dreamers love to picture a day when all shall find for effort a full reward in the mere doing,--the reward of the artist, of the scholar, of the saint, in addition to the objective result in economic wealth. Probably we are slowly nearing this ideal. Not only in the professions and in the esthetic arts, but in commerce, in mechanics, and in the humblest walks of life are found men free from envy, rejoicing in their daily tasks. Such is the normal feeling of the healthy optimist. And yet in every serious occupation there are numberless moments and occasions when the spirit flags and only hard necessity holds men to their tasks. The dilettante does not go far or long or steadily; the real tasks of the world are done by men that labor, now with joy, now wearily. [Sidenote: The distinction between men and things] 2. _The agents of production compose two great species, material goods and human services._ Our discussion of consumption goods, rent, and interest has been an analysis of the nature and uses of material goods. We now come to the other great species, human services, which comprise those acts of men (one's own or other's) that minister to the gratification of wants. There are also misdirected efforts, and evil deeds which are "disutilities" to all but the doer. The distinction between men and things is fundamental in modern economic discussion where each man is looked upon as free. It is not so clear where slavery exists and the master looks in the same way upon the services of his cattle, of his chattel slaves, and of his land. Even in the freest society, man's services are compared purely as to their utility, with the uses of other parts of the material world. It is said that the price of mules at the Pennsylvania mines has been affected by immigration, because a man and a mule sometimes represent interchangeable services. But in the study of political economy the distinction between men and other material things must never be lost sight of; they are the two fundamental classes of economic agents, the one being solely a means to an end, the other being an end in itself. [Sidenote: Rent and wages mutually affect each other] 3. _Labor and material wealth are complementary and indispensable to each other in most of their uses._ The discussion of material wealth and its value apart from the subject of labor, of the problem of rent and interest apart from that of wages, does not imply that this material wealth would have the same value in real life if labor were absent. As one field affects the value of another field, and one good, by substitution, the value of another good, so does labor affect material wealth. Some material wealth can be used apart from labor, but most of it must be used in combination with some labor. Rent, therefore, is not determined in concrete cases apart from men and their services. It is allowable, however, in abstract analysis, to simplify the question by leaving out a difficult complication, and thus to set forth more clearly the logical bearing and effect of a certain factor. [Sidenote: Certain shares of the product are logically attributed to each] Each of two kinds of agents used together affects the utility of the other, and the value of the product. If neither can be credited with the whole value, how is any distribution to be made between them? It is not possible to measure their technical services in the product, but it usually is possible to gage their marginal utility under particular conditions. Flour, water, and labor are needed to make biscuits; but water being a free agent, does not enter into the combination with any marginal utility. A match also is almost indispensable to start the fire (and who has not seen the time when he would give far more for a match than for a bucket of coal), but as things usually are, the match is credited with a value of a very small fraction of a cent. Again, how is to be measured the economic service of the tree and of the labor needed for gathering its fruits? There is here suggested the superficial aspect of what is known as the problem of complementary values. Where two or more things are indispensable to a product, how much shall be credited to each? [Sidenote: Labor gratifies directly and indirectly] 4. _Human service has the same general relation to wants that material goods have, affording gratification either directly or indirectly._ It is axiomatic that to be "economic goods" human efforts like material goods must afford utilities whose importance is felt. Many services give pleasure directly and are immediately consumed. A tropical potentate has an attendant to fan him, and another to carry an umbrella; a humble citizen is shaved, doctored, sung to, and played for. The gratification in such cases is directly produced in personal comfort, in the consciousness of heightened beauty, in the feeling of self-esteem. Value is thus created and consumed immediately, taking no material form apart from the consumer. [Sidenote: Labor embodied for a time in material form] But the results of most human services may be seen to rest, at least temporarily, in some material form. Effort is put upon a material thing to be used later. The work of the waiter in spreading and arranging the table is not an immediate service, for it is embodied in material form an hour or two before the meal. The service of cook no less than that of gardener and butcher, is put into material form before it comes to the consumer. The woodman fells, cuts up and splits a tree, and piles it at the door, putting his labor into a utility to be consumed months afterward. The old economists used to class labor as productive and unproductive according as it was or was not embodied in material form. The classing of the services of cook, waiter, valet, etc., as unproductive seems, even from the old point of view, to have been inconsistent, and the attempt to distinguish services by any such test is now wholly given up. Whether the service rests in material form for a week, a month, a year, or as often happens, for a much longer period, is not essential. The test of the productiveness of services is not their embodiment in material form, but their appearance as psychic income, their ministry to wants. The most varied kinds of human activity may be unified by this thought in the concept of economic labor. § II. VARIETIES OF TALENTS AND OF ABILITIES IN MEN [Sidenote: Grades of labor are analogous to grades of wealth] 1. _As material things differ in their fitness to gratify wants, so do men differ in their powers of labor._ The fields, hammers, plows, tools, and machinery of different kinds and qualities have been seen to grade off from the best to the poorest. The poorest, discarded or just about to be discarded, are no-rent agents. The utility felt and recognized in the better qualities is expressed in the rents they yield. Recognizing the variety and inequality of human talent, some economists of late speak of the "rent" of ability, meaning that, like land rent, the greater utility (and corresponding reward) of some labor as compared with others, reflects the difference in the quality of agents. But this expression, though often met in contemporary economic writings, is one to be avoided because it tends to blur the essential distinction between human and other agents. Pursuing the same analogy some economists have talked of capitalizing the worker,--expressing in a lump sum the value of the man as the present worth of the series of incomes which he may be expected to earn in his working life. This, also, is to be avoided, for while possibly it is suggestive in studying some problems, it is on the whole a misleading analogy, dimming the distinction between free-workers and owned and exchangeable wealth. [Sidenote: Physical differences among men] 2. _The physical strength of workers differs according to age, individual, race, and sex._ Differences due to age are the most obvious. The child, at first weak, grows toward his maximum of physical strength, which he attains before his fullest intellectual capacity. The period of maximum physical working power lasts fifteen to twenty-five years according to the individual, and then gradually declines as the old worker approaches again the inefficiency of the child. Mental efficiency develops more slowly and longer, the highest qualities of judgment and wisdom being the fruits only of a life rich in experiences. Families and strains of stock differ notably in physical and mental powers; one excels in stature, another in development of muscle. The differences within families are inexplicable, sometimes one brother excelling in one thing, the other in another. The physically perfect man is a rare product. Among three thousand students are but two score endowed with the remarkable combination of lungs, heart, muscle, nerve, and character, that makes possible the finest athletes. The national and racial differences in working power, even in the simplest tasks, are marked but difficult to explain, as so many influences of customs, habits of life, and varieties of diet modify the result. We cannot tell how much of the Englishman's great superiority over the East Indiaman is due to individual, native differences of mind and body, how much to the social environment in which they have lived. Certainly, though, the difference is not mainly one in size; in the Chinese War the little brown men of Japan outmarched all the others. Certainly fiber counts for more than bulk, and character for more than muscle. [Sidenote: Comparative strength of men and women] A difference in the physical strength of the sexes is found in some degree throughout the world, but it would appear to be far more marked in civilized than in savage communities. Compare the records at the Vassar field-games with that of the men in any leading college: in the hundred-yard dash, fifteen seconds as against ten and a fraction; in the high jump, forty-eight inches as against six feet and over. The muscular force of American college women as tested in the Yale and the Oberlin gymnasiums is but one third that of men, that is, taking all the students, the weaklings and the little men along with the athletes, and the women large and small. As to strength of back the average for men is 154 kilograms, for women 54 kilograms; legs, average for men 186, average for women 76.5; right forearm, average for men 56, average for women 21.4. This is an abnormal difference. The natural and possible strength is more nearly attained by men than by women under our social conditions. Women escape the physical toil which strengthens, but not the mental strain which kills. Men carry more of the wood, but the women not less of the worries. A fairer test is applied among peasants in field-work in France and Germany, where the strength of women is found to be about two thirds that of men. American women should do and will do more to attain their natural strength when we attain sounder ideas of education and saner modes of living. [Sidenote: Talent and training as factors of efficiency] 3. _Differences in intelligence are a resultant of native talent and acquired ability._ It is difficult to distinguish these two factors sharply. Two men sitting side by side in an examination, get the same grade; one of them has had excellent preparation from childhood, and all the opportunities that money, travel, and cultured associates can give; the other, under great difficulties, has prepared in a country district school with a little coaching now and then, and struggling against great odds, has at last entered college. The same grade does not mean that their natural ability or even their efficiency in this particular class, is equal. Yet the grade is the best expression to be had of their efficiency in the particular work. Native intelligence shortens the time needed for preparation in any calling; hastens new methods; decreases the cost of supervision; saves materials, tools, and time; diminishes loss from breakage; makes possible the use of finer machinery and better appliances, and imparts those subtler qualities that distinguish the best from the mediocre products. Education and native talent are in a degree interchangeable; one supplements the other. Education increases adaptability; the trained mind will outstrip the untrained mind of greater power. It makes direction easier, fits for higher tasks, and decreases the difficulty of coöperation. Any ability may be helped by education in the broad and true sense, though a fool cannot be made wise by training, and though many a potential genius doubtless has been dwarfed in dusty school-rooms by stupid teachers. [Sidenote: The moral qualities required in industry] 4. _The moral qualities of the worker are increasingly important as society grows more complex._ The need of a particular moral quality is relative to the special task in hand. Honesty is needed in the bank teller, but he need not spoil a good story. The champion broncho-buster of Arizona is not a Sunday-school superintendent. So, discipline, obedience, self-control, regularity, and punctuality are needed, for more and more in these days business is run by the watch; confidence, patience, good temper, in fact all the virtues in the calendar are necessary at some time and place, and most of them are needed all the time in business. Places may be found in our developed society for those who are deficient in these qualities (it is fortunate that it is so), but these are the poorer places. Many men fail to examine the qualities necessary for success, and do not understand the causes of their own failure. Blind to their own faults, they are dropped down one notch after another in the scale of industry, and, equally blind to the virtues of their successful rivals, they rail against the unjust fates. [Sidenote: The union of many qualities needed] 5. _Skill and capacity in industrial tasks is a resultant of many qualities._ The simplest task calls for a combination of force and judgment,--even the digging of a ditch, the raising of a window, or the fitting of a stovepipe. For most industrial tasks rarer combinations of qualities are required. The retail clerk must be neat, punctual, polite, and long suffering. A confidential clerk must have discretion, judgment, and other moral qualities in an unusual combination. The substitution of qualities is possible within limits; a rare quality may make amends for the lack of a commoner one, and a man may, because of peculiar fitness in some regards, continue to hold a position for which in other ways he is little fitted. The rarest and most valued worker is one uniting many good qualities and fitted to deal with emergencies. The economic efficiency of the worker often is no stronger than its weakest link. A strong motive for training is offered by the fact that supplying some one lacking quality may raise the total efficiency in a remarkable degree. [Sidenote: Inequality of talents shown by biologic studies] 6. _Biologic studies have of late made clearer the existence and continuation of the inequality of talents._ The political philosophy of the eighteenth century was based on the idea of natural rights and natural equality. Adam Smith, accepting the prevailing view, discussed wages on the assumption that all men had equal natural ability. It is still a favorite assumption of radical social reformers that the natural ability of all men is equal, and that all the differences in success result from political injustice. The study of biology of late has made patent the unending differences that prevail throughout the animate world. No two members of the same family or species are just alike; no two pigeons have wings of just the same length. Nature by numberless devices is experimenting constantly with variations on either side of the established mean. The accepted fact of biologic evolution rests on the foundation of inequality in structure and powers, making possible selection and adaptation. Men in all their qualities of mind and body display this kaleidescopic variety. In all life there is inequality, and the whole drama of human history as well as that of biologic evolution must be meaningless or illusory to the man who does not see this truth. Accustomed now to this point of view, we as inevitably think of the natural inequalities in men as did Adam Smith of their equality. This fact does not force to the conclusion that industrial inequality as it exists to-day, the great disparity of incomes, correctly or justly reflects the degree of difference in men's qualities, either native or acquired. It does not follow that a thousand-dollar income represents ten times the ability of a hundred dollar one--far from it. But to those who ignore the inequality of men, the whole problem of industrial remuneration must remain a mystery. A crude socialism is possible only to those who are blind to the enormous differences in human capacity. [Sidenote: Scarcity of labor is essential to wages] [Sidenote: Unlimited demand for labor] 7. _The scarcity of human services, relative to wants, is the fundamental fact in the problem of wages._ It is clearly seen that some qualities of service are scarce. Most women will confess that they cannot warble as Patti could, most men will admit that they have not the mercantile ability of John Wanamaker. The man of mediocre capacity recognizes even through the fog of his self-esteem that there is a reason for the high value of certain rare services. But it must also be recognized that the commonest services have value only because they are scarce. There are many things to be done if there were labor enough to do them. There is no need to "make work," in the popular sense; it is here, but labor is lacking to do it. It is true there may be a temporary superfluity of human labor at a time of an industrial crisis. There is at all times a superfluity of "useless" human agents whose qualities are such that they have no net utility. The ignorant, insane, feeble-minded, vicious, drunken, and debauched, can give to the world only negative utilities. But services that are in any degree useful are nearly always in demand, and the higher services are so rare that they are in great demand. The proverb, "There's always room at the top," is seen to be true when conditions are thus analyzed. There is a large, though limited, supply of the commoner kinds of services at the bottom of the scale, but in every branch of human effort there is a never-ending lack of that higher qualification and training required for the best results. CHAPTER 21 THE SUPPLY OF LABOR § I. WHAT IS A DOCTRINE OF POPULATION? [Sidenote: The employer's and the social view of supply of labor] 1. _The supply of labor means here not the number of workers available in any one industry, but the number available in the whole field of industry._ The individual employer thinks of the supply of labor as consisting of the men seeking employment in his special industry. In this view it is the demand by the employers that apportions the workers among the various occupations. The social view of the supply of labor, however, looks at the whole field. The demand for labor is then seen to be represented not by human employers, but by resources and agents presenting opportunities and demanding labor to employ them. The rich acre, the tool, the machine, all material wealth needing the human touch to give it a higher utility, represent a demand for labor in this broad sense. The thought of a supply of labor is therefore relative to that of the demand embodied in resources. A million men are a great or a small supply of labor according as they occupy a little island or a large continent, according as they are equipped with a small or a large supply of agents. [Sidenote: Population in relation to resources] 2. _"Supply of labor," as an economic problem, presents a large and complex case of diminishing returns._ The population of different countries and of different sections of a country is seen to bear a general relation to their resources. An unintelligent race with little wealth and poor machinery is doomed to remain few in numbers. Mountains, districts poorly watered, the frozen regions of the North, are sparsely populated because natural resources are lacking. If food production alone is thought of there are apparent exceptions to this statement, but there are no absolute contradictions of it. A favored harbor may make possible a flourishing commerce on a rocky coast; an unfertile soil may support a large population when great deposits of coal or iron insure by exchange great food-supplies. Productivity must be measured under modern conditions by the purchasing power that is possible in the environment. The connection of wealth and resources with the extent of the population is in itself a recognition of diminishing returns, of an objective limit to the number of men that can occupy a certain area and employ a given stock of agents. [Sidenote: Equilibrium between numbers of animals of different species] 3. _Each species of the lower animals is seen to have a relatively fixed habitat limited by its food-supply and by its enemies._ The rocks tell a story of a slow and steady change that has gone on in the earth and in the species of animals that inhabit it. History records some rapid changes due to convulsions of nature or to interference by man with the natural conditions. But the usual condition is an equilibrium of numbers, long maintained, though each species appears to have in itself a capacity for unlimited increase. Why this contradiction? The limit set by the food-supply is seen in a simple case when herbivorous animals are placed on an island from which they cannot escape, and where there are no dogs, wolves, weasels, or foxes. Substantially this experiment was unintentionally tried on an enormous scale with the rabbit in Australia. This peculiar and long-isolated continent contained none of the rabbit's ancient enemies. The rabbits became a pest, devastated great areas, were hunted, trapped, poisoned, and great numbers of them died of starvation outside the fences erected to stop their advance. In the imaginary island they would increase up to the point where starvation would bring about an equilibrium between the number of animals and the food supply. The destruction of one kind of animal by another limits numbers in another way. The number of lions is limited by the number of their prey in the region where they roam. The number of deer, therefore, is limited in two ways, by the amount of their food and by the number of lions which catch the deer. The more numerous the lions, the fewer the deer; the fewer the deer, the greater the supply of vegetable food; as the pressure increases on one side, it decreases on the other, until an equilibrium is reached. [Sidenote: The surplus of life germs] Throughout nature each species of animal keeps its customary place, changing little despite its efforts to increase and to crowd into the habitat of other species. Even the slow-breeding elephant, with a period of gestation of three years, and producing one calf at a birth, would cover the entire earth and leave no standing-room in a few centuries if every calf born could live to full age. The myriads of frogs born every spring, the swarms of insects, the countless plants, are struggling to find a foothold on the crowded earth. Of the vastly greater number of seeds and embryos, only one in a multitude ever comes or could come to maturity. Here are the undisputed facts on which rests a biologic "doctrine of population," so to speak, for the vegetable and lower animal world. Because of the limited powers of the soil, no form of life, animal or vegetable, can continue to increase even for a single generation, without meeting enormous forces of opposition, which destroy great numbers and set a limit to the increase of the species. [Sidenote: These facts related to the doctrine of population] 4. _A doctrine of human population is a reasoned explanation of the causes determining the number of people in the world._ Man in his economic life is constantly struggling with the problem of the scarcity of goods. If in any given environment men continue long to increase, they must, like the lower animals, meet limits in the capacities of the resources they use. The supply of labor force which is thus brought to be combined with the material agents must meet with diminishing returns unless these agents also continue to increase at a like rate. The relation of population to resources thus presents probably the most fundamental problem in the realm of economics. It is a problem of great complexity, bristling with difficulties, and incapable of exact mathematical treatment; but it is capable of rational study. There is a great difference between a purely fatalistic view of this question and the view that is to be reached by a consideration of the motives, causes, and physical influences at work; It is possible to find some principles in the chaos of prejudices and contradictions that the subject presents. The fruit of a century of discussion of the economic, social, and biologic factors involved, is a rational, if not a final, doctrine of population. § II. POPULATION IN HUMAN SOCIETY [Sidenote: The biologic stage of human population] 1. _In the earlier stages of human history, population is limited mainly by biologic factors._ The biologic stage continues so long as there are no artificial restraints put on the birth-rate, and no deliberate destruction of offspring for the purposes of limiting the size of the family. There the limits are all objective; they are found in scantiness of the food-supply, or in destruction by enemies, animal or human. Each species has an average or normal birth-rate, great or small. Just why this varies, why the rabbit produces a score of young in a year, and the elephant but one in three years, is a question capable of a rational answer, but it is one for the natural scientist rather than for the economist. Each species is impelled by instinct to realize this birth-rate, to bring into existence as many young as possible. No human society known to us is so primitive that it has not passed this stage, but many societies have risen but little above it. In most savage tribes, where starvation, disease, and war are constantly at work, the difficult task is to maintain the population. Few of those born arrive at maturity. The custom of the adoption of captives from hostile tribes is widespread, because the efficiency and even the survival of the tribe depends upon keeping up its number of warriors. [Sidenote: War among primitive societies] 2. _War for the possession of limited resources is the first rude social remedy for an excess of population._ War is the normal condition of most primitive tribes. Its cause usually appears to be standing feuds and ancient enmities, but the deeper and abiding cause is the struggle for hunting-grounds, for pasturage, for natural resources. The rude industry and economy of hunting, fishing, or pastoral peoples, or of those in the earlier stages of agriculture, requires a large area for a small population. Distant excursions and frequent forays, when food fails, develop rival claims to favored districts, and war is the only settlement. Fighting under these conditions is an activity of such economic importance that much of the energy of the tribe must be strenuously given to it. The ceaseless loss of life in savage wars is almost incredible to modern minds. The invasion of the Roman Empire by the Teutonic tribes, the later successive inundations of medieval Europe by the fierce pastoral tribes from central Asia, are more recent and familiar examples of the economic and political effects of the increase of population and of the outgrowing of resources by barbarian peoples. When the custom arises of capturing enemies and reducing them to slavery instead of killing them, forces are set into operation to reorganize society and to create new checks on the growth of population. [Sidenote: Crude beginnings of volitional control] 3. _Volitional control of population begins by the destruction of offspring before or after birth._ The population problem ceases to be simply biologic, and takes on its sociological aspect, when the awakening intelligence of man first grasps the mystery of birth, and when the first attempts are made in any way to regulate family relations or to interfere with the growth of numbers. The student of primitive peoples finds in the methods applied to prevent the birth of children an almost inconceivable brutality. The same methods to a large degree persist in savage communities to-day. Infanticide was generally practiced in ancient times among peoples of advanced civilization, as, for example, in Sparta and Rome, where not only deformed and weak children, but unwelcome ones, commonly were destroyed. The practice, if not legalized, is at least permitted even to-day by public opinion in great portions of India, China, and other densely populated districts of the world. It is one of the dark spots on our own civilization. [Sidenote: Private property limits population] [Sidenote: The problem a psychic one] 4. _The pressure of increase of numbers on resources is confined by individual industry and by private property to special portions of the population._ A condition of communism, where all the members of the tribe or family share equally, means that all enjoy together when food and wealth are abundant, and all starve together when it becomes scarce. Along with a fierce enmity for other tribes, is found in many early societies a close approximation to tribal communism. Private property alters the nature of the struggle for subsistence and of the motives for limiting population. Society divides into a number of partially independent classes or family groups, each holding its share of wealth apart, not in common with the tribe. A society with private property is like a ship divided into a number of water-tight compartments. In communistic conditions if population increases, all sink together into want. The self-interest of those having private property keeps them from dividing their property, and starvation is confined to the propertyless members. This acts in two ways: it increases the motive for the production of wealth; it gives a motive for the limitation of the consumers of the wealth. A smaller family with larger resources means a wider margin between numbers and misery. This converts the problem of population from a material one of a balance of food and physical needs, to a psychic one of a balance of motives in the minds of men. When this stage is reached, the extreme objective limit of the birth-rate or of increase of population is no longer attained in the well-to-do classes, although it may still continue to be in the less provident. [Sidenote: Social classes differ in volitional control] 5. _Volitional control is effective in very different degrees in different families and industrial classes._ The possession of property is both a sign of forethought and an incentive to it. Concern for the welfare of children is one of the most powerful motives, especially after social distinctions become marked. It may become abnormally strong, leading parents to sacrifice their own welfare or their own lives foolishly for their children, as is done often in the accumulation of property. Among the classes with property the provision for the children depends not only upon the amount of wealth, but upon the number among whom it is to be divided. It is simple division: wealth the dividend, number of children the divisor. Among the poorer classes very different motives operate. After the first few years the parents' income is increased by the earnings of the children, both on the farm and in the factory districts if the laws do not prohibit child labor. Moreover, when the children are grown, their wages will depend on the general labor market, not upon the number of their brothers and sisters. So, according as the family income is from rents or from wages, the motives of the parents differ. [Sidenote: Motives in volitional control] Postponement of marriage must be classed as a mode of volitional control of population. The average age of marriage, both of men and women, is higher in the classes of greater wealth and ambition than in the poorer classes. The contrast in this regard between civilized and savage peoples is likewise noteworthy. The failure to marry, from whatever cause, is, in the social view of the question, volitional control. It is rare that the motive is directly and immediately the wish to avoid parenthood; now it is religious zeal, again it is disappointed sentiment; here it is conflicting duty, and there it is the individual selfish wish to retain an undivided income for one's own enjoyment. By countless strands of motive in the form of sentiments, social institutions, and interests, the primitive impulses of humanity are firmly bound; and in varying degrees, in different classes, the enormous possibilities of reproduction are controlled by human volition. § III. CURRENT ASPECT OF THE POPULATION PROBLEM [Sidenote: The many motives controlling population] 1. _Changes in population are resultants of many forces: those favoring a high birth-rate and low death-rate, and those limiting births or survival._ Whether the population on the whole shall grow, stand still, or diminish, depends upon the relative strength of contending forces making for life or death. But this control may lose its cruder aspect and may be waged in the realm of motive. More and more it is volition that controls in human society the growth of population; less and less it is the objective limit of the food-supply. Dire need resulting in ill-health and even in starvation, is still acting in some portions of society, but less to-day than ever before. The growth of population in this stage is not "fatalistic," as there is no inevitable tendency to increase or to decrease. It depends on the interaction of a number of forces, clearly distinguishable, by which population actually is kept far within the limits of food resources. Volitional control is not by a central and unified despotism determining human action, but it is by motives of the most complex sort, diffused throughout society and acting upon every member of it. [Sidenote: The standard of life in Asiatic countries] 2. _The desire to maintain and raise the standard of life is the most effective motive limiting population in our society._ The phrase "standard of life" expresses the complex thought of that measure of necessities, comforts, and luxuries considered by any individual to be indispensable for himself and his children; that measure which he will make great sacrifices to secure. This standard differs from land to land, and from time to time. In the Asiatic countries it is so low that it touches in large classes the minimum of subsistence. Despite adverse influences and the uninterrupted series of famines, the population of India in the last century under English rule increased from two hundred millions to three hundred millions. Such a population "lets out all the slack" of income, and never takes up any. The great public works of irrigation, forestry, and transportation, and the development of industry under English rule, gave an opportunity for a higher standard of living; but it was used instead to permit the existence of a greater number of men in the same old misery. These facts have a bearing upon the question of Oriental immigration to America. The emigration of millions of Chinese from their native land would leave no void in their numbers. Peopling their own land constantly down to their own standard of living, they have the power, if they are tempted hither in great numbers, to people this continent also to the same density. [Sidenote: The American standard] The American standard of living, while it differs in different classes, is on the whole the highest found anywhere in the world. The increasing appeal to individual selfishness in the last twenty-five years, the greater ease of travel and taste for it, the multiplied and costly pleasures and pastimes, make children a greater and greater burden. The abnormal conditions of city life increase the sacrifice required to support children, and take away a large part of the value of their services in the home. In the greater cities are whole areas larger than the city of Ithaca where children are not admitted to the apartment houses, where no one who has a child can rent rooms. Despite the increasing incomes of the masses of the population, the number of childless homes is increasing, and while the standard of comfort grows, the size of the average family dwindles. [Sidenote: The decreasing death-rate] 3. _Great improvements in medical and in sanitary science are decreasing the death-rate and thus partly neutralizing the effects of a lower birth-rate._ The death-rate in a community is a fairly good index of its general welfare. The death of a large proportion of the children before they arrive at maturity indicates poverty or ignorance. The death-rate in the Middle Ages, especially in cities, was tremendously high, but during the last hundred years has steadily decreased. The race of man which, ever since the beginnings of volitional control, probably has had a smaller death-rate relative to the total number of individuals coming into existence than has any other species of living creatures, has to-day a far lower rate than ever before. Even in the most miserable industrial population where one half the children die before they are five years old, the death-rate is much less than among the young of the lion or the eagle. [Sidenote: The quality of population counts] 4. _Volitional control is acting with the greatest force in the more capable classes and thus threatens to reduce the quality of the population._ The quality of population is of more import than its quantity, alike in its economic, its social, and its ethical results. The productive force of a population is not measured merely by numbers. "Who" make up the population at any moment is no more a matter of indifference than "how many." One new-born child represents a negative addition to society, unintelligent, incapable, foredoomed to become a burden; another, with energy, thrift, inventive genius, comes to enrich and uplift his fellow-men. Quality counts for much. [Sidenote: Change in the American birth-rate] The average number of children reaching maturity in the families of the American colonists was six; the average number to-day in families of American descent is about two. Since many of these do not live to maturity, and of those who do survive many do not marry, the stock does not maintain itself in numbers. Much larger families are found among the poor whites of the mountains, the foreign population, the rate negroes, and, in general, in the lower ranks of labor. Forces are at work to sterilize or reduce in number the more intelligent elements of the population. The "new woman" movement, tempting into "careers," takes away from family life many of the women most worthy to become the mothers of succeeding generations, Self-interest is at war with the social interest. The individual asks, "Am I bound to sacrifice my comfort and happiness to the general good?" If this continues, the result must be a steady decline in the proportion of the population born of the successful strains of stock, and a steady increase of the descendants of the mediocre and duller-witted elements. [Sidenote: Rate of increase in the nineteenth century] 5. _Population increased at an unprecedented rate throughout Christendom in the nineteenth century, but the pace is now slackening._ The nineteenth century saw a great increase in the food-supplies available for Europe. The resources of the American continent were hardly touched until the great Western movement of population began and new agencies of transportation brought American fields thousands of miles nearer to European markets. The improvement of machinery and of other economic equipment in Europe likewise aided to increase production rapidly. Population followed, though not with equal step. Europe had a population of 200,000,000 in 1800, nearly 400,000,000 in 1900. The increase in England was from 12 to 18 per cent, each decade; it had 8,000,000 in 1800 and 30,000,000 in 1900. The United States had 5,000,000 at the beginning of the century and 75,000,000 at the close, an increase of over 30 per cent, each decade. Recently there has been a notable decline in the rate of increase in all the countries of Europe. France is already at the stationary stage, and England probably will have reached it by the middle of the century. The rate of increase by decades has fallen in America from thirty-three to twenty-four since the Civil War. Though the movement of the population is still upward, large classes are stationary or declining in numbers. [Sidenote: Conclusion] Population should increase more slowly than wealth and resources if progress is to go on. It has done so in the past century, and there is no probability of a too rapid increase in Christendom in the near future. A stationary or declining population, while not desirable, is not an impossibility. But this does not destroy the significance of the fact that there is inherent in humanity a great potential power of increase, the realization of which would be disastrous, the control of which is an important and ever-present condition of the social welfare. CHAPTER 22 CONDITIONS FOR EFFICIENT LABOR § I. OBJECTIVE PHYSICAL CONDITIONS [Sidenote: Subjective and objective factors of efficiency] 1. _The efficiency of labor, in its broadest sense, is its ability to render services or produce things that minister to welfare._ The efficiency of labor is a resultant of many influences. In part it depends on the physical and mental powers of men; in part on things outside of the worker that either stimulate and strengthen him, or give him more favorable conditions in which to work. These are respectively the subjective and the objective factors of efficiency. In its broader sense, therefore, the phrase "efficiency of labor" implies any and every influence that makes for a larger and better supply of goods. [Sidenote: Bounty and goodness of productive agents affect the output of labor] 2. _The efficiency of labor is limited objectively by the abundance and quality of material resources._ Material resources include both those called natural (as the field and its fertile qualities), and those called artificial (as improvements and machinery). According as these resources are more or less developed, as labor is employed in a fertile or a barren field, with a sharp tool or a dull one, with a highly developed machine or a poor one, the product is more or less. If resources were much more abundant than at present, many goods now scarce would become almost, or quite, free. In the last chapter it was shown that an increase of the labor in a limited area or with a limited supply of indirect agents results in a decline in the relative bounty of the environment. A certain part of the result is thought of as due to material agents, a certain part to labor. "Efficiency of labor" is thought of in the narrower sense as the part of the product that is logically attributable to labor,--the laborer's contribution to the value of the product,--as apart from rent, the part attributable to material resources. [Sidenote: Causal relation of wages and efficiency; food] 3. _The laborer's efficiency is greatly affected by the quality of his food, clothing, and shelter._ Usually workmen that are getting good wages enjoy abundant food and creature comforts; poorly paid workers go scantily fed. The question arises: which is cause, which effect? Some maintain that all that is needed to make workmen more efficient is to feed them well. In some cases this is probably true. The Porto Ricans enlisted in the American regular army are reported to have increased at once in strength, weight, and vigor; the Filipino recruits, thanks to the American army rations, soon outgrew their uniforms. Some employers in Europe pay their workmen an extra sum on condition that it is spent for meat. But if wages increase, it is by no means certain that more or better food will be bought or if it is that the workmen's powers will be increased. There is a limit to the benefits of increasing food. There is some reason to believe that in America great numbers of our people, perhaps even many manual laborers, would be better off if they bought simpler and less costly food. The maximum of health and vigor may be attained with moderate outlay, and beyond that point richer food doubtless does more harm than good. Poor judgment in the selection of food is shown in many workers' families, and there is no appreciation of its influence on health. [Sidenote: An experiment in feeding] A few years ago an experiment in the feeding of pigs was tried on the Cornell farm. Four groups of six pigs each were put in four different pens and fed four different rations. Though alike in breed and age; the groups began at once to differ in character. One group squealed more; another scratched more; another waxed fat faster. Every week they were weighed, and finally were butchered, hung up, and photographed. At that same time, at the Elmira Reformatory Mr. Brockway was experimenting on some criminals of the lower class. They were given daily baths, special physical exercises, and were fed on a specially bountiful diet. Scientific philanthropy stopped there, but photographs "before and after," reproduced in the printed reports, show the great physical improvement that resulted, and a marked change occurred likewise in disposition and intelligence. Many laboratory experiments have been made of late to test the chemical nature and the physiological effects of foods. It is becoming more fully recognized that the quality and quantity of food, and the cooking of it, have a great influence on the economic quality of the worker. [Sidenote: Clothing] The effect of the quality and amount of clothing, while of course varying with the climate, is in general of less practical importance. Loss of heat and energy, dulling the powers, stiffening the muscles, causing illness with many trains of evils, make ill-clad workmen inefficient. The cost of clothing enough for comfort is, however, comparatively small, the amount spent for ornament is comparatively high. Even more important in its effects on efficiency is housing. The conditions in the factory and in the home make for health or for disease. [Sidenote: Physical conditions surrounding labor grow worse or better] 4. _The growth of society is, for the average man, making some of the conditions of efficiency more difficult, others more easy, to secure._ In agricultural and sparse populations fresh air, sunshine, good water, and unbounded natural playgrounds for children, where they can grow into strong and efficient manhood, are free goods. As population grows more dense, these things become more difficult to secure; men are brought into unnatural conditions, the evils of slum and factory life develop, and the housing problem appears. The character of the housing and working places could well be left to individuals in early times. If the individual chose to live and work in unsuitable places and under unsanitary conditions, it was usually his own fault and he bore the consequences. When the unsanitary conditions about each family are visited upon its neighbors, society must deal with them. Engineering, sanitary science, and medicine must be directed against the evils; factory and tenement-house legislation must seek to make possible a decent life in the cities, the factories, and the homes. Indeed, in many places the development in these and other directions has enabled the mass of the workers to enjoy blessings impossible to the most favored in the past. § II. SOCIAL CONDITIONS FAVORING EFFICIENCY [Sidenote: Government to insure the reward to labor] 1. _The first social condition for the workers' efficiency is political security._ For the same reason that this condition is favorable to the growth of capital, it is essential if men are to labor in the present and for the future. As the framers of the Constitution expressed it, the function of government is to insure domestic tranquillity, provide for the common defense, and insure the blessings of liberty to the citizen. Directness and certainty of reward are more essential than mere size of reward in insuring action and effort. There must be a close relation between work and the fruits of work. Political insecurity weakens this relation and makes the reward dependent on chance. [Sidenote: Common honesty as a condition to efficient labor] 2. _The prevalence of standards of honesty in private and public business is a condition to high efficiency._ Corruption in government has the same effect as political insecurity; in fact, it is but another form of it. We are accustomed to the thought that in an Asiatic despotism a worker beginning a task is uncertain whether he will reap the reward, as public officials may at any moment seize upon the fruits of his labor. But in our own country similar evils are not entirely lacking. Assessments often are unfair, and justice sometimes is bought. Men in high executive positions are able to make or mar the fortunes of their followers. Sometimes a legislator from a country town goes to the state capital poor and returns rich. Such things becoming generally known tend to break down the motives to industry. They breed the notion that wealth is more dependent on chance or jobbery than on efficient service. Dishonesty in private business means the use of energy not to produce wealth, not to add to the sum for all to enjoy, but to get it from some one else. Public corruption and commercial dishonesty alike entail on the industrious not only the immediate loss, but the far greater cost of weakened character, relaxed energy, and decreased efficiency of labor. [Sidenote: Effect of caste on efficiency of lower and upper classes] 3. _Custom and social ideals that raise or depress hope and ambition, affect efficiency._ The institution called caste, which fixes the place of the worker and makes it impossible to rise out of the social position in which he is born, and disgraceful to do any work reserved to other castes, is deadening to energy. It exists in some form throughout the world, and where it is not called by that name, the same caste spirit is at work. The European peasants in the Middle Ages lived under the shadow of it. Where slavery exists the master class at times feels its hardships. "It is not so hard to live," says the hungry Creole daughter in "The Grandissimes," "but it is hard to be ladies.... We are compelled not to make a living. Look at me: I can cook, but I must not cook; I am skilful with the needle, but I must not take in sewing; I could keep accounts; I could nurse the sick; but I must not." Nowhere in the world is there less caste than in America, but it is here. The negro's low measure of industrial virtues is partly the cause of the prejudice against him, but in turn doubtless inherited class feeling is in some measure the cause of his inefficiency. To close to a worker all but the menial occupations is to take from him the most powerful motives for effort. The thought is paralyzing. The race problem in America is in part one of caste sentiment, whatever can or cannot be done about it. [Sidenote: American democracy and the efficiency of labor] Democracy makes for the efficiency of American industry not less than do the great natural resources. If America is to surpass the world in all the great industrial lines, it will be largely because of her ideas and institutions. They lead to greater energy and to a faster working pace in all grades of labor than is found anywhere else in the world. There is danger that as the West is closed to settlement something of the spirit of enterprise will be lost. To Western eyes already the young men in the older East seem to be trammeled by social conventions. In an older community there is less of hopeful ambition; one's position depends more on what his fathers achieved; in the new community, more on what he does himself. If it is true, as wise students declare, that the frontier has been the nursery of our democratic ideas, we may well ask what effect the closing of the frontier will have on our national sentiment and on our material prosperity. [Sidenote: The balance of advantage between work and leisure] 4. _Custom and national temperament affect the efficiency of labor by determining the normal period of labor time._ After the bare necessities of life are provided for, the worker has a wide or narrow margin of productive energy to use as he pleases. If four hours' work a day would enable him to live, will he work longer or will he stop? The answer is determined by the balance of utility and disutility. Will additional hours of labor yield more gratification than idleness yields? Does the pain of toil repel more than its fruits attract? The use made of spare time differs according to climate, race, and temperament. In the tropics the margin is converted usually into loafing, in the temperate zones largely into objective forms of enjoyment. Individual differences are plainly seen when each man labors on his own field. The prudent man, in the old maxims, makes hay while the sun shines and ploughs deep while sluggards sleep. In the modern larger organization of industry, working hours are much the same for all workers in the establishment. Individual preferences are still expressed, however, in irregularity of employment. In the South some manufacturers have found that on an average the negroes will work in a factory not more than five or six hours a day, working ten hours for four days and lying off two days a week. Such a standard of working hours is the mark of the primitive stage of wants and industrial qualities, although a shortening of the hours of manual labor, as incomes increase above bare subsistence, is in accord with a rational valuation of leisure. A moderate change in that direction cannot but increase rather than diminish the efficiency of labor. § III. DIVISION OF LABOR [Sidenote: Division and exchange of labor] 1. _Division of labor is a term expressing that complex arrangement of industrial society whereby individual workers are enabled to apply themselves to the production of certain kinds of goods, securing others by exchange._ The term "division of labor" is simple, but the thought is a complex one. Its full discussion would cover the whole field of political economy, but only its most essential aspects can here be touched upon. Division of labor and exchange are counterparts and mutually determine each other. Division of labor depends on the extent of the market, and in turn widens its limits. The number of articles that any one would care to produce at one time and place depends upon the opportunity to exchange them. These two aspects of industry thus are inseparable in thought and practice. The worker finds division of labor existing as a social institution and, according as he adapts himself to it wisely or foolishly, it increases more or less his efficiency. [Sidenote: Division of labor between trades and territories] 2. _Division of labor is primarily between individuals, but appears between trades, territories, and nations._ In division of labor between trades, each worker applies himself to the production of some product or group of products and secures other goods by exchange. A special form of this is territorial division of labor, arising out of differences in soil, climate, and natural products, when each community develops in a high degree some one class of products to exchange in distant or foreign trade. Division of labor beginning because of such natural differences, becomes fixed by habit and training, by the advantage of a larger and regular labor supply, by the economy of nearness to related and tributary industries, and by the use of waste products where industry is conducted on a large scaled. The natural advantages in another district must be large to enable it to start successfully against these acquired economies, and territorial division of labor thus tends to continue for long periods when once established. [Sidenote: Advantages of division of labor] 3. _Division of labor increases efficiency by: (a) increasing skill; (b) saving time; (c) saving tools and materials; (d) improving quality; (e) increasing knowledge; (f) stimulating invention; (g) encouraging enterprise; (h) economizing talent._ There is a tradition that an ingenious lecturer in one of our universities was accustomed to give to his class eighty reasons why division of labor was of advantage. It is none too many, as every reason for the modern, as contrasted with the primitive, organization of industry should be included. The phrase division of labor is but a synonym for specialization, a word that expresses all that is most characteristic of our complex industrial society. The headings just given may serve, however, to suggest the leading phases of the subject. Repetition of the same task trains the muscles, forms a mental habit, and gives the swiftness and deftness of touch called _skill_. Specialization _saves time_ by making unnecessary the physical change of place for the worker, the frequent shifting of tools, and the mental readjustment required for the undertaking of a new task. Specialization _saves tools_ for, either each kind of work must be most ineffectively done, or there must be provided for each worker a complete set of tools which thus will be used rarely and will rust out rather than wear out. If a few tools are thoroughly used, they yield a larger income on the investment, and require less care and repairs in proportion to their uses. In fact this fuller economic use of machinery and plant where a large product is turned out at one place, is a prime factor in the advantages of large production, a subject to be treated elsewhere much more fully than is here possible. By specialization is made possible a _quality_ of goods never to be secured by the less skilled efforts of the Jack-of-all trades. The specialist steadily grows in _knowledge_ of his materials and of the best processes, and he gains a power of delicate observation and facility in meeting new difficulties that are impossible when attention is divided among a number of tasks. By dividing and simplifying processes, specialization _stimulates invention_. The most complex machines have been developed gradually by combinations and adaptations of simple tools, and the more a process is subdivided, the greater is the chance of hitting upon a device to repeat mechanically the few simple movements. Division of labor increases the motives of emulation and _enterprise_, by making possible the more exact comparison of results. It _economizes talent_ by giving to each the highest task of which he is capable, while fitting the less efficient workers into the minor places made possible by subdivision. In an American wagon-factory, a one-armed man operating a machine is turning out as large a product and earning as high wages as any other employee. The same advantages of specialization are found with modifying conditions in educational and professional lines. The marvelous progress of science in recent years has been made possible by each worker's doing a few things and doing them well. [Sidenote: Best adjustment of talent and occupation] [Sidenote: Choice of a life career] 4. _The individual worker, to attain his highest economic efficiency, must select from the occupations made possible by division of labor the one for which his talents are best fitted._ It seems unnecessary to state this almost axiomatic truth, yet the slight reflection given to the choice of an occupation by most young people gives to this statement a very practical bearing. The world is filled with industrial misfits, "round men in square holes," good carpenters spoiled to make poor doctors. It so often happens that the natural aptitude of the youth is the thing last or, in any event, least considered. Unreasoning imitation, family traditions, parental wishes, class pride, social prejudice, childish whim, are often decisive of the life career. Happily in some cases, before too late, the man "finds himself," but too often the poverty of the family and the obstacles to education preclude the exercise of intelligent choice. It is of importance to society as well as to the individual that talent should be discovered in time, that tasks should be fitted to aptitudes, that each member of society should attain to his highest efficiency. The approach to this ideal, made possible by popular education, the decline of caste, the spread of genuine democracy, the progress of social justice, will increase not only the workers' efficiency, but society's abiding welfare. CHAPTER 23 THE LAW OF WAGES § I. NATURE OF WAGES AND THE WAGES PROBLEM [Sidenote: Wages and rent compared and contrasted] 1. _Wage in the broad sense is the income due to labor, in distinction from that due to the control of material agents._ The uses of material agents, studied under the subject of rent, are sometimes called "material services." The adjective refers to the source or bearer of the use, and does not imply that the service is to be thought of as a material thing. In its last analysis a service is never a material thing, but a psychic effect on men and their wants. Material services and human services are merely specific kinds of the genus services (or utilities), and it would doubtless be a better usage to speak of labor's services and wealth's uses. Wages bear the same relation to man's services that rent does to the material uses of wealth. Wages are more like rent than like interest in that neither wages nor rent are expressed as a percentage. While rent is the value of the uses of things, wages is the value of the services of men. In discussing interest, wealth is capitalized; but, in discussing wages, men are thought of as affording utilities for a time, as is wealth under the renting contract. The resemblance thus is very close between rent and wages, but not so close between wages and interest. Despite this interesting analogy, it is not well to speak, as some do, of "the rent of labor"--as well might one speak of the wages of wealth. Such a usage only beclouds the distinction between two concepts, suggesting identity where there are important differences. The aim of scientific classification is missed when contrasts are thus concealed under a single term. [Sidenote: Nature of the law of wages] 2. _A law of wages is a statement of the relation of the general causes of value to the value of human services._ In real life no one agent is valued independently of other goods. The felt importance of a good depends on the degree to which other wants are gratified. If men are starving, they attach less importance to ornaments; if cold, more importance to clothing and fuel, being willing to part even with some needed food to secure them. That is, man's desire for each thing is affected by his general condition and by the existence of other goods and wants. A similar relation exists between the values of indirect agents, and must exist between wages and rent. We are to discuss the law of wages. An economic law does not state a command; it is not a political law; it states merely an observed relation. Things do not need to happen actually according to any law of wages that can be formulated, but they will happen in the measure that the assumed conditions exist. The law states a tendency of wages, just as the law of gravitation states a tendency and does not predict positively whether a given object will fall at a given moment. The "law of wages," therefore, is to be understood as a hypothetical statement of the value that will be attributed to labor under a given set of conditions. [Sidenote: Economic wages and contract wages] 3. _Economic wages are the value of human services in the broad sense; contract wages are the goods paid by one wages man to another according to an agreement._ In discussing rent and interest, we have become familiar with this important distinction between economic and contract values. Economic wages are fundamental, the primary subject of theoretical study. Contract wages are the wages paid by one man to another in accordance with an agreement, and may not at this moment coincide with economic wages. When the contract was made, one party may have been ignorant or helpless, and have failed to get all he now could; or meantime the conditions may have changed. But contract wages are based on economic wages and tend to conform to them. If one person performs services for another without expecting to receive economic goods or services in return, it is a gift, not wages. A workman can get as contract wages the amount of his economic wage if free competition exists and he acts intelligently. Of course, these are important conditions. Real and nominal wages must be distinguished: real wages are the reward of labor as measured in goods and enjoyments; nominal wages are the reward expressed in terms of money, whose purchasing power varies from time to time and from place to place. [Sidenote: Scarce services gratify wants] 4. _Human services, being one of the conditions of psychic income, bear the same relation to wants that material goods bear._ As the material agents that are fitted to gratify wants are scarce, labor is applied to the outer world to change and adapt it, thus making it answer desire better. Labor, thus, in many of its applications merely supplements the bounty of nature. Men have a use to and for each other; they have a relation to other men's welfare similar to that borne by material things. The different human actions have all grades of relation to gratification, from harmful to helpful, just as things have. According to their relation to this scale services therefore become ranked either high or low in the estimation of men. Some acts are negative services, to use the term service in a paradoxical sense; they are things to be avoided and escaped. Value then is attributed to the services of men according to their rank in this scale, just as it is to the uses of agents in the case of rent. Scarcity is the condition of value in labor, as it is of value in any good; but scarcity is a relative term. The commonest kinds of labor would not ordinarily be called scarce, but compared with their possible desirable uses, they are scarce, and this fact is the key to a large part of the wage problem. The question is: how and in what degree does this scarcity cause value to attach to labor? § II. THE DIFFERENT MODES OF EARNING WAGES [Sidenote: The simplest case of economic wages] 1. _The self-employed laborer earns wages in the broad economic sense._ In this sense the isolated workman, Robinson Crusoe on his island, earns wages, but these wages could not be measured at all exactly. They are a part of an indivisible income, and there is no way to determine how much should be attributed to the uses of the wealth employed and how much to the labor. The independent farmer, producing on his own farm nearly everything he consumes, may be said to earn wages in the broad sense. These can, moreover, be estimated, because they can be compared with what he could get by working for some one else. The farmer, therefore, attributes a certain part of his income to the farm as rent and a certain part to his own labor as wages. [Sidenote: Wages of the self-employed exchanging worker] 2. _The wages of self-employed labor are often simply the value of the material product it secures by exchange._ Labor has value indirectly because embodied in products. The worker value of these products is reflected to the labor which secures them. The wages of the fisherman day by day, as he follows his vocation, are simply the market value of the fish he catches day by day. The gold-miner, working with simple tools in the days of placer-mining, earned wages exactly expressed by the gold he washed out. The independent worker with few tools does not think of attributing any considerable part of his income to his tools. The umbrella-mender's "kit" is so small that his true wage is little less than his total receipts. The tinker, the shoemaker, and the tailor, who went from house to house in the old days, thought only in the vaguest way of marking off from their incomes a part to be counted as the rent of their little outfit of tools. Until very recent times the capital invested in tools commonly was small, and usually was owned by the handworker who thus received an undivided income, of which wages were by far the larger part. It was inevitable, therefore, that labor alone should have been thought of as the cause of the value of goods produced by the artisans in the towns and cities. This error, small at first, was magnified as the capital investment of modern industry grew, and it persists in many fallacious notions that still taint modern economic theory. [Sidenote: Both impersonal and personal causes of contract wages] 3. _Contract wages, paid by an employer, rest on the same cause of value, the direct or indirect effect of labor in the gratifying of wants._ When contract wages come to be spoken of, the personal element of bargaining between man and man comes in to obscure somewhat the impersonal causes that are operating. If the fisher and the miner bring their products to the general markets, the impersonal part of the problem is uppermost and the wages are recognized to be the market value of the material products. But if an employer hires a number of workmen, and the labor of each becomes merged and lost to view in a complex product, the uncritical mind stops, loses all hold on a guiding principle of value, and sees only the superficial fact of a personal bargain between employer and workman. Such a view overlooks the logical cause of value, and the network of impersonal forces which enwraps and binds the personal acts. [Sidenote: A single direct personal service] To begin with the simplest case: workers often are temporarily employed to produce for others means of gratification at once consumed. The barber shaves his patron, the ferryman takes the traveler across the river, the boy carries a message, the surgeon sets a broken bone. Each performs a useful service, but produces no long-abiding material result outside of the beneficiary, and no separable, salable material good. When each is paid according to the value of the gratification afforded, the first step is taken toward the regular contract-wage relation between man and man. [Sidenote: The continued wage contract for personal services] In ordinary domestic service the only condition not present in the cases just given is the more abiding character of the contract relation. The employer does not hire a coachman each time he wishes to take a ride, but having summed up the advantages of a coachman's services, he buys them by the month or the year. The price is determined in the market for coachmen of the needed ability, qualities ranging from stupid to bright, from weak to strong, and from drunk to sober. Instead of buying flowers from day to day, a wealthy man hires a gardener to cultivate them in a conservatory. The average market price of flowers influences the wages paid to the gardener, his wages being but the sum of the values (or of his contribution to the values) of flowers, well-kept lawn, and garden products. According to the conditions of each household and of the general market, the one or the other mode of buying these utilities is the more advantageous. [Sidenote: Labor employed on products exchanged] 4. _The payment of the laborer to produce goods for exchange is the most common modern case of wages._ The relation of wages to the value of the product is in this case more complex, for the employer is directing the labor to gratifying the wants of others, not his own wants. It is the desire of prospective customers for the product, and the chance of exchanging it, that will eventually enable the employer to recover the amounts paid to laborers. Labor is only one of the elements entering into the product. Within limits it may be substituted for the other elements, fewer machines being used and more laborers, or vice versa. No more will be given for any labor than it is expected to add to the value of the product. As employers test by experience the contribution of the marginal labor to the value of the product, labor is constantly compared with the value of other things. When industry becomes complex, the connection between the wages and the value ultimately realized in the product may be broken for a time, but rarely for a very long time. Because of miscalculations, labor is employed on things that prove to be quite valueless, and on other things that have a much greater value than was expected. When months or years intervene before the value of the labor is realized in the sale of the product, the employer must forecast the outcome as best he can, and employ labor only when the wages promise to be recovered. These are complicating facts, but in any logical view they do not falsify the principle that wages are determined by their prospective contribution to the utility of goods. [Sidenote: Various methods of remuneration, but one general rule] 5. _The wages paid by the various methods of remuneration--as, by time, by the piece, by premium for output--all conform in a general way to the economic value of the service._ Many methods are employed to measure the services of wage workers. If time is used, a general or average output is assumed, and the workman must come up to that standard if he is to hold his place. If payment is by the piece, the price per piece must be enough to make possible the prevailing time-wage to workers of that grade if the supply is to be maintained in that industry. The convenience of the different methods of payment varies from industry to industry, and even from task to task within the same factory, so that now one, now another method is followed. In any case, however, the aim is to find some convenient measurement of the rate of labor, and of its contribution to the value of the product. § III. WAGES AS EXEMPLIFYING THE GENERAL LAW OF VALUE [Sidenote: Ratio of exchange of services adjusted to their marginal utility] 1. _Each grade of labor is a potential supply of desirable things and its wage is determined in essentially the same way as if it were an actual supply._ If all the various psychic goods that labor produces were spread out before men in visible form, some would be in great demand, some would exchange in a very unfavorable ratio with others. The exchange would come to equilibrium at a point where each buyer had adjusted his supply of enjoyments in the most favorable way, had so distributed his purchasing power as to get those kinds and amounts of services which afford him the highest possible sum of enjoyment. [Sidenote: Differences in wages persist] In this situation the real wages of some being so much more than those of others, the low-paid workers will have a motive to change their occupations. But the various laborers have limited abilities and cannot change at will and, despite the unfavorable ratio, they may be compelled to continue at the same work. Just as apples cannot become peaches or sheep become horses when there is a change in their price, so the unskilled workman cannot become skilled quickly, if he ever can, and the possibility of changing occupations within any reasonable period is very small indeed. Labor is constantly trying to adjust itself, to get into the better-paid industries. It moves, it emigrates, it seeks training and education. Especially the workers between the ages of fifteen and twenty-five choose the callings that promise the highest reward. Within limits an adjustment is possible, but these limits are not wide and not quickly shifted, and the wages of labor continue diverse in different occupations for an indefinite time. [Sidenote: Various grades of labor and rates of wages] 2. _The term general rate of wages can be used only of a certain grade of labor and of the rate for the average worker._ Every grade and kind of ability has its rate of wages. To be sure, it is sometimes convenient to speak in a broad but inexact way of "a general rate of wages," when comparing different countries and periods. When it is said that the rate of wages is higher in America than in England, in England than in France, in France than in India, the comparison is between men of the same occupation in the different countries; _e.g._, the unskilled laborer or the mechanic gets more here than the same grade of laborer gets in England. There is no such thing as a general rate of wages extending throughout all industries. The different grades of ability differ more markedly in wages than do industries compared as wholes. In the manufacture of cloth all grades of ability are required, from the highly paid artist and engineer, down to the roustabout in the yard. The industries of manufacturing, commerce, and education alike require the coöperation of bookkeepers, janitors, carpenters, and superintendents. It is easy in most cases to pass from any grade of occupation in one industry to a corresponding grade in another industry; but it is difficult to pass from a lower grade to a higher grade in the same or another industry. [Sidenote: Equilibrium of services and wages] Abstractly considered, that is, wherever free competition exists, there is a constant tendency toward a state of equilibrium; each workman is moving into the industry where he earns the highest possible amount, and where he receives just what his fellow-men estimate his importance to be, judged by the service he performs. Each man's place is determined by his specific gravity, just as the place of liquids poured into a glass is determined by their density. There is much reason to believe that this condition is approached actually in a far greater degree than is thought by those who come to the question with preconceived notions of what ought to be, or of what they would like to see. This principle of the economic wage does not preclude the questioning of the justice of existing institutions, but it is a guide in the discussion of all practical problems of wages. [Sidenote: Wages follow the law of marginal valuation] 3. _The law of wages may be stated thus: in any state of the labor market the wages of any labor or class of labor is equal to its marginal contribution--that is, to the value of its products._ Each agent in industry, whether it be a plough, a horse, or a man, is valued in connection with other agents, never apart or isolated. It is not the total service any one of them performs that can be got at; all that can be got at is the utility attributed to the last unit of supply. Their marginal contribution determines their importance. Each agent is considered in combination with other things at a given moment under existing conditions of supply. [Sidenote: Wages exemplify the general law of value] This statement of the law of wages is broad, and appears to be modified in many ways in practice: by changes in industry, by ignorance on the part of the worker, by unequal skill in bargaining; but the law of wages just stated allows for these modifications, and is a guide amid the complexity of facts, for it gives a place to the influence of trade unions, caste, and everything else that affects the labor-supply. The law of wages is but the general law of value, working itself out amid the special conditions accompanying the gratification of wants by human effort. CHAPTER 24 THE RELATION OF LABOR TO VALUE § I. RELATION OF RENT TO WAGES [Sidenote: Concrete conditions of industry must be studied with wages] 1. _The law of wages must be considered in connection with other far-reaching influences._ One may use the sentence, "the marginal productivity of labor determines wages," without having a true understanding of its meaning. Memorizing a definition is only the first step toward economic reasoning. Till that definition becomes a real thing in the student's thought it helps him but little. The law of wages is an abstract statement of the logical relation of wages to utility; it is not a concrete statement of the industrial conditions in which labor works, yet these are more nearly in the nature of true causes of value. The marginal utility is itself determined by forces and conditions outside of labor that are constantly changing. The more thorough is the student's knowledge of the actual conditions of industry, the more correctly he can apprehend the relations of wages to other incomes, and the more wisely he will apply the abstract law to practical life. [Sidenote: Productivity of labor and diminishing returns of natural agents] 2. _The marginal productivity of labor is affected by the relative abundance and efficiency of natural resources._ If land suddenly becomes more abundant through the opening up of new continents, the lower grades of agents are sooner or later abandoned. Labor having more of a choice as to the place where it is to be used, spreads itself over the better grades and takes on a greater marginal productivity. The marginal unit of labor working on better soil than before produces more, and wages expressed in produce are higher. Ground rent, on the other hand, is less under these conditions. If, however, the land is fixed in area, and population increases, no other change taking place, the principle of diminishing returns applies. The marginal laborers (the last arrivals or the growing generation) being compelled to work with less efficient resources on a poorer quality of land, produce less than was the rule before, and a smaller product therefore is attributed to all the laborers of that grade. They get lower wages and more goes as rent to the owners of the land. By shifting of occupations this reduction may be somewhat moderated and equalized among the workers in other industries. In both these cases, wages vary more than does the physical amount of the total product. In the first case, wages are a larger proportion of a larger product; in the second case, the product is larger (there being more laborers) but wages are a smaller proportion of it. [Sidenote: The iron law of wages] 3. _The unwarranted assumption that a disproportionate increase in population is sure to occur, gave rise to the subsistence theory, or iron law of wages._ This assumption is now seen not to correspond with what is occurring in the civilized world. A hundred years ago, however, when the poorer classes of Europe appeared to be increasing with little restraint, it was not strange that thinkers should look upon this increase as inevitable. According to the subsistence theory, the question of population was simply a question of food; it was believed that men surely would multiply up to the point where they could not further increase their numbers, and starvation wages would be the rule. It was this way of looking at things that gave to political economy the name of the dismal science. When population is limited in large measure by volitional means instead of by war, starvation, and other material means, the problem changes and the error in such a theory of wages becomes clear. [Sidenote: The standard of living, and wages] The "standard of living" theory of wages is a refined form of the subsistence theory. This theory is that wages must rise to meet the cost of any standard that the laborers may set, and below which they will refuse to multiply. This is probably a fragmentary truth, but is quite inadequate as a theory. A high standard of living and all the social institutions and customs that aid in keeping the population from too rapid increase, are factors in determining ultimately the marginal productivity of labor and, hence, the height of wages. If these restraining influences suddenly were withdrawn, a reduction of wages would follow slowly because of the diminishing returns of material agents. But the standard of living is merely a partial and negative factor. No limitation of the number of workers can raise wages above their productive contribution and, in the present state of industry, a considerable falling off in population might be expected to result in a loss of enterprise, of coöperation, and of capital. The positive factor in wages is productivity. [Sidenote: If labor increases faster than wealth, wages fall] 4. _An increase of population more rapid than that of the artificial industrial agents would reduce marginal productivity._ Labor makes use of many kinds of agents besides the so-called natural resources. If population is stationary while tools are allowed to wear out or if an increasing population, while opening up a proportionate supply of land for food, fails to accumulate a proportionate stock of other tools, the marginal productivity of labor must diminish. Labor would be more imperfectly equipped with spades, hoes, wagons, horses, cattle, machinery. These artificial agents help in getting not only manufactured products, but food products. The equipment of labor must keep pace with the number of workers or they will be forced to the lower, or less effective, uses in the tools. On the other hand, the growth of science and invention, and the growth of wealth faster than the population, equipping labor as it does with more efficient implements, cause the marginal productivity of labor to rise, and hence also the wages. [Sidenote: The wage-fund theory explained] 5. _The "wage-fund theory" was an imperfect perception of this truth that wages are influenced by the efficiency of the industrial equipment._ As the subsistence theory took a partial view, looking at agricultural land alone as the determinant of wages, so the wage-fund theory looked alone at a portion of the capital in the hands of employers which was the fund from which wages were paid. The large part played in discussion by this doctrine and the strong hold it had on thought is somewhat puzzling now; for if one begins to doubt its entire truth it is difficult to be quite just to its merits or to state it in a form that is plausible. The theory was that wages depended on the amount of capital that, in some way not clearly seen, was set apart by employers for the payment of wages. The capital making up the fund out of which wages were supposed to be paid, was only a very small part of all capital, even in the narrow sense in which that term was then used. It was assumed that this wage fund, once set aside, was necessarily paid out to laborers, wages being therefore determined by simple division: laborers were the divisor, the wage fund the dividend, and the average wage the result. When the theory is thus baldly expressed, it appears to begin and end on the surface of the facts; and the wage fund appears to be rather the arithmetic sum of variously determined payments than, in any sense, the cause of wages. [Sidenote: The wage-fund theory a partial truth] The abler wage-fund theorists did not fail at times to see, though too dimly, as the determining causes behind the employers' action, certain other things, such as the material facilities, the desires of consumers, the capabilities of the workers, and the resulting value of the labor. The element of truth which still should be recognized in this theory is that the relation of labor to its equipment influences its efficiency, and determines the part of the product to be set aside for wages. In that sense, wages are related to the abstinence of capitalists and to the supply of "capital," but capital understood not as a special fund of the employers, but, in a broader sense, as labor's entire environment of indirect agents. § II. RELATION OF TIME-VALUE TO WAGES [Sidenote: Labor may be near or far, in time, from gratifications] 1. _The services of labor, whether for one's self or others, have a more or less immediate relation in time to the gratifying of wants._ While all human efforts to which the term services is applied have a relation to wants, there is much diversity in their nearness to the gratification for which they are destined. The process may be technically roundabout, to use the language of recent economists. One may break a stick from a tree, pick up a stone and drill a hole in it, catch an animal, cut thongs, tie the handle to the stone, and use it as a weapon to kill other animals for food, the first step being taken with the last object in view. But a still more essential relation we have seen to be the relation in time. Some things, some goods, are used at once, some after a long interval; some are durable, others perishable. Labor produces a song or a glass of lemonade to be consumed on the instant; it is employed on bridges, monuments, railroads, or interoceanic canals lasting for centuries. In all these cases the general object sought is the same though very different intervals of time must elapse before the gratification matures. [Sidenote: All future products of labor are discounted to their present value] 2. _As different periods of time must elapse before services are enjoyed, the expected value of all products but those immediately available is discounted in advance._ The services that afford gratification immediately, and those that afford gratification at a later time, are judged and compared at one and the same moment. All economic life centers in the present. This difference in the time of services surely cannot be ignored. If Robinson Crusoe, at work on his island with his limited supply of energy, continues to provide for next year's enjoyment, neglecting the present, present goods become scarce and their utility rises as compared with the future goods the same labor secures. To escape inconvenience, and in the extremest case to escape starvation, Crusoe would be compelled to restore the equilibrium between the wants of the two periods by shifting his labor back to the present. So in each little economic group and in our complex society there is constant rivalry of present and future wants, competing for the limited present supply of labor. The present says, "Give me your labor and I will give you the fullest enjoyment." The future says, "I will give you a greater gratification, but you must wait for it." A given labor force thus making possible a wide range of choice among present and future services, labor is distributed according to the prevailing rate of time-value, which, as we have seen, is approximately expressed by the rate of interest. If the rate of interest is high, it means that the present is urgent and will not easily yield to the future. If the rate is low, it implies that the present is comparatively well provided for, and that future wants are given more consideration. [Sidenote: The employer adjusts his labor force to the interest rate] 3. _The employer in hiring labor and producing goods takes account of these time differences._ In the preceding paragraph has been noted the influence of time differences in the simplest problem of economic wages. Interest is likewise taken account of in the bargains between workman and employer, by which contract wages are fixed. The employer of labor works subject to a prevailing rate of interest. If he ignores it he must lose. He should direct a given amount of labor to products that mature next year only when their expected selling price is greater than that of products that can be marketed this year. This difference due to time can no more be ignored than can any other difference in the cost of products. If the employer keeps the future goods to sell later, they will normally increase in value as they approach maturity; if he markets the goods at once, he normally must pass on to the purchaser the benefit of the discount he has made on their future value. That is to say, it is not the employer of labor, the purchaser of labor as such, who gains by discounting the future value of labor; it is the investor of capital (whether employer or later purchaser) who secures the rent as it matures. [Sidenote: The discount of the future value of services is inevitable] 4. _Hence all wages paid for help on products that are remote are based on the present worth, or discounted value, of the future gratification to which the labor contributes._ The idea is held in one form or another by all radical socialistic writers, that the laborer does not get the full value of his products. In the sense that is here discussed, he does not. He does not get what the product will sell for in the future. He gets the probable future value at its present worth, discounted at the prevailing rate. That part of the employer's gains corresponding to this discount on labor is economic time-value. Nor is this discount of future services dependent on a political system or on private property or on the wage system, as some have assumed. It is a universal truth. It is in the nature of wants that present and future should differ. A communistic or socialistic state would have to take account of this difference, else the whole social economy would be irrational and there would be no principle by which to apportion in time the productive forces of the community. Contracts to pay interest and contracts to pay wages might be forbidden and made criminal by formal law, but time-value would persist. [Sidenote: Relations of wages, rent, and time-value] 5. _Wages and rent are coördinate species of the value problem; time-value is a different kind of problem, bearing to both the other problems a similar relation._ A close examination of the problems of rent and wages serves to bring out the close parallelism of these two forms of income as here defined. Rent is the value of the usufruct of wealth, wages are the value of the usufruct of labor. The bearer of the use in one case is material goods, in the other is human agents. Different in the source of use, they are in large measure alike in the form of contract, or nature of the calculation. Together rent and wages comprise the value of all currently arising uses; they are the two coördinate species of the genus "value of uses." The two groups of uses are closely interrelated in practice, each acting and reacting on the value of the other. Time-value is a different genus of the value problem. Having to do with time differences, it must be found in connection with every use that is not immediate, whatever be the bearer of that use. Its application to rent is more frequent and obvious, as only the uses of material agents are capitalized, that is, sold in perpetuity. Moreover any service of labor that is not at once consumed is fixed in material form and appears thenceforward as wealth whose uses are yielded as rent or as consumption goods. § III. THE RELATION OF LABOR TO VALUE [Sidenote: Several conditions of value] 1. _Labor is a cause, but only one of the causes of value._ A cause is some one condition which is seen to be necessary to the existence of a thing, and usually that condition which brings the thing about, other things being assumed. In what sense ought a cause of value be spoken of? In one sense it is in the minds of men--it is their wants; again, looked at objectively it is in the nature of the good--it is the quality that fits it to gratify the want. But if both these causes are operative, and labor is applied to fit goods better to gratify wants, labor appears as the cause of value. Personal causes are so much more evident, an explanation through personal causation is so much more satisfying in the earlier stages of scientific inquiry, that labor long continued to be looked upon as the one source of value. This erroneous view has never quite ceased to influence economic thought, and a great deal of effort has been directed to formulating theories of value based upon it. The cruder form of the error has now almost disappeared, but in various little recognized ways it still persists. [Sidenote: Two phases of economic production] 2. _Economic production is the origin, or genesis, of value finding its source either in objective things or in services._ The writers of fifty years ago defined economic production as the application of labor to the creation of wealth. But as there are two factors in production, man and material things, so there are two productive sources of value. In some cases the origin of value is attributable to man's action; in other cases scarce uses arise in objective things without man's action. Broad as is this definition of production, it does not include the enjoyment of free goods, as in the case of the care-free darky basking in the sun. Anything that, causing a feeling of greater importance to attach to a thing, changes it from a free good to a scarce good or makes it more scarce, is a cause of its value. A large rainfall causing a greater crop of grain may be thought of as producing utility. The regular surplus of value attributable to the waterfall or to the railroad, is the product of the material services of wealth. Production through human action is the more obvious and is the more usually thought of; the part of material agents must be recognized if the fallacies of the labor theory of value are to be avoided. [Sidenote: Labor applied to creating utility] 3. _Human activity is directed to shaping and arranging things so as to increase their want-gratifying power._ Human and non-human agents are combined in different proportions in various products. In one thing more land and machinery are used, in another more labor is used. But either of these two great classes of agents may touch the vanishing point in the production of value. While it is true that man's part is the most striking aspect of production, yet there may be value without labor. The study of rent puts this abstractly, but in a clear light. In actual life, however, a part of the value is usually attributable to rent, a part to labor. [Sidenote: Value of labor derived from its products] But in what sense is even this part attributable? Not in the sense that the labor is the original source of value which imparts that value to its products. The usufruct of wealth is the basis of rent; the need to pay rent is not the cause of value in the product. Likewise, product is the basis of wages, labor is not the origin of value. Labor, like the forces and qualities of wealth, is the cause of technical changes. These changes, if favorable, cause the goods to take on a higher value which is reflected back to the labor. The labor itself has not a predetermined, ascertainable value, but only a resultant, derived value. An exception to this statement appears on a superficial view of the value of labor hired under the wage contract to make a particular product. The labor having a market value because of a large number of well-known alternate uses, can be diverted to a particular use only on condition of a definite payment. Labor here, as viewed by the employer, appears to have an original value; products, a derived value. But in the logical view, labor is seen to impart technical qualities to the goods; in turn, the goods to impart value to the labor. Man hunts throughout industry for those things to which his labor can be applied usefully. He foresees in them the changes that will increase the value. It is only as he has judged rightly that the value taken on by the things is reflected back to the labor attributed to it. [Sidenote: No unit of labor to serve as a standard of value] 4. _Labor being of many qualities and receiving many rates of pay, there is no unit of labor that can be used as a measure of value._ The idea of finding in a "unit of labor" an objective standard of value to which the value of all other things could be reduced has been a very attractive one. This fallacious hope animates every one beginning to think of the value problem. The thought was so plausibly formulated by Ricardo that it continued for a long time to be the generally accepted doctrine of value. Although most writers reject the formal statement of the labor theory of value, use is frequently made, even now, of the phrase "unit of labor," suggesting the thought that labor is the standard by which the value of all goods may be measured. This unit of labor of the text-books may be seen to be either labor arbitrarily assumed to be of uniform quality and quantity, as a day of unskilled labor (in that form quite incomparable as to amount with other qualities), or a given amount of money invested in labor of different grades at its market value. It is only by expressing labor in terms of its value that the various grades of skilled and unskilled labor can be reduced to a homogeneous unit, which is but a unit of money wages. This should not deceive us into the belief that in any peculiar sense labor can be used as a unit of value. It is equally valid and convenient to speak of units of machinery and of units of land. In terms of capital a factory site can be expressed as a multiple of a potato patch not less perfectly than can a sculptor's labor as a multiple of a ditch-digger's. [Sidenote: Scarcity and utility of labor] Scarcity of things desired is the one objective condition of value. The things that labor can produce and the labor to produce them being scarce, labor takes on a value. All things at last become comparable in terms of psychic income in each individual's judgment, but as yet neither in this comparison nor in the market values that are fixed in exchange, has any absolute standard been found by which the utility of all goods or the welfare of all men can be measured. CHAPTER 25 THE WAGE SYSTEM AND ITS RESULTS § I. SYSTEMS OF LABOR [Sidenote: The wage system defined] [Sidenote: Never the exclusive form of organization] 1. _The wage system is the organization of industry wherein some men, owning and directing capital, buy at their competitive value the services of men without capital._ The wage system is a method of organization never found completely realized. A community made up entirely of independent small farmers, living each on his little patch of ground, does not have any essential feature of the wage system. So long as they continue to be independent small farmers, owners of small capital, self-employing workers, the wage system does not exist in complete form. Some men with capital in every community are working for wages, while others, as independent producers, are their own employers. Society is not sharply divided into two classes, one controlling all the working capital, the other quite without resources. The wage system may be spoken of as prevailing to-day not as the exclusive, but as the typical, or dominant, form, while side by side or along with it is found independent production. It is clear that the wages here spoken of are contract wages. The wage system implies a money contract between employer and employed. The relation or bond between them is that of a wage payment. The wage system cannot be judged properly apart from questions to be later considered, such as private property and the enterpriser's part in industry; but some consideration of the subject properly belongs here. The wage system has become of recent years in America the dominant form of industry. The theory of wages is applied most frequently in the discussion of contract wages, and there are certain practical relations between the results of the wage system and the theory of wages. [Sidenote: Workers subordinate in early societies] 2. _The wage system, historically considered, is seen not to have displaced a system of independent labor._ This question should be viewed in historical perspective. As far back as history can be traced, the masses of workers have been subordinate. Civilization began with direction, with obedience to superiors on the part of the mass of men. Within the family, in the rudest tribes, the women and children were subject to the will of the stronger, the head of the family. Among the Aryan races the family system was widened, and the patriarch of the tribe secured personal obedience and economic service from all members of the community. Chattel slavery, the typical form of industrial organization in early tropical civilization, seems to have been one of the necessary steps to progress from rude conditions; students to-day incline to view it as an essential stage in the history of the race. But as conditions changed with industrial development, chattel slavery became a hindrance to progress, a disadvantage to higher industry. [Sidenote: Place of the workers in the Middle Ages] 3. _Serfdom for rural labor and many limitations on the workman's freedom in the towns, were the prevailing conditions in medieval Europe._ Serfdom was both a political and an economic relation. The serf was bound to the soil; the lord could command and control him; but the serf's obligations were pretty well defined. He had to give services, but in return for them he got something definite in the form of protection and the use of land. Between the lord and the serf continued a lifelong contract, which passed by inheritance from father to son, in the case both of the master and of the serf. In the towns conditions were better for the skilled workmen, but many things bore heavily on the mass of the workers shut out from special privileges. There were strict rules of apprenticeship; gild regulations forbidding the free choice of a trade or a residence; laws against immigration; settlement laws making it impossible for poor men to remove from one place to another; arbitrary regulation of wages, either by the gilds in the towns or by national councils and parliaments, forbidding the workmen to take the competitive wages that economic conditions forced the employers to pay; combination laws forbidding laborers to combine in their own interest. It is not an attractive picture, but, as far as is possible in a few words, it is a truthful picture of the conditions that existed before the coming of the modern system. [Sidenote: The wage system not the main cause of present evils] 4. _Many continuing limitations on the freedom of the worker are not the results of the wage system or a part of it, but are opposed to its complete workings._ The worker's ignorance is a limitation, preventing the choice of an occupation for which he might naturally be fitted. Neglect of children by parents is a limitation, preventing industrial training and the development of qualities that would make it possible for the child to excel. The faults of human nature cannot be attributed to any "system"; and if they are remediable, it is by education and better social opportunity. Trade unions often forbid boys to become apprentices, and forbid the choice of a trade except under conditions so exacting that to many they are impossible. Such limitations are made by the privileged few in their own interest, but they are annoying and opposed to the interests of the many. The typical wage system would be one in which all such hindrances were lacking, in which there were no social or political limitations on free competition except such as would help in educating and training the worker. The wage system should be judged by what it is, not by things directly opposed to its spirit. § II. THE WAGE SYSTEM AS IT IS [Sidenote: Merits and faults of the definite wage payment] 1. _Under the wage contract the worker gets in a definite sum at once the market value of his services._ Under the wage contract the employer takes the risk as to the future selling price of the product. That he is the one best prepared to assume the risk will be made clearer in the discussion of the employer's function. Wage payment, therefore, is a form of insurance to the workingman; he gets something definite instead of taking chances he is ill prepared to take. Wage payment is a form of credit to the laborer whose labor has not yet produced the distant gratification. The employer advances to the workman the value of the future gratification, discounting it at the prevailing rate of interest. The darker side of the wage bargain is that the "cash nexus," as Carlyle expressed it, is too often the only bond between the parties. When the wages are paid, the employer considers his obligations discharged. There is a lack of fellowship and sympathy in it all. Work should be a bond of communion between men, but as it is, the laborers in some great factories and their employers live in entirely different worlds. The great inequality of their condition makes mutual understanding difficult. They are master and man, "boss" and hireling, not co-workers, each with a worthy part in the noble tasks of industry. [Sidenote: Strength and weakness of the worker in competition] 2. _The wage-earner gets the competitive value of his services, securing in most cases much more than a bare subsistence._ At the present time competition is in a large measure active among employed as well as among employers. A believer in the subsistence theory of wages must, under these conditions, expect wages to fall to the starvation level. But according to the law of wages here presented, it is to be expected that wages can and will remain indefinitely above that level, falling or rising as conditions change. The increase in material wealth of itself tends to increase the wages of the workman. The laborer, though without resources and even though not contributing to the increase of capital by saving, thus shares in the benefit of increasing capital. It is true that under some conditions the workman is at a disadvantage in making the wage contract; labor must be applied from day to day or it is lost, and the laborer must work to live. While this does not determine the rate of wages in the long run in any occupation nor to any great extent except among the lowest grades of labor, it does give an advantage for the moment to the employer, and enables him to exercise at times a harsh power over the workmen in his immediate neighborhood. A single workman is thus very often at a disadvantage, but it must not be overlooked that in a large degree the competition for good workmen is effective between employers in different trades and in distant localities. [Sidenote: Wages as affecting the ambition of the worker] 3. _Increase of efficiency due to the sacrifice of parents or to personal exertion, goes to the individual worker._ The most essential practical feature in any industrial system is the appeal to the ambition of each man. This appeal is made where a premium is placed on increasing efficiency, by insuring to it a higher return. This result is possible and in large measure is attained under the wage system. Little less important is the appeal to family affection to make possible by its sacrifices each worker's best preparation. An offsetting disadvantage appears in the loss to the laborer in the decline of his powers. As he gains in wages if he increases in efficiency, so he loses if his strength fails from accident or in the course of years. This loss falls upon him, not, as is sometimes said to have been the case under serfdom or slavery, upon his owner (as if that secured to the slave immunity from suffering). It is true that in general under the wage system the worker has no guarantee against loss of work or, what is equally important, against sudden changes in industry. He may be, and often is, a victim of invention and of changes in machinery or industrial processes, by which the masses of men are the gainers. [Sidenote: Large liberty of the wage-worker] 4. _Liberty of the worker in his choice of work and outside of working hours makes for happiness, character, and progress._ Opinion is almost a unit as to the truth of this statement. The present wage system is the freest condition for the mass of men that ever has existed. Their religious, political, and personal convictions, are for the most part inviolate. There is a true but much misused maxim that liberty has its dangers. Freedom means freedom to make mistakes. Intelligence and strong industrial virtues are required to exercise properly a freedom newly acquired. Thus it is the lowest class of labor that reaps the smallest advantage from free conditions, and that suffers most from their misuse. [Sidenote: Limits to the worker's liberty] The main evil in the wage system is certainly not that the liberty of the worker is too great, but that it is too small. The sale of labor involves the obeying of orders during certain hours specified in the contract. Here again the evil is greatest in the lowest grades of work, while the great majority of wage-earners are left a large measure of choice in the time and manner of their work. Where labor is severe and without joy to the worker, it appears to be little better than a form of slavery. Contrast the condition of the section hand, cursed and beaten by a brutal foreman, with that of the wage-earner in the locomotive-cab, self-respecting, self-directing, and trusted with the safety of property and lives. The wage system is manifold, it is adaptable. If it holds a portion of the laborers with a harsh hand, it gives to all a wide measure of opportunity, and to most a great degree of independence in their lives. A hasty resort to indiscriminating analogy, as in calling wage-work "slavery," does not further truth or social justice. § III. PROGRESS OF THE MASSES UNDER THE WAGE SYSTEM [Sidenote: The rise of money wages] 1. _The nineteenth century was a period of great progress for the masses in America, England, and throughout Europe._ There are differences of opinion as to the extent of this progress, the way in which it is to be measured, and the degree to which it is an occasion for congratulation. There is no longer any dispute as to the actual fact that it has taken place. Many lines of evidence converge to confirm this one conclusion. The average money wages in the United States may be represented in 1840 by 87.7, in 1860 by 100, and in 1891 by 161.2. This was the high mark for a time and a decline followed. Again wages rose from 1897 on, and in 1899 had reached 163.2. They have continued to rise since and in 1903 attained the highest point in the history of our country and therefore in the history of the world. Another temporary decline undoubtedly will occur when industrial conditions become less prosperous. [Sidenote: Changes in real wages] Real wages, also, the power to purchase goods with labor, are greater than ever before so far as this can be measured in the price of leading commodities. The offsetting loss of the free health-giving pleasures of country life cannot easily be expressed. In England likewise the rise in money wages has been great. In 1860 it is represented by 100, in 1870 by 113, in 1880 by 125, in 1891 by 140, in the intervals some decline occurring. For a century in all civilized lands wages have moved in an ever-rising series of waves. The purchasing power of wages in England increased ninety per cent, in the thirty years between 1860 and 1891. Throughout Europe the same general change is seen, going always hand in hand with new industrial methods and the displacing of the old agricultural system by the wage system. As the hours of labor have at the same time been shortened, the workers have gained doubly. [Sidenote: Need of a broad explanation of rising wages] 2. _This progress is mainly due to the opening up of rich natural resources and to the development of industrial processes._ Recognized in some measure by every one, this progress is attributed by different observers to different causes: in America, by many to the protective tariff; in England, by many to the freer trade introduced about 1840; throughout the continent of Europe, to the spread of constitutional government and free institutions; by trade-unions everywhere, to the organization of labor. There is, doubtless, under certain conditions, some portion of truth in each of these claims. But, either separately or altogether, they fall short of a broad, reasonable, and sufficient explanation. The two-fold proposition just presented, the justification for which has been given in preceding chapters, points to a general and adequate cause. [Sidenote: The gloomy view as to the wage system was mistaken] Seventy-five years ago it was thought that, with the increase of machinery, of factories, of the concentrated control of wealth, and especially with the wage system, there must go a steady depression in the welfare of the workingman. This idea was connected with the iron law of wages. It was believed by some that, whatever the causes of advancing social income might be, the wage system would rob the wage-earners of all share in progress. In view of the facts, if it cannot now be asserted positively that the wage system is the cause of all the gain, it can be asserted negatively that it is not inconsistent with great progress on the part of the laboring classes. It might be possible to go further and to maintain that the organization of industry, under the wage system and competitive conditions, by its encouragement of enterprise, energy, and economy, has been an indispensable condition in the industrial progress which has in turn made possible the rising wages of labor. [Sidenote: More workers now in better-paid callings] 3. _The increased proportion of workers in the higher occupations means a further rise in the average condition of the masses._ A smaller proportion of workers is now engaged in the low-paid industries than fifty years ago, and a correspondingly larger proportion is in the better, or highly paid, industries. Decade by decade the proportion shifts toward the upper part of the scale. Both in America and in England (doubtless also in other countries) more men are now engaged in the higher professions and skilled occupations, a smaller proportion in the lower occupations. This would raise the average of wages even if the wages of particular occupations had not risen. [Sidenote: The masses gain by general social advance] 4. _The diffused advantages of progress mean relatively more to the masses than to the rich._ In the olden days the poor man was bound to the spot where he lived, the rich man had his carriage; to-day poor and rich ride side by side in the trolley car. The introduction of these cheap methods of enjoyment means relatively more to the poor. Better medical care, better sanitation, more abundant food, clothing, comfort, free schools, and libraries have all a part in this movement. The enormous possibilities in these lines are just beginning to be realized. The achievements of the last twenty years read like a story from fairy-land. It tells the leveling up of the conditions enjoyed by the common man. [Sidenote: Better social conditions must grow out of the wage system] [Sidenote: Improvement in the wage system] 5. _Any sound method of improving social conditions must grow out of experience, not break with it._ Even if things were on the downward instead of the upward road there would be no excuse for wild speculation. The only rational way is to find what is good in what is, and build upon it. There can be no excuse for suggesting a method from imagination. Projects of social change must be tried by successful experiment, and gradually fitted to present needs. It is in this way that the higher forms of life have developed; it is in this way that social and political institutions have come into being. Things that work successfully first in a small way are worthy of trial on a larger scale. The wage system is a favorite object of attack for radical social reformers. It has many unlovely features and there are many individual cases of hardship. It may well be asked, What method shall be pursued to reform it? Its retention, however, is not inconsistent with very great changes in the present political and economic arrangements. The impersonal economic forces are working for improvement; but further, there is a growth of sentiment, an increase in sympathy, a feeling among men that the "cash nexus" is not the only bond that should unite different classes, and this sympathy is becoming an economic force, softening and improving many of the most unlovely features of the modern wage system. CHAPTER 26 MACHINERY AND LABOR § I. EXTENT OF THE USE OF MACHINERY [Sidenote: Tools, machines, and power] 1. _A machine is a mechanical device by which power is applied in an automatically repeated manner, to change the place or form of things._ It is not easy, perhaps not important, to distinguish the machine from the tool in every case. Tools are portions of matter, such as bone, wood, iron, which man guides and directs in applying his energy to things. A machine may be used by the foot, but the hand is the great tool-using member. In many cases there is a clearly marked distinction between tool and machine. A simple, single piece that can be taken into the hand, as a spade, a hammer, a knife, is a tool; a combination of wheels, levers, pulleys, etc., is a machine. The simplest machine is but a slight adaptation of the tool, by which power may be applied in an automatically repeated manner. The drag develops into the cart, a simple machine. The spinning-stick, a tool used in ancient times, developed into the Saxon spinning-wheel of the sixteenth century, the form used when America was colonized. The use of power derived from nature, as that of wind and water and steam, while not the essential mark of machines, is the most characteristic feature of their modern development. Hand-machines, such as the hand-press and the type-writer, have had important industrial results, but it is the use of power leading to the concentration of industry and the ownership of machinery by the employers that has the greatest significance in the modern economic problem. [Sidenote: Machinery brought in an industrial revolution] 2. _Machinery of many sorts has long been used, but the "age of machinery" begins with the eighteenth century._ Inventions, new machines, and new processes, though not frequent, were not unknown in the Middle Ages; but no one class of machines took possession of a whole field of industry and gave rise to a great economic problem by the displacing of labor. The great industrial changes in the Middle Ages generally grew out of political changes, or of changes of routes of trade whereby large industries were disturbed, or of changes in the use of land through new methods and the bringing into use of land in other places. The industrial changes in England at the end of the eighteenth century on the contrary were due mainly to great mechanical inventions. The development of the textile machines for cotton and wool spinning and weaving mark the beginning of the movement. Here for the first time were inventions in such numbers, of such a nature, and under such conditions, that they were rapidly and widely applied, affecting the lives of a great number of workers. The steam-engine at the same time opened up the long line of mechanical inventions by which wood and iron are shaped and wrought, and the iron industry underwent notable developments. Since that time, have taken place in all Western countries that rapid expansion in the use of machines and those notable changes in industrial organization which distinguish our era from all others. [Sidenote: Increased use of power] 3. _Machinery is applicable in very different degrees to the different processes and industries._ Machinery can save much labor in some directions, little or none in others. It is especially adapted to the application of power. In the United States, in 1870, in manufactures alone, two and one third million horse-power were used; in 1900, eleven and one third million, the increase being five-fold. It is said that in the world, in 1870, three and one half million horse-power was furnished by stationary engines, ten millions by locomotives. Probably to-day the total is four-fold as great. [Sidenote: Machines can best be used in manufactures] Machinery is applicable with especial advantage to industries that change the form of materials easily transported and widely used. There must be a large output to justify the use of machinery. In 1840 a man's work in spinning cotton was three hundred and twenty times as effective as in 1769, in 1855 it was seven hundred times; and though the rate of improvement is diminishing, to-day the productivity of such labor is still greater. Similar examples are found in the manufacture of shoes, and in all varieties of wood- and iron-work. Machinery is most applicable where there is a compact plant; not so easily where the power has to be distributed over a wide area, unless a special track can be provided. [Sidenote: Not to so great an extent in agriculture] Machinery, therefore, has affected manufactures much more immediately and greatly than it has agriculture. It has not as yet, for example, been found practicable to apply steam to ploughing to any great extent. As the profitable use of most farm machinery requires a level surface and a large area given to a single crop, it cannot be used as well east of the Alleghany Mountains as in the Mississippi Valley, and it is still uneconomical in large portions of the civilized world. Despite this difficulty the methods of the farmer of to-day contrast strongly with those of one hundred or fifty years ago. Planters and seeders, reapers, harvesters, corn-shellers, hay-loaders, automatic unloading-forks, elevators, water-power-, steam-, and gasoline-engines allow great economies. The labor needed to produce food for one hundred people is a fraction of what it was one hundred years ago. In many other industries machines are usable only in a slight measure, indirectly, or not at all. They are of the least assistance in the personal services, and in the work of the thinker, the teacher, the speaker, and the artist. § II. EFFECT OF MACHINERY ON THE WELFARE AND WAGES OF THE MASSES [Sidenote: Evil of sudden introduction of machinery] 1. _The immediate effect of improved machinery, if suddenly introduced, is almost always to throw some men out of employment._ Any sudden change in industry injures men who have become adapted to the work that is affected. A well-mastered trade, a wage-earning though intangible possession, may be made suddenly valueless. Men cannot quickly change their methods of working or their place of work. This is as true of change brought about by new trade routes or by scientific discoveries (where machinery does not enter in) as in the case of labor-saving machines. If machines displace labor rapidly, men who cannot adjust themselves to the new conditions suffer, and there are always some who cannot adjust themselves, always some who suffer. It is rarely possible for a man past middle life to shift over into a new trade where his efficiency will be as great and his pay as high as in the old. New methods of puddling iron sent many old men into the poorhouses of Pennsylvania only a few years ago. Even where the total employment increases, the individual sometimes suffers. The increased demand resulting from the cheapening of a product may call for more workers than were employed before the new machinery came in, and yet some of the former workmen may be thrown out of employment. The introduction of the linotype is said to have displaced a large number of hand type-setters, but to have increased greatly the amount of printing. As the machines are expensive and cannot be worked properly by men not highly expert, men past thirty-five years of age have not been allowed to learn their use. [Sidenote: Loss falls on the less efficient workers] The least efficient men in any trade always suffer most. The change crushes hardest the man at the margin of employment. The more skilled workman can hasten his pace and still earn a living wage in competition with a machine, while the less skilled can but drop out entirely, innocent victims of an economic change, sacrifices to the cause of industrial progress. Happily such pathetic incidents are relatively not numerous. Most machinery is introduced in commercial centers, and gradually spreads to other factories in such a way that most men can adapt themselves to the change. The effect of machinery must not be judged by the extreme cases. It was found that there were more hand-looms in use in England in 1850 than fifty years before, though in the meantime power-looms had displaced the hand-looms in all the great factories. [Sidenote: Error of the "lump of labor" notion] 2. _After time for adjustment, the total sum of employment is as great as before, but the labor is differently distributed._ The "lump of labor" idea, as it is called, is widely held, especially among workingmen. The notion is that there is exactly so much labor predetermined to be done; therefore, if machines are introduced, there is that much less for men to do. The logical conclusion easily drawn is that every machine reduces wages. Few, however, would go on to the further conclusion that in the aggregate the existing machinery, like an enormous vampire, is sucking the life-blood of the working-people,--though traces of such a notion frequently appear. [Sidenote: Effect of machinery varies in different industries] If extreme examples are taken, it may be made to appear either that an increase or that a decrease of employment results from machinery. Industries grade off from those that are capable of developing a greater and greater demand, to those at the other extreme that are capable of a very slight increase, as a result of a lowering of the price. There seems to be practically no limit to the consumption of textiles, provided their price falls; the demand for dress alone is indefinitely expansible. Queen Elizabeth, who had a different dress for every day in the year, has many potential imitators. There is a constant increase relatively, as well as absolutely, in the number employed in transportation, as each census shows; there are more railroad men relatively than there were stage-drivers and teamsters before the day of railroads. The number of people now engaged in printing books and papers is larger by far than in the days when all the books of the world were written by the old monks in their cloisters. The proportion of workers in agriculture, on the other hand, is less than it formerly was. In part this is a change in appearance only, for the farmer once made a large part of his tools which are now made by workers employed in manufactures, yet who in a very real way are aiding in agriculture. In part the change is, however, the effect of the use of machinery and other improvements in agricultural processes. The amount of raw-food products required for each hundred persons is quite inelastic. As it becomes possible to expend more for food, the change is made in quality, variety, flavor, rather than in quantity. The greater part of the saving in the cost of food is, however, expended in other products, and the labor saved in agriculture finds employment in supplying these rising wants. In other cases also, new industries are made possible as machines liberate energy from the production of the more necessary goods. At each census it is necessary to change the schedule of occupations, because men have adopted callings unknown before. [Sidenote: Abnormal effect of the new machinery in England] 3. _In some cases the introduction of new machines injures particular workmen._ The only reason for the use of machinery is to improve the quality or to lower the price of products. If the workers can do nothing but blindly pursue the same tasks, it is to be expected that the wages of hand-labor will fall in a particular trade into which machinery is suddenly introduced. When, as sometimes happens, employers introduce machines for the immediate purpose of breaking a strike, the workmen are convinced that machinery is the enemy of labor. Because the extensive introduction of machinery in England was at first accompanied by the unhappy result of a lengthening of the hours of labor in factories, this result was deemed to be necessary in all other cases. It was in fact quite abnormal, and has not been seen elsewhere. The owners of factories wished to keep their machines employed as many hours as possible; the laboring classes of England, being at the same time demoralized and depressed by industrial and social influences that had no logical connection with machinery, had no power to resist this movement. In all other countries of Europe and in America, where the introduction of machinery has been more gradual and normal, it has been followed immediately by a shortening of working hours, as eventually it was in England also. [Sidenote: Higher wages logically result from the use of machinery] 4. _Indeed, the economic effect of improved appliances is logically and inevitably to raise wages._ It has been shown above, in the discussion of wages, that if the efficiency of machines increases faster than does the number of workers who use them, the marginal application of labor stops at the higher uses or services of agents and is not forced to the lower. The more perfect the economic environment, the higher the incomes even of those who own no part of the machinery. A part of this benefit may appear in the form of higher money wages received, a part in the form of the lower price of things bought. Real wages are the essential thing, and as a consumer the laborer shares with every other member of society in the benefits of improved machinery. The benefits resulting from greater abundance are diffused, and as goods are brought from the high, or scarcity, end of the scale of value down toward the level of free goods, everybody gains by the abundance and cheapness. [Sidenote: Some grades gain more than others] The general, or average, gain is not to be judged by comparing the conditions of the lowest grade of society with those of fifty years ago, for while that grade may have been bettered only a little, it has been possible for large numbers to rise to higher grades because of the use of machinery. The physical tasks are to-day much lighter than ever before, and a larger proportion of society is engaged in industries that require skill and thought rather than physical labor. That portion of the work is being more and more shifted upon machines. It is important, though, to distinguish between classes of workers in judging of the benefits and evils of machines. A machine is "an iron man," it has been said, and comes into competition with other men to lower their wages by outworking and underbidding them. But this iron man can do only automatic tasks; it is not capable of exercising judgment. Every intelligent laborer who can adjust, adapt, fit himself for more intelligent action will rise above the machine and profit by its presence. But the crude physical labor which can compete only on the plane of automatic machines, must find its field of employment more and more hedged in. If the wages of unskilled labor are not depressed, it is because of the enterprise of others who rise to more skilled employments and thus reduce the competitors of the lowest rank. [Sidenote: The growth of factories] 5. _The early effects of the factory system on the health, intelligence, and morals of the workers often have been bad; but not necessarily the abiding effects._ Some kinds of machines can be more profitably used when they are grouped in great factories, and, where this is common, it is spoken of as the factory system. In the ideal modern factory (realized in few cases) each smaller machine is a part of a larger organization of machinery, so perfect that the material goes in at one end of the building and out at the other without the loss of a single motion. Factories compel great numbers of laborers to live near each other and to work together. The sudden crowding together of people into new social relations is usually bad for morals. Men are moral under the eyes of their neighbors, acquaintances, and families; habits become adjusted to right standards, and the temptations in new conditions are always great. Until of late, engineering science has not been able to deal with the problems that arise where population is densely crowded, and the early factories with their surroundings were most unsanitary. Under the degrading conditions that resulted in some places, especially in England, the effect of machinery on the intelligence of the workers was bad. Whether this is its natural result is debatable, but the factory worker in general does not appear to be less intelligent than the agricultural worker. The alertness of the city dweller is due doubtless to social contact more than to the immediate work he does. This work may or may not be less thought-awakening than work with simple tools. There is a general improvement along all the lines of intelligence, morals, and health. The conditions in the cities as regards health and morals are approaching those of agricultural communities. While many factory districts are forlorn, there may be seen around many factories more happy conditions, better buildings, better sanitation, increased leisure for workers, workmen's clubs, educational agencies, and many other evidences of civic and social progress. [Sidenote: Problems of large industry] 6. _The great social consequences flowing from the concentration of industry and wealth are the most serious problems in the relation of machinery to labor._ The ownership of tools was widely diffused in medieval times. It is not yet evident how many can own a share in great factories, but the control drifts into few hands. It is not yet clear what social effects great corporations will have on our democratic institutions. Many problems of large industry remain to be solved in the near future. The question in the old form, as to the effect of machinery on labor, is no longer open. It has been clearly answered by experience and explained by theory: the economic effect of machinery is to lift the productiveness and efficiency of the average man. The benefits are unequally distributed, but nearly all share in them to some degree. The question which the future will have to answer is, What will be the social and political effects of the great fortunes that have been made possible by the enormous development of machinery? CHAPTER 27 TRADE-UNIONS § I. THE OBJECTS OF TRADE-UNIONS [Sidenote: Definition and purposes of trade-unions] 1. _A trade-union is an association of wage-workers for purposes of mutual information, mutual help, and for the raising of wages._ The term trade-union is used in a general sense both of combinations of workers in the same trade, and of men in different trades, though usually the latter are called _labor_-unions. The "Knights of Labor" is a good example of the labor-union, the "American Federation of Labor" of a combination of trade-unions. The Knights of Labor is composed of local branches to which workers of every class except lawyers and saloon-keepers are admitted. The Federation of Labor, however, is composed of chapters, or lodges, that are homogeneous, all the men of each lodge being in the same trade. The definition given is broad enough to include the various degrees of help given and the various methods adopted by trade-unions to accomplish their objects. Trade-unions are mutual-benefit associations: insurance against accident, sickness, death, or lack of employment, forms an important part, and in some cases almost the whole of their work. All unions in a measure serve their members as employment bureaus, while in some unions this is a most important feature. Through trade-papers, correspondence, and personal meetings, information is exchanged regarding trade conditions, and great mutual service is thus rendered. But a great deal of the help given is in the more impersonal economic ways: help to get from the employers better wages, to secure shorter hours, to improve in various ways the conditions of employment. [Sidenote: Lack of personal touch between employers and workmen] 2. _The organization of workers has resulted from the separation of the economic and personal interests of employers and workmen._ The control of industry has become more concentrated during the age of machinery, and this has reduced the feeling of economic unity among the different ranks of industry. There is now to the average workman no possibility of becoming a master, an employer. The largeness of industry forbids, moreover, the meeting and personal acquaintance of employer and workman which were before possible. Misunderstandings grow when men cannot talk over their differences. The social chasm has widened between the workmen and the responsible director of industry. As a result of these changes, the attitude of the employer very often has become that of the buyer of labor as a mere ware. He has with the mass of his employees no personal relations whatever. Under these conditions, when the employer feels the presence of competition, he is more likely to force the lowest wage that is possible. It is not unusual for the immediate direction of factories to be intrusted to paid managers, who are responsible to the stockholders and whose work is judged only by the dividends they succeed in earning. Many examples might be found where the managers or the resident owners have wished to pursue a more liberal policy than the absentee shareholders would permit. [Sidenote: Lack of personal acquaintance among workers] 3. _The need of organization of labor has grown with the growth of factories and with the loss of personal touch among the workers._ This is another aspect of the point just mentioned. The smaller the number of employers, the easier is it by an understanding to suppress competition on their side. If there is only one factory of a kind in a town or city, the employer is able to drive a harder bargain with the worker. Especially in times of industrial depression is a change of employment difficult for the laborer; it involves much risk, and loss of time and money in moving. In the long run competition must be felt even in such cases. The unfair employer will find his workmen drifting away, his force reduced in number and quality, and his evil reputation going abroad among workmen. But there is a great deal of friction in this adjustment and the loss falls largely upon the workman. In a large industry, especially, the workers have no personal acquaintance with each other, nothing to give them a sense of unity and power. In the old-fashioned shop, with its close association and its interchange of views, could grow up a strong public opinion; but in the wilderness of a modern factory the worker may be unknown in name and character to the man who touches elbows with him. Moreover, in America differences in nationality and in speech among immigrant workers is often an effective factor in preventing the assertion of their interests. There is an analogy (though it is only an analogy) between these conditions and the political conditions that have led pure democracies to give way to representative governments. So long as a community is small and men know each other personally, there may be popular government, but when the number becomes larger the only way in which public opinion can be concentrated and made effective is by delegating the functions of government to representatives. [Sidenote: Main objects of trade-unions to-day] 4. _The main objects of labor-unions to-day are to improve conditions in their working places, to maintain or increase wages, and to shorten working hours._ Better conditions of safety and sanitation in their work were not the first thought of the unions. The workers, as a result of habit and ignorance, were strangely unconcerned about this matter. Reforms in this direction at the outset had to come largely from sympathetic observers. But since better ideals have been developed, organized laborers strive to improve the sanitary, moral, and other conditions in the places of work. Their main object, however, was for a long time to raise wages, or to resist any decrease. Shorter hours have been a prime object of recent years, and almost coördinate with that of higher wages. The eight-hour movement has declined somewhat of late, but a few years ago it seemed possible that the eight-hour day would become the rule. This aim has never been lost sight of, however, and now and then another step is taken toward it. Labor leaders have repeatedly asserted in recent years, when the two demands have been made together, that shorter hours were more desirable than increased wages. § II. THE METHODS OF TRADE-UNIONS [Sidenote: Organized labor seeks to prevent competition among workers] 1. _The union's first aim is to get control of all the labor force in the market, and to minimize competition among workers._ Every labor federation aims to extend its control to every branch of its trade. A sense of wrong is one of the strongest forces to bring the workers into the organization. The appeal to a common interest is effective in times of great grievance, as it was effective in the dangerous times of the American Revolution, though failing during the Confederation. The unwilling are first persuaded, then coerced by threats, by petty persecutions, by the most cruel of all peaceful weapons, social ostracism, and finally by personal violence. The "public opinion" and class feeling fostered among workers by their organization are analogous to the sense of patriotism and loyalty in the country at large, and at times displace it, as is seen in the opposition to the militia and to the maintenance of public order at times of strikes. The individual who declines to enter the union is denounced as a traitor and made to feel the scorn of his associates. When all these measures fail, pressure is brought to bear upon the employer to get him to force the unwilling workers into the union. [Sidenote: The union seeks to secure the full competitive wage] [Sidenote: And as much more as possible] 2. _Its next aim is to use collective in the place of individual bargaining, to force as much as the competitive wage, and more if possible._ The term collective bargaining has been much used to describe bargaining between a group of labor leaders, the delegated representatives of the workingmen, and a group of employers or directors. It is sometimes claimed that all the trade-union seeks is to put the workman on an equality with the employer in bargaining, enabling him to get all he would if competition were free on both sides. It is said that organized labor simply prevents the employer from following the maxim of Napoleon to "divide and conquer," from meeting his employees one by one and forcing his own terms upon them. But the most effective argument in organizing the trade-union is that it forces a higher wage, more than the market would warrant. It is sometimes assumed by labor leaders that competitive wages would be very low, almost starvation wages, and anything above that level is credited to the work of the union; while in other cases where the wages are already large, the purpose frankly avowed is to limit the labor supply in the particular trade and to force a monopoly wage by any means possible. One's opinion of trade-unions is likely to differ according as they work in one or the other of these ways. The impartial onlooker sympathizes with the efforts of the trade-unions in so far as they serve merely to put the workers on an equality with the employers in bargaining. The public wants to see "fair play," and up to a certain point the union is merely a device to get fair play. But if the union is a device to defeat competition, to force artificially high wages, it will be judged differently. The public readily sees that if the unions force more than a fair and open market affords, it is rarely at the expense of the employer; that in the long run it is at the expense of the purchasing public itself, including the unprivileged workmen shut out from the monopoly of labor. [Sidenote: The issue of the closed shop vs. the open shop] 3. _In order to accomplish their ends, the trade-unions seek to control their employers' business in various ways._ They demand, first, that no non-union men shall be employed even at union wages; they demand that the employer shall help them to force his employees into the unions. In this very usual demand for the "closed shop" or "union shop" the public can see very little justice. On this point, nearly always, unions forfeit in a strike the sympathy of the public; yet the unions assert that it is almost absolutely necessary to gain this point in order to carry out their objects. If a union and a non-union man work side by side there are many ways in which the employer may make the union man suffer. If business slackens, it is likely to be the union man that is discharged; if any preference is given, it is to the non-union man. Certainly all will agree that if the unions are to get the strength to enforce _all_ their demands it is essential that they make good this claim which leaves the employer almost helpless. Yet it certainly is not essential to the accomplishing of valuable services for the members of the union. The educational and mutual-benefit features are attained without this means; and much experience shows that, if their cause is strong, the organized men can carry with them a large proportion of the workers and the sympathy of the public in a contest for higher wages. It never has seemed to any considerable portion of the public any more desirable that organized labor through its officers should be able to dictate to employees, than that employers should crush the workmen. It is by just this assumption that union advocates beg the question of the "union shop." [Sidenote: Other limitations put upon industry by unions] Further, the unions direct and control the employment of labor, often limit the number of apprentices in a trade, and assume to determine who shall enjoy the privilege of learning it. They limit the output, fix the maximum amount, and forbid the use of labor-saving machinery. Whenever the unions are charged with these acts, labor leaders either deny the facts or avoid giving a direct answer, but there is no doubt that the charge is true in many ways and in many cases. The requirement that each special kind of work shall be controlled by a special trade, and disputes between rival trades, for which their jealousies are responsible, give rise to great annoyance, expense, and loss to employers and to the entire public. [Sidenote: The strike and the boycott] 4. _The strike is a threat and a mode of attack to enforce the demands of the union._ To most newly organized laborers the union appeals mainly as an instrument for striking, for threatening the employer or for making him suffer. When a new union is formed, it is nearly always dedicated by a strike, which is the simultaneous stopping of work by a number of workers. A strike is intended to force the employer to grant the wages and conditions demanded. Its effectiveness lies in the injury which it occasions or threatens in the stopping of machinery, the ruin of material, the loss of custom, and the failure to complete contracts undertaken. Its success being dependent on the inability of the employer to fill the places of the strikers, their energies are bent on persuading or coercing other workers from taking employment. There are many ways of coercing workers without personal violence. Public opinion does much, and probably the severest of all coercive measures is the social ostracism of the worker. What may be called the endless-chain boycott is an excommunication, without measure or limit, of the non-union worker and of every one in any way befriending him or the employer. So far as in their power lies, the enraged strikers dissolve the very bonds of society, brother casts off brother, and mother disowns son. The unhappy conditions in the coal regions in 1902 rivaled the tragedies of civil war. A reasonable use of the boycott, refusal to maintain social relations with the person who offends one, is doubtless a part of personal liberty; but the boycott, as experience shows, has moral limits, and it should have strict legal limits. Its use beyond the moderate limit of the first degree of personal relations is antisocial to the degree of criminality, whether it be used as the weapon of organized workers or of organized wealth. [Sidenote: Violence in strikes is mob law] When peaceable means fail, often there is a recourse to violence both against the employer and his property and against the non-union men. The evils of violence in strikes often are tardily recognized by the public, whose sympathy up to a certain point is with the striker as "the under dog." It is slow to realize that strike violence is mob-law. Whenever men of one group assume the right to coerce forcibly and to wreak their hatred against one of their fellow-workers, it is a blow at political liberty. No free society can safely go the first step in permitting one group of men to usurp control over others in this way. [Sidenote: Costliness of strikes] 5. _The great losses caused by strikes are the penalty of an unsolved industrial problem._ The losses to workers in wages, to employers and to investors in income and property, and to the public in interruption of business, aggregate an enormous sum. It is, however, impossible to estimate it at all exactly, as the losses are in many cases indirect and intangible. The strikers are concerned not with the balance of total losses and total gains to society as a whole, but with the net gain that in the long run accrues to them. It is true that there are indirect gains not easily calculable, as the advance of wages made to avoid a strike while the lesson of the consequences is still fresh. Opinion among workingmen is not a unit as to the value of strikes. A few years ago it seemed safe to say that strikes were declining as compared with the period of the early eighties. It is probably true, as is often said, that as laborers become educated they put less faith in strikes. The epidemic of labor troubles, marking the years from 1899 to 1903, gave no evidence of a decrease in the use of strikes, yet many of these were due to the recent organization in various trades. The coal strike of 1902, though doubtless due to real grievances, was opposed by the officers of the union, an unusually capable set of men, but the more violent and discordant elements overruled the more pacific counsels. The public is perhaps as favorable as it has ever been to the cause of labor, but it appears to have less patience with strikes than it had fifteen years ago, and strikes usually fail if not backed by public opinion. The public has not as yet thought out consistent conclusions on the question of the rights of the union. It is just now much impressed with the value of arbitration. As experience destroys the unsound sentiments, and divides the wise from the unwise measures, a peaceable solution of industrial differences must and will be found. § III. COMBINATION AND WAGES [Sidenote: Wages are raised by a labor monopoly] 1. _Wages in particular industries often are maintained above the competitive rate._ The older economic writers were somewhat unsympathetic with trade-unions, and were even inclined to deny that organization could be helpful in any way in raising wages. This view, it must now be recognized, was mistaken, and overlooked the hindrances to competition and the effective economic forces that organization can bring into play. The sympathies of most men favor the wage-earner so strongly that they hesitate to express an opinion in any way unfavorable to his efforts to raise wages. But the view of the economic theorist as to the services of the union cannot be as roseate as is that of the union labor leader. The general proposition, however, is applicable, that wherever it is possible to limit supply, prices may be raised. If men fitted to do a certain work are not permitted to do it, labor in the special industry becomes more scarce and consequently more highly valued. This involves the result that some men are forced to remain where they get lower wages than they could earn if free to act. The temporary need of the employer may enable the union to force from him a division of his profits. If the trade-union watches its opportunity and takes occasion to strike when a failure to fill orders would cause him great loss, it may compel him to pay for a time more than the normal value of the labor. It may well be doubted whether such action on the part of labor is generous, fair, honest, or in the long run wise; but that it may be immediately effective cannot be denied. By the principle of complementary goods an essential kind of labor can be given an artificially high value, if its supply can be controlled. If only the labor that is ready and willing to come in to take the place of the strikers can for a time be kept out, wages may be fixed practically according to monopoly principles, later to be discussed in connection with capitalistic organization. [Sidenote: Exaggerated claims made for trade-unions] 2. _Trade-unions can, in various but limited ways, set in motion economic forces to increase the productiveness of labor._ It is difficult to take a moderate view of trade-unions; it is easier to go to one extreme or the other. In a book by Trant, reprinted from the English edition and circulated by the American Federation of Labor as representing its theory and claims, all the advances in wages that have been made are said to be due to the trade-unions. This claim is believed by many besides the members of trade-unions. The thought is sometimes expressed even by social students that but for the trade-unions wages in America would be the same as in 1850. Many well-known facts should cause such an opinion to be accepted with hesitation, to say the least. Only about one tenth of the workers in England are unionists and of the twenty-two million workers in the United States, far less than ten per cent. are organized. Can it be maintained that one tenth of the labor supply fixes the value of all? In many lines where labor is not organized, as in teaching, clerical positions, professional and domestic service, wages have risen even more than in organized trade. The evidence advanced to support the extreme claim is that wages are higher in some organized trades than in other unorganized trades requiring the same grade of laborers. Trant says that "where there are no unions wages should be lower. This is exactly the case"; and he quotes: "Wherever we find union principles ignored, a low rate of wages prevails and the reverse where organization is perfect." But he later explains in part this difference: "The union men are the best workmen and often employers pay a man more than union wages. This is not surprising as no man can be a union carpenter unless he be in good health, have worked a certain number of years at his trade, be a good workman, of steady habits and good moral character." [Sidenote: Certain unquestionable reasons why union wages should be higher] If this be true, it is in accordance with strict competitive principles that, as the elite of the trade, they should get higher wages than those outside. Moreover the unions exist mainly in the more populated places where cost of living, wages, and all prices range higher than in the towns. A much higher standard of work prevails in the cities, both among union and non-union men, and the old men and the inefficient drift away to the smaller towns and the places where wages are lower. Many of the differences are explicable without taking any account of the union. So far as unions tend toward intelligence, education, sobriety, efficiency, fuller and fairer competition, they are economic factors in all branches of industry, and it cannot be doubted that they do work in some measure in all these ways. So far also as they strengthen the bargaining power of the laborers, or as they can enforce a monopoly of labor in a particular trade and locality, they can secure the full competitive or even a monopoly price. [Sidenote: Labor organizations a minor factor in lifting the mass of the workers] [Sidenote: The chief factors determining wages] 3. _Wages viewed in general industry, and in the long run, are determined mainly by impersonal economic forces._ That implies the converse, that they are not determined mainly by the trade-unions. This statement, in fact, is admitted in calmer moments by the extreme partisans of the unions. Even the book before quoted says somewhat vaguely that "it is an error to think that the trade-union seeks to determine the rate of wages. It cannot do that. It can do no more than affect them." Again it says: "Capital is increasing faster than population.... It seems therefore merely in obedience to natural laws that wages should rise." Men can easily see personal and immediate results. They cannot follow out the impersonal and ultimate workings of economic forces. The leaders make exaggerated claims; laborers believe them and pay their dues more readily; the public believes them and is the more inclined to pardon the excesses of so important an institution. That wages in a number of special trades are raised in a considerable degree cannot be questioned. The open or secret use of violence and other antisocial forces make much of this boasted service to some of the workers, an injury to others, and an occasion of reproach from the citizen who condemns the spirit of lawlessness thus encouraged. The chief factors tending to raise the general standard of wages are the productiveness of industry, peace, order, and security to wealth, honesty in man and master, in lawmaker and in judge, the efficiency and intelligence of the workers, and an earnest effort on their part to get the share that competition would accord them. Chiefly, though not exclusively, because of their bearing on this last factor, trade-unions have a useful, even though subordinate, part in the regulating of wages over the whole field of employment. DIVISION B--ENTERPRISE AND PROFITS CHAPTER 28 PRODUCTION AND THE COMBINATION OF THE FACTORS § I. THE NATURE OF PRODUCTION [Sidenote: Man's active intervention in production here to be studied] 1. _The aim of industrial effort is the increase of the quantity and quality of scarce goods; this is economic production._ The thought has become familiar to the student that the supply of economic resources of whatever sort is limited, while the wants are practically unlimited. A supply of consumption goods meets a perennial stream of wants, the result being that value is attributed to things. The aim of production is to add to scarce things, to make the supply of goods as large as possible. There is occasion here to recall the thought of the two aspects of production noticed in Chapter 24. Man's part in production is passive when goods come into existence without his effort. One can imagine the indolent savage of the tropics, lying under the banana-tree, letting the fruit drop into his mouth. One can conceive of a tribe living upon manna, where every day the people awoke to discover a certain amount of food provided to each person's hand. Though no effort could increase that amount, still, if the food differed in flavor and the better qualities were rare, value would come into existence and exchange would arise. Now there is something very analogous to that in daily experience. There are some goods which effort can do little to, increase. Usually, however, there is a possibility of change and adaptation to make them better suited to needs, and there is required the use of intelligence to choose among the goods and to employ them in the best way. Further, man can intervene and direct the course of industry; he does not merely gather what is provided. It is this active intervention and effort that is here to be considered. [Sidenote: The four essential characteristics of value] 2. _To have value, a thing must be of the right stuff, in the right form, at the right time, and at the right place to gratify wants._ A distinction is sometimes made between elemental, form, time, and place value. It is a mistake to say that the value of anything is due to any one of these features, for to have value all must be united in a single thing. But the distinction is useful in emphasizing the missing characteristics, which if supplied, cause value to emerge. Ice may be considered to have form value when produced artificially by a machine, time value when stored from winter to summer, and place value when brought from the north to the south. But not less essential is the psychological condition of a hungry and thirsty population ready to consume the ice. Any act or agent is said to be productive which works in any one of these respects: puts things in better form, or in a more fitting place, or provides them at a more fitting time to serve human wants. [Sidenote: Economic vs. technical changes in goods] 3. _Economic production (in contrast with technical or merely formal production) is such a change in goods as is attended by an increase in value._ It is often well to contrast form, appearance, imitation, with the thing itself, the reality. Men sometimes go through the forms of study when their eyes and thoughts are wandering; through the form of getting a college education when they are simply having a good time. Likewise in production there is the form and the reality. The young lady just out of boarding-school rarely produces a masterpiece with the tubes and brushes that Raphael might have used. The justification for amateur work is to be found in the doing and not in the market value of the result. Blue rosebuds, painted with loving if unskilled touch on red velvet slippers, may bloom into a romance and happiness; but to the economist this appears to be a consumption of good pigment for amusement, not a creation of value. The difference between the form and value of productive effort becomes, in the study of business organization, a most essential question. The significance of leadership and control of industry is found in this fact that economic goods may be united to produce results having either a less or a greater value than the materials that are used. [Sidenote: Acquisition vs. social production] 4. _Individual acquisition may be contrasted with social production in cases where the individual increases his wealth at the expense of others, without adding to value._ Most economic efforts increase the income of the individual and the income of society at the same time. The fruits of the field and the uses of machines are net additions to current income; they are not merely subtracted from the income of one and added to that of another. The increase of products by labor may depress somewhat the exchange value of competing labor, but the general welfare is furthered by the greater abundance. With very slight qualification it is true that in these cases the good of each is the good of all. But in some forms of human effort, social and individual interests clash. When two men bet, one gains and the other loses. The gambler's gain is a loss not only directly to his beaten opponent but indirectly to society. Certain forms of speculation approach dangerously near to the appropriation of the goods of others, and others become outright stealing, or cheating so nearly like stealing that it would be treated as a crime if discovered. But many a man prowls along the border-line of crime all his life and succeeds in making large gains without falling into the clutches of the law. Cheating that can be detected, and outright stealing, are prohibited by the law not because the burglar is an idler; he loses sleep; he has his trials too. The pursuit of burglary requires courage, effort, and ingenuity, but society does not reward these as virtues nor recognize as production the transfer of wealth from the bank-vault to the pocket of the burglar. It is the aim of social institutions to harmonize individual and social interests in the pursuit of wealth, to force men into lines of action where individual acquisition adds to the sum of social utilities. But there are many marginal cases where human justice discriminates only in a bungling way, and many controverted questions arise at the meeting-point of ethics, economics, and law. [Sidenote: Industries are socially more or less productive] 5. _In this sense, productive industries may be distinguished from unproductive ones._ The old distinction between productive and unproductive labor rested on the idea that production must be embodied in material and lasting form. We have rejected this for the thought that the tests of production are to be found in feeling, not in outward things. The distinction, therefore, between productive and unproductive labor must now be of a very different kind. Viewed from the social standpoint, the efforts of men may be seen to be directed along more or less productive lines. Enterprise and effort shade off from the more to the less productive, from the extreme where the value is a net addition to wealth, through other cases where one's gain is partly at the cost of others, to fraud and crime where there is merely a transfer of ownership. § II. COMBINATION OF THE FACTORS [Sidenote: The factors of production defined] 1. _The various parts, materials, and agents that unite to form products are called the factors of production._ In a general sense every separate thing that enters into industry is a factor; as, in agriculture, for example, the seed, plows, fields, fences, barns, cattle, labor. But usually in economic discussion, these numerous factors are grouped in large classes. The main factors are two, variously named as man and nature, or labor and material agents, or humanity and wealth. Rejecting, as we have, the old view as to the nature of consumption goods and as to the nature and possibility of the distinction between "land" and artificial capital, we class under wealth all material economic agents whatsoever. The discussion of labor and wages has broadly laid down the principles that apply to the value of human effort, but the factor of directing energy presents in modern society so many important features that it calls for special and fuller consideration. [Sidenote: Progressive stages of control over natural conditions] 2. _The economic progress of society has been marked by decreasing dependence on the bounties and chances of nature and by increasing control of natural forces by man._ Various stages of progress in human history have been recognized. First is the stage of _appropriation_--the stage of hunting, or of fishing, or of gathering fruits. Man in this stage is still an animal in his economic methods, not guiding and controlling nature, but merely gathering what nature chances to bring forth. The limitations to man's powers in this stage are marked. There is excess of supply and waste at one season, scarcity and great suffering at another. With such crude utilization of the bounties of nature, a vast area will support but a small population. When sheep and cattle have been domesticated, and where there is a large area for grazing, industry rises to the _pastoral_ stage. While still dependent on nature's bounties for the feeding of his cattle, man is hourly intervening to increase, regulate, and improve the supply of food and materials. Famines are more rare, economic welfare is greater, a greater population is nourished on the same area. The _agricultural_ stage begins whenever man plants seeds, trims, tends, and increases by his care the supply of vegetable food. This is a still greater intervention in the course of nature. Man anticipates the future, directs forces, and groups materials to his purpose of getting a regular food-supply. He is thus himself forced into settled life, begins hand-production, and makes the first steps in commerce. Then gradually comes the _industrial_ stage, in which control over nature grows, supplies increase, machinery and motive forces are utilized, and humanity is in the full tide of industrial development. These are not sharply marked changes, but throughout all there is a growth of security, of certainty, and of productivity. With man's increasing power and foresight, chance is lessened, for directing energy takes its place. [Sidenote: Increasing importance of skilled organization and direction] [Sidenote: The source of American enterprise] 3. _For a high efficiency of production, as a whole, conditions must favor the best organization and direction of industry._ Industry is dependent primarily upon natural resources. Climate, rainfall, iron deposits, fuel, supply of wood or coal, predetermine in large measure the limits within, and the direction in which, the industry of any community can move. The progress of production depends also on an increasing efficiency of labor as embodied in individual men, and upon social and political conditions making possible an increase of capital. But--a condition as important as any of these--production is dependent also on a wise combination of the factors. Social, political, and economic conditions must be such as to call forth the factor of direction and control of industry, to make possible industrial progress. This is one of the greatest sources of America's superiority to-day. It has been strikingly said that it is now no longer "young America and old Europe," but "old America and young Europe." America is older in industrial experience; Europe, with undeveloped resources, awaits the touch of American methods and machinery. There are dynamic forces in American society not present in equal degree in any other. It is therefore not alone the great resources of coal and iron,--equal resources may be found in unexplored parts of the world,--it is the dynamic social forces, invention, enterprise, and organization, which have brought America to the forefront in industry. Her natural resources have thus yielded an incentive and a premium to enterprise as a sort of by-product. Absence of caste, political liberty, the democracy following the spread of the frontier, have not made it possible for every one to succeed, but they have made it possible, as nowhere else in the world, for real ability to scale the barriers of birth, poverty, and hardship. A conservative population never can equal a progressive population in industrial efficiency. It has been remarked that America has little to fear from Oriental competition so long as the avenues of education and enterprise are open to her young men, insuring her the highest capacity in the organization and direction of industry. [Sidenote: Growing specialization of industry] 4. _A high efficiency of industry is dependent on many social causes making possible a great specialization._ It was said in another connection that division of labor is dependent upon the size of the market. With a large population massed at one spot, so that the demand for even the less important products is large, there may be a high specialization of industry. An increase of transportation, such as railways and telegraphs, is equivalent for many economic purposes to growth of population on one spot. In colonial days it took ten days to go from Boston to Philadelphia, and two weeks to go to Washington. San Francisco is now for many economic purposes but one fourth as far from Boston as Washington was at that time. California and the eastern states are distant only thirty minutes by telegraph and three days and a fraction by railroad, and are thus in many respects in the same market. The great development during the past century in the means of communication and of carriage has made possible, as never before, the massing of population to secure the advantages of division of labor in most lines, without meeting the hitherto insurmountable difficulty in the securing of food for such large numbers in a limited space. The population draws its food from the whole vast area; whereas it is massed at the points more favorable for other products and can make use of the most highly specialized machinery. These several conditions thus have favored the growth of large industry under a single control and direction, on a scale never before approached. These changes have brought in their train social problems connected with the concentration of economic power. It remains to be seen whether the unquestioned economies of this new organization can be retained and improved while it is divested of its evils. [Sidenote: Growing importance of directive ability] 5. _With the growing division of labor, grows the need of the highest ability for the directing of industry._ Ability may be judged by various standards. From one point of view, the scientific mind, grouping facts in the cold light of reason to arrive at truth, is the highest type. But supreme, each in his own sphere, are also the artist expressing, through painting, poetry, dramatic action, and music, the subtleties and complexities of feeling, the moral philosopher, the prophet, the preacher, in the best sense of the term the teacher, all aiding to guide the spiritual forces of humanity along lines that make for social welfare. Not least is the business enterpriser, whose function is to direct the economic forces for production. It is vain to assign a mean place to the organizing intelligence and its social work. Its importance grows apace with the growing magnitude and complexity of industry. Misjudgment now will destroy more wealth, and wise judgment can produce larger results, than ever before. The captain of industry also may work as an artist or as a gambler; he may, by the methods he pursues, uplift the moral plane of his society or he may help to corrupt and degrade it. No citizen is in control of more potent influence for good or ill than the successful business organizer. On the attitude of society toward him, and on the standards to which he is held, depend in large measure the use that will be made of his exceptional powers. CHAPTER 29 BUSINESS ORGANIZATION AND THE ENTERPRISER'S FUNCTION § I. THE DIRECTION OF INDUSTRY [Sidenote: Judgment and self-direction as elements in personal skill] 1. _In the simplest kinds of individual production the value of the results depends largely on intelligent choice._ Even for the solitary worker the choice of the right time to do work is most important. The first thing Robinson Crusoe did was to turn to the ship to save as much as possible of the cargo before it was dashed in pieces by the waves. If he had begun first to till the soil to provide a future supply of food it would have shown one kind of foresight, but it would have shown very poor judgment. Every moment of delay in recovering the cargo of the wrecked vessel cost him many useful materials. The humblest farmer has a great range of choice and a need of good judgment in fixing the time to sow, to reap, to do each simple task. There is the same need to-day for the small shopkeepers, for the blacksmiths, for the small producers of all kinds to make wise choice of time in the use of their own labor. There is also a wide range of choice in the distributing and combining of labor, agents, and materials. A limited supply of agents can be used to secure a variety of goods, more or less desirable. There are many chances for mistake, but in the long run it is judgment, not chance, that determines the success of one man as compared with another. There is a choice in ways and methods by which a thing can be done. There are many wrong ways, there is but one best way, at any stage of industrial progress. While most work is done in customary ways and little independent judgment is required, yet in every business from time to time new problems arise and call for an exercise of choice as to methods. Moral qualities are continually called for, such as control of impulse, and the giving up of the comfort of the moment. The wisdom of our fathers is embodied in a multitude of proverbs that suggest the wise course. Men must "make hay while the sun shines," not lie in the shade. But virtue fails less often from lack of knowledge than from lack of will. As men differ in judgment, character, and will-power, their products differ, even in the simplest circumstances. The ability to choose and to do wisely is an element in personal skill. [Sidenote: Direction of a group of workers] 2. _When men work in an associated group, the direction of effort becomes relatively more important._ The first and simplest advantage of association is working in unison. Men unite their muscular efforts for a single task, and accomplish what is impossible to them working singly. But when many work in unison, the right selection of time and way is of greater importance; a mistake will waste more materials and agents. If association is to yield its advantages, there must be division of labor; hence harmony of effort, hence agreement or direction. While the gain of well-directed association is large, the waste of ill-directed effort is greater, when specialization has taken place, than with isolated workers. Most communal societies have failed because of the lack of a good head. The few exceptional successes have been due to the presence of a man of superior ability, such as George Rapp of the Harmonist Community, who, had he lived in this day, could have become easily the head of a great business corporation. [Sidenote: Direction of interrelated groups] 3. _Where various industrial groups are associated, direction becomes still more important._ In the single group it is an internal harmony alone that is needed. The work of a dozen men must be so arranged that each is in his fitting place. But as this group comes into contact with others, the relationship becomes two-fold, and there must be both internal and external harmony. The more complex the economic organization of society, the more the chance of mistake and the more injurious are the mistakes to a wide range of interests. Large amounts of capital and labor can be rapidly lost through lack of wise direction of associated groups. [Sidenote: Greatest need now of capable direction of industry] 4. _The increased efficiency of industry has been accompanied by the specialization of control._ The crude, early methods of enforcing harmony in industry were slavery and political subordination. Under division of labor, with free workmen, industry is ruled by impersonal economic forces that bring the less capable under the direction of the more capable. This work is rudely done, no doubt, but the penalties of bad direction of labor and capital are so great that blundering cannot be permitted. The man who shovels dirt must do it at the right time and place if, in this complex society, it counts for something and gives the effort value. If he cannot choose well for himself, he comes under direction. The average man cannot decide nearly as well here as he could on a desert island where and when to put in his spade. There it would be to raise food for the current year; here it may be to dig a canal or a tunnel whose uses will not become actual for many years. The more distant the end sought, the more difficult is the choice. To every worker, according to his personal skill, is left some degree of choice in the method of his work, but in a large part of industry the range of choice is very narrow. The man with the shovel and the man with the hoe come under direction. § II. QUALITIES OF A BUSINESS ORGANIZER [Sidenote: Technical knowledge and skill] 1. _The organizer and director of industry must first have technical knowledge of methods, processes, and materials._ The qualities required in the direction of industry are implied in the foregoing section, but they may be more specifically enumerated. Knowledge of technical processes is relatively more important in the direction of industry in the earlier stage. In the single independent producer it is the quality most desirable. He must know the quality of the materials with which he works and the best modes of combining them. But, as industrial organization becomes more complex, only a broad knowledge and ability to judge of the results of different processes and to compare plans are necessary in the organizer. He can hire the technical knowledge of details required in the larger management of business. Draftsmen, engineers, pattern-makers, men with far more education and capacity in certain lines than the business manager, work under his direction. [Sidenote: Judgment of men] 2. _The organizer requires ability to judge men and tact in relations with them._ In the small group, ability to get on well in personal contact with workmen is of great importance. Especially rare is the genial manner that wins the confidence and even the affection of the men. A sense of humor and the ability to turn a joke are said to have obviated many a strike and thus to have prevented losses both to the employer and to the men. In large affairs much of this managing tact can be hired in good foremen; but the organizer must still have a knowledge of men, ability to judge of human nature, to select his subordinates, and to animate them with his own purposes and plans. Mr. Carnegie has said that an appropriate epitaph for himself would be, "He was a man who knew how to surround himself with men abler than he was himself." That seems too modest; but in a sense it is not, because he claims for himself, and justly, the highest of all industrial qualities. A great administrator in political or industrial affairs can dispense with everything else rather than with this, the supreme quality of the great organizer. [Sidenote: Foresight in commercial affairs] 3. _The organizer must have unusual foresight and the ability to form a large commercial policy._ This proposition is to be interpreted relatively to the task before the organizer, and to the size of the business. Modern industry anticipates demand far more than did primitive industry. Large amounts of materials and energy are embarked in directions from which they cannot be recalled. With the progress of electrical engineering it soon may become possible to recall at any moment a cargo embarked for a distant port. But no wireless telegraphy is able to recall the great masses of capital that are embarked on distant and definite journeys in modern business. The organizer anticipates future demand, and prepares for it. The process has been figuratively expressed somewhat as follows: the enterpriser throws into the crucible great quantities of material; they melt, and an industrial result is secured, but whether the deposit is greater in value than the material is a question that cannot be answered for years. The need of anticipating demand is greater to-day than ever before, and this requires large investments months and even years in advance. The losses are proportionally large if there is miscalculation of demand. A large commercial policy is one that takes into account the more distant factors, and anticipates the new conditions. The rare ability to do this is rightly called statemanship in economic affairs. [Sidenote: Command of financial resources] 4. _The organizer need not himself have great wealth, but he must have ability to command financial resources._ Business to-day is done in many cases with borrowed capital. Even a subscription to stock is frequently as much in the nature of a loan, made in reliance on the reputation of the organizer, as an investment for profits. There are many temporary needs that require sudden loans. The confidence of investors, whether banks, trust companies, individual shareholders or investors in bonds, must be secured by the organizer. Good judgment of the money market often is as vital as judgment of the market for the particular product. In some of the largest corporate enterprises this quality becomes the most essential. [Sidenote: Scarcity of great organizing ability] [Sidenote: The industrial leaders] 5. _Organizing ability of the highest order is rarely found._ This is almost a superfluous statement after the foregoing. According to the theory of chances, such a combination and balancing of qualities is likely to occur in very few cases. Even where it exists, it may not be discovered or developed. The man may not find his opportunity, nor the task the man. There are many misfits in the world. On the occasion of the visit of Prince Henry of Prussia to America, in 1902, he was entertained at luncheon in New York with one hundred of the leaders in invention, finance, and industry, wherein have been the most characteristic achievements of America. In jocular reference to the French Academy, whose members are the forty most noted literary men of France, the newspapers called this the meeting of America's one hundred immortals. There were J. P. Morgan, the great financier; Vanderbilt, Hill, and Harriman, the railroad kings; Carnegie, the iron magnate; Irving Scott, "the man who built the Oregon"--nearly all the company deserving a place at the table mainly by reason of excellence as business organizers. Such a gathering has a dramatic interest as presenting the greatest leaders of industry, but about other tables might be gathered thousands of other less notable figures worthy to be accounted captains of industry in their several fields. One may well ask, How did they come into the important places they occupy? § III. THE SELECTION OF ABILITY [Sidenote: Various roads to industrial leadership] 1. _The men actually in control of industry have been selected in manifold ways._ Skill develops a small industry into a large one. A small factory owner gradually adds machine to machine, building to building, till he finds himself at the head of a great industry. Or an employee develops ability and becomes an employer. Who does not know of some one who, as a small boy, went into a store to do chores, worked up to a clerkship and, enlisting the confidence of men of wealth, was enabled to establish a business of his own and become an employer? Others have won promotion from the ranks to the head of a large industry in which they secured at last a controlling interest. Employees that have proved their ability may be selected by the directors of a stock company. Men that have worked their way up from the ranks may bequeath their business positions to their sons and grandsons, as in the case of the Vanderbilts and the Goulds. And finally, but rarely, there may be selection by fellow-workmen in the case of coöperative business. [Sidenote: Success as the evidence of ability] 2. _There is a constant selective process: dropping out the weak and advancing the efficient organizer._ There is, to be sure, an element of chance in this selection. The process in general is a rude one. Accidents and unforeseen changes, industrial crises, failure of health at a critical moment, fraud and crime, may defeat men of ability and they may never regain their foothold. Lack of experience may lead to disaster a naturally able but youthful heir, too suddenly burdened with the responsibilities of a fortune. On the other hand, men of limited ability may inherit fortunes and preserve them by caution, without enterprise. It is not always true, even in America, that "It is but three generations from shirt-sleeves to shirt-sleeves," although many fortunes slip away from the sons of rich fathers. In general, success in retaining the control of a business is an evidence of considerable ability. By loss of fortune unwisely risked, through unforeseen changes in methods, and after manifold blunders, the less capable drop out. Thus, by the ceaseless working of competition, the higher places are taken by those most capable of filling them, and the efficiency both of the employers and of the workmen is increased. [Sidenote: Various modes of business organization] 3. _In the various kinds of business organization the merits of men and of methods are tested._ The independent producer working entirely alone, directing his own industry, is analogous to the animal organism of a single cell. More complex is the family partnership found often in early stages of industry but more rarely now, where the father directs the work of his children and all share in common. The simplest form of the wage system is the single employer with a few assistants. When the employer is in danger of losing valuable assistants, he sometimes gives them a share in the business. In the ordinary partnership, two or more men divide the ownership and duties, agreeing as to the division of control. Coöperation among workmen, though rare, gives an unusual opportunity for the discovery of special talent. The dominant form of organization to-day is that of the stock company, or corporation, the ownership of which is divided among the holders of shares of stock, or of certificates of membership. [Sidenote: Many chances to try ability] This variety of organization affords opportunity for a two-fold test: that of the ability of men and of the merits, in varying circumstances, of the different forms of organization. Methods of organization are constantly tested by their results. Men having money to invest are asking whether they would be better off to go into business by themselves, or to join with a partner, or to buy stock in some large corporation. Each of these forms of organization has its peculiar advantages. A stock company can better enlist large amounts of capital, while the individual employer is generally more free from dictation and can adapt his business more quickly to changing conditions. At the same time this variety of organization offers better opportunities for managing ability to show its metal. On the watch towers of industry are many observers sweeping the horizon for the appearance of men of business talent. Some characters develop better under direction; others prove that nowhere does native ability count for more, and mere book-schooling for less, than in business administration. There is some ground for the belief that a college education does not increase executive capacity in business. Such ability often seems to be a freak of nature and a product of practical experience, rather than the result of college training. CHAPTER 30 COST OF PRODUCTION § 1. COST OF PRODUCTION FROM THE ENTERPRISER'S POINT OF VIEW [Sidenote: The enterpriser's cost] 1. _The task of the enterpriser is to get together the essential factors to secure valuable products._ The enterpriser must first decide what product he will endeavor to secure, and the kind, the place, the time, the quantity, and the quality. He must then select in the right proportion the materials, labor, plant, and machinery necessary for that product. He must purchase these factors in the market at the lowest price he can, unite them and sell the product to recover the expenses in the selling price. A thousand items enter into the cost and perhaps a single product emerges. What the business man thus pays out, expressed in money form, are the costs that are here to be considered. [Sidenote: Several meanings of cost] 2. _The term cost of production is used in several senses, the chief of which are money cost, psychic cost, and alternative cost._ The ambiguity of this term is a source of much confusion. _Psychic cost_ is the pain, fatigue, irksomeness of labor. This is not definitely measured except at rare points. When the pain of work more than offsets the value of the product, the worker who is free to determine the length of his own working-day, stops. At that point the psychic cost and the utility of the marginal unit are almost equal in intensity--the one as a positive, the other as a negative quantity. But the value of the product as a whole cannot be related to the psychic cost or sacrifice, and therefore it cannot serve as a measure of cost in every-day business. _Alternative cost_ is any good or gratification that must be given up when any other good is chosen. One may stay at home and read a book or go on a picnic; the pleasure of reading the book will cost the pleasure of the picnic. A good dress may cost a happy vacation that must be given up for it. In this sense, each thing is a cost of every other thing that might be chosen in the place of it. Alternative cost is therefore manifold and indefinite. The thought is significant at the moment of a choice, but it is not constantly measurable for practical purposes. The _money cost_ is the practical cost generally implied in the term cost of production. It expresses not the pain of the laborer in doing the work, not the sacrifice of the owner of the capital in saving the money, but merely the sum of money paid out by the producer. There is frequent confusion of these ideas in economic discussion, few even of the leading economists of the nineteenth century having quite escaped it. [Sidenote: The cost of the factors is their market price] 3. _The enterpriser, looking upon the cost of most of the factors as fixed, seeks to combine them as economically as possible._ Whether the enterpriser is running a factory or a farm, is engaged in a retail or a wholesale store, is conducting a school, or a railroad, he has to solve much the same problem. By close attention, good judgment, skilful bargaining, he may be able to buy slightly cheaper than his competitors, and thus have an advantage over them at the outset. When he does this, it is usually by searching out a better market in which to buy, buying at a better time, and judging better than his competitors the quality of goods. If, in a given market at a given time, goods are sold to one more cheaply than to others, it is an act of generosity. Even the best buyers pay nearly the prevailing market price for agents. The most successful enterprisers are not found to be those paying lower wages or lower ground-rent than their competitors. It must not be forgotten that the main forces fixing the prices of agents are impersonal, and can be only slightly modified in most cases by a particular buyer. He looks therefore upon the cost of the elements as an ultimate fact which he can change little, if at all, and he shows his judgment chiefly in the selection of quality. Cost determines and limits the extent of his business and determines the price at which he sells. [Sidenote: The right proportioning of the factors] 4. _The right proportioning and skilful substitution of the factors is a delicate technical task for the enterpriser._ Good buying and good selling must precede and follow the central part of the enterpriser's task, that is, the combining of the various factors. Each factor is applied, subject to diminishing returns, up to a point where its addition will not secure the value attributed to it in its cost. The enterpriser is constantly studying the question whether the application of another unit of any one factor at the price will add to the value of the product as much or more than the cost. This calculation is made for every one of the minor factors entering into the business, and for the business as a whole. The proper proportion varies at different prices, or costs. If wages rise, "it pays" to get machinery; if wages fall, it pays to let the machinery deteriorate and to do more by hand-labor. Likewise there is constant substitution of the various materials. The right proportions change constantly with inventions. A model factory is so proportioned that the buildings hold the right number of machines, with the right amount of space for the workmen, and the right amount of power. If there is more of a single factor than the ideal proportion, it is an unnecessary cost. Even the model factory begins to be out of date almost as soon as the walls are dry, and the latest method is to build as nearly as possible on the unit system, so that new parts may be added without the loss of harmony and proportion. [Sidenote: Pressure of price toward cost at certain points] [Sidenote: The enterpriser in contact with costs] 5. _The enterpriser's costs determine the lowest price at which he can continue to sell, but if successful he may have a wide margin of profits._ New factories are constantly arising with new and better adjustments. In industries of competing products, also, the processes are changing. Hence there is always a pressure of competition on some enterprisers who constantly complain that they must sell below the cost of production. The organizers of a trust always declare, some no doubt truly, that they have been selling below the cost of production. Business men say that competition is destructive, and it certainly does destroy the less favorably situated enterprises. Each enterpriser's price is the highest he can get in the market for his product; it may far exceed his costs; it may even fall below them, but only temporarily, for if sales continue to encroach on capital, the sheriff soon closes the doors. Successful competitors are constantly pressing upon the marginal enterpriser, fixing a price that leaves themselves a profit, but is below his cost. Even the most successful enterpriser comes into contact with cost, and seems to be compelled by it. He reaches out for trade, and sells some (not all) goods at a price which leaves him no profit. He enlarges his factory and ships goods farther, paying the freight, which means a lower price at the factory. The expanding business, therefore, comes at length to the point where it cannot go farther at the prevailing prices. Hence the business man's view of the costs is that they determine value. It is true in the sense that the supply of a particular product in any market is at last limited by cost of marginal producers or of marginal portions of supply. But it is not true of all the units of product that costs determine, or equal, market price. There is a margin above costs to the successful enterpriser on a large portion of his output. The margin may be narrow or wide, according to the business. The margin is "profit," or the gain of the enterpriser. § II. COST OF PRODUCTION FROM THE ECONOMIST'S STANDPOINT [Sidenote: Money cost not the ultimate explanation of value] 1. _The economist should view money cost as an intermediate and not as an ultimate explanation of value._ The value of all things must be traced back to gratification, to the relation of goods with psychic income. This being true, the value of the factors which the enterpriser uses must be derived from the value of the products, and not the reverse. This does not mean that the business man is deceived into the belief that he has in cost of production a final explanation of value. He simply is not interested in that question. He knows that there are many influences determining the cost of the factors he buys, but they are distant; he cannot influence them, and in the single stage of his production they seem to fix the price. In some purchases, and on the stock exchange, a marvelous recognition and analysis of the most distant influences is necessary; but in general a superficial view of value is taken in business; it does not pay to do other. The logical treatment, however, must go deeper into the question and trace the cost of agents back to the ultimate cause of value, that is, to want-gratifying power. To say that the price of a product is determined by the money cost, or price, of the factors is simply to postpone the answer to the question of value; one has still to ask, What determines the money cost, or price, of those factors themselves? [Sidenote: The cost of agents is fixed by their marginal utility in alternative uses] 2. _The demand for any factor entering into products is reflected, in an increased price, to its cost in all competing products._ Figuratively speaking, products compete with each other for the factors that enter into them. According to location, quality of the soil, and improvements, a certain area of land has various rival uses. These uses bid for the land, or put in an economic claim for it. Products of a higher value outbid and exclude those of a lower. If fine wine can be raised on a piece of land, potatoes ordinarily will not be planted in it. But if there is such a supply of that quality of land that it continues to be used side by side for both products, it will have the same value and yield the same rental in both uses. The least utility yielded by any portion of the supply fixes the value of all the units. Machines are usually made for some product determined in advance, but often they are only partially specialized and within limits they can be adapted. Sewing-machine factories were readily turned to the making of bicycles at the time of greatest demand, and bicycle factories later were used for the making of automobiles. Thus, in general, machinery is used for the product to which it contributes the most value. Any enterpriser seeking it for any other use finds its "cost" affected by its various alternative uses. The same is true of all the materials and of all the grades of labor entering into products. The enterpriser's _cost_ is therefore the reflection of the want-gratifying power of the productive agent in all its other uses as well as in the particular product he desires. To the enterpriser, cost seems the cause of the value of a product. To the economist it should be clear that the utility found in the various products is the basis of value in the factors, _i. e._, of the costs. [Sidenote: A single source of a single product] 3. _The genealogy of value may thus be traced through the various intermediate products to consumption goods._ A single product having a single source of supply shows most clearly the reflection of value directly from the product. The discovery of a mineral spring or of a good quality of building-stone on worthless land, will cause a value to attach at once to the source of supply. When a great singer like Adelina Patti commands several thousand dollars for each appearance in concert, the source is the magical throat of the singer, and the salary reflects the utility of the music in the minds of delighted hearers. [Sidenote: One source of several products] When the one source of supply yields several different kinds of products there is just one new condition which confuses the thought and suggests the error that value begins in the source (with costs therefore) and not in the product. Looking at the products severally, no one of them explains the value of the source, and, on the contrary, each one is seen to have a value independent of the particular use to which it is put. To make the illustration most simple: a savage finds in a wreck on the coast a number of bars of iron. His fellows wish them for various purposes: to make arrow heads, spears, knives, hatchets, hoes, ornaments, nails, needles, etc. Value is in this case derived in part, through the source, from the alternate uses. Taken jointly and considered as one sum, the value of the various products accounts as completely and exclusively for the value of the source as if they were merged into one product. The source (_S_) is distributed to each of the products in accordance with their marginal utility, and therefore the value of the various products from any source of supply constantly tends to equality. Any unit of product sought for any purpose must be paid for according to a marginal utility determined in all the applications. The genesis of the value is in the utility of the product; the value of the source is derived. [Illustration: _1. A single Product_ _2. Several Products from one Source_] [Sidenote: Complex conditions with intermediate products] In actual life the problem is far more complex, and yet, through its settlement runs just the same principle. There is constant bidding for materials, and through their price the claims of rival products are adjusted. A point is reached where it does not pay to use any more of an agent in a certain industry; the production of another unit results in a loss. There is a most complex relation among many different industries using the same factors, the value of a unit of product (at _a_) being reflected up to the source, and through successive links to the most distant product (_z_). The effect of this is to reduce the sale (of _z_) and correspondingly the use made of the agent in question. A higher price of leather, due to the increased use of shoes, raises the value of hides and cattle (this increasing the extent of cattle raising) and raises thus the cost of carriage-trimmings, pocket-books, foot-balls, leather belts, and every other leather product. As the price rises, substitutes for leather, and imitations of it, are used for such of the products as cannot bear the increased cost of leather. [Illustration: _3. Complex Relations Through Intermediate Products_] [Sidenote: The enterpriser the medium of price movements] [Sidenote: Costs are an expression of consumers' estimates] 4. _The enterpriser does not fix the value of products or of agents, but is the medium through which consumers express their estimates._ The enterpriser who anticipates aright and satisfies the public taste is the good medium. He readily transmits and accurately focuses the rays of public judgment. One that misjudges is a poor medium. The enterpriser is himself the servant of costs. Laborers sometimes assume that the employer can dictate wages, prices, and markets, can rule things with a lordly hand. With rare exceptions the ultimate control in these matters by business men is very slight. In the main the enterpriser masters the situation only by bowing to it, just as the scientist and the engineer gain mastery over nature because they know when to bend and how to obey. The consumer, by deciding to buy this or that product, sets in motion waves of value. The consumers of products are the true purchasers of labor, materials, and uses of agents. The enterpriser must conform closely to cost, to the price prevailing for the moment, or his competitors in this day of narrow margins will seize the opportunity. The enterpriser is merely the distributor or equalizer of cost among all the different products for which different agents can be used. If he acts efficiently, profits arise. CHAPTER 31 THE LAW OF PROFITS § I. MEANING OF TERMS [Sidenote: Broadest use of the term profit] 1. _The term profit is popularly used as any gain or advantage secured by any means in business._ The terms used in economics, being taken from popular language, vary in meaning according to the context. It is necessary to clear thinking to reject some words entirely and when using others to define them more strictly. The broad usage of the term profits just noted includes every kind of return to industry: such as interest on capital, and wages or services of the man owning the industry. Precise thinking requires its use in a much narrower sense. [Sidenote: Used of gross gains on sales] 2. _A common meaning of profits in retail business is the gross gain on a given sale._ Buying an article for one dollar and selling it for two dollars, is said by the merchant to be selling at one hundred per cent. profit, jocularly called, "The Dutchman's one per cent." The cost price is considered to be that paid to the manufacturer or wholesaler. In different lines of goods there is added regularly to this cost twenty, thirty, or fifty per cent., as the case may be, as the merchant's profit on the sale. This is of course a gross profit, and not net, or true profit. It leaves out of account rent, interest on capital, clerk hire, freight, and many other minor items that enter into the cost of running a store. It often happens that the Dutchman's way of reckoning is nearer the truth, and that the gross profit of one hundred per cent. proves at the end of the year to be only a net profit of one per cent. This evidently is a loose meaning, impossible in the discussion of theoretical questions. This meaning is sometimes developed, making profits the sum of all the gross profits on separate sales within a year, or the difference between the wholesale and retail prices of goods sold within the year. Another meaning given to the term is gross profit (as above) compared with the capital invested. The "profit" in this case varies partly with the rate of the turnover. To illustrate: if the amount invested in a printing-office is $100,000, and the annual business done is $300,000, the capital is said to be turned over three times; if the gross profits on sales averaged twenty per cent., they would be sixty per cent. on the investment; but, if the capital had been turned over four times, the gross profit would have been eighty per cent. on the investment. [Sidenote: Of net gains as a percentage of invested capital] 3. _Another meaning of profits is the annual net gain of the business, as compared with the average investment of capital._ This is a long step toward greater definiteness. If at the end of a year it were found that after paying all outside expenses there were $10,000 to set aside, this would be accounted a profit of ten per cent. on $100,000 invested. But confusion still reigns because of wide variation in the methods of estimating costs before fixing net profits. In one case the enterpriser rents lands and buildings, in another he owns them; in one case he has borrowed money and counts interest as a cost, in another he is free from debt; in one case he counts as a part of cost an estimated fair salary for himself and his partners, in another (usually in a small business) no such allowance is made Such a variation in business usage is most perplexing. In all these cases one must have the exact conditions in mind before it is possible to make any comparisons and draw any conclusions as to the relative profits of different industries. [Sidenote: Profits in economic theory] 4. _In the narrower and exacter sense profits are the net gain of the enterpriser after counting the rent of material agents and contract wages of employees at the prevailing rates._ Into the practical problem of cost and profit many factors enter, and the theoretical problem is to determine just how much ought to be attributed to each. In a large business usually the practical bookkeeping problem is not unlike that of economic analysis. A stock company counts as cost, as a part of fixed charges, interest on capital borrowed either from banks or bondholders. Its managers are paid salaries, counted as a part of cost. The net balance, after deducting these and all other expenses, is counted profits and paid in dividends to stockholders. The economic student is not attempting to get a theory of profits that is in contrast with practice. Rather, he is trying to analyze profits generally, just as they are analyzed in the few cases where the books are properly kept. In economic theory, therefore, profits are the part of the gain of any business that is logically attributable to fortunate investment and good management; profits are the income attributable to the enterpriser's services. [Sidenote: Profits a species of wages] 5. _Typical economic profits are thus a species of wages but are marked by peculiar features._ In some of the older treatises on political economy, profits are treated merely as a combination of "wages of management," and of interest on capital invested. A man hired at a fixed sum to manage a business is receiving simply contract wages. Economic profits are not _contract_ wages, not being paid by agreement, but being yielded impersonally by the industry. Profits are, however, _economic_ wages or the earnings of services. As business has developed, it has been seen that the enterpriser's work has its peculiar character and deserves special attention. The old English word "enterpriser," used of the "adventurer" who embarked in foreign trade, may fittingly apply to the organizer and director of business to-day. Foreign trade then, more often than now, was most uncertain, and there were many chances that the ship would be lost, or the venture prove a losing one. In the simplest business to-day there is this element of enterprise, or undertaking, combined with ordinary capital and labor. As industry develops, this special service stands out more clearly. In the corner-grocer and in the manager of the little news-stand, the elements of enterprise and labor are not apart. In the large wholesale house, the enterpriser is seen to be not merely an abstractly thinkable function, but a separate and concrete person. The typical enterpriser is the man who gives his time and energies to the launching and guiding of business. § II. THE TYPICAL ENTERPRISER'S SERVICES REVIEWED [Sidenote: The enterpriser's skilful use of capital] 1. _The enterpriser guarantees to the capitalist-lender a fixed return._ Agents will yield the highest economic rent of which they are capable only in the hands of those who can use them with exceptional skill. Owners of capital who for any reason, such as youth, inexperience, ill health, incapacity, or conflicting duties, are not able to make agents yield the average rent, seek out, or are sought out by, those who in general can make the agents yield more than the average. The interest contract between them is one of mutual advantage, in that the enterpriser pays a definite sum to the investor unable himself to apply his productive agents. Immense sums of capital are now put into the hands of small enterprisers, such as Western farmers improving their lands, builders of city homes and business blocks, and small manufacturers. But stocks and bonds of corporations give a wide variety of investments which shade off from the safer or capitalistic type, to the more uncertain, or enterpriser's type. First-mortgage bonds, being a first claim on the income and property, have the highest security and yield generally the lowest interest. Even national bonds are not absolutely safe, and for that reason as well as because of their fluctuation in price, even their purchase has something of the nature of an enterprise. Stocks are the enterpriser's type of investment, the dividends being more uncertain, but giving the chance of a higher return than the average. It is because some stand ready to assume the risk of making goods yield average returns or more, that others can sit and enjoy a fixed income with little effort and in comparative security. [Sidenote: The enterpriser's insurance of the lender's capital] 2. _The enterpriser gives up the certain income to be got by lending his own capital, and, becoming a borrower, offers his capital as insurance to the lender._ Every business has an element of uncertainty in it, and some one must meet the risk. A man with marked ability as an organizer of industry is rarely found long without capital of his own. But even a penniless man who can gain the confidence of investors is able to get backing and to secure the necessary funds to engage in business. The lenders in such a case, however, run a greater risk than when the enterpriser is a man of some means, and they therefore ask a higher rate of interest than if they were loaning to a wealthy man or to a wealthy company. They are in part the enterprisers. When, as usually, the enterpriser invests some of his own capital, it is a guarantee of his good faith, a sort of insurance reserve to protect the lender from loss. The first loss falls on the enterpriser, and the chance of loss to the lender is in large part, though not entirely, eliminated. It is characteristic of modern loans that the borrower may be rich, not poor,--often richer than the lender. The mortgage on real estate and the creditor's claim on a merchant's property usually give security of far greater value than the loan. [Sidenote: The enterpriser's insurance of the laborer's production] 3. _The enterpriser gives to other workers a definite amount for services applied to distant ends._ In discussing the wage system it was pointed out that most labor at the present time is put upon future goods. It is not known what they will be worth a month or a year later when they mature as consumption goods; their present worth can merely be estimated. If they prove to be worth little, the profits may be nothing or less than nothing. The enterpriser, however, buys the services for ready money, embodies them in goods, and assumes the risk; the goods may sell for more or less than the wages. It is sometimes said with a certain irony that if the enterpriser assumes the risk he is very careful to pay so little for labor that he does not lose. In this naive view the enterpriser is so independent of the market that he can pay much or little as he pleases. In fact in many cases he gains little, and in many he loses and loses largely. [Sidenote: The risk of the enterpriser's services] 4. _The enterpriser risks his own services and accepts an indefinite chance instead of a definite amount for them._ Assuming the risk for the right conduct of industry, he backs himself, expresses his faith in himself as a manager who can make labor earn more than the prevailing wages and make capital yield more than the prevailing rate of interest. If it were otherwise, he would loan what capital he has instead of borrowing more; instead of employing others, he would himself seek employment in some other industry. Men are constantly shifting from the class of hired workers to that of enterprisers. It is a rude and often tragic process of adjustment and selection that enables men having ability as enterprisers to continue in that work, and forces others into the class of employees. [Sidenote: The enterpriser the intermediary in industry] 5. _The enterpriser is the economic buffer; economic forces are transmitted through him._ In a more primitive industry each man is wage-earner, capitalist, and enterpriser combined in one. As industry develops, some of the factors of cost become distinguishable, and relatively stable and calculable. A low rate of interest, ranging from three to four per cent., can be secured with practical certainty by putting one's money into good corporation securities, into the savings-bank, or into national bonds. Contract wages in each class of labor also are fixed by competition at a point where they are a medium or average of gains and losses. The enterpriser is the most movable element. As the specialized risk-taker, he is the spring or buffer, which takes up and distributes the strain of industry. He feels first the influence of changing conditions. If the prices of his products fall, the first loss comes upon him, and he avoids further loss as best he can by paying less for materials and labor. At such times the wage-earners look upon him as their evil genius, and usually blame him for lowering their wages, not the public for refusing to buy the product at the former high prices. Again, if prices rise, he gains from the increased value of the stock in his hand that has been produced at low cost. If the employer often appears to be a hard man, his disposition is the result of "natural selection." He is placed between the powerful, selfish forces of competition, and his economic survival is conditioned on vigilance, strength, and self-assertion. Weak generosity cannot endure. [Sidenote: Fluctuation of profits] 6. _Profits therefore fluctuate more from industry to industry and from man to man than do other incomes._ As a somewhat exceptional case, small employers in industries such as baking and tailoring, may for long periods get less for their work than their employees get in wages. The pride in being an employer and occasional chances of greater gains perhaps explain the fact. The fluctuations of the market may sweep away from the enterpriser not only all his "profits," but all his accumulated wealth. As a consequence, profits may be at other times very high, for men will not take the risk of great losses unless there is a chance of large gains. While the income of the salaried man is occasionally advanced, and then for long periods remains unchanged, the profits of enterprise come in waves. In seasons of prosperity the income of the employer swells with a dramatic swiftness while rents and wages move tardily upward. But for years again the employer earns a return hardly exceeding a low interest on the capital invested in the enterprise, or runs the business for a time at a loss. Profits of this kind should not be spoken of as a percentage. Greater or less, they are the net result attributable to the enterpriser's skill, and bear no fixed or calculable relation to any capital investment. § III. STATEMENT OF THE LAW OF PROFITS [Sidenote: Antisocial or pseudo-profits] 1. _Some apparent profits are due to antisocial or criminal acts._ Cheating, lying, breaking of contracts, bribery of public officials, and many similar acts may greatly increase individual incomes. These are not profits, as the term is here understood, but they are hard to distinguish from profits in practical life. One man gains a temporary success by acts that are later punished as crimes; another, guilty of like deeds, escapes conviction for lack of evidence or on technicalities, and enjoys ill-gotten wealth. More fortunes, however, are due to actions on the border-line of ethics, which society is not yet honest enough to condemn or wise enough to prevent. No code of laws can be framed that will make possible the punishment of all antisocial acts. Any law that would catch all the guilty would injure many of the innocent. Economic analysis may exclude from the concept of profits the gains made by such means, but only omniscience could distinguish them in every actual case from "swag and boodle." [Sidenote: Chance profits] 2. _Some profits are the result of pure chance or luck._ What is luck? A result that is not calculable, coming to pass in conditions where a rational choice is not possible, is called luck, for lack of another name. Now pure luck often brings temporary profit to the individual, but chance does not in the least account for the average and abiding profits. There is bad luck as well as good luck. According to the law of chance, in the tossing of a coin for "heads and tails," one side is as likely to come up as the other, and in the long run the number of heads and tails will be equal. Where cases are numerous, losses and gains distribute themselves about a general average, and may be eliminated by insurance, as that against fire, flood, lightning, against sickness of the employer, which would cripple the business, or against his death, which would check it. But many factors evade all attempts to reduce them to rule, and chance remains a considerable factor in the success of many individuals. It still sometimes appears better to be born lucky than rich. [Sidenote: Profits due to a union of chance and choice] 3. _Some profits are temporary gains from happy but not entirely accidental choice of the best course._ Many cases of profit said to be due to chance are found on closer knowledge to be due to superior judgment. A slight advantage in choice will give now and then apparently chance gains. The adventurer who, on the discovery of gold, goes at once to California or to Alaska, may stumble upon a gold-mine. It is luck; but if he stays at home it is more likely, according to the theory of chances, that he will stumble over an ash-heap. In places where gold-mines are comparatively plentiful, one takes chances between a load of lead and a bag of money. Throughout life there is constant opportunity, but it must be sought. One who has the good judgment to be ever at the right time at the place where he has the best chance of stumbling upon a good thing, usually gets the advantage, and men call it luck. The more the causes of success in general are studied, the larger is found the element of choice, the smaller that of luck. Some writers make these temporary gains the essence of profits. Considering that profits are always due to the introduction of new and better methods, and not to the continued use of better ones, they argue that as the knowledge of these becomes common property profits will disappear. But this in our view is a partial truth. [Sidenote: Skill the essential condition of continuing profits] 4. _Continuing profits arise from the continued exercise of superior judgment._ After all the chance elements are taken into account, there remain differences in the abilities of men, and a continued and ever-renewed need of organizing power. Profits, being recognized as due to these differences in the abilities just as rent is due to differences in the fertility and efficiency of goods, have therefore been called differential gains. There would be no objection to the term were it not intended to emphasize a supposed difference between profits and rents on the one hand and interest wages on the other. [Sidenote: Risk of loss reduced by skill] Some writers have so magnified the thought that the enterpriser's function is to assume risk, as to make it a denial of the view that profits are the earnings of ability. The risks of business are not those of the throwing of dice in which (if it is fair) skill plays no part, and gains in the long run offset losses. Business risks are rather those of the rope-walker in crossing Niagara; the task is easily undertaken by the skilful Blondin, it is fatally dangerous to the man of unsteady nerve and limb. Profits are due not to risks, but to superior skill in taking risks. They are not subtracted from the gains of labor but are earned, in the same sense in which the wages of skilled labor are earned. So long as some men have better organizing ability than others, have better judgment, are better able to take the risks, there is reason to believe that profits will continue. Profits are the share, or income, of the enterpriser for his skill in directing industry and in assuming the risks. Despite the complex influences, they are determined by his contribution to industry essentially as is the value of any skilled service. CHAPTER 32 PROFIT-SHARING, PRODUCERS' AND CONSUMERS' COÖPERATION § I. PROFIT-SHARING [Sidenote: Nature and definition of profit-sharing] 1. _Profit-sharing is rewarding labor with a share of the profits in addition to contract wages._ The essential mark of profit-sharing is that the additional payment depends on the net profits of the whole business at the end of the year. It is not to be confused with a free gift, or with special privileges granted by the employer, such as lunch-rooms, bathrooms or houses at a low rent. Profit-sharing is a contract made in advance, not a free gift. Nor is it the same as a bonus or premium for a larger output, made contingent on the physical product, on the increased number of pieces turned out by the workmen, individually or in groups. Premium for output is given for something directly under the influence of the worker. The amount of profits is affected by the amount of output, but also by a number of other things that are quite outside the control of the workmen. [Sidenote: The possibilities of profit-sharing] 2. _The purpose of the employer in adopting profit-sharing is to stimulate the industry of the workers, thus reducing waste and cost of labor and supervision._ The employer adopting the plan does not intend to lose by it; he believes that if he can get his workmen to take an interest in the business his costs will be reduced. He offers to divide with them the resulting savings. There is, in every factory, greater or less waste of materials, destruction of tools, and loss of time, that no rules or penalties can prevent. If the worker can be made to take a strong enough personal interest he will use care when the eye of the foreman is not upon him. The product also can be slightly increased in many ways by the workmen's exertions or suggestions. In some cases the quality of the work cannot be insured by the closest inspection as well as it can be by a small degree of personal interest. Either responsibility for the fault cannot be fixed, or the defect is one not measurable by any easily applied standard. Strikes are averted, good feeling is promoted, and contentment is furthered if the interest of the worker can be made to approach, and actually to be in harmony with, that of the employer. The economic result of the plan, if it can be made to work, must be to reduce the costs of these establishments below what they are. The crucial question is whether this alone insures that the costs will be less than those of competitors, thus giving a source out of which an increased amount, really a wage, can be paid to the laborer. This additional wage is made conditional on the employer's success in gaining a net profit on the year's business. [Sidenote: Its successes and failures] 3. _The profit-sharing plan is now successfully working in over one hundred firms in America and Europe._ The plan was first tried in Paris by Leclaire, a house-painter. In house-painting there is often a great waste of materials and time by men working singly or in small groups in different parts of the city. By this new method Leclaire enlisted the aid of the workmen, reduced the costs, and increased the profits. It is a remarkable fact that the plan has been continued successfully by the same firm to the present time. The most important examples of profit-sharing in the United States are the Pillsbury Mills in Minneapolis, Procter and Gamble's soap-factories at Ivorydale, O., and the Nelson Mfg. Co. at Leclaire, Ill. In some cases both manufacturer and workman value the system highly. N. P. Gilman, the author of "Profit Sharing," puts the ratio of successes very high. Others declare that the failures are mostly lost sight of and are very many. The proportion of business done in this way is not large. One hundred firms is a very small fraction of one per cent. of the total number of firms in Germany, France, England, and America. A still more important fact is that this method of remuneration did not spread in the ten years preceding 1900. [Sidenote: Objections to and difficulties in profit-sharing in practice] 4. _The failure of profit-sharing to grow is due to objections on the side both of the employer and of the workman._ On the side of the workman there is the bookkeeping difficulty. He is suspicious, and he lacks knowledge of the business. If at the end of the year the books show no profits, the workman loses confidence, considers the plan to be mere deception, and rejects it. Moreover, the plan puts a limitation upon the workman's freedom to compete for better wages by changing his place of work. It is almost indispensable to make length of service a condition to the sharing of profits. Workmen coming and going, working only a few months, cannot be allowed to share; the percentage given to the others increases with length of employment. Whenever men are thus practically subject to a fine (equal to the amount of shared profits) if they accept a better position, there is danger of a covert lowering of wages. The plan tends to break up the trade-unions, which is one of the reasons that the employers like it, and is the reason that organized labor opposes it. The employer on his part objects to the interference with his management, the troublesome inspection of the books, and the constant grumbling and complaint of the workmen. It makes known the amount of his profits; if they are large, the advertising of his success invites competition; if they are small, publicity injures his credit and depresses the value of his property. In view of all these difficulties it is not surprising that while the plan often starts promisingly, it usually loses its efficiency after a short trial. Business methods are severely subject to the principle of the survival of the fittest. Through competition and the survival of the firms that adopt improvements, better methods must eventually supplant poorer ones. If a method fails to spread when it has been tried for fifty years and all are free to adopt it, there must be some defects inherent in it. That must be our conclusion as to profit-sharing. [Sidenote: Defective character of profit-sharing] 5. _It is usually better to make wages depend on the worker's efficiency rather than on the profits of the whole business._ The strongest motive to efficiency is present when reward is connected immediately and directly with effort, not with some result only slightly under the worker's control. In profit-sharing the added share is only partially due to increased effort of the worker. Labor is but one of the groups of costs. Profits are the net result of many influences. Chief among these is the wisdom of the enterpriser in planning and conducting the business. The "profits" may be nothing, though the worker may be exerting himself to the utmost. The plan is, therefore, reactionary, not in accord with the general progress of the wage system, which is tending constantly to centralize responsibility, to put the risk into the hands of competent managers, and to secure to the worker a definite amount in advance, as high as conditions make possible. The system of premiums, or bonus payments, for output, gives in most cases better results and is rapidly spreading. It is sounder in conception and works better in practice. This premium depends on the increase by the laborer of the output of his particular machine or process as compared with a standard based on the experience of some definite period. § II. PRODUCERS' COÖPERATION [Sidenote: Purpose of producers' coöperation] 1. _Producers' coöperation is the union of workers in a self-employing group to do away with any other enterpriser than themselves, and to secure for themselves the profits._ Its object is not to do away with any return on the capital investment. Capital may be borrowed either from outsiders or from the individual coöperators, and is paid a stipulated interest apart from the profits. The source of the gain is to be found in the saving of what the worker looks upon as the needless drain of profits into the pockets of the employer. The hope is that the enterpriser's function (if it is admitted that he has any useful function) will be performed by the workers collectively or through their representatives. They undertake to furnish brain as well as muscle, management as well as hand-work. The hope is even to increase the profits through increasing the stimulus to the workers and by saving in friction, disputes, and strikes. [Sidenote: Its limited success] 2. _Practically the plan has been made to work in a comparatively few simple industries._ The most notable examples of successful coöperation in America have been the cooper-shops in Minneapolis. There were a simple problem of costs, few and uniform materials, patterns, and qualities of product, few machines and much hand-labor, simple well-known processes, a sure local market. Mr. Lloyd, in a recent book, describes many successful societies in England, but they are all of a simple sort of industry, as agriculture and dairy-farming. Within the whole field of industry, this method of organization makes little if any progress. Most experiments have failed and the successful ones often become ordinary stock companies with the most able men in control. Therefore, whether losing or making money, they nearly all cease to exist as coöperative enterprises. This result has disappointed the prophecies of many wise men of seventy-five years ago. In the time of John Stuart Mill, great expectations were entertained of the future of productive coöperation, which was thought to be a solution of the whole social problem. [Sidenote: Its main difficulty] 3. _The main difficulty in productive coöperation is to secure managing ability of a high order._ There is no touchstone for business talent, no way of selecting it with any certainty in advance of trial. This selection is made hard in coöperative shops by the jealousies and rivalries, and by the politics among the workmen. A man thus selected by his fellows finds it almost impossible to enforce discipline. In coöperation there is occasionally developed good business ability that might have remained dormant under the wage system; some workmen showing unusual capacity cease to be handicraftsmen. But the unwillingness on the part of the workers to pay high salaries results in the loss of able managers. Having demonstrated their ability, the leaders go to competing industries where their function is not in such bad repute, and where higher salaries can be earned; or they go into business independently, being able easily to get control of the necessary capital. [Sidenote: Coöperators under-value the enterpriser's function] 4. _Most coöperative schemes have suffered from a lack of good theory, an inability of the workers to see the importance of the enterpriser's service._ Most men make a very imperfect analysis of the productive process. They see that a large part of the product does not go to the workmen; they see the gross amount going to the enterpriser, and they ignore the fact that this contains the cost of materials, interest on capital, and incidental expenses. They ignore further that the enterpriser's function is a productive and essential one. The theory of exploitation, or robbery, as explaining the employer's profits, is very commonly held in a more or less vague way by workmen. With a body of intelligent and thoroughly honest workmen, keenly alive to the truth, the dangers, and the risks of the enterprise, coöperation would be possible in many industries where now it is not. The producers' coöperative schemes usually stumble into an unsuspected pitfall. When a heedless and over-confident army ventures into an enemy's country without a knowledge of its geography, without a map, and without leaders that have been tested on the field of battle, the result can easily be foreseen. § III. CONSUMERS' COÖPERATION [Sidenote: Nature and kinds of consumers' coöperation] 1. _Consumers' coöperation is the union of a number of buyers to save for themselves the profits of the merchants or agents._ There are many classes of consumers' coöperation, but the chief ones are: (1) to sell goods (retail stores); (2) to provide insurance (coöperative insurance companies); (3) to provide credit or capital (coöperative banks). These are also productive enterprises, for the merchant's work adds value to the goods, the insurance company and its agent do a real service, the profits of the small bank are, ordinarily, earned fairly under existing conditions. The terms producers' and consumers' coöperation merely set in contrast the part of the productive process that is undertaken. Producers' coöperation is concerned with the earlier steps, usually stopping when the product is disposed of to wholesale or retail merchants. Consumers' coöperation (often called distributive coöperation) is concerned with the later steps, the placing of a consumption good (rarely also productive agents) into the hands of the final user. It imparts the same value to goods that the retail merchant does. The one thing this class of coöperators is sure of when they begin is a number of consumers to make use of the service or products they purpose to supply; hence the name. [Sidenote: Costliness of competitive mercantile business] 2. _The waste of competitive mercantile business is the source from which it is expected that the savings of the coöperative enterprise will come._ It is a great expense to the retail dealer to secure a body of customers. Rent of store-room, clerk hire, interest on invested capital are fixed charges, which can be met only on condition of a regular and frequent turnover of the stock. To attract customers the dealer must have a well-located store, must advertise, keep open long hours, and pay idle clerks. Frequently he must give credit, raising the price enough to cover the expense of bookkeeping, collection, bad accounts, and loss of interest. The public's likings, whims, lack of judgment, and lack of business analysis make these charges necessary. There are many communities where it would be impossible to carry on a cash business even at considerably lower prices. Customers are exacting and require the costly delivery of small packages; two horses and a driver must travel two miles to deliver a spool of thread or a half-dozen oranges. Frequent changes of fashion and the shifting of customers from one store to another keep the merchant always insecure in his trade. A number of buyers mutually agreeing to pay cash, to buy at certain times, to place all their orders with one store, to go to a cheaper location, down an alley or into a basement, can save much of this cost on one condition: that the management approaches in its efficiency that of ordinary competitive business. In spite of all these advantages, if there is inefficient management the final cost will be no less than that of ordinary business. [Sidenote: The more successful coöperative stores] 3. _Despite the possibilities of saving, most coöperative stores fail through a lack of good management._ Note first the greater successes. Since 1842, from which time it dates, the coöperative-store movement has progressed steadily in England, where the scores of retail societies are federated and own large wholesale stores. The long experience has developed good methods and a conservatism almost inconceivable to an American mind. They are practically great stock companies in which one can buy a share at a small cost and become a purchaser at usual prices, receiving a dividend later according to the amount of his purchases. Coöperative stores in American universities are generally successful, apparently because they don't coöperate. Some get into politics and go the way of the wicked. The survivors gravitate into the hands of a committee of the faculty, which tries to employ an efficient manager, and administers the business as a public trust without private profit. The wastefulness of multiplying orders for text-books to be used by a class whose number is definitely known in advance, and the comparatively uniform character of the supplies, make economy peculiarly easy in this case. A large part of the services of the coöperative store, however, are indirect; it reduces and regulates the charges in the stores near by. [Sidenote: The failures and their causes] Nearly all the Granger stores, started thirty years ago in great numbers, and most of the coöperative stores among American workmen, have failed. The failure is easily explained by the ignorance of danger, by lack of harmony, by credit sales, and by inefficient management. The wastes of competitive business are partly a tax imposed upon men (taken collectively) by their lack of business method; the community is not intelligent enough, honest enough, or self-sacrificing enough to do business in the most economical way. Partly they are the price paid for variety and change, and for the cherished American right "to kick"--something difficult for the members of a coöperative store to do without hurting themselves. [Sidenote: Profit-sharing and coöperation in relation to the enterpriser] [Sidenote: Continued need of the enterpriser] 4. _The experience with these plans verifies the analysis of the enterpriser's function: pure profits are the earnings of a productive service._ Comparing these three plans, they are seen to be alike in seeking to make workers share some of the profits, to change the destination to which profits would go. The first would create profits by the effort of the workers, and give them a part of the saving. The second would have collective workers perform the enterpriser's work in the factory and get his reward. The third would have collective buyers do the work of the merchant and save his profits and other costs. The last is the easiest to do. Profit-sharing is next in difficulty, and producers' coöperation is the hardest of all to put into practice. In some cases, under some conditions, the enterpriser's services may be more economically performed than at present, for the waste is great. But taking men as they are and things as they are, in most places the enterpriser's service is necessary and must be paid for. His contribution to the success of the industry depends on his nature and ability, and it can be distinguished theoretically and practically from the contribution made by the workmen. Nothing but changes in human nature, in education, and in morality can diminish the necessity for his service. CHAPTER 33 MONOPOLY PROFITS § I. NATURE OF MONOPOLY [Sidenote: Difficulty of fixing the meaning of monopoly] 1. _The term monopoly is used loosely and in many senses._ In popular discussion monopoly means almost any wealthy corporation or the power the corporation possesses, a power which is usually thought of as oppressive. Even economists have held the vaguest ideas regarding monopoly. The recent rise of trusts and monopolies has given a large new body of facts bearing upon the subject, but all the resulting discussion by the public and by economists has not brought agreement upon a definition entirely satisfactory. When usage has not settled upon any one meaning, the selection of a definition is in a measure arbitrary, though it may be guided by logic and considerations of expediency. Let us state the various meanings and indicate the one adopted in this discussion. [Sidenote: Monopoly is not merely scarcity] 2. _Monopoly should not be used as synonymous with scarcity._ Scarcity is the essential condition of all value. The simplest things--bricks, sand, the commonest unskilled labor--would have no value were there not a degree of scarcity relative to the wants that may be gratified. "Monopoly," whatever else it means, always conveys the idea of some exceptional kind of scarcity, scarcity due in part to some source or cause not ordinarily present. It is a bad practice in definition to apply two words to one idea, leaving the other idea unnamed, as is done when monopoly is made synonymous with scarcity. Both words are needed. Such a usage unfortunately is common in economic literature. Many economic writers, for example, have called landownership monopoly, saying that land being the work of nature cannot be increased by men, and therefore must always be scarce. Even if it were true that in the economic sense land could be produced by man, there still would be confusion here between a general class of goods and a special thing. The fact that a particular field cannot be duplicated does not make a monopoly of land as a whole, any more than the existence of desert land in Arizona makes land valueless or a free good. Nor is a land-owner a monopolist any more than is the owner of a valuable machine. The owner of forty acres of land worth four hundred dollars, or the owner of a village lot worth a hundred dollars, can hardly be called a monopolist. It leads to absurdity to use the word monopoly with reference to landownership indiscriminately. Neither mere scarcity nor the limitation of natural stores should be called monopoly when ownership is scattered and combination between owners does not exist. [Sidenote: Monopoly is not merely superior economic power] 3. _The ability of superior material agents and of skilled workers to secure higher returns than do poor ones does not constitute monopoly._ The free competition assumed in abstract discussions of value, does not mean equal capacity or efficiency, but the legal freedom and personal willingness to move a productive agent into the highest industrial place it is capable of holding. The rocky field does not compete with the fertile one in the sense that it can yield the same uses. The field fit only for potatoes does not compete with those rare and favored localities that can raise the best wines. The gardener earning two dollars a day does not compete with the skilled physician with an income of twenty thousand dollars a year, for he has not the economic capacity to do so; but he is _free_ to compete (as is the owner of the rocky field) unless law, caste, class legislation, social prejudice, or some other objective factor forbids. Anything, however, that prevents the labor or capital of buyers or sellers from application for which they are fitted, defeats free competition. To use the term monopoly of any and every limitation of economic ability is to extend it to every case of value. To use it of the high wages of skilled workmen, where no union to suppress competition exists among them, is to make it a colorless synonym of scarcity. It should be confined to a narrower and more exclusive use. Some special kinds of limitation should be connected with the idea of monopoly. [Sidenote: Monopoly consists in unified control] 4. _The limitation connected with monopoly is not that of economic capacity but that of ownership and control._ The derivation of the word from the Greek points to the general thought: _monos_, alone, _poléo_, to sell, a single seller, the sole source of supply in a given market. The term was first used in England of special grants or patents of monopoly from the crown to make or deal in specified articles, such as soap, candles, etc. The political power of the state created and defended the monopoly. This policy is pursued in a limited degree to-day for the encouragement of invention, in the granting of patents and copyrights. In the current definition, "The exclusive right, power, or privilege of dealing in some article or trading in some market," the term "dealing in" is well chosen, for it is broad enough to cover cases of buying as well as selling, and includes power derived from political as well as from other sources. But the term "exclusive" is too absolute, allows of no gradations, and makes the definition applicable only in the rarest cases. [Sidenote: Definition of monopoly] [Sidenote: Monopoly limits supply] 5. _Monopoly is such a degree of control over the supply of goods in a given market that a net gain will result to the seller if a portion is withheld._ Every producer has control over some agents and some portion of the supply of products; but ordinarily the portion controlled by any one is so small that withholding it entirely from sale would not cause the market price to rise in any appreciable degree. The producer in such a case regulates his action as if the market price were fixed beyond his control, and he uses his productive agents fully up to the point where costs equal price on the marginal unit of product. A skilled worker getting five dollars a day loses that sum every day he is idle. A landowner whose land can command a competitive rent of ten dollars an acre must take that sum or less, or nothing; he cannot get more. How can a net gain ever result from a smaller sale? As a reduction of supply results in a higher price, it is possible, as is seen in the paradox of value, for a situation to arise in the case of some goods, where a smaller number of units yield a larger sum in the market than a larger number of units. But the seller's interest lies not in the increase of total sales, but in that of net gains. Net gains, being the product of the number of units sold multiplied by the gain on each unit, increase at a much faster rate than do total sales. The existence of monopoly power in any degree depends therefore on several factors: the effect of contraction of supply in raising prices, the effect on costs, the number of units remaining in the ownership of the one contracting supply, and the possibility of preventing others from increasing supply later to profit by the higher prices. § II. KINDS OF MONOPOLY [Sidenote: The sources of monopoly power] [Sidenote: Political monopoly] 1. _Monopoly gets its power from political, economic, and commercial sources._ A political monopoly derives its power of control from a special grant from the government, forbidding others to engage in that business. The typical political monopoly is that conferred by a crown patent bestowing the exclusive right to carry on a certain business. A second kind is that conferred by a patent for invention, or the copyright on books, the object of which is to stimulate invention, research, and writing by giving the full control and protection of the government to the inventor and writer or their assignees. In this case the privilege is socially earned by the monopolist; it is not gotten for nothing. Moreover, the patent is limited in time, expires and becomes a social possession. A third kind is a government monopoly for purposes of revenue. In France, the government controls the tobacco trade, and the high price charged for tobacco makes the monopoly yield a large income. A fourth kind are public franchises for public service, as street-railways, lights, gas, waterworks, etc. These are granted to private capitalists to induce them to invest capital in something which has public utility. [Sidenote: Economic monopoly] Economic monopoly arises when the ownership of scarce natural agents, as mines, land, water-power, comes under the control of one man or one group of men who agree on a price. Economic monopoly is a result of private property that is undesigned by the government or by society. It is exceptional, considering the whole range of private property, but it is important. The oil-wells embracing the main sources of the world's supply have come under one control. One corporation may control so many of the richest iron-mines of the country as to be able to fix a price different from that which would result under competition. Coal-mines, especially those of some peculiar and limited kind, such as anthracite, appear to become easily an object of monopolization. Economic monopoly merges into political monopolies, such as patents and franchises. Private property is a political institution designed to further social welfare, and only rarely is any particular property a monopoly. Private control of great natural resources doubtless would have been prohibited had it been foreseen. [Sidenote: Commercial monopoly] Commercial monopoly, variously called contractual, organized, or capitalistic monopoly, arises where men unite their wealth to control a market, to overpower or intimidate opposition, and to keep out or limit competition by the mere magnitude of their wealth. These various kinds so merge into each other that they cannot always be distinguished in practice. A patent may help a capitalistic monopoly in getting control of a market; great wealth may enable a company to get control of rare natural resources. [Sidenote: Special classes of monopoly] 2. _Monopolies may, for special purposes, be classified also as selling and buying, producing and trading, lasting and temporary, general and local._ The terms selling and buying monopoly explain themselves, though the latter conflicts with the etymology. Under conditions of barter the selling and the buying monopoly would be the same thing in two aspects. A selling monopoly is by far the more common, but a buying monopoly may be connected with it. A large oil-refining corporation that sells most of the product may by various methods succeed in driving out the competitors who would buy the crude oil. It thus becomes practically the only outlet for the oil product, and the owners of the land thus must share their ownership with the buying monopoly by accepting, within certain limits, the price it fixes. The Hudson Bay Company, dealing in furs, had practically this sort of power in North America. Many instances can be found, yet, relatively to the selling monopolies, those of the buying kind are rare. A producing monopoly is one controlling the manufacture or the source of supply of an article; a trading monopoly is one controlling the avenues of commerce between the source and the consumers. Monopolies are lasting or temporary, according to the duration of control. By far the larger number are of the temporary sort, because high prices strongly stimulate efforts to develop other sources of supply. Yet the average profits of a monopoly may be large throughout a succession of periods of high and low prices. Monopolies are general or local, according to the extent of territory where their power is felt. At its maximum where transportation and other costs most effectually shut out competition, monopoly power shades off to zero on the border-line of competitive territory. [Sidenote: Relativity of monopoly] [Sidenote: The test of monopoly] 3. _Degrees of power to affect price result from varying extent of control; monopoly is a relative term._ The term monopoly by its derivation has reference to a single seller; but there are other thoughts in the concept. Monopoly has reference also to the amount of the supply controlled. The frequent use of the adjectives partial, limited, and virtual are implied but usually superfluous recognitions of the relative character of monopoly. Ownership of a particular knife, pencil, book, makes one the unique seller of it, but confers no monopoly power, as the power of substitution is practically absolute; the welfare of no one depends in any appreciable measure on that particular pencil. Ownership of an important fraction of an entire species of goods gives more power to affect value. One owning a large part of the desirable building sites or houses in town may gain by occasionally letting one stand vacant in order to drive better bargains with tenants. A trade-union may control most of the labor-supply of one kind in a town. But the test of monopoly is that a gain results from a higher price and fewer sales. It begins at the point where there is a motive to limit the supply in accordance with the paradox of value. The control of an entire species of goods gives price-fixing power, limited only by substitution of goods. Even though one person controlled all the coal and wood in any market, their prices still would be limited. If there were but one possible source of meat-supply, most people could live without meat. The monopoly of great species of goods can thus be seen gradually to merge from one grade into another. It is a matter of quality as well as quantity. There is more or less of it in the different industries, and, as noted in the preceding paragraph, it varies over time and territory. § III. THE FIXING OF A MONOPOLY PRICE [Sidenote: Forces governing competitive prices] 1. _A competitive producer gets the highest price that will permit him to dispose of his product._ The enterpriser seeks to get the highest price for his product that the market will afford. His ability to continue making a profit at a lower price does not induce him to reduce the price unless the reduction is to his interest. The ordinary competing manufacturer is limited in his price by two things: first, his customers may cease to buy such articles entirely and may substitute other goods if the price is too high; secondly, they may buy of other sellers. Between his wish to keep the price up, and the customer's wish to buy as cheaply as he can, the price is fixed at a point where there is no inducement for others to come in and reduce his sales, or for him to seek a better market. There may be under these conditions a potential but very limited monopoly power. The sole druggist in a small town might occasionally get extortionate prices from particular customers in times of dire need, but he would thus drive away much of his custom, and would tempt a fairer and less grasping competitor to come in. Thus, when men and capital are free to come and go, there results an average or normal return for ability and agents of a certain grade. Prices come to equilibrium where each is selling his total product. [Sidenote: Monopoly's greater control of price] 2. _Where a monopoly exists to a greater or less degree, there is less reason to fear loss of custom to competitors._ The degree of control determines the fear of competitors. If the control is slight, a very small rise of price will bring in competitors. The monopoly profits in this case either must be very small or they will be very brief. Those outside, controlling a large supply, will be tempted by large profits to market it at once and to increase it as fast as possible. Even where a large part of the supply is under one control, the fear of substitution puts a limit on the price demanded. If the control were extended to all wealth, the monopolist would be the absolute despot of the lives of his fellows. But as things are, the monopolist aims, just as the competitor does, to get the price that gives the maximum gain. The monopolist, however, is in a more or less favored position, as he can raise his price considerably before losing the most of his customers. Much depends on whether the costs increase or decrease as output grows. Where a large increase in output greatly decreases the cost, lower price may leave a larger margin between the cost and the selling price. A general monopoly price is therefore not an unlimited price. It is higher than the competitive price if the same cost of production is maintained. It may conceivably be lower than the former competitive price if the economies of combination greatly reduce the cost and justify a large increase of the output. [Sidenote: Discriminating monopoly rates] 3. _A monopoly often seeks to avoid a general market price, and it adjusts its charge in each small market separately._ This is a most important aspect of the monopoly problem and a most important modification of the principle just stated. A market price is the expression of the least urgent demand that aids in carrying off a given supply. It is a maxim that there can be but one price at a time in a given market. The baker ordinarily sells the loaf at the same price to every one buying a given quantity. If he had a monopoly of the bread-supply, however, he might deal with each customer separately, ascertain, by personal inquiry into the lives of the citizens and by the aid of a force of detectives, just how much each could or would pay rather than do without bread. The policy of varying prices is thus followed by monopolies, though usually in a less inquisitorial way, to enable them to get the highest possible returns. Under the name of "charging what the traffic will bear," it is practiced by the railroads as local and personal discrimination. The endurance of some communities and of some individuals being greater than that of others, the burden is adjusted to the back, being made not as light but as heavy as each can be forced to bear. [Sidenote: Low rates to destroy competitors] Large monopolies dealing in commodities use an adaptation of this method to kill off small competitors who, within a certain district, sell at less than the monopoly price. Prices are suddenly reduced in that community below cost until, the small competitor being ruined, the monopoly rate is reëstablished perhaps higher than before. Fear of suffering a like fate prevents others from attempting competition even when prices offer a great attraction and give a high monopoly profit. [Sidenote: The source of monopolistic profits] The profits of monopoly can be explained by the ordinary laws of value, yet evidently they form a peculiar economic and social problem. They appear to be due not to the services of the enterpriser in increasing production, but to his success in limiting it. There is, therefore, an antisocial element in them not found in the profits of ordinary industry. This deserves further and closer study. CHAPTER 34 GROWTH OF TRUSTS AND COMBINATIONS IN THE UNITED STATES § I. GROWTH OF LARGE INDUSTRY IN THE UNITED STATES [Sidenote: Distinction between large capital] [Sidenote: Large production] [Sidenote: And monopoly] 1. _In the discussion of the so-called trust problem three things must be distinguished: large individual capital, large production, and monopoly power._ Capital, in the sense of valuable agents, is found in the smallest as well as the largest industry, and every owner, from the small shop-keeper to the wealthiest bondholder, is a capitalist. In popular discussion, however, the word frequently implies great wealth in a single hand, though this wealth may be invested in a large number of small industries. Large production is the concentration of capital into large units of industry. The capital may be the same as before, the ownership may or may not be widely diffused, but the control and management are unified. Large factories may or may not have monopoly power; as factories grow in size, competition among them often becomes more, not less, complete and severe. On the contrary, monopoly, as before defined, may exist where the industry is small, as the waterworks in a small town, or a small factory for making patented articles. In periods of depression a business with a capital of ten thousand dollars may go on and prosper, while one with millions may be forced into bankruptcy. These three ideas--great individual wealth, large industry, and monopoly power--are often hopelessly confused in the discussion of present-day questions. [Sidenote: Stages of tools and household industries] [Sidenote: Of simple machines] [Sidenote: And of large industry] 2. _Three industrial stages may be broadly distinguished: that of tools, that of machines and small factories, and that of large production._ Men are prone to forget that all the world is not doing just as they are. Over two thirds of the people on the globe are still in the first industrial stage. One billion people use only tools, and have no better source and means of power than domestic animals. This is true in the most of Asia and Africa, in the greater part of South America, and in many portions of North America. About two hundred million people live in the stage of simple machines and small factories. These are found in eastern and southern Europe, small portions of South America, some parts even of the United States. In this stage there is not enough manufacturing power in the community to supply much more than its own needs. About two hundred million people in the United States and western Europe have reached the third and highest industrial plane, where the highest mechanical devices are employed and industry becomes highly specialized. These differences are broadly stated; there are contrasts within every nation. Three hundred miles from here, in the Alleghanies, people still can be found spinning and weaving and wearing homespun as in colonial days. In a trip of twenty miles in Tyrol or Switzerland one can observe every one of these industrial stages. The most striking development, if not the typical form, in America to-day is large or concentrated industry. [Sidenote: Household industry in America] [Sidenote: Recent changes in number of factories] 3. _In the last half century the unit of organization in leading industries has tended to grow larger._ Seventy-five years ago a tool-using household industry, on farms and in homes where the greater part of the things used were produced in the family, was still the typical organization in the United States. The early factories growing out of the household industry were small. A family specialized in producing cloth and exchanged with its neighbors; so with shoes, candles, soap, canned goods, cured meats, etc. Since that time two counter forces have been at work to affect the ratio of manufacturing establishments to population. The number of establishments has been increased by specialization of farming which has called for many industries to produce the things once made on farms, and by increasing wealth and invention, which has made possible many small industries supplying things before almost unknown. The number of establishments has been diminished as the staple products that can be transported have come to be made in larger factories. The resultant of these movements during the thirty years ending in 1900 is somewhat surprising: the ratio of factories (with an output worth five hundred dollars) to population has somewhat increased. In 1870 there were two hundred and fifty-two thousand establishments; in 1890, three hundred and fifty-five thousand, and in 1900, five hundred and twelve thousand, a ratio to population of one to one hundred and sixty-two, one hundred and seventy-seven, and one hundred and forty-four respectively. The last date was one of great industrial prosperity, and doubtless many ephemeral enterprises had been called into existence, thus giving a somewhat abnormal result. Moreover, there has been a large increase in the number of things made in factories which were formerly made in the homes, and which then did not appear at all in the census of manufactures. [Sidenote: Large production in some industries] In cotton-weaving, however, the unit of industry is growing, factories in 1870 numbering nine hundred and fifty-six; in 1890, nine hundred and five; in 1900, one thousand and fifty-five, the later increase being due to the fact that many new factories in the South have been started in the last decade. The population meantime doubled. This movement has been going on for seventy years, there being about the same number of mills in 1900 as in 1830, though population had multiplied six-fold. Iron- and steel-mills numbered one thousand three hundred in 1880, one thousand in 1890, and nine hundred and sixty-five in 1900. In industries having local markets and sources of supply for materials, the change has been less rapid. There were twenty-four thousand grist-mills in 1880, eighteen thousand in 1890, and twenty-five thousand in 1900, a change of ratio from two thousand one hundred to three thousand population per grist-mill. There were twenty-six thousand sawmills in 1880, twenty-two thousand in 1890, and thirty-three thousand in 1900, a change from about one thousand nine hundred and twenty to two thousand two hundred and seventy persons per sawmill. But while the number of establishments in these staple industries was decreasing, the number of employees per establishment in most cases was increasing. The average in all industries, in 1870, was eight; in 1890, twelve; in 1900, ten and four tenths. In cotton-mills, in 1870, the average was one hundred and eighty-four; in 1890, two hundred and forty-four; in 1900, two hundred and eighty-seven. The grist-mills, in 1880, had two and four tenths persons per establishment; in 1890, three and four tenths. The sawmills, in 1880, averaged six employees each; in 1890, fourteen; iron- and steel-mills in 1880, one hundred and twenty-one each; in 1890, one hundred and ninety-six. [Sidenote: Growing concentration of capital into large industries] 4. _The amount of capital per establishment is tending to increase in the leading lines of industry._ The amount of capital is not so easy to determine as the number of employees, and it is recognized that the census figures on this subject are only approximately correct. We are told that in cotton-mills, in 1830, the average capital invested was fifty thousand dollars; in 1890, nearly four hundred thousand dollars; in 1900, four hundred and forty thousand dollars. It is easy to observe the large increase in investment of capital in flouring-mills since the new processes came into use. The average capital of all industries does not grow as in the staple ones, for many smaller industries have come into existence. In 1880, the average capital was eleven thousand dollars; in 1900, it was eighteen thousand dollars. [Sidenote: Recent formation of combinations] The years between 1890 and 1900 saw the rapid formation of trusts and combinations, and of larger industries. Consolidation took place on a great scale in railroads and in manufactures. Much of this has been of such a kind that it does not appear at all in the figures showing the number of establishments and of employees. Many discrepancies appear in the data regarding this movement given by different authorities, as there is no generally accepted rule by which to determine the selection of the companies to be included in the lists, and as the conditions are changing from day to day. A competent financial authority[1] gives the following figures regarding the "industrial" trusts (manufacturing and commercial) and gas trusts, organized in the United States between 1860 and 1899, not including combinations in such businesses as banking, shipping, railroad transportation, etc. The figures refer to the reorganization and consolidation of industries into larger units, some of which have much and others little or no monopoly power. Decade Number Organized Total Nominal Capital 1860-69 2 $13,000,000 1870-79 4 135,000,000 1880-89 18 288,000,000 1890-99 157 3,150,000,000 --------------- --- ------------- Total, 40 years 181 $3,586,000,000 The number organized and the capital represented by this movement in the last of these decades are eight times as great as in the thirty years preceding. In the last ten years can be traced the influence of general industrial conditions. Year Number Organized Total Nominal Capital 1890 6 $82,000,000 1891 13 168,000,000 1892 13 140,000,000 1893 5 226,000,000 1894 2 35,000,000 1895 7 104,000,000 1896 3 40,000,000 1897 6 93,000,000 1898 22 574,000,000 1899 80 1,688,000,000 --------------- --- ------------- Total, 10 years 157 $3,150,000,000 [Footnote 1: Compiled from data given by "The Journal of Commerce and Commercial Bulletin," reprinted in "The Commercial Year Book," Vol. V, 1900, pp. 564-569.] The first three years enjoyed great prosperity and the number of combinations were six, thirteen, thirteen. In 1893, the number was less, but the total nominal capital (preferred and common stocks and bonds) was still the greatest it had ever been in any year. Then came the period of depression, 1894-97, when both the numbers and the capital were comparatively small. Then followed the period of the greatest formation of trust companies the world has ever seen, which extended from 1898 to 1901, and ended in 1902. [Sidenote: Trust statistics for 1904] In a list recently revised by another authority[2] it appears that the data for all "industrial trusts" (nearly, but not quite, comparable with the foregoing figures), are in round numbers as follows: Number of Plants Acquired Total Date Number or Controlled Nominal Capital Jan. 1, 1904 318 5288 $7,246,000,000 [Footnote 2: John Moody, "The Truth About the Trusts," 1904.] These figures would indicate that the industrial trusts more than doubled within four years, most of the growth being within three years. The same authority, in a more comprehensive list, classifies in six groups all so-called "trusts" of the United States, at the date of January 1, 1904, as follows (the figures just given above are the totals of the first three groups): No. of Plants Acquired or Total Groups Number Controlled Nominal Capital 1. Greater industrial trusts 7 1528 $2,660,000,000 2. Lesser industrial trusts 298 3426 4,055,000,000 3. Other industrial trusts in process of reorganization or readjustment 13 334 528,000,000 4. Franchise trusts 111 1336 3,735,000,000 5. Great steam railroad groups 6 790 9,017,000,000 6. Allied independent railroad groups 10 250 380,000,000 --- ---- --------------- Total, 445 8664 $20,000,000,000 § II. ADVANTAGES OF LARGE PRODUCTION [Sidenote: Economical use of machinery in large production] 1. _A great technical advantage of large production is the better and fuller use of machinery._ A large factory with a large output can keep a special machine adjusted for each pattern and process, whereas in a small factory much time and energy are wasted in adjusting one machine for various processes. The machinery in a large factory is thus more fully utilized. Compare the machinery used in a large ax-factory with that used in twenty-five small ax-factories having the same total output: the one hundred and fifty workmen in twenty-five small factories would use twenty-five shears, one hundred trip-hammers, fifty grindstone-pits, fifty polishing-frames, a total of two hundred and twenty-five machines; the same one hundred and fifty men in one large factory would require three shears, a saving of twenty-two; twenty trip-hammers, a saving of eighty; thirty-seven grindstone-pits, a saving of thirteen; thirty polishing-frames, a saving of twenty; a total of ninety machines, a saving of one hundred and thirty-five machines. The difference in cost due to machinery is not so great as these figures indicate, as the unused machines last longer; but in the small factory there is more depreciation from rust and decay, and a larger proportionate investment of capital for which interest must be earned. The average amount of stock and materials required in a large factory is not so great in proportion to the output. [Sidenote: Economy in labor power] 2. _In a large factory the division of labor may be more complete and effective._ The technical economies of the division of labor can be realized in large measure only when a number of men work together. Partly because of the advantages in the use of machinery, but partly from other causes, labor in a large group is proportionately more effective than in a small group, especially in producing form-value. In making plows, nine men working separately will average sixty-six plows each per year, while one hundred and eighty men working together will average one hundred and ten each per year, the output per man being increased sixty-six and two thirds per cent. In a rifle-factory with a daily output of fifty, eight men are needed for the same product that can be supplied by three men in a factory with an output of one thousand daily. [Sidenote: Miscellaneous economies] 3. _In the larger industry the costs of management, supervision, and marketing are relatively less._ Division of labor decreases the difficulty of supervision in larger factories, where the processes are divided, systematized, and made a matter of routine. The necessary inspection of the results is more rapid and easy. The advertising of certain kinds of goods involves a large and inevitable outlay, which is relatively less for a larger business, as the greater the output the smaller the burden on each unit of the product. Combination effects a great saving in the number of commercial travelers, a result partly due to the decrease in competition, but partly also to better organization. Each of twenty different factories must send its drummers into every part of the country to seek business. In combination they can divide the territory, visit every merchant and get larger orders at smaller cost. Supplies can be purchased more cheaply in large amounts, and shipments in car-load and train-load lots make possible special (sometimes illegal) concessions from railroads and from carriers on waterways. [Sidenote: Limits to the growth of a single factory] 4. _There are some disadvantages in a large industry which put a limit to the growth of a single local establishment._ There is practically a limit to the advantages of size in a factory. When each man is working on the smallest possible subdivision of the product, doubling the number of employees will not increase his skill. When the finest machinery can be kept constantly in use, economy in its use has reached the maximum. As large factories tend to create cities around them, land rises in value and higher wages must be paid the workmen. Small factories are constantly seeking out lower rents, taxes, wages, salaries, cheaper local sources of materials, cheap though limited sources of power, and thus they compete successfully in many markets. The point is reached in the growth of establishments where oversight cannot be as perfect and complete; the eye of the master cannot be over all. The market that can be reached by one factory is limited by distance, as the cost of transportation finally offsets all the other advantages of large industry. [Sidenote: Do not necessarily limit consolidation] It is evident that most of these reasons apply to a single local factory with far greater force than to a federation of locally scattered plants. It was once believed that the growing disadvantages of large industry would set an early limit to consolidation. While there is a truth in this thought not to be overlooked, the effects must now be recognized to be more distant than was supposed. The limits to the advantages of combination have been removed by the application of the federative plan which makes possible under one management the maximum of advantages with the minimum of the disadvantages in large industry. That was the discovery of the early promoters of the trust movement. § III. CAUSES OF INDUSTRIAL COMBINATIONS [Sidenote: Trusts in the legal and the popular sense] 1. _Trusts are large combinations of capital with some degree of monopoly power._ The original, legal meaning of the term trust does not include the idea of monopoly. The old legal idea of a trust is the confidence imposed in a trustee. The method that was adopted by the early combinations was the trust method, that is, they made use of this legal device: the stock of the separate companies was put into the hands of a board of trustees to whom was thus given the right to control. As it has been found possible to accomplish the same end without the use of this legal method, the popular meaning of the word trust, as applied to a monopoly, no longer agrees with the legal meaning. The word trust is popularly used of any large industry, though usually there is connected with it the idea of some evil power to raise prices to the consumers. A large number of the corporations called trusts have, however, little monopoly power, and some have none at all. They are simply large establishments. [Sidenote: Economies of combination] 2. _A strong reason for combination of competing plants is found in the legitimate economies of large production._ The economies that are possible within a single factory may be still greater in a number of combined or federated industries. The cost of management, amount of stock carried, advertising, cost of selling the product, may all be smaller per unit of product. A large aggregation can control credit better and escape loss from bad debts. By regulating and equalizing the output in the different localities, it can run more nearly full time. Being acquainted with the entire situation, it can reduce the friction. A strong combination has advantages in shipment. It can have a clearing-house for orders and ship from the nearest source of supply. The least efficient factories can be first closed when demand falls off. Factories can be specialized to produce that for which each is best fitted. The magnitude of the industry and its presence in different localities strengthens its influence with the railroads. Its political as well as its economic power is increased. [Sidenote: Integration of industry] A recent phase of corporate growth is the "integration of industry," that is, the grouping under one control of a whole series of industries. One company may carry the iron ore through all the processes from the mine to the finished product. A railroad line across the continent owns its own steamers for shipping goods to Asia or Europe. Large wholesale houses own or control the output of entire factories. The possibilities in this direction have only begun to be realized. [Sidenote: Combination prevents competition] 3. _The men uniting to form a trust always declare that its formation is the necessary result of excessive competition._ The statement is often true in the sense that a hard fight and lower prices have preceded the formation of the trust. But as this excessive competition usually is for the very purpose of forcing the combination, this explanation is a begging of the question. It is fallacious also in that it ignores the marginal principle in the problem of profits. Profits are never homogeneous from factory to factory, and to those that are on the margin competition may appear excessive. It is generally the largest and strongest factories, in the more favored situations, that, in order to get rid of troublesome competitors, force the smaller, weaker, industries to come into the trust. When, therefore, it is said that competition is destructive, it may be a partial truth, but more likely it is a pleasantry reflecting the happy humor of the prosperous promoters of the combination. [Sidenote: Financial gains of combination] 4. _Another strong motive for the combination is the profit to promoters and organizers._ There are indirect as well as direct gains to the managers of a large business. There is the gain from the production and sale of goods to consumers, and there is the gain from the financial management, from the rise and fall in the value of stock. The promoters of a combination often expect to make from sales to the investing public far more than from sales to the consumer of the product. A season of prosperity and confidence, when trusts and their enormous profits are constantly discussed, has an effect on the public mind like that of the discovery of a new El Dorado, a California, or a Klondike. Then is the time for the wily promoter to offer shares without limit to investors. These considerations show that the trust is not simple in its cause, nor in its nature. In a sense the most artificial of industrial arrangements, in another sense it is a natural evolution of industry. More and more it is being recognized that though it has in it something of evil, it has as well something of good, and certainly much of the inevitable. CHAPTER 35 EFFECT OF TRUSTS ON PRICES § I. HOW TRUSTS MIGHT AFFECT PRICES [Sidenote: Economics of the trust problem] 1. _The economist's task, strictly confined, is to explain the relation of trusts to prices, not to solve the problem of their political control._ The question of trusts is such a large one that its discussion here must be confined to those aspects having close relation to the central subject of economic study,--the laws of value. These laws were by the older economists thought to be true only within the limits of free competition. Seeing that in various ways this freedom is interfered with not only by caste, custom, organized labor, but by patents, political privileges, and the power of large aggregations of capital (in short by all things that check the flow of ability and of agents from one industry to another), the question occurs: Are the abstract laws of rents, profits, and wages of any significance or of any help in discussing the great practical questions of to-day? Are not prices determined by the personal whim of industrial despots who can bid defiance to the laws of price? The control of trusts by legislative action is largely a political problem, but it must be guided by a correct economic analysis. Proposed legislative measures often assume or imply that in no way, directly or indirectly, is competition found in the problem. It should be the aim of economic study to make clear the true bearing and force of monopoly power in practical problems of value. [Sidenote: Limited power of trusts] [Sidenote: Monopoly and supply] 2. _The fundamental principles of market value cannot be changed by a trust; a selling monopoly can affect price only as it affects supply or demand._ The strongest "trust" yet seen has not been omnipotent. Many careless expressions on the subject are heard even from ordinarily careful writers and speakers: "The trust can fix its own prices," "has unlimited control," "can determine what it will pay and for what it will sell." This implies that trusts are benevolent, seeing that the prices they charge are usually not far in excess of competitive prices in the past. Such a view overlooks the forces that limit the price a monopoly can charge. The law according to which the value of products on the market is determined, is as valid where there is a trust as anywhere else. The marginal utility of goods to the consumer determines the price of any given supply. If the supply remains the same, no trust can make the price go higher. What it gets in exchange are the services or the wealth of the rest of the public. At what rate can it exchange its products for the products of others (including other trusts)? The monopoly usually directs its efforts to affecting the supply, leaving the price to adjust itself. (This is the case of the selling monopoly; the statement must be adjusted where it is a buying monopoly.) It can affect the supply either by lessening its own output or by intimidating and forcing out its competitors. It is true that this logical order is not always the order of events. The trust does not first limit the supply, and then wait for prices to adjust themselves; it first raises its prices, but unless it is prepared to limit the supply in accordance with the new resulting conditions of demand, such action would be vain. The control of the sources of supply is the logical explanation of the higher price, even though the limitation of supply is effected later by successive acts found necessary to maintain the higher price. Monopoly price is therefore a rational thing, not a mystery entirely out of harmony with the simple law of value laid down for consumption goods. The trust works as the magician does, not as was thought of old, in defiance of natural laws, but in harmony with them and by their aid. The view the public took of the trusts was at first medieval. That should not be the view to-day. [Sidenote: Monopolistic gains from successful combination] 3. _The economies of large production after a successful combination may be divided in varying proportions among monopolists, workmen, and consumers._ If the great economies of large production are effected by a new combination which makes no attempt to fix a higher price and limit production, where will the fruits of these economies go? They will go first to the owners of the trust, because, unless inspired by motives of philanthropy, they have no need to lower prices. Though they are in possession of special facilities, they will try to secure as high a price as before. A wider margin permits greater profits on each unit without limiting the output or the sales. They may retain this so long as they do not yield to the temptation to increase the output in proportion to their new facilities. [Sidenote: Gains to workmen] These economies, may, however, at times inure to the benefit of the workmen in higher wages if they succeed by any means whatever in squeezing the employers at this time of exceptional gains. The suggestion has even come from employers that in order to allay labor troubles there should be a union of capital and labor to squeeze the consumer, by doing away with all competition in fixing prices. This proposition to divide the plunder of monopoly has been viewed approvingly by some leaders of organized labor, but it does not look especially alluring to the general public, to which is assigned the humble part of paying the bill. [Sidenote: Gains to consumers] Part of the advantages will go to the consumer whenever there is a motive on the part of the large establishment to increase supply in order to get a larger profit or to forestall new competition. As the improvements become matters of public knowledge, most of the new economic methods can and will be adopted by new enterprisers, and other large aggregations of capital will be induced to come in to reap the benefits. The effect, of course, is an increase in supply and a lowering of prices. The fiat of the trust to prices to remain fixed while supply increases is as vain as a mortal's commands to the waves to be still. The undesigned result of the economies of large production, therefore, where control is not great, is to lower the prices and to diffuse the benefits among the public. [Sidenote: Social burden of monopoly profits] 4. _If the trust succeeds in raising its prices it gains at the expense of the community._ If a producer has some monopoly power, recognizes and uses it, his gain does not correspond with an increase in production. It is taken from those who buy these products, it is deducted from the psychic incomes of other members of society. This raising of prices actually reduces technical production, for the output is limited in order to secure the higher price. The probably less urgent wants of the receivers of monopoly incomes are gratified in place of the probably more urgent wants of the average purchaser. The result is a decreased social income, with an increase of the inequality of distribution. There is an analogy here with the effects of trade-unions. If the trade-union succeeds in forcing prices higher than the competitive prices, it gains at the expense of the other portion of the community. But while its gains appear to be more largely at the expense of the richer elements of society, the gains of the trust are more likely at the expense of the poorer elements. If the success of organized labor means to some extent a leveling up of income, the success of the trust means a still further inequality. Hence a difference in public sympathy in the two cases. [Sidenote: The praise and blame for trust prices] 5. _The responsibility for either the rise or the decline of trust prices cannot always be determined._ Prices are changing constantly under competitive conditions. In this active, moving world, changes of demand, the exhaustion of sources of supply, new processes, expiration of patents, opening up of new lines of transportation, affect prices in a multitude of ways entirely independent of organization. Trust-controlled industries are open to all these influences. Economic forces cannot be isolated as can elements in a chemical laboratory, and, therefore, trusts claim the credit for all the reductions of price that have occurred. By such a calculation the trusts usually make a showing of progress, as, until 1896, for twenty years the tendency of prices in most lines was downward. Always getting the highest price they can under the market conditions, they yet pose as benefactors. They would claim that the economies possible only under trust organization cause even a monopoly price to be less than a competitive price would be. Critics of the trusts, on the other hand, charge them with causing all the increase that occurs, and with checking the decline in prices. The critics compare the percentages of decline in price during the decades before and after the combination was formed, and as it is impossible for a geometric rate of decrease in price, as a result of improvements, to be long maintained, this showing is very unfavorable to the trusts. A method has been found, however, of testing, in the case of a few leading industries, the effects they have had on the price of their portion of the productive process. § II. HOW TRUSTS HAVE AFFECTED PRICES [Sidenote: Trusts raise prices] [Sidenote: The oil trust] 1. _Examination of the course of prices in the case of some notable trusts shows that, wherever effective, they raise prices above the competitive rate possible to smaller production._ The most instructive study in the subject is that undertaken by J. W. Jenks a number of years ago, and later developed by him when working with the Industrial Commission from 1898 to 1900. Its results are embodied in a series of charts. It appears that the price of refined petroleum, in 1871, was twenty-five and seven tenths cents per gallon; in 1880, eight and six tenths cents; in 1887, seven and eight tenths cents; in 1900, seven and eight tenths cents. A writer in the "North American Review" claims that this decline was due to the economies accomplished by the Standard Oil Trust. It will be noticed, however, that prices fell most rapidly (from twenty-five and seven tenths cents to eight and six tenths cents) between 1871 to 1880, a period of intense competition, when the industry was new, and when the independent companies, fighting for their existence, introduced many improvements and began the construction of the pipe-lines that were later secured by the Standard Oil Co. Despite this rapid decline, the smaller companies still could have maintained a profitable business had it not been for the ruinous discrimination of the railroads against them. Because of this, the Standard Oil Co., in 1880, obtained almost complete control. The price twenty years later than that date was less than a cent cheaper. In the meantime the price for a time continued to fall. Competition was never quite stilled. The small competitor, wherever he saw a chance, has nibbled off a bit of the tempting profits. The rise from 1898 to 1900 was in accord with that occurring in other lines. A much lower cost of production is now possible to the great monopoly with its larger sales and more economical methods. The by-products, unknown at the beginning of the period, now yield large sums, yet the price remains much the same as a quarter of a century ago. The trust has succeeded in retaining a large part of the increasing margin of price over cost. [Sidenote: The sugar trust] The influence of the sugar trust may be studied by what is known as the method of differentials. The differential in sugar is the difference between the cost of the raw sugar and the refined granulated sugar. Raw sugar is the main material and the principal fluctuating item of cost beyond the control of the trust. Changes in the differential reflect the changes in profits except as modified by a cheapening of the process. The period from 1880 to 1887 was one of great competition. In 1880, the differential was one and ninety-two hundredths cents on each pound of refined sugar, but it fell steadily till, in 1887, it had reached sixty-four hundredths cents. In the fall of that year the trust was formed; and the next year the differential had risen to one and twenty-five hundredths cents, in 1889 to one and thirty-two hundredths cents. Tempted by the enormous profits, the rival refineries of Claus Spreckel were started, and with competition the differential fell, in 1890, to seventy hundredths cents. The rival factories were then bought up and under the new combination the differential went sailing up to one and three hundredths in 1892, and to one and fifteen hundredths in 1893. Rival factories again arose and competition grew stronger, reducing the differential to ninety-four hundredths in 1894. It was in that year that the firm of Arbuckle Brothers and Claus Doscher each opened a great refinery, and in the next year the differential fell to fifty hundredths cents. In 1900, some agreement, the terms of which were unknown to the public, was entered into by the rivals and the differential had risen, in March, 1901, to ninety-five hundredths cents. In every case the differential fell when competition was effective and went up when monopoly power was regained. [Sidenote: The nail trust] The differential of steel-wire nails is the difference between the cost of the steel billets and the price of the wire. Between 1890 and 1895 there was a steady decline in the differential. In 1895 was formed the nail pool, an agreement to share the profits, a form of combination. A rapid advance took place, both in the price and in the differential. In the fall of 1896 the pool was broken and then occurred a fall in prices and in the differential during 1896-97. In January, 1899, the nail trust was formed, controlling sixty-five to ninety-five per cent. of the output of wire nails, and a rapid advance occurred in the price and also in the differential. [Sidenote: The tin-plate trust] The tin-plate industry practically had its origin in the United States, in 1892, under the McKinley tariff. As competition increased, prices and the differential fluctuated and declined. At the end of 1898 the tin-plate company was formed and prices at once started upward with a rapid increase in the differential. Cause may, in a measure, be mistaken here for effect. In these cases the part of the rise in price due to the rise of materials is not brought about by the trust. The differential represents its part of the productive process and its source of profits. The power to make the differential high is due in part to the general conditions of business in the last three years considered. The profits of all industries in those years increased. While prices may have risen partly because the trust was formed, it may have been possible to form the trust because prices were rising. The general conclusion is that trust prices are always raised when, and to the extent that, control is secured. They are lowered below normal prices when competition becomes troublesome. Fluctuation of prices probably has been more rapid and more spasmodic under trusts than it has been under ordinary competitive conditions. [Sidenote: Effective trusts injure various producers] 2. _A large degree of monopoly control may lower the incomes of producers of materials, the value of competitive plants, and prices in special local markets._ A strong selling monopoly tends to become also a buying monopoly. A great industry using great quantities of materials may either own the sources or purchase from small producers. The steel trust owns mines, and ships and railroads to bring the ore to the furnaces; but the tobacco trust buys from the farmers. If the packing, refining, and marketing of a product is monopolized, the sellers of the raw or partly finished product are subject to one-sided competition. The small producers of tobacco, of crude oil, and of anthracite coal claim that the effect of the trusts is to give them lower prices for their products. Some have been severely punished by the monopolies for refusing to take the first offer made. Monopoly is thus likewise able to purchase competing plants at ridiculously small sums, by first making them valueless through fierce price-cutting, or by threats of it. "Rich" is often a relative term, and it is said that many a small millionaire producer has anxiously waited to see whether the great trust would next turn its attention to him. [Sidenote: The persistence of competition reducing prices] 3. _Competition of less capable producers works in most cases to prevent the great or continued rise of trust prices._ Early trusts overestimated their power. The persistence of competition in industries where the trusts have had great advantages in position and resources has been astonishing. The wall-paper trust, though for many years it kept prices above competitive rates, was repeatedly undermined by competition. The whisky trust, while it frequently raised prices, was as often forced by the growth of small distilleries to lower them below competitive rates. Competition in the oil industry has persisted under the greatest difficulties. The smaller companies have hauled the product by wagon when the trust was moving it by pipe-lines. The continuance of high prices by a trust depends on a high degree of control of supply. A recognition of the limits of their power has led trusts in some cases to a policy of moderate prices, affording a good profit, but not encouraging competition. [Sidenote: Supply as the condition of low prices] The limits of the power of the trust to control prices are strikingly shown by the fact that it cannot even insure low prices if the market conditions do not justify them. The steel trust, in 1902-3, declared that it would not advance the price of steel rails above twenty-eight dollars, and this was hailed as a beneficent effect of trust control, which, by equalizing production, could prevent excessive fluctuations of price. But the trust's declaration was a bit of inexpensive humor on the part of the managers; the trust had nothing to sell at the price quoted, as its entire product had been sold out months in advance. While, therefore, the trust continued calmly to quote steel rails at twenty-eight dollars, competition raised the market price to thirty-three dollars a ton; twenty-eight dollars or more was paid for second-hand rails, and a proportionate price for other iron products. Such exceptional conditions, raising prices to abnormal levels, are followed by a decline disastrous not only to the small producer, but to the trusts as well. [Sidenote: Modes of controlling trusts] 4. _The control of the trusts must be sought in the direction of maintaining potential competition through fair and free conditions of industry._ Many of the remedies suggested are reactionary and would give up the benefits of large production. Measures must be sought in harmony with the economic principles of price. Since many of the trusts have grown wealthy by special shipping privileges from the great quasi-public corporations, the railroads, and by special favors from public or corporation officers, who have been false to their duties, the solution must be a political and moral one; it must be sought in the development of honest citizenship and of a more efficient social regulation of quasi-public industries. The conditions of competition may be made fairer by requiring publicity of accounts, and by making it impossible for great corporations to strangle their local competitors by special and temporary prices. The state here has the same duty to perform that it has to protect the weak man from personal violence at the hands of the strong. This will not prevent competition, but it will determine the ways in which the rivalries of men can be manifested. Any measures for controlling the great combinations must start from a right understanding of the law of value, neither underestimating nor overestimating their economic power. Public sentiment toward the trust question has changed somewhat in recent years, because the nature of trusts and the extent of their power are better understood. There is now less fear of them, and more confidence that they can be tamed and made to serve the welfare of society. CHAPTER 36 GAMBLING, SPECULATION, AND PROMOTERS' PROFITS § I. GAMBLING VS. INSURANCE [Sidenote: Unavoidable chances] 1. _Many forms of chance are inseparable from the individual enterprise._ There are what may be called natural chances chances, arising from the uncertainties of the seasons, from rainfall, heat, hail, storm, flood, lightning, land-slides. Such chances must be taken both by the small enterpriser and by the large. In an earlier condition of society natural chance almost dominated industry, and it still remains and must always remain an important factor to deal with. There are political chances, as war and riot; as legislation on money, tariffs, credit, and business relations. These are caused, it is true, by the action of men, but it is a collective action out of the control, to a greater or less degree, of the individual--absolutely out of the control of most individuals. Men of greater political influence can to some extent control these chances, possibly in their own favor. There are chances of carelessness causing fire, explosions, wrecks on misplaced switches, and involving penalties and losses that must be met. There is the chance of physical or mental collapse, as the sudden insanity or the sudden death, unforeseen and unpreventable, of one performing responsible duties. Sickness often wrecks the plans and the fortune of a whole family. There are economic changes, such as those in methods of production, in machinery, in methods of transportation; such as the growth of fashions or the growth of population changing demand in some directions and for some materials. [Sidenote: Average of chances in each industry] Some of these chances are more connected with money-lending, others with manufacturing; some with agriculture, others with commerce; but all are present in some degree in every industry. In the broadest view they are not chances, for on the basis of experience it can be foretold that they will occur to some one; but no individual can tell when and how they will occur to him. A general average of chances in different lines of business causes some to be called safe, others extra-hazardous. The chance is averaged and added to the profit or gain of that industry, for an extra-hazardous industry must in general afford a higher average of profit in order to induce men to engage in it. It is folly to take a risk without ascertaining its degree, so far as general experience enables one to choose. But inasmuch and in as far as the gains and losses fall unequally upon different individuals, income depends on chance. [Sidenote: Other chances artificial and avoidable] 2. _The essence of gambling is the attempt to gain by taking chances that are not the unavoidable incidents of productive enterprise_. The chances just enumerated are not sought, but avoided as far as possible; yet they must be borne by some one, and the burden must be distributed throughout society. There are unquestionably many kinds of chance-taking which differ from these in economic, and therefore in moral quality; but it has taxed the ingenuity of philosophers to lay down an abstract definition of gambling that would permit ready and certain distinction in practice between gambling and legitimate chance-taking. Typical gambling is the transfer of wealth on the outcome of events absolutely unpredictable, so far as the two gamblers are concerned. Examples are the shaking of unloaded dice or the honest dealing of a pack of cards. There can be no doubt of the entire lack of a productive economic basis in the betting on prices carried on in so-called bucket-shops by ignorant persons having no connection with the market of real things, and seeking to get something for nothing as a result of mere chance. [Sidenote: Cheating and gambling] Cheating is not a necessary mark of gambling, although the cruder kinds of dishonesty, such as the loading of dice or the collusion of horse-owners or of horse-jockeys to deceive the betting public, are so common that they seem often to be its essential feature. Gamblers recognize fair as opposed to unfair methods. Fair gambling is a kind of minor morality within the immoral field of gambling, like the honor found among thieves. Gambling bears somewhat the same relation to legitimate chance-taking that play does to labor. The chance-taking in gambling has no useful purpose or result outside itself. The gamblers constitute themselves a little fictitious economic circle, and they transfer gains and losses on the turn of events that have no practical objective result within their circle except to determine the direction of the transfer. [Sidenote: Various cases of a mixed nature; partisan bets] 3. _Legitimate forms of chance, or risk-taking, shade off into illegitimate forms, or gambling._ Ranging between the extremes of legitimate risk-taking and of gambling are a number of cases of a mixed nature. The bets made on college games, races, and contests differ from ordinary bets only in the added feature of so-called college loyalty (a travesty on the real sentiment). These college gambling contracts are supposed (according to a mode of reasoning found also among primitive peoples) to exercise a subtle and irresistible influence upon the result. A crew that enters the race with the odds against it is unnerved and undone, thinks the patriotic collegian. [Sidenote: Knowledge and skill affecting the result] In nearly all wagers, judgment in some degree influences the choice of sides. One man bets on a horse whose pedigree and performances he knows thoroughly; another judges by the horse's appearance as it comes upon the track. The professional book-makers have the latest possible and most exact information on which to base their bids. In the bets made on one's own prowess, as on speed in running or rowing, or in playing cards (wherein also the element of pure chance is mingled) the chance-taking is still far over on the uneconomic side of the border-line. The running is for the sake of the wager, not for a useful purpose. A premium won by a runner for speed in delivering a message of economic importance is in striking contrast to the winnings in a wager. Finally, the very border-line of difficulty is reached in the purchase and sale of goods in the market with a view of profiting by chance changes in price. Land speculation, the purchasing and holding of lumber, grain, cattle, and other tangible and useful things, must be judged liberally. The quality of gambling depends somewhat on the motive as well as on the ability of the actor. The enterpriser dealing with real wealth, and fitted to take the risks, both because of his resources and of his exceptional knowledge, needs the motive of gain, and in a sense can be said to earn socially what he gets. The motive of the uninformed must be a blind trust in luck, and a hope to gain from a rise in prices which they are quite unable to foresee or rationally to explain. [Sidenote: Gambling an economic loss to society] 4. _In its relation to value, a bet, or wager, is the exchange of the chance of loss for the chance of gain, involving a social loss._ Even when fairest, the average results of such an exchange must be unfavorable to society. One person loses a part of his income that gratifies relatively urgent wants; another gains something that gratifies only less urgent wants than were represented by the sum he risked. The area that is subtracted from the loser's psychic income is larger than the area added to the winner's psychic income. The result would be different on the impossible condition that it were always the poorer man that gained and the richer one that lost. Betting, then, does not produce wealth; it merely transfers ownership in a way that reduces the total want-gratifying power of wealth. The effects that gambling and betting have upon character are still more important and dangerous than their effects upon income. Motives of economic activity are reduced; energy is diverted from productive enterprise; society is demoralized through dishonesty of men intoxicated by gambling; speculation and embezzlement occur; and there is a reduction both of production and of enjoyment in society. These things can be reasoned out with mathematical certainty by means of the law of marginal utility. [Sidenote: Insurance as a wager] 5. _Insurance is, in outer form, a bet; but its essential purpose is the useful one of equalizing and eliminating chance._ In its early form insurance was a bet made by a ship-owner to protect his cargo from loss. The chance of loss in shipping was even greater in the Middle Ages than now, and it became customary for the ship-owner to bet with a wealthy man that the ship would not return. If it did come back, the owner could afford to pay the bet; if it did not, he won his bet and thus recovered a part of his loss. It was what is called to-day "a hedge," that is, one bet made to neutralize, or offset, another. This gave to the smaller merchant the advantage of distributing his losses over a number of voyages, as was done by the owner of many vessels. Antonio, the wealthy merchant, is made thus to express his security: "My ventures are not in one bottom trusted Nor to one place; nor is my whole estate Upon the fortune of this present year. Therefore my merchandise makes me not sad." Gradually there came about a specialization of risk-taking by the men most able to bear it. They could tell by experience about what was the degree of uncertainty, and could lay their wagers accordingly. When several insurers were in the same business, competition forced them to insure the vessel and cargo of the ordinary trader for something near the percentage of risk involved. The insurance thus tended to become a mutual protection to the ship-owners; what had to be paid in premiums to cover risk came to be counted as part of the cost of carrying on that business. [Sidenote: Insurance as mutual protection] Modern insurance is mutual in nearly every case: the total premiums equal the total losses plus operating expenses, the interest on the reserve of premiums counting as part of the premium. Each one gets protection for the loss of his property in return for the payment of a sum that will cover the losses on others' property. Such an exchange is a profitable one. The premium comes from marginal income; the loss of house or property would fall upon the parts of income having higher marginal utility. The less urgent wants of the present are sacrificed in order to protect the income that gratifies the more urgent wants of the future. In insurance each party gives a smaller utility for a greater; each has a margin of advantage; while the greater certainty in business stimulates effort and rewards it. This is quite the opposite of the working of betting and gambling. [Sidenote: Conditions of sound insurance] 6. _To be economically sound, insurance must have to do with real productive agents, and with somewhat regular, ascertainable events beyond the control of the insured._ The difficulties that arise in case of fire-insurance are due largely to the failure to meet these requirements. When the insured sets fire to his own buildings, fire insurance ceases to be a legitimate thing. Constant efforts are made by insurance companies to guard against these "moral risks," the least calculable of any. Merchants whose stocks have been mysteriously burned two or three times find difficulty in getting insured. In life-insurance it was the custom formerly to refuse to pay death-losses in case of suicide; but now that condition is attached only for the first two or three years. It being reasonable to suppose that no man would plan suicide years in advance, death by one's own hand some years after taking life-insurance is regarded as coming under the ordinary rule of chance. § II. THE SPECULATOR AS A RISK-TAKER [Sidenote: An element of speculation in all business] 1. _Every enterpriser is to some extent specializing as a risk-taker._ This familiar idea may be taken as a starting point in discussing speculation. In its broadest sense speculation means to look into things, to examine attentively, study deeply, contemplate, meditate. In a business sense the speculator is one who studies carefully the conditions and the chances of a change of prices; hence arises the thought that speculation is connected with chance. The enterpriser can estimate these chances better than most men. He stands on a hilltop sweeping the horizon, and can see farther than the workingman can. He relieves the other agents of part of the risk, and he insures both laborer and capitalist against future fluctuations of prices. Some of the profits of successful enterprise in countries where no system of regular insurance has grown up, and in certain lines here where no insurance is possible, are speculative gains of this sort. Offsetting them, however, in large measure, are the speculative losses, by which in many cases the investment has been swept away altogether. The cautious business man tries to reduce chance as much as possible by insurance, and to confine his thought and worry to the parts of the productive process where his ability counts in the result. The wise have found out that it is better to shift the risk to some specialist who can take it better than they. For a man who has his thought and effort concentrated on running a flour-mill, it is foolish to take the risks of fire, of loss in shipment, of a rise in the price of grain needed to fill outstanding orders--it is as foolish as it would be for him to make his own machinery. Insurance being the economical way to cover risk, the reckless will, in the long run, be eliminated from the ranks of enterprisers. [Sidenote: Specialization of risk taking] 2. _In some lines the risk of marketing and carrying large stocks becomes highly specialized, so that ordinary enterprisers shift it to a small group of risk-takers._ In buying and selling large quantities of produce there is required the closest and most exclusive attention of a small group of men. The marketing of some staple products requires the most minute acquaintance with world conditions. To foretell the price of wheat one must know the rainfall in India, the condition of the crop in Argentina, must be in touch as nearly as possible with every unit of supply that will come into the market. Such knowledge is sought by the great produce speculators in the central markets. If all means of communication--telegraph, cables, mails--are open to all, competition among these speculators becomes intense, and the result is the extremest efficiency. Their survival depends on the development of acute insight into market conditions. It is the testimony of expert witnesses and of writers in the report of the Industrial Commission that the margin at which farm produce is sold has fallen greatly in the last few years. These products are marketed along the lines of the least resistance, that is, of the greatest economy. The function of the commercial specialists is to foresee the markets, and to ship to the best place, at the right time, in the right quantities. If a product shipped to Liverpool will, by the time it arrives there, be worth more in Hamburg, there is a loss. Such difficult decisions can be made best by a small group of men selected by competition. When handling actual products they perform a real economic service. [Sidenote: Produce speculators as insurers] [Sidenote: Source of legitimate speculators' gain] 3. _Even some mere speculators on the produce markets may and do at times perform a productive service as risk-takers._ Many of the speculators in staples, wheat, corn, wool, rarely handle the material things, the real products. They make it their business to study the world conditions, to foresee prices, and in a sense to bet upon them. Regular merchants buy and sell fictitious products of these men. When a miller buys ten thousand bushels of wheat that will remain in the mill three months before they are marketed as actual flour, he at the same time sells that number of bushels to a speculator for future delivery; or selling flour for future delivery the miller buys a future in wheat. In either case he cancels the chance of loss or gain, giving up the chance of profit in the rise of wheat in exchange for protection from the loss of the product on his hands. To him this is legitimate insurance, for he is striving not to create an artificial risk, but like the medieval ship-owners, to neutralize one that is inseparable from the ordinary conditions of his business. One may ask, How, if the miller in the long run benefits, can the speculator gain? He does not intend to perform this service for nothing. Yet as the sales in the whole market equal the purchases, some say that there can be no profits to the speculator. There are unsuccessful speculators and at any rate their losses go to the successful as a sort of gambling profit. Speculators do not dine entirely on "lambs"; they are anthropophagous. But, further, the sales to legitimate purchasers should net a gain to the abler speculator. In proportion as his estimates are correct, there will remain a regular slight margin of profit to him. If he agrees to sell wheat at eighty-five cents to be delivered in three months, he expects it to be a little less at that time. In the long run the ablest speculator probably buys at a little less and sells at a little more than the price really proves to be. This means that the merchants in the long run pay something for protection against changes in prices, just as they pay something for insurance. And yet this is the cheapest way to eliminate risk, and a man engaged on a large scale in milling is, it is said, at a disadvantage if he neglects this method of marginal buying. [Sidenote: Ignorant and dishonest speculation] 4. _The buying of margins by the "lambs" is simple betting, and much manipulation of the market is dishonest._ What has just been described is the more legitimate phase of marginal buying, not its darker aspect. One who, having no special opportunities to know the market, buys or sells wheat, or other commodities or securities, on margin, is called a lamb. He is simply betting. He has no unusual skill; he cannot foresee the result. The commission paid to brokers "loads the dice" slightly; the opportunities of the larger dealer of anticipating information load the dice heavily against the lambs. Secret combinations and all kinds of false rumors cause fluctuations large enough to use up the margins of the small speculator. At times a number of powerful dealers unite to cause an artificially high or low price, a situation called "a corner." But this is little other than gambling between betters. The general public gains and loses little if any by these operations, except in the evil effects they entail socially. § III. PROMOTER'S AND TRUSTEE'S PROFITS [Sidenote: The promoter's service to the owners] 1. _The promoter of trusts performs in some ways a substantial economic service._ A promoter is one who undertakes to convert a number of unrelated factories, or establishments, into a trust, or combination. He gets options on different factories, that is, the right to buy them at an agreed price within certain time limits. He gets some banking house to underwrite the combination, that is, to agree to dispose of a number of shares to the investing public. A certain number of shares go to the owners, a certain number to the banking house for its services in underwriting, and a substantial number, it may be ten or twenty per cent, of the enormous capitalization, to the promoter himself. This is payment for his ability to water the stock successfully, to capitalize it for more than its former value. Evidently the owners think he earns the money or they would not pay him. So far as there are economic advantages in large production, and inasmuch as there is always friction in the forming of new industrial arrangements, there is a real social service performed by the promoter. The gains of the promoter are in part the legitimate price of progress. [Sidenote: The loss of the investors] 2. _A large part of the profits of promoter and of owners is unfairly taken from the investor._ The larger modern business is less and less attached to particular neighborhoods. A much smaller proportion of investments is made in industries which the investor himself can control or even see in operation. Business, therefore, in these days is done largely on faith in other men. Especially the investor takes great chances. The prospectus announcing a reorganization is frequently misleading. It frequently misrepresents the sources of income and the probable dividends, conceals essential facts, and makes misleading statements. The capitalization often is absurdly high, compared with the value of the different establishments. In one case eight million dollars of stock were issued to represent factories whose combined value had been five hundred thousand dollars. So far as the capitalization is based on the increased profits due to the monopoly power, the profits of reorganization are taken out of the pockets of the public. But in fact even monopoly earnings cannot support such valuations, and from the outset if fair dividends are paid, they are falsely paid out of capital, not out of earnings. With the approach of bad times there must be a suspension of dividends, a fall in the value of securities, and a loss falling upon the investors. Such practices are a serious evil, for the stability of industry depends on the opening up of opportunities for safe investment to the average man. [Sidenote: The speculating trustee] 3. _Corporation officers and trustees, speculating in the stocks of their own companies, are reaping illegitimate gains._ It is recognized by public sentiment and in law that for public officials to let contracts to themselves is bad morals and bad public policy. It is the duty of legislators not to make laws for companies in which they are interested. One of the greatest scandals in American public life, "the Credit Mobilier affair," was caused by the acceptance by members of Congress, virtually as a gift, of shares in a company that was seeking favoring legislation. Such action must be looked upon as a sort of industrial treason, comparable to the old form of political treason. Corporation officers are in a position of public trust toward the investors quite comparable to that of government officers toward the citizens. The power of directors and of other officers to manipulate earnings and dividends, and thus to affect the market value of the stock, leaves the investing public helpless. The practice by officials in great corporations of speculating in their own stocks, whose prices they can manipulate, is so common as scarcely to attract comment. Large fortunes result from this betrayal of the trust imposed by the shareholders. This is not legitimate speculation; it is like loading the dice, pulling the horse, drugging the pugilist--things despised and condemned even in gambling and sporting circles. [Sidenote: Two types of speculation] It appears, therefore, that in the complex conditions of modern business there is a legitimate concentration of risk in the more capable hands, but also a growth of opportunities for illegitimate speculation and for large dishonest gains that were not possible before. These two types of speculation should be distinguished, as far as possible, in thought and in practice; but this it not easy in concrete instances, which vary almost indistinguishably from the clear case of honest earnings to the other extreme of illegitimate gains. CHAPTER 37 CRISES AND INDUSTRIAL DEPRESSIONS § I. DEFINITION AND DESCRIPTION OF CRISES [Sidenote: Broader definition of a crisis] 1. _In a broad sense, a crisis is a decisive moment or turning point; hence, in industry, a collapse of prosperity._ In the course of a fever the crisis is the point where there is a turn for the better or for the worse. The figure of speech as applied to industrial conditions would seem to fail, in that what precedes is apparently exuberant health, not disease. Business conditions do not move along uniformly. There are waves of prosperity. Profits are apparently great, then may be suddenly swept away. The profits of the prosperous time are partly illusory, or exist only on paper. The situation has all the unhealthiness of the fever-patient. Men trade in promises and when the crisis comes, they have only promises for profits. The discussion of business management and profits is not complete without a consideration of this rhythmic movement of confidence and prices. A crisis in the business affairs of an individual, in the sense of a collapse of prosperity, may occur from many mischances. A local crisis may be felt in some one neighborhood as a result of flood, of fire, or of other accidents. Such a case was that which occurred in 1864, in Manchester, England, when the cotton factories were compelled to close because the supply of cotton was cut off by the blockade of the ports of the South in the Civil War. Such a local crisis sometimes results from a change of transportation, throwing a town out of the line of trade. These have been mentioned in discussing chance and risk; but the phenomenon known generally as an industrial crisis is of wider extent and of a more peculiar nature. [Sidenote: Various types of crises] 2. _In a more special sense a financial crisis is the confusion and loss that mark the end of a period of rising prices; an industrial depression is the period of hard times that follows._ The word crisis suggests a brief period, a moment, something that is severe, sudden, and soon over. The term financial panic is frequently used as a synonym for financial crisis. A crisis in the narrower sense has to do with prices--is always connected with money in some way. While, therefore, crises may be divided into industrial, speculative, and financial, according to their immediate occasion, all of them are financial in the sense that they have to do with a change in the general price level. A crisis is a jolt to prices which shatters the credit of some banks, brokers, merchants, and manufacturers. Crises are thus peculiar to the money economy and to a developed industry. Not every business misfortune is to be called an industrial crisis, but only those where prices and credit are generally depressed. A long period of hard times is sometimes called a crisis, but it is better to distinguish it by the term industrial depression. [Sidenote: Industrial conditions preceding a crisis] 3. _The period leading up to a crisis is one of general prosperity._ Industry in successive decades does not pass through an unvarying series of changes, but history repeats itself with sufficient regularity to justify the view that a certain series of changes is typical in modern industry. When prices are at the lowest point many factories are closed, and much labor is unemployed. Conditions are worse in some industries than in others. General economy and great caution prevail; few new enterprises are undertaken. To those having available money this is a good time to buy, and property begins to change hands. Then hoarded money begins to come out of its hiding-places. Money flows in from other countries, particularly if business conditions are better abroad than here, for low prices make a country a good place in which to buy. At the same time that the money in circulation thus increases, there is a general return of confidence that increases credit. Not only are there more dollars, but each does more work. Then old enterprises are resumed and new ones are undertaken. The purchase of materials in larger quantities causes a rise in prices and an increase in costs. The surplus labor on the margin of efficiency gets employment, and wages begin to increase. The only classes not sharing in this improvement are the receivers of fixed incomes. As prices rise, the purchasing power of their incomes gradually falls. [Sidenote: The crisis and its results] 4. _The crisis is a moment of widespread loss, which is followed by a long period of small profits to most enterprises, and of enforced economy._ As prices cease to go up rapidly, the question arises in many minds whether the movement can continue, and if not, when it will cease. Men wish to hold on for the last profits, and are willing to risk something to gain them. When foreign prices do not rise in as great proportion as domestic prices, foreign imports are stimulated and the quantity of exports falls. This disturbs the equilibrium of money and requires at length large and continued exportation of specie. This checks prices, and, reducing the specie reserves of the banks, compels them to be more cautious. The fall in the value of many stocks and securities held by the banks forces many brokers and speculators to convert their resources into ready money. This is the moment of danger; weak enterprises find their foundations crumbling, and there are many failures. The falling prices, the shattered credit, and the financial losses force many factories to close; many workmen are thrown out of employment, and business must again enter upon a period of retrenchment, for it has completed the cycle of changing prices. § II. CRISES IN THE NINETEENTH CENTURY [Sidenote: No financial crises in the Middle Ages] 1. _The periods of industrial hardship in the Middle Ages were connected with adverse conditions of production, not with the collapse of prices._ Periods of exceptional hardship in medieval times were mostly due to political oppression, famine, wars, pestilence, and scourges of nature. There being very little of the money economy, there was no development of credit and of credit prices. The money economy began, as has been noted, in the cities. As the use of money spread, as larger commercial enterprises were undertaken, as borrowing and the payment of interest became common, there began to appear in city trading circles, on a small scale, the phenomena of the modern crisis. [Sidenote: European crises of the eighteenth and nineteenth centuries] 2. _In Europe general industrial crises date from 1763 and have occurred at more or less regular intervals since._ It frequently is said that the cycle, or period, of crises is ten years, but it takes an elastic imagination to find support for this in history. The crises of the eighteenth century occurred in 1763, 1783, 1793, these dates marking the close of wars of some magnitude. The crises were not widespread or general, but were more marked in England, which was most developed industrially and in its money economy. Likewise in the nineteenth century, the crises were of unequal force in the various countries, usually being severer in England. The English crises may be roughly dated 1803, 1825, 1838, 1847, 1857, 1864, 1875, 1890. These were attributed to various causes; that of 1825 to over-trading abroad; that of 1847 to railroad-building; that of 1864 to the interruption of the cotton trade and of commerce, as a result of the Civil War in America. While in many parts of England the crisis of 1864 was unusually severe, in other countries it was of little moment. Germany, after several years of great speculative prosperity, had a most severe crisis in 1875; while France (a somewhat significant fact), although prostrated by the war of 1870-71, losing a large amount of wealth, and paying a thousand millions of dollars to Germany as a war indemnity, escaped a commercial crisis almost entirely at that time. [Sidenote: Crises in the United States] 3. _In the United States there have been five marked crises: the first in 1817, the last in 1893._ These crises were of date 1817-20, 1837-39, 1857, 1873, 1893. Major crises thus occurred about twenty years apart, and minor crises in several instances alternated with them, notably in 1866, 1884, and we might add, 1903. These crises were the culmination of different kinds of speculation, usually spoken of as their causes. The crisis of 1817 was due to over-trading and to the immense importation following the war of 1812 and the resumption of commerce with Europe in 1816. In 1837-39 came in quick succession two crises, not quite distinct from each other, the second similar to the relapse of a fever patient. The immediate occasions were over-speculation in lands, a great issue of bank money, national expansion, and over-confidence, possibly in some degree the heedless financial measures of Andrew Jackson. The crisis of 1857 followed a period of great prosperity marked by the discovery of gold in California in 1848, by great expansion of commerce, by the building of railroads, and by a great increase in foreign trade. The crisis of 1873, probably the severest in our history, is attributable to great speculation, especially to railroad-building on an unexampled scale following the war. The blow, when it fell, was intensified by the contraction of currency leading to the return to a specie basis and lower prices. The crisis of 1884, a comparatively slight one, occasioned (rather than caused) by the discussion of the money question, was followed by some years of noticeable depression. The years 1889 to 1892 witnessed a prosperity that culminated in a crisis in September, 1893, (likewise generally explained as due to the unsettled state of our monetary system) followed by a period of depression lasting until 1897. The period from 1897 to 1903 has been marked by great prosperity and by rising prices. The over-hasty prophecies of collapse in the last two years have thus far been falsified,[3] but there is now a general feeling of distrust in investing circles. Already there has been a reduction of dividends in leading industries, and here and there a fall in the value of stocks. High prices have greatly checked building. The great credit advances made on "industrials," the stocks of manufacturing corporations, are one of the main sources of danger. Caution, however, has been learned by experience; the banking interests are more closely coördinated and give better mutual support than in the past, and a considerable decline in stocks has already occurred without as yet affecting general prices of commodities. Various novel features in the situation make prophecy difficult, but a period of liquidation and lower prices appears to be at hand. [Footnote 3: These statements are retained as they were made in March, 1903. In the following September occurred a very remarkable panic in stocks which had the minimum of effect on general business. While stock prices have somewhat recovered since that time, general business conditions, on the whole, tended for a while toward the worse until the spring of 1904.] [Sidenote: General features of crises] 4. _Irregular in time, and unlike in their immediate occasions, crises show some general features._ The chief of these are told in the brief story of the course of prices. Crises are less severe in countries with less developed money and credit systems. They are harder in the United States and England than in Germany, harder in Germany than in France, harder in western Europe than in eastern Europe, harder in Christendom than in heathendom. They are less severe in rural districts, where prosperity depends more on crop conditions, and business has in it less of financial speculation. Their effects are least felt in the staple industries, for when hard times come, people economize on the less essential things. The glove-factory, the silk-factory, the golf-club-factory are more likely to close than the flouring-mill. They are felt less by classes with fixed incomes than by those with variable ones. They affect wages and salaries less than profits. The rate of wages is affected only in a moderate degree, but laborers suffer in the loss of employment. The money-lender who has eliminated chance as far as possible and has taken a low rate of interest loses little; the risk-taker who draws his income from dividends on stock probably loses much. § III. VARIOUS EXPLANATIONS OF CRISES [Sidenote: Glut theories of crises] 1. _Over-production and under-consumption theories are those most widely held._ In the first annual report of the United States Commissioner of Labor (1886) is given a long list of theories, more or less wild, that have been advanced in explanation of crises. It is simply a catalogue, not a logical grouping. Most of the views can be classed as under-consumption or over-production theories, which are but two aspects of the same idea. One view is that too many things are produced, another that too few are consumed. The over-production theorist, seeing that warehouses are filled with goods that cannot be disposed of for what they cost, that factories are shut down and men are out of employment for lack of demand, declares that productive power has grown too great. The under-consumption theorist, seeing the same facts, says that the trouble is lack of purchasing power. He admits that there are people who would like to buy these things, but he asserts that such people lack money because production grows faster than wages, wages being fixed, as he believes, by the minimum of subsistence--a theory akin to the iron law of wages. In both over-production and under-consumption theories the inequality of demand and supply is looked upon as a general one. There is supposed to be not merely an unequal and mistaken distribution of production, but a general excess of productive power. [Sidenote: Defects of glut theories] The wide vogue held by these views would justify a fuller discussion and disproof of them here, did space permit. It must suffice to indicate merely that they have the same taint of illogicalness as the "fallacy of waste," the "fallacy of saving" and, still closer likeness, the "fallacy of luxury." They overlook the fact that an income, either of money or of other goods, coming even to the wealthiest, will be used in some way. It may be used either for immediate consumption or for further indirect use in durable form. Through miscalculation there may be, at a given moment, too many consumption goods of a particular kind, but the durable applications can find no limit until the inconceivable day when the material world is no longer capable of improvement. At the time of a crisis, there is unquestionably a bad apportionment of productive agents, and a still worse adjustment of their valuations, but these in no wise negative the basic economic fact of the scarcity of wealth. [Sidenote: Money theories of crises] 2. _Another group of theories explains the crises as being due to money, either too much or too little._ The unregulated issue of bank-notes has been assigned as the cause of crises, especially under the circumstances accompanying such crises as those of 1837 and 1857 in America, when bank-note issues chanced to be the agency most marked in the undue and unsound expansion of credit. The issue of government paper money, leading to inflation and speculation, is assigned as a cause leading up to such a crisis as that of 1873, following our Civil War. The reverse view is taken by the advocates of a cheap and plentiful money. They say that these crises were caused, not by the expansion, but by the reduction of bank-notes; for example, not by the inflation of prices through the issue of greenbacks in 1862 to 1865, but by the contraction of the currency from 1866 to 1873. [Sidenote: Their inadequacy] There is only a fragment of truth in these various views. It is always lack of money at the moment of the crisis that causes any particular failure, and in that sense it is always lack of money that causes a crisis. But the question is, whether in any reasonable sense it can be said that it was lack of a circulating medium before the crisis that brought it on. There is no support for this view, except in the rare case when the money standard is undergoing a rapid change, as in the United States from 1866 to 1873, and the statement then needs much modification and explanation. The money theories of crises are nearer to the truth than are the over-production type, for the crisis is always connected with money and prices. But it cannot be said that the absolute amount of money in circulation in the period preceding crises gives occasion to them. In a few instances a rapid change in the amount has had an important effect, but this fact does not explain crises in general. Lack of confidence is said to be a cause of crises. This is a truism, but the lack of confidence is not without reason and cause. Over-confidence in the period of expanding prices is succeeded by extreme depression when many false hopes are shattered. [Sidenote: Capitalization theory of crises] 3. _Crises must be explained essentially as the forcible and sudden movement of readjustment in the mistaken capitalization of productive agents._ Capitalization runs through all industry. The value of everything that lasts for more than a moment is built in part upon rents that are not actual, but expectative, whose amount, therefore, is a matter of guesswork, or "speculation." Many unknown factors enter into the estimate of future rents. The universal tendency to rhythm in motion (material or psychic) manifests itself in an overestimate or underestimate of rent and of every other factor in value. This is emphasized by a psychological factor called the "hypnotism of the crowd," Most men follow a leader in investment as in other things. The spirit of speculation grows till it becomes almost a frenzy, and people rush toward this or that investment, throwing capitalization in some industries far out of equilibrium with that in others. The use of credit enhances the rhythm of price. A large part of business is done practically on margins. If the value of a thing fully paid for falls in the hands of the owner, he alone loses; but if the value of a thing only partly paid for falls so much that the owner is forced to default in his payment, the loss may be transmitted along the line of credit to every one in the series of transactions. A credit system, highly developed, is a house of cards at a time of financial stress. There is an element of credit in all modern business. Enterprisers enter into strenuous rivalry to secure the profits of a rise, ever hoping to get out whole before the crisis comes. [Sidenote: Psychological nature and objective conditions of crises] The fundamental cause of crises thus is seen to be psychological; it is the rhythmic miscalculation of rents and of capital value, occurring to some degree throughout industry, but particularly in certain lines. But this subjective cause in men is given full opportunity for action only when certain favoring objective conditions are present. Most noteworthy of these besides the credit system is a dynamic condition of industry. The past century has opened up new fields for investment on an unexampled scale. Investment has advanced both intensively and extensively in a series of great waves. New machinery and processes have given undreamed of opportunities for enterprise in the older countries, and the physical frontier of investment has moved outward with the march of millions of immigrants to people the fertile wilderness. Such factors disturb the equilibrium of prices both in time and space, give a powerful impulse toward higher values in the older lands, and stimulate the hopes of all investors. When the balance between the capitalizations of various industries and between the rents of the various periods proves to be false, the inevitable readjustment causes suffering and loss to many, but particularly in the inflated industries. But, because of the mutual relations of men in business, few even of those who have kept freest from speculation can quite escape the evils. [Sidenote: Widespread effects on incomes] 4. _Crises must be discussed in connection with other subjects than profits._ In the text-books the subject of the crisis is variously classified. It may well be discussed with money, credit, and banking. It has its bearings on wages, justice in distribution, the theory of interest, and the consumption of wealth. But the reasons for taking it up in connection with the subject of profits are strongest. In no other connection is the presence of the element of speculation and of chance profit and loss in business so forcibly seen. [Sidenote: Their probable mitigation] The income of every class of society is to some extent affected by these more or less periodic fluctuations. They are in part the price paid for progress under the constantly shifting conditions of our dynamic industry. In part they are the proof of industrial maladjustment. The force of the shocks will no doubt be much reduced by better banking and business methods, and by a sound currency system. More important still, the development of moderation, conservatism, and a less speculative spirit among the leaders of business will do much toward softening the asperity of these scourges of industry. PART III THE SOCIAL ASPECTS OF VALUE DIVISION A--RELATION OF PRIVATE INCOME TO SOCIAL WELFARE CHAPTER 38 PRIVATE PROPERTY AND INHERITANCE § I. IMPERSONAL AND PERSONAL SHARES OF INCOME [Sidenote: Functional vs. personal distribution] 1. _Under the title "the social aspects of value" are to be considered the influences exerted upon incomes by various social acts, ideals, and institutions._ The incomes from the wages of free labor and those from the rent of wealth, as studied in the abstract theory of value, are alike in their impersonal aspect, their relation to utility. But while wage flows from a personal source--is an income appearing to reward the personal effort of the laborer, the income of the wealth-owner is due to the uses of goods. In the abstract theory of value we do not seek to get behind this impersonal phase of rent. The income arising from goods goes to the de facto owner of the goods. We do not ask how the goods first came into his possession, whether through labor or as a gift, whether stolen or inherited. Indeed, the economic theory of competitive rent may be said not to recognize the personal fact of ownership; it is concerned with the impersonal fact of usufruct. The theory of economic rent, of time-value and capital, and of wages, as measured by efficiency, is impersonal, is a study of functional distribution. In the problem of monopoly the personal factor is more prominent, but the economic study of rent cannot well stop there. [Sidenote: Social institutions and personal incomes] An answer, at least in broad outline, must now be given to the question why some men are permitted to hold wealth as their "own," that is, as "property," while other men are propertyless. Why do the owners exact payment for the use of goods, and why are they allowed by their fellows to do so? Back of these facts is a great system of social institutions that helps to determine what men will do. Market value is a social fact; price is determined by the bidding of men under the existing social and political conditions. These broader social aspects of value remain for consideration. The influence of lawmaking, of collective action, and of social institutions on value must be noted. Incidentally, this has been done in speaking of patents, political monopolies, and related questions; but mainly the subject has been viewed from the individual standpoint; now it must be looked at more fully from the social side. [Sidenote: Harmony of the studies of impersonal and of personal distribution] 2. _The study of personal distribution should include a further explanation of the various elements that unite to form the individual's income._ "Distribution" in economics is the reasoned explanation of the way in which the total product of a society is divided among its members. It is a logical question and not an ethical one. The economist first asks, What is the effect of utility on value? and, next, What is the relation of these goods to the personal incomes of the members of society? It is not his peculiar part to say whether this is the best distribution in an ethical sense, yet in pursuing the question of distribution one comes to the border of certain moral questions. The impersonal and the personal views of distribution are not, however, contradictory; they are different aspects of the same question. It cannot be said that the analysis of economic rent is a purely abstract piece of work. In fact, the impersonal view of distribution is essential to an understanding of the personal view of it. The one gives general principles, the other the special cases. In the practical economic issues of the day, the most urgent need is a better popular understanding of the abstracter theory of value. It is a guiding thread through otherwise bewildering mazes. [Sidenote: Composition of personal incomes] The actual incomes of individuals are made up of different elements. The wage-earner and the salaried man are rarely quite without material wealth. The enterpriser gets some income also in the form of contract interest, or as rent from machinery. Actual personal incomes are therefore a sum of various functional or impersonal incomes. The earnings of every agent may be thought of as always going either to some individual or to some group. By social convention the receiver of incomes that are not personal gifts is supposed to have produced them. This involves the great assumption that the owner of a piece of land has produced or contributed in some way to society an amount equal to the rent. This may be true in many cases, but in many cases this view cannot be accepted without close scrutiny. [Sidenote: Law in relation to wealth] 3. _Property and wealth are respectively the personal and the impersonal, the legal and the economic, aspects of productive agents._ Law holds an important place in the discussion of actual economic questions. This fact was not overlooked by John Stuart Mill, and it has been far more clearly recognized in the last few years, especially by the German economists. Political law in the broadest sense, as embodied in the state, is, in the first place, a set of rules to guide the conduct and regulate the relations of men in society--a legal code; it is, in the next place, a governmental machine to determine disputes between men--a judicial system; and it is, finally, physical power to bring contestants into court and to secure and protect their rights--a police force. Whether acting through legislature, courts, or police, in all its dealings with wealth the law is predominantly personal. The question the law asks and answers regarding wealth is not _What_, but _Who?_ Who is the owner, who should control, receive, enjoy the income? Economic wealth consists of scarce things, of valuable agents, and because they are scarce, men quarrel over them. Because of the impersonal economic fact that a field and a machine produce scarce goods, arises the legal question as to which man is entitled to enjoy them. [Sidenote: Property and wealth] In the case of material things, property value and capital value must be exactly equal. Property rights cover the ownership of a material thing. Material property consists of things viewed with reference to ownership; capital consists of the same things viewed with reference to their economic services. There are other property rights besides those in material things, various immaterial rights controlling the action of the individual and thus giving a sort of ownership of the individual's actions. Such are patents which forbid other men making a particular kind of machine; copyrights which forbid other men printing certain writings; legal contracts that limit the action of men in various ways, and thus appear to abridge their liberty. § II. THE ORIGIN OF PRIVATE PROPERTY [Sidenote: Property and income] 1. _Property is ownership, the legal control over the sources of economic income._ The Latin word property means ownership, and hence that which pertains to the individual, that which is a man's own. The control of property is greater or less. The law makes between property rights and equity rights certain subtle distinctions which have their reason in the history, if not in the logic, of the law, but which are not essential to economic discussion. What we are interested in are the equitable claims of men to wealth rather than the technical property rights. With that thought let us consider the value of the control of wealth. If a farm worth ten thousand dollars is mortgaged for five thousand dollars, its economic worth is ten thousand dollars after as before the mortgage, but the equitable claim is divided into two shares of five thousand dollars each. The value of the property right cannot, in a reasonable view, be greater than the value of the economic wealth it covers. There is much confusion in the law of taxation on this point. The law treats the farm as property and the debt upon it, whether secured by a mortgage or not, as another body of property. Needless to say, this leads to absurd conclusions in reasoning, and to gross injustice. [Sidenote: Forms and modes of ownership] There are different forms of ownership: first, private, as that of individuals, families, partnerships, or corporations; second, public or state, as the ownership of the state house, the highway, the Adirondack forest-reserve or the Erie Canal. These are equally effective as against the claims of outsiders, but the rights of those inside the circle of ownership differ. For example, the rights of one shareholder against another, or the rights of one member of a family as against another, are not the same as the rights against outsiders. Private property is the characteristic feature of our present industrial society, but it exists side by side with state property and with many intermediate grades between private and common property. Private property, while attacked on some sides, is usually accepted without question; but in this age of inquiry its origin should be examined, its limits and the reasons for them should be noted, and its purpose, faults, and effects should be set clearly before the judgment. [Sidenote: Various theories of property: Occupation] 2. _The older theories of the origin of private property are those of occupation, conquest, labor, natural rights, and law._ The theory of occupation is that property is based upon the priority of claim of one who finds wealth without an owner and appropriates it. This, to be sure, is a statement of what happens in the settlement of new countries, but it is not an explanation of the property rights that are arising every moment, nor does it give a logical reason for the continuance of ancient property rights. [Sidenote: Conquest] The same can be said of the conquest theory, the theory that property is based on force. It applies to the invasion of the Roman provinces by the barbarian tribes who divided the country and enslaved the population. But it rarely applies to present-day happenings and at its best it cannot, to modern minds, "justify" present property rights. [Sidenote: Labor] The labor theory, meeting some queries where others fail, is that ownership is based on production, on the right of a man to that to which his brain and his muscle have imparted value. It is evident that this test leaves without explanation or justification a great number of things that do exist and have existed as property. [Sidenote: Natural rights] The natural-rights theory is that property is necessary for the realization of the dignity of human nature. This, if true, would be not so much an explanation as a condemnation of private property as it has existed in most cases, as millions of men are in every land all but lacking in property, and inequality of possession is everywhere marked. This theory expresses, however, one of the worthy ideals of modern democracy. Although, in common with the various other "natural rights" theories, it must to-day be deemed too absolute and too individualistic, it contains a far-reaching truth, of which due account must be taken in our social philosophy. [Sidenote: Law] The legal theory is that property exists because the law says it shall. This expresses a truth, but is no more than a truism. The law determines the limits of property, but what determines the limits of the law? What practical or social justification is there for passing and continuing such law? The legal theory does not explain anything finally. Each of these theories has its defects, but each points to some fact important and significant, at certain times and places, in the explanation of this widespread institution. [Sidenote: Property in early societies] 3. _The institution of private property has evolved under diverse conditions; the question of its origin is not the same as that of its present justification._ In early societies individual property rights were not very clearly marked. Every tribe asserted against other tribes, and tried to uphold, by war, its claims upon its customary hunting-grounds; but the claims of the individual hunter and fisher within the tribe did not often come into conflict. Private property at the outset was in personal possessions, ornaments, weapons, utensils, which were very meager in that primitive society where it was the custom "to go calling with a club instead of a card-case." Only later came individual property in land. A few years ago it was generally believed that the organization of the old German tribes was politically an almost perfect democracy, and economically a communism wherein all had equal claims on the land. To-day this opinion is very seriously questioned. It seems probable that the so-called communism was really an oligarchy of the favored, and that the masses lived in subjection, cut off from all but a meager share in the public property. [Sidenote: Origin vs. present justification of property] However that may have been, strong forces within historic times have put an end to the common ownership and tillage of land as it existed among the serfs of Europe. The common tillage of land was shown by experience to be wasteful. Not only did competition tend to bring the economic agents into more efficient hands, but the movement was furthered by many acts of injustice and violence on the part of those in power. Inquiries into the origin and development of this social institution are interesting and helpful in forming an estimate of its present significance, but the problems of the past are not those of to-day. Whether or not the ancient beginning of property in Europe was in violence and evil has but a remote bearing on the question as to the present working of it. Social conditions and needs have not changed more than have the forms and limits of property itself. Each generation has its own problems to solve, and each must test existing institutions by their present results, ignoring for the most part the evils of the past. [Sidenote: Social expediency the ground of private property] [Sidenote: Shifting limits of the law of property] 4. _Private property may now be justified mainly on the grounds of social expediency._ This is a broad explanation under which can be brought the many varying conditions; but it has the fault of a broad explanation, that it needs be further explained. Conceding that private property works hardship to the individual in many cases, it must be justified on the ground that, on the whole, it furthers the progress of society. Private property is looked upon by some as merely reflecting or expressing the economic inequalities of men; the man poor in ability is the man poor in property. It is looked upon by others as exaggerating, indeed at times reversing, the economic abilities of men. In general, it must be judged by this test: Does it further the welfare of society better than would any alternative plan for the control of economic wealth? The question is not whether it is faultless, for no human institution is so. Nor must it be assumed that property is a fixed and uniform mode of control; there are many kinds of property. Different parts of wealth may be treated in different ways: there may be private property in wagons, and public property in roads; private property in houses, and public property in forests; private property in automobiles, and, in some countries, public property in railway-carriages. But any rule of property, like any other workable human law, must be applicable to all individuals that meet the conditions. Hence any human institution must be judged by its average working, not by exceptional cases. The very acceptance of the theory of social expediency implies the need of a readjustment of the institution of private property; for private property, as it is found to-day, is complicated by many historical accidents. Survivals of ancient injustice and relics of feudal institutions that rest on no vital reason remain in our new country as well as in the older ones. The limits of property in many respects are determined, not according to the logic of expediency, but by the social inertia which often governs succeeding generations. § III. LIMITATIONS OF THE RIGHT OF PRIVATE PROPERTY [Sidenote: Public interests limiting property rights] 1. _Unmodified private control of property is unknown: the public makes many reservations in its own interest._ Few realize the manifold ways in which property rights are limited. There is, first, a whole set of limitations to prevent nuisances. An owner in many situations is not free to build a slaughter-house or to start a glue-factory on his land. Property is governed by general public utility, and anything that threatens to become a nuisance or a danger is excluded. When, under the right of eminent domain, the state or the railroad takes the old homestead from its owner who would live and die there, the payment of money damages to him does not make this the less a limitation of his property rights. Rights of way on property exist either through contract or by prescription permitting its public use. Most important of all limitations is the right of taxation, by which society takes more or less of private incomes for purposes of which the individual owners may in no way approve. [Sidenote: Private claims limiting property rights] 2. _The law enforces a multitude of private claims against private owners._ A variety of rights called easements or servitudes may attach to private property, modifying its exclusive use. Leases for any period are a virtual limitation of the control and division of the ownership. Both the holder of the lease and the owner of the property have certain rights before the law. The lender of money secured by mortgage has a legally recognized and enforceable interest in the mortgaged wealth. Property is left in trust for the benefit of persons or of institutions or of the public, and is administered by trustees who are strictly bound to the execution of the terms of their instructions. Contracts of many sorts are entered into by owners, limiting their control in manifold ways, and the law enforces these contracts. These all form a complex of equitable claims, which together equal in value one undivided property right, which in turn equals the value of the wealth. These claims mutually limit each other (whether they be called equitable claims, or liens, or property rights), and wealth is not multiplied by multiplying the claims, as the lawmakers unfortunately sometimes assume to be the case. [Sidenote: Limitation of bequest] 3. _The right of bequest, or of gift at death, is limited in various ways in different countries._ The term bequest implies a will, usually a written will in which the person, foreseeing death, has expressed his wishes as to the disposition of his property. It is said sometimes that bequest is a "logical" result of private property, but the law does not treat it as such. In countries where hereditary aristocracies exist, primogeniture is in some cases required by law, in others so strongly favored by public opinion that it is practically always followed. Custom limits bequests in England to members of the family, and wills giving outside the family are rare, and are almost always broken in the courts. John Stuart Mill contrasts this with the frequent practice by rich men in America of giving for public purposes. In France the right of bequest outside the family is legally limited; only the share of one child can be willed away by the father, and the rest must be equally divided among the children. Settlements and _fidei commissa_ are limited in many countries, because of the recognized social evils resulting from the tying up of estates for generations. Throughout the history of England, Parliament has given attention to the question of mortmain, which chiefly concerned the drifting of great estates into the hands of the church or of corporations, as a result of bequests by the pious. Only recently in England, and to a less extent in this country, has been seriously discussed the policy of permitting unlimited endowments to charitable institutions, and new legislation has diverted from their original purposes some of the old endowments. These varied and often strict limitations of the right of private property are all determined by some thought, wise or foolish, of social expediency. [Sidenote: Limitation of right of inheritance] 4. _The law of inheritance varies greatly with time and place._ Inheritance, in contrast with bequest, usually means succession to the property of one who has died intestate, that is, has made no will. The old idea of family unity survives in great measure in modern laws of inheritance. The nearest living relatives, no matter how distant they may be, inherit property when there is no will. When a miser dies in solitude and neglect, the world must be searched over to find a remote cousin to take the hoarded wealth. Inheritance is limited largely at present by the power of taxation. The view is growing that the claims of the society in which wealth has been acquired are stronger than those of relatives distant alike in space, in blood, and in affectionate interest. This view is reflected in many recent inheritance-tax laws which take from the shares of distant relatives a goodly portion for public purposes. The question is raised in many minds, If private property is not an absolute right, what shall be its limits? What changes should be made in it? The essential thought in the various attacks on the institution of private property is that, because it occasions inequality in incomes, it is not socially expedient. The conviction is growing that, in some general way, incomes should correspond to, and reflect, social service. It is well to consider more closely what the terms social expediency and social service imply. CHAPTER 39 INCOME AND SOCIAL SERVICE § I. INCOME FROM PROPERTY [Sidenote: The justice of property questioned] 1. _Property rights must meet the test of social expediency._ If private property is defended on the ground of social expediency, it must show good social results. It is not a sacred thing; it is open to examination, and must be judged by its fruits. Of all the forms of income, that from property has been most strongly attacked. The thought is that enjoyment of wealth should not be found apart from labor, and that it should bear some proportion to services performed. The enjoyment of an ample income by one who does no more than to draw checks or to sign coupons seems to many minds to be unjust; and it is often questioned whether there is any social service performed by the receivers of the rent from land. Property seems in many cases to be distributed without rule or reason. It does not correspond with beauty, strength, wit, wisdom, temperance, gentleness, or charity. Since the beginning of the Christian era, reformers have assailed and preached against the prevailing inequality of wealth. The idea that incomes, if not equal, should correspond to social service has always been present in some vague way in the minds of men. [Sidenote: Social effect of the right to give] 2. _The right to transmit property by inheritance or by gift may be judged with reference to its effect on the giver, on the receiver, and on society at large._ It is well to take these three points of view. The right to dispose of property either during life or at death has undoubtedly in many ways a good effect on the character of men. It stimulates the father to provide for his children, the husband to provide for his wife. There is a joy in giving, a joy in the power to bestow one's wealth on those one loves. The right to give stimulates industry, frugality, ingenuity, and yields productive results. Much of the existing wealth probably never would have been created if men did not have this right of gift. But there is a limit to the working of this motive, and other motives often are much more effective. Many men after gaining a competence continue to work for love of wealth and power in their own lifetime, as the miser continues to toil for love of gold. When men without families die wealthy, when men that have not the slightest interest in their nearest relatives labor and amass wealth till their dying day, it is evident that the right to bequeath property has little to do with their efforts. Love of accumulation and love of power in these cases supply the motive. A more limited liberty to dispose of property at death might still suffice, therefore, to call out the greater part of the efforts now made to accumulate property. [Sidenote: Effect of the right to receive] That the effects on the receiver of the property are good is somewhat more doubtful. It is true that children raised in great comfort or luxury would be more than ordinarily unhappy if plunged into poverty or even into humble circumstances on the death of their parents. There is much social justification for permitting families to maintain an accustomed standard of comfort. Few would deny that a moderate provision by parents to provide education and opportunity for their children is commendable and desirable. But the evil effects of waiting for dead men's shoes are proverbial. Many a boy's greatest curse has been his father's fortune. Men of native ability wait idly for fortune to come, and opportunities for self-help slip by unheeded. The world often exclaims over the failure of the sons of noted men to achieve great things, for, despite confusing evidence, men still have faith in heredity. A too easy fortune saps ambition and relaxes energy; and thus rich men's sons, if not most carefully and wisely trained, are made pitiable paupers in spirit, while the self-made fathers think their boys have chances they themselves did not enjoy. The greater social loss is not the dissipated fortunes, but the ruined characters. [Sidenote: Broader social effects of inheritance] The effects of inheritance on the community are good in so far as it secures efficient management of wealth. If the son or relative has been in business with the deceased, there is a reason that he should inherit the property, and his succession to it makes the least disturbance to existing business conditions. But every profligate son is an argument against inheritance; every incompetent heir is an argument in the hands of the enemies of the existing order of society. It is to society's interest that no able-bodied member shall stand idle. Every child should have presented to him the motive to devote his powers to the social welfare in economic or other directions. Moreover, many feel that the great fortunes now accumulating through successive generations in the hands of a few families are endangering our free society, even if these fortunes should continue to be well administered. There is a widespread feeling that the heredity of great wealth is, like the heredity of political power, out of harmony with the democratic spirit--though this may easily become a misleading comparison. Still, democracy wishes to see men as individuals put to the test, not profiting forever by the deeds of their forebears. This feeling is shared by those who cannot be charged with radical prejudices. A few years ago the Illinois Bar Association passed a somewhat startling resolution favoring moderate limits to inherited fortunes. Every year sees bills of this purport introduced in the legislatures and in Congress. Andrew Carnegie says it would be a good thing if every boy had to start in poverty and make his own way. Cecil Rhodes recorded in his will his contempt for the idle, expectant heir. [Sidenote: The test of wise inheritance laws] 3. _Social expediency will limit the right of intestate inheritance to persons in essential economic and social relations._ Public opinion is not yet crystallized in favor of this formal proposition, but tends strongly toward it. The foregoing considerations show that the right of gift in the lifetime of the giver should be the freest. The right of bequest, that is, of gift by will, should be liberal. The man who has acquired wealth may well be trusted to decide who bear to him a close social or personal relation, and to say whose lives have in a measure furnished the motives of his activity. But the right of intestate inheritance by distant relatives is one that stands on weak social foundations to-day. It appears to be an unreasonable survival from more patriarchal conditions. The true test is whether the wish to provide for these heirs has furnished the motive for the producing and preserving of the wealth. The claims of those nearest in blood and closest in personal relations are strongest. Family affection and friendship form the strongest of social ties, and it is socially expedient to cultivate them. Motives for abstinence and industry must be strengthened. But the same test shows that the zealous regard of the American law for the rights of grandnephews in Australia, or even of brothers long absent in distant quarters of this country, is irrational, and is unjust to the community where the fortune lies. [Sidenote: Social services of favored classes] 4. _Many fortunes built on favoring legislation are defended as due to social service._ In the Middle Ages kings often granted great estates to nobles as rewards for past merit and as a payment for expected public actions. The great landlords were the magistrates, military leaders, and supporters of social order, and thus, in the judgment both of the king and of the commonalty, the nobles earned their incomes by their social service. While this practice has disappeared under constitutional government, large grants are still made to royal families. Many Englishmen who are democratic at heart uphold such grants as the price of social stability. Regard for royalty is so deep-rooted in the minds of the people of any long-established monarchy that there is always danger in change. England must pay many millions annually as the price of loyal and conservative sentiment. So long as this is true, a family of royal figureheads and idlers performs a social service. [Sidenote: Possible social service of protected industries] Protective tariffs sought by wealthy manufacturers are granted, not ostensibly to help them, but to help the country. The argument is that the benefits are diffused. Aid to enterprises in private hands, such as ship subsidies or as the grants to the Pacific railroads, are defended on the ground that, as a whole, society benefits by thus increasing the income of one class. The promise of social service is most urged by those who get the immediate benefit. Their eyes are keenest. The manufacturer sees clearly the benefits that will come to his factory from a protective tariff, but before he can get it he must convince many others that they too will gain. The majority of the American electorate is not voting a special favor at the polls, but is recognizing what it believes to be in its own interest. Most students of social questions doubt the wisdom of most of these grants to the wealthy on grounds of social service. The burden of proof is on their advocates, but few to-day are so rash as to say that such a claim of social service is never sound. [Sidenote: Private property in land questioned] 5. _Property in natural agents is the most strongly attacked._ In the case of great natural deposits, such as those of coal or iron, the social service that is performed by the mine-owner is hard to see. Great incomes are drawn in the form of royalty or rent by those who never lift a pick or direct a stroke of work. Agricultural land in the hands of absentee landlords yields an income not very clearly due to social service, and this phase of property has been especially assailed during the past century. The modern form of this discussion is concerning "the unearned increment," the rise in the value of lands as a result of social growth. It is proposed to appropriate by "the single tax" the entire rental value of the land for the use of the public. The defense of property in land is first positive: taking not the extreme but the usual case, private property secures the discovery and development of natural resources and their thorough use and good management (not necessarily by personal labor with the hands). If this is true, it is well for the individual and for the community to have this wealth in private hands. But in other cases there is merely a negative argument for property in land: no other better method of employing it has been devised and found practicable The experience with state ownership of mines, forests, and estates has not definitely answered in every case the question whether the social results of state ownership are more favorable than those of private ownership. In some cases they clearly are not, in others they may be; and as the balance of opinion inclines in the direction of public ownership, other reforms will doubtless be undertaken. [Sidenote: Inequality of fortunes] 6. _The present inequality of wealth, not private property as such, is often attacked._ It is estimated that in the United Kingdom two per cent. of the families own seventy-five per cent. of all the wealth, while ninety-three per cent. own less than eight per cent. In the United States it is estimated that one per cent. of all the families own more than the remaining ninety-nine per cent.; and at the other part of the scale eighty-seven per cent. of all the families own less than twelve per cent. of all the wealth. The trend has been toward concentration of fortunes and a larger proportion of the growing income from property is in a few hands. Many feel that the law of property is defective when this is possible, although at the same time the average income of the wage-earner is increasing. Yet, it is not the institution as a whole that is attacked, but its details. The custom of equal division of property among children in the United States has not been as effective in keeping fortunes small as was expected. The wealthy American families have averaged small, and in some of the most prominent the rule of equal division has not been followed. Opportunities for the investment of small savings at low interest are not lacking, but the great fortunes overtower the little ones, securing the great profits and great political and economic power. The farms and the villages are refuges for the small industry and for the small fortunes, and this fact has a great influence on our national character. The whole social atmosphere in the cities, with their extremes of wealth, differs from that in the country, and this contrast promises to become greater as the years go on. [Sidenote: Private property vs. socialism] 7. _The ideal of property rights is that they shall furnish the highest motives for efficient social service._ Private property furnishes such a motive in a broad way, but its most ardent defenders will recognize that it does so imperfectly. It is an institution that has been tried and that does the work, while other methods suggested to do away with it are found to be dreams. The ideal of socialism is the abolition of private property, the centralizing under the control of the state of all wealth, except the simple personal belongings, clothing and other consumption goods. But history and human nature unite to testify that extreme socialism is an unworkable plan, excepting under special conditions, as in barbarous times and under a political despotism. The modern ideal for the control of wealth is the best attainable harmony of liberty and efficiency. If private property as it is, falls short of that ideal, at any rate it works either on a small or on a large scale, and socialism does not work at all. Property rights as they exist are not a product of pure reason. They are the result of social evolution, of historical accidents, of class legislation, and of selfish interest in many cases. Changing social conditions and ideas are bringing many changes in law, and further change must be expected to come. § II. INCOME FROM PERSONAL SERVICES [Sidenote: Some anti-social speculative gains] 1. _Incomes from legitimate enterprise and speculation correspond roughly to social service._ It has been recognized above that there are many grades of chance, of speculation, and of enterprise. The extreme cases are bald crimes and are punished as such. Over some men that never directly break the law there always hangs a suspicion of guilt. It is the purpose of the law to make dishonesty unprofitable, but how imperfectly it does so! There are many cases of chance gains where the lucky man without social service legally enjoys his fortune. The law must be framed in broad terms, and cannot provide for every case. It may broadly forbid lotteries whose evils clearly exceed their benefits. But what would be the effect of taking away reward for the discovery of a gold-mine, even though sometimes it is awkward stumbling, not industry, that reveals the veins of metal? Society has studied that question in the past; even now changes are being made in the laws; and in their turn the citizens and legislators of the next generation must decide the question. It is always under consideration. [Sidenote: Reward and enterprise] Are the rewards of the successful enterpriser greater than he deserves? How shall it be judged what he deserves? The answer is in the form of a question, Could society have the service without the reward? Society may be thought of as hiring the services of the efficient business man at the lowest price. Does it wish the services of Cornelius Vanderbilt in organizing a great system of railroads, of Andrew Carnegie, of Pierpont Morgan? What can it get them for? It must appeal not only to their love of money but to their love of power. Large services and large results can be bought only with large rewards. The shrewd enterpriser is not to be paid with abstract social gratitude. He is not to be tricked, as is a Chinese god, with tissue-paper gold. [Sidenote: Unmeasured gains of vast wealth] But in many ways fortunes appear to grow without social services, and sometimes with social harm. Russell Sage, the noted capitalist (who should know something of Wall Street), in speaking of the greatest of American corporations, said: "They dominate wherever they choose to go. They can make and unmake any property, no matter how vast. They can almost compel any man to sell out anything, at any price." Henry Clews, the well-known New York banker, said of a certain group of financiers: "Their resources are so vast that they need only to concentrate on any given property in order to do with it what they please.... There is an utter absence of chance that is terrible to contemplate. This combination controls Wall Street almost absolutely. With such power and facilities it is easily conceivable that these men must make enormous sums on either side of the market." [Sidenote: Antisocial use of rare ability] 2. _The high pay of rare ability and skilled labor reflects in general a high social service._ The large income of some men reflects service to a narrow class, not to society as a whole. Lawyers as a class aid in maintaining right, but a corporation lawyer may get enormous fees for defeating just public claims; a skilful criminal lawyer may grow rich aiding the guilty to escape justice. Other service ministers to the whims, follies, and vices of the men who pay the bill. Such a service is "social" in a mean sense, corresponding to the low standards of desire in that social group. But what of the high rewards of skilled service ministering to worthy ends? Such favorites of fortune as Jenny Lind and Patti have received five thousand dollars for a single concert. Is this because they are the lucky possessors of a rare gift, or because they perform a social service deserving such reward? Certainly many of their auditors get what they want and believe they are getting the worth of their money. [Sidenote: General social result of rewarding talent] In general the legal right of everyone to get the highest pay he can in a free and open market is essential to the calling forth of ability. In a particular instance it is possible that the service would continue if one half or more of the income were confiscated by the public; but such a personal discrimination would introduce an arbitrary and demoralizing uncertainty into the problem. Who can tell how far the exceptional money rewards have inspired to the highest cultivation of great genius and of many minor talents? In a broad but very true sense, therefore, it appears that high personal achievement, large economic reward, and large social service are connected. [Sidenote: Social service of manual workers] 3. _The low income of unskilled labor seems to fall short of its social service._ This does not refer to the feeble-minded or utterly inefficient, but rather to honest, industrious, "day-laborers," and to the low-paid manual workers in field, on railroad, and in factory. Their service is essential to the existence of society as it is, to all the higher arts, to the sciences, and to the amenities of life; their tasks are the roughest, most painful, most dangerous; yet their pecuniary rewards are the lowest. There is such a unity in society that each more fortunate man is dependent on the services of the humbler laborers who make up a large part of society. According to the breadth of social sympathy their claims seem more or less urgent. [Sidenote: The problem of increasing their reward] There is a vaguely recognized and growing conviction that these hewers of wood and drawers of water should enjoy a larger income. But how are they to get it? How is society to grant it to them? They get what they can under the competitive conditions, they get what their service is worth in the market. Are the conditions of the competition fair? If not, what will be the effect of a change? If they get more, others will get less; and with what result? However great the wish for better things, the attempt to change conditions fundamentally in a forcible and artificial way is both dangerous and foolish. Improvement must come through the coöperation of many indirect agencies gradually changing the nature and direction of the deeper economic forces. [Sidenote: Imperfect social and individual estimates of service] 4. _The services of each are being measured and paid for by each and all._ In two ways society is putting its valuation on the economic services of other members of society: first, by law, or formal social convention; secondly, by individual estimates. By formal law is determined what institutions shall be continued. If the class of property owners is considered worthy of this reward, the institution of property will be continued; if not, it will be altered or destroyed. These decisions are made imperfectly, but as well as men of limited intelligence and honesty can make them. If men were more capable in both these ways they would enact better laws. Again, individuals are putting their estimates on others in bidding for services to minister to wisdom and virtue or to ignorance and vice. If there is to be a much juster estimate of social service, there must be wiser men in society. [Sidenote: The ideal of social service] Does the world owe each man a living? No; on the contrary, each man owes the world his services in exchange for his living. The pauperism of spirit that consists in taking something for nothing is found in every rank of society that enjoys the blessings of progress without giving its best services in return. The ideal of a better adjustment of reward and service grows in the minds of men. Social evolution, shaped by this changing ideal and by accumulating experience, will bring into closer relation the social services and the economic rewards of men. CHAPTER 40 WASTE AND LUXURY § I. WASTE OF WEALTH [Sidenote: Loss of wealth in an isolated or an exchanging economy] 1. _The accidental destruction of wealth is a loss to the owner, rarely with benefit, on the whole, to others._ In the consumption of wealth the loss of its utility is accompanied by the gratifying of wants; in the destruction of wealth utility is lost without the gratifying of wants. In a simple society, without exchange, the result of such a loss is evident. If food is destroyed, men suffer from hunger or gratify appetite less perfectly; if clothing is destroyed, they are cold; if houses are destroyed, they have no shelter. Likewise, if the self-sufficing family on a farm loses wealth by fire or storm or blight, its economic environment is made less fitted to gratify wants. In the conditions of our society, where goods are exchanged, the result appears to be different. The need to replace the lost goods makes a demand for special kinds of labor or goods. There may be, therefore, an immediate benefit to some, which obscures the corresponding loss to others. If a part of the income of the loser must be diverted from other uses to replace the wealth destroyed, those from whom he would have bought suffer an unexpected falling off of their sales, and he has himself gained nothing. The net result is a loss of wealth and gratification to the community as a whole. There is a real exception where the accidental destruction removes some social difficulty. The great fire in London and the great fire in Chicago resulted in wonderful improvement. When an old city is built almost entirely of wood, each owner may think it to his interest to keep the old buildings. A great fire sweeps them all down and compels the rebuilding of the city on a new and higher standard. But the usual social result of accidental destruction is a loss. It is a use of wealth without a fulfilling of the purpose of production, the gratifying of wants. [Sidenote: Intentional destruction of wealth by the owner] 2. _The intentional destruction of wealth by the owner, to make trade good, benefits neither himself nor others._ The case in mind is one where there is full choice between keeping or losing the good, not such a case as the throwing overboard of a part of the cargo when the ship is in danger of sinking, in the hope thereby of saving the rest, or as the blowing up of buildings to prevent the spread of a fire. In such cases the destruction is inevitable without man's action; he merely tries to minimize it. The case in mind is the deliberate destruction of wealth that might be kept for use. One labor leader, for example, boasted that when he drank pop he always broke the bottle "to make trade good" by helping the glass industry. The refuting of this fallacy is one of the time-honored tasks in political economy. There is, it is true, an increase in the demand for glass and glass-blowers' labor, but without an increase in gratification; but at the same time there is a decrease in the demand for other goods which would afford additional gratification. The proverb, old in Shakespeare's time, runs, "Nothing can come of nothing." What is spent for one purpose cannot be for another; "you cannot eat your cake and have it too." A given income can be spent in one of many ways, but not in all ways or even in two ways at once. It is a question of this _or_ that. At the same moment that the demand for pop-bottles is increased, the demand for other things is decreased, possibly that for pop-corn or pop-guns or Populist papers--who can tell? Such a form of benevolence is a mistaken, uneconomic attempt to provide labor for one man by taking it from another. If the advocate of wealth-destruction would be consistent, he should break, not merely the pop-bottle, but the water-pitcher and the table as well; he should make a bonfire at least once daily of his clothing, his house, and its furnishings; he should advise blowing up the steamboat and ripping up the railroad when they have carried a single load of passengers. Thus, when all men were naked and starving, and civilization had sunk to savagery, trade would have been made as "good" as, by the policy of destruction, he could ever hope to make it. [Sidenote: Intentional destruction of others' wealth] 3. _The intentional destruction of wealth owned by other persons is falsely thought to benefit trade in general._ The cases referred to are not acts done with criminal motives, but those done with a view to the public interest. If one sets fire to the property of another, seeking revenge or plunder, he is guilty of the crime of arson. But what shall be said of volunteer firemen that let an old house burn down to provide labor for carpenters and "to make business good"? The duty of firemen is to put out fires, no matter what the building is; but they choose sometimes to be ministers to the social interest as they interpret it. The more spent for carpenters' work out of any income, the less can be spent for other objects. It is true, however, that if in a small town the money to rebuild is borrowed from a distant loan or insurance company, there is an increase in employment in that town for one season; and that is as far as most men try to carry their economic analysis. Let the student carry it further. [Sidenote: The seen and the unseen] Servants sometimes excuse the breaking of dishes and furniture on the ground that it makes work, and that the employer can afford it. But income is thus diverted from other expenditure, either for production or for consumption. In the light of the theory of wages, it would appear that carelessness reduces the servant's own efficiency, and in the long run the loss comes, in part at least, off the wages of that particular servant. Bastiat's discussion of the broken window-pane is often and deservedly quoted. What is seen is a certain immediate benefit that the glass-maker and glazier get; what is not seen is that the power to expend an equal amount for other things is thereby lost by the owner of the house. [Sidenote: The wasteful use of wealth] 4. _The destruction of unnecessarily large value to secure a given gratification is not economically sound._ The careless use of wealth to secure an inadequate result is likewise justified as "making trade good." The blunder that compels the rebuilding of a wall in a rich man's garden is an occasion for congratulation to those who see in it a happy provision of work for the unemployed. It is easy to forget that the proper use of goods is the final step in production. According as goods are well or poorly used, the production--that is, the real income or gratification they afford--is large or small. Differences in skill in the use of wealth are great. A French cook, we are often told, can make a palatable soup from what goes from the average American kitchen into the swill-pail. Waste in the use of goods is more likely to be found in new countries where wealth comes more easily and necessity does not enforce frugality. The praise of waste implies the error noted in the preceding propositions. Deliberately securing less than the maximum result from wealth is merely a minor degree of the intentional destruction of wealth. The mistaken view is essentially that of the opponents of labor-saving machinery. It may be true, if the interests of a small class of workers or of tradesmen for the moment are looked at; it is false, if the interests of society as a whole be considered. Far more of wisdom lies in the proverb, "A penny saved is two earned." The economic use of wealth as surely adds to wealth (and, ultimately, to the income of society) as any other mode of production. [Sidenote: Waste in public outlay] Some government expenditures, as for river and harbor improvements, are sometimes favored, not because their immediate purposes are good, but because they "make work" and "distribute money" throughout the country. This money comes from taxation, and no matter what the system of taxation, the burden falls on some one, reducing the incomes at the disposal of the people to expend for objects of their own choice. If the work is not worth doing for itself, the collection of money in small amounts from many taxpayers and its expenditure as a large sum in one locality results in a net loss to society as a whole. Where the result is worth something, but not enough by itself to justify the expenditure, the fallacy of the destruction of wealth is present in a smaller degree. Examples are seen in the extreme use of pensions and in some public subsidies. [Sidenote: The fallacy of waste] 5. _The supposed benefits of destruction and waste are due to a narrow and incomplete view of the question._ Let us restate the ideas that have been touched upon. In many cases it is possible that one person may benefit by another's mishap or folly in the use of wealth. The complex interrelations of men in society make this inevitable. But, to appreciate the final effects of such action upon society, one needs but to go back to the essential thought of wealth and its purposes. As the average efficiency and bounty of the world fall, so fall the income and welfare of men. As it rises, the social and economic levels rise also. Every kind of economic wealth has potentially two kinds of uses: to gratify wants--thus fulfilling its destiny--or to be converted into higher and more efficient agents--consumption or production. That the possibilities of the latter are boundless is overlooked in the fallacies here criticized. An efficient world would be the result of "economy" and saving; a wasted and used-up world, the result of the fallacy of the destruction and waste of wealth. § II. LUXURY [Sidenote: Luxury defined] 1. _Luxury, while variously defined, involves always the thought of great consumption of wealth for unessential pleasures._ It is not possible to define luxury absolutely; it is a relative term. Those opposed to it condemn it in their definition of it, as, for example: "an excessive consumption of wealth," or "devoting a relatively large amount of wealth to the satisfaction of a relatively superfluous want." Those who take a more moderate and favorable view say: "It is the enjoyment of forms of wealth not obtainable by the mass of men." The difficulty in the definition as well as in the problem of luxury is that it involves a mixture of economic and of ethical questions. [Sidenote: Extravagance "to give employment"] 2. _Luxury is erroneously justified by some as giving employment to labor._ Typical instances are extravagant dress and elaborate balls where fine and costly flowers, decorations, music, coaches, require the expenditure of a large amount of money. It is said of the Empress Eugenie, wife of Napoleon III, that, in order to help the glove industry of France, she wore no pair of gloves more than once; in order to help other French industries, she purchased many silks and laces. It is a very comfortable doctrine to some people that the oftener they change their dress, the greater benefactors to society they are. A few years ago the "Bradley-Martin ball" was given in New York city. It was possibly little more elaborate and expensive than many another ball, but it chanced to be a dull time for news and the papers all over the land gave columns to its discussion. In the many interviews with ministers and business men, the thought appeared over and over that the ball had at least the merit of giving employment to labor. [Sidenote: The fallacy of luxury] The fallacy of this is essentially the same as that in the argument for waste and destruction. From the fact that these particular tailors, musicians, and florists would have less employment if this ball were not given, it is falsely concluded that, but for this ball, this particular income, or capital, would not be used at all. The average of employment in those special industries which minister to luxury is the result of and is determined by the average level of demand. There are more caterers and florists in Ithaca than in Hayt's Corners. A more than ordinarily gay season gives unusual profits to these enterprises, and it is true that an abrupt and extreme falling off in demand would cause them large losses, and leave many workers lacking employment for that one season. But, if this limited demand became usual, capital and labor would shift to the other industries to which expenditure had shifted. Other modes of expenditure than twenty-five thousand-dollar balls are possible, as, for example, twenty-five thousand-dollar public libraries. Mr. Carnegie takes his dissipation in that form. That gives employment also; not less does investment in new houses, in new railroads, and in new factories. More employment of a particular kind of labor is caused in one case than in another, but not more employment of labor as a whole and on the average. [Sidenote: Results of a sudden change in standards of living] 3. _If all extreme luxury ceased, men of means would improve durable agents more or would give more or would take more leisure while producing less._ The question of luxury is most difficult when put thus: What would happen if everybody began suddenly to live on the simplest food and to confine himself to the bare necessities of life? A sudden change of this sort is almost unthinkable, but if it took place, all the factories and agents used for non-essentials would lose their value at once. A great industrial crisis would follow, as industry would have to adjust itself abruptly to an unprecedented standard of desires. What would happen if that standard continued would vary as human nature varies. There might follow increase of population, or a heightening of the efficiency of such agents as were of use, or, more probable than all else, a progressive lightening of labor, a use of the surplus of energy in study, rest, and recreation. It is, of course, illogical to suppose that with limited desires for the objective goods of the world there would continue undiminished efforts to produce goods and to save for future superfluities. In actual life changes of standard occur gradually. Economizing in material things by simpler living makes possible not only the increased efficiency of productive agents but the increased enjoyment of immaterial goods. [Sidenote: Luxury as an incentive to progress] 4. _The defenders of luxury claim that it is the great incentive to progress._ It is undoubtedly true that a dead level of conditions is unfavorable to the progress of society. There must be in society some motive for emulation and ambition after the bare necessities of life are provided. There is therefore much strength in the defense of luxury. Necessities, strictly understood, are things absolutely essential to life and health. No hard line can be drawn between necessities and comforts, between comforts and luxuries. The level rises; it is a trite and true saying that the luxuries of one age become the necessities of the next. The rise of the bath-tub in the nineteenth century is an epitome of the progress of civilization in that period. The free baths in our cities surpass the hopes of the wealthy of a century ago. Even the meaner motives of envy may have their social function. The lower social grades, emulous of the higher standard held before them, labor with greater energy. The successful and capable, not content with necessities, continue to give their efforts to production. The destruction of the motive of luxury before the development of a substitute in a higher social conscience, would be paralyzing to industry. Luxury in a moderate measure may be defended by the same arguments as those for private property. True as this view may be in many cases, in others it seems directly opposed to the facts. Let us look at the economico-moral questions involved from the side of the individual who is indulging in luxury, and from that of the society in which he lives. [Sidenote: Happiness and the simple life] 5. _As a question of consumption luxury involves for the individual both an economic and a moral problem._ The economic question is, Does luxury enhance the man's real income? Does a greater expenditure on himself give him a larger sum of gratification in life than a moderate expenditure would give? Ostentation has its penalties. Undue striving after effect defeats its own purpose. This is the cold fact of experience, not a speculative proposition. To get back to the fundamental principle: gratification results from a harmonious relation between man's nature and the world. Life loaded with too much luggage staggers under the burden. The tired faculties of the Sybarite cease at length to respond to natural pleasures. When the senses are robbed of their fineness, youth grows blasé, mature manhood is ennuied, life is empty. The praise of "the simple life" has lately been heard in a quarter whence such counsel does not usually come. In gay Paris, a wise pastor has made one of the most beautiful and rational pleas for plain and sincere living that society has heard since the time of the stoic philosophers. The word is needed. With the growth of incomes grows the strain to reach the self-imposed standards of frivolity. Insanity and suicide are on the increase. The stress of modern life makes men yearn for the simpler joys. Happiness dwells not outside of men; they must seek it within. [Sidenote: Luxury vs. social welfare] An economic failure, luxury is likewise in most cases a moral failure. Morality has to do with others; the social aspect of luxury is its effect on other people. The mere spending of a large income in selfish indulgence absorbs all the energies and interests of some men and women. Not only happiness in the narrow sense, but self-realization, is to such lives impossible. Those absorbed in display can give no due measure of thought to social obligations. A society made up of self-absorbed and self-centered individuals is a selfish society, foredoomed to decay. [Sidenote: Luxury generally condemned] 6. _The larger moral problem involved in luxury is connected with distribution or the justice of the income, rather than with consumption or the spending of the income._ The individual effects of luxury broaden thus into the larger social effects. Most of the enemies of luxury condemn all expenditure of wealth above a very moderate sum, declaring that it is "unjust" for one man to have much while others are in poverty. This communistic doctrine pervades the teaching of many moral teachers, pagan and Christian. In many ways a public opinion can be developed to disapprove and condemn ostentation. Frivolous display becomes bad taste. Flaunting riches meet the public frown. The spending of income for dress and display has never been successfully forbidden by law. The Middle Ages are full of futile sumptuary laws which sprang from the envy of the nobles for the wealthy merchants. The growth of good taste may do what formal law found impossible. [Sidenote: Increasing social uses of wealth] The use of wealth in these days is taking more social directions. It turns from dress toward education, art, music, and travel; then ceases to be applied merely to self and family, and benefits the community. Nowhere and never before has this movement gone so far as in America. Andrew Carnegie, with his gifts of millions annually to public libraries; Peter Cooper, founder of the People's Institute; Ezra Cornell, the patron and prophet of the modern type of higher education--are citizens of a kind better known in this country than in any other. [Sidenote: Justice of the large income] [Sidenote: Legal repression of luxury inadvisable] The immorality of luxury rests in most minds on the conviction that it is unjust that any one should have so large an income to use. The question of luxury leads back to the question of distribution: Has the man honestly gained his wealth? If so, he may spend it with good judgment or poor, with good taste or bad, but, so long as he does not injure others in the spending of it, there is much vagueness and confusion in the talk of "justice" or "injustice." Each must in large measure be his own judge of the wisdom of expenditure. Luxury is not always a question of wealth. Every person of moderate income has relatively superfluous and expensive tastes. One spends more for music than many a millionaire does; another more for books. How many college students' budgets could pass the censorship of Hetty Green, reputed to be the richest woman in America? If expenditures were regulated by the public, few persons would be within the law. But whatever the goods that are bought, if income is unjustly acquired, if its distribution is by rules that do not give the best possible approach to social service, there may well be talk of injustice. There is need of better standards of taste and judgment in expenditure, but not of sumptuary laws. If there is any legal change, it should be rather in the law of property. CHAPTER 41 REACTION OF CONSUMPTION ON PRODUCTION § I. REACTION UPON MATERIAL PRODUCTIVE AGENTS [Sidenote: Essential mark of the consumption of goods] 1. _Economic consumption is the enjoyment of the utilities which wealth is capable of affording._ All wealth looks toward consumption. To take away the prospect of the enjoyment of goods is to take away all their value. Consumption involves generally the using up of a thing. Food is consumed quickly, clothing more slowly, and houses wear out after many years. The using up is, in some cases, due to the forces of nature, and is not hastened by enjoyment. A house goes to ruin more rapidly if uninhabited than with a careful tenant; clothing is destroyed more quickly by moths than by wear. The use of many goods that give esthetic pleasures, as art, painting, sculpture, and the enjoyment of fine scenery or of beautiful building sites, does not destroy the things that afford the pleasure. The idea that all value originates in labor has led to false views on this question. The essential mark of consumption is the using of the income as it arises, not necessarily the using up of the material agents that afford it, though this frequently occurs as well. [Sidenote: Consumers' choice as influencing value] 2. _The kind of consumption affects the value of material agents._ Each buyer helps to determine the use of productive agents. The control of purchasing power means the potential control of industry to that degree. It was necessary in discussing the enterpriser to recognize that the buyer eventually dictates the direction of industry; the enterpriser seeks to produce that for which there is most demand. A change of taste affects the value of natural agents. An increase in the demand for meat affects the value of wheat and potatoes, and also the land used for producing them. A change in the national diet may be equivalent to the discovery or to the destruction of half a continent. If one chooses to drink wine instead of buying statuary, he increases the value of vineyards and decreases that of marble quarries: If one drinks beer, he bids for barley; if he eats candy, he may be offering a bounty for beets. Therefore, choosing vines or violets, pictures or pretzels, each with his nickel helps to determine what shall be produced. [Sidenote: Inventions influencing value] The distribution of wealth thus affects the value of agents. The wealthy spend relatively more for luxuries, the poor for food and other essentials. Where wealth and incomes are very nearly equally distributed, the demand of different families will be for much the same kinds of goods. If there were no rich men, the demand for vineyards producing fine wines would be less. The very best qualities of goods take on the highest prices when there is a small, but very wealthy, class of purchasers. Inventions often shift demand, and value follows. The invention of the bicycle with pneumatic tires, coincident with the adoption of electric traction for street cars, reduced the price of horses between 1890 and 1895. This doubtless was a factor in agricultural land values at that time. This change was sudden, extreme, and temporary, and there has since been a gradual adjustment and a return to the former values. [Sidenote: Consumers' choice as affecting productive forces] 3. _The production of the next period may be radically affected by the use now made of agents._ Some consumption takes the form of using up and reducing the stock of wealth. The demand for lumber causes the disappearance of the forests, whereas the demand for oranges stimulates the planting of orange trees. The reckless exploitation of natural resources leaves society poorer. Great herds of buffalo were slaughtered to get the hides, which were of comparatively slight value. Rich land has been exhausted to get a few harvests. War is a use of wealth for ends believed at the time to be necessary and believed to forward social welfare better in the long run than would dishonorable submission; but it causes misery and leaves industry prostrate. The forms taken by saving are affected by the choice of expenditure. In war the savings of individuals are given to the government and used for destructive purposes. The lender parts with his wealth and society uses it up. While the lender has a claim on the industry and on the remaining property of the community, society as a whole is the poorer. If the savings had taken the form of public buildings, libraries, railroads, and factories, the wealth and income of society as a whole would have been enhanced. [Sidenote: Consumers' choice as affecting wages] 4. _The kind of consumption affects the wages of the various classes of labor._ That an increase in the supply of a given grade of labor reduces its wages and encourages its use, and vice versa, is a truth that became familiar in the study of wages. An influence also is exerted from the side of goods upon the price of labor. A shift of demand from one kind of goods to another depresses the wage of the one kind of labor and raises that of the other. A low grade of labor that performs only simple tasks, and those but badly, is injured if demand shifts to better products. Back of the sweat-shop shirt is the problem of the inefficient worker. Progress takes place by the effort of labor to increase its efficiency and to move into higher paid callings, and at the same time by the desire of the purchaser to buy as good a quality as he can. [Sidenote: The consumer's responsibility] Every buyer then determines in some degree the direction of industry. The market is a democracy where every penny gives a right of vote. It is the thought of the society called "The Consumers' League" that through purchases, pressure may be brought to bear upon the employer to provide better conditions of work. The members of The Consumers' League refuse to buy goods not made under sanitary conditions. Undoubtedly there is here a great economic force which an enlightened public opinion, even without a formal association, can make in large measure effective. Every individual may organize a consumer's league, leaguing himself with the powers of righteousness. Will he read a yellow journal or a pink or a white one? A nickel or two will buy either. He has a dollar; will he go to the theater or buy ten dishes of ice-cream? He decides to buy a book, and more type and paper are made, and more printers are employed; he subscribes to foreign missions and Christian workers penetrate farther into Africa. Every purchase has far-reaching consequences. You may spend your monthly allowance as an agent of iniquity or of truth. You cannot escape a choice even by burying the money, for that is either a demand for gold or a gift to the issuer of paper currency. § II. REACTION UPON THE EFFICIENCY OF THE WORKERS [Sidenote: Instinctive choice as related to welfare] 1. _All consumption works some temporary change in the consumer, making him a more or less efficient producer._ Most consumption goods are used to gratify a wish of the moment. Many actions are governed by impulse rather than by reason; but in general this impulse is in harmony with the interests of efficiency. In primitive society instinct and appetite must generally have been safe guides. Food not merely appeased hunger and gratified the palate, but it gave strength. Sensations of cold, hunger, and thirst were developed by nature to stimulate men to do the things that helped them to survive. In primitive societies there are few chances to seek pleasures that are not favorable to efficiency. In the struggle for existence the more efficient tribes survive, and those that develop many abnormal tastes must perish. But the conditions of modern life are more complex, and temptations beset men on every side. Tastes are pampered and appetite is gratified at the expense of later welfare. [Sidenote: Choice of foods] 2. _The physical efficiency of the worker is conditioned on wise consumption._ Chemists and physiologists are telling now in accurate terms how the nutritive values of foods differ. Food values are not measured by the pleasure afforded the palate. The wide variety and greater choice now possible, even to the modest purse, make the chance of error much greater than in simpler conditions. This subject, already touched upon in the sections on the efficiency of labor, deserves further notice. From youth to age, the foolish choice of goods yields its harvest of ultimate misery. When babies are fed on crackers dipped in coffee, or, as among the Italian immigrants, on stale bread dipped in sour wine, there is a poor foundation laid for a vigorous manhood. Rich and poor cook too much for taste and too little for nutrition or digestion. Much cooking is still done in ways fit only for our grandfathers who had cast-iron stomachs and worked in the open air. Culinary methods have not been adapted as yet to a sedentary life. [Sidenote: Of drinks] Drinking tempts some men not only by taste, but by the appeal to sociability; to other coarser natures the joys of Bacchus offer the one hope of exhilaration. The pleasure from alcoholic liquor may at the moment outweigh the cost in money, but a diseased appetite forbids any reckoning of the vast psychic cost that follows. The coin paid for the drink is the beginning of the expense; misery, disgrace, degeneracy, and bestialty too often are the unreckoned items. [Sidenote: Of clothing] Clothing is primarily for ornament, secondly for physical comfort. That was the historical order, and it is the logical order in most minds to-day. How badly the two needs are harmonized! No wonder that the savage suffers in adopting civilized dress. Travelers describe the African potentate, attired in a high hat and a bracelet, striving to outshine his rival resplendent in full-dress coat and a palm-leaf fan. Civilization is making headway there; but the student of primitive peoples finds one of the important causes of their decay to be their bad judgment in adopting civilized dress, unsuited to their customs and climate. A mistake is made likewise by workers in physical tasks in imitating the dress of the wealthy and professional classes. The dress of the higher classes often is chosen because of its unsuitableness for an active worker. It serves thus to mark its wearer as one engaged in delicate tasks or as a person of leisure. Possibly, therefore, because of their strong social ambitions, the manual workers in America more than elsewhere adopt a costume that is not sensible or sanitary. [Sidenote: Reactions of enjoyment upon the intelligence] 3. _The intelligence of the worker is affected by the form of his enjoyments._ This does not refer to the use made of spare time for regular study in night schools, correspondence schools, vacation work, but to the use of time when seeking recreation. The choice of recreation reacts upon the nature of the man. Will he read a book or play billiards? In proper proportions both may be good, in excess both are evil. Liking realism, does he read Howells or the blood-curdling serial entitled "Piping the Mystery"? Does he devote his spare hours to the "Scientific American" or to the "Police Gazette"? At the moment there may be as much pleasure in one as in the other (and one might add, in Hibernian phrase, "Yes, and more too."). Does he enjoy music, the theater, or the cheaper attractions of Coney Island and the Bowery? Is his recreation permeated with a certain intellectual ambition? There may be just as much momentary joy in one choice as in another, and life is shaped by the direction of one's enjoyments. Much depends on the natural bent; some natures incline to the healthy as the plant grows toward the sun. With most characters much depends on the influences of neighborhood life; thus the boy's clubs and college settlements of the cities, the schools and playgrounds of the villages, are tending to surround child life with healthier conditions, that will mould it into better social habits. [Sidenote: Reaction upon the character] 4. _The form of the worker's expenditures affects his industrial virtues._ This is not a moral lecture; it is a look at the economic side of the subject. There are some moral qualities, however, that are closely connected with efficiency, while others are not. Some individuals are corrupt in private personal relations, but "square" in business dealings. But usually there is some connection between the two, and under modern conditions this is becoming closer. Fitness for daily tasks is affected by the daily thoughts of the worker. Sordid and foul thoughts, like an internal malady, sap the economic efficiency of the worker; clean, bright thoughts act as a tonic. Drink, gambling, fast living, unfit men for positions of trust, while many pastimes leave the moral nature cleaner and stronger. Few can live a double life--honorable, conscientious, and exact in one part of the day, and corrupt in another. Dr. Jekylls and Mr. Hydes are not often found in real life. The habitual train of thought in leisure hours possesses and controls the man throughout his work. It is said that "A man is what his work makes him," but it is equally true that a man's work tends to become what he is. A man fit for a higher kind of work rises to it in the usual order of things; but no matter how humble the task, it partakes of the worth and wholesomeness of its doer. § III. EFFECTS ON THE ABIDING WELFARE OF THE CONSUMER [Sidenote: Production vs. welfare] 1. _Man and his welfare are the end and aim of the economic process._ The starting point of industry is wants; the goal is welfare. Momentary gratification is only a way-station, not the journey's end. Too often, in economic reasoning, things are looked at from the employer's point of view. The older writers, such as Ricardo and Mill, were inclined to take what John B. Clark has called the "feed and work" view,--the view that the workman is merely an agent of production, a means to an end; that his food, the same as coal for an engine, is to be thought of rather as employer's cost than as consumer's gratification. But, in the broader view, the welfare of men as men is the subject most worthy of economic study. The workman's food is to gratify his hunger, primarily; not merely to make him a better working machine. This reverses the order of the older reasoning. The use made of the income is itself a kind of production--its last stage. Is the process, on the whole, worth while? This can only be judged by finding whether, on the whole, the welfare of man has been furthered. [Sidenote: The marginal application of income] 2. _An income yields the maximum gratification when it is apportioned among goods so that their marginal utilities, as nearly as possible, are equal._ Even a small income is income capable of many applications. The choice lies among many thousands of articles. Utility varies not only according to the kinds of good, but according to the varying quantities of each. Every moment, therefore, the conditions of a choice are changing. The best use of income forbids the purchase of an additional unit of any good unless it affords the highest gratification obtainable, at the moment, at an equal price. Various circumstances prevent the exact application of this rule. Expenditure is a matter of habit, in large measure, rather than a matter of judgment. The knowledge needed for a rational choice very often is lacking. Appetites change, making unwise the old purchases, yet men go on buying the same things in the same proportions simply because a readjustment that would give greater gratification requires thought. Finally, the best economic adjustment must conform to the abiding physical and moral welfare of the user, not to a temporary impulse; and such a choice is far more difficult than that of the temporary good. [Sidenote: Progress and the refinement of desires] 3. _Progress takes place where new wealth gratifies marginal wants as intense as those of the preceding period._ If the utility of every kind of goods decreased uniformly as wealth increased, desire would steadily decline in intensity. But old wants vary and new wants develop with prosperity. Desire grows by what it feeds on. Ambition passes on to other and higher peaks. The direction of the individual man's life thus is determined by the expenditure of his increasing income. Wealth makes possible a new adjustment of life, a new character, both in the individual and in the society. [Sidenote: Wealth a means to living] The thought that needs emphasis in this connection is that, while production and consumption are separable in thought and distinguishable in practice, they are not opposed in their ultimate purpose. The highest fruits of production are in the lessons of sacrifice and discipline, and in its opportunities for experience and self-expression. The best result of the consumption of wealth is not the gratification of appetite, but the strengthening of the spiritual forces within men. The world is to rise to a higher social stage not by banishing labor and by multiplying sensual enjoyments of the commoner sort. Wealth, even in an economic view, is not the end of life, but merely the means to its realization. [Sidenote: Variety and harmony in the choice of goods] 4. _Enjoyment is increased by a proper variety and harmony of goods._ As the old kinds of goods increase in amount and fall in value, there must be a substitution of new goods. An element added to the dress or to the diet heightens greatly the total gratification. The result is a unit. Think of a dinner without butter, or a cranberry-pie without sugar, or a dress-suit without a linen collar. Certain combinations are essential to the requirements of developed taste and present a problem of complementary goods. Combinations of complementary goods enhance the enjoyment; inharmonious combinations decrease it. That certain things "go together" is a fact that rests often in the nature of things. Complementary colors please the eye; well-seasoned dishes please the palate. Again, the harmony of goods is affected by the special nature of the occupation. A farmer with his out-of-door life can use tobacco with far less danger than the sedentary worker. A piano player cannot be a base-ball player: the one requires soft and supple hands, the other hard and callous ones. The young man must give up the piano or the game, or play both badly. The harmony may rest on a still more complex social adjustment. The loss to the man whose life is in the main on a higher plane is greater if he descends occasionally to a lower. A ditch-digger, looking at the question short-sightedly, may deem "a good drunk" a very desirable form of enjoyment. But a brain-worker, whose joy as well as efficiency depends on the clearness of his intellectual processes, must see that in his case the perils and the costs are much greater. [Sidenote: Unity of choice in happiness and in character] Wise consumption depends not alone on physical pleasures, but on the spiritual unity of the uses made of goods. Happiness and character are akin in the qualities of simplicity and unity. Happiness, so far as it depends on wealth, is a harmony of gratifications. Character is a harmony of actions, a group of complementary deeds. There can be no harmony, without a central, simple, guiding principle. The wise and moral use of goods and the economic use of them are therefore for the individual essentially the same. Life is a unity. The results of the choice of goods are reflected in the health, intelligence, happiness, morality, and progress of society. It is vain for the economist to ignore the ultimate relations between economic choice and morality; it is folly for the moralist to ignore the economic bases of right and wrong in human conduct. CHAPTER 42 DISTRIBUTION OF THE SOCIAL INCOME § I. THE NATURE OF PERSONAL DISTRIBUTION [Sidenote: Definition of personal distribution reviewed] 1. _Personal distribution, in economics, is the reasoned explanation of the ways in which income is divided among the members of the community._ Before noting more exactly the ways in which distribution can and does take place, it may be well to review briefly some definitions that have been given in other connections. Distribution is bound up in practice with production, but it can be thought of as a more or less distinct problem. Functional distribution is the attribution of value to agents or classes of producers, to land, machinery, and labor considered impersonally as groups of productive agents. Personal distribution is the actual apportioning of income to living persons. This theme now to be dealt with is the more important practically, for the abstract discussion of rent and interest is of use only as it helps to an understanding of this vital human problem. It is well to recall also the distinction between wealth income, money income, and psychic income. The first is the objective aspect, the last is the subjective aspect, of income; the second, money income, may be an expression, in money form, of either of the others, but commonly of the former. The money expression of psychic income can be only approximately attained. [Sidenote: Personal affection and distribution] 2. _The individual's income is determined by a number of forces, only part of which are primarily economic._ Many persons derive income directly neither from property nor from labor. They neither toil nor clip coupons, but they flourish in the favor of others--parent, husband, wife, friends, patrons. So long as the good-will continues these persons may be as well off as if they drew a salary or owned a bank. If a person in control of goods shares them with another, it is a matter that economists must recognize, but cannot well reduce to rules of value. It is not the task of economists to explain why the impulses of generosity arise, but only how they affect distribution. The economic problem of distribution really ends where owner or worker secures his income. Giving a part of it to some one else is essentially a form of consumption, and only secondarily a mode of distribution; it is the way chosen to spend the wealth income. [Sidenote: Complex source of psychic incomes] The psychic income of individuals, therefore, is often made up of many elements. Some parts are due to services performed by the person himself. When one combs his own hair he is adding to his income. Benjamin Franklin said it was better to teach a boy to shave himself than to give him a thousand dollars. Other goods are the uses and fruits of legally controlled wealth: chance finds, as gifts of value or lost and abandoned goods; goods assigned to one by authority; wealth inherited; illegal gains by robbery; goods secured on credit; gifts either of things or of services. The uses of this university are a gift forming a part, first, of the student's income, and, finally, of the social income. Such gifts can be traced back to large-hearted, public-spirited men like Ezra Cornell, but they must be looked upon as coming from some one. This list, incomplete as it is, suggests that the real income of most individuals has manifold sources. Let us undertake to examine and analyze the various methods in actual use in the distribution of income to the persons making up society. § II. METHODS OF PERSONAL DISTRIBUTION [Sidenote: Compulsory distribution; violence] 1. _Distribution is sometimes compulsory, by force or fraud._ This crude and primitive mode of distribution, the negation of personal liberty, never has been quite eliminated. In every country an unhappily large number of men from time to time break over into crime, from violence and highway robbery down to sneak-thieving, pocket-picking, and bunco games. Not more than ten per cent. of this criminal element is at any one time in prison. This method of personal distribution, not hinted at in most theories of distribution, determines a large part of the income of tens of thousands of men in this country and concerns the distribution of millions of dollars. These enemies of society appropriate whatever they can, and the law stops them if it is able. [Sidenote: Chattel slavery] Slavery is distribution by legalized force, but the force is not legalized by the consent of the victims. The evolution of the harsher slavery may be traced through various forms of milder serfdom. There is found an element of this in the freest existing societies; men unwilling are forced to do things. A patent example is the convict on a chain-gang, a slave to society as a penalty for his violation of its commands. But some radical reformers to-day claim that present society is wholly based on legalized force, and that the workingman is essentially a slave. Their ideal cannot be realized without dissolving social bonds and destroying civilization; yet the presence, even in our society, of this forced, unwilling submission on the part of some of its members cannot be ignored. [Sidenote: War indemnities] A similar example of forcible taking is seen in case of war. Savage tribes plunder and take captive their weaker neighbors. Conquering modern nations usually exact tribute from defeated enemies. Germany got a billion dollars from France, Japan a quarter of a billion from China. The terms of peace at the close of our great Civil War were the most liberal ever granted by conqueror to vanquished; and yet the federal pensions granted to Northern soldiers are a form of tribute, being paid by taxes falling alike upon the North and the South. In all these cases the distribution by force is unwillingly suffered. In none of them is it reducible to economic rules or capable of a strict economic explanation. [Sidenote: Charitable distribution within the family] 2. _Distribution may be charitable, that is, determined by considerations of benevolence and affection._ Charitable is here used in its original sense, as synonymous with love or affection. First to be mentioned is the love of parents, the root and type of all the forms of charity. The lack of economic equivalence in the relation of parent and child is complete in early years. The helpless infant gives nothing economic to the parent, the parent gives all to the child. Gradually, however, the balance is regained; as the years go on, not only does the child repay in affection but in many cases he repays in material ways. In the factory districts and on the farm the child in early years begins to reëstablish the balance, becomes a worker, and contributes as much as the cost of his support, and finally more. A student of modern English town life has traced the curve of poverty traversed by the average child of the poor, as the family moves, now below, again above, the level of minimum income required for physical efficiency. In the middle or propertied classes the children do not for many years take the burden from the parents, and it is doubtful whether in most cases the economic balance is ever reëstablished. It is not to the parents, but to the succeeding generation, that the debt is vicariously paid. [Sidenote: And in larger circles] Friendship widens the range of generosity and multiplies the mass of gifts. Broad sentiments of humanity lead to gifts outside the range of personal affection and personal interest, to the beggar on the street, to institutions devoted to charity. In New York state about twenty million dollars a year is given to charity, and in the country at large many times as much. In the year 1901 over one hundred million dollars was given to education in the United States by private donors; and that high mark will no doubt soon be passed. Gifts in cases of great disasters, as the Irish and Indian famines, the Chicago fire, the Galveston flood, the eruption of Mount Pelée, bespeak a widening generosity. Religion impels to the building of churches, to the support of priests, missions, and manifold religious undertakings. Charity in this connection is the expression of a sentiment that varies from the broadest and most general humanitarian sentiment to the most intense and ardent personal affection. [Sidenote: Authoritative distribution in the despotic state] 3. _Distribution may be by an authority willingly acknowledged._ The two preceding forms of distribution, force and love, shade off into this form. In them the ones from whom goods are taken or to whom they are given have no power to change the conditions; here is to be considered the case where the person bows willingly to the superior power and takes what that power accords him. There are few despotisms in which the government is not based on the wishes and average capacities of the governed. If the citizens as a body really desired and were deserving of better government, in most cases they could get it. Much is heard, for example, of despotism in Russia, and of the abject condition of the people; but travelers testify that while many in the educated student classes are filled with the greatest discontent, and the intelligent subject peoples, such as the Finns, detest their rulers, such sentiments are far from general throughout the empire. The power of the Czar could not exist for a single moment if the mass of the people did not look to him as the great father whom they venerate and love. If this is true, the despotism in Russia, though abhorrent to our ideals of freedom, is fitted to the aspirations of the mass of the people. So far as government determines income, the authority distributing income there, as elsewhere, is one willingly acknowledged. [Sidenote: In communities and families] In patriarchal tribes, in communal societies, in monastic and other religious orders distribution is by an accepted authority. Each person works at what he is commanded to do, and some one in authority (the patriarch, head of the community, the father of the monastic order) portions out the work and the reward. In the family this rule largely prevails, and even after the children have come to years of discretion they not infrequently accept, from habit or affection, the will of the parents, and give up their entire wages to receive back a portion. The method of charitable distribution while the child is young gradually changes to authoritative distribution after the child becomes a worker. The untrained and indocile youth, however, is made the subject of compulsory distribution. [Sidenote: In much governmental action] The collection and distribution of taxes is by public authority. No attempt is made to give back an exact equivalent to the tax-payer. The money is taken and spent by authority for the public good. This method is exemplified in the work of certain commissions appointed by law to fix rates or settle disputes, as boards of conciliation and arbitration and railway commissions. The courts sometimes find themselves obliged to enter this field, although they do so most unwillingly. They try to confine their efforts to interpreting the contracts men have voluntarily entered into, and they avoid, so far as possible, the making of contracts or the fixing of rates. [Sidenote: In various contests] In many cases, little thought of as economic distribution, the authoritative method is followed. Literary and oratorical contests are passed upon by a set of judges whose opinion of merit determines the award. It is a poor method, often resulting in injustice (as every defeated candidate will admit); but it is the only way practicable for deciding such contests. Yet there are literary and oratorical contests decided very differently. If a man advertises himself as an orator and charges fifty cents admission to his lecture, everyone who goes to hear the man votes that he is an orator; everyone having money but staying away votes that he is not of such value. The one is judgment by the authoritative, the other by the competitive, method. The essence of the method of distributing by authority is that one individual (or group of individuals) judges of the deserts or duties of others, decides what others must get or must pay, not what he himself is willing to pay. Authoritative distribution is necessary in many cases, but it is fraught with dangers. It is the essence of socialism that it would make this plan universal. 4. _Distribution of psychic income may be in part by the collective use of social wealth._ By collective use in the full sense is meant the continuing enjoyment at the same time by all caring to partake and without limit as to amount. [Sidenote: Distribution by collective enjoyment] Now it is evident that, because of difficulties that arise, not all things are capable of this kind of enjoyment. Free water for private use from public waterworks is wasted; free meals and clothing to school-children are open to still greater abuses. Men cannot thus collectively enjoy rare wines or good confectionery; they cannot partake without limit of a limited supply. But libraries and schools may practically be managed in this way. They require both certain qualifications and certain sacrifices on the part of the user. Collective enjoyment is most completely possible where the use of a permanent form of wealth, such as a park, can be made free to the public. All individuals may enjoy equal privileges, though general rules may limit the kind of use; for example: no one may be permitted to pull flowers or to walk on the grass, but all who make use of the park enjoy equal privileges. Henry van Dyke in one of his essays puts into the mouth of his boy the question, "Father, who owns the mountains?" and the answer is, He who can enjoy them. Every man without covetousness, as he stands on this hilltop, owns the mountains, the lake, and this beautiful valley. In some ways the amount of public enjoyment is decreasing, as by the growing density of population, by the loss of open spaces and commons for playgrounds, by the destruction or fencing in of natural scenery; but in other ways it is growing and must grow rapidly. The spirit of civic improvement spreads. The streets are better paved than formerly; there are more public buildings, art galleries, and noble monuments. Every cross-road in the land will some day have its fountain and its statue. The coöperation of the whole community gives to collective use many of the advantages of large production, and the maximum of enjoyment. [Sidenote: Distribution by custom and status] 5. _Distribution may be by status or set rules and customs._ Distribution by status fixes the shares of men independently of their effort and without their control. It is guided neither by their personal merit nor by the economic value of their services, but by the merits and acts of men not living. This method has prevailed and still prevails to a great extent, though in our society this is hardly realized. Feudal society was built on status. Men were born to certain privileges and positions; they inherited property which could neither be bought nor sold; they followed trades which could rarely be entered by any outside of favored families. Caste in India and in other Oriental countries regulates by status a large part of the life. In western countries to-day inheritance of property is the main legal form of status and it shades off into other forms of distribution. While in some cases inheritance may be looked upon as a gift to the heir, in other cases, elsewhere noted, it is partly earned by the heir who has helped to produce it. By public opinion and by prejudices, status is still maintained even where the law has formally abolished it, as is seen in modern race problems. [Sidenote: Competitive distribution the dominant form] 6. _Distribution is usually competitive in accordance with the value of the product._ This is the dominant form of distribution in modern society. It is the essentially economic form, as contrasted with the legal and personal forms just described, because it is impersonal and reducible to a rule of value. Distribution under competition is made not with reference to abstract ethical principles or to personal affection, but to the value of the product so far as it is honestly controlled. Monopoly, it may be noted, never has ceased to rest under the ban of Anglo-Saxon law, hence to exemplify compulsory, as opposed to competitive, distribution. A striking feature of the competitive method is its decentralization. Each helps to value the economic services of each. If one pays more for the services of the singer than for those of the cook, it is not because he would rather listen to the singing than to eat, but because by apportioning his income he can get the singing and the eating too. In the existing circumstances, the singer's services seem to him worth paying for, and he backs his opinion with his money. So each is measuring the services of all others, and all are valuing each. It is the democracy of valuation, while the method of authority is an oligarchy or monarchy. [Sidenote: Various ideals of distribution] 7. _The best distribution in practice must be sought in union and harmony of these various methods._ Various social reforms propose simply the extreme application of one kind to the exclusion of the others. There are two opposing views of competition: one, that it is the ideal to be sought; the other, that it is inherently bad, and therefore should be abolished. Extreme individualists, believing that everything would be settled for the best by free competition, wish to make it universal. They ignore the many cases where it does not, should not, and cannot exist. Socialists, ill content with the share secured by the less skilled laborer, say that the competitive plan is unsound at the core. They say that distribution should be not in proportion to value, but in proportion either to needs or to deserts (they are not agreed which), judged by a vague ethical standard. But this involves the principle of authority in its extremest form. It intrusts to some men the function of passing upon the economic merits or desires of all others. Yet that alone is not a conclusive argument against all use of authoritative distribution. In many practical cases the intrusting of power and authority to men to judge of the value of others cannot be avoided. Whatever is indispensable, whatever is the best possible, is, humanly speaking, just. Assessors, judges, jurors, must be employed. Interstate commerce commissioners determine whether rates are reasonable, boards of arbitration settle disputes, the strike commission adjudicates difficulties in the coal regions. Doubtless these methods will be increasingly used. [Sidenote: Need of a wise blending of methods] There is no other kind of distribution than those enumerated. The strongest contrast is between the competitive and the authoritative principles; the others are minor and modifying. None of them alone is sufficient; each has its merits and each has its defects; they must supplement each other. Actually they are employed in modern society side by side; each seems essential and best in some special application. But it does not follow that exactly the proper use is now made of each. No two generations have followed the same rule, and the proportions in which use has been made of them has constantly shifted. It must be recognized that the principle of diminishing utility applies to each method of distribution as it does to the productive processes. Each may be best under certain conditions and circumstances, but, extended in application, each reveals its weaknesses. In any productive process the best method depends upon the proper proportion and combination of elements. Progress toward the best possible distribution is to be sought in the wise adjustment of the various methods to human nature and to human needs. CHAPTER 43 SURVEY OF THE THEORY OF VALUE § I. REVIEW OF THE PLAN FOLLOWED [Sidenote: The cycle and order of economic study] 1. _The beginning and end of economic study is man._ Before leaving the more theoretical and abstracter part of the theory of value, it may be well, at the cost of some repetition, to restate and review the relations of the various parts of the argument. Intent on details of the theory of value the student is in danger of losing its broader perspective. The proposition with which this section opens was accepted as our axiomatic starting-point. It was not so in the older political economy; men too often were looked upon rather as a means to an end, namely, the creation of wealth. This proposition refers to all classes, not to a small group of men. The aim of economic study is democratic, being the welfare of all men. Economics does not purpose, however, to explain man's action with reference to all things. It asks and attempts to answer the question: "Why does man attach value to certain things and actions; why does he measure them in certain ratios as expressed in terms of each other; and why do these ratios change with changing conditions?" This purpose has determined the order of our study. Beginning with an analysis of the nature of wants, and of the mental process of valuing consumption goods, the circle of inquiry widened to the problem of valuing things whose relation to wants is more remote and indirect (though not less important). The problem of future uses, the major part of the theory of value, leads back to the question of the use man makes of things--a field claimed by the moralist, but one that cannot be neglected by the economist. Economics is not the whole science of social relations. It is a restricted part of the field. But it comes into relation with great practical questions that touch all sides of life. Thus economics broadens and unites with the general stream of sociology. In the pursuit of our study one comes back to the starting-point and cause of value--human wants and the use made of wealth to gratify them. The circle is completed. We have surveyed, rapidly and imperfectly it is true, the whole range of economic inquiry. [Sidenote: The unit in value problems] _2. The central point in economic study is the simplest problem of exchange value._ The first look at the economic world reveals so many things that have relation to wants, and relations so complex, that the mind is confused. The object of science is to simplify; it seeks unity in the midst of chaos. Relations exist between wants and things that certainly never can gratify them directly. Where is the simplest aspect of the problem to be found? Evidently in the exchange of consumption goods, for these are in closest touch with wants. Out of the complex of direct and indirect goods, those few which are at the moment gratifying wants must be somewhat abstractly, but logically, set apart and studied. In the simplest problem, the exchange of the most typical consumption goods, is the key to the larger problem of value. If one could follow it step by step into its complexer relations, he might hope to understand everything in economics. [Sidenote: Former or conventional conceptions of rent and interest] 3. _The problems of rent and of time-value are successive steps in the explanation of the exchange value of indirect agents._ The term rent has been so variously defined that no caution to the student as to its use can be deemed superfluous. Until recently economists sought to confine the term to the income from natural resources (or land). Rent, in their conception, was the income from one group of goods, physically distinguishable from another group of goods, called capital, which were supposed to yield interest. That is, rent and interest was each supposed to bear much the same relation to a particular set of durable agents; the difference between them was primarily in the agent that yielded them (though there were other complicating thoughts) rather than in the aspect of value they represented. [Sidenote: Rent and time-value as here used] Rent as defined in this volume has the much broader meaning of the usufruct of any material agent as contrasted with the use-bearer. Usufruct is a conception most intimately related to that of consumption goods, but is logically one step further removed from want. Time-value, as here considered, is a broader conception than that of contract interest, for it has to do with the all-pervading element of time in its influence on value. Some rents are logically, and in practical business as well, not measured over periods of time, but at the moment of their accrual. The measurement of time differences is mainly required in setting a valuation upon a more or less permanent use-bearer. This process, which is capitalization, has only recently been recognized to be the discounting of all the future uses to their present worth. While in its essence this is merely a problem in exchange value, it is the highest, subtlest, and most difficult of such problems. Its understanding presupposes rent, just as rent presupposes the analysis of wants and marginal utility. It is the outer zone of the value problem, carrying the thought of value years away (all but an eternity away) from present enjoyment. [Sidenote: Different stages in value] While both rent and time value are widened so that each applies in some manner to all durable agents, it is a grave error to conclude hastily that the intention is to make synonymous the old terms rent and interest. Rent and time-discount remain essentially different stages in the value problem. Actual concrete net _economic incomes_ as they arise _are always rents_. Interest never accrues in a concrete form except under the interest contract for a money loan (a contract income, not an economic income), and this evidently is a species of contract rent. Time-value is a phase of value connected logically with investment, or the calculation of future earning power; rents are both actual and expectative, or future, but as realized incomes they always express present earning power. Together, rent and capitalization embrace the whole problem of valuing durable material agents. [Sidenote: Wages and profits related] 4. _Wages and profits are of the same genus, the value of human services of different grades._ The attempt has been made in the foregoing treatment to show the unity between the problems of wages and profits, and to point out the difference between the conditions that surround them. Through the common characteristic, social utility, the employer's service can be compared with the most ordinary or the most artistic labor. Profits and wages, therefore, are simply different aspects of the same question. A common power, or principle, is found in all objects of value, a power to gratify human wants. In the variety of human services and in material goods must be sought this unity. The different kinds of services range from direct to most indirect goods. The commonest labor may serve welfare at the moment or may be embodied in a form to be used years later. In that light, wages seems a more complex problem than either rent or capitalization. But the moment the service embodies itself in a material good with future uses the general theory of capitalization applies to it. § II. RELATION OF VALUE THEORIES TO SOCIAL REFORMS [Sidenote: "Orthodox" political economy] 1. _The earlier theories of political economy implied a dismal view of the future of the masses._ The theory of value one holds is sure to affect his view of economic progress and of social reform. The theories from the middle of the eighteenth to the middle of the nineteenth centuries, however varied they were in other respects, nearly all gave a gloomy view of the condition of the laboring-men. The physiocratic school in France, the so-called "orthodox" economists in England (that is, the writers from about 1800 to 1850 that were in sympathy with the landholding or commercial classes), and the socialistic or laboring-class theorists, all inclined to this view. It was while this view prevailed that Carlyle characterized political economy by the term still sometimes heard--"the dismal science." The thinkers of that time started their study of value at wages, and assumed that population would always increase so fast as to force labor to a bare subsistence. The other shares (or the other classes of society) were supposed then to absorb all the surplus income. Economics to-day is not especially lugubrious, and its more cheerful note is due as well to its changed theory of value as to the evidence of advancing welfare among the masses. [Sidenote: The gloomy socialistic theory] 2. _The socialistic theory of value, akin to the other, holds that capitalists absorb all the benefits of progress._ The socialists (of the radical school) claim that their theory is merely the logical conclusion to be drawn from the old "orthodox" theory, stated in its extremest form. Usually, however, the orthodox theorists softened and modified greatly the statement of their harsher views. The socialists have not been willing to recognize any ameliorating conditions. They say: economic theory shows that under a competitive condition of society the laboring-man must be forever ground down in helpless misery; therefore the only hope of the laboring masses is to do away with competitive society and to substitute for it central, governmental control of all industry. They did not and do not attempt to distinguish carefully the part of production, due to brains and effort, from the part due to ownership of capital. The socialist theory is a plan for political agitation rather than a scientific theory of value. It was originated or elaborated by men such as Karl Marx, Frederick Engels, and Ferdinand Lasalle, as labor leaders and political agitators, who found a ready weapon in the bungling economic analysis of the time. The claim of a scientific basis for socialism has continued to be proudly made by their followers, but it has a tottering support in their defective theory of value. [Sidenote: George's single-tax theory] 3. _The single-tax theory of value is that ground-rent automatically absorbs all benefits of progress._ This is the most notable example of a plan of social reform growing out of an abstract theory of value. While the socialists first had their plan of social reform (or revolution), in whose support Marx's fanciful theory of value was invented, Henry George appears first to have got hold of a theory of value that suggested his plan of social reform. Studying the political economy of Ricardo and Mill, he accepted their ideas regarding the hopeless outlook of the laboring classes, and their conception of the theory of ground-rent with its false implication that landowners get all the surplus in society. George thus came to believe that, with private ownership in land, competition steadily robbed all but landlords, even the non-landholding capitalist, of any share in the benefits of progress. This theory of value is thought to explain all the poverty in the world. It calls, in the single-taxer's opinion, for a radical measure of reform, namely, the taking of all rent of land for public purposes as a common instead of an individual income. If the theory of value on which it is based were sound, the doctrine would have irresistible reasons in its favor; if it is false, most of the argument falls to the ground, though there may still be substantial reasons of a different nature for the exceptional treatment of ground-rents for purposes of taxation. [Sidenote: Recent hopeful theories of wages; Walker's] 4. _Recent theories of value assign to labor a more hopeful position._ A most optimistic theory of wages is "the residual claimant theory," presented by Francis A. Walker. His view was that the various shares of production, such as land-rent, the income from machinery, etc., and the enterpriser's profits, were fixed by forces independent of wages, and any increase in the product must therefore fall to the laborer as the residual claimant. This conclusion has the one merit of explaining somehow the rise in wages in the past century, but the fallacy of its method is too evident to call for exposure. Not to enter into the details of the method, it is enough to note that it involves the circular reasoning that land-rent is a surplus over cost of production, and is fixed regardless of wages, whereas the cost of production itself is made up of money wages. [Sidenote: Clark's wage theory] Another American economist, John B. Clark, is led by his theory of profits to a most hopeful conclusion as to the future of wages. Profits he considers to be essentially the reward for improvements in productive processes, which gradually accrue to the general benefit. As profits thus disappear, the average wage-earner is correspondingly uplifted, a conclusion quite as hopeful as that of Walker. In discussing profits above, dissent from the narrow conception of their source has been expressed. Some facts lend support to every one of these theories of social progress, but other facts refuse to be harmonized. The temptation to get a simple, dogmatic explanation of value should be resisted. When the interrelation of the factors is recognized there is little likelihood of concluding that some one of them will absorb all the benefits of progress. One is not driven to the extreme either of optimism or of pessimism. While the theory of value is not in itself a theory of society, it greatly influences social conclusions. Clear economic analysis is a condition to sound thinking on practical questions. § III. INTERRELATION OF ECONOMIC AGENTS [Sidenote: Organic nature of the productive process] 1. _The industrial process is a unity and the different agents bear an organic relation to each other._ The problem of value is not one of physical division; it is one of logical analysis, and this is not possible in isolation or without the competition of men. Production as now carried on is a social process; the determination of market price is a social process. The different agents are complementary goods, each necessary to the best use of the various other agents. The value of seed is not to be found apart from the use of the ground; or the value of the leather apart from the shoemaker or the thread he uses. When these things are brought together in society their value is found by the comparison and measurement of marginal utilities. Economic forces, like other classes of forces, act and react upon each other. Two bodies attract each other in space; two chemicals uniting are both transformed into a substance differing from either. The economic result of materials and men coöperating is something differing from either factor, yet dependent on both. [Sidenote: The conventional divisions of economics] 2. _The divisions of the older political economy are aspects of the general problem of value._ The divisions conventional in the text-books on political economy, namely, "production, exchange, distribution, and consumption," have not been observed in the plan of this work. It has not seemed possible to accept the view that each of these phases of the vital economic process could be discussed completely apart from the others. _Consumption_ must be studied at the beginning, as the basis of exchange value, and again at the end, when the circle of thought has returned to the use man makes of wealth; and it pervades the whole subject of value, for back of every price is the potential utility of the good. _Exchange_ is coextensive with the whole process of associated industry; for wherever there is a price, there is exchange. Subjective value outside a market forms a small, though not negligible, part of the problem for the student of to-day. _Production_ is implied in every exchange, as exchange is in all social production. They are, indeed, but different phases of the larger phenomenon, the economic process. Nor is _distribution_, considered in its impersonal or economic form, any other than the logical valuing of the shares of the factors in economic production. Impersonal distribution is coextensive with economic production. Whatever a good, logically considered, contributes to value in production, that is its share of the product. Personal distribution, it is true, brings in other great influences which have been partly considered, but which will be treated more fully in the division to follow, on the influence of the state in the distribution of income. [Sidenote: The broadest principle of value] 3. _The law of diminishing returns is the broadest principle of value._ The one character common to all goods is that their importance varies with their quantity in any given connection. This is true of direct goods whose power to gratify wants falls as the supply grows; it is true of indirect goods, whose technical importance diminishes as the quantity increases, and which when taken at any given cost can be applied, after a point, only with diminishing advantage. The gradual extension of the marginal principle from land used in agriculture to every conceivable economic agent is the most important development of the last century of economic theory. [Sidenote: Generality of the law of value] It being true that things are measured by the utility of the unit used last, logically considered, the least change in the combination alters the value of all the factors. Practical economic problems, therefore, are dynamic, not static. The view that the shares of the different factors are fixed by quite separate laws has not been accepted here. The law of rent is the same as the law of wages in its essential point and principle. It is a general law of value applied to a particular kind of want-gratifier. The law of substitution likewise is a general law, for within limits some substitution of factors is always possible along the margin. That being true, every movement of price creates its own resistance; substitutes will be found for materials, demand will decline, and a new equilibrium of price will be attained. [Sidenote: Mutual employment of the factors] [Sidenote: An ever changing problem] 4. _The factors and agents of production mutually furnish the field of employment for each other._ Each factor is dependent for its technical efficiency on the presence of the other factors. If labor is plentiful and machines are scarce, machines bear a high rent. In accordance with the law of diminishing returns, the last unit of labor in that case contributes little to the product, and labor gets low wages, while more is attributed to the machine. Each machine thus may be considered to offer a field for the employment of labor. If population increases and land remains fixed, the need for food raises the rental value of land. But if population increases slowly, and capital and science progress, the field for the employment of labor is enlarged; and if new lands are opened up or new resources are discovered beneath the surface of the land, the field for labor is still more enlarged and a greater share is attributed to labor. This changing character of the problem must be recognized; no share is foreordained in size. The pursuit of the analysis of value along the lines of marginal utility thus leads to conclusions far less mechanical, and, to the superficial student, less simple than were the doctrines prevailing in the older economics. But the conclusions are, let us hope, more exact and more applicable to the real world, enabling the student to arrive at juster views of the present interests and of the future welfare of society. DIVISION B--RELATION OF THE STATE TO INDUSTRY CHAPTER 44 FREE COMPETITION AND STATE ACTION § I. COMPETITION AND CUSTOM [Sidenote: Definition of economic freedom] 1. _Economic freedom exists when men's goods or their own services may be exchanged as they choose, without hindrance._ Competition is but another expression for economic freedom. Where men are _free_ to exchange their goods and to get the best price they can, and actually do so, they are said to compete. The action of men in the mass follows pretty regular lines, corresponding to certain abiding motives. If one man dictated all industry, a very fragmentary science of economics would be possible; but the mass of men act according to some rule and are free so to act. When men are free to bring their goods to a market and get the best price possible, a single market price results. When cost of production was believed to be the regulator of value, it was said that the law of value laid down was true "within the limit of free competition." Market price varied ceaselessly from cost of production, and whenever it did "the law of value" as then formulated was admittedly invalid or inapplicable. The law of monopoly price was supposed to be in marked contrast to the law of competitive prices. The law of prices, as followed in our study, stated in terms of marginal utility, is equally valid in competitive and in monopolistic conditions if there is merely one-sided, or buyers', competition. Two-sided competition is not the sole, though it is the usual condition, which the economist takes account of in reasoning on the problem of price. Anything that keeps men from exchanging what they have for the best price, interferes with competition. Some of these hindrances have been noted, others are now to be. [Sidenote: Economic freedom vs. equality of efficiency] 2. _Economic freedom does not mean equality of power or of efficiency._ It was said in discussing monopoly that it was not to be understood to be merely either scarcity or superiority. To speak of the class of laborers of ability above that of the average day laborer as having a monopoly is certainly a confusion of monopoly with the scarcity of efficiency. The term competition is not easy to define in practice; for it is not easy to see just what part of a man's inability to exchange is due to his own lack of efficiency, and what to things outside of himself which prevent him from exchanging his labor. But the thought is clear that free competition--economic freedom--is limited whenever men are hindered by any power outside themselves from using their economic power as they prefer. The limitations of competition, thus understood, are essentially social limitations, imposed by other men either unconsciously by custom, convention, tradition, or consciously by force or by laws. When, among Polynesian tribes, the custom of taboo prevailed, by which certain things were reserved to the rulers and were forbidden to the common man, there was a limitation on his economic freedom. Contrast such limits with those set by the penury of nature. The savage may like best to hunt, but if there is no game, he must fish; he may like best to make arrowheads, but in need of food he must dig roots. Economic action is limited by lack of knowledge and skill; the resources of nature lie unused under the feet of savages who are suffering from their lack. These are limitations not of economic freedom but of economic efficiency. [Sidenote: Limitation by custom in early society] 3. _In early society custom limits economic freedom in many ways._ The savage is not a man without law; he is bound in many ways to prescribed lines of conduct. Primitive custom usually takes on a religious sanction, and every member of the tribe is compelled to do as his fathers have done and as his neighbors are doing. He is not free to choose. Custom in some ways is favorable to the welfare of society, for it limits the power of masters and rulers, preserves the rights of individuals to common property, and is in the interest of the weak as well as of the strong. In an age of force if it were not for custom, he who had might on his side could take all. So in early society even economic relations were complex and yet almost fixed--changing only slowly from generation to generation. Every such social custom that limits the choice of men limits economic freedom. [Sidenote: Limitation by custom in the Middle Ages] 4. _Custom ruled a large share of the industrial life of the Middle Ages._ Political and economic interests were not clearly divided in the Middle Ages. Land was the all-important kind of wealth. Military and other public services were performed by the vassal, who thus at the same time paid his taxes and the rent of the land. The landlord was at once the ruler, the receiver of rents, and the collector of taxes. The rent, however, was not a competitive price, but consisted of the dues and services the forefathers had been accustomed to pay. This limited slavery, like all other slavery, was wasteful, as it did not give to the individual the strongest motive to increase the quantity and to improve the quality of his service. Trade became limited in almost every direction. Crafts and gilds arrogated to themselves the right of employment in their industries. No matter what talent the son of a peasant might show, he usually found it impossible and always found it difficult to follow the occupation of his choice. Privilege pervaded all the life of that time. In such conditions economic friction is great. Men are kept in trades below their ability, while others gain command of monopolistic and unearned returns. Yet through all the Middle Ages ran the forces of competition. The inefficiency of customary services was a constant invitation to competitors. Men were striving to break over the barriers of custom and prejudice. The strife for freedom was the vital economic force even of the Middle Ages. The industrial history of that time is largely the story of the struggle of the forces of competition against the bounds of custom. § II. ECONOMIC HARMONY THROUGH COMPETITION [Sidenote: Effect of modern forces on custom] 1. _The industrial events following the discovery of America strengthened the forces making for economic freedom._ Discoveries in the Western hemisphere opened up a wide field for the adventure and enterprise of Europe. Commerce is the strongest enemy of custom, and new opportunities gave a rude shock to the conservatism both of the manor and of the village. With the rapid growth of industry and manufactures, old methods broke down. In an open market custom declines; it flourishes best in sheltered places. Further, the movement of thought in the Reformation and the spirit of the time, expressing the principle of personal liberty, allowing the individual to follow his own opinions and take the consequences, were favorable to competition. Despite these facts the restraints of the national governments on trade continued great, in some respects increasing during the seventeenth and eighteenth centuries, in France, Holland, and England. The regulation before attempted by towns and villages was employed on a larger scale by national governments with their commercial systems. The colonies in America were used for the economic ends of the "mother countries" and for the selfish interests of the home merchants in Europe. The American Revolution was one of the bitter fruits of the English policy of trade restriction. [Sidenote: Adam Smith's influence] [Sidenote: The philosophy of natural law] 2. _Adam Smith's work advocating greater economic freedom had a profound influence upon public thought._ "The Wealth of Nations," the first great work on political economy, was published in the year 1776. That was the "psychological moment," as public thought was so prepared for it that it had its maximum possible influence. The year of the American Declaration of Independence gave the most striking object lesson on the evils of a selfish colonial policy that interfered on a grand scale with economic freedom. The old customs had become ill fitted to life, ill adapted to the rapid industrial changes that were going on. What was needed in many directions, both in politics and in industry, was negative action by the government, the repeal of the old laws, the overthrow of old abuses. The French Revolution, following a few years later, emphasized this thought in the political field. The philosophers of the time believed in a "natural law" in industry and politics. The reformers of the time wished to throw off the trammels of the past and to give men opportunity to exert themselves "naturally." In America the old abuses never had taken deep root, as the conditions of a new continent were not favorable to monopoly and privilege. Although the movement for the repeal of medieval laws has continued in Europe from 1776 till the present time, yet to-day custom is stronger in Europe than in America. Serfdom was not abolished until the nineteenth century in Austria and southeastern Europe, and not until a few years ago in Russia. Many economic and cultural forces furthered this movement, but the most powerful intellectual force in its favor was the work of Adam Smith. So strong an impression did Smith's book make, that in the minds of men "free trade" became almost identical in thought with political economy, whereas that was but the temporary economic problem of the eighteenth century. [Sidenote: The doctrine of the economic harmonies] 3. _The doctrine of the "economic harmonies" is the extremest form of belief in the virtues of competition._ Every truth in political philosophy finds some exaggerated expression. The main task of the student is to determine what shade of gray things are, rather than whether they are white or black. The belief in the benefits of competition and the virtues of economic freedom found expression in the doctrine of "the economic harmonies." This is the faith that if men are left entirely free to do as their interest dictates, the highest and best efficiency for all will follow; it is the belief that the economic interests of all men are in harmony. The most striking evidence in support of this thought is the stimulating effect of self-interest freely working in the field of competition. Each strives to do what will bring him the largest return, and the price others pay measures their estimate of the service. Each seeking his own interest is led to make himself more useful to others. Thus are men stimulated to sacrifice, to invention, to preparation; thus is zeal animated and are efforts sustained. [Sidenote: Good social effects of self-interest] Through self-interest the working force is distributed over the field of industry wherever it is most needed. The remarkable adjustment of industry to the needs of each neighborhood is brought about by individual motives, not by centralized authority. It is not mere chance that produces this harmony. Wherever consumers settle, stores are started and factories are built. Wherever work is to be done, men come in about the right number to do it. Skill is adjusted to needs by the delicate measurement of the market rate of wages. Competition gives a definite rule of price--certainly the only definite impersonal rule; some say the only just rule. The competitive price must be appealed to even in arbitration. It is the standard to which things tend constantly to adjust themselves in an open market. [Sidenote: Conflicting interests in the business world] 4. _Experience shows that the economic interests of men are only partly, not wholly, in harmony._ That there is a great measure of truth in the statements just made, all must admit; but their application is limited. They are partial truths, never to be ignored, but quite false if taken, without modification, as practical rules of conduct. There are three species of competition in every market: that between sellers, that between buyers, and that between sellers on the one hand and buyers on the other. It is to the interest of the buyers that the sellers shall be numerous, eager, and freely competing. It is to the interest of the seller that supply shall be small, that sellers shall be united, and that buyers shall compete sharply. If at any point free competition is hindered, even the disciple of economic harmony must expect a discordant result. But in reality competition is rarely quite complete on both sides, and when it is not, the weak suffer. Men do not start with fair and equal opportunities. All that they may be entitled to under competition may be so little that social sympathy seeks to better the result; hence poor relief, public and private. Society as a whole has an interest in the outcome of the individual's economic struggle. It cannot see men starving or driven into crime. But the argument need not be confined to such crude and extreme cases, for wherever economic interests are not in harmony and it is possible to further the social welfare, will not society be justified in acting? § III. SOCIAL LIMITING OF COMPETITION [Sidenote: Imperfections of economic freedom] 1. _Undoubted evils result from some forms of competition under the conditions actually existing._ Complete freedom must remain a somewhat abstract ideal, and actual conditions must be recognized. Entire freedom of choice means freedom to make mistakes, a privilege whose enjoyment society cannot always permit. The child should be raised to good citizenship, and entire freedom of choice makes that impossible or improbable. The freedom of choice of the insane, the feeble-minded, and the criminal, cannot be recognized. Even where competition is the ideal of sound adult humanity, it is not to be too suddenly or extremely applied. The inequality of faculties, the prevailing dishonesty, the mass of inherited abuses, cannot be either ignored or at once ended. The immigrant from Europe, plunged into the trying conditions of city life, suffers in health and in morals, and often becomes a burden upon society. One of many competitors may drive competition to an evil extreme. The "problem of the twentieth man" is presented when nineteen men desire to limit competition in ways not socially harmful, as by closing shops on Sunday or in the evening, and the one man refuses. The appeal to economic harmony often is the cry of "peace, peace, where there is no peace." The highest social result may be attained now by limiting, again by directing, in other cases possibly by fostering, competition. [Sidenote: Forces opposing competition] 2. _The main rivals of competition are custom, religion, morality, combination, and state action._ The first three of these were the strongest forces in the past and they are still operating; but combination and state action are more characteristic of the present. The influence of custom, of morality, and of religion on value, has been touched upon at several points in our study; that of combination has been recently and more fully discussed. But state action, one of the most important of all the limitations, has been reserved for the concluding portion of our work. [Sidenote: The state's part in directing competition] 3. _It is a function of the state to determine in part the ways in which men shall exert their powers._ This is not the sole function of the state, nor is its influence toward this end exclusive. The state puts limits to the physical rivalry of men. In the distant past no doubt physical rivalry between men was an agent of progress. The strong drove out the weak; physical contest developed more vigorous limbs, keener senses, and higher sagacity. To-day it is one of the principal functions of the state to suppress the physical contest between men. The citizen is surrounded with a network of rules and regulations of which he is hardly conscious. Most men easily avoid coming into contact with the police and feel no irksomeness in the control of the civil courts. The state regulates economic interests in many other ways; it controls the building of streets; it inspects the material and construction of houses; it forbids acts injurious to the public welfare; it regulates the issue of money; it determines the manner in which credit may be extended, the forms of taxation, and the direction which trade may legally take. The state has a part in shaping great industries of a public or semi-public nature, such as waterworks, railroads, and the postal system. [Sidenote: Aim and failings of state action] The state is as wise as the men who constitute it. Men make mistakes, therefore men collectively will make them. The state regulates and limits--now wisely, now foolishly; but its aim is to preserve the benefits of competition without its evils, to lift the competition to a higher plane, and, by determining the direction in which men shall put forth their efforts, to give a higher and truer economic freedom. CHAPTER 45 USE, COINAGE, AND VALUE OF MONEY § I. THE PRECIOUS METALS AS MONEY [Sidenote: Money defined and reviewed] 1. _Money we have defined as a material means of payment and medium of exchange, generally accepted and passing from hand to hand._ The origin and function of money were set forth in the study of capital. The subject must now be approached from a different side and with the two-fold purpose of seeing whether there is anything peculiar in the relation of money to the general problem of value, and what is the influence of the action of the state on the value of money. The definition of money implies several ideas. First, the words "generally accepted means of payment" imply that money, as something bearing the stamp of social approval, has a peculiar social character, is not an ordinary good. Second, the definition implies that money itself must be a thing having value, otherwise it could not serve as a medium of exchange. Exchange means the taking and giving of things of value. Money is, therefore, not merely an order for goods, as a card or paper requesting payment; it is itself a thing of value, though this value may be due solely to its possessing the money function. This point is one of the most difficult in the subject. Third, the definition implies that money is a material thing. The telegram when transferring an order for the payment of money, the spoken word, the promise to pay, etc., are not money. Fourth, it implies that money passes from hand to hand, is a thing that can be handled, and is or can be bodily transported. [Sidenote: Difficulty in applying the definition] The application of the definition is not always easy, for money shades off into other things that serve the same purpose and are related in nature. Even special students differ as to the border-line of the concept, but as to the general nature of money there is essential agreement. In many problems it appears to be at the same time like and unlike other things of value, and just wherein lies the difference often is difficult to determine. The use of money is of such social importance, and it touches so many practical interests, that it raises many questions of a political and ethical nature. There are perhaps more popular errors on this than on any other one subject in economics. Yet the general principles of money are as fully understood and as firmly established as any parts of economics. [Sidenote: Standard, or primary, money] [Sidenote: Gold-using countries] 2. _The precious metals, gold and silver, are the standard, or primary, moneys in the world to-day._ Primary, typical, standard money is the unit in which the value of the money of a country is expressed, no matter what its form is; the standard is a certain weight and fineness of a particular metal. Coins of this standard are called full, or real, money by some writers who deny the title of money to everything else. It has been shown before that there has been an evolution in the use of money. The more efficient forms, gold and silver, have competed with copper, iron, tin, cattle, salt, tobacco. In this contest silver had proved itself a few centuries ago to be the fittest medium of exchange, but in the last century gold has, among the leading nations, been displacing silver rapidly. In a higher degree than any other material, gold has the qualities of a good standard money in rich and industrially developed communities. The gold-using countries to-day are those of the western world. England for perhaps two centuries practically has had gold as its standard money; the United States since 1834 (except for the period of paper money from 1862 to 1879); France since about the year 1855, at which time she shifted from silver under the working of the bimetallic law; and Germany, then more backward industrially, since 1873. Australia and Japan have reached that result only within the last few years, and Italy, Russia, India, Mexico--even China and other Oriental countries--are striving to attain it. [Sidenote: Subordinate kinds of money] In all these countries other kinds of money are used side by side with gold and silver. The actual money consists of a wide and confusing variety: silver, nickel, copper, paper in various forms and issued by various authorities. But among all the kinds, either gold or silver is found standing preëminent and in a peculiar position. The difficulties of the money problem must be attacked at the point of standard money where it is nearest to ordinary value problems and is less complicated than when the various money substitutes are included. Most of the fallacies regarding money have arisen not about standard money, but about paper and light-weight silver. [Sidenote: Coinage defined] 3. _Coinage is the act of shaping and marking a piece of metal to be used as money so as to indicate its weight and fineness._ The precious metals can and do circulate as money without coinage. Any other mark equally plain and equally recognizable serves for many purposes just as well as the government stamp on the standard metal. The use of metals in antiquity was without coinage, by weight and test of fineness. In backward countries to-day most payments are made by weight. International payments are made by means of gold ingots that bear the mark of some well-known banking-house, and for that purpose gold bullion is money without the coiner's stamp. But for most uses government coinage has marked advantages. It is far more convenient for the average citizen to handle coins uniform in size and design than the diverse coins that would be put out by private enterprisers. [Sidenote: Technical features of coinage] An established rate of fineness insuring uniform quality is a great convenience. In the United States all gold and silver coins are nine tenths fine; in Great Britain, eleven twelfths. The established weight of the gold dollar in the United States is twenty-three and twenty-two hundredths grains of fine gold or twenty-five and eight tenths grains of standard gold. The limit of tolerance is the variation either above or below the standard weight or fineness that a coin is allowed to have when it leaves the mint. The par of exchange between standard coins of different countries is the expression of the ratio of fine gold in them. Thus the par of exchange between the American dollar and the English sovereign (the "pound") is four and eighty-six and two third hundredths, that is, four and eighty-six and two third hundredths dollars contain the same amount of gold as an English gold sovereign. The embossed design, milled or lettered edges, and other similar devices are merely to make the coins easily recognizable and difficult to counterfeit. [Sidenote: Seigniorage defined] 4. _Seigniorage is the right the ruler or state has to charge for coinage, or it is the charge made for coinage._ Coinage as a function of great importance politically as well as economically was early exercised by governments or rulers. The prince, king, or emperor stamped his own device or portrait upon the coin; hence the term seigniorage from seignior (meaning lord or ruler). The right to issue money came to be one of the most essential prerogatives of sovereignty. Coinage is rarely without charge, and often has been a source of revenue to the ruler. In the Middle Ages this right was frequently exercised by princes for their selfish advantage to the injury and unsettling of trade. [Sidenote: Free or gratuitous coinage] When no charge is made for coinage, the coinage is said to be gratuitous. Coinage is said to be free if the subject or citizen can take bullion to the mint whenever he pleases, paying the usual seigniorage. Coinage is limited if the government or ruler determines when coinage is to take place. Thus, coinage may be both free and gratuitous, when citizens are allowed to bring bullion whenever they please and have it converted into coins without charge or deduction. But coinage is free without being gratuitous when any citizen may bring metal to the mint, whenever he chooses, to be coined subject to the seigniorage charge. [Sidenote: Money value under free coinage] 5. _Where coinage is free and gratuitous the coin is worth the same as the bullion that is in it._ This evidently and necessarily must be near the truth if the citizens exercise their right. They will not long keep metal uncoined in their possession when it is worth more in the form of money, nor will they long keep money from the melting-pot when it is worth more as bullion. Yet there may be a slight disparity between the bullion and the money values before the metal is converted into coin or the coin melted down into metal. A motive for action must exist before either change will be made; but a thing cannot have considerably different values in two different uses at the same moment. [Sidenote: Adjustment of supply to value] There is here no special problem of value. The value of gold as bullion and money is fixed by marginal demand. The several uses of gold are constantly competing for it: its uses for rings, pens, ornaments, championship cups, photography, dentistry, delicate instruments, and as a circulating medium. If the metal becomes worth more in one use, its amount there is increased and correspondingly diminished in the others. The supply likewise is influenced by changes in price. Gold-mining is one among various industries to which men may apply their labor and capital. Some mines are superior, others average, others marginal which it barely pays to work. There is, therefore, a rise and fall of the margin of production with change in price and change in cost of production. If at a given moment, when it barely pays to work a mine, gold becomes worth less, that mine will go out of use. As gold rises, some mines that did not pay before, come into use. A similar variation has been noted in the case of marginal land, marginal factories, marginal forges, and marginal agents of every kind. [Sidenote: "What is a dollar?"] The question was once asked in Parliament, "What is a pound?" and a good question to ask in beginning the study of money is, "What is a dollar?" The answer, so far as it refers to the standard money, is: a dollar is a convenient name applied to twenty-three and twenty-two hundredths grains of fine gold or twenty-five and eight tenths grains of standard fineness. The exchange value of gold varies in different places and conditions, but the name remains the same. A dollar exchanges for more wheat in Dakota than in New York or for more iron in Pittsburg than in Oregon, yet it is sometimes asserted that the value is always the same because the name is always the same. The fallacy of this may be seen in the equivalent expression that twenty-three and twenty-two hundredths grains of gold have the same value always and under all circumstances. The problem of the bullion value of money metal, under gratuitous coinage, presents no special difficulties. The ordinary theory of value applies to it. The difficulties of the money question begin at the point where the money value is seen to diverge from, and depend on, something else than the value of the bullion. Yet in the principles just discussed are found a firm foundation for any further study of the question. § II. THE QUANTITY THEORY OF MONEY [Sidenote: The money use] 1. _The fundamental use that money serves is to apportion incomes of goods so as to make them yield the maximum gratification._ Money first increases utility by increasing the ease with which exchange takes place. Like any tool or agent, it is valued for what it does or helps to do. But further, it enhances the sum of enjoyments by the division of goods into proper quantities, making them available at the best time. It follows from the principle of diminishing utility that the particular time at which goods are available for wants has an essential bearing on their value. A hundred loaves of bread in the hands of a single individual would mold long before they could be consumed. Money enables men in society to acquire these hundred loaves in a series so that they can be used when most needed. Money is the most successful device man has ever discovered for distributing the supplies of a journey along its course, and the goods of daily need over a period of time. The use of money as a storehouse of value is merely an extreme case of keeping things for the future when they will have a greater gratifying power. [Sidenote: Concept of the money demand] [Sidenote: Variation in the average] The fact that money is essentially a valuable good kept on hand as the best possible provision against emergencies points to the essential nature of the money demand. Money is sought, in order to form a cash reserve, up to a point where the loss from keeping it balances the probable gain. The money use is subject to the law of diminishing utility; beyond a certain point its added convenience is purchased at too great cost. Every man may be thought of as having an average, or usual, money demand, which is that proportion of his income that gives him more utility retained in money form than if at once expended. A man with an income and expenditure of fifty dollars a month paid monthly has use ordinarily for no more than fifty dollars as his cash reserve. While under ordinary circumstances this is his maximum demand, various circumstances may diminish it. If his expenses are distributed in two equal parts (the one on pay-day, the other thirty days later) his average money demand is twenty-five dollars, not fifty dollars. If most of his purchasing is done at the beginning of the month, his average money demand may be perhaps ten dollars. Many a workman purchases on credit, spends his fifty dollars within an hour after he receives it, and goes without money for the rest of the month. The average demand of a community for money required as a reserve is affected by the methods of doing business. With a given method of use a reduction in the supply of money results in loss of time and waste of effort; an increase in the supply results in a lowering of its value relative to other things. In either case the equilibrium of the marginal utilities of income must be restored. The thought of an average, rational, money demand relative to money income is the fundamental requisite for clear thinking on the question of money, but to grasp this thought there is needed a certain power of scientific imagination lacking in some minds. [Sidenote: The quantity theory of money] 2. _The quantity theory of money is that, other things being equal, the value of money falls as its quantity increases, and vice versa._ This is an abstract statement of a concrete and difficult problem. The phrase "other things being equal" betokens the statement of a tendency where there are several unknown factors. In recent discussion the quantity theory of money has been questioned by some critics; yet it is held by most economists to be merely the general law of value as applied to money. There are three sets of facts to be brought into relationship with each other in the quantity theory: (1) amount of business or exchanges to be effected; (2) the methods by which this is done; (3) the amount of money available to do it. According to the quantity theory we must expect that when conditions (1) and (2) remain fixed, the value of money will vary inversely as its quantity. This conclusion follows from the conception of the money demand as the value of circulating medium that bears an average proportion to the value of goods exchanged. [Sidenote: Example of its application] Let us consider various conditions. When a number of men, by reason of increasing gold supplies, get larger stocks of money than they have had, the former proportion between their money incomes and their money is altered. In reducing their stock of money by buying goods they bid up the prices of goods until the total value of goods exchanged again bears the same ratio as before to the total value of money. Taking an extreme case: if twice as many dollars get into circulation in a community, either some few men must have several times as many dollars as before, while others have the same; or every man will have his due proportion, just twice as much as before. The latter, "other things being equal," must be the logical result after equilibrium has been restored. Is any other result thinkable? Now if prices of goods remained the same as before, there would be twice as great a value of money available to effect exchanges. There is no reason why each should tie up twice as large a proportion of his income in a supply of the medium of exchange. If, however, there is a concerted movement to spend the surplus money, there results a general bidding down of the exchange value of money, a general bidding up of prices of goods. At what point will this movement stop? The rational conclusion must be that "other things being equal" equilibrium will be reëstablished only when the ratio between the value of money and the price of goods becomes the same as before. The money being doubled, prices must be double, and likewise for any other change in quantity. [Sidenote: Objections made to the quantity theory] 3. _The quantity theory is misunderstood, and is criticized on the ground that the facts oppose it._ If but one kind of metal were used as money, and this were coined of uniform weight and fineness, the problem would be comparatively simple. But in fact gold and silver, full-weight and light-weight coins, circulate side by side. More mysterious still, the money in circulation is partly coin and partly paper. How can the quantity theory hold in these conditions? Several objections to the quantity theory are presented. It is said, first, that prices do not vary exactly with the per capita circulation of different countries at a given moment. The per capita circulation in Mexico may be five dollars and in the United States twenty-five dollars, while prices are much less than five times as great here as in Mexico. Secondly, it is said that prices do not vary directly with changes in the amount of money in a given country. There is now perhaps five times as much money per capita in the United States as fifty years ago and yet prices are not five times as high. Thirdly, it is said that credit methods change, and therefore that money does not fix prices. Fourthly, it is said that even if true of primary money the theory fails to apply to actual conditions with many forms of money in circulation side by side. Fifthly, it is said that there are too many unknown quantities to permit the rule to be used. [Sidenote: The objections examined] 4. _A reasonable interpretation of the quantity theory makes it a statement of the effect of a change in a single factor._ The objections to the quantity theory assume that it is a statement of what occurs under all conditions, instead of what it is, an index to the working of one condition at a time. The foregoing objections need but to be further analyzed to show that in each of them it is not merely the quantity of money, but a number of other factors that differ in each of the propositions. We may note briefly in turn the defects in the arguments of the preceding paragraph. [Sidenote: Not a per capita rule] First, the quantity theory does not remotely imply that prices in different countries differ at a given moment according to the per capita money. In the case of the United States and Mexico not only the amount of exchange per capita but the method of exchange, and the rapidity of the circulation of money differ quite as much, doubtless, as does the per capita circulation. The quantity theory would lead any fairly careful student to a conclusion the exact opposite of that which its critics have twisted from it. [Sidenote: Recognizes the growth of trade] Second, the quantity theory does not imply that during a period of years when a country is changing in a multitude of ways, as in population, methods of industry, modes of exchange and transportation, and in wealth and income, the prices will vary directly either as the absolute or per capita amount of money does. In the light of the quantity theory the inquirer must be led to just the opposite of the ridiculous conclusion imputed to it. [Sidenote: Recognizes use of credit] Third, the theory does not overlook the effect of an increased use of credit, for it fully implies that any such a change, by economizing the use of money, would enable the same amount of money to support a higher scale of prices. [Sidenote: Not confined to primary money] Fourth, the theory does not overlook the variety of forms, and is not true merely of primary money. However great this variety, the money demand of individuals and of communities still represents a pretty definite ratio of the value of exchanges effected. If the primary money alone were doubled in quantity, while the various forms of substitute money (smaller coins, bank-notes, government notes, etc.) remained unchanged, the quantity of money as a whole would not be doubled, and according to the theory, prices would not be expected to double. Indeed, in such a case, the method of exchange would be very greatly altered, and the case is fully covered by the statement of the theory. [Sidenote: Is a practical rule] Fifth, despite the number of changing factors affecting the methods of exchange, the method of business, etc., the quantity theory is a rule usable at any moment. These various factors change slowly, and the quantity theory answers the question, What change occurs in prices as a result of an increase or decrease of the money in a given community at a given moment? Like the law of gravitation, the law of projectiles, and the statement of the chemical reaction to be expected when adding some substance to a given compound, the theory must be interpreted with practical limitations. When the quantity theory is thus stated and understood, its negation is unthinkable, as is evidenced by the involuntary use made of it constantly by every one of its few critics in explaining the simplest monetary phenomena. [Sidenote: Practical application of the quantity theory] [Sidenote: Recent price changes] 5. _The quantity theory makes intelligible the great and rapid changes in price that have followed sudden changes in the money supply._ Inductive demonstration of broadly stated economic principles is difficult, but in no other economic problem is laboratory experiment so nearly possible as in that of money. Many inflations and contractions of the circulating medium have occurred, now in a single country, again in the entire world, and the local or general results have served to exemplify richly the working of the quantity principle. With the scanty yield of silver- and gold-mines in the Middle Ages, prices were low. After the discovery of America, especially in the sixteenth century, quantities of silver flowed into Europe. The great rise of prices that occurred was explained by the keenest thinkers of that day along the essential lines of the quantity theory, though there were many monetary fallacies current at the time. The experience in England during the Napoleonic wars, when the money of England was inflated and prices rose above those of the Continent, led to the modern formulation of the theory by Ricardo and others. The discovery of gold in California and Australia, in 1848-50, increased the gold supply marvelously, and gold prices rose throughout the world. Between 1870 and 1890 the production of gold fell off greatly while its use as money increased and prices fell. A great increase of gold production has occurred in the period since 1890. In part the rising prices from 1897 to 1902 are explicable as the periodic upswing of confidence and credit, but in part doubtless they are due to the stimulus of increasing gold supplies. These are but a few of many instances in monetary history which, taken together, make an argument of probability in favor of the quantity theory so strong as to constitute practically its inductive proof. CHAPTER 46 TOKEN COINAGE AND GOVERNMENT PAPER MONEY § I. LIGHT-WEIGHT COINS [Sidenote: Seigniorage and the value of coins] [Sidenote: Saturation point for coinage] 1. _When the number of coins issued is limited properly, a seigniorage charge does not reduce their money value; they are worth more as money than as bullion._ The coinage thus far considered has been that of full-weight coins without seigniorage. The question now is, What is the effect of a seigniorage charge on the value of the coin as compared with the bullion that is in it? This is one of the most difficult phases of monetary theory. Two values must be thought of: one the value of the coin as money, the other the value of the bullion in it. When coinage is free and gratuitous, these two values are the same. How can they ever be different? The answer to the question is found in the theory of monopoly value. If the supply of coin is limited by the sole agency of issue, the value can be kept above the cost of production (_i.e._, in this case the bullion value), the seigniorage being the profit of the government. The limit within which the coinage must be kept is the number of coins that would circulate freely if they were made full weight without a seigniorage charge. This is the "saturation point" of the money demand of the country; it is a certain number of pieces of full-weight metal. If more than that amount gets into circulation it becomes worth less as money than as bullion, and it is melted or exported. [Sidenote: Example of seigniorage value in coins] If this full supply of money at a given moment is 100,000 pieces or dollars, a seigniorage charge of ten per cent. could be made if the number of pieces were not increased above 100,000. The government alone having the right of coinage, the need of money would give the circulating medium a monopoly value. The value of the money would rise until the coin would buy one ninth more bullion than was in it, but if there were any further rise the citizens would begin to take coins to the mint. After the ten per cent. charge was taken out they would receive a coin which, though containing one tenth less bullion, would be worth very nearly the same as the metal taken to the mint. No considerable depreciation could take place unless the volume of business fell off so that less money was needed than at the old standard. In that case there would be no outlet for the excess of coins until they fell to their bullion value, _i.e._, till they lost the entire value of the seigniorage, the monopoly element in them. Melting or exporting them before that point was reached would cause the loss of whatever element of seigniorage value they contained. [Sidenote: Example of excess and depreciation of coins] Assuming that the volume of business, or sum of exchanges, remains unchanged, let us consider what will result if the government begins to issue "on its own account." The number of coins might be increased until at the bullion price the total money value were equal to the original 100,000 full-weight coins, at which point exportation would take place. There being nine tenths as much precious metal as before, it would require ten ninths as many pieces, or 111,111 pieces, to have as great a value as the 100,000 had before. At this point there is no further profit to the government in issuing coins of that weight. To make a further profit it must again reduce the amount of pure metal in the coin. [Sidenote: Medieval examples of depreciation] This is essentially what occurred often throughout the Middle Ages. A ruler debased the quality or reduced the weight of money, but for a time the new coin, having the same money use, circulated as freely as the old coin. If, as so often happened, the ruler yielded to the temptation to issue more in order to get the profit, the older, heavier coins at once began to go abroad or into the melting-pot. Then occurred a fall in value, mystifying alike to the prince and the people. The reason is now perfectly plain: the number of pieces issued had not been kept within the proper limits, and the coins went down to their bullion value. [Sidenote: Difficulties with full-weight subsidiary coins] 2. _Subsidiary coins of lighter weight than the standard, if properly limited, will remain in circulation at par._ Money to serve all of its purposes must be of different denominations. The amount required of each denomination is determined by the volume of exchanges for which each is most convenient. Each kind of money, as the penny, nickel, dime, has its own peculiar demand and its saturation point. For the smaller denominations the standard metal is not suitable. A gold dollar cannot well be cut into twenty or a hundred pieces. Thus copper, nickel, silver remain in restricted use. When these are issued at their bullion value, difficulties arise; not only are they too heavy, but as they vary in bullion value, some of them become worth more as bullion than as coin, and suddenly disappear from circulation. [Sidenote: Adoption of light-weight minor coins] [Sidenote: Theory of light-weight coins] This happened often throughout the Middle Ages and until the nineteenth century. Gold and silver generally were coined at a ratio of weight corresponding exactly to their market ratio at a given moment, and every time the market conditions varied, one kind of the money went out of circulation, and the country was left either without the larger gold coins, or without subsidiary coin, or "small change." At length the plan was hit upon of issuing a limited number of subsidiary coins of less than full bullion value, that is, as "token coins." By this plan there is given to the minor coins a value greater than that of the bullion in them. The small profit made by the government on every penny, nickel, or dime issued, is a seigniorage charge. These minor coins, in somewhat confusing variety, circulate side by side with full-weight money, their value depending on the monopoly principle. The result of a large issue of any one denomination would be a lowering of its value. In practice their issue is determined by the needs of business and by the requests of citizens for small coins in exchange for standard money. One needing "change" gets it at the bank; when the bank finds its supply falling short it gets more from the government mints. As business increased in 1898, the demand for nickels, dimes, and quarters became unprecedented, and the mints worked night and day to supply them. [Sidenote: Gresham's law] 3. _Gresham's law of the circulation of coins of different bullion value is: bad money drives out good money._ This so-called "law" was stated in these circumstances: England had two kinds of metal money, silver and gold, which were coined at a fixed ratio in weight; and as the market value of the bullion changed, the new full-weight coins of the metal rising in value went out of circulation. The coining of the cheaper metal caused the melting or exporting of the one becoming dearer, and for those purposes the coins containing the most bullion were picked. Likewise full-weight coins disappear whenever money of less bullion value (either because containing more alloy, or because made of a cheaper metal or of paper) is poured into the circulation in large quantities. [Sidenote: Proper interpretation of Gresham's law] Gresham's law needs some explanation, for it is frequently misunderstood. "Bad" money means money that has not the bullion value equal to its money value, money that is either debased in quality or light in weight. But not every piece of bad money will drive out every piece of good money. If that were so, a single bad penny would drive out of circulation all the gold. The law applies only under certain conditions. The "good" will leave the country only if the total amount of money in circulation is in excess of what would be needed if all were of full weight or best quality. Paradoxically speaking, if there is not too much of the bad money, it is just as good as the good money. The good money may not leave the country. It may be hoarded, or be picked out by banks and savings-institutions to retain as their reserve, or it may be melted for use in the arts. Gresham's "law" is thus a practical precept: keep the amount of token or light-weight coin limited to the field of its peculiar use, or it will cause the other forms, the fuller weight money, to leave for a better market. That better market may be the melting-pot or it may be a foreign country. § II. PAPER MONEY EXPERIMENTS [Sidenote: Nature of paper money] [Sidenote: The legal-tender quality] 1. _Government paper money may be defined as money for which a seigniorage of one hundred per cent. is charged._ The order in the study of the money question is from seigniorage to paper money, because paper money embodies the principle of seigniorage in its extremest form. The issue of paper money grew out of the practice of debasing metal. The gain of seigniorage from paper money is greater and is just as easily secured. Government paper money is sometimes called "political money," in contrast with money whose value rests on the value of its material. In this sense, however, all coins containing an element of seigniorage, or monopoly value, are to that degree "political" money. The typical paper money is irredeemable, that is, it cannot be turned into bullion money on demand. It was simply put into circulation with the legal-tender quality. The "legal-tender" quality is the declaration of the government that the paper money must be accepted by citizens as a legal discharge for debts due them. The object of this is to compel people to use it as money whether they will or not. The purpose of the government in thus employing its power over the circulating medium is usually to profit, that is, to secure the value of the seigniorage for public purposes. Paper money differs from bank-notes in that it does not depend for its redemption on the credit of the issuer. It differs from bonds in that its value is not based on the interest it yields, but solely on its money uses. The issue of paper money may save the government the payment of interest on an equal amount of bonds. The promise to receive paper money in payment for taxes or for public lands, may help to maintain the value of the notes by reducing their quantity, but nothing short of prompt exchange for standard coins makes them truly redeemable. [Sidenote: Examples of paper money in the eighteenth century] 2. _The most notable examples of paper money in the eighteenth century were the American colonial currencies, the continental notes, and the French assignats._ In all the American colonies before the Revolution notes or bills of credit were issued which were in most cases legal tender. Without exception they were issued in large amounts and without exception they depreciated. Parliament forbade the issues, but to no effect. The continental notes were issued by the Continental Congress in the first year of the war (1775), and for the next five years. The object at first was to anticipate taxes, and it was expected that the states would redeem and destroy the notes, but this was not done. The notes passed at par for a time, but depreciated rapidly as their number increased. The country had less than $10,000,000 of coin before the war, and when, in 1780, over $200,000,000 of notes were in circulation they were completely discredited; hence the phrase "not worth a continental." Specie quickly came back into use. A few years later the leaders of the French Revolution, failing to learn the lesson of the American experience, issued, on the security of land, notes called assignats in such enormous quantities that they became worth no more than the paper on which they were printed. In a figurative sense they may be said to have fallen to their "bullion" value. [Sidenote: More recent examples of paper money] 3. _Notable examples of paper money in the nineteenth century were the English bank-notes in the years 1797-1820, and the American greenbacks, 1862-79._ There have been many other examples. During the Franco-Prussian War, France, through the medium of its great state bank, issued notes which only slightly depreciated. At the present time many countries--Russia, Austria, Portugal, Italy, all the South American republics--have depreciated paper currencies. But the English bank restriction of 1797-1820 is notable because it gave rise to the controversy which did most to develop the modern theory of the subject. The Bank of England was forbidden to redeem its notes in coin because the government wished to borrow all the coin the bank had. The result was the issue of a large amount of bank money not subject to the ordinary rule of redemption on demand. It was virtually government paper money. The notes depreciated and drove gold out of circulation, and not until 1820 was there a return to specie payments. [Sidenote: The greenbacks] The United States under the constitution did not try paper money till 1862 when paper notes (called greenbacks, because of the color of ink with which the reverse side was printed) were issued as a war measure to the amount of about $450,000,000. Other interest-bearing notes were issued with legal-tender quality and circulated as money to some extent. Greenbacks depreciated in terms of gold, and gold rose in price until, in June, 1864, it sold at two hundred and eighty a hundred. Fourteen years elapsed after the war before these notes rose to par, in terms of gold. [Sidenote: Evil effects of political money] 4. _Paper-money issues usually have had injurious effects on general industry._ The purpose of the issue of paper money is generally to relieve the financial necessities of the government. It is a costly expedient, resorted to only in desperate extremities. A result usually unintended is the derangement of business and of the existing distribution of incomes. The rapid and unpredictable changes in prices give opportunity for speculative profits, but most legitimate business is injured. This incidental effect on debts and industry becomes the main motive of some citizens in advocating the issue. It is peculiarly liable to be the subject of political intrigue and of popular misunderstanding. § III. THEORIES OF POLITICAL MONEY [Sidenote: Commodity-money theory] 1. _The commodity-money theorists declare that government is powerless to influence value, or to impart value to paper by law._ There are two extreme views regarding the nature of paper money, and a third which endeavors to find the truth between these two. First is that of the commodity-money theorists, or the cost-of-production theorists, who will not admit that there is any other basis for the value of money than the cost of the material that is in it. Money made of paper, on a printing press, has a cost almost negligibly small, and, therefore, they say it can have no value. The fact that it does circulate, and is treated as if it had value, is explained by the commodity theorists as follows: While the paper note is a mere promise to pay, with no value in itself, it is accepted because of the hope of its redemption, just as is any private note. Depreciation in this view is due to loss of confidence; the rise toward par measures the hope of repayment. Such a view overlooks the feature in which paper money differs from ordinary credit paper. The value of one's promise to pay depends on his reputation and his resources; the resources constitute the basis of value. Bonds have value because they yield interest and are payable at a definite time in standard money. But paper money, lacking this basis for its value, has another basis in its money use, in its power to buy goods. The money demand in connection with the monopoly power of government over the money supply, furnishes a satisfactory logical explanation of the value of paper money. [Sidenote: Fiat-money theory] 2. _The fiat-money advocates assert that government has unlimited power to maintain the value of paper money by conferring upon it the legal-tender quality._ The meaning of fiat is "let there be," and the fiat-money advocates believe that the government has but to say, "let it be money," to invest paper with value. The typical fiat advocates in the United States were the "Greenbackers," those voters who wished to retain the paper money issued in the Civil War, and to increase its amount greatly. They saw in paper money an unlimited source of income to the government. They proposed the payment of the national debt, the support of the government without taxes, and the loan of unlimited money without interest to citizens. All might live in luxury if the extreme fiat-money theorists could realize their dream. There are still some survivors of this faith in the power of the government fiat. The depreciation that has taken place in every case where government notes have been issued, they declare to be due to a too mild enforcement of the law of legal tender. To them the fact that paper money may circulate for a time at par appears a reason why it always should. They do not admit that there is a saturation point in the use of money, and that its use is still further limited by the fear of larger issues. They do not see that the ultimate basis of the value of paper money is economic,--is in its money use, not in the fiat of the government. [Sidenote: Theoretical possibility of a good paper money] 3. _A sound theory of paper money makes it a special case of monopoly value._ It has been seen that the power of almost every monopoly over price is relative, not absolute. As the power of a great private corporation over the price of its product is limited, so is that of the government over the value of political money. The money use is the source of value to the paper notes. Business conditions remaining unchanged, the limit of possible issue without depreciation is the number of units in circulation before the paper money was issued, the saturation point of full-weight and full-value coins. Because governments generally have not stopped at that point, paper money has depreciated. Popular error and selfish interests force legislation beyond the reasonable limit. In a few cases only have there been public integrity and courage enough to retrace the steps before great harm resulted. It is principally this lack of control that prevents paper money from being a good circulating medium. [Sidenote: Influence of law on value] It is sometimes said that government cannot affect value in any way, but it can do so in many ways. Certainly one of the most remarkable is by the use of its monopoly power over the medium of exchange, whereby it can, under certain conditions, cause a piece of paper to have the value of a piece of gold. Thereby at the same time it affects the interests of nearly every member of society, raising or lowering the value of many kinds of property, and of many incomes. CHAPTER 47 THE STANDARD OF DEFERRED PAYMENTS § I. FUNCTION OF THE STANDARD [Sidenote: Definition of the standard] 1. _The standard of deferred payments is the thing of value in which, by the law or by contract, the amount of a debt is expressed._ A credit transaction is a lengthened exchange; one party fulfils his part of the contract, the other party promises to give an equivalent at a later date. The equivalent may be in any kind of goods; for example, in barter one may part with a horse on the promise of a cow to be received later; or a small horse on the promise of a large one; or a flock of sheep on the promise of its return at the end of the year with a part of the increase of the flock. A simple standard in which to express the debt is the thing borrowed, as horse, sheep, wheat, house, etc. This involves the use of the renting contract. Again, the thing to which the value of debts is referred may be a thing quite different from the goods borrowed, and with the growth of the money economy and the use of the interest contract, money comes more and more to be used as the standard. The parties express the debt in terms of the standard unit established by law. [Sidenote: Increasing use of the interest contract] 2. _The importance of the standard of deferred payments increases with the use of money and with the amount of outstanding debts._ Until the use of money develops, the use of credit is difficult and limited; it becomes easy when the value of all things is expressed in terms of a common circulating medium. If all business were done for cash there would be no great interests affected when a change in the value of money occurred. Every dollar would change in value in the hands of the holder, but there the effect would cease. But the volume of outstanding debts expressed in terms of money now exceeds many fold the total value of the circulating medium. The value of all these debts changes in the same proportion as does that of the standard unit of money; when this is cheapened either by law or as a result of increasing supplies, a creditor to whom a thousand dollars are due loses the same as if he had a thousand metal dollars locked up in a strong chest. [Sidenote: Great effects of money changes] Outstanding contract debts may be roughly divided into three classes: short-time loans, running less than a year; medium-time, running from one to five years; long-time, running over five years. Fluctuations are rarely rapid and great enough to affect appreciably the debtors and creditors in the case of short-time loans. The results are greater in the case of long-time loans, such as national, state, and city debts, bonds of corporations, mortgages given by farmers on their land or by owners of city real estate. A multitude of interests are affected by a change in the value of money. When, as in the years 1873-96, money gains in purchasing power (prices fall) receivers of fixed incomes are gainers. When, as in the years 1896-1903, the value of money falls, the revenues from educational and charitable endowments, the salaries of public officials, and all fixed incomes, lose purchasing power. In a capitalistic age, therefore, almost every individual is affected in some way by a change in the value of money. In most cases the change escapes recognition; people do not trace out the relation that an industrial change bears to their own interests. In a few notable cases, however, the change has been revolutionary as in the period following the discovery of America, when the feudal dues had come to be expressed in terms of money instead of labor services. In modern times, the mass of debts being greater than ever before, such changes as those following the discovery of gold in California or the decrease in gold production between 1873 and 1890 have the gravest economic results. [Sidenote: Merits of gold and of silver as standards] 3. _The best standards of deferred payments available--the precious metals, gold and silver--are still imperfect._ The good that is most convenient as a standard of deferred payments is the one used as money. Gold to-day is constantly expressing the value of all other things. Borrowers prefer to make loans in the form of the general medium of exchange. From the usage of speaking of all things in terms of money, the false idea arises that the value of other things changes, but that the value of gold is always the same. Money is no such a fixed objective standard as a foot-rule or a pound weight. The value of gold rests on the estimates made by men, and is constantly changing according to conditions. A fixed objective standard of value is not possible of attainment. The value of the precious metals is stable as compared with most things. The current new supply is comparatively regular. For generations at a time there may be no radical changes in the output of gold and silver. For centuries there was no change in the methods of extraction. Recent inventions, however, have considerably altered these conditions. The nature of the use of gold and silver, likewise, is such as to make the demand for them, under ordinary conditions, most stable. The precious metals are but slowly worn out; only a portion of the annual output is used in the arts; there is, therefore, a large reservoir into which flows steadily a small stream; the existing stock is twenty or thirty times the annual output. Yet the value of the standard metals is never quite stable, and sometimes several influences combine, as in the last century, to affect their value greatly and suddenly. [Sidenote: Various standards suggested] [Sidenote: Enjoyment] [Sidenote: Sacrifice] [Sidenote: Labor] [Sidenote: Tabular standard] 4. _Various ideals for a standard of deferred payments have been suggested--as return of equal enjoyment, of equal sacrifice, social expediency; and various standards--as labor, commodities, and the tabular standard._ The ideal standard of deferred payments is one that will insure justice between borrower and lender. Different views have been taken as to what constitutes justice in this matter. The suggestion is attractive that the sum when returned should represent the same amount of enjoyment as it did when it was borrowed. Such a standard is impossible of realization in any general way, for men's circumstances are constantly changing. To insure even to the average man the same amount of enjoyment is only roughly possible. The same goods do not afford the same enjoyment when conditions have changed. Another suggestion is that the goods returned should represent the same sacrifice as those loaned. Here again the difficulty is in the lack of an objective standard. Whose sacrifice? That of the lender, who may be rich, or that of the borrower, who may be poor? Some have supposed the conditions of equal sacrifice were met by the labor standard, according to which the sum returned should purchase the same number of days of labor as when borrowed. But what kind of labor is to be taken, that of the lender or that of the borrower, or that of some one else? Labor is of many different qualities, which can be exactly compared only through their objective value in terms of some one good. The ideal of equal enjoyment has been supposed to be realized by the tabular standard, which consists of a number of leading commodities in fixed proportions. The money returned is to be enough to purchase the same goods at the expiration as at the making of the loan, and thus may be a larger or smaller sum than was borrowed. While this does not, as is sometimes claimed, insure equality of enjoyment, it averages the fluctuations of many goods, and thus prevents great extremes. This standard has been favored by notable monetary authorities, but the difficulties of its practical application are prohibitive. It must be recognized that any possible concrete standard of deferred payments will sometimes work hardship to individuals. The best average results for justice and social welfare will be secured by measuring debts in goods that change least often, least rapidly, and in the least unpredictable manner. Gold thus far has proved itself worthy to serve as the standard. § II. INTERNATIONAL BIMETALLISM [Sidenote: Examples of price fluctuations] 1. _The fall of prices in 1873 and the following years meant a great change in the standard of deferred payments._ The monetary changes following the discovery of America were due to the inflow to Europe of great quantities of silver taken by force from the native American rulers, and from the rich mines. Silver, at that time throughout Europe the main standard of deferred payments, was thus greatly lowered in value. This change lightened all outstanding obligations, lowered the money rents of the peasants, and the customary dues of labor wherever they had come to be expressed in money form. By the third quarter of the nineteenth century gold had become in Europe and America the main standard, though silver still served as such in some countries. The output of gold in 1849-57 caused the greatest money inflation that has occurred since the sixteenth century, favoring in a similar manner the debtor classes. The substitution of gold for silver by some countries at that time, by making a great additional market for gold, helped in some degree to check the fall in its value. [Sidenote: The recent great fall of prices] The decline in the output of gold was a change of the opposite character, causing a fall of prices and increasing the burden of debts. From 1873 to 1896 there was almost constant decline of the prosperity of the agricultural classes, due in part to this money influence, but in part to influences which cannot be dwelt upon here, as they had nothing to do with the money question. There was complaint, agitation, and demand for relief on the part of many interests in France, Germany, England, and the United States. [Sidenote: Bitmetallism defined] 2. _Bimetallism, the use of two metals as standard moneys, was the remedy proposed._ Bimetallism is legally complete when both metals are admitted to the mints for free coinage at an established ratio of weight; it is halting or limping when one of the metals is not freely coined. Bimetallism may be legally authorized, but not actually working. As soon as the legal ratio varies appreciably from the market value, only one of the metals will in fact be brought to the mint. National bimetallism is confined to a single country, as that in the United States before the Civil War, or in France before 1867. International bimetallism is an agreement among several nations to use two metals on the same terms, the only case in history being that of the Latin Union, which included France, Italy, Switzerland, and other countries. The discussion of international bimetallism in recent years has been on the proposal to make a much larger league of states than the Latin Union, embracing all the leading countries. [Sidenote: Object of international bimetallism] 3. _The main object of international bimetallism is to prevent the fluctuations of the standard of deferred payments._ Commercial dealings between gold-using and silver-using countries are of great magnitude, and the use of different standards leads to many difficulties. Fluctuations in the ratio of the two metals occasion much uncertainty and loss to individual traders. The rise in the value of gold meant an increase in the burden of the public debts of silver-using countries which collect their revenues in silver, but which must pay their debts, principal and interest, in gold. [Sidenote: Its theory] The theory of bimetallism is that the government can act on the value of the two metals through the principle of substitution. The metal tending to become dearer will not be coined, the other will be coined in greater quantities. The degree of influence that can thus be exerted on the value of the two metals depends on the size of the reservoir of the metal that is rising in price. When it all leaves circulation, the law on the statute book permitting it to be coined becomes a mere sounding phrase. In such a case there is bimetallism _de jure_, but monometallism _de facto_. The greater the league of states, the greater is the likelihood that the scheme will work. The economic theory of bimetallism was recognized by a majority of economists to be abstractly sound, but the political difficulties in the way of international agreements are great, and have proved to be insurmountable. § III. THE FREE-SILVER MOVEMENT IN AMERICA [Sidenote: Conditions leading to the demand for free-silver] 1. _International bimetallism, despite many efforts, failed of adoption._ This brief proposition sums up the history of the movement, from 1878 to 1892, to form a league of states and an agreement for international bimetallism. International conferences were held, and taken part in by the leading financiers of the world. France at first favored the policy, and the United States was always foremost in advocating it, while England in the main was opposed. Some of the advocates of bimetallism argued that the fall of prices was due not alone to economic forces, but also to a money conspiracy which had influenced legislation to introduce and continue the gold standard. This, of course, was strenuously denied. It is true that the commercial classes found gold the form of money most suitable to large business, and no doubt class interests entered into the question in some measure. The difficulties of the debtor class in America were peculiarly great, owing to the inflated paper currency, from 1862 to 1879, which had made our conditions quite abnormal. In the period of speculation following the Civil War an enormous mass of debts had been accumulated. The hopes of thousands of tillers of the soil suffering from a fall in prices, and of the great debtor class, clamoring for relief, were centered upon the success of this movement. Banking and other large business interests in general opposed it. [Sidenote: Purpose of the free-silver movement] 2. _The plan of the free-silver advocates was to legalize national bimetallism in the United States at a ratio between gold and silver very different from the market ratio._ Gold had become, long before 1860, the real standard of our money system, and after 1873 it was the only metal admitted to free coinage. Silver, little by little, was losing purchasing power in terms of gold, until from being worth, in 1873, one sixteenth as much, ounce for ounce, it became, in 1896, worth but one thirtieth as much as gold. It must be recognized that the power of silver to purchase general commodities fell much less than the change in its ratio to gold would indicate, gold having risen in terms of most other goods as well as of silver. Nevertheless, the proposal to open the mints to free silver at sixteen to one in the year 1896 meant a sudden and marked cheapening of money. The prime purpose was to lighten the burden of debts by making the standard of deferred payments cheaper. It was at first a debtors' movement, but to succeed it had to enlist the support of other large classes of voters. And thus, by force of political necessity, but doubtless in large part naïvely, it developed into the more sweeping theory that wages, welfare, and prosperity called for a larger supply of money independently of the effect on debts. [Sidenote: The free-silver theory] In its extreme form the free-silver plan was a fiat scheme, for some of its supporters believed that by the mere passage of the law the two metals could be made to bear to each other any ratio desired. But its most intelligent and high-minded advocates (who were moved to its support by a sincere sympathy and concern for the distressed agriculturalists) recognized fully that the force of the law was limited by economic conditions. The extreme opponents of the plan, ignoring the evident fact that the adoption of a metal as a standard money is one of the most essential of the market conditions, denied that government action could in any way affect the value. Most of the arguments presented on either side in the political campaigns showed little evidence of a sound theory of money. The victory of the gold standard in 1896 and 1900, it would seem, was due more to the well-founded fear that a sudden change of the money standard would cause a panic, than to a thorough understanding of the question. [Sidenote: Increase of gold production] 3. _The increase of the gold output has for the present checked the fall of prices._ Before 1890, for a number of years, the average output of gold was shrinking till it reached a scant hundred million per year. At the same time, nations which recently had gone over to the gold standard were striving to secure large stocks for their banks and general circulation, and those great reservoirs, as a result, became better filled than they ever were before. After the opening of new gold-yielding territory in South Africa and in the Klondike, the annual output of gold became greater than it had ever been, being at the opening of the South African War in 1898 nearly three times that of ten years earlier. The present methods of extracting gold resemble those of fifty years ago as civilized industry resembles that of savages. Intricate machinery has taken the place of crude tools, chemical processes have been introduced, and the principal product results from the regular and certain working of deep mines rather than from chance surface discoveries. Great masses of debris can now be reworked profitably. In many parts of the world are enormous deposits of low-grade ores, before useless, that can be worked economically by present methods. For a generation at least the world's supply of gold is likely to continue larger than ever before in history, and prices in terms of gold probably will rise. [Sidenote: Rising prices the temporary solution] Though no change seems likely or possible at the present time, the free-silver advocate has been justified by events against those gold advocates who said that the amount of money has nothing to do with prices. Prices have gone up as gold has increased. The free-silver advocates have gotten what they wanted through a change for which neither party can claim the credit. Yet the present situation is unsatisfactory and undeveloped. A standard better than a single metal, more stable than a single commodity, is desirable if it can be found. The money question must arise again and in a new form before many years. The difficulty has not been finally settled; it is but postponed. CHAPTER 48 BANKING AND CREDIT § I. FUNCTIONS OF A BANK [Sidenote: The essential banking function] 1. _A bank is a business whose income is derived chiefly from lending its promises to pay._ Banks have passed through many changes in the past three centuries. Originating on the street corner for exchange of money, they have evolved into great institutions of many forms, and performing many functions. The definition seems paradoxical, but it expresses what in modern thought is the essential feature of a bank: the lending of its credit. A reserve of money is needed by the man of business. But for the banks each man would have to keep his reserve in his own till. Except the small sum needed for current uses, a bank can keep this reserve more economically than individuals can. It has the advantages of large production similar to those of a large factory. The process of lending credit is called deposit and discount. It grew out of the deposit of actual money for safe keeping and the loaning to borrowers by the method of discounting their notes. The term now has a somewhat different meaning, for a merchant may obtain a deposit to-day without putting any money in the bank. He gets the bank to discount his notes or collateral security, and to enter the sum to his credit as a deposit. He becomes a depositor by borrowing, not by lending to the bank. The sum is under the borrower's control; he can check it out when he wishes; but he usually keeps a certain balance to his credit. The bank's gain is larger than ordinary interest, because it gets a discount on the large sums left in its possession. The bank increases its funds also by attracting deposits from those who do not care to borrow. [Sidenote: Other functions usually performed] 2. _Functions not essential to banking are ordinary money-lending, money-changing, exchange to distant points, safe deposit, and issue of bank-notes._ Banks often lend in the ordinary way, allowing borrowers to draw the money out at once, but this is not the business they prefer. Many individuals and corporations, such as endowed charities, colleges, insurance companies, lend great sums of their own money without thereby partaking in any degree of the peculiar character of banking. Money-changing (the exchange of coins of different countries) is done by banks, but likewise by many other agencies not sharing the essential banking character. Foreign and domestic exchange is the issue and cashing of "drafts" for money payments between distant places. Most banks are well fitted to perform this function, but some banks do not undertake it, and it is performed also by some business houses that are not banks. Safe deposit is the keeping of things to be returned in identical form, as silverware, notes, and papers. By banks in small towns this is sometimes done freely, sometimes for a slight charge; but in large cities safe-deposit vaults are generally quite unconnected with banks. Even bank-note issue is not essential to banking; most banks in the United States issue no notes, others issue very few. All these functions may be united under one management, but the essential banking function is deposit and discount. [Sidenote: Sources of the income of banks] 3. _The income of banks is derived from discounts, interest on their own capital, charges for exchange and collection, rents on investments, and profit from the loan of their bank-notes._ The income of banks is drawn from different sources, according to the size of the community, and the nature of the banks. While in the villages and smaller cities they perform a number of functions, in the larger cities they usually specialize in a far greater degree. Like every other enterprise, a bank must start in business with some paid-up capital as a guarantee of credit. Further security is afforded by the limited liability of shareholders for losses, in proportion to their capital stock. The same amount of money could be loaned with less trouble and more cheaply without starting a bank, but used as a banking capital a part of it can be loaned while still serving to attract money deposits. Charges to smaller customers for exchange are a source of income to some banks, but in many cases this service is freely performed for regular customers and becomes a considerable expense. Banks make few investments in real estate or other physical property; it is, in fact, their duty to keep out of ordinary enterprises, but they are forced sometimes to take for unpaid debts things that have been held as security. Profits on bank-notes have at times been the main, possibly the sole, motive for starting banks; but that is not the case to-day when the right of issue is so strictly limited. [Sidenote: Productive services of banks] 4. _Banks are productive economic agents performing important industrial services._ False ideas have long been entertained about the magic power of banks to produce wealth from nothing. To many, banks are a mystery much like paper money. Their opponents sometimes have pictured them as vampires fattening on the blood of industry. That they have shown abuses at times is undeniable, but, like other economic agents, they are to be judged by their net efficiency. The bank is a tool performing services similar to those of money. For some purposes money is an awkward and costly agent in comparison with banks. For remitting payments from New York to San Francisco or Hong Kong, money is a medieval device. Money can more safely be entrusted to a bank than to a strong chest in one's own house. The man who refused to make use of banks in this day would isolate himself economically, and would soon find himself out of any but the smallest business. He could no more get along without the banks than without the post, the telegraph, or the telephone. [Sidenote: The bank as a labor-saving device] The gathering of loanable funds by the banks, making them available at once, reduces hoarding, makes money move more rapidly, and creates a central market between borrowers and lenders for the sale of credit. While not creating more physical wealth directly, it adds to the efficiency of wealth; it oils the bearings of the industrial machine. To abolish banks would be to destroy labor-saving machinery. Banks perform incidentally a further service in developing better business methods in the community. In supplying credit to active business, banks are constantly passing judgment on the collateral security presented to them and on the solidity of the enterprises that are seeking support. They enforce promptness and exactitude in business dealings. Because in their public nature banks are very analogous to money, they have always been looked upon as properly subject to more supervision than most private business, and government has always exercised a considerable measure of control over them, sometimes for good, sometimes for evil. § II. TYPICAL BANK MONEY [Sidenote: Nature of typical bank money] 1. _Typical bank money consists of notes issued by banks on the credit of their general assets, without special regulation by law._ As no two leading countries have quite the same system of bank-notes, the subject is a difficult one. It is well to begin, therefore, with a clear conception of typical bank money, unregulated by government. Such a form of note is one with which few now living in the United States have had any experience, as the present national bank-notes differ in essential ways from the typical form. Typical bank-notes are notes issued by banks as a means of loaning their credit. The borrower, instead of receiving a credit balance at the bank subject to check, gets notes which he hands on to other men. These notes are returned for redemption to the issuing bank as soon as any one wishes specie in their stead. The limit of the issue of such notes is the need of the community for that form of money, and if they are promptly redeemed in gold on demand, they never can exceed that amount. A holder of a note (in the absence of special regulations) has the same claim on the bank that a depositor has. As it is to the interest of the bank to keep in circulation as many notes as possible, there is a temptation to abuse the power of note-issue, to which many banks yielded in the period of so-called "wild-cat banking" before the Civil War. [Sidenote: Bank-notes viewed as commercial paper] 2. _Bank-notes are viewed by some as a form of commercial credit._ Typical bank-notes are not legal tender, and every one has the legal right to take or refuse them as he pleases. It is therefore said by some that bank-note issue is of no special concern to the state, that it can safely be left to individual self-interest. It is said that if one has little faith in a note, he may refuse to accept it. But in reality every one is compelled to take the money that is current. The average citizen cannot know the credit of distant banks, and thus has not the same power of judging wisely in taking bank-notes that he has in making deposits in the bank of his own neighborhood. Between bank-notes and ordinary promissory notes, there are other differences of a nature pretty generally recognized. Bank-notes pass without endorsement and thus depend on the credit of the bank alone, not like checks, on the credit of the person from whom received. They yield no interest to the holder. They are intended to be used as money and are so used. Thus they come near to paper money in their nature, and the banks are near to exercising the right of coinage. [Sidenote: Bank-notes viewed as a form of political money] 3. _By others, bank-notes are considered to be almost identical with government paper money._ Some opponents of bank-note issue declare that it is a usurpation of the prerogatives of government, and that no power but the sovereign state should issue money. While many in America to-day hold this view, the comparison probably is false and strained. Typical bank-notes, unlike inconvertible paper money, depend for their value on the credit of the bank, not on their legal-tender quality and on political power. They must be redeemed on penalty of insolvency; government notes need not be, and yet will circulate at par if properly limited. While these differences mark off government paper money pretty sharply from typical bank-notes, it must be noted that in many cases actual bank-note issues have been far from this typical form. In the days of "wild-cat" banking, bank-notes were issued in excess and fell below par, yet the man in a Western community who dared to ask the bank to redeem the notes in specie was not only frowned on by the bank, but condemned by the public, which felt that business was endangered by such a demand. Redemption on demand would have required a reduction of the amount of money in circulation and would have caused a fall in prices. Inflation of the bank currency went on with results almost identical with those following an excessive issue of government paper money. Not formal law but public opinion made such bank-notes essentially political money. [Sidenote: Policy of public regulation of bank-notes] 4. _The public nature of bank money has led to many forms of public regulation of their issues._ Bank-notes thus stand midway in their economic nature between political money and private notes, sharing something of the character of each. An extreme analogy in either direction is misleading. It is of great social importance that the circulating medium should be reliable. The least possible amount of the citizen's energy and thought should be required to decide whether the money is good or bad. Nevertheless, those opposed to state interference in industry declare that if the citizen is not left to look out for himself, the growth of stupidity will be encouraged; and they say that it is no more essential for the state to guarantee the quality of bank-notes than the quality of woolen cloth or of sugar. Few, however, take so extreme a view, and it is generally held that it is a function of the state to insure in a greater or less degree the quality of the money in circulation. The actual bank-notes of the leading countries are thus of many varieties. The Canadian notes are the most nearly typical bank-notes issued to-day; those of Germany come next, while those of the United States have little of the typical character. § III. BANKS OF THE UNITED STATES TO-DAY [Sidenote: Forms of banks in the United States] 1. _The three forms of banks in the United States are private, state, and national._ Any one with a little capital may become a private banker. There are "curbstone brokers" in almost every town, and some of the great financial houses are private banks. But the law will not allow this to go very far. Some states will not allow a man to put up a sign announcing himself as a banker unless he complies with certain banking laws. In some states even private banks are subjected to the same inspection as the state banks and are required to make the same reports to the state officials. State banks are those organized under special state banking laws. They are usually subject to inspection by state-bank commissioners, must make regular reports, and are required to comply with certain rules as to their reserves, rates, and investments. In any case they do not issue bank-notes, because the national laws now tax the notes of state banks so heavily that they are unprofitable. National banks, the largest and most important portion of our banking system, were authorized by law in 1863, during the Civil War. They are subject to stricter regulation and inspection than are other banks, and that regulation is perhaps an advantage to them, as it strengthens public confidence in their stability. Yet this regulation does not insure the depositors against loss, as some national banks fail every year. They may be organized with twenty-five thousand dollars capital in towns of less than three thousand population, with fifty thousand dollars in towns of less than six thousand, with one hundred thousand dollars in cities of less than fifty thousand, and with two hundred thousand dollars in larger cities. [Sidenote: Nature of our national bank-notes] 2. _Our national bank-notes have no essential mark of typical bank money._ The one marked peculiarity of the national banks of the United States as compared with those of other countries, is their mode of note-issue. They perform all the other functions of banks, essential and unessential, and perform them well, but the issue of bank-notes is optional with them, and some of them do not issue any bank-notes. The legal condition to their issue is that bonds of the United States shall be purchased in the open market and deposited with the treasurer of the United States. Until 1900, notes might be issued only to ninety per cent. of the value of the bonds deposited; but now they may be issued up to the par value of the bonds. The notes, being secured by the value of the bonds, rest on the credit of the government, not on the credit of the bank. These notes are not promptly sent back for redemption to the banks issuing them, as is done with typical bank-notes. They may circulate thousands of miles away from the bank that issued them, and for years after that bank has gone out of business. They are not an "elastic currency" increasing or diminishing with the needs of business. The changes in their amount depend upon the chance of the banks to make more or less in this way than by any other use of their capital, and this in turn depends largely on the price of bonds and on the rate of interest they bear. From 1864 to 1870, fortunes were made from this source, but in recent years there has been little opportunity of gain from note-issues. Our present bank-note issues are not on a logical basis, and satisfy no one entirely. They are of importance neither to the bank, to which they afford little or no profit, nor to the public, for which they do a service equally well done by silver certificates, greenbacks, or coins. [Sidenote: Suggested reforms of the bank-note system] Along with the discussion of the currency has gone, since 1896, a vigorous discussion of the banking system. The two problems are so closely related that a change in the one suggests readjustment of the other. One extreme plan is to abolish bank-notes entirely and to replace them with additional issues of greenbacks; the other extreme plan is to authorize the issue of almost typical bank-notes. A modification of the Canadian banking system, which has great merits, is held up for imitation. Bills have been repeatedly before Congress authorizing the maintenance of a general guarantee fund with which the notes of failed banks could be redeemed, and at the same time authorizing branch banks such as those in Canada. Public sentiment has never strongly favored this plan, however, and there is more likelihood of the passage of a bill providing for emergency notes in time of financial stress, after the plan followed in Germany. [Sidenote: Bank regulation a protective measure] That the control of banking is an important duty of government is the conclusion of the practical world. The various banking systems of the leading countries embody different plans for the one purpose of the adequate control of banking in the public interest. Government control of bank-notes is felt to be of the same nature as factory inspection, that is, to be a protective measure. When public interests are at stake and private interests conflict with them, government acts to forbid one citizen from doing harm, and to protect other citizens from injury. CHAPTER 49 TAXATION IN ITS RELATION TO VALUE § I. PURPOSES OF TAXATION [Sidenote: Taxation defined] 1. _Provision for the expense of organized government is the fundamental purpose of taxation._ Taxation may be defined as the taking by the government of private property for public uses. This implies a certain degree of compulsion. When the national government accepts ten million dollars in trust for the Carnegie Institution, it is not taxation, though wealth is given for public uses. The effects of taxation pervade all industrial affairs, but they will be discussed here only in relation to the value of goods and to the distribution of incomes. By taxation the government interferes with the individual's free choice and with the impersonal economic forces. It expends income in different ways from those which would be chosen by the individual. [Sidenote: Taxation for public defense] The primary purpose of taxation is public defense. War often has driven men into closer social relations. Public defense requires sacrifice on the part of the family and of the individual. In family or patriarchal communities all share a common income and combine in the common defense, but self-preservation compels such small communities to form a larger, stronger state for the common defense. Personal service in the field gives place to money taxes permitting a more regular, continuing, and perfect organization of military forces. [Sidenote: To preserve domestic order] Next comes the need of civil government to insure domestic tranquillity. As political unity grows, the citizens need less often protection against foreign foes, and they need more often, relatively, defense against the aggressions of some of their own countrymen. The preservation of domestic order requires police, courts of justice, and other agencies. The ideal of the anarchist to do without government is nowhere realized. Everywhere there must be government to preserve peace and to protect property. Unfortunately, this need grows with the growing density of population. Crime increases when men swarm in great cities. To maintain and operate the social machinery requires ever-increasing resources. The courts which settle disputes between men, and which interpret their contracts, are agencies of peace, displacing physical contests. Many other public expenses tend to enlarge, as those for legislative bodies, public buildings, statistical inquiries, the printing of public documents. Government on these accounts has become in modern times an increasingly costly institution. [Sidenote: Developing public wants; social and industrial welfare] 2. _The promotion of the social and industrial welfare of society has come to be an important purpose of taxation._ Some functions of government, less essential than the primary ones just mentioned, seem naturally to grow out of them. In a democratic society, popular education is one of the necessary conditions of good government, as it appears that domestic order is not possible in a democratic state without intelligent citizens. Step by step the functions of government are widened. Some industrial functions are performed by the government in connection with the primary needs. Lighthouses are necessary to guide the navy, but they also serve to guide the merchant marine and to aid industry. The post was established as an agent of political and military government to connect the ruler with the outposts (a fact the name post indicates), but the postal service has grown in every country to be a great industrial and social agency. The consular service, beginning in the political need of keeping official representatives in foreign lands, has grown to be a great economic agency. Consuls are commercial travelers, advancing the trade-interests of their countries in all quarters of the globe. These social and industrial functions have been increasing of late. As the national and local governments engage more in industry, they usually make larger demands in the shape of taxation. [Sidenote: The sphere of the state expands] It is along the border-line between the primary and the secondary purposes of taxation that the contest goes on regarding the proper functions of government. If they are to stop short of the extreme of socialism, where shall the line be drawn? The movement has been of late toward greater government activity; more of the wants of men are thus supplied through the agency of the state. That year by year a greater sum is taken by taxation and spent for the citizen is a fact that may be recognized without debate here. The toll-road becomes a public road, the toll-bridge becomes free, more is supplied by taxation for schools, for advanced research, and for technical training. In our country great wealth was given by the Morrill Act to scientific and technical schools. The state universities, against much opposition, have become in many states of the Union the dominant educational force. Moreover, taxation often is used as a means not merely of raising revenue, but of discouraging one kind of industry and encouraging another. One industry wanes or dies under increasing burdens, another waxes strong by fostering exemptions and bounties. A large share of this "protective legislation" is done under the guise of taxation. [Sidenote: Government as a consumption good and as a means of production] 3. _Shifting of the limits of state action and corresponding changes in the weight of taxation are constantly affecting value and incomes._ Society as a whole is made up of many groups of industry. Government is the largest of these, collecting and expending more than any individual or corporation. Government is in one aspect a consumption good. In return for its collective cost men collectively get the enjoyment of social organization, markedly in contrast with the uncertain ties and hazards of primitive communities. But government becomes also a mode of social investment, an indirect agent, a productive enterprise. Wealth applied through it secures a greater product than is possible by individual action. Government can maintain lighthouses more economically than individuals could otherwise secure them. [Sidenote: Apportioning of the cost] But when the government undertakes these various tasks, the expense falls unequally on individuals and affects differently their incomes. When free schools take the place of private schools, the law compels every one to contribute to education. To many individuals it is a matter of indifference whether they pay tuition or taxes, but the wealthy bachelor sometimes grumbles when forced to help in educating the day-laborer's family of twelve. The average result may be right, but individuals diverge from the average and thus have constantly a motive to attempt to change the limits of governmental action. Happily the subject is not always viewed with selfish eyes. The ethical and patriotic thought is not, "How will this affect my interests?" but, "How will it affect the general interests?" But as the question of value is always involved, men are usually found favoring or opposing a measure of taxation according as it affects their own income. Thus taxation is inevitably an economic question. § II. FORMS OF TAXATION [Sidenote: The various forms of taxes] [Sidenote: On incomes] [Sidenote: On property] [Sidenote: On expenditure] [Sidenote: On business] 1. _Taxes usually are a portion taken from the income arising from labor or from wealth._ In rare cases more than the net income of wealth may be taken, but the aim of taxation in general is to take only a portion of the income for public uses. As economic income has many sources, it may be intercepted at many different points, and taxation may take various forms. First, private income may be appropriated by a tax on income. This is the simplest in thought, but the administrative difficulties of the income-tax are great in practice. It is not easy to determine the money value of the various sources of enjoyment that come into a man's possession in the course of a year, including, as the ideal requires, the immaterial gratifications along with the material. A second form is a tax on property in proportion to value. Since the value of material wealth is the capitalization of the rentals at the prevailing rate of interest, the property tax, so far as it applies to material wealth, should take an approximately equal proportion of incomes. If it were accurately assessed, it would be in some respects better than a tax on actual rents, for it reaches the prospective, or speculative, rental. A third form of tax is one on consumption, or expenditure. This is but another mode of attacking income, for in the long run income is spent, not always by the individual who earned it, but by some one, and thus it is reached by a tax on expenditure. The principal consumption taxes in the United States are the tariff duties and the internal revenues of the national government. In time of war, internal revenues are extended in the United States to a multitude of articles, but usually they are limited (with minor exceptions) to liquor and tobacco. A fourth form of tax is one on selected agencies of industry; such are business taxes, licenses, taxes on investment in business, corporation taxes, etc. These burdens are diffused and rest eventually on some income, not always exactly ascertainable. Actual tax systems combine these forms in great variety, subtracting many minute fractions from each citizen's income in ways unsuspected by him. [Sidenote: Changes of taxation and in capitalization] 2. _The immediate effect of a change in the form of taxation is a change in the market value of goods._ If the new tax reduces the net rent of any productive agent, it reduces likewise its value, which is but the capitalization of its net rental. If taxes are taken off of factories and put upon farm rents, factories rise and farm-land falls in value. The immediate change in value is much greater than the annual tax, for if five dollars is to be taken permanently from the annual rental of the farm, nearly one hundred dollars is taken at once from its selling value. Taxes are reckoned by enterprisers as a part of the cost of production whenever the conditions of competition and of substitution make it possible to do so. In such a case the products rise in price and most of the tax falls upon the consumers. In the Civil War an increase in the tax on whisky increased its selling price, and distillers who owned stocks on which a smaller tax had already been paid reaped profits of millions of dollars. When recently the tax on tea was increased in England, all dealers who had accumulated a stock before the law went into effect were gainers. Every change in taxation inevitably affects, either favorably or unfavorably, many interests. The chance to anticipate a change in tax laws or to get, from those in power, information of a proposed change, makes speculation possible and political corruption profitable. [Sidenote: Shifting and incidence of taxation] 3. _After every change in taxation, competition among bargainers goes on and a new equilibrium of prices results._ The citizen who pays a tax into the public treasury is not always the one whose income is reduced in the long run. In most cases the final and regular burden of the tax is distributed over a number of incomes. The passing on of the burden is called the shifting of the tax; the location of the final burden is called the incidence of the tax. The lawmaker cannot tell exactly where the weight will fall. The principles of value give some guidance in the inquiry, but the workings of the principle are difficult to follow. Certain it is that the new tax, both in its collection and in its expenditure, becomes a new influence in industry. Some occupations are made more attractive, others less so. Some places are made more, others less, desirable to live in. As property thus fluctuates in value, as investments become more or less remunerative, the market price of corporation stocks rises and falls. The rate of adjustment varies greatly under different conditions. The inflow and the outflow of labor and capital are more or less rapid in the various industries. [Sidenote: Many personal incomes affected] The fact that a change in taxation is a disturbing element in price is not to be thought insignificant merely because "all comes out right in the end." Every change in taxation is an element of uncertainty in business and increases the fortunes of some men at the expense of others. Hence no considerable change should be made without good reasons in its favor. The older taxes have the virtue of stability, but in many cases they have grown out of harmony with the industrial conditions. While, therefore, from time to time there is a real need of a reform in the tax system, it should not be undertaken without recognizing the many and complex interests involved. § III. PRINCIPLES AND PRACTICE [Sidenote: Various standards of justice suggested] 1. _Taxation should be adjusted with reference to the general social interest._ Many standards have been suggested to measure the distribution of the burden of taxation, such as benefit, equality, and ability. Each of these terms is capable of various interpretations which have changed from time to time. The benefit derived by any citizen from most of the public services evidently cannot be measured with exactness. The standard of equality cannot be applied in any literal sense to strong and weak, to rich and poor. It is possible, however, to interpret equality with reference not to objective goods, but to the psychic sacrifice occasioned by taxation. Ability thus is of many kinds and may be differently understood. Some think ability to bear taxation is "in exact proportion to the money income"; others believe that it increases at a greater rate than money income, and favor, therefore, progressive taxation, that is, higher rates on the larger incomes. [Sidenote: Social welfare as the aim] The conflicting interests of the classes in each period are to some degree softened by the social conscience, and taxes are adjusted according to a vaguely held ideal of the social welfare. Social expediency, more or less broadly interpreted, determines who shall be taxed and what will give the best social results. The exemptions from taxation in feudal times were great, and viewed from our standpoint were inequitable, for it was the upper classes who escaped while the peasants bore all the burdens. The landlords and nobility who were assumed to be performing important social functions, often had outgrown their usefulness. Exemptions are granted liberally in most states to-day for some purposes and to some classes of citizens; to educational, religious, and charitable institutions; to the homes of priests and ministers; to homesteads purchased with pension money, etc. California alone of all the states in the Union continued until 1903 to tax churches and private schools. The social interest requires that taxes be both elastic and productive, so that the needs of the government shall be amply provided for. The harmonizing of these needs in the laws of taxation requires a high degree of wisdom, of foresight, and of integrity, in the legislator and in the citizen. No hard-and-fast rule for the apportioning of taxes can be laid down. The decision must be made in each generation by social opinion, guided by the social conscience. [Sidenote: Principles of administration] 2. _The administration of taxation should be economical, certain, and uniform._ Whatever taxes are adopted, whether on property or income, whether at a proportional or a progressive rate, their justice and expediency depend largely on their administration. Principle and practice in this as in most affairs may go far apart. Some laws are more easily and economically executed than others. The time of collection should be as convenient as possible for the citizen, and the mode of payment should be the most simple. As to the time, method of payment, and amount, the utmost certainty is desirable. Taxation that is variable, shifting, dependent on personal whim and favoritism, is despotism. Above all, the administration of the law should be uniform and impartial,--yet this is a principle most frequently departed from in practice. The assessment of taxes has to be intrusted to men with fallible judgment, imperfect knowledge, and selfish interests. The assessor is as near a despot as any agent of popular government to-day. Not infrequently it is to men incapable of earning two dollars a day in any private business that the power is given of passing judgment on the value of millions of dollars' worth of property. Under the circumstances, evils are to be expected and they occur. The small property-owner often is crushed under the unequal assessment while the large owner comes lightly off. Political friends are favored, political foes are made to suffer. Woman nearly everywhere pays more than her fair share of taxes, a fact that the advocates of woman suffrage do not fail to urge as an argument for their cause, although women's disadvantage in this matter is little greater than that of any man without special political influence. [Sidenote: Importance of taxation as a public question] 3. _The relation of taxation to private incomes makes it one of the largest public questions of the day._ The discussion of taxation has accompanied the growth of free government in England and America from the time of Magna Charta. The control of the public purse frequently was the occasion of conflict between the monarch and the people. Taxation was a leading issue in the American Revolution. While, therefore, it cannot be said that the subject has been of no great importance in the past, it is true that in our own national history since the adoption of the Constitution, taxation has not been much discussed, except in the one aspect of the tariff. Constitutional and political questions, states rights, and the question of slavery, long absorbed the interest of citizens and legislators. But with the aroused interest of the public in economic problems, taxation is attracting, and is certain to attract in the next few years, increasing attention in local, commonwealth, and national politics. CHAPTER 50 THE GENERAL THEORY OF INTERNATIONAL TRADE § I. INTERNATIONAL TRADE AS A CASE OF EXCHANGE [Sidenote: The motive of individual gain in foreign trade] 1. _International trade is exchange between individual men, and has the same object as other exchange of goods._ The term international trade should not be misunderstood as meaning that nations rather than individuals engage in it. International trade differs from domestic trade only in the fact that the parties are citizens of different sovereign states. Exchanges between men in the same village, between those in neighboring villages, and between those in different countries, are prompted by essentially the same economic motive--the wish to increase the want-gratifying power of goods. In every such case both parties gain or think they are gaining. In international trade there is the same chance for mistake as in domestic trade, but no more. In a single transaction in either domestic or foreign trade one party may be cheated, but the continuance of trade relations is dependent on continued benefits. The once generally accepted maxim that the gain of one in trade is the loss of another, is rarely applied now except to international trade. The starting point for the consideration of this subject is in this proposition: Foreign trade is carried on by individuals, for individual gain, with the same motives and for the same benefits as are found in other trade. [Sidenote: Natural differences affecting foreign trade] [Sidenote: Political boundaries and trade] 2. _As commerce has grown, the territorial division of labor has correspondingly increased._ Although economic motives have had influence in political affairs and have helped to determine political groupings and the limits of modern nations, there is to-day no very close correspondence between political and economic boundary lines. Both industrial and political conditions have changed so rapidly that the lines often have tended to diverge rather than to agree. It is common for two portions of a nation to exchange far less than do two portions of entirely different nations. The great territorial divisions of industry are determined first and mainly by differences of climate, soil, and natural resources. Thus trade arises easily between north and south, between warm and frigid climes, between new countries and old, between regions sparsely and regions densely populated. Foreign trade with distant lands is as old as history. In medieval times the luxuries of the temperate zone were mostly articles produced in the tropics. Political divisions usually have not been large enough to embrace widely varied soils and climates, the Roman Empire being an exception in marked contrast with the comparatively small political units of the Middle Ages. Before modern methods of transportation, a large free federal state like our republic was impossible. As in recent centuries the large political units have been formed, the question has arisen, Shall the political boundary be likewise the economic boundary marking the limits of trade? The firm constitutional Union of the American states arose out of difficulties with regard to trade. The German Zollverein, the forerunner of the modern German Empire, had a similar origin. The Australian Federation consummated within the last few years has grown out of the need of adjusting tariffs and tariff boundaries. These larger political units containing such varied resources can in larger measure, but never completely, become independent of the rest of the world if they will. [Sidenote: Differences in culture and industry] Territorial division of trade is determined secondly by differences in the accumulation of wealth, in the development of capital, of invention, and of organization, in the degree of intelligence of the workers, and in the grade of civilization. It is mainly trade due to this second group of causes, and carried on between old and new countries of about the same latitude, that is the subject of discussion in economic treatises on international trade. [Sidenote: Comparative costs as between individual workers] 3. _The doctrine of comparative costs is that relative, not absolute, advantages of production determine for a country the benefits of international trade._ The free-trade question in any country is whether it is for its interests as a whole to permit trade between its citizens and the citizens of other countries. The question appears especially difficult where both countries have natural resources of about the same character (as iron and coal in the case of England and America), and where, therefore, both can produce the things that are exchanged. If American labor can produce as much iron in a day as English labor,--or more,--is it not foolish and wasteful, it is asked, not to produce that wealth? Now, exactly the same case is presented in simple neighborhood exchanges. The merchant may be able to keep his books better than does the bookkeeper whom he employs. The proprietor may be able to sweep out the store better than the cheap boy does it. The carpenter may be able to raise better vegetables than can the gardener from whom he purchases, and yet the merchant and the carpenter do not quit their better-paying work and turn to clerking or to raising vegetables. [Sidenote: As between communities differing in advantages] It often happens that both countries can technically produce both the articles that are internationally exchanged. It may frequently happen that one of the two countries has an advantage in amount of sacrifice and effort, as to both articles; but if the advantage is greater in one article than in the other, the foreigners, like the low-paid clerk, will be willing to exchange at a ratio that will make it profitable to specialize in the product wherein the greater superiority lies. Therefore not the advantage as to a single product, enjoyed by one country over the other is most important in determining whether to produce at home or to exchange, but the comparative advantages enjoyed in the production of the two articles in question. [Sidenote: Examples of comparative costs] It must be remembered that comparative cost as here used refers to cost in effort, not to money cost,--a point on which there is often confusion. The money cost of a certain product is often greater in a new country because wages are high, and wages are high just because psychic cost is low, that is, because labor can produce so much. At the time of the great gold discoveries in 1849-50, the price of goods in California was much higher than in the East, and much higher in Australia than in Europe. A day's labor doubtless would produce as much food in Australia and in California as in New England and in Norway, but it produced far more gold. Hence butter and cheese were shipped by long routes from Norway to Australia and from New England around Cape Horn to California, to be exchanged for gold. One of the standing arguments against foreign trade is based on the idea that a country cannot profitably import goods unless it is at an absolute disadvantage in their production. It is declared that as our country can produce these goods "as well" as foreign countries (meaning with as few days' labor), there is a loss on every unit imported. [Sidenote: Selection of the most paying industries] 4. _The equation of international exchange is that adjustment of prices which results in the equalizing of the imports and exports of the country._ The superiority of a new country over an old one is not equally great in every line of industry. It is almost certainly most marked in those enterprises where natural resources are employed. To compete with the older country in less favored industries, capital and labor in the new are forced to take a lower rate than they can earn in the more favored. Without any government supervision, therefore, but simply through the choice of enterprisers seeking the best investment of capital, industries are developed in which the country is either most markedly superior or least inferior to its neighbors. If the productive energies of men interchanged between industries and between countries with perfect readiness, a perfect equilibrium of advantage would everywhere result. In every country, in every occupation, labor and capital of given quality and amount would receive the same reward. But the interchange of labor and capital between countries is never without friction. Adam Smith said that "a man is of all sorts of luggage the most difficult to be transported." The higher wages in a new country are sufficient to attract constantly from the older lands a portion of their labor supply; the higher rate of interest in the new countries attracts constant additions of capital; yet, despite these forces working toward equalization, the inequality may remain and through the working of other influences even increase in the course of years. [Sidenote: Persistence of the differences] The laborers, enterprisers, and investors in the one country are thus in a position of more or less enduring advantage relative to those of the other countries. The advantage is sometimes said to be a "monopoly" which they, or the country as a whole, enjoy; but in the absence of any contractual limiting of competition, this is a misuse of the term monopoly. This variation in the degree of scarcity of agents in different territories is not peculiar to nations as a whole. Differences of the same nature exist between the Northern and the Southern states of the American Union, have continued for decades between Eastern and Western states, and are found even between neighboring counties. The differences between two countries, however, are likely to be more marked, the circulation of factors being so active within a country that it is allowable to speak broadly of prevailing national rates of wages and of interest. [Sidenote: The ratio of international demand defined] Every exchange of goods between the countries is made at a ratio that reflects, or expresses, this abiding difference in comparative costs. The imports into the favored country represent regularly the results of more units of labor of a given grade than do the corresponding exports. The ratio which expresses the disparity of advantage of productive factors is called "the equation of international demand." This does not mean that the money value of the imports exceeds that of the exports, or vice versa. On the contrary, the equation itself embodies a maxim of international trade that "in the long run," or "on the average," imports and exports must be equal in value (_i.e._, equation of demand). This brings us to the theory of foreign exchanges, which is essential to an understanding of this feature of international trade. § II. THEORY OF FOREIGN EXCHANGES OF MONEY [Sidenote: Purpose of foreign exchange] [Sidenote: The rate of foreign exchange] 1. _Foreign exchange of money is the purchase and sale of the right to receive a given kind and weight of metal at a specified time and place._ Par of exchange is the number of units of the standard coin of one country that contain the same amount of fine gold (or silver) as the standard coin of the other country. Usually the English pound is taken as the basis in the tables which express the ratio of the gold in the standard coins of different countries. The _gold shipping point_ is par of exchange plus or minus the cost of moving the actual metal; it varies with means of transportation and communication. The par of exchange between England and America being $4.866 and the cost of expressing and insuring a gold pound between New York and London being approximately .03, the shipping point for the export of gold from New York is $4.896. At the upper and lower limits, there is a motive for shipping gold as a commodity. If each transaction were independent of all others, the cost of exchange would be the weight of metal called for, plus grains enough more to pay for loss of interest, cost of freight, risk, and trouble. In such a case it would cost $4.896 to remit one pound; while a debt of one pound payable in London would at the same time be worth $4.836 to the creditor in New York. When, in New York, a number of men having bills to pay in London meet a number of owners of bills receivable in London, a market for London drafts is created and a rate of exchange results somewhere between the shipping points. In this is the explanation of the variation of the rate, and of the facts that the cost of outward exchange sometimes is less than the par of exchange and that the value of foreign drafts sometimes is above par. [Sidenote: Variation about par of exchange] The balancing of foreign exchanges is of essentially the same nature as the domestic cancelation of indebtedness. It is going on constantly between two merchants in the same town, between two banks in the same town who represent groups of merchants, between men in neighboring towns, between distant states like New York and California, and between the trading nations of the world. The price of exchange to the individual is reduced by the specializing of the business in the hands of a few dealers, permitting cancelation of indebtedness or offsetting of exchange, and greatly reducing the amount of bullion to be transported. Exchange varies above and below par as conditions change. When the movement of money is into the country, drafts on London are bought and sold for less than par, for every pound draft thus remitted to London reduces the need of shipping gold to this country, while every London draft collected in New York at such a time increases the need to ship gold. [Sidenote: The cash balance of international trade] 2. _International shipment of money is always just the amount needed to balance the accounts due._ The proposition that in the long run the value of imports must equal the value of exports, while the fundamental truth in the theory of international trade, must be understood in a broad sense. Into the balance between the traders of two nations enter many items: the cash values of the imports and exports of each; freights, insurance premiums, and commissions; the expense of Americans traveling in foreign lands, and the cost of the foreign service of this government (such as the salaries of consuls and of diplomatic representatives) which count as the importation to America of an equivalent amount of food, clothing, and sundry services; subsidies and war indemnities to foreign nations representing, as they do, an expenditure, which at the moment may be paid in coin, but which, as is to be more fully explained, must be offset ultimately in some way by exports. [Sidenote: Various credit items entering into the balance] Many credit transactions affect the balance one way or another until settled. The loans made by European capital to the American government or to individuals and corporations in America, as well as the European capital expended in purchasing American enterprises, require the remitting of gold to New York, and thus offset many imports of goods to New York otherwise calling for the remitting of gold to London. In the direction opposite to this, act the interest payments and the eventual repayment of the principal loan, for these require either money or goods to be exported from America to the value of the obligations. Loans that run for years thus offset annually (in their accruing interest) a portion of the exports of the debtor country. An excess of exports may therefore at any given moment indicate either that the country is in debt or that it is getting out of debt. An excess of exports is generally looked upon as an evidence of national prosperity; but it is absolutely inconclusive on the point. Finally, after all the items of imports and credit paper purchased abroad are set opposite the items of exports and promissory papers sold abroad, the balance is paid in gold bullion and is shipped one way or the other. Evidently the amount of gold shipped is but a small fraction of the total volume of transactions. Industrial indebtedness is represented in various forms: bills of lading for goods shipped, drafts made by the creditor on his debtor for goods shipped or property sold, checks or letters of credit of travelers, bonds and notes public and private. These are the objects dealt in by the bankers who are the agents to carry on the work of exchange. [Sidenote: Relations of the international flow of goods to the flow of money] 3. _The territorial distribution of money is both a determined and a determining factor in international trade._ It appears to be determined in that the balance of all accounts for or against the country must be settled eventually in money. After any such a settlement one country has less, the other more money than before. The change in the amount of money at once reacts on prices and becomes a determining factor in international trade. The flow of money out of a country causes money to tighten, interest rates on short loans in the large cities to stiffen, and prices slightly to fall. When prices fall, imports decline, as the country is not so good a place to sell in; when prices rise, imports increase, as it is a better place to sell in. As the opposite effect is produced on exports, there occurs immediately a change in the quantity of money which continues until the national credits and debits balance and for a brief time remain in equilibrium. If the trade of a country with its neighbors continued long to give a balance of imports of goods and of debit items (exclusive of money) it would ultimately be drained of all its coin, and would default payment or cease to import. If the trade constantly gave a balance of exports and credit items, money would continue to flow in, until prices rose to unexampled heights. In fact no such extreme is even remotely approached, for a slight movement of money in either direction at once influences prices and sets in motion counteracting forces. Decade after decade the circulating medium of leading countries changes only slightly in amount, and the fluctuations during periods of so-called "favorable balance of trade" and of "unfavorable balance of trade" represent only the smallest fraction of the value of goods passing through the ports of the country. § III. REAL BENEFITS OF FOREIGN TRADE [Sidenote: Fallacious explanations of the gains from foreign trade] 1. _The direct advantages of foreign trade consist in the increased efficiency it imparts to productive forces._ In explanation of the advantages of foreign trade it is said to be a vent for surplus production and to give a wider market to what would otherwise go to waste. This involves the same fallacy as the "lump of labor," the destruction of machinery, and the praise of luxury. If backward nations now give a vent for products which would otherwise rot in the warehouses, at length a time will come when the world will have an enormous surplus unless neighboring planets can be successively annexed. Again it is said that the great purpose of foreign trade is to keep exports in excess of imports so that money may constantly increase in amount. The ideal of such theorists is an impossible condition where the country would constantly sell and never buy. In the commercial view the sole object of foreign trade is to afford a profit to the merchants, regardless of the welfare of the mass of the citizens. [Sidenote: The real advantages of foreign trade] The main advantage of foreign trade is the same as that of any other exchange. It is hardly necessary to review the explanation here: the increased efficiency of labor when it is applied in the way for which each country is best fitted; the liberation of productive forces for the best uses; the development of special branches of industry with increasing returns; the larger scale production with resulting greater use of machinery and with increased chance of invention; the destruction of local monopolies. The moral and intellectual gains of foreign commerce were formerly much emphasized. Commerce is an agent of progress; it stimulates the arts and sciences; it creates bonds of common interest; it gives an understanding of foreign peoples and an appreciation of their merits; it raises a commercial and moral barrier to war; and it furthers the ideal of a world federation, the brotherhood of man. [Sidenote: Conflict between general and special interests] [Sidenote: Prevalence of protective tariffs] 2. _Free foreign trade thus has in its favor the presumption of advantage to the citizens; but various interests may be adversely affected._ The general attitude of economic students for a century and a half has been favorable to a large measure of freedom in foreign trade. But the actual practice of nations is opposed to the principles laid down by the philosophers and accepted by nearly all serious students of the question. Germany adopted very restrictive measures under Bismarck in 1879 and by a recent law has discouraged trade still further. France, Italy, and other smaller nations of Europe have strong protective tariffs. The United States has followed a restrictive policy for the last century almost unvaryingly. The explanation of this contradiction is not entirely simple. Free trade is not the most desirable thing for every one. Great interests are affected by foreign trade and certain of these interests are able to dominate legislation. The general proposition of free trade between nations, as advocated by most economists since Adam Smith, is rejected by a majority of the people, by the politicians, and by the legislators. CHAPTER 51 THE PROTECTIVE TARIFF § I. THE NATURE AND CLAIMS OF PROTECTION [Sidenote: Nature of a tariff for revenue] 1. _A protective tariff is a schedule of import duties so arranged as to give appreciably more favorable conditions to some domestic industries than they would enjoy with free trade._ Tariff duties were first laid to get revenues for the government. The first effect of the tariff is the same as that of any tax that enters as a new factor into enterpriser's cost--the domestic price of the taxed article tends to rise. Other results then follow. If the article cannot be produced within the country (as oranges, spices, and coffee, in England, Norway, and Sweden), its consumption is reduced. The lessening of demand may affect somewhat the price in the producing country and may compel the foreign producers to sell each unit for less than before. As such a tariff does not increase home production, it is for revenue, not for protection. [Sidenote: Effects upon home industry] But if the article can be produced in the importing country at the new price, "home industries" will start. If the whole demand at home is thus supplied, imports stop and therewith stop all revenues to the government from that source. This is a prohibitive or completely protective tariff. Most tariffs combine the characters both of revenue and protective measures. Where the freight charges are low along the coast and on the main lines of transportation, some imports take place; while farther inland, where freight charges are high, some home production of the same goods takes place. A tariff that reduces imports but does not cut them off entirely is either a revenue tariff with incidental protection or a protective tariff with incidental revenue. The difference is partly one of legislative intention, partly one of degree only. [Sidenote: The beginning of the tariff under the Constitution] 2. _The tariff question has been the most discussed of economic questions in American politics._ The tariff bill passed by the first session of Congress in 1789 was primarily a revenue measure with rates averaging only about five per cent.; but incidentally it was protective (as most tariffs are), being laid on imports of iron and cloth, the production of which had been undertaken to some extent before, but which thus were further encouraged. Between 1808 and 1812, the United States and England were in constant disagreement, and our government repeatedly laid an embargo on British commerce, closing our ports to British ships, and British ports to our ships. The war from 1812 to 1815 almost annihilated American trade on the ocean. Added to this discouragement of foreign trade was the high tariff imposed, in the vain effort to get revenue from greatly decreased imports. Altogether these causes almost completely stopped importation and forced the American people to rely on their own efforts for such goods. Some industries having been "stimulated" in a high degree, their destruction was threatened by the repeal of the high war tariffs. Many investments and interests were at stake, and the tariff became a most important question. [Sidenote: The tariff controversy before 1865] The first period of real discussion of the protective policy was between 1816 and 1846. The result of the first twelve years was an increase of the tariff rates which, in 1828, reached a high point. By the compromise of 1832, the rates were reduced by steps till 1841. Again from 1842 to 1846 was a brief period of higher duties, followed by a policy which, relatively speaking, was one for revenue, from 1846 to 1860. Again in the Civil War, 1861-65, the rates were steadily increased without much discussion, the tariff not being the leading question at a time when the prosecution of the war was absorbing nearly all attention. [Sidenote: Recent discussion of the tariff] The latest period of discussion was from 1874 to 1892. In the Tilden and Hayes campaign of 1876 the tariff was made the leading issue and the advocates of a lower tariff were very nearly successful. In 1880, protection again triumphed in the election of Garfield. In the election of Cleveland in 1884, the issue of tariff reform had some part, but no effective legislation on the subject was enacted in the next four years. In 1888, Cleveland was defeated in a campaign fought mainly on the tariff issue, and Harrison was elected as a pronounced protectionist. In 1892, Cleveland was reëlected on the issue of tariff reform. From that time, however, there has been a lull in the discussion of the tariff question. The campaign of 1892 was the last presidential election in which the tariff was the dominant issue. Since 1896, the money question and imperialism have quite crowded the tariff issue off the stage. [Sidenote: The "balance of trade" argument] 3. _A leading argument in favor of a protective tariff is that by encouraging an excess of exports it maintains a favorable balance of trade._ This notion of the favorable balance of trade appears in several forms. One of these, already discussed in connection with foreign exchanges, is that the exports of a country in the form of merchandise must exceed the imports if the country is to prosper. The ideal cherished is to keep more merchandise constantly flowing out of the country than comes in. An interesting commentary on this delusion is the fact that this is the usual situation in poor debtor countries having constant interest payments to meet; while the opposite of the ideal is the situation in rich creditor countries. England for many years in the period of her greatest prosperity has had a constant excess of imports, these being goods to the value of the interest payments due to Englishmen from investments abroad. [Sidenote: "To keep money at home"] 4. _Another argument is that the protective tariff keeps money at home which, if trade is free, will be sent abroad to buy foreign goods, thus impoverishing the country._ This is the "favorable balance of trade" argument, with the emphasis on money rather than on goods. A superficial glance at the trade relations of an old and rich country with a new province seems to give evidence for such a belief. The older country is lending capital (which it sends to the debtor country in the form of goods) and it has at the same time a larger supply of money. These two facts--the lack of money and the poverty of the newer country--are looked upon by the protectionist as due to the importation of goods. The real cause of the imports to the newer country and of its scanty money-supply, it need hardly be said, is its comparative poverty. Europe and the United States, in their trade with China and South America, do not get gold in exchange, but merchandise of various sorts. It is true that in the trade of England and New York with great gold-producing districts, such as California, South Africa, and Alaska, gold is received in return for merchandise, for to these districts gold is merchandise and its export does not drain them of their supply. The richer states in the Union do not drain the poorer states of money. A few years ago the states of Kansas, Nebraska, Iowa, and their neighbors were filled with resentment against the money-lenders of the Eastern states. There was a widespread belief that hard times were due to an insufficient currency. Attempted action took the form of the greenback and free-silver movements, which were defeated by the opposition of the East, but there can be little doubt that if the Federal Constitution had not forbidden it, the discontented states would have established a protective tariff "to keep their money at home." Few advocates of protective tariffs are ready to admit that the money-supply of the country is dependent on the general wealth of the country, and on the methods of doing business, rather than on a protective tariff. [Sidenote: The "two profits" argument] 5. _It is said that the tariff keeps "two profits" at home, foreign trade gives but one._ The word "profits" is here used in the popular sense of gain from a single transaction. This argument becomes somewhat confused, for certainly in the admission that there are "two profits" in a trade, the notion that "one man's gain is another's loss" is rejected. Both parties are said to profit and both profits are thought to be secured at home when two citizens are forced to trade with each other. There is an error in elementary arithmetic here, both as to the number and as to the aggregate amount of profits. The purpose of a protective tariff is to compel _two_ of the citizens of a country to trade with each other instead of trading with _two_ citizens of a foreign state; the number of profits is therefore not increased by substituting domestic for foreign trade. What, then, as to the size and aggregate amount of the profits? The margin of advantage is not the same on all exchanges; the exchange is made if there is a margin to both parties, no matter how small it is; but the generous "profit" on one transaction where the conditions of the two parties are very different may be greater than the total of petty margins on a dozen exchanges between two traders of evenly matched powers. Can it safely be assumed that every trade with a foreigner is less advantageous than one with a fellow-citizen? Diamond cuts diamond, but two shrewd Yankees left to themselves surely should not be worsted in bargains with the universe. If they could exchange to better advantage with each other they probably would discover it as soon as the interested manufacturers and political orators who can prove so eloquently that they know the other man's business better than he knows it himself. Forcing the home trade is doubtless to the advantage of one citizen, but it is not likely to be to the advantage of both citizens. [Sidenote: The claim that protection raises wages] 6. _The most effective popular argument for protection is that it raises, or maintains, the general scale of wages in the country._ This argument is two-fold: first, when wages are low in a country it is claimed that a tariff is needed to raise them; and, secondly, when wages are high it is argued that a tariff alone can preserve them. In Germany the fear is of the higher paid and more efficient labor of England. In America, where wages at all times have been higher than in England, it was first argued that because of the greater cost of production, due to high wages, the tariff was needed to start certain industries; but after the tariff had long been established and the old argument had been forgotten, it was said that the tariff was the cause of the high wages and must be maintained to protect against the (so-called) "pauper" labor of the older countries. That wages generally are higher in new countries and where a tariff prevails is always claimed to be one of the chief fruits of a protective policy. The cause of the high wages in America appears to be the productive efficiency of industry under existing conditions. Labor is surrounded here with advantages in the forms of rich natural resources and of mechanical appliances such as never before were combined. Because of the scarcity of workers in particular protected industries, wages may be higher in them than in some other industries; but such workers form a small fraction of the population. The claim that the general scale of wages in all occupations is raised by the tariff protecting this fraction, is no less invalid than the sweeping claims in favor of trade-unions. § II. THE REASONABLE MEASURE OF JUSTIFICATION OF PROTECTION [Sidenote: Political arguments for protection] 1. _For military and political reasons an otherwise uneconomic tariff may be justified._ It usually is admitted by the believers in free trade that in the interest of diplomacy, to secure proper concessions, tariffs may sometimes be levied. Even in England, where protective arguments long have had little acceptance, Mr. Chamberlain, with his eye on a tariff union and imperial federation of England and her colonies, has been advocating this policy. In such a case there is no pretense that the justification of the tariff is its immediate economic advantages; it is an expenditure for ultimate gain. By the same argument a protective tariff is upheld as a means of defense--to encourage the building of ships, arsenals, and factories for munitions. It is always questionable whether an outright expenditure would not be better, whether the government cannot build its own arsenals, ship-yards, etc., more cheaply than it can foster private enterprise by means of a tariff. [Sidenote: The infant-industry argument] [Sidenote: Applied to America] 2. _Protection may be defended as encouraging infant industries and thus diversifying the industries of the country._ Most free-trade writers concede a limited validity to this argument. If the natural resources of a land are adapted to an industry, it may be called into being early by a fostering protective tariff. This is merely anticipating and hastening the natural order of progress. In the American colonies the manufactures of iron, cloth, hats, ships, and furniture sprang up not only without "protection," but despite numerous harassing trade restrictions made in the interest of the English merchants; and they continued in some cases despite their absolute prohibition by Parliament. Can it be doubted that many of these industries would have developed and flourished in America under no other fostering influences than those of rich resources and of economy in freights? The growth of industries in the Middle West in the last twenty-five years has been phenomenal. The discovery of natural gas and the presence of abundant coal, ore, and timber have enabled them to develop without protection against the Eastern states. Industries capable of eventual self-support must in most cases naturally appear in due time. Economic forces will bring them out. It is a trite but valid remark that protective tariffs are often like hothouse culture, anticipating the season by a few weeks and at great cost. The question is whether the mere possession of the hothouse is a luxury worth the price, if meantime the products can be gotten more cheaply by exchange. English manufactures flourished because they were well established, had excellent coal supplies, great stores of iron ore, and low-paid labor which did not have the opportunity of better alternatives, as did the American workman. If America had imported _more_ (it would not have been _all_) of her iron and coal, the English mines would have been exhausted earlier, and America's advantage surely would have asserted itself in time. Her iron manufactures undoubtedly were hastened--they cannot truly be said to have been created--by the protective tariff. [Sidenote: Social effects of the tariff] Industries are forced into an earlier diversification by tariffs. The peculiar advantages of a new country attract labor and enterprise into a few lines. Is it an evil? Contrast Iowa, Dakota, and Minnesota, or Kansas, if you please, with New York and Pennsylvania. Is it so certain that a dense population congested in cities and crowded in factories and mines is a more ideal social aggregation than is a community of prosperous farmers? The smoky industrialism fostered by protection often puts a premium on a low grade of immigrant and keeps him an alien to the American spirit. It would be surprising if Americanism on the Western plains were not as good as in the Eastern cities. But the infant-industry argument appeals strongly to the enterprise and the speculative spirit of Americans, who like to do all things rapidly and on a large scale. Every village aspires to be a great industrial center. Americans are impatient of the suggestion that things "will come in time"; they like things to come at once. [Sidenote: The "home-market" argument as to freights] 3. _The tariff develops a home market for the products of agriculture._ It has been especially hard to reconcile the farmers in America to the tariff. While in England the protection that existed before 1846 was almost entirely for the benefit of the landholding interests, the tariff in America has been peculiarly favorable to manufactures. The "home-market" argument is the protectionist appeal that has proved most effective with the American farmers. This argument, which takes on several aspects, is akin to the "two-profits" argument when it declares that the shipping of food to Europe and the importing of manufactures involve a great cost for freight which could be saved by manufacturing "at home." Of course the farmer is supposed to pay this cost, although there is nothing in the argument to show that it is not all paid by the European, either the manufacturer or the food consumer. Home trade "saves the freights" for the farmer only in case he can buy goods under a tariff with less of his own labor and products than under free trade. The payment of freight charges is true economy when the goods can be bought at a distance on more favorable terms than near home. The freight-argument proves too much, for it condemns every exchange, within the country, of goods produced a stone's throw away from the consumer. [Sidenote: As to security of trade] Again, the home-market argument dwells on the greater steadiness of domestic trade. War or political changes, it is said, may change the demand for products. This is true, but no other changes have affected American agriculture so radically as the peaceful development of domestic transportation and the opening of the West. [Sidenote: As to the value of farm-lands] The home-market argument is strongest when addressed, not to all farmers, but to one class of farmers, those whose lands are situated nearer the manufacturing cities. The higher value taken on by land as it is converted from the extensive cultivation of corn and wheat to dairying, fruit, and market-gardening, is pointed to as a benefit of protection. The decaying agriculture and deserted farms throughout the great industrial states during the past twenty-five years are pathetic evidence that this benefit has failed to come to the average farmer just where it should be most expected. There is, however, a partial validity in the argument as applied to a comparatively small number of farmers, who gain as landholders, not as tillers of the soil. [Sidenote: Exports and exhaustion of the soil] 4. _The tariff may keep some of the natural resources of a new country from becoming quickly exhausted._ The export of food takes out of the soil and out of the country fertile qualities never to be returned. The shipment of several hundred million dollars of food products year after year represents a tremendous drain from the soil of the United States. The assumption, however, that the use of the food in this country would preserve the fertility of our own fields has been in the main mistaken. The fertile material in the food shipped for human consumption five miles away from the field is almost absolutely lost. Engineering skill has as yet succeeded in saving hardly a fraction of the fertile organic matter that flows into the sewers, that is dumped into river and ocean, and that is buried in heaps at the borders of our cities. On the other hand, the increased use of iron, coal, and timber, as a result of encouraging manufactures, has very effectually aided in exhausting the natural resources of the country. [Sidenote: Protection as a monopoly measure] 5. _A new country has a limited potential monopoly in certain kinds of products; a tariff may make it effective._ The opening up of a new country with rich natural resources may be a great gain to the average consumer in the older countries, although it causes a loss to a special class of landowners. Whether the citizens of the older or of the newer country shall reap the greater benefit in the trade depends on the reciprocal demand for the two classes of goods, as was seen in discussing the equation of international demand. A wide margin of advantage may go to one party and a narrow margin to the citizen of the more favored land. To put it concretely: if America, having great natural resources for agriculture, continues to exchange food for manufactures up to the narrowest margin of advantage, England reaps most of the benefits of the trade. An American tariff on manufactures from England will, under such conditions, check the demand for English products and compel some Americans to leave farming. This reduction of the American supply of wheat or corn and of the American demand for English manufactures compels a new ratio of exchange. It is conceivable that exchanging fewer goods at a larger margin of advantage, will give a larger total of gain to the favored nation. Thus, by the shifting of the ratio of exchange, foreigners may be compelled to pay a part of the tariff to enjoy the favored market. This is but a special case of the monopoly principle; the government by law artificially limits the supply of goods offered by its citizens. [Sidenote: Limited monopoly advantages of America] This argument is somewhat subtle, but probably is the soundest one in the theory of protection. The supposed conditions seldom occur, but they may exist, and probably have existed in America. When the great system of internal transportation was developed in the United States before that of the other new countries, this country had such peculiar advantages for the production of food that the quantity was enormously increased and the prices fell. At such a time the tariff may work toward retarding the unfavorable turn in the ratio of exchange and toward reëstablishing early a more favorable ratio. But the limited application of the principle must be recognized. The potential competition of undeveloped countries on all sides, seeking to develop their resources, to raise their own food, and to profit by the higher prices in the world-market caused by the tariff, threaten the peculiar advantages of the favored land. A great nation with its manifold interests is not eminently fitted to practice the gentle art of monopoly. § III. VALUES AS AFFECTED BY PROTECTION [Sidenote: Influence on the value of capital] 1. _An increase of the tariff is favorable to many capitalists and to many owners of natural resources._ A denial of large general advantages in protection is not the denial of all its influence on value. On the contrary, it cannot be too strongly emphasized that manifold interests are affected by the tariff. Owners of natural mineral resources are among the first to benefit. When the price of iron is low, many iron- and coal-mines may yield no rent and have small prospective values. A tariff forcing home production opens the marginal resources and gives them a large capital value. Factory sites and surrounding lands leap from the level of rural prices to that of city real estate. The owners of farms situated near the new industries have a home market and get scarcity prices, as they alone can supply the needed fresh vegetables and dairy products. Wealth less favorably situated, however, is in many cases depressed in value because its products exchange for smaller amounts of other products. [Sidenote: The special gains and the general burden] 2. _A tariff is immediately favorable to some enterprises and to special classes of workmen._ Enterprisers already acquainted with and engaged in a business always may hope to gain by the higher prices immediately following a rise in the tariff rates on their particular products. Though they are granted no enduring monopoly by the protection, they for the time enjoy the advantage of being on the ground and reap the first fruits of the favoring conditions. The enterpriser usually profits when the price of his product suddenly rises. Usually skilled workmen are affected slowly by competition when there is any considerable increase of their special industry. The burden of higher prices is very soon distributed to a number of less favored citizens. A part of it may be borne by the retail merchant, a part by his customers. The weight falling on each is usually small, often unsuspected, always hard to measure. The increased benefit is concentrated in a few industries and accrues to a comparatively few producers. Here is a recipe for riches: get everybody to give you a penny; they'll not miss it, and it will mean a great deal to you. Something like this happens in the case of many protected industries; every consumer of the article pays a penny more, a few wage-earners gain, and a few enterprisers wax wealthy. [Sidenote: Sudden tariff reduction injurious] 3. _A sudden reduction of the tariff causes local crises and may bring on a general crisis._ The repeal of the tariff works in a direction the reverse of its enactment. The benefits of the lower prices are diffused; the immediate injury is concentrated and acute. Factories are closed, capital is depreciated, labor is thrown out of employment. The organic nature of local industry causes the evil to be felt by many classes. Merchants, professional men, servants, and skilled laborers that are tributary to the depressed industry, suffer. The effects are transmitted to commercial and financial centers and credit is shaken. The readjustment of industry is slow and much capital is lost in the process. [Sidenote: The two policies in political discussion] It is rarely appreciated how great is the tactical advantage enjoyed in political contests by the advocates of a high tariff. They can so easily impress the popular judgment with the evident fruits of their own policy, and with the immediate dangers of the policy of their opponents. The low-tariff advocates in America undoubtedly have made the mistake of underestimating or of quite overlooking these immediate effects. They have been too abstractly doctrinaire, and have argued too absolutely for the merits of free trade. They have opposed one extreme system by another, with no thought of the inexpediency and injustice of sweeping changes. There is a strong feeling among business men that any tariff, be it high or low, is better than a shifting policy. Despite the great preponderance of domestic production over foreign trade, it is perhaps too much to say that the tariff is unimportant in our present conditions. It can, however, be said that the tariff agitation has taught that radical changes, especially sudden and large reductions, are fraught with evils, and that business can adjust itself in large measure to any settled conditions. The future of the tariff discussion in America is hard to prophesy. The infant-industry argument now is of little force. With the widening of our international relations are growing interests favorable to reciprocity or to other freer trade relations. CHAPTER 52 OTHER PROTECTIVE SOCIAL AND LABOR LEGISLATION § I. SOCIAL LEGISLATION [Sidenote: City growth and new social problems] 1. _Under modern conditions many laws restricting free competition are required to secure the health and convenience of the citizens._ The rapid growth of city populations has brought new social and economic problems. The friction in social relations is greater when men are crowded together. In 1790, three per cent. only of our population lived in cities of over eight thousand; to-day the percentage is thirty-three. Then the city dwellers numbered one hundred and thirty-one thousand; now they number twenty-five millions. Then there were but six cities of eight thousand or over; now there are five hundred and forty-five. Then the largest city (Philadelphia) numbered fifty thousand persons; to-day the largest city (New York) numbers three millions. Many laws are survivals suited only to the older rural conditions. In London, these problems were first forced into prominence, and a law passed after the great fire of 1665 to regulate the rebuilding of houses, streets, sidewalks, and sewers, foreshadowed alike the American law of special assessments and the modern tenement-house legislation. A mass of laws wise and foolish has resulted from the attempt to meet the new conditions. The laws of nuisance and of sanitation have been rapidly changing. [Sidenote: Need of social regulation] Why not leave such subjects to individuals? It is for the interest of every one that his back yard should not be a place of noisome smells and disagreeable sights. But men are at times strangely obstinate, selfish, and neglectful, and through one man's fault a whole community may suffer. The refusal of one man to put a sewer in front of his house would block the improvement of a whole street. The obstinacy of one may bring an epidemic upon an entire city. There must be a plan, and by law the will of the majority must be imposed upon the unsocial few. Where voluntary coöperation fails, compulsory coöperation often is necessary. Thus health laws, tax laws, and improvement laws regulate many of the acts of citizens, limit the use of property, and compel men to a course against their own wishes and judgments. The justification for these limitations on the right of private property, on free choice of the individual, on "free competition," must be found in the social result secured. [Sidenote: Tenement-house laws in cities] [Sidenote: Interests affected] 2. _Tenement-house legislation is an important recent expression of this social protective policy._ As city population grows denser, land increases in value, and the evils of bad housing threaten the welfare of the great majority of city dwellers. Light, sun, air are shut out, and cleanliness, decency, and home life are made impossible. Two policies are open to the public. It may be left to private enterprise to solve the problem. If the tenant agrees to rent a disease-breeding house, he is the first to suffer. The interests of investors, it is said, will supply as good a house as each tenant can pay for. The other policy now adopted is to set a minimum standard of sanitation and comfort, to which all builders and owners must attain. Property owners are no longer left free to determine plans, height of building, proportion of lot built on, lighting, materials, and workmanship. Complying with the legal requirements, they are left quite free to collect whatever rent they can get. Such legislation is partly in the interest of the body of landowners as against the selfish desires of some individuals. One bad building may bring down the rent of all on the street. Partly, however, the regulation is in the interest of the tenants and of society as a whole, and against that of the landlord. The rents from slum property are threatened; hence the strong opposition always manifested against tenement-house legislation by some landlords, architects, and contractors, who fight it bitterly as an interference with their interests and as a confiscation of their property. It is not quite certain how marked will be the effect of this policy in making the rents too high for the poorer tenants and driving them into the country. But this result, predicted by the enemies of the policy, is not so undesirable, and the enlightened sentiment of the public to-day favors all efforts to destroy the breeding-places of disease, misery, and crime. [Sidenote: Public inspection of goods used in the homes] 3. _Laws forbid adulteration of products for domestic use and provide for public inspection._ English laws of the Middle Ages forbade false measures and the sale of defective goods, and provided for the inspection of markets in the cities. Recent legislation in many lands has developed much further the policy of insuring the purity or the safety of articles consumed in the home. The oleomargarin law passed by Congress was, however, designed as protective legislation in the interest of the farmer. Usually, the self-interest of the purchaser is the best safeguard for the quality of goods; but personal inspection by each buyer frequently is difficult and time-consuming, requiring special and unusual knowledge of the products, and special costly testing apparatus. The state undertakes, therefore, to set a minimum standard of quality, and to apply it by the economical method of social coöperation. This policy extends only to staple products and to a comparatively few articles. It would be impossible as well as unwise to apply it to art products, except to protect the morality of the community. This inspection sometimes raises the price, but the evils are small compared with the convenience and the benefits resulting to the citizen. He is assured that the article he buys is of standard quality, and if he wishes a cheaper quality there is no law to prevent his adulterating it for his own use. [Sidenote: State support of education] 4. _Other kinds of social amelioration undertaken by the state, through free, compulsory education, charity, and temperance legislation, are likewise interferences with competition and freedom of contract._ Many of these are so customary that they are not thought of in this light. Schools are productive enterprises, education is industry, and the supply of this service is always in large measure undertaken by private enterprise and could be left entirely to it. But free elementary education is the established policy, and is no longer debatable in America and France. In England the policy is still debated, much as is that of public ownership of trolley lines in America. One by one the states are passing compulsory education laws, and thus interfering still further with the freedom of the individual. The affection of parents can in most cases be trusted to provide for the education of children, but when family affection fails, the child and the state are the victims of the resulting ignorance, crime, and pauperism. State support of higher education is more in dispute. It is a universally accepted view that social welfare requires a more generous support for higher education than could be secured if it were sold at a competitive price; but while in eastern America its provision is left mainly to private gifts, in the West and South it is undertaken largely by the state. The justification of this policy must be found, not in the benefit to the particular students, but in the benefit diffused throughout the commonwealth by the encouragement of science, arts, and letters. [Sidenote: Public charity] [Sidenote: Temperance legislation] The system of public relief for the defective classes of blind, deaf, insane, feeble-minded, and paupers, are examples of the social protective policy. The public interest undoubtedly is served by having these suffering classes systematically relieved, but the extent and nature of the provision are questions ever in debate. Still more debated is temperance legislation, both as to licensing and as to prohibiting the liquor traffic. Nowhere is the manufacture and sale of intoxicating liquor treated quite like the traffic in most other goods, because it is recognized that the public interest is affected in a different way. While it is beyond question that society should protect itself against the drunkard, it is more doubtful whether it owes to the man, for his sake, protection against his own blunders. Not even the gods can save the stupid. Temperance legislation is strongest in its social aspect. The opponent of it usually champions the individualist view; its partisans uphold, in varying degrees, the social view. [Sidenote: Other laws to protect public morals] Similar questions arise regarding lotteries, gambling, betting, horse-racing, etc. When a man backs a worthless horse against the field, money probably is transferred from the stupider to the shrewder party. The philosopher may say that the sooner a fool and his money are parted the better; but the broken gambler remains a burden and a threat to honest society. Gambling, lotteries, and speculation cause embezzlement, crime, unhappy homes, and wrecked lives. Here are to be found with difficulty the true boundaries between ethics and expediency. A busybody despotism may protect the fool, but it thereby helps to perpetuate and multiply his folly; yet if the fool is left alone, he too often is a plague to the wise and the virtuous. [Sidenote: Usury laws as social legislation] 5. _Usury laws are found almost universally in civilized lands._ By usury was formerly meant any payment for the loan of goods or money; now it means only excessive payments. In former times moralists and lawmakers were opposed to all usury or interest. Most loans were made in times of distress. The sources of loanable capital and the chances of profitable investment were fewer in the past than to-day. For the last four centuries there has been on the question of usury a gradual change of opinion, beginning in the commercial centers and most rapid in the countries with more developed industry. A moderate rate of interest is now everywhere permitted; but in all but a few communities the rate that can be collected is limited by law, and penalties more or less severe are imposed on the usurious lender. It has been noted in another connection that usury laws are practically evaded in a number of ways within the letter of the law. Many writers maintain that usury laws do more harm than good even to the borrower, whom they are designed to protect. In a developed credit economy, where a regular money-market exists, they are superfluous, to say the least, as most loans are made below the legal rate. Such laws, however, have a partial justification. In a small money-market they to some extent protect the weak borrower at the moment of distress from the rapacity of the would-be usurer. Their utility is disappearing, but in simpler industrial conditions usury laws are fruits of the social conscience, a recognition of the duty to protect the weaker citizen in the period of his direst need. § II. LABOR LEGISLATION [Sidenote: Growth of child-labor legislation] 1. _Factory laws now limit in many ways the employment of women and children, and the hours of work._ Factory legislation began in England, early in the nineteenth century, to check some of the worst evils then showing themselves in the factories. It has since increased in England and has been copied rapidly by other countries. Some of the agricultural states of the Union have as yet no factory laws, but the states industrially more advanced have many. They are made, first, to apply to children. The evil of forcing children into factories is easily recognized. The child, subject to the commands of his parents or guardians, is not a free agent. At times a lazy father is tempted to support himself in idleness on the wages of his young children. Often poverty leads the parents to rob their children of health, of schooling, and of the joys of childhood. Child-labor depresses the wages of adults and the evil grows. Children laboring long hours in close and grimy factories, and growing into blighted and ignorant manhood, are a threat to society. In agricultural conditions, such as have prevailed generally in America, there is far less need of limiting the hours of work and the age at which children may begin to work. The barefoot boy trudging over clover-fields to carry water to the harvesters may be the happier, healthier, and better for his work. [Sidenote: Women's work and shorter hours] The work of women in factories tends to depress the wages of men, is inevitably harmful to family life, and, when the work is arduous and continuous, the evils are visited upon succeeding generations. In the early days of the factory system in England, the hours of work were lengthened in order to make the machinery earn as much as possible. The first laws regulating hours applied especially to women and children, limiting their work to ten or twelve hours daily. Later, this regulation was made to apply to men, and now is found in most civilized lands. In recent years the agitation has been for an eight-hour day, and doubtless it will some day be adopted in the majority of trades. [Sidenote: The workmen's remedies for injuries] 2. _Many laws provide for the health and safety of workers in factories and mines._ Both workman and employer are in many ways interested in providing against danger from fire, bad ventilation and lighting, bad sanitation, unprotected and dangerous machinery, and bad moral conditions in the factories and other places of work. What can the workman do to protect himself? (1) He may refuse to work whenever the conditions are bad. But this requires that he inspect the factory and judge of the sanitary conditions in each case, and that he then resist the temptation to accept employment of which he may be sorely in need. (2) He may ask higher wages to compensate for the added risk. But this is not practically possible with his insufficient knowledge of conditions, and it supposes an equal caution in many other workers. It is well that individual men are not excessively cautious, or the state would lack brave citizens and defenders. It is better that the forethought be in part exercised by the community collectively. (3) The person injured in health or limb may sue for damages. But this, with his means and knowledge, is often impossible, and is a costly process, yielding a pitiful recompense for a blighted life. [Sidenote: Factory laws to reduce accidents] The employer is interested in attracting better workmen at lower wages, and in avoiding damages by making the conditions of work favorable. The law seeks the same end by more economical ways when it sets a minimum standard. Experience shows that certain safety appliances should always be present to prevent the evils; for a state to leave their provision to self-interest, is to trifle with the welfare of its citizens. Factory legislation usually is opposed by employers because of the expense it causes; but if the regulations apply to all factories, the expense becomes a part of the cost of production and is shifted, like the other expenses of production, to the general body of consumers, of which the employers form only a small part. [Sidenote: Legal regulation of wage-payment] 3. _Laws regulate the form, time, and methods of payment in manufactures and mining._ Companies sometimes keep stores and pay the workers in mines and factories in goods, instead of money. Such a store in the hands of a philanthropic employer might easily be made, without expense to himself, a great boon to his workmen, giving them more than the benefits of consumers' coöperation. But the usual result is told by the fact that such stores are known as "truck stores," "pluck-me stores." They are most often found where some one large corporation dominates in the community, as in mines, where the workers are in a very dependent condition. If the higher prices demanded practically lower real wages, it would seem that the worker had an immediate remedy in his power to demand higher money-wages. Recognizing that this is for the most part an illusion--for it is just in such places that the conditions for free competition are least present--the law in many states prohibits these stores. It regulates also the measuring of work, fixing the size of screens and of cars used in coal-mining. The law is especially favorable to the hand-laborer in regard to the collection of his wages, requiring regular monthly or fortnightly or sometimes weekly payments. Mechanics' liens give to workmen in the building trades the first claim on the products of their labor. [Sidenote: Limitation of freedom of contract] 4. _In some cases the law forbids "contracting out," and the courts fix the terms of the contract._ In general, the law does not interfere with the right of the citizen to make any formal contract he chooses. It confines itself to providing rules and agencies for interpreting and enforcing the contracts when made. Employers often compel workmen to sign a release from damages in case of accident. This practice was forbidden even by common law, and many recent statutes have specifically provided that employers cannot "contract out" of the right to claim damages. The courts are particularly watchful of the interests of children, who are usually deemed incapable of entering into contracts binding them to their injury. Sailors, likewise, have long been protected and guarded by the law, because, journeying far from home, they are peculiarly in the power of their employers. The English courts may even change the contract if the sailors have been coerced by their masters. The rights of married women to mortgage their property is limited in some states in recognition of the undue influence that may be exercised by their husbands. The attempts in the last twenty years to settle the Irish land-question have resulted in a steady increase of the interference of law and courts with the freedom of contract between tenant and landlord. Though in many ways freedom of contract is thus limited, competition is not entirely destroyed; it is turned in other and usually better directions. [Sidenote: General nature of this social legislation] [Sidenote: Economic or moral objects primary] 5. _This group of social laws resembles protective tariffs in preventing free competition, but differs from them in varying ways and degrees._ Writers class all such laws as protective legislation, in that they depart from the rule of free trade taken in its broadest sense. It does not follow, however, that all these laws stand or fall together,--that if the protective tariff is wrong, all are wrong. The justification of every such measure is limited and relative, and therefore of varying strength. All protective measures are alike in that the free choice of the citizen is forbidden by law. The argument for the tariff is economic and political. The tariff does not seek to prevent a moral evil; foreign trade is morally as good as other trade. In a large majority of social laws the moral purpose is fundamental. It is the demand of humanity that competition be placed on a higher plane. Tariff legislation is primarily in the interest of a special well-to-do class, with which other citizens are compelled unwillingly to trade. Most social legislation is to protect the weak from being forced into contracts injurious to their welfare and happiness. In any case, social legislation is not to be justified by any but the most general abstract principle,--the attainment of the best social result. The best test of social protective laws is their contribution to a higher independence and to a freer competition on a higher, more worthy, and more humane plane. CHAPTER 53 PUBLIC OWNERSHIP OF INDUSTRY § I. EXAMPLES OF PUBLIC OWNERSHIP [Sidenote: The kinds of political units] 1. _Local political units generally acquire only industries whose products must be used in the place where produced._ The word industry is used here in a broad sense, including agents of psychic income not usually so classed, such as public parks. The grouping of publicly owned industries according to the size and importance of the political units cannot be exact, because some classes of industries are owned by several kinds of political units. Yet, especially with application to American conditions, an approximate classification may be made on this principle. Federal states consist of three main groups of political units: national, provincial, and local. Provincial units are the largest subdivisions, as the American "states," or commonwealths, the German states, and the provinces in other countries. The term local political unit is more complex and may mean county, township, village, city, and school or sanitary district; but most of what is to be said of local ownership refers to cities or to incorporated villages. [Sidenote: Municipal ownership of parks, libraries, &c.] [Sidenote: Of bridges, markets, waterworks, &c.] Nearly all public parks and recreation grounds are owned by cities. As population has become more dense, private yards of any extent become impossible, in cities, for all but the wealthy. Public ownership of parks insures recreation grounds to the common man in the most economical way. Of late the movement for large and small public parks and playgrounds has gone on rapidly in American cities. Related to parks are public baths, public libraries, art collections, museums, zoölogical gardens, etc. Some have declared that such a policy stops little short of a paralyzing socialism for the masses. Reason and experience fail to reveal any such danger so long as the things supplied gratify the higher tastes--as art, music, literature, innocent social recreation. Not until the necessities of life, as bread, clothing, and houses, are supplied, is encouragement given to the increase of improvident families and to the breaking down of independent character. The means of local communication--streets, roads, bridges--were once owned largely by private citizens. Here and there still are found toll roads and toll bridges built under charters granted a century ago, but tolls on public thoroughfares are for the most part abolished. A public market, where the producer from the farm and the city consumer can meet, is an old institution that is now being established anew in many cities. The providing of apparatus for extinguishing fires is always a public duty; the conveyance of waste water is increasingly a public function; and the supply of pure water, while often a private enterprise in villages, and sometimes in large cities, is increasingly undertaken by public agencies. Public ownership of gas and electric lighting is less common, as the utility supplied is not so essential and the industry is somewhat less subject to monopoly; but the difference is one of degree only. Street-railroads are often under public ownership in Europe; but there has thus far been no case of the kind in the United States, and only one in Canada. [Sidenote: American failures in state industry] 2. _The American state owns and conducts industries mainly whose products have a wider territorial use._ The American commonwealth has retired from some fields where once it was engaged in industry. Students of American history know that between the years 1830 and 1840 some states engaged largely, even wildly, in the building of canals and undertook to construct railroads, to start banks, and to engage in other enterprises. The undertaking of these industries was determined often by political and by selfish local interests, and their operation often was wasteful. A few enterprises succeeded, the most notable of these being the Erie Canal in New York. The unsuccessful ones remained worthless property in the hands of the state or were sold to private companies, as in the case of the Pennsylvania railroad. This reckless state enterprise was a bitter lesson in public ownership, and even after seventy-five years is not without effect on public opinion. For a long time no proposal for public ownership could have a fair hearing in America. But railroads and canals are publicly owned, and more or less successfully operated, in many foreign countries, as in Prussia and other German states, in Switzerland, and in the new states of Australia. [Sidenote: State ownership of various kinds] There has been recently a rise of interest in forestry in America. This is especially likely to be a state enterprise wherever the forest tracts are entirely within the limits of the state, as is the case of the Adirondacks in New York. Most of the forests in Germany are either communal or state-owned. The schools, a great industry for turning out a product of public utility, are largely conducted by the American state and by local units rather than by the nation or by private enterprise. The state encourages researches in the arts and sciences, and gives technical training. A variety of minor enterprises have been undertaken by states to supply salt, phosphate, banking facilities, even some manufactures. In the prisons and public institutions, states, such as New York, that have adopted the system of labor on public account engage in agriculture and manufacturing on a large scale, the products, amounting to millions of dollars annually, being used almost entirely by public agencies. [Sidenote: National ownership of various kinds] 3. _The nation owns and controls many industries of the widest use and most general interest._ Some industries grow out of the political needs of government. Established as a means of communication with military outposts, the post became a convenient means of communication for merchants and other citizens and grew into a great economic institution. In most countries the telegraph is publicly owned and has been annexed to the post, to which it is very closely related in purpose. The national improvements connected with rivers and harbors were first political--that is, they were for the use of the governmental navy; they became, secondly, commercial--for the free use of all citizens engaged in trade; and they continue to unite these two characters. Forestry is most largely undertaken in this country by the national government, doubtless because the large forest areas in the West extend over state boundaries, and because large tracts of public lands were still unsold at the time public attention was attracted to the subject. Since 1890, the policy of reserving great areas for forests, and picturesque districts for national parks, has developed greatly. In some countries mines are thought to be peculiarly fitted for national ownership and control. In Germany, the state owns some coal, salt, and other mines. Coinage and banking are everywhere looked upon as a function of sovereignty, and yet it is no more necessary for a nation to own its own mint in order to control the monetary system than for it to print the bank-notes in order to regulate their issue. The American government has its own printing office and therewith its share of troubles with organized labor. The fish commission, and the various branches of the department, coöperate with private industry in many ways. In Germany, compulsory insurance is provided for the workingman. This hasty survey suggests that the industries undertaken by government are both varied in nature and large in extent, although small in proportion to the mass of private industry. § II. ECONOMIC ASPECTS OF PUBLIC OWNERSHIP [Sidenote: The primary need of public ownership] 1. _Public ownership is primarily to control the essential agencies of government._ A large part of public ownership and activity in industry develops from political functions. As society evolves, what was unessential to political life becomes essential. Civilized government requires the use of a number of material agents. Buildings for legislative and executive officers, custom-houses, post-offices, lighthouses, can be rented of private citizens, as post-offices usually are in small places; but it is obviously economical and convenient in large cities for the government to own the public buildings. Government can reduce to a minimum its employment of labor by "farming out" the taxes, as all countries once did to some extent, and as France continued to do up to the French Revolution. It is now the settled policy for government to own or control its essential agencies, but this does not involve in every case the employment of day-labor direct to clean the streets, to collect garbage, etc. The more simple political functions shade off into the economic. To coinage usually are added the issue of legal-tender notes and certain banking functions; the post carries packages, transmits money, and in some cases performs the function of a savings-bank for small amounts. The only open question is as to the proper limit to this development. [Sidenote: Conflict of public and private interests] 2. _Public industry expands to supply as free goods many essentials of good citizenship, and to insure cheaper and more bountiful supplies of others._ It is the ideal of Herbert Spencer and of a small surviving group of _laissez faire_ philosophers that government should confine itself exclusively to the most essential political functions, leaving the economic functions absolutely alone. It should keep the peace, prevent men from beating and robbing each other, and preserve the personal liberty of the citizen. They assume that all of the economic needs will be provided by competition, in the best way humanly possible, in quantities and at the rate needed. In many cases, however, the general interest fails to harmonize with that of the individual. The forest has an immediate utility to the consumers of lumber, and it has also a diffused utility in its influence on industry, on climate, and on torrents and floods. Yet, as the private owner cannot control enough of the forest to affect the climate, and could not sell climate even if he could affect it, he will cut down the tree whenever he can gain by doing so. In this situation either government control or government ownership of forests is essential. [Sidenote: Social economy of some public industry] In some cases the difficulty of private ownership is in the excessive cost of collecting for the service. The cost of maintaining tollhouses at short intervals on a turnpike sometimes exceeds the amount collected. Collection in other cases, as for the service of lighthouses to passing ships, is impossible. Public industry secures, through the economy of large production, a cheaper and more efficient service, the benefits and costs being diffused throughout the community. The benefits of the work of experiment-stations for agriculture are felt immediately by the farmers, but are diffused to all citizens. A manufacturer able to keep his methods secret, or to retain his advantages for a time, can afford to undertake experiments in his factory, but the farmer seldom can. The public ownership of parks for the use of all gives a maximum of economy in the production of the most essential utilities--fresh air, sunshine, natural beauty, and playgrounds in the midst of crowded populations. Municipal ownership of waterworks is an extension of the same idea. Not only because large amounts of water are used by the public, but because cheap, pure, abundant water is an essential condition to good citizenship, speculation should in every possible way be eliminated from this industry. [Sidenote: Monopolistic nature of localized industries] 3. _Public ownership tends constantly to include the industries of a monopolistic nature, locally supplying general necessities._ This is no abstract principle; it is merely a statement of what is seen to be happening. Some industries are of such a nature that they drift inevitably into monopolistic control. Waterworks, gas, electric lighting, street-railways, telephone systems, are among these. However fierce may be the competition for a time, sooner or later either one company drives out the other or buys it up, or both come to an agreement by which the public is made to pay higher prices. [Sidenote: Localized production favors monopoly] A feature favoring the growth of monopoly when such industries are left to private enterprise, is the need to produce and supply the utility at a given locality. While two street-railways can compete on neighboring streets, it is physically impossible for two or more to compete on the same street. Two systems of water-mains or gas-mains can be put down, as sometimes is done, but this is not only a great economic waste, but the tearing up of the streets is an intolerable public nuisance. This difficulty is less marked in the case of telephones and electric lighting, and some persons still cling to faith in competition to regulate the rates in those industries; but faith in competition between water-companies and between gas-companies has been given up by nearly all students of the subject. [Sidenote: Gains from large production favor monopoly] 4. _A second feature favoring monopoly in such industries is the marked advantage of large production in them._ These industries are usually spoken of as "industries of increasing returns." This advantage is enjoyed in some degree by every enterprise, but it is gradually neutralized and limited (as has been noted elsewhere). The need to extend an expensive physical plant to every point where customers are to be served, and the very much smaller cost per unit of delivering large amounts of water, gas, electricity, transportation, etc., on the same street, offered a greater inducement for one competitor to crowd out or buy out the other at a more than liberal price. Even then, larger net dividends and correspondingly larger capitalization are secured than were before possible to both companies combined. [Sidenote: Uniformity of products favors monopoly] 5. _A third feature favoring monopoly is uniformity in the quality of the product furnished._ It is a general truth that competition is most persistent where there is the greatest range of choice open to the customer, and consequently the most individual treatment required in the enterpriser. An artist, even a storekeeper, attracts about him a body of patrons who like his product (for the merchant's manner and method of dealing are a part of the quality of his goods), and who cannot be tempted away by slight differences in price. Rival companies in the stage of competition are seen to claim superiority for their particular goods and to improve their service in every way possible. A new telephone company, entering where a monopoly has held the field, works at once a wonderful betterment in rates, courtesy, and service. But as the product of all competitors attains the highest technical standard possible at the time, the rivalry is reduced to one of price, and it is usually a "fight to the finish." [Sidenote: Franchises favor monopoly] 6. _A fourth feature favoring monopoly in these enterprises is the necessity of making permanent and exceptional use of the public streets and alleys._ If this right were granted by a general law to every citizen, this feature would be sufficiently implied in the foregoing discussion. As it would be intolerable to allow private interests to use public property in whatever way they wished, the legislative body makes special grants in such cases in view of the circumstances. Not only is the legislature (or council, or county board of commissioners, etc.) induced by the economic difficulties to withhold a charter to a second company, but it is exposed to the greatest corrupting influences by the one already established. The knowledge of the opposition to be encountered in getting a franchise must keep competitors out, even though monopoly prices are maintained. In view of these several features, which are so closely related that they form a common character, more or less fully shared by various industries, and especially in view of the necessity for the formal granting to them of peculiar privileges in the form of a public franchise, the public, in order to protect the general interest, is forced to undertake an exceptional control of these industries. [Sidenote: Modes of controlling public utilities] 7. _Several courses are open to the public, acting in its political capacity, to retain these monopoly advantages for the general welfare._ First, it may do nothing, trusting vainly to competition to regulate the rate, or consciously leaving the result to be worked out by the monopoly principle; this is what in most cases has been done in the past in America. Second, in granting the franchise it may attempt to fix near cost the charge for the service or product, so that the franchise will be worth little or nothing. Third, it may leave the rate to be fixed by the monopoly principle, but charge for the franchise so much that the value of the monopoly is appropriated into the public treasury. Fourth, it may have public officials carry on the business, either selling the product at cost or making monopoly profits that go into the public treasury. Various combinations of these plans are followed in practice, the most common plan being the fixing of maximum rates which, with improved methods, generally become ineffective. It is difficult to fix a uniform rate that is equitable, because conditions change, and, further, because a uniform rate must be applied to all parts of the town, although the cost of service varies greatly. It is difficult to sell the franchise for near what it is worth, because of the uncertainty, of the political blackmail, and of the limited number of competent bidders. There remains only the policy of public ownership to secure the profits of monopoly to the public, either directly or in a diffused manner. [Sidenote: Economic basis of public ownership] [Sidenote: Cost under public or private ownership] 8. _Public ownership is economically justified when it secures a utility of widespread consumption, otherwise impossible, or insures the public a better quality or a lower price._ The question of public ownership is not exclusively an economic question. There are incidental problems, such as its effects on enterprise and on political integrity, with which it is not possible here to deal. In the main, however, public ownership is simply a business proposition which must be justified by its economic results. In the case of a general social benefit not to be secured without public ownership, as popular education or the climatic effect of forests, the only question to answer is whether the utility is worth the cost. In the case of industries already in private hands, as waterworks, gas and electric lighting, there is needed, to make a wise decision possible, a knowledge of the effect a change to public ownership will have on value. If public officials can furnish some goods cheaper than they are furnished by private enterprise, it is because of the wide margin of monopoly profit, not because there is any magic in public ownership. The same general items of cost must be met. The first cost of the plant and the annual interest payments are much the same. Experience shows that, because of political influence, wages are likely to be higher under public ownership, but salaries of officials are higher under private ownership. On the whole, public industry in these respects probably has no advantage. Some items of cost may be less under public management. Public collection of dues along with taxes is an advantage not enjoyed by private companies. Several public officials sometimes share the same office and thus reduce expenses. In small towns the public electric lighting and waterworks have been operated more economically under one roof. Public industry does not have to meet the cost of lobbying and blackmail which are often forced upon private companies. But the greatest source of saving in public ownership is the value of monopoly privileges that, under private management, go into private pockets. [Sidenote: Character of public officials] [Sidenote: Limits and effects of public ownership] The temptation to political corruption may be more insistent when a large force of men is constantly employed, and when large supplies are constantly purchased, by public officials, but the temptation is not so strong or so centralized as it is in the granting of franchises to wealthy corporations. Public industry is weakened by the absence of certain motives to excellence that are present in private business. The income of public officials not being dependent on the economy of management, the spur and motives of competitive industry are lacking. No social discovery has made individual honesty and civic virtue useless to good government. The decision in any specific case is one dependent on local conditions, and the exact limits of public ownership are not fixed. Industry is changing so rapidly that new experience is needed each year. The main outlines of public ownership, however, are now in large part determined. Some industries do well, others ill, under public management, and between these lie many debatable cases. Waterworks and probably electric lighting, because of the comparative simplicity of their operation, are more suitable for public ownership than are gas-works. No absolute line divides the one group from the other. But whatever the changes, the student of the theory of value must never overlook the fact that the increase of public ownership is altering in manifold ways the prices of goods, and is reacting also on the production, distribution, and consumption of incomes. CHAPTER 54 RAILROADS AND INDUSTRY § I. TRANSPORTATION AS A FORM OF PRODUCTION [Sidenote: Productivity of transportation] 1. _Transportation of goods and men is one of the most important modes of production._ When utility was thought of as inherent in things rather than as resulting from a relation between things and wants, it was usual to consider only those industries as truly productive that brought something physical into existence, as do agriculture and the extractive industries. Even after it was recognized that a change of form also imparted value, it was still denied that a changing of place could be truly productive industry. But when production is seen to be the bringing of things into right relations with wants, transportation may be deemed to be the primary and typical mode of increasing income. Movement is necessary to the existence of animals. The animal, in the order of evolution a higher form of life than the more fixed plants, goes to seek food, and has open to it a wider range of possibilities in life. With slight exceptions, it is true that the only way in which animals can bring about better place-relations between their wants and goods is by moving themselves. To this power man has added that of moving goods and thus adds enormously to income. Agents being valued in accordance with their net productiveness, the nearness to market and the ease of transporting the product are large factors in price. The location of a field enters into its value as truly as do the chemical qualities of the soil. A rocky field near a market may be richer, in an industrial sense, than the richest soil far remote, which can be used by men only at the cost of their alienation from society. Means of transportation set a limit to social and political groupings, to the size of the market, and to the possibility of exchange. Indeed, all exchange value is conditioned upon the possibility of transportation. [Sidenote: Original local advantages] 2. _Natural differences in the grades of fertility and of accessibility determine first the most valued locations._ Primitive man, dependent on the bounties of nature, had to take things as he found them. Few places unite the best grades of the essential things: water, food, fertile soil, a favorable climate, protection against enemies. Between tribe and tribe went on ceaseless war for the few favored spots of the earth. Where transportation is possible, trade can supply one or more of the missing elements. International trade began early, wherever it could, to strengthen economically the weak localities. Advantages in transportation are sometimes better than fertile soil and rich resources. The early centers of civilization were on the banks of rivers and the shores of seas. Around the Mediterranean were the ancient empires. Trading-towns grew up at ports and at the favored points of trade: Tyre, Sidon, Carthage, Florence, Genoa, Venice, Antwerp, London, New York. The early settlements in America were grouped along the coast. Without the cheap communication afforded by water, the colonies would have been cut off from the benefits of continuing contact with the older civilization. It would have been a great price to pay, even for a rich continent. [Sidenote: Influence of waterways on local advantages] 3. _The opening up of new water-routes of travel has profoundly altered the prosperity of nations._ Sometimes the relation of cause and effect is the reverse of that just noted. The conquest of Asia Minor by the Turks closed the lines of travel with the East, destroyed the trade of the Italian cities, and stimulated exploration for new routes. The War of 1812 in America stopped the coast trade and forced on the wagon-roads between the New England and the Southern states a great traffic, which declined quickly at the close of the war. Again, the growth of population and industry shifts the center of trade, as it did from the south to the north of Europe, and as it is doing from England to America. The discovery of new routes, however, has wrought the most rapid and sweeping changes. These three causes united, about the time of the discovery of America, to overthrow the prosperity of the older cities of Europe, while the opening of the resources in America, the abundance of silver and gold, trade with the colonists and the Indians, showered wealth and trade into the lap of Spain, Holland, Belgium, England, and the northern cities of Germany. Such changes continue under our eyes. The Erie Canal has an influence on values in every township from New York to Buffalo, and along the lake shores to the head of Lake Superior. The Suez Canal marked an epoch in ocean travel. The American Isthmian Canal will affect the value of many investments, from the Gulf of Mexico to the Pacific Coast. A marked change in transportation thus shifts the level of values in a locality. Fortunes are made and lost. One community rises and another sinks. Increments and decrements of value on a great scale are unearned, and all classes of goods are affected, though in varying degrees. § II. THE RAILROAD AS A CARRIER [Sidenote: Technical vs. economic efficiency of transportation] 1. _Different modes of transport are more or less economical relatively to the other industrial conditions._ Not only new routes but new agents of travel change the scale of values. In early societies, undeveloped industrially, first men, then domestic animals, were used as beasts of burden. The first vehicles are technically simple in design and construction; on land are used drags, sleds, carts; on waterways are used rafts, canoes, barges, and boats. Primitive means of transportation had to be inexpensive, for poverty and the uncertainty of early society forbade the tying up of large resources in them. Technical efficiency of means of transportation may be contrasted with economic efficiency. Technical goodness is absolute, and is measured in speed and weight of cargo; economic efficiency is relative, and varies with the money cost and money value of the services. A turnpike is more efficient than a mud road, yet in some districts it is bad economy to build it. A railroad is more efficient than a cart, yet in some places even pack-horses are more economical. To be economical, the expenditure needed to supply the efficient agent must be warranted by the volume and value of traffic. [Sidenote: Economic advantages of natural waterways] 2. _The most economical means of transportation before the railroad were the waterways, natural and artificial._ Some natural waterways still afford the most economical means of transportation between favorably situated ports. Coal is shipped most cheaply in sailing vessels from Wales around Cape Horn to ports along the western coasts of America. A part of California's regular fuel-supply is obtained in this way. Coal has been shipped from Pennsylvania to Europe, and in the anthracite coal-strike in 1902, some was shipped from England to America. Invention has reduced the cost of construction and operation of vessels and has increased their safety and speed, thus multiplying the efficiency of the natural waterways. The large cities in America are situated on waterways, usually where there is a break in transportation requiring reshipment, as, for example, at New York, San Francisco, Buffalo, New Orleans, Cincinnati, Chicago, Minneapolis, and St. Paul. Likewise many of the small cities and villages, serving as local trading centers, owe their existence to similar though less powerful influences. [Sidenote: Merits and defects of canals] Canals are begun as connecting links in a system of natural waterways to extend the advantages of cheap transportation. The Erie Canal not only serves the three hundred miles of territory along its banks, but it opened to commerce all the lands tributary to the Great Lakes. The great advantage of canals is cheapness of operation due to the simplicity of the machinery needed and to the great loads that can be moved with small power. A cent a ton-mile is a paying rate on a canal. For heavy, slow-moving freight, the railroads can hardly rival the canals at their best. As canals, however, can be built only along a level country and where the water supply is at a high level, their construction is limited to a small portion of the country. The law of extensive diminishing returns applies strongly to the construction of canals. The first canals are easily constructed and economically operated, but it is only with greater cost and difficulty that the system can be successively extended. In temperate climates their use is limited by ice to a part of the year, and the summer's drought sometimes limits it still further. At its best, therefore, the small land-locked canal is fitted only to be a supplementary agent in the system of transportation wherever industry demands high speed and great regularity. Far different is the case of the oceanic canal in a tropical climate. [Sidenote: Superior advantages of railroads] 3. _The railroad is rapidly surpassing in importance every other agency of transportation._ Even in respect to cheapness, the unique virtue of waterways in favored localities, the railroad has been making rapid gains. Improvements in roadbed, rails, cars, engines, and other equipment are reducing greatly the cost of conducting traffic on the main lines of roads. The adaptability of the railroad excels that of any other agent of transportation; it can go over mountains or tunnel through them. In certainty its superiority is marked; floods and snows may delay it for a day, but there is no seasonal stoppage of traffic. In speed, the railroad so far excels that the canal can survive only by dividing the traffic, taking the lower grades of freight, and leaving to the railroad the passenger traffic and fast freight. [Sidenote: Results of the rapid growth of railroads] Because of these qualities, the extension of the railroads in the last fifty years has been so rapid that it has not given time for a gradual adaptation of industry. It has worked in many places revolutionary changes. The building of railroads in the Mississippi valley in the seventies lowered the value of Eastern farms, ruined many English farmers, and depressed the peasantry in all western Europe. With the prices that resulted when the fertile lands of the Western prairies were opened to the world's markets, the stony and worked-out lands of the older districts could not compete. Great regions are still to be opened in this manner in Russia, Siberia, Africa, and South America. While one can only speculate upon the effects this development will have, the changes promise to be less sudden and tremendous than those of the last twenty years. Many minor changes, of no less moment in limited districts, result from the building of railroads. Local trading-centers decrease in importance. Villages and towns, hoping to be enriched by the railroads, see trade going to the cities. Commerce becomes centralized. Enormous increase of value at a few points is offset by losses in other localities. § III. DISCRIMINATION IN RATES ON RAILROADS [Sidenote: Monopoly power of railroads] 1. _The railroad has more monopoly power in fixing rates at points along its lines than is the case with other agents of transportation._ The ownership of the wagons, ships, and canal-boats of a country is usually divided. Every point along the line of the turnpike or the canal and at ocean ports enjoys competition between carriers, the great shipping combinations not having been successfully formed as yet. In the early days of the railroads it was believed that a company or the government would own the rails and charge toll to the different carriers, who would own cars and conduct the traffic as was done on the canals. Experience soon showed the utter impracticability of this scheme and the need of unified management. The railroad, therefore, has a monopoly at all points on its line not touched by other carriers. This, like all other monopoly, is limited by the need to secure some business and to meet competition at terminal points. The railroads in private hands early began to "charge what the traffic would bear" at every station, thus practising various forms of discrimination disastrous in their effects on the citizens. [Sidenote: Discrimination as to goods] 2. _Discrimination as to goods is charging more for transporting one kind of goods than for another without a corresponding difference in the cost._ When reasonably understood, this proposition does not apply to a higher charge for goods of greater bulk, as more per pound for feathers than for iron, the "dead weight" of car being much greater in one case than in the other. It does not apply where there is a difference in risk, as in carrying bricks and powder, or coal and crockery; nor where there is a difference in trouble, as in shipping live stock and wheat. Any difference that can reasonably be explained as due to a difference in cost is not discrimination; on the other hand a difference in cost without a difference in rate is discrimination. Discrimination as to goods may be by value, as low rates for heavy, cheap goods and high rates for lighter, valuable ones. Coal always goes at a low rate as compared with dry goods, and sometimes more is charged for coal to be used for gas than for coal to be used for heating purposes. Discrimination as to goods is the most usual and, if reasonably employed, one of the most justifiable of the various kinds of rate discriminations. [Sidenote: Local discrimination] 3. _Discrimination between places (local discrimination) is charging different rates to two localities for substantially the same service._ This occurs when local rates are high and through rates are low; when rates at local points are high and at competing points are low; when less is charged for shipments consigned to foreign ports than for domestic shipments; when more is charged for goods going east than for goods going west. The causes of local discrimination are: first, water-competition, found at great trade centers such as New York and San Francisco; second, differences in terminal facilities, making some places better shipping-points than others; third, competition by other railroads, which is concentrated at certain points, only four thousand (one tenth) of the stations of the United States being junctions; fourth, the influence of powerful individuals or large corporations and the personal favoritism shown by railroad officials. [Sidenote: Its effects] The effect of discrimination is to develop some districts and depress others; to stimulate cities and blight villages; to destroy established industries; to foster monopolies at favored points; and to sacrifice the future revenues of the road by forcing industry to move to the competing points to get the low rates. The power of railroad officials arbitrarily to cause rates to rise or fall is happily limited in practice by the need of earning as large and as regular an income as possible, but even as exercised it has been at times as great as that possessed by many political rulers. [Sidenote: Personal discrimination] 4. _Discrimination between shippers (personal discrimination) is charging one person more than another for substantially the same service._ This most odious of railroad vices, rarely practised openly, is done by false billing of weight, by wrong descriptions or false classification to reduce the charge below published rate-sheets, by carrying some goods free, by issuing passes to one and not to all patrons under the same conditions, or by donations or rebates after the regular rate has been paid. In some cases a subordinate agent shares his commission with the shipper, and the transaction does not appear on the books of the company. In other cases favored shippers are given secret information that the rate is to be changed, so that they are enabled to regulate their shipments to secure the lower rate. [Sidenote: Causes of personal discrimination] One group of reasons for personal discrimination is connected with the interests of the road. It is to build up new business; it is to make competition with rival roads more effective by favoring certain agents, as is very commonly done in the Western grain business; it is to exclude competition, as by refusing to make a rate from a connecting line or to receive materials for a new railroad which is to be a competitor; and it is to satisfy large shippers whose power, skill, and persistence make the concession necessary. Another group of reasons has to do with the interests of company officials. It is to enable them to grant special favors to friends; or it is to build up a business in which they are interested; or it is to earn a bribe that has been given them. [Sidenote: Evils of personal discrimination] That the evils of personal discrimination are great, need hardly be said. It introduces uncertainty, fear, and danger into all business; it causes business men to waste, socially viewed, an enormous fund of energy to get good rates and to guard against surprises; it grants unearned fortunes and destroys those honestly made; it gives enormous power and presents strong temptations to railroad officials to injure the interests of the stockholders on the one hand and of the public on the other. Apart from government, the railroad represents the greatest single economic factor in personal distribution. It has introduced a new form of problem into economic society. It has created a monopoly comparable to the prerogatives of feudal lords. No other industrial agency in private hands so affects all the producing forces of society and exercises such a potent influence on values. CHAPTER 55 THE PUBLIC NATURE OF RAILROADS § I. PUBLIC PRIVILEGES OF RAILROAD CORPORATIONS [Sidenote: Public nature of railroad franchises] 1. _Railroads enjoy peculiar public privileges through their charters, franchises, and the right of eminent domain._ Railroads in our country are owned by private corporations and are managed by private citizens, not, as in some countries, by public officials. They have been built under the motive of private enterprise, in the interest of the investor, not as a charity or as a public benefaction. Railroad-building appears thus at first glance to be a case of free competition where public interests are served in the following of private interests. But, looked at more closely, it may be seen to be in many ways different from the ordinary competitive business. Competition would make the building of railroads a matter of bargain with proprietors along the line, and an obdurate farmer could compel a long detour or could block the whole undertaking. But the public says: a public enterprise is of more importance than the interests of a single farmer. By charter or by franchise the railroad is granted the power of eminent domain, whereby the property of private citizens may be taken from them at an appraised valuation. The manufacturer, enjoying no such privilege, can only by ordinary purchase obtain a site urgently needed for his business. Why may the railway exercise the sovereign power of government and invade other private property rights? Because the railway is peculiarly "affected with a public interest." The primary object is not to favor the railroads, but to benefit the community. These charters and franchises are granted sparingly in most European countries. In this country they have been granted recklessly, often in general laws, by states keen in their rivalry for railroad extension. When thus great public privileges had been granted without reserve to private corporations, it was realized, too late in many cases, that a mistake had been made and that an impossible situation had been created. [Sidenote: State and National aid to American railroads] 2. _In America and in many other countries, large grants of lands and money have been made to railroads on the ground of their peculiar public nature._ Railroads were granted not only peculiar powers and privileges, but also material aid. The railroad enterprise was uncertain, the possibilities of its growth could not be foreseen, and private capital would not invest without great inducements. In European countries where capitalists were less enterprising or venturesome than in America, railroad extension was very slow except where the state in some manner extended its aid to the enterprise. The American states abandoned the principle of non-interference most recklessly, and vied with each other in giving lands, money, and privileges, in loaning bonds, in subscribing for stock, and in releasing from taxation. These protective measures fostering a special enterprise were expected by increasing wealth to diffuse a greater welfare throughout the community. Many of the states were forced to the point of bankruptcy by their reckless generosity, and some of them repudiated the debts thus incurred. The national government then took up the same policy and granted lands to the states to be used for this purpose. The first example of this was the grant to the Illinois Central road, in 1850, of a great strip of land through the state from north to south. Grants were made in fourteen states, covering tens of millions of acres of land. Then the national government, between 1863 and 1869, aided the building of the Pacific railroads by granting outright twenty square miles of land for every mile of track and by loaning the credit of the government to the extent of fifty million dollars--a debt settled by compromise only after thirty years. [Sidenote: Railroad grants by localities] Counties, townships, cities, and villages along the line of projected roads then entered into keen competition to secure them. Bonds, bonuses, tax-exemptions, and many special privileges were granted. To obtain this new Aladdin's lamp, this great wealth-bringer, localities mortgaged their prosperity for years to come. The promoters bargained skilfully for these grants, playing off town against town, cultivating the speculative spirit, punishing the obdurate. Not the civil engineer, but the financial engineer platted the devious lines of many a railroad on the level prairies of America. The effects of these grants were in many cases disastrous, and since 1870 they have been forbidden in a number of states by legislation and by state constitutions. But before this era of generosity ended, probably the railroads had received more public aid than has ever been given to any other form of industry in private hands. [Sidenote: Investors' view of railroads' obligations] 3. _The railroads are now generally held to have peculiar public duties corresponding to their privileges._ Do all these grants in the past make the railroads other than mere private enterprises? One answer, that of those financially interested in the railroads, is No. They say that the bargain was a fair one, and is now closed. The public gave because it expected benefit; the corporation fulfilled its agreement by building the road. The terms of the charter, as granted, determine the rights of the public; but no new terms can now be read into it, even though the public now sees the question in a new light. Similar grants, though not so large, have been made to other industries. Bounties have been given to sugar-factories; tariffs have favored iron-forges and woolen-mills; factories have been given, by competing cities, land and exemption from taxation; yet no attempt is made on that account to control these businesses in a peculiar way and to treat them as public enterprises. So, it is said, the railroad is still merely a private business. [Sidenote: Social view of railroads' obligations] But the social answer is stronger than this. As to the precedent of tariff- and bounty-favored enterprises, most careful students would admit a close analogy in the two cases, but would maintain that the tariff policy also has been carried to an unjustifiable extreme, and that it could not be used to vindicate a still greater assault on public rights. But, further, privileges of railroads are greater in amount and more important in character than those granted to any ordinary private enterprise. The legislatures recognize constantly the peculiar public functions of the railroads. In other private enterprises, investors take all the risk; legislatures and courts recognize the duty of guarding, where possible, the investment of capital in railroads. Laws have been passed in several states to protect the railroads against ticket-scalping. Whenever the question comes before them, the courts maintain the right of the railroads to earn a fair dividend. Private enterprise has been invited to undertake a public work, yet public interests are paramount. [Sidenote: Need of harmonizing public and private interests] If an extremely abstract view is taken there is danger of losing sight of the real problem, which is that of harmonizing these two interests in thought and in public policy. Yet the extreme advocates of the private control of railroads have resented indignantly any public interference with railroad rates and with railroad management as an infringement of individual liberty. At the time of the passage of the Interstate Commerce Act this position was inconsistently taken by those in whose interests free competition had been violently set aside at the very outset of railroad construction, and for whom government interference had made possible great fortunes. The railroads cannot change from a public to a private character just as it suits their convenience. They cannot be allowed to play Dr. Jekyll and Mr. Hyde; smooth and affable in the character of public agents when public advantages are to be gained, and then as private enterprises ugly and scowling, flouting the public interests, charging all the traffic will bear, and resisting all reasonable regulation and conditions. Though railroads are private enterprises as regards the character of the investment, they are public enterprises as to their privileges, functions, and obligations. § II. POLITICAL AND ECONOMIC POWER OF RAILROAD MANAGERS [Sidenote: Railroad rates like taxes] 1. _In various ways railroad managers exercise great political influence and power._ Some writers maintain that the power to make rates on railroads is a power of taxation. They point out that if rates are not subject to fixed rules imposed by the state, the private managers of railroads wield the power of the lawmaker. By changing the rates on foreign exports or imports, the railroads frequently have made or nullified a protective tariff and have defeated the intention of the legislature. High rates on state-owned roads have openly been used in lieu of protective duties. These facts go to show that a change of railroad rates between two places within the country is similar in effect to the imposing or repeal of tariff duties between them. [Sidenote: Political influence of railroads] The wealth and industrial importance of the railroads give them widespread political power in other ways. It is commonly charged in some states that the legislature and the courts are "owned" by the railroads. The railroads, in part because they are the victims at times of attempts at blackmail by dishonest public officials, are compelled in self-defense to maintain a lobby. The railroad lobby, defensive and offensive, is in many states the all-powerful "third house." Railroads even have their agents in the primaries, they enter political conventions, they dictate nominations from the lowest office up to that of governor, and they elect judges and legislators. The extent to which this is done differs according as the railroads have large or small interests within the state. How is this great political problem to be met except by an appreciation of its importance and by a growth of public integrity? [Sidenote: The complex obligations of railroad directors] 2. _The economic power of the higher railroad officials enables them to exercise certain functions of an important public nature._ When the railroad was a young industry, its essentially public nature was not recognized. It was at first thought to be simply an iron-track turnpike to which the old English law of common carriers would apply. As this and similar notions proved illusory, the railroad manager became invested with complex and often conflicting duties to the stockholders and to the public. He wore his conscience-burden lightly, and frequently made little attempt to meet the one and no attempt whatever to meet the other obligation. The new field offered for speculation gave opportunities for great private fortunes. There were no precedents, no ripened public opinion, no established code of ethics, to govern. It was a betrayal of the interests of the stockholders when directors formed "construction companies" and granted contracts to themselves at outrageously high prices. It was an injury not only to shippers, but also to the stockholders, when special rates were granted to friends and to industries in which the directors were interested. [Sidenote: Unclear convictions as to the railroads' public nature] It is believed that a better code of business morality has developed, and that the officers' relation of trusteeship toward the shareholders is now more often recognized. But practical ethics need to be developed much farther than this. A railroad manager is engaged by the stockholders, is responsible to them, and looks to them for his promotion. Hence their interests are uppermost whenever the welfare of the public is not in harmony with the earning of liberal dividends. The manager feels bound to defend the principle of "charging what the traffic will bear" in the case of each individual, locality, and kind of goods. If this ruins some men and enriches others, if it destroys the prosperity of cities to increase the earnings of the road, at all events he feels he has done his full duty. Railroad directors do not yet recognize, and possibly never will, that their office is more than a private trusteeship, that it is a public trust. [Sidenote: Progress of railroad consolidation] 3. _The progress of consolidation among railroads is putting into fewer hands greater financial and economic power._ The early railroads, many of which were built in sections of a few miles in length, have been slowly welded into continuous trunk lines with many branches. The New York Central between Albany and Buffalo was a consolidation, by Commodore Vanderbilt, of sixteen short lines. The Pennsylvania system was formed link by link from scores of small roads. The growth of consolidation recently has been more rapid than ever before. Sixty per cent. of the mileage of the United States is under the control of five interests; seventy-five per cent. is controlled by a group of men that can sit about one table. The country is being divided territorially into great railroad domains, within each of which one financial interest is dominant. Great financial alliances and "community of interests" still further unify the policy of the leading roads. [Sidenote: Economic results of consolidation] Toward this result strong economic forces are working. Consolidation has many technical advantages: it saves time, reduces the unit cost of administration and of handling goods, gives better use of the rolling stock and of the terminal facilities of the railroads, and insures continuous train service. It has the advantages of other large production and the possible economies of the trusts. Most important, however, from the point of view of the railroads, is the prevention of competition and the making possible of higher rates and larger dividends. The statement that competition is not an effective regulator of railroads often is misunderstood to mean that it in no way acts on rates. It is true that competition between roads does not prevent discrimination and excessive charges between stations on one line only; but competition usually has acted powerfully at well-recognized "competing points." The larger the area controlled by one management, the fewer are the competing points; the larger, therefore, is the power over the rate and the more completely the monopoly principle applies. It is a grim jest to say that consolidation does not change the railroad situation as regards the question of rates. § III. COMMISSIONS TO CONTROL RAILROADS [Sidenote: Railroad evils and the old legal remedies] 1. _Most of the states have undertaken, through commissions, to regulate the railroads in the public interest._ When it became evident that public and private interests in the railroads were so divergent, it still was not easy to determine how the public was to be safeguarded. At first, some general conditions such as maximum rates were inserted in the laws and charters; but these were not adaptable to changing conditions and, for lack of administrative agents, could not be enforced. The early efforts at state ownership were, as was noted above, futile and disastrous, the remedy of state ownership, as then applied, being worse than the disease. The old law of common carriers gave to individual shippers an uncertain redress in the courts for unreasonable rates; but the remedy was costly because the aggrieved shipper had to employ counsel, to gather evidence, and to risk the penalty of failure; it was slow, for while delay was death to the shipper's business, cases hung for months or years in the courts; it was ineffectual, for even when the case was won, the shipper was not repaid for all his losses, and the same discrimination could be immediately repeated against him and other shippers. [Sidenote: Object and working of the state commissions] Attempting to remedy these evils, thirty-one of the states have appointed commissions and, as the most important states are included, this mode of regulation applies probably to four fifths of all traffic beginning and ending in a single state. These commissions differ in power, but in general they attempt to prevent excessive discrimination in rates and to check all railroad practices injurious to the public welfare. The commission principle, strongly opposed at first by the railroads, has been upheld by the courts and is now an established public policy. The state commissions, however, have fallen far short of a solution of the problem. Though they have done much to make the accounts of the railroads intelligible, something to make the rates reasonable and subject to rule, and much to educate public sentiment, on the whole their results have been disappointing. It has been difficult to get commissioners at once strong, able, and honest; the public does not yet know its own mind well enough to support the commissions properly; and--more fatal weakness still--the courts early decided that state commissions could regulate only the traffic originating and ending within the state, and this left untouched the much greater volume and more important class of interstate traffic. [Sidenote: Passage of the Interstate Commerce Act] 2. _The Interstate Commerce Commission is an agency by which it was hoped to secure a uniform national public control of railroads._ Public hostility to private railroad management was greatest in the regions where the most rapid building of roads occurred from 1866 to 1873. One center of grievances was in "the granger states" of Illinois, Wisconsin, Kansas, Nebraska, Iowa, and Minnesota; another center was in the oil regions of Ohio and Pennsylvania. The Eastern states were not without their troubles, for the report of the Hepburn Committee of the New York legislature in 1879 shows that discrimination between shippers prevailed to an almost incredible degree in every portion of New York state. When the courts, in 1886, decided that the greater portion of the railroad rates could not be treated by state commissions, national control was loudly demanded. Scores of bills were presented to Congress between 1870 and 1886, and, despite the bitter opposition of the railroads, the Interstate Commerce Act was passed in 1887. [Sidenote: Its provisions] The act laid down some general rules: that rates should be just and reasonable; that railroads should not pool, or agree to divide, their earnings to avoid competition; that they should, unless expressly excused, fix rates in accordance with the long- and short-haul principle (to charge no more for a shorter distance than for a longer one on the same line and in the same direction, the shorter being included within the longer). The act provided for a commission of five men, to be appointed by the President, which might require uniform accounts from the railroads, and which should enforce the provisions of the act. [Sidenote: Results of the act] 3. _The object of the Interstate Commerce Act has been but imperfectly attained._ This brief proposition sums up the story of years of efforts and defeated hopes. The powers of the commission have proved inadequate to attain the main purposes of the act--the prevention of discrimination and the securing of steady and equitable rates to all shippers. By the decisions of the federal courts, the commission's power has been reduced far below the intentions of the Congress that passed the law. The railroads have in many cases refused to obey the orders of the commission and have succeeded in maintaining their refusal. Admirable results have been secured in the way of uniform accounting, uniformity of rates has been somewhat furthered at times, and the public has been in many cases enlightened. But the greatest evils remain. Railroads still give secret rates in great numbers; many competent witnesses before the Industrial Commission in 1900 and 1901 testified that discrimination had never been worse. From time to time the recognition of the injury to dividends wrought by discriminating rates prompts some railroad to offer its coöperation to the commission, and this inspires new hopes of an effective administration of the act. The pressure of competition, however, soon forces the penitent road back into its old ways. On one thing the railroads and the commission are agreed: that pooling should be permitted, though the commission wishes to have this under strict supervision. To this point the public has not yet advanced. [Sidenote: The railroad problem unsolved] Despite the general acceptance now of the principle that the railroads should be controlled in the public interest, despite the barren legal triumph of the commission principle, it is evident that the railroad is not yet under social control. The future must determine whether the solution is to be found in effective public regulation or in public ownership. CHAPTER 56 PUBLIC POLICY AS TO CONTROL OF INDUSTRY § I. STATE REGULATION OF CORPORATE INDUSTRY [Sidenote: The social problems of corporations] 1. _The great increase of late in the number of industries under corporate control has brought new problems of social regulation._ Inventions, machinery, better transportation, better communication, widening markets, have united to favor large-scale production, and this in turn to multiply corporations. Corporate organization makes possible greater massing of capital, greater stability of policy, and (because not dependent on a single life) greater permanence than does individual ownership. With these advantages the corporation brings also new social problems. The relations in corporate business are more complex than those in individual enterprise. The ordinary stockholder cannot have personal knowledge of the business or exercise personal supervision over his investment. The corporate official controls chiefly not his own wealth, but the wealth of others. When men deal personally with each other their sympathies are more appealed to. But, as noted in the case of the railroad, the corporate official at best seeks to satisfy his employers, often to the detriment both of the employes and of the public. Corporations are "soulless" because they permit less of the close personal relation that makes for morality. At various points in these later chapters on the relation of the state to industry, mention has been made of the measures society has taken to regulate corporate industry. The purpose now is to survey the field more systematically and to see the extent of this regulation, the difficulties arising, and the principles involved. [Sidenote: Examples of public control of corporate industry] 2. _Numerous laws and commissions recently have been established to provide public regulation of industry._ The Interstate Commerce Commission is the most prominent of the agencies for regulating corporate industry, as the railroad problem is the most prominent of the corporation questions. But before the advent of the railroad, banks had been recognized as having an exceptional public character. Not only stockholders, investors, depositors, and note-holders, but a large part of the public suffers losses by the failure of banks. As investigation by the various interested persons is quite impossible, the state through its agents inspects the books of the bank in a manner not thought of in the case of ordinary private business. The bank commission is the eye of the public, safeguarding the public welfare. State inspection of insurance companies, a later kind of corporate enterprise, grew out of a similar need. Insurance to provide for sickness, old age, or death is socially desirable and is possible in an equitable way only by the association of a large number of policy-holders. But inspection of the business by each policy-holder being impossible, regulation and control through some public agency is needed. The tax commissions now found in a majority of the states have been created principally to deal with corporations. In California, a debris commission regulates the relations between the farmers and the miners using hydraulic processes. A number of states have mining commissions, harbor commissions, labor commissions, boards of arbitration, and other similar bodies. The increase of these public agencies to regulate corporate industry has lately been condemned by some as a useless multiplication of state machinery. Doubtless some commissions have, through improper influences, been needlessly created; others having important duties have been intrusted to incompetent political appointees. But most of these commissions are needed, though at first their work may be ineffective. [Sidenote: Helplessness of the small investor] 3. _There is a strong and increasing demand for publicity in the business of the ordinary corporation, as a protection to investors._ The law has looked upon corporations, with few exceptions, as private businesses, having the right to keep every detail of their management secret from their rivals. The inner management, therefore, has been closely hidden from most of the stockholders, who, in the economic analysis, are in the main the enterprisers. More and more the business and capital of the country has thus come into the control of the few. The ordinary investor in corporate stock "buys a pig in a poke" and trusts to the integrity of officers working behind closed doors, responsible to no one, too often speculating in the stock of their own companies. The unearned gains thus secured have tainted with dishonesty many a large fortune. No small part of the evil is the closing of the avenues of safe investment to the small capitalists, giving to a favored few a measure of monopoly in investments yielding large returns. Only recently has it been recognized that no large corporation can now be a private business in the old sense. The evolution of industry has left investors and shareholders without protection in advance of a wrong, and usually without legal redress when a wrong has been committed. [Sidenote: Steps toward publicity to protect investors] The demand for some remedy for a condition whose seriousness has been steadily increasing has not come so much from radical quarters as from business and financial circles. In England, some of the worst abuses have been corrected by legislation. In 1900, a bill was drafted at the suggestion of Theodore Roosevelt, then Governor of New York, which aimed eventually to make the corporation a quasi-public institution, open to inspection. The organizers of a company voluntarily accepting the act were to be personally responsible for the statements in its prospectus; its issue of stock was to be limited to actual investment and to be publicly made; its office and records were to be open to inspection. Though public opinion was not ready for this bill, and it failed of passage, the bureau of corporations of the new department of commerce of the federal government, established in 1903 under President Roosevelt, may be looked upon as a fruit of this initial attempt. [Sidenote: Broad social grounds for publicity] 4. _Greater publicity of corporation business is essential in the interest of the public._ With the interests of the investor are usually united more general public interests; but in many cases the two groups of interests conflict. Some persons favor control of corporations only to the degree needed to protect investors, but others place the policy on broader social grounds. The ability of a manufacturing corporation, at times, by threats of removal, to coerce unfair terms from the community, from its employees, and from those who supply it with materials, has led to the proposal that factories shall be forbidden to change their location without the consent of the state. [Sidenote: Publicity to insure just prices] Especially does it seem desirable, if it is possible, to preserve the benefits of competition, by forbidding rates and agreements in restraint of trade. The old English idea, inherited in our law, is that the highest price that can be got in an open market, under ordinary conditions, is in general a just price. The control of any line of industry by a few corporations makes secret agreement much more easy, and thus replaces a general market-price by a discriminating rate, the highest that each individual will bear. A trust's price might still be a reasonable one if the seller met competition in every market; but it is not reasonable when opposition is crushed by local and by individual discriminations. The methods by which this result is obtained shrink from the public gaze. They include secret agreements with railroad agents, a system of espionage on the business of competitors, secret special rates to the competitor's customers, to say nothing more of corrupt political influence. Publicity in corporation accounts is the first condition to a public and uniform price. The need thus to develop potential competition is especially strong where a monopoly in a natural product exists. A more general recognition of the public nature of corporations will lead to further legislation and to the appointment of corporation commissions, as has been done already in some states. § II. DIFFICULTIES OF PUBLIC CONTROL OF INDUSTRY [Sidenote: Growing need of social coöperation] 1. _The progress of industry is compelling greater social contact and more use of the agencies of government._ The numerous exemplifications of this general statement that have been met in the course of this study have a common cause. In simple conditions of industry, where most of the productive energies were given to securing the necessities of life, the struggle of men was with nature. Social relations then were simple and crude, such as those of chattel slavery. Now, most men get their livelihood from their bargains with other men. The relations of men with nature now are fewer, and less close; the relations of men with men are more numerous and complex. Efficient coöperation is a factor in production. Right social relations are more essential to industry than a fertile soil. [Sidenote: The practical limits of legislative reform] The social institutions of any community are its answer, expressed in human consciousness and in formal laws, to this difficult problem of living together. Laws and ways for regulating industry may be good or bad. The good laws are those in harmony with human nature, giving the best motives for work and the greatest happiness both in the effort and in its reward. The merit of laws, therefore, is relative to human nature; those good for one kind of citizens may be bad for another. Men cannot be legislated into honesty without limit. The best that is possible is to enact laws that encourage the best in men as they are. A dishonest community neither has, nor is capable of choosing, men honest enough to supervise the others. Society cannot, by any amount of tugging and pulling on legislative boot-straps, lift itself above its own moral plane. But though the change in formal law cannot far precede, it may lag behind and retard, social progress. Law tardily adjusted to social needs tempts and corrupts men. A time has never been when a higher wisdom could not have corrected some ancient grievance, have leveled some unmerited inequality, and, by making laws as good as men were capable of administering at the moment, have freed their energies for further advances. It is only a spirit of moderate expectation that will not be cast down by the results of legal "reforms." Hence it cannot be hoped that abuses will not appear in the attempts to regulate private industry. Fallible men make mistakes and commit injustice, sometimes greater than that which they are seeking to prevent. [Sidenote: Local selfishness in industrial legislation] 2. _Legislative interference with industry presents temptations to community selfishness to misuse social legislation._ Community greed is not more lovely than individual greed. Many a citizen holds up a high standard for the public official and bewails the corruptions of politics when the legislator votes for his own interest instead of for his constituents' interests. Such a citizen rarely reflects that the responsibility for many legislative abuses comes back to the community and to the individual voter. Can the water rise higher than its source? Is it a high conception of a representative's duty that he should out-talk, outwit, and out-vote his fellow-representatives, to get "a graft" for the men who elect him? In many communities, the one public question of importance is tariff legislation in favor of the local industries. This selfish issue bribes the electorate, and blinds it and its legislator to every question of the general welfare. A great industrial commonwealth steeps its public life in corruption when its voters sell their political birthright for a duty on iron. Many congressmen are so burdened with the task of securing some public expenditure in their district to help their constituents that they have little thought and less interest to give to larger public questions. If a local improvement will furnish labor and increase the value of surrounding property, though it is most uneconomic for the general community, the representative is expected to labor hard to secure it. Many citizens see little harm in "log-rolling" by the legislator,--that is, in his voting for a law without merit in order to get another law that his constituents want. The guilt of this worst form of bribery comes back to the community that forces its representatives to such a course, sinking public morality to a lower level. [Sidenote: Political corruption in industrial legislation] 3. _The power of the legislature to affect private fortunes presents strong temptations to public representatives._ That the legislator is so often true to a high standard of public duty, goes to illustrate the familiar truth that the individual moral code is better than that of communities. That some individuals betray their trust is less surprising. The Credit-Mobilier scandal, in connection with legislation in aid of the Union Pacific Railroad, implicated many congressmen. A few years ago, in one of the greatest states, it was discovered that an innocent-looking bill, relating to the rights of property-owners on streams, practically involved the gift, to a ring of men, of a quarter of a billion dollars' worth of coal-lands, lying under the navigable streams, and belonging to the state. Such temptations for wealth-getting are too great for men selected solely for their ability to obtain offices and pensions for political supporters, and to secure class-legislation for reputable citizens. The power of the legislative bodies to grant franchises and to permit the use of public property to corporations, constantly gives opportunity for dishonesty and occasion for scandal in the larger cities. The histories of the granting of franchises in New York, Philadelphia, Pittsburg, St. Louis, and many other municipalities, are full of black pages. Public duties are too heavy for the public integrity. Industrial power has grown faster than the civic conscience, and somehow the balance must be made even. [Sidenote: Heavy duties of the courts] 4. _The power of the courts and of executive officers in the interpreting and executing of laws governing business has become greater._ With closer contact of men there is greater friction in social relations, and litigation increases. Fortunes turn on the result of a civil suit. While juries often are corrupt, yet it is remarkable how well the courts have kept their integrity in the midst of great temptations. Professional pride and the noble traditions of the English judiciary strengthen the individual's character on the bench, not infrequently transforming a dishonest lawyer into a just judge; but popular elections, selfish interests, and the social forces of wealth and ambition make the task at times too heavy. [Sidenote: Integrity needed in public officials] The executive branch of government is necessarily intrusted with great power, increasing with the extent of social regulation. The Secretary of the Treasury has discretion as to the sale and purchase of bonds, and thus can affect the rate of discount and the selling price of securities. One man's decision, if known in advance, makes possible fortunes for private pockets. A recognition of the importance of these facts, which are typical of a great class of facts, must help to develop a higher sense of public duty. Patriotism has been thought of too narrowly. The enemies of early society were outside its borders, and the citizen who traitorously gave them aid was held in abhorrence. Now, independently, in many quarters is voiced the conviction that the greatest enemies of society are within its borders, and that political corruption is the modern form of treason. A higher conception of civic virtue is required to meet the added tasks of society. Public official control must be united with private industrial control in a way to present the fewest temptations to the betrayal of public trust. Now, as never before, must be felt the wisdom of Emerson's words: "The best political economy is the care and culture of men." § III. TREND OF POLICY AS TO PUBLIC INDUSTRIAL ACTIVITY [Sidenote: Recent growth of state socialism] 1. _There has been a large increase of state socialism in recent years._ The term state socialism, broadly understood, includes all the forms of public participation in industry that have been passed in review: ownership by towns, cities, state, or nation; laws regulating the freedom of contract; agencies to inspect conditions and to enforce the laws; commissions to supervise and control corporate industry. From every direction comes evidence of the increase of state socialism within the past twenty-five years. To those accustomed to think of the spirit of the Germanic races as that of individual liberty and enterprise, it seems remarkable that this increase has been greater among people of Teutonic origin (Germany, England, America, Australia) than among those of Latin race. The change seems to be a part of the movement of democracy, even the measures of Bismarck in Germany having been taken to ward off the demands of the radical party. The mere name of socialism no longer frightens the citizens of a free state, and when men of strong individualistic spirit even claim with pride that they are socialists, the meaning of that term is becoming very vague indeed. [Sidenote: Varieties of socialism] 2. _State socialism must not be confused with collectivism, or radical socialism._ The word socialism is so variously defined that the earnest student sometimes despairs of getting a clear understanding of it. The thought of socialism ranges from the simplest form of state interference, such as the support of public schools and public fire-departments, up to complete public ownership of all industry. It is well to describe as radical socialists those who would abolish private property, and would strike at the very root of the existing order of society. The modern form of radical socialism originated among German thinkers of the school of Karl Marx, but it has many supporters in other lands. The typical radical socialist claims to possess the only pure brand of social reform, disdains any interest in state socialism, and scoffs at state control as mere temporizing, as not even a single step toward radical socialism. [Sidenote: Aim of state socialism] The typical state socialist agrees that these measures do not logically force him toward the extremer view. He is at heart an individualist, believing that the motive forces of society are in human character, not in governmental machinery; but he seeks to prevent some kinds of competition, to put other kinds on a better basis; "to make the rules of the game fairer," but not to suppress it. According to this difference in ultimate plan, men and present measures can in general be classified. Yet one view sometimes shades into the other in the life-history of a single individual. Believers in moderate interference sometimes move toward the extreme, and the most radical thinkers, sometimes with no less honesty, become, with broadening experience, more and more moderate. It would be surprising if any one who is thinking and growing in social philosophy should succeed in so exactly adjusting to each other all his opinions, as to be absolutely consistent at a particular moment in his views on social policy. [Sidenote: Unripe social philosophy] 3. _It is not safe to predict from present evidence a continued trend toward extreme social control._ Social prophecy is fascinating. Men like to answer out of their ignorance the question, Whither are we tending? A deeper study of social law should give this power, but it is not won by hasty generalization. Unripe social philosophers assume that because the theory of biological evolution is correct, the particular theory of social evolution which they choose to invent or accept is unimpeachable. Radical socialism is the exaggerated statement of a present social need. It is a bridging with hope, not with experience, of the chasm between reality and the dreams of the unsuccessful. [Sidenote: Progress of social control] [Sidenote: True Aim of social control] It is true that many evidences point to an increase in social control for some time to come. The laws, the institutions, the prevailing morality of society, have not kept pace with industrial growth in this period of sweeping change. What is seen, however, is a small arc of the curve of progress. Much of the social regulation in the Middle Ages was similar to that which is now increasing. Legislation by gilds and privileges of private corporations hedged industry about. A reaction against this in the seventeenth and eighteenth centuries brought on national and state control, and state interference of another kind rapidly increased until the time of Adam Smith. Then a strong reaction came, and the next period of fifty years saw far less of interference. The years from 1825 to 1840 were those of the greatest state socialism ever seen in America, but the results were so unfortunate that a violent reaction followed. The recent great increase of state activity is not likely to be continued indefinitely. The path of progress is a spiral. There are forces already at work creating a resistance to any great extension of this movement. Competition of the healthier sort cannot be suppressed without paralyzing results. Inequality and the opportunity for ability to realize itself cannot be destroyed. The social regulations must be of a sort to liberate the best energies of men, not to enchain them. If the evils of state regulation increasingly appear to outweigh the benefits, a limit must be put to the movement. While social control may aid in lifting production and competition to a higher and more moral plane, the ability of society will refuse to be ruled by the standards of the weak and inefficient. CHAPTER 57 FUTURE TREND OF VALUES § I. PAST AND PRESENT OF ECONOMIC SOCIETY [Sidenote: Definition of economics recalled] 1. _The meaning and scope of economics can be better seen at the end than at the beginning of its study._ The proposition with which this inquiry opened may well be recalled in the closing chapter. The words of the formal definition of economics should at this point convey a fuller meaning. In the wide range of subjects passed in review has been sought the answer to one question: What determines and affects the values of good? [Sidenote: Influence of economics on practical life] Perhaps now also can be better appreciated what the influence of such a study might and should be on practical action. At times economic students have gained the ear of statesmen and rulers, and have exercised much influence upon practical politics. It is sometimes bemoaned that economists have to-day so small a direct part in the government of our republic. They certainly have a greater part to-day than they had twenty years ago, but if they had not, there would be small occasion for regret. The immediate influence of the specialist on those in authority is at most times less in a republic than it is in a monarchy, at those rare times when a ruler shows the students his favor. That influence in America is mostly indirect, but it is no less sure and lasting. The results of the earnest pursuit of economic inquiry in the universities and outside of them are already appearing, not in dramatic ways, but in the more subtle, surer form of an intelligent public opinion. [Sidenote: Examples of mistaken social prophecy] 2. _Economic science has not reached a stage that permits of much prophecy._ Prediction is sometimes given as the test of science. This test, however, is one that only astronomy can meet in any remarkable degree. Chemistry can tell much of what will happen in the laboratory, but nothing of the date of future powder-mill explosions. Geology answers the question "What?" with surmises, and "When?" with an estimate of a few million years more or less. Is it surprising that in human affairs still less prediction is possible? There are countless unmeasured factors in human action. Such generalizations as are possible must be based on actions that appear and reappear with practical constancy. Though a number of facts unite to suggest some conclusions as to the immediate future, the experience of the last century bids one beware of sweeping predictions. The close of the French Revolution was a period marked by much speculation regarding the future of society. The optimists, with faith in the perfectability of human nature and of society, believed that all social ills were due to bad government; if despotism were but overthrown, man's nature would develop, untrammeled, to perfection. The economists of that day were sceptical, because, looking deeper, they saw sources of misery in the scantiness of man's environment, and in the sloth, ignorance, and incapacity of human nature. The pessimists--the communists, and socialists of that day--seeing the same evils, had other explanations to offer. While the economists of that day believed the conditions of poverty and misery to be inevitable, the pessimists pronounced them unendurable, and advocated a radical social change as the only hope of saving the masses from starvation. In such a variety of mutually contradictory views there must have been much error, but likewise much truth if it could be disentangled. [Sidenote: Economic prophecies of the nineteenth century] 3. _The unexpected changes in transportation and in industry altered the course of economic development in the last century._ Much of the economic theory of that day appears absurd in the light of history. The inventions of the period, from Adam Smith's writings to Ricardo's (1776 to 1820), were mostly for use in manufacturing. This suggested to the minds of that time the progressive cheapening of cloth, iron, pottery, and of all other products of machinery, but not the cheapening of food. Indeed, the situation in western Europe then suggested strongly the opinion that the products of the soil would steadily become more difficult to get. The railroad was not of practical importance until after 1830; the steamboat was not applied to ocean travel until 1837. The opening of a rich continent and its annexation, by these new agencies, to the available resources of the older countries were not dreamed of. It was not fully appreciated that a great change in social standards, controlling the growth of population, was in progress. This was the panorama of the progress of society as seen by both the conservative economists and the socialists of less than a century ago: continued invention, an increasing population, low wages, scanty food, growing wealth for the few, and growing poverty and misery for the masses. [Sidenote: Unexpected course of development in the nineteenth century] 4. _The actual course of economic development in the nineteenth century falsified the predictions alike of optimists, economists, and pessimists._ Not foreseeing the great supplies of natural resources soon to be made available for the older countries, the men of that day naturally thought of the supply of land as limited and fixed. Supply in the economic sense means the amount available at the given time in the market; but despite the great areas since brought into the world-markets, the false idea of a century ago still persists in the text-books, and shapes economic reasoning. It is vain to say that the circumstances have been unique and that the general principle is still valid. Much of the so-called orthodox economic analysis was essentially erroneous as applied to the conditions of the past century; it is erroneous to-day and will be so for years to come, if it ever fits the facts. New continents are about to be opened. The building of railroads the length of South America and to the center of Africa will make available new mineral wealth, rare woods, enormous forests, and some of the greatest food-producing areas on the globe. Population in Christendom has increased more rapidly than ever before in the history of the world, but it has not overtaken the progress in resources. The rate of increase of population is slackening. The result of this combination of events has been a general rise of the conditions making for popular welfare. Despite the problems and the abuses that every new change brings, the civilized world undoubtedly is more prosperous to-day than ever before. The greatest misery and discontent is in the more backward communities. This is past and present; what of the economic future? Is the present condition a normal one--is this prosperity likely to grow or to decline? Thus far, surely, the economic student may question the oracles; for though the distant future is veiled from man's view, the role of economic theory is to show causal relations, to convert mystery into reason, and thus to give a lamp to the feet of the present. § II. THE ECONOMIC FUTURE OF SOCIETY [Sidenote: Exhaustion of certain natural resources] 1. _Present industrial progress is largely due to material conditions, temporarily favorable._ Many of the materials now being destroyed in immense quantities have been slowly stored up through the ages and are not renewable.[4] Till modern times man knew little of the world beneath its crust. Living, he scratched the earth's surface, and dying, left his bones to fertilize the soil. But to-day, man exhausts the stores in the interior of the earth, burns the treasures of the carboniferous age, casts the fertilizing elements into the ocean, and leaves the world an empty shell. Forests are being so rapidly cut off that the price of fuel-wood and lumber in many parts of the United States has, within twenty years, been multiplied by three. The world's store of iron ore is not yet fully known, but much of it has been measured, and of the deposits known to be within the United States over one half are said to be owned by one corporation, and they are enough to continue its present output no more than sixty years. Many other natural products are in like manner gathered by civilized man from a stock created long ago. While the supply of vegetable food promises to be ample, the supply of meat will be maintained with difficulty as population becomes denser. [Footnote 4: Though at first glance this may seem contradictory to the statement in the foregoing paragraph regarding the nature of supply, it will not be found so on closer examination.] [Sidenote: Possibilities of other resources] 2. _Many other inexhaustible sources of essential materials have not yet been developed._ What has just been said is the darker side. The coal-mines can be emptied, but so long as the sun shines and the rains fall, Niagara will remain as a source of light, heat, and power. The tides flow on forever. In every thunder-storm enough force is dissipated to run thousands of factories. The heat in the center of the globe, though not inexhaustible, would suffice for man's needs for many centuries. The force in Mount Pelée, if chained and utilized, would run a million factories a million years. It is not too much to hope that engineering skill will some day reach and utilize these sources. Such a cheapening and diffusion of power would put a new face on many of the problems of industry. New sources of materials undoubtedly will be developed. It is reasonable to hope that before iron ore has become extremely scarce, a cheap and practicable method of extracting aluminium from clay will have been perfected. Secure of these permanent sources, civilization will stand on a firmer foundation. [Sidenote: Effect on values of shifting centers of power and materials] A great displacement of local values must accompany this shifting of the centers of power and materials. When the coal districts are heaps of slag and cinders, industry will be found near the water-power. Because of distance from raw materials, New England even now finds herself hard pushed in her rivalry with the Southern states in the manufacture of textiles. The industrial map of our country will be greatly altered a hundred years hence. The possession of rich natural resources to-day does not insure a community enduring prosperity. [Sidenote: Effect of accumulating wealth] 3. _The mass and quality of wealth will increase rapidly if social and political conditions remain stable._ The main method of increasing wealth must be the putting of energies and resources into more abiding forms. In order that a motive for saving may be present, there must be stable conditions. Increasing subordination of present to future will be accompanied by a fall in the rate of interest. The growth of wealth means a higher quality of all artificial productive agents. A larger part of the energies of men will then be directed merely to supervising the developed machinery. Man will live in a better environment, in a better and richer world. Wages must rise as the quality of tools and machinery improves. Population most probably will not increase proportionately and the relation of the labor-supply to the resources with which it works should be more and more in favor of the laboring classes. The difficult problems of the concentrated control of industry and of the control of wealth must be solved in the interests of all. [Sidenote: Social progress vs. race progress] 4. _Improvement of the race biologically, through selection of the ablest individuals, has been a great factor in human progress._ Social progress is not necessarily the steady biological betterment of the native ability of men. The education of the average member of society is becoming yearly better; it is doubtful whether the innate capacity of a new-born babe in Europe and America to-day is greater than it was among our Germanic ancestors in Roman times. Indeed, the progress of the past two thousand years has been in social organization, in the enlargement and simplifying of the mass of knowledge which has to be reappropriated by each new individual, rather than in race-breeding and in quality. [Sidenote: Nature vs. culture] Few thoughtful persons now hold the view that the race can be rapidly improved biologically by the process of educating the individual. Education is cumulative in so far as it builds up a better environment into which other children will be born, but the betterment is not due to the inheritance by the child of the acquired knowledge and skill of the parent. If this question is open to dispute among biologists, it is only as regards a minute increment of improvement. Practically, selection is the only means of improving the innate capacity of any species in any large measure. Many forces were at work in the past to lift man above the brute, and especially to increase the average brain-power of the human race. The weak, the ignorant, the incapable in primitive societies were ruthlessly killed off. The strong, the sagacious, and the enterprising left the largest numbers of descendants. [Sidenote: Decrease of the successful elements] 5. _Progress will be checked if the native quality of the race declines._ Under modern conditions, especially within the last quarter of a century, the successful elements of society are becoming less fertile. Large families were the rule among the capable pioneers of America; now they are rare except in the lower industrial ranks. Democracy and opportunity are favoring this process of increasing the mediocre and reducing the excellent strains of stock. Caste and status kept successful generations of capable men in humble social ranks from which only by chance some remarkable individual could rise. In a democracy, those of marked ability can more easily move into the better-paid callings and professions. This individual good fortune, however, reduces the probability of offspring. In the higher social ranks are more bachelors and old maids than in the lower ranks, and fewer children are born to each marriage. The president of our oldest university has shown that one fourth of the graduates of the last generation have remained single, and that the average number of children of the married graduate is two. That group of men, therefore, has left only three fourths enough descendants to maintain its numbers, and as the population has doubled within the same generation, that class represents only three eighths as large a proportion of the American stock as formerly. [Sidenote: The menace to progress] This sterilization of ability has cumulative results. If society were composed in equal parts of two distinct strains of stock, not intermarrying; if the total population kept intact from one generation to another (say each period of thirty years), but the superior strain contributed only three fourths of its own number, at the end of five generations it would have sunk from one half to a little more than one eighth of the population. A period brief in the life of nations would serve to leave it an almost negligible factor in social life. There can hardly be a doubt that at present our society is on the average increasing far more from the less provident, less enterprising, less intelligent classes. There has not yet been time for many of the cumulative effects of this process to appear. Progress is threatened unless social institutions can be so adjusted as to reverse the present process of multiplying the poorest, and of extinguishing the most capable families. [Sidenote: Sympathy and selfishness in relation to progress] 6. _If progress is to continue, there must be left a wide field for the ambitions and for the competition of individuals._ The results of any given ability are dependent upon the energy with which it is used. The social machinery finds its motive force in the nature of men. In taking economic wants as the starting point of our study, it was not implied that men were entirely selfish. Sympathy widens; economic wants include family, friends, and, in a growing measure, humanity. The happiness of a truly socialized man consists in part in the happiness of his fellows. As social sympathy broadens, the sense of duty becomes a stronger economic force. Men change, but not rapidly, and not always for the better. It is unsafe to overestimate the generosity of men. Individual wants and interests must, so far as can now be seen, continue to be among the stronger forces that move society. Progress is made because to exceptional ability in general is now presented the hope of large rewards. [Sidenote: Status endangering progress] [Sidenote: Envy endangering progress] These dynamic forces making for progress are at present, however, threatened from two sides. Enterprise is threatened from the side of privilege or status. The avoidance of certain kinds of work which, by social convention, come to be regarded as degrading, takes much ability out of business. The freedom of America to so great a degree from this disdain of honest labor has been a large factor in her progress, but it is endangered when men become timidly conservative of social position. Progress is threatened, secondly, by democracy, with its tendency to carry the notion of literal equality over into industry. When democracy becomes envious, it denies to exceptional ability an exceptional reward. The line of growth must be the resultant of the positive forces in these two principles. The energy of the social reformer must be directed along rational lines. If this can be done, the economic outlook is for a great development of wealth and popular welfare. Economics must be looked upon as the study of the forces in human nature as much as of the material resources of the world. QUESTIONS AND CRITICAL NOTES THE QUESTIONS.--These questions are not intended to be used merely as tests of knowledge of the text. They leave untouched many of the most important questions in the reading, and they raise other inquiries hardly hinted at in it. The list began ten years ago with one or two questions on each topic, assigned in advance of lectures and recitations, with the object of arousing the student's thought, quickening his observation, and stimulating his interest in the subjects. The possibilities of helpful questions of this kind are hardly more than suggested by the examples given, and every teacher will find peculiar opportunities in his own neighborhood for other similar inquiries. Other questions are more of the nature of those in _Problems in Political Economy_, by W. G. Sumner (published by Holt & Co., New York, 1884), which are intended to be reasoned out in the light of principles given in the class-room. Many teachers and students have found much help in that little book, which in turn acknowledges large obligations to earlier lists of questions. The changed point of view in economic theory has, however, made most of the older problems of this nature unusable except after reformulation. Fertile in suggestions of both of the kinds of questions mentioned are two books by H. J. Davenport, _Outlines of Economic Theory_ and _Outlines of Elementary Economics_ (The Macmillan Co., New York, 1896 and 1897), though some of the questions imply theoretical views differing from those of this book. Excellent lists of questions with references to reading have been prepared by W. G. L. Taylor, in his _Exercises in Economics_ (The University Publishing Co., Lincoln, Neb., 1900). The list of problems of this kind can easily be extended to meet the special conditions of each community. THE BIBLIOGRAPHICAL NOTES.--The few references and critical notes given are intended as a help to teachers and advanced students desirous of following some of the more recent contributions to controverted points in economic theory. No attempt has been made to furnish a list of books for the beginner or the regular reader. Among accessible books containing helpful lists of that kind may be mentioned: _The Reader's Guide in Economic, Social, and Political Science_, by Bowker and Iles. _Outlines of Economics_, by R. T. Ely (published by Macmillan, New York, 2d ed., 1900). Contains both questions and bibliographies. _Introduction to the Study of Economics_, by C. J. Bullock (published by Silver, Burdett & Co., 2d ed., 1900). The references to the literature are given by pages or sections at the end of each chapter, and at the back is a list (about twenty pages) of the most useful texts, documents, and materials. _Financial History of the United States_, by D. R. Dewey (published by Longmans, Green & Co., 1903). Contains excellent references on public finances, tariff, banking, and taxation of the United States. _Introduction to Economics_, by H. R. Seager (published by Holt & Co., New York, 1903). Each of the first twenty-six chapters is followed by fresh and well-selected references varying from one line to nearly a page in length. A good general bibliographical note is given on pp. 61-2. CHAPTER 1. THE NATURE AND PURPOSE OF POLITICAL ECONOMY 1. Has political economy anything to do with woman suffrage, the liquor problem, a republican _vs._ a monarchical form of government, the silver question? 2. Is political economy a study of things or of men? 3. Shall a piece of coal be studied in geology, botany, physics, chemistry, or economics? 4. Do you expect to acquire wealth more easily as a result of the study of political economy? 5. Of what practical use do you think political economy is? 6. Is political economy necessary to the understanding of the business world, or vice versa? 7. How wide a knowledge would a complete understanding of industrial society require? 8. Did the discovery of America make the study of political economy more important? CHAPTER 2. THE ECONOMIC MOTIVES 1. If you found $10 to-day on the street, what would you do with it? 2. What would be the chief differences between your use of it now and at the age of five or the age of twelve? 3. Name Crusoe's wants in the order of their importance. 4. Is it well to be contented with your lot? Is it well to be discontented? 5. Why does a horse like hay and a man prefer meat? 6. Are the wants of a savage more easily satisfied than those of civilized men? Why? 7. How many motives led you to come to college? 8. If you ever worked for wages, or a salary, was that the only motive? What else? 9. James Bryce says that the incomes of American university professors are much less than those of men of corresponding ability in law and medicine. If true, why? 10. If you could, would you do nothing always? Why? 11. Which would you prefer, to clerk in a store at $1.50 a day, or to lay masonry at $2? Why? 12. Do men work better under threat or when their pride is appealed to? 13. Is pride as powerful a motive as greed, in economic action? 14. Do you know any persons that work from a sense of duty alone? 15. Are charity workers usually well paid? Why? CHAPTER 3. WEALTH AND WELFARE 1. What is it to be economical of money? 2. Why did Crusoe work at all? 3. When he began to work at one thing, why did he ever stop to work at another? 4. What is the difference in utility between the water in a solid mountain reservoir and the same water when it is flooding the valley? 5. Does it change the utility of a load of powder to touch a match to it? 6. Is water useful? Is dynamite? 7. Is the last bait worth more when the fish are biting well? 8. Are the following wealth: food, tobacco, medicine, whisky, good looks, good health, a wooden leg? 9. Is a book full of useful information, wealth? Is a head full of useful knowledge, wealth? 10. Is a ship at the bottom of the ocean, or gold in the mine, wealth? 11. Is well-being in proportion to wealth? Why? 12. Are services, music, a theatrical performance, a gambler's pack of cards, wealth? NOTE.--The theory of marginal utility broadly outlined in chapters 3-5 has been worked out in detail by the group of writers called the Austrian economists. The mechanism, or the technique, of marginal utility and exchange as they conceive of it, is essentially what this text seeks to explain. Our application and development of the conception of marginal utility differs from theirs, however, in ways that will appear as the text advances. For more detailed discussion of many points in chapter 3, see Smart, _Introduction to the Theory of Value_, pp. 9-17; Wieser, _Natural Value_, pp. 3-16; Böhm-Bawerk, _Positive Theory of Capital_, pp. 129-153. CHAPTER 4. THE NATURE OF DEMAND 1. Give illustrations of the difference between desire and demand. 2. Do people actually expend their incomes so as to get the maximum utility judged by a standard they would admit to be morally sound? 3. What causes a demand for an additional supply of food? Of books? 4. If you never eat corn-bread, will the failure of the corn-crop affect your grocery bill? 5. Give examples you have seen of a higher price of one thing causing an increasing use of another. 6. Do you buy what you most desire? 7. Give examples of cases where supply is fixed, and demand varies. 8. Give examples of demand shifting from one product to another. NOTE.--For a more detailed discussion see works cited: Smart, 18-33; Böhm-Bawerk, 159-169; Wieser, 16-36. CHAPTER 5. EXCHANGE IN A MARKET 1. Are merchants producers of wealth, or are their profits merely subtracted from the wealth already produced? 2. Is the railroad productive? Why? 3. Give examples within your observation of improved productive processes increasing exchange; of the reverse. 4. Why is exchange profitable if it is fair? 5. Would doubling all commodities affect their exchange value? 6. Is part of a stock of goods ever worth more than the whole? Examples. 7. Do you ever take account of a difference of five cents in deciding whether to purchase? 8. Is barter more or less frequent now in America than formerly? In the world? 9. Is there any causal relationship between commerce and manufactures? If so, in what way? 10. In a time of high excitement gold was sold for more at one side of the room than at the other side; how account for this? 11. Give examples of, and reasons for, two prices in the same market. 12. What effect on prices should be expected from an invention that makes possible the carrying of fresh meat from South America to England? 13. Describe the method of selling any product you know about. What is the market in which it is sold? NOTE.--See works cited: Smart, pp. 40-63; Böhm-Bawerk, 193-222; Wieser, 39-53. CHAPTER 6. PSYCHIC INCOME 1. Is it possible to compare the value of the portrait-painter's service with that of the gardener? 2. To call the teacher's work unproductive, and the ditch-digger's work productive was once usual, but is so no longer; give reasons for either view. 3. It is usual to call the use of a house for business purposes a productive use, but its use as a residence an unproductive one. What reasons are there for and against this? 4. Give a list of material agents that are yielding non-material uses. 5. Give examples of personal services that are most immediately expressed as gratifications. NOTE.--The phrase "psychic income," used here for the first time, expresses a conception long neglected, but essential to the advancement of psychological economics. The idea has been recognized in the writings of Edwin Cannan, Irving Fisher, W. M. Daniels, and perhaps of late by others. It was discussed by the author in the _Quarterly Journal of Economics_, Vol. XV, pp. 19-30, especially pp. 25-26, in an article called "Recent Discussion of the Capital Concept" (November, 1900). CHAPTER 7. WEALTH AND ITS INDIRECT USES 1. Give reasons for attributing exchange value to the waves of the ocean; to a waterfall, a water-wheel, a loom, a piece of cloth, a dress made of the cloth. 2. Show the connection between these things. 3. How can the use of a flock of sheep be of value to one who must return them all to the owner? 4. Why should the use of a machine that never can be a direct cause of gratification, have a value that men will pay for? 5. Give examples of wealth never becoming a direct cause of gratification, yet whose possession is greatly valued. NOTE.--The conception in this chapter was ably presented by Böhm-Bawerk in _Capital and Interest_, Bk. III, ch. v, pp. 219-227. He does not, however, make use of it in a theory of rent. CHAPTER 8. THE RENTING CONTRACT 1. What things beside land are rented? 2. What is the form of contract used in the renting of farms, business buildings, and residences, in the community where you live? 3. Does the rent of pianos, type-writers, or masquerade-suits depend on the value of the thing rented? Is the rental a moderate return on the investment? 4. What are the difficulties in determining tenants' improvements? NOTE.--Various writers have recognized that social, class distinctions had an influence on the conceptions of rent and capital in England in the eighteenth century; see Fetter, article on "The Next Decade of Economic Theory," in _American Economic Association_, 3d ser., Vol. III, pp. 236-246, especially 243-4; also A. S. Johnson, _Rent in Modern Economic Theory_, p. 19, and references there given. Heretofore, however, there has not been assigned to the form of the contract the significance here given it. A discussion of the points at issue will be found in _The Relations between Rent and Interest_, by F. A. Fetter and others (published by Macmillan, New York, 1904), pp. 8-10, on the renting contract. CHAPTER 9. THE LAW OF DIMINISHING RETURNS 1. Is it possible to do twice the amount of business in any store-room by doubling the stock and the force of clerks? 2. Is it possible to expand a university indefinitely by increasing the force of teachers and the equipment, without enlarging the buildings? 3. Why do men cultivate two acres instead of one? Where land is plentiful, why do not men cultivate two acres instead of one? 4. Are there any things, not free goods, that could be indefinitely increased without increasing difficulty? 5. English farmers raise thirty-five bushels of wheat per acre, Americans perhaps fifteen; why this difference? 6. Why did people go to Dakota and Iowa when there was still room in New England? 7. Why put up a twenty-story building? Why not build a fifty-story one? NOTE.--The broad reading here given to the law of diminishing returns is so recent that even the latest texts have recognized it only in a partial manner, defining "the law" in the old terms confined to land. For the old statement see J. S. Mill, _Principles of Political Economy_ (1846), Bk. I, ch. XII. Writers even so advanced as Alfred Marshall follow Mill with no essential modification. For a good historical account of the doctrine see Edwin Cannan, _History of the Theories of Production and Distribution_, pp. 147-182 (1893; 2d ed., with additions, 1903), which advances no positive theory, but makes evident many inconsistencies in the older view. A keen analysis and important contribution to economic thought was made by J. R. Commons, _Distribution of Wealth_, pp. 116-159 (1895). John B. Clark, in various earlier articles, and in his _Distribution of Wealth_ (1900), has done more than any one else to develop the conception of "a universal law of economic variation." In magazine articles by various writers, the same idea has been developed, but no thorough-going application of it has been made in the available text-books. CHAPTER 10. THE THEORY OF RENT 1. Is competition severe in the renting of land in your community? 2. Give examples you have seen of a rise of rent; the cause. Of a fall of rent; the cause. 3. Does the existence of the land of California have any effect on rents in New York city? On agricultural rents in New York state? 4. If all the land on an island were equally fertile and equally convenient of access, would any of it pay a rent? 5. If you owned the Golden Gate, or the harbor of New York, could you rent it? 6. How does the hire of a team of horses resemble the rent of land? 7. How do livery charges in a college town in commencement week illustrate the subject of rent? 8. Show how a change of circumstances may raise the rent of machinery. NOTE.--Although most texts still present the older, narrow conception of land rent, its defects have been revealed by many critics. J. B. Clark has been the chief champion of the broader conception; _American Economic Association_, 1st ser., Vol. III, No. 2, _Capital and Its Earnings_ (1888); and _Distribution of Wealth_, ch. IX and ch. XIII. See our summary of the present situation, _American Economic Association_, 3d ser., Vol. II, p. 241 (1900). Alfred Marshall's effort to save the older conception by compromise on a "quasi-rent" doctrine has many supporters, but this doctrine is examined in detail and criticized adversely by the writer in an article entitled "The Passing of the Old Rent Concept," _Quarterly Journal of Economics_, Vol. XV, pp. 416-455 (1901). For both negative and positive reasons for a change in the concept, see _The Relations between Rent and Interest_, before cited (in note to ch. 8). CHAPTER 11. REPAIR, DEPRECIATION, AND DESTRUCTION OF WEALTH 1. What is the difficulty in the definition: Rent is the payment for the original and indestructible powers of the soil? 2. If the value of improvements on land is all counted, is there anything over? Examples. 3. What is stumpage? Does it differ from rent? 4. What do you know about the methods of renting mines? 5. What methods are adopted to keep up the efficiency of factories? NOTE.--Compare and note the inconsistent use of the term "rent" by Ricardo, pp. 34-5 and 45-6, McCulloch's edition. See also article, "Depreciation," in _Palgrave's Dictionary_. CHAPTER 12. INCREASE OF RENT-BEARERS AND OF RENTS 1. What are the most obvious ways of increasing the productiveness of land? 2. How does a new railroad affect the value of the land it passes through? 3. How would the rent of a rocky island be affected if it became a summer resort? 4. Mention any cases you may have seen where a greater value was imparted to land by a newly discovered use. 5. A tunnel was made to drain a mine; the stock doubled in price. Was it really the stock, the old mine, or the new hole in the mountain-side that had increased in value? 6. Criticize the statement that, in an economic sense, land is a "fixed stock for all time." NOTE.--The changes which the rent concept is undergoing can be traced in the work of Alfred Marshall. See _Principles of Economics_, Bk. V, ch. IX on "Quasi-rent," and ch. X on "Situation Rent," and Bk. VI, ch. IX, Secs. 6-7, in which Marshall modifies the older conception of rent. This is discussed in "The Passing of the Old Rent Concept," cited above (in note to ch. 10). CHAPTER 13. MONEY AS A TOOL IN EXCHANGE 1. Why do you value money? Do you value it more than the things it buys? 2. What functions does money perform in society? 3. Could a country better do without money, horses, or roads? 4. If money is a tool, what does it make? 5. What is the difficulty in deciding whether to call the following money: gold ingots, gold coin, silver dollars, copper cents, greenbacks, bank-checks, chalk-marks to keep account? 6. Are men wealthy in proportion to the money they have? Are countries? 7. Would a nation be poorer if, like Sparta, it prohibited all money? CHAPTER 14. THE MONEY ECONOMY AND THE CONCEPT OF CAPITAL 1. Are national bonds or promissory notes, wealth? 2. Is it money or things that the borrower wants? 3. If you were starting a factory on credit, would you rent the machines or buy them with borrowed money? Why? 4. When a man says he has a certain capital invested in his business, does he mean to include the value of the land and buildings? 5. What is the meaning of the phrase, "a capitalistic age"? NOTE.--We are indebted to the economic historians for a better understanding of the important influence money has had on economic organization. See Hildebrand's notable article in the first number of the _Jahrbücher_, and Ashley, _English Economic History_. J. B. Clark was the first among contemporary economists to emphasize the value concept of capital. The scholarly and judicial article by Irving Fisher on "Precedents for Defining Capital" in _Quarterly Journal of Economics_, May, 1904, makes possible better understanding and agreement on the subject. I am pleased to say that in this article, and in personal correspondence, Professor Fisher disavows the interpretation I had thought (see "Recent Discussion," etc.) that his words required. His conception of capital is thus, in essentials, the one here employed, differing from it not in thought, but merely in terminology. Professor Fisher's original studies of the capital concept, in the _Economic Journal_ in 1896-7, are indispensable to an understanding of the development of this important phase of the new economic theory. The connection between the conclusions of economic history and the value concept of capital in economic theory has been made by the author in essays before cited under chapters 6 and 8: "Recent Discussion of the Capital Concept"; "The Next Decade of Economic Theory," and "The Relations between Rent and Interest." CHAPTER 15. THE CAPITALIZATION OF ALL FORMS OF RENT 1. What relation is there between the rate of interest and the price of land bearing a given rental? 2. If a $100 share of railroad stock sells at par when interest on loans is at 5%, what will be its price when interest rises to 6%? When interest falls to 4%? 3. If a business is very successful and its dividends double, what will be the effect on the selling price of its stock? NOTE.--The subject is almost foreign to the standard works on economics, which have continued to look upon capital as primary, and its income as derived. Numerous recent articles will be found, however, dealing with concrete problems where the logical and the practical views are seen to be the same; _e.g._, W. Z. Ripley, _Quarterly Journal of Economics_, Vol. XV, p. 106 (1900), article on "The Capitalization of Public Service Corporations"; also article in _Engineering News_, Vol. XXVIII, p. 492 (November, 1892). CHAPTER 16. INTEREST ON MONEY LOANS 1. Some money-lenders in cities get 10% a day from fruit-vendors for the advance of small sums of money, and the losses are very slight. Pawnbroking pays frequently 25 to 100% per year. In these cases what affects the rate of interest? 2. Through what agency does the Western farmer borrow Eastern capital? 3. How do Englishmen invest in American railroads? 4. In what ways can a lender collect a high rate of interest without appearing to do so? 5. What would be the effect upon the rate of interest in a new state if it passed a law preventing the collection of loans by outside lenders? 6. Why has interest been about 10% in the West, 7% in the Central States, 5% in New York, 4% in Germany? 7. What is the money market? Who are the buyers and sellers, and what do they buy and sell? 8. In a panic, interest rises on short loans and prices fall, while it is almost impossible to borrow money; does this show that the amount of money determines the interest rate? 9. When gold is leaving England, the bank raises the rate of discount (interest); does this show that the quantity of money determines the rate of interest? CHAPTER 17. THE THEORY OF TIME-VALUE 1. Give examples of a high cost for the use of wealth without the borrowing of money. 2. Give some examples of the neglect of repairs through lack of resources, and show how it involved time-value. 3. What would be some of the first effects on production if interest on money loans fell to one half its present rate? 4. Which is the more important for the rate of interest, the amount of money in the banks or the amount of goods in the country? 5. How would the rate of interest be affected if the amount of money were doubled at once? NOTE.--In an interesting article on "Prestige Value," by L. M. Keasbey, in _Quarterly Journal of Economics_, May, 1903, has been developed one phase of the thought in Sec. II, proposition 2. The very active recent discussion of "the interest problem" has done much to clarify economic theory; but almost the entire recent literature of the subject (as seen from our point of view) is based on a defective concept of capital. See in _Quarterly Journal of Economics_, Vol. XVII, pp. 163-180 (November, 1902), article entitled "The 'Roundabout Process' in the Interest Theory," the author's criticism of Böhm-Bawerk's _Positive Theory_. All the recent "marginal productivity" interest theories are at fault, we venture to say, in trying to derive income from capital instead of deriving the amount of capital from rent. CHAPTER 18. RELATIVELY FIXED AND RELATIVELY INCREASABLE FORMS OF CAPITAL 1. Why not raise seals in California and fruit in Alaska? 2. Has the rainfall any relation to the density of population? 3. Has the isothermal line any relation to the number of millionaires? 4. What physical reasons account for the greatness of ancient Egypt, of Venice, of Holland, of England, of the United States? 5. Is all land useful? Is all land wealth? 6 Is there a different term for land that is wealth and land that is not? 7. Are there different economic terms for hewn and unhewn blocks of stone? What makes the difference? NOTE.--A meritorious though fragmentary essay to rethink the old conception of natural resources and to express them in new terms, is _Natural Economy_, by A. H. Gibson, 1901, reviewed by the writer in _Journal of Political Economy_, March, 1902. CHAPTER 19. SAVING AND PRODUCTION AS AFFECTED BY THE RATE OF INTEREST 1. The savings of the people of the United States are nearly a billion dollars a year. What and where are they? 2. What are the main social conditions necessary to saving? 3. What influence has commercial morality on saving? 4. Do savings-banks and insurance companies stimulate saving, or do they exist because of a disposition to save? 5. What influence has the formation of joint-stock companies on saving? 6. Will you save more or less if the rate of interest falls? 7. Distinguish between hoarding and saving. 8. A woman cut the wool from a sheep's back, spun and wove it by old hand-methods, and within twenty-four hours wore the dress made of it. Is more or less time needed in production with the best machinery and processes? 9. Ricardo said that on account of the cheapness of food in America there was less temptation to employ machines than in England, where food was high. What is the fact about this temptation in America? NOTE.--The older abstinence theory of interest is given by F. A. Walker, _Political Economy_, Secs. 87-93. A noteworthy advance was the able article, by T. N. Carver, in _Quarterly Journal of Economics_, Vol. VIII, p. 40 (1893), "The Place of Abstinence in the Theory of Interest." A number of writers have written (fallaciously, in our judgment) on the "fallacy of saving," arguing that the capital-market easily becomes glutted; the contrary view is well presented by Cassel, _The Nature and Necessity of Interest_ (1903), pp. 96-157, in chapters on what he calls "The Demand for Waiting," and "The Supply of Waiting." CHAPTER 20. LABOR AND CLASSES OF LABORERS 1. Is dancing labor? Is the dancing of a dancing-master labor? If he would rather dance than eat, is it labor? 2. Enumerate some kinds of labor necessary to produce bread. 3. "Washing of clothes is unproductive labor; therefore as little of it should be done as possible." Criticize the argument. 4. Would you say that differences in ability at manual trades are due to practice or to native talent? If to both, in what proportion? 5. Do sons usually follow the father's trade? Is it more or less common than formerly for them to do so? 6. Do you know from personal observation whether a Mexican, a German, or an American, is the best workman? 7. What important personal traits are needed to make a man an efficient market-gardener? 8. Which would be of the greatest economic advantage, to increase by 50% the intelligence, the physical strength, or the integrity of the workers of this country? CHAPTER 21. THE SUPPLY OF LABOR 1. Has the principle of the survival of the fittest any influence on the population of America? 2. What limits the number of wild rabbits? Of tame pigeons? Do the same influences act in the case of men? 3. What other influences affect population? 4. What relation is there between population and mountains, temperature and water-supply? 5. It has been said that the supply of labor is fixed by biologic laws. Is it therefore not subject to economic influences? 6. What application do you think the principle of diminishing returns has to the question of population? 7. What is meant by the standard of life? NOTE.--The subject of population generally is discussed under the name of "The Malthusian Doctrine" and much space is given to it in the texts. So much useless controversy has been occasioned by the ambiguities of Malthus's argument that it seemed best not to introduce this difficulty into the text. The subject is discussed with broadest view by A. T. Hadley, _Economics_, Secs. 47-60. The writer attempted to make a judicial study of Malthus and his work in _Versuch einer Bevölkerungslehre_, Jena, 1894, and sought to put the discussion on higher ground in an article in the _Yale Review_, August, 1898, "The Essay of Malthus, a Centennial Review." CHAPTER 22. CONDITIONS FOR EFFICIENT LABOR 1. Is hunger the cause of food? 2. Is there any relation between a republican form of government and the growth of manufactures. 3. What are the necessary conditions to the building of a house: (_a_) natural forces; (_b_) changes in material things; (_c_) human activities; (_d_) social conditions? 4. Is the public school system an economic factor? Where among the four preceding heads would you classify it? 5. From an economic standpoint, can we say that robbery really reduces the wealth in existence? 6. When does an industrious man stop working on his own farm, and why? 7. With a given number of workers, what may be causes of differences in the labor-supply? 8. Would men work better if they ate more? 9. What moral agencies increase the efficiency of labor? 10. Is there a strong selfish motive for men to increase their efficiency in most industries? How effective is it? 11. What effect has republican government on the efficiency of labor? 12. Why is the variety of occupations greater or less than formerly? What is influencing the change? 13. What cases have you seen where great skill came from practice? 14. What gain is it for men to work together instead of singly? 15. With increasing division of labor is there greater or less opportunity for the payment of laborers according to the piece-wage plan? 16. Discuss the following statement: Under the piece-work system the foreman looks out for the quality and the operative for the quantity of the work; under the time-wage system the foreman looks out for the quantity and the laborer for the quality of the work. 17. What remedy has the foreman for an inefficient laborer working under the time-wage system? 18. Is time- or piece-work best adapted to the following kinds of laborers: coal-miners, coopers, farm-hands, printers, engravers, shoe-factory hands, railroad brakemen, telegraph operators? CHAPTER 23. THE LAW OF WAGES 1. What is the effect of free common schools on the comparative wages of skilled and of unskilled laborers? 2. What would be the effect of technical and industrial schools on the wages of artisans? 3. If a man is not content with $2 a day, why does he not do work that is paid $5 a day? 4. What is the effect on wages of differences in the danger, pleasurableness, social distinction, expense of preparation, of occupation? 5. If women are paid less than men for the same work, why are men employed at all? 6. What is the difference between these definitions: wages is the share of labor; wages is the payment by one man to another for his services? 7. If the supply of labor of any class were to be decreased 10% would wages rise in like proportion? 8. Since under the piece-work system a man is paid only for what he does, is there any reason for discharging a workman employed under this plan whose efficiency falls below the average? CHAPTER 24. THE RELATION OF LABOR TO VALUE 1. May a singer of songs or a mixer of drinks be called a productive laborer? 2. Are fine products high in price because wages are high, or vice versa? 3. Is common, unskilled labor "scarce" (in any reasonable sense of the word) in China? in the United States? 4. Can a manufacturer pay the same to laborers if the product will be marketed next year, as he can if it is to be marketed to-morrow? If so, how is the value of the labor adjusted to its product? NOTE.--An able discussion of the effect of discounting in the sale of labor in the market is given by Böhm-Bawerk, _Positive Theory of Capital_, pp. 313-318 _et seq._; see also Wieser, _Natural Value_, numerous passages. The changes in industrial organization are treated with historic insight by Hadley, _Economics_, Secs. 341-354. F. W. Taussig's _Wages and Capital_ (1896) gives a sympathetic interpretation of the wage-fund doctrine; the work is especially valuable for its excellent review of the history of the subject and for the chapters analyzing the modern industrial process. CHAPTER 25. THE WAGE SYSTEM AND ITS RESULTS 1. Why has machinery changed the relations of workman to master? 2. In what ways does labor get paid for its share, and who pays it? 3. Will a day's work of a common laborer buy more to-day than it would a half century ago? Why? 4. Are the opportunities for workmen to rise to the rank of masters as great as formerly? 5. Are wages independent of the other kinds of income? CHAPTER 26. MACHINERY AND LABOR 1. Do you think that the amount of work is reduced by new machinery? Point out ambiguities in the question. 2. What is the difference to the workman whether he becomes more efficient or works with a better machine? 3. Is the work of any kind fixed in quantity? What would cause it to change? 4. What kinds of laborers were thrown out of employment by the invention of the type-writer? What kinds of labor found employment as a result of its invention? Was the net result a gain or a loss of employment? 5. Answer the same questions with regard to the invention of railroads, mowing-, binding-, and threshing-machines; or the new roller-process of flour milling. 6. Can you describe from your own experience any example of readjustment of labor due to introduction of new machinery? CHAPTER 27. TRADE-UNIONS 1. Does it make any difference in the permanence of an increase of wages brought about by a strike, whether the employer is one of the more successful or one of the less successful in that business? 2. Is there any similarity between the methods of trade-unions and the etiquette of the medical and the legal professions? 3. If you were an officer of a trade-union, would you begin a strike when trade was good or when it was poor? 4. If you can do more work in two hours than in one, can you do more continuously in sixteen consecutive hours than in eight? 5. What determines the maximum study-time for the earnest student? 6. If as much is produced in a general eight-hour day, who benefits? 7. If production is reduced one fourth by shorter hours, is "work made" to that degree for the unemployed? 8. If all day-laborers should agree to work with one hand tied behind them, would their wages go up or down? Would it be good or bad for the whole class of laborers? CHAPTER 28. PRODUCTION AND THE COMBINATION OF THE FACTORS 1. What is production? Does the economic idea of production conflict with the physical principle that matter cannot be created? 2. Is it production to buy fifty cents' worth of yarn and knit a pair of socks worth twenty-five cents if you enjoy doing it? If you do not enjoy it? 3. Give examples of factors of production. 4. What factors of production must be combined by a savage to produce a canoe? 5. Outline the combination of factors that has produced New York bread made from Minnesota wheat. 6. What is the largest manufacturing establishment in your home town? Would a number of smaller establishments of the same sort and with the same aggregate capacity succeed as well? Why? 7. Have you observed the growth of any local industry from a small beginning to large proportions? If so, how do you account for it? 8. Would you prefer to begin your business career with a large company or with a small merchant? Why? 9. Through what historic stages has production passed? 10. Give examples of the industrial advantages of America as compared with Europe. CHAPTER 29. BUSINESS ORGANIZATION AND THE ENTERPRISER'S FUNCTION 1. What is the relative importance of organization in sawing wood, building houses, running a small store, or a large factory? 2. Which wins the battle: the general, the soldiers, or the armament? 3. What determines whether a crop is poor or good: the ground, the weather, or the farmer? 4. Why do some businesses give increasing returns as they grow? 5. One has said: "The natural differences in powers and aptitudes are certainly not greater than are natural differences in stature." Is this sound in an economic sense? 6. Who runs the business in a large store owned by a large family? Who has the risk? 7. Who is the enterpriser in a stock company where there is a superintendent elected by a board of directors, themselves elected by shareholders with one vote per share? 8. Who is the employer in a coöperative cooper-shop whose superintendent is elected by the workmen? 9. Has "a good chance in life" much to do with success? 10. What are the chief elements of business success? 11. Is modern business competition a competition of men only? CHAPTER 30. COST OF PRODUCTION 1. What is the cost of a good you have made entirely with your own labor? 2. What is the difference to the employer between rent, interest, and wages as items of cost? 3. Is there anything in common between "cost, the onerous exertion necessary to get goods," and cost as the money expenses of production? 4. Why does a merchant engage in one business rather than in another? 5. When prices fall, what determines which factories shall close, and which workmen shall be discharged? 6. Does the value of a product conform to the capital that has been put into it. NOTE.--For a fuller treatment of the more recent view of the subject, see Smart, pp. 64-83; Wieser, _Natural Value_, pp. 171-214; Böhm-Bawerk, _Positive Theory of Capital_, pp. 179-189, 223-234. The defects of such revisions as that attempted by Alfred Marshall are pointed out in _Quarterly Journal of Economics_, Vol. XV, pp. 432-452, article "The Passing of the Old Rent Concept." CHAPTER 31. THE LAW OF PROFITS 1. Business being poor, one employer is making good profits; how different will be the wages he pays from those paid by the unsuccessful employer? 2. How many of the men you know at the head of large businesses started life poor? 3. Was the rise in fortune due most often to chance, inheritance of wealth, or exceptional ability and power of work? 4. How should the income of an inventor be classified, as wages or profits? 5. Are the profits of the employer deducted from wages? Are the high wages of skilled labor deducted from the wages of unskilled? CHAPTER 32. PROFIT-SHARING, PRODUCERS' AND CONSUMERS' COÖPERATION 1. Describe any case of profit-sharing you may have seen in operation. 2. Is advertising of any social service or is its sole purpose to divert trade from one merchant to another? 3. In what ways are retail stores wasteful in their expenditures? Can this be avoided? 4. If you have seen a coöperative store in operation tell what was its success. 5. Are you willing to pay more for goods in order to have a choice of stores? CHAPTER 33. MONOPOLY PROFITS 1. How is the blacksmith free to compete with the physician and how not? In what sense have we assumed that competition exists? 2. Is there competition between the owner of good land and the owner of poor land? 3. Has the owner of a poor gold-mine a monopoly? Has the owner of a rich mine a monopoly? 4. Does the ownership of land give a monopoly? The ownership of a horse? 5. In what sense is a street-railway a monopoly? What is the value of its franchise? 6. Why does the public consent to grant patents or public franchises? 7. If one company controlled all the petroleum in the world, what would it consider in fixing the selling price? 8. Why will railroads issue commutation tickets? NOTE.--Of the very large recent literature bearing on monopoly and trusts may be mentioned as especially useful: J. B. Clark, _Control of Trusts_; R. T. Ely, _Monopolies and Trusts_; J. W. Jenks, _The Trust Problem_ (a summary by the expert for the Industrial Commission); J. E. le Rossignol, _Monopolies, Past and Present_; _Report of the Chicago Conference on Trusts, 1899_; _Report of the United States Industrial Commission_, 19 vols., 1900-2 (a mine of information). CHAPTER 34. GROWTH OF TRUSTS AND COMBINATIONS 1. What advantages are there to manufacturers in combination? What to the public? 2. What relation has improved transportation and other means of communication to trusts? 3. Name as many economic monopolies as you can. 4. What large trusts have recently been formed? 5. Does the public consider the growth of trusts to be good or bad? What do students of the question think of it? CHAPTER 35. EFFECT OF TRUSTS ON PRICES 1. Can the large factory always outsell the small one? Why? 2. Why are trusts or selling agreements formed? 3. Describe any agreement of which you know, made between merchants or manufacturers for the purpose of regulating prices. Did prices go up or down as a result? 4. Would it be a good thing for society if a trust made great economies in production, crowded out its smaller competitors, and maintained prices just where they were before, dividing among its shareholders the amounts saved? 5. How would the effects on society be different if prices were reduced by better organization and the prevention of waste? 6. Is it good public policy to allow a trust to undersell its smaller competitor in one district while it keeps up its prices elsewhere? CHAPTER 36. GAMBLING, SPECULATION, AND PROMOTERS' PROFITS 1. Do you think that store-keepers fix the price of the produce they buy of the farmers? If so, to what extent? 2. Can brokers fix the price of grain on the market? How, and to what extent? 3. What is speculation? Give examples you have seen. 4. Were they, on the whole, good for the community? 5. Give other examples showing the difference between a gambling-house and an insurance company? 6. Is the immorality of betting based on economic grounds? 7. Ought lotteries to be permitted by law? 8. Ought speculation in mines to be permitted by law? 9. Ought the profits of the farmer from a sudden rise in the value of wheat be confiscated to the public? NOTE.--The ablest study of the subject is by H. C. Emery, _Speculation on the Stock and Produce Exchanges of the United States_, in Columbia University Studies in History, Economics, and Public Law, Vol. VII, No. 2, 1896. CHAPTER 37. CRISES AND INDUSTRIAL DEPRESSIONS 1. What is a financial crisis? An industrial depression? 2. Define the expressions "over-production" and "under-consumption." 3. In a period of depression is there less money than usual in the country? In the banks? 4. If there were twice as much money in the world, would panics take place? 5. Before a financial crisis how are prices, high or low? After a panic? 6. What economic changes occurred in your own community in the panic of 1893-4, or in the years 1903-4? 7. Do people save more in good times or hard times? CHAPTER 38. PRIVATE PROPERTY AND INHERITANCE 1. If the law permits certain classes to be fleeced without redress, is wealth thereby reduced? 2. What are vested rights? Do they ever stand in the way of progress? Examples. 3. Is it right that the lucky inventor of a popular toy should make $100 a day from it? 4. Is it right that an inventor should by patent laws be able to keep the profits of his business high? 5. Do you know of any father who created more wealth because he could bequeath it to his son? 6. Does the son work as hard when he inherits his father's wealth? 7. What is the effect of private property on saving? 8. If capital is needed in production why is the question of justice raised when its use is paid for? CHAPTER 39. INCOME AND SOCIAL SERVICE 1. What is it to earn a living? How many people do it? 2. When is a man poor? 3. Would it be a good thing if the boot-black got a dollar a shine? 4. Does luck have greater influence on business success in an old country or a new one? 5. Ditto in agriculture, mining, commerce, or manufactures? 6. A rare coin and a piece of land sold for the same price one year, and the next year both sold for double the amount. Was there an unearned increment in both cases, and of the same kind? 7. If rewards were equal, what would determine the choice of work? NOTE.--The most important contributions to the theory of consumption have been made by S. N. Patten in his numerous writings, among them: _The Consumption of Wealth_ (1889); _Theory of Dynamic Economics_ (1892); _The Theory of Prosperity_ (1902). A number of the ideas are well restated in more simple terms by E. T. Devine in _Economics_, especially pp. 375-396, and 73-111 (applies to chapter 41). CHAPTER 40. WASTE AND LUXURY 1. Can we determine what luxury is, or give the notion definiteness? 2. Do you feel a sense of injustice when you read of a millionaire's ball if you are not a millionaire? 3. Can you excuse the sense of injustice felt by the hungry man when he sees you wear patent-leather shoes and kid gloves? 4. Under private property, can men complain of the use made by others of their wealth on the ground merely that it was unwise? 5. Is luxury necessary to give employment to labor? 6. Is the spendthrift the best friend of labor? 7. Ought legislation attempt to prevent luxury, or can public opinion affect it? 8. Is smoking high-priced cigars economically justifiable, assuming that the smoker is wealthy and does not injure his health thereby? 9. Wines, balls, pensions are said to be good because they put money into circulation. Criticize. 10. What is the difference between the consumption of wealth and its destruction? 11. In what ways can a piece of iron be consumed, economically speaking? 12. Was the great Chicago fire, which led to the rebuilding of the city, a good thing economically? CHAPTER 41. REACTION OF CONSUMPTION ON PRODUCTION 1. What are complementary goods? Give some illustrations. 2. Can people live on the future, consuming in advance of production? How is it with the nation in time of war? 3. Does economic theory throw any light on the ethics of miserliness? 4. It is said that the demand of the day-laborer for cheap white shirts has reduced the wages of the women who make them. Criticize. 5. What effect on wealth would a change of climate have, whereby the consumption of coal would be decreased? 6. If manna fell from heaven daily in a climate where clothing and shelter were unnecessary, what effect on wealth would result? CHAPTER 42. DISTRIBUTION OF THE SOCIAL INCOME 1. What different ideas does the expression "distribution of wealth" suggest to you? 2. What different methods of obtaining an income have you noted among the men you know? 3. How can a yard of cloth be said to be distributed to the labor and capital producing it? 4. If two men of equal skill go fishing together, how would they find a rule for dividing the catch? 5. If one is more skilful or stronger, or owns the boat and the tackle, how would it affect the division? Would any rule be attainable? 6. If socialism reduced the total product, would it still be desirable because of the better distribution? 7. What classes of thinkers are most inclined to take up socialism? (Classes considered socially, industrially, as to race, as to economic and historical training.) CHAPTER 43. SURVEY OF THE THEORY OF VALUE 1. Mention any cases you can think of where merely changing the place of things added to their value; or changing their form; or where the mere lapse of time added to the value of the thing. 2. What effect on wages and interest does the bringing in of foreign capital have? 3. If, through greater efficiency of labor, wealth increases, which share benefits? 4. What would be the effect on wages, interest, and land rent of a sudden addition of rich land to the country? 5. What would be the effect on interest, land rent, and wages of a great increase of national saving? 6. What concern have the poor in the abundance of capital? The rich in the abundance of labor? 7. Walker says that the laborer gets what is left after the other shares are deducted according to their law; wages are the residual claimant. Are the other shares independent of wages? 8. Can wage-earners be shut out from all advantages in the land of the country? 9. Are high wages and high interest seen to go together? Give such examples as you think of. 10. Do improvements in agriculture increase or decrease the rent of land? CHAPTER 44. FREE COMPETITION AND STATE ACTION 1. What is economic freedom? How different from political freedom? 2. Does the presence of a policeman increase or diminish competition among men? 3. Are most positive laws intended to hinder competition or make it freer? 4. In what ways does competition reduce the total product? 5. Is custom a better regulator of economic action than competition? 6. Criticize the doctrine of economic harmony, giving examples. CHAPTER 45. USE, COINAGE, AND VALUE OF MONEY 1. If gold were to become as plentiful as iron, would it be worth more or less than iron? 2. Some say Providence has indicated gold and silver as the materials for money. How has this been done? 3. Why does nearly all the gold produced in California leave the state? What keeps any of it there? 4. Who makes coins? Would jewelers make better ones? 5. When gold comes out of the mine is the gain to the community greater or less than when the same value of grain is harvested? 6. Does gold cost the day-laborer as much in California as in New York? 7. What are the principal things besides money uses that cause a demand for gold and silver? 8. The mint price of an ounce of gold, .900 fine, is alike at San Francisco and Philadelphia, $18.604. Why is gold ever shipped from California to New York? 9. Give examples of things that increase the demand for money. 10. Note any habits of friends that result in their carrying more or less money than others of the same income. 11. What determines the amount of money needed by different persons, towns, states, and nations? 12. When goods are exchanged for money or money for goods, what is the gain? 13. On an isolated island would it make any difference as to the value of money if there were but one gold-mine or several competing ones, supposing that the output were the same? CHAPTER 46. TOKEN COINAGE AND GOVERNMENT PAPER MONEY 1. Define legal-tender as applied to money. What is meant by fiat money? 2. Show the difference between convertible and inconvertible money. 3. The government of the island of Guernsey having no money, issued paper-notes to pay for the building of a market. They circulated and were gradually taken up as the market earned its cost, during ten years. When they were all redeemed and burned, the island had the market free of cost. Explain how this could be done. (This is from Sumner's _Problems in Political Economy_.) CHAPTER 47. THE STANDARD OF DEFERRED PAYMENTS 1. If every piece of money should miraculously be doubled in a night, whose interests would be affected? 2. Is the fact of one man's gain and another man's loss by chance of any economic or political importance? 3. What gives rise to the belief sometimes held that money is an invariable standard of value? 4. Is there anything in the nature of mining that keeps the ratio of the supply of gold and silver nearly uniform? 5. Is the value of gold and silver due to the action of government? 6. Does the principle of the substitution of goods have any bearing on the value of metals under bimetallism? 7. Note carefully, and indicate the different meanings of bimetallism; of demonetization. 8. What is the extent of the influence one nation can have on the ratio of the two precious metals? 9. If money wages are higher and general prices are lower, how is the laborer affected? Is this due to the appreciation of money? 10. Can you get a kind of money that will make the things that are sold, dearer, and the things that are bought, cheaper? 11. What are the main reasons given for the ratio of 16 to 1? CHAPTER 48. BANKING AND CREDIT 1. What does a bank do for a community? 2. What are the sources of income to a bank? 3. Can a bank that issues its own notes afford to lend cheaper than the ordinary capitalist? 4. What is discount and deposit? 5. Do all banks issue notes? Why? 6. What is the function of a clearing-house? 7. If there are twenty banks in a town and no clearing-house, how many collections would have to be made by all the banks daily assuming that each day depositors of each bank receive checks on the other nineteen banks? 8. Does a clearing-house enable the banks that belong to it to get along with a smaller cash reserve? 9. What element of security is furnished by clearing-houses during panics? CHAPTER 49. TAXATION IN ITS RELATION TO VALUE 1. Does taxation ever infringe on the right of private property? 2. What is it a citizen gets in return for his taxes? 3. Is there any relation between the taxes paid and the benefits secured from government? 4. A recent newspaper item says: "This is the year real estate is assessed. Turn the cow loose in the front yard, tear down the fence, make things look generally dilapidated, for it will be money in your pocket." What does this indicate regarding taxation? 5. The parts of an estate divided into fifteen equal shares by expert real estate agents were soon after assessed variously from $900 to $2850 for purposes of taxation. What does this indicate? (From Sumner's _Problems_.) 6. In what ways may we understand the proposition that taxation should be proportioned to ability? 7. Can taxation be used to secure some of the profits of large corporations? CHAPTER 50. THE GENERAL THEORY OF INTERNATIONAL TRADE 1. Is it bad policy to let the people of Palo Alto spend money in San Francisco for things that could be produced at home? 2. Pensions are defended as putting money in circulation. Is this like any tariff arguments you have heard? 3. Is it bad policy for California to buy New England manufactures? 4. If there were no legal bar to a tariff between the states, would a tariff probably be imposed? If so, would it be a wise measure? 5. A nation with _n_ dollars in circulation has to pay a war indemnity of _n_ dollars to another country having the same circulation, how much money will each then have, and what will be the effect on prices, foreign trade, rate of exchange? (From Davenport.) 6. If large shipments of wheat are made to England, will bills of exchange on London be higher or lower in New York? 7. What effect on exchange has the holding of American bonds abroad? CHAPTER 51. THE PROTECTIVE TARIFF 1. If all trade is exchange do not the members of a trust reduce their income when they raise the price of their products by artificial agreement? 2. Is there any likeness between trade-unions and tariffs? Between tariffs and factory legislation? 3. Can it be of advantage to trade freely with one nation if general free trade is bad? 4. Who gained when Hawaiian sugar (before annexation) was admitted free of duty, while other sugar was taxed? 5. If it would pay us to admit goods free, may we be justified in taxing them to force concessions from the other country? 6. What have you read this year about reciprocity? CHAPTER 52. OTHER PROTECTIVE SOCIAL AND LABOR LEGISLATION 1. Is granting patents an interference with trade similar to tariffs? 2. What reasons are given in justification of laws closing barbershops on Sundays? 3. Can a person owning a lot on a residence street of a city erect a glue-factory on it? 4. What have you noted as to the benefits or hardships of restricting child labor in factories? 5. Are men less able to bargain for the loan of money than for other things? 6. Can law fix the rate of interest at any point desired? If so, then why not at zero; if not, then why fix any maximum rate of interest? 7. Are interest rates changing in America? 8. In what ways is the rate of interest affected by the rise or fall of the value of money? CHAPTER 53. PUBLIC OWNERSHIP OF INDUSTRY 1. What are municipal franchises? Where are they? 2. What kinds of municipal industries have you seen in operation? How successful were they? 3. What are the main arguments for and against the city ownership and control of gas and waterworks? 4. What troubles arise from city politics? 5. Name the industries that are owned and controlled by towns and cities of which you have a personal knowledge. 6. Which of them are most satisfactory in your judgment? Which the least so? 7. What is the public sentiment in your home community as to the ownership of industries by the town or city? 8. What forms of state activity favor survival of unfit men and bad traits of character? What forms help the fittest to survive? NOTE.--For exhaustive and well-arranged references on all aspects of municipal control and municipal ownership see R. C. Brooks, _Bibliography of Municipal Problems_, pp. 157-169, in _Municipal Affairs_, Vol. V, No. 1 (March, 1901). CHAPTER 54. RAILROADS AND INDUSTRY 1. Why is transportation a greater problem in the United States than in Europe? 2. Show in what way natural waterways have determined the location of leading cities in America. 3. Give examples of cities whose growth has been caused by railroads. 4. What interests favor and what oppose the building of an isthmian canal? 5. Mention in order of economic importance four things that would happen if all American railroads were suddenly to be destroyed. 6. What cases have you seen where the railways impose unjustly on the public? 7. Give instances you have seen or heard of where two shippers paid different rates for the same service. 8. Why should preachers get half-fare rates? 9. If your neighbor rides on a pass and you pay your fare, are you helping to pay for his ride? 10. Do you know any large cities that are more favorable shipping-points than neighboring towns? Give reasons. CHAPTER 55. THE PUBLIC NATURE OF RAILROADS 1. What legal rights do the builders of a railroad have that are not enjoyed by all citizens? 2. Can you see any clear distinction between the public nature of a railroad and of a horse and carriage? 3. What harm can there be in the acceptance of passes by judges, legislators, and other public officials? 4. Ought the law prohibit the sale of tickets by "scalpers"? 5. Who has the greater political power, the president of the Pennsylvania Railroad, or the governor of that state? CHAPTER 56. PUBLIC POLICY AS TO CONTROL OF INDUSTRY 1. What effect would it have if the state should make laborers work for unsuccessful employers at lower wages than for successful ones? 2. Or should reduce rents for the less capable merchants and manufacturers? 3. Is there any rule for determining the limits of state interference? 4. Why does the question of the control of the railways in the interest of the public present especial difficulties in America? CHAPTER 57. FUTURE TREND OF VALUES 1. Make a list of the things discussed in this course that tend toward improving the average condition of men. 2. Make a list of those that tend toward worse conditions for the mass of men. 3. State what kinds of material agents will probably increase in value relative to other kinds, giving reasons. 4. State what to your mind are three important economic problems whose answer is most uncertain, giving reasons. 5. If you had the power, what single public measure that you believe would be practicable and effective would you put on the statute books, in order to make a juster division of the social income? Give reasons. NOTE.--On the subject of this chapter, see Devine, _Economics_, ch. XVII (disposition of the social surplus); Jenks, _The Trust Problem_, pp. 190-211; Marshall, Bk. VI, chs. XI and XII. INDEX Ability, variety, 177-83; physical differences, 178; intelligence, 179; training, 180; moral qualities, 180; inequality, 181; scarcity, 182; and occupation, 203; grades, 212; types, 264; selection, 270-2; sterilization, 561-2 Abstinence, definition, kinds, 163; see Saving Acquisition vs. social production, 259 Affection in personal distribution, 402 Agricultural classes, opposition to commercial, 113 Agricultural stage, 261 Agriculture, machinery in, 238 Alternative uses, relation to costs, 277 America, farms let on shares, 59; land changes hands, 60; exhaustion of the lands, 82; use of interchangeable parts, 85; destruction of forests, 87; coal deposits, 88-9; improvement of horses, 91; watch-factory, 92; price of horses in Boer War, 95; discovery of mines, 102; varied industrial conditions, 108; use of money, 109; expression of wealth, 114; land became part of world's supply, 155; standard of living, 192; size of families, 193; food supply, 194; increase of population, 194; army rations, 196; standard of food, 196; caste, 199; democracy and efficiency, 200; wage system dominant, 227; wages, 232; changing occupations, 234; favorable effect of machinery, 242; difference of race among workers, 247; industrial superiority, 262; Oriental competition, 263; fortunes, 271; profit-sharing, 283; producers' coöperation, 296; consumers' coöperation, 300; industrial stage, 313; crises, 352; gifts by wealthy men, 368; law of inheritance, 373; fortunes, 375; dress of workers, 397; colonial policy toward, 425, 426; custom, 426; gold standard, 432; silver supplies from, 441; gold supplies, 442; paper money, 448-9; effect of silver supplies from, 454, 457; effect of gold output, 457; banks, 468-70; discussion of taxation, 479; prices in California, 483; in different sections, 484; protective tariff, 491-503; growth of manufactures, 497; factory laws, 509-12; state enterprise, 514-17; early settlement on the coast, 526; trade in War of 1812, 526; canals, 528; railroad building, 529; aid to railroads, 535 American Federation of Labor, 245; claims of, 254 American Revolution, economic issues in, 8 Animal economy, provision for wants, 40 Animals, problem of numbers, 185-6 Antisocial profits, 289; of monopoly, 311; from speculation, 377; antisocial use of ability, 378 Appropriation stage, 261 Ashley, W. J., 575 Assignats, 448 Attribution of product, 176 Austrian economists, 570 Authoritative distribution, 406-8; use of, 410-11 Balance of trade, international, 486-7; so-called favorable, 493 Bank-notes, and paper money compared, 447; typical, 465-8; in United States, 469 Banks, and credit, 462-70; functions, 462-5; in United States, 468-70 Barter, definition, 31; under simple conditions, 32-5; difficulty of, 99; decline, 108-14; economy in Middle Ages, 110 Bequest, limitation of right, 368 Bets, see Gambling Bimetallism, international, 457-9; national, 459-61 Biologic doctrine of population, 186, 187 Biology, shows inequality of talents, 181 Birth-rate, of animals, 187; decreasing American, 193, 561 Böhm-Bawerk, E. von, 570, 571, 572, 577, 580, 583 Boycott, 251 Brooks, R. C., 593 Building laws, 505 Bullock, C. J., 568 Buyers, bidding, 34; margin of advantage, 35 Canadian bank-notes, 468, 470 Canals, as carriers, 528-9 Cannan, Edwin, 571, 573 Capital, origin of term, 112; concept in modern business, 114-7; definition, 115; not identical with money, 115; purpose of borrowing, 116; sum, expressed in years' purchase, 121; sum of expected rents, 122; value not primary, 123; stock, 127; value of stocks fluctuate, 134; time-value and, 142; fixed and increasable forms, 152-3; use by enterprisers, 285; insured by enterprisers, 286; in coöperation, 295; large, 312; amount in factories, 315; value affected by protection, 501 Capitalistic, age, 114, 117; monopoly, 306 Capitalization, of all forms of rent, 118-30; rent-charges as an example of, 118; of land rents, 124; of uniform or varying series of rents, 125-6; increasing role, 127; of any continuing income, 128; of franchises, 129; of corporate incomes, 130; rate, 147; and interest, 168; influenced by taxation, 475 Capitalization, theory of crises, 353-4 Carlyle, T., on wage, 229 Carnegie, Andrew, 268, 270, 372, 377; economies of gifts to libraries, 387, 390 Carver, T. N., 578 Cassel, 578 Caste, and efficiency, 199 Chance, unavoidable, 333; average in industry, 334; artificial, 334; legitimate and illegitimate, 335 Character, affected by expenditure, 398; highest point of production, 400; unity of choice determining, 401 Charitable distribution, 405-6 Charity, public, 507 Cheating and gambling, 335 Child-labor legislation, 509 Choice, of goods, harmony in, 400 Cities, wealth of, contrasted with feudal estates, 111, 113; growth, 504; large, on waterways, 528 City ownership, 514-5; see Public ownership Clark, J. B., 398; theory of profits and wages, 418, 573, 575, 584 Clews, Henry, on Wall Street finance, 378 Climate, and income, 48 Closed shop, 249-50 Clothing and efficiency, 196; effect of choice of, 396 Coal, use and exhaustion, 88, 558; strike of 1902, 251, 252 Coinage, 433-6; definition, 433; free or gratuitous, 434-6; token, 443-7; free and gratuitous, 443 Coins, light-weight, 443-7 Collective bargaining, 248 Collective enjoyment, as a mode of distribution, 408 Collectivism, 552 Combination and wages, 253-6; of the factors, 260; opposes competition, 429; of capital, see Trusts Comforts, relative meaning, 11; and luxury, 388 Commercial monopoly, 306 Commercial paper, discounting of, 132 Commissions, to control railroads; 541-3; to control corporations, 545 Commodity-money theory, 450 Common denominator of values, see Money Commons, J. R., 573 Communism, among Germanic tribes, questioned, 365 Comparative costs, doctrine of, 482-3 Competition, definition, 33; one-sided, 33; present limitations on, 228; the worker in, 229; reduced by trade-unions, 248-50; costly in mercantile business, 298; free, not equality of efficiency, 303; alleged cause of trusts, 322; persistence of, 331; and state action, 422-30; and custom, 422-5; economic harmony through, 425-8; social limiting of, 428-30; modern restrictions, 504 Competitive distribution, 409-10 Competitive price, forces governing, 308 Complementary agents, and value, 78; intensive use of, 78; labor and wealth, 175 Compulsory distribution, 404 Conquest theory of property, 363 Consolidation of railroads, 539-40 Consumers, determining costs, 280; gain from trusts, 325 Consumers', choice influences value, 392; choice influences wages, 394; coöperation, 298-301; League, 394 Consumption, reaction upon production, 392-401; definition of economic, 392; reaction upon material agents, 392-5; reaction upon efficiency of workers, 395-410; effects on consumer, 398; as a conventional division of political economy, 419 Consumption, tax on, 475 Consumption goods, definition, 20; immediately enjoyable, 21; a part of income, 41; differential advantages, 73-5; diagram, grades by quality, 75; proposed uses, 161; saved, 166; see Goods Continental notes, 448 Contracting out, forbidden, 512 Contract interest, see Interest Contract rent, see Rent Contract wages, see Wages Coöperation, producers', 295-7; consumers', 298-301 Corporation, securities, 127-8; public-service, 129; increase of, 133 Cost, involved in improvements, 90; of operation, 168; in larger production, 319; of government, 474; see Comparative costs Cost of production, 273-81; from the enterpriser's point of view, 273-6; psychic, 273; alternative, 274; money, 274; and price 276; from the economist's standpoint, 276-81, 422 Courts and industrial legislation, 543, 550-1 Credit, sales involve interest, 134; and banking, 462-70 Crises and industrial depressions, 345-55; caused by sudden tariff changes, 502-3 Crusoe economy, subjective valuations, 30; time-value, 131, 140; saving, 166; economic wages, 208; present and future goods, 219-20; need of judgment, 265 Cultivation, margin of, 64; see Utilization Custom, and rents, 56; and efficiency, 199, 200; affecting distribution, 409; and competition, 422-5, 429 Daniels, Winthrop M., 571 Davenport, Herbert J., 567 Death-rate, decreasing, 192 Debts, public, as investments, 133 Deferred payments, standard of, 453-61; definition, 453; ideals for a standard, 455-7 Demand, definition, 27; social aspect of choice, 28; law of, 28; curve, 29; elasticity, 29; reciprocal, becomes exchange, 30; curve, diagram, 35 Democracy, and efficiency, 199; effect on race progress, 561, 563 Deposit and discount, 462 Depreciation and rent, 85-7 Desire, see Wants Destruction, and rent, of wealth, 87-9; accidental, of wealth, 381-2; intentional, 382-3 Devine, Edward T., 587, 594 Dewey, Davis R., 568 Differential advantages, in consumption goods, 73-5; in indirect goods, 75-80 Diminishing returns, law, 61-72; definition, 61; of all agents, 62; technical, 62; economic, 63; other meanings of term, 66-9; general application to space relations, 67-8; confused with large production, 68; technical, 68; historical, 68; development of the concept, 69-72; applies to all wealth, 70; and population, 184; and productivity of labor, 215; the broadest principle of value, 420 Diminishing utility, law, 22; diagram, 24; relation to diminishing returns, 71 Directors, of railroads, obligations of, 539 Discount, commercial, 132, 135 Discovery enlarges natural resources, 156 Discrimination in rates, by monopoly, 310; in railroad rates, 530-3 Distribution, personal and functional, 359; impersonal, 360; personal, nature of, 402-3; definition, 402; of the social income, 402-11; methods of, 404-11; as a conventional division of political economy, 419 Dividends, manipulation of, 130 Division of labor, 201-4; definition, 201; kinds, 201; advantages, 202; calls for directive ability, 264; growth of territorial, 480-2 Dollar, meaning of, 435 Drink, effect of, 396 Durable agents, see Goods Durableness of rented agents, 55 Economic goods, definition of, 19; see Goods Economic harmony, through competition, 425-8; definition, 427 Economic law, nature of, 206 Economic monopoly, 306 Economic motives, see Wants Economic production, 258; see Production Economic rent, see Rent Economic wages, see Wages Economics, nature and purpose 3-8; definition, 3, 4; subject matter, 4; place among social sciences, 5, 6; as a science, 7; synonym for political economy, 7; democratic in aim, 8; importance, 8; aim of study, 412; a part only of social science, 413; central point of, 413; redefined, 555; relation to practical life, 555 Economy, involves choice, 27; the barter, 108; the money, 108-14 Education, free public, 507 Efficiency, talent, and training as factors in, 180; resultant of many qualities, 181; of labor, 195-204; equality of, not essential to competition, 423; see Ability Ely, Richard T., 568, 584 Emery, Henry C., 585 Employer, adjusts labor to interest rate, 220; see Enterpriser Employment, no lack of, 183 Energy, sources of, and income, 50 Engels, Frederick, 416 England, idea of rent in, 59; long leases, 59; food supply during Napoleonic wars, 69; coal deposits, 89; wages, 232; changes in 18th century, 237; loans, 240; abnormal effect of machinery, 241; coöperation, 296, 299; use of term monopoly, 304; cotton crisis, 345; crises, 348; endowments limited, 368; grants to royal families, 373; gold standard, 432; prices in Napoleonic wars, 442; bank restriction act, 448-9; balance of imports, 493; discussion of protection, 496 Enjoyable goods, see Consumption goods Enterprise, income, and social service, 376-7 Enterpriser, function of, 265-72; qualities of, 267-70; selection of, 270-2; his task, 273-5; his costs, 275; medium for consumers' estimates, 280; profits of, 283; origin of term, 284; his services reviewed, 285-8; his risk, 287; intermediary in industry, 287; lacking in coöperation, 297; relation to profit-sharing and coöperation, 300; as risk-taker, 338 Environment, betterment, 92, 162 Ethics, definition, 6; and economics of time-value, 144; of consumption, 395, 398, 401; of railroad problem, 532, 539; see Morality Europe, industrial methods of, 262 Exchange, in a market, 30-8; and demand, 30, 31; advantage, 31; isolated, 32; of present and future goods, 145-9; as a conventional division of political economy, 419; foreign and domestic, of money, 463; international, see International trade Extensive margin of indirect goods, 78-9; see Utilization Extravagance to give employment, 386 Factors, definition, 260; combination of, 260-4; cost of, 274; proportioning of, 275; mutual employment of, 420 Factory, system, growth and effect, 243-4; change in number, 314; limits to growth, 319; legislation, 509-13 Farmers and the tariff, 498-9 Fauna and income, 49 Feeling and utility, 26 Fiat-money theory, 450-1 Fisher, Irving, 571, 575 Fixed charges, 168 Flora and income, 49 Food, and income, 50; and efficiency, 196; effect of, 396; laws and inspection of goods, 506 Foreign exchanges, theory of, 485-8 Forestry, need of, 88 Forests, destruction of, 87-8 Franchises, for public utilities, 96; capitalizing of, 129; granting monopolies, 522 Free competition, see Competition Free coinage, money value, 435 Freedom, economic, 422-30; definition, 422 Free goods, definition, 19; on the margin of utilization, 75 Free-silver movement in America, 459-61 Free trade, see International trade Future rents capitalized, 125 Gambling vs. insurance, 333-8; definition of typical, 334; economic theory of 336 George, Henry, his theory of value, 417 Gibson, A. H., 577 Gilman, N. P., on profit-sharing, 293 Glut theory of crises, 351-2 Gold, fitness as money, 102; as money, 432-3; supply of, 435; discoveries, 442; as a standard, 455, 457; increased output, 461; shipping point, 485 Goods, definition, 19; adjustment to wants, 21; shifting series, 27; substitution, 27; series of, 39; relation of indirect to gratification, 46; enjoyable, 47; durable, 47; unripened, 47; degrees of durableness, 48; limited number, 52; free and unlimited, 152 Government, a condition of efficient labor, 198; as consumptive good and productive agent, 473; paper money, see Paper money Granger stores, 300 Gratification, defined, 16; and marginal utility, 22; temporary, 39; at different times, 45; time-value of, 141, 143 Greenbacks, 448, 451 Gresham's law, 446-7 Hadley, A. T., 579, 580 Happiness, and wealth, 18; and ostentation, 388; and character, 401 Hildebrand, 575 Historical diminishing returns, 68; confused with technical, 70; see Diminishing returns Home-market argument for protection, 498-9 Honesty, a condition of efficiency, 198; of public officials, 551 Household industry in America, 313 Immigration and protection, 498 Improvements to increase products, 90 Incidence of taxation, 476 Income, as a flow of goods, 39-42; national, social, individual, private, objective, money, 40; gross, net, 41; of consumption goods, 41; present, future, 41; funded, unfunded, 42; as a series of gratifications, 43; psychic, 43-5; all sources of, are productive, 43; affected by objective conditions, 48-52; affected by increasing capital, 152; and social service, 370-80; from property, 370-6; from personal services, 376-80; justice of large, 389-91; distribution of the social, 402-11; and taxation, 474-7; affected by crises, 354-5; personal and impersonal shares, 359-62; personal, 361; complex sources of psychic, 403 Increasable agents, 153-5; scale of increasableness, 158 Increase, of product, 90; of agents, 92, 95; of rent-bearer affects others, 93 Indestructibility imputed to rented agents, 55 Indirect goods, see Goods Individualism, extreme, its ideal of competition, 410 Industrial depressions, definition, 346 Industrial revolution caused by machinery, 237 Industrial stage, 261 Industry, changes in, affecting money, 101; money reacts upon, 102; diversity of condition in America, 108; changes in Europe, 109; growing complexity as interest falls, 168 Infant-industry argument for protection, 497 Inheritance, effect on industry, 12; social effects, 369-73 Insurance, origin, 337; economic theory of, 338; sound conditions in, 338 Integration of industry, 321 Intensive margin, see Utilization Interest, opposition to, in Middle Ages, 112; the modern contract forms for borrowing wealth, 114; contract and rent contract, 116; on loans contrasted with rent-charges, 120; increased use of, 121; permitted by Rome, 122; two modes of approach, 123; "the prevailing rate" and capitalization, 124; on money loans, 131-7; gross and net, 132; in credit sales, 134; concealed, 135; evasion of legal rate, 135; adjustment of business to the rate, 140; rate of contract, 147-8; in sacrifice sale, 149; and time-value, 150; relation to rent, 150; first use of term, 151; rate divides present and future uses, 159; and future goods, diagram, 160; equalizer of time-values, 162; rate of, and saving, 165; and capitalization, 168; and improvements, 168; rate relates present and future, 220; contract, with enterpriser, 285; conventional conception of, 413; contract, and deferred payments, 454 Intermediate products and costs, 279 Internal revenue, 475 International demand, ratio of, 484-5 International trade, general theory of, 480-90; as a case of exchange, 480-5; definition, 480; equation of international exchange, definition, 483; cash balance of, 486; real benefits of, 488-90 Interstate Commerce Act, discussion of, 537, 542; workings of, 543; importance of, 545 Inventions, affect rent, 85-6; to increase rent-bearers, 91; adds to supply, 156 Investment, and rate of interest, 148; and saving, 165; in stock of corporation, 342 Ireland, tenants' improvements in, 59 Iron law of wages, 216 Jenks, J. W., on trusts, 327, 584, 594 Jevons, W. S., on the coal-supply, 88 Johnson, A. S., 572 Justice in taxation, 477 Just price, 547 Keasbey, L. M., 576 Knights of Labor, 245 Labor, the old distinction between productive and unproductive, 43, 260; and classes of laborers, 173-83; definition, 173; and play, 173; pleasurable, 174; and wealth, 175; direct and indirect services, 176; grades of, 177; scarcity, 182; supply of, 184-194; employer's and social view, 184; conditions for efficient, 195-204; objective physical conditions, 195-8; social conditions, 198-201; division of, 201-4; of different grades, 212; relation to value, 215-25; productivity of, 215; distance from gratification, 219; no unit of, 224; value of product insured by enterpriser, 286; economized in large production, 318; legislation, 509-13 Labor theory of property, 364 _Laissez faire_, ideal of, 518 Land, rented in Middle Ages, 57, 110; and diminishing returns, 69, 70; and repairs, 81-2; continues to be rented, 113; products of increasing cost, 154; relatively fixed in quantity, 154-5; economic supply of, 155-6; produced, 157; not monopoly, 303 Land grants, to railroads, 535 Large industry, social effects of, 244; in United States, 312-7; advantages of, 318-20; economics of combination, 321 Large production, confused with diminishing returns, 68; sharing of the economics of, 325 Lasalle, Ferdinand, 416 Latin Union, 458 Law, definition, 6; nature of economic, 206; in relation to wealth, 361 Legislation and local interests, 549 Liberty of wage-worker, 231 Lloyd, Henry D., on coöperation, 296 Legal theory of property, 364 Legal-tender, quality of paper money, 447 Loans, short-time, 132, 137; long-time, 133, 138 Luck and profits, 289 Lump of labor, error of notion, 240 Luxury, relative meaning, 11; 385-91; definition, 385; fallacy of, 386-7 Machinery, need of repairs, 83-4; and natural resources, 91; definition, 236; and labor, 236-44; extent of use, 236-8; age of, 237; effect on wages, 239-44; evils of sudden introduction, 239; economy in large production, 318 Malthus, Robert, on fixity of land, 154; on population, 579 Malthusian doctrine, 578 Manual workers, social service of, 379 Manufactures, fallacious contrast with agriculture, 67; do not fix interest rate, 124-5; machinery in, 283 Marx Karl, 416, 417 Marginal contribution of labor, 213 Marginal labor, 210 Marginal pair, 34; diagram, 35 Marginal utility, definition, 23-7; in barter, 32; in use of goods, 64; of consumption goods, 75; of indirect goods, 78-9; of wages, 211, 213; fixes cost of factors, 277; applied to gambling, 336-7; in insurance, 338; of income, 399; extension of the principle, 420-1 Margin of advantage, 34; diagram, 35 Markets, definition, 36; exchange in, 36-8; widening, 36-7; growth, 263 Market value, built on subjective valuation, 35, 38; of time, 145 Marriage, postponement, 190 Marshall, Alfred, 573, 574, 583, 594 Material resources, relation to efficiency, 195 Material wants as motives, 9 Medium of exchange, see Money Merchants impart utility, 31 Middle Ages, markets, 36; customary rents, 56; renting contract, 57-9; limited use of money, 109-13; rent-charges, 118-22; use of term interest, 151; death-rate, 192; caste, 199; system of labor, 227; industrial changes, 237; marine insurance, 337; no crises, 348; favored classes, 373; sumptuary laws, 390; custom, 424; competition, 425; prices, 441; depreciation of money, 444-5; small political units in, 481; control of industry in, 553 Mill, John Stuart, on fixity of land, 155; on coöperation, 296, 361, 368, 398, 417, 572 Money, as a tool in exchange, 98-107; origin, 98-103; nature of use, 103-5; value, 105-10; as medium of exchange, 99; qualities, 100; materials, 101; an indirect agent, 103; as common denominator, 104; as storehouse of saving, 105; commodities with monetary use, 106; general use of, 107; defined, 107, 431-2; and the concept of capital, 108-17; use in various countries, 109; increasing use in medieval cities, 111; not identical with capital, 115; time-value and, 142; form taken by saving, 167; movement of, before a crisis, 346; use, coinage, and value, 431-42; the precious metals as, 431-6; quantity theory of, 436-42; standard, or primary, 432; fundamental use, 436; average demand for, 437; effect of changes in supply, 454, 457, 459; territorial distribution, 487-8; and foreign trade, 484 Money-changing, 463 Money market, for short-time loans, 137; for productive loans, 139 Money theories of crises, 352-3 Monopoly, of labor, 253; profits, 302-11; nature of, 302-5; definition, 304; kinds of, 305-8; test of, 308; price fixed by, 308-11; meaning, 312; and supply, 324; profits, social burden, 326; in protective tariff, 500-1; in localized public utilities, 519-21; public gain from, 522; power of the railroad, 530, 533 Moral qualities in industry, 180 Morality, as motive, 13-14; of luxury, 389; opposes competition, 429 Mortgages, nature of security, 133 Motives, economic, 9-14; see Wants Nail trust, 329 Natural economy, 110 Natural law, philosophy of, 426 Natural resources, and income, 49; exhaustion of, 89, 558; adapted and improved, 90; machinery an adaption of, 91; development of, 560; see Land Natural-rights theory of property, 364 National ownership, 516-7; see Public ownership Necessities, relative meaning, 11 Negro, simple wants, 11; caste sentiment regarding, 199; working hours, 201 Normal price, 37 Occupation and talent, 203 Occupation theory of property, 363 Oil trust, 328 Open shop, 249-50 Organization, of workers, need of, 246; required for efficiency, 262; and the enterpriser's function, 265-72 Orthodox economists, 415, 416; predictions of, 557 Over-production theory of crises, 351 Ownership, forms of, 363 Paper money, bank-notes as political, 466; experiments, 447-9; definition, 447; theories of, 450-2 Par of exchange, definition, 485, 486 Pastoral stage, 261 Patten, S. N., 586 Permanent possession, 53; see Capitalization, Property Personal distribution, see Distribution Physiocratic school, 415 Political corruption and industrial legislation, 550 Political economy, see Economics Political money, see Paper money Political monopoly, 305 Political security, and saving, 163; a condition of efficiency, 198 Politics, definition, 6; and the tariff, 503; influence of railroads in, 538 Population, growth in Europe in 18th century, 69; doctrine of, 184-7; related to resources, 184; animal stage of problem, 185; human population, 186; in human society, 187-90; excess, 188; control, 188; current aspect of, 191-4; resultant of many forces, 191; growth not fatalistic, 191; quality, 193, 561, 562; increase in the 19th century, 194 Present and future, wants, 44; rents, 125; goods, 145; competing for labor, 220-21 Price, definition, 36; market and normal, 37; under competition, 308; under monopoly, 309-310; of trusts affected by competition, 331; a social fact, 360; changes, see Money Primitive society, war in, 188; custom in, 424 Private property, and saving, 164; and monopoly, 306; and inheritance, 359-69; origin, 362-6; limitations, 367-9; vs. socialism, 376 Producers injured by trusts, 330 Producers' coöperation, 295-7; definition, 295 Production, and rate of interest, 166-9; agents of, 175; two sources of economic, 222; and the combination of the factors, 257-64; nature of, 257; economic and personal, 258; social, 259; vs. welfare, 398; unity of process, 418; as a conventional division of political economy, 419; by transportation, 525 Productive goods, definition, 20; affect output of labor, 195 Productive and unproductive industries, 260 Productive labor, see Labor Profits, unearned, by some directors, 130; on purchase of capital, 138; margin of, 275; loss of, 282-91; definition, 282, 291; meaning of terms, 282-5; a species of economic wages, 284; fluctuation of, 288; statement of law, 289; pseudo, 289; chance, 289-90; conditioned on skill, 290; risk theory of, 291; to promoters of trusts, 322; of promoter, 342; of trustee, 343; before and after a crisis, 347; relation to wages, 415; Clark's theory, 418; in foreign trade, 495 Profit-sharing, 292-5; definition, 292 Progress, of the masses, 232; cause of, 232-3; must grow out of wage system, 234; marked by control over nature, 261; stimulated by luxury, 388; and refinement of desire, 399; by wise method of distribution, 411; due to temporary conditions, 558; social vs. racial, 560; depends on race quality, 561; depends on competition, 562; endangered by status and envy, 563 Promoter, services of, 342; profits, 342-3 Property, private, effect on industry, 12; effect on population, 189, 190; and wealth, 361-2; definition, 362; and social expediency, 370; in land, 374; defense of, 374-5; see Private property Property tax, 475 Protective social and labor legislation, 504-13 Protective tariff, claimed to be socially expedient, 374, 491-503; definition, 491; nature and claims of protection, 491-6; measure of justification in, 496-501; values as affected by, 501-3; compared with other social legislation, 512 Psychic income, 39-45; complex sources of, 403; see Income Psychology of crises, 354 Public control of industry, examples, 544-8; difficulties, 548-51 Public interests, limiting private property, 367; paramount in social legislation, 505-9 Public officers, interested in corporations, 343 Public ownership of industry, 514-24; examples of, 514-7; economic aspects of, 517-24 Public policy as to control of industry, see Public control Public utilities, increase of rents from, 96 Public wants, development of, 472 Publicity of corporation management, 546-7 Quantity theory of money, 436-42; definition, 438; objections to, 439-41 Railroad, need of repairs, 83; and industry, 525-33; as a carrier, 527-30; economic vs. technical efficiency, 527; public nature of, 534-43; privileges of, 534-8; obligations of, 536-8; political and economic power of, 538-40; commissions to control, 541-3 Railroad rates, discrimination in, 530-3; similarity to taxes, 538 Rank of goods, technical, 46 Rapp, George, 266 Real wages, definition, 207; raised by machinery, 242 Recreation, influence on efficiency, 397 Religion, as economic motive, 13-14; opposes competition, 429 Remuneration, profit-sharing as a method, 295; methods of, see Wages Rent, the renting contract, 53-60; origin of term, 53; several meanings, 54; essence, 55; as usufruct, 55; imputed durableness of rented agents, 55; gross and net, 55; economic and contract, 56-7; history of contract, 56-60; rent charge, 58; economic rent wider than renting contract, 60; connection with gratification, 73; varies with quality, 75; with quantity, diagram, 77; limits of, 79; economic and contract, 79-80; of wealth, affected by repair, depreciation, and destruction, 81-9; changes in, 90-7; of money, 106; basis of capitalization, 122-4; discounted, 123; relation to time-discount, 150-1; and wages, mutually influence, 175; "of ability," 178; and wages, 205; "of labor," 205; relation to wages, 215-8, 221; as personal or impersonal income, 359; conventional conception of, 413; as usufruct, 414; in Middle Ages, 424 Rent-bearers and rents, 90-7 Rent-charges, 58; sale and purchase, 118-22 Renting contract, 53-60; definition, 57; in the Middle Ages, 57; narrow use, 58, 59, 60; and economic rent, 60; hindered improvements, 110; contrasted with interest contract, 116 Repairs, and rent, 81-84; do not prevent decay, 85; and time-value, 143 Replenishing agents, 154 Rhodes, Cecil, 372 Ricardo, David, on fixity of land, 155; labor theory of value, 224, 398, 417, 442, 574 Ripley, W. Z., 575 Risk by enterpriser, 287 Risk theory of profits, 291 Risk-taking, legitimate and illegitimate, 335 Roosevelt, Theodore, efforts to control corporations, 546 Rossignol, J. E. le, 584 Roundabout process, 46, 576 Sage, Russell, on great corporations, 377 Satisfaction, see Gratification Saturation point for coinage, 443 Saving, and rate of interest, 159-63; conditions favorable to, 163-6; influence on methods of production, 166-9; benefits, 169; future effect of, 560 Scarcity, basis of economy, 19; effect on utility, 73; of various goods, 76; of present goods, 146; of common materials, 153; of all economic goods, 153; of human services, 182; of labor, 207, 225; not synonymous with monopoly, 302 Seager, H. R., 568 Seigniorage, definition, 434; and value, 443-7 Self-interest, social effects of, 427 Sellers' margin of advantage, 35 Serfdom, conditions, 227; see Middle Ages Services, a condition of income, 207; and wages, 210, 213; social and individual estimates of, 379; see Labor Shifting of taxes, 476 Silver, fitness as money, 102; as money, 432-3; as a standard, 455 Single-tax, purpose, 374; theory of value, 417 Skill, condition of continuing profits, 290; of labor, see Ability Slavery, as a system of labor, 227 Smart, 570, 571, 583 Smith, Adam, on money, 103, 181, 182; his "Wealth of Nations," 425-6, 484, 557 Social amelioration, various kinds, 504-9 Social changes, and rents, 94; temporary, 95 Social classes, volitional control in, 190 Social control, progress of, 551-4; see Public control Social effects of a tariff, 498 Social-expediency theory of property, 365-6; basis of private property, 370; of inheritance, 370-3; of class legislation, 373; of protective tariffs, 374; of rewarding talent, 378; in taxation, 478 Social institutions and personal incomes, 360 Social legislation, growing need, 197, 504 Social sciences, nature, 5; complexity, 5, 6 Socialism, extreme, its ideal of distribution, 410; radical, vs. social reform, 552 Socialistic theory of value, 416 Socialists, predictions of, 553 Social prophecy, 553 Social regulation of bank-notes, 467, 470 Social service and income, 370-80 Specialization, and size of market, 263; of risk-taking, 339-40 Speculation, in goods, 336; as risk-taking, 338-42; in all business, 339; as insurance, 340; by lambs, 341; legitimate and illegitimate, 344; income from, 376-7 Spencer, Herbert, 518 Spiritual needs as economic motives, 13-4 Stages of industry, 313 Standard of deferred payments, see Deferred payments Standard of living, definition, 191; Asiatic, 191; American, 192; theory of wages, 216; result of sudden change in, 387-8; change in 19th century, 557 State, function to direct competition, 429-30; function of the, 471-3; regulates railroads, 541-2; regulates corporate industry, 544-8; increasing functions, 548 State ownership, 515-6; see Public ownership State socialism, growth of, 551-2 Status, as method of distribution, 409 Storehouse of saving, see Money Strength of men and women, 179 Strikes, 251; violence, 252; cost, 252 Subsidiary coinage, 445-6 Subsistence theory of wages, 217 Sugar trust, 328 Sumner, W. G., 567 Supply, relation to utility, 24-6; curve, diagram, 35; of land in economic sense, 155; limitation of better qualities, 158; of labor, 184; and monopoly, 324; and trust prices, 331 Sympathy, as an economic force, 13, 235 Talent and occupation, 203; see Ability Tariff for revenue, 491; see Protective tariff Taussig, F. W., 580 Taxation, in its relation to value, 471-9; definition, 471; purposes of, 471-4; forms of, 474-7; principles and practice, 477-9 Taxes, as a mode of distribution, 407 Technical diminishing returns, 68; confused with historical, 70; refers to limited time, 71 Technical rank of goods, 46 Temperance legislation, 507 Temporary use, 53; see Rent Tenement-house laws, 505 Time, in relation to wants, 44; relation to gratification, 161 Time-discount, of future rents, 125-6; rate fixed in practice, 126 Time relations of goods to wants, 46 Time-value, and interest, 131; theory of, 141-51; definition and scope, 141-5; fixing of rate, 145-51; and rate of interest, 159-50; relation to wages, 219-22; the highest problem of value, 414 Tin-plate trust, 329 Token coins, 445-6 Trade-unions, 245-56; objects, 245-8; methods, 248-53; claims of, 254; effects, on wages, 253-6; and profit-sharing, 294; monopoly of labor, 308 Transportation, as a form of production, 525; changes in 19th century, 529-30 Trant, book on trade-unions, 254-5 Trustee, speculating, 343 Trusts, in United States, growth of, 312-22; recent organization of, 315-7; economic possibilities of consolidation, 321; causes of, 320-2; in legal and popular sense, 320; effect on prices, 323-32; control of, 332 Under-consumption theory of crises, 351 Unearned increments, various kinds, 96 Unions, see Trade-unions United States, see America Unproductive labor, see Labor Unripe goods, see Goods Usufruct, see Rent Usury, in Middle Ages, 113; usury laws, 508 Utility, broad sense, 19; see Marginal utility Utilization, intensive margin, 64; extensive, 65; diagram, 65; equilibrium of two margins, 66; of indirect goods, 78-9 Value, definition, 20; relation of labor to, 222-5; characteristics of, 258; cost of production explanation, 277; genealogy of, (diagram) 278-80; law of, and monopoly price, 311; law of, and trusts, 323; survey of the theory, 412; the unit of, 413; stages of value, 414; various aspects, 419; generality of the law, 420; effect of taxation on, 475-7; future trend of, 555-63 Value theories, relation to social reforms, 415-8 Volitional control, of population, 188, 189, 191, 193, 561 Wage contract, terms of, 229 Wage-fund theory of wages, 217 Wages, related to scarcity, 182; and efficiency, 196; law of, 205-14; nature of, 205-8; and rent, 205; economic and contract, 206; real and nominal, 207; modes of earning, 208-11; methods of remuneration, 211; and the general law of value, 211-4; term "general rate," 211; differences in, 212; statement of law, 213; and rent, 215-8; and time-value, 219-22; law of wages, 215; iron law, 216; and ambition, 230; rise of money form of, 232; real, changes in, 232; more better-paid callings, 233; raised by machinery, 242; in general industry determined by impersonal economic forces, 255; and profits, 284; and profit-sharing, 295; as personal or impersonal income, 359; influenced by consumers' choice, 394; relation to profits, 415; and protective tariff, 495; laws regulating payment, 511 Wages system, and its result, 226-35; defined, 226; development, 227; as it is, 229-31; progress under, 232-5; gloomy view of, 233 Walker, Francis A., theory of wages, 417, 578 Wants, material, 9-12; non-material, 13-4; of animals, 9; primitive, 10; civilized, 10; and progress, 11; growth, 12; refinement, 12; complex, 14; dependence on things, 15; relation to goods, 16; kinds, 21; changing, 26; recurrence, 39; in series, 39; present and future, 44; see Consumption War, to remedy over-population, 188; affects productive agents, 394 Waste, and luxury, 381-91; of wealth, 381-5; individual, 384; in public outlay, 384-5; fallacy of, 385 Water routes, influence on local advantages, 526-7; economy of, 528 Wealth, and welfare, 15-20; definition, 17, 18; and income, 41; related to gratification, 44; and its indirect uses, 46-52; conditions of economic, 48-52; in city and country, contrasted, 111; loan of, in Middle Ages, 112; concept, and capital concept, 116; and property, 362; inequality of, 375 Welfare, and wealth, 15-20; and instinctive choice, 395; vs. production, 398 Wieser, 570, 571, 580, 583 Wind and water as sources of power, 51 Woman's work, 510 Work, see Labor Workers, effect of machinery on, 239-44; need of organization, 246; need of direction, 265-7; and profit-sharing, 294; gains from trusts, 325; health in factories, 509-10 Years' purchase, 120 
41936	----	Transcriber's note: Text enclosed by underscores is in italics (_italics_). Text enclosed by tilde characters is transliteration of Greek (~dragma~). PRINCIPLES OF POLITICAL ECONOMY. * * * * * PROFESSOR PERRY'S WORKS ON POLITICAL ECONOMY. 1. INTRODUCTION TO POLITICAL ECONOMY. Fifth Edition. 12mo. 357 pp. Price, $1.50. 2. PRINCIPLES OF POLITICAL ECONOMY. 8vo. 585 pp. Price, $2.00. 3. POLITICAL ECONOMY. Twenty-First Edition. Crown 8vo. 600 pp. Price, $2.50. * * * * * PRINCIPLES OF POLITICAL ECONOMY by ARTHUR LATHAM PERRY, LL.D. Orrin Sage Professor of History and Political Economy in Williams College _"No task is ill where Hand and Brain And Skill and Strength have equal gain, And each shall each in honor hold, And simple manhood outweigh gold."_ WHITTIER. New York Charles Scribner's Sons 1891 Copyright, 1890, by Arthur Latham Perry. Dedication. TO MY PERSONAL FRIEND OF LONG STANDING J. STERLING MORTON OF NEBRASKA A FRIEND OF THE PEOPLE ALSO FOUNDER OF ARBOR DAY PREFACE. It is now exactly twenty-five years since was published my first book upon the large topics at present in hand. It was but as a bow drawn at a venture, and was very properly entitled "Elements of Political Economy." At that time I had been teaching for about a dozen years in this Institution the closely cognate subjects of History and Political Economy; cognate indeed, since Hermann Lotze, a distinguished German philosopher of our day, makes prominent among its only _five_ most general phases, the "industrial" element in all human history; and since Goldwin Smith, an able English scholar, resolves the elements of human progress, and thus of universal history, into only _three_, namely, "the moral, the intellectual, and the productive." During these studious and observant years of teaching, I had slowly come to a settled conviction that I could say something of my own and something of consequence about Political Economy, especially at two points; and these two proved in the sequel to be more radical and transforming points than was even thought of at the first. For one thing, I had satisfied myself, that the word "Wealth," as at once a strangely indefinite and grossly misleading term, was worse than useless in the nomenclature of the Science, and would have to be utterly dislodged from it, before a scientific content and defensible form could by any possibility be given to what had long been called in all the modern languages the "Science of Wealth." Accordingly, so far as has appeared in the long interval of time since 1865, these "Elements" were the very first attempt to undertake an orderly construction of Economics from beginning to end without once using or having occasion to use the obnoxious word. A scientific substitute for it was of course required, which, with the help of Bastiat, himself however still clinging to the technical term "Richesse," was discerned and appropriated in the word "Value"; a good word indeed, that can be simply and perfectly defined in a scientific sense of its own; and, what is more important still, that precisely covers in that sense all the three sorts of things which are ever bought and sold, the three only Valuables in short, namely, material Commodities, personal Services, commercial Credits. It is of course involved in this simple-looking but far-reaching change from "Wealth" to "Value," that Economics become at once and throughout a science of Persons buying and selling, and no longer as before a science of Things howsoever manipulated for and in their market. For another thing, before beginning to write out the first word of that book, I believed myself to have made sure, by repeated and multiform inductions, of this deepest truth in the whole Science, which was a little after embodied (I hope I may even say _embalmed_) in a phrase taking its proper place in the book itself,--_A market for Products is products in Market_. The fundamental thus tersely expressed may be formulated more at length in this way: One cannot Sell without at the same instant and in the same act Buying, nor Buy anything without simultaneously Selling something else; because in Buying one pays for what he buys, which is Selling, and in Selling one must take pay for what is sold, which is Buying. As these universal actions among men are always voluntary, there must be also an universal motive leading up to them; this motive on the part of both parties to each and every Sale can be no other than the mutual satisfaction derivable to both; the inference, accordingly, is easy and invincible, that governmental restrictions on Sales, or prohibitions of them, must lessen the satisfactions and retard the progress of mankind. Organizing strictly all the matter of my book along these two lines of Personality and Reciprocity, notwithstanding much in it that was crude and more that was redundant and something that was ill-reasoned and unsound, the book made on account of this original mode of treatment an immediate impression upon the public, particularly upon teachers and pupils; new streaks of light could not but be cast from these new points of view, upon such topics especially as Land and Money and Foreign Trade; and nothing is likely ever to rob the author of the satisfaction, which he is willing to share with the public, of having contributed something of importance both in substance and in feature to the permanent up-building of that Science, which comes closer, it may be, to the homes and happiness and progress of the People, than any other science. And let it be said in passing, that there is one consideration well-fitted to stimulate and to reward each patient and competent scientific inquirer, no matter what that science may be in which he labors, namely, this: Any just generalization, made and fortified inductively, is put thereby beyond hazard of essential change for all time; for this best of reasons, that God has constructed the World and Men on everlasting lines of Order. As successive editions of this first book were called for, and as its many defects were brought out into the light through teaching my own classes from it year after year, occasion was taken to revise it and amend it and in large parts to rewrite it again and again; until, in 1883, and for the eighteenth edition, it was recast from bottom up for wholly new plates, and a riper title was ventured upon,--"Political Economy,"--instead of the original more tentative "Elements." Since then have been weeded out the slight typographical and other minute errors, and the book stands now in its ultimate shape. My excellent publishers, who have always been keenly and wisely alive to my interests as an author, suggested several times after the success of the first book was reasonably assured, that a second and smaller one should be written out, with an especial eye to the needs of high schools and academies and colleges for a text-book within moderate limits, yet soundly based and covering in full outline the whole subject. This is the origin of the "Introduction to Political Economy," first published in 1877, twelve years after the other. Its success as a text-book and as a book of reading for young people has already justified, and will doubtless continue to justify in the future, the forethought of its promoters. It has found a place in many popular libraries, and in courses of prescribed reading. Twice it has been carefully corrected and somewhat enlarged, and is now in its final form. In the preface to the later editions of the "Introduction" may be found the following sentence, which expresses a feeling not likely to undergo any change in the time to come:--"I have long been, and am still, ambitious that these books of mine may become the horn-books of my countrymen in the study of this fascinating Science." Why, then, should I have undertaken of my own motion a new and third book on Political Economy, and attempted to mark the completion of the third cycle of a dozen years each of teaching it, by offering to the public the present volume? One reason is implied in the title, "_Principles of Political Economy_." There are three extended historical chapters in the earlier book, occupying more than one-quarter of its entire space, which were indeed novel, which cost me wide research and very great labor, and which have also proven useful and largely illustrative of almost every phase of Economics; but I wanted to leave behind me one book of about the same size as that, devoted exclusively to the Principles of the Science, and using History only incidentally to illustrate in passing each topic as it came under review. For a college text-book as this is designed to become, and for a book of reading and reference for technical purposes, it seems better that all the space should be taken up by purely scientific discussion and illustration. This does not mean, however, that great pains have not been taken in every part to make this book also easily intelligible, and as readable and interesting as such careful discussions can be made. A second reason is, to provide for myself a fresh text-book to teach from. My mind has become quite too thoroughly familiarized with the other, even down to the very words, by so long a course of instructing from it, for the best results in the class-room. Accordingly, a new plan of construction has been adopted. Instead of the fourteen chapters there, there are but seven chapters here. Not a page nor a paragraph as such has been copied from either of the preceding books. Single sentences, and sometimes several of them together, when they exactly fitted the purposes of the new context, have been incorporated here and there, in what is throughout both in form and style a new book, neither an enlargement nor an abridgment nor a recasting of any other. I anticipate great pleasure in the years immediately to come from the handling with my classes, who have always been of much assistance to me from the first in studying Political Economy, a fresh book written expressly for them and for others like-circumstanced; in which every principle is drawn from the facts of every-day life by way of induction, and also stands in vital touch with such facts (past or present) by way of illustration. The third and only other reason needful to be mentioned here is, that in recent years the legislation of my country in the matter of cheap Money and of artificial restrictions on Trade has run so directly counter to sound Economics in their very core, that I felt it a debt due to my countrymen to use once more the best and ripest results of my life-long studies, in the most cogent and persuasive way possible within strictly scientific limits, to help them see and act for themselves in the way of escape from false counsels and impoverishing statutes. Wantonly and enormously heavy lies the hand of the national Government upon the masses of the people at present. But the People are sovereign, and not their transient agents in the government; and the signs are now cheering indeed, that they have not forgotten their native word of command, nor that government is instituted for the sole benefit of the governed and governing people, nor that the greatest good of the greatest number is the true aim and guide of Legislation. I am grateful for the proofs that appear on every hand, that former labors in these directions and under these motives have proven themselves to have been both opportune and effective; and I am sanguine almost to certainty, that this reiterated effort undertaken for the sake of my fellow-citizens as a whole, will slowly bear abundant fruit also, as towards their liberty of action as individuals, and in their harmonious co-operation together as entire classes to the end of popular comforts and universal progress. A. L. PERRY. WILLIAMS COLLEGE, November 25, 1890. TABLE OF CONTENTS PAGE CHAPTER I. VALUE 1 CHAPTER II. MATERIAL COMMODITIES 80 CHAPTER III. PERSONAL SERVICES 181 CHAPTER IV. COMMERCIAL CREDITS 271 CHAPTER V. MONEY 361 CHAPTER VI. FOREIGN TRADE 451 CHAPTER VII. TAXATION 540 INDEX 587 PRINCIPLES OF POLITICAL ECONOMY. CHAPTER I. VALUE. The first question that confronts the beginner in this science, and the one also that controls the whole scope of his inquiries to the very end, is: What is the precise subject of Political Economy? Within what exact field do its investigations lie? There is indeed a short and broad and full answer at hand to this fundamental and comprehensive question; and yet it is every way better for all concerned to reach this answer by a route somewhat delayed and circuitous, just as it is better in ascending a mountain summit for the sake of a strong and complete view to circle up leisurely on foot or on horseback, rather than to dash straight up to the top by a cog-wheel railway and take all of a sudden what might prove to be a less impressive or a more confusing view. The preliminary questions are: What sort of facts has Political Economy to deal with, to inquire into, to classify, to make a science of? Are these facts easily separable in the mind and in reality from other kinds of facts perhaps liable to be confounded with them? Are they facts of vast importance to the welfare of mankind? And are the activities of men everywhere greatly and increasingly occupied with just those things, with which this science has exclusively to do? Let us see if we cannot come little by little by a route of our own to clear and true answers for all these questions. If one should take his stand for an hour upon London Bridge, perhaps the busiest bit of street in the world, and cast his eyes around intelligently to see what he can see, and begin also to classify the things coming under his vision, what might he report to himself and to others? Below the bridge in what is called the "Pool," which was dredged out for that very purpose by the ancient Romans, there lie at anchor or move coming and going many merchant-ships of all nations, carrying out and bringing in to an immense amount in the whole aggregate tangible articles of all kinds to and from the remote as well as the near nations of the earth. All this movement of visible goods, home and foreign, is in the interest and under the impulse of Buying and Selling. The foreign goods come in simply to buy, that is, to pay for, the domestic goods taken away; and these latter go out in effect even if not in appearance to buy, that is, to pay for, the foreign goods coming in. At the same hour the bridge itself is covered with land-vehicles of every sort moving in both directions, loaded with salable articles of every description; artisans of every name are coming and going; merchants of many nationalities step within the field of view; and porters and servants and errand-boys are running to and fro, all in some direct relation to the sale or purchase of those visible and tangible things called in Political Economy _Commodities_. Moreover, vast warehouses built in the sole interest of trade on both sides the river above and below the bridge, built to receive and to store for a time till their ultimate consumers are found, some of these thousand things bought and sold among men, lift their roofs towards heaven in plain sight. Doubtless some few persons, like our observer himself, may be on the spot for pleasure or instruction, but for the most part, all that he can see, the persons, the things, the buildings, even the bridge itself, are where they are in the interest of _Sales_ of some sort, mostly of Commodities. What is thus true of a single point in London is true in a degree of every other part of London, of every part of Paris and of Berlin, and in its measure of every other city and village and hamlet in the whole world. Wherever there is a street there is some exchange of commodities upon it, and wherever there is a market there are buyers and sellers of commodities. If the curiosity of our supposed observer be whetted by what he saw on London Bridge, and if the natural impulse to generalize from particulars be deepened in his mind, he may perhaps on his return to America take an opportunity to see what he can see and learn what he can learn within and around one of the mammoth cotton mills in Lowell or Fall River or Cohoes. Should he take his stand for this purpose at one of these points, say Lowell, he will be struck at once by some of the differences between what he saw on the bridge and what he now sees in the mill. He will indeed see as before some commodities brought in and carried out, such as the raw cotton and new machinery and the finished product ready for sale, but in general no other commodities than the cotton in its various stages of manufacture, and those like the machinery and means of transportation directly connected with transforming the cotton into cloth and taking it to market. But he sees a host of persons both within and without the mill, all busy here and there, and all evidently bound to the establishment by a strong unseen tie of some sort; he sees varying degrees of authority and subordination in these persons from the Treasurer, the apparent head of the manufactory, down to the teamsters in the yard and the common laborers within and without; he will not find the owners of the property present in any capacity, for they are scattered capitalists of Boston and elsewhere, who have combined through an act of incorporation their distinct capitals into a "Company" for manufacturing cotton; besides their Treasurer present, whose act is their act and whose contracts their contracts, he will see an Agent also who acts under the Treasurer and directly upon the Overseers and their assistants in the spinning and weaving and coloring and finishing rooms, and under these Operatives of every grade as skilled and unskilled; and lastly he will observe, that the direct representatives of the owners and all other persons present from highest to lowest are conspiring with a will towards the common end of getting the cotton cloth all made and marketed. What is it that binds all these persons together? A little tarrying in the Treasurer's office will answer this question for our observer and for us. He will find it to be the second kind of Buying and Selling. At stated times the Treasurer pays the salary of the Agent, and his own. He pays the wages of the Overseers and the wages of all the Operatives and Laborers,--men and women and children. Here he finds a buying and selling on a great scale not of material commodities as before, but of personal services of all the various kinds. Every man and woman and child connected with the factory and doing its work sells an intangible personal service to the "Company" and takes his pay therefor, which last is a simple buying on the part of the unseen employers. Here, then, in this mill is a single specimen of this buying and selling of personal services, which is going on to an immense extent and in every possible direction in each civilized country of the world, and everywhere to an immensely increased volume year by year. Clergymen and lawyers and physicians and teachers and legislators and judges and musicians and actors and artisans of every name and laborers of every grade sell their intangible services to Society, and take their pay back at the market-rate. The aggregate value of all these services sold in every advanced country is probably greater than the aggregate value of the tangible commodities sold there. At any rate, both classes alike, commodities and services, are bought and sold under substantially the same economic principles. The inductive appetite in intelligent persons, that is to say, their desire to classify facts and to generalize from particulars, almost always grows by what it feeds on; and our supposed observer will scarcely rest contented until he has taken up at least one more stand-point, from which to observe men's Buying and Selling. Suppose now he enter for this purpose on any business-day morning the New York Clearing-House. He will see about 125 persons present, nearly one half of these bank clerks sitting behind desks, and the other half standing before these desks or moving in cue from one to the next. The room is perfectly still. Not a word is spoken. The Manager of the Clearing with his assistant sits or stands on a raised platform at one end of the room, and gives the signal to begin the Exchange. No commodities of any name or nature are within the field of view. The manager indeed and his assistant and two clerks of the establishment who sit near him are in receipt of salaries for their personal services, and all the other clerks present receive wages for their services from their respective banks, but the exchange about to commence is no sale of personal services any more than it is a sale of tangible commodities. It is however a striking instance of the buying and selling of some valuables of the third and final class of valuable things. At a given signal from the manager the (say) 60 bank messengers, each standing in front of the desk of his own bank and each having in hand before him 59 small parcels of papers, the parcels arranged in the same definite order as the desks around the room, step forward to the next desk and deliver each his parcel to the clerk sitting behind it, and so on till the circuit of the room is made. It takes but ten minutes. Each parcel is made up of cheques or credit-claims, the _property_ of the bank that brings it and the _debts_ of the bank to which it is delivered. Accordingly each bank of the circle receives through its sitting clerk its own _debits_ to all the rest of the banks, and delivers to all through its standing messenger its own _credits_ as off-set. In other words, each bank buys of the rest what it owes to each with what each owes to it. It is at bottom a mutual buying and selling of debts. There is of course a daily balance on one side or the other between every two of these banks, which must be settled in money, because it would never happen in practice that each should owe the other precisely the same sum on any one day; but substantially and almost exclusively the exchange at the Clearing-House is a simple trade in credit-claims. Each bank pays its debts by credits. A merchant is a dealer in commodities, a laborer is a dealer in services, and a banker is a dealer in credits. Each of the three is a buyer and seller alike, and the difference is only in the kind of valuables specially dealt in by each. In all cases alike, however, there is no buying without selling and no selling without buying; because, when one buys he must always pay for what he buys and that is selling, and when one sells he must always take his pay for what he sells and that is buying. This is just as true when one credit is bought or sold against a commodity or a service, and when two or more credits are bought and sold as against each other, as it is when two commodities or two services are exchanged one for the other. But the Clearing-House is not by any means the only place where credits or debts (they are the same thing) are bought and sold. Every bank is such a place. Every broker's office is such a place. Every place is an establishment of the same kind where commercial rights, that is, claims to be realized in future time and for which a consideration is paid, are offered for sale and sold. The amount of transactions in Credits in every commercial country undoubtedly surpasses the amount in Commodities or that in Services. Now our supposed observer and classifier, having noted on London Bridge the sale of material commodities, and in the Lowell Mill the sale of personal services, and within the New York Clearing-House the sale of credit-claims, has seen in substance everything that ever was or ever will be exhibited in the world of trade. He may rest. There is no other class of salable things than these three. Keen eyes and minds skilled in induction have been busy for two millenniums and a half more or less to find another class of things bought and sold among men, and have not yet found it or any trace of it. This work has been perfectly and scientifically done. The generalization is completed for all time. The _genus_, then, with which Political Economy deals from beginning to end, has been discovered, can be described, and is easily and completely separable for its own purposes of science from all other kinds and classes and _genera_ of things, namely, Salable things or (what means precisely the same) Valuable things or (what is exactly equivalent) Exchangeable things. In other words, the sole and single class of things, with which the Science of Political Economy has to do, is Valuables, whose origin and nature and extent and importance it is the purpose of the present chapter to unfold. We have fully seen already that this Genus, Valuables, is sub-divided into three _species_, and three only, namely, Commodities, Services, Credits. A little table here may help at once the eye and the mind:-- ECONOMICS. _The Genus_ _Valuables_ { _Commodities_ _The Species_ { _Services_ { _Credits_ If only these three species of things are ever bought and sold, then it certainly follows that only six kinds of commercial exchanges are possible to be found in the world, namely these:-- 1. _A commodity for a commodity._ 2. _A commodity for a personal service._ 3. _A commodity for a credit-claim._ 4. _A personal service for another service._ 5. _A personal service for a credit-claim._ 6. _One credit-claim for another._ Though the kinds of possible exchanges are thus very few, the exchanges themselves in one or other of these six forms and in all of them are innumerable on every business day in every civilized country of the globe. And this point is to be particularly noted, that while buying and selling in these forms has been going on everywhere since the dawn of authentic History, it has gone on all the while in ever-increasing volume, it is increasing now more rapidly and variously than ever, and moreover all signs foretell that it will play a larger and still larger part in the affairs of men and nations as this old world gains in age and unity. Damascus is one of the very oldest cities of the world, and its very name means a "_seat of trade_." We are told in the Scriptures, that Abraham about 2000 years before Christ went up out of Egypt "very rich in cattle, in silver, and in gold," and the only possible way he could have acquired these possessions was by buying and selling. He afterwards purchased the cave and the field in Hebron for a family burial-place, and "weighed unto Ephron the silver which he had named in the audience of the sons of Heth, four hundred shekels of silver, current money with the merchant." We may notice here, that there were then "merchants" as a class, that silver by weight passed as "money" from hand to hand, and that in the lack of written deeds to land, as we have them, sales were "made sure" before the faces of living men, who would tell the truth and pass on the word. Abraham indeed seems to have given the pitch for the song of trade sung by his descendants, the Jews, from that day to this; for Jacob, his grandson, was a skilled trafficker, not to say a secret trickster, in his bargains; and wherever in the Old World or the New the Jews have been, _there_ have been in fact and in fame busy buyers and sellers. But the Jews have had no special privileges in the realm of trade; on the contrary, they have always been under special disabilities both legal and social. Even in England, the most liberal country in Europe, they were exiled for long periods, maltreated at all points of contact with other people, more or less put under the ban of the Common and the Statute law, often outrageously taxed on their goods and persons, and studiously kept out of the paths of highest public employment even down to a time within the memory of living men.[1] Yet so natural is the impulse to trade, so universally diffused, so imperative also if progress is in any direction to be attained, that the English and all other peoples were as glad to borrow money, that is, buy the use of it, of the persecuted Jews, as the latter were to get money by buying and selling other things, and then to loan it, that is, sell the use of it, under the best securities (never very good) for its return with interest, that they could obtain. Happily, the mutual gains that always wait on the Exchanges even when their conditions are curtailed, of course attended the mutilated exchanges between Jews and Christians: otherwise, they would not continue to take place. Christianity, however, as the perfected Judaism, gradually brought in the better conditions, the higher impulses, and the more certain rewards, of Trade, all which, we may be sure, were designed in the divine Plan of the world. What is called the Progress of Civilization has been marked and conditioned at every step by an extension of the opportunities, a greater facility in the use of the means, a more eager searching for proper expedients, and a higher certainty in the securing of the returns, of mutual exchanges among men. There have been indeed, and there still are, vast obstacles lying across the pathway of this Progress in the unawakened desires and reluctant industry and short-sighted selfishness of individuals, as well as in the ignorant prejudices and mistaken legislation of nations; but all the while Christianity has been indirectly tugging away at these obstacles, and Civilization has been able to rejoice over the partial or complete removal of some of them; while also Christianity directly works out in human character those chief qualities, on which the highest success of commercial intercourse among men will always depend, namely, Foresight, Diligence, Integrity, and mutual Trust; so that, what we call Civilization is to a large extent only the result of a better development of these human qualities in domestic and foreign commerce. Contrary to a common conception in the premises, the sacred books of both Jews and Christians display no bias at all against buying and selling, but rather extol such action as praiseworthy, and also those qualities of mind and habits of life that lead up to it and tend too to increase its amount, and they constantly illustrate by means of language derived from traffic the higher truths and more spiritual life, which are the main object of these inspired writers. It is indeed true that the chosen people of God were forbidden to take Usury of each other, though they were permitted to take it freely of strangers, and that they were forbidden to buy horses and other products out of Egypt, for fear they would be religiously corrupted by such commercial intercourse with idolaters; but there is nothing of this sort in the law of Moses that cannot be easily explained from the grand purpose to found an agricultural commonwealth for religious ends, in which commonwealth no family could permanently alienate its land, and in which it was a great object to preserve the independence and equality of the tribes and families. Throughout the Old Testament there is no word or precept that implies that trade in itself is not helpful and wholesome; there were sharp and effective provisions for the recovery of debts; there were any number of exhortations to diligence in business, such as, "_In the morning sow thy seed, and at evening withhold not thy hand_"; King Solomon himself made a gigantic exchange in preparation for the temple with King Hiram of Tyre, by which the cedars of Lebanon were to be paid for by the grain and oil of the agricultural kingdom; chapter xxvii of the prophet Ezekiel is a graphic description of the commerce of the ancient world as it centered in the market of Tyre, a description carried out into detail both as to the nations that frequented that market and as to the products that were exchanged in it,--"_silver, iron, tin, lead, persons of men, vessels of brass, horses, horsemen, mules, horns of ivory, ebony-wood, carbuncles, purple work, fine linen, corals, rubies, wheat, pastry, syrup, oil, balm, wine of Helbon, white wool, thread, wrought iron, cassia, sweet reed, cloth, lambs, rams, goats, precious spices, precious stones, splendid apparel, mantles of blue, embroidered work, chests of damask, and gold_"; and chapter xxxi of Proverbs describes the model housewife in terms like these,-- "_The heart of her husband trusteth in her, And he is in no want of gain. She seeketh wool and flax, And worketh willingly with her hands. She is like the merchants' ships; She bringeth her food from afar. She riseth while it is yet night, And giveth food to her family, And a task to her maidens. She layeth a plan for a field and buyeth it; With the fruit of her hands she planteth a vineyard. She perceiveth how pleasant is her gain, And her lamp is not extinguished in the night. She putteth forth her hands to the distaff, And her hands take hold of the spindle. She maketh for herself coverlets; Her clothing is of fine linen and purple. She maketh linen garments and selleth them, And delivereth girdles to the merchants._" Still more explicit and instructive are the words and spirit of the New Testament. There cannot be the least doubt that the whole influence of Christianity is favorable to the freest commercial exchanges at home and abroad, because these depend largely on mutual confidence between man and man, of which confidence Christianity is the greatest promoter. It may be conceded at once that our Lord "_overthrew the tables of the money-changers and the seats of them that sold doves_" within the sacred precincts of the temple, but this, not because it is wrong to change money or sell doves, but because that was not the _place_ for such merchandising; so He himself explained his own action in the sequel; provincial worshippers coming up to Jerusalem must needs have their coins changed into the money of the Capital, and must needs buy somewhere the animal victims for sacrifice; but the whip of small cords had significance only as to the _place_, and not at all as to the _propriety_, of such trading. One of our Lord's parables, the parable of the Talents, sets forth in several striking lights the privilege and duty and reward of diligent trading. "_Then he that had received the five talents went and traded with the same, and made them other five talents._" And when this servant came to the reckoning, and brought as the result of his free and busy traffic "_five talents more_," the prompt and hearty approval of his lord--"well done, thou good and faithful servant"--becomes the testimony of the New Testament to the merit and the profit and the benefit of a vigorous buying and selling. For this servant could not have been authoritatively pronounced good and faithful if the results of his action commended had been in any way prejudicial to others. The truth is, as we shall abundantly see by and by with the reasons of it, that any man who buys and sells under the free and natural conditions of trade, benefits the man he trades with just as much as he benefits himself. But the parable has a still stronger word in favor of exchanges. There was another servant also entrusted with capital by his lord at the same time, when the latter was about to travel "_into a far country_." We are expressly told that distribution was made "_to every man according to his several ability_," and thus this servant was only entrusted with a single talent, the size of the capital given to him being in just proportion to the size of the man,--the smallest share falling of course to the smallest man. But he had the same opportunity as the two others. The world was open to him. Capital was in demand, if not in those parts then in some other, to which, like his lord, he might straightway take his journey. But when his time of reckoning came, and he had nothing to show for the use of his capital, he upbraided his lord as a hard man for expecting any increase, and brought out his bare talent wrapped in a napkin, saying, "_I was afraid, and I went and hid thy talent in the earth_." His wise lord at once denounced this servant as "_wicked and slothful_," insisted that his money ought to have been "_put to the exchangers_," and said finally in a just anger "_cast ye the unprofitable servant into outer darkness_." It is moreover in incidental passages of the Scriptures, in which the methods of business are commended to the searchers after higher things, that we see their high estimate of those methods and gains. "_Buy the truth, and sell it not; buy wisdom and understanding_" (Prov. xxiii, 23). "_Buying up for yourselves opportunities_" (Col. iv, 5). "_I counsel thee to buy of me gold refined by fire, that thou mayest be rich; and white garments, that thou mayest be clothed; and eye-salve to anoint thine eyes, that thou mayest see_" (Rev. iii, 18). "_But rather let him labor, working with his hands at that which is good, that he may have to give to him that is in need_" (Eph. iv, 28). "_But if any one provideth not for his own, and especially for those of his own house, he hath denied the faith, and is worse than an unbeliever_" (1 Tim. v, 8). Now, the universal test and proof of any truth is its harmony with some other truths. Does an alleged truth fall in with and fill out well some other demonstrated and accepted proposition, or a number of such other propositions? If so, then that truth is _proved_. Human reason can no further go. The mind rests with relish and content in a new acquisition. To apply this to the case in hand,--if men were designed of their Maker to buy and sell to their own mutual benefit and advancement, if mankind have always been buying and selling as towards that end and with that obvious result, and if the Future promises to increase and reduplicate the buying and selling of the Present in every direction without end, and all in the interest of a broad civilization and a true and lasting progress; and if, in harmony with these truths, the written revelation of God in every part of it assumes that buying and selling in its inmost substance and essential forms be good and righteous and progressive, and suitable in all its ends and methods to illustrate and enforce ends and methods in the higher kingdom of spiritual and eternal Life;--then these coördinate truths will logically and certainly follow, (1) that Trade is natural and essential and beneficial to mankind; (2) that it constitutes in an important sense a realm of human thought and action by itself, separate from the neighboring realm of Giving, and equally from the hostile realm of Stealing; and (3) that a careful analysis of what buying and selling in its own peculiar nature is, a thorough ascertainment and a consequent clear statement of its fundamental laws, and a faithful exposure of what in individual selfishness and in subtle or open Legislation makes against these laws, _must be of large consequence to the welfare of mankind_. Accordingly, let us now attempt such Analysis and Ascertainment and Exposure. This is precisely the task that lies before us in this book--just this, and nothing more. The term, "Political Economy," has long been and is still an elastic title over the zealous work of many men in many lands; but in the hands of the present writer during a life now no longer short, the term has always had a definite meaning, the work has covered an easily circumscribed field, and so the present undertaking concerns only Buying and Selling and what is essentially involved in that. This gives scope and verge enough for the studies of a life-time. This has the advantage of a complete sphere of its own. Terms may thus be made as definite as the nature of language will ever allow; definitions will thus cover things of one kind only; and generalizations, although they may be delicate and difficult, will deal with no incongruous and obstinate material. 1. The grandfather of the writer, an illiterate but long-headed farmer, was able to give good points to his three college-bred sons, by insisting that they look "_into the natur on't_." What, then, are the ultimate elements of Buying and Selling? What are the invariable conditions that precede, accompany, and follow, any and every act of Trade? Of course we are investigating now and throughout this treatise the deliberative acts of reasonably intelligent human beings, in one great department of their common foresight and rational action. We have consequently nothing to do here with Fraud or Theft or Mania or Gift. Acts put forth under the impulse of these are direct opposites of, or at best antagonistic to, acts of Trade. They tend to kill trade, and therefore they are no part of trade. These, then, and such as these, aside, we will now analyze a single Act of Exchange at one time and place,--which will serve in substance for all acts of exchange in all times and places, and just find out for ourselves what are the Fundamentals and Essentials of that matter, with which alone we have to do in this science of Political Economy. Incidental reference was had a little way back to an Exchange once made between King Solomon of Jerusalem and King Hiram of Tyre. Let that be our typical instance. (a) _There were two persons_, Solomon and Hiram. Those two, and no more, stood face to face, as it were, to make a commercial bargain. They made it, and it was afterwards executed. The execution indeed concerned a great many persons on both sides, and occupied a long period of time; but the bargain itself, the trade, the exchange, the covenant, concerned only two persons, and occupied but a moment of time. It made no difference with the bargain as such, with the binding nature of it, with the terms of it, with the mutual gains of it, that each person represented a host of others, subordinates and subjects, who would have to coöperate in the carrying of it out, because each king had the right to speak for his subjects as well as for himself, for commercial purposes each was an agent as well as a monarch, the word of each concluded the consent and the action of others as well as his own. Nor did it make any, the least, difference with this exchange or the advantages of it, that each party to it belonged to, was even the head of, independent and sometimes hostile Peoples. Commerce is one thing, and nationality a totally different thing. The present point is, in the words of the old proverb,--"It takes two to make a bargain." And it takes _only_ two to make a bargain. When corporations and even nations speak in trade, they speak, and speak finally, through one accredited agent. We reach, then, as the first bit of our analysis of Trade, the fact, that there are always two parties to it, "the party of the first part and the party of the second part." (b) _There were two desires_, Solomon's desire for cedar-timbers to build the temple with, and Hiram's desire for wheat and oil with which to support the people of his sterile kingdom. "_So Hiram gave Solomon cedar-trees and fir-trees according to all his desire: and Solomon gave Hiram twenty thousand measures of wheat for food to his household, and twenty measures of pure oil._" The desire of each party was personal and peculiar, known at first only to himself, but upon occasion became directed towards something in the possession of the other, and each at length became aware of the desire of the other, and also of his own ability to satisfy the want of the other. If Solomon could have satisfied his desire for timber by his own or his subjects' efforts directly, this trade would never have taken place; if Hiram or his subjects could have gotten the wheat and oil directly out of their narrow and sandy strips of sea-coast, this trade would not have taken place; and so there must be in every case of trade not only two desires each springing from a separate person, but also each person must have in his possession something fitted to gratify the desire of the other person, and each be willing to yield that something into the possession of the other for the sake of receiving from him that which will satisfy his own desire, and so both desires be satisfied indirectly. Here is the deep and perennial source of exchanges. Men's desires are so many and various, and so constantly becoming more numerous and miscellaneous, and so extremely few of his own wants can ever be met by any one man directly, that the foundation of exchanges, and of a perpetually increasing volume of exchanges, is laid in the deep places of human hearts, namely, in Desires ever welling up to the surface and demanding their satisfaction through an easy and natural interaction with the ever swelling Desires of other men. Here too is a firm foundation (a chief foundation) of human Society. Reciprocal wants, which can only be met through exchanges, draw men together locally and bind them together socially, in hamlets and towns and cities and States and Nations, and also knit ties scarcely less strong and beneficent between the separate and remotest nationalities of the earth. It is certain that an inland commercial route connected the East of Asia with the West of Europe centuries before Christ, and that a traffic was maintained on the frontier of China between the Sina and the Scythians, in the manner still followed by the Chinese and the Russians at _Kiachta_. The Sina had an independent position in Western China as early as the eighth century before Christ, and five centuries later established their sway under the dynasty of Tsin (whence our word "China") over the whole of the empire. The prophet Isaiah exclaims (xlix, 12), "Behold! these shall come from far; and behold! these from the North and from the West; _and these from the land of Sinim_." The second bit of our analysis leads to Desires as an essential and fundamental element in every commercial transaction. (c) _There were two efforts_, those of the Tyrians as represented by King Hiram and those of the Israelites as represented by King Solomon. It was no holiday task that was implied in the proposition of Solomon to the party of the other part,--"_Send me now cedar-trees, fir-trees, and algum-trees out of Lebanon; for I know that thy servants are skilful to cut timber in Lebanon; even to prepare me timber in abundance, for the house which I am about to build shall be wonderfully great._" On the other hand, the efforts insolved on the part of the people of Israel in paying for these timbers, and for their transportation by sea from Lebanon to Joppa, were equally gigantic. Solomon's offer in return for the proposed service of the Tyrian king was in these words,--"_And behold, I will give to thy servants, the hewers that cut timber, twenty thousand measures of beaten wheat, and twenty thousand measures of barley, and twenty thousand baths of wine, and twenty thousand baths of oil._" The reason why two efforts are always an element in every act of traffic, however small or however large the transaction may be, is the obvious reason, that the things rendered in exchange, whether they be Commodities, Services, or Credits, invariably cost efforts of some kind to get them ready to sell and to sell them, and no person can have a just claim to render them in exchange, who has not either put forth these efforts himself or become proprietor in some way of the result of such efforts. Efforts accordingly are central in all trade. Every trade in its inmost nature is and must be either an exchange of two Efforts directly, as when one of two farmers personally helps his neighbor in haying for the sake of securing that neighbor's personal help in his own harvesting, or an exchange of two things each of which is the result of previous Efforts of somebody, as when a man gives a silver dollar for a bushel of wheat. The third bit of the present analysis brings us to Efforts, perhaps the most important factor in the whole list. (d) _There were also two reciprocal estimates_, the estimate of King Hiram of all the efforts requisite to cut and hew and float the timber, as compared with the aggregate of efforts needed to obtain the necessary wheat and barley and wine and oil in any other possible way; and the estimate of King Solomon of all the labors required to grow and market these agricultural products, as compared with what would otherwise be involved in getting the much-wished-for timbers. Such estimates invariably precede every rational exchange of products. It is not in human nature to render a greater effort or the result of it, when a lesser effort or the result of it will as well procure the satisfaction of a desire. Efforts are naturally irksome. No more of them will ever be put forth than is necessary to meet the want that calls them forth. No man in his senses will ever put more labor on anything, with which to buy something else, than is necessary to get that something else by direct effort or through some other exchange. Here we are on ground as solid as the very substance of truth can make it. The Jews of Solomon's time were too shrewd and sparing of irksome labor to devote themselves for years to the toils of the field and of the vat to get by traffic the materials for their temple, if they could have gotten those materials by a less expenditure of toil in any other way. Those Phoenicians of Tyre and Sidon, the born merchants of the East, the founders of commercial Carthage in the West, if they could have extorted from the reluctant sands of their coast the cereals and the vines and olives requisite for their own support with only so much of exertion as was needed to get that to market with which to buy them, would never have taken the indirect in preference to the direct method. They took the indirect, because it was the easier, and therefore the better. It may, accordingly, be laid down as a maxim, that men never buy and sell to satisfy their wants but when that is the easiest and best way to satisfy them. It saves effort. It saves time. It saves trouble. It divides labor. It induces skill. It propels progress. But in order to determine which may be the easier way, requires constant _estimates_ on the part of each party to a possible trade. Shall I shave myself or go to the barber? Before I decide, I estimate the direct effort in the light of the effort to get that with which to pay the barber for his service. If I trade with him, it is because I deem it easier, cheaper in effort, more convenient in time. Trade means comparisons in every case--comparisons by both parties--and in the more recondite and complicated cases, elaborate comparisons and often comprehensive calculations involving future time. Now these estimates inseparable from exchanges, and these calculations which are a factor in all the far-reaching exchanges, are mental activities. They quicken and strengthen the _minds_ of men. Trade is usually, if not always, the initial step in the mental development of individuals and nations. Desires stir early in the minds of all children; efforts more or less earnest are the speedy outcome of natural desires; direct efforts, however, to satisfy these soon reach their limits; it is now but a step over to simple exchanges, by which the desires are met indirectly; exchanges once commenced tend to multiply in all directions, and the estimates that must precede and accompany these are mental states,--the more of them, the greater the mental development, the higher the education; consequently, commerce domestic and foreign is a grand agency in civilization, a constant and broadening impulse towards progress in all its forms; and Christianity, as we have already seen, is friendly to commerce in its every breath. Those, therefore, who talk and preach about Trade as tending to _materialism_, do not know what they are talking about. Because Commodities are material things, and because a portion of the trade of the world concerns itself with commodities, these shallow thinkers jump to the conclusion that trade is materialistic. _It is just the reverse._ Let us hear no more from Professor Pulpit or Platform that buying and selling is antagonistic to men's higher intellectual and spiritual culture, because the present careful analysis has brought us indubitably to mental Estimates and prolonged comparisons, which are activities of Mind, as the fourth and a leading factor among the radical elements of Sale. (e) _There were two renderings_, King Hiram's rendering at Joppa the desired cedars from the mountains of Lebanon, and King Solomon's rendering in return at Tyre the food products grown in his fertile country. These renderings were visible to all men. Unlike the desires and the estimates, which were subjective and invisible; the actual exchange of the products, the culmination of the previous efforts, the stipulated renderings by and to each party, were outward and objective--"known and read of all men." This is the reason why public attention is always strongly drawn to this particular link of the chain of events which we are now unlocking and taking apart, while other links of the series, that are just as essential, almost wholly escape observation. The ports and the markets are apt to be noisy and conspicuous, when the desires and the estimates and the satisfactions, without which in their place there would be no market-places, work in silence, and leave no records except the indirect one of the renderings themselves. It is of great moment to note here, that each of the two parties to an exchange always has an advantage over the other, either absolute or relative, in the rendering his own product, whatever it may be, as compared with his present ability to get directly or through any other exchange the product he receives in return. Take the example in hand. Cedars and sandal-wood were natural to Mount Lebanon; there were no other workmen in those regions of country that could "_skill to hew timber like unto the Sidonians_"; the Mediterranean afforded a level and free and easy highway from its northern coast to the Judean seaport at Joppa; and all these natural and acquired facilities put King Hiram into a posture of advantage in the rendering of timber, not only over the Jews, but also over all the other peoples in the basin of the midland sea. Still this advantage, great as it was, could only be made a real and palpable gain to themselves, the proprietors of the timber, by means of some exchange with somebody else, by which some wants of their own greater than their present want of timber, could be supplied by means of the timber. They had more of that commodity, and more skill to fashion and transport it, than their present and immediately prospective needs could make use of; and the only way in which they could practically avail themselves of their advantages, was, to sell their surplus timber and buy with it something that they needed more. Otherwise their very advantage perished with them. God has scattered such a diversity of blessings and capacities and opportunities over the earth on purpose, that, through traffic, on which his special benediction rests, the good of each part and people may become the portion of other parts and peoples. So, on the other hand, of the southern neighbors of the Tyrians. There the earth brought forth by handfuls. There was an abundance of corn in the land, even to the tops of the mountains. Its fruit did indeed shake like Lebanon. But there were no cedars there, no fir-trees, no sandal-woods. How short-sighted, then, and futile, would it have been for the Jews, to try to hang on in their own behoof to all the natural advantages that God had given to them, and to say, We will not part with the direct results of any of them, we will build treasure-cities as they did in Egypt, we will store up all the fruits of these fat years against the possible coming of some famine years in the time to come. That is anything in ordinary times but the divine plan. It is anything but the letter and spirit of the divine injunction: "_Him that keepeth back corn the people curse; but blessing shall be upon the head of him that selleth it_" (Prov. xii, 26). Had they talked and acted thus, no temple could then have been built in Jerusalem, and the people of that generation would have lost the moral and religious impulse and uplifting of their service and sacrifice. Their grain would have become worthless from its very abundance, and would have decayed on their hands. They would have missed a great gain for themselves, and would have snatched away from their neighbors to the northward a providential opportunity for an equal gain. The general truth must not be lost sight of here, even in passing, that all trade whatsoever is based upon a Diversity of relative Advantage as between the parties exchanging products. If, for example, the Hills of Judah and the Mountains of Israel had been covered with timber suitable for building the temple, and the coasts of Tyre and Sidon and the foot-hills of Lebanon had been fertile stretches of arable land, this particular trade would never have been thought of and could never have been realized. There would have been no gain in it for either party, and unless there be a valid gain for both parties at least in prospect, no trade will ever spring into being, because there would be no motive, no impulse, no reason, in it. Unless the Jews could get the timber easier by raising grain to pay for it, and the Tyrians get the oil and wheat and barley easier by cutting and floating timber to pay for them,--no trade; but the greater easiness to each actually came about, because each had an Advantage both natural and acquired over the other in his own rendering, and the mutual gain of the trade was wholly owing to that circumstance. So far as that matter went, the Tyrians had no cause to envy their neighbors the superior soil of the south, for they reaped indirectly but effectively a part of those harvests for themselves; and the Jews had no reason to be jealous of their northern neighbors on account of the noble forests crowning their mountains, because through trade they secured easily to themselves a share of that vast natural advantage. Diversity of Advantage both natural and acquired is the sole ground of Trade both domestic and foreign; and consequently by means of trade the peculiar advantages of each are fully shared in by all. It is perhaps less obvious but surely equally true, that the greater the relative diversity of advantage as between two exchangers, the more profitable does the exchange become to each. If the Vale of Sharon had been twice as fertile as it was, and the cedars of Lebanon twice as large and lofty as they were, the easier and better would Israel have gotten its timber, and the more secure and abundant would have become the food of Tyre and Sidon; and, therefore, the more unreasonable, or rather the more absurd and wicked, would have been any envy or jealousy of either of the superior advantages at any point or points of the other. So universally. By the divine Purpose as expressed in the constitution of Nature, in the structure of Man, and in the laws of Society, Trade in good measure and degree imparts to each the bounties of all, arms each with the power of all, and impels each by the progress of all. One other important matter is closely connected with these two Renderings, which is the fifth bit in succession of our present analysis, namely this, that traffic renderings always make necessary new and better routes of travel and transportation. It is mainly for this reason, that persons and things have to be carried to distances less or greater in order to consummate these Renderings of home and foreign commerce, that roads by land and routes by sea have been sought for and found, made and made shorter, improved as to method and facilitated as to force, from the dawn of History until the present hour. It was to get the goods of India, and so find a market for the goods of Europe, that the earliest land routes between the two were tried and maintained. The ground-thought of Columbus, meditated on for years, was to discover a new commercial way to India; Magellan with the same intent sailed westward through the Straits that wear his name, and so circumnavigated the globe; repeated searches mainly with the mercantile view, never long intermitted, have attempted ever since the North-West or the North-East passage to India; Vasco da Gama in 1497 boldly accomplished the East passage, and thus changed for all the Continents the channels of trade; the West now trades with all the East through the Suez Canal, dug for that express purpose; and the words, "Panama" and "Nicaragua" are upon everybody's lips, simply because through Central America is the shortest and safest route for men and goods to and from all the Oceans. Quite recently Dr. W. Heyd has announced through the Berlin Geographical Society the discovery of two commercial routes from India to the West not hitherto described. Trebizond (on the Black Sea) and Tana (at the mouth of the Don) were the chief distributing points. Through Tana passed westward the pepper and ginger and nutmeg and cloves; and the price of spices is said to have doubled in Italy, when the Italians were for a time shut out of Tana in 1343. The chief overland route from India to Tana ran through Cabul to Khiva by the Oxus, and then by land through Astrakhan. The other route to Trebizond passed through Persia, and came out by Tabriz to the Black Sea. It may perhaps be pardoned, if a far homelier, more modern, and even local, illustration be given of the present point, that trade makes roads. The western wall of Williamstown is the mountain range of the Taconics, whose general height is about 2000 feet above tide water at Albany. Within the limits of this town are four natural depressions or passes over this range, which is also the watershed between the Hoosac River on the east and the Little Hoosac on the west. About the beginning of this century, the population was quite sparse in both these valleys, while the impulse to travel and traffic over the barrier was sufficient to build (wholly at local expense) wagon roads over each of the four passes, one of which soon after became a turnpike between Northampton and Albany; and another was built mainly to accommodate the medical practice on the west side of the mountain of Dr. Samuel Porter--a Williamstown surgeon of local eminence. So soon as railroads were constructed to run down these parallel valleys (railroads themselves are perhaps the best illustration of the point in hand), the mountain roads were relatively deserted, and only two of them are now open to transient travel.[2] Lastly, (f) _There were two satisfactions_, the satisfaction of the southern king in actually obtaining the excellent timbers, without which the cherished national temple could not have gone up; and the satisfaction by the northern king in the easy receiving of the abundant food products for the daily maintenance of his court and kingdom. The simple story of these commercial transactions between Jew and Tyrian indicates clearly enough, what might have been anticipated and what always happens in such circumstances, not only a mutual satisfaction at the completion of each specific exchange, but also a general relation of contentment and peace in consequence of advantageous commercial intercourse. "_And Hiram, king of Tyre, sent his servants unto Solomon; for he had heard, that they had anointed him king in the room of his father; because Hiram was ever a lover of David. And it came to pass, when Hiram heard the words of Solomon, that he rejoiced greatly, and said, Blessed be the Lord this day, which hath given unto David a wise son over this great people; and there was peace between Hiram and Solomon; and they two made a league together._" It is plain to reason and to all experience, that mutual Satisfactions are the ultimate thing in exchanges. Our present analysis can go no further, for the reason, that we have now reached in Satisfactions the end, for the sake of which all the previous processes have been gone through with. Persons do not engage in buying and selling for the mere pleasure of it, but always for the sake of some satisfactions derivable to both parties from the issue of it. Ordinary self-inspection and foresight and industry being presupposed, the issue of exchanges is just what was expected by the two persons, the satisfaction of each follows as a matter of course, and stimulates to new exchanges in ever-widening circles. Since the desires of all men, which the efforts of other men can satisfy through exchange, are indefinite in number and unlimited in degree, there is no end of human Satisfactions to be reached along this road of reciprocal trade; and since the very object of all trade and the actual result of all trade (the exceptions are infinitesimal) is to multiply and reduplicate continually mutual Satisfactions among men; we can see right here what a loss and wrong it is, what a wanton destruction of possible human happiness it is, what a bar to progress among men in comforts and powers it is, for nations to impede and to prohibit commerce by legislation! As we shall see more fully in a later chapter, Governments can have no moral or constitutional right to restrict the trade of their people, except in the sole interest of revenue or health or morals. Such is the constitution of the universe, that a really good thing is usually cognate with and inseparable from a good many other good things. Buying and selling, as we have now clearly seen, springs right out of the nature of men in the circumstances in which they are providentially placed on the earth, and ends in the satisfaction of innumerable wants common to all men. This makes trade a thoroughly good thing in itself; and consequently it is intimately associated with many other good things. The scriptural instance, that we have been examining, gives a neat illustration of this: "_and there was peace between Hiram and Solomon; and they two made a league together_." The mutually profitable exchange of commodities led to a feeling of amity between the two neighboring kings; the feeling of amity led to a treaty of Peace between the two adjacent nations; and the "_league_" so ratified not only kept out war from their borders, but also permitted the unhindered continuance of profitable exchanges between them. So it is always. Peace waits on Commerce. Good-will among the nations is strengthened by the ties of interest and profit among their citizens. The mercantile classes as such are always averse to war, because war is the natural enemy of exchanges. Thus traffic leads to peace and tends to maintain it, and peace preludes increased prosperity, and commercial prosperity under freedom is wholly friendly to mental and moral progress, and Christianity walks before and all along this line of individual and national blessing. The commercial treaty of 1860 between France and England has tended powerfully, perhaps more powerfully than any other single cause, to keep those formerly inter-belligerent nationalities in peace and amity ever since. We will now put into a little table the final results of the present analysis of Buying and Selling. The ultimate elements seem to be these: 1. _Two Persons._ 4. _Two Estimates._ 2. _Two Desires._ 5. _Two Renderings._ 3. _Two Efforts._ 6. _Two Satisfactions._ The thoughtful reader will note in this table the fact, that three of these elements are objective, that is, outward and visible; and the other three are subjective, that is, inward and invisible. Persons, Efforts, Renderings, are seen and known of all men; Desires, Estimates, Satisfactions, can be directly known only to the persons who feel and make them. This is a peculiarity of Political Economy, that has been far too little observed even when it has been observed at all. Objective and subjective elements in it meet and mingle in each transaction. Indeed, they alternate, as is shown in the table above: first a Seen, and then an Unseen, Element throughout. It is this commingling of outward and inward, visible and invisible, that makes all the difficulty and gives all the fascination in Political Economy. Whatever carries us into the steady though billowy play of universal human nature is at once difficult and fascinating. Quite contrary, however, to a common impression, the _certainty_ both of action and prediction in all the other Sciences as well as in Economics lies rather in the unseen elements than in those that are seen. Take for an example the calculation of an eclipse: it is not so much from what is visible in the heavens and on the earth that the astronomer infers and predicts to the instant the shadow of one orb thrown upon another, as it is from the wholly hidden but ever-enduring forces of gravitation constantly relating these orbs one to the other. So it is of the Sciences generally; progress is made in them and certainties are reached in connection with them, "_while we look not at the things which are seen, but at the things which are not seen; for the things which are seen are but for a time; but the things which are not seen are everlasting_." Invisible Desires and Satisfactions felt in connection with Exchanges are among the most constant elements of human nature; they, as it were, give birth to the relatively more transient (though visible) data of Efforts and Renderings; while inferences and conclusions and even predictions may be securely drawn from all of these, giving a solid ground for Political Economy to stand on,--almost as solid as the ground of the chief Physical Sciences. 2. We will next examine the inmost nature and the outward manifestations of _Value_. "Value" is by much the most important word in the Science of Economics; and we must, therefore, comprehend it thoroughly, root and branch. Nearly all the writers in English have used in place of this the word "Wealth" and those in other languages some equivalent and equally concrete word; but the present writer fully satisfied himself some twenty-five years ago, that it is impossible to use that word to any advantage in economical discussions, owing to its inherent ambiguities and concrete associations in the minds of men. He utterly discarded the word at that time, and has found not the least occasion to pick it up again since, and believes now that his substitution of the word "Value" in place of it will ultimately be seen to have been his greatest contribution to that Science, to which he devoted his life. Even professed and excellent logicians, like John Stuart Mill, found the word "Wealth" an insoluble element in the science of Economics; he commenced his great work by writing, that it was not really needful to _define_ the word which nevertheless he laid at the foundation of his discussions, that "every one has a notion sufficiently correct for common purposes of what is meant by Wealth"; he goes on, however, to give at least a half-dozen definitions of the word, no two of which are at all consistent with each other, only one of which embodies a clear and scientific conception, and even to this one he himself does by no means coherently adhere throughout his treatise. No wonder, that this great man died thoroughly dissatisfied with his own work in Economics, and wishing for longer life in which to recast and improve it! No wonder, too, that the crowd of writers both English and American, many of them able and thoughtful and otherwise logical, who have been content to continue to use this irreducible and utterly unscientific word at the bottom, have made a mess of it! In dropping the word, "Wealth," accordingly, Political Economy has dropped a clog, and its movements are now relatively free and certain; and it is all the more incumbent on the Science for that very reason to define the good word that it substitutes for a bad one with absolute clearness, to explain it through and through until it become quite transparent, and then always to use it in its defined and economical sense, and none other, even though the same word be properly enough used in other senses in common speech and in other than scientific relations. Exactly that is what we are now going to attempt to do in a simple and consecutive order. (a) Perhaps it will help us to find out precisely what Value _is_ by seeing as clearly as possible at the outset what it is _not_. It is not _easy_, and never can be made so, to teach and to learn distinctly what Value is in its ultimate nature and constant changes. Here is the one unavoidable difficulty that lies at the very threshold of Political Economy; and this difficulty, which is not found as in the case of "Wealth" in the meaning of the word but in the complex character of that which the word describes, once overmastered, and one walks thereafter with ease and pleasure throughout the economic domain. It would be wrong and cruel to deny that just here is one hard place in the road for teacher and pupils to get over. It arises wholly from the nature of the subject, as we shall soon see, and not at all from the insufficiency of the word, Value. We have already seen fully, that Buying and Selling in each and every transaction is complex and relative, involving twelve elements every time; that Desires and Estimates and Renderings are especially relative,--each party to a trade desires something in possession of the other, estimates that something relatively to something in his own possession, and finally renders to the other his own something for the sake of receiving the other's something. Now everybody is used to all this and practically understands it perfectly, but it is complicated and reciprocal nevertheless, and Value, which is the single birth of the two Renderings, though perfectly intelligible to him that takes pains, is not a thing to be seized once for all at a passing trot. Value, then, is _not_ a quality of single things, belonging to them as if by nature, as hardness is a quality of a rock or gravity is an attribute of gold; because all physical qualities in physical things, all that which makes or helps to make anything such as it is, may be learned by a study of the things themselves by themselves; a careful examination and analysis of the mechanical and chemical properties of any physical thing will discover all its distinguishing characteristics, all that makes it that particular thing in distinction from all other things; but it is plain already, that the _Value_ of anything (if it have value) cannot be found out by studying that particular thing by itself alone; the questioning of the senses however minute, the test of the laboratory however delicate, can never determine how much anything is _worth_, because that always implies a comparison between _two_ things, or more strictly a comparison between two Renderings in exchange. Value is not an attribute of single things: not even if the things be physical and tangible. Now two other kinds of things are bought and sold besides physical and tangible things, namely, personal services and commercial credits; and it is very plain, that Value cannot be a quality of any one personal service rendered, as looked at by itself, such as the service of a physician towards a fever patient, because the service in and of itself might be the same whether rendered to his own child or the child of one of his patrons, while in the former case there would be no value, and in the latter there would be; and so too the very name "commercial credit" implies an exchange of two Renderings, out of which Value always emerges, and not at all an attribute of one credit considered by itself. Value is no more a characteristic of single intangible services and claims than it is of single intangible commodities rendered. And what makes all this still more certain is, that Value even in physical things, and perhaps still more in services and claims, is all the while changing under demand and supply, now rising and then falling, while the physical properties of things, that make them what they are, are fixed and unchangeable. A gold eagle, for example, has certain primary qualities as gold, without which it would not be gold; it is hard and heavy and colored: gold is gold the world over and in all ages: Value is not one of these primary qualities, nor even a secondary quality, nor any quality at all, of gold as such; because circumstances are readily conceived and have often occurred, in which gold has no Value even in exchange; for instance, among a crew abandoned at sea, a bag of gold belonging to one of the sailors might not buy even a biscuit belonging to another; all the natural qualities of the gold are present,--it is still yellow and weighty and solid,--but its Value has escaped altogether. Gold is always 19 times heavier than water: specific gravity is a _quality_ and is constant in all physical things: Value is not a quality in this sense at all, inasmuch as it is something that is constantly changing, rising or falling, and not infrequently disappearing altogether, leaving no sign. Ignorance of this vastly important truth has pecuniarily ruined thousands upon thousands of the people of this country during the last 20 years. They have gone into the mining of metals, gold and silver and copper, sometimes as individuals and more often as companies gathering in the driblets of investors, under the notion that if they could only get these metals out of the ground their Value would be just as secure and fixed as their physical qualities. They found out their mistake in bitterness of spirit. For example, the Value of an ounce of silver has gone down and down and down as the quantity of silver excavated has increased under zealous digging, in accordance with the universal and pitiless law of Supply and Demand. So of copper. And both these great monetary interests went to Congress and secured the passage of laws designed to lift artificially the Values that were sinking naturally under increased Supply, the silver men by a law requiring the United States to buy and mint at least $2,000,000 in silver each month whether the silver dollars were needed or not, and the copper men by a law imposing a tariff-tax on foreign copper that has actually lifted the price two cents a pound on the average of the whole 20 years above the average price of copper in the markets of the world. Take another illustration of disappearing Values, this time in lands, long supposed to be the most stable in value of all human possessions. Whole tiers of farms in the writer's native town in New Hampshire, and for that matter all over New England as well, that in his boyhood supported large families, and when sold usually brought a fair price, are now abandoned of their owners as wholly or comparatively worthless, and are allowed to grow up into forest again, without a sign of present human habitation upon them. Value is something that needs to be studied carefully, if it is to be fully understood. (b) Perhaps the origin of the word, "Value," will throw some light upon its nature and changes. Etymology can never be safely despised in scientific discussions, although words are perpetually changing their meaning in the mouths of men. No science can afford to build upon the transient meaning of a word; and yet it is clearly possible so to use words as to reach and describe ultimate and unchanging facts in science; and some knowledge of the original meaning of words is always a help in getting at those definitions and analyses of facts that are permanent in science. Let us hold fast to the cheering truth exemplified on all sides of every science, that a just analysis and exact description of ultimate facts in any department of knowledge are for all time, in spite of the transient meaning of current words. The present word is derived from the Latin VALERE, _to pass for, to be worth_. There is a strong hint of a _comparison_ in the original meaning of the word, and the current use of it both in Latin and English develops the hint into a certainty. In common language, when the Value of anything is asked for, the answer always comes in the terms of something else. If the question be, How much is it worth? the answer is, So many dollars or cents. Now the cents or dollars are very different things from those whose value is thus inquired after; and so we see again from another point of view that Value is a relative matter, since it clearly implies a comparison between two distinct things; and, if so, it is clearly enough not a quality of any one thing, and of course it would be useless to try to ascertain the Value of anything by a study of that thing alone. Etymology thus easily brings us up to our present vital question, and will assist us to solve it completely. (c) _What is Value?_ Plainly it is the result of a comparison instituted between two things, using the word, "things," here in its broadest sense. But who institutes the comparison? And who is competent to announce the result of it in Value? A comparison is required in order to ascertain the length of a stick of timber in feet and inches, and a carpenter's square is the instrument by which the comparison is made, and it makes no difference in the result whose the square is or whose the stick of timber is, since the square and the stick have in common the physical quality of length, and a simple comparison of square with stick determines the length of the latter, and one man in this case may determine the result by himself alone, and it is not needful that he be the _owner_ of either of the things compared. But it is a different kind of comparison from this that issues in Value. Let us suppose an exchange of a bushel of wheat for a mason's trowel: there is no common physical quality, as length, between the wheat and the trowel; and it is evident, that no _one_ man can measure in any form one of these two commodities by means of the other. It is a peculiar kind of comparison that is involved in any and every trade; and the first peculiarity of it is, as we have already seen in another connection, that it always requires "two persons" to make it; and each of the two persons must always be the virtual _owner_ of one of the two things exchanged. A thief may indeed go through the motions of selling a stolen horse, but as he is not the owner of the horse there can be no sale, and the actual owner may take his horse wherever he finds it even in the hands of an innocent third party. In other words, there must ever be "two efforts" also, two legitimate efforts giving a valid claim of ownership to each of the two parties in the exchange. And there is a second distinctive peculiarity in that comparison that ends in Value, namely, the two things to be exchanged are not compared directly with each other at all, as square and stick are compared, but in the light of the "two desires" with which we are already familiar, and in that of the "two estimates" resulting therefrom. The owner of the wheat desires a trowel, and the owner of the trowel desires a bushel of wheat; the former estimates the effort it has already cost him to procure the wheat in a sort of comparison with the effort that it would otherwise cost him to procure the trowel, and he does not trade unless the trowel seem more and better to him than does the wheat; the latter estimates the effort it has cost him to procure the trowel in a sort of comparison with the effort it would cost him to procure otherwise the wheat that he wants, and he does not trade unless the wheat then and there seem more desirable than the trowel, which he already has; and these two relative estimates of the two owners must _coincide_, that is, the owner of the wheat must think more of the trowel than of the wheat, and the owner of the trowel must think more of the wheat than of the trowel, before these two parties can ever trade. So of all traffic whatsoever. Now the third and last distinctive peculiarity of that kind of comparison out of which Value emerges is this,--an _action_ is necessary in order to complete the comparison. Desires and estimates may have been never so busy, but no Value can ever be born until an outward action takes place in the "two renderings" of our former analysis. Then first we come out upon plain and solid ground. We leave the play of the subjective elements, which yet are essential in the premises, and touch firmly objective realities. _The trowel-maker passes over his tool in the sight of men to the wheat-grower in firm possession and ownership, and takes in return for it from him the grain, which the latter passes over to the former for the sake of receiving the trowel._ The two "satisfactions" follow as a matter of course, and that whole transaction as a commercial exchange and as the sole subject of Political Economy is ended. _But where is the "Value," of which we have been in search?_ The answer is easy and certain and unevadible. _The Value is in the Renderings, and nowhere else._ The value of the trowel is the wheat, that is actually given in exchange for it; and the value of the wheat is equally the trowel, for the sake of getting which the wheat was rendered. What was the Value of King Hiram's cedar-timbers? The oil and wheat actually returned in pay for them. What was the Value of the oil and wheat sent northward by King Solomon? The timbers rendered in direct exchange for the same. This is not merely the only possible answer to the question, _What is Value?_ but it is also a perfectly complete and satisfactory answer. Common language here corresponds exactly with scientific language. "How much did the horse cost?" "One hundred dollars." The dollars have nothing whatever in common with the horse, except that they express his Value at the time; the horse has nothing in common with the dollars, except that it expresses the Value of the dollars at the time. It is just as exact to say, it means precisely the same thing to say, the dollars are worth the horse, as to say, the horse is worth the dollars. In general terms, the Value of anything is something else received in return for it, when each owner renders the one _for the sake of_ getting the other. This is the whole of it, so far as any specific valuable thing is concerned. We shall indeed need after a little, and shall have no trouble in finding, an abstract and universal definition of "_Value_," as an abstract and scientific term perfectly circumscribing the field of Economics. Here and now we are dealing with the simpler concrete question, What is the value of any specific valuable thing? The unvarying answer is, Some other specific valuable thing already exchanged for the first! There may be expected value, estimated value, but actual value there is none, until a real exchange has settled how much the value is. The value of anything is something else already exchanged for it. Value is not simply a relation subsisting between two things, the result of a careful comparison between them, but rather an actual fact established in connection with them. The universal formula of Value is _quid pro quo_, in which formula _quid_ stands for one of the valuables and _quo_ for the other, and _pro_ unfolds the motive of each owner for the reciprocal receiving and rendering. Here a caution is needful. Because nobody can tell what the value of anything is until something else has been put over against it in order to get it and actually received therefor, and because the only possible way to express the value of either is in the terms of the other,--the trowel is worth the wheat and the wheat is worth the trowel,--one must not therefore jump to the conclusion that the value of either is settled for all time or even for any future time. It is only settled for _this_ time. In Economics as in Christianity, Now is the accepted time. There is nothing fixed in Values, and never can be from the nature of the case, because Desires are personal to individuals, and Efforts fluctuate with times and persons, and Estimates that wait on these vary from necessity, and the Renderings of to-day may not be the chosen renderings of other persons in the same articles to-morrow. Value is not a quality at all, still less is it a permanent quality, of anything; it is a relation established between two things when these are in the hands of two given persons; but now when these are in the hands of two different persons, whose views are pretty sure to differ from the former, and a new relation is sought to be established between these in the old way of Estimates, is it strange that a new balance is struck, and Value is expressed in quite different terms? One of the chief charms of Political Economy is the open secret, that it deals not with rigidities and inflexible qualities and mathematical quantities and the unchanging laws of matter, but with the billowy play of desires and estimates and purposes and satisfactions, all of which are mental states, and all of which are subject in the general to ascertainable laws, though laws of a quite different kind from those of Mechanics. Values come and they go. Within certain limits and under certain conditions they may be anticipated and even predicted, but never with the precision of an eclipse or the result of a known chemical combination. There is a useful and fascinating Science of Value, as we shall see indubitably by and by in the present chapter; but it is a science that deals primarily with _persons_ and only secondarily with _things_, with mind and not with matter, with the general undulations of the sea and not with the crests of the waves. And all this is so, because Values are relative, because the announcements in the market-place to-day may stand listed differently to-morrow and very differently next year, and because old values may disappear altogether and many new ones come in, all in accordance with the incessant changes in the wants and labors and fashions and projects of men. We are now in a good place to see once for all the sharp distinction there is between Utility and Value. These two are often confounded to the deep detriment of our Science; and no clear thinking is possible in Economics without drawing this line sharp, and then holding it fast; for the hazard of this confusion is all the greater, because Utility is always connected with Value, although it is a totally different thing from Value. We will see. Utility is the simple capacity of anything to gratify the desire of anybody. This is at once the etymological as well as the popular signification of the word. It is derived from the Latin _utor_, to make use of, a word that is often conjoined in Latin with _fruor_, to enjoy; so much so, that the two verbs are often put together, _utor et fruor_, and also often without the conjunctive, _utor fruor_. Utility, then, is a quality of innumerable things. Anything that is _good for_ anything, anything _useful_, anything that has the power to still _the desires_ of any person, has Utility. But multitudes of things that have this capacity to gratify human desires are never bought and sold, and therefore can have no Value, since nobody will give anything for them. The air we breathe, the water we refresh ourselves with from spring or brook, the light of the sun and moon and stars, the fragrance of the flowers, the mountain prospect that delights the eye,--all these, and thousands more, possess the highest utility, but no value whatsoever. They are free. They are the bounty of God. They are never bought and sold. They are a vast class of things by themselves, with which Political Economy as such has nothing to do. Nevertheless the element of Utility comes into every case of Value, because the element of Desire comes into every case of Value, and whatever merely satisfies the Desire of any person is Utility, whether that capacity be the direct gift of God or whether the Efforts of men have been employed to bring it about. It is just here that we see the precise function of our "two efforts" in each case of Value, in distinction from mere Utility in all cases: much of utility is absolutely free, no effort of men having been put forth to secure it, for example, the fragrance of the wild rose; much more of utility is the commingled bounty of Nature and the gratuitous effort of men, for example, the fragrance of the domestic rose brought by the householder himself into his own yard for the gratification of his own family; while by much the most of utility is commingled free gift of God and the compensated efforts of men, for example, the fragrance of the bank of roses cultivated and cared for by the hired gardener. It is important for our purposes to discriminate carefully the three kinds of Utility: (1) what is wholly disconnected from the efforts of men, and comes freely from the hand of God; (2) what is mingled with the unpaid efforts of men, so that the satisfaction of the desire comes partly from Nature and partly from unbought effort; and (3) the compound utility that is partly free gift and partly the result of compensated labor. The last is the only kind of Utility that stands in any connection with Value. And even this is very different from Value. Utility in all three of its forms--now free, now onerous, now partly bought--is always a quality of one thing by itself, going straight to the satisfaction of some desire, and there an end. It is simplicity itself compared with Value, which is always a resultant of several things, and is specifically a relation of mutual purchase established between two "renderings," each of which expresses the value of the other, in each of which is embodied an "effort" made by each of the two "persons" rendering, and each of which excites a "desire" and an "estimate" before being passed over in ownership to another, and a "satisfaction" afterwards. The utility in every valuable rendering comes partly from free Nature and partly from compensated effort, but it is remarkable, that a principle, with which we are to become very familiar later on, namely, Competition, eliminates for the most part from all influence upon Value that portion of the Utility that is the free gift of God. The great Father never takes pay for anything, and never authorizes anybody to take pay in his behalf; and, moreover, has arranged things so, that it is exceedingly difficult for any person to extort anything from another person on the strength of anything that God has made, and man has not improved. Take, for example, ten horses of any general grade, brought into the same market by their ten owners for sale. These men did not make these horses, but they have cared for and trained them, or at least have become proprietors by purchase or otherwise of the results of such care and training. The Utility in each horse is compound, consisting partly of what God has done for him and partly of what man has done for him,--the two parts inextricably interwoven,--and all ten are offered now for sale. Each of the owners would indeed be glad to get something for his horse on the ground of what God has done to make him sound and strong and fleet, in addition to a fair compensation for what he (and his predecessors) has done in raising and breaking him; but the cupidity of all is likely to be thwarted by the ultimate willingness of some to sell their horses for a price covering the element of human "efforts" involved, and the action of these tends to fix a general rate for the whole ten, and thus the gratuitous element is eliminated from influence on Value. Even if the ten owners should combine for a higher price, there are doubtless a plenty of horses of that general grade elsewhere, some of whose owners are content to get back an equivalent for their own and others' "efforts" expended on their horses; and so the action of these tends to fix the general price for horses of that kind for that time and place at a point not above a fair estimate of the onerous human elements involved; thus throwing out by the action of competition all effect of natural Utility upon the Value of horses then and there. So of all other products of that kind. It is true, that in certain unique cases, in which competition has little or no play, because there is only one or a very few owners of such unique products, one cannot certainly say that free Utility may _not_ influence the Value to lift it above the gauge of human efforts involved; but such cases are rare, and relatively unimportant; and the tendency is immensely strong, under the natural and beneficial condition of things, for Values to graduate themselves through the reciprocal estimates and renderings of commerce, down to the actual and onerous contribution of _men_ to that Utility that underlies Value. Thus we are brought again and again from differing points of view to the "two renderings" as central and determinative in Value, and also more specifically to the "two efforts" of persons rather than any free contribution of Nature as constituting that portion of the compound Utility, whose function it is to gratify the "two desires" that precede the realization of Value,--that portion of the utility in any rendering that must be _compensated for_ by the other rendering. Now in order to reach in a moment more our final definition of "Value," a definition, it is believed, that will cover all the cases and take the life out of endless disputes, we need a scientific term to carry easily and exactly the meaning of any economic _rendering_. Let that word be SERVICE. We must have it in its generalized meaning, to cover the renderings of all the three kinds, in distinction from the term "personal services," which we have already used and shall continue to use to designate one class only of things exchanged, in contradistinction to "commodities" and to "credits," the other two classes. VALUE IS THE RELATION OF MUTUAL PURCHASE ESTABLISHED BETWEEN TWO SERVICES BY THEIR EXCHANGE. We offer this definition of "Value" to our readers in much confidence, that they will find it exact and adequate and altogether trustworthy. No one of them, however, is precluded from attempts to improve it in breadth and brevity and beauty; and all are invited to pick logical flaws in it, whether of ambiguity or superfluity or deficiency. Many minds and many hands in many lands have left their impress on parts of this definition, for example, Aristotle in Greece and Bastiat in France and Macleod in Great Britain; the present writer thinks, that he has bettered the definition of Bastiat, namely, "_Value is the relation of two services exchanged_," by precisely _defining_ the relation as one of mutual purchase; and he is sure, that he has improved the definition of Macleod, namely, "_The value of any economic quantity is any other economic quantity for which it can be exchanged_," by making his definition at once more abstract and more general and more definite, and also by escaping the slight implication in the word, "quantity," that only material things are exchanged in economics. The immense importance of securing _first_ a clear and correct Definition of "Value," which is the foundation-word and the circumference-word of Political Economy, and _then_ of using that term and all other scientific terms in the Science in their defined senses only, will certainly be appreciated by those who have wandered in the wide wilderness of the discussions on the undefinable word, "Wealth," and especially by those who have reflected most upon the vast and illimitable significance of economic Exchanges on the welfare of mankind. Associate Justice Miller of the Supreme Court of the United States, not an Economist in the technical sense, referred in 1888, in words that are worth remembering, to "_the philosophical maxim of modern times, that of all the agencies of civilization and progress of the human race commerce is the most efficient_." In August of that year John Sherman of Ohio, a man far enough from being a technical Economist, said in the Senate of the United States, that "_it is almost a crime against civilization_" to maintain commercial barriers between Canada and the United States. There were tokens a plenty in the year of Grace just referred to, that the Science of Value in all the lands of the civilized world, and particularly in the United States, was drawing to itself a new and more popular esteem. It was seen more clearly and felt more deeply than ever before, that this science has a weighty word for every man and woman and child in the world; that there are certain Rights in every one inherent and inalienable to buy and sell for his own advantage; that most if not all of the Governments, under the lead of comparatively few selfish and powerful men, were infringing upon these Rights, and robbing under the forms of Law the masses of their citizens to immense amounts for the special benefit of these very men; that the only sure defences of the people against these abuses of all kinds were in the maintenance and diffusion of the scientific and consequently disinterested principles and maxims of a sound Political Economy; that such a science was only friendly to the broadest rights, to universal gains, to illimitable increase in human comforts and powers, to international fellowship, to peace on earth and good-will among men; that, accordingly, a science of such scope and tendencies must be encouraged and cultivated and improved; that what had been crude in it, and narrow, and merely national, must be sloughed off; that the English and insular and special speculations of a century ago, which regarded "Wealth" as consisting of material things only, excepting however considerable portions of Adam Smith's immortal book, were antiquated and unusable; that the Science had really moved into a broader and still a well-circumscribed field, new and more permanent foundations were being laid, and fresh contributions from all countries should be welcomed; and that the time had fully come, when the accepted truths of this Science, like those of the other developed sciences, should be practically and steadily applied to the betterment of mankind. Under these broadening and inspiriting and uplifting conditions Political Economy, as never before, thanked God and took courage. 3. Having now a satisfactory definition of Value, and knowing accordingly just what Valuables are in clear distinction from all other things in the world, we must examine with some care two or three of the most general facts and laws and limits of Value, before we pass in the next following chapters to study in detail each of the three kinds of Valuables, namely, material Commodities, personal Services, commercial Credits. (a) Since Value in general is the relation of mutual purchase between two Services, and consequently the specific value of either can only be expressed by the other,--one Valuable being always measured by the Valuable exchanged against it,--it follows as a matter of course that such a thing as a general Rise or Fall of Valuables is an impossibility. The rise of one valuable involves of necessity a fall in the other, as the fall of one implies the rise of the other. If the articles exchanged be bushels of wheat and dollars of silver, and if a bushel buys a dollar to-day, then wheat is worth a dollar a bushel; but if wheat rises next week, so that a dollar will not buy a full bushel, that is precisely the same thing as saying, that the dollar has fallen in its purchasing-power as compared with the wheat. Such specific changes in the purchasing-power of one Valuable over another are incessant throughout the commercial world, and a merchant's sagacity consists in anticipating these so far as possible and in availing himself of them alertly and prudently; but each one of us must needs see clearly and hold firmly in mind, that each fall in the purchasing-power of a Valuable means a corresponding rise of power in the other Valuable,--if the first buys more of the second than before, then the second must buy less than before of the first; and, consequently, a general rise of Valuables is a contradiction in terms, and so of course is a general fall of Valuables. This brings us to _Price_. Price is Value reckoned in money; and this is the only difference in the meaning of the two terms. When one valuable is sold against another, even when one of the two is money, each is the _Value_ of the other: Value is the general and universal term in Economics. When any other valuable is sold against money, the amount of money it buys is called its _Price_: Price is a specific and restricted term in Economics. Since we shall study Money thoroughly in a later chapter, and there explain the origin and extent of its functions throughout, it is only in order to remark here, that it is for convenience' sake, that is, to make easy the comparison of valuables one with another, that Value in commerce is commonly reduced to Price. Money becomes a sort of measure, by means of which to compare all other valuables with each other. In order to ascertain the Price of a Valuable, it only needs to be sold once against money; but in order to ascertain the Value of a Valuable, it would need to be sold once against all other valuables whatsoever. This last is clearly impracticable; and so Value for practical purposes is reduced to Price. The General is made Particular for convenience. Hence we have "Prices current," but never Values current. Now it will be plain to all, how there may easily be and often is a general rise or fall of Prices while a rise or fall of Values is impossible. Price is a relative word as much as Value is, but it does not relate to so many things. Price is specific, and Value universal. Both equally involve buying and selling, but one sale of a single valuable against money leads to Price, while ten thousand sales of the same valuable against other than money would not conduct to complete Value. That would require a sale of this valuable against all other valuables in the world, and a complete statement of the comparative results. General, or at least universal, changes of Prices in rise or fall in any given country are due to general and great changes in the Money current there. Subordinate changes in other valuables, money being supposed to remain uniform, will of course vary their Prices; but it is impossible that such changes should affect equally or even generally all the various and numberless valuables of a whole country; while some are coming easier, others are coming harder, while some are more desired than formerly others are less desired, and this will bring in of course altered prices, some higher and some lower; but a general rise of all prices, or a general fall in the same, can only come about by great changes of some kind in the circulating medium, that is, the money, of the country. For example, in the United States, between 1862 and 1878 inclusive, a government paper promise, called _greenbacks_, was the current money of the country; owing to its excessive issue, and to some doubt in the minds of the people whether the paper would ever be redeemed in gold, it soon became depreciated as compared with gold, the premium on which over the paper money varied at different times from 1 to 185 _per centum_; as all other valuables were then sold against greenback money, which had declined, their prices naturally rose in some sort of proportion as the medium fell; general _values_ remained much as before, but general _prices_ were much enhanced; and when, after the resumption of specie payments in January, 1879, gold became again the standard medium, general prices declined in full accordance with the same universal principle reversed. (b) Prices, as we have now seen, are only a subordinate form of Values: the universal law that regulates all the variations of them both, within certain fixed limits to be examined shortly, is called the LAW OF SUPPLY AND DEMAND. This is perhaps the most comprehensive and beautiful law in Political Economy. We shall look at it now only in outline: the filling in will be the pastime and profit of all that is to come. "Demand" is a technical term in Economics, and accordingly needs to be defined, and then always used in its defined sense. So is "Supply." _Demand is the "desire" of a "person" for something in the hands of another person, coupled with the possession of something else capable of buying that something._ Mere desire has no function in Political Economy: hungry and penniless children passing by the stalls of a great market, have no influence on the prices or values of the viands, on which they cast their eager glances: only desires accompanied by "efforts" competent to excite the desires and to pay for the efforts of another are a Demand. Supply is the same thing as Demand looked at from the other side. Supply is the correlative of Demand. The Supplyer is a person, who has in his possession something desired by the Demander, and who in turn desires something in the hands of the Demander, when both are willing to exchange their "renderings." There is no economical difference in the position of the Demander and the Supplyer. Each is equally a Demand and a Supply with reference to the other. It is the old and ever-recurring case of Value, the propositions being here stated in their most universal terms. For simplicity's sake, however, and for convenience, without altering the substance of the definitions a particle, the valuables when looked at as a Demand are practically reduced in all markets to their equivalent in Money, so that Money offered or ready to be offered against any other exchangeable thing constitutes what is called in commercial language a Demand; and this is sufficiently accurate as well as current, although it must always be remembered that each valuable in any market in reality constitutes a Demand for another, and is equally a Supply in reference to that other. _Supply is any exchangeable thing offered for sale against any other exchangeable thing._ For example, corn in any market is at bottom a Demand and a Supply at once for every valuable offered in that market at that time, say, ploughs for one thing; but in the talk of the market, the presence of corn there, or its being ready to be immediately brought there and offered in exchange for money, constitutes what is called a Supply of corn; money offered, or ready to be offered, in exchange for corn, constitutes what is called a Demand. On this account Money seems to play a much more important part in trade than it actually does play; the corn is sold in the terms of money, that is, for dollars and cents as denominations of Value; convenience dictates such a reduction of general Value to this particular form of it, because this is found to make easier the ultimate exchange; but there is not one chance in a hundred, as trade runs nowadays in the larger markets, that this seller of corn will take his pay for it in actual money whether metallic or paper; money is never an ultimate product, but only an intermediate one; this seller of corn wants perhaps a plough or some other farming implement, and ten to one he will take for his corn a bill or order in some form on the seller of ploughs, and it will be corn for a plough, each becoming a Demand and a Supply for the other, though money or rather its denominations has acted as an agent in bringing about the final trade; the details of all this in manner and result will be as plain as day when we come to study "Money" and "Credits" in following chapters; while the essential point to be noted here is, that all Valuables are a Demand and Supply as towards one another. In other words, the world over, A MARKET FOR PRODUCTS IS PRODUCTS IN MARKET. What, then, is Market-Value returned in the terms of Money? And what is the universal Law of it? Market-value is the present rate of exchange between dollars and cents and any other valuable, that can be fairly graded in a class made up of valuables similar to itself; and the law of market-value is the equation of Supply and Demand, that is, the current rate is adjusted when money enough is offered to take off within the usual times the valuables on hand and offered for sale. If Demand for any reason become quickened, and the Supply be not increased, there is competition among buyers for the stock in market, and the market-rate rises or tends to rise. If, on the other hand, Demand become sluggish, the Supply remaining the same, there is a like competition among the sellers to dispose of their stock, and market-value sinks or tends to sink. So far it is the simple action on Value of the element of one "desire" expressing itself through a money-demand, the elements of "desire" and of "efforts" expressing themselves through Supply being supposed to remain stable, and the pulsations in the market-rate follow accordingly. How far can this simple action go? Demand increasing, Supply remaining as before, market-rate rises: how far can it rise from this cause? Here we must remember that Demand not only acts upon Value, but also Value reacts upon Demand. As Value rises, the number of those whose means or inclinations enable them to purchase at the new rate is constantly diminished: there are ten persons who may wish an article at one dollar, of whom not over four will wish it at two dollars, and perhaps only one at three dollars. Every rise in market-rate then, under the impulse of enlarged Demand, tends to cut off a part of that Demand, that is, to lessen the number of those who will purchase at the increased price; and the rate consequently can only rise to that point, whatever it be, where an equalization takes place between the Supply and Demand, between the quantity of flour, for example, offered at the enhanced rate, and the quantity of money in the hands of those willing to exchange it for flour at the higher rate. Just so in the reverse way, when Demand is slackened, Supply continuing as before, the market-rate is sure to decline; but declining rates tend strongly in turn to increase the demand by bringing the article within the range of a larger number of purchasers; Society is like a pyramid, each lower stratum is broader than the one above; and so the decline of rates under a weaker Demand is arrested by a stronger Demand coming from a wider circle of buyers, and a new market-rate is determined at the point of equalization between the new Demand and the old Supply. Thus every rise or fall of Demand tends to check itself, and will check itself in all the great classes of valuables, even without any variations in the Supply; everything oscillates under the variations of Demand; while the point of stable equilibrium, if we may use the expression of anything so unstable as Market-value, is always the equation of Supply and Demand. But all considerable variations of market-rate are commonly checked at an earlier point than the one just indicated by variations in the Supply. A sharper Demand carries up the market-rate, and a higher market-rate commonly acts upon Supply to enlarge it, and an increased Supply too checks the rise of market-rate. _Per contra_, a slacker Demand lowers market-rates, and lowered rates often lessen the Supply by the action of holders and speculators,--holders withdrawing their stock for a better market, and speculators buying now when the article is cheap to store away until it shall be dearer. Thus rise of market-rate from Demand growing stronger is checked doubly; first, by curtailing the number of would-be buyers, and second, by enlarging the Supply: the fall of market-rate from Demand growing weaker is checked doubly; first, by increasing the number of consumers of a now cheaper article, and second, by a diminution of Supply by the action of holders and speculators. This double and harmonious working of the law of the Equalization of Demand and Supply is one of the most comprehensive and beautiful laws in Political Economy. Besides this, we must note the effect on Value of conditions in Supply only, Demand being supposed to continue steady. There are three classes of valuables in respect to the law of their Supply. (1) When the Supply is scant, and cannot be increased at all, as is the case with choice antiques and certain gems and paintings by the old masters, their value may rise to any point under the action of Demand, there is and can be in such cases no market-rate, and the individual value will be struck at the point of equalization of the demand then existing with the supply there offered. For instance, the French Government paid, in 1852, 615,300 francs for a painting by Murillo, which had belonged to Marshal Soult. The genuine Murillos are comparatively few, and their number cannot be increased, and their merit causes a strong "desire" to possess them, and their value rises in connection with the limitation of Supply to a point beyond which no one purchaser can be found. When this painting was offered in Paris for sale, many "persons" of course were anxious to buy it, there was but one painting, there could be but one purchaser, value rose under the influence of a sharp Demand, the rise could not be checked by any duplication of the Supply, and the equation was complete and the value for that sale determined when one party distanced all other competitors and offered a sum greater than any one else would give. The same principle controls all sales of this sort, and is practically the principle of the _Auction_, whose very name indicates its nature in this regard, that Demand becomes restricted to one party, and that the highest bidder. (2) When the Supply, instead of being absolutely limited, can only be increased with difficulty or after the lapse of time, similar but less extreme results will be observed. Let us suppose, that pianos are selling in some rural community at $300 each, that there are twenty persons in the place who want a piano immediately, that there are but fifteen pianos on hand, and that the number cannot be increased for half a year. The market-rate will certainly rise above $300. How much above? To that point, at which only fifteen of the twenty will be willing to purchase at the new rate. The equation of Supply and Demand will be reached by a rising rate which cuts off five competitors. This is the principle, working only roughly in practice through the estimates and good judgment of dealers and purchasers. A better illustration of this second class of cases is, perhaps, the Grains and other agricultural products. When these have been gathered, there is no more home supply for a year; and any deficiency in the crops will raise their market-rate, not at all in the ratio of the deficiency, but according to the relations of the diminished Supply to a new Demand. Since the abolition of the Corn-Laws in England in 1846, and the resulting ease of grain-imports from abroad, a deficiency of home crops has no such effect on the price of cereals as it had before that time; when, according to Tooke's History of Prices, an expected falling-off of one third in the crops often doubled and sometimes quadrupled the usual prices; which shows that the world ought to become one country in respect to all food supplies, as indeed happily it is now for the most part, each country allowing them to be distributed freely everywhere in accordance with this law of Demand and Supply. Speculation is more busy in grain, in cotton, and in such things generally, because a new Supply can only be had once a year; early information is eagerly sought at the trade centres in regard to the prospects of the growing crops, and has its influence one way or the other on current prices; but the world is so wide and all the parts of it now so closely connected together by steamship and telegraph, that the prices of the great food staples are remarkably uniform over the earth, and Speculation has not the chance it once had to count and "corner." (3) In the only remaining and by far most comprehensive class of cases, in which the Supply of Commodities and Services and Credits can be readily and indefinitely increased to meet enhanced Demand, and easily withdrawn from market and stored when Demand declines, each rise and fall of market-rate tends to be speedily checked through the mere action of Supply; and the doubly and harmoniously working Law but just now referred to keeps Value in this class of cases comparatively steady all over the world. (c) It only remains in this branch of the general discussion on Value, to indicate the Limits, within which all oscillations of Value are contained. These extreme limits are specially to be found in the element of Value which we have called "Efforts." We have clearly seen already, that "efforts" (or Labor) are not, as has been often asserted, the cause of Value, but only one of several constituent causes; if Labor be asserted to be the sole cause of Value, the inquiry becomes instantly pertinent, what is the cause of the value of Labor; yet we know, that "efforts" always stand in preconnection with value, and, the mutual "desires" being presupposed, there must always be Limitations of Value lying partly in the efforts made by the person serving and partly in the efforts saved to the person served. In every valuable transaction, each of the parties is reciprocally serving and served, and it is clear, that the two would not exchange "renderings" unless the service which each renders to the other is less onerous than the "efforts" which each would have to make if each served himself directly. For example, it takes a certain effort for me to bring water from the spring for the use of my family; I am willing to pay a neighbor for bringing it for me, but I should not be willing to make a greater effort for him in return than the effort is to bring it myself; neither should I be willing to make an effort for him in return which I regarded just as onerous as the bringing the water myself; and unless there is some service which he will accept less onerous to me than that, I shall continue to bring the water. On the other hand, he will surely not render the service to me of bringing the water, unless it be less onerous to him to do so than the doing that for himself which I am ready to do for him. This principle, applicable to all exchanges whatsoever, draws on the one side the outermost line, beyond which Value never can pass. It may be asserted with confidence, that no person will ever knowingly make a greater effort to satisfy a desire through exchange, than the effort needful to satisfy it without an exchange. Therefore, it follows, that all exchanges lessen onerous efforts among men relatively to the satisfaction of their desires, and tend to lessen these more and more as exchanges multiply in number and variety, otherwise the exchanges would not take place. Moreover, within this outermost Limit of Value, which is made by the comparative onerousness of the respective "efforts," there is a second limitation of a similar kind to be found specially in the element which we have called "estimates." The estimate of each exchanger is based at once on his own effort about to be rendered and on his desire for the return service offered: the element of effort in the case of both being considered for the time as fixed, Value will vary according to the varying desire of each for the return service of the other, affecting of course the "estimate" of each, and furnishing also a secondary Limit of Value. To pursue the same illustration, suppose I regard the effort required to bring the water myself as 10; that there are several persons, who would be glad to do that service for me at a return service which I consider as 8; that there are two persons, who are willing to do it for something which I estimate at 6; and that there is only one person, who will do it for a return service which I regard as 5. It is evident, that the extreme limits of that service to me are 10 and 5. Higher than 10 it cannot go, lower than 5 it cannot sink. But why have I before me three possible classes of renderers? Because the persons in each class, while estimating their own efforts alike in the proposed rendering to me, have varying "desires" as towards a possible rendering from me to them, and consequently put differing "estimates" upon the possible transactions. The man who will bring the water for 5 has for some reason (no matter what) a stronger desire for the return than anybody else, and I should of course employ him so long as he would serve me on those terms; if he decline the exchange, I fall back on one of the two persons in the class above him, and Value rises now from 5 to 6, and will be steadier there than it was before; if each of these in turn should give out, I should fall back upon the larger class ready to serve me at 8, and Value would be very steady at that rate, because there are numerous competitors; and by no possibility could it rise above 10. Between 10 and 5 the value may fluctuate, but it cannot overpass these Limits in either direction under existing circumstances. Therefore we may conclude, that the _maximum_ Value of any Service in exchange will be struck at the point where the recipient will prefer to serve himself, or go without the satisfaction, rather than make the exchange; and the _minimum_ Value of any Service in exchange is struck at the point below which the recipient cannot get himself served even by him who most highly estimates the return service offered. (4) We come now to the last and most important Inquiry in this initial chapter, namely this, _Can there be, and is there, a strict Science of Buying and Selling? Is there a Science by itself, clear and certain, that covers and controls Valuables?_ Here we must go slowly, if we would go surely. We must first find out exactly what a Science is in general, and then ascertain in particular whether Political Economy bears all the marks and stands all the tests of the other genuine Sciences. What is a Science? _A Science is the body of exact definitions and sound principles educed from and applied to a single class of facts or phenomena._ The very first condition, accordingly, of any science is, that there be a single class of facts, objective or subjective, that can be separated from all other classes of facts, in the mind by a generalization and in words by a definition, and that such generalization and definition be clearly made and held; the second condition is, that the class of facts so circumscribed and defined be open to some or all of the logical processes of construction, of which the most important are Induction and Deduction; the third condition is, that the subordinate definitions and working principles within the inchoate Science be all educed from and applied to these circumscribed facts in strict accordance with these well-known logical processes; and the last condition is, that these definitions and principles have gradually become "_a body_," in which there is an organic arrangement of parts, all being placed in a just order and mutual interdependence. There is no old Science, and there can be no new Science, in which these four conditions do not meet and become blended; and the beauty of it is, that this Definition applies to any Science in all stages of its growth. No one of all the Sciences is as yet completed; but just so soon as any correct definitions and principles are drawn from and applied to any _class_ of things clearly circumscribed as such, and these definitions and principles are orderly arranged in a _body_, there is an incipient Science; and its progress towards perfection will proceed in precisely the same manner in which its foundations have been laid; new facts and principles and definitions will gradually be discovered, and these when reapplied to the class of things out of which they have sprung, will lead to corrections and adjustments and enlargements of the Science; and no matter how far these logical processes may be carried, the general Definition with which we start will also be found ample at the end of the journey. All of the Sciences without exception have been developed into their present position in just this manner; and they fall easily into three great classes, namely, the Exact, the Physical, and the Moral Sciences. The ground of this triple classification is partly the distinct subject-matter in the three classes of Sciences, and partly the distinctive prominence of one or more of the logical processes of construction in each. Thus, the class of the Exact Sciences consists only of the formal Logic, and pure Mathematics. These two are distinct from all other sciences, because their logical method of procedure is wholly Deductive. Deduction is the process of the mind, by which we pass from a _general_ truth to a _particular_ case under it, that is to say, from _more_ to _less_ inclusive propositions. Stuart Mill argues at much length in his book on Logic, that even the axioms of pure Mathematics are originally gained by Induction, while others claim that the truth of these axioms is perceived _intuitively_, but no matter how this point is decided, the construction process of the Pure Mathematics is from the General to the Particular. So it is also with the Aristotelian logic, whose Major Premise, whether only _supposed_ to be true or intuitively _perceived_ or inductively _proved_ is always General in its terms. This is the form of Aristotle's Syllogism:--All sinners deserve to be punished; John is a sinner; and therefore, John deserves punishment. Physical Sciences are those concerned with the classifications and laws of action belonging to material substances. There are a great circle of these, of which Astronomy, Botany, and Chemistry, may serve as examples. They have been mostly developed since the time, and in accordance with the methods, of Lord Bacon; who, in strong reaction against the Deductive logic of Aristotle, exalted Induction or the mode of generalizing from _particulars_, as the true way of building up Sciences; and, as the subject-matter of each of the physical sciences is well open to observation and experiment, to Induction and Deduction, and to corrective verifications, both inductive and deductive, the new method proved remarkably pregnant and successful. Each of these sciences has a distinct _Class_ of objects or phenomena to which its attention is directed; the class is circumscribed by the scientific Conception and Definition; its devotees as a rule are skilled in using the Baconian tools; and consequently, its conclusions receive the confidence and control the action of men. All of the Physical Sciences are constantly enlarging "the body of exact definitions and sound principles" connected with their several classes "of facts or phenomena." Moral Sciences are those concerned with the classifications and laws of action belonging to beings having Thoughts and Desires and Will. The most developed of these sciences at present are Metaphysics, Ethics, and Economics. Each of these is concerned with a single class of phenomena, which may be exactly conceived of and defined, and is open to the logical processes by which alone Sciences can be built up. But Induction cannot march up with quite so sure a stride, nor Deduction descend with so large degrees of certainty, in relation to _persons_ endowed with free-will, as in relation to physical substances held firm in the grip of unvaried law. Still, the doubt always attaches far more to the actions of an _individual_ than to the actions of the _masses_ of men. It is much easier to know human nature in general, than one man in particular, because many Inductions guided by observation and History make it almost certain how masses of men will act under a given set of conditions, while any one _may_ act in a contrary way. Deduction, accordingly, cannot hold quite the same place in the Moral Sciences so far as individuals are concerned, as it holds in the Physical and Exact Sciences; but this lack is perhaps more than made up by other advantages. _Experience_ in the moral sciences corresponds to _Experiments_ in the physical sciences. Then there is the great advantage of _Introspection_; since each man has within himself the means of interpreting and testing the inductions of Metaphysics, Ethics, and Economics. Then also there is the great resource of _Feigned Cases_, which, provided only they be cases possible to occur, open up to Reasoning a new means of proving and correcting. Besides these, which it enjoys in common with them, Economics, as we shall soon see, possesses one other great advantage over and above the rest of the Moral Sciences. Since, then, Political Economy deals primarily with Persons, and only quite secondarily with Things, it is, under the definition and on every ground, a "moral science"; yet it must not be confounded in the least with what is sometimes called the science of Morals, or Ethics. There is one word that marks and circumscribes the field of Ethics, and that word is _Ought_; there is one word also that marks and circumscribes the field of Economics, and that word is _Value_. Now, the idea of _obligation_, on which ethical science is founded, and the idea of _gainful exchange_, on which economical science is founded, are totally distinct ideas. The imperatives of ethical obligation rest upon the consciences of men, and Duty is to be done at all hazards; guilt is incurred if it be neglected; while pecuniary gains and losses, however large, do not, or at least ought not, weigh a feather against an intuition of Right and Wrong. Economics, on the other hand, does not aspire to place its feet upon this lofty ethical ground; no man is ever under any moral obligation to make a trade; he properly makes it or not, according to his present sense of its gainfulness to himself; and so economic science finds a solid and adequate footing upon the expedient and the useful. Ethics appeals only to an enlightened conscience, and certain conduct is approved because it is Right, and for no other reason; Economics appeals only to an enlightened self-interest, and exchanges are made because they are mutually Advantageous, and for no other reason; each of the two Sciences, therefore, has a basis and sphere of its own, and the grounds of the two are not only independent, but also incommensurable. We will now apply _seriatim_ to Political Economy the four fundamental conditions belonging to all recognized Sciences, and so determine for ourselves whether it be not a strict science, and thus worthy in its leading propositions of all acceptation. (a) Every science must have to begin with a definite Class of facts, which lie in an easily circumscribable field, and which are not likely to be confounded with other facts of a differing nature. Economy has such a class of facts, that lie in such a field, and that cut themselves off by sharp lines from all other things. _Valuables_ is its class of things. It has nothing to do with any other class of things. Its field is Value, or Sales, or Exchanges. This field is perfectly definite. Sales are never confounded with gifts, and are never confounded with thefts. They have a distinctive character of their own. They have always been in the world, will always be in the world in ever-multiplying volume, and no one ever mistakes their main features for anything else. Anything whatsoever that is salable, or is about to be made so, comes within the view of Economics, and scientifically it cares for nothing else. While it finds its field definite, it also finds it broad. It has no wish to encroach on other sciences, nor will it tolerate any encroachments on its own. Before anything is sold, or is being made ready to sell, it cares nothing what other science employs itself upon that thing; after the thing is sold, Economy loses its interest in it, and other sciences may take it up if they choose. Valuableness is the one quality that constitutes the Class of things with which the Science is conversant, and it claims complete jurisdiction over all things just so far forth as they have this one quality, and no farther. Now there _is_ in the actual world such a Class of things; its exterior boundaries have been exactly ascertained by a long series of Inductions and Deductions, tentative, corrective, and confirmatory; and accordingly, Political Economy has now in full possession the first grand condition of a Science. (b) This great class of facts, thus reached by logical Generalization and grasped and held by a mental Conception and fixed by an adequate verbal Definition, is remarkably open to all the logical processes of reasoning, by which alone sciences are constructed, and thus possesses in full measure the second grand condition of the Sciences. Not one logical resource is denied to the economists: all the tools of the scientific workshop are at their hands. Let us now catalogue these in their order. (1) _Induction._ This is the logical and universal process, by which the mind naturally passes up from a certain number of observed cases, in which a certain quality appears, to a Generalization, which is a conception of the mind followed by a statement in words to the effect, that _all possible cases_ of that kind will exhibit the quality already observed in _the few cases_. It has as its basis a confidence in the resemblances and uniformities of Nature; it proceeds upon the axiom that Nature throughout is consistent with herself; and this confidence has been ten thousand times justified in the issue, when it is found that Nature preordained the Sciences by causing grand analogies to run through each department of her works, including man and his works. The structure of the human mind corresponds with these objective resemblances; it seizes upon them, and delights in them, and naturally and joyfully infers and concludes that what has been observed of _a part_ may be safely affirmed of _the whole_ of that kind; accordingly, the world over, when certain things are found to be true in a considerable number of cases, the mind leaps over space and time to a whole class, and frames for itself a general rule or principle, which binds all the cases into one bundle, and thereafter confidently affirms what is known to be true of some to be probably true of all. This is inductive Generalization; and the strength and the joy of it is well expressed by Descartes: "_I have thought that I could take as a just generalization that which I very clearly and vividly conceived to be true._" Experience in Economics corresponds to Experiment in the Physical Sciences, and furnishes to Induction all the fuel it can ask for to feed its logical furnace and to forge the chains that bind the Cases to the Classes. Personal experience in buying and selling, local experience in buying and selling, and national experience in buying and selling, with all that belongs to these, the records of which are full to overflowing, afford to the inductive inquirer in Economics an inexhaustible supply of material. Instances abound. Particulars may be gathered up one by one on every hand and linked into the inductive chain. If any doubt be felt about the strength of any one of these chains, another one may at once be linked in terms drawn from another field of Experience with a view to test the strength of the first. Most fortunate from this point of view is the United States, because here there are States with substantive powers of control over most matters of trade within their borders, as well as a Nation with sovereign powers of control over some points of trade within the country as a whole. This feature has given birth to commercial experiments as well as commercial experience of all kinds; and Induction rejoices in all these abundant materials for generalization thus furnished free of cost to Science, though unfortunately not free of cost to the People. (2) _Deduction._ This is a logical process exactly the reverse of the first, in that it descends from a generalized statement reached by the inductive process to some particular, or subordinate class of particulars, ostensibly covered by the general maxim. Induction examines a number of particulars, and then makes a leap, it may be a long leap, over all intervening particulars, to its Generalization clamping them. The main use of Deduction is to make sure of any one of these overleaped particulars, which may come into importance, and thus confirm the generalization, or correct it. It is not strictly true, what is often alleged against deductive reasoning, that there is nothing _new_ in its result, that the Induction had already passed through that particular in rising to its Generalization, and therefore to descend to any particular link to examine that, is something useless. The exact truth is, that it _is_ useless to examine again deductively the very particulars that were carefully studied inductively, but on the other hand there is always much actually untraversed territory between these already examined particulars and the inductive generalization, and Deduction is often very useful in carrying us down to questionable points in this territory. Even Lord Bacon, who scorned the syllogism, admits this: "_Axioms duly and orderly formed from particulars easily discover the way to new particulars, and thus render sciences active._" We will illustrate this by a reference to Franklin's famous induction to prove the identity of lightning with electricity. Only one experiment, and that a very rude one, was needful in this case; although usually many experiments, or the careful observation of many particulars, are necessary in inductions; but the generalization having been gained, Deduction had a chance to try its hand; it had long been observed that electricity could be conducted from point to point, and if electricity and lightning be identical, then lightning can be so conducted; therefore, deduced Franklin, a pointed iron rod elevated above buildings will harmlessly conduct lightning from the clouds into the ground. Deduction gave mankind the lightning-rod, and so made one point of science "_active_," as Bacon phrased it; and it is noticeable, that Turgot's felicitous epigram turns on the deductive rather than the inductive side of Franklin's experiment: _Eripuit coelo fulmen sceptrumque tyrannis._ Let us catch up another illustration from the science of Botany, to show how Deduction may strengthen and sharpen an inductive result. The botanists say, that apple-tree blossoms are always five-petaled, because blossoms from a large number of apple-trees in various localities have been observed to have just five petals to the blossom; so far, they affirm inductively, and indeed securely; but they have also reached by means of another induction a much broader law of plant-life, namely, that outside-growers, when they have petaled flowers at all, always have them five-fold; now apple-trees are outside-growers; and therefore, deductively also, and conclusively beyond shadow of question, apple-tree blossoms are five-petaled. Political Economy is just as open to Deduction as it is to Induction, and the two continually are reaching each other the hands of economical reasoning, not always indeed pursuing each a separate and distinct path to the end, as in the botanical instance just adduced; because in practice the two processes mingle constantly, and neither is carried out in full and due form, since premises used by the mind are often dropped in the statement, and shortened forms of expression take the place of long-drawn-out formulas. But all good reasoning in Economics, as in all other sciences, is analyzable into one or other of these two processes, both based alike on the uniformities of Nature and the structure of the human mind. Deduction has not quite the same scope and certainty in Economics as in the Physical Sciences, because any one _may_ act contrary to the vastly probable action of many individuals; still, it is a safe and potent process in economics, since it may descend securely from the larger masses to the smaller, even though perchance the individual escape, because of the simplicity and universality and certainty of the impulses that lead men to exchange. John Bascom gives the reason well, why both Induction and Deduction have so firm a grasp upon this science: "_Between one dollar and two dollars a man has no choice, he must take the greater; between one day and two days of labor he must take the less; between the present and the future he must take the present. This is not a sphere of caprice, nor scarcely even of liberty; the actions themselves present no alternative, and, if an alternative giving an opportunity for choice does arise, it arises from some partial or individual impulse, from some one of those transitory and foreign influences, which, while rippling the surface, neither belong to nor affect the current of the stream._" (3) _Introspection._ Everybody buys and sells, and almost everybody watches the action of his own mind enough to see what are his _motives_ in buying and selling, and soon comes to know also that the other party has corresponding motives. Even the child knows perfectly, that it takes two to make a bargain, that each party renders something to the other, that each is glad to part with something for the sake of receiving something from the other, and that this higher esteem put by each on what is taken from the other makes for each the gain of the trade. A very little introspection tells anybody, that were this higher esteem wanting in the minds of either of the two, the trade would not take place at all. Everybody within the pale of _compos mentis_ knows, that, were his own desire for the rendering of another to increase, he himself would offer more of his own rendering rather than forego the trade; and he rightly infers, that what is true of himself is true of all other men; and so, every seller rightly tries to display his wares in such a way as to increase the desire of buyers for them; knowing full well from his own experience in buying that, other things being equal, they will be willing to render him more for them in consequence. The phrase above, "rightly infers," is based upon the truth, that all men are remarkably alike in certain great departments of action; and that, in no department are they so nearly alike as in this of buying and selling. Introspection, therefore, an easy self-knowledge open to all persons alike, and a personal experience in these matters that everybody gains, give most trustworthy answers to Inductive inquiry along these lines. Trade is natural and gainful, as any person can see, who stops to ask himself why he has made, or is about to make, a given trade; and if natural and gainful to _him_, equally so for precisely the same reasons to the party of the other part; hence no law or encouragement is needed to induce any persons to enter upon traffic; and any law, or artificial obstacle, that hinders any two persons from trading, who would otherwise trade, not only interferes with an inalienable right that belongs to both, but also destroys an inevitable gain that would otherwise accrue to both. Political economy is very fortunate, accordingly, in being able to make its appeal to the common sense of all men, giving sound starting-points through self-knowledge possessed by all men, guiding to safe steps by means of Induction all who like to generalize and prove, and especially breaking up current fallacies by asking the potent question, "How would you like it yourself?" (4) _Feigned Cases._ There are two kinds of these, namely, those which might be realized in actual fact, and those which never can be so realized. The acute mind of the Greeks marked in their flexible language a decided difference between the class of suppositions that might possibly become facts, and another class of suppositions impossible to become facts, by developing a distinct form of expression for each. This distinction must always be borne in mind by those who use or note in economical discussions the expedient of Feigned Cases. Reasoning is always legitimate and often pregnant from suppositions, whenever these are such as might readily become facts of experience, because in that case the argument proceeds upon recognized and inductive resemblances; but otherwise, no inference at all can be drawn from them, because it is an universal truth in Nature and in Logic, _ex nihilo nihil fit_, out of nothing nothing can come. In plausible suppositions impossible to become facts is a nest of logical fallacies, that need to be watched. A good illustration may be found in the Monetary Conference at Paris in 1881. Delegates were there from all the nations of Europe, from the United States, and even the distant India. Some of these in their eagerness for a factitious ratio of value between gold and silver forgot the important distinction now in hand, and argued of the good results to flow from the realization of a supposition, _which in fact never could be realized_. Mr. Evarts voiced the French and American delegates in this declaration: "_Any ratio now or of late in use by any commercial nation, if adopted by an important group of states, could be maintained; but the adoption of a ratio of 15-1/2 silver to 1 of gold would accomplish the principal object with less disturbance in the monetary systems to be affected by it than any other ratio._" The fallacy in this passage is in the words, "could be maintained," which are a supposition, and what is much worse, a supposition contrary to fact, from which all arguing is nugatory. Why it is contrary to fact will be seen at length in the following chapter on Money. On the other hand, a supposition that may clearly become a fact is a substantive thing, and logical inferences may be drawn from it, just as geometrical inferences may be drawn from a _supposed_ circle: the circle on the page is not a _perfect_ circle--no such circle was ever drawn--but _suppose_ it perfect, as it might possibly be, and argument becomes at once valid. Let us take another Monetary Conference at Paris in 1867 as an illustration: its judgment as voiced by Mr. Ruggles of New York was taken with logical propriety, when the great benefits of an international coinage of gold alone were argued and announced, because, while that was then a mere conjectural project, it was possible any day by mutual agreement among the nations to become a reality. An international coinage of gold is a simple question of equivalence of _weights_ in the coins of different countries: an equivalence of _values_ as between gold and silver coins for any great length of time is neither simple nor possible. (5) _Results measurable in numbers._ The four preceding logical processes of proof and construction Political Economy is glad to share with the other Moral Sciences, but this fifth and last one it has to itself alone, and this is its chief scientific advantage over them, and is consequently the main reason why it is already more advanced and more symmetrically developed than any of them. In common with them it has important subjective elements, such as Desires, Estimates, and Satisfactions; in marked advantage over them it has also objective elements, that can be weighed and measured and even hardened into statistics. Economics has an ever ready objective test, which mere mental and ethical and other moral processes never can have from their very nature. The _result_ of each and of all economic transactions may be measured by money, and put down in a ledger, and published to the world in the form of statistics. An economic blunder, whether in legislation or in private action, pretty soon proves itself to be such by the lessened gains of somebody, and these losses can be stated arithmetically; and similarly, an economic improvement evidences itself at once by increased gains coming to somebody; while it may take years and years to work out the results of an ethical mistake, and even then their amount can only be guessed at. Theories in metaphysics can only be tested by the _Reason_ of men, and reasonable men without apparent bias of motive take opposite views of Sensations and Intuitions and Volitions; while theories in economics, which can be even better tested by the _Reason_, have an additional and almost immediate and constantly recurring test through men's pockets and the tables of the Census. The people indeed sometimes deceive themselves, and are also too often deceived by others, in these matters of buying and selling; but it is none the less of the utmost consequence to this Science, that all the results of good and bad practice in Economics work themselves at last into a definite shape, into facts and figures that cannot lie. It is not, as in Ethics and Metaphysics, that tendencies and potencies only are ascertained, but everything speedily drifts into results measurable in numbers, which stand out like landmarks against the sky. It is just for this reason, as both the schools of the Roman lawyers admitted, namely, that we have in all cases the Return-Service as the outward expression and measure of the Desire and Effort of him who renders the service, and because it makes no difference which of two services exchanged be regarded as the return-service, that our Science is reared on the firm ground of objective realities, notwithstanding the strong subjective elements that have a constant part in it. (c) The third condition of a recognized Science is, that the logical processes appropriate to its class of facts have been already carefully applied to them and a certain number of "exact definitions and sound principles" have been already "educed from and applied to" them. We do not hesitate a moment to claim, that this condition also is fairly and fully met by Political Economy, and that this is a "Science" under the definition from every point of view, and particularly from this third point of view; and a few examples will now be given as a specimen merely of the logical work already achieved in Economics. First, Induction more or less busy for two thousand years has given at last an exact and acceptable definition of the Science, and impliedly an exact description of the class of facts with which it is conversant, namely, the Science of Sales, or what is exactly equivalent, the Science of Value; and Deduction at all points along this slow road has helped to correct and to broaden successive imperfect inductions, which an inquisitive and tentative and cautious spirit--the mainspring of Constructive Science--has instituted from time to time. Second, precisely the same processes often repeated have ascertained beyond question, that there are only three classes of Valuables and the exact differences between them, and that, consequently, only six cases of Value are possible to happen. Third, so many nations at different times in all ages have lowered the standard of their Money under a misapprehension of its nature and in a vain hope of profit, and a general scale of rising prices following each attempt of this kind having been several times observed and no instance to the contrary, Economists came by Induction to assert the proposition, that falling Moneys cause rising Prices; the proposition stood secure on inductive grounds alone; but so soon as a perfect definition of Money, namely, a Measure of Services, had at last been reached both inductively and deductively, it became at once a safe Deduction from the definition, that rising Prices must succeed a falling Measure. Thus assurance became doubly sure. Fourth, Introspection gives each buyer and seller such firm possession of _his own motive_ in buying and selling, that he naturally and inductively concludes on the ground that men are substantially alike, that the _motive is similar_ in the party of the other part; each further step of experience in traffic assures him of this beyond a doubt,--each wants to get and does get something from the other of more consequence to him than what he gives; every attempted deviation from rectitude in trade so far forth throws the trader out from opportunity to trade; opportunity to trade is nothing in the world but _a market_; a market is nothing in the world but men with products in their hands, desiring to buy other products with these; the more men anywhere with the more products in their hands of all sorts to buy with, the better market everywhere for other men (the more the better) with other products of all kinds to buy with; all the appropriate logical processes in action and reaction, all the commercial experience of all men everywhere, and all the true statistics of traffic ever gathered, do but assure the inductive assent to one of the best and broadest of all the Generalizations in Economics, namely this: _A market for products is products in market._ (d) Are the definitions and principles already logically educed from and applied to the great class of Valuables orderly arranged in "_a body_"? This is the only inquiry that remains, in order to determine whether Political Economy is already a "Science" in the strictest sense of that term. It is admitted, that a jumble of even just definitions and principles do not constitute a science, but only these when placed in a just order and interdependence. A "body" implies an organic arrangement of parts. It has been well said of the human body, that all its parts are reciprocally means and ends; the same may be said of every living organic body, whether vegetable or animal; and the same may be said in the way of analogy of every developed and recognized Science. All the definitions and propositions and illustrations in any science should be so arranged, as to show the mutual relations and reciprocal dependence of all the parts, and as to display the whole in harmony and symmetry. It is as certain as anything in the future can be in science, that new principles will be discovered in Economics as Time and Inquiry go on, and that these will find their place little by little in a fuller and more rounded "body" than is at present possible; while it is also as certain as anything in the future of science can be, that the Outline of economics is already perfectly drawn, that the great class of Valuables will never be enlarged nor be better described, that the category of Commodities, Services, Credits, is completed for all time, and that the analysis of each act of trade into two Desires and two Efforts and two Estimates and two Renderings and two Satisfactions will never yield additional elements. Political Economy is already a body of exact definitions and sound principles educed from and applied to a single class of facts. This body will indeed be enlarged by a future and finer scientific construction, the arrangement and interdependence of its parts will be better exhibited, the form and filling up of the Science within the outline already determined is sure to become more compact, more robust, and more beautiful, as the decades and centuries go by; while, as in the human body throughout all the changes of its growth and mature life, that future body of economic science in all its stages towards perfection will be but the continuation and fuller development of the present "body" of Political Economy. FOOTNOTES: [1] Green's Short History of the English People, p. 591. [2] See on this general topic, Mommsen's Provinces of the Roman Empire, _passim._ CHAPTER II. MATERIAL COMMODITIES. Valuables fall naturally and exactly into three classes, Commodities, Services, and Credits. The reasons are obvious at first glance, why articles falling in the first class occupied the thoughts and the efforts of men almost exclusively for the first thousand years of recorded history. Commodities appealed to the senses of men: they are visible, tangible, weighable. Some form of personal slavery existed everywhere, and largely withdrew attention from personal services bought and sold; and there was not apparently sufficient personal confidence between man and man in the earlier ages to allow much development of credits, whose ground is personal trust and whose sphere is future time. Commodities, on the other hand, fitted by the efforts of some men to satisfy the immediate wants of other men, all ready for delivery, to be exchanged against other commodities similarly fitted and at hand, took the field apparently in the earliest ages of recorded Time, gradually became very large in volume, opened new routes of travel and transportation, and served to connect in a rough and ready way neighboring tribes and even neighboring nations. _Commodities are the class of Valuables comprising material things, organic and inorganic, fitted by human efforts to satisfy human desires._ Cattle were probably among the first things to become valuable, that is, salable; and it is certain, that they became very early in many quarters of the world a sort of Money or standard of comparison among other things exchangeable, and indeed they continue to be such in some quarters to this day. Near the middle of the sixth book of the Iliad occur these lines:-- "Then did the son of Saturn take away The judging mind of Glaucus, when he gave His arms of gold away for arms of brass Worn by Tydides Diomed,--_the worth Of fivescore oxen for the worth of nine_." Gold and silver also became valuable in the ordinary way in very early times, and later became Money or a medium in exchanging other things; and much later other metals came into use as commodities and then too as money; for the Latin word for money, _pecunia_, derived from _pecus_, cattle, seems to imply some original equivalence in value between the bronze stamped with the image of cattle and the cattle themselves. Parcels of land subdued and improved by human hands were probably bought and sold in some portions of the world as early as anything was,--at any rate very early. Land-parcels are a commodity under the definition. Another passage from Homer, towards the end of the seventh book of the Iliad, displays some of the commodities in common use during the heroic age in Greece:-- "But the long-haired Greeks Bought for themselves their wines; some gave their brass, And others shining steel; some bought with hides, And some with steers, and some with slaves, and thus Prepared an ample banquet." The earliest detailed record of a commercial transaction in commodities, is the purchase by Abraham of the field and cave in Hebron, more than 2000 years before Christ. It is narrated at length in Genesis xxiii. Long before this purchase, however, it is said of Abraham that he "went up out of Egypt very rich in cattle, in silver, and in gold." This formal sale to him in Hebron of the field and cave of Machpelah is in all its parts instructive to us, and full of signs of the drift of those times. It was "_in the audience of the sons of Heth, before all that went in at the gate of his city, that the field and the cave were made sure unto him for a possession. And Abraham weighed unto Ephron the silver which he had named in the audience of the sons of Heth, four hundred shekels of silver, current money with the merchant._" In the lack of written and recorded deeds to land-parcels, as we have them now, the sale of them was "_made sure_" before the faces of living men, who would tell the truth and pass on the word. The market-place in those days was "_at the gate of the city_," where the judges also used to hold their courts, the place most frequented of all, and sales were made "_before all that went in_" thither; "_in the audience of the sons of Heth_" was the silver weighed out, and the field made sure in exchange. Then there were "merchants" as a class; silver passed by weight rather than by tale, although it had already passed beyond a mere commodity and had become money, "_current money with the merchant_"; and even at this day the Bank of England takes in and pays out gold and silver by balance rather than by count, though they be in coined money: it is the more accurate method. The author of the book of Job, believed to be of great antiquity, and certainly true to nature and to fact in its essential parts, knew very well the modes in which the ancient mines were wrought, and the worth of the commodities extracted:-- "Truly there is a vein for silver, And a place for gold, which men refine. Iron is obtained from earth, And stone is melted into copper. Man putteth an end to darkness; He searcheth to the lowest depths For the stone of darkness and the shadow of death. From the place where they dwell they open a shaft; Forgotten by the feet, They hang down, they swing away from men. The earth, out of which cometh bread, Is torn up underneath, as it were by fire. Her stones are the place of sapphires, And she hath clods of gold for man. The path thereto no bird knoweth, And the vulture's eye hath not seen it; The fierce wild beast hath not trodden it; The lion hath not passed over it. Man layeth his hand upon the rock; He upturneth mountains from their roots; He cleaveth out streams in the rocks, And his eye seeth every precious thing; He bindeth up the streams, that they trickle not, And bringeth hidden things to light." The prophet Ezekiel, who wrote in the sixth century before Christ, incidentally described in his chapter xxvii the commerce in commodities, that then centered in the city of Tyre on the eastern Mediterranean. "_All the ships of the sea with their mariners were in thee to traffic in thy merchandise: many islands were at hand to thee for trade: with silver, iron, tin, and lead, they traded in thy fairs: they brought thee for payment horns of ivory and ebony-wood._" Among the commodities besides these exchanged in that market, are mentioned by the prophet horses and mules and lambs and rams and goats, wine of Helbon and white wool, fine linen and embroidered work, and riding cloths and mantles of blue and chests of damask and thread, wheat and pastry and syrup and oil and balm, precious spices and cassia and sweet reed, and gold and carbuncles and corals and rubies. These old Phoenicians of Tyre colonized Carthage, and thus bore a vast trade in commodities to the West, going overland into the heart of Africa for dates and salt and gold-dust and slaves, and by sea through the Pillars of Hercules northward to the British Isles for the sake of the trade in tin. The amount of transactions in commodities, the first class of Valuables, has been constantly increasing, under natural impulses which we shall have shortly to describe, from the dawn of authentic History down to the present moment; and figures are baffled in expressing to our minds the sum of these transactions even in a single country, still more their aggregate in the commercial world. The foreign trade of every country is almost exclusively in commodities, and is only a small fraction of its domestic trade in the same; and so, when we remember that the foreign trade of the United States, for example, under a commercial system designed and adapted to curtail such trade, amounted in 1889 to about $1,600,000,000, and the foreign trade by Great Britain the same year to about 4,000,000,000, we gain a glimpse, we touch as it were the hem of the garment, of the gigantic traffic of the world in commodities alone. _The Production of Commodities is the getting them ready to sell and the selling them._ 1. We must look first at the REQUISITES of such production. They are three, _Natural Agents_, _Human Efforts_, _Reserved Capital_. The following lines of Whittier touch incidentally on these three requisites, and may serve us as a general introduction to them:-- "Speed on the ship!--But let her bear No merchandise of sin, No groaning cargo of despair Her roomy hold within. "No Lethean drug for Eastern lands, No poison-draught for ours: But honest fruits of toiling hands, And Nature's sun and showers!" Natural Agents include not only "Nature's sun and showers," but also all the forces and fertilities and materials of free Nature, that men may and do avail themselves of in preparing commodities to exchange with the commodities of other men. Of higher rank in Production than these natural agencies are the Efforts of men in molding them so as to answer other men's Desires, of which efforts the "toiling hands" of the poet are a symbol. They include also the inventive brains and eloquent tongues and the skilful manipulations of every name. The poet's "ship" is an instance of capital, which is always a result of previous toil reserved to help on some future sales. These three elements, Nature, Labor, Capital, conspire in all production of commodities. Nature comes first with her free forces and materials; and then present toil aided by the results of past toil in the form of capital does all the rest in getting commodities ready to sell and selling them. Let us now note each of these three a little more closely. (a) Natural Agents. The most important point about these is, that they are the free gifts of God, and continue so throughout the complications and transformations wrought on them and through them by Labor and Capital, until the material commodity of whatever kind is finally sold, and so passes out of the purview of our Science. Many of the gifts of God, like the air we breathe and the light in which we recreate ourselves and the water of refreshment drunk from spring or brook, do not connect themselves in any way with commodities bought and sold, and nobody ever thinks of them as salable at all; but it has seemed and still seems to many, as if the natural fertility in a land-parcel, the water-fall along the course of river or stream, the timber-growth which the hand of man planted not, the deposit of gold or coal in the bowels of the earth, and other such-like cases in which natural gifts _do_ connect themselves with human services and then are sold, lifted the Value of the things sold above the point to which the mere human efforts, whether past or present, would raise it. In point of fact, this seeming is not a reality, as will fully appear in the sequel. God is a Giver, and never a Seller; and he has arranged it so in his great world of gifts, that, however much shrewd men may try to monopolize these gifts and then dole them out to other men for pay, they are always practically thwarted in the attempt. God himself never takes pay for anything, and has never authorized anybody to take pay in his behalf; and when this role of Seller of free gifts, which have cost him nothing and which he has not improved, is taken up by any one, he is shortly crowded off the stage in shame by other actors true to Nature. This is the place for a grand induction. When we study in detail the free gifts of God to this world and its inhabitants, we find they come and keep coming _in great classes_. This is one of the uniformities of Nature, on whose solid ground men tread and stride in safe inductive reasoning. Can a farmer get pay in the price of his grain for the original fertility of his field, which neither he nor his fathers nor his neighbors have bettered or made more available? Doubtless he would be _glad_ to do so, doubtless he _would_ do so, were it not for the primary fact, that such fertilities as his are in a _class_ of fields, that other men in more or less proximity to him raise grain on other fields, whose original fertility is equal to that in his field; and some of these other men in common competition with the rest as sellers will be willing to part with _their_ grain for a price which will be a fair equivalent for the onerous human services rendered in getting their grain ready to sell and selling it; and the free action of _these_ men as sellers will tend to fix a general market-rate for grain then and there, at which rate _all_ must sell whether they will or nill; and where now is the effect on price of God's free gift? It is still free. Here is a fine water-fall on the bounding river, the banks are low at this point, just the place for mill and factory, the weight of God's free water will turn the wheels, a hamlet will grow up around them--perhaps a city,--can the riparian owner charge a fancy price for site of dam and mill? He might under some circumstances; but the same river doubtless, above, below, rolling over similar geological strata, leaps and falls at other points also; there are other owners of mill-privileges within hail; besides, there are other streams and tributaries in the region round about; and water has a knack of dropping to the lower levels. God's gifts are broad in classes; competition naturally has free play; natural agents are an essential factor in commodities; so and more so are human efforts; but Values tend perpetually and powerfully under natural competition between men as sellers to proportion themselves to the onerous human efforts involved, and to eliminate completely from all influence on themselves the broad and bountiful gifts of Providence. What has been observed to be true in respect to two or three or more of the classes of God's free gifts _to_ men, or _in_ men, may almost certainly be inferred to be true of all such classes. Therefore, inductively, _such free gifts have no effect on Values to lift them, their influence being eliminated by human competition_. Of course, if there be unique cases of remarkable gifts, falling in no class, subject consequently to no competition, one cannot say confidently that the free element in conjunction with the onerous element may not make the return-service greater than it would be otherwise. It may, or it may not, make it greater. There is no living principle at work in such cases, that makes it certain, that the return-service will _not_ be greater. Still, unique cases, if they exist, are of little or no consequence in Economics. They are most remarkably few, at all events. Where come in the solitary gifts, that may later be connected with Valuables, on the round earth as God fashioned it? Gold, silver, diamonds, copper, coal, tin, amber, spice-shrubs, chinchona-trees, and all such things, have been scattered too widely and liberally for individuals to monopolize them, or even combinations of men unless they be assisted by law. Where even are the unique cases of God-given talent or genius in men themselves, such as may become connected with Valuables of the second class? Daniel Webster had his competitors in the Court-room and in the Senate, Ben Jonson did not let Shakspeare have it all his own way on the stage, and even "Milton's starry splendor" did not make Paradise Lost sell well. We must just note here in passing the supreme importance in an economical point of view of untrammelled competition in the sale of commodities. It is the divinely-appointed means, and the only possible means, of preventing wide-spread injustice through Monopoly. Nothing else in the world can be made effective to estop men from robbing their fellow-men through exchanges artificially restricted; from charging more in the market for their wares than a just compensation for their own efforts; from enriching themselves by impoverishing their neighbors; from worsening the quality of their wares offered for sale; and from relying upon the artificial restrictions put on their competitors, rather than on their own skill and enterprise and the goodness of their goods, for a market. The Common Law of England holds monopolies to be illegal, and the reasons given (11 Coke, 84) are, first, because the price of the commodity will be raised; second, because the quality of the commodity will not be so good and merchantable as it was before; and third, because they are apt to throw many working people out of employment. It is nothing less than a crime against Civilization, than a sin against the clear ordinance of God, than an artificial obstruction to individual and national Progress, to put up bars and barriers by law for the purpose of cutting off competition, whether domestic or foreign, either by putting disabilities in the path of any or through monopoly tariff-taxes, in the buying and selling of useful commodities anywhere. (b) Human Efforts. Every way unlike the free forces and materials of Nature, indispensable as these are in the production of commodities, is the second requisite in such productions, namely, the onerous efforts of men. Persons are very different from things, from powers, from lifeless materials. Persons act from motives only. Minds lie back of bodily exertions, impelling and guiding them. Such efforts as are needful to mold materials into commodities are only put forth in view of, and for the sake of, a remunerative return; and only rational beings, acting under motives whose goal is in the future, capable of foresight and of adapting means to ends, can put forth such efforts. No degree of training can make even the most intelligent animals capable in any degree of that kind of exertion, which we call _Labor_; and there is no improvement whatever in the methods of animals in reaching their instinctive ends,--the beaver builds his dam and the bee gathers and deposits the honey exactly as bees and beavers did ages ago. In the strictest sense, accordingly, there is no such thing as physical labor, because the mental must coöperate with the physical even in the lowest forms of human exertion; and in the same sense there can be no such thing as exclusively mental labor, for the bodily powers conspire more or less in the highest intellectual efforts that are ever sold. Nevertheless, both the phrases, physical labor and mental labor, are convenient and not harmful, whenever on the one side the bodily powers seem to be predominant in the effort, and on the other the intellectual. It is now to be noticed, that all that men can do, when they labor physically, is _to move something_. When a man works with his hands or his feet or his whole body, all that he does or can do, is to begin a series of motions or resistances to motion, for this good reason, human muscles in their very structure are capable only of starting motion and stopping motion. All the marvellous results of physical effort in all the world have flowed from so simple a matter as the contraction and expansion of muscle; and the world of materials is so cunningly constructed, that, when these are moved into right position by human hands, or by some form of capital itself the result of previous human handling, the free powers of Nature do all the rest, and valuable commodities are the good outcome. For one example, when the woodman fells a tree for sale, he brings a series of motions (_labor_) to bear upon the trunk, by means of his sharp axe (_capital_), and then the power of gravitation (_nature_) seizes the tree and brings it crashing to the earth. For a second illustration, wool and cotton have by nature a certain tenacity of fibre, and what is more to the point, a certain _kinkiness_ of fibre easily interlinking one with another indefinitely in length; men move these separate fibres in certain relations to each other by an instrument (_capital_) called a spindle, and the result is thread; then other men move these threads into relations with each other by means of an implement (_capital_) called a shuttle, and the outcome is a web of cloth; lastly, the tailor moves his shears through the cloth, and then his needles, and the issue is a coat, a commodity, the valuable for which all these processes were gone through with, and by the sale of which all the onerous factors therein are compensated. Now, since human muscles are soon wearied in action, and since motion is the only thing required of men in the production of commodities, they naturally look around for outside help in this matter; and the first help they lighted on for moving things was the domestic animals, the ox and ass and horse, doubtless domesticated in the very beginnings of society; and as these can be used in so many different places, and for such a variety of purposes, and are so cheaply reared, they are exceedingly useful as a motive power, and will probably never be superseded as such. Inanimate auxiliaries in moving things into right position for the production of commodities, such as the water-wheel and wind-mill, were undoubtedly brought into use much later; and much later still, steam and electricity and other more subtle and recondite natural agents. All of these helps, whether animate or inanimate, do but cause simple motions of the same kind as those caused by the human hand. The most ponderous engine merely reduplicates that which the arm of a child is capable of; while in point of delicacy and firmness of touch, perhaps no machinery can subdivide and apply this motion so skilfully as the human fingers can. It is said that some of the lace made wholly by hand is finer and more delicate than any yet woven by machinery, although the introduction of machinery into lace-making has cheapened lace products in general to a small fraction of their former cost. What we commonly call "_Power_," then, by whatever instrumentality furnished, is simple auxiliary motion, additional to that of physical human Labor. Commodities are produced in unlimited quantity and variety by such labor, assisted by the free forces of nature applied by means of animals and implements, which are capital. But such labor is irksome as well as wearisome, and is never expended except in view of a reward, which is secured only from the sale of the finished commodity. (c) Reserved Capital. We must examine the nature of Capital with care, and follow its varied forms without confusion, because it is the only other factor besides labor in the production of commodities, that has to be paid for out of their sale. Simplest cases are always the best in economical discussions. Let us take for illustration a recently observed case from the gold hills of North Carolina. All the methods are strongly primitive, but all the elements of production are present. A negro woman is the laborer, the bits of gold scattered in the soil are the free gift of nature, a bored log to divert the water from the mountain stream, and a tin pan in which to gather and wash the sand and gravel, are two crude forms of capital; free gravitation also brings the water through the log, and free gravity carries down the particles of gold to the bottom of the washing-pan, and many other agencies of free nature coöperate in this very simple case of production; and besides the log and the pan, there are doubtless some other forms of capital, at least the whittled plug to stop at need the flow of water through the log. The chief factor in these processes of production is still the laborer, the motions of her hands in stirring the sand and picking out the precious bits at the bottom of the pan are the chief motions, the labor is both physical and mental,--no animal could be trained to adopt means to ends like this negro woman. It is her capital that now engages our attention. _Any Valuable outside of man himself reserved to assist in the production of further valuables is Capital._ The idea of growth and increase inheres in the very word, which is derived from the Latin noun, _caput_, a head, a source, and gives intimation in its etymology of its scientific meaning. The word, _caput_, is often used in classical Latin for a sum of money put out at interest, and its derivative, _capitale_, is also used in the same sense, at least in mediæval Latin; and from this form of the word have come into English not only _Capital_, but also by corruption _Cattle_ and _Chattels_. Flocks and herds were at one time the principal riches of our Saxon ancestors, and also the principal means of _increasing_ their riches, and in process of time the same root-word came to be spelled differently as applied to animate or inanimate things of value; while the notion implied in the Latin _caput_, and in the English _source_, came along in all three of these words; and hence the careful definition of Capital above given. It makes no difference whether the colored woman bored her own log by means of an item of capital already existing, namely, an auger, or hired another person to bore it for her, or bought the log already perforated, it is an article of Capital, a valuable kept to increase future valuables; she might doubtless sell it for something to a new-comer wishing to operate other sand in the neighborhood, but she keeps it to help herself gather more gold for ultimate sale, she practises what we call in Economics _abstinence_ and must have her reward for this in the form of _profits_ from the ultimate sale of her commodity, gold, as well as a reward for her labor in the form of _wages_ from the same source. As one person furnishes both the labor and capital in this case, there is no actual division of the gross return into wages and profits, as there always must be when separate parties furnish the two essential factors, both of which must be remunerated by the sale of the commodity. What is thus true of the log, is equally true of the tin-pan, and even of the plug also, if it be capable of repeated use and cost something of labor and the help of a previous item of capital, namely, the jack-knife. Our negro woman of the South is a small capitalist as well as a rude laborer, and practises _abstinence_ as well as puts forth _exertion_, and consequently is entitled to receive _profits_ as well as _wages_ in the return she gets for her gold-dust when she sells it. We are now beginning to see what the nature of Capital is, and what the motives are for employing it. In the production of commodities Capital is always something that makes easier to the producers the getting ready to sell and the selling of future commodities. The capital always spares more or less of onerous and irksome human exertion. It always mediates between some free force of Nature and some otherwise more onerous effort of men. The sole motive to employ capital in any one or in all of its multitudinous forms from the simplest to the most complex is to throw off upon the ever-willing shoulders of Nature some part of the irksome effort that would otherwise come to the easily-wearied muscles of men. Nature is "good," to use a commercial term, for all she can be made to carry of men's work, through implements devised and machinery contrived to apply, to commodities in every stage of their transformation and transportation till the last, the ever-present potencies of this physical world. These potencies cost nothing. The implements and machinery cost much in present labor and previously created capital. The ultimate sale of commodities must make return for all the forms of capital employed in their production, in the shape of Profits, the reward of _abstinence_; and for all the forms of direct labor employed in their production, in the shape of Wages, the reward of personal _effort_. The beaver gnaws down the tree with his teeth from generation to generation in precisely the same manner; but man is a being more nobly endowed than the beaver, and no sooner had he occasion to fell trees, than something of the nature of an axe suggested itself to his ingenuity. It is true, that his earliest attempts at axe-making were probably of the rudest sort, but just as soon as anything was devised, whether of flint or shell or metal, that rendered easier the felling of a tree, Capital made a beginning along that line of obstacles. Our chief interest in studying the implements of the successive so-called Ages of Stone and Bronze and Iron, is to witness the increasing degrees of ingenuity displayed by those pre-historic men. Among the more gifted races, progress in this direction was perhaps more rapid than we are wont to think it was, since Tubal-Cain, the first artificer of record, is said to have "_hammered all kinds of implements out of copper and iron_" (Gen. iv, 22). Lucretius, writing in the century before the Christian era, put down the following lines in vigorous Latin, as translated by Mason Good:-- "Man's earliest arms were fingers, teeth, and nails, And stones, and fragments from the branching woods; Then copper next; and last, as later traced, The tyrant iron." We are at no loss, then, to explain the origin of Capital and its motives. Tools are invented and employed for no other reason than this, that, by means of their help, the human efforts are lessened relatively to the given satisfactions. Since it requires tools to make tools, the progress of this branch of capital must have been relatively slow at first; but, since every advance in mechanical contrivance makes still further advances easier, there is a natural tendency, which facts abundantly exemplify, to a more and more rapid progression in the number and perfection of all implements of production. The same motive that impelled to the first invention, has impelled to the whole series of inventions since, and will constantly impel to further inventions till the end of time. Every step of this progress gives birth to a larger and still larger proportion of satisfactions relatively to efforts; marks an increasing control on the part of man over the powers of Nature; and gives promise for the time to come of greater advantages still in both of these directions. The powers of Nature, such as those which make the grain grow, bring the tree down, turn the water-wheel, impel the locomotive, and send the message round the world, all stand ready to slave in the service of man; but in order to make their aid available for human purposes, there must be a plough, an axe, a wheel, an engine, an electric machine; and it is because capital brings gratuitous natural forces into service, and the more so as capital progresses, that the Value of those commodities produced by the aid of capital tends constantly to decline as compared with those commodities, in the production of which capital conspires less. It is already plain, that the class, Capital, is a smaller and a peculiar sub-class under the great class, Valuables; nothing can become Capital until it first become a Valuable, and then be _capitalized_ by a distinct act or intention on the part of the owner to reserve it in his own hands as an aid in further production, or transfer it to other hands to be so used, he meanwhile receiving profits as the reward of his abstinence; only a _transferable_ valuable, accordingly, can become Capital in any case, that is to say, it must be either a Commodity or a Credit, since personal services, though they may be sold, cannot be put over into the hands of another to be used in production, and therefore cannot become Capital in any case; and the chief peculiarity of this sub-class, Capital, is, unlike the three great classes of Valuables, each of which is utterly distinct from the other two, so that a Commodity can never become a Credit or a personal Service either of the others, that Capital as a class has extremely flexible limits, and consequently certain Commodities and Credits may easily enough be Capital to-day, and fall back to-morrow into their respective classes of mere Valuables and the next day come out from the class Non-Capital into the class Capital again. The same commodities and credits may be capital at one time, and non-capital at another, though they must be valuable all the time, or cease to be commodities and credits. When it is said that a young man's talents and skill are his "capital," the word of course is used in a metaphorical sense, and the meaning is, that skill and talents are _like_ capital in some respects. Popular language is not scientific. Cicero wrote long ago: "Optimum et in privatis familiis et in republica vectigal est parsimonia." _Abstinence is the best means of revenue as well in private families as in the State._ The source of Capital in a distinct act of will saving or sparing from present use (_parsimonia_) a valuable commodity or credit, and the quick nature of Capital as adding to itself (_vectigal_) in profits, are both brought out in this Latin maxim, which is rather an expression of an old and ingrained Roman sentiment than anything original with Cicero. It is the very nature as well as the very name of "Capital" to increase itself by rapid increments. It is as well the Stream as the Source. For example, any sum of money soon doubles itself when put out at compound interest, because the original sum increases day and night until it be repaid. It is of the essence of every form of Capital _to make growth_, because its sole purpose as such is to become an aid to future and further production. A trowel in the hands of a mason, which is capital, pays for itself every day he works with it, and perhaps every hour of the day, in the increased production wrought by means of it. The wheel, which free water turns, though a costly implement, repays that cost a hundred fold in the additional bushels of wheat turned into flour through its aid as capital. So of all implements. So of all machinery. So of all means of transportation: ships, canals, railroads. There was a strange prejudice in ancient and mediæval times against this natural increase of capital out of its own bowels, as it were, owing probably to this dictum of Aristotle: "_For usury is most reasonably detested, as the increase of our fortune arises from the money itself, and not by employing it for the purpose for which it was intended._" In 1360, a French bishop, Nicole Oresme, repeats the error of Aristotle under the same rhetorical image: "_It is monstrous and contrary to Nature that a barren stock should give birth, that a thing sterile in its whole being should fructify and be multiplied from itself, and such a thing is money._" Even Shakspeare catches up the old figure: "_Is your gold and silver ewes and rams?_" Shylock answers: "_I cannot tell; I make it breed as fast._" In the light of the three requisites of Production, in the light of the purpose and wisdom of God in arranging the active forces of this world, the prejudice in question disappears, and intelligence rejoices in the ever-increasing use of Capital as the handmaid of Labor, in the quick and sure reward of him who practises abstinence, in the production of commodities constantly made easier and cheaper in all directions, in a scale of comforts for the masses of men assuredly rising, in a divinely appointed force lifting like Christianity itself upon the otherwise sagging condition of mankind. Capital assumes but two economical forms, namely, Circulating Capital and Fixed Capital. _Circulating Capital is all those capitalized products, whether commodities or credits, the returns for the sale or use of which are derived at once and once for all._ All circulating capital will be found in one or other of the following sub-forms: (1) raw materials; (2) wages paid out in view of an ultimate profit; (3) completed products on hand for sale; and (4) products bought and held for the sake of resale. The crucial test of circulating capital is the question, Are the returns to be secured by the single use or single transfer of that particular product? Tools, for example, in the hands of him who has manufactured them for sale is circulating capital. _Fixed Capital is all those capitalized products, which are purchased or held with a view of deriving an income from their delayed and repeated use._ All fixed capital will probably be found in one or other of the sub-forms following: (1) tools and machinery in use; (2) buildings used for productive purposes; (3) permanent improvements in land parcels; (4) investments in aid of locomotion and transportation; (5) products rented or retained for that purpose; and (6) the national money considered as a whole. 2. We will next look at the essential CONDITIONS of the production of Commodities. These are also three, as are the Requisites, namely, _Association_, _Invention_, _Freedom_. More or less will men make and sell to one another commodities in any state of society, in which there is permitted any considerable degree of association of men with men locally or commercially, in which is encouraged in any way the universal spirit of invention or the desire to get hard things done easier, and in which some degree of liberty of action and security of property and equality of privileges is guaranteed; but it is very plain, that the production of commodities will increase in all directions and become the greatest in that age and country when and where are allowed the closest ties of human association both in place and in commerce, the freest scope and largest rewards of inventive genius, and the highest possible degree of liberty and security and equality of rights. Let us illustrate from a state of things in the southern half of the United States during the first half of the nineteenth century. For the most part the land owners lived on isolated plantations widely separate from one another, these plantations were cultivated by gangs of slaves, a system that tends to bring all manual labor into contempt, the poor whites scattered in hamlets felt themselves above the slaves and beneath the masters, intercourse between the three classes was little, opportunity to better essentially their condition was denied to all three alike, there were but few cities sprinkled over the vast territory and these relatively small, the only commodity produced on a large scale was raw cotton, the simple device for ginning this had been invented in the decade preceding by a college boy from Connecticut, the agricultural implements were of the rudest kind, even the coarse shoes for the slaves were bought at the North;--in short, the degree of association and invention and freedom was each so low, that the production of commodities was exceedingly small, even as compared with what that production became in one quarter of a century after the abolition of slavery. (a) Association. If we may continue for purpose of illustration our childhood trust in the story of De Foe, Robinson Crusoe came to lead a very tolerable life upon his desolate island by means of his own industry directed so as to satisfy his own wants by his own efforts. He did everything for himself, and had no opportunity to buy anything or sell anything. The whole course of such an isolated life could never develop the idea of Value, would require no such word as Commodities or suggest their production, and such a man while solitary upon his island could not possess Property in the true sense of that word. Association is the first main condition of Production, because of the natural obstacles interposed between the isolated man and the supply of his various wants. If any one man try to surmount a considerable number of these natural obstacles, he must miserably fail, because his powers are not adequate to the task; and hence it follows, that, in a state of isolation, _men's wants exceed their powers_; but now let the same man devote himself to overcome a single class of obstacles, for instance, those in the way of procuring suitable clothing, and his powers are adequate to this, he soon acquires skill in it, he learns to avail himself of the free help of Nature and the facilitating processes of art, he is able to realize large products along his line, and is now ready to offer his surplus in exchange with other men, who meanwhile have been giving themselves each to another class of obstacles, have concentrated efforts and skill upon them, have succeeded by the help of Nature and art in surmounting them, and are now ready to offer their surplus commodities in exchange for others; and, the exchanges beginning to be made in all directions, men find that they thus obtain vastly greater satisfactions for their various desires than they could possibly get by direct efforts: so that we may even say, that, in a state of society through association, _men's powers tend to overtake their wants_. Without association with his fellow-men, there is no creature so helpless, so unable to reach his true end, as is man; and therefore it is, that the impulse to association is one of the strongest of our natural impulses. Men come together, as it were by instinct, into society; and, thus associating themselves together, it is soon discovered, not only that there are various desires in the different members of the community, which are now readily met by coöperation and mutual exchange, but also that there are very different powers in the different individuals in relation to those obstacles which are to be surmounted. The tastes and aptitudes of different men are very diverse. There is a great diversity in natural gifts. One man has physical strength, another mechanical ingenuity, a third a philosophical turn, and a fourth a bent and genius for traffic. Now, then, Nature speaks in as loud a voice as she can utter, in favor of such a degree of association and exchange as shall allow a free development of these varying capacities, while they work upon the obstacles to the gratification of men's wants, which lie appropriately opposite to them. Men must come together either locally or commercially, must learn each other's wants, must compare with each other powers and tastes and opportunities, must come to have some confidence in each other, and then they will begin by rendering mutual services back and forth to experience the better satisfactions and the new strength that exchanges bring. Whatever improves the character of men, and thus leads to greater confidence among them, will enlarge their commerce, and knit closer and wider ties of association and production. Neighborhood associations and productions soon create a surplus to be exchanged for something else with other neighborhoods; parts of single nations however remote from each other find a relative diversity of advantage and an increasing profit in connecting themselves by the ties of trade; and the separate nations learn, though late, that they are only one great family for the grand ends of production and progress. Even within the single nation, there is a strong tendency for particular trades to localize themselves in one spot, as for instance, the manufacture of skin gloves has centered itself for the United States in Gloversville, N. Y.; and so in the great cities that are centres of distribution, for example, the wholesale grocers of St. Paul are on one street, the dry goods houses of Boston are in close proximity, and the booksellers of New York are tending towards each other in place. Now, this broad association as between persons and nations, instead of detracting at all from the individuality and power of each, is the very thing that brings out the individuality and intensifies the power of each; because it is only thus that full scope is given to the exercise and development of each peculiar power whether of the individual or the nation. Hence the strong tendency everywhere visible in the world of commerce towards Specialties: the old single trades and vocations and professions are constantly breaking themselves up into parts, and each man is taking up that for which he is naturally best fitted and has specially trained himself, and all to the great advantage of individuality and personal power and progress. Mr. Carey is certainly right in his principle (much insisted on in all his books), that the degree of individuality depends on the degree of association, each advancing hand in hand with the other; and he is as certainly wrong in lacking confidence in the natural forces at work tending to the highest degree of association and consequently to the highest degree of individuality. These forces are immensely strong. Men come together as it were by instinct, being conscious of individual feebleness; personal interest is soon seen to follow the bent of social attraction; a just sense of personal dignity and importance in being a substantive part in the ongoings of society enormously strengthens the impulse to association and individuality; the progress of each and all in achievement and elevation still further knits the ties of union; and lastly, a strong feeling of social justice, of what is _due_ to others as well as to one's self,--that every man has an inalienable right to his full _opportunity_ and all that that implies, to buy and sell and get gain, to life and liberty and the pursuit of happiness. When motives and powers and potencies such as these, proven to be universal by broad and constant inductions, fail as economical forces to secure association and individuality, then it will be time to look around with Mr. Carey for some inferior and factitious force. (b) Invention. This is the second main condition in the production of commodities; because production is processes, getting something ready to sell and selling it; and Nature stands ever ready with her free agencies to facilitate these processes, just so far as the inventive brain of man can contrive to unite the two. Invention is the marriage of a gratuitous force to an onerous process, and the fruit of that union is an easier way and multiplied utilities. There are some in every considerable community, and more in every community enlarged by the natural association but just now described, who have the knack of contrivance, who find their joy in finding a new power in Nature or some new application of an old power; were it not for unhindered association and free exchange, the individuality of these would be effectually repressed, and they would have to drudge for their daily bread; but the importance of inventors is well understood in every progressive community, and under advanced exchanges their livelihood is guaranteed by those who hope to profit by its results while their work is maturing; and Production rejoices and grows strong and throws out unnumbered hands to make instant use of the new power and the easier processes, in order to multiply commodities in number and variety. As an illustration of all this, the reader will be interested in a brief account of the series of Inventions made in Great Britain during the last third of the eighteenth century, in consequence of which the Cotton Industry was established in that country in such preëminence as has to this day baffled the attempts of all other countries even to approximate it. We catch our first glimpse of Cotton in the pages of Herodotus, who wrote more than 400 years B.C. in relation to India as follows: "_There are trees, which grow wild there, the fruit whereof is a wool exceeding in beauty and goodness that of sheep. The natives make their clothes of this tree-wool._" This passage is interesting, as showing that the first comparison of cotton with wool exhibited their resemblance in whiteness and in _kinkiness_, which latter quality enables them both to be spun into yarn; as showing also, that the Hindoos very early both spun and wove cotton, and then made it into clothes; and as showing lastly, the appropriateness of the original name given to cotton in Europe, namely, "tree-wool," a name by which the Germans still designate it (Baumwolle). If the extreme East furnishes the first notice of cotton, the extreme West follows it next in order. When the Spaniards discovered Central and Southern America in the first quarter of the sixteenth century, they reported that they found the Mexicans clothed in cotton cloth. But wool was the staple of England. Parliament and people were jealous of cotton, lest it might prove a rival to wool, and actually prohibited the introduction of printed calicoes (so called from Calicut in India whence they were exported). The taste, however, for calicoes increased in spite of the prohibition, which was afterwards intermitted for a revenue duty on plain cotton, which was then rudely printed on blocks in London, Manchester, and elsewhere; but the prohibition of Parliament against wearing printed calicoes was first repealed in 1736. Fifteen years later the United Kingdom imported only 2,976,610 lbs. of raw cotton, and exported only £45,986 of cotton goods; in one century the import of cotton became 500 times larger than that, and the export of cottons 1300 times larger than that; and this prodigious result was due mainly to three or four inventions occurring within short times of each other, by means of which the free forces of nature took the place of the onerous efforts of men. John Hargreaves, a poor weaver in the neighborhood of Blackburn in Lancashire, was returning home from a long walk, in which he had been purchasing a further supply of yarn for his own loom. Spinning at that time only admitted of one thread spun at a time by one pair of hands, one of which turned the wheel and thus made the single spindle rapidly revolve, and the other hand pulled gently upon the "roving" attached to the spindle and thus drew it out to the requisite tenuity twisted into yarn. The "carding," then effected by rude instruments called hand-cards, by means of which the fibres of the cotton were disentangled and straightened and laid parallel with each other; and the "roving," a process by which the short fleecy rolls stripped off the hand-cards were applied to the spindle and made into thick threads only slightly twisted, were the two preparatory operations for the spinning. All these operations were slow and clumsy, and the consequent expensiveness of the yarn formed a great obstacle to the establishment of the cotton manufacture in England. The improvements made in the loom of that period by Kay, father and son, had shortly before doubled the power of each weaver, and the spinners could not keep up in furnishing material to the weavers. As Hargreaves entered his cottage from this excursion to get yarn to keep his loom agoing, his wife, Jenny, accidentally upset the spindle, which, as was her wont, she was diligently using. Her husband noticed that the spindle, which was now thrown into an upright position, continued to revolve just as when horizontal, and that the thread was still spinning in his wife's hands. The idea immediately occurred to him, that it might be possible to connect a considerable number of upright spindles with the revolutions of one wheel, and thus multiply the power of each spinster. "_He contrived a frame in one part of which he placed eight rovings in a row, and in another part a row of eight spindles. The rovings, when extended to the spindles, passed between two horizontal bars of wood, forming a clasp which opened and shut somewhat like a parallel ruler. When pressed together this clasp held the threads fast; a certain portion of roving being extended from the spindles to the wooden clasp, the clasp was closed, and was then drawn along the horizontal frame to a considerable distance from the spindles, by which the threads were lengthened out and reduced to the proper tenuity; this was done with the spinner's left hand, and his right hand at the same time turned a wheel which caused the spindles to revolve rapidly, and thus the roving was spun into yarn. By returning the clasp to its first situation and letting down a piercer wire the yarn was wound upon the spindle._" The powers of Hargreaves' machine soon became known among his ignorant neighbors, notwithstanding his strenuous efforts to keep his admirable invention a secret, and these neighbors naturally enough concluded that a contrivance, which enabled one spinster to do the work of eight, would throw many people out of employment. A mob broke into his house and destroyed his machine. Hargreaves retired in disgust to Nottingham, where by means of the friendly assistance of one other person he was enabled to take out a patent for his invention, which he called in compliment to his industrious wife the "_Spinning-Jenny_." This invention gave a new impulse to the cotton manufacture, but had it been unaccompanied by other improvements, no purely cotton goods could have been made in England; because the yarn spun by the new jenny, like that previously spun by hand, was not fine enough nor hard enough to be used as warp, and linen or woollen threads had consequently to be employed for that purpose. In the very year, however, in which John Hargreaves, the poor weaver, migrated to Nottingham, Richard Arkwright, a poor barber's assistant, took out a patent for his still more celebrated machine for spinning by rollers. In one respect Arkwright was much worse off than Hargreaves: the latter had a helpmate meet for him, the former had a wife who is said to have destroyed the models her husband had made and to have opposed him in every step of his career. But Arkwright was not deterred from his life pursuit by the poverty of his circumstances or the scandalous conduct of his wife. After many years of intense and opposed devotion to the possible application of a simple principle he had conceived in his mind, namely, that of spinning by means of rollers revolving at varying rates of rapidity, he succeeded in contriving and patenting his memorable machine, which, more than any other one invention, localized and concentrated in England the gigantic cotton-industry of the world. Arkwright's idea and achievement was to pass the coarse thread drawn out from the rovings over two pairs of rollers in succession, the first of which revolving slowly fined the thread down evenly and gradually, and then this thread was passed over a second pair of rollers turning with a high velocity and drawing out the line into any requisite tenuity. Thus a cotton thread was spun capable of being used as warp. Cotton cloth as such could now be manufactured in England. From the circumstance that the mill, at which Arkwright's machinery was first erected, was driven by water power, the machine received the inappropriate name of the "water-frame"; and the thread spun on these rollers was commonly called the "water-twist." The old mode of carding the cotton by hand now furnished the "rovings" too slowly to meet the wants of the new spinning-jenny and the new water-frame; and these great inventions would consequently have proven comparatively useless, had not a more efficient and rapid process of carding the cotton superseded just at the right time the old system of hand-carding. Lewis Paul introduced revolving cylinders for carding the raw cotton into rovings preparatory to spinning, in partial imitation perhaps of Arkwright's principle of spinning the rovings by the rotatory motion of rollers. Paul's machine consisted "_of a horizontal cylinder, covered in its whole circumference with parallel rows of cards with intervening spaces, and turned by a handle. Under the cylinder was a concave frame, lined internally with cards exactly fitting the lower half of the cylinder, so that when the handle was turned, the cards of the cylinder and of the concave frame worked against each other and carded the wool. The cardings were of course only of the length of the cylinder, but an ingenious apparatus was attached for making them into a perpetual carding. Each length was placed on a flat broad riband, which was extended between two short cylinders, and which wound upon one cylinder as it unwound from the other._" While the foregoing series of inventions placed an almost unlimited supply of cotton yarn at the disposal of the weaver, the machinery as yet introduced was still incapable of providing yarn fit for the finest grades of cotton cloth. The "water-frame" indeed spun abundant twist for warps, but it could not furnish the finest qualities of yarn, because these were too tenuous to bear safely the pull of the rollers while they wound themselves on the bobbin. Samuel Crompton, a young weaver living near Bolton, possessed the ingenuity needful to remove this difficulty. He succeeded in combining in one machine, which from its nature is happily called the "mule," the several excellences of Hargreaves' spinning-jenny and Arkwright's water-frame. Copying after the latter, the mule has a system of rollers to reduce the roving; copying after the former it has spindles without bobbins to give the twist; and the thread is stretched and spun at the same time by the spindles after the rollers have ceased to give out the rove. "_The distinguishing feature of the mule is that the spindles, instead of being stationary, as in both the other machines, are placed on a movable carriage which is wheeled out to the distance of fifty-four or fifty-six inches from the roller beam, in order to stretch and twist the thread, and wheeled in again to wind it on the spindles. In the jenny, the clasp which held the rovings was drawn back by the hand from the spindles; in the mule, on the contrary, the spindles recede from the clasp, or from the roller-beam which acts as a clasp. The rollers of the mule draw out the roving much less than those of the water-frame, and they act like the clasp of the jenny by stopping and holding fast the rove, after a certain quantity has been given out, whilst the spindles continue to recede for a short distance farther, so that the draught of the thread is in part made by the receding of the spindles. By this arrangement, comprising the advantages both of the roller and the spindles, the thread is stretched now gently and equably, and a much finer quality of yarn can therefore be produced._" The ingenuity of Hargreaves, Arkwright, and Crompton had been exercised to provide the weaver with yarn, and had now indeed provided him with more yarn than he could use; the spinster had beaten the weaver, just as the weaver had previously beaten the spinster; and the making of cotton cloth seemed likely to continue sluggish, because the yarn could not be woven any faster than a skilled workman could weave it with Kay's improved fly-shuttle. In the summer of 1784, a Kentish clergyman named Edmund Cartwright, being in conversation with some Manchester gentlemen, one of whom observed that, "as soon as Arkwright's patent expired so many mills would be erected and so much cotton spun that hands would never be found to weave it," replied, "Arkwright must then set his wits to work to invent a weaving-mill." Notwithstanding the unanimous opinion expressed by the Manchester gentlemen, that such a weaving-machine was wholly impracticable, the clergyman himself within three years had invented and brought into successful operation the "_power-loom_." Subsequent inventors improved the idea which Cartwright originated, and before 1834 there were not less than 100,000 power-looms at work in Great Britain alone.[3] Substantially the same machinery invented for carding and spinning and weaving cotton was very shortly and successfully applied to the carding and spinning and weaving of wool, because the wisdom of Nature imparted to them both the same sort of tenacity of fibre, the same capacity in that fibre to be spun into a thread of indefinite length by means of the little loops or kinks easily interlocking contiguous fibres into a single thread, which two obvious resemblances gave an identical name to the animal and vegetable products otherwise so different from each other. The spirit of Invention, one of the chief conditions in the production of material commodities, thus simply illustrated along the line of a single manufacture, may serve us for a sample of similar improvements taken and taking place in scores upon scores of other lines of effort and production. The principle is the same in all cases past and present and still to come, namely this, to throw the strain from the mind and muscles of men upon the forces and agencies of free Nature, with which the world around us is crowded in our behalf, and which are waiting to slave in the service of mankind without rest and without fatigue,--without money and without price. (c) Freedom. By far the most important of all the conditions, under which the production of material commodities goes broadly forward, is liberty of action on the part of the individual; because, wherever such liberty is conceded, association and invention and all other needful conditions follow right along by laws of natural sequence. By liberty of individual action is meant the practical right of every man to employ his own efforts for the satisfaction of his own wants in his own way, whether directly or through exchange. Each man's right of individual freedom is limited of course by every other man's right to equal freedom, which the first man is not at liberty to infringe; and also, in certain few and limited respects, by what is sometimes called the "general good," the judge of the application of which must be the government under which the man lives. With these limitations, which are few in number and never serious in degree when rightly applied, and which limit in common all other rights whatsoever, the right of every man to buy and sell and get gain is just as fully a right as the right of breathing. It stands on the same impregnable ground. It is a natural and self-evident and inalienable right, with which each man has been endowed by his Creator, to put forth efforts for his own well-being and for those dependent upon him, either directly or by means of efforts exchanged with other men equally free; and he is a slave in spirit and position, who tamely submits to have his own rights of buying and selling curtailed, or to stand by and see the rights of his fellow-citizens similarly curtailed, unless such act of interference and curtailment on the part of his Government be justified by a solid proof that some other public or private rights, which are at least as well based as his own, would be endangered by the exercise of his own. In what cases may a Government properly step in to regulate or prohibit the buying and selling of its citizens? Hundreds of inductions extending through hundreds of years have been carefully and logically conducted in order to reach a just and comprehensive answer to this question; and in all probability the cases have been inductively ascertained for all time, and they are these: _such buying and selling may be controlled and prohibited, as are proven to be contrary_ (1) _to the public Morals_, (2) _to the public Health_, (3) _to the public Revenue_. All other buying and selling may be safely assumed to be both profitable to the parties to it, and also useful to the Commonwealth in general; and any interference with it by public authority is a high-handed infringement of natural rights, a blow aimed at the life and source of property. These wrongful strokes at private rights, this restriction on the freedom of individuals to exchange products for their own welfare, is now mostly confined in civilized countries to the region of Taxation. Within this region the wrongs are still frightful. Judge Cooley, in his "Principles of Constitutional Law," states the matter as follows: "_Constitutionally a tax can have no other basis than the raising of revenue for public purposes; and whatever governmental action has not this basis is tyrannical and unlawful. A tax on imports, therefore, the purpose of which is not to raise a revenue, but to discourage and indirectly prohibit some particular import for the sake of some home manufacturer, may well be questioned as being merely colorable, and therefore not warranted by constitutional principle._" Formerly, governments interfered almost beyond belief with the freedom of their people in all industrial and commercial action; dictating what should and what should not be grown and manufactured, what should and what should not be exported and imported; decreeing by proclamation or enacting by statute, the number of apprentices each artisan might employ, and the years during which these must serve as such, and the conditions under which they might then work as journeymen; the materials to be used in woven fabrics, and even the widths and other minor features of such fabrics, were prescribed in the foremost of the European nations; in the reign of St. Louis of France, a "Book of Trades" was issued under royal authority and is still extant, which organizes minutely and subjects to cumbersome rules more than one hundred separate industries as then practised; England was the country of the great trading "Companies," and of all of these the same may be said as Adam Smith said of the Turkey Company formed in 1579, namely, it was "a strict and oppressive monopoly"; among others there were the African Company established in 1530, the Russia Company beginning its operations in 1553, the East India Company chartered on the very last day of the seventeenth century and going out of existence in our own time, and the Hudson's Bay Company, chartered in 1670 and so having the sole control in trade of a region forty times larger than all England; while the colonial system prevailing for two centuries in all the countries of Western Europe regulated the commerce and controlled the manufactures in the colonies with a single eye to the benefits of the mother country, as those were conceived of under the wretched Mercantile system. Happily, since governments have become more enlightened than formerly, they are perceiving for the most part that they have not the least right to interfere in those ways or in any ways with the natural right of their people to make and grow freely all material commodities, and to buy and sell these freely in the best markets wherever these markets are to be found; and they are also perceiving, that by such interference incalculable losses of property and indefinite retardations of progress are caused to their people, as well as weakness to themselves as governments through a more difficult gathering of taxes and a harder maintenance of prestige and power. The only motive to a mutual exchange of services, whether in one or in all of their three kinds, that is to say, to a free production of commodities and services and credits, is always and everywhere the mutual benefit of the two parties exchanging. After all the processes have been gone through with and the exchanges are consummated, all the parties are richer than before, that is, they have more _satisfactions_, otherwise the processes and exchanges would instantly cease. Therefore, a universally free production benefits everybody, and harms nobody. Moreover, under a system of free production, every man is allowed under the stimulus of self-interest to work away at those obstacles to the gratification of human desires which he feels himself best able to overcome, to follow the bent of his own mind, and to avail himself of all those free helps in his peculiar work which Nature offers to him. Under these circumstances, obstacles give way in all directions; the amount of material products produced is vastly augmented, the number and variety and excellence of personal services proffered are indefinitely increased, and credits compelling the Future to pay tribute to production are multiplied; the diversified and rapidly increasing desires of all persons in such a community are readily met through profitable exchanges; while all peculiar facilities natural and acquired are taken immediate advantage of, the diversities of relative advantage in production become marked in all directions, and a new day of industrial and commercial prosperity is ushered in. Because under freedom all men are sure to dispose of their industrial efforts to the best advantage, they have the strongest possible motives to put them forth; since they can purchase with them what they will and when they will, and where they will. Thus freedom leads to extended association, and also to the invention of machinery and all labor-saving appliances. 3. We are now in position to understand thoroughly the ultimate GROUNDS of the production of material commodities. We have seen, that these commodities have been multiplying in number and variety and excellence ever since the beginnings of history, that they are everywhere multiplying now at a rate hitherto unprecedented and undreamed of, and that improved and improving methods of transportation by land and sea are now carrying these back and forth to the ends of the earth. What is the _principle_, under which these things have been done, are now being done, and are certain to be done in the time to come? The physical and moral obstacles, that Nature has interposed to the gratification of the multitudinous and constantly increasing desires of men, are so great in all directions, that the powers of the individual man are utterly unable to surmount any considerable number of them; while at the same time, the physical and moral powers, adapted under sufficient motives to overcome these obstacles, are very diverse in the different individuals of mankind. Not only is there a surprising diversity in original gifts, but also the powers acquired by gradual concentration of personal effort upon one set of obstacles become exceedingly diverse, as does moreover familiarity in the use of the gratuitous forces of nature which lend their aid towards overcoming these particular obstacles. As the result of one or two or all of these, one man naturally comes to have a vast advantage over others in his particular branch of business, whatever that may be; each of these others by precisely the same means comes to have a legitimate advantage over the first in his own branch of effort, whatever that may be; and if, as always happens practically, the first has desires which the varied efforts of the others can satisfy, and they too desires which his efforts can satisfy, nothing more is necessary to profitable exchanges between them than this diversity of relative advantage at different points. It is solely because a given effort irksome in itself put forth for another person, in view of and for the sake of a return-service from him, realizes more of satisfaction to both parties than when put forth for one's self directly, that commercial exchanges ever take place among men. The sole ground of these, the principle underlying them everywhere, is DIVERSITY OF ADVANTAGE BETWEEN DIFFERENT MEN AND BETWEEN DIFFERENT NATIONS IN DIFFERENT RESPECTS. All exchanges whatsoever depend on diversity of relative advantage in the production of commodities or services or credits as between the persons exchanging; and this diversity of relative advantage exists by God's appointment primarily among individual men as such, and only secondarily on the ground of the varied soil and climate and position and natural gifts of different parts of the earth. Reserving these secondary considerations, which are quite secondary in importance also, to a later detailed discussion, it is very clear and of central consequence in our science that a diversity of relative advantage in different things displays itself as between the individuals of every community and country large and small. There is no hamlet in any land in which one man has not an advantage over his neighbors in the making of clothes, another in the making and setting of horse-shoes, a third in the building of houses, a fourth in the curing of diseases, and another in the keeping a school; while each of those neighbors has undoubtedly some advantage or other over each of these in some trade or means of livelihood. As a natural result of this diversity any two of these villagers may profitably exchange their respective efforts with each other, provided of course each has a desire for the product of the other, to the manifest lessening of the effort of each relatively to the satisfaction of each, and the more so as the relative superiority of each to the other in his own trade is the greater. This point will repay some pains in minute illustration. If the blacksmith can make and set horse-shoes only a trifle better than the tailor could do this if he tried, and the tailor can make coats only a little better than the blacksmith could make one if he chose, there will be but a slight benefit to each in their changing works with one another. For the sake of definiteness, let us say, that the tailor's capacity for making coats is 6, and his capacity in making and setting horse-shoes is 5; and also that the blacksmith's capacity for shoeing horses is 6, and his ability in making coats is 5. Each has a relative superiority to the other of 1 in his own trade; and if they exchange efforts, as they probably would under these circumstances, there is only an advantage of 2 to be divided between them. Now let us suppose (what might easily become a fact), that the tailor by exclusive and augmented attention to the conditions of his own craft carries up his capacity for making coats to 15, the blacksmith's efficiency in both the trades remaining the same as before. There will now be an increased motive to both the artisans for exchanging products with one another, and a larger gain to each than before as the result of such exchange. The diversity of relative advantage as between the two has now gone up from 2 to 11. The tailor can now make a coat much better and quicker than before; and though the blacksmith owing to his inertness can neither make nor set horse-shoes any better than before, still less make coats any better, he will after all by still trading with the tailor reap a part of the benefit of the latter's increased efficiency in making coats; the new coat is at once better and costs less than the previous one; the tailor is still less inclined than before to leave his new and greater advantage over the blacksmith to set himself to shoeing his own horse; even on the old terms the blacksmith can do that 1 better than he himself can, and rather than forego the trade he will naturally offer the blacksmith somewhat better terms than before, or in other words will feel impelled to share with the blacksmith a part of the proceeds and rewards of his own now superior skill and diligence. The trade began on the sole basis of a relative diversity of advantage as between the two mechanics, each in his own craft; this relative diversity, without which no exchange ever takes place between any two persons, has now gone up as between these two from 2 units of advantage to 11 units of advantage; how will these 11 units be divided in this case? Nobody can tell exactly how they will be divided. Two things about it, however, are _certain_ at least in their tendencies and potencies. The blacksmith is sure to get some part of the extra fruit of his neighbor's new push and spirit, while the tailor is sure to get as his own reward by much the larger part of the whole blessed 11. We must by no means omit to notice the logical inference from this instance, nor fail to make the proper inductive generalization from a sufficient number of similar instances. It is this: no man can make any essential improvement in any of the methods of producing material commodities, without at the same time benefiting other people as well as himself. Under natural law, which is no respecter of persons, he can by no possibility selfishly take to himself the entire fruits of his own growing skill and vigor. The only way in which he can gather in at all the fruits of these is to sell their proceeds in the open market. To broaden his own market for now better and more abundant goods he must offer them to everybody on somewhat better terms than formerly--and the better the terms the broader the market--and he can well afford to do this, because the goods now cost him less of irksome human effort. Every improvement in the production of commodities is precisely of that complexion. The issue of every invention, of every improved process of every kind, is, so far forth, a cheaper product. And this public gain follows, must follow, individual enterprise at single points, even when the great mass of exchangers remain at the old stage of sluggishness. Whatever increases at one point even, and _a fortiori_ at two points, the diversity of relative advantage as between any two exchangers, is of benefit to them both, and the greater this relative diversity becomes the greater the benefit to both. Now let us see how the matter stands, when tailor and blacksmith at the same time feel and obey the impulses to a more skilled and vigorous artisan life. Suppose the blacksmith too carries up his efficiency in his own trade to 15, just as the tailor has done, the potency of each in the trick of the other remaining as before at 5; under these circumstances when the two come to trade with each other, each has a relative superiority over the other of 10, and there is an advantage of 20 points to be divided between the two; the trade is now ten times more profitable to each than it was at the outset, when there was only an aggregate of 2 units for the division between two parties; and accordingly the motive to an exchange and the gain of an exchange as between tailor and blacksmith are ten times greater than they were before. Therefore we lay down the principle, as inductively ascertained and as universally applicable to all exchanges, that the greater the relative superiority at different points as between the parties exchanging, the more beneficial and profitable do the exchanges become to all the participators in them. If this principle be just, and we may well flatter ourselves that it will be found to be just, it follows, that every man who has anything to buy or sell, is directly interested in the highest success of his fellow-exchangers, that every trade finds its own advantage in the success of all other trades, and that all discoveries and inventions by which Nature is made to pay tribute to art is, restrictions apart, so much clear gain to the world at large. In the light of sound and broad principles, what David Hume called the "Jealousy of Trade" is simply silly. The mainspring that impels all buyers and sellers to quicken their movements and to improve their methods and thus and otherwise to cheapen their costs of production, is the natural press of _competition_. Somebody else is offering this product, or will offer it, for less than we are now selling it for, and we must contrive some way by shortened times or cheaper processes or a quicker zeal not to be beaten in this market-race, is the silent argument ever making itself felt on the mind and hand of the producer. Such natural action always increases the general diversity of relative advantage as among buyers and sellers. But, on the other hand, whatever lessens or threatens to lessen this natural and most beneficial stress of competition among producers of similar commodities at home or abroad, necessarily lessens the motive on the part of these producers to excellence of quality in their goods and to cheapness of their cost, because it makes less the diversity of relative advantage as between these producers and those producers of other commodities against which the first exchange. The units of advantage that would otherwise be divided between the exchangers are diminished; the motives to trade and the rewards of trade are thus lessened to each pair of parties subject to such diminution of competition, and consequently to the community, or nation, or family of nations, as a whole; and accordingly this is the precise place for us to look into the nature and effects of _Monopoly_, so called, and to perceive once for all, that Monopoly is the enemy of mankind. Monopoly is a word derived from two Greek words, which mean when combined _selling alone_, that is, the privilege of selling one's commodity free from the competition to which it is naturally subject by other sellers than the privileged one. Monopoly is thus artificial restraint imposed on some buyers and sellers for the supposed benefit of other buyers and sellers. It is wholly unnatural. It is usually enjoyed under the forms of law. Its beneficiaries commonly cajole or extort from Government by hook or by crook the exclusive privilege of selling certain commodities in a designated market. Their motive is purely selfish: it is simply and solely to get for themselves a return-service artificially enhanced by selling commodities in a legally restricted market. The effect in the first instance usually corresponds to their expectations. The public are at their mercy so far as the designated commodities are concerned. The general story of monopolies is a dreary stretch of record of human greed and wrong on the one hand, and of wide-spread poverty and suffering and slowly-gathering resistance on the other. We will look at only two instances at present in the long account, premising that, the motives of greed and grab are the same in all instances, and the results of wrong and hate on the part of those oppressed by them are the same also in all instances. Let Macaulay (I, 40) tell us something of the first instance selected for illustration. "_But at length the Queen took upon herself to grant patents of monopoly by scores. There was scarcely a family in the realm which did not feel itself aggrieved by the oppression and extortion which this abuse naturally caused. Iron, oil, vinegar, coal, saltpetre, lead, starch, yarn, skins, leather, glass, could be bought only at exorbitant prices. The House of Commons met in an angry mood. It was in vain that a courtly minority blamed the Speaker for suffering the acts of the Queen's Highness to be called in question. The language of the discontented party was high and menacing, and was echoed by the voice of the whole nation. The coach of the chief Minister of the Crown was surrounded by an indignant populace, who cursed the monopolies, and exclaimed that the prerogative should not be suffered to touch the old liberties of England. There seemed for a moment to be some danger that the long and glorious reign of Elisabeth would have a shameful and disastrous end. She, however, with admirable judgment and temper, declined the contest, put herself at the head of the reforming party, redressed the grievance, thanked the Commons in touching and dignified language for their tender care of the general weal, brought back to herself the hearts of the people, and left to her successors a memorable example of the way in which it behooves a ruler to deal with public movements which he has not the means of resisting._" Perhaps some one of my readers may suggest, that these are the words of a Whig-Liberal, and may thus exaggerate the cause of the people as against the monopolists. Well, then, let us hear the words of a high Tory-Loyalist, the historian Hume (IV, 335, 350), in relation to the same monopolies. "_The active reign of Elizabeth had enabled many persons to distinguish themselves in civil and military employments; and the Queen, who was not able from her revenue to give them any rewards proportioned to their services, had made use of an expedient which had been employed by her predecessors, but which had never been carried to such an extreme as under her administration. She granted her servants and courtiers patents for monopolies; and those patents they sold to others, who were thereby enabled to raise commodities to what price they pleased, and who put invincible restraints upon all commerce, industry, and emulation in the arts. It is astonishing to consider the number and the importance of those commodities which were thus assigned over to patentees. Currants, salt, iron, powder, cards, calf-skins, felts, pouldavies, ox-skin-bones, train oil, lists of cloth, potashes, anise-seeds, vinegar, seacoals, steel, aquavitæ, brushes, pots, bottles, saltpetre, lead, accidences, oil, calamine stone, oil of blubber, glasses, paper, starch, tin, sulphur, new drapery, dried pilchards, transportation of iron ordnance, of beer, of horn, of leather, importation of Spanish wool, of Irish yarn; these are but a part of the commodities which had been appropriated to monopolists. These monopolists were so exorbitant in their demands, that in some places they raised the price of salt from sixteen pence a bushel to fourteen or fifteen shillings. Such high profits naturally begat intruders upon their commerce; and in order to secure themselves against encroachments, the patentees were armed with high and arbitrary powers from the Council, by which they were enabled to oppress the people at pleasure, and to exact money from such as they thought proper to accuse of interfering with their patent. The patentees of saltpetre, having the power of entering into every house, and of committing what havoc they pleased in stables, cellars, or wherever they expected saltpetre might be gathered, commonly extorted money from those who desired to free themselves from this damage or trouble. And while all domestic intercourse was restrained, lest any scope should remain for industry, almost every species of foreign commerce was confined to exclusive Companies, who bought and sold at any price that they themselves thought proper to offer or exact._" "_The Government of England during that age, however different in other particulars, bore in this respect some resemblance to that of Turkey at present: the Sovereign possessed every power, except that of imposing taxes; and in both countries, this limitation, unsupported by other privileges, appears rather prejudicial to the people. In Turkey, it obliges the Sultan to permit the extortion of the pashas and governors of provinces, from whom he afterwards squeezes presents and takes forfeitures: in England, it engaged the Queen to erect monopolies, and grant patents for exclusive trade; an invention so pernicious, that had she gone on during a tract of years at her own rate, England, the seat of riches, and arts, and commerce, would have contained at present as little industry as Morocco or the coast of Barbary._" But, some one will say, Hume and Macaulay are historians, writing long after these events took place, and may likely have been too favorable in their judgment to freedom of trade domestic and foreign. It is indeed true, that both of them were firmly convinced that freedom of trade is an inalienable right as well as an unspeakable blessing to all men everywhere. So, then, let us go back to contemporaries. Let us hear the eye and ear witnesses of the grievances complained of in 1601. Robert Cecil was then prime minister of Queen Elizabeth. He and his father had had more to do in granting the monopolies than any other persons in the realm except the Queen. Said he from his place in the Commons on the 25th of November: "_I say, therefore, there shall be a proclamation general throughout the realm, to notify Her Majesty's resolution in this behalf. And because you may eat your meat more savory than you have done, every man shall have salt as good and cheap as he can buy it or make, freely without danger of that patent which shall be presently revoked. The same benefit shall they have which have cold stomachs, both for aqua vitæ and aqua composita and the like. And they that have weak stomachs, for their satisfaction, shall have vinegar and alegar, and the like, set at liberty. Train oil shall go the same way; oil of blubber shall march in equal rank; brushes and bottles endure the like judgment. Those that desire to go sprucely in their ruffs, may at less charge than accustomed obtain their wish; for the patent for starch, which hath so much been prosecuted, shall now be repealed. The patents for calf-skins and felts, for leather, for cards, for glass, shall also be suspended, and left to the law._" Five days later one hundred and forty members of the House were formally received by Elizabeth in person, the Speaker having been instructed to convey their thanks to her majesty; and, after the Speaker's address, he with the rest knelt down, and the Queen gave her answer as follows: "_Mr. Speaker, you give me thanks, but I doubt me, I have more cause to thank you all, than you me: for had I not received a knowledge from you, I might have fallen into the lap of an error, only for lack of true information. Since I was queen, yet never did I put my pen to any grant, but that upon pretext and semblance made unto me that it was both good and beneficial to the subjects in general, though a private profit to some of my ancient servants who had deserved well; but the contrary being found by experience, I am exceeding beholding to such subjects as would move the same at first. I have ever used to set the last judgment-day before mine eyes, and so to rule as I shall be judged to answer before a higher judge. To whose judgment-seat I do appeal, that never thought was cherished in my heart that tended not to my people's good. And now if my kingly bounty hath been abused, and my grants turned to the hurt of my people, contrary to my will and meaning; or if any in authority under me have neglected or prevented what I have committed to them, I hope God will not lay their culps and offences to my charge. Though you have had, and may have, many princes more mighty and wise, sitting in this seat, yet you never had, or shall have, any that will be more careful and loving._"[4] These were the last words of Elizabeth to the Commons of England. She died in a little more than a year. In a little less than a year before the death of her successor, the famous Act of Parliament of 1624 declares, that all monopolies, grants, letters patent for the sole buying, selling, and making of goods and manufactures, shall be thereafter wholly null and void. Though this Act, and many others, was violated more or less in the next reign, it effectually secured in the long run the freedom of industry in England; and in the opinion of excellent authorities, has done more to excite the spirit of invention and industry, and to accelerate the progress of commerce in that country, than any other law on the statute book. Our second instance of Monopolies shall be drawn from the state of things in the United States in this year of Grace, 1890. The monopolies of to-day are secured by means of an instrument called a Tariff, which, later on in these pages, will be fully discussed in its history, inmost nature, and invariable effects. Here it will suffice to say, that a tariff is nothing in the world but a combination of Taxes, which taxes the people of the country, on which the tariff is imposed, are obliged to pay in one form or another. The only word ever uttered by a tariff, the only word a tariff from its own nature can utter, is, _Thou shalt pay_! The ostensible reason for levying these taxes is the constitutional one of getting money into the national Treasury,--"_to pay the debts and provide for the common defence and general welfare of the United States_"; but the real purpose of laying these tariff-taxes at present is only secondarily and remotely the ostensible and constitutional one; because, on the authority of Professor Taussig of Harvard University, there is not a single one of over 4000 items of taxes in this tariff, that is designed primarily to get money into the treasury from the pockets of the people, but every one of them is designed more or less and more rather than less to raise the price of domestic goods to our own people artificially by keeping out of the country by means of these taxes on them the foreign goods, which would otherwise come into a profit. In other words, there is no purely revenue-tax in our immense tariff at present, but every item in the enormous list is a so-called and mis-called "protective"-tax. By this shutting off from domestic goods the natural competition of corresponding foreign goods by means of such tariff-taxes, a monopoly is created at the instance and for the sole benefit of certain classes of privileged home-producers. They can sell alone (monopoly) just so far as other sellers are kept out by these heavy taxes. The goal of all their striving is to get an artificially-enhanced price for their own products at the cost of their countrymen by means of a market restricted to themselves through obstacles excluding foreign sellers. The end proposed by these shrewd manipulators is realized in fact. Domestic prices are lifted on so-called "protected" goods. This is the first effect of the monopoly. It has often been alleged, and with great vehemence by the late Horace Greely, that competition among the domestic producers of such wares will lower their price again to the natural point; but if this is so, what _motive_ have the individual producers to work so assiduously in elections and lobbyings to get on and keep on these tariff-taxes? Again, Mr. Greely, and all others of like association, forgets the admirable generalization of Robert Stephenson,--"_Where combination is possible, competition is impossible._" Combination among producers to keep up prices is always possible in a market restricted by law. This has been proven on a large scale in the United States during each of the past thirty years: combinations among coal operators to keep up the prices of "protected" coal by restricting the annual output of their collieries; combinations among carpet and other woollen manufacturers to maintain high prices of their fabrics by restricting their workmen to certain hours per day or to certain months per year; have been among the commonest of industrial events in all this interval. Within a very few years past there has come into almost universal vogue among these monopolists a new kind of combination called "_Trusts_,"--again abusing a good word by making it cover an abominable purpose,--which are probably illegal at Common Law, which only become possible under monstrously unjust tariff laws, and which work wide-spread wrong among the masses of the people. A second effect of this monopoly (as of all monopolies) is to worsen the quality of the goods sold in an artificially restricted market. The historian Gibbon noticed this fact more than a century ago, and said: "_The spirit of monopolists is narrow, lazy and oppressive. Their work is more costly and less productive than that of independent artists; and the new improvements so eagerly grasped by the competition of freedom, are admitted by them with slow and sullen reluctance._" Alfred Lapoint, United States consul in Peru, warned the State Department at Washington in 1883 of this poor quality of our manufactures, which were then trying to find a South American market. He wrote: "_It is my duty to indicate that great carelessness prevails with our manufacturers; for instance, I was called upon to purchase in the United States a steam pump and boiler, which I ordered from one of the most famed manufacturers, and when it arrived, not alone was the boiler inadequate for the pump, but actually after two months' work the upper tube sheet split in three parts, a proof of its bad quality and construction._" As men are, a natural competition among buyers and sellers is just as needful to keep up the quality of goods as to keep down their price. Good quality always costs more of effort and skill and capital than bad quality: why should producers continue to furnish good quality to a market from which a free competition in good qualities is excluded by law? Every tendency of human nature, as well as every relevant fact in history, attests, that poor wares at high rates invariably attends upon tariff-monopolies. Shoddy takes the place of wool. Cheaper crowds out better material. Skilled workmanship is displaced by unskilled. Processes of manufacture are hastened in time, and left incomplete to the damage of the goods in order to save capital. Monopoly is always and everywhere the foe of excellence. A third effect of tariff-monopoly is to prevent the sale abroad of domestic goods to the same extent and amount as foreign wares are kept out by these monopoly-taxes. This vital and fundamental result is almost always overlooked. If a man or a nation refuse to _buy_ of a proffered customer, they cannot by any possibility _sell_ to him; because buying and selling are reciprocal and synchronous; because it takes two to make a bargain; because material commodities, for the most part, ultimately, exchange against each other; and because the only motive a foreigner ever has to bring his goods _hither_, is to take in exchange for them our domestic goods at a profit, and carry these _hence_. To forbid entrance to foreign goods is to forbid exit to domestic goods. Monopoly-tariff-taxes, therefore, so far forth, destroy the market for home products, without creating or tending to create, any other market for them. Such taxes, accordingly, cause a dead loss all around,--to the foreign producer who wants to buy our products with his own, to the home producer who wants to sell his own products against those, and even to the government also as a tax-collector, which can get no revenue on foreign goods excluded by monopoly-taxes. There is a final and deeper point of view, from which all such monopolies are wholly condemnable. _They lessen of necessity,--from their own nature and inexorable operation_,--THE DIVERSITY OF RELATIVE ADVANTAGE AS BETWEEN EXCHANGERS, on which diversity, as we have now seen, the whole fact and gain of exchanges depend. Taxes on raw materials, for example, whether actually paid on them or used to enhance the price of other corresponding materials as in the tariff-taxes, increase the costs of all products into which such taxed materials enter, and so restrict the market of the home-producer by lessening his relative advantage as compared with the relative advantage of the foreigner over him. He cannot sell so well, perhaps cannot sell at all, his cost-enhanced products. Monopoly-taxes on industrial processes of any kind, on the means of transportation, have similar effects on the cost of products; and of course, similar effects in lessening Diversity, in restricting markets, and in destroying the life of Trade. Before quitting this subject, it may be well for us briefly to classify Monopolies. (a) Patent Rights. In the great parliamentary Statute of 21 James I, which declared the exclusive privileges to use any and to sell any merchandise to be contrary to the ancient and fundamental laws of the realm, and all grants and dispensations for such monopolies to be of none effect, two exceptions had been made; the first, in favor of Patents for fourteen years to the true and first inventors of new manufactures within the realm; and the second, in favor of the grants by Act of Parliament to any Company for the enlargement of foreign Trade, of which the East India Company chartered on the last day of the last year of the sixteenth century became the most famous and the longest-lived. Open letters or letters _patent_, as they were called, giving to inventors exclusive authority to vend for a limited time any chattel or article of commerce, of which a _model_ could be made showing the point and application of what was claimed to be _new_; and Copyrights, which grant an exclusive property also for a limited time to authors and discoverers of something new and useful, of which a model cannot be made, or, as it is phrased in the Constitution of the United States, "_the exclusive right to their respective writings and discoveries_"; are a part of the results among all English-speaking peoples of the two exceptions in this famous and beneficent Act of Parliament. In the United States a patent lasts for 17 years, and is not reissued except by a special act of Congress; a copyright lasts for 28 years, and may be renewed by the author, his widow, or children, for 14 years longer. In the constitution of the new German Empire of 1871, this protection of intellectual property (_der Schutz des geistigen Eigenthums_) is expressly included in the matters which are to be dealt with by the _Reichstag_ or imperial parliament. Now while patents and copyrights are a monopoly under the definition, they are quite distinct in their purpose and spirit from the monopolies already described. On the whole, Society does well in trying to protect, by law, inventors and thinkers in the sole use and benefit of their respective products for a brief and specified time. There are large difficulties in the way of reaching this end practically, as is proven by the endless and expensive lawsuits in such cases, but the postulate on which it is attempted is sound, namely, that otherwise citizens would have less motive to think and to invent; since in that case only the public-spirited and the rich could or would devote themselves to an important branch of the public progress. A patent or copyright is merely a return service which Society renders for a service received. It violates no man's right of property, as an ordinary monopoly does, but on the other hand is a provision to protect for a time a new right of property created by the thought and efforts of a deserving class of men. The phrase, "intellectual property," used above in translating from the German, is not well chosen, since we have amply learned that anything is property that can be bought and sold, that simple rights of many kinds are constantly on sale in the market, and consequently that patents and copyrights are at once proper and property because they are a technical return-service for other services ready to be rendered to the community. (b) Revenue Rights. Once at a court ball, Napoleon the First noticed a lady very richly dressed and wearing splendid diamonds, and on asking for her name, ascertained that she was the wife of a tobacco manufacturer of Paris; whereupon it occurred immediately to the quick mind of the French ruler, that the State might just as well have those great profits as an individual; and the sale of tobacco in all its forms became accordingly a State monopoly in the interest of taxation, and so it has continued to this day, and yields now about 400,000,000 francs a year. Other nations have adopted to some small extent this mode of indirect taxation of their people. By legally cutting off the competition of all private dealers in the taxed article, and by preventing to the utmost of their power its being smuggled into the country, Governments are enabled to sell the article at a price enhanced artificially by the monopoly; but all that the people are made to pay _extra_ under the monopoly, saving the costs of maintaining it, goes directly into the treasury of the State; and, so far forth, becomes an unobjectionable mode of taxation. Under all forms of taxation, the aim should clearly be, that the Treasury receive all that the People are made to pay, except the cost of an economical collection. (c) Tariff Monopolies. The United States has never undertaken, like France and Germany, to vend directly and exclusively an article taxed by themselves for the sole purpose of revenue; but unfortunately they have undertaken and still maintain (1890) monopolies a thousand times more unjust and objectionable than any such revenue-monopoly can be; they have laid distinct tariff-taxes upon thousands of foreign articles, not with the design of getting revenue from them, but with an avowed and realized design of _preventing_ revenue by means of these taxes, since they have made the taxes so high and onerous as to be in many cases absolutely prohibitory of the entry of the goods, and in all cases more or less prohibitory of such entry. Revenue can only be gotten on goods that come in, while the very intent and result of these taxes is to shut the foreign goods out on which they are levied, so as to give certain domestic producers (who have themselves secured this legislation) the monopoly of the home market in these goods. This is the very core of public wrong-doing. This is the worst form of monopoly that ever existed in a civilized country. Queen Elizabeth's monopolies, which so roused the ire of the Parliament of 1601, were nothing in enormity as compared with these tariff-taxes. Civilization long ago sloughed off such direct grants of personal privilege as were forbidden forever by the Act of 1624, and accordingly there is no need of mentioning these in the present classification. Tariff-taxes for other ends than pure revenue are the worst monopolies in existence, because (1) they compel the people to pay under ostensible taxes many times more than the Treasury gets from them in actual revenue; (2) they are wholly deceptive in their terms, and their operation is clothed in disguises difficult to strip off; (3) they are always put on at the instance and under the pressure of the man (or men) who expects thereby to raise the price of his own wares at the expense of his countrymen; (4) they create under legal forms however unconstitutional privileged classes in the community; (5) their first effect is invariably to make the rich richer and the poor poorer; (6) their ultimate effect is to impoverish the privileged classes themselves by taking away from them the natural spur of competition and self-dependence, in consequence of which their own goods become poor, and their zeal flags, and they come to lean still more heavily on monopoly-supports; (7) they destroy the market for domestic goods to precisely the same extent as they cut off the market for foreign goods, and (8) their whole retinue of evils is wrapped up in the great fact, that the _Diversity of Relative Advantage_ is thereby diminished both as among domestic producers of commodities and as between foreign and domestic producers. The expression, "natural monopoly," is sometimes used of those, who, under freedom, and using to the utmost their natural gifts and acquired skill, have distanced all local competitors, and may be said to control the market in their own interest, furnishing the best goods at the cheapest rates. This is in no proper sense of the term a "monopoly." Production has no complaint to make of any such pre-eminence in excellence and opportunity. It harms nobody and benefits everybody. Exchange rejoices over every man and woman and child, who so puts his head and heart and hand into his own peculiar product as to outstrip all others in that one line in point of ease and excellence, and so be able to offer a service at once better and cheaper than any one else can offer it then and there; and when all men and women and children, so far as they are employed commercially, come to possess a "natural monopoly" each in his own specialty, then Exchanges become as profitable and progressive as possible then and there, because the ever-blessed diversity of relative advantage has its utmost limit. 4. We come now to consider the natural LIMITS, if any such there be, to the Production of material commodities. This point has been much discussed. For example, Dr. Chalmers, a Scotch clergyman of great intelligence, profoundly moved by the condition of the poor in Glasgow, published in 1822 an interesting but not over-sound treatise entitled "Political Economy," in which the proposition is maintained, that the universal market is strictly limited, and therefore that, were it not for the unproductive consumption of the rich and luxurious, and the equally unproductive consumption of national wars, there would soon be a general glut of material commodities, and consequently Production would have to cease for the lack of a vent for its products. Pretty soon we shall be able to detect the enormous fallacy in this proposition. On the other hand, in 1803, Jean-Baptiste Say, a very competent French economist, in chapter xv of his well-known treatise, fully developed this very important proposition, if true, namely, _that production may go on indefinitely in all directions without ever a fear of reaching a general glut of products_. What is a market? What is a limited market? What is an illimitable market? A market, as we have already seen in substance, is nothing in the world but certain _persons_ somewhere with return-services in their hands desirous to part with these in order to get, that is, to buy, some other services offered in exchange. Each set of services is equally a market in relation to the other set. _A market is always persons having something in their hands to sell._ Buyers and sellers are equally a market in relation to each other. Whenever anybody goes forth to buy, he must of course take with him something with which to pay for what he wants to buy, that is to say, he must become a seller the very instant he becomes a buyer; and whenever anybody wants to sell something, he must of course want something already in the hands of somebody else, in which to take his pay, that is, he becomes a buyer the moment he becomes a seller. This helps us to see perfectly what a market is. Defined in the terms of persons, _a market is two men, each glad to get the product of the other, and to render in return his own product_; defined in the terms of things, _a market for products is products in market_. Now, what can limit the universal market for material products? Clearly, it can only be limited either in the element of _Desires_ or in the element of _Return-Services_. But the desires of all men, even of one man, which the efforts of other men may satisfy, have never yet come to a stand-still. Who ever heard of even one man, who was in possession of all the products of all kinds, that he wanted? Even if there were one such man somewhere, there are millions upon millions of other men, whose desires for products such as the efforts of other men can furnish are unlimited in number and infinite in degree. It is not possible, therefore, that there should be a lack of human desires anywhere, that could put any bound to the production of commodities or hinder in the least its ever-swelling march. If only two things can limit the universal market, and if there never has been and never can be any lack on the part of some men of Desires which the efforts of other men can satisfy through exchange, can there ever be any lack in the second element of a market, namely, in Return-services? It is not meant to be asserted, that there are not definite limitations at any one time or place, or in the whole world at any given period, in the capacities of men then and there to produce material commodities, with their knowledge of things and powers of invention; but what _is_ meant to be asserted is this, that wherever Production is most busy and universal in response to the desires of some men somewhere, _there_ will be the greatest plenty of return-services, with which to pay for the services of these "some men somewhere" offered in response to the desires of the first set of producers. Therefore, no general glut of products is possible to occur. The more and the more _kinds_ of commodities produced anywhere, the better market _that_ for the more and the more kinds of commodities produced somewhere else. The nearer Industry may seem to be about to come to the goal of a limit, the farther off from that goal it is in reality. The aggregate of human industrial powers has indeed a potential limit at any one moment, but the knowledge of things and the power of invention and the means of transportation are enlarging every moment of time; so that, that potential limit never can become an actual limitation. Human industry will go on enlarging and diversifying itself so long as the world shall stand. Let us put this vastly important argument in other and briefer words: the Desires of men which the Efforts of other men can satisfy through exchange are unlimited in number and indefinite in degree; and therefore, mutual industrial efforts can continue to be put forth in exchange, until these unlimited and indefinite desires of all men are all met,--a goal which clearly never can be reached. This proposition demolishes at a stroke the fallacy, that pervades Dr. Chalmers' book but just now alluded to; and, what is more to the present point, demolishes equally fallacies current and prevalent in the United States at this hour. What our national industries need and all they need, what they always needed and all they ever will need, is a quick market for their products; products in market is the only market for products; but the United States for 30 years past has been putting vast obstacles in the shape of formidable taxation in the way of the presence of products from abroad in our domestic market, and consequently and inexorably the market for domestic products has been lost in foreign countries, to the immense and irreparable damage of domestic producers as well as to the foreign producers themselves. No general glut of exchangeable products is possible to take place in this world under natural liberty and just law, because under these the diversity of relative advantage and consequently the profitableness of commercial exchanges is all the time widening everywhere, tending to bring the whole earth into a commercial and blessed union. On the other hand, while a general glut of products is impossible to occur under a decent freedom, a partial glut in respect to certain commodities in certain places is very common. Through want of foresight as to a prospective demand, or miscalculation as to its probable amount, particular services are sometimes offered in too great abundance or of a kind not now adapted to the chosen market, and in respect to these the market may truly be said to be glutted. This frequently happens with editions of books; more copies are printed than can be sold at paying prices. Also, when the fashion changes, which is after all less capricious than is commonly supposed, the goods that were fashionable but are so no longer, are very apt to be somewhere in excess of the demand for them. Nothing can then hinder a partial or total loss in their value in the hands of their last holders. Precautions, however, may well be taken to avoid losses of this character, through the cultivation of foresight, and by studying as accurately as possible the nature of human desires and the not altogether irregular changes that have been observed to take place in them. This constitutes the art of mercantile sagacity; and the most successful producers in all the departments of exchange are those who best develop this attainable sagacity, who adapt their particular services closest to the existing and to the coming demands; who, to excellence in the substance of their products, add taste and attractiveness to their form; and who, as the result of this, tend rather to lead the fashions of the many than to follow in their wake. It cannot be wrong to repeat here in substance, what has indeed been said already in another connection, that Production as a general rule is no dead level of monotonous exertion,--no going forth and coming back on precisely the same track,--since its sphere is Life with all its wants and Man with all his desires; since there is scope and verge enough for the development of ingenious minds in almost all of its departments; and since its ultimate goal is beyond the ken of man. 5. We must now study with considerable pains the ultimate facts and the essential functions of LANDS in connection with the Production of material commodities. This has always been the most vexed question in our Science; but it is approaching, even if it has not already reached, a satisfactory and final solution. The present writer believes that his own studies and researches have thrown some original and important light upon the perplexing problem of the Value of lands and of their produce. His present readers are surely entitled to his clearest possible presentation of all the facts and principles of this radical question. The French "physiocrats" of a hundred years ago, founders of the first School in Political Economy, excellent men for the most part as well as good economists in general, thought, that lands were property in a peculiar and eminent sense, that they were the ultimate source of all values but their own, and that consequently lands should bear the weight of the national taxes. English economists, constituting with their followers in other countries the second School in our Science, while not going to the length of the physiocrats, still maintained that the value of lands and of the produce of lands were distinct in important respects from all other values whatever. In our own time and country, Henry George, though belonging for the most part to the third economic School, is a great stickler for a single tax on lands in lieu of all other taxes. We must, then, concentrate all the lights we can gather on these points of dispute and difficulty. (a) _The presumption in science is always against the existence of a few outlying cases, whenever the induction has been long and carefully conducted by many persons, and the generalization appears on all other grounds to be sound and comprehensive._ All induction proceeds upon the premise, that Nature is _uniform_ in those essential resemblances that constitute a _class_ of things in science. Nature has so often justified confidence in her essential resemblances even under the greatest differences in external circumstance and apparent diversity, that the presumption becomes immensely strong in her favor, whenever a generalization patiently gathered from many particulars seems to cover the whole ground concerned except a few obstinate-looking items, that have not yet been closely studied. Two to one these items also will presently fall into their predestined place. We have already seen abundant grounds for believing, that Values arise from human services rendered and received: is it at all likely, considering the nature of scientific generalization and the history of all the more advanced sciences, that in Political Economy, lands and their produce should be found to constitute an outlying exception to the law of all other valuable things? (b) There is one vital distinction to be made at the outset and held to throughout the discussion, namely, that, between all lands as a _physical thing_, which God made and gave to all men in common without any effort of their own, and some lands now as a _valuable thing_, in all probability made such through the action of human desires and human efforts brought to bear upon what _was_ merely physical but what has now _become_ valuable. The failure to distinguish between _lands_ as such and _valuable lands_ as such, has always wrought confusion and mischief in the land problem. The two things are utterly different and incommensurable. There are vast stretches of lands on the surface of the earth, to which no _value_ ever attached or ever will attach. They are lands, and that is all. Political Economy has nothing to say of them, and nothing to do with them. Because they are never bought or sold, because they never give birth to "produce," they lie wholly outside the field of Value. Then there are immense areas of lands now valuable, that were once as valueless as the first class. With these Political Economy has a great deal to do, and also with the way in which they passed from valueless to valuable. Then there is a third class of lands, that have not yet been studied as they ought and till recently have not been studied at all, namely, those known to have been valuable at one time, but which have now lost their value either wholly or in large measure. There are such lands as these in every State of our Union, and in every civilized country beneath the sun; and Political Economy has already learned something, and is destined to learn much more, about the processes by which lands pass from out the first great class into the second, and from the second into the third. Valueless, Valuable, Unvalued,--these three words describe to the economist all the lands of the world. (c) If we may trust the simple record in Genesis, the whole earth was given of God to the whole race, under the direction that they "_replenish and subdue it_." All the lands were then certainly valueless, although some of them were doubtless possessed of Utility, that is, a capacity to gratify human desires through a direct appropriation, which is a very different thing from Value, which last is the rendering and receiving of equivalents as between two persons. It seems very plain, that under this word, "Subdue," and under the human services implied in that, came in the first idea of ownership in land. When a family or tribe commenced the work of subjugation upon a piece of land, when they enclosed it, settled on it, tilled it, in any way whatever improved it by their own toil, then _could_ first the idea of ownership dawn upon their minds, then first began that land to be capable of value, since now that family might reasonably say to another, If you want this field, you must give us an equivalent for what we have expended on it to improve it. If the transfer took place, what was it that was sold? What was it that was paid for by the party of the second part? It could not be the inherent quality of the soil, it could not be anything that the first family had gratuitously entered upon, because similar free land with all its inherent qualities lay open to occupation on every hand, and the second family would surely say, For as much effort as you have put upon your land to better it, we can make other free land as good as yours, consequently we can give you no more at the most than a fair equivalent for your efforts already expended. If the parcel were sold, therefore, the _value_ of it must have been determined, not by the _gratuitous_ elements involved but the _onerous_ elements involved. The physical thing, land, which cost nothing, has now become the valuable thing, land, through a series of human efforts expended of such kind as call out human desires for the results reached, and justify the rendering of return-services for them; and that which the buyer pays for is never the free _old_ but always the onerous _new_; new utilities, that cost something, have been added to and intermixed with old utilities, that cost nothing; and solely in consequence of this expenditure of efforts on the part of some men, answering to the desires and calling out the efforts of other men, do parcels of land pass out from the first great class into the second great class. So far as it can be gathered from the nature of the case, and from the known steps of past experience, this is the simple and rational process by which valueless lands become valuable, and _less_ valuable become _more_ valuable lands. (d) This line of proof, strong in itself, is strengthened by observing how land-parcels gradually and practically pass out from the second into the third class of lands,--from the Valuable into the Unvalued. As it is only human Efforts wisely bestowed upon valueless lands or in some connection with them, that ever make these valuable, so it is, that these Efforts intermitted for a time, or less wisely bestowed, or reckoned less in harmony with the present and prospective desires of other men, invariably cause a loss of value in valuable lands; and, if such neglect or unwisdom of effort continue long enough, nothing is more certain, than that lands so treated will lose their value altogether, nobody will give anything for them, they will drop out from the second class into the third by the same path (only in inverse order), by which they crept at first from valueless to valuable. Under the writer's own observation in different parts of New England, whole tiers of farms once valuable and productive have lost that character either wholly or for the most part, taxes can no longer be collected from them, nobody will really give anything for them in exchange, they are abandoned of their former owners, they are left to lie waste or to grow up into forest again. It follows from all this beyond a doubt, and the logical issue is one of vast consequence to mankind, that Value is no attribute of matter, no inherent quality of lands as such wherever situated, but it comes and goes, it is a relation of mutual purchase between human services rendered and received. (e) Land-parcels becoming valuable in the way but just now indicated, and so long as they continue valuable, that is, salable, are technically _Commodities_, according to our triple division of all Valuables. They belong in this grand division, that we are specially studying in this chapter, for the same reason as a horse does or a steam-engine does. Men did not originally make the land as a congeries of matter, neither do men make horses, nor do they make the iron ore out of which most parts of the steam-engine is made; but men do modify bits of the land as God made it, they subdue it, they improve it in manifold ways, they make it _desirable_ in the eyes of other men, and thus or otherwise they come into possession of it, gain for themselves a right to sell it, prepare it to be sold and sell it, on the same principle as men raise and break and train horses and prepare them to be sold and sell them, and just as men by many processes transform the iron ore into a steam-engine and sell that. Ricardo, in his famous doctrine of Rent, says a good deal about "the original and indestructible powers of the soil"; but as a matter of fact, _there are no such powers_, since the elements and properties that constitute land are all the time changing under chemical and other action; and even if there were such powers, it would still be impossible to separate what God did for the land from what men have done in order to fit it to be sold; and what men have ever been authorized to take pay from other men for what God did in the creation of the world? The simple truth is, that Value is never of God's creation but only of men's exertion. There never was any land anywhere fit for cultivation and sale without more or less expenditure of human labor and reserved capital upon it; and the "powers" of the land, whatever they are, instead of being "indestructible," are in a constant process of wearing out, and require a constant application of labor and capital to keep up their fertility. Valuable pieces of land, accordingly, like all other commodities, derive their _utility_ partly from the free contribution of Nature, and partly from the onerous contribution of men; but, on the other hand, they derive their _value_, whether the value be then increasing or diminishing, wholly from human desires and corresponding efforts. (f) It is but a step from this impregnable position to another, namely, that Henry George is wholly wrong in his view, that there is Value in lands as God made them and gave them to men in common; and consequently, wholly wrong in his doctrine, that a single tax on land values would be just and equal to land owners, and might well be made to take the place of all other taxes on all other persons. He says: "_If we are all here by the equal permission of the Creator, we are all here with an equal title to the enjoyments of his bounty._" What bounty? If he means the original utility which God put into all lands in common, and which certain men have done nothing to better, there is nobody to dispute his proposition. But he does not mean that, because there is nothing of any significance that could come out of that. What he means is, that it is God and not man who makes lands valuable. He makes no distinction between Utility and Value in lands. He lumps the two together in one, and calls the aggregate the Creator's "bounty." He goes on to say: "_There is on earth no power which can rightfully make a grant of exclusive ownership in land._" Well! Is there any power on earth which can rightfully deny to any man or family the proprietorship of his own exclusive _efforts_, nobody's else rights being infringed thereby? Or can deny to him or them the _results_ of such efforts, however embodied? When valueless lands are made valuable by human efforts expended to that end, does not the "value" belong to those who made it? When valuable lands have been made more valuable than they were by the efforts and foresight of their owners, the rights of others untouched, does not the "increment" belong to those who have created it? The truth is, if Henry George's powers of radical analysis had been at all equal to his remarkable power of rhetorical presentation, the world would never have been treated to his popular and imposing land-fallacies. Prudhon's "Property is theft," and George's "Single tax on land," rest on the same basis of socialism. (g) All valuable land-parcels are material Commodities, made to be such by onerous human efforts of some sort expended upon or in some connection with the free Utilities furnished by Nature; the utilities are one thing in origin and function, and the values are a very different thing both in origin and function; and the present point is, that nearly all valuable lands everywhere are Capital also, that is to say, products reserved to aid in a further and future production. Capital is a relatively small class under the immensely large class Values. Capital is by no means coincident with Commodities, since vast lines of the latter are consumed with no reference to a further production by means of their use. But capital is always either commodities or claims, and valuable bits of land are always commodities and nearly always capital; because all tillage and pasture lands, all forests grown for wood and timber, and lands of all sorts rented or held for resale at a higher price, are capital under the definition, are "_products reserved as an aid to further production_." The peculiarity of all farming lands is this, they are themselves commodities, in whose creation God's free gifts and men's onerous labors have conspired; and they are held in reserve by their owners as capital, for the sake of producing by their means with the help of more of God's free gifts further valuable commodities, such as grain, and fruit and timber. Farms in their highest reach of previous culture still need for crops the sun and the rain. Indeed the sun is the most useful and powerful force in the world. Oh! how it warms and lifts and quickens! Give it and the rain and the dew but a fair chance on lands properly prepared for them, and endless fields blossom like the rose and are white to the harvest! Agriculture always has been and always will be the vocation of the masses of mankind. Under a fair freedom, and a decent law, and a reasonable industry, Agriculture is always profitable; because it is natural, that is, designed by God for the welfare of mankind; because it lies at the basis of all other industries,--most of the food of mankind, most of the raw material of all manufactures, most of the subject-matter of all national and international commerce,--come out of the farms of the world; because it has been ordered so in the nature of things, that, under a tolerable freedom, a given amount of agricultural products tends constantly to buy, that is, to pay for, more and more of almost all kinds of manufactured products, for a reason to be explained shortly, thus tending strongly to uplift the farming masses in a scale of comforts; and because there is no other main line of human activities so constantly and so prodigiously and so gratuitously assisted by Natural Agents as is Agriculture. As Milton has profoundly expressed it in the "Hymn to the Nativity," the Sun is indeed to Mother Earth "_her lusty paramour_." But at this very time of writing a wail is coming up in ever deepening tones from Italy and France and Germany and Russia and especially the United States, that a colossal blunder in legislation common to all these countries now, say rather a colossal crime of the powerful few against the humble many, in the shape of tariff-monopolies, neutralizes in large part these natural advantages of agriculture, makes farming unprofitable and farmers unable to pay their taxes, diverts young men in increasing numbers from the farms to the towns, plasters the lands over with mortgages, shuts out from their natural markets the products of the land, thus depressing their price, and shuts off from farmers by outrageous taxes their natural supplies, thus augmenting their price. Farmers in all these countries are revolving between the upper and the nether millstones. Count Giusso, ex-Mayor of Naples, and now a deputy from that city, has just made a speech in the Italian Parliament, which sets forth in strong terms the great depression in Agriculture, and the critical condition of the public finances, brought about by the new policy of protectionism there. He says: "_The Utopian idea of creating an industrial Italy on the ruins of an agricultural Italy, has been a colossal error big with disastrous results. We have preferred the shop to the land; we have preferred the coal we do not possess to our Italian sun; we have preferred the motive force of steam to the most powerful motive force in the universe, the sun; and we are naturally suffering the sad consequences._" Exports increased in Italy in 1888 by $24,000,000, and imports by $42,000,000; and the Count quotes the cry coming up from one end of the Peninsula to the other: "_Give us the means of selling our products, and we will pay the taxes._" England is the only considerable country in the world, whose customs-revenue increased in the fiscal year 1888-89 over the year before; this English increase was over 5 _per centum_, which means an increase both in imports and exports, whose movements are almost absolutely free so far as England is concerned; while in all the countries mentioned above, which are under a different system in that respect, there was a _deficit_ of revenue from tariff-taxes as compared with the year before, and a _decrease_ in both exports and imports. (h) If nearly all bits of valuable lands be capital, as we have just seen strong grounds for believing, then it follows of course, _that the Rent of leased lands whether for buildings or harvests is the same in nature with the Interest on money loaned, and is the measure of the service rendered by the owners to the actual users of the Capital_. This proposition, seen in its radical proofs and in its logical corollaries, takes the very life out of Henry George's land-theories, and out of the popular remedies thereto annexed. The writer firmly believes also, that this proposition in the grounds of it and in the inferences from it might have been used by Mr. Gladstone and his followers with telling effect in the animated discussions of the Irish land-question in the British Parliament during the decade 1880-90. In the debates on the Irish Land Bill passed in 1881, the representatives of the land-owners in Ireland held to their right to take all the rent they could extort by the help of the law; on the other hand the representatives of the Irish rent-payers held to their right as cultivators and maintainers to withhold rent in large part or altogether; and Mr. Gladstone, as representative of the nation, while insisting on the right of the owners to certain rents, insisted equally on the right of the cultivators to certain important privileges in the soil. Our present proposition with those that spring out of it, though it was not used by Gladstone, as it might well have been to smooth his pathway through the roughness of that legislation, yet justifies at one and the same time the discontent of the Irish rent-payer, the claim of the Irish land-holder to an assured rent of some sort, and the fundamental principle of the Irish Land Bill of 1881. That bill gives a certain modified ownership and control to the actual cultivators and maintainers of the soil. That is right. The principle of land-values herewith enunciated, their uprise and increase and frequent decay also in all land-parcels, justifies completely the concessions to tenants in that bill; while the old and still commonly accepted English principles of land, and the false yet famous doctrine of Rent promulgated by Ricardo at the beginning of the century, are wholly against Gladstone and his concessions in that bill. Let us now see whither simple analysis and logical processes will quickly bring us in this whole matter. Valuable land was once valueless, and always remained so, until, by virtue of human efforts expended upon it or in some direct connection with it, coupled with the desires of certain other men for that land or its produce, accompanied with a readiness on the part of these men to render some equivalent for it or its use, first imparted value to that particular patch; moreover, it has been found in practice ten thousand times, just as one would expect, knowing the origin of value in general, that, unless human efforts are further and constantly expended on or in connection with that piece, and unless desires of other men continue to turn towards it in the way of exchange, its value will silently and inevitably escape from it; therefore, whoever has come into possession of that valuable piece of land by purchase or inheritance, and foregoes the use of it in favor of another as a tenant, is morally and commercially entitled to the stipulated return for that use, _which is rent_; but also, if that other, aside from the current use which is always a wearing-out process, contributes in any way to the continuance and increase of the value and fertility of the land, then and so far he gains rights in the land and becomes a sort of joint owner of it, since what he has done in the way of maintenance and improvement is inextricably mingled with what the other owners or users have done, and is of the same nature with that; and, therefore, the modified ownership of certain tenants recognized in Gladstone's bill is in strict accordance with ultimate justice, as it is also in strict accord with right, that the legal owner should continue to receive a return in the shape of rent for all the fertility and opportunity actually contributed by him, and no more. The discontent of the Irish peasantry has largely come from an instinct or intelligence more unerring than the economics of the land-owners, namely, that they are called on to pay rent for what they themselves have _contributed_ in addition to the rent for what they have _received_. The true origin of value in land, and the only way in which value in land is kept up, seems to have penetrated deeper into the minds of Irish tenants than into the minds of many British statesmen. (i) If the bulk of all valuable land-parcels be capital, as it is, then one might expect beforehand to find _a law of diminishing returns_ from such lands, agricultural labor and skill remaining the same; because, all capital is tools made such by the expenditure of human efforts on changeable material, and then by the practice of _abstinence_, and tools from their very nature are always wearing out. Increase of efforts in connection with any form of capital unimproved by new inventions and uninvigorated by fresh skill, though they may indeed increase the aggregate return, cannot, for the reason just given, _secure an increase proportioned to the increase of the efforts_. The English writers generally, and Mr. Ricardo in particular, justly lay much stress on this proposition, although they have not taken lands to be capital, and have proven the law of diminishing returns in a different way from ours, and consequently have not set the propositions of land in their best and most ultimate relations. Their method of proving the law, however, is short and conclusive: If by doubling the efforts upon a piece of land, double the produce could be secured, and by quadrupling it, quadruple, and so on, there would be no reason why any man should ever cultivate more than a square acre, or even a square rod. He has a strong motive to confine his culture to a small space, just so long as the amount of produce is in the ratio of the efforts expended, because there is less locomotion of tools and fertilizers and crops. The fact that he extends his culture from one acre to another, and then to distant acres, notwithstanding the inconvenience and expense of transportation, is an irrefragable proof of the proposition in question. Increase of agricultural efforts and expenditures on a given space of land will secure a larger amount of produce, but as a general law, _the increased amount will not be proportioned to the increased expenditure_. It is through this law of diminishing returns, that the Creator has secured the gradual occupation, by men, of almost the whole earth. There is a strong and natural tendency to leave the old acres to advance upon new, the old countries to emigrate to new, whenever the returns begin to bear a more unfavorable ratio to the labors bestowed. The farmer will advance from the first to the second acre as soon as he thinks that more produce can be obtained from it by a given amount of efforts than can be gotten by a like expenditure of additional efforts upon the first acre, allowance being made for the increased inconvenience; and so, cultivation has gradually extended itself and men have become dispersed over the whole earth. Other principles leading to dispersion have undoubtedly co-operated, but this is the fundamental one, operative at all times, changing the course of population, and consequently of empire. (j) It follows from the points already made, _that all permanent improvements in agriculture retard the operation of the law of diminishing returns_. The recent introduction of the silo, for example, upon the long-used and wearing-out farms of New England promises, if the public law would quit throwing in obstacles, to help restore the fertility of many of them. The discovery of new and more available fertilizers, the invention of better agricultural implements, the light thrown by chemistry upon agriculture, the consequent adoption of better methods of culture and rotation of crops, the more perfect adaptation to the various soils of the kinds of produce sought to be raised from them,--all these and similar improvements tend to increase the ratio of produce to the labor, and to disguise the law just established. The lands that are now under cultivation may be made, under more skilful modes of culture to yield indefinitely more than at present, and the vast still uncultivated lands of the world may come to render an incalculable quantity of food to the world's population; but yet, as improvements are naturally less continuous in this than in most other departments of production, as invention has much less play, as there is less opportunity for the division and co-operation of laborers, _as nothing can materially shorten the time during which the fruits of the earth must ripen_, it is certain that possible improvements will never override the law of diminishing returns; and, consequently, _that the value of agricultural produce tends constantly to rise relatively to manufactured products generally_. (k) The last point to be made under the general topic we are now discussing, is, _that the best tenure of lands in the interest of the production of material commodities is the fee simple in the hands of the actual cultivators_. This is the old Teutonic holding; but special circumstances in the British Islands have gradually changed these small holdings once cultivated by the hands of their free owners into large estates, the parts of which are leased out at will or for a term of years to tenants or "farmers" as they are there called, who, in turn, being small capitalists, as the land-owners are large capitalists, furnish the stock and hire the laborers and thus become the actual cultivators, and even often sublet parts of their own leased holdings to tenants of the next degree below, who can furnish less stock and can hire fewer laborers. The word "farmer" as used in the United States has a quite different meaning from that it bears in Great Britain; it means here a man cultivating his own fields with his own funds in his own way, and it means there a man cultivating another's fields with his own funds in a way and on terms made a matter of contract between the two; and these two modes of culture are so distinct that they are not likely to lie alongside of each other to any great extent for a very long time in the same country. Since her great Revolution, and under the action of the law requiring the equal partition of every man's landed estate among all his children, France has had for the most part the small holding tilled by the owner's own hands, instead of the great estates of the old _régime_, the average being about 14 acres to each owner, and nearly one fourth of the entire population being proprietors of land either in town or country; in the United States the plough is guided almost wholly by the man who owns the soil he tills; while in Great Britain the original peasant proprietor has almost entirely disappeared. Each system has its advocates and arguments. The question at bottom is, whether capital in the form of tillable land is more _effective_ when held in large masses and loaned out to men, who possess small capitals in another form than land, and are willing to apply these for a return upon that land, or when held in small masses and used as capital by the owners themselves, who also own some capital in another form than land and are willing to apply this to their own profit upon their land. We hold, that the latter method is better than the former, both for the maintenance and improvement of the land itself as capital and also for the current production of commodities from it, because, (1) when one owns the farm he works, from the very nature of permanent ownership he takes a greater interest in it, perhaps he has inherited it from his fathers, perhaps he has bought it and paid for it at the hardest, at any rate it is his own, and as all men work from _motives_ and the energy of the work is proportioned to the constant press of the motives, then must the owner of the capital, whose abstinence _makes_ it capital, be under the strongest possible motive at once to improve his capital and also to make the current produce from it as great as possible, since the capital itself and all it yields is his own; moreover, (2) ownership improves the moral _character_ of the cultivators, it tends to make them industrious, thrifty, frugal, independent, hopeful of the future, anxious to give their children better privileges than they themselves had, and it would seem as if the masses of men are educated by nothing so much, at least by nothing more, as and than by the _ownership_ of land, wherever such tenure is possible and easy to the masses; and (3) the outward testimony is abundant from many lands, that the peasant proprietor _is_ a happier and more virtuous man, a more productive and progressive one, than the mere tenant and farm-laborer, while there is much perhaps less conclusive testimony that leased lands are inferior in point of improvements and productiveness to the same lands when cultivated by their owners and to contiguous or at least similar lands still so cultivated. It is a cognate point yet worthy of separate mention, that a general division of lands into farms only moderately large and approximately equal is most favorable to the largest aggregate production. Such a division takes place of itself wherever the lands are held in fee simple, and the cost of land-transfers is slight, and there are no such obstacles as slavery or primogeniture, as has happened practically in New England and in the Middle and Western States, and as is now happening of its own accord more or less at the South. The Greek writer, Aristotle, quoted some centuries before Christ from "the African," probably some Carthaginian writer on agriculture, the now familiar saying, "_the best manure for the land is the foot of the owner_." This homely word long attributed to Dr. Franklin, who stole it for his "Poor Richard's Almanack" more than a century ago, is based on the sound principle, that personal supervision to be most effective must be limited in its sphere, and that the best agricultural skill becomes weak when it attempts to exhibit itself on too broad a surface. Because a man can cultivate 100 acres better than any of his neighbors, it does not prove that he will cultivate 50 acres additional to them better than a neighbor of inferior skill, who is the owner of these 50 and no more. When the freeholds are small and nearly equal a wide competition among the farmers comes naturally into play, success is seen to depend upon personal efforts of intelligence and will, and interest and hope become the motives to the most productive cultivation. There is a high pleasure in possession and in self-guided exertion, and an impulse is broadly felt over the whole region to get as much as possible out of the land and at the same time to keep good and ever improve its condition. To protect and advance his own interests, to attend upon the seasons, to watch and wait, to foresee and plan and labor,--all this develops the farmer, and gives him energy and independence; and wherever there is a broad basis of such independent yeomanry to lean back upon, when heavy taxes are to be raised and strong blows of battle are to be struck, the national safety and position are assured. 6. We come now in the last place to consider the _Costs of Production_ of material commodities of all sorts. Valuable patches of land, all prepared for Production in its several kinds, are the most important Commodities in the world, and the largest also in volume of Value. What did it cost "_to subdue_" the present tillable lands of this country? How much did it cost to get ready for grazing the broad pastures? To make accessible the forests that yield the timber? To open up the mines also and bring them into "touch" with the population? These questions are of great consequence, not that the actual past cost of any class of these more permanent "commodities" in the commercial world will be any safe guide to their present value, since cheaper and cheaper means of subduing the rugged forms of Nature are all the while coming into play, and all things that did cost more once tend pitilessly to fall to what similar things cost now; and since also it is never "efforts" alone that determine the value of anything, but efforts in conjunction with the "desires" of other men. Still, the _amount_ of efforts expended at any given time upon these more stable commodities to make them productive, that is, their cost of production, is always gauged in general by an _estimate_ of what the "desires" for them will be when completed; and this makes their cost of production a sort of loose measure of their value at the time. The main reason, however, why the cost of production of these primal commodities, namely, valuable land-patches, whatever may be expected to be produced from them afterwards, is so important, is, that as a general rule, the less the cost of any commodity meeting a universal want _the wider and surer is its market_. The larger the circle of the buyers of anything the more certain its sale; because, the world over, the men of small incomes are manifold larger in number than the men of large incomes. Society is like a pyramid: the lowest course of masonry is the longest and widest,--has the most stones or bricks in it,--and ever fewer towards the top. If we reckon valuable lands as the _primary_ commodities, then the _secondary_ commodities will be of two classes, namely, (1) the _produce_ of these valuable lands, whether animal or vegetable or mineral, such as cattle and cereals and coal; and (2) vendible material products obtained by human efforts from non-valuable land and sea, such as furs and fish. This division of material commodities into primary and secondary, and the distinction among secondary commodities according as their source is costly and costless, has never before been drawn in Political Economy; and it is fully believed, that the thoughtful reader and student will pretty soon perceive its advantages in helping clear up one of the most confused and perplexing sections of our Science, namely, that which relates to the causes and measures of _Rent_. We are now to inquire into the elements of the _cost of production_ of each of these three classes of commodities; and we may find ourselves surprised at the simplicity and certainty of these elements. _1._ We will now look into the Cost of Production of valuable land-patches themselves, the first and most important class of commodities. Here, as everywhere else in Valuables, we discover certain free gifts of Nature, without whose presence indeed the value could never come into being, but which are not _constituents_ of the value, because they are gratuitous, given of God, and because the natural competition among buyers and sellers inevitably flings out from all effect on value of the otherwise possible action of these free and bountiful gifts, as have been already fully illustrated in chapter first. No piece of land ever yet had one particle of Value until human efforts of some sort had been expended on it or in some connection with it, for two excellent reasons, first, no man would ever even _think_ of saying to another in reference to such a piece of land "Give me something for it and I will pass it over to you," and second, even if he did think of such an absurdity the other would reply "Why should I give you anything for something to which you have not the least claim, especially as I can take for nothing just such pieces all around here?" It must be remembered, not only that God gave the whole earth to all mankind without distinction, but also that his bountiful hand scattered all peculiar kinds of patches in great number upon each of the Continents. There is a plenty of Utility (gratuitous) in land-parcels just as God made them, but no possibility of Value (onerous) till other hands than His have touched and benefited them. What, then, are the onerous elements that enter into the value of land-parcels and constitute their Cost of Production? There are only two such elements, namely, _Cost of Labor and Cost of Capital_. To find out exactly what "Labor" is, and what there is in it entitling and assuring its reward in "Wages," will be the task and perhaps also the pleasure of the next chapter; but it will suffice for the present discussion to say, that Labor is human exertion put forth for the sake of a commercial return. Lands can by no possibility be brought out of a state of nature into a state of value without the expenditure of Labor; and the actual or estimated cost of this labor, accordingly, is the first constituent of the Cost of Production of valuable lands considered as Commodities. Labor, however, can not apply itself to free lands in order to make them valuable without the co-operation of another onerous element, namely, Capital, in some of its many forms. For example, if forest lands are to be made tillable, the trees must first be cut down, and this will require besides the muscular exertion of the laborer something in the way of an axe, which is capital, the result of previous labor reserved to assist in further production: if native prairie is to be subdued to a valuable commodity, something of the nature of a plough must be employed in the process, and horses or a steam engine to propel it, and a plough and horses are capital, and still require fresh labor to make them useful in production. But capital always costs something; and, therefore, the cost of the Capital enters in as a second constituent into the cost of production of Land-Commodities. But these two costs are all. We shall search in vain for any other onerous element in the cost of producing commodities. There are two variables only in the Cost of Production, which itself is the sum of the two subordinate costs. (a) And now let us analyze first the Cost of Labor in this connection, and then second the Cost of Capital, and we shall soon reach radical and unchangeable ground, and find in the sum of these two an aggregate Cost of Production, and also all of the variables that can ever enter into such Cost. It is plain to reason, that only by Labor non-valuable land-pieces ever did or ever can become valuable. Captain John Smith understood this in 1607 at Jamestown as well as anybody understands it now: there were 48 gentlemen, and only 12 tillers of the soil, among the 105 colonists, who originally landed there: "_nothing is to be expected hence_," he wrote of the new country, _but by_ "_labor_:" new supplies of laborers, aided by a wise allotment of land-parcels to each colonist, secured after five years of struggle the lasting fortunes of Virginia: "_men fell to building houses and planting corn_": the very streets of Jamestown were sown with tobacco; and in fifteen years the colony numbered 5000 souls. Now the cost of Labor is analyzable into three variables only, namely, (1) the _efficiency_ of the labor; (2) the _rate_ of nominal wages paid; (3) the cost to the employer of _that valuable_, in which the wages are paid. Let us see: what an employer wants _is to get things done_; consequently, if an employer hire two men to work for him at the same rate of wages, and if one be twice as efficient a laborer as the other, the _cost_ of the labor of the first is only one half the cost of the labor of the second: therefore, a _high rate of wages_ does not mean _a high cost of labor_ whenever and wherever the laborers are very efficient. As a rule, it is found, that the cost of labor in reference to a given product is _the least_ in those countries, like the United States and Great Britain, in which the rates of nominal wages are _the highest_; because, it is found also, that a high _efficiency_ of laborers accompanies both as a cause and as an effect high rates of wages. Secondly, there are striking differences in the rates of nominal wages paid for a day's work in the same general employment in different parts of the same country, and especially in different countries. The agricultural laborer in the west of England, say in Wiltshire, gets about 10_s._ per week, while in the north of England, say Nottinghamshire, laborers at the same general work get about 16_s._ per week. Walker in his Wages-Question gathers from the best authorities many such statements as these: "On the Grand Trunk Railway in Canada the French-Canadian laborers received 3_s._ 6_d._ a day, while the Englishmen received from 5_s._ to 6_s._ a day, but it was found that the English did the greatest amount of work for the money." "In the quarry at Bonnieres, in which Frenchmen, Irishmen, and Englishmen were employed side by side, the Frenchmen received 3, the Irishmen 4, and the Englishmen 6, francs a day; and at those different rates the Englishman was found to be the most advantageous workman of the three." "The statistics of the iron industry in France show, that on the average 42 men are employed to do the same work in smelting pig iron as is done by 25 men on the Tees." "In India, although the cost of daily labor ranges from 4-1/2_d._ to 6_d._ a day, mile for mile, the cost of railway work is about the same as in England." Thus it is plain, that a _high rate of wages_ does not import a _high cost of labor_, but rather the reverse. A vast mass of current fallacies are disposed of in a moment by this truth seen in its grounds. The United States have shown in the past the highest rates of nominal wages in the world, and at the same time have shown the lowest costs of labor to the employers, because as a rule the laborers here have been more efficient than elsewhere. England has the highest rates of wages and the lowest costs of labor in Europe for the same reason. The degree of _efficiency_ shown by different laborers is the second variable in a cost of labor. Thirdly, if that valuable, whether money or other, in which wages are paid, varies in cost to the employer, then the cost of the labor paid for by that valuable, efficiency of the laborers, and nominal rate of pay remaining the same, will of course be varied thereby. We shall learn hereafter in the chapter under that title, that the value of "Money" is by no means invariable even in one country, just as we have already learned the variable nature of all other values; and, too, wages are not always paid in money, though they are commonly reckoned in the terms of money; and accordingly, the third and last variable in a cost of labor is the cost to the employer of that valuable, whatever it be, in which the wages are paid. Assuming, as we may, that given wages are paid in money, then any country that has for any reason a more abundant money than another may clearly pay higher rates of nominal wages than that other without making its costs of labor any higher than in that. The United States, for example, has usually had a very abundant money (not always of the best kind), which of course has tended to make higher the current prices of all commodities, and this has enabled capitalist-employers to pay higher nominal rates of wages, without at all enhancing relatively the costs of labor, and also without really benefiting the laborers. (b) We will now analyze second the Cost of Capital in this connection, as the only other element of cost in the Cost of Production of Commodities in general, and particularly now in the cost of making worthless land-pieces valuable so as to be used in further production. Here too we find three variables, no one of which can be safely neglected any more than the other three in the reckoning that has for its object a prospective cost of production. These are, first, _the current rate per centum_; second, _the time for which the capital is advanced_; and third, _the liability of that form of capital to slow or rapid wearing out_. For instance, under the first variable, the rate per centum of capital, if the rate at Amsterdam be 3 and that at New York be 7, if the cost of labor be equal in the two cities, if the time of advance be one year, and if there be no liability of the capital to wear out; then any commodity made at Amsterdam with an outlay of $100 may be sold at a profit for $103, while a similar commodity made at New York with the same outlay cannot be sold for less than $107. All other things being equal, a _low rate per centum_ of capital in any country gives that country an advantage in the markets of the world for selling its commodities over other countries offering similar commodities where the rate is higher, because its cost of their production is less. Of course also such a country can subjugate its wild lands and make them valuable at less cost than the other countries. To illustrate the operation of the second variable, the time for which the capital is advanced, let the same suppositions be continued, except that the _time of advance_ at New York be extended to four years. Then the commodity may be sold at and from Amsterdam, as before, at $103, but the corresponding commodity at and from New York for not less than $131, so far as mere cost of production determines the prices. This point is also well shown up in the case of wine, which, to reach its perfection, requires to be kept a number of years, for, if it be genuine and ripe, its cost of production has been by so much enhanced by its delay in reaching the market. If the time of advance be long, and the rate _per centum_ high at the same time, the cost of capital from the two causes combined multiplies the cost of the product; and consequently, only countries in which the _rates_ are low can successfully engage in enterprises requiring a large capital to be invested for _long periods_ before returns are realized. One million of Dutch capital at 3% a year, expecting to realize returns only after 20 years, may be remunerated by products selling for $1,806,111; but American capital under like circumstances, except that the rate here is 7%, must have a return of $3,869,685, or lose by the operation. To illustrate the action of the third and last variable, we must observe, that all forms of capital wear out, but some forms much faster than others, and that this makes a difference in the sinking-funds that must be reserved out of the gross profits of the capital in order to replace the principal whole. This difference will at once affect the cost of capital, and so of production, and so indirectly the ultimate value of the product. Suppose there are two commodities, which we will call A and B, produced in two different establishments, in each of which is invested a capital of $11,000, in one of which is used a machine that costs $1000 and is wholly worn out by one year's use, and in the other a machine costing the same sum, which will last, however, for ten years. Suppose further, that the rate _per centum_ of profit be 10, and the time consumed in completing each of the two products be one year. Now there is a marked difference in the Cost of Capital in the two establishments, and this difference will indirectly but immediately appear in the Value of the respective products. For, to A must be charged not only $1100, the interest on the whole capital at the current rate, but also another $1000, wherewith to replace the machine already worn out by a single year's use. A, accordingly, cannot be sold without loss for less than $2100. B, however, will cost less and can be sold for less at the usual profit. Because, to it must be charged, as before, $1100, current rate of profit on the capital invested, and only $100 (really less than that for an obvious reason) to replace the durable machine after ten years' use. The capitalist, therefore, can sell B for $1200, and make something over the current rate of profit. Since the cost of capital invariably resolves itself into these three variables, every capitalist in order to become successful as such must give strict attention to all three of these points. To any one who projects the making of valueless into valuable land, or valuable into more valuable land, by the expenditure of capital upon them for that purpose, it becomes a matter of prime importance for him to inquire how long a time the whole process will take, how much he must allow _per annum_ for the cost of all the implements employed, and especially how complete in action and duration are these costly implements. The _durability of machinery_, whatever the name it bear and whatsoever the work it do, is at once the most significant and the most neglected point in the actual and prospective Production of our time and country; and no condemnation can be too severe upon a policy of public law, such as now prevails, whose whole tendency and actual effect is to worsen the quality and lessen the durability of all commercial implements whatsoever, from the needle to the locomotive. The same abominable public policy increases the cost and decreases the durability of all agricultural implements, like the axe and the plough, designed and adapted to transform valueless and non-productive into valuable and food-producing lands. _2._ Now, having fully seen the elements of the cost of reducing land itself from a natural into a valuable and productive form, what next are the elements of the cost of production of those material commodities produced for sale _by the aid_ of these subdued and now productive lands? Commodities so produced constitute the second class in the law of their Cost of Production. And a vastly important class it is. The food of the world, so far as that food is purchased as the product, whether animal or vegetable, of valuable lands; the fuel of the world, so far as that fuel is bought from owned and accessible forests and mines; the clothing of the world, so far as the fabrics come from the cultivated cotton and flax and wool and skins offered for sale; the shelter of the world, so far as the wood and brick and stones and lime are drawn from valuable lands and quarries; and the warehouses and the temples and the theatres of the world, built, as they are, out of the products of costly and rentful lands: these all, and many more like these, constitute a class of commodities immense in their volume, whose cost of production has in it an element peculiar and additional to that of the first class already analyzed, and to that of the third class also soon to be considered. This peculiar and additional element in the cost of production of these things, class second of commodities, is called RENT. Interminable have been and still are, especially in the British Islands, the definitions and discussions upon Rent: they have boxed the compass of economical nomenclature: they have run up and down the entire gamut of possible expression on such a theme. David Ricardo, the Anglo-Jewish Banker, formerly announced, near the beginning of this century, that "_Rent is that portion of the produce of the earth, which is paid to the landlord for the use of the original and indestructible powers of the soil._" Two objections lie with fatal weight against this definition and all that is involved in it: first, there _are_ no "indestructible powers of the soil," either "original" or acquired, since the universal verdict of all agriculture has been and still is, that the "powers" of all soils are continually wearing out, and need to be constantly renovated by fertilizers and manipulations of all sorts; and second, even if there were such "original and indestructible powers," it would be impossible to separate them from the additional "powers" acquired by means of the capital expended to bring that land from the state of nature to its present state, and the landlord has had nothing to do with any "powers" of the land except those conferred by his own labor and capital upon it, and can by no possibility put himself into a position where he can _enforce_ any claim of his own for a return from any "original powers" of any land-parcel whatever. The simple truth is, and it illumines the whole subject of agriculture and its products, that the value of land-parcels and also the value of the transient use of them, or _Rent_, hang wholly on the onerous human efforts involved in them, and not at all on original and gratuitous utilities. Science has only to unfold the plan of God and its actual and beneficent workings. "_In the sweat of thy face shalt thou eat bread._" All that God furnishes to men in order to get a living and in order even to get rich is Opportunity. The opportunity is ample. The call to a partnership in Effort as between God and men is loud and constant. The world with all its powers, free lands with all their utilities, the change of seasons, the blessed sun and the blessed dew and rain, the constant disintegration of rocks beneath the soil and the gradual clothing with lichens and moss and verdure of the rocks above in preparation for a new soil, and the wonderful chemistry of the vast laboratory of Nature, all work night and day without fee or reward in the service of mankind. But men themselves must not intermit their labor. All values are of _their_ creation and maintenance. If they cease or relax their labor upon land-pieces so only made valuable and rentful, then will the value and the rent begin to slip away inexorably, and no prayers and no regrets will avail to call them back. Now, then, since commodities of the second class in the cost of their production must respond not only to the _current_ cost of Labor and Capital in bringing them to market, but also something additional in the way of Rent to the _past_ cost of the implement, the land-parcel, without whose contributing agency present results could not be gained; _Rent is the Rendering for the present use of a Valuable made such by past Labor and Capital._ Land-parcels leased for agriculture; mines and the access to them leased for the production of metals and minerals; and forests whose growth has been permitted by the past _abstinence_ of their owners; all properly yield a rent; because these forms of capital, whose existence is due to past labor and capital, are present contributors to products, whose sale must compensate not only present labor and the use of current capital, but also the use of these more permanent forms of capital long ago created. A competent authority estimated in 1881, that the land-parcels of the United Kingdom of Great Britain were worth £3,000,000,000; and there were at the same time 6,000,000 of inhabited houses, excluding factories and business premises and tenements renting for £20 and under. Most of these lands and houses are rented by their owners to the actual occupiers on the just principle explained above, inasmuch as the lease-system is the prevailing one in that country. According to the Census of 1880, there were 4,008,907 so-called farms in the United States in that year. Most of these are held in fee simple, and are tilled by their owners; but just so far as land-patches and forests and mines are leased in this country, their products must provide in their price of sale for current rents, as well as current costs of present production. This is just as it should be, and just as it must be, if Capital is to take this form of assisting the processes of future production. But this form of Capital, as well as all other forms of the same, is perpetually wearing out, that is to say, is gradually losing its power to contribute as at first to the present and future processes of production. This loss is in the very nature of things,--in the very nature of all Capital. The great Father never intended that His children should cease from work. He has ordered all things so, that they cannot cease from work, and continue to live in any comfort and progress. Value, as we have already thoroughly learned, is not a quality that can be put into anything _to stay there_: it is a recurring relation of mutual services between man and man; and each of these services of the three kinds involves recurring Efforts. Capital is a form of Value; and, consequently, it cannot possibly take on a shape not subject to the _law of diminishing returns_. This is deductive proof. And precisely the same result is reached by Induction. Men have noticed and recorded the fact at all times, and have made provision for it in their pecuniary calculations, that tools and machinery need to be repaired and then replaced, that the current interest on moneyed capital tends to decline from generation to generation in all progressive countries, and also that lands and other forms of real estate so lose their productive and rental power unless cared for in renovation that men migrate and emigrate in consequence. How much Rent shall the tenant pay to the landlord for the present use of the latter's old lands? Or in other words, how much shall be added to the going price of the product on account of the diminishing return due for the use of the old landed capital? This is a hard question to answer: probably the hardest question that is ever asked in practical Economics. Mr. Gladstone wrestled with it as complicated with a larger political question in passing the Irish Land Bill of 1881. Another honest athlete, Mr. Parnell, wrestled with it upon the same parliamentary arena. Scores of able and practical statesmen in Great Britain, and elsewhere, have struggled to reach a practical answer to this question; and scores of able and theoretical economists in all countries have striven to reach a theoretical answer to it. Most of these answers have been inharmonious, and many of them contradictory, with each other. The Land Bill of 1881 created a parliamentary Commission, whose duty and authority it was, to visit the Irish counties in person, to gain information in detail, to take sworn testimony of all the parties concerned, and then to lift or lower rents according to their discretion. The discontent of the Irish tenants in general was considerably mollified by the action of this Commission; while the debates and wrangles of the parliamentary session of 1889, and the persistent agitations for Home Rule (an agitation at once political and economical), show that the results of the work of that Commission were not wholly satisfactory. (a) It is easy enough to see why the solution of this general problem is so extremely difficult. The new is mixed in with the old. The result of the old labor and capital is a productive piece of land; the current labor and capital is expended upon the same piece to make it more productive; the same sort of thing is done now that was done then, and the results of the two are now thoroughly intermixed; there were original free utilities in soil and growths and deposits, but these had and have no value and can never yield rent; the old labor and capital improved the soil by clearing and drainage and fertilizers, and made the growths and deposits more valuable and accessible, so that even the old onerous was more or less transformed into the original gratuitous; and now the new onerous, the fresh cultivation and fertilization and betterments generally, in soils and roads and buildings, are inextricably commingled with former betterments of the same general kind and with the original free gifts of Nature. No wonder the Commission of 1881 found difficulty in determining what was what and which was which! No wonder that Irish tenants on long leases quarrel with their landlords about the betterments, how much is new, how much is old! It is clear, that when the lease is ended, the landlord ought to compensate the tenant for all that portion of the latter's betterments, which is not already worn out; it is equally clear, that the tenant ought to be willing to pay a fair rent for the use of the unexpended betterments of the landlord and his predecessors; while there is room and verge enough for endless disputes between them as to the respective amounts of these, and consequently as to the amounts of rent and of its remissions. These difficulties and intricacies do not belong to the _principles_ of the Science of buying and selling, which are in the main clear and certain in their action, but are incidents of determining in certain cases _what that is_, which is bought and sold. Parties in interest in all kinds of buying and selling are sometimes compelled to go to the courts in order to have the Law decide what their respective rights are as buyers and sellers; but this is no fault of Political Economy as a science, or of trading as an art; two men in all cases make their own bargain, according to their own estimate of the respective rendering and receiving of each; if the uncertainties of language, the misconception on the part of one or both of the terms agreed upon, and the misapprehension of some of the circumstances of the case, breed confusion and litigation, all this cannot be justly charged to the science of Political Economy. Nevertheless, it is into these incidental intricacies and uncertainties, that Henry George's now famous theory of landed rents and the taxation of them, strikes its roots. Instead of building his structure upon firm and open ground, so that thoughtful men can see that his basis is solid and scientific, Mr. George dashes at once into a thicket and lays his foundations with quickness and assurance where all is dark and doubtful, or at best where all is rather incidental than fundamental and demonstrable, and pretty soon displays a superstructure that appears attractive both without and within, through whose airy halls he knows how to conduct to their delight the credulous and discontented, and on whose walls hang plausible pictures calculated to invite and hold the attention of the masses. Let the perfect integrity and rhetorical ability of Mr. George be freely conceded; let it be freely conceded also, that he teaches in his books and lectures a great deal of vastly important industrial truth in a popular way so as to accomplish great good, such, for example, as the imperative need of greater simplicity in taxation, and the indisputable right of the people to their liberty in buying and selling; yet it must at the same time be owned, that he has never yet found out exactly what _Value_ is in general, consequently what are the causes of value in lands, and what are the nature and grounds of Rent. Something more of patient and radical analysis at the outset, and of logical and scientific unfolding afterwards, would have made Henry George one of the chief benefactors of his age. (b) It is also very easy to see, that the current price of produce, that is, what is gotten in return for the sale of what is gotten out of the land-parcels, must have a dominant influence upon what can be paid as rent for the use of the parcels. Unless the return from the produce be sufficient to reward at current rates the present labor and capital employed upon the parcel, the parcel will not continue to be cultivated at all, otherwise men would act without a motive for action, which they never do; unless, therefore, the price of produce be more than high enough to repay current wages and profits, there will be nothing left for Rent; and, consequently, the amount of the rent that can continue to be paid for lands will be _the difference between the going price of what is produced from them and the current expenses of cultivating them_. Here, as everywhere else within the domain of Exchange, Competition exerts its beneficent action. If one dealer, or ten, endeavors to put a price upon the produce more than enough to pay current wages and profits with a fair margin for the diminishing rate of rent, there are a plenty of others, dealers in the same grade of produce, who will be content with a fair return for present and past expenditure of labor and capital; and the action of these will effectually debar the others from exorbitant rates. The price of produce, accordingly, under free competition, is the divinely appointed regulator of landed rents. It regulates also, though more indirectly, the current rates of wages and profits in agriculture. Very different from this is Ricardo's doctrine of Rent. He makes everything turn on the Cost of Production of the Produce, which is Effort, ignoring the ever-varying demands for the produce, which is Desire. His doctrine, too famous and too long received for us to pass by in this connection, though now superannuated, was for substance, this: there are some lands in every country whose produce just repays the expenses of cultivation, and consequently yields no margin for rent; and the cost of production on these rentless and poorest lands under cultivation, will determine the price of the produce; and as there can be but one price in the same market, the produce raised on more fertile land will be sold for the same price, and this price, besides paying the cost of cultivation, will yield a rent rising higher according as the land is more fertile; so that the rent paid on any land is always a measure of the excess of productiveness of that land over the least productive land under paying cultivation; and therefore, an increased demand for food in consequence of increased population, and the higher price resulting, will force cultivation down upon still poorer soils, or compel a higher culture for less remunerative returns on the old soils, according to the law of diminishing returns, which in either case will raise the rents on all the soils above that grade that just repays the expenses of cultivation; so that it is the sole interest of landlords, as such, that population should be dense and food high, their interest being directly antagonistic to that of the other classes of the community. (c) Finally, in this connection, it is easy enough to see, what were the motives on the part of the landlords, and what were the results on the part of the masses, of Great Britain, in putting on and keeping on the infamous Corn Laws, so-called, which were repealed forever in 1846. The Corn Laws forbade the importation of foreign cereals under heavy pecuniary penalties. The simple purpose of the landlords then governing England was to raise the price of their grain by shutting off Competition of foreigners by means of these prohibitory tariff-taxes. It was Protectionism pure and simple. It was designed to raise the price of bread to the masses of their countrymen, and often did raise it to the point of their starvation. But we have just seen, that the higher the price of the produce, the wider the margin for Rent for the lands that produce it. The Corn Laws of England enriched the landlords at the expense of all other classes and to the starvation of many of the poor. As has been well said, this was the most successful of all the many expedients that have been tried, "_to fertilize the rich man's land by the sweat of the poor man's brow_." The words of Daniel O'Connell, spoken Sept. 28, 1843, in his parliamentary fight against the high-tariff Corn Laws, were surfeited with truth and righteousness: "_But what is the meaning of 'Protection'? It means an additional sixpence for each loaf; that is the Irish of it. If the landlord had not the protection, the loaf would sell for a shilling, but if he has protection, it will sell for one and sixpence. Protection is the English for sixpence; and what is more, it is the English for an extorted sixpence. The real meaning of 'Protection,' therefore, is robbery,--robbery of the poor by the rich._" At the present moment and for twenty-five years past, the public laws of the United States ostensibly relating to Taxes, have had an immense influence upon the value and rents of the agricultural lands of the country to depress them; because these laws have put up nearly or wholly impassable barriers to the coming in of those foreign goods, against which the farmers would naturally and profitably and inevitably have sold their surplus agricultural produce; by destroying the foreign market for farm products, these laws do in effect destroy a large part of the value of the farms of the country, and of what would otherwise be the rentals of a part of them; the Constitution of the country expressly forbids any taxation whatever of Exports, but these laws have precisely the same effect on the value of farm products if they were themselves forbidden to be exported, because those goods for which these would be otherwise exchanged for a profit are forbidden to be imported. _A market for products is products in market._ Thus these wretched laws lower the price of farm products, and consequently the value of farms and of their rents, and impoverish the farmers who are nearly one-half of the entire population of the country. While these paragraphs are being written, comes the intelligence of the formation of the "North American Salt Company," whose purpose is in their own language "_to unify and systematize the salt interests of the United States and Canada_," and to this end "_arrangements have been completed for the purchase and control of nearly all the existing salt properties of the North American continent_." As this is a fair instance out of some thousands, in which a tariff-tax has the designed effect to lift or lower values which deeply concern the people, let us look at it for a moment. On the average of the past twenty-five years the tariff-tax on salt has in general doubled the cost of that necessary of life to the whole people of the United States. When Canada had no such tax, American makers of it sold salt sometimes to the Canadians 40% less than they would sell it to their own countrymen. On the basis of this United States tariff-tax (it would never have been dreamed of without it) this new company comes forward with a scheme of international monopoly to control in their own interest the price of a prime necessity of life. They propose to issue stock and bonds to the amount of $15,000,000, with which to buy up "the existing salt properties"; and they frankly avow in the prospectus from which we are quoting, that profits of $2,000,000 a year on their capital are justified by the present outlook. Whence are these immense profits to come? Out of the pockets of the masses of the American people bound hand and foot in the meshes of a legal monopoly, which they themselves allow themselves to be ensnared in! In a similar but more outrageous way, are bound up at the present moment in the secret so-called "Trusts" about forty more of the necessaries of life; each one of which, unless it be the "Standard Oil Trust," has its footing in a so-called "protective" tariff-tax, and would collapse instantly on the repeal of that! It was necessary in order to complete our study of the second class of material commodities, namely, those produced from valuable and rentful lands, to glance in passing at the frequently disturbing effect on these, aside from their cost of production, of sinister laws plausibly imposed upon an unsuspicious people in the interest and at the instance of a privileged few. _3._ It only remains in this chapter, devoted to the discussion of material Commodities in their three economic classes, to conclude with a glance at the third class, namely, those material valuables that are obtained from free and unowned sources, such as masts cut in the wilds of America on both oceans two and three hundred years ago, and fish caught on the Banks of Newfoundland, and furs gathered to such profit in the north by the Hudson's Bay Company, and salt evaporated in the tropics by a free sun from old ocean's brine. These, and all such things as these, have a cost of production determined only by the cost of present labor and capital, and consequently a grade of value determined only by present Demand and Supply, unentangled for the most part by questions of rent and prior claim and taxation and nationality. All these things, accordingly, are relatively cheap, except as the element of Scarcity, and on that account of strong Desire, may sometimes come in to enhance the value. No man can tell the time exactly when French fishermen from the coasts of Brittany ventured over to the Banks of Newfoundland in their frail barks for the abundant cod in those waters, and went back home again at the close of the season freighted with plenty of a free and cheap food for their families and countrymen; or when it was that rude men calling themselves English followed these in their western track for the same general purposes, to become thereby hardy seamen on deeper seas, such as those who gained long afterwards the naval victories of Nelson; and we have all read in the fascinating pages of Irving the ventures and adventures of John Jacob Astor, the attraction of free furs in the Northwest of America, the hazards and the history incident to obtaining them, and the immense profits gained by their sale in the markets of the old world. FOOTNOTES: [3] Baines' History of the Cotton Manufacture, as condensed and quoted in Walpole's History of England, Vol. I. [4] Charles Knight's History of England, III. 292 _et seq._ CHAPTER III. PERSONAL SERVICES. There are three kinds of things only ever bought and sold in this good world of ours. In the preceding chapter we have conned carefully the first kind, material commodities, in their three subdivisions of land-parcels and products of such parcels and products of free land and sea. In the present chapter we come to study the second kind of valuable things, personal services, which we shall also find subdivisible into three classes. We have treated of Commodities first, because their value in its grounds and changes is more easily understood than that of the other two kinds, while in point of _time_ Services might well enough have been considered first, since it is these that manipulate into value the originally rude forms of Nature. The main difference between the two is this: in Commodities the attention is naturally drawn to tangible _things_ offered for sale, such as lands and wheat and fish; while in Services the attention is strongly drawn to _persons_ offering them for sale, such as the common laborer and the skilled artisan and the professional artist. This distinction, though obvious and useful as between commodities and services, is not after all radical; because Economics is a science of Persons from beginning to end; inasmuch as the services precede and are merged in the commodities, and inasmuch as the Desires (personal) of some men for the renderings of other men antedate and underlie all exchanges whatsoever. Personal Services are technically named _Labor_ in the science of Political Economy. This nomenclature is old and familiar, and will probably always persist on that account, but it is not of itself of the happiest, and it gives birth to some ambiguities and many fallacies. Let us look at these for a moment, before we pass to the definition and discussion of what is commonly called Labor, but what is better described by the term, Personal Services. Contrast will help us a little here. Commodities can always be measured by some _Standard_ outside of themselves: for example, land-parcels are measured into acres and fractions thereof by a surveyor's compass and chain; metals and cereals are weighed into centners and parts thereof by scales of some sort; and sugar is not only weighed at the custom-house, but tested as to other qualities by the polariscope. Now land, wheat, sugar, and all other commodities, have an existence separate from the standards that measure them, and whether they are bought or not they continue for a time essentially the same. They exist _per se_. They were indeed brought into existence on purpose to be sold, and if they cannot be sold, similar things additional will not then and there be brought into the market, but these things themselves are there separate from the seller and separate from the buyer. Not so with personal services. They do not exist _per se_. They are not separate from the seller, and they cannot come into existence without a buyer. _Skill_ is something the artisan cannot part with, nor can he sell the service to which the skill gives rise till the buyer be present with the return-service in his hands. The Laborer of any class cannot put his "service" on exhibition, and then wait for a buyer, as the commercial drummer sells goods by sample. The doctor, for example, must have his _patient_ before he can show his skill. The buying and selling of personal services, accordingly, is more intimate and ultimate than the buying and selling of commodities: it brings people more closely together: it depends much more on traits of _character_ and on acquired _skill_. Right here we may see clearly the main objection to the term, "Labor," as commonly used, and the bad fallacy to which it gives birth. "Labor" is indeed in form and origin an _abstract_ term as much as "service" is, with this difference, that the word "service" radically implies the person serving and another person served at the same instant; but the term "Labor" has long been taking on itself in the mouths of men a _concrete_ meaning, as if it might be something separate from the laborers, as in the common phrase "Labor and Capital," which has already done a world of mischief and is likely to do a good deal more, because it seems to imply, that the two are alike in independent self-existence, and that they stand over against each other on equal terms for a fair bargain or for a free fight. This is not the case, as we shall see more fully later; since capital is something separable from the capitalist, always a commodity or a claim, always transferable, always valuable or else it will not be "Capital." Some of the German economists, and particularly John Conrad of Halle, have avoided this difficulty by a clean nomenclature. They say "_Labor-givers_" and "_Labor-takers_," instead of Laborers and Capitalists, and especially instead of "Labor and Capital," thus emphasizing the personal element in both terms, and also leaving themselves free to define and use the term "Capital" as distinct from any particular capitalist, while the term "Labor" cannot be defined and used as distinct from any given laborer. This precise point, though probably new, is of very considerable consequence in the true doctrine of Wages. We are compelled by the exigencies of the English language and the still stronger fetters of economical custom to continue to use the terms "Labor" and "Laborers" in their technical sense, and in connection with the scientific terms "Capital" and "Capitalist"; but we shall always use each of these words in the same meaning, and free them as far as possible from the fungous accretions that have fastened upon them in the course of time. _Personal effort of any kind put forth for another in view of a return-service and for the sake of it is labor._ _Laborers are persons rendering their peculiar services to other persons for a commercial reward._ _The valuable received by a laborer for his service rendered is Wages._ These definitions exclude from our circle of view all Efforts of anybody put forth for other than commercial reasons; and they include all Efforts of everybody, from the President to the scrub, put forth under the inducement of a return-service or Wages. No good end seems to be reached by trying to distinguish, as Francis Walker does in his "Wages-Question," between the "Wages-class" and the "Salary-class," because there appears to be no scientific or other economical difference between Wages and Salary. Each is a return-service for another service rendered, and that is all there is to it. The whole class of Laborers, accordingly, in any civilized and progressive country, is immensely large and becoming constantly larger. Excluding, of course, from this class all persons in so far as they render so-called moral services to others, which are in their very nature _free_, such as those that spring from duty and courtesy and benevolence, and these happily are also an immense and fast-augmenting class, though our Science has nothing to do with them directly, the number of those persons in every community and in every rank of every community, who sell personal services of some sort in distinction from commodities and credits, is pretty nearly as large as the _per capita_ population of adults and competents within that circuit. It must be borne in mind, that the same persons whose primary business it may be to sell commodities or credits, often sell services also in some subordinate or incidental way; and also, that the same persons, who are dispensing on the one hand their gifts and moral renderings freely, are frequently of the busiest in selling on the other hand their personal services for pay. In other words, the sellers of Services cannot be discriminated _as to their persons_ from other sellers, or even from downright _givers_; but the _action_ itself, and the law of it, is quite distinct in the three cases of selling, and utterly diverse in the one case of giving. Now, can we sub-classify within this vast class of service-sellers, so as to help us understand better the class as a whole, and so especially as to help us understand better the Law of Wages within the entire class? We have just criticised Walker in a friendly spirit for attempting to draw lines of demarcation within this wide field: can we draw any useful ones ourselves less open to criticism than his, and such as rest back upon fair differences in nature and form? Walker makes his distinctions turn on certain peculiarities in the return-services: can we make ours turn better and clearer on certain peculiarities in the services themselves? We can at least try. Hard and fast lines cannot be drawn here, we admit. The exterior lines around Commodities and around Services and around Credits are each sharp and firm; and so is the deep-fixed circle that includes all three of these alike as Valuables; but _within_ the smaller circles the lines of needful division are somewhat more shadowy, though we leave with confidence to competent Economists the triple lines but just now drawn within the sphere of material Commodities. A rude classification among "Laborers," then, yet one useful and indeed indispensable, may be made into (1) Common Laborers, (2) Skilled Laborers, and (3) Professional Laborers. Common Laborers are those, whose services may be acceptably rendered by an ordinarily competent person after a little patient practice and instruction, without anything corresponding to an _apprenticeship_ as a preliminary to their selling their service. Farm hands, teamsters, porters, waiters, miners, 'longshoremen, railroad laborers, and many more belong to this first class. Owing to the ease with which this class can be recruited at any time from growing boys and emigrating foreigners and from those who may have essayed the class above and fallen back, the Supply here is kept constantly large relatively to the Demand for such services, and consequently Wages are always the lowest and steadiest in this lowest class of Laborers. Skilled Laborers are those, who have had to pass through something equivalent to an apprenticeship in order to be able to offer their services for sale. These, as a class, present some considerable points of difference from common laborers. Their numbers are fewer, for the reason, that relatively few parents can afford to give their children the time and money needful for them to learn a trade, or to become skilful in any art requiring prolonged education; as a result of this lessened press of competition among themselves, and because being intelligent and consequently mobile they are able to insist better on their claims and distribute themselves to points where their services are in more demand; and because they are likely to be subject to a stronger Demand than common laborers, on account of the close connection of their services with special accumulations of Capital; the Wages of skilled laborers will infallibly rule higher than those of common laborers. Artisans in general constitute this second class of laborers. Professional Laborers are those, who have received a technical education,--something more than an apprenticeship,--expressly to fit them to render difficult and delicate services to their fellow-men for pay, and who possess besides the requisite character and talents and genius to enable them to succeed. Clergymen, physicians, lawyers, literary men, artists, actors, and many more, render professional services loosely so-called. The obstacles at the entrance of this path occasioned by the lack (1) of appropriate natural gifts, or (2) of the requisite industry and character, or (3) of the means of suitable education and training, practically exclude so many persons, that the competition in the higher walks of professional life is not such as to prevent a very large remuneration for services rendered. The demand for these is often peculiarly intense, as well as the supply peculiarly limited. When great interests of property, of reputation, of life, are at stake, it is felt that the best men to secure these must be had at almost any price. Fees and rewards for services of great delicacy, of great difficulty, of great danger, are paid by individuals and corporations and nations without grudging. Comparatively few men reach the highest points of excellence in their respective professions, and they have in consequence a natural monopoly in these fields of effort, and receive for their labor a very high rate of Wages. For example, Daniel Webster often took a fee of $1000 for a single plea in court; Paganini, a like sum for an hour's playing on a violin; and Jenny Lind, at least as much for an evening's singing in a concert, because there was in each case a strong demand for a peculiar service and only one person in the world who could render that service in the circumstances to the same perfection. But the objections which lie with such force against artificial monopolies, cannot be urged at all against a natural monopoly; for, if the road to excellence be open to all, and no artificial obstructions thrown in the way of any, there is no blame but rather praise for him who distances all competitors, and asks and receives for services of peculiar excellence a large remuneration. Exchange rejoices in all diversities of advantage that are the birth of freedom, but reprobates with all her force advantage that is gained by artificial restrictions, because artificial restrictions always infringe on somebody's right to render services for a return; and the right to render services for a return is the fundamental conception in the Right of Property. Is it open for us, to gain a somewhat deeper and clearer sense of _what that is exactly_ that is rendered in these three classes of personal Services, before we pass to the considerations which determine in all cases their Value? It is plain, that what common Laborers sell for the most part, if not exclusively, is _muscular exertion_ of some kind, guided by the mind as trained in habit, and aided by appropriate implements, all designed to meet the desire and so call forth the return-service of the purchaser; it is equally plain, that skilled Laborers with scarcely any more exceptions than before sell the same sort of physical exertions, or motions, this time guided by mental action of a higher grade and wider scope, and aided also by more elaborate tools working towards the desires and consequent returns of a set of buyers more scrupulous and exacting than the first set; and it is plain enough, that some of the highest professional services, for instance the surgeon's, though not by any means the mass of such services, are essentially of the same kind as the two former, namely, muscular motions, guided by the most intimate and exact knowledge of things, and aided too by instruments the most scientific and expensive. In many of the professional services the physical element sinks to a minimum, while the intellectual and moral factors come to the front and take up the chief attention; it will be found, however, that the physical factor is always present in some degree, as, for example, in the counsel's plea before the court, and in the physician's visit on his patient; and in almost all cases, if not in all, some implement or other plays its part in the process of professional service before it ends, as Cicero used a pitch-pipe or tuning-fork to gauge his voice in his great pleas for Roman clients. Precisely what is rendered, then, in all cases of Personal Services in each of their three loose kinds, is _muscular motion conjoined with mental effort and both these assisted by habit and by some form of what we call Capital_. The Services are therefore _Personal_ in the highest sense. The Mind and Body of the Laborer conspire to render them. The most sagacious animal can never be trained to render one of them. They are wholly _human_. Nevertheless the muscular part in the rendering--motion and resistance to motion--is just what tools and machinery can be made to take the place of in large measure but never in whole measure, because tools may not be taught _to think_. It may seem sometimes as if machinery were about to take the place of human hands in some classes of Production; but it will be found in the ultimate issue, as it has been found in every stage of the process, that human hands and human minds in action are absolutely essential at every point of the Exchanges among men. Men are so made and Society is so organized, that they need increasingly for their comfort and progress the personal services of their fellow-men, and can render their own in exchange for these; and consequently, there never can fail (under freedom) a MARKET for Personal Services of the three kinds. Having now seen as closely as possible what that is which is rendered in personal services, let us pass to the principles which determine their remuneration. That is, we will now inquire carefully into the Value of personal services. We have learned already, that Demand and Supply in their action and reaction upon each other determine in all cases the value of Commodities for the time being; and we shall find it to be equally the dictate of all reason, and the outcome of all experience, that Demand and Supply decide too in all cases on the value of all Services and all Credits then and there. Shall we look first at the considerations that issue in the Demand for personal services, and then at those other considerations that limit the Supply of them? 1. Demand is never the mere desire for anything, but desire coupled with the ability to pay for it at rates satisfactory to the present holder. The Demand for Services, therefore, is made by the prospective purchasers of them; and the purchasers, of course, are those who desire them and are willing to pay for them at current rates. It will be easiest and surest for us to study the Demand for Services in each of the three classes of them in succession. (1) The Demand for Common Laborers has several points of difference from that for Skilled, and from that for Professional, Laborers. It is scarcely ever intense. It is mostly disconnected from large accumulations of Capital. The desire is usually for immediate gratification, without any other end in view. It is frequently for such a service, as, if a renderer may not be conveniently and cheaply found, one is inclined to do for himself. For instances: if the barber be not accessible and reasonable and tolerably skilful, a man will certainly shave himself, provided he have not yet attained the independence and the luxury of wearing a full beard; and the ordinary housewife, if the cleanly and tractable domestic does not come into sight, will do her own work with casual assistance. It is this important fact, that common services among men and women in common life may in many cases be dispensed with altogether, and in many other cases substitutes be found for them, in connection with the other important fact, that common laborers learn their art quickly and easily, and consequently are present everywhere in large numbers, that makes the Wages of such laborers uniformly low. The Demand is moderate and the Supply is large. (2) The Demand for Skilled Laborers is steadier and stronger than for Common, because in general the desire for these is not for immediate gratification, but for an ultimate satisfaction to arise from the commercial coöperation of these laborers with their employers, who are capitalists, in connection with accumulations of capital, the end in view being the production of commodities for sale at a profit. Here comes in a new motive on the part of capitalists to buy the personal services of laborers. The motive is simple and intelligible and commendable, but its nature and operation is popularly and grossly misapprehended. Capital is the result of Abstinence from the present use of a Valuable in gratification, for the sake of a future increase of it through Production. But Abstinence is always irksome in itself. It must have its prospective reward in an increase, a profit, or it will never transform itself from a mere valuable into a capitalized product. Now, the owner of the valuable, having transformed it into capital from this motive, is under a commercial necessity to hire laborers, in order by their help to make his capital yield a profit. Capital lying idle decreases in _value_ even, to say nothing of its yielding no increase to itself; and the motive of the capital-owner, accordingly, is strong and constant to buy the services of laborers, to marry these services with his own capitalized products, and thus to produce commodities for sale, whose value shall be greater than the present value of the capital and the services combined. Here we reach in the minds and motives of a large class of men an ultimate Demand for laborers, and specially for skilled laborers, which is as true and constant to its legitimate end of Profit as the needle is true and constant to the pole. At this point it is very evident, that, if the fair expectation of the capitalists be realized in a steady profit, and the larger the circle of capitalists and the more of capitalized products to each the better for all concerned, the Demand for laborers will become steady, and will be likely to steadily increase, because there will then be a constant motive on the part of all capitalists as such to put back a part or all of their yearly profits into capitalized products, and thus the Demand for laborers will become more intense, and the rates of Wages so far forth must be enhanced. The steady Demand for the services of the laborers hinges upon the steady Profits of the capitalists, and there is no antagonism between the interests of these two classes of buyers and sellers, but rather a complete identity of interest between them. We are looking now solely at what constitutes the Demand for laborers of the second class. As always, so here, there is Desire first and then a ready Return-service. The Desire of employers of this class is for a Profit on their capital, and the return-service for the laborers is present as a part of these capitalized products. This part of the capital we call Wages-Portion. It is already in hand or provided to be in hand when the wages fall due. Of course it is expected, that the current wages will ultimately come out of the current joint-production of the laborers upon the capitalized products set apart for that purpose by the capitalist. But if the profits fail to the capitalists at the end of that industrial-cycle, whether it be two months or twenty-four, then Desire will fail or be weakened to hire laborers for the next cycle, and the return-services or Wages-Portion with which to pay them for another cycle will be lessened of necessity. Both elements in Demand are curtailed by the falling-off of Profits. There is at the same instant less desire to buy services and less ability to pay for them. It is of the very nature of capitalized products to wear out in the process of production; if there be not net profits at the end of the cycle for the capitalists, it shall go hard but there will be less wages for the laborers during the next cycle. This is not a matter of sentiment or of philanthropy, but of eternal law, which God has ordained and the devices of men cannot frustrate. Capitalists and laborers are joint partners in the same concern. Under industrial and commercial freedom their interests are identical. Both are buyers and sellers to each other at the same instant; and, as always when both parties are alike benefited and satisfied with a trade, both will cheerfully and profitably continue the connection. The Demand of each class for the product of the other will continue unabated. Profits and wages reciprocally beget each other. But still it is not altogether true, what has sometimes been stated by economists, that capitalists are under the same sort of pressure to buy their services as the laborers are to sell them. Capital is a Valuable already created by the mutual desires and efforts of two persons, and is now the exclusive property of one of them, and has also been set apart by him through an act of will to be thereafter an aid to some future production under the motive of a new value to accrue thereby. The capital has now become secondary to and separated from the person who owns it. He very seldom understands the real nature and operation of it. He commonly imparts to it in his imagination a more substantive and persistent existence than it actually possesses. He is frequently more or less stuck up as towards his neighbors and employees in consequence of his possession of it. The very fact that he has capitalized it for future operations shows that he is independent of it as a means of present livelihood. The personal services of the laborers, on the other hand, stand in very different relations to _them_. Their personal services may indeed be _valuable_, but they cannot be _capitalized_. As laborers they have nothing else to sell. Unless they sell their services now, these have no existence even, still less can they have any value. It is only by a mischievous figure of speech, that the skill of laborers is sometimes spoken of as their "Capital." Therefore, the laborers are under a certain remote yet inherent disadvantage as sellers of their personal services, when compared with the capitalists as buyers of them. This disadvantage, however, though apparent in the nature of things, and under certain circumstances disastrous to the laborers, may disappear practically under another and natural state of things; and it is every way to be desired by both classes alike that it should disappear in practice. Whenever there is a broad and constant and profitable market for all the commodities the capitalists and the laborers can jointly produce,--that is to say, whenever profits are steady and remunerative and wages are high and growing in their purchasing-power,--the Demand for skilled laborers must always be such as puts the laborers on a footing of equality as over against the capitalists, because under such circumstances the purchasers of services are many and eager, two bosses will be likely to be bidding for one skilled laborer, and then wages are always growing in dollars and each dollar growing in effective purchasing-power. It is of the last importance in this connection to notice, that everything in Profits and Wages turns in the last resort upon the breadth and freedom of MARKETS. It is out of the return-service received from the _sale_ of the commodities produced jointly by the capitalists and laborers, that both wages and profits must ultimately be paid. There is no other possible source of them. When the Market fails, everything fails that leads up to a market. Particularly fails the Demand for laborers for the next industrial cycle, and of course drops also the prospective wages for that cycle. The public folly and universal loss of shutting off foreign markets for our own commodities by lofty tariff-barriers, as has been conspicuously done by the United States for thirty years past, follows of course from this radical truth; and the Wages of laborers, instead of being lifted by tariff-taxes, as has been so often falsely and wickedly asserted, are inevitably _depressed_ by them, because they effectually forbid to capitalists and laborers their best and freely chosen _markets_ for the sale of their joint products. Another vastly important matter, constantly affecting the Demand for laborers of the second class, is the Competency or otherwise of the practical managers of the Capital invested in industrial enterprises. Capital cannot manage itself. It is of itself wholly inert. It is always either a Commodity or a Credit. Conscious of their inability to handle wisely their own bits of Capital, or else taught it through a bitter experience, by far the larger number of individual owners of it loan it to others to manage; they invest it in some industrial corporation, in a bank or a mill or a railroad. Some one person, or at least a small body of persons, must practically manage now all specific accumulations of capital. It is they in their capacity of manipulating-capitalists, who constitute in large measure the Demand for laborers. But such managers, who are at once skilful and long-headed and honest, do not grow upon a chance bush. They are rare. Most of them in this country at least have been those, who started in a small way in the control of their own earned or small-inherited properties, and rose through practice and knowledge and conscience to the ability to handle profitably to all concerned large masses of Capital. In the hands of such men, given a tolerable chance by public law and private circumstances, both Profits and Wages are sure to come in satisfactorily. They are Captains of Industry. They are an honor to human nature. They are a blessing to the whole community. They have no need and no will to ask to be bolstered up in their business by unjust taxes enforced upon a whole people. Such men sometimes have sons or _protégés_, who possess similar capacities and similar integrity, and these by experience become able to carry on the business to similar successful issues. This is happy, but it is unusual. More commonly, in the second, and pretty certainly in the third, generation, the line of royal succession fails. There comes in a lieutenant rather than a captain of Industry. Likely enough he mistakes the nature of capital, and thinks that it will go along of itself without that eternal vigilance that is the one price of its maintenance and increase; likely enough he lacks the touch and rule of men, and his laborers become demoralized and refractory; more likely still he thinks he sees other operators around him getting quicker rich by speculating in enterprises outside the legitimate business, and takes some of his own and of what is not his own and throws it out of its proper channels; and, as the result of one or all of these, things soon go wrong, profits and wages fall off, poor work is done and finds slow sale, and Demand for laborers (which is their life-blood) slackens or goes out in that establishment. No wonder the Paper-makers in their annual gathering at Saratoga of 1889, resolved as the main outcome of their meeting, that they would bring up their sons (or somebody's sons) to succeed them in their business by a thorough practical training in the paper-mill itself, beginning early and continuing long. Industrial higher education in this or some other form is the secondary hope of manufacturing business in the United States, the primary hope being in a decent commercial liberty to buy their supplies and to sell their products in the best markets wherever these are to be found. There is one other important item that bears directly upon the Demand for laborers of the second class, and consequently upon their Wages, namely, the constant introduction of more and better Machinery. At first blush it would seem, and it has often been stated so, that the use of machinery takes just so much work from human hands, reduces by so much the Demand for laborers, and tends to lessen by so much their wages. All this is the opposite of the truth; but before we explain _why_ it is the opposite of the truth, let us attend carefully to the truth itself, as stated in 1889 by the highest living authority on these special points, Sir Edwin Chadwick, the octogenarian pioneer in sanitary and economic reforms. Fifty-six years ago Chadwick joined with his colleagues of the English Factory Inspection Board in recommending reduced hours of labor and other improvements which have now become general in England. In a paper recently read before the Political Economy Club, he calls attention to the greatly increased production which follows improved machinery and shortened hours. He says: "_Spinning machines which formerly turned 8000 in a minute, now turn 11,000; and in Lancashire not more than half the hands are now employed to produce the same amount with new machinery as were employed on the machinery of 1833. As an example of the extent of the reduction of hands by these improvements, it may be mentioned that one large family of cotton spinners in Manchester, which 40 years ago employed 11,000 hands, could not now muster one half that number._ YET THE MILL POPULATION HAS INCREASED, AS WELL AS THE GENERAL POPULATION, THE HANDS DISCHARGED BEING ABSORBED IN OTHER EMPLOYMENTS. _At the beginning of the century the cost of spinning a pound of yarn was a shilling. The pound of that same yarn is now spun for a half-penny by hands earning double wages for their increased energetic attention and skill. It is now found, however, that the strain of the increased responsible attention cannot be so long sustained as the slow, semi-automatic pace by the old working of the old mills with the long hours. Hence there is a tendency to a further voluntary reduction of the working hours in the best mills, first to nine hours. In one mill, in which 2000 men are employed a voluntary reduction has been effected to about eight hours with a more equable production; and I have heard of other examples. As showing the cost of working with inferior hands and loose regulations, a recent report from the Manchester Chamber of Commerce states that 20s. worth of bundled yarn may be produced at a cost of from 2d. to 3d. per pound less in Manchester than in Bombay, notwithstanding the hours of working are 80 hours per week, while in Manchester they are only 50. At the present time Lancashire, with its short hours, will meet Germany or any other country, in neutral markets, in the world. In Germany the spinners and weavers still work 13 hours a day as they once did in England; France has only come down to 12 hours; whereas the English rate has long been 10 hours, and may soon be 9 or even 8. And this reduction improves the health of the wage-workers, while the reduced cost of production allows them higher wages; yet Germany with its long hours and high tariff maintains a system_ OF LOW PAY, DEAR PRODUCTION, HIGH COST OF DISTRIBUTION, AND LIMITED SALES." The accuracy of these important statements of fact is confirmed on every hand. Committees of British spinners and weavers have repeatedly visited the United States, and then reported to their fellows at home, that wages, all things considered, were equal for spinners and weavers in Great Britain and the United States, and in some cases and respects higher in the former. Many times before his late lamented death, John Bright publicly testified that wages in England during his parliamentary life had risen in general 50%, and in some of the manufacturing lines 100%. A few months before these statements of Chadwick were made, Sir Richard Temple reported to his section of the British Association, "_That the average earnings per head in the United Kingdom, taking the whole population without division into classes, is £35, 4s., and exceeds the average of the United States, which is £27, 4s., and of Canada, which is £26, 18s., and of the Continent, which is £18, 1s.; while it falls below that of Australia, which is £43, 4s. per head._" According to this, the average earnings in Great Britain per head of the population are 30% higher than in the United States, and 81% higher than on the Continent of Europe. Truly, Britain is a prosperous and profitable country so far as average earnings of the whole people by the year is concerned. Sir Richard goes on in the same statistical paper to show, that the average annual profit on British Capital is 14%, and that Capital yields about the same rate for the United States. Now, can we easily give the grounds on which the introduction of more and better machinery, instead of displacing laborers, tends to lift and actually does lift the wages of those concerned, who continue to work with their hands and heads? We will try it. (a) It takes the hands and heads of laborers to invent and construct and keep in repair the machinery itself, that is often supposed to displace laborers, and so far forth opens a vent for the more profitable employment of some of the laborers, who before performed the cruder and more repetitive and automatic parts of the processes, which parts alone machinery can be made to perform. (b) Machinery always lessens the cost of a given amount of production, otherwise there would be no motive for its introduction. But, other things being equal, the lessened cost of a commodity broadens the market for its sale. The cheaper a useful commodity is offered, the more the buyers of it the world over. The more and the better the machinery brought in, the more and the cheaper the commodities produced and the broader and better the markets to be supplied; and, therefore, the more and the more skilful the hands needed to tend the machinery and to market the products. (c) The more commodities thus created by men and machines, and the wider the markets found for them over the earth, the more laborers are required to extract and prepare and transport the raw materials for the now augmenting commodities, and also to ship and distribute the finished products. As Chadwick says, notwithstanding the strictly _factory_ hands have diminished one half in one place, "yet the _mill_ population has increased, as well as the general population, the hands discharged being absorbed in other employments." (d) These improvements in machinery, and the consequent refinements in the skill of the laborers, cheapen also of course the commodities consumed by the laborers themselves, and therefore a given rate of wages, to say nothing of a rate sure to enlarge under these circumstances, now secures for the laborers a higher grade of comforts. More and better and more durable machinery, consequently, so far forth, tends at once to enhance the rate of laborers' wages and increase the purchasing power of the unit in which wages are paid. To return now to the main line of discussion under the present head, we have shown by proof positive that there is nothing either in new machinery introduced, or in higher wages paid in connection with such machinery, or in shortened hours made possible by these two, to lessen the Demand of Capitalists for the personal services of Laborers; because, there is nothing in all these, commercial and industrial freedom being presupposed, to lessen the Profits of the Capitalists, which profits are the sole motive actuating them as such. That high wages and short hours are rather an advantage to Profits in connection with skilled laborers and fine machinery, than a disadvantage when compared with long hours and low pay and poor implements, is clearly shown by Chadwick in the passage quoted comparing England with English Bombay, where the working hours are 60% more and the wages greatly less and the cost of the machinery very little; "twenty shillings' worth of bundled yarn may be produced at a cost of from 2_d._ to 3_d._ less in Manchester than in Bombay"; call it 2-1/2_d._ less; that is, it costs the Bombay spinner more than 1% per pound of yarn more to spin it than it costs the Manchester spinner! For truth and decency's sake, then, let us have done with the gabble in this country about the advantages of "pauper labor" over skilled, of low wages over high, of cheap machinery over dear! The penetrating reader will perceive, that the root of this whole matter lies in the breadth and quickness of the _Markets_, in which the commodities produced by the laborers and capitalists may be sold against other commodities, and against Services and Credits; if the markets of the world are free to all to buy in and to sell in, which seemingly two things are precisely one and the same thing, then the Demand of Capitalists for the services of laborers to create and market salable commodities wherever these may be wanted, can apparently never slacken on the whole; because, the desires of men which the efforts of other men may satisfy commercially, are indefinite in number and unlimited in degree; and, therefore, the Wages of the skilled laborers, the commercial freedom of the nations being presupposed, are likely to be on the whole on a steady rise throughout the world; and the amount and excellence of the machinery on a similar rise, since Capitalists can always under these circumstances see their Profits looming up ahead of them,--the profits of an endlessly diversified and marketable Production. The chief reason at any rate, and almost the only reason in common sight, why little England has surpassed in commercial prosperity of every sort every other nation on the globe during the past forty years, as evidenced by these statistics of Sir Richard Temple and other abounding proofs on sea and land, is in the fact, that her statesmen of the last generation came to perceive clearly, and then helped the people to see, that a market for products is products in market; that her traditional tariff-barriers to keep foreign goods out kept in equally domestic goods that wanted to get out for a profit, and so down went the tariff-barriers little by little, accursed alike by God and Englishmen, never to be set up again around the shores of the land of Cobden and Bright and Elliott; and to-day we read, that the average annual Earnings per head of the entire population of the United Kingdom, men and women and children, English and Irish and Scotch, are $176, while the annual average Profits of Capital within the three kingdoms is 14%. (3) In the last place here, we must now look at the Demand for the personal services of Professional laborers. These are persons, who have done something more with reference to their life-work than serve an apprenticeship to a trade, or acquire some mechanical skill in connection with some kind of machinery. An Education rather than an Apprenticeship is implied in Professional laborers. Knowledge of the bodies and of the minds of men; acquaintance with some one section at least of the general laws that pervade the universe; some confidence (the more the better) in God, who created and governs the world; are all requisite to a reasonable success on the part of Professional laborers. The Demand for their services, and of course also the Return made to them for such services, will largely depend on such superior knowledge and confidence acquired by such persons, and involved in their services. Clergymen, physicians, lawyers, statesmen, literators, actors, teachers, and scientific experts, may serve as our chief examples of Professional laborers. (a) "All that a man hath will he give for his life." When men fall sick, or those fall sick who are dear to them, they send for the doctor. Scarcely any trait of human nature is more universal than this. And the trait puts honor on human nature, because it implies a relatively high estimate of the worth of life in the mind of the patient, and also a relatively high confidence in a certain class of one's fellow-men. As Society progresses, and as Christianity deepens the sense of the worth of the individual life, and knits a stronger tie of confidence between man and man, a change is slowly coming over the relations between physicians and their patients; people do not wait to fall sick before they send for the doctor, so much as they formerly did; some individuals and families are establishing connections with a medical adviser, who studies their constitutions and habits of life beforehand, guides them in general sanitation, and thus both he and they are better ready for curatives in times of illness. Gladstone has long had such an attendant, with the best of results as he thinks, and strongly commended such action to John Bright, but too late to save the latter from what was thought to be premature death in consequence of imprudent and ill-advised handling of his health. In a few cases in England and the United States an annual salary is paid a physician for general care of the family's health, whether sickness befall or not, instead of the more usual fees on consultation and attendance. Dr. Munn of New York receives such an annual salary from Mr. Jay Gould. But in whatever way medical services are paid for, the Demand for them is constant and intense. The motive to buy them is immediate and personal, not mediate and remote, as in the case of capitalists and laborers of the second class. It is to be noticed further in respect to physicians, and indeed in respect to all professional laborers much more than in respect to other laborers, that much knowledge has been gained by them for its own sake, out of pure love for it, rather than for the sake of merely selling their services as laborers; while this does not diminish in the least the commercial character of their services, it tends to beget on the part of the buyers of them a stronger confidence in the men who render them, so that the Demand for such services and consequently the pay for them is enhanced by the trust reposed in the laborers on the ground of something acquired by them for other than selling purposes, and which indeed _cannot be sold_; and superior _character_ also, as well as superior knowledge, which is wholly _moral_ in its basis and not mercantile at all, affects the Demand for the services of the possessor of it to increase it, on the ground of a naturally stronger trust in him as a professional laborer, and at the same time tends to increase his Wages by limiting the circle of those who can offer in competition such services on the background of such superior knowledge and character. (b) Lawyers do not meet such a universal Demand in the nature of things as do physicians. Said Jonathan Smith of Lanesborough in the Massachusetts Convention of 1788: "We have no lawyer in our town, and we do well enough without." Still, one hundred years after that time there were about 70,000 lawyers in the United States, and Lanesborough itself had had in the meantime at least three distinguished ones. The interests of property and of reputation, and the constitutional rights of individuals as over against the claims of Government, so far as these may be conserved through the agency of lawyers, are by no means so constant and imperative as are the interests of life and health. Yet lawyers are in legitimate request in all civilized countries. A Latin legal maxim announces the obvious truth: _It is the interest of the Commonwealth that there should be an end of disputes and litigations._ Beyond question courts and counsel are wholesome on the whole for the individual and for the commonwealth. But the extremely complicated and unsatisfactory condition of American Law at present, owing to the fact that we have a none too simple United States Law with its three grades of courts and judges, and considerably divergent bodies of Law in each of 42 States, and owing also to the fact that our law in general is drawn almost at random from two pretty distinct Sources, the Common Law of England and the Civil Law of Rome, multiplies the number of lawyers relatively to the population out of all proportion to such ratio in other countries, and tends to make the lawyers as a class too conservative of old and drawn-out processes to the extent of opposing obvious betterments and simplifications. Said David Dudley Field, President of the American Bar Association, in August, 1889, at Chicago: "_So far as I am aware, there is no other country calling itself civilized where it takes so long to punish a criminal, and so many years to get a final decision between man and man. Truly we may say, that Justice passes through the land on leaden sandals. One of our most trustworthy journalists asserts that more murderers are hung by mobs every year than are executed in course of law. And yet we have, it is computed, nearly 70,000 lawyers in the country. The proportion of the legal element is, in France, 1:4762; in Germany, 1:6423; in the United States, 1:909. Now turn from the performers to the performance. It appears that the average length of a lawsuit varies very much in the different States; the greatest being about 6 years, and the least 1-1/2. Very few States finish a litigation in this shorter period. Taking all these figures together, is it any wonder that a cynic should say that we American lawyers talk more and speed less than any other equal number of men known to history?_" Mr. Field then repeated his well-known argument for Codification, ascribing the law's delays to the chaotic condition of the law, and maintaining that it is the first duty of a government to bring the laws to the knowledge of the People. "_You must, of course, be true to your clients and the courts, but you must also give speedy justice to your fellow-citizens, more speedy than you have yet given, and you must give them a chance to know their laws._" Owing to the immense difficulties in the way of any one person mastering the various branches of the law in this country, it is falling more and more into specialties, and lawyers are devoting themselves to some one of its many branches, the main division line being between "Law" and "Equity" technically so-called; and whenever one becomes eminent along any line, his compensation is apt to be very large owing at once to a large Demand and to a small Supply at that point, while the average compensation of the lawyers as a whole class is meagre enough, because there are too many of them, and the people have become very suspicious of the law's meshes and delays. (c) The grounds for the unabating Demand in Christian countries for religious teachers and preachers, let us rather say, for spiritual guides, lie deep down in the nature of man. If there be one proposition about men more incontestable than another, it may be this, that men are made in the image of God, and that there is among men in general an irrepressible striving to maintain and deepen this image. The touch between man and man and between man and God is such at this point, that men can help each other in this striving, and that they _feel_ that they can help each other. This is the chief reason why some men are constantly consecrating themselves to the Christian ministry, and other men as constantly soliciting these to become their pastors and teachers. Those more enlightened in divine things and more spiritually minded offer themselves, as it were, not commercially but morally, to the unenlightened and less advanced as guides and helpers. It is, as it was with Wolfe and his men at the Heights of Abraham: those who got first to the top tarried a little to help those up who came after. And the most striking thing about it is, that the masses of men at bottom are as desirous to be uplifted as the choicer spirits among them are desirous to help the work forward. Ministers are still, and always will be (human nature is unchangeable), eagerly called; chapels and churches and cathedrals are still going up all over the earth; worship and petition and aspiration are ever ascending on the great world's altar stairs towards heaven, guided and inflamed by the chosen and choosing men of God,--"_when priests on grand cathedral altars praise_!"[5] It is a monstrous perversion of language to maintain, that a clergyman in rendering such services as these is selling his religion. It is true, that he is selling under Demand services to the appropriate rendering of which his own personal piety contributes one large element, and thorough confidence in him on the part of his people as a good and earnest man contributes another large element; but the piety and the spiritual power and the worthy example are not nourished for the sake of selling the services, but for their own sake in personal worth and worthiness, and these things must not be confounded with the services that are sold. Accordingly, while the clergyman's vocation is sacred, and belongs to the sphere of religion, his salary belongs to the sphere of exchange, and its determination, in harmony of course with the higher impulses, is a business transaction. This distinction ought to be better understood than it is; and both clergymen and people need to be reminded that the spiritual things belong to one sphere, and the temporal things to another. The amount of a minister's salary, and the time and mode of its payment, are matters of pure business; and the minister himself is to be blamed if he does not attend to them, and insist on them, on business principles. In the professions generally, and particularly in the ministerial profession, while, if we confine our attention to those persons who both have the requisite gifts of Nature and have been also thoroughly trained, we shall find a high rate of compensation on the two grounds of a strong Demand and a limited Supply, we must bear in mind too the counter-working influences which tend to increase the competition and thus decrease the compensation, namely, the respectability which attends them, the desire of knowledge for its own sake which is gained in connection with them, the instruction wholly or in part gratuitously offered to those in course of preparation for them, and the desire to do good without regard to pecuniary reward which actuates many who enter upon them. (d) Physicians and lawyers and clergymen serve primarily individuals, or at most relatively small groups of individuals, and of course look for their pay to those whom they have served. It is different with Statesmen, the fourth class of professional laborers that we need to look at in an economic view. Statesmen worthy of the name serve at least a whole nation, and to the nation as such must they turn for their pecuniary rewards. And such men have never turned in vain to those whom they have benefited as a whole. Bismarck is the best modern instance of a Statesman, who has received from a grateful country immense money-measured remunerations for immense political services rendered. The Demand for the services of Statesmen rests in the deep consciousness of men organized politically into a Nation, that they need, especially in trying times, a Man of the highest natural gifts, and of the broadest attainments and of the loftiest political integrity to plan and act for them in emergencies, as they are conscious that they cannot plan and act for themselves organically. This does not mean, that the one ever knows essentials better than the many: he does not. This does not mean, that the true objective of a nation's march is ever discerned more clearly, or rather _felt after_ more eagerly, by one man than by the many men concerned: it is not. Still less does it mean "_a man on horseback_." But it does mean this: a Nation (as the very name implies) is made up of the thoughts and hopes and throbbings and dim forecastings and half-formed purposes of multitudes constituting a unit (born together for one destiny on earth); and the true Statesman is one of themselves, sharing with them at once the traditions of the past and the perspectives of the future; one, with the instinct and the intellect to gather up and embody the general feeling and the general will; one, who has gained in some way the confidence of the masses who are willing for the time being to entrust to him the guidance of their affairs, and to empower him to plan and act for them as their champion and deliverer; and one, who (because he _is_ one) can better seize the propitious moments for declaration and negotiation and public action, yet who never forgets that he is nothing but an _agent_ for others, and is as ready to lay down responsibility at the public will as to assume it at the public will. Washington was such a statesman, and Lincoln. Even Bismarck, under monarchical and later imperial environment, disclaims anything substantive and original in his own action: he did what he could not help doing: he followed the instincts of Prussia, and his own; and became the means of fulfilling as they gradually ripened the longings of the other German people for unity and order. Such a statesman was Chatham in England, and Cavour in Italy. Now, such services as these, done for a whole people, always deserve and usually receive, though not expressly bargained for beforehand, yet implied in the public devotion of one party and the general _consensus_ of the other, extraordinary honors and emoluments. This is right, even on purely Economic principles. The services of great statesmen to their country in great epochs and emergencies are at once a gift and a sale, they are both patriotic and economic, there is equally a national Demand for them and a grateful recognition of them, the Supply is always exceedingly rare and the reward often exceedingly great; and it is to be put down to the lasting credit of the science of Economics, that its peculiar motives and results may mingle in and harmonize with the motives and results of the higher moral impulses, such as those of Patriotism and Religion, as in the cases of the Soldier and Statesman and Clergyman. There was no rational ground for the hesitation of Garibaldi to receive from the Parliament of Italy in 1875 an annual pension of 50,000 lire. (e) There is a single class more of Professional laborers, loosely so-named, which should be noted before we dismiss the subject of Demand for laborers to pass to consider the Supply of them, namely, Literators and Artists and Actors of the highest rank. Statesmen primarily serve the individual nation that selects and rewards them, though their influence may indirectly uplift other nations also; but the great Writers and Painters and Actors, whatever may be their local habitation and name at first, soon come to belong to the world at large and to derive their revenue from many lands, because the highest Art is cosmopolitan in its own nature, and the best characterization of men as such cannot but be the property of Mankind. Shakspeare is no longer English, nor Angelo Italian, nor Mozart German, nor even Bernhardt French. Deep as are the scars and the sea that separate nation from nation, there is something deeper still in the innate recognition by man of man as depicted by the great Masters in immortal lines. There is, accordingly, a sort of Demand in the inmost soul of Humanity as such for these living and lofty touches and delineations of itself, whencesoever they may come. There is not indeed nor can there be, as in most other cases of sale, a bargain made beforehand between these preordained sellers of the rarest services and their silent yet waiting purchasers, yet there is after all an antecedent and an assured understanding between them. They are in touch even across the sea. The master strikes his chord, and the audience, fit, though few and scattered, listens and applauds _and makes return_. Is the principle of "International Copyright," so-called, correct? Let us look narrowly before we pronounce. At present this good country of ours makes itself a mocking and a by-word even to its own intelligent and art-loving citizens by putting a tariff-tax of 30% on paintings and statuary by foreign artists, not at all to get revenue thereby, but to "protect" domestic artists in their inferior work by artificially lifting the price of their wares. So far is carried this jealousy of foreign works of art, that when the artists generously loan them for exhibition on our national occasions, they are put under bonds _not to sell them on this side_ without previously paying the tariff-tax, which is graciously intermitted during the Exposition. This is Restriction. This is Protectionism pure and simple. This is legally excluding the Better in order to give a forced currency to the Worse. Now, domestic Copyright restricts the sale of any book to one publisher in his interest and in that of the author. The book now in the reader's hand is thus copyrighted. This legal arrangement between authors and publishers and their public may be perhaps logically defended, it may even be for the public weal on the whole, though in many cases it doubtless raises the price of good books, which would have been published without any such artificial encouragement. The copyright, however, like all patent-rights also, soon expires by limitation of time, and the public thereafter have the unrestricted use of what is really their own. For what is sometimes called "literary property" is not property in the strict sense of the word. A book is not like a plough or a house. Its contents even when most original have been but colored, as it were, and rearranged and reinforced by the author's individual mind. Its substance always comes out of the common stock. It cannot be the author's own, as the bushel of wheat is the farmer's, who sowed the seed on his own land and threshed it in his own barn and carried it to market in his own wagon. The rights of the individual and the rights of the Community commingle more or less in private property of every kind, at least to the extent that the latter may tax the property if needful for the common wellbeing, as it is bound also legally to secure it to the owner when threatened by others; it is no part of the purpose of the present book to draw the wavering line in general between the rights of individuals and the rights of their Government as towards them; but the distinction between common property and copyrighted property is plain enough to everybody, and the Law puts emphasis on the distinction by making the one quickly terminable and the other continual. So then, when the Government under which the author resides, has given him a limited copyright within its own jurisdiction, it would seem as if the individual right in the premises had been sufficiently recognized alongside of the undoubted right of the Whole to the ultimate use of the labors of their own citizen. When, however, it comes to International Copyright, which is an attempt to secure to authors of one country artificial privileges under restriction in selling their wares in all other countries, the argument breaks down. Even for the one country, in which the author lives and is taxable, the argument is not very strong, and hardly binds advanced public opinion either as to the grounds of it or even the practical benefits of it on the whole. By the attempted extension of it to all countries, its reasonableness disappears. Taxation cannot extend beyond the jurisdiction of the country taxing; and it certainly seems as if a legal privilege, beyond common law privileges, ought not by extension through the formal action of other countries to exempt from taxation (in case it were needful) the results of the original privilege. The purpose of International Copyright is not the blessed one as announced to the world by James Smithson, "_the increase and diffusion of knowledge among mankind_," but directly and artificially by means of legal restrictions the "increase" of the prices of books and of other "knowledge" to the masses of "mankind," and the "diffusion" of these extra prices as between authors and publishers. Protectionism does not seem to be one whit more respectable in this form than in the form of tariff-taxes on foreign works of art. 2. We have already seen in our first chapter the proofs of the proposition, that the Value of anything whatsoever bought and sold is determined by the Demand for it and the Supply of it then and there present. Also we have now seen at considerable length the main phases and grounds of the Demand for each of the three classes of Personal services bought and sold among men. The next topic in order is the Supply of personal services in the various markets. Here it will not be necessary to distinguish particularly the three classes of Services, inasmuch as the circumstances governing the Supply in each are substantially similar. In Economics generally we have to deal chiefly with Persons, and only subordinately with Things; when we come to the Supply of personal services, answering to the Demand for them on the part of other persons, this point becomes conspicuous; and it is here, if anywhere, within the realm of our science, that we need to devote a word to a singular doctrine, that has been famous for nearly a century under the term of _Malthusianism_. Thomas Robert Malthus, 1766-1836, was an English clergyman and teacher, a wide traveller and keen observer of men, one who divided his time during a long life between cure and chair and the libraries of the Universities, published in 1798 his "_Essay on the Principles of Population as it affects the Future Improvement of Society_"; in this and in subsequent editions enlarged and enriched, he brought out with its proofs the core of his startling pronouncement, that the human race is found to increase in numbers in something like geometrical progression, while the means of subsistence for them on any given area of agriculture can only increase in something like arithmetical proportion; the United States was then doubling its population in 25 years, and he calculated that, at this rate, the inhabitants of any country in five centuries would increase to above a million times their present number, which would give England in that time more than twenty million millions of people, or more than could even get standing-room there; for this natural tendency of the law of human fecundity to outstrip the results of the law of returns from land, he saw no remedy except in checks to population, which he divided into _the positive_ and _the preventive_, the first of which, such as war and famine and disease, increase the annual number of deaths; and the second of which, such as prudence in contracting marriage and temperance after marriage, diminish the number of births; and Malthus and his followers, among whom the famous Thomas Chalmers was prominent, were at great pains to inculcate upon the laboring classes the duty of later marriages and fewer children, as an indispensable condition of their rise in comforts, and of "the future improvement of Society." These discussions have attracted great attention almost to the present day, and have been supposed to be very pertinent to the subject of wages, and thus to be an important part of Political Economy; but when one looks more closely, the force of that spring of population which the Creator has coiled up in the nature of man, as contrasted with the weakness of that power by which the earth brings forth sustenance for man, is seen to be a topic in Physiology and not in Political Economy at all. Political Economy presupposes the existence of Persons able and willing to make exchanges with each other, before it even begins its inquiries and generalizations. How they come into existence, the rate of their natural increase, and the ratio of this increase to the increase of food, however interesting as physiological questions, have clearly nothing to do with our Science. Each adult human being is as much constituted by Nature to receive personal services as to render them, in Economics each without exception receives when and because he renders, and all alike are naturally able to become capitalists also; economical laws present no obstacles, that we can see, to all men becoming _rich_, as we use that term; the town or city in which many people are growing rich simultaneously, is the best place in the world for other people to go to get rich in, and not at all towns in which other people are getting poorer; most men are unwilling, some perhaps may be unable, to fulfil the moral conditions of growing rich; while, we may depend upon it, the famines of the world have been caused more by the indolence and want of foresight of individuals, and especially by the monstrous maladministrations of Governments, than by any law of the increase of population. Experience too has shown, that the strong impulse in mankind towards procreation is not too strong for the purpose intended by the Creator; that HE who is the author of the impulses is author also of natural counterworkings of them; that, as men under moral and religious training come more and more under the influence of reason and affection, the preventive checks to population come silently and effectually into operation; and that, taking the world at large, food and comforts have more than kept pace with the stride of population, since its inhabitants as a whole were plainly never so well fed and clothed and housed as now. The abstract antagonism of the law of the increase of population with the law of the increase of food, or what we prefer to call the law of diminishing returns from Land, may be admitted, if one chooses to insist on it; but any practical _tendency_ of these to come into collision, as the world is and is to be, is confidently denied. When Malthus wrote, and long afterwards, England was under the dominance of Protectionism; the wretched Corn-laws forbidding the importations of foreign grain, in order that the domestic growers might sell to their countrymen at artificial prices, and thus grow the richer as bread became the dearer, were only repealed in 1846; and the demonstrated ability of Great Britain under free trade to draw on the fertility of the whole world for the steadily and increasingly cheap maintenance of her people, demonstrates the irrelevancy of Malthusianism to the Science of Economics. The Supply of personal services at any time or place in answer to the Demand for them, is affected by several important circumstances, which we shall now proceed to consider in their order. (a) The _agreeableness_ or disagreeableness of rendering a given set of services will affect the Supply of laborers at that point, and help to determine the rate of Wages paid to them; because the more agreeable employment will attract the larger number of laborers, will experience in consequence the press of competition, and the rate of wages then and there will be lessened thereby. The more disagreeable employment will feel less the pressure of numbers, and will secure, other things being equal, a higher rate of remuneration in consequence. Among the elements which, in spite of diversity of tastes, make any employment agreeable or disagreeable to the laborers, are (1) the less or greater exertion of physical strength required, (2) the healthfulness or unhealthfulness of the service, (3) its cleanliness or dirtiness, (4) the degree of liberty or confinement in it, (5) the safety or hazard of the employment, (6) the esteem or disrepute of it in public opinion. To illustrate each of these in order, the stone-mason, the glass-blower, the scavenger, the factory operative, the worker in a powder-mill, the smuggler, will each receive a larger compensation owing to the peculiar element of disagreeableness involved in his own personal service; and he will be able to demand and secure the higher rate through the action of this disagreeableness upon the Supply of such laborers. Of all these elements, public opinion is perhaps the most operative; and if this be favorable to an employment, and some social consideration be attached to it, and only common qualifications be required for it, the wages in it will infallibly be low. This is doubtless the main reason why so many young women prefer to teach, rather than be employed in mills or shops or offices, and why the wages of female teachers have been so remarkably low; although each of the elements of agreeableness specified above may also contribute something towards the same result. If a business be decidedly opposed to public opinion, it must hold out the inducement of a large reward, or nobody will engage in it. This explains the abnormal gains of the slave-trade, the liquor-business, of gambling-houses, and of lotteries. (b) The _easiness_ or difficulty of learning to render acceptably a given set of personal services, will have a quick and constant influence on the Supply of these services, and of course also on the rate of the return paid for them. The elements of this Difficulty in general are time, expense, lack of natural gifts, want of foresight on the part of those concerned, and lack of push and persistency on the part of the learner himself. To put a boy apprentice to a trade, for example, requires on the part of the parents a foresight, an ability to get on without his immediate help, and sometimes also an amount of money for his board and clothes which all parents do not possess; many boys too, who must acquire their skill to sell personal services when they are young, if at all, find on trial that they do not like the trade, or have not the requisite gifts, or fail in the appropriate patience and propulsion; and the consequence is, that the Supply of laborers along that particular line is lessened, and the right to demand and the ability to secure a higher rate of wages than is accorded to common laborers accompany the small supply, through the reduction of numbers which these obstacles at the entrance occasion and the consequent weakness of competition. This is one principal ground of the difference in the wages of skilled and unskilled laborers; the other being, as we have seen, the stronger and more constant Demand for the former, owing to the impulse imparted by Capital. All these points of difficulty at the outset apply still more strongly in the case of professional laborers, serving more effectually to thin out the ranks of these, and pushing upward still higher the gauge of compensation for the successful competitors. (c) The _constancy_ or inconstancy of prospective employment in a given business, is a consideration that affects the Supply within it, and then the wages. If the services be of such a character, that they can only be carried on during nine months of the year, the wages of the renderers will be greater by the day or the month than they would be, provided the services were in order during all the twelve months. The laborer is apt to look at the aggregate earnings of the year, and will hardly take up a trade which affords employment but a part of the time, unless some compensation can be found in the higher wages for that time. This is the chief reason why the wages of the mason and house-painter, in this climate at least, are higher than those of the blacksmith and carpenter. The coachman, also, may stand by his horses half the day or night with no call for his services, and must have, therefore, a proportionably higher fare from those whom he does transport. In general, it is found that men prefer a constant rendering with a lower rate of pay, than an inconstant one with a prospect of larger wages for the particular jobs actually done; and because the many prefer that, those who take up with the other are able to secure a higher relative rate of pay in their less eligible vocation. It must be noticed, however, as counterworking this, that some men have desire for intervals of leisure in their business, and for opportunity to make these intervals subservient to some avocation or other means of livelihood. (d) The _probability of success_ or the opposite in any line of personal services, is a circumstance that has some influence on the rate of wages paid in it, through the action of this probability on the numbers of those who enter upon it. If ultimate success be doubtful, fewer persons will naturally engage in such a business, and those who dare in it and succeed, will probably reap a very high reward. So, also, those who take jobs by the contract, and therein assume more or less of risk, are commonly paid at a higher rate for their services than those who do similar work by the day. It is true, that this is owing partly to the fact that the contractor usually puts in his own capital more or less, and must therefore be paid profits as well as wages, and also that the wages of superintendence are due to him in addition to ordinary wages; still, there is a residuum of difference, which can only be accounted for by the risk he runs of a successful issue of his contract. The general variation in Supply and wages from this fourth cause, would certainly be greater than it is, were it not for the overweening confidence which men in all generations seem to have in their own good luck. This excess of worldly faith is always seen in the rush which is made for newly discovered mining regions. It was seen to perfection in 1889 in the uncontrollable advance of thousands _into_, and their almost immediate exit _out of_, the then just opened territory of Oklahoma. The facility with which lottery tickets are sold even yet in many countries proves the prevalence of this over-confidence. It is demonstrable beforehand on the doctrine of Chances, that no person can rationally buy _any_ lottery ticket at its advertised price, because if that person should buy all the tickets advertised he would certainly lose money, since the sum of the prizes is always less than the sum of the prices. Otherwise the projectors of the lottery would always lose money. (e) The _mobility_ or immobility of laborers as a class acts powerfully upon the Supply of them at any one time and place, and consequently upon the rates of wages then and there. In some countries, notably in the United States, laborers as a class move from place to place with considerable facility under the action of Demand for personal services. According to the Census of 1870, 7,500,000 of the native population dwelt in other States than those in which they were born. Many of these, doubtless, had left their native region to obtain more fertile land, and many also to obtain more remunerative employment as laborers. The native American, more than most other persons, is not only willing to move from place to place in the hope of bettering his condition, but is also willing to change his occupation from time to time in the same hope. There is more freedom of movement locally, and less fixedness of occupation on the part of laborers and others, in this country than in any other industrial country. Even foreign immigrants here,--factory operatives, miners, and other laborers,--seem to catch after a while the spirit of the country in both these respects. There is one considerable advantage in all this, namely, competition becomes more uniform in all places, an unusual demand for laborers at any one point is easily met, and wages neither rise so high nor fall so low at special points as they otherwise would. But there are considerable disadvantages in all this too, chiefly these, the services of laborers floating locally or changing the kind of their labor can never become so excellent as service more _steady_ in place and time; and, especially, thorough apprenticeships, or whatever may be equivalent to these, are held in too little esteem by public opinion, and are too little requisite in order to obtain transient employment. To meet the obvious pressure of these disadvantages, an admirable device is now being hit on, namely, to introduce into our public schools something in the way of "manual training" for the various trades. Public institutions also, some of them on a great scale, as the Cooper Union in New York and a more recent munificent foundation in Philadelphia, have been established on purpose to train boys and girls both in eye and hand to render skilfully those artisan services of the various kinds which will always be in demand among men, and which have certainly deteriorated among us owing in part to the disuse of the old apprenticeship-system. In Europe, on the other hand, the laborers as a class are far less mobile than here; and in Asia still less so. There is said to be no country in Europe in which the proportion of foreigners to the native population exceeds _three per centum_. In England, which is a small country, the difference in Wages between the northern and southern counties is very remarkable. Professor Fawcett is authority for the statement, that an ordinary agricultural laborer in Yorkshire during the winter months earns 13 shillings a week, while a Wiltshire or Dorsetshire laborer doing similar work during the same number of hours earns but 9 shillings. The contrast in general between the Wages of English agricultural laborers and those paid in mills and mines and furnaces is still more striking. And so more or less, in respect to the Value of Commodities: competition is yet by no means perfect in distributing these so as to make their price uniform in the same country or even in the same county; but the immobility of laborers for an obvious reason is much greater than the immobility of goods. While laborers should certainly be free to go wherever their services may be in greater Demand, the natural reluctance of most men to leave their native haunts, enables each of the nations to work out its freely chosen ends without wholesale interference from abroad. If China should precipitate itself upon the United States, or India upon England, as the mere _economical_ impulse might indicate, it would be disastrous to the western nations; but men are everywhere under other influences besides the economical one, although this is strong and distinct and pervasive; Political Economy deals with men as they _are_ all things considered, and with Buying and Selling as this actually takes place over the world, or rather as it would take place if factitious economical restraints were removed; and Providence has other great ends in view besides commercial prosperity, vital as that is to all other progress, and often holds one impulse in check by a stronger one. (f) _Custom_, with its cognates Prejudice and Fashion, has still a good deal to do with the Supply of laborers in certain departments of effort, and of course with the rates of wages in them. In former times in this country and in the older countries particularly, Custom and decree were dominant in determining, for example, the current fees of lawyers and doctors, competition coming in to decide how many such fees a professional laborer should get, rather than the amount of each particular fee. The shares of the produce going respectively to the agricultural tenant and to the landowner, were specially under the dominion of Custom; as the mode (now decadent) of taking farms "_at the halves_," once universally prevalent in New England, sufficiently shows. In certain other matters relating to land and trade, Custom has long been gradually hardening into express law, as, for instance, the famous "Ulster Right" in Ireland. Prejudice, which is only another name for Custom, has some voice still in adjusting rates of wages, as may be seen in women's wages crowded down apparently to a point unreasonably low as compared with the wages of men; and also in the rate of John Chinaman's wages in those parts of the United States where he ventures to offer his services in the teeth of public opinion and hostile legislation. It may be spoken with general truth and satisfaction, that competition seems now to be breaking down mere custom and prejudice in all directions, and may perhaps in the good time coming reign supreme over the economic field; while Fashion, which bears indeed on one side of its shield the motto "custom," carries too on the other the bold word "competition," and this second side is likely to be presented to the public mostly in the future, because, they who lead the styles in any department whatsoever will always offer their services to Society at an advantage to themselves, that being one form of competition, and their rate of compensation will be legitimately higher than the average rate of their fellows, of which a good instance was the marked worldly prosperity during the decade of the Eighties of Worth, the man-dressmaker of Paris. (g) _Legal Restrictions_ are another cause acting on wages, by acting directly on the Supply of laborers. Laws inhibiting or promoting immigration; laws appointing the fees and salaries of officials; tariff-taxes, whether prohibitory or only restrictive; laws creating privileged classes of any kind, which is only another designation for laws restricting the rights of the masses; unequal modes of taxation, whether adopted in ignorance or by design; all have a direct and powerful agency upon the distribution of laborers, upon the supply of them at given points, and upon the rates of their wages. Governments are coming, however, much more freely than formerly, but never through their natural choice and drift as governments, only by the gradual and oft-disappointed compulsion of their citizens, to leave all these matters Economical except the wages of their own servants and those commodities which they choose to tax, to the simple and safe action of Supply and Demand. (h) _Voluntary Associations_ for that avowed purpose were a mediæval, and have come to be again a modern, agency in adjusting the Supply of laborers to their respective markets, and in regulating the wages of various classes of them. The Guilds of the Middle Ages, and particularly the old guilds of London, had a remarkable history, upon which we can not here even touch. Their local importance is sufficiently attested by the fact, that the City Hall of London is to this day the "Guildhall." King Edward III. humored the civic feeling of his time by becoming himself a member of the Guild of Armorers. "A seven years' apprenticeship formed the necessary prelude to full membership of any trade-guild. Their regulations were of the minutest character; the quality and value of work was rigidly prescribed, the hours of toil fixed from daybreak to curfew, and strict provision made against competition in labor. At each meeting of these guilds their members gathered round the Craft-box, which contained the rules of their Society, and stood with bared heads as it was opened. The warden and a quorum of guild-brothers formed a court which enforced the ordinances of the guild, inspected all work done by its members, confiscated unlawful tools or unworthy goods; and disobedience to their orders was punished by fines, or in the last resort by expulsion, which involved the loss of right to trade. A common fund was raised by contributions among the members, which not only provided for the trade objects of the guild, but sufficed to found chantries and masses, and set up painted windows in the church of their patron saint. Even at the present day the arms of the craft-guild may often be seen blazoned in cathedrals, side by side with those of prelates and kings."[6] The Trades-Unions and Brotherhoods of the present day cannot plead the provocations and justifications of their mediæval predecessors. It cannot be denied, however, that they have some provocations and justifications in the bad example set before them by the various combinations (implied or explicit) of the Wages-payers as a class. If the Wages-payers combine, then the Wages-takers would seem to have no resource but in combination. Both alike are wrong in this. Both alike oppose in this the spirit of Political Economy, which is ever the spirit of Freedom, and is ever against such factitious associations for such purposes, because they tend to destroy the independence of personal action on the part of both payers and takers of wages, and tend also to bring all the workmen of any one general grade down to one level of effort and reward. (i) Lastly, we must note the influence of _Casual Events_ upon wages, as these events affect the Supply of laborers. For example, in 1348, a terrible plague, called the Black Death, invaded England and swept away more than one-half of its population. "Even when the first burst of panic was over, the sudden rise of wages consequent on the enormous diminution in the supply of free labor, though accompanied by a corresponding rise in the price of food, rudely disturbed the course of industrial employments; harvests rotted on the ground, and fields were left untilled, not merely from scarcity of hands, but from the strife which now for the first time revealed itself between Capital and Labor" (Green). The landowners of the country districts, and the craftsmen of the towns, not understanding the law of Wages as an invariable resultant of the Demand and Supply of laborers, were scandalized by what seemed to them the extravagant demands of the new labor-class. Parliament equally ignorant with the People of the natural economic law, enacted as follows: "_Every man or woman of whatsoever condition, free or bond, able in body, and within the age of threescore years, and not having of his own whereof he may live, nor land of his own about the tillage of which he may occupy himself, and not serving any other, shall be bound to serve the employer who shall require him to do so, and shall take only the wages which were accustomed to be taken in the neighborhood where he is bound to serve two years before the plague began._" Afterwards, the runaway laborer was ordered by Parliamentary enactment to be branded in the forehead by a hot iron, and the harboring of the country serfs in the towns, in which under their civic rules a serf keeping himself a year and a day was thereafter free, was rigorously forbidden. These acts of Parliament, and many more of the same kind, were powerless to keep down wages to the old standard, but were powerful to keep up ill-blood and social discontent. They prepared the way for agitators like John Ball, for the poet-agitator Piers Ploughman, and for the great Peasant Revolt of 1381. John Ball's famous rhyme condensed the scorn for the nobles, the longing for just rule, and the resentment at oppression, of the peasants of that time and of all times:-- "When Adam delved and Eve span, Who was then the gentleman?" A hundred years after the Black Death the wages of a common English laborer--we have the highest authority for the statement--commanded twice the amount of the necessaries of life which could have been obtained for the wages paid under Edward III. 3. Having now seen fully the varied action of Supply and Demand upon the Value of personal services in their three kinds, we come at length to the most important general point in this chapter, namely, that in the second class of Services, those purchased in connection with the use of _Capital_, WAGES ARE ALL THE TIME ENLARGING RELATIVELY TO PROFITS. We have seen clearly already, that Cost of Labor and Cost of Capital are the only onerous elements in the cost of Commodities; because, while Natural Agents are all the time assisting and assisting more and more effectively in such production, they work without weariness or decay and without fee or reward. The reward of laborers is Wages, and the reward of capitalists is Profits; and we are now to demonstrate, that the part of their joint products falling to laborers as wages is all the while increasing as compared with the remaining part falling to capitalists as profits. This truth is of the deepest significance, and of the most cheering character; because men are more important in the universe than things; and because the number of men who sell their services as laborers is vastly greater than the number of men who sell their services as capitalists. It is another indisputable and exhilarating truth for the masses of mankind, that the Value of each item or article of those products created by the joint action of laborers and capitalists is ever becoming less and less as measured by any relatively fixed standard as Money; so that, while wages as thus measured becomes a larger and larger aggregate as compared with the aggregate of profits, and is shared of course by a much larger number of people, those commodities looked at as a collection of items for which the wages of these many is usually expended for their own comforts, are becoming all the time cheaper and cheaper to everybody, owing to the ever-enlarging and wholly gratuitous action of natural forces. For the sake of simplicity in the argument on this great point, we will first look at what the facts are through recent illustrations gathered by other parties for a wholly different purpose, and then give in detail the economical grounds for these patent and universal facts. Take for example, from Poor's Railroad Manual for 1889 a table showing in a graphic way the steady reduction in freight charges per ton per mile from 1865 to 1888 of seven representative Eastern trunk railroad lines, namely, the Pennsylvania, Fort Wayne and Chicago, New York Central, Michigan Central, Lake Shore, Boston and Albany, and Lake Erie and Western; and of six leading Western roads, namely, the Illinois Central, St. Paul, Burlington and Quincy, Chicago and Northwestern, Rock Island, and Chicago and Alton. The following are the figures:-- RATE CHARGES PER TON PER MILE (IN CENTS). +------+----------+----------++------+----------+----------+ | Year.| Eastern. | Western. || Year.| Eastern. | Western. | +------+----------+----------++------+----------+----------+ | 1865 | 2.900 | 3.642 || 1877 | .971 | 1.664 | | 1866 | 2.503 | 3.459 || 1878 | .898 | 1.476 | | 1867 | 2.305 | 3.175 || 1879 | .764 | 1.279 | | 1868 | 2.132 | 3.151 || 1880 | .869 | 1.389 | | 1869 | 1.860 | 3.026 || 1881 | .763 | 1.405 | | 1870 | 1.593 | 2.423 || 1882 | .756 | 1.364 | | 1871 | 1.478 | 2.509 || 1883 | .829 | 1.310 | | 1872 | 1.504 | 2.324 || 1884 | .740 | 1.220 | | 1873 | 1.476 | 2.188 || 1885 | .636 | 1.158 | | 1874 | 1.332 | 2.160 || 1886 | .711 | 1.111 | | 1875 | 1.161 | 1.979 || 1887 | .718 | 1.014 | | 1876 | .985 | 1.877 || 1888 | .609 | .934 | +------+----------+----------++------+----------+----------+ This reduction of rates in the case of the group of Eastern roads has amounted to 79 _per centum_, and in the Western group to 73 _per centum_, in the twenty-four years. Not less remarkable than the extent of this decline in freight charges per mile is its uniformity. Both groups show a wonderful steadiness in the progress of rate reductions. Starting at quite different points as to territorial development, they have yet travelled at a nearly equal pace in the same direction. This shows the operation of causes at once steady and universal. Statistics can never of themselves yield us _causes_; but they guide the way to them; at any rate, they prevent any radical misinterpretation of them. The great and overshadowing cause here of the cheaper freights per ton, as everywhere else of cheaper rates at the junction of efforts by capitalists and laborers, is of course the perpetual and augmenting and ever-gratuitous assistance of natural forces at every point. While the rates of freight per ton have decreased more than three-quarters in less than one-quarter of a century in the case of these 13 railroads on the whole average, the entire cost of the operation of these roads in this interval of time has not been diminished to any appreciable extent, as also stated by the same Manual. The main item in all the operation-expenses of railroads is the wages paid to the laborers of all grades; and the laborers are quite as well paid now on these 13 roads as they were in 1865, proper allowances being made for the changed and changing standards in the national Money. If, on a broad view, railroad employees of all grades have lost nothing as such in their wages in this interval; and the general public, including these laborers and also the capitalists concerned, have greatly gained, how can we account for the immensely lessened freight-charges while the whole operation-expenses continue substantially as before? There is only one rational account to be given of this. And it is trustworthy. All known facts jump with it, and nothing substantial can be urged against it. The gains to the masses including the capitalists and the laborers _have come out of the capitalists as such_. This is apparent as well as real. Cost of Labor and Cost of Capital is the whole cost. If the whole cost of moving one ton of freight from Boston to Chicago is 3/4 less than it was 1/4 of a century ago, the cost of the labor being the same at the two points of time, then the conclusion is inevitable, that the _cost of the capital_ at the second point is less than it was at the first point. With this conclusion all facts agree. All the laborers connected with a railroad from highest to lowest must be paid at any rate, or else the trains will certainly cease to move, whether the stockholders receive any dividend or not on their capital invested. The original _stock_--the capital that built the roads--of many if not of most the railroads in the country, has been annihilated, a new indebtedness in another form called _bonds_ having taken the place of it. Even the nominal dividends of dividend-paying roads have declined in the interval from 10 or 8 to 5 or 4 _per centum_ in the general, that is, 50 _per centum_. It is perfectly evident on every hand, that there is something in the nature and progress of things, that makes for wages as contrasted with profits: wages hold on and relatively enlarge, profits decline or go out altogether. Fortunately we are not left to generalities here, however plain and certain these may be. One of the 13 railroads specified above, the Illinois Central, made a remarkable exhibit in its own annual Report of 1887, showing the cost of its locomotive service for each year of the thirty years preceding. This cost per mile run had fallen from 26.52 cents in 1857 to 13.93 cents in 1886. This reduction had been effected wholly on the _Capital_ side of the account, by inventions and improvements of all sorts in the _machinery_ of locomotion; while the wages of the engineers and firemen had risen in the period from 4.51 cents to 5.52 cents per mile run. The cost of the labor had risen both relatively and absolutely while the cost of the capital had declined both absolutely and relatively. In 1857 the engineers and firemen had received as wages 17% of the entire cost of the locomotive service, but in 1886 they had received 39% of that total cost. The table is as follows:-- I. C. R. R. CO. PERFORMANCE OF LOCOMOTIVES. RELATION OF WAGES TO TOTAL COST PER MILE RUN. ------------------------------------------------------------------------ | Cost of wages | Total cost|| | Cost of wages |Total cost Years.| of engineers | per ||Years.| of engineers | per |and firemen per | mile run. || | and firemen per |mile run. | mile run. | || | mile run. | ------+----------------+-----------++------+-----------------+---------- | Cents. | Cents. || | Cents. | Cents. 1857 |Gold. { 4.51 | 26.22 || 1872 |Currency. { 5.77 | 21.76 1858 | { 3.97 | 19.81 || 1873 | { 5.84 | 21.10 1859 | { 3.81 | 20.78 || 1874 | { 6.02 | 19.57 1860 | { 3.96 | 20.17 || 1875 | { 6.03 | 19.57 1861 | { 3.84 | 18.92 || 1876 | { 5.79 | 18.81 1862 |Currency.{ 3.85 | 17.42 || 1877 | { 5.54 | 17.21 1863 | { 3.93 | 22.28 || 1878 | { 5.46 | 15.29 1864 | { 5.56 | 33.52 || 1879 |Gold. { 5.41 | 14.15 1865 | { 5.65 | 37.44 || 1880 | { 5.41 | 14.95 1866 | { 5.78 | 32.67 || 1881 | { 5.54 | 16.58 1867 | { 6.18 | 29.62 || 1882 | { 5.09 | 15.82 1868 | { 6.11 | 27.57 || 1883 | { 5.35 | 15.57 1869 | { 5.88 | 25.49 || 1884 | { 5.28 | 14.45 1870 | { 5.95 | 25.15 || 1885 | { 5.49 | 15.02 1871 | { 5.72 | 21.50 || 1886 | { 5.52 | 13.93 ----------------------------------------------------------------------- In 1857 the engineers and firemen received 17-201/1000 per cent. of total cost. In 1865 the engineers and firemen received 15-91/1000 per cent. of total cost. In 1867 the engineers and firemen received 20-865/1000 per cent. of total cost. In 1886 the engineers and firemen received 39-627/1000 per cent. of total cost. These illustrations from the railroads are plainly indicative of a general truth of the utmost importance in Political Economy, namely, _that all increase of Capital and all inventions and improvements in its practical application, while it redounds to the benefit of capitalists as a class, redounds in a still higher degree to the benefit of laborers as a class_. Let us now attend for a moment to the convincing Proof of this truth in two phases of such proof, and also to a cheering conclusion that follows it. (a) As any country grows older in time and richer through abstinence, and as the whole world thus grows older and richer, the tendency there and everywhere towards a general decline in the rate _per centum_ for the use of capital becomes patent and universal. The rate of interest on money loaned, and the rate of profits on capital used, tend all the while to go down as and because capital accumulates. No one will dispute this as a simple fact of history. And no economist will dispute, that this is just what we might expect beforehand as a corollary from the admitted proposition, that, other things being equal, an increased Supply of anything means a lessened Value for any specific part of it. Three centuries ago in England the legal rate of interest was 10%, while now the current rate is about 4% in that country, and has been considerably lower than that in Holland, although in both countries and everywhere else there are temporary interruptions and reactions in the constant tendency now being considered. During the first years of mining operations in California, from 8% to 15% per month with security of real estate was paid for the use of money, which enormous rates long ago declined to rates not much higher than those paid in the States along the Mississippi River, and in these also the rates are all the while approximating those current in the older Eastern States, whose own rates too are slowly declining. But, while there is a less rate of profit or interest on each 100 invested, there are many more hundreds capitalized; consequently, there is an absolute gain to capitalists as a class, at once in the aggregate amount of the capital and in the aggregate sum of the profits from it, since no capitalist would have a motive to capitalize further under the smaller rates of profit, unless the aggregate of profits under the new conditions were greater than under the old condition of higher rates; and, as much of this accumulating capital in order to become productive must now be offered to laborers in the form of wages, we might almost pronounce beforehand, that it would prove both an absolute and also a _relative_ gain to laborers as a class. And so it is. (b) Let us take to figures. An hypothesis or supposed case, whenever it may easily become an overt fact, may be reasoned from just as logically and securely as the overt fact itself. Let $100,000,000, while the rate of profit is 6%, and $500,000,000, when the rate has fallen to 4%, be expended in payment of simple wages. So far forth as that one element of cost goes, the value of the products to be divided yearly between capitalists and laborers will become respectively $106,000,000 and $520,000,000. In the first case, $6,000,000 is profits and $100,000,000 is wages; in the second case, $20,000,000 is profits and $500,000,000 is wages. Here is an absolute gain to the capitalists, since profits have gone up from $6,000,000 to $20,000,000, and so are more than _three_ times as great as before. But wages have gone up both absolutely and relatively to the rise of profits. They have risen from $100,000,000 to $500,000,000, and are _five_ times as great as before. Profits have risen as in the ratio 1:3+, but wages in the ratio of 1:5. This arithmetical example is put for the sake of illustration merely, but the principle of it holds good in every case, in which the rate _per centum_ goes down in consequence of the increase of capital in business; and, therefore, the advantages of ever-enlarging Capital are even greater to laborers as a class than to the capitalists themselves. Most assuredly, if the capitalists take less out of each hundred of the swelling hundreds now than before, the laborers must take more out of each hundred than before. Profits and Wages are reciprocally the _leavings_ of each other, because the aggregate products created by the joint agency of Capitalist and Laborer are wholly to be divided between the two. There can be no other _claimant_ even. (c) This demonstration is extremely important in Political Economy, and consequently in Social Life; for it proves beyond the possibility of a cavil, the Value of personal services tends constantly to rise, not only as compared with the Value of the material commodities which by the aid of capital they help to create (a truth we have seen before), but also as compared with the Value of the use of its co-partner capital itself; and therefore, that there is inwrought into the very substance of things in this world a tendency towards an equality of economical condition among men. God has ordered it, and men cannot radically alter it. Self-interest is indeed the mainspring of movement in the economic world; but the beauty of it and the wonder of it is, that no man can labor intelligently and productively under the influence of self-interest without at the same time benefiting the masses of men. His fair exchanges benefit the parties of the other part as much as they benefit himself. His very savings productively employed are poor men's livings. Only under the blessed freedom of universal Buying and Selling, subject only to the taxation of a good Government for public purposes purely, can these broad benefits designed by a wise Providence be fully realized in action; and the power of individual greed and corporate privilege and governmental perversion to thwart the beneficent though complicated workings of these laws of Capital and Labor towards the common weal and universal progress of mankind is shortlived and soon punished. 4. How comes it about, then, if these laws of mutual inter-dependence between capitalists and laborers are so well-placed and Providentially balanced, that there always have been and are still so many misunderstandings and ill-feelings and actual collisions between employers and skilled laborers, whose interests are at bottom one and whose relations ought to be so cordial? This is the last topic in our Chapter on Personal Services. Here we must look around narrowly and tread carefully. But there is a path. We can find it if we will. It leads through many short-comings in men's characters and through much ignorance of plain economical truths and past unreasoning jealousies and aggregated action on the part of both classes, and over the needful distinctions between impulsive selfishness and a true self-interest back to the same old laws of God laid down at once in the constitution of things and in the constitution of men. Labor-troubles are almost as old as Civilization. The Greek poet Euripides in his play of the "Supplicants" both indicates facts as they were then, and points out a future hope in which we may share, that these middle classes by a better harmony preordained and mutually beneficial may yet "save the State":-- "In each State Are marked three classes: of the public good The rich are listless, all their thoughts to more Aspiring; they that struggle with their wants, Short of the means of life, are clamorous, rude, To envy much addicted, 'gainst the rich Aiming their bitter shafts, and led away By the false glosses of their wily leaders. 'Twixt these extremes there are who save the State, Guardians of order, and their country's laws." At Rome and in the Roman Empire, instead of the usual voluntary union of capitalists and laborers for the mutual advantage of each other, the laborer was owned by the capitalist, and the true relations between the two were thoroughly disguised and wretchedly distorted. Business in all its branches came to be carried on by means of slaves; the lands were tilled by slaves; slaves became the artisans of the country; the money-lenders and bankers of the centre scattered branch-banks in the towns under the direction of their slaves and freedmen; the Company that leased on speculation the Customs-Taxes from the State had their slaves and freedmen levy these taxes at each custom-house; the contractor for buildings bought architect-slaves; and the merchant imported his goods in ships of his own manned by his slaves or freedmen, and then sold the same at wholesale or retail by the same means. In this way a gigantic system of unnatural traffic was built up and extended. In this way the very name "laborer" became tainted by the vile system of slavery of which he was a part, and the distinction itself between capitalist and laborer was obliterated. "Roman mercantile transactions fully kept pace with the contemporary development of political power, and were no less grand of their kind." "The Roman _denarius_ followed up closely the Roman legions." "It is very possible that, compared with the suffering of the Roman slaves, the sum of all negro suffering is but a drop" (Mommsen). We want now to examine critically the CAUSES of these constantly recurring labor-troubles, the true economical REMEDIES for them, and in connection with these the futility of the remedies popularly recommended for low Wages and the disputes between employers and employed of the second class. (1) There is an extremely common misapprehension on the part of both labor-givers and labor-takers as to the real _nature_ of the transaction between them. Both parties forget, or rather neither party is ever fully instructed, that it is a case of pure Buying and Selling. There is never any _obligation_ of the moral sort between buyers and sellers. The relation itself is purely economical. Moral considerations indeed cover this relation from above, just as they cover all other relations between man and man in human Society; and any two individuals standing over against one another as buyer and seller, also stand over against each other in higher and broader relations as man and man; but it works confusion and mischief as between both, whenever relations differing in their nature and operation and reward are not separated from each other in the mind of each relator, and whenever each does not act in the particular relation according to the nature and rules of that relation alone. When A hires B to work in his factory, this new relation is economical not moral; there were moral relations between the two before this relation was knit, and will be again after this has been broken, and indeed are while this continues; but the economical relation is one thing, and the others a very different thing; they are so different, that they cannot be blended in mind or motive to any advantage to either individual or to either set of relations; and any degree of confusion as between the relations has always wrought mischief as between the individuals, because instead of seeing either set of relations in its own clear light, they now see both in a commingled twilight. What is the economical relation? This. A desires the personal service of B in his factory purely for his pecuniary benefit, and assumes his own ability to make all the calculations requisite for determining how much he can (profitably to himself) offer B for his service; and B, who knows all about his own skill, how it was acquired and how much it has cost, wants to sell his service to A for the sake of the pecuniary return or wages. There is no obligation resting upon either. Man to man, each in his own right. There is no benevolence in the heart of either, so far as this matter goes. Benevolence is now an impertinence. It is a question of honest gain in broad daylight. Benevolence is blessed in its own sphere, but there is no call for it here and now. If it comes in an unbidden guest, it comes in to mar and to distort. It is an incongruity. "_I never knew a Jew converted but it spoilt him_," was the word of one deeply versed in human nature and in Christian experience. Conversion is good, and its field is broad; but the Jew _as such_ is incongruous with it. Good is benevolence and wide its field, but Buying and Selling does not need it. Its own motives are independent of it, and sufficient without it. A clouded understanding of this vital distinction has always played its part in Labor-troubles. Buyers and Sellers of personal services are always on a plane of perfect equality as such exchangers, and no one can be more independent than either of them except the hermit in his cell. Which must look out for the interest of the other beyond the terms implied in the trade itself? Which is the superior party? Which should take off his hat, the other remaining covered? The truth is, and all experience and all analysis brings us up abreast of it, that the two parties to a trade of any kind stand on a footing of absolute equality towards each other then and there in the economical relation about to be knit, and any conception in the mind of either that he has the other "at his mercy" in either the good or bad sense of that phrase, disturbs and destroys the proper conditions and balances of the exchange in hand; and, what is more to the point, it implies that each party has _not_ all he can do to fulfil in the letter and in the spirit what is always implied in the terms of a trade deliberately entered upon by two parties. When B agrees to work for A at skilled labor in his factory for a year at $15 per week, he makes a good deal of a contract; and virtually pledges to A not only the motions of his hands for that period of time, but also the vigorous attention of his mind to that service and to the general interests of his employer so far as these come under his own eye and supervision. Nor is this all: he virtually pledges himself to B to coöperate with the least possible friction in all plans for betterment in his division of the work, and to cordially coalesce with all other employees for the general ends of the business without too much of self-assertion and without too little of courtesy to others. To fulfil this contract in all its spirit rounds up the circle of B's economical obligations to A. He will practically have all he can do, so far as A is concerned, and in consistency with all his various duties to others, to make good to him at all points his simple business pledges. Benevolence, the interests of a common citizenship, and the reciprocal ties of religion, lie wholly outside. A will practically have all he can do, so far as B is concerned, to fulfil in the letter and in the spirit his economical obligations to him, without troubling himself to see whether B is going to vote the same party ticket that he himself votes, and without confounding either B's poverty or prosperity with his own obligation to be polite to him at all times and to pay him promptly his weekly stipend. So long as B renders in letter and in spirit what he has agreed to render, and A returns in the same way what he has promised to return, the less either thinks and talks and acts about the other in all the other relations of life, the better hope of good success to both in this relation. Church relations and social relations and political relations are all of consequence in themselves; but when any of these begin to get mixed up with labor-relations, there is soon a muss and a mess. Incongruous things, things no way vitally connected with that, often come in to disturb and destroy a simple matter of mutual renderings. (a) The first practical remedy for difficulties arising under this first head, is a clearer separation in the mind of both parties to a trade of what really belongs to Buying and Selling from what belongs to all other departments of activity. More common sense is needed at this point, more simple analysis, more daylight, more personal independence, more introspection as to motives, more power in making distinctions, and a more practical separation of what is clear and fixed from what is complex and obscure in human relations. Metaphysics may yet lie in cloud-land, Ethics may not yet have drawn its outer and interior lines so strong and deep as it will, Sociology also is a vast field of complexities, but truth to tell Economics has no mysteries to speak of. I buy and sell for my own advantage, which proves in the nature of things to be for the equal advantage of my compeer. It is my business and my compeer's business and every other man's business who buys and sells, to pick that action out in its motive and result from the great mass of dubious actions, and to set it up in its own light, to rejoice in it as the clearest thing in social action, to claim it as God's own plan so far forth for our comfort and progress, and then to see to it that no preposterous hand mixes it up with perplexities or theologies or other abominations--muddying with a tentative pole the stream of our clear brook! In this country at least, in its ignorance of common things and common science, the pulpit often fulminates against the gains of exchange as "materialism," and mixes up buying and selling with "worldliness," and only half permits its deluded hearers the privileges of the market, and illustrates again in modern times such teaching as is denounced to St. Timothy,--"_some swerving turned aside to vain babbling, desiring to be teachers of the Law, understanding neither what they say, nor whereof they affirm_." "Let every shoemaker stick to his last." Those who have looked into it with any care have found, that Exchange in all its natural outgoings is not answerable to these pulpit charges, nor is contrary to the letter or spirit of the biblical precepts, but on the other hand is in full harmony with the claims of Conscience and with all the inbreathings and aspirations of Christianity. (b) The second practical remedy for the labor-difficulties arising from the want of thorough understanding by both parties of the real nature of hired renderings of the second class, is fair _common honesty_. More of an easily accessible intelligence, more of penetration and separation as to social relations in general, meets the first point; but quite as needful as this simple intellectual process, is the still simpler moral habit of doing just what one has agreed to do, without evasions and without diminutions. Labor difficulties take their origin more often, perhaps, in some clouded moral action of one of the parties, than in a clouded mental apprehension. Men are too conscious as men of their own temptations, to be lax in their pledged renderings and of their own shortcomings at this point, not to be suspicious of each other as buyers and sellers, for fear the party of the other part is about to withdraw something either in quantity or quality of what he has promised to render; there is almost always something or other to give color to such a suspicion, and it grows by what it feeds on; frank explanations are not had at the outset, and a good understanding is not come to, as it doubtless might be in nine cases out of ten; and the little cloud, at first no bigger than a man's hand, by and by becomes black and threatening, and bursts at last in a strike or lock-out of large proportions. An open honesty that is such and seems such, that is not beyond the aim and reach of common men, that is taught in scores of forms in "Poor Richard's Almanack," and that each man ever likes to meet with and so ought ever to put forth, is in fact a preventive of conflicts between laborers and employers, and would if properly manifested have prevented multitudes of such actual conflicts. Here is the main, almost the sole, point of contact between strict Ethics and the Economics. What buyers and sellers, that is to say, the whole practical world, needs, is not disquisitions on Morals from Press or Pulpit, but an inner ear to hear the true click of Conscience, and the quick and open answer in honest action. (2) A second general cause of the Labor-troubles of the past and present has been a strong tendency to neglect the special _preparation_ for their peculiar functions by both capitalists and laborers. A successful employer of laborers year in and year out to their advantage and his own is always one who has been _trained_ to that function by special preparations. He is a living man with all the limitations of living men: he has to deal with many living men with all their imperfections: he has to deal also, and constantly, with what is in its own nature dead, namely, Capital, always either a commodity or a claim: to animate and invigorate these dead forms of value, to put them into vital connection with living men who shall enhance their value, and thus to become a leader to living men as towards swelling interests, demands unusual native gifts and a special long-continued training. When one looks from without upon such an establishment as this in full action, it seems automatic, it seems as if almost anybody with a clear head could continue to direct it; and when this "captain of industry" departs this life, perhaps his son or some previous subordinate, without the proper gifts and at least without the peculiar training, assumes the post of direction. For a little everything seems to go on as before. As sure as fate, however, a friction will soon develop here, and a misunderstanding there, there will be whisperings among the men, some breath of suspicion will be likely to cloud the borrowing-power, opening difficulties of any kind such as loss of credit or a weakening of the usual markets are apt to throw a new operator more or less off his base, and gathering labor-troubles of any sort commonly find such a man unprepared for lack of suitable training and experience to ward them off or to make timely concessions to the men or to minimize the evil results when these become inevitable. Also labor-troubles are quite as likely to arise from the want of character and training and considerateness of the employees towards the capitalists. The relations are reciprocal and they are also in their very nature delicate. One poor workman however good his disposition, one unfaithful overseer no matter how great his possible skill, may mar the current product in such a way as to lose it the market and cost the establishment the present profit. The strength of a chain is the strength of its weakest link. It is a matter of immense difficulty at any time, and emphatically so at the present time to organize a working force in factory from top to bottom so as to have it go forward as a unit as towards the marketing of the product, without bad workmanship at some point and unskilful supervision at another; because the laborers as a rule have not given themselves time to learn thoroughly their special parts, because they are not content to remain steady at one thing and at one place, and because they do not practically recognize even if they perceive it that their own permanent interests are exactly coincident with the permanent interests of their employers. Just now in this country the public Law robs the manufacturers (at their own behest) of their best markets at home and abroad, makes it difficult or impossible for them through wanton taxation of their raw materials to create a good quality of goods for any market, and so multiplies frictions and failures and losses along the whole line of production. The lack of what may be called Apprenticeship on the part of skilled laborers, the consequent difficulty of rising from one gradation of effort to a higher and better-paid one, the restlessness of native laborers under such disabilities, the rapid admixture of foreigners, the lack of coherence throughout in point of intelligence and apparent identity of interests, together with the instability and haphazardness of the resources and personal training of the employers as a class, gives birth to Labor-troubles which are at the same time Capital-troubles, to read the daily record of which makes one sick at heart. (a) The only possible and practicable remedy for this state of things, so far as the employers are concerned, is in a more conservative attitude of capitalists as a class about passing over their resources to the hands of men who have not proven their ability to handle them wisely by a full course of training in the management of practical affairs. By a wretched policy in this country at present Capital is prohibited from building and from buying ships, with which to navigate the oceans; from selling domestic manufactures in foreign markets; and also from a profitable agriculture, which may sell its products abroad and take its pay back. Consequently Capital, eager in its own nature to be invested to a profit somehow somewhere, has rushed without due circumspection into the hands of domestic operators, who have not been half fitted for their task, who have knitted relations with laborers without being able to secure their permanent respect or to control their services, and who have lost to their owners in multitudes of cases the entire capital intrusted to them. If capitalists had had during the last quarter of a century one-half of their natural and proper chance to invest their money to a profit, there would not have been such a reckless investment through incompetent hands in building mills and foundries in this interval of time, and such wholesale losses in connection with them. When capital comes to be at liberty to turn right or left according to its own will in view of a prospective profit, factory companies and projectors cannot draw resources from the public for their operations, without demonstrating to the owners the trained and tried capacity of the practical operators, who will buy the materials and hire the laborers and market the products. (b) The practical remedy for the inexperience and instability and unskilfulness of laborers as tending towards labor-troubles of all kinds and degrees, is only to be found in a want of market for such services. In a natural and wholesome state of things, such as would exist in the United States were it not for national laws tampering with Trade and with Money, the questions asked an applicant for skilled work by any labor-taker would be, "_What have you learned to do? How long and for what pay do you want to do it? What do you want to reach next, when the present job is done?_" When employment turns on good answers to such questions as these, and when the questions themselves are put in good faith, there will be an end of Strikes and Lockouts. Untrained and restless hands will get nothing to do in mills and factories. Apprenticeship in its various forms will come back into vogue, and will probably be made a part of the course in public schools. The division and gradation of laborers will be carried out further than it ever yet has been. Laborers will then be _organized_ in the best sense of that word, and to the best advantage of capitalists. The permanent Supply of skilled laborers will be constantly adjusting itself to a permanent and increasing Demand for them. And it requires no millennium for such a state of things to come in. It requires nothing but an ordinary and enlightened and beneficent selfishness on the part of capitalists to adjust itself to the ordinary selfishness of laborers sure to become enlightened and beneficent to the best and ever-growing interests of both parties. This is not the spoken word of Morality, still less is it the divine word of Religion, it is only the common programme of a common-sense Political Economy. (3) The third and last general cause of misunderstandings and embittered disputes as between laborers and capitalists is partly economical and partly moral, and consequently the remedy for it is partly moral and partly economical. The Past projects itself down into the Present partly with blessings and partly with curses. In the old times under Slavery and Feudalism the laborer always came forward to his task with a taint upon him. Sometimes the taint attached to his birth, and at all times it attached to his calling. Slavery in all its forms always makes manual labor degrading. The courtly Cicero _apologizes_ in a letter to his friend for his open sorrow over the death of his favorite slave; and in several passages of his treatise on Morals he follows his Greek teachers, Plato and Aristotle, and declaims in a pitiful way against the noble rights of laborers. "_All artisans are engaged in a degrading profession._" Again, "_there can be nothing ingenuous in a workshop_." When trade and commerce are carried on on a small scale, "_they are to be regarded as disgraceful_"; when on a large scale, "_they must not be greatly condemned--non admodum vituperanda_!" (I, 42.) Serfdom once existed in England, and threw its shade over free laborers there long after itself had disappeared. A class of indented servants pervaded all the New England Colonies, and a clause of the New England Confederation of 1643 provided for their forced rendition from Colony to Colony, and passed over almost verbally into the Constitution of the United States of 1787 as applicable to the slaves of the South. In this way in all parts of this country manual laborers came to be more or less off color, and this has continued in a continually lessened degree till this time. When those who work with their hands are looked down upon by those who do not, two sets of feelings are apt to be engendered equally unfortunate to the two classes that entertain them. The non-manual workers, the employers, are more or less puffed up with pride and a sense of superiority (there are beautiful exceptions) as towards their laborers, and the latter in their turn are apt to develop alongside an unmanly servility and an apparent deference, a sort of secret breasting up of hostility and defiance, which is sure to manifest itself when labor troubles come on even when it has not helped to brood these troubles into life. The parties then are not well placed as towards each other to negotiate and to compromise and to coalesce in a future harmony. The party of the first part is too proud to yield to their inferiors, and the party of the second part is too bitter to be sweetened. Who is sufficient for these things? And what is the remedy for them? (a) So far as employers are concerned, their natural though unreasonable and provoking arrogance may well be reduced by the economical reflection, that the laborers are exactly as necessary to production as the capitalists are, that the two stand on a precise level so far as the product goes, that each is one blade of the shears and the other the other and that it takes both blades to cut anything, that while the laborers are sellers in the open market the capitalists are likewise sellers and that the same ultimate purchaser furnishes the market for both sets of sellers, that as sellers they are only equal in position, that buying and selling is a levelling as well as an uplifting process the world over, and that as such co-equal partners in one indivisible operation all haughtiness on one side and all undue humility on the other is nothing but obstacle as towards the common end; and also by the moral and social reflection, that their laborers are just such men as themselves in motive and action, that the two are very likely to exchange places with each other before very long, that riches are extremely liable to take to themselves wings and fly away, that Christianity is no respecter of persons, that humanity deems nothing human alien from itself, that morality puts the golden rule upon the fore-front of its precepts, and that whatever may unite any body of men in a legitimate purpose of achievement along any line of human action multiplies the power of each individual and exalts his standing and responsibility as such individual and thus reduplicates the reward of his individual action. (b) So far as the employees are concerned, in any temporary sense of dependence or even of injustice, there is open to them the economical reflection (and it will do them good to bring it home) that their best route to the respect and favor and feeling of equality of their employers is through the excellence of the service they render them and the courtesy (not servility) with which they render it, that as every capitalist becomes such by means of abstinence they may themselves by saving become capitalists, that there is nothing in the nature of their work or its relations to capital to cause them to hang down their heads, that handsome is that handsome does, that the opportune offer of the present capital to work on gives them a chance to exhibit their skill and to earn a living, that the capitalists are just as dependent on them as they upon those, and that as single sellers of a valuable personal service they daily confront on a footing of equality the sellers of a valuable product so created; and there is open to them also the moral and social reflection fortified by constant observation and experience, that no matter where a man begins it is the end that crowns his work, that life to all is a series of stepping-stones, that manly qualities are appreciated everywhere, that character tells in the lowest position however high and low are reckoned, that the poor gain and hold friends quite as well as the rich, that there was a certain poor wise man that saved the city by his wisdom and gained a lasting record in consequence, that the poor and the rich are constantly changing places in this world, and that there is no respect of persons with God. We may see now what we are to think of some popular remedies constantly recommended for low Wages. A brief discussion of what is false will give us a stronger hold of what is true. The chapter will close with relevant reference to three current remedies. 1. It is being dinned into the ears of the present generation, that Government has large functions in the ongoings of business, that it ought sometimes to interfere to better the rate of Wages, at least to designate a minimum below which they shall not go, and that Government should hold itself ready to undertake directly to carry on certain branches of business under certain circumstances. This scheme goes under the high-sounding name of _Nationalism_. Richard T. Ely, Professor of Political Economy in Johns Hopkins University, is one of the most prominent representatives at present of this school of thought. In his Introduction to Political Economy just published (1889), he lays down this principle: "_When for any class of business it becomes necessary to abandon the principle of freedom in the establishment of enterprises, this business should be entirely turned over to Government, either local, state, or federal, according to the nature of the undertaking._" He begins his book by attempting to hammer in the "lesson" that as Civilization improves, coöperation takes the place of individualism. The golden age of individualism, he says, is among the wild tribes of Australia. They never coöperate with each other in their economic efforts, or in anything else. No one expects anything from his neighbor, and every one does unto others as he thinks they would do to him. The life there is one prolonged scene of selfishness and fear. But as civilization comes in, he says, individualism goes out, and coöperation takes its place. The fine old Bentham principle of _laissez faire_, which most English thinkers for a century past have regarded as established forever in the nature of man and in God's plans of providence and government, is gently tossed by Dr. Ely into the wilds of Australian barbarism. There are some propositions that are _certainly_ true, and one of them is, that no man can write like that, who ever analyzed into their elements either Economics or Politics, who ever gained a clear conception of the sphere of either science in its relation to the other, or who ever saw distinctly the relations of either to the nature of Man. The sole motive in Buying and Selling is the gain of the individual, each for and by himself. That always was the motive, is now, and always will be. No complications of modern business, no complexities of credit, no combinations of capitalists or laborers, ever altered or ever can alter one particle the motives of men in buying and selling. In a natural and progressive state of things, Individualism, instead of going out, comes more and more into play, through the Division of Labor and the falling of all sorts of services more and more into specialties. To talk glibly, as Professor Ely does, about Government taking up easily and carrying on in a better way and to better ends branches of pure business as they are dropped or forced from the hands of Individuals, is ignorance at once and alike of the real nature of Government and of Business. Let us look at a few of the native incongruities and logical fallacies of this nationalistic position. (1) What is human Government? Is there anything substantive and continuous in its _personnel_ and purposes, as there is in the government of God? Is government anything more, can it be anything more, than a transient Committee of the citizens charged and changed to do in certain few particulars the changing will of a Majority? Government is indeed a necessity, as men are, to restrain the lawless, and to shape the ends of the law-abiding; but it has to be administered, if at all, by precisely the same kind of men as the rest are, chosen for brief periods, their duties sharply prescribed by constitution or custom, and impeachments or other punishments provided for them when they transgress. One President of the United States and one Judge of its Supreme Court have already been solemnly impeached by the sovereign people themselves. Government, then, is an _Agent_, and nothing more. Even nationalists will not contend for the divine right of kings. And the duties of every decent government on earth are _political_ in their character. The agents are chosen and dismissed with a direct reference to that kind of action. Politics has a sphere wholly distinct from Economics. The true and only end of politics is the greatest good of the greatest number, so far as that end can be mediated by governmental agents of the people. Individualism as such does indeed sink out of sight under a true Politics, and the inalienable rights of one are maintained for the sake of and in consistency with the greater rights of all. But Economics is all individuals from beginning to end. "_It takes two to make a bargain._" Only two. Each of the two has his own motive, estimates for himself, gives and takes for himself, and enjoys alone his own gain. All this is involved in the very idea of _Property_, which is derived from _proprius_, and which means _one's own_. How illogical, then, and incongruous, to suppose, that a set of limited human agents briefly trained to purely _political_ action, and liable to be turned out of office by every change in party administration, can be competent at the same time and in addition to perform _economical_ functions for the people! Notice, too, that governmental agents in all good countries are already _overburdened_ with their mere political duties. Work is behindhand in every portfolio, on every court calendar, and in every legislative body, in Christendom. How absurd it is, therefore, to talk about throwing upon shoulders, already overburdened, additional loads of a different kind, for which shoulders and heads are wholly unfitted! Why not, then, inquires our nationalist innovator, organize new bureaus to undertake in their behalf the buying and selling of the people? Ah! Who pays the taxes needful for the support of the present _political_ bureaus? And who would have to pay the taxes needful for the support of the new _economical_ bureaus? Besides not having any substantive existence of its own Government has not one cent of money, except what the people voluntarily pay in taxes out of their own personal gains, in order to maintain their own agents to do certain political things for them, which they cannot do as well for themselves directly; and when it comes to the cold question for the people themselves to answer, whether they will organize a new set of hired men to do their trading for them, and pay them for doing this out of aggregate gains certainly to be vastly diminished by the process, our nationalistic leaders will perhaps find out that the people have common sense, whether the said leaders have it or not. But the damning difficulty with this governmental business association is, after all, in the inevitable _lack of motive_ on the part of the hired men doing the buying and selling. It is an honor to human nature, that hired men never have and never can have the zeal and enterprise of principals and owners to forecast and to perform and to lay up; because it shows that man is a rational animal, made in the image of his Maker, always acting under the pressure of personal motives, and always estimating what is his own more highly than what belongs to another. Business motives act in their fulness only on the individual, whose is the effort and whose is the return. Any policy whatever on the part of Government, which lessens the number and the eagerness of individual operators in favor of great artificial combinations resting in the shadow of the Law, lessens of necessity the gains of exchanges, and the progress of the nation, because it lessens of necessity the press of motive on the many to work and save. Government, accordingly, is quite too far off in every respect from the business, that is to say, from the buying and selling of the people, to undertake any branch of it when "it becomes necessary to abandon the principle of freedom in the establishment of enterprises." It will then be high time to "abandon" the "enterprises" themselves. If the "principle of freedom" cannot compass the "establishment of enterprises," is it likely that the "principle" of secondary and irresponsible agents can do it? To show the people how to make their bargains, how to buy and sell and save and spend, is a function government is not fitted for, was not established to perform, and never undertook without making a botch of it. In the Preamble of the Constitution of the United States there is a careful and complete and elegant enumeration of the purposes, which the body of the instrument was designed to attain. These purposes are six. No one of them contains even a hint of any purpose to enter upon the "establishment of enterprises," still less of any necessity "to abandon the principle of freedom." The last of these six purposes is phrased: "AND TO SECURE THE BLESSINGS OF LIBERTY TO OURSELVES AND OUR POSTERITY." The liberty to buy and sell freely was precisely that "liberty" of the Colonies which was most threatened and infringed by the British Government, to vindicate that special "liberty" was the chief cause of the American Revolution, and "to secure the blessings" of that and other forms of similar "liberty" was the final purpose of the Constitution of the United States. It is true indeed that the Constitution empowers Congress, a creature of the People, "_to establish Post Offices and Post Roads_"; but the purpose of this was _political_, and not pecuniary; it was to bind all the States together in one Union of intelligence and intercourse; it was to keep the outlying and distant parts in touch with the central and seaboard; it is not in any sense a "business" enterprise; the department of the mails is not now and never has been, for any length of time, self-supporting; and it illustrates through and through in its "Star route frauds" and other contracts, in its appointment and removal of postmasters, and in the sickening dependence of primal Service of the people on partisan and corrupting impulses, many of them inherent evils of the much-vaunted Nationalism. But besides all these vital and political objections to the assumption on the part of government of any direct industrial functions whatever, there remains two other fundamental objections, of which the first is, that our national government has received no powers to any such end, and is emphatically prohibited in the Constitution itself from exercising them:--"THE POWERS NOT DELEGATED TO THE UNITED STATES BY THE CONSTITUTION, NOR PROHIBITED BY IT TO THE STATES, ARE RESERVED TO THE STATES RESPECTIVELY OR TO THE PEOPLE." (2) The second remaining objection is, that such proposed action of government could have no tendency at all either to enlarge the Wages-portion, or to increase the industrial efficiency of the laborers, or to diminish the number of competitors at any one point of the wages-scale. As a matter of fact, such governmental action would have precisely the opposite effect at each of these three vital points of wages: employers would have less motive to swell the wages-portion, laborers less motive to improve their capacity, and more motive to congregate locally. Suppose, that at some given point in the scale of wages, free and intelligent competition has been had on both sides, and that the average rate of wages as thus determined proves one dollar per day for each laborer. Suppose further, that everybody outside the employers thinks this is quite too little, and that government accordingly issues a decree that wages at that point must be thereafter one dollar and a half per day. That decree can have no tendency at all to enlarge the _wages-portion_ of those particular employers, because _that_ has already been determined for the next industrial cycle by the general productiveness of the cycle last past, and by the last division under free competition between wages and profits; if, therefore, the decree were carried out, as it never practically could be, the result would be that only two-thirds of the laborers previously employed could be employed then at all, and the remaining third would certainly be worse off than before; and besides the Division of Labor being necessarily lessened, production would be less profitable to the employers, and the next wages-portion would certainly be less than the one before, and thus the outcome of the _remedy_ would be worse than the _disease_. Now let alone the artificial interference of government, and all natural accessions to Capital at that point, all investment of profits in an enlarged business, all saving from expenditure for the sake of further production, tend strongly of their own accord to enlarge the wages-portion, and thus, the number and intelligence of the laborers continuing as before, are sure to raise the rate of wages. Or, if there be no accessions to Capital, or other influence swelling the wages-portion, and the number of laborers be diminished at that point, as by migration to new fields of effort or enlistment in armies, the competition of wages-givers for laborers will be quickened, and the rate of wages will rise. Reversed conditions will of course give reversed results. 2. A second popular remedy for low Wages, not only proposed, but also for a long time brought into practical action, is Labor-Unions in their various forms and with their manifold methods of operation upon employers. It is important to note here and to remember, that the Guilds of the mediæval times, from which the modern Trades-Unions have borrowed something of form and much of nomenclature, were in substance extremely different from their modern imitators. Those were combinations of Masters with their journeymen and apprentices and dependents in order to control the entire manufacture and sale of a certain class of products, from the name of which the Guild usually took its own name, as "Cloth-workers' guild," "Shoemakers' guild," and so on. Whittier, himself a shoemaker in his boyhood, apostrophizes the latter guild in words which more or less describe them all:-- "Ho! workers of the old time styled The gentle Craft of Leather! Young brothers of the ancient guild, Stand forth once more together! Call out again your long array, In the olden merry manner! Once more on gay St. Crispin's day, Fling out your blazoned banner!" These masters thus organized with their laborers were the capitalists of their time, and in this vital matter differed from the Unions of to-day, which are made up of laborers as such organized to confront, and if need be, to antagonize, capitalists. A royal charter was indispensable to the legal existence of those craftsmen. It took money for them to start their guilds, and in progress of time most of them became very rich. "A common fund was raised by contributions among the members, which not only provided for the trade objects of the guild; but sufficed to found chantries and masses, and set up painted windows in the church of their patron saint. Even at the present day the arms of the craft-guild may often be seen blazoned in cathedrals side by side with those of prelates and kings." This radical difference between the two must always be borne in mind in all arguments and inferences drawn over from the mediæval "unions" to those of the present day. Two points may be freely conceded to these labor-organizations before we pass to the economic objections to them. In the first place, the employers _set the example_ for the employees in a tacit if not open combination as against the employees in their own interest and emolument. The so-called "protective" tariff, for instance, is nothing in the world but a strongly-linked combination of certain rich capitalists to extort from the masses (their own laborers included) artificially lifted prices for the necessaries of life; and the certain result of shutting out imports by tariff-taxes is the shutting in of would-be exports, to the certain lowering of general wages in a country, because there is a lessened demand for laborers in consequence. For a second good instance of combinations as against employees on the part of employers, take the well-known understanding among manufacturers of the same sort of goods in the same general locality, that laborers discharged from one establishment shall not be hired in any of the rest; and that if the general voice call for a "shut down," or for three-fourths time or less, all in that line of goods shall comply. How can laborers be blamed for organizations in their own behalf when they find themselves confronted as individuals with an organization of employers? Then, too, it must be acknowledged, that, had it not been for united action of some sort on the part of the laborers, the unreasonable hours of fifty years ago in mills and factories would probably not have been shortened to this day. Capitalists as a class are conservative of methods, as well as of ends. The cotton and woollen manufacturers of Berkshire County, for example, who may doubtless be taken as a fair sample of the manufacturers of New England, stiffly refused the demands of their work-people that the hours might be reduced from an average of 14 throughout the year to an average of 11. When the late Civil War was going on, and the manufacturing became extremely profitable, and the mills were more or less depleted by enlistment, and the remaining hands felt more independent from the consequent rise of wages, the combined demand in one mill for fewer hours was reinforced by simultaneous demands for the same in other mills in the neighborhood (the time and manner having been agreed upon beforehand), and visits in force by the work-people from mill to mill completed the desired reform. The mill-owners were sullen and indignant, and submitted of necessity. The work-men were right. The reform was imperative. Credit must be given to them for the good they have done acting as a body on this and other occasions. On the other hand, all this is not _business_. All this is contrary to the very old, and the very good adage, that it takes _two_ to make a bargain. If we express this adage in the language of our science, it will take some such form as this: When two men have mutual services to exchange, let them come to a fair agreement as to the terms on which they will exchange. Certainly, let each make the best terms he can, but let the bargain always be free. If one party, who happens to have the power to do it, uses anything like compulsion upon the other, it ceases so far forth to be a bargain at all, and becomes a sort of robbery, of which in some cases courts will take cognizance. Now, workmen bring a certain valuable service to the market, just such a service as the capitalist wants, and he has to offer just such a service as they want, namely, wages: let the two parties come to a free and fair agreement on the terms of their exchange; let each workman by all means make the very best terms he can, insisting to the last penny on all he can get elsewhere, for the value of his service is determined, as other values are determined, by what it will bring: let the employer do just the same on his side, and so let a fair bargain for the time present be struck. This is a very good kind of _striking_, and the more intelligence and skill and self-respect a workman has, the better prepared he is to strike the bargain and secure his just due by and for himself alone; and this gives a good chance for every man who has any peculiar gift, who may have surpassed his fellows in diligence and skill, to secure a proportionate reward now and to go on higher in future; all this gives opportunity for _diversity of relative advantage_, which, as we have seen, lies at the basis of all exchange, which itself starts in individualism and naturally proceeds in a still higher individualism to the end. This is the only way for a laborer of talent and diligence to secure fully what belongs to _him_ as a man and a workman. If he cannot get from a given employer what he thinks he ought to get, what he thinks the service is worth in another market, let him exercise his perfect right to quit and go elsewhere. All this is fair and aboveboard and individual and progressive. Everybody knows that there is a kind of _striking_ now in vogue wholly different from this, in that it brings a sort of compulsion into play. _A fair bargain should be broken, if at all, just as it was made, with the two parties face to face, and everybody else aloof; and a new bargain should be made, just as the old one was, with the two parties face to face, and everybody else aloof._ But a combination among workmen to leave an employer in the lurch, and especially a combination which forces into its ranks by cajoling or menaces those who are unwilling to join it, as is so commonly the case in Strikes, is not only contrary to the inmost nature of a bargain, but is also of itself a sort of confession of the injustice of the claim. If the claim be just so far as _all_ the individuals are concerned, there is no occasion to extort it. If the value of the service rendered by each be equal to the sum demanded, and especially if this can be obtained elsewhere, which is the only gauge of the value of any service anywhere, there is no need of conference and combination and conspiracy. Of course, this radical argument against Strikes implies that employers of that grade have not entered into a combination not to hire dissatisfied laborers from other establishments; if they have, then the agreement can be turned with equal force against the employers themselves, for _they_ are resorting to means outside the nature of a bargain, means of the same nature as a Strike. Let, then, each workman tell his employer the present facts just as they are, and if this appeal prove ineffective to secure his commercial right, let him go quickly where he can get the most for his service. That this is not done, that means of the nature of a threat are brought to bear upon the employer, that the justice of the claim is not relied on in a case where more than anywhere else justice can enforce itself, that free and full explanations are not had, that no notice is given, that great damage is expected by their action to accrue to the employer,--all this seems to forget that the transaction between employers and employed is a case of pure exchange, a simple bargain of one service against another service. The above is the universal and fundamental objection to Strikes. _The remedy for economical evils, real or supposed, must ever be found in economical considerations._ The strong but foolish tendency of the times is to mix up things that are quite distinct; to try to apply to the evils of Trade the rules of Morals, which is a useless task; to appeal to Politics in matters of pure Bargain; and to resort to Force to cure the evils that flow from the wholly voluntary action of individuals. This is like the doctor who would cure bodily ailments by mental and spiritual recipes. It has all the absurdities of the late famous "Mind-cure." The mind is indeed higher than the body, but bodily maladies must be treated as such, or the patient will die; the imperatives of Ethics are certainly superior to the profitables of Economics, but the latter are well able to take care of themselves on their own ground; Religion is loftier than Morals, but it becomes a very poor substitute for morals in the daily routine of life. _Similia similibus curantur._ Economical evils can only be removed by a better Economics better applied. Strikes are an outside and irrelevant remedy for low Wages. A bad principle works badly in practice of course; the principle that underlies strikes is so opposed to the fundamental nature of exchange, that we might know beforehand that it would work badly; and as a matter of fact, it does work badly enough both upon employers and employed, because strikes are certain to embitter the relations between the two classes, which ought always to be cordial and free, and especially, because strikes must work on the minds of the capitalist to lessen the Wages-Portion for the next industrial cycle. Fortunately, we possess authentic statistics gathered about Strikes by the Massachusetts Bureau of Statistics of Labor, and published in detail in the Report of December, 1888. The information given is exact in relation to five principal States, and approximate in relation to the other parts of the United States. We will copy first the table exhibiting the Losses in six years on account of Strikes of both Employers and Employees, and the outside assistance received by the latter:-- EMPLOYEES' LOSS AND ASSISTANCE AND EMPLOYERS' LOSS IN THE FIVE PRINCIPAL STATES ON ACCOUNT OF STRIKES AND LOCK-OUTS FOR 1881-1886. +------------------------+-------------+------------+-------------+ | STATES. | Employees' | Employees' | Employers' | | | Loss. |Assistance. | Loss. | +------------------------+-------------+------------+-------------+ | _Strikes._ | | | | | Illinois, | $6,636,208 | $238,452 | $5,251,829 | | Massachusetts, | 4,200,489 | 266,708 | 1,970,881 | | New York, | 8,581,784 | 726,696 | 5,966,421 | | Ohio, | 6,378,757 | 415,568 | 2,793,427 | | Pennsylvania, | 12,890,346 | 781,338 | 3,897,757 | | Other parts of the | | | | | United States, | 13,127,139 | 895,795 | 10,821,238 | | +-------------+------------+-------------+ | THE UNITED STATES, | $51,814,723 | $3,324,557 | $30,701,553 | +------------------------+-------------+------------+-------------+ The large percentage of establishments represented in this table, in which the strikes were ordered by labor-organizations, is particularly noticeable. In New York 94.26% of the establishments had strikes which were ordered, in Illinois 83.96%, in Massachusetts 81.91%, and in the United States 82.24%. The "walking-delegate" so-called became the principal personage in all these strikes; he brought the orders to the men from the "central-union" of their special organization, and became in most cases the sole means of communication between the two. "_You are the strike_," exclaimed the Lord Mayor of London the other day to Mr. Burns, the walking delegate of the dock-laborers now on strike in that city. That the daily bread and home comforts of tens of thousands of men depend on the secret and irresponsible decision of a little knot of agitators, sending out their verbal and often ambiguous written orders by a walking-delegate or two, is one of the monstrosities of Strikes often witnessed in the United States. The laborers sometimes do not know even the causes of the strike. There has been great want and suffering for three months past among the striking coal-miners in the State of Illinois; and a brief editorial in the "Springfield Republican" of Aug. 24, 1889, describes the state of things so justly, that we quote it:-- "Ex-Congressman William L. Scott, who owns coal mines at Spring Valley, Ill., has offered to pay 75 cents a ton for mining to the strikers who in their destitution have been subsisting for some time on public charity. This is 2-1/2 cents a ton more than the miners have asked for, but it is coupled with the condition that each man must seek work individually and not through some outside union committee. Although the men have been reduced to a state of abject want it is said the conditions imposed will prevent a settlement. In that case we may conclude that a few well-fed walking delegates are acting for the men and not they for themselves. It is a strange time to quibble over such a matter. The worst and most oppressive enemy of labor is the parasite who lives upon its distresses." A strike is a state of war, and like war, there are two parties to it, and it cannot be expected that the party of the other part should not strike back. The "_lock-out_" is the counter-stroke of the capitalist to the "_strike_" of the laborer. Lock-outs, however, are comparatively infrequent. Capitalists, as a rule, are conservative and forbearing. Massachusetts took the statistics of lock-outs as carefully as those of strikes, and the following is the table:-- +------------------------+------------+------------+------------+ | STATES. | Employees' | Employees' | Employers' | | | Loss. |Assistance. | Loss. | +------------------------+------------+------------+------------+ | _Lock-outs._ | | | | | Illinois, | $533,497 | $5,374 | $347,065 | | Massachusetts, | 952,310 | 136,626 | 550,675 | | New York, | 3,150,123 | 392,316 | 845,262 | | Ohio, | 848,829 | 231,870 | 493,100 | | Pennsylvania, | 712,956 | 77,038 | 237,735 | | Other parts of the | | | | | United States, | 1,960,002 | 262,814 | 988,424 | | +------------+------------+------------+ | THE UNITED STATES, | $8,157,717 | $1,106,038 | $3,462,261 | +------------------------+------------+------------+------------+ Like war too, strikes and lock-outs are wasteful and demoralizing to both parties. Why should there be a resort to force to settle an industrial dispute any more than to settle any other private dispute? Will such a resort be long tolerated by public opinion in civilized countries? The Legislature of Massachusetts in 1886 provided for a State Board of Arbitration for the settlement of differences between employers and employees. The statute was crude in some respects, and the basis of it not very firmly fixed in the nature of things, but the Bureau of Labor reports that it has been justified by the results in its practical application during the short time of its operation. The broad truth is, that the value of Commodities and the value of Credits is now left to the safe action of Demand and Supply under free competition in every country in Christendom: why should not the value of Services be left to the same safe and inexorable action? Governments gave up long ago all idea of regulating directly or indirectly the prices of merchandise and the prices of commercial claims of all kinds: will they not shortly give up also all idea of regulating directly or indirectly the rates of Wages? They will. The three kinds of things bought and sold are on an exact level in the nature of things, so far as Government is concerned. Wages are abundantly able to take care of themselves in the ordinary way, as goods do, and stocks and bonds; and an enlightened Public Opinion is fast coming to see, that a man's personal service rendered needs no more the oversight of the State in its sale than his horse, or note of hand at interest. Strikes, and lock-outs, and all extraordinary courts or boards to settle quarrels between a labor-giver and a labor-taker as such, since it is a case of ordinary buying and selling, are foredoomed to pass out in the good time coming. Towards this good end works strongly the common _futility_ of strikes and lock-outs. Carroll D. Wright, chief of the Bureau of Labor in Massachusetts, now the head of the National Bureau of Labor, in his State Report for 1880, gave a succinct account of all strikes in that State from their beginning in 1830. They were 159 in all, of which 109 were unsuccessful, 18 apparently successful, 16 compromised, 6 partly successful, and 10 "result unknown." In Great Britain during the year 1878, there occurred 277 strikes, of which 256 were failures, 17 were compromised, and only 4 were successful. The following table taken from the Massachusetts Report of 1888, gives on a broad scale the results of Strikes in the United States for six years:-- GENERAL SUMMARY OF STRIKES IN FIVE PRINCIPAL STATES FOR 1881-1886. _Percentages._ +--------------+-------+---------+-------+-----+--------+-------+-------+ | CLASSIFI- | Illi- |Massa- | New |Ohio.|Pennsyl-|Other |THE | | CATIONS. | nois. |chusetts.| York. | |vania. |Parts |UNITED | | | | | | | |of the |STATES.| | | | | | | |United | | | | | | | | |States.| | +--------------+-------+---------+-------+-----+--------+-------+-------| | _Strikes._ | | | | | | | | |Ordered by | | | | | | | | | labor organ- | | | | | | | | | izations, | 83.96 | 81.91 | 94.26 |71.21| 61.59 | 73.06 | 82.24 | |Establish- | | | | | | | | | ments closed | 70.70 | 79.10 | 51.01 |81.21| 70.11 | 57.57 | 60.13 | | | | | | | | | | |Causes: | | | | | | | | |Against | | | | | | | | | reduction of | | | | | | | | | wages, | 5.35 | 6.23 | 2.50 |20.73| 22.65 | 8.61 | 7.77 | |For change of | | | | | | | | | hour of | | | | | | | | | beginning | | | | | | | | | work, | - | - | 3.86 | - | - | 0.05 | 1.61 | |For increase | | | | | | | | | of wages, | 41.54 | 35.28 | 39.09 |52.42| 46.97 | 45.01 | 42.32 | |For increase | | | | | | | | | of wages and | | | | | | | | | reduction of | | | | | | | | | hours, | 17.85 | 0.50 | 9.37 | 1.85| 1.06 | 4.96 | 7.59 | |For reduction | | | | | | | | | of hours, | 18.35 | 42.71 | 24.31 | 5.32| 5.32 | 17.23 | 19.48 | |For reduction | | | | | | | | | of hours and | | | | | | | | | against being| | | | | | | | | compelled to | | | | | | | | | board with | | | | | | | | | employer, | - | - | 7.32 | - | - | 2.19 | 3.59 | |Other causes, | 16.91 | 15.28 | 13.55 |19.68| 24.00 | 21.95 | 17.64 | | | | | | | | | | |Results: | | | | | | | | |Succeeded, | 54.16 | 35.28 | *51.05|49.44| 32.60 | 42.69 | *46.52| |Succeeded | | | | | | | | | partly, | 10.33 | 45.93 | *8.14| 8.87| 17.57 | 17.27 | *13.47| |Failed, | 35.51 | 18.79 | *40.65|41.69| 49.83 | 40.04 | *39.95| +--------------+-------+---------+-------+-----+--------+-------+-------+ * In 15 establishments the results were not ascertained. 3. The third popular remedy for low Wages, which has at least the merit of being in the line of economical considerations, as the other two are not, is "Co-operation." The interest in this proposed remedy is much less both in Europe and in the United States than formerly, owing to the failures that have mostly attended the attempts to put the scheme into practice, although there have been some remarkable successes also, particularly in England. The idea of Co-operation is this, namely, that certain laborers within given classes combine of their own accord, (1) _either to purchase their necessaries in common and at wholesale, hence at cheaper rates because avoiding all profits of the middlemen_; or (2), _more especially to engage in the joint production of the commodities they are familiar with, the laborers furnishing the capital also from their little hoards or borrowing it on the strength of their individual or associated credit, managing the business themselves, all being co-partners, and of course all sharing pro rata the entire profits of the concern_. All this is well; and in countries where laborers have been under traditional disabilities, it may be in some cases very promotive of their self-respect, activity, frugality, and general welfare; but any one can see that no new economic principle is involved in the plan. As in all other production, so here, there must be (1) capital from some source, (2) steady and skilful labor, and (3) superintendence or management of the business. It is at the third point that schemes of co-operation have mostly broken down. The faculty of good management is rare; the organizing and executive ability needful to carry through any scheme of co-operation will not come upon call; if any of the co-operators chance to possess it, the scheme may succeed, although he who is conscious of having it will prefer to use it for his own gain in his own way, to say nothing of the practical impossibility of any man's working with the same spirit when the gain or loss is to be largely another's as when it is to be wholly his own; moreover, it has been well said, "it is impossible _to hire_ commercial genius or the instincts of a skilful trader"; so that, while there is no trouble about the workmen uniting the character of capitalist and laborer in their own persons, and no doubt that they will work harder and more skilfully while sharing profits as well as receiving wages, it is still true, that the difficulty of securing a real "captain of industry," and thus a perfect organization and management of the whole business, puts the scheme of co-operation out of the question as a means of raising wages, or promoting the general welfare of laborers. In this country, where there is nothing to hinder any laborer from becoming a capitalist, where the savings-banks are open to the smallest gains, where nothing is more common than for two or more workmen to organize a firm to carry on some branch of business, where most of the present capitalists proper were formerly laborers proper, and where the shares of most of the joint-stock companies are open to everybody who has the means to buy them, there is only one consideration that seems to justify any special jealousy of laborers as such towards capitalists as such; and that is the fact, that Legislation, every now and then, sometimes on a small scale and then on a gigantic one, now by means of corporate charters and then by other means more indirect and effective, _does confer certain extraordinary privileges upon capitalists_. So long as capitalists and laborers rest upon their natural rights and positions, neither can get any undue advantage of the other; and just so far as each recognizes their identity of economic interest and the consequent reciprocity of obligation and effort, the prosperity of each will help build up the other; but, on the other hand, so far forth as any advantages are given to capitalists by special laws, either of State or Nation, these become necessarily unjust to laborers, and ultimately also injurious to capitalists; and in this case, the laborers, seeing just what it is that hurts them, _ought to combine together and to strike, not capital (their best friend), but a piece of perverted legislation (their worst enemy)_. FOOTNOTES: [5] O'Reilly's Poem, at Plymouth, 1889. [6] Green's Short History of the English People, p. 144. CHAPTER IV. COMMERCIAL CREDITS. Political Economy is the Science of Sales; and because it _is_ the science of sales, its definitions and principles must cover equally all cases of sales actually occurring or possible to occur. We have seen repeatedly, that only three kinds of things are ever bought and sold, or ever will be, and these are Commodities and Services and Claims. The first two kinds have been fully elucidated already in the two preceding chapters, and it belongs to the present chapter to explain and illustrate clearly the peculiarities of the third kind of things salable. Ours is the only science that has to do with the motives and facts and economic results of all sales as such. The discussions of the present chapter will proceed orderly through the following topics:-- _The Nature of Credit._ _The Forms of Credit._ _The Advantages of Credit._ _The Disadvantages of Credit._ 1. Certain things are essential in every sale of anything, and of course are common to all sales of everything, such as two persons and two desires and two estimates and two renderings; while there are certain _peculiarities_ in the sale of things belonging to each of the three special classes of things salable; for example, in the sale of a commodity there is a rendering of a tangible object that has been prepared for sale in past time, and in the sale of a service a rendering of an intangible something wholly in the present time; while in the sale of a credit there are likewise two peculiarities, one of them relating to future time and the other to a special trust felt in a person by some other person. We must now study these two peculiarities with care; and, mastering these, we shall be master of the Nature of Credit. a. Some sales are consummated at once, the things exchanged and the ownership in them are mutually passed over then and there, the reciprocal satisfactions are entered upon immediately, and there is at once an economical end. For example, one neighbor sells another a peck of green peas and takes in pay a peck of new potatoes, both vegetables may be cooked for dinner in the respective families the same day, and the commercial transaction is all over. But there are other exchanges, an immense class of them, different from these in this respect, that though the transaction considered as a mere case of value created and measured is then and there ended, yet considered as to the nature of that preliminary exchange which implies and requires another future exchange to consummate it, it is not then and there ultimately closed, but one (or both) of the parties then exchanging relies on the good faith of some one else to fulfil in the future a pledge expressly or impliedly made in the prior exchange. Commonly some external evidence of the pledge is created and passed at the time, but this is not essential to the validity of the pledge itself. For example, A buys 50 bushels of wheat of B, and B takes in pay for it A's note of hand at six months for $75. The note is not the pledge, but it is a legal and convenient proof of it. As a case in Value, the wheat is sold for the pledge and the pledge is the equivalent of the wheat. Each party rendered the other then and there satisfactory equivalents. All our definitions apply here perfectly. Still a further and future exchange was contemplated by both parties at the time of making this exchange, and as a silent part of it. A takes what is now his own wheat, and B takes as an equivalent for what was his wheat a right to demand of A in six months an equivalent for the present equivalent (the pledge) for the sake of which B rendered the wheat. The note of hand is the evidence of this pledge, and it belongs absolutely to B. It is his property. He may keep it till maturity and then sell it to A for its face, or he may sell it at once to a bank for its face less the discount for six months. Discount is the difference between the face and the present price of a note of hand. The first peculiarity, then, of Credit is, that it always involves the element of future time. But it involves this secondarily, and not primarily. In other words, a present equivalent is always rendered by both parties in every commercial transaction; but the present equivalent in the case of a credit transaction is the right to demand something of somebody sometime in the future. This distinction is very important, as we shall see clearly when we come to treat of Banking, though it is generally ill-understood at present. Valuables, when they exchange at all, exchange once for all. But there is one kind of valuables, namely, claims, which, when subject to exchange, imply and require another and a future exchange, not necessarily between the parties to the first exchange, but between _some_ two parties; and not, speaking strictly, to _consummate_ the first exchange, because that took and gave its own satisfactory equivalents; but, as involving both time and trust, the credit sale must in the nature of things be followed by another sale of one of the three kinds. We see, accordingly, that in Credit our science of Economics takes partial possession of future time for certain purposes of its own. Exchange sets its throne and reigns pre-eminently in present time; but its sceptre extends also over past time, so far as all capital is concerned, and so far as all material commodities (the result of past work) are exposed for sale in the present; and its right hand of rule goes forth also to grasp the future, under limitations indeed both as to the stretch of time covered and as to the character of the persons concerned, but still there is there a fair domain and a broad domain, and a realm on the whole winning a wider and wider circuit. It is one of the proud boasts of Political Economy as a science, as it is too one of the exalted traits of human nature, that the lordly impulse to buy and sell does not confine itself to what the Past offers in all its accumulated valuables, nor to what the Present unfolds in the unlimited desires and efforts of congregated men, but reaches out also into the Future, and makes that pay tribute more and more into the vast treasury of its Gains. And this too is legitimate. Man is at once and all the time actor and historian and prophet. The future is not wholly unknown. Given the one assumption, that Earth and Men go on as heretofore, Exchange knows well enough, and better and better, whom of the coming men to trust and for how long a time. The doctrine of averages and of probabilities comes along to guide and to enhearten the investor. Any thoroughly established government of to-day can borrow all the money that it wants on its public pledge to repay the principal fifty years hence. England has borrowed millions of pounds sterling, giving no day certain in the future for its repayment. These funds are called "Consolidated Annuities": the interest on them is paid on a day nominated in the bond: the principal is to be paid when the borrower chooses, or never. b. The other and final peculiarity of Credit is, that it always involves on the part of one person a commercial confidence in some person _as such_. The term, Credit, is derived from the Latin CREDO, _I believe_, and the corresponding term, Debt, from DEBEO, _I owe_. Thus the personal element and the future element are wrapt up in the very origin of the words. There is no credit without debt, and no debt without credit. The very words imply a _belief_ of one of the two parties in a commercial promise made by the other, and also an _obligation_ acknowledged by this party as due to the first. There is a basis for credit in human nature. Faith in each other to a certain extent is natural to men. Whatever enlarges the intellectual foresight, and especially the moral character of men, opens a broader and surer field for Credits. Civilization, so-called, and Christianity certainly, deepens and broadens the natural trust of man in man. Despite all the instances of broken faith, and they are too many; despite the shocks and cautions that come every now and then to every man who trusts much in his fellow-men; experience itself justifies and rewards an ever-growing commercial trust. It is one of the noble things in international commerce, as we shall see, that men trust each other across the oceans, and lay millions of value upon the faith of a single firm. As the core of the Christian religion is confidence in a _Person_, so the very substance of credits is a natural and in general well-grounded faith in _persons as such_. A Credit, then, may be defined to be _a Right to demand something of somebody_; and a Debt to be _an Obligation to pay something to somebody_. What always lies, accordingly, between creditors and debtors, are Rights coupled with Obligations; and these are _Property_, just as much as anything is and for the same reason, since they always may be, and usually are, bought and sold by other parties as well as the original parties. In these Rights or Claims, therefore, arises a commerce, domestic and foreign, immense in extent and amount, and the Rights themselves take their undisputed place on an equality with tangible Commodities and personal Services. Having thus reached an ultimate and satisfactory definition of Credit, we must still pursue a little further our present object, namely, to obtain a clear conception of the _nature_ of this great class of Valuables, by drawing two or three distinctions between Credit-Rights and some other rights very apt to be confounded with them. (1) The distinction between credit-rights and other rights is well rooted in the Latin language and in the Roman law, while the corresponding English terms are quite ambiguous and need to be used with great caution. In Latin, a true debt is called a _Mutuum_, because it lies between two persons, a creditor, and a debtor, and is a credit-right independent of the question of fact whether the debtor has now the thing rendered to him or not, indeed whether he has anything at all to pay with or not; on the other hand, a thing merely lent, when the very thing lent is to be returned to its owner, who has not in the meantime parted with his property to the other, is called in Latin a _Commodatum_. The English tongue has but the one word, _Loan_, for the two very distinct operations: for the loan of a book, for instance, which is to be returned after use, and which may be legally reclaimed by the owner if he chance to find it anywhere, that is, the Latin _commodatum_; and for the loan of money, or other such measurable thing, which is to be returned _in kind_ only, and which may _not_ legally be reclaimed except through some action of the borrower, since the ownership of that thing rendered has passed over to him completely, that is, the Latin _mutuum_. The same ambiguity of course inheres in the corresponding English word, _Borrow_. The English language is relatively poor in words expressing nice legal distinctions. Now, as a true debt is a claim on a _person_ and never on a _thing_, the Roman Law is true to the nature of things and to the vital distinctions of our science, when it names the right to which a _mutuum_ gives birth as a _jus in personam_, that is to say, a right against the person; while it names the legal obligation arising out of a _commodatum_ as a _jus in re_, that is to say, a right to the very thing. So strongly is this doctrine, namely, that the security of a true debt lies against persons and not against things, intrenched in the Roman Law, that debts or credits are even termed "_nomina_," _names_, in that law, as when Ulpian says, "_Nomina eorum qui sub conditione vel in diem debent et emere et vendere solemus_": We are accustomed to buy and sell DEBTS payable on a certain day and at a certain event. The fundamental law of the present national banks of the United States explicitly recognizes this old and good distinction by requiring the banks to loan money on _personal_ security only, that is to say, no tangible things, not even real estate, may be taken as _original_ security for any loan. (2) Henry Dunning Macleod, who has cast fresh light on the nature of Credit, draws another distinction that lies on the threshold of the subject, namely, that between paper documents conveying titles to _specific things_, such as a bill of lading, for example, and those conveying _credit-rights_, such as a bank-note, for example. Bills of lading describe the goods, go out with the goods, are a title to the goods, and have no value separate from the goods; bank-notes have nothing to do with any specific pieces of property anywhere, are in no proper sense a title to anything whatever, but a general _claim_ for something upon some person somewhere that awaits his action for its validity and realization. For instance, a grain-dealer in Chicago sells 1,000 bushels of No. 2 wheat to a party in New York, and ships the grain to that point by rail: two kinds of paper documents arise in connection with this transaction, which are quite diverse in their nature and course of operation: one is a _bill of lading_, that goes along with the wheat, and gives the person named in the bill a complete title to 1,000 bushels of wheat of a certain description, and the holder of the bill takes the wheat and asks no favors of anybody; and the other is a _bill of exchange_, drawn by the grain-dealer in Chicago on the consignee of the wheat in New York, which bill of exchange is sold at once by the creditor in Chicago to a banker there, provided the banker has commercial confidence in the two names on the bill and a sufficient motive in the shape of a discount for buying it: thus the bill of lading has in it neither element of Credit, neither Time nor Trust, while the bill of exchange has both of these elements in it. (3) Attention should be called to a third distinction of the same general nature, as between relations very different in themselves and yet extremely liable to be confounded with each other. Let us take a common instance: a customer of a bank takes a package of valuables of any kind to his banker, such as bonds and bills payable and jewels and plate, and asks him to take care of it for the present in his vault, subject of course to a return to him or any one else to his order at any time: no property in these valuables passes over to the banker, it is not a deposit in the ordinary banking sense, the relation of debtor and creditor does not arise as between banker and depositor, the banker becomes Trustee or Bailee of the package, and is bound to exercise common vigilance in the care of it, but if it be burned or stolen extraordinarily the loss is the customer's and not the banker's. But now, on the other hand, when a customer deposits in the banking sense money or bills payable with his banker, the property in the money and bills passes over to the banker instantly, the relation of debtor and creditor arises, the depositor receives a credit on the banker's books in return for the money and bills rendered, the exchange as a mere case of value is consummated to the profit of both parties, but the return-service to the depositor is _the right to demand equivalents of the banker at some future time_. In other words, it is a case in Credit. (4) As this general distinction is vital, we shall lose nothing in the end if we make even a fourth exemplification of it. The United States Treasury receives silver dollars of its own minting from any person who chooses to place them there, and gives out in token what are called "Silver certificates" to the same amount, entitling the bearer to take out the dollars again at will, and thus the certificates being more convenient than the dollars and just as valuable become a part of the money of the country. The Treasury is bound to exercise due care in the keeping of these silver coins, and to return them to the holders of certificates on demand, just as the elevator and railroad companies are under legal obligations to show diligence in keeping and transporting the wheat of our former example; but the United States is not _debtor_ to the holders of these certificates any more than the elevator company is _debtor_ to the wheat shipper, and consequently there is no element of Credit in these certificates. Just so of the later gold certificate. On the other hand, the so-called greenbacks issued by the United States are also a part of the money of the country, but they are _credit_-money, inasmuch as they are a _promise_ to pay to the bearer some time in the future so many dollars. The Treasury has never kept up any special fund of gold and silver, with which to redeem the greenbacks. They rest back for their value on the good faith of the country. The United States is _debtor_ to the bearers, and these in turn are _creditors_, and the legal-tender quality of the greenbacks does not alter their character as a form of pure credit. Both the elements of good faith and future time inhere in the greenbacks, as they do also in the bonds of the United States, while in the certificates neither of these elements appears. However, circumstances easily conceivable and which were actually realized in the case of the famous Bank of Amsterdam, founded in 1609, might make the United States a debtor and the holders of the silver certificates creditors in the commercial sense of those terms. The Directors of the Bank of Amsterdam, towards the close of the second century of its beneficent existence, loaned out to the Dutch East India Company and to the City of Amsterdam large parts of the bullion, on which its certificates ("bank money") were based, unknown to the public, which felt unlimited confidence in the bank, and the result was in 1795, when the French invaded Holland and the facts became known, that bank money which had previously borne a premium of 5% fell at once to a discount of 16%, although the bullion that remained and the debts due the Bank were fully equal to redeem the certificates and were used for that purpose. So, if the United States should use, clandestinely or otherwise, the silver dollars for other purposes than to redeem the certificates on demand, the latter would undoubtedly both in law and fact be transformed from mere token-money (as now) into credit-money valid as against the United States as debtor, like the greenbacks at present. Have we now compassed our first object? Do we fully understand, from the foregoing descriptions and distinctions, the _Nature_ of Credit? If so, we are prepared to look narrowly into its _Forms_. 2. Credit-rights are commonly, but not always, recorded upon paper; but it is important to observe, that the paper-document is the mere evidence of the right, and not the right itself, which lies back of the paper as substance to shadow, and persists intact even were the paper lost or destroyed. These paper instruments of Credit are commonly contemplated as of two kinds, Promises to pay and Orders to pay, but there is not at bottom any radical difference between these, the Right as between two persons is not affected by this superficial difference, as we shall see, and the present enumeration of credit-forms will proceed independently of it. _a._ Book Accounts. A charge in a trader's books is both a current and a legal evidence that the person charged has received a certain service, and has virtually promised to render the sum charged as a return-service. Book accounts are the most common of the forms of credit; and if the person charged fails of his own accord to complete the exchange thus commenced, the law, in the absence of any proof to make the charge suspicious, collects it, if possible, and forcibly completes the exchange. The convenience of this form of credit is so great, that it is not likely ever to be disused; and as between people who deal much with each other is very useful, inasmuch as their respective book accounts are set against each other in settlement, and only balances are required to be cancelled in money. It is for the benefit of both creditors and debtors, however, even when the same parties are both creditor and debtor, that such credits should be short in time and such settlements frequent, since in book accounts there is no interest on charges however long they run, and since in this way only can the creditor realize the full gain of the exchange, and the debtor keep fair his mercantile name. If it be difficult or impossible to follow strictly the excellent financial maxim, "Pay as you go," the next best thing to that is, "Go and pay." The gains of an exchange are lessened, or its terms become more onerous, just in proportion as delay in its completion is experienced or expected. Book accounts are subject also to this disadvantage as compared with other forms of credit, that their number and amount as against any person are less likely to become publicly known, and therefore he is more likely to be trusted in this form by others beyond the point of his solvency and their safety. _b._ Promissory Notes. These differ from Book accounts in that they are always either expressly or virtually on interest, and are consequently negotiable. They are issued by individuals, corporations, and Nations. If the principal be deemed secure, that is, if there be a thorough trust on the part of the holder in the maker of the note, the time of the payment of the principal becomes a matter of comparative indifference, because the interest is compensation for delay, and is often the motive on the part of the holder for rendering that service of which the note is evidence. Indeed a long obligation, other things being equal, is commonly preferred to a short one, and bears a higher price. When a note is sold (negotiated) by the original holder it becomes payable to the purchaser, or to each subsequent purchaser in turn, and thus may run a devious round, may play a part in many commercial transactions, may be set off by the transient holder against a debt owed by him and thus cancel that, and when itself is cancelled by ultimate set-off or by any other mode of payment the last holder takes the return for the service originally rendered by the first holder. The promissory notes of individuals are frequently discounted by Banks in a manner to be presently explained. These are always for short times, and are debts bought by banks on the personal security of the names upon the notes. The notes are founded on the relation of debtor and creditor, which is always a personal relation, and so differ in their nature from a _mortgage_, which is a qualified _title_ to a specific piece of property, usually real estate. A note secured by a mortgage is, as it were, absorbed into the mortgage, and becomes another thing from a common promissory note, or _commercial paper_, as it is called. A mortgage rests therefore on other grounds than a commercial trust in the good faith of a _person_. Corporations also issue promissory notes, and as such issuers become in a sense _moral persons_ entitled to confidence according to the character and purposes of the individual corporators and the financial means and methods of the corporation itself. It is an old saying, that "corporations have no souls"; economists as such have no need to pronounce on that proposition; the fact is enough for them, that the short notes of corporations are often discounted by bankers on the same ground as the notes of individuals are discounted; and that their long-time obligations, commonly called _Bonds_, are all the time bought and sold in the market like commodities. Many of the Railroad bonds, of which immense quantities are in the markets of the world, rest back also for their security upon _Mortgages_ of the real estate of the corporations made over to Trustees to hold for the assurance of the holders of the bonds. The personal obligation of the corporators is thus reinforced, much as a common mortgage reinforces the note or bond, to secure which the mortgage is executed. Whenever _all_ the real estate of a railroad company becomes subject to a mortgage, when there are previous partial mortgages or liens, these latter take precedence in due order of any subsequent pledges or bonds secured by what is properly called the _consolidated mortgage_. Such a mortgage has recently been executed by the Northern Pacific Railroad Company for $160,000,000. Railroad Bonds so fortified in proper and legal terms possess the highest possible credit-security to their holders. When no such consolidated or "blanket" mortgage has been put on the property, first and second and third mortgages sometimes support bonds of primary and secondary and tertiary validity; and sometimes so-called _Income-bonds_ are issued, with or without mortgages behind them, for the payment of the interest on which bonds the net earnings of the corporations are specifically pledged. Frequently also simple long-time bonds resting on corporation security only are negotiated without difficulty. It must be constantly borne in mind, that certificates of Stock in railroad and all other similar corporations are not credit-documents at all, but are mere evidences of so much proportional _ownership_ in the corporate property. They are not interest-bearing documents at all, although they may draw interest or rather dividends, if the property be prosperous. They are somewhat like deeds to land, in which no element of credit inheres. Nations too are moral persons in the same loose though binding sense as corporations, and as such often issue promissory notes on interest, commonly called in this country Bonds, in Great Britain Funds, and in some countries Stocks. These are always pure credit. Nations give no mortgages. Yet they often borrow at a less rate of interest than the most solvent individuals or corporations can, as is seen by the fact, that British consols carry but 3%, and yet bear a premium in the present market. The term, "consols," is a popular contraction of "consolidated annuities," the Act to create which at 3%, out of a then confused mass of public debts at various rates of interest passed Parliament in 1757. The maximum of the British debt was $4,500,000,000 in 1815, and has now decreased to $3,467,787,960. The United States also sold its bonds at 3% for a small premium in 1882. It had borrowed of its own citizens in 1862-65, both inclusive, about $2,500,000,000 on its bonds at different rates of interest and at different times of repayment: some of these bore gold interest at 6% annually, Government reserving the right to pay the principal in five years and pledging itself to pay it twenty years from date, and so these bonds were called "Five-twenties"; others bore gold interest at 5%, becoming payable at ten and demandable at forty years, and so were called "Ten-forties"; and still others bore greenback interest at 7-30/100%, the principal payable in greenbacks at three years, or fundable in gold sixes, at the option of the holders, and these were named "Seven-thirties." Over $90,000,000 of this last kind of bonds were subscribed for by the American people in the course of a single week in the spring of 1865. The whole of our national debt issued prior to 1865 was made payable on a day certain; the so-called "consols" of 1865 and 1867 and 1868 were payable _not more_ than forty years from date; while all the bonds authorized from 1870 to 1882 were Consols proper, whose peculiarity is, that they never fall due so as to become a claim for the principal against the Government, but after a day fixed or on a condition fixed are payable "at the pleasure of the United States."[7] The separate States of our Union, as sovereign in their own sphere quite as much as the national Government is sovereign in its sphere, have unlimited power to contract debts for State purposes through their regularly constituted authorities; and consequently to issue promissory notes or bonds to liquidate such debts. New York commenced in this way in 1817 the magnificent enterprise of the Erie Canal, to connect the great Lakes with the city of New York by an inland water-way for commerce, and the completion of this in 1825 made the State the "Empire State," and the city the undisputed commercial metropolis of the Union. In a similar way Massachusetts undertook in 1862 the completion of the Hoosac Tunnel for a railway lengthwise of the State; and although the process became unduly expensive, and great abuses sprang up in connection with it, no one now questions that the pecuniary and moral resources of the State have been augmented, on the whole, by contracting the debt and providing by taxation for the liquidation of both interest and principal. The credit of Massachusetts, that is, the ability to borrow money at low rates of interest, has been at times greater than that of the United States; mainly because the State in 1862 and onwards refused to avail itself of a depreciated national paper-money (greenbacks) made legal tender for all debts, with which to pay the interest on its then existing State debt, but persisted throughout (alone of the States) to pay that interest so soon as due in gold coin. On the other hand, several of the States of the Union at different times, and under more or less of provocation and justification, have made a partial or entire repudiation of certain portions of their public debts, justly damaging to their individual credit, and even to the good name abroad of the whole people of the United States. Counties and cities and towns may also issue interest-bearing bonds for public improvements, which have a _quasi_ governmental character, but only under conditions and to a maximum amount prescribed by a law of the State. _c._ Bank Bills. These are a form of promissory notes not on interest, and thus differ from the notes of ordinary corporations, and from the bonds of nations and states and municipalities; but the issuing Bank offers, as a sort of compensation for the privilege of circulating notes not on interest, to convert them into coin, that is, to pay them instantly on the demand of any holder. It is this proffered and immediate convertibility into coin that enables the promissory notes of a bank to circulate as money, while the notes of other corporations and individuals equally solid and solvent do not circulate as money. It must be borne in mind, however, that this offer to convert them into the legal and ultimate coin-money does not essentially alter the nature of Bank Bills; they are a form of commercial credit; and although they are commonly issued against another form of such credit, namely, against the interest-bearing promissory notes of individuals and corporations who resort to the bank for discount, this only complicates the exchange without changing its nature. It is a common instance of exchanging one form of credit for another form which happens to have a greater currency or validity than the first, and for this superiority of the bank credit the individual credit pays an interest, in other words, is discounted; and such exchanges of one form of paper credit for another, with or without a premium, may go on indefinitely; especially as _credit-money_ in the form of bank bills, such paper may serve as a medium in many exchanges; but ultimately, and before the entire series of transactions is closed, such bank bills are to be redeemed in coin, or taken in by the banker in payment of some debt due to him, in both which cases they are extinguished as an instrument of Credit. The Bank of England keeps out in circulation on the average £25,000,000 in bank bills. It has been computed, that the average length of life of a Bank of England bill between its issue and redemption is about three days; and no bill once redeemed or received back over the counters of the Bank is ever issued again. It is then placed on file for record only. The joint-stock and private banks of England and Wales circulate on the average rather more than £4,000,000 of bank bills of their own; and no bank bill of any kind is legal in England and Wales of a less denomination than £5. The ten Scotch banks and their branches keep out in bills about £5,000,000; six out of the nine Irish banks and their branches issue on the average not far from £10,000,000; but both the Scotch and Irish banks are allowed to put out £1 bills. Bank bills, as a form of paper credit not on interest, but ostensibly redeemable in coin on demand of the holder, have been issued in the United States by more parties and to a larger extent and with more recklessness as to redemption than in any other country. Omitting all reference to Colonial issues, and confining the outlook to the first century under the Constitution, let us note, that when the present national government went into operation in 1789, the "Bank of North America" in Philadelphia and the "Bank of New York" in New York and the "Bank of Massachusetts" in Boston had been opened for business, and all three were State banks issuing bills convertible into coin, though each confined its business mostly to the city in which it was located. Two years later under the auspices of Alexander Hamilton, then Secretary of the Treasury, the first "United States Bank" went into operation at Philadelphia under a charter from Congress that was to run twenty years with a capital stock of $10,000,000. At first no bills were issued by this bank of a less denomination than $10; the money was popular and was converted on demand; the Bank was prosperous, and paid dividends to stockholders never falling below 8% and frequently rising to 10% annually; as the time approached for the charter to expire, the stockholders were anxious for a renewal of their privileges; but the opposition to them in Congress was now strong, owing mainly to the increase in the number of State banks from 3 to 88; and accordingly the recharter was defeated in the House by one vote, and in the Senate also, by the casting vote of the Vice-President, and the Bank was obliged to wind up its affairs in 1811. Then came in a sort of mania for the creation of new State banks, under the hope that these, now there was no National Bank, might obtain the Custody and temporary use of the national funds, and especially might furnish the country with paper money in the shape of State bank bills. The number of banks went up to 246 in 1816. So many bank bills were put out, and became so much distrusted, and so many were presented for redemption, that the banks could not respond in coin, and in the fall of 1814, there was a general stoppage of specie payment in all the banks of the Country excepting those in New England. General resumption of specie payment by the banks did not take place till 1819. New York bank bills went down to 90%, those of Philadelphia to 82%, those of Baltimore to 80%, and those of Pittsburg to 75%. Under these circumstances the Second Bank of the United States went into operation in January, 1817, also with a charter to run twenty years, with a capital stock of $35,000,000, of which the national Government subscribed one-fifth. The new Bank helped indeed the State banks to resume specie payments, as was a part of the purpose, but it pushed its own bills into circulation with such eagerness, that it is thought $100,000,000 of them were in the hands of the people, before the first year was out. In this way the Bank fell into difficulties. Its bills were distrusted. Coin came to bear a premium over them of 10%. President Jackson began his famous contest with the Bank seven years before its charter was to expire, and took care that it went out of being the same year that he went out of office, in 1837, namely. The next year the State banks increased in number to 675, and continued to increase till 1862, when there were over 1500 of them, and when the issue of the "Greenbacks" by the national Government interfered with what had been their exclusive issuing of the paper money after 1837. In 1857, before the commercial panic of that year, the aggregate of their bills stood at $214,000,000, the largest it ever reached. These bills were nominally convertible into coin at the will of the holders, but they were never actually so convertible for any great length of time. The ratio of their volume to the specie reserved to redeem it was always a very high ratio. For instance, the average for the whole country in January, 1863, was 4:1; in Rhode Island 12:1; and in Vermont 28:1. Such a paper money can be called convertible only by a stretch of courtesy. It was wisely determined by the People to abandon this loose form of paper money, and in 1863 went into operation the present national banking system, under which originally $300,000,000 of bank bills were authorized to be issued in the aggregate, but this limit was extended in 1870 to $354,000,000, and the Act of 1875 removed all restrictions on the total amount, while there have always been restrictions on the amount that can be issued by any _one_ bank in the system. By the law of 1882, national banks may withdraw their bills by depositing lawful money in the Treasury to take them up, and then take back the proportionate amount of the bonds held for the security of the bills. There were outstanding Dec. 26, 1883, $341,320,256 of these national bank bills, but their volume declined under the law of 1882 to $151,702,809 on Oct. 4, 1888. These bills were from the first redeemable in greenbacks, which were themselves, however, irredeemable in gold and silver till New Year's, 1879, since which time till the present all the paper money of the United States of both kinds has been convertible into coin at the will of the holder. _d._ Bank Deposits. We are studying in order the forms of commercial Credits, and we have now come to that one which is central in the operations of Banking, and accordingly this is the place for us to understand clearly what a Bank is, who a Banker is, and what are the motives actuating at once the Banker and his Customers. A BANK IS AN INSTITUTION FOR THE CREATION, MANAGEMENT, AND EXTINCTION OF CREDITS. Money of any kind plays a very subordinate part in the general operations of banks, which live and move and have their being in the sphere of pure Credits. _Bankers are buyers and sellers of credits._ As merchants are dealers in commodities, so bankers are dealers in credits, buying (1) some credits with other credits, (2) some credits with money, and (3) money also with credits. Before unfolding these three operations of bankers in their motives and profits, a glance backward to the origin of banks would be a help to us in grasping their nature and benefits. The word "bank" meant originally a mass or pile or ridge of earth, as we still say, a _sand-bank_, and the _banks_ of a river. When first applied to commercial transactions, the word had a different meaning from what it has at present, although the idea of _credit_ has inhered in it from the first: in 1171, the Republic of Venice, being at war, ordered a forced loan from its citizens, and promised to pay interest on it at 5%; and certificates were issued for the sums paid in, and public commissioners were appointed to manage the payment of the interest and the transfers of the certificates, which were made negotiable. The Italian word applied to such a public loan is _monte_, but as the Germans were then strong in Italy, the German equivalent word, _bank_, came to be used alongside of it and instead of it. It meant this common contribution of the citizens to the wants of the State, represented by the mass of the certificates, and came to be applied also to the _place_ where the commissioners paid the interest and transferred the shares. Two other such loans were contracted there afterwards, and an English writer, in 1646, quoted by Macleod, speaks of the "_three bankes of Venice_," meaning these three public debts, including the evidences of them and the place where they were managed. The Bank of England also was in its origin in 1694 an incorporation of those persons willing to subscribe to a public loan in time of stress, as "The Governer and Company of the Bank of England." The subscribers to a loan of £1,200,000 became an association, or bank, on the condition that the Government should pay interest to the lenders at 8% annually, and also £4000 a year in addition for the management of the bank, that is, of this debt of £1,200,000 which was the sole capital stock of the new Company, which was authorized to issue an equivalent amount of bank bills to circulate as money. The capital stock was of no use, so far as redeeming these bills was concerned, the stockholders must furnish other money for that purpose besides what they have loaned to the State, but the ownership of so much of the public debt divided among the shareholders, made the Bank respectable, and tended to give public credit to its bills, which at first were paid promptly in coin on demand, and thus the Bank, by increasing the volume of money and by showing confidence in the stability of the State, strengthened the revolutionary position of William and Mary, and consequently the Whigs were the friends and the Jacobites the enemies of the Bank. This function of issuing bills or promissory notes designed to circulate as money, thus begun and still continued by the Bank of England, is much less important in modern banking than the other two functions of receiving Deposits and making Discounts, but it was the function on which the turn began to be made from the older to the newer modes of Banking. All that is needful to be said on this tertiary or money-issuing function of Banks has been already urged under the last head. The two Banks of the United States in succession, as they were more or less modelled after the Bank of England, gave the same prominence to the function of issuing paper money, under the belief that government bonds afford the best security for the redemption of bank bills, an idea that underlies our present system of National Banks also; and, moreover, those two great banks began to teach the people of the United States something of the mysteries of _Deposit-banking_, the point that we have now in hand. One-fifth of the capital stock of the first Bank, $2,000,000 out of $10,000,000, was subscribed by the national Government; and besides, the proceeds of the national taxes as they were paid in were passed over to the Bank as _Deposits_, that is to say, the Bank bought this money of the Government, paying for it with a Credit; and then properly used the money as its own in paying expenses and in discounting paper. Bank deposits do not belong to the depositors, but to the bank; which has thus bought money with credit; and when Andrew Jackson suddenly removed from the second Bank of the United States the national moneys deposited there, and placed them "in the custody," as he expressed it, of certain selected State banks, these amounted at the moment to $10,000,000, and the discount line resting in part on these deposits was at the time over $60,000,000, he removed them under a strong misapprehension _of the nature of such deposits_; and their _removal_ affected credit, and disarranged business to a remarkable degree, and caused intense excitement all over the Union. Depositing those national moneys with the Bank was a _trade_ between the Government and the Bank for the time being. The Government took in return for the moneys a Right to demand of the Bank in future by cheque or otherwise sums at its convenience to the aggregate of the sums deposited; the moneys became the property of the Bank to be used at its discretion in its ordinary business; the Government took its return-service for the moneys in a Credit, that is, a right to draw out at its convenience in the future corresponding sums; there was a commercial understanding in that case between the Government and the Bank underlying the buying and selling involved in the Deposit, as there always is between depositors and their banks; the banks are always bound to order their business in such a way as to be able to respond to every depositor's call for money, when it comes; but banks in general find practically that a cash reserve of one-third of their Deposits is ample to answer the current demands of their depositors, and the remaining two-thirds may be safely used in discounting short-time commercial paper to their own profit; Deposits, accordingly, are not placed "in the custody" of the banks receiving them; they are really bought by the banks of their customers, who receive in return certain privileges and credits that they prefer to the "custody" of their own moneys; and under these general motives on both sides, there has grown up in all commercial countries an immense line of Bank Deposits so-called, and perhaps we may say that the principal function of banks at present is to buy these deposits with their Credit, and then to handle them in further operations to the convenience of their customers and to their own gain. Under our present national banking system the Government is still a depositor of public moneys in some of the banks designated as "depositaries." At the close of the fiscal year, 1888, there were 290 of such depositary national banks, and the Treasurer held United States bonds of the face value of $56,128,000 and the market value of $68,668,182 in trust for these banks to secure public moneys lodged with them. This system of national deposit with the banks began in 1864. The total held by the banks June 30, 1888, was $58,712,511, an increase during the year of $35,395,633. But our concern is especially with the Bank Deposits of individuals, with their motives in making these, and with the motives and the methods of the bankers in handling them. In order to draw the confidence of the people in its locality, a bank must not only be, but also _seem_ to be, well-to-do and prosperous. Most bankers find it to their account to become known owners of public stocks; and in many cases, as in the present national banks of this country, are required by law to own such stocks, and this gives them a kind of credit and public standing scarcely to be reached by the ownership of ordinary property. Thus the Bank of England held at the outset £1,200,000, and now holds £15,000,000 of securities, mostly of the public debt of England. As merchants begin by laying in stocks of goods of the kinds they purpose to deal in and offering them for sale, so bankers begin by bringing together money and credits of their own in order to attract to themselves in the way of buying and selling the money and credits of other people. In order to deal successfully in credits the banker must have _credit_, that is, he must have the reputation of having property of his own, and of being an honest and careful manager of his own affairs and of the affairs of others so far as they are intrusted to him. Each of our present national banks, now (1890) 3150 in number, must have by law a paid-up capital of not less than $100,000, and in cities of 50,000 people their capital must not be less than $200,000 each, except that in places having less than 6000 inhabitants banks with not less than $50,000 capital _may be_ organized at the discretion of the Secretary of the Treasury. The main purpose of all this is to secure strong financial organizations fitted to draw the confidence of the communities in which they are placed, and in this manner and by means also of constant national supervision to attract the Deposits of the people to the banks. Now, as was said a little while ago, perhaps the central function in banking is for the banker to receive his customer's money and also his credits falling due, and to render to him in return for these _a credit_, that is, a right to demand from himself an equal sum at a future time or times. The evidence of this right is entered on the banker's books, and usually too on the customer's passbook, and thus becomes what is called a DEPOSIT. The ownership of the money and of the credits deposited passes over completely from the customer to the banker. It is a complete case of buying and selling to the mutual profit of the parties. The banker has the right to do just what he pleases with his deposits, and the customer has a right to draw cheques on his credit as and when he pleases; only the banker's entry of the transaction on his books is a virtual and a legal _promise_ to pay that amount to his customer, and therefore he must be ready to respond to his customer's call, whenever the latter demands, not his own money, but so much of his banker's money. _A deposit, accordingly, is not the very thing deposited, but a credit._ It is the banker's promise and the depositor's property. It is in this way that a banker buys ready money with a credit. The motive, then, that leads the depositor to intrust his money to the banker is the desire, not to have that specific money kept safely for him, for he lost possession of it absolutely when it passed the counter, he _sold_ it and took his pay in something else, but rather to have the unquestioned right to call on the banker for such sums (not to exceed the deposit in the aggregate) and at such times as may suit his own convenience. He has such confidence in the integrity and solvency of the banker, finds it so practically convenient to have dealings with him, and comes to have certain minor privileges at the bank in other relations over non-depositors, that he quite prefers a credit on the banker to the possession of the money itself. The corresponding motive of the banker to receive his customer's funds on these terms is that he finds by experience (his own and others'), that he can safely use a large portion of these moneys deposited in other operations in credit profitable to himself, and at the same time be practically sure of meeting all his customer's calls for money as they are made. Every good banker finds out, that many of his customers wish always to leave a balance in his hands; that while some of them are constantly drawing cheques on him for cash, others of them are as constantly depositing with him in cash; and that consequently he can properly and safely use a large part of the money he has purchased with his credit to purchase other credits with. Deposit-banking, therefore, is not only convenient and profitable for the depositor, but also excellent and profitable for the banker. Besides these two parties benefited, there is a gain, too, for the community at large in deposit-banking; inasmuch as a new capital as such has been thereby created, a series of new values, which would not otherwise have existed at all. Were there no deposit-bank in that locality, every man now a customer of it would of course keep his own reserves for himself for prospective contingencies: now, all these little reserves are aggregated in the bank, the convenience of them for each customer's contingencies is just as great as if he kept his own in his own safe or wallet, but the banker finds that he can use, say two-thirds of the whole, and still answer each customer's call. Here is a new capital. Here are scattered valuables brought together to be loaned out to a profit, which were otherwise barren and useless for the time being. Industry is quickened in a wide circle, products are created and brought to market, wages are paid and profits are gained, in direct consequence of bringing together under favorable auspices for safe loaning the little hoards and driblets of many individuals, which were practically useless in isolated hands. It may easily be objected at this point, that it is entirely possible that any banker might be called upon to pay off all his deposit-liabilities at once in money, which, if it happened, would break him of course; so it is abstractly possible that all the lives insured in a Life Insurance Company might terminate in one day, in which case no Company in the world could meet its obligations; and so it is abstractly possible that all the houses insured in a Fire Insurance Company might be burned up in a single night, which, if it happened, would cause the collapse of the soundest company; but in all these cases of possibility there is a _certainty_ that the possibility will not become a fact. _Ex nihilo nihil fit._ A supposition practically impossible to become a fact can yield no logical inference whatever. The Greek language has a special grammatical form for a hypothesis impossible to be realized in fact: would that the English had also such a form of speech! It would save us a mess of bad reasoning. If, however, any banker may have misjudged for his locality at any time the proper ratio of reserves kept to deposits received, and be crowded in consequence, he must sell some of the securities bought with the excess, or borrow money on them. Surprisingly large is the amount of bank deposits in all the leading commercial nations of the world. The average public and private deposits of the Bank of England, on which no current interest is paid by the Bank, amounts to about £40,000,000 all the time. The ten joint-stock banks of London carry about £80,000,000 in private deposits, of which those to remain some time _draw_ an interest, but those lodged on current accounts and on call _draw_ none. Scotland has carried deposit-banking further and to greater advantage than any other country in the world. There are now no private banks in Scotland, but the ten joint-stock banks with their numerous branches scattered to every village in the land hold constantly about £70,000,000 as individual deposits, on which current interest is allowed, and so the habit of keeping one's account with a banker has become universal with the people. No one thinks of keeping money to any amount in his house or about his person, and consequently house-breaking and highway robbery have almost ceased. Bankers even attend all the great fairs in the country to receive deposits and to pay off cheques. Credit in this form and in another form soon to be described treads its utmost verge in Scotland. Although in the United States the custom of keeping deposits with bankers and drawing cheques against them has not gone nearly so far as in Scotland, and not nearly so far as it will go in the immediate future, yet the aggregate of individual deposits in the national banks alone, Oct. 4, 1888, was $1,350,320,861, an increase in just seven years of 26%. _e._ Bank Discounts. The credits that are discounted by bankers may be either the promissory notes of individuals and corporations already characterized, or the Bills of Exchange soon to be characterized, but the entire function of discount is so peculiar, that the paper subjected to it ought to be enumerated in a classification of the instruments of Credit. The discounting of commercial paper is the second essential function of banking, as the buying and handling of deposits is the first; and it is more in accordance with genuine _banking_ to pass the price of the paper discounted to the seller's credit in the form of a deposit, that is, to buy one credit by creating another, than to pay the money over the counter at once, and thus to buy credits with money. Those who do the latter are called _bill-discounters_ rather than bankers, but most of our bankers do both, though there is a tendency towards the separation of the two in this country also. Manufacturers and wholesale merchants usually sell their goods _on time_, as it is called, say three or six months. Debts are thus created, or to say the same thing in other words, Credits are thus given. The manufacturer or wholesaler is creditor and the jobber or retailer is debtor. But a debt is property; and the creditor in this case wishes to avail himself of his property at once for further production; so he either takes a Promissory Note from his debtor, or draws a Bill of Exchange upon him, and this piece of property is ready for sale. Neither piece mentions _interest_ expressly, but the face sum virtually covers it as contemplating discount. Banks have been organized for the express purpose of buying for their own profit and for the convenience of business such pieces of property; some banker, accordingly, buys this particular piece, that is to say, this creditor passes over to this banker the commercial right to demand payment from this debtor at the end of three months, and receives in return from the banker either money direct or so much of the banker's credit, that is, a deposit in favor of the creditor on the banker's books. For furnishing this creditor either with ready money or a more available credit in lieu of his mercantile paper, the banker charges of course _a percentage_. This is _Discount_. _Discount is the difference between the face and the price of the paper._ This percentage called discount is the chief source of profit in ordinary banking. It is virtually compound interest on the sum advanced till the maturity of the paper, when the banker realizes from the debtor its full face. The following is a common form of a bankable note:-- $1,000 WILLIAMSTOWN, Mass., Nov. 10, 1889. Three months after date I promise to pay to the order of JOSHUA SWAN, one thousand dollars, payable at the Williamstown National Bank, value received. Due Feb. 10/13. LEANDER ALLEN. When Swan has put his name on the back of this note, that is in bank phrase, has _indorsed_ it, in token that he thereby at once sells and guarantees it to the bank, it is then discounted on the strength of the two _names_, Allen and Swan. As Allen technically takes the advance from the bank for his own benefit, he is technically expected to take up the note when it matures, and if he do not, the bank falls back on Swan, who is equally bound with Allen to see that it is paid at the proper time. Two names are nearly always, not always, requisite to a note acceptable for discount at a bank; and more names merely strengthen the note, since it is discounted on the combined validity of all the names upon it. One obvious advantage of discount is, that it tends to make all capital active and thus productive. It enables the banks to sell their credit and make a gain, to use a part of their money deposits to buy mercantile paper with, and so get a bank interest on them; it enables dealers in commodities to realize in cash _minus_ the discount the sum of what they have sold _on time_; and by means of _accommodation_ notes or bills, which only differ from the others in that there is no _actual_ debt between the parties, business men may swell the volume of their business temporarily, and non-business people may borrow small sums for convenience or emergencies. Bankers have not always credit enough or money enough from their depositors to buy in either mode all the good paper that is offered to them, in which case, they raise the rate of discount unless the law forbids, or by easy evasions even when the law forbids; or else accommodate regular customers and large depositors first, or buy of all that are "good" a certain proportion only. The discount line of 3140 national banks reporting Oct. 4, 1888, was $1,674,886,285.29. It is thus through the purchase of discountable notes for money, that banks derive their partial character as money-lenders. Also, such reserve sums as they do not wish to invest in negotiable paper, on account of the time involved before such paper matures, banks frequently loan _on call_ to those customers who have good collateral securities to pledge for the repayment of such loans. The terms of such a contract give the bank full authority to sell such collateral "_at the Brokers' Board or at public or private sale, or otherwise at said bank's option, on the non-performance of this promise, and without notice_." So far forth banks become direct money-lenders. It ought also to be added, that promissory notes with a single name (or more) are often discounted by banks partly on the strength of collateral securities deposited to fortify the names upon the notes. _f._ Bills of Exchange. A Bill of Exchange is a written instrument designed to secure the payment of a distant debt without the transmission of money, being in effect a setting-off or exchange of one debt against another. It is in form and in several technicalities different from a promissory note, inasmuch as it is an _order to pay_ instead of a _promise to pay_, and inasmuch as the maker of a note is always _debtor_ and the drawer of a bill of exchange is always _creditor_; but all this makes practically very little difference between the two as instruments of Credit, since nearly all bills of exchange come into banks in the way of ordinary business, either for discount or collection, and as the banks care nothing except for _names_, the _form_ of the purchasable paper is a matter of indifference to them. The following is the essential form of an inland bill of exchange:-- $3,000 PITTSFIELD, Mass., Oct. 16, 1889. Four months after date pay to the order of JOHN KENT three thousand dollars, value received, and charge the same to account of To ELI TRIPP, Boston, Mass. DAN STORRS. In the case of this bill, which may serve as a sample of thousands, Storrs is the _drawer_, who is creditor in relation to Tripp, and Tripp is _drawee_, but Storrs is debtor in relation to Kent, who is the _payee_. A bill of exchange is the sale of a debt, in such a way that two debts are so far forth set off against each other, and both transactions are closed without sending any money at all. Tripp owes Storrs, and Storrs owes Kent, and so Storrs pays Kent by an order on Tripp. As this is a bill at four months, Kent will doubtless send it to Tripp for his _acceptance_, as it is called, that is, his acknowledgment that he owes Storrs to that amount, and that he will pay the sum to the holder of the bill when it becomes due. An acceptance is written on the _face_ of a bill, and an indorsement upon the _back_ of the note: the initials are sufficient for the name of an acceptor, but the full business name is usual for an indorser. Thus a bill of exchange is the formal sale of a debt, in order to liquidate thereby another debt, when the parties to the transaction live in different and distant places. Storrs does business in Pittsfield, and Tripp in Boston, and it is a matter of comparative indifference where Kent lives, unless there is trouble at the time of collection, for he will perhaps negotiate this bill again, that is, make use of it to pay some debt that he himself owes. It is not often that the same person, as Tripp, happens to owe another person in a distant town, as Storrs, the same amount as Storrs owes another person somewhere, as Kent; but by two bills of exchange, one drawn by each creditor on his own debtor, and then each set off against the other, through the simple and beautiful expedient of bank balances, substantially the same advantages are reached as if it always happened so. Many bills of exchange are drawn _at sight_, as it is called, in which case the payee presents it for payment to the drawee, there is no acceptance and no discount, and a bill of this kind becomes the same as a cheque. Time bills, however, are usually discounted: the payee indorses his claim over to a fourth party by name, or, by what is called an indorsement _in blank_, that is, by merely writing his own name on the back of the bill, makes it payable to bearer: when banks buy these bills for discount, it is on the joint credit of acceptor and drawer and payee, and in that order of validity and precedence: a promissory note may be protested by a bank without notice to the maker, but a bill of exchange cannot be without notice to the drawer: a promissory note has two parties to it, a debtor and a creditor; while a bill of exchange has three parties to it, two creditors and a debtor. Inland bills of exchange, both time bills and sight bills, are very convenient in settling debts between distant places without the costly, and more or less hazardous, transmission of money back and forth; besides this, time bills possess the very useful function of enabling a debt due from one person to avail the creditor as a means of obtaining credit from a third party in discount; and in addition to these two points of benefit, it is plain, that the common use of bills of exchange in all their forms releases from use large amounts of money that would else be needful in trade. The less money in use in any country beyond a certain point, the better, because, if coin, it costs much to mint and maintain it, and if paper, it is difficult to make and sustain it of full value. Bankers sometimes change what they call "exchange" for settling debts between distant places in the same country; in some cases there may be a sound reason for this, in other cases there is none, but in all cases it adds a little to the profits of the banks for handling the bills of exchange; the principle of charging an "exchange" is this,--when one place as Chicago draws more bills on another place as New York than suffice to cancel the bills drawn at that time by New York on Chicago, the point _at_ which the larger indebtedness lies is the point for sending drafts _to_ which banks naturally charge a percentage; perhaps the idea, which is actually realized in foreign exchange, that money may have to be sent to liquidate such a balance, may have brought in the custom of charging "exchange" in such cases; and there are instances aside from such a supposed balance, in which there may be an extra cost of collection in some form to the bank, that may justify an "exchange" charge; but there is another principle counterworking and often neutralizing entirely this alleged doctrine of a "balance" of debt as between two distant places, namely, that the chief settling place and commercial centre of a country, such as New York is, draws towards itself from the whole circuit with such force, everybody wanting a balance there and having occasion to send funds thither, that drafts on such a place are apt to bear a premium without any reference to its comparative indebtedness at the time. Very similar to these inland bills in their nature and course and usefulness are Foreign Bills of Exchange, which, as a vastly important topic, especially in its relations with Foreign Trade, we must now study minutely and completely. Commercial relations between two countries, let us say, for instance, France and England, always give rise to a mutual indebtedness of their merchants; if these reciprocal debts were all to be paid by the actual sending of money to and from, there would have to be a constant and expensive and more or less hazardous outward and inward flow of the precious metals in respect to each country; all which necessity is neatly obviated by the use of reciprocal bills of exchange, and coin is only transmitted to settle the balances on whichever side there may happen an excess of debt at the time. French dealers are always sending goods to England, and English dealers goods to France; and for what they send to England the French merchants draw bills of exchange on the parties to whom the goods are consigned, and the English merchants draw similar bills on their debtors in France; then these bills are bought up by bankers or brokers in either country, and virtually exposed again for sale through new bills drawn against them to any parties who may have debts to pay in the other country. Thus bills on London, in other words, on English debtors, are always for sale in France; and bills on France, that is, on French debtors, are always for sale in London; the reciprocal debtors of the two countries, therefore, instead of sending coin to cancel their debts, buy and transmit these bills. Let us take a sample instance. Pierre & Co. of Paris send a cargo of wine worth £1000 in English money to John Barclay of London. Barclay thus becomes indebted to the Paris firm to that amount, and Pierre & Co. draw at once, so soon as the cargo is despatched, a bill in francs to the equivalent of £1000. If they themselves have no debt to pay in London, they will sell this bill immediately to a Paris banker or broker (if the exchange be then at par) for its full face _minus_ interest for the time it has to run, say two months; this broker is now ready to sell this bill again, or what is the same, his own bill drawn on the strength of it, to anybody in Paris who may have a debt to pay in London; and the party in London who receives it in liquidation of a French debt to him, presents it at maturity to John Barclay for payment. Thus one bill of exchange serves the ends of two creditors and one debtor: Pierre & Co. get their pay for the wine, the London party gets his pay for goods, and Barclay pays his debt, by means of it. A bill drawn in London for a cargo of hardware sent to Paris is similarly negotiated with a London broker or banker, and finds its way similarly to France in payment of some English debt owed there, and ends its course when it reaches the French firm on which it was originally drawn. We are now in position to understand clearly what is meant by the _par of Exchange_ in its commercial (not coinage) import. The merchants in Paris, who have debts due to them from London, draw bills of exchange for the amount of these debts; and, through the agency of middlemen, go into the market to sell these bills to other Paris dealers who have debts to pay in London. If the former class have a larger amount to sell than the latter have occasion to buy, in other words, if there be a larger amount of debts due from London to Paris than from Paris to London, then the natural competition of the sellers in Paris of the bills on London will lower their price somewhat in that market (Paris), in order, as usual, that the Supply and Demand may be equalized there. In this case the par of exchange is disturbed, a bill on London for £100 in francs may not sell for over £99, and the exchange is then said to be 1% _against_ London, or, which is the same thing, 1% _in favor_ of Paris. The _par of Exchange_, accordingly, between two countries, depends on the substantial equality of their commercial debts. In the above example, if the exchange as against London in favor of Paris continue long, and especially if the premium of 1% on bills drawn in London on Paris be sufficient to cover the expense of the transmission of specie from London to Paris, gold will begin to flow from London to Paris, because the debtors there may find it cheaper for themselves to buy and send gold than to pay the high premium on bills; and thus the equilibrium of payments and the commercial par may be restored. Also, this par tends to restore itself, without any sending of specie, in this other perfectly natural and effectual way: if bills on Paris are at a premium in London, for the same reason that they are so will bills on London be at a discount in Paris; therefore, there will be a direct encouragement to the extent of the premium for _exportation_ of goods from England to France, because on every cargo thus sent bills can be drawn and sold in London for a premium; while the more bills on Paris thus offered in London, the more the premium disappears of course, and the par will be restored so soon as the bills on Paris substantially equal the bills on London offered in Paris; and at the same time, so long as the discount on London bills continues in Paris, there is a direct _discouragement_ to further exportations from France to England, because the bills drawn in virtue of such cargoes can only be sold below par, and this too tends to _restore_ the par in the commercial sense of the term. Here is another instance of a magnificently comprehensive law, by which Nature vindicates her right to reign in the domain of Exchange. It is through this natural and beneficent law of automatic compensations, stimulating exportations on the one side and slackening them on the other, that most of the casual disturbances of the commercial par as between two countries are easily and perfectly rectified. While this great law is in full possession of our minds, let us note in passing how artificial restrictions by one country on the importation of goods from another, commonly called "Protectionism," affects this commercial par as between those two countries. Besides stopping absolutely a mass of otherwise profitable exportations and importations for both countries, it makes less profitable to the country imposing the restrictions whatever foreign trade _does take place_ between them in spite of the restrictions. Suppose England, as is the fact, opens her ports freely to the commodities of France, while France puts restrictions in the shape of heavy taxes upon importations from England; more French goods are likely under these circumstances to seek English ports than English goods to seek French ports, because they are more welcome; consequently, more bills of exchange drawn on London will naturally be offered in Paris than bills on Paris in London, and will so far forth be sold at a discount, while the London bills drawn on Paris will be sold at a premium; in other words, the comparatively few goods that do get out of a "protected" country, realize less to their owners than the natural value, because the bills drawn on them are extremely apt to be sold below par! With this course of things all known facts agree. Since the United States became conspicuously a "protected" country a quarter of a century ago, it has been at rare intervals and for short periods that bills drawn here on London have been at par. They have been usually much below par. The equivalent of £1 sterling in United States money is $4.8665; and when bills on London sell for less per pound sterling than $4.86, they are at a discount in New York or Boston; and exporters here are direct losers to the extent of the discount. If, however, notwithstanding the beautiful action of this great law of commerce, the disturbance in the commercial par as between two countries continues obstinate, it indicates one of several things as true of the country, whose bills of exchange drawn on another persist in a considerable discount; (1) it has come to be a pretty steady debtor country as towards the other, by sending thither its national or State or corporation bonds, whose interest and ultimately principal also must sooner or later be remitted in exports _extra_ to the exports needed to pay for the current imports of goods; (2) it has either naturally or by persistence in a bad public policy little or no shipping of its own, so that freights both ways have to be paid to foreigners in the form of exported goods _extra_ to those exported to pay for those imported in transient trade, which of course increases the number and face of the bills drawn _in_ the luckless country _on_ the lucky country or countries; (3) it has made the vast and fatal mistake of excluding by legal barriers of taxes put on for that purpose the goods of foreigners, whose only motive in coming is to take off corresponding goods of the deluded country's own to the profit of both, and so these last-mentioned goods must seek a foreign market (if at all) at reduced rates, their natural market having been destroyed by national law; and (4) it may have made the national money in which the bills drawn on it are liable to be paid an inferior money, either transiently by mere abundance or permanently by worsened quality, which is well illustrated in the instance of Amsterdam as cited in a preceding chapter, and which can only be remedied by raising the standard of the money to the level of the best. Very little, if anything, can be inferred as to the prosperity of a country or even as to the real condition of its "exchanges" in this technical sense of the term, by the transient movements of gold to and from the commercial countries, in their present complex relations as gold-producing and non-gold-producing countries and as debt-settling and non-debt-settling centres. Gold moves back and forth in obedience to several other impulses than to settle the balances in an international trade of Commodities. Gold-producing countries of course export gold just as they would any other native product. If for any reason gold becomes relatively more abundant in one country than in other commercial countries around it, general prices will rise in that country in consequence; which means, that gold is then and there the cheapest article that the people of that country can export to pay their commercial debts with. Also, the imports which a nation pays for in gold, or in bills of exchange bought above par, are often bought with a high profit. Creditor nations, nations that have managed to make themselves settling-places for the world's commercial debts, and nations that welcome imports without impediment from every quarter of the earth (and England may serve as a sample for all these three), will largely pay for imports in gold or in bills bearing a premium. It is a thousand pities, that technical terms which are quite misleading unless one remembers their origin and exact significance, have come to be intrenched in commercial language too strongly to be dislodged at this late day, as the common terms to express the state of the "exchanges" as between two countries. These terms are "_against_" and "_in favor of_." The old Mercantile system, which has left other unsavory progeny behind it besides this, in order to keep and heap gold and silver in a country, encouraged exports in every way and discouraged imports, in order that the "_balance of trade_," as the phrase ran, that is, the difference in volume between exports and imports, might come back to the country in gold and silver; and this foolish and now thoroughly exploded notion gave rise to the terms in question; exchanges were then said to be "against" a country when the record seemed to show more imports than exports, as if that implied that the imports were too great for a "balance" in gold and silver; and were said to be "in favor of" a country when its export-line was greater than the line of imports, as implying a favorable balance to be met by a specie-import in future. The false "System" is gone forever, but the "terms" still abide in commercial language, and confuse the minds more or less (more rather than less) of everybody who tries to make these terms a vehicle of thought. We have now described the causes and courses of international bills of exchange without resorting to these technicalities, which imply movements of gold and silver which do not actually take place under the conditions supposed; for example, the exchanges were "in favor" of the United States in 1874-77, there being an apparent trade balance of $164,000,000 in 1877 and a still larger in 1876 and a larger one in the two years preceding, but the import of specie was small in all those years, averaging about $25,000,000 a year, and the rest of the excess of exports went to pay interest due to foreigners, freights on the cargoes both ways, and so on. It is difficult to use without abusing the terms "against" and "in favor of" in this connection, and the reader is cautioned not to employ them; although "discount" and "premium" on international bills of exchange are matters extremely important to observe and to know the grounds of. Were there no counterworking principle, bills of exchange drawn _on_ capitalist and creditor countries, like Great Britain, whose imports are apt to be strongly in excess of the exports, and whose public policy is wise enough to put no obstacles in the way of the free receipt of imports, would be at a _discount_ in countries sending exports thither. This counterworking principle, already illustrated as to inland exchange in the case of New York, is best seen internationally in connection with London, which is the settling-place of the world's commerce. When the Romans dredged the Thames and made "the pool" just below London Bridge, they took the first steps towards making that town a commercial centre; since a market for products is products in market, the busy exchange of commodities there has quickened in every age the accumulation of capital and the increase of population; previous to the Dock Laborers' Strike in 1889, about 100 vessels entered the port of London every day, which received about one-half of the total customs revenue of the United Kingdom, and sent out about one-fourth of its exports; the business of out-of-the-way and semi-civilized countries has somehow (and it would not be hard to tell why) centered in London, as well as the business of originally British Colonies everywhere and of all other commercial countries; accordingly, debtors and creditors abound there, bills of exchange concentre there, and debts due from everywhere are payable _there_; and therefore, because bills on London are good all over the world, the Demand for them counterworks the natural cheapness of the bills drawn on exports _thither_ as compared with the natural dearness of the bills drawn there on exports _thence_. Another thing must be borne in mind in comparing the merchandise accounts of any country, namely, that whenever the "exchange" is sufficient to cover the cost and risk of the transmission of gold, gold itself is likely to go freely from the country, in which bills drawn on exports are at a premium, or to use for once the old hazardous phrase, "_against_" which the exchanges have turned, and bills will be drawn on that gold, as upon common merchandise, and sold of course for the sake of the premium; or, if a decidedly higher rate of discount prevail in a neighboring country, gold will naturally go thither from the lower-rate lands, because lenders in the latter will desire to realize the higher rate of current interest on money, and bills will be drawn on this gold as well, which will tend to lower the premium on bills there; unless, then, the premium _and_ the difference in interest abroad will justify the speculation, the gold will not stir; although, if the difference in interest abroad were very considerable and promised to continue for some time, the bills on the gold might sell at a discount and still leave a profit to the senders; but the home bankers can always stop a drain of gold of this kind by raising their own rates of discount. This casual mention of bankers leads on to the weighty point, that the whole business of foreign exchange is falling more and more into the hands of the bankers, because bills drawn _by_ and _upon_ well-known bankers naturally have a better credit than ordinary commercial bills, the names upon which are less widely and favorably known. Accordingly, persons sending cargoes of cotton, say, or of any other valuables, from New York to Liverpool, arrange with their bankers in New York to have the proceeds of the cargoes put to the _bankers'_ credit in London, and then these bankers draw bills on the London bankers, which will bring a higher price in New York than a common commercial bill, because many remitters and most travellers prefer bankers' bills, which, though they cost more, pay better and buy better abroad. Commercial bills are still bought and sold in every commercial town, but bankers' bills are more and more taking their place; and the quotations usually give the current price of each. London is so prominent as the settling-place of the world's transactions by means of bills drawn on and by London bankers, partly on account of the commercial predominance of England, partly from excellent banking customs there, and mainly because an immense mass of cheap loanable capital exists there, which even foreigners may borrow at London rates, provided only that they can get credit there, that is, leave to draw on a London banker, to whom of course remittances must be made as fast as he accepts their bills. Besides, the Bank of England, as the principal bank in Great Britain, and as closely connected with the Government, acts as a bank of support to the public and private Credit of that country. It does a regular business as a bank of deposits and discounts, but it means to keep its rate of discount somewhat above the rate demanded by the other bankers in London, so as not to come into competition with them much in their ordinary business, and be able to act as a bank of support to them and all others in times of pressure. All banks have about so much credit to sell, _and no more_; most banks sell in ordinary times about all the credit they have, because their profits depend on that; but if the Bank of England did this, it would become useless in periods of panic. In point of fact, that Bank just begins to sell its reserve credit, when the credit of the bankers below is exhausted. When they are at the _end_ of their rope, there is generally an abundance of slack rope still in the great Institution above. Now, as gold can be drawn out of the Bank of England by the cheques of depositors as well as by the presentation of its own notes for redemption, the Rate of Discount becomes a matter of prime importance in the management of the Bank. The whole line of deposits is a line of liabilities to pay out gold, if the depositors demand it; and, as deposits come largely through discounts, whenever there is a strong tendency to draw out gold so as to weaken the reserves of the Bank, the directors have an effectual remedy by raising the rate of discount. The higher the _price_ the Bank charges for its credit, the fewer, so far forth, will be its customers, and the smaller its line of deposits, and the less likely a continuous drain of gold from its vaults. The Bank of England is managed throughout by so simple a manner as the turning back and forth of this magic screw of Discount. Besides the use of the term "Par of Exchange" in the broad commercial sense in which we have now been examining it, as indicating the substantial equality of international debts as between two countries by the current prices of bills of exchange, there is another and subordinate sense in which the phrase is employed, namely, as denoting the _relative value_ of the coins of one nation in the coins of another. Thus, our present gold dollar contains 23.22 grains of pure gold; the English pound sterling contains 113.001 grains; consequently, there are $4.8665 to the English pound; and this is the "par of exchange" (in the secondary sense) between the United States and Great Britain. Between the United States and France the "par" is $1 to 5.18 francs, since the franc is 19.29 of our cents. An English shilling equals 24.33 of our cents, the new German "mark" is 23.82 cents, and the new Scandinavian "crown" equals 26.78 cents. _g._ Bank Cheques. In substance indeed and even in form, Cheques are Bills of Exchange, but the two have such differing legal incidents, and run so different a course towards extinguishment, that for our purposes in this treatise they should be put under a separate discussion. Bills of exchange are expressly drawn "at sight" or for a day certain, when they become payable by the drawee: cheques _say_ nothing about "sight" or any future date, though they are _really_ drawn at sight, and are payable to bearer on demand: they must, therefore, be presented for payment within the shortest reasonable time (all things considered), in order that the holder may legally claim against the drawer should the banker fail meantime: a cheque is held as the payment of a debt until it be dishonored on presentation: the banker bears the risk of the forgery of the drawer's name, unless his mistake be made easier by the drawer's carelessness in drawing: a cheque is not payable after the drawer's death. The parties to cheques are the Drawer, who is a depositor with some banker; that banker thus becomes the Drawee; and the person named in the cheque is the Payee, who can indorse his own right over to another person by name or in blank to bearer. When a cheque is drawn in this way by one _banker_ upon another, it is usually called in this country a _Draft_. Formerly in England, and in other countries as well, each considerable dealer kept his own strong box, and when he had occasion to make payments, told down the solid cash upon his own counter. Afterwards, the goldsmiths of London solicited the honor of keeping in their vaults the spare cash of the merchants, and these in their payments among each other came to employ orders or cheques drawn on the goldsmiths, and at the shops of the latter the principal payments in coin were effected. The later introduction of Banks brought along with it the custom, now continually widening in commercial countries among all classes of the people, of keeping one's funds with some banker, and making payments by written orders or cheques upon him. When the person making the payment and the person receiving it keep their money with the same banker, there is no need of any money at all passing in the premises, the sum being merely transferred in the banker's books from the credit of the payer to the credit of the receiver. The banker is quite willing usually to do this business for nothing, and even sometimes to allow the depositors a low rate of interest on all balances remaining in his hands, in consideration of the privilege involved of loaning such proportion of the aggregate of these sums as he deems safe to other parties at a higher rate of interest. In the larger cities, by an arrangement called the "Clearing-house," substantially the same benefits are secured as if all the depositors of the city kept their cash at the same bank; inasmuch as all the cheques drawn on each of the different banks, and passing in the course of the business day into other banks, are assorted before evening at all the banks, and adjusted the next morning through the clearing-house, and the credits and debits of each bank are set off as far as possible against each other, leaving only small balances to be settled in money. The London Bankers' Clearing-house was established in 1775; in 1864, the Bank of England was admitted to it; and since then, the Clearing-house itself, and all the bankers and firms using it, keep accounts with the Bank of England, and the balances, formerly settled by money, are now adjusted by simple transfers of account on the books of that great Bank. This carries out the grand principle of the Clearing further than it has yet been carried in this Country, although the United States Sub-Treasury not very long ago joined the New York Clearing-house, while the practical details of the Clearing are simpler and better in New York than in London. The average clearings in the London house (and there are besides many other clearing-houses in the United Kingdom) were £5,218,000,000 a year for 1875-80, and the amounts cleared frequently rose to £20,000,000 a day; which, if paid in gold coin, would weigh about 157 tons and require about 80 horses to carry it; and if paid in silver coin would weigh more than 2500 tons and require 1275 horses. This is stated on the excellent authority of the late Professor Jevons. The total business of the 23 clearing-houses of the United States in 1880 was over $50,000,000,000; the New York Clearing-house did 65% of that business for that year; and the average daily clearings there for the fiscal year 1879 were $76,167,983. We will now describe mainly from personal observation the New York Clearing-house, which was established in 1853, premising that the principle is the same, though the details may be different, in all other clearing-houses wherever located. Business men in New York, as elsewhere, usually pass in to their bankers as a deposit all the cheques and current credits received in the course of a business day. It is the custom for everybody to draw his own cheque _on_ his banker to make payments with, and to pass in _to_ his banker the cheques he receives from others. Say there are sixty clearing-banks in New York City. Each of these banks sorts out after business hours every day all the cheques it has received that day drawn on each of the other banks into separate parcels ready for the clearing the next morning. Each bank has, then, fifty-nine parcels _to deliver_, which represent the property of that bank, and are a _claim_ upon the other banks; and also _to receive_ fifty-nine parcels, which represent the property of the other banks, and are a claim upon _itself_. Before ten o'clock in the morning sixty messengers, each having fifty-nine parcels to deliver, appear at the clearing-house, each reporting to the manager at once for record the amount of "exchange" he has brought, which is entered of course as _credit_ to his bank; and then all take their positions in order in front of the sixty desks, which occupy the floor of the house, behind which sit sixty clerks, each representing one of the banks. Each messenger stands opposite the desk of his own bank, with his fifty-nine parcels already arranged in the exact order of the bank-desks before him. Of course no messenger has anything to deliver to the clerk of his own bank. Each clerk inside his desk has a sheet of paper containing the names of all the other banks arranged in the same order as the desks, with the amounts carried out upon it which his messenger has just brought to each. All these are entered in his credit column. Each messenger carries also a slip of paper ready to be delivered with each parcel to each clerk, on which is entered the amount of the cheques he now brings to each bank. Of course the amount delivered _to_ each bank is _debit_ to that bank, just as the amount brought _by_ each is _credit_ to that bank. A signal from the manager, who stands on a raised platform at one end of the room with his two or more clerks before him, and each messenger steps forward to the next desk in front of him, delivers his parcel and also the slip that goes with it, which latter the clerk signs with his initials and hands back to the messenger as his voucher for the delivery; and then each messenger advances to the next desk,--the whole _cue_ moving in order,--at which precisely the same things take place as before, and so on, until the circuit of the room is made, and each comes opposite again the desk of his own bank, having passed to each its "exchange" and taken a receipt for each delivery. This process takes about ten minutes; when each clerk, who had on his sheet to start with the _credit_ due to his bank, has now the _data_ (fifty-nine items) by which to calculate the _debit_ of his bank. The difference between the aggregate of cheques _received_ and _brought_ by his bank is the balance due _to_ or _from_ the clearing-house as to that bank. All the clerks report to the manager the amounts _received_ by each, and as his proof-sheets hold already the amounts _brought_, if the two columns add up alike, no mistake has been made, and the general clearing is over. Thirty-five minutes are allowed the clerks to enter, report, and prove their work. Fines are imposed for errors discovered after that time. The Clearing-house gives tickets of debit or credit to all the banks, and the debit ones must pay in lawful money before half-past one, and the credit ones will get their due from the manager immediately after. The largest sum ever cleared in New York in one day was $206,034,920.51 on Nov. 17, 1868, and the smallest $8,357,394.82 on Oct. 30 of the panic year, 1857. _h._ Crossed Cheques. About twenty years ago there was instituted in London what is called the Cheque-Bank, which is designed to bring the benefits of the credit-system in the form of cheques more easily to all classes of the people. The cheques issued by this institution are so different in character and in course from common bank-cheques, and are in some respects so new in principle, that we must give to them a separate heading and a full explanation. The Cheque-Bank is a stock company in London under that style, which has entered into relations with nearly all the banks and bankers of the United Kingdom, and with many Colonial and foreign banks also, by which Cheque-Books are furnished for sale by the Cheque-Bank through these associated banks, which also agree to cash the cheques, every cheque in which books indicates by printed and indelible perforated notices upon the forms what the utmost sum is against which that cheque can be drawn; the aggregate of these perforated sums is the price for which each book is sold less 1-1/5 penny for each cheque in it, of which the penny is for the Government stamp required and the one-fifth for the profits of the Cheque-Bank; and all these cheques in books of different sizes and amounts are drawn in form _on_ the Cheque-Bank, and _Crossed_, that is, _only made payable through a banker_. It is one security against fraud that each cheque bears on its face the utmost sum for which it can be used, and another is that it can only be taken up by a banker and thus settled ultimately through the clearing-house. The Crossed Cheques Act of Parliament in 1876 makes any obliteration of the crossing or essential alteration of a cheque _felony_ at law. Cheque-crossing is of two kinds, _special_ and _general_; when any particular banker's name is written between two transverse lines, in which form alone crossed cheques differ from ordinary ones, that makes that cheque payable by him only; when the words "_and Company_" or "_and Co._" are written between these lines, that makes the cheque payable only through _some_ banker, that is, the cheque is crossed _generally_; and when two parallel transverse lines simply are drawn across the face of a cheque, with or without the words "not negotiable," that cheque is legally deemed to be _crossed_ and crossed _generally_. When a cheque is uncrossed, the lawful holder may cross it either generally or specially; when it is crossed generally, he may at his option cross it specially; and whether crossed generally or specially he may add the words "not negotiable." All this facilitates greatly the _collection_ of cheques by set-off through the clearing; and has a direct bearing on the fortunes of the Cheque-Bank. The Cheque-Bank publicly guarantees the payment of all the cheques in all its cheque-books to the maximum amount for which each cheque may be drawn; and it may well do this, for no cheque-book is sold except for money, and the money is ready in the hands of some banker to pay every cheque when presented; any banker or other person will give cash for them, or take them in payment for goods or other services, or if they are drawn for a sum larger than the debt due will give back the charge to the bearer; and if the cheques be actually drawn for less than the maximum perforated on them, the Bank itself will give additional cheques for the balance. The ultimate payment, then, of these cheques is as sure as anything in the future can be; the buyer of a cheque-book knows, that the money is already in deposit to pay them, and that the government-stamps on them have already been paid for, while the receiver of an ordinary cheque cannot know beforehand that the drawer has money in deposit against it. Moreover, the holder of an ordinary cheque must use due diligence in presenting it for payment as soon as possible, or delay it at his own risk, while the holder of these has no motive whatever for haste,--time does not deteriorate them. All money received for cheque-books is left in the hands of the bankers who sell them, or transferred to other bankers in order to meet the cheques presented elsewhere, and accordingly an interest is paid by the bankers to the Cheque-Bank, on the balance of deposits thus held, and this interest, together with the one-fifth of a penny for each cheque, is the only source of profit to the Cheque-Bank. Of course, the longer these cheques remain out before presentation, the more profitable to the Cheque-Bank; and their average length of life has been heretofore not far from ten days. Since these cheques are crossed _generally_ (not specially) with the words "and Co.," that is to say, since they can ultimately be taken up only by some banker, they have a more _generalized_ character than common bank-cheques, they are safer to carry and keep than so much money would be, there is no difficulty in shopping or paying wages by means of them, they are very much the same in their nature as bank bills are, and might easily in certain circumstances become _money_ just as bank bills in some circumstances are money. Each of the associated banks keeps an account of course with the Cheque-Bank, but is not obliged to keep a separate account with the purchasers of cheque-books, which is a great relief to the banks. In this way the Cheque-Bank extends the use of cheques in the lieu of money to a great multitude of small transactions, and relieves the other banks from what would otherwise be a great deal of troublesome accounting and collection. The ingenuity and the utility of this comparatively new form of Credit cannot be questioned for one moment; the promoters of the Bank intended that their cheques should be received by the people as a substitute for cash and for Post Office orders, and such has been the effect, many railway and other companies having long ago agreed to receive them as cash, and the people generally regard them as cheaper and more convenient than postal orders and even for many purposes than cash. _i._ Cash Credits. As the Cheque-Bank in the sense as just explained has been thus far in the history of Credit peculiar to England, so we have now to look to Scotland only for an exemplification of a form of Credit hitherto confined to that country. It is a national characteristic of the Scotch to be "canny," that is, they _can_, a word from the old Teutonic _können, to be able_; and, as a consequence, Scotch Banking has long been famous the world over; and the one peculiarity of it, with which we are now concerned, goes back certainly to 1729, as we happen to know from a minute of the Directors of the Bank of Scotland under that date. That bank was chartered by the old Scotch Parliament in 1695, one year after the chartering by the English Parliament of the Bank of England, and under substantially the same title as that, namely, "The Governor and Company of the Bank of Scotland." It began to establish branches in different towns of the realm in 1696, and began to issue bank notes for £1 (a privilege denied to the Bank of England) in 1704; and it began also at a very early period to exhibit the two main peculiarities of Scotch banking, namely, (1) to receive deposits _on interest_ and (2) _to grant credit on cash accounts_, or, as they have come to be called less properly, Cash Credits. This second peculiarity, which has proved extremely beneficial to Scotland, is for substance this, to create a drawing account in favor of a deserving customer, who has made as yet no deposits in the bank, but who draws out money and pays it in from time to time just like an ordinary depositor, and instead of receiving interest on the daily balance to his _credit_ (old Scotch fashion), he pays interest on the daily balance to his _debit_. These accounts are called Cash Credits. They are not intended to be dead loans, but quick accounts; and they are not granted except to persons in business, or to those who are frequently drawing out and paying in money. The individual who has obtained such a credit is enabled to draw the whole sum, or any part of it, when he pleases, replacing it, or portions of it, when he pleases, according as he finds it convenient, interest being charged only upon such part as he draws out. David Hume in his Essay of the Balance of Trade, published in 1752, makes this nice point in favor of Cash Credits: "If a man borrows £5000 from a private hand, besides that it is not always to be found when required, he pays interest for it whether he be using it or not. On the other hand, his Cash Credit costs him nothing, except during the moment it is of service to him; and this circumstance is of equal advantage as if he had borrowed money at a much lower rate of interest." The Cash Credit is always for a limited sum, seldom under £100, given upon the customer's own security, and that in addition of two or three individuals approved by the bank, who become sureties for its payment. Of course, only those banks can furnish such credits which possess a surplus of credit more than they can sell in the ordinary way, and these credits are safe and useful only in small communities, in which men are well known to each other. Some friends of the parties thus accommodated always guarantee the bank against loss; but the losses have proved to be insignificant, the gains to be marvellous; and this form of credit issued on the basis of no previous transaction in the way of deposits illustrates better than any other the radical principle, that Credit is Capital. The Report of a Committee of the House of Lords made in 1826 on Scotch and Irish banking describes very clearly and fully the system of Cash Credits: "There is also one part of their system, which is stated by all the witnesses to have had the best effects upon the people of Scotland, and particularly upon the middling and poorer classes of society, in producing and encouraging habits of frugality and industry. The practice referred to is that of Cash Credits. Any person who applies to a bank for a Cash Credit is called upon to produce two or more competent sureties, who are jointly bound; and after a full inquiry into the character of the applicant, the nature of his business, and the sufficiency of his securities, he is allowed to open a credit, and to draw upon the bank for the whole of its amount, or for such part of it as his daily transactions may require. To the credit of the account he pays in such sums as he may not have occasion to use, and interest is charged or credited upon the daily balance, as the case may be. From the facility which these Cash Credits give to all the small transactions of the country, and from the opportunities which they afford to persons who begin business with little or no capital but their character to employ profitably the minutest products of their industry, it cannot be doubted that the most important advantages are derived to the whole community. The advantage to the banks that give these Cash Credits arises from the call which they continually produce for the issue of their paper, and from the opportunity which they afford for the profitable employment of part of their deposits. The banks are indeed so sensible that, in order to make this part of their business advantageous and secure, it is necessary that their Cash Credits should be operated upon, that they refuse to continue them unless this implied condition be fulfilled. The total amount of their Cash Credits is stated by one witness to be £5,000,000, of which the average amount advanced by the banks may be one-third." There are only ten Banks doing business in Scotland, and the Bank of Scotland, the oldest of these, had 86 branches in 1875, and the average number of branches of the other nine is very nearly the same with that. _j._ Circular Credits. These are a device of bankers to enable travellers and merchants of one country to obtain credit and cash in foreign countries in sums to suit their convenience, not to exceed in the aggregate the limit mentioned in the credits drawn. These credits assume different forms and are called by different names, but they are all at bottom foreign Bills of Exchange. They are Orders to pay. They are drawn by Bankers at home upon Bankers abroad. They are bought by travellers and others, because they are safer to carry than so much money would be, and much more convenient. In nearly all of those forms the credits are available for no one else than the payee, whose name is upon the form as well as the names of the bankers who are the drawees, and so the credits are not liable to be stolen, although they may be temporarily (not ultimately) lost. Purchasers of such credits can obtain money on them in all of the principal cities of the world in just such sums as they need. They have ultimately to pay for no more credit than they actually use, because the drawer will pay back to the payee, in case he has bought and paid for the entire credit drawn, the cash difference; while on the other hand, arrangements can always be made beforehand, by which money need not be deposited with the banker at home any faster than it is actually called for abroad; and while also a good customer of the bank drawing the credit, one who keeps ordinarily a good line of deposits, may pay for whatever credit he has used when he returns from his trip. There is one kind of these foreign credits that deserves separate mention, since it has come of late years into quite general use, namely, "Circular Notes," as they are called. These are sight bills of exchange, each drawn for a relatively small amount, say £10, and multiplied in number to the requirements of the buyer, and drawn by one domestic banking-house, say Kountze Brothers of New York, on one foreign banking-house, say Union Bank of London, the names of drawer and drawee only being upon the "notes," the payee or buyer being expected to indorse each note in the presence of the Correspondent making the payment. The notes, therefore, are not negotiable except by the signature of the payee himself from time to time as he needs the proceeds. This makes them safer than so much money to carry: if stolen, they could do the thief no possible good. At the same time the drawer of the notes furnishes the payee a circular letter addressed to his banking correspondents all over the world, just as in an ordinary Letter of Credit, containing the name and also the personal signature of the payee, but unlike the ordinary Letter making no reference to the amounts of credit furnished, and there are no indorsements of any kind by the correspondents on this circular letter, which the payee is cautioned in print on the back _to keep separate_ from the Circular Notes covered by it. One of these letters runs as follows, the name of the payee being entered in manuscript and also in autograph:-- "TO OUR CORRESPONDENTS, GENTLEMEN, THIS LETTER WILL BE PRESENTED TO YOU BY GRACE PERRY, WHO IS RECOMMENDED TO YOUR KIND ATTENTION, AND IS SUPPLIED WITH OUR CIRCULAR NOTES, THE VALUE OF WHICH PLEASE FURNISH AT THE CURRENT RATE FOR SIGHT BILLS ON LONDON, WITHOUT ANY EXPENSE TO US. AFTER YOU HAVE EXAMINED THIS LETTER, PLEASE RETURN IT TO THE BEARER, IN WHOSE HANDS IT WILL REMAIN UNTIL THE EXPIRATION OF THE CIRCULAR NOTES." These Circular Notes approximate in certain respects in kind towards the cheques of the Cheque-Bank of London: both are bought at the outset and paid for in full on the spot; and both are drawn _upon one Bank_, which is the ultimate Drawee and Payer. In two essential respects, however, the notes differ from the cheques: the cheques are payable to Bearer without any indorsement by anybody, and so have a much more _generalized_ purchasing-power than the notes, which have to be indorsed by the payee (not named indeed in the notes but in the letter accompanying them), as they are negotiated in a way preliminary to their ultimate payment by the single bank on which they are drawn; and also the notes, like all other foreign bills of exchange, are subject in their value to the fluctuations of International Exchange, while the cheques in their value are independent of commercial exchanges "in favor" or "against" any country, and entitle the bearer to so many pounds sterling in value according to English coinage without any possible discount or premium. These London Cheques, accordingly, approach much nearer to the character of Money than any other form of Credit yet devised, except Bank bills undoubtedly convertible; and already take their place as one of the _media_ in the international trade, and are sold in New York by authorized agents of the Cheque-Bank, as they have long been by such agents in all English and Colonial and in many foreign cities. These _Ten_ are the principle instruments in Credit-Exchanges throughout the world; and we pass now, as proposed, to the next section of our subject, namely, the Advantages of Credit. 3. As introducing these advantages and also as illustrating them, we call attention first to the antiquity of many of the forms of Credit, a point upon which much fresh light has been cast by recent discoveries in, and ability to decipher the cuneiform writing of, the ancient Assyria and Babylonia. It is to the credit of Credit, that the earliest of civilized men seem to have perceived its nature, to have seized upon its powers, and to have realized for themselves some of its advantages. Credit is natural and legitimate. The moderns have invented new forms of it, and have tested its capacities to the utmost, but the ancients know it well in several of its instruments, and vindicate their own insight into the recesses of Exchanges by tablets and documents now known and read of all men. In an earthenware jar found some years ago in the neighborhood of Hillah, a few miles from Babylon, were discovered many clay tablets inscribed with records relating to banking, and, what is more, to banking as carried on for generations by a single family or firm, which the cuneiform archæologists have translated as "Egibi & Co." These tablets are now deposited in the British Museum. Those who can read them say, that the founder of this banking-house, Egibi, probably lived in the reign of Sennacherib, about 700 B.C. This family has been traced in banking transactions during a century and a half, and through five generations down to the reign of Darius. They were the Rothschilds in the region of the Euphrates: they acted in a sort as the national bank of Babylon. The Tigris is always associated with the Euphrates and forever will be. Nineveh on the former river, like Babylon on the latter, has yielded from its tablet-records information as to the use of credit in the more northern capital of Assyria. "Within the palace of Asshur-bani-pal, the Sardanapalus of the Greeks, who reigned at Nineveh from 668 B.C., Layard discovered what is known as the Royal Library. There were two chambers, the floors of which were heaped with books, like the Chaldean tablets already described. The number of books in the collection has been estimated at ten thousand. The writing upon some of the tablets is so minute that it cannot be read without the aid of a magnifying-glass. We learn from the inscriptions that a librarian had charge of the collection. Catalogues of the books have been found, made out on clay tablets. The library was open to the public, for an inscription of Asshur-bani-pal says, "_I wrote upon the tablets_; _I place them in my palace for the instruction of my people._" The Assyrian tablets embrace a great variety of subjects; the larger part, however, are lexicons and treatises on grammar, and various other works intended as text-books for scholars. Perhaps the most curious of the tablets yet found are notes issued by the Government, and made redeemable in gold and silver on presentation at the King's treasury. Tablets of this character have been found bearing date as early as 625 B.C. It would seem from this that the Assyrians had very correct notions of the promise-character of paper (tablet) money" (Myers). In the Metropolitan Museum of Art in New York are Babylonian tablets bearing distinct records of credit transactions that took place in the reign of Nebuchadnezzar. The earliest tablet is of the year 601 B.C. On it are memoranda of loans of silver made by Kurdurru as follows: "1 mina of silver to Suta, 1 mina to Balludh, 1/2 mina to Buluepus, 5 shekels to Nabu-basa-napsate, and 5 shekels to Nergal-dann;--total, 3 minas, 5 shekels of silver." There are more than 50 similar tablets in this collection; the latest dated, "Babylon, 18th day of 14th year of Darius," that is, B.C. 505. M. Lenormant, who can read them, divides these credit documents into five principal types. 1. Simple obligations; 2. Obligations with a penal clause in case of non-fulfilment; 3. Obligations with the guarantee to a third party; 4. Obligations payable to a third person; and 5. Drafts drawn upon one place, payable in another. These last are letters of Credit. They contain the names of several witnesses. They are evidently negotiable, but from the nature of things could not pass by indorsement, because when the clay was once baked nothing new could be added, and under these circumstances the name of the payee was often omitted. It seems to follow from this peculiarity, that the drawee must have been regularly advised by the drawer. One of the credits in this most interesting collection had 79 days to run. The main elements of their civilization came to the Greeks, and especially to the Greek cities in Asia Minor demonstrably from the Eastward; the Greek West proved itself quick to catch up the thoughts and the modes of the East; accordingly, Isocrates in his plea against the banker, Pasion, describes a formal bill of Exchange bought by Stratocles in Athens, payable in Pontus, and guaranteed principal and interest by Pasion; the practical Romans were pupils of the Greeks in all such matters, and so it came about in course of time, that Cicero wrote as follows in a letter to Atticus,--"Let me know, if the money my son needs at Athens can be sent him _by way of exchange_, or if it be necessary for it to be taken to him,--_permutarine possit an ipsi ferendum sit_"; and after that the Jews and the Lombards carried the Letter of Credit all over the world. It goes without saying, when the most civilized and advanced people of the world were the first to adopt and have been since the quickest to expand the use of Credit, that there must be pretty obvious and very solid advantages from such use and expansion; and we must now note and weigh a few of these advantages. (1) There are young men in every advanced community in the world who have integrity and industry and skill, but little or no _Capital_; and when such men are enabled to borrow money, as by the Scotch system of "cash accounts" or otherwise, to start themselves in business or to enlarge a business already in successful operation, the general interests of Production as well as their own personal interests, are greatly subserved by such credit; because in all probability much capital thus passes out of hands which are _less_ into hands which are _more_ able to use it _productively_. Those who are best able to make capital _tell_ by increase are generally those who are most desirous to obtain it, and frequently those who can offer the best security for its replacement. Nothing, therefore, is to be said against, but everything in favor of, such a loaning of capital as shall bring it under safe conditions from the hands of the idle and the aged, from those indisposed or incompetent to use it productively, into other hands at once competent and honest. Such credits as these are a benefit and only a benefit to all the parties concerned, and to Society at large. The active operators retain something of profit after replacing the capital with current interest upon it; the lenders receive more than if their capital remained idle, or they employed it themselves; and Society is benefited by a more complete development, and rapid circulation, of Services. Despite all the instances of broken faith, it is still an honor to human nature, that men do so gain by good character the confidence of their fellows, that they are and ought to be trusted with capital on their simple word or note; and it is the glory of free political institutions, that under their influence more than elsewhere, young men do rise by the help of so slight a stepping-stone as this, in crowds, to the high places of opulence. In the important point of view, that thus all of the available capital of a community is brought out into productive activity, too much can scarcely be said of Savings-Banks, which take the surplus earnings of the poor, and not only keep them safely, but pay a fair interest on each deposit, and loan the aggregate at a higher rate on choice securities, thus stimulating frugality in a wide circle of depositors, and at the same time aiding Production by opportune loans to the best class of borrowers. In the year 1881, there were $443,000,000 invested in savings-banks in the State of New York, and $230,000,000 in the small State of Massachusetts. In this first category of the advantages of Credit, come also the ordinary bank discounts, made for short periods only, holding the debtor to the strictest rules of payment, only professing and only enabled to help customers over the transient hard places in their business, and _not_ to furnish the funds on which the business is mainly conducted. Loans drawn from the banks on interest should never be put into the form of fixed capital, and should only be a _part_ of the quick or circulating capital, since only the passing necessities of a business having an independent basis and movement of its own, can safely be met by bank discounts. The cash credits of Scotland are quite different both in what they are and in what they imply from the short and sharp discounts of the banks of our own country. So far as the capital stock of banks is made up, as it usually is, of a large number of comparatively small subscriptions, there is the great advantage just spoken of, of calling a multitude of otherwise idle sums into activity in production; and so far as no undue privileges, unjust to other corporations and individuals, are accorded to banks by law, there is no branch of industry more legitimate and beneficial than banking. It is no essential part of the functions of a bank, that it manufacture and issue paper money; that feature is always rather a source of weakness than a ground of strength; the money the bank circulates should always be the national money; and if that too, unfortunately, should be credit-money, the element of credit in the _money_ should be sharply discriminated in the public mind from that other and quite different element of credit by which the bank _loans_ it to its customers. (2) There is another class of advantages in Credit, which do not depend so much on the transfer of Capital from less to more productive hands, as on the facilities which credit affords in economizing the general operations of Exchange. Here the advantages are derived from the convenience of _settling accounts_ arising out of exchanges, rather than from the _character_ of the exchanges themselves. Look a moment, for example, at foreign Bills of Exchange. They serve to settle up the accounts arising from the Commerce of two or six Continents, with but little transmission of money from any, and with but very little loss of time. Commercial bills drawn in New York on London have been usually payable at sixty days' sight; the New York merchant despatching a ship is able to realize at once the value of her cargo, minus interest for the time his bill has to run; since bankers' bills have so largely taken the place of "commercial" bills, the time is much shortened thereby, and this is one reason why bankers' bills bear a higher price in the market; the merchant or sender is indeed still liable in part to see that his bill is ultimately paid by the drawee; but the commercial integrity of the leading houses and leading banks in all countries is with justice so firmly believed in and acted on, that on the whole but little anxiety springs from this source. It is one of the noble things in international commerce, that men trust each other across the oceans, and lay millions of value on the faith of a single firm. Inland bills of exchange equally facilitate settlements within the country itself; and cheques, which are of the same essential nature as inland bills, contribute to the same end even more simply and surely, passing readily in payments wherever the parties are known, and through credit and set-off doing the work of money more conveniently and economically than, and within certain limits just as safely as, money itself could do it. The face of a cheque drawn to the amount of his deposit in favor of another depositor in the same bank is transferred in the banker's books from the credit of the drawer to that of the payee by the stroke of a pen, no money at all passes in the premises, while the banker is released from one debt by creating another of equal amount, the drawer is released from one debt by another to be transferred to the payee, and the payee is paid by the drawer by the former's receipt of another debt more acceptable to him. (3) Besides the two essential functions of all banks, namely, the receiving of deposits and the discounting of bills, most of them perform a variety of other legitimate operations in Credit, which must be classed among the advantages of Credit. They buy and sell debts of all sorts. They make collection of debts for their customers. They sell their own drafts on distant places. Since 1863, our national banks have done an immense business in handling the debt of the United States: they were instrumental in diffusing the national bonds among all classes of the people: they collect for their customers the coupons at maturity: they have been and still are the factors of the government in exchanging, for those who desire it, one species of bond for another; and the entire debt of the United States has been several times changed, mainly through the agency of the banks, from bonds at high rates of interest and for short times of maturity to bonds at lower rates and for longer times. (4) The fourth, and probably the chief, advantage of Credit is the fact, that a new purchasing-power is created by means of it, a new Valuable, something additional to all existing before in the world of Values. One can buy other things with Credit, as well as with material Commodities and personal Services. Credit, therefore, becomes a Salable under the two peculiar limitations already explained, those of future Time and personal Confidence, just as Commodities become a Salable under the peculiar limitations belonging to _them_; and, what is more to the present purpose, just as some Commodities (all of them salable) become Capital under the action of the abstinence of their owners, so some Credits (all of them salable) become Capital under the action of the Abstinence of their owners. Some commodities and some credits are expended, that is, sold, for the immediate gratification of their owners, without ever a thought of a future increase to accrue; but also, some commodities and credits are reserved by their owners for use in further production, that is, for future buying and selling; and the motive in all such cases is the same that creates all Capital everywhere, namely, the increase to accrue as the result of such abstinence; and, consequently, we lay down the postulate with all confidence, and enumerate it as one of the main advantages of Credit, that some Credits are CAPITAL, with all the powers in production of that potent agent already exemplified. It is only fair to apprise the reader right here, that almost all Economists deny that any new capital is created through Credit. These deny _in toto_ that the relation of debtor and creditor involves anything more than the exchange between the two parties of certain _titles to tangible goods_. Let the reader now hear, and then judge for himself. Bonamy Price of Oxford University, a professed Economist and a teacher of acknowledged ability, writes as follows:[8] "_Omitting the capital which a joint stock company puts into a bank, the banker possesses no capital, except his premises and any coin that may be in them, however much commercial and monetary literature may ascribe capital to banks. Lines and names in ledgers, cheques at the Clearing-house, debts due to depositors, debts due upon bills by borrowers, are neither wealth nor capital. They are words and nothing more. Incorporeal property, under which these kinds of written words are summed up, is not wealth; it is merely a collection of title-deeds, but from which the reality is absent. The corpus is not in those deeds, but the right to acquire that property, even before possession is obtained, is itself a property. If a title-deed or a mortgage is declared to be actual wealth by Political Economy, then the sooner it is consigned to the waste-basket, the better._" This passage shows how the word, "wealth," tangles men up inextricably, who, by discarding it utterly, might have become clear thinkers and useful expositors. It also shows, that Professor Price never analyzed Valuables into their three kinds, never thoroughly mastered in a preliminary way the Idea that underlies Economics, never precisely understood what Money is, and certainly never found out the radical nature of Credit. Nevertheless, the passage just quoted really concedes the whole matter in the present dispute,--"the right to acquire that property, even before possession is obtained, is itself a property,"--that is all that we claim, namely, that rights are property, and that new rights (which are property) are created by Credit, and that some of these new property-rights thus created may become and do become a new Capital. These new rights, however, this new and acknowledged "property," are not "_titles_" to any specific valuables whatever, as Price supposed; "_a title-deed or a mortgage_" is a totally different thing from a Credit, since the one always describes and gives a qualified title to _some specific and tangible thing_, while a credit-right is always a claim against _a person_; the Roman law drew this distinction perfectly, a credit-right was a _jus in personam_, while a title-right was a _jus in re_; the common Latin language as spoken and written marked the difference by separate words, a credit-right or true debt was a _Mutuum_, while a title-right or thing loaned was a _Commodatum_; and the Law of our present national banks explicitly recognizes this universal and fundamental distinction, by requiring the banks to loan money _on personal security only_, that is to say, no tangible things whatever, not even real estate, are allowed to be taken as _original_ security for any loan. Banks deal only in true debts,--_mutua_,--and when they keep custody of concrete valuables--_commodata_--for their customers, it is as trustees or bailees and not at all as debtors. Our late Oxford friend was far too well informed in general to contend, that a cheque, for example, is "the right to acquire possession" of any _specific_ property anywhere; the drawer has indeed deposited money with the banker on whom the cheque is drawn, but that money became the banker's money the moment it was deposited and no longer his own; the cheque, accordingly, is a general claim on the banker, and not at all on any special fund in the banker's hands; it follows, therefore, that the excess of the banker's average deposits over his average reserves to secure them, is a new creation of Credit, a new resource of Production, a new Purchasing-power now available to the banker not previously and practically available to anybody, a new Valuable which he proposes to use and does use for the sake of profits accruing, consequently a new Capital. Now let us listen to the objections to this view by a practical banker, J. H. Walker, of Worcester, Mass., in a little book of his on Banking published in 1882: "_A man always borrows something of intrinsic value. What he borrows is not a piece of paper, whatever may be on it, but a farm, a house, a factory, or a part of them; a store, a mine, or goods. No man can borrow or lend anything else. The borrower gets from the lender what puts him in possession of the things he seeks, and it must be some one of these things. So of all money (except coin). It has no value in itself. It adds nothing to the capital of the world. It purports to be and is only a title to property, a convenient device for transferring the ownership of property._" This author is led astray by the worse than useless adjective "intrinsic," having never yet learned that there is only one kind of value in the world of Economics, namely, purchasing-power; he sees men as trees walking through the haze cast over paper-money by John Law in the last century, as if paper-money must be "_based_" on something tangible and specific; he makes a narrow and false assumption that the only objects ever bought or borrowed are corporeal "things," denying that the debts in which alone he deals as a banker are _realities_ as much as any "thing" can be; and it all comes in his case, as in the case of hundreds of others, from a totally inadequate analysis of Valuables into their three separate and virtually independent kinds, namely, Commodities and Services and Promises. Mr. Walker, although he writes a book on purpose to do this, can not explain at all under his view the Deposits and Discounts of his own bank, and would be as dumb as an oyster when confronted with the "Cash Credits" of Scotland. (5) The fifth advantage of the use of Credit, and the last one to be mentioned in this connection, is, that it dispenses with the use and wear of large amounts of expensive Money. It is perfectly certain that Credit answers many of the purposes of Money. Suppose A has bought of B $100 worth of goods, and B has bought of A $125 worth of goods. Three ways are open to close up these transactions. A may pay B and B may pay A _in money_. This would take $225. A may pay B in money, and B may send that back with $25 more. This would take $125. Or A and B may mutually balance their credit-books, and B pay the difference in account. This would take but $25. It is clear then, that, as one or other of these general methods prevails in practice, the quantity of expensive money required to do the business of a country is very different. Just so in international trade. Foreign bills of exchange lessen enormously the quantity of metallic money that would otherwise have to be transported. It is not strange that some thinkers and writers, seeing these unquestionable benefits of Credit even within the peculiar sphere of Money itself, have come, like Herbert Spencer and many more, to think and teach that Credit might answer _all_ the purposes of money. Credit _does_ take the place of money in part. Can it take the place of money entirely? Let us see. We have defined Credit as _a right to demand something of somebody_, and Debt as _an obligation to render something to somebody_; the denominations of Money are certainly needful in order _to measure_ this right or obligation; and how can the denominations of money be established or maintained at all separate from the use of _some_ money itself as a circulating medium? Moreover, great as is the undoubted power of Credit, vast as are these five advantages from its current use, still, each particular piece or form of Credit waits for something beyond itself; it waits for its own _extinction_ in future time; which can only come about in one of three ways, (a) by _set-off_ against another debt with or without a balance, (b) by _renewal_ which creates a new debt and extinguishes the old, (c) by its _payment_ in money; and now how can these extinctions come about without the current use of some money, at least to settle the balances at the clearing-house? Furthermore, there have always been heretofore in all commercial countries longer or shorter periods, called "crises" or "panics," during which there was a popular reluctance to accept in exchange the ordinary instruments of Credit. Money, and much of it, was then found to be indispensable. Indeed the very advantages of Credit itself, which have now been explained at length, are dependent on this, that there be alongside of it to sustain and limit it, _a current and legal measure of Services in metallic form_, in whose denominations Values may be reckoned, in whose coins the balances of Credit may be struck, and whose presence secured everywhere by natural laws alone may enable _fulfilment_ to join hand in hand with _promise_. If ever Credit should try to usurp the whole domain of Money, a tolerable standard of Value or measure of Services would be no longer possible, Credit itself would lose its foothold, and the vast balloon of Promise, sailing for awhile through the blue, the joy of projectors and the wonder of credulous spectators, would of a sudden descend to the earth collapsed and ruined. 4. There are too some disadvantages inhering in Credit. This admitted fact makes no valid argument against the use and extension of it; because there are disadvantages connected with all human devices whatever,--with all means contrived to reach earthly ends--and even a child may discover many of these; some objections lie against everything, and against everybody, and the practical question always is, Which preponderates, the good or the evil? In respect to Credit there can be no doubt, that the good outweighs the evil many fold; still, in accordance with the purpose in this book of both writer and readers to look on both sides of each significant point in Economics, we will now give attention to the chief disadvantages inhering in the nature of Credit. (1) In the first place, when credit is much given by dealers to ordinary retail buyers, the reverse results take place from those but just now characterized as happening under bank credits, namely, capital passes out from the hands of productive operators into hands less able and less willing to use it in further production. Indeed, in most such cases it ceases to be capital, and is expended in immediate gratification. It is much easier for the average man of fair character within the present customs of Society to "get trusted" than to pay "as he goes." Such a man is even called "easy-going." He almost always over-estimates his resources for the future, and under-estimates his obligations at the present. It is always a disadvantage in the long outlook for both parties when such men easily and largely "get trusted." Let us take a sample case: when an industrious artisan or efficient merchant has given credit for six months or a year to dilatory customers, it is so much withdrawn for so long a time from his active capital; and in order to make up his consequent loss of profit to the average and expected rate, there must be an addition to the prices of his wares sold to other parties; and, besides, some bad debts belong to such a system, and there must be additional prices somewhere to compensate for this; and thus the customers who pay promptly bear a part of the burden of the delinquents, who at least do not wholly escape, inasmuch as they ultimately (if they pay at all) pay a price enhanced by their own delay. Thus, if the current and expected profit on his capital be 12%, and the artisan or merchant sells and gets returns four times a year on the average, something less than 3% profit may be charged to each article on the average; while if he only gets returns at the end of the year, at best 12% must be put on everything at the average, and in reality considerably more, because of the bad debts that stick like a burr to that way of doing business. Hence the excellent maxim, "Quick sales and small profits." (2) There is a greater inherent _uncertainty_ in values connected with credits than in those connected with commodities, or than with those connected with personal services. We have already seen repeatedly that Value has its sphere of operations in the Past, in the Present, and in the Future. There is some uncertainty connected with what _has been done_ in reference to value, since the market may prove to have been miscalculated, and the commodities to have become unsuitable; there is perhaps more uncertainty connected with what _is now being done_ in reference to value, because the services bargained and being paid for may prove to be less steady and skilful than was supposed; but in the very nature of the case there is still greater uncertainty connected with what _is to be done_ in relation to its value, because in the first two cases some at least of the conditions are already fixed, while in the last one all of them are at least open to hazard. There is sufficient certainty in all three of the grand divisions of Time to justify, and probably to reward, operations in each in reference to value under the peculiar limitations and conditions of each, but credits are naturally more sensitive in the law of their value than either commodities or services. (3) Largely in consequence of what has just been expressed under the last head, credit-exchanges are more likely than commodities-exchanges or than services-exchanges to become unduly multiplied and consequently to fail of ultimate realization. The majority of men are sanguine in relation to the future. Unless they are in actual contact with their limitations, they are apt to belittle the rigidity and inevitableness of such limitations. As the outcome of this, promises are apt to overpass the powers of fulfilment. No more bales of cotton of any one year's crop can be actually delivered to buyers, than have been actually grown and marketed; the services of no more men in any capacity can be contracted for and rendered, than there are men able and willing to work; here are impassable limits; but the field of the future is buoyant with possibilities; and hence credits, whose sphere is the future, though legitimate and potent under the proper conditions, lie in a field whose limits are invisible, and within which _Hope_ is ever a tempter to overdoing. Is speculation proper? Certainly; if by the word "speculation" is meant the buying of anything with an expectation based on rational probabilities of being able to sell it again under different conditions at a higher price. Speculation in this sense is both proper and beneficial to the immediate parties to it, and to the general public as well, because the values of things thus bought and sold neither fall so low nor rise so high as they otherwise would do, which is a public gain. Speculators as a rule buy on a falling market, _which tends to lift it_, and sell on a rising market, _which tends to lower it_. It is better for all concerned, that the necessaries and conveniencies of life should bear as steady a market as is possible in the nature of things, summer and winter, year in and year out; and the ports of every nation should be open with the slightest possible hindrance in the way of tax to the corresponding necessaries and conveniencies from abroad, whenever combinations and "corners" attempt to lift their prices beyond the level determined by a natural and free Supply in contact with the current Demand. Credits occupy the field of Probabilities; that is to say, probabilities seeming to be such to men of sharp insight and cultivated forecast. When such men _on such grounds_ buy and sell "futures" in cotton or corn; when they buy and sell stocks either "short" or "long"; when they seem to themselves to perceive a sound reason for lurching over from the "bulls" to the "bears," or _vice versa_; and when they really think that what they are wont to deal in has touched bottom in price, and they buy now in view of a rise, Economics has nothing to say in blame of any or all of these operations, for they are the same in substance and motive as all other buying and selling; but nevertheless, it has this to say, that all these operations in credit-futures lie adjoining to and in dangerous proximity with another field, for operations within which it has nothing _but_ blame to utter. Gambling occupies the field of Chance. There is a great difference between chances and probabilities. Political Economy has no trouble in drawing a fast and hard line between them. But practically the operators in credit-futures experience an immense difficulty in keeping within this line of rational probabilities. The coolest heads are apt to become heated, and to lose sight of distinctions, in the close air of the Stock Exchange and the offices circumjacent. Some operators openly confess they know nothing which way the index of reason points, by buying "straddles," as they are significantly called. A friend and old-time pupil, who has for years been accustomed to these excitements in New York, said recently to the writer,--"_The Stock Exchange is a great gambling hell, and that's all there is of it!_" In buying and selling of all kinds, both sides gain: in gambling of all kinds, what one side gains the other side loses: therefore, under a sound money, healthful public opinion, and good law, gambling never can become formidable. In every lottery scheme, no matter how honestly managed, the sum of the _prices_ of the tickets is greater than the sum of the _prizes_ offered, otherwise nothing would be left for the profits of the managers; therefore, he would be a very foolish man, who should buy all the tickets of a given lottery with the certainty of drawing all the prizes; and _he_ is a still more foolish man, who should take his _chance_ of drawing all the prizes by buying two or ten tickets. (4) Another and a principal Disadvantage of Credit is seen in its usual action on _prices_ through increased Demand, and its consequent tendency to bring about Commercial Crises. Any man's whole purchasing-power is made up of three items: first, the property in his possession; secondly, the values that are owed to him; and thirdly, his credit. He can buy services of the three kinds with these three valuables; and the sum of his power to buy is exactly measured by the aggregate of these three valuables under his control. But while the first two, his property and debts due, are limited and ascertainable, the third (his credit) is indefinite and undeterminable beforehand. Being based upon _confidence_, which is itself sensitive and variable, a man's credit at one time may be vastly greater than at another, compared with his other two means of purchase; and if he have the reputation of doing a safe and regular business, and is favored by circumstances, he will find himself able sometimes to buy on credit to an extent out of all expected proportion to his other capital. When, therefore, credit is offered and received for commodities, it has the same influence upon their prices as when money is offered and received for them. It follows, consequently, that there is likely to be a general rise of prices whenever there is an extension of credit for the purpose of purchasing; indeed, when money only is used to buy with, there can not be a _general_ rise of prices, because while more money may be spent on some things, and they rise in price, there would be less money for other things, and _they_ would rather fall in price; but when credit is used freely in addition, and increased purchases go on in all departments at once, there is apt to be a rise of prices as to all commodities and a universal spirit of speculation. At such times, and while prices are still rising, men _seem_ to be making great gains; everybody wishes to extend his operations by means of all his money and all his credit; and forms of indebtedness are multiplied on every hand. By and by it begins to be perceived in certain quarters that the matter has been overdone; speculative purchases cease; banks become particular whose paper they discount; men find it difficult to sell their debts due in order to provide for their debts owed; they fall back on the sale of their commodities, but when holders are anxious to sell, prices always fall; a panic now sets in, more irrational, if possible, than the previous overconfidence; their inflated credits and commodities collapse in the hands of their holders; sales at great sacrifices are inadequate to meet the mass of maturing debts contracted when confidence was high; men fail, and must fail; the banks cannot help them, or think they cannot; and so wide-spread commercial disaster comes in. Such commercial crises swept over the United States in 1837, 1857, and 1873; and will doubtless recur in the time to come. They always arise from disordered credits, and though not necessarily connected with credit-money, are much more likely to come in connection with that. The more strong and conservative the Banks maintain their ordinary condition, the more powerfully can they operate to prevent or abate a panic. They ought always to be on the shore and never in the stream. From the very nature of banks and of the motives that create and operate them, they are apt to sell for a profit in ordinary times about all of the credit they safely can; unless, then, they foresee a stringency some time ahead, and curtail their loans, and otherwise keep their position strong in reserves and deposits, they will be powerless to help even their most deserving customers when the panic sets in; even then by a special association with other banks in the same city for reciprocal support during a crisis, as was happily brought about in New York some years ago, something may be done for their common constituency and good customers to help them out of trouble by discounts continued to them; especially as it is not money so much that is needed to allay a panic, nor even credit actually given, as it is a general knowledge that abundant credit can and will be given either by some pre-eminent bank, like the Bank of England in London, or by an association of banks for that special purpose, like the agreement just referred to as entered into temporarily by the banks of New York city. As a panic becomes imminent anywhere, some Bank or banks there ought to be in a position to extend their discounts freely, at a high rate of interest indeed, so as to discriminate between customers urgent for and deserving of discounts, and another class whose need of accommodation is not so sore, and a third class who are sure to fail if the Panic stalks forward. A permission given of the Government to the Bank of England to overpass under these circumstances the Discount-limits laid down by the Bank Act of 1844, has on three several occasions acted like a charm to still the ragings of a commercial storm. On each of these occasions, 1847, 1857, and 1866, the Bank was forbidden by the Privy Council to discount for less than 10%. As the inclined plane of rising prices is slowly ascended before a Crisis, so the fall of general prices afterwards seems to be rather gradual also till the lowest point of them is reached, from which another ascent is apt to commence. The following table taken from the _New York Public_ of the first week of November, 1881, is instructive on both these points. Taking the prices in 1860 of 43 articles of prime necessity, which constituted then and afterwards about 3/4 of the commerce of the country, as the normal standard or 100, the table gives the comparative gold prices of the same for four years previous to 1873 and for seven years subsequent, as follows:-- 1869 116 1870 118 1871 120 1872 122 1873 113 1874 115 1875 107 1876 100 1878 81 1879 98 1880 103 1881 111 (5) A penultimate Disadvantage of Credit may be noted in the facility which it offers for contracting great national Debts. There are certain aspects, under which a Nation may be properly regarded as a moral person, and as such person may pledge the public faith for the present and the future, becoming a debtor to its own people or to foreigners, and thus a public debt may be made a sort of mortgage on the national property and income. Now, it cannot be fairly denied, that incidental advantages may spring up in connection with such a national debt: for example, the bonds, which are its evidences, may open up to the people a convenient form of investment for presently inactive capital, and for trust funds of all kinds; there can be little doubt that certain classes of persons holding these national obligations are won thereby to a stronger patriotism and become better friends to stability in government, although this consideration applies mainly to new governments and to those temporarily endangered; both England and the United States now make a portion of their public debt the basis of a national system of Banking, but it is perhaps questionable whether this can be justly put among the incidental benefits of the Debts; and again "a moderate debt adds to the credit of a Nation, and its ability to raise money in an emergency, for bankers and capitalists are more ready to take such securities as they are in the habit of dealing in" (Sidney Homer). On the other hand, the burdens of a National Debt are very apparent: for example, the annual _interest_ charge to the Union at the close of our late civil war was $150,000,000, which gradually declined by the lowering of the interest-rate and by the paying off of principal to $61,368,912 for the fiscal year ending June 30, 1881; between March, 1869, and August, 1873, the United States paid $378,015,065 on the principal of its public debt; the collection of the Internal Revenue alone of the national government cost for the fiscal year 1867, $7,712,089; and in each of the two years, 1870 and 1881, a little over $101,500,000 was paid out to reduce the principal of the Debt. All those vast sums came out of the industry and income of individuals; and taxation to any degree as all this implies is a mighty disturbance to industry, and gives rise to an army of officials who eat out a considerable percentage of all they collect. Moreover, the various expedients of taxation, which are always practically unequal in their operation, are apt to give rise to irritation and political agitation, and even sometimes to threats of repudiation, especially when the occasion has gone by under which the debt was contracted, and another generation is called upon to pay off a debt it had no agency in creating. Here the vexed question arises, how far has one generation _the right_ to throw upon succeeding ones the burdens of a National Debt? The true answer to this question is, _it has a very limited right indeed_. The opposite doctrine implies tacitly when not openly, that the succeeding generations will have no occasion for extraordinary expenses of their own, and, therefore, may rightfully be made to contribute to the extraordinary expenditures of this generation. But it is pure assumption to take for granted, that the next generations will not have, of some kind or other, as much occasion for an extraordinary effort in the way of defence or of improvement as the present generation has had. It is a common but harmful illusion to estimate what has now to be done as of much more importance than what will have to be done. Therefore, to throw the present burden forward on another generation of men, who are likely to have to make their own special exertion, just as great and just as imperatively called for, is a procedure unwarranted by past experience. The view that has long prevailed in practice, that a great War-debt, for example, might be easily and justly cast upon posterity, has again and again given rise to needless and expensive wars; _those_ have been called upon to pay the piper, who perceived the utter inutility of the expenditure; and thus bitterness has been added to burden. Besides, the men to fight the battles, and the capital by which to feed, clothe, and furnish them the munitions of war, _must come from that generation_; and there is always great injustice in the manipulations of a great debt ostensibly incurred to obtain this capital, and the debt itself is usually in large part rather a memorial of the war than of the means by which its expenses were actually defrayed. The generation of American citizens not yet wholly passed off the stage was called on in the Providence of God to suppress a Civil War of enormous proportions, and to eradicate a social institution that was thoroughly bad; the expense of doing this was many fold enhanced by timorous counsels in the field, by class legislation in Congress, and by wretched financiering in the Cabinet; but the Debt, vast as it was, and needlessly incurred as a large portion of it was, has already in good part been paid off and must be entirely paid off by the generation that incurred it. That this great task may be thus completed, will require (1) an economical administration of the national Government; (2) an avoidance of intervention in the affairs of our Neighbors, and of entangling alliances with Foreigners; (3) a free Commercial System, under which the taxes shall be adjusted only towards the most productive revenue; and (4) a constant and onerous home Taxation. (6) The final Disadvantage of Credit is this, that it is apt to confuse the minds of men as to its own nature, from its apparent resemblance to something else, which is at bottom wholly unlike it. The people of the United States have suffered greatly from this confusion, and are likely to suffer from it still more in the time to come, both in their property and progress at home and in their good name abroad; and it becomes all good citizens, and especially all those called upon to pronounce on the Law of the Land, to know thoroughly the radical difference between a _Credit_ and a _Quittance_, and so to escape the contagious confusion that has entered and stirred up the popular, and even the judicial, mind of this country. All through the present chapter has been insisted on and illustrated the point, perhaps to the weariness of the reader, that Credit is always essentially the _Promise_ of one person to another, and that whatever is thus _Promised_ is necessarily and fundamentally different from the Promise itself. To confound those two things as if they were or could be made one and the same thing, is in thought illogical and in practice execrable. And yet it must be allowed, that there is somewhat in the nature of Credit, that makes this confusion plausible, or else it never would prevail; and also that there is something more still to make it plausible in the nature of Money, which last point can only be cleared up in the next following chapter under that title. Mr. E. G. Spaulding of Buffalo, in his copious and excellent History of the Legal Tender Act, "all of which he saw and part of which he was," as the chairman of the subcommittee of the Ways and Means at the time the Act was passed, demonstrates the extreme reluctance of everybody concerned to give a forced circulation, that is, a compulsory legal-tender quality, to the first batch of Treasury Notes to the amount of $150,000,000 in February, 1862. We have already noted in another place in this chapter, that two successive batches of similar Notes, each to the same amount as the first, were issued within less than a year. These Notes then and since called Greenbacks, bore at the time four essential features: first, they were both in terms and in reality _national Promises_ to pay to the bearer gold dollars of the then and present standard of weight and fineness, because there is no other possible meaning to the words "THE UNITED STATES WILL PAY TO THE BEARER FIVE DOLLARS"; second, in addition to their being a forced loan from the people to the amount of notes authorized, they were given a _forced circulation_ as money by means of the clause, "_and shall also be lawful money and a legal tender in payment of all debts public and private within the United States except duties on imports and interest on the national bonds_," which clause still recognizes gold dollars as the only universal and standard money; third, the notes were made _fundable_ in sums of fifty dollars, "or some multiple of fifty dollars," in six-per-centum gold bearing bonds of the United States, then called 5-20's, again in this clause recognizing the radical difference between the legal-tender paper promises as money and the gold dollars promised in them, in which gold money the interest and principal of the bonded debt must still be paid; and fourth, these notes were publicly known and acknowledged by the Issuer and the receivers to be presently _irredeemable_, since the Government did not have, and did not pretend to have, any coin with which to redeem them, and everybody knew that they were made a legal-tender _because_ they were irredeemable. These prompt recognitions of the impassable gulf between a Promise and what is Promised, were confirmed by all that happened afterwards. The notes, notwithstanding they were legal tender and all bonds of the United States could at first be bought with them at par, almost immediately began to droop as compared with gold. The daily quotations showed a pretty steady decline for two years. On Jan. 15, '64, gold in greenbacks was 100:155; April 15, 100:178; June 15, 100:197; June 29, 100:250, that is, 40 cents to the dollar; and July 11, 100:285, or 35 cents to the dollar in gold, their lowest point. From this depth they slowly rose with many fluctuations back and forth from many causes for 14 years. Jan. 1, 1879, they became redeemable in gold, and have so continued till the present time. When the Civil War was all over, and these startling vicissitudes of the paper money were measurably forgotten; though no prominent man, when they were passed, thought the Legal-Tender Acts constitutional; the paper money began to be popular; the distinction between a promise and its fulfilment began to fade out of the minds of the people; there had always been bank bills circulating as money in the country; these had been called "dollars" equally with the coin; and in December, 1869, a test case, Hepburn _versus_ Griswold, was decided by the Supreme Court on the question, whether Congress had the constitutional authority to make anything but gold and silver lawful money in satisfaction of _contracts entered into before the first legal-tender Act was passed_. The question, Can Congress make such notes a legal tender for contracts made _after_ the passage of the Act? was not involved in this case; but it was very clear from the Opinion of the court delivered by Chief Justice Chase, that the majority of the justices regarded the Act as being unconstitutional in its application to contracts made _after_ as well as _before_ the Act was passed. Upon the special question before the Court, the justices were divided in opinion; five, including the Chief Justice, agreed that the Act was invalid so far as it made the notes a legal tender on _contracts executed prior to its enactment_; and the three other judges were of the opinion that it was valid. Of course, the Decision of the Court was rendered by a majority of two, that the Act was unconstitutional. Chase, Nelson, Grier, Clifford, and Field constituted the majority; Miller, Swayne, and Davis, the minority. Salmon P. Chase was one of the greatest men of the great period of the Civil War. He was Secretary of the Treasury at the time the greenbacks were issued, and they were issued at his instance and advice, but he was opposed to the clause that made the notes a legal tender. He never expressed the opinion that the Legal-Tender Acts were constitutional, nor did he expect that the notes, of which these authorized the issue, would ever become a permanent national money. This is evident from the fact that the notes were made _fundable_ at his instance, not so much with the view of keeping up the value of the notes by giving them a present market in bonds, as with the view that they would help the sale of the bonds and would be absorbed by them as soon as the price of the bonds was above par in greenbacks. Afterwards Mr. Chase thought that this _fundability_ of the notes into bonds would so far take up the notes as to stand in the way of the negotiation of further necessary loans to the Government, and at his instance this provision of the law was repealed. Consequently, there was nothing inconsistent between his position as Secretary and his later position as Chief Justice. He was undoubtedly right in both of these positions. The making the greenbacks legal tender did not probably add one particle to their purchasing-power, but rather the reverse, because that feature implied a doubt on the part of Congress itself as to the validity and currency of such national promises-to-pay. That he was also right in his judicial opinion and decision, however subsequently overruled in his own Court, may be safely left to the inevitable future appeal to common sense and to the common principles of constitutional interpretation. This judgment in Hepburn _versus_ Griswold was favorably received by the country at large, as being just in the line of the great decisions of Chief Justice Marshall, and as being exactly in accordance with Amendment X of the Constitution, namely, "THE POWERS NOT DELEGATED TO THE UNITED STATES BY THE CONSTITUTION, NOR PROHIBITED BY IT TO THE STATES, ARE RESERVED TO THE STATES RESPECTIVELY, OR TO THE PEOPLE." The State of Massachusetts particularly, which has always maintained and still maintains a strong doctrine of State Rights as over against, though in harmony with, the Rights of the United States under the Constitution, applauded this judgment as sound in law and politics, and as righteous altogether. But the then administration of General Grant, inexperienced alike in law and politics, and linked in entangling alliances with the great corporations of the country, received the Decision with marked dissatisfaction; and it was especially offensive to the huge railroad companies, whose bonds had been executed prior to Feb. 25, 1862, inasmuch as it made the principal and interest of these bonds payable in coin, which they had hoped to pay off in the depreciated greenbacks, made legal tender for all debts. The Administration lost no time in trying to bring about by fair means or foul, a reversal of this unwelcome decision. E. R. Hoar of Massachusetts, at that time attorney-general in Grant's Cabinet, was the principal agent in accomplishing this end by means so discreditable that he lost in consequence his popularity in Massachusetts and all chance of further political preferment. The means chosen and put into effect was the appointment by the President of two new judges, Strong and Bradley, the first to take the place of Grier, resigned, and the second appointed under a law increasing the number of judges to nine, whose opinions on the point at issue were known beforehand, and who were selected to serve on that very account. "_It was no secret, indeed it was a matter of public notoriety, that these justices were appointed in order that the decision of 1869 might be reversed. Their opinions in regard to the constitutionality of the Legal-Tender Acts had been clearly and publicly expressed. It was therefore pretty well known what the decision would be when the question was again presented._" (Hugh McCulloch.) The second Legal-Tender case, accordingly, that of Knox _versus_ Lee, decided in December, 1870, reversed the judgment of a year before, _no new points therefor being raised either by the new judges or by counsel in the new trial_, the Chief Justice and his three former associates still adhering to their original opinions. It was then five judges to four, the special question being, Is it constitutional to make promises-to-pay a legal tender on contracts executed before the promises were issued? The judicial answer was in this case, Yes; provided Congress regarded such action as a necessary means of preserving the Government in time of War, or any other period of extraordinary emergency. That is to say, _bona fide_ creditors were constitutionally bound to receive depreciated notes as legal tender in satisfaction of contracts entered into when no notes were in existence; to receive on contracts specifically calling for "_dollars_" the depreciated notes of the Government merely promising to pay "_dollars_," but on which the "_dollars_" could not be obtained! What is that, but the monstrous incongruity that _a promise_ is the same thing legally as its _fulfilment_? What is that but judicial blindness as to the _nature_ of Credit? What is it but the old confusion between _names_ and _things_? What is it, finally, but the dazed and hazy vision, pardonable perhaps in the popular mind but half-opened to radical distinctions, but unpardonable in learned men professing to lay down the law in a civilized country? It is scarcely needful to add, that the Supreme Court of the United States suffered in the judgment of good citizens by that transaction; that the best legal and financial opinion of the country yielded little respect to a decision _thus secured_; and that intelligent people do not believe that constitutional law _can_ sanction what contravenes at once common sense and common morality. Judge Field (and his memory the country will not willingly let die), one of the majority in the first decision, and writing the opinion of the dissenting minority in the second, used this strong but just language, "_It follows, then, logically, from the doctrine advanced by the majority of the Court as to the power of Congress over the subject of legal tender, that Congress may borrow gold coin upon a pledge to repay gold at the maturity of its obligations, and yet in direct disregard of its pledge, in open violation of faith, may compel the lender to take, in place of the gold stipulated, its own promises; and that legislation of this character would not be in violation of the Constitution, but in harmony with its letter and spirit. What is this but declaring that repudiation by the Government of the United States of its solemn obligations would be Constitutional?_" FOOTNOTES: [7] John Jay Knox's United States Notes. [8] Practical Political Economy, 1877, p. 452. CHAPTER V. MONEY. The subject of Money presents few difficulties, or rather none of any depth, to one who has thoroughly mastered the subject of Value. To all others the difficulties are insuperable. Essay after essay and volume after volume has been written in this country upon Money, by men who would have become good economists and good monetaries, if they had only begun their inquiries at the right place and followed them in the right direction. As we saw in the last chapter that it is impossible for anybody to understand the subject of Credit without first comprehending the matter of Value, so we shall see in this chapter that in the order of Nature Value precedes Money, and that the latter can only be learned in the light of the former. The logical reason for this in general is, that Money itself is always a Valuable, and comes to its function as money only through a comparison of itself with other Valuables. The thin difficulties that confront the student of Money, who has reached the topic along the proper highway cast up for economical inquiries, arise apparently from two sources; and we will begin our present discussion by first looking at these in their order. In the first place, Money is the only Valuable that may belong to two out of the three possible categories into which Valuables may be scientifically thrown. All Valuables are either Commodities, or Services, or Credits. These categories never change places. Once a Commodity always a commodity, so long as value can be predicate of it; a personal Service can never take on any other valuable form; and a Credit is ever a credit, and nothing else, until it is annihilated by Fulfilment. Now Money is the only Valuable that ever appears in two of these forms. The same Dollar indeed cannot be both a Commodity and a Credit; but some Dollars are a Commodity cut out from gold and silver, and some other Dollars (so-called) are a Credit issued by Government or parties responsible to government; while Money as a general term properly enough covers both kinds of Dollars, the Commodity-Dollar and the Credit-Dollar. In other words, Money is of two kinds, and only two kinds, either a Piece of valuable metal stamped as to weight and fineness by the image and inscription of Cæsar,--a Commodity; or a Promise to pay to somebody some of these pieces,--a Credit. This unique peculiarity of Money, by which, always a Valuable, it may appear and does appear in two out of three possible predicaments of Valuables, makes a little difficulty at the outset of its discussion, and requires continued care in formulating its scientific propositions. In the second place, a more considerable difficulty, and yet a slight one still, is found in the fact that the choices and the legislations of men have more to do in shaping the propositions of Money than in most other economical propositions. It is true, that Nature and men coöperate in the determination of every case of Value whatsoever; while there is a difference in the cases, though perhaps not a distinction, in respect to the fixedness and universality of the natural laws involved, in contrariety to the purely human impulses concerned. The Providential elements in Economics, both the social and the physical, are of course relatively fixed and unchangeable, otherwise Science could not grapple with and classify them; and so also are those principles of Human Nature related to exchanges, which may be said to be _universal_ in their character,--such as, for example, the preference to receive a larger rather than a less return-service, and to render a smaller rather than a larger effort; and at the same time there are other principles of human nature related to exchanges much more _variable_ in their character than these, such, for instance, as the nation's choice of the kind of Money it will use, or the kind of Taxation it will impose. It certainly follows from this, that some Economical laws must be more _general_ than others, owing to a less variation in the human impulses concerned in them: it follows, for example, that the law of landed rents, or the law of the approach of the price of raw materials to that of the finished products, is more universal in its terms of generalization than most of the propositions of Money and Taxation can be. It seems like a paradox, that those parts of Economics in which the human elements of variable choice may predominate over the relatively fixed laws of nature and of mind, should be just the parts hardest for men to catch clearly and hold firmly; because, we naturally think, that difficulty and mystery are rather to be found in those departments in which an Infinite Mind has been at work upon an infinite plan, and that there is no such profundity in the works of men; but after all, even those natural laws like Gravitation, which are clear and universal as laws, if they be such as the devices of men have to do with, such as may be modified and in a certain sense controlled by human actions, become from that very circumstance liable to some difficulty and perhaps to some mystery. Now all the truths of Money, and as we shall see in the final chapter all the truths of Taxation also, belong to this class of less general generalizations; still, it is scarcely less than foolish to say, that Money is such an elusive and ideal agent that nobody can understand it. That is the language of indolence and lack of penetration. Money is wholly a matter of man's device, though it comes into constant contact with something greater and more fixed than itself; it was invented, just as any other instrument is invented, to accomplish a certain economical purpose; and it would be strange indeed if men by taking pains could not perfectly comprehend what men themselves have wholly devised. We hope, accordingly, in the following paragraphs to clear up completely to all intelligent readers the whole doctrine of Money. The key to unlock all the superficial difficulties (and there are no others) is this: Money is always a Valuable before it becomes money, and continues a valuable independently of the fact that it _is_ money; and, it is always one or other of two kinds, either itself a Commodity or a Promise to pay a commodity. In this chapter, we will not begin with definitions and justify them afterwards, but will come up to them step by step, and, as it were, justify them beforehand. 1. Economical Exchanges may begin, be profitable to both parties, and go forward to a certain extent, without the use of any money at all. As a matter of fact and probably for a long time, while the Civilizations were gathering their inchoate forces for a further progress, men exchanged one Service directly for another without the intervention of any medium. This form of trade is called Barter. King Hiram of Tyre furnished to King Solomon of Judea a certain quantity of cedars from Mt. Lebanon for the building of the new Temple at Jerusalem, and Solomon in return furnished to the Tyrians a certain quantity of wheat and oil, Judea being a fertile agricultural country with no forests, and Tyre a wooded country with no farms. This may well serve us as an instance of Barter, although Money had been in current use in those regions a thousand years before, as is seen in the purchase by Abraham of the cave and field of Machpelah, for which he weighed out "_four hundred shekels of silver, current money with the merchants_." It is obvious, however, that while Barter is a good deal better than no exchanges at all, there are inherent and immense difficulties in that form of trade. (a) Under Barter trade is extremely limited in its _personnel_. Only those parties can engage in it, each of whom is in position to render to the other just such a Service as the other is in direct and immediate need of, and each of whom also wants another Service in kind and quantity exactly what the second man has to render. It is not enough under these conditions, that a man should have some Service to sell, but he must also find some other man, who not only wants that specific service but who also has some service to render in return just such as the first man wants. If A has wheat which he wishes to exchange for a coat, he must first find a party desiring wheat and also having a coat to sell, and moreover who wants just as much wheat as will pay for a coat, no more and no less; if he wants more, he may have nothing to render for the excess which A is willing to accept; if less, A may have nothing besides wheat with which to help pay for the coat. Even in the simpler states of Society the inconveniences of thus hunting up a specific market for each specific service are very great, and in more advanced states of civilization would become intolerable, if it were possible (as it is not) for Society to become advanced under such conditions. (b) Barter presents insuperable obstacles to trade in point of _place_. While men still exchanged in kind, as it is called, and knew no other mode, the purchasing-power of any Service was necessarily confined to that locality, and would not be parted with except in view of a return service actually there present in the same place. There could be no commercial contact without a local contact. The ultimate parties to every exchange must come together face to face. There could be no middle-men or distributors. The market was circumscribed to the hamlet. (c) Buying and selling under the scheme of Barter is also wretchedly limited in point of _time_. The fruit-dealer, for example, must dispose of his product quickly, or it perishes on his hands. So of many other commodities. If they are to be sold at all, they must be sold quick. The ultimate buyer must be on hand in time. As the result of these three concomitants of Barter, ten thousand things that are now bought and sold to profit never came to a market or thought of a market, exchanges were so limited in time and place and variety, human associations were so hampered, and the development of all peculiar talents so impeded, that one of the initial steps in the progress of all Civilization has been to hit upon some expedient to lessen these intrinsic difficulties, and so to facilitate Exchanges. 2. The Invention of Money was nothing in the world but the tentative selection by certain people in a certain locality of some Commodity then and there _valuable_, that is, capable of buying _some_ things then and there, and gradually giving to that commodity by general consent the capacity of buying _all_ things then and there salable. The commodity thus slowly becoming money, whatever it was, had and must have had a _limited_ purchasing-power to start with, because no instance to the contrary has ever been shown, and still more because that peculiar comparison between _two_ things that lies at the bottom in each single case of Value is exactly the same kind of comparison that holds between money and the _many_ things which money purchases; given a _valuable_ in common use as a starting-point, and the transition is easy and natural to a _generalized_ valuable, that is, to a recognized money; the relation of mutual purchase between the commodity and _some_ other things was a common fact to begin with, the making it money was merely the common consent that thereafter it should have a general purchasing-power within the circuit; so that as a simple result, whenever anybody had anything to exchange, he might first exchange it for this selected product, which was valuable before but is now generally valuable, and then with this money-product in hand he could buy whatever he might want at any time or place within the circuit. It is impossible from the very nature of Value, impossible from that comparison of two distinct Services, that precedes every Exchange, as well under Money as under Barter, that anything except a valuable anterior to and independent of its becoming money, could ever have become money at all. Money makes no alteration in any law of Value, but only substitutes for convenience' sake in every transaction in which it plays a part, a general for a specific purchasing-power; a book, for example, has a specific purchasing-power, since there is somebody who wants it, and is willing to give a sum of money for it; and the owner of the book by the sale of it parts with a product which has only the power to purchase something from a few persons, and receives a product in return which has the power to purchase something from all persons; it is not true to say that the money is worth more than the book, because they are just worth each other, as is demonstrated by the sale; but it _is_ true to say that the seller of the book has substituted in the place of a limited purchasing-power, of which he was proprietor, a general purchasing-power, of which he has now become proprietor; that is, that the command of the money, which has no larger value than the book had, does carry along with it a superior command over purchasable articles generally. In one word, Value in the form of money is in a more available shape for general buying and selling than value in any other form. This is the exact and ultimate expression for all the truth there is in the common vague remark, namely, that Money is something different from all other Valuables; it _is_ different from them in just one respect, namely, while they have the power of buying some things from some persons, it has the power derived from the _consensus_ of Society to buy all sorts of things from all sorts of persons. This simple change or substitution, which seems in itself so little and easy and natural, has changed in its ever-enlarging results the face of the world! It makes the valuable now selected to be money seem to the minds of men to be a very different thing from what it was before, although the change in itself is slight indeed. It removes most of the inconveniences of Barter as by a stroke of the hand. So soon as a commodity selected to become money by one people comes to be acceptable as such to all other peoples, as is the case with gold, the advantages of its use are vastly multiplied to all. Experience has shown many times over, and reflection will explain to any one, how that there is no other machine that has economized labor like money; no other instrument that plays so deep and broad a part in Production; no invention whatever, unless it be the invention of letters, which has contributed more to the civilization of mankind. Money makes vast distances relatively indifferent; for it is sufficient to constitute a market for any valuable that it is practically wanted anywhere on the round globe, the middle-man paying the seller for it in money transports it thither, and receives back his investment with a profit from the ultimate buyer. So, also, money generalizes any purchasing-power in point of time. The dealer, exchanging his perishable products for money, may keep its power of purchase locked in this form as long as he lists, putting an interval at his own pleasure between selling and buying, and with this generalized power in his pocket he may buy when he will and what he will and where he will. Money, too, makes any purchasing-power portable, divisible, and loanable. A man may carry the value of his farm in his purse, and may divide it up for a thousand different purchases, and especially is able to loan it in this form in order to receive it back again with interest at a future day. 3. It is important to notice in the next place, that, whatever made the commodity selected as money originally desirable and valuable, it has now become desirable and valuable for other and wider reasons. The tobacco of Virginia, for example, in the early days of that Colony, became valuable at first on account of the demand for it as a narcotic both there and in England; but as soon as it was made a legal money in the Colony by the general consent already described, its value depended in part upon another set of causes. Of course Demand and Supply still controlled its value just as before, only certain parties who had not desired it before as a mere _commodity_ thereafter desired it as a current _money_. Its convenience and necessity as money widened the circle of those parties willing to receive it and glad to render a return for it. It is true, that many now received it only because they could pay it out again to buy something else with; but that made no difference so far as Value is concerned; it was valuable before under a certain limited demand, and continued valuable under an additional and broader demand; we cannot certainly say, that it became _more_ valuable under this new and wider demand, because we do not know how the then combined demand affected the Supply. We may probably say, that the value became _steadier_ if not _larger_, under the double demand than under the previous single one; and the vital point to mark and remember is, that the _value of money_, previously valuable as a commodity only, is still maintained under the law of Demand and Supply, just as all other values are, the only peculiarity being this, namely, as a generalized valuable and consequently a potent social agent money is in demand by everybody who has anything else to sell. It follows from this in necessary sequence, that Money as such, whatever may have been the ground of its original value as a commodity, _is always received as money in order to be parted with_. It is not bought for its own sake to be used and enjoyed, as most other things are, but is only bought to be sold again. Men will sell everything to buy it, with the sole intent to sell it again to buy something else; and the odd thing about it is, that everybody buys it to sell again, not at all as the speculator buys grain to sell it again at a higher price by the bushel or centner, but, the money remaining constant in their minds, they sell for it something they care less about in order to buy with it something they care more about. Money, therefore, becomes a _medium_ in men's exchanges. The word "medium" in this proposition is to be taken in its etymological and strict sense, as something that comes between two extremes and serves also to relate them to each other. This is not the ultimate characteristic of Money, as we shall see, nor can a final definition be founded here, but it is a good step towards ultimates to see that money is exchanged for other things as a means and not as an end, that it is a great help in exchanging all other valuables but is never exchanged for itself in an ultimate transaction. Small boys, indeed, sometimes swop cents; but men, the miser excepted, who is under a deplorable fallacy of the senses, use and estimate money mainly as the _medium_ that facilitates the real exchanges of Society. What is actually and ultimately exchanged is the wheat, the cloth, the lumber, the furniture, the commercial service of every kind, and Money is but the instrument making those exchanges easy, which might perhaps go on in part without it, though with difficulty and loss. In short, money is somewhat like a railroad ticket. Transportation to a given place is what is really bought when one pays for a railroad ticket. The proof of the purchase is the bit of paper exhibited. That comes in as a _medium_ between the traveller and the railroad company; and while it facilitates the real exchange, it also partly disguises it. This comparison holds good in the main feature, but in two respects the resemblance fails: Money is not a specific ticket for a single purpose, as the pasteboard is, but is a general ticket (so far as it goes), for all purposes of purchase; and secondly, Money really stands as a value in its own right (so far as any single thing can so stand) at the same time it is serving as a _medium_, while the railroad ticket does not. Still, we are all desirous to get money, not for the sake of the money itself, but for the sake of those things which the money will buy. We part with money freely and constantly for those things which we care more about. What we exactly care for is what our money will buy, is the conscious command over all services and commodities which the possession of money insures to us. If we could give our own commodity or service or claim, whatever it may be, and receive directly in return the claim or commodity or service which we want, whatever that might be, there would be no need of money at all; but this is always inconvenient, and generally impossible; and, therefore, we introduce a middle term, and money is found to be a good mean to help exchange the two extremes. 4. We are now getting on towards a just conception and a true definition of Money, though two or three more points must still be noted as preparatory to that consummation. As a result of the fact already reached, that money serves as a _medium_ in men's exchanges, it follows of course that the power of money as such a medium is multiplied by what has been called _rapidity of circulation_, that is, a brisker use of the volume already in circulation will reach the same end as the increase of its volume. As in mechanics, so in money, the whole power is the product of mass and velocity. Money also is like any other tool, the more constant its use the more profitable its agency. The quick movement of a small mass, accordingly, is better than the torpid movement of a large mass, both in what it saves of expense, and in what it presupposes of the general conditions of exchange. The value of the money-volume of any country is a small fraction of the aggregate value of those products which the money helps directly to exchange; and a very small fraction indeed of the aggregate value of all the products which it helps indirectly to exchange through Credit by means of its _denominations_. We shall see better a little farther on, that Money works not only as a medium direct, itself exchanged against other Services, but also as furnishing those denominations of Value, like the _dollar_, which are always used in bargaining; and also used in all cases of Credit, in which settlement is not made by money but by offsetting one piece of indebtedness against another, and these denominations can arise only from the use of money as a direct medium. Therefore, we may say that the hub and the spokes and the rim of the wheel of exchange consist of personal services and commercial credits and all material commodities except money, while, to borrow the famous comparison of Hume, "Money is but the grease which makes the wheel turn easier." It would be a vast mistake to suppose, as some of the ancients did, that the grease is really the wheel. While Money thus facilitates the revolution of the wheel of Exchange, it follows too from its nature as a medium, that the dimensions of the wheel as a whole are vastly greater than they would have been but for the Money. Money indeed helped to exchange the products that already existed and were coming into existence at its first invention, but by far the largest part of products since have come into existence largely through the agency of Money. We get quite too low a view of the functions of this potent agent, if we think of it merely as an aid in circulating products, that would have existed whether or no; some products would certainly have existed whether or no, and money would surely be of great use and convenience in helping bring these to the ultimate consumers; but this is a partial and wholly inadequate view of the function of Money as a medium of exchange. The fact that such a medium is in universal circulation, and that the present holders of it are ready to exchange it against any sort of Services adapted to gratify their desires, exercises a kind of creative power, and brings a thousand products to the market which would otherwise never have come into existence. Since money will buy anything, men are on the alert to bring forward something which will buy money; and since Money is divisible into small pieces, an incredible number and variety of small services are brought forward to be exchanged against these pieces, for example, into railroad cars and fares of all sorts, which services we have no reason to suppose would ever be brought forward at all were it not for the strong attraction of the money. 5. From this last point of view we may gain another closely connected with it, namely, that Money must be a very important part of the _Capital_ of the world. We have already thoroughly learned that Capital is any product outside of man himself from whose use springs a pecuniary increase. Now any one may see that the monetary medium of any country is the most active and the most essential and the most profitable of all those instruments reserved in aid of further production. The axe, the plough, the spindle, the loom, the wheel, the engine, are all instruments, are all Capital, and they each aid respectively some part or parts of the processes of Production; but Money is a form of Capital which stimulates and facilitates all the processes of Production without exception. Just as we have seen that Money is a form of Value generalized, so is it also a form of generalized Capital, that is to say, it is an instrument capable of aiding all processes of Production in every department, while every other capitalized instrument is capable of aiding but few processes in one department. Without Money, for instance, there could be no thorough Division of Labor, because there would be no adequate means of estimating or rewarding each one's share in a complicated process. By means of Money all services small or great contributing towards a common product are neatly measured, and may be paid for by some one, who thereby becomes proprietor of the whole product; or, if the contributors choose, they may wait till the product itself is sold, and then the money received is divisible without loss to each contributor, according to the service rendered. Thus the influence of Money as Capital pervades the whole field of Exchange from centre to circumference, facilitating every transfer and stimulating new transfers. Now then, if Money be, as it is, a peculiar kind of Capital, since it is a Medium in all Exchanges, the question becomes pertinent, How much of it is wanted? Clearly, only _so much_ as will serve the _purposes_ which such a medium is fitted to subserve; there should be enough fairly to mediate between the Services actually ready to be exchanged then and there, and also enough fairly to call out other Services proper and profitable in the then circumstances of Society, and whose only obstacle to a profitable exchange then and there _is a lack of a facilitating medium_. All increase of the volume of money beyond this point, which the very nature of Money itself marks out as the boundary, leads to a diminution of Value of every part of it, to a consequent disturbance of all existing monetary contracts, to a universal rise of prices which are illusory and gainless, to unsteadiness and derangement in all legitimate business, and to a spirit of restless enterprise and speculation which seeks to draw off the excess of money in untried and reckless experiments. The only real subjects of Exchange are mutual efforts, mutual services, as these are expressed in Commodities and Services and Credits, and money is the instrument merely that comes in between the real exchanges to facilitate them; and, therefore, it seems to be perfectly conclusive on this point to remark that the quantity of money needed in any country or the whole world is limited by the number of the services ready to be exchanged, to make easy the exchange of which is the good purpose and sole end of Money. The physical and mental powers of man, which alone can give birth to commercial services, when considered as they must be in this connection as belonging to a given number of men at a given time and place, are strictly limited of course; and although the presence of money then and there is both a stimulus and an aid to all these men to bring forward services of all sorts to the market, there are obvious restrictions both in their powers and in their circumstances; and the quantity of money needed among them is just that quantity which will fairly act as a medium in exchanging the services which they are able and willing to render to each other. All increase in the quantity of money beyond that point would have, and could have, the only effect of increasing the nominal Prices of Services, without making the services themselves any greater in number or better in quality. It is with Money exactly as it is with any other form of Capital, allowance being made for the fact that Money is a kind of generalized capital. To illustrate, How many ships does a commercial nation need to employ? As many as will fairly take off its exports and bring in its imports. Ships are wanted for one definite purpose; and when enough are secured to answer that purpose, all additions will lessen the Value, that is, the purchasing-power, of ships generally. So of all instruments whatever. Enough is as good as a feast. Enough is better than more. In regard to every form of Capital, and consequently in regard to Money as such, the point of sufficiency is determined by the quantity of work to be done. And as no law of Congress is required to determine how many ships are best to do the transportation for the people of the United States, so no legislation is needed to fix the amount of Money that is best for the same people, or for any people. As the people find out for themselves how many steam-engines they want to do their work of the year, so they find out without any aid from their legislators how much money they want to make their exchanges of the year. The less Law and the more Liberty on all such points the better for all concerned. Let the reader notice in passing, as a corollary from what has just been shown, that when forms of Credit like bank cheques come into growing use to make payments with and settle balances, they displace to a large extent commodity-moneys, like gold and silver, which would otherwise have to be employed. Speculations, and even scientific discussions, over the needful amounts of gold and silver for money in the United States, have usually overlooked this essential consideration of displacement; and one result of this has doubtless been too large a coinage of the precious metals, to the hazard of their stable value, and especially to the hazard of the permanent maintenance of the gold standard. Men forget in their zeal for Money that it is nothing but a Tool, and that the multiplication of tools beyond the amount of work to be done by means of them always makes the tools a drug; and they are apt to forget also that the cheaper and more convenient substitutes for metallic moneys, namely, forms of Credit, are all the time and more and more taking the place of the older moneys, which, nevertheless, must still be kept at the foundation, though a lessened quantity of them be needful for circulation. 6. We must now carefully sink our analysis one grade deeper, in order to reach the bottom characteristic of Money, and so to formulate an ultimate definition of it. The only quality common to all valuable things is the fact that they are all _salable_; and if these various and multitudinous valuables are ever to be made in any way commensurable with each other, it must be by means of one of their number assumed as a _standard of comparison_ with the rest. Comparisons can only turn on points of _likeness._ The single respect in which all valuables whatsoever resemble each other is their common possession of purchasing-power, be it more or less. Therefore, as a yardstick, itself possessed of length, _and because it is possessed of length_, if assumed as a standard of comparison with other objects that have length, may be used to measure all such objects whatsoever, and may accurately express in units or fractions of itself the simple length of anything and everything; so, any valuable may be selected as a _standard_ with which to compare all other valuables, and by means of the terms of which to express numerically the reciprocal relations between all valuables whatsoever. This is just what is done whenever any valuable is selected as Money; and this is the exact and single purpose of such selection. What is the precise change, then, in the valuable chosen as Money when it becomes money? This: it was a valuable before, else it could not by any possibility serve the present purpose, but now it has become a _standard_ valuable, with which other valuable things may be compared in the single point of their _value_. Valuables are now commensurable. That is all. But that is a great deal. As we have already learned to the nail, Valuables are all Services; and now some one Service has been selected from the rest, capable in its very nature of _measuring_ all the rest, and so capable of becoming immensely _useful_ to mankind. What, accordingly, is the bottom characteristic of Money? And where shall we find the terms for an immutable definition of it? _The core of Money is this quality of being a Measure of Services, taken on in addition to the usual and universal qualities constituting anything a Valuable._ This additional quality arises under the choices and action of men, just as the ordinary qualities constituting anything a valuable arise under the choices and action of men. But it is an _additional_ quality, distinctly conferred, and vastly important. The valuable chosen as Money was a Service to start with, was constantly rendered as such then and there, and was consequently fitted by qualities already possessed to assume a further and a _unique_ quality, namely, the capacity to measure and express relatively to itself all other valuable Services whatever. As each and every Valuable is the outcome of a _comparison_ instituted by two persons as between two things, as is thoroughly unfolded in the first Chapter, it is not at all strange, rather it is natural and inevitable, that there should arise in connection with Valuables as a whole class some such further _comparative_ measure, as Money is now shown to be; because, without some such common measure of Services in general, itself a Service of the same kind, it would be inconvenient, not to say impossible, to carry on any considerable traffic anywhere. For instance: a baker has only loaves of bread, and wishes to buy a hat, a horse, a house. How many loaves shall he give for each? Unless there be some common Service, in the terms of which these differing Valuables can be expressed, and by means of which they can be brought into commercial relations with each other, it would be an awkward piece of business to effect even the _three_ exchanges; and every time the baker wished to buy another article, there must be a rude and slow calculation from independent data, in order to decide upon the terms of the exchange. Let now some Common Service be introduced, in the terms of which each of these values can express itself independently, and the difficulty disappears in an instant. "My loaves are worth ten cents each," says the baker. "My hat is worth ten dollars," says the hatter. Their saying so does not indeed _make_ it so; that matter is a preliminary; but each has come to that approximate conclusion by a relatively easy comparison of two Services, his own and another common one; and if the loaves will duly bring ten cents and the hat ten dollars, the terms of their own exchange are one hundred for one, and there is no need of parleying. So of the rest; so of everything that is ever bought and sold. Money becomes by common consent a Measure of them; because it measures them, it makes the interchange of them a very facile matter; because it measures them, it easily becomes a medium between them; and, accordingly, because the money rendered is itself a Service, it is a natural and universal measure of all other Services. MONEY IS A CURRENT AND LEGAL MEASURE OF SERVICES. With this final definition of "Money" the writer is more than willing to take all the risks. It was new when propounded many years ago in one of the editions of his earlier book. All subsequent testings of it in form and substance have but confirmed the original confidence in it. The word "legal" in this definition is not always to be pressed to its utmost signification, but denotes anything sanctioned by law or usage _equivalent to law_. The other words are to be taken in their full and technical meaning. It is believed that, while this definition is short and simple, it just covers the whole ground and no more. It is not enough that a certain valuable be "legal" as Money; it must also be "current" in order to be a true money. In the United States between 1862 and 1879, to take an example, gold coins, though legal tender all the time for all debts public and private, were not "current" in the full sense of that term, and hence were _not_ the Money of the country. Till the last-mentioned date, the gold dollar of 25-4/5 grains standard fine was required by law to pay customs-taxes with and the interest on the public debt, and was used to a small extent in a few branches of private business, and was not otherwise in the hands of the people. These dollars, accordingly, were not strictly money, but bore a premium over the "current" money of the country. To be Money, then, a Valuable must be recognized as money by law or custom as strong as law, and also circulate among all classes of the people as a medium in their exchanges. But we are bound to observe that Money becomes a _medium_ in men's exchanges, because it first became a _measure_ in their Services. Some economists think that these two functions are separate, and are of equal rank; but it is easy to see that one only is original, and that the other is derived from that. Even Aristotle perceived that Money is a Measure, inasmuch as he defined property "_anything that can be measured by money_." We may be pretty sure, in opposition to Professor Jevons, in his Money and the Mechanism of Exchange at page 13, who thinks there are _four_ characteristics of Money, that Money as such has but _one_ primary characteristic difference from other forms of Value, namely, this _measure_-quality, this _standard_-quality, this publicly recognized function as a _common measure_ to which all other valuables are constantly referred. This additional attribute put upon a money-valuable by law or custom is not what _makes_ it valuable, since an ounce of uncoined gold standard fine is worth within a very small fraction as much as an ounce of gold coins, but it makes the money a far more convenient instrument to purchase with, inasmuch as money, having now the attribute of making all other valuables easily commensurable with itself, becomes at once something which everybody is ready to receive, because everybody knows in general what its power will be to purchase all other things. In other words, Money becomes a _medium_ in exchanges just because it has already become a _measure_ of Services in general; and there are not consequently two prime functions of Money, still less four, but only one. This view seems to simplify the whole subject of Money very much; and we may be sure that it will be found to be scientifically correct, and that we shall find many means of testing its accuracy as we go on. To maintain, as we do, that "Money is a measure of Services," is much better than to say, in connection with many economists, that "Money is a Measure of Value." That phrase is objectionable because Value is always relative to two Services exchanged for each other; and to say that money is a measure of that _relation_ is neither so simple nor so ultimate as to say that it is a measure of each of the Services entering _into_ that relation. The Services may be conceived of and spoken of separate from the Value into which they merge, although they come into existence solely for the sake of that resultant Value, and it is more exact and final to propound that Money, itself a Service, is a measure of all other Services considered as constituent elements of the Values into which they fall. We are not without strong hopes, accordingly, that competent economists will concede, that here is a radical improvement in the nomenclature of our Science. In the place of our expression and definition, and the foregoing explanation consequent upon its use, President Walker in his Money, pages 280 _et seq._, prefers the mathematical and excellent phrase, "_the common denominator in exchange_"; Professor Bonamy Price, in his Practical Political Economy, page 363, shows his fondness for the formula (and it is a good one), "_the tool of exchange_"; and Henry Dunning Macleod, in his Elements of Banking, page 17, insists with much less reason, that "_Money is the representative of Debt_." He says: "The quantity of money in any country represents the amount of Debt which there would be if there was no money; and consequently when there is no debt there can be no money." The unfortunate use by some countries of a paper money, which is indeed a form of debt, gives some plausibility to the notion that Money is a representative of Debt; and perhaps the fact that Money is often used to pay debts previously contracted, and that debts are almost always contracted in the terms of Money, may give some additional plausibility to this view; but as Macleod himself goes on to say that "no substance possesses so many advantages as a metal for money," and that "all civilized nations therefore have agreed to adopt a metal as money, and of metals, gold, silver, and copper have been chiefly used," we do not see how he can logically hold that a gold dollar, or a gold sovereign, whose value is as substantive and independent as that of any Valuable in the world can be, becomes through coinage and circulation "a representative of Debt." Instead of saying as he does, "where there is no debt there can be no money," it may be confidently asserted on the other hand, where all transactions are settled at once in solid money there can be no debt. 7. Having thus looked into the nature of Money, and seen what is its one essential characteristic, and its one obvious and universal function as the result of that, it will help us now in our further discussion, to examine some of the material commodities that have served as Money at different times and places. _Cattle_ appear to have been the earliest money of which there remains any record. Homer, near the middle of the sixth book of the Iliad, indicates in the following lines that oxen were an incipient money in the Heroic age:-- "Then did the son of Saturn take away The judging mind of Glaucus, when he gave His arms of gold away for arms of brass Worn by Tydides Diomed,--the worth Of fivescore oxen for the worth of nine." We cannot certainly infer, when it is said in Genesis that "Abraham departed out of Egypt very rich in _cattle_ and silver and gold," that any of these were anything more than articles of valuable merchandise; but on the other hand it is certain from the Latin name of Money, _Pecunia_, which is derived from the root _pecus_, which means "_cattle_," that Cattle were the Money of the early Romans; and Pliny writes expressly that King Servius Tullius stamped the first bronze money of Rome with the _image of cattle_, undoubtedly indicating by that some equivalence in current value between the two. At any rate cattle have been used as Money among pastoral peoples very widely in place and in time, and are still so used in various parts of Africa. In the region of the Euphrates and Tigris the precious metals became money in very remote antiquity; for the art of coining, and all other arts, came thence westward to the Greek cities of Asia Minor, and to Greece itself, and we learn that Pheidon, King of Argos, coined silver money on a scale derived from the East in 869 B.C.; and a better proof still is the fact that burnt clay tablets are found in the Royal Library at Nineveh, discovered by Layard, which are really credit-money, notes issued by the Government, and made redeemable in gold and silver money on presentation at the king's treasury. Tablets of this character are extant bearing date as early as 625 B.C. But the gold and silver money must have been circulating a long time in their own right as valuables, before such a credit-money, such a promise-money, as those tablets are, could have originated in connection with them. Abraham, who himself migrated from "Ur of the Chaldees" about 2000 years B.C., not long after reaching the Mediterranean, "weighed unto Ephron the silver which he had named in the audience of the sons of Heth, four hundred shekels of silver, current money with the merchant." This is expressly said to be "money" and "current money." Perhaps it was coined money. At any rate, it was cut and piece money. It was indeed weighed out, and not counted out. This is still the more accurate and speedy manner, when the facilities for the weighing are present. The Bank of England at this day weighs, and not counts, the coins received and paid out. The Romans first coined silver money in 269 B.C., and gold money in 207 B.C., and gold coins were stamped in Greece about the time of Alexander the Great, say 333 B.C. Other metals than those called precious were also early used as money. Long before Pheidon's silver coinage in Greece, _copper skewers_ were used as money in that country, of which six made up a _drachm_, which was afterwards both a coin and a unit of weight, the coin being worth about 17 cents of our money, and the weight being about 66 grains avoirdupois. The word drachm is derived from ~dragma~, _a handful_; and the sixth part of it, called an _obol_, from the Greek word meaning a _spit_, became also both a coin and a weight, all which makes it evident that these were used in connection with roasting meat, and that one skewer or obol was originally a unit both of value and of weight. In Adam Smith's day, in certain districts in Scotland, _nails_ were still used as small money, which is a forcible reminder of these old Greek skewers. Iron became money in Sparta; money of lead was known to the ancients, and is still current in the Burman empire; the earliest Roman coins were of copper, which were cast rather than stamped, for no die would have sufficed for pieces so large and heavy, and the _denarius_ was the unit divided into ten _asses_, the _denarius_ being nearly the equivalent of the Greek _drachma_ whether of copper or silver, because the Romans reckoned from the first the ratio of copper to silver as 250:1; bronze is a mixture of copper and tin, and brass of copper and zinc, and copper coins with both these admixtures--used for the purpose of hardening the copper, it being a general law of metals that a mixture of two is harder than either--have been very common in ancient and modern times; Sicilian, Roman, and old British coins of tin alone are known to have been struck; and Herodotus makes the statement that the Lydians of Asia Minor were the first to make a coinage of _electrum_, which, as some claim, was a mixture of gold and silver, and of which ancient specimens are still existing. Cowry _shells_ are still used in the East Indies, and also in Africa in the place of small coins, and have sometimes been imported into England from India to be exported in trade to the coast of Africa, being reckoned in Bengal at about 3200 to a silver rupee, which is about 46 of our cents. The New England Indians also used beads or shells of periwinkles (white) and of clams (black), of which 360 made up a belt of _wampum_, as they called it, the black being counted worth twice as much as the white; and the English colonists accepted the wampum in their exchanges with the Indians, regarding a string of white as equal to five shillings, and a string of black to ten shillings, and afterwards made it legal tender among themselves for small sums, and even counterfeited it. Cakes of _tea_ have passed as money in India, and elsewhere; and it is said, that at the great annual fair at Novgorod, in Russia, the price of tea has first to be determined before the prices of other things can be settled upon, since that is a kind of standard of Values in that great mart. _Salt_ has been current money in Abyssinia; _cod-fish_ in Ireland and Newfoundland; and _beaver-skins_ in New Netherlands, New England, and the western parts of America. We do not here try at all to give a full list of the things that are known to have been used in the early states of society as money; and there would be no ground for surprise in any list, however large and varied, when we remember how great is the need of some such form of value generalized in order that exchanges may grow to any considerable size and vigor. Two points only need now to be noted, (1) that the tendency everywhere has been sooner or later to come to the metals as the best form of money, and among the metals to reach gold and silver as the only ultimately satisfactory materials for Money; and (2) that no instance has ever been found in the whole stretch of inquiry over all the earth, of anything becoming a Money that had not been previously a Valuable. We might be perfectly sure of this beforehand, without any search at all among the moneys of primitive times and states of civilization, because, from the _very nature of the case_ nothing could ever serve the purpose of Money except what was already a valuable to make the comparison with,--nothing could ever possibly serve as a measure of services except a service. It has several times been claimed, that actual exceptions to this law have been historically discovered, but when the alleged exceptions have been closely scrutinized they have been found to be apparent only. To take two or three of the most plausible examples: the Carthaginians had a kind of leather money, which originally enclosed bits of the precious metals, and circulated in virtue of them, though they afterwards came to circulate as bits of leather only, as counters and pledges, in a way that will be explained later. According to the Venetian traveller, Polo, China had in the thirteenth century a money made of the bark of the mulberry tree, cut into round pieces and stamped with the name of the sovereign, which money it was death to counterfeit or to refuse to take in any part of the empire. If we had the whole history of this money, it would surely ally itself either with the other commodity-moneys now being treated, or with the modern credit-moneys made legal tender to be treated hereafter. It is just as certain as anything can be, that these circles of stamped bark did not start out as money in their own right. The French writer, Montesquieu, asserted that there was in use in the last century among the people of the coast of Africa, what he called "an ideal money," "a sign of value without money," the unit of which was called a _macoute_, which was subdivided in ideal tenths, called _pieces_. This statement was startling, as implying a denomination without the thing denominated, as implying a standard of value which had no basis in a valuable thing. It was afterwards discovered, however, that this money of account had its origin, just as we should suppose it must have had, in an actual _macoute_, a piece of stuff, a fabric, which they had used first as a commodity-money, and afterwards its _name_ as a money of account. A valuable thing may become money, and then its name may become a _denomination_ of value, and still later a bit of leather or a bit of paper may be called by the same name, and in a certain sense take the place of the same thing. All this will be as clear as day pretty soon. 8. Contrary to what has often been affirmed by Economists, the real measure of Services is the service itself, the _thing_-dollar and not the _denomination_-dollar. The denominations are used in bargainings and calculations as representatives of the money itself, and thus indeed in a secondary sense serve as _measures_; but the subtle connection between the thing and its name, between money and its denominations, and the differences between the two, need to be clearly unfolded, because most of the current fallacies about money take their rise just at this point. An illustration will best serve us here. The original measure of Services in France and England and Scotland was the pound weight of silver. No coin of that weight was ever struck; but the pound of silver was cut into 240 coins called pence. Twelve of these pence were called a _solidus_ or shilling. Thus, as applied to silver, the symbols lb. and £ denoted equivalent weights, the former of uncoined metal, the latter of metal coined. But in course of time, more "pence" than 240, and at last in Elizabeth's reign 744 "pence were coined out of a lb. of silver." Yet all the while 240 of these pence were called a £. £ and lb., both a contraction of the Latin _libra_, were no longer equivalent. The lb. of weight continued stable; the £ of money had dwindled to less than one-third. Yet the _name_ pound continued to attach to 240 pence, although the pence embodied a less and less quantity of silver. Each actual penny had less silver in it, and though it was still called a penny as before, the _denomination_, though spelled and sounded as before, represented less silver, and therefore less _value_, than before. The denominations, then, always follow the fortunes of the coins, whose names they are, to the frequent loss and shame of the unthinking, who suppose the same _name_ must represent the same _thing_. Unfortunately it does not. Take another illustration. In 1834 the gold eagle of the United States was reduced in weight from 270 to 258 grains troy, and the alloy increased from one part in 12 to one part in 10. These changes took out more than 6 parts of gold from every 100 parts in all the gold coins of the country. Yet all these coins bore the same names as before. The things denominated changed, but the denominations changed not. Other things remaining equal, the coins lost six _per centum_ of their purchasing-power, or in other words, general prices rose in that proportion; the _measure_ became so much smaller; and the names, _eagle_, _dollar_, outwardly unchanged, varied simultaneously and equally with the change in the coins. Also, coins are liable to change in their function as a measure of general Services from unavoidable changes in the general purchasing-power of the precious metals themselves. If for any reason an ounce of gold will buy less of general Services than formerly, of course the coins cut from that gold will buy less than formerly; and this change in the _measure_ is followed instantly and inevitably by a corresponding change in the meaning, though not in the spelling, of the _denomination_. Not so with all other tables of denominations. These have a _basis_ independent of the things which they help to measure. The French _metre_, for example, is not variable by the lengths or breadths or heights of the things it measures, but is an invariable unit of length the world over; so is one of Troughton's inches; but this feature does not hold at all of the denominations of Money; because _sovereigns_, _dollars_, _marks_, _francs_, are denominations of _Value_, which is itself a variable relation. Such denominations, consequently, are _not_ an independent standard to which values themselves can be referred, as lengths are referred to metres and inches, but vary with the varying purchasing-power of the coins themselves. The "_dollar_," as a denomination, means more or less, just according as the "DOLLAR," as a coin, buys, that is, measures, more or less. Still, essential as is the point now made to any just understanding of the subject of Money, it is vastly important for all the interests of Exchange that the accepted measure of Services be as little liable to fluctuations as possible, especially in all cases in which lapse of time is involved before the exchange is fully consummated. An inflexible standard there cannot be from the very nature of the measuring, but also from the very nature of all measuring, the money-standard should be and should be kept as nearly inflexible as it possibly can be. For the same reason in kind, only multiplied a thousand-fold in force, that the bushel-measure should be of the same capacity in sowing-time and in harvest-time, to sell and buy by, always a bushel, no more and no less; and the yard-stick an inflexible measure of length, always 36 of Troughton's inches, no more and no less; so, as far as it is possible in the nature of Values, ought the current measure of Services, and hence its denominations, to represent, year in and year out, a uniform degree of purchasing-power. 9. This brings us logically to the historical fact, that, no matter what measure of services any people may have adopted in their primitive times, there has always been a steady force at work tending to displace these in favor of gold and silver. This has become the universal result the world over among all advanced peoples. Governor Bradford in his History of Plymouth Colony gives a quaint account of the origin of money among the Pilgrims, and in connection with that of the fee-simple in lands: "_The Pilgrims began now highly to prize corn as more precious than silver, and those that had some to spare began to trade one with another for small things, by the quart bottle and peck; for money they had none, and if any had, corn was preferred before it. That they might, therefore, increase their tillage to better advantage, they made suit to the governor to have some portion of land given them for continuance and not by yearly lot, for by that means that which the more industrious had brought into good culture (by such pains) one year came to leave it the next and often another might enjoy it; so as the dressing of their lands were the more sleighted over and to less profit; which, being well considered, their request was granted._" The neighboring Colony of Massachusetts, settled about ten years later, used Bullets for small change, reckoning them at a farthing apiece, and made them legal tender for debts of less than one shilling; for larger exchanges Wampum and Beaver-skins were long used; but the steady force just spoken of induced Massachusetts in 1652 to supplant these with a silver coinage of her own, called the Pine-tree shillings and sixpences and threepences and twopences. This mint existed (sometimes idle) for over 30 years, but all the pieces coined bore the dates of 1652 or 1662. In 1691, the two Colonies were forced into one government through a new charter granted by William and Mary; and after lengthened trials of inferior moneys, not needful to be described now, Massachusetts determined in 1749 to have no other than silver money circulate in the Colony, and became thereafter till the Revolution the so-called "Silver Colony," and business rapidly and steadily revived and enlarged in consequence of the change, and in contrast with the rest of New England. Gold and silver, thus ever urging their way in to take the place of tentative and transient standards, and ever coming back again to stay if displaced for a time by cheaper and changeable moneys, have never been anywhere of equal value, weight for weight. An ounce of gold has always been more valuable than an ounce of silver. Probably in the Euphrates country where coinage began, and certainly in Asia Minor deriving thence its weights and measures, gold was strictly the standard with silver as subsidiary to that; in Greece, when Philip's victories established a double standard there, gold was reckoned relatively to silver as 1:12-1/2; in the Roman world, where silver had been the standard after 217 B.C., Augustus Cæsar legalized gold as a co-standard in the ratio of 1:12; in 1717 a double standard was established in Great Britain, gold being rated in the coinage as 1:15-1/5 of silver, but in 1816 by a law still in force, gold was made the sole standard for the United Kingdom, the legal use of silver being limited to 40s. in any one payment; in France the legal relation of gold to silver was fixed in 1803 as 1:15-1/2, and so continued till 1876; in the United States the ratio first established, in accordance with the recommendation of Alexander Hamilton as Secretary of the Treasury, was 1:15, but in 1834 this was changed to the relation of 1:15.98, and so it remains to this day; in 1871, the new German Empire adopted the sole gold standard, and limited silver to the amount of 20 _marks_ in any one forced payment, still allowing the old silver _thaler_ to circulate at the rate of three marks to a thaler; and since 1875, the Scandinavian Union permits gold alone to be coined for private persons, and limits the debt-paying power of silver to 20 _crowns_. A crown is 26.78, and a mark 23.82, of our standard cents. Moreover, the relative value of gold in silver never continues the same for any great length of time, even after the law has sought to ascertain and fix it. Indeed, any law fixing the ratio between the two has very little, if any, effect towards maintaining the ratio. Demand and Supply determine the value of the precious metals each in each at any one time as absolutely as they decree the value of Hindoo rice in silver. France managed to maintain her legal ratio at 1:15-1/2 for 73 years, because all the conditions were on the whole favorable; but when the Germans threw a portion of their silver on the world's market in hopes to reach the single gold standard, and the mines of Nevada poured forth on the same market their millions of silver, the ratio could no longer stand, the right of private individuals to have silver coined for them was taken away in behalf of the government, and only the five-franc silver pieces continued to be legal-tender to all amounts, the other silver coins becoming then (1876) only legal to pay debts to the amount of fifty francs. A franc is 19.29 of our standard cents. And this brings us to notice what are called _subsidiary coins_. France, England, Germany, and the United States have debased their smaller silver coins in weight, so that the _nominal_ value of these coins is from 7 to 15% above their _bullion_ value. For example, two halves, four quarters, ten dimes, of our silver since 1875 weigh 385.8 grains, which is also the exact weight of the French five-franc piece, while our standard silver dollar weighs 412-1/2 grains, both 9/10 fine, so that our "subsidiary" silver is debased in weight 6.48%. There are three advantages in thus treating the smaller silver: (1) there is so much clear profit to the Government minting them, thus lessening taxation; (2) a security to the peoples that they shall not lose their convenient small change by export to neighboring countries; and (3) this scheme allows a very considerable rise in the market value of silver without tending to throw the subsidiaries out of circulation. As these are never legal-tender except to very small amounts in domestic trade, there are no serious objections to their use in limited quantities. The English can pay debts in their silver to the amount of £2, and we in ours to the extent of $5. Coins of copper and of other inferior metals are also _subsidiary_ in principle and motive. Our 5-cent and 3-cent nickel pieces are 75 parts copper and 25 parts nickel, and the 1-cent piece is 95 parts copper and 5 parts tin-zinc; and debts of 4 cents can be paid in 1-cent pieces, of 60 cents in 3-cent pieces, and of 100 cents in 5-cent pieces. 10. The steady experience of civilized men for two milleniums and a half seems to demonstrate, that gold and silver constitute the best Money; and we must now investigate the reasons, one by one, _why_ they are the best money. The reasons appear to be three. Of these the first is by much the most important. (1) The first and main reason why gold and silver make the best money is to be found _in their comparatively steady general Value_. Since Money is a Measure of all other valuables, its success as a measure must depend on its own _steadiness_ of value, and gold and silver meet this test better than anything else. Money is a valuable, and not in any sense a _representative_ of value; except as to the subsidiaries, a coin does not owe its value at all to the _stamp_ impressed upon it or to the _law_ authorizing it, since the metal in it is worth as much out of the coinage as in it; coin-values arise under the same conditions as all other values, and are variable by any change in any one of the four elements which alone can vary the value of anything; and it would seem that nothing more is needed in order to remove the last vestiges of the dark cloud which has so long overhung this subject of Money, than to familiarize ourselves first of all, as we have already done, with the true doctrine of Value in general, and then to hold fast the truth exemplified on every hand, that the value of Money is just like every other value. Let us examine then, first, why the value of gold and silver is so steady. (a) On account of the comparatively steady Demand for these metals. Gold and silver are wanted for two general purposes: first, to be used as money, and second, to be used in the arts; and the usual estimate is, that about 2/5 of the aggregate quantity in the world is in the form of money, and the other 3/5 in the form of plate and utensils and ornaments. Now, so far as the element of Desire controls Value, the purpose for which any article is desired is a matter of indifference. The aggregate desire for it for all purposes, accompanied with the offer of something with which to buy it, constitutes the Demand; and the more universal the desire, no matter for what use, the steadier the Demand and so far forth the steadier the Value. It is a point still too little noticed, that the combined demand for the precious metals for all uses is what helps determine their general value, and not the demand for them as coin alone; just as the value of barley is regulated partly by the demand for it for food, and partly by the demand for it for malting purposes. Hence an ounce of bullion of the standard fineness destined for the smelting-pot of the artisan is worth within a very trifle as much as an ounce of coined money. For example, by the law of the Bank of England an ounce of standard gold (11/12 fine) is coined into £3 17s. 10-1/2d., and the Bank is obliged to buy all bullion and foreign coins of the standard fineness offered to it at £3 17s. 9d. per ounce,--a difference of only three half-pennies. Now, gold and silver are so indispensable in the form of money, so beautiful in the form of ornaments, so well adapted to serve the purposes of luxury and love of distinction, and so really useful in the arts, that the Demand for them is constant and well-nigh universal; and should there be in the progress of civilization a lessened demand for them for purposes of personal ornamentation and luxury, and a less quantity be required for coins on account of the multiplied use of cheques and other credit-forms, as seems likely in both cases, a greater quantity will doubtless be required for all the other uses old and new, and so, as the Demand in the past has been steady, and probably steadily increasing, there is every reason to expect the same course of things for the time to come. Moreover, it contributes to the steadiness in value of the gold and silver coin, that there is at hand at all times, in the form of plate, a reservoir from which a chance chasm in the coin may be replenished, or an extra demand for it answered. (b) On account of their tolerably uniform Cost of Production. Not Desires only but Efforts as well determine Value. Supply is the correlative of Demand; and when to a steady demand there answers a steady supply realized under conditions of pretty uniform difficulty, there will be as a matter of course a pretty steady Value. Nature herself, that is to say, God himself, has indicated in a manner not to be mistaken the intention, that these precious metals should be the Money of the nations. They are scattered all over the earth, and so scattered that the cost of their production has been on the whole pretty steady ever since civilization and commerce began in earnest. God is a God of order throughout all His works. Corresponding to the nature and necessities of men is the whole structure of the outward world. Science builds only on these predetermined lines of Order. Induction is only possible where original Resemblances run through great departments of phenomena. To be enabled to buy and sell to any considerable extent in order to meet their subjective wants, men must have an objective measure of mutual Services, and this measure must be a valuable steady in its purchasing-power: very well; such a possible measure was all provided for beforehand, when the foundations of the earth were laid. The precious metals have always been obtained in one or other of two ways: by surface diggings and washings, and by rock-mining. Both were employed in the very beginnings of Civilization. There is a description in the book of Job (chapter xxviii) of the way in which the ancient mines were wrought, and of the worth of the ores: "Truly there is a vein for silver, And a place for gold, which men refine. Iron is obtained from earth, And stone is melted into copper. Man putteth an end to darkness; He searcheth to the lowest depths For the stone of darkness and the shadow of death, From the place where they dwell they open a shaft. Forgotten by the feet They hang down, they swing away from men. The earth, out of which cometh bread, Is torn up underneath, as it were by fire. Her stones are the place of sapphires, And she hath clods of gold for man. The path thereto no bird knoweth, And the vulture's eye hath not seen it; The fierce wild beast hath not trodden it; The lion hath not passed over it. Man layeth his hand upon the rock; He upturneth mountains from their roots; He cleaveth out streams in the rocks, And his eye seeth every precious thing; He bindeth up the streams, that they trickle not, And bringeth hidden things to light." These methods and difficulties in rock-mining, thus poetically and beautifully delineated, have been substantially the same from that early day to the present time; and, consequently, there have been but two or three striking changes in the general value of gold and silver in the commercial world during the last 500 years, at least changes owing to easier and larger Supply. The discovery of the mines of Potosi in 1545, and the large influx of silver into Europe from those and other American sources, together with the irrational stimulus thereby given to the working of European mines under the false impression not even yet wholly dissipated that Value can be clutched bodily in mining, so increased the stock of silver, that its value as measured in grain or other commodities declined in Europe in 70 years after 1570 to about 25% of its previous purchasing-power. Adam Smith expresses the opinion in his Wealth of Nations, that silver did not perceptibly fall before 1570, nor continue to fall further after 1640. The discovery of gold deposits on the Pacific coast of the United States in 1848, and a similar discovery in Australia in 1851, enlarged the annual supply of gold for the world from $40,000,000 in 1848 (_Chevalier_), to an average of $136,000,000 for the five years ending in 1859 (_Jevons_); and the latter writer estimated the fall of gold in general commodities from 1845 to 1862 at about 15%. But with exceptions like these, and similar ones are perhaps not likely to recur, the precious metals have always maintained and seem likely to maintain in the future a considerable uniformity of Value, as estimated by their power to purchase other valuables, so far forth as Cost of Production goes to determine their value. Even the great changes just noted in the cost of the metals issued only gradually in a rise of Prices, which many were able to foresee and thus to provide for, but by which many more were caught and brought into distress and even pauperism. The two classes that suffer the most under a fall in the Value of Money are the wages-receivers and the holders of long annuities and other similar obligations. (c) On account of their Quantity. The amount of gold and silver in circulation in the commercial world, to say nothing of the quantity so easily brought into circulation from the reservoir of plate, is so vast, that it receives the annual contributions from the mines much as the ocean receives the waters of the rivers, without sensible increase of its volume, and parts with the annual loss by detrition and shipwreck, as the sea yields its waters to evaporation, without sensible diminution of volume. The yearly supply and the yearly waste are small in comparison with the accumulations of ages; and, therefore, the relation of the whole mass to the uses of the world, and the purchasing-power of any given portion, remain comparatively steady. It is probable, that production at the mines might cease altogether for a considerable interval without very sensibly enhancing throughout the commercial world the value of gold, as it is certain, from experience, that a production very largely augmented only very gradually and after a considerable interval of time diminishes its value. The mass of the precious metals has been aptly compared with the heavy balance-wheel in mechanics, which preserves an equable and working condition of the machinery under any sudden increase of the power, and even when the power is for a moment withdrawn. Just at this point a caution is needful. Because it is affirmed that the great amount of the precious metals is a ground of their firm value, it must not be supposed that we are going beyond our general doctrine, and introducing another element, namely, Quantity, besides the four elements, which, as we have so often alleged, can alone vary the value of any Service. Quantity, in itself, is not an element capable of varying the value of anything, but taken in connection with durability, it is an element of what might, perhaps, be called with propriety the _Inertia_ of Value, and tends to keep the purchasing-power of gold and silver where it is. _Value and Steadiness of Value are two distinct ideas._ The present value of an ounce of gold is decided by four things alone, two Desires and two Efforts; but other elements besides these may help determine that that ounce of gold shall have ten years from now a purchasing-power approximately the same as now. It will depend of course in the last analysis upon the relation of the then Demand to the then Supply; yet the vast quantity of the precious metals in existence, combined with their durability, prevents those fluctuations in the Supply which are so destructive to a steady value. It is not with them as with the fruits and the cereals, whose value varies perpetually with the seasons, and which are so perishable that they must be sold quick or never. Gold and silver are almost indestructible, and the existing mass is not liable to be lessened except by wear and accident, and in so far as the annual production from the mines exceeds the yearly waste there is a natural provision made for the natural increase of Demand to supply the wants of the world for money and for the arts without much disturbing the relation of the Demand and the Supply; and so Quantity in connection with durability helps preserve to them a tolerably steady value from generation to generation. (d) On account of their Fluency. Gold and silver are in demand the world over. Having great value in comparatively small bulk, they are easily transported from Continent to Continent; and whenever from any cause they become relatively in excess in any country, and so lose there a portion of their previous purchasing-power, there is an immediate motive in profits to export them to other countries, in which their power in exchange is greater, and thus the equilibrium tends to restore itself. The proposition is, The value of gold and silver is kept pretty steady throughout the commercial world by the facility with which they are carried from points where they are relatively in excess to points where they are relatively in deficiency. In any country or place where the precious metals are temporarily in excess, the prices of general commodities as measured in them will rise of necessity, because the unit of measure is smaller than it was; and for the same general reason, the country temporarily lacking in these will experience in consequence a fall of general prices. There is, therefore, a private gain in carrying these metals to those countries in which their power of purchase is the greatest owing to the lack of them, because more commodities can be obtained in exchange for them than at home; and private motives here coincide, as indeed they generally do, with public welfare, since what the traders do in carrying gold and silver abroad with an eye to their own interest only, helps maintain at home and abroad the steady value of these commodities. This law of the distribution of the precious metals by Commerce, and the equilibrium of their general value resulting therefrom, is as natural and beautiful as the law which preserves the level of the ocean, or that which balances the bodies of the planetary system. This has come at length to be recognized by the nations, and the laws which used to forbid by heavy penalties the exportation of gold and silver are all swept away, and these metals are now free to go and do actually go wherever they can obtain the most in exchange. It is absurd to suppose that their owners would carry them out of a country unless they were worth more abroad than at home; and, therefore, the prejudice which still exists in this country (the relics of itself) is a senseless prejudice. The gold is not given away, it is _sold_, and sold for more than it will buy at home; otherwise nothing in the world could start on its foreign travels. There is the same kind of gain in this as in all other exchanges of commodities, with this great incidental advantage in addition, that its general value is by this means kept pretty uniform throughout the commercial world. Unluckily for the darker and middle Ages, so far as they took their cue and thought from the Romans, the latter, in the teeth of the sound view of Aristotle, looked upon Money as something quite different from other forms of salable things, looked upon it in short as an _end_ in itself, as something to be gained and not readily to be parted with. If this were the right view of Money, as it is not, then the policy to spring from it might well be,--Get all the money possible into the country, and let as little as possible out! Just this came to be the policy of the Romans. In one of his Orations, Cicero says, "_The Senate solemnly decreed both many times previously, and again when I was consul, that gold and silver ought not to be exported._" The other and the true opinion, that money is bought and sold like any other valuable, and that its sole peculiar function is as a _means_ to further sales, was indeed held and argued at Rome, as we learn incidentally from a passage in the Institutes of Justinian; but the false though plausible opinion, that money is _ultimate_, and not _mediate_, is said in the same passage "to _have prevailed_"; and accordingly this superficial view of money, and that it "_ought not to be exported_," constitute what may be called the Bullion Theory, and it is the first general theory of Sales ever promulgated. The Romans brought it forth, and other nations took it from them. It could never stand in the light of Reason, and still less amid the exigencies of practical Commerce. It is an illustration of the continuity of human thinking as well in wrong as in right directions, that the second main theory of Sales, which has long been styled the Mercantile Theory, is a prolongation and expansion of the first. _That_ gave an undue weight to gold and silver over other goods in trade, and forbade their export: _this_ did the same thing too, but also tried to swell the exports of other goods beyond the worth of current imports, _so as to get back a balance in gold and silver_: both alike interfered with the international fluency of the precious metals, to the constant detriment of all parties to the restrictions. The common principles of both Theories may be thus expressed: _Gold and silver are the things to get; they are worth more than what they will buy; therefore let us get all of these in that we can, and let as little of them out as we can; and let us work all our trade so, that others shall have to give us a balance back in gold and silver._ These false postulates and inferences wrought centuries of woe in the world of commerce, because all the leading nations became devotees simultaneously to this scheme of each shrewdly plundering the rest. The germs of this Mercantile Theory appear first in France, when Phillippe le Bel, in ordinances of 1303 and 1304, put his hand in as king to mend the movement of trade, to forbid the export of gold and silver, to fix the price of wheat and to forbid its export, and to lessen imports by prohibitions of them. "_Considering that our enemies might profit by our provisions, and that it is important to leave them their merchandise, we have ordered that the former should not be exported nor the latter imported._" The famous Colbert, who laid down many financial maxims that are good, thought nevertheless, that he could so manage the foreign trade of France that she should get the better of her neighbors, and embodied his plan in the tariff of 1664. We will let him state his plan in his own words: "_To reduce export duties on provisions and manufactures of the Kingdom; to diminish import duties on everything which is of use in manufactures; and to repel the products of foreign manufactures by raising the duties._" The principle of the Mercantile Theory was never better or briefer expressed than by Ustariz, a Spaniard, in 1740: "_It is necessary rigorously to employ all the means that can lead us to sell to foreigners more of our productions than they will sell us of theirs, as that is the whole secret and the sole advantage of trade._" Too many nations knew the "whole secret" at the same time, and accordingly the "sole advantage" to any became exceedingly small. England was as deep in the sloughs and wars and losses of this false system as any of the rest. It may be laid down as an axiom, that no country will ever export for the sake of buying other things those things which are more needful for its own welfare at home. So long as human nature continues what it is, what it always was, what it always will be, no persons in any nation will ever export gold and silver except to buy therewith other valuables then and there more important to them and consequently to their country. There need not be the slightest fear that any nation which cultivates its own commercial advantages under freedom will ever lack for a day a sufficient _quantum_ of the precious metals; because under freedom these metals will always go, and go in just the right proportions, to and from those countries which produce and offer in exchange those desirable Services which other countries want. The greater the enterprise and skill, the keener the development of all peculiar and presently available resources, the more honorable and free the commercial system, so much the surer is any nation whether it be a gold-bearing country or not, of securing all the gold and silver which it needs. This is so, because _there_ will be a good market to buy in, an abundance of good and cheap goods will be there, and they who have gold will resort thither to buy. But such a free and enterprising nation will also want to buy other things besides gold and silver, and other things than those itself can make or grow to advantage, and when enough of the precious metals is secured for money and the arts, the residue will be exported, perhaps to the very countries from which it originally came, in payment for some products which _those_ countries have an advantage in producing. The United States, for example, is a gold- and silver-bearing country, and exported in the years 1850-60, both inclusive, $502,789,759 in coin and bullion, according to the official Report on the Finances, 1863; and during the same period imported from other countries $81,270,571 in coin and bullion. Where was the famous and fallacious "balance of trade" in that case? The United Kingdom, on the other hand, is not a gold- and silver-producing country at all, but it is the central market of the world for the precious metals all the same, its imports and exports of them are immense in all directions, because it is an enterprising country within the lines of Nature in agriculture and manufactures and commerce, and is not afraid to allow its people to buy and sell freely with all the world. Where lies in the technical sense the "balance of trade" between Great Britain and the rest of the world? Who can tell? All that is known, and all that is worth knowing, is, that all that trade is immensely profitable to all the parties to it wherever situated. Now, there is always a double advantage in these free movements of coin and bullion in exportation and importation. In the first place, more and better commodities are secured to the countries exporting, whether they be gold-bearing or not, than the gold could have bought in those countries, otherwise it would not have been carried abroad, that being the sole motive that stirs it from its present haunts; and in the second place, the benefit to the countries importing is the market for their own commodities created by the gold brought in, for we must never forget that a market for products is products in market, is a benefit also in naturally and easily filling up a chance deficiency in the quantum of coin there, and incidentally too a benefit to the world as tending to keep _in equilibrio_ the purchasing-power of the metals everywhere. This last is especially seen when new and pregnant sources of supply are opened in any country. For example, in the United States about the middle of the century the stock of gold was more than doubled in ten years' time; unless by much the larger part of this had been carried abroad in commerce, it would have inevitably depreciated the whole mass and disturbed the prices of everything; but by causing the new gold to impinge on the whole world's stock, the shock of the new production on the measure of Services, though perceptible, was reduced and deadened. The world's mass of the precious metals is comparatively torpid beneath the action of an accretion which would break down by its weight the metals of a single nation. Therefore, in conclusion on this topic, the Fluency of gold and silver, by which they pass easily in commerce to those places where their present value in exchange is greatest, or to such countries as India and China which have shown for centuries a wonderful power to absorb the metals of the West, and return as easily when the conditions are reversed, or when a larger use of paper-credits releases some portion of the coin, tends powerfully to make their general value uniform throughout the world, and consequently to make them the best medium of Exchange and the best measure of Services. (e) On account of this Circumstance, that every general rise or fall in the value of gold and silver tends quickly to check itself. This principle, indeed, is applicable more or less to the value of all commodities, but owing to their quantity and durability and fluency pre-eminently applicable to the value of the precious metals. The check is double in either direction. First, let us suppose that the purchasing-power of an ounce of gold or silver be rising: then, production will be stimulated at all the mines, and the more stimulated as the rise is more; and this new and enlarged Supply will tend to check a farther rise, and unless the permanent Demand has been in the meantime intensified, to bring back the value to the old point; moreover, when there is a rise in the value of the coin, a less quantity is required to do the same amount of business; and the demand for gold which causes the rise tends to be checked by the rise itself, because a lessened quantity is needed for money-use in consequence of the rise. If the exchanges mediated by money have become permanently greater than before, then of course the Demand will continue greater than before, and the rise in value may be maintained. And just so, _mutatis mutandis_, of a fall in the purchasing-power of the coin. The production of the metals is thereby slackened at the mines, and the lessened Supply tends naturally to enhance the value; and if the same amount of business is to be done as before, there is a stronger demand for money while the fall continues, and this new Demand helps also to bring back the old value. All this is in the interest of a steady value. (f) On account, lastly, of this Circumstance, that a stronger Demand for Money is met in either one of two ways, by increasing the stock of coin, or by an increased rapidity of circulation of that on hand. It is exceedingly fortunate that a brisker demand for money, especially if it be but temporary, does not necessarily enlarge the Supply or alter the value, but only hurries round the existing money. Oscillations in the Demand are responded to by a slower or a more rapid circulation. This tends admirably to keep the value of the existing-stock of money steady within certain limits. Ignorance of this principle, or indifference to it, has caused mighty mischiefs in the United States. In General Grant's administration, for instance, the cry that a larger _volume_ of money was needed "_to move the crops_" was disastrous in its results. The truth is, that the volume of Money in the United States was then, and has been ever since, by much too great, considering its character, as we shall see by and by. The multiplying and fructifying nature of Rapidity of Circulation has never been understood by our national financiers. When, however, enterprises are multiplying and Exchanges are being permanently increased in number and variety, then there must be a larger volume of money, and this larger amount is secured in the ways already indicated, with perhaps slight disturbances of value, but the temporary ebbs and flows of business should have no effect at all on the mass of money, but only on its movement, and its value consequently would scarcely be disturbed. These Six grounds appear to be satisfactory and sufficient to account for the superior steadiness of the value of gold and silver, so far as their value is determined by considerations relating to these metals themselves. We now proceed to the two reasons additional to this why gold and silver constitute the best Money. (2) The second general reason why gold and silver make the best money is found in the fact _that Governments have little to say or do about the Value and Quantity and Mode of Circulation of such Money_. In respect to Credit-Moneys, like our own Greenbacks and national Bank-Bills, the Government has everything to say. When we remember how governments are constituted, that they are only a transient Committee of the citizens for special purposes; of what sort of persons they commonly consist; the variety of subjects they are obliged to consider during short periods of office; the absence for the most part of expert knowledge among them; the enormous blunders they have made in the past in all financial measures; and that those who know the most about their action in the past and present in such matters have the least confidence in their ability to act wisely; the better we shall see the strength of the grounds of this second reason. In all essential respects money of gold and silver regulates itself. These metals came to be money and continue to be money in the main sense independent of the enactments of any Government. The people chose them: they choose them still. As we have seen, coins do not owe their value to the stamp of the Government, since the metal in them is worth within a trifle as much before coinage as after. Coinage publicly attests the quantity and quality of the metal in the coin, and that is all. Of the value of their coins governments say nothing. They can say nothing. That depends on men's judgments, and not on edicts at all. No law of the United States can add directly an appreciable fraction to the value of a gold dollar. The law makes it consist of 25-4/5 grains troy of gold 9/10 fine, the mint so stamps and attests it, and thereafter it takes its own chance as to value. Some Governments charge a little something for coining for their People, and some do not. What is charged is called _seignorage_. England coins gold for all comers at a seignorage of .032%, which is practically a free coinage. France charges for gold .216%; and by the law of 1874, the United States charge nothing for coining gold. It is left to the People to say _how much_ money they will have coined; and, having received it back from the mint, they may do just what they please with it; they may hoard it, they may melt it, they may sell it at home in purchase, and they may export it in foreign trade, at will. Now, it is a great gain, an immense relief, to have a Money with which the Government has nothing to do except to mint it; a money that asks no favors, needs no puffing, never deceives anybody, knows how to take care of itself, is always respectable and everywhere respected. (3) The last general reason why gold and silver make the best Money is to be found in their physical peculiarities, in accordance with which they are (a) _uniform in quality_, (b) _conveniently portable_, (c) _divisible without loss_, (d) _easily impressible_, and (e) _always beautiful_. Pure gold and pure silver, no matter where they are mined, are exactly of the same _quality_ all over the earth. Not so with iron and coal and copper. Gold is gold, and silver is silver. The gold mined to-day in California differs in no essential respect from the gold used by Solomon in the construction of the Temple, and the silver out of the Nevada mines is the same thing as the silver paid by Abraham for the cave of Machpelah. Nature with her wise finger has thus stamped them for the universal money; and a universal coinage, that is, coins of the same degree of fineness, and brought into easy numerical relations with each other in respect to weight, and current everywhere by virtue of universal confidence in them, though bearing the symbols preferred by the nation that mints them, is one of the dreams and hopes of economists, that will be realized in some "Fair future day Which Fate shall brightly gild." Gold and silver are sufficiently _portable_ for all the purposes of modern Money. Their weight is little relatively to their value. A thousand dollars in gold are not indeed carried so easily as a Bill of Exchange or a Bank-note; and expedients are easily adopted, and have been in use since the days of the Romans (really since the later days of the Assyrians), by which the transfer in place of large masses of coin is for the most part obviated; and these expedients have all been explained at length in the foregoing chapter on Commercial Credits. But for the ordinary exchanges for which they are designed, gold and silver coins are portable enough. The writer has carried across the ocean, incased in a glove-finger and borne in a vest-pocket, a troy pound of English sovereigns, worth about $230, scarcely conscious of their weight though easily reassured of their presence by a touch of the hand. The experience of those countries, like France and Germany, in which the Money has been and is still mostly metallic, has not pronounced it onerous on account of its weight; and, at any rate, it is better to accept all the other immense advantages of gold and silver money, together with some inconvenience as to weight, if one chooses to insist on that, than to adopt substitutes every way inferior as money, except that they are lighter in our purses. They are unfortunately "lighter" in other respects also. Moreover, gold and silver differ from jewels and most other precious things, in that they are _divisible_ without any loss of value into pieces of any required size. The aggregate of pieces is worth as much as the mass and the mass as much as the pieces. This is a great advantage in Money, because for the convenience of business a considerable variety of coins is required, and the proper proportion of each kind to the rest is a matter of trial, and if any kind be minted in excess of the demand nothing more is required than to remint in other denominations, and the whole value is thus saved to the country in the most convenient form. Then, gold and silver are easily _impressible_ by any stamp which the Government chooses to put upon them. Indeed in their natural state they are too soft to retain long the impress of the die. Accordingly for coinage purposes they are always alloyed with another metal, chiefly copper, since by a chemical law whenever two such metals are mixed together the compound is harder than either of the two ingredients. Most of the Nations now use in their gold and silver coins 1/10 alloy, but England still adheres to her ancient rule of 1/12 only. So compounded coins receive readily and retain for a long time with sharp distinctness the legend and other devices chosen for them to bear. In monarchical countries the head of the reigning sovereign is usually stamped upon the current coins; in all countries national emblems of some sort; quite recently some of the coins of the United States have been made to bear the appropriate legend "In God we trust"; so that patriotic and even religious associations are connected with the national Money. Although the alloys harden the coins, yet after long usage they will lose a part of their weight by abrasion, and Governments usually indicate a short weight, after coming to which the coins are no longer a legal tender for debts. Thus an English sovereign weighs 5 pennyweights 3-171/623 grains, containing 113-1/623 grains of fine gold, and when it falls below 5 pennyweights 2-3/4 grains, it loses its legal-tender character. Lastly, gold and silver when coined into Money are objects of great _beauty_. This is no slight recommendation of these metals for the money of the world. They are clean. They are beautiful. People like to see them, and to handle them, and to have them. Their perfectly circular form, the device covering the whole piece, the milled and fluted edges, the patriotic emblem, whatever it be, the religious or other legend, and their bright color, are all elements in their beauty. The educating power over the young of a good coinage well kept up, æsthetically, historically, and commercially, is a matter of consequence to any country. A whole people handling constantly such money cannot fail to receive a wholesome development thereby. The new German coinage, for example, in contrast with the old moneys of the German States, furnishes a good illustration of all this. The new German coins from highest to lowest are very beautiful, and have already tended and will tend more and more, other things being equal, to a true German nationality. 11. Silver is much inferior to gold as a metal for Money, for this main reason, that it has proved itself much less steady in its general _value_; and its value is less steady, because it is subject to greater changes in its Supply and greater variations in its Demand. As an example touching Supply, we cite the fact, that the annual silver product of the world _doubled_ in the third quarter of this Century, rising from an average of $40,000,000 yearly, 1851-61, to $80,000,000 in 1875; and that Nevada alone yielded in 1876 as much as the whole world yielded twenty years before. Then, too, Demand, that is, effective public opinion, does not hold to silver as it does to gold for a standard of Values. The action of England in 1816, of the United States in 1853, of Germany in 1871, of Scandinavia in 1874, and of the Latin Union in 1876, _in legally making gold the sole standard of Services and silver subsidiary to that_, of course affected more or less the Demand for silver as Money, and thus varied its value. We have at hand the data to demonstrate the effect of these two causes combined: the average price of silver in gold from 1833 to 1874, in the London market, which is the bullion market of the world, was for the 40 years just about 60 pence per ounce, never falling below 58-1/2 and never rising to 63. At 60 pence per ounce (444 grains of pure silver, standard English silver being .925 fine) the ratio of gold to silver is 1:15.716. But between May, 1875, and July, 1876, when both the above causes had come into full action, silver dropped in the London market to 47 pence per ounce, a fall of 21%, and a ratio of gold to silver of 1:20. The price gradually rose again to about 53 pence per ounce, and remained in that general neighborhood till 1882, between which date and 1890 the _sagging_ process went on to the general result of 25% discount as compared with the old average of 60 pence in gold per ounce of silver. These facts settle the question adversely to the fitness of silver to become an independent Measure of Values. When, however, it is designed that gold and silver shall circulate together in some numerical relation to each other as Money, it becomes needful that Government shall fix as well as it can, not the general value of either but the relative value each in each for the time being. But this specific value, too, goes on to regulate itself independently of government edicts. No matter how well the work is done at first by ascertaining the actual ratio in which they are exchanging in a free market, it will certainly require revision from time to time. This is what is called _Bimetallism_. The reader will now perceive the fundamental and ineradicable difficulty with the bimetallic system, which has led by bitter experience nearly all the European nations to abandon it. It especially becomes us to understand how the United States have fared in a century's attempt to keep _in equilibrio_ as a conjoint and legal Measure of Services both gold and silver in a fixed numerical relation. Alexander Hamilton as the first Secretary of the National Treasury, entering upon excellent preparatory work done both by Robert Morris and Thomas Jefferson, guided the action of Congress in establishing the Mint in 1792, and really determined the weight and fineness of the first federal coins and their relative value each in each, the silver coins being struck in 1794 and the gold ones in 1795. The silver dollar was copied from the Spanish milled dollar of commerce, which contained 371.25 grains of pure silver, and that has been the exact content of our national silver dollar from that day to this. The halves and quarters and dimes were exactly proportioned in weight and fineness to their units. Hamilton supposed that gold was then worth in Europe 15 times as much as silver, and advised consequently that the gold dollar should contain 24.75 grains pure, and that both dollars should be alloyed at the English rate of 1/12, thus making the silver dollar weigh 405 grains and the gold dollar 27 grains; but Congress, while enacting the gold dollar just as the Secretary recommended, preferred to _alloy_ the silver dollar by 44.75 grains instead of 33.75, thus making its weight 416 grains. Alloy is of no account in value. From the ratio of 1:15 fixed by the act of Congress in accord with Hamilton's opinion as to the relative value of gold in silver to be maintained in the coins, unforeseen and important consequences followed, since that was not the true ratio of their value at the time in the markets of the world; an ounce of gold was worth more at that time than 15 ounces of silver, and, accordingly, was worth more out of the coinage than in it, and was therefore exported in preference to silver in payment of foreign balances, especially after France had changed the relative legal value to 1:15-1/2, which happened in 1803; and of course the gold refused to circulate here under those circumstances, being _undervalued_ in the coinage, thus giving a neat illustration of the economical law to be unfolded under the next numerical heading, namely, that the cheaper money will always push the dearer out of the circulation. Not till 1834 was the attention of Congress so strongly drawn to this fact and consequence, as to secure an enactment to remedy it; and this coinage law of 1834 rated gold to silver as 1:15.98. The weight of the gold dollar was at the same time reduced from 27 to 25.8 grains, and the alloy increased from 1/12 to 1/10. These changes of 1834 increased the relative legal valuation of gold in silver 6.53%. But this in turn was going too far in the opposite direction; gold was not worth 1:15.98 in the bullion markets of Europe; France was holding steady her ratio of 1:15.50; and, consequently, the commercial current of the metals was now reversed, silver passing in preference to Europe to liquidate the balances of trade, and gold beginning to come to the United States, where it would buy more than 3% more silver than in Europe. Three years after the above changes, that is, in 1837, the standard of 9/10 fine instead of 11/12 was applied by law to silver also, and this altered fineness made a change in the weight of the silver coins necessary, if the ratio of 1:15.98 was to be maintained between the gold and silver. Accordingly, the weight of the silver dollar, and of two halves, four quarters, and so on, was reduced from 416 grains to 412-1/2, that is to say, less alloy was put into the silver coins, but the fine silver to the dollar was kept just as it was, namely, 371.25 grains. Since 1834 there has been no change in the gold dollar and its multiples, and since 1837 there has been no change in the silver _dollar-piece_, and the legal ratio of value between gold and silver in our coins is still 1:15.98, since the silver dollar of 1878 and onwards to 1890 corresponds in weight and fineness with the dollar of 1837. Still, notwithstanding the pains taken and the changes made from time to time to keep the two metals in legal _equilibrio_, there never has been any considerable period in the century now drawing to a close, during which gold dollars and silver dollars have circulated freely and indifferently in the United States. Sometimes it has been the one kind, and sometimes the other kind, but never both kinds at the same time. The present writing is in the spring-time of 1890: both kinds of dollars are legal tender for all debts public and private in the old-time ratio; the national Government professes to be indifferent whether it pay out gold or silver in redemption of its paper-moneys, but after all, with the exception of the Pacific States and a few special branches of business in the cities of the East and of the Middle, gold coins are not now in common circulation, the bank drawers crowded with silver dollars feel little of the weight and see little of the shine of the gold coins, and if any of these chance to be paid out to ordinary bank-customers they are pretty certain to return in speedy deposit. The theoretical bimetallism of the United States has been a practical though alternate monometallism with various incidental and concurrent disadvantages and losses. By 1853 these disadvantages of a long-attempted double Measure of Services made legal tender for all debts had become plain enough to everybody, for experience had demonstrated that the Value of gold and silver each in each was not constant but constantly variable; and Congress then wisely determined to make Gold alone the legal tender, except in sums below $5. In connection with this great change in the coinage, a lesser one was introduced at the same time, namely, to reduce the weight of the silver half-dollar and its subdivisions, so that their nominal value in the coinage should be considerably above their metallic value, and their exportations be thus prevented. Accordingly, the half-dollar was reduced in weight from 206-1/4 to 192 grains, and the smaller coins proportionally. This was in imitation of the English legislation of 1816, and brought into this country a _subsidiary_ silver coinage, which still continues, and of which a nominal dollar's worth weighed 6.91% less than the Silver Dollar, which was not mentioned one way or the other in the law of 1853, but which was then worth about three cents more than the gold dollar, and was of course wholly out of circulation. Through the influence of the late Samuel B. Ruggles, these subsidiary silver coins were brought in 1875 into harmony with the silver-system of France and the Latin Union. Their five-franc silver piece which is also 9/10 fine, weighs just 25 _grams_ or 385.8 _grains_; a dollar's worth of our subsidiary silver, as we have just seen, weighed 384 grains; and it was, therefore, needful to add only a slight fraction of weight to our smaller silver coins in order to knit a real connection between them and much of the European silver. Two halves, four quarters, ten dimes of our silver since 1875, are debased in weight (not in fineness) 6.47% as compared with the standard silver dollar. A more important coinage connection with Europe was knit through our first five-cent nickel pieces, each of which weighs just five _grams_, and five of which laid along in order measure exactly a _decimetre_ in length. These were the first official applications of the Metric System on the part of the United States. The nickel pieces, both the five-cent and the three-cent, are 75 parts copper and 25 parts nickel; and the one-cent piece is 95 parts copper and 5 parts tin-zinc. Debts of 4 cents can be legally paid in one-cent pieces, of 60 cents in three-cent pieces, of 100 cents in five-cent pieces, of 500 cents in _subsidiary_ silver, and of any amount in gold coins or in silver _dollars_. 12. _A money inferior in general value will, so long as it circulates locally, drive a superior money out of the circulation._ This proposition is a fundamental and universal one in monetary Science. The only exception to it is found in _token-coins_, and in subsidiary silver so far as that has the _token_-quality, that is, so far as its _nominal_ is above its _bullion_ Value. The main motive in coining tokens is to make sure for its own local uses of a nation's small change. Token-money is worthless for export, is only designed for the smaller exchanges, is legal tender only for very small sums, and is acceptable only on local and conventional grounds. The exception aside, the above proposition is a pervading and controlling Law of Finance and has been illustrated over and over again in every Age and Nation. It is as solid as the substance of truth can make it, although it looks at first sight like a paradox. We naturally think that what is excellent all round tends rather to displace what is inferior in spots, but with Money the exact reverse is the law; and the perfect coin of full weight, instead of driving out the light and the debased pieces, is always itself driven out of the circulation by them. The reason for this becomes obvious the moment we ponder the nature of Money. Money is always a Valuable, taking on in addition under Law or Custom the function of serving as an instrument of Exchange. As money, nobody wants it except to buy with, and so long as the Government and the community treat light coin and full coin as of equal value, receiving them indifferently in payment of debts and of taxes, it is clear that nobody will give in payment of debts and of taxes that which is really worth more so long as that which is really worth less will go just as far. The inferior pieces will abide in a market where they will fetch just as much as the superior pieces, while the superior pieces will take on a form or migrate to a place in which some advantage can be gained from their superiority. Thrown into the crucible, or exported in commerce, this superiority immediately manifests itself; and therefore into the crucible or into the channels of foreign trade it might be confidently predicted beforehand that such money would be thrown, and all experience testifies with one voice that exactly those are the destinations of such money. Aristophanes, the Greek comic poet, in the 5th century before Christ, seems to have been the first writer who noticed that good coins of full weight are apt to be crowded out of the circulation by the lighter and poorer pieces, and he, mistaking the cause of this, satirized his countrymen unmercifully for preferring bad coins to good, and demagogues, like Cleon, to honorable citizens for rulers. The following are the verses:-- "Oftentimes have we reflected on a similar abuse, In the choice of men for office, and of coins for common use; For your old and standard pieces, valued and approved and tried, Here among the Grecian nations, and in all the world beside, Recognised in every realm for trusty stamp and pure assay, Are rejected and abandoned for the trash of yesterday; For a vile, adulterate issue, drossy, counterfeit, and base, Which the traffic of the city passes current in their place! And the men that stood for office, noted for acknowledged worth, And for manly deeds of honor, and for honorable birth; Trained in exercise and art, in sacred dances and in song, All are ousted and supplanted by a base, ignoble throng; Paltry stamp and vulgar metal raise them to command and place, Brazen counterfeit pretenders, scoundrels of a scoundrel race, Whom the State in former ages scarce would have allowed to stand At the sacrifice of outcasts, as the scapegoats of the land." Sir Thomas Gresham, financier of Queen Elizabeth and founder of the Royal Exchange and of Gresham College in London, was the first thinker to understand fully and explain scientifically what Aristophanes and others had noticed as a fact, and what in its explanation may hence properly be called "_Gresham's Law_." We will append a few historical illustrations of the fact and the law as instructive in many ways. (a) The City of Amsterdam founded its famous Bank in 1609, because no other way seemed to open of preventing the clipped and worn foreign coins then and for a long time circulating in that great Mart of Trade from driving out completely the good money of full weight, which the Mint of the City had been constantly pouring in. The Bank was devised as a municipal Institution with this intent; it was a Bank of Deposit only; it took in all the old coins at their _bullion_ value only; and then had them reminted at full weight; it gave the depositors credit on its books in the terms of the _new_ money for all of the _old_ they chose to bring in; it then adjusted accounts between merchants and all other of its customers by mere transfers on its books; the City required all debts falling due in Amsterdam to be paid in the new "bank-money," which took away all uncertainty from Bills of Exchange drawn on Amsterdam, which were previously liable to be paid in the clipped and worn coin, and were therefore sometimes at as much as 10% discount in other cities; this simple requirement brought these foreign bills to par, and kept them there; the full-weighted money now stamped by the city Mint abode in the circulation, being now the sole Measure of Services there; and thus it became the interest and convenience of every business man in Amsterdam to have these simple dealings with the Bank, which in turn enjoyed unlimited credit in the commercial world for almost two hundred years. (b) The great English Recoinage of 1696 was completed under the imperatives of Gresham's Law. Graphically does Macaulay describe the causes and the effects of this in his 21st Chapter. The old silver coins had been stamped under the hammer; few of them were perfectly circular; the edges were neither milled nor fluted; the legend was not so near the edge as that the letters were impaired by a little clipping; it was easy to pare off a pennyworth or two, and then pass the coins along; it was profitable to do it, and in vain that Elizabeth enacted that the clipper must suffer the penalties of high treason; nearly all the coin of the realm became mutilated, and about 1660 a new process of coinage was brought in. A mill worked by horses fabricated the new coins on better principles. They were exactly round, and the edges were inscribed with a legend, and they were all of just and equal weight. They were thrown out to pass current with the hammered money, and it seems to have been expected that they would soon come to displace it. But they did not. Both were received at first without distinction by the individual traders and by the public tax-gatherers. But the milled money soon came to be scarce, and the old money grew constantly worse. The lighter the old coins became, the scarcer became the new ones; for who would pay two ounces of silver when one ounce was legal tender? The new money was melted, was exported, was hoarded, but circulate it would not. At length the lightest pieces began to be refused by some people, and other people demanded that their silver should be paid to them by weight and not by tale, and there was wrangling over every counter, and a dispute at every settlement, and the coin was really so diverse in its value that there was no longer any measure of value in the kingdom; business was in utmost confusion, society was by the ears, poor people were unmercifully fleeced, and shrewd ones grew enormously rich; and the Jacobites secretly exulted in the hope of being able to avail themselves of the prevailing discontent to overthrow the scarcely established revolutionary government of William and Mary; when, by the joint counsels of two such philosophers as Locke and Newton, and two such statesmen as Somers and Montague, the government took the bold resolution of recoining all the silver of the kingdom. An early day was fixed by Parliament after which no clipped money could pass except in payments to Government, and a later day after which it could not pass at all. (c) Gresham's Law has had beautiful illustrations in the monetary history of the United States. We have already seen the reason why the first silver dollars of 1794 could not compete in currency with the gold coins of 1795,--the silver was under-valued in the legal ratio 1:15,--it would have been much nearer the European market at 1:15.5. There was another reason operative in the same direction from the beginning, which did not, however, come to the notice of the Government till ten years later. Only 321 silver dollar-pieces were coined in the year 1805; and May 1, 1806, there stands an order from President Jefferson to the Director of the Mint,--"_that all the silver to be coined at the Mint shall be of small denominations, so that the value of the largest pieces shall not exceed half a dollar_." The presidential reason given for this order is,--"_that considerable purchases have been made of dollars coined at the Mint for the purpose of exporting them, and that it is probable that further purchases and exportations will be made_." The coinage of silver dollars thus suspended was not resumed for 30 years. What was the matter with these dollars? Nothing, only they were too valuable. Hamilton had adopted for his new dollar the exact weight in fine silver of the normal Spanish-Mexican dollar, then and for a long time the unit of the thriving West India commerce; clipped and worn coins of this popular stamp had slipped into circulation in large numbers throughout the United States, and driven out the new and good pieces in accordance with a principle much better understood now than then; the President's order itself was not very intelligent, inasmuch as two halves, four quarters, or ten dimes, were then equal in weight and purity with the dollar-pieces, and as a matter of fact were almost (if not quite) equally driven out by the smaller Spanish-Mexican coins. The "four-pences" and "nine-pences" ("York shilling") of that coinage were almost exclusively the small change of New York and New England during the first half of this century. The "dimes" and "half-dimes" of our own mintage, though long legalized, were but slowly naturalized. The coin-changes of 1853, already described, gave a fair chance for the first time to our smaller silver coins. The last native illustration of Gresham's Law will force us to anticipate here the discussion under the next numerical heading, so far as to assume that there is such a thing as paper money, and that the Law now in hand works in connection with that as well as with diverse forms of metallic money. In 1862, Treasury notes, commonly called Greenbacks, made a legal tender for debts though not bearing interest, were issued by the national Government to the amount of $450,000,000. Of course, under these circumstances they depreciated in value as compared with the gold dollars, which gold dollars _they were unfulfilled promises to pay_. Just so soon as the greenback dollars fell fairly below the gold dollars in value, the latter left the channels of trade in a very few days' time. Down sank the greenbacks gradually below the _subsidiary_ silver coins in value, and the latter obediently and utterly abandoned the commercial field. At last the greenbacks went down even below the level of the copper cents, which at that time cost the government about half a cent each, and this invariable law of money swept the circulation bare of coppers, and the people had to resort for their smallest change to postage-stamps and shin-plasters and other abominations. Happily, the country survived to see these processes exactly reversed, and the old law confirmed on its other side. When, after a considerable interval, the paper dollar appreciated to the proper height, it was interesting to watch the copper cents put in a prompt re-appearance; after a still larger appreciation of the paper, back came in abundance the subsidiary silver; and as the day of the redemption of the paper drew near, silver dollars and gold dollars greeted smilingly their old acquaintances of the street. 13. So far we have treated only of Coin-Money in its two forms, _substantive_ and _subsidiary_. The latter may now be dismissed as of little consequence in itself, and as already elucidated fully: the latter is the only Money that stands in its own right as a _commodity_, and the only Money that can give birth to the _Denominations_ of Value, such as sovereigns, dollars, marks, and francs. _What is a Dollar?_ A dollar is 25-4/5 grains of a metal compound coined, of which nine parts are pure gold and one part a hardening alloy. It is a definite _quantity_ of a thing definitely and legally described. It is a visible and tangible and well-known _commodity_. Government is competent, if it pleases, to alter the quantity of gold that shall constitute a dollar, although the People will quickly and roughly readjust the prices of Services to a changed measure of them; it is competent even to make a dollar out of silver, as our Government has tried to do (for the most part vainly) for a century, though it is _not_ competent to cause both dollars to circulate as such at the same time; but civilized and advanced Governments are not practically competent to make a Dollar out of anything else than gold and silver. Money is a current and legal Measure of Services; for the end and in the way in which Money alone originates and becomes current its material must be a valuable commodity; and after centuries of experiments and exclusions no civilized People now tolerate any other commodity in this relation than gold or silver. Such a selected commodity becoming in the manner already explained an actual medium passing from hand to hand in Exchanges, impresses its _name_ on the minds of men as an ideal _measure_ of services, which measure they can use, and do constantly use, without handling at the time the commodity itself. But these ideal-dollars, these denomination-dollars, need to be kept in check by a constant recurrence to actual, palpable thing-dollars. The denomination only comes into existence in connection with the use of the thing, cannot possibly exist independently of it, and needs constantly to be reduced to it (as it were by actual contact) in order to be useful as a measure. Just as men talk about inches, and calculate by inches, in thousands of cases in which no actual inch is used as a measure, and in every case of doubt, dispute, or difficulty have recourse to the actual inch, and thus the ideal inch is kept steady in the minds of men by frequent reference to the outward standard; so the mental measure of services, which men insensibly acquire from the use of the objective measure, needs to be kept true by actual and frequent contact with that measure. But besides this Thing-Dollar and its Denomination, which always go together like a man and his shadow, there is one other kind of Money, namely, the Promise-Dollar. We must now attend to this. What is a Dollar-Bill? How does it read? It is always a Promise of some Issuer to pay to bearer One Dollar, that is to say, this legal and definite quantity of a precious metal. There is no mystery here. There can be none. A Dollar is a tangible and weighable commodity. A Dollar-Bill is a Promise to render this commodity to bearer on demand. The difference is the same in kind as that between a bushel of corn and a man's promise to his poor neighbor to give him a bushel if he will come for it. It depends on the _man_, on his ability and character, how much the corn-promise is worth; and so it depends on the _issuer_, on his ability and character, how much the coin-promise is worth. The Issuer may be of such standing as to be able to secure for his promises that they become "a current and legal measure of Services"; and if so, they become Money under the definition. There is, then, such a thing as Paper-Money, though many high authorities are reluctant to concede, that any mere promises can be money at all. For ourselves we cannot refuse the courtesy of the term "money" to paper-promises-to-pay-coin, which our Country makes a legal tender for all debts, public and private. The making them legal tender, however, does not alter their nature one particle. They are still promises,--and nothing more. Their _Value_ depends in all cases upon the character and resources of the Issuer; their _Currency_ may be quickened (at some rate of value) by their being made a legal tender. Nothing can by any possibility become a Money unless it first be a Valuable. The essential characteristic of Money is its possession of a _generalized_ purchasing-power. The Value of a promise depends on one set of causes, with which we are now very familiar,--the same causes on which the value of everything depends; the Generalization of any purchasing-power into money depends upon another set of causes, of which the action of a Government in legislation may be one. Paper-Money, as now defined, may be issued by Banks with or without an indirect government sanction, or through the direct action of Government. The Bank of England has been issuing since 1694 paper-money under a series of Charters granted by the Government, which becomes thereby in a manner responsible to the bearers for the redemption, that is, the fulfilment, of the direct promises of "The Governor and Company of the Bank of England"; since 1863 the so-called National Banks of the United States have issued promises-to-pay, designed to circulate as money, under the direct authority and quasi-endorsement of the national Government; and since 1862 that Government has been putting out directly its own promises commonly called "greenbacks." These last have rested and now rest for their value solely on the good faith of the People as between themselves. By a separate and additional act of legislation, which it is mischievous as well as unscientific to confound with the original promise-legislation, this particular paper-money was and is legal tender for debts, which collateral circumstance whether wise or unwise neither changes the nature nor lessens the obligation of the original promise to pay coin. No so-called Decision of the Supreme Court can abolish or abridge a natural and scientific distinction. Money is at bottom of two kinds only: the first kind is an intermediate and equivalent merchandise, COIN; and the second kind is Promises to pay this to a bearer on demand, PAPER MONEY. The only way to make any promise respectable is to fulfil it in due time. The only way to make Paper Money a decency is to hold sacred in action the promise that distends it. The United States undertook in 1862 and onwards to make its own plain promises respectable by a different method, namely, by legally asserting in substance that the _promise_ is its own _fulfilment_, and needs no other; and in this persistent undertaking encountered a miserable failure throughout; because the People also persisted in _estimating_ the promise solely in the light of the _prospect_ of its literal fulfilment. The greenbacks at one time lost two-thirds of their normal value under the working of such estimation. This question of the relation of two kinds of Money to each other is a question of Economics, and not of Constitutional Law; or rather, it is a question of common sense and common honesty, and the judgment upon it of nine men learned in the Law is no whit better than the judgment of nine other intelligent men. As Money is analyzable into two varieties only, Coin and Paper, so Paper Money falls into two classes, Convertible and Inconvertible. A convertible paper money consists of promises that are always _kept_ by the issuer according to their terms, that is to say, that are paid in specie at the will of the holder. An inconvertible paper money is only another name for unfulfilled promises. Is it any wonder that unfulfilled promises to pay invariably become less valuable than _that_ which they promise to pay? They are valuable to start with, else they could not become money, and they are valuable because men suppose the promise will be kept: they are commonly valueless to end with, because men lose faith in the fulfilment of a promise long delayed. This is the simple secret of the depreciation of inconvertible money so soon as the amount of it passes a certain limit, and so soon as a certain time has elapsed after its issue and the issuer shows no signs of keeping his word. As money is only a measure of Services, and as possible Services are limited at any one time and place, and consequently as the amount of money needed for healthful business is limited also, a steadily convertible paper money, provided the limit of quantity be not overpassed, will constitute a tolerable money. But this limit of quantity is apt to be overpassed, whether the paper money be convertible or inconvertible, and especially in the latter case, because the temptation to issue promises to pay in excess of the means of promptly redeeming them always besets the issuer on account of the _gain_ to him in such issue at least for a time. This temptation has been yielded to first or last by every nation, and probably by every corporation, that has ever issued paper money. The Bank of England has been on the whole the best managed Bank of Issue in the world, and its Bills (Promises) have gained the most confidence and the widest circulation. This is because they have been kept by the Issuers _convertible_ from the beginning, with the exception of two comparatively brief intervals of time. As already related under the last general proposition, the silver coins of the realm were much worn and clipped when the Bank was established in 1694, the Bank, however, had received them on deposit of customers at their full nominal value; but after the Recoinage began in 1696, it was obliged under the law to redeem its Bills in new coin of full weight, that is, for perhaps 9 ounces of silver received, it was now bound to pay 12. Consequently its enemies, the Jacobites, made a "run" upon the Bank by collecting up its Bills to a large amount and presenting them for payment. The Bank was obliged to suspend payment, at first partially, and then generally. In February, 1697, the Bills were 24% below par. The Promises could not be kept, and therefore they drooped in value according to man's estimation of the probability of their becoming again _convertible_, which happened in the course of that year under a new charter and privileges from Government to the Bank. Just 100 years after the first suspension of specie payments, in 1797, when the War of the French Revolution made such demands upon the English for money, the Bank broke its solemn promises the second time, and did not formally resume payments until 1821. Government and the business men of London did their best to hold up the credit of the notes during the suspension, _but they were not made a legal tender for debts_. Government received them at par for taxes, and provided that business payments in notes would be held as payments in cash if offered and accepted as such. Debtors, having tendered bank notes, which the creditor refused, had certain privileges before the law which other debtors had not. The notes therefore had a _quasi_ legalization, but not a forced circulation. The bank was also authorized at this time to issue £5, £2, and £1 notes. Cautiously issued at first, bank paper continued at par for several years after the suspension, which proves that when government possesses the monopoly of issuing paper money, and carefully limits its quantity, and both receives and pays it out at par, it may keep an inconvertible paper at par, or even by sufficiently limiting its quantity carry it above par. But this truth does not make an inconvertible paper a good money, because it does not make it a self-regulating money, and because government is not wise and firm enough to fix and maintain a proper limit. Though Parliament intended in successive acts to confirm to the Bank of England the monopoly of banking by enacting that no partnership of more than six persons should take up money on its own bills, yet the common law assured to private persons and smaller partnerships the right to do this; and private bankers multiplied after the suspension, since they were allowed to pay their notes in Bank of England notes. Thus the quantity of paper money gradually increased till in August, 1813, the Bank of England notes were at 30% discount in gold. The United States, both as Colonies and as a Country, have had varied and instructive experience with inconvertible paper Money. We will glance at two or three specimens only. The first issue of Treasury Notes, commonly called Greenbacks, given by Congress the quality of legal tender for all debts, public and private, except duties on imports and interest and principal of the national bonds, was made in April, 1862, and was justified in Congress and out solely as a war measure. An aggregate of $450,000,000 was put out in all, of which $87,000,000 were afterwards taken in, and the balance was still circulating in 1890. In one month after the first issue of $150,000,000, these greenbacks began to droop in value as compared with gold; in four months, when the second batch of $150,000,000 was authorized, their depreciation was already marked and firm; and in nine months, when President Lincoln reluctantly gave his approval to the third issue of the same amount in order to pay off the soldiers and sailors, he uttered a solemn protest against the policy of thus inflating the current money, which, he said, "_has already become so redundant as to increase prices beyond real values, thereby augmenting the cost of living to the injury of labor, and the cost of supplies to the injury of the whole country_." In March, 1863, $50,000,000 of paper promises for fractions of a dollar were authorized, redeemable in sums of not less than three dollars in greenbacks, and receivable for all dues to the United States less than five dollars, except for duties on imports. Subsidiary silver coins have since taken the place of these fractionals. In July, 1863, the greenback dollar had lost one-quarter of its nominal value; in July, 1864, it had lost almost two-thirds of its nominal value, as its lowest point was reached in that month, namely, 35 cents as compared with the gold dollar; in July, 1865, it had risen to 70 cents; in July, 1866, it stood at 66 cents, just two-thirds of a dollar proper; and from that time it slowly rose, with many fluctuations, till New Year's, 1879, when it became legally and actually redeemable in gold and silver. Its variations for the sixteen years, however, cannot be counted by the number of years, nor even by the number of days; for they were numerous on each business day, and, as Comptroller Knox says, "_can only be numbered by tens of thousands_." What a Measure of Services that was! Between 1863 and 1879 the Bills of the new national Banks were redeemable in the greenbacks only, that is to say, one species of national promises-to-pay were paid on demand by another species of similar promises, both alike inconvertible into coin; and, as a natural consequence, the bank-bills bobbed up and down in value in servile obedience to the inconvertible legal tenders. Massachusetts Colony was the first constituent of the present United States both to mint silver, and to issue irredeemable promises to pay it. Under the false impression that only Money made inferior to Sterling would stay in the Colony, Massachusetts began to mint in 1652 silver shillings and sixpences and threepences purposely debased in weight (including seigniorage) 22% below sterling. The silver for these coins came in mostly from the trade with the West Indies, to which were now shipped peltry, fish, various forms of lumber, beef, pork, pease, cattle, and horses, for which they took mainly sugar, molasses, rum, and silver. "_They would have brought more silver and less rum and other merchandise, had the first been in greater request at home._" (Bronson.) John Hull, the mint-master took out 15 pence out of every £ for his own pay, and grew rich by the process. That was over 6%. In 1662, a twopenny piece was added to the series, and the mint existed (sometimes idle) for over 30 years, but all the pieces coined bore the dates of 1652 or 1662. This paucity of dates is commonly and perhaps properly accounted for on the ground that coining in the colony was contrary to the prerogative of the Crown; but it is to be added that John Hull was not a man to get new dies so long as the old ones would answer his purpose. The law forbade the exportation of these pieces under the penalty of thereby forfeiting one's whole visible estate; because, though this money was much worse than sterling, there was a worse money than this circulating in the colony, and Gresham's law began to crowd it from the first, and to some extent it was both smuggled out and clipped down. But it furnished a sort of standard, nevertheless, and tended to keep the later money within distant sight of the silver, and became the reason why in New England there were six shillings to the dollar. The Spanish pillar dollar, which was the standard in the West Indies, was worth 4_s._ 6_d._ sterling; and in 1672 a law was passed in Massachusetts allowing these dollars to circulate at 6_s._ provincial, which was a discount on the home pieces of 25%. Ever after there were six shillings in a dollar in New England. Hull's money is called the "pine-tree" coinage, and was the only coin money minted in the country till after Independence. Also in 1690 Massachusetts set the first example, which was imitated 20 years later by the other New England Colonies and by New York and New Jersey, of issuing "Bills of Credit" to meet the expenses of the two disastrous Expeditions against the French in Canada. Those Bills were not made legal tender in private payments, and pains were taken to keep up their credit, but they were depreciated from the first, and came to be very much depreciated. Massachusetts and Connecticut made their bills receivable for taxes at a premium of 5%, laid special taxes for their redemption, and from time to time called in portions of the issues. In 1718 Connecticut enacted that a debtor tendering these bills should not be liable to legal execution on his estate or person for the payment of that debt, an expedient, as we have seen, resorted to by England in the great Bank restriction of 1797-1821. These early New England bills bore no interest, were not loaned out by the colony, and were a convenient though dangerous means of anticipating the income of future taxes; but after 1712 a paper money scheme originating in South Carolina came into favor in the colonies, which was, to open loan-offices for the issue of colony bills on the mortgage of land, the interest on which helped to pay the colony expenses, the principal of which at first, and on being paid back and re-loaned, furnished a capital to borrowers, while the bills themselves furnished a money for the people. Pennsylvania had the best luck with this scheme of all the colonies which tried it: as early as 1729 Benjamin Franklin became thoroughly possessed of John Law's notion, that paper money may be "based" on land or other valuables, saying in a pamphlet of that year that "_bills issued upon land are in effect coined land_": Pennsylvania bills nevertheless were at 46% discount in 1748. Some of the later colony bills bore interest, some were of a "new-tenor," so-called, designed to take up the old ones,--Virginia in 1755 made hers a legal tender for debts,--some were issued in bounties for Indian scalps and for various manufactures and fisheries, but all ran one road of depreciation and gave birth to one set of results. Connecticut managed her issues the best of the colonies, and yet Bronson says of the state of things in that colony in 1749, "_Trade was embarrassed and the utmost confusion prevailed: no safe estimate could be made as to the future, and credit was almost at an end: no man could safely enter into a contract which was to be discharged in money at a subsequent date: prudence and sagacity in the management of business were without their customary reward._" John Law, a shrewd Scotchman, born in Edinburgh in 1671, son of a goldsmith, with an innate talent for finance and well educated, was the first to give scientific form and color to the false theory that paper money _represents_ commodities of some sort, and may be issued to an amount equal to the value of these. "_Any goods that have the qualities necessary in money may be made money equal to their value. Five ounces of gold is equal in value to £20, and may be made money to that value; an acre of land is equal to £20, and may be made money equal to that value, for it has all the qualities necessary in money._" The fallacy in these words of Law is patent enough to any one who will stop to think a moment about the _nature of Money_. Because land, for example, has value, it does not follow that it has "_all the qualities necessary in money_"; and, as a matter of fact, it lacks the precise quality necessary in money, because, though it has purchasing-power, it cannot from its very form and nature become _a generalized and current_ purchasing-power. Money is indeed a valuable thing, but that does not prove that all valuable things can be money. With this radical vice of Law's view was wrapped up another, namely, that there may be in any country as much paper money as the sum of the values of all its valuable things. Now, we have learned perfectly, what escaped the acute intellect of John Law, that Money is only a valuable _measure_ of all other salable Services; and therefore, that the amount of it that can be made useful at any one time and place is strictly limited, and bears very little relation to the sum of the values present at that time and place. Scotland fought shy of Law's idea when he published it there in 1705, and so did Paris the first time he visited that city, in which and in other cities he gambled successfully and talked finance to princes and statesmen fascinatingly; but when he returned to Paris in 1715 with his ill-gotten fortune, he gained the ear of the Regent Duke of Orleans, who permitted him to found a bank there, in which were incorporated some sound principles of monetary science as well as the prime fallacy of his system. The bank bought a portion of the State Debt, just as the Bank of England had done, and laid in also a fair stock of coin, and thereupon issued a paper money. For a couple of years, or so, the bank surpassed all hopes, for Law had touched a spring till then but little known in France, the potent spring of Credit. But his whole thought, meditated on for years, could not be expressed through a private bank. The State should be a banker; it should collect all its revenues into a central bank, and attract the money of individuals to it as deposits; besides, the State has public property of vast value, on the strength of which paper money can be emitted and made legal tender; and thus the State, instead of borrowing, should lend to all on easy terms and the profits thus accruing would lessen or abolish taxes. Nor was this all. The State should also be a merchant; the whole nation should form a commercial company, a body of traders, whose common treasury should be the State bank. Commerce by individuals creates great wealth; why should not the organized commerce of a State make everybody rich? The discounts of the bank, and the profits of the trade, would surely provide for the public service without taxation. These vast ideas were actually carried out. Law's bank became the Royal Bank, issuing a paper money guaranteed by the State and resting back upon the value of all national property. The money was receivable in taxes, nominally redeemable in coin, and made a legal tender. It actually bore at one time 5 and 10% premium over gold and silver. People were anxious to exchange their coin for notes. Meanwhile a commercial company was formed in connection with the bank, to which the State ceded at first the monopoly of the commerce of Louisiana and of the Canada beaver trade for twenty-five years, and the soil of Louisiana forever; under the auspices of which NEW ORLEANS was founded, and named from the Regent, the patron of the grand system; and in succession, the monopoly of tobaccos, the rights of the Senegal Company, of the East India Company, of the China Company, and of the Barbary Company; until, having almost all the commerce of France outside of Europe in its hands, it entitled itself the COMPANY OF THE INDIES. Its shares rose from a par value of 500 francs to 10,000 francs, more than forty times their value in specie at their first emission. To support such speculations, which completely turned the heads of all classes of the people, the amount of paper money reached at last the sum of 3,071,000,000 francs, 833,000,000 more than had been legally authorized to be emitted. The collapse of this most gigantic bubble of history was terrific. Before the close of 1720, the shares of the Company could be bought for a louis d'or, or twenty shillings sterling, and the paper money of course became worthless. The ghost of John Law reappears gibbering and chattering in some human shape once in a generation or two in all civilized countries. In March, 1890, Senator Stanford of California, himself reputed to be worth $30,000,000, propounded the question in the Senate of the United States, whether it were not advisable for the Government to issue legal-tender notes on the basis of the real estate of the country. His interrogative argumentation implied, (1) that there was a scarcity of Money causing great hardship to individuals and depression to business, (2) that if national bank bills are properly issued on government bonds it is equally proper to base legal tenders on real property, (3) that there is no natural and strict limitation to the amount of Money in a country at any one time, and (4) that as far as he knows there may well enough be as much money in amount as the estimated value of the real estate. All this is John Lawism pure and simple. All this utterly ignores the nature of Money as a valuable measure of all other Services. It also ignores the truth, that an advancing country needs less rather than more Money in amount as it advances, because cheques and other forms of non-money Credits are constantly increasing both absolutely and relatively. It is because this Senator's monetary notions seemed to correspond with those of a majority of the Senate, that it is perhaps proper to give them here a moment's attention. These supposed legal-tender notes would be secured by a government lien on land and buildings, and by the direct credit of the Government as well; just as the national bank bills are secured by the bonds of the nation held in reserve for that purpose, and also by the direct image and superscription of Cæsar upon every bill. People holding mortgaged real estate could accept a non-interest bearing government lien instead of a 6% or 8% private mortgage, that is, could pay off their mortgages with the legal tenders given them by the Government, the latter taking the lien or new mortgage; and people owning real estate clear could, if they chose, execute a perpetual mortgage to the Government, that is, give up the fee simple to their lands, and receive legal-tender notes to the full amount in return. This would at least relieve the "scarcity" of Money! The volume of national Money at that moment was in round numbers $1,400,000,000; the assessed valuation of the real property of the country was at the same moment at least $15,000,000,000; so that, on this scheme, perhaps $10,000,000,000 of additional legal-tender Money could be issued! Here is paternalism and socialism and John Lawism all combined. Here is a Government of strictly limited and carefully enumerated powers, under a written Constitution as precise as language can make it, containing the solemn declaration that all "powers not delegated to the United States are reserved to the States respectively or to the People," owning or soon to own not only the railroads and the telegraphs but also the major part of the lands of a free country, and going into the mortgage business on the heroic scale! If this honorable Senator and his like-minded colleagues were tolerably familiar with the financial history of their country, and perhaps they were, they would have known that this precise scheme had had a practical trial in Rhode Island, just before the adoption of the national Constitution. The Legislature authorized the issue of $500,000 in scrip-money based upon the value of the real estate of the farmers of the Colony. The law required a mortgage for twice the amount of scrip-money based upon it, and it was therefore supposed the money would be as good as gold or better. But somehow or other the merchants of the towns could not see the matter in that light. The depreciation of the scrip-money began at once, and the prices of wares ran up in a way that should have set business in active motion, according to all the views of the "scarcity" school. It was therefore enacted by the Legislature, that anybody who refused to accept the scrip at its face value should be fined $500 and lose the right of suffrage! They made it a legal tender! But business refused to boom. The merchants shut up their stores, the farmers could not market their crops, and idleness and rioting set in all over the State. Then the farmers organized a boycott against the towns, and food became scarce. Meanwhile the mortgage legal tenders would not pass at the best for over 16 cents to the dollar! There was more of "enforcing" legislation, and appeal to the courts, but nothing could boost the mortgage-money. The chief result of the experiment was, that Rhode Island gained in this way the title of "Rogues' Island." No matter how good the cause, how patriotic the People, an inconvertible paper money is sure to run down at the heel. In June, 1775, one week after Bunker Hill, the Continental Congress voted to emit $2,000,000 in "Bills of Credit" issued on the faith of the "Continent." Eleven separate Colonies, New Hampshire and Georgia issuing none, began about the same time their revolutionary issues of the same sort, amounting in all during 1775-83 to $209,524,776. The vice of such irredeemable scrip is, there is no economical limitation of the Supply. The middle of 1777, when Burgoyne was prosperously advancing from Canada towards New York, saw a general fall of the notes both Continental and Colonial, and of course and in consequence a universal rise of the prices of other products. At the close of that year, the average depreciation from silver was not far from 3 to 1; at the close of 1778, it was not far from 6 to 1; at the end of 1779, it was about 28 to 1; the Continental press then rested, after $200,000,000 nominally had been put out, but actually about $40,000,000 more than that, a usual if not universal accompaniment of such issues. When the stuff dropped out altogether in the spring of 1781, the country found no more lack of silver for Money than Massachusetts had found in 1749, when and after she redeemed her outstanding bills of credit at 11 for 1 in sterling silver, £138,649 of which, the share falling to her from the capture of Louisburg, was shipped to the Colony in coin, and she became for the next 25 years the "Silver Colony." Assuming that only $200,000,000 Continental had been issued, Thomas Jefferson carefully estimated that the Nation realized from them $36,367,720 in specie value, or 18% of the nominal value. 14. Whether the Money of any Nation be coin or paper or both, when once it is in the hands of the People, Government has properly nothing to say _about the rate of interest at which one person loans this money to another_. Usury Laws so-called, prohibiting the lender from taking more than a prescribed rate % for the use of money loaned, under penalties sometimes of the entire interest and sometimes of the entire debt have disfigured the statute-books of all Nations and of all the States of this Union. Such laws cannot justify themselves for a moment in the light of sound principles of Political Economy. Their origin may be explained by a reference to two false views, now happily exploded. (a) The laws of Moses forbade to the Israelites the taking from one another any _interest_ on money loaned, but at the same time it allowed them to take such interest freely of strangers; the permission in the one case going to show that there is nothing in the taking of interest that is unjust or sinful, and the prohibition in the other being readily explainable from the general purpose of the municipal regulations of Moses, which was to found an agricultural and not a trading commonwealth, in which every family was to possess land that could not be permanently alienated or sold, in which it was a great object to maintain the personal independence and equality of these families, in which the law for the recovery of debts was very summary and effective, lessening the risk of losing the principal, and which was to be and was sedulously separated in its usages from the surrounding nations. It has been well understood for a long time that the municipal code of Moses was local and peculiar, not necessarily applicable at all to the circumstances of other States, and in no sense binding on the conscience of legislators; and yet there doubtless sprang from the prohibition referred to a prejudice against interest, and this prejudice was perhaps deepened in the Middle Ages and onwards by the conduct of the Jews themselves, who, in addition to their sin of persistently growing rich in spite of the endless disabilities laid on them by the people of Europe, always demanded, in accordance with the permission of their great lawgiver, a good rate _per centum_ of interest from those strangers to whom they became money-lenders. The Jews were everywhere hated, and consequently the usury which they practised was hated also. The fundamental absurdity of forbidding in trading communities the taking of interest on sums loaned to a borrower which he was at liberty to use for his own profit, deterred the nations from going to the length of prohibition, unless it might be in the case of the hated Jews. There is a clause of Magna Charta, interesting as showing how early the children of Abraham became the money-lenders of Europe, to the effect that, during the minority of any baron, while his lands are in wardship, no debt which he owes to the Jews shall bear any interest. (b) Governments formerly deemed themselves competent to determine and fix the _general_ purchasing-power of their own money. Even the Constitution of the United States uses this language: "to coin money, _regulate the value thereof, and of foreign coins_." There was formerly, and there is still to some extent, a curious and harmful confusion in the public mind in respect to this term, "the value of money." In the only proper sense of the term the _value of money_ means its power of purchasing services in general, and the value of money is _high_ when a given sum of it will purchase much of general services, and _low_ in the contrary case; and a high or low value of money in this true sense depends on a very distinct set of causes from those which determine the high or low rate of interest on money loaned; nevertheless, so long as governments supposed that they could regulate the former, it is very natural that they should also suppose that they could regulate the latter; and although all intelligent governments have given over the idea of being able to regulate the general value of the money they furnish to the people, many of them still adhere to the notion, equally false with the other, that they _are_ able to regulate the loanable value, or the rate of interest, at least to prevent any more than their prescribed maximum rate from being taken. A few simple considerations will sufficiently condemn all usury laws. (1) It is at once needless and invidious to deny by law to money-lenders, who offer just as honorable and useful services to society as any other class of men, the privilege of selling _their_ service for what it will bring in the market, while other men in every department of business are allowed to exchange their services on the best terms they can make without interference or control. Let us see precisely the nature of the transaction when one man loans money to another. It is a clear case of value. The lender does a service to the borrower, and for this service justly demands a compensation. The service is this: The lender might himself use the money to gratify his own desires. It is his money; he may use it, as he pleases, for his own gratification. Or he may himself employ it productively, and, at the end of the period, receive back his principal with the customary rate of profit. If he surrenders this advantage to the borrower, if he passes over to him the right to use this money, say, for a year, he practises what we call in Political Economy _abstinence_. For this abstinence he has a right to claim a reward, precisely as the man has a right to claim a reward who foregoes working for himself in order to work for another. This reward of abstinence is _interest_. The money-lender foregoes an advantage. He performs a service for the borrower; and, therefore, the right to interest stands on just as unassailable ground as the right to wages. Moreover, the loanable value of money varies under Supply and Demand just like other values; there are always those who want to borrow, and always those who want to lend; both parties must be assumed to know their own minds, and to be equally competent to make their own bargains; it is a case of mutual exchange for a mutual benefit, like all other trade; and the current rate of interest is determined at any one time by the actual free exchanges between borrowers and lenders. Now for any government to try to compel a lender by law to take only 6% when his money is worth 8, is a direct violation of the rights of property. It is a forcible and pernicious interference with the freedom of contracts. It is based on the false premise that the loanable value of money is uniform, and that government is competent to determine what it is. No value is uniform. And no government is competent to determine even the maximum price of money loaned, any more than the maximum price of commodities. (2) Usury laws are almost uniformly _disregarded_, both by the governments which make them and by the people for whom they are made. Indeed, such laws cannot be enforced in a commercial community. Common sense is outraged by a law which requires a man to part with his property at less than the actual value; and when common sense is against a law, it stands a slim chance of observance. If the legal rate be six, and the actual worth be eight, who lends at six? Not the banks. They require deposits of their customers, the use of whose money shall make up to them the difference between the legal and the actual rate. The modes of evasion are various, but they are adequate and universal. Besides, governments themselves have shown a noteworthy inconsistency in this matter, which incidentally proves the unsoundness of their whole action. While announcing pains and penalties to those who take more than a given rate, they are careful never to bind themselves down to any given rate. Governments are always more or less borrowers, and if usury laws are necessary in order to help borrowers in a pinch, there ought to be a clause in the organic law of every country, forbidding the government to pay and its lenders to take any more than a certain rate per cent. There is no such clause in any organic law. Governments wisely follow the natural market, and borrow low when they can, and pay high when they must. In the last months of Mr. Buchanan's administration, the United States paid 12% on a public loan, and could get but little at that. Sauce for the goose is sauce for the gander, and if usury laws are good for the citizens, some solid reason ought to be rendered why they are not good for the government. The truth is, they are not good for either, since natural laws are perfectly competent to regulate the rate of interest, and do regulate it substantially in spite of a factitious, impertinent, and mischief-making interference. (3) If Usury laws were _not_ disregarded, they would be even worse in their effects than they are now. We must suppose that their aim is to aid borrowers, and make it easier for them to contract loans. But are borrowers, as a class, any more deserving of the fostering care of government than are lenders? Even if it could make its interference effective, as it cannot, is there any reason why government, leaving these borrowers to make all other bargains, sales, and transfers according to their best skill and judgment, should rush to their rescue only when they propose to borrow money? If they are competent to do their other business for themselves, government pays their capacity a poor compliment in undertaking to help them in the single matter of making loans; and the borrowers in turn have reason to pray to be delivered from their friends, since they, of all others, would be the men especially injured if all the lenders obeyed the usury laws. Suppose that a borrower is in great need of a loan, and that for some reason his credit is now a little weak. Many men would be willing to loan him at 9%, which affords a margin for the extra risk, but at 6, which we will suppose the maximum allowed by the law, he cannot borrow a dollar, because his credit is not quite equal to the best. If, therefore, the lenders obey the law, he, and such as he, must fail. And because it is unlawful to take over 6% he will be obliged to pay those who are willing to violate the law 10 or 12, to compensate them for the risk and odium of such violation, while, under freedom, he could borrow at 8. Moreover, if the loanable value of money at the time be actually 9, while the law only allows 6, many men will attempt to use their own capital productively, who would otherwise loan it, in order to realize the high rate; and this action of theirs still further restricts the loan-market and makes it more difficult to borrow. If, then, the purpose of government be to aid borrowers, no means could be more unskilfully chosen for that end than to pass usury laws, since such laws, so far as they are obeyed, have necessarily the opposite tendency; and even when violated redound to the disadvantage of borrowers, so long as the laws themselves are popularly regarded as of any legal or moral force. In 1716, the Bank of England, as a great loaning institution, was exempted from the operation of all usury laws: why the bank only, and not other people as well, the Act of Parliament does not state. In 1867, the State of Massachusetts repealed all its usury laws, though 6% is to be understood in the absence of special agreement, and the result has been entirely satisfactory to all classes of the people. Rhode Island had done this previously, and Connecticut did it subsequently, and both have experienced equal satisfaction in the result. Other States will soon follow in their lead; and this relic of ignorance and prejudice will pass away. Adam Smith left the Wealth of Nations disfigured by the concession that governments might properly enough pass usury laws; but it is gratifying to be able to add that he was convinced of his error in that by Bentham's book on Usury, and fully acknowledged his conviction in the spirit of a genuine lover of truth. We conclude, then, that usury laws are needless, since interest, like all other prices, will perfectly adjust itself. They are disregarded, since lenders will loan or withhold their money according to their own keen sense of interest. They are pernicious, since they infringe the rights of property, and tend to prevent weak borrowers from having a fair chance in the market. The present writing is at midsummer, 1890; and, in order to complete the entire discussion so far as this country is concerned, it is needful to add, that, between 1878 (when specie payments were resumed) and 1890, the circulating medium of all kinds is proven by official statistics of the highest authority to have increased from $805,793,807 to $1,405,018,000, or more than 57 _per centum_. This circulating medium consists of six formal kinds; namely, gold, silver, greenbanks, bank-bills, gold-certificates, and silver-certificates. Each of these differs in important respects from each of the rest, but all come alike under our fundamental classification of Moneys, as either an intermediate merchandise or promises to render it. This increase is way beyond any increase in the population of the country, and way beyond any apparent or proven increase in the national business; while at the same time the banking facilities of the country, which always spare the use of Money by substituting cheques therefor in the wholesale business and in a large share of the retail business also, have been increasing in equal measure. The number of national banks, especially in the West and South, has been multiplying. The use of cheques has been enlarging in every commercial community in the land. Yet up to the present time all of this vast volume of Money has been kept at par with gold, and consequently at the highest state of efficiency for commercial purposes. What about the immediate future? Science is not prophecy except in a quite subordinate sense. Congress is loudly threatening at this very moment to more than double the enforced monthly coinage of silver dollars at the public expense for the sole benefit of a comparatively few miners of silver. If this threat be executed upon a long-suffering people of tax-payers, who will have no one to blame but themselves if they tolerate the outrage, Science is willing to venture the prediction, that the monetary standard here will drop from gold to silver within a twelvemonth or two; that general prices will rise much beyond the appreciation of money implied in that drop, though they will be illusory and gainless; that prudent debtors will hold high carnival for a time at the expense of their creditors; that the country will become as empty of gold as a contribution-box is of other money between Sundays; that foreign trade (soon to be explained), already in a sickening decline, under restrictions and prohibitions, will hasten to a practical demise; and that the United States, at once the laughing-stock and the victim to the superior intelligence of other nations, will come through alternate fever and chills to a position of common sense and ultimate recovery. CHAPTER VI. FOREIGN TRADE. Wonderful is the continuity in the growth of any great Science, and equally so the persistency of any radical error that once gets fairly imbedded within it. As we saw fully in the last chapter Money is nothing in the world but a convenient, intermediate, equivalent, and easily measurable merchandise; but almost as soon as men began to analyze Sales and to generalize from their data, a notion nestled way down in their work, that Sales against Money were somehow or other different from Sales against other merchandise; and thence sprang up, particularly among the Romans, what we have called the Bullion Theory. The broad and the true view was held indeed from the beginning, and was maintained even among the Romans, as we learn from an interesting passage in the Roman Law,--"_Sabinus and Cassius think Value can dwell in another thing than money too, whence is that which was commonly said, Buying and Selling is carried on in the exchange of goods, and that view of purchase and sale is very old; but the opinion of Procullus has deservedly prevailed, who says, Exchange is a particular kind of transaction different from Selling._" Science has indeed sloughed off this old and vital error, and most of its sequels; but Public Opinion in many countries is full of it still; and Legislation, in our own country at least, is all the time trying or threatening to transmute merchandise (say silver) into money, as if that could raise its value or change its nature. It was but a single step from the Bullion Theory to the Mercantile System. If money be somehow different from and better than merchandise, then each nation should strive to handle its foreign trade so as to get back from other nations more money than it renders to them in exchange: in other words, each nation must try to sell to the rest more goods than it takes goods back in pay, so as to have a "_balance_" come in of gold and silver. How natural the transition from Bullionism to Mercantileism! And it was a step of genuine progress too. Goods are good, and there is profit in their exchange; but gold is somehow better than goods, and we must manage somehow to get a "balance" in that! If this position had only been sound, and one nation only been in possession of the precious secret, how nicely it might have worked for that nation! But all the leading Nations of Europe made the transition from Bullionism to Mercantileism at one and the same time, and they vexed and impoverished each other for three half-centuries, and went to war with each other besides, under the double illusion, (1) that gold could be practically gotten in that way, and (2) that if gotten it were one whit better than the goods for which it would have been at once spent. Economics as a Science is now free from every taint of Mercantileism also, but it lingers on more or less in half-informed minds, and in the less-experienced nations; and the system itself merged itself three half-centuries ago into another, which is not another, namely, into Protectionism. If nation A must sell more goods to nation B than it takes back in goods, so as to get the coveted "balance" in gold from B, would it not help that cause along to put obstacles in the way of restrictions or prohibitions against the introduction of goods from B to A? Less goods, more gold, argues A. A forgets that the same mental processes are going forward in B's mind towards the same conclusion in relation to A. Now, cogitates A, what kind of goods from B had we better restrict or prohibit? A, by the way, consists of some millions of individuals, some of whom are always on the watch to get their axes ground at the government grindstone. What kind of goods shall we prohibit from B? Why, of course, those kinds which we are now making or growing. We can supply these for ourselves. It does not escape the notice of these makers and growers, that the restriction or prohibition of similar goods from B will raise the price at home of their own goods. Scarce is ever costly. On go the restrictions, ostensibly at first in behalf of an imaginary "balance" in gold, which fragile reason soon passes out of mind in the presence of a very real reason for such restrictions, namely, artificial high prices for certain domestic goods, paid indeed by the entire home community to the comparatively few makers or growers of the goods now "protected," as the current phrase is. Mercantileism has passed over into protectionism. The feeble friends of a "balance" have now become the strong friends of a "monopoly." Personal greed to grow rich at the expense of one's own countrymen thus becomes the single or combined force that puts on and keeps on and piles up the so-called "protective" restrictions and prohibitions. Scientifically Protectionism is as dead as Mercantileism and Bullionism. There is not an Economist in Christendom, of any international or even national reputation, who now undertakes fairly and squarely by means of analysis and induction, to propound or defend a scheme so contrary to common sense and common honesty as this is, and which, universally applied, would annihilate the commerce of the world. But many of the nations are still tinctured more or less by the old subtlety, and powerful classes within them and specially within the United States, classes grown rich and powerful by what is nothing else than public plunder, are strenuous and successful advocates, not in open discussion and fair debate but by clandestine and corrupting methods and combinations, to maintain in the light of the nineteenth century an outworn and decrepit "something" worthy only of the dark ages. The old and foolish cry for a "balance of trade" is merged now in the United States into the insane and hateful clamor for the destruction of public trade in the behalf of private gain. This is the sole reason why we must now undertake a careful chapter on Foreign Trade. There is no reason in the nature of things, or in the nature of trade, why Foreign Commerce should be treated of separately from Domestic Commerce. The two are precisely alike in all their principles and in all their results. In one as in the other, in every case and everywhere, there are (1) two persons, each of whom has a Service in his hands to sell against a Service in the hands of the other; (2) two reciprocal estimates, by which each owner concludes that he prefers the Service of the other to his own; (3) two mutual renderings, by which each Service comes into the possession, present or prospective, of the new owner; and (4) two personal satisfactions as the result of all, constituting the ultimate motive and the sole reward of Buying and Selling. There are two possible differences in certain cases between Domestic and Foreign trade, both superficial and but barely worth the mention here. Foreign countries engaged in trade _may_ be more remote from each other than places exchanging products within the same country. The distances, however, between Bangor selling ice to New Orleans for sugar, and Boston selling boots and shoes to San Francisco for fruits and wine, are much greater than those between Liverpool and St. Petersburg, or those between Stockholm and Palermo; so that, it may be said in general, that the trade between all the European countries confronts less distances, and presumably less costs of transportation, than the trade within the United States. And another thing is to be said in this connection: Foreign trade as a general rule is conducted by water-routes, and domestic trade under the same rule is carried on by land-routes; and, therefore, the costs of transportation by the latter are much more expensive. The other possible difference is more considerable, and considerably more in favor of Foreign as compared with Domestic trade. We have learned perfectly already, and the point is fundamental, that all trade proceeds on the sole basis of a relative Diversity of Advantage as between the two parties exchanging. This relative superiority of each exchanger over the other at different points depends in domestic trade partly upon divergent natural gifts to individuals, partly upon their concentration of mind or muscle or both on a single class of efforts each, and partly upon the use and familiarity in the use of the gratuitous helps of Nature aiding that class of efforts. But in foreign trade there are commonly some additional grounds of Diversity, since the various countries of the earth have received from the hands of God a diversity of original gifts, in climate, soil, natural productions, position, and opportunity. And besides these original international differences, there has been developed of course in the history of the inhabitants of these countries a diversity of tastes, aptitudes, habits, strength, intelligence, and skill to avail themselves of the forces of Nature around them. International trade, accordingly, is somewhat more broadly and firmly based than the home trade can be, inasmuch as these international differences are apt to be more inherent and less flexible than domestic differences between individuals; it is on these diversities, original, traditional and acquired, that international commerce hangs; it could never have come into existence without them; and it would cease instantly and completely were they to fade out. Men engage in foreign trade,--not for the pleasure of it,--but for the sake of the mutual gain derivable to both parties; they desist from it so soon as that mutual gain disappears; and there is no gain in any series of exchanges, unless each party has a superior power in producing that which is rendered, compared with his power in producing that which is received. With these few preliminaries, we pass now, in the first place, to unfold in order the COMMON AND UNIVERSAL PRINCIPLES OF FOREIGN TRADE. For the sake of illustrating these, we will now take a simple supposed case, a trade between England and France in cottons and silks, and follow it through clearly to the end. 1. When will it be mutually profitable for England, that is, for certain English merchants, to send cottons to France to buy silks with, and for France, that is, for certain French traders, to send silks to England to buy cottons with? Money and all other commodities except these two, silks and cottons, are wholly out of the question now and should be wholly out of our minds the while, though for simplicity's sake we shall use the _denominations_ of money for comparing the respective efforts, translating pounds and francs into dollars. The answer is easy: the trade will be mutually profitable, when efforts bestowed in France upon silks will procure through exchange with England more of cottons than the same amount of efforts bestowed in France upon cottons will produce of cottons directly; _and_ then, when efforts bestowed upon cottons in England will procure more of silks through exchange with France than the same amount of efforts bestowed in England upon silks will produce of silks directly. It is not a question of the absolute cost of either commodity to the parties producing it, or of a comparison of those absolute costs at all, but a question of the relative cost of that produced in either country compared with what would be the cost of the other commodity were it to be produced in that country. So long as there is a difference of relative efficiency in the production of the two commodities in the two countries, so long, setting aside the costs of carriage, may there be a profitable exchange of the two. A demand in each country for the product of the other is of course presupposed in the illustration. Suppose now, that Efforts in England on certain cottons be gauged at $100, and that Efforts in France on certain silks be gauged at $80, and that these finished commodities then exchange even-handed against each other: is that a losing trade for England and a gainful trade for France? That is more than we can tell yet. That depends upon the further decisive question, whether the Efforts gauged at $100 if expended in England in the manufacture of silks will procure as many and as good silks as the same obtain in exchange with France; and whether the Efforts gauged at $80 if expended in France on cottons directly will secure as many of them as if expended on silks directly and then traded off for cottons. In effect the Frenchmen ask, Can we get more and better cottons by working on silks and then trading them off for English cottons than we can get by equivalent Efforts in working on cottons at home? Likewise the Englishmen ask, Can we get more and better silks by working on cottons at home and then trading with France for silks than we can get by trying to make silks directly? France by climate and soil and habitudes is better adapted to silks than cottons: England by virtue of the same is better adapted to cottons than silks. 2. How does the Diversity of relative Advantage practically work in foreign trade? Let us suppose that while the cottons cost $100 in England, it would cost $120 to manufacture there as good silks as can be made in France for $80; and that while the silks cost but $80 in France, it would cost $96 to make cottons there as good as the English can make for $100. On this supposition France can make both the silks and the cottons at a cheaper absolute cost than England can. What of it? Does that destroy the motive and the gain of an exchange between the countries in these two articles? Let us see. By an exchange with England, France gets for $80 in silks, cottons which would otherwise cost her $96, which is a handsome gain of 20%; while England gets for cottons costing her $100 silks which would otherwise have cost her $120, which is another handsome gain of 20%. Although France can make each commodity for less absolute money than England can make either of them, there is a Diversity of relative Advantage; and, therefore, there might be in this case, as there is actually in many such cases, a very profitable trade. The efficiency of France in making silks relatively to the efficiency of England in making silks is in the ratio of 80 to 120, namely, a difference of 50%; while the aptitudes of France in making cottons relatively to that of England in making the same is only in the ratio of 96 to 100, namely, a difference of 4-1/6%. So long as England offers in cottons a good market for French silks, how utter the folly and large the loss of France in going to work to make cottons! In the majority of cases, doubtless, foreign trade takes place in articles, in the production of one of which each of the respective countries has an absolute advantage over the other; but an every way advantageous trade may be carried on in commodities, in the production of _both_ of which one nation shall have an absolute superiority over the other, provided only that this superiority be _relatively diverse_ in the two commodities, as has just been shown. This is an effectual answer to the ignorant clamor of some, we take it, who make objection to importing articles which might be made at home for the same sum of money as foreigners expend in making them; admitted, that they might be so made, does it follow that the country importing them would get them as cheaply by making them itself? _By no means does that follow._ Let no nation, then, be in haste to drop a trade, because it thinks it can make the goods received in exchange as cheaply as the other nation makes them, so long as it has an advantage absolute or relative over the other in making the goods rendered in exchange; and when that advantage ceases, it may be sure, that the trade will drop of itself; because it always takes _motives_ to make the mare go. 3. What are the extreme limits of the Value of cottons and silks in the case supposed, and when will a third nation be able to undersell either in the ports of the other? This is the answer: the extreme value of French silks in English cottons will be 80 and 96; they cannot fall below 80 because they cost the French that to manufacture them; they cannot rise above 96, because at that rate the French can make cottons, and there would be no motive, that is, no _gain_, in their exchanging for cottons. Nations, that is to say, individuals, will never get themselves served at a greater effort than that at which they can serve themselves. If a given effort does not realize more through exchange than it would do directly, then that exchange ceases of necessity, as fire goes out for lack of fuel. The extreme limits of the value of English cottons in French silks will be 100 (lowest) and 120 (highest) for reasons precisely similar in the case of the English. Therefore, the highest profits possible to both nations under the conditions of the trade are 20% each. France would be glad to take the cottons at a return of 80 in silks, at which rate her gain would be 20%, and she cannot under any circumstances offer quite 96, at which rate her gain would disappear. No third nation, accordingly, in a trade of silks for cottons can expel the French from the English ports, until it is prepared to offer nearly 96 (or more) in silks in return for English cottons; that is to say, until its efficiency in making silks relatively to that of England in making them presents a greater difference than the difference of efficiency between France and England in making silks, which is a difference of 50%. England would be glad to take the silks from France at a return of 100 in cottons, at which rate her gain also is 20%, and she cannot possibly offer quite 120 in cottons, because at that rate her gain would wholly vanish. England could be undersold in the French ports, when somebody is ready to offer nearly 120 (or more) in cottons against the French silks, whose _quantum_ in the exchange may vary from 80 towards 96. Here is the whole doctrine of one nation underselling another in the ports of a third nation. Silks stand here for sample of all French commodities of whatever name and cottons for all English goods whatsoever; and England and France stand in the illustration for any and all nationalities. Any nation obtains any share or a greater share in the commerce of the world solely in virtue of a greater relative efficiency in producing _something_ valuable, as compared with some other nation's power in producing something _else_ that is valuable. 4. How does the varying play of International Demand affect the value of articles in foreign trade? The answer is clear and easy: if the demand for French silks in England just answers to the demand for English cottons in France, so that the silks offered by France just pay for the cottons offered by England, then, cost of carriage aside, the gains of the trade will be equally divided between the two sets of merchants, and each will realize 20% profits, because neither will have any motive to lower the value of its commodity below its highest value. The Frenchmen from their point of view will offer 80 in silks and take 96 in cottons: the Englishmen from their standpoint will offer 100 in cottons and get 120 in silks. Demand and Supply are equalized at a point of value most favorable to both parties, and one really determined by the relative cost of production. This case of equalization, though possible, is likely rarely to occur in practice. On any terms of exchange first offered, there is likely to be a stronger demand in one country for the product of the other than in this country for the product of that. This will of course lead to a change of Value, and a new division of Profits. The product for which the demand is less will find its market sluggish, and in order to tempt further and brisker exchanges will be compelled to offer more favorable conditions. He who enters a market in quest of what is _more_ in demand with a service which is _less_ in demand, will have to lower his terms, or not trade. The equalization of Supply and Demand will only be reached in this case, by quickening the demand for the commodity now less in demand through an offer of better terms in trade. Thus, if the demand for French silks in the English ports be slack, in comparison with the demand for English cottons in France, at the rate of exchange first established, say, 80 for 96, the French merchant has no resource, if he wishes to continue the trade, but to agree to give more silks, for the same amount of cottons, say, 85 for 96. If this actual reduction prove sufficient to cancel the account in cottons with the account in silks, then the trade will proceed on this new basis for a while, because the equalization of demand and supply has been reached through a new valuation of the two commodities, and there is now consequently a new division of the profits. France gains less than 13% by her trade with England, while England gains 27% in her trade with France. Under these new terms of exchange, it is quite possible that silks may again become heavy in reference to cottons, and a new decline take place in their relative value. If the French are obliged in consequence to offer 90 for 96, in order to obtain the cottons they want, their own profits will sink to 6%, while the same causes will lift the English profits to 35%. If, in any contingency, the French were driven by the state of the market to concede something near to 96 in silks for 96 in cottons, the trade would cease in that case, just as every transaction ceases when the motive for it ceases. We must remember of course, that the cottons of England are just as likely to become slack in reference to silks, as the silks are relative to the cottons; and when this happens, the English dealers will have to lower their terms, and thus surrender a larger share of the profits to the French. By this ceaseless play of Supply and Demand, within the outermost limits drawn by the relative Cost of Production at the time, is the Value of commodities determined in Foreign Trade; and no degree of complication in the variety of articles, or in circuitous exchanges, affects, for substance, these fundamental principles. 5. What are the causes deciding the exportable articles of any nation, and their order of precedence in Export? Watch a little at this point, and the true answer will loom up steady and certain. If, instead of one article, say cottons, England sends two or ten kinds of goods to France in payment for silks or wines or whatnot, she will of course send in preference that commodity in which her own commercial efforts are relatively most efficient, so long as the French demand will receive it, because her own profits will be the greatest on that; then, when obliged to lower terms on that down to the point of relative advantage at which her next available article stands, she will send that next in quantities regulated by the demand for that; and so on down to the end of the list of possible exportables to France. France is guided as to her exportables to England by precisely the same principles and prospects of profit. So of all commercial nations whatsoever. No matter whether the articles be one or many; no matter whether the trade be a direct or indirect trade; the profits in international commerce depend in all cases, first, upon the ratio of the cost of what is rendered to what would otherwise be the cost of what is received, secondly, upon the relative intensity of the two Demands. It follows logically and necessarily from all this, that what a nation purchases by its exports, it purchases by its own most efficient Production, and consequently at the cheapest possible rate to itself, and at the highest possible profit to its merchants. Under a decent freedom of international choice and action, of sale and delivery, only _those things_ are ever exported, for the procuring of which a nation possesses decided advantages relatively to other nations, and relatively to its own advantages in producing directly what is received in return; and hence, the return cargoes, no matter what they have cost their original producers, are purchased by this nation as cheaply as if they had been produced by its own most advantageously expended Effort. This is a wholly impregnable position; and the advocates of restricting and prohibiting Foreign Trade are challenged to try their hand a little or a good deal (as best suits them) at its bristling defences. It follows also from the discussion under this head, what shallow thinkers are they, who deem it needful that each nation should be able "_to compete_" with other nations in every branch of production. Why are they not consistent enough to apply their favorite catchword, "_compete_," to domestic exchanges also, and require that the clergyman shall have artificial and governmental facilities for "_competing_" with the lawyer, the tailor with the blacksmith, the farmer with the manufacturer, the publisher with the author? Will folks never learn that _all_ Exchanges, domestic as well as foreign, hang on relative superiority at different points, and that any Nation trying to make its success in production equal at all points would be just as stupid as an artisan trying to learn and practice all the trades at once? Suppose the said nation to succeed, what then? It would supply its wants at a certain low average efficiency of effort; whereas, by a thorough development of all its own peculiar resources, it could command by exchange the products of the whole world at a cost not exceeding that of its own most productive and efficient Exertion. The precious metals, whether produced at home or obtained from other nations by another series of exchanges, whether coined or in the form of bullion, stand here in the same relations as other commodities, and are frequently the most profitable articles that a nation can export. In one word, whatever justifies individuals in selecting diverse paths of production according to their capacities and opportunity, the same (and even more) justifies the Nations in fully drawing out their own best capabilities under the conditions in which God has placed them; and then, exchanging what costs them little for what would otherwise cost them much, in enjoying all that the world offers at the least possible expenditure of irksome effort. Such wise and wide action promotes the common good of all the nations, and makes the best of all accessible to all, and arms each with the power of all; while the narrow and senseless policy of drawing into one's own shell after putting up barricades against one's neighbors, by lessening everywhere the Diversities of relative Advantage, so far forth incapacitates all for profitable and progressive Exchanges. 6. How do new improvements in machinery and other enhanced facilities of Production in one country affect its foreign trade? A cheering response will be drawn out, if we now apply this question to the conditions of our old trade in silks and cottons. Suppose France by new methods of silk culture to become able to make the silk which before cost $80 for $50, cottons in France and silk and cottons in England remaining in natural cost as before, does France alone gain the entire advantage of the increased cheapness of silk? Wait a minute, and we will see. The production of silk in France is greatly quickened by the cheaper methods, more is produced, more is carried to England to buy cottons with, but at the old rate of 80 for 96, the English will not take any more silks, and the French who can now abundantly afford it, since their nominal 80 is really 50, will offer more silks for 96 in cottons, in order to tempt a brisker and broader sale. They offer, say, 96 in silks for 96 in cottons, and if that reduction of Value of silks in cottons be enough for the equalization of the respective Demands, the trade will proceed on that basis, at least for a time; and as there is now a larger difference of relative advantage than before, there will be, as always in such cases, larger profits to be divided between the two parties. The 96 now in silks to the English is really only 60 in cost to the French, so that the French gain in the trade is largely increased; because they now get for what costs them 60 what would otherwise cost them 96, a clear gain of 60%. Before the new methods of silk culture were introduced they could gain but 20% at the utmost. But the English have also reaped largely from the ingenuity and diligence of their neighbors. Before, they gained only 20% in the exchange at best; but now they get for what cost them $100 that which would otherwise cost them $144, a handsome profit of 44%. Indeed, it might easily happen, through the incessant changes in International Demand, that even a larger share of the benefit of the French improvements should accrue to the English than to the French themselves; the share of the French all the while being large, and much larger, than if, greedily endeavoring to keep all the benefit, they should refuse to trade at all. Thus we reach again from another outlook, a grand and universal doctrine of Exchange, _that each party is benefited by the progress and prosperity of the other_. Indeed, the only possible way in which all nations can share in the thrift and enterprise and improvements of each other, is through mutual international exchanges; and when each nation sees to it that it have a few commodities at least for which there is a strong demand among foreigners, and in the production of which themselves have a strong superiority, it may rest assured that it buys all it buys from abroad, gold included, at the cheapest rate to itself, and shares a part of the prosperity of every nation with which it trades. 7. Which party in foreign trade pays the Costs of Carriage, or do each pay them in equal proportion? It is plain, that the aggregate cost of transportation to the foreign markets is just so much added to the Cost of Production, and is a deduction of so much from what would otherwise be the whole gain of the Commerce; but it is plainly not true, that each party necessarily pays the whole of his own freights; and, therefore, that the party carrying bulky articles is at a disadvantage compared with the other. He may or may not be at a disadvantage on that account. That will depend on the effect of the new expense for freight, however divided, on the Demand in each country for the product of the other. We will suppose, that in the outset England pays the whole cost of carrying cottons to France, and France the whole cost of sending silks to England; but as cottons are many times more bulky than silks proportionably to value, a larger bill of freights would fall of course to England; and cottons would therefore fall in value relatively to silks; but cottons and silks have both risen absolutely, that is, with reference to any given effort, or with reference to a money standard. Suppose now that France, instead of 80 for 96, has to render 82 for 96; and England, instead of 100 for 120, now has to give 105 for 120. The French gain in the trade is reduced from 20 to nearly 17%, and the English gain from 20 to nearly 14%; but it is by no means certain, that the commerce would go on precisely on these terms; the enhanced value of silks might well deaden the demand for them in England, more than the relatively less enhanced value of cottons in France would affect the demand for them. Silks have risen in England 5%, but cottons have risen in France only 2-1/2%; it is therefore very likely that thereafter the demand for cottons will be stronger than the demand for silks, and if so, the French will have to offer better terms, or, what is the same thing, to be obliged to pay a part of the English freights; so that there is nothing in the true state of the case to justify the conclusion jumped at by some people, that they who carry heavy goods are at a disadvantage compared with those who carry light goods. That will depend wholly upon the Equation of International Demand as between the two kinds of goods. Nothing in the nature of things hinders, that each party shall in effect pay the freights of the other, or one even really pay the freights of both. 8. Lastly, what is the effect upon international commerce of the constant play of the Par of Foreign Exchange. This is a point of great importance, that has been but little discussed in this connection, because it has not been popularly understood or scarcely even popularly explained. In the light of the full unfolding of "Credits" in our Fourth Chapter, and in the light of these simple principles now under discussion, there will be no great difficulty to any intelligent reader in fully understanding this matter of Foreign Exchange,--a matter never before so vital to the commercial interests of the United States as now. For the sake of general illustration we will take the "Exchange" as between the United States and Great Britain, since the same fundamental principles apply as between all commercial countries. When merchants export goods, say from New York to London, or _vice versa_, they do not wait for their pay till the goods be actually marketed abroad, but draw at once Bills of Exchange to the amount of the home value of the goods on the parties to whom the goods are sent, and then put these bills on present sale with brokers or middlemen at home. There thus becomes a market or prices current in New York for commercial bills drawn on London, and similarly a market in London for bills drawn on New York. The New York exporter, accordingly, is not certain of getting in money the full face of his bill _minus_ interest for the time it has to run, because a great many such exporters may have thrown their similar bills upon the market the same day, which always tends so far forth to depress the price of the bills in accordance with an universal law of Economics. Scarce is ever costly: plenty is ever cheap. Who buys these bills when exposed for sale in New York? Who wants them? Clearly, only those who have commercial debts to pay in London. A bill of exchange drawn in New York on London is nothing but a debt due from somebody in London to anybody whom the drawer in New York chooses to make the payee. The debtor lives in London, and it is every way cheap and convenient for all parties, that he settle his debt with a creditor living in London. So it happens, that parties in London who have sold goods in New York and drawn bills on them for present payment, expose those bills for sale in London to the parties who have debts to pay in New York. If now, London or those whom London represents in these transactions, have sold but few goods to New York or to those whose business is settled in New York relatively to the amounts sold by New York to London, then London bills will be relatively scarce as compared with the New York bills drawn on London. In other words, New York has more debts to pay in London than London has in New York, and, consequently, the parties in London who want bills to pay New York debts with, have to buy them in a relatively scarce market. They have to _bid_ for them, as it were. The effect of this is always to carry up the price of that, for which the buyers are many and the sellers relatively few. So, under perfectly natural causes, London bills on New York come to a premium; that is to say, the London sellers get more than the face of their bills drawn, and the trade with New York becomes _extra_ profitable to them. Suppose London bills of Exchange on New York are selling for 101, thus giving 1% extra profit to English exporters; for precisely the same reasons that they are so selling, New York bills on London are selling in New York for 99, thus subtracting 1% from what would otherwise be the gains of the New York exporters to England under the common principles of Foreign Trade. It is evident, therefore, that the causes of the course of the international Par of Exchange are an essential part of the principles of foreign Commerce; and whatever tends to derange or upset the natural course of the Par, as a constant or constantly recurring cause, must receive careful attention in a book like the present. We have begun at the very beginning of this matter, and we are now going to follow it up to the very end. The Diversity of relative advantage in the Production of the two commodities exchanged, is the first and chief ground of mutual Profit in foreign trade; the varying Intensity of relative Desire on the part of each exchanger for the product of the other, is the second and secondary ground on which foreign trade must go on; and the third and final difference as between the two parties, which goes to make or mar the profit of each of them in the trade, is the current Price of the Bill of Exchange drawn by each creditor on his debtor abroad. It is plain that these three things must always be taken into account simultaneously by prudent exporters and importers, in order to estimate the prospect of a profitable trade then and there; and it is plain also, that one or even two of these three differences of relative advantage might fade out for a time, and a profitable trade still proceed, provided the other two or one of these differences were sufficiently pronounced. For example, to take an extreme case, silks from France might still go to England for cottons to the advantage of both countries for a time, though "exchange" were exactly at "par" between them and the "demand" for silks were precisely met by the "demand" for cottons, on the strength of a marked and persistent diversity in relative cost of production of the two textiles. Here is another of the trinities of Political Economy. Here is complication indeed, but a complication regulated and beautified by inflexible laws of Nature and the scarcely less inflexible laws of human Motives. So far the argument has proceeded on the supposition of a common standard of Value, say gold, between England and France, London and New York, and by implication all other commercial countries. Commerce rejoices in, and progresses by, a common measure of Values. By an experience of 2000 years the world has proven gold to be the best international Measure. From a simple comparison of the weights of pure metal in the standard coins of the nations is established a fixed monetary "par" as between them. Thus the dollar of the United States contains 23.22 grains of pure gold, and the English pound sterling contains 113.001 grains of the same; consequently, there are $4.8665 to the £ sterling, and this is and has been since 1834 the monetary "par" between the United States and Great Britain. Similarly, the par between France and the United States is $1 to 5 fr. 18 centimes, since the franc is 19.29 cents gold for gold. The monetary par, accordingly, as between any two nations using the gold standard, is a matter easily ascertained and kept in mind; while the constantly variable prices current of Bills of Exchange are reckoned in and from this monetary par. Thus, if a commercial bill drawn in New York on London sells for $4.8665 _minus_ current interest for the time it has to run, English "exchange" with us is said to be at "par"; if it sell for more than that, exchange is technically said to be "_against_" us, although the excess in price is just so much additional profit to the American exporter; and if it sell for less than that, exchange is said to be in our "_favor_," although the difference is just so much subtracted from the gains of the American exporter. The close of the second week in July, 1890, found in New York "Sterling exchange dull but firm, with actual business at $4.84-3/4 for 60-day bills and $4.89 for demand bills: the posted rates were $4.85-1/2 and $4.89-1/2 respectively." Exchange, accordingly, had turned "against" the United States, that is to say, American exporters could get a little more for their bills on London than the monetary par. Under such circumstances it may be cheaper to send the gold to liquidate a British debt than to buy bills and send _them_. Just this happened last week: $2,000,000 in gold went (mainly under this impulse) from New York to London. There is a limit, therefore, to any further rise in the price of "exchange," when it reaches in an upward direction the then present cost of sending gold to foreign creditors. The limit in the downward direction to the price of exchange is the last margin of profit to the exporter as such. Thus, when the New York exporter can only get, say, $4.83 for his sight bill of exchange on London, his loss in the trade so far forth is 1%; and it may be doubtful, whether his possible gains at the other two points, namely, relative cost of production and relative intensity of demand, will overbalance this certain loss and leave a sufficient margin of profit. This chance of profit or loss from casual turns in the commercial "exchanges" is a very small matter in foreign trade in comparison with the other two grounds of possible profit or loss. The main thing for every commercial nation to see to is, that it have at least a few (the more the better) commodities in general use throughout the world, _in the cost of the production of which it has a relative advantage over all competitors, and the demand for which by foreigners is relatively intense and constant_. And it will never come amiss for any nation with these two crucial advantages to keep a sharp watch over a class of its own citizens, lest they, shrewdly and greedily, for special reasons of their own, get laws passed the result of which can only be _to increase the costs of production of these few exportables, and at the same time lessen the foreign demand for them_. ETERNAL VIGILANCE IS THE PRICE OF LIBERTY OF COMMERCE. As a general rule for the last half century commercial "exchanges" have been "against" Great Britain, that is, her exporters have been able to get more than "par" for goods sent abroad in the price of the bills drawn on them, and her commerce has been _profitable_ to her so far as this cause is concerned; which during the same interval of time the "exchanges" have been "in favor" of the United States, that is, her exporters have been obliged to sell their bills drawn for less than "par," and her commerce so far forth has been _unprofitable_ to her. We may only briefly indicate here the causes of this state of things. (a) Great Britain has been during this period a vast loaner of Capital to other countries, and particularly to the United States; while the United States has been a vast borrower of Capital, particularly from Great Britain. The interest on these loans from Britain, and the principal also so far as it has been repaid, has been constantly remitted thither in goods for the most part, and bills of exchange drawn on these goods have been sold at all ports, and particularly at New York; the abundance of these bills has tended of course to lower their price at the place of sale, and so far forth to heighten in effect the relatively less abundant British bills drawn on exports thence; and the _creditor_ country for this reason is apt to sell its bills above "par," and the _debtor_ country its bills below par. It makes no difference at this point how the borrowed funds have been invested by the borrowing country, since the interest and the principal must be repaid at some time chiefly in the manner just indicated. (b) With the exception of a dozen or two articles customs-taxed for simple revenue, Great Britain in this period has kept her ports absolutely open to imports from all the world, and of course to all imports from the United States, which has tended to swell the volume of imports into that country, and the volume of foreign bills drawn on them, particularly of United States bills; while the United States during the same time has excluded imports by customs-taxes designed for that very purpose, to the number of over 4000, and in many cases to a height of tax involving prohibition of import. The Constitution of the United States expressly forbids customs-taxes upon exports, so that goods may indeed go out freely, so far as tariff-barriers are concerned; but as the only impulse that ever carries goods _out_ is to get _back_ more desirable goods in pay, and as these return-goods are greatly restricted or virtually prohibited by the United States, the Constitutionally-free exports are not large enough to help much in keeping down below "par" the price of bills of exchange drawn here. It should also be said that Great Britain is restrained in her exports to the United States by the latter's legal unwillingness to receive them, which tends of course to keep the price of bills drawn on the exports she can and does send still more above "par." (c) The enormous customs-taxes in the United States on ship-building materials and on almost everything else have practically destroyed the ocean merchant-marine of the country. The bulk of the Freights, therefore, on what foreign commerce there is left to us under the Chinese-wall policy of our Government,--the bulk of the freights both ways,--has to be paid to foreigners, mostly to the British, and these payments too are made in exportable goods, which wretched fact (looked at in its causes) increases exports hence relatively to imports hither, and of course diminishes _pro tanto_ the current price of mercantile bills drawn here. So far as these _extra_ exports to meet freight charges are carried to England, they tend to lift there in the usual way the price of bills drawn on British exports. It is a million pities, no matter from what point of view one looks at it, that the present governing classes of this country totally misapprehend the Nature of foreign trade, and by short-sighted legislation minimize its Benefits to the people. So far we have been unfolding the causes and courses of foreign exchange on the hypothesis, that both the nations exchanging employ the same standard in measuring Values. While the present paragraphs were in process of composition, the President of the United States signed (July 14, 1890) the so-called "Compromise Silver Bill," which is to go into operation after thirty days, and the effect of which in the judgment of some of the best economists and financiers of the country _may be_ to bring down the national measure of Values from the gold dollar to the silver dollar. We are bound at this point, therefore, to explain the action and reaction on the course of the "exchanges," of a monetary standard lower in general value than the standard prevailing in the commercial world. We have all the data needful for clearing up this matter completely, at once in the inflexible laws of Money and in the actual experience of several of the Nations. For example, England has the gold standard, and India the silver standard; there is an immense commerce between the two countries; silver is merchandise and not money in London, and gold is merchandise and not money in India; every cargo, accordingly, to and from either has to have its value "changed" through the price of current bills into the current money of the other country; the price of silver in gold in London (average) between 1852 and 1867 was 61-1/3 pence per ounce; at 60 pence per ounce the ratio of gold to silver is 1:15.716; between 1875 and 1882 silver drooped (with many fluctuations) in the London market, bearing about the average of 52-1/3 pence per ounce, which is a ratio with gold of 1:18; during the first half of 1890 the price of silver in London was as nearly as possible 43 pence per ounce, which is a ratio with gold of 1:21.93; so that, the prices of India bills in London and of London bills in Bombay have yielded up to the careful observer all the secrets of the "exchanges" between high-standard and low-standard countries. But we have no need to go out of our own country for illustrations of all this. Between May, 1862, and January, 1879, the "Greenback Dollar" was the measure of current Values. It was depreciated every day of that interval as compared with the gold dollar, and it fluctuated in the comparison more or less nearly every business day. The New York importer bought his foreign goods for gold, paid the customs-taxes on them in gold, and then sold them against greenbacks. How much must he charge for his goods in order to make himself whole? The current premium in gold over greenbacks was posted every day, and perhaps every hour, but was that a safe guide to greenback prices for our importer? Wholesales are rarely for immediate realization in money, and even if they were, the money would have to be rechanged into gold in the future for repurchases abroad. In the uncertainty of greenback values, the importer must _insure himself_ in his prices to-day against a possible further depreciation next week, or next month. In other words, _he must speculate in the prospective gold premium_. Suppose his industrial cycle to be one month. If he sell his foreign goods in greenbacks to-day as these stand in comparison with gold, and greenbacks fall still lower before the month is out, he will lose money in those transactions; if greenbacks should rise in the interval, he would gain money, because he could get more gold for them in the next turn. To the credit of human nature be it said, that in 9 cases out of 10 a merchant will raise the present prices of his goods in order to make himself as sure as possible in a case where all is uncertain. There can be no reasonable doubt that in the fifteen years of depreciated greenback units, retail prices to ultimate consumers were lifted 10% above the average reckoning of goods in greenbacks from this cause alone. In regard to exports at that time the facts and principles are still clearer. These exports were sold in Europe for gold. But the bills of exchange drawn on them were sold in New York for greenbacks. Take wheat, for example, of which there was a large export in all those years. The New York broker or banker in buying these bills was obliged to make the conversion from greenbacks to gold. He had to estimate as well as he could what the value of greenbacks would be when the gold-bill became payable in London. In other words, he had to speculate in greenbacks, because he had to take the risk of their declining or advancing value for an interval of time, say, one month. He would not take this risk without virtually making a charge sufficient in his judgment to cover it, and leave him a good profit in any case. This charge came out of the price of the wheat ultimately paid to the growers thereof. The bill of exchange was sold in New York or Chicago in order to get present pay for the farmers who furnished the wheat, and present profit for the commission-merchants or middlemen. But the bill brought less greenbacks than the quoted premium on gold would warrant for that day, on account of the risk, the uncertainty, the speculation. Therefore, less went to the farmers for their wheat per bushel or centner. _The masses of the people lose the immense losses of that depreciated money._ And during these very years also the Government put customs-taxes to a then unheard-of height on imports from abroad, not primarily for the sake of the revenue to come from the taxes, but chiefly with a view to keep certain foreign goods out of the country altogether, in order that _some_ citizens might be able to sell their own product _to the rest_ at artificially enhanced prices. Thus the natural market abroad for wheat and pork and petroleum and other provisions was enormously lessened by the prohibition of imports,--a market for products is products in market,--at the same moment when the actual prices for products exported were still further diminished by the action of depreciated money on the par of commercial exchange. Our neighboring Republic of Mexico has had for a long time the so-called bi-metallic standard of Money, the same as the United States have had.[9] When the great fall of silver in gold took place in the London market as indicated above, gold was rapidly exported from Mexico, and soon disappeared from circulation, in accordance with Gresham's Law. For many years now the simple silver standard has prevailed in Mexico. Its entire working in foreign trade through the "exchanges" has been sufficiently demonstrated; and as there is more than a possibility, more even than a bare probability, that the United States under the law of 1890, and other and earlier extremely complicated laws of Money, may drop from bi-metallism to silver monometallism in the near future, in the way of premonition and warning to our own people we may fitly close our discussion of foreign "Exchanges" by briefly stating what of hazard and disaster under the silver standard is now going forward among our neighbors to the southward. The effect of estimating Mexican transactions in silver money, while all the nations with which they trade estimate theirs in gold, is seen in an artificial enhancement of prices to the Mexicans on all their imports, and an artificial depression of prices to them on their exports. Look first at imports. There is of course a current discount on Mexican silver as compared with the gold in which the imported goods are bought. This discount is now over 20% throughout the commercial world, the London price of silver in gold giving the key to that song. But this is not all by any means; the discount is variable from day to day and from month to month; in changing his gold prices present into silver prices future, the Mexican importers must insure themselves. This necessitates a speculation in the future of silver. What the risk may be will depend somewhat on the activity of the silver market: if silver be rapidly fluctuating in price, the importer will add more to his silver prices additional to the current premium on gold, than if silver be comparatively stable; but in all cases he will add enough to cover all prospective risks. It is quite likely that five _per centum_ is added on the average to wholesale prices by Mexican importers on this ground alone, which addition with all the usual increments must be borne by retail and ultimate prices. Now look at Mexican exports. The larger part in value of these exports is silver in some form, mostly in the form of silver dollars. But these silver dollars are merchandise in London, and quite variable in price there, as has already been shown; and bills of exchange drawn on this silver in any form, and sold in Mexico to parties remitting gold values to London, are subject to constant depression on account of the uncertainty as to the value of silver in gold when the bills reach London. It follows from this, that the use of the silver standard in Mexico actually depresses the value of silver there. By means of the "exchanges" both ways, silver tends to be still further depreciated in comparison with gold, retail prices of all importables enhanced in silver, and the chief exportable (silver) depressed in value all the while! Truly, the Mexicans are between the upper and nether millstones. Poor Money never pays. In confirmation of this fact that Mexico has not lifted the relative value of silver by making it the sole Measure of Value, we have the corresponding fact that the herculean efforts of the United States since 1878 to advance the value of silver to a parity with that of gold in the legal ratio of 1:15.98, have issued in the constant relative decline of silver here; and, what is more surprising, in an almost constant increase of the yearly production of silver here. The following table tells the whole instructive story: the figures are official: commercial "fine ounces" are .915 of technically "fine" silver. +------+--------------+-------++------+--------------+-------+ | Year.| Production |Average|| Year.| Production |Average| | |(fine ounces).|Price. || |(fine ounces).|Price. | +------+--------------+-------++------+--------------+-------+ | 1878 | 34,960,000 | $1.15 || 1884 | 37,800,000 | $1.11 | | 1879 | 31,550,000 | 1.12 || 1885 | 39,910,000 | 1.06 | | 1880 | 30,320,000 | 1.14 || 1886 | 39,440,000 | .99 | | 1881 | 33,260,000 | 1.13 || 1887 | 41,260,000 | .97 | | 1882 | 36,200,000 | 1.13 || 1888 | 45,780,000 | .93 | | 1883 | 35,730,000 | 1.11 || | | | +------+--------------+-------++------+--------------+-------+ These Seven, then, are the essential Principles of Foreign Trade, brought out, it is hoped, as clearly and consecutively as the relative and complicated nature of the transactions will allow; in the light of these Principles it is very clear, that Foreign Trade is just as legitimate as, and may be more profitable than, Domestic Trade; that it rests on the same ultimate and unchangeable grounds in the constitution of Man, and in the Providential arrangements of Nature; that the Profit of it is mutual to both parties, or it would never come into being, or, coming into being, would cease of itself; that to prohibit it, or restrict it, otherwise than in the interest of Morals, Health, or Revenue, must find its justification, if any at all, wholly outside the pale of Political Economy; and that for any Government to say to its citizens (of whom Government itself is only a Committee), who may wish to render commercial services to foreigners in order to receive back similar services in return, that such services shall neither be rendered nor received, is not only to destroy a Gain to both parties, but also to interfere losingly with a natural and inalienable Right belonging to both. If the reader pleases, we will turn now, in the second place, to the METHODS AND MOTIVES IN VOGUE TO RESTRICT AND PROHIBIT FOREIGN TRADE. The instrument for this purpose is called a _Tariff_. The origin of the word Tariff, its nature and kinds, will throw much light upon what has been a vexed question, but is one easily solvable, and indeed long ago resolved. 1. Origin.--When the Moors from Africa conquered Spain in the year of our Lord 711, they fortified the southernmost point of the peninsula where it juts down into the Straits of Gibraltar, and by means of their castle and town, called in their Barbary language _Tarifa_, compelled all vessels passing through the Straits to stop and to pay to these Moorish lords of the castle a certain part (determined by themselves) of the value of the cargoes. This payment appears to have been blackmail pure and simple; it was certainly extorted by force; and whether there were any pretence of a return-service in the form of promised exemption from further pillage or not, that made no real difference in the nature of the transaction. Eleven centuries later, the United States demonstrated what they thought about similar extortions on American commerce practised in the same waters by the descendants of these same Moors, by despatching Commodore Decatur with a strong fleet to Algiers and Tunis and Tripoli; to which piratical states they had already paid in twenty-five years two millions of dollars in "tribute" or "presents" for exemptions of their Mediterranean commerce from plunder; who captured the pirate ships and compelled the terrified Dey of Algiers (and the rest) to renounce all claim thereafter to American "tribute" or "presents" of any kind. The word _Tarifa_, accordingly, in English and other modern languages, a word which seems to be very dear to some men's hearts, does not appear to have had a very respectable origin, though that is not sufficient of itself to condemn the thing described by the word. That will depend upon its nature and purposes. 2. Its nature.--There never was one particle of doubt on the part of those compelled to pay the Moorish demands at Tarifa, or on the part of the United States compelled to pay "tribute" to the Algerines for a quarter of a century, about the _nature_ of the transaction. The sign at Tarifa was _minus_, and not _plus_. To the credit of those pirates let it be said, that they never pretended to take what they took for the _benefit_ of those from whom they took it. They took it for their own benefit. The action was abominable, but it was aboveboard. There was no deceit and no pretence about it. Both parties knew perfectly what was going on. What was delivered was just so much _out_ from what would otherwise have been the _gains_ of the voyage. And the truth is, the thing, tariff, is always true to the origin of the word, tariff, so far as this, that a tariff always _takes_, and never _gives_. The only phrase a tariff speaks, or can speak, is, _Thou shalt pay_! There is lying open on the table of the writer at this moment a stout volume of 417 pages, printed, with nearly as many more interleaved, entitled Tariff Compilation, published by the United States Senate in 1884, containing every item of all the tariffs passed by Congress from 1789 to the present time. One may read this volume from beginning to the end, or he may read it from the end backwards to the beginning, or he may begin in the middle and read both ways, and all he will find between the covers is a series of _Demands_ made upon somebody to _pay_ something. These demands, of course, are made upon, and realized from, the citizens of the United States, who are the only people under the authority and jurisdiction of the Congress. A tariff, then, may be correctly defined as _a body of takings or taxings levied upon the people of any country by their own government on their exchanges with foreigners_. How anybody can intelligently suppose that a body of _taxes_, which their own countrymen will have _to pay_, can be so cunningly adjusted as to become to them a positively productive agent, a blessing and enrichment to the payers, a spur to the progress of their Society, _they_ may be properly called upon to explain who pretend to believe such an absurdity in the nature of things. 3. Its kinds.--There are two kinds of Tariffs under our general definition, very diverse from each other in their respective purposes, principles, incidence, and results. (1) There is a tariff for Revenue. The sole purpose of a revenue tariff as such is to get money by this mode of indirect taxation out of the pockets of the People for the coffers of the Government, in order to be then expended, governmentally, for the general benefit of those who have paid the money in for that single end. The underlying thought of this kind of tariff, a tariff for revenue only, is, that the Government itself shall get all the money which the people are obliged to pay under these taxes, except the bare cost of collecting them; that only _such_ taxes shall be levied at all as will come bodily and readily into the general Treasury for public uses; and no intelligent and justice-loving people will long tolerate tariff-taxes laid with any other intent than the economical support of their government, or laid in any other way than shall bring into the Treasury all that is taken out of the People. A Revenue Tariff, therefore, may be properly defined as _a schedule of taxes levied on certain imported goods with an eye only to just and general taxation_. There are three vital principles on which a revenue tariff as such must always be levied. (a) As the sole object is to get money for the national treasury, and as money can only be gotten as the foreign goods taxed are allowed _to come in_, such taxes must be levied at _a low rate_ on each article taxed, so as not to interfere essentially with the bringing in of that class of goods with a profit to the importers, and not at all to encourage the smuggling of them in. (b) A varied experience of all the commercial nations has shown, that it is not needful in order to derive a large and growing revenue to lay even low rates on _all_ goods imported, but only on certain classes of them, so as to burden at as few points as possible the successful ongoing of international exchanges; since the prosperity ever induced by commercial freedom enables a country to import and to pay for in its own quickened products vast quantities of the articles subjected to the tax, so that large revenues come from low rates levied at few points. Here we lay bare the ground of a great income in the exemption of the bulk of imports from any tax at all. (c) Custom-taxes should be laid wholly or at least mainly on articles procured from abroad, and not also produced at home; for otherwise the incidence of the tax on the portion imported will necessarily raise the price also of that portion made or grown at home; and thus the people will pay _more_ money in consequence of the tax than the Government _gets_ from the tax in revenue. Three points, then, in a revenue tariff, namely, _low duties on few articles, and these wholly foreign_. The best modern example of a purely revenue tariff is that of Great Britain since 1860. All duties are on one or other of the following sixteen items, namely, Beer, Cards, Chiccory, Chocolate, Cocoa, Coffee, Fruit, Malt, Pickles, Plate, Spirits, Spruce, Tea, Tobacco, Vinegar, and Wine. Of these, Spruce yielded no revenue in 1880; Cards, Malt, Pickles, and Vinegar, yielded in the aggregate that year only £1.491; leaving the other eleven items to furnish practically all the customs revenue; but of these Coffee and its three substitutes with Beer and Plate, furnished only £337.258, so that, the remaining five articles yielded £18.915.489, or 98% of the whole income in 1880. In other words, Fruit, Spirits, Tea, Tobacco, and Wine, brought in all but 2% of the customs-taxes of Great Britain in 1880. In 1890, the duties on certain Wines and Spirits having been lifted, there was a large surplus of revenue over the Estimates, which has just been devoted to the enlargement of the Navy. Every other European commercial country had a deficit that year as compared with its Estimates of the year preceding. The figures are not now at hand for an exact statement, but there can be little reasonable doubt that the "Five Articles" rendered at least 98-1/2% of the tariff-taxes of England last year. If there be also some domestic production of any article taxed by the British tariff, a corresponding excise-tax on that part produced at home, which part would otherwise be raised in price by the tariff-tax to no advantage of the Revenue, enables that Government to get easily all that the people are made to pay in consequence of the tariff-tax on the imported part. (2) There is a tariff under Protectionism so-called. The ruling aim in this second kind of tariff is not at all to obtain income for Government in order to promote the general good, but on the contrary by means of heavy taxes on _foreign_ articles to raise the prices of corresponding _domestic_ ones for the exclusive benefit of a few producers of these home goods at the expense of all home buyers of them. If these special tariff-taxes be so high and complicated as to keep out altogether the foreign articles, and so the Treasury realize nothing at all from the taxes on them, so much the more "protectionist" do they become, and so much the better pleased are the special domestic producers with the entire monopoly of the home market at their own prices. Such taxes are prohibitory and protectionist at the same time. Prohibition is the perfection of Protectionism. A Protectionist Tariff, accordingly, may be justly defined as _a body of taxes laid on specified imported goods with a single eye to raise thereby the prices of certain home commodities_. The vital points of a protectionist tariff are also three, but these are the exact opposites and antipodes of the three points of a revenue tariff, so that it is self-contradictory and impossible to combine in one tariff-bill the two sets of contrary elements. A revenue tariff with incidental protectionism is a solecism. (a) If a tariff-rate is to be protectionist in character, that is, competent to raise the price of home products, it must be _high_, so as either to exclude altogether the corresponding foreign products, in which case there is no revenue at all, or else to make their price by means of the duty added reach the point at which the home producers plan to sell their own, in which case there will be very little revenue. For instance, when the Bessemer steel companies asked in 1870 for two cents a pound tariff-tax on foreign steel rails, they called it in terms in their "confidential" statement to the Ways and Means "_exceptional protection_," and admitted in so many words that they expected to supply the home market entirely, and so the Government would get _nothing_ in revenue and the people be compelled to pay $44.80 _extra_ for their home steel rails per ton. It is a little bit of comfort to think, that they only obtained $28 per ton, or 1-1/4 cents per pound, which was not quite prohibitory, so that the Government got a little revenue on steel rails, and the people paid for some years only about _double_ for their rails what they were worth in a free market! To reach its end a protectionist tariff-tax must be _high_ of necessity. (b) No system of protectionist tariff-taxes can be entered upon or continued in any country except by means of many persons who all alike want their special products artificially lifted in price by legislation, and who are obliged _to combine_ in order to get and keep what they want, so that protectionist taxes on a few things only were rarely or never found in a tariff; so contrary are such taxes to the common sense and common interests of man, that only strong combinations of many special interests can begin or maintain them, whence there must be _many_ taxes if any under this strongly selfish scheme; and by an actual count of them by the writer in 1868 there were found to be 2317 distinct rates of tax assessed on different foreign articles in the Tariff of the United States, which was strikingly in contrast with the Revenue Tariff of Britain in point of the number of things taxed. So needful is log-rolling to the maintenance of protectionism, that the passage of the "knit-goods bill" in the summer of 1882, for example, was contingent on the contemporaneous passage of the famous "River and Harbor bill" of that year. (c) While Revenue Taxes select by preference things wholly imported, Protectionist Taxes are placed of course on such foreign goods as are also and especially made or grown at home, otherwise their plain and sole purpose would be thwarted, which completes the contrast between the two kinds of tariffs. For illustration, Tea and Coffee are the best things possible to tax in a tariff for revenue, because (1) they are in universal consumption, and (2) they are wholly imported, and taxes upon them do not raise the price of anything else, and so the Government gets all that the people pay under them; for this very reason the taxes upon Tea and Coffee, which had yielded for years some $20,000,000 of revenue yearly, were thrown off in 1872 under protectionist leadership, by the deceptive cry of "_a free breakfast table_," in the subtle interest of commercial bondage; seeking to give the impression on the one hand that everything on the breakfast table was to be free, whereas nothing on it or around was to be free except the two beverages mentioned, and on the other hand that the removal of these two taxes was a great boon to the people, whereas the motive for the removal of these was _to continue_ on the people burdens tenfold heavier. Eighteen years have rolled away since then, and Tea and Coffee are still upon the free list; the incompatibility of the two kinds of tariff-taxes is demonstrated in the fact, that there has not been for years a single tax primarily for revenue in the United States tariff,[10] the opposite protectionist idea having logically wrought itself out there; and the same incompatibility is shown in the British tariff, in which there has been no protectionist tax since 1860. Each aim logically carried out completely excludes the other aim. The best and worst specimen of a protectionist tariff that the world has ever seen, has been in operation in the United States for thirty years, 1861-1890. Its inner history is not yet fully known by the public, but enough is known to expose the motives and to condemn the action of all those, whether constituents or congressmen, who knowing what they were doing, contributed to build up gradually that mass of incongruities and iniquities, under which the entire agricultural class of the country (nearly one-half of the people) has become impoverished, by much the larger part of the farming lands of the Union covered by heavy mortgages, and the ocean-marine of a naturally nautical people almost totally destroyed. Attempts more or less successful have been made at various times and at different points to conceal from the Public the impulses really behind the provisions of this tariff, and even the amount and the mode of the incidence of its taxes; many of the most protectionist taxes have been complex, combining upon the same article _specific_ and _advalorem_ rates, as for instance, upon blankets "_50 cents per pound and 35% advalorem_," so that it was difficult or rather impossible for the common reader or buyer to ascertain how much the tariff-tax really was; much of the language of the tariff-bills has been to the last degree involved and uncertain, often leading to perplexing disputes and costly litigations, and sometimes covering up a half-hidden purpose; importers have been bribed, as it were, in cases of doubtful legality, to pay the maximum rates demanded, by the prospect and promise that the extra sums if ultimately found by the courts illegal should be repaid bodily _to them_ and not to the people who in the mean time had bought and paid for the goods thus enormously enhanced in price, and millions of the people's money have gone back in that way to importers and to spies and informers; a careless wording in tariff-descriptions has again and again covered goods not designed to be touched, as the lastings and rubber webbings of the shoemakers to the consternation of that great interest, which asked for no protectionist privilege for itself, but wanted its raw materials at their natural price; and the iron industry of Pennsylvania was bitterly angry at Secretary Sherman, who construed a line of the tariff relating to cotton ties used at the South more favorably to the planters than to the iron-workers, although the latter were strongly privileged at every point of the tariff (even at this) in the teeth of the interests of the consumers of iron, and the later honorable ambition of the Secretary to become a candidate for the Presidency of the United States was largely thwarted in consequence by the hostility of these miserable and revengeful monopolists. There were fifty descriptions of iron and steel taxed by the tariff in 1879, and the average rate of tax on these at that time was 77% _advalorem_, and this was about the average rate for the thirty years under the consideration. On special articles of prime necessity and universal consumption, as steel rails, the tax varied under the rate of $28 per ton put on in 1870 from 85% to 100% _advalorem_; and the purpose of this particular tax was plainly seen in an average price of domestic steel rails in this country $24.44 a ton higher than in England for better rails under a longer guarantee for the eleven years, 1870-80; in other words, 87% of the tax paid on the smaller and better part imported was added to the average price of the larger and worser part produced at home during those eleven years. That the English rails were better and even regarded as cheaper under their guarantee with the $28 a ton added to their price, is proven by the fact that the N. Y. Central railroad company relaid their tracks with the English rails, and were putting them down in Detroit in plain sight of simultaneous track-laying across the river in Canada, where the same kind of English rails were costing $28 a ton less. Every passenger and ton of freight carried by steel-track roads in the United States in this interval contributed his and its share to make up to the roads this _extra_ price paid for steel rails. In 1883 the tariff-tax on steel rails was reduced to $17 per ton. That this enormous artificial price of iron and steel products under tariff-taxes redounded wholly to the profit of the capitalists concerned, and not at all to the benefit of the laborers concerned, is shown by the Census of 1880, which gives $393 as the average pay for that year of the persons employed in the iron and steel industries of the country; and the late Senator Beck of Kentucky demonstrated on the floor of the Senate, _nemine contradicente_, that only 8.8% of the value of the products of the Bessemer steel industry in 1881 went to the laborers employed in it, while 66.9% of the same went to the capitalists as profits. Let the thoughtful reader remember at this point, that iron and steel products are only one of an indefinite number coddled and privileged by the tariff at the expense of the masses of consumers. It is impossible to tell exactly _how much_ more the people of the United States were compelled to pay for their commodities under tariff-taxes, whose ground-thought was to compel them to pay more and the more the better, than the Treasury received as the direct product of these taxes during 1861-90, but an approximation can be made within the truth whose results are fitted to startle the minds of all good citizens. For convenience' sake only, and because the official figures are complete for the shorter period, let us take for comparison the twenty years, 1863-82. The annual average tariff-income for those 20 years was in round numbers $158,000,000; but the ground-thought of the tariff-scheme in all those years was not to get an income for Government, but factitious prices for capitalists privileged by law; and during the last half of the time there were no tariff-taxes on Tea and Coffee, which had been before the principal revenue taxes. If, now, we may fairly suppose, that for each _one_ foreign article paying a tax into the Treasury there were _four_ domestic articles raised each in price as much as the foreign article paid in customs-tax, then it follows, that the People paid in each of those 20 years under customs chiefly protectionist, $632,000,000, or $12,640,000,000 in all, no penny of which went into the Treasury of the United States. That this supposition of 4:1 is wholly reasonable, appears partly from the known proportion (officially reported) between Domestic and Imported as to several leading articles, for example, of steel rails in 1880 the Domestic was 20 times the Imported, and the People paid 19 times more under the tax than the Treasury got; and on woollen blankets in 1881 the Treasury took in less than $2000, while the People paid in the _extra_ price of blankets more than 1000 times that sum that year; and on iron and steel goods of all kinds the average tariff-taxes were about 77% in that interval of time and the vast bulk of the iron and steel goods consumed was boasted to be of domestic production. Let us confirm these striking results by another more than reasonable supposition taken from the opposite quarter. The census of 1870 gave $4,232,000,000 as the value of home manufactures for that year, which we may fairly take as the average of the 20 years under consideration; now, if we throw off one-third of those home products as not affected by the tariff at all, and reckon that the rest were only raised in price 22%, which was only one-half of the average rate of tax on dutiable goods,--the average rate on these was officially pronounced in 1880 at 44%,--then almost precisely the same results will follow as before: two-thirds of $4,232,000,000 is $2,880,000,000, and 22% on that sum is $633,600,000. An acknowledged statistical expert of national reputation, Mr. J. S. Moore, calculated from data quite diverse from our own, that the People paid $1,000,000,000 in the one year, 1882, _extra_ to the sum reaching the Treasury that year, under protectionist tariff-taxes. We see, then, clearly the _methods_, by which Protectionism reaches its ends, and we cannot but conclude, that these methods issue in monstrously unjust burdens on the masses of the People. It remains, under this second general head, to examine the _motives_ of those men, who have gotten the protectionist tariff-taxes put upon the different classes of imported goods in this country. Fortunately we have data of unquestionable authority, covering the entire first century of our national existence, which prove these two propositions: first, _that no protectionist tax has ever been_ PUT ON _by our Congress from the first day until this day except at the instance and under the pressure of the very men personally and pecuniarily interested to secure thereby an artificial rise of price for their own domestic wares_; and second, _that these very men have been almost, if not quite, as active and determined_ TO KEEP OFF _protectionist taxes on other goods used by them in their processes of production, whether raw material, machinery, or accessories_. These two propositions, taken together, demonstrate beyond a cavil the motives of the protectionists as a class. Of course, they have had their dupes and tools. Out of their own mouths and out of their own actions are they to be judged. One hundred years is long enough of time in order to display perfectly the motives of a prominent and persistent class of men, under that Government of the world, whose key-note is Exposure, and under that maxim of the world, Actions speak louder than words. Thomas H. Benton, a United States Senator from Missouri for 30 years, 1820-50, himself in all that time a prominent leader and debater, and always an indefatigable investigator, published an _Abridgment of the Debates in Congress from 1789 to 1856_ in 15 large volumes. Each important tariff Debate for the first 70 years of our national history is distinctly brought out in these volumes, and the impulses and motives behind each leading speaker may be discerned as clear as day. The present writer has been over these debates with great care, and has mastered them in their substance and motives on both sides; and he has been besides a deeply interested reader and excerptor of all Congressional tariff-debates for more than 30 years just past; and now invites his present readers to take a cursory glance over this broad field, and satisfy themselves as to the motives personal and associate of the protectionist debaters from the first to the present time. Because the new Constitution prescribed that "_all bills for raising revenue shall originate in the House of Representatives_," the main debates on the first tariff-act of 1789 were in that branch of the national Legislature. Nothing could be simpler or sounder than the basis of the new tariff as proposed by Madison, the acknowledged leader in the debates, namely, the so-called Revenue System of 1783, as adopted by the old Congress, and ratified by all the States in succession, excepting New York. That was, small specific taxes on eight articles, namely, Wines, Spirits, Tea, Coffee, Cocoa, Molasses, Sugar, and Pepper. In the earlier part of the discussion no other end than revenue was mentioned in connection with the taxes. Madison said: "_I own myself the friend of a very free system of commerce: if industry and labor are left to take their own course they will generally be directed to those objects which are most productive, and that in a manner more certain and direct than the wisdom of the most enlightened legislature could point out; nor do I believe that the national interest is more promoted by such legislative directions than the interests of the individuals concerned._" It is significant of after times that the first word in this debate respecting any other word than revenue through the tariff-taxes came from Pennsylvania; and equally significant, that the next and strongest words for something else than revenue came from Massachusetts; and more significant than either was the junction of the two States in influence and votes when it came to the final adjustment of the actual tariff-rates. Pennsylvania had already gotten well forward in the manufacture of iron and steel products, particularly of nails, and wanted "_encouragement_," that is, protectionist taxes upon the foreign products corresponding. Said Hartley of Pennsylvania: "_I am therefore sorry that gentlemen seem to fix their mind to so early a period as 1783; for we very well know our circumstances are much changed since that time: we had then but few manufactures among us, and the vast quantities of goods that flowed in upon us from Europe at the conclusion of the war rendered those few almost useless; since then we have been forced by necessity, and various other causes, to increase our domestic manufactures to such a degree as to be able to furnish some in sufficient quantity to answer the consumption of the whole Union, while others are daily growing into importance. Our stock of materials is, in many instances, equal to the greatest demand, and our artisans sufficient to work them up even for exportation. In these cases, I take it to be the policy of every enlightened nation to give their manufactures that degree of encouragement necessary to perfect them, without oppressing other parts of the community._" Massachusetts was not a whit behind Pennsylvania in asking for discriminations in her own favor at the obvious expense of the rest of the country. New England rum was made out of molasses, and Jamaica rum was its competitor in public favor; distillers in the neighborhood of Boston and Salem wanted therefore a _high tax_ on Jamaica rum, and a _low one_ on the imported molasses used in the home manufacture. Madison was willing to discourage rum-making and rum-selling both in the interest of temperance, and proposed a tax of eight cents a gallon on molasses and fifteen cents on Jamaica rum, which called out this indignant burst from Goodhue of Massachusetts: "_Molasses is a raw material, essentially requisite for the well-being of a very extensive and valuable manufacture. It ought likewise to be considered a necessary of life. In the Eastern States it enters into the diet of the poorer classes of people, who are, from the decay of trade and other adventitious circumstances, totally unable to bear such a weight as a tax of eight cents would be upon them. I cannot consent to allow more than two cents. Massachusetts imports from 30,000 to 40,000 hogsheads annually, more than all the other States together. Fifteen cents, the sum laid on Jamaica spirits, is about one-third part of its value: now eight cents on molasses is considerably more: the former is an article of luxury, therefore that duty may not be improper; but the latter cannot be said to partake of that quality in the substance, and when manufactured into rum is no more a luxury than Jamaica spirits._" The Senate in the First Congress sat with closed doors, and was thus more open than the House to the influence of interested petitions which soon began to pour in upon it, asking for amendments to the House bill in the line of protectionism; and through such amendments the Massachusetts and Pennsylvania members, with a few other members similarly inclined, partially carried their points into the first Tariff. The tax on molasses was fixed at 2-1/2 cents a gallon, and on Jamaica rum at ten cents a gallon; nails were taxed one cent per pound imported; and an accepted Senate amendment classed Hemp and Cotton together as two products of the soil worth "encouraging," hemp at 3/5 of a cent per pound and cotton at three cents a pound; yet hemp constantly "encouraged" to this day at the cost of ship building and other industries has never risen to the rank of a staple. Coal was also taxed protectionistly, at the instance of Virginia, then the coal-producing State. Note the three universal features of Protectionism in the original application of it to the United States; (1) the purely selfish call to tax one's neighbor in order to lift the price of one's own wares (nails), (2) the equally selfish resistance to such a tax as falls on one's raw materials (molasses), and (3) the final log-rolling among those legally privileged at different points (Massachusetts and Pennsylvania and Virginia). Take a second instance of the same general point from our second Tariff, passed in 1816. Two Massachusetts young men, Lowell and Jackson, brothers-in-law, had started a modern cotton-mill in Waltham, near Boston, in 1813, and constructed in it, with the help of an ingenious mechanic named Moody, a power-loom; as soon as the war with England was over, and Congress in consequence began to talk about a new Tariff, Lowell went to Washington, and by personal influence with Mr. Calhoun, then the leading man in the House, with Mr. Lowndes his colleague from South Carolina, who afterwards reported the new bill, and with other members of Congress, contributed largely to the introduction into this Tariff of protectionist features towards _cottons_. Lowell struck strong at the start. He represented (doubtless with entire honesty) to Calhoun and Lowndes, both from a cotton-planting State, that a domestic market for raw cotton _in addition_ to the foreign market would raise the price of that agricultural staple. Both were easily convinced that such would be the case, although both found ample reasons afterwards for altering their opinion in that regard. Lowell, the "cotton city" on the Merrimack, founded in 1821, was named from the successful lobbyist of 1816. Lowndes reported a tax on cottons of 33-1/3% _advalorem_, with a proviso _that all cottons should be assumed at the custom-house to have cost at least 25 cents to the square yard_. This was the famous principle of the "_minimum_," a device to increase the protectionism without _seeming_ to do so. The debate on this feature of the bill was a marvel in many ways. The penetrating reader will not be at a loss for the reason of this. John Randolph moved to strike out from the bill the proviso for the cotton _minimum_, and argued at some length "_against the propriety of promoting the manufacturing establishments to the extent and in the manner proposed by the bill, and against laying up 8000 tons of shipping now employed in the East India trade, and levying an immense tax on one portion of the community to put money into the pockets of another_." Calhoun rejoined: "_Until the debate assumed this new form, he had determined to be silent; participating, as he largely did, in that general anxiety which is felt, after so long and laborious a session, to return to the bosom of our families. It has been objected to that bill, that it will injure our marine, and consequently impair our naval strength. How far it is fairly liable to this charge, he was not prepared to say. He hoped and believed it would not, at least to any alarming extent, have that effect immediately; and he firmly believed that its lasting operation would be highly beneficial to our commerce. The trade to the East Indies would certainly be much affected; but it was stated in debate that the whole of that trade employed but six hundred sailors. The cotton and woollen manufactures are not to be introduced: they are already introduced to a great extent; freeing us entirely from the hazards, and in a great measure, the sacrifices experienced in giving the capital of the country a new direction. The restrictive measures and the war, though not intended for that purpose, have by the necessary operation of things turned a large amount of capital to these new branches of industry. But it will no doubt be said, if they are so far established, and if the situation of the country be so favorable to their growth, where is the necessity of affording them protection? It is to put them beyond the reach of contingency._" Thus Calhoun goes on, making the greatest mistake of his life which he regretted to his dying day, to give plausible reasons for his insistence and his vote, but he does not even touch upon the _real reason_. If he had detailed his conversations with Lowell, it would have been far more to the point. His motive, like that of every other man in Congress who has urged protectionist schemes, was the special benefit of some of his constituents at the more or less concealed expense of their countrymen. But, as always happens when men really act from unavowed motives, he was suspected of having them; and he guarded himself: "_He was no manufacturer; he was not from that portion of the country supposed to be peculiarly interested. Coming as he did from the South, and having in common with his immediate constituents, no interest but in the cultivation of the soil, in selling its products high, and buying cheap the wants and conveniences of life, no motives could be attributed to him but such as were disinterested._" But Randolph still charged, that the discussion showed "_a strange and mysterious connection_" between this measure and the National Bank bill which had just passed. This was a loophole of escape for Calhoun: "_he wished merely to reply to the insinuation of a mysterious connection between this bill and that to establish the Bank. He denied any improper or unfair understanding, and could challenge the House to support the charge._" A beautiful instance of the _confession_, which all protectionists make in action when it comes to the pinch, that a rise of price is at once the object and the result of protectionist tariff-taxes, is found in the awkward attempt of Congress to relieve indirectly the burnt-out citizens of Chicago in 1871. The great fire occurred in October of that year. In the winter following a bit of legislation took place in Congress in consequence, which is too instructive to be passed by without notice, because in all the parts of it taken together we have in epitome the motives and the processes and the prompt confessions of Protectionism. Contributions were taken up all over the country, and even in Europe, for the relief of the people of Chicago. As Whittier puts it: "From East, from West, from South and North, The messages of love shot forth, And, underneath the severing wave, The world, full-handed, reached to save." But cannot Congress do something to help rebuild the ruined city? April 5, 1872, President Grant set his signature to a congressional bill enacted to last one year only, and for the express benefit of Chicago alone, _to exempt all building materials except lumber from the operation of tariff-taxes_. As a public and emphatic confession on the part of Congress, that tariff-taxes raise the prices of protectionist goods, and that the remission of such taxes lowers the prices of such goods and becomes a boon to the buyers, all this is refreshing and satisfactory; but why was _lumber_, by much the most important of the building materials needed, _excepted_ from the bounty of the legislators to the unfortunates of Chicago? The bill applied to Chicago only, and was to last but one year at best! The bill as drawn and debated included _all_ building materials. Why was lumber excepted? Because, while the bill was still pending, a special car filled with the lumber-lords of Michigan and Wisconsin was rolled to Washington in haste, and the potent influence of these men was sufficient to cause the express exemption of their product from the intended cheapening (for one year) of the building materials for desolated Chicago. The brief official record of this curious transaction will be found in U.S. Statutes for 1872, page 33. It needs no comment but the obvious one, that here is the whole matter of protectionism in a nutshell;--the motive, the open confession, the greedy lobby determined to thrive on their neighbors' misfortunes, the inhumanity, the spirit of monopoly, the infernalism,--a game of grab from beginning to end! Shameless as the protectionist debates in Congress have been from the start, in letting it be plainly seen, that the sole motive of their efforts is an artificial rise of price in certain goods which their fellow-citizens would be compelled under the law to pay, the debate in the House of Representatives in the spring of 1883 was by far the most shameless and avowed in this respect of any that ever transpired there. In the last days of that debate all pretence of any action for the good of the country at large dropped utterly out of the discourse: the old fallacies and disguises and subterfuges of "home markets" and "higher wages" and "commercial independence" were no longer put forward even in word under the clash of selfish interests, and in the eagerness to secure for their wares a factitious price to be paid by their countrymen; proposed reductions in tariff-taxes were fought off by these men, and in many instances still higher taxes were urged on, under their unabashed avowal that, unless home prices were thus stiffened and uplifted, they could not make and sell their wares at a profit; one honorable member from New Jersey brought his pottery wares upon the floor of the House, and tried to demonstrate to his fellow-members that, unless these very goods were hoisted in price, by taxes on his foreign competitors, he could no longer tread his clay and work his wheels with profit to himself: in other words, he and others like-circumstanced, by lobbying and log-rolling, persuaded Congress to pass so-called laws to compel their countrymen _to hire them to carry on what they publicly alleged were unprofitable branches of business_. By their own confession, the only trouble with their goods was, that they were inferior in quality and superior in price to otherwise similar goods in the open market of the world. One more, and the latest instance, out of hundreds equally accessible and equally conclusive, will suffice for a demonstration of the point in hand. In the early summer of 1890, a Massachusetts member of the House of Representatives, an avowed protectionist from an alleged protectionist district of that State, waxed so warm in arguing against a protectionist tax upon a certain raw material useful in tanning leather, that he took off his coat and proceeded in his shirt-sleeves! One would suppose, both from his zeal and the tenor of his speech, that he was a veritable free-trader! But no! He had argued a hundred times that protectionist taxes (to be paid by other people) were a good thing for the payers, and enriched the whole country; but lo! it turned out in this case that he himself was a buyer of this particular material, and lo! he did not relish the tax-lifted prices caused by the tariff. They were all wrong. They must be fought off at all hazards, even in the hottest weather! This is a very respectable gentleman, well thought of by his neighbors in Worcester County, but his protectionism is _not_ respectable. It is chameleon-colored. It is one thing in one light, and an opposite thing in another light. Indeed, the protectionist congressman has never yet been discovered in this country, who was fond of paying protectionist taxes himself, or willing that his immediate and powerful constituents should pay them! It has been proven many times over, that the very strongest friends of a Free List in this broad land have been certain so-called protectionist Senators and Representatives. From these few sample-examples, the reader of penetration will perceive, that there is no element of logical coherence or moral decency or even outward respectability in Protectionism. There is no _principle_ in it or of it. It does not hang together. It walks in darkness and not in light. It is full of deceit. It is fond of disguises. It is contrary to common sense. It offends justice. Morality frowns at it. It has no basis in any Science, least of all in the Science of Buying and Selling, whose best impulses it feebly tries to deny, and whose largest and most innocent gains it fain would destroy. Next in order we will examine, in the third place, a few of the chief FALLACIES AND FALSEHOODS, by which Protectionism has striven to give itself a standing in the commercial world. In our day at least, these are, without exception, afterthoughts and subterfuges. We have just seen under the last head the real impulses, plain as a mountain peak, which put on and keep on and pile up these taxes on the masses of the people; but these real motives will not bear inspection and public criticism, and so plausible reasons must be found or at least propounded, which shall do the double duty of covering the real reasons, and of seeming to convince while they only perplex the victims of the scheme. These plausibilities we propose now to analyze and to expose. The test of any alleged truth is its harmony with acknowledged truths: the test of any propounded error is its incongruity with and contradiction of acknowledged truths. On a logical comparison, therefore, of any false proposition with any known truth, the latter will be sure to fling out its flat contradiction and floor the falsehood forever. Protectionism contradicts economic truths at practically innumerable points, but we will now watch the collisions at the principal points only. Fallacy A: _that a nation may still sell to foreign nations while prohibiting the buying from them_. Protectionism is multiplied prohibitions on the buying of goods from foreigners. Between four and five thousand of such prohibitions deface our national Statute-book at the present moment. All the while, however, the assumption underlies this policy, and the express proposition is often heard in different forms along the lines, that our citizens may still sell their products to foreigners, nevertheless. England has _got to buy_ our cotton or starve: the Continent _is compelled_ to take our pork products, for they are the cheapest food in the world: how can China or India _help_ taking the silver from our mines? Softly. Buying and selling from the very nature of it is never compulsory, but always voluntary. A commercial service is never rendered but in plain view of a return-service to be received. The mental estimation of each buyer is couched in the very terms of what is offered in return by each seller. Buying and selling from its inmost nature is always one act of two persons acting conjointly and inseparably to the advantage of each. How, then, can the individuals of one country _sell_ anything to individuals of another country without at the same instant _buying_ of these in return? The act of selling is just as much buying as it is selling, and the act of buying is just as much selling as it is buying. As we have abundantly seen already, the introduction of Money as a _medium_ in the transaction makes no difference in the _nature_ of the exchange of commodities internationally. The postulate, therefore, that the people of one country can continue to sell products to the people of another while refusing to take their products of some kind in return, is an _absurdity_ in the nature of things and an _impossibility_ in the world of facts. _A market for products is products in market._ All known facts confirm this irrefragable reasoning, and discredit utterly the fallacy in hand. When France and Germany a few years ago gave back to our protectionists a dose of their own medicine, and prohibited American pork-products, ostensibly because they feared the trichinæ but really to cajole their own farmers under the plea of protectionism, their brethren in the faith have made up all sorts of faces ever since, have wound up the respective diplomatic clocks to strike twelve against the too presumptuous countries which ventured to restrict American products in their ports, have protested and proclaimed. What is the matter? Is not sauce for the goose sauce for the gander also? Have not American protectionists shut out French and German products 100:1 under the same plea now used on the Continent? "_But we cannot sell our products abroad_," cry the angered Western farmers. Of course they cannot, because restrictions on buying _are_ restrictions on selling; and additional restrictions of the same kind put on French and German buying are of course still further restrictions on American selling. And the farmers are, as usual, the victims both ways. To hear an ordinary American protectionist talk, one would think that Great Britain is the enemy of mankind for admitting into her ports practically without let or hindrance the goods of all the world. _Free Trade England!_ Let us look a moment. England has to pay for all these goods received from all quarters. In what does she pay? In her own goods, of course. What is her market? The whole world. Is that market ever slack on the whole? Never. Is she ever flooded with cheap goods? The more she buys the more she sells of necessity. How much does she sell _per capita_ of her people? More than twice as much as the United States sells _per capita_. How can she sell so much of her own stuff? Because she buys freely other stuff from all the world. What are the limits to her capacity to sell her own goods to foreigners? Precisely the limits of her willingness to take in pay other goods from foreigners. Cannot these limits be overpassed in either direction? By no possibility: when people can no longer pay for what they buy, the buying ceases; and when they are not permitted to take their pay for what they sell, the selling ceases. Is this free trade profitable to Great Britain? Immensely so in every way. Whither has it carried up her ocean-marine? To the topmost notch. Is capital abundant in England in bulk, and are its loanable rates low? England is the richest country in the world, and all nations resort thither to buy. What is the source of this vast volume of Capital? The only source of Capital is savings from the natural gains of Buying and Selling. Is Great Britain willing to take in goods from the United States? Certainly, under the universal conditions of taking in foreign goods at all. Is the United States willing to take in British goods in pay for her own goods exported thither? She is not, except over protectionist barriers averaging 47%. Is it a good thing for the United States, that Great Britain takes in her goods freely? We should suppose so! Does the former already sell to the latter and through the latter more goods than to all the world besides? Much more. Could this profitable trade be easily increased? It could be quadrupled in a very short time. How? By simply according to our citizens a decent liberty, which is their inalienable right. Would the United States like it to be commercially treated by Britain exactly as the former treats the latter? It would bankrupt the United States in six months. Would our protectionists like it? It would make them howl. Is it the commercial salvation of the United States that Britain is immovably for free trade with her and the rest of the world? Nothing else saves her from commercial ruin. Can the ghost of a reason be given, commercial or other, why the United States should continue to fling double fists into the face of British goods seeking a market and so making one? Not a shadow of a shade of a good reason was ever given for such folly, or ever can be. It is more than a pleasure to acknowledge at this point the great service done by James G. Blaine, Secretary of State, during the summer of 1890, to Country and Commerce, by his courageous avowal contrary to his own personal record and to the vehement behest of his party, that the economic principle just enunciated is sound, and should be at once applied by the United States in connection with all the countries of Latin America. In a letter to the Senate on the results of the recent Pan-American Conference, he said: "_The Conference believed that while great profit would come to all the countries, if reciprocity treaties could be adopted, the United States would be by far the greatest gainer._" The principle of reciprocity is the principle of free trade applied by both parties to the trade. It is the sound principle, that goods buy goods and pay for goods at the same instant to a mutual profit. Manifold reiterations of this principle came from the Secretary that summer, especially in vigorous protestations against the McKinley tariff-bill then pending, alleging with truth that "_there is not a line or a section in the bill which opens a market for another bushel of wheat or another barrel of pork_." The unequivocal statements of a favorite statesman have roused the somewhat indifference of thousands of citizens, and make certain the speedy prevalence in the United States of the unassailable doctrine, that any People must buy freely if they would sell broadly. Fallacy B: _that tariff-taxes are needful in order to start infant industries_. There is no analogy whatever between Child-bearing and Child-growing and any form of Buying and Selling at any time, but the deceit in the wretched simile has cost the world billions of dollars of pure loss. To bring up infants from birth to maturity is indeed a good deal of a task for the parents, but it is not in any sense an economical task: the parents neither ask for nor receive a return-service in kind: the transaction is wholly moral in its character, and not economical at all: there is no party of the second part in the premises: there is a free giving, and that is all. Buying and Selling, on the contrary, has no infancy, and no maturity and no old age. This particular Minerva springs at once full-grown and full-armed from the brain of Jove. The conditions of Trading are forever the same; with no reference to the age of the parties, the antiquity of the industry, or any other such irrelevant thing. If any person anywhere (old or young) has got something to sell, and finds (directly or indirectly) any other person anywhere who wants his wares and can pay for them,--all the conditions of mutual profit are present, and everything else is an impertinence. Much more than this. Tariff-taxes have to be paid by somebody. Their payment is inexorable at the custom-house, and interest and other charges are added before the sum reaches the ultimate payer. But the ultimate sum however made up is exactly so much _out_ of the commercial gains of the payer. The sign is every time _minus_ and _not_ plus. When egregiously high tariff-taxes are multiplied in number, and all the additions are made to them, they become an incalculably large sum, every cent of which _has to be paid_ out of the gains of current Industry. Now, what a queer way that is to foster industries! What a queer way to help start them! It takes Capital to start new industries, and to carry on old ones; but tariff-taxes (with all their accretions) take just so much _out_ from what would otherwise naturally become Capital. That is to say, all Capital is savings from the gains of Exchanges; and these gains are _reduced_ by every tariff-tax that touches them directly or indirectly. Taxes from their very nature can help nobody. They hurt everybody. What a device this is to start new industries with, namely, to pick the pockets of the very men, who are to start the industries, if they ever are to start at all! Lower your reservoir to begin with, in order to give head and force to your faucet flow! But this is not half of it. On what industries do the protectionist taxes fall at first to weaken and discourage them? Of course on the natural and profitable ones, which only ask to be let alone in order to maintain a healthful life and growth. If, under natural conditions, any industry is in existence, one may be perfectly sure it is profitable, since Profit is the only thing in the world that can start and build up an industry: when the profit ceases, the trade ceases of necessity: the motive to it is _gone_. In behalf of what sort of industries are these taxes ostensibly and plausibly levied? Only, if we are to believe the protectionists, the weak and presently unprofitable ones. _It is the infant industries that need the nursing-bottle!_ That is to say, tax down and perhaps destroy the _profitable_ industries, the industries that _pay_, that can paddle their own canoe and no thanks to anybody, in order to bring forward certain other industries, which by confession and open proclamation are _unprofitable_, and can only _start_ by taxing their neighbors! Of course, there is a cat in this meal, and we shall let her out of the bag in plain sight presently; but we are taking now our friends, the protectionists, at their own word, and exhibiting their marvellous wisdom under the terms of their own choosing. What a blessed way for a nation to grow rich, to smite down with high taxes the active and enterprising and independent and therefore profitable industries with one hand, and grope around with the other to find some poor and inactive and unfrugal and naturally unprofitable industries, in order to fetch forward these by means of the plunder filched from the others! To go back for historical illustration to Washington's first administration, when the first (extremely mild) protectionist taxes were levied in this country, we have the highest authority for knowing that many of the leading branches of manufactures were prosperous and profitable. They had no artificial help in order to start, but on the contrary had had continual discouragement for a century under the miserable protectionist policy of the mother country. Washington himself was inaugurated in a dark brown suit of woollen cloth of American manufacture: so was John Adams inaugurated first Vice-President of the United States about the same time in a garb of wholly native manufacture.[11] This was in April, 1789. In November of the same year, Washington returned to New York from his first tour in New England "_astonished both at the marvellous growth of commerce and manufactures in New England and the general contentment of its inhabitants with the new government_" (Schouler, p. 117). Alexander Hamilton, the first Secretary of the Treasury, in his famous Report to Congress on Manufactures, in 1791, enumerated seventeen branches as then thriving so as to fairly supply the home market, and settle into regular trades. These were, skins and leather, flax and hemp, iron and steel, brick and pottery, starch, brass and copper, tinware, carriages, painter's colors, refined sugars, oils, soaps, candles, hats, gunpowder, chocolate, snuff and chewing tobacco. It is plain enough from the debates of the time as well as from the nature of the case, that the protectionist taxes in our first two Tariffs, already considered here in detail, although they were comparatively slight in number and amount, fell in the way of discouragement on these incipient yet independent manufactures as well as upon all the farmers of the land. There can be but little rational question, that the woollen industry was sounder at the core in 1789, when Washington was inaugurated in native woollens, than in 1889, when Harrison was inaugurated in the same, the ostentatious gift of a firm of protectionist woollen manufacturers shortly afterwards adjudged to be bankrupt and fraudulently so. The best point, after all, to make against this hollow fallacy, is the practical one, that no industry whatever, whether "infant" or other, has ever come in this country into an acknowledged self-sustaining position under a whole century's tariff-taxes. Salt, hemp, coal, cottons, woollens, nails, and iron and steel products generally, were the chief articles protectionized at first, and have been protectionized ever since, but no one of them all has ever come into a condition of self-support according to the view of the privileged beneficiaries. Each one of them was an old industry, and a relatively rich industry, when it was taken under the "fostering care" of the tariff-taxes, levied for their further enrichment on the masses of the people; and it was only greedy and secret combinations among these for that purpose, which put them at first and has kept them ever since in the rank of public beneficiaries. The simple truth is, that diversity of employments is rooted in human nature and in the circumstances amid which God has placed men, and so far is it from being true that taxes and restrictions are needful in order to foster manufactures, taxes and prohibitions cannot prevent them from springing into life! They are just as natural to men and to colonies as agriculture is. Indeed, agriculture can scarcely take a step without them. The farmer must have ploughs and carts and other implements; and, depend upon it, there are some natural mechanics in that colony. Clothes are as needful as food, and spinning and weaving in some form will begin at once, and prohibitions will be powerless to stop them. Deadly to the fallacy in hand is the word of unquestionable History. Any one may read in Palfrey and Bancroft and Hildreth such facts as these, scattered all along through the noble volumes. The manufacture of linen and woollen and cotton cloth was begun in Massachusetts in 1638, in Rowley, by some families from Yorkshire; and became so remunerative in a couple of years that some acts of the General Court designed to stimulate it were repealed. Brick-making and glass-works and the manufacture of salt were all begun in Massachusetts before 1640. In 1643, the younger Winthrop established iron-works in Braintree and Lynn, which after some losses were successfully prosecuted. Within less than twenty years thereafter, tannery and shoemaking had made such strides, that boots and shoes became articles of export. That these were no fancy beginnings in manufactures, we may strikingly learn from an Act of Parliament passed in 1698. Notice the date. This law is a sample of many more:--"_After the first day of December, 1699, no wool, or manufacture made or mixed with wool, being the produce or manufacture of any of the English plantations in America, shall be loaden in any ship or vessel, upon any pretence whatsoever,--nor loaden upon any horse, cart, or other carriage,--to be carried out of the English plantations to any other of the said plantations, or to any other place whatsoever._" Thus the fabrics of Massachusetts were forbidden to find a market in Connecticut, or to be carried to Albany to traffic with the Five Nations. "That the country which was the home of the beaver might not manufacture its own hats, no man in the colonies could be a hatter or a journeyman at that trade, unless he had served an apprenticeship of seven years. No hatter might employ more than two apprentices. No American hat might be sent from one plantation to another." In 1701 the three charter colonies are reproached by the lords of trade "_with promoting and propagating woollen and other manufactures proper to England_." In 1721 New England alone had six furnaces and nineteen forges, and there were many others in Pennsylvania and Virginia. Parliament enacted in 1750 that no more mills should be erected in America for slitting or rolling iron, or forges for hammering it, or furnaces for making steel; and in certain cases, agents of the crown were authorized to tear down such establishments as "_nuisances_." How far all the arts of navigation had been carried in the Colonies before the Revolution, every one may read in Burke's famous speech on Conciliation with America. How far the products of the loom, the forge, and the anvil, were already being exported, in spite of British legislation, to other countries, any one may see in Lord North's last proposals and concessions to ward off Independence. Protectionism having once fed its petted beneficiaries from the public crib, that is to say, from taxes wrenched from the many to enrich the few, invariably clamors for more and more rations for its pets from the same public source. Not only does no industry become self-supporting by its bite and its sup, but each becomes according to its own facile representations and representatives, more and more helpless in itself, more and more shameless in its demands, more and more _entitled_ to public charity, and less and less inclined to surrender one iota of past or present privilege. The daughters of the horse-leech cry continually, Give! Give! The following schedule relates to woollens mainly, but it is a fair sample of many other protectionized classes of goods under the successive tariffs in this country, in point of increased taxes on the people in their behoof. While these lines are being written, the McKinley tariff-bill, so-called, having passed the House, is pending in the Senate. It is significant, that this piece of legislation, whether it be finally enacted or not, proposes to open the second century of the United States Protectionism by largely hoisting the tariff-taxes along the main line. Infant industries indeed! ======================+=============================================== | RATE OF DUTIES UNDER THE TARIFF OF ARTICLES. +-----+-----+--------+--------+--------+-------- |1791.|1859.| 1861. | 1864. | 1883. | 1890. ----------------------+-----+-----+--------+--------+--------+-------- | Per | Per | | | | |cent.|cent.| | | | Dress goods of cotton | 5 | 19 | 30 per | 55 per | 68 per | 88 per and worsted, | | | cent.| cent.| cent.| cent. costing 15 cts. | | | | | | the sq. yd. | | | | | | | | | | | | Same, costing 20 | 5 | 19 | 30 " | 50 " | 60 " | 90 " cents sq. yd. | | | | | | | | | | | | Same, all wool or | 5 | 24 | 30 " | 47 " | 77 " |100 " of mixed materials, | | | | | | costing 24 cents | | | | | | sq. yd. | | | | | | | | | | | | Same, costing 30 | 5 | 24 | 30 " | 55 " | 70 " | 90 " cents sq. yd. | | | | | | | | | | | | Same, costing 60 | 5 | 24 | 30 " | 45 " | 55 " | 70 " cents sq. yd. | | | | | | | | | | | | Same, weighing over | 5 | 24 |25% and |40% and |40% and |50% and 4 oz. sq. yd. | | | 12 cts.| 24 cts.| 23 cts.| 44 cts. | | | per lb.| per lb.| per lb.| per lb. | | | | | | Ready-made clothing |7-1/2| 24 |25% and |40% and |35% and |60% and | | | 12 cts.| 24 cts.| 40 cts.| 50 cts. | | | per lb.| per lb.| per lb.| per lb. | | | | | | Tapestry Brussels |7-1/2| 24 |30 cts. |50 cts. |20 cts. |28 cts. carpets | | | sq. yd.| sq. yd.| sq. yd.| sq. yd. | | | | | and 30%| and 30% | | | | | | Tapestry velvet |7-1/2| 24 |50 cts. |80 cts. |25 cts. |40 cts. carpets | | | sq. yd.| sq. yd.| sq. yd.| sq. yd. | | | | | and 30%| and 30% | | | | | | Brussels carpets |7-1/2| 24 |40 cts. |70 cts. |30 cts. |40 cts. | | | sq. yd.| sq. yd.| sq. yd.| sq. yd. | | | | | and 30%| and 30% | | | | | | Druggets and bockings | 5 | 24 |20 cts. |25 cts. |15 cts. |20 cts. | | | sq. yd.| sq. yd.| sq. yd.| sq. yd. | | | | | and 30%| and 30% | | | | | | Silk goods, including |7-1/2| 19 | 30 per | 60 per | 50 per |Average velvets and plushes | | | cent.| cent.| cent.|probably | | | | | | 90% | | | | | | Woollen hosiery and | | | | | | underwear: | | | | | | Costing 32 cents | 5 | 24 | 30 " | 90 " | 77 " |214 per per lb. | | | | | | cent. Costing 42 cents | 5 | 24 | 30 " | 79 " | 79 " |175 " per lb. | | | | | | Costing 62 cents | 5 | 24 | 30 " | 62 " | 74 " |135 " per lb. | | | | | | Costing 82 cents | 5 | 24 | 30 " | 54 " | 82 " |120 " per lb. | | | | | | | | | | | | Linen goods | 5 | 15 | 30 " |Average | 35 " | 50 " | | | |37-1/2% | | Cotton hosiery: | | | | | | Costing 62-1/2 cents|7-1/2| 24 | 30 " | 35 per | 40 " |110 " per doz. | | | | cent.| | Costing 2.10 cents |7-1/2| 24 | 30 " | 35 " | 40 " | 76 " per doz. | | | | | | Costing 4.10 cents |7-1/2| 24 | 30 " | 35 " | 40 " | 64 " per doz. | | | | | | ======================+=====+=====+========+========+========+======== It is also significant in this connection to read an extract from the Report of Mr. William Whitman, President of the National Association of Wool Manufacturers, dated March 29, 1890, to the Stockholders of the Arlington Mills, Massachusetts. "_I have been your Treasurer for a consecutive period of twenty years. During this period the average earnings have been_ 20-8/10 _per centum upon the capital. The earnings of the last year were nearly three and a half times those of the year previous, and there is every indication that the current year will be the most profitable one in the company's history._" Fallacy C: _that a home market is better and broader than a foreign market_. Professor Thompson of Pennsylvania has publicly and repeatedly stated, that, by a persistent policy of Protectionism a "home market" would be created for all the bread-stuffs that this great country produces; and John Roach, the shipbuilder, expatiated at length before the Tariff Commission of 1882 on the advantages the farmer derives from the better "home market" already created by Protectionism. To come nearer home in place and further down in time, there was organized in Eastern Massachusetts with headquarters at Boston in some connection with the national election of 1888, a so-called "Home Market Club" of large proportions. It is generally understood in the State, that a large minority, if not a majority, of the members, are displeased with the McKinley Bill of 1890, declaring that the mustard is carried to fanaticism in this bill, that neither the "home market" nor any other can profit by such a series of prohibitions. However this last may be, it is plain, that a ridiculous and most harmful fallacy underlies all references to a "home market" in any connection with foreign trade. It is simple Gospel charity to believe, that Thompson and Roach and the founders of the Home Market Club and all others, who repeat this wretched stuff, never stopped in their thoughts long enough to inquire what a "market" really is, never analyzed into its simple elements that composite thing called a "market," but each and all in turn have taken up a catch-word carelessly which seems on the surface to have some significance though in reality it has none. All will agree, if they will stop to think, that a "market" is always made up of _buyers_ with return-services in their hands. A bigger home market than before consists only in more domestic buyers than before, all ready with acceptable pay in all their hands. More persons than before, more services-in-return than before. Now, if Protectionism _can enlarge the home market_, it must be (1) either by increasing the number of births or diminishing the number of deaths in a given time in a given country. Precisely how big bundles of big taxes, which the whole population must pay in one form or another and over and over again, may be made to stimulate births or prolong lives, no reasonable man can see, and it is not unreasonable to deny that a protectionist can see it. But conceding that he can see and show this, his task is then but half done, for he must proceed to see and show how these same onerous taxes are able (2) to multiply the return-services in the hands of this increased population! If he think at all, the protectionist is compelled to remember, that his system is always and everywhere a series of prohibitions on profitable trade. A profitable trade always gives birth to gains. It always gives birth to Capital. It always gives birth to Plenty. That is the nature of it, and the Divinely ordained blessing on it. But when the greater part of these gains are artificially cut off, when the possible capital is reduced in volume, when the scarcity comes in which is the primary _purpose_ of Protectionism to create, it shall go hard if there be even as many return-services as when the process began. Not a better "home market," but a more meagre one, is the inevitable issue of restrictions and prohibitions. If our protectionist try to get out of this snug place, in which he now finds himself, provided he is able to feel the force of any logic whatever, by claiming that his broader "home market" is to be made by new immigrants with old-world values in their hands to buy with, he certainly cannot escape by this route, because (1) he must in order to do this see and show what there is in big taxes enormously multiplied to invite immigrants here at all; and (2) our typical protectionist is scared to death by the _handiwork_ of foreign "pauper labor" wherever exposed for sale, and of course he is not prepared to welcome the pauper laborers themselves, of which class as described by him the immigrants would mostly consist; and besides, the tariff would not admit to our shores the old-world values, which would be the immigrants' sole _return-services_ to help make up the new market! Within a week of the present writing, Senator Morrill of Vermont has broached from his place the idea in debate, that the industries of the United States can be so stimulated by protectionism as to cause the consumption of all the agricultural products of the United States. Well, when? The stimulus has been applied now just thirty years under Mr. Morrill's own eye, and by a tariff called by Mr. Morrill's own name, increasing its rates every little while, even in 1883, when the public pretence was to diminish them; and agricultural products of all kinds, including lard and pork and wool, have never been so "deadly dull" as in this interval of high protectionism. Scores of thousands of bushels of well-ripened Indian corn were burned for fuel in the more western States and Territories the very last winter, because the market for it was too poor to pay for its transportation to Chicago over protectionized rails, and in cars built of tariff-cursed lumber, every nail and bolt and screw in which doubled in price from the same general causes. If Mr. Morrill were not in his dotage, or if in his prime he had ever closely analyzed a single case of trade, foreign or domestic, he would see that the abandoned farms of his own State reckoned to be about one-third of the cultivated land on the eastern slope of the Green Mountains to the Connecticut River,--Mr. Morrill's own native region and residence,--abandoned farms for two years past assiduously sought by State officials to be filled in if possible by immigrants from Sweden virtually giving them the lands and farm-buildings,--fling out their flat contradictions to this senatorial drivel; that the constant decline for a quarter of a century of the farming population in every State in New England gives the lie to this miserable proposition; and that the constantly increasing area of mortgaged farms in every agricultural State in this Union is an overwhelming proof that the "home market" for farm staples has been growing constantly worse for years under this boasted protectionism. The year 1890 is likely to prove the pivotal point of time in the swing of this whole proposition of Deceit, for two reasons, namely, (1) it is the year of the decennial Census, in which at least a half-hearted attempt is being made to bring out the aggregate area in each State of the mortgaged farming lands, and nothing can prevent the appearance in which of the lessening volumes of population in the purely agricultural communities; and (2) the year has already been marked by the political revolt from the party of protectionism of the masses of the farmers in the Mississippi Valley, and their organization into "Farmers' Alliances," naturally and demonstrably hostile to all Restrictions on the sale of farmers' produce. Fallacy D: _that protectionism tends to raise the wages of general laborers_. In our third chapter, the whole doctrine of Wages was clearly and carefully laid down, and it is only needful now to remind the reader of two or three of those fundamental principles. The Labor-giver and the Labor-taker only touch each other at the old points of reciprocal Desires and Renderings. There are two persons standing in that relation each to each. A rate of Wages is always a result of a Comparison. If the Labor-takers, whoever they may be, more strongly desire the services of the Labor-givers, whoever they may be, other things remaining as before, there will be a rise in the rates of Wages, because Effects always follow the operation of Causes in Economics, as in all other scientific spheres; and if the Labor-takers, for any reason, desire less than before the services of Laborers, other things being equal, the general rates of Wages will decline of necessity. Now, what is the necessary effect of Protectionism upon the general Demand for Laborers? How is the whole class of Labor-takers affected by prohibitory tariff-taxes? Note every time, that it is the presently and independently _profitable_ industries, the industries that ask for nothing except to be let alone, that are struck and restrained by these tariff-taxes; the fact that any industry is successfully going forward under its own motives is sufficient proof of its own profitableness; these are the industries, in every case, which are curtailed by restrictive tariff-taxes, their former gains are lessened of course and by design, and their _motives_ consequently to hire Laborers to carry on these branches of business now taxed and tormented are _lessened_; less Desire for Labor-givers gives laborers less every time round; the so-called argument of Protectionists is, to introduce alleged _unprofitable_ industries by means of taxing down _profitable_ ones; and pray, what effect must that have upon the general Desire to employ Labor-givers, and consequently what effect upon general rates of Wages? Take one look further along this same line. Tariff-taxes of this character are designed to keep out, and do keep out, foreign wares, which are the natural and profitable market for domestic wares: how will this forced exclusion affect the Demand for laborers to make or grow the domestic wares whose market is now lost? And what is the influence on the Wages of those whose services are now in lessened Desire along the whole line? Causes produce their Effects everywhere and every time. Dissatisfaction among, and actual disaster to, Labor-givers as a class, have always followed the imposition of protectionist tariff-taxes in this country, as a matter of plain observation and record; have followed increasingly and more disastrously increased restrictions and prohibitions on profitable trade; "Strikes" on the one hand to resist a lowering or secure a lifting of Wages, "Lockouts" on the other to bring laborers to terms, "Shut-downs" for pretended repairs in order to gain time to tide over the gluts that always accompany artificially restricted markets, semi-hostile relations between Employers and Employed, interruptions to travel and transportation, timidities of Capital fatal to new and enlarged enterprises, have never characterized this country so strikingly as during the quarter-century of Protectionism culminating in 1890. The following table accurately compiled by Editor Philpott of Iowa, from the National Census, shows in remarkable figures the relatively slow rate of progress of the Nation in thirteen essential items of growth under the Morrill Tariff, as compared with the rapid rates of progress in the leading lines under the Walker Tariff. _The comparison lies in the per centum of increase over the previous decade of the period_ 1850-60 _relatively to each of the two periods_ 1860-70 _and _1870-80_: the average of the last two periods is taken for the sake of an easier comparison of the progress of the one decade (Walker) with the average of the two later ones (Morrill)._ +----------------------------------+------------+-------------------+ | Lines of Progress. | 1850-1860. | Average each Ten | | | | years--1860-1880. | +----------------------------------+------------+-------------------+ | Population | 35.5 | 26.2 | | Wealth | 126.6 | 61.0 | | Foreign commerce, aggregate | 131.0 | 45.6 | | Foreign commerce, per capita | 70.3 | 15.2 | | Railroads, aggregate | 240.0 | 69.0 | | Railroads, per capita | 150.0 | 34.0 | | Capital in manufactures | 90.0 | 66.0 | | Wages in manufactures, aggregate | 60.3 | 58.2 | | Wages in manufactures, per hand | 17.3 | 9.4 | | Products | 85.0 | 69.6 | | Value of farms | 103.0 | 23.6 | | Farm tools and machinery | 62.0 | 27.7 | | Live stock on farms | 100.0 | 17.3 | +----------------------------------+------------+-------------------+ The State of Massachusetts has been diligently and scientifically taking the Statistics of everything relating to Laborers as such for many years; and we take now by way of confirmation of what has just been written a few statements of fact from the official Reports. _One-third of Massachusetts wage-earners were out of work one-third of the time under the benign influence of Protectionism [1887]. Wages went down in Massachusetts on the whole average 5 per centum 1872-83, while in the same interval of time they went up 9 per centum in Great Britain [1885]. Wages in Massachusetts advanced in 1830-60 (Walker) 52 per centum and in 1860-83 only 28 per centum (Morrill). What is called the needful cost of living increased in Massachusetts between 1860 and 1878 (Morrill) 14-1/2 per centum in spite of immense cheapenings in costs of production and transportation [1885]._ The U. S. Government has been gathering for a long time important Statistics relating to Laborers and their Wages and their Costs of Living, not only in the decennial Censuses but also in Consular Reports and in the Reports of a national Commission established for that purpose. We excerpt a few relevant statements from these almost at random. _Wages in free-trade England are from 50 to 100 per centum higher than they are in any protectionized country on the Continent of Europe. The aggregate Values of this country increased 1850-60 (Walker) 126 per centum, and in 1870-80 (Morrill) only 80 per centum, after reducing the census values of 1870 to a gold basis. Vessels American-owned and American-built controlled three-fourths of our foreign carrying trade in 1856, and less than one-sixth of it in 1886._ The Census of 1880 gives the total number of persons employed in the great subdivisions of industry in the United States as follows:-- Trade and transportation 1,810,256 Manufactures, mechanical and mining 3,837,112 Professional and personal services 4,074,238 Agriculture 7,670,493 The following table compiled from the censuses of the last four decades will be found to yield food for thought in the light of the present paragraphs. _It relates solely to manufactured goods at the four successive epochs._ +-----------+--------------+--------------+--------------+--------------+ | | 1850. | 1860. | 1870. | 1880. | +-----------+--------------+--------------+--------------+--------------+ |Value of | | | | | | products |$1,019,109,616|$1,885,861,676|$4,232,325,442|$5,369,579,191| |Value of | | | | | | materials | 555,174,320| 1,031,605,092| 2,488,427,242| 3,395,823,547| |Wages paid | | | | | | out | 236,759,464| 378,878,966| 775,584,343| 947,953,795| |Materials | | | | | | to | | | | | | products, | | | | | | per cent | 54| 54| 58| 63| |Wages to | | | | | | products, | | | | | | per cent | 22| 21| 18| 17| |Average | | | | | | wages | | | | | | earned | $247| $289| $377| $346| |Capital to | | | | | | products, | | | | | | per cent | 52| 53| 50| 50| |Number of | | | | | | establish-| | | | | | ments | 123,029| 140,433| 252,148| 253,852| |Average | | | | | | hands | | | | | | each | 7.79| 9.34| 8.16| 10.79| +-----------+--------------+--------------+--------------+--------------+ Our manufactures were put down in the Census of 1880 as in value $5,369,579,191. But this sum contains $1,670,000,000 that does not strictly belong to manufactures, such as flouring, lumbering, blacksmithing, sugar-refining, coffee-roasting, slaughtering, and a few others. This sum being taken out, there is left in round numbers but $3,700,000,000. This is not a great amount for 50,000,000 of people, and for a land with such natural advantages for manufacturing as our own. Fallacy E: _that the costs of Wages to employers and of Materials to manufacturers somehow justify Protectionism_. The harmful confusion is constantly made here between Rates of Wages and Costs of Labor--two very diverse matters. Rates of Wages depend on a very different set of circumstances from Costs of Labor. Failure to draw this distinction, and a desperate desire to clutch even at a straw with which to bolster up absurd Restrictions, have made a hotch-potch and a caricature of attempted argument at this point. Rates of Wages have always been relatively high in this country as compared with the countries of Europe for two general reasons: (1) the country is new, with enormous natural advantages of every sort, with comparatively few laborers competing steadily with each other for work, large numbers of persons passing constantly out of the employed into the employing classes; and (2) there has almost always been from the first, and there is likely to be again in the immediate future even if there be not at the present moment, a Money in this country depreciated below the gold standards of Europe, in which the rates of current wages are always reckoned, and which makes them _seem_ to be higher than they actually are in purchasing-power. On the other hand, Costs of Labor have always been, and are now, low in this country as compared with Europe, for two general reasons also: (1) all classes of laborers are more efficient and skilled in this country than in Europe, working with more energy more hours in the week, under less cost of superintendence, being as a rule more temperate and healthful and educated persons, so that employers _get more for what they give_ than do employers abroad; and (2) the cost of that to the employers in which the laborers are paid, whether money or other valuables, is always less here than abroad, because the money usually is depreciated money which costs less in commodities, and even if it be not, the current prices of general commodities are higher here than there, so that the cost of wages paid directly or indirectly in commodities is less here to employers. A second and distinct and wholly convincing proof, that the Cost of Labor to employers has been less here than abroad during the first century of our national existence, has been the unquestioned fact, that the Rate of Profits has been higher. A constant stream of foreign Capital has come hither for investment, drawn solely by the higher rates of Profit. But if the rates of Profit have proven to be higher, the costs of Labor must have been lower, because laborers and capitalists divide the whole returns between them. Nobody else has any claim upon the conjoint proceeds. _Profits are the Leavings of the Costs of Labor._ If, therefore, these Leavings are larger in one country than another, then of necessity the Costs of Labor are lower in the first country. Now, Protectionists have had the effrontery (largely the result of ignorance) to contend, that they are at a disadvantage as employers of laborers on account of the rates of Wages they are obliged to pay to them! _Exactly the reverse is the truth._ Instead of being at any disadvantage at this point, it is a matter of absolute demonstration, that American employers pay the smallest costs of Labor in the world! Employers as such have no interest in the rates of Wages as such, but only in the costs of Labor to themselves as capitalists. High rates of Wages not only usually accompany low costs of Labor, but also are a proof of them! The patient (not to say stupid) American People have consented for thirty years past to be abominably taxed for the exclusive benefit of a set of brazen mendicants, on the ostensible ground, that the said public beggars were unfortunately placed in comparison with European competitors, when the simple truth has been, that they had a constant advantage in the best, and cheapest (in cost to themselves), and steadiest and most intelligent (on the whole), laborers in the world. What is the truth about raw materials in this country? Especially raw materials in those branches of industry, which have been most steadily protectionized from the first, like iron and copper, and cottons and woollens? Can any reason be found for legislatively excluding foreign products of these classes on the ground of any disadvantage of our producers on the score of raw materials? Look at iron ore, for example, now protectionized to the extent of 75 cents per ton. No country in the world possesses such deposits in quantity and quality and accessibility of iron ore as the United States of America. Vast beds of the best ore in the world, especially in wide regions along the whole course of the Tennessee River, lie directly upon the surface of the ground; and the so-called "Iron Mountain" in Missouri is said to have ore enough above the general surface of the country round to supply the wants of the entire United States for two centuries! Yet every ton of this ore is artificially lifted in price to the very People to whom God gave it in exceeding abundance. The average cost of mining, washing, screening, and loading upon steam freight-cars for transportation to market, of brown-hematite ore at one of the Mines in Tennessee during the summer and autumn of 1890, was 33 cents per ton, with a constant downward tendency in cost as machinery was multiplied and methods improved. This included the rent paid to the owners of the land holding the ore-beds, and every other item of cost carefully computed by the owner of the capital and manager at the mines. This statement is made on the authority of the said owner and manager over his own sign manual, with his consent given that it be printed as at present in the interest at once of Science and Righteousness. It has often been publicly stated by experts, that there is more coal in deposit in the United States than in all the rest of the world put together. Nevertheless, bituminous coal has been protectionized since 1874 to the extent of 75 cents per ton, and slack or culm (another form of coal) 40 and 30 cents per ton. The bounty of God to the people of this country has been so far forth thwarted by the greed of mine-owners acting on the subservience of members of Congress to the few rich combined for that purpose to the impoverishment of the unorganized masses. Especially has every interest of New England both popular and manufacturing been sacrificed to the short-sighted selfishness of the mine-owners, because the British Provinces, just to the northward, are full of bituminous coal waiting for a market against New England goods. Limestone is a second indispensable requisite for the reduction of iron ores. God has put the ore and the coal and the lime in unfailing quantities in close proximity with each other throughout the entire valley of the Tennessee. So small is the natural cost of making iron in that favored region, that it has been transported this summer to Savannah by rail (freights heightened by tariff-taxes on steel rails and lumber), and then exported 3000 miles to Liverpool with good profits to the makers by their own confession. Steel rails are protectionized at present to the extent of $17 per ton, formerly $28 per ton. Fortunately, we have at present a competent National Labor-Commissioner, heretofore in the service of Massachusetts in the same capacity, Carroll D. Wright, who has just made a Report to Congress on the comparative cost of producing steel rails here and abroad. The following table is national and official and indisputable. It shows the Element of Cost in one ton of steel rails in Eleven distinct establishments, the first Two being located in the United States, the next Seven in countries on the Continent of Europe, and the last Two in Great Britain. The first column gives the Cost of the Material in the several districts, the second the Cost of Labor, and the third the total cost of the rails. +-----------------+-------------+-------------+-------------+ | Distinct | Materials. | Labor. | Total Cost. | | Establishments. | | | | +-----------------+-------------+-------------+-------------+ | 1 | $21.10 | $1.54 | $24.79 | | 2 | 25.11 | 1.38 | 27.68 | | 3 | 17.67 | 1.04 | 19.57 | | 4 | 18.06 | 2.51 | 22.18 | | 5 | 18.06 | 4.64 | 25.65 | | 6 | 18.23 | 2.58 | 23.12 | | 7 | 18.10 | 2.68 | 23.19 | | 8 | 18.66 | 2.97 | 23.74 | | 9 | 23.42 | 2.01 | 27.02 | | 10 | 18.05 | 2.54 | 21.90 | | 11 | 16.39 | 1.36 | 18.58 | +-----------------+-------------+-------------+-------------+ The reader who knows how to read between the lines will observe the strong confirmation of this table to the point already made in these pages, namely, that the "pauper labor of Europe" costs much more at a given point than the more highly paid labor of England and the United States. Thus: the average Cost of Labor in a ton of rails in the two latter countries is $1.70; the average in the seven Continental countries is $2.63. The average total cost per ton in the nine foreign countries is $22.77; the average in the two establishments here is $26.23. It must be remembered, that the cost of the material and of all the processes of manufacture here is greatly enhanced by the device of the tariff-taxes: still the difference in cost is even then only $3.46 per ton greater than the foreigners' cost: considering that these foreign rails must be carried 3000 miles over sea, how comes it that a tariff-tax of $28 or $17 per ton is needful in order to foster rail-making in this country? Take off all the tariff-taxes the rail-makers and transporters have _to pay out_, and could they not well forego the additional taxes they now impose on their fellow-citizens? Is there anything anywhere in the natural costs of Materials and Labor here to put American manufacturers at any disadvantage in their natural lines of business as compared with foreigners in _their_ natural lines of industry? Fallacy F: _that artificial tariff-burdens placed at one point may become a compensation for other such burdens placed at another point of the same general line_. This fallacy has been luridly illustrated in this country since 1867, when in the Wool and Woollens Tariff of that year additional protectionism was accorded to Woollens ostensibly to compensate the manufacturers for protectionism then first accorded to raw wools. For a number of years the woollen manufacturers had succeeded in persuading the wool-growers not to demand of Congress tariff-taxes on raw wools, thus publicly confessing that such taxes raise the prices of materials to the manufacturers thereof. But the wool-raisers argued naturally, if protectionism be good for woollens, it must also be good for wools; the truth was, it was equally baneful to both, and to every other beneficiary of it in the long run; but the wool-workers had no answer to the simple logic of the wool-growers,--they gave their case away when they alleged that _they_ could not live without government aid,--and so they were obliged to surrender to their already angered brethren of the fleeces in 1867, and higher tariff-taxes were put on the woollens in order to compensate the manufacturers for the anticipated rise in the price of wools. Of course it was supposed that the patient people would bear the now doubled burdens put upon them by _two_ privileged sets of their fellow-citizens. If protectionist taxes made the manufacturers rich, why should they not also enrich the rural herdsmen? In short, why may not such taxes make everybody rich? There were those at the time, and the present writer was one of them, who foresaw and foretold just what has actually happened, namely, that both allies in this scheme of popular plunder were going in to their own death as well as in to the impoverishment of their countrymen. How would any level-headed man, capable of seeing beyond the point of his nose, have prognosticated in the premises? Something like this: it takes many kinds of wools mixed, say six or eight, to make the best woollen cloths, and several kinds to make good cloths at all; the United States could only furnish two or three kinds, and these in quite limited quantities; the tariff-taxes would raise the price of the foreign wools by just so much, to the detriment of the manufacturers, who could no longer buy the foreign wools, needful for good cloths, and must consequently drop down to inferior cloths in their mills, using shoddy and cotton and what not: how will that affect the market for native wools, especially the fine Ohio and Vermont wools? Only as the manufacturers are prosperous in making good cloths that find a quick and wide market at home, can the growers find a good market for their wool; from these heavy taxes on their material and machinery and lumber and dye-stuffs and so on, the manufacture will surely droop, and employ itself on poor goods from cheap materials, and the market for native fleeces will droop in consequence, and the prices of home-wools will go down and down and down of necessity. Precisely this has happened. The gold prices of wool were never before so low in this country as since the unholy alliance of 1867, and as a rule they have gone down lower and lower and lower. Why? Because the manufacturers _could_ not, under the tax-laws of their country which they themselves had egged on, make the cloths demanding the native fine wools. Sheep-raising became unprofitable. Millions of fine-woolled sheep were slaughtered in a few years for their pelts and mutton in Ohio alone. The following official table from the Department of Agriculture exhibits the relative number of sheep in thirteen States of the Union, at the two epochs 22 years apart:-- +--------------+------------+------------+ | States. | Feb. 1867. | Feb. 1889. | +--------------+------------+------------+ | Maine | 895,884 | 547,725 | | Vermont | 1,335,980 | 365,770 | | New York | 5,373,005 | 1,548,426 | | Pennsylvania | 3,456,568 | 935,646 | | Kentucky | 933,193 | 805,978 | | Virginia | 700,666 | 435,846 | | Missouri | 1,005,509 | 1,109,444 | | Illinois | 2,764,072 | 773,468 | | Indiana | 3,033,870 | 1,420,000 | | Ohio | 7,159,177 | 4,065,556 | | Michigan | 4,028,767 | 2,134,134 | | Wisconsin | 1,664,388 | 793,146 | | Iowa | 2,399,425 | 540,700 | | +------------+------------+ | | 34,750,504 | 15,475,839 | +--------------+------------+------------+ The effect of the tariff-taxes on wools, accordingly, even during a period when the population of the country increased 65 _per centum_, has been _to diminish the number of sheep in the hands of the farmers by more than one-half_. The wool clip in the entire country has indeed increased since 1867, but it has been in Texas and on the free ranges of the extreme boundaries of civilization in the West, where about one pound in three of the gross fleece is clean wool, and the most favorable estimate of the present clip would only suffice to clothe about one-half of the people of the country. Does this look like becoming "_independent_" of the rest of the world in the matter of woollen clothing for our great People? Will our folks never learn that there is nothing "_dependent_" in Buying and Selling, that the more any individual or nation Buys and Sells the more _independent_ they become of course, and that the hermit in his poverty-stricken cell is the best image of Protectionism? The extra barriers heaped up in 1867 against foreign woollens not only did not lessen their importation, but in connection with the discouragements thrown upon the domestic manufacture as just explained increased the importations; so that, in 1877, imports of woollen goods stood at $25,000,000; and in 1882 had increased to $42,000,000, the latter being an increase in one year, from 1881, of 34 _per centum_. The people must be clothed at some rate, and many people will have good cloth at any cost; and the whole result of this imbecile policy of Prohibitions on wool and woollens has been demonstrated right before our eyes, (1) to kill off the sheep, (2) to compel the manufacture of poor goods, (3) to multiply foreign woollens in domestic use, and (4) to double in general the cost of clothing the American People. It is difficult to say whether the grangers as a class, or the manufacturers as a class, or the consumers of woollens, are more put out by this state of things. They are all in the slough together, and have only themselves to thank for their condition. And it is growing worse and worse. As a mere and small example, less than one-half the amount of woollen machinery is now in operation in Berkshire County, Massachusetts, that was running here 15 years ago; and three-fourths of all the woollen manufacturers doing business in the County have failed in the 20 years just now past. In one word, _it is no compensation to one industry for artificial burdens piled upon it, to pile corresponding burdens upon other industries affiliated with it_. ALL LEGITIMATE INDUSTRIES EVERYWHERE ARE INTIMATELY AFFILIATED WITH EACH OTHER. Fallacy G: _that because some kinds of prosperity sometimes accompany and follow after Protectionism, therefore they are caused by it_. This is at once the commonest and the hollowest of the forms of false argumentation employed in this country to bolster up a monstrously unjust Privilege. The rapid growth of Chicago, for example, in the ten years following the first imposition of the Morrill tariff-taxes, was often referred to, as if the Taxes caused the Growth. Admitting for argument's sake, what would be the height of folly to admit in reality, that these Taxes were _among_ the causes of that Growth, how absurd to refer to one antecedent the result of one hundred or one thousand antecedents! So of the growth of national population in the twenty years following the Wool and Woollens Tariff of 1867: population increased about 65 _per centum_ in that interval: tariff-taxes on most of the necessaries of life increased in the same interval just about in the same proportion: was there any tie of Cause and Effect as between the rise of taxes and the rising tide of population? Any _tendency_ in the one to bring the other? Because one thing _follows_ another in point of time, is that any proof that the second is the _result_ of the other in point of cause? In the old classification of Logical Fallacies this particular one was called by the Romans "_post hoc ergo propter hoc_," that is, _after something therefore on account of that thing_. The thoughts and the speech of civilized men have always been full of some form of this incongruity of inference; but it is the stock in trade, the staple and body of protectionist argumentation. But it is utterly devoid of any significance whatever. Unless some natural tie of connection can be shown, as between precedent and consequent, unless it can be probably shown that _nothing but_ the precedent could cause the consequent, unless taxes are adapted in their very nature to increase riches, unless repeated subtractions can be shown to be the same thing as multiplied additions, then all this sickening talk of cheapening prices and intensified activities and diffused popular blessings under an odious scheme of subtle taxes that only _take_ and can never _give_, is to be treated with a silent and pitying contempt, whether used by the duped or the duping. A good instance of this empty form of reasoning,--much better because more uniform than any one ever sought to be applied in the realm of Trade,--would be this: the Day has uniformly followed after the Night ever since the dawn of Time, and therefore the Night is the cause of the Day! It has been indeed hard work to destroy the commerce utterly of a great People by legal restraints however multiplied and by mountain-barriers however piled up, and some prosperity has pushed itself into prominence after all these and in spite of all these. Behold! cry the logical protectionists, behold in such prosperity the _effects_ of our beautiful legislation! Immeasurable areas of fertile land to be had by all Immigrants for the asking; endless deposits on every hand of coal and of all the useful and precious metals; primeval forests and streams leaping with power from their mountain springs to mill-wheel and intervale; commodious land-locked ocean harbors on every side but one, and vast chains of inland "unsalted seas"; a salubrious climate, and an ingenious, well-trained people; self-organized and liberal governments, guaranteeing all rational liberties to the people--but one; all these antecedents and accompaniments go, as it were, for nothing in the minds and on the tongues of some of our citizens, as causes of accruing prosperity, in comparison with (as a cause) the commercial bondage at the one point possible under our liberal and blessed institutions. These are seven of the fundamental Falsities of Protectionism. They might easily be made seven times seven, and even seventy times seven. But not one of them is to be forgiven. They are unpardonable sins against Science and Liberty and Progress. Any radical and comprehensive Falsehood, like Protectionism, practically contradicts the Truth at innumerable points. The test of any proposed truth is its harmony with other and acknowledged truths: the test of any suspected error is its contradiction to such truths. Enough has now been said to settle the place of any pretended right of a part of the people commercially to enslave the other part, and ultimately themselves also. It only remains in this chapter, in the fourth place, to indicate briefly at a few points the course of OPINIONS in relation to commercial Restrictions and Prohibitions in general, such as exist at present in their most exaggerated forms within the United States, on the part of those best entitled by study and intellect and opportunity to form and formulate a candid judgment in such matters. In respect to the personal motive and circumstances of those combining to frame such legal interferences with the natural liberty of their contemporaries, and the inevitable results of them, we will quote first from Sir Thomas More, a man of men, in his Utopia, written in 1516. "_The rich are ever striving to pare away something further from the daily wages of the poor by private fraud, and even by public laws; so that the wrong already existing, for it is a wrong that those from whom the State derives most benefit should receive least reward, is made yet greater by means of the law of the State. It is nothing but a conspiracy of the rich against the poor. The rich devise every means by which they may in the first place secure to themselves what they have amassed by wrong, and then take to their own use and profit at the lowest possible price the work and labor of the poor. And so soon as the rich decide on adopting these devices in the name of the public, then they become law. The life of the labor-class becomes so wretched in consequence that even a beast's life seems enviable._" The utter folly of supposing that a Parliament or a Congress or a Committee of either is fit to determine, or to have any voice in deciding, what shall or what shall not be manufactured or grown, what shall or what shall not be exported and imported, was never more happily exposed than by Adam Smith in his Wealth of Nations, published in 1776. "_The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but would assume an authority which could be safely trusted not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it._" Alexander Hamilton, our first Secretary of the Treasury, and in some respects the most brilliant of all our statesmen, has often been claimed and referred to as a protectionist by those unfamiliar with his writings; but the paragraph of those writings, or the phrase of any authenticated conversation of his, has never been quoted and never can be, because they do not exist, which proves him to have been a "protectionist" in the modern, or any other proper, sense of that word. On the contrary, his deliberate and well-founded opinion in the premises is given at length in number XXXV of the Federalist, this number printed early in 1788: "_Exorbitant duties on imported articles serve to beget a general spirit of smuggling; which is always prejudicial to the fair trader, and eventually to the revenue itself: they tend to render other classes of the community tributary, in an improper degree, to the manufacturing classes, to whom they give a premature monopoly of the markets: they sometimes force industry out of its most natural channels into which it flows with less advantage; and in the last place, they oppress the merchant, who is often obliged to pay them himself without any retribution from the consumer. When the Demand is equal to the quantity of goods at market, the consumer generally pays the duty; but when the markets happen to be overstocked, the great proportion falls upon the merchant, and sometimes not only exhausts his profits, but breaks in upon his capital. I am apt to think, that a division of the duty between the seller and the buyer more often happens than is commonly imagined. There is no part of the administration of the Government that requires extensive information, and a thorough knowledge of the principles of Political Economy, so much as the business of taxation. The man who understands those principles best, will be least likely to resort to oppressive expedients, or to sacrifice any particular class of citizens to the procurement of revenue. It might be demonstrated that the most productive system of finance will always be the least burdensome._"[12] Shrewd old Benjamin Franklin, impersonation of common sense and common honesty, ridicules in his sly way the whole wretched business in the columns of the "Pennsylvania Gazette" in 1789. "_I am a manufacturer, and was a petitioner for the act to encourage and protect the manufacturers of Pennsylvania. I was very happy when the act was obtained, and I immediately added to the price of my manufacture as much as it would bear, so as to be a little cheaper than the same article imported and paying the duty. By this addition I hoped to grow richer. But as every other manufacturer, whose wares are under the protection of the act, has done the same, I begin to doubt whether, considering the whole year's expenses of my family, with all these separate additions which I pay to other manufacturers, I am at all the gainer. And I confess, I cannot but wish that, except the protecting duty on my own manufacture, all duties of the kind were taken off and abolished._" In the first congressional debate on the Tariff after the new Government went into operation, that is, in 1789, Fisher Ames of Massachusetts, who had just before made the strongest plea against the Molasses Tax, the raw material of New England rum, became also the strongest stickler there for the protectionist view, that artificial manufactures may properly enough fasten and fatten upon Agriculture, like shell-fish upon ship-bottoms, and went to the root of the whole matter of that inevitable antagonism in a few frank and radical words, the best because the most truthful words that can be found upon that side in the century that has followed. "_From the different situation of the manufacturers in Europe and America, encouragement is necessary. In Europe, the artisan is driven to labor for his bread. Stern necessity, with her iron rod, compels his exertion. In America, invitation and encouragement are needed. Without them, the infant manufacture droops, and those who might be employed in it seek with success a competency from our cheap and fertile soil._" Gouverneur Morris, one of the youngest and among the most gifted of the Revolutionary statesmen, had a clear insight into Economic realities. "_Whatever saves Labor rewards Labor._" "_Those who will give the most for money, in other words, those who will sell cheapest, will have the most money._" "_Taxes can be raised only from revenue: push the matter further, and their nature is changed: it is no longer taxation, it is confiscation._" FOOTNOTES: [9] See an excellent Essay on Mexican Finance by M. L. Scudder, Jr. [10] Public Statement of Professor Taussig of Harvard College. [11] See James Schouler's United States, p. 77 of Vol. I. [12] There were two other authors of some of the papers of the Federalist, Madison and Jay; but Hamilton's authorship of number XXXV was never questioned by anybody; he himself claimed it expressly with his other numbers a few days before he was shot. CHAPTER VII. TAXATION. Political Economy is the Science of Buying and Selling. It must include of course in its discussions the Motives, the Methods, the Obstacles, the Rewards, relating to Sales, which are themselves first to be defined as furnishing the sole Field of the Science. We have now gone through with painstaking all of these topics in order, but we have not yet fairly struck Taxation, which is indeed in all its forms an obstacle to Sales, and in some of them the annihilation of Sales, but which in its nature is something much more than an obstacle, namely, a Condition of something higher than itself. In the very strictest sense of the terms, Taxation is not a part of the Science of Political Economy, because it is not an essential part of any one of those natural processes by which men buy and sell and get gain. It is rather a Condition through Government of the successful ongoing of all those processes. There cannot be, therefore, a _science_ of Taxes, as there is unquestionably a science of Sales. The facts of Taxes are artificial and governmental, the facts of Sales are natural and original. All forms of Production, as we have now seen, go forward in accordance with positive natural forces and motives, which God has appointed, and which men have a natural impulse to ascertain and generalize and profit by; for it is Nature bids men work and save, buy and sell, invent and transport, navigate and grow rich; but Nature has given no whisper anywhere, at least that we can hear, about any Taxes. That is the work of Society. That seems to be something negative, not positive, so far as Buying and Selling is concerned. Taxation is indeed something necessary to the social order, as men are; it furnishes means of defence against greater evils than itself is; but in itself considered, it is an economic evil, because it takes away from exchangers a part of the gains of their exchanges; strictly speaking, therefore, it cannot be made a part of Economic Science. But, on the other hand, as we shall see at length in the exposition that follows, all the relations of Taxation from the beginning to the end are so ultimately connected with Exchanges, are so founded on and limited by Exchanges, its true principles are so exclusively economical, and its abuses are so instantly and constantly harmful to all the ongoings of natural and profitable Trade, that Taxation must always be treated as if it were a part of Economics. The latter is a science, the former is an art; but the art is almost exclusively dependent upon the principles of this one science; and a comprehensive treatise on the science, accordingly, must exhibit all its main bearings upon those practical rules of Taxation, which are so vital to the happiness and prosperity of any People. All scientific Economists, therefore, have considered the subject of Taxes to lie within their legitimate beat. They have, however, justified the inclusion upon very different grounds, one from another; and so far as now appears, the present writer was the first technical Economist to disclaim in the name of his Science direct jurisdiction over Taxation. A careful discussion of a series of distinct though related Questions belonging to Taxes will exhibit the whole practical matter in the light of well-established principles of economical Science. 1. What is the fundamental GROUND of Taxes? _Government_ is an essential prerequisite to any general and satisfactory Exchanges, since it contributes by direct effort to the security of person and property; and justly claims, therefore, from each citizen a compensation in return for the Services thus rendered to him. We do not mean to say that government exists solely for the protection of person and property, or that all the operations of government are to be brought down within the sphere of exchange, for government exists as well for the improvement as for the protection of society, and many of its high functions are moral, to be performed under a lofty sense of responsibility to God and to future ages; nor do we mean to say that government has not also a deep ground for its existence, in virtue of which it may on extraordinary occasions demand all the property of all, and even the lives of some, of its citizens; but we do mean to say that, whatever may be conceded as the ultimate ground of government, the matter of taxation, by which government is outwardly and ordinarily supported, and by which it takes to itself a part of the gains of every man's industry, finds a ready and solid justification in the common principles of Exchange. If, as far as the tax-payer is concerned, the exchange does not seem to be voluntary, on a closer analysis it is seen to be really voluntary; for in effect the people organize government for themselves, and voluntarily support it, and there is no government separate from the will of the people. In a very important sense, accordingly, a tax paid is a reward for a service rendered. The service which government renders to Production by its laws, courts, and officers, by the force which it is at all times ready to exert in behalf of any citizen or the whole society when threatened with evil in person or property, is rendered somewhat on the principle of division of labor, one set of agents devoting themselves to that work; and, notwithstanding some crying abuses of authority which no constitution or public virtue has yet been found adequate wholly to avert, is rendered on the whole economically and satisfactorily. Taxes, therefore, demanded of citizens by a lawful government which tolerably performs its functions, are legitimate and just on principles of Exchange alone. 2. What is the SOURCE out of which Taxes are actually paid? The answer is, out of the gains of Exchanges of some sort. Gifts aside, and thefts which are out of the question, no man ever did, no man ever can, pay his taxes, except out of the gains of some sales which he has already made. Even the man who lives wholly on the interest of his money must make a true exchange in lending it (a credit transaction), and must already have gotten his return-service in interest, before he can pay his taxes; personal and professional servants must receive their wages, the outcome of exchanges, before they can possibly pay their taxes; and men can realize nothing for taxes or other payments from their farms or foundries or stocks in trade except as they sell either them or their products. The more sales, the more gains, and the greater reservoir whence taxes may be drawn. Political Economy, as the vindicator of sales, as the defender of all legitimate gains whatsoever, is the best possible friend of tax-payers and tax-gatherers as such. Whatever thought or force restricts sales, makes it _pro tanto_ the harder to pay and collect taxes, so much the harder for a government to keep its head above water and reach the ends of its being. It follows from all this, by a necessary inference, that the annual Taxes of any country must come out of the annual Earnings of the people of that country, using the word "earnings" in its general and proper sense. The greater the earnings _per capita_, the easier are the taxes paid. Sir Richard Temple read an address not long since in the Section of Economic Science and Statistics of the British Association, some of whose results are not only interesting but also astonishing. For instance, taking the whole population of the United Kingdom (England, Scotland, and Ireland), without division into classes, he demonstrates that the average of yearly earnings per head of the population is £35 4_s._, or $171.28. This exceeds the average earnings in the United States by 30%, £27 4_s._:£35 4_s._ It exceeds also the average on the Continent of Europe by 95%, £18 1_s._:£35 4_s._ It falls below that of Australia only, £43 4_s._:£35 4_s._, or 19% less. Canada's average earnings _per capita_ are $126.80, or 5% less than those in the United States, £27 4_s._:£26 18_s._ According to the same unimpeachable authority in the same paper, the annual income from investments is in Great Britain and the United States as nearly as possible one-seventh of the aggregate Property in each (all kinds), or 14%. In Canada and Australia, 18% and 22% respectively. Undoubtedly the most profitable country in the world at present is Australia, and Great Britain stands next. The only apparent reason why the United States, whose natural resources of every kind are vastly superior to either, takes the third rank is, that profitable exchanges here are forcefully suppressed by law, and that to an enormous extent, neutralizing natural resources and glorious opportunities for easily acquired and widespread gains. This violent suppression of commerce by national legislation makes it just so much the harder for any man to pay his taxes, whether these be due to Nation, State, or Municipality. If the reservoir be diminished the flow from it through every pipe becomes feebler. 3. In what PROPORTION ought the individual citizens to contribute to the fund annually necessary to be raised by Taxation? The usual answer has been, that a man should be taxed according to his _Property_. That is the radically correct answer, though most who have given it have not understood clearly the meaning of the word _property_. We have already seen that the ultimate idea of property is the power and right to render services in exchange, and defined it as _anything that can be bought and sold_. Robinson Crusoe, while solitary upon his island, did not and could not have property, in the true sense of that word. It is not the fact of appropriation that makes anything property; it is not the fact that a man has made it or transformed it, that makes anything property; it is not the fact that a man may rightfully give it away, that makes anything property; but it is the fact that a man has something, no matter what it is, for which something else may be obtained in exchange, that makes that something property, and gives government the right to tax it. In other words, property consists in Values, in a purchasing-power, and not in possession, or in appropriation, or in the esteem in which a man holds anything he has as long as it is his own. The test of property is a sale; that which will bring something when exposed for exchange is property; that which will bring nothing, either never was, or has now ceased to be, distinctively property. This view may not seem to be as novel as it is, or it may be prejudiced by its very novelty, but at any rate it carries along with it that strongest of the criteria of truth, that it simplifies and illumines a confused section of the field of human thinking; and at the same time justifies a practice which governments have reached, as it were through instinct, the practice, namely, of taxing men who have neither real estate nor chattels, on their incomes from industry and from credits. To the general question, then, in what proportions shall the citizens contribute in taxes to the support of government, the general answer comes, that they ought to contribute _in proportion to the gains of their exchanges_, of whatever kind they may be. The farm, the foundry, the mill, the railroad, the real estate of every name; personal property of every kind; and personal acquirements and efforts of all descriptions, best appear, for the purposes of taxation, _through the gains realized by means of them_. If, for any reason, any of these become unproductive, taxes should cease to be derived from them; indeed, must cease to be derived from them, because their owners can no longer pay by virtue of them. It may be objected that lands, for example, presently unproductive, may be held untaxed under this principle, held for the sake of a prospective rise of price. Very well; when they are sold at a profit, let the owner be taxed on that profit: it will be time enough then, especially as men do not like to hold unproductive forms of property. It may also be objected, that, under this principle, wages, the result of personal and professional exertion, would be taxed just the same as profits and rents, the result of previously accumulated property. Very well; they ought to be so taxed. Can anybody give a solid reason why they ought not to be so taxed? One may say, that a professional man earning a large income, on which taxes are paid the same as on a similar income of a land proprietor, dying, leaves to his children no further means of earning, while the land-proprietor, dying, does leave such means. Granted; but the land income continues to pay taxes, while that professional income does not! Other members of the profession will do the business which the former one would have done had he lived, and they will pay taxes on the income from it. What a man transmits to his children, whether a great name or a great estate, has nothing to do with the amount of taxes that he ought to pay while he lives. There is an illusion about lands and real property that needs to be dissipated before men will understand clearly the whole matter of Taxation. Without constant watchfulness and foresight, without constant efforts in improvements and repairs, almost every form of realized property will rapidly deteriorate and become unproductive. Land even in Great Britain, where land is scarce, is only worth about twenty-five years' rent; and without the exercise of intelligence and will property ceases to be. _Property has its birth in services exchanged; services exchanged give rise to gains; taxes can only be paid out of these gains; they ought to be proportioned to the amount of these gains without any reference to the class of exchanges producing them; while the right to tax on the part of the government is connected with a service rendered by government, and both grows out of and is limited by the right to exchange on the part of the citizens._ These considerations, though they may exclude the propriety of a poll-tax, are consistent with most other forms of taxation, and give unity to them. 4. Does it not follow from all the preceding, that a single and universal INCOME-TAX would prove the best form of what is in its own nature a subtraction from the gains of the governed for the maintenance of Government? If the approximate amount of Income could in all cases be ascertained, and if no other form of tax were levied upon the same persons, this would seem to be a perfectly unexceptionable mode of Taxation. The only sources of Income are three: Wages, Profits, Rents. It does not seem that gifts are legitimately taxable; they lie outside the field of exchange; they spring from sympathy, from benevolence, from duty; and while exchange must claim all that fairly belongs to it, it must be careful not to throw discouragements into the adjacent but distinct fields of morals. Hence, it may well be questioned whether legacies, bequeathments, gifts to charitable and educational institutions, and gifts to individuals proceeding from friendship, gratitude, or other such impulse, are properly subject to taxation. The property is taxable in the hands of the donor, and may be in the hands of the recipient, but the passage from one to the other ought to be unobstructed by a tax. Gifts, then, excepted, and plunder, which is out of the question, the sources of income are few and simple, and there is no great difficulty in every man ascertaining about what his annual income is. Because this income, exactly ascertained, exactly measures the gains of his exchanges for that year, a tax upon that income is the fairest of all possible forms of taxation, and might be made with advantage, in time, to supersede all other forms. Superficial objections may be easily raised, and are raised constantly in the United States, against any form of an income-tax. Reference is often had to our national experience with such a tax during and just after the late Civil War. The truth is, that tax was thrown on in addition to, and in no proper relations with, a large number of other national taxes of all sorts, good and bad; it was no possible experiment in Taxation, because there was no opportunity of watching its operation separate from that of other and confused forms; industry of all kinds was demoralized by the war, and still more by a depreciated and abominable paper money made legal tender for all debts; and the tax became unpopular in influential quarters for certain reasons not inherent in the nature of the tax, and was discontinued in consequence. In order to be fairly tested, an income-tax should either be exclusive, all other taxes being intermitted for the time being; or at least levied simply in itself in connection with a few other simple taxes, each of which can be watched in its incidence and results separately from the others. Great Britain derives its national revenues almost wholly from five sources; namely, (1) Excises, say £27,000,000 annually; (2) Customs, say £20,000,000; (3) Incomes, say £12,000,000; (4) Stamps, say £12,000,000; (5) Postals, say £9,000,000. The remaining, say £10,000,000, come from miscellaneous sources. One feature of the English Income-tax is, that it is varied from time to time according to prevailing national needs, the rate having been lifted from 2_d._ to 16_d._ per pound of income, according to estimated expenditures. In 1857, it realized in our money $80,255,000. In 1866, the largest year, our own national income-tax realized $60,894,135. By varying the rate to the pound of income according to the prospective wants of the Exchequer, the English have found for about forty years their income-tax to be the most uniform, unfailing, expansive, and responsive to control, of all their fiscal expedients. The Prussians, too, are applying an income-tax as a means of raising revenue with good success. There, as in England it is somewhat complicated with other kinds of taxes, and cannot exhibit itself altogether in its own nature as if it were _exclusive_, such as all scientific economists would like to see it tried somewhere on a large scale; and the Germans have a different method from the English, of making the tax more or less flexible as circumstances vary. The English change the _rate_ of the tax to the unit of income: the Germans _graduate_ the tax to different classes of income-receivers. For example, those persons having an income between 420 and 660 _marks_ a year pay 84 pennies (_pfennige_) as income-tax; persons in the next higher class pay 164 pennies a year; those in the class, whose maximum income is 6000 marks, pay 44 marks and 80 pennies a year; and all persons whose income does not rise above 420 marks are not subject to this tax. On account of hard times a few years ago, Bismarck brought it about, that all the classes included between 420 and 6000 marks of income should be wholly exempted from one-quarter's taxes. A _mark_ is 23.82 of our cents; and a _pfennig_ is one-hundredth of a mark. Besides the complete harmony of an Income-tax with the general principles of Taxation, as already unfolded, it has several specific advantages over other forms of Taxes. a. It has no tendency _to disturb prices_. Were there no taxation except on Incomes, and were all the incomes rightly ascertained, the prices of everything would be just as if there were no taxes at all. Taxation would then be like the atmosphere, pressing equally on all points and consciously on none. It is through tricks wrought on Prices, that the greatest and most widely spread injustices have been done and suffered in this country during the past thirty years: a depreciated Money, whether of paper or silver, raises some prices and not others, and some prices before others, and thus distributes its mischiefs unequally; protectionist tariff-taxes play of design fantastic tricks with prices, raising some and depressing others, thus working monstrous injustice on a vast scale; and almost all forms of taxation become unequal and unjust through their diverse action on Prices. But a universal Income-tax exclusive of all others, properly levied and fully responded to by the payers, would have no influence at all upon prices, could by no possibility work essential injustice, and would be certain to be very productive without becoming burdensome. b. A second great advantage of such an Income-tax in such a country as this, would manifestly be, that all men would be obliged to keep exact pecuniary accounts; more orderly methods of Business would generally prevail; most men would know much better than they do now how they stand themselves, and whom of others to safely trust; sudden commercial failures, indeed failures at all, would be less frequent and severe; and everything in the business world would be more aboveboard and better known. c. A third advantage of such an Income-tax, and the chief, would be its tendencies _to fiscal simplicity_. Complexities in the Exchequer are always and in many ways expensive to the People. In this country, where distinct taxes have to be paid, first to the local municipality, then to the State, and last to the Nation, Income-taxes, were all others abolished, would have this striking advantage, that the local municipality might best ascertain the incomes of all its legal residents once for all, no matter from what sources local or other the incomes be derived; and, having collected its own local _per centum_, the State and then the Nation would each have to collect an additional _per centum_ on the same income for themselves. Or, better still, by an amicable arrangement, neither party yielding up its inherent right to tax, one set of officials might ascertain the incomes and also collect the tax for all three governments once for all. It may be long, it doubtless will be, before we shall ever come to such economy and simplicity and fiscal beauty as this is; for the pride of sovereignty is very strong both in State and Nation; each is jealous of the powers of the other, each is fond of the pelf and patronage and officialism connected with the gathering of the taxes, and each would be disinclined to yield anything to the other; but the fact remains, that, as it is of acknowledged moment to have the single Cæsar's image and inscription on every piece of the national Money, so it is of almost equal moment in point of cheapness and clearness and simplicity to have the hand of Cæsar seen but once in taking in the Taxes. Objection has been often raised to any form of Income-tax from the publicity of private affairs resulting from it. It was just this that proved fatal to our own first experiment along this line of national action. But there seems to be some confusion of ideas in connection with this phrase, "publicity of private affairs," for really, so far as taxation is concerned, there ought to be nothing "private" about the amount of any man's income, or the aggregate of all forms of his property, inasmuch as every man has a _right_ to know, that all his neighbors are contributing _pro rata_ with himself to support that Government, which is _common_ to him and them. There is nothing, at least there should be nothing, "private" in connection with Government; that is the one absolutely "_public_" thing of the world; least of all should there be anything private in the matter of public taxes, since in bearing up the burdens of Government all the citizens are alike copartners, and in this view and for this purpose each has a right to demand a look into the books of all the others. Another objection has often been raised, namely, that some men will never give in a true return of their Income. Ah! but they can be made to do so, as the forms are perfected, as fraudulent returns are promptly punished by additional assessment and collection, and as the memory and conscience of the payers are quickened by the action of a healthful public opinion brought to bear through the annual publication of the list of their returns. Men are not so isolated from each other as that a man's neighbors do not know pretty well the general amount of his income. There is the additional security of an oath, of the fear of punishment, and of the wish to stand well with one's class. At the worst, it may be said, that evasions and fraud accompany also all other forms of Taxation. 5. What is the difference between DIRECT and INDIRECT Taxes? This is an old and proper division: we must now see what is the economical basis of it. A direct tax is levied on the very persons who are expected themselves to pay it; an indirect tax is demanded from one person in the expectation that he will pay it provisionally, but will indemnify himself in the higher price which he will receive from the ultimate consumer. Thus an income tax is direct, while duties laid on imported goods are indirect. There has been a great amount of discussion on the point whether direct or indirect taxation be the more eligible form; but the reader of penetration will perceive that there is not at bottom any very radical difference between them; each is alike a tax on actual or possible exchanges, with this main difference, that men pay indirect taxes as a part of the price of the goods they buy, without thinking perhaps that it is a tax they are paying, and consequently without any of the repugnance that is sometimes felt towards a tax-gatherer who comes with an unwelcome demand. Thus indirect taxes are conveniently and economically collected. Especially is this true of impost taxes; since one set of custom-house officers may collect easily and at once the government tax which is ultimately paid by consumers all over the country. The taxes also levied by the present United States internal revenue law are indirect taxes, whereby the government gets in a lump what is afterwards distributed over many subordinate exchanges. The countervailing disadvantage of indirect taxation, however, is, that the price of the commodity is usually enhanced to an extent much beyond the amount of the tax, partly because it is a cover under which dealers may put an unreasonable demand, and partly because the tax, having to be advanced over and over again by the intermediate dealers, profits rapidly accumulate as an element of the ultimate price. Direct taxes are laid either on Income or Expenditure. As the difficulty of a tax on a person's whole expenditure is much greater than one on his whole income, inasmuch as the items are more numerous and more diffused, it is only attempted to levy a few taxes on some special items of expenditure, such as those on horses, carriages, plate, watches, and so on; but as these do not reach all persons with any degree of quality, they are so far forth objectionable. A house-tax, levied on the occupier, and not on the owner, unless he be at the same time the occupier, would be a direct tax on expenditure every way unobjectionable. Taking society at large, the house a man lives in and its furniture are probably the most accurate index attainable of the size of his general expenditures. They are open to observation and current remark; they are that on which persons rely more perhaps than on anything else external for their consideration and station in life; the tax could be assessed with very little trouble on the part of the assessor; and it is well worthy the attention of our State and National Legislatures, whether such a tax, if more taxes should be needed, would not be more equal and more easy of collection than any others now open; or whether it might not with advantage take the place of some of the complicated and objectionable taxes now laid. Direct taxes have this general advantage over indirect, that they bring the people into more immediate contact with the government that lays the taxes, and subject it to a quicker supervision and more effectual curb, whenever its expenditures grow larger than the people think it desirable to incur; perhaps they have this general disadvantage over indirect taxes, especially over imposts, that the number of officials required to assess and collect them is larger, thus swallowing up a part of the proceeds of the taxes, with this liability also of bringing the people into an attitude of hostility to the government and to its contemplated expenditures. But whether the taxes be direct or indirect, or whatever be their form, except it be a poll-tax, which is questionable at best, they are laid upon Exchanges, and are designed to withdraw for the use of the government a part of the Gains of exchanges. 6. Are CREDITS a legitimate subject of Taxation? The answer is very easy. Unless this whole treatise from beginning to end be unsound, Credits stand upon the same economical grounds as Commodities and Services, and so may be taxed for the same reasons as those may be taxed. Whatever is bought and sold is properly enough taxed, if the needs of the government require it, and if such taxation would be productive and not too unequal. As Values always spring from the action of individuals, so the incidence of taxes is upon persons rather than upon things; and the question is what can a man sell, or what has he already sold, on the gains of which sale the government may lay some claim? If I have a note and mortgage on my neighbor's farm, I can sell it at any time to a third party; it pays me interest _ad interim_, and I can collect it at maturity. Government therefore properly taxes me for that credit in my possession. It is a part of my property. The holders of the government bonds occupy an economical position exactly similar. They have a lien on the national property and income. The credits they hold are vendible commodities. They are a paper bearing interest. They can be collected at maturity. They are indeed exempted by law from municipal and State taxation. That was a legitimate inducement held out to everybody alike to invest in the bonds. But there is no reason why the nation, having withdrawn them from town and State taxation, should not itself all the more subject them to their fair share of the national burdens, unless indeed it be claimed, as perhaps it fairly may be, that the exemption enables the government to borrow at a just so much lower rate of interest. The income at any rate derived from the bonds should be taxed as soon as any other income is. It is no longer any ground of merit, even if it ever has been, for persons to buy the government debt. It is a mercantile transaction, and should be so considered in relation to taxes. So of other mercantile credits. They are taxable. Massachusetts has had a great deal of trouble of late years both in the Legislature and otherwise about the taxation of mortgages on taxed Massachusetts farms and other real estate. The question is intricate and full of difficulty. Some things about it, however, are clear. The note and mortgage is a different _piece_ of property, and a different _kind_ of property, from the real estate. It is a peculiar sort of credit. The owner of it is a different person from the owner of the real estate. Either bit of property may change hands without changing the _status_ of the other. The question of taxing the note and mortgage, like the question of taxing the bonds, seems to hinge on the effect it would have on the rate of interest of the obligation secured by the mortgage. If the holder of the mortgage expects to have to pay a tax upon it, he will try to get a higher rate of interest on his money loaned and thus secured. Whether mortgagees taxed as such _can_ throw off the tax upon the mortgagors in a higher rate of interest on the money loaned is a point much disputed and at least doubtful. General principles would lead us to favor the taxation of note and mortgages in the hands of their holders, so long as such cumbersome forms of taxing as prevail in Massachusetts are maintained. A universal income-tax would solve this difficulty also in a moment of time. 7. Has Political Economy anything to say about the RATE of taxes per unit of that which is subject to tax? Yes; it has an important word to say upon that point. From the very nature of Taxes in general, and in order that they may be most productive in the long run, as well as discourage as little as possible the Exchanges which would otherwise go forward, the Rate of taxes ought always to be _low_ relatively to the amount of Values exchangeable. A high rate of tax not infrequently stops exchanges in the taxed articles altogether, and of course the tax then realizes nothing to the government. As the only motive to an exchange is the gain of it, the exchange ceases whenever the government cuts so deeply into the gain as to leave little margin to the exchangers. The greater the gain left to the parties, after the tax is abstracted, the more numerous will the exchanges become, and the greater the number of times will the tax fall into the coffers of the government. In almost all articles, consumption increases from a lowered price in even a greater ratio than the diminution of the rate of tax; so that the interests of consumers and of the revenue are not antagonistic but harmonious. On articles of luxury and ostentation, and on those, such as liquors and tobaccos, whose moral effects are clearly questionable, very high taxes may properly enough be laid, because their incidence will hardly tend to diminish consumption, and it would scarcely be regretted if it did; but with this exception, duties and taxes should be levied at a low rate _per centum_ as well for the interest of revenue as of consumers. It is to be added, however, that the taxes even on these articles may be too high to meet either a revenue or a moral purpose. The internal tax of two dollars a gallon upon distilled spirits was of this character. Experience has demonstrated that a less tax will produce more revenue, and the drinking of whiskey, bad as that is, is less culpable than the endless frauds on the government provoked by the high tax. 8. What is the difference between SPECIFIC and ADVALOREM Taxes, and why should the student take careful note of these both singly and combined? These terms are used more particularly in relation to Tariff-taxes, but there is nothing in the distinction itself so to limit its application. A Specific tax is a tax of so many cents or dollars on the pound, yard, gallon, or other _quantity_ measurable: an Advalorem tax is a tax of so much _per centum_ on the invoiced or appraised _money value_ of the goods subject to the tax. Specific taxes, accordingly, are far simpler and steadier in their operation than the others; it is easy to ascertain the weight or number or other quantity of valuables, and then to apply a fixed ratio to them in the way of tax; the payer knows or may know beforehand precisely how much the tax will amount to, and consequently just how it is to affect the profitableness of his current trade; and on these and other grounds specific taxes are preferable to advalorem ones. To be sure, this form of tax involves that high-priced grades of an article pay no higher taxes than low-priced grades of the same, but this consideration is largely overbalanced by those of convenience and productiveness. Advalorem taxes, on the other hand, are never calculable beforehand; because Values from their nature are variable, and as a matter of fact do constantly vary. Imported goods, for instance, bring with them the invoice of the seller giving the values at the place of exportation. But the importer is by no means sure that the tax will be levied upon that valuation. The home valuation will of course be higher, otherwise the goods would not be imported. Whenever it becomes the policy of a country, as of the United States at present, to keep foreign goods _out_ to the utmost extent possible under the law, which law is itself devised on purpose to keep them out, there will always be suspicions and charges of undervaluations at the place of export; there will always be a motive on the part of the foreign seller or agent thus to undervalue the goods in the interest of the importer, so as to lessen his tax, and so increase the seller's market; such abnormal tariff-taxes are the enemy of mankind in general, and, therefore, there will be no end of deceits and evasions at both terminals of the ocean-route, and "custom-house oaths" will become a by-word of course; the importing, or rather the non-importing, country will keep in pay an army of spies and informers on both sides of the water in order to prevent what is called "frauds," and another army of "appraisers" at its custom-houses in order to discredit the invoices, and to jump at a valuation of the goods, on which the tax shall be levied; and honorable merchants and importers, without any fault of their own, are liable to get entangled in the miserable meshes of such goings-on, as happened in a memorable case in New York a few years ago, and be mulcted in fines (perhaps to immense amounts) one-half of which shall go to the informer. There are too many practical difficulties connected with either of these two forms of tax to make it proper to combine the two upon the same article of merchandise. To combine them thus is one of the tricks and traps of Protectionism. That makes it next to impossible for any importer to tell beforehand what the two taxes will aggregate, and quite impossible for any ultimate consumer to tell how much of his price paid is due to the demands of his Government. Opening the official tax-book at random, we quote as follows from a single page: "Webbings, pound 50 cents, and 50 per cent"; "Buttons, pound 50 cents, and 50 per cent"; "Suspenders, pound 50 cents, and 50 per cent"; "Mohair cloth, pound 30 cents, and 50 per cent"; "Dress trimmings, pound 50 cents, and 50 per cent." Besides these, on that same page, there are 14 other articles under similar compound taxes, mostly at 50 cents a pound and 50 per cent additional, this as under the Tariff as it was 1874-83; but all these 18 articles were put in 1883 at "_pound 30 cents, and 50 per cent_." 9. What are the economical reasons for an EXCISE or INTERNAL-TAX in connection with Tariff-taxes for revenue? A tariff-tax, whether for revenue or other purpose, raises the price by so much of the article subjected to it and actually imported; now, if similar articles of the same quality be made or grown at home, and be not subjected to a corresponding tax, these will inevitably rise to the price of the foreign, with the tariff-tax added, for there is no possible competition or conceivable impulse that can keep it lower than that; so that, in that case, the government gets in revenue, only the taxes paid on the part imported, while the people are compelled to pay in addition virtually the same taxes on all that part produced at home. Why should not the government have the proceeds of the last as well as of the first? The last is the direct result of the first. If now, a corresponding excise-tax be put on the domestic product also, the government will get in revenue all that the people are obliged to pay in consequence of government-tax. This is just: the other is wantonly unjust. Take an illustration, please. The national Census of 1890 gives the Pig-iron production of the Census year as 9,579,779 tons of 2000 lbs. each. This is an increase over the production of the Census year, 1880, of 255 _per centum_,--3,781,021:9,579,779. Fortunately the present Census adds the net imports for the two years respectively, with these results: the _per capita_ consumption of Pig-iron in 1880 was 196 lbs., of which 126 was home production, and 70 of foreign import; while in 1890 the consumption was 320 lbs. _per capita_, of which 299 was domestic, and 21 foreign. That is to say, in 1880, 65% of the pig-iron consumed in this country was of home production, and 35% was of foreign production. At that time the tariff-tax on imported pig was $7 per ton. Government secured this tax on a little more than one-third of what was consumed, while a small circle of citizens banded together for that purpose secured for themselves this tax on the remaining two-thirds of all pig-iron consumed that year, _and the whole people paid the tax on the entire three-thirds_. As we shall see fully a little further on, our national Government has no constitutional or other right to tax the people one penny except to supply its own needs as such; if, therefore, the $7 impost per ton were put on as a legitimate tax, there should have been an _excise_ or internal-tax to the same amount put on the pig-iron produced at home. That would have cost the people no more, and the Government would have gotten twice as much more as it did get from the tax. If there be an axiom in Taxation, one point indisputable by any rational human being, it is this: _The Treasury should receive all that the people are made to give up under a public tax._ In 1890, this particular matter came to be much more flagrant. Only 21 parts out of 320 parts were in that year foreign pig-iron; that is, a little less than 7%, while 93% was domestic pig-iron; the tariff-tax at that date was .3 of a cent per pound, or $6.72 per ton of 2240 lbs.; the tax was sufficient practically to exclude foreign pig, although the Scotch pig as more fluent is very much desired here in some branches of the iron manufacture, particularly in making steel rails; Government received the proceeds of its own tax on only one-fourteenth of that, which really paid the tax on its whole fourteen-fourteenths; where did the tax on the thirteen-thirteenths go to? If this were a matter of genuine taxation, ought there not to have been an _excise_ on the domestic corresponding to the _impost_ on the foreign? Precisely that is what we do in the case of other articles not _protectionized_. For example, in the fiscal year 1889, the excise or internal-tax on "distilled spirits and wines" realized to the Treasury $74,312,200, and the tariff-tax on the same realized $7,123,062, total, $81,435,268; on "malt or fermented liquors" the same year, the excise was $23,723,835, the impost only $663,337, total, $24,387,172; and on "tobacco" the excise was $31,866,860, the impost $11,194,486, total, $43,061,346. These figures are official. An ostentatious display of private figures and price-lists is often made, with a design to show that the prices of home-made products protectionized are not lifted so high to consumers or buyers as those of foreign-made products with the tariff-taxes added. The main sophistry in these figures is this: the pure assumption, that the _quality_ of the home-made products alleged to be cheaper than the tax-added price of the foreign, is _the same_ as that of the foreign. Unluckily, things are often called by the same names, and even described by the same technical terms, which are very different sorts of things in reality. A subordinate sophistry in these figures, often allowed to pass, but not requiring any sharp insight to detect, is, that the selected price-lists are not the results of an average extending throughout years, but are _picked_ at points when (owing to other causes than the taxes) the current prices of protectionized home products are lower than the average of the years. One easy way to expose the putters-forth of these figures, as not themselves really believing in them, is, gravely to propose to lower or remove the tariff-taxes, which (it is alleged) do not have the effect to lift much, if any, domestic prices. This simple experiment has several times been tried, with ludicrous effect upon the figure-mongers; they cannot spare one iota of present taxes on foreign products: if the smallest fraction be removed, they can no longer make and vend their wares; indeed, heavier tariff-taxes are needed at this very moment, in order to lift the domestic prices higher; and, presto! another set of figures are forthcoming at once to prove the disabilities, either in respect to Labor or Capital, under which the poor protectionized producers are staggering in order to keep the home market! Another complete refutation of the false position of the protectionists, namely, that the domestics are not lifted in price on the average to the price of the foreigns of the same quality with the tariff-taxes added, is their utter failure and inability to project any reason in the nature of things or the motives of men, why the _home-prices should_ NOT _be thus lifted_! What impulse, pray, on the earth or under the earth, can serve to depress them on the whole average _below_ that point? Does any one say, that "domestic competition" will depress and keep depressed the prices of home goods of the same grade below the prices of the foreign taxes paid? Did this astute objector ever hear of "domestic combination" to keep prices up to the highest possible point? To shut down mills and factories, to avoid depressing prices? To sell surplus stocks abroad for what can be gotten for them, in order to make prices at home up to the usual scarcity point? In July, 1890, the Boston Commercial Bulletin, the special organ of Protectionism in New England, and special spokesman for the wool-and-woollens industry, spoke thus of that industry, after 30 years of public hiring the growers and manufacturers to carry it on with a _bonus_, just at a time when the worsted tariff-taxes had been advanced, alleged custom-house frauds stopped, and still higher tariff-taxes on their way from the so-called McKinley Bill in Congress: "_The woollen goods industry was probably never in much worse condition in this country. The slowness of its development may be judged from the fact, that, despite an average yearly increase of over a million in population, the increase in the number of wool cards in this country is less than a hundred a year, while the proportion of woollen machinery shut down between June 1 and September 1 bids fair to be the largest ever known. The market is dull, deadly dull. The large amount of silent machinery is making its presence felt. The sluggish sales of wool are due to most of the big mills being closed. Depression in business is the cause of so many woollen mills closing, and the news comes this week of four woollen mills, three in the Bay State and one in Pennsylvania, that will close for periods ranging from two weeks to several months._" Not only is it true, that the purpose and usual effect of tariff-taxes is to hoist the price of domestics protectionized up to the limit of the corresponding foreigns with the taxes added, but it sometimes happens that the home products are carried for considerable periods at a level a good deal above that. A conspicuous instance of this, commented on at the time by all the Boston papers, was brought to notice a couple of years ago in connection with the steel beams purchased by the city for the new and noble Boston Court-House. The beams were bought in Belgium at $28 a ton, paid at the Boston Custom-house "_one and one-fourth cents a pound_," that is, just $28 a ton, making their cost to the city $56 a ton. But domestic steel beams of the same general description were selling here at $73 a ton. Their price had been raised here twice in one summer, about fifty cents a ton each time. One of the conglomerated curses of cutting off by law the natural competition in such products is, that the unnatural competition still permitted by law is sluggish in coming into operation, and the monopoly becomes even more such than was intended by the law. The tariff-tax on steel rails is $17 a ton, formerly $28 a ton, proposed in the McKinley bill to be reduced to $11.20 a ton. That even this last is wholly needless, or any tax at all on steel rails, is proven by the fact, that in March, 1890, Pittsburg rail-makers sold 5000 tons of rails at Vera Cruz at lower prices than the corresponding European rails were offered for in Mexico. Another fact that proves the same thing is this: James M. Swank, the mouth-piece of the Pennsylvania iron and steel interests, describes the year 1885 as one of unprecedented prosperity in the steel-rail industry, and gives a formidable list of new establishments opened in that year. But steel rails were much lower in that exceptional year than in any year before or since. A tariff-tax of $5 a ton would have been in that year absolutely prohibitory, for steel rails were worth less than $28 a ton the greater part of that year. Yet that very year was the year of greatest prosperity, Mr. Swank being the competent witness! But the fact in general, which ought to overwhelm the iron and steel protectionists with confusion, if they were capable of any such emotion, is, that iron and steel in every form of both, owing to the unprecedented bounty of God to this good land, costs less both in labor and capital here than in any other country in the world. The official figures of the current Census demonstrate this, authentic statements of practical operators at the iron mines and furnaces and foundries throughout the Tennessee Valley confirm it, and there is not one particle of evidence to the contrary of any name or nature. Let the reader notice carefully the following quotation from a private letter to the writer, dated July 30, 1890, written by a graduate of this college, in whom all who know him have the fullest confidence: "_We began to open the mines here just three years ago this Fall, and began shipping the following Spring. Our price for the ore was then about $1.50 a ton, depending on the analysis. We mined in the old-fashioned way--with picks and shovels--and I am safe in saying it cost us all we got for it. I know I was continually making drafts on my father to keep me out of debt. I did not figure on the cost at that time--I was afraid of the figures. My only thought was how to reduce the cost. We had a Steam Shovel in Pennsylvania, and I got my father to send it to me for trial in this ore. We found we could use it to advantage by using also plenty of powder, and I was soon able to buy the second shovel. Of course that reduced the cost of production still lower, and as there was a market for all I could do, I got the third, and am now putting in the fourth, and the fifth is bought and to be delivered inside of 60 days. This doubling up of the shovels made me get locomotives to carry the ore in the mines instead of mules. I have now two locomotives. You will understand how it would make a saving at that point. It would require 15 mules to do that work, and it could not be done so promptly._ _During the month of May we shipped about 14,500 tons with the use of three shovels, and at a cost per ton for labor and fuel and powder of 33 cents. We have reduced the cost on a week's run, in good weather and with no lack of empty cars, to 29 cents, but it never came lower on the month's average than 33. I expect this Fall, with five shovels instead of three, and two locomotives instead of one, to lower the cost of production._ _Our average price at the mines is $1.20; we sell some higher. I have just now taken a contract for 40,000 tons to be delivered between now and the 1st of February, 1891, at $1.12-1/2. This is the lowest contract price we have ever made, and likely that has ever been made in this locality; but I did it to get into a different market. That ore is to go to Nashville--a distance of 120 miles. The reason for cutting the price to get the increased quantity I will not need to explain to you. You taught it to me. The freight to Nashville is 75 cents. To our other furnaces in Alabama, at Sheffield and Florence, the freight is only 35 cents. What other contracts I have at present are at $1.25._ _With three shovels we make from 600 to 800 tons a day. With one shovel we made from 150 to 250 a day. The variation from day to day depends on the quality of the material we handle._ _The ore is all washed and picked and screened before it is loaded on the cars. A very important part of the work is the work done in the washer. It requires very expensive machinery, and the wear and tear is enormous._ _We pay unskilled laborers ten cents an hour, skilled men as high as twenty-five. We work eleven hours a day. Our general foreman gets $100 a month._" Sugar and Molasses brought in through the tariff in the fiscal year 1889, $55,995,137. The quantity of domestic sugar and molasses relatively to the quantity imported is so small, that an excise upon it in accordance with the general principle of these paragraphs is not worth while, but would be far more just and rational than to offer bounties to the domestic producers out of the taxes paid by the consumers of foreign sugar. A "bounty" in this sense is at once an abuse of a good word, and an abomination in point of fact. For any Government, which is nothing but a Committee of all the citizens to attend to certain joint concerns of all, to abstract money through taxes from the pockets of a part of these citizens in order to reward another part for carrying on an unprofitable branch of business, is something equally repugnant to Economy and Equality. 10. What, then, is the BOTTOM-PRINCIPLE in the Mode of Taxation? It is this: _Relatively low taxes so adjusted on comparatively few things as not to disturb natural prices_. The principle is simple: the problem is difficult; but wonderfully less so the moment all attempts are given up to foster any branch of industry whatever. Our legislators are not called upon to foster any industries. It is out of their beat. They cannot permanently do it, if they try; and they do immense harm while they try. Their "bounty," instead of being a gift, as the word imports, is a haphazard bestowment of other people's money extorted from them by public taxes. The problem becomes simpler every year of public experience under the practical design of so laying the public burdens as to realize to the Treasury the most money with the least possible interference with what would otherwise be the on-going of Exchanges in all directions. So relatively simple and easy has the English taxing system become, under this one leading design, that Gladstone performed without difficulty the functions of Chancellor of the Exchequer in conjunction with the far more arduous and complicated duties of Prime Minister. _Low taxes on few things._ The opposite of this principle at either of its two points becomes at once pernicious. High taxes in general prevent exchanges altogether, by cutting in too deeply in the gain of them, which is the sole motive to them; high imposts prevent importations, and of course destroy the profitable exportations consequent to, and conditioned on, such importations; high taxes even on few things are apt to raise prices of other articles than those on which they are directly levied, and so become objectionable always, and unbearable whenever it is their purpose to raise such prices: taxes on many things, and even on few things every time they change hands, throw an indefinite burden on Exchange, whose weight cannot well be calculated beforehand, either by the consumer or by the government, through uncertainty as to the number of transfers. Once for all, and then an end. Exchanges are indeed the only legitimate subject of taxation, but not every specific and subordinate exchange. An attempt to tax all sales whatever was followed in Spain, and will be followed everywhere, by a sluggish indisposition to trade at all. Let the amount of the tax be definite, and let everybody be sure that when it is once paid government will produce no further claim, and industry will go along under heavy taxes better than under those nominally lighter to which uncertainty as to time or amount attaches. All the more advanced governments have been simplifying of late years their systems of taxation, and collecting their revenue at fewer points, and under more tangible conditions, in order to interfere as little as possible with a free industry and free exchange. The subsidiary principle is important, namely, that all taxes should be collected by the government in as economical a manner as possible, inasmuch as all direct and indirect costs of collection are so much added to the burdens of the People. This covers two practical points: (1) the number and efficiency of the tax-gatherers, and the whole outward machinery of collection, such as the custom-houses, offices of internal revenue, and so on. These, as they concern the whole people equally, should be separated as far as possible from party politics, and the inevitable corruptions thereupon attendant. All the fiscal officers of the United States, from the Secretary of the Treasury down to the lowest tide-waiter, are liable to be changed every four years, and as a matter of fact are usually to a very large extent so changed, to the great detriment of the service and ultimate expense of the people, to say nothing of the moral losses and crevasses involved. (2) The tax-money should be kept out of the pockets of the people as short a time as possible, disbursement following quick upon collection. It is poor policy to gather taxes at the beginning of the year which will not be disbursed till the end of the year. Let the people use their funds till they are wanted at the treasury; and if the taxes do not then come in as fast as wanted, it is better to issue what are called in England exchequer-bills, and in the United States certificates of indebtedness, to be redeemed at the end of the year from the proceeds of the taxes, than to let the people's money lie idle in the treasury. The Secretary of the Treasury should have nothing to do or say about the circulating medium of the country, or the loanable price of the units of it, under any circumstances whatever. He is neither competent enough in Knowledge nor enough established in Integrity to be trusted with any such functions. 11. Should there be any EXEMPTIONS from Taxation? If the necessities of the State require it, government has the right to demand from all persons who are capable of making exchanges, and who do make them, something in the form of taxes. But it is every way better, when possible, that people of very moderate means should be exempted altogether from direct taxes; and the payment of indirect taxes is a matter more in their own option, since they are at liberty to buy much or little of those commodities subjected to an indirect tax. In the State of Massachusetts, incomes not exceeding $2000 are exempted by the law. If a house-tax should be levied, all houses below a certain grade of style and comfort should be exempted, and the tax pass up by easy gradations from those just taxed to the palatial residences of the rich. In the present age of the world, the well-to-do citizens of every country are able to bear without too great difficulty the burdens of the government, and nothing tests better the degree of civilization which a nation has reached than the care and solicitude it displays for the welfare of its poorer citizens. 12. Who pays the INDIRECT TAXES? At a court ball, Napoleon the First once observed a lady noticeable as richly dressed and as wearing splendid diamonds, and on asking her name, found that she was the wife of a tobacco manufacturer of Paris; it occurred at once to the quick mind of the French ruler, that the State might just as well have those profits as an individual; and the sale of tobacco in all its forms became accordingly a State monopoly, which now yields about 400,000,000 francs a year. That is indirect taxation. So is the British and United States tariff and excise on tobacco. Producers and dealers and bankers and companies add the tax demanded from them, and sometimes more than the tax under color of it, to the price of their wares. But it is not true that they can always realize the whole of this enhanced price. Generally they can, sometimes they cannot. If the article be one of necessity, or a luxury that has become equivalent to a necessity, and there be no other source of supply than the taxed one, then, as a rule, the tax falls wholly on the consumer, and is a matter of indifference to the producer or dealer. But the usual effect of an enhanced price is to lessen demand, and if the article is dispensable, or its consumption can be lessened, or it can be obtained elsewhere, the market will be sluggish under the tax, and producers or dealers will be likely to tempt it by lowering prices, in other words, by sharing the tax with consumers, and paying that share out of profits. This is the principle. Producers and dealers would rather the tax were off. Consumers generally, but do not always, pay the whole of it. 13. What is to be said about the DIFFUSION of Taxes? David A. Wells, an admirable and indefatigable authority on all practical questions in Economics, though perhaps less skilled in scientific classification and generalizations, several years ago made somewhat prominent in public discussion the tendency of Taxes _to diffuse themselves_. Much more has been written about this than is actually known about it. By Diffusion is meant that it does not make so much difference upon what or upon whom a tax is originally levied, because the tendency of things is to _diffuse it_, that is, to compel others to assist in paying the tax. The result of much personal reading and reflection on this point is the conclusion that taxes do not "diffuse themselves" nearly so much as has been sometimes supposed; and that, at any rate, it is a good deal better to take the taxes from those who ought to pay them, than to lay them at random, and then to trust some unknown forces to make them afterwards just. It is certain that _some_ unjust taxes cannot be diffused; for example, the protective tariff-taxes paid by the farmers upon articles of necessary consumption. These taxes have no tendency to raise the price of the farmers' produce, for _that_ is determined by the foreign market, to which large parts of the produce are exported. For such taxes the farmers cannot reimburse themselves. Taxes that affect no prices are the best of all; taxes that affect prices the least are the next best; and taxes that are _designed_ to affect prices are the very worst. 14. What are the bearings of the UNITED STATES CONSTITUTION on the whole matter of Taxation in this country? We have now seen pretty fully, what the science of Economics has to say about the sources and modes and results of tax-laying: but we are bound to tell also, what the kindred but much less developed science of Politics, and particularly what the Constitution of the Fathers, has to say upon the same vitally important topics. (1) The first power granted by the People to Congress, which is simply their agent, in that Instrument from which each of the three great Departments of Government derives all its authority, is in these words, exactly copied from the original and official parchment in every particular: "_The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States._" This grant of power, which stands first in order, is followed by seventeen other express powers granted to Congress in the same eighth Section of the first Article. There never has been any difference of opinion, and there cannot be under such completely explicit language as this, among competent Statesmen and Commentators, as to the exact meaning of this clause, namely, Congress is given power to lay taxes in order to get money, with which to pay the debts and provide for the common defence and general welfare of the United States. That was the opinion and purpose of every member of the Federal Convention, that framed the Constitution in the summer of 1787; of Alexander Hamilton, who was first called on as Secretary of the Treasury officially to interpret it; of Daniel Webster, often called the "great expounder" of the Constitution; of John Marshall, the great Chief Justice of the Supreme Court; of Judge Story, the first copious and most distinguished commentator upon the Text; of George Bancroft and George T. Curtis, the learned and elaborate historians of the Text; and in short, of everybody else, who has earned any right in any way to have an opinion on any such matter of political interpretation. Why, then, has there been from the first until now, a feeble flutter of butterfly wings around the clause, as if, somehow or other, it gave Congress by hook or by crook some power or other to do something _else_ than to lay taxes in order to get money for the maintenance of the national Government? As if there lay concealed in the language somewhere a power to lay taxes for a purpose precisely opposite to that expressed in the text, namely, _nominal taxes designed to prohibit any money being gotten under them_? And why did Hamilton himself, whose wings were those of an eagle, sweep low and hover uncertainly about these words, and so give color to the political historians of our time to say: "_Once more laying hold of the "general welfare" clause of the Constitution, Hamilton here argued, under color of giving bounties to manufactures, as though Congress might take under its own management every thing which that body should pronounce to be for the general welfare, provided only it was susceptible of the application of money. Though he limited this central discretion to the application of money, and stated some restrictions rather vaguely, the insidious tenor of his report was to show that the Federal power of raising money was plenary and indefinitely great._" The true answer to these questions is a point of Grammar. The simple English infinitive, unlike the simple infinitive of any other language with which the writer is acquainted, _often expresses purpose_, as well as the action of the verb without limitation of person or number; so that, it is perfectly good English to say, "To lay taxes to pay," when the only possible sense of it is, "To lay taxes _in order to pay_." Greek, Latin, and German would use here with the infinitive the particle expressing the purpose: the English language does not. It is not true to say, that ambiguity enters this clause, through the common and elegant use of the simple infinitive in English to express the purpose; but it _is_ true to say, that superficial confusion has entered here, and a mess of bad logic. What makes it absolutely certain, beyond the possibility of a controversy, that Congress can levy taxes only in order to get money by means of them, is, (a) that is the only English of the clause; (b) the "debts" of the United States can only be paid in money; and (c) if this be _not_ the meaning of the clause, its meaning must then be plenary, and there would be no need or place for the remaining seventeen powers, "and all other powers vested by this Constitution in the Government of the United States or in any Department or Officer thereof"; in other words, any other interpretation of the taxing clause than the plain one would destroy the Constitution root and branch; for, if Congress have the general power "to pay the debts and provide for the common defence and general welfare of the United States," all other possible powers are included in this, and President and Court disappear, and all other clauses of the Text are a nullity. If the above course of reasoning be sound, and he would be a bold logician who should openly dispute it, then taxes laid for any other end than revenue are clearly unconstitutional. The Supreme Court has never passed upon this bald point, for it has never been mooted in this form; but one would think, there can be little doubt how the judges would decide in any "case" directly involving the constitutional power of Congress to levy prohibitory tariff-taxes, whose avowed or clearly inferrible design it is, _not_ to get money with which to pay the debts and so on, but to cut off the possibility of getting any money thereby. The general trend of the decisions of the Supreme Court has wisely been, to leave in their interpretations of the Text the widest margin of discretion to the Legislative branch as to the best means of _raising_ revenue; but when it comes to face the question of allowing as constitutional the best means of _preventing_ revenue,--well, may we be there to see and hear! (2) There are prohibitions on Congress in the Constitution, as well as powers conferred, and among these this: "_No tax or duty shall be laid on Articles exported from any State._" This is a part of the third great Compromise of the Constitution, and was a concession to the southern and planting States to make more palatable to them the power "to regulate commerce," that was expected to be used (and was used) in behalf of the northern and navigating States. But the concession was more nominal than real, as the southerners found out in time to their vexation. To prohibit taxes on exports, and to leave in full vigor the power to tax imports, though consonant with the then prevailing delusion of Mercantilism, is no boon to commerce in general; because, any restriction on buying products is equally and instantly a restriction on selling products. Exemption from taxes on exports is a good thing in itself, but the only reason for selling exports is to take in profitable pay the imports naturally offered against them; and if these be restricted or prohibited, the restriction or prohibition applies instantaneously and inevitably to the would-be exports. A reasonable liberty of exporting is nothing, unless accompanied by a reasonable liberty of importing, because the imports pay for the exports and the exports buy the imports. The southern States rejoiced for a time in this exemption-clause of the Constitution, for their rice and cotton and indigo found no obstacles in going out; but the only motive in sending them out was to buy something with them to bring back; and after the snare of Protectionism entangled the People in 1816, 1824, and specially in 1828, when the "Tariff of Abominations" was passed, the southern people saw only too distinctly, that taxes on imports which they wished to bring in were the same in effect as taxes on their own exports would have been. Mr. Calhoun and the others were effectually undeceived by the customary on-goings of commerce; and as the northern statesmen unwisely and unpatriotically determined to crowd this iron home in 1828, the party of the other part developed under great provocation the doctrines of Nullification and Secession, which have since caused a plenty of tears and bloodshed. One wrong ever begets other wrongs. The wretched Greed of one section of the country was own father to the wrongful Secession of the other section. The Farmers of this country have often been congratulated on their privilege under the constitution of exporting their agricultural products without a tax. The congratulation is hollow. Of what use is it to go out free and come back manacled? The ultimate is always the return-service. The farmers are cheated. Their agricultural exports are falling off year by year solely in consequence of outrageous tariff-taxes on imports. In 1881, farmers' produce was exported to the amount of $730,394,943, and that was not one-half what it would have been under a simple and adequate Tariff for Revenues; but in 1889, these exports only reached $532,141,490, a falling off of nearly $200,000,000. This decline was chiefly in meats and breadstuffs. No wonder the farmers have been complaining of terribly hard times of late years: no wonder they are organizing "Alliances" and other machinery for reaching a remedy: they must see clearly first where the disease lies: the truth is, they are tariff-taxed to death: their foes are they of their own household: Vermont, a purely agricultural State, is the only one in the Union, that has actually _retrograded_ in property and population in the last census-decade: those excellent people have hugged the Tariff-delusion to their ruin; their senior Senator, whose name is unpleasantly connected with the national tax-laws of a generation, has never yet in the course of a long and reputable life gained a glimmer of the commercial truth,--if men _will_ not buy they _can_ not sell. (3) The only other clause of the Constitution, which, as students of Taxation, we are bound to examine, is the following: "_No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken._" A capitation tax is a poll-tax, which may be easily "proportioned" to the Census. It is not clear, what is the meaning of the words "or other direct tax"; the Supreme Court early struggled with that question, to this apparent result, that _lands_, as the only form of property that can be "proportioned" in their appraised value to population with any considerable degree of accuracy, are the only "other" subject of "direct" Taxation. However this may be, it is of considerable consequence to note, that the term, "direct tax," as used in the Constitution, does not correspond in its meaning to the significance of the same term as employed in Economics. With us, a "direct tax" means one demanded from and paid by the person on whom it is ostensibly levied, and cannot be thrown off or forward on anybody else; while an "indirect tax" is one which can be so thrown off or forward. Attention is called to the distinction here, in order to show that an Income-tax, while in the Economical sense it is a "direct tax," is not such in the sense of the Constitution. Objections were urged against the late Income-tax in this country, that it was a "direct tax," and so, because it could not be proportioned to the population, was unconstitutional. The point is not well taken. It remains, and will remain, after the most searching scrutiny, that an universal Income-tax, all other taxes being abolished, is the form most consonant with the principles of Political Economy, and not at all repugnant to the Constitution of the United States. 15. Finally, are there any hints and guides to thought and legislation in the matter of Taxation through an extremely brief summary of the HISTORY of Taxes? So far as the Greeks are concerned, they showed a practical good sense in their laws of Property in general, and in their laws relating to Taxes in particular. The natural march of industry and commerce was not hindered by taxation: there was no forbidding the export of raw materials or specie; no favoring of manufactures at the expense of agriculture; no hint of the future Mercantilism in any efforts to preserve an artificial balance of trade; and no taxes on imports except for purposes of Revenue. These at Athens itself were usually 2% of the value of the goods, at the ports of her subject-allies 5%, and exceptional cases of higher rates than these were regarded as extortionate. The Romans also were sensible and moderate in their modes of Taxation. They laid taxes for the sake of getting money for the public treasury, and had no other end in view. They knew nothing of what has since become famous under the name of "Protectionism." Their taxes were both direct and indirect, but especially the latter. The chief direct tax was the land-tax, that is, a claim to the tenth part of the sheaves and of other field produce, such as grapes and olives; and also pasture-money (_scriptura_) demanded of those who made use of the public pastures and woods. In Macedonia and the other larger Provinces, in lieu of the land-tax a fixed sum of money (_tributum_) was paid to Rome each year by each community in its own way. The grain-tenths and pasture-moneys were always farmed out to private contractors or companies on condition of their paying fixed quantities of grain or fixed sums of money. The chief indirect tax was customs-duties. There never was at any time a general tariff for the whole empire, but there were customs-districts, such as Italy, Sicily, proconsular Asia, the province of Narbo in Gaul, and others, each with a sort of tariff of its own, and some with special immunities. Goods imported by sea into Italy, for example, not for the personal use of the importer, were subject to a tax, which seems to have been mainly a tax on luxuries, since pepper, cinnamon, myrrh, ginger, perfumes, ivory and diamonds, are among the dutiable goods mentioned in one of these tariffs. Sicily had a tariff-tax quite distinct from this, since one-twentieth of the value of the goods (5%) was levied on the frontier on _all_ imports and exports; and a similar tax of one-fortieth was laid by the Sempronian law on the province of Asia. These imposts, too, were leased to contractors, which gave, of course, some chance of fraud and wrong. There were other temporary taxes, like those, for instance, which Augustus laid of 5% on legacies and inheritances, and of 1% on articles publicly exposed for sale. Green's History of England (I., 322 _et seq._) gives an outline of the taxes there from the beginning of the monarchy. As land was almost the only source of salable things in the early time, so it was almost the only thing on which taxes were levied. Danegeld and scutage and feudal aids fastened only on the land. "But a new principle of taxation was disclosed in the tithe levied for a Crusade at the close of Henry Second's reign. Land was no longer the only source of wealth. The growth of national prosperity, of trade and commerce, was creating a mass of personal property which offered irresistible temptations to the Angevin financiers. No usage fettered the Crown in dealing with personal property, and its growth in value promised a growing revenue. Grants of from a seventh to a thirtieth of movables, household property, and stock were demanded. The right of the king to grant licenses to bring goods into or to trade within the realm, a right springing from the need of his protection, felt by the strangers who came there for purposes of traffic, laid the foundation for our taxes on imports. Those on exports were only a part of the general system of taxing personal property. How tempting this source of revenue was proving, we see from a provision of the Great Charter, which forbids the levy of more than the ancient customs on merchants entering or leaving the realm. Commerce was in fact growing with the growing wealth of the people." This passage shows, that, as a matter of fact, _taxes_ have always hinged, and must hinge, on _trade_. A few facts in the most recent movements of national Taxation in the United States may fitly conclude this Chapter and this Volume. Since 1867, Wool and Woollens have been the ass, upon whose breaking back the most conspicuous burdens have been piled; and the "McKinley Bill" so-called, still pending at the present writing in the Senate, heaps up still higher the groaning loads. The following table shows how futile is the attempt to keep out wools and woollens from such a country as ours, even by the most exaggerated barriers:-- IMPORTS OF WOOLS AND WOOLLENS. (Calendar Years.) -------------------------------------- | Years. | Wools. | Woollens. | |--------+-------------+-------------| | 1886 | $17,403,099 | $43,995,641 | | 1887 | 15,645,020 | 45,065,986 | | 1888 | 14,542,244 | 49,984,298 | | 1889 | 18,696,277 | 54,080,159 | | 1890 |(fiscal year)| 56,582,000 | -------------------------------------- Roger Q. Mills of Texas stated from his place in the House of Representatives in 1888, that the United States grows but about 265,000,000 lbs. of wool yearly, while it takes about 600,000,000 lbs. to clothe our own people. Why should more than half the wool needed to clothe the people be taxed in such a way as to double (in general) the cost of the people's clothing? And why should Benjamin Harrison, now President of the United States, have said in that same year, in view of these elsewhere unheard-of taxes, and in view of the average climate of his country, that somehow it seemed to him _that cheap clothing implied a cheap man_? In view of the enormous natural demand for woollens, in order to keep comfortable day and night 64,000,000 of inhabitants, is it not strange, and must there not be artificial causes for it in the kind and mode of national Taxation, that the United States has but 16 sheep to the square mile, while Germany has 92, France 111, and Great Britain 339? Senator John Sherman stated in his place in August, 1888, and again in substance Sept. 2, 1890, that a line of custom-houses on our joint-frontier with Canada was "_the height of nonsense, and almost a crime against civilization_." Well might he say this in view of what his colleague, Allison of Iowa, has recently said, namely, that the Dominion bought in 1880 of the United States 8% of its brass goods, 86% of its copper manufactures, 94% of its cordage, 88% of its gingham, 65% of its glasswares, 99% of its rubber goods, 94% of its printing ink, 92% of wooden wares, 91% of tinware, 90% of wall-paper, 72% of paper wares, 98% of ploughs, 97% of engines, 99% of sewing-machines, and 90% of miscellaneous machinery. The imports and exports of the United States for the last two fiscal years are as follows:-- ------------------------------------------------------- | | 1889. | 1890. | |-------------------------+-------------+-------------| |Imports, free |$256,487,078 |$265,588,499 | |Imports, dutiable | 488,644,574 | 523,633,729 | |Total | 745,131,652 | 789,222,228 | |Exports | 742,401,375 | 857,824,834 | |Gold and Silver {Imports | 28,963,073 | 33,976,326 | | {Exports | 96,641,533 | 52,148,420 | |Total Imports | 774,094,725 | 823,198,554 | |Total Exports | 839,042,908 | 909,973,254 | ------------------------------------------------------- There two or three noticeable points from this table. First, the large relative increase of free imports over those of former years. Free articles in 1867 were less than 5% of the whole; in 1882, 30%; and in 1890, 33.9%. The Free List, so-called, has indeed been enlarged in the interval, but free goods tend naturally to swell over the taxed goods, so that in 1890 the free were almost exactly one-half of the taxed. Second, of the large total of merchandise exports, it is to be sorrowfully noted, that more than 82% of the whole is made up of the products of agriculture and forests and mines (not gold and silver); while manufactures compose only 17.8%. What ails our manufactures, that we cannot sell them abroad? We have been for 30 years under a vaunted scheme warranted to develop manufactures,--expressly designed and recommended to make them cheap and good,--under an elaborate and artificial scheme that makes everything bend, even the backs of the toiling millions, to foster and propel manufactures! But we do not succeed in selling much of them abroad, except some fractions of them to Canada. The ratio of them to the total of exports of merchandise seems to be growing less: in 1889, 18.9%; in 1890, 17.8%. The simple truth is, that we are able to sell abroad even this beggarly proportion of manufactures to the total exports of merchandise, only in consequence of a shrewd device working within the Grand Device, namely, the so-called "Free List." Some of the little wheels within the big wheel revolve rapidly. Manufacturers do not like to pay protectionist tariff-taxes _themselves_ any better than other people like to pay them. They have by their own open confession in overt act precisely the same opinion of their deadening influence, that other people have. If, however, they can escape such taxes on the things they have to buy, especially their raw material, and _keep_ them on their own finished goods offered for sale in a monopoly market, they would be happy. Hence, the Free List. Hear Senator Dawes before the Paper-makers' Convention at Saratoga in 1887: "_There is one other feature of tariff revision much discussed at the present time which must not escape our attention, and that is free raw material. No industrial policy will promote the highest prosperity of both labor and capital in this country, which fails to lay down the raw material at the door of the manufactory at the lowest possible cost. In any new revision of the tariff this rule of preference for our own raw material must be adhered to by those who do not propose to give up the American for the indifferent policy in legislating between ourselves and foreigners._ IT WILL BE FOUND, HOWEVER, TO ADD VERY FEW RAW MATERIALS TO THE FREE LIST, FOR THE REVISIONS OF 1874 AND 1883 HAVE ALREADY MADE FREE ALL SUCH NON-COMPETING RAW MATERIALS AS AT THE TIME OF THE PASSAGE OF THOSE ACTS WERE ENTERING TO ANY CONSIDERABLE EXTENT INTO THE CONSUMPTION OR PRODUCTION OF THE COUNTRY." Till now, we have been dealing in facts, and figures, and in careful generalizations after the inductive manner: let us, at the very last, indulge in a freak of fancy. Suppose for a moment, that all taxes of every name could be abolished instantaneously, and the Governments, like the Israelites, live on manna for forty years. What harm would ensue? What industry would decline? Who would be impoverished? What stimulus to work and save and grow rich would be weakened thereby? Would not wages, and profits, and rents, all be lifted thereby, with no damage to anybody? A child can see that Taxes from their very nature are a burden, are a subtraction from income, are a _minus_ and not a _plus_. Who, then, except from sinister motives, can imagine and represent, that Taxes are a good in themselves, a positive blessing, a spur to the progress of Society? Taxes of some sort there must be for the maintenance of Governments, which are established for the good of all. Why, then, should not the Taxes be just as few, just as simple, just as comprehensible, just as universal and equitable, as is consonant with the single end of their existence at all? INDEX. A. Abraham, 9, 384. Abstinence, 93, 191, 338, 445. Abyssinia, 386. Activities of men, 1. Actors, 4. Act of Parliament, 127. Act of 1624, 135. Adams's inauguration suit, 510. Administration, 358. Advalorem rates of tariff tax, 489, 558. Advantages of credit, 271. Advantages of discount, 302. African _macoute_, 388. "African, the," 158. Agent of the mill, 4. Age of iron, 95. Ages of stone, 95. Agreeableness of rendering, 218. Agriculture, 149, 538. Allison of Iowa, 582. Alloy, 416. America, 3. American capital, 166. Ames, Fisher, 538. Amsterdam, 165, 311, 421. Analysis, 15. Ancient Romans, 2. Annual earnings, 543. Apprenticeship, 186, 203. Arbitration, 266. Aristophanes, 420. Aristotle, 47, 98, 158, 248, 381, 402. Aristotle's Logic, 63. Arkwright, Richard, 108. Arlington Mills, 516. Artisans of every name, 2. Ascertainment, 15, 246. Asia, 19. Asia Minor, 333. Asia, pro-consular, 579. Association, 99. Assyria and Babylonia, 330. Astor, J. J., 180. Astronomy, 63. Auction, 57. Augustus Cæsar, 392, 580. Australia, 252, 399. Axe, 90. Axioms, 69. B. Babylonian tablets, 332. Bacon, Lord, 63, 64. Bailee, 278. "_Balance of trade_," 312, 406, 452. Bales of cotton, 345. Ball, John, 228. Balloon of promise, 343. Bancroft, historian, 512, 573. Bangor, 454. Bank bills, 286. Bank defined, 291. Bank deposits, 291. Bank discount, 299. Bank messengers, 5. Banker defined, 6. "Bankers' bills," 315. Bank of Amsterdam, 280. Bank of England, 82, 287, 292, 350, 396, 448. Bank of Massachusetts, 288. Bank of New York, 288. "Bank of North America," 288. Bank of Scotland, 325. Banks of Newfoundland, 180. Barter, 364. Bascom, John, 71. Bastiat, 47. Beauty of gold and silver coins, 413. Beck, Senator, 491. Benevolence and impertinence in trade, 239. Bentham, Jeremy, 252, 448. Benton, Thomas H., 494. Berkshire Co., Mass., 260, 533. Berlin, 3. Berlin Geographical Society, 27. Bernhardt, 211. Bessemer Steel Co., 487, 491. Best money, 395. Best tenure of lands, 155. Betterments on land, 173. Bill-discounters, 300. Bill of exchange, 278, 300, 303. Bill of lading, 277. "Bills of credit," 435. Bimetallism, 415. Bismarck, 210. "Black Death," 227. Blacksmith's capacity, 118. Blades of the shears, 249. Blaine, Secretary, 507. "Blanket" mortgage, 284. Blunders in economics, 75. "Body," 78. Bombay spinner, 201. Bonnieres quarry, 164. "Book of Trades," 114. Borrow, 277. Boston Commercial Bulletin, 563. Boston Custom House, 564. Botany, 63. Bottom-principle in taxes, 567. Bounty of God, 43. Bradford, Governor, 391. Bradley, Mr. Justice, 359. Breadth of contracts, 241. Bright, John, 199. British colonies, 313. British Isles, 84. British Provinces, 527. British Revenue Tariff, 485. British statesman, 153. Brokers' board, 302. Broker's office, 6. Bronson, 434, 436. Brotherhoods, 226. Buchanan, James, 447. Bullets as money, 392. Bullion theory, 403, 451, 453. Bureau of Statistics, 264. Burman Empire, 385. Buying, 14. Buying and selling, 4, 15, 236. C. Cakes of tea, 386. Calhoun, Senator, 497, 499. Calicoes, 105. Canada, 179. Capital, 92, 96, 246. Capital defined, 93. Capital wears out, 171. Capitalists as a class, 233. Capitalists of Boston, 4. Captains of industry, 196, 244. Carey, H. C., 103. Carpenter's square, 38. Carthage, 21, 84. Carthaginians, 387. Cartwright, Edmund, 111. Cases and classes, 68. "Cash accounts," 333. Cash credits, 324, 327. Cattle, 80. Cattle as money, 383. Causes of labor troubles, 238. Cavour, 210. Cecil, Robert, 126. Cedars, 23, 40. Census, 75. Central America, 27. Chadwick, Sir Edwin, 197, 200. Chaldean tablets, 331. Chalmers, Thomas, 137, 215. Chase, Chief Justice, 356, 357. Chatham, 210. Chattels, 93. Checks on market rate, 56. Chemistry, 63. Cheque-Bank, 321, 329. Cheques, 303, 317. Chevalier, 399. Chicago, 278, 477, 501. Chicago, fire in, 500. China, 19, 387. Chinese-wall policy, 474. Christianity, 22, 30. Christians, 10. Church relations, 241. Cicero, 97, 189, 248, 333, 403. Circular credits, 327. "Circular notes," 328. Circulating capital defined, 99. Civil Law of Rome, 206. Civil war, 353. Civil wars, 260. Civilization, 10, 89, 252, 366. Claims of conscience, 243. Classes of facts, 66. Classes of salable things, 7. Classes of valuable things, 5, 62. "Clearing house," 318, 321. Cleon, 421. Clergyman, 4. Clerks at the clearing, 320. Clifford, Mr. Justice, 357. Clog of economy, 33. "Cloth-workers' guild," 258. Coal, 497, 527. Cobden, Richard, 202. Codification, 206. Coffee and tea, 488. Cog-wheel railway, 1. Cohoes, 3. COIN, 429. Coined money of two kinds, 426. Coke, Lord, 89. Colbert, 404. Colonies of New England, 249. Columbus, 26. Commerce, 17, 402. Commercial credits, 49, 271. Commercial crises, 347. Commercial treaty of 1860, 30. _Commodatum_, 276, 340. Commodities, 2, 8, 20. Commodities defined, 80. Common law, 9, 88, 130, 205. "Company," 4. COMPANY OF THE INDIES, 438. "Compete," 464. Competition, 44, 121, 175. "Compromise Silver Bill," 475. Conditions of production, 99. Conditions of a science, 67. Conditions of trade, 15. Congress, 256, 288, 450. Connecticut, 100, 435. Conrad, John, 183. "Consolidated annuities," 274. Consols, 285. Constancy of employment, 219. Constitution of the United States, 133, 178, 256, 358, 444, 474, 494, 572, 578. Constitutional law, 429. Continental Congress, 441. Cooley, Judge, 113. Co-operation, 268. Cooper Union, 222. Copper skewers, 385. Copyrights, 132. Core of money, 378. Corn laws, 58, 177, 217. Cost by railway mile run, 233. Cost of capital, 161, 165, 231. Cost of labor, 161, 231. Costs of carriage, 466. Costs of production, 159, 165, 397, 462. Cotton, 105. "Cotton City," 498. Cotton-gin, 100. Cottons and silks, 457. Coupons, 337. Court calendars, 254. Craft-box, 226. Craftsmen, 259. Credit, 372. Credit-claims, 6. Credit defined, 275. Credits, 8, 20, 58. Credits are capital, 338. Credits as taxable, 555. Crompton, Samuel, 110. Crossed cheques, 321. Current rate per centum, 165. Curtis, George T., 573. Custom, 224. Customs-taxes, 238, 474. D. Damascus, 8. Davis, Mr. Justice, 357. Dawes, Senator, 584. Dawn of history, 8. Dealer in services, 6. Debits at the bank, 6. Debt, its etymology, 275. Debts of the bank, 6. Decatur, Commodore, 482. Decennial Census, 519. Deduction, 62, 69. Deductive sciences, 63. De Foe, 100. Demand acts upon value, 54. Demand and supply, 369. Demand defined, 52, 190. Denarius of Rome, 238, 385. Denomination-dollar, 388, 390. Denominations of money, 372, 388. "Depositaries," 295. Deposit-banking, 293, 295, 297. Deposits, 296. Descartes, 68. Desires, 18, 64, 75, 138. Detroit, 491. Dey of Algiers, 482. Diffusion of taxes, 571. Diminishing profits, 228. Direct taxation, 553. Disadvantages of credit, 271, 343. Discount, 273. Discount defined, 301. Diversity of advantage, 25, 102, 117, 131, 136, 262, 455, 458. Divine purpose, 26. Division of labor, 252, 257, 374. Dock laborers' strike, 313. Doctors' fees, 204. Doctrine of chances, 221. Doctrine of rent, 146. Dollar-bill, 427. "Dollars," 359. Domestic trade, 481. Dorsetshire laborer, 223. Drachm, 385. Drawee, 329. Drawer and bearer, 330. Duke of Orleans, 437. Durability of machinery, 168. Dutch capital, 166. Dutch East India Co., 280. Duty, 65. E. Easiness of learning, 219. East India Co., 114, 132. Economics, 31, 40, 64. Efficiency, 164. Efforts, 20, 59. Efforts and renderings, 32. Egypt, 9, 11, 24. Electricity and lightning, 70. Elliott, Ebenezer, 202. Ely, Professor, 251. "Empire State," 286. English recoinage, 422. English shilling, 317. Enlarging wages, 228. Ephron, 9, 384. Equation of international demand, 468. Erie Canal, 286. Estimates, 22, 34, 39, 43, 60. Ethics, 64, 75. Etymology, 37. Etymology of "credit," 275. Euphrates country, 392. Euripides, 237. Europe, 9. Evarts, William M., 73. Exact sciences, 63, 65. "Exchange against," 314. "Exchange in favor," 315. Exchequer, 549, 568. Excise tax, 560. Exemption from taxes, 570. Experience and experiments, 65. Exports, 462. Exposure, 15. Ezekiel the prophet, 11, 83. F. Fallacies of protectionism, 503. Fallacy A, 504. Fallacy B, 508. Fallacy C, 516. Fallacy D, 520. Fallacy E, 524. Fallacy F, 529. Fallen market rate, 55. Fall of valuables, 49, 77. Falsities of protectionism, 535. "Farmer," 156. "Farmers' Alliances," 519. Farmers of United States, 577. Fawcett, Professor, 223. Federalists, the, 537. Fees of preachers, 207. Feigned cases, 65, 73. Feudalism, 248. Field, David Dudley, 206. Field, Mr. Justice, 357, 360. Field of investigation, 1. Field of the science, 540. Fire Insurance Co., 298. First difficulty in money, 361. "Five articles," 485. "Five-twenties," 285, 355. Fixed capital defined, 99. Fluency of gold and silver, 401, 407. Foreign bills of exchange, 306, 336. Foreign trade, 454, 462. Forms of credit, 271. France and England, 30. France and England in trade, 456. Franklin, Benjamin, 436, 538. Franklin's experiment, 69. Fraud, 16. Freak of fancy, 584. "_Free breakfast table_," 488. Free list, 583. Freedom, 99, 112. French "francs," 316. French government, 56. French lands, 156. Fruit dealer, 366. Funds, British, 284. Future time in credit, 273. G. Gambling, 347. Gangs of slaves, 100. Garibaldi, 211. General rise of prices, 348. Generalizations, 7, 67. Genesis, Book of, 143. _Genus_, 7. George, Henry, 142, 147, 151, 174. Georgia, 441. German Empire, 133. German "Mark," 317, 393, 413. Germans in Italy, 292. Gibbon, historian, 130. Gift, 16. Gifts of God, 85. Giving, 15. Gladstone, W. E., 151, 153, 172, 568. Glasgow, 137. Gloversville, 103. Glut of products, 140. Gold and silver divisible, 412. Gold and silver impressible, 412. Gold coins, 409. Gold eagle, 35. Gold eagle of United States, 389. Gold in greenbacks, 356. Goodhue of Massachusetts, 496. Gould, Jay, 204. Government a committee, 252, 481. Governments, 29, 267, 409. Gradual occupation of the earth, 154. Graduated income tax, 549, 550. Grains, 57, 87. Grand Device, 583. Grand Trunk Railway, 163. Grant, General, 358, 359, 408, 500. Gratuitous elements, 144. Gravitation, 363. Great Britain, 313. Greek cities, 384. Greek language, 298. Greeks, 73. Greeley, Horace, 129. Greenback dollar, 476. Greenbacks, 51, 280, 290, 409, 425, 432. Green Mountains, 519. Green's History, 9, 580. Gresham's Law, 421. Gresham, Sir Thomas, 421. Grier, Mr. Justice, 357. Ground of taxes, 542. Ground of trade, 25. Grounds of production, 116. Guild of Armorers, 226. "Guildhall," 226. Guilds of the Middle Ages, 258. H. Hamilton, Alexander, 288, 393, 415, 511, 536, 573. "Handsome is that handsome does," 250. Hargreaves, John, 106. Harrison, President, 582. Harrison's inaugural suit, 511. Hartley of Pennsylvania, 495. Health, 113. Hebron, 9, 81, 83. Henry II., 580. Hepburn _vs._ Griswold, 356. Herodotus, 386. Heyd, Dr. W., 27. Hildreth, historian, 512. Hills of Judah, 25. Hindoo rice, 393. Hired men lack motives, 255, 208. History of taxes, 579. Hoar, Judge E, R., 358. Holland, 280. "Home Market Club," 516. Home Rule, 173. Homer, 81, 383. Homer, Sidney, 351. Hoosac River, 27. Hoosac Tunnel, 286. Horse-leech cry, 514. House-tax, 555, 570. Hudson's Bay Company, 114, 180. Hull, John, 434. Human efforts, 89. Human nature, 363. Hume, David, 121, 124, 326, 373. "Hymn to the Nativity," 149. I. Ideal dollar, 426. Idle capital, 191. Iliad, 81, 383. Illinois Central Railway, 232. Impeachments, 253. Imports, 474. Improvements in machinery, 465. Income bonds, 284. Income tax, 547, 549, 578. Indented servants, 248. India, 26. Indirect taxation, 553, 570. Individuals _vs._ Government, 253. Indorsements, 304. Induction, 62, 397. "Infant industries," 514. Infinite Mind at work, 363. "In God we Trust," 413. Inland bills of exchange, 306, 336. Inquiry, 78. Internal taxes, 560. International demand, 460. "International Copyright," 212. International exchange, 330. Introspection, 65, 67, 71, 77. Invention, 99, 104. Invention of money, 366. Ireland, 386. Irish banks, 288. Irish Land Bill, 151. Irish leases, 173. Iron Mountain, 526. Iron in Tennessee Valley, 565. Irving, Washington, 180. Israelites, 584. Issuer and bearer, 355, 427. Italy, 150. J. Jack-knife, 94. Jacob, 9. Jacobites, 292, 422, 431. Jamaica rum, 496. Jamestown, Va., 162. Jay, John, 537. "Jealousy of Trade," 121. Jefferson, Thomas, 415, 424, 442. Jerusalem, 12, 24. Jevons, Professor, 319, 381, 399. Jews, 9, 10, 21, 24, 240, 333, 443. Job, the Book of, 83, 397. Jonson, Ben, 88. Joppa, 22, 23. Judges, 4. K. Kay, father and son, 106. Kentucky, 491. Key to unlock difficulties, 364. Kinds of tariffs, two, 483. Kinds of utility, 44. King Hiram, 11, 16, 364. King Philip's victories, 392. King Solomon, 11, 16, 364. _Kinkiness_, 105. "Knit-goods Bill," 488. Knox, Comptroller, 433. Knox _vs._ Lee, 359. Kountze Brothers, 328. L. Labor, 182. "Labor and Capital," 183. Labor defined, 90, 161, 184. Laborers, 4, 184, 186. Laborers as a class, 233. Labor-troubles, 237. _Laissez faire_, 252. Land Bill, 1881, 172. Land parcels, 146, 170. Lands, 141. Lapoint, Alfred, 130. Latin Union, 414. Law, John, 341, 436, 439. Law of diminishing returns, 153, 172. Law of supply and demand, 52, 53. Laws of Moses, 443. Lawyers, 4. Layard, 331, 384. Legal rate of interest, 234. Legal ratio of gold and silver, 393. Legal restrictions, 225. Legal tender, 355, 356, 359. Legislators, 4, 270, 377, 451. Life Insurance Co., 298. Lightning-rod, 70. Limestone, 527. Limits of production, 136. Limits of value, 58. Lincoln, Abraham, 210. Lind, Jennie, 187. Liverpool, 455, 528. Loan, 276. Loaves of bread, 379. Locke and Newton, 423. Lockouts, 247, 266, 521. Locomotives, 233. Logic, 63. Logical fallacies, 534. London bills, 310. London bills of exchange, 469. London Bridge, 2, 3, 313. Lord Mayor of London, 265. Losses from depreciated money, 478. Louisiana, 438. Lowell, 3. Lowell and Jackson, 497. Lowell mill, 7. Lowell on the Merrimack, 498. Lowering rates of interest, 234. Lowndes, Congressman, 498. Low taxes on few things, 568. Lucretius, 95. M. Macaulay, 123, 422. McCulloch, Hugh, 359. Macedonia, 579. Machinery, 197, 200. McKinley, 508, 516, 563, 581. Macleod, Henry Dunning, 47, 278, 292, 382, 383. Machpelah, 82, 365. Madison, James, 494, 537. Magellan, 26. Magna Charta, 444, 581. Major Premise, 63. Malthus, T. R., 215. Manager at the Clearing, 5, 320. Mania, 16. Market defined, 137. Market for products, 54. Market value, 54. MARKETS, 195. Marshall, Mr. Justice, 358, 573. Mason's trowel, 38, 98. Massachusetts, 286. Material commodities, 49. Maximum value, 61. Mechanics, 42. Mediterranean, 23. Mercantile sagacity, 140. Mercantile system, 115, 312. Mercantile Theory, 403, 452. Mercantilism, 576. Merchant defined, 6. Merchants as a class, 9. Messengers at the Clearing, 320. Metaphysics, 64, 75, 242. Methods and motives in foreign trade, 481. Methods of mining, 398. Metric system, 419. Metropolitan Museum, 332. Mexican exports, 479. Mexican imports, 479. Mexicans, 105. Mill, John Stuart, 32, 63. Miller, Mr. Justice, 47, 357. Mills, Roger Q., 581. Milton, 149. "Mind-cure," 263. Mint of Amsterdam, 422. Mississippi Valley, 519. Mobility of laborers, 221. Molasses, 496. Molasses tax, 538. Mommsen, 238. Monetary Conference at Paris, 73, 74. Monetary "par," 471. Money, 77, 361, 367. Money a measure, 380, 415. Money a "medium," 370. Money a tool, 377. Money, current, 51. Money defined, 380. Money divisible, 374. Money is capital, 374. Monopoly, 88, 122. Montesquieu, 388. Moody's "power-loom," 497. Moors from Africa, 481. Moral sciences, 63. Morals, 113, 248. More, Sir Thomas, 536. Morrill, Senator, 518. "Morrill Tariff," 521, 533. Morris, Gouverneur, 539. Morris, Robert, 415. Moses, 11. Motives of Protectionists, 493. Motives to trade, 77. Mountain view, 1. Mountains of Israel, 25. Mount Lebanon, 23, 364. Mozart, 211. Munn, Dr., 204. Murillo, 56. Muscular effort, 189. Musicians, 4. _Mutuum_, 276. Myers, P. V. N., 332. N. Names on notes, 301. Napoleon, the First, 134, 570. Narbo in Gaul, 579. National Bank, 289. National Banks of United States, 428. National Debt, 351. National Labor Commissioner, 528. Nationalism, 251, 256. Nature, 102. Nature of Credit, 271. Natural agents, 85, 86. "Natural monopolies," 136. Nebuchadnezzar, 332. Nelson, Mr. Justice, 357. Nevada mines, 411. New England, 145. New Hampshire, 36, 441. New Jersey, 502. New Orleans, 438, 454. New Testament, 12. New York, 165, 477. New York Central Railway Co., 491. New York Clearing-House, 5, 7, 319. "New York Public," 350. Nickel pieces, 394. Non-capital, 97. North Carolina, 92. Nottinghamshire, 163. Novgorod, in Russia, 386. Nullification, 577. O. Objective and subjective, 31. Objective realities, 76. Obligation in credit, 275. Ocean freights, 474. O'Connell, Daniel, 177. Ohio sheep, 530. "Oil Trust," 179. Oklahoma, 221 Old Testament, 11. Open ports of Great Britain, 474. Operatives, 4. Opinions on Protectionism, 535. Orders to pay, 328. O'Reilly's poem, 208. Oresme, Nicole, 98. Origin of capital, 95. Oscillations of demand, 408. "_Ought_," 65. Ounce of silver, 36. Our Lord, 12. Outlying cases, 142. Overseers of the mill, 4. Owners, 38. Oxford University, 338. Oxus River, 27. P. Pacific States, 418. Paganini, 187. Palermo, 455. Palfrey, historian, 512. Paper-makers, 197. Paper-makers' convention, 584. Paper money, 427, 429. Par of Exchange, 307, 316. Par of foreign exchange, 468. Paradise Lost, 88. Parcels in the Clearing, 6. Paris, 3, 57. Paris bills of exchange, 470. Parliament, 284. Past time in commodities, 274. Patent rights, 132. Paul, Lewis, 109. Pauper labor of Europe, 528. Payer and payee, 329. Peace, 29. Peas and potatoes, 272. Peasant proprietor, 157. Peculiarities of Credit, 271. _Pecunia_, 81, 384. Pence and pound, 389. Pennsylvania, 436, 490. Personal services, 181. Personal slavery, 80. _Persons_ in credit, 275. Petals of flowers, 70. Pheidon, King of Argos, 384. Philip le Bel, 404. Philpott, editor, 521. Phoenicians, 21. Physical sciences, 32, 63, 64, 71. Physicians, 4. "Physiocrats," 141. Physiology, 216. Pierre and Company of Paris, 307. Piers Ploughman, 228. Pig-iron production, 560. Pilgrims, 391. Pillars of Hercules, 84. Pine-tree shillings, 392. Plato, 248. Pliny, 384. "Political Economy," 15, 174. Polo, the traveller, 387. "Pool," the, 2. Poor Richard's Almanack, 158, 243. Poor's Railroad Manual, 229. Popular remedies for low wages, 251. Portability of money, 411. Porter, Dr. Samuel, 28. Porters, 2. Portfolio of governments, 254. _Post hoc ergo propter hoc_, 534. Post Offices, 256. Potosi, silver of, 398. Pottery wares, 502. Pounds sterling, 310. "Power," 91. "Power-loom," 111. Preamble of the Constitution, 256. Present time in services, 274. President Jackson, 289. Press and Pulpit, 244. Price, 50. Price, Bonamy, 338, 382. "Prices current," 50. Prices of services, 375. Prices under taxation, 549. Principle of taxes, 546. Privy Council, 350. Probabilities, 347. Probability of success, 220. _Procullus_, 451. Production defined, 84. Products in market, 54. Profitable exchanges, 473. Profits, 94. Profits the leavings of wages, 235. Progress of civilization, 10. Promise to pay, 279. Promissory notes, 300. Property, 101, 275, 545. "Property is theft," 148. Proportion of taxes, 544. "Protectionism," 309, 453, 493. Protectionism is prohibition, 486. Proverbs, 12. Providential elements in Economics, 362. Prudhon, 148. Prussians, 549. Public opinion, 451. "Pulpit or Platform," 22. Q. Quality of gold uniform, 411. Quantity of metals, 399. Queen Elizabeth, 123. Questions of taxes, 541. "Quick sales and small profits," 344. Quittance, 354. R. Randolph, John, 498. Rapidity of circulation, 372, 409. Rate of interest in Holland, 234. Rate of taxes, 556. Rates of discount, 316. Ratio of gold and silver, 74. Raw materials, 526. Redemption of greenbacks, 291. Religion higher than morals, 263. Remedies for labor troubles, 238. Renderings, 26, 59, 76, 78. Rent, 160, 169. Rent defined, 170. Republic of Mexico, 478. Republic of Venice, 291. Requisites of production, 84. Return services, 138. Revenue, 113. Revenue rights, 134. Ricardo, David, 146, 153, 169, 176. Right and wrong, 65. Rise in market rate, 55, 77. Rise of prices, 408. Rise of valuables, 49. "River and Harbor Bill," 488. Roach, John, 516. Robinson Crusoe, 100. "Rogues' Island," 441. Roman coins, 385. Roman Law, 277. Roman mercantile transactions, 238. Roman taxes, 579. Romans, 313, 402, 579. Royal Bank of France, 438. Royal library at Nineveh, 384. Ruggles, S. B., 74, 418. Rupee, 386. Russia, 150. S. _Sabinus and Cassius_, 451. Salary-class, 184. Salt, 178. San Francisco, 455. Sandal-wood, 23. Sardanapalus, 331. Satisfactions, 28, 75, 115. Savannah, 527. Savings banks, 270, 334. Saxon ancestors, 93. Say, J. B., 137. Scandinavian "crown," 317, 393. "Scarcity" of money, 440. Schouler, James, 511. Science as prophetic, 450. Science defined, 62. Science of buying and selling, 61. Science of value, 42. Scotch banking, 325. Scotch banks, 288. Scotland, 437. Scott, W. L., 265. Screw of Discount, 316. Scriptures, 9, 14. Scudder, M. L., 478. Secession, 577. Second difficulty in money, 362. Secretary of the Treasury, 296. Sempronian law, 580. Services, 7. Servius Tullius, 384. "Seven-thirties," 285. Shakspeare, 88, 98, 211. Shears, 91. Shekels, 9. Sherman, Senator, 48, 490, 582. Shoddy, 130. "Shoemakers' Guild," 258. Shut-downs, 521. Shuttle, 91. Shylock, 98. Sicily, 580. Silks and cottons, 457. Silo, 155. Silver certificates, 279. "Silver Colony," 392, 442. Silver dollar, 418. Six kinds of exchanges, 8. Skilled laborers, 186. Smith, Adam, 114, 385, 398, 448, 536. Smith, Captain John, 162. Smith, Jonathan, 205. Smithson, James, 214. Social relations, 241. Society, 5, 18. Sociology, 242. Solomon, 18. Somers and Montague, 423. Sons of Heth, 9. Source of taxes, 543. Sources of income, three, 547. South Carolina, 435, 497. Spain, taxes in, 569. Spanish-Mexican dollar, 424. Spanish milled dollar, 415. Spaulding, E. G., 354. Speaker of Commons, 126. Specialties, 103. Species, 8. Specific rates of tariff-tax, 489. Specific taxes, 558. Speculation, 476. Speculation proper, 346. Spencer, Herbert, 342. Spinning, 106. Spinning-Jenny, 108. "Springfield Republican," 265. St. Louis, 114. St. Petersburg, 455. St. Timothy, 242. Standard of comparison, 377. Stanford, Senator, 439. "Star Route Frauds," 256. State banks, 288. States and nation, 68. Statistics, 230. Statute law, 9. Stealing, 15. Steel beams, 564. Steel rails, 487, 490. Sterling exchange, 472. Stephenson, Robert, 129. Stock, 284. Stock Exchange, 347. Stockholm, 455. Storrs, Dan, 303. Story, Mr. Justice, 573. "Straddles," 347. Straits of Gibraltar, 481. Strikes, 247, 261, 521. Strong, Mr. Justice, 359. "Subdue," 144. Sub-forms of capital, 99. Subject of money clear, 361. Subject of Political Economy, 1. Subjective elements, 39. Subsidiary coins, 394, 418, 425, 433. Sub-treasury of United States, 319. Sugar and molasses, as taxed, 567. "Suppliants" of Euripides, 237. Supply and demand, 36, 445. Supply defined, 53. Supply of laborers, 219. Supreme Court, 575. Supreme Court of United States, 360. Suspension of specie payment, 431. Swank, James M., 565. Swayne, Mr. Justice, 357. Syllogism, 69. T. Taconics, 27. Tailor's capacity, 119. Talents, Parable of, 13. Tariff, 128, 481. Tariff defined, 483. Tariff delusion, 577. Tariff for revenue, 483. Tariff Monopolies, 134. "Tariff of Abominations," 576. Tariff of United States, 487. Taussig, Professor, 128, 488. Taxation, 363, 540. Tea and coffee, 488, 492. Teachers, 4. Temple at Jerusalem, 364. Temple, Lord Richard, 199, 202, 544. "Thaler," 393. Theft, 16. Thing-dollar, 427. Third nation in trade, 459. Thompson, Professor, 516. Thoughts, 64. Ticket, a general, 371. Time of advance, 166. Tobacco of Virginia, 369. Tobacco taxes, 571. Tools, 95. Trade, 10, 72. Trades-unions, 226, 258. Treasurer of the mill, 4. Trebizond, 27. Tree-wool, 105. Troughton's inch, 390. Trust, 10. Trustee, 278. Tubal Cain, 95. Tunis and Tripoli, 482. Tyre, 11, 83. Tyrians, 19, 22. U. Ulpian, 277. "Ulster right," 224. Ultimate elements, 30. Union Bank of London, 328. Unique cases, 46. United Kingdom, 171, 203, 393, 406. United States, 139, 165, 247, 288, 380, 405, 415, 450. United States Bank, 288, 289, 293. United States Money, 310. United States Treasury, 279. Universal income tax, 556. University, Johns Hopkins, 251. Unprofitable exchanges, 473. Unseen elements, 31. Unvalued lands, 143. "Ur of the Chaldees," 384. Usury laws, 442, 448. Utility, 144, 161. Utility and Value, 43, 147. V. Vale of Sharon, 26. Valuable lands, 143. Valuables, 7, 49, 368, 378. Value, 32, 65. Value acts upon demand, 54. Value defined, 46. Value of cottons and silks, 459. Vasco da Gama, 27. Vermont, 577. Vermont wools, 530. Vice-President Clinton, 289. Virginia in 1755, 436. Vital principles of a protective tariff, three, 486. Vital principles of a revenue tariff, three, 483. Voluntary associations, 226. W. "Wages," 161, 184. Wages-portion, 192, 257. "Wages-question," 163. Wages, the leavings of profits, 235. Walker, Francis A., 163, 184. Walker, J. H., 340. Walker's "Money," 382. "Walking-delegate," 265. Waltham, 497. Wampum, 386. War debt, 353. Washington, 210. Washington's inauguration suit, 510. Water from the spring, 59. Waterfall, 87. "Water-twist," 109. Ways and means, 355, 487. "Wealth," 32. "Wealth of Nations," 398, 536. Webster, Daniel, 88, 187, 573. Wells, David A., 571. West of Europe, 19. Whigs, 292. Whitman, William, 516. Whittier, 258, 500. Will, 64. William and Mary, reign of, 292, 392, 423. Wiltshire laborer, 223. Wolfe, General, 207. Wool, 105. Wool and woollen industry, 563, 581. Wool and woollens tariff, 529, 533. Wool manufacturers, 516. Worn-out farms of New England, 155. Wright, C. D., 267, 528. Y. Yard-stick, 378. York shilling, 424. Typography by J. S. Cushing & Co., Boston. Presswork by Berwick & Smith, Boston. * * * * * Two Earlier Works By PROF. PERRY. INTRODUCTION TO POLITICAL ECONOMY. Revised Edition. 12mo, $1.50. POLITICAL ECONOMY. Eighteenth Edition. Rewritten and Enlarged. Crown 8vo, $2.50. Prof. Perry's most elementary text-book, Introduction to Political Economy, presents the subjects of Value, Production, Commerce, Money, Credit, and Taxation, in a way plain and easily grasped by young minds, but at the same time scientifically exact. In his preface the author says: "I have endeavored so to lay the foundations of Political Economy in their whole circuit, that they will never need to be disturbed afterwards by persons resorting to it for their early instruction, however long and however far these persons may pursue their studies in this science." "This work is not meant in any way to take the place of its author's larger treatise, but rather to occupy a field which, in the nature of the case, that work cannot occupy. It is not an abridgment of that work but a separate treatise, intended primarily for the use of students and readers whose time for study is small, but who wish to learn the broad principles of the science thoroughly and well, especially with reference to the scientific principles which are involved in the practical discussions of our time.... We need scarcely add, with respect to a writer so well known as he, that his thinking is sound as well as acute, or that his doctrines are those which the greatest masters of political science have approved." --_The N. Y. Evening Post._ _Prof. Perry's Advanced Work._ POLITICAL ECONOMY. Eighteenth Edition. _Rewritten and Enlarged, 1 vol., Crown 8vo. $2.50._ This book has passed through several revisions, to the most thorough of which it was subjected in 1883. 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Among them are Yale College, Bowdoin College, Dartmouth, Trinity, Wesleyan, University of Wooster, Dennison University, Rutgers College, New York University, Union College, Seton Hall College, Hampden-Sidney, and many other colleges and normal and high schools. * * * * * CRITICAL NOTICES. "This edition has the marks of mature power and complete grasp of the subject, and that finished style in which thought and language have become perfectly adjusted to each other. The statements and illustrations convey the thought clearly and aptly."--_Boston Watchman._ "You have made an exceedingly valuable contribution to the science of political economy. I am not a little surprised that a college professor should have written a book so intelligible to the common mind, and so eminently practical and instructive. Accept my thanks for your kindness in sending me the book, and my grateful acknowledgments as your fellow-citizen for the service you have rendered the country. 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It is the most interesting and valuable one that has been given to the American public on this important subject."--_New York Independent._ "In all the portions of the book which we have read the author shows himself to be a clear, strong, bold, and generally sound thinker."--_New Englander._ "Prof. Perry has certainly produced one of the best elementary treatises on political economy that we have ever met with in any language."--_New York Commercial._ "Prof. Perry is a vigorous thinker, a clear and forcible writer."--_Princeton Review._ .*. _Full Descriptive Catalogue of distinguished works in all departments of education sent free. Introductory and examination rates furnished on application._ CHARLES SCRIBNER'S SONS, Publishers, 743 and 745 Broadway, New York. * * * * * Transcriber's note: Obvious typographical errors were corrected. 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26716	----	Note: Project Gutenberg also has an HTML version of this file which includes the original illustrations. See 26716-h.htm or 26716-h.zip: (http://www.gutenberg.net/dirs/2/6/7/1/26716/26716-h/26716-h.htm) or (http://www.gutenberg.net/dirs/2/6/7/1/26716/26716-h.zip) Illustrated Library Edition THE CROWN OF WILD OLIVE Also MUNERA PULVERIS PRE-RAPHAELITISM--ARATRA PENTELICI THE ETHICS OF THE DUST FICTION, FAIR AND FOUL THE ELEMENTS OF DRAWING by JOHN RUSKIN, M.A. [Illustration: _Portrait of Carlyle_ Etched by E. A. Fowle--From Painting by Samuel Lawrence] [Illustration] Boston and New York Colonial Press Company Publishers CONTENTS. THE CROWN OF WILD OLIVE. PAGE LECTURE I. WORK, 17 LECTURE II. TRAFFIC, 44 LECTURE III. WAR, 66 MUNERA PULVERIS. PREFACE, 97 CHAP. I. DEFINITIONS, 111 II. STORE-KEEPING, 125 III. COIN-KEEPING, 151 IV. COMMERCE, 170 V. GOVERNMENT, 181 VI. MASTERSHIP, 204 APPENDICES, 222 PRE-RAPHAELITISM. PREFACE, 235 PRE-RAPHAELITISM, 237 ARATRA PENTELICI. PREFACE, 283 LECTURE I. OF THE DIVISION OF ARTS, 287 II. IDOLATRY, 304 III. IMAGINATION, 322 IV. LIKENESS, 350 V. STRUCTURE, 372 VI. THE SCHOOL OF ATHENS, 395 THE FUTURE OF ENGLAND, 415 NOTES ON POLITICAL ECONOMY OF PRUSSIA, 435 LIST OF ILLUSTRATIONS. ARATRA PENTELICI. PLATES FACING PAGE I. PORCH OF SAN ZENONE. VERONA, 300 II. THE ARETHUSA OF SYRACUSE, 302 III. THE WARNING TO THE KINGS, 302 IV. THE NATIVITY OF ATHENA, 308 V. TOMB OF THE DOGES JACOPO AND LORENZO TIEPOLO, 333 VI. ARCHAIC ATHENA OF ATHENS AND CORINTH, 334 VII. ARCHAIC, CENTRAL AND DECLINING ART OF GREECE, 355 VIII. THE APOLLO OF SYRACUSE AND THE SELF-MADE MAN, 366 IX. APOLLO CHRYSOCOMES OF CLAZOMENÆ, 368 X. MARBLE MASONRY IN THE DUOMO OF VERONA, 381 XI. THE FIRST ELEMENTS OF SCULPTURE, 382 XII. BRANCH OF PHILLYREA. DARK PURPLE, 390 XIII. GREEK FLAT RELIEF AND SCULPTURE BY EDGED INCISION, 392 XIV. APOLLO AND THE PYTHON. HERACLES AND THE NEMEAN LION, 400 XV. HERA OF ARGOS. ZEUS OF SYRACUSE, 401 XVI. DEMETER OF MESSENE. HERA OF CROSSUS, 402 XVII. ATHENA OF THURIUM. SEREIE LIGEIA OF TERINA, 402 XVIII. ARTEMIS OF SYRACUSE. HERA OF LACINIAN CAPE, 404 XIX. ZEUS OF MESSENE. AJAX OF OPUS, 405 XX. GREEK AND BARBARIAN SCULPTURE, 407 XXI. THE BEGINNINGS OF CHIVALRY, 409 FIGURE PAGE 1. SPECIMEN OF PLATE, 293 2. WOODCUT, 323 3. FIGURE ON GREEK TYPE OF VASES, 326 4. EARLY DRAWING OF THE MYTH 330 5. CUT, "GIVE IT TO ME," 332 6. ENGRAVING ON COIN, 335 7. DRAWING OF FISH. BY TURNER, 362 8. IRON BAR, 379 9. DIAGRAM OF LEAF, 391 THE CROWN OF WILD OLIVE THREE LECTURES ON WORK, TRAFFIC AND WAR PREFACE. Twenty years ago, there was no lovelier piece of lowland scenery in South England, nor any more pathetic in the world, by its expression of sweet human character and life, than that immediately bordering on the sources of the Wandle, and including the lower moors of Addington, and the villages of Beddington and Carshalton, with all their pools and streams. No clearer or diviner waters ever sang with constant lips of the hand which 'giveth rain from heaven;' no pastures ever lightened in spring time with more passionate blossoming; no sweeter homes ever hallowed the heart of the passer-by with their pride of peaceful gladness--fain-hidden--yet full-confessed. The place remains, or, until a few months ago, remained, nearly unchanged in its larger features; but, with deliberate mind I say, that I have never seen anything so ghastly in its inner tragic meaning,--not in Pisan Maremma--not by Campagna tomb,--not by the sand-isles of the Torcellan shore,--as the slow stealing of aspects of reckless, indolent, animal neglect, over the delicate sweetness of that English scene: nor is any blasphemy or impiety--any frantic saying or godless thought--more appalling to me, using the best power of judgment I have to discern its sense and scope, than the insolent defilings of those springs by the human herds that drink of them. Just where the welling of stainless water, trembling and pure, like a body of light, enters the pool of Carshalton, cutting itself a radiant channel down to the gravel, through warp of feathery weeds, all waving, which it traverses with its deep threads of clearness, like the chalcedony in moss-agate, starred here and there with white grenouillette; just in the very rush and murmur of the first spreading currents, the human wretches of the place cast their street and house foulness; heaps of dust and slime, and broken shreds of old metal, and rags of putrid clothes; they having neither energy to cart it away, nor decency enough to dig it into the ground, thus shed into the stream, to diffuse what venom of it will float and melt, far away, in all places where God meant those waters to bring joy and health. And, in a little pool, behind some houses farther in the village, where another spring rises, the shattered stones of the well, and of the little fretted channel which was long ago built and traced for it by gentler hands, lie scattered, each from each, under a ragged bank of mortar, and scoria; and brick-layers' refuse, on one side, which the clean water nevertheless chastises to purity; but it cannot conquer the dead earth beyond; and there, circled and coiled under festering scum, the stagnant edge of the pool effaces itself into a slope of black slime, the accumulation of indolent years. Half-a-dozen men, with one day's work, could cleanse those pools, and trim the flowers about their banks, and make every breath of summer air above them rich with cool balm; and every glittering wave medicinal, as if it ran, troubled of angels, from the porch of Bethesda. But that day's work is never given, nor will be; nor will any joy be possible to heart of man, for evermore, about those wells of English waters. When I last left them, I walked up slowly through the back streets of Croydon, from the old church to the hospital; and, just on the left, before coming up to the crossing of the High Street, there was a new public-house built. And the front of it was built in so wise manner, that a recess of two feet was left below its front windows, between them and the street-pavement--a recess too narrow for any possible use (for even if it had been occupied by a seat, as in old time it might have been, everybody walking along the street would have fallen over the legs of the reposing wayfarers). But, by way of making this two feet depth of freehold land more expressive of the dignity of an establishment for the sale of spirituous liquors, it was fenced from the pavement by an imposing iron railing, having four or five spearheads to the yard of it, and six feet high; containing as much iron and iron-work, indeed as could well be put into the space; and by this stately arrangement, the little piece of dead ground within, between wall and street, became a protective receptacle of refuse; cigar ends, and oyster shells, and the like, such as an open-handed English street-populace habitually scatters from its presence, and was thus left, unsweepable by any ordinary methods. Now the iron bars which, uselessly (or in great degree worse than uselessly), enclosed this bit of ground, and made it pestilent, represented a quantity of work which would have cleansed the Carshalton pools three times over;--of work, partly cramped and deadly, in the mine; partly fierce[1] and exhaustive, at the furnace; partly foolish and sedentary, of ill-taught students making bad designs: work from the beginning to the last fruits of it, and in all the branches of it, venomous, deathful, and miserable. Now, how did it come to pass that this work was done instead of the other; that the strength and life of the English operative were spent in defiling ground, instead of redeeming it; and in producing an entirely (in that place) valueless piece of metal, which can neither be eaten nor breathed, instead of medicinal fresh air, and pure water? There is but one reason for it, and at present a conclusive one,--that the capitalist can charge per-centage on the work in the one case, and cannot in the other. If, having certain funds for supporting labour at my disposal, I pay men merely to keep my ground in order, my money is, in that function, spent once for all; but if I pay them to dig iron out of my ground, and work it, and sell it, I can charge rent for the ground, and per-centage both on the manufacture and the sale, and make my capital profitable in these three bye-ways. The greater part of the profitable investment of capital, in the present day, is in operations of this kind, in which the public is persuaded to buy something of no use to it, on production, or sale, of which, the capitalist may charge per-centage; the said public remaining all the while under the persuasion that the per-centages thus obtained are real national gains, whereas, they are merely filchings out of partially light pockets, to swell heavy ones. Thus, the Croydon publican buys the iron railing, to make himself more conspicuous to drunkards. The public-housekeeper on the other side of the way presently buys another railing, to out-rail him with. Both are, as to their _relative_ attractiveness to customers of taste, just where they were before; but they have lost the price of the railings; which they must either themselves finally lose, or make their aforesaid customers of taste pay, by raising the price of their beer, or adulterating it. Either the publicans, or their customers, are thus poorer by precisely what the capitalist has gained; and the value of the work itself, meantime, has been lost to the nation; the iron bars in that form and place being wholly useless. It is this mode of taxation of the poor by the rich which is referred to in the text (page 31), in comparing the modern acquisitive power of capital with that of the lance and sword; the only difference being that the levy of black mail in old times was by force, and is now by cozening. The old rider and reiver frankly quartered himself on the publican for the night; the modern one merely makes his lance into an iron spike, and persuades his host to buy it. One comes as an open robber, the other as a cheating pedlar; but the result, to the injured person's pocket, is absolutely the same. Of course many useful industries mingle with, and disguise the useless ones; and in the habits of energy aroused by the struggle, there is a certain direct good. It is far better to spend four thousand pounds in making a good gun, and then to blow it to pieces, than to pass life in idleness. Only do not let it be called 'political economy.' There is also a confused notion in the minds of many persons, that the gathering of the property of the poor into the hands of the rich does no ultimate harm; since, in whosesoever hands it may be, it must be spent at last, and thus, they think, return to the poor again. This fallacy has been again and again exposed; but grant the plea true, and the same apology may, of course, be made for black mail, or any other form of robbery. It might be (though practically it never is) as advantageous for the nation that the robber should have the spending of the money he extorts, as that the person robbed should have spent it. But this is no excuse for the theft. If I were to put a turnpike on the road where it passes my own gate, and endeavour to exact a shilling from every passenger, the public would soon do away with my gate, without listening to any plea on my part that 'it was as advantageous to them, in the end, that I should spend their shillings, as that they themselves should.' But if, instead of out-facing them with a turnpike, I can only persuade them to come in and buy stones, or old iron, or any other useless thing, out of my ground, I may rob them to the same extent, and be, moreover, thanked as a public benefactor, and promoter of commercial prosperity. And this main question for the poor of England--for the poor of all countries--is wholly omitted in every common treatise on the subject of wealth. Even by the labourers themselves, the operation of capital is regarded only in its effect on their immediate interests; never in the far more terrific power of its appointment of the kind and the object of labour. It matters little, ultimately, how much a labourer is paid for making anything; but it matters fearfully what the thing is, which he is compelled to make. If his labour is so ordered as to produce food, and fresh air, and fresh water, no matter that his wages are low;--the food and fresh air and water will be at last there; and he will at last get them. But if he is paid to destroy food and fresh air or to produce iron bars instead of them,--the food and air will finally _not_ be there, and he will _not_ get them, to his great and final inconvenience. So that, conclusively, in political as in household economy, the great question is, not so much what money you have in your pocket, as what you will buy with it, and do with it. I have been long accustomed, as all men engaged in work of investigation must be, to hear my statements laughed at for years, before they are examined or believed; and I am generally content to wait the public's time. But it has not been without displeased surprise that I have found myself totally unable, as yet, by any repetition, or illustration, to force this plain thought into my readers' heads,--that the wealth of nations, as of men, consists in substance, not in ciphers; and that the real good of all work, and of all commerce, depends on the final worth of the thing you make, or get by it. This is a practical enough statement, one would think: but the English public has been so possessed by its modern school of economists with the notion that Business is always good, whether it be busy in mischief or in benefit; and that buying and selling are always salutary, whatever the intrinsic worth of what you buy or sell,--that it seems impossible to gain so much as a patient hearing for any inquiry respecting the substantial result of our eager modern labours. I have never felt more checked by the sense of this impossibility than in arranging the heads of the following three lectures, which, though delivered at considerable intervals of time, and in different places, were not prepared without reference to each other. Their connection would, however, have been made far more distinct, if I had not been prevented, by what I feel to be another great difficulty in addressing English audiences, from enforcing, with any decision, the common, and to me the most important, part of their subjects. I chiefly desired (as I have just said) to question my hearers--operatives, merchants, and soldiers, as to the ultimate meaning of the _business_ they had in hand; and to know from them what they expected or intended their manufacture to come to, their selling to come to, and their killing to come to. That appeared the first point needing determination before I could speak to them with any real utility or effect. 'You craftsmen--salesmen--swordsmen,--do but tell me clearly what you want, then, if I can say anything to help you, I will; and if not, I will account to you as I best may for my inability.' But in order to put this question into any terms, one had first of all to face the difficulty just spoken of--to me for the present insuperable,--the difficulty of knowing whether to address one's audience as believing, or not believing, in any other world than this. For if you address any average modern English company as believing in an Eternal life, and endeavour to draw any conclusions, from this assumed belief, as to their present business, they will forthwith tell you that what you say is very beautiful, but it is not practical. If, on the contrary, you frankly address them as unbelievers in Eternal life, and try to draw any consequences from that unbelief,--they immediately hold you for an accursed person, and shake off the dust from their feet at you. And the more I thought over what I had got to say, the less I found I could say it, without some reference to this intangible or intractable part of the subject. It made all the difference, in asserting any principle of war, whether one assumed that a discharge of artillery would merely knead down a certain quantity of red clay into a level line, as in a brick field; or whether, out of every separately Christian-named portion of the ruinous heap, there went out, into the smoke and dead-fallen air of battle, some astonished condition of soul, unwillingly released. It made all the difference, in speaking of the possible range of commerce, whether one assumed that all bargains related only to visible property--or whether property, for the present invisible, but nevertheless real, was elsewhere purchasable on other terms. It made all the difference, in addressing a body of men subject to considerable hardship, and having to find some way out of it--whether one could confidentially say to them, 'My friends,--you have only to die, and all will be right;' or whether one had any secret misgiving that such advice was more blessed to him that gave, than to him that took it. And therefore the deliberate reader will find, throughout these lectures, a hesitation in driving points home, and a pausing short of conclusions which he will feel I would fain have come to; hesitation which arises wholly from this uncertainty of my hearers' temper. For I do not now speak, nor have I ever spoken, since the time of my first forward youth, in any proselyting temper, as desiring to persuade any one of what, in such matters, I thought myself; but, whomsoever I venture to address, I take for the time his creed as I find it; and endeavour to push it into such vital fruit as it seems capable of. Thus, it is a creed with a great part of the existing English people, that they are in possession of a book which tells them, straight from the lips of God all they ought to do, and need to know. I have read that book, with as much care as most of them, for some forty years; and am thankful that, on those who trust it, I can press its pleadings. My endeavour has been uniformly to make them trust it more deeply than they do; trust it, not in their own favourite verses only, but in the sum of all; trust it not as a fetish or talisman, which they are to be saved by daily repetitions of; but as a Captain's order, to be heard and obeyed at their peril. I was always encouraged by supposing my hearers to hold such belief. To these, if to any, I once had hope of addressing, with acceptance, words which insisted on the guilt of pride, and the futility of avarice; from these, if from any, I once expected ratification of a political economy, which asserted that the life was more than the meat, and the body than raiment; and these, it once seemed to me, I might ask without accusation or fanaticism, not merely in doctrine of the lips, but in the bestowal of their heart's treasure, to separate themselves from the crowd of whom it is written, 'After all these things do the Gentiles seek.' It cannot, however, be assumed, with any semblance of reason, that a general audience is now wholly, or even in majority, composed of these religious persons. A large portion must always consist of men who admit no such creed; or who, at least, are inaccessible to appeals founded on it. And as, with the so-called Christian, I desired to plead for honest declaration and fulfilment of his belief in life,--with the so-called Infidel, I desired to plead for an honest declaration and fulfilment of his belief in death. The dilemma is inevitable. Men must either hereafter live, or hereafter die; fate may be bravely met, and conduct wisely ordered, on either expectation; but never in hesitation between ungrasped hope, and unconfronted fear. We usually believe in immortality, so far as to avoid preparation for death; and in mortality, so far as to avoid preparation for anything after death. Whereas, a wise man will at least hold himself prepared for one or other of two events, of which one or other is inevitable; and will have all things in order, for his sleep, or in readiness, for his awakening. Nor have we any right to call it an ignoble judgment, if he determine to put them in order, as for sleep. A brave belief in life is indeed an enviable state of mind, but, as far as I can discern, an unusual one. I know few Christians so convinced of the splendour of the rooms in their Father's house, as to be happier when their friends are called to those mansions, than they would have been if the Queen had sent for them to live at Court: nor has the Church's most ardent 'desire to depart, and be with Christ,' ever cured it of the singular habit of putting on mourning for every person summoned to such departure. On the contrary, a brave belief in death has been assuredly held by many not ignoble persons, and it is a sign of the last depravity in the Church itself, when it assumes that such a belief is inconsistent with either purity of character, or energy of hand. The shortness of life is not, to any rational person, a conclusive reason for wasting the space of it which may be granted him; nor does the anticipation of death to-morrow suggest, to any one but a drunkard, the expediency of drunkenness to-day. To teach that there is no device in the grave, may indeed make the deviceless person more contented in his dulness; but it will make the deviser only more earnest in devising, nor is human conduct likely, in every case, to be purer under the conviction that all its evil may in a moment be pardoned, and all its wrong-doing in a moment redeemed; and that the sigh of repentance, which purges the guilt of the past, will waft the soul into a felicity which forgets its pain,--than it may be under the sterner, and to many not unwise minds, more probable, apprehension, that 'what a man soweth that shall he also reap'--or others reap,--when he, the living seed of pestilence, walketh no more in darkness, but lies down therein. But to men whose feebleness of sight, or bitterness of soul, or the offence given by the conduct of those who claim higher hope, may have rendered this painful creed the only possible one, there is an appeal to be made, more secure in its ground than any which can be addressed to happier persons. I would fain, if I might offencelessly, have spoken to them as if none others heard; and have said thus: Hear me, you dying men, who will soon be deaf for ever. For these others, at your right hand and your left, who look forward to a state of infinite existence, in which all their errors will be overruled, and all their faults forgiven; for these, who, stained and blackened in the battle smoke of mortality, have but to dip themselves for an instant in the font of death, and to rise renewed of plumage, as a dove that is covered with silver, and her feathers like gold; for these, indeed, it may be permissible to waste their numbered moments, through faith in a future of innumerable hours; to these, in their weakness, it may be conceded that they should tamper with sin which can only bring forth fruit of righteousness, and profit by the iniquity which, one day, will be remembered no more. In them, it may be no sign of hardness of heart to neglect the poor, over whom they know their Master is watching; and to leave those to perish temporarily, who cannot perish eternally. But, for you, there is no such hope, and therefore no such excuse. This fate, which you ordain for the wretched, you believe to be all their inheritance; you may crush them, before the moth, and they will never rise to rebuke you;--their breath, which fails for lack of food, once expiring, will never be recalled to whisper against you a word of accusing;--they and you, as you think, shall lie down together in the dust, and the worms cover you;--and for them there shall be no consolation, and on you no vengeance,--only the question murmured above your grave: 'Who shall repay him what he hath done?' Is it therefore easier for you in your heart to inflict the sorrow for which there is no remedy? Will you take, wantonly, this little all of his life from your poor brother, and make his brief hours long to him with pain? Will you be readier to the injustice which can never be redressed; and niggardly of mercy which you _can_ bestow but once, and which, refusing, you refuse for ever? I think better of you, even of the most selfish, than that you would do this, well understood. And for yourselves, it seems to me, the question becomes not less grave, in these curt limits. If your life were but a fever fit,--the madness of a night, whose follies were all to be forgotten in the dawn, it might matter little how you fretted away the sickly hours,--what toys you snatched at, or let fall,--what visions you followed wistfully with the deceived eyes of sleepless phrenzy. Is the earth only an hospital? Play, if you care to play, on the floor of the hospital dens. Knit its straw into what crowns please you; gather the dust of it for treasure, and die rich in that, clutching at the black motes in the air with your dying hands;--and yet, it may be well with you. But if this life be no dream, and the world no hospital; if all the peace and power and joy you can ever win, must be won now; and all fruit of victory gathered here, or never;--will you still, throughout the puny totality of your life, weary yourselves in the fire for vanity? If there is no rest which remaineth for you, is there none you might presently take? was this grass of the earth made green for your shroud only, not for your bed? and can you never lie down _upon_ it, but only _under_ it? The heathen, to whose creed you have returned, thought not so. They knew that life brought its contest, but they expected from it also the crown of all contest: No proud one! no jewelled circlet flaming through Heaven above the height of the unmerited throne; only some few leaves of wild olive, cool to the tired brow, through a few years of peace. It should have been of gold, they thought; but Jupiter was poor; this was the best the god could give them. Seeking a greater than this, they had known it a mockery. Not in war, not in wealth, not in tyranny, was there any happiness to be found for them--only in kindly peace, fruitful and free. The wreath was to be of _wild_ olive, mark you:--the tree that grows carelessly, tufting the rocks with no vivid bloom, no verdure of branch; only with soft snow of blossom, and scarcely fulfilled fruit, mixed with grey leaf and thornset stem; no fastening of diadem for you but with such sharp embroidery! But this, such as it is, you may win while yet you live; type of grey honour and sweet rest.[2] Free-heartedness, and graciousness, and undisturbed trust, and requited love, and the sight of the peace of others, and the ministry to their pain;--these, and the blue sky above you, and the sweet waters and flowers of the earth beneath; and mysteries and presences, innumerable, of living things,--these may yet be here your riches; untormenting and divine: serviceable for the life that now is nor, it may be, without promise of that which is to come. FOOTNOTES: [1] 'A fearful occurrence took place a few days since, near Wolverhampton. Thomas Snape, aged nineteen, was on duty as the "keeper" of a blast furnace at Deepfield, assisted by John Gardner, aged eighteen, and Joseph Swift, aged thirty-seven. The furnace contained four tons of molten iron, and an equal amount of cinders, and ought to have been run out at 7.30 P.M. But Snape and his mates, engaged in talking and drinking, neglected their duty, and in the meantime, the iron rose in the furnace until it reached a pipe wherein water was contained. Just as the men had stripped, and were proceeding to tap the furnace, the water in the pipe, converted into steam, burst down its front and let loose on them the molten metal, which instantaneously consumed Gardner; Snape, terribly burnt, and mad with pain, leaped into the canal and then ran home and fell dead on the threshold, Swift survived to reach the hospital, where he died too. In further illustration of this matter, I beg the reader to look at the article on the 'Decay of the English Race,' in the '_Pall-Mall Gazette_' of April 17, of this year; and at the articles on the 'Report of the Thames Commission,' in any journals of the same date. [2] [Greek: melitoessa, aethlôn g' eneken]. THE CROWN OF WILD OLIVE. LECTURE I. _WORK._ (_Delivered before the Working Men's Institute, at Camberwell._) My Friends,--I have not come among you to-night to endeavour to give you an entertaining lecture; but to tell you a few plain facts, and ask you some plain, but necessary questions. I have seen and known too much of the struggle for life among our labouring population, to feel at ease, even under any circumstances, in inviting them to dwell on the trivialities of my own studies; but, much more, as I meet to-night, for the first time, the members of a working Institute established in the district in which I have passed the greater part of my life, I am desirous that we should at once understand each other, on graver matters. I would fain tell you, with what feelings, and with what hope, I regard this Institution, as one of many such, now happily established throughout England, as well as in other countries;--Institutions which are preparing the way for a great change in all the circumstances of industrial life; but of which the success must wholly depend upon our clearly understanding the circumstances and necessary _limits_ of this change. No teacher can truly promote the cause of education, until he knows the conditions of the life for which that education is to prepare his pupil. And the fact that he is called upon to address you nominally, as a 'Working Class,' must compel him, if he is in any wise earnest or thoughtful, to inquire in the outset, on what you yourselves suppose this class distinction has been founded in the past, and must be founded in the future. The manner of the amusement, and the matter of the teaching, which any of us can offer you, must depend wholly on our first understanding from you, whether you think the distinction heretofore drawn between working men and others, is truly or falsely founded. Do you accept it as it stands? do you wish it to be modified? or do you think the object of education is to efface it, and make us forget it for ever? Let me make myself more distinctly understood. We call this--you and I--a 'Working Men's' Institute, and our college in London, a 'Working Men's' College. Now, how do you consider that these several institutes differ, or ought to differ, from 'idle men's' institutes and 'idle men's' colleges? Or by what other word than 'idle' shall I distinguish those whom the happiest and wisest of working men do not object to call the 'Upper Classes?' Are there really upper classes,--are there lower? How much should they always be elevated, how much always depressed? And, gentlemen and ladies--I pray those of you who are here to forgive me the offence there may be in what I am going to say. It is not _I_ who wish to say it. Bitter voices say it; voices of battle and of famine through all the world, which must be heard some day, whoever keeps silence. Neither is it to _you_ specially that I say it. I am sure that most now present know their duties of kindness, and fulfil them, better perhaps than I do mine. But I speak to you as representing your whole class, which errs, I know, chiefly by thoughtlessness, but not therefore the less terribly. Wilful error is limited by the will, but what limit is there to that of which we are unconscious? Bear with me, therefore, while I turn to these workmen, and ask them, also as representing a great multitude, what they think the 'upper classes' are, and ought to be, in relation to them. Answer, you workmen who are here, as you would among yourselves, frankly; and tell me how you would have me call those classes. Am I to call them--would _you_ think me right in calling them--the idle classes? I think you would feel somewhat uneasy, and as if I were not treating my subject honestly, or speaking from my heart, if I went on under the supposition that all rich people were idle. You would be both unjust and unwise if you allowed me to say that;--not less unjust than the rich people who say that all the poor are idle, and will never work if they can help it, or more than they can help. For indeed the fact is, that there are idle poor and idle rich; and there are busy poor and busy rich. Many a beggar is as lazy as if he had ten thousand a year; and many a man of large fortune is busier than his errand-boy, and never would think of stopping in the street to play marbles. So that, in a large view, the distinction between workers and idlers, as between knaves and honest men, runs through the very heart and innermost economies of men of all ranks and in all positions. There is a working class--strong and happy--among both rich and poor; there is an idle class--weak, wicked, and miserable--among both rich and poor. And the worst of the misunderstandings arising between the two orders come of the unlucky fact that the wise of one class habitually contemplate the foolish of the other. If the busy rich people watched and rebuked the idle rich people, all would be right; and if the busy poor people watched and rebuked the idle poor people, all would be right. But each class has a tendency to look for the faults of the other. A hard-working man of property is particularly offended by an idle beggar; and an orderly, but poor, workman is naturally intolerant of the licentious luxury of the rich. And what is severe judgment in the minds of the just men of either class, becomes fierce enmity in the unjust--but among the unjust _only_. None but the dissolute among the poor look upon the rich as their natural enemies, or desire to pillage their houses and divide their property. None but the dissolute among the rich speak in opprobrious terms of the vices and follies of the poor. There is, then, no class distinction between idle and industrious people; and I am going to-night to speak only of the industrious. The idle people we will put out of our thoughts at once--they are mere nuisances--what ought to be done with _them_, we'll talk of at another time. But there are class distinctions, among the industrious themselves; tremendous distinctions, which rise and fall to every degree in the infinite thermometer of human pain and of human power--distinctions of high and low, of lost and won, to the whole reach of man's soul and body. These separations we will study, and the laws of them, among energetic men only, who, whether they work or whether they play, put their strength into the work, and their strength into the game; being in the full sense of the word 'industrious,' one way or another--with a purpose, or without. And these distinctions are mainly four: I. Between those who work, and those who play. II. Between those who produce the means of life, and those who consume them. III. Between those who work with the head, and those who work with the hand. IV. Between those who work wisely, and who work foolishly. For easier memory, let us say we are going to oppose, in our examination.-- I. Work to play; II. Production to consumption; III. Head to Hand; and, IV. Sense to nonsense. I. First, then, of the distinction between the classes who work and the classes who play. Of course we must agree upon a definition of these terms,--work and play,--before going farther. Now, roughly, not with vain subtlety of definition, but for plain use of the words, 'play' is an exertion of body or mind, made to please ourselves, and with no determined end; and work is a thing done because it ought to be done, and with a determined end. You play, as you call it, at cricket, for instance. That is as hard work as anything else; but it amuses you, and it has no result but the amusement. If it were done as an ordered form of exercise, for health's sake, it would become work directly. So, in like manner, whatever we do to please ourselves, and only for the sake of the pleasure, not for an ultimate object, is 'play,' the 'pleasing thing,' not the useful thing. Play may be useful in a secondary sense (nothing is indeed more useful or necessary); but the use of it depends on its being spontaneous. Let us, then, enquire together what sort of games the playing class in England spend their lives in playing at. The first of all English games is making money. That is an all-absorbing game; and we knock each other down oftener in playing at that than at foot-ball, or any other roughest sport; and it is absolutely without purpose; no one who engages heartily in that game ever knows why. Ask a great money-maker what he wants to do with his money--he never knows. He doesn't make it to do anything with it. He gets it only that he _may_ get it. 'What will you make of what you have got?' you ask. 'Well, I'll get more,' he says. Just as, at cricket, you get more runs. There's no use in the runs, but to get more of them than other people is the game. And there's no use in the money, but to have more of it than other people is the game. So all that great foul city of London there,--rattling, growling, smoking, stinking,--a ghastly heap of fermenting brick-work, pouring out poison at every pore,--you fancy it is a city of work? Not a street of it! It is a great city of play; very nasty play, and very hard play, but still play. It is only Lord's cricket ground without the turf,--a huge billiard table without the cloth, and with pockets as deep as the bottomless pit; but mainly a billiard table, after all. Well, the first great English game is this playing at counters. It differs from the rest in that it appears always to be producing money, while every other game is expensive. But it does not always produce money. There's a great difference between 'winning' money and 'making' it; a great difference between getting it out of another man's pocket into ours, or filling both. Collecting money is by no means the same thing as making it; the tax-gatherer's house is not the Mint; and much of the apparent gain (so called), in commerce, is only a form of taxation on carriage or exchange. Our next great English game, however, hunting and shooting, is costly altogether; and how much we are fined for it annually in land, horses, gamekeepers, and game laws, and all else that accompanies that beautiful and special English game, I will not endeavour to count now: but note only that, except for exercise, this is not merely a useless game, but a deadly one, to all connected with it. For through horse-racing, you get every form of what the higher classes everywhere call 'Play,' in distinction from all other plays; that is--gambling; by no means a beneficial or recreative game: and, through game-preserving, you get also some curious laying out of ground; that beautiful arrangement of dwelling-house for man and beast, by which we have grouse and black-cock--so many brace to the acre, and men and women--so many brace to the garret. I often wonder what the angelic builders and surveyors--the angelic builders who build the 'many mansions' up above there; and the angelic surveyors, who measured that four-square city with their measuring reeds--I wonder what they think, or are supposed to think, of the laying out of ground by this nation, which has set itself, as it seems, literally to accomplish, word for word, or rather fact for word, in the persons of those poor whom its Master left to represent him, what that Master said of himself--that foxes and birds had homes, but He none. Then, next to the gentlemen's game of hunting, we must put the ladies' game of dressing. It is not the cheapest of games. I saw a brooch at a jeweller's in Bond Street a fortnight ago, not an inch wide, and without any singular jewel in it, yet worth 3,000_l._ And I wish I could tell you what this 'play' costs, altogether, in England, France, and Russia annually. But it is a pretty game, and on certain terms, I like it; nay, I don't see it played quite as much as I would fain have it. You ladies like to lead the fashion:--by all means lead it--lead it thoroughly, lead it far enough. Dress yourselves nicely, and dress everybody else nicely. Lead the _fashions for the poor_ first; make _them_ look well, and you yourselves will look, in ways of which you have now no conception, all the better. The fashions you have set for some time among your peasantry are not pretty ones; their doublets are too irregularly slashed, and the wind blows too frankly through them. Then there are other games, wild enough, as I could show you if I had time. There's playing at literature, and playing at art--very different, both, from working at literature, or working at art, but I've no time to speak of these. I pass to the greatest of all--the play of plays, the great gentlemen's game, which ladies like them best to play at,--the game of War. It is entrancingly pleasant to the imagination; the facts of it, not always so pleasant. We dress for it, however, more finely than for any other sport; and go out to it, not merely in scarlet, as to hunt, but in scarlet and gold, and all manner of fine colours: of course we could fight better in grey, and without feathers; but all nations have agreed that it is good to be well dressed at this play. Then the bats and balls are very costly; our English and French bats, with the balls and wickets, even those which we don't make any use of, costing, I suppose, now about fifteen millions of money annually to each nation; all of which, you know is paid for by hard labourer's work in the furrow and furnace. A costly game!--not to speak of its consequences; I will say at present nothing of these. The mere immediate cost of all these plays is what I want you to consider; they all cost deadly work somewhere, as many of us know too well. The jewel-cutter, whose sight fails over the diamonds; the weaver, whose arm fails over the web; the iron-forger, whose breath fails before the furnace--_they_ know what work is--they, who have all the work, and none of the play, except a kind they have named for themselves down in the black north country, where 'play' means being laid up by sickness. It is a pretty example for philologists, of varying dialect, this change in the sense of the word 'play,' as used in the black country of Birmingham, and the red and black country of Baden Baden. Yes, gentlemen, and gentlewomen, of England, who think 'one moment unamused a misery, not made for feeble man,' this is what you have brought the word 'play' to mean, in the heart of merry England! You may have your fluting and piping; but there are sad children sitting in the market-place, who indeed cannot say to you, 'We have piped unto you, and ye have not danced:' but eternally shall say to you, 'We have mourned unto you, and ye have not lamented.' This, then, is the first distinction between the 'upper and lower' classes. And this is one which is by no means necessary; which indeed must, in process of good time, be by all honest men's consent abolished. Men will be taught that an existence of play, sustained by the blood of other creatures, is a good existence for gnats and sucking fish; but not for men: that neither days, nor lives, can be made holy by doing nothing in them: that the best prayer at the beginning of a day is that we may not lose its moments; and the best grace before meat, the consciousness that we have justly earned our dinner. And when we have this much of plain Christianity preached to us again, and enough respect for what we regard as inspiration, as not to think that 'Son, go work to-day in my vineyard,' means 'Fool, go play to-day in my vineyard,' we shall all be workers, in one way or another; and this much at least of the distinction between 'upper' and 'lower' forgotten. II. I pass then to our second distinction; between the rich and poor, between Dives and Lazarus,--distinction which exists more sternly, I suppose, in this day, than ever in the world, Pagan or Christian, till now. I will put it sharply before you, to begin with, merely by reading two paragraphs which I cut from two papers that lay on my breakfast table on the same morning, the 25th of November, 1864. The piece about the rich Russian at Paris is commonplace enough, and stupid besides (for fifteen francs,--12_s._ 6_d._,--is nothing for a rich man to give for a couple of peaches, out of season). Still, the two paragraphs printed on the same day are worth putting side by side. 'Such a man is now here. He is a Russian, and, with your permission, we will call him Count Teufelskine. In dress he is sublime; art is considered in that toilet, the harmony of colour respected, the _chiar' oscuro_ evident in well-selected contrast. In manners he is dignified--nay, perhaps apathetic; nothing disturbs the placid serenity of that calm exterior. One day our friend breakfasted _chez_ Bignon. When the bill came he read, "Two peaches, 15f." He paid. "Peaches scarce, I presume?" was his sole remark. "No, sir," replied the waiter, "but Teufelskines are."' _Telegraph_, November 25, 1864. 'Yesterday morning, at eight o'clock, a woman, passing a dung heap in the stone yard near the recently-erected alms-houses in Shadwell Gap, High Street, Shadwell, called the attention of a Thames police-constable to a man in a sitting position on the dung heap, and said she was afraid he was dead. Her fears proved to be true. The wretched creature appeared to have been dead several hours. He had perished of cold and wet, and the rain had been beating down on him all night. The deceased was a bone-picker. He was in the lowest stage of poverty, poorly clad, and half-starved. The police had frequently driven him away from the stone yard, between sunset and sunrise, and told him to go home. He selected a most desolate spot for his wretched death. A penny and some bones were found in his pockets. The deceased was between fifty and sixty years of age. Inspector Roberts, of the K division, has given directions for inquiries to be made at the lodging-houses respecting the deceased, to ascertain his identity if possible.'--_Morning Post_, November 25, 1864. You have the separation thus in brief compass; and I want you to take notice of the 'a penny and some bones were found in his pockets,' and to compare it with this third statement, from the _Telegraph_ of January 16th of this year:-- 'Again, the dietary scale for adult and juvenile paupers was drawn up by the most conspicuous political economists in England. It is low in quantity, but it is sufficient to support nature; yet within ten years of the passing of the Poor Law Act, we heard of the paupers in the Andover Union gnawing the scraps of putrid flesh and sucking the marrow from the bones of horses which they were employed to crush.' You see my reason for thinking that our Lazarus of Christianity has some advantage over the Jewish one. Jewish Lazarus expected, or at least prayed, to be fed with crumbs from the rich man's table; but _our_ Lazarus is fed with crumbs from the dog's table. Now this distinction between rich and poor rests on two bases. Within its proper limits, on a basis which is lawful and everlastingly necessary; beyond them, on a basis unlawful, and everlastingly corrupting the framework of society. The lawful basis of wealth is, that a man who works should be paid the fair value of his work; and that if he does not choose to spend it to-day, he should have free leave to keep it, and spend it to-morrow. Thus, an industrious man working daily, and laying by daily, attains at last the possession of an accumulated sum of wealth, to which he has absolute right. The idle person who will not work, and the wasteful person who lays nothing by, at the end of the same time will be doubly poor--poor in possession, and dissolute in moral habit; and he will then naturally covet the money which the other has saved. And if he is then allowed to attack the other, and rob him of his well-earned wealth, there is no more any motive for saving, or any reward for good conduct; and all society is thereupon dissolved, or exists only in systems of rapine. Therefore the first necessity of social life is the clearness of national conscience in enforcing the law--that he should keep who has JUSTLY EARNED. That law, I say, is the proper basis of distinction between rich and poor. But there is also a false basis of distinction; namely, the power held over those who earn wealth by those who levy or exact it. There will be always a number of men who would fain set themselves to the accumulation of wealth as the sole object of their lives. Necessarily, that class of men is an uneducated class, inferior in intellect, and more or less cowardly. It is physically impossible for a well-educated, intellectual, or brave man to make money the chief object of his thoughts; as physically impossible as it is for him to make his dinner the principal object of them. All healthy people like their dinners, but their dinner is not the main object of their lives. So all healthily minded people like making money--ought to like it, and to enjoy the sensation of winning it; but the main object of their life is not money; it is something better than money. A good soldier, for instance, mainly wishes to do his fighting well. He is glad of his pay--very properly so, and justly grumbles when you keep him ten years without it--still, his main notion of life is to win battles, not to be paid for winning them. So of clergymen. They like pew-rents, and baptismal fees, of course; but yet, if they are brave and well educated, the pew-rent is not the sole object of their lives, and the baptismal fee is not the sole purpose of the baptism; the clergyman's object is essentially to baptize and preach, not to be paid for preaching. So of doctors. They like fees no doubt,--ought to like them; yet if they are brave and well educated, the entire object of their lives is not fees. They, on the whole, desire to cure the sick; and,--if they are good doctors, and the choice were fairly put to them,--would rather cure their patient, and lose their fee, than kill him, and get it. And so with all other brave and rightly trained men; their work is first, their fee second--very important always, but still _second_. But in every nation, as I said, there are a vast class who are ill-educated, cowardly, and more or less stupid. And with these people, just as certainly the fee is first, and the work second, as with brave people the work is first and the fee second. And this is no small distinction. It is the whole distinction in a man; distinction between life and death _in_ him, between heaven and hell _for_ him. You cannot serve two masters;--you _must_ serve one or other. If your work is first with you, and your fee second, work is your master, and the lord of work, who is God. But if your fee is first with you, and your work second, fee is your master, and the lord of fee, who is the Devil; and not only the Devil, but the lowest of devils--the 'least erected fiend that fell.' So there you have it in brief terms; Work first--you are God's servants; Fee first--you are the Fiend's. And it makes a difference, now and ever, believe me, whether you serve Him who has on His vesture and thigh written, 'King of Kings,' and whose service is perfect freedom; or him on whose vesture and thigh the name is written, 'Slave of Slaves,' and whose service is perfect slavery. However, in every nation there are, and must always be, a certain number of these Fiend's servants, who have it principally for the object of their lives to make money. They are always, as I said, more or less stupid, and cannot conceive of anything else so nice as money. Stupidity is always the basis of the Judas bargain. We do great injustice to Iscariot, in thinking him wicked above all common wickedness. He was only a common money-lover, and, like all money-lovers, didn't understand Christ;--couldn't make out the worth of Him, or meaning of Him. He didn't want Him to be killed. He was horror-struck when he found that Christ would be killed; threw his money away instantly, and hanged himself. How many of our present money-seekers, think you, would have the grace to hang themselves, whoever was killed? But Judas was a common, selfish, muddle-headed, pilfering fellow; his hand always in the bag of the poor, not caring for them. He didn't understand Christ;--yet believed in Him, much more than most of us do; had seen Him do miracles, thought He was quite strong enough to shift for Himself, and he, Judas, might as well make his own little bye-perquisites out of the affair. Christ would come out of it well enough, and he have his thirty pieces. Now, that is the money-seeker's idea, all over the world. He doesn't hate Christ, but can't understand Him--doesn't care for him--sees no good in that benevolent business; makes his own little job out of it at all events, come what will. And thus, out of every mass of men, you have a certain number of bag-men--your 'fee-first' men, whose main object is to make money. And they do make it--make it in all sorts of unfair ways, chiefly by the weight and force of money itself, or what is called the power of capital; that is to say, the power which money, once obtained, has over the labour of the poor, so that the capitalist can take all its produce to himself, except the labourer's food. That is the modern Judas's way of 'carrying the bag,' and 'bearing what is put therein.' Nay, but (it is asked) how is that an unfair advantage? Has not the man who has worked for the money a right to use it as he best can? No; in this respect, money is now exactly what mountain promontories over public roads were in old times. The barons fought for them fairly:--the strongest and cunningest got them; then fortified them, and made everyone who passed below pay toll. Well, capital now is exactly what crags were then. Men fight fairly (we will, at least, grant so much, though it is more than we ought) for their money; but, once having got it, the fortified millionaire can make everybody who passes below pay toll to his million, and build another tower of his money castle. And I can tell you, the poor vagrants by the roadside suffer now quite as much from the bag-baron, as ever they did from the crag-baron. Bags and crags have just the same result on rags. I have not time, however, to-night to show you in how many ways the power of capital is unjust; but this one great principle I have to assert--you will find it quite indisputably true--that whenever money is the principal object of life with either man or nation, it is both got ill, and spent ill; and does harm both in the getting and spending; but when it is not the principal object, it and all other things will be well got, and well spent. And here is the test, with every man, of whether money is the principal object with him, or not. If in mid-life he could pause and say, "Now I have enough to live upon, I'll live upon it; and having well earned it, I will also well spend it, and go out of the world poor, as I came into it," then money is not principal with him; but if, having enough to live upon in the manner befitting his character and rank, he still wants to make more, and to _die_ rich, then money is the principal object with him, and it becomes a curse to himself, and generally to those who spend it after him. For you know it _must_ be spent some day; the only question is whether the man who makes it shall spend it, or some one else. And generally it is better for the maker to spend it, for he will know best its value and use. This is the true law of life. And if a man does not choose thus to spend his money, he must either hoard it or lend it, and the worst thing he can generally do is to lend it; for borrowers are nearly always ill-spenders, and it is with lent money that all evil is mainly done, and all unjust war protracted. For observe what the real fact is, respecting loans to foreign military governments, and how strange it is. If your little boy came to you to ask for money to spend in squibs and crackers, you would think twice before you gave it him; and you would have some idea that it was wasted, when you saw it fly off in fireworks, even though he did no mischief with it. But the Russian children, and Austrian children, come to you, borrowing money, not to spend in innocent squibs, but in cartridges and bayonets to attack you in India with, and to keep down all noble life in Italy with, and to murder Polish women and children with; and _that_ you will give at once, because they pay you interest for it. Now, in order to pay you that interest, they must tax every working peasant in their dominions; and on that work you live. You therefore at once rob the Austrian peasant, assassinate or banish the Polish peasant, and you live on the produce of the theft, and the bribe for the assassination! That is the broad fact--that is the practical meaning of your foreign loans, and of most large interest of money; and then you quarrel with Bishop Colenso, forsooth, as if _he_ denied the Bible, and you believed it! though, wretches as you are, every deliberate act of your lives is a new defiance of its primary orders; and as if, for most of the rich men of England at this moment, it were not indeed to be desired, as the best thing at least for _them_, that the Bible should _not_ be true, since against them these words are written in it: 'The rust of your gold and silver shall be a witness against you, and shall eat your flesh, as it were fire.' III. I pass now to our third condition of separation, between the men who work with the hand, and those who work with the head. And here we have at last an inevitable distinction. There _must_ be work done by the arms, or none of us could live. There _must_ be work done by the brains, or the life we get would not be worth having. And the same men cannot do both. There is rough work to be done, and rough men must do it; there is gentle work to be done, and gentlemen must do it; and it is physically impossible that one class should do, or divide, the work of the other. And it is of no use to try to conceal this sorrowful fact by fine words, and to talk to the workman about the honourableness of manual labour and the dignity of humanity. That is a grand old proverb of Sancho Panza's, 'Fine words butter no parsnips;' and I can tell you that, all over England just now, you workmen are buying a great deal too much butter at that dairy. Rough work, honourable or not, takes the life out of us; and the man who has been heaving clay out of a ditch all day, or driving an express train against the north wind all night, or holding a collier's helm in a gale on a lee-shore, or whirling white hot iron at a furnace mouth, that man is not the same at the end of his day, or night, as one who has been sitting in a quiet room, with everything comfortable about him, reading books, or classing butterflies, or painting pictures. If it is any comfort to you to be told that the rough work is the more honourable of the two, I should be sorry to take that much of consolation from you; and in some sense I need not. The rough work is at all events real, honest, and, generally, though not always, useful; while the fine work is, a great deal of it, foolish and false as well as fine, and therefore dishonourable; but when both kinds are equally well and worthily done, the head's is the noble work, and the hand's the ignoble; and of all hand work whatsoever, necessary for the maintenance of life, those old words, 'In the sweat of thy face thou shalt eat bread,' indicate that the inherent nature of it is one of calamity; and that the ground, cursed for our sake, casts also some shadow of degradation into our contest with its thorn and its thistle; so that all nations have held their days honourable, or 'holy,' and constituted them 'holydays' or 'holidays,' by making them days of rest; and the promise, which, among all our distant hopes, seems to cast the chief brightness over death, is that blessing of the dead who die in the Lord, that 'they rest from their labours, and their works do follow them.' And thus the perpetual question and contest must arise, who is to do this rough work? and how is the worker of it to be comforted, redeemed, and rewarded? and what kind of play should he have, and what rest, in this world, sometimes, as well as in the next? Well, my good working friends, these questions will take a little time to answer yet. They must be answered: all good men are occupied with them, and all honest thinkers. There's grand head work doing about them; but much must be discovered, and much attempted in vain, before anything decisive can be told you. Only note these few particulars, which are already sure. As to the distribution of the hard work. None of us, or very few of us, do either hard or soft work because we think we ought; but because we have chanced to fall into the way of it, and cannot help ourselves. Now, nobody does anything well that they cannot help doing: work is only done well when it is done with a will; and no man has a thoroughly sound will unless he knows he is doing what he should, and is in his place. And, depend upon it, all work must be done at last, not in a disorderly, scrambling, doggish way, but in an ordered, soldierly, human way--a lawful way. Men are enlisted for the labour that kills--the labour of war: they are counted, trained, fed, dressed, and praised for that. Let them be enlisted also for the labour that feeds: let them be counted, trained, fed, dressed, praised for that. Teach the plough exercise as carefully as you do the sword exercise, and let the officers of troops of life be held as much gentlemen as the officers of troops of death; and all is done: but neither this, nor any other right thing, can be accomplished--you can't even see your way to it--unless, first of all, both servant and master are resolved that, come what will of it, they will do each other justice. People are perpetually squabbling about what will be best to do, or easiest to do, or adviseablest to do, or profitablest to do; but they never, so far as I hear them talk, ever ask what it is _just_ to do. And it is the law of heaven that you shall not be able to judge what is wise or easy, unless you are first resolved to judge what is just, and to do it. That is the one thing constantly reiterated by our Master--the order of all others that is given oftenest--'Do justice and judgment.' That's your Bible order; that's the 'Service of God,' not praying nor psalm-singing. You are told, indeed, to sing psalms when you are merry, and to pray when you need anything; and, by the perversion of the Evil Spirit, we get to think that praying and psalm-singing are 'service.' If a child finds itself in want of anything, it runs in and asks its father for it--does it call that, doing its father a service? If it begs for a toy or a piece of cake--does it call that serving its father? That, with God, is prayer, and He likes to hear it: He likes you to ask Him for cake when you want it; but He doesn't call that 'serving Him.' Begging is not serving: God likes mere beggars as little as you do--He likes honest servants, not beggars. So when a child loves its father very much, and is very happy, it may sing little songs about him; but it doesn't call that serving its father; neither is singing songs about God, serving God. It is enjoying ourselves, if it's anything; most probably it is nothing; but if it's anything, it is serving ourselves, not God. And yet we are impudent enough to call our beggings and chauntings 'Divine Service:' we say 'Divine service will be "performed"' (that's our word--the form of it gone through) 'at eleven o'clock.' Alas!--unless we perform Divine service in every willing act of our life, we never perform it at all. The one Divine work--the one ordered sacrifice--is to do justice; and it is the last we are ever inclined to do. Anything rather than that! As much charity as you choose, but no justice. 'Nay,' you will say, 'charity is greater than justice.' Yes, it is greater; it is the summit of justice--it is the temple of which justice is the foundation. But you can't have the top without the bottom; you cannot build upon charity. You must build upon justice, for this main reason, that you have not, at first, charity to build with. It is the last reward of good work. Do justice to your brother (you can do that, whether you love him or not), and you will come to love him. But do injustice to him, because you don't love him; and you will come to hate him. It is all very fine to think you can build upon charity to begin with; but you will find all you have got to begin with, begins at home, and is essentially love of yourself. You well-to-do people, for instance, who are here to-night, will go to 'Divine service' next Sunday, all nice and tidy, and your little children will have their tight little Sunday boots on, and lovely little Sunday feathers in their hats; and you'll think, complacently and piously, how lovely they look! So they do: and you love them heartily and you like sticking feathers in their hats. That's all right: that _is_ charity; but it is charity beginning at home. Then you will come to the poor little crossing-sweeper, got up also,--it, in its Sunday dress,--the dirtiest rags it has,--that it may beg the better: we shall give it a penny, and think how good we are. That's charity going abroad. But what does Justice say, walking and watching near us? Christian Justice has been strangely mute, and seemingly blind; and, if not blind, decrepit, this many a day: she keeps her accounts still, however--quite steadily--doing them at nights, carefully, with her bandage off, and through acutest spectacles (the only modern scientific invention she cares about). You must put your ear down ever so close to her lips to hear her speak; and then you will start at what she first whispers, for it will certainly be, 'Why shouldn't that little crossing-sweeper have a feather on its head, as well as your own child?' Then you may ask Justice, in an amazed manner, 'How she can possibly be so foolish as to think children could sweep crossings with feathers on their heads?' Then you stoop again, and Justice says--still in her dull, stupid way--'Then, why don't you, every other Sunday, leave your child to sweep the crossing, and take the little sweeper to church in a hat and feather?' Mercy on us (you think), what will she say next? And you answer, of course, that 'you don't, because every body ought to remain content in the position in which Providence has placed them.' Ah, my friends, that's the gist of the whole question. _Did_ Providence put them in that position, or did _you_? You knock a man into a ditch, and then you tell him to remain content in the 'position in which Providence has placed him.' That's modern Christianity. You say--'_We_ did not knock him into the ditch.' How do you know what you have done, or are doing? That's just what we have all got to know, and what we shall never know, until the question with us every morning, is, not how to do the gainful thing, but how to do the just thing; nor until we are at least so far on the way to being Christian, as to have understood that maxim of the poor half-way Mahometan, 'One hour in the execution of justice is worth seventy years of prayer.' Supposing, then, we have it determined with appropriate justice, _who_ is to do the hand work, the next questions must be how the hand-workers are to be paid, and how they are to be refreshed, and what play they are to have. Now, the possible quantity of play depends on the possible quantity of pay; and the quantity of pay is not a matter for consideration to hand-workers only, but to all workers. Generally, good, useful work, whether of the hand or head, is either ill-paid, or not paid at all. I don't say it should be so, but it always is so. People, as a rule, only pay for being amused or being cheated, not for being served. Five thousand a year to your talker, and a shilling a day to your fighter, digger, and thinker, is the rule. None of the best head work in art, literature, or science, is ever paid for. How much do you think Homer got for his Iliad? or Dante for his Paradise? only bitter bread and salt, and going up and down other people's stairs. In science, the man who discovered the telescope, and first saw heaven, was paid with a dungeon; the man who invented the microscope, and first saw earth, died of starvation, driven from his home: it is indeed very clear that God means all thoroughly good work and talk to be done for nothing. Baruch, the scribe, did not get a penny a line for writing Jeremiah's second roll for him, I fancy; and St. Stephen did not get bishop's pay for that long sermon of his to the Pharisees; nothing but stones. For indeed that is the world-father's proper payment. So surely as any of the world's children work for the world's good, honestly, with head and heart; and come to it, saying, 'Give us a little bread, just to keep the life in us,' the world-father answers them, 'No, my children, not bread; a stone, if you like, or as many as you need, to keep you quiet.' But the hand-workers are not so ill off as all this comes to. The worst that can happen to _you_ is to break stones; not be broken by them. And for you there will come a time for better payment; some day, assuredly, more pence will be paid to Peter the Fisherman, and fewer to Peter the Pope; we shall pay people not quite so much for talking in Parliament and doing nothing, as for holding their tongues out of it and doing something; we shall pay our ploughman a little more and our lawyer a little less, and so on: but, at least, we may even now take care that whatever work is done shall be fully paid for; and the man who does it paid for it, not somebody else; and that it shall be done in an orderly, soldierly, well-guided, wholesome way, under good captains and lieutenants of labour; and that it shall have its appointed times of rest, and enough of them; and that in those times the play shall be wholesome play, not in theatrical gardens, with tin flowers and gas sunshine, and girls dancing because of their misery; but in true gardens, with real flowers, and real sunshine, and children dancing because of their gladness; so that truly the streets shall be full (the 'streets,' mind you, not the gutters) of children, playing in the midst thereof. We may take care that working-men shall have at least as good books to read as anybody else, when they've time to read them; and as comfortable fire-sides to sit at as anybody else, when they've time to sit at them. This, I think, can be managed for you, my working friends, in the good time. IV. I must go on, however, to our last head, concerning ourselves all, as workers. What is wise work, and what is foolish work? What the difference between sense and nonsense, in daily occupation? Well, wise work is, briefly, work _with_ God. Foolish work is work _against_ God. And work done with God, which He will help, may be briefly described as 'Putting in Order'--that is, enforcing God's law of order, spiritual and material, over men and things. The first thing you have to do, essentially; the real 'good work' is, with respect to men, to enforce justice, and with respect to things, to enforce tidiness, and fruitfulness. And against these two great human deeds, justice and order, there are perpetually two great demons contending,--the devil of iniquity, or inequity, and the devil of disorder, or of death; for death is only consummation of disorder. You have to fight these two fiends daily. So far as you don't fight against the fiend of iniquity, you work for him. You 'work iniquity,' and the judgment upon you, for all your 'Lord, Lord's,' will be 'Depart from me, ye that work iniquity.' And so far as you do not resist the fiend of disorder, you work disorder, and you yourself do the work of Death, which is sin, and has for its wages, Death himself. Observe then, all wise work is mainly threefold in character. It is honest, useful, and cheerful. I. It is HONEST. I hardly know anything more strange than that you recognise honesty in play, and you do not in work. In your lightest games, you have always some one to see what you call 'fair-play.' In boxing, you must hit fair; in racing, start fair. Your English watchword is fair-play, your English hatred, foul-play. Did it ever strike you that you wanted another watchword also, fair-work, and another hatred also, foul-work? Your prize-fighter has some honour in him yet; and so have the men in the ring round him: they will judge him to lose the match, by foul hitting. But your prize-merchant gains his match by foul selling, and no one cries out against that. You drive a gambler out of the gambling-room who loads dice, but you leave a tradesman in flourishing business, who loads scales! For observe, all dishonest dealing _is_ loading scales. What does it matter whether I get short weight, adulterate substance, or dishonest fabric? The fault in the fabric is incomparably the worst of the two. Give me short measure of food, and I only lose by you; but give me adulterate food, and I die by you. Here, then, is your chief duty, you workmen and tradesmen--to be true to yourselves, and to us who would help you. We can do nothing for you, nor you for yourselves, without honesty. Get that, you get all; without that, your suffrages, your reforms, your free-trade measures, your institutions of science, are all in vain. It is useless to put your heads together, if you can't put your hearts together. Shoulder to shoulder, right hand to right hand, among yourselves, and no wrong hand to anybody else, and you'll win the world yet. II. Then, secondly, wise work is USEFUL. No man minds, or ought to mind, its being hard, if only it comes to something; but when it is hard, and comes to nothing; when all our bees' business turns to spiders'; and for honeycomb we have only resultant cobweb, blown away by the next breeze--that is the cruel thing for the worker. Yet do we ever ask ourselves, personally, or even nationally, whether our work is coming to anything or not? We don't care to keep what has been nobly done; still less do we care to do nobly what others would keep; and, least of all, to make the work itself useful instead of deadly to the doer, so as to use his life indeed, but not to waste it. Of all wastes, the greatest waste that you can commit is the waste of labour. If you went down in the morning into your dairy, and you found that your youngest child had got down before you; and that he and the cat were at play together, and that he had poured out all the cream on the floor for the cat to lap up, you would scold the child, and be sorry the milk was wasted. But if, instead of wooden bowls with milk in them, there are golden bowls with human life in them, and instead of the cat to play with--the devil to play with; and you yourself the player; and instead of leaving that golden bowl to be broken by God at the fountain, you break it in the dust yourself, and pour the human blood out on the ground for the fiend to lick up--that is no waste! What! you perhaps think, 'to waste the labour of men is not to kill them.' Is it not? I should like to know how you could kill them more utterly--kill them with second deaths, seventh deaths, hundredfold deaths? It is the slightest way of killing to stop a man's breath. Nay, the hunger, and the cold, and the little whistling bullets--our love-messengers between nation and nation--have brought pleasant messages from us to many a man before now; orders of sweet release, and leave at last to go where he will be most welcome and most happy. At the worst you do but shorten his life, you do not corrupt his life. But if you put him to base labour, if you bind his thoughts, if you blind his eyes, if you blunt his hopes, if you steal his joys, if you stunt his body, and blast his soul, and at last leave him not so much as to reap the poor fruit of his degradation, but gather that for yourself, and dismiss him to the grave, when you have done with him, having, so far as in you lay, made the walls of that grave everlasting (though, indeed, I fancy the goodly bricks of some of our family vaults will hold closer in the resurrection day than the sod over the labourer's head), this you think is no waste, and no sin! III. Then, lastly, wise work is CHEERFUL, as a child's work is. And now I want you to take one thought home with you, and let it stay with you. Everybody in this room has been taught to pray daily, 'Thy kingdom come.' Now, if we hear a man swear in the streets, we think it very wrong, and say he 'takes God's name in vain.' But there's a twenty times worse way of taking His name in vain, than that. It is to _ask God for what we don't want_. He doesn't like that sort of prayer. If you don't want a thing, don't ask for it: such asking is the worst mockery of your King you can mock Him with; the soldiers striking Him on the head with the reed was nothing to that. If you do not wish for His kingdom, don't pray for it. But if you do, you must do more than pray for it; you must work for it. And, to work for it, you must know what it is: we have all prayed for it many a day without thinking. Observe, it is a kingdom that is to come to us; we are not to go to it. Also, it is not to be a kingdom of the dead, but of the living. Also, it is not to come all at once, but quietly; nobody knows how. 'The kingdom of God cometh not with observation.' Also, it is not to come outside of us, but in the hearts of us: 'the kingdom of God is within you.' And, being within us, it is not a thing to be seen, but to be felt; and though it brings all substance of good with it, it does not consist in that: 'the kingdom of God is not meat and drink, but righteousness, peace, and joy in the Holy Ghost:' joy, that is to say, in the holy, healthful, and helpful Spirit. Now, if we want to work for this kingdom, and to bring it, and enter into it, there's just one condition to be first accepted. You must enter it as children, or not at all; 'Whosoever will not receive it as a little child shall not enter therein.' And again, 'Suffer little children to come unto me, and forbid them not, for of such is the kingdom of heaven.' _Of such_, observe. Not of children themselves, but of such as children. I believe most mothers who read that text think that all heaven is to be full of babies. But that's not so. There will be children there, but the hoary head is the crown. 'Length of days, and long life and peace,' that is the blessing, not to die in babyhood. Children die but for their parents sins; God means them to live, but He can't let them always; then they have their earlier place in heaven: and the little child of David, vainly prayed for;--the little child of Jeroboam, killed by its mother's step on its own threshold,--they will be there. But weary old David, and weary old Barzillai, having learned children's lessons at last, will be there too: and the one question for us all, young or old, is, have we learned our child's lesson? it is the _character_ of children we want, and must gain at our peril; let us see, briefly, in what it consists. The first character of right childhood is that it is Modest. A well-bred child does not think it can teach its parents, or that it knows everything. It may think its father and mother know everything,--perhaps that all grown-up people know everything; very certainly it is sure that _it_ does not. And it is always asking questions, and wanting to know more. Well, that is the first character of a good and wise man at his work. To know that he knows very little;--to perceive that there are many above him wiser than he; and to be always asking questions, wanting to learn, not to teach. No one ever teaches well who wants to teach, or governs well who wants to govern; it is an old saying (Plato's, but I know not if his, first), and as wise as old. Then, the second character of right childhood is to be Faithful. Perceiving that its father knows best what is good for it, and having found always, when it has tried its own way against his, that he was right and it was wrong, a noble child trusts him at last wholly, gives him its hand, and will walk blindfold with him, if he bids it. And that is the true character of all good men also, as obedient workers, or soldiers under captains. They must trust their captains;--they are bound for their lives to choose none but those whom they _can_ trust. Then, they are not always to be thinking that what seems strange to them, or wrong in what they are desired to do, _is_ strange or wrong. They know their captain: where he leads they must follow, what he bids, they must do; and without this trust and faith, without this captainship and soldiership, no great deed, no great salvation, is possible to man. Among all the nations it is only when this faith is attained by them that they become great: the Jew, the Greek, and the Mahometan, agree at least in testifying to this. It was a deed of this absolute trust which made Abraham the father of the faithful; it was the declaration of the power of God as captain over all men, and the acceptance of a leader appointed by Him as commander of the faithful, which laid the foundation of whatever national power yet exists in the East; and the deed of the Greeks, which has become the type of unselfish and noble soldiership to all lands, and to all times, was commemorated, on the tomb of those who gave their lives to do it, in the most pathetic, so far as I know, or can feel, of all human utterances: 'Oh, stranger, go and tell our people that we are lying here, having _obeyed_ their words.' Then the third character of right childhood is to be Loving and Generous. Give a little love to a child, and you get a great deal back. It loves everything near it, when it is a right kind of child--would hurt nothing, would give the best it has away, always, if you need it--does not lay plans for getting everything in the house for itself, and delights in helping people; you cannot please it so much as by giving it a chance of being useful, in ever so little a way. And because of all these characters, lastly, it is Cheerful. Putting its trust in its father, it is careful for nothing--being full of love to every creature, it is happy always, whether in its play or in its duty. Well, that's the great worker's character also. Taking no thought for the morrow; taking thought only for the duty of the day; trusting somebody else to take care of to-morrow; knowing indeed what labour is, but not what sorrow is; and always ready for play--beautiful play,--for lovely human play is like the play of the Sun. There's a worker for you. He, steady to his time, is set as a strong man to run his course, but also, he _rejoiceth_ as a strong man to run his course. See how he plays in the morning, with the mists below, and the clouds above, with a ray here and a flash there, and a shower of jewels everywhere; that's the Sun's play; and great human play is like his--all various--all full of light and life, and tender, as the dew of the morning. So then, you have the child's character in these four things--Humility, Faith, Charity, and Cheerfulness. That's what you have got to be converted to. 'Except ye be converted and become as little children'--You hear much of conversion now-a-days; but people always seem to think they have got to be made wretched by conversion,--to be converted to long faces. No, friends, you have got to be converted to short ones; you have to repent into childhood, to repent into delight, and delightsomeness. You can't go into a conventicle but you'll hear plenty of talk of backsliding. Backsliding, indeed! I can tell you, on the ways most of us go, the faster we slide back the better. Slide back into the cradle, if going on is into the grave--back, I tell you; back--out of your long faces, and into your long clothes. It is among children only, and as children only, that you will find medicine for your healing and true wisdom for your teaching. There is poison in the counsels of the _men_ of this world; the words they speak are all bitterness, 'the poison of asps is under their lips,' but, 'the sucking child shall play by the hole of the asp.' There is death in the looks of men. 'Their eyes are privily set against the poor;' they are as the uncharmable serpent, the cockatrice, which slew by seeing. But 'the weaned child shall lay his hand on the cockatrice den.' There is death in the steps of men: 'their feet are swift to shed blood; they have compassed us in our steps like the lion that is greedy of his prey, and the young lion lurking in secret places,' but, in that kingdom, the wolf shall lie down with the lamb, and the fatling with the lion, and 'a little child shall lead them.' There is death in the thoughts of men: the world is one wide riddle to them, darker and darker as it draws to a close; but the secret of it is known to the child, and the Lord of heaven and earth is most to be thanked in that 'He has hidden these things from the wise and prudent, and has revealed them unto babes.' Yes, and there is death--infinitude of death in the principalities and powers of men. As far as the east is from the west, so far our sins are--_not_ set from us, but multiplied around us: the Sun himself, think you he _now_ 'rejoices' to run his course, when he plunges westward to the horizon, so widely red, not with clouds, but blood? And it will be red more widely yet. Whatever drought of the early and latter rain may be, there will be none of that red rain. You fortify yourselves, you arm yourselves against it in vain; the enemy and avenger will be upon you also, unless you learn that it is not out of the mouths of the knitted gun, or the smoothed rifle, but 'out of the mouths of babes and sucklings' that the strength is ordained which shall 'still the enemy and avenger.' LECTURE II. _TRAFFIC._ (_Delivered in the Town Hall, Bradford._) My good Yorkshire friends, you asked me down here among your hills that I might talk to you about this Exchange you are going to build: but earnestly and seriously asking you to pardon me, I am going to do nothing of the kind. I cannot talk, or at least can say very little, about this same Exchange. I must talk of quite other things, though not willingly;--I could not deserve your pardon, if when you invited me to speak on one subject, I wilfully spoke on another. But I cannot speak, to purpose, of anything about which I do not care; and most simply and sorrowfully I have to tell you, in the outset, that I do _not_ care about this Exchange of yours. If, however, when you sent me your invitation, I had answered, 'I won't come, I don't care about the Exchange of Bradford,' you would have been justly offended with me, not knowing the reasons of so blunt a carelessness. So I have come down, hoping that you will patiently let me tell you why, on this, and many other such occasions, I now remain silent, when formerly I should have caught at the opportunity of speaking to a gracious audience. In a word, then, I do not care about this Exchange,--because _you_ don't; and because you know perfectly well I cannot make you. Look at the essential circumstances of the case, which you, as business men, know perfectly well, though perhaps you think I forget them. You are going to spend 30,000_l._, which to you, collectively, is nothing; the buying a new coat is, as to the cost of it, a much more important matter of consideration to me than building a new Exchange is to you. But you think you may as well have the right thing for your money. You know there are a great many odd styles of architecture about; you don't want to do anything ridiculous; you hear of me, among others, as a respectable architectural man-milliner: and you send for me, that I may tell you the leading fashion; and what is, in our shops, for the moment, the newest and sweetest thing in pinnacles. Now, pardon me for telling you frankly, you cannot have good architecture merely by asking people's advice on occasion. All good architecture is the expression of national life and character; and it is produced by a prevalent and eager national taste, or desire for beauty. And I want you to think a little of the deep significance of this word 'taste;' for no statement of mine has been more earnestly or oftener controverted than that good taste is essentially a moral quality. 'No,' say many of my antagonists, 'taste is one thing, morality is another. Tell us what is pretty; we shall be glad to know that; but preach no sermons to us.' Permit me, therefore, to fortify this old dogma of mine somewhat. Taste is not only a part and an index of morality--it is the ONLY morality. The first, and last, and closest trial question to any living creature is, 'What do you like?' Tell me what you like, and I'll tell you what you are. Go out into the street, and ask the first man or woman you meet, what their 'taste' is, and if they answer candidly, you know them, body and soul. 'You, my friend in the rags, with the unsteady gait, what do _you_ like?' 'A pipe and a quartern of gin.' I know you. 'You, good woman, with the quick step and tidy bonnet, what do you like?' 'A swept hearth and a clean tea-table, and my husband opposite me, and a baby at my breast.' Good, I know you also. 'You, little girl with the golden hair and the soft eyes, what do you like?' 'My canary, and a run among the wood hyacinths.' 'You, little boy with the dirty hands and the low forehead, what do you like?' 'A shy at the sparrows, and a game at pitch-farthing.' Good; we know them all now. What more need we ask? 'Nay,' perhaps you answer: 'we need rather to ask what these people and children do, than what they like. If they _do_ right, it is no matter that they like what is wrong; and if they _do_ wrong, it is no matter that they like what is right. Doing is the great thing; and it does not matter that the man likes drinking, so that he does not drink; nor that the little girl likes to be kind to her canary, if she will not learn her lessons; nor that the little boy likes throwing stones at the sparrows, if he goes to the Sunday school.' Indeed, for a short time, and in a provisional sense, this is true. For if, resolutely, people do what is right, in time they come to like doing it. But they only are in a right moral state when they _have_ come to like doing it; and as long as they don't like it, they are still in a vicious state. The man is not in health of body who is always thirsting for the bottle in the cupboard, though he bravely bears his thirst; but the man who heartily enjoys water in the morning and wine in the evening, each in its proper quantity and time. And the entire object of true education is to make people not merely _do_ the right things, but _enjoy_ the right things--not merely industrious, but to love industry--not merely learned, but to love knowledge--not merely pure, but to love purity--not merely just, but to hunger and thirst after justice. But you may answer or think, 'Is the liking for outside ornaments,--for pictures, or statues, or furniture, or architecture,--a moral quality?' Yes, most surely, if a rightly set liking. Taste for _any_ pictures or statues is not a moral quality, but taste for good ones is. Only here again we have to define the word 'good.' I don't mean by 'good,' clever--or learned--or difficult in the doing. Take a picture by Teniers, of sots quarrelling over their dice: it is an entirely clever picture; so clever that nothing in its kind has ever been done equal to it; but it is also an entirely base and evil picture. It is an expression of delight in the prolonged contemplation of a vile thing, and delight in that is an 'unmannered,' or 'immoral' quality. It is 'bad taste' in the profoundest sense--it is the taste of the devils. On the other hand, a picture of Titian's, or a Greek statue, or a Greek coin, or a Turner landscape, expresses delight in the perpetual contemplation of a good and perfect thing. That is an entirely moral quality--it is the taste of the angels. And all delight in art, and all love of it, resolve themselves into simple love of that which deserves love. That deserving is the quality which we call 'loveliness'--(we ought to have an opposite word, hateliness, to be said of the things which deserve to be hated); and it is not an indifferent nor optional thing whether we love this or that; but it is just the vital function of all our being. What we _like_ determines what we _are_, and is the sign of what we are; and to teach taste is inevitably to form character. As I was thinking over this, in walking up Fleet Street the other day, my eye caught the title of a book standing open in a bookseller's window. It was--'On the necessity of the diffusion of taste among all classes.' 'Ah,' I thought to myself, 'my classifying friend, when you have diffused your taste, where will your classes be? The man who likes what you like, belongs to the same class with you, I think. Inevitably so. You may put him to other work if you choose; but, by the condition you have brought him into, he will dislike the other work as much as you would yourself. You get hold of a scavenger, or a costermonger, who enjoyed the Newgate Calendar for literature, and "Pop goes the Weasel" for music. You think you can make him like Dante and Beethoven? I wish you joy of your lessons; but if you do, you have made a gentleman of him:--he won't like to go back to his costermongering.' And so completely and unexceptionally is this so, that, if I had time to-night, I could show you that a nation cannot be affected by any vice, or weakness, without expressing it, legibly, and for ever, either in bad art, or by want of art; and that there is no national virtue, small or great, which is not manifestly expressed in all the art which circumstances enable the people possessing that virtue to produce. Take, for instance, your great English virtue of enduring and patient courage. You have at present in England only one art of any consequence--that is, iron-working. You know thoroughly well how to cast and hammer iron. Now, do you think in those masses of lava which you build volcanic cones to melt, and which you forge at the mouths of the Infernos you have created; do you think, on those iron plates, your courage and endurance are not written for ever--not merely with an iron pen, but on iron parchment? And take also your great English vice--European vice--vice of all the world--vice of all other worlds that roll or shine in heaven, bearing with them yet the atmosphere of hell--the vice of jealousy, which brings competition into your commerce, treachery into your councils, and dishonour into your wars--that vice which has rendered for you, and for your next neighbouring nation, the daily occupations of existence no longer possible, but with the mail upon your breasts and the sword loose in its sheath; so that, at last, you have realised for all the multitudes of the two great peoples who lead the so-called civilisation of the earth,--you have realised for them all, I say, in person and in policy, what was once true only of the rough Border riders of your Cheviot hills-- 'They carved at the meal With gloves of steel, And they drank the red wine through the helmet barr'd;-- do you think that this national shame and dastardliness of heart are not written as legibly on every rivet of your iron armour as the strength of the right hands that forged it? Friends, I know not whether this thing be the more ludicrous or the more melancholy. It is quite unspeakably both. Suppose, instead of being now sent for by you, I had been sent for by some private gentleman, living in a suburban house, with his garden separated only by a fruit-wall from his next door neighbour's; and he had called me to consult with him on the furnishing of his drawing room. I begin looking about me, and find the walls rather bare; I think such and such a paper might be desirable--perhaps a little fresco here and there on the ceiling--a damask curtain or so at the windows. 'Ah,' says my employer, 'damask curtains, indeed! That's all very fine, but you know I can't afford that kind of thing just now!' 'Yet the world credits you with a splendid income!' 'Ah, yes,' says my friend, 'but do you know, at present, I am obliged to spend it nearly all in steel-traps?' 'Steel-traps! for whom?' 'Why, for that fellow on the other side the wall, you know: we're very good friends, capital friends; but we are obliged to keep our traps set on both sides of the wall; we could not possibly keep on friendly terms without them, and our spring guns. The worst of it is, we are both clever fellows enough; and there's never a day passes that we don't find out a new trap, or a new gun-barrel, or something; we spend about fifteen millions a year each in our traps, take it all together; and I don't see how we're to do with less.' A highly comic state of life for two private gentlemen! but for two nations, it seems to me, not wholly comic? Bedlam would be comic, perhaps, if there were only one madman in it; and your Christmas pantomime is comic, when there is only one clown in it; but when the whole world turns clown, and paints itself red with its own heart's blood instead of vermilion, it is something else than comic, I think. Mind, I know a great deal of this is play, and willingly allow for that. You don't know what to do with yourselves for a sensation: fox-hunting and cricketing will not carry you through the whole of this unendurably long mortal life: you liked pop-guns when you were schoolboys, and rifles and Armstrongs are only the same things better made: but then the worst of it is, that what was play to you when boys, was not play to the sparrows; and what is play to you now, is not play to the small birds of State neither; and for the black eagles, you are somewhat shy of taking shots at them, if I mistake not. I must get back to the matter in hand, however. Believe me, without farther instance, I could show you, in all time, that every nation's vice, or virtue, was written in its art: the soldiership of early Greece; the sensuality of late Italy; the visionary religion of Tuscany; the splendid human energy and beauty of Venice. I have no time to do this to-night (I have done it elsewhere before now); but I proceed to apply the principle to ourselves in a more searching manner. I notice that among all the new buildings that cover your once wild hills, churches and schools are mixed in due, that is to say, in large proportion, with your mills and mansions and I notice also that the churches and schools are almost always Gothic, and the mansions and mills are never Gothic. Will you allow me to ask precisely the meaning of this? For, remember, it is peculiarly a modern phenomenon. When Gothic was invented, houses were Gothic as well as churches; and when the Italian style superseded the Gothic, churches were Italian as well as houses. If there is a Gothic spire to the cathedral of Antwerp, there is a Gothic belfry to the Hôtel de Ville at Brussels; if Inigo Jones builds an Italian Whitehall, Sir Christopher Wren builds an Italian St. Paul's. But now you live under one school of architecture, and worship under another. What do you mean by doing this? Am I to understand that you are thinking of changing your architecture back to Gothic; and that you treat your churches experimentally, because it does not matter what mistakes you make in a church? Or am I to understand that you consider Gothic a pre-eminently sacred and beautiful mode of building, which you think, like the fine frankincense, should be mixed for the tabernacle only, and reserved for your religious services? For if this be the feeling, though it may seem at first as if it were graceful and reverent, you will find that, at the root of the matter, it signifies neither more nor less than that you have separated your religion from your life. For consider what a wide significance this fact has; and remember that it is not you only, but all the people of England, who are behaving thus just now. You have all got into the habit of calling the church 'the house of God.' I have seen, over the doors of many churches, the legend actually carved, '_This_ is the house of God, and this is the gate of heaven.' Now, note where that legend comes from, and of what place it was first spoken. A boy leaves his father's house to go on a long journey on foot, to visit his uncle; he has to cross a wild hill-desert; just as if one of your own boys had to cross the wolds of Westmoreland, to visit an uncle at Carlisle. The second or third day your boy finds himself somewhere between Hawes and Brough, in the midst of the moors, at sunset. It is stony ground, and boggy; he cannot go one foot farther that night. Down he lies, to sleep, on Wharnside, where best he may, gathering a few of the stones together to put under his head;--so wild the place is, he cannot get anything but stones. And there, lying under the broad night, he has a dream; and he sees a ladder set up on the earth, and the top of it reaches to heaven, and the angels of God are ascending and descending upon it. And when he wakes out of his sleep, he says, 'How dreadful is this place; surely, this is none other than the house of God, and this is the gate of heaven.' This PLACE, observe; not this church; not this city; not this stone, even, which he puts up for a memorial--the piece of flint on which his head has lain. But this _place_; this windy slope of Wharnside; this moorland hollow, torrent-bitten, snow-blighted; this _any_ place where God lets down the ladder. And how are you to know where that will be? or how are you to determine where it may be, but by being ready for it always? Do you know where the lightning is to fall next? You _do_ know that, partly; you can guide the lightning; but you cannot guide the going forth of the Spirit, which is that lightning when it shines from the east to the west. But the perpetual and insolent warping of that strong verse to serve a merely ecclesiastical purpose, is only one of the thousand instances in which we sink back into gross Judaism. We call our churches 'temples.' Now, you know, or ought to know, they are _not_ temples. They have never had, never can have, anything whatever to do with temples. They are 'synagogues'--'gathering places'--where you gather yourselves together as an assembly; and by not calling them so, you again miss the force of another mighty text--'Thou, when thou prayest, shalt not be as the hypocrites are; for they love to pray standing in the _churches_' [we should translate it], 'that they may be seen of men. But thou, when thou prayest, enter into thy closet, and when thou hast shut thy door, pray to thy Father,'--which is, not in chancel nor in aisle, but 'in secret.' Now, you feel, as I say this to you--I know you feel--as if I were trying to take away the honour of your churches. Not so; I am trying to prove to you the honour of your houses and your hills; I am trying to show you--not that the Church is not sacred--but that the whole Earth is. I would have you feel, what careless, what constant, what infectious sin there is in all modes of thought, whereby, in calling your churches only 'holy,' you call your hearths and homes profane; and have separated yourselves from the heathen by casting all your household gods to the ground, instead of recognising, in the place of their many and feeble Lares, the presence of your One and Mighty Lord and Lar. 'But what has all this to do with our Exchange?' you ask me, impatiently. My dear friends, it has just everything to do with it; on these inner and great questions depend all the outer and little ones; and if you have asked me down here to speak to you, because you had before been interested in anything I have written, you must know that all I have yet said about architecture was to show this. The book I called 'The Seven Lamps' was to show that certain right states of temper and moral feeling were the magic powers by which all good architecture, without exception, had been produced. 'The Stones of Venice,' had, from beginning to end, no other aim than to show that the Gothic architecture of Venice had arisen out of, and indicated in all its features, a state of pure national faith, and of domestic virtue; and that its Renaissance architecture had arisen out of, and in all its features indicated, a state of concealed national infidelity, and of domestic corruption. And now, you ask me what style is best to build in; and how can I answer, knowing the meaning of the two styles, but by another question--do you mean to build as Christians or as Infidels? And still more--do you mean to build as honest Christians or as honest Infidels? as thoroughly and confessedly either one or the other? You don't like to be asked such rude questions. I cannot help it; they are of much more importance than this Exchange business; and if they can be at once answered, the Exchange business settles itself in a moment. But, before I press them farther, I must ask leave to explain one point clearly. In all my past work, my endeavour has been to show that good architecture is essentially religious--the production of a faithful and virtuous, not of an infidel and corrupted people. But in the course of doing this, I have had also to show that good architecture is not _ecclesiastical_. People are so apt to look upon religion as the business of the clergy, not their own, that the moment they hear of anything depending on 'religion,' they think it must also have depended on the priesthood; and I have had to take what place was to be occupied between these two errors, and fight both, often with seeming contradiction. Good architecture is the work of good and believing men; therefore, you say, at least some people say, 'Good architecture must essentially have been the work of the clergy, not of the laity.' No--a thousand times no; good architecture has always been the work of the commonalty, _not_ of the clergy. What, you say, those glorious cathedrals--the pride of Europe--did their builders not form Gothic architecture? No; they corrupted Gothic architecture. Gothic was formed in the baron's castle, and the burgher's street. It was formed by the thoughts, and hands, and powers of free citizens and soldier kings. By the monk it was used as an instrument for the aid of his superstition; when that superstition became a beautiful madness, and the best hearts of Europe vainly dreamed and pined in the cloister, and vainly raged and perished in the crusade--through that fury of perverted faith and wasted war, the Gothic rose also to its loveliest, most fantastic, and, finally, most foolish dreams; and, in those dreams, was lost. I hope, now, that there is no risk of your misunderstanding me when I come to the gist of what I want to say to-night--when I repeat, that every great national architecture has been the result and exponent of a great national religion. You can't have bits of it here, bits there--you must have it everywhere, or nowhere. It is not the monopoly of a clerical company--it is not the exponent of a theological dogma--it is not the hieroglyphic writing of an initiated priesthood; it is the manly language of a people inspired by resolute and common purpose, and rendering resolute and common fidelity to the legible laws of an undoubted God. Now, there have as yet been three distinct schools of European architecture. I say, European, because Asiatic and African architectures belong so entirely to other races and climates, that there is no question of them here; only, in passing, I will simply assure you that whatever is good or great in Egypt, and Syria, and India, is just good or great for the same reasons as the buildings on our side of the Bosphorus. We Europeans, then, have had three great religions: the Greek, which was the worship of the God of Wisdom and Power; the Mediæval, which was the Worship of the God of Judgment and Consolation; the Renaissance, which was the worship of the God of Pride and Beauty; these three we have had--they are past,--and now, at last, we English have got a fourth religion, and a God of our own, about which I want to ask you. But I must explain these three old ones first. I repeat, first, the Greeks essentially worshipped the God of Wisdom; so that whatever contended against their religion,--to the Jews a stumbling block,--was, to the Greeks--_Foolishness_. The first Greek idea of Deity was that expressed in the word, of which we keep the remnant in our words '_Di_-urnal' and '_Di_-vine'--the god of _Day_, Jupiter the revealer. Athena is his daughter, but especially daughter of the Intellect, springing armed from the head. We are only with the help of recent investigation beginning to penetrate the depth of meaning couched under the Athenaic symbols: but I may note rapidly, that her ægis, the mantle with the serpent fringes, in which she often, in the best statues, is represented as folding up her left hand for better guard, and the Gorgon on her shield, are both representative mainly of the chilling horror and sadness (turning men to stone, as it were,) of the outmost and superficial spheres of knowledge--that knowledge which separates, in bitterness, hardness, and sorrow, the heart of the full-grown man from the heart of the child. For out of imperfect knowledge spring terror, dissension, danger, and disdain; but from perfect knowledge, given by the full-revealed Athena, strength and peace, in sign of which she is crowned with the olive spray, and bears the resistless spear. This, then, was the Greek conception of purest Deity, and every habit of life, and every form of his art developed themselves from the seeking this bright, serene, resistless wisdom; and setting himself, as a man, to do things evermore rightly and strongly;[3] not with any ardent affection or ultimate hope; but with a resolute and continent energy of will, as knowing that for failure there was no consolation, and for sin there was no remission. And the Greek architecture rose unerring, bright, clearly defined, and self-contained. Next followed in Europe the great Christian faith, which was essentially the religion of Comfort. Its great doctrine is the remission of sins; for which cause it happens, too often, in certain phases of Christianity, that sin and sickness themselves are partly glorified, as if, the more you had to be healed of, the more divine was the healing. The practical result of this doctrine, in art, is a continual contemplation of sin and disease, and of imaginary states of purification from them; thus we have an architecture conceived in a mingled sentiment of melancholy and aspiration, partly severe, partly luxuriant, which will bend itself to every one of our needs, and every one of our fancies, and be strong or weak with us, as we are strong or weak ourselves. It is, of all architecture, the basest, when base people build it--of all, the noblest, when built by the noble. And now note that both these religions--Greek and Mediæval--perished by falsehood in their own main purpose. The Greek religion of Wisdom perished in a false philosophy--'Oppositions of science, falsely so called.' The Mediæval religion of Consolation perished in false comfort; in remission of sins given lyingly. It was the selling of absolution that ended the Mediæval faith; and I can tell you more, it is the selling of absolution which, to the end of time, will mark false Christianity. Pure Christianity gives her remission of sins only by _ending_ them; but false Christianity gets her remission of sins by _compounding for_ them. And there are many ways of compounding for them. We English have beautiful little quiet ways of buying absolution, whether in low Church or high, far more cunning than any of Tetzel's trading. Then, thirdly, there followed the religion of Pleasure, in which all Europe gave itself to luxury, ending in death. First, _bals masqués_ in every saloon, and then guillotines in every square. And all these three worships issue in vast temple building. Your Greek worshipped Wisdom, and built you the Parthenon--the Virgin's temple. The Mediæval worshipped Consolation, and built you Virgin temples also--but to our Lady of Salvation. Then the Revivalist worshipped beauty, of a sort, and built you Versailles, and the Vatican. Now, lastly, will you tell me what _we_ worship, and what _we_ build? You know we are speaking always of the real, active, continual, national worship; that by which men act while they live; not that which they talk of when they die. Now, we have, indeed, a nominal religion, to which we pay tithes of property, and sevenths of time; but we have also a practical and earnest religion, to which we devote nine-tenths of our property and six-sevenths of our time. And we dispute a great deal about the nominal religion; but we are all unanimous about this practical one, of which I think you will admit that the ruling goddess may be best generally described as the 'Goddess of Getting-on,' or 'Britannia of the Market.' The Athenians had an 'Athena Agoraia,' or Minerva of the Market: but she was a subordinate type of their goddess, while our Britannia Agoraia is the principal type of ours. And all your great architectural works, are, of course, built to her. It is long since you built a great cathedral; and how you would laugh at me, if I proposed building a cathedral on the top of one of these hills of yours, taking it for an Acropolis! But your railroad mounds, prolonged masses of Acropolis; your railroad stations, vaster than the Parthenon, and innumerable; your chimneys, how much more mighty and costly than cathedral spires! your harbour-piers; your warehouses; your exchanges!--all these are built to your great Goddess of 'Getting-on;' and she has formed, and will continue to form, your architecture, as long as you worship her; and it is quite vain to ask me to tell you how to build to _her_; you know far better than I. There might indeed, on some theories, be a conceivably good architecture for Exchanges--that is to say if there were any heroism in the fact or deed of exchange, which might be typically carved on the outside of your building. For, you know, all beautiful architecture must be adorned with sculpture or painting; and for sculpture or painting, you must have a subject. And hitherto it has been a received opinion among the nations of the world that the only right subjects for either, were _heroisms_ of some sort. Even on his pots and his flagons, the Greek put a Hercules slaying lions, or an Apollo slaying serpents, or Bacchus slaying melancholy giants, and earth-born despondencies. On his temples, the Greek put contests of great warriors in founding states, or of gods with evil spirits. On his houses and temples alike, the Christian put carvings of angels conquering devils; or of hero-martyrs exchanging this world for another; subject inappropriate, I think, to our manner of exchange here. And the Master of Christians not only left his followers without any orders as to the sculpture of affairs of exchange on the outside of buildings, but gave some strong evidence of his dislike of affairs of exchange within them. And yet there might surely be a heroism in such affairs; and all commerce become a kind of selling of doves, not impious. The wonder has always been great to me, that heroism has never been supposed to be in anywise consistent with the practice of supplying people with food, or clothes; but rather with that of quartering oneself upon them for food, and stripping them of their clothes. Spoiling of armour is an heroic deed in all ages; but the selling of clothes, old, or new, has never taken any colour of magnanimity. Yet one does not see why feeding the hungry and clothing the naked should ever become base businesses, even when engaged in on a large scale. If one could contrive to attach the notion of conquest to them anyhow? so that, supposing there were anywhere an obstinate race, who refused to be comforted, one might take some pride in giving them compulsory comfort; and as it were, 'occupying a country' with one's gifts, instead of one's armies? If one could only consider it as much a victory to get a barren field sown, as to get an eared field stripped; and contend who should build villages, instead of who should 'carry' them. Are not all forms of heroism, conceivable in doing these serviceable deeds? You doubt who is strongest? It might be ascertained by push of spade, as well as push of sword. Who is wisest? There are witty things to be thought of in planning other business than campaigns. Who is bravest? There are always the elements to fight with, stronger than men; and nearly as merciless. The only absolutely and unapproachably heroic element in the soldier's work seems to be--that he is paid little for it--and regularly: while you traffickers, and exchangers, and others occupied in presumably benevolent business, like to be paid much for it--and by chance. I never can make out how it is that a knight-errant does not expect to be paid for his trouble, but a pedlar-errant always does;--that people are willing to take hard knocks for nothing, but never to sell ribands cheap;--that they are ready to go on fervent crusades to recover the tomb of a buried God, never on any travels to fulfil the orders of a living God;--that they will go anywhere barefoot to preach their faith, but must be well bribed to practise it, and are perfectly ready to give the Gospel gratis, but never the loaves and fishes. If you chose to take the matter up on any such soldierly principle, to do your commerce, and your feeding of nations, for fixed salaries; and to be as particular about giving people the best food, and the best cloth, as soldiers are about giving them the best gunpowder, I could carve something for you on your exchange worth looking at. But I can only at present suggest decorating its frieze with pendant purses; and making its pillars broad at the base for the sticking of bills. And in the innermost chambers of it there might be a statue of Britannia of the Market, who may have, perhaps advisably, a partridge for her crest, typical at once of her courage in fighting for noble ideas; and of her interest in game; and round its neck the inscription in golden letters, 'Perdix fovit quæ non peperit.'[4] Then, for her spear, she might have a weaver's beam; and on her shield, instead of her Cross, the Milanese boar, semi-fleeced, with the town of Gennesaret proper, in the field and the legend 'In the best market,' and her corslet, of leather, folded over her heart in the shape of a purse, with thirty slits in it for a piece of money to go in at, on each day of the month. And I doubt not but that people would come to see your exchange, and its goddess, with applause. Nevertheless, I want to point out to you certain strange characters in this goddess of yours. She differs from the great Greek and Mediæval deities essentially in two things--first, as to the continuance of her presumed power; secondly, as to the extent of it. 1st, as to the Continuance. The Greek Goddess of Wisdom gave continual increase of wisdom, as the Christian Spirit of Comfort (or Comforter) continual increase of comfort. There was no question, with these, of any limit or cessation of function. But with your Agora Goddess, that is just the most important question. Getting on--but where to? Gathering together--but how much? Do you mean to gather always--never to spend? If so, I wish you joy of your goddess, for I am just as well off as you, without the trouble of worshipping her at all. But if you do not spend, somebody else will--somebody else must. And it is because of this (among many other such errors) that I have fearlessly declared your so-called science of Political Economy to be no science; because, namely, it has omitted the study of exactly the most important branch of the business--the study of _spending_. For spend you must, and as much as you make, ultimately. You gather corn:--will you bury England under a heap of grain; or will you, when you have gathered, finally eat? You gather gold:--will you make your house-roofs of it, or pave your streets with it? That is still one way of spending it. But if you keep it, that you may get more, I'll give you more; I'll give you all the gold you want--all you can imagine--if you can tell me what you'll do with it. You shall have thousands of gold pieces;--thousands of thousands--millions--mountains, of gold: where will you keep them? Will you put an Olympus of silver upon a golden Pelion--make Ossa like a wart? Do you think the rain and dew would then come down to you, in the streams from such mountains, more blessedly than they will down the mountains which God has made for you, of moss and whinstone? But it is not gold that you want to gather! What is it? greenbacks? No; not those neither. What is it then--is it ciphers after a capital I? Cannot you practise writing ciphers, and write as many as you want? Write ciphers for an hour every morning, in a big book, and say every evening, I am worth all those noughts more than I was yesterday. Won't that do? Well, what in the name of Plutus is it you want? Not gold, not greenbacks, not ciphers after a capital I? You will have to answer, after all, 'No; we want, somehow or other, money's _worth_.' Well, what is that? Let your Goddess of Getting-on discover it, and let her learn to stay therein. II. But there is yet another question to be asked respecting this Goddess of Getting-on. The first was of the continuance of her power; the second is of its extent. Pallas and the Madonna were supposed to be all the world's Pallas, and all the world's Madonna. They could teach all men, and they could comfort all men. But, look strictly into the nature of the power of your Goddess of Getting-on; and you will find she is the Goddess--not of everybody's getting on--but only of somebody's getting on. This is a vital, or rather deathful, distinction. Examine it in your own ideal of the state of national life which this Goddess is to evoke and maintain. I asked you what it was, when I was last here;[5]--you have never told me. Now, shall I try to tell you? Your ideal of human life then is, I think, that it should be passed in a pleasant undulating world, with iron and coal everywhere underneath it. On each pleasant bank of this world is to be a beautiful mansion, with two wings; and stables, and coach-houses; a moderately sized park; a large garden and hot houses; and pleasant carriage drives through the shrubberies. In this mansion are to live the favoured votaries of the Goddess; the English gentleman, with his gracious wife, and his beautiful family; always able to have the boudoir and the jewels for the wife, and the beautiful ball dresses for the daughters, and hunters for the sons, and a shooting in the Highlands for himself. At the bottom of the bank, is to be the mill; not less than a quarter of a mile long, with a steam engine at each end, and two in the middle, and a chimney three hundred feet high. In this mill are to be in constant employment from eight hundred to a thousand workers, who never drink, never strike, always go to church on Sunday, and always express themselves in respectful language. Is not that, broadly, and in the main features, the kind of thing you propose to yourselves? It is very pretty indeed seen from above; not at all so pretty, seen from below. For, observe, while to one family this deity is indeed the Goddess of Getting on, to a thousand families she is the Goddess of _not_ Getting on. 'Nay,' you say, 'they have all their chance.' Yes, so has every one in a lottery, but there must always be the same number of blanks. 'Ah! but in a lottery it is not skill and intelligence which take the lead, but blind chance.' What then! do you think the old practice, that 'they should take who have the power, and they should keep who can,' is less iniquitous, when the power has become power of brains instead of fist? and that, though we may not take advantage of a child's or a woman's weakness, we may of a man's foolishness? 'Nay, but finally, work must be done, and some one must be at the top, some one at the bottom.' Granted, my friends. Work must always be, and captains of work must always be; and if you in the least remember the tone of any of my writings, you must know that they are thought unfit for this age, because they are always insisting on need of government, and speaking with scorn of liberty. But I beg you to observe that there is a wide difference between being captains or governors of work, and taking the profits of it. It does not follow, because you are general of an army, that you are to take all the treasure, or land, it wins (if it fight for treasure or land); neither, because you are king of a nation, that you are to consume all the profits of the nation's work. Real kings, on the contrary, are known invariably by their doing quite the reverse of this,--by their taking the least possible quantity of the nation's work for themselves. There is no test of real kinghood so infallible as that. Does the crowned creature live simply, bravely, unostentatiously? probably he _is_ a King. Does he cover his body with jewels, and his table with delicates? in all probability he is _not_ a King. It is possible he may be, as Solomon was; but that is when the nation shares his splendour with him. Solomon made gold, not only to be in his own palace as stones, but to be in Jerusalem as stones. But even so, for the most part, these splendid kinghoods expire in ruin, and only the true kinghoods live, which are of royal labourers governing loyal labourers; who, both leading rough lives, establish the true dynasties. Conclusively you will find that because you are king of a nation, it does not follow that you are to gather for yourself all the wealth of that nation; neither, because you are king of a small part of the nation, and lord over the means of its maintenance--over field, or mill, or mine, are you to take all the produce of that piece of the foundation of national existence for yourself. You will tell me I need not preach against these things, for I cannot mend them. No, good friends, I cannot; but you can, and you will; or something else can and will. Do you think these phenomena are to stay always in their present power or aspect? All history shows, on the contrary, that to be the exact thing they never can do. Change _must_ come; but it is ours to determine whether change of growth, or change of death. Shall the Parthenon be in ruins on its rock, and Bolton priory in its meadow, but these mills of yours be the consummation of the buildings of the earth, and their wheels be as the wheels of eternity? Think you that 'men may come, and men may go,' but--mills--go on forever? Not so; out of these, better or worse shall come; and it is for you to choose which. I know that none of this wrong is done with deliberate purpose. I know, on the contrary, that you wish your workmen well; that you do much for them, and that you desire to do more for them, if you saw your way to it safely. I know that many of you have done, and are every day doing, whatever you feel to be in your power; and that even all this wrong and misery are brought about by a warped sense of duty, each of you striving to do his best, without noticing that this best is essentially and centrally the best for himself, not for others. And all this has come of the spreading of that thrice accursed, thrice impious doctrine of the modern economist, that 'To do the best for yourself, is finally to do the best for others.' Friends, our great Master said not so; and most absolutely we shall find this world is not made so. Indeed, to do the best for others, is finally to do the best for ourselves; but it will not do to have our eyes fixed on that issue. The Pagans had got beyond that. Hear what a Pagan says of this matter; hear what were, perhaps, the last written words of Plato,--if not the last actually written (for this we cannot know), yet assuredly in fact and power his parting words--in which, endeavouring to give full crowning and harmonious close to all his thoughts, and to speak the sum of them by the imagined sentence of the Great Spirit, his strength and his heart fail him, and the words cease, broken off for ever. It is the close of the dialogue called 'Critias,' in which he describes, partly from real tradition, partly in ideal dream, the early state of Athens; and the genesis, and order, and religion, of the fabled isle of Atlantis; in which genesis he conceives the same first perfection and final degeneracy of man, which in our own Scriptural tradition is expressed by saying that the Sons of God intermarried with the daughters of men, for he supposes the earliest race to have been indeed the children of God; and to have corrupted themselves, until 'their spot was not the spot of his children.' And this, he says, was the end; that indeed 'through many generations, so long as the God's nature in them yet was full, they were submissive to the sacred laws, and carried themselves lovingly to all that had kindred with them in divineness; for their uttermost spirit was faithful and true, and in every wise great; so that, in all meekness of wisdom, they dealt with each other, and took all the chances of life; and despising all things except virtue, they cared little what happened day by day, and _bore lightly the burden_ of gold and of possessions; for they saw that, if only their common love and virtue increased, all these things would be increased together with them; but to set their esteem and ardent pursuit upon material possession would be to lose that first, and their virtue and affection together with it. And by such reasoning, and what of the divine nature remained in them, they gained all this greatness of which we have already told, but when the God's part of them faded and became extinct, being mixed again and again, and effaced by the prevalent mortality; and the human nature at last exceeded, they then became unable to endure the courses of fortune; and fell into shapelessness of life, and baseness in the sight of him who could see, having lost everything that was fairest of their honour; while to the blind hearts which could not discern the true life, tending to happiness, it seemed that they were then chiefly noble and happy, being filled with all iniquity of inordinate possession and power. Whereupon, the God of God's, whose Kinghood is in laws, beholding a once just nation thus cast into misery, and desiring to lay such punishment upon them as might make them repent into restraining, gathered together all the gods into his dwelling-place, which from heaven's centre overlooks whatever has part in creation; and having assembled them, he said'---- The rest is silence. So ended are the last words of the chief wisdom of the heathen, spoken of this idol of riches; this idol of yours; this golden image high by measureless cubits, set up where your green fields of England are furnace-burnt into the likeness of the plain of Dura: this idol, forbidden to us, first of all idols, by our own Master and faith; forbidden to us also by every human lip that has ever, in any age or people, been accounted of as able to speak according to the purposes of God. Continue to make that forbidden deity your principal one, and soon no more art, no more science, no more pleasure will be possible. Catastrophe will come; or worse than catastrophe, slow mouldering and withering into Hades. But if you can fix some conception of a true human state of life to be striven for--life for all men as for yourselves--if you can determine some honest and simple order of existence; following those trodden ways of wisdom, which are pleasantness, and seeking her quiet and withdrawn paths, which are peace;--then, and so sanctifying wealth into 'commonwealth,' all your art, your literature, your daily labours, your domestic affection, and citizen's duty, will join and increase into one magnificent harmony. You will know then how to build, well enough; you will build with stone well, but with flesh better; temples not made with hands, but riveted of hearts; and that kind of marble, crimson-veined, is indeed eternal. FOOTNOTES: [3] It is an error to suppose that the Greek worship, or seeking, was chiefly of Beauty. It was essentially of Rightness and Strength, founded on Forethought: the principal character of Greek art is not Beauty, but Design: and the Dorian Apollo-worship and Athenian Virgin-worship are both expressions of adoration of divine Wisdom and Purity. Next to these great deities rank, in power over the national mind, Dionysus and Ceres, the givers of human strength and life: then, for heroic example, Hercules. There is no Venus-worship among the Greek in the great times: and the Muses are essentially teachers of Truth, and of its harmonies. [4] Jerem. xvii. 11 (best in Septuagint and Vulgate). 'As the partridge, fostering what she brought not forth, so he that getteth riches, not by right shall leave them in the midst of his days, and at his end shall be a fool.' [5] Two Paths, p. 98. LECTURE III. _WAR._ (_Delivered at the Royal Military Academy, Woolwich._) Young soldiers, I do not doubt but that many of you came unwillingly to-night, and many in merely contemptuous curiosity, to hear what a writer on painting could possibly say, or would venture to say, respecting your great art of war. You may well think within yourselves, that a painter might, perhaps without immodesty, lecture younger painters upon painting, but not young lawyers upon law, nor young physicians upon medicine--least of all, it may seem to you, young warriors upon war. And, indeed, when I was asked to address you, I declined at first, and declined long; for I felt that you would not be interested in my special business, and would certainly think there was small need for me to come to teach you yours. Nay, I knew that there ought to be _no_ such need, for the great veteran soldiers of England are now men every way so thoughtful, so noble, and so good, that no other teaching than their knightly example, and their few words of grave and tried counsel should be either necessary for you, or even, without assurance of due modesty in the offerer, endured by you. But being asked, not once nor twice, I have not ventured persistently to refuse; and I will try, in very few words, to lay before you some reason why you should accept my excuse, and hear me patiently. You may imagine that your work is wholly foreign to, and separate from mine. So far from that, all the pure and noble arts of peace are founded on war; no great art ever yet rose on earth, but among a nation of soldiers. There is no art among a shepherd people, if it remains at peace. There is no art among an agricultural people, if it remains at peace. Commerce is barely consistent with fine art; but cannot produce it. Manufacture not only is unable to produce it, but invariably destroys whatever seeds of it exist. There is no great art possible to a nation but that which is based on battle. Now, though I hope you love fighting for its own sake, you must, I imagine, be surprised at my assertion that there is any such good fruit of fighting. You supposed, probably, that your office was to defend the works of peace, but certainly not to found them: nay, the common course of war, you may have thought, was only to destroy them. And truly, I who tell you this of the use of war, should have been the last of men to tell you so, had I trusted my own experience only. Hear why: I have given a considerable part of my life to the investigation of Venetian painting and the result of that enquiry was my fixing upon one man as the greatest of all Venetians, and therefore, as I believed, of all painters whatsoever. I formed this faith, (whether right or wrong matters at present nothing,) in the supremacy of the painter Tintoret, under a roof covered with his pictures; and of those pictures, three of the noblest were then in the form of shreds of ragged canvas, mixed up with the laths of the roof, rent through by three Austrian shells. Now it is not every lecturer who _could_ tell you that he had seen three of his favourite pictures torn to rags by bombshells. And after such a sight, it is not every lecturer who _would_ tell you that, nevertheless, war was the foundation of all great art. Yet the conclusion is inevitable, from any careful comparison of the states of great historic races at different periods. Merely to show you what I mean, I will sketch for you, very briefly, the broad steps of the advance of the best art of the world. The first dawn of it is in Egypt; and the power of it is founded on the perpetual contemplation of death, and of future judgment, by the mind of a nation of which the ruling caste were priests, and the second, soldiers. The greatest works produced by them are sculptures of their kings going out to battle, or receiving the homage of conquered armies. And you must remember also, as one of the great keys to the splendour of the Egyptian nation, that the priests were not occupied in theology only. Their theology was the basis of practical government and law, so that they were not so much priests as religious judges, the office of Samuel, among the Jews, being as nearly as possible correspondent to theirs. All the rudiments of art then, and much more than the rudiments of all science, are laid first by this great warrior-nation, which held in contempt all mechanical trades, and in absolute hatred the peaceful life of shepherds. From Egypt art passes directly into Greece, where all poetry, and all painting, are nothing else than the description, praise, or dramatic representation of war, or of the exercises which prepare for it, in their connection with offices of religion. All Greek institutions had first respect to war; and their conception of it, as one necessary office of all human and divine life, is expressed simply by the images of their guiding gods. Apollo is the god of all wisdom of the intellect; he bears the arrow and the bow, before he bears the lyre. Again, Athena is the goddess of all wisdom in conduct. It is by the helmet and the shield, oftener than by the shuttle, that she is distinguished from other deities. There were, however, two great differences in principle between the Greek and the Egyptian theories of policy. In Greece there was no soldier caste; every citizen was necessarily a soldier. And, again, while the Greeks rightly despised mechanical arts as much as the Egyptians, they did not make the fatal mistake of despising agricultural and pastoral life; but perfectly honoured both. These two conditions of truer thought raise them quite into the highest rank of wise manhood that has yet been reached; for all our great arts, and nearly all our great thoughts, have been borrowed or derived from them. Take away from us what they have given; and I hardly can imagine how low the modern European would stand. Now, you are to remember, in passing to the next phase of history, that though you _must_ have war to produce art--you must also have much more than war; namely, an art-instinct or genius in the people; and that, though all the talent for painting in the world won't make painters of you, unless you have a gift for fighting as well, you may have the gift for fighting, and none for painting. Now, in the next great dynasty of soldiers, the art-instinct is wholly wanting. I have not yet investigated the Roman character enough to tell you the causes of this; but I believe, paradoxical as it may seem to you, that, however truly the Roman might say of himself that he was born of Mars, and suckled by the wolf, he was nevertheless, at heart, more of a farmer than a soldier. The exercises of war were with him practical, not poetical; his poetry was in domestic life only, and the object of battle, 'pacis imponere morem.' And the arts are extinguished in his hands, and do not rise again, until, with Gothic chivalry, there comes back into the mind of Europe a passionate delight in war itself, for the sake of war. And then, with the romantic knighthood which can imagine no other noble employment,--under the fighting kings of France, England, and Spain; and under the fighting dukeships and citizenships of Italy, art is born again, and rises to her height in the great valleys of Lombardy and Tuscany, through which there flows not a single stream, from all their Alps or Apennines, that did not once run dark red from battle: and it reaches its culminating glory in the city which gave to history the most intense type of soldiership yet seen among men;--the city whose armies were led in their assault by their king, led through it to victory by their king, and so led, though that king of theirs was blind, and in the extremity of his age. And from this time forward, as peace is established or extended in Europe, the arts decline. They reach an unparalleled pitch of costliness, but lose their life, enlist themselves at last on the side of luxury and various corruption, and, among wholly tranquil nations, wither utterly away; remaining only in partial practice among races who, like the French and us, have still the minds, though we cannot all live the lives, of soldiers. 'It may be so,' I can suppose that a philanthropist might exclaim. 'Perish then the arts, if they can flourish only at such a cost. What worth is there in toys of canvas and stone if compared to the joy and peace of artless domestic life?' And the answer is--truly, in themselves, none. But as expressions of the highest state of the human spirit, their worth is infinite. As results they may be worthless, but, as signs, they are above price. For it is an assured truth that, whenever the faculties of men are at their fulness, they _must_ express themselves by art; and to say that a state is without such expression, is to say that it is sunk from its proper level of manly nature. So that, when I tell you that war is the foundation of all the arts, I mean also that it is the foundation of all the high virtues and faculties of men. It was very strange to me to discover this; and very dreadful--but I saw it to be quite an undeniable fact. The common notion that peace and the virtues of civil life flourished together, I found, to be wholly untenable. Peace and the _vices_ of civil life only flourish together. We talk of peace and learning, and of peace and plenty, and of peace and civilisation; but I found that those were not the words which the Muse of History coupled together: that on her lips, the words were--peace and sensuality, peace and selfishness, peace and corruption, peace and death. I found, in brief, that all great nations learned their truth of word, and strength of thought, in war; that they were nourished in war, and wasted by peace; taught by war, and deceived by peace; trained by war, and betrayed by peace;--in a word, that they were born in war, and expired in peace. Yet now note carefully, in the second place, it is not _all_ war of which this can be said--nor all dragon's teeth, which, sown, will start up into men. It is not the ravage of a barbarian wolf-flock, as under Genseric or Suwarrow; nor the habitual restlessness and rapine of mountaineers, as on the old borders of Scotland; nor the occasional struggle of a strong peaceful nation for its life, as in the wars of the Swiss with Austria; nor the contest of merely ambitious nations for extent of power, as in the wars of France under Napoleon, or the just terminated war in America. None of these forms of war build anything but tombs. But the creative or foundational war is that in which the natural restlessness and love of contest among men are disciplined, by consent, into modes of beautiful--though it may be fatal--play: in which the natural ambition and love of power of men are disciplined into the aggressive conquest of surrounding evil: and in which the natural instincts of self-defence are sanctified by the nobleness of the institutions, and purity of the households, which they are appointed to defend. To such war as this all men are born; in such war as this any man may happily die; and forth from such war as this have arisen throughout the extent of past ages, all the highest sanctities and virtues of humanity. I shall therefore divide the war of which I would speak to you into three heads. War for exercise or play; war for dominion; and, war for defence. I. And first, of war for exercise or play. I speak of it primarily in this light, because, through all past history, manly war has been more an exercise than anything else, among the classes who cause, and proclaim it. It is not a game to the conscript, or the pressed sailor; but neither of these are the causers of it. To the governor who determines that war shall be, and to the youths who voluntarily adopt it as their profession, it has always been a grand pastime; and chiefly pursued because they had nothing else to do. And this is true without any exception. No king whose mind was fully occupied with the development of the inner resources of his kingdom, or with any other sufficing subject of thought, ever entered into war but on compulsion. No youth who was earnestly busy with any peaceful subject of study, or set on any serviceable course of action, ever voluntarily became a soldier. Occupy him early, and wisely, in agriculture or business, in science or in literature, and he will never think of war otherwise than as a calamity. But leave him idle; and, the more brave and active and capable he is by nature, the more he will thirst for some appointed field for action; and find, in the passion and peril of battle, the only satisfying fulfilment of his unoccupied being. And from the earliest incipient civilisation until now, the population of the earth divides itself, when you look at it widely, into two races; one of workers, and the other of players--one tilling the ground, manufacturing, building, and otherwise providing for the necessities of life;--the other part proudly idle, and continually therefore needing recreation, in which they use the productive and laborious orders partly as their cattle, and partly as their puppets or pieces in the game of death. Now, remember, whatever virtue or goodliness there may be in this game of war, rightly played, there is none when you thus play it with a multitude of small human pawns. If you, the gentlemen of this or any other kingdom, choose to make your pastime of contest, do so, and welcome; but set not up these unhappy peasant-pieces upon the green fielded board. If the wager is to be of death, lay it on your own heads, not theirs. A goodly struggle in the Olympic dust, though it be the dust of the grave, the gods will look upon, and be with you in; but they will not be with you, if you sit on the sides of the amphitheatre, whose steps are the mountains of earth, whose arena its valleys, to urge your peasant millions into gladiatorial war. You also, you tender and delicate women, for whom, and by whose command, all true battle has been, and must ever be; you would perhaps shrink now, though you need not, from the thought of sitting as queens above set lists where the jousting game might be mortal. How much more, then, ought you to shrink from the thought of sitting above a theatre pit in which even a few condemned slaves were slaying each other only for your delight! And do you _not_ shrink from the _fact_ of sitting above a theatre pit, where,--not condemned slaves,--but the best and bravest of the poor sons of your people, slay each other,--not man to man,--as the coupled gladiators; but race to race, in duel of generations? You would tell me, perhaps, that you do not sit to see this; and it is indeed true, that the women of Europe--those who have no heart-interests of their own at peril in the contest--draw the curtains of their boxes, and muffle the openings; so that from the pit of the circus of slaughter there may reach them only at intervals a half-heard cry and a murmur as of the wind's sighing, when myriads of souls expire. They shut out the death-cries; and are happy, and talk wittily among themselves. That is the utter literal fact of what our ladies do in their pleasant lives. Nay, you might answer, speaking for them--'We do not let these wars come to pass for our play, nor by our carelessness; we cannot help them. How can any final quarrel of nations be settled otherwise than by war?' I cannot now delay, to tell you how political quarrels might be otherwise settled. But grant that they cannot. Grant that no law of reason can be understood by nations; no law of justice submitted to by them: and that, while questions of a few acres, and of petty cash, can be determined by truth and equity, the questions which are to issue in the perishing or saving of kingdoms can be determined only by the truth of the sword, and the equity of the rifle. Grant this, and even then, judge if it will always be necessary for you to put your quarrel into the hearts of your poor, and sign your treaties with peasants' blood. You would be ashamed to do this in your own private position and power. Why should you not be ashamed also to do it in public place and power? If you quarrel with your neighbour, and the quarrel be indeterminable by law, and mortal, you and he do not send your footmen to Battersea fields to fight it out; nor do you set fire to his tenants' cottages, nor spoil their goods. You fight out your quarrel yourselves, and at your own danger, if at all. And you do not think it materially affects the arbitrement that one of you has a larger household than the other; so that, if the servants or tenants were brought into the field with their masters, the issue of the contest could not be doubtful? You either refuse the private duel, or you practise it under laws of honour, not of physical force; that so it may be, in a manner, justly concluded. Now the just or unjust conclusion of the private feud is of little moment, while the just or unjust conclusion of the public feud is of eternal moment: and yet, in this public quarrel, you take your servants' sons from their arms to fight for it, and your servants' food from their lips to support it; and the black seals on the parchment of your treaties of peace are the deserted hearth and the fruitless field. There is a ghastly ludicrousness in this, as there is mostly in these wide and universal crimes. Hear the statement of the very fact of it in the most literal words of the greatest of our English thinkers:-- 'What, speaking in quite unofficial language, is the net-purport and upshot of war? To my own knowledge, for example, there dwell and toil, in the British village of Dumdrudge, usually some five hundred souls. From these, by certain "natural enemies" of the French, there are successively selected, during the French war, say thirty able-bodied men. Dumdrudge, at her own expense, has suckled and nursed them; she has, not without difficulty and sorrow, fed them up to manhood, and even trained them to crafts, so that one can weave, another build, another hammer, and the weakest can stand under thirty stone avoirdupois. Nevertheless, amid much weeping and swearing, they are selected; all dressed in red; and shipped away, at the public charges, some two thousand miles, or say only to the south of Spain; and fed there till wanted. 'And now to that same spot in the south of Spain are thirty similar French artisans, from a French Dumdrudge, in like manner wending; till at length, after infinite effort, the two parties come into actual juxtaposition; and Thirty stands fronting Thirty, each with a gun in his hand. 'Straightway the word "Fire!" is given, and they blow the souls out of one another, and in place of sixty brisk useful craftsmen, the world has sixty dead carcases, which it must bury, and anon shed tears for. Had these men any quarrel? Busy as the devil is, not the smallest! They lived far enough apart; were the entirest strangers; nay, in so wide a universe, there was even, unconsciously, by commerce, some mutual helpfulness between them. How then? Simpleton! their governors had fallen out; and instead of shooting one another, had the cunning to make these poor blockheads shoot.' (Sartor Resartus.) Positively, then, gentlemen, the game of battle must not, and shall not, ultimately be played this way. But should it be played any way? Should it, if not by your servants, be practised by yourselves? I think, yes. Both history and human instinct seem alike to say, yes. All healthy men like fighting, and like the sense of danger; all brave women like to hear of their fighting, and of their facing danger. This is a fixed instinct in the fine race of them; and I cannot help fancying that fair fight is the best play for them, and that a tournament was a better game than a steeple-chase. The time may perhaps come in France as well as here, for universal hurdle-races and cricketing: but I do not think universal 'crickets' will bring out the best qualities of the nobles of either country. I use, in such question, the test which I have adopted, of the connection of war with other arts; and I reflect how, as a sculptor, I should feel, if I were asked to design a monument for a dead knight, in Westminster abbey, with a carving of a bat at one end, and a ball at the other. It may be the remains in me only of savage Gothic prejudice; but I had rather carve it with a shield at one end, and a sword at the other. And this, observe, with no reference whatever to any story of duty done, or cause defended. Assume the knight merely to have ridden out occasionally to fight his neighbour for exercise; assume him even a soldier of fortune, and to have gained his bread, and filled his purse, at the sword's point. Still, I feel as if it were, somehow, grander and worthier in him to have made his bread by sword play than any other play; had rather he had made it by thrusting than by batting;--much more, than by betting. Much rather that he should ride war horses, than back race horses; and--I say it sternly and deliberately--much rather would I have him slay his neighbour, than cheat him. But remember, so far as this may be true, the game of war is only that in which the _full personal power of the human creature_ is brought out in management of its weapons. And this for three reasons:-- First, the great justification of this game is that it truly, when well played, determines _who is the best man_;--who is the highest bred, the most self-denying, the most fearless, the coolest of nerve, the swiftest of eye and hand. You cannot test these qualities wholly, unless there is a clear possibility of the struggle's ending in death. It is only in the fronting of that condition that the full trial of the man, soul and body, comes out. You may go to your game of wickets, or of hurdles, or of cards, and any knavery that is in you may stay unchallenged all the while. But if the play may be ended at any moment by a lance-thrust, a man will probably make up his accounts a little before he enters it. Whatever is rotten and evil in him will weaken his hand more in holding a sword hilt, than in balancing a billiard cue; and on the whole, the habit of living lightly hearted, in daily presence of death, always has had, and must have, a tendency both to the making and testing of honest men. But for the final testing, observe, you must make the issue of battle strictly dependent on fineness of frame, and firmness of hand. You must not make it the question, which of the combatants has the longest gun, or which has got behind the biggest tree, or which has the wind in his face, or which has gunpowder made by the best chemist, or iron smelted with the best coal, or the angriest mob at his back. Decide your battle, whether of nations, or individuals, on _those_ terms;--and you have only multiplied confusion, and added slaughter to iniquity. But decide your battle by pure trial which has the strongest arm, and steadiest heart,--and you have gone far to decide a great many matters besides, and to decide them rightly. And the other reasons for this mode of decision of cause, are the diminution both of the material destructiveness, or cost, and of the physical distress of war. For you must not think that in speaking to you in this (as you may imagine), fantastic praise of battle, I have overlooked the conditions weighing against me. I pray all of you, who have not read, to read with the most earnest attention, Mr. Helps's two essays on War and Government, in the first volume of the last series of 'Friends in Council.' Everything that can be urged against war is there simply, exhaustively, and most graphically stated. And all, there urged, is true. But the two great counts of evil alleged against war by that most thoughtful writer, hold only against modern war. If you have to take away masses of men from all industrial employment,--to feed them by the labour of others,--to move them and provide them with destructive machines, varied daily in national rivalship of inventive cost; if you have to ravage the country which you attack,--to destroy for a score of future years, its roads, its woods, its cities, and its harbours;--and if, finally, having brought masses of men, counted by hundreds of thousands, face to face, you tear those masses to pieces with jagged shot, and leave the fragments of living creatures countlessly beyond all help of surgery, to starve and parch, through days of torture, down into clots of clay--what book of accounts shall record the cost of your work;--What book of judgment sentence the guilt of it? That, I say, is _modern_ war,--scientific war,--chemical and mechanic war, worse even than the savage's poisoned arrow. And yet you will tell me, perhaps, that any other war than this is impossible now. It may be so; the progress of science cannot, perhaps, be otherwise registered than by new facilities of destruction; and the brotherly love of our enlarging Christianity be only proved by multiplication of murder. Yet hear, for a moment, what war was, in Pagan and ignorant days;--what war might yet be, if we could extinguish our science in darkness, and join the heathen's practice to the Christian's theory. I read you this from a book which probably most of you know well, and all ought to know--Muller's 'Dorians;'--but I have put the points I wish you to remember in closer connection than in his text. 'The chief characteristic of the warriors of Sparta was great composure and subdued strength; the violence [Greek: lyssa] of Aristodemus and Isadas being considered as deserving rather of blame than praise; and these qualities in general distinguished the Greeks from the northern Barbarians, whose boldness always consisted in noise and tumult. For the same reason the Spartans _sacrificed to the Muses_ before an action; these goddesses being expected to produce regularity and order in battle; as they _sacrificed on the same occasion in Crete to the god of love_, as the confirmer of mutual esteem and shame. Every man put on a crown, when the band of flute-players gave the signal for attack; all the shields of the line glittered with their high polish, and mingled their splendour with the dark red of the purple mantles, which were meant both to adorn the combatant, and to conceal the blood of the wounded; to fall well and decorously being an incentive the more to the most heroic valour. The conduct of the Spartans in battle denotes a high and noble disposition, which rejected all the extremes of brutal rage. The pursuit of the enemy ceased when the victory was completed; and after the signal for retreat had been given, all hostilities ceased. The spoiling of arms, at least during the battle, was also interdicted; and the consecration of the spoils of slain enemies to the gods, as, in general, all rejoicings for victory, were considered as ill-omened. Such was the war of the greatest soldiers who prayed to heathen gods. What Christian war is, preached by Christian ministers, let any one tell you, who saw the sacred crowning, and heard the sacred flute-playing, and was inspired and sanctified by the divinely-measured and musical language, of any North American regiment preparing for its charge. And what is the relative cost of life in pagan and Christian wars, let this one fact tell you:--the Spartans won the decisive battle of Corinth with the loss of eight men; the victors at indecisive Gettysburg confess to the loss of 30,000. II. I pass now to our second order of war, the commonest among men, that undertaken in desire of dominion. And let me ask you to think for a few moments what the real meaning of this desire of dominion is--first in the minds of kings--then in that of nations. Now, mind you this first,--that I speak either about kings, or masses of men, with a fixed conviction that human nature is a noble and beautiful thing; not a foul nor a base thing. All the sin of men I esteem as their disease, not their nature; as a folly which may be prevented, not a necessity which must be accepted. And my wonder, even when things are at their worst, is always at the height which this human nature can attain. Thinking it high, I find it always a higher thing than I thought it; while those who think it low, find it, and will find it, always lower than they thought it: the fact being, that it is infinite, and capable of infinite height and infinite fall; but the nature of it--and here is the faith which I would have you hold with me--the _nature_ of it is in the nobleness, not in the catastrophe. Take the faith in its utmost terms. When the captain of the 'London' shook hands with his mate, saying 'God speed you! I will go down with my passengers,' _that_ I believe to be 'human nature.' He does not do it from any religious motive--from any hope of reward, or any fear of punishment; he does it because he is a man. But when a mother, living among the fair fields of merry England, gives her two-year-old child to be suffocated under a mattress in her inner room, while the said mother waits and talks outside; _that_ I believe to be _not_ human nature. You have the two extremes there, shortly. And you, men, and mothers, who are here face to face with me to-night, I call upon you to say which of these is human, and which inhuman--which 'natural' and which 'unnatural?' Choose your creed at once, I beseech you:--choose it with unshaken choice--choose it forever. Will you take, for foundation of act and hope, the faith that this man was such as God made him, or that this woman was such as God made her? Which of them has failed from their nature--from their present, possible, actual nature;--not their nature of long ago, but their nature of now? Which has betrayed it--falsified it? Did the guardian who died in his trust, die inhumanly, and as a fool; and did the murderess of her child fulfil the law of her being? Choose, I say; infinitude of choices hang upon this. You have had false prophets among you--for centuries you have had them--solemnly warned against them though you were; false prophets, who have told you that all men are nothing but fiends or wolves, half beast, half devil. Believe that and indeed you may sink to that. But refuse that, and have faith that God 'made you upright,' though _you_ have sought out many inventions; so, you will strive daily to become more what your Maker meant and means you to be, and daily gives you also the power to be--and you will cling more and more to the nobleness and virtue that is in you, saying, 'My righteousness I hold fast, and will not let it go.' I have put this to you as a choice, as if you might hold either of these creeds you liked best. But there is in reality no choice for you; the facts being quite easily ascertainable. You have no business to _think_ about this matter, or to choose in it. The broad fact is, that a human creature of the highest race, and most perfect as a human thing, is invariably both kind and true; and that as you lower the race, you get cruelty and falseness, as you get deformity: and this so steadily and assuredly, that the two great words which, in their first use, meant only perfection of race, have come, by consequence of the invariable connection of virtue with the fine human nature, both to signify benevolence of disposition. The word generous, and the word gentle, both, in their origin, meant only 'of pure race,' but because charity and tenderness are inseparable from this purity of blood, the words which once stood only for pride, now stand as synonyms for virtue. Now, this being the true power of our inherent humanity, and seeing that all the aim of education should be to develop this;--and seeing also what magnificent self sacrifice the higher classes of men are capable of, for any cause that they understand or feel,--it is wholly inconceivable to me how well-educated princes, who ought to be of all gentlemen the gentlest, and of all nobles the most generous, and whose title of royalty means only their function of doing every man '_right_'--how these, I say, throughout history, should so rarely pronounce themselves on the side of the poor and of justice, but continually maintain themselves and their own interests by oppression of the poor, and by wresting of justice; and how this should be accepted as so natural, that the word loyalty, which means faithfulness to law, is used as if it were only the duty of a people to be loyal to their king, and not the duty of a king to be infinitely more loyal to his people. How comes it to pass that a captain will die with his passengers, and lean over the gunwale to give the parting boat its course; but that a king will not usually die with, much less _for_, his passengers,--thinks it rather incumbent on his passengers, in any number, to die for _him_? Think, I beseech you, of the wonder of this. The sea captain, not captain by divine right, but only by company's appointment;--not a man of royal descent, but only a plebeian who can steer;--not with the eyes of the world upon him, but with feeble chance, depending on one poor boat, of his name being ever heard above the wash of the fatal waves;--not with the cause of a nation resting on his act, but helpless to save so much as a child from among the lost crowd with whom he resolves to be lost,--yet goes down quietly to his grave, rather than break his faith to these few emigrants. But your captain by divine right,--your captain with the hues of a hundred shields of kings upon his breast,--your captain whose every deed, brave or base, will be illuminated or branded for ever before unescapable eyes of men,--your captain whose every thought and act are beneficent, or fatal, from sunrising to setting, blessing as the sunshine, or shadowing as the night,--this captain, as you find him in history, for the most part thinks only how he may tax his passengers, and sit at most ease in his state cabin! For observe, if there had been indeed in the hearts of the rulers of great multitudes of men any such conception of work for the good of those under their command, as there is in the good and thoughtful masters of any small company of men, not only wars for the sake of mere increase of power could never take place, but our idea of power itself would be entirely altered. Do you suppose that to think and act even for a million of men, to hear their complaints, watch their weaknesses, restrain their vices, make laws for them, lead them, day by day, to purer life, is not enough for one man's work? If any of us were absolute lord only of a district of a hundred miles square, and were resolved on doing our utmost for it; making it feed as large a number of people as possible; making every clod productive, and every rock defensive, and every human being happy; should we not have enough on our hands think you? But if the ruler has any other aim than this; if, careless of the result of his interference, he desire only the authority to interfere; and, regardless of what is ill-done or well-done, cares only that it shall be done at his bidding,--if he would rather do two hundred miles' space of mischief, than one hundred miles' space of good, of course he will try to add to his territory; and to add inimitably. But does he add to his power? Do you call it power in a child, if he is allowed to play with the wheels and bands of some vast engine, pleased with their murmur and whirl, till his unwise touch, wandering where it ought not, scatters beam and wheel into ruin? Yet what machine is so vast, so incognisable, as the working of the mind of a nation what child's touch so wanton, as the word of a selfish king? And yet, how long have we allowed the historian to speak of the extent of the calamity a man causes, as a just ground for his pride; and to extol him as the greatest prince, who is only the centre of the widest error. Follow out this thought by yourselves; and you will find that all power, properly so called, is wise and benevolent. There may be capacity in a drifting fire-ship to destroy a fleet; there may be venom enough in a dead body to infect a nation:--but which of you, the most ambitious, would desire a drifting kinghood, robed in consuming fire, or a poison-dipped sceptre whose touch was mortal? There is no true potency, remember, but that of help; nor true ambition, but ambition to save. And then, observe farther, this true power, the power of saving, depends neither on multitude of men, nor on extent of territory. We are continually assuming that nations become strong according to their numbers. They indeed become so, if those numbers can be made of one mind; but how are you sure you can stay them in one mind, and keep them from having north and south minds? Grant them unanimous, how know you they will be unanimous in right? If they are unanimous in wrong, the more they are, essentially the weaker they are. Or, suppose that they can neither be of one mind, nor of two minds, but can only be of _no_ mind? Suppose they are a more helpless mob; tottering into precipitant catastrophe, like a waggon load of stones when the wheel comes off. Dangerous enough for their neighbours, certainly, but not 'powerful.' Neither does strength depend on extent of territory, any more than upon number of population. Take up your maps when you go home this evening,--put the cluster of British Isles beside the mass of South America; and then consider whether any race of men need care how much ground they stand upon. The strength is in the men, and in their unity and virtue, not in their standing room: a little group of wise hearts is better than a wilderness full of fools; and only that nation gains true territory, which gains itself. And now for the brief practical outcome of all this. Remember, no government is ultimately strong, but in proportion to its kindness and justice; and that a nation does not strengthen, by merely multiplying and diffusing itself. We have not strengthened as yet, by multiplying into America. Nay, even when it has not to encounter the separating conditions of emigration, a nation need not boast itself of multiplying on its own ground, if it multiplies only as flies or locusts do, with the god of flies for its god. It multiplies its strength only by increasing as one great family, in perfect fellowship and brotherhood. And lastly, it does not strengthen itself by seizing dominion over races whom it cannot benefit. Austria is not strengthened, but weakened, by her grasp of Lombardy; and whatever apparent increase of majesty and of wealth may have accrued to us from the possession of India, whether these prove to us ultimately power or weakness, depends wholly on the degree in which our influence on the native race shall be benevolent and exalting. But, as it is at their own peril that any race extends their dominion in mere desire of power, so it is at their own still greater peril, that they refuse to undertake aggressive war, according to their force, whenever they are assured that their authority would be helpful and protective. Nor need you listen to any sophistical objection of the impossibility of knowing when a people's help is needed, or when not. Make your national conscience clean, and your national eyes will soon be clear. No man who is truly ready to take part in a noble quarrel will ever stand long in doubt by whom, or in what cause, his aid is needed. I hold it my duty to make no political statement of any special bearing in this presence; but I tell you broadly and boldly, that, within these last ten years, we English have, as a knightly nation, lost our spurs: we have fought where we should not have fought, for gain; and we have been passive where we should not have been passive, for fear. I tell you that the principle of non-intervention, as now preached among us, is as selfish and cruel as the worst frenzy of conquest, and differs from it only by being not only malignant, but dastardly. I know, however, that my opinions on this subject differ too widely from those ordinarily held, to be any farther intruded upon you; and therefore I pass lastly to examine the conditions of the third kind of noble war;--war waged simply for defence of the country in which we were born, and for the maintenance and execution of her laws, by whomsoever threatened or defied. It is to this duty that I suppose most men entering the army consider themselves in reality to be bound, and I want you now to reflect what the laws of mere defence are; and what the soldier's duty, as now understood, or supposed to be understood. You have solemnly devoted yourselves to be English soldiers, for the guardianship of England. I want you to feel what this vow of yours indeed means, or is gradually coming to mean. You take it upon you, first, while you are sentimental schoolboys; you go into your military convent, or barracks, just as a girl goes into her convent while she is a sentimental schoolgirl; neither of you then know what you are about, though both the good soldiers and good nuns make the best of it afterwards. You don't understand perhaps why I call you 'sentimental' schoolboys, when you go into the army? Because, on the whole, it is love of adventure, of excitement, of fine dress and of the pride of fame, all which are sentimental motives, which chiefly make a boy like going into the Guards better than into a counting-house. You fancy, perhaps, that there is a severe sense of duty mixed with these peacocky motives? And in the best of you, there is; but do not think that it is principal. If you cared to do your duty to your country in a prosaic and unsentimental way, depend upon it, there is now truer duty to be done in raising harvests than in burning them; more in building houses, than in shelling them--more in winning money by your own work, wherewith to help men, than in taxing other people's work, for money wherewith to slay men; more duty finally, in honest and unselfish living than in honest and unselfish dying, though that seems to your boys' eyes the bravest. So far then, as for your own honour, and the honour of your families, you choose brave death in a red coat before brave life in a black one, you are sentimental; and now see what this passionate vow of yours comes to. For a little while you ride, and you hunt tigers or savages, you shoot, and are shot; you are happy, and proud, always, and honoured and wept if you die; and you are satisfied with your life, and with the end of it; believing, on the whole, that good rather than harm of it comes to others, and much pleasure to you. But as the sense of duty enters into your forming minds, the vow takes another aspect. You find that you have put yourselves into the hand of your country as a weapon. You have vowed to strike, when she bids you, and to stay scabbarded when she bids you; all that you need answer for is, that you fail not in her grasp. And there is goodness in this, and greatness, if you can trust the hand and heart of the Britomart who has braced you to her side, and are assured that when she leaves you sheathed in darkness, there is no need for your flash to the sun. But remember, good and noble as this state may be, it is a state of slavery. There are different kinds of slaves and different masters. Some slaves are scourged to their work by whips, others are scourged to it by restlessness or ambition. It does not matter what the whip is; it is none the less a whip, because you have cut thongs for it out of your own souls: the fact, so far, of slavery, is in being driven to your work without thought, at another's bidding. Again, some slaves are bought with money, and others with praise. It matters not what the purchase-money is. The distinguishing sign of slavery is to have a price, and be bought for it. Again, it matters not what kind of work you are set on; some slaves are set to forced diggings, others to forced marches; some dig furrows, others field-works, and others graves. Some press the juice of reeds, and some the juice of vines, and some the blood of men. The fact of the captivity is the same whatever work we are set upon, though the fruits of the toil may be different. But, remember, in thus vowing ourselves to be the slaves of any master, it ought to be some subject of forethought with us, what work he is likely to put us upon. You may think that the whole duty of a soldier is to be passive, that it is the country you have left behind who is to command, and you have only to obey. But are you sure that you have left _all_ your country behind, or that the part of it you have so left is indeed the best part of it? Suppose--and, remember, it is quite conceivable--that you yourselves are indeed the best part of England; that you who have become the slaves, ought to have been the masters; and that those who are the masters, ought to have been the slaves! If it is a noble and whole-hearted England, whose bidding you are bound to do, it is well; but if you are yourselves the best of her heart, and the England you have left be but a half-hearted England, how say you of your obedience? You were too proud to become shopkeepers: are you satisfied then to become the servants of shopkeepers? You were too proud to become merchants or farmers yourselves: will you have merchants or farmers then for your field marshals? You had no gifts of special grace for Exeter Hall: will you have some gifted person thereat for your commander-in-chief, to judge of your work, and reward it? You imagine yourselves to be the army of England: how if you should find yourselves, at last, only the police of her manufacturing towns, and the beadles of her little Bethels? It is not so yet, nor will be so, I trust, for ever; but what I want you to see, and to be assured of, is, that the ideal of soldiership is not mere passive obedience and bravery; that, so far from this, no country is in a healthy state which has separated, even in a small degree, her civil from her military power. All states of the world, however great, fall at once when they use mercenary armies; and although it is a less instant form of error (because involving no national taint of cowardice), it is yet an error no less ultimately fatal--it is the error especially of modern times, of which we cannot yet know all the calamitous consequences--to take away the best blood and strength of the nation, all the soul-substance of it that is brave, and careless of reward, and scornful of pain, and faithful in trust; and to cast that into steel, and make a mere sword of it; taking away its voice and will; but to keep the worst part of the nation--whatever is cowardly, avaricious, sensual, and faithless--and to give to this the voice, to this the authority, to this the chief privilege, where there is least capacity, of thought. The fulfilment of your vow for the defence of England will by no means consist in carrying out such a system. You are not true soldiers, if you only mean to stand at a shop door, to protect shop-boys who are cheating inside. A soldier's vow to his country is that he will die for the guardianship of her domestic virtue, of her righteous laws, and of her anyway challenged or endangered honour. A state without virtue, without laws, and without honour, he is bound _not_ to defend; nay, bound to redress by his own right hand that which he sees to be base in her. So sternly is this the law of Nature and life, that a nation once utterly corrupt can only be redeemed by a military despotism--never by talking, nor by its free effort. And the health of any state consists simply in this: that in it, those who are wisest shall also be strongest; its rulers should be also its soldiers; or, rather, by force of intellect more than of sword, its soldiers its rulers. Whatever the hold which the aristocracy of England has on the heart of England, in that they are still always in front of her battles, this hold will not be enough, unless they are also in front of her thoughts. And truly her thoughts need good captain's leading now, if ever! Do you know what, by this beautiful division of labour (her brave men fighting, and her cowards thinking), she has come at last to think? Here is a bit of paper in my hand,[6] a good one too, and an honest one; quite representative of the best common public thought of England at this moment; and it is holding forth in one of its leaders upon our 'social welfare,'--upon our 'vivid life'--upon the 'political supremacy of Great Britain.' And what do you think all these are owing to? To what our English sires have done for us, and taught us, age after age? No: not to that. To our honesty of heart, or coolness of head, or steadiness of will? No: not to these. To our thinkers, or our statesmen, or our poets, or our captains, or our martyrs, or the patient labour of our poor? No: not to these; or at least not to these in any chief measure. Nay, says the journal, 'more than any agency, it is the cheapness and abundance of our coal which have made us what we are.' If it be so, then 'ashes to ashes' be our epitaph! and the sooner the better. I tell you, gentlemen of England, if ever you would have your country breathe the pure breath of heaven again, and receive again a soul into her body, instead of rotting into a carcase, blown up in the belly with carbonic acid (and great _that_ way), you must think, and feel, for your England, as well as fight for her: you must teach her that all the true greatness she ever had, or ever can have, she won while her fields were green and her faces ruddy;--that greatness is still possible for Englishmen, even though the ground be not hollow under their feet, nor the sky black over their heads;--and that, when the day comes for their country to lay her honours in the dust, her crest will not rise from it more loftily because it is dust of coal. Gentlemen, I tell you, solemnly, that the day is coming when the soldiers of England must be her tutors and the captains of her army, captains also of her mind. And now, remember, you soldier youths, who are thus in all ways the hope of your country; or must be, if she have any hope: remember that your fitness for all future trust depends upon what you are now. No good soldier in his old age was ever careless or indolent in his youth. Many a giddy and thoughtless boy has become a good bishop, or a good lawyer, or a good merchant; but no such an one ever became a good general. I challenge you, in all history, to find a record of a good soldier who was not grave and earnest in his youth. And, in general, I have no patience with people who talk about 'the thoughtlessness of youth' indulgently, I had infinitely rather hear of thoughtless old age, and the indulgence due to _that_. When a man has done his work, and nothing can any way be materially altered in his fate, let him forget his toil, and jest with his fate, if he will; but what excuse can you find for wilfulness of thought, at the very time when every crisis of future fortune hangs on your decisions? A youth thoughtless! when all the happiness of his home for ever depends on the chances, or the passions, of an hour! A youth thoughtless! when the career of all his days depends on the opportunity of a moment! A youth thoughtless! when his every act is a foundation-stone of future conduct, and every imagination a fountain of life or death! Be thoughtless in _any_ after years, rather than now--though, indeed, there is only one place where a man may be nobly thoughtless,--his deathbed. No thinking should ever be left to be done there. Having, then, resolved that you will not waste recklessly, but earnestly use, these early days of yours, remember that all the duties of her children to England may be summed in two words--industry, and honour. I say first, industry, for it is in this that soldier youth are especially tempted to fail. Yet surely, there is no reason because your life may possibly or probably be shorter than other men's, that you should therefore waste more recklessly the portion of it that is granted you; neither do the duties of your profession, which require you to keep your bodies strong, in any wise involve the keeping of your minds weak. So far from that, the experience, the hardship, and the activity of a soldier's life render his powers of thought more accurate than those of other men; and while, for others, all knowledge is often little more than a means of amusement, there is no form of science which a soldier may not at some time or other find bearing on business of life and death. A young mathematician may be excused for langour in studying curves to be described only with a pencil; but not in tracing those which are to be described with a rocket. Your knowledge of a wholesome herb may involve the feeding of an army; and acquaintance with an obscure point of geography, the success of a campaign. Never waste an instant's time, therefore; the sin of idleness is a thousandfold greater in you than in other youths; for the fates of those who will one day be under your command hang upon your knowledge; lost moments now will be lost lives then, and every instant which you carelessly take for play, you buy with blood. But there is one way of wasting time, of all the vilest, because it wastes, not time only, but the interest and energy of your minds. Of all the ungentlemanly habits into which you can fall, the vilest is betting, or interesting yourselves in the issues of betting. It unites nearly every condition of folly and vice; you concentrate your interest upon a matter of chance, instead of upon a subject of true knowledge; and you back opinions which you have no grounds for forming, merely because they are your own. All the insolence of egotism is in this; and so far as the love of excitement is complicated with the hope of winning money, you turn yourselves into the basest sort of tradesmen--those who live by speculation. Were there no other ground for industry, this would be a sufficient one; that it protected you from the temptation to so scandalous a vice. Work faithfully, and you will put yourselves in possession of a glorious and enlarging happiness: not such as can be won by the speed of a horse, or marred by the obliquity of a ball. First, then, by industry you must fulfil your vow to your country; but all industry and earnestness will be useless unless they are consecrated by your resolution to be in all things men of honour; not honour in the common sense only, but in the highest. Rest on the force of the two main words in the great verse, _integer_ vitæ, scelerisque _purus_. You have vowed your life to England; give it her wholly--a bright, stainless, perfect life--a knightly life. Because you have to fight with machines instead of lances, there may be a necessity for more ghastly danger, but there is none for less worthiness of character, than in olden time. You may be true knights yet, though perhaps not _equites_; you may have to call yourselves 'cannonry' instead of 'chivalry,' but that is no reason why you should not call yourselves true men. So the first thing you have to see to in becoming soldiers is that you make yourselves wholly true. Courage is a mere matter of course among any ordinarily well-born youths; but neither truth nor gentleness is matter of course. You must bind them like shields about your necks; you must write them on the tables of your hearts. Though it be not exacted of you, yet exact it of yourselves, this vow of stainless truth. Your hearts are, if you leave them unstirred, as tombs in which a god lies buried. Vow yourselves crusaders to redeem that sacred sepulchre. And remember, before all things--for no other memory will be so protective of you--that the highest law of this knightly truth is that under which it is vowed to women. Whomsoever else you deceive, whomsoever you injure, whomsoever you leave unaided, you must not deceive, nor injure, nor leave unaided according to your power, any woman of whatever rank. Believe me, every virtue of the higher phases of manly character begins in this;--in truth and modesty before the face of all maidens; in truth and pity, or truth and reverence, to all womanhood. And now let me turn for a moment to you,--wives and maidens, who are the souls of soldiers; to you,--mothers, who have devoted your children to the great hierarchy of war. Let me ask you to consider what part you have to take for the aid of those who love you; for if you fail in your part they cannot fulfil theirs; such absolute helpmates you are that mo man can stand without that help, nor labour in his own strength. I know your hearts, and that the truth of them never fails when an hour of trial comes which you recognise for such. But you know not when the hour of trial first finds you, nor when it verily finds you. You imagine that you are only called upon to wait and to suffer; to surrender and to mourn. You know that you must not weaken the hearts of your husbands and lovers, even by the one fear of which those hearts are capable,--the fear of parting from you, or of causing you grief. Through weary years of separation, through fearful expectancies of unknown fate; through the tenfold bitterness of the sorrow which might so easily have been joy, and the tenfold yearning for glorious life struck down in its prime--through all these agonies you fail not, and never will fail. But your trial is not in these. To be heroic in danger is little;--you are Englishwomen. To be heroic in change and sway of fortune is little;--for do you not love? To be patient through the great chasm and pause of loss is little;--for do you not still love in heaven? But to be heroic in happiness; to bear yourselves gravely and righteously in the dazzling of the sunshine of morning; not to forget the God in whom you trust, when He gives you most; not to fail those who trust you, when they seem to need you least; this is the difficult fortitude. It is not in the pining of absence, not in the peril of battle, not in the wasting of sickness, that your prayer should be most passionate, or your guardianship most tender. Pray, mothers and maidens, for your young soldiers in the bloom of their pride; pray for them, while the only dangers round them are in their own wayward wills; watch you, and pray, when they have to face, not death, but temptation. But it is this fortitude also for which there is the crowning reward. Believe me, the whole course and character of your lovers' lives is in your hands; what you would have them be, they shall be, if you not only desire to have them so, but deserve to have them so; for they are but mirrors in which you will see yourselves imaged. If you are frivolous, they will be so also; if you have no understanding of the scope of their duty, they also will forget it; they will listen,--they _can_ listen,--to no other interpretation of it than that uttered from your lips. Bid them be brave;--they will be brave for you; bid them be cowards; and how noble soever they be;--they will quail for you. Bid them be wise, and they will be wise for you; mock at their counsel, they will be fools for you: such and so absolute is your rule over them. You fancy, perhaps, as you have been told so often, that a wife's rule should only be over her husband's house, not over his mind. Ah, no! the true rule is just the reverse of that; a true wife, in her husband's house, is his servant; it is in his heart that she is queen. Whatever of the best he can conceive, it is her part to be; whatever of highest he can hope, it is hers to promise; all that is dark in him she must purge into purity; all that is failing in him she must strengthen into truth: from her, through all the world's clamour, he must win his praise; in her, through all the world's warfare, he must find his peace. And, now, but one word more. You may wonder, perhaps, that I have spoken all this night in praise of war. Yet, truly, if it might be, I, for one, would fain join in the cadence of hammer-strokes that should beat swords into ploughshares: and that this cannot be, is not the fault of us men. It is _your_ fault. Wholly yours. Only by your command, or by your permission, can any contest take place among us. And the real, final, reason for all the poverty, misery, and rage of battle, throughout Europe, is simply that you women, however good, however religious, however self-sacrificing for those whom you love, are too selfish and too thoughtless to take pains for any creature out of your own immediate circles. You fancy that you are sorry for the pain of others. Now I just tell you this, that if the usual course of war, instead of unroofing peasants' houses, and ravaging peasants' fields, merely broke the china upon your own drawing-room tables, no war in civilised countries would last a week. I tell you more, that at whatever moment you chose to put a period to war, you could do it with less trouble than you take any day to go out to dinner. You know, or at least you might know if you would think, that every battle you hear of has made many widows and orphans. We have, none of us, heart enough truly to mourn with these. But at least we might put on the outer symbols of mourning with them. Let but every Christian lady who has conscience toward God, vow that she will mourn, at least outwardly, for His killed creatures. Your praying is useless, and your churchgoing mere mockery of God, if you have not plain obedience in you enough for this. Let every lady in the upper classes of civilised Europe simply vow that, while any cruel war proceeds, she will wear _black_;--a mute's black,--with no jewel, no ornament, no excuse for, or evasion into, prettiness.--I tell you again, no war would last a week. And lastly. You women of England are all now shrieking with one voice,--you and your clergymen together,--because you hear of your Bibles being attacked. If you choose to obey your Bibles, you will never care who attacks them. It is just because you never fulfil a single downright precept of the Book, that you are so careful for its credit: and just because you don't care to obey its whole words, that you are so particular about the letters of them. The Bible tells you to dress plainly,--and you are mad for finery; the Bible tells you to have pity on the poor,--and you crush them under your carriage-wheels; the Bible tells you to do judgment and justice,--and you do not know, nor care to know, so much as what the Bible word 'justice means.' Do but learn so much of God's truth as that comes to; know what He means when He tells you to be just: and teach your sons, that their bravery is but a fool's boast, and their deeds but a firebrand's tossing, unless they are indeed Just men, and Perfect in the Fear of God;--and you will soon have no more war, unless it be indeed such as is willed by Him, of whom, though Prince of Peace, it is also written, 'In Righteousness He doth judge, and make war.' FOOTNOTES: [6] I do not care to refer to the journal quoted, because the article was unworthy of its general tone, though in order to enable the audience to verify the quoted sentence, I left the number containing it on the table, when I delivered this lecture. But a saying of Baron Liebig's, quoted at the head of a leader on the same subject in the 'Daily Telegraph' of January 11, 1866, summarily digests and presents the maximum folly of modern thought in this respect. 'Civilization,' says the Baron, 'is the economy of power, and English power is coal.' Not altogether so, my chemical friend. Civilization is the making of civil persons, which is a kind of distillation of which alembics are incapable, and does not at all imply the turning of a small company of gentlemen into a large company of ironmongers. And English power (what little of it may be left), is by no means coal, but, indeed, of that which, 'when the whole world turns to coal, then chiefly lives.' MUNERA PULVERIS SIX ESSAYS ON THE ELEMENTS OF POLITICAL ECONOMY PREFACE. The following pages contain, I believe, the first accurate analysis of the laws of Political Economy which has been published in England. Many treatises, within their scope, correct, have appeared in contradiction of the views popularly received; but no exhaustive examination of the subject was possible to any person unacquainted with the value of the products of the highest industries, commonly called the "Fine Arts;" and no one acquainted with the nature of those industries has, so far as I know, attempted, or even approached, the task. So that, to the date (1863) when these Essays were published, not only the chief conditions of the production of wealth had remained unstated, but the nature of wealth itself had never been defined. "Every one has a notion, sufficiently correct for common purposes, of what is meant by wealth," wrote Mr. Mill, in the outset of his treatise; and contentedly proceeded, as if a chemist should proceed to investigate the laws of chemistry without endeavouring to ascertain the nature of fire or water, because every one had a notion of them, "sufficiently correct for common purposes." But even that apparently indisputable statement was untrue. There is not one person in ten thousand who has a notion sufficiently correct, even for the commonest purposes, of "what is meant" by wealth; still less of what wealth everlastingly _is_, whether we mean it or not; which it is the business of every student of economy to ascertain. We, indeed, know (either by experience or in imagination) what it is to be able to provide ourselves with luxurious food, and handsome clothes; and if Mr. Mill had thought that wealth consisted only in these, or in the means of obtaining these, it would have been easy for him to have so defined it with perfect scientific accuracy. But he knew better: he knew that some kinds of wealth consisted in the possession, or power of obtaining, other things than these; but, having, in the studies of his life, no clue to the principles of essential value, he was compelled to take public opinion as the ground of his science; and the public, of course, willingly accepted the notion of a science founded on their opinions. I had, on the contrary, a singular advantage, not only in the greater extent of the field of investigation opened to me by my daily pursuits, but in the severity of some lessons I accidentally received in the course of them. When, in the winter of 1851, I was collecting materials for my work on Venetian architecture, three of the pictures of Tintoret on the roof of the School of St. Roch were hanging down in ragged fragments, mixed with lath and plaster, round the apertures made by the fall of three Austrian heavy shot. The city of Venice was not, it appeared, rich enough to repair the damage that winter; and buckets were set on the floor of the upper room of the school to catch the rain, which not only fell directly through the shot holes, but found its way, owing to the generally pervious state of the roof, through many of the canvases of Tintoret's in other parts of the ceiling. It was a lesson to me, as I have just said, no less direct than severe; for I knew already at that time (though I have not ventured to assert, until recently at Oxford,) that the pictures of Tintoret in Venice were accurately the most precious articles of wealth in Europe, being the best existing productions of human industry. Now at the time that three of them were thus fluttering in moist rags from the roof they had adorned, the shops of the Rue Rivoli at Paris were, in obedience to a steadily-increasing public Demand, beginning to show a steadily-increasing Supply of elaborately-finished and coloured lithographs, representing the modern dances of delight, among which the cancan has since taken a distinguished place. The labour employed on the stone of one of these lithographs is very much more than Tintoret was in the habit of giving to a picture of average size. Considering labour as the origin of value, therefore, the stone so highly wrought would be of greater value than the picture; and since also it is capable of producing a large number of immediately saleable or exchangeable impressions, for which the "demand" is constant, the city of Paris naturally supposed itself, and on all hitherto believed or stated principles of political economy, was, infinitely richer in the possession of a large number of these lithographic stones, (not to speak of countless oil pictures and marble carvings of similar character), than Venice in the possession of those rags of mildewed canvas, flaunting in the south wind and its salt rain. And, accordingly, Paris provided (without thought of the expense) lofty arcades of shops, and rich recesses of innumerable private apartments, for the protection of these better treasures of hers from the weather. Yet, all the while, Paris was not the richer for these possessions. Intrinsically, the delightful lithographs were not wealth, but polar contraries of wealth. She was, by the exact quantity of labour she had given to produce these, sunk below, instead of above, absolute Poverty. They not only were false Riches--they were true _Debt_, which had to be paid at last--and the present aspect of the Rue Rivoli shows in what manner. And the faded stains of the Venetian ceiling, all the while, were absolute and inestimable wealth. Useless to their possessors as forgotten treasure in a buried city, they had in them, nevertheless, the intrinsic and eternal nature of wealth; and Venice, still possessing the ruins of them, was a rich city; only, the Venetians had _not_ a notion sufficiently correct even for the very common purpose of inducing them to put slates on a roof, of what was "meant by wealth." The vulgar economist would reply that his science had nothing to do with the qualities of pictures, but with their exchange-value only; and that his business was, exclusively, to consider whether the remains of Tintoret were worth as many ten-and-sixpences as the impressions which might be taken from the lithographic stones. But he would not venture, without reserve, to make such an answer, if the example be taken in horses, instead of pictures. The most dull economist would perceive, and admit, that a gentleman who had a fine stud of horses was absolutely richer than one who had only ill-bred and broken-winded ones. He would instinctively feel, though his pseudo-science had never taught him, that the price paid for the animals, in either case, did not alter the fact of their worth: that the good horse, though it might have been bought by chance for a few guineas, was not therefore less valuable, nor the owner of the galled jade any the richer, because he had given a hundred for it. So that the economist, in saying that his science takes no account of the qualities of pictures, merely signifies that he cannot conceive of any quality of essential badness or goodness existing in pictures; and that he is incapable of investigating the laws of wealth in such articles. Which is the fact. But, being incapable of defining intrinsic value in pictures, it follows that he must be equally helpless to define the nature of intrinsic value in painted glass, or in painted pottery, or in patterned stuffs, or in any other national produce requiring true human ingenuity. Nay, though capable of conceiving the idea of intrinsic value with respect to beasts of burden, no economist has endeavoured to state the general principles of National Economy, even with regard to the horse or the ass. And, in fine, _the modern political economists have been, without exception, incapable of apprehending the nature of intrinsic value at all_. And the first specialty of the following treatise consists in its giving at the outset, and maintaining as the foundation of all subsequent reasoning, a definition of Intrinsic Value, and Intrinsic Contrary-of-Value; the negative power having been left by former writers entirely out of account, and the positive power left entirely undefined. But, secondly: the modern economist, ignoring intrinsic value, and accepting the popular estimate of things as the only ground of his science, has imagined himself to have ascertained the constant laws regulating the relation of this popular demand to its supply; or, at least, to have proved that demand and supply were connected by heavenly balance, over which human foresight had no power. I chanced, by singular coincidence, lately to see this theory of the law of demand and supply brought to as sharp practical issue in another great siege, as I had seen the theories of intrinsic value brought, in the siege of Venice. I had the honour of being on the committee under the presidentship of the Lord Mayor of London, for the victualling of Paris after her surrender. It became, at one period of our sittings, a question of vital importance at what moment the law of demand and supply would come into operation, and what the operation of it would exactly be: the demand, on this occasion, being very urgent indeed; that of several millions of people within a few hours of utter starvation, for any kind of food whatsoever. Nevertheless, it was admitted, in the course of debate, to be probable that the divine principle of demand and supply might find itself at the eleventh hour, and some minutes over, in want of carts and horses; and we ventured so far to interfere with the divine principle as to provide carts and horses, with haste which proved, happily, in time for the need; but not a moment in advance of it. It was farther recognized by the committee that the divine principle of demand and supply would commence its operations by charging the poor of Paris twelve-pence for a penny's worth of whatever they wanted; and would end its operations by offering them twelve-pence worth for a penny, of whatever they didn't want. Whereupon it was concluded by the committee that the tiny knot, on this special occasion, was scarcely "_dignus vindice_," by the divine principle of demand and supply: and that we would venture, for once, in a profane manner, to provide for the poor of Paris what they wanted, when they wanted it. Which, to the value of the sums entrusted to us, it will be remembered we succeeded in doing. But the fact is that the so-called "law," which was felt to be false in this case of extreme exigence, is alike false in cases of less exigence. It is false always, and everywhere. Nay to such an extent is its existence imaginary, that the vulgar economists are not even agreed in their account of it; for some of them mean by it, only that prices are regulated by the relation between demand and supply, which is partly true; and others mean that the relation itself is one with the process of which it is unwise to interfere; a statement which is not only, as in the above instance, untrue; but accurately the reverse of the truth: for all wise economy, political or domestic, consists in the resolved maintenance of a given relation between supply and demand, other than the instinctive, or (directly) natural, one. Similarly, vulgar political economy asserts for a "law" that wages are determined by competition. Now I pay my servants exactly what wages I think necessary to make them comfortable. The sum is not determined at all by competition; but sometimes by my notions of their comfort and deserving, and sometimes by theirs. If I were to become penniless to-morrow, several of them would certainly still serve me for nothing. In both the real and supposed cases the so-called "law" of vulgar political economy is absolutely set at defiance. But I cannot set the law of gravitation at defiance, nor determine that in my house I will not allow ice to melt, when the temperature is above thirty-two degrees. A true law outside of my house, will remain a true one inside of it. It is not, therefore, a law of Nature that wages are determined by competition. Still less is it a law of State, or we should not now be disputing about it publicly, to the loss of many millions of pounds to the country. The fact which vulgar economists have been weak enough to imagine a law, is only that, for the last twenty years a number of very senseless persons have attempted to determine wages in that manner; and have, in a measure, succeeded in occasionally doing so. Both in definition of the elements of wealth, and in statement of the laws which govern its distribution, modern political economy has been thus absolutely incompetent, or absolutely false. And the following treatise is not, as it has been asserted with dull pertinacity, an endeavour to put sentiment in the place of science; but it contains the exposure of what insolently pretended to be a science; and the definition, hitherto unassailed--and I do not fear to assert, unassailable--of the material elements with which political economy has to deal, and the moral principles in which it consists; being not itself a science, but "a system of conduct founded on the sciences, and impossible, except under certain conditions of moral culture." Which is only to say, that industry, frugality, and discretion, the three foundations of economy, are moral qualities, and cannot be attained without moral discipline: a flat truism, the reader may think, thus stated, yet a truism which is denied both vociferously, and in all endeavour, by the entire populace of Europe; who are at present hopeful of obtaining wealth by tricks of trade, without industry; who, possessing wealth, have lost in the use of it even the conception,--how much more the habit?--of frugality; and who, in the choice of the elements of wealth, cannot so much as lose--since they have never hitherto at any time possessed,--the faculty of discretion. Now if the teachers of the pseudo-science of economy had ventured to state distinctly even the poor conclusions they had reached on the subjects respecting which it is most dangerous for a populace to be indiscreet, they would have soon found, by the use made of them, which were true, and which false. But on main and vital questions, no political economist has hitherto ventured to state one guiding principle. I will instance three subjects of universal importance. National Dress. National Rent. National Debt. Now if we are to look in any quarter for a systematic and exhaustive statement of the principles of a given science, it must certainly be from its Professor at Cambridge. Take the last edition of Professor Fawcett's _Manual of Political Economy_, and forming, first clearly in your mind these three following questions, see if you can find an answer to them. I. Does expenditure of capital on the production of luxurious dress and furniture tend to make a nation rich or poor? II. Does the payment, by the nation, of a tax on its land, or on the produce of it, to a certain number of private persons, to be expended by them as they please, tend to make the nation rich or poor? III. Does the payment, by the nation, for an indefinite period, of interest on money borrowed from private persons, tend to make the nation rich or poor? These three questions are, all of them, perfectly simple, and primarily vital. Determine these, and you have at once a basis for national conduct in all important particulars. Leave them undetermined, and there is no limit to the distress which may be brought upon the people by the cunning of its knaves, and the folly of its multitudes. I will take the three in their order. I. Dress. The general impression on the public mind at this day is, that the luxury of the rich in dress and furniture is a benefit to the poor. Probably not even the blindest of our political economists would venture to assert this in so many words. But where do they assert the contrary? During the entire period of the reign of the late Emperor it was assumed in France, as the first principle of fiscal government, that a large portion of the funds received as rent from the provincial labourer should be expended in the manufacture of ladies' dresses in Paris. Where is the political economist in France, or England, who ventured to assert the conclusions of his science as adverse to this system? As early as the year 1857 I had done my best to show the nature of the error, and to give warning of its danger;[7] but not one of the men who had the foolish ears of the people intent on their words, dared to follow me in speaking what would have been an offence to the powers of trade; and the powers of trade in Paris had their full way for fourteen years more,--with this result, to-day,--as told us in precise and curt terms by the Minister of Public Instruction,--[8] "We have replaced glory by gold, work by speculation, faith and honour by scepticism. To absolve or glorify immorality; to make much of loose women; to gratify our eyes with luxury, our ears with the tales of orgies; to aid in the manoeuvres of public robbers, or to applaud them; to laugh at morality, and only believe in success; to love nothing but pleasure, adore nothing but force; to replace work with a fecundity of fancies; to speak without thinking; to prefer noise to glory; to erect sneering into a system, and lying into an institution--is this the spectacle that we have seen?--is this the society that we have been?" Of course, other causes, besides the desire of luxury in furniture and dress, have been at work to produce such consequences; but the most active cause of all has been the passion for these; passion unrebuked by the clergy, and, for the most part, provoked by economists, as advantageous to commerce; nor need we think that such results have been arrived at in France only; we are ourselves following rapidly on the same road. France, in her old wars with us, never was so fatally our enemy as she has been in the fellowship of fashion, and the freedom of trade: nor, to my mind, is any fact recorded of Assyrian or Roman luxury more ominous, or ghastly, than one which came to my knowledge a few weeks ago, in England; a respectable and well-to-do father and mother, in a quiet north country town, being turned into the streets in their old age, at the suit of their only daughter's milliner. II. Rent. The following account of the real nature of rent is given, quite accurately, by Professor Fawcett, at page 112 of the last edition of his _Political Economy_:-- "Every country has probably been subjugated, and grants of vanquished territory were the ordinary rewards which the conquering chief bestowed upon his more distinguished followers. Lands obtained by force had to be defended by force; and before law had asserted her supremacy, and property was made secure, no baron was able to retain his possessions, unless those who lived on his estates were prepared to defend them....[9] As property became secure, and landlords felt that the power of the State would protect them in all the rights of property, every vestige of these feudal tenures was abolished, and the relation between landlord and tenant has thus become purely commercial. A landlord offers his land to any one who is willing to take it; he is anxious to receive the highest rent he can obtain. What are the principles which regulate the rent which may thus be paid?" These principles the Professor goes on contentedly to investigate, never appearing to contemplate for an instant the possibility of the first principle in the whole business--the maintenance, by force, of the possession of land obtained by force, being ever called in question by any human mind. It is, nevertheless, the nearest task of our day to discover how far original theft may be justly encountered by reactionary theft, or whether reactionary theft be indeed theft at all; and farther, what, excluding either original or corrective theft, are the just conditions of the possession of land. III. Debt. Long since, when, a mere boy, I used to sit silently listening to the conversation of the London merchants who, all of them good and sound men of business, were wont occasionally to meet round my father's dining-table; nothing used to surprise me more than the conviction openly expressed by some of the soundest and most cautious of them, that "if there were no National debt they would not know what to do with their money, or where to place it safely." At the 399th page of his Manual, you will find Professor Fawcett giving exactly the same statement. "In our own country, this certainty against risk of loss is provided by the public funds;" and again, as on the question of rent, the Professor proceeds, without appearing for an instant to be troubled by any misgiving that there may be an essential difference between the effects on national prosperity of a Government paying interest on money which it spent in fire works fifty years ago, and of a Government paying interest on money to be employed to-day on productive labour. That difference, which the reader will find stated and examined at length, in §§ 127-129 of this volume, it is the business of economists, before approaching any other question relating to government, fully to explain. And the paragraphs to which I refer, contain, I believe, the only definite statement of it hitherto made. The practical result of the absence of any such statement is, that capitalists, when they do not know what to do with their money, persuade the peasants, in various countries, that the said peasants want guns to shoot each other with. The peasants accordingly borrow guns, out of the manufacture of which the capitalists get a per-centage, and men of science much amusement and credit. Then the peasants shoot a certain number of each other, until they get tired; and burn each other's homes down in various places. Then they put the guns back into towers, arsenals, &c., in ornamental patterns; (and the victorious party put also some ragged flags in churches). And then the capitalists tax both, annually, ever afterwards, to pay interest on the loan of the guns and gunpowder. And that is what capitalists call "knowing what to do with their money;" and what commercial men in general call "practical" as opposed to "sentimental" Political Economy. Eleven years ago, in the summer of 1860, perceiving then fully, (as Carlyle had done long before), what distress was about to come on the said populace of Europe through these errors of their teachers, I began to do the best I might, to combat them, in the series of papers for the _Cornhill Magazine_, since published under the title of _Unto this Last_. The editor of the Magazine was my friend, and ventured the insertion of the three first essays; but the outcry against them became then too strong for any editor to endure, and he wrote to me, with great discomfort to himself, and many apologies to me, that the Magazine must only admit one Economical Essay more. I made, with his permission, the last one longer than the rest, and gave it blunt conclusion as well as I could--and so the book now stands; but, as I had taken not a little pains with the Essays, and knew that they contained better work than most of my former writings, and more important truths than all of them put together, this violent reprobation of them by the _Cornhill_ public set me still more gravely thinking; and, after turning the matter hither and thither in my mind for two years more, I resolved to make it the central work of my life to write an exhaustive treatise on Political Economy. It would not have been begun, at that time, however, had not the editor of _Fraser's Magazine_ written to me, saying that he believed there was something in my theories, and would risk the admission of what I chose to write on this dangerous subject; whereupon, cautiously, and at intervals, during the winter of 1862-63, I sent him, and he ventured to print, the preface of the intended work, divided into four chapters. Then, though the Editor had not wholly lost courage, the Publisher indignantly interfered; and the readers of _Fraser_, as those of the _Cornhill_, were protected, for that time, from farther disturbance on my part. Subsequently, loss of health, family distress, and various untoward chances, prevented my proceeding with the body of the book;--seven years have passed ineffectually; and I am now fain to reprint the Preface by itself, under the title which I intended for the whole. Not discontentedly; being, at this time of life, resigned to the sense of failure; and also, because the preface is complete in itself as a body of definitions, which I now require for reference in the course of my _Letters to Workmen_; by which also, in time, I trust less formally to accomplish the chief purpose of _Munera Pulveris_, practically summed in the two paragraphs 27 and 28: namely, to examine the moral results and possible rectifications of the laws of distribution of wealth, which have prevailed hitherto without debate among men. Laws which ordinary economists assume to be inviolable, and which ordinary socialists imagine to be on the eve of total abrogation. But they are both alike deceived. The laws which at present regulate the possession of wealth are unjust, because the motives which provoke to its attainment are impure; but no socialism can effect their abrogation, unless it can abrogate also covetousness and pride, which it is by no means yet in the way of doing. Nor can the change be, in any case, to the extent that has been imagined. Extremes of luxury may be forbidden, and agony of penury relieved; but nature intends, and the utmost efforts of socialism will not hinder the fulfilment of her intention, that a provident person shall always be richer than a spendthrift; and an ingenious one more comfortable than a fool. But, indeed, the adjustment of the possession of the products of industry depends more on their nature than their quantity, and on wise determination therefore of the aims of industry. A nation which desires true wealth, desires it moderately, and can therefore distribute it with kindness, and possess it with pleasure; but one which desires false wealth, desires it immoderately, and can neither dispense it with justice, nor enjoy it in peace. Therefore, needing, constantly in my present work, to refer to the definitions of true and false wealth given in the following Essays, I republish them with careful revisal. They were written abroad; partly at Milan, partly during a winter residence on the south-eastern slope of the Mont Saléve, near Geneva; and sent to London in as legible MS. as I could write; but I never revised the press sheets, and have been obliged, accordingly, now to amend the text here and there, or correct it in unimportant particulars. Wherever any modification has involved change in the sense, it is enclosed in square brackets; and what few explanatory comments I have felt it necessary to add, have been indicated in the same manner. No explanatory comments, I regret to perceive, will suffice to remedy the mischief of my affected concentration of language, into the habit of which I fell by thinking too long over particular passages, in many and many a solitary walk towards the mountains of Bonneville or Annecy. But I never intended the book for anything else than a dictionary of reference, and that for earnest readers; who will, I have good hope, if they find what they want in it, forgive the affectedly curt expressions. The Essays, as originally published, were, as I have just stated, four in number. I have now, more conveniently, divided the whole into six chapters; and (as I purpose throughout this edition of my works) numbered the paragraphs. I inscribed the first volume of this series to the friend who aided me in chief sorrow. Let me inscribe the second to the friend and guide who has urged me to all chief labour, THOMAS CARLYLE. * * * * * I would that some better means were in my power of showing reverence to the man who alone, of all our masters of literature, has written, without thought of himself, what he knew it to be needful for the people of his time to hear, if the will to hear were in them: whom, therefore, as the time draws near when his task must be ended, Republican and Free-thoughted England assaults with impatient reproach; and out of the abyss of her cowardice in policy and dishonour in trade, sets the hacks of her literature to speak evil, grateful to her ears, of the Solitary Teacher who has asked her to be brave for the help of Man, and just, for the love of God. _Denmark Hill,_ _25th November, 1871._ FOOTNOTES: [7] _Political Economy of Art._ (Smith and Elder, 1857, pp. 65-76.) [8] See report of speech of M. Jules Simon, in _Pall Mall Gazette_ of October 27, 1871. [9] The omitted sentences merely amplify the statement; they in no wise modify it. MUNERA PULVERIS. "Te maris et terræ numeroque carentis arenæ Mensorem cohibent, Archyta, Pulveris exigui prope litus parva Matinum Munera." CHAPTER I. DEFINITIONS. 1. As domestic economy regulates the acts and habits of a household, Political economy regulates those of a society or State, with reference to the means of its maintenance. Political economy is neither an art nor a science; but a system of conduct and legislature, founded on the sciences, directing the arts, and impossible, except under certain conditions of moral culture. 2. The study which lately in England has been called Political Economy is in reality nothing more than the investigation of some accidental phenomena of modern commercial operations, nor has it been true in its investigation even of these. It has no connection whatever with political economy, as understood and treated of by the great thinkers of past ages; and as long as its unscholarly and undefined statements are allowed to pass under the same name, every word written on the subject by those thinkers--and chiefly the words of Plato, Xenophon, Cicero and Bacon--must be nearly useless to mankind. The reader must not, therefore, be surprised at the care and insistance with which I have retained the literal and earliest sense of all important terms used in these papers; for a word is usually well made at the time it is first wanted; its youngest meaning has in it the full strength of its youth: subsequent senses are commonly warped or weakened; and as all careful thinkers are sure to have used their words accurately, the first condition, in order to be able to avail our selves of their sayings at all, is firm definition of terms. 3. By the "maintenance" of a State is to be understood the support of its population in healthy and happy life; and the increase of their numbers, so far as that increase is consistent with their happiness. It is not the object of political economy to increase the numbers of a nation at the cost of common health or comfort; nor to increase indefinitely the comfort of individuals, by sacrifice of surrounding lives, or possibilities of life. 4. The assumption which lies at the root of nearly all erroneous reasoning on political economy,--namely, that its object is to accumulate money or exchangeable property,--may be shown in a few words to be without foundation. For no economist would admit national economy to be legitimate which proposed to itself only the building of a pyramid of gold. He would declare the gold to be wasted, were it to remain in the monumental form, and would say it ought to be employed. But to what end? Either it must be used only to gain more gold, and build a larger pyramid, or for some purpose other than the gaining of gold. And this other purpose, however at first apprehended, will be found to resolve itself finally into the service of man;--that is to say, the extension, defence, or comfort of his life. The golden pyramid may perhaps be providently built, perhaps improvidently; but the wisdom or folly of the accumulation can only be determined by our having first clearly stated the aim of all economy, namely, the extension of life. If the accumulation of money, or of exchangeable property, were a certain means of extending existence, it would be useless, in discussing economical questions, to fix our attention upon the more distant object--life--instead of the immediate one--money. But it is not so. Money may sometimes be accumulated at the cost of life, or by limitations of it; that is to say, either by hastening the deaths of men, or preventing their births. It is therefore necessary to keep clearly in view the ultimate object of economy; and to determine the expediency of minor operations with reference to that ulterior end. 5. It has been just stated that the object of political economy is the continuance not only of life, but of healthy and happy life. But all true happiness is both a consequence and cause of life: it is a sign of its vigor, and source of its continuance. All true suffering is in like manner a consequence and cause of death. I shall therefore, in future, use the word "Life" singly: but let it be understood to include in its signification the happiness and power of the entire human nature, body and soul. 6. That human nature, as its Creator made it, and maintains it wherever His laws are observed, is entirely harmonious. No physical error can be more profound, no moral error more dangerous, than that involved in the monkish doctrine of the opposition of body to soul. No soul can be perfect in an imperfect body: no body perfect without perfect soul. Every right action and true thought sets the seal of its beauty on person and face; every wrong action and foul thought its seal of distortion; and the various aspects of humanity might be read as plainly as a printed history, were it not that the impressions are so complex that it must always in some cases (and, in the present state of our knowledge, in all cases) be impossible to decipher them completely. Nevertheless, the face of a consistently just, and of a consistently unjust person, may always be rightly distinguished at a glance; and if the qualities are continued by descent through a generation or two, there arises a complete distinction of race. Both moral and physical qualities are communicated by descent, far more than they can be developed by education; (though both may be destroyed by want of education), and there is as yet no ascertained limit to the nobleness of person and mind which the human creature may attain, by persevering observance of the laws of God respecting its birth and training. 7. We must therefore yet farther define the aim of political economy to be "The multiplication of human life at the highest standard." It might at first seem questionable whether we should endeavour to maintain a small number of persons of the highest type of beauty and intelligence, or a larger number of an inferior class. But I shall be able to show in the sequel, that the way to maintain the largest number is first to aim at the highest standard. Determine the noblest type of man, and aim simply at maintaining the largest possible number of persons of that class, and it will be found that the largest possible number of every healthy subordinate class must necessarily be produced also. 8. The perfect type of manhood, as just stated, involves the perfections (whatever we may hereafter determine these to be) of his body, affections, and intelligence. The material things, therefore, which it is the object of political economy to produce and use, (or accumulate for use,) are things which serve either to sustain and comfort the body, or exercise rightly the affections and form the intelligence.[10] Whatever truly serves either of these purposes is "useful" to man, wholesome, healthful, helpful, or holy. By seeking such things, man prolongs and increases his life upon the earth. On the other hand, whatever does not serve either of these purposes,--much more whatever counteracts them,--is in like manner useless to man, unwholesome, unhelpful, or unholy; and by seeking such things man shortens and diminishes his life upon the earth. 9. And neither with respect to things useful or useless can man's estimate of them alter their nature. Certain substances being good for his food, and others noxious to him, what he thinks or wishes respecting them can neither change, nor prevent, their power. If he eats corn, he will live; if nightshade, he will die. If he produce or make good and beautiful things, they will _Re-Create_ him; (note the solemnity and weight of the word); if bad and ugly things, they will "corrupt" or "break in pieces"--that is, in the exact degree of their power, Kill him. For every hour of labour, however enthusiastic or well intended, which he spends for that which is not bread, so much possibility of life is lost to him. His fancies, likings, beliefs, however brilliant, eager, or obstinate, are of no avail if they are set on a false object. Of all that he has laboured for, the eternal law of heaven and earth measures out to him for reward, to the utmost atom, that part which he ought to have laboured for, and withdraws from him (or enforces on him, it may be) inexorably, that part which he ought not to have laboured for until, on his summer threshing-floor, stands his heap of corn; little or much, not according to his labour, but to his discretion. No "commercial arrangements," no painting of surfaces, nor alloying of substances, will avail him a pennyweight. Nature asks of him calmly and inevitably, What have you found, or formed--the right thing or the wrong? By the right thing you shall live; by the wrong you shall die. 10. To thoughtless persons it seems otherwise. The world looks to them as if they could cozen it out of some ways and means of life. But they cannot cozen IT: they can only cozen their neighbours. The world is not to be cheated of a grain; not so much as a breath of its air can be drawn surreptitiously. For every piece of wise work done, so much life is granted; for every piece of foolish work, nothing; for every piece of wicked work, so much death is allotted. This is as sure as the courses of day and night. But when the means of life are once produced, men, by their various struggles and industries of accumulation or exchange, may variously gather, waste, restrain, or distribute them; necessitating, in proportion to the waste or restraint, accurately, so much more death. The rate and range of additional death are measured by the rate and range of waste; and are inevitable;--the only question (determined mostly by fraud in peace, and force in war) is, Who is to die, and how? 11. Such being the everlasting law of human existence, the essential work of the political economist is to determine what are in reality useful or life-giving things, and by what degrees and kinds of labour they are attainable and distributable. This investigation divides itself under three great heads;--the studies, namely, of the phenomena, first, of WEALTH; secondly, of MONEY; and thirdly, of RICHES. These terms are often used as synonymous, but they signify entirely different things. "Wealth" consists of things in themselves valuable; "Money," of documentary claims to the possession of such things; and "Riches" is a relative term, expressing the magnitude of the possessions of one person or society as compared with those of other persons or societies. The study of Wealth is a province of natural science:--it deals with the essential properties of things. The study of Money is a province of commercial science:--it deals with conditions of engagement and exchange. The study of Riches is a province of moral science:--it deals with the due relations of men to each other in regard of material possessions; and with the just laws of their association for purposes of labour. I shall in this first chapter shortly sketch out the range of subjects which will come before us as we follow these three branches of inquiry. 12. And first of WEALTH, which, it has been said, consists of things essentially valuable. We now, therefore, need a definition of "value." "Value" signifies the strength, or "availing" of anything towards the sustaining of life, and is always twofold; that is to say, primarily, INTRINSIC, and secondarily, EFFECTUAL. The reader must, by anticipation, be warned against confusing value with cost, or with price. _Value is the life-giving power of anything; cost, the quantity of labour required to produce it; price, the quantity of labour which its possessor will take in exchange for it._[11] Cost and price are commercial conditions, to be studied under the head of money. 13. Intrinsic value is the absolute power of anything to support life. A sheaf of wheat of given quality and weight has in it a measurable power of sustaining the substance of the body; a cubic foot of pure air, a fixed power of sustaining its warmth; and a cluster of flowers of given beauty a fixed power of enlivening or animating the senses and heart. It does not in the least affect the intrinsic value of the wheat, the air, or the flowers, that men refuse or despise them. Used or not, their own power is in them, and that particular power is in nothing else. 14. But in order that this value of theirs may become effectual, a certain state is necessary in the recipient of it. The digesting, breathing, and perceiving functions must be perfect in the human creature before the food, air, or flowers can become of their full value to it. _The production of effectual value, therefore, always involves two needs: first, the production of a thing essentially useful; then the production of the capacity to use it._ Where the intrinsic value and acceptant capacity come together there is Effectual value, or wealth; where there is either no intrinsic value, or no acceptant capacity, there is no effectual value; that is to say, no wealth. A horse is no wealth to us if we cannot ride, nor a picture if we cannot see, _nor can any noble thing be wealth, except to a noble person_. As the aptness of the user increases, the effectual value of the thing used increases; and in its entirety can co-exist only with perfect skill of use, and fitness of nature. 15. Valuable material things may be conveniently referred to five heads: (i.) Land, with its associated air, water, and organisms. (ii.) Houses, furniture, and instruments. (iii.) Stored or prepared food, medicine, and articles of bodily luxury, including clothing. (iv.) Books. (v.) Works of art. The conditions of value in these things are briefly as follows:-- 16. (i.) Land. Its value is twofold; first, as producing food and mechanical power; secondly, as an object of sight and thought, producing intellectual power. Its value, as a means of producing food and mechanical power, varies with its form (as mountain or plain), with its substance (in soil or mineral contents), and with its climate. All these conditions of intrinsic value must be known and complied with by the men who have to deal with it, in order to give effectual value; but at any given time and place, the intrinsic value is fixed: such and such a piece of land, with its associated lakes and seas, rightly treated in surface and substance, can produce precisely so much food and power, and no more. The second element of value in land being its beauty, united with such conditions of space and form as are necessary for exercise, and for fullness of animal life, land of the highest value in these respects will be that lying in temperate climates, and boldly varied in form; removed from unhealthy or dangerous influences (as of miasm or volcano); and capable of sustaining a rich fauna and flora. Such land, carefully tended by the hand of man, so far as to remove from it unsightlinesses and evidences of decay, guarded from violence, and inhabited, under man's affectionate protection, by every kind of living creature that can occupy it in peace, is the most precious "property" that human beings can possess. 17. (ii.) Buildings, furniture, and instruments. The value of buildings consists, first, in permanent strength, with convenience of form, of size, and of position; so as to render employment peaceful, social intercourse easy, temperature and air healthy. The advisable or possible magnitude of cities and mode of their distribution in squares, streets, courts, &c.; the relative value of sites of land, and the modes of structure which are healthiest and most permanent, have to be studied under this head. The value of buildings consists secondly in historical association, and architectural beauty, of which we have to examine the influence on manners and life. The value of instruments consists, first, in their power of shortening labour, or otherwise accomplishing what human strength unaided could not. The kinds of work which are severally best accomplished by hand or by machine;--the effect of machinery in gathering and multiplying population, and its influence on the minds and bodies of such population; together with the conceivable uses of machinery on a colossal scale in accomplishing mighty and useful works, hitherto unthought of, such as the deepening of large river channels;--changing the surface of mountainous districts;--irrigating tracts of desert in the torrid zone;--breaking up, and thus rendering capable of quicker fusion, edges of ice in the northern and southern Arctic seas, &c., so rendering parts of the earth habitable which hitherto have been lifeless, are to be studied under this head. The value of instruments is, secondarily, in their aid to abstract sciences. The degree in which the multiplication of such instruments should be encouraged, so as to make them, if large, easy of access to numbers (as costly telescopes), or so cheap as that they might, in a serviceable form, become a common part of the furniture of households, is to be considered under this head.[12] 18. (iii.) Food, medicine, and articles of luxury. Under this head we shall have to examine the possible methods of obtaining pure food in such security and equality of supply as to avoid both waste and famine: then the economy of medicine and just range of sanitary law: finally the economy of luxury, partly an æsthetic and partly an ethical question. 19. (iv.) Books. The value of these consists, First, in their power of preserving and communicating the knowledge of facts. Secondly, in their power of exciting vital or noble emotion and intellectual action. They have also their corresponding negative powers of disguising and effacing the memory of facts, and killing the noble emotions, or exciting base ones. Under these two heads we have to consider the economical and educational value, positive and negative, of literature;--the means of producing and educating good authors, and the means and advisability of rendering good books generally accessible, and directing the reader's choice to them. 20. (v.) Works of art. The value of these is of the same nature as that of books; but the laws of their production and possible modes of distribution are very different, and require separate examination. 21. II.--MONEY. Under this head, we shall have to examine the laws of currency and exchange; of which I will note here the first principles. Money has been inaccurately spoken of as merely a means of exchange. But it is far more than this. It is a documentary expression of legal claim. It is not wealth, but a documentary claim to wealth, being the sign of the relative quantities of it, or of the labour producing it, to which, at a given time, persons, or societies, are entitled. If all the money in the world, notes and gold, were destroyed in an instant, it would leave the world neither richer nor poorer than it was. But it would leave the individual inhabitants of it in different relations. Money is, therefore, correspondent in its nature to the title-deed of an estate. Though the deed be burned, the estate still exists, but the right to it has become disputable. 22. The real worth of money remains unchanged, as long as the proportion of the quantity of existing money to the quantity of existing wealth or available labour remains unchanged. If the wealth increases, but not the money, the worth of the money increases; if the money increases, but not the wealth, the worth of the money diminishes. 23. Money, therefore, cannot be arbitrarily multiplied, any more than title-deeds can. So long as the existing wealth or available labour is not fully represented by the currency, the currency may be increased without diminution of the assigned worth of its pieces. But when the existing wealth, or available labour is once fully represented, every piece of money thrown into circulation diminishes the worth of every other existing piece, in the proportion it bears to the number of them, provided the new piece be received with equal credit; if not, the depreciation of worth takes place, according to the degree of its credit. 24. When, however, new money, composed of some substance of supposed intrinsic value (as of gold), is brought into the market, or when new notes are issued which are supposed to be deserving of credit, the desire to obtain the money will, under certain circumstances, stimulate industry: an additional quantity of wealth is immediately produced, and if this be in proportion to the new claims advanced, the value of the existing currency is undepreciated. If the stimulus given be so great as to produce more goods than are proportioned to the additional coinage, the worth of the existing currency will be raised. Arbitrary control and issues of currency affect the production of wealth, by acting on the hopes and fears of men, and are, under certain circumstances, wise. But the issue of additional currency to meet the exigencies of immediate expense, is merely one of the disguised forms of borrowing or taxing. It is, however, in the present low state of economical knowledge, often possible for governments to venture on an issue of currency, when they could not venture on an additional loan or tax, because the real operation of such issue is not understood by the people, and the pressure of it is irregularly distributed, and with an unperceived gradation. 25. The use of substances of intrinsic value as the materials of a currency, is a barbarism;--a remnant of the conditions of barter, which alone render commerce possible among savage nations. It is, however, still necessary, partly as a mechanical check on arbitrary issues; partly as a means of exchanges with foreign nations. In proportion to the extension of civilization, and increase of trustworthiness in Governments, it will cease. So long as it exists, the phenomena of the cost and price of the articles used for currency are mingled with those proper to currency itself, in an almost inextricable manner: and the market worth of bullion is affected by multitudinous accidental circumstances, which have been traced, with more or less success, by writers on commercial operations: but with these variations the true political economist has no more to do than an engineer, fortifying a harbour of refuge against Atlantic tide, has to concern himself with the cries or quarrels of children who dig pools with their fingers for its streams among the sand. 26. III.--RICHES. According to the various industry, capacity, good fortune, and desires of men, they obtain greater or smaller share of, and claim upon, the wealth of the world. The inequalities between these shares, always in some degree just and necessary, may be either restrained by law or circumstance within certain limits; or may increase indefinitely. Where no moral or legal restraint is put upon the exercise of the will and intellect of the stronger, shrewder, or more covetous men, these differences become ultimately enormous. But as soon as they become so distinct in their extremes as that, on one side, there shall be manifest redundance of possession, and on the other manifest pressure of need,--the terms "riches" and "poverty" are used to express the opposite states; being contrary only as the terms "warmth" and "cold" are contraries, of which neither implies an actual degree, but only a relation to other degrees, of temperature. 27. Respecting riches, the economist has to inquire, first, into the advisable modes of their collection; secondly, into the advisable modes of their administration. Respecting the collection of national riches, he has to inquire, first, whether he is justified in calling the nation rich, if the quantity of wealth it possesses relatively to the wealth of other nations, be large; irrespectively of the manner of its distribution. Or does the mode of distribution in any wise affect the nature of the riches? Thus, if the king alone be rich--suppose Croesus or Mausolus--are the Lydians or Carians therefore a rich nation? Or if a few slave-masters are rich, and the nation is otherwise composed of slaves, is it to be called a rich nation? For if not, and the ideas of a certain mode of distribution or operation in the riches, and of a certain degree of freedom in the people, enter into our idea of riches as attributed to a people, we shall have to define the degree of fluency, or circulative character which is essential to the nature of common wealth; and the degree of independence of action required in its possessors. Questions which look as if they would take time in answering.[13] 28. And farther. Since the inequality, which is the condition of riches, may be established in two opposite modes--namely, by increase of possession on the one side, and by decrease of it on the other--we have to inquire, with respect to any given state of riches, precisely in what manner the correlative poverty was produced: that is to say, whether by being surpassed only, or being depressed also; and if by being depressed, what are the advantages, or the contrary, conceivable in the depression. For instance, it being one of the commonest advantages of being rich to entertain a number of servants, we have to inquire, on the one side, what economical process produced the riches of the master; and on the other, what economical process produced the poverty of the persons who serve him; and what advantages each, on his own side, derives from the result. 29. These being the main questions touching the collection of riches, the next, or last, part of the inquiry is into their administration. Their possession involves three great economical powers which require separate examination: namely, the powers of selection, direction, and provision. The power of SELECTION relates to things of which the supply is limited (as the supply of best things is always). When it becomes matter of question to whom such things are to belong, the richest person has necessarily the first choice, unless some arbitrary mode of distribution be otherwise determined upon. The business of the economist is to show how this choice may be a wise one. The power of DIRECTION arises out of the necessary relation of rich men to poor, which ultimately, in one way or another, involves the direction of, or authority over, the labour of the poor; and this nearly as much over their mental as their bodily labour. The business of the economist is to show how this direction may be a Just one. The power of PROVISION is dependent upon the redundance of wealth, which may of course by active persons be made available in preparation for future work or future profit; in which function riches have generally received the name of capital; that is to say, of head-, or source-material. The business of the economist is to show how this provision may be a Distant one. 30. The examination of these three functions of riches will embrace every final problem of political economy;--and, above, or before all, this curious and vital problem,--whether, since the wholesome action of riches in these three functions will depend (it appears), on the Wisdom, Justice, and Farsightedness of the holders; and it is by no means to be assumed that persons primarily rich, must therefore be just and wise,--it may not be ultimately possible so, or somewhat so, to arrange matters, as that persons primarily just and wise, should therefore be rich? Such being the general plan of the inquiry before us, I shall not limit myself to any consecutive following of it, having hardly any good hope of being able to complete so laborious a work as it must prove to me; but from time to time, as I have leisure, shall endeavour to carry forward this part or that, as may be immediately possible; indicating always with accuracy the place which the particular essay will or should take in the completed system. FOOTNOTES: [10] _See_ Appendix I. [11] Observe these definitions,--they are of much importance,--and connect with them the sentences in italics on this and the next page. [12] [I cannot now recast these sentences, pedantic in their generalization, and intended more for index than statement, but I must guard the reader from thinking that I ever wish for cheapness by bad quality. A poor boy need not always learn mathematics; but, if you set him to do so, have the farther kindness to give him good compasses, not cheap ones, whose points bend like lead.] [13] [I regret the ironical manner in which this passage, one of great importance in the matter of it, was written. The gist of it is, that the first of all inquiries respecting the wealth of any nation is not, how much it has; but whether it is in a form that can be used, and in the possession of persons who can use it.] CHAPTER II. STORE-KEEPING. 31. The first chapter having consisted of little more than definition of terms, I purpose, in this, to expand and illustrate the given definitions. The view which has here been taken of the nature of wealth, namely, that it consists in an intrinsic value developed by a vital power, is directly opposed to two nearly universal conceptions of wealth. In the assertion that value is primarily intrinsic, it opposes the idea that anything which is an object of desire to numbers, and is limited in quantity, so as to have rated worth in exchange, may be called, or virtually become, wealth. And in the assertion that value is, secondarily, dependent upon power in the possessor, it opposes the idea that the worth of things depends on the demand for them, instead of on the use of them. Before going farther, we will make these two positions clearer. 32. I. First. All wealth is intrinsic, and is not constituted by the judgment of men. This is easily seen in the case of things affecting the body; we know, that no force of fantasy will make stones nourishing, or poison innocent; but it is less apparent in things affecting the mind. We are easily--perhaps willingly--misled by the appearance of beneficial results obtained by industries addressed wholly to the gratification of fanciful desire; and apt to suppose that whatever is widely coveted, dearly bought, and pleasurable in possession, must be included in our definition of wealth. It is the more difficult to quit ourselves of this error because many things which are true wealth in moderate use, become false wealth in immoderate; and many things are mixed of good and evil,--as mostly, books, and works of art,--out of which one person Will get the good, and another the evil; so that it seems as if there were no fixed good or evil in the things themselves, but only in the view taken, and use made of them. But that is not so. The evil and good are fixed; in essence, and in proportion. And in things in which evil depends upon excess, the point of excess, though indefinable, is fixed; and the power of the thing is on the hither side for good, and on the farther side for evil. And in all cases this power is inherent, not dependent on opinion or choice. Our thoughts of things neither make, nor mar their eternal force; nor--which is the most serious point for future consideration--can they prevent the effect of it (within certain limits) upon ourselves. 33. Therefore, the object of any special analysis of wealth will be not so much to enumerate what is serviceable, as to distinguish what is destructive; and to show that it is inevitably destructive; that to receive pleasure from an evil thing is not to escape from, or alter the evil of it, but to be _altered by_ it; that is, to suffer from it to the utmost, having our own nature, in that degree, made evil also. And it may be shown farther, that, through whatever length of time or subtleties of connexion the harm is accomplished, (being also less or more according to the fineness and worth of the humanity on which it is wrought), still, nothing _but_ harm ever comes of a bad thing. 34. So that, in sum, the term wealth is never to be attached to the _accidental object of a morbid_ desire, but only to the _constant object of a legitimate one_.[14] By the fury of ignorance, and fitfulness of caprice, large interests may be continually attached to things unserviceable or hurtful; if their nature could be altered by our passions, the science of Political Economy would remain, what it has been hitherto among us, the weighing of clouds, and the portioning out of shadows. But of ignorance there is no science; and of caprice no law. Their disturbing forces interfere with the operations of faithful Economy, but have nothing in common with them: she, the calm arbiter of national destiny, regards only essential power for good in all that she accumulates, and alike disdains the wanderings[15] of imagination, and the thirsts of disease. 35. II. Secondly. The assertion that wealth is not _only_ intrinsic, but dependent, in order to become effectual, on a given degree of vital power in its possessor, is opposed to another popular view of wealth;--namely, that though it may always be constituted by caprice, it is, when so constituted, a substantial thing, of which given quantities may be counted as existing here, or there, and exchangeable at rated prices. In this view there are three errors. The first and chief is the overlooking the fact that all exchangeableness of commodity, or effective demand for it, depends on the sum of capacity for its use existing, here or elsewhere. The book we cannot read, or picture we take no delight in, may indeed be called part of our wealth, in so far as we have power of exchanging either for something we like better. But our power of effecting such exchange, and yet more, of effecting it to advantage, depends absolutely on the number of accessible persons who can understand the book, or enjoy the painting, and who will dispute the possession of them. Thus the actual worth of either, even to us, depends no more on their essential goodness than on the capacity existing somewhere for the perception of it; and it is vain in any completed system of production to think of obtaining one without the other. So that, though the true political economist knows that co-existence of capacity for use with temporary possession cannot be always secured, the final fact, on which he bases all action and administration, is that, in the whole nation, or group of nations, he has to deal with, for every atom of intrinsic value produced he must with exactest chemistry produce its twin atom of acceptant digestion, or understanding capacity; or, in the degree of his failure, he has no wealth. Nature's challenge to us is, in earnest, as the Assyrians mock; "I will give thee two thousand horses, if thou be able on thy part to set riders upon them." Bavieca's paces are brave, if the Cid backs him; but woe to us, if we take the dust of capacity, wearing the armour of it, for capacity itself, for so all procession, however goodly in the show of it, is to the tomb. 36. The second error in this popular view of wealth is, that in giving the name of wealth to things which we cannot use, we in reality confuse wealth with money. The land we have no skill to cultivate, the book which is sealed to us, or dress which is superfluous, may indeed be exchangeable, but as such are nothing more than a cumbrous form of bank-note, of doubtful or slow convertibility. As long as we retain possession of them, we merely keep our bank-notes in the shape of gravel or clay, of book-leaves, or of embroidered tissue. Circumstances may, perhaps, render such forms the safest, or a certain complacency may attach to the exhibition of them; into both these advantages we shall inquire afterwards; I wish the reader only to observe here, that exchangeable property which we cannot use is, to us personally, merely one of the forms of money, not of wealth. 37. The third error in the popular view is the confusion of Guardianship with Possession; the real state of men of property being, too commonly, that of curators, not possessors, of wealth. A man's power over his property is at the widest range of it, fivefold; it is power of Use, for himself, Administration, to others, Ostentation, Destruction, or Bequest: and possession is in use only, which for each man is sternly limited; so that such things, and so much of them as he can use, are, indeed, well for him, or Wealth; and more of them, or any other things, are ill for him, or Illth.[16] Plunged to the lips in Orinoco, he shall drink to his thirst measure; more, at his peril: with a thousand oxen on his lands, he shall eat to his hunger measure; more, at his peril. He cannot live in two houses at once; a few bales of silk or wool will suffice for the fabric of all the clothes he can ever wear, and a few books will probably hold all the furniture good for his brain. Beyond these, in the best of us but narrow, capacities, we have but the power of administering, or _mal_-administering, wealth: (that is to say, distributing, lending, or increasing it);--of exhibiting it (as in magnificence of retinue or furniture),--of destroying, or, finally, of bequeathing it. And with multitudes of rich men, administration degenerates into curatorship; they merely hold their property in charge, as Trustees, for the benefit of some person or persons to whom it is to be delivered upon their death; and the position, explained in clear terms, would hardly seem a covetable one. What would be the probable feelings of a youth, on his entrance into life, to whom the career hoped for him was proposed in terms such as these: "You must work unremittingly, and with your utmost intelligence, during all your available years, you will thus accumulate wealth to a large amount; but you must touch none of it, beyond what is needful for your support. Whatever sums you gain, beyond those required for your decent and moderate maintenance, and whatever beautiful things you may obtain possession of, shall be properly taken care of by servants, for whose maintenance you will be charged, and whom you will have the trouble of superintending, and on your deathbed you shall have the power of determining to whom the accumulated property shall belong, or to what purposes be applied." 38. The labour of life, under such conditions, would probably be neither zealous nor cheerful; yet the only difference between this position and that of the ordinary capitalist is the power which the latter supposes himself to possess, and which is attributed to him by others, of spending his money at any moment. This pleasure, taken _in the imagination of power to part with that with which we have no intention of parting_, is one of the most curious, though commonest forms of the Eidolon, or Phantasm of Wealth. But the political economist has nothing to do with this idealism, and looks only to the practical issue of it--namely, that the holder of wealth, in such temper, may be regarded simply as a mechanical means of collection; or as a money-chest with a slit in it, not only receptant but suctional, set in the public thoroughfare;--chest of which only Death has the key, and evil Chance the distribution of the contents. In his function of Lender (which, however, is one of administration, not use, as far as he is himself concerned), the capitalist takes, indeed, a more interesting aspect; but even in that function, his relations with the state are apt to degenerate into a mechanism for the convenient contraction of debt;--a function the more mischievous, because a nation invariably appeases its conscience with respect to an unjustifiable expense, by meeting it with borrowed funds, expresses its repentance of a foolish piece of business, by letting its tradesmen wait for their money, and always leaves its descendants to pay for the work which will be of the least advantage to them.[17] 39. Quit of these three sources of misconception, the reader will have little farther difficulty in apprehending the real nature of Effectual value. He may, however, at first not without surprise, perceive the consequences involved in his acceptance of the definition. For if the actual existence of wealth be dependent on the power of its possessor, it follows that the sum of wealth held by the nation, instead of being constant, or calculable, varies hourly, nay, momentarily, with the number and character of its holders! and that in changing hands, it changes in quantity. And farther, since the worth of the currency is proportioned to the sum of material wealth which it represents, if the sum of the wealth changes, the worth of the currency changes. And thus both the sum of the property, and power of the currency, of the state, vary momentarily as the character and number of the holders. And not only so, but different rates and kinds of variation are caused by the character of the holders of different kinds of wealth. The transitions of value caused by the character of the holders of land differ in mode from those caused by character in holders of works of art; and these again from those caused by character in holders of machinery or other working capital. But we cannot examine these special phenomena of any kind of wealth until we have a clear idea of the way in which true currency expresses them; and of the resulting modes in which the cost and price of any article are related to its value. To obtain this we must approach the subject in its first elements. 40. Let us suppose a national store of wealth, composed of material things either useful, or believed to be so, taken charge of by the Government,[18] and that every workman, having produced any article involving labour in its production, and for which he has no immediate use, brings it to add to this store, receiving from the Government, in exchange, an order either for the return of the thing itself, or of its equivalent in other things, such as he may choose out of the store, at any time when he needs them. The question of equivalence itself (how much wine a man is to receive in return for so much corn, or how much coal in return for so much iron) is a quite separate one, which we will examine presently. For the time, let it be assumed that this equivalence has been determined, and that the Government order, in exchange for a fixed weight of any article (called, suppose _a_), is either for the return of that weight of the article itself, or of another fixed weight of the article _b_, or another of the article _c_, and so on. Now, supposing that the labourer speedily and continually presents these general orders, or, in common language, "spends the money," he has neither changed the circumstances of the nation, nor his own, except in so far as he may have produced useful and consumed useless articles, or _vice versâ_. But if he does not use, or uses in part only, the orders he receives, and lays aside some portion of them; and thus every day bringing his contribution to the national store, lays by some per-centage of the orders received in exchange for it, he increases the national wealth daily by as much as he does not use of the received order, and to the same amount accumulates a monetary claim on the Government. It is, of course, always in his power, as it is his legal right, to bring forward this accumulation of claim, and at once to consume, destroy, or distribute, the sum of his wealth. Supposing he never does so, but dies, leaving his claim to others, he has enriched the State during his life by the quantity of wealth over which that claim extends, or has, in other words, rendered so much additional life possible in the State, of which additional life he bequeaths the immediate possibility to those whom he invests with his claim. Supposing him to cancel the claim, he would distribute this possibility of life among the nation at large. 41. We hitherto consider the Government itself as simply a conservative power, taking charge of the wealth entrusted to it. But a Government may be more or less than a conservative power. It may be either an improving, or destructive one. If it be an improving power, using all the wealth entrusted to it to the best advantage, the nation is enriched in root and branch at once, and the Government is enabled, for every order presented, to return a quantity of wealth greater than the order was written for, according to the fructification obtained in the interim. This ability may be either concealed, in which case the currency does not completely represent the wealth of the country, or it may be manifested by the continual payment of the excess of value on each order, in which case there is (irrespectively, observe, of collateral results afterwards to be examined) a perpetual rise in the worth of the currency, that is to say, a fall in the price of all articles represented by it. 42. But if the Government be destructive, or a consuming power, it becomes unable to return the value received on the presentation of the order. This inability may either be concealed by meeting demands to the full, until it issue in bankruptcy, or in some form of national debt;--or it may be concealed during oscillatory movements between destructiveness and productiveness, which result on the whole in stability;--or it may be manifested by the consistent return of less than value received on each presented order, in which case there is a consistent fall in the worth of the currency, or rise in the price of the things represented by it. 43. Now, if for this conception of a central Government, we substitute that of a body of persons occupied in industrial pursuits, of whom each adds in his private capacity to the common store, we at once obtain an approximation to the actual condition of a civilized mercantile community, from which approximation we might easily proceed into still completer analysis. I purpose, however, to arrive at every result by the gradual expansion of the simpler conception; but I wish the reader to observe, in the meantime, that both the social conditions thus supposed (and I will by anticipation say also, all possible social conditions), agree in two great points; namely, in the primal importance of the supposed national store or stock, and in its destructibility or improveability by the holders of it. 44. I. Observe that in both conditions, that of central Government-holding, and diffused private-holding, the quantity of stock is of the same national moment. In the one case, indeed, its amount may be known by examination of the persons to whom it is confided; in the other it cannot be known but by exposing the private affairs of every individual. But, known or unknown, its significance is the same under each condition. The riches of the nation consist in the abundance, and their wealth depends on the nature, of this store. 45. II. In the second place, both conditions, (and all other possible ones) agree in the destructibility or improveability of the store by its holders. Whether in private hands, or under Government charge, the national store may be daily consumed, or daily enlarged, by its possessors; and while the currency remains apparently unaltered, the property it represents may diminish or increase. 46. The first question, then, which we have to put under our simple conception of central Government, namely, "What store has it?" is one of equal importance, whatever may be the constitution of the State; while the second question--namely, "Who are the holders of the store?" involves the discussion of the constitution of the State itself. The first inquiry resolves itself into three heads: 1. What is the nature of the store? 2. What is its quantity in relation to the population? 3. What is its quantity in relation to the currency? The second inquiry into two: 1. Who are the Holders of the store, and in what proportions? 2. Who are the Claimants of the store, (that is to say, the holders of the currency,) and in what proportions? We will examine the range of the first three questions in the present paper; of the two following, in the sequel. 47. I. QUESTION FIRST. What is the nature of the store? Has the nation hitherto worked for and gathered the right thing or the wrong? On that issue rest the possibilities of its life. For example, let us imagine a society, of no great extent, occupied in procuring and laying up store of corn, wine, wool, silk, and other such preservable materials of food and clothing; and that it has a currency representing them. Imagine farther, that on days of festivity, the society, discovering itself to derive satisfaction from pyrotechnics, gradually turns its attention more and more to the manufacture of gunpowder; so that an increasing number of labourers, giving what time they can spare to this branch of industry, bring increasing quantities of combustibles into the store, and use the general orders received in exchange to obtain such wine, wool, or corn, as they may have need of. The currency remains the same, and represents precisely the same amount of material in the store, and of labour spent in producing it. But the corn and wine gradually vanish, and in their place, as gradually, appear sulphur and saltpetre, till at last the labourers who have consumed corn and supplied nitre, presenting on a festal morning some of their currency to obtain materials for the feast, discover that no amount of currency will command anything Festive, except Fire. The supply of rockets is unlimited, but that of food, limited, in a quite final manner; and the whole currency in the hands of the society represents an infinite power of detonation, but none of existence. 48. This statement, caricatured as it may seem, is only exaggerated in assuming the persistence of the folly to extremity, unchecked, as in reality it would be, by the gradual rise in price of food. But it falls short of the actual facts of human life in expression of the depth and intensity of the folly itself. For a great part (the reader would not believe how great until he saw the statistics in detail) of the most earnest and ingenious industry of the world is spent in producing munitions of war; gathering, that is to say the materials, not of festive, but of consuming fire; filling its stores with all power of the instruments of pain, and all affluence of the ministries of death. It was no true _Trionfo della Morte_[19] which men have seen and feared (sometimes scarcely feared) so long; wherein he brought them rest from their labours. We see, and share, another and higher form of his triumph now. Task-master, instead of Releaser, he rules the dust of the arena no less than of the tomb; and, content once in the grave whither man went, to make his works to cease and his devices to vanish,--now, in the busy city and on the serviceable sea, makes his work to increase, and his devices to multiply. 49. To this doubled loss, or negative power of labour, spent in producing means of destruction, we have to add, in our estimate of the consequences of human folly, whatever more insidious waste of toil there is in production of unnecessary luxury. Such and such an occupation (it is said) supports so many labourers, because so many obtain wages in following it; but it is never considered that unless there be a supporting power in the product of the occupation, the wages given to one man are merely withdrawn from another. We cannot say of any trade that it maintains such and such a number of persons, unless we know how and where the money, now spent in the purchase of its produce, would have been spent, if that produce had not been manufactured. The purchasing funds truly support a number of people in making This; but (probably) leave unsupported an equal number who are making, or could have made That. The manufacturers of small watches thrive at Geneva;--it is well;--but where would the money spent on small watches have gone, had there been no small watches to buy? 50. If the so frequently uttered aphorism of mercantile economy--"labour is limited by capital," were true, this question would be a definite one. But it is untrue; and that widely. Out of a given quantity of funds for wages, more or less labour is to be had, according to the quantity of will with which we can inspire the workman; and the true limit of labour is only in the limit of this moral stimulus of the will, and of the bodily power. In an ultimate, but entirely unpractical sense, labour is limited by capital, as it is by matter--that is to say, where there is no material, there can be no work,--but in the practical sense, labour is limited only by the great original capital of head, heart, and hand. Even in the most artificial relations of commerce, labour is to capital as fire to fuel: out of so much fuel, you _can_ have only so much fire; but out of so much fuel, you _shall_ have so much fire,--not in proportion to the mass of combustible, but to the force of wind that fans and water that quenches; and the appliance of both. And labour is furthered, as conflagration is, not so much by added fuel, as by admitted air.[20] 51. For which reasons, I had to insert, in § 49, the qualifying "probably;" for it can never be said positively that the purchase-money, or wages fund of any trade is withdrawn from some other trade. The object itself may be the stimulus of the production of the money which buys it; that is to say, the work by which the purchaser obtained the means of buying it, would not have been done by him unless he had wanted that particular thing. And the production of any article not intrinsically (nor in the process of manufacture) injurious, is useful, if the desire of it causes productive labour in other directions. 52. In the national store, therefore, the presence of things intrinsically valueless does not imply an entirely correlative absence of things valuable. We cannot be certain that all the labour spent on vanity has been diverted from reality, and that for every bad thing produced, a precious thing has been lost. In great measure, the vain things represent the results of roused indolence; they have been carved, as toys, in extra time; and, if they had not been made, nothing else would have been made. Even to munitions of war this principle applies; they partly represent the work of men who, if they had not made spears, would never have made pruning hooks, and who are incapable of any activities but those of contest. 53. Thus then, finally, the nature of the store has to be considered under two main lights; the one, that of its immediate and actual utility; the other, that of the past national character which it signifies by its production, and future character which it must develop by its use. And the issue of this investigation will be to show us that. Economy does not depend merely on principles of "demand and supply," but primarily on what is demanded, and what is supplied; which I will beg of you to observe, and take to heart. * * * * * 54. II. QUESTION SECOND.--What is the quantity of the store, in relation to the population? It follows from what has been already stated that the accurate form in which this question has to be put is--"What quantity of each article composing the store exists in proportion to the real need for it by the population?" But we shall for the time assume, in order to keep all our terms at the simplest, that the store is wholly composed of useful articles, and accurately proportioned to the several needs for them. Now it cannot be assumed, because the store is large in proportion to the number of the people, that the people must be in comfort; nor because it is small, that they must be in distress. An active and economical race always produces more than it requires, and lives (if it is permitted to do so) in competence on the produce of its daily labour. The quantity of its store, great or small, is therefore in many respects indifferent to it, and cannot be inferred from its aspect. Similarly an inactive and wasteful population, which cannot live by its daily labour, but is dependent, partly or wholly, on consumption of its store, may be (by various difficulties, hereafter to be examined, in realizing or getting at such store) retained in a state of abject distress, though its possessions may be immense. But the results always involved in the magnitude of store are, the commercial power of the nation, its security, and its mental character. Its commercial power, in that according to the quantity of its store, may be the extent of its dealings; its security, in that according to the quantity of its store are its means of sudden exertion or sustained endurance; and its character, in that certain conditions of civilization cannot be attained without permanent and continually accumulating store, of great intrinsic value, and of peculiar nature.[21] 55. Now, seeing that these three advantages arise from largeness of store in proportion to population, the question arises immediately, "Given the store--is the nation enriched by diminution of its numbers? Are a successful national speculation, and a pestilence, economically the same thing?" This is in part a sophistical question; such as it would be to ask whether a man was richer when struck by disease which must limit his life within a predicable period, than he was when in health. He is enabled to enlarge his current expenses, and has for all purposes a larger sum at his immediate disposal (for, given the fortune, the shorter the life, the larger the annuity); yet no man considers himself richer because he is condemned by his physician. 56. The logical reply is that, since Wealth is by definition only the means of life, a nation cannot be enriched by its own mortality. Or in shorter words, the life is more than the meat; and existence itself, more wealth than the means of existence. Whence, of two nations who have equal store, the more numerous is to be considered the richer, provided the type of the inhabitant be as high (for, though the relative bulk of their store be less, its relative efficiency, or the amount of effectual wealth, must be greater). But if the type of the population be deteriorated by increase of its numbers, we have evidence of poverty in its worst influence; and then, to determine whether the nation in its total may still be justifiably esteemed rich, we must set or weigh, the number of the poor against that of the rich. To effect which piece of scale-work, it is of course necessary to determine, first, who are poor and who are rich; nor this only, but also how poor and how rich they are. Which will prove a curious thermometrical investigation; for we shall have to do for gold and for silver, what we have done for quicksilver;--determine, namely, their freezing-point, their zero, their temperate and fever-heat points; finally, their vaporescent point, at which riches, sometimes explosively, as lately in America, "make to themselves wings:"--and correspondently, the number of degrees _below_ zero at which poverty, ceasing to brace with any wholesome cold, burns to the bone.[22] 57. For the performance of these operations, in the strictest sense scientific, we will first look to the existing so-called "science" of Political Economy; we will ask it to define for us the comparatively and superlatively rich, and the comparatively and superlatively poor; and on its own terms--if any terms it can pronounce--examine, in our prosperous England, how many rich and how many poor people there are; and whether the quantity and intensity of the poverty is indeed so overbalanced by the quantity and intensity of wealth, that we may permit ourselves a luxurious blindness to it, and call ourselves, complacently, a rich country. And if we find no clear definition in the existing science, we will endeavour for ourselves to fix the true degrees of the scale, and to apply them.[23] * * * * * 58. QUESTION THIRD. What is the quantity of the store in relation to the Currency? We have seen that the real worth of the currency, so far as dependent on its relation to the magnitude of the store, may vary, within certain limits, without affecting its worth in exchange. The diminution or increase of the represented wealth may be unperceived, and the currency may be taken either for more or less than it is truly worth. Usually it is taken for much more; and its power in exchange, or credit-power, is thus increased up to a given strain upon its relation to existing wealth. This credit-power is of chief importance in the thoughts, because most sharply present to the experience, of a mercantile community: but the conditions of its stability[24] and all other relations of the currency to the material store are entirely simple in principle, if not in action. Far other than simple are the relations of the currency to the available labour which it also represents. For this relation is involved not only with that of the magnitude of the store to the number, but with that of the magnitude of the store to the mind, of the population. Its proportion to their number, and the resulting worth of currency, are calculable; but its proportion to their will for labour is not. The worth of the piece of money which claims a given quantity of the store is, in exchange, less or greater according to the facility of obtaining the same quantity of the same thing without having recourse to the store. In other words it depends on the immediate Cost and Price of the thing. We must now, therefore, complete the definition of these terms. 59. All cost and price are counted in Labour. We must know first, therefore, what is to be counted _as_ Labour. I have already defined labour to be the Contest of the life of man with an opposite. Literally, it is the quantity of "Lapse," loss, or failure of human life, caused by any effort. It is usually confused with effort itself, or the application of power (opera); but there is much effort which is merely a mode of recreation, or of pleasure. The most beautiful actions of the human body, and the highest results of the human intelligence, are conditions, or achievements, of quite unlaborious,--nay, of recreative,--effort. But labour is the _suffering_ in effort. It is the negative quantity, or quantity of de-feat, which has to be counted against every Feat, and of de-fect which has to be counted against every Fact, or Deed of men. In brief, it is "that quantity of our toil which we die in." We might, therefore, _à priori_, conjecture (as we shall ultimately find), that it cannot be bought, nor sold. Everything else is bought and sold for Labour, but labour itself cannot be bought nor sold for anything, being priceless.[25] The idea that it is a commodity to be bought or sold, is the alpha and omega of Politico-Economic fallacy. 60. This being the nature of labour, the "Cost" of anything is the quantity of labour necessary to obtain it;--the quantity for which, or at which, it "stands" (constant). It is literally the "Constancy" of the thing;--you shall win it--move it--come at it, for no less than this. Cost is measured and measurable (using the accurate Latin terms) only in "labour," not in "opera."[26] It does not matter how much _work_ a thing needs to produce it; it matters only how much _distress_. Generally the more the power it requires, the less the distress; so that the noblest works of man cost less than the meanest. True labour, or spending of life, is either of the body, in fatigue or pain; of the temper or heart (as in perseverance of search for things,--patience in waiting for them,--fortitude or degradation in suffering for them, and the like), or of the intellect. All these kinds of labour are supposed to be included in the general term, and the quantity of labour is then expressed by the time it lasts. So that a unit of labour is "an hour's work" or a day's work, as we may determine.[27] 61. Cost, like value, is both intrinsic and effectual. Intrinsic cost is that of getting the thing in the right way; effectual cost is that of getting the thing in the way we set about it. But intrinsic cost cannot be made a subject of analytical investigation, being only partially discoverable, and that by long experience. Effectual cost is all that the political Economist can deal with; that is to say, the cost of the thing under existing circumstances, and by known processes. Cost, being dependent much on application of method, varies with the quantity of the thing wanted, and with the number of persons who work for it. It is easy to get a little of some things, but difficult to get much; it is impossible to get some things with few hands, but easy to get them with many. 62. The cost and value of things, however difficult to determine accurately, are thus both dependent on ascertainable physical circumstances.[28] But their _price_ is dependent on the human will. Such and such a thing is demonstrably good for so much. And it may demonstrably be had for so much. But it remains questionable, and in all manner of ways questionable, whether I choose to give so much.[29] This choice is always a relative one. It is a choice to give a price for this, rather than for that;--a resolution to have the thing, if getting it does not involve the loss of a better thing. Price depends, therefore, not only on the cost of the commodity itself, but on its relation to the cost of every other attainable thing. Farther. The _power_ of choice is also a relative one. It depends not merely on our own estimate of the thing, but on everybody else's estimate; therefore on the number and force of the will of the concurrent buyers, and on the existing quantity of the thing in proportion to that number and force. Hence the price of anything depends on four variables. (1.) Its cost. (2.) Its attainable quantity at that cost. (3.) The number and power of the persons who want it. (4.) The estimate they have formed of its desirableness. Its value only affects its price so far as it is contemplated in this estimate; perhaps, therefore, not at all. 63. Now, in order to show the manner in which price is expressed in terms of a currency, we must assume these four quantities to be known, and the "estimate of desirableness," commonly called the Demand, to be certain. We will take the number of persons at the lowest. Let A and B be two labourers who "demand," that is to say, have resolved to labour for, two articles, _a_ and _b_. Their demand for these articles (if the reader likes better, he may say their need) is to be conceived as absolute, their existence depending on the getting these two things. Suppose, for instance, that they are bread and fuel, in a cold country, and let a represent the least quantity of bread, and _b_ the least quantity of fuel, which will support a man's life for a day. Let _a_ be producible by an hour's labour, but _b_ only by two hours' labour. Then the _cost of a_ is one hour, and of _b_ two (cost, by our definition, being expressible in terms of time). If, therefore, each man worked both for his corn and fuel, each would have to work three hours a day. But they divide the labour for its greater ease.[30] Then if A works three hours, he produces 3 _a_, which is one a more than both the men want. And if B works three hours, he produces only 1-1/2 _b_, or half of _b_ less than both want. But if A work three hours and B six, A has 3 _a_, and B has 3 _b_, a maintenance in the right proportion for both for a day and half; so that each might take half a day's rest. But as B has worked double time, the whole of this day's rest belongs in equity to him. Therefore the just exchange should be, A giving two _a_ for one _b_, has one _a_ and one _b_;--maintenance for a day. B giving one _b_ for two _a_, has two _a_ and two _b_; maintenance for two days. But B cannot rest on the second day, or A would be left without the article which B produces. Nor is there any means of making the exchange just, unless a third labourer is called in. Then one workman, A, produces _a_, and two, B and C, produce _b_:--A, working three hours, has three _a_;--B, three hours, 1-1/2 _b_;--C, three hours, 1-1/2 _b_. B and C each give half of _b_ for _a_, and all have their equal daily maintenance for equal daily work. To carry the example a single step farther, let three articles, _a_, _b_, and _c_ be needed. Let _a_ need one hour's work, _b_ two, and _c_ four; then the day's work must be seven hours, and one man in a day's work can make 7 _a_, or 3-1/2 _b_, or 1-3/4 _c_. Therefore one A works for _a_, producing 7 _a_; two B's work for _b_, producing 7 _b_; four C's work for _c_, producing 7 _c_. A has six _a_ to spare, and gives two _a_ for one _b_, and four _a_ for one _c_. Each B has 2-1/2 _b_ to spare, and gives 1/2 _b_ for one _a_, and two _b_ for one _c_. Each C has 3/4 of _c_ to spare, and gives 1/2 _c_ for one _b_, and 1/4 of _c_ for one _a_. And all have their day's maintenance. Generally, therefore, it follows that if the demand is constant,[31] the relative prices of things are as their costs, or as the quantities of labour involved in production. 64. Then, in order to express their prices in terms of a currency, we have only to put the currency into the form of orders for a certain quantity of any given article (with us it is in the form of orders for gold), and all quantities of other articles are priced by the relation they bear to the article which the currency claims. But the worth of the currency itself is not in the slightest degree founded more on the worth of the article which it either claims or consists in (as gold) than on the worth of every other article for which the gold is exchangeable. It is just as accurate to say, "so many pounds are worth an acre of land," as "an acre of land is worth so many pounds." The worth of gold, of land, of houses, and of food, and of all other things, depends at any moment on the existing quantities and relative demands for all and each; and a change in the worth of, or demand for, any one, involves an instantaneously correspondent change in the worth of, and demand for, all the rest;--a change as inevitable and as accurately balanced (though often in its process as untraceable) as the change in volume of the outflowing river from some vast lake, caused by change in the volume of the inflowing streams, though no eye can trace, nor instrument detect, motion, either on its surface, or in the depth. 65. Thus, then, the real working power or worth of the currency is founded on the entire sum of the relative estimates formed by the population of its possessions; a change in this estimate in any direction (and therefore every change in the national character), instantly alters the value of money, in its second great function of commanding labour. But we must always carefully and sternly distinguish between this worth of currency, dependent on the conceived or appreciated value of what it represents, and the worth of it, dependent on the _existence_ of what it represents. A currency is _true, or false_, in proportion to the security with which it gives claim to the possession of land, house, horse, or picture; but a currency is _strong or weak_,[32] worth much, or worth little, in proportion to the degree of estimate in which the nation holds the house, horse, or picture which is claimed. Thus the power of the English currency has been, till of late, largely based on the national estimate of horses and of wine: so that a man might always give any price to furnish choicely his stable, or his cellar; and receive public approval therefor: but if he gave the same sum to furnish his library, he was called mad or a biblio-maniac. And although he might lose his fortune by his horses, and his health or life by his cellar, and rarely lost either by his books, he was yet never called a Hippo-maniac nor an Oino-maniac; but only Biblio-maniac, because the current worth of money was understood to be legitimately founded on cattle and wine, but not on literature. The prices lately given at sales for pictures and MSS. indicate some tendency to change in the national character in this respect, so that the worth of the currency may even come in time to rest, in an acknowledged manner, somewhat on the state and keeping of the Bedford missal, as well as on the health of Caractacus or Blink Bonny; and old pictures be considered property, no less than old port. They might have been so before now, but that it is more difficult to choose the one than the other. 66. Now, observe, all these sources of variation in the power of the currency exist, wholly irrespective of the influences of vice, indolence, and improvidence. We have hitherto supposed, throughout the analysis, every professing labourer to labour honestly, heartily, and in harmony with his fellows. We have now to bring farther into the calculation the effects of relative industry, honour, and forethought; and thus to follow out the bearings of our second inquiry: Who are the holders of the Store and Currency, and in what proportions? This, however, we must reserve for our next paper--noticing here only that, however distinct the several branches of the subject are, radically, they are so interwoven in their issues that we cannot rightly treat any one, till we have taken cognizance of all. Thus the need of the currency in proportion to number of population is materially influenced by the probable number of the holders in proportion to the non-holders; and this again, by the number of holders of goods, or wealth, in proportion to the non-holders of goods. For as, by definition, the currency is a claim to goods which are not possessed, its quantity indicates the number of claimants in proportion to the number of holders; and the force and complexity of claim. For if the claims be not complex, currency as a means of exchange may be very small in quantity. A sells some corn to B, receiving a promise from B to pay in cattle, which A then hands over to C, to get some wine. C in due time claims the cattle from B; and B takes back his promise. These exchanges have, or might have been, all effected with a single coin or promise; and the proportion of the currency to the store would in such circumstances indicate only the circulating vitality of it--that is to say, the quantity and convenient divisibility of that part of the store which the _habits_ of the nation keep in circulation. If a cattle breeder is content to live with his household chiefly on meat and milk, and does not want rich furniture, or jewels, or books--if a wine and corn grower maintains himself and his men chiefly on grapes and bread;--if the wives and daughters of families weave and spin the clothing of the household, and the nation, as a whole, remains content with the produce of its own soil and the work of its own hands, it has little occasion for circulating media. It pledges and promises little and seldom; exchanges only so far as exchange is necessary for life. The store belongs to the people in whose hands it is found, and money is little needed either as an expression of right, or practical means of division and exchange. 67. But in proportion as the habits of the nation become complex and fantastic (and they may be both, without therefore being civilized), its circulating medium must increase in proportion to its store. If every one wants a little of everything,--if food must be of many kinds, and dress of many fashions,--if multitudes live by work which, ministering to fancy, has its pay measured by fancy, so that large prices will be given by one person for what is valueless to another,--if there are great inequalities of knowledge, causing great inequalities of estimate,--and, finally, and worst of all, if the currency itself, from its largeness, and the power which the possession of it implies, becomes the sole object of desire with large numbers of the nation, so that the holding of it is disputed among them as the main object of life:--in each and all of these cases, the currency necessarily enlarges in proportion to the store; and as a means of exchange and division, as a bond of right, and as an object of passion, has a more and more important and malignant power over the nation's dealings, character, and life. Against which power, when, as a bond of Right, it becomes too conspicuous and too burdensome, the popular voice is apt to be raised in a violent and irrational manner, leading to revolution instead of remedy. Whereas all possibility of Economy depends on the clear assertion and maintenance of this bond of right, however burdensome. The first necessity of all economical government is to secure the unquestioned and unquestionable working of the great law of Property--that a man who works for a thing shall be allowed to get it, keep it, and consume it, in peace; and that he who does not eat his cake to-day, shall be seen, without grudging, to have his cake to-morrow. This, I say, is the first point to be secured by social law; without this, no political advance, nay, no political existence, is in any sort possible. Whatever evil, luxury, iniquity, may seem to result from it, this is nevertheless the first of all Equities; and to the enforcement of this, by law and by police-truncheon, the nation must always primarily set its mind--that the cupboard door may have a firm lock to it, and no man's dinner be carried off by the mob, on its way home from the baker's. Which, thus fearlessly asserting, we shall endeavour in next paper to consider how far it may be practicable for the mob itself, also, in due breadth of dish, to have dinners to carry home. FOOTNOTES: [14] Remember carefully this statement, that Wealth consists only in the things which the nature of humanity has rendered in all ages, and must render in all ages to come, (that is what I meant by "constant") the objects of legitimate desire. And see Appendix II. [15] The _Wanderings_, observe, not the Right goings, of Imagination. She is very far from despising these. [16] _See_ Appendix III. [17] I would beg the reader's very close attention to these 37th and 38th paragraphs. It would be well if a dogged conviction could be enforced on nations, as on individuals, that, with few exceptions, what they cannot at present pay for, they should not at present have. [18] _See_ Appendix IV. [19] I little thought, what _Trionfo della Morte_ would be, for this very cause, and in literal fulfilment of the closing words of the 47th paragraph, over the fields and houses of Europe, and over its fairest city--within seven years from the day I wrote it. [20] The meaning of which is, that you may spend a great deal of money, and get very little work for it, and that little bad; but having good "air" or "spirit," to put life into it, with very little money, you may get a great deal of work, and all good; which, observe, is an arithmetical, not at all a poetical or visionary circumstance. [21] More especially, works of great art. [22] The meaning of that, in plain English, is, that we must find out how far poverty and riches are good or bad for people, and what is the difference between being miserably poor--so as, perhaps, to be driven to crime, or to pass life in suffering--and being blessedly poor, in the sense meant in the Sermon on the Mount. For I suppose the people who believe that sermon, do not think (if they ever honestly ask themselves what they do think), either that Luke vi. 24. is a merely poetical exclamation, or that the Beatitude of Poverty has yet been attained in St. Martin's Lane and other back streets of London. [23] Large plans!--Eight years are gone, and nothing done yet. But I keep my purpose of making one day this balance, or want of balance, visible, in those so seldom used scales of Justice. [24] These are nearly all briefly represented by the image used for the force of money by Dante, of mast and sail:-- Quali dal vento le gonfiate vele Caggiono avvolte, poi che l'alber fiacca Tal cadde a terra la fiera crudele. The image may be followed out, like all of Dante's, into as close detail as the reader chooses. Thus the stress of the sail must be proportioned to the strength of the mast, and it is only in unforeseen danger that a skilful seaman ever carries all the canvas his spars will bear, states of mercantile languor are like the flap of the sail in a calm; of mercantile precaution, like taking in reefs; and mercantile ruin is instant on the breaking of the mast. [I mean by credit-power, the general impression on the national mind that a sovereign, or any other coin, is worth so much bread and cheese--so much wine--so much horse and carriage--or so much fine art: it may be really worth, when tried, less or more than is thought: the thought of it is the credit-power.] [25] The object of Political Economy is not to buy, nor to sell labour, but to spare it. Every attempt to buy or sell it is, in the outcome, ineffectual; so far as successful, it is not sale, but Betrayal; and the purchase-money is a part of that thirty pieces which bought, first the greatest of labours, and afterwards the burial-field of the Stranger; for this purchase-money, being in its very smallness or vileness the exactly measured opposite of the "vilis annona amicorum," makes all men strangers to each other. [26] Cicero's distinction, "sordidi quæstus, quorum operæ, non quorum artes emuntur," admirable in principle, is inaccurate in expression, because Cicero did not practically know how much operative dexterity is necessary in all the higher arts; but the cost of this dexterity is incalculable. Be it great or small, the "cost" of the mere perfectness of touch in a hammer-stroke of Donatello's, or a pencil-touch of Correggio's, is inestimable by any ordinary arithmetic. [Old notes, these, more embarrassing I now perceive, than elucidatory; but right, and worth retaining.] [27] Only observe, as some labour is more destructive of life than other labour, the hour or day of the more destructive toil is supposed to include proportionate rest. Though men do not, or cannot, usually take such rest, except in death. [28] There is, therefore, observe, no such thing as cheapness (in the common use of that term), without some error or injustice. A thing is said to be cheap, not because it is common, but because it is supposed to be sold under its worth. Everything has its proper and true worth at any given time, in relation to everything else; and at that worth should be bought and sold. If sold under it, it is cheap to the buyer by exactly so much as the seller loses, and no more. Putrid meat, at twopence a pound, is not "cheaper" than wholesome meat at sevenpence a pound; it is probably much dearer; but if, by watching your opportunity, you can get the wholesome meat for sixpence a pound, it is cheaper to you by a penny, which you have gained, and the seller has lost. The present rage for cheapness is either, therefore, simply and literally a rage for badness of all commodities, or it is an attempt to find persons whose necessities will force them to let you have more than you should for your money. It is quite easy to produce such persons, and in large numbers; for the more distress there is in a nation, the more cheapness of this sort you can obtain, and your boasted cheapness is thus merely a measure of the extent of your national distress. There is, indeed, a condition of apparent cheapness, which we have some right to be triumphant in; namely, the real reduction in cost of articles by right application of labour. But in this case the article is only cheap with reference to its _former_ price; the so-called cheapness is only our expression for the sensation of contrast between its former and existing prices. So soon as the new methods of producing the article are established, it ceases to be esteemed either cheap or dear, at the new price, as at the old one, and is felt to be cheap only when accident enables it to be purchased beneath this new value. And it is no advantage to produce the article more easily, except as it enables you to multiply your population. Cheapness of this kind is merely the discovery that more men can be maintained on the same ground; and the question how many you will maintain in proportion to your additional means, remains exactly in the same terms that it did before. A form of immediate cheapness results, however, in many cases, without distress, from the labour of a population where food is redundant, or where the labour by which the food is produced leaves much idle time on their hands, which may be applied to the production of "cheap" articles. All such phenomena indicate to the political economist places where the labour is unbalanced. In the first case, the just balance is to be effected by taking labourers from the spot where pressure exists, and sending them to that where food is redundant. In the second, the cheapness is a local accident, advantageous to the local purchaser, disadvantageous to the local producer. It is one of the first duties of commerce to extend the market, and thus give the local producer his full advantage. Cheapness caused by natural accidents of harvest, weather, &c., is always counterbalanced, in due time, by natural scarcity, similarly caused. It is the part of wise government, and healthy commerce, so to provide in times and places of plenty for times and places of dearth, as that there shall never be waste, nor famine. Cheapness caused by gluts of the market is merely a disease of clumsy and wanton commerce. [29] Price has been already defined (p. 9) to be the quantity of labour which the possessor of a thing is willing to take for it. It is best to consider the price to be that fixed by the possessor, because the possessor has absolute power of refusing sale, while the purchaser has no absolute power of compelling it; but the effectual or market price is that at which their estimates coincide. [30] This "greater ease" ought to be allowed for by a diminution in the times of the divided work; but as the proportion of times would remain the same, I do not introduce this unnecessary complexity into the calculation. [31] Compare _Unto this Last_, p. 115, _et seq._ [32] [That is to say, the love of money is founded first on the intenseness of desire for given things; a youth will rob the till, now-a-days, for pantomime tickets and cigars; the "strength" of the currency being irresistible to him, in consequence of his desire for those luxuries.] CHAPTER III. COIN-KEEPING. 68. It will be seen by reference to the last chapter that our present task is to examine the relation of holders of store to holders of currency; and of both to those who hold neither. In order to do this, we must determine on which side we are to place substances such as gold, commonly known as bases of currency. By aid of previous definitions the reader will now be able to understand closer statements than have yet been possible. 69. _The currency of any country consists of every document acknowledging debt, which is transferable in the country._[33] This transferableness depends upon its intelligibility and credit. Its intelligibility depends chiefly on the difficulty of forging anything like it;--its credit much on national character, but ultimately _always on the existence of substantial means of meeting its demand_.[34] As the degrees of transferableness are variable, (some documents passing only in certain places, and others passing, if at all, for less than their inscribed value), both the mass, and, so to speak, fluidity, of the currency, are variable. True or perfect currency flows freely, like a pure stream; it becomes sluggish or stagnant in proportion to the quantity of less transferable matter which mixes with it, adding to its bulk, but diminishing its purity. [Articles of commercial value, on which bills are drawn, increase the currency indefinitely; and substances of intrinsic value if stamped or signed without restriction so as to become acknowledgments of debt, increase it indefinitely also.] Every bit of gold found in Australia, so long as it remains uncoined, is an article offered for sale like any other; but as soon as it is coined into pounds, it diminishes the value of every pound we have now in our pockets. 70. Legally authorized or national currency, in its perfect condition, is a form of public acknowledgment of debt, so regulated and divided that any person presenting a commodity of tried worth in the public market, shall, if he please, receive in exchange for it a document giving him claim to the return of its equivalent, (1) in any place, (2) at any time, and (3) in any kind. When currency is quite healthy and vital, the persons entrusted with its management are always able to give on demand either, A. The assigning document for the assigned quantity of goods. Or, B. The assigned quantity of goods for the assigning document. If they cannot give document for goods, the national exchange is at fault. If they cannot give goods for document, the national credit is at fault. The nature and power of the document are therefore to be examined under the three relations it bears to Place, Time, and Kind. 71. (1.) It gives claim to the return of equivalent wealth in any _Place_. Its use in this function is to save carriage, so that parting with a bushel of corn in London, we may receive an order for a bushel of corn at the Antipodes, or elsewhere. To be perfect in this use, the substance of currency must be to the maximum portable, credible, and intelligible. Its non-acceptance or discredit results always from some form of ignorance or dishonour: so far as such interruptions rise out of differences in denomination, there is no ground for their continuance among civilized nations. It may be convenient in one country to use chiefly copper for coinage, in another silver, and in another gold,--reckoning accordingly in centimes, francs, or zecchins: but that a franc should be different in weight and value from a shilling, and a zwanziger vary from both, is wanton loss of commercial power. 72. (2.) It gives claim to the return of equivalent wealth at any _Time_. In this second use, currency is the exponent of accumulation: it renders the laying-up of store at the command of individuals unlimitedly possible;--whereas, but for its intervention, all gathering would be confined within certain limits by the bulk of property, or by its decay, or the difficulty of its guardianship. "I will pull down my barns and build greater," cannot be a daily saying; and all material investment is enlargement of care. The national currency transfers the guardianship of the store to many; and preserves to the original producer the right of re-entering on its possession at any future period. 73. (3.) It gives claim (practical, though not legal) to the return of equivalent wealth in any _Kind_. It is a transferable right, not merely to this or that, but to anything; and its power in this function is proportioned to the range of choice. If you give a child an apple or a toy, you give him a determinate pleasure, but if you give him a penny, an indeterminate one, proportioned to the range of selection offered by the shops in the village. The power of the world's currency is similarly in proportion to the openness of the world's fair, and, commonly, enhanced by the brilliancy of external aspect, rather than solidity of its wares. 74. We have said that the currency consists of orders for equivalent goods. If equivalent, their quality must be guaranteed. The kinds of goods chosen for specific claim must, therefore, be capable of test, while, also, that a store may be kept in hand to meet the call of the currency, smallness of bulk, with great relative value, is desirable; and indestructibility, over at least a certain period, essential. Such indestructibility, and facility of being tested, are united in gold; its intrinsic value is great, and its imaginary value greater; so that, partly through indolence, partly through necessity and want of organization, most nations have agreed to take gold for the only basis of their currencies;--with this grave disadvantage, that its portability enabling the metal to become an active part of the medium of exchange, the stream of the currency itself becomes opaque with gold--half currency and half commodity, in unison of functions which partly neutralize, partly enhance each other's force. 75. They partly neutralize, since in so far as the gold is commodity, it is bad currency, because liable to sale; and in so far as it is currency, it is bad commodity, because its exchange value interferes with its practical use. Especially its employment in the higher branches of the arts becomes unsafe on account of its liability to be melted down for exchange. Again. They partly enhance, since in so far as the gold has acknowledged intrinsic value, it is good currency, because everywhere acceptable; and in so far as it has legal exchangeable value, its worth as a commodity is increased. We want no gold in the form of dust or crystal; but we seek for it coined, because in that form it will pay baker and butcher. And this worth in exchange not only absorbs a large quantity in that use,[35] but greatly increases the effect on the imagination of the quantity used in the arts. Thus, in brief, the force of the functions is increased, but their precision blunted, by their unison. 76. These inconveniences, however, attach to gold as a basis of currency on account of its portability and preciousness. But a far greater inconvenience attaches to it as the only legal basis of currency. Imagine gold to be only attainable in masses weighing several pounds each, and its value, like that of malachite or marble, proportioned to its largeness of bulk;--it could not then get itself confused with the currency in daily use, but it might still remain as its basis; and this second inconvenience would still affect it, namely, that its significance as an expression of debt varies, as that of every other article would, with the popular estimate of its desirableness, and with the quantity offered in the market. My power of obtaining other goods for gold depends always on the strength of public passion for gold, and on the limitation of its quantity, so that when either of two things happen--that the world esteems gold less, or finds it more easily--_my right of claim is in that degree effaced_; and it has been even gravely maintained that a discovery of a mountain of gold would cancel the National Debt; in other words, that men may be paid for what costs much in what costs nothing. Now, it is true that there is little chance of sudden convulsion in this respect; the world will not so rapidly increase in wisdom as to despise gold on a sudden; and perhaps may [for a little time] desire it more eagerly the more easily it is obtained; nevertheless, the right of debt ought not to rest on a basis of imagination; nor should the frame of a national currency vibrate with every miser's panic, and every merchant's imprudence. 77. There are two methods of avoiding this insecurity, which would have been fallen upon long ago, if, instead of calculating the conditions of the supply of gold, men had only considered how the world might live and manage its affairs without gold at all.[36] One is, to base the currency on substances of truer intrinsic value; the other, to base it on several substances instead of one. If I can only claim gold, the discovery of a golden mountain starves me; but if I can claim bread, the discovery of a continent of corn-fields need not trouble me. If, however, I wish to exchange my bread for other things, a good harvest will for the time limit my power in this respect; but if I can claim either bread, iron, or silk at pleasure, the standard of value has three feet instead of one, and will be proportionately firm. Thus, ultimately, the steadiness of currency depends upon the breadth of its base; but the difficulty of organization increasing with this breadth, the discovery of the condition at once safest and most convenient[37] can only be by long analysis, which must for the present be deferred. Gold or silver[38] may always be retained in limited use, as a luxury of coinage and questionless standard, of one weight and alloy among all nations, varying only in the die. The purity of coinage, when metallic, is closely indicative of the honesty of the system of revenue, and even of the general dignity of the State.[39] 78. Whatever the article or articles may be which the national currency promises to pay, a premium on that article indicates bankruptcy of the government in that proportion, the division of its assets being restrained only by the remaining confidence of the holders of notes in the return of prosperity to the firm. Currencies of forced acceptance, or of unlimited issue, are merely various modes of disguising taxation, and delaying its pressure, until it is too late to interfere with the cause of pressure. To do away with the possibility of such disguise would have been among the first results of a true economical science, had any such existed; but there have been too many motives for the concealment, so long as it could by any artifices be maintained, to permit hitherto even the founding of such a science. 79. And indeed, it is only through evil conduct, wilfully persisted in, that there is any embarrassment, either in the theory or working of currency. No exchequer is ever embarrassed, nor is any financial question difficult of solution, when people keep their practice honest, and their heads cool. But when governments lose all office of pilotage, protection, or scrutiny; and live only in magnificence of authorized larceny, and polished mendacity; or when the people, choosing Speculation (the s usually redundant in the spelling) instead of Toil, visit no dishonesty with chastisement, that each may with impunity take his dishonest turn;--there are no tricks of financial terminology that will save them; all signature and mintage do but magnify the ruin they retard; and even the riches that remain, stagnant or current, change only from the slime of Avernus to the sand of Phlegethon--_quick_sand at the embouchure;--land fluently recommended by recent auctioneers as "eligible for building leases." 80. Finally, then, the power of true currency is fourfold. (1.) Credit power. Its worth in exchange, dependent on public opinion of the stability and honesty of the issuer. (2.) Real worth. Supposing the gold, or whatever else the currency expressly promises, to be required from the issuer, for all his notes; and that the call cannot be met in full. Then the actual worth of the document would be, and its actual worth at any moment is, therefore to be defined as, what the division of the assets of the issuer would produce for it. (3.) The exchange power, of its base. Granting that we can get five pounds in gold for our note, it remains a question how much of other things we can get for five pounds in gold. The more of other things exist, and the less gold, the greater this power. (4.) The power over labour, exercised by the given quantity of the base, or of the things to be got for it. The question in this case is, how much work, and (question of questions!) _whose_ work, is to be had for the food which five pounds will buy. This depends on the number of the population, on their gifts, and on their dispositions, with which, down to their slightest humours, and up to their strongest impulses, the power of the currency varies. 81. Such being the main conditions of national currency, we proceed to examine those of the total currency, under the broad definition, "transferable acknowledgment of debt;"[40] among the many forms of which there are in effect only two, distinctly opposed; namely, the acknowledgments of debts which will be paid, and of debts which will not. Documents, whether in whole or part, of bad debt, being to those of good debt as bad money to bullion, we put for the present these forms of imposture aside (as in analysing a metal we should wash it clear of dross), and then range, in their exact quantities, the true currency of the country on one side, and the store or property of the country on the other. We place gold, and all such substances, on the side of documents, as far as they operate by signature;--on the side of store as far as they operate by value. Then the currency represents the quantity of debt in the country, and the store the quantity of its possession. The ownership of all the property is divided between the holders of currency and holders of store, and whatever the claiming value of the currency is at any moment, that value is to be deducted from the riches of the store-holders. 82. Farther, as true currency represents by definition debts which will be paid, it represents either the debtor's wealth, or his ability and willingness; that is to say, either wealth existing in his hands transferred to him by the creditor, or wealth which, as he is at some time surely to return it, he is either increasing, or, if diminishing, has the will and strength to reproduce. A sound currency therefore, as by its increase it represents enlarging debt, represents also enlarging means; but in this curious way, that a certain quantity of it marks the deficiency of the wealth of the country from what it would have been if that currency had not existed.[41] In this respect it is like the detritus of a mountain; assume that it lies at a fixed angle, and the more the detritus, the larger must be the mountain; but it would have been larger still, had there been none. 83. Farther, though, as above stated, every man possessing money has usually also some property beyond what is necessary for his immediate wants, and men possessing property usually also hold currency beyond what is necessary for their immediate exchanges, it mainly determines the class to which they belong, whether in their eyes the money is an adjunct of the property, or the property of the money. In the first case the holder's pleasure is in his possessions, and in his money subordinately, as the means of bettering or adding to them. In the second, his pleasure is in his money, and in his possessions only as representing it. (In the first case the money is as an atmosphere surrounding the wealth, rising from it and raining back upon it; but in the second, it is as a deluge, with the wealth floating, and for the most part perishing in it.[42]) The shortest distinction between the men is that the one wishes always to buy, and the other to sell. 84. Such being the great relations of the classes, their several characters are of the highest importance to the nation; for on the character of the store-holders chiefly depend the preservation, display, and serviceableness of its wealth; on that of the currency-holders, its distribution; on that of both, its reproduction. We shall, therefore, ultimately find it to be of incomparably greater importance to the nation in whose hands the thing is put, than how much of it is got; and that the character of the holders may be conjectured by the quality of the store; for such and such a man always asks for such and such a thing; nor only asks for it, but if it can be bettered, betters it: so that possession and possessor reciprocally act on each other, through the entire sum of national possession. The base nation, asking for base things, sinks daily to deeper vileness of nature and weakness in use; while the noble nation, asking for noble things, rises daily into diviner eminence in both; the tendency to degradation being surely marked by "[Greek: ataxia];" that is to say, (expanding the Greek thought), by carelessness as to the hands in which things are put, consequent dispute for the acquisition of them, disorderliness in the accumulation of them, inaccuracy in the estimate of them, and bluntness in conception as to the entire nature of possession. 85. The currency-holders always increase in number and influence in proportion to the bluntness of nature and clumsiness of the store-holders; for the less use people can make of things, the more they want of them, and the sooner weary of them, and want to change them for something else; and all frequency of change increases the quantity and power of currency. The large currency-holder himself is essentially a person who never has been able to make up his mind as to what he will have, and proceeds, therefore, in vague collection and aggregation, with more and more infuriate passion, urged by complacency in progress, vacancy in idea, and pride of conquest. While, however, there is this obscurity in the nature of possession of currency, there is a charm in the seclusion of it, which is to some people very enticing. In the enjoyment of real property, others must partly share. The groom has some enjoyment of the stud, and the gardener of the garden; but the money is, or seems, shut up; it is wholly enviable. No one else can have part in any complacencies arising from it. The power of arithmetical comparison is also a great thing to unimaginative people. They know always they are so much better than they were, in money; so much better than others, in money; but wit cannot be so compared, nor character. My neighbour cannot be convinced that I am wiser than he is, but he can, that I am worth so much more; and the universality of the conviction is no less flattering than its clearness. Only a few can understand,--none measure--and few will willingly adore, superiorities in other things; but everybody can understand money, everybody can count it, and most will worship it. 86. Now, these various temptations to accumulation would be politically harmless if what was vainly accumulated had any fair chance of being wisely spent. For as accumulation cannot go on for ever, but must some day end in its reverse--if this reverse were indeed a beneficial distribution and use, as irrigation from reservoir, the fever of gathering, though perilous to the gatherer, might be serviceable to the community. But it constantly happens (so constantly, that it may be stated as a political law having few exceptions), that what is unreasonably gathered is also unreasonably spent by the persons into whose hands it finally falls. Very frequently it is spent in war, or else in a stupefying luxury, twice hurtful, both in being indulged by the rich and witnessed by the poor. So that the _mal tener_ and _mal dare_ are as correlative as complementary colours; and the circulation of wealth, which ought to be soft, steady, strong, far-sweeping, and full of warmth, like the Gulf stream, being narrowed into an eddy, and concentrated at a point, changes into the alternate suction and surrender of Charybdis. Which is indeed, I doubt not, the true meaning of that marvellous fable, "infinite," as Bacon said of it, "in matter of meditation."[43] 87. It is a strange habit of wise humanity to speak in enigmas only, so that the highest truths and usefullest laws must be hunted for through whole picture-galleries of dreams, which to the vulgar seem dreams only. Thus Homer, the Greek tragedians, Plato, Dante, Chaucer, Shakspeare, and Goethe, have hidden all that is chiefly serviceable in their work, and in all the various literature they absorbed and re-embodied, under types which have rendered it quite useless to the multitude. What is worse, the two primal declarers of moral discovery, Homer and Plato, are partly at issue; for Plato's logical power quenched his imagination, and he became incapable of understanding the purely imaginative element either in poetry or painting: he therefore somewhat overrates the pure discipline of passionate art in song and music, and misses that of meditative art. There is, however, a deeper reason for his distrust of Homer. His love of justice, and reverently religious nature, made him dread, as death, every form of fallacy; but chiefly, fallacy respecting the world to come (his own myths being only symbolic exponents of a rational hope). We shall perhaps now every day discover more clearly how right Plato was in this, and feel ourselves more and more wonderstruck that men such as Homer and Dante (and, in an inferior sphere, Milton), not to speak of the great sculptors and painters of every age, have permitted themselves, though full of all nobleness and wisdom, to coin idle imaginations of the mysteries of eternity, and guide the faiths of the families of the earth by the courses of their own vague and visionary arts: while the indisputable truths of human life and duty, respecting which they all have but one voice, lie hidden behind these veils of phantasy, unsought, and often unsuspected. I will gather carefully, out of Dante and Homer, what, in this kind, bears on our subject, in its due place; the first broad intention of their symbols may be sketched at once. 88. The rewards of a worthy use of riches, subordinate to other ends, are shown by Dante in the fifth and sixth orbs of Paradise; for the punishment of their unworthy use, three places are assigned; one for the avaricious and prodigal whose souls are lost, (_Hell_, canto 7); one for the avaricious and prodigal whose souls are capable of purification, (_Purgatory_, canto 19); and one for the usurers, of whom _none_ can be redeemed (_Hell_, canto 17). The first group, the largest in all hell ("gente piu che altrove troppa," compare Virgil's "quæ maxima turba"), meet in contrary currents, _as the_ _waves of Charybdis_, casting weights at each other from opposite sides. This weariness of contention is the chief element of their torture; so marked by the beautiful lines beginning "Or puoi, figliuol," &c.: (but the usurers, who made their money inactively, _sit_ on the sand, equally without rest, however. "Di qua, di la, soccorrien," &c.) For it is not avarice, but _contention_ for riches, leading to this double misuse of them, which, in Dante's light, is the unredeemable sin. The place of its punishment is guarded by Plutus, "the great enemy," and "la fièra crudele," a spirit quite different from the Greek Plutus, who, though old and blind, is not cruel, and is curable, so as to become far-sighted. ([Greek: ou typhlos all' oxy blepôn].--Plato's epithets in first book of the _Laws_.) Still more does this Dantesque type differ from the resplendent Plutus of Goethe in the second part of _Faust_, who is the personified power of wealth for good or evil--not the passion for wealth; and again from the Plutus of Spenser, who is the passion of mere aggregation. Dante's Plutus is specially and definitely the Spirit of Contention and Competition, or Evil Commerce; because, as I showed before, this kind of commerce "makes all men strangers;" his speech is therefore unintelligible, and no single soul of all those ruined by him _has recognizable features_. On the other hand, the redeemable sins of avarice and prodigality are, in Dante's sight, those which are without deliberate or calculated operation. The lust, or lavishness, of riches can be purged, so long as there has been no servile consistency of dispute and competition for them. The sin is spoken of as that of degradation by the love of earth; it is purified by deeper humiliation--the souls crawl on their bellies; their chant is, "my soul cleaveth unto the dust." But the spirits thus condemned are all recognizable, and even the worst examples of the thirst for gold, which they are compelled to tell the histories of during the night, are of men swept by the passion of avarice into violent crime, but not sold to its steady work. 89. The precept given to each of these spirits for its deliverance is--Turn thine eyes to the lucre (lure) which the Eternal King rolls with the mighty wheels. Otherwise, the wheels of the "Greater Fortune," of which the constellation is ascending when Dante's dream begins. Compare George Herbert-- "Lift up thy head; Take stars for money; stars, not to be told By any art, yet to be purchased." And Plato's notable sentence in the third book of the _Polity_.--"Tell them they have divine gold and silver in their souls for ever; that they need no money stamped of men--neither may they otherwise than impiously mingle the gathering of the divine with the mortal treasure, _for through that which the law of the multitude has coined, endless crimes have been done and suffered; but in their's is neither pollution nor sorrow_." 90. At the entrance of this place of punishment an evil spirit is seen by Dante, quite other than the "Gran Nemico." The great enemy is obeyed knowingly and willingly; but this spirit--feminine--and called a Siren--is the "_Deceitfulness_ of riches," [Greek: apatê ploutou] of the Gospels, winning obedience by guile. This is the Idol of riches, made doubly phantasmal by Dante's seeing her in a dream. She is lovely to look upon, and enchants by her sweet singing, but her womb is loathsome. Now, Dante does not call her one of the Sirens carelessly, any more than he speaks of Charybdis carelessly; and though he had got at the meaning of the Homeric fable only through Virgil's obscure tradition of it, the clue he has given us is quite enough. Bacon's interpretation, "the Sirens, _or pleasures_," which has become universal since his time, is opposed alike to Plato's meaning and Homer's. The Sirens are not pleasures, but _Desires_: in the Odyssey they are the phantoms of vain desire; but in Plato's Vision of Destiny, phantoms of divine desire; singing each a different note on the circles of the distaff of Necessity, but forming one harmony, to which the three great Fates put words. Dante, however, adopted the Homeric conception of them, which was that they were demons of the Imagination, not carnal; (desire of the eyes; not lust of the flesh); therefore said to be daughters of the Muses. Yet not of the Muses, heavenly or historical but of the Muse of pleasure; and they are at first winged, because even vain hope excites and helps when first formed; but afterwards, contending for the possession of the imagination with the Muses themselves, they are deprived of their wings. 91. And thus we are to distinguish the Siren power from the power of Circe, who is no daughter of the Muses, but of the strong elements, Sun and Sea; her power is that of frank, and full vital pleasure, which, if governed and watched, nourishes men; but, unwatched, and having no "moly," bitterness or delay, mixed with it, turns men into beasts, but does not slay them,--leaves them, on the contrary, power of revival. She is herself indeed an Enchantress;--pure Animal life; transforming--or degrading--but always wonderful (she puts the stores on board the ship invisibly, and is gone again, like a ghost); even the wild beasts rejoice and are softened around her cave; the transforming poisons she gives to men are mixed with no rich feast, but with pure and right nourishment,--Pramnian wine, cheese, and flour; that is, wine, milk, and corn, the three great sustainers of life--it is their own fault if these make swine of them; (see Appendix V.) and swine are chosen merely as the type of consumption; as Plato's [Greek: hyôn polis], in the second book of the _Polity_, and perhaps chosen by Homer with a deeper knowledge of the likeness in variety of nourishment, and internal form of body. "Et quel est, s'il vous plait, cet audacieux animal qui se permet d'être bâti au dedans comme une jolie petite fille?" "Hélas! chère enfant, j'ai honte de le nommer, et il ne faudra pas m'en vouloir. C'est ... c'est le cochon. Ce n'est pas précisément flatteur pour vous; mais nous en sommes tous là, et si cela vous contrarie par trop, il faut aller vous plaindre au bon Dieu qui a voulu que les choses fussent arrangées ainsi: seulement le cochon, qui ne pense qu'à manger, a l'estomac bien plus vaste que nous et c'est toujours une consolation."--_(Histoire d'une Bouchée de Pain_, Lettre ix.) 92. But the deadly Sirens are in all things opposed to the Circean power. They promise pleasure, but never give it. They nourish in no wise; but slay by slow death. And whereas they corrupt the heart and the head, instead of merely betraying the senses, there is no recovery from their power; they do not tear nor scratch, like Scylla, but the men who have listened to them are poisoned, and waste away. Note that the Sirens' field is covered, not merely with the bones, but with the _skins_, of those who have been consumed there. They address themselves, in the part of the song which Homer gives, not to the passions of Ulysses, but to his vanity, and the only man who ever came within hearing of them, and escaped untempted, was Orpheus, who silenced the vain imaginations by singing the praises of the gods. 93. It is, then, one of these Sirens whom Dante takes as the phantasm or deceitfulness of riches; but note further, that she says it was her song that deceived Ulysses. Look back to Dante's account of Ulysses' death, and we find it was not the love of money, but pride of knowledge, that betrayed him; whence we get the clue to Dante's complete meaning: that the souls whose love of wealth is pardonable have been first deceived into pursuit of it by a dream of its higher uses, or by ambition. His Siren is therefore the Philotimé of Spenser, daughter of Mammon-- "Whom all that folk with such contention Do flock about, my deare, my daughter is-- Honour and dignitie from her alone Derived are." By comparing Spenser's entire account of this Philotimé with Dante's of the Wealth-Siren, we shall get at the full meaning of both poets; but that of Homer lies hidden much more deeply. For his Sirens are indefinite; and they are desires of any evil thing; power of wealth is not specially indicated by him, until, escaping the 'harmonious danger of imagination, Ulysses has to choose between two practical ways of life, indicated by the two _rocks_ of Scylla and Charybdis. The monsters that haunt them are quite distinct from the rocks themselves, which, having many other subordinate significations, are in the main Labour and Idleness, or getting and spending; each with its attendant monster, or betraying demon. The rock of gaining has its summit in the clouds, invisible, and not to be climbed; that of spending is low, but marked by the cursed fig-tree, which has leaves, but no fruit. We know the type elsewhere; and there is a curious lateral allusion to it by Dante when Jacopo di Sant' Andrea, who had ruined himself by profusion and committed suicide, scatters the leaves of the bush of Lotto degli Agli, endeavouring to hide himself among them. We shall hereafter examine the type completely; here I will only give an approximate rendering of Homer's words, which have been obscured more by translation than even by tradition. 94. "They are overhanging rocks. The great waves of blue water break round them; and the blessed Gods call them the Wanderers. "By one of them no winged thing can pass--not even the wild doves that bring ambrosia to their father Jove--but the smooth rock seizes its sacrifice of them." (Not even ambrosia to be had without Labour. The word is peculiar--as a part of anything is offered for Sacrifice; especially used of heave-offering.) "It reaches the wide heaven with its top, and a dark blue cloud rests on it, and never passes; neither does the clear sky hold it, in summer nor in harvest. Nor can any man climb it--not if he had twenty feet and hands, for it is smooth as though it were hewn. "And in the midst of it is a cave which is turned the way of hell. And therein dwells Scylla, whining for prey: her cry, indeed, is no louder than that of a newly-born whelp: but she herself is an awful thing--nor can any creature see her face and be glad; no, though it were a god that rose against her. For she has twelve feet, all fore-feet, and six necks, and terrible heads on them; and each has three rows of teeth, full of black death. "But the opposite rock is lower than this, though but a bow-shot distant; and upon it there is a great fig-tree, full of leaves; and under it the terrible Charybdis sucks down the black water. Thrice in the day she sucks it down, and thrice; casts it up again: be not thou there when she sucks down, for Neptune himself could not save thee." [Thus far went my rambling note, in _Fraser's Magazine_. The Editor sent me a compliment on it--of which I was very proud; what the Publisher thought of it, I am not informed; only I know that eventually he stopped the papers. I think a great deal of it myself, now, and have put it all in large print accordingly, and should like to write more; but will, on the contrary, self-denyingly, and in gratitude to any reader who has got through so much, end my chapter.] FOOTNOTES: [33] Remember this definition: it is of great importance as opposed to the imperfect ones usually given. When first these essays were published, I remember one of their reviewers asking contemptuously, "Is half-a-crown a document?" it never having before occurred to him that a document might be stamped as well as written, and stamped on silver as well as on parchment. [34] I do not mean the demand of the holder of a five-pound note for five pounds, but the demand of the holder of a pound for a pound's worth of something good. [35] [Read and think over, the following note very carefully.] The waste of labour in obtaining the gold, though it cannot be estimated by help of any existing data, may be understood in its bearing on entire economy by supposing it limited to transactions between two persons. If two farmers in Australia have been exchanging corn and cattle with each other for years, keeping their accounts of reciprocal debt in any simple way, the sum of the possessions of either would not be diminished, though the part of it which was lent or borrowed were only reckoned by marks on a stone, or notches on a tree; and the one counted himself accordingly, so many scratches, or so many notches, better than the other. But it would soon be seriously diminished if, discovering gold in their fields, each resolved only to accept golden counters for a reckoning; and accordingly, whenever he wanted a sack of corn or a cow, was obliged to go and wash sand for a week before he could get the means of giving a receipt for them. [36] It is difficult to estimate the curious futility of discussions such as that which lately occupied a section of the British Association, on the absorption of gold, while no one can produce even the simplest of the data necessary for the inquiry. To take the first occurring one,--What means have we of ascertaining the weight of gold employed this year in the toilettes of the women of Europe (not to speak of Asia); and, supposing it known, what means of conjecturing the weight by which, next year, their fancies, and the changes of style among their jewellers, will diminish or increase it? [37] See, in Pope's epistle to Lord Bathurst, his sketch of the difficulties and uses of a currency literally "pecuniary"--(consisting of herds of cattle). "His Grace will game--to White's a bull be led," &c. [38] Perhaps both; perhaps silver only. It may be found expedient ultimately to leave gold free for use in the arts. As a means of reckoning, the standard might be, and in some cases has already been, entirely ideal.--_See_ Mill's _Political Economy_, book iii. chap. VII. at beginning. [39] The purity of the drachma and zecchin were not without significance of the state of intellect, art, and policy, both in Athens and Venice;--a fact first impressed upon me ten years ago, when, in taking daguerreotypes at Venice, I found no purchaseable gold pure enough to gild them with, except that of the old Venetian zecchin. [40] Under which term, observe, we include all documents of debt, which, being honest, might be transferable, though they practically are not transferred; while we exclude all documents which are in reality worthless, though in fact transferred temporarily, as bad money is. The document of honest debt, not transferred, is merely to paper currency as gold withdrawn from circulation is to that of bullion. Much confusion has crept into the reasoning on this subject from the idea that the withdrawal from circulation is a definable state, whereas it is a graduated state, and indefinable. The sovereign in my pocket is withdrawn from circulation as long as I choose to keep it there. It is no otherwise withdrawn if I bury it, nor even if I choose to make it, and others, into a golden cup, and drink out of them; since a rise in the price of the wine, or of other things, may at any time cause me to melt the cup and throw it back into currency; and the bullion operates on the prices of the things in the market as directly, though not as forcibly, while it is in the form of a cup as it does in the form of a sovereign. No calculation can be founded on my humour in either case. If I like to handle rouleaus, and therefore keep a quantity of gold, to play with, in the form of jointed basaltic columns, it is all one in its effect on the market as if I kept it in the form of twisted filigree, or, steadily "amicus lamnæ," beat the narrow gold pieces into broad ones, and dined off them. The probability is greater that I break the rouleau than that I melt the plate; but the increased probability is not calculable. Thus, documents are only withdrawn from the currency when cancelled, and bullion when it is so effectually lost as that the probability of finding it is no greater than of finding new gold in the mine. [41] For example, suppose an active peasant, having got his ground into good order and built himself a comfortable house, finding time still on his hands, sees one of his neighbours little able to work, and ill-lodged, and offers to build him also a house, and to put his land in order, on condition of receiving for a given period rent for the building and tithe of the fruits. The offer is accepted, and a document given promissory of rent and tithe. This note is money. It can only be good money if the man who has incurred the debt so far recovers his strength as to be able to take advantage of the help he has received, and meet the demand of the note; if he lets his house fall to ruin, and his field to waste, his promissory note will soon be valueless: but the existence of the note at all is a consequence of his not having worked so stoutly as the other. Let him gain as much as to be able to pay back the entire debt; the note is cancelled, and we have two rich store-holders and no currency. [42] [You need not trouble yourself to make out the sentence in parenthesis, unless you like, but do not think it is mere metaphor. It states a fact which I could not have stated so shortly, _but_ by metaphor.] [43] [What follows, to the end of the chapter, was a note only, in the first printing; but for after service, it is of more value than any other part of the book, so I have put it into the main text.] CHAPTER IV. COMMERCE. 95. As the currency conveys right of choice out of many things in exchange for one, so Commerce is the agency by which the power of choice is obtained; so that countries producing only timber can obtain for their timber silk and gold; or, naturally producing only jewels and frankincense, can obtain for them cattle and corn. In this function, commerce is of more importance to a country in proportion to the limitations of its products, and the restlessness of its fancy;--generally of greater importance towards Northern latitudes. 96. Commerce is necessary, however, not only to exchange local products, but local skill. Labour requiring the agency of fire can only be given abundantly in cold countries; labour requiring suppleness of body and sensitiveness of touch, only in warm ones; labour involving accurate vivacity of thought only in temperate ones; while peculiar imaginative actions are produced by extremes of heat and cold, and of light and darkness. The production of great art is limited to climates warm enough to admit of repose in the open air, and cool enough to render such repose delightful. Minor variations in modes of skill distinguish every locality. The labour which at any place is easiest, is in that place cheapest; and it becomes often desirable that products raised in one country should be wrought in another. Hence have arisen discussions on "International values" which will be one day remembered as highly curious exercises of the human mind. For it will be discovered, in due course of tide and time, that international value is regulated just as inter-provincial or inter-parishional value is. Coals and hops are exchanged between Northumberland and Kent on absolutely the same principles as iron and wine between Lancashire and Spain. The greater breadth of an arm of the sea increases the cost, but does not modify the principle of exchange; and a bargain written in two languages will have no other economical results than a bargain written in one. The distances of nations are measured, not by seas, but by ignorances; and their divisions determined, not by dialects, but by enmities.[44] 97. Of course, a system of international values may always be constructed if we assume a relation of moral law to physical geography; as, for instance, that it is right to cheat or rob across a river, though not across a road; or across a sea, though not across a river, &c.;--again, a system of such values may be constructed by assuming similar relations of taxation to physical geography; as, for instance, that an article should be taxed in crossing a river, but not in crossing a road; or in being carried fifty miles, but not in being carried five, &c.; such positions are indeed not easily maintained when once put in logical form; but _one_ law of international value is maintainable in any form: namely, that the farther your neighbour lives from you, and the less he understands you, _the more you are bound to be true in your dealings with him_; because your power over him is greater in proportion to his ignorance, and his remedy more difficult in proportion to his distance.[45] 98. I have just said the breadth of sea increases the cost of exchange. Now note that exchange, or commerce, _in itself_, is always costly; the sum of the value of the goods being diminished by the cost of their conveyance, and by the maintenance of the persons employed in it; so that it is only when there is advantage to both producers (in getting the one thing for the other) greater than the loss in conveyance, that the exchange is expedient. And it can only be justly conducted when the porters kept by the producers (commonly called merchants) expect _mere_ pay, and not profit.[46] For in just commerce there are but three parties--the two persons or societies exchanging, and the agent or agents of exchange; the value of the things to be exchanged is known by both the exchangers, and each receives equal value, neither gaining nor losing (for whatever one gains the other loses). The intermediate agent is paid a known per-centage by both, partly for labour in conveyance, partly for care, knowledge, and risk; every attempt at concealment of the amount of the pay indicates either effort on the part of the agent to obtain unjust profit, or effort on the part of the exchangers to refuse him just pay. But for the most part it is the first, namely, the effort on the part of the merchant to obtain larger profit (so-called) by buying cheap and selling dear. Some part, indeed, of this larger gain is deserved, and might be openly demanded, because it is the reward of the merchant's knowledge, and foresight of probable necessity; but the greater part of such gain is unjust; and unjust in this most fatal way, that it depends, first, on keeping the exchangers ignorant of the exchange value of the articles; and, secondly, on taking advantage of the buyer's need and the seller's poverty. It is, therefore, one of the essential, and quite the most fatal, forms of usury; for usury means merely taking an exorbitant[47] sum for the use of anything; and it is no matter whether the exorbitance is on loan or exchange, on rent or on price--the essence of the usury being that it is obtained by advantage of opportunity or necessity, and not as due reward for labour. All the great thinkers, therefore, have held it to be unnatural and impious, in so far as it feeds on the distress of others, or their folly.[48] Nevertheless, attempts to repress it by law must for ever be ineffective; though Plato, Bacon, and the First Napoleon--all three of them men who knew somewhat more of humanity than the "British merchant" usually does--tried their hands at it, and have left some (probably) good moderative forms of law, which we will examine in their place. But the only final check upon it must be radical purifying of the national character, for being, as Bacon calls it, "concessum propter duritiem cordis," it is to be done away with by touching the heart only; not, however, without medicinal law--as in the case of the other permission, "propter duritiem." But in this more than in anything (though much in all, and though in this he would not himself allow of their application, for his own laws against usury are sharp enough), Plato's words in the fourth book of the Polity are true, that neither drugs, nor charms, nor burnings, will touch a deep-lying political sore, any more than a deep bodily one; but only right and utter change of constitution: and that "they do but lose their labour who think that by any tricks of law they can get the better of these mischiefs of commerce, and see not that they hew at a Hydra." 99. And indeed this Hydra seems so unslayable, and sin sticks so fast between the joinings of the stones of buying and selling, that "to trade" in things, or literally "cross-give" them, has warped itself, by the instinct of nations, into their worst word for fraud; for, because in trade there cannot but be trust, and it seems also that there cannot but also be injury in answer to it, what is merely fraud between enemies becomes treachery among friends: and "trader," "traditor," and "traitor" are but the same word. For which simplicity of language there is more reason than at first appears: for as in true commerce there is no "profit," so in true commerce there is no "sale." The idea of sale is that of an interchange between enemies respectively endeavouring to get the better one of another; but commerce is an exchange between friends; and there is no desire but that it should be just, any more than there would be between members of the same family.[49] The moment there is a bargain over the pottage, the family relation is dissolved:--typically, "the days of mourning for my father are at hand." Whereupon follows the resolve, "then will I slay my brother." 100. This inhumanity of mercenary commerce is the more notable because it is a fulfilment of the law that the corruption of the best is the worst. For as, taking the body natural for symbol of the body politic, the governing and forming powers may be likened to the brain, and the labouring to the limbs, the mercantile, presiding over circulation and communication of things in changed utilities, is symbolized by the heart; and, if that hardens, all is lost. And this is the ultimate lesson which the leader of English intellect meant for us, (a lesson, indeed, not all his own, but part of the old wisdom of humanity), in the tale of the _Merchant of Venice_; in which the true and incorrupt merchant,--_kind and free beyond every other Shakspearian conception of men_,--is opposed to the corrupted merchant, or usurer; the lesson being deepened by the expression of the strange hatred which the corrupted merchant bears to the pure one, mixed with intense scorn,-- "This is the fool that lent out money gratis; look to him, jailer," (as to lunatic no less than criminal) the enmity, observe, having its symbolism literally carried out by being aimed straight at the heart, and finally foiled by a literal appeal to the great moral law that flesh and blood cannot be weighed, enforced by "Portia"[50] ("Portion"), the type of divine Fortune, found, not in gold, nor in silver, but in lead, that is to say, in endurance and patience, not in splendour; and finally taught by her lips also, declaring, instead of the law and quality of "merces," the greater law and quality of mercy, which is not strained, but drops as the rain, blessing him that gives and him that takes. And observe that this "mercy" is not the mean "Misericordia," but the mighty "Gratia," answered by Gratitude, (observe Shylock's leaning on the, to him detestable, word, _gratis_, and compare the relations of Grace to Equity given in the second chapter of the second book of the _Memorabilia_;) that is to say, it is the gracious or loving, instead of the strained, or competing manner, of doing things, answered, not only with "merces" or pay, but with "merci" or thanks. And this is indeed the meaning of the great benediction "Grace, mercy, and peace," for there can be no peace without grace, (not even by help of rifled cannon), nor even without triplicity of graciousness, for the Greeks, who began but with one Grace, had to open their scheme into three before they had done. 101. With the usual tendency of long repeated thought, to take the surface for the deep, we have conceived these goddesses as if they only gave loveliness to gesture; whereas their true function is to give graciousness to deed, the other loveliness arising naturally out of that. In which function Charis becomes Charitas;[51] and has a name and praise even greater than that of Faith or Truth, for these may be maintained sullenly and proudly; but Charis is in her countenance always gladdening (Aglaia), and in her service instant and humble; and the true wife of Vulcan, or Labour. And it is not until her sincerity of function is lost, and her mere beauty contemplated instead of her patience, that she is born again of the foam flake, and becomes Aphrodite; and it is then only that she becomes capable of joining herself to war and to the enmities of men, instead of to labour and their services. Therefore the fable of Mars and Venus is chosen by Homer, picturing himself as Demodocus, to sing at the games in the court of Alcinous. Phæacia is the Homeric island of Atlantis; an image of noble and wise government, concealed, (how slightly!) merely by the change of a short vowel for a long one in the name of its queen; yet misunderstood by all later writers, (even by Horace, in his "pinguis, Phæaxque"). That fable expresses the perpetual error of men in thinking that grace and dignity can only be reached by the soldier, and never by the artisan; so that commerce and the useful arts have had the honour and beauty taken away, and only the Fraud and Pain left to them, with the lucre. Which is, indeed, one great reason of the continual blundering about the offices of government with respect to commerce. The higher classes are ashamed to employ themselves in it; and though ready enough to fight for (or occasionally against) the people,--to preach to them,--or judge them, will not break bread for them; the refined upper servant who has willingly looked after the burnishing of the armoury and ordering of the library, not liking to set foot in the larder. 102. Farther still. As Charis becomes Charitas on the one side, she becomes--better still--Chara, Joy, on the other; or rather this is her very mother's milk and the beauty of her childhood; for God brings no enduring Love, nor any other good, out of pain; nor out of contention; but out of joy and harmony. And in this sense, human and divine, music and gladness, and the measures of both, come into her name; and Cher becomes full-vowelled Cheer, and Cheerful; and Chara opens into Choir and Choral.[52] 103. And lastly. As Grace passes into Freedom of action, Charis becomes Eleutheria, or Liberality; a form of liberty quite curiously and intensely different from the thing usually understood by "Liberty" in modern language: indeed, much more like what some people would call slavery: for a Greek always understood, primarily, by liberty, deliverance from the law of his own passions (or from what the Christian writers call bondage of corruption), and this a complete liberty: not being merely safe from the Siren, but also unbound from the mast, and not having to resist the passion, but making it fawn upon, and follow him--(this may be again partly the meaning of the fawning beasts about the Circean cave; so, again, George Herbert-- Correct thy passion's spite, Then may the beasts draw thee to happy light)-- And it is only in such generosity that any man becomes capable of so governing others as to take true part in any system of national economy. Nor is there any other eternal distinction between the upper and lower classes than this form of liberty, Eleutheria, or benignity, in the one, and its opposite of slavery, Douleia, or malignity, in the other; the separation of these two orders of men, and the firm government of the lower by the higher, being the first conditions of possible wealth and economy in any state,--the Gods giving it no greater gift than the power to discern its true freemen, and "malignum spernere vulgus." 104. While I have traced the finer and higher laws of this matter for those whom they concern, I have also to note the material law--vulgarly expressed in the proverb, "Honesty is the best policy." That proverb is indeed wholly inapplicable to matters of private interest. It is not true that honesty, as far as material gain is concerned, profits individuals. A clever and cruel knave will in a mixed society always be richer than an honest person can be. But Honesty is the best "policy," if policy mean practice of State. For fraud gains nothing in a State. It only enables the knaves in it to live at the expense of honest people; while there is for every act of fraud, however small, a loss of wealth to the community. Whatever the fraudulent person gains, some other person loses, as fraud produces nothing; and there is, _besides_, the loss of the time and thought spent in accomplishing the fraud, and of the strength otherwise obtainable by mutual help (not to speak of the fevers of anxiety and jealousy in the blood, which are a heavy physical loss, as I will show in due time). Practically, when the nation is deeply corrupt cheat answers to cheat; every one is in turn imposed upon, and there is to the body politic the dead loss of the ingenuity, together with the incalculable mischief of the injury to each defrauded person, producing collateral effect unexpectedly. My neighbour sells me bad meat: I sell him in return flawed iron. We neither of us get one atom of pecuniary advantage on the whole transaction, but we both suffer unexpected inconvenience; my men get scurvy, and his cattle-truck runs off the rails. 105. The examination of this form of Charis must, therefore, lead us into the discussion of the principles of government in general, and especially of that of the poor by the rich, discovering how the Graciousness joined with the Greatness, or Love with Majestas, is the true Dei Gratia, or Divine Right, of every form and manner of King; _i. e._, specifically, of the thrones, dominations, princedoms, virtues, and powers of the earth:--of the thrones, stable, or "ruling," literally right-doing powers ("rex eris, recte si facies"):--of the dominations--lordly, edifying, dominant and harmonious powers; chiefly domestic, over the "built thing," domus, or house; and inherently twofold, Dominus and Domina; Lord and Lady:--of the Princedoms, pre-eminent, incipient, creative, and demonstrative powers; thus poetic and mercantile, in the "princeps carmen deduxisse" and the merchant-prince:--of the Virtues or Courages; militant, guiding, or Ducal powers:--and finally of the Strengths, or Forces pure; magistral powers, of the More over the less, and the forceful and free over the weak and servile elements of life. Subject enough for the next paper, involving "economical" principles of some importance, of which, for theme, here is a sentence, which I do not care to translate, for it would sound harsh in English,[53] though, truly, it is one of the tenderest ever uttered by man; which may be meditated over, or rather _through_, in the meanwhile, by any one who will take the pains:-- [Greek: Ar oun, hôsper Hippos tô anepistêmoni men encheirounti de chrêsthai zêmia estin, houtô kai adelphos, otan tis autô mê epistamenos encheir chrêsthai, zêmia esti]; FOOTNOTES: [44] I have repeated the substance of this and the next paragraph so often since, that I am ashamed and weary. The thing is too true, and too simple, it seems, for anybody ever to believe. Meantime, the theories of "international values," as explained by Modern Political Economy, have brought about last year's pillage of France by Germany, and the affectionate relations now existing in consequence between the inhabitants of the right and left banks of the Rhine. [45] I wish some one would examine and publish accurately the late dealings of the Governors of the Cape with the Caffirs. [46] By "pay," I mean wages for labour or skill; by "profit," gain dependent on the state of the market. [47] Since I wrote this, I have worked out the question of interest of money, which always, until lately, had embarrassed and defeated me; and I find that the payment of interest of any amount whatever is real "usury," and entirely unjustifiable. I was shown this chiefly by the pamphlets issued by Mr. W. C. Sillar, though I greatly regret the impatience which causes Mr. Sillar to regard usury as the radical crime in political economy. There are others worse, that act with it. [48] Hence Dante's companionship of Cahors, _Inf._, canto xi., supported by the view taken of the matter throughout the middle ages, in common with the Greeks. [49] I do not wonder when I re-read this, that people talk about my "sentiment." But there is no sentiment whatever in the matter. It is a hard and bare commercial fact, that if two people deal together who don't try to cheat each other, they will in a given time, make more money out of each other than if they do. See § 104. [50] Shakspeare would certainly never have chosen this name had he been forced to retain the Roman spelling. Like Perdita, "lost lady," or Cordelia, "heart-lady," Portia is "fortune" lady. The two great relative groups of words, Fortuna, fero, and fors--Portio, porto, and pars (with the lateral branch, op-portune, im-portune, opportunity, &c.), are of deep and intricate significance; their various senses of bringing, abstracting, and sustaining being all centralized by the wheel (which bears and moves at once), or still better, the ball (spera) of Fortune,--"Volve sua spera, e beata si gode:" the motive power of this wheel distinguishing its goddess from the fixed majesty of Necessitas with her iron nails; or [Greek: anankê], with her pillar of fire and iridescent orbits, _fixed_ at the centre. Portus and porta, and gate in its connexion with gain, form another interesting branch group; and Mors, the concentration of delaying, is always to be remembered with Fors, the concentration of bringing and bearing, passing on into Fortis and Fortitude. [This note is literally a mere memorandum for the future work which I am now completing in _Fors Clavigera_; it was printed partly in vanity, but also with real desire to get people to share the interest I found in the careful study of the leading words in noble languages. Compare the next note.] [51] As Charis becomes Charitas, the word "Cher," or "Dear," passes from Shylock's sense of it (to buy cheap and sell dear) into Antonio's sense of it: emphasized with the final _i_ in tender "Cheri," and hushed to English calmness in our noble "Cherish." The reader must not think that any care can be misspent in tracing the connexion and power of the words which we have to use in the sequel. (See Appendix VI.) Much education sums itself in making men economize their words, and understand them. Nor is it possible to estimate the harm which has been done, in matters of higher speculation and conduct, by loose verbiage, though we may guess at it by observing the dislike which people show to having anything about their religion said to them in simple words, because then they understand it. Thus congregations meet weekly to invoke the influence of a Spirit of Life and Truth; yet if any part of that character were intelligibly expressed to them by the formulas of the service, they would be offended. Suppose, for instance, in the closing benediction, the clergyman were to give vital significance to the vague word "Holy," and were to say, "the fellowship of the Helpful and Honest Ghost be with you, and remain with you always," what would be the horror of many, first at the irreverence of so intelligible an expression; and secondly, at the discomfortable occurrence of the suspicion that while throughout the commercial dealings of the week they had denied the propriety of Help, and possibility of Honesty, the Person whose company they had been now asking to be blessed with could have no fellowship with cruel people or knaves. [52] "[Greek: ta men oun alla zôa ouk echein aisthêsin tôn en tais kinêsesi taxeôn oude ataxiôn ois dê rythmos unoma kai haomonia êmin de ous eipomen tous Theous] (Apollo, the Muses, and Bacchus--the grave Bacchus, that is--ruling the choir of age; or Bacchus restraining; 'sæva _tene_, cum Berecyntio cornu tympana,' &c.) [Greek: synchoreutas dedosthai, toutous einai kai tous dedôkotas tên enrythmon te kai enarmonion aisthêsin meth' êdonês ... chorous te ônomakenai para tês charas emphyton onoma]." "Other animals have no perception of order nor of disorder in motion; but for us, Apollo and Bacchus and the Muses are appointed to mingle in our dances; and there are they who have given us the sense of delight in rhythm and harmony. And the name of choir, choral dance, (we may believe,) came from chara (delight)."--Laws, book ii. [53] [My way now, is to say things plainly, if I can, whether they sound harsh or not;--this is the translation--"Is it possible, then, that as a horse is only a mischief to any one who attempts to use him without knowing how, so also our brother, if we attempt to use him without knowing how, may be a mischief to us?"] CHAPTER V. GOVERNMENT. 106. It remains for us, as I stated in the close of the last chapter, to examine first the principles of government in general, and then those of the government of the Poor by the Rich. The government of a state consists in its customs, laws, and councils, and their enforcements. I. CUSTOMS. As one person primarily differs from another by fineness of nature, and, secondarily, by fineness of training, so also, a polite nation differs from a savage one, first, by the refinement of its nature, and secondly by the delicacy of its customs. In the completeness of custom, which is the nation's self-government, there are three stages--first, fineness in method of doing or of being;--called the manner or moral of acts; secondly, firmness in holding such method after adoption, so that it shall become a habit in the character: _i. e._, a constant "having" or "behaving;" and, lastly, ethical power in performance and endurance, which is the skill following on habit, and the ease reached by frequency of right doing. The sensibility of the nation is indicated by the fineness of its customs; its courage, continence, and self-respect by its persistence in them. By sensibility I mean its natural perception of beauty, fitness, and rightness; or of what is lovely, decent, and just: faculties dependent much on race, and the primal signs of fine breeding in man; but cultivable also by education, and necessarily perishing without it. True education has, indeed, no other function than the development of these faculties, and of the relative will. It has been the great error of modern intelligence to mistake science for education. You do not educate a man by telling him what he knew not, but by making him what he was not. And making him what he will remain for ever: for no wash of weeds will bring back the faded purple. And in that dyeing there are two processes--first, the cleansing and wringing-out, which is the baptism with water; and then the infusing of the blue and scarlet colours, gentleness and justice, which is the baptism with fire. 107.[54] The customs and manners of a sensitive and highly-trained race are always Vital: that is to say, they are orderly manifestations of intense life, like the habitual action of the fingers of a musician. The customs and manners of a vile and rude race, on the contrary, are conditions of decay: they are not, properly speaking, habits, but incrustations; not restraints, or forms, of life; but gangrenes, noisome, and the beginnings of death. And generally, so far as custom attaches itself to indolence instead of action, and to prejudice instead of perception, it takes this deadly character, so that thus Custom hangs upon us with a weight Heavy as frost, and deep almost as life. But that weight, if it become impetus, (living instead of dead weight) is just what gives value to custom, when it works _with_ life, instead of against it. 108. The high ethical training of a nation implies perfect Grace, Pitifulness, and Peace; it is irreconcilably inconsistent with filthy or mechanical employments,--with the desire of money,--and with mental states of anxiety, jealousy, or indifference to pain. The present insensibility of the upper classes of Europe to the surrounding aspects of suffering, uncleanness, and crime, binds them not only into one responsibility with the sin, but into one dishonour with the foulness, which rot at their thresholds. The crimes daily recorded in the police-courts of London and Paris (and much more those which are _un_recorded) are a disgrace to the whole body politic;[55] they are, as in the body natural, stains of disease on a face of delicate skin, making the delicacy itself frightful. Similarly, the filth and poverty permitted or ignored in the midst of us are as dishonourable to the whole social body, as in the body natural it is to wash the face, but leave the hands and feet foul. Christ's way is the only true one: begin at the feet; the face will take care of itself. 109. Yet, since necessarily, in the frame of a nation, nothing but the head can be of gold, and the feet, for the work they have to do, must be part of iron, part of clay;--foul or mechanical work is always reduced by a noble race to the minimum in quantity; and, even then, performed and endured, not without sense of degradation, as a fine temper is wounded by the sight of the lower offices of the body. The highest conditions of human society reached hitherto have cast such work to slaves; but supposing slavery of a politically defined kind to be done away with, mechanical and foul employment must, in all highly organized states, take the aspect either of punishment or probation. All criminals should at once be set to the most dangerous and painful forms of it, especially to work in mines and at furnaces,[56] so as to relieve the innocent population as far as possible: of merely rough (not mechanical) manual labour, especially agricultural, _a large portion should be done by the upper classes_;--_bodily health, and sufficient contrast and repose for the mental functions, being unattainable without it_; what necessarily inferior labour remains to be done, as especially in manufactures, should, and always will, when the relations of society are reverent and harmonious, fall to the lot of those who, for the time, are fit for nothing better. For as, whatever the perfectness of the educational system, there must remain infinite differences between the natures and capacities of men; and these differing natures are generally rangeable under the two qualities of lordly, (or tending towards rule, construction, and harmony), and servile (or tending towards misrule, destruction, and discord); and since the lordly part is only in a state of profitableness while ruling, and the servile only in a state of redeemableness while serving, the whole health of the state depends on the manifest separation of these two elements of its mind; for, if the servile part be not separated and rendered visible in service, it mixes with, and corrupts, the entire body of the state; and if the lordly part be not distinguished, and set to rule, it is crushed and lost, being turned to no account, so that the rarest qualities of the nation are all given to it in vain.[57] II. LAWS. 110. These are the definitions and bonds of custom, or of what the nation desires should become custom. Law is either archic,[58] (of direction), meristic, (of division), or critic, (of judgment). Archic law is that of appointment and precept: it defines what is and is not to be _done_. Meristic law is that of balance and distribution: it defines what is and is not to be _possessed_. Critic law is that of discernment and award: it defines what is and is not to be _suffered_. 111. A. ARCHIC LAW. If we choose to unite the laws of precept and distribution under the head of "statutes," all law is simply either of statute or judgment; that is, first the establishment of ordinance, and, secondly, the assignment of the reward, or penalty, due to its observance or violation. To some extent these two forms of law must be associated, and, with every ordinance, the penalty of disobedience to it be also determined. But since the degrees and guilt of disobedience vary, the determination of due reward and punishment must be modified by discernment of special fact, which is peculiarly the office of the judge, as distinguished from that of the lawgiver and law-sustainer, or king; not but that the two offices are always theoretically, and in early stages, or limited numbers, of society, are often practically, united in the same person or persons. 112. Also, it is necessary to keep clearly in view the distinction between these two kinds of law, because the possible range of law is wider in proportion to their separation. There are many points of conduct respecting which the nation may wisely express its will by a written precept or resolve, yet not enforce it by penalty:[59] and the expedient degree of penalty is always quite a separate consideration from the expedience of the statute; for the statute may often be better enforced by mercy than severity, and is also easier in the bearing, and less likely to be abrogated. Farther, laws of precept have reference especially to youth, and concern themselves with training; but laws of judgment to manhood, and concern themselves with remedy and reward. There is a highly curious feeling in the English mind against educational law: we think no man's liberty should be interfered with till he has done irrevocable wrong; whereas it is then just too late for the only gracious and kingly interference, which is to hinder him from doing it. Make your educational laws strict, and your criminal ones may be gentle; but, leave youth its liberty and you will have to dig dungeons for age. And it is good for a man that he "wear the yoke in his youth:" for the reins may then be of silken thread; and with sweet chime of silver bells at the bridle; but, for the captivity of age, you must forge the iron fetter, and cast the passing bell. 113. Since no law can be, in a final or true sense, established, but by right, (all unjust laws involving the ultimate necessity of their own abrogation), the law-giving can only become a law-sustaining power in so far as it is Royal, or "right doing;"--in so far, that is, as it rules, not misrules, and orders, not dis-orders, the things submitted to it. Throned on this rock of justice, the kingly power becomes established and establishing; "[Greek: theios]," or divine, and, therefore, it is literally true that no ruler can err, so long as he is a ruler, or [Greek: archôn oudeis amartanei tote hotan archôn ê]; perverted by careless thought, which has cost the world somewhat, into--"the king can do no wrong." 114. B. MERISTIC LAW,[60] or that of the tenure of property, first determines what every individual possesses by right, and secures it to him; and what he possesses by wrong, and deprives him of it. But it has a far higher provisory function: it determines what every man _should_ possess, and puts it within his reach on due conditions; and what he should _not_ possess, and puts this out of his reach, conclusively. 115. Every article of human wealth has certain conditions attached to its merited possession; when these are unobserved, possession becomes rapine. And the object of meristic law is not only to secure to every man his rightful share (the share, that is, which he has worked for, produced, or received by gift from a rightful owner), but to enforce the due conditions of possession, as far as law may conveniently reach; for instance, that land shall not be wantonly allowed to run to waste, that streams shall not be poisoned by the persons through whose properties they pass, nor air be rendered unwholesome beyond given limits. Laws of this kind exist already in rudimentary degree, but need large development; the just laws respecting the possession of works of art have not hitherto been so much as conceived, and the daily loss of national wealth, and of its use, in this respect, is quite incalculable. And these laws need revision quite as much respecting property in national as in private hands. For instance: the public are under a vague impression that, because they have paid for the contents of the British Museum, every one has an equal right to see and to handle them. But the public have similarly paid for the contents of Woolwich arsenal; yet do not expect free access to it, or handling of its contents. The British Museum is neither a free circulating library, nor a free school: it is a place for the safe preservation, and exhibition on due occasion, of unique books, unique objects of natural history, and unique works of art; its books can no more be used by everybody than its coins can be handled, or its statues cast. There ought to be free libraries in every quarter of London, with large and complete reading-rooms attached; so also free educational museums should be open in every quarter of London, all day long, until late at night, well lighted, well catalogued, and rich in contents both of art and natural history. But neither the British Museum nor National Gallery is a school; they are _treasuries_; and both should be severely restricted in access and in use. Unless some order of this kind is made, and that soon, for the MSS. department of the Museum, (its superintendents have sorrowfully told me this, and repeatedly), the best MSS. in the collection will be destroyed, irretrievably, by the careless and continual handling to which they are now subjected. Finally, in certain conditions of a nation's progress, laws limiting accumulation of any kind of property may be found expedient. 116. C. CRITIC LAW determines questions of injury, and assigns due rewards and punishments to conduct. Two curious economical questions arise laterally with respect to this branch of law, namely, the cost of crime, and the cost of judgment. The cost of crime is endured by nations ignorantly, that expense being nowhere stated in their budgets; the cost of judgment, patiently, (provided only it can be had pure for the money), because the science, or perhaps we ought rather to say the art, of law, is felt to found a noble profession and discipline; so that civilized nations are usually glad that a number of persons should be supported by exercise in oratory and analysis. But it has not yet been calculated what the practical value might have been, in other directions, of the intelligence now occupied in deciding, through courses of years, what might have been decided as justly, had the date of judgment been fixed, in as many hours. Imagine one half of the funds which any great nation devotes to dispute by law, applied to the determination of physical questions in medicine, agriculture, and theoretic science; and calculate the probable results within the next ten years! I say nothing yet of the more deadly, more lamentable loss, involved in the use of purchased, instead of personal, justice--[Greek: "epaktô par allôn--aporia oikeiôn."] 117. In order to true analysis of critic law, we must understand the real meaning of the word "injury." We commonly understand by it, any kind of harm done by one man to another; but we do not define the idea of harm: sometimes we limit it to the harm which the sufferer is conscious of; whereas much the worst injuries are those he is unconscious of; and, at other times, we limit the idea to violence, or restraint; whereas much the worse forms of injury are to be accomplished by indolence, and the withdrawal of restraint. 118. "Injury" is then simply the refusal, or violation of, any man's right or claim upon his fellows: which claim, much talked of in modern times, under the term "right," is mainly resolvable into two branches: a man's claim not to be hindered from doing what he should; and his claim to be hindered from doing what he should not; these two forms of hindrance being intensified by reward, help, and fortune, or Fors, on one side, and by punishment, impediment, and even final arrest, or Mors, on the other. 119. Now, in order to a man's obtaining these two rights, it is clearly needful that the _worth_ of him should be approximately known; as well as the _want_ of worth, which has, unhappily, been usually the principal subject of study for critic law, careful hitherto only to mark degrees of de-merit, instead of merit;--assigning, indeed, to the _De_ficiencies (not always, alas! even to these) just estimate, fine, or penalty; but to the _Ef_ficiencies, on the other side, which are by much the more interesting, as well as the only profitable part of its subject, assigning neither estimate nor aid. 120. Now, it is in this higher and perfect function of critic law, _en_abling instead of _dis_abling, that it becomes truly Kingly, instead of Draconic: (what Providence gave the great, wrathful legislator his name?): that is, it becomes the law of man and of life, instead of the law of the worm and of death--both of these laws being set in changeless poise one against another, and the enforcement of both being the eternal function of the lawgiver, and true claim of every living soul: such claim being indeed strong to be mercifully hindered, and even, if need be, abolished, when longer existence means only deeper destruction, but stronger still to be mercifully helped, and recreated, when longer existence and new creation mean nobler life. So that reward and punishment will be found to resolve themselves mainly[61] into help and hindrance; and these again will issue naturally from time recognition of deserving, and the just reverence and just wrath which follow instinctively on such recognition. 121. I say, "follow," but, in reality, they are part of the recognition. Reverence is as instinctive as anger;--both of them instant on true vision: it is sight and understanding that we have to teach, and these _are_ reverence. Make a man perceive worth, and in its reflection he sees his own relative unworth, and worships thereupon inevitably, not with stiff courtesy, but rejoicingly, passionately, and, best of all, _restfully_: for the inner capacity of awe and love is infinite in man, and only in finding these, can we find peace. And the common insolences and petulances of the people, and their talk of equality, are not irreverence in them in the least, but mere blindness, stupefaction, and fog in the brains,[62] the first sign of any cleansing away of which is, that they gain some power of discerning, and some patience in submitting to, their true counsellors and governors. In the mode of such discernment consists the real "constitution" of the state, more than in the titles or offices of the discerned person; for it is no matter, save in degree of mischief, to what office a man is appointed, if he cannot fulfil it. 122. III. GOVERNMENT BY COUNCIL. This is the determination, by living authority, of the national conduct to be observed under existing circumstances; and the modification or enlargement, abrogation or enforcement, of the code of national law according to present needs or purposes. This government is necessarily always by council, for though the authority of it may be vested in one person, that person cannot form any opinion on a matter of public interest but by (voluntarily or involuntarily) submitting himself to the influence of others. This government is always twofold--visible and invisible. The visible government is that which nominally carries on the national business; determines its foreign relations, raises taxes, levies soldiers, orders war or peace, and otherwise becomes the arbiter of the national fortune. The invisible government is that exercised by all energetic and intelligent men, each in his sphere, regulating the inner will and secret ways of the people, essentially forming its character, and preparing its fate. Visible governments are the toys of some nations, the diseases of others, the harness of some, the burdens of more the necessity of all. Sometimes their career is quite distinct from that of the people, and to write it, as the national history, is as if one should number the accidents which befall a man's weapons and wardrobe, and call the list his biography. Nevertheless, a truly noble and wise nation necessarily has a noble and wise visible government, for its wisdom issues in that conclusively. 123. Visible governments are, in their agencies, capable of three pure forms, and of no more than three. They are either monarchies, where the authority is vested in one person; oligarchies, when it is vested in a minority; or democracies, when vested in a majority. But these three forms are not only, in practice, variously limited and combined, but capable of infinite difference in character and use, receiving specific names according to their variations; which names, being nowise agreed upon, nor consistently used, either in thought or writing, no man can at present tell, in speaking of any kind of government, whether he is understood; nor, in hearing, whether he understands. Thus we usually call a just government by one person a monarchy, and an unjust or cruel one, a tyranny: this might be reasonable if it had reference to the divinity of true government; but to limit the term "oligarchy" to government by a few rich people, and to call government by a few wise or noble people "aristocracy," is evidently absurd, unless it were proved that rich people never could be wise, or noble people rich; and farther absurd, because there are other distinctions in character, as well as riches or wisdom (greater purity of race, or strength of purpose, for instance), which may give the power of government to the few. So that if we had to give names to every group or kind of minority, we should have verbiage enough. But there is only one right name--"oligarchy." 124. So also the terms "republic" and "democracy"[63] are confused, especially in modern use; and both of them are liable to every sort of misconception. A republic means, properly, a polity in which the state, with its all, is at every man's service, and every man, with his all, at the state's service--(people are apt to lose sight of the last condition), but its government may nevertheless be oligarchic (consular, or decemviral, for instance), or monarchic (dictatorial). But a democracy means a state in which the government rests directly with the majority of the citizens. And both these conditions have been judged only by such accidents and aspects of them as each of us has had experience of; and sometimes both have been confused with anarchy, as it is the fashion at present to talk of the "failure of republican institutions in America," when there has never yet been in America any such thing as an institution, but only defiance of institution; neither any such thing as a _res-publica_, but only a multitudinous _res-privata_; every man for himself. It is not republicanism which fails now in America; it is your model science of political economy, brought to its perfect practice. There you may see competition, and the "law of demand and supply" (especially in paper), in beautiful and unhindered operation.[64] Lust of wealth, and trust in it; vulgar faith in magnitude and multitude, instead of nobleness; besides that faith natural to backwoodsmen--"lucum ligna,"[65]--perpetual self-contemplation, issuing in passionate vanity; total ignorance of the finer and higher arts, and of all that they teach and bestow; and the discontent of energetic minds unoccupied, frantic with hope of uncomprehended change, and progress they know not whither;[66]--these are the things that have "failed" in America; and yet not altogether failed--it is not collapse, but collision; the greatest railroad accident on record, with fire caught from the furnace, and Catiline's quenching "non aquâ, sed ruinâ."[67] But I see not, in any of our talk of them, justice enough done to their erratic strength of purpose, nor any estimate taken of the strength of endurance of domestic sorrow, in what their women and children suppose a righteous cause. And out of that endurance and suffering, its own fruit will be born with time; [_not_ abolition of slavery, however. See § 130.] and Carlyle's prophecy of them (June, 1850), as it has now come true in the first clause, will, in the last:-- "America, too, will find that caucuses, divisionalists, stump-oratory, and speeches to Buncombe will not carry men to the immortal gods; that the Washington Congress, and constitutional battle of Kilkenny cats is there, as here, naught for such objects; quite incompetent for such; and, in fine, that said sublime constitutional arrangement will require to be (with terrible throes, and travail such as few expect yet) remodelled, abridged, extended, suppressed, torn asunder, put together again--not without heroic labour and effort, quite other than that of the stump-orator and the revival preacher, one day." 125.[68] Understand, then, once for all, that no form of government, provided it be a government at all, is, as such, to be either condemned or praised, or contested for in anywise, but by fools. But all forms of government are good just so far as they attain this one vital necessity of policy--_that the wise and kind, few or many, shall govern the unwise and unkind_; and they are evil so far as they miss of this, or reverse it. Not does the form, in any case, signify one whit, but its _firmness_, and adaptation to the need; for if there be many foolish persons in a state, and few wise, then it is good that the few govern; and if there be many wise, and few foolish, then it is good that the many govern; and if many be wise, yet one wiser, then it is good that one should govern; and so on. Thus, we may have "the ant's republic, and the realm of bees," both good in their kind; one for groping, and the other for building; and nobler still, for flying;--the Ducal monarchy[69] of those Intelligent of seasons, that set forth The aery caravan, high over seas. 126. Nor need we want examples, among the inferior creatures, of dissoluteness, as well as resoluteness, in government. I once saw democracy finely illustrated by the beetles of North Switzerland, who by universal suffrage, and elytric acclamation, one May twilight, carried it, that they would fly over the Lake of Zug; and flew _short_, to the great disfigurement of the Lake of Zug,--[Greek: Kantharon limên]--over some leagues square, and to the close of the cockchafer democracy for that year. Then, for tyranny, the old fable of the frogs and the stork finely touches one form of it; but truth will image it more closely than fable, for tyranny is not complete when it is only over the idle, but when it is over the laborious and the blind. This description of pelicans and climbing perch, which I find quoted in one of our popular natural histories, out of Sir Emerson Tennant's _Ceylon_, comes as near as may be to the true image of the thing:-- "Heavy rains came on, and as we stood on the high ground, we observed a pelican on the margin of the shallow pool gorging himself; our people went towards him, and raised a cry of 'Fish, fish!' We hurried down, and found numbers of fish struggling upward through the grass, in the rills formed by the trickling of the rain. There was scarcely water to cover them, but nevertheless they made rapid progress up the bank, on which our followers collected about two baskets of them. They were forcing their way up the knoll, and had they not been interrupted, first by the pelican, and afterwards by ourselves, they would in a few minutes have gained the highest point, and descended on the other side into a pool which formed another portion of the tank. In going this distance, however, they must have used muscular exertion enough to have taken them half a mile on level ground; for at these places all the cattle and wild animals of the neighbourhood had latterly come to drink, so that the surface was everywhere indented with footmarks, in addition to the cracks in the surrounding baked mud, into which the fish tumbled in their progress. In those holes, which were deep, and the sides perpendicular, they remained to die, and were carried off by kites and crows."[70] 127. But whether governments be bad or good, one general disadvantage seems to attach to them in modern times--that they are all _costly_.[71] This, however, is not essentially the fault of the governments. If nations choose to play at war, they will always find their governments willing to lead the game, and soon coming under that term of Aristophanes, "[Greek: kapêloi aspidôn]," "shield-sellers." And when ([Greek: pêm epi pêmati])[72] the shields take the form of iron ships, with apparatus "for defence against liquid fire,"--as I see by latest accounts they are now arranging the decks in English dockyards--they become costly biers enough for the grey convoy of chief mourner waves, wreathed with funereal foam, to bear back the dead upon; the massy shoulders of those corpse-bearers being intended for quite other work, and to bear the living, and food for the living, if we would let them. 128. Nor have we the least right to complain of our governments being expensive, so long as we set the government _to do precisely the work which brings no return_. If our present doctrines of political economy be just, let us trust them to the utmost; take that war business out of the government's hands, and test therein the principles of supply and demand. Let our future sieges of Sebastopol be done by contract--no capture, no pay--(I admit that things might sometimes go better so); and let us sell the commands of our prospective battles, with our vicarages, to the lowest bidder; so may we have cheap victories, and divinity. On the other hand, if we have so much suspicion of our science that we dare not trust it on military or spiritual business, would it not be but reasonable to try whether some authoritative handling may not prosper in matters utilitarian? If we were to set our governments to do useful things instead of mischievous, possibly even the apparatus itself might in time come to be less costly. The machine, applied to the building of the house, might perhaps pay, when it seems not to pay, applied to pulling it down. If we made in our dockyards ships to carry timber and coals, instead of cannon, and with provision for the brightening of domestic solid culinary fire, instead of for the scattering of liquid hostile fire, it might have some effect on the taxes. Or suppose that we tried the experiment on land instead of water carriage; already the government, not unapproved, carries letters and parcels for us; larger packages may in time follow;--even general merchandise--why not, at last, ourselves? Had the money spent in local mistakes and vain private litigation, on the railroads of England, been laid out, instead, under proper government restraint, on really useful railroad work, and had no absurd expense been incurred in ornamenting stations, we might already have had,--what ultimately it will be found we must have,--quadruple rails, two for passengers, and two for traffic, on every great line; and we might have been carried in swift safety, and watched and warded by well-paid pointsmen, for half the present fares. [For, of course, a railroad company is merely an association of turnpike-keepers, who make the tolls as high as they can, not to mend the roads with, but to pocket. The public will in time discover this, and do away with turnpikes on railroads, as on all other public-ways.] 129. Suppose it should thus turn out, finally, that a true government set to true work, instead of being a costly engine, was a paying one? that your government, rightly organized, instead of itself subsisting by an income-tax, would produce its subjects some subsistence in the shape of an income dividend?--police, and judges duly paid besides, only with less work than the state at present provides for them. A true government set to true work!--Not easily to be imagined, still less obtained; but not beyond human hope or ingenuity. Only you will have to alter your election systems somewhat, first. Not by universal suffrage, nor by votes purchasable with beer, is such government to be had. That is to say, not by universal _equal_ suffrage. Every man upwards of twenty, who has been convicted of no legal crime, should have his say in this matter; but afterwards a louder voice, as he grows older, and approves himself wiser. If he has one vote at twenty, he should have two at thirty, four at forty, ten at fifty. For every single vote which he has with an income of a hundred a year, he should have ten with an income of a thousand, (provided you first see to it that wealth is, as nature intended it to be, the reward of sagacity and industry--not of good luck in a scramble or a lottery). For every single vote which he had as subordinate in any business, he should have two when he became a master; and every office and authority nationally bestowed, implying trustworthiness and intellect, should have its known proportional number of votes attached to it. But into the detail and working of a true system in these matters we cannot now enter; we are concerned as yet with definitions only, and statements of first principles, which will be established now sufficiently for our purposes when we have examined the nature of that form of government last on the list in § 105,--the purely "Magistral," exciting at present its full share of public notice, under its ambiguous title of "slavery." 130. I have not, however, been able to ascertain in definite terms, from the declaimers against slavery, what they understand by it. If they mean only the imprisonment or compulsion of one person by another, such imprisonment or compulsion being in many cases highly expedient, slavery, so defined, would be no evil in itself, but only in its abuse; that is, when men are slaves, who should not be, or masters, who should not be, or even the fittest characters for either state, placed in it under conditions which should not be. It is not, for instance, a necessary condition of slavery, nor a desirable one, that parents should be separated from children, or husbands from wives; but the institution of war, against which people declaim with less violence, effects such separations,--not unfrequently in a very permanent manner. To press a sailor, seize a white youth by conscription for a soldier, or carry off a black one for a labourer, may all be right acts, or all wrong ones, according to needs and circumstances. It is wrong to scourge a man unnecessarily. So it is to shoot him. Both must be done on occasion; and it is better and kinder to flog a man to his work, than to leave him idle till he robs, and flog him afterwards. The essential thing for all creatures is to be made to do right; how they are made to do it--by pleasant promises, or hard necessities, pathetic oratory, or the whip--is comparatively immaterial.[73] To be deceived is perhaps as incompatible with human dignity as to be whipped; and I suspect the last method to be not the worst, for the help of many individuals. The Jewish nation throve under it, in the hand of a monarch reputed not unwise; it is only the change of whip for scorpion which is inexpedient; and that change is as likely to come to pass on the side of license as of law. For the true scorpion whips are those of the nation's pleasant vices, which are to it as St. John's locusts--crown on the head, ravin in the mouth, and sting in the tail. If it will not bear the rule of Athena and Apollo, who shepherd without smiting ([Greek: ou plêgê nemontes]), Athena at last calls no more in the corners of the streets; and then follows the rule of Tisiphone, who smites without shepherding. 131. If, however, by slavery, instead of absolute compulsion, is meant _the purchase, by money, of the right of compulsion_, such purchase is necessarily made whenever a portion of any territory is transferred, for money, from one monarch to another: which has happened frequently enough in history, without its being supposed that the inhabitants of the districts so transferred became therefore slaves. In this, as in the former case, the dispute seems about the fashion of the thing, rather than the fact of it. There are two rocks in mid-sea, on each of which, neglected equally by instructive and commercial powers, a handful of inhabitants live as they may. Two merchants bid for the two properties, but not in the same terms. One bids for the people, buys _them_, and sets them to work, under pain of scourge; the other bids for the rock, buys _it_, and throws the inhabitants into the sea. The former is the American, the latter the English method, of slavery; much is to be said for, and something against, both, which I hope to say in due time and place.[74] 132. If, however, slavery mean not merely the purchase of the right of compulsion, but _the purchase of the body and soul of the creature itself for money_, it is not, I think, among the black races that purchases of this kind are most extensively made, or that separate souls of a fine make fetch the highest price. This branch of the inquiry we shall have occasion also to follow out at some length, for in the worst instances of the selling of souls, we are apt to get, when we ask if the sale is valid, only Pyrrhon's answer[75]--"None can know." 133. The fact is that slavery is not a political institution at all, _but an inherent, natural, and eternal inheritance_ of a large portion of the human race--to whom, the more you give of their own free will, the more slaves they will make themselves. In common parlance, we idly confuse captivity with slavery, and are always thinking of the difference between pine-trunks (Ariel in the pine), and cowslip-bells ("in the cowslip-bell I lie"), or between carrying wood and drinking (Caliban's slavery and freedom), instead of noting the far more serious differences between Ariel and Caliban themselves, and the means by which, practically, that difference may be brought about or diminished. 134.[76] Plato's slave, in the _Polity_, who, well dressed and washed, aspires to the hand of his master's daughter, corresponds curiously to Caliban attacking Prospero's cell; and there is an undercurrent of meaning throughout, in the _Tempest_ as well as in the _Merchant of Venice_; referring in this case to government, as in that to commerce. Miranda[77] ("the wonderful," so addressed first by Ferdinand, "Oh, you wonder!") corresponds to Homer's Arete: Ariel and Caliban are respectively the spirits of faithful and imaginative labour, opposed to rebellious, hurtful and slavish labour. Prospero ("for hope"), a true governor, is opposed to Sycorax, the mother of slavery, her name "Swine-raven," indicating at once brutality and deathfulness; hence the line-- "As wicked dew as e'er my mother brushed, with _raven's feather_,"--&c. For all these dreams of Shakespeare, as those of true and strong men must be, are "[Greek: phantasmata theia, kai skiai tôn ontôn]"--divine phantasms, and shadows of things that are. We hardly tell our children, willingly, a fable with no purport in it; yet we think God sends his best messengers only to sing fairy tales to us, fond and empty. The _Tempest_ is just like a grotesque in a rich missal, "clasped where paynims pray." Ariel is the spirit of generous and free-hearted service, in early stages of human society oppressed by ignorance and wild tyranny: venting groans as fast as mill-wheels strike; in shipwreck of states, dreadful; so that "all but mariners plunge in the brine, and quit the vessel, then all afire with _me_," yet having in itself the will and sweetness of truest peace, whence that is especially called "Ariel's" song, "Come unto these yellow sands, and there, _take hands_," "courtesied when you have, and kissed, the wild waves whist:" (mind, it is "cortesia," not "curtsey,") and read "quiet" for "whist," if you want the full sense. Then you may indeed foot it featly, and sweet spirits bear the burden for you--with watch in the night, and call in early morning. The _vis viva_ in elemental transformation follows--"Full fathom five thy father lies, of his bones are coral made." Then, giving rest _after_ labour, it "fetches dew from the still vext Bermoöthes, and, with a charm joined to their suffered labour, leaves men asleep." Snatching away the feast of the cruel, it seems to them as a harpy; followed by the utterly vile, who cannot see it in any shape, but to whom it is the picture of nobody, it still gives shrill harmony to their false and mocking catch, "Thought is free;" but leads them into briers and foul places, and at last hollas the hounds upon them. Minister of fate against the great criminal, it joins itself with the "incensed seas and shores "--the sword that layeth at it cannot hold, and may "with bemocked-at stabs as soon kill the still-closing waters, as diminish one dowle that is in its plume." As the guide and aid of true love, it is always called by Prospero "fine" (the French "fine," not the English), or "delicate"--another long note would be needed to explain all the meaning in this word. Lastly, its work done, and war, it resolves itself into the elements. The intense significance of the last song, "Where the bee sucks," I will examine in its due place. The types of slavery in Caliban are more palpable, and need not be dwelt on now: though I will notice them also, severally, in their proper places;--the heart of his slavery is in his worship: "That's a brave god, and bears celestial--liquor." But, in illustration of the sense in which the Latin "benignus" and "malignus" are to be coupled with Eleutheria and Douleia, note that Caliban's torment is always the physical reflection of his own nature--"cramps" and "side stiches that shall pen thy breath up; thou shalt be pinched, as thick as honeycombs:" the whole nature of slavery being one cramp and cretinous contraction. Fancy this of Ariel! You may fetter him, but you set no mark on him; you may put him to hard work and far journey, but you cannot give him a cramp. 135. I should dwell, even in these prefatory papers, at more length on this subject of slavery, had not all I would say been said already, in vain, (not, as I hope, ultimately in vain), by Carlyle, in the first of the _Latter-day Pamphlets_, which I commend to the reader's gravest reading; together with that as much neglected, and still more immediately needed, on model prisons, and with the great chapter on "Permanence" (fifth of the last section of "Past and Present"), which sums what is known, and foreshadows, or rather forelights, all that is to be learned of National Discipline. I have only here farther to examine the nature of one world-wide and everlasting form of slavery, wholesome in use, as deadly in abuse;--the service of the rich by the poor. FOOTNOTES: [54] [Think over this paragraph carefully; it should have been much expanded to be quite intelligible; but it contains all that I want it to contain.] [55] "The ordinary brute, who flourishes in the very centre of ornate life, tells us of unknown depths on the verge of which we totter, being bound to thank our stars every day we live that there is not a general outbreak, and a revolt from the yoke of civilization."--_Times_ leader, Dec. 25, 1862. Admitting that our stars are to be thanked for our safety, whom are we to thank for the danger? [56] Our politicians, even the best of them, regard only the distress caused by the _failure_ of mechanical labour. The degradation caused by its excess is a far more serious subject of thought, and of future fear. I shall examine this part of our subject at length hereafter. There can hardly be any doubt, at present, cast on the truth of the above passages, as all the great thinkers are unanimous on the matter. Plato's words are terrific in their scorn and pity whenever he touches on the mechanical arts. He calls the men employed in them not even human, but partially and diminutively human, "[Greek: anthrôpiskoi,]" and opposes such work to noble occupations, not merely as prison is opposed to freedom but as a convict's dishonoured prison is to the temple (escape from them being like that of a criminal to the sanctuary); and the destruction caused by them being of soul no less than body.--_Rep._ vi. 9. Compare _Laws_, v. 11. Xenophon dwells on the evil of occupations at the furnace and especially their "[Greek: ascholia], want of leisure."--_Econ._ i. 4. (Modern England, with all its pride of education, has lost that first sense of the word "school;" and till it recover that, it will find no other rightly.) His word for the harm to the soul is to "break" it, as we say of the heart.--_Econ._ i. 6. And herein, also, is the root of the scorn, otherwise apparently most strange and cruel, with which Homer, Dante, and Shakspeare always speak of the populace; for it is entirely true that, in great states, the lower orders are low by nature as well as by task, being precisely that part of the commonwealth which has been thrust down for its coarseness or unworthiness (by coarseness I mean especially insensibility and irreverence--the "profane" of Horace); and when this ceases to be so, and the corruption and profanity are in the higher instead of the lower orders, there arises, first, helpless confusion, then, if the lower classes deserve power, ensues swift revolution, and they get it; but if neither the populace nor their rulers deserve it, there follows mere darkness and dissolution, till, out of the putrid elements, some new capacity of order rises, like grass on a grave; if not, there is no more hope, nor shadow of turning, for that nation. Atropos has her way with it. So that the law of national health is like that of a great lake or sea, in perfect but slow circulation, letting the dregs fall continually to the lowest place, and the clear water rise; yet so as that there shall be no neglect of the lower orders, but perfect supervision and sympathy, so that if one member suffer, all members shall suffer with it. [57] "[Greek: oligês, kai allôs gignomenês]." (Little, and that little born in vain.) The bitter sentence never was so true as at this day. [58] [This following note is a mere cluster of memoranda, but I keep it for reference.] Thetic, or Thesmic, would perhaps be a better term than archic; but liable to be confused with some which we shall want relating to Theoria. The administrators of the three great divisions of law are severally Archons, Merists, and Dicasts. The Archons are the true princes, or beginners of things; or leaders (as of an orchestra). The Merists are properly the Domini, or Lords of houses and nations. The Dicasts, properly, the judges, and that with Olympian justice, which reaches to heaven and hell. The violation of archic law is [Greek: hamartia] (error), [Greek: ponêria] (failure), or [Greek: plêmmeleia] (discord). The violation of meristic law is [Greek: anomia] (iniquity). The violation of critic law is [Greek: adikia] (injury). Iniquity is the central generic term; for all law is _fatal_; it is the division to men of their fate; as the fold of their pasture, it is [Greek: nomos]; as the assigning of their portion, [Greek: moira]. [59] [This is the only sentence which, in revising these essays, I am now inclined to question; but the point is one of extreme difficulty. There might be a law, for instance, of curfew, that candles should be put out, unless for necessary service, at such and such an hour, the idea of "necessary service" being quite indefinable, and no penalty possible; yet there would be a distinct consciousness of illegal conduct in young ladies' minds who danced by candlelight till dawn.] [60] [Read this and the next paragraph with attention; they contain clear statements, which I cannot mend, of things most necessary.] [61] [Mainly; not altogether. Conclusive reward of high virtue is loving and crowning, not helping; and conclusive punishment of deep vice is hating and crushing, not merely hindering.] [62] Compare Chaucer's "villany" (clownishness). Full foul and chorlishe seemed she, And eke villanous for to be, And little coulde of norture To worship any creature. [63] [I leave this paragraph, in every syllable, as it was written, during the rage of the American war; it was meant to refer, however, chiefly to the Northerns: what modifications its hot and partial terms require I will give in another place: let it stand now as it stood.] [64] Supply and demand! Alas! for what noble work was there ever any audible "demand" in that poor sense (Past and Present)? Nay, the demand is not loud, even for ignoble work. _See_ "Average Earnings of Betty Taylor," in _Times_ of 4th February of this year [1863]: "Worked from Monday morning at 8 A.M. to Friday night at 5.30 P.M. for 1_s._ 5-1/2_d._"--_Laissez faire._ [This kind of slavery finds no Abolitionists that I hear of.] [65] ["That the sacred grove is nothing but logs."] [66] Ames, by report of Waldo Emerson, says "that a monarchy is a merchantman, which sails well, but will sometimes strike on a rock, and go to the bottom; whilst a republic is a raft, which would never sink, but then your feet are always in the water." Yes, that is comfortable; and though your raft cannot sink (being too worthless for that), it may go to pieces, I suppose, when the four winds (your only pilots) steer competitively from its four corners, and carry it, [Greek: ôs opôrinos Boreês phoreêsin akanthas], and then more than your feet will be in the water. [67] ["Not with water, but with ruin." The worst ruin being that which the Americans chiefly boast of. They sent all their best and honestest youths, Harvard University men and the like, to that accursed war; got them nearly all shot; wrote pretty biographies (to the ages of 17, 18, 19) and epitaphs for them; and so, having washed all the salt out of the nation in blood, left themselves to putrefaction, and the morality of New York.] [68] [This paragraph contains the gist of all that precede.] [69] [Whenever you are puzzled by any apparently mistaken use of words in these essays, take your dictionary, remembering I had to fix terms, as well as principles. A Duke is a "dux" or "leader;" the flying wedge of cranes is under a "ducal monarch"--a very different personage from a queen bee. The Venetians, with a beautiful instinct, gave the name to their King of the Sea.] [70] [This is a perfect picture of the French under the tyrannies of their Pelican Kings, before the Revolution. But they must find other than Pelican Kings--or rather, Pelican Kings of the Divine brood, that feed their children, and with their best blood.] [71] [Read carefully, from this point; because here begins the statement of things requiring to be done, which I am now re-trying to make definite in _Fors Clavigera_.] [72] ["Evil on the top of Evil." Delphic oracle, meaning iron on the anvil.] [73] [Permit me to enforce and reinforce this statement, with all earnestness. It is the sum of what needs most to be understood in the matter of education.] [74] [A pregnant paragraph, meant against English and Scotch landlords who drive their people off the land.] [75] [In Lucian's dialogue, "The sale of lives."] [76] [I raise this analysis of the _Tempest_ into my text; but it is nothing but a hurried note, which I may never have time to expand. I have retouched it here and there a little, however.] [77] Of Shakspeare's names I will afterwards speak at more length; they are curiously--often barbarously--much by Providence,--but assuredly not without Shakspeare's cunning purpose--mixed out of the various traditions he confusedly adopted, and languages which he imperfectly knew. Three of the clearest in meaning have been already noticed. Desdemona, "[Greek: dysdaimonia]," "miserable fortune," is also plain enough. Othello is, I believe, "the careful;" all the calamity of the tragedy arising from the single flaw and error in his magnificently collected strength. Ophelia, "serviceableness," the true lost wife of Hamlet, is marked as having a Greek name by that of her brother, Laertes; and its signification is once exquisitely alluded to in that brother's last word of her, where her gentle preciousness is opposed to the uselessness of the churlish clergy--"A _ministering_ angel shall my sister be, when thou liest howling." Hamlet is, I believe, connected in some way with "homely" the entire event of the tragedy turning on betrayal of home duty. Hermione ([Greek: erma]), "pillar-like," ([Greek: hê eidos eche chrysês 'Aphroditês]). Titania ([Greek: titênê]), "the queen;" Benedict and Beatrice, "blessed and blessing;" Valentine and Proteus, enduring (or strong), (valens), and changeful. Iago and Iachimo have evidently the same root--probably the Spanish Iago, Jacob, "the supplanter," Leonatus, and other such names, are interpreted, or played with, in the plays themselves. For the interpretation of Sycorax, and reference to her raven's feather, I am indebted to Mr. John R. Wise. CHAPTER VI. MASTERSHIP. 136. As in all previous discussions of our subject, we must study the relation of the commanding rich to the obeying poor in its simplest elements, in order to reach its first principles. The simplest state of it, then, is this:[78] a wise and provident person works much, consumes little, and lays by a store; an improvident person works little, consumes all his produce, and lays by no store. Accident interrupts the daily work, or renders it less productive; the idle person must then starve, or be supported by the provident one, who, having him thus at his mercy, may either refuse to maintain him altogether, or, which will evidently be more to his own interest, say to him, "I will maintain you, indeed, but you shall now work hard, instead of indolently, and instead of being allowed to lay by what you save, as you might have done, had you remained independent, _I_ will take all the surplus. You would not lay it up for yourself; it is wholly your own fault that has thrown you into my power, and I will force you to work, or starve; yet you shall have no profit of your work, only your daily bread for it; [and competition shall determine how much of that[79]]." This mode of treatment has now become so universal that it is supposed to be the only natural--nay, the only possible one; and the market wages are calmly defined by economists as "the sum which will maintain the labourer." 137. The power of the provident person to do this is only checked by the correlative power of some neighbour of similarly frugal habits, who says to the labourer--"I will give you a little more than this other provident person: come and work for me." The power of the provident over the improvident depends thus, primarily, on their relative numbers; secondarily, on the modes of agreement of the adverse parties with each other. The accidental level of wages is a variable function of the number of provident and idle persons in the world, of the enmity between them as classes, and of the agreement between those of the same class. _It depends, from beginning to end, on moral conditions._ 138. Supposing the rich to be entirely selfish, _it is always for their interest that the poor should be as numerous as they can employ, and restrain_. For, granting that the entire population is no larger than the ground can easily maintain--that the classes are stringently divided--and that there is sense or strength of hand enough with the rich to secure obedience; then, if nine-tenths of a nation are poor, the remaining tenth have the service of nine persons each;[80] but, if eight-tenths are poor, only of four each; if seven-tenths are poor, of two and a third each; if six-tenths are poor, of one and a half each; and if five-tenths are poor, of only one each. But, practically, if the rich strive always to obtain more power over the poor, instead of to raise them--and if, on the other hand, the poor become continually more vicious and numerous, through neglect and oppression,--though the _range_ of the power of the rich increases, its _tenure_ becomes less secure; until, at last the measure of iniquity being full, revolution, civil war, or the subjection of the state to a healthier or stronger one, closes the moral corruption, and industrial disease.[81] 139. It is rarely, however, that things come to this extremity. Kind persons among the rich, and wise among the poor, modify the connexion of the classes: the efforts made to raise and relieve on the one side, and the success of honest toil on the other, bind and blend the orders of society into the confused tissue of half-felt obligation, sullenly-rendered obedience, and variously-directed, or mis-directed toil, which form the warp of daily life. But this great law rules all the wild design: that success (while society is guided by laws of competition) _signifies always so much victory over your neighbour_ as to obtain the direction of his work, and to take the profits of it. _This is the real source of all great riches._ No man can become largely rich by his personal toil.[82] The work of his own hands, wisely directed, will indeed always maintain himself and his family, and make fitting provision for his age. _But it is only by the discovery of some method of taxing the labour of others that he can become opulent._ Every increase of his capital enables him to extend this taxation more widely; that is, to invest larger funds in the maintenance of labourers,--to direct, accordingly, vaster and yet vaster masses of labour, and to appropriate its profits. 140. There is much confusion of idea on the subject of this appropriation. It is, of course, the interest of the employer to disguise it from the persons employed; and, for his own comfort and complacency, he often desires no less to disguise it from himself. And it is matter of much doubt with me, how far the foul and foolish arguments used habitually on this subject are indeed the honest expression of foul and foolish convictions;--or rather (as I am sometimes forced to conclude from the irritation with which they are advanced) are resolutely dishonest, wilful, and malicious sophisms, arranged so as to mask, to the last moment, the real laws of economy, and future duties of men. By taking a simple example, and working it thoroughly out, the subject may be rescued from all but such determined misrepresentation. 141. Let us imagine a society of peasants, living on a rivershore, exposed to destructive inundation at somewhat extended intervals; and that each peasant possesses of this good, but imperilled, ground, more than he needs to cultivate for immediate subsistence. We will assume farther (and with too great probability of justice), that the greater part of them indolently keep in tillage just as much land as supplies them with daily food;--that they leave their children idle, and take no precautions against the rise of the stream. But one of them, (we will say but one, for the sake of greater clearness) cultivates carefully _all_ the ground of his estate; makes his children work hard and healthily; uses his spare time and theirs in building a rampart against the river; and, at the end of some years, has in his storehouses large reserves of food and clothing,--in his stables a well-tended breed of cattle, and around his fields a wedge of wall against flood. The torrent rises at last--sweeps away the harvests, and half the cottages of the careless peasants, and leaves them destitute. They naturally come for help to the provident one, whose fields are unwasted, and whose granaries are full. He has the right to refuse it to them: no one disputes this right.[83] But he will probably _not_ refuse it; it is not his interest to do so, even were he entirely selfish and cruel. The only question with him will be on what terms his aid is to be granted. 142. Clearly, not on terms of mere charity. To maintain his neighbours in idleness would be not only his ruin, but theirs. He will require work from them, in exchange for their maintenance; and, whether in kindness or cruelty, all the work they can give. Not now the three or four hours they were wont to spend on their own land, but the eight or ten hours they ought to have spent.[84] But how will he apply this labour? The men are now his slaves;--nothing less, and nothing more. On pain of starvation, he can force them to work in the manner, and to the end, he chooses. And it is by his wisdom in this choice that the worthiness of his mastership is proved, or its unworthiness. Evidently, he must first set them to bank out the water in some temporary way, and to get their ground cleansed and resown; else, in any case, their continued maintenance will be impossible. That done, and while he has still to feed them, suppose he makes them raise a secure rampart for their own ground against all future flood, and rebuild their houses in safer places, with the best material they can find; being allowed time out of their working hours to fetch such material from a distance. And for the food and clothing advanced, he takes security in land that as much shall be returned at a convenient period. 143. We may conceive this security to be redeemed, and the debt paid at the end of a few years. The prudent peasant has sustained no loss; _but is no richer than he was, and has had all his trouble for nothing_. But he has enriched his neighbours materially; bettered their houses, secured their land, and rendered them, in worldly matters, equal to himself. In all rational and final sense, he has been throughout their true Lord and King. 144. We will next trace his probable line of conduct, presuming his object to be exclusively the increase of his own fortune. After roughly recovering and cleansing the ground, he allows the ruined peasantry only to build huts upon it, such as he thinks protective enough from the weather to keep them in working health. The rest of their time he occupies, first in pulling down, and rebuilding on a magnificent scale, his own house, and in adding large dependencies to it. This done, in exchange for his continued supply of corn, he buys as much of his neighbours' land as he thinks he can superintend the management of; and makes the former owners securely embank and protect the ceded portion. By this arrangement, he leaves to a certain number of the peasantry only as much ground as will just maintain them in their existing numbers; as the population increases, he takes the extra hands, who cannot be maintained on the narrowed estates, for his own servants; employs some to cultivate the ground he has bought, giving them of its produce merely enough for subsistence; with the surplus, which, under his energetic and careful superintendence, will be large, he maintains a train of servants for state, and a body of workmen, whom he educates in ornamental arts. He now can splendidly decorate his house, lay out its grounds magnificently, and richly supply his table, and that of his household and retinue. And thus, without any abuse of right, we should find established all the phenomena of poverty and riches, which (it is supposed necessarily) accompany modern civilization. In one part of the district, we should have unhealthy land, miserable dwellings, and half-starved poor; in another, a well-ordered estate, well-fed servants, and refined conditions of highly educated and luxurious life. 145. I have put the two cases in simplicity, and to some extremity. But though in more complex and qualified operation, all the relations of society are but the expansion of these two typical sequences of conduct and result. I do not say, observe, that the first procedure is entirely recommendable; or even entirely right; still less, that the second is wholly wrong. Servants, and artists, and splendour of habitation and retinue, have all their use, propriety, and office. But I am determined that the reader shall understand clearly what they cost; and see that the condition of having them is the subjection to us of a certain number of imprudent or unfortunate persons (or, it may be, more fortunate than their masters), over whose destinies we exercise a boundless control. "Riches" mean eternally and essentially this; and God send at last a time when those words of our best-reputed economist shall be true, and we _shall_ indeed "all know what it is to be rich;"[85] that it is to be slave-master over farthest earth, and over all ways and thoughts of men. Every operative you employ is your true servant: distant or near, subject to your immediate orders, or ministering to your widely-communicated caprice,--for the pay he stipulates, or the price he tempts,--all are alike under this great dominion of the gold. The milliner who makes the dress is as much a servant (more so, in that she uses more intelligence in the service) as the maid who puts it on; the carpenter who smooths the door, as the footman who opens it; the tradesmen who supply the table, as the labourers and sailors who supply the tradesmen. Why speak of these lower services? Painters and singers (whether of note or rhyme,) jesters and storytellers, moralists, historians, priests,--so far as these, in any degree, paint, or sing, or tell their tale, or charm their charm, or "perform" their rite, _for pay_,--in so far, they are all slaves; abject utterly, if the service be for pay only; abject less and less in proportion to the degrees of love and of wisdom which enter into their duty, or _can_ enter into it, according as their function is to do the bidding and the work of a manly people;--or to amuse, tempt, and deceive, a childish one. 146. There is always, in such amusement and temptation, to a certain extent, a government of the rich by the poor, as of the poor by the rich; but the latter is the prevailing and necessary one, and it consists, when it is honourable, in the collection of the profits of labour from those who would have misused them, and the administration of those profits for the service either of the same persons in future, or of others; and when it is dishonourable, as is more frequently the case in modern times, it consists in the collection of the profits of labour from those who would have rightly used them, and their appropriation to the service of the collector himself. 147. The examination of these various modes of collection and use of riches will form the third branch of our future inquiries; but the key to the whole subject lies in the clear understanding of the difference between selfish and unselfish expenditure. It is not easy, by any course of reasoning, to enforce this on the generally unwilling hearer; yet the definition of unselfish expenditure is brief and simple. It is expenditure which, if you are a capitalist, does not pay _you_, but pays somebody else; and if you are a consumer, does not please _you_, but pleases somebody else. Take one special instance, in further illustration of the general type given above. I did not invent that type, but spoke of a real river, and of real peasantry, the languid and sickly race which inhabits, or haunts--for they are often more like spectres than living men--the thorny desolation of the banks of the Arve in Savoy. Some years ago, a society, formed at Geneva, offered to embank the river for the ground which would have been recovered by the operation; but the offer was refused by the (then Sardinian) government. The capitalists saw that this expenditure would have "paid" if the ground saved from the river was to be theirs. But if, when the offer that had this aspect of profit was refused, they had nevertheless persisted in the plan, and merely taking security for the return of their outlay, lent the funds for the work, and thus saved a whole race of human souls from perishing in a pestiferous fen (as, I presume, some among them would, at personal risk, have dragged any one drowning creature out of the current of the stream, and not expected payment therefor), such expenditure would have precisely corresponded to the use of his power made, in the first instance, by our supposed richer peasant--it would have been the king's, of grace, instead of the usurer's, for gain. 148. "Impossible, absurd, Utopian!" exclaim nine-tenths of the few readers whom these words may find. No, good reader, _this_ is not Utopian: but I will tell you what would have seemed, if we had not seen it, Utopian on the side of evil instead of good; that ever men should have come to value their money so much more than their lives, that if you call upon them to become soldiers, and take chance of a bullet through their heart, and of wife and children being left desolate, for their pride's sake, they will do it gaily, without thinking twice; but if you ask them, for their country's sake, to spend a hundred pounds without security of getting back a hundred-and-five,[86] they will laugh in your face. 149. Not but that also this game of life-giving and taking is, in the end, somewhat more costly than other forms of play might be. Rifle practice is, indeed, a not unhealthy pastime, and a feather on the top of the head is a pleasing appendage; but while learning the stops and fingering of the sweet instrument, does no one ever calculate the cost of an overture? What melody does Tityrus meditate on his tenderly spiral pipe? The leaden seed of it, broadcast, true conical "Dents de Lion" seed--needing less allowance for the wind than is usual with that kind of herb--what crop are you likely to have of it? Suppose, instead of this volunteer marching and countermarching, you were to do a little volunteer ploughing and counter-ploughing? It is more difficult to do it straight: the dust of the earth, so disturbed, is more grateful than for merely rhythmic footsteps. Golden cups, also, given for good ploughing, would be more suitable in colour: (ruby glass, for the wine which "giveth his colour" on the ground, might be fitter for the rifle prize in ladies' hands). Or, conceive a little volunteer exercise with the spade, other than such as is needed for moat and breastwork, or even for the burial of the fruit of the leaden avena-seed, subject to the shrill Lemures' criticism-- Wer hat das Haus so schlecht gebauet? If you were to embank Lincolnshire more stoutly against the sea? or strip the peat of Solway, or plant Plinlimmon moors with larch--then, in due season, some amateur reaping and threshing? "Nay, we reap and thresh by steam, in these advanced days." I know it, my wise and economical friends. The stout arms God gave you to win your bread by, you would fain shoot your neighbours, and God's sweet singers with;[87] then you invoke the fiends to your farm-service; and-- When young and old come forth to play On a sulphurous holiday, Tell how the darkling goblin sweat (His feast of cinders duly set), And, belching night, where breathed the morn, His shadowy flail hath threshed the corn That ten day-labourers could not end. 150. Going back to the matter in hand, we will press the example closer. On a green knoll above that plain of the Arve, between Cluse and Bonneville, there was, in the year 1860, a cottage, inhabited by a well-doing family--man and wife, three children, and the grandmother. I call it a cottage, but in truth, it was a large chimney on the ground, wide at the bottom, so that the family might live round the fire; lighted by one small broken window, and entered by an unclosing door. The family, I say, was "well-doing;" at least it was hopeful and cheerful; the wife healthy, the children, for Savoyards, pretty and active, but the husband threatened with decline, from exposure under the cliffs of the Mont Vergi by day, and to draughts between every plank of his chimney in the frosty nights. "Why could he not plaster the chinks?" asks the practical reader. For the same reason that your child cannot wash its face and hands till you have washed them many a day for it, and will not wash them when it can, till you force it. 151. I passed this cottage often in my walks, had its window and door mended; sometimes mended also a little the meal of sour bread and broth, and generally got kind greeting and smile from the face of young or old; which greeting this year, narrowed itself into the half-recognizing stare of the elder child, and the old woman's tears; for the father and mother were both dead,--one of sickness, the other of sorrow. It happened that I passed not alone, but with a companion, a practised English joiner, who, while these people were dying of cold, had been employed from six in the morning to six in the evening, for two months, in fitting, without nails, the panels of a single door in a large house in London. Three days of his work taken, at the right time from fastening the oak panels with useless precision, and applied to fasten the larch timbers with decent strength, would have saved these Savoyards' lives. _He_ would have been maintained equally; (I suppose him equally paid for his work by the owner of the greater house, only the work not consumed selfishly on his own walls;) and the two peasants, and eventually, probably their children, saved. 152. There are, therefore,--let me finally enforce, and leave with the reader, this broad conclusion,--three things to be considered in employing any poor person. It is not enough to give him employment. You must employ him first to produce useful things; secondly, of the several (suppose equally useful) things he can equally well produce, you must set him to make that which will cause him to lead the healthiest life; lastly, of the things produced, it remains a question of wisdom and conscience how much you are to take yourself, and how much to leave to others. A large quantity, remember, unless you destroy it, _must_ always be so left at one time or another; the only questions you have to decide are, not _what_ you will give, but _when_, and _how_, and _to whom_, you will give. The natural law of human life is, of course, that in youth a man shall labour and lay by store for his old age, and when age comes, shall use what he has laid by, gradually slackening his toil, and allowing himself more frank use of his store; taking care always to leave himself as much as will surely suffice for him beyond any possible length of life. What he has gained, or by tranquil and unanxious toil continues to gain, more than is enough for his own need, he ought so to administer, while he yet lives, as to see the good of it again beginning, in other hands; for thus he has himself the greatest sum of pleasure from it, and faithfully uses his sagacity in its control. Whereas most men, it appears, dislike the sight of their fortunes going out into service again, and say to themselves,--"I can indeed nowise prevent this money from falling at last into the hands of others, nor hinder the good of it from becoming theirs, not mine; but at least let a merciful death save me from being a witness of their satisfaction; and may God so far be gracious to me as to let no good come of any of this money of mine before my eyes." 153. Supposing this feeling unconquerable, the safest way of rationally indulging it would be for the capitalist at once to spend all his fortune on himself, which might actually, in many cases, be quite the rightest as well as the pleasantest thing to do, if he had just tastes and worthy passions. But, whether for himself only, or through the hands, and for the sake, of others also, the law of wise life is, that the maker of the money shall also be the spender of it, and spend it, approximately, all, before he dies; so that his true ambition as an economist should be, to die, not as rich, but as poor, as possible,[88] calculating the ebb tide of possession in true and calm proportion to the ebb tide of life. Which law, checking the wing of accumulative desire in the mid-volley,[89] and leading to peace of possession and fulness of fruition in old age, is also wholesome, in that by the freedom of gift, together with present help and counsel, it at once endears and dignifies age in the sight of youth, which then no longer strips the bodies of the dead, but receives the grace of the living. Its chief use would (or will be, for men are indeed capable of attaining to this much use of their reason), that some temperance and measure will be put to the acquisitiveness of commerce.[90] For as things stand, a man holds it his duty to be temperate in his food, and of his body, but for no duty to be temperate in his riches, and of his mind. He sees that he ought not to waste his youth and his flesh for luxury; but he will waste his age, and his soul, for money, and think he does no wrong, nor know the _delirium tremens_ of the intellect for disease. But the law of life is, that a man should fix the sum he desires to make annually, as the food he desires to eat daily; and stay when he has reached the limit, refusing increase of business, and leaving it to others, so obtaining due freedom of time for better thoughts.[91] How the gluttony of business is punished, a bill of health for the principals of the richest city houses, issued annually, would show in a sufficiently impressive manner. 154. I know, of course, that these statements will be received by the modern merchant as an active border rider of the sixteenth century would have heard of its being proper for men of the Marches to get their living by the spade, instead of the spur. But my business is only to state veracities and necessities; I neither look for the acceptance of the one, nor hope for the nearness of the other. Near or distant, the day _will_ assuredly come when the merchants of a state shall be its true ministers of exchange, its porters, in the double sense of carriers and gate-keepers, bringing all lands into frank and faithful communication, and knowing for their master of guild, Hermes the herald, instead of Mercury the gain-guarder. 155. And now, finally, for immediate rule to all who will accept it. The distress of any population means that they need food, house-room, clothes, and fuel. You can never, therefore, be wrong in employing any labourer to produce food, house-room, clothes, or fuel; but you are _always_ wrong if you employ him to produce nothing, (for then some other labourer must be worked double time to feed him); and you are generally wrong, at present, if you employ him (unless he can do nothing else) to produce works of art or luxuries; because modern art is mostly on a false basis, and modern luxury is criminally great.[92] 156. The way to produce more food is mainly to bring in fresh ground, and increase facilities of carriage;--to break rock, exchange earth, drain the moist, and water the dry, to mend roads, and build harbours of refuge. Taxation thus spent will annihilate taxation, but spent in war, it annihilates revenue. 157. The way to produce house-room is to apply your force first to the humblest dwellings. When your brick-layers are out of employ, do not build splendid new streets, but better the old ones; send your paviours and slaters to the poorest villages, and see that your poor are healthily lodged, before you try your hand on stately architecture. You will find its stateliness rise better under the trowel afterwards; and we do do not yet build so well that we need hasten to display our skill to future ages. Had the labour which has decorated the Houses of Parliament filled, instead, rents in walls and roofs throughout the county of Middlesex; and our deputies met to talk within massive walls that would have needed no stucco for five hundred years,--the decoration might have been afterwards, and the talk now. And touching even our highly conscientious church building, it may be well to remember that in the best days of church plans, their masons called themselves "logeurs du bon Dieu;" and that since, according to the most trusted reports, God spends a good deal of His time in cottages as well as in churches, He might perhaps like to be a little better lodged there also. 158. The way to get more clothes is--not, necessarily, to get more cotton. There were words written twenty years ago[93] which would have saved many of us some shivering, had they been minded in time. Shall we read them again? "The Continental people, it would seem, are importing our machinery, beginning to spin cotton, and manufacture for themselves; to cut us out of this market, and then out of that! Sad news, indeed; but irremediable. By no means the saddest news--the saddest news, is that we should find our national existence, as I sometimes hear it said, depend on selling manufactured cotton at a farthing an ell cheaper than any other people. A most narrow stand for a great nation to base itself on! A stand which, with all the Corn-law abrogations conceivable, I do not think will be capable of enduring. "My friends, suppose we quitted that stand; suppose we came honestly down from it and said--'This is our minimum of cotton prices; we care not, for the present, to make cotton any cheaper. Do you, if it seem so blessed to you, make cotton cheaper. Fill your lungs with cotton fur, your heart with copperas fumes, with rage and mutiny; become ye the general gnomes of Europe, slaves of the lamp!' I admire a nation which fancies it will die if it do not undersell all other nations to the end of the world. Brothers, we will cease to undersell them; we will be content to equal-sell them; to be happy selling equally with them! I do not see the use of underselling them: cotton-cloth is already twopence a yard, or lower; and yet bare backs were never more numerous among us. Let inventive men cease to spend their existence incessantly contriving how cotton can be made cheaper; and try to invent a little how cotton at its present cheapness could be somewhat justlier divided among us. "Let inventive men consider--whether the secret of this universe does after all consist in making money. With a hell which means--'failing to make money,' I do not think there is any heaven possible that would suit one well. In brief, all this Mammon gospel of supply-and-demand, competition _laissez faire_, and devil take the hindmost (foremost, is it not, rather, Mr. Carlyle?), 'begins to be one of the shabbiest gospels ever preached.'" 159. The way to produce more fuel[94] is first to make your coal mines safer, by sinking more shafts; then set all your convicts to work in them, and if, as is to be hoped, you succeed in diminishing the supply of that sort of labourer, consider what means there may be, first, of growing forest where its growth will improve climate; secondly, of splintering the forests which now make continents of fruitful land pathless and poisonous, into fagots for fire;--so gaining at once dominion icewards and sunwards. Your steam power has been given (you will find eventually) for work such as that: and not for excursion trains, to give the labourer a moment's breath, at the peril of his breath for ever, from amidst the cities which it has crushed into masses of corruption. When you know how to build cities, and how to rule them, you will be able to breathe in their streets, and the "excursion" will be the afternoon's walk or game in the fields round them. 160. "But nothing of this work will pay?" No; no more than it pays to dust your rooms, or wash your doorsteps. It will pay; not at first in currency, but in that which is the end and the source of currency,--in life; (and in currency richly afterwards). It will pay in that which is more than life,--in light, whose true price has not yet been reckoned in any currency, and yet into the image of which, all wealth, one way or other, must be cast. For your riches must either be as the lightning, which, Begot but in a cloud, Though shining bright, and speaking loud, Whilst it begins, concludes its violent race; And, where it gilds, it wounds the place;-- or else, as the lightning of the sacred sign, which shines from one part of the heaven to the other. There is no other choice; you must either take dust for deity, spectre for possession, fettered dream for life, and for epitaph, this reversed verse of the great Hebrew hymn of economy (Psalm cxii.):--"He hath gathered together, he hath stripped the poor, his iniquity remaineth for ever:"--or else, having the sun of justice to shine on you, and the sincere substance of good in your possession, and the pure law and liberty of life within you, leave men to write this better legend over your grave:-- "He hath dispersed abroad. He hath given to the poor. His righteousness remaineth for ever." FOOTNOTES: [78] In the present general examination, I concede so much to ordinary economists as to ignore all _innocent_ poverty. I adapt my reasoning, for once, to the modern English practical mind, by assuming poverty to be always criminal; the conceivable exceptions we will examine afterwards. [79] [I have no terms of English, and can find none in Greek nor Latin, nor in any other strong language known to me, contemptuous enough to attach to the bestial idiotism of the modern theory that wages are to be measured by competition.] [80] I say nothing yet of the quality of the servants, which, nevertheless, is the gist of the business. Will you have Paul Veronese to paint your ceiling, or the plumber from over the way? Both will work for the same money; Paul, if anything, a little the cheaper of the two, if you keep him in good humour; only you have to discern him first, which will need eyes. [81] [I have not altered a syllable in these three paragraphs, 137, 138, 139, on revision; but have much italicised: the principles stated being as vital, as they are little known.] [82] By his art he may; but only when its produce, or the sight or hearing of it, becomes a subject of dispute, so as to enable the artist to tax the labour of multitudes highly, in exchange for his own. [83] [Observe this; the legal right to keep what you have worked for, and use it as you please, is the corner-stone of all economy: compare the end of Chap. II.] [84] [I should now put the time of necessary labour rather under than over the third of the day.] [85] [See Preface to _Unto this Last_.] [86] I have not hitherto touched on the subject of interest of money; it is too complex, and must be reserved for its proper place in the body of the work. The definition of interest (apart from compensation for risk) is, "the exponent of the comfort of accomplished labour, separated from its power;" the power being what is lent: and the French economists who have maintained the entire illegality of interest are wrong; yet by no means so curiously or wildly wrong as the English and French ones opposed to them, whose opinions have been collected by Dr. Whewell at page 41 of his _Lectures_; it never seeming to occur to the mind of the compiler, any more than to the writers whom he quotes, that it is quite possible, and even (according to Jewish proverb) prudent, for men to hoard as ants and mice do, for use, not usury; and lay by something for winter nights, in the expectation of rather sharing than lending the scrapings. My Savoyard squirrels would pass a pleasant time of it under the snow-laden pine branches, if they always declined to economize because no one would pay them interest on nuts. [I leave this note as it stood: but, as I have above stated, should now side wholly with the French economists spoken of, in asserting the absolute illegality of interest.] [87] Compare Chaucer's feeling respecting birds (from Canace's falcon, to the nightingale, singing, "Domine, labia--" to the Lord of Love), with the usual modern British sentiments on this subject. Or even Cowley's:-- "What prince's choir of music can excel That which within this shade does dwell, To which we nothing pay, or give, They, like all other poets, live Without reward, or thanks for their obliging pains! 'Tis well if they become not prey." Yes; it Is better than well; particularly since the seed sown by the wayside has been protected by the peculiar appropriation of part of the church-rates in our country parishes. See the remonstrance from a "Country parson," in _The Times_ of June 4th (or 5th; the letter is dated June 3rd,) 1862:--"I have heard at a vestry meeting a good deal of higgling over a few shillings' outlay in cleaning the church; but I have never heard any dissatisfaction expressed on account of that part of the rate which is invested in 50 or 100 dozens of birds' heads." [If we could trace the innermost of all causes of modern war, I believe it would be found, not in the avarice nor ambition of nations, but in the mere idleness of the upper classes. They have nothing to do but to teach the peasantry to kill each other.] [88] [See the _Life of Fenelon_. "The labouring peasantry were at all times the objects of his tenderest care; his palace at Cambray, with all his books and writings, being consumed by fire, he bore the misfortune with unruffled calmness, and said it was better his palace should be burnt than the cottage of a poor peasant." (These thoroughly good men always go too far, and lose their power over the mass.) He died exemplifying the mean he had always observed between prodigality and avarice, leaving neither debts nor money.] [89] [Greek: kai penian hêgoumenous einai mê to tên ousian elattô poiein alla to têi aplêstian pleiô]. "And thinking (wisely) that poverty consists not in making one's possessions less, but one's avarice more."--_Laws_, v. 8. Read the context, and compare. "He who spends for all that is noble, and gains by nothing but what is just, will hardly be notably wealthy, or distressfully poor."--_Laws_, v. 42. [90] The fury of modern trade arises chiefly out of the possibility of making sudden fortunes by largeness of transaction, and accident of discovery or contrivance. I have no doubt that the final interest of every nation is to check the action of these commercial lotteries; and that all great accidental gains or losses should be national,--not individual. But speculation absolute, unconnected with commercial effort, is an unmitigated evil in a state, and the root of countless evils beside. [91] [I desire in the strongest terms to reinforce all that is contained in this paragraph.] [92] It is especially necessary that the reader should keep his mind fixed on the methods of consumption and destruction, as the true sources of national poverty. Men are apt to call every exchange "expenditure," but it is only consumption which is expenditure. A large number of the purchases made by the richer classes are mere forms of interchange of unused property, wholly without effect on national prosperity. It matters nothing to the state whether, if a china pipkin be rated as worth a hundred pounds, A has the pipkin and B the pounds, or A the pounds and B the pipkin. But if the pipkin is pretty, and A or B breaks it, there is national loss, not otherwise. So again, when the loss has really taken place, no shifting of the shoulders that bear it will do away with the reality of it. There is an intensely ludicrous notion in the public mind respecting the abolishment of debt by denying it. When a debt is denied, the lender loses instead of the borrower, that is all; the loss is precisely, accurately, everlastingly the same. The Americans borrow money to spend in blowing up their own houses. They deny their debt, by one-third already [1863], gold being at fifty premium; and they will probably deny it wholly. That merely means that the holders of the notes are to be the losers instead of the issuers. The quantity of loss is precisely equal, and irrevocable; it is the quantity of human industry spent in effecting the explosion, plus the quantity of goods exploded. Honour only decides _who_ shall pay the sum lost not whether it is to be paid or not. Paid it must be, and to the uttermost farthing. [93] [(_Past and Present._ Chap. IX. of Third Section.) To think that for these twenty--now twenty-six--years, this one voice of Carlyle's has been the only faithful and useful utterance in all England, and has sounded through all these years in vain! See _Fors Clavigera_, Letter X.] [94] [We don't want to produce more fuel just now, but much less; and to use what we get for cooking and warming ourselves, instead of for running from place to place.] APPENDICES. I have brought together in these last pages a few notes, which were not properly to be incorporated with the text, and which, at the bottom of pages, checked the reader's attention to the main argument. They contain, however, several statements to which I wish to be able to refer, or have already referred, in other of my books, so that I think right to preserve them. APPENDIX I.--(p. 22.) The greatest of all economists are those most opposed to the doctrine of "laissez faire," namely, the fortifying virtues, which the wisest men of all time have arranged under the general heads of Prudence, or Discretion (the spirit which discerns and adopts rightly); Justice (the spirit which rules and divides rightly); Fortitude (the spirit which persists and endures rightly); and Temperance (the spirit which stops and refuses rightly). These cardinal and sentinel virtues are not only the means of protecting and prolonging life itself, but they are the chief guards, or sources, of the material means of life, and the governing powers and princes of economy. Thus, precisely according to the number of just men in a nation, is their power of avoiding either intestine or foreign war. All disputes may be peaceably settled, if a sufficient number of persons have been trained to submit to the principles of justice, while the necessity for war is in direct ratio to the number of unjust persons who are incapable of determining a quarrel but by violence. Whether the injustice take the form of the desire of dominion, or of refusal to submit to it, or of lust of territory, or lust of money, or of mere irregular passion and wanton will, the result is economically the same;--loss of the quantity of power and life consumed in repressing the injustice, added to the material and moral destruction caused by the fact of war. The early civil wars of England, and the existing[95] war in America, are curious examples--these under monarchical, this under republican, institutions--of the results on large masses of nations of the want of education in principles of justice. But the mere dread or distrust resulting from the want of the inner virtues of Faith and Charity prove often no less costly than war itself. The fear which France and England have of each other costs each nation about fifteen millions sterling annually, besides various paralyses of commerce; that sum being spent in the manufacture of means of destruction instead of means of production. There is no more reason in the nature of things that France and England should be hostile to each other than that England and Scotland should be, or Lancashire and Yorkshire; and the reciprocal terrors of the opposite sides of the English Channel are neither more necessary, more economical, nor more virtuous, than the old riding and reiving on the opposite flanks of the Cheviots, or than England's own weaving for herself of crowns of thorn, from the stems of her Red and White roses. APPENDIX II.--(p. 34.) Few passages of the book which at least some part of the nations at present most advanced in civilization accept as an expression of final truth, have been more distorted than those bearing on Idolatry. For the idolatry there denounced is neither sculpture, nor veneration of sculpture. It is simply the substitution of an "Eidolon," phantasm, or imagination of Good, for that which is real and enduring; from the Highest Living Good, which gives life, to the lowest material good which ministers to it. The Creator, and the things created, which He is said to have "seen good" in creating, are in this their eternal goodness appointed always to be "worshipped,"--_i. e._, to have goodness and worth ascribed to them from the heart; and the sweep and range of idolatry extend to the rejection of any or all of these, "calling evil good, and good evil,--putting bitter for sweet, and sweet for bitter."[96] For in that rejection and substitution we betray the first of all Loyalties, to the fixed Law of life, and with resolute opposite loyalty serve our own imagination of good, which is the law, not of the House, but of the Grave, (otherwise called the law of "mark missing," which we translate "law of Sin"); these "two masters," between whose services we have to choose, being otherwise distinguished as God and Mammon, which Mammon, though we narrowly take it as the power of money only, is in truth the great evil Spirit of false and fond desire, or "Covetousness, which is Idolatry." So that Iconoclasm--_image_-breaking--is easy; but an Idol cannot be broken--it must be forsaken; and this is not so easy, either to do, or persuade to doing. For men may readily be convinced of the weakness of an image; but not of the emptiness of an imagination. APPENDIX III.--(p. 36.) I have not attempted to support, by the authority of other writers, any of the statements made in these papers; indeed, if such authorities were rightly collected, there would be no occasion for my writing at all. Even in the scattered passages referring to this subject in three books of Carlyle's--Sartor Resartus, Past and Present, and the Latter Day Pamphlets,--all has been said that needs to be said, and far better than I shall ever say it again. But the habit of the public mind at present is to require everything to be uttered diffusely, loudly, and a hundred times over, before it will listen; and it has revolted against these papers of mine as if they contained things daring and new, when there is not one assertion in them of which the truth has not been for ages known to the wisest, and proclaimed by the most eloquent of men. It would be [I had written _will_ be; but have now reached a time of life for which there is but one mood--the conditional,] a far greater pleasure to me hereafter, to collect their words than to add to mine; Horace's clear rendering of the substance of the passages in the text may be found room for at once, Si quis emat citharas, emptas comportet in unum Nec studio citharae, nec Musae deditus ulli; Si scalpra et formas non sutor, nautica vela Aversus mercaturis, delirus et amens Undique dicatur merito. Qui discrepat istis Qui nummos aurumque recondit, nescius uti Compositis; metuensque velut contingere sacrum? [Which may be roughly thus translated:-- "Were anybody to buy fiddles, and collect a number, being in no wise given to fiddling, nor fond of music: or if, being no cobbler, he collected awls and lasts, or, having no mind for sea-adventure, bought sails, every one would call him a madman, and deservedly. But what difference is there between such a man and one who lays by coins and gold, and does not know how to use, when he has got them?"] With which it is perhaps desirable also to give Xenophon's statement, it being clearer than any English one can be, owing to the power of the general Greek term for wealth, "useable things." [I have cut out the Greek because I can't be troubled to correct the accents, and am always nervous about them; here it is in English, as well as I can do it:-- "This being so, it follows that things are only property to the man who knows how to use them; as flutes, for instance, are property to the man who can pipe upon them respectably; but to one who knows not how to pipe, they are no property, unless he can get rid of them advantageously.... For if they are not sold, the flutes are no property (being serviceable for nothing); but, sold, they become property. To which Socrates made answer,--'and only then if he knows how to sell them, for if he sell them to another man who cannot play on them, still they are no property.'"] APPENDIX IV.--(p. 39.) The reader is to include here in the idea of "Government," any branch of the Executive, or even any body of private persons, entrusted with the practical management of public interests unconnected directly with their own personal ones. In theoretical discussions of legislative interference with political economy, it is usually, and of course unnecessarily, assumed that Government must be always of that form and force in which we have been accustomed to see it;--that its abuses can never be less, nor its wisdom greater, nor its powers more numerous. But, practically, the custom in most civilized countries is, for every man to deprecate the interference of Government as long as things tell for his personal advantage, and to call for it when they cease to do so. The request of the Manchester Economists to be supplied with cotton by Government (the system of supply and demand having, for the time, fallen sorrowfully short of the expectations of scientific persons from it), is an interesting case in point. It were to be wished that less wide and bitter suffering, suffering, too, of the innocent, had been needed to force the nation, or some part of it, to ask itself why a body of men, already confessedly capable of managing matters both military and divine, should not be permitted, or even requested, at need, to provide in some wise for sustenance as well as for defence; and secure, if it might be,--(and it might, I think, even the _rather_ be),--purity of bodily, as well as of spiritual, aliment? Why, having made many roads for the passage of armies, may they not make a few for the conveyance of food; and after organizing, with applause, various schemes of theological instruction for the Public, organize, moreover, some methods of bodily nourishment for them? Or is the soul so much less trustworthy in its instincts than the stomach, that legislation is necessary for the one, but inapplicable to the other. APPENDIX V.--(p. 70.) I debated with myself whether to make the note on Homer longer by examining the typical meaning of the shipwreck of Ulysses, and his escape from Charybdis by help of her fig-tree; but as I should have had to go on to the lovely myth of Leucothea's veil, and did not care to spoil this by a hurried account of it, I left it for future examination; and, three days after the paper was published, observed that the reviewers, with their customary helpfulness, were endeavouring to throw the whole subject back into confusion by dwelling on this single (as they imagined) oversight. I omitted also a note on the sense of the word [Greek: lygron], with respect to the pharmacy of Circe, and herb-fields of Helen, (compare its use in Odyssey, xvii., 473, &c.), which would farther have illustrated the nature of the Circean power. But, not to be led too far into the subtleties of these myths, observe respecting them all, that even in very simple parables, it is not always easy to attach indisputable meaning to every part of them. I recollect some years ago, throwing an assembly of learned persons who had met to delight themselves with interpretations of the parable of the prodigal son, (interpretations which had up to that moment gone very smoothly,) into mute indignation, by inadvertently asking who the _un_prodigal son was, and what was to be learned by _his_ example. The leading divine of the company, Mr. Molyneux, at last explained to me that the unprodigal son was a lay figure, put in for dramatic effect, to make the story prettier, and that no note was to be taken of him. Without, however, admitting that Homer put in the last escape of Ulysses merely to make his story prettier, this is nevertheless true of all Greek myths, that they have many opposite lights and shades; they are as changeful as opal, and like opal, usually have one colour by reflected, and another by transmitted light. But they are true jewels for all that, and full of noble enchantment for those who can use them; for those who cannot, I am content to repeat the words I wrote four years ago, in the appendix to the _Two Paths_-- "The entire purpose of a great thinker may be difficult to fathom, and we may be over and over again more or less mistaken in guessing at his meaning; but the real, profound, nay, quite bottomless and unredeemable mistake, is the fool's thought, that he had _no_ meaning." APPENDIX VI.--(p. 84) The derivation of words is like that of rivers: there is one real source, usually small, unlikely, and difficult to find, far up among the hills; then, as the word flows on and comes into service, it takes in the force of other words from other sources, and becomes quite another word--often much more than one word, after the junction--a word as it were of many waters, sometimes both sweet and bitter. Thus the whole force of our English "charity" depends on the guttural in "charis" getting confused with the c of the Latin "carus;" thenceforward throughout the middle ages, the two ideas ran on together, and both got confused with St. Paul's [Greek: agapê], which expresses a different idea in all sorts of ways; our "charity" having not only brought in the entirely foreign sense of alms-giving, but lost the essential sense of contentment, and lost much more in getting too far away from the "charis" of the final Gospel benedictions. For truly it is fine Christianity we have come to, which, professing to expect the perpetual grace or charity of its Founder, has not itself grace or charity enough to hinder it from overreaching its friends in sixpenny bargains; and which, supplicating evening and morning the forgiveness of its own debts, goes forth at noon to take its fellow-servants by the throat, saying,--not merely "Pay me that thou owest," but "Pay me that thou owest me _not_." It is true that we sometimes wear Ophelia's rue with a difference, and call it "Herb o' grace o' Sundays," taking consolation out of the offertory with--"Look, what he layeth out; it shall be paid him again." Comfortable words indeed, and good to set against the old royalty of Largesse-- Whose moste joie was, I wis, When that she gave, and said, "Have this." [I am glad to end, for this time, with these lovely words of Chaucer. We have heard only too much lately of "Indiscriminate charity," with implied reproval, not of the Indiscrimination merely, but of the Charity also. We have partly succeeded in enforcing on the minds of the poor the idea that it is disgraceful to receive; and are likely, without much difficulty, to succeed in persuading not a few of the rich that it is disgraceful to give. But the political economy of a great state makes both giving and receiving graceful; and the political economy of true religion interprets the saying that "it is more blessed to give than to receive," not as the promise of reward in another life for mortified selfishness in this, but as pledge of bestowal upon us of that sweet and better nature, which does not mortify itself in giving.] _Brantwood, Coniston,_ _5th October, 1871._ THE END FOOTNOTES: [95] [Written in 1862. I little thought that when I next corrected my type, the "existing" war best illustrative of the sentence would be between Frenchmen in the Elysian Fields of Paris.] [96] Compare the close of the Fourth Lecture in _Aratra Pentelici_. PRE-RAPHAELITISM To FRANCIS HAWKSWORTH FAWKES, ESQ OF FARNLEY THESE PAGES WHICH OWE THEIR PRESENT FORM TO ADVANTAGES GRANTED BY HIS KINDNESS ARE AFFECTIONATELY INSCRIBED BY HIS OBLIGED FRIEND JOHN RUSKIN PREFACE. Eight years ago, in the close of the first volume of "Modern Painters," I ventured to give the following advice to the young artists of England:-- "They should go to nature in all singleness of heart, and walk with her laboriously and trustingly, having no other thought but how best to penetrate her meaning; rejecting nothing, selecting nothing, and scorning nothing." Advice which, whether bad or good, involved infinite labor and humiliation in the following it; and was therefore, for the most part, rejected. It has, however, at last been carried out, to the very letter, by a group of men who, for their reward, have been assailed with the most scurrilous abuse which I ever recollect seeing issue from the public press. I have, therefore, thought it due to them to contradict the directly false statements which have been made respecting their works; and to point out the kind of merit which, however deficient in some respects, those works possess beyond the possibility of dispute. Denmark Hill, Aug. 1851. PRE-RAPHAELITISM. It may be proved, with much certainty, that God intends no man to live in this world without working: but it seems to me no less evident that He intends every man to be happy in his work. It is written, "in the sweat of thy brow," but it was never written, "in the breaking of thine heart," thou shalt eat bread; and I find that, as on the one hand, infinite misery is caused by idle people, who both fail in doing what was appointed for them to do, and set in motion various springs of mischief in matters in which they should have had no concern, so on the other hand, no small misery is caused by over-worked and unhappy people, in the dark views which they necessarily take up themselves, and force upon others, of work itself. Were it not so, I believe the fact of their being unhappy is in itself a violation of divine law, and a sign of some kind of folly or sin in their way of life. Now in order that people may be happy in their work, these three things are needed: They must be fit for it: They must not do too much of it: and they must have a sense of success in it--not a doubtful sense, such as needs some testimony of other people for its confirmation, but a sure sense, or rather knowledge, that so much work has been done well, and fruitfully done, whatever the world may say or think about it. So that in order that a man may be happy, it is necessary that he should not only be capable of his work, but a good judge of his work. The first thing then that he has to do, if unhappily his parents or masters have not done it for him, is to find out what he is fit for. In which inquiry a man may be very safely guided by his likings, if he be not also guided by his pride. People usually reason in some such fashion as this: "I don't seem quite fit for a head-manager in the firm of ---- & Co., therefore, in all probability, I am fit to be Chancellor of the Exchequer." Whereas, they ought rather to reason thus: "I don't seem quite fit to be head-manager in the firm of ---- & Co., but I daresay I might do something in a small green-grocery business; I used to be a good judge of peas;" that is to say, always trying lower instead of trying higher, until they find bottom: once well set on the ground, a man may build up by degrees, safely, instead of disturbing every one in his neighborhood by perpetual catastrophes. But this kind of humility is rendered especially difficult in these days, by the contumely thrown on men in humble employments. The very removal of the massy bars which once separated one class of society from another, has rendered it tenfold more shameful in foolish people's, i. e. in most people's eyes, to remain in the lower grades of it, than ever it was before. When a man born of an artisan was looked upon as an entirely different species of animal from a man born of a noble, it made him no more uncomfortable or ashamed to remain that different species of animal, than it makes a horse ashamed to remain a horse, and not to become a giraffe. But now that a man may make money, and rise in the world, and associate himself, unreproached, with people once far above him, not only is the natural discontentedness of humanity developed to an unheard-of extent, whatever a man's position, but it becomes a veritable shame to him to remain in the state he was born in, and everybody thinks it his _duty_ to try to be a "gentleman." Persons who have any influence in the management of public institutions for charitable education know how common this feeling has become. Hardly a day passes but they receive letters from mothers who want all their six or eight sons to go to college, and make the grand tour in the long vacation, and who think there is something wrong in the foundations of society, because this is not possible. Out of every ten letters of this kind, nine will allege, as the reason of the writers' importunity, their desire to keep their families in such and such a "station of life." There is no real desire for the safety, the discipline, or the moral good of the children, only a panic horror of the inexpressibly pitiable calamity of their living a ledge or two lower on the molehill of the world--a calamity to be averted at any cost whatever, of struggle, anxiety, and shortening of life itself. I do not believe that any greater good could be achieved for the country, than the change in public feeling on this head, which might be brought about by a few benevolent men, undeniably in the class of "gentlemen," who would, on principle, enter into some of our commonest trades, and make them honorable; showing that it was possible for a man to retain his dignity, and remain, in the best sense, a gentleman, though part of his time was every day occupied in manual labor, or even in serving customers over a counter. I do not in the least see why courtesy, and gravity, and sympathy with the feelings of others, and courage, and truth, and piety, and what else goes to make up a gentleman's character, should not be found behind a counter as well as elsewhere, if they were demanded, or even hoped for, there. Let us suppose, then, that the man's way of life and manner of work have been discreetly chosen; then the next thing to be required is, that he do not over-work himself therein. I am not going to say anything here about the various errors in our systems of society and commerce, which appear (I am not sure if they ever do more than appear) to force us to over-work ourselves merely that we may live; nor about the still more fruitful cause of unhealthy toil--the incapability, in many men, of being content with the little that is indeed necessary to their happiness. I have only a word or two to say about one special cause of over-work--the ambitious desire of doing great or clever things, and the hope of accomplishing them by immense efforts: hope as vain as it is pernicious; not only making men over-work themselves, but rendering all the work they do unwholesome to them. I say it is a vain hope, and let the reader be assured of this (it is a truth all-important to the best interests of humanity). _No great intellectual thing was ever done by great effort_; a great thing can only be done by a great man, and he does it _without_ effort. Nothing is, at present, less understood by us than this--nothing is more necessary to be understood. Let me try to say it as clearly, and explain it as fully as I may. I have said no great _intellectual_ thing: for I do not mean the assertion to extend to things moral. On the contrary, it seems to me that just because we are intended, as long as we live, to be in a state of intense moral effort, we are _not_ intended to be in intense physical or intellectual effort. Our full energies are to be given to the soul's work--to the great fight with the Dragon--the taking the kingdom of heaven by force. But the body's work and head's work are to be done quietly, and comparatively without effort. Neither limbs nor brain are ever to be strained to their utmost; that is not the way in which the greatest quantity of work is to be got out of them: they are never to be worked furiously, but with tranquillity and constancy. We are to follow the plough from sunrise to sunset, but not to pull in race-boats at the twilight: we shall get no fruit of that kind of work, only disease of the heart. How many pangs would be spared to thousands, if this great truth and law were but once sincerely, humbly understood,--that if a great thing can be done at all, it can be done easily; that, when it is needed to be done, there is perhaps only one man in the world who can do it; but _he_ can do it without any trouble--without more trouble, that is, than it costs small people to do small things; nay, perhaps, with less. And yet what truth lies more openly on the surface of all human phenomena? Is not the evidence of Ease on the very front of all the greatest works in existence? Do they not say plainly to us, not, "there has been a great _effort_ here," but, "there has been a great _power_ here"? It is not the weariness of mortality, but the strength of divinity, which we have to recognise in all mighty things; and that is just what we now _never_ recognise, but think that we are to do great things, by help of iron bars and perspiration:--alas! we shall do nothing that way but lose some pounds of our own weight. Yet, let me not be misunderstood, nor this great truth be supposed anywise resolvable into the favorite dogma of young men, that they need not work if they have genius. The fact is, that a man of genius is always far more ready to work than other people, and gets so much more good from the work that he does, and is often so little conscious of the inherent divinity in himself, that he is very apt to ascribe all his capacity to his work, and to tell those who ask how he came to be what he is: "If I _am_ anything, which I much doubt, I made myself so merely by labor." This was Newton's way of talking, and I suppose it would be the general tone of men whose genius had been devoted to the physical sciences. Genius in the Arts must commonly be more self-conscious, but in whatever field, it will always be distinguished by its perpetual, steady, well-directed, happy, and faithful labor in accumulating and disciplining its powers, as well as by its gigantic, incommunicable facility in exercising them. Therefore, literally, it is no man's business whether he has genius or not: work he must, whatever he is, but quietly and steadily; and the natural and unforced results of such work will be always the things that God meant him to do, and will be his best. No agonies nor heart-rendings will enable him to do any better. If he be a great man, they will be great things; if a small man, small things; but always, if thus peacefully done, good and right; always, if restlessly and ambitiously done, false, hollow, and despicable. Then the third thing needed was, I said, that a man should be a good judge of his work; and this chiefly that he may not be dependent upon popular opinion for the manner of doing it, but also that he may have the just encouragement of the sense of progress, and an honest consciousness of victory: how else can he become "That awful independent on to-morrow, Whose yesterdays look backwards with a smile." I am persuaded that the real nourishment and help of such a feeling as this is nearly unknown to half the workmen of the present day. For whatever appearance of self-complacency there may be in their outward bearing, it is visible enough, by their feverish jealousy of each other, how little confidence they have in the sterling value of their several doings. Conceit may puff a man up, but never prop him up; and there is too visible distress and hopelessness in men's aspects to admit of the supposition that they have any stable support of faith in themselves. I have stated these principles generally, because there is no branch of labor to which they do not apply: But there is one in which our ignorance or forgetfulness of them has caused an incalculable amount of suffering: and I would endeavor now to reconsider them with especial reference to it,--the branch of the Arts. In general, the men who are employed in the Arts have freely chosen their profession, and suppose themselves to have special faculty for it; yet, as a body, they are not happy men. For which this seems to me the reason, that they are expected, and themselves expect, to make their bread _by being clever_--not by steady or quiet work; and are, therefore, for the most part, trying to be clever, and so living in an utterly false state of mind and action. This is the case, to the same extent, in no other profession or employment. A lawyer may indeed suspect that, unless he has more wit than those around him, he is not likely to advance in his profession; but he will not be always thinking how he is to display his wit. He will generally understand, early in his career, that wit must be left to take care of itself, and that it is hard knowledge of law and vigorous examination and collation of the facts of every case entrusted to him, which his clients will mainly demand; this it is which he has to be paid for; and this is healthy and measurable labor, payable by the hour. If he happen to have keen natural perception and quick wit, these will come into play in their due time and place, but he will not think of them as his chief power; and if he have them not, he may still hope that industry and conscientiousness may enable him to rise in his profession without them. Again in the case of clergymen: that they are sorely tempted to display their eloquence or wit, none who know their own hearts will deny, but then they _know_ this to _be_ a temptation: they never would suppose that cleverness was all that was to be expected from them, or would sit down deliberately to write a clever sermon: even the dullest or vainest of them would throw some veil over their vanity, and pretend to some profitableness of purpose in what they did. They would not openly ask of their hearers--Did you think my sermon ingenious, or my language poetical? They would early understand that they were not paid for being ingenious, nor called to be so, but to preach truth; that if they happened to possess wit, eloquence, or originality, these would appear and be of service in due time, but were not to be continually sought after or exhibited: and if it should happen that they had them not, they might still be serviceable pastors without them. Not so with the unhappy artist. No one expects any honest or useful work of him; but every one expects him to be ingenious. Originality, dexterity, invention, imagination, every thing is asked of him except what alone is to be had for asking--honesty and sound work, and the due discharge of his function as a painter. What function? asks the reader in some surprise. He may well ask; for I suppose few painters have any idea what their function is, or even that they have any at all. And yet surely it is not so difficult to discover. The faculties, which when a man finds in himself, he resolves to be a painter, are, I suppose, intenseness of observation and facility of imitation. The man is created an observer and an imitator; and his function is to convey knowledge to his fellow-men, of such things as cannot be taught otherwise than ocularly. For a long time this function remained a religious one: it was to impress upon the popular mind the reality of the objects of faith, and the truth of the histories of Scripture, by giving visible form to both. That function has now passed away, and none has as yet taken its place. The painter has no profession, no purpose. He is an idler on the earth, chasing the shadows of his own fancies. But he was never meant to be this. The sudden and universal Naturalism, or inclination to copy ordinary natural objects, which manifested itself among the painters of Europe, at the moment when the invention of printing superseded their legendary labors, was no false instinct. It was misunderstood and misapplied, but it came at the right time, and has maintained itself through all kinds of abuse; presenting in the recent schools of landscape, perhaps only the first fruits of its power. That instinct was urging every painter in Europe at the same moment to his true duty--_the faithful representation of all objects of historical interest, or of natural beauty existent at the period_; representations such as might at once aid the advance of the sciences, and keep faithful record of every monument of past ages which was likely to be swept away in the approaching eras of revolutionary change. The instinct came, as I said, exactly at the right moment; and let the reader consider what amount and kind of general knowledge might by this time have been possessed by the nations of Europe, had their painters understood and obeyed it. Suppose that, after disciplining themselves so as to be able to draw, with unerring precision, each the particular kind of subject in which he most delighted, they had separated into two great armies of historians and naturalists;--that the first had painted with absolute faithfulness every edifice, every city, every battle-field, every scene of the slightest historical interest, precisely and completely rendering their aspect at the time; and that their companions, according to their several powers, had painted with like fidelity the plants and animals, the natural scenery, and the atmospheric phenomena of every country on the earth--suppose that a faithful and complete record were now in our museums of every building destroyed by war, or time, or innovation, during these last 200 years--suppose that each recess of every mountain chain of Europe had been penetrated, and its rocks drawn with such accuracy that the geologist's diagram was no longer necessary--suppose that every tree of the forest had been drawn in its noblest aspect, every beast of the field in its savage life--that all these gatherings were already in our national galleries, and that the painters of the present day were laboring, happily and earnestly, to multiply them, and put such means of knowledge more and more within reach of the common people--would not that be a more honorable life for them, than gaining precarious bread by "bright effects?" They think not, perhaps. They think it easy, and therefore contemptible, to be truthful; they have been taught so all their lives. But it is not so, whoever taught it them. It is most difficult, and worthy of the greatest men's greatest effort, to render, as it should be rendered, the simplest of the natural features of the earth; but also be it remembered, no man is confined to the simplest; each may look out work for himself where he chooses, and it will be strange if he cannot find something hard enough for him. The excuse is, however, one of the lips only; for every painter knows that when he draws back from the attempt to render nature as she is, it is oftener in cowardice than in disdain. I must leave the reader to pursue this subject for himself; I have not space to suggest to him the tenth part of the advantages which would follow, both to the painter from such an understanding of his mission, and to the whole people, in the results of his labor. Consider how the man himself would be elevated: how content he would become, how earnest, how full of all accurate and noble knowledge, how free from envy--knowing creation to be infinite, feeling at once the value of what he did, and yet the nothingness. Consider the advantage to the people; the immeasurably larger interest given to art itself; the easy, pleasurable, and perfect knowledge conveyed by it, in every subject; the far greater number of men who might be healthily and profitably occupied with it as a means of livelihood; the useful direction of myriads of inferior talents, now left fading away in misery. Conceive all this, and then look around at our exhibitions, and behold the "cattle pieces," and "sea pieces," and "fruit pieces," and "family pieces;" the eternal brown cows in ditches, and white sails in squalls, and sliced lemons in saucers, and foolish faces in simpers;--and try to feel what we are, and what we might have been. Take a single instance in one branch of archæology. Let those who are interested in the history of religion consider what a treasure we should now have possessed, if, instead of painting pots, and vegetables, and drunken peasantry, the most accurate painters of the seventeenth and eighteenth centuries had been set to copy, line for line, the religious and domestic sculpture on the German, Flemish, and French cathedrals and castles; and if every building destroyed in the French or in any other subsequent revolution, had thus been drawn in all its parts with the same precision with which Gerard Douw or Mieris paint bas-reliefs of Cupids. Consider, even now, what incalculable treasure is still left in ancient bas-reliefs, full of every kind of legendary interest, of subtle expression, of priceless evidence as to the character, feelings habits, histories, of past generations, in neglected and shattered churches and domestic buildings, rapidly disappearing over the whole of Europe--treasure which, once lost, the labor of all men living cannot bring back again; and then look at the myriads of men, with skill enough, if they had but the commonest schooling, to record all this faithfully, who are making their bread by drawing dances of naked women from academy models, or idealities of chivalry fitted out with Wardour Street armor, or eternal scenes from Gil Blas, Don Quixote, and the Vicar of Wakefield, or mountain sceneries with young idiots of Londoners wearing Highland bonnets and brandishing rifles in the foregrounds. Do but think of these things in the breadth of their inexpressible imbecility, and then go and stand before that broken bas-relief in the southern gate of Lincoln Cathedral, and see if there is no fibre of the heart in you that will break too. But is there to be no place left, it will be indignantly asked, for imagination and invention, for poetical power, or love of ideal beauty? Yes; the highest, the noblest place--that which these only can attain when they are all used in the cause, and with the aid of truth. Wherever imagination and sentiment are, they will either show themselves without forcing, or, if capable of artificial development, the kind of training which such a school of art would give them would be the best they could receive. The infinite absurdity and failure of our present training consists mainly in this, that we do not rank imagination and invention high enough, and suppose that they _can_ be taught. Throughout every sentence that I ever have written, the reader will find the same rank attributed to these powers,--the rank of a purely divine gift, not to be attained, increased, or in any wise modified by teaching, only in various ways capable of being concealed or quenched. Understand this thoroughly; know once for all, that a poet on canvas is exactly the same species of creature as a poet in song, and nearly every error in our methods of teaching will be done away with. For who among us now thinks of bringing men up to be poets?--of producing poets by any kind of general recipe or method of cultivation? Suppose even that we see in youth that which we hope may, in its development, become a power of this kind, should we instantly, supposing that we wanted to make a poet of him, and nothing else, forbid him all quiet, steady, rational labor? Should we force him to perpetual spinning of new crudities out of his boyish brain, and set before him, as the only objects of his study, the laws of versification which criticism has supposed itself to discover in the works of previous writers? Whatever gifts the boy had, would much be likely to come of them so treated? unless, indeed, they were so great as to break through all such snares of falsehood and vanity, and build their own foundation in spite of us; whereas if, as in cases numbering millions against units, the natural gifts were too weak to do this, could any thing come of such training but utter inanity and spuriousness of the whole man? But if we had sense, should we not rather restrain and bridle the first flame of invention in early youth, heaping material on it as one would on the first sparks and tongues of a fire which we desired to feed into greatness? Should we not educate the whole intellect into general strength, and all the affections into warmth and honesty, and look to heaven for the rest? This, I say, we should have sense enough to do, in order to produce a poet in words: but, it being required to produce a poet on canvas, what is our way of setting to work? We begin, in all probability, by telling the youth of fifteen or sixteen, that Nature is full of faults, and that he is to improve her; but that Raphael is perfection, and that the more he copies Raphael the better; that after much copying of Raphael, he is to try what he can do himself in a Raphaelesque, but yet original, manner: that is to say, he is to try to do something very clever, all out of his own head, but yet this clever something is to be properly subjected to Raphaelesque rules, is to have a principal light occupying one-seventh of its space, and a principle shadow occupying one-third of the same; that no two people's heads in the picture are to be turned the same way, and that all the personages represented are to possess ideal beauty of the highest order, which ideal beauty consists partly in a Greek outline of nose, partly in proportions expressible in decimal fractions between the lips and chin; but partly also in that degree of improvement which the youth of sixteen is to bestow upon God's work in general. This I say is the kind of teaching which through various channels, Royal Academy lecturings, press criticisms, public enthusiasm, and not least by solid weight of gold, we give to our young men. And we wonder we have no painters! But we do worse than this. Within the last few years some sense of the real tendency of such teaching has appeared in some of our younger painters. It only _could_ appear in the younger ones, our older men having become familiarised with the false system, or else having passed through it and forgotten it, not well knowing the degree of harm they had sustained. This sense appeared, among our youths,--increased,--matured into resolute action. Necessarily, to exist at all, it needed the support both of strong instincts and of considerable self-confidence, otherwise it must at once have been borne down by the weight of general authority and received canon law. Strong instincts are apt to make men strange, and rude; self-confidence, however well founded, to give much of what they do or say the appearance of impertinence. Look at the self-confidence of Wordsworth, stiffening every other sentence of his prefaces into defiance; there is no more of it than was needed to enable him to do his work, yet it is not a little ungraceful here and there. Suppose this stubbornness and self-trust in a youth, laboring in an art of which the executive part is confessedly to be best learnt from masters, and we shall hardly wonder that much of his work has a certain awkwardness and stiffness in it, or that he should be regarded with disfavor by many, even the most temperate, of the judges trained in the system he was breaking through, and with utter contempt and reprobation by the envious and the dull. Consider, farther, that the particular system to be overthrown was, in the present case, one of which the main characteristic was the pursuit of beauty at the expense of manliness and truth; and it will seem likely, _à priori_, that the men intended successfully to resist the influence of such a system should be endowed with little natural sense of beauty, and thus rendered dead to the temptation it presented. Summing up these conditions, there is surely little cause for surprise that pictures painted, in a temper of resistance, by exceedingly young men, of stubborn instincts and positive self-trust, and with little natural perception of beauty, should not be calculated, at the first glance, to win us from works enriched by plagiarism, polished by convention, invested with all the attractiveness of artificial grace, and recommended to our respect by established authority. We should, however, on the other hand, have anticipated, that in proportion to the strength of character required for the effort, and to the absence of distracting sentiments, whether respect for precedent, or affection for ideal beauty, would be the energy exhibited in the pursuit of the special objects which the youths proposed to themselves, and their success in attaining them. All this has actually been the case, but in a degree which it would have been impossible to anticipate. That two youths, of the respective ages of eighteen and twenty, should have conceived for themselves a totally independent and sincere method of study, and enthusiastically persevered in it against every kind of dissuasion and opposition, is strange enough; that in the third or fourth year of their efforts they should have produced works in many parts not inferior to the best of Albert Durer, this is perhaps not less strange. But the loudness and universality of the howl which the common critics of the press have raised against them, the utter absence of all generous help or encouragement from those who can both measure their toil and appreciate their success, and the shrill, shallow laughter of those who can do neither the one nor the other,--these are strangest of all--unimaginable unless they had been experienced. And as if these were not enough, private malice is at work against them, in its own small, slimy way. The very day after I had written my second letter to the Times in the defence of the Pre-Raphaelites, I received an anonymous letter respecting one of them, from some person apparently hardly capable of spelling, and about as vile a specimen of petty malignity as ever blotted paper. I think it well that the public should know this, and so get some insight into the sources of the spirit which is at work against these men--how first roused it is difficult to say, for one would hardly have thought that mere eccentricity in young artists could have excited an hostility so determined and so cruel;--hostility which hesitated at no assertion, however impudent. That of the "absence of perspective" was one of the most curious pieces of the hue and cry which began with the Times, and died away in feeble maundering in the Art Union; I contradicted it in the Times--I here contradict it directly for the second time. There was not a single error in perspective in three out of the four pictures in question. But if otherwise, would it have been anything remarkable in them? I doubt, if with the exception of the pictures of David Roberts, there were one architectural drawing in perspective on the walls of the Academy; I never met but with two men in my life who knew enough of perspective to draw a Gothic arch in a retiring plane, so that its lateral dimensions and curvatures might be calculated to scale from the drawing. Our architects certainly do not, and it was but the other day that, talking to one of the most distinguished among them, the author of several most valuable works, I found he actually did not know how to draw a circle in perspective. And in this state of general science our writers for the press take it upon them to tell us, that the forest trees in Mr. Hunt's _Sylvia_, and the bunches of lilies in Mr. Collins's _Convent Thoughts_, are out of perspective.[97] It might not, I think, in such circumstances, have been ungraceful or unwise in the Academicians themselves to have defended their young pupils, at least by the contradiction of statements directly false respecting them,[98] and the direction of the mind and sight of the public to such real merit as they possess. If Sir Charles Eastlake, Mulready, Edwin and Charles Landseer, Cope, and Dyce would each of them simply state their own private opinion respecting their paintings, sign it and publish it, I believe the act would be of more service to English art than any thing the Academy has done since it was founded. But as I cannot hope for this, I can only ask the public to give their pictures careful examination, and look at them at once with the indulgence and the respect which I have endeavored to show they deserve. Yet let me not be misunderstood. I have adduced them only as examples of the kind of study which I would desire to see substituted for that of our modern schools, and of singular success in certain characters, finish of detail, and brilliancy of color. What faculties, higher than imitative, may be in these men, I do not yet venture to say; but I do say that if they exist, such faculties will manifest themselves in due time all the more forcibly because they have received training so severe. For it is always to be remembered that no one mind is like another, either in its powers or perceptions; and while the main principles of training must be the same for all, the result in each will be as various as the kinds of truth which each will apprehend; therefore, also, the modes of effort, even in men whose inner principles and final aims are exactly the same. Suppose, for instance, two men, equally honest, equally industrious, equally impressed with a humble desire to render some part of what they saw in nature faithfully; and, otherwise trained in convictions such as I have above endeavored to induce. But one of them is quiet in temperament, has a feeble memory, no invention, and excessively keen sight. The other is impatient in temperament, has a memory which nothing escapes, an invention which never rests, and is comparatively near-sighted. Set them both free in the same field in a mountain valley. One sees everything, small and large, with almost the same clearness; mountains and grasshoppers alike; the leaves on the branches, the veins in the pebbles, the bubbles in the stream: but he can remember nothing, and invent nothing. Patiently he sets himself to his mighty task; abandoning at once all thoughts of seizing transient effects, or giving general impressions of that which his eyes present to him in microscopical dissection, he chooses some small portion out of the infinite scene, and calculates with courage the number of weeks which must elapse before he can do justice to the intensity of his perceptions, or the fulness of matter in his subject. Meantime, the other has been watching the change of the clouds, and the march of the light along the mountain sides; he beholds the entire scene in broad, soft masses of true gradation, and the very feebleness of his sight is in some sort an advantage to him, in making him more sensible of the aërial mystery of distance, and hiding from him the multitudes of circumstances which it would have been impossible for him to represent. But there is not one change in the casting of the jagged shadows along the hollows of the hills, but it is fixed on his mind for ever; not a flake of spray has broken from the sea of cloud about their bases, but he has watched it as it melts away, and could recall it to its lost place in heaven by the slightest effort of his thoughts. Not only so, but thousands and thousands of such images, of older scenes, remain congregated in his mind, each mingling in new associations with those now visibly passing before him, and these again confused with other images of his own ceaseless, sleepless imagination, flashing by in sudden troops. Fancy how his paper will be covered with stray symbols and blots, and undecipherable shorthand:--as for his sitting down to "draw from Nature," there was not one of the things which he wished to represent that stayed for so much as five seconds together: but none of them escaped, for all that: they are sealed up in that strange storehouse of his; he may take one of them out, perhaps, this day twenty years, and paint it in his dark room, far away. Now, observe, you may tell both of these men, when they are young, that they are to be honest, that they have an important function, and that they are not to care what Raphael did. This you may wholesomely impress on them both. But fancy the exquisite absurdity of expecting either of them to possess any of the qualities of the other. I have supposed the feebleness of sight in the last, and of invention in the first painter, that the contrast between them might be more striking; but, with very slight modification, both the characters are real. Grant to the first considerable inventive power, with exquisite sense of color; and give to the second, in addition to all his other faculties, the eye of an eagle; and the first is John Everett Millais, the second Joseph Mallard William Turner. They are among the few men who have defied all false teaching, and have, therefore, in great measure, done justice to the gifts with which they were entrusted. They stand at opposite poles, marking culminating points of art in both directions; between them, or in various relations to them, we may class five or six more living artists who, in like manner, have done justice to their powers. I trust that I may be pardoned for naming them, in order that the reader may know how the strong innate genius in each has been invariably accompanied with the same humility, earnestness, and industry in study. It is hardly necessary to point out the earnestness or humility in the works of William Hunt; but it may be so to suggest the high value they possess as records of English rural life, and _still_ life. Who is there who for a moment could contend with him in the unaffected, yet humorous truth with which he has painted our peasant children? Who is there who does not sympathize with him in the simple love with which he dwells on the brightness and bloom of our summer fruit and flowers? And yet there is something to be regretted concerning him: why should he be allowed continually to paint the same bunches of hot-house grapes, and supply to the Water Color Society a succession of pineapples with the regularity of a Covent Garden fruiterer? He has of late discovered that primrose banks are lovely; but there are other things grow wild besides primroses: what undreamt-of loveliness might he not bring back to us, if he would lose himself for a summer in Highland foregrounds; if he would paint the heather as it grows, and the foxglove and the harebell as they nestle in the clefts of the rocks, and the mosses and bright lichens of the rocks themselves. And then, cross to the Jura, and bring back a piece of Jura pasture in spring; with the gentians in their earliest blue, and the soldanelle beside the fading snow! And return again, and paint a gray wall of Alpine crag, with budding roses crowning it like a wreath of rubies. That is what he was meant to do in this world; not to paint bouquets in china vases. I have in various other places expressed my sincere respect for the works of Samuel Prout: his shortness of sight has necessarily prevented their possessing delicacy of finish or fulness of minor detail; but I think that those of no other living artist furnish an example so striking of innate and special instinct, sent to do a particular work at the exact and only period when it was possible. At the instant when peace had been established all over Europe, but when neither national character nor national architecture had as yet been seriously changed by promiscuous intercourse or modern "improvement;" when, however, nearly every ancient and beautiful building had been long left in a state of comparative neglect, so that its aspect of partial ruinousness, and of separation from recent active life, gave to every edifice a peculiar interest--half sorrowful, half sublime;--at that moment Prout was trained among the rough rocks and simple cottages of Cornwall, until his eye was accustomed to follow with delight the rents and breaks, and irregularities which, to another man, would have been offensive; and then, gifted with infinite readiness in composition, but also with infinite affection for the kind of subjects he had to portray, he was sent to preserve, in an almost innumerable series of drawings, _every one made on the spot_, the aspect borne, at the beginning of the nineteenth century, by cities which, in a few years more, rekindled wars, or unexpected prosperities, were to ravage, or renovate, into nothingness. It seems strange to pass from Prout to John Lewis; but there is this fellowship between them, that both seem to have been intended to appreciate the characters of foreign countries more than of their own--nay, to have been born in England chiefly that the excitement of strangeness might enhance to them the interest of the scenes they had to represent. I believe John Lewis to have done more entire justice to all his powers (and they are magnificent ones) than any other man amongst us. His mission was evidently to portray the comparatively animal life of the southern and eastern families of mankind. For this he was prepared in a somewhat singular way--by being led to study, and endowed with altogether peculiar apprehension of, the most sublime characters of animals themselves. Rubens, Rembrandt, Snyders, Tintoret, and Titian, have all, in various ways, drawn wild beasts magnificently; but they have in some sort humanized or demonized them, making them either ravenous fiends or educated beasts, that would draw cars, and had respect for hermits. The sullen isolation of the brutal nature; the dignity and quietness of the mighty limbs; the shaggy mountainous power, mingled with grace, as of a flowing stream; the stealthy restraint of strength and wrath in every soundless motion of the gigantic frame; all this seems never to have been seen, much less drawn, until Lewis drew and himself engraved a series of animal subjects, now many years ago. Since then, he has devoted himself to the portraiture of those European and Asiatic races, among whom the refinements of civilization exist without its laws or its energies, and in whom the fierceness, indolence, and subtlety of animal nature are associated with brilliant imagination and strong affections. To this task he has brought not only intense perception of the kind of character, but powers of artistical composition like those of the great Venetians, displaying, at the same time, a refinement of drawing almost miraculous, and appreciable only, as the minutiæ of nature itself are appreciable, by the help of the microscope. The value, therefore, of his works, as records of the aspect of the scenery and inhabitants of the south of Spain and of the East, in the earlier part of the nineteenth century, is quite above all estimate. I hardly know how to speak of Mulready: in delicacy and completion of drawing, and splendor of color, he takes place beside John Lewis and the pre-Raphaelites; but he has, throughout his career, displayed no definiteness in choice of subject. He must be named among the painters who have studied with industry, and have made themselves great by doing so; but having obtained a consummate method of execution, he has thrown it away on subjects either altogether uninteresting, or above his powers, or unfit for pictorial representation. "The Cherry Woman," exhibited in 1850, may be named as an example of the first kind; the "Burchell and Sophia" of the second (the character of Sir William Thornhill being utterly missed); the "Seven Ages" of the third; for this subject cannot be painted. In the written passage, the thoughts are progressive and connected; in the picture they must be co-existent, and yet separate; nor can all the characters of the ages be rendered in painting at all. One may represent the soldier at the cannon's mouth, but one cannot paint the "bubble reputation" which he seeks. Mulready, therefore, while he has always produced exquisite pieces of painting, has failed in doing anything which can be of true or extensive use. He has, indeed, understood how to discipline his genius, but never how to direct it. Edwin Landseer is the last painter but one whom I shall name: I need not point out to any one acquainted with his earlier works, the labor, or watchfulness of nature which they involve, nor need I do more than allude to the peculiar faculties of his mind. It will at once be granted that the highest merits of his pictures are throughout found in those parts of them which are least like what had before been accomplished; and that it was not by the study of Raphael that he attained his eminent success, but by a healthy love of Scotch terriers. None of these painters, however, it will be answered, afford examples of the rise of the highest imaginative power out of close study of matters of fact. Be it remembered, however, that the imaginative power, in its magnificence, is not to be found every day. Lewis has it in no mean degree; but we cannot hope to find it at its highest more than once in an age. We _have_ had it once, and must be content. Towards the close of the last century, among the various drawings executed, according to the quiet manner of the time, in greyish blue, with brown foregrounds, some began to be noticed as exhibiting rather more than ordinary diligence and delicacy, signed W. Turner.[99] There was nothing, however, in them at all indicative of genius, or even of more than ordinary talent, unless in some of the subjects a large perception of space, and excessive clearness and decision in the arrangement of masses. Gradually and cautiously the blues became mingled with delicate green, and then with gold; the browns in the foreground became first more positive, and then were slightly mingled with other local colors; while the touch, which had at first been heavy and broken, like that of the ordinary drawing masters of the time, grew more and more refined and expressive, until it lost itself in a method of execution often too delicate for the eye to follow, rendering, with a precision before unexampled, both the texture and the form of every object. The style may be considered as perfectly formed about the year 1800, and it remained unchanged for twenty years. During that period the painter had attempted, and with more or less success had rendered, every order of landscape subject, but always on the same principle, subduing the colors of nature into a harmony of which the key-notes are greyish green and brown; pure blues and delicate golden yellows being admitted in small quantity, as the lowest and highest limits of shade and light: and bright local colors in extremely small quantity in figures or other minor accessories. Pictures executed on such a system are not, properly speaking, works in _color_ at all; they are studies of light and shade, in which both the shade and the distance are rendered in the general hue which best expresses their attributes of coolness and transparency; and the lights and the foreground are executed in that which best expresses their warmth and solidity. This advantage may just as well be taken as not, in studies of light and shadow to be executed with the hand: but the use of two, three, or four colors, always in the same relations and places, does not in the least constitute the work a study of color, any more than the brown engravings of the Liber Studiorum; nor would the idea of color be in general more present to the artist's mind, when he was at work on one of these drawings, than when he was using pure brown in the mezzotint engraving. But the idea of space, warmth, and freshness being not successfully expressible in a single tint, and perfectly expressible by the admission of three or four, he allows himself this advantage when it is possible, without in the least embarrassing himself with the actual color of the objects to be represented. A stone in the fore ground might in nature have been cold grey, but it will be drawn nevertheless of a rich brown, because it is in the foreground; a hill in the distance might in nature be purple with heath, or golden with furze; but it will be drawn nevertheless of a cool grey, because it is in the distance. This at least was the general theory,--carried out with great severity in many, both of the drawings and pictures executed by him during the period: in others more or less modified by the cautious introduction of color, as the painter felt his liberty increasing; for the system was evidently never considered as final, or as anything more than a means of progress: the conventional, easily manageable color, was visibly adopted, only that his mind might be at perfect liberty to address itself to the acquirement of the first and most necessary knowledge in all art--that of form. But as form, in landscape, implies vast bulk and space, the use of the tints which enabled him best to express them, was actually auxiliary to the mere drawing; and, therefore, not only permissible, but even necessary, while more brilliant or varied tints were never indulged in, except when they might be introduced without the slightest danger of diverting his mind for an instant from his principal object. And, therefore, it will be generally found in the works of this period, that exactly in proportion to the importance and general toil of the composition, is the severity of the tint; and that the play of color begins to show itself first in slight and small drawings, where he felt that he could easily secure all that he wanted in form. Thus the "Crossing the Brook," and such other elaborate and large compositions, are actually painted in nothing but grey, brown, and blue, with a point or two of severe local color in the figures; but in the minor drawings, tender passages of complicated color occur not unfrequently in easy places; and even before the year 1800 he begins to introduce it with evident joyfulness and longing in his rude and simple studies, just as a child, if it could be supposed to govern itself by a fully developed intellect, would cautiously, but with infinite pleasure, add now and then a tiny dish of fruit or other dangerous luxury to the simple order of its daily fare. Thus, in the foregrounds of his most severe drawings, we not unfrequently find him indulging in the luxury of a peacock; and it is impossible to express the joyfulness with which he seems to design its graceful form, and deepen with soft pencilling the bloom of its blue, after he has worked through the stern detail of his almost colorless drawing. A rainbow is another of his most frequently permitted indulgences; and we find him very early allowing the edges of his evening clouds to be touched with soft rose-color or gold; while, whenever the hues of nature in anywise fall into his system, and can be caught without a dangerous departure from it, he instantly throws his whole soul into the faithful rendering of them. Thus the usual brown tones of his foreground become warmed into sudden vigor, and are varied and enhanced with indescribable delight, when he finds himself by the shore of a moorland stream, where they truly express the stain of its golden rocks, and the darkness of its clear, Cairngorm-like pools, and the usual serenity of his aërial blue is enriched into the softness and depth of the sapphire, when it can deepen the distant slumber of some Highland lake, or temper the gloomy shadows of the evening upon its hills. The system of his color being thus simplified, he could address all the strength of his mind to the accumulation of facts of form; his choice of subject, and his methods of treatment, are therefore as various as his color is simple; and it is not a little difficult to give the reader who is unacquainted with his works, an idea either of their infinitude of aims, on the one hand, or of the kind of feeling which prevades them all, on the other. No subject was too low or too high for him; we find him one day hard at work on a cock and hen, with their family of chickens in a farm-yard; and bringing all the refinement of his execution into play to express the texture of the plumage; next day, he is drawing the Dragon of Colchis. One hour he is much interested in a gust of wind blowing away an old woman's cap; the next he is painting the fifth plague of Egypt. Every landscape painter before him had acquired distinction by confining his efforts to one class of subject. Hobbima painted oaks; Ruysdael, waterfalls and copses; Cuyp, river or meadow scenes in quiet afternoons; Salvator and Poussin, such kind of mountain scenery as people could conceive, who lived in towns in the seventeenth century. But I am well persuaded that if all the works of Turner, up to the year 1820, were divided into classes (as he has himself divided them in the Liber Studiorum), no preponderance could be assigned to one class over another. There is architecture, including a large number of formal "gentlemen's seats," I suppose drawings commissioned by the owners; then lowland pastoral scenery of every kind, including nearly all farming operations,--ploughing, harrowing, hedging and ditching, felling trees, sheep-washing, and I know not what else; then all kinds of town life--court-yards of inns, starting of mail coaches, interiors of shops, house-buildings, fairs, elections, &c.; then all kinds of inner domestic life--interiors of rooms, studies of costumes, of still life, and heraldry, including multitudes of symbolical vignettes; then marine scenery of every kind, full of local incident; every kind of boat and method of fishing for particular fish, being specifically drawn, round the whole coast of England;--pilchard fishing at St. Ives, whiting fishing at Margate, herring at Loch Fyne; and all kinds of shipping, including studies of every separate part of the vessels, and many marine battle-pieces, two in particular of Trafalgar, both of high importance,--one of the Victory after the battle, now in Greenwich Hospital; another of the Death of Nelson, in his own gallery; then all kinds of mountain scenery, some idealised into compositions, others of definite localities; together with classical compositions, Romes and Carthages and such others, by the myriad, with mythological, historical, or allegorical figures,--nymphs, monsters, and spectres; heroes and divinities.[100] What general feeling, it may be asked incredulously, can possibly pervade all this? This, the greatest of all feelings--an utter forgetfulness of self. Throughout the whole period with which we are at present concerned, Turner appears as a man of sympathy absolutely infinite--a sympathy so all-embracing, that I know nothing but that of Shakespeare comparable with it. A soldier's wife resting by the roadside is not beneath it; Rizpah, the daughter of Aiah, watching the dead bodies of her sons, not above it. Nothing can possibly be so mean as that it will not interest his whole mind, and carry away his whole heart; nothing so great or solemn but that he can raise himself into harmony with it; and it is impossible to prophesy of him at any moment, whether, the next, he will be in laughter or in tears. This is the root of the man's greatness; and it follows as a matter of course that this sympathy must give him a subtle power of expression, even of the characters of mere material things, such as no other painter ever possessed. The man who can best feel the difference between rudeness and tenderness in humanity, perceives also more difference between the branches of an oak and a willow than any one else would; and therefore, necessarily the most striking character of the drawings themselves is the speciality of whatever they represent--the thorough stiffness of what is stiff, and grace of what is graceful, and vastness of what is vast; but through and beyond all this, the condition of the mind of the painter himself is easily enough discoverable by comparison of a large number of the drawings. It is singularly serene and peaceful: in itself quite passionless, though entering with ease into the external passion which it contemplates. By the effort of its will it sympathises with tumult or distress, even in their extremes, but there is no tumult, no sorrow in itself, only a chastened and exquisitely peaceful cheerfulness, deeply meditative; touched without loss of its own perfect balance, by sadness on the one side, and stooping to playfulness upon the other. I shall never cease to regret the destruction, by fire, now several years ago, of a drawing which always seemed to me to be the perfect image of the painter's mind at this period,--the drawing of Brignal Church near Rokeby, of which a feeble idea may still be gathered from the engraving (in the Yorkshire series). The spectator stands on the "Brignal banks," looking down into the glen at twilight; the sky is still full of soft rays, though the sun is gone; and the Greta glances brightly in the valley, singing its evening-song; two white clouds, following each other, move without wind through the hollows of the ravine, and others lie couched on the far away moorlands; every leaf of the woods is still in the delicate air; a boy's kite, incapable of rising, has become entangled in their branches, he is climbing to recover it; and just behind it in the picture, almost indicated by it, the lowly church is seen in its secluded field between the rocks and the stream; and around it the low churchyard wall, and the few white stones which mark the resting places of those who can climb the rocks no more, nor hear the river sing as it passes. There are many other existing drawings which indicate the same character of mind, though I think none so touching or so beautiful; yet they are not, as I said above, more numerous than those which express his sympathy with sublimer or more active scenes; but they are almost always marked by a tenderness of execution, and have a look of being beloved in every part of them, which shows them to be the truest expression of his own feelings. One other characteristic of his mind at this period remains to be noticed--its reverence for talent in others. Not the reverence which acts upon the practices of men as if they were the laws of nature, but that which is ready to appreciate the power, and receive the assistance, of every mind which has been previously employed in the same direction, so far as its teaching seems to be consistent with the great text-book of nature itself. Turner thus studied almost every preceding landscape painter, chiefly Claude, Poussin, Vandevelde, Loutherbourg, and Wilson. It was probably by the Sir George Beaumonts and other feeble conventionalists of the period, that he was persuaded to devote his attention to the works of these men; and his having done so will be thought, a few scores of years hence, evidence of perhaps the greatest modesty ever shown by a man of original power. Modesty at once admirable and unfortunate, for the study of the works of Vandevelde and Claude was productive of unmixed mischief to him; he spoiled many of his marine pictures, as for instance Lord Ellesmere's, by imitation of the former; and from the latter learned a false ideal, which confirmed by the notions of Greek art prevalent in London in the beginning of this century, has manifested itself in many vulgarities in his composition pictures, vulgarities which may perhaps be best expressed by the general term "Twickenham Classicism," as consisting principally in conceptions of ancient or of rural life such as have influenced the erection of most of our suburban villas. From Nicolo Poussin and Loutherbourg he seems to have derived advantage; perhaps also from Wilson; and much in his subsequent travels from far higher men, especially Tintoret and Paul Veronese. I have myself heard him speaking with singular delight of the putting in of the beech leaves in the upper right-hand corner of Titian's Peter Martyr. I cannot in any of his works trace the slightest influence of Salvator; and I am not surprised at it, for though Salvator was a man of far higher powers than either Vandevelde or Claude, he was a wilful and gross caricaturist. Turner would condescend to be helped by feeble men, but could not be corrupted by false men. Besides, he had never himself seen classical life, and Claude was represented to him as competent authority for it. But he _had_ seen mountains and torrents, and knew therefore that Salvator could not paint them. One of the most characteristic drawings of this period fortunately bears a date, 1818, and brings us within two years of another dated drawing, no less characteristic of what I shall henceforward call Turner's Second period. It is in the possession of Mr. Hawkesworth Fawkes of Farnley, one of Turner's earliest and truest friends; and bears the inscription, unusually conspicuous, heaving itself up and down over the eminences of the foreground--"PASSAGE OF MONT CENIS. J. M. W. TURNER, January 15th, 1820." The scene is on the summit of the pass close to the hospice, or what seems to have been a hospice at that time,--I do not remember such at present,--a small square-built house, built as if partly for a fortress, with a detached flight of stone steps in front of it, and a kind of drawbridge to the door. This building, about 400 or 500 yards off, is seen in a dim, ashy grey against the light, which by help of a violent blast of mountain wind has broken through the depth of clouds which hangs upon the crags. There is no sky, properly so called, nothing but this roof of drifting cloud; but neither is there any weight of darkness--the high air is too thin for it,--all savage, howling, and luminous with cold, the massy bases of the granite hills jutting out here and there grimly through the snow wreaths. There is a desolate-looking refuge on the left, with its number 16, marked on it in long ghastly figures, and the wind is drifting the snow off the roof and through its window in a frantic whirl; the near ground is all wan with half-thawed, half-trampled snow; a diligence in front, whose horses, unable to face the wind, have turned right round with fright, its passengers struggling to escape, jammed in the window; a little farther on is another carriage off the road, some figures pushing at its wheels, and its driver at the horses' heads, pulling and lashing with all his strength, his lifted arm stretched out against the light of the distance, though too far off for the whip to be seen. Now I am perfectly certain that any one thoroughly accustomed to the earlier works of the painter, and shown this picture for the first time, would be struck by two altogether new characters in it. The first, a seeming enjoyment of the excitement of the scene, totally different from the contemplative philosophy with which it would formerly have been regarded. Every incident of motion and of energy is seized upon with indescribable delight, and every line of the composition animated with a force and fury which are now no longer the mere expression of a contemplated external truth, but have origin in some inherent feeling in the painter's mind. The second, that although the subject is one in itself almost incapable of color, and although, in order to increase the wildness of the impression, all brilliant local color has been refused even where it might easily have been introduced, as in the figures; yet in the low minor key which has been chosen, the melodies of color have been elaborated to the utmost possible pitch, so as to become a leading, instead of a subordinate, element in the composition; the subdued warm hues of the granite promontories, the dull stone color of the walls of the buildings, clearly opposed, even in shade, to the grey of the snow wreaths heaped against them, and the faint greens and ghastly blues of the glacier ice, being all expressed with delicacies of transition utterly unexampled in any previous drawings. These, accordingly, are the chief characteristics of the works of Turner's second period, as distinguished from the first,--a new energy inherent in the mind of the painter, diminishing the repose and exalting the force and fire of his conceptions, and the presence of Color, as at least an essential, and often a principal, element of design. Not that it is impossible, or even unusual, to find drawings of serene subject, and perfectly quiet feeling, among the compositions of this period; but the repose is in them, just as the energy and tumult were in the earlier period, an external quality, which the painter images by an effort of the will: it is no longer a character inherent in himself. The "Ulleswater," in the England series, is one of those which are in most perfect peace: in the "Cowes," the silence is only broken by the dash of the boat's oars, and in the "Alnwick" by a stag drinking; but in at least nine drawings out of ten, either sky, water, or figures are in rapid motion, and the grandest drawings are almost always those which have even violent action in one or other, or in all: e. g. high force of Tees, Coventry, Llanthony, Salisbury, Llanberis, and such others. The color is, however, a more absolute distinction; and we must return to Mr. Fawkes's collection in order to see how the change in it was effected. That such a change would take place at one time or other was of course to be securely anticipated, the conventional system of the first period being, as above stated, merely a means of Study. But the immediate cause was the journey of the year 1820. As might be guessed from the legend on the drawing above described, "Passage of Mont Cenis, January 15th, 1820," that drawing represents what happened on the day in question to the painter himself. He passed the Alps then in the winter of 1820; and either in the previous or subsequent summer, but on the same journey, he made a series of sketches on the Rhine, in body color, now in Mr. Fawkes's collection. Every one of those sketches is the almost instantaneous record of an _effect_ of color or atmosphere, taken strictly from nature, the drawing and the details of every subject being comparatively subordinate, and the color nearly as principal as the light and shade had been before,--certainly the leading feature, though the light and shade are always exquisitely harmonized with it. And naturally, as the color becomes the leading object, those times of day are chosen in which it is most lovely; and whereas before, at least five out of six of Turner's drawings represented ordinary daylight, we now find his attention directed constantly to the evening: and, for the first time, we have those rosy lights upon the hills, those gorgeous falls of sun through flaming heavens, those solemn twilights, with the blue moon rising as the western sky grows dim, which have ever since been the themes of his mightiest thoughts. I have no doubt, that the _immediate_ reason of this change was the impression made upon him by the colors of the continental skies. When he first travelled on the Continent (1800), he was comparatively a young student; not yet able to draw form as he wanted, he was forced to give all his thoughts and strength to this primary object. But now he was free to receive other impressions; the time was come for perfecting his art, and the first sunset which he saw on the Rhine taught him that all previous landscape art was vain and valueless, that in comparison with natural color, the things that had been called paintings were mere ink and charcoal, and that all precedent and all authority must be cast away at once, and trodden under foot. He cast them away: the memories of Vandevelde and Claude were at once weeded out of the great mind they had encumbered; they and all the rubbish of the schools together with them; the waves of the Rhine swept them away for ever; and a new dawn rose over the rocks of the Siebengebirge. There was another motive at work, which rendered the change still more complete. His fellow artists were already conscious enough of his superior power in drawing, and their best hope was, that he might not be able to color. They had begun to express this hope loudly enough for it to reach his ears. The engraver of one of his most important marine pictures told me, not long ago, that one day about the period in question, Turner came into his room to examine the progress of the plate, not having seen his own picture for several months. It was one of his dark early pictures, but in the foreground was a little piece of luxury, a pearly fish wrought into hues like those of an opal. He stood before the picture for some moments; then laughed, and pointed joyously to the fish;--"They say that Turner can't color!" and turned away. Under the force of these various impulses the change was total. _Every subject thenceforth was primarily conceived in color_; and no engraving ever gave the slightest idea of any drawing of this period. The artists who had any perception of the truth were in despair; the Beaumontites, classicalists, and "owl species" in general, in as much indignation as their dulness was capable of. They had deliberately closed their eyes to all nature, and had gone on inquiring, "Where do you put your brown tree?" A vast revelation was made to them at once, enough to have dazzled any one; but to _them_, light unendurable as incomprehensible. They "did to the moon complain," in one vociferous, unanimous, continuous "Tu whoo." Shrieking rose from all dark places at the same instant, just the same kind of shrieking that is now raised against the Pre-Raphaelites. Those glorious old Arabian Nights, how true they are! Mocking and whispering, and abuse loud and low by turns, from all the black stones beside the road, when one living soul is toiling up the hill to get the golden water. Mocking and whispering, that he may look back, and become a black stone like themselves. Turner looked not back, but he went on in such a temper as a strong man must be in, when he is forced to walk with his fingers in his ears. He retired into himself; he could look no longer for help, or counsel, or sympathy from any one; and the spirit of defiance in which he was forced to labor led him sometimes into violences, from which the slightest expression of sympathy would have saved him. The new energy that was upon him, and the utter isolation into which he was driven, were both alike dangerous, and many drawings of the time show the evil effects of both; some of them being hasty, wild, or experimental, and others little more than magnificent expressions of defiance of public opinion. But all have this noble virtue--they are in everything his own: there are no more reminiscences of dead masters, no more trials of skill in the manner of Claude or Poussin; every faculty of his soul is fixed upon nature only, as he saw her, or as he remembered her. I have spoken above of his gigantic memory: it is especially necessary to notice this, in order that we may understand the kind of grasp which a man of real imagination takes of all things that are once brought within his reach--grasp thenceforth not to be relaxed for ever. On looking over any catalogues of his works, or of particular series of them, we shall notice the recurrence of the same subject two, three, or even many times. In any other artist this would be nothing remarkable. Probably most modern landscape painters multiply a favorite subject twenty, thirty, or sixty fold, putting the shadows and the clouds in different places, and "inventing," as they are pleased to call it, a new "effect" every time. But if we examine the successions of Turner's subjects, we shall find them either the records of a succession of impressions actually perceived by him at some favorite locality, or else repetitions of one impression received in early youth, and again and again realised as his increasing powers enabled him to do better justice to it. In either case we shall find them records of _seen facts_; _never_ compositions in his room to fill up a favorite outline. For instance, every traveller, at least every traveller of thirty years' standing, must love Calais, the place where he first felt himself in a strange world. Turner evidently loved it excessively. I have never catalogued his studies of Calais, but I remember, at this moment, five: there is first the "Pas de Calais," a very large oil painting, which is what he saw in broad daylight as he crossed over, when he got near the French side. It is a careful study of French fishing boats running for the shore before the wind, with the picturesque old city in the distance. Then there is the "Calais Harbor" in the Liber Studiorum: that is what he saw just as he was going into the harbor,--a heavy brig warping out, and very likely to get in his way, or run against the pier, and bad weather coming on. Then there is the "Calais Pier," a large painting, engraved some years ago by Mr. Lupton:[101] that is what he saw when he had landed, and ran back directly to the pier to see what had become of the brig. The weather had got still worse, the fishwomen were being blown about in a distressful manner on the pier head, and some more fishing boats were running in with all speed. Then there is the "Fortrouge," Calais: that is what he saw after he had been home to Dessein's, and dined, and went out again in the evening to walk on the sands, the tide being down. He had never seen such a waste of sands before, and it made an impression on him. The shrimp girls were all scattered over them too, and moved about in white spots on the wild shore; and the storm had lulled a little, and there was a sunset--such a sunset,--and the bars of Fortrouge seen against it, skeleton-wise. He did not paint that directly; thought over it,--painted it a long while afterwards. Then there is the vignette in the illustrations to Scott. That is what he saw as he was going home, meditatively; and the revolving lighthouse came blazing out upon him suddenly, and disturbed him. He did not like that so much; made a vignette of it, however, when he was asked to do a bit of Calais, twenty or thirty years afterwards, having already done all the rest. Turner never told me all this, but any one may see it if he will compare the pictures. They might, possibly, not be impressions of a single day, but of two days or three; though in all human probability they were seen just as I have stated them;[102] but they _are_ records of successive impressions, as plainly written as ever traveller's diary. All of them pure veracities. Therefore immortal. I could multiply these series almost indefinitely from the rest of his works. What is curious, some of them have a kind of private mark running through all the subjects. Thus I know three drawings of Scarborough, and all of them have a starfish in the foreground: I do not remember any others of his marine subjects which have a starfish. The other kind of repetition--the recurrence to one early impression--is however still more remarkable. In the collection of F. H. Bale, Esq., there is a small drawing of Llanthony Abbey. It is in his boyish manner, its date probably about 1795; evidently a sketch from nature, finished at home. It had been a showery day; the hills were partially concealed by the rain, and gleams of sunshine breaking out at intervals. A man was fishing in the mountain stream. The young Turner sought a place of some shelter under the bushes; made his sketch, took great pains when he got home to imitate the rain, as he best could; added his child's luxury of a rainbow; put in the very bush under which he had taken shelter, and the fisherman, a somewhat ill-jointed and long-legged fisherman, in the courtly short breeches which were the fashion of the time. Some thirty years afterwards, with all his powers in their strongest training, and after the total change in his feelings and principles which I have endeavored to describe, he undertook the series of "England and Wales," and in that series introduced the subject of Llanthony Abbey. And behold, he went back to his boy's sketch, and boy's thought. He kept the very bushes in their places, but brought the fisherman to the other side of the river, and put him, in somewhat less courtly dress, under their shelter, instead of himself. And then he set all his gained strength and new knowledge at work on the well-remembered shower of rain, that had fallen thirty years before, to do it better. The resultant drawing[103] is one of the very noblest of his second period. Another of the drawings of the England series, Ulleswater, is the repetition of one in Mr. Fawkes's collection, which, by the method of its execution, I should conjecture to have been executed about the year 1808, or 1810: at all events, it is a very quiet drawing of the first period. The lake is quite calm; the western hills in grey shadow, the eastern massed in light. Helvellyn rising like a mist between them, all being mirrored in the calm water. Some thin and slightly evanescent cows are standing in the shallow water in front; a boat floats motionless about a hundred yards from the shore: the foreground is of broken rocks, with lovely pieces of copse on the right and left. This was evidently Turner's record of a quiet evening by the shore of Ulleswater, but it was a feeble one. He could not at that time render the sunset colors: he went back to it therefore in the England series, and painted it again with his new power. The same hills are there, the same shadows, the same cows,--they had stood in his mind, on the same spot, for twenty years,--the same boat, the same rocks, only the copse is cut away--it interfered with the masses of his color: some figures are introduced bathing, and what was grey, and feeble gold in the first drawing, becomes purple, and burning rose-color in the last. But perhaps one of the most curious examples is in the series of subjects from Winchelsea. That in the Liber Studiorum, "Winchelsea, Sussex," bears date 1812, and its figures consist of a soldier speaking to a woman, who is resting on the bank beside the road. There is another small subject, with Winchelsea in the distance, of which the engraving bears date 1817. It has _two_ women with bundles, and _two_ soldiers toiling along the embankment in the plain, and a baggage waggon in the distance. Neither of these seems to have satisfied him, and at last he did another for the England series, of which the engraving bears date 1830. There is now a regiment on the march; the baggage waggon is there, having got no further on in the thirteen years, but one of the women is tired, and has fainted on the bank; another is supporting her against her bundle, and giving her drink; a third sympathetic woman is added, and the two soldiers have stopped, and one is drinking from his canteen. Nor is it merely of entire scenes, or of particular incidents, that Turner's memory is thus tenacious. The slightest passages of color or arrangement that have pleased him--the fork of a bough, the casting of a shadow, the fracture of a stone--will be taken up again and again, and strangely worked into new relations with other thoughts. There is a single sketch from nature in one of the portfolios at Farnley, of a common wood-walk on the estate, which has furnished passages to no fewer than three of the most elaborate compositions in the Liber Studiorum. I am thus tedious in dwelling on Turner's powers of memory, because I wish it to be thoroughly seen how all his greatness, all his infinite luxuriance of invention, depends on his taking possession of everything that he sees,--on his grasping all, and losing hold of nothing,--on his forgetting himself, and forgetting nothing else. I wish it to be understood how every great man paints what he sees or did see, his greatness being indeed little else than his intense sense of fact. And thus Pre-Raphaelitism and Raphaelitism, and Turnerism, are all one and the same, so far as education can influence them. They are different in their choice, different in their faculties, but all the same in this, that Raphael himself, so far as he was great, and all who preceded or followed him who ever were great, became so by painting the truths around them as they appeared to each man's own mind, not as he had been taught to see them, except by the God who made both him and them. There is, however, one more characteristic of Turner's second period, on which I have still to dwell, especially with reference to what has been above advanced respecting the fallacy of overtoil; namely, the magnificent ease with which all is done when it is _successfully_ done. For there are one or two drawings of this time which are _not_ done easily. Turner had in these set himself to do a fine thing to exhibit his powers; in the common phrase, to excel himself; so sure as he does this, the work is a failure. The worst drawings that have ever come from his hands are some of this second period, on which he has spent much time and laborious thought; drawings filled with incident from one side to the other, with skies stippled into morbid blue, and warm lights set against them in violent contrast; one of Bamborough Castle, a large water-color, may be named as an example. But the truly noble works are those in which, without effort, he has expressed his thoughts as they came, and forgotten himself; and in these the outpouring of invention is not less miraculous than the swiftness and obedience of the mighty hand that expresses it. Any one who examines the drawings may see the evidence of this facility, in the strange freshness and sharpness of every touch of color; but when the multitude of delicate touches, with which all the aërial tones are worked, is taken into consideration, it would still appear impossible that the drawing could have been completed with _ease_, unless we had direct evidence in the matter: fortunately, it is not wanting. There is a drawing in Mr. Fawkes's collection of a man-of-war taking in stores: it is of the usual size of those of the England series, about sixteen inches by eleven: it does not appear one of the most highly finished, but is still farther removed from slightness. The hull of a first-rate occupies nearly one-half of the picture on the right, her bows towards the spectator, seen in sharp perspective from stem to stern, with all her portholes, guns, anchors, and lower rigging elaborately detailed; there are two other ships of the line in the middle distance, drawn with equal precision; a noble breezy sea dancing against their broad bows, full of delicate drawing in its waves; a store-ship beneath the hull of the larger vessel, and several other boats, and a complicated cloudy sky. It might appear no small exertion of mind to draw the detail of all this shipping down to the smallest ropes, from memory, in the drawing-room of a mansion in the middle of Yorkshire, even if considerable time had been given for the effort. But Mr. Fawkes sat beside the painter from the first stroke to the last. Turner took a piece of blank paper one morning after breakfast, outlined his ships, finished the drawing in three hours, and went out to shoot. Let this single fact be quietly meditated upon by our ordinary painters, and they will see the truth of what was above asserted,--that if a great thing can be done at all, it can be done easily; and let them not torment themselves with twisting of compositions this way and that, and repeating, and experimenting, and scene-shifting. If a man can compose at all, he can compose at once, or rather he must compose in spite of himself. And this is the reason of that silence which I have kept in most of my works, on the subject of Composition. Many critics, especially the architects, have found fault with me for not "teaching people how to arrange masses;" for not "attributing sufficient importance to composition." Alas! I attribute far more importance to it than they do;--so much importance, that I should just as soon think of sitting down to teach a man how to write a Divina Commedia, or King Lear, as how to "compose," in the true sense, a single building or picture. The marvellous stupidity of this age of lecturers is, that they do not see that what they call "principles of composition," are mere principles of common sense in everything, as well as in pictures and buildings;--A picture is to have a principal light? Yes; and so a dinner is to have a principal dish, and an oration a principal point, and an air of music a principal note, and every man a principal object. A picture is to have harmony of relation among its parts? Yes; and so is a speech well uttered, and an action well ordered, and a company well chosen, and a ragout well mixed. Composition! As if a man were not composing every moment of his life, well or ill, and would not do it instinctively in his picture as well as elsewhere, if he could. Composition of this lower or common kind is of exactly the same importance in a picture that it is in any thing else,--no more. It is well that a man should say what he has to say in good order and sequence, but the main thing is to say it truly. And yet we go on preaching to our pupils as if to have a principal light was every thing, and so cover our academy walls with Shacabac feasts, wherein the courses are indeed well ordered, but the dishes empty. It is not, however, only in invention that men over-work themselves, but in execution also; and here I have a word to say to the Pre-Raphaelites specially. They are working too hard. There is evidence in failing portions of their pictures, showing that they have wrought so long upon them that their very sight has failed for weariness, and that the hand refused any more to obey the heart. And, besides this, there are certain qualities of drawing which they miss from over-carefulness. For, let them be assured, there is a great truth lurking in that common desire of men to see things done in what they call a "masterly," or "bold," or "broad," manner: a truth oppressed and abused, like almost every other in this world, but an eternal one nevertheless; and whatever mischief may have followed from men's looking for nothing else but this facility of execution, and supposing that a picture was assuredly all right if only it were done with broad dashes of the brush, still the truth remains the same:--that because it is not intended that men shall torment or weary themselves with any earthly labor, it is appointed that the noblest results should only be attainable by a certain ease and decision of manipulation. I only wish people understood this much of sculpture, as well as of painting, and could see that the finely finished statue is, in ninety-nine cases out of a hundred, a far more vulgar work than that which shows rough signs of the right hand laid to the workman's hammer: but at all events, in painting it is felt by all men, and justly felt. The freedom of the lines of nature can only be represented by a similar freedom in the hand that follows them; there are curves in the flow of the hair, and in the form of the features, and in the muscular outline of the body, which can in no wise be caught but by a sympathetic freedom in the stroke of the pencil. I do not care what example is taken, be it the most subtle and careful work of Leonardo himself, there will be found a play and power and ease in the outlines, which no _slow_ effort could ever imitate. And if the Pre-Raphaelites do not understand how this kind of power, in its highest perfection, may be united with the most severe rendering of all other orders of truth, and especially of those with which they themselves have most sympathy, let them look at the drawings of John Lewis. These then are the principal lessons which we have to learn from Turner, in his second or central period of labor. There is one more, however, to be received; and that is a warning; for towards the close of it, what with doing small conventional vignettes for publishers, making showy drawings from sketches taken by other people of places he had never seen, and touching up the bad engravings from his works submitted to him almost every day,--engravings utterly destitute of animation, and which had to be raised into a specious brilliancy by scratching them over with white, spotty lights, he gradually got inured to many conventionalities, and even falsities; and, having trusted for ten or twelve years almost entirely to his memory and invention, living I believe mostly in London, and receiving a new sensation only from the burning of the Houses of Parliament, he painted many pictures between 1830 and 1840 altogether unworthy of him. But he was not thus to close his career. In the summer either of 1840 or 1841, he undertook another journey into Switzerland. It was then at least forty years since he had first seen the Alps; (the source of the Arveron, in Mr. Fawkes's collection, which could not have been painted till he had seen the thing itself, bears date 1800,) and the direction of his journey in 1840 marks his fond memory of that earliest one; for, if we look over the Swiss studies and drawings executed in his first period, we shall be struck with his fondness for the pass of the St. Gothard; the most elaborate drawing in the Farnley collection is one of the Lake of Lucerne from Fluelen; and, counting the Liber Studiorum subjects, there are, to my knowledge, six compositions taken at the same period from the pass of St. Gothard, and, probably, several others are in existence. The valleys of Sallenche, and Chamouni, and Lake of Geneva, are the only other Swiss scenes which seem to have made very profound impressions on him. He returned in 1841 to Lucerne; walked up Mont Pilate on foot, crossed the St. Gothard, and returned by Lausanne and Geneva. He made a large number of colored sketches on this journey, and realised several of them on his return. The drawings thus produced are different from all that had preceded them, and are the first which belong definitely to what I shall henceforth call his Third period. The perfect repose of his youth had returned to his mind, while the faculties of imagination and execution appeared in renewed strength; all conventionality being done away with by the force of the impression which he had received from the Alps, after his long separation from them. The drawings are marked by a peculiar largeness and simplicity of thought: most of them by deep serenity, passing into melancholy; all by a richness of color, such as he had never before conceived. They, and the works done in following years, bear the same relation to those of the rest of his life that the colors of sunset do to those of the day; and will be recognised, in a few years more, as the noblest landscapes ever yet conceived by human intellect. Such has been the career of the greatest painter of this century. Many a century may pass away before there rises such another; but what greatness any among us may be capable of, will, at least, be best attained by following in his path; by beginning in all quietness and hopefulness to use whatever powers we may possess to represent the things around us as we see and feel them; trusting to the close of life to give the perfect crown to the course of its labors, and knowing assuredly that the determination of the degree in which watchfulness is to be exalted into invention, rests with a higher will than our own. And, if not greatness, at least a certain good, is thus to be achieved; for though I have above spoken of the mission of the more humble artist, as if it were merely to be subservient to that of the antiquarian or the man of science, there is an ulterior aspect in which it is not subservient, but superior. Every archæologist, every natural philosopher, knows that there is a peculiar rigidity of mind brought on by long devotion to logical and analytical inquiries. Weak men, giving themselves to such studies, are utterly hardened by them, and become incapable of understanding anything nobler, or even of feeling the value of the results to which they lead. But even the best men are in a sort injured by them, and pay a definite price, as in most other matters, for definite advantages. They gain a peculiar strength, but lose in tenderness, elasticity, and impressibility. The man who has gone, hammer in hand, over the surface of a romantic country, feels no longer, in the mountain ranges he has so laboriously explored, the sublimity or mystery with which they were veiled when he first beheld them, and with which they are adorned in the mind of the passing traveller. In his more informed conception, they arrange themselves like a dissected model: where another man would be awe-struck by the magnificence of the precipice, he sees nothing but the emergence of a fossiliferous rock, familiarised already to his imagination as extending in a shallow stratum, over a perhaps uninteresting district; where the unlearned spectator would be touched with strong emotion by the aspect of the snowy summits which rise in the distance, he sees only the culminating points of a metamorphic formation, with an uncomfortable web of fan-like fissures radiating, in his imagination, through their centres[104]. That in the grasp he has obtained of the inner relations of all these things to the universe, and to man, that in the views which have been opened to him of natural energies such as no human mind would have ventured to conceive, and of past states of being, each in some new way bearing witness to the unity of purpose and everlastingly consistent providence of the Maker of all things, he has received reward well worthy the sacrifice, I would not for an instant deny; but the sense of the loss is not less painful to him if his mind be rightly constituted; and it would be with infinite gratitude that he would regard the man, who, retaining in his delineation of natural scenery a fidelity to the facts of science so rigid as to make his work at once acceptable and credible to the most sternly critical intellect, should yet invest its features again with the sweet veil of their daily aspect; should make them dazzling with the splendor of wandering light, and involve them in the unsearchableness of stormy obscurity; should restore to the divided anatomy its visible vitality of operation, clothe naked crags with soft forests, enrich the mountain ruins with bright pastures, and lead the thoughts from the monotonous recurrence of the phenomena of the physical world, to the sweet interests and sorrows of human life and death. THE END. FOOTNOTES: [97] It was not a little curious, that in the very number of the Art Union which repeated this direct falsehood about the Pre-Raphaelite rejection of "linear perspective" (by-the-bye, the next time J. B. takes upon him to speak of any one connected with the Universities, he may as well first ascertain the difference between a Graduate and an Under-Graduate), the second plate given should have been of a picture of Bonington's,--a professional landscape painter, observe,--for the want of _aërial_ perspective in which the Art Union itself was obliged to apologise, and in which the artist has committed nearly as many blunders in _linear_ perspective as there are lines in the picture. [98] These false statements may be reduced to three principal heads, and directly contradicted in succession. The first, the current fallacy of society as well as of the press, was, that the Pre-Raphaelites imitated the _errors_ of early painters. A falsehood of this kind could not have obtained credence anywhere but in England, few English people, comparatively, having ever seen a picture of early Italian Masters. If they had, they would have known that the Pre-Raphaelite pictures are just as superior to the early Italian in skill of manipulation, power of drawing, and knowledge of effect, as inferior to them in grace of design; and that in a word, there is not a shadow of resemblance between the two styles. The Pre-Raphaelites imitate no pictures: they paint from nature only. But they have opposed themselves as a body to that kind of teaching above described, which only began after Raphael's time: and they have opposed themselves as sternly to the entire feeling of the Renaissance schools; a feeling compounded of indolence, infidelity, sensuality, and shallow pride. Therefore they have called themselves Pre-Raphaelites. If they adhere to their principles, and paint nature as it is around them, with the help of modern science, with the earnestness of the men of the thirteenth and fourteenth centuries, they will, as I said, found a new and noble school in England. If their sympathies with the early artists lead them into mediævalism or Romanism, they will of course come to nothing. But I believe there is no danger of this, at least for the strongest among them. There may be some weak ones, whom the Tractarian heresies may touch; but if so, they will drop off like decayed branches from a strong stem. I hope all things from the school. The second falsehood was, that the Pre-Raphaelites did not draw well. This was asserted, and could have been asserted only by persons who had never looked at the pictures. The third falsehood was, that they had no system of light and shade. To which it may be simply replied that their system of light and shade is exactly the same as the Sun's; which is, I believe, likely to outlast that of the Renaissance, however brilliant. [99] He did not use his full signature, J. M. W., until about the year 1800. [100] I shall give a _catalogue raisonnée_ of all this in the third volume of "Modern Painters." [101] The plate was, however, never published. [102] And the more probably because Turner was never fond of staying long at any place, and was least of all likely to make a pause of two or three days at the beginning of his journey. [103] Vide Modern Painters, Part II. Sect. III. Chap. IV. § 14. [104] This state of mind appears to have been the only one which Wordsworth had been able to discern in men of science; and in disdain of which, he wrote that short-sighted passage in the Excursion, Book III. l. 165-190, which is, I think, the only one in the whole range of his works which his true friends would have desired to see blotted out. What else has been found fault with as feeble or superfluous, is not so in the intense distinctive relief which it gives to his character. But these lines are written in mere ignorance of the matter they treat; in mere want of sympathy with the men they describe; for, observe, though the passage is put into the mouth of the Solitary, it is fully confirmed, and even rendered more scornful, by the speech which follows. ARATRA PENTELICI SIX LECTURES ON THE ELEMENTS OF SCULPTURE GIVEN BEFORE THE UNIVERSITY OF OXFORD IN MICHAELMAS TERM, 1870 PREFACE. I must pray the readers of the following Lectures to remember that the duty at present laid on me at Oxford is of an exceptionally complex character. Directly, it is to awaken the interest of my pupils in a study which they have hitherto found unattractive, and imagined to be useless; but more imperatively, it is to define the principles by which the study itself should be guided; and to vindicate their security against the doubts with which frequent discussion has lately encumbered a subject which all think themselves competent to discuss. The possibility of such vindication is, of course, implied in the original consent of the universities to the establishment of Art Professorships. Nothing can be made an element of education of which it is impossible to determine whether it is ill done or well; and the clear assertion that there is a canon law in formative Art is, at this time, a more important function of each University than the instruction of its younger members in any branch of practical skill. It matters comparatively little whether few or many of our students learn to draw; but it matters much that all who learn should be taught with accuracy. And the number who may be justifiably advised to give any part of the time they spend at college to the study of painting or sculpture ought to depend, and finally _must_ depend, on their being certified that painting and sculpture, no less than language or than reasoning, have grammar and method,--that they permit a recognizable distinction between scholarship and ignorance, and enforce a constant distinction between Right and Wrong. This opening course of Lectures on Sculpture is therefore restricted to the statement, not only of first principles, but of those which were illustrated by the practice of one school, and by that practice in its simplest branch, the analysis of which could be certified by easily accessible examples, and aided by the indisputable evidence of photography.[105] The exclusion of the terminal Lecture of the course from the series now published, is in order to mark more definitely this limitation of my subject; but in other respects the Lectures have been amplified in arranging them for the press, and the portions of them trusted at the time to extempore delivery, (not through indolence, but because explanations of detail are always most intelligible when most familiar,) have been in substance to the best of my power set down, and in what I said too imperfectly, completed. In one essential particular I have felt it necessary to write what I would not have spoken. I had intended to make no reference, in my University Lectures, to existing schools of Art, except in cases where it might be necessary to point out some undervalued excellence. The objects specified in the eleventh paragraph of my inaugural Lecture, might, I hoped, have been accomplished without reference to any works deserving of blame; but the Exhibition of the Royal Academy in the present year showed me a necessity of departing from my original intention. The task of impartial criticism[106] is now, unhappily, no longer to rescue modest skill from neglect; but to withstand the errors of insolent genius, and abate the influence of plausible mediocrity. The Exhibition of 1871 was very notable in this important particular, that it embraced some representation of the modern schools of nearly every country in Europe; and I am well assured that looking back upon it after the excitement of that singular interest has passed away, every thoughtful judge of Art will confirm my assertion, that it contained not a single picture of accomplished merit; while it contained many that were disgraceful to Art, and some that were disgraceful to humanity. It becomes, under such circumstances, my inevitable duty to speak of the existing conditions of Art with plainness enough to guard the youths whose judgments I am entrusted to form, from being misled, either by their own naturally vivid interest in what represents, however unworthily, the scenes and persons of their own day, or by the cunningly devised, and, without doubt, powerful allurements of Art which has long since confessed itself to have no other object than to allure. I have, therefore, added to the second of these Lectures such illustration of the motives and course of modern industry as naturally arose out of its subject, and shall continue in future to make similar applications; rarely, indeed, permitting myself, in the Lectures actually read before the University, to introduce subjects of instant, and therefore too exciting, interest; but completing the addresses which I prepare for publication in these, and in any other particulars which may render them more widely serviceable. The present course of Lectures will be followed, if I am able to fulfil the design of them, by one of a like elementary character on Architecture; and that by a third series on Christian Sculpture: but, in the meantime, my effort is to direct the attention of the resident students to Natural History, and to the higher branches of ideal Landscape: and it will be, I trust, accepted as sufficient reason for the delay which has occurred in preparing the following sheets for the press, that I have not only been interrupted by a dangerous illness, but engaged, in what remained to me of the summer, in an endeavour to deduce, from the overwhelming complexity of modern classification in the Natural Sciences, some forms capable of easier reference by Art students, to whom the anatomy of brutal and floral nature is often no less important than that of the human body. The preparation of examples for manual practice, and the arrangement of standards for reference, both in Painting and Sculpture, had to be carried on meanwhile, as I was able. For what has already been done, the reader is referred to the _Catalogue of the Educational Series_, published at the end of the Spring Term; of what remains to be done I will make no anticipatory statement, being content to have ascribed to me rather the fault of narrowness in design, than of extravagance in expectation. DENMARK HILL, _25th November, 1871._ FOOTNOTES: [105] Photography cannot exhibit the character of large and finished sculpture; but its audacity of shadow is in perfect harmony with the more roughly picturesque treatment necessary in coins. For the rendering of all such frank relief, and for the better explanation of forms disturbed by the lustre of metal or polished stone, the method employed in the plates of this volume will be found, I believe, satisfactory. Casts are first taken from the coins, in white plaster; these are photographed, and the photograph printed by the heliotype process of Messrs. Edwards and Kidd. Plate XII. is exceptional, being a pure mezzotint engraving of the old school, excellently carried through by my assistant, Mr. Allen, who was taught, as a personal favour to myself, by my friend, and Turner's fellow-worker, Thomas Lupton. Plate IV. was intended to be a photograph from the superb vase in the British Museum, No. 564 in Mr. Newton's Catalogue; but its variety of colour defied photography, and after the sheets had gone to press I was compelled to reduce Le Normand's plate of it, which is unsatisfactory, but answers my immediate purpose. The enlarged photographs for use in the Lecture Room were made for me with most successful skill by Sergeant Spackman, of South Kensington; and the help throughout rendered to me by Mr. Burgess is acknowledged in the course of the Lectures; though with thanks which must remain inadequate lest they should become tedious; for Mr. Burgess drew the subjects of Plates III., X., and XIII.; drew and engraved every woodcut in the book; and printed all the plates with his own hand. [106] A pamphlet by the Earl of Southesk, "_Britain's Art Paradise_," (Edmonston and Douglas, Edinburgh) contains an entirely admirable criticism of the most faultful pictures of the 1871 Exhibition. It is to be regretted that Lord Southesk speaks only to condemn; but indeed, in my own three days' review of the rooms, I found nothing deserving of notice otherwise, except Mr. Hook's always pleasant sketches from fisher life, and Mr. Pettie's graceful and powerful, though too slightly painted, study from _Henry VI_. ARATRA PENTELICI. LECTURE I. OF THE DIVISION OF ARTS. _November, 1870._ 1. If, as is commonly believed, the subject of study which it is my special function to bring before you had no relation to the great interests of mankind, I should have less courage in asking for your attention to-day, than when I first addressed you; though, even then, I did not do so without painful diffidence. For at this moment, even supposing that in other places it were possible for men to pursue their ordinary avocations undisturbed by indignation or pity; here, at least, in the midst of the deliberative and religious influences of England, only one subject, I am well assured, can seriously occupy your thoughts--the necessity, namely, of determining how it has come to pass, that in these recent days, iniquity the most reckless and monstrous can be committed unanimously, by men more generous than ever yet in the world's history were deceived into deeds of cruelty; and that prolonged agony of body and spirit, such as we should shrink from inflicting wilfully on a single criminal, has become the appointed and accepted portion of unnumbered multitudes of innocent persons, inhabiting the districts of the world which, of all others, as it seemed, were best instructed in the laws of civilization, and most richly invested with the honour, and indulged in the felicity, of peace. Believe me, however, the subject of Art--instead of being foreign to these deep questions of social duty and peril,--is so vitally connected with them, that it would be impossible for me now to pursue the line of thought in which I began these lectures, because so ghastly an emphasis would be given to every sentence by the force of passing events. It is well, then, that in the plan I have laid down for your study, we shall now be led into the examination of technical details, or abstract conditions of sentiment; so that the hours you spend with me may be times of repose from heavier thoughts. But it chances strangely that, in this course of minutely detailed study, I have first to set before you the most essential piece of human workmanship, the plough, at the very moment when--(you may see the announcement in the journals either of yesterday or the day before)--the swords of your soldiers have been sent for _to be sharpened_, and not at all to be beaten into ploughshares. I permit myself, therefore, to remind you of the watchword of all my earnest writings--"Soldiers of the Ploughshare, instead of Soldiers of the Sword"--and I know it my duty to assert to you that the work we enter upon to-day is no trivial one, but full of solemn hope; the hope, namely, that among you there may be found men wise enough to lead the national passions towards the arts of peace, instead of the arts of war. I say the work "we enter upon," because the first four lectures I gave in the spring were wholly prefatory; and the following three only defined for you methods of practice. To-day we begin the systematic analysis and progressive study of our subject. 2. In general, the three great, or fine, Arts of Painting, Sculpture, and Architecture, are thought of as distinct from the lower and more mechanical formative arts, such as carpentry or pottery. But we cannot, either verbally, or with any practical advantage, admit such classification. How are we to distinguish painting on canvas from painting on china?--or painting on china from painting on glass?--or painting on glass from infusion of colour into any vitreous substance, such as enamel?--or the infusion of colour into glass and enamel from the infusion of colour into wool or silk, and weaving of pictures in tapestry, or patterns in dress? You will find that although, in ultimately accurate use of the word, painting must be held to mean only the laying of a pigment on a surface with a soft instrument; yet, in broad comparison of the functions of Art, we must conceive of one and the same great artistic faculty, as governing _every mode of disposing colours in a permanent relation on, or in, a solid substance_; whether it be by tinting canvas, or dyeing stuffs; inlaying metals with fused flint, or coating walls with coloured stone. 3. Similarly the word "Sculpture,"--though in ultimate accuracy it is to be limited to the development of form in hard substances by cutting away portions of their mass--in broad definition, must be held to signify _the reduction of any shapeless mass of solid matter into an intended shape_, whatever the consistence of the substance, or nature of the instrument employed; whether we carve a granite mountain, or a piece of box-wood, and whether we use, for our forming instrument axe, or hammer, or chisel, or our own hands, or water to soften, or fire to fuse;--whenever and however we bring a shapeless thing into shape, we do so under the laws of the one great Art of Sculpture. 4. Having thus broadly defined painting and sculpture, we shall see that there is, in the third place, a class of work separated from both, in a specific manner, and including a great group of arts which neither, of necessity, _tint_, nor for the sake of form merely, _shape_, the substances they deal with; but construct or arrange them with a view to the resistance of some external force. We construct, for instance, a table with a flat top, and some support of prop, or leg, proportioned in strength to such weights as the table is intended to carry. We construct a ship out of planks, or plates of iron, with reference to certain forces of impact to be sustained, and of inertia to be overcome; or we construct a wall or roof with distinct reference to forces of pressure and oscillation, to be sustained or guarded against; and therefore, in every case, with especial consideration of the strength of our materials, and the nature of that strength, elastic, tenacious, brittle, and the like. Now although this group of arts nearly always involves the putting of two or more separate pieces together, we must not define it by that accident. The blade of an oar is not less formed with reference to external force than if it were made of many pieces; and the frame of a boat, whether hollowed out of a tree-trunk, or constructed of planks nailed together, is essentially the same piece of art; to be judged by its buoyancy and capacity of progression. Still, from the most wonderful piece of all architecture, the human skeleton, to this simple one,[107] the ploughshare, on which it depends for its subsistence, _the putting of two or more pieces together_ is curiously necessary to the perfectness of every fine instrument; and the peculiar mechanical work of Dædalus,--inlaying,--becomes all the more delightful to us in external aspect, because, as in the jawbone of a Saurian, or the wood of a bow, it is essential to the finest capacities of tension and resistance. 5. And observe how unbroken the ascent from this, the simplest architecture, to the loftiest. The placing of the timbers in a ship's stem, and the laying of the stones in a bridge buttress, are similar in art to the construction of the ploughshare, differing in no essential point, either in that they deal with other materials, or because, of the three things produced, one has to divide earth by advancing through it, another to divide water by advancing through it, and the third to divide water which advances against it. And again, the buttress of a bridge differs only from that of a cathedral in having less weight to sustain, and more to resist. We can find no term in the gradation, from the ploughshare to the cathedral buttress, at which we can set a logical distinction. 6. Thus then we have simply three divisions of Art--one, that of giving colours to substance; another, that of giving form to it without question of resistance to force; and the third, that of giving form or position which will make it capable of such resistance. All the fine arts are embraced under these three divisions. Do not think that it is only a logical or scientific affectation to mass them together in this manner; it is, on the contrary, of the first practical importance to understand that the painter's faculty, or masterhood over colour, being as subtle as a musician's over sound, must be looked to for the government of every operation in which colour is employed; and that, in the same manner, the appliance of any art whatsoever to minor objects cannot be right, unless under the direction of a true master of that art. Under the present system, you keep your Academician occupied only in producing tinted pieces of canvas to be shown in frames, and smooth pieces of marble to be placed in niches; while you expect your builder or constructor to design coloured patterns in stone and brick, and your china-ware merchant to keep a separate body of workwomen who can paint china, but nothing else. By this division of labour, you ruin all the arts at once. The work of the Academician becomes mean and effeminate, because he is not used to treat colour on a grand scale and in rough materials; and your manufactures become base because no well educated person sets hand to them. And therefore it is necessary to understand, not merely as a logical statement, but as a practical necessity, that wherever beautiful colour is to be arranged, you need a Master of Painting; and wherever noble form is to be given, a Master of Sculpture; and wherever complex mechanical force is to be resisted, a Master of Architecture. 7. But over this triple division there must rule another yet more important. Any of these three arts may be either imitative of natural objects or limited to useful appliance. You may either paint a picture that represents a scene, or your street door, to keep it from rotting; you may mould a statue, or a plate; build the resemblance of a cluster of lotus stalks, or only a square pier. Generally speaking, Painting and Sculpture will be imitative, and Architecture merely useful; but there is a great deal of Sculpture--as this crystal ball[108] for instance, which is not imitative, and a great deal of Architecture which, to some extent is so, as the so called foils of Gothic apertures; and for many other reasons you will find it necessary to keep distinction clear in your minds between the arts--of whatever kind--which are imitative, and produce a resemblance or image of something which is not present; and those which are limited to the production of some useful reality, as the blade of a knife, or the wall of a house. You will perceive also, as we advance, that sculpture and painting are indeed in this respect only one art; and that we shall have constantly to speak and think of them as simply _graphic_, whether with chisel or colour, their principal function being to make us, in the words of Aristotle, "[Greek: theôrêtikoi tou peri ta sômata kallous]" (Polit. 8, 3.), "having capacity and habit of contemplation of the beauty that is in material things;" while Architecture, and its co-relative arts, are to be practised under quite other conditions of sentiment. 8. Now it is obvious that so far as the fine arts consist either in imitation or mechanical construction, the right judgment of them must depend on our knowledge of the things they imitate, and forces they resist: and my function of teaching here would (for instance) so far resolve itself, either into demonstration that this painting of a peach,[109] does resemble a peach, or explanation of the way in which this ploughshare (for instance) is shaped so as to throw the earth aside with least force of thrust. And in both of these methods of study, though of course your own diligence must be your chief master, to a certain extent your Professor of Art can always guide you securely, and can show you, either that the image does truly resemble what it attempts to resemble, or that the structure is rightly prepared for the service it has to perform. But there is yet another virtue of fine art which is, perhaps, exactly that about which you will expect your Professor to teach you most, and which, on the contrary, is exactly that about which you must teach yourselves all that it is essential to learn. 9. I have here in my hand one of the simplest possible examples of the union of the graphic and constructive powers,--one of my breakfast plates. Since all the finely architectural arts, we said, began in the shaping of the cup and the platter, we will begin, ourselves, with the platter. Why has it been made round? For two structural reasons: first, that the greatest holding surface may be gathered into the smallest space; and secondly, that in being pushed past other things on the table, it may come into least contact with them. [Illustration: FIG. 1.] Next, why has it a rim? For two other structural reasons; first, that it is convenient to put salt or mustard upon; but secondly and chiefly, that the plate may be easily laid hold of. The rim is the simplest form of continuous handle. Farther, to keep it from soiling the cloth, it will be wise to put this ridge beneath, round the bottom; for as the rim is the simplest possible form of continuous handle, so this is the simplest form of continuous leg. And we get the section given beneath the figure for the essential one of a rightly made platter. 10. Thus far our art has been strictly utilitarian having respect to conditions of collision, of carriage, and of support. But now, on the surface of our piece of pottery, here are various bands and spots of colour which are presumably set there to make it pleasanter to the eye. Six of the spots, seen closely, you discover are intended to represent flowers. These then have as distinctly a graphic purpose as the other properties of the plate have an architectural one, and the first critical question we have to ask about them is, whether they are like roses or not. I will anticipate what I have to say in subsequent lectures so far as to assure you that, if they are to be like roses at all, the liker they can be, the better. Do not suppose, as many people will tell you, that because this is a common manufactured article, your roses on it are the better for being ill-painted, or half-painted. If they had been painted by the same hand that did this peach, the plate would have been all the better for it; but, as it chanced, there was no hand such as William Hunt's to paint them, and their graphic power is not distinguished. In any case, however, that graphic power must have been subordinate to their effect as pink spots, while the band of green-blue round the plate's edge, and the spots of gold, pretend to no graphic power at all, but are meaningless spaces of colour or metal. Still less have they any mechanical office: they add nowise to the serviceableness of the plate; and their agreeableness, if they possess any, depends, therefore, neither on any imitative, nor any structural, character; but on some inherent pleasantness in themselves, either of mere colours to the eye (as of taste to the tongue), or in the placing of those colours in relations which obey some mental principle of order, or physical principle of harmony. 11. These abstract relations and inherent pleasantnesses, whether in space, number, or time, and whether of colours or sounds, form what we may properly term the musical or harmonic element in every art; and the study of them is an entirely separate science. It is the branch of art-philosophy to which the word "æsthetics" should be strictly limited, being the inquiry into the nature of things that in themselves are pleasant to the human senses or instincts, though they represent nothing, and serve for nothing, their only service _being_ their pleasantness. Thus it is the province of æsthetics to tell you, (if you did not know it before,) that the taste and colour of a peach are pleasant, and to ascertain, if it be ascertainable, (and you have any curiosity to know,) why they are so. 12. The information would, I presume, to most of you, be gratuitous. If it were not, and you chanced to be in a sick state of body in which you disliked peaches, it would be, for the time, to you false information, and, so far as it was true of other people, to you useless. Nearly the whole study of æsthetics is in like manner either gratuitous or useless. Either you like the right things without being recommended to do so, or if you dislike them, your mind cannot be changed by lectures on the laws of taste. You recollect the story of Thackeray, provoked, as he was helping himself to strawberries, by a young coxcomb's telling him that "he never took fruit or sweets." "That" replied, or is said to have replied, Thackeray, "is because you are a sot, and a glutton." And the whole science of æsthetics is, in the depth of it, expressed by one passage of Goethe's in the end of the 2nd part of Faust;--the notable one that follows the song of the Lemures, when the angels enter to dispute with the fiends for the soul of Faust. They enter singing--"Pardon to sinners and life to the dust." Mephistopheles hears them first, and exclaims to his troop, "Discord I hear, and filthy jingling"--"Mistöne höre ich; garstiges Geklimper." This, you see, is the extreme of bad taste in music. Presently the angelic host begin strewing roses, which discomfits the diabolic crowd altogether. Mephistopheles in vain calls to them--"What do you duck and shrink for--is that proper hellish behaviour? Stand fast, and let them strew"--"Was duckt und zuckt ihr; ist das Hellen-brauch? So haltet stand, und lasst sie streuen." There you have, also, the extreme of bad taste in sight and smell. And in the whole passage is a brief embodiment for you of the ultimate fact that all æsthetics depend on the health of soul and body, and the proper exercise of both, not only through years, but generations. Only by harmony of both collateral and successive lives can the great doctrine of the Muses be received which enables men "[Greek: chairein orthôs]," "to have pleasures rightly;" and there is no other definition of the beautiful, nor of any subject of delight to the æsthetic faculty, than that it is what one noble spirit has created, seen and felt by another of similar or equal nobility. So much as there is in you of ox, or of swine, perceives no beauty, and creates none: what is human in you, in exact proportion to the perfectness of its humanity, can create it, and receive. 13. Returning now to the very elementary form in which the appeal to our æsthetic virtue is made in our breakfast-plate, you notice that there are two distinct kinds of pleasantness attempted. One by hues of colour; the other by proportions of space. I have called these the musical elements of the arts relating to sight; and there are indeed two complete sciences, one of the combinations of colour, and the other of the combinations of line and form, which might each of them separately engage us in as intricate study as that of the science of music. But of the two, the science of colour is, in the Greek sense, the more musical, being one of the divisions of the Apolline power; and it is so practically educational, that if we are not using the faculty for colour to discipline nations, they will infallibly use it themselves as a means of corruption. Both music and colour are naturally influences of peace; but in the war trumpet, and the war shield, in the battle song and battle standard, they have concentrated by beautiful imagination the cruel passions of men; and there is nothing in all the Divina Commedia of history more grotesque, yet more frightful, than the fact that, from the almost fabulous period when the insanity and impiety of war wrote themselves in the symbols of the shields of the Seven against Thebes, colours have been the sign and stimulus of the most furious and fatal passions that have rent the nations: blue against green, in the decline of the Roman Empire; black against white, in that of Florence; red against white, in the wars of the Royal houses in England; and at this moment, red against white, in the contest of anarchy and loyalty, in all the world. 14. On the other hand, the directly ethical influence of colour in the sky, the trees, flowers, and coloured creatures round us, and in our own various arts massed under the one name of painting, is so essential and constant that we cease to recognize it, because we are never long enough altogether deprived of it to feel our need; and the mental diseases induced by the influence of corrupt colour are as little suspected, or traced to their true source, as the bodily weaknesses resulting from atmospheric miasmata. 15. The second musical science which belongs peculiarly to sculpture (and to painting, so far as it represents form), consists in the disposition of beautiful masses. That is to say, beautiful surfaces limited by beautiful lines. Beautiful _surfaces_, observe; and remember what is noted in my fourth lecture of the difference between a space and a mass. If you have at any time examined carefully, or practised from, the drawings of shells placed in your copying series, you cannot but have felt the difference in the grace between the aspects of the same line, when enclosing a rounded or unrounded space. The exact science of sculpture is that of the relations between outline and the solid form it limits; and it does not matter whether that relation be indicated by drawing or carving, so long as the expression of solid form is the mental purpose; it is the science always of the beauty of relation in three dimensions. To take the simplest possible line of continuous limit--the circle: the flat disc enclosed by it may indeed be made an element of decoration, though a very meagre one but its relative mass, the ball, being gradated in three dimensions, is always delightful. Here[110] is at once the simplest, and in mere patient mechanism, the most skilful, piece of sculpture I can possibly show you,--a piece of the purest rock-crystal, chiselled, (I believe, by mere toil of hand,) into a perfect sphere. Imitating nothing, constructing nothing; sculpture for sculpture's sake, of purest natural substance into simplest primary form. 16. Again. Out of the nacre of any mussel or oyster-shell you might cut, at your pleasure, any quantity of small flat circular discs of the prettiest colour and lustre. To some extent, such tinsel or foil of shell _is_ used pleasantly for decoration. But the mussel or oyster becoming itself an unwilling modeller, agglutinates its juice into three dimensions, and the fact of the surface being now geometrically gradated, together with the savage instinct of attributing value to what is difficult to obtain, make the little boss so precious in men's sight that wise eagerness of search for the kingdom of heaven can be likened to their eagerness of search for _it_; and the gates of Paradise can be no otherwise rendered so fair to their poor intelligence, as by telling them that every several gate was of "one pearl." 17. But take note here. We have just seen that the sum of the perceptive faculty is expressed in those words of Aristotle's "to take pleasure rightly" or straightly--[Greek: chairein orthôs]. Now, it is not possible to do the direct opposite of that,--to take pleasure iniquitously or obliquely--[Greek: chairein adikôs] or [Greek: skoliôs]--more than you do in enjoying a thing because your neighbour cannot get it. You may enjoy a thing legitimately because it is rare, and cannot be seen often, (as you do a fine aurora, or a sunset, or an unusually lovely flower); that is Nature's way of stimulating your attention. But if you enjoy it because your neighbour cannot have it--and, remember, all value attached to pearls more than glass beads, is merely and purely for that cause,--then you rejoice through the worst of idolatries, covetousness; and neither arithmetic, nor writing, nor any other so-called essential of education, is now so vitally necessary to the population of Europe, as such acquaintance with the principles of intrinsic value, as may result in the iconoclasm of jewellery; and in the clear understanding that we are not in that instinct, civilized, but yet remain wholly savage, so far as we care for display of this selfish kind. You think, perhaps, I am quitting my subject, and proceeding, as it is too often with appearance of justice alleged against me, into irrelevant matter. Pardon me; the end, not only of these lectures, but of my whole professorship, would be accomplished,--and far more than that,--if only the English nation could be made to understand that the beauty which is indeed to be a joy for ever, must be a joy for all; and that though the idolatry may not have been wholly divine which sculptured gods, the idolatry is wholly diabolic, which, for vulgar display, sculptures diamonds. 18. To go back to the point under discussion. A pearl, or a glass bead, may owe its pleasantness in some degree to its lustre as well as to its roundness. But a mere and simple ball of unpolished stone is enough for sculpturesque value. You may have noticed that the quatrefoil used in the Ducal Palace of Venice owes its complete loveliness in distant effect to the finishing of its cusps. The extremity of the cusp is a mere ball of Istrian marble; and consider how subtle the faculty of sight must be, since it recognizes at any distance, and is gratified by, the mystery of the termination of cusp obtained by the gradated light on the ball. In that Venetian tracery this simplest element of sculptured form is used sparingly, as the most precious that can be employed to finish the façade. But alike in our own, and the French, central Gothic, the ball-flower is lavished on every line--and in your St. Mary's spire, and the Salisbury spire, and the towers of Notre Dame of Paris, the rich pleasantness of decoration,--indeed, their so-called "decorated style,"--consists only in being daintily beset with stone balls. It is true the balls are modified into dim likeness of flowers; but do you trace the resemblance to the rose in their distant, which is their intended effect? 19. But farther, let the ball have motion; then the form it generates will be that of a cylinder. You have, perhaps, thought that pure Early English Architecture depended for its charm on visibility of construction. It depends for its charm altogether on the abstract harmony of groups of cylinders,[111] arbitrarily bent into mouldings, and arbitrarily associated as shafts, having no _real_ relation to construction whatsoever, and a theoretical relation so subtle that none of us had seen it, till Professor Willis worked it out for us. 20. And now, proceeding to analysis of higher sculpture, you may have observed the importance I have attached to the porch of San Zenone, at Verona, by making it, among your standards, the first of the group which is to illustrate the system of sculpture and architecture founded on faith in a future life. That porch, fortunately represented in the photograph, from which Plate I. has been engraved, under a clear and pleasant light, furnishes you with examples of sculpture of every kind from the flattest incised bas-relief to solid statues, both in marble and bronze. And the two points I have been pressing upon you are conclusively exhibited here, namely,--(1). That sculpture is essentially the production of a pleasant bossiness or roundness of surface; (2) that the pleasantness of that bossy condition to the eye is irrespective of imitation on one side, and of structure on the other. 21. (1.) Sculpture is essentially the production of a pleasant bossiness or roundness of surface. If you look from some distance at these two engravings of Greek coins, (place the book open so that you can see the opposite plate three or four yards off,) you will find the relief on each of them simplifies itself into a pearl-like portion of a sphere, with exquisitely gradated light on its surface. When you look at them nearer, you will see that each smaller portion into which they are divided--cheek, or brow, or leaf, or tress of hair--resolves itself also into a rounded or undulated surface, pleasant by gradation of light. Every several surface is delightful in itself, as a shell, or a tuft of rounded moss, or the bossy masses of distant forest would be. That these intricately modulated masses present some resemblance to a girl's face, such as the Syracusans imagined that of the water-goddess Arethusa, is entirely a secondary matter; the primary condition is that the masses shall be beautifully rounded, and disposed with due discretion and order. [Illustration: PLATE I.--PORCH OF SAN ZENONE. VERONA.] 22. (2.) It is difficult for you, at first, to feel this order and beauty of surface, apart from the imitation. But you can see there is a pretty disposition of, and relation between, the projections of a fir-cone, though the studded spiral imitates nothing. Order exactly the same in kind, only much more complex; and an abstract beauty of surface rendered definite by increase and decline of light--(for every curve of surface has its own luminous law, and the light and shade on a parabolic solid differs, specifically, from that on an elliptical or spherical one)--it is the essential business of the sculptor to obtain; as it is the essential business of a painter to get good colour, whether he imitates anything or not. At a distance from the picture, or carving, where the things represented become absolutely unintelligible, we must yet be able to say, at a glance, "That is good painting, or good carving." And you will be surprised to find, when you try the experiment, how much the eye must instinctively judge in this manner. Take the front of San Zenone for instance, Plate I. You will find it impossible without a lens, to distinguish in the bronze gates, and in great part of the wall, anything that their bosses represent. You cannot tell whether the sculpture is of men, animals, or trees; only you feel it to be composed of pleasant projecting masses; you acknowledge that both gates and wall are, somehow, delightfully roughened; and only afterwards, by slow degrees, can you make out what this roughness means; nay, though here (Plate III.) I magnify[112] one of the bronze plates of the gate to a scale, which gives you the same advantage as if you saw it quite close, in the reality,--you may still be obliged to me for the information, that _this_ boss represents the Madonna asleep in her little bed, and this smaller boss, the Infant Christ in His; and this at the top, a cloud with an angel coming out of it, and these jagged bosses, two of the Three Kings, with their crowns on, looking up to the star, (which is intelligible enough I admit); but what this straggling, three-legged boss beneath signifies, I suppose neither you nor I can tell, unless it be the shepherd's dog, who has come suddenly upon the Kings with their crowns on, and is greatly startled at them. 23. Farther, and much more definitely, the pleasantness of the surface decoration is independent of structure; that is to say, of any architectural requirement of stability. The greater part of the sculpture here is exclusively ornamentation of a flat wall, or of door panelling; only a small portion of the church front is thus treated, and the sculpture has no more to do with the form of the building than a piece of a lace veil would have, suspended beside its gates on a festal day; the proportions of shaft and arch might be altered in a hundred different ways, without diminishing their stability; and the pillars would stand more safely on the ground than on the backs of these carved animals. 24. I wish you especially to notice these points, because the false theory that ornamentation should be merely decorated structure is so pretty and plausible, that it is likely to take away your attention from the far more important abstract conditions of design. Structure should never be contradicted, and in the best buildings it is pleasantly exhibited and enforced; in this very porch the joints of every stone are visible, and you will find me in the Fifth Lecture insisting on this clearness of its anatomy as a merit; yet so independent is the mechanical structure of the true design, that when I begin my Lectures on Architecture, the first building I shall give you as a standard will be one in which the structure is wholly concealed. It will be the Baptistry of Florence, which is, in reality, as much a buttressed chapel with a vaulted roof, as the Chapter House of York--but round it, in order to conceal that buttressed structure, (not to decorate, observe, but to _conceal_) a flat external wall is raised; simplifying the whole to a mere hexagonal box, like a wooden piece of Tunbridge ware, on the surface of which the eye and intellect are to be interested by the relations of dimension and curve between pieces of encrusting marble of different colours, which have no more to do with the real make of the building than the diaper of a Harlequin's jacket has to do with his bones. [Illustration: PLATE II.--THE ARETHUSA OF SYRACUSE.] [Illustration: PLATE III.--THE WARNING TO THE KINGS. San Zenone. Verona.] 25. The sense of abstract proportion, on which the enjoyment of such a piece of art entirely depends, is one of the æsthetic faculties which nothing can develop but time and education. It belongs only to highly-trained nations; and, among them, to their most strictly refined classes, though the germs of it are found, as part of their innate power, in every people capable of art. It has for the most part vanished at present from the English mind, in consequence of our eager desire for excitement, and for the kind of splendour that exhibits wealth, careless of dignity; so that, I suppose, there are very few now even of our best-trained Londoners who know the difference between the design of Whitehall and that of any modern club-house in Pall-mall. The order and harmony which, in his enthusiastic account of the Theatre of Epidaurus, Pausanias insists on before beauty, can only be recognized by stern order and harmony in our daily lives; and the perception of them is as little to be compelled, or taught suddenly, as the laws of still finer choice in the conception of dramatic incident which regulate poetic sculpture. 26. And now, at last, I think, we can sketch out the subject before us in a clear light. We have a structural art, divine, and human, of which the investigation comes under the general term, Anatomy; whether the junctions or joints be in mountains, or in branches of trees, or in buildings, or in bones of animals. We have next a musical art, falling into two distinct divisions--one using colours, the other masses, for its elements of composition; lastly, we have an imitative art, concerned with the representation of the outward appearances of things. And, for many reasons, I think it best to begin with imitative Sculpture; that being defined as _the art which, by the musical disposition of masses, imitates anything of which the imitation is justly pleasant to us; and does so in accordance with structural laws having due reference to the materials employed_. So that you see our task will involve the immediate inquiry what the things are of which the imitation is justly pleasant to us: what, in few words,--if we are to be occupied in the making of graven images--we ought to like to make images _of_. Secondly, after having determined its subject, what degree of imitation or likeness we ought to desire in our graven image; and lastly, under what limitations demanded by structure and material, such likeness may be obtained. These inquiries I shall endeavour to pursue with you to some practical conclusion, in my next four lectures, and in the sixth, I will briefly sketch the actual facts that have taken place in the development of sculpture by the two greatest schools of it that hitherto have existed in the world. 27. The tenor of our next lecture then must be an inquiry into the real nature of Idolatry; that is to say, the invention and service of Idols: and, in the interval, may I commend to your own thoughts this question, not wholly irrelevant, yet which I cannot pursue; namely, whether the God to whom we have so habitually prayed for deliverance "from battle, murder, and sudden death," _is_ indeed, seeing that the present state of Christendom is the result of a thousand years' praying to that effect, "as the gods of the heathen who were but idols;" or whether--(and observe, one or other of these things _must_ be true)--whether our prayers to Him have been, by this much, worse than Idolatry;--that heathen prayer was true prayer to false gods; and our prayers have been false prayers to the True One. FOOTNOTES: [107] I had a real ploughshare on my lecture table; but it would interrupt the drift of the statements in the text too long if I attempted here to illustrate by figures the relation of the coulter to the share, and of the hard to the soft pieces of metal in the share itself. [108] A sphere of rock crystal, cut in Japan, enough imaginable by the reader, without a figure. [109] One of William Hunt's peaches; not, I am afraid, imaginable altogether, but still less representable by figure. [110] The crystal ball above mentioned. [111] All grandest effects in mouldings may be, and for the most part have been, obtained by rolls and cavettos of circular (segmental) section. More refined sections, as that of the fluting of a Doric shaft, are only of use near the eye and in beautiful stone; and the pursuit of them was one of the many errors of later Gothic. The statement in the text that the mouldings, even of best time, "have no real relation to construction," is scarcely strong enough: they in fact contend with, and deny the construction, their principal purpose seeming to be the concealment of the joints of the voussoirs. [112] Some of the most precious work done for me by my assistant Mr. Burgess, during the course of these lectures, consisted in making enlarged drawings from portions of photographs. Plate III. is engraved from a drawing of his, enlarged from the original photograph of which Plate I. is a reduction. LECTURE II. IDOLATRY. _November, 1870._ 28. Beginning with the simple conception of sculpture as the art of fiction in solid substance, we are now to consider what its subjects should be. What--having the gift of imagery--should we by preference endeavour to image? A question which is, indeed, subordinate to the deeper one--why we should wish to image anything at all. 29. Some years ago, having been always desirous that the education of women should begin in learning how to cook, I got leave, one day, for a little girl of eleven years old to exchange, much to her satisfaction, her schoolroom for the kitchen. But as ill fortune would have it, there was some pastry toward, and she was left unadvisedly in command of some delicately rolled paste; whereof she made no pies, but an unlimited quantity of cats and mice. Now you may read the works of the gravest critics of art from end to end; but you will find, at last, they can give you no other true account of the spirit of sculpture than that it is an irresistible human instinct for the making of cats and mice, and other imitable living creatures, in such permanent form that one may play with the images at leisure. Play with them, or love them, or fear them, or worship them. The cat may become the goddess Pasht, and the mouse, in the hand of the sculptured king, enforce his enduring words "[Greek: es eme tis oreôn eusebês estô];" but the great mimetic instinct underlies all such purpose; and is zooplastic,--life-shaping,--alike in the reverent and the impious. 30. Is, I say, and has been, hitherto; none of us dare say that it will be. I shall have to show you hereafter that the greater part of the technic energy of men, as yet, has indicated a kind of childhood; and that the race becomes, if not more wise, at least more manly,[113] with every gained century. I can fancy that all this sculpturing and painting of ours may be looked back upon, in some distant time, as a kind of doll-making, and that the words of Sir Isaac Newton may be smiled at no more: only it will not be for stars that we desert our stone dolls, but for men. When the day comes, as come it must, in which we no more deface and defile God's image in living clay, I am not sure that we shall any of us care so much for the images made of Him, in burnt clay. 31. But, hitherto, the energy of growth in any people may be almost directly measured by their passion for imitative art; namely, for sculpture, or for the drama, which is living and speaking sculpture, or, as in Greece, for both; and in national as in actual childhood, it is not merely the _making_, but the _making-believe_; not merely the acting for the sake of the scene, but acting for the sake of acting, that is delightful. And, of the two mimetic arts, the drama, being more passionate, and involving conditions of greater excitement and luxury, is usually in its excellence the sign of culminating strength in the people; while fine sculpture, requiring always submission to severe law, is an unfailing proof of their being in early and active progress. _There is no instance of fine sculpture being produced by a nation either torpid, weak, or in decadence._ Their drama may gain in grace and wit; but their sculpture, in days of decline, is _always_ base. 32. If my little lady in the kitchen had been put in command of colours, as well as of dough, and if the paste would have taken the colours, we may be sure her mice would have been painted brown, and her cats tortoise-shell; and this, partly indeed for the added delight and prettiness of colour itself, but more for the sake of absolute realization to her eyes and mind. Now all the early sculpture of the most accomplished nations has been thus coloured, rudely or finely; and, therefore, you see at once how necessary it is that we should keep the term "graphic" for imitative art generally; since no separation can at first be made between carving and painting, with reference to the mental powers exerted in, or addressed by, them. In the earliest known art of the world, a reindeer hunt may be scratched in outline on the flat side of a clean-picked bone, and a reindeer's head carved out of the end of it; both these are flint-knife work, and, strictly speaking, sculpture: but the scratched outline is the beginning of drawing, and the carved head of sculpture proper. When the spaces enclosed by the scratched outline are filled with colour, the colouring soon becomes a principal means of effect; so that, in the engraving of an Egyptian-colour bas-relief (S. 101), Rosellini has been content to miss the outlining incisions altogether, and represent it as a painting only. Its proper definition is, "painting accented by sculpture;" on the other hand, in solid coloured statues,--Dresden china figures, for example,--we have pretty sculpture accented by painting; the mental purpose in both kinds of art being to obtain the utmost degree of realization possible, and the ocular impression being the same, whether the delineation is obtained by engraving or painting. For, as I pointed out to you in my fifth lecture, everything is seen by the eye as patches of colour, and of colour only; a fact which the Greeks knew well; so that when it becomes a question in the dialogue of Minos, "[Greek: tini onti tê opsei horatai ta hoômena]," the answer is "[Greek: aisthêsei tautê tê dia tôn ophthalmôn dêloisê hêmin ta chrômata]."--"What kind of power is the sight with which we see things? It is that sense which, through the eyes, can reveal _colours_ to us." 33. And now observe that while the graphic arts begin in the mere mimetic effort, they proceed, as they obtain more perfect realization, to act under the influence of a stronger and higher instinct. They begin by scratching the reindeer, the most interesting object of sight. But presently, as the human creature rises in scale of intellect, it proceeds to scratch, not the most interesting object of sight only, but the most interesting object of imagination; not the reindeer, but the Maker and Giver of the reindeer. And the second great condition for the advance of the art of sculpture is that the race should possess, in addition to the mimetic instinct, the realistic or idolizing instinct; the desire to see as substantial the powers that are unseen, and bring near those that are far off, and to possess and cherish those that are strange. To make in some way tangible and visible the nature of the gods--to illustrate and explain it by symbols; to bring the immortals out of the recesses of the clouds, and make them Penates; to bring back the dead from darkness, and make them Lares. 34. Our conception of this tremendous and universal human passion has been altogether narrowed by the current idea that Pagan religious art consisted only, or chiefly, in giving personality to the gods. The personality was never doubted; it was visibility, interpretation, and possession that the hearts of men sought. Possession, first of all--the getting hold of some hewn log of wild olive-wood that would fall on its knees if it was pulled from its pedestal--and, afterwards, slowly clearing manifestation; the exactly right expression is used in Lucian's dream,--[Greek: Pheidias edeixe ton Dia]; "Showed[114] Zeus;" manifested him, nay, in a certain sense, brought forth, or created, as you have it, in Anacreon's ode to the Rose, of the birth of Athena herself-- [Greek: polemoklonon t' Athênên koruphês edeiknye Zeus.] But I will translate the passage from Lucian to you at length--it is in every way profitable. 35. "There came to me, in the healing[115] night, a divine dream, so clear that it missed nothing of the truth itself; yes, and still after all this time, the shapes of what I saw remain in my sight, and the sound of what I heard dwells in my ears"--note the lovely sense of [Greek: enaulos]--the sound being as of a stream passing always by in the same channel,--"so distinct was everything to me. Two women laid hold of my hands and pulled me, each towards herself, so violently, that I had like to have been pulled asunder; and they cried out against one another,--the one, that she was resolved to have me to herself, being indeed her own, and the other that it was vain for her to claim what belonged to others;--and the one who first claimed me for her own was like a hard worker, and had strength as a man's; and her hair was dusty, and her hand full of horny places, and her dress fastened tight about her, and the folds of it loaded with white marble-dust, so that she looked just as my uncle used to look when he was filing stones: but the other was pleasant in features, and delicate in form, and orderly in her dress; and so in the end, they left it to me to decide, after hearing what they had to say, with which of them I would go; and first the hard featured and masculine one spoke:-- [Illustration: IV THE NATIVITY OF ATHENA.] 36. "'Dear child, I am the Art of Image-sculpture, which yesterday you began to learn; and I am as one of your own people, and of your house, for your grandfather,' (and she named my mother's father) 'was a stone-cutter; and both your uncles had good name through me: and if you will keep yourself well clear of the sillinesses and fluent follies that come from this creature,' (and she pointed to the other woman) 'and will follow me, and live with me, first of all, you shall be brought up as a man should be, and have strong shoulders; and, besides that, you shall be kept well quit of all restless desires, and you shall never be obliged to go away into any foreign places, leaving your own country and the people of your house; _neither shall all men praise you for your talk_.[116] And you must not despise this rude serviceableness of my body, neither this meanness of my dusty dress; for, pushing on in their strength from such things as these, that great Phidias revealed Zeus, and Polyclitus wrought out Hera, and Myron was praised, and Praxiteles marvelled at: therefore are these men worshipped with the gods.'" 37. There is a beautiful ambiguity in the use of the preposition with the genitive in this last sentence. "Pushing on from these things" means indeed, justly, that the sculptors rose from a mean state to a noble one; but not as _leaving_ the mean state;--not as, from a hard life, attaining to a soft one,--but as being helped and strengthened by the rough life to do what was greatest. Again, "worshipped with the gods" does not mean that they are thought of as in any sense equal to, or like to, the gods, but as being on the side of the gods against what is base and ungodly; and that the kind of worth which is in them is therefore indeed worshipful, as having its source with the gods. Finally, observe that every one of the expressions, used of the four sculptors, is definitely the best that Lucian could have chosen. Phidias carved like one who had seen Zeus, and had only to _reveal_ him; Polyclitus, in labour of intellect, completed his sculpture by just law, and _wrought_ out Hera; Myron was of all most _praised_, because he did best what pleased the vulgar; and Praxiteles, the most _wondered at_ or admired, because he bestowed utmost exquisiteness of beauty. 38. I am sorry not to go on with the dream; the more refined lady, as you may remember, is liberal or gentlemanly Education, and prevails at last; so that Lucian becomes an author instead of a sculptor, I think to his own regret, though to our present benefit. One more passage of his I must refer you to, as illustrative of the point before us; the description of the temple of the Syrian Hieropolis, where he explains the absence of the images of the sun and moon. "In the temple itself," he says, "on the left hand as one goes in, there is set first the throne of the sun; but no form of him is thereon, for of these two powers alone, the sun and the moon, they show no carved images. And I also learned why this is their law, for they say that it is permissible, indeed, to make of the other gods, graven images, since the forms of them are not visible to all men. But Helios and Selenaia are everywhere clear-bright, and all men behold them; what need is there therefore for sculptured work of these, who appear in the air?" 39. This, then, is the second instinct necessary to sculpture; the desire for the manifestation, description, and companionship of unknown powers; and for possession of a bodily substance--the "bronze Strasbourg," which you can embrace, and hang immortelles on the head of--instead of an abstract idea. But if you get nothing more in the depth of the national mind than these two feelings, the mimetic and idolizing instincts, there may be still no progress possible for the arts except in delicacy of manipulation and accumulative caprice of design. You must have not only the idolizing instinct, but an [Greek: êthos] which chooses the right thing to idolize! Else, you will get states of art like those in China or India, non-progressive, and in great part diseased and frightful, being wrought under the influence of foolish terror, or foolish admiration. So that a third condition, completing and confirming both the others, must exist in order to the development of the creative power. 40. This third condition is that the heart of the nation shall be set on the discovery of just or equal law, and shall be from day to day developing that law more perfectly. The Greek school of sculpture is formed during, and in consequence of, the national effort to discover the nature of justice; the Tuscan, during, and in consequence of, the national effort to discover the nature of justification. I assert to you at present briefly, what will, I hope, be the subject of prolonged illustration hereafter. 41. Now when a nation with mimetic instinct and imaginative longing is also thus occupied earnestly in the discovery of Ethic law, that effort gradually brings precision and truth into all its manual acts; and the physical progress of sculpture as in the Greek, so in the Tuscan, school, consists in gradually _limiting_ what was before indefinite, in _verifying_ what was inaccurate, and in _humanizing_ what was monstrous. I might perhaps content you by showing these external phenomena, and by dwelling simply on the increasing desire of naturalness, which compels, in every successive decade of years, literally, in the sculptured images, the mimicked bones to come together, bone to his bone; and the flesh to come up upon them, until from a flattened and pinched handful of clay, respecting which you may gravely question whether it was intended for a human form at all;--by slow degrees, and added touch to touch, in increasing consciousness of the bodily truth,--at last the Aphrodite of Melos stands before you, a perfect woman. But all that search for physical accuracy is merely the external operation, in the arts, of the seeking for truth in the inner soul; it is impossible without that higher effort, and the demonstration of it would be worse than useless to you, unless I made you aware at the same time of its spiritual cause. 42. Observe farther; the increasing truth in representation is co-relative with increasing beauty in the thing to be represented. The pursuit of justice which regulates the imitative effort, regulates also the development of the race into dignity of person, as of mind; and their culminating art-skill attains the grasp of entire truth at the moment when the truth becomes most lovely. And then, ideal sculpture may go on safely into portraiture. But I shall not touch on the subject of portrait sculpture to-day; it introduces many questions of detail, and must be a matter for subsequent consideration. 43. These then are the three great passions which are concerned in true sculpture. I cannot find better, or, at least, more easily remembered, names for them than "the Instincts of Mimicry, Idolatry, and Discipline;" meaning, by the last, the desire of equity and wholesome restraint, in all acts and works of life. Now of these, there is no question but that the love of Mimicry is natural and right, and the love of Discipline is natural and right. But it looks a grave question whether the yearning for Idolatry, (the desire of companionship with images,) is right. Whether, indeed, if such an instinct be essential to good sculpture, the art founded on it can possibly be "fine" art. 44. I must now beg for your close attention, because I have to point out distinctions in modes of conception which will appear trivial to you, unless accurately understood; but of an importance in the history of art which cannot be overrated. When the populace of Paris adorned the statue of Strasbourg with immortelles, none, even the simplest of the pious decorators, would suppose that the city of Strasbourg itself, or any spirit or ghost of the city, was actually there, sitting in the Place de la Concorde. The figure was delightful to them as a visible nucleus for their fond thoughts about Strasbourg; but never for a moment supposed to _be_ Strasbourg. Similarly, they might have taken delight in a statue purporting to represent a river instead of a city,--the Rhine, or Garonne, suppose,--and have been touched with strong emotion in looking at it, if the real river were dear to them, and yet never think for an instant that the statue _was_ the river. And yet again, similarly, but much more distinctly, they might take delight in the beautiful image of a god, because it gathered and perpetuated their thoughts about that god; and yet never suppose, nor be capable of being deceived by any arguments into supposing, that the statue _was_ the god. On the other hand, if a meteoric stone fell from the sky in the sight of a savage, and he picked it up hot, he would most probably lay it aside in some, to him, sacred place, and believe _the stone itself_ to be a kind of god, and offer prayer and sacrifice to it. In like manner, any other strange or terrifying object, such, for instance, as a powerfully noxious animal or plant, he would be apt to regard in the same way; and very possibly also construct for himself frightful idols of some kind, calculated to produce upon him a vague impression of their being alive; whose imaginary anger he might deprecate or avert with sacrifice, although incapable of conceiving in them any one attribute of exalted intellectual or moral nature. 45. If you will now refer to § 52-59 of my Introductory Lectures, you will find this distinction between a resolute conception, recognized for such, and an involuntary apprehension of spiritual existence, already insisted on at some length. And you will see more and more clearly as we proceed, that the deliberate and intellectually commanded conception is not idolatrous in any evil sense whatever, but is one of the grandest and wholesomest functions of the human soul; and that the essence of evil idolatry begins only in the idea or belief of a real presence of any kind, in a thing in which there is no such presence. 46. I need not say that the harm of the idolatry must depend on the certainty of the negative. If there be a real presence in a pillar of cloud, in an unconsuming flame, or in a still small voice, it is no sin to bow down before these. But, as matter of historical fact, the idea of such presence has generally been both ignoble and false, and confined to nations of inferior race, who are often condemned to remain for ages in conditions of vile terror, destitute of thought. Nearly all Indian architecture and Chinese design arise out of such a state: so also, though in a less gross degree, Ninevite and Phoenician art, early Irish, and Scandinavian; the latter, however, with vital elements of high intellect mingled in it from the first. But the greatest races are never grossly subject to such terror, even in their childhood, and the course of their minds is broadly divisible into three distinct stages. 47. (I.) In their infancy they begin to imitate the real animals about them, as my little girl made the cats and mice, but with an undercurrent of partial superstition--a sense that there must be more in the creatures than they can see; also they catch up vividly any of the fancies of the baser nations round them, and repeat these more or less apishly, yet rapidly naturalizing and beautifying them. They then connect all kinds of shapes together, compounding meanings out of the old chimeras, and inventing new ones with the speed of a running wild-fire; but always getting more of man into their images, and admitting less of monster or brute; their own characters, meanwhile, expanding and purging themselves, and shaking off the feverish fancy, as springing flowers shake the earth off their stalks. 48. (II.) In the second stage, being now themselves perfect men and women, they reach the conception of true and great gods as existent in the universe; and absolutely cease to think of them as in any wise present in statues or images; but they have now learned to make these statues beautifully human, and to surround them with attributes that may concentrate their thoughts of the gods. This is, in Greece, accurately the Pindaric time, just a little preceding the Phidian; the Phidian is already dimmed with a faint shadow of infidelity; still, the Olympic Zeus may be taken as a sufficiently central type of a statue which was no more supposed to _be_ Zeus, than the gold or elephants' tusks it was made of; but in which the most splendid powers of human art were exhausted in representing a believed and honoured God to the happy and holy imagination of a sincerely religious people. 49. (III.) The third stage of national existence follows, in which, the imagination having now done its utmost, and being partly restrained by the sanctities of tradition, which permit no farther change in the conceptions previously created, begins to be superseded by logical deduction and scientific investigation. At the same moment, the elder artists having done all that is possible in realizing the national conceptions of the Gods, the younger ones, forbidden to change the scheme of existing representations, and incapable of doing anything better in that kind, betake themselves to refine and decorate the old ideas with more attractive skill. Their aims are thus more and more limited to manual dexterity, and their fancy paralyzed. Also, in the course of centuries, the methods of every art continually improving, and being made subjects of popular inquiry, praise is now to be got, for eminence in these, from the whole mob of the nation; whereas intellectual design can never be discerned but by the few. So that in this third æra, we find every kind of imitative and vulgar dexterity more and more cultivated; while design and imagination are every day less cared for, and less possible. 50. Meanwhile, as I have just said, the leading minds in literature and science become continually more logical and investigative; and, once that they are established in the habit of testing facts accurately, a very few years are enough to convince all the strongest thinkers that the old imaginative religion is untenable, and cannot any longer be honestly taught in its fixed traditional form, except by ignorant persons. And at this point the fate of the people absolutely depends on the degree of moral strength into which their hearts have been already trained. If it be a strong, industrious, chaste, and honest race, the taking its old gods, or at least the old forms of them, away from it, will indeed make it deeply sorrowful and amazed; but will in no whit shake its will, nor alter its practice. Exceptional persons, naturally disposed to become drunkards, harlots, and cheats, but who had been previously restrained from indulging these dispositions by their fear of God, will, of course, break out into open vice, when that fear is removed. But the heads of the families of the people, instructed in the pure habits and perfect delights of an honest life, and to whom the thought of a Father in heaven had been a comfort, not a restraint, will assuredly not seek relief from the discomfort of their orphanage by becoming uncharitable and vile. Also the high leaders of their thought gather their whole strength together in the gloom; and at the first entrance of this valley of the Shadow of Death, look their new enemy full in the eyeless face of him, and subdue him, and his terror, under their feet. "Metus omnes, et inexorabile fatum,... strepitumque Acherontis avari." This is the condition of national soul expressed by the art, and the words, of Holbein, Durer, Shakspeare, Pope, and Goethe. 51. But if the people, at the moment when the trial of darkness approaches, be not confirmed in moral character, but are only maintaining a superficial virtue by the aid of a spectral religion; the moment the staff of their faith is broken, the character of the race falls like a climbing plant cut from its hold: then all the earthliest vices attack it as it lies in the dust; every form of sensual and insane sin is developed, and half a century is sometimes enough to close, in hopeless shame, the career of the nation in literature, art, and war. 52. Notably, within the last hundred years, all religion has perished from the practically active national mind of France and England. No statesman in the senate of either country would dare to use a sentence out of their acceptedly divine Revelation, as having now a literal authority over them for their guidance, or even a suggestive wisdom for their contemplation. England, especially, has cast her Bible full in the face of her former God; and proclaimed, with open challenge to Him, her resolved worship of His declared enemy, Mammon. All the arts, therefore, founded on religion, and sculpture chiefly, are here in England effete and corrupt, to a degree which arts never were hitherto in the history of mankind: and it is possible to show you the condition of sculpture living, and sculpture dead, in accurate opposition, by simply comparing the nascent Pisan school in Italy with the existing school in England. 53. You were perhaps surprised at my placing in your educational series, as a type of original Italian sculpture, the pulpit by Niccola Pisano in the Duomo of Siena. I would rather, had it been possible, have given the pulpit by Giovanni Pisano in the Duomo of Pisa; but that pulpit is dispersed in fragments through the upper galleries of the Duomo, and the cloister of the Campo Santo; and the casts of its fragments now put together at Kensington are too coarse to be of use to you. You may partly judge, however, of the method of their execution by the eagle's head, which I have sketched from the marble in the Campo Santo (Edu., No. 113), and the lioness with her cubs, (Edu., No. 103, more carefully studied at Siena); and I will get you other illustrations in due time. Meanwhile, I want you to compare the main purpose of the Cathedral of Pisa, and its associated Bell Tower, Baptistery, and Holy Field, with the main purpose of the principal building lately raised for the people of London. In these days, we indeed desire no cathedrals; but we have constructed an enormous and costly edifice, which, in claiming educational influence over the whole London populace, and middle class, is verily the Metropolitan cathedral of this century,--the Crystal Palace. 54. It was proclaimed, at its erection, an example of a newly discovered style of architecture, greater than any hitherto known,--our best popular writers, in their enthusiasm, describing it as an edifice of Fairyland. You are nevertheless to observe that this novel production of fairy enchantment is destitute of every kind of sculpture, except the bosses produced by the heads of nails and rivets; while the Duomo of Pisa, in the wreathen work of its doors, in the foliage of its capitals, inlaid colour designs of its façade, embossed panels of its baptistery font, and figure sculpture of its two pulpits, contained the germ of a school of sculpture which was to maintain, through a subsequent period of four hundred years, the greatest power yet reached by the arts of the world in description of Form, and expression of Thought. 55. Now it is easy to show you the essential cause of the vast discrepancy in the character of these two buildings. In the vault of the apse of the Duomo of Pisa, was a colossal image of Christ, in coloured mosaic, bearing to the temple, as nearly as possible, the relation which the statue of Athena bore to the Parthenon; and in the same manner, concentrating the imagination of the Pisan on the attributes of the God in whom he believed. In precisely the same position with respect to the nave of the building, but of larger size, as proportioned to the three or four times greater scale of the whole, a colossal piece of sculpture was placed by English designers, at the extremity of the Crystal Palace, in preparation for their solemnities in honour of the birthday of Christ, in December, 1867 or 1868. That piece of sculpture was the face of the clown in a pantomime, some twelve feet high from brow to chin, which face, being moved by the mechanism which is our pride, every half minute opened its mouth from ear to ear, showed its teeth, and revolved its eyes, the force of these periodical seasons of expression being increased and explained by the illuminated inscription underneath "Here we are again." 56. When it is assumed, and with too good reason, that the mind of the English populace is to be addressed, in the principal Sacred Festival of its year, by sculpture such as this, I need scarcely point out to you that the hope is absolutely futile of advancing their intelligence by collecting within this building, (itself devoid absolutely of every kind of art, and so vilely constructed that those who traverse it are continually in danger of falling over the cross-bars that bind it together) examples of sculpture filched indiscriminately from the past work, bad and good, of Turks, Greeks, Romans, Moors, and Christians, miscoloured, misplaced, and misinterpreted;[117] here thrust into unseemly corners, and there mortised together into mere confusion of heterogeneous obstacle; pronouncing itself hourly more intolerable in weariness, until any kind of relief is sought from it in steam wheelbarrows or cheap toy-shops; and most of all in beer and meat, the corks and the bones being dropped through the chinks in the damp deal flooring of the English Fairy Palace. 57. But you will probably think me unjust in assuming that a building prepared only for the amusement of the people can typically represent the architecture or sculpture of modern England. You may urge, that I ought rather to describe the qualities of the refined sculpture which is executed in large quantities for private persons belonging to the upper classes, and for sepulchral and memorial purposes. But I could not now criticise that sculpture with any power of conviction to you, because I have not yet stated to you the principles of good sculpture in general. I will, however, in some points, tell you the facts by anticipation. 58. We have much excellent portrait sculpture; but portrait sculpture, which is nothing more, is always third-rate work, even when produced by men of genius;--nor does it in the least require men of genius to produce it. To paint a portrait, indeed, implies the very highest gifts of painting; but any man, of ordinary patience and artistic feeling, can carve a satisfactory bust. 59. Of our powers in historical sculpture, I am, without question, just, in taking for sufficient evidence the monuments we have erected to our two greatest heroes by sea and land; namely, the Nelson Column, and the statue of the Duke of Wellington opposite Apsley House. Nor will you, I hope, think me severe,--certainly, whatever you may think me, I am using only the most temperate language, in saying of both these monuments, that they are absolutely devoid of high sculptural merit. But, consider how much is involved in the fact thus dispassionately stated, respecting the two monuments in the principal places of our capital, to our two greatest heroes. 60. Remember that we have before our eyes, as subjects of perpetual study and thought, the art of all the world for three thousand years past: especially, we have the best sculpture of Greece, for example of bodily perfection; the best of Rome, for example of character in portraiture; the best of Florence, for example of romantic passion: we have unlimited access to books and other sources of instruction; we have the most perfect scientific illustrations of anatomy, both human and comparative; and, we have bribes for the reward of success, large, in the proportion of at least twenty to one, as compared with those offered to the artists of any other period. And with all these advantages, and the stimulus also of fame carried instantly by the press to the remotest corners of Europe, the best efforts we can make, on the grandest of occasions, result in work which it is impossible in any one particular to praise. Now consider for yourselves what an intensity of the negation of the faculty of sculpture this implies in the national mind! What measures can be assigned to the gulf of incapacity, which can deliberately swallow up in the gorge of it the teaching and example of three thousand years, and produce as the result of that instruction, what it is courteous to call "nothing?" 61. That is the conclusion at which we arrive, on the evidence presented by our historical sculpture. To complete the measure of ourselves, we must endeavour to estimate the rank of the two opposite schools of sculpture employed by us in the nominal service of religion, and in the actual service of vice. I am aware of no statue of Christ, nor of any apostle of Christ, nor of any scene related in the New Testament, produced by us within the last three hundred years, which has possessed even superficial merit enough to attract public attention. Whereas the steadily immoral effect of the formative art which we learn, more or less apishly, from the French schools, and employ, but too gladly, in manufacturing articles for the amusement of the luxurious classes, must be ranked as one of the chief instruments used by joyful fiends and angry fates, for the ruin of our civilization. If, after I have set before you the nature and principles of true sculpture, in Athens, Pisa, and Florence, you reconsider these facts,--(which you will then at once recognize as such),--you will find that they absolutely justify my assertion that the state of sculpture in modern England, as compared with that of the great Ancients, is literally one of corrupt and dishonourable death, as opposed to bright and fameful life. 62. And now, will you bear with me, while I tell you finally why this is so? The cause with which you are personally concerned is your own frivolity; though essentially this is not your fault, but that of the system of your early training. But the fact remains the same, that here, in Oxford, you, a chosen body of English youth, in no wise care for the history of your country, for its present dangers, or its present duties. You still, like children of seven or eight years old, are interested only in bats, balls, and oars: nay, including with you the students of Germany and France, it is certain that the general body of modern European youth have their minds occupied more seriously by the sculpture and painting of the bowls of their tobacco-pipes, than by all the divinest workmanship and passionate imagination of Greece, Rome, and Mediæval Christendom. 63. But the elementary causes, both of this frivolity in you, and of worse than frivolity in older persons, are the two forms of deadly Idolatry which are now all but universal in England. The first of these is the worship of the Eidolon, or Phantasm of Wealth; worship of which you will find the nature partly examined in the 37th paragraph of my _Munera Pulveris_; but which is briefly to be defined as the servile apprehension of an active power in Money, and the submission to it as the God of our life. 64. The second elementary cause of the loss of our nobly imaginative faculty, is the worship of the Letter, instead of the Spirit, in what we chiefly accept as the ordinance and teaching of Deity; and the apprehension of a healing sacredness in the act of reading the Book whose primal commands we refuse to obey. No feather idol of Polynesia was ever a sign of a more shameful idolatry, than the modern notion in the minds of certainly the majority of English religious persons, that the Word of God, by which the heavens were of old, and the earth, standing out of the water and in the water,--the Word of God which came to the prophets, and comes still for ever to all who will hear it, (and to many who will forbear); and which, called Faithful and True, is to lead forth, in the judgment, the armies of heaven,--that this "Word of God" may yet be bound at our pleasure in morocco, and carried about in a young lady's pocket, with tasselled ribands to mark the passages she most approves of. 65. Gentlemen, there has hitherto been seen no instance, and England is little likely to give the unexampled spectacle, of a country successful in the noble arts, yet in which the youths were frivolous, the maidens falsely religious, the men, slaves of money, and the matrons, of vanity. Not from all the marble of the hills of Luni will such a people ever shape one statue that may stand nobly against the sky; not from all the treasures bequeathed to them by the great dead, will they gather, for their own descendants, any inheritance but shame. FOOTNOTES: [113] Glance forward at once to § 75, read it, and return to this. [114] There is a primary and vulgar sense of "exhibited" in Lucian's mind; but the higher meaning is involved in it. [115] In the Greek, "ambrosial." Recollect always that ambrosia, as food of gods, is the continual restorer of strength; that all food is ambrosial when it nourishes, and that the night is called "ambrosial" because it restores strength to the soul through its peace, as, in the 23rd Psalm, the stillness of waters. [116] I have italicised this final promise of blessedness, given by the noble Spirit of Workmanship. Compare Carlyle's 5th Latter-day pamphlet, throughout; but especially pp. 12-14, in the first edition. [117] "Falsely represented," would be the better expression. In the cast of the tomb of Queen Eleanor, for a single instance, the Gothic foliage of which one essential virtue is its change over every shield, is represented by a repetition of casts from one mould, of which the design itself is entirely conjectural. LECTURE III. IMAGINATION. _November, 1870._ 66. The principal object of the preceding lecture (and I choose rather to incur your blame for tediousness in repeating, than for obscurity in defining it), was to enforce the distinction between the ignoble and false phase of Idolatry, which consists in the attribution of a spiritual power to a material thing; and the noble and truth-seeking phase of it, to which I shall in these lectures[118] give the general term of Imagination;--that is to say, the invention of material symbols which may lead us to contemplate the character and nature of gods, spirits, or abstract virtues and powers, without in the least implying the actual presence of such Beings among us, or even their possession, in reality, of the forms we attribute to them. [Illustration: FIG. 2.] 67. For instance, in the ordinarily received Greek type of Athena, on vases of the Phidian time (sufficiently represented in the opposite woodcut), no Greek would have supposed the vase on which this was painted to be itself Athena, nor to contain Athena inside of it, as the Arabian fisherman's casket contained the genie; neither did he think that this rude black painting, done at speed as the potter's fancy urged his hand, represented anything like the form or aspect of the Goddess herself. Nor would he have thought so, even had the image been ever so beautifully wrought. The goddess might, indeed, visibly appear under the form of an armed virgin, as she might under that of a hawk or a swallow, when it pleased her to give such manifestation of her presence; but it did not, therefore, follow that she was constantly invested with any of these forms, or that the best which human skill could, even by her own aid, picture of her, was, indeed, a likeness of her. The real use, at all events, of this rude image, was only to signify to the eye and heart the facts of the existence, in some manner, of a Spirit of wisdom, perfect in gentleness, irresistible in anger; having also physical dominion over the air which is the life and breadth of all creatures, and clothed, to human eyes, with ægis of fiery cloud, and raiment of falling dew. 68. In the yet more abstract conception of the Spirit of agriculture, in which the wings of the chariot represent the winds of spring, and its crested dragons are originally a mere type of the seed with its twisted root piercing the ground, and sharp-edged leaves rising above it; we are in still less danger of mistaking the symbol for the presumed form of an actual Person. But I must, with persistence, beg of you to observe that in all the noble actions of imagination in this kind, the distinction from idolatry consists, not in the denial of the being, or presence of the Spirit, but only in the due recognition of our human incapacity to conceive the one, or compel the other. [Illustration: FIG. 3.] 69. Farther--and for this statement I claim your attention still more earnestly. As no nation has ever attained real greatness during periods in which it was subject to any condition of Idolatry, so no nation has ever attained or persevered in greatness, except in reaching and maintaining a passionate Imagination of a spiritual estate higher than that of men; and of spiritual creatures nobler than men, having a quite real and personal existence, however imperfectly apprehended by us. And all the arts of the present age deserving to be included under the name of sculpture have been degraded by us, and all principles of just policy have vanished from us,--and that totally,--for this double reason; that we are on one side, given up to idolatries of the most servile kind, as I showed you in the close of the last lecture,--while, on the other hand, we have absolutely ceased from the exercise of faithful imagination; and the only remnants of the desire of truth which remain in us have been corrupted into a prurient itch to discover the origin of life in the nature of the dust, and prove that the source of the order of the universe is the accidental concurrence of its atoms. 70. Under these two calamities of our time, the art of sculpture has perished more totally than any other, because the object of that art is exclusively the representation of form as the exponent of life. It is essentially concerned only with the human form, which is the exponent of the highest life we know; and with all subordinate forms only as they exhibit conditions of vital power which have some certain relation to humanity. It deals with the "particula undique desecta" of the animal nature, and itself contemplates, and brings forward for its disciples' contemplation, all the energies of creation which transform the [Greek: pêlos], or lower still, the [Greek: borboros] of the _trivia_, by Athena's help, into forms of power;--([Greek: to men holon architektôn autos ên. syneirgazeto de toi kai ê 'Athêna empneousa ton pêlon kai empsycha poiousa einai ta plasmata];)[119]--but it has nothing whatever to do with the representation of forms not living, however beautiful, (as of clouds or waves); nor may it condescend to use its perfect skill, except in expressing the noblest conditions of life. These laws of sculpture, being wholly contrary to the practice of our day, I cannot expect you to accept on my assertion, nor do I wish you to do so. By placing definitely good and bad sculpture before you, I do not doubt but that I shall gradually prove to you the nature of all excelling and enduring qualities; but to-day I will only confirm my assertions by laying before you the statement of the Greeks themselves on the subject; given in their own noblest time, and assuredly authoritative, in every point which it embraces, for all time to come. 71. If any of you have looked at the explanation I have given of the myth of Athena in my _Queen of the Air_, you cannot but have been surprised that I took scarcely any note of the story of her birth. I did not, because that story is connected intimately with the Apolline myths; and is told of Athena, not essentially as the goddess of the air, but as the goddess of Art-Wisdom. You have probably often smiled at the legend itself, or avoided thinking of it, as revolting. It is indeed, one of the most painful and childish of sacred myths; yet remember, ludicrous and ugly as it seems to us, this story satisfied the fancy of the Athenian people in their highest state; and if it did not satisfy--yet it was accepted by, all later mythologists: you may also remember I told you to be prepared to find that, given a certain degree of national intellect, the ruder the symbol, the deeper would be its purpose. And this legend of the birth of Athena is the central myth of all that the Greeks have left us respecting the power of their arts; and in it they have expressed, as it seemed good to them, the most important things they had to tell us on these matters. We may read them wrongly; but we must read them here, if anywhere. 72. There are so many threads to be gathered up in the legend, that I cannot hope to put it before you in total clearness, but I will take main points. Athena is born in the island of Rhodes; and that island is raised out of the sea by Apollo, after he had been left without inheritance among the gods. Zeus[120] would have cast the lot again, but Apollo orders the golden-girdled Lachesis to stretch out her hands; and not now by chance or lot, but by noble enchantment, the island rises out of the sea. Physically, this represents the action of heat and light on chaos, especially on the deep sea. It is the "Fiat lux" of Genesis, the first process in the conquest of Fate by Harmony. The island is dedicated to the Nymph Rhodos, by whom Apollo has the seven sons who teach [Greek: sophôtata noêmata]; because the rose is the most beautiful organism existing in matter not vital, expressive of the direct action of light on the earth, giving lovely form and colour at once; (compare the use of it by Dante as the form of the sainted crowd in highest heaven) and remember that, therefore, the rose is in the Greek mind, essentially a Doric flower, expressing the worship of Light, as the Iris or Ion is an Ionic one, expressing the worship of the Winds and Dew. 73. To understand the agency of Hephæstus at the birth of Athena, we must again return to the founding of the arts on agriculture by the hand. Before you can cultivate land you must clear it; and the characteristic weapon of Hephæstus,--which is as much his attribute as the trident is of Poseidon, and the rhabdos of Hermes, is not, as you would have expected, the hammer, but the clearing-axe--the doubled-edged [Greek: pélekys], the same that Calypso gives Ulysses with which to cut down the trees for his home voyage; so that both the naval and agricultural strength of the Athenians are expressed by this weapon, with which they had to hew out their fortune. And you must keep in mind this agriculturally laborious character of Hephæstus, even when he is most distinctly the god of serviceable fire; thus Horace's perfect epithet for him "avidus" expresses at once the devouring eagerness of fire, and the zeal of progressive labour, for Horace gives it to him when he is fighting against the giants. And this rude symbol of his cleaving the forehead of Zeus with the axe, and giving birth to Athena signifies, indeed, physically the thrilling power of heat in the heavens, rending the clouds, and giving birth to the blue air; but far more deeply it signifies the subduing of adverse Fate by true labour; until, out of the chasm, cleft by resolute and industrious fortitude, springs the Spirit of Wisdom. 74. Here (Fig. 4) is an early drawing of the myth, to which I shall have to refer afterwards in illustration of the childishness of the Greek mind at the time when its art-symbols were first fixed; but it is of peculiar value, because the physical character of Vulcan, as fire, is indicated by his wearing the [Greek: endromides] of Hermes, while the antagonism of Zeus, as the adverse chaos, either of cloud or of fate, is shown by his striking at Hephæstus with his thunderbolt. But Plate IV. gives you (as far as the light on the rounded vase will allow it to be deciphered) a characteristic representation of the scene, as conceived in later art. [Illustration: FIG. 4.] 75. I told you in a former lecture of this course that the entire Greek intellect was in a childish phase as compared to that of modern times. Observe, however, childishness does not necessarily imply universal inferiority: there may be a vigorous, acute, pure, and solemn childhood, and there may be a weak, foul, and ridiculous condition of advanced life; but the one is still essentially the childish, and the other the adult phase of existence. 76. You will find, then, that the Greeks were the first people that were born into complete humanity. All nations before them had been, and all around them still were, partly savage, bestial, clay-encumbered, inhuman; still semi-goat, or semi-ant, or semi-stone, or semi-cloud. But the power of a new spirit came upon the Greeks, and the stones were filled with breath, and the clouds clothed with flesh; and then came the great spiritual battle between the Centaurs and Lapithæ; and the living creatures became "Children of Men." Taught, yet, by the Centaur--sown, as they knew, in the fang--from the dappled skin of the brute, from the leprous scale of the serpent, their flesh came again as the flesh of a little child, and they were clean. Fix your mind on this as the very central character of the Greek race--the being born pure and human out of the brutal misery of the past, and looking abroad, for the first time, with their children's eyes, wonderingly open, on the strange and divine world. 77. Make some effort to remember, so far as may be possible to you, either what you felt in yourselves when you were young, or what you have observed in other children, of the action of thought and fancy. Children are continually represented as living in an ideal world of their own. So far as I have myself observed, the distinctive character of a child is to live always in the tangible present, having little pleasure in memory, and being utterly impatient and tormented by anticipation: weak alike in reflection and forethought, but having an intense possession of the actual present, down to the shortest moments and least objects of it; possessing it, indeed, so intensely that the sweet childish days are as long as twenty days will be; and setting all the faculties of heart and imagination on little things, so as to be able to make anything out of them he chooses. Confined to a little garden, he does not imagine himself somewhere else, but makes a great garden out of that; possessed of an acorn-cup, he will not despise it and throw it away, and covet a golden one in its stead: it is the adult who does so. The child keeps his acorn-cup as a treasure, and makes a golden one out of it in his mind; so that the wondering grown-up person standing beside him is always tempted to ask concerning his treasures, not, "What would you have more than these?" but "What possibly can you see _in_ these?" for, to the bystander, there is a ludicrous and incomprehensible inconsistency between the child's words and the reality. The little thing tells him gravely, holding up the acorn-cup, that "this is a queen's crown, or a fairy's boat," and, with beautiful effrontery, expects him to believe the same. But observe--the acorn-cup must be _there_, and in his own hand. "Give it me;" then I will make more of it for myself. That is the child's one word, always. [Illustration: FIG. 5.] 78. It is also the one word of the Greek--"Give it me." Give me _any_ thing definite here in my sight, then I will make more of it. [Illustration: PLATE V.--TOMB OF THE DOGES JACOPO AND LORENZO TIEPOLO.] I cannot easily express to you how strange it seems to me that I am obliged, here in Oxford, to take the position of an apologist for Greek art; that I find, in spite of all the devotion of the admirable scholars who have so long maintained in our public schools the authority of Greek literature, our younger students take no interest in the manual work of the people upon whose thoughts the tone of their early intellectual life has exclusively depended. But I am not surprised that the interest, if awakened, should not at first take the form of admiration. The inconsistency between an Homeric description of a piece of furniture or armour, and the actual rudeness of any piece of art approximating within even three or four centuries, to the Homeric period, is so great, that we at first cannot recognize the art as elucidatory of, or in any way related to, the poetic language. 79. You will find, however, exactly the same kind of discrepancy between early sculpture, and the languages of deed and thought, in the second birth, and childhood, of the world, under Christianity. The same fair thoughts and bright imaginations arise again; and similarly, the fancy is content with the rudest symbols by which they can be formalized to the eyes. You cannot understand that the rigid figure (2) with chequers or spots on its breast, and sharp lines of drapery to its feet, could represent, to the Greek, the healing majesty of heaven: but can you any better understand how a symbol so haggard as this (Fig. 5) could represent to the noblest hearts of the Christian ages the power and ministration of angels? Yet it not only did so, but retained in the rude undulatory and linear ornamentation of its dress, record of the thoughts intended to be conveyed by the spotted ægis and falling chiton of Athena, eighteen hundred years before. Greek and Venetian alike, in their noble childhood, knew with the same terror the coiling wind and congealed hail in heaven--saw with the same thankfulness the dew shed softly on the earth, and on its flowers; and both recognized, ruling these, and symbolized by them, the great helpful spirit of Wisdom, which leads the children of men to all knowledge, all courage, and all art. 80. Read the inscription written on the sarcophagus (Plate V.), at the extremity of which this angel is sculptured. It stands in an open recess in the rude brick wall of the west front of the church of St. John and Paul at Venice, being the tomb of the two doges, father and son, Jacopo and Lorenzo Tiepolo. This is the inscription:-- "Quos natura pares studiis, virtutibus, arte Edidit, illustres genitor natusque, sepulti Hác sub rupe Duces. Venetum charissima proles Theupula collatis dedit hos celebranda triumphis. Omnia presentis donavit predia templi Dux Jacobus: valido fixit moderamine leges Urbis, et ingratam redimens certamine Jadram Dalmatiosque dedit patrie, post, Marte subactas Graiorum pelago maculavit sanguine classes. Suscipit oblatos princeps Laurentius Istros, Et domuit rigidos, ingenti strage cadentes, Bononie populos. Hinc subdita Cervia cessit. Fundavere vias pacis; fortique relictá Re, superos sacris petierunt mentibus ambo. "Dominus Jachobus hobiit[121] M.CCLI. Dominus Laurentius hobiit M.CCLXXVIII." You see, therefore, this tomb is an invaluable example of thirteenth century sculpture in Venice. In Plate VI., you have an example of the (coin) sculpture of the date accurately corresponding in Greece to the thirteenth century in Venice, when the meaning of symbols was everything and the workmanship comparatively nothing. The upper head is an Athena, of Athenian work in the seventh or sixth century--(the coin itself may have been struck later, but the archaic type was retained). The two smaller impressions below are the front and obverse of a coin of the same age from Corinth, the head of Athena on one side, and Pegasus, with the archaic Koppa, on the other. The smaller head is bare, the hair being looped up at the back and closely bound with an olive branch. You are to note this general outline of the head, already given in a more finished type in Plate II., as a most important elementary form in the finest sculpture, not of Greece only, but of all Christendom. In the upper head the hair is restrained still more closely by a round helmet, for the most part smooth, but embossed with a single flower tendril, having one bud, one flower, and above it, two olive leaves. You have thus the most absolutely restricted symbol possible to human thought of the power of Athena over the flowers and trees of the earth. An olive leaf by itself could not have stood for the sign of a tree, but the two can, when set in position of growth. [Illustration: PLATE VI.--ARCHAIC ATHENA OF ATHENS AND CORINTH.] I would not give you the reverse of the coin on the same plate, because you would have looked at it only, laughed at it, and not examined the rest; but here it is, wonderfully engraved for you (Fig. 6): of it we shall have more to say afterwards. [Illustration: FIG. 6.] 81. And now as you look at these rude vestiges of the religion of Greece, and at the vestiges, still ruder, on the Ducal tomb, of the religion of Christendom, take warning against two opposite errors. There is a school of teachers who will tell you that nothing but Greek art is deserving of study, and that all our work at this day should be an imitation of it. Whenever you feel tempted to believe them, think of these portraits of Athena and her owl, and be assured that Greek art is not in all respects perfect, nor exclusively deserving of imitation. There is another school of teachers who will tell you that Greek art is good for nothing; that the soul of the Greek was outcast, and that Christianity entirely superseded its faith, and excelled its works. Whenever you feel tempted to believe _them_, think of this angel on the tomb of Jacopo Tiepolo; and remember, that Christianity, after it had been twelve hundred years existent as an imaginative power on the earth, could do no better work than this, though with all the former power of Greece to help it; nor was able to engrave its triumph in having stained its fleets in the seas of Greece with the blood of her people, but between barbarous imitations of the pillars which that people had invented. 82. Receiving these two warnings, receive also this lesson; In both examples, childish though it be, this Heathen and Christian art is alike sincere, and alike vividly imaginative: the actual work is that of infancy; the thoughts, in their visionary simplicity, are also the thoughts of infancy, but in their solemn virtue, they are the thoughts of men. We, on the contrary, are now, in all that we do, absolutely without sincerity;--absolutely, therefore, without imagination, and without virtue. Our hands are dexterous with the vile and deadly dexterity of machines; our minds filled with incoherent fragments of faith, which we cling to in cowardice, without believing, and make pictures of in vanity, without loving. False and base alike, whether we admire or imitate, we cannot learn from the Heathen's art, but only pilfer it; we cannot revive the Christian's art, but only galvanize it; we are, in the sum of us, not human artists at all, but mechanisms of conceited clay, masked in the furs and feathers of living creatures, and convulsed with voltaic spasms, in mockery of animation. 83. You think, perhaps, that I am using terms unjustifiable in violence. They would, indeed, be unjustifiable, if, spoken from this chair, they were violent at all. They are, unhappily, temperate and accurate,--except in shortcoming of blame. For we are not only impotent to restore, but strong to defile, the work of past ages. Of the impotence, take but this one, utterly humiliatory, and, in the full meaning of it, ghastly, example. We have lately been busy embanking, in the capital of the country, the river which, of all its waters, the imagination of our ancestors had made most sacred, and the bounty of nature most useful. Of all architectural features of the metropolis, that embankment will be, in future, the most conspicuous; and in its position and purpose it was the most capable of noble adornment. For that adornment, nevertheless, the utmost which our modern poetical imagination has been able to invent, is a row of gas-lamps. It has, indeed, farther suggested itself to our minds as appropriate to gas-lamps set beside a river, that the gas should come out of fishes' tails; but we have not ingenuity enough to cast so much as a smelt or a sprat for ourselves; so we borrow the shape of a Neapolitan marble, which has been the refuse of the plate and candlestick shops in every capital of Europe for the last fifty years. We cast _that_ badly, and give lustre to the ill-cast fish with lacquer in imitation of bronze. On the base of their pedestals, towards the road, we put for advertisement's sake, the initials of the casting firm; and, for farther originality and Christianity's sake, the caduceus of Mercury; and to adorn the front of the pedestals towards the river, being now wholly at our wit's end, we can think of nothing better than to borrow the door-knocker which--again for the last fifty years--has disturbed and decorated two or three millions of London street-doors; and magnifying the marvellous device of it, a lion's head with a ring in its mouth (still borrowed from the Greek), we complete the embankment with a row of heads and rings, on a scale which enables them to produce, at the distance at which only they can be seen, the exact effect of a row of sentry boxes. 84. Farther. In the very centre of the city, and at the point where the Embankment commands a view of Westminster Abbey on one side and of St. Paul's on the other--that is to say, at precisely the most important and stately moment of its whole course--it has to pass under one of the arches of Waterloo Bridge, which, in the sweep of its curve, is as vast--it alone--as the Rialto at Venice, and scarcely less seemly in proportions. But over the Rialto, though of late and debased Venetian work, there still reigns some power of human imagination: on the two flanks of it are carved the Virgin and the Angel of the Annunciation; on the keystone the descending Dove. It is not, indeed, the fault of living designers that the Waterloo arch is nothing more than a gloomy and hollow heap of wedged blocks of blind granite. But just beyond the damp shadow of it, the new Embankment is reached by a flight of stairs, which are, in point of fact, the principal approach to it, a-foot, from central London; the descent from the very midst of the metropolis of England to the banks of the chief river of England; and for this approach, living designers _are_ answerable. 85. The principal decoration of the descent is again a gas-lamp, but a shattered one, with a brass crown on the top of it or, rather, half-crown, and that turned the wrong way, the back of it to the river and causeway, its flame supplied by a visible pipe far wandering along the wall; the whole apparatus being supported by a rough cross-beam. Fastened to the centre of the arch above is a large placard, stating that the Royal Humane Society's drags are in constant readiness, and that their office is at 4, Trafalgar Square. On each side of the arch are temporary, but dismally old and battered boardings, across two angles capable of unseemly use by the British public. Above one of these is another placard, stating that this is the Victoria Embankment. The steps themselves--some forty of them--descend under a tunnel, which the shattered gas-lamp lights by night, and nothing by day. They are covered with filthy dust, shaken off from infinitude of filthy feet; mixed up with shreds of paper, orange-peel, foul straw, rags, and cigar ends, and ashes; the whole agglutinated, more or less, by dry saliva into slippery blotches and patches; or, when not so fastened, blown dismally by the sooty wind hither and thither, or into the faces of those who ascend and descend. The place is worth your visit, for you are not likely to find elsewhere a spot which, either in costly and ponderous brutality of building, or in the squalid and indecent accompaniment of it, is so far separated from the peace and grace of nature, and so accurately indicative of the methods of our national resistance to the Grace, Mercy, and Peace of Heaven. 86. I am obliged always to use the English word "Grace" in two senses, but remember that the Greek [Greek: charis] includes them both (the bestowing, that is to say of Beauty and Mercy); and especially it includes these in the passage of Pindar's first ode, which gives us the key to the right interpretation of the power of sculpture in Greece. You remember that I told you, in my Sixth Introductory Lecture (§ 151), that the mythic accounts of Greek sculpture begin in the legends of the family of Tantalus; and especially in the most grotesque legend of them all, the inlaying of the ivory shoulder of Pelops. At that story Pindar pauses--not, indeed, without admiration, nor alleging any impossibility in the circumstances themselves, but doubting the careless hunger of Demeter--and gives his own reading of the event, instead of the ancient one. He justifies this to himself, and to his hearers, by the plea that myths have, in some sort, or degree, ([Greek: pou ti]), led the mind of mortals beyond the truth: and then he goes on:-- "Grace, which creates everything that is kindly and soothing for mortals, adding honour, has often made things at first untrustworthy, become trustworthy through Love." 87. I cannot, except in these lengthened terms, give you the complete force of the passage; especially of the [Greek: apiston emêsato pioton]--"made it trustworthy by passionate desire that it should be so"--which exactly describes the temper of religious persons at the present day, who are kindly and sincere, in clinging to the forms of faith which either have long been precious to themselves, or which they feel to have been without question instrumental in advancing the dignity of mankind. And it is part of the constitution of humanity--a part which, above others, you are in danger of unwisely contemning under the existing conditions of our knowledge, that the things thus sought for belief with eager passion, do, indeed, become trustworthy to us; that, to each of us, they verily become what we would have them; the force of the [Greek: mênis] and [Greek: mnêmê] with which we seek after them, does, indeed, make them powerful to us for actual good or evil; and it is thus granted to us to create not only with our hands things that exalt or degrade our sight, but with our hearts also, things that exalt or degrade our souls; giving true substance to all that we hoped for; evidence to things that we have not seen, but have desired to see; and calling, in the sense of creating, things that are not, as though they were. 88. You remember that in distinguishing Imagination from Idolatry, I referred you to the forms of passionate affection with which a noble people commonly regards the rivers and springs of its native land. Some conception of personality or of spiritual power in the stream, is almost necessarily involved in such emotion; and prolonged [Greek: charis] in the form of gratitude, the return of Love for benefits continually bestowed, at last alike in all the highest and the simplest minds, when they are honourable and pure, makes this untrue thing trustworthy; [Greek: apiston emêsato piston], until it becomes to them the safe basis of some of the happiest impulses of their moral nature. Next to the marbles of Verona, given you as a primal type of the sculpture of Christianity, moved to its best energy in adorning the entrance of its temples, I have not unwillingly placed, as your introduction to the best sculpture of the religion of Greece, the forms under which it represented the personality of the fountain Arethusa. But, without restriction to those days of absolute devotion, let me simply point out to you how this untrue thing, made true by Love, has intimate and heavenly authority even over the minds of men of the most practical sense, the most shrewd wit, and the most severe precision of moral temper. The fair vision of Sabrina in _Comus_, the endearing and tender promise, "Fies nobilium tu quoque fontium," and the joyful and proud affection of the great Lombard's address to the lakes of his enchanted land,-- Te, Lari maxume, teque Fluctibus et fremitu assurgens, Benace, marino, may surely be remembered by you with regretful piety, when you stand by the blank stones which at once restrain and disgrace your native river, as the final worship rendered to it by modern philosophy. But a little incident which I saw last summer on its bridge at Wallingford, may put the contrast of ancient and modern feeling before you still more forcibly. 89. Those of you who have read with attention (none of us can read with too much attention), Molière's most perfect work, the _Misanthrope_, must remember Celiméne's description of her lovers, and her excellent reason for being unable to regard with any favour, "notre grand flandrin de vicomte,--depuis que je l'ai vu, trois quarts d'heure durant, cracher dans un puits pour faire des ronds." That sentence is worth noting, both in contrast to the reverence paid by the ancients to wells and springs, and as one of the most interesting traces of the extension of the loathsome habit among the upper classes of Europe and America, which now renders all external grace, dignity, and decency, impossible in the thoroughfares of their principal cities. In connection with that sentence of Molière's you may advisably also remember this fact, which I chanced to notice on the bridge of Wallingford. I was walking from end to end of it, and back again, one Sunday afternoon of last May, trying to conjecture what had made this especial bend and ford of the Thames so important in all the Anglo-Saxon wars. It was one of the few sunny afternoons of the bitter spring, and I was very thankful for its light, and happy in watching beneath it the flow and the glittering of the classical river, when I noticed a well-dressed boy, apparently just out of some orderly Sunday-school, leaning far over the parapet; watching, as I conjectured, some bird or insect on the bridge-buttress. I went up to him to see what he was looking at; but just as I got close to him, he started over to the opposite parapet, and put himself there into the same position, his object being, as I then perceived, to spit from both sides upon the heads of a pleasure party who were passing in a boat below. 90. The incident may seem to you too trivial to be noticed in this place. To me, gentlemen, it was by no means trivial. It meant, in the depth of it, such absence of all true [Greek: charis], reverence, and intellect, as it is very dreadful to trace in the mind of any human creature, much more in that of a child educated with apparently every advantage of circumstance in a beautiful English country town, within ten miles of our University. Most of all, is it terrific when we regard it as the exponent (and this, in truth, it is), of the temper which, as distinguished from former methods, either of discipline or recreation, the present tenor of our general teaching fosters in the mind of youth;--teaching which asserts liberty to be a right, and obedience a degradation; and which, regardless alike of the fairness of nature and the grace of behaviour, leaves the insolent spirit and degraded senses to find their only occupation in malice, and their only satisfaction in shame. 91. You will, I hope, proceed with me, not scornfully any more, to trace, in the early art of a noble heathen nation, the feeling of what was at least a better childishness than this of ours; and the efforts to express, though with hands yet failing, and minds oppressed by ignorant phantasy, the first truth by which they knew that they lived; the birth of wisdom and of all her powers of help to man, as the reward of his resolute labour. 92. "[Greek: Aphaistou technaisi]." Note that word of Pindar in the Seventh Olympic. This axe-blow of Vulcan's was to the Greek mind truly what Clytemnestra falsely asserts hers to have been "[Greek: tês de dexias cheros ergon dikaias tektonos]"; physically, it meant the opening of the blue through the rent clouds of heaven, by the action of local terrestrial heat of Hephæstus as opposed to Apollo, who shines on the surface of the upper clouds, but cannot pierce them; and, spiritually, it meant the first birth of prudent thought out of rude labour, the clearing-axe in the hand of the woodman being the practical elementary sign of his difference from the wild animals of the wood. Then he goes on, "From the high head of her Father, Athenaia rushing forth, cried with her great and exceeding cry; and the Heaven trembled at her, and the Earth Mother." The cry of Athena, I have before pointed out, physically distinguishes her, as the spirit of the air, from silent elemental powers; but in this grand passage of Pindar it is again the mythic cry of which he thinks; that is to say, the giving articulate words, by intelligence, to the silence of Fate. "Wisdom crieth aloud, she uttereth her voice in the streets," and Heaven and Earth tremble at her reproof. 93. Uttereth her voice in "the streets." For all men, that is to say; but to what work did the Greeks think that her voice was to call them? What was to be the impulse communicated by her prevailing presence; what the sign of the people's obedience to her? This was to be the sign--"But she, the goddess herself, gave to them to prevail over the dwellers upon earth, _with best-labouring hands in every art. And by their paths there were the likenesses of living and of creeping things_; and the glory was deep. For to the cunning workman, greater knowledge comes, undeceitful." 94. An infinitely pregnant passage, this, of which to-day you are to note mainly these three things: First, that Athena is the goddess of Doing, not at all of sentimental inaction. She is begotten, as it were, of the woodman's axe; her purpose is never in a word only, but in a word and a blow. She guides the hands that labour best, in every art. 95. Secondly. The victory given by Wisdom, the worker, to the hands that labour best, is that the streets and ways, [Greek: keleuthoi], shall be filled by likenesses of living and creeping things? Things living, and creeping! Are the Reptile things not alive then? You think Pindar wrote that carelessly? or that, if he had only known a little modern anatomy, instead of "reptile" things, he would have said "monochondylous" things? Be patient, and let us attend to the main points first. Sculpture, it thus appears, is the only work of wisdom that the Greeks care to speak of; they think it involves and crowns every other. Image-making art; _this_ is Athena's, as queenliest of the arts. Literature, the order and the strength of word, of course belongs to Apollo and the Muses; under Athena are the Substances and the Forms of things. 96, Thirdly. By this forming of Images there is to be gained a "deep"--that is to say--a weighty, and prevailing, glory; not a floating nor fugitive one. For to the cunning workman, greater knowledge comes, "undeceitful." "[Greek: Daenti]" I am forced to use two English words to translate that single Greek one. The "cunning" workman, thoughtful in experience, touch, and vision of the thing to be done; no machine, witless, and of necessary motion; yet not cunning only, but having perfect habitual skill of hand also; the confirmed reward of truthful doing. Recollect, in connection with this passage of Pindar, Homer's three verses about getting the lines of ship-timber true, (_Il._ xv. 410) [Greek: "All' ôste stathmê dory nêion exithynei tektonos en palamêsi daêmonos, hos ra te pasês ed eidê sophiês, upothêmosynêsin Athênês,"] and the beautiful epithet of Persephone, "[Greek: daeira]," as the Tryer and Knower of good work; and remembering these, trust Pindar for the truth of his saying, that to the cunning workman--(and let me solemnly enforce the words by adding--that to him _only_,) knowledge comes undeceitful. 97. You may have noticed, perhaps, and with a smile, as one of the paradoxes you often hear me blamed for too fondly stating, what I told you in the close of my Third Introductory Lecture, that "so far from art's being immoral, little else except art is moral." I have now farther to tell you, that little else, except art, is wise; that all knowledge, unaccompanied by a habit of useful action, is too likely to become deceitful, and that every habit of useful action must resolve itself into some elementary practice of manual labour. And I would, in all sober and direct earnestness advise you, whatever may be the aim, predilection, or necessity of your lives, to resolve upon this one thing at least, that you will enable yourselves daily to do actually with your hands, something that is useful to mankind. To do anything well with your hands, useful or not;--to be, even in trifling, [Greek: palamêsi daêmôn] is already much;--when we come to examine the art of the middle ages I shall be able to show you that the strongest of all influences of right then brought to bear upon character was the necessity for exquisite manual dexterity in the management of the spear and bridle; and in your own experience most of you will be able to recognize the wholesome effect, alike on body and mind, of striving, within proper limits of time, to become either good batsmen, or good oarsmen. But the bat and the racer's oar are children's toys. Resolve that you will be men in usefulness, as well as in strength; and you will find that then also, but not till then, you can become men in understanding; and that every fine vision and subtle theorem will present itself to you thenceforward undeceitfully, [Greek: hypothêmosynêsin Athênês]. 98. But there is more to be gathered yet from the words of Pindar. He is thinking, in his brief, intense way, at once of Athena's work on the soul, and of her literal power on the dust of the Earth. His "[Greek: keleuthoi]" is a wide word meaning all the paths of sea and land. Consider, therefore, what Athena's own work _actually is_--in the literal fact of it. The blue, clear air _is_ the sculpturing power upon the earth and sea. Where the surface of the earth is reached by that, and its matter and substance inspired with, and filled by that, organic form becomes possible. You must indeed have the sun, also, and moisture; the kingdom of Apollo risen out of the sea: but the sculpturing of living things, shape by shape, is Athena's, so that under the brooding spirit of the air, what was without form, and void brings forth the moving creature that hath life. 99. That is her work then--the giving of Form; then the separately Apolline work is the giving of Light; or, more strictly, Sight: giving that faculty to the retina to which we owe not merely the idea of light, but the existence of it; for light is to be defined only as the sensation produced in the eye of an animal, under given conditions; those same conditions being, to a stone, only warmth or chemical influence, but not light. And that power of seeing, and the other various personalities and authorities of the animal body, in pleasure and pain, have never, hitherto, been, I do not say, explained, but in any wise touched or approached by scientific discovery. Some of the conditions of mere external animal form and of muscular vitality have been shown; but for the most part that is true, even of external form, which I wrote six years ago. "You may always stand by Form against Force. To a painter, the essential character of anything is the form of it, and the philosophers cannot touch that. They come and tell you, for instance, that there is as much heat, or motion, or calorific energy (or whatever else they like to call it), in a tea-kettle, as in a gier-eagle. Very good: that is so; and it is very interesting. It requires just as much heat as will boil the kettle, to take the gier-eagle up to his nest, and as much more to bring him down again on a hare or a partridge. But we painters, acknowledging the equality and similarity of the kettle and the bird in all scientific respects, attach, for our part, our principal interest to the difference in their forms. For us, the primarily cognisable facts, in the two things, are, that the kettle has a spout, and the eagle a beak; the one a lid on its back, the other a pair of wings; not to speak of the distinction also of volition, which the philosophers may properly call merely a form or mode of force--but, then to an artist, the form or mode is the gist of the business." 100. As you will find that it is, not to the artist only, but to all of us. The laws under which matter is collected and constructed are the same throughout the universe: the substance so collected, whether for the making of the eagle, or the worm, may be analyzed into gaseous identity; a diffusive vital force, apparently so closely related to mechanically measurable heat as to admit the conception of its being itself mechanically measurable, and unchanging in total quantity, ebbs and flows alike through the limbs of men, and the fibres of insects. But, above all this, and ruling every grotesque or degraded accident of this, are two laws of beauty in form, and of nobility in character, which stand in the chaos of creation between the Living and the Dead, to separate the things that have in them a sacred and helpful, from those that have in them an accursed and destroying, nature; and the power of Athena, first physically put forth in the sculpturing of these [Greek: zôa and erpeta], these living and reptile things, is put forth, finally, in enabling the hearts of men to discern the one from the other; to know the unquenchable fires of the Spirit from the unquenchable fires of Death; and to choose, not unaided, between submission to the Love that cannot end, or to the Worm that cannot die. 101. The unconsciousness of their antagonism is the most notable characteristic of the modern scientific mind; and I believe no credulity or fallacy admitted by the weakness (or it may sometimes rather have been the strength) of early imagination, indicates so strange a depression beneath the due scale of human intellect, as the failure of the sense of beauty in form, and loss of faith in heroism of conduct, which have become the curses of recent science,[122] art, and policy. 102. That depression of intellect has been alike exhibited in the mean consternation confessedly felt on one side, and the mean triumph apparently felt on the other, during the course of the dispute now pending as to the origin of man. Dispute for the present, not to be decided, and of which the decision is to persons in the modern temper of mind, wholly without significance: and I earnestly desire that you, my pupils, may have firmness enough to disengage your energies from investigation so premature and so fruitless, and sense enough to perceive that it does not matter how you have been made, so long as you are satisfied with being what you are. If you are dissatisfied with yourselves, it ought not to console, but humiliate you, to imagine that you were once seraphs; and if you are pleased with yourselves, it is not any ground of reasonable shame to you if, by no fault of your own, you have passed through the elementary condition of apes. 103. Remember, therefore, that it is of the very highest importance that you should know what you _are_, and determine to be the best that you may be; but it is of no importance whatever, except as it may contribute to that end, to know what you have been. Whether your Creator shaped you with fingers, or tools, as a sculptor would a lump of clay, or gradually raised you to manhood through a series of inferior forms, is only of moment to you in this respect--that in the one case you cannot expect your children to be nobler creatures than you are yourselves--in the other, every act and thought of your present life may be hastening the advent of a race which will look back to you, their fathers (and you ought at least to have attained the dignity of desiring that it may be so), with incredulous disdain. 104. But that you _are_ yourselves capable of that disdain and dismay; that you are ashamed of having been apes, if you ever were so; that you acknowledge instinctively, a relation of better and worse, and a law respecting what is noble and base, which makes it no question to you that the man is worthier than the baboon--_this_ is a fact of infinite significance. This law of preference in your hearts is the true essence of your being, and the consciousness of that law is a more positive existence than any dependent on the coherence or forms of matter. 105. Now, but a few words more of mythology, and I have done. Remember that Athena holds the weaver's shuttle, not merely as an instrument of _texture_, but as an instrument of _picture_; the ideas of clothing, and of the warmth of life, being thus inseparably connected with those of graphic beauty and the brightness of life. I have told you that no art could be recovered among us without perfectness in dress, nor without the elementary graphic art of women, in divers colours of needlework. There has been no nation of any art-energy, but has strenuously occupied and interested itself in this household picturing, from the web of Penelope to the tapestry of Queen Matilda, and the meshes of Arras and Gobelins. 106. We should then naturally ask what kind of embroidery Athena put on her own robe; "[Greek: peplon heanon, poikilon hou r autê poiêsato kai kame chersin]." The subject of that [Greek: poikilia] of hers, as you know, was the war of the giants and gods. Now the real name of these giants, remember, is that used by Hesiod, "[Greek: pêlochonoi]," "mud-begotten," and the meaning of the contest between these and Zeus, [Greek: pêlogonôn elatêr], is, again, the inspiration of life into the clay, by the goddess of breath; and the actual confusion going on visibly before you, daily, of the earth, heaping itself into cumbrous war with the powers above it. 107. Thus briefly, the entire material of Art, under Athena's hand, is the contest of life with clay; and all my task in explaining to you the early thought of both the Athenian and Tuscan schools will only be the tracing of this battle of the giants into its full heroic form, when, not in tapestry only--but in sculpture--and on the portal of the Temple of Delphi itself, you have the "[Greek: klonos en teichesi lainoisi gigantôn]," and their defeat hailed by the passionate cry of delight from the Athenian maids, beholding Pallas in her full power, "[Greek: leussô Pallad' eman theon]," my own goddess. All our work, I repeat, will be nothing but the inquiry into the development of this the subject, and the pressing fully home the question of Plato about that embroidery--"And think you that there is verily war with each other among the Gods? and dreadful enmities and battle, such as the poets have told, and such as our painters set forth in graven scripture, to adorn all our sacred rites and holy places; yes, and in the great Panathenaea themselves, the Peplus, full of such wild picturing, is carried up into the Acropolis--shall we say that these things are true, oh Euthuphron, right-minded friend?" 108. Yes, we say, and know, that these things are true; and true for ever: battles of the gods, not among themselves, but against the earth-giants. Battle prevailing age by age, in nobler life and lovelier imagery; creation, which no theory of mechanism, no definition of force, can explain, the adoption and completing of individual form by individual animation, breathed out of the lips of the Father of Spirits. And to recognize the presence in every knitted shape of dust, by which it lives and moves and has its being--to recognize it, revere, and show it forth, is to be our eternal Idolatry. "Thou shalt not bow down to them, nor worship them." "Assuredly no," we answered once, in our pride; and through porch and aisle, broke down the carved work thereof, with axes and hammers. Who would have thought the day so near when we should bow down to worship, not the creatures, but their atoms,--not the forces that form, but those that dissolve them? Trust me, gentlemen, the command which is stringent against adoration of brutality, is stringent no less against adoration of chaos, nor is faith in an image fallen from heaven to be reformed by a faith only in the phenomenon of decadence. We have ceased from the making of monsters to be appeased by sacrifice;--it is well,--if indeed we have also ceased from making them in our thoughts. We have learned to distrust the adorning of fair phantasms, to which we once sought for succour;--it is well, if we learn to distrust also the adorning of those to which we seek, for temptation; but the verity of gains like these can only be known by our confession of the divine seal of strength and beauty upon the tempered frame, and honour in the fervent heart, by which, increasing visibly, may yet be manifested to us the holy presence, and the approving love, of the Loving God, who visits the iniquities of the Fathers upon the Children, unto the third and fourth generation of them that hate Him, and shows mercy unto thousands in them that love Him, and keep His Commandments. FOOTNOTES: [118] I shall be obliged in future lectures, as hitherto in my other writings, to use the terms, Idolatry and Imagination in a more comprehensive sense; but here I use them for convenience sake, limitedly, to avoid the continual occurrence of the terms, noble and ignoble, or false and true, with reference to modes of conception. [119] "And in sum, he himself (Prometheus) was the master-maker, and Athena worked together with him, breathing into the clay, and caused the moulded things to have soul (psyche) in them."--LUCIAN, PROMETHEUS. [120] His relations with the two great Titans, Themis and Mnemosyne, belong to another group of myths. The father of Athena is the lower and nearer physical Zeus, from whom Metis, the mother of Athena, long withdraws and disguises herself. [121] The Latin verses are of later date; the contemporary plain prose retains the Venetian gutturals and aspirates. [122] The best modern illustrated scientific works show perfect faculty of representing monkeys, lizards, and insects; absolute incapability of representing either a man, a horse, or a lion. LECTURE IV. LIKENESS. _November, 1870._ 109. You were probably vexed, and tired, towards the close of my last lecture, by the time it took us to arrive at the apparently simple conclusion, that sculpture must only represent organic form, and the strength of life in its contest with matter. But it is no small thing to have that "[Greek: leussô Pallada]" fixed in your minds, as the one necessary sign by which you are to recognize right sculpture, and believe me you will find it the best of all things, if you can take for yourselves the saying from the lips of the Athenian maids, in its entirety, and say also--[Greek: leussô Pallad' eman theon]. I proceed to-day into the practical appliance of this apparently speculative, but in reality imperative, law. 110. You observe, I have hitherto spoken of the power of Athena, as over painting no less than sculpture. But her rule over both arts is only so far as they are zoographic;--representative, that is to say, of animal life, or of such order and discipline among other elements, as may invigorate and purify it. Now there is a speciality of the art of painting beyond this, namely, the representation of phenomena of colour and shadow, as such, without question of the nature of the things that receive them. I am now accordingly obliged to speak of sculpture and painting as distinct arts, but the laws which bind sculpture, bind no less the painting of the higher schools which has, for its main purpose, the showing beauty in human or animal form; and which is therefore placed by the Greeks equally under the rule of Athena, as the Spirit, first, of Life, and then of Wisdom in conduct. 111. First, I say, you are to "see Pallas" in all such work, as the Queen of Life; and the practical law which follows from this, is one of enormous range and importance, namely, that nothing must be represented by sculpture, external to any living form, which does not help to enforce or illustrate the conception of life. Both dress and armour may be made to do this, by great sculptors, and are continually so used by the greatest. One of the essential distinctions between the Athenian and Florentine schools is dependent on their treatment of drapery in this respect; an Athenian always sets it to exhibit the action of the body, by flowing with it, or over it, or from it, so as to illustrate both its form and gesture; a Florentine, on the contrary, always uses his drapery to conceal or disguise the forms of the body, and exhibit mental emotion: but both use it to enhance the life, either of the body or soul; Donatello and Michael Angelo, no less than the sculptors of Gothic chivalry, ennoble armour in the same way; but base sculptors carve drapery and armour for the sake of their folds and picturesqueness only, and forget the body beneath. The rule is so stern that all delight in mere incidental beauty, which painting often triumphs in, is wholly forbidden to sculpture;--for instance, in _painting_ the branch of a tree, you may rightly represent and enjoy the lichens and moss on it, but a sculptor must not touch one of them: they are inessential to the tree's life,--he must give the flow and bending of the branch only, else he does not enough "see Pallas" in it. Or to take a higher instance, here is an exquisite little painted poem, by Edward Frere; a cottage interior, one of the thousands which within the last two months[123] have been laid desolate in unhappy France. Every accessory in the painting is of value--the fireside, the tiled floor, the vegetables lying upon it, and the basket hanging from the roof. But not one of these accessories would have been admissible in sculpture. You must carve nothing but what has life. "Why"? you probably feel instantly inclined to ask me.--You see the principle we have got, instead of being blunt or useless, is such an edged tool that you are startled the moment I apply it. "Must we refuse every pleasant accessory and picturesque detail, and petrify nothing but living creatures"?--Even so: I would not assert it on my own authority. It is the Greeks who say it, but whatever they say of sculpture, be assured, is true. 112. That then is the first law--you must see Pallas as the Lady of Life--the second is, you must see her as the Lady of Wisdom; or [Greek: sophia]--and this is the chief matter of all. I cannot but think, that after the considerations into which we have now entered, you will find more interest than hitherto in comparing the statements of Aristotle, in the Ethics, with those of Plato in the Polity, which are authoritative as Greek definitions of goodness in art, and which you may safely hold authoritative as constant definitions of it. You remember, doubtless, that the [Greek: sophia] or [Greek: aretê technês], for the sake of which Phidias is called [Greek: sophos] as a sculptor, and Polyclitus as an image-maker, Eth. 6. 7. (the opposition is both between ideal and portrait sculpture, and between working in stone and bronze) consists in the "[Greek: nous tôn timiôtatôn tê physei]" "the mental apprehension of the things that are most honourable in their nature." Therefore what is, indeed, most lovely, the true image-maker will most love; and what is most hateful, he will most hate, and in all things discern the best and strongest part of them, and represent that essentially, or, if the opposite of that, then with manifest detestation and horror. That is his art wisdom; the knowledge of good and evil, and the love of good, so that you may discern, even in his representation of the vilest thing, his acknowledgment of what redemption is possible for it, or latent power exists in it; and, contrariwise, his sense of its present misery. But for the most part, he will idolize, and force us also to idolize, whatever is living, and virtuous, and victoriously right; opposing to it in some definite mode the image of the conquered [Greek: herpeton]. 113. This is generally true of both the great arts; but in severity and precision, true of sculpture. To return to our illustration: this poor little girl was more interesting to Edward Frere, he being a painter, because she was poorly dressed, and wore these clumsy shoes, and old red cap, and patched gown. May we sculpture her so? No. We may sculpture her naked, if we like; but not in rags. But if we may not put her into marble in rags, may we give her a pretty frock with ribands and flounces to it, and put her into marble in that? No. We may put her simplest peasant's dress, so it be perfect and orderly, into marble; anything finer than that would be more dishonourable in the eyes of Athena than rags. If she were a French princess, you might carve her embroidered robe and diadem; if she were Joan of Arc you might carve her armour--for then these also would be "[Greek: tôn timiôtatôn]," not otherwise. 114. Is not this an edge-tool we have got hold of, unawares? and a subtle one too; so delicate and scimitar-like in decision. For note, that even Joan of Arc's armour must be only sculptured, _if she has it on_; it is not the honourableness or beauty of it that are enough, but the direct bearing of it by her body. You might be deeply, even pathetically, interested by looking at a good knight's dinted coat of mail, left in his desolate hall. May you sculpture it where it hangs? No; the helmet for his pillow, if you will--no more. You see we did not do our dull work for nothing in last lecture. I define what we have gained once more, and then we will enter on our new ground. 115. The proper subject of sculpture, we have determined, is the spiritual power seen in the form of any living thing, and so represented as to give evidence that the sculptor has loved the good of it and hated the evil. "_So_ represented," we say; but how is that to be done? Why should it not be represented, if possible, just as it is seen? What mode or limit of representation may we adopt? We are to carve things that have life;--shall we try so to imitate them that they may indeed seem living,--or only half living, and like stone instead of flesh? It will simplify this question if I show you three examples of what the Greeks actually did: three typical pieces of their sculpture, in order of perfection. 116. And now, observe that in all our historical work, I will endeavour to do, myself, what I have asked you to do in your drawing exercises; namely, to outline firmly in the beginning, and then fill in the detail more minutely. I will give you first, therefore, in a symmetrical form, absolutely simple and easily remembered, the large chronology of the Greek school; within that unforgettable scheme we will place, as we discover them, the minor relations of arts and times. I number the nine centuries before Christ thus, upwards, and divide them into three groups of three each. { 9 A. ARCHAIC. { 8 { 7 ---- { 6 B. BEST. { 5 { 4 ---- { 3 C. CORRUPT. { 2 { 1 Then the ninth, eighth, and seventh centuries are the period of Archaic Greek Art, steadily progressive wherever it existed. The sixth, fifth, and fourth are the period of central Greek Art; the fifth, or central century producing the finest. That is easily recollected by the battle of Marathon. And the third, second, and first centuries are the period of steady decline. [Illustration: PLATE VII.--ARCHAIC, CENTRAL AND DECLINING ART OF GREECE.] Learn this A B C thoroughly, and mark, for yourselves, what you, at present, think the vital events in each century. As you know more, you will think other events the vital ones; but the best historical knowledge only approximates to true thought in that matter; only be sure that what is truly vital in the character which governs events, is always expressed by the art of the century; so that if you could interpret that art rightly, the better part of your task in reading history would be done to your hand. 117. It is generally impossible to date with precision art of the archaic period--often difficult to date even that of the central three hundred years. I will not weary you with futile minor divisions of time; here are three coins (Plate VII.) roughly, but decisively, characteristic of the three ages. The first is an early coin of Tarentum. The city was founded as you know, by the Spartan Phalanthus, late in the eighth century. I believe the head is meant for that of Apollo Archegetes, it may however be Taras, the son of Poseidon; it is no matter to us at present whom it is meant for, but the fact that we cannot know, is itself of the greatest import. We cannot say, with any certainty, unless by discovery of some collateral evidence, whether this head is intended for that of a god, or demi-god, or a mortal warrior. Ought not that to disturb some of your thoughts respecting Greek idealism? Farther, if by investigation we discover that the head is meant for that of Phalanthus, we shall know nothing of the character of Phalanthus from the face; for there is no portraiture at this early time. 118. The second coin is of Ænus in Macedonia; probably of the fifth or early fourth century, and entirely characteristic of the central period. This we know to represent the face of a god--Hermes. The third coin is a king's, not a city's. I will not tell you, at this moment, what king's; but only that it is a late coin of the third period, and that it is as distinct in purpose as the coin of Tarentum is obscure. We know of this coin, that it represents no god nor demi-god, but a mere mortal; and we know precisely, from the portrait, what that mortal's face was like. 119. A glance at the three coins, as they are set side by side, will now show you the main differences in the three great Greek styles. The archaic coin is sharp and hard; every line decisive and numbered, set unhesitatingly in its place; nothing is wrong, though everything incomplete, and, to us who have seen finer art, ugly. The central coin is as decisive and clear in arrangement of masses, but its contours are completely rounded and finished. There is no character in its execution so prominent that you can give an epithet to the style. It is not hard, it is not soft, it is not delicate, it is not coarse, it is not grotesque, it is not beautiful; and I am convinced, unless you had been told that this is fine central Greek art, you would have seen nothing at all in it to interest you. Do not let yourselves be anywise forced into admiring it; there is, indeed, nothing more here, than an approximately true rendering of a healthy youthful face, without the slightest attempt to give an expression of activity, cunning, nobility, or any other attribute of the Mercurial mind. Extreme simplicity, unpretending vigour of work, which claims no admiration either for minuteness or dexterity, and suggests no idea of effort at all; refusal of extraneous ornament, and perfectly arranged disposition of counted masses in a sequent order, whether in the beads, or the ringlets of hair; this is all you have to be pleased with; neither will you ever find, in the best Greek Art, more. You might at first suppose that the chain of beads round the cap was an extraneous ornament; but I have little doubt that it is as definitely the proper fillet for the head of Hermes, as the olive for Zeus, or corn for Triptolemus. The cap or petasus cannot have expanded edges, there is no room for them on the coin; these must be understood, therefore; but the nature of the cloud-petasus is explained by edging it with beads, representing either dew or hail. The shield of Athena often bears white pellets for hail, in like manner. 120. The third coin will, I think, at once strike you by what we moderns should call its "vigour of character." You may observe also that the features are finished with great care and subtlety, but at the cost of simplicity and breadth. But the _essential_ difference between it and the central art, is its disorder in design--you see the locks of hair cannot be counted any longer--they are entirely dishevelled and irregular. Now the individual character may, or may not be, a sign of decline; but the licentiousness, the casting loose of the masses in the design, is an infallible one. The effort at portraiture is good for art if the men to be portrayed are good men, not otherwise. In the instance before you, the head is that of Mithridates VI. of Pontus, who had, indeed, the good qualities of being a linguist and a patron of the arts; but as you will remember, murdered, according to report, his mother, certainly his brother, certainly his wives and sisters, I have not counted how many of his children, and from a hundred to a hundred and fifty thousand persons besides; these last in a single day's massacre. The effort to represent this kind of person is not by any means a method of study from life ultimately beneficial to art. 121. This however is not the point I have to urge to-day. What I want you to observe is that, though the master of the great time does not attempt portraiture, he _does_ attempt animation. And as far as his means will admit, he succeeds in making the face--you might almost think--vulgarly animated; as like a real face, literally, "as it can stare." Yes: and its sculptor meant it to be so; and that was what Phidias meant his Jupiter to be, if he could manage it. Not, indeed, to be taken for Zeus himself; and yet, to be as like a living Zeus as art could make it. Perhaps you think he tried to make it look living only for the sake of the mob, and would not have tried to do so for connoisseurs. Pardon me; for real connoisseurs, he would, and did; and herein consists a truth which belongs to all the arts, and which I will at once drive home in your minds, as firmly as I can. 122. All second-rate artists--(and remember, the second-rate ones are a loquacious multitude, while the great come only one or two in a century; and then, silently)--all second-rate artists will tell you that the object of fine art is not resemblance, but some kind of abstraction more refined than reality. Put that out of your heads at once. The object of the great Resemblant Arts is, and always has been, to resemble; and to resemble as closely as possible. It is the function of a good portrait to set the man before you in habit as he lived, and I would we had a few more that did so. It is the function of a good landscape to set the scene before you in its reality, to make you, if it may be, think the clouds are flying, and the streams foaming. It is the function of the best sculptor--the true Dædalus--to make stillness look like breathing, and marble look like flesh. 123. And in all great times of art, this purpose is as naïvely expressed as it is steadily held. All the talk about abstraction belongs to periods of decadence. In living times, people see something living that pleases them; and they try to make it live for ever, or to make it something as like it as possible, that will last for ever. They paint their statues, and inlay the eyes with jewels, and set real crowns on their heads; they finish, in their pictures, every thread of embroidery, and would fain, if they could, draw every leaf upon the trees. And their only verbal expression of conscious success is, that they have made their work "look real." 124. You think all that very wrong. So did I, once; but it was I that was wrong. A long time ago, before ever I had seen Oxford, I painted a picture of the Lake of Como, for my father. It was not at all like the Lake of Como; but I thought it rather the better for that. My father differed with me; and objected particularly to a boat with a red and yellow awning, which I had put into the most conspicuous corner of my drawing. I declared this boat to be "necessary to the composition." My father not the less objected, that he had never seen such a boat, either at Como or elsewhere; and suggested that if I would make the lake look a little more like water, I should be under no necessity of explaining its nature by the presence of floating objects. I thought him at the time a very simple person for his pains; but have since learned, and it is the very gist of all practical matters, which, as professor of fine art, I have now to tell you, that the great point in painting a lake is--to get it to look like water. 125. So far, so good. We lay it down for a first principle, that our graphic art, whether painting or sculpture, is to produce something which shall look as like Nature as possible. But now we must go one step farther, and say that it is to produce what shall look like Nature to people who know what Nature is like! You see this is at once a great restriction, as well as a great exaltation of our aim. Our business is not to deceive the simple; but to deceive the wise! Here, for instance, is a modern Italian print, representing, to the best of its power, St. Cecilia, in a brilliantly realistic manner. And the fault of the work is not in its earnest endeavour to show St. Cecilia in habit as she lived, but in that the effort could only be successful with persons unaware of the habit St. Cecilia lived in. And this condition of appeal only to the wise increases the difficulty of imitative resemblance so greatly, that, with only average skill or materials, we must surrender all hope of it, and be content with an imperfect representation, true as far as it reaches, and such as to excite the imagination of a wise beholder to complete it; though falling very far short of what either he or we should otherwise have desired. For instance, here is a suggestion, by Sir Joshua Reynolds, of the general appearance of a British Judge--requiring the imagination of a very wise beholder indeed, to fill it up, or even at first to discover what it is meant for. Nevertheless, it is better art than the Italian St. Cecilia, because the artist, however little he may have done to represent his knowledge, does, indeed, know altogether what a Judge is like, and appeals only to the criticism of those who know also. 126. There must be, therefore, two degrees of truth to be looked for in the good graphic arts; one, the commonest, which, by any partial or imperfect sign conveys to you an idea which you must complete for yourself; and the other, the finest, a representation so perfect as to leave you nothing to be farther accomplished by this independent exertion; but to give you the same feeling of possession and presence which you would experience from the natural object itself. For instance of the first, in this representation of a rainbow,[124] the artist has no hope that, by the black lines of engraving, he can deceive you into any belief of the rainbow's being there, but he gives indication enough of what he intends, to enable you to supply the rest of the idea yourself, providing always you know beforehand what a rainbow is like. But in this drawing of the falls of Terni,[125] the painter has strained his skill to the utmost to give an actually deceptive resemblance of the iris, dawning and fading among the foam. So far as he has not actually deceived you, it is not because he would not have done so if he could; but only because his colours and science have fallen short of his desire. They have fallen so little short that, in a good light, you may all but believe the foam and the sunshine are drifting and changing among the rocks. 127. And after looking a little while, you will begin to regret that they are not so: you will feel that, lovely as the drawing is, you would like far better to see the real place, and the goats skipping among the rocks, and the spray floating above the fall. And this is the true sign of the greatest art--to part voluntarily with its greatness;--to make _itself_ poor and unnoticed; but so to exalt and set forth its theme that you may be fain to see the theme instead of it. So that you have never enough admired a great workman's doing till you have begun to despise it. The best homage that could be paid to the Athena of Phidias would be to desire rather to see the living goddess; and the loveliest Madonnas of Christian art fall short of their due power, if they do not make their beholders sick at heart to see the living Virgin. 128. We have then, for our requirement of the finest art (sculpture, or anything else), that it shall be so like the thing it represents as to please those who best know or can conceive the original; and, if possible, please them deceptively--its final triumph being to deceive even the wise; and (the Greeks thought) to please even the Immortals, who were so wise as to be undeceivable. So that you get the Greek, thus far entirely true, idea of perfectness in sculpture, expressed to you by what Phalaris says, at first sight of the bull of Perilaus, "It only wanted motion and bellowing to seem alive; and as soon as I saw it, I cried out, it ought to be sent to the god." To Apollo, for only he, the undeceivable, could thoroughly understand such sculpture, and perfectly delight in it. 129. And with this expression of the Greek ideal of sculpture, I wish you to join the early Italian, summed in a single line by Dante--"non vide me' di me, chi vide 'l vero." Read the 12th canto of the "Purgatory," and learn that whole passage by heart; and if ever you chance to go to Pistoja, look at La Robbia's coloured porcelain bas-reliefs of the seven works of Mercy on the front of the hospital there; and note especially the faces of the two sick men--one at the point of death, and the other in the first peace and long-drawn breathing of health after fever--and you will know what Dante meant by the preceding line, "Morti li morti, e i vivi parèn vivi." 130. But now, may we not ask farther,--is it impossible for art such as this, prepared for the wise, to please the simple also? Without entering on the awkward questions of degree, how many the wise can be, or how much men should know, in order to be rightly called wise, may we not conceive an art to be possible, which would deceive _every_body, or everybody worth deceiving? I showed you at my first lecture, a little ringlet of Japan ivory, as a type of elementary bas-relief touched with colour; and in your rudimentary series you have a drawing by Mr. Burgess, of one of the little fishes enlarged, with every touch of the chisel facsimiled on the more visible scale; and showing the little black bead inlaid for the eye, which in the original is hardly to be seen without a lens. You may, perhaps be surprised, when I tell you, that (putting the question of _subject_ aside for the moment, and speaking only of the mode of execution and aim at resemblance), you have there a perfect example of the Greek ideal of method in sculpture. And you will admit that, to the simplest person whom we could introduce as a critic, that fish would be a satisfactory, nay, almost a deceptive fish; while to any one caring for subtleties of art, I need not point out that every touch of the chisel is applied with consummate knowledge, and that it would be impossible to convey more truth and life with the given quantity of workmanship. [Illustration: FIG. 7.] 131. Here is, indeed, a drawing by Turner, (Edu. 131), in which with some fifty times the quantity of labour, and far more highly educated faculty of sight, the artist has expressed some qualities of lustre and colour which only very wise persons indeed could perceive in a John Dory; and this piece of paper contains, therefore, much more, and more subtle, art, than the Japan ivory; but are we sure that it is therefore _greater_ art? or that the painter was better employed in producing this drawing, which only one person can possess, and only one in a hundred enjoy, than he would have been in producing two or three pieces on a larger scale, which should have been at once accessible to, and enjoyable by, a number of simpler persons? Suppose for instance, that Turner, instead of faintly touching this outline, on white paper, with his camel's hair pencil, had struck the main forms of his fish into marble, thus (Fig. 7): and instead of colouring the white paper so delicately that, perhaps, only a few of the most keenly observant artists in England can see it at all, had, with his strong hand, tinted the marble with a few colours, deceptive to the people, and harmonious to the initiated; suppose that he had even conceded so much to the spirit of popular applause as to allow of a bright glass bead being inlaid for the eye, in the Japanese manner; and that the enlarged, deceptive, and popularly pleasing work had been carved on the outside of a great building,--say Fishmongers' Hall,--where everybody commercially connected with Billingsgate could have seen it, and ratified it with the wisdom of the market;--might not the art have been greater, worthier, and kinder in such use? 132. Perhaps the idea does not once approve itself to you of having your public buildings covered with ornaments like this; but pray, remember that the choice of _subject_ is an ethical question, not now before us. All I ask you to decide is whether the method is right, and would be pleasant in giving the distinctiveness to pretty things, which it has here given to what, I suppose it may be assumed, you feel to be an ugly thing. Of course, I must note parenthetically, such realistic work is impossible in a country where the buildings are to be discoloured by coal-smoke; but so is all fine sculpture, whatsoever; and the whiter, the worse its chance. For that which is prepared for private persons, to be kept under cover, will, of necessity, degenerate into the copyism of past work, or merely sensational and sensual forms of present life, unless there be a governing school addressing the populace, for their instruction, on the outside of buildings. So that, as I partly warned you in my third lecture, you can simply have _no_ sculpture in a coal country. Whether you like coals or carvings best, is no business of mine. I merely have to assure you of the fact that they are incompatible. But, assuming that we are again, some day, to become a civilized and governing race, deputing ironmongery, coal-digging, and lucre-digging, to our slaves in other countries, it is quite conceivable that, with an increasing knowledge of natural history, and desire for such knowledge, what is now done by careful, but inefficient, woodcuts, and in ill-coloured engravings, might be put in quite permanent sculptures, with inlay of variegated precious stones, on the outside of buildings, where such pictures would be little costly to the people; and in a more popular manner still, by Robbia ware and Palissy ware, and inlaid majolica, which would differ from the housewives' present favourite decoration of plates above her kitchen dresser, by being every piece of it various, instructive, and universally visible. 133. You hardly know, I suppose, whether I am speaking in jest or earnest. In the most solemn earnest, I assure you; though such is the strange course of our popular life that all the irrational arts of destruction are at once felt to be earnest; while any plan for those of instruction on a grand scale, sounds like a dream or jest. Still, I do not absolutely propose to decorate our public buildings with sculpture wholly of this character; though beast, and fowl, and creeping things, and fishes, might all find room on such a building as the Solomon's House of a New Atlantis; and some of them might even become symbolic of much to us again. Passing through the Strand, only the other day, for instance, I saw four highly finished and delicately coloured pictures of cock-fighting, which, for imitative quality, were nearly all that could be desired, going far beyond the Greek cock of Himera; and they would have delighted a Greek's soul, if they had meant as much as a Greek cock-fight; but they were only types of the "[Greek: endomachas alektôr]," and of the spirit of home contest, which has been so fatal lately to the Bird of France; and not of the defence of one's own barnyard, in thought of which the Olympians set the cock on the pillars of their chariot course; and gave it goodly alliance in its battle, as you may see here, in what is left of the angle of mouldering marble in the chair of the priest of Dionusos. The cast of it, from the centre of the theatre under the Acropolis, is in the British Museum; and I wanted its spiral for you, and this kneeling Angel of Victory;--it is late Greek art, but nobly systematic flat bas-relief. So I set Mr. Burgess to draw it; but neither he nor I for a little while, could make out what the Angel of Victory was kneeling for. His attitude is an ancient and grandly conventional one among the Egyptians; and I was tracing it back to a kneeling goddess of the greatest dynasty of the Pharaohs--a goddess of Evening, or Death, laying down the sun out of her right hand;--when, one bright day, the shadows came out clear on the Athenian throne, and I saw that my Angel of Victory was only backing a cock at a cock-fight. 134. Still, as I have said, there is no reason why sculpture, even for simplest persons, should confine itself to imagery of fish, or fowl, or four-footed things. We go back to our first principle: we ought to carve nothing but what is honourable. And you are offended, at this moment, with my fish, (as I believe, when the first sculptures appeared on the windows of this museum, offence was taken at the unnecessary introduction of cats), these dissatisfactions being properly felt by your "[Greek: nous tôn timiôtatôn]." For indeed, in all cases, our right judgment must depend on our wish to give honour only to things and creatures that deserve it. 135. And now I must state to you another principle of veracity, both in sculpture, and all following arts, of wider scope than any hitherto examined. We have seen that sculpture is to be a true representation of true external form. Much more is it to be a representation of true internal emotion. You must carve only what you yourself see as you see it; but, much more, you must carve only what you yourself feel, as you feel it. You may no more endeavour to feel through other men's souls, than to see with other men's eyes. Whereas generally now in Europe and America, every man's energy is bent upon acquiring some false emotion, not his own, but belonging to the past, or to other persons, because he has been taught that such and such a result of it will be fine. Every attempted sentiment in relation to art is hypocritical; our notions of sublimity, of grace, or pious serenity, are all second hand; and we are practically incapable of designing so much as a bell-handle or a door-knocker without borrowing the first notion of it from those who are gone--where we shall not wake them with our knocking. I would we could. 136. In the midst of this desolation we have nothing to count on for real growth, but what we can find of honest liking and longing, in ourselves and in others. We must discover, if we would healthily advance, what things are verily [Greek: timiôtata] among us; and if we delight to honour the dishonourable, consider how, in future, we may better bestow our likings. Now it appears to me from all our popular declarations, that we, at present, honour nothing so much as liberty and independence; and no person so much as the Free man and Self-made man, who will be ruled by no one, and has been taught, or helped, by no one. And the reason I chose a fish for you as the first subject of sculpture, was that in men who are free and self-made, you have the nearest approach, humanly possible, to the state of the fish, and finely organized [Greek: herpeton]. You get the exact phrase in Habakkuk, if you take the Septuagint text.--"[Greek: poiêseis tous anthrôpous hôs tous ichthyas tês thalassês, kai hôs ta herpeta ta ouk echonta hêgoumenon."] "Thou wilt make men as the fishes of the sea, and as the reptile things, _that have no ruler over them_." And it chanced that as I was preparing this lecture, one of our most able and popular prints gave me a woodcut of the "self-made man," specified as such, so vigorously drawn, and with so few touches, that Phidias or Turner himself could scarcely have done it better; so that I had only to ask my assistant to enlarge it with accuracy, and it became comparable with my fish at once. Of course it is not given by the caricaturist as an admirable face; only, I am enabled by his skill to set before you, without any suspicion of unfairness on _my_ part, the expression to which the life we profess to think most honourable, naturally leads. If we were to take the hat off, you see how nearly the profile corresponds with that of the typical fish. [Illustration: PLATE VIII.--THE APOLLO OF SYRACUSE AND THE SELF-MADE MAN.] 137. Such, then, being the definition by your best popular art, of the ideal of feature at which we are gradually arriving by self-manufacture; when I place opposite to it (in Plate VIII.) the profile of a man not in any wise self-made, neither by the law of his own will, nor by the love of his own interest--nor capable, for a moment, of any kind of "Independence," or of the idea of independence; but wholly dependent upon, and subjected to, external influence of just law, wise teaching, and trusted love and truth, in his fellow-spirits;--setting before you, I say, this profile of a God-made instead of a self-made, man, I know that you will feel, on the instant, that you are brought into contact with the vital elements of human art; and that this, the sculpture of the good, is indeed the only permissible sculpture. 138. A God-made _man_, I say. The face, indeed, stands as a symbol of more than man in its sculptor's mind. For as I gave you, to lead your first effort in the form of leaves, the sceptre of Apollo, so this, which I give you as the first type of rightness in the form of flesh, is the countenance of the holder of that sceptre, the Sun-God of Syracuse. But there is nothing in the face (nor did the Greek suppose there was) more perfect than might be seen in the daily beauty of the creatures the Sun-God shone upon, and whom his strength and honour animated. This is not an ideal, but a quite literally true, face of a Greek youth; nay, I will undertake to show you that it is not supremely beautiful, and even to surpass it altogether with the literal portrait of an Italian one. It is in verity no more than the form habitually taken by the features of a well educated young Athenian or Sicilian citizen; and the one requirement for the sculptors of to-day is not, as it has been thought, to invent the same ideal, but merely to see the same reality. Now, you know I told you in my fourth lecture, that the beginning of art was in getting our country clean and our people beautiful, and you supposed that to be a statement irrelevant to my subject; just as, at this moment, you perhaps think, I am quitting the great subject of this present lecture--the method of likeness-making--and letting myself branch into the discussion of what things we are to make likeness of. But you shall see hereafter that the method of imitating a beautiful thing must be different from the method of imitating an ugly one; and that, with the change in subject from what is dishonourable to what is honourable, there will be involved a parallel change in the management of tools, of lines, and of colours. So that before I can determine for you _how_ you are to imitate, you must tell me what kind of face you wish to imitate. The best draughtsmen in the world could not draw this Apollo in ten scratches, though he can draw the self-made man. Still less this nobler Apollo of Ionian Greece, (Plate IX.) in which the incisions are softened into a harmony like that of Correggio's painting. So that you see the method itself,--the choice between black incision or fine sculpture, and perhaps, presently, the choice between colour or no colour, will depend on what you have to represent. Colour may be expedient for a glistening dolphin or a spotted fawn;--perhaps inexpedient for white Poseidon, and gleaming Dian. So that, before defining the laws of sculpture, I am compelled to ask you, _what you mean to carve_; and that, little as you think it, is asking you how you mean to live, and what the laws of your State are to be, for _they_ determine those of your statue. You can only have this kind of face to study from, in the sort of state that produced it. And you will find that sort of state described in the beginning of the fourth book of the laws of Plato; as founded, for one thing, on the conviction that of all the evils that can happen to a state, quantity of money is the greatest! [Greek: meizon kakon, ôs epos eipein, polei ouden an gignoito, eis gennaiôn kai dikaiôn êthôn ktêsin], "for, to speak shortly, no greater evil, matching each against each, can possibly happen to a city, as adverse to its forming just or generous character," than its being full of silver and gold. 139. Of course, the Greek notion may be wrong, and ours right, only--[Greek: ôs epos eipein]--you can have Greek sculpture only on that Greek theory: shortly expressed by the words put into the mouth of Poverty herself, in the Plutus of Aristophanes "[Greek: Tou ploutou parechô beltionas andras, kai tên gnômên, kai tên idean]," "I deliver to you better men than the God of Money can, both in imagination and feature." So on the other hand, this ichthyoid, reptilian, or mono-chondyloid ideal of the self-made man can only be reached, universally, by a nation which holds that poverty, either of purse or spirit,--but especially the spiritual character of being [Greek: ptôchoi tô pneumati], is the lowest of degradations; and which believes that the desire of wealth is the first of manly and moral sentiments. As I have been able to get the popular ideal represented by its own living art, so I can give you this popular faith in its own living words; but in words meant seriously and not at all as caricature, from one of our leading journals, professedly æsthetic also in its very name, the _Spectator_, of August 6th, 1870. [Illustration: PLATE IX.--APOLLO CHRYSOCOMES OF CLAZOMENÆ.] "Mr. Ruskin's plan," it says, "would make England poor, in order that she might be cultivated, and refined and artistic. A wilder proposal was never broached by a man of ability; and it might be regarded as a proof that the assiduous study of art emasculates the intellect, _and even the moral sense_. Such a theory almost warrants the contempt with which art is often regarded by essentially intellectual natures, like Proudhon" (sic). "Art is noble as the flower of life, and the creations of a Titian are a great heritage of the race; but if England could secure high art and Venetian glory of colour only by the sacrifice of her manufacturing supremacy, and _by the acceptance of national poverty_, then the pursuit of such artistic achievements would imply that we had ceased to possess natures of manly strength, _or to know the meaning of moral aims_. If we must choose between a Titian and a Lancashire cotton mill, then, in the name of manhood and of morality, give us the cotton mill. Only the dilettantism of the studio; that dilettantism which loosens the moral no less than the intellectual fibre, and which is as fatal to rectitude of action as to correctness of reasoning power, would make a different choice." You see also, by this interesting and most memorable passage, how completely the question is admitted to be one of ethics--the only real point at issue being, whether this face or that is developed on the truer moral principle. 140. I assume, however, for the present, that this Apolline type is the kind of form you wish to reach and to represent. And now observe, instantly, the whole question of manner of imitation is altered for us. The fins of the fish, the plumes of the swan, and the flowing of the Sun-God's hair are all represented by incisions--but the incisions do sufficiently represent the fin and feather,--they _in_sufficiently represent the hair. If I chose, with a little more care and labor, I could absolutely get the surface of the scales and spines of the fish, and the expression of its mouth; but no quantity of labor would obtain the real surface of a tress of Apollo's hair, and the full expression of his mouth. So that we are compelled at once to call the imagination to help us, and say to it, _You_ know what the Apollo Chrysocomes must be like; finish all this for yourself. Now, the law under which imagination works, is just that of other good workers. "You must give me clear orders; show me what I have to do, and where I am to begin, and let me alone." And the orders can be given, quite clearly, up to a certain point, in form; but they cannot be given clearly in color, now that the subject is subtle. All beauty of this high kind depends on harmony; let but the slightest discord come into it, and the finer the thing is, the more fatal will be the flaw. Now, on a flat surface, I can command my color to be precisely what and where I mean it to be; on a round one I cannot. For all harmony depends, first, on the fixed proportion of the color of the light to that of the relative shadow; and therefore if I fasten my color, I must fasten my shade. But on a round surface the shadow changes at every hour of the day; and therefore all coloring which is expressive of form, is impossible; and if the form is fine, (and here there is nothing but what is fine,) you may bid farewell to color. 141. Farewell to color; that is to say, if the thing is to be seen distinctly, and you have only wise people to show it to; but if it is to be seen indistinctly, at a distance, color may become explanatory; and if you have simple people to show it to, color may be necessary to excite _their_ imaginations, though not to excite yours. And the art is great always by meeting its conditions in the straightest way; and if it is to please a multitude of innocent and bluntly-minded persons, must express itself in the terms that will touch them; else it is not good. And I have to trace for you through the history of the past, and possibilities of the future, the expedients used by great sculptors to obtain clearness, impressiveness, or splendor; and the manner of their appeal to the people, under various light and shadow, and with reference to different degrees of public intelligence: such investigation resolving itself again and again, as we proceed, into questions absolutely ethical; as, for instance, whether color is to be bright or dull,--that is to say, for a populace cheerful or heartless;--whether it is to be delicate or strong,--that is to say, for a populace attentive or careless; whether it is to be a background like the sky, for a procession of young men and maidens, because your populace revere life--or the shadow of the vault behind a corpse stained with drops of blackened blood, for a populace taught to worship Death. Every critical determination of rightness depends on the obedience to some ethic law, by the most rational and, therefore, simplest means. And you see how it depends most, of all things, on whether you are working for chosen persons, or for the mob; for the joy of the boudoir, or of the Borgo. And if for the mob, whether the mob of Olympia, or of St. Antoine. Phidias, showing his Jupiter for the first time, hides behind the temple door to listen, resolved afterwards "[Greek: rhythmizein to agalma pros to tois pleistois dokoun, ou gar hêgeito mikran einai symboulên dêmou tosoutou]," and truly, as your people is, in judgment, and in multitude, so must your sculpture be, in glory. An elementary principle which has been too long out of mind. 142. I leave you to consider it, since, for some time, we shall not again be able to take up the inquiries to which it leads. But, ultimately, I do not doubt that you will rest satisfied in these following conclusions: 1. Not only sculpture, but all the other fine arts, must be for the people. 2. They must be didactic to the people, and that as their chief end. The structural arts, didactic in their manner; the graphic arts, in their matter also. 3. And chiefly the great representative and imaginative arts--that is to say, the drama and sculpture--are to teach what is noble in past history, and lovely in existing human and organic life. 4. And the test of right manner of execution in these arts, is that they strike, in the most emphatic manner, the rank of popular minds to which they are addressed. 5. And the test of utmost fineness in execution in these arts, is that they make themselves be forgotten in what they represent; and so fulfil the words of their greatest Master, "THE BEST, IN THIS KIND, ARE BUT SHADOWS." FOOTNOTES: [123] See date of delivery of Lecture. The picture was of a peasant girl of eleven or twelve years old, peeling carrots by a cottage fire. [124] In Durer's "Melencholia." [125] Turner's, in the Hakewill series. LECTURE V. STRUCTURE. _December, 1870._ 143. On previous occasions of addressing you, I have endeavoured to show you, first, how sculpture is distinguished from other arts; then its proper subjects, then its proper method in the realization of these subjects. To-day, we must, in the fourth place, consider the means at its command for the accomplishment of these ends; the nature of its materials; and the mechanical or other difficulties of their treatment. And however doubtful we may have remained, as to the justice of Greek ideals, or propriety of Greek methods of representing them, we may be certain that the example of the Greeks will be instructive in all practical matters relating to this great art, peculiarly their own. I think even the evidence I have already laid before you is enough to convince you, that it was by rightness and reality, not by idealism or delightfulness only, that their minds were finally guided; and I am sure that, before closing the present course, I shall be able so far to complete that evidence, as to prove to you that the commonly received notions of classic art are, not only unfounded, but even in many respects, directly contrary to the truth. You are constantly told that Greece idealized whatever she contemplated. She did the exact contrary: she realized and verified it. You are constantly told she sought only the beautiful. She sought, indeed, with all her heart; but she found, because she never doubted that the search was to be consistent with propriety and common sense. And the first thing you will always discern in Greek work is the first which you _ought_ to discern in all work; namely, that the object of it has been rational, and has been obtained by simple and unostentatious means. 144. "That the object of the work has been rational!" Consider how much that implies. That it should be by all means seen to have been determined upon, and carried through, with sense and discretion; these being gifts of intellect far more precious than any knowledge of mathematics, or of the mechanical resources of art. Therefore, also, that it should be a modest and temperate work, a structure fitted to the actual state of men; proportioned to their actual size, as animals,--to their average strength,--to their true necessities,--and to the degree of easy command they have over the forces and substances of nature. 145. You see how much this law excludes! All that is fondly magnificent, insolently ambitious, or vainly difficult. There is, indeed, such a thing as Magnanimity in design, but never unless it be joined also with modesty and _Equ_animity. Nothing extravagant, monstrous, strained, or singular, can be structurally beautiful. No towers of Babel envious of the skies; no pyramids in mimicry of the mountains of the earth; no streets that are a weariness to traverse, nor temples that make pigmies of the worshippers. It is one of the primal merits and decencies of Greek work that it was, on the whole, singularly small in scale, and wholly within reach of sight, to its finest details. And, indeed, the best buildings that I know are thus modest; and some of the best are minute jewel cases for sweet sculpture. The Parthenon would hardly attract notice, if it were set by the Charing Cross Railway Station: the Church of the Miracoli, at Venice, the Chapel of the Rose, at Lucca, and the Chapel of the Thorn, at Pisa, would not, I suppose, all three together, fill the tenth part, cube, of a transept of the Crystal Palace. And they are better so. 146. In the chapter on Power in the "Seven Lamps of Architecture," I have stated what seems, at first, the reverse of what I am saying now; namely, that it is better to have one grand building than any number of mean ones. And that is true, but you cannot command grandeur by size till you can command grace in minuteness; and least of all, remember, will you so command it to-day, when magnitude has become the chief exponent of folly and misery, co-ordinate in the fraternal enormities of the Factory and Poorhouse,--the Barracks and Hospital. And the final law in this matter is, that if you require edifices only for the grace and health of mankind, and build them without pretence and without chicanery, they will be sublime on a modest scale, and lovely with little decoration. 147. From these principles of simplicity and temperance, two very severely fixed laws of construction follow; namely, first, that our structure, to be beautiful, must be produced with tools of men; and secondly, that it must be composed of natural substances. First, I say, produced with tools of men. All fine art requires the application of the whole strength and subtlety of the body, so that such art is not possible to any sickly person, but involves the action and force of a strong man's arm from the shoulder, as well as the delicatest touch of his finger: and it is the evidence that this full and fine strength has been spent on it which makes the art executively noble; so that no instrument must be used, habitually, which is either too heavy to be delicately restrained, or too small and weak to transmit a vigorous impulse; much less any mechanical aid, such as would render the sensibility of the fingers ineffectual.[126] 148. Of course, any kind of work in glass, or in metal, on a large scale, involves some painful endurance of heat; and working in clay, some habitual endurance of cold; but the point beyond which the effort must not be carried is marked by loss of power of manipulation. As long as the eyes and fingers have complete command of the material (as a glass blower has, for instance, in doing fine ornamental work)--the law is not violated; but all our great engine and furnace work, in gun-making and the like, is degrading to the intellect; and no nation can long persist in it without losing many of its human faculties. Nay, even the use of machinery, other than the common rope and pully, for the lifting of weights, is degrading to architecture; the invention of expedients for the raising of enormous stones has always been a characteristic of partly savage or corrupted races. A block of marble not larger than a cart with a couple of oxen could carry, and a cross-beam, with a couple of pulleys, raise, is as large as should generally be used in any building. The employment of large masses is sure to lead to vulgar exhibitions of geometrical arrangement,[127] and to draw away the attention from the sculpture. In general, rocks naturally break into such pieces as the human beings that have to build with them can easily lift, and no larger should be sought for. 149. In this respect, and in many other subtle ways, the law that the work is to be with tools of men is connected with the farther condition of its modesty, that it is to be wrought in substance provided by Nature, and to have a faithful respect to all the essential qualities of such substance. And here I must ask your attention to the idea, and, more than idea,--the fact, involved in that infinitely misused term, "Providentia," when applied to the Divine Power. In its truest sense and scholarly use, it is a human virtue, [Greek: Promêtheia]; the personal type of it is in Prometheus, and all the first power of [Greek: technê], is from him, as compared to the weakness of days when men without foresight "[Greek: ephyron eikê panta]." But, so far as we use the word "Providence" as an attribute of the Maker and Giver of all things, it does not mean that in a shipwreck He takes care of the passengers who are to be saved and takes none of those who are to be drowned; but it _does_ mean that every race of creatures is born into the world under circumstances of approximate adaptation to its necessities; and, beyond all others, the ingenious and observant race of man is surrounded with elements naturally good for his food, pleasant to his sight, and suitable for the subjects of his ingenuity;--the stone, metal, and clay of the earth he walks upon lending themselves at once to his hand, for all manner of workmanship. 150. Thus, his truest respect for the law of the entire creation is shown by his making the most of what he can get most easily; and there is no virtue of art, nor application of common sense, more sacredly necessary than this respect to the beauty of natural substance, and the ease of local use; neither are there any other precepts of construction so vital as these--that you show all the strength of your material, tempt none of its weaknesses, and do with it only what can be simply and permanently done. 151. Thus, all good building will be with rocks, or pebbles, or burnt clay, but with no artificial compound; all good painting, with common oils and pigments on common canvas, paper, plaster, or wood,--admitting, sometimes for precious work, precious things, but all applied in a simple and visible way. The highest imitative art should not, indeed, at first sight, call attention to the means of it; but even that, at length, should do so distinctly, and provoke the observer to take pleasure in seeing how completely the workman is master of the particular material he has used, and how beautiful and desirable a substance it was, for work of that kind. In oil painting its unctious quality is to be delighted in; in fresco, its chalky quality; in glass, its transparency; in wood, its grain; in marble, its softness; in porphyry, its hardness; in iron, its toughness. In a flint country, one should feel the delightfulness of having flints to pick up, and fasten together into rugged walls. In a marble country one should be always more and more astonished at the exquisite colour and structure of marble; in a slate country one should feel as if every rock cleft itself only for the sake of being built with conveniently. [Illustration: PLATE X.--MARBLE MASONRY IN THE DUOMO OF VERONA.] 152. Now, for sculpture, there are, briefly, two materials--Clay, and Stone; for glass is only a clay that gets clear and brittle as it cools, and metal a clay that gets opaque and tough as it cools. Indeed, the true use of gold in this world is only as a very pretty and very ductile clay, which you can spread as flat as you like, spin as fine as you like, and which will neither crack, nor tarnish. All the arts of sculpture in clay may be summed up under the word "Plastic," and all of those in stone, under the word "Glyptic." 153. Sculpture in clay will accordingly include all cast brick-work, pottery, and tile-work[128]--a somewhat important branch of human skill. Next to the potter's work, you have all the arts in porcelain, glass, enamel, and metal; everything, that is to say, playful and familiar in design, much of what is most felicitously inventive, and, in bronze or gold, most precious and permanent. 154. Sculpture in stone, whether granite, gem, or marble, while we accurately use the general term "glyptic" for it, may be thought of with, perhaps, the most clear force under the English word "engraving." For, from the mere angular incision which the Greek consecrated in the triglyphs of his greatest order of architecture, grow forth all the arts of bas-relief, and methods of localized groups of sculpture connected with each other and with architecture: as, in another direction, the arts of engraving and wood-cutting themselves. 155. Over all this vast field of human skill the laws which I have enunciated to you rule with inevitable authority, embracing the greatest, and consenting to the humblest, exertion; strong to repress the ambition of nations, if fantastic and vain, but gentle to approve the efforts of children, made in accordance with the visible intention of the Maker of all flesh, and the Giver of all Intelligence. These laws, therefore, I now repeat, and beg of you to observe them as irrefragable. 1. That the work is to be with tools of men. 2. That it is to be in natural materials. 3. That it is to exhibit the virtues of those materials, and aim at no quality inconsistent with them. 4. That its temper is to be quiet and gentle, in harmony with common needs, and in consent to common intelligence. We will now observe the bearing of these laws on the elementary conditions of the art at present under discussion. 156. There is, first, work in baked clay, which contracts as it dries, and is very easily frangible. Then you must put no work into it requiring niceness in dimension, nor any so elaborate that it would be a great loss if it were broken, but as the clay yields at once to the hand, and the sculptor can do anything with it he likes, it is a material for him to sketch with and play with,--to record his fancies in, before they escape him--and to express roughly, for people who can enjoy such sketches, what he has not time to complete in marble. The clay, being ductile, lends itself to all softness of line; being easily frangible, it would be ridiculous to give it sharp edges, so that a blunt and massive rendering of graceful gesture will be its natural function; but as it can be pinched, or pulled, or thrust in a moment into projection which it would take hours of chiselling to get in stone, it will also properly be used for all fantastic and grotesque form, not involving sharp edges. Therefore, what is true of chalk and charcoal, for painters, is equally true of clay, for sculptors; they are all most precious materials for true masters, but tempt the false ones into fatal license; and to judge rightly of terra-cotta work is a far higher reach of skill in sculpture-criticism than to distinguish the merits of a finished statue. 157. We have, secondly, work in bronze, iron, gold, and other metals; in which the laws of structure are still more definite. All kinds of twisted and wreathen work on every scale become delightful when wrought in ductile or tenacious metal, but metal which is to be _hammered_ into form separates itself into two great divisions--solid, and flat. [Illustration: PLATE XI.--THE FIRST ELEMENTS OF SCULPTURE. Incised Outline and Opened Space.] (A.) In solid metal work, _i. e._, metal cast thick enough to resist bending, whether it be hollow or not, violent and various projection may be admitted, which would be offensive in marble; but no sharp edges, because it is difficult to produce them with the hammer. But since the permanence of the material justifies exquisiteness of workmanship, whatever delicate ornamentation can be wrought with rounded surfaces may be advisedly introduced; and since the colour of bronze or any other metal is not so pleasantly representative of flesh as that of marble, a wise sculptor will depend less on flesh contour, and more on picturesque accessories, which, though they would be vulgar if attempted in stone, are rightly entertaining in bronze or silver. Verrochio's statue of Colleone at Venice, Cellini's Perseus at Florence, and Ghiberti's gates at Florence, are models of bronze treatment. (B.) When metal is beaten thin, it becomes what is technically called "plate," (the _flattened_ thing) and may be treated advisably in two ways; one, by beating it out into bosses, the other by cutting it into strips and ramifications. The vast schools of goldsmith's work and of iron decoration, founded on these two principles, have had the most powerful influences over general taste in all ages and countries. One of the simplest and most interesting elementary examples of the treatment of flat metal by cutting is the common branched iron bar, Fig. 8, used to close small apertures in countries possessing any good primitive style of iron-work, formed by alternate cuts on its sides, and the bending down of the several portions. The ordinary domestic window balcony of Verona is formed by mere ribands of iron, bent into curves as studiously refined as those of a Greek vase, and decorated merely by their own terminations in spiral volutes. [Illustration: FIG. 8.] All cast work in metal, unfinished by hand, is inadmissible in any school of living art, since it cannot possess the perfection of form due to a permanent substance; and the continual sight of it is destructive of the faculty of taste: but metal stamped with precision, as in coins, is to sculpture what engraving is to painting. 158. Thirdly. Stone-sculpture divides itself into three schools: one in very hard material; one in very soft, and one in that of centrally useful consistence. A. The virtue of work in hard material is the expression of form in shallow relief, or in broad contours; deep cutting in hard material is inadmissible, and the art, at once pompous and trivial, of gem engraving, has been in the last degree destructive of the honour and service of sculpture. B. The virtue of work in soft material is deep cutting, with studiously graceful disposition of the masses of light and shade. The greater number of flamboyant churches of France are cut out of an adhesive chalk; and the fantasy of their latest decoration was, in great part, induced by the facility of obtaining contrast of black space, undercut, with white tracery easily left in sweeping and interwoven rods--the lavish use of wood in domestic architecture materially increasing the habit of delight in branched complexity of line. These points, however, I must reserve for illustration in my lectures on architecture. To-day, I shall limit myself to the illustration of elementary sculptural structure in the best material;--that is to say, in crystalline marble, neither soft enough to encourage the caprice of the workman, nor hard enough to resist his will. 159. C. By the true "Providence" of Nature, the rock which is thus submissive has been in some places stained with the fairest colours, and in others blanched into the fairest absence of colour, that can be found to give harmony to inlaying, or dignity to form. The possession by the Greeks of their [Greek: leukos lithos] was indeed the first circumstance regulating the development of their art; it enabled them at once to express their passion for light by executing the faces, hands, and feet of their dark wooden statues in white marble, so that what we look upon only with pleasure for fineness of texture was to them an imitation of the luminous body of the deity shining from behind its dark robes; and ivory afterwards is employed in their best statues for its yet more soft and flesh-like brightness, receptive also of the most delicate colour--(therefore to this day the favourite ground of miniature painters). In like manner, the existence of quarries of peach-coloured marble within twelve miles of Verona, and of white marble and green serpentine between Pisa and Genoa, defined the manner both of sculpture and architecture for all the Gothic buildings of Italy. No subtlety of education could have formed a high school of art without these materials. 160. Next to the colour, the fineness of substance which will take a perfectly sharp edge, is essential; and this not merely to admit fine delineation in the sculpture itself, but to secure a delightful precision in placing the blocks of which it is composed. For the possession of too fine marble, as far as regards the work itself, is a temptation instead of an advantage to an inferior sculptor; and the abuse of the facility of undercutting, especially of undercutting so as to leave profiles defined by an edge against shadow, is one of the chief causes of decline of style in such encrusted bas-reliefs as those of the Certosa of Pavia and its contemporary monuments. But no undue temptation ever exists as to the fineness of block fitting; nothing contributes to give so pure and healthy a tone to sculpture as the attention of the builder to the jointing of his stones; and his having both the power to make them fit so perfectly as not to admit of the slightest portion of cement showing externally, and the skill to insure, if needful, and to suggest always, their stability in cementless construction. Plate X. represents a piece of entirely fine Lombardic building, the central portion of the arch in the Duomo of Verona, which corresponds to that of the porch of San Zenone, represented in Plate I. In both these pieces of building, the only line that traces the architrave round the arch, is that of the masonry joint; yet this line is drawn with extremest subtlety, with intention of delighting the eye by its relation of varied curvature to the arch itself; and it is just as much considered as the finest pen-line of a Raphael drawing. Every joint of the stone is used, in like manner, as a thin black line, which the slightest sign of cement would spoil like a blot. And so proud is the builder of his fine jointing, and so fearless of any distortion or strain spoiling the adjustment afterwards, that in one place he runs his joint quite gratuitously through a bas-relief, and gives the keystone its only sign of pre-eminence by the minute inlaying of the head of the Lamb, into the stone of the course above. 161. Proceeding from this fine jointing to fine draughtsmanship, you have, in the very outset and earliest stage of sculpture, your flat stone surface given you as a sheet of white paper, on which you are required to produce the utmost effect you can with the simplest means, cutting away as little of the stone as may be, to save both time and trouble; and, above all, leaving the block itself, when shaped, as solid as you can, that its surface may better resist weather, and the carved parts be as much protected as possible by the masses left around them. 162. The first thing to be done is clearly to trace the outline of subject with an incision approximating in section to that of the furrow of a plough, only more equal-sided. A fine sculptor strikes it, as his chisel leans, freely, on marble; an Egyptian, in hard rock, cuts it sharp, as in cuneiform inscriptions. In any case, you have a result somewhat like the upper figure, Plate XI., in which I show you the most elementary indication of form possible, by cutting the outline of the typical archaic Greek head with an incision like that of a Greek triglyph, only not so precise in edge or slope, as it is to be modified afterwards. 163. Now, the simplest thing we can do next, is to round off the flat surface _within_ the incision, and put what form we can get into the feebler projection of it thus obtained. The Egyptians do this, often with exquisite skill, and then, as I showed you in a former lecture, colour the whole--using the incision as an outline. Such a method of treatment is capable of good service in representing, at little cost of pains, subjects in distant effect, and common, or merely picturesque, subjects even near. To show you what it is capable of, and what coloured sculpture would be in its rudest type, I have prepared the coloured relief of the John Dory[129] as a natural history drawing for distant effect. You know, also, that I meant him to be ugly--as ugly as any creature can well be. In time, I hope to show you prettier things--peacocks and kingfishers,--butterflies and flowers, on grounds of gold, and the like, as they were in Byzantine work. I shall expect you, in right use of your æsthetic faculties, to like those better than what I show you to-day. But it is now a question of method only; and if you will look, after the lecture, first at the mere white relief, and then see how much may be gained by a few dashes of colour, such as a practised workman could lay in a quarter of an hour,--the whole forming, if well done, almost a deceptive image--you will, at least, have the range of power in Egyptian sculpture clearly expressed to you. 164. But for fine sculpture, we must advance by far other methods. If we carve the subject with real delicacy, the cast shadow of the incision will interfere with its outline, so that, for representation of beautiful things, you must clear away the ground about it, at all events for a little distance. As the law of work is to use the least pains possible, you clear it only just as far back as you need, and then for the sake of order and finish, you give the space a geometrical outline. By taking, in this case, the simplest I can,--a circle,--I can clear the head with little labor in the removal of surface round it; (see the lower figure in Plate XI.) 165. Now, these are the first terms of all well-constructed bas-relief. The mass you have to treat consists of a piece of stone, which, however you afterwards carve it, can but, at its most projecting point, reach the level of the external plane surface out of which it was mapped, and defined by a depression round it; that depression being at first a mere trench, then a moat of certain width, of which the outer sloping bank is in contact, as a limiting geometrical line, with the laterally salient portions of sculpture. This, I repeat, is the primal construction of good bas-relief, implying, first, perfect protection to its surface from any transverse blow, and a geometrically limited space to be occupied by the design, into which it shall pleasantly (and as you shall ultimately see, ingeniously,) contract itself: implying, secondly, a determined depth of projection, which it shall rarely reach, and never exceed: and implying, finally, the production of the whole piece with the least possible labor of chisel and loss of stone. 166. And these, which are the first, are very nearly the last constructive laws of sculpture. You will be surprised to find how much they include, and how much of minor propriety in treatment their observance involves. In a very interesting essay on the architecture of the Parthenon, by the professor of architecture of the Ecole Polytechnique, M. Emile Boutmy, you will find it noticed that the Greeks do not usually weaken, by carving, the constructive masses of their building; but put their chief sculpture in the empty spaces between the triglyphs, or beneath the roof. This is true; but in so doing, they merely build their panel instead of carving it; they accept no less than the Goths, the laws of recess and limitation, as being vital to the safety and dignity of their design; and their noblest recumbent statues are, constructively, the fillings of the acute extremity of a panel in the form of an obtusely summitted triangle. 167. In gradual descent from that severest type, you will find that an immense quantity of sculpture of all times and styles may be generally embraced under the notion of a mass hewn out of, or, at least, placed in, a panel or recess, deepening, it may be, into a niche; the sculpture being always designed with reference to its position in such recess; and, therefore, to the effect of the building out of which the recess is hewn. But, for the sake of simplifying our inquiry, I will at first suppose no surrounding protective ledge to exist, and that the area of stone we have to deal with is simply a flat slab, extant from a flat surface depressed all round it. 168. A _flat_ slab, observe. The flatness of surface is essential to the problem of bas-relief. The lateral limit of the panel may, or may not, be required; but the vertical limit of surface _must_ be expressed; and the art of bas-relief is to give the effect of true form on that condition. For observe, if nothing more were needed than to make first a cast of a solid form, then cut it in half, and apply the half of it to the flat surface;--if, for instance, to carve a bas-relief of an apple, all I had to do was to cut my sculpture of the whole apple in half, and pin it to the wall, any ordinary trained sculptor, or even a mechanical workman, could produce bas-relief; but the business is to carve a _round_ thing out of _flat_ thing; to carve an apple out of a biscuit!--to conquer, as a subtle Florentine has here conquered,[130] his marble, so as not only to get motion into what is most rigidly fixed, but to get boundlessness into what is most narrowly bounded; and carve Madonna and Child, rolling clouds, flying angels, and space of heavenly air behind all, out of a film of stone not the third of an inch thick where it is thickest. 169. Carried, however, to such a degree of subtlety as this, and with so ambitious and extravagant aim, bas-relief becomes a tour-de-force; and, you know, I have just told you all tours-de-force are wrong. The true law of bas-relief is to begin with a depth of incision proportioned justly to the distance of the observer and the character of the subject, and out of that rationally determined depth, neither increased for ostentation of effect, nor diminished for ostentation of skill, to do the utmost that will be easily visible to an observer, supposing him to give an average human amount of attention, but not to peer into, or critically scrutinize the work. 170. I cannot arrest you to-day by the statement of any of the laws of sight and distance which determine the proper depth of bas-relief. Suppose that depth fixed; then observe what a pretty problem, or, rather, continually varying cluster of problems, will be offered to us. You might, at first, imagine that, given what we may call our scale of solidity, or scale of depth, the diminution from nature would be in regular proportion, as for instance, if the real depth of your subject be, suppose a foot, and the depth of your bas-relief an inch, then the parts of the real subject which were six inches round the side of it would be carved, you might imagine, at the depth of half-an-inch, and so the whole thing mechanically reduced to scale. But not a bit of it. Here is a Greek bas-relief of a chariot with two horses (upper figure, Plate XXI). Your whole subject has therefore the depth of two horses side by side, say six or eight feet. Your bas-relief has, on the scale,[131] say the depth of the third of an inch. Now, if you gave only the sixth of an inch for the depth of the off horse, and, dividing him again, only the twelfth of an inch for that of each foreleg, you would make him look a mile away from the other, and his own forelegs a mile apart. Actually, the Greek has made the _near leg of the off horse project much beyond the off leg of the near horse_; and has put nearly the whole depth and power of his relief into the breast of the off horse, while for the whole distance from the head of the nearest to the neck of the other, he has allowed himself only a shallow line; knowing that, if he deepened that, he would give the nearest horse the look of having a thick nose; whereas, by keeping that line down, he has not only made the head itself more delicate, but detached it from the other by giving no cast shadow, and left the shadow below to serve for thickness of breast, cutting it as sharp down as he possibly can, to make it bolder. 171. Here is a fine piece of business we have got into!--even supposing that all this selection and adaptation were to be contrived under constant laws, and related only to the expression of given forms. But the Greek sculptor, all this while, is not only debating and deciding how to show what he wants, but, much more, debating and deciding what, as he can't show everything, he will choose to show at all. Thus, being himself interested, and supposing that you will be, in the manner of the driving, he takes great pains to carve the reins, to show you where they are knotted, and how they are fastened round the driver's waist (you recollect how Hippolytus was lost by doing that), but he does not care the least bit about the chariot, and having rather more geometry than he likes in the cross and circle of one wheel of it, entirely omits the other! 172. I think you must see by this time that the sculptor's is not quite a trade which you can teach like brickmaking; nor its produce an article of which you can supply any quantity "demanded" for the next railroad waiting-room. It may perhaps, indeed, seem to you that, in the difficulties thus presented by it, bas-relief involves more direct exertion of intellect than finished solid sculpture. It is not so, however. The questions involved by bas-relief are of a more curious and amusing kind, requiring great variety of expedients; though none except such as a true workmanly instinct delights in inventing and invents easily; but design in solid sculpture involves considerations of weight in mass, of balance, of perspective and opposition, in projecting forms, and of restraint for those which must not project, such as none but the greatest masters have ever completely solved; and they, not always; the difficulty of arranging the composition so as to be agreeable from points of view on all sides of it, being, itself, arduous enough. 173. Thus far, I have been speaking only of the laws of structure relating to the projection of the mass which becomes itself the sculpture. Another most interesting group of constructive laws governs its relation to the line that contains or defines it. In your Standard Series I have placed a photograph of the south transept of Rouen Cathedral. Strictly speaking, all standards of Gothic are of the thirteenth century; but, in the fourteenth, certain qualities of richness are obtained by the diminution of restraint; out of which we must choose what is best in their kinds. The pedestals of the statues which once occupied the lateral recesses are, as you see, covered with groups of figures, enclosed each in a quatrefoil panel; the spaces between this panel and the enclosing square being filled with sculptures of animals. You cannot anywhere find a more lovely piece of fancy, or more illustrative of the quantity of result that may be obtained with low and simple chiselling. The figures are all perfectly simple in drapery, the story told by lines of action only in the main group, no accessories being admitted. There is no undercutting anywhere, nor exhibition of technical skill, but the fondest and tenderest appliance of it; and one of the principal charms of the whole is the adaptation of every subject to its quaint limit. The tale must be told within the four petals of the quatrefoil, and the wildest and playfullest beasts must never come out of their narrow corners. The attention with which spaces of this kind are filled by the Gothic designers is not merely a beautiful compliance with architectural requirements, but a definite assertion of their delight in the restraint of law; for, in illuminating books, although, if they chose it, they might have designed floral ornaments, as we now usually do, rambling loosely over the leaves, and although, in later works, such license is often taken by them, in all books of the fine time the wandering tendrils are enclosed by limits approximately rectilinear, and in gracefullest branching often detach themselves from the right line only by curvature of extreme severity. 174 Since the darkness and extent of shadow by which the sculpture is relieved necessarily vary with the depth of the recess, there arise a series of problems, in deciding which the wholesome desire for emphasis by means of shadow is too often exaggerated by the ambition of the sculptor to show his skill in undercutting. The extreme of vulgarity is usually reached when the entire bas-relief is cut hollow underneath, as in much Indian and Chinese work, so as to relieve its forms against an absolute darkness; but no formal law can ever be given; for exactly the same thing may be beautifully done for a wise purpose, by one person, which is basely done, and to no purpose, or to a bad one, by another. Thus, the desire for emphasis itself may be the craving of a deadened imagination, or the passion of a vigorous one; and relief against shadow may be sought by one man only for sensation, and by another for intelligibility. John of Pisa undercuts fiercely, in order to bring out the vigour of life which no level contour could render; the Lombardi of Venice undercut delicately, in order to obtain beautiful lines, and edges of faultless precision; but the base Indian craftsmen undercut only that people may wonder how the chiselling was done through the holes, or that they may see every monster white against black. 175. Yet, here again we are met by another necessity for discrimination. There may be a true delight in the inlaying of white on dark, as there is a true delight in vigorous rounding. Nevertheless, the general law is always, that, the lighter the incisions, and the broader the surface, the grander, cæteris paribus, will be the work. Of the structural terms of that work you now know enough to understand that the schools of good sculpture, considered in relation to projection, divide themselves into four entirely distinct groups:-- 1st. Flat Relief, in which the surface is, in many places, absolutely flat; and the expression depends greatly on the lines of its outer contour, and on fine incisions within them. 2nd. Round Relief, in which, as in the best coins, the sculptured mass projects so as to be capable of complete modulation into form, but is not anywhere undercut. The formation of a coin by the blow of a die necessitates, of course, the severest obedience to this law. 3rd. Edged Relief. Undercutting admitted, so as to throw out the forms against a background of shadow. 4th. Full Relief. The statue completely solid in form, and unreduced in retreating depth of it, yet connected locally with some definite part of the building, so as to be still dependent on the shadow of its background and direction of protective line. 176. Let me recommend you at once to take what pains may be needful to enable you to distinguish these four kinds of sculpture, for the distinctions between them are not founded on mere differences in gradation of depth. They are truly four species, or orders, of sculpture, separated from each other by determined characters. I have used, you may have noted, hitherto in my Lectures, the word "bas-relief" almost indiscriminately for all, because the degree of lowness or highness of relief is not the question, but the _method_ of relief. Observe again, therefore-- A. If a portion of the surface is absolutely flat, you have the first order--Flat Relief. B. If every portion of the surface is rounded, but none undercut, you have Round Relief--essentially that of seals and coins. C. If any part of the edges be undercut, but the general projection of solid form reduced, you have what I think you may conveniently call Foliate Relief,--the parts of the design overlapping each other in places, like edges of leaves. D. If the undercutting is bold and deep, and the projection of solid form unreduced, you have full relief. Learn these four names at once by heart:-- Flat Relief. Round Relief. Foliate Relief. Full Relief. And whenever you look at any piece of sculpture, determine first to which of these classes it belongs; and then consider how the sculptor has treated it with reference to the necessary structure--that reference, remember, being partly to the mechanical conditions of the material, partly to the means of light and shade at his command. [Illustration: PLATE XII.--BRANCH OF PHILLYREA. DARK PURPLE] 177. To take a single instance. You know, for these many years, I have been telling our architects with all the force of voice I had in me, that they could design nothing until they could carve natural forms rightly. Many imagine that work was easy; but judge for yourselves whether it be or not. In Plate XII., I have drawn, with approximate accuracy, a cluster of Phillyrea leaves as they grow. Now, if we wanted to cut them in bas-relief, the first thing we should have to consider would be the position of their outline on the marble;--here it is, as far down as the spring of the leaves. But do you suppose that is what an ordinary sculptor could either lay for his first sketch, or contemplate as a limit to be worked down to? Then consider how the interlacing and springing of the leaves can be expressed within this outline. It must be done by leaving such projection in the marble as will take the light in the same proportion as the drawing does;--and a Florentine workman could do it, for close sight, without driving one incision deeper, or raising a single surface higher, than the eighth of an inch. Indeed, no sculptor of the finest time would design such a complex cluster of leaves as this, except for bronze or iron work; they would take simpler contours for marble; but the laws of treatment would, under these conditions, remain just as strict: and you may, perhaps, believe me now when I tell you that, in any piece of fine structural sculpture by the great masters, there is more subtlety and noble obedience to lovely laws than could be explained to you if I took twenty lectures to do it in, instead of one. [Illustration: FIG. 9.] 178. There remains yet a point of mechanical treatment, on which I have not yet touched at all; nor that the least important,--namely, the actual method and style of handling. A great sculptor uses his tools exactly as a painter his pencil, and you may recognize the decision of his thought, and glow of his temper, no less in the workmanship than the design. The modern system of modelling the work in clay, getting it into form by machinery, and by the hands of subordinates, and touching it at last, if indeed the (so called) sculptor touch it at all, only to correct their inefficiencies, renders the production of good work in marble a physical impossibility. The first result of it is that the sculptor thinks in clay instead of marble, and loses his instinctive sense of the proper treatment of a brittle substance. The second is that neither he nor the public recognize the touch of the chisel as expressive of personal feeling or power, and that nothing is looked for except mechanical polish. 179. The perfectly simple piece of Greek relief represented in Plate XIII., will enable you to understand at once,--examination of the original, at your leisure, will prevent you, I trust, from ever forgetting--what is meant by the virtue of handling in sculpture. [Illustration: PLATE XIII.--GREEK FLAT RELIEF AND SCULPTURE BY EDGED INCISION.] The projection of the heads of the four horses, one behind the other, is certainly not more, altogether, than three-quarters of an inch from the flat ground, and the one in front does not in reality project more than the one behind it, yet, by mere drawing,[132] you see the sculptor has got them to appear to recede in due order, and by the soft rounding of the flesh surfaces, and modulation of the veins, he has taken away all look of flatness from the necks. He has drawn the eyes and nostrils with dark incision, careful as the finest touches of a painter's pencil: and then, at last, when he comes to the manes, he has let fly hand and chisel with their full force, and where a base workman, (above all, if he had modelled the thing in clay first,) would have lost himself in laborious imitation of hair, the Greek has struck the tresses out with angular incisions, deep driven, every one in appointed place and deliberate curve, yet flowing so free under his noble hand that you cannot alter, without harm, the bending of any single ridge, nor contract, nor extend, a point of them. And if you will look back to Plate IX. you will see the difference between this sharp incision, used to express horse-hair, and the soft incision with intervening rounded ridge, used to express the hair of Apollo Chrysocomes; and, beneath, the obliquely ridged incision used to express the plumes of his swan; in both these cases the handling being much more slow, because the engraving is in metal; but the structural importance of incision, as the means of effect, never lost sight of. Finally, here are two actual examples of the work in marble of the two great schools of the world; one, a little Fortune, standing tiptoe on the globe of the Earth, its surface traced with lines in hexagons; not chaotic under Fortune's feet; Greek, this, and by a trained workman;--dug up in the temple of Neptune at Corfu;--and here, a Florentine portrait-marble, found in the recent alterations, face downwards, under the pavement of St'a Maria Novella;[133] both of them first-rate of their kind; and both of them, while exquisitely finished at the telling points, showing, on all their unregarded surfaces, the rough furrow of the fast-driven chisel, as distinctly as the edge of a common paving-stone. 180. Let me suggest to you, in conclusion, one most interesting point of mental expression in these necessary aspects of finely executed sculpture. I have already again and again pressed on your attention the beginning of the arts of men in the make and use of the ploughshare. Read more carefully--you might indeed do well to learn at once by heart,--the twenty-seven lines of the Fourth Pythian, which describe the ploughing of Jason. There is nothing grander extant in human fancy, nor set down in human words: but this great mythical expression of the conquest of the earth-clay, and brute-force, by vital human energy, will become yet more interesting to you when you reflect what enchantment has been cut, on whiter clay, by the tracing of finer furrows;--what the delicate and consummate arts of man have done by the ploughing of marble, and granite, and iron. You will learn daily more and more, as you advance in actual practice, how the primary manual art of engraving, in the steadiness, clearness, and irrevocableness of it, is the best art-discipline that can be given either to mind or hand;[134] you will recognize one law of right, pronouncing itself in the well-resolved work of every age; you will see the firmly traced and irrevocable incision determining not only the forms, but, in great part, the moral temper, of all vitally progressive art; you will trace the same principle and power in the furrows which the oblique sun shows on the granite of his own Egyptian city,--in the white scratch of the stylus through the colour on a Greek vase--in the first delineation, on the wet wall, of the groups of an Italian fresco; in the unerring and unalterable touch of the great engraver of Nüremberg,--and in the deep driven and deep bitten ravines of metal by which Turner closed, in embossed limits, the shadows of the Liber Studiorum. Learn, therefore, in its full extent, the force of the great Greek word, [Greek: charassô];--and, give me pardon--if you think pardon needed, that I ask you also to learn the full meaning of the English word derived from it. Here, at the Ford of the Oxen of Jason, are other furrows to be driven than these in the marble of Pentelicus. The fruitfullest, or the fatallest of all ploughing is that by the thoughts of your youth, on the white field of its imagination. For by these, either down to the disturbed spirit, "[Greek: kekoptai kai charassetai pedon];" or around the quiet spirit, and on all the laws of conduct that hold it, as a fair vase its frankincense, are ordained the pure colours, and engraved the just Characters, of Æonian life. FOOTNOTES: [126] Nothing is more wonderful, or more disgraceful among the forms of ignorance engendered by modern vulgar occupations in pursuit of gain, than the unconsciousness, now total, that fine art is essentially Athletic. I received a letter from Birmingham, some little time since, inviting me to see how much, in glass manufacture, "machinery excelled rude hand work." The writer had not the remotest conception that he might as well have asked me to come and see a mechanical boat-race rowed by automata, and "how much machinery excelled rude arm-work." [127] Such as the sculptureless arch of Waterloo Bridge, for instance, referred to in the Third Lecture, § 84. [128] It is strange, at this day, to think of the relation of the Athenian Ceramicus to the French Tile-fields, Tileries, or Tuileries; and how these last may yet become--have already partly become--"the Potter's field," blood-bought (December, 1870.) [129] This relief is now among the other casts which I have placed in the lower school in the University galleries. [130] The reference is to a cast from a small and low relief of Florentine work in the Kensington Museum. [131] The actual bas-relief is on a coin, and the projection not above the twentieth of an inch, but I magnified it in photograph, for this Lecture, so as to represent a relief with about the third of an inch for maximum projection. [132] This plate has been executed from a drawing by Mr. Burgess, in which he has followed the curves of incision with exquisite care, and preserved the effect of the surface of the stone, where a photograph would have lost it by exaggerating accidental stains. [133] These two marbles will always, henceforward, be sufficiently accessible for reference in my room at Corpus Christi College. [134] That it was also, in, some cases, the earliest that the Greeks gave, is proved by Lucian's account of his first lesson at his uncle's; the [Greek: enkopeus], literally "in-cutter"--being the first tool put into his hand, and an earthenware tablet to cut upon, which the boy pressing too hard, presently breaks;--gets beaten--goes home crying, and becomes, after his dream above quoted, a philosopher instead of a sculptor. LECTURE VI. THE SCHOOL OF ATHENS. _December, 1870._ 181. It can scarcely be needful for me to tell even the younger members of my present audience, that the conditions necessary for the production of a perfect school of sculpture have only twice been met in the history of the world, and then for a short time; nor for short time only, but also in narrow districts, namely, in the valleys and islands of Ionian Greece, and in the strip of land deposited by the Arno, between the Apennine crests and the sea. All other schools, except these two, led severally by Athens in the fifth century before Christ, and by Florence in the fifteenth of our own era, are imperfect; and the best of them are derivative: these two are consummate in themselves, and the origin of what is best in others. 182. And observe, these Athenian and Florentine schools are both of equal rank, as essentially original and independent. The Florentine, being subsequent to the Greek, borrowed much from it; but it would have existed just as strongly--and, perhaps, in some respects, more nobly--had it been the first, instead of the latter of the two. The task set to each of these mightiest of the nations was, indeed, practically the same, and as hard to the one as to the other. The Greeks found Phoenician and Etruscan art monstrous, and had to make them human. The Italians found Byzantine and Norman art monstrous, and had to make them human. The original power in the one case is easily traced; in the other it has partly to be unmasked, because the change at Florence was, in many points, suggested and stimulated by the former school. But we mistake in supposing that Athens taught Florence the laws of design; she taught her, in reality, only the duty of truth. 183. You remember that I told you the highest art could do no more than rightly represent the human form. This is the simple test, then, of a perfect school,--that it has represented the human form, so that it is impossible to conceive of its being better done. And that, I repeat, has been accomplished twice only: once in Athens, once in Florence. And so narrow is the excellence even of these two exclusive schools, that it cannot be said of either of them that they represented the entire human form. The Greeks perfectly drew, and perfectly moulded the body and limbs; but there is, so far as I am aware, no instance of their representing the face as well as any great Italian. On the other hand, the Italian painted and carved the face insuperably; but I believe there is no instance of his having perfectly represented the body, which, by command of his religion, it became his pride to despise, and his safety to mortify. 184. The general course of your study here renders it desirable that you should be accurately acquainted with the leading principles of Greek sculpture; but I cannot lay these before you without giving undue prominence to some of the special merits of that school, unless I previously indicate the relation it holds to the more advanced, though less disciplined, excellence of Christian art. In this and the last lecture of the present course,[135] I shall endeavour, therefore, to mass for you, in such rude and diagram-like outline as may be possible or intelligible, the main characteristics of the two schools, completing and correcting the details of comparison afterwards; and not answering, observe, at present, for any generalization I give you, except as a ground for subsequent closer and more qualified statements. And in carrying out this parallel, I shall speak indifferently of works of sculpture, and of the modes of painting which propose to themselves the same objects as sculpture. And this indeed Florentine, as opposed to Venetian, painting, and that of Athens in the fifth century, nearly always did. 185. I begin, therefore, by comparing two designs of the simplest kind--engravings, or, at least, linear drawings, both; one on clay, one on copper, made in the central periods of each style, and representing the same goddess--Aphrodite. They are now set beside each other in your Rudimentary Series. The first is from a patera lately found at Camirus, authoritatively assigned by Mr. Newton, in his recent catalogue, to the best period of Greek art. The second is from one of the series of engravings executed, probably, by Baccio Baldini, in 1485, out of which I chose your first practical exercise--the Sceptre of Apollo. I cannot, however, make the comparison accurate in all respects, for I am obliged to set the restricted type of the Aphrodite Urania of the Greeks beside the universal Deity conceived by the Italian as governing the air, earth, and sea; nevertheless the restriction in the mind of the Greek, and expatiation in that of the Florentine, are both characteristic. The Greek Venus Urania is flying in heaven, her power over the waters symbolized by her being borne by a swan, and her power over the earth by a single flower in her right hand; but the Italian Aphrodite is rising out of the actual sea, and only half risen: her limbs are still in the sea, her merely animal strength filling the waters with their life; but her body to the loins is in the sunshine, her face raised to the sky; her hand is about to lay a garland of flowers on the earth. 186. The Venus Urania of the Greeks, in her relation to men, has power only over lawful and domestic love; therefore, she is fully dressed, and not only quite dressed, but most daintily and trimly: her feet delicately sandalled, her gown spotted with little stars, her hair brushed exquisitely smooth at the top of her head, trickling in minute waves down her forehead; and though, because there's such a quantity of it, she can't possibly help having a chignon, look how tightly she has fastened it in with her broad fillet. Of course she is married, so she must wear a cap with pretty minute pendant jewels at the border; and a very small necklace, all that her husband can properly afford, just enough to go closely round the neck, and no more. On the contrary, the Aphrodite of the Italian, being universal love, is pure-naked; and her long hair is thrown wild to the wind and sea. These primal differences in the symbolism, observe, are only because the artists are thinking of separate powers: they do not necessarily involve any national distinction in feeling. But the differences I have next to indicate are essential, and characterize the two opposed national modes of mind. 187. First, and chiefly. The Greek Aphrodite is a very pretty person, and the Italian a decidedly plain one. That is because a Greek thought no one could possibly love any but pretty people; but an Italian thought that love could give dignity to the meanest form that it inhabited, and light to the poorest that it looked upon. So his Aphrodite will not condescend to be pretty. 188. Secondly. In the Greek Venus the breasts are broad and full, though perfectly severe in their almost conical profile;--(you are allowed on purpose to see the outline of the right breast, under the chiton:)--also the right arm is left bare, and you can just see the contour of the front of the right limb and knee; both arm and limb pure and firm, but lovely. The plant she holds in her hand is a branching and flowering one, the seed vessel prominent. These signs all mean that her essential function is child-bearing. On the contrary, in the Italian Venus the breasts are so small as to be scarcely traceable; the body strong, and almost masculine in its angles; the arms meagre and unattractive, and she lays a decorative garland of flowers on the earth. These signs mean that the Italian thought of love as the strength of an eternal spirit, for ever helpful; and for ever crowned with flowers, that neither know seed-time nor harvest, and bloom where there is neither death, nor birth. 189. Thirdly. The Greek Aphrodite is entirely calm, and looks straight forward. Not one feature of her face is disturbed, or seems ever to have been subject to emotion. The Italian Aphrodite looks up, her face all quivering and burning with passion and wasting anxiety. The Greek one is quiet, self-possessed, and self-satisfied; the Italian incapable of rest, she has had no thought nor care for herself; her hair has been bound by a fillet like the Greeks; but it is now all fallen loose, and clotted with the sea, or clinging to her body; only the front tress of it is caught by the breeze from her raised forehead, and lifted, in the place where the tongues of fire rest on the brows, in the early Christian pictures of Pentecost, and the waving fires abide upon the heads of Angelico's seraphim. 190. There are almost endless points of interest, great and small, to be noted in these differences of treatment. This binding of the hair by the single fillet marks the straight course of one great system of art method, from that Greek head which I showed you on the archaic coin of the seventh century before Christ, to this of the fifteenth of our own era--nay, when you look close, you will see the entire action of the head depends on one lock of hair falling back from the ear, which it does in compliance with the old Greek observance of its being bent there by the pressure of the helmet. That rippling of it down her shoulders comes from the Athena of Corinth; the raising of it on her forehead, from the knot of the hair of Diana, changed into the vestal fire of the angels. But chiefly, the calmness of the features in the one face, and their anxiety in the other, indicate first, indeed, the characteristic difference in every conception of the schools, the Greek never representing expression, the Italian primarily seeking it; but far more, mark for us here the utter change in the conception of love; from the tranquil guide and queen of a happy terrestrial domestic life, accepting its immediate pleasures and natural duties, to the agonizing hope of an infinite good, and the ever mingled joy and terror of a love divine in jealousy, crying, "Set me as a seal upon thine heart, as a seal upon thine arm; for love is strong as death, jealousy is cruel as the grave." The vast issues dependent on this change in the conception of the ruling passion of the human soul, I will endeavour to show you, on a future occasion: in my present lecture, I shall limit myself to the definition of the temper of Greek sculpture, and of its distinctions from Florentine in the treatment of any subject whatever, be it love or hatred, hope or despair. These great differences are mainly the following. 191. 1. A Greek never expresses momentary passion; a Florentine looks to momentary passion as the ultimate object of his skill. When you are next in London, look carefully in the British Museum at the casts from the statues in the pediment of the Temple of Minerva at Ægina. You have there Greek work of definite date;--about 600 B.C., certainly before 580--of the purest kind; and you have the representation of a noble ideal subject, the combats of the Æacidæ at Troy, with Athena herself looking on. But there is no attempt whatever to represent expression in the features, none to give complexity of action or gesture; there is no struggling, no anxiety, no visible temporary exertion of muscles. There are fallen figures, one pulling a lance out of his wound, and others in attitudes of attack and defence; several kneeling to draw their bows. But all inflict and suffer, conquer or expire, with the same smile. 192. Plate XIV. gives you examples, from more advanced art, of true Greek representation; the subjects being the two contests of leading import to the Greek heart--that of Apollo with the Python, and of Hercules with the Nemean Lion. You see that in neither case is there the slightest effort to represent the [Greek: lyssa] or agony of contest. No good Greek artist would have you behold the suffering, either of gods, heroes, or men; nor allow you to be apprehensive of the issue of their contest with evil beasts, or evil spirits. All such lower sources of excitement are to be closed to you; your interest is to be in the thoughts involved by the fact of the war; and in the beauty or rightness of form, whether active or inactive. I have to work out this subject with you afterwards, and to compare with the pure Greek method of thought, that of modern dramatic passion, engrafted on it, as typically in Turner's contest of Apollo and the Python: in the meantime, be content with the statement of this first great principle--that a Greek, as such, never expresses momentary passion. [Illustration: PLATE XIV.--APOLLO AND THE PYTHON. HERACLES AND THE NEMEAN LION.] [Illustration: PLATE XV.--HERA OF ARGOS. ZEUS OF SYRACUSE.] 193. Secondly. The Greek, as such, never expresses personal character, while a Florentine holds it to be the ultimate condition of beauty. You are startled, I suppose, at my saying this, having had it often pointed out to you, as a transcendent piece of subtlety in Greek art, that you could distinguish Hercules from Apollo by his being stout, and Diana from Juno by her being slender. That is very true; but those are general distinctions of class, not special distinctions of personal character. Even as general, they are bodily, not mental. They are the distinctions, in fleshly aspect, between an athlete and a musician,--between a matron and a huntress; but in no wise distinguish the simple-hearted hero from the subtle Master of the Muses, nor the wilful and fitful girl-goddess from the cruel and resolute matron-goddess. But judge for yourselves;--In the successive plates, XV.--XVIII., I show you,[136] typically represented as the protectresses of nations, the Argive, Cretan, and Lacinian Hera, the Messenian Demeter, the Athena of Corinth, the Artemis of Syracuse, the fountain Arethusa of Syracuse, and the Sirem Ligeia of Terina. Now, of these heads, it is true that some are more delicate in feature than the rest, and some softer in expression: in other respects, can you trace any distinction between the Goddesses of Earth and Heaven, or between the Goddess of Wisdom and the Water Nymph of Syracuse? So little can you do so, that it would have remained a disputed question--had not the name luckily been inscribed on some Syracusan coins--whether the head upon them was meant for Arethusa at all; and, continually, it becomes a question respecting finished statues, if without attributes, "Is this Bacchus or Apollo--Zeus or Poseidon?" There is a fact for you; noteworthy, I think! There is no personal character in true Greek art:--abstract ideas of youth and age, strength and swiftness, virtue and vice,--yes: but there is no individuality; and the negative holds down to the revived conventionalism of the Greek school by Leonardo, when he tells you how you are to paint young women, and how old ones; though a Greek would hardly have been so discourteous to age as the Italian is in his canon of it,--"old women should be represented as passionate and hasty, after the manner of Infernal Furies." 194. "But at least, if the Greeks do not give character, they give ideal beauty?" So it is said, without contradiction. But will you look again at the series of coins of the best time of Greek art, which I have just set before you? Are any of these goddesses or nymphs very beautiful? Certainly the Junos are not. Certainly the Demeters are not. The Siren, and Arethusa, have well-formed and regular features; but I am quite sure that if you look at them without prejudice, you will think neither reach even the average standard of pretty English girls. The Venus Urania suggests at first, the idea of a very charming person, but you will find there is no real depth nor sweetness in the contours, looked at closely. And remember, these are chosen examples; the best I can find of art current in Greece at the great time; and if even I were to take the celebrated statues, of which only two or three are extant, not one of them excels the Venus of Melos; and she, as I have already asserted, in _The Queen of the Air_, has nothing notable in feature except dignity and simplicity. Of Athena I do not know one authentic type of great beauty; but the intense ugliness which the Greeks could tolerate in their symbolism of her will be convincingly proved to you by the coin represented in Plate VI. You need only look at two or three vases of the best time, to assure yourselves that beauty of feature was, in popular art, not only unattained, but unattempted; and finally,--and this you may accept as a conclusive proof of the Greek insensitiveness to the most subtle beauty--there is little evidence even in their literature, and none in their art, of their having ever perceived any beauty in infancy, or early childhood. [Illustration: PLATE XVI.--DEMETER OF MESSENE. HERA OF CROSSUS.] [Illustration: PLATE XVII.--ATHENA OF THURIUM. SEREIE LIGEIA OF TERINA] 195. The Greeks, then, do not give passion, do not give character, do not give refined or naïve beauty. But you may think that the absence of these is intended to give dignity to the gods and nymphs; and that their calm faces would be found, if you long observed them, instinct with some expression of divine mystery or power. I will convince you of the narrow range of Greek thought in these respects, by showing you, from the two sides of one and the same coin, images of the most mysterious of their Deities, and the most powerful,--Demeter and Zeus. Remember, that just as the west coasts of Ireland and England catch first on their hills the rain of the Atlantic, so the western Peloponnese arrests, in the clouds of the first mountain ranges of Arcadia, the moisture of the Mediterranean; and over all the plains of Elis, Pylos, and Messene, the strength and sustenance of men was naturally felt to be granted by Zeus; as, on the east coast of Greece, the greater clearness of the air by the power of Athena. If you will recollect the prayer of Rhea, in the single line of Callimachus--"[Greek: Gaia philê, teke kai su teai d' ôdines elaphrai]," (compare Pausanias iv. 33, at the beginning,)--it will mark for you the connection, in the Greek mind, of the birth of the mountain springs of Arcadia with the birth of Zeus. And the centres of Greek thought on this western coast are necessarily Elis, and, (after the time of Epaminondas,) Messene. 196. I show you the coin of Messene, because the splendid height and form of Mount Ithome were more expressive of the physical power of Zeus than the lower hills of Olympia; and also because it was struck just at the time of the most finished and delicate Greek art--a little after the main strength of Phidias, but before decadence had generally pronounced itself. The coin is a silver didrachm, bearing on one side a head of Demeter (Plate XVI., at the top); on the other a full figure of Zeus Aietophoros (Plate XIX., at the top); the two together signifying the sustaining strength of the earth and heaven. Look first at the head of Demeter. It is merely meant to personify fulness of harvest; there is no mystery in it, no sadness, no vestige of the expression which we should have looked for in any effort to realize the Greek thoughts of the Earth Mother, as we find them spoken by the poets. But take it merely as personified abundance;--the goddess of black furrow and tawny grass--how commonplace it is, and how poor! The hair is grand, and there is one stalk of wheat set in it, which is enough to indicate the goddess who is meant; but, in that very office, ignoble, for it shows that the artist could only inform you that this was Demeter by such a symbol. How easy it would have been for a great designer to have made the hair lovely with fruitful flowers, and the features noble in mystery of gloom, or of tenderness. But here you have nothing to interest you, except the common Greek perfections of a straight nose and a full chin. 197. We pass, on the reverse of the die, to the figure of Zeus Aietophoros. Think of the invocation to Zeus in the Suppliants, (525), "King of Kings, and Happiest of the Happy, Perfectest of the Perfect in strength, abounding in all things, Jove--hear us and be with us;" and then, consider what strange phase of mind it was, which, under the very mountain-home of the god, was content with this symbol of him as a well-fed athlete, holding a diminutive and crouching eagle on his fist. The features and the right hand have been injured in this coin, but the action of the arms shows that it held a thunderbolt, of which, I believe, the twisted rays were triple. In the, presumably earlier, coin engraved by Millingen, however,[137] it is singly pointed only; and the added inscription "[Greek: ITHÔM]," in the field, renders the conjecture of Millingen probable, that this is a rude representation of the statue of Zeus Ithomates, made by Ageladas, the master of Phidias; and I think it has, indeed, the aspect of the endeavour, by a workman of more advanced knowledge, and more vulgar temper, to put the softer anatomy of later schools into the simple action of an archaic figure. Be that as it may, here is one of the most refined cities of Greece content with the figure of an athlete as the representative of their own mountain god; marked as a divine power merely by the attributes of the eagle and thunderbolt. [Illustration: PLATE XVIII.--ARTEMIS OF SYRACUSE. HERA OF LACINIAN CAPE.] [Illustration: PLATE XIX.--ZEUS OF MESSENE. AJAX OF OPUS.] 198. Lastly. The Greeks have not, it appears, in any supreme way, given to their statues character, beauty, or divine strength. Can they give divine sadness? Shall we find in their artwork any of that pensiveness and yearning for the dead, which fills the chants of their tragedy? I suppose if anything like nearness or firmness of faith in afterlife is to be found in Greek legend, you might look for it in the stories about the Island of Leuce, at the mouth of the Danube, inhabited by the ghosts of Achilles, Patroclus, Ajax the son of Oïleus, and Helen; and in which the pavement of the Temple of Achilles was washed daily by the sea-birds with their wings, dipping them in the sea. Now it happens that we have actually on a coin of the Locrians the representation of the ghost of the Lesser Ajax. There is nothing in the history of human imagination more lovely, than their leaving always a place for his spirit, vacant in their ranks of battle. But here is their sculptural representation of the phantom; (lower figure, Plate XIX.), and I think you will at once agree with me in feeling that it would be impossible to conceive anything more completely unspiritual. You might more than doubt that it could have been meant for the departed soul, unless you were aware of the meaning of this little circlet between the feet. On other coins you find his name inscribed there, but in this you have his habitation, the haunted Island of Leuce itself, with the waves flowing round it. 199. Again and again, however, I have to remind you, with respect to these apparently frank and simple failures, that the Greek always intends you to think for yourself, and understand, more than he can speak. Take this instance at our hands, the trim little circlet for the Island of Leuce. The workman knows very well it is not like the island, and that he could not make it so; that at its best, his sculpture can be little more than a letter; and yet, in putting this circlet, and its encompassing fretwork of minute waves, he does more than if he had merely given you a letter L, or written "Leuce." If you know anything of beaches and sea, this symbol will set your imagination at work in recalling them; then you will think of the temple service of the novitiate sea-birds, and of the ghosts of Achilles and Patroclus appearing, like the Dioscuri, above the storm-clouds of the Euxine. And the artist, throughout his work, never for an instant loses faith in your sympathy and passion being ready to answer his;--if you have none to give, he does not care to take you into his counsel; on the whole, would rather that you should not look at his work. 200. But if you have this sympathy to give, you may be sure that whatever he does for you will be right, as far as he can render it so. It may not be sublime, nor beautiful, nor amusing; but it will be full of meaning, and faithful in guidance. He will give you clue to myriads of things that he cannot literally teach; and, so far as he does teach, you may trust him. Is not this saying much? And as he strove only to teach what was true, so, in his sculptured symbol, he strove only to carve what was--Right. He rules over the arts to this day, and will for ever, because he sought not first for beauty, nor first for passion, or for invention, but for Rightness; striving to display, neither himself nor his art, but the thing that he dealt with, in its simplicity. That is his specific character as a Greek. Of course, every nation's character is connected with that of others surrounding or preceding it; and in the best Greek work you will find some things that are still false, or fanciful; but whatever in it is false or fanciful, is not the Greek part of it--it is the Phoenician, or Egyptian, or Pelasgian part. The essential Hellenic stamp is veracity:--Eastern nations drew their heroes with eight legs, but the Greeks drew them with two;--Egyptians drew their deities with cats' heads, but the Greeks drew them with men's; and out of all fallacy, disproportion, and indefiniteness, they were, day by day, resolvedly withdrawing and exalting themselves into restricted and demonstrable truth. 201. And now, having cut away the misconceptions which encumbered our thoughts, I shall be able to put the Greek school into some clearness of its position for you, with respect to the art of the world. That relation is strangely duplicate; for on one side, Greek art is the root of all simplicity; and on the other, of all complexity. [Illustration: PLATE XX.--GREEK AND BARBARIAN SCULPTURE.] On one side I say, it is the root of all simplicity. If you were for some prolonged period to study Greek sculpture exclusively in the Elgin Room of the British Museum, and were then suddenly transported to the Hôtel de Cluny, or any other museum of Gothic and barbarian workmanship, you would imagine the Greeks were the masters of all that was grand, simple, wise, and tenderly human, opposed to the pettiness of the toys of the rest of mankind. 202. On one side of their work they are so. From all vain and mean decoration--all weak and monstrous error, the Greeks rescue the forms of man and beast, and sculpture them in the nakedness of their true flesh, and with the fire of their living soul. Distinctively from other races, as I have now, perhaps to your weariness, told you, this is the work of the Greek, to give health to what was diseased, and chastisement to what was untrue. So far as this is found in any other school, hereafter, it belongs to them by inheritance from the Greeks, or invests them with the brotherhood of the Greek. And this is the deep meaning of the myth of Dædalus as the giver of motion to statues. The literal change from the binding together of the feet to their separation, and the other modifications of action which took place, either in progressive skill, or often, as the mere consequence of the transition from wood to stone, (a figure carved out of one wooden log must have necessarily its feet near each other, and hands at its sides), these literal changes are as nothing, in the Greek fable, compared to the bestowing of apparent life. The figures of monstrous gods on Indian temples have their legs separate enough; but they are infinitely more dead than the rude figures at Branchidæ sitting with their hands on their knees. And, briefly, the work of Dædalus is the giving of deceptive life, as that of Prometheus the giving of real life; and I can put the relation of Greek to all other art, in this function, before you in easily compared and remembered examples. 203. Here, on the right, in Plate XX., is an Indian bull, colossal, and elaborately carved, which you may take as a sufficient type of the bad art of all the earth. False in form, dead in heart, and loaded with wealth, externally. We will not ask the date of this; it may rest in the eternal obscurity of evil art, everywhere and for ever. Now, besides this colossal bull, here is a bit of Dædalus work, enlarged from a coin not bigger than a shilling: look at the two together, and you ought to know, henceforward, what Greek art means, to the end of your days. 204. In this aspect of it then, I say, it is the simplest and nakedest of lovely veracities. But it has another aspect, or rather another pole, for the opposition is diametric. As the simplest, so also it is the most complex of human art. I told you in my fifth Lecture, showing you the spotty picture of Velasquez, that an essential Greek character is a liking for things that are dappled. And you cannot but have noticed how often and how prevalently the idea which gave its name to the Porch of Polygnotus, "[Greek: stoa poikilê]," occurs to the Greeks as connected with the finest art. Thus, when the luxurious city is opposed to the simple and healthful one, in the second book of Plato's Polity, you find that, next to perfumes, pretty ladies, and dice, you must have in it "[Greek: poikilia]," which observe, both in that place and again in the third book, is the separate art of joiners' work, or inlaying; but the idea of exquisitely divided variegation or division, both in sight and sound--the "ravishing division to the lute," as in Pindar's "[Greek: poikiloi hymnoi]"--runs through the compass of all Greek art-description; and if, instead of studying that art among marbles you were to look at it only on vases of a fine time, (look back, for instance, to Plate IV. here), your impression of it would be, instead of breadth and simplicity, one of universal spottiness and chequeredness, "[Greek: en angeôn Herkesin pampoikilois];" and of the artist's delighting in nothing so much as in crossed or starred or spotted things; which, in right places, he and his public both do unlimitedly. Indeed they hold it complimentary even to a trout, to call him a "spotty." Do you recollect the trout in the tributaries of the Ladon, which Pausanias says were spotted, so that they were like thrushes and which, the Arcadians told him, could speak? In this last [Greek: poikilia], however, they disappointed him. "I, indeed, saw some of them caught," he says, "but I did not hear any of them speak, though I waited beside the river till sunset." [Illustration: PLATE XXI.--THE BEGINNINGS OF CHIVALRY.] 205. I must sum roughly now, for I have detained you too long. The Greeks have been thus the origin not only of all broad, mighty, and calm conception, but of all that is divided, delicate, and tremulous; "variable as the shade, by the light quivering aspen made." To them, as first leaders of ornamental design, belongs, of right, the praise of glistenings in gold, piercings in ivory, stainings in purple, burnishings in dark blue steel; of the fantasy of the Arabian roof--quartering of the Christian shield,--rubric and arabesque of Christian scripture; in fine, all enlargement, and all diminution of adorning thought, from the temple to the toy, and from the mountainous pillars of Agrigentum to the last fineness of fretwork in the Pisan Chapel of the Thorn. And in their doing all this, they stand as masters of human order and justice, subduing the animal nature guided by the spiritual one, as you see the Sicilian Charioteer stands, holding his horse-reins, with the wild lion racing beneath him, and the flying angel above, on the beautiful coin of early Syracuse; (lowest in Plate XXI). And the beginnings of Christian chivalary were in that Greek bridling of the dark and the white horses. 206. Not that a Greek never made mistakes. He made as many as we do ourselves, nearly;--he died of his mistakes at last--as we shall die of them; but so far he was separated from the herd of more mistaken and more wretched nations--so far as he was Greek--it was by his rightness. He lived, and worked, and was satisfied with the fatness of his land, and the fame of his deeds, by his justice, and reason, and modesty. He became _Græculus esuriens_, little, and hungry, and every man's errand-boy, by his iniquity, and his competition, and his love of talk. But his Græcism was in having done, at least at one period of his dominion, more than anybody else, what was modest, useful, and eternally true; and as a workman, he verily did, or first suggested the doing of, everything possible to man. Take Dædalus, his great type of the practically executive craftsman, and the inventor of expedients in craftsmanship, (as distinguished from Prometheus, the institutor of moral order in art). Dædalus invents,--he, or his nephew,-- The potter's wheel, and all work in clay; The saw, and all work in wood; The masts and sails of ships, and all modes of motion; (wings only proving too dangerous!) The entire art of minute ornament; And the deceptive life of statues. By his personal toil, he involves the fatal labyrinth for Minos; builds an impregnable fortress for the Agrigentines; adorns healing baths among the wild parsley fields of Selinus; buttresses the precipices of Eryx, under the temple of Aphrodite; and for her temple itself--finishes in exquisiteness the golden honeycomb. 207. Take note of that last piece of his art: it is connected with many things which I must bring before you when we enter on the study of architecture. That study we shall begin at the foot of the Baptistery of Florence, which, of all buildings known to me, unites the most perfect symmetry with the quaintest [Greek: poikilia]. Then, from the tomb of your own Edward the Confessor, to the farthest shrine of the opposite Arabian and Indian world, I must show you how the glittering and iridescent dominion of Dædalus prevails; and his ingenuity in division, interposition, and labyrinthine sequence, more widely still. Only this last summer I found the dark red masses of the rough sandstone of Furness Abbey had been fitted by him, with no less pleasure than he had in carving them, into wedged hexagons--reminiscences of the honeycomb of Venus Erycina. His ingenuity plays around the framework of all the noblest things; and yet the brightness of it has a lurid shadow. The spot of the fawn, of the bird, and the moth, may be harmless. But Dædalus reigns no less over the spot of the leopard and snake. That cruel and venomous power of his art is marked, in the legends of him, by his invention of the saw from the serpent's tooth; and his seeking refuge, under blood-guiltiness, with Minos, who can judge evil, and measure, or remit, the penalty of it, but not reward good: Rhadamanthus only can measure _that_; but Minos is essentially the recognizer of evil deeds "conoscitor delle peccata," whom, therefore, you find in Dante under the form of the [Greek: erpeton]. "Cignesi con la coda tante volte, quantunque gradi vuol che giu sia messa." And this peril of the influence of Dædalus is twofold; first in leading us to delight in glitterings and semblances of things, more than in their form, or truth;--admire the harlequin's jacket more than the hero's strength; and love the gilding of the missal more than its words;--but farther, and worse, the ingenuity of Dædalus may even become bestial, an instinct for mechanical labour only, strangely involved with a feverish and ghastly cruelty:--(you will find this distinct in the intensely Dædal work of the Japanese); rebellious, finally, against the laws of nature and honour, and building labyrinths for monsters,--not combs for bees. 208. Gentlemen, we of the rough northern race may never, perhaps, be able to learn from the Greek his reverence for beauty: but we may at least learn his disdain of mechanism:--of all work which he felt to be monstrous and inhuman in its imprudent dexterities. We hold ourselves, we English, to be good workmen. I do not think I speak with light reference to recent calamity, (for I myself lost a young relation, full of hope and good purpose, in the foundered ship _London_,) when I say that either an Æginetan or Ionian shipwright built ships that could be fought from, though they were under water; and neither of them would have been proud of having built one that would fill and sink helplessly if the sea washed over her deck, or turn upside down if a squall struck her topsail. Believe me, gentlemen, good workmanship consists in continence and common sense, more than in frantic expatiation of mechanical ingenuity; and if you would be continent and rational, you had better learn more of Art than you do now, and less of Engineering. What is taking place at this very hour,[138] among the streets, once so bright, and avenues once so pleasant, of the fairest city in Europe, may surely lead us all to feel that the skill of Dædalus, set to build impregnable fortresses, is not so wisely applied as in framing the [Greek: trêton ponou]--the golden honeycomb. FOOTNOTES: [135] The closing Lecture, on the religious temper of the Florentine, though necessary for the complete explanation of the subject to my class, at the time, introduced new points of inquiry which I do not choose to lay before the general reader until they can be examined in fuller sequence. The present volume, therefore, closes with the Sixth Lecture, and that on Christian art will be given as the first of the published course on Florentine Sculpture. [136] These plates of coins are given for future reference and examination, not merely for the use made of them in this place. The Lacinian Hera, if a coin could be found unworn in surface, would be very noble; her hair is thrown free because she is the goddess of the cape of storms though in her temple, there, the wind never moved the ashes on its altar. (Livy, xxiv. 3.) [137] Ancient Cities and Kings, Plate IV. No. 20. [138] The siege of Paris, at the time of the delivery of this Lecture, was in one of its most destructive phases. _THE FUTURE OF ENGLAND._ (_Delivered at the R. A. Institution, Woolwich, December 14, 1869._) I would fain have left to the frank expression of the moment, but fear I could not have found clear words--I cannot easily find them, even deliberately,--to tell you how glad I am, and yet how ashamed, to accept your permission to speak to you. Ashamed of appearing to think that I can tell you any truth which you have not more deeply felt than I; but glad in the thought that my less experience, and way of life sheltered from the trials, and free from the responsibilities of yours, may have left me with something of a child's power of help to you; a sureness of hope, which may perhaps be the one thing that can be helpful to men who have done too much not to have often failed in doing all that they desired. And indeed, even the most hopeful of us, cannot but now be in many things apprehensive. For this at least we all know too well, that we are on the eve of a great political crisis, if not of political change. That a struggle is approaching between the newly-risen power of democracy and the apparently departing power of feudalism; and another struggle, no less imminent, and far more dangerous, between wealth and pauperism. These two quarrels are constantly thought of as the same. They are being fought together, and an apparently common interest unites for the most part the millionaire with the noble, in resistance to a multitude, crying, part of it for bread and part of it for liberty. And yet no two quarrels can be more distinct. Riches--so far from being necessary to noblesse--are adverse to it. So utterly adverse, that the first character of all the Nobilities which have founded great dynasties in the world is to be poor;--often poor by oath--always poor by generosity. And of every true knight in the chivalric ages, the first thing history tells you is, that he never kept treasure for himself. Thus the causes of wealth and noblesse are not the same; but opposite. On the other hand, the causes of anarchy and of the poor are not the same, but opposite. Side by side, in the same rank, are now indeed set the pride that revolts against authority, and the misery that appeals against avarice. But, so far from being a common cause, all anarchy is the forerunner of poverty, and all prosperity begins in obedience. So that thus, it has become impossible to give due support to the cause of order, without seeming to countenance injury; and impossible to plead justly the claims of sorrow, without seeming to plead also for those of license. Let me try, then, to put in very brief terms, the real plan of this various quarrel, and the truth of the cause on each side. Let us face that full truth, whatever it may be, and decide what part, according to our power, we should take in the quarrel. First. For eleven hundred years, all but five, since Charlemagne set on his head the Lombard crown, the body of European people have submitted patiently to be governed; generally by kings--always by single leaders of some kind. But for the last fifty years they have begun to suspect, and of late they have many of them concluded, that they have been on the whole ill-governed, or misgoverned, by their kings. Whereupon they say, more and more widely, "Let us henceforth have no kings; and no government at all." Now we said, we must face the full truth of the matter, in order to see what we are to do. And the truth is that the people _have_ been misgoverned;--that very little is to be said, hitherto, for most of their masters--and that certainly in many places they will try their new system of "no masters:"--and as that arrangement will be delightful to all foolish persons, and, at first, profitable to all wicked ones,--and as these classes are not wanting or unimportant in any human society,--the experiment is likely to be tried extensively. And the world may be quite content to endure much suffering with this fresh hope, and retain its faith in anarchy, whatever comes of it, till it can endure no more. Then, secondly. The people have begun to suspect that one particular form of this past misgovernment has been, that their masters have set them to do all the work, and have themselves taken all the wages. In a word, that what was called governing them, meant only wearing fine clothes, and living on good fare at their expense. And I am sorry to say, the people are quite right in this opinion also. If you inquire into the vital fact of the matter, this you will find to be the constant structure of European society for the thousand years of the feudal system; it was divided into peasants who lived by working; priests who lived by begging; and knights who lived by pillaging; and as the luminous public mind becomes gradually cognizant of these facts, it will assuredly not suffer things to be altogether arranged that way any more; and the devising of other ways will be an agitating business; especially because the first impression of the intelligent populace is, that whereas, in the dark ages, half the nation lived idle, in the bright ages to come, the whole of it may. Now, thirdly--and here is much the worst phase of the crisis. This past system of misgovernment, especially during the last three hundred years, has prepared, by its neglect, a class among the lower orders which it is now peculiarly difficult to govern. It deservedly lost their respect--but that was the least part of the mischief. The deadly part of it was, that the lower orders lost their habit, and at last their faculty, of respect;--lost the very capability of reverence, which is the most precious part of the human soul. Exactly in the degree in which you can find creatures greater than yourself, to look up to, in that degree, you are ennobled yourself, and, in that degree, happy. If you could live always in the presence of archangels, you would be happier than in that of men; but even if only in the company of admirable knights and beautiful ladies, the more noble and bright they were, and the more you could reverence their virtue the happier you would be. On the contrary, if you were condemned to live among a multitude of idiots, dumb, distorted and malicious, you would not be happy in the constant sense of your own superiority. Thus all real joy and power of progress in humanity depend on finding something to reverence; and all the baseness and misery of humanity begin in a habit of disdain. Now, by general misgovernment, I repeat, we have created in Europe a vast populace, and out of Europe a still vaster one, which has lost even the power and conception of reverence;[139]--which exists only in the worship of itself--which can neither see anything beautiful around it, nor conceive anything virtuous above it; which has, towards all goodness and greatness, no other feelings than those of the lowest creatures--fear, hatred, or hunger a populace which has sunk below your appeal in their nature, as it has risen beyond your power in their multitude;--whom you can now no more charm than you can the adder, nor discipline, than you can the summer fly. It is a crisis, gentlemen; and time to think of it. I have roughly and broadly put it before you in its darkness. Let us look what we may find of light. Only the other day, in a journal which is a fairly representative exponent of the Conservatism of our day, and for the most part not at all in favor of strikes or other popular proceedings; only about three weeks since, there was a leader, with this, or a similar, title--"What is to become of the House of Lords?" It startled me, for it seemed as if we were going even faster than I had thought, when such a question was put as a subject of quite open debate, in a journal meant chiefly for the reading of the middle and upper classes. Open or not--the debate is near. What _is_ to become of them? And the answer to such question depends first on their being able to answer another question--"What is the _use_ of them!" For some time back, I think the theory of the nation has been, that they are useful as impediments to business, so as to give time for second thoughts. But the nation is getting impatient of impediments to business; and certainly, sooner or later, will think it needless to maintain these expensive obstacles to its humors. And I have not heard, either in public, or from any of themselves, a clear expression of their own conception of their use. So that it seems thus to become needful for all men to tell them, as our one quite clear-sighted teacher, Carlyle, has been telling us for many a year, that the use of the Lords of a country is to _govern_ the country. If they answer that use, the country will rejoice in keeping them; if not, that will become of them which must of all things found to have lost their serviceableness. Here, therefore, is the one question, at this crisis, for them, and for us. Will they be lords indeed, and give us laws--dukes indeed, and give us guiding--princes indeed, and give us beginning, of truer dynasty, which shall not be soiled by covetousness, nor disordered by iniquity? Have they themselves sunk so far as not to hope this? Are there yet any among them who can stand forward with open English brows, and say,--So far as in me lies, I will govern with my might, not for Dieu et _mon_ Droit, but for the first grand reading of the war cry, from which that was corrupted, "Dieu et Droit?" Among them I know there are some--among you, soldiers of England, I know there are many, who can do this; and in you is our trust. I, one of the lower people of your country, ask of you in their name--you whom I will not any more call soldiers, but by the truer name of Knights;--Equites of England. How many yet of you are there, knights errant now beyond all former fields of danger--knights patient now beyond all former endurance; who still retain the ancient and eternal purpose of knighthood, to subdue the wicked, and aid the weak? To them, be they few or many, we English people call for help to the wretchedness, and for rule over the baseness, of multitudes desolate and deceived, shrieking to one another this new gospel of their new religion. "Let the weak do as they can, and the wicked as they will." I can hear you saying in your hearts, even the bravest of you, "The time is past for all that." Gentlemen, it is not so. The time has come for _more_ than all that. Hitherto, soldiers have given their lives for false fame, and for cruel power. The day is now when they must give their lives for true fame, and for beneficent power: and the work is near every one of you--close beside you--the means of it even thrust into your hands. The people are crying to you for command, and you stand there at pause, and silent. You think they don't want to be commanded; try them; determine what is needful for them--honorable for them; show it them, promise to bring them to it, and they will follow you through fire. "Govern us," they cry with one heart, though many minds. They _can_ be governed still, these English; they are men still; not gnats, nor serpents. They love their old ways yet, and their old masters, and their old land. They would fain live in it, as many as may stay there, if you will show them how, there, to live;--or show them even, how, there, like Englishmen, to die. "To live in it, as many as may!" How many do you think may? How many _can_? How many do you want to live there? As masters, your first object must be to increase your power; and in what does the power of a country consist? Will you have dominion over its stones, or over its clouds, or over its souls? What do you mean by a great nation, but a great multitude of men who are true to each other, and strong, and of worth? Now you can increase the multitude only definitely--your island has only so much standing room--but you can increase the _worth in_definitely. It is but a little island;--suppose, little as it is, you were to fill it with friends? You may, and that easily. You must, and that speedily; or there will be an end to this England of ours, and to all its loves and enmities. To fill this little island with true friends--men brave, wise, and happy! Is it so impossible, think you, after the world's eighteen hundred years of Christianity, and our own thousand years of toil, to fill only this little white gleaming crag with happy creatures, helpful to each other? Africa, and India, and the Brazilian wide-watered plain, are these not wide enough for the ignorance of our race? have they not space enough for its pain? Must we remain _here_ also savage,--_here_ at enmity with each other,--_here_ foodless, houseless, in rags, in dust, and without hope, as thousands and tens of thousands of us are lying? Do not think it, gentlemen. The thought that it is inevitable is the last infidelity; infidelity not to God only, but to every creature and every law that He has made. Are we to think that the earth was only shaped to be a globe of torture; and that there cannot be one spot of it where peace can rest, or justice reign? Where are men ever to be happy, if not in England? by whom shall they ever be taught to do right, if not by you? Are we not of a race first among the strong ones of the earth; the blood in us incapable of weariness, unconquerable by grief? Have we not a history of which we can hardly think without becoming insolent in our just pride of it? Can we dare, without passing every limit of courtesy to other nations, to say how much more we have to be proud of in our ancestors than they? Among our ancient monarchs, great crimes stand out as monstrous and strange. But their valor, and, according to their understanding, their benevolence, are constant. The Wars of the Roses, which are as a fearful crimson shadow on our land, represent the normal condition of other nations; while from the days of the Heptarchy downwards we have had examples given us, in all ranks, of the most varied and exalted virtue; a heap of treasure that no moth can corrupt, and which even our traitorship, if we are to become traitors to it, cannot sully. And this is the race, then, that we know not any more how to govern! and this the history which we are to behold broken off by sedition! and this is the country, of all others, where life is to become difficult to the honest, and ridiculous to the wise! And the catastrophe, forsooth, is to come just when we have been making swiftest progress beyond the wisdom and wealth of the past. Our cities are a wilderness of spinning wheels instead of palaces; yet the people have not clothes. We have blackened every leaf of English greenwood with ashes, and the people die of cold; our harbors are a forest of merchant ships, and the people die of hunger. Whose fault is it? Yours, gentlemen; yours only. You alone can feed them, and clothe, and bring into their right minds, for you only can govern--that is to say, you only can educate them. Educate, or govern, they are one and the same word. Education does not mean teaching people to know what they do not know. It means teaching them to behave as they do not behave. And the true "compulsory education" which the people now ask of you is not catechism, but drill. It is not teaching the youth of England the shapes of letters and the tricks of numbers; and then leaving them to turn their arithmetic to roguery, and their literature to lust. It is, on the contrary, training them into the perfect exercise and kingly continence of their bodies and souls. It is a painful, continual, and difficult work; to be done by kindness, by watching, by warning, by precept, and by praise,--but above all--by example. Compulsory! Yes, by all means! "Go ye out into the highways and hedges, and _compel_ them to come in." Compulsory! Yes, and gratis also. _Dei Gratia_, they must be taught, as, _Dei Gratia_, you are set to teach them. I hear strange talk continually, "how difficult it is to make people pay for being educated!" Why, I should think so! Do you make your children pay for their education, or do you give it them compulsorily, and gratis? You do not expect _them_ to pay you for their teaching, except by becoming good children. Why should you expect a peasant to pay for his, except by becoming a good man?--payment enough, I think, if we knew it. Payment enough to himself, as to us. For that is another of our grand popular mistakes--people are always thinking of education as a means of livelihood. Education is not a profitable business, but a costly one; nay, even the best attainments of it are always unprofitable, in any terms of coin. No nation ever made its bread either by its great arts, or its great wisdoms. By its minor arts or manufactures, by its practical knowledges, yes: but its noble scholarship, its noble philosophy, and its noble art, are always to be bought as a treasure, not sold for a livelihood. You do not learn that you may live--you live that you may learn. You are to spend on National Education, and to be spent for it, and to make by it, not more money, but better men;--to get into this British Island the greatest possible number of good and brave Englishmen. _They_ are to be your "money's worth." But where is the money to come from? Yes, that is to be asked. Let us, as quite the first business in this our national crisis, look not only into our affairs, but into our accounts, and obtain some general notion how we annually spend our money, and what we are getting for it. Observe, I do not mean to inquire into the public revenue only; of that some account is rendered already. But let us do the best we can to set down the items of the national _private_ expenditure; and know what we spend altogether, and how. To begin with this matter of education. You probably have nearly all seen the admirable lecture lately given by Captain Maxse, at Southampton. It contains a clear statement of the facts at present ascertained as to our expenditure in that respect. It appears that of our public moneys, for every pound that we spend on education we spend twelve either in charity or punishment;--ten millions a year in pauperism and crime, and eight hundred thousand in instruction. Now Captain Maxse adds to this estimate of ten millions public money spent on crime and want, a more or less conjectural sum of eight millions for private charities. My impression is that this is much beneath the truth, but at all events it leaves out of consideration much the heaviest and saddest form of charity--the maintenance, by the working members of families, of the unfortunate or ill-conducted persons whom the general course of misrule now leaves helpless to be the burden of the rest. Now I want to get first at some, I do not say approximate, but at all events some suggestive, estimate of the quantity of real distress and misguided life in this country. Then next, I want some fairly representative estimate of our private expenditure in luxuries. We won't spend more, publicly, it appears, than eight hundred thousand a year, on educating men gratis. I want to know, as nearly as possible, what we spend privately a year, in educating horses gratis. Let us, at least, quit ourselves in this from the taunt of Rabshakeh, and see that for every horse we train also a horseman; and that the rider be at least as high-bred as the horse, not jockey, but chevalier. Again, we spend eight hundred thousand, which is certainly a great deal of money, in making rough _minds_ bright. I want to know how much we spend annually in making rough _stones_ bright; that is to say, what may be the united annual sum, or near it, of our jewellers' bills. So much we pay for educating children gratis;--how much for educating diamonds gratis? and which pays best for brightening, the spirit or the charcoal? Let us get those two items set down with some sincerity, and a few more of the same kind. _Publicly_ set down. We must not be ashamed of the way we spend our money. If our right hand is not to know what our left does, it must not be because it would be ashamed if it did. That is, therefore, quite the first practical thing to be done. Let every man who wishes well to his country, render it yearly an account of his income, and of the main heads of his expenditure; or, if he is ashamed to do so, let him no more impute to the poor their poverty as a crime, nor set them to break stones in order to frighten them from committing it. To lose money ill is indeed often a crime; but to get it ill is a worse one, and to spend it ill, worst of all. You object, Lords of England, to increase, to the poor, the wages you give them, because they spend them, you say, unadvisedly. Render them, therefore, an account of the wages which _they_ give _you_; and show them, by your example, how to spend theirs, to the last farthing advisedly. It is indeed time to make this an acknowledged subject of instruction, to the workingman,--how to spend his wages. For, gentlemen, we _must_ give that instruction, whether we will or no, one way or the other. We have given it in years gone by; and now we find fault with our peasantry for having been too docile, and profited too shrewdly by our tuition. Only a few days since I had a letter from the wife of a village rector, a man of common sense and kindness, who was greatly troubled in his mind because it was precisely the men who got highest wages in summer that came destitute to his door in the winter. Destitute, and of riotous temper--for their method of spending wages in their period of prosperity was by sitting two days a week in the tavern parlor, ladling port wine, not out of bowls, but out of buckets. Well, gentlemen, who taught them that method of festivity? Thirty years ago, I, a most inexperienced freshman, went to my first college supper; at the head of the table sat a nobleman of high promise and of admirable powers, since dead of palsy; there also we had in the midst of us, not buckets, indeed, but bowls as large as buckets; there also, we helped ourselves with ladles. There (for this beginning of college education was compulsory), I choosing ladlefuls of punch instead of claret, because I was then able, unperceived to pour them into my waistcoat instead of down my throat, stood it out to the end, and helped to carry four of my fellow-students, one of them the son of the head of a college, head foremost, down stairs and home. Such things are no more; but the fruit of them remains, and will for many a day to come. The laborers whom you cannot now shut out of the ale-house are only the too faithful disciples of the gentlemen who were wont to shut themselves into the dining-room. The gentlemen have not thought it necessary, in order to correct their own habits, to diminish their incomes; and, believe me, the way to deal with your drunken workman is not to lower his wages,--but to mend his wits.[140] And if indeed we do not yet see quite clearly how to deal with the sins of our poor brother, it is possible that our dimness of sight may still have other causes that can be cast out. There are two opposite cries of the great liberal and conservative parties, which are both most right, and worthy to be rallying cries. On their side "let every man have his chance;" on yours "let every man stand in his place." Yes, indeed, let that be so, every man in his place, and every man fit for it. See that he holds that place from Heaven's Providence; and not from his family's Providence. Let the Lords Spiritual quit themselves of simony, we laymen will look after the heretics for them. Let the Lords Temporal quit themselves of nepotism, and we will take care of their authority for them. Publish for us, you soldiers, an army gazette, in which the one subject of daily intelligence shall be the grounds of promotion; a gazette which shall simply tell us, what there certainly can be no detriment to the service in our knowing, when any officer is appointed to a new command,--what his former services and successes have been,--whom he has superseded,--and on what ground. It will be always a satisfaction to us; it may sometimes be an advantage to you: and then, when there is really necessary debate respecting reduction of wages, let us always begin not with the wages of the industrious classes, but with those of the idle ones. Let there be honorary titles, if people like them; but let there be no honorary incomes. So much for the master's motto, "Every man in his place." Next for the laborer's motto, "Every man his chance." Let us mend that for them a little, and say, "Every man his certainty"--certainty, that if he does well, he will be honored, and aided, and advanced in such degree as may be fitting for his faculty and consistent with his peace; and equal certainty that if he does ill, he will by sure justice be judged, and by sure punishment be chastised; if it may be, corrected; and if that may not be, condemned. That is the right reading of the Republican motto, "Every man his chance." And then, with such a system of government, pure, watchful and just, you may approach your great problem of national education, or in other words, of national employment. For all education begins in work. What we think, or what we know; or what we believe, is in the end, of little consequence. The only thing of consequence is what we _do;_ and for man, woman, or child, the first point of education is to make them do their best. It is the law of good economy to make the best of everything. How much more to make the best of every creature! Therefore, when your pauper comes to you and asks for bread, ask of him instantly--What faculty have you? What can you do best? Can you drive a nail into wood? Go and mend the parish fences. Can you lay a brick? Mend the walls of the cottages where the wind comes in. Can you lift a spadeful of earth? Turn this field up three feet deep all over. Can you only drag a weight with your shoulders? Stand at the bottom of this hill and help up the overladen horses. Can you weld iron and chisel stone? Fortify this wreck-strewn coast into a harbor; and change these shifting sands into fruitful ground. Wherever death was, bring life; that is to be your work; that your parish refuge; that your education. So and no otherwise can we meet existent distress. But for the continual education of the whole people, and for their future happiness, they must have such consistent employment as shall develop all the powers of the fingers, and the limbs, and the brain: and that development is only to be obtained by hand-labor, of which you have these four great divisions--hand-labor on the earth, hand-labor on the sea, hand-labor in art, hand-labor in war. Of the last two of these I cannot speak to-night, and of the first two only with extreme brevity. I. Hand-labor on the earth, the work of the husbandman and of the shepherd;--to dress the earth and to keep the flocks of it--the first task of man, and the final one--the education always of noblest lawgivers, kings and teachers; the education of Hesiod, of Moses, of David, of all the true strength of Rome; and all its tenderness: the pride of Cincinnatus, and the inspiration of Virgil. Hand-labor on the earth, and the harvest of it brought forth with singing:--not steam-piston labor on the earth, and the harvest of it brought forth with steam-whistling. You will have no prophet's voice accompanied by that shepherd's pipe, and pastoral symphony. Do you know that lately, in Cumberland, in the chief pastoral district of England--in Wordsworth's own home--a procession of villagers on their festa day provided for themselves, by way of music, a steam-plough whistling at the head of them. Give me patience while I put the principle of machine labor before you, as clearly and in as short compass as possible; it is one that should be known at this juncture. Suppose a farming proprietor needs to employ a hundred men on his estate, and that the labor of these hundred men is enough, but not more than enough, to till all his land, and to raise from it food for his own family, and for the hundred laborers. He is obliged, under such circumstances, to maintain all the men in moderate comfort, and can only by economy accumulate much for himself. But, suppose he contrive a machine that will easily do the work of fifty men, with only one man to watch it. This sounds like a great advance in civilization. The farmer of course gets his machine made, turns off the fifty men, who may starve or emigrate at their choice, and now he can keep half of the produce of his estate, which formerly went to feed them, all to himself. That is the essential and constant operation of machinery among us at this moment. Nay, it is at first answered; no man can in reality keep half the produce of an estate to himself, nor can he in the end keep more than his own human share of anything; his riches must diffuse themselves at some time; he must maintain somebody else with them, however he spends them. That is mainly true (not altogether so), for food and fuel are in ordinary circumstances personally wasted by rich people, in quantities which would save many lives. One of my own great luxuries, for instance, is candlelight--and I probably burn, for myself alone, as many candles during the winter, as would comfort the old eyes, or spare the young ones, of a whole rushlighted country village. Still, it is mainly true, that it is not by their personal waste that rich people prevent the lives of the poor. This is the way they do it. Let me go back to my farmer. He has got his machine made, which goes creaking, screaming, and occasionally exploding, about modern Arcadia. He has turned off his fifty men to starve. Now, at some distance from his own farm, there is another on which the laborers were working for their bread in the same way, by tilling the land. The machinist sends over to these, saying--"I have got food enough for you without your digging or ploughing any more. I can maintain you in other occupations instead of ploughing that land; if you rake in its gravel you will find some hard stones--you shall grind those on mills till they glitter; then, my wife shall wear a necklace of them. Also, if you turn up the meadows below you will find some fine white clay, of which you shall make a porcelain service for me: and the rest of the farm I want for pasture for horses for my carriage--and you shall groom them, and some of you ride behind the carriage with staves in your hands, and I will keep you much fatter for doing that than you can keep yourselves by digging." Well--but it is answered, are we to have no diamonds, nor china, nor pictures, nor footmen, then--but all to be farmers? I am not saying what we ought to do, I want only to show you with perfect clearness first what we _are doing_; and that, I repeat, is the upshot of machine-contriving in this country. And observe its effect on the national strength. Without machines, you have a hundred and fifty yeomen ready to join for defence of the land. You get your machine, starve fifty of them, make diamond-cutters or footmen of as many more, and for your national defence against an enemy, you have now, and _can_ have, only fifty men, instead of a hundred and fifty; these also now with minds much alienated from you as their chief,[141] and the rest, lapidaries or footmen; and a steam plough. That is one effect of machinery; but at all events, if we have thus lost in men, we have gained in riches; instead of happy human souls, we have at least got pictures, china, horses, and are ourselves better off than we were before. But very often, and in much of our machine-contriving, even _that_ result does not follow. We are not one whit the richer for the machine, we only employ it for our amusement. For observe, our gaining in riches depends on the men who are out of employment consenting to be starved, or sent out of the country. But suppose they do not consent passively to be starved, but some of them become criminals, and have to be taken charge of and fed at a much greater cost than if they were at work, and, others, paupers, rioters, and the like, then you attain the real outcome of modern wisdom and ingenuity. You have your hundred men honestly at country work; but you don't like the sight of human beings in your fields; you like better to see a smoking kettle. You pay, as an amateur, for that pleasure, and you employ your fifty men in picking oakum, or begging, rioting, and thieving. By hand-labor, therefore, and that alone, we are to till the ground. By hand-labor also to plough the sea; both for food, and in commerce, and in war: not with floating kettles there neither, but with hempen bridle, and the winds of heaven in harness. That is the way the power of Greece rose on her Egean, the power of Venice on her Adria, of Amalfi in her blue bay, of the Norman sea-riders from the North Cape to Sicily:--so, your own dominion also of the past. Of the past mind you. On the Baltic and the Nile, your power is already departed. By machinery you would advance to discovery; by machinery you would carry your commerce;--you would be engineers instead of sailors; and instantly in the North seas you are beaten among the ice, and before the very Gods of Nile, beaten among the sand. Agriculture, then, by the hand or by the plough drawn only by animals; and shepherd and pastoral husbandry, are to be the chief schools of Englishmen. And this most royal academy of all academies you have to open over all the land, purifying your heaths and hills, and waters, and keeping them full of every kind of lovely natural organism, in tree, herb, and living creature. All land that is waste and ugly, you must redeem into ordered fruitfulness; all ruin, desolateness, imperfectness of hut or habitation, you must do away with; and throughout every village and city of your English dominion there must not be a hand that cannot find a helper, nor a heart that cannot find a comforter. "How impossible!" I know, you are thinking. Ah! So far from impossible, it is easy, it is natural, it is necessary, and I declare to you that, sooner or later, it _must be done_, at our peril. If now our English lords of land will fix this idea steadily before them; take the people to their hearts, trust to their loyalty, lead their labor;--then indeed there will be princes again in the midst of us, worthy of the island throne, "This royal throne of kings--this sceptred isle-- This fortress built by nature for herself Against infection, and the hand of war; This precious stone set in the silver sea; This happy breed of men--this little world: This other Eden--Demi-Paradise." But if they refuse to do this, and hesitate and equivocate, clutching through the confused catastrophe of all things only at what they can still keep stealthily for themselves--their doom is nearer than even their adversaries hope, and it will be deeper than even their despisers dream. That, believe me, is the work you have to do in England; and out of England you have room for everything else you care to do. Are her dominions in the world so narrow that she can find no place to spin cotton in but Yorkshire? We may organize emigration into an infinite power. We may assemble troops of the more adventurous and ambitious of our youth; we may send them on truest foreign service, founding new seats of authority, and centres of thought, in uncultivated and unconquered lands; retaining the full affection to the native country no less in our colonists than in our armies, teaching them to maintain allegiance to their fatherland in labor no less than in battle; aiding them with free hand in the prosecution of discovery, and the victory over adverse natural powers; establishing seats of every manufacture in the climates and places best fitted for it, and bringing ourselves into due alliance and harmony of skill with the dexterities of every race, and the wisdoms of every tradition and every tongue. And then you may make England itself the centre of the learning, of the arts, of the courtesies and felicities of the world. Yon may cover her mountains with pasture; her plains with corn, her valleys with the lily, and her gardens with the rose. You may bring together there in peace the wise and the pure, and the gentle of the earth, and by their word, command through its farthest darkness the birth of "God's first creature, which was Light." You know whose words those are; the words of the wisest of Englishmen. He, and with him the wisest of all other great nations, have spoken always to men of this hope, and they would not hear. Plato, in the dialogue of Critias, his last, broken off at his death--Pindar, in passionate singing of the fortunate islands--Virgil, in the prophetic tenth eclogue--Bacon, in his fable of the New Atlantis--More, in the book which, too impatiently wise, became the bye-word of fools--these, all, have told us with one voice what we should strive to attain; _they_ not hopeless of it, but for our follies forced, as it seems, by heaven, to tell us only partly and in parables, lest we should hear them and obey. Shall we never listen to the words of these wisest of men? Then listen at least to the words of your children--let us in the lips of babes and sucklings find our strength; and see that we do not make them mock instead of pray, when we teach them, night and morning, to ask for what we believe never can be granted;--that the will of the Father,--which is, that His creatures may be righteous and happy--should be done, _on earth_, as it is in Heaven. FOOTNOTES: [139] Compare _Time and Tide_, § 169, _and Fors Clavigera_, Letter XIV, page 9. [140] See Appendix, "Modern Education," and compare § 70 of _Time and Tide_. [141] [They were deserting, I am informed, in the early part of this year, 1873, at the rate of a regiment a week.] _NOTES ON THE POLITICAL ECONOMY OF PRUSSIA._ I am often accused of inconsistency; but believe myself defensible against the charge with respect to what I have said on nearly every subject except that of war. It is impossible for me to write consistently of war, for the groups of facts I have gathered about it lead me to two precisely opposite conclusions. When I find this the case, in other matters, I am silent, till I can choose my conclusion: but, with respect to war, I am forced to speak, by the necessities of the time; and forced to act, one way or another. The conviction on which I act is, that it causes an incalculable amount of avoidable human suffering, and that it ought to cease among Christian nations; and if therefore any of my boy-friends desire to be soldiers, I try my utmost to bring them into what I conceive to be a better mind. But, on the other hand, I know certainly that the most beautiful characters yet developed among men have been formed in war;--that all great nations have been warrior nations, and that the only kinds of peace which we are likely to get in the present age are ruinous alike to the intellect, and the heart. The lecture on "War," in this volume, addressed to young soldiers, had for its object to strengthen their trust in the virtue of their profession. It is inconsistent with itself, in its closing appeal to women, praying them to use their influence to bring wars to an end. And I have been hindered from completing my long intended notes on the economy of the Kings of Prussia by continually increasing doubt how far the machinery and discipline of war, under which they learned the art of government, was essential for such lesson; and what the honesty and sagacity of the Friedrich who so nobly repaired his ruined Prussia, might have done for the happiness of his Prussia, unruined. In war, however, or in peace, the character which Carlyle chiefly loves him for, and in which Carlyle has shown him to differ from all kings up to this time succeeding him, is his constant purpose to use every power entrusted to him for the good of his people; and be, not in name only, but in heart and hand, their king. Not in ambition, but in natural instinct of duty. Friedrich, born to govern, determines to govern to the best of his faculty. That "best" may sometimes be unwise; and self-will, or love of glory, may have their oblique hold on his mind, and warp it this way or that; but they are never principal with him. He believes that war is necessary, and maintains it; sees that peace is necessary, and calmly persists in the work of it to the day of his death, not claiming therein more praise than the head of any ordinary household, who rules it simply because it is his place, and he must not yield the mastery of it to another. How far, in the future, it may be possible for men to gain the strength necessary for kingship without either fronting death, or inflicting it, seems to me not at present determinable. The historical facts are that, broadly speaking, none but soldiers, or persons with a soldierly faculty, have ever yet shown themselves fit to be kings; and that no other men are so gentle, so just, or so clear-sighted. Wordsworth's character of the happy warrior cannot be reached in the height of it _but by_ a warrior; nay, so much is it beyond common strength that I had supposed the entire meaning of it to be metaphorical, until one of the best soldiers of England himself read me the poem,[142] and taught me, what I might have known, had I enough watched his own life, that it was entirely literal. There is nothing of so high reach distinctly demonstrable in Friedrich: but I see more and more, as I grow older, that the things which are the most worth, encumbered among the errors and faults of every man's nature, are never clearly demonstrable; and are often most forcible when they are scarcely distinct to his own conscience,--how much less, clamorous for recognition by others! Nothing can be more beautiful than Carlyle's showing of this, to any careful reader of Friedrich. But careful readers are but one in the thousand; and by the careless, the masses of detail with which the historian must deal are insurmountable. My own notes, made for the special purpose of hunting down the one point of economy, though they cruelly spoil Carlyle's own current and method of thought, may yet be useful in enabling readers, unaccustomed to books involving so vast a range of conception, to discern what, on this one subject only, may be gathered from that history. On any other subject of importance, similar gatherings might be made of other passages. The historian has to deal with all at once. I therefore have determined to print here, as a sequel to the Essay on War, my notes from the first volume of Friedrich, on the economies of Brandenburg, up to the date of the establishment of the Prussian monarchy. The economies of the first three Kings of Prussia I shall then take up in _Fors Clavigera_, finding them fitter for examination in connection with the subject of that book than of this. I assume, that the reader will take down his first volume of Carlyle, and read attentively the passages to which I refer him. I give the reference first to the largest edition, in six volumes (1858-1865); then, in parenthesis, to the smallest or "people's edition" (1872-1873). The pieces which I have quoted in my own text are for the use of readers who may not have ready access to the book; and are enough for the explanation of the points to which I wish them to direct their thoughts in reading such histories of soldiers or soldier-kingdoms. I. _Year_ 928 to 936.--_Dawn of Order in Christian Germany._ Book II. Chap. i. p. 67 (47). Henry the Fowler, "the beginning of German kings," is a mighty soldier _in the cause of peace_; his essential work the building and organization of fortified towns for the protection of men. Read page 72 with utmost care (51), "He fortified towns," to end of small print. I have added some notes on the matter in my lecture on Giovanni Pisano; but whether you can glance at them or not, fix in your mind this institution of truly civil or civic building in Germany, as distinct from the building of baronial castles for the security of _robbers_: and of a standing army consisting of every ninth man, called a "burgher" ("townsman")--a soldier, appointed to learn that profession that he may guard the walls--the exact reverse of _our_ notion of a burgher. Frederick's final idea of his army is, indeed, only this. Brannibor, a chief fortress of the Wends, is thus taken, and further strengthened by Henry the Fowler; wardens appointed for it; and thus the history of Brandenburg begins. On all frontiers, also, this "beginning of German kings" has his "Markgraf." "Ancient of the marked place." Read page 73, measuredly, learning it by heart, if it may be. (51-2.) II. 936-1000.--_History of Nascent Brandenburg._ The passage I last desired you to read ends with this sentence: "The sea-wall you build, and what main floodgates you establish in it, will depend on the state of the outer sea." From this time forward you have to keep clearly separate in your minds, (A) the history of that outer sea, Pagan Scandinavia, Russia, and Bor-Russia, or Prussia proper; (B) the history of Henry the Fowler's Eastern and Western Marches; asserting themselves gradually as Austria and the Netherlands; and (C) the history of this inconsiderable fortress of Brandenburg, gradually becoming considerable, and the capital city of increasing district between them. That last history, however, Carlyle is obliged to leave vague and gray for two hundred years after Henry's death. Absolutely dim for the first century, in which nothing is evident but that its wardens or Markgraves had no peaceable possession of the place. Read the second paragraph in page 74 (52-3), "in old books" to "reader," and the first in page 83 (59) "meanwhile" to "substantial," consecutively. They bring the story of Brandenburg itself down, at any rate, from 936 to 1000. III. 936-1000.--_State of the Outer Sea._ Read now Chapter II. beginning at page 76 (54), wherein you will get account of the beginning of vigorous missionary work on the outer sea, in Prussia proper; of the death of St. Adalbert, and of the purchase of his dead body by the Duke of Poland. You will not easily understand Carlyle's laugh in this chapter, unless you have learned yourself to laugh in sadness, and to laugh in love. "No Czech blows his pipe in the woodlands without certain precautions and preliminary fuglings of a devotional nature." (Imagine St. Adalbert, in spirit, at the railway station in Birmingham!) My own main point for notice in the chapter is the purchase of his body for its "weight in gold." Swindling angels held it up in the scales; it did not weigh so much as a web of gossamer. "Had such excellent odor, too, and came for a mere nothing of gold," says Carlyle. It is one of the first commercial transactions of Germany, but I regret the conduct of the angels on the occasion. Evangelicalism has been proud of ceasing to invest in relics, its swindling angels helping it to better things, as it supposes. For my own part, I believe Christian Germany could not have bought at this time any treasure more precious; nevertheless, the missionary work itself you find is wholly vain. The difference of opinion between St. Adalbert and the Wends, on Divine matters, does not signify to the Fates. They will not have it disputed about; and end the dispute adversely, to St. Adalbert--adversely, even, to Brandenburg and its civilizing power, as you will immediately see. IV. 1000-1030.--_History of Brandenburg in Trouble._ Book II. Chap. iii. p. 83 (59). The adventures of Brandenburg in contest with Pagan Prussia, irritated, rather than amended, by St. Adalbert. In 1023, roughly, a hundred years after Henry the Fowler's death, Brandenburg is taken by the Wends, and its first line of Markgraves ended; its population mostly butchered, especially the priests; and the Wends' God, Triglaph, "something like three whales' cubs combined by boiling," set up on the top of St. Mary's Hill. Here is an adverse "Doctrine of the Trinity" which has its supporters! It is wonderful,--this Tripod and Triglyph--three-footed, three-cut faith of the North and South, the leaf of the oxalis, and strawberry, and clover, fostering the same in their simple manner. I suppose it to be the most savage and natural of notions about Deity; a prismatic idol-shape of Him, rude as a triangular log, as a trefoil grass. I do not find how long Triglaph held his state on St. Mary's Hill. "For a time," says Carlyle, "the priests all slain or fled--shadowy Markgraves the like--church and state lay in ashes, and Triglaph, like a triple porpoise under the influence of laudanum, stood, I know not whether on his head or his tail, aloft on the Harlungsberg, as the Supreme of this Universe for the time being." V. 1030-1130.--_Brandenburg under the Ditmarsch Markgraves, or Ditmarsch-Stade Markgraves._ Book II. Chap. iii. p. 85 (60). Of Anglish, or Saxon breed. They attack Brandenburg, under its Triglyphic protector, take it--dethrone him, and hold the town for a hundred years, their history "stamped beneficially on the face of things, Markgraf after Markgraf getting killed in the business. 'Erschlagen,' 'slain,' fighting with the Heathen--say the old books, and pass on to another." If we allow seven years to Triglaph--we get a clear century for these--as above indicated. They die out in 1130. VI. 1130-1170.--_Brandenburg under Albert the Bear._ Book II. Chap iv. p. 91 (64). He is the first of the Ascanien Markgraves, whose castle of Ascanica is on the northern slope of the Hartz Mountains, "ruins still dimly traceable." There had been no soldier or king of note among the Ditmarsch Markgraves, so that you will do well to fix in your mind successively the three men, Henry the Fowler, St. Adalbert, and Albert the Bear. A soldier again, and a strong one. Named the Bear only from the device on his shield, first wholly definite Markgraf of Brandenburg that there is, "and that the luckiest of events for Brandenburg." Read page 93 (66) carefully, and note this of his economies. * * * * * Nothing better is known to me of Albert the Bear than his introducing large numbers of Dutch Netherlanders into those countries; men thrown out of work, who already knew how to deal with bog and sand, by mixing and delving, and who first taught Brandenburg what greenness and cow-pasture was. The Wends, in presence of such things, could not but consent more and more to efface themselves--either to become German, and grow milk and cheese in the Dutch manner, or to disappear from the world. * * * * * After two-hundred and fifty years of barking and worrying, the Wends are now finally reduced to silence; their anarchy well buried and wholesome Dutch cabbage planted over it; Albert did several great things in the world; but this, for posterity, remains his memorable feat. Not done quite easily, but done: big destinies of nations or of persons are not founded gratis in this world, He had a sore, toilsome time of it, coercing, warring, managing among his fellow-creatures, while his day's work lasted--fifty years or so, for it began early. He died in his castle of Ballenstädt, peaceably among the Hartz Mountains at last, in the year 1170, age about sixty-five. * * * * * Now, note in all this the steady gain of soldiership enforcing order and agriculture, with St. Adalbert giving higher strain to the imagination. Henry the Fowler establishes walled towns, fighting for mere peace. Albert the Bear plants the country with cabbages, fighting for his cabbage-fields. And the disciples of St. Adalbert, generally, have succeeded in substituting some idea of Christ for the idea of Triglaph. Some idea only; other ideas than of Christ haunt even to this day those Hartz Mountains among which Albert the Bear dies so peacefully. Mephistopheles, and all his ministers, inhabit there, commanding mephitic clouds and earth-born dreams. VII. 1170-1320.--_Brandenburg 150 years under the Ascanien Markgraves._ Vol. I. Book II Chap. viii. p. 135 (96). "Wholesome Dutch cabbages continued to be more and more planted by them in the waste sand: intrusive chaos, and Triglaph held at bay by them," till at last in 1240, seventy years after the great Bear's death, they fortify a new Burg, a "_little_ rampart," Wehrlin, diminutive of Wehr (or vallum), gradually smoothing itself, with a little echo of the Bear in it too, into Ber-lin, the oily river Spree flowing by, "in which you catch various fish;" while trade over the flats and by the dull streams, is widely possible. Of the Ascanien race, the notablest is Otto with the Arrow, whose story see, pp. 138-141 (98-100), noting that Otto is one of the first Minnesingers; that, being a prisoner to the Archbishop of Magdeburg, his wife rescues him, selling her jewels to bribe the canons; and that the Knight, set free on parole and promise of farther ransom, rides back with his own price in his hand; holding himself thereat cheaply bought, though no angelic legerdemain happens to the scales now. His own estimate of his price--"Rain gold ducats on my war-horse and me, till you cannot see the point of my spear atop." Emptiness of utter pride, you think? Not so. Consider with yourself, reader, how much you dare to say, aloud, _you_ are worth. If you have _no_ courage to name any price whatsoever for yourself, believe me, the cause is not your modesty, but that in very truth you feel in your heart there would be no bid for you at Lucian's sale of lives, were that again possible, at Christie and Manson's. Finally (1319 exactly; say 1320, for memory), the Ascanien line expired in Brandenburg, and the little town and its electorate lapsed to the Kaiser: meantime other economical arrangements had been in progress; but observe first how far we have got. The Fowler, St. Adalbert and the Bear have established order, and some sort of Christianity; but the established persons begin to think somewhat too well of themselves. On quite honest terms, a dead saint or a living knight ought to be worth their true "weight in gold." But a pyramid, with only the point of the spear seen at top, would be many times over one's weight in gold. And although men were yet far enough from the notion of modern days, that the gold is better than the flesh, and from buying it with the clay of one's body, and even the fire of one's soul, instead of soul and body with _it_, they were beginning to fight for their own supremacy, or for their own religious fancies, and not at all to any useful end, until an entirely unexpected movement is made in the old useful direction forsooth, only by some kind ship-captains of Lübeck! VIII. 1210-1320.--_Civil work, aiding military, during the Ascanien period._ Vol. I. Book II. Chap. vi. p. 109 (77). In the year 1190, Acre not yet taken, and the crusading army wasting by murrain on the shore, the German soldiers especially having none to look after them, certain compassionate ship-captains of Lübeck, one Walpot von Bassenheim taking the lead, formed themselves into an union for succor of the sick and the dying, set up canvas tents from the Lübeck ship stores, and did what utmost was in them silently in the name of mercy and heaven. Finding its work prosper, the little medicinal and weather-fending company took vows on itself, strict chivalry forms, and decided to become permanent "Knights Hospitallers of our dear Lady of Mount Zion," separate from the former Knights Hospitallers, as being entirely German: yet soon, as the German Order of St. Mary, eclipsing in importance Templars, Hospitallers, and every other chivalric order then extant; no purpose of battle in them, but much strength for it; their purpose only the helping of German pilgrims. To this only they are bound by their vow, "gelübde," and become one of the usefullest of clubs in all the Pall Mall of Europe. Finding pilgrimage in Palestine falling slack, and more need for them on the homeward side of the sea, their Hochmeister, Hermann of the Salza, goes over to Venice in 1210. There the titular bishop of still unconverted Preussen advises him of that field of work for his idle knights. Hermann thinks well of it: sets his St. Mary's riders at Triglaph, with the sword in one hand and a missal in the other. Not your modern way of affecting conversion! Too illiberal, you think; and what would Mr. J. S. Mill say? But if Triglaph _had_ been verily "three whales' cubs combined by boiling," you would yourself have promoted attack upon him for the sake of his oil, would not you? The Teutsch Ritters, fighting him for charity, are they so much inferior to you? * * * * * They built, and burnt, innumerable stockades for and against; built wooden forts which are now stone towns. They fought much and prevalently; galloped desperately to and fro, ever on the alert. In peaceabler ulterior times, they fenced in the Nogat and the Weichsel with dams, whereby unlimited quagmire might become grassy meadow--as it continues to this day. Marienburg (Mary's Burg), with its grand stone Schloss still visible and even habitable: this was at length their headquarter. But how many Burgs of wood and stone they built, in different parts; what revolts, surprisals, furious fights in woody, boggy places they had, no man has counted. But always some preaching by zealous monks, accompanied the chivalrous fighting. And colonists came in from Germany; trickling in, or at times streaming. Victorious Ritterdom offers terms to the beaten heathen: terms not of tolerant nature, but which _will be punctually kept by Ritterdom_. When the flame of revolt or general conspiracy burnt up again too extensively, high personages came on crusade to them. Ottocar, King of Bohemia, with his extensive far-shining chivalry, "conquered Samland in a month;" tore up the Romova where Adalbert had been massacred, and burned it from the face of the earth. A certain fortress was founded at that time, in Ottocar's presence; and in honor of him they named it King's Fortress, "Königsberg." Among King Ottocar's esquires, or subaltern junior officials, on this occasion, is one Rudolf, heir of a poor Swiss lordship and gray hill castle, called Hapsburg, rather in reduced circumstances, whom Ottocar likes for his prudent, hardy ways; a stout, modest, wise young man, who may chance to redeem Hapsburg a little, if he lives. Conversion, and complete conquest once come, there was a happy time for Prussia; ploughshare instead of sword: busy sea-havens, German towns, getting built; churches everywhere rising; grass growing, and peaceable cows, where formerly had been quagmire and snakes, and for the Order a happy time. On the whole, this Teutsch Ritterdom, for the first century and more, was a grand phenomenon, and flamed like a bright blessed beacon through the night of things, in those Northern countries. For above a century, we perceive, it was the rallying place of all brave men who had a career to seek on terms other than vulgar. The noble soul, aiming beyond money, and sensible to more than hunger in this world, had a beacon burning (as we say), if the night chanced to overtake it, and the earth to grow too intricate, as is not uncommon. Better than the career of stump-oratory, I should fancy, and its Hesperides apples, golden, and of gilt horse-dung. Better than puddling away one's poor spiritual gift of God (loan, not gift), such as it may be, in building the lofty rhyme, the lofty review article, for a discerning public that has sixpence to spare! Times alter greatly.[143] * * * * * We must pause here again for a moment to think where we are, and who is _with us_. The Teutsch Ritters have been fighting, independently of all states, for their own hand, or St. Adalbert's; partly for mere love of fight, partly for love of order, partly for love of God. Meantime, other Riders have been fighting wholly for what they could get by it; and other persons, not Riders, have not been fighting at all, but in their own towns peacefully manufacturing and selling. Of Henry the Fowler's Marches, Austria has become a military power, Flanders a mercantile one, pious only in the degree consistent with their several occupations. Prussia is now a practical and farming country, more Christian than its longer-converted neighbors. * * * * * Towns are built, Königsberg (King Ottocar's town), Thoren (Thorn, City of the Gates), with many others; so that the wild population and the tame now lived tolerably together, under Gospel and Lübeck law; and all was ploughing and trading. * * * * * But Brandenburg itself, what of it? The Ascanien Markgraves rule it on the whole prosperously down to 1320, when their line expires, and it falls into the power of Imperial Austria. IX. 1320-1415.--_Brandenburg under the Austrians._ A century--the fourteenth--of miserable anarchy and decline for Brandenburg, its Kurfürsts, in deadly succession, making what they can out of it for their own pockets. The city itself and its territory utterly helpless. Read pp. 180, 181 (129, 130). "The towns suffered much, any trade they might have had going to wreck. Robber castles flourished, all else decayed, no highway safe. What are Hamburg pedlars made for but to be robbed?" X. 1415-1440.--_Brandenburg under Friedrich of Nüremberg._ This is the fourth of the men whom you are to remember as creators of the Prussian monarchy, Henry the Fowler, St. Adalbert, Albert the Bear, of Ascanien, and Friedrich of Nüremberg; (of Hohenzollern, by name, and by country, of the Black Forest, north of the Lake of Constance). Brandenburg is sold to him at Constance, during the great Council, for about 200,000_l._ of our money, worth perhaps a million in that day; still, with its capabilities, "dog cheap." Admitting, what no one at the time denied, the general marketableness of states as private property, this is the one practical result, thinks Carlyle (not likely to think wrong), of that oecumenical deliberation, four years long, of the "elixir of the intellect and dignity of Europe. And that one thing was not its doing; but a pawnbroking job, intercalated," putting, however, at last, Brandenburg again under the will of one strong man. On St. John's day, 1412, he first set foot in his town, "and Brandenburg, under its wise Kurfürst, begins to be cosmic again." The story of Heavy Peg, pages 195-198 (138, 140), is one of the most brilliant and important passages of the first volume; page 199, specially to our purpose, must be given entire:-- The offer to be Kaiser was made him in his old days; but he wisely declined that too. It was in Brandenburg, by what he silently founded there, that he did his chief benefit to Germany and mankind. He understood the noble art of governing men; had in him the justness, clearness, valor, and patience needed for that. A man of sterling probity, for one thing. _Which indeed is the first requisite in said art_:--if you will have your laws obeyed without mutiny, see well that they be pieces of God Almighty's law; otherwise all the artillery in the world will not keep down mutiny. Friedrich "travelled much over Brandenburg;" looking into everything with his own eyes; making, I can well fancy, innumerable crooked things straight; reducing more and more that famishing dog-kennel of a Brandenburg into a fruitful arable field. His portraits represent a square-headed, mild-looking, solid gentleman, with a certain twinkle of mirth in the serious eyes of him. Except in those Hussite wars for Kaiser Sigismund and the Reich, in which no man could prosper, he may be defined as constantly prosperous. To Brandenburg he was, very literally, the blessing of blessings; redemption out of death into life. In the ruins of that old Friesack Castle, battered down by Heavy Peg, antiquarian science (if it had any eyes) might look for the taproot of the Prussian nation, and the beginning of all that Brandenburg has since grown to under the sun. Which growth is now traced by Carlyle in its various budding and withering, under the succession of the twelve Electors, of whom Friedrich, with his heavy Peg, is first, and Friedrich, first King of Prussia, grandfather of Friedrich the Great, the twelfth. XI. 1416-1701.--_Brandenburg under the Hohenzollern Kurfürsts._ Book III. Who the Hohenzollerns were, and how they came to power in Nüremberg, is told in Chap. v. of Book II. Their succession in Brandenburg is given in brief at page 377 (269). I copy it, in absolute barrenness of enumeration, for our momentary convenience, here: Friedrich 1st of Brandenburg (6th of Nüremberg), 1412-1440 Friedrich II., called "Iron Teeth," 1440-1472 Albert, 1472-1486 Johann, 1486-1499 Joachim I., 1499-1535 Joachim II., 1535-1571 Johann George, 1571-1598 Joachim Friedrich, 1598-1608 Johann Sigismund, 1608-1619 George Wilhelm, 1619-1640 Friedrich Wilhelm (the Great Elector), 1640-1688 Friedrich, first King; crowned 18th January, 1701 Of this line of princes we have to say they followed generally in their ancestor's steps, and had success of the like kind more or less; Hohenzollerns all of them, by character and behaviour as well as by descent. No lack of quiet energy, of thrift, sound sense. There was likewise solid fair-play in general, no founding of yourself on ground that will not carry, _and there was instant, gentle, but inexorable crushing of mutiny_, if it showed itself, which after the Second Elector, or at most the Third, it had altogether ceased to do. This is the general account of them; of special matters note the following:-- II. Friedrich, called "Iron-teeth," from his firmness, proves a notable manager and governor. Builds the palace at Berlin in its first form, and makes it his chief residence. Buys Neumark from the fallen Teutsch Ritters, and generally establishes things on securer footing. III. Albert, "a fiery, tough old Gentlemen," called the Achilles of Germany in his day; has half-a-century of fighting with his own Nürembergers, with Bavaria, France, Burgundy, and its fiery Charles, besides being head constable to the Kaiser among any disorderly persons in the East. His skull, long shown on his tomb, "marvellous for strength and with no visible sutures." IV. John, the orator of his race; (but the orations unrecorded). His second son, Archbishop of Maintz, for whose piece of memorable work see page 223 (143) and read in connection with that the history of Margraf George, pp. 237-241 (152-154), and the 8th chapter of the third book. V. Joachim I., of little note; thinks there has been enough Reformation, and checks proceedings in a dull stubbornness, causing him at least grave domestic difficulties.--Page 271 (173). VI. Joachim II. Again active in the Reformation, and staunch, though generally in a cautious, weighty, never in a rash, swift way, to the great cause of Protestantism and to all good causes. He was himself a solemnly devout man; deep, awe-stricken reverence dwelling in his view of this universe. Most serious, though with a jocose dialect, commonly having a cheerful wit in speaking to men. Luther's books he called his Seelenschatz, (soul's treasure); Luther and the Bible were his chief reading. Fond of profane learning, too, and of the useful or ornamental arts; given to music, and "would himself sing aloud" when he had a melodious leisure hour. VII. Johann George, a prudent thrifty Herr; no mistresses, no luxuries allowed; at the sight of a new-fashioned coat he would fly out on an unhappy youth and pack him from his presence. Very strict in point of justice; a peasant once appealing to him in one of his inspection journeys through the country-- "Grant me justice, Durchlaucht, against so and so; I am your Highness's born subject." "Thou shouldst have it, man, wert thou a born Turk!" answered Johann George. Thus, generally, we find this line of Electors representing in Europe the Puritan mind of England in a somewhat duller, but less dangerous, form; receiving what Protestantism could teach of honesty and common sense, but not its anti-Catholic fury, or its selfish spiritual anxiety. Pardon of sins is not to be had from Tetzel; neither, the Hohenzollern mind advises with itself, from even Tetzel's master, for either the buying, or the asking. On the whole, we had better commit as few as possible, and live just lives and plain ones. A conspicuous thrift, veracity, modest solidity, looks through the conduct of this Herr; a determined Protestant he too, as indeed all the following were and are. VIII. Joachim Friedrich. Gets hold of Prussia, which hitherto, you observe, has always been spoken of as a separate country from Brandenburg. March 11, 1605--"squeezed his way into the actual guardianship of Preussen and its imbecile Duke, which was his by right." For my own part, I do not trouble myself much about these rights, never being able to make out any single one, to begin with, except the right to keep everything and every place about you in as good order as you can--Prussia, Poland, or what else. I should much like, for instance, just now, to hear of any honest Cornish gentleman of the old Drake breed taking a fancy to land in Spain, and trying what he could make of his rights as far round Gibraltar as he could enforce them. At all events, Master Joachim has somehow got hold of Prussia; and means to keep it. IX. Johann Sigismund. Only notable for our economical purposes, as getting the "guardianship" of Prussia confirmed to him. The story at page 317 (226), "a strong flame of choler," indicates a new order of things among the knights of Europe--"princely etiquettes melting all into smoke." Too literally so, that being one of the calamitous functions of the plain lives we are living, and of the busy life our country is living. In the Duchy of Cleve, especially, concerning which legal dispute begins in Sigismund's time. And it is well worth the lawyers' trouble, it seems. It amounted, perhaps, to two Yorkshires in extent. A naturally opulent country of fertile meadows, shipping capabilities, metalliferous hills, and at this time, in consequence of the Dutch-Spanish war, and the multitude of Protestant refugees, it was getting filled with ingenious industries, and rising to be what it still is, the busiest quarter of Germany. A country lowing with kine; the hum of the flax-spindle heard in its cottages in those old days--"much of the linen called Hollands is made in Jülich, and only bleached, stamped, and sold by the Dutch," says Büsching. A country in our days which is shrouded at short intervals with the due canopy of coal-smoke, and loud with sounds of the anvil and the loom. The lawyers took two hundred and six years to settle the question concerning this Duchy, and the thing Johann Sigismund had claimed legally in 1609 was actually handed over to Johann Sigismund's descendant in the seventh generation. "These litigated duchies are now the Prussian provinces, Jülich, Berg, Cleve, and the nucleus of Prussia's possessions in the Rhine country." X. George Wilhelm. Read pp. 325 to 327 (231, 233) on this Elector and German Protestantism, now fallen cold, and somewhat too little dangerous. But George Wilhelm is the only weak prince of all the twelve. For another example how the heart and life of a country depend upon its prince, not on its council, read this, of Gustavus Adolphus, demanding the cession of Spandau and Küstrin: Which cession Kurfürst George Wilhelm, though giving all his prayers to the good cause, could by no means grant. Gustav had to insist, with more and more emphasis, advancing at last with military menace upon Berlin itself. He was met by George Wilhelm and his Council, "in the woods of Cöpenick," short way to the east of that city; there George Wilhelm and his Council wandered about, sending messages, hopelessly consulting, saying among each other, "Que faire? ils ont des canons." For many hours so, round the inflexible Gustav, who was there like a fixed mile-stone, and to all questions and comers had only one answer. On our special question of war and its consequences, read this of the Thirty Years' one: But on the whole, the grand weapon in it, and towards the latter times, the exclusive one, was hunger. The opposing armies tried to starve one another; at lowest, tried each not to starve. Each trying to eat the country or, at any rate, to leave nothing eatable in it; what that will mean for the country we may consider. As the armies too frequently, and the Kaiser's armies habitually, lived without commissariat, often enough without pay, all horrors of war and of being a seat of war, that have been since heard of, are poor to those then practised, the detail of which is still horrible to read. Germany, in all eatable quarters of it, had to undergo the process; tortured, torn to pieces, wrecked, and brayed as in a mortar, under the iron mace of war. Brandenburg saw its towns seized and sacked, its country populations driven to despair by the one party and the other. Three times--first in the Wallenstein-Mecklenburg times, while fire and sword were the weapons, and again, twice over, in the ultimate stages of the struggle, when starvation had become the method--Brandenburg fell to be the principal theatre of conflict, where all forms of the dismal were at their height. In 1638, three years after that precious "Peace of Prag,"... the ravages of the starving Gallas and his Imperialists excelled all precedent,... men ate human flesh, nay, human creatures ate their own children. "Que faire? ils ont des canons!" "We have now arrived at the lowest nadir point" (says Carlyle) "of the history of Brandenburg under the Hohenzollerns." Is this then all that Heavy Peg and our nine Kurfürsts have done for us? Carlyle does not mean that; but even he, greatest of historians since Tacitus, is not enough careful to mark for us the growth of national character, as distinct from the prosperity of dynasties. A republican historian would think of this development only, and suppose it to be possible without any dynasties. Which is indeed in a measure so, and the work now chiefly needed in moral philosophy, as well as history, is an analysis of the constant and prevalent, yet unthought of, influences, which, without any external help from kings, and in a silent and entirely necessary manner, form, in Sweden, in Bavaria, in the Tyrol, in the Scottish border, and on the French sea-coast, races of noble peasants; pacific, poetic, heroic, Christian-hearted in the deepest sense, who may indeed perish by sword or famine in any cruel thirty years' war, or ignoble thirty years' peace, and yet leave such strength to their children that the country, apparently ravaged into hopeless ruin, revives, under any prudent king, as the cultivated fields do under the spring rain. How the rock to which no seed can cling, and which no rain can soften, is subdued into the good ground which can bring forth its hundredfold, we forget to watch, while we follow the footsteps of the sower, or mourn the catastrophes of storm. All this while, the Prussian earth--the Prussian soul--has been thus dealt upon by successive fate; and now, though laid, as it seems, utterly desolate, it can be revived by a few years of wisdom and of peace. Vol. I. Book III. Chap, xviii.--The Great Elector, Friedrich Wilhelm. Eleventh of the dynasty:-- There hardly ever came to sovereign power a young man of twenty under more distressing, hopeless-looking circumstances. Political significance Brandenburg had none; a mere Protestant appendage, dragged about by a Papist Kaiser. His father's Prime Minister, as we have seen, was in the interest of his enemies; not Brandenburg's servant, but Austria's. The very commandants of his fortresses, Commandant of Spandau more especially, refused to obey Friedrich Wilhelm on his accession; "were bound to obey the Kaiser in the first place." For twenty years past Brandenburg had been scoured by hostile armies, which, especially the Kaiser's part of which, committed outrages new in human history. In a year or two hence, Brandenburg became again the theatre of business, Austrian Gallas advancing thither again (1644) with intent "to shut up Torstenson and his Swedes in Jutland." Gallas could by no means do what he intended; on the contrary, he had to run from Torstenson--what feet could do; was hunted, he and his Merode Brüder (beautiful inventors of the "marauding" art), till they pretty much all died (crepirten) says Köhler. No great loss to society, the death of these artists, but we can fancy what their life, and especially what the process of their dying, may have cost poor Brandenburg again! Friedrich Wilhelm's aim, in this as in other emergencies, was sun-clear to himself, but for most part dim to everybody else. He had to walk very warily, Sweden on one hand of him, suspicious Kaiser on the other: he had to wear semblances, to be ready with evasive words, and advance noiselessly by many circuits. More delicate operation could not be imagined. But advance he did; advance and arrive. With extraordinary talent, diligence, and felicity the young man wound himself out of this first fatal position, got those foreign armies pushed out of his country, and kept them out. His first concern had been to find some vestige of revenue, to put that upon a clear footing, and by loans or otherwise to scrape a little ready-money together. On the strength _of which a small body of soldiers could be collected about him, and drilled into real ability to fight and obey_. This as a basis: on this followed all manner of things, freedom from Swedish-Austrian invasions, as the first thing. He was himself, as appeared by-and-by, a fighter of the first quality, when it came to that; but never was willing to fight if he could help it. Preferred rather to shift, manoeuvre, and negotiate, which he did in most vigilant, adroit, and masterly manner. But by degrees he had grown to have, and could maintain it, an army of twenty-four thousand men, among the best troops then in being. To wear semblances, to be ready with evasive words, how is this, Mr. Carlyle? thinks perhaps the rightly thoughtful reader. Yes, such things have to be; There are lies and lies, and there are truths and truths. Ulysses cannot ride on the ram's back, like Phryxus; but must ride under his belly. Read also this, presently following: Shortly after which, Friedrich Wilhelm, who had shone much in the battle of Warsaw, into which he was dragged against his will, changed sides. An inconsistent, treacherous man? Perhaps not, O reader! perhaps a man advancing "in circuits," the only way he has; spirally, face now to east, now to west, with his own reasonable private aim sun-clear to him all the while? The battle of Warsaw, three days long, fought with Gustavus, the grandfather of Charles XII., against the Poles, virtually ends the Polish power: Old Johann Casimir, not long after that peace of Oliva, getting tired of his unruly Polish chivalry and their ways, abdicated--retired to Paris, and "and lived much with Ninon de l'Enclos and her circle," for the rest of his life. He used to complain of his Polish chivalry, that there was no solidity in them; nothing but outside glitter, with tumult and anarchic noise; fatal want of one essential talent, _the talent of obeying_; and has been heard to prophesy that a glorious Republic, persisting in such courses, would arrive at results which would surprise it. Onward from this time, Friedrich Wilhelm figures in the world; public men watching his procedure; kings anxious to secure him--Dutch print-sellers sticking up his portraits for a hero-worshipping public. Fighting hero, had the public known it, was not his essential character, though he had to fight a great deal. He was essentially an industrial man; great in organizing, regulating, in constraining chaotic heaps to become cosmic for him. He drains bogs, settles colonies in the waste places of his dominions, cuts canals; unweariedly encourages trade and work. The Friedrich Wilhelm's Canal, which still carries tonnage from the Oder to the Spree, is a monument of his zeal in this way; creditable with the means he had. To the poor French Protestants in the Edict-of-Nantes affair, he was like an express benefit of Heaven; one helper appointed to whom the help itself was profitable. He munificently welcomed them to Brandenburg; showed really a noble piety and human pity, as well as judgment; nor did Brandenburg and he want their reward. Some twenty thousand nimble French souls, evidently of the best French quality, found a home there; made "waste sands about Berlin into potherb gardens;" and in spiritual Brandenburg, too, did something of horticulture which is still noticeable. Now read carefully the description of the man, p. 352 (224-5); the story of the battle of Fehrbellin, "the Marathon of Brandenburg," p. 354 (225); and of the winter campaign of 1679, p. 356 (227), beginning with its week's marches at sixty miles a day; his wife, as always, being with him; Louisa, honest and loving Dutch girl, aunt to our William of Orange, who trimmed up her own "Orange-burg" (country-house), twenty miles north of Berlin, into a little jewel of the Dutch type, potherb gardens, training-schools for young girls, and the like, a favorite abode of hers when she was at liberty for recreation. But her life was busy and earnest; she was helpmate, not in name only, to an ever busy man. They were married young; a marriage of love withal. Young Friedrich Wilhelm's courtship; wedding in Holland; the honest, trustful walk and conversation of the two sovereign spouses, their journeyings together, their mutual hopes, fears, and manifold vicissitudes, till death, with stern beauty, shut it in; all is human, true, and wholesome in it, interesting to look upon, and rare among sovereign persons. Louisa died in 1667, twenty-one years before her husband, who married again--(little to his contentment)--died in 1688; and Louisa's second son, Friedrich, ten years old at his mother's death, and now therefore thirty-one, succeeds, becoming afterwards Friedrich I. of Prussia. And here we pause on two great questions. Prussia is assuredly at this point a happier and better country than it was, when inhabited by Wends. But is Friedrich I. a happier and better man than Henry the Fowler? Have all these kings thus improved their country, but never themselves? Is this somewhat expensive and ambitious Herr, Friedrich I. buttoned in diamonds, indeed the best that Protestantism can produce, as against Fowlers, Bears, and Red Beards? Much more, Friedrich Wilhelm, orthodox on predestination; most of all, his less orthodox son;--have we, in these, the highest results which Dr. Martin Luther can produce for the present, in the first circles of society? And if not, how is it that the country, having gained so much in intelligence and strength, lies more passively in their power than the baser country did under that of nobler men? These, and collateral questions, I mean to work out as I can, with Carlyle's good help;--but must pause for this time; in doubt, as heretofore. Only of this one thing I doubt not, that the name of all great kings, set over Christian nations, must at last be, in fufilment, the hereditary one of these German princes, "Rich in Peace;" and that their coronation will be with Wild olive, not with gold. FOOTNOTES: [142] The late Sir Herbert Edwardes. [143] I would much rather print these passages of Carlyle in large golden letters than small black ones; but they are only here at all for unlucky people who can't read them with the context. THE ETHICS OF THE DUST TEN LECTURES TO LITTLE HOUSEWIVES ON THE ELEMENTS OF CRYSTALLISATION CONTENTS. ETHICS OF THE DUST. LECTURE I. PAGE THE VALLEY OF DIAMONDS 1 LECTURE II. THE PYRAMID BUILDERS 21 LECTURE III. THE CRYSTAL LIFE 31 LECTURE IV. THE CRYSTAL ORDERS 43 LECTURE V. CRYSTAL VIRTUES 56 LECTURE VI. CRYSTAL QUARRELS 70 LECTURE VII. HOME VIRTUES 82 LECTURE VIII. CRYSTAL CAPRICE 98 LECTURE IX. CRYSTAL SORROWS 111 LECTURE X. THE CRYSTAL REST 125 NOTES 143 FICTION--FAIR AND FOUL 153 ELEMENTS OF DRAWING. LETTER I. ON FIRST PRACTICE 233 LETTER II. SKETCHING FROM NATURE 293 LETTER III. ON COLOUR AND COMPOSITION 331 APPENDIX: THINGS TO BE STUDIED 403 LIST OF ILLUSTRATIONS. ELEMENTS OF DRAWING. FIGURE PAGE 1. SQUARES 237 2. GRADATED SPACES 241 3. OUTLINE OF LETTER 245 4. OUTLINE OF BOUGH OF TREE 248 5. CHARRED LOG 257 6. SHOOT OF LILAC 272 7. LEAF 274 8. BOUGH OF PHILLYREA 275 9. SPRAY OF PHILLYREA 276 10. TRUNK OF TREE, BY TITIAN 284 11. SKETCH FROM RAPHAEL 285 12. OUTLINES OF A BALL 287 13. WOODCUT OF DURER'S 289 14, 15, 16. MASSES OF LEAVES 290, 291 17, 18, 19. CURVATURES IN LEAVES 295, 296 20. FROM AN ETCHING, BY TURNER 297 21. ALPINE BRIDGE 307 22. ALPINE BRIDGE AS IT APPEARS AT VARIOUS DISTANCES 308 23. OUTLINES EXPRESSIVE OF FOLIAGE 314 24. SHOOT OF SPANISH CHESTNUT 315 25. YOUNG SHOOT OF OAK 316 26, 27, 28. WOODCUTS AFTER TITIAN 321, 322 29. DIAGRAM OF WINDOW 339 30. SWISS COTTAGE 355 31. GROUPS OF LEAVE 350 32. PAINTING, by Turner 361 33. SKETCH ON CALAIS SANDS, by Turner 365 34. DRAWING OF AN IDEAL BRIDGE, by Turner 369 35. PROFILE OF THE TOWERS OF EHRENBREITSTEIN 370 36. CURVES 371 37, 38, 39. CURVES FOUND IN LEAVES 372 40. OUTLINES OF A TREE TRUNK 373 41-44. TREE RADIATION 374, 375 45, 46. WOODCUTS OF LEAF 376 47. LEAF OF COLUMBINE 378 48. TOP OF AN OLD TOWER 385 PERSONÆ. OLD LECTURER (of incalculable age) FLORRIE, on astronomical evidence presumed to be aged 9. ISABEL " 11. MAY " 11. LILY " 12. KATHLEEN " 14. LUCILLA " 15. VIOLET " 16. DORA (who has the keys and is housekeeper) " 17. EGYPT (so called from her dark eyes) " 17. JESSIE (who somehow always makes the room look brighter when she is in it) " 18. MARY (of whom everybody, including the Old Lecturer, is in great awe) " 20. PREFACE TO THE SECOND EDITION. I have seldom been more disappointed by the result of my best pains given to any of my books, than by the earnest request of my publisher, after the opinion of the public had been taken on the 'Ethics of the Dust,' that I would "write no more in dialogue!" However, I bowed to public judgment in this matter at once, (knowing also my inventive powers to be of the feeblest,); but in reprinting the book, (at the prevailing request of my kind friend, Mr. Henry Willett,) I would pray the readers whom it may at first offend by its disconnected method, to examine, nevertheless, with care, the passages in which the principal speaker sums the conclusions of any dialogue: for these summaries were written as introductions, for young people, to all that I have said on the same matters in my larger books; and, on re-reading them, they satisfy me better, and seem to me calculated to be more generally useful, than anything else I have done of the kind. The summary of the contents of the whole book, beginning, "You may at least earnestly believe," at p. 130, is thus the clearest exposition I have ever yet given of the general conditions under which the Personal Creative Power manifests itself in the forms of matter; and the analysis of heathen conceptions of Deity, beginning at p. 131, and closing at p. 138, not only prefaces, but very nearly supersedes, all that in more lengthy terms I have since asserted, or pleaded for, in 'Aratra Pentelici,' and the 'Queen of the Air.' And thus, however the book may fail in its intention of suggesting new occupations or interests to its younger readers, I think it worth reprinting, in the way I have also reprinted 'Unto this Last,'--page for page; that the students of my more advanced works may be able to refer to these as the original documents of them; of which the most essential in this book are these following. I. The explanation of the baseness of the avaricious functions of the Lower Pthah, p. 39, with his beetle-gospel, p. 41, "that a nation can stand on its vices better than on its virtues," explains the main motive of all my books on Political Economy. II. The examination of the connexion between stupidity and crime, pp. 57-62, anticipated all that I have had to urge in Fors Clavigera against the commonly alleged excuse for public wickedness,--"They don't mean it--they don't know any better." III. The examination of the roots of Moral Power, pp. 90-92, is a summary of what is afterwards developed with utmost care in my inaugural lecture at Oxford on the relation of Art to Morals; compare in that lecture, §§ 83-85, with the sentence in p. 91 of this book, "Nothing is ever done so as really to please our Father, unless we would also have done it, though we had had no Father to know of it." This sentence, however, it must be observed, regards only the general conditions of action in the children of God, in consequence of which it is foretold of them by Christ that they will say at the Judgment, "When saw we thee?" It does not refer to the distinct cases in which virtue consists in faith given to command, appearing to foolish human judgment inconsistent with the Moral Law, as in the sacrifice of Isaac; nor to those in which any directly-given command requires nothing more of virtue than obedience. IV. The subsequent pages, 92-97, were written especially to check the dangerous impulses natural to the minds of many amiable young women, in the direction of narrow and selfish religious sentiment: and they contain, therefore, nearly everything which I believe it necessary that young people should be made to observe, respecting the errors of monastic life. But they in nowise enter on the reverse, or favourable side: of which indeed I did not, and as yet do not, feel myself able to speak with any decisiveness; the evidence on that side, as stated in the text, having "never yet been dispassionately examined." V. The dialogue with Lucilla, beginning at p. 63, is, to my own fancy, the best bit of conversation in the book, and the issue of it, at p. 67, the most practically and immediately useful. For on the idea of the inevitable weakness and corruption of human nature, has logically followed, in our daily life, the horrible creed of modern "Social science," that all social action must be scientifically founded on vicious impulses. But on the habit of measuring and reverencing our powers and talents that we may kindly use them, will be founded a true Social science, developing, by the employment of them, all the real powers and honourable feelings of the race. VI. Finally, the account given in the second and third lectures, of the real nature and marvellousness of the laws of crystallization, is necessary to the understanding of what farther teaching of the beauty of inorganic form I may be able to give, either in 'Deucalion,' or in my 'Elements of Drawing.' I wish however that the second lecture had been made the beginning of the book; and would fain now cancel the first altogether, which I perceive to be both obscure and dull. It was meant for a metaphorical description of the pleasures and dangers in the kingdom of Mammon, or of worldly wealth; its waters mixed with blood, its fruits entangled in thickets of trouble, and poisonous when gathered; and the final captivity of its inhabitants within frozen walls of cruelty and disdain. But the imagery is stupid and ineffective throughout; and I retain this chapter only because I am resolved to leave no room for any one to say that I have withdrawn, as erroneous in principle, so much as a single sentence of any of my books written since 1860. One license taken in this book, however, though often permitted to essay-writers for the relief of their dulness, I never mean to take more,--the relation of composed metaphor as of actual dream, pp. 23 and 104. I assumed, it is true, that in these places the supposed dream would be easily seen to be an invention; but must not any more, even under so transparent disguise, pretend to any share in the real powers of Vision possessed by great poets and true painters. BRANTWOOD: _10th October, 1877._ PREFACE. The following lectures were really given, in substance, at a girls' school (far in the country); which in the course of various experiments on the possibility of introducing some better practice of drawing into the modern scheme of female education, I visited frequently enough to enable the children to regard me as a friend. The lectures always fell more or less into the form of fragmentary answers to questions; and they are allowed to retain that form, as, on the whole, likely to be more interesting than the symmetries of a continuous treatise. Many children (for the school was large) took part, at different times, in the conversations; but I have endeavoured, without confusedly multiplying the number of imaginary[144] speakers, to represent, as far as I could, the general tone of comment and enquiry among young people. It will be at once seen that these Lectures were not intended for an introduction to mineralogy. Their purpose was merely to awaken in the minds of young girls, who were ready to work earnestly and systematically, a vital interest in the subject of their study. No science can be learned in play; but it is often possible, in play, to bring good fruit out of past labour, or show sufficient reasons for the labour of the future. The narrowness of this aim does not, indeed, justify the absence of all reference to many important principles of structure, and many of the most interesting orders of minerals; but I felt it impossible to go far into detail without illustrations; and if readers find this book useful, I may, perhaps, endeavour to supplement it by illustrated notes of the more interesting phenomena in separate groups of familiar minerals;--flints of the chalk;--agates of the basalts;--and the fantastic and exquisitely beautiful varieties of the vein-ores of the two commonest metals, lead and iron. But I have always found that the less we speak of our intentions, the more chance there is of our realizing them; and this poor little book will sufficiently have done its work, for the present, if it engages any of its young readers in study which may enable them to despise it for its shortcomings. DENMARK HILL: _Christmas, 1865._ FOOTNOTES: [144] I do not mean, in saying 'imaginary,' that I have not permitted to myself, in several instances, the affectionate discourtesy of some reminiscence of personal character; for which I must hope to be forgiven by my old pupils and their friends, as I could not otherwise have written the book at all. But only two sentences in all the dialogues, and the anecdote of 'Dotty,' are literally 'historical.' THE ETHICS OF THE DUST. LECTURE I. _THE VALLEY OF DIAMONDS._ _A very idle talk, by the dining-room fire, after raisin-and-almond time._ OLD LECTURER; FLORRIE, ISABEL, MAY, LILY, _and_ SIBYL. OLD LECTURER (L.). Come here, Isabel, and tell me what the make-believe was, this afternoon. ISABEL (_arranging herself very primly on the foot-stool_). Such a dreadful one! Florrie and I were lost in the Valley of Diamonds. L. What! Sindbad's, which nobody could get out of? ISABEL. Yes; but Florrie and I got out of it. L. So I see. At least, I see you did; but are you sure Florrie did? ISABEL. Quite sure. FLORRIE (_putting her head round from behind_ L.'s _sofa-cushion_). Quite sure. (_Disappears again._) L. I think I could be made to feel surer about it. (FLORRIE _reappears, gives_ L. _a kiss, and again exit._) L. I suppose it's all right; but how did you manage it? ISABEL. Well, you know, the eagle that took up Sindbad was very large--very, very large--the largest of all the eagles. L. How large were the others? ISABEL. I don't quite know--they were so far off. But this one was, oh, so big! and it had great wings, as wide as--twice over the ceiling. So, when it was picking up Sindbad, Florrie and I thought it wouldn't know if we got on its back too: so I got up first, and then I pulled up Florrie, and we put our arms round its neck, and away it flew. L. But why did you want to get out of the valley? and why haven't you brought me some diamonds? ISABEL. It was because of the serpents. I couldn't pick up even the least little bit of a diamond, I was so frightened. L. You should not have minded the serpents. ISABEL. Oh, but suppose that they had minded me? L. We all of us mind you a little too much, Isabel, I'm afraid. ISABEL. No--no--no, indeed. L. I tell you what, Isabel--I don't believe either Sindbad, or Florrie, or you, ever were in the Valley of Diamonds. ISABEL. You naughty! when I tell you we were! L. Because you say you were frightened at the serpents. ISABEL. And wouldn't you have been? L. Not at those serpents. Nobody who really goes into the valley is ever frightened at them--they are so beautiful. ISABEL (_suddenly serious_). But there's no real Valley of Diamonds, is there? L. Yes, Isabel; very real indeed. FLORRIE (_reappearing_). Oh, where? Tell me about it. L. I cannot tell you a great deal about it; only I know it is very different from Sindbad's. In his valley, there was only a diamond lying here and there; but, in the real valley, there are diamonds covering the grass in showers every morning, instead of dew: and there are clusters of trees, which look like lilac trees; but, in spring, all their blossoms are of amethyst. FLORRIE. But there can't be any serpents there, then? L. Why not? FLORRIE. Because they don't come into such beautiful places. L. I never said it was a beautiful place. FLORRIE. What! not with diamonds strewed about it like dew? L. That's according te your fancy, Florrie. For myself, I like dew better. ISABEL. Oh, but the dew won't stay; it all dries! L. Yes; and it would be much nicer if the diamonds dried too, for the people in the valley have to sweep them off the grass, in heaps, whenever they want to walk on it; and then the heaps glitter so, they hurt one's eyes. FLORRIE. Now you're just playing, you know. L. So are you, you know. FLORRIE. Yes, but you mustn't play. L. That's very hard, Florrie; why mustn't I, if you may? FLORRIE. Oh, I may, because I'm little, but you mustn't, because you're--(_hesitates for a delicate expression of magnitude_). L. (_rudely taking the first that comes_). Because I'm big? No; that's not the way of it at all, Florrie. Because you're little, you should have very little play; and because I'm big I should have a great deal. ISABEL _and_ FLORRIE (_both_). No--no--no--no. That isn't it at all. (ISABEL _sola, quoting Miss Ingelow._) 'The lambs play always--they know no better.' (_Putting her head very much on one side._) Ah, now--please--please--tell us true; we want to know. L. But why do you want me to tell you true, any more than the man who wrote the 'Arabian Nights?' ISABEL. Because--because we like to know about real things; and you can tell us, and we can't ask the man who wrote the stories. L. What do you call real things? ISABEL. Now, you know! Things that really are. L. Whether you can see them or not? ISABEL. Yes, if somebody else saw them. L. But if nobody has ever seen them? ISABEL (_evading the point_.) Well, but, you know, if there were a real Valley of Diamonds, somebody _must_ have seen it. L. You cannot be so sure of that, Isabel. Many people go to real places, and never see them; and many people pass through this valley, and never see it. FLORRIE. What stupid people they must be! L. No, Florrie. They are much wiser than the people who do see it. MAY. I think I know where it is. ISABEL. Tell us more about it, and then we'll guess. L. Well. There's a great broad road, by a river-side, leading up into it. MAY (_gravely cunning, with emphasis on the last word_). Does the road really go _up_? L. You think it should go down into a valley? No, it goes up; this is a valley among the hills, and it is as high as the clouds, and is often full of them; so that even the people who most want to see it, cannot, always. ISABEL. And what is the river beside the road like? L. It ought to be very beautiful, because it flows over diamond sand--only the water is thick and red. ISABEL. Red water? L. It isn't all water. MAY. Oh, please never mind that, Isabel, just now; I want to hear about the valley. L. So the entrance to it is very wide, under a steep rock; only such numbers of people are always trying to get in, that they keep jostling each other, and manage it but slowly. Some weak ones are pushed back, and never get in at all; and make great moaning as they go away: but perhaps they are none the worse in the end. MAY. And when one gets in, what is it like? L. It is up and down, broken kind of ground: the road stops directly; and there are great dark rocks, covered all over with wild gourds and wild vines; the gourds, if you cut them, are red, with black seeds, like water-melons, and look ever so nice; and the people of the place make a red pottage of them: but you must take care not to eat any if you ever want to leave the valley (though I believe putting plenty of meal in it makes it wholesome). Then the wild vines have clusters of the colour of amber; and the people of the country say they are the grape of Eshcol; and sweeter than honey; but, indeed, if anybody else tastes them, they are like gall. Then there are thickets of bramble, so thorny that they would be cut away directly, anywhere else; but here they are covered with little cinque-foiled blossoms of pure silver; and, for berries, they have clusters of rubies. Dark rubies, which you only see are red after gathering them. But you may fancy what blackberry parties the children have! Only they get their frocks and hands sadly torn. LILY. But rubies can't spot one's frocks as blackberries do? L. No; but I'll tell you what spots them--the mulberries. There are great forests of them, all up the hills, covered with silkworms, some munching the leaves so loud that it is like mills at work; and some spinning. But the berries are the blackest you ever saw; and, wherever they fall, they stain a deep red; and nothing ever washes it out again. And it is their juice, soaking through the grass, which makes the river so red, because all its springs are in this wood. And the boughs of the trees are twisted, as if in pain, like old olive branches; and their leaves are dark. And it is in these forests that the serpents are; but nobody is afraid of them. They have fine crimson crests, and they are wreathed about the wild branches, one in every tree, nearly; and they are singing serpents, for the serpents are, in this forest, what birds are in ours. FLORRIE. Oh, I don't want to go there at all, now. L. You would like it very much indeed, Florrie, if you were there. The serpents would not bite you; the only fear would be of your turning into one! FLORRIE. Oh, dear, but that's worse. L. You wouldn't think so if you really were turned into one, Florrie; you would be very proud of your crest. And as long as you were yourself (not that you could get there if you remained quite the little Florrie you are now), you would like to hear the serpents sing. They hiss a little through it, like the cicadas in Italy; but they keep good time, and sing delightful melodies; and most of them have seven heads, with throats which each take a note of the octave; so that they can sing chords--it is very fine indeed. And the fire-flies fly round the edge of the forests all the night long; you wade in fire-flies, they make the fields look like a lake trembling with reflection of stars; but you must take care not to touch them, for they are not like Italian fireflies, but burn, like real sparks. FLORRIE. I don't like it at all; I'll never go there. L. I hope not, Florrie; or at least that you will get out again if you do. And it is very difficult to get out, for beyond these serpent forests there are great cliffs of dead gold, which form a labyrinth, winding always higher and higher, till the gold is all split asunder by wedges of ice; and glaciers, welded, half of ice seven times frozen, and half of gold seven times frozen, hang down from them, and fall in thunder, cleaving into deadly splinters, like the Cretan arrowheads; and into a mixed dust of snow and gold, ponderous, yet which the mountain whirlwinds are able to lift and drive in wreaths and pillars, hiding the paths with a burial cloud, fatal at once with wintry chill, and weight of golden ashes. So the wanderers in the labyrinth fall, one by one, and are buried there:--yet, over the drifted graves, those who are spared climb to the last, through coil on coil of the path;--for at the end of it they see the king of the valley, sitting on his throne: and beside him (but it is only a false vision), spectra of creatures like themselves, set on thrones, from which they seem to look down on all the kingdoms of the world, and the glory of them. And on the canopy of his throne there is an inscription in fiery letters, which they strive to read, but cannot; for it is written in words which are like the words of all languages, and yet are of none. Men say it is more like their own tongue to the English than it is to any other nation; but the only record of it is by an Italian, who heard the King himself cry it as a war cry, 'Pape Satan, Pape Satan Aleppe.'[145] SIBYL. But do they all perish there? You said there was a way through the valley, and out of it. L. Yes; but few find it. If any of them keep to the grass paths, where the diamonds are swept aside; and hold their hands over their eyes so as not to be dazzled, the grass paths lead forward gradually to a place where one sees a little opening in the golden rocks. You were at Chamouni last year, Sibyl; did your guide chance to show you the pierced rock of the Aiguille du Midi? SIBYL. No, indeed, we only got up from Geneva on Monday night; and it rained all Tuesday; and we had to be back at Geneva again, early on Wednesday morning. L. Of course. That is the way to see a country in a Sibylline manner, by inner consciousness: but you might have seen the pierced rock in your drive up, or down, if the clouds broke: not that there is much to see in it; one of the crags of the aiguille-edge, on the southern slope of it, is struck sharply through, as by an awl, into a little eyelet hole; which you may see, seven thousand feet above the valley (as the clouds flit past behind it, or leave the sky), first white, and then dark blue. Well, there's just such an eyelet hole in one of the upper crags of the Diamond Valley; and, from a distance, you think that it is no bigger than the eye of a needle. But if you get up to it, they say you may drive a loaded camel through it, and that there are fine things on the other side, but I have never spoken with anybody who had been through. SIBYL. I think we understand it now. We will try to write it down, and think of it. L. Meantime, Florrie, though all that I have been telling you is very true, yet you must not think the sort of diamonds that people wear in rings and necklaces are found lying about on the grass. Would you like to see how they really are found? FLORRIE. Oh, yes--yes. L. Isabel--or Lily--run up to my room and fetch me the little box with a glass lid, out of the top drawer of the chest of drawers. (_Race between_ LILY _and_ ISABEL.) (_Re-enter_ ISABEL _with the box, very much out of breath._ LILY _behind._) L. Why, you never can beat Lily in a race on the stairs, can you, Isabel? ISABEL (_panting_). Lily--beat me--ever so far--but she gave me--the box--to carry in. L. Take off the lid, then; gently. FLORRIE (_after peeping in, disappointed_). There's only a great ugly brown stone! L. Not much more than that, certainly, Florrie, if people were wise. But look, it is not a single stone; but a knot of pebbles fastened together by gravel; and in the gravel, or compressed sand, if you look close, you will see grains of gold glittering everywhere, all through; and then, do you see these two white beads, which shine, as if they had been covered with grease? FLORRIE. May I touch them? L. Yes; you will find they are not greasy, only very smooth. Well, those are the fatal jewels; native here in their dust with gold, so that you may see, cradled here together, the two great enemies of mankind,--the strongest of all malignant physical powers that have tormented our race. SIBYL. Is that really so? I know they do great harm; but do they not also do great good? L. My dear child, what good? Was any woman, do you suppose, ever the better for possessing diamonds? but how many have been made base, frivolous, and miserable by desiring them? Was ever man the better for having coffers full of gold? But who shall measure the guilt that is incurred to fill them? Look into the history of any civilised nations; analyse, with reference to this one cause of crime and misery, the lives and thoughts of their nobles, priests, merchants, and men of luxurious life. Every other temptation is at last concentrated into this; pride, and lust, and envy, and anger all give up their strength to avarice. The sin of the whole world is essentially the sin of Judas. Men do not disbelieve their Christ; but they sell Him. SIBYL. But surely that is the fault of human nature? it is not caused by the accident, as it were, of there being a pretty metal, like gold, to be found by digging. If people could not find that, would they not find something else, and quarrel for it instead? L. No. Wherever legislators have succeeded in excluding, for a time, jewels and precious metals from among national possessions, the national spirit has remained healthy. Covetousness is not natural to man--generosity is; but covetousness must be excited by a special cause, as a given disease by a given miasma; and the essential nature of a material for the excitement of covetousness is, that it shall be a beautiful thing which can be retained _without a use_. The moment we can use our possessions to any good purpose ourselves, the instinct of communicating that use to others rises side by side with our power. If you can read a book rightly, you will want others to hear it; if you can enjoy a picture rightly, you will want others to see it: learn how to manage a horse, a plough, or a ship, and you will desire to make your subordinates good horsemen, ploughmen, or sailors; you will never be able to see the fine instrument you are master of, abused; but, once fix your desire on anything useless, and all the purest pride and folly in your heart will mix with the desire, and make you at last wholly inhuman, a mere ugly lump of stomach and suckers, like a cuttle-fish. SIBYL. But surely, these two beautiful things, gold and diamonds, must have been appointed to some good purpose? L. Quite conceivably so, my dear: as also earthquakes and pestilences; but of such ultimate purposes we can have no sight. The practical, immediate office of the earthquake and pestilence is to slay us, like moths; and, as moths, we shall be wise to live out of their way. So, the practical, immediate office of gold and diamonds is the multiplied destruction of souls (in whatever sense you have been taught to understand that phrase); and the paralysis of wholesome human effort and thought on the face of God's earth: and a wise nation will live out of the way of them. The money which the English habitually spend in cutting diamonds would, in ten years, if it were applied to cutting rocks instead, leave no dangerous reef nor difficult harbour round the whole island coast. Great Britain would be a diamond worth cutting, indeed, a true piece of regalia. (_Leaves this to their thoughts for a little while._) Then, also, we poor mineralogists might sometimes have the chance of seeing a fine crystal of diamond unhacked by the jeweller. SIBYL. Would it be more beautiful uncut? L. No; but of infinite interest. We might even come to know something about the making of diamonds. SIBYL. I thought the chemists could make them already? L. In very small black crystals, yes; but no one knows how they are formed where they are found; or if indeed they are formed there at all. These, in my hand, look as if they had been swept down with the gravel and gold; only we can trace the gravel and gold to their native rocks, but not the diamonds. Read the account given of the diamond in any good work on mineralogy;--you will find nothing but lists of localities of gravel, or conglomerate rock (which is only an old indurated gravel). Some say it was once a vegetable gum; but it may have been charred wood; but what one would like to know is, mainly, why charcoal should make itself into diamonds in India, and only into black lead in Borrowdale. SIBYL. Are they wholly the same, then? L. There is a little iron mixed with our black lead but nothing to hinder its crystallisation. Your pencils in fact are all pointed with formless diamond, though they would be HHH pencils to purpose, if it crystallised. SUBYL. But what _is_ crystallisation? L. A pleasant question, when one's half asleep, and it has been tea time these two hours. What thoughtless things girls are! SIBYL. Yes, we are; but we want to know, for all that. L. My dear, it would take a week to tell you. SIBYL. Well, take it, and tell us. L. But nobody knows anything about it. SIBYL. Then tell us something that nobody knows. L. Get along with you, and tell Dora to make tea. (_The house rises; but of course the_ LECTURER _wanted to be forced to lecture again, and was._) FOOTNOTES: [145] Dante, Inf. 7. 1. LECTURE II. _THE PYRAMID BUILDERS._ _In the large Schoolroom, to which everybody has been summoned by ringing of the great bell._ L. So you have all actually come to hear about crystallisation! I cannot conceive why, unless the little ones think that the discussion may involve some reference to sugar-candy. (_Symptoms of high displeasure among the younger members of council._ ISABEL _frowns severely at L., and shakes her head violently._) My dear children, if you knew it, you are yourselves, at this moment, as you sit in your ranks, nothing, in the eye of a mineralogist, but a lovely group of rosy sugar-candy, arranged by atomic forces. And even admitting you to be something more, you have certainly been crystallising without knowing it. Did I not hear a great hurrying and whispering, ten minutes ago, when you were late in from the playground; and thought you would not all be quietly seated by the time I was ready:--besides some discussion about places--something about 'it's not being fair that the little ones should always be nearest?' Well, you were then all being crystallised. When you ran in from the garden, and against one another in the passages, you were in what mineralogists would call a state of solution, and gradual confluence; when you got seated in those orderly rows, each in her proper place, you became crystalline. That is just what the atoms of a mineral do, if they can, whenever they get disordered: they get into order again as soon as may be. I hope you feel inclined to interrupt me, and say, 'But we know our places; how do the atoms know theirs? And sometimes we dispute about our places; do the atoms--(and, besides, we don't like being compared to atoms at all)--never dispute about theirs?' Two wise questions these, if you had a mind to put them! it was long before I asked them myself, of myself. And I will not call you atoms any more. May I call you--let me see--'primary molecules?' (_General dissent, indicated in subdued but decisive murmurs._) No! not even, in familiar Saxon, 'dust?' (_Pause, with expression on faces of sorrowful doubt_; LILY _gives voice to the general sentiment in a timid 'Please don't._') No, children, I won't call you that; and mind, as you grow up, that you do not get into an idle and wicked habit of calling yourselves that. You are something better than dust, and have other duties to do than ever dust can do; and the bonds of affection you will enter into are better than merely 'getting into order.' But see to it, on the other hand, that you always behave at least as well as 'dust;' remember, it is only on compulsion, and while it has no free permission to do as it likes, that _it_ ever gets out of order; but sometimes, with some of us, the compulsion has to be the other way--hasn't it? (_Remonstratory whispers, expressive of opinion that the_ LECTURER _is becoming too personal._) I'm not looking at anybody in particular--indeed I am not. Nay, if you blush so, Kathleen, how can one help looking? We'll go back to the atoms. 'How do they know their places?' you asked, or should have asked. Yes, and they have to do much more than know them: they have to find their way to them, and that quietly and at once, without running against each other. We may, indeed, state it briefly thus:--Suppose you have to build a castle, with towers and roofs and buttresses, out of bricks of a given shape, and that these bricks are all lying in a huge heap at the bottom, in utter confusion, upset out of carts at random. You would have to draw a great many plans, and count all your bricks, and be sure you had enough for this and that tower, before you began, and then you would have to lay your foundation, and add layer by layer, in order, slowly. But how would you be astonished, in these melancholy days, when children don't read children's books, nor believe any more in fairies, if suddenly a real benevolent fairy, in a bright brick-red gown, were to rise in the midst of the red bricks, and to tap the heap of them with her wand, and say: 'Bricks, bricks, to your places!' and then you saw in an instant the whole heap rise in the air, like a swarm of red bees, and--you have been used to see bees make a honeycomb, and to think that strange enough, but now you would see the honeycomb make itself!--You want to ask something, Florrie, by the look of your eyes. FLORRIE. Are they turned into real bees, with stings? L. No, Florrie; you are only to fancy flying bricks, as you saw the slates flying from the roof the other day in the storm; only those slates didn't seem to know where they were going, and, besides, were going where they had no business: but my spell-bound bricks, though they have no wings, and what is worse, no heads and no eyes, yet find their way in the air just where they should settle, into towers and roofs, each flying to his place and fastening there at the right moment, so that every other one shall fit to him in his turn. LILY. But who are the fairies, then, who build the crystals? L. There is one great fairy, Lily, who builds much more than crystals; but she builds these also. I dreamed that I saw her building a pyramid, the other day, as she used to do, for the Pharaohs. ISABEL. But that was only a dream? L. Some dreams are truer than some wakings, Isabel; but I won't tell it you unless you like. ISABEL. Oh, please, please. L. You are all such wise children, there's no talking to you; you won't believe anything. LILY. No, we are not wise, and we will believe anything, when you say we ought. L. Well, it came about this way. Sibyl, do you recollect that evening when we had been looking at your old cave by Cumæ, and wondering why you didn't live there still; and then we wondered how old you were; and Egypt said you wouldn't tell, and nobody else could tell but she; and you laughed--I thought very gaily for a Sibyl--and said you would harness a flock of cranes for us, and we might fly over to Egypt if we liked, and see. SIBYL. Yes, and you went, and couldn't find out after all! L. Why, you know, Egypt had been just doubling that third pyramid of hers;[146] and making a new entrance into it; and a fine entrance it was! First, we had to go through an ante-room, which had both its doors blocked up with stones; and then we had three granite portcullises to pull up, one after another; and the moment we had got under them, Egypt signed to somebody above; and down they came again behind us, with a roar like thunder, only louder; then we got into a passage fit for nobody but rats, and Egypt wouldn't go any further herself, but said we might go on if we liked; and so we came to a hole in the pavement, and then to a granite trap-door--and then we thought we had gone quite far enough, and came back, and Egypt laughed at us. EGYPT. You would not have had me take my crown off, and stoop all the way down a passage fit only for rats? L. It was not the crown, Egypt--you know that very well. It was the flounces that would not let you go any farther. I suppose, however, you wear them as typical of the inundation of the Nile, so it is all right. ISABEL. Why didn't you take me with you? Where rats can go, mice can. I wouldn't have come back. L. No, mousie; you would have gone on by yourself, and you might have waked one of Pasht's cats.[147] and it would have eaten you. I was very glad you were not there. But after all this, I suppose the imagination of the heavy granite blocks and the underground ways had troubled me, and dreams are often shaped in a strange opposition to the impressions that have caused them; and from all that we had been reading in Bunsen about stones that couldn't be lifted with levers, I began to dream about stones that lifted themselves with wings. SIBYL. Now you must just tell us all about it. L. I dreamed that I was standing beside the lake, out of whose clay the bricks were made for the great pyramid of Asychis.[148] They had just been all finished, and were lying by the lake margin, in long ridges, like waves. It was near evening; and as I looked towards the sunset, I saw a thing like a dark pillar standing where the rock of the desert stoops to the Nile valley. I did not know there was a pillar there, and wondered at it; and it grew larger, and glided nearer, becoming like the form of a man, but vast, and it did not move its feet, but glided like a pillar of sand. And as it drew nearer, I looked by chance past it, towards the sun; and saw a silver cloud, which was of all the clouds closest to the sun (and in one place crossed it), draw itself back from the sun, suddenly. And it turned, and shot towards the dark pillar; leaping in an arch, like an arrow out of a bow. And I thought it was lightning; but when it came near the shadowy pillar, it sank slowly down beside it, and changed into the shape of a woman, very beautiful, and with a strength of deep calm in her blue eyes. She was robed to the feet with a white robe; and above that, to her knees, by the cloud which I had seen across the sun; but all the golden ripples of it had become plumes, so that it had changed into two bright wings like those of a vulture, which wrapped round her to her knees. She had a weaver's shuttle hanging over her shoulder, by the thread of it, and in her left hand, arrows, tipped with fire. ISABEL (_clapping her hands_). Oh! it was Neith, it was Neith! I know now. L. Yes; it was Neith herself; and as the two great spirits came nearer to me, I saw they were the Brother and Sister--the pillared shadow was the Greater Pthah.[149] And I heard them speak, and the sound of their words was like a distant singing. I could not understand the words one by one; yet their sense came to me; and so I knew that Neith had come down to see her brother's work, and the work that he had put into the mind of the king to make his servants do. And she was displeased at it; because she saw only pieces of dark clay: and no porphyry, nor marble, nor any fair stone that men might engrave the figures of the gods upon. And she blamed her brother, and said, 'Oh, Lord of truth! is this then thy will, that men should mould only four-square pieces of clay: and the forms of the gods no more?' Then the Lord of truth sighed, and said, 'Oh! sister, in truth they do not love us; why should they set up our images? Let them do what they may, and not lie--let them make their clay four-square; and labour; and perish.' Then Neith's dark blue eyes grew darker, and she said, 'Oh, Lord of truth! why should they love us? their love is vain; or fear us? for their fear is base. Yet let them testify of us, that they knew we lived for ever.' But the Lord of truth answered, 'They know, and yet they know not. Let them keep silence; for their silence only is truth.' But Neith answered, 'Brother, wilt thou also make league with Death, because Death is true? Oh! thou potter, who hast cast these human things from thy wheel, many to dishonour, and few to honour; wilt thou not let them so much as see my face; but slay them in slavery?' But Pthah only answered, 'Let them build, sister, let them build.' And Neith answered, 'What shall they build, if I build not with them?' And Pthah drew with his measuring rod upon the sand. And I saw suddenly, drawn on the sand, the outlines of great cities, and of vaults, and domes, and aqueducts, and bastions, and towers, greater than obelisks, covered with black clouds. And the wind blew ripples of sand amidst the lines that Pthah drew, and the moving sand was like the marching of men. But I saw that wherever Neith looked at the lines, they faded, and were effaced. 'Oh, Brother!' she said at last, 'what is this vanity? If I, who am Lady of wisdom, do not mock the children of men, why shouldst thou mock them, who art Lord of truth?' But Pthah answered, 'They thought to bind me; and they shall be bound. They shall labour in the fire for vanity.' And Neith said, looking at the sand, 'Brother, there is no true labour here--there is only weary life and wasteful death.' And Pthah answered, 'Is it not truer labour, sister, than thy sculpture of dreams?' Then Neith smiled; and stopped suddenly. She looked to the sun; its edge touched the horizon-edge of the desert. Then she looked to the long heaps of pieces of clay, that lay, each with its blue shadow, by the lake shore. 'Brother,' she said, 'how long will this pyramid of thine be in building?' 'Thoth will have sealed the scroll of the years ten times, before the summit is laid.' 'Brother, thou knowest not how to teach thy children to labour,' answered Neith. 'Look! I must follow Phre beyond Atlas; shall I build your pyramid for you before he goes down?' And Pthah answered, 'Yea, sister, if thou canst put thy winged shoulders to such work.' And Neith drew herself to her height; and I heard a clashing pass through the plumes of her wings, and the asp stood up on her helmet, and fire gathered in her eyes. And she took one of the flaming arrows out of the sheaf in her left hand, and stretched it out over the heaps of clay. And they rose up like flights of locusts, and spread themselves in the air, so that it grew dark in a moment. Then Neith designed them places with her arrow point; and they drew into ranks, like dark clouds laid level at morning. Then Neith pointed with her arrow to the north, and to the south, and to the east, and to the west, and the flying motes of earth drew asunder into four great ranked crowds; and stood, one in the north, and one in the south, and one in the east, and one in the west--one against another. Then Neith spread her wings wide for an instant, and closed them with a sound like the sound of a rushing sea; and waved her hand towards the foundation of the pyramid, where it was laid on the brow of the desert. And the four flocks drew together and sank down, like sea-birds settling to a level rock; and when they met, there was a sudden flame, as broad as the pyramid, and as high as the clouds; and it dazzled me; and I closed my eyes for an instant; and when I looked again, the pyramid stood on its rock, perfect; and purple with the light from the edge of the sinking sun. THE YOUNGER CHILDREN (_variously pleased_). I'm so glad! How nice! But what did Pthah say? L. Neith did not wait to hear what he would say. When I turned back to look at her, she was gone; and I only saw the level white cloud form itself again, close to the arch of the sun as it sank. And as the last edge of the sun disappeared, the form of Pthah faded into a mighty shadow, and so passed away. EGYPT. And was Neith's pyramid left? L. Yes; but you could not think, Egypt, what a strange feeling of utter loneliness came over me when the presence of the two gods passed away. It seemed as if I had never known what it was to be alone before; and the unbroken line of the desert was terrible. EGYPT. I used to feel that, when I was queen: sometimes I had to carve gods, for company, all over my palace. I would fain have seen real ones, if I could. L. But listen a moment yet, for that was not quite all my dream. The twilight drew swiftly to the dark, and I could hardly see the great pyramid; when there came a heavy murmuring sound in the air; and a horned beetle, with terrible claws, fell on the sand at my feet, with a blow like the beat of a hammer. Then it stood up on its hind claws, and waved its pincers at me: and its fore claws became strong arms, and hands; one grasping real iron pincers, and the other a huge hammer; and it had a helmet on its head, without any eyelet holes, that I could see. And its two hind claws became strong crooked legs, with feet bent inwards. And so there stood by me a dwarf, in glossy black armour, ribbed and embossed like a beetle's back, leaning on his hammer. And I could not speak for wonder; but he spoke with a murmur like the dying away of a beat upon a bell. He said, 'I will make Neith's great pyramid small. I am the lower Pthah; and have power over fire. I can wither the strong things, and strengthen the weak; and everything that is great I can make small, and everything that is little I can make great.' Then he turned to the angle of the pyramid and limped towards it. And the pyramid grew deep purple; and then red like blood, and then pale rose-colour, like fire. And I saw that it glowed with fire from within. And the lower Pthah touched it with the hand that held the pincers; and it sank down like the sand in an hour-glass,--then drew itself together, and sank, still, and became nothing, it seemed to me; but the armed dwarf stooped down, and took it into his hand, and brought it to me, saying, 'Everything that is great I can make like this pyramid; and give into men's hands to destroy.' And I saw that he had a little pyramid in his hand, with as many courses in it as the large one; and built like that, only so small. And because it glowed still, I was afraid to touch it; but Pthah said, 'Touch it--for I have bound the fire within it, so that it cannot burn.' So I touched it, and took it into my own hand; and it was cold; only red, like a ruby. And Pthah laughed, and became like a beetle again, and buried himself in the sand, fiercely; throwing it back over his shoulders. And it seemed to me as if he would draw me down with him into the sand; and I started back, and woke, holding the little pyramid so fast in my hand that it hurt me. EGYPT. Holding WHAT in your hand? L. The little pyramid. EGYPT. Neith's pyramid? L. Neith's, I believe; though not built for Asychis. I know only that it is a little rosy transparent pyramid, built of more courses of bricks than I can count, it being made so small. You don't believe me, of course, Egyptian infidel; but there it is. (_Giving crystal of rose Fluor._) (_Confused examination by crowded audience, over each other's shoulders and under each other's arms. Disappointment begins to manifest itself._) SIBYL (_not quite knowing why she and others are disappointed_). But you showed us this the other day! L. Yes; but you would not look at it the other day. SIBYL. But was all that fine dream only about this? L. What finer thing could a dream be about than this! It is small, if you will; but when you begin to think of things rightly, the ideas of smallness and largeness pass away. The making of this pyramid was in reality just as wonderful as the dream I have been telling you, and just as incomprehensible. It was not, I suppose, as swift, but quite as grand things are done as swiftly. When Neith makes crystals of snow, it needs a great deal more marshalling of the atoms, by her flaming arrows, than it does to make crystals like this one; and that is done in a moment. EGYPT. But how you _do_ puzzle us! Why do you say Neith does it? You don't mean that she is a real spirit, do you? L. What _I_ mean, is of little consequence. What the Egyptians meant, who called her 'Neith,'--or Homer, who called her 'Athena,'--or Solomon, who called her by a word which the Greeks render as 'Sophia,' you must judge for yourselves. But her testimony is always the same, and all nations have received it: 'I was by Him as one brought up with Him, and I was daily His delight; rejoicing in the habitable parts of the earth, and my delights were with the sons of men.' MARY. But is not that only a personification? L. If it be, what will you gain by unpersonifying it, or what right have you to do so? Cannot you accept the image given you, in its life; and listen, like children, to the words which chiefly belong to you as children: 'I love them that love me, and those that seek me early shall find me?' (_They are all quiet for a minute or two; questions begin to appear in their eyes._) I cannot talk to you any more to-day. Take that rose-crystal away with you and think. FOOTNOTES: [146] Note i. [147] Note iii. [148] Note ii. [149] Note iii. LECTURE III. _THE CRYSTAL LIFE._ _A very dull Lecture, wilfully brought upon themselves by the elder children. Some of the young ones have, however, managed to get in by mistake._ SCENE, _the Schoolroom._ L. So I am to stand up here merely to be asked questions, to-day, Miss Mary, am I? MARY. Yes; and you must answer them plainly; without telling us any more stories. You are quite spoiling the children: the poor little things' heads are turning round like kaleidoscopes; and they don't know in the least what you mean. Nor do we old ones, either, for that matter: to-day you must really tell us nothing but facts. L. I am sworn; but you won't like it, a bit. MARY. Now, first of all, what do you mean by 'bricks?'--Are the smallest particles of minerals all of some accurate shape, like bricks? L. I do not know, Miss Mary; I do not even know if anybody knows. The smallest atoms which are visibly and practically put together to make large crystals, may better be described as 'limited in fixed directions' than as 'of fixed forms.' But I can tell you nothing clear about ultimate atoms: you will find the idea of little bricks, or, perhaps, of little spheres, available for all the uses you will have to put it to. MARY. Well, it's very provoking; one seems always to be stopped just when one is coming to the very thing one wants to know. L. No, Mary, for we should not wish to know anything but what is easily and assuredly knowable. There's no end to it If I could show you, or myself, a group of ultimate atoms, quite clearly, in this magnifying glass, we should both be presently vexed because we could not break them in two pieces, and see their insides. MARY. Well then, next, what do you mean by the flying of the bricks? What is it the atoms do, that is like flying? L. When they are dissolved, or uncrystallised, they are really separated from each other, like a swarm of gnats in the air, or like a shoal of fish in the sea;--generally at about equal distances. In currents of solutions, or at different depths of them, one part may be more full of the dissolved atoms than another; but on the whole, you may think of them as equidistant, like the spots in the print of your gown. If they are separated by force of heat only, the substance is said to be melted; if they are separated by any other substance, as particles of sugar by water, they are said to be 'dissolved.' Note this distinction carefully, all of you. DORA. I will be very particular. When next you tell me there isn't sugar enough in your tea, I will say, 'It is not yet dissolved, sir.' L. I tell you what shall be dissolved, Miss Dora; and that's the present parliament, if the members get too saucy. (DORA _folds her hands and casts down her eyes._) L. (_proceeds in state_). Now, Miss Mary, you know already, I believe, that nearly everything will melt, under a sufficient heat, like wax. Limestone melts (under pressure); sand melts; granite melts; the lava of a volcano is a mixed mass of many kinds of rocks, melted: and any melted substance nearly always, if not always, crystallises as it cools; the more slowly the more perfectly. Water melts at what we call the freezing, but might just as wisely, though not as conveniently, call the melting, point; and radiates as it cools into the most beautiful of all known crystals. Glass melts at a greater heat, and will crystallise, if you let it cool slowly enough, in stars, much like snow. Gold needs more heat to melt it, but crystallises also exquisitely, as I will presently show you. Arsenic and sulphur crystallise from their vapours. Now in any of these cases, either of melted, dissolved, or vaporous bodies, the particles are usually separated from each other, either by heat, or by an intermediate substance; and in crystallising they are both brought nearer to each other, and packed, so as to fit as closely as possible: the essential part of the business being not the bringing together, but the packing. Who packed your trunk for you, last holidays, Isabel? ISABEL. Lily does, always. L. And how much can you allow for Lily's good packing, in guessing what will go into the trunk? ISABEL. Oh! I bring twice as much as the trunk holds. Lily always gets everything in. LILY. Ah! but, Isey, if you only knew what a time it takes! and since you've had those great hard buttons on your frocks, I can't do anything with them. Buttons won't go anywhere, you know. L. Yes, Lily, it would be well if she only knew what a time it takes; and I wish any of us knew what a time crystallisation takes, for that is consummately fine packing. The particles of the rock are thrown down, just as Isabel brings her things--in a heap; and innumerable Lilies, not of the valley, but of the rock, come to pack them. But it takes such a time! However, the best--out and out the best--way of understanding the thing, is to crystallise yourselves. THE AUDIENCE. Ourselves! L. Yes; not merely as you did the other day, carelessly, on the schoolroom forms; but carefully and finely, out in the playground. You can play at crystallisation there as much as you please. KATHLEEN _and_ JESSIE. Oh! how?--how? L. First, you must put yourselves together, as close as you can, in the middle of the grass, and form, for first practice any figure you like. JESSIE. Any dancing figure, do you mean? L. No; I mean a square, or a cross, or a diamond. Any figure you like, standing close together. You had better outline it first on the turf, with sticks, or pebbles, so as to see that it is rightly drawn; then get into it and enlarge or diminish it at one side, till you are all quite in it, and no empty space left. DORA. Crinoline and all? L. The crinoline may stand eventually for rough crystalline surface, unless you pin it in; and then you may make a polished crystal of yourselves. LILY. Oh, we'll pin it in--we'll pin it in! L. Then, when you are all in the figure, let every one note her place, and who is next her on each side; and let the outsiders count how many places they stand from the corners. KATHLEEN. Yes, yes,--and then? L. Then you must scatter all over the playground--right over it from side to side, and end to end; and put yourselves all at equal distances from each other, everywhere. You needn't mind doing it very accurately, but so as to be nearly equidistant; not less than about three yards apart from each other, on every side. JESSIE. We can easily cut pieces of string of equal length, to hold. And then? L. Then, at a given signal, let everybody walk, at the same rate, towards the outlined figure in the middle. You had better sing as you walk; that will keep you in good time. And as you close in towards it, let each take her place, and the next comers fit themselves in beside the first ones, till you are all in the figure again. KATHLEEN. Oh! how we shall run against each other! What fun it will be! L. No, no, Miss Katie; I can't allow any running against each other. The atoms never do that, whatever human creatures do. You must all know your places, and find your way to them without jostling. LILY. But how ever shall we do that? ISABEL. Mustn't the ones in the middle be the nearest, and the outside ones farther off--when we go away to scatter, I mean? L. Yes; you must be very careful to keep your order; you will soon find out how to do it; it is only like soldiers forming square, except that each must stand still in her place as she reaches it, and the others come round her; and you will have much more complicated figures, afterwards, to form, than squares. ISABEL. I'll put a stone at my place: then I shall know it. L. You might each nail a bit of paper to the turf, at your place, with your name upon it: but it would be of no use, for if you don't know your places, you will make a fine piece of business of it, while you are looking for your names. And, Isabel, if with a little head, and eyes, and a brain (all of them very good and serviceable of their kind, as such things go), you think you cannot know your place without a stone at it, after examining it well,--how do you think each atom knows its place, when it never was there before, and there's no stone at it? ISABEL. But does every atom know its place? L. How else could it get there? MARY. Are they not attracted to their places? L. Cover a piece of paper with spots, at equal intervals; and then imagine any kind of attraction you choose, or any law of attraction, to exist between the spots, and try how, on that permitted supposition, you can attract them into the figure of a Maltese cross, in the middle of the paper. MARY (_having tried it_). Yes; I see that I cannot:--one would need all kinds of attractions, in different ways, at different places. But you do not mean that the atoms are alive? L. What is it to be alive? DORA. There now; you're going to be provoking, I know. L. I do not see why it should be provoking to be asked what it is to be alive. Do you think you don't know whether you are alive or not? (ISABEL _skips to the end of the room and back._) L. Yes, Isabel, that's all very fine; and you and I may call that being alive: but a modern philosopher calls it being in a 'mode of motion.' It requires a certain quantity of heat to take you to the sideboard; and exactly the same quantity to bring you back again. That's all. ISABEL. No, it isn't. And besides, I'm not hot. L. I am, sometimes, at the way they talk. However, you know, Isabel, you might have been a particle of a mineral, and yet have been carried round the room, or anywhere else, by chemical forces, in the liveliest way. ISABEL. Yes; but I wasn't carried: I carried myself. L. The fact is, mousie, the difficulty is not so much to say what makes a thing alive, as what makes it a Self. As soon as you are shut off from the rest of the universe into a Self, you begin to be alive. VIOLET (_indignant_). Oh, surely--surely that cannot be so. Is not all the life of the soul in communion, not separation? L. There can be no communion where there is no distinction. But we shall be in an abyss of metaphysics presently, if we don't look out; and besides, we must not be too grand, to-day, for the younger children. We'll be grand, some day, by ourselves, if we must. (_The younger children are not pleased, and prepare to remonstrate; but, knowing by experience, that all conversations in which the word 'communion' occurs, are unintelligible, think better of it._) Meantime, for broad answer about the atoms. I do not think we should use the word 'life,' of any energy which does not belong to a given form. A seed, or an egg, or a young animal are properly called 'alive' with respect to the force belonging to those forms, which consistently develops that form, and no other. But the force which crystallises a mineral appears to be chiefly external, and it does not produce an entirely determinate and individual form, limited in size, but only an aggregation, in which some limiting laws must be observed. MARY. But I do not see much difference, that way, between a crystal and a tree. L. Add, then, that the mode of the energy in a living thing implies a continual change in its elements; and a period for its end. So you may define life by its attached negative, death; and still more by its attached positive, birth. But I won't be plagued any more about this, just now; if you choose to think the crystals alive, do, and welcome. Rocks have always been called 'living' in their native place. MARY. There's one question more; then I've done. L. Only one? MARY. Only one. L. But if it is answered, won't it turn into two? MARY. No; I think it will remain single, and be comfortable. L. Let me hear it. MARY. You know, we are to crystallise ourselves out of the whole playground. Now, what playground have the minerals? Where are they scattered before they are crystallised; and where are the crystals generally made? L. That sounds to me more like three questions than one, Mary. If it is only one, it is a wide one. MARY. I did not say anything about the width of it. L. Well, I must keep it within the best compass I can. When rocks either dry from a moist state, or cool from a heated state, they necessarily alter in bulk; and cracks, or open spaces, form in them in all directions. These cracks must be filled up with solid matter, or the rock would eventually become a ruinous heap. So, sometimes by water, sometimes by vapour, sometimes nobody knows how, crystallisable matter is brought from somewhere, and fastens itself in these open spaces, so as to bind the rock together again, with crystal cement. A vast quantity of hollows are formed in lavas by bubbles of gas, just as the holes are left in bread well baked. In process of time these cavities are generally filled with various crystals. MARY. But where does the crystallising substance come from? L. Sometimes out of the rock itself; sometimes from below or above, through the veins. The entire substance of the contracting rock may be filled with liquid, pressed into it so as to fill every pore;--or with mineral vapour;--or it may be so charged at one place, and empty at another. There's no end to the 'may be's.' But all that you need fancy, for our present purpose, is that hollows in the rocks, like the caves in Derbyshire, are traversed by liquids or vapour containing certain elements in a more or less free or separate state, which crystallise on the cave walls. SIBYL. There now;--Mary has had all her questions answered: it's my turn to have mine. L. Ah, there's a conspiracy among you, I see. I might have guessed as much. DORA. I'm sure you ask us questions enough! How can you have the heart, when you dislike so to be asked them yourself? L. My dear child, if people do not answer questions, it does not matter how many they are asked, because they've no trouble with them. Now, when I ask you questions, I never expect to be answered; but when you ask me, you always do; and it's not fair. DORA. Very well, we shall understand, next time. SIBYL. No, but seriously, we all want to ask one thing more, quite dreadfully. L. And I don't want to be asked it, quite dreadfully; but you'll have your own way, of course. SIBYL. We none of us understand about the lower Pthah. It was not merely yesterday; but in all we have read about him in Wilkinson, or in any book, we cannot understand what the Egyptians put their god into that ugly little deformed shape for. L. Well, I'm glad it's that sort of question; because I can answer anything I like, to that. EGYPT. Anything you like will do quite well for us; we shall be pleased with the answer, if you are. L. I am not so sure of that, most gracious queen; for I must begin by the statement that queens seem to have disliked all sorts of work, in those days, as much as some queens dislike sewing to-day. EGYPT. Now, it's too bad! and just when I was trying to say the civillest thing I could! L. But, Egypt, why did you tell me you disliked sewing so? EGYPT. Did not I show you how the thread cuts my fingers? and I always get cramp, somehow, in my neck, if I sew long. L. Well, I suppose the Egyptian queens thought every body got cramp in their neck, if they sewed long; and that thread always cut people's fingers. At all events, every kind of manual labour was despised both by them, and the Greeks; and, while they owned the real good and fruit of it, they yet held it a degradation to all who practised it. Also, knowing the laws of life thoroughly, they perceived that the special practice necessary to bring any manual art to perfection strengthened the body distortedly; one energy or member gaining at the expense of the rest. They especially dreaded and despised any kind of work that had to be done near fire: yet, feeling what they owed to it in metal-work, as the basis of all other work, they expressed this mixed reverence and scorn in the varied types of the lame Hephæstus, and the lower Pthah. SIBYL. But what did you mean by making him say 'everything great I can make small, and everything small great?' L. I had my own separate meaning in that. We have seen in modern times the power of the lower Pthah developed in a separate way, which no Greek nor Egyptian could have conceived. It is the character of pure and eyeless manual labour to conceive everything as subjected to it: and, in reality, to disgrace and diminish all that is so subjected; aggrandising itself, and the thought of itself, at the expense of all noble things. I heard an orator, and a good one too, at the Working Men's College, the other day, make a great point in a description of our railroads; saying, with grandly conducted emphasis, 'They have made man greater, and the world less.' His working audience were mightily pleased; they thought it so very fine a thing to be made bigger themselves; and all the rest of the world less. I should have enjoyed asking them (but it would have been a pity--they were so pleased), how much less they would like to have the world made;--and whether, at present, those of them really felt the biggest men, who lived in the least houses. SIBYL. But then, why did you make Pthah say that he could make weak things strong, and small things great? L. My dear, he is a boaster and self-assertor, by nature; but it is so far true. For instance, we used to have a fair in our neighbourhood--a very fine fair we thought it. You never saw such an one; but if you look at the engraving of Turner's 'St. Catherine's Hill,' you will see what it was like. There were curious booths, carried on poles; and peep-shows; and music, with plenty of drums and cymbals; and much barley-sugar and gingerbread, and the like: and in the alleys of this fair the London populace would enjoy themselves, after their fashion, very thoroughly. Well, the little Pthah set to work upon it one day; he made the wooden poles into iron ones, and put them across, like his own crooked legs, so that you always fall over them if you don't look where you are going; and he turned all the canvas into panes of glass, and put it up on his iron cross-poles; and made all the little booths into one great booth; and people said it was very fine, and a new style of architecture; and Mr. Dickens said nothing was ever like it in Fairyland, which was very true. And then the little Pthah set to work to put fine fairings in it; and he painted the Nineveh bulls afresh, with the blackest eyes he could paint (because he had none himself), and he got the angels down from Lincoln choir, and gilded their wings like his gingerbread of old times; and he sent for everything else he could think of, and put it in his booth. There are the casts of Niobe and her children; and the Chimpanzee; and the wooden Caffres and New-Zealanders; and the Shakespeare House; and Le Grand Blondin, and Le Petit Blondin; and Handel; and Mozart; and no end of shops, and buns, and beer; and all the little-Pthah-worshippers say, never was anything so sublime! SIBYL. Now, do you mean to say you never go to these Crystal Palace concerts? They're as good as good can be. L. I don't go to the thundering things with a million of bad voices in them. When I want a song, I get Julia Mannering and Lucy Bertram and Counsellor Pleydell to sing 'We be three poor Mariners' to me; then I've no headache next morning. But I do go to the smaller concerts, when I can; for they are very good, as you say, Sibyl: and I always get a reserved seat somewhere near the orchestra, where I am sure I can see the kettle-drummer drum. SIBYL. Now _do_ be serious, for one minute. L. I am serious--never was more so. You know one can't see the modulation of violinists' fingers, but one can see the vibration of the drummer's hand; and it's lovely. SIBYL. But fancy going to a concert, not to hear, but to see! L. Yes, it is very absurd. The quite right thing, I believe, is to go there to talk. I confess, however, that in most music, when very well done, the doing of it is to me the chiefly interesting part of the business. I'm always thinking how good it would be for the fat, supercilious people, who care so little for their half-crown's worth, to be set to try and do a half-crown's worth of anything like it. MARY. But surely that Crystal Palace is a great good and help to the people of London? L. The fresh air of the Norwood hills is, or was, my dear; but they are spoiling that with smoke as fast as they can. And the palace (as they call it) is a better place for them, by much, than the old fair; and it is always there, instead of for three days only; and it shuts up at proper hours of night. And good use may be made of the things in it, if you know how: but as for its teaching the people, it will teach them nothing but the lowest of the lower Pthah's work--nothing but hammer and tongs. I saw a wonderful piece, of his doing, in the place, only the other day. Some unhappy metal-worker--I am not sure if it was not a metal-working firm--had taken three years to make a Golden eagle. SIBYL. Of real gold? L. No; of bronze, or copper, or some of their foul patent metal--it is no matter what. I meant a model of our chief British eagle. Every feather was made separately; and every filament of every feather separately, and so joined on; and all the quills modelled of the right length and right section, and at last the whole cluster of them fastened together. You know, children, I don't think much of my own drawing; but take my proud word for once, that when I go to the Zoological Gardens, and happen to have a bit of chalk in my pocket, and the Gray Harpy will sit, without screwing his head round, for thirty seconds,--I can do a better thing of him in that time than the three years' work of this industrious firm. For, during the thirty seconds, the eagle is my object,--not myself; and during the three years, the firm's object, in every fibre of bronze it made, was itself, and not the eagle. That is the true meaning of the little Pthah's having no eyes--he can see only himself. The Egyptian beetle was not quite the full type of him; our northern ground beetle is a truer one. It is beautiful to see it at work, gathering its treasures (such as they are) into little round balls; and pushing them home with the strong wrong end of it,--head downmost all the way,--like a modern political economist with his ball of capital, declaring that a nation can stand on its vices better than on its virtues. But away with you, children, now, for I'm getting cross. DORA. I'm going down-stairs; I shall take care, at any rate, that there are no little Pthahs in the kitchen cupboards. LECTURE IV. _THE CRYSTAL ORDERS._ _A working Lecture, in the large Schoolroom; with experimental Interludes The great bell has rung unexpectedly._ KATHLEEN (_entering disconsolate, though first at the summons_). Oh dear, oh dear, what a day! Was ever anything so provoking! just when we wanted to crystallise ourselves;--and I'm sure it's going to rain all day long. L. So am I, Kate. The sky has quite an Irish way with it But I don't see why Irish girls should also look so dismal. Fancy that you don't want to crystallise yourselves: you didn't, the day before yesterday, and you were not unhappy when it rained then. FLORRIE. Ah! but we do want to-day; and the rain's so tiresome. L. That is to say, children, that because you are all the richer by the expectation of playing at a new game, you choose to make yourselves unhappier than when you had nothing to look forward to, but the old ones. ISABEL. But then, to have to wait--wait--wait; and before we've tried it;--and perhaps it will rain to-morrow, too! L. It may also rain the day after to-morrow. We can make ourselves uncomfortable to any extent with perhapses, Isabel. You may stick perhapses into your little minds, like pins, till you are as uncomfortable as the Lilliputians made Gulliver with their arrows, when he would not lie quiet. ISABEL. But what _are_ we to do to-day? L. To be quiet, for one thing, like Gulliver when he saw there was nothing better to be done. And to practise patience. I can tell you children, _that_ requires nearly as much practising as music; and we are continually losing our lessons when the master comes. Now, to-day, here's a nice little adagio lesson for us, if we play it properly. ISABEL. But I don't like that sort of lesson. I can't play it properly. L. Can you play a Mozart sonata yet, Isabel? The more need to practise. All one's life is a music, if one touches the notes rightly, and in time. But there must be no hurry. KATHLEEN. I'm sure there's no music in stopping in on a rainy day. L. There's no music in a 'rest,' Katie, that I know of: but there's the making of music in it. And people are always missing that part of the life-melody; and scrambling on without counting--not that it's easy to count; but nothing on which so much depends ever _is_ easy. People are always talking of perseverance, and courage, and fortitude; but patience is the finest and worthiest part of fortitude,--and the rarest, too. I know twenty persevering girls for one patient one: but it is only that twenty-first who can do her work, out and out, or enjoy it. For patience lies at the root of all pleasures, as well as of all powers. Hope herself ceases to be happiness, when Impatience companions her. (ISABEL _and_ LILY _sit down on the floor, and fold their hands. The others follow their example._) Good children! but that's not quite the way of it, neither. Folded hands are not necessarily resigned ones. The Patience who really smiles at grief usually stands, or walks, or even runs: she seldom sits; though she may sometimes have to do it, for many a day, poor thing, by monuments; or like Chaucer's, 'with facë pale, upon a hill of sand.' But we are not reduced to that to-day. Suppose we use this calamitous forenoon to choose the shapes we are to crystallise into? we know nothing about them yet. (_The pictures of resignation rise from the floor, not in the patientest manner. General applause._) MARY _(with one or two others_). The very thing we wanted to ask you about! LILY. We looked at the books about crystals, but they are so dreadful. L. Well, Lily, we must go through a little dreadfulness, that's a fact: no road to any good knowledge is wholly among the lilies and the grass; there is rough climbing to be done always. But the crystal-books are a little _too_ dreadful, most of them, I admit; and we shall have to be content with very little of their help. You know, as you cannot stand on each other's heads, you can only make yourselves into the sections of crystals,--the figures they show when they are cut through; and we will choose some that will be quite easy. You shall make diamonds of yourselves---- ISABEL. Oh, no, no! we won't be diamonds, please. L. Yes, you shall, Isabel; they are very pretty things, if the jewellers, and the kings and queens, would only let them alone. You shall make diamonds of yourselves, and rubies of yourselves, and emeralds; and Irish diamonds; two of those--with Lily in the middle of one, which will be very orderly, of course; and Kathleen in the middle of the other, for which we will hope the best;--and you shall make Derbyshire spar of yourselves, and Iceland spar, and gold, and silver, and--Quicksilver there's enough of in you, without any making. MARY. Now, you know, the children will be getting quite wild: we must really get pencils and paper, and begin properly. L. Wait a minute, Miss Mary; I think as we've the school room clear to-day, I'll try to give you some notion of the three great orders or ranks of crystals, into which all the others seem more or less to fall. We shall only want one figure a day, in the playground; and that can be drawn in a minute: but the general ideas had better be fastened first. I must show you a great many minerals; so let me have three tables wheeled into the three windows, that we may keep our specimens separate;--we will keep the three orders of crystals on separate tables. (_First Interlude, of pushing and pulling, and spreading of baize covers._ VIOLET, _not particularly minding what she is about, gets herself jammed into a corner, and bid to stand out of the way; on which she devotes herself to meditation._) VIOLET (_after interval of meditation_). How strange it is that everything seems to divide into threes! L. Everything doesn't divide into threes. Ivy won't, though shamrock will; and daisies won't, though lilies will. VIOLET. But all the nicest things seem to divide into threes. L. Violets won't. VIOLET. No; I should think not, indeed! But I mean the great things. L. I've always heard the globe had four quarters. ISABEL. Well; but you know you said it hadn't any quarters at all. So mayn't it really be divided into three? L. If it were divided into no more than three, on the outside of it, Isabel, it would be a fine world to live in; and if it were divided into three in the inside of it, it would soon be no world to live in at all. DORA. We shall never get to the crystals, at this rate. (_Aside to_ MARY.) He will get off into political economy before we know where we are. (_Aloud._) But the crystals are divided into three, then? L. No; but there are three general notions by which we may best get hold of them. Then between these notions there are other notions. LILY (_alarmed_). A great many? And shall we have to learn them all? L. More than a great many--a quite infinite many. So you cannot learn them all. LILY (_greatly relieved_). Then may we only learn the three? L. Certainly; unless, when you have got those three notions, you want to have some more notions;--which would not surprise me. But we'll try for the three, first. Katie, you broke your coral necklace this morning? KATHLEEN. Oh! who told you? It was in jumping. I'm so sorry! L. I'm very glad. Can you fetch me the beads of it? KATHLEEN. I've lost some; here are the rest in my pocket, if I can only get them out. L. You mean to get them out some day, I suppose; so try now. I want them. (KATHLEEN _empties her pocket on the floor. The beads disperse. The School disperses also. Second Interlude--hunting piece._) L. (_after waiting patiently for a quarter of an hour, to_ ISABEL, _who comes up from under the table with her hair all about her ears, and the last findable beads in her hand_). Mice are useful little things sometimes. Now, mousie, I want all those beads crystallised. How many ways are there of putting them in order? ISABEL. Well, first one would string them, I suppose? L. Yes, that's the first way. You cannot string ultimate atoms; but you can put them in a row, and then they fasten themselves together, somehow, into a long rod or needle. We will call these '_Needle_-crystals.' What would be the next way? ISABEL. I suppose, as we are to get together in the playground, when it stops raining, in different shapes? L. Yes; put the beads together, then, in the simplest form you can, to begin with. Put them into a square, and pack them close. ISABEL (_after careful endeavour_). I can't get them closer. L. That will do. Now you may see, beforehand, that if you try to throw yourselves into square in this confused way, you will never know your places; so you had better consider every square as made of rods, put side by side. Take four beads of equal size, first, Isabel; put them into a little square. That, you may consider as made up of two rods of two beads each. Then you can make a square a size larger, out of three rods of three. Then the next square may be a size larger. How many rods, Lily? LILY. Four rods of four beads each, I suppose. L. Yes, and then five rods of five, and so on. But now, look here; make another square of four beads again. You see they leave a little opening in the centre. ISABEL (_pushing two opposite ones closer together_). Now they don't. L. No; but now it isn't a square; and by pushing the two together you have pushed the two others farther apart. ISABEL. And yet, somehow, they all seem closer than they were! L. Yes; for before, each of them only touched two of the others, but now each of the two in the middle touches the other three. Take away one of the outsiders, Isabel; now you have three in a triangle--the smallest triangle you can make out of the beads. Now put a rod of three beads on at one side. So, you have a triangle of six beads; but just the shape of the first one. Next a rod of four on the side of that; and you have a triangle of ten beads: then a rod of five on the side of that; and you have a triangle of fifteen. Thus you have a square with five beads on the side, and a triangle with five beads on the side; equal-sided, therefore, like the square. So, however few or many you may be, you may soon learn how to crystallise quickly into these two figures, which are the foundation of form in the commonest, and therefore actually the most important, as well as in the rarest, and therefore, by our esteem, the most important, minerals of the world. Look at this in my hand. VIOLET. Why, it is leaf-gold! L. Yes; but beaten by no man's hammer; or rather, not beaten at all, but woven. Besides, feel the weight of it. There is gold enough there to gild the walls and ceiling, if it were beaten thin. VIOLET. How beautiful! And it glitters like a leaf covered with frost. L. You only think it so beautiful because you know it is gold. It is not prettier, in reality, than a bit of brass: for it is Transylvanian gold; and they say there is a foolish gnome in the mines there, who is always wanting to live in the moon, and so alloys all the gold with a little silver. I don't know how that may be: but the silver always _is_ in the gold; and if he does it, it's very provoking of him, for no gold is woven so fine anywhere else. MARY (_who has been looking through her magnifying glass_). But this is not woven. This is all made of little triangles. L. Say 'patched,' then, if you must be so particular. But if you fancy all those triangles, small as they are (and many of them are infinitely small), made up again of rods, and those of grains, as we built our great triangle of the beads, what word will you take for the manufacture? MAY. There's no word--it is beyond words. L. Yes; and that would matter little, were it not beyond thoughts too. But, at all events, this yellow leaf of dead gold, shed, not from the ruined woodlands, but the ruined rocks, will help you to remember the second kind of crystals, _Leaf_-crystals, or _Foliated_ crystals; though I show you the form in gold first only to make a strong impression on you, for gold is not generally, or characteristically, crystallised in leaves; the real type of foliated crystals is this thing, Mica; which if you once feel well, and break well, you will always know again; and you will often have occasion to know it, for you will find it everywhere, nearly, in hill countries. KATHLEEN. If we break it well! May we break it? L. To powder, if you like. (_Surrenders plate of brown mica to public investigation. Third Interlude. It sustains severely philosophical treatment at all hands._) FLORRIE. (_to whom the last fragments have descended_) Always leaves, and leaves, and nothing but leaves, or white dust! L. That dust itself is nothing but finer leaves. (_Shows them to_ FLORRIE _through magnifying glass._) ISABEL. (_peeping over_ FLORRIE'S _shoulder_). But then this bit under the glass looks like that bit out of the glass! If we could break this bit under the glass, what would it be like? L. It would be all leaves still. ISABEL. And then if we broke those again? L. All less leaves still. ISABEL (_impatient_). And if we broke them again, and again, and again, and again, and again? L. Well, I suppose you would come to a limit, if you could only see it. Notice that the little flakes already differ somewhat from the large ones: because I can bend them up and down, and they stay bent; while the large flake, though it bent easily a little way, sprang back when you let it go, and broke, when you tried to bend it far. And a large mass would not bend at all. MARY. Would that leaf gold separate into finer leaves, in the same way? L. No; and therefore, as I told you, it is not a characteristic specimen of a foliated crystallisation. The little triangles are portions of solid crystals, and so they are in this, which looks like a black mica; but you see it is made up of triangles like the gold, and stands, almost accurately, as an intermediate link, in crystals, between mica and gold. Yet this is the commonest, as gold the rarest, of metals. MARY. Is it iron? I never saw iron so bright. L. It is rust of iron, finely crystallised: from its resemblance to mica, it is often called micaceous iron. KATHLEEN. May we break this, too? L. No, for I could not easily get such another crystal; besides, it would not break like the mica; it is much harder. But take the glass again, and look at the fineness of the jagged edges of the triangles where they lap over each other. The gold has the same: but you see them better here, terrace above terrace, countless, and in successive angles, like superb fortified bastions. MAY. But all foliated crystals are not made of triangles? L. Far from it: mica is occasionally so, but usually of hexagons; and here is a foliated crystal made of squares, which will show you that the leaves of the rock-land have their summer green, as well as their autumnal gold. FLORRIE. Oh! oh! oh! (_jumps for joy_). L. Did you never see a bit of green leaf before, Florrie? FLORRIE. Yes, but never so bright as that, and not in a stone. L. If you will look at the leaves of the trees in sunshine after a shower, you will find they are much brighter than that; and surely they are none the worse for being on stalks instead of in stones? FLORRIE. Yes, but then there are so many of them, one never looks, I suppose. L. Now you have it, Florrie. VIOLET (_sighing_). There are so many beautiful things we never see! L. You need not sigh for that, Violet; but I will tell you what we should all sigh for,--that there are so many ugly things we never see. VIOLET. But we don't want to see ugly things! L. You had better say, 'We don't want to suffer them.' You ought to be glad in thinking how much more beauty God has made, than human eyes can ever see; but not glad in thinking how much more evil man has made, than his own soul can ever conceive, much more than his hands can ever heal. VIOLET. I don't understand;--how is that like the leaves? L. The same law holds in our neglect of multiplied pain, as in our neglect of multiplied beauty. Florrie jumps for joy at sight of half an inch of a green leaf in a brown stone; and takes more notice of it than of all the green in the wood: and you, or I, or any of us, would be unhappy if any single human creature beside us were in sharp pain; but we can read, at breakfast, day after day, of men being killed, and of women and children dying of hunger, faster than the leaves strew the brooks in Vallombrosa;--and then go out to play croquet, as if nothing had happened. MAY. But we do not see the people being killed or dying. L. You did not see your brother, when you got the telegram the other day, saying he was ill, May; but you cried for him and played no croquet. But we cannot talk of these things now; and what is more, you must let me talk straight on, for a little while; and ask no questions till I've done: for we branch ('exfoliate,' I should say, mineralogically) always into something else,--though that's my fault more than yours; but I must go straight on now. You have got a distinct notion, I hope, of leaf-crystals; and you see the sort of look they have: you can easily remember that 'folium' is Latin for a leaf, and that the separate flakes of mica, or any other such stones, are called 'folia;' but, because mica is the most characteristic of these stones, other things that are like it in structure are called 'micas;' thus we have Uran-mica, which is the green leaf I showed you; and Copper-mica, which is another like it, made chiefly of copper; and this foliated iron is called 'micaceous iron.' You have then these two great orders, Needle-crystals, made (probably) of grains in rows; and Leaf-crystals, made (probably) of needles interwoven; now, lastly, there are crystals of a third order, in heaps, or knots, or masses, which may be made, either of leaves laid one upon another, or of needles bound like Roman fasces; and mica itself, when it is well crystallised, puts itself into such masses, as if to show us how others are made. Here is a brown six-sided crystal, quite as beautifully chiselled at the sides as any castle tower; but you see it is entirely built of folia of mica, one laid above another, which break away the moment I touch the edge with my knife. Now, here is another hexagonal tower, of just the same size and colour, which I want you to compare with the mica carefully; but as I cannot wait for you to do it just now, I must tell you quickly what main differences to look for. First, you will feel it is far heavier than the mica. Then, though its surface looks quite micaceous in the folia of it, when you try them with the knife, you will find you cannot break them away---- KATHLEEN. May I try? L. Yes, you mistrusting Katie. Here's my strong knife for you. (_Experimental pause._ KATHLEEN, _doing her best._) You'll have that knife shutting on your finger presently, Kate; and I don't know a girl who would like less to have her hand tied up for a week. KATHLEEN (_who also does not like to be beaten--giving up the knife despondently_). What _can_ the nasty hard thing be? L. It is nothing but indurated clay, Kate: very hard set certainly, yet not so hard as it might be. If it were thoroughly well crystallised, you would see none of those micaceous fractures; and the stone would be quite red and clear, all through. KATHLEEN. Oh, cannot you show us one? L. Egypt can, if you ask her; she has a beautiful one in the clasp of her favourite bracelet. KATHLEEN. Why, that's a ruby! L. Well, so is that thing you've been scratching at. KATHLEEN. My goodness! (_Takes up the stone again, very delicately; and drops it. General consternation._) L. Never mind, Katie; you might drop it from the top of the house, and do it no harm. But though you really are a very good girl, and as good-natured as anybody can possibly be, remember, you have your faults, like other people; and, if I were you, the next time I wanted to assert anything energetically, I would assert it by 'my badness,' not 'my goodness.' KATHLEEN. Ah, now, it's too bad of you! L. Well, then, I'll invoke, on occasion, my 'too-badness.' But you may as well pick up the ruby, now you have dropped it; and look carefully at the beautiful hexagonal lines which gleam on its surface; and here is a pretty white sapphire (essentially the same stone as the ruby), in which you will see the same lovely structure, like the threads of the finest white cobweb. I do not know what is the exact method of a ruby's construction; but you see by these lines, what fine construction there _is_, even in this hardest of stones (after the diamond), which usually appears as a massive lump or knot. There is therefore no real mineralogical distinction between needle crystals and knotted crystals, but, practically, crystallised masses throw themselves into one of the three groups we have been examining to-day; and appear either as Needles, as Folia, or as Knots; when they are in needles (or fibres), they make the stones or rocks formed out of them '_fibrous_;' when they are in folia, they make them '_foliated_;' when they are in knots (or grains), '_granular_.' Fibrous rocks are comparatively rare, in mass; but fibrous minerals are innumerable; and it is often a question which really no one but a young lady could possibly settle, whether one should call the fibres composing them 'threads' or 'needles.' Here is amianthus, for instance, which is quite as fine and soft as any cotton thread you ever sewed with; and here is sulphide of bismuth, with sharper points and brighter lustre than your finest needles have; and fastened in white webs of quartz more delicate than your finest lace; and here is sulphide of antimony, which looks like mere purple wool, but it is all of purple needle crystals; and here is red oxide of copper (you must not breathe on it as you look, or you may blow some of the films of it off the stone), which is simply a woven tissue of scarlet silk. However, these finer thread forms are comparatively rare, while the bolder and needle-like crystals occur constantly; so that, I believe, 'Needle-crystal' is the best word (the grand one is 'Acicular crystal,' but Sibyl will tell you it is all the same, only less easily understood; and therefore more scientific). Then the Leaf-crystals, as I said, form an immense mass of foliated rocks; and the Granular crystals, which are of many kinds, form essentially granular, or granitic and porphyritic rocks; and it is always a point of more interest to me (and I think will ultimately be to you), to consider the causes which force a given mineral to take any one of these three general forms, than what the peculiar geometrical limitations are, belonging to its own crystals.[150] It is more interesting to me, for instance, to try and find out why the red oxide of copper, usually crystallising in cubes or octahedrons, makes itself exquisitely, out of its cubes, into this red silk in one particular Cornish mine, than what are the absolutely necessary angles of the octahedron, which is its common form. At all events, that mathematical part of crystallography is quite beyond girls' strength; but these questions of the various tempers and manners of crystals are not only comprehensible by you, but full of the most curious teaching for you. For in the fulfilment, to the best of their power, of their adopted form under given circumstances, there are conditions entirely resembling those of human virtue; and indeed expressible under no term so proper as that of the Virtue, or Courage of crystals:--which, if you are not afraid of the crystals making you ashamed of yourselves, we will try to get some notion of, to-morrow. But it will be a bye-lecture, and more about yourselves than the minerals, Don't come unless you like. MARY. I'm sure the crystals will make us ashamed of ourselves; but we'll come, for all that. L. Meantime, look well and quietly over these needle, or thread crystals, and those on the other two tables, with magnifying glasses, and see what thoughts will come into your little heads about them. For the best thoughts are generally those which come without being forced, one does not know how. And so I hope you will get through your wet day patiently. FOOTNOTES: [150] Note iv. LECTURE V. _CRYSTAL VIRTUES._ _A quiet talk, in the afternoon, by the sunniest window of the Drawing-room. Present_, FLORRIE, ISABEL, MAY, LUCILLA, KATHLEEN, DORA, MARY, _and some others, who have saved time for the bye-Lecture._ L. So you have really come, like good girls, to be made ashamed of yourselves? DORA (_very meekly_). No, we needn't be made so; we always are. L. Well, I believe that's truer than most pretty speeches: but you know, you saucy girl, some people have more reason to be so than others. Are you sure everybody is, as well as you? THE GENERAL VOICE. Yes, yes; everybody. L. What! Florrie ashamed of herself? (FLORRIE _hides behind the curtain._) L. And Isabel? (ISABEL _hides under the table._) L. And May? (MAY _runs into the corner behind the piano._) L. And Lucilla? (LUCILLA _hides her face in her hands._) L. Dear, dear; but this will never do. I shall have to tell you of the faults of the crystals, instead of virtues, to put you in heart again. MAY (_coming out of her corner_). Oh! have the crystals faults, like us? L. Certainly, May. Their best virtues are shown in fighting their faults. And some have a great many faults; and some are very naughty crystals indeed. FLORRIE (_from behind her curtain_). As naughty as me? ISABEL (_peeping from under the table cloth_). Or me? L. Well, I don't know. They never forget their syntax, children, when once they've been taught it. But I think some of them are, on the whole, worse than any of you. Not that it's amiable of you to look so radiant, all in a minute, on that account. DORA. Oh! but it's so much more comfortable. (_Everybody seems to recover their spirits. Eclipse of_ FLORRIE _and_ ISABEL _terminates._) L. What kindly creatures girls are, after all, to their neighbours' failings! I think you may be ashamed of yourselves indeed, now, children! I can tell you, you shall hear of the highest crystalline merits that I can think of, to-day: and I wish there were more of them; but crystals have a limited, though a stern, code of morals; and their essential virtues are but two;--the first is to be pure, and the second to be well shaped. MARY. Pure! Does that mean clear--transparent? L. No; unless in the case of a transparent substance. You cannot have a transparent crystal of gold; but you may have a perfectly pure one. ISABEL. But you said it was the shape that made things be crystals; therefore, oughtn't their shape to be their first virtue, not their second? L. Right, you troublesome mousie. But I call their shape only their second virtue, because it depends on time and accident, and things which the crystal cannot help. If it is cooled too quickly, or shaken, it must take what shape it can; but it seems as if, even then, it had in itself the power of rejecting impurity, if it has crystalline life enough. Here is a crystal of quartz, well enough shaped in its way; but it seems to have been languid and sick at heart; and some white milky substance has got into it, and mixed itself up with it, all through. It makes the quartz quite yellow, if you hold it up to the light, and milky blue on the surface. Here is another, broken into a thousand separate facets, and out of all traceable shape; but as pure as a mountain spring. I like this one best. THE AUDIENCE. So do I--and I--and I. MARY. Would a crystallographer? L. I think so. He would find many more laws curiously exemplified in the irregularly grouped but pure crystal. But it is a futile question, this of first or second. Purity is in most cases a prior, if not a nobler, virtue; at all events it is most convenient to think about it first. MARY. But what ought we to think about it? Is there much to be thought--I mean, much to puzzle one? L. I don't know what you call 'much.' It is a long time since I met with anything in which there was little. There's not much in this, perhaps. The crystal must be either dirty or clean,--and there's an end. So it is with one's hands, and with one's heart--only you can wash your hands without changing them, but not hearts, nor crystals. On the whole, while you are young, it will be as well to take care that your hearts don't want much washing; for they may perhaps need wringing also, when they do. (_Audience doubtful and uncomfortable._ LUCILLA _at last takes courage._) LUCILLA. Oh! but surely, sir, we cannot make our hearts clean? L. Not easily, Lucilla; so you had better keep them so when they are. LUCILLA. When they are! But, sir-- L. Well? LUCILLA. Sir--surely--are we not told that they are all evil? L. Wait a little, Lucilla; that is difficult ground you are getting upon; and we must keep to our crystals, till at least we understand what _their_ good and evil consist in; they may help us afterwards to some useful hints about our own. I said that their goodness consisted chiefly in purity of substance, and perfectness of form: but those are rather the _effects_ of their goodness, than the goodness itself. The inherent virtues of the crystals, resulting in these outer conditions, might really seem to be best described in the words we should use respecting living creatures--'force of heart' and steadiness of purpose.' There seem to be in some crystals, from the beginning, an unconquerable purity of vital power, and strength of crystal spirit. Whatever dead substance, unacceptant of this energy, comes in their way, is either rejected, or forced to take some beautiful subordinate form; the purity of the crystal remains unsullied, and every atom of it bright with coherent energy. Then the second condition is, that from the beginning of its whole structure, a fine crystal seems to have determined that it will be of a certain size and of a certain shape; it persists in this plan, and completes it. Here is a perfect crystal of quartz for you. It is of an unusual form, and one which it might seem very difficult to build--a pyramid with convex sides, composed of other minor pyramids. But there is not a flaw in its contour throughout; not one of its myriads of component sides but is as bright as a jeweller's facetted work (and far finer, if you saw it close). The crystal points are as sharp as javelins; their edges will cut glass with a touch. Anything more resolute, consummate, determinate in form, cannot be conceived. Here, on the other hand, is a crystal of the same substance, in a perfectly simple type of form--a plain six-sided prism; but from its base to its point,--and it is nine inches long,--it has never for one instant made up its mind what thickness it will have. It seems to have begun by making itself as thick as it thought possible with the quantity of material at command. Still not being as thick as it would like to be, it has clumsily glued on more substance at one of its sides. Then it has thinned itself, in a panic of economy; then puffed itself out again; then starved one side to enlarge another; then warped itself quite out of its first line. Opaque, rough-surfaced, jagged on the edge, distorted in the spine, it exhibits a quite human image of decrepitude and dishonour; but the worst of all the signs of its decay and helplessness, is that half-way up, a parasite crystal, smaller, but just as sickly, has rooted itself in the side of the larger one, eating out a cavity round its root, and then growing backwards, or downwards, contrary to the direction of the main crystal. Yet I cannot trace the least difference in purity of substance between the first most noble stone, and this ignoble and dissolute one. The impurity of the last is in its will, or want of will. MARY. Oh, if we could but understand the meaning of it all! L. We can understand all that is good for us. It is just as true for us, as for the crystal, that the nobleness of life depends on its consistency,--clearness of purpose,--quiet and ceaseless energy. All doubt, and repenting, and botching, and retouching, and wondering what it will be best to do next, are vice, as well as misery. MARY (_much wondering_). But must not one repent when one does wrong, and hesitate when one can't see one's way? L. You have no business at all to do wrong; nor to get into any way that you cannot see. Your intelligence should always be far in advance of your act. Whenever you do not know what you are about, you are sure to be doing wrong. KATHLEEN. Oh, dear, but I never know what I am about! L. Very true, Katie, but it is a great deal to know, if you know that. And you find that you have done wrong afterwards; and perhaps some day you may begin to know, or at least, think, what you are about. ISABEL. But surely people can't do very wrong if they don't know, can they? I mean, they can't be very naughty. They can be wrong, like Kathleen or me, when we make mistakes; but not wrong in the dreadful way. I can't express what I mean; but there are two sorts of wrong are there not? L. Yes, Isabel; but you will find that the great difference is between kind and unkind wrongs, not between meant and unmeant wrong. Very few people really mean to do wrong,--in a deep sense, none. They only don't know what they are about. Cain did not mean to do wrong when he killed Abel. (ISABEL _draws a deep breath, and opens her eyes very wide._) L. No, Isabel; and there are countless Cains among us now, who kill their brothers by the score a day, not only for less provocation than Cain had, but for _no_ provocation,--and merely for what they can make of their bones,--yet do not think they are doing wrong in the least. Then sometimes you have the business reversed, as over in America these last years, where you have seen Abel resolutely killing Cain, and not thinking he is doing wrong. The great difficulty is always to open people's eyes: to touch their feelings, and break their hearts, is easy; the difficult thing is to break their heads. What does it matter, as long as they remain stupid, whether you change their feelings or not? You cannot be always at their elbow to tell them what is right: and they may just do as wrong as before, or worse; and their best intentions merely make the road smooth for them,--you know where, children. For it is not the place itself that is paved with them, as people say so often. You can't pave the bottomless pit; but you may the road to it. MAY. Well, but if people do as well as they can see how, surely that is the right for them, isn't it? L. No, May, not a bit of it; right is right, and wrong is wrong. It is only the fool who does wrong, and says he 'did it for the best.' And if there's one sort of person in the world that the Bible speaks harder of than another, it is fools. Their particular and chief way of saying 'There is no God' is this, of declaring that whatever their 'public opinion' may be, is right: and that God's opinion is of no consequence. MAY. But surely nobody can always know what is right? L. Yes, you always can, for to-day; and if you do what you see of it to-day, you will see more of it, and more clearly, to-morrow. Here, for instance, you children are at school, and have to learn French, and arithmetic, and music, and several other such things. That is your 'right' for the present; the 'right' for us, your teachers, is to see that you learn as much as you can, without spoiling your dinner, your sleep, or your play; and that what you do learn, you learn well. You all know when you learn with a will, and when you dawdle. There's no doubt of conscience about that, I suppose? VIOLET. No; but if one wants to read an amusing book, instead of learning one's lesson? L. You don't call that a 'question,' seriously, Violet? You are then merely deciding whether you will resolutely do wrong or not. MARY. But, in after life, how many fearful difficulties may arise, however one tries to know or to do what is right! L. You are much too sensible a girl, Mary, to have felt that, whatever you may have seen. A great many of young ladies' difficulties arise from their falling in love with a wrong person: but they have no business to let themselves fall in love, till they know he is the right one. DORA. How many thousands ought he to have a year? L. (_disdaining reply_). There are, of course, certain crises of fortune when one has to take care of oneself, and mind shrewdly what one is about. There is never any real doubt about the path, but you may have to walk very slowly. MARY. And if one is forced to do a wrong thing by some one who has authority over you? L. My dear, no one can be forced to do a wrong thing, for the guilt is in the will: but you may any day be forced to do a fatal thing, as you might be forced to take poison; the remarkable law of nature in such cases being, that it is always unfortunate _you_ who are poisoned, and not the person who gives you the dose. It is a very strange law, but it _is_ a law. Nature merely sees to the carrying out of the normal operation of arsenic. She never troubles herself to ask who gave it you. So also you may be starved to death, morally as well as physically, by other people's faults. You are, on the whole, very good children sitting here to-day;--do you think that your goodness comes all by your own contriving? or that you are gentle and kind because your dispositions are naturally more angelic than those of the poor girls who are playing, with wild eyes, on the dustheaps in the alleys of our great towns; and who will one day fill their prisons,--or, better, their graves? Heaven only knows where they, and we who have cast them there, shall stand at last. But the main judgment question will be, I suppose, for all of us, 'Did you keep a good heart through it?' What you were, others may answer for;--what you tried to be, you must answer for, yourself. Was the heart pure and true--tell us that? And so we come back to your sorrowful question, Lucilla, which I put aside a little ago. You would be afraid to answer that your heart _was_ pure and true, would not you? LUCILLA. Yes, indeed, sir. L. Because you have been taught that it is all evil--'only evil continually.' Somehow, often as people say that, they never seem, to me, to believe it? Do you really believe it? LUCILLA. Yes, sir; I hope so. L. That you have an entirely bad heart? LUCILLA (_a little uncomfortable at the substitution of the monosyllable for the dissyllable, nevertheless persisting in her orthodoxy_). Yes, sir. L. Florrie, I am sure you are tired; I never like you to stay when you are tired; but, you know, you must not play with the kitten while we're talking. FLORRIE. Oh! but I'm not tired; and I'm only nursing her. She'll be asleep in my lap directly. L. Stop! that puts me in mind of something I had to show you, about minerals that are like hair. I want a hair out of Tittie's tail. FLORRIE (_quite rude, in her surprise, even to the point of repeating expressions_). Out of Tittie's tail! L. Yes; a brown one: Lucilla, you can get at the tip of it nicely, under Florrie's arm; just pull one out for me. LUCILLA. Oh! but, sir, it will hurt her so! L. Never mind; she can't scratch you while Florrie is holding her. Now that I think of it, you had better pull out two. LUCILLA. But then she may scratch Florrie! and it will hurt her so, sir! if you only want brown hairs, wouldn't two of mine do? L. Would you really rather pull out your own than Tittie's? LUCILLA. Oh, of course, if mine will do. L. But that's very wicked, Lucilla! LUCILLA. Wicked, sir? L. Yes; if your heart was not so bad, you would much rather pull all the cat's hairs out, than one of your own. LUCILLA. Oh! but sir, I didn't mean bad, like that. L. I believe, if the truth were told, Lucilla, you would like to tie a kettle to Tittie's tail, and hunt her round the playground. LUCILLA. Indeed, I should not, sir. L. That's not true, Lucilla; you know it cannot be. LUCILLA. Sir? L. Certainly it is not;--how can you possibly speak any truth out of such a heart as you have? It is wholly deceitful. LUCILLA. Oh! no, no; I don't mean that way; I don't mean that it makes me tell lies, quite out. L. Only that it tells lies within you? LUCILLA. Yes. L. Then, outside of it, you know what is true, and say so; and I may trust the outside of your heart; but within, it is all foul and false. Is that the way? LUCILLA. I suppose so: I don't understand it, quite. L. There is no occasion for understanding it; but do you feel it? Are you sure that your heart is deceitful above all things, and desperately wicked? LUCILLA (_much relieved by finding herself among phrases with which she is acquainted_). Yes, sir. I'm sure of that. L. (_pensively_). I'm sorry for it, Lucilla. LUCILLA. So am I, indeed. L. What are you sorry with, Lucilla? LUCILLA. Sorry with, sir? L. Yes; I mean, where do you feel sorry? in your feet? LUCILLA (_laughing a little_). No, sir, of course. L. In your shoulders, then? LUCILLA. No, sir. L. You are sure of that? Because, I fear, sorrow in the shoulders would not be worth much. LUCILLA. I suppose I feel it in my heart, if I really am sorry. L. If you really are! Do you mean to say that you are sure you are utterly wicked, and yet do not care? LUCILLA. No, indeed; I have cried about it often. L. Well, then, you are sorry in your heart? LUCILLA. Yes, when the sorrow is worth anything. L. Even if it be not, it cannot be anywhere else but there. It is not the crystalline lens of your eyes which is sorry, when you cry? LUCILLA. No, sir, of course. L. Then, have you two hearts; one of which is wicked, and the other grieved? or is one side of it sorry for the other side? LUCILLA (_weary of cross-examination, and a little vexed_). Indeed, sir, you know I can't understand it; but you know how it is written--'another law in my members, warring against the law of my mind.' L. Yes, Lucilla, I know how it is written; but I do not see that it will help us to know that, if we neither understand what is written, nor feel it. And you will not get nearer to the meaning of one verse, if, as soon as you are puzzled by it, you escape to another, introducing three new words--'law,' 'members,' and 'mind'; not one of which you at present know the meaning of; and respecting which, you probably never will be much wiser; since men like Montesquieu and Locke have spent great part of their lives in endeavouring to explain two of them. LUCILLA. Oh! please, sir, ask somebody else. L. If I thought anyone else could answer better than you, Lucilla, I would; but suppose I try, instead, myself, to explain your feelings to you? LUCILLA. Oh, yes; please do. L. Mind, I say your 'feelings,' not your 'belief.' For I cannot undertake to explain anybody's beliefs. Still I must try a little, first, to explain the belief also, because I want to draw it to some issue. As far as I understand what you say, or any one else, taught as you have been taught, says, on this matter,--you think that there is an external goodness, a whited-sepulchre kind of goodness, which appears beautiful outwardly, but is within full of uncleanness: a deep secret guilt, of which we ourselves are not sensible; and which can only be seen by the Maker of us all. (_Approving murmurs from audience._) L. Is it not so with the body as well as the soul? (_Looked notes of interrogation._) L. A skull, for instance, is not a beautiful thing? (_Grave faces, signifying 'Certainly not,' and 'What next?'_) L. And if you all could see in each other, with clear eyes, whatever God sees beneath those fair faces of yours, you would not like it? (_Murmured 'No's.'_) L. Nor would it be good for you? (_Silence._) L. The probability being that what God does not allow you to see, He does not wish you to see; nor even to think of? (_Silence prolonged._) L. It would not at all be good for you, for instance, whenever you were washing your faces, and braiding your hair, to be thinking of the shapes of the jawbones, and of the cartilage of the nose, and of the jagged sutures of the scalp? (_Resolutely whispered No's._) L. Still less, to see through a clear glass the daily processes of nourishment and decay? (_No._) L. Still less if instead of merely inferior and preparatory conditions of structure, as in the skeleton,--or inferior offices of structure, as in operations of life and death,--there were actual disease in the body; ghastly and dreadful. You would try to cure it; but having taken such measures as were necessary, you would not think the cure likely to be promoted by perpetually watching the wounds, or thinking of them. On the contrary, you would be thankful for every moment of forgetfulness: as, in daily health, you must be thankful that your Maker has veiled whatever is fearful in your frame under a sweet and manifest beauty; and has made it your duty, and your only safety, to rejoice in that, both in yourself and in others:--not indeed concealing, or refusing to believe in sickness, if it come; but never dwelling on it. Now, your wisdom and duty touching soul-sickness are just the same. Ascertain clearly what is wrong with you; and so far as you know any means of mending it, take those means, and have done: when you are examining yourself, never call yourself merely a 'sinner,' that is very cheap abuse; and utterly useless. You may even get to like it, and be proud of it. But call yourself a liar, a coward, a sluggard, a glutton, or an evil-eyed jealous wretch, if you indeed find yourself to be in any wise any of these. Take steady means to check yourself in whatever fault you have ascertained, and justly accused yourself of. And as soon as you are in active way of mending, you will be no more inclined to moan over an undefined corruption. For the rest, you will find it less easy to uproot faults, than to choke them by gaining virtues. Do not think of your faults; still less of others' faults: in every person who comes near you, look for what is good and strong: honour that; rejoice in it; and, as you can, try to imitate it: and your faults will drop off, like dead leaves, when their time comes. If, on looking back, your whole life should seem rugged as a palm tree stem; still, never mind, so long as it has been growing; and has its grand green shade of leaves, and weight of honied fruit, at top. And even if you cannot find much good in yourself at last, think that it does not much matter to the universe either what you were, or are; think how many people are noble, if you cannot be; and rejoice in _their_ nobleness. An immense quantity of modern confession of sin, even when honest, is merely a sickly egotism; which will rather gloat over its own evil, than lose the centralisation of its interest in itself. MARY. But then, if we ought to forget ourselves so much, how did the old Greek proverb 'Know thyself' come to be so highly esteemed? L. My dear, it is the proverb of proverbs; Apollo's proverb, and the sun's;--but do you think you can know yourself by looking _into_ yourself? Never. You can know what you are, only by looking _out_ of yourself. Measure your own powers with those of others; compare your own interests with those of others; try to understand what you appear to them, as well as what they appear to you; and judge of yourselves, in all things, relatively and subordinately; not positively: starting always with a wholesome conviction of the probability that there is nothing particular about you. For instance, some of you perhaps think you can write poetry. Dwell on your own feelings and doings:--and you will soon think yourselves Tenth Muses; but forget your own feelings; and try, instead, to understand a line or two of Chaucer or Dante: and you will soon begin to feel yourselves very foolish girls--which is much like the fact. So, something which befalls you may seem a great misfortune;--you meditate over its effects on you personally; and begin to think that it is a chastisement, or a warning, or a this or that or the other of profound significance; and that all the angels in heaven have left their business for a little while, that they may watch its effects on your mind. But give up this egotistic indulgence of your fancy; examine a little what misfortunes, greater a thousandfold, are happening, every second, to twenty times worthier persons: and your self-consciousness will change into pity and humility; and you will know yourself, so far as to understand that 'there hath nothing taken thee but what is common to man.' Now, Lucilla, these are the practical conclusions which any person of sense would arrive at, supposing the texts which relate to the inner evil of the heart were as many, and as prominent, as they are often supposed to be by careless readers. But the way in which common people read their Bibles is just like the way that the old monks thought hedgehogs ate grapes. They rolled themselves (it was said), over and over, where the grapes lay on the ground. What fruit stuck to their spines, they carried off, and ate. So your hedgehoggy readers roll themselves over and over their Bibles, and declare that whatever sticks to their own spines is Scripture; and that nothing else is. But you can only get the skins of the texts that way. If you want their juice, you must press them in cluster. Now, the clustered texts about the human heart, insist, as a body, not on any inherent corruption in all hearts, but on the terrific distinction between the bad and the good ones. 'A good man, out of the good treasure of his heart, bringeth forth that which is good; and an evil man, out of the evil treasure, bringeth forth that which is evil.' 'They on the rock are they which, in an honest and good heart, having heard the word, keep it.' 'Delight thyself in the Lord, and He shall give thee the desires of thine heart.' 'The wicked have bent their bow, that they may privily shoot at him that is upright in heart.' And so on; they are countless, to the same effect. And, for all of us, the question is not at all to ascertain how much or how little corruption there is in human nature; but to ascertain whether, out of all the mass of that nature, we are of the sheep or the goat breed; whether we are people of upright heart, being shot at, or people of crooked heart, shooting. And, of all the texts bearing on the subject, this, which is a quite simple and practical order, is the one you have chiefly to hold in mind. 'Keep thy heart with all diligence, for out of it are the issues of life.' LUCILLA. And yet, how inconsistent the texts seem! L. Nonsense, Lucilla! do you think the universe is bound to look consistent to a girl of fifteen? Look up at your own room window;--you can just see it from where you sit. I'm glad that it is left open, as it ought to be, in so fine a day. But do you see what a black spot it looks, in the sunlighted wall? LUCILLA. Yes, it looks as black as ink. L. Yet you know it is a very bright room when you are inside of it; quite as bright as there is any occasion for it to be, that its little lady may see to keep it tidy. Well, it is very probable, also, that if you could look into your heart from the sun's point of view, it might appear a very black hole indeed; nay, the sun may sometimes think good to tell you that it looks so to Him; but He will come into it, and make it very cheerful for you, for all that, if you don't put the shutters up. And the one question for _you_, remember, is not 'dark or light?' but 'tidy or untidy?' Look well to your sweeping and garnishing; and be sure it is only the banished spirit, or some of the seven wickeder ones at his back, who will still whisper to you that it is all black. LECTURE VI. _CRYSTAL QUARRELS._ _Full conclave, in Schoolroom. There has been a game at crystallisation in the morning, of which various account has to be rendered. In particular, everybody has to explain why they were always where they were not intended to be._ L. (_having received and considered the report_). You have got on pretty well, children: but you know these were easy figures you have been trying. Wait till I have drawn you out the plans of some crystals of snow! MARY. I don't think those will be the most difficult:--they are so beautiful that we shall remember our places better; and then they are all regular, and in stars: it is those twisty oblique ones we are afraid of. L. Read Carlyle's account of the battle of Leuthen, and learn Freidrich's 'oblique order.' You will 'get it done for once, I think, provided you _can_ march as a pair of compasses would.' But remember, when you can construct the most difficult single figures, you have only learned half the game--nothing so much as the half, indeed, as the crystals themselves play it. MARY. Indeed; what else is there? L. It is seldom that any mineral crystallises alone. Usually two or three, under quite different crystalline laws, form together. They do this absolutely without flaw or fault, when they are in fine temper: and observe what this signifies. It signifies that the two, or more, minerals of different natures agree, somehow, between themselves, how much space each will want;--agree which of them shall give away to the other at their junction; or in what measure each will accommodate itself to the other's shape! And then each takes its permitted shape, and allotted share of space; yielding, or being yielded to, as it builds, till each crystal has fitted itself perfectly and gracefully to its differently-natured neighbour. So that, in order to practise this, in even the simplest terms, you must divide into two parties, wearing different colours; each must choose a different figure to construct; and you must form one of these figures through the other, both going on at the same time. MARY. I think _we_ may, perhaps, manage it; but I cannot at all understand how the crystals do. It seems to imply so much preconcerting of plan, and so much giving way to each other, as if they really were living. L. Yes, it implies both concurrence and compromise, regulating all wilfulness of design: and, more curious still, the crystals do _not_ always give way to each other. They show exactly the same varieties of temper that human creatures might. Sometimes they yield the required place with perfect grace and courtesy; forming fantastic, but exquisitely finished groups: and sometimes they will not yield at all; but fight furiously for their places, losing all shape and honour, and even their own likeness, in the contest. MARY. But is not that wholly wonderful? How is it that one never sees it spoken of in books? L. The scientific men are all busy in determining the constant laws under which the struggle takes place; these indefinite humours of the elements are of no interest to them. And unscientific people rarely give themselves the trouble of thinking at all when they look at stones. Not that it is of much use to think; the more one thinks, the more one is puzzled. MARY. Surely it is more wonderful than anything in botany? L. Everything has its own wonders; but, given the nature of the plant, it is easier to understand what a flower will do, and why it does it, than, given anything we as yet know of stone-nature, to understand what a crystal will do, and why it does it. You at once admit a kind of volition and choice, in the flower, but we are not accustomed to attribute anything of the kind to the crystal. Yet there is, in reality, more likeness to some conditions of human feeling among stones than among plants. There is a far greater difference between kindly-tempered and ill-tempered crystals of the same mineral, than between any two specimens of the same flower: and the friendships and wars of crystals depend more definitely and curiously on their varieties of disposition, than any associations of flowers. Here, for instance, is a good garnet, living with good mica; one rich red, and the other silver white: the mica leaves exactly room enough for the garnet to crystallise comfortably in; and the garnet lives happily in its little white house; fitted to it, like a pholas in its cell. But here are wicked garnets living with wicked mica. See what ruin they make of each other! You cannot tell which is which; the garnets look like dull red stains on the crumbling stone. By the way, I never could understand, if St. Gothard is a real saint, why he can't keep his garnets in better order. These are all under his care; but I suppose there are too many of them for him to look after. The streets of Airolo are paved with them. MAY. Paved with garnets? L. With mica-slate and garnets; I broke this bit out of a paving stone. Now garnets and mica are natural friends, and generally fond of each other; but you see how they quarrel when they are ill brought up. So it is always. Good crystals are friendly with almost all other good crystals, however little they chance to see of each other, or however opposite their habits may be; while wicked crystals quarrel with one another, though they may be exactly alike in habits, and see each other continually. And of course the wicked crystals quarrel with the good ones. ISABEL. Then do the good ones get angry? L. No, never: they attend to their own work and life; and live it as well as they can, though they are always the sufferers. Here, for instance, is a rock-crystal of the purest race and finest temper, who was born, unhappily for him, in a bad neighbourhood, near Beaufort in Savoy; and he has had to fight with vile calcareous mud all his life. See here, when he was but a child, it came down on him, and nearly buried him; a weaker crystal would have died in despair; but he only gathered himself together, like Hercules against the serpents, and threw a layer of crystal over the clay; conquered it,--imprisoned it,--and lived on. Then, when he was a little older, came more clay; and poured itself upon him here, at the side; and he has laid crystal over that, and lived on, in his purity. Then the clay came on at his angles, and tried to cover them, and round them away; but upon that he threw out buttress-crystals at his angles, all as true to his own central line as chapels round a cathedral apse; and clustered them round the clay; and conquered it again. At last the clay came on at his summit, and tried to blunt his summit; but he could not endure that for an instant; and left his flanks all rough, but pure; and fought the clay at his crest, and built crest over crest, and peak over peak, till the clay surrendered at last; and here is his summit, smooth and pure, terminating a pyramid of alternate clay and crystal, half a foot high! LILY. Oh, how nice of him! What a dear, brave crystal! But I can't bear to see his flanks all broken, and the clay within them. L. Yes; it was an evil chance for him, the being born to such contention; there are some enemies so base that even to hold them captive is a kind of dishonour. But look, here has been quite a different kind of struggle: the adverse power has been more orderly, and has fought the pure crystal in ranks as firm as its own. This is not mere rage and impediment of crowded evil: here is a disciplined hostility; army against army. LILY. Oh, but this is much more beautiful! L. Yes, for both the elements have true virtue in them; it is a pity they are at war, but they war grandly. MARY. But is this the same clay as in the other crystal? L. I used the word clay for shortness. In both, the enemy is really limestone; but in the first, disordered, and mixed with true clay; while, here, it is nearly pure, and crystallises into its own primitive form, the oblique six-sided one, which you know: and out of these it makes regiments; and then squares of the regiments, and so charges the rock crystal literally in square against column. ISABEL. Please, please, let me see. And what does the rock crystal do? L. The rock crystal seems able to do nothing. The calcite cuts it through at every charge. Look here,--and here! The loveliest crystal in the whole group is hewn fairly into two pieces. ISABEL. Oh, dear; but is the calcite harder than the crystal then? L. No, softer. Very much softer. MARY. But then, how can it possibly cut the crystal? L. It did not really cut it, though it passes through it. The two were formed together, as I told you; but no one knows how. Still, it is strange that this hard quartz has in all cases a good-natured way with it, of yielding to everything else. All sorts of soft things make nests for themselves in it; and it never makes a nest for itself in anything. It has all the rough outside work; and every sort of cowardly and weak mineral can shelter itself within it. Look; these are hexagonal plates of mica; if they were outside of this crystal they would break, like burnt paper; but they are inside of it,--nothing can hurt them,--the crystal has taken them into its very heart, keeping all their delicate edges as sharp as if they were under water, instead of bathed in rock. Here is a piece of branched silver: you can bend it with a touch of your finger, but the stamp of its every fibre is on the rock in which it lay, as if the quartz had been as soft as wool. LILY. Oh, the good, good quartz! But does it never get inside of anything? L. As it is a little Irish girl who asks, I may perhaps answer, without being laughed at, that it gets inside of itself sometimes. But I don't remember seeing quartz make a nest for itself in anything else. ISABEL. Please, there was something I heard you talking about, last term, with Miss Mary. I was at my lessons, but I heard something about nests; and I thought it was birds' nests; and I couldn't help listening; and then, I remember, it was about 'nests of quartz in granite.' I remember, because I was so disappointed! L. Yes, mousie, you remember quite rightly; but I can't tell you about those nests to-day, nor perhaps to-morrow: but there's no contradiction between my saying then, and now; I will show you that there is not, some day. Will you trust me meanwhile? ISABEL. Won't I! L. Well, then, look, lastly, at this piece of courtesy in quartz; it is on a small scale, but wonderfully pretty. Here is nobly born quartz living with a green mineral, called epidote; and they are immense friends. Now, you see, a comparatively large and strong quartz-crystal, and a very weak and slender little one of epidote, have begun to grow, close by each other, and sloping unluckily towards each other, so that they at last meet. They cannot go on growing together; the quartz crystal is five times as thick, and more than twenty times as strong,[151] as the epidote; but he stops at once, just in the very crowning moment of his life, when he is building his own summit! He lets the pale little film of epidote grow right past him; stopping his own summit for it; and he never himself grows any more. LILY (_after some silence of wonder_). But is the quartz _never_ wicked then? L. Yes, but the wickedest quartz seems good-natured, compared to other things. Here are two very characteristic examples; one is good quartz, living with good pearlspar, and the other, wicked quartz, living with wicked pearlspar. In both, the quartz yields to the soft carbonate of iron: but, in the first place, the iron takes only what it needs of room; and is inserted into the planes of the rock crystal with such precision, that you must break it away before you can tell whether it really penetrates the quartz or not; while the crystals of iron are perfectly formed, and have a lovely bloom on their surface besides. But here, when the two minerals quarrel, the unhappy quartz has all its surfaces jagged and torn to pieces; and there is not a single iron crystal whose shape you can completely trace. But the quartz has the worst of it, in both instances. VIOLET. Might we look at that piece of broken quartz again, with the weak little film across it? it seems such a strange lovely thing, like the self-sacrifice of a human being. L. The self-sacrifice of a human being is not a lovely thing, Violet. It is often a necessary and noble thing; but no form nor degree of suicide can be ever lovely. VIOLET. But self-sacrifice is not suicide! L. What is it then? VIOLET. Giving up one's self for another. L. Well; and what do you mean by 'giving up one's self?' VIOLET. Giving up one's tastes, one's feelings, one's time, one's happiness, and so on, to make others happy. L. I hope you will never marry anybody, Violet, who expects you to make him happy in that way. VIOLET (_hesitating_). In what way? L. By giving up your tastes, and sacrificing your feelings, and happiness. VIOLET. No, no, I don't mean that; but you know, for other people, one must. L. For people who don't love you, and whom you know nothing about? Be it so; but how does this 'giving up' differ from suicide then? VIOLET. Why, giving up one's pleasures is not killing one's self? L. Giving up wrong pleasure is not; neither is it self-sacrifice, but self-culture. But giving up right pleasure is. If you surrender the pleasure of walking, your foot will wither; you may as well cut it off: if you surrender the pleasure of seeing, your eyes will soon be unable to bear the light; you may as well pluck them out. And to maim yourself is partly to kill yourself. Do but go on maiming, and you will soon slay. VIOLET. But why do you make me think of that verse then about the foot and the eye? L. You are indeed commanded to cut off and to pluck out, if foot or eye offend you; but why _should_ they offend you? VIOLET. I don't know; I never quite understood that. L. Yet it is a sharp order; one needing to be well understood if it is to be well obeyed! When Helen sprained her ancle the other day, you saw how strongly it had to be bandaged: that is to say, prevented from all work, to recover it. But the bandage was not 'lovely.' VIOLET. No, indeed. L. And if her foot had been crushed, or diseased, or snake-bitten, instead of sprained, it might have been needful to cut it off. But the amputation would not have been 'lovely.' VIOLET. No. L. Well, if eye and foot are dead already, and betray you--if the light that is in you be darkness, and your feet run into mischief, or are taken in the snare,--it is indeed time to pluck out, and cut off, I think: but, so crippled, you can never be what you might have been otherwise. You enter into life, at best, halt or maimed; and the sacrifice is not beautiful, though necessary. VIOLET (_after a pause_). But when one sacrifices one's self for others? L. Why not rather others for you? VIOLET. Oh! but I couldn't bear that. L. Then why should they bear it? DORA (_bursting in, indignant_). And Thermopylæ, and Protesilaus, and Marcus Curtius, and Arnold de Winkelried, and Iphigenia, and Jephthah's daughter? L. (_sustaining the indignation unmoved_). And the Samaritan woman's son? DORA. Which Samaritan woman's? L. Read 2 Kings vi. 29. DORA (_obeys_). How horrid! As if we meant anything like that! L. You don't seem to me to know in the least what you do mean, children. What practical difference is there between 'that,' and what you are talking about? The Samaritan children had no voice of their own in the business, it is true; but neither had Iphigenia: the Greek girl was certainly neither boiled, nor eaten; but that only makes a difference in the dramatic effect; not in the principle. DORA (_biting her lip_). Well, then, tell us what we ought to mean. As if you didn't teach it all to us, and mean it yourself, at this moment, more than we do, if you wouldn't be tiresome! L. I mean, and have always meant, simply this, Dora;--that the will of God respecting us is that we shall live by each other's happiness, and life; not by each other's misery, or death. I made you read that verse which so shocked you just now, because the relations of parent and child are typical of all beautiful human help. A child may have to die for its parents; but the purpose of Heaven is that it shall rather live for them;--that, not by its sacrifice, but by its strength, its joy, its force of being, it shall be to them renewal of strength; and as the arrow in the hand of the giant. So it is in all other right relations. Men help each other by their joy, not by their sorrow. They are not intended to slay themselves for each other, but to strengthen themselves for each other. And among the many apparently beautiful things which turn, through mistaken use, to utter evil, I am not sure but that the thoughtlessly meek and self-sacrificing spirit of good men must be named as one of the fatallest. They have so often been taught that there is a virtue in mere suffering, as such; and foolishly to hope that good may be brought by Heaven out of all on which Heaven itself has set the stamp of evil, that we may avoid it,--that they accept pain and defeat as if these were their appointed portion; never understanding that their defeat is not the less to be mourned because it is more fatal to their enemies than to them. The one thing that a good man has to do, and to see done, is justice; he is neither to slay himself nor others causelessly: so far from denying himself, since he is pleased by good, he is to do his utmost to get his pleasure accomplished. And I only wish there were strength, fidelity, and sense enough, among the good Englishmen of this day, to render it possible for them to band together in a vowed brotherhood, to enforce, by strength of heart and hand, the doing of human justice among all who came within their sphere. And finally, for your own teaching, observe, although there may be need for much self-sacrifice and self-denial in the correction of faults of character, the moment the character is formed, the self-denial ceases. Nothing is really well done, which it costs you pain to do. VIOLET. But surely, sir, you are always pleased with us when we try to please others, and not ourselves? L. My dear child, in the daily course and discipline of right life, we must continually and reciprocally submit and surrender in all kind and courteous and affectionate ways: and these submissions and ministries to each other, of which you all know (none better) the practice and the preciousness, are as good for the yielder as the receiver: they strengthen and perfect as much as they soften and refine. But the real sacrifice of all our strength, or life, or happiness to others (though it may be needed, and though all brave creatures hold their lives in their hand, to be given, when such need comes, as frankly as a soldier gives his life in battle), is yet always a mournful and momentary necessity; not the fulfilment of the continuous law of being. Self-sacrifice which is sought after, and triumphed in, is usually foolish; and calamitous in its issue: and by the sentimental proclamation and pursuit of it, good people have not only made most of their own lives useless, but the whole framework of their religion so hollow, that at this moment, while the English nation, with its lips, pretends to teach every man to 'love his neighbour as himself,' with its hands and feet it clutches and tramples like a wild beast; and practically lives, every soul of it that can, on other people's labour. Briefly, the constant duty of every man to his fellows is to ascertain his own powers and special gifts; and to strengthen them for the help of others. Do you think Titian would have helped the world better by denying himself, and not painting; or Casella by denying himself, and not singing? The real virtue is to be ready to sing the moment people ask us; as he was, even in purgatory. The very word 'virtue' means not 'conduct' but 'strength,' vital energy in the heart. Were not you reading about that group of words beginning with V,--vital, virtuous, vigorous, and so on,--in Max Muller, the other day, Sibyl? Can't you tell the others about it? SIBYL. No, I can't; will you tell us, please? L. Not now, it is too late. Come to me some idle time to-morrow, and I'll tell you about it, if all's well. But the gist of it is, children, that you should at least know two Latin words; recollect that 'mors' means death and delaying; and 'vita' means life and growing: and try always, not to mortify yourselves, but to vivify yourselves. VIOLET. But, then, are we not to mortify our earthly affections? and surely we are to sacrifice ourselves, at least in God's service, if not in man's? L. Really, Violet, we are getting too serious. I've given you enough ethics for one talk, I think! Do let us have a little play. Lily, what were you so busy about, at the ant-hill in the wood, this morning? LILY. Oh, it was the ants who were busy, not I; I was only trying to help them a little. L. And they wouldn't be helped, I suppose? LILY. No, indeed. I can't think why ants are always so tiresome, when one tries to help them! They were carrying bits of stick, as fast as they could, through a piece of grass; and pulling and pushing, _so_ hard; and tumbling over and over,--it made one quite pity them; so I took some of the bits of stick, and carried them forward a little, where I thought they wanted to put them; but instead of being pleased, they left them directly, and ran about looking quite angry and frightened; and at last ever so many of them got up my sleeves, and bit me all over, and I had to come away. L. I couldn't think what you were about. I saw your French grammar lying on the grass behind you, and thought perhaps you had gone to ask the ants to hear you a French verb. ISABEL. Ah! but you didn't, though! L. Why not, Isabel? I knew, well enough, Lily couldn't learn that verb by herself. ISABEL. No; but the ants couldn't help her. L. Are you sure the ants could not have helped you, Lily? LILY (_thinking_). I ought to have learned something from them, perhaps. L. But none of them left their sticks to help you through the irregular verb? LILY. No, indeed. (_Laughing, with some others._) L. What are you laughing at, children? I cannot see why the ants should not have left their tasks to help Lily in her's,--since here is Violet thinking she ought to leave _her_ tasks, to help God in His. Perhaps, however, she takes Lily's more modest view, and thinks only that 'He ought to learn something from her.' (_Tears in_ VIOLET'S _eyes._) DORA (_scarlet_). It's too bad--it's a shame:--poor Violet! L. My dear children, there's no reason why one should be so red, and the other so pale, merely because you are made for a moment to feel the absurdity of a phrase which you have been taught to use, in common with half the religious world. There is but one way in which man can ever help God--that is, by letting God help him: and there is no way in which his name is more guiltily taken in vain, than by calling the abandonment of our own work, the performance of His. God is a kind Father. He sets us all in the places where He wishes us to be employed; and that employment is truly 'our Father's business.' He chooses work for every creature which will be delightful to them, if they do it simply and humbly. He gives us always strength enough, and sense enough, for what He wants us to do; if we either tire ourselves or puzzle ourselves, it is our own fault. And we may always be sure, whatever we are doing, that we cannot be pleasing Him, if we are not happy ourselves. Now, away with you, children; and be as happy as you can. And when you cannot, at least don't plume yourselves upon pouting. FOOTNOTES: [151] Quartz is not much harder than epidote; the strength is only supposed to be in some proportion to the squares of the diameters. LECTURE VII. _HOME VIRTUES._ _By the fireside, in the Drawing-room. Evening._ DORA. Now, the curtains are drawn, and the fire's bright and here's your arm-chair--and you're to tell us all about what you promised. L. All about what? DORA. All about virtue. KATHLEEN. Yes, and about the words that begin with V. L. I heard you singing about a word that begins with V, in the playground, this morning, Miss Katie. KATHLEEN. Me singing? MAY. Oh tell us--tell us. L. 'Vilikens and his----' KATHLEEN (_stopping his mouth_). Oh! please don't. Where were you? ISABEL. I'm sure I wish I had known where he was! We lost him among the rhododendrons, and I don't know where he got to; oh, you naughty--naughty--(_climbs on his knee_). DORA. Now, Isabel, we really want to talk. L. _I_ don't. DORA. Oh, but you must. You promised, you know. L. Yes, if all was well; but all's ill. I'm tired, and cross; and I won't. DORA. You're not a bit tired, and you're not crosser than two sticks; and we'll make you talk, if you were crosser than six. Come here, Egypt; and get on the other side of him. (EGYPT _takes up a commanding position near the hearth-brush._) DORA (_reviewing her forces_). Now, Lily, come and sit on the rug in front. (LILY _does as she is bid._) L. (_seeing he has no chance against the odds_.) Well, well; but I'm really tired. Go and dance a little, first; and let me think. DORA. No; you mustn't think. You will be wanting to make us think next; that will be tiresome. L. Well, go and dance first, to get quit of thinking; and then I'll talk as long as you like. DORA. Oh, but we can't dance to-night. There isn't time; and we want to hear about virtue. L. Let me see a little of it first. Dancing is the first of girl's virtues. EGYPT. Indeed! And the second? L. Dressing. EGYPT. Now, you needn't say that! I mended that tear the first thing before breakfast this morning. L. I cannot otherwise express the ethical principle, Egypt; whether you have mended your gown or not. DORA. Now don't be tiresome. We really must hear about virtue, please; seriously. L. Well. I'm telling you about it, as fast as I can. DORA. What! the first of girls' virtues is dancing? L. More accurately, it is wishing to dance, and not wishing to tease, nor hear about virtue. DORA (_to_ EGYPT). Isn't he cross? EGYPT. How many balls must we go to in the season, to be perfectly virtuous? L. As many as you can without losing your colour. But I did not say you should wish to go to balls. I said you should be always wanting to dance. EGYPT. So we do; but everybody says it is very wrong. L. Why, Egypt, I thought-- 'There was a lady once, That would not be a queen,--that would she not, For all the mud in Egypt.' You were complaining the other day of having to go out a great deal oftener than you liked. EGYPT. Yes, so I was; but then, it isn't to dance. There's no room to dance: it's--(_Pausing to consider what it is for_). L. It is only to be seen, I suppose. Well, there's no harm in that. Girls ought to like to be seen. DORA (_her eyes flashing_). Now, you don't mean that; and you're too provoking; and we won't dance again, for a month. L. It will answer every purpose of revenge, Dora, if you only banish me to the library; and dance by yourselves: but I don't think Jessie and Lily will agree to that. You like me to see you dancing, don't you Lily? LILY. Yes, certainly,--when we do it rightly. L. And besides, Miss Dora, if young ladies really do not want to be seen, they should take care not to let their eyes flash when they dislike what people say; and, more than that, it is all nonsense from beginning to end, about not wanting to be seen. I don't know any more tiresome flower in the borders than your especially 'modest' snowdrop; which one always has to stoop down and take all sorts of tiresome trouble with, and nearly break its poor little head off, before you can see it; and then, half of it is not worth seeing. Girls should be like daisies; nice and white, with an edge of red, if you look close; making the ground bright wherever they are; knowing simply and quietly that they do it, and are meant to do it, and that it would be very wrong if they didn't do it. Not want to be seen, indeed! How long were you in doing your back hair, this afternoon, Jessie? (JESSIE _not immediately answering_, DORA _comes to her assistance._) DORA. Not above three-quarters of an hour, I think, Jess? JESSIE (_putting her finger up_). Now, Dorothy, _you_ needn't talk, you know! L. I know she needn't, Jessie; I shall ask her about those dark plaits presently. (DORA _looks round to see if there is any way open for retreat._) But never mind; it was worth the time, whatever it was; and nobody will ever mistake that golden wreath for a chignon; but if you don't want it to be seen, you had better wear a cap. JESSIE. Ah, now, are you really going to do nothing but play? And we all have been thinking, and thinking, all day; and hoping you would tell us things; and now--! L. And now I am telling you things, and true things, and things good for you; and you won't believe me. You might as well have let me go to sleep at once, as I wanted to. (_Endeavours again to make himself comfortable._) ISABEL. Oh, no, no, you sha'n't go to sleep, you naughty--Kathleen, come here. L. (_knowing what he has to expect if_ KATHLEEN _comes_). Get away, Isabel, you're too heavy. (_Sitting up._) What have I been saying? DORA. I do believe he has been asleep all the time! You never heard anything like the things you've been saying. L. Perhaps not. If you have heard them, and anything like them, it is all I want. EGYPT. Yes, but we don't understand, and you know we don't; and we want to. L. What did I say first? DORA. That the first virtue of girls was wanting to go to balls. L. I said nothing of the kind. JESSIE. 'Always wanting to dance,' you said. L. Yes, and that's true. Their first virtue is to be intensely happy;--so happy that they don't know what to do with themselves for happiness,--and dance, instead of walking. Don't you recollect 'Louisa,' 'No fountain from a rocky cave E'er tripped with foot so free; She seemed as happy as a wave That dances on the sea.' A girl is always like that, when everything's right with her. VIOLET. But, surely, one must be sad sometimes? L. Yes, Violet; and dull sometimes, and stupid sometimes, and cross sometimes. What must be, must; but it is always either our own fault, or somebody else's. The last and worst thing that can be said of a nation is, that it has made its young girls sad, and weary. MAY. But I am sure I have heard a great many good people speak against dancing? L. Yes, May; but it does not follow they were wise as well as good. I suppose they think Jeremiah liked better to have to write Lamentations for his people, than to have to write that promise for them, which everybody seems to hurry past, that they may get on quickly to the verse about Rachel weeping for her children; though the verse they pass is the counter-blessing to that one: 'Then shall the virgin rejoice in the dance; and both young men and old together; and I will turn their mourning into joy.' (_The children get very serious, but look at each other, as if pleased._) MARY. They understand now: but, do you know what you said next? L. Yes; I was not more than half asleep. I said their second virtue was dressing. MARY. Well! what did you mean by that? L. What do _you_ mean by dressing? MARY. Wearing fine clothes. L. Ah! there's the mistake. _I_ mean wearing plain ones. MARY. Yes, I daresay! but that's not what girls understand by dressing, you know. L. I can't help that. If they understand by dressing, buying dresses, perhaps they also understand by drawing, buying pictures. But when I hear them say they can draw, I understand that they can make a drawing; and when I hear them say they can dress, I understand that they can make a dress and--which is quite as difficult--wear one. DORA. I'm not sure about the making; for the wearing, we can all wear them--out, before anybody expects it. EGYPT (_aside, to_ L., _piteously_). Indeed I have mended that torn flounce quite neatly; look if I haven't! L. (_aside, to_ EGYPT). All right; don't be afraid. (_Aloud to_ DORA.) Yes, doubtless; but you know that is only a slow way of _un_dressing. DORA. Then, we are all to learn dress-making, are we? L. Yes; and always to dress yourselves beautifully--not finely, unless on occasion; but then very finely and beautifully too. Also, you are to dress as many other people as you can; and to teach them how to dress, if they don't know; and to consider every ill-dressed woman or child whom you see anywhere, as a personal disgrace; and to get at them, somehow, until everybody is as beautifully dressed as birds. (_Silence; the children drawing their breaths hard, as if they had come from under a shower bath._) L (_seeing objections begin to express themselves in the eyes_). Now you needn't say you can't; for you can: and it's what you were meant to do, always; and to dress your houses, and your gardens, too; and to do very little else, I believe, except singing; and dancing, as we said, of course; and--one thing more. DORA. Our third and last virtue, I suppose? L. Yes; on Violet's system of triplicities. DORA. Well, we are prepared for anything now. What is it? L. Cooking. DORA. Cardinal, indeed! If only Beatrice were here with her seven handmaids, that she might see what a fine eighth we had found for her! MARY. And the interpretation? What does 'cooking' mean? L. It means the knowledge of Medea, and of Circe, and of Calypso, and of Helen, and of Rebekah, and of the Queen of Sheba. It means the knowledge of all herbs, and fruits, and balms, and spices; and of all that is healing and sweet in fields and groves, and savoury in meats; it means carefulness, and inventiveness, and watchfulness, and willingness, and readiness of appliance; it means the economy of your great-grandmothers, and the science of modern chemists; it means much tasting, and no wasting; it means English thoroughness, and French art, and Arabian hospitality; and it means, in fine, that you are to be perfectly and always 'ladies'--'loaf-givers;' and, as you are to see, imperatively that everybody has something pretty to put on,--so you are to see, yet more imperatively, that everybody has something nice to eat. (_Another pause, and long drawn breath._) DORA (_slowly recovering herself_) _to_ EGYPT. We had better have let him go to sleep, I think, after all! L. You had better let the younger ones go to sleep now: for I haven't half done. ISABEL (_panic-struck_). Oh! please, please! just one quarter of an hour. L. No, Isabel; I cannot say what I've got to say, in a quarter of an hour; and it is too hard for you, besides:--you would be lying awake, and trying to make it out, half the night. That will never do. ISABEL. Oh, please! L. It would please me exceedingly, mousie: but there are times when we must both be displeased; more's the pity. Lily may stay for half an hour, if she likes. LILY. I can't; because Isey never goes to sleep, if she is waiting for me to come. ISABEL. Oh, yes, Lily; I'll go to sleep to-night, I will, indeed. LILY. Yes, it's very likely, Isey, with those fine round eyes! (_To_ L.) You'll tell me something of what you've been saying, to-morrow, won't you? L. No, I won't, Lily. You must choose. It's only in Miss Edgeworth's novels that one can do right, and have one's cake and sugar afterwards, as well (not that I consider the dilemma, to-night, so grave). (LILY, _sighing, takes_ ISABEL's _hand._) Yes, Lily dear, it will be better, in the outcome of it, so, than if you were to hear all the talks that ever were talked, and all the stories that ever were told. Good night. (_The door leading to the condemned cells of the Dormitory closes on_ LILY, ISABEL, FLORRIE, _and other diminutive and submissive victims._) JESSIE (_after a pause_). Why, I thought you were so fond of Miss Edgeworth! L. So I am; and so you ought all to be. I can read her over and over again, without ever tiring; there's no one whose every page is so full, and so delightful; no one who brings you into the company of pleasanter or wiser people; no one who tells you more truly how to do right. And it is very nice, in the midst of a wild world, to have the very ideal of poetical justice done always to one's hand:--to have everybody found out, who tells lies; and everybody decorated with a red riband, who doesn't; and to see the good Laura, who gave away her half sovereign, receiving a grand ovation from an entire dinner party disturbed for the purpose; and poor, dear, little Rosamond, who chooses purple jars instead of new shoes, left at last without either her shoes or her bottle. But it isn't life: and, in the way children might easily understand it, it isn't morals. JESSIE. How do you mean we might understand it? L. You might think Miss Edgeworth meant that the right was to be done mainly because one was always rewarded for doing it. It is an injustice to her to say that: her heroines always do right simply for its own sake, as they should; and her examples of conduct and motive are wholly admirable. But her representation of events is false and misleading. Her good characters never are brought into the deadly trial of goodness,--the doing right, and suffering for it, quite finally. And that is life, as God arranges it. 'Taking up one's cross' does not at all mean having ovations at dinner parties, and being put over everybody else's head. DORA. But what _does_ it mean then? That is just what we couldn't understand, when you were telling us about not sacrificing ourselves, yesterday. L. My dear, it means simply that you are to go the road which you see to be the straight one; carrying whatever you find is given you to carry, as well and stoutly as you can; without making faces, or calling people to come and look at you. Above all, you are neither to load, nor unload, yourself; nor cut your cross to your own liking. Some people think it would be better for them to have it large; and many, that they could carry it much faster if it were small; and even those who like it largest are usually very particular about its being ornamental, and made of the best ebony. But all that you have really to do is to keep your back as straight as you can; and not think about what is upon it--above all, not to boast of what is upon it. The real and essential meaning of 'virtue' is in that straightness of back. Yes; you may laugh, children, but it is. You know I was to tell about the words that began with V. Sibyl, what does 'virtue' mean, literally? SIBYL. Does it mean courage? L. Yes; but a particular kind of courage. It means courage of the nerve; vital courage. That first syllable of it, if you look in Max Müller, you will find really means 'nerve,' and from it come 'vis,' and 'vir,' and 'virgin' (through vireo), and the connected word 'virga'--'a rod;'--the green rod, or springing bough of a tree, being the type of perfect human strength, both in the use of it in the Mosaic story, when it becomes a serpent, or strikes the rock; or when Aaron's bears its almonds; and in the metaphorical expressions, the 'Rod out of the stem of Jesse,' and the 'Man whose name is the Branch,' and so on. And the essential idea of real virtue is that of a vital human strength, which instinctively, constantly, and without motive, does what is right. You must train men to this by habit, as you would the branch of a tree; and give them instincts and manners (or morals) of purity, justice, kindness, and courage. Once rightly trained, they act as they should, irrespectively of all motive, of fear, or of reward. It is the blackest sign of putrescence in a national religion, when men speak as if it were the only safeguard of conduct; and assume that, but for the fear of being burned, or for the hope of being rewarded, everybody would pass their lives in lying, stealing, and murdering. I think quite one of the notablest historical events of this century (perhaps the very notablest), was that council of clergymen, horror-struck at the idea of any diminution in our dread of hell, at which the last of English clergymen whom one would have expected to see in such a function, rose as the devil's advocate; to tell us how impossible it was we could get on without him. VIOLET (_after a pause_). But, surely, if people weren't afraid--(_hesitates again_). L. They should be afraid of doing wrong, and of that only, my dear. Otherwise, if they only don't do wrong for fear of being punished, they _have_ done wrong in their hearts, already. VIOLET. Well, but surely, at least one ought to be afraid of displeasing God; and one's desire to please Him should be one's first motive? L. He never would be pleased with us, if it were, my dear. When a father sends his son out into the world--suppose as an apprentice--fancy the boy's coming home at night, and saying, 'Father, I could have robbed the till to-day; but I didn't, because I thought you wouldn't like it.' Do you think the father would be particularly pleased? (VIOLET _is silent._) He would answer, would he not, if he were wise and good, 'My boy, though you had no father, you must not rob tills'? And nothing is ever done so as really to please our Great Father, unless we would also have done it, though we had had no Father to know of it. VIOLET (_after long pause_). But, then, what continual threatenings, and promises of reward there are! L. And how vain both! with the Jews, and with all of us. But the fact is, that the threat and promise are simply statements of the Divine law, and of its consequences. The fact is truly told you,--make what use you may of it: and as collateral warning, or encouragement, or comfort, the knowledge of future consequences may often be helpful to us; but helpful chiefly to the better state when we can act without reference to them. And there's no measuring the poisoned influence of that notion of future reward on the mind of Christian Europe, in the early ages. Half the monastic system rose out of that, acting on the occult pride and ambition of good people (as the other half of it came of their follies and misfortunes). There is always a considerable quantity of pride, to begin with, in what is called 'giving one's self to God.' As if one had ever belonged to anybody else! DORA. But, surely, great good has come out of the monastic system--our books,--our sciences--all saved by the monks? L. Saved from what, my dear? From the abyss of misery and ruin which that false Christianity allowed the whole active world to live in. When it had become the principal amusement, and the most admired art, of Christian men, to cut one another's throats, and burn one another's towns; of course the few feeble or reasonable persons left, who desired quiet, safety, and kind fellowship, got into cloisters; and the gentlest, thoughtfullest, noblest men and women shut themselves up, precisely where they could be of least use. They are very fine things, for us painters, now,--the towers and white arches upon the tops of the rocks; always in places where it takes a day's climbing to get at them; but the intense tragi-comedy of the thing, when one thinks of it, is unspeakable. All the good people of the world getting themselves hung up out of the way of mischief, like Bailie Nicol Jarvie;--poor little lambs, as it were, dangling there for the sign of the Golden Fleece; or like Socrates in his basket in the 'Clouds'! (I must read you that bit of Aristophanes again, by the way.) And believe me, children, I am no warped witness, as far as regards monasteries; or if I am, it is in their favour. I have always had a strong leaning that way; and have pensively shivered with Augustines at St. Bernard; and happily made hay with Franciscans at Fesolé; and sat silent with Carthusians in their little gardens, south of Florence; and mourned through many a day-dream, at Melrose and Bolton. But the wonder is always to me, not how much, but how little, the monks have, on the whole, done, with all that leisure, and all that goodwill! What nonsense monks characteristically wrote;--what little progress they made in the sciences to which they devoted themselves as a duty,--medicine especially;--and, last and worst, what depths of degradation they can sometimes see one another, and the population round them, sink into; without either doubting their system, or reforming it! (_Seeing questions rising to lips._) Hold your little tongues, children; it's very late, and you'll make me forget what I've to say. Fancy yourselves in pews, for five minutes. There's one point of possible good in the conventual system, which is always attractive to young girls; and the idea is a very dangerous one;--the notion of a merit, or exalting virtue, consisting in a habit of meditation on the 'things above,' or things of the next world. Now it is quite true, that a person of beautiful mind, dwelling on whatever appears to them most desirable and lovely in a possible future will not only pass their time pleasantly, but will even acquire, at last, a vague and wildly gentle charm of manner and feature, which will give them an air of peculiar sanctity in the eyes of others. Whatever real or apparent good there may be in this result, I want you to observe, children, that we have no real authority for the reveries to which it is owing. We are told nothing distinctly of the heavenly world; except that it will be free from sorrow, and pure from sin. What is said of pearl gates, golden floors, and the like, is accepted as merely figurative by religious enthusiasts themselves; and whatever they pass their time in conceiving, whether of the happiness of risen souls, of their intercourse, or of the appearance and employment of the heavenly powers, is entirely the product of their own imagination; and as completely and distinctly a work of fiction, or romantic invention, as any novel of Sir Walter Scott's. That the romance is founded on religious theory or doctrine;--that no disagreeable or wicked persons are admitted into the story;--and that the inventor fervently hopes that some portion of it may hereafter come true, does not in the least alter the real nature of the effort or enjoyment. Now, whatever indulgence may be granted to amiable people for pleasing themselves in this innocent way, it is beyond question, that to seclude themselves from the rough duties of life, merely to write religious romances, or, as in most cases, merely to dream them, without taking so much trouble as is implied in writing, ought not to be received as an act of heroic virtue. But, observe, even in admitting thus much, I have assumed that the fancies are just and beautiful, though fictitious. Now, what right have any of us to assume that our own fancies will assuredly be either the one or the other? That they delight us, and appear lovely to us, is no real proof of its not being wasted time to form them: and we may surely be led somewhat to distrust our judgment of them by observing what ignoble imaginations have sometimes sufficiently, or even enthusiastically, occupied the hearts of others. The principal source of the spirit of religious contemplation is the East; now I have here in my hand a Byzantine image of Christ, which, if you will look at it seriously, may, I think, at once and for ever render you cautious in the indulgence of a merely contemplative habit of mind. Observe, it is the fashion to look at such a thing only as a piece of barbarous art; that is the smallest part of its interest. What I want you to see, is the baseness and falseness of a religious state of enthusiasm, in which such a work could be dwelt upon with pious pleasure. That a figure, with two small round black beads for eyes; a gilded face, deep cut into horrible wrinkles; an open gash for a mouth, and a distorted skeleton for a body, wrapped about, to make it fine, with striped enamel of blue and gold;--that such a figure, I say, should ever have been thought helpful towards the conception of a Redeeming Deity, may make you, I think, very doubtful, even of the Divine approval,--much more of the Divine inspiration,--of religious reverie in general. You feel, doubtless, that your own idea of Christ would be something very different from this; but in what does the difference consist? Not in any more divine authority in your imagination; but in the intellectual work of six intervening centuries; which, simply, by artistic discipline, has refined this crude conception for you, and filled you, partly with an innate sensation, partly with an acquired knowledge, of higher forms,--which render this Byzantine crucifix as horrible to you, as it was pleasing to its maker. More is required to excite your fancy; but your fancy is of no more authority than his was: and a point of national art-skill is quite conceivable, in which the best we can do now will be as offensive to the religious dreamers of the more highly cultivated time, as this Byzantine crucifix is to you. MARY. But surely, Angelico will always retain his power over everybody? L. Yes, I should think, always; as the gentle words of a child will: but you would be much surprised, Mary, if you thoroughly took the pains to analyse, and had the perfect means of analysing, that power of Angelico,--to discover its real sources. Of course it is natural, at first, to attribute it to the pure religious fervour by which he was inspired; but do you suppose Angelico was really the only monk, in all the Christian world of the middle ages, who laboured, in art, with a sincere religious enthusiasm? MARY. No, certainly not. L. Anything more frightful, more destructive of all religious faith whatever, than such a supposition, could not be. And yet, what other monk ever produced such work? I have myself examined carefully upwards of two thousand illuminated missals, with especial view to the discovery of any evidence of a similar result upon the art, from the monkish devotion; and utterly in vain. MARY. But then, was not Fra Angelico a man of entirely separate and exalted genius? L. Unquestionably; and granting him to be that, the peculiar phenomenon in his art is, to me, not its loveliness, but its weakness. The effect of 'inspiration,' had it been real, on a man of consummate genius, should have been, one would have thought, to make everything that he did faultless and strong, no less than lovely. But of all men, deserving to be called 'great,' Fra Angelico permits to himself the least pardonable faults, and the most palpable follies. There is evidently within him a sense of grace, and power of invention, as great as Ghiberti's:--we are in the habit of attributing those high qualities to his religious enthusiasm; but, if they were produced by that enthusiasm in him, they ought to be produced by the same feelings in others; and we see they are not. Whereas, comparing him with contemporary great artists, of equal grace and invention, one peculiar character remains notable in him--which, logically, we ought therefore to attribute to the religious fervour;--and that distinctive character is, the contented indulgence of his own weaknesses, and perseverance in his own ignorances. MARY. But that's dreadful! And what _is_ the source of the peculiar charm which we all feel in his work? L. There are many sources of it, Mary; united and seeming like one. You would never feel that charm but in the work of an entirely good man; be sure of that; but the goodness is only the recipient and modifying element, not the creative one. Consider carefully what delights you in any original picture of Angelico's. You will find, for one minor thing, an exquisite variety and brightness of ornamental work. That is not Angelico's inspiration. It is the final result of the labour and thought of millions of artists, of all nations; from the earliest Egyptian potters downwards--Greeks, Byzantines, Hindoos, Arabs, Gauls, and Northmen--all joining in the toil; and consummating it in Florence, in that century, with such embroidery of robe and inlaying of armour as had never been seen till then; nor, probably, ever will be seen more. Angelico merely takes his share of this inheritance, and applies it in the tenderest way to subjects which are peculiarly acceptant of it. But the inspiration, if it exist anywhere, flashes on the knight's shield quite as radiantly as on the monk's picture. Examining farther into the sources of your emotion in the Angelico work, you will find much of the impression of sanctity dependent on a singular repose and grace of gesture, consummating itself in the floating, flying, and above all, in the dancing groups. That is not Angelico's inspiration. It is only a peculiarly tender use of systems of grouping which had been long before developed by Giotto, Memmi, and Orcagna; and the real root of it all is simply--What do you think, children? The beautiful dancing of the Florentine maidens! DORA (_indignant again_). Now, I wonder what next! Why not say it all depended on Herodias' daughter, at once? L. Yes; it is certainly a great argument against singing, that there were once sirens. DORA. Well, it may be all very fine and philosophical, but shouldn't I just like to read you the end of the second volume of 'Modern Painters'! L. My dear, do you think any teacher could be worth your listening to, or anybody else's listening to, who had learned nothing, and altered his mind in nothing, from seven and twenty to seven and forty? But that second volume is very good for you as far as it goes. It is a great advance, and a thoroughly straight and swift one, to be led, as it is the main business of that second volume to lead you, from Dutch cattle pieces, and ruffian-pieces, to Fra Angelico. And it is right for you also, as you grow older, to be strengthened in the general sense and judgment which may enable you to distinguish the weaknesses from the virtues of what you love: else you might come to love both alike; or even the weaknesses without the virtues. You might end by liking Overbeck and Cornelius as well as Angelico. However, I have perhaps been leaning a little too much to the merely practical side of things, in to-night's talk; and you are always to remember, children, that I do not deny, though I cannot affirm, the spiritual advantages resulting, in certain cases, from enthusiastic religious reverie, and from the other practices of saints and anchorites. The evidence respecting them has never yet been honestly collected, much less dispassionately examined: but assuredly, there is in that direction a probability, and more than a probability, of dangerous error, while there is none whatever in the practice of an active, cheerful, and benevolent life. The hope of attaining a higher religious position, which induces us to encounter, for its exalted alternative, the risk of unhealthy error, is often, as I said, founded more on pride than piety; and those who, in modest usefulness, have accepted what seemed to them here the lowliest place in the kingdom of their Father, are not, I believe, the least likely to receive hereafter the command, then unmistakable, 'Friend, go up higher.' LECTURE VIII. _CRYSTAL CAPRICE._ _Formal Lecture in Schoolroom, after some practical examination of minerals._ L. We have seen enough, children, though very little of what might be seen if we had more time, of mineral structures produced by visible opposition, or contest among elements; structures of which the variety, however great, need not surprise us: for we quarrel, ourselves, for many and slight causes;--much more, one should think, may crystals, who can only feel the antagonism, not argue about it. But there is a yet more singular mimicry of our human ways in the varieties of form which appear owing to no antagonistic force; but merely to the variable humour and caprice of the crystals themselves: and I have asked you all to come into the schoolroom to-day, because, of course, this is a part of the crystal mind which must be peculiarly interesting to a feminine audience. (_Great symptoms of disapproval on the part of said audience._) Now, you need not pretend that it will not interest you; why should it not? It is true that we men are never capricious; but that only makes us the more dull and disagreeable. You, who are crystalline in brightness, as well as in caprice, charm infinitely, by infinitude of change. (_Audible murmurs of 'Worse and worse!' 'As if we could be got over that way!' &c. The_ LECTURER, _however, observing the expression of the features to be more complacent, proceeds._) And the most curious mimicry, if not of your changes of fashion, at least of your various modes (in healthy periods) of national costume, takes place among the crystals of different countries. With a little experience, it is quite possible to say at a glance, in what districts certain crystals have been found; and although, if we had knowledge extended and accurate enough, we might of course ascertain the laws and circumstances which have necessarily produced the form peculiar to each locality, this would be just as true of the fancies of the human mind. If we could know the exact circumstances which affect it, we could foretell what now seems to us only caprice of thought, as well as what now seems to us only caprice of crystal: nay, so far as our knowledge reaches, it is on the whole easier to find some reason why the peasant girls of Berne should wear their caps in the shape of butterflies; and the peasant girls of Munich their's in the shape of shells, than to say why the rock-crystals of Dauphiné should all have their summits of the shape of lip-pieces of flageolets, while those of St. Gothard are symmetrical; or why the fluor of Chamouni is rose-coloured, and in octahedrons, while the fluor of Weardale is green, and in cubes. Still farther removed is the hope, at present, of accounting for minor differences in modes of grouping and construction. Take, for instance, the caprices of this single mineral, quartz;--variations upon a single theme. It has many forms; but see what it will make out of this _one_, the six-sided prism. For shortness' sake, I shall call the body of the prism its 'column,' and the pyramid at the extremities its 'cap.' Now, here, first you have a straight column, as long and thin as a stalk of asparagus, with two little caps at the ends; and here you have a short thick column, as solid as a haystack, with two fat caps at the ends; and here you have two caps fastened together, and no column at all between them! Then here is a crystal with its column fat in the middle, and tapering to a little cap; and here is one stalked like a mushroom, with a huge cap put on the top of a slender column! Then here is a column built wholly out of little caps, with a large smooth cap at the top. And here is a column built of columns and caps; the caps all truncated about half way to their points. And in both these last, the little crystals are set anyhow, and build the large one in a disorderly way; but here is a crystal made of columns and truncated caps, set in regular terraces all the way up. MARY. But are not these, groups of crystals, rather than one crystal? L. What do you mean by a group, and what by one crystal? DORA (_audibly aside, to_ MARY, _who is brought to pause_). You know you are never expected to answer, Mary. L. I'm sure this is easy enough. What do you mean by a group of people? MARY. Three or four together, or a good many together, like the caps in these crystals. L. But when a great many persons get together they don't take the shape of one person? (MARY _still at pause._) ISABEL. No, because they can't; but, you know the crystals can; so why shouldn't they? L. Well, they don't; that is to say, they don't always, nor even often. Look here, Isabel. ISABEL. What a nasty ugly thing! L. I'm glad you think it so ugly. Yet it is made of beautiful crystals; they are a little grey and cold in colour, but most of them are clear. ISABEL. But they're in such horrid, horrid disorder! L. Yes; all disorder is horrid, when it is among things that are naturally orderly. Some little girl's rooms are naturally _dis_orderly, I suppose; or I don't know how they could live in them, if they cry out so when they only see quartz crystals in confusion. ISABEL. Oh! but how come they to be like that? L. You may well ask. And yet you will always hear people talking as if they thought order more wonderful than disorder! It _is_ wonderful--as we have seen; but to me, as to you, child, the supremely wonderful thing is that nature should ever be ruinous or wasteful, or deathful! I look at this wild piece of crystallisation with endless astonishment. MARY. Where does it come from? L. The Tête Noire of Chamonix. What makes it more strange is that it should be in a vein of fine quartz rock. If it were in a mouldering rock, it would be natural enough; but in the midst of so fine substance, here are the crystals tossed in a heap; some large, myriads small (almost as small as dust), tumbling over each other like a terrified crowd, and glued together by the sides, and edges, and backs, and heads; some warped, and some pushed out and in, and all spoiled and each spoiling the rest. MARY. And how flat they all are! L. Yes; that's the fashion at the Tête Noire. MARY. But surely this is ruin, not caprice? L. I believe it is in great part misfortune; and we will examine these crystal troubles in next lecture. But if you want to see the gracefullest and happiest caprices of which dust is capable, you must go to the Hartz; not that I ever mean to go there myself, for I want to retain the romantic feeling about the name; and I have done myself some harm already by seeing the monotonous and heavy form of the Brocken from the suburbs of Brunswick. But whether the mountains be picturesque or not, the tricks which the goblins (as I am told) teach the crystals in them, are incomparably pretty. They work chiefly on the mind of a docile, bluish coloured, carbonate of lime; which comes out of a grey limestone. The goblins take the greatest possible care of its education, and see that nothing happens to it to hurt its temper; and when it may be supposed to have arrived at the crisis which is, to a well brought up mineral, what presentation at court is to a young lady--after which it is expected to set fashions--there's no end to its pretty ways of behaving. First it will make itself into pointed darts as fine as hoar-frost; here, it is changed into a white fur as fine as silk; here into little crowns and circlets, as bright as silver; as if for the gnome princesses to wear; here it is in beautiful little plates, for them to eat off; presently it is in towers which they might be imprisoned in; presently in caves and cells, where they may make nun-gnomes of themselves, and no gnome ever hear of them more; here is some of it in sheaves, like corn; here, some in drifts, like snow; here, some in rays, like stars: and, though these are, all of them, necessarily, shapes that the mineral takes in other places, they are all taken here with such a grace that you recognise the high caste and breeding of the crystals wherever you meet them; and know at once they are Hartz-born. Of course, such fine things as these are only done by crystals which are perfectly good, and good-humoured; and of course, also, there are ill-humoured crystals who torment each other, and annoy quieter crystals, yet without coming to anything like serious war. Here (for once) is some ill-disposed quartz, tormenting a peaceable octahedron of fluor, in mere caprice. I looked at it the other night so long, and so wonderingly, just before putting my candle out, that I fell into another strange dream. But you don't care about dreams. DORA. No; we didn't, yesterday; but you know we are made up of caprice; so we do, to-day: and you must tell it us directly. L. Well, you see, Neith and her work were still much in my mind; and then, I had been looking over these Hartz things for you, and thinking of the sort of grotesque sympathy there seemed to be in them with the beautiful fringe and pinnacle work of Northern architecture. So, when I fell asleep, I thought I saw Neith and St. Barbara talking together. DORA. But what had St. Barbara to do with it?[152] L. My dear, I am quite sure St. Barbara is the patroness of good architects: not St. Thomas, whatever the old builders thought. It might be very fine, according to the monks' notions, in St. Thomas, to give all his employer's money away to the poor: but breaches of contract are bad foundations; and I believe, it was not he, but St. Barbara, who overlooked the work in all the buildings you and I care about. However that may be, it was certainly she whom I saw in my dream with Neith. Neith was sitting weaving, and I thought she looked sad, and threw her shuttle slowly; and St. Barbara was standing at her side, in a stiff little gown, all ins and outs, and angles; but so bright with embroidery that it dazzled me whenever she moved; the train of it was just like a heap of broken jewels, it was so stiff, and full of corners, and so many-coloured, and bright. Her hair fell over her shoulders in long, delicate waves, from under a little three pinnacled crown, like a tower. She was asking Neith about the laws of architecture in Egypt and Greece; and when Neith told her the measures of the pyramids, St. Barbara said she thought they would have been better three-cornered: and when Neith told her the measures of the Parthenon, St. Barbara said she thought it ought to have had two transepts. But she was pleased when Neith told her of the temple of the dew, and of the Caryan maidens bearing its frieze: and then she thought that perhaps Neith would like to hear what sort of temples she was building herself, in the French valleys, and on the crags of the Rhine. So she began gossiping, just as one of you might to an old lady: and certainly she talked in the sweetest way in the world to Neith; and explained to her all about crockets and pinnacles: and Neith sat, looking very grave; and always graver as St. Barbara went on; till at last, I'm sorry to say, St. Barbara lost her temper a little. MAY (_very grave herself_). 'St. Barbara?' L. Yes, May. Why shouldn't she? It was very tiresome of Neith to sit looking like that. MAY. But, then, St. Barbara was a saint! L. What's that, May? MAY. A saint! A saint is--I am sure you know! L. If I did, it would not make me sure that you knew too, May: but I don't. VIOLET (_expressing the incredulity of the audience_). Oh,--sir! L. That is to say, I know that people are called saints who are supposed to be better than others: but I don't know how much better they must be, in order to be saints; nor how nearly anybody may be a saint, and yet not be quite one; nor whether everybody who is called a saint was one; nor whether everybody who isn't called a saint, isn't one. (_General silence; the audience feeling themselves on the verge of the Infinities--and a little shocked--and much puzzled by so many questions at once._) L. Besides, did you never hear that verse about being 'called to be saints'? MAY (_repeats Rom._ i. 7.) L. Quite right, May. Well, then, who are called to be that? People in Rome only? MAY. Everybody, I suppose, whom God loves. L. What! little girls as well as other people? MAY. All grown-up people, I mean. L. Why not little girls? Are they wickeder when they are little? MAY. Oh, I hope not. L. Why not little girls, then? (_Pause._) LILY. Because, you know, we can't be worth anything if we're ever so good;--I mean, if we try to be ever so good; and we can't do difficult things--like saints. L. I am afraid, my dear, that old people are not more able or willing for their difficulties than you children are for yours. All I can say is, that if ever I see any of you, when you are seven or eight and twenty, knitting your brows over any work you want to do or to understand, as I saw you, Lily, knitting your brows over your slate this morning, I should think you very noble women. But--to come back to my dream--St. Barbara _did_ lose her temper a little; and I was not surprised. For you can't think how provoking Neith looked, sitting there just like a statue of sandstone; only going on weaving, like a machine; and never quickening the cast of her shuttle; while St. Barbara was telling her so eagerly all about the most beautiful things, and chattering away, as fast as bells ring on Christmas Eve, till she saw that Neith didn't care; and then St. Barbara got as red as a rose, and stopped, just in time;--or I think she would really have said something naughty. ISABEL. Oh, please, but didn't Neith say anything then? L. Yes. She said, quite quietly, 'It may be very pretty, my love; but it is all nonsense.' ISABEL. Oh dear, oh dear; and then? L. Well; then I was a little angry myself, and hoped St. Barbara would be quite angry; but she wasn't. She bit her lips first; and then gave a great sigh--such a wild, sweet sigh--and then she knelt down and hid her face on Neith's knees. Then Neith smiled a little, and was moved. ISABEL. Oh, I am so glad! L. And she touched St. Barbara's forehead with a flower of white lotus; and St. Barbara sobbed once or twice, and then said: 'If you only could see how beautiful it is, and how much it makes people feel what is good and lovely; and if you could only hear the children singing in the Lady chapels!' And Neith smiled,--but still sadly,--and said, 'How do you know what I have seen, or heard, my love? Do you think all those vaults and towers of yours have been built without me? There was not a pillar in your Giotto's Santa Maria del Fiore which I did not set true by my spearshaft as it rose. But this pinnacle and flame work which has set your little heart on fire, is all vanity; and you will see what it will come to, and that soon; and none will grieve for it more than I. And then every one will disbelieve your pretty symbols and types. Men must be spoken simply to, my dear, if you would guide them kindly, and long.' But St. Barbara answered, that, 'Indeed she thought every one liked her work,' and that 'the people of different towns were as eager about their cathedral towers as about their privileges or their markets;' and then she asked Neith to come and build something with her, wall against tower; and 'see whether the people will be as much pleased with your building as with mine.' But Neith answered, 'I will not contend with you, my dear. I strive not with those who love me; and for those who hate me, it is not well to strive with me, as weaver Arachne knows. And remember, child, that nothing is ever done beautifully, which is done in rivalship; nor nobly, which is done in pride.' Then St. Barbara hung her head quite down, and said she was very sorry she had been so foolish; and kissed Neith; and stood thinking a minute: and then her eyes got bright again, and she said, she would go directly and build a chapel with five windows in it; four for the four cardinal virtues, and one for humility, in the middle, bigger than the rest. And Neith very nearly laughed quite out, I thought; certainly her beautiful lips lost all their sternness for an instant; then she said, 'Well, love, build it, but do not put so many colours into your windows as you usually do; else no one will be able to see to read, inside: and when it is built, let a poor village priest consecrate it, and not an archbishop.' St. Barbara started a little, I thought, and turned as if to say something; but changed her mind, and gathered up her train, and went out. And Neith bent herself again to her loom, in which she was weaving a web of strange dark colours, I thought; but perhaps it was only after the glittering of St. Barbara's embroidered train: and I tried to make out the figures in Neith's web, and confused myself among them, as one always does in dreams; and then the dream changed altogether, and I found myself, all at once, among a crowd of little Gothic and Egyptian spirits, who were quarrelling: at least the Gothic ones were trying to quarrel; for the Egyptian ones only sat with their hands on their knees, and their aprons sticking out very stiffly; and stared. And after a while I began to understand what the matter was. It seemed that some of the troublesome building imps, who meddle and make continually, even in the best Gothic work, had been listening to St. Barbara's talk with Neith; and had made up their minds that Neith had no workpeople who could build against them. They were but dull imps, as you may fancy by their thinking that; and never had done much, except disturbing the great Gothic building angels at their work, and playing tricks to each other; indeed, of late they had been living years and years, like bats, up under the cornices of Strasbourg and Cologne cathedrals, with nothing to do but to make mouths at the people below. However, they thought they knew everything about tower building; and those who had heard what Neith said, told the rest; and they all flew down directly, chattering in German, like jackdaws, to show Neith's people what they could do. And they had found some of Neith's old workpeople somewhere near Sais, sitting in the sun, with their hands on their knees; and abused them heartily: and Neith's people did not mind at first, but, after a while, they seemed to get tired of the noise; and one or two rose up slowly, and laid hold of their measuring rods, and said, 'If St. Barbara's people liked to build with them, tower against pyramid, they would show them how to lay stones.' Then the little Gothic spirits threw a great many double somersaults for joy; and put the tips of their tongues out slily to each other, on one side; and I heard the Egyptians say, 'they must be some new kind of frog--they didn't think there was much building in _them_.' However, the stiff old workers took their rods, as I said, and measured out a square space of sand; but as soon as the German spirits saw that, they declared they wanted exactly that bit of ground to build on, themselves. Then the Egyptian builders offered to go farther off, and the Germans ones said, 'Ja wohl.' But as soon as the Egyptians had measured out another square, the little Germans said they must have some of that too. Then Neith's people laughed; and said, 'they might take as much as they liked, but they would not move the plan of their pyramid again.' Then the little Germans took three pieces, and began to build three spires directly; one large, and two little. And when the Egyptians saw they had fairly begun, they laid their foundation all round, of large square stones: and began to build, so steadily that they had like to have swallowed up the three little German spires. So when the Gothic spirits saw that, they built their spires leaning, like the tower of Pisa, that they might stick out at the side of the pyramid. And Neith's people stared at them; and thought it very clever, but very wrong; and on they went, in their own way, and said nothing. Then the little Gothic spirits were terribly provoked because they could not spoil the shape of the pyramid; and they sat down all along the ledges of it to make faces; but that did no good. Then they ran to the corners, and put their elbows on their knees, and stuck themselves out as far as they could, and made more faces; but that did no good, neither. Then they looked up to the sky, and opened their mouths wide, and gobbled, and said it was too hot for work, and wondered when it would rain; but that did no good, neither. And all the while the Egyptian spirits were laying step above step, patiently. But when the Gothic ones looked, and saw how high they had got, they said, 'Ach, Himmel!' and flew down in a great black cluster to the bottom; and swept out a level spot in the sand with their wings, in no time, and began building a tower straight up, as fast as they could. And the Egyptians stood still again to stare at them; for the Gothic spirits had got quite into a passion, and were really working very wonderfully. They cut the sandstone into strips as fine as reeds; and put one reed on the top of another, so that you could not see where they fitted: and they twisted them in and out like basket work, and knotted them into likenesses of ugly faces, and of strange beasts biting each other; and up they went, and up still, and they made spiral staircases at the corners, for the loaded workers to come up by (for I saw they were but weak imps, and could not fly with stones on their backs), and then they made traceried galleries for them to run round by; and so up again; with finer and finer work, till the Egyptians wondered whether they meant the thing for a tower or a pillar: and I heard them saying to one another, 'It was nearly as pretty as lotus stalks; and if it were not for the ugly faces, there would be a fine temple, if they were going to build it all with pillars as big as that!' But in a minute afterwards,--just as the Gothic spirits had carried their work as high as the upper course, but three or four, of the pyramid--the Egyptians called out to them to 'mind what they were about, for the sand was running away from under one of their tower corners.' But it was too late to mind what they were about; for, in another instant, the whole tower sloped aside; and the Gothic imps rose out of it like a flight of puffins, in a single cloud; but screaming worse than any puffins you ever heard: and down came the tower, all in a piece, like a falling poplar, with its head right on the flank of the pyramid; against which it snapped short off. And of course that waked me! MARY. What a shame of you to have such a dream, after all you have told us about Gothic architecture! L. If you have understood anything I ever told you about it, you know that no architecture was ever corrupted more miserably; or abolished more justly by the accomplishment of its own follies. Besides, even in its days of power, it was subject to catastrophes of this kind. I have stood too often, mourning, by the grand fragment of the apse of Beauvais, not to have that fact well burnt into me. Still, you must have seen, surely, that these imps were of the Flamboyant school; or, at least, of the German schools correspondent with it in extravagance. MARY. But, then, where is the crystal about which you dreamed all this? L. Here; but I suppose little Pthah has touched it again, for it is very small. But, you see, here is the pyramid, built of great square stones of fluor spar, straight up; and here are the three little pinnacles of mischievous quartz, which have set themselves, at the same time, on the same foundation; only they lean like the tower of Pisa, and come out obliquely at the side: and here is one great spire of quartz which seems as if it had been meant to stand straight up, a little way off; and then had fallen down against the pyramid base, breaking its pinnacle away. In reality, it has crystallised horizontally, and terminated imperfectly: but, then, by what caprice does one crystal form horizontally, when all the rest stand upright? But this is nothing to the phantasies of fluor, and quartz, and some other such companions, when they get leave to do anything they like. I could show you fifty specimens, about every one of which you might fancy a new fairy tale. Not that, in truth, any crystals get leave to do quite what they like; and many of them are sadly tried, and have little time for caprices--poor things! MARY. I thought they always looked as if they were either in play or in mischief! What trials have they? L. Trials much like our own. Sickness, and starvation; fevers, and agues, and palsy; oppression; and old age, and the necessity of passing away in their time, like all else. If there's any pity in you, you must come to-morrow, and take some part in these crystal griefs. DORA. I am sure we shall cry till our eyes are red. L. Ah, you may laugh, Dora: but I've been made grave, not once, nor twice, to see that even crystals 'cannot choose but be old' at last. It may be but a shallow proverb of the Justice's; but it is a shrewdly wide one. DORA (_pensive, for once_). I suppose it is very dreadful to be old! But then (_brightening again_), what should we do without our dear old friends, and our nice old lecturers? L. If all nice old lecturers were minded as little as one I know of---- DORA. And if they all meant as little what they say, would they not deserve it? But we'll come--we'll come, and cry. FOOTNOTES: [152] Note v. LECTURE IX. _CRYSTAL SORROWS._ _Working Lecture in Schoolroom._ L. We have been hitherto talking, children, as if crystals might live, and play, and quarrel, and behave ill or well, according to their characters, without interruption from anything else. But so far from this being so, nearly all crystals, whatever their characters, have to live a hard life of it, and meet with many misfortunes. If we could see far enough, we should find, indeed, that, at the root, all their vices were misfortunes: but to-day I want you to see what sort of troubles the best crystals have to go through, occasionally, by no fault of their own. This black thing, which is one of the prettiest of the very few pretty black things in the world, is called 'Tourmaline.' It may be transparent, and green, or red, as well as black; and then no stone can be prettier (only, all the light that gets into it, I believe, comes out a good deal the worse; and is not itself again for a long while). But this is the commonest state of it,--opaque, and as black as jet. MARY. What does 'Tourmaline' mean? L. They say it is Ceylanese, and I don't know Ceylanese; but we may always be thankful for a graceful word, whatever it means. MARY. And what is it made of? L. A little of everything; there's always flint, and clay, and magnesia in it; and the black is iron, according to its fancy; and there's boracic acid, if you know what that is; and if you don't, I cannot tell you to-day; and it doesn't signify; and there's potash, and soda; and, on the whole, the chemistry of it is more like a mediæval doctor's prescription, than the making of a respectable mineral: but it may, perhaps, be owing to the strange complexity of its make, that it has a notable habit which makes it, to me, one of the most interesting of minerals. You see these two crystals are broken right across, in many places, just as if they had been shafts of black marble fallen from a ruinous temple; and here they lie, imbedded in white quartz, fragment succeeding fragment, keeping the line of the original crystal, while the quartz fills up the intervening spaces. Now tourmaline has a trick of doing this, more than any other mineral I know: here is another bit which I picked up on the glacier of Macugnaga; it is broken, like a pillar built of very flat broad stones, into about thirty joints, and all these are heaved and warped away from each other sideways, almost into a line of steps; and then all is filled up with quartz paste. And here, lastly, is a green Indian piece, in which the pillar is first disjointed, and then wrung round into the shape of an S. MARY. How _can_ this have been done? L. There are a thousand ways in which it may have been done; the difficulty is not to account for the doing of it; but for the showing of it in some crystals, and not in others. You never by any chance get a quartz crystal broken or twisted in this way. If it break or twist at all, which it does sometimes, like the spire of Dijon, it is by its own will or fault; it never seems to have been passively crushed. But, for the forces which cause this passive ruin of the tourmaline,--here is a stone which will show you multitudes of them in operation at once. It is known as 'brecciated agate,' beautiful, as you see; and highly valued as a pebble: yet, so far as I can read or hear, no one has ever looked at it with the least attention. At the first glance, you see it is made of very fine red striped agates, which have been broken into small pieces, and fastened together again by paste, also of agate. There would be nothing wonderful in this, if this were all. It is well known that by the movements of strata, portions of rock are often shattered to pieces:--well known also that agate is a deposit of flint by water under certain conditions of heat and pressure: there is, therefore, nothing wonderful in an agate's being broken; and nothing wonderful in its being mended with the solution out of which it was itself originally congealed. And with this explanation, most people, looking at a brecciated agate, or brecciated anything, seem to be satisfied. I was so myself, for twenty years; but, lately happening to stay for some time at the Swiss Baden, where the beach of the Limmat is almost wholly composed of brecciated limestones, I began to examine them thoughtfully; and perceived, in the end, that they were, one and all, knots of as rich mystery as any poor little human brain was ever lost in. That piece of agate in your hand, Mary, will show you many of the common phenomena of breccias; but you need not knit your brows over it in that way; depend upon it, neither you nor I shall ever know anything about the way it was made, as long as we live. DORA. That does not seem much to depend upon. L. Pardon me, puss. When once we gain some real notion of the extent and the unconquerableness of our ignorance, it is a very broad and restful thing to depend upon: you can throw yourself upon it at ease, as on a cloud, to feast with the gods. You do not thenceforward trouble yourself,--nor any one else,--with theories, or the contradiction of theories; you neither get headache nor heartburning; and you never more waste your poor little store of strength, or allowance of time. However, there are certain facts, about this agate-making, which I can tell you; and then you may look at it in a pleasant wonder as long as you like; pleasant wonder is no loss of time. First, then, it is not broken freely by a blow; it is slowly wrung, or ground, to pieces. You can only with extreme dimness conceive the force exerted on mountains in transitional states of movement. You have all read a little geology; and you know how coolly geologists talk of mountains being raised or depressed. They talk coolly of it, because they are accustomed to the fact; but the very universality of the fact prevents us from ever conceiving distinctly the conditions of force involved. You know I was living last year in Savoy; my house was on the back of a sloping mountain which rose gradually for two miles, behind it; and then fell at once in a great precipice towards Geneva, going down three thousand feet in four or five cliffs, or steps. Now that whole group of cliffs had simply been torn away by sheer strength from the rocks below, as if the whole mass had been as soft as biscuit. Put four or five captains' biscuits on the floor, on the top of one another; and try to break them all in half, not by bending, but by holding one half down, and tearing the other halves straight up;--of course you will not be able to do it, but you will feel and comprehend the sort of force needed. Then, fancy each captains' biscuit a bed of rock, six or seven hundred feet thick; and the whole mass torn straight through; and one half heaved up three thousand feet, grinding against the other as it rose,--and you will have some idea of the making of the Mont Saléve. MAY. But it must crush the rocks all to dust! L. No; for there is no room for dust. The pressure is too great; probably the heat developed also so great that the rock is made partly ductile; but the worst of it is, that we never can see these parts of mountains in the state they were left in at the time of their elevation; for it is precisely in these rents and dislocations that the crystalline power principally exerts itself. It is essentially a styptic power, and wherever the earth is torn, it heals and binds; nay, the torture and grieving of the earth seem necessary to bring out its full energy; for you only find the crystalline living power fully in action, where the rents and faults are deep and many. DORA. If you please, sir,--would you tell us--what are 'faults'? L. You never heard of such things? DORA. Never in all our lives. L. When a vein of rock which is going on smoothly, is interrupted by another troublesome little vein, which stops it, and puts it out, so that it has to begin again in another place--that is called a fault. _I_ always think it ought to be called the fault of the vein that interrupts it; but the miners always call it the fault of the vein that is interrupted. DORA. So it is, if it does not begin again where it left off. L. Well, that is certainly the gist of the business: but, whatever good-natured old lecturers may do, the rocks have a bad habit, when they are once interrupted, of never asking 'Where was I?' DORA. When the two halves of the dining table came separate, yesterday, was that a 'fault'? L. Yes; but not the table's. However, it is not a bad illustration, Dora. When beds of rock are only interrupted by a fissure, but remain at the same level, like the two halves of the table, it is not called a fault, but only a fissure; but if one half of the table be either tilted higher than the other, or pushed to the side, so that the two parts will not fit, it is a fault. You had better read the chapter on faults in Jukes's Geology; then you will know all about it. And this rent that I am telling you of in the Saléve, is one only of myriads, to which are owing the forms of the Alps, as, I believe, of all great mountain chains. Wherever you see a precipice on any scale of real magnificence, you will nearly always find it owing to some dislocation of this kind; but the point of chief wonder to me, is the delicacy of the touch by which these gigantic rents have been apparently accomplished. Note, however, that we have no clear evidence, hitherto, of the time taken to produce any of them. We know that a change of temperature alters the position and the angles of the atoms of crystals, and also the entire bulk of rocks. We know that in all volcanic, and the greater part of all subterranean, action, temperatures are continually changing, and therefore masses of rock must be expanding or contracting, with infinite slowness, but with infinite force. This pressure must result in mechanical strain somewhere, both in their own substance, and in that of the rocks surrounding them; and we can form no conception of the result of irresistible pressure, applied so as to rend and raise, with imperceptible slowness of gradation, masses thousands of feet in thickness. We want some experiments tried on masses of iron and stone; and we can't get them tried, because Christian creatures never will seriously and sufficiently spend money, except to find out the shortest ways of killing each other. But, besides this slow kind of pressure, there is evidence of more or less sudden violence, on the same terrific scale; and, through it all, the wonder, as I said, is always to me the delicacy of touch. I cut a block of the Saléve limestone from the edge of one of the principal faults which have formed the precipice; it is a lovely compact limestone, and the fault itself is filled up with a red breccia formed of the crushed fragments of the torn rock, cemented by a rich red crystalline paste. I have had the piece I cut from it smoothed, and polished across the junction; here it is; and you may now pass your soft little fingers over the surface, without so much as feeling the place where a rock which all the hills of England might have been sunk in the body of, and not a summit seen, was torn asunder through that whole thickness, as a thin dress is torn when you tread upon it. (_The audience examine the stone, and touch it timidly; but the matter remains inconceivable to them._) MARY (_struck by the beauty of the stone_). But this is almost marble? L. It is quite marble. And another singular point in the business, to my mind, is that these stones, which men have been cutting into slabs, for thousands of years, to ornament their principal buildings with,--and which, under the general name of 'marble,' have been the delight of the eyes, and the wealth of architecture, among all civilised nations,--are precisely those on which the signs and brands of these earth agonies have been chiefly struck; and there is not a purple vein nor flaming zone in them, which is not the record of their ancient torture. What a boundless capacity for sleep, and for serene stupidity, there is in the human mind! Fancy reflective beings, who cut and polish stones for three thousand years, for the sake of the pretty stains upon them; and educate themselves to an art at last (such as it is), of imitating these veins by dexterous painting; and never a curious soul of them, all that while, asks, 'What painted the rocks?' (_The audience look dejected, and ashamed of themselves._) The fact is, we are all, and always, asleep, through our lives; and it is only by pinching ourselves very hard that we ever come to see, or understand, anything. At least, it is not always we who pinch ourselves; sometimes other people pinch us; which I suppose is very good of them,--or other things, which I suppose is very proper of them. But it is a sad life; made up chiefly of naps and pinches. (_Some of the audience, on this, appearing to think that the others require pinching, the_ LECTURER _changes the subject._) Now, however, for once, look at a piece of marble carefully, and think about it. You see this is one side of the fault; the other side is down or up, nobody knows where; but, on this side, you can trace the evidence of the dragging and tearing action. All along the edge of this marble, the ends of the fibres of the rock are torn, here an inch, and there half an inch, away from each other; and you see the exact places where they fitted, before they were torn separate; and you see the rents are now all filled up with the sanguine paste, full of the broken pieces of the rock; the paste itself seems to have been half melted, and partly to have also melted the edge of the fragments it contains, and then to have crystallised with them, and round them. And the brecciated agate I first showed you contains exactly the same phenomena; a zoned crystallisation going on amidst the cemented fragments, partly altering the structure of those fragments themselves, and subject to continual change, either in the intensity of its own power, or in the nature of the materials submitted to it;--so that, at one time, gravity acts upon them, and disposes them in horizontal layers, or causes them to droop in stalactites; and at another, gravity is entirely defied, and the substances in solution are crystallised in bands of equal thickness on every side of the cell. It would require a course of lectures longer than these (I have a great mind,--you have behaved so saucily--to stay and give them) to describe to you the phenomena of this kind, in agates and chalcedonies only;--nay, there is a single sarcophagus in the British Museum, covered with grand sculpture of the 18th dynasty, which contains in the magnificent breccia (agates and jaspers imbedded in porphyry), out of which it is hewn, material for the thought of years; and record of the earth-sorrow of ages in comparison with the duration of which, the Egyptian letters tell us but the history of the evening and morning of a day. Agates, I think, of all stones, confess most of their past history; but all crystallisation goes on under, and partly records, circumstances of this kind--circumstances of infinite variety, but always involving difficulty, interruption, and change of condition at different times. Observe, first, you have the whole mass of the rock in motion, either contracting itself, and so gradually widening the cracks; or being compressed, and thereby closing them, and crushing their edges;--and, if one part of its substance be softer, at the given temperature, than another, probably squeezing that softer substance out into the veins. Then the veins themselves, when the rock leaves them open by its contraction, act with various power of suction upon its substance;--by capillary attraction when they are fine,--by that of pure vacuity when they are larger, or by changes in the constitution and condensation of the mixed gases with which they have been originally filled. Those gases themselves may be supplied in all variation of volume and power from below; or, slowly, by the decomposition of the rocks themselves; and, at changing temperatures, must exert relatively changing forces of decomposition and combination on the walls of the veins they fill; while water, at every degree of heat and pressure (from beds of everlasting ice, alternate with cliffs of native rock, to volumes of red hot, or white hot, steam), congeals, and drips, and throbs, and thrills, from crag to crag; and breathes from pulse to pulse of foaming or fiery arteries, whose beating is felt through chains of the great islands of the Indian seas, as your own pulses lift your bracelets, and makes whole kingdoms of the world quiver in deadly earthquake, as if they were light as aspen leaves. And, remember, the poor little crystals have to live their lives, and mind their own affairs, in the midst of all this, as best they may. They are wonderfully like human creatures,--forget all that is going on if they don't see it, however dreadful; and never think what is to happen to-morrow. They are spiteful or loving, and indolent or painstaking, and orderly or licentious, with no thought whatever of the lava or the flood which may break over them any day; and evaporate them into air-bubbles, or wash them into a solution of salts. And you may look at them, once understanding the surrounding conditions of their fate, with an endless interest. You will see crowds of unfortunate little crystals, who have been forced to constitute themselves in a hurry, their dissolving element being fiercely scorched away; you will see them doing their best, bright and numberless, but tiny. Then you will find indulged crystals, who have had centuries to form themselves in, and have changed their mind and ways continually; and have been tired, and taken heart again; and have been sick, and got well again; and thought they would try a different diet, and then thought better of it; and made but a poor use of their advantages, after all. And others you will see, who have begun life as wicked crystals; and then have been impressed by alarming circumstances, and have become converted crystals, and behaved amazingly for a little while, and fallen away again, and ended, but discreditably, perhaps even in decomposition; so that one doesn't know what will become of them. And sometimes you will see deceitful crystals, that look as soft as velvet, and are deadly to all near them; and sometimes you will see deceitful crystals, that seem flint-edged, like our little quartz-crystal of a housekeeper here, (hush! Dora,) and are endlessly gentle and true wherever gentleness and truth are needed. And sometimes you will see little child-crystals put to school like school-girls, and made to stand in rows; and taken the greatest care of, and taught how to hold themselves up, and behave: and sometimes you will see unhappy little child-crystals left to lie about in the dirt, and pick up their living, and learn manners, where they can. And sometimes you will see fat crystals eating up thin ones, like great capitalists and little labourers; and politico-economic crystals teaching the stupid ones how to eat each other, and cheat each other; and foolish crystals getting in the way of wise ones; and impatient crystals spoiling the plans of patient ones, irreparably; just as things go on in the world. And sometimes you may see hypocritical crystals taking the shape of others, though they are nothing like in their minds; and vampire crystals eating out the hearts of others; and hermit-crab crystals living in the shells of others; and parasite crystals living on the means of others; and courtier crystals glittering in attendance upon others; and all these, besides the two great companies of war and peace, who ally themselves, resolutely to attack, or resolutely to defend. And for the close, you see the broad shadow and deadly force of inevitable fate, above all this: you see the multitudes of crystals whose time has come; not a set time, as with us, but yet a time, sooner or later, when they all must give up their crystal ghosts:--when the strength by which they grew, and the breath given them to breathe, pass away from them; and they fail, and are consumed, and vanish away; and another generation is brought to life, framed out of their ashes. MARY. It is very terrible. Is it not the complete fulfilment, down into the very dust, of that verse: 'The whole creation groaneth and travaileth in pain'? L. I do not know that it is in pain, Mary: at least, the evidence tends to show that there is much more pleasure than pain, as soon as sensation becomes possible. LUCILLA. But then, surely, if we are told that it is pain, it must be pain? L. Yes; if we are told; and told in the way you mean, Lucilla; but nothing is said of the proportion to pleasure. Unmitigated pain would kill any of us in a few hours; pain equal to our pleasures would make us loathe life; the word itself cannot be applied to the lower conditions of matter, in its ordinary sense. But wait till to-morrow to ask me about this. To-morrow is to be kept for questions and difficulties; let us keep to the plain facts to-day. There is yet one group of facts connected with this rending of the rocks, which I especially want you to notice. You know, when you have mended a very old dress, quite meritoriously, till it won't mend any more---- EGYPT (_interrupting_). Could not you sometimes take gentlemen's work to illustrate by? L. Gentlemen's work is rarely so useful as yours, Egypt; and when it is useful, girls cannot easily understand it. DORA. I am sure we should understand it better than gentlemen understand about sewing. L. My dear, I hope I always speak modestly, and under correction, when I touch upon matters of the kind too high for me; and besides, I never intend to speak otherwise than respectfully of sewing;--though you always seem to think I am laughing at you. In all seriousness, illustrations from sewing are those which Neith likes me best to use; and which young ladies ought to like everybody to use. What do you think the beautiful word 'wife' comes from? DORA (_tossing her head_). I don't think it is a particularly beautiful word. L. Perhaps not. At your ages you may think 'bride' sounds better; but wife's the word for wear, depend upon it. It is the great word in which the English and Latin languages conquer the French and the Greek. I hope the French will some day get a word for it, yet, instead of their dreadful 'femme.' But what do you think it comes from? DORA. I never _did_ think about it. L. Nor you, Sibyl? SIBYL. No; I thought it was Saxon, and stopped there. L. Yes; but the great good of Saxon words is, that they usually do mean something. Wife means 'weaver.' You have all the right to call yourselves little 'housewives,' when you sew neatly. DORA. But I don't think we want to call ourselves 'little housewives.' L. You must either be house-Wives, or house-Moths; remember that. In the deep sense, you must either weave men's fortunes, and embroider them; or feed upon, and bring them to decay. You had better let me keep my sewing illustration, and help me out with it. DORA. Well we'll hear it, under protest. L. You have heard it before; but with reference to other matters. When it is said, 'no man putteth a piece of new cloth on an old garment, else it taketh from the old,' does it not mean that the new piece tears the old one away at the sewn edge? DORA. Yes; certainly. L. And when you mend a decayed stuff with strong thread, does not the whole edge come away sometimes, when it tears again? DORA. Yes; and then it is of no use to mend it any more. L. Well, the rocks don't seem to think that: but the same thing happens to them continually. I told you they were full of rents, or veins. Large masses of mountain are sometimes as full of veins as your hand is; and of veins nearly as fine (only you know a rock vein does not mean a tube, but a crack or cleft). Now these clefts are mended, usually, with the strongest material the rock can find; and often literally with threads; for the gradually opening rent seems to draw the substance it is filled with into fibres, which cross from one side of it to the other, and are partly crystalline; so that, when the crystals become distinct, the fissure has often exactly the look of a tear, brought together with strong cross stitches. Now when this is completely done, and all has been fastened and made firm, perhaps some new change of temperature may occur, and the rock begin to contract again. Then the old vein must open wider; or else another open elsewhere. If the old vein widen, it _may_ do so at its centre; but it constantly happens, with well filled veins, that the cross stitches are too strong to break; the walls of the vein, instead, are torn away by them; and another little supplementary vein--often three or four successively--will be thus formed at the side of the first. MARY. That is really very much like our work. But what do the mountains use to sew with? L. Quartz, whenever they can get it: pure limestones are obliged to be content with carbonate of lime; but most mixed rocks can find some quartz for themselves. Here is a piece of black slate from the Buet: it looks merely like dry dark mud;--you could not think there was any quartz in it; but, you see, its rents are all stitched together with beautiful white thread, which is the purest quartz, so close drawn that you can break it like flint, in the mass; but, where it has been exposed to the weather, the fine fibrous structure is shown: and, more than that, you see the threads have been all twisted and pulled aside, this way and the other, by the warpings and shifting of the sides of the vein as it widened. MARY. It is wonderful! But is that going on still? Are the mountains being torn and sewn together again at this moment? L. Yes, certainly, my dear: but I think, just as certainly (though geologists differ on this matter), not with the violence, or on the scale, of their ancient ruin and renewal. All things seem to be tending towards a condition of at least temporary rest; and that groaning and travailing of the creation, as, assuredly, not wholly in pain, is not, in the full sense, 'until now.' MARY. I want so much to ask you about that! SIBYL. Yes; and we all want to ask you about a great many other things besides. L. It seems to me that you have got quite as many new ideas as are good for any of you at present: and I should not like to burden you with more; but I must see that those you have are clear, if I can make them so; so we will have one more talk, for answer of questions, mainly. Think over all the ground, and make your difficulties thoroughly presentable. Then we'll see what we can make of them. DORA. They shall all be dressed in their very best; and curtsey as they come in. L. No, no, Dora; no curtseys, if you please. I had enough of them the day you all took a fit of reverence, and curtsied me out of the room. DORA. But, you know, we cured ourselves of the fault, at once, by that fit. We have never been the least respectful since. And the difficulties will only curtsey themselves out of the room, I hope;--come in at one door--vanish at the other. L. What a pleasant world it would be, if all its difficulties were taught to behave so! However, one can generally make something, or (better still) nothing, or at least less, of them, if they thoroughly know their own minds; and your difficulties--I must say that for you, children,--generally do know their own minds, as you do yourselves. DORA. That is very kindly said for us. Some people would not allow so much as that girls had any minds to know. L. They will at least admit that you have minds to change, Dora. MARY. You might have left us the last speech, without a retouch. But we'll put our little minds, such as they are, in the best trim we can, for to-morrow. LECTURE X. _THE CRYSTAL REST._ _Evening. The fireside._ L's _arm-chair in the comfortablest corner._ L. (_perceiving various arrangements being made of foot-stool, cushion, screen, and the like_). Yes, yes, it's all very fine! and I am to sit here to be asked questions till supper-time, am I? DORA. I don't think you can have any supper to-night:--we've got so much to ask. LILY. Oh, Miss Dora! We can fetch it him here, you know, so nicely! L. Yes, Lily, that will be pleasant, with competitive examination going on over one's plate; the competition being among the examiners. Really, now that I know what teasing things girls are, I don't so much wonder that people used to put up patiently with the dragons who took _them_ for supper. But I can't help myself, I suppose;--no thanks to St. George. Ask away, children, and I'll answer as civilly as may be. DORA. We don't so much care about being answered civilly, as about not being asked things back again. L. 'Ayez seulement la patience que je le parle.' There shall be no requitals. DORA. Well, then, first of all--What shall we ask first, Mary? MARY. It does not matter. I think all the questions come into one, at last, nearly. DORA. You know, you always talk as if the crystals were alive; and we never understand how much you are in play, and how much in earnest. That's the first thing. L. Neither do I understand, myself, my dear, how much I am in earnest. The stones puzzle me as much as I puzzle you. They look as if they were alive, and make me speak as if they were; and I do not in the least know how much truth there is in the appearance. I'm not to ask things back again to-night, but all questions of this sort lead necessarily to the one main question, which we asked, before, in vain, 'What is it to be alive?' DORA. Yes; but we want to come back to that: for we've been reading scientific books about the 'conservation of forces,' and it seems all so grand, and wonderful; and the experiments are so pretty; and I suppose it must be all right: but then the books never speak as if there were any such thing as 'life.' L. They mostly omit that part of the subject, certainly, Dora; but they are beautifully right as far as they go; and life is not a convenient element to deal with. They seem to have been getting some of it into and out of bottles, in their 'ozone' and 'antizone' lately; but they still know little of it: and, certainly, I know less. DORA. You promised not to be provoking, to-night. L. Wait a minute. Though, quite truly, I know less of the secrets of life than the philosophers do; I yet know one corner of ground on which we artists can stand, literally as 'Life Guards' at bay, as steadily as the Guards at Inkermann; however hard the philosophers push. And you may stand with us, if once you learn to draw nicely. DORA. I'm sure we are all trying! but tell us where we may stand. L. You may always stand by Form, against Force. To a painter, the essential character of anything is the form of it; and the philosophers cannot touch that. They come and tell you, for instance, that there is as much heat, or motion, or calorific energy (or whatever else they like to call it), in a tea-kettle as in a Gier-eagle. Very good; that is so; and it is very interesting. It requires just as much heat as will boil the kettle, to take the Gier-eagle up to his nest; and as much more to bring him down again on a hare or a partridge. But we painters, acknowledging the equality and similarity of the kettle and the bird in all scientific respects, attach, for our part, our principal interest to the difference in their forms. For us, the primarily cognisable facts, in the two things, are, that the kettle has a spout, and the eagle a beak; the one a lid on its back, the other a pair of wings;--not to speak of the distinction also of volition, which the philosophers may properly call merely a form or mode of force;--but then, to an artist, the form, or mode, is the gist of the business. The kettle chooses to sit still on the hob; the eagle to recline on the air. It is the fact of the choice, not the equal degree of temperature in the fulfilment of it, which appears to us the more interesting circumstance;--though the other is very interesting too. Exceedingly so! Don't laugh, children; the philosophers have been doing quite splendid work lately, in their own way: especially, the transformation of force into light is a great piece of systematised discovery; and this notion about the sun's being supplied with his flame by ceaseless meteoric hail is grand, and looks very likely to be true. Of course, it is only the old gun-lock,--flint and steel,--on a large scale: but the order and majesty of it are sublime. Still, we sculptors and painters care little about it. 'It is very fine,' we say, 'and very useful, this knocking the light out of the sun, or into it, by an eternal cataract of planets. But you may hail away, so, for ever, and you will not knock out what we can. Here is a bit of silver, not the size of half-a-crown, on which, with a single hammer stroke, one of us, two thousand and odd years ago, hit out the head of the Apollo of Clazomenæ. It is merely a matter of form; but if any of you philosophers, with your whole planetary system to hammer with, can hit out such another bit of silver as this,--we will take off our hats to you. For the present, we keep them on.' MARY. Yes, I understand; and that is nice; but I don't think we shall any of us like having only form to depend upon. L. It was not neglected in the making of Eve, my dear. MARY. It does not seem to separate us from the dust of the ground. It is that breathing of the life which we want to understand. L. So you should: but hold fast to the form, and defend that first, as distinguished from the mere transition of forces. Discern the moulding hand of the potter commanding the clay, from his merely beating foot, as it turns the wheel. If you can find incense, in the vase, afterwards,--well: but it is curious how far mere form will carry you ahead of the philosophers. For instance, with regard to the most interesting of all their modes of force--light;--they never consider how far the existence of it depends on the putting of certain vitreous and nervous substances into the formal arrangement which we call an eye. The German philosophers began the attack, long ago, on the other side, by telling us, there was no such thing as light at all, unless we chose to see it: now, German and English, both, have reversed their engines, and insist that light would be exactly the same light that it is, though nobody could ever see it. The fact being that the force must be there, and the eyes there; and 'light' means the effect of the one on the other;--and perhaps, also--(Plato saw farther into that mystery than any one has since, that I know of),--on something a little way within the eyes; but we may stand quite safe, close behind the retina, and defy the philosophers. SIBYL. But I don't care so much about defying the philosophers, if only one could get a clear idea of life, or soul, for one's self. L. Well, Sibyl, you used to know more about it, in that cave of yours, than any of us. I was just going to ask you about inspiration, and the golden bough, and the like; only I remembered I was not to ask anything. But, will not you, at least, tell us whether the ideas of Life, as the power of putting things together, or 'making' them; and of Death, as the power of pushing things separate, or 'unmaking' them, may not be very simply held in balance against each other? SIBYL. No, I am not in my cave to-night; and cannot tell you anything. L. I think they may. Modern Philosophy is a great separator; it is little more than the expansion of Molière's great sentence, 'Il s'ensuit de là, que tout ce qu'il y a de beau est dans les dictionnaires; il n'y a que les mots qui sont transposés.' But when you used to be in your cave, Sibyl, and to be inspired, there was (and there remains still in some small measure), beyond the merely formative and sustaining power, another, which we painters call 'passion'--I don't know what the philosophers call it; we know it makes people red, or white; and therefore it must be something, itself; and perhaps it is the most truly 'poetic' or 'making' force of all, creating a world of its own out of a glance, or a sigh: and the want of passion is perhaps the truest death, or 'unmaking' of everything;--even of stones. By the way, you were all reading about that ascent of the Aiguille Verte, the other day? SIBYL. Because you had told us it was so difficult, you thought it could not be ascended. L. Yes; I believed the Aiguille Verte would have held its own. But do you recollect what one of the climbers exclaimed, when he first felt sure of reaching the summit? SIBYL. Yes, it was, 'Oh, Aiguille Verte, vous êtes morte, vous êtes morte!' L. That was true instinct. Real philosophic joy. Now can you at all fancy the difference between that feeling of triumph in a mountain's death; and the exultation of your beloved poet, in its life-- 'Quantus Athos, aut quantus Eryx, aut ipse coruscis Quum fremit ilicibus quantus, gandetque nivali Vertice, se attollens pater Apenninus ad auras.' DORA. You must translate for us mere house-keepers, please,--whatever the cave-keepers may know about it. MARY. Will Dryden do? L. No. Dryden is a far way worse than nothing, and nobody will 'do.' You can't translate it. But this is all you need know, that the lines are full of a passionate sense of the Apennines' fatherhood, or protecting power over Italy; and of sympathy with their joy in their snowy strength in heaven; and with the same joy, shuddering through all the leaves of their forests. MARY. Yes, that is a difference indeed! but then, you know, one can't help feeling that it is fanciful. It is very delightful to imagine the mountains to be alive; but then,--_are_ they alive? L. It seems to me, on the whole, Mary, that the feelings of the purest and most mightily passioned human souls are likely to be the truest. Not, indeed, if they do not desire to know the truth, or blind themselves to it that they may please themselves with passion; for then they are no longer pure: but if, continually seeking and accepting the truth as far as it is discernible, they trust their Maker for the integrity of the instincts He has gifted them with, and rest in the sense of a higher truth which they cannot demonstrate, I think they will be most in the right, so. DORA _and_ JESSIE (_clapping their hands_). Then we really may believe that the mountains are living? L. You may at least earnestly believe, that the presence of the spirit which culminates in your own life, shows itself in dawning, wherever the dust of the earth begins to assume any orderly and lovely state. You will find it impossible to separate this idea of gradated manifestation from that of the vital power. Things are not either wholly alive, or wholly dead. They are less or more alive. Take the nearest, most easily examined instance--the life of a flower. Notice what a different degree and kind of life there is in the calyx and the corolla. The calyx is nothing but the swaddling clothes of the flower; the child-blossom is bound up in it, hand and foot; guarded in it, restrained by it, till the time of birth. The shell is hardly more subordinate to the germ in the egg, than the calyx to the blossom. It bursts at last; but it never lives as the corolla does. It may fall at the moment its task is fulfilled, as in the poppy; or wither gradually, as in the buttercup; or persist in a ligneous apathy, after the flower is dead, as in the rose; or harmonise itself so as to share in the aspect of the real flower, as in the lily; but it never shares in the corolla's bright passion of life. And the gradations which thus exist between the different members of organic creatures, exist no less between the different ranges of organism. We know no higher or more energetic life than our own; but there seems to me this great good in the idea of gradation of life--it admits the idea of a life above us, in other creatures, as much nobler than ours, as ours is nobler than that of the dust. MARY. I am glad you have said that; for I know Violet and Lucilla and May want to ask you something; indeed, we all do; only you frightened Violet so about the ant-hill, that she can't say a word; and May is afraid of your teasing her, too: but I know they are wondering why you are always telling them about heathen gods and goddesses, as if you half believed in them; and you represent them as good; and then we see there is really a kind of truth in the stories about them; and we are all puzzled: and, in this, we cannot even make our difficulty quite clear to ourselves;--it would be such a long confused question, if we could ask you all we should like to know. L. Nor is it any wonder, Mary; for this is indeed the longest, and the most wildly confused question that reason can deal with; but I will try to give you, quickly, a few clear ideas about the heathen gods, which you may follow out afterwards, as your knowledge increases. Every heathen conception of deity in which you are likely to be interested, has three distinct characters:-- I. It has a physical character. It represents some of the great powers or objects of nature--sun or moon, or heaven, or the winds, or the sea. And the fables first related about each deity represent, figuratively, the action of the natural power which it represents; such as the rising and setting of the sun, the tides of the sea, and so on. II. It has an ethical character, and represents, in its history, the moral dealings of God with man. Thus Apollo is first, physically, the sun contending with darkness; but morally, the power of divine life contending with corruption. Athena is, physically, the air; morally, the breathing of the divine spirit of wisdom. Neptune is, physically, the sea; morally, the supreme power of agitating passion; and so on. III. It has, at last, a personal character; and is realised in the minds of its worshippers as a living spirit, with whom men may speak face to face, as a man speaks to his friend. Now it is impossible to define exactly, how far, at any period of a national religion, these three ideas are mingled; or how far one prevails over the other. Each enquirer usually takes up one of these ideas, and pursues it, to the exclusion of the others: no impartial effort seems to have been made to discern the real state of the heathen imagination in its successive phases. For the question is not at all what a mythological figure meant in its origin; but what it became in each subsequent mental development of the nation inheriting the thought. Exactly in proportion to the mental and moral insight of any race, its mythological figures mean more to it, and become more real. An early and savage race means nothing more (because it has nothing more to mean) by its Apollo, than the sun; while a cultivated Greek means every operation of divine intellect and justice. The Neith, of Egypt, meant, physically, little more than the blue of the air; but the Greek, in a climate of alternate storm and calm, represented the wild fringes of the storm-cloud by the serpents of her ægis; and the lightning and cold of the highest thunder-clouds, by the Gorgon on her shield: while morally, the same types represented to him the mystery and changeful terror of knowledge, as her spear and helm its ruling and defensive power. And no study can be more interesting, or more useful to you, than that of the different meanings which have been created by great nations, and great poets, out of mythological figures given them, at first, in utter simplicity. But when we approach them in their third, or personal, character (and, for its power over the whole national mind, this is far the leading one), we are met at once by questions which may well put all of you at pause. Were they idly imagined to be real beings? and did they so usurp the place of the true God? Or were they actually real beings--evil spirits,--leading men away from the true God? Or is it conceivable that they might have been real beings,--good spirits,--entrusted with some message from the true God? These were the questions you wanted to ask; were they not, Lucilla? LUCILLA. Yes, indeed. L. Well, Lucilla, the answer will much depend upon the clearness of your faith in the personality of the spirits which are described in the book of your own religion;--their personality, observe, as distinguished from merely symbolical visions. For instance, when Jeremiah has the vision of the seething pot with its mouth to the north, you know that this which he sees is not a real thing; but merely a significant dream. Also, when Zechariah sees the speckled horses among the myrtle trees in the bottom, you still may suppose the vision symbolical;--you do not think of them as real spirits, like Pegasus, seen in the form of horses. But when you are told of the four riders in the Apocalypse, a distinct sense of personality begins to force itself upon you. And though you might, in a dull temper, think that (for one instance of all) the fourth rider on the pale horse was merely a symbol of the power of death,--in your stronger and more earnest moods you will rather conceive of him as a real and living angel. And when you look back from the vision of the Apocalypse to the account of the destruction of the Egyptian first-born, and of the army of Sennacherib, and again to David's vision at the threshing floor of Araunah, the idea of personality in this death-angel becomes entirely defined, just as in the appearance of the angels to Abraham, Manoah, or Mary. Now, when you have once consented to this idea of a personal spirit, must not the question instantly follow: 'Does this spirit exercise its functions towards one race of men only, or towards all men? Was it an angel of death to the Jew only, or to the Gentile also?' You find a certain Divine agency made visible to a King of Israel, as an armed angel, executing vengeance, of which one special purpose was to lower his kingly pride. You find another (or perhaps the same) agency, made visible to a Christian prophet as an angel standing in the sun, calling to the birds that fly under heaven to come, that they may eat the flesh of kings. Is there anything impious in the thought that the same agency might have been expressed to a Greek king, or Greek seer, by similar visions?--that this figure, standing in the sun, and armed with the sword, or the bow (whose arrows were drunk with blood), and exercising especially its power in the humiliation of the proud, might, at first, have been called only 'Destroyer,' and afterwards, as the light, or sun, of justice, was recognised in the chastisement, called also 'Physician' or 'Healer?' If you feel hesitation in admitting the possibility of such a manifestation, I believe you will find it is caused, partly indeed by such trivial things as the difference to your ear between Greek and English terms; but, far more, by uncertainty in your own mind respecting the nature and truth of the visions spoken of in the Bible. Have any of you intently examined the nature of your belief in them? You, for instance, Lucilla, who think often, and seriously, of such things? LUCILLA. No; I never could tell what to believe about them. I know they must be true in some way or other; and I like reading about them. L. Yes; and I like reading about them too, Lucilla; as I like reading other grand poetry. But, surely, we ought both to do more than like it? Will God be satisfied with us, think you, if we read His words merely for the sake of an entirely meaningless poetical sensation? LUCILLA. But do not the people who give themselves to seek out the meaning of these things, often get very strange, and extravagant? L. More than that, Lucilla. They often go mad. That abandonment of the mind to religious theory, or contemplation, is the very thing I have been pleading with you against. I never said you should set yourself to discover the meanings; but you should take careful pains to understand them, so far as they _are_ clear; and you should always accurately ascertain the state of your mind about them. I want you never to read merely for the pleasure of fancy; still less as a formal religious duty (else you might as well take to repeating Paters at once; for it is surely wiser to repeat one thing we understand, than read a thousand which we cannot). Either, therefore, acknowledge the passages to be, for the present, unintelligible to you; or else determine the sense in which you at present receive them; or, at all events, the different senses between which you clearly see that you must choose. Make either your belief, or your difficulty, definite; but do not go on, all through your life, believing nothing intelligently, and yet supposing that your having read the words of a divine book must give you the right to despise every religion but your own. I assure you, strange as it may seem, our scorn of Greek tradition depends, not on our belief, but our disbelief, of our own traditions. We have, as yet, no sufficient clue to the meaning of either; but you will always find that, in proportion to the earnestness of our own faith, its tendency to accept a spiritual personality increases: and that the most vital and beautiful Christian temper rests joyfully in its conviction of the multitudinous ministry of living angels, infinitely varied in rank and power. You all know one expression of the purest and happiest form of such faith, as it exists in modern times, in Richter's lovely illustrations of the Lord's Prayer. The real and living death-angel, girt as a pilgrim for journey, and softly crowned with flowers, beckons at the dying mother's door; child-angels sit talking face to face with mortal children, among the flowers;--hold them by their little coats, lest they fall on the stairs;--whisper dreams of heaven to them, leaning over their pillows; carry the sound of the church bells for them far through the air; and even descending lower in service, fill little cups with honey, to hold out to the weary bee. By the way, Lily, did you tell the other children that story about your little sister, and Alice, and the sea? LILY. I told it to Alice, and to Miss Dora. I don't think I did to anybody else. I thought it wasn't worth. L. We shall think it worth a great deal now, Lily, if you will tell it us. How old is Dotty, again? I forget. LILY. She is not quite three; but she has such odd little old ways, sometimes. L. And she was very fond of Alice? LILY. Yes; Alice was so good to her always! L. And so when Alice went away? LILY. Oh, it was nothing, you know, to tell about; only it was strange at the time. L. Well; but I want you to tell it. LILY. The morning after Alice had gone, Dotty was very sad and restless when she got up; and went about, looking into all the corners, as if she could find Alice in them, and at last she came to me, and said, 'Is Alie gone over the great sea?' And I said, 'Yes, she is gone over the great, deep sea, but she will come back again some day.' Then Dotty looked round the room; and I had just poured some water out into the basin; and Dotty ran to it, and got up on a chair, and dashed her hands through the water, again and again; and cried, 'Oh, deep, deep sea! send little Alie back to me.' L. Isn't that pretty, children? There's a dear little heathen for you! The whole heart of Greek mythology is in that; the idea of a personal being in the elemental power;--of its being moved by prayer;--and of its presence everywhere, making the broken diffusion of the element sacred. Now, remember, the measure in which we may permit ourselves to think of this trusted and adored personality, in Greek, or in any other, mythology, as conceivably a shadow of truth, will depend on the degree in which we hold the Greeks, or other great nations, equal, or inferior, in privilege and character, to the Jews, or to ourselves. If we believe that the great Father would use the imagination of the Jew as an instrument by which to exalt and lead him; but the imagination of the Greek only to degrade and mislead him: if we can suppose that real angels were sent to minister to the Jews and to punish them; but no angels, or only mocking spectra of angels, or even devils in the shapes of angels, to lead Lycurgus and Leonidas from desolate cradle to hopeless grave:--and if we can think that it was only the influence of spectres, or the teaching of demons, which issued in the making of mothers like Cornelia, and of sons like Cleobis and Bito, we may, of course, reject the heathen Mythology in our privileged scorn: but, at least, we are bound to examine strictly by what faults of our own it has come to pass, that the ministry of real angels among ourselves is occasionally so ineffectual, as to end in the production of Cornelias who entrust their child-jewels to Charlotte Winsors for the better keeping of them; and of sons like that one who, the other day, in France, beat his mother to death with a stick; and was brought in by the jury, 'guilty, with extenuating circumstances.' MAY. Was that really possible? L. Yes, my dear. I am not sure that I can lay my hand on the reference to it (and I should not have said 'the other day'--it was a year or two ago), but you may depend on the fact; and I could give you many like it, if I chose. There was a murder done in Russia, very lately, on a traveller. The murderess's little daughter was in the way, and found it out, somehow. Her mother killed her, too, and put her into the oven. There is a peculiar horror about the relations between parent and child, which are being now brought about by our variously degraded forms of European white slavery. Here _is_ one reference, I see, in my notes on that story of Cleobis and Bito; though I suppose I marked this chiefly for its quaintness, and the beautifully Christian names of the sons; but it is a good instance of the power of the King of the Valley of Diamonds[153] among us. In 'Galignani' of July 21-22, 1862, is reported a trial of a farmer's son in the department of the Yonne. The father, two years ago, at Malay le Grand, gave up his property to his two sons, on condition of being maintained by them. Simon fulfilled his agreement, but Pierre would not. The tribunal of Sens condemns Pierre to pay eighty-four francs a year to his father. Pierre replies, 'he would rather die than pay it.' Actually, returning home, he throws himself into the river, and the body is not found till next day. MARY. But--but--I can't tell what you would have us think. Do you seriously mean that the Greeks were better than we are; and that their gods were real angels? L. No, my dear. I mean only that we know, in reality, less than nothing of the dealings of our Maker with our fellow-men; and can only reason or conjecture safely about them, when we have sincerely humble thoughts of ourselves and our creeds. We owe to the Greeks every noble discipline in literature; every radical principle of art; and every form of convenient beauty in our household furniture and daily occupations of life. We are unable, ourselves, to make rational use of half that we have received from them: and, of our own, we have nothing but discoveries in science, and fine mechanical adaptations of the discovered physical powers. On the other hand, the vice existing among certain classes, both of the rich and poor, in London, Paris, and Vienna, could have been conceived by a Spartan or Roman of the heroic ages only as possible in a Tartarus, where fiends were employed to teach, but not to punish, crime. It little becomes us to speak contemptuously of the religion of races to whom we stand in such relations; nor do I think any man of modesty or thoughtfulness will ever speak so of any religion, in which God has allowed one good man to die, trusting. The more readily we admit the possibility of our own cherished convictions being mixed with error, the more vital and helpful whatever is right in them will become: and no error is so conclusively fatal as the idea that God will not allow _us_ to err, though He has allowed all other men to do so. There may be doubt of the meaning of other visions, but there is none respecting that of the dream of St. Peter; and you may trust the Rock of the Church's Foundation for true interpreting, when he learned from it that, 'in every nation, he that feareth God and worketh righteousness, is accepted with Him.' See that you understand what that righteousness means; and set hand to it stoutly: you will always measure your neighbors' creed kindly, in proportion to the substantial fruits of your own. Do not think you will ever get harm by striving to enter into the faith of others, and to sympathise, in imagination, with the guiding principles of their lives. So only can you justly love them, or pity them, or praise. By the gracious effort you will double, treble--nay, indefinitely multiply, at once the pleasure, the reverence, and the intelligence with which you read: and, believe me, it is wiser and holier, by the fire of your own faith to kindle the ashes of expired religions, than to let your soul shiver and stumble among their graves, through the gathering darkness, and communicable cold. MARY (_after some pause_). We shall all like reading Greek history so much better after this! but it has put everything else out of our heads that we wanted to ask. L. I can tell you one of the things; and I might take credit for generosity in telling you; but I have a personal reason--Lucilla's verse about the creation. DORA. Oh, yes--yes; and its 'pain together, until now.' L. I call you back to that, because I must warn you against an old error of my own. Somewhere in the fourth volume of 'Modern Painters,' I said that the earth seemed to have passed through its highest state: and that, after ascending by a series of phases, culminating in its habitation by man, it seems to be now gradually becoming less fit for that habitation. MARY. Yes, I remember. L. I wrote those passages under a very bitter impression of the gradual perishing of beauty from the loveliest scenes which I knew in the physical world;--not in any doubtful way, such as I might have attributed to loss of sensation in myself--but by violent and definite physical action; such as the filling up of the Lac de Chêde by landslips from the Rochers des Fiz;--the narrowing of the Lake Lucerne by the gaining delta of the stream of the Muotta-Thal, which, in the course of years, will cut the lake into two, as that of Brientz has been divided from that of Thun;--the steady diminishing of the glaciers north of the Alps, and still more, of the sheets of snow on their southern slopes, which supply the refreshing streams of Lombardy:--the equally steady increase of deadly maremma round Pisa and Venice; and other such phenomena, quite measurably traceable within the limits even of short life, and unaccompanied, as it seemed, by redeeming or compensatory agencies. I am still under the same impression respecting the existing phenomena; but I feel more strongly, every day, that no evidence to be collected within historical periods can be accepted as any clue to the great tendencies of geological change; but that the great laws which never fail, and to which all change is subordinate, appear such as to accomplish a gradual advance to lovelier order, and more calmly, yet more deeply, animated Rest. Nor has this conviction ever fastened itself upon me more distinctly, than during my endeavour to trace the laws which govern the lowly framework of the dust. For, through all the phases of its transition and dissolution, there seems to be a continual effort to raise itself into a higher state; and a measured gain, through the fierce revulsion and slow renewal of the earth's frame, in beauty, and order, and permanence. The soft white sediments of the sea draw themselves, in process of time, into smooth knots of sphered symmetry; burdened and strained under increase of pressure, they pass into a nascent marble; scorched by fervent heat, they brighten and blanch into the snowy rock of Paros and Carrara. The dark drift of the inland river, or stagnant slime of inland pool and lake, divides, or resolves itself as it dries, into layers of its several elements; slowly purifying each by the patient withdrawal of it from the anarchy of the mass in which it was mingled. Contracted by increasing drought, till it must shatter into fragments, it infuses continually a finer ichor into the opening veins, and finds in its weakness the first rudiments of a perfect strength. Bent at last, rock from rock, nay, atom from atom, and tormented in lambent fire, it knits, through the fusion, the fibres of a perennial endurance; and, during countless subsequent centuries, declining, or rather let me say, rising to repose, finishes the infallible lustre of its crystalline beauty, under harmonies of law which are wholly beneficent, because wholly inexorable. (_The children seem pleased, but more inclined to think over these matters than to talk._) L. (_after giving them a little time_). Mary, I seldom ask you to read anything out of books of mine; but there is a passage about the Law of Help, which I want you to read to the children now, because it is of no use merely to put it in other words for them. You know the place I mean, do not you? MARY. Yes (_presently finding it_); where shall I begin? L. Here; but the elder ones had better look afterwards at the piece which comes just before this. MARY (_reads_): * * * * * 'A pure or holy state of anything is that in which all its parts are helpful or consistent. The highest and first law of the universe, and the other name of life, is therefore, "help." The other name of death is "separation." Government and co-operation are in all things, and eternally, the laws of life. Anarchy and competition, eternally, and in all things, the laws of death. 'Perhaps the best, though the most familiar, example we could take of the nature and power of consistence, will be that of the possible changes in the dust we tread on. 'Exclusive of animal decay, we can hardly arrive at a more absolute type of impurity, than the mud or slime of a damp, over-trodden path, in the outskirts of a manufacturing town. I do not say mud of the road, because that is mixed with animal refuse; but take merely an ounce or two of the blackest slime of a beaten footpath, on a rainy day, near a manufacturing town. That slime we shall find in most cases composed of clay (or brickdust, which is burnt clay), mixed with soot, a little sand and water. All these elements are at helpless war with each other, and destroy reciprocally each other's nature and power: competing and fighting for place at every tread of your foot; sand squeezing out clay, and clay squeezing out water, and soot meddling everywhere, and defiling the whole. Let us suppose that this ounce of mud is left in perfect rest, and that its elements gather together, like to like, so that their atoms may get into the closest relations possible. 'Let the clay begin. Ridding itself of all foreign substance, it gradually becomes a white earth, already very beautiful, and fit, with help of congealing fire, to be made into finest porcelain, and painted on, and be kept in kings' palaces. But such artificial consistence is not its best. Leave it still quiet, to follow its own instinct of unity, and it becomes, not only white but clear; not only clear, but hard; nor only clear and hard, but so set that it can deal with light in a wonderful way, and gather out of it the loveliest blue rays only, refusing the rest. We call it then a sapphire. 'Such being the consummation of the clay, we give similar permission of quiet to the sand. It also becomes, first, a white earth; then proceeds to grow clear and hard, and at last arranges itself in mysterious, infinitely fine parallel lines, which have the power of reflecting, not merely the blue rays, but the blue, green, purple, and red rays, in the greatest beauty in which they can be seen through any hard material whatsoever. We call it then an opal. 'In next order the soot sets to work. It cannot make itself white at first; but, instead of being discouraged, tries harder and harder; and comes out clear at last; and the hardest thing in the world: and for the blackness that it had, obtains in exchange the power of reflecting all the rays of the sun at once, in the vividest blaze that any solid thing can shoot. We call it then a diamond. 'Last of all, the water purifies, or unites itself; contented enough if it only reach the form of a dewdrop: but, if we insist on its proceeding to a more perfect consistence, it crystallises into the shape of a star. And, for the ounce of slime which we had by political economy of competition, we have, by political economy of co-operation, a sapphire, an opal, and a diamond, set in the midst of a star of snow.' * * * * * L. I have asked you to hear that, children, because, from all that we have seen in the work and play of these past days, I would have you gain at least one grave and enduring thought. The seeming trouble,--the unquestionable degradation,--of the elements of the physical earth, must passively wait the appointed time of their repose, or their restoration. It can only be brought about for them by the agency of external law. But if, indeed, there be a nobler life in us than in these strangely moving atoms;--if, indeed, there is an eternal difference between the fire which inhabits them, and that which animates us,--it must be shown, by each of us in his appointed place, not merely in the patience, but in the activity of our hope; not merely by our desire, but our labour, for the time when the Dust of the generations of men shall be confirmed for foundations of the gates of the city of God. The human clay, now trampled and despised, will not be,--cannot be,--knit into strength and light by accident or ordinances of unassisted fate. By human cruelty and iniquity it has been afflicted;--by human mercy and justice it must be raised: and, in all fear or questioning of what is or is not, the real message of creation, or of revelation, you may assuredly find perfect peace, if you are resolved to do that which your Lord has plainly required,--and content that He should indeed require no more of you,--than to do Justice, to love Mercy, and to walk humbly with Him. FOOTNOTES: [153] Note vi. NOTES. NOTE I. Page 24. _'That third pyramid of hers.'_ Throughout the dialogues, it must be observed that 'Sibyl' is addressed (when in play) as having once been the Cumæan Sibyl; and 'Egypt' as having been queen Nitocris,--the Cinderella, and 'the greatest heroine and beauty' of Egyptian story. The Egyptians called her 'Neith the Victorious' (Nitocris), and the Greeks 'Face of the Rose' (Rhodope). Chaucer's beautiful conception of Cleopatra in the 'Legend of Good Women,' is much more founded on the traditions of her than on those of Cleopatra; and, especially in its close, modified by Herodotus's terrible story of the death of Nitocris, which, however, is mythologically nothing more than a part of the deep monotonous ancient dirge for the fulfilment of the earthly destiny of Beauty; 'She cast herself into a chamber full of ashes.' I believe this Queen is now sufficiently ascertained to have either built, or increased to double its former size, the third pyramid of Gizeh: and the passage following in the text refers to an imaginary endeavour, by the Old Lecturer and the children together, to make out the description of that pyramid in the 167th page of the second volume of Bunsen's 'Egypt's Place in Universal History'--ideal endeavour,--which ideally terminates as the Old Lecturer's real endeavours to the same end always have terminated. There are, however, valuable notes respecting Nitocris at page 210 of the same volume: but the 'Early Egyptian History for the Young,' by the author of Sidney Gray, contains, in a pleasant form, as much information as young readers will usually need. NOTE II. Page 25. _'Pyramid of Asychis.'_ This pyramid, in mythology, divides with the Tower of Babel the shame, or vain glory, of being presumptuously, and first among great edifices, built with 'brick for stone.' This was the inscription on it, according to Herodotus:-- 'Despise me not, in comparing me with the pyramids of stone; for I have the pre-eminence over them, as far as Jupiter has pre-eminence over the gods. For, striking with staves into the pool, men gathered the clay which fastened itself to the staff, and kneaded bricks out of it, and so made me.' The word I have translated 'kneaded' is literally 'drew;' in the sense of drawing, for which the Latins used 'duco;' and thus gave us our 'ductile' in speaking of dead clay, and Duke, Doge, or leader, in speaking of living clay. As the asserted pre-eminence of the edifice is made, in this inscription, to rest merely on the quantity of labour consumed in it, this pyramid is considered, in the text, as the type, at once, of the base building, and of the lost labour, of future ages, so far at least as the spirits of measured and mechanical effort deal with it: but Neith, exercising her power upon it, makes it a type of the work of wise and inspired builders. NOTE III. Page 25. _'The Greater Pthah.'_ It is impossible, as yet, to define with distinctness the personal agencies of the Egyptian deities. They are continually associated in function, or hold derivative powers, or are related to each other in mysterious triads; uniting always symbolism of physical phenomena with real spiritual power. I have endeavoured partly to explain this in the text of the tenth Lecture: here, it is only necessary for the reader to know that the Greater Pthah more or less represents the formative power of order and measurement: he always stands on a four-square pedestal, 'the Egyptian cubit, metaphorically used as the hieroglyphic for truth;' his limbs are bound together, to signify fixed stability, as of a pillar; he has a measuring-rod in his hand; and at Philæ, is represented as holding an egg on a potter's wheel; but I do not know if this symbol occurs in older sculptures. His usual title is the 'Lord of Truth.' Others, very beautiful: 'King of the Two Worlds, of Gracious Countenance,' 'Superintendent of the Great Abode,' &c., are given by Mr. Birch in Arundale's 'Gallery of Antiquities,' which I suppose is the book of best authority easily accessible. For the full titles and utterances of the gods, Rosellini is as yet the only--and I believe, still a very questionable--authority; and Arundale's little book, excellent in the text, has this great defect, that its drawings give the statues invariably a ludicrous or ignoble character. Readers who have not access to the originals must be warned against this frequent fault in modern illustration (especially existing also in some of the painted casts of Gothic and Norman work at the Crystal Palace). It is not owing to any wilful want of veracity: the plates in Arundale's book are laboriously faithful: but the expressions of both face and body in a figure depend merely on emphasis of touch; and, in barbaric art, most draughtsmen emphasise what they plainly see--the barbarism; and miss conditions of nobleness, which they must approach the monument in a different temper before they will discover, and draw with great subtlety before they can express. The character of the Lower Pthah, or perhaps I ought rather to say, of Pthah in his lower office, is sufficiently explained in the text of the third Lecture; only the reader must be warned that the Egyptian symbolism of him by the beetle was not a scornful one; it expressed only the idea of his presence in the first elements of life. But it may not unjustly be used, in another sense, by us, who have seen his power in new development; and, even as it was, I cannot conceive that the Egyptians should have regarded their beetle-headed image of him (Champollion, 'Pantheon,' pl. 12), without some occult scorn. It is the most painful of all their types of any beneficent power; and even among those of evil influences, none can be compared with it, except its opposite, the tortoise-headed demon of indolence. Pasht (p. 24, line 32) is connected with the Greek Artemis, especially in her offices of judgment and vengeance. She is usually lioness-headed; sometimes cat-headed; her attributes seeming often trivial or ludicrous unless their full meaning is known; but the enquiry is much too wide to be followed here. The cat was sacred to her; or rather to the sun, and secondarily to her. She is alluded to in the text because she is always the companion of Pthah (called 'the beloved of Pthah,' it may be as Judgment, demanded and longed for by Truth); and it may be well for young readers to have this fixed in their minds, even by chance association. There are more statues of Pasht in the British Museum than of any other Egyptian deity; several of them fine in workmanship; nearly all in dark stone, which may be, presumably, to connect her, as the moon, with the night; and in her office of avenger, with grief. Thoth (p. 27, line 17), is the Recording Angel of Judgment; and the Greek Hermes Phre (line 20), is the Sun. Neith is the Egyptian spirit of divine wisdom; and the Athena of the Greeks. No sufficient statement of her many attributes, still less of their meanings, can be shortly given; but this should be noted respecting the veiling of the Egyptian image of her by vulture wings--that as she is, physically, the goddess of the air, this bird, the most powerful creature of the air known to the Egyptians, naturally became her symbol. It had other significations; but certainly this, when in connection with Neith. As representing her, it was the most important sign, next to the winged sphere, in Egyptian sculpture; and, just as in Homer, Athena herself guides her heroes into battle, this symbol of wisdom, giving victory, floats over the heads of the Egyptian kings. The Greeks, representing the goddess herself in human form, yet would not lose the power of the Egyptian symbol, and changed it into an angel of victory. First seen in loveliness on the early coins of Syracuse and Leontium, it gradually became the received sign of all conquest, and the so-called 'Victory' of later times; which, little by little, loses its truth, and is accepted by the moderns only as a personification of victory itself,--not as an actual picture of the living Angel who led to victory. There is a wide difference between these two conceptions,--all the difference between insincere poetry, and sincere religion. This I have also endeavoured farther to illustrate in the tenth Lecture; there is however one part of Athena's character which it would have been irrelevant to dwell upon there; yet which I must not wholly leave unnoticed. As the goddess of the air, she physically represents both its beneficent calm, and necessary tempest: other storm-deities (as Chrysaor and Æolus) being invested with a subordinate and more or less malignant function, which is exclusively their own, and is related to that of Athena as the power of Mars is related to hers in war. So also Virgil makes her able to wield the lightning herself, while Juno cannot, but must pray for the intervention of Æolus. She has precisely the correspondent moral authority over calmness of mind, and just anger. She soothes Achilles, as she incites Tydides; her physical power over the air being always hinted correlatively. She grasps Achilles by his hair--as the wind would lift it--softly, 'It fanned his cheek, it raised his hair, Like a meadow gale in spring.' She does not merely turn the lance of Mars from Diomed; but seizes it in both her hands, and casts it aside, with a sense of making it vain, like chaff in the wind;--to the shout of Achilles, she adds her own voice of storm in heaven--but in all cases the moral power is still the principal one--most beautifully in that seizing of Achilles by the hair, which was the talisman of his life (because he had vowed it to the Sperchius if he returned in safety), and which, in giving at Patroclus' tomb, he, knowingly, yields up the hope of return to his country, and signifies that he will die with his friend. Achilles and Tydides are, above all other heroes, aided by her in war, because their prevailing characters are the desire of justice, united in both with deep affections; and, in Achilles, with a passionate tenderness, which is the real root of his passionate anger. Ulysses is her favourite chiefly in her office as the goddess of conduct and design. NOTE IV. Page 54. _'Geometrical limitations.'_ It is difficult, without a tedious accuracy, or without full illustration, to express the complete relations of crystalline structure, which dispose minerals to take, at different times, fibrous, massive, or foliated forms; and I am afraid this chapter will be generally skipped by the reader: yet the arrangement itself will be found useful, if kept broadly in mind; and the transitions of state are of the highest interest, if the subject is entered upon with any earnestness. It would have been vain to add to the scheme of this little volume any account of the geometrical forms of crystals: an available one, though still far too difficult and too copious, has been arranged by the Rev. Mr. Mitchell, for Orr's 'Circle of the Sciences'; and, I believe, the 'nets' of crystals, which are therein given to be cut out with scissors and put prettily together, will be found more conquerable by young ladies than by other students. They should also, when an opportunity occurs, be shown, at any public library, the diagram of the crystallisation of quartz referred to poles, at p. 8 of Cloizaux's 'Manuel de Minéralogie': that they may know what work is; and what the subject is. With a view to more careful examination of the nascent states of silica, I have made no allusion in this volume to the influence of mere segregation, as connected with the crystalline power. It has only been recently, during the study of the breccias alluded to in page 113, that I have fully seen the extent to which this singular force often modifies rocks in which at first its influence might hardly have been suspected; many apparent conglomerates being in reality formed chiefly by segregation, combined with mysterious brokenly-zoned structures, like those of some malachites. I hope some day to know more of these and several other mineral phenomena (especially of those connected with the relative sizes of crystals), which otherwise I should have endeavoured to describe in this volume. NOTE V. Page 102. _'St. Barbara.'_ I would have given the legends of St. Barbara, and St. Thomas, if I had thought it always well for young readers to have everything at once told them which they may wish to know. They will remember the stories better after taking some trouble to find them: and the text is intelligible enough as it stands. The idea of St. Barbara, as there given is founded partly on her legend in Peter de Natalibus, partly on the beautiful photograph of Van Eyck's picture of her at Antwerp: which was some time since published at Lille. NOTE VI. Page 137. _'King of the Valley of Diamonds.'_ Isabel interrupted the Lecturer here, and was briefly bid to hold her tongue; which gave rise to some talk, apart, afterwards, between L. and Sibyl, of which a word or two may be perhaps advisably set down. SIBYL. We shall spoil Isabel, certainly, if we don't mind: I was glad you stopped her, and yet sorry; for she wanted so much to ask about the Valley of Diamonds again, and she has worked so hard at it, and made it nearly all out by herself. She recollected Elisha's throwing in the meal, which nobody else did. L. But what did she want to ask? SIBYL. About the mulberry trees and the serpents; we are all stopped by that. Won't you tell us what it means? L. Now, Sibyl, I am sure you, who never explained yourself, should be the last to expect others to do so. I hate explaining myself. SIBYL. And yet how often you complain of other people for not saying what they meant. How I have heard you growl over the three stone steps to purgatory; for instance! L. Yes; because Dante's meaning is worth getting at; but mine matters nothing: at least, if ever I think it is of any consequence, I speak it as clearly as may be. But you may make anything you like of the serpent forests. I could have helped you to find out what they were, by giving a little more detail, but it would have been tiresome. SIBYL. It is much more tiresome not to find out. Tell us, please, as Isabel says, because we feel so stupid. L. There is no stupidity; you could not possibly do more than guess at anything so vague. But I think, you, Sibyl, at least, might have recollected what first dyed the mulberry? SIBYL. So I did; but that helped little; I thought of Dante's forest of suicides, too, but you would not simply have borrowed that? L. No. If I had had strength to use it, I should have stolen it, to beat into another shape; not borrowed it. But that idea of souls in trees is as old as the world; or at least, as the world of man. And I _did_ mean that there were souls in those dark branches; the souls of all those who had perished in misery through the pursuit of riches; and that the river was of their blood, gathering gradually, and flowing out of the valley. That I meant the serpents for the souls of those who had lived carelessly and wantonly in their riches; and who have all their sins forgiven by the world, because they are rich: and therefore they have seven crimson crested heads, for the seven mortal sins; of which they are proud: and these, and the memory and report of them, are the chief causes of temptation to others, as showing the pleasantness and absolving power of riches; so that thus they are singing serpents. And the worms are the souls of the common money-getters and traffickers, who do nothing but eat and spin: and who gain habitually by the distress or foolishness of others (as you see the butchers have been gaining out of the panic at the cattle plague, among the poor),--so they are made to eat the dark leaves, and spin, and perish. SIBYL. And the souls of the great, cruel, rich people who oppress the poor, and lend money to government to make unjust war, where are they? L. They change into the ice, I believe, and are knit with the gold; and make the grave dust of the valley. I believe so, at least, for no one ever sees those souls anywhere. (SIBYL _ceases questioning._) ISABEL (_who has crept up to her side without any one's seeing_). Oh, Sibyl, please ask him about the fire-flies! L. What, you there, mousie! No; I won't tell either Sibyl or you about the fire-flies; nor a word more about anything else. You ought to be little fire-flies yourselves, and find your way in twilight by your own wits. ISABEL. But you said they burned, you know? L. Yes; and you may be fire-flies that way too, some of you, before long, though I did not mean that. Away with you, children. You have thought enough for to-day. NOTE TO SECOND EDITION. _Sentence_ out of letter from May (who is staying with Isabel just now at Cassel), dated 15th June, 1877:-- "I am reading the Ethics with a nice Irish girl who is staying here, and she's just as puzzled as I've always been about the fire-flies, and we both want to know so much.--Please be a very nice old Lecturer, and tell us, won't you?" Well, May, you never were a vain girl; so could scarcely guess that I meant them for the light, unpursued vanities, which yet blind us, confused among the stars. One evening, as I came late into Siena, the fire-flies were flying high on a stormy sirocco wind,--the stars themselves no brighter, and all their host seeming, at moments, to fade as the insects faded. FICTION--FAIR AND FOUL. On the first mild--or, at least, the first bright--day of March, in this year, I walked through what was once a country lane, between the hostelry of the Half-moon at the bottom of Herne Hill, and the secluded College of Dulwich. In my young days, Croxsted Lane was a green bye-road traversable for some distance by carts; but rarely so traversed, and, for the most part, little else than a narrow strip of untilled field, separated by blackberry hedges from the better cared-for meadows on each side of it: growing more weeds, therefore, than they, and perhaps in spring a primrose or two--white archangel--daisies plenty, and purple thistles in autumn. A slender rivulet, boasting little of its brightness, for there are no springs at Dulwich, yet fed purely enough by the rain and morning dew, here trickled--there loitered--through the long grass beneath the hedges, and expanded itself, where it might, into moderately clear and deep pools, in which, under their veils of duck-weed, a fresh-water shell or two, sundry curious little skipping shrimps, any quantity of tadpoles in their time, and even sometimes a tittlebat, offered themselves to my boyhood's pleased, and not inaccurate, observation. There, my mother and I used to gather the first buds of the hawthorn; and there, in after years, I used to walk in the summer shadows, as in a place wilder and sweeter than our garden, to think over any passage I wanted to make better than usual in _Modern Painters_. So, as aforesaid, on the first kindly day of this year, being thoughtful more than usual of those old times, I went to look again at the place. Often, both in those days, and since, I have put myself hard to it, vainly, to find words wherewith to tell of beautiful things; but beauty has been in the world since the world was made, and human language can make a shift, somehow, to give account of it, whereas the peculiar forces of devastation induced by modern city life have only entered the world lately; and no existing terms of language known to me are enough to describe the forms of filth, and modes of ruin, that varied themselves along the course of Croxsted Lane. The fields on each side of it are now mostly dug up for building, or cut through into gaunt corners and nooks of blind ground by the wild crossings and concurrencies of three railroads. Half a dozen handfuls of new cottages, with Doric doors, are dropped about here and there among the gashed ground: the lane itself, now entirely grassless, is a deep-rutted, heavy-hillocked cart-road, diverging gatelessly into various brick-fields or pieces of waste; and bordered on each side by heaps of--Hades only knows what!--mixed dust of every unclean thing that can crumble in drought, and mildew of every unclean thing that can rot or rust in damp: ashes and rags, beer-bottles and old shoes, battered pans, smashed crockery, shreds of nameless clothes, door-sweepings, floor-sweepings, kitchen garbage, back-garden sewage, old iron, rotten timber jagged with out-torn nails, cigar-ends, pipe-bowls, cinders, bones, and ordure, indescribable; and, variously kneaded into, sticking to, or fluttering foully here and there over all these,--remnants broadcast, of every manner of newspaper, advertisement or big-lettered bill, festering and flaunting out their last publicity in the pits of stinking dust and mortal slime. The lane ends now where its prettiest windings once began; being cut off by a cross-road leading out of Dulwich to a minor railway station: and on the other side of this road, what was of old the daintiest intricacy of its solitude is changed into a straight, and evenly macadamised carriage drive, between new houses of extreme respectability, with good attached gardens and offices--most of these tenements being larger--all more pretentious, and many, I imagine, held at greatly higher rent than my father's, tenanted for twenty years at Herne Hill. And it became matter of curious meditation to me what must here become of children resembling my poor little dreamy quondam self in temper, and thus brought up at the same distance from London, and in the same or better circumstances of worldly fortune; but with only Croxsted Lane in its present condition for their country walk. The trimly kept road before their doors, such as one used to see in the fashionable suburbs of Cheltenham or Leamington, presents nothing to their study but gravel, and gas-lamp posts; the modern addition of a vermilion letter-pillar contributing indeed to the splendour, but scarcely to the interest of the scene; and a child of any sense or fancy would hastily contrive escape from such a barren desert of politeness, and betake itself to investigation, such as might be feasible, of the natural history of Croxsted Lane. But, for its sense or fancy, what food, or stimulus, can it find, in that foul causeway of its youthful pilgrimage? What would have happened to myself, so directed, I cannot clearly imagine. Possibly, I might have got interested in the old iron and wood-shavings; and become an engineer or a carpenter: but for the children of to-day, accustomed from the instant they are out of their cradles, to the sight of this infinite nastiness, prevailing as a fixed condition of the universe, over the face of nature, and accompanying all the operations of industrious man, what is to be the scholastic issue? unless, indeed, the thrill of scientific vanity in the primary analysis of some unheard-of process of corruption--or the reward of microscopic research in the sight of worms with more legs, and acari of more curious generation than ever vivified the more simply smelling plasma of antiquity. One result of such elementary education is, however, already certain; namely, that the pleasure which we may conceive taken by the children of the coming time, in the analysis of physical corruption, guides, into fields more dangerous and desolate, the expatiation of imaginative literature: and that the reactions of moral disease upon itself, and the conditions of languidly monstrous character developed in an atmosphere of low vitality, have become the most valued material of modern fiction, and the most eagerly discussed texts of modern philosophy. The many concurrent reasons for this mischief may, I believe, be massed under a few general heads. I. There is first the hot fermentation and unwholesome secrecy of the population crowded into large cities, each mote in the misery lighter, as an individual soul, than a dead leaf, but becoming oppressive and infectious each to his neighbour, in the smoking mass of decay. The resulting modes of mental ruin and distress are continually new; and in a certain sense, worth study in their monstrosity: they have accordingly developed a corresponding science of fiction, concerned mainly with the description of such forms of disease, like the botany of leaf-lichens. In De Balzac's story of _Father Goriot_, a grocer makes a large fortune, of which he spends on himself as much as may keep him alive; and on his two daughters, all that can promote their pleasures or their pride. He marries them to men of rank, supplies their secret expenses, and provides for his favourite a separate and clandestine establishment with her lover. On his deathbed, he sends for this favourite daughter, who wishes to come, and hesitates for a quarter of an hour between doing so, and going to a ball at which it has been for the last month her chief ambition to be seen. She finally goes to the ball. This story is, of course, one of which the violent contrasts and spectral catastrophe could only take place, or be conceived, in a large city. A village grocer cannot make a large fortune, cannot marry his daughters to titled squires, and cannot die without having his children brought to him, if in the neighbourhood, by fear of village gossip, if for no better cause. II. But a much more profound feeling than this mere curiosity of science in morbid phenomena is concerned in the production of the carefullest forms of modern fiction. The disgrace and grief resulting from the mere trampling pressure and electric friction of town life, become to the sufferers peculiarly mysterious in their undeservedness, and frightful in their inevitableness. The power of all surroundings over them for evil; the incapacity of their own minds to refuse the pollution, and of their own wills to oppose the weight, of the staggering mass that chokes and crushes them into perdition, brings every law of healthy existence into question with them, and every alleged method of help and hope into doubt. Indignation, without any calming faith in justice, and self-contempt, without any curative self-reproach, dull the intelligence, and degrade the conscience, into sullen incredulity of all sunshine outside the dunghill, or breeze beyond the wafting of its impurity; and at last a philosophy develops itself, partly satiric, partly consolatory, concerned only with the regenerative vigour of manure, and the necessary obscurities of fimetic Providence; showing how everybody's fault is somebody else's, how infection has no law, digestion no will, and profitable dirt no dishonour. And thus an elaborate and ingenious scholasticism, in what may be called the Divinity of Decomposition, has established itself in connection with the more recent forms of romance, giving them at once a complacent tone of clerical dignity, and an agreeable dash of heretical impudence; while the inculcated doctrine has the double advantage of needing no laborious scholarship for its foundation, and no painful self-denial for its practice. III. The monotony of life in the central streets of any great modern city, but especially in those of London, where every emotion intended to be derived by men from the sight of nature, or the sense of art, is forbidden for ever, leaves the craving of the heart for a sincere, yet changeful, interest, to be fed from one source only. Under natural conditions the degree of mental excitement necessary to bodily health is provided by the course of the seasons, and the various skill and fortune of agriculture. In the country every morning of the year brings with it a new aspect of springing or fading nature; a new duty to be fulfilled upon earth, and a new promise or warning in heaven. No day is without its innocent hope, its special prudence, its kindly gift, and its sublime danger; and in every process of wise husbandry, and every effort of contending or remedial courage, the wholesome passions, pride, and bodily power of the labourer are excited and exerted in happiest unison. The companionship of domestic, the care of serviceable, animals, soften and enlarge his life with lowly charities, and discipline him in familiar wisdoms and unboastful fortitudes; while the divine laws of seed-time which cannot be recalled, harvest which cannot be hastened, and winter in which no man can work, compel the impatiences and coveting of his heart into labour too submissive to be anxious, and rest too sweet to be wanton. What thought can enough comprehend the contrast between such life, and that in streets where summer and winter are only alternations of heat and cold; where snow never fell white, nor sunshine clear; where the ground is only a pavement, and the sky no more than the glass roof of an arcade; where the utmost power of a storm is to choke the gutters, and the finest magic of spring, to change mud into dust: where--chief and most fatal difference in state, there is no interest of occupation for any of the inhabitants but the routine of counter or desk within doors, and the effort to pass each other without collision outside; so that from morning to evening the only possible variation of the monotony of the hours, and lightening of the penalty of existence, must be some kind of mischief, limited, unless by more than ordinary godsend of fatality, to the fall of a horse, or the slitting of a pocket. I said that under these laws of inanition, the craving of the human heart for some kind of excitement could be supplied from _one_ source only. It might have been thought by any other than a sternly tentative philosopher, that the denial of their natural food to human feelings would have provoked a reactionary desire for it; and that the dreariness of the street would have been gilded by dreams of pastoral felicity. Experience has shown the fact to be otherwise; the thoroughly trained Londoner can enjoy no other excitement than that to which he has been accustomed, but asks for _that_ in continually more ardent or more virulent concentration; and the ultimate power of fiction to entertain him is by varying to his fancy the modes, and defining for his dulness the horrors, of Death. In the single novel of _Bleak House_ there are nine deaths (or left for death's, in the drop scene) carefully wrought out or led up to, either by way of pleasing surprise, as the baby's at the brickmaker's, or finished in their threatenings and sufferings, with as much enjoyment as can be contrived in the anticipation, and as much pathology as can be concentrated in the description. Under the following varieties of method:-- One by assassination Mr. Tulkinghorn. One by starvation, with phthisis Joe. One by chagrin Richard. One by spontaneous combustion Mr. Krook. One by sorrow Lady Dedlock's lover. One by remorse Lady Dedlock. One by insanity Miss Flite. One by paralysis Sir Leicester. Besides the baby, by fever, and a lively young Frenchwoman left to be hanged. And all this, observe, not in a tragic, adventurous, or military story, but merely as the further enlivenment of a narrative intended to be amusing; and as a properly representative average of the statistics of civilian mortality in the centre of London. Observe further, and chiefly. It is not the mere number of deaths (which, if we count the odd troopers in the last scene, is exceeded in _Old Mortality_, and reached, within one or two, both in _Waverley_ and _Guy Mannering_) that marks the peculiar tone of the modern novel. It is the fact that all these deaths, but one, are of inoffensive, or at least in the world's estimate respectable persons; and that they are all grotesquely either violent or miserable, purporting thus to illustrate the modern theology that the appointed destiny of a large average of our population is to die like rats in a drain, either by trap or poison. Not, indeed, that a lawyer in full practice can be usually supposed as faultless in the eye of heaven as a dove or a woodcock; but it is not, in former divinities, thought the will of Providence that he should be dropped by a shot from a client behind his fire-screen, and retrieved in the morning by his housemaid under the chandelier. Neither is Lady Dedlock less reprehensible in her conduct than many women of fashion have been and will be: but it would not therefore have been thought poetically just, in old-fashioned morality, that she should be found by her daughter lying dead, with her face in the mud of a St. Giles's churchyard. In the work of the great masters death is always either heroic, deserved, or quiet and natural (unless their purpose be totally and deeply tragic, when collateral meaner death is permitted, like that of Polonius or Roderigo). In _Old Mortality_, four of the deaths, Bothwell's, Ensign Grahame's, Macbriar's, and Evandale's, are magnificently heroic; Burley's and Oliphant's long deserved, and swift; the troopers', met in the discharge of their military duty, and the old miser's, as gentle as the passing of a cloud, and almost beautiful in its last words of--now unselfish--care. 'Ailie' (he aye ca'd me Ailie, we were auld acquaintance,) 'Ailie, take ye care and haud the gear weel thegither; for the name of Morton of Milnwood's gane out like the last sough of an auld sang.' And sae he fell out o' ae dwam into another, and ne'er spak a word mair, unless it were something we cou'dna mak out, about a dipped candle being gude eneugh to see to dee wi'. He cou'd ne'er bide to see a moulded ane, and there was ane, by ill luck, on the table. In _Guy Mannering_, the murder, though unpremeditated, of a single person, (himself not entirely innocent, but at least by heartlessness in a cruel function earning his fate,) is avenged to the uttermost on all the men conscious of the crime; Mr. Bertram's death, like that of his wife, brief in pain, and each told in the space of half-a-dozen lines; and that of the heroine of the tale, self-devoted, heroic in the highest, and happy. Nor is it ever to be forgotten, in the comparison of Scott's with inferior work, that his own splendid powers were, even in early life, tainted, and in his latter years destroyed, by modern conditions of commercial excitement, then first, but rapidly, developing themselves. There are parts even in his best novels coloured to meet tastes which he despised; and many pages written in his later ones to lengthen his article for the indiscriminate market. But there was one weakness of which his healthy mind remained incapable to the last. In modern stories prepared for more refined or fastidious audiences than those of Dickens, the funereal excitement is obtained, for the most part, not by the infliction of violent or disgusting death; but in the suspense, the pathos, and the more or less by all felt, and recognised, mortal phenomena of the sick-room. The temptation, to weak writers, of this order of subject is especially great, because the study of it from the living--or dying--model is so easy, and to many has been the most impressive part of their own personal experience; while, if the description be given even with mediocre accuracy, a very large section of readers will admire its truth, and cherish its melancholy: Few authors of second or third rate genius can either record or invent a probable conversation in ordinary life; but few, on the other hand, are so destitute of observant faculty as to be unable to chronicle the broken syllables and languid movements of an invalid. The easily rendered, and too surely recognised, image of familiar suffering is felt at once to be real where all else had been false; and the historian of the gestures of fever and words of delirium can count on the applause of a gratified audience as surely as the dramatist who introduces on the stage of his flagging action a carriage that can be driven or a fountain that will flow. But the masters of strong imagination disdain such work, and those of deep sensibility shrink from it.[154] Only under conditions of personal weakness, presently to be noted, would Scott comply with the cravings of his lower audience in scenes of terror like the death of Front-de-Boeuf. But he never once withdrew the sacred curtain of the sick-chamber, nor permitted the disgrace of wanton tears round the humiliation of strength, or the wreck of beauty. IV. No exception to this law of reverence will be found in the scenes in Coeur de Lion's illness introductory to the principal incident in the _Talisman_. An inferior writer would have made the king charge in imagination at the head of his chivalry, or wander in dreams by the brooks of Aquitaine; but Scott allows us to learn no more startling symptoms of the king's malady than that he was restless and impatient, and could not wear his armour. Nor is any bodily weakness, or crisis of danger, permitted to disturb for an instant the royalty of intelligence and heart in which he examines, trusts and obeys the physician whom his attendants fear. Yet the choice of the main subject in this story and its companion--the trial, to a point of utter torture, of knightly faith, and several passages in the conduct of both, more especially the exaggerated scenes in the House of Baldringham, and hermitage of Engedi, are signs of the gradual decline in force of intellect and soul which those who love Scott best have done him the worst injustice in their endeavours to disguise or deny. The mean anxieties, moral humiliations, and mercilessly demanded brain-toil, which killed him, show their sepulchral grasp for many and many a year before their final victory; and the states of more or less dulled, distorted, and polluted imagination which culminate in _Castle Dangerous_, cast a Stygian hue over _St. Ronan's Well, The Fair Maid of Perth_, and _Anne of Geierstein_, which lowers them, the first altogether, the other two at frequent intervals, into fellowship with the normal disease which festers throughout the whole body of our lower fictitious literature. Fictitious! I use the ambiguous word deliberately; for it is impossible to distinguish in these tales of the prison-house how far their vice and gloom are thrown into their manufacture only to meet a vile demand, and how far they are an integral condition of thought in the minds of men trained from their youth up in the knowledge of Londinian and Parisian misery. The speciality of the plague is a delight in the exposition of the relations between guilt and decrepitude; and I call the results of it literature 'of the prison-house,' because the thwarted habits of body and mind, which are the punishment of reckless crowding in cities, become, in the issue of that punishment, frightful subjects of exclusive interest to themselves; and the art of fiction in which they finally delight is only the more studied arrangement and illustration, by coloured firelights, of the daily bulletins of their own wretchedness, in the prison calendar, the police news, and the hospital report. The reader will perhaps be surprised at my separating the greatest work of Dickens, _Oliver Twist_, with honour, from the loathsome mass to which it typically belongs. That book is an earnest and uncaricatured record of states of criminal life, written with didactic purpose, full of the gravest instruction, nor destitute of pathetic studies of noble passion. Even the _Mysteries of Paris_ and Gaboriau's _Crime d'Augival_ are raised, by their definiteness of historical intention and forewarning anxiety, far above the level of their order, and may be accepted as photographic evidence of an otherwise incredible civilisation, corrupted in the infernal fact of it, down to the genesis of such figures as the Vicomte d'Augival, the Stabber,[155] the Skeleton, and the She-wolf. But the effectual head of the whole cretinous school is the renowned novel in which the hunchbacked lover watches the execution of his mistress from the tower of Notre-Dame; and its strength passes gradually away into the anatomical preparations, for the general market, of novels like _Poor Miss Finch_, in which the heroine is blind, the hero epileptic, and the obnoxious brother is found dead with his hands dropped off, in the Arctic regions.[156] This literature of the Prison-house, understanding by the word not only the cell of Newgate, but also and even more definitely the cell of the Hôtel-Dieu, the Hôpital des Fous, and the grated corridor with the dripping slabs of the Morgue, having its central root thus in the Ile de Paris--or historically and pre-eminently the 'Cité de Paris'--is, when understood deeply, the precise counter-corruption of the religion of the Sainte Chapelle, just as the worst forms of bodily and mental ruin are the corruption of love. I have therefore called it 'Fiction mécroyante,' with literal accuracy and precision; according to the explanation of the word which the reader may find in any good French dictionary,[157] and round its Arctic pole in the Morgue, he may gather into one Caina of gelid putrescence the entire product of modern infidel imagination, amusing itself with destruction of the body, and busying itself with aberration of the mind. Aberration, palsy, or plague, observe, as distinguished from normal evil, just as the venom of rabies or cholera differs from that of a wasp or a viper. The life of the insect and serpent deserves, or at least permits, our thoughts; not so, the stages of agony in the fury-driven hound. There is some excuse, indeed, for the pathologic labour of the modern novelist in the fact that he cannot easily, in a city population, find a healthy mind to vivisect: but the greater part of such amateur surgery is the struggle, in an epoch of wild literary competition, to obtain novelty of material. The varieties of aspect and colour in healthy fruit, be it sweet or sour, may be within certain limits described exhaustively. Not so the blotches of its conceivable blight: and while the symmetries of integral human character can only be traced by harmonious and tender skill, like the branches of a living tree, the faults and gaps of one gnawed away by corroding accident can be shuffled into senseless change like the wards of a Chubb lock. V. It is needless to insist on the vast field for this dice-cast or card-dealt calamity which opens itself in the ignorance, money-interest, and mean passion, of city marriage. Peasants know each other as children--meet, as they grow up in testing labour; and if a stout farmer's son marries a handless girl, it is his own fault. Also in the patrician families of the field, the young people know what they are doing, and marry a neighbouring estate, or a covetable title, with some conception of the responsibilities they undertake. But even among these, their season in the confused metropolis creates licentious and fortuitous temptation before unknown; and in the lower middle orders, an entirely new kingdom of discomfort and disgrace has been preached to them in the doctrines of unbridled pleasure which are merely an apology for their peculiar forms of illbreeding. It is quite curious how often the catastrophe, or the leading interest, of a modern novel, turns upon the want, both in maid and bachelor, of the common self-command which was taught to their grandmothers and grandfathers as the first element of ordinarily decent behaviour. Rashly inquiring the other day the plot of a modern story from a female friend, I elicited, after some hesitation, that it hinged mainly on the young people's 'forgetting themselves in a boat;' and I perceive it to be accepted as nearly an axiom in the code of modern civic chivalry that the strength of amiable sentiment is proved by our incapacity on proper occasions to express, and on improper ones to control it. The pride of a gentleman of the old school used to be in his power of saying what he meant, and being silent when he ought, (not to speak of the higher nobleness which bestowed love where it was honourable, and reverence where it was due); but the automatic amours and involuntary proposals of recent romance acknowledge little further law of morality than the instinct of an insect, or the effervescence of a chemical mixture. There is a pretty little story of Alfred de Musset's,--_La Mouche_, which, if the reader cares to glance at it, will save me further trouble in explaining the disciplinarian authority of mere old-fashioned politeness, as in some sort protective of higher things. It describes, with much grace and precision, a state of society by no means pre-eminently virtuous, or enthusiastically heroic; in which many people do extremely wrong, and none sublimely right. But as there are heights of which the achievement is unattempted, there are abysses to which fall is barred; neither accident nor temptation will make any of the principal personages swerve from an adopted resolution, or violate an accepted principle of honour; people are expected as a matter of course to speak with propriety on occasion, and to wait with patience when they are bid: those who do wrong, admit it; those who do right don't boast of it; everybody knows his own mind, and everybody has good manners. Nor must it be forgotten that in the worst days of the self-indulgence which destroyed the aristocracies of Europe, their vices, however licentious, were never, in the fatal modern sense, 'unprincipled.' The vainest believed in virtue; the vilest respected it. 'Chaque chose avait son nom,'[158] and the severest of English moralists recognises the accurate wit, the lofty intellect, and the unfretted benevolence, which redeemed from vitiated surroundings the circle of d'Alembert and Marmontel.[159] I have said, with too slight praise, that the vainest, in those days, 'believed' in virtue. Beautiful and heroic examples of it were always before them; nor was it without the secret significance attaching to what may seem the least accidents in the work of a master, that Scott gave to both his heroines of the age of revolution in England the name of the queen of the highest order of English chivalry.[160] It is to say little for the types of youth and maid which alone Scott felt it a joy to imagine, or thought it honourable to portray, that they act and feel in a sphere where they are never for an instant liable to any of the weaknesses which disturb the calm, or shake the resolution, of chastity and courage in a modern novel. Scott lived in a country and time, when, from highest to lowest, but chiefly in that dignified and nobly severe[161] middle class to which he himself belonged, a habit of serene and stainless thought was as natural to the people as their mountain air. Women like Rose Bradwardine and Ailie Dinmont were the grace and guard of almost every household (God be praised that the race of them is not yet extinct, for all that Mall or Boulevard can do), and it has perhaps escaped the notice of even attentive readers that the comparatively uninteresting character of Sir Walter's heroes had always been studied among a class of youths who were simply incapable of doing anything seriously wrong; and could only be embarrassed by the consequences of their levity or imprudence. But there is another difference in the woof of a Waverley novel from the cobweb of a modern one, which depends on Scott's larger view of human life. Marriage is by no means, in his conception of man and woman, the most important business of their existence;[162] nor love the only reward to be proposed to their virtue or exertion. It is not in his reading of the laws of Providence a necessity that virtue should, either by love or any other external blessing, be rewarded at all;[163] and marriage is in all cases thought of as a constituent of the happiness of life, but not as its only interest, still less its only aim. And upon analysing with some care the motives of his principal stories, we shall often find that the love in them is merely a light by which the sterner features of character are to be irradiated, and that the marriage of the hero is as subordinate to the main bent of the story as Henry the Fifth's courtship of Katherine is to the battle of Agincourt. Nay, the fortunes of the person who is nominally the subject of the tale are often little more than a background on which grander figures are to be drawn, and deeper fates forth-shadowed. The judgments between the faith and chivalry of Scotland at Drumclog and Bothwell bridge owe little of their interest in the mind of a sensible reader to the fact that the captain of the Popinjay is carried a prisoner to one battle, and returns a prisoner from the other: and Scott himself, while he watches the white sail that bears Queen Mary for the last time from her native land, very nearly forgets to finish his novel, or to tell us--and with small sense of any consolation to be had out of that minor circumstance,--that 'Roland and Catherine were united, spite of their differing faiths.' Neither let it be thought for an instant that the slight, and sometimes scornful, glance with which Scott passes over scenes which a novelist of our own day would have analysed with the airs of a philosopher, and painted with the curiosity of a gossip, indicate any absence in his heart of sympathy with the great and sacred elements of personal happiness. An era like ours, which has with diligence and ostentation swept its heart clear of all the passions once known as loyalty, patriotism, and piety, necessarily magnifies the apparent force of the one remaining sentiment which sighs through the barren chambers, or clings inextricably round the chasms of ruin; nor can it but regard with awe the unconquerable spirit which still tempts or betrays the sagacities of selfishness into error or frenzy which is believed to be love. That Scott was never himself, in the sense of the phrase as employed by lovers of the Parisian school, 'ivre d'amour,' may be admitted without prejudice to his sensibility,[164] and that he never knew 'l'amor che move 'l sol e l'altre stelle,' was the chief, though unrecognised, calamity of his deeply chequered life. But the reader of honour and feeling will not therefore suppose that the love which Miss Vernon sacrifices, stooping for an instant from her horse, is of less noble stamp, or less enduring faith, than that which troubles and degrades the whole existence of Consuelo; or that the affection of Jeanie Deans for the companion of her childhood, drawn like a field of soft blue heaven beyond the cloudy wrack of her sorrow, is less fully in possession of her soul than the hesitating and self-reproachful impulses under which a modern heroine forgets herself in a boat, or compromises herself in the cool of the evening. I do not wish to return over the waste ground we have traversed, comparing, point by point, Scott's manner with those of Bermondsey and the Faubourgs; but it may be, perhaps, interesting at this moment to examine, with illustration from those Waverley novels which have so lately _re_tracted the attention of a fair and gentle public, the universal conditions of 'style,' rightly so called, which are in all ages, and above all local currents or wavering tides of temporary manners, pillars of what is for ever strong, and models of what is for ever fair. But I must first define, and that within strict horizon, the works of Scott, in which his perfect mind may be known, and his chosen ways understood. His great works of prose fiction, excepting only the first half-volume of _Waverley_, were all written in twelve years, 1814-26 (of his own age forty-three to fifty-five), the actual time employed in their composition being not more than a couple of months out of each year; and during that time only the morning hours and spare minutes during the professional day. 'Though the first volume of _Waverley_ was begun long ago, and actually lost for a time, yet the other two were begun and finished between the 4th of June and the first of July, during all which I attended my duty in court, and proceeded without loss of time or hindrance of business.'[165] Few of the maxims for the enforcement of which, in _Modern Painters_, long ago, I got the general character of a lover of paradox, are more singular, or more sure, than the statement, apparently so encouraging to the idle, that if a great thing can be done at all, it can be done easily. But it is in that kind of ease with which a tree blossoms after long years of gathered strength, and all Scott's great writings were the recreations of a mind confirmed in dutiful labour, and rich with organic gathering of boundless resource. Omitting from our count the two minor and ill-finished sketches of the _Black Dwarf_ and _Legend of Montrose_, and, for a reason presently to be noticed, the unhappy _St. Ronan's_, the memorable romances of Scott are eighteen, falling into three distinct groups, containing six each. The first group is distinguished from the other two by characters of strength and felicity which never more appeared after Scott was struck down by his terrific illness in 1819. It includes _Waverley_, _Guy Mannering_, _The Antiquary_, _Rob Roy_, _Old Mortality_, and _The Heart of Midlothian_. The composition of these occupied the mornings of his happiest days, between the ages of 43 and 48. On the 8th of April, 1819 (he was 48 on the preceding 15th of August) he began for the first time to dictate--being unable for the exertion of writing--_The Bride of Lammermuir_, 'the affectionate Laidlaw beseeching him to stop dictating, when his audible suffering filled every pause. "Nay, Willie," he answered "only see that the doors are fast. I would fain keep all the cry as well as all the wool to ourselves; but as for giving over work, that can only be when I am in woollen."'[166] From this time forward the brightness of joy and sincerity of inevitable humour, which perfected the imagery of the earlier novels, are wholly absent, except in the two short intervals of health unaccountably restored, in which he wrote _Redgauntlet_ and _Nigel_. It is strange, but only a part of the general simplicity of Scott's genius, that these revivals of earlier power were unconscious, and that the time of extreme weakness in which he wrote _St. Ronan's Well_, was that in which he first asserted his own restoration. It is also a deeply interesting characteristic of his noble nature that he never gains anything by sickness; the whole man breathes or faints as one creature; the ache that stiffens a limb chills his heart, and every pang of the stomach paralyses the brain. It is not so with inferior minds, in the workings of which it is often impossible to distinguish native from narcotic fancy, and throbs of conscience from those of indigestion. Whether in exaltation or languor, the colours of mind are always morbid, which gleam on the sea for the 'Ancient Mariner,' and through the casements on 'St. Agnes' Eve;' but Scott is at once blinded and stultified by sickness; never has a fit of the cramp without spoiling a chapter, and is perhaps the only author of vivid imagination who never wrote a foolish word but when he was ill. It remains only to be noticed on this point that any strong natural excitement, affecting the deeper springs of his heart, would at once restore his intellectual powers in all their fullness, and that, far towards their sunset: but that the strong will on which he prided himself, though it could trample upon pain, silence grief, and compel industry, never could warm his imagination, or clear the judgment in his darker hours. I believe that this power of the heart over the intellect is common to all great men: but what the special character of emotion was, that alone could lift Scott above the power of death, I am about to ask the reader, in a little while, to observe with joyful care. The first series of romances then, above named, are all that exhibit the emphasis of his unharmed faculties. The second group, composed in the three years subsequent to illness all but mortal, bear every one of them more or less the seal of it. They consist of the _Bride of Lammermuir_, _Ivanhoe_, the _Monastery_, the _Abbot_, _Kenilworth_, and the _Pirate_.[167] The marks of broken health on all these are essentially twofold--prevailing melancholy, and fantastic improbability. Three of the tales are agonizingly tragic, the _Abbot_ scarcely less so in its main event, and _Ivanhoe_ deeply wounded through all its bright panoply; while even in that most powerful of the series, the impossible archeries and axestrokes, the incredibly opportune appearances of Locksley, the death of Ulrica, and the resuscitation of Athelstane, are partly boyish, partly feverish. Caleb in the _Bride_, Triptolemus and Halcro in the _Pirate_, are all laborious, and the first incongruous; half a volume of the _Abbot_ is spent in extremely dull detail of Roland's relations with his fellow-servants and his mistress, which have nothing whatever to do with the future story; and the lady of Avenel herself disappears after the first volume, 'like a snaw wreath when it's thaw, Jeanie.' The public has for itself pronounced on the _Monastery_, though as much too harshly as it has foolishly praised the horrors of _Ravenswood_ and the nonsense of _Ivanhoe_; because the modern public finds in the torture and adventure of these, the kind of excitement which it seeks at an opera, while it has no sympathy whatever with the pastoral happiness of Glendearg, or with the lingering simplicities of superstition which give historical likelihood to the legend of the White Lady. But both this despised tale and its sequel have Scott's heart in them. The first was begun to refresh himself in the intervals of artificial labour on _Ivanhoe_. 'It was a relief,' he said, 'to interlay the scenery most familiar to me[168] with the strange world for which I had to draw so much on imagination.'[169] Through all the closing scenes of the second he is raised to his own true level by his love for the queen. And within the code of Scott's work to which I am about to appeal for illustration of his essential powers, I accept the _Monastery_ and _Abbot_, and reject from it the remaining four of this group. The last series contains two quite noble ones, _Redgauntlet_ and _Nigel_; two of very high value, _Durward_ and _Woodstock_; the slovenly and diffuse _Peveril_, written for the trade; the sickly _Tales of the Crusaders_, and the entirely broken and diseased _St. Ronan's Well_. This last I throw out of count altogether, and of the rest, accept only the four first named as sound work; so that the list of the novels in which I propose to examine his methods and ideal standards, reduces itself to these following twelve (named in order of production): _Waverley_, _Guy Mannering_, the _Antiquary_, _Rob Roy_, _Old Mortality_, the _Heart of Midlothian_, the _Monastery_, the _Abbot_, the _Fortunes of Nigel_, _Quentin Durward_, and _Woodstock_.[170] It is, however, too late to enter on my subject in this article, which I may fitly close by pointing out some of the merely verbal characteristics of his style, illustrative in little ways of the questions we have been examining, and chiefly of the one which may be most embarrassing to many readers, the difference, namely, between character and disease. One quite distinctive charm in the Waverleys is their modified use of the Scottish dialect; but it has not generally been observed, either by their imitators, or the authors of different taste who have written for a later public, that there is a difference between the dialect of a language, and its corruption. A dialect is formed in any district where there are persons of intelligence enough to use the language itself in all its fineness and force, but under the particular conditions of life, climate, and temper, which introduce words peculiar to the scenery, forms of word and idioms of sentence peculiar to the race, and pronunciations indicative of their character and disposition. Thus 'burn' (of a streamlet) is a word possible only in a country where there are brightly running waters, 'lassie,' a word possible only where girls are as free as the rivulets, and 'auld,' a form of the southern 'old,' adopted by a race of finer musical ear than the English. On the contrary, mere deteriorations, or coarse, stridulent, and, in the ordinary sense of the phrase, 'broad' forms of utterance, are not dialects at all, having nothing dialectic in them, and all phrases developed in states of rude employment, and restricted intercourse, are injurious to the tone and narrowing to the power of the language they affect. Mere breadth of accent does not spoil a dialect as long as the speakers are men of varied idea and good intelligence; but the moment the life is contracted by mining, millwork, or any oppressive and monotonous labour, the accents and phrases become debased. It is part of the popular folly of the day to find pleasure in trying to write and spell these abortive, crippled, and more or less brutal forms of human speech. Abortive, crippled, or brutal, are however not necessarily 'corrupted' dialects. Corrupt language is that gathered by ignorance, invented by vice, misused by insensibility, or minced and mouthed by affectation, especially in the attempt to deal with words of which only half the meaning is understood, or half the sound heard. Mrs. Gamp's 'aperiently so'--and the 'undermined' with primal sense of undermine, of--I forget which gossip, in the _Mill on the Floss_, are master- and mistress-pieces in this latter kind. Mrs. Malaprop's 'allegories on the banks of the Nile' are in a somewhat higher order of mistake: Miss Tabitha Bramble's ignorance is vulgarised by her selfishness, and Winifred Jenkins' by her conceit. The 'wot' of Noah Claypole, and the other degradations of cockneyism (Sam Weller and his father are in nothing more admirable than in the power of heart and sense that can purify even these); the 'trewth' of Mr. Chadband, and 'natur' of Mr. Squeers, are examples of the corruption of words by insensibility: the use of the word 'bloody' in modern low English is a deeper corruption, not altering the form of the word, but defiling the thought in it. Thus much being understood, I shall proceed to examine thoroughly a fragment of Scott's Lowland Scottish dialect; not choosing it of the most beautiful kind; on the contrary, it shall be a piece reaching as low down as he ever allows Scotch to go--it is perhaps the only unfair patriotism in him, that if ever he wants a word or two of really villainous slang, he gives it in English or Dutch--not Scotch. I had intended in the close of this paper to analyse and compare the characters of Andrew Fairservice and Richie Moniplies for examples, the former of innate evil, unaffected by external influences, and undiseased, but distinct from natural goodness as a nettle is distinct from balm or lavender; and the latter of innate goodness, contracted and pinched by circumstance, but still undiseased, as an oak-leaf crisped by frost, not by the worm. This, with much else in my mind, I must put off; but the careful study of one sentence of Andrew's will give us a good deal to think of. I take his account of the rescue of Glasgow Cathedral at the time of the Reformation. Ah! it's a brave kirk--nane o' yere whigmaleeries and curliewurlies and opensteek hems about it--a' solid, weel-jointed mason-wark, that will stand as lang as the warld, keep hands and gunpowther aff it. It had amaist a douncome lang syne at the Reformation, when they pu'd doun the kirks of St. Andrews and Perth, and thereawa', to cleanse them o' Papery, and idolatry, and image-worship, and surplices, and sic-like rags o' the muckle hure that sitteth on seven hills, as if ane wasna braid eneugh for her auld hinder end. Sae the commons o' Renfrew, and o' the Barony, and the Gorbals, and a' about, they behoved to come into Glasgow ae fair morning, to try their hand on purging the High Kirk o' Popish nicknackets. But the townsmen o' Glasgow, they were feared their auld edifice might slip the girths in gaun through siccan rough physic, sae they rang the common bell, and assembled the train-bands wi' took o' drum. By good luck, the worthy James Rabat was Dean o' Guild that year--(and a gude mason he was himsell, made him the keener to keep up the auld bigging), and the trades assembled, and offered downright battle to the commons, rather than their kirk should coup the crans, as others had done elsewhere. It wasna for luve o' Paperie--na, na!--nane could ever say that o' the trades o' Glasgow--Sae they sune came to an agreement to take a' the idolatrous statues of sants (sorrow be on them!) out o' their neuks--And sae the bits o' stane idols were broken in pieces by Scripture warrant, and flung into the Molendinar burn, and the auld kirk stood as crouse as a cat when the flaes are kaimed aff her, and a'body was alike pleased. And I hae heard wise folk say, that if the same had been done in ilka kirk in Scotland, the Reform wad just hae been as pure as it is e'en now, and we wad hae mair Christian-like kirks; for I hae been sae lang in England, that naething will drived out o' my head, that the dog-kennel at Osbaldistone-Hall is better than mony a house o' God in Scotland. Now this sentence is in the first place a piece of Scottish history of quite inestimable and concentrated value. Andrew's temperament is the type of a vast class of Scottish--shall we call it '_sow_-thistlian'--mind, which necessarily takes the view of either Pope or saint that the thistle in Lebanon took of the cedar or lilies in Lebanon; and the entire force of the passions which, in the Scottish revolution, foretold and forearmed the French one, is told in this one paragraph; the coarseness of it, observe, being admitted, not for the sake of the laugh, any more than an onion in broth merely for its flavour, but for the meat of it; the inherent constancy of that coarseness being a fact in this order of mind, and an essential part of the history to be told. Secondly, observe that this speech, in the religious passion of it, such as there may be, is entirely sincere. Andrew is a thief, a liar, a coward, and, in the Fair service from which he takes his name, a hypocrite; but in the form of prejudice, which is all that his mind is capable of in the place of religion, he is entirely sincere. He does not in the least pretend detestation of image worship to please his master, or any one else; he honestly scorns the 'carnal morality[171] as dowd and fusionless as rue-leaves at Yule' of the sermon in the upper cathedral; and when wrapt in critical attention to the 'real savour o' doctrine' in the crypt, so completely forgets the hypocrisy of his fair service as to return his master's attempt to disturb him with hard punches of the elbow. Thirdly. He is a man of no mean sagacity, quite up to the average standard of Scottish common sense, not a low one; and, though incapable of understanding any manner of lofty thought or passion, is a shrewd measurer of weaknesses, and not without a spark or two of kindly feeling. See first his sketch of his master's character to Mr. Hammorgaw, beginning: 'He's no a'thegither sae void o' sense, neither;' and then the close of the dialogue: 'But the lad's no a bad lad after a', and he needs some carefu' body to look after him.' Fourthly. He is a good workman; knows his own business well, and can judge of other craft, if sound, or otherwise. All these four qualities of him must be known before we can understand this single speech. Keeping them in mind, I take it up, word by word. You observe, in the outset, Scott makes no attempt whatever to indicate accents or modes of pronunciation by changed spelling, unless the word becomes a quite definitely new and scarcely writeable one. The Scottish way of pronouncing 'James,' for instance, is entirely peculiar, and extremely pleasant to the ear. But it is so, just because it does _not_ change the word into Jeems, nor into Jims, nor into Jawms. A modern writer of dialects would think it amusing to use one or other of these ugly spellings. But Scott writes the name in pure English, knowing that a Scots reader will speak it rightly, and an English one be wise in letting it alone. On the other hand he writes 'weel' for 'well,' because that word is complete in its change, and may be very closely expressed by the double _e_. The ambiguous '_u_'s in 'gude' and 'sune' are admitted, because far liker the sound than the double _o_ would be, and that in 'hure,' for grace' sake, to soften the word;--so also 'flaes' for 'fleas.' 'Mony' for 'many' is again positively right in sound, and 'neuk' differs from our 'nook' in sense, and is not the same word at all, as we shall presently see. Secondly, observe, not a word is corrupted in any indecent haste, slowness, slovenliness, or incapacity of pronunciation. There is no lisping, drawling, slobbering, or snuffling: the speech is as clear as a bell and as keen as an arrow: and its elisions and contractions are either melodious, ('na,' for 'not,'--'pu'd,' for 'pulled,') or as normal as in a Latin verse. The long words are delivered without the slightest bungling; and 'bigging' finished to its last _g_. I take the important words now in their places. _Brave._ The old English sense of the word in 'to go brave' retained, expressing Andrew's sincere and respectful admiration. Had he meant to insinuate a hint of the church's being too fine, he would have said 'braw.' _Kirk._ This is of course just as pure and unprovincial a word as 'Kirche,' or 'église.' _Whigmaleerie._ I cannot get at the root of this word, but it is one showing that the speaker is not bound by classic rules, but will use any syllables that enrich his meaning. 'Nipperty-tipperty' (of his master's 'poetry-nonsense') is another word of the same class. 'Curlieurlie' is of course just as pure as Shakespeare's 'Hurly-burly.' But see first suggestion of the idea to Scott at Blair-Adam (L. vi. 264). _Opensteek hems._ More description, or better, of the later Gothic cannot be put into four syllables. 'Steek,' melodious for stitch, has a combined sense of closing or fastening. And note that the later Gothic, being precisely what Scott knew best (in Melrose) and liked best, it is, here as elsewhere, quite as much himself[172] as Frank, that he is laughing at, when he laughs _with_ Andrew, whose 'opensteek hems' are only a ruder metaphor for his own 'willow-wreaths changed to stone.' _Gunpowther._ '-Ther' is a lingering vestige of the French '-dre.' _Syne._ One of the melodious and mysterious Scottish words which have partly the sound of wind and stream in them, and partly the range of softened idea which is like a distance of blue hills over border land ('far in the distant Cheviot's blue'). Perhaps even the least sympathetic 'Englisher' might recognise this, if he heard 'Old Long Since' vocally substituted for the Scottish words to the air. I do not know the root; but the word's proper meaning is not 'since,' but before or after an interval of some duration, 'as weel sune as syne.' 'But first on Sawnie gies a ca', Syne, bauldly in she enters.' _Behoved_ (_to come_). A rich word, with peculiar idiom, always used more or less ironically of anything done under a partly mistaken and partly pretended notion of duty. _Siccan._ Far prettier, and fuller in meaning than 'such.' It contains an added sense of wonder; and means properly 'so great' or 'so unusual.' _Took_ (_o' drum_). Classical 'tuck' from Italian 'toccata,' the preluding 'touch' or flourish, on any instrument (but see Johnson under word 'tucket,' quoting _Othello_). The deeper Scottish vowels are used here to mark the deeper sound of the bass drum, as in more solemn warning. _Bigging._ The only word in all the sentence of which the Scottish form is less melodious than the English, 'and what for no,' seeing that Scottish architecture is mostly little beyond Bessie Bell's and Mary Gray's? 'They biggit a bow're by yon burnside, and theekit it ow're wi rashes.' But it is pure Anglo-Saxon in roots; see glossary to Fairbairn's edition of the Douglas _Virgil_, 1710. _Coup._ Another of the much-embracing words; short for 'upset,' but with a sense of awkwardness as the inherent cause of fall; compare Richie Moniplies (also for sense of 'behoved'): 'Ae auld hirplin deevil of a potter behoved just to step in my way, and offer me a pig (earthern pot--etym. dub.), as he said "just to put my Scotch ointment in;" and I gave him a push, as but natural, and the tottering deevil coupit owre amang his own pigs, and damaged a score of them.' So also Dandie Dinmont in the postchaise: ''Od! I hope they'll no coup us.' _The Crans._ Idiomatic; root unknown to me, but it means in this use, full, total, and without recovery. _Molendinar._ From 'molendinum,' the grinding-place. I do not know if actually the local name,[173] or Scott's invention. Compare Sir Piercie's 'Molinaras.' But at all events used here with bye-sense of degradation of the formerly idle saints to grind at the mill. _Crouse._ Courageous, softened with a sense of comfort. _Ilka._ Again a word with azure distance, including the whole sense of 'each' and 'every.' The reader must carefully and reverently distinguish these comprehensive words, which gather two or more perfectly understood meanings into one _chord_ of meaning, and are harmonies more than words, from the above-noted blunders between two half-hit meanings, struck as a bad piano-player strikes the edge of another note. In English we have fewer of these combined thoughts; so that Shakespeare rather plays with the distinct lights of his words, than melts them into one. So again Bishop Douglas spells, and doubtless spoke, the word 'rose,' differently, according to his purpose; if as the chief or governing ruler of flowers, 'rois,' but if only in her own beauty, rose. _Christian-like._ The sense of the decency and order proper to Christianity is stronger in Scotland than in any other country, and the word 'Christian' more distinctly opposed to 'beast.' Hence the back-handed cut at the English for their over-pious care of dogs. I am a little surprised myself at the length to which this examination of one small piece of Sir Walter's first-rate work has carried us, but here I must end for this time, trusting, if the Editor of the _Nineteenth Century_ permit me, yet to trespass, perhaps more than once, on his readers' patience; but, at all events, to examine in a following paper the technical characteristics of Scott's own style, both in prose and verse, together with Byron's, as opposed to our fashionably recent dialects and rhythms; the essential virtues of language, in both the masters of the old school, hinging ultimately, little as it might be thought, on certain unalterable views of theirs concerning the code called 'of the Ten Commandments,' wholly at variance with the dogmas of automatic morality which, summed again by the witches' line, 'Fair is foul, and foul is fair,' hover through the fog and filthy air of our prosperous England. JOHN RUSKIN. * * * * * '_He hated greetings in the market-place_, and there were generally loiterers in the streets to persecute him _either about the events of the day_, or about some petty pieces of business.' These lines, which the reader will find near the beginning of the sixteenth chapter of the first volume of the _Antiquary_, contain two indications of the old man's character, which, receiving the ideal of him as a portrait of Scott himself, are of extreme interest to me. They mean essentially that neither Monkbarns nor Scott had any mind to be called of men, Rabbi, in mere hearing of the mob; and especially that they hated to be drawn back out of their far-away thoughts, or forward out of their long-ago thoughts, by any manner of 'daily' news, whether printed or gabbled. Of which two vital characteristics, deeper in both the men, (for I must always speak of Scott's creations as if they were as real as himself,) than any of their superficial vanities, or passing enthusiasms, I have to speak more at another time. I quote the passage just now, because there was one piece of the daily news of the year 1815 which did extremely interest Scott, and materially direct the labour of the latter part of his life; nor is there any piece of history in this whole nineteenth century quite so pregnant with various instruction as the study of the reasons which influenced Scott and Byron in their opposite views of the glories of the battle of Waterloo. But I quote it for another reason also. The principal greeting which Mr. Oldbuck on this occasion receives in the market-place, being compared with the speech of Andrew Fairservice, examined in my first paper, will furnish me with the text of what I have mainly to say in the present one. '"Mr. Oldbuck," said the town-clerk (a more important person, who came in front and ventured to stop the old gentleman), "the provost, understanding you were in town, begs on no account that you'll quit it without seeing him; he wants to speak to ye about bringing the water frae the Fairwell spring through a part o' your lands." '"What the deuce!--have they nobody's land but mine to cut and carve on?--I won't consent, tell them." '"And the provost," said the clerk, going on, without noticing the rebuff, "and the council, wad be agreeable that you should hae the auld stanes at Donagild's Chapel, that ye was wussing to hae." '"Eh?--what?--Oho! that's another story--Well, well, I'll call upon the provost, and we'll talk about it." '"But ye maun speak your mind on't forthwith, Monkbarns, if ye want the stanes; for Deacon Harlewalls thinks the carved through-stanes might be put with advantage on the front of the new council-house--that is, the twa cross-legged figures that the callants used to ca' Robbin and Bobbin, ane on ilka door-cheek; and the other stane, that they ca'd Ailie Dailie, abune the door. It will be very tastefu', the Deacon says, and just in the style of modern Gothic." '"Good Lord deliver me from this Gothic generation!" exclaimed the Antiquary,--"a monument of a knight-templar on each side of a Grecian porch, and a Madonna on the top of it!--_O crimini!_--Well, tell the provost I wish to have the stones, and we'll not differ about the water-course.--It's lucky I happened to come this way to-day." 'They parted mutually satisfied; but the wily clerk had most reason to exult in the dexterity he had displayed, since the whole proposal of an exchange between the monuments (which the council had determined to remove as a nuisance, because they encroached three feet upon the public road) and the privilege of conveying the water to the burgh, through the estate of Monkbarns, was an idea which had originated with himself upon the pressure of the moment.' In this single page of Scott, will the reader please note the kind of prophetic instinct with which the great men of every age mark and forecast its destinies? The water from the Fairwell is the future Thirlmere carried to Manchester; the 'auld stanes'[174] at Donagild's Chapel, removed as a _nuisance_, foretell the necessary view taken by modern cockneyism, Liberalism, and progress, of all things that remind them of the noble dead, of their father's fame, or of their own duty; and the public road becomes their idol, instead of the saint's shrine. Finally, the roguery of the entire transaction--the mean man seeing the weakness of the honourable, and 'besting' him--in modern slang, in the manner and at the pace of modern trade--'on the pressure of the moment.' But neither are these things what I have at present quoted the passage for. I quote it, that we may consider how much wonderful and various history is gathered in the fact, recorded for us in this piece of entirely fair fiction, that in the Scottish borough of Fairport, (Montrose, really,) in the year 17-- of Christ, the knowledge given by the pastors and teachers provided for its children by enlightened Scottish Protestantism, of their fathers' history, and the origin of their religion, had resulted in this substance and sum;--that the statues of two crusading knights had become, to their children, Robin and Bobbin; and the statue of the Madonna, Ailie Dailie. A marvellous piece of history, truly: and far too comprehensive for general comment here. Only one small piece of it I must carry forward the readers' thoughts upon. The pastors and teachers aforesaid, (represented typically in another part of this errorless book by Mr. Blattergowl) are not, whatever else they may have to answer for, answerable for these names. The names are of the children's own choosing and bestowing, but not of the children's own inventing. 'Robin' is a classically endearing cognomen, recording the _errant_ heroism of old days--the name of the Bruce and of Rob Roy. 'Bobbin' is a poetical and symmetrical fulfilment and adornment of the original phrase. 'Ailie' is the last echo of 'Ave,' changed into the softest Scottish Christian name familiar to the children, itself the beautiful feminine form of royal 'Louis;' the 'Dailie' again symmetrically added for kinder and more musical endearment. The last vestiges, you see, of honour for the heroism and religion of their ancestors, lingering on the lips of babes and sucklings. But what is the meaning of this necessity the children find themselves under of completing the nomenclature rhythmically and rhymingly? Note first the difference carefully, and the attainment of both qualities by the couplets in question. Rhythm is the syllabic and quantitative measure of the words, in which Robin, both in weight and time, balances Bobbin; and Dailie holds level scale with Ailie. But rhyme is the added correspondence of sound; unknown and undesired, so far as we can learn, by the Greek Orpheus, but absolutely essential to, and, as special virtue, becoming titular of, the Scottish Thomas. The 'Ryme,'[175] you may at first fancy, is the especially childish part of the work. Not so. It is the especially chivalric and Christian part of it. It characterises the Christian chant or canticle, as a higher thing than a Greek ode, melos, or hymnos, or than a Latin carmen. Think of it, for this again is wonderful! That these children of Montrose should have an element of music in their souls which Homer had not,--which a melos of David the Prophet and King had not,--which Orpheus and Amphion had not,--which Apollo's unrymed oracles became mute at the sound of. A strange new equity this,--melodious justice and judgment as it were,--in all words spoken solemnly and ritualistically by Christian human creatures;--Robin and Bobbin--by the Crusader's tomb, up to 'Dies iræ, dies illa,' at judgment of the crusading soul. You have to understand this most deeply of all Christian minstrels, from first to last; that they are more musical, because more joyful, than any others on earth: ethereal minstrels, pilgrims of the sky, true to the kindred points of heaven and home; their joy essentially the sky-lark's, in light, in purity; but, with their human eyes, looking for the glorious appearing of something in the sky, which the bird cannot. This it is that changes Etruscan murmur into Terza rima--Horatian Latin into Provençal troubadour's melody; not, because less artful, less wise. Here is a little bit, for instance, of French ryming just before Chaucer's time--near enough to our own French to be intelligible to us yet. 'O quant très-glorieuse vie, Quant cil quit out peut et maistrie, Veult esprouver pour nécessaire, Ne pour quant il ne blasma mie La vie de Marthe sa mie: Mais il lui donna exemplaire D'autrement vivre, et de bien plaire A Dieu; et plut de bien à faire: Pour se conclut-il que Marie Qui estoit à ses piedz sans braire, Et pensait d'entendre et de taire, Estleut la plus saine partie. La meilleur partie esleut-elle Et la plus saine et la plus belle, Qui jà ne luy sera ostée Car par vérité se fut celle Qui fut tousjours fresche et nouvelle, D'aymer Dieu et d'en estre aymée; Car jusqu'au cueur fut entamée, Et si ardamment enflammée. Que tous-jours ardoit l'estincelle; Par quoi elle fut visitée Et de Dieu premier comfortée; Car charité est trop ysnelle.' The only law of _metre_, observed in this song, is that each line shall be octosyllabic: Qui fut | tousjours | fresche et | nouvelle, D'autre | ment vi | vret de | bien (ben) plaire, Et pen | soit den | tendret | de taire But the reader must note that words which were two-syllabled in Latin mostly remain yet so in the French. La _vi_ | -_e_ de | Marthe | sa mie, although _mie_, which is pet language, loving abbreviation of _amica_ through _amie_, remains monosyllabic. But _vie_ elides its _e_ before a vowel: Car Mar- | the me | nait vie | active Et Ma- | ri-e | contemp | lative; and custom endures many exceptions. Thus _Marie_ may be three-syllabled as above, or answer to _mie_ as a dissyllable; but _vierge_ is always, I think, dissyllabic, _vier-ge_, with even stronger accent on the -_ge_, for the Latin -_go_. Then, secondly, of quantity, there is scarcely any fixed law. The metres may be timed as the minstrel chooses--fast or slow--and the iambic current checked in reverted eddy, as the words chance to come. But, thirdly, there is to be rich ryming and chiming, no matter how simply got, so only that the words jingle and tingle together with due art of interlacing and answering in different parts of the stanza, correspondent to the involutions of tracery and illumination. The whole twelve-line stanza is thus constructed with two rymes only, six of each, thus arranged: AAB | AAB | BBA | BBA | dividing the verse thus into four measures, reversed in ascent and descent, or _descant_ more properly; and doubtless with correspondent phases in the voice-given, and duly accompanying, or following, music; Thomas the Rymer's own precept, that 'tong is chefe in mynstrelsye,' being always kept faithfully in mind.[176] Here then you have a sufficient example of the pure chant of the Christian ages; which is always at heart joyful, and divides itself into the four great forms, Song of Praise, Song of Prayer, Song of Love, and Song of Battle; praise, however, being the keynote of passion through all the four forms; according to the first law which I have already given in the laws of Fesolé; 'all great Art is Praise,' of which the contrary is also true, all foul or miscreant Art is accusation, [Greek: diabolê]: 'She gave me of the tree and I did eat' being an entirely museless expression on Adam's part, the briefly essential contrary of Love-song. With these four perfect forms of Christian chant, of which we may take for pure examples the 'Te Deum,' the 'Te Lucis Ante,' the 'Amor che nella mente,'[177] and the 'Chant de Roland,' are mingled songs of mourning, of Pagan origin (whether Greek or Danish), holding grasp still of the races that have once learned them, in times of suffering and sorrow; and songs of Christian humiliation or grief, regarding chiefly the sufferings of Christ, or the conditions of our own sin: while through the entire system of these musical complaints are interwoven moralities, instructions, and related histories, in illustration of both, passing into Epic and Romantic verse, which gradually, as the forms and learnings of society increase, becomes less joyful, and more didactic, or satiric, until the last echoes of Christian joy and melody vanish in the 'Vanity of human wishes.' And here I must pause for a minute or two to separate the different branches of our inquiry clearly from one another. For one thing, the reader must please put for the present out of his head all thought of the progress of 'civilisation'--that is to say, broadly, of the substitution of wigs for hair, gas for candles, and steam for legs. This is an entirely distinct matter from the phases of policy and religion. It has nothing to do with the British Constitution, or the French Revolution, or the unification of Italy. There are, indeed, certain subtle relations between the state of mind, for instance, in Venice, which makes her prefer a steamer to a gondola, and that which makes her prefer a gazetteer to a duke; but these relations are not at all to be dealt with until we solemnly understand that whether men shall be Christians and poets, or infidels and dunces, does not depend on the way they cut their hair, tie their breeches, or light their fires. Dr. Johnson might have worn his wig in fulness conforming to his dignity, without therefore coming to the conclusion that human wishes were vain; nor is Queen Antoinette's civilised hair-powder, as opposed to Queen Bertha's savagely loose hair, the cause of Antoinette's laying her head at last in scaffold dust, but Bertha in a pilgrim-haunted tomb. Again, I have just now used the words 'poet' and 'dunce,' meaning the degree of each quality possible to average human nature. Men are eternally divided into the two classes of poet (believer, maker, and praiser) and dunce (or unbeliever, unmaker, and dispraiser). And in process of ages they have the power of making faithful and formative creatures of themselves, or unfaithful and _de_formative. And this distinction between the creatures who, blessing, are blessed, and evermore _benedicti_, and the creatures who, cursing, are cursed, and evermore _maledicti_, is one going through all humanity; antediluvian in Cain and Abel, diluvian in Ham and Shem. And the question for the public of any given period is not whether they are a constitutional or unconstitutional vulgus, but whether they are a benignant or malignant vulgus. So also, whether it is indeed the gods who have given any gentleman the grace to despise the rabble, depends wholly on whether it is indeed the rabble, or he, who are the malignant persons. But yet again. This difference between the persons to whom Heaven, according to Orpheus, has granted 'the hour of delight,'[178] and those whom it has condemned to the hour of detestableness, being, as I have just said, of all times and nations,--it is an interior and more delicate difference which we are examining in the gift of _Christian_, as distinguished from unchristian, song. Orpheus, Pindar, and Horace are indeed distinct from the prosaic rabble, as the bird from the snake; but between Orpheus and Palestrina, Horace and Sidney, there is another division, and a new power of music and song given to the humanity which has hope of the Resurrection. _This_ is the root of all life and all rightness in Christian harmony, whether of word or instrument; and so literally, that in precise manner as this hope disappears, the power of song is taken away, and taken away utterly. When the Christian falls back out of the bright hope of the Resurrection, even the Orpheus song is forbidden him. Not to have known the hope is blameless: one may sing, unknowing, as the swan, or Philomela. But to have known and fall away from it, and to declare that the human wishes, which are summed in that one--'Thy kingdom come'--are vain! The Fates ordain there shall be no singing after that denial. For observe this, and earnestly. The old Orphic song, with its dim hope of yet once more Eurydice,--the Philomela song--granted after the cruel silence,--the Halcyon song--with its fifteen days of peace, were all sad, or joyful only in some vague vision of conquest over death. But the Johnsonian vanity of wishes is on the whole satisfactory to Johnson--accepted with gentlemanly resignation by Pope--triumphantly and with bray of penny trumpets and blowing of steam-whistles, proclaimed for the glorious discovery of the civilised ages, by Mrs. Barbauld, Miss Edgeworth, Adam Smith, and Co. There is no God, but have we not invented gunpowder?--who wants a God, with that in his pocket?[179] There is no Resurrection, neither angel nor spirit; but have we not paper and pens, and cannot every blockhead print his opinions, and the Day of Judgment become Republican, with everybody for a judge, and the flat of the universe for the throne? There is no law, but only gravitation and congelation, and we are stuck together in an everlasting hail, and melted together in everlasting mud, and great was the day in which our worships were born. And there is no Gospel, but only, whatever we've got, to get more, and, wherever we are, to go somewhere else. And are not these discoveries, to be sung of, and drummed of, and fiddled of, and generally made melodiously indubitable in the eighteenth century song of praise? The Fates will not have it so. No word of song is possible, in that century, to mortal lips. Only polished versification, sententious pentameter and hexameter, until, having turned out its toes long enough without dancing, and pattered with its lips long enough without piping, suddenly Astræa returns to the earth, and a Day of Judgment of a sort, and there bursts out a song at last again, a most curtly melodious triplet of Amphisbænic ryme. '_Ça ira._' Amphisbænic, fanged in each ryme with fire, and obeying Ercildoune's precept, 'Tong is chefe of mynstrelsye,' to the syllable.--Don Giovanni's hitherto fondly chanted 'Andiam, andiam,' become suddenly impersonal and prophetic: IT shall go, and you also. A cry--before it is a song, then song and accompaniment together--perfectly done; and the march 'towards the field of Mars. The two hundred and fifty thousand--they to the sound of stringed music--preceded by young girls with tricolor streamers, they have shouldered soldier-wise their shovels and picks, and with one throat are singing _Ça ira_.'[180] Through all the springtime of 1790, 'from Brittany to Burgundy, on most plains of France, under most city walls, there march and constitutionally wheel to the Ça-iraing mood of fife and drum--our clear glancing phalanxes;--the song of the two hundred and fifty thousand, virgin led, is in the long light of July.' Nevertheless, another song is yet needed, for phalanx, and for maid. For, two springs and summers having gone--amphisbænic,--on the 28th of August 1792, 'Dumouriez rode from the camp of Maulde, eastwards to _Sedan_.'[181] And Longwi has fallen basely, and Brunswick and the Prussian king will beleaguer Verdun, and Clairfait and the Austrians press deeper in over the northern marches, Cimmerian Europe behind. And on that same night Dumouriez assembles council of war at his lodgings in Sedan. Prussians here, Austrians there, triumphant both. With broad highway to Paris and little hindrance--_we_ scattered, helpless here and there--what to advise? The generals advise retreating, and retreating till Paris be sacked at the latest day possible. Dumouriez, silent, dismisses _them_,--keeps only, with a sign, Thouvenot. Silent, thus, when needful, yet having voice, it appears, of what musicians call tenor-quality, of a rare kind. Rubini-esque, even, but scarcely producible to fastidious ears at opera. The seizure of the forest of Argonne follows--the cannonade of Valmy. The Prussians do not march on Paris _this_ time, the autumnal hours of fate pass on--_ça ira_--and on the 6th of November, Dumouriez meets the Austrians also. 'Dumouriez wide-winged, they wide-winged--at and around Jemappes, its green heights fringed and maned with red fire. And Dumouriez is swept back on this wing and swept back on that, and is like to be swept back utterly, when he rushes up in person, speaks a prompt word or two, and then, with clear tenor-pipe, uplifts the hymn of the Marseillaise, ten thousand tenor or bass pipes joining, or say some forty thousand in all, for every heart leaps up at the sound; and so, with rhythmic march melody, they rally, they advance, they rush death-defying, and like the fire whirlwind sweep all manner of Austrians from the scene of action.' Thus, through the lips of Dumouriez, sings Tyrtæus, Rouget de Lisle,[182] 'Aux armes--marchons!' Iambic measure with a witness! in what wide strophe here beginning--in what unthought-of antistrophe returning to that council chamber in Sedan! While these two great songs were thus being composed, and sung, and danced to in cometary cycle, by the French nation, here in our less giddy island there rose, amidst hours of business in Scotland and of idleness in England, three troubadours of quite different temper. Different also themselves, but not opponent; forming a perfect chord, and adverse all the three of them alike to the French musicians, in this main point--that while the _Ça ira_ and Marseillaise were essentially songs of blame and wrath, the British bards wrote, virtually, always songs of praise, though by no means psalmody in the ancient keys. On the contrary, all the three are alike moved by a singular antipathy to the priests, and are pointed at with fear and indignation by the pietists, of their day;--not without latent cause. For they are all of them, with the most loving service, servants of that world which the Puritan and monk alike despised; and, in the triple chord of their song, could not but appear to the religious persons around them as respectively and specifically the praisers--Scott of the world, Burns of the flesh, and Byron of the devil. To contend with this carnal orchestra, the religious world, having long ago rejected its Catholic Psalms as antiquated and unscientific, and finding its Puritan melodies sunk into faint jar and twangle from their native trumpet-tone, had nothing to oppose but the innocent, rather than religious, verses of the school recognised as that of the English Lakes; very creditable to them; domestic at once and refined; observing the errors of the world outside of the Lakes with a pitying and tender indignation, and arriving in lacustrine seclusion at many valuable principles of philosophy, as pure as the tarns of their mountains, and of corresponding depth.[183] I have lately seen, and with extreme pleasure, Mr. Matthew Arnold's arrangement of Wordsworth's poems; and read with sincere interest his high estimate of them. But a great poet's work never needs arrangement by other hands; and though it is very proper that Silver How should clearly understand and brightly praise its fraternal Rydal Mount, we must not forget that, over yonder, are the Andes, all the while. Wordsworth's rank and scale among poets were determined by himself, in a single exclamation:-- 'What was the great Parnassus' self to thee, Mount Skiddaw?' Answer his question faithfully, and you have the relation between the great masters of the Muse's teaching, and the pleasant fingerer of his pastoral flute among the reeds of Rydal. Wordsworth is simply a Westmoreland peasant, with considerably less shrewdness than most border Englishmen or Scotsmen inherit; and no sense of humour: but gifted (in this singularly) with vivid sense of natural beauty, and a pretty turn for reflections, not always acute, but, as far as they reach, medicinal to the fever of the restless and corrupted life around him. Water to parched lips may be better than Samian wine, but do not let us therefore confuse the qualities of wine and water. I much doubt there being many inglorious Miltons in our country churchyards; but I am very sure there are many Wordsworths resting there, who were inferior to the renowned one only in caring less to hear themselves talk. With an honest and kindly heart, a stimulating egoism, a wholesome contentment in modest circumstances, and such sufficient ease, in that accepted state, as permitted the passing of a good deal of time in wishing that daisies could see the beauty of their own shadows, and other such profitable mental exercises, Wordsworth has left us a series of studies of the graceful and happy shepherd life of our lake country, which to me personally, for one, are entirely sweet and precious; but they are only so as the mirror of an existent reality in many ways more beautiful than its picture. But the other day I went for an afternoon's rest into the cottage of one of our country people of old statesman class; cottage lying nearly midway between two village churches, but more conveniently for downhill walk towards one than the other. I found, as the good housewife made tea for me, that nevertheless she went up the hill to church. 'Why do not you go to the nearer church?' I asked. 'Don't you like the clergyman?' 'Oh no, sir,' she answered, 'it isn't that; but you know I couldn't leave my mother.' 'Your mother! she is buried at H---- then?' 'Yes, sir; and you know I couldn't go to church anywhere else.' That feelings such as these existed among the peasants, not of Cumberland only, but of all the tender earth that gives forth her fruit for the living, and receives her dead to peace, might perhaps have been, to our great and endless comfort, discovered before now, if Wordsworth had been content to tell us what he knew of his own villages and people, not as the leader of a new and only correct school of poetry, but simply as a country gentleman of sense and feeling, fond of primroses, kind to the parish children, and reverent of the spade with which Wilkinson had tilled his lands: and I am by no means sure that his influence on the stronger minds of his time was anywise hastened or extended by the spirit of tunefulness under whose guidance he discovered that heaven rhymed to seven, and Foy to boy. Tuneful nevertheless at heart, and of the heavenly choir, I gladly and frankly acknowledge him; and our English literature enriched with a new and a singular virtue in the aërial purity and healthful rightness of his quiet song;--but _aërial_ only,--not ethereal; and lowly in its privacy of light. A measured mind, and calm; innocent, unrepentant; helpful to sinless creatures and scatheless, such of the flock as do not stray. Hopeful at least, if not faithful; content with intimations of immortality such as may be in skipping of lambs, and laughter of children,--incurious to see in the hands the print of the Nails. A gracious and constant mind; as the herbage of its native hills, fragrant and pure;--yet, to the sweep and the shadow, the stress and distress, of the greater souls of men, as the tufted thyme to the laurel wilderness of Tempe,--as the gleaming euphrasy to the dark branches of Dodona. * * * * * [I am obliged to defer the main body of this paper to next month,--revises penetrating all too late into my lacustrine seclusion; as chanced also unluckily with the preceding paper, in which the reader will perhaps kindly correct the consequent misprints, p. 29, l. 20, of 'scarcely' to 'securely,' and p. 31, l. 34, 'full,' with comma, to 'fall,' without one; noticing besides that _Redgauntlet_ has been omitted in the italicised list, p. 25, l. 16; and that the reference to note 2 should not be at the word 'imagination,' p. 24, but at the word 'trade,' p. 25, l. 7. My dear old friend, Dr. John Brown, sends me, from Jamieson's _Dictionary_, the following satisfactory end to one of my difficulties:--'Coup the crans.' The language is borrowed from the 'cran,' or trivet on which small pots are placed in cookery, which is sometimes turned with its feet uppermost by an awkward assistant. Thus it signifies to be _completely_ upset.] JOHN RUSKIN. [BYRON.] 'Parching summer hath no warrant To consume this crystal well; Rains, that make each brook a torrent, Neither sully it, nor swell.' So was it, year by year, among the unthought-of hills. Little Duddon and child Rotha ran clear and glad; and laughed from ledge to pool, and opened from pool to mere, translucent, through endless days of peace. But eastward, between her orchard plains, Loire locked her embracing dead in silent sands; dark with blood rolled Iser; glacial-pale, Beresina-Lethe, by whose shore the weary hearts forgot their people, and their father's house. Nor unsullied, Tiber; nor unswoln, Arno and Aufidus; and Euroclydon high on Helle's wave; meantime, let our happy piety glorify the garden rocks with snowdrop circlet, and breathe the spirit of Paradise, where life is wise and innocent. Maps many have we, now-a-days clear in display of earth constituent, air current, and ocean tide. Shall we ever engrave the map of meaner research, whose shadings shall content themselves in the task of showing the depth, or drought,--the calm, or trouble, of Human Compassion? For this is indeed all that is noble in the life of Man, and the source of all that is noble in the speech of Man. Had it narrowed itself then, in those days, out of all the world, into this peninsula between Cockermouth and Shap? Not altogether so; but indeed the _Vocal_ piety seemed conclusively to have retired (or excursed?) into that mossy hermitage, above Little Langdale. The _Un_vocal piety, with the uncomplaining sorrow, of Man, may have had a somewhat wider range, for aught we know: but history disregards those items; and of firmly proclaimed and sweetly canorous religion, there really seemed at that juncture none to be reckoned upon, east of Ingleborough, or north of Criffel. Only under Furness Fells, or by Bolton Priory, it seems we can still write Ecclesiastical Sonnets, stanzas on the force of Prayer, Odes to Duty, and complimentary addresses to the Deity upon His endurance for adoration. Far otherwise, over yonder, by Spezzia Bay, and Ravenna Pineta, and in ravines of Hartz. There, the softest voices speak the wildest words; and Keats discourses of Endymion, Shelley of Demogorgon, Goethe of Lucifer, and Bürger of the Resurrection of Death unto Death--while even Puritan Scotland and Episcopal Anglia produce for us only these three minstrels of doubtful tone, who show but small respect for the 'unco guid,' put but limited faith in gifted Gilfillan, and translate with unflinching frankness the _Morgante Maggiore_.[184] Dismal the aspect of the spiritual world, or at least the sound of it, might well seem to the eyes and ears of Saints (such as we had) of the period--dismal in angels' eyes also assuredly! Yet is it possible that the dismalness in angelic sight may be otherwise quartered, as it were, from the way of mortal heraldry; and that seen, and heard, of angels,--again I say--hesitatingly--_is_ it possible that the goodness of the Unco Guid, and the gift of Gilfillan, and the word of Mr. Blattergowl, may severally not have been the goodness of God, the gift of God, nor the word of God: but that in the much blotted and broken efforts at goodness, and in the careless gift which they themselves despised,[185] and in the sweet ryme and murmur of their unpurposed words, the Spirit of the Lord had, indeed, wandering, as in chaos days on lightless waters, gone forth in the hearts and from the lips of those other three strange prophets, even though they ate forbidden bread by the altar of the poured-out ashes, and even though the wild beast of the desert found them, and slew. This, at least, I know, that it had been well for England, though all her other prophets, of the Press, the Parliament, the Doctor's chair, and the Bishop's throne, had fallen silent; so only that she had been able to understand with her heart here and there the simplest line of these, her despised. I take one at mere chance: 'Who thinks of self, when gazing on the sky?'[186] Well, I don't know; Mr. Wordsworth certainly did, and observed, with truth, that its clouds took a sober colouring in consequence of his experiences. It is much if, indeed, this sadness be unselfish, and our eyes _have_ kept loving watch o'er Man's Mortality. I have found it difficult to make any one now-a-days believe that such sobriety can be; and that Turner saw deeper crimson than others in the clouds of Goldau. But that any should yet think the clouds brightened by Man's _Im_mortality instead of dulled by his death,--and, gazing on the sky, look for the day when every eye must gaze also--for behold, He cometh with the clouds--this it is no more possible for Christian England to apprehend, however exhorted by her gifted and guid. 'But Byron was not thinking of such things!'--He, the reprobate! how should such as he think of Christ? Perhaps not wholly as you or I think of Him. Take, at chance, another line or two, to try: 'Carnage (so Wordsworth tells you) is God's daughter;[187] If _he_ speak truth, she is Christ's sister, and Just now, behaved as in the Holy Land.' Blasphemy, cry you, good reader? Are you sure you understand it? The first line I gave you was easy Byron--almost shallow Byron--these are of the man in his depth, and you will not fathom them, like a tarn,--nor in a hurry. 'Just now behaved as in the Holy Land.' How _did_ Carnage behave in the Holy Land then? You have all been greatly questioning, of late, whether the sun, which you find to be now going out, ever stood still. Did you in any lagging minute, on those scientific occasions, chance to reflect what he was bid stand still _for_? or if not--will you please look--and what, also, going forth again as a strong man to run his course, he saw, rejoicing? 'Then Joshua passed from Makkedah unto Libnah--and fought against Libnah. And the Lord delivered it and the king thereof into the hand of Israel, and he smote it with the edge of the sword, and all the souls that were therein.' And from Lachish to Eglon, and from Eglon to Kirjath-Arba, and Sarah's grave in the Amorites' land, 'and Joshua smote all the country of the hills and of the south--and of the vale and of the springs, and all their kings; he left none remaining, but utterly destroyed all that breathed--as the Lord God of Israel commanded.' Thus 'it is written:' though you perhaps do not so often hear _these_ texts preached from, as certain others about taking away the sins of the world. I wonder how the world would like to part with them! hitherto it has always preferred parting first with its Life--and God has taken it at its word. But Death is not _His_ Begotten Son, for all that; nor is the death of the innocent in battle carnage His 'instrument for working out a pure intent' as Mr. Wordsworth puts it; but Man's instrument for working out an impure one, as Byron would have you to know. Theology perhaps less orthodox, but certainly more reverent;--neither is the Woolwich Infant a Child of God; neither does the iron-clad 'Thunderer' utter thunders of God--which facts, if you had had the grace or sense to learn from Byron, instead of accusing him of blasphemy, it had been better at this day for _you_, and for many a savage soul also, by Euxine shore, and in Zulu and Afghan lands. It was neither, however, for the theology, nor the use, of these lines that I quoted them; but to note this main point of Byron's own character. He was the first great Englishman who felt the cruelty of war, and, in its cruelty, the shame. Its guilt had been known to George Fox--its folly shown practically by Penn. But the _compassion_ of the pious world had still for the most part been shown only in keeping its stock of Barabbases unhanged if possible: and, till Byron came, neither Kunersdorf, Eylau, nor Waterloo, had taught the pity and the pride of men that 'The drying up a single tear has more Of honest fame than shedding seas of gore.'[188] Such pacific verse would not indeed have been acceptable to the Edinburgh volunteers on Portobello sands. But Byron can write a battle song too, when it is _his_ cue to fight. If you look at the introduction to the _Isles of Greece_, namely the 85th and 86th stanzas of the 3rd canto of _Don Juan_,--you will find--what will you _not_ find, if only you understand them! 'He' in the first line, remember, means the typical modern poet. 'Thus usually, when he was asked to sing, He gave the different nations something national. 'Twas all the same to him--"God save the King" Or "Ça ira" according to the fashion all; His muse made increment of anything From the high lyric down to the low rational: If Pindar sang horse races, what should hinder Himself from being as pliable as Pindar? 'In France, for instance, he would write a chanson; In England a six-canto quarto tale; In Spain, he'd make a ballad or romance on The last war--much the same in Portugal; In Germany, the Pegasus he'd prance on Would be old Goethe's--(see what says de Staël) In Italy he'd ape the 'Trecentisti;' In Greece, he'd sing some sort of hymn like this t' ye. Note first here, as we did in Scott, the concentrating and foretelling power. The 'God Save the Queen' in England, fallen hollow now, as the 'Ça ira' in France--not a man in France knowing where either France or 'that' (whatever 'that' may be) is going to; nor the Queen of England daring, for her life, to ask the tiniest Englishman to do a single thing he doesn't like;--nor any salvation, either of Queen or Realm, being any more possible to God, unless under the direction of the Royal Society: then, note the estimate of height and depth in poetry, swept in an instant, 'high lyric to low rational.' Pindar to Pope (knowing Pope's height, too, all the while, no man better); then, the poetic power of France--resumed in a word--Béranger; then the cut at Marmion, entirely deserved, as we shall see, yet kindly given, for everything he names in these two stanzas is the best of its kind; then Romance in Spain on--the _last_ war, (_present_ war not being to Spanish poetical taste), then, Goethe the real heart of all Germany, and last, the aping of the Trecentisti which has since consummated itself in Pre-Raphaelitism! that also being the best thing Italy has done through England, whether in Rossetti's 'blessed damozels' or Burne Jones's 'days of creation.' Lastly comes the mock at himself--the modern English Greek--(followed up by the 'degenerate into hands like mine' in the song itself); and then--to amazement, forth he thunders in his Achilles voice. We have had one line of him in his clearness--five of him in his depth--sixteen of him in his play. Hear now but these, out of his whole heart:-- 'What,--silent yet? and silent _all_? Ah no, the voices of the dead Sound like a distant torrent's fall, And answer, "Let _one_ living head, But one, arise--we come--we come:" --'Tis but the living who are dumb.' Resurrection, this, you see like Bürger's; but not of death unto death. 'Sound like a distant torrent's fall.' I said the _whole_ heart of Byron was in this passage. First its compassion, then its indignation, and the third element, not yet examined, that love of the beauty of this world in which the three--unholy--children, of its Fiery Furnace were like to each other; but Byron the widest-hearted. Scott and Burns love Scotland more than Nature itself: for Burns the moon must rise over Cumnock Hills,--for Scott, the Rymer's glen divide the Eildons; but, for Byron, Loch-na-Gar _with Ida_, looks o'er Troy, and the soft murmurs of the Dee and the Bruar change into voices of the dead on distant Marathon. Yet take the parallel from Scott, by a field of homelier rest:-- 'And silence aids--though the steep hills Send to the lake a thousand rills; In summer tide, so soft they weep, The sound but lulls the ear asleep; Your horse's hoof-tread sounds too rude, So stilly is the solitude. Naught living meets the eye or ear, But well I ween the dead are near; For though, in feudal strife, a foe Hath laid our Lady's Chapel low, Yet still beneath the hallowed soil, The peasant rests him from his toil, And, dying, bids his bones be laid Where erst his simple fathers prayed.' And last take the same note of sorrow--with Burns's finger on the fall of it: 'Mourn, ilka grove the cushat kens, Ye hazly shaws and briery dens, Ye burnies, wimplin' down your glens Wi' toddlin' din, Or foamin' strang wi' hasty stens Frae lin to lin.' As you read, one after another, these fragments of chant by the great masters, does not a sense come upon you of some element in their passion, no less than in their sound, different, specifically, from that of 'Parching summer hath no warrant'? Is it more profane, think you--or more tender--nay, perhaps, in the core of it, more true? For instance, when we are told that 'Wharfe, as he moved along, To matins joined a mournful voice,' is this disposition of the river's mind to pensive psalmody quite logically accounted for by the previous statement (itself by no means rhythmically dulcet,) that 'The boy is in the arms of Wharfe, And strangled by a merciless force'? Or, when we are led into the improving reflection, 'How sweet were leisure, could it yield no more Then 'mid this wave-washed churchyard to recline, From pastoral graves extracting thoughts divine!' --is the divinity of the extract assured to us by its being made at leisure, and in a reclining attitude--as compared with the meditations of otherwise active men, in an erect one? Or are we perchance, many of us, still erring somewhat in our notions alike of Divinity and Humanity,--poetical extraction, and moral position? On the chance of its being so, might I ask hearing for just a few words more of the school of Belial? Their occasion, it must be confessed, is a quite unjustifiable one. Some very wicked people--mutineers, in fact--have retired, misanthropically, into an unfrequented part of the country, and there find themselves safe, indeed, but extremely thirsty. Whereupon Byron thus gives them to drink: 'A little stream came tumbling from the height And straggling into ocean as it might. Its bounding crystal frolicked in the ray And gushed from cliff to crag with saltless spray, Close on the wild wide ocean,--yet as pure And fresh as Innocence; and more secure. Its silver torrent glittered o'er the deep As the shy chamois' eye o'erlooks the steep, While, far below, the vast and sullen swell Of ocean's Alpine azure rose and fell.'[189] Now, I beg, with such authority as an old workman may take concerning his trade, having also looked at a waterfall or two in my time, and not unfrequently at a wave, to assure the reader that here _is_ entirely first-rate literary work. Though Lucifer himself had written it, the thing is itself good, and not only so, but unsurpassably good, the closing line being probably the best concerning the sea yet written by the race of the sea-kings. But Lucifer himself _could_ not have written it; neither any servant of Lucifer. I do not doubt but that most readers were surprised at my saying, in the close of my first paper, that Byron's 'style' depended in any wise on his views respecting the Ten Commandments. That so all-important a thing as 'style' should depend in the least upon so ridiculous a thing as moral sense: or that Allegra's father, watching her drive by in Count G.'s coach and six, had any remnant of so ridiculous a thing to guide,--or check,--his poetical passion, may alike seem more than questionable to the liberal and chaste philosophy of the existing British public. But, first of all, putting the question of who writes, or speaks, aside, do you, good reader, _know_ good 'style' when you get it? Can you say, of half-a-dozen given lines taken anywhere out of a novel, or poem, or play, That is good, essentially, in style, or bad, essentially? and can you say why such half-dozen lines are good, or bad? I imagine that in most cases, the reply would be given with hesitation, yet if you will give me a little patience, and take some accurate pains, I can show you the main tests of style in the space of a couple of pages. I take two examples of absolutely perfect, and in manner highest, _i. e._ kingly, and heroic, style: the first example in expression of anger, the second of love. (1) 'We are glad the Dauphin is so pleasant with us, His present, and your pains, we thank you for. When we have match'd our rackets to these balls, We will in France, by God's grace, play a set, Shall strike his father's crown into the hazard.' (2) 'My gracious Silence, hail! Would'st thou have laughed, had I come coffin'd home That weep'st to see me triumph? Ah, my dear, Such eyes the widows in Corioli wear, And mothers that lack sons.' Let us note, point by point, the conditions of greatness common to both these passages, so opposite in temper. A. Absolute command over all passion, however intense; this the first-of-first conditions, (see the King's own sentence just before, 'We are no tyrant, but a Christian King, Unto _whose grace_ our passion is as subject As are our wretches fettered in our prisons'); and with this self-command, the supremely surveying grasp of every thought that is to be uttered, before its utterance; so that each may come in its exact place, time, and connection. The slightest hurry, the misplacing of a word, or the unnecessary accent on a syllable, would destroy the 'style' in an instant. B. Choice of the fewest and simplest words that can be found in the compass of the language, to express the thing meant: these few words being also arranged in the most straightforward and intelligible way; allowing inversion only when the subject can be made primary without obscurity; thus, 'his present, and your pains, we thank you for' is better than 'we thank you for his present and your pains,' because the Dauphin's gift is by courtesy put before the Ambassador's pains; but 'when to these balls our rackets we have matched' would have spoiled the style in a moment, because--I was going to have said, ball and racket are of equal rank, and therefore only the natural order proper; but also here the natural order is the desired one, the English racket to have precedence of the French ball. In the fourth line the 'in France' comes first, as announcing the most important resolution of action; the 'by God's grace' next, as the only condition rendering resolution possible; the detail of issue follows with the strictest limit in the final word. The King does not say 'danger,' far less 'dishonour,' but 'hazard' only; of _that_ he is, humanly speaking, sure. C. Perfectly emphatic and clear utterance of the chosen words; slowly in the degree of their importance, with omission however of every word not absolutely required; and natural use of the familiar contractions of final dissyllable. Thus, 'play a set shall strike' is better than 'play a set _that_ shall strike,' and 'match'd' is kingly short--no necessity could have excused 'matched' instead. On the contrary, the three first words, 'We are glad,' would have been spoken by the king more slowly and fully than any other syllables in the whole passage, first pronouncing the kingly 'we' at its proudest, and then the 'are' as a continuous state, and then the 'glad,' as the exact contrary of what the ambassadors expected him to be.[190] D. Absolute spontaneity in doing all this, easily and necessarily as the heart beats. The king _cannot_ speak otherwise than he does--nor the hero. The words not merely come to them, but are compelled to them. Even lisping numbers 'come,' but mighty numbers are ordained, and inspired. E. Melody in the words, changeable with their passion fitted to it exactly and the utmost of which the language is capable--the melody in prose being Eolian and variable--in verse, nobler by submitting itself to stricter law. I will enlarge upon this point presently. F. Utmost spiritual contents in the words; so that each carries not only its instant meaning, but a cloudy companionship of higher or darker meaning according to the passion--nearly always indicated by metaphor: 'play a set'--sometimes by abstraction--(thus in the second passage 'silence' for silent one) sometimes by description instead of direct epithet ('coffined' for dead) but always indicative of there being more in the speaker's mind than he has said, or than he can say, full though his saying be. On the quantity of this attendant fulness depends the majesty of style; that is to say, virtually, on the quantity of contained thought in briefest words, such thought being primarily loving and true: and this the sum of all--that nothing can be well said, but with truth, nor beautifully, but by love. These are the essential conditions of noble speech in prose and verse alike, but the adoption of the form of verse, and especially rymed verse, means the addition to all these qualities of one more; of music, that is to say, not Eolian merely, but Apolline; a construction or architecture of words fitted and befitting, under external laws of time and harmony. When Byron says 'rhyme is of the rude,'[191] he means that Burns needs it,--while Henry the Fifth does not, nor Plato, nor Isaiah--yet in this need of it by the simple, it becomes all the more religious: and thus the loveliest pieces of Christian language are all in ryme--the best of Dante, Chaucer, Douglas, Shakespeare, Spenser, and Sidney. I am not now able to keep abreast with the tide of modern scholarship; (nor, to say the truth, do I make the effort, the first edge of its waves being mostly muddy, and apt to make a shallow sweep of the shore refuse:) so that I have no better book of reference by me than the confused essay on the antiquity of ryme at the end of Turner's _Anglo-Saxons_. I cannot however conceive a more interesting piece of work, if not yet done, than the collection of sifted earliest fragments known of rymed song in European languages. Of Eastern I know nothing; but, this side Hellespont, the substance of the matter is all given in King Canute's impromptu 'Gaily (or is it sweetly?--I forget which, and it's no matter) sang the monks of Ely, As Knut the king came sailing by;' much to be noted by any who make their religion lugubrious, and their Sunday the eclipse of the week. And observe further, that if Milton does not ryme, it is because his faculty of Song was concerning Loss, chiefly; and he has little more than faculty of Croak, concerning Gain; while Dante, though modern readers never go further with him than into the Pit, is stayed only by Casella in the ascent to the Rose of Heaven. So, Gibbon can write in _his_ manner the Fall of Rome; but Virgil, in _his_ manner, the rise of it; and finally Douglas, in _his_ manner, bursts into such rymed passion of praise both of Rome and Virgil, as befits a Christian Bishop, and a good subject of the Holy See. 'Master of Masters--sweet source, and springing well, Wide where over all ringes thy heavenly bell; * * * * Why should I then with dull forehead and vain, With rude ingene, and barane, emptive brain, With bad harsh speech, and lewit barbare tongue Presume to write, where thy sweet bell is rung, Or counterfeit thy precious wordis dear? Na, na--not so; but kneel when I them hear. But farther more--and lower to descend Forgive me, Virgil, if I thee offend Pardon thy scolar, suffer him to ryme Since _thou_ wast but ane mortal man sometime.' 'Before honour is humility.' Does not clearer light come for you on that law after reading these nobly pious words? And note you _whose_ humility? How is it that the sound of the bell comes so instinctively into his chiming verse? This gentle singer is the son of--Archibald Bell-the-Cat! And now perhaps you can read with right sympathy the scene in _Marmion_ between his father and King James. 'His hand the monarch sudden took-- Now, by the Bruce's soul, Angus, my hasty speech forgive, For sure as doth his spirit live As he said of the Douglas old I well may say of you,-- That never king did subject hold, In speech more free, in war more bold, More tender and more true: And while the king his hand did strain The old man's tears fell down like rain.' I believe the most infidel of scholastic readers can scarcely but perceive the relation between the sweetness, simplicity, and melody of expression in these passages, and the gentleness of the passions they express, while men who are not scholastic, and yet are true scholars, will recognise further in them that the simplicity of the educated is lovelier than the simplicity of the rude. Hear next a piece of Spenser's teaching how rudeness itself may become more beautiful even by its mistakes, if the mistakes are made lovingly. 'Ye shepherds' daughters that dwell on the green, Hye you there apace; Let none come there but that virgins been To adorn her grace: And when you come, whereas she in place, See that your rudeness do not you disgrace; Bind your fillets fast, And gird in your waste, For more fineness, with a taudry lace.' 'Bring hither the pink and purple cullumbine With gylliflowers; Bring coronatiöns, and sops in wine, Worn of paramours; Strow me the ground with daffadowndillies And cowslips, and kingcups, and loved lilies; The pretty paunce And the chevisaunce Shall match with the fair flowre-delice.'[192] Two short pieces more only of master song, and we have enough to test all by. (2) 'No more, no more, since thou art dead, Shall we e'er bring coy brides to bed, No more, at yearly festivals, We cowslip balls Or chains of columbines shall make, For this or that occasion's sake. No, no! our maiden pleasures be Wrapt in thy winding-sheet with thee.'[193] (3) 'Death is now the phoenix rest, And the turtle's loyal breast To eternity doth rest. Truth may seem, but cannot be; Beauty brag, but 'tis not she: Truth and beauty buried be.'[194] If now, with the echo of these perfect verses in your mind, you turn to Byron, and glance over, or recall to memory, enough of him to give means of exact comparison, you will, or should, recognise these following kinds of mischief in him. First, if any one offends him--as for instance Mr. Southey, or Lord Elgin--'his manners have not that repose that marks the caste,' &c. _This_ defect in his Lordship's style, being myself scrupulously and even painfully reserved in the use of vituperative language, I need not say how deeply I deplore.[195] Secondly. In the best and most violet-bedded bits of his work there is yet, as compared with Elizabethan and earlier verse, a strange taint; and indefinable--evening flavour of Covent Garden, as it were;--not to say, escape of gas in the Strand. That is simply what it proclaims itself--London air. If he had lived all his life in Green-head Ghyll, things would of course have been different. But it was his fate to come to town--modern town--like Michael's son; and modern London (and Venice) are answerable for the state of their drains, not Byron. Thirdly. His melancholy is without any relief whatsoever; his jest sadder than his earnest; while, in Elizabethan work, all lament is full of hope, and all pain of balsam. Of this evil he has himself told you the cause in a single line, prophetic of all things since and now. 'Where _he_ gazed, a gloom pervaded space.'[196] So that, for instance, while Mr. Wordsworth, on a visit to town, being an exemplary early riser, could walk, felicitous, on Westminster Bridge, remarking how the city now did like a garment wear the beauty of the morning; Byron, rising somewhat later, contemplated only the garment which the beauty of the morning had by that time received for wear from the city: and again, while Mr. Wordsworth, in irrepressible religious rapture, calls God to witness that the houses seem asleep, Byron, lame demon as he was, flying smoke-drifted, unroofs the houses at a glance, and sees what the mighty cockney heart of them contains in the still lying of it, and will stir up to purpose in the waking business of it, 'The sordor of civilisation, mixed With all the passions which Man's fall hath fixed.'[197] Fourthly, with this steadiness of bitter melancholy, there is joined a sense of the material beauty, both of inanimate nature, the lower animals, and human beings, which in the iridescence, colour-depth, and morbid (I use the word deliberately) mystery and softness of it,--with other qualities indescribable by any single words, and only to be analysed by extreme care,--is found, to the full, only in five men that I know of in modern times; namely Rousseau, Shelley, Byron, Turner, and myself,--differing totally and throughout the entire group of us, from the delight in clear-struck beauty of Angelico and the Trecentisti; and separated, much more singularly, from the cheerful joys of Chaucer, Shakespeare, and Scott, by its unaccountable affection for 'Rokkes blak' and other forms of terror and power, such as those of the ice-oceans, which to Shakespeare were only Alpine rheum; and the Via Malas and Diabolic Bridges which Dante would have condemned none but lost souls to climb, or cross;--all this love of impending mountains, coiled thunder-clouds, and dangerous sea, being joined in us with a sulky, almost ferine, love of retreat in valleys of Charmettes, gulphs of Spezzia, ravines of Olympus, low lodgings in Chelsea, and close brushwood at Coniston. And, lastly, also in the whole group of us, glows volcanic instinct of Astræan justice returning not to, but up out of, the earth, which will not at all suffer us to rest any more in Pope's serene 'whatever is, is right;' but holds, on the contrary, profound conviction that about ninety-nine hundredths of whatever at present is, is wrong: conviction making four of us, according to our several manners, leaders of revolution for the poor, and declarers of political doctrine monstrous to the ears of mercenary mankind; and driving the fifth, less sanguine, into mere painted-melody of lament over the fallacy of Hope and the implacableness of Fate. In Byron the indignation, the sorrow, and the effort are joined to the death: and they are the parts of his nature (as of mine also in its feebler terms), which the selfishly comfortable public have, literally, no conception of whatever; and from which the piously sentimental public, offering up daily the pure emotion of divine tranquillity, shrink with anathema not unembittered by alarm. Concerning which matters I hope to speak further and with more precise illustration in my next paper; but, seeing that this present one has been hitherto somewhat sombre, and perhaps, to gentle readers, not a little discomposing, I will conclude it with a piece of light biographic study, necessary to my plan, and as conveniently admissible in this place as afterwards;--namely, the account of the manner in which Scott--whom we shall always find, as aforesaid, to be in salient and palpable elements of character, of the World, worldly, as Burns is of the Flesh, fleshly, and Byron of the Deuce, damnable,--spent his Sunday. As usual, from Lockhart's farrago we cannot find out the first thing we want to know,--whether Scott worked after his week-day custom, on the Sunday morning. But, I gather, not; at all events his household and his cattle rested (L. iii. 108). I imagine he walked out into his woods, or read quietly in his study. Immediately after breakfast, whoever was in the house, 'Ladies and gentlemen, I shall read prayers at eleven, when I expect you all to attend' (vii. 306). Question of college and other externally unanimous prayers settled for us very briefly: 'if you have no faith, have at least manners.' He read the Church of England service, lessons and all, the latter, if interesting, eloquently (_ibid._). After the service, one of Jeremy Taylor's sermons (vi. 188). After the sermon, if the weather was fine, walk with his family, dogs included and guests, to _cold_ picnic (iii. 109), followed by short extempore biblical novelettes; for he had his Bible, the Old Testament especially, by heart, it having been his mother's last gift to him (vi. 174). These lessons to his children in Bible history were always given, whether there was picnic or not. For the rest of the afternoon he took his pleasure in the woods with Tom Purdie, who also always appeared at his master's elbow on Sunday after dinner was over, and drank long life to the laird and his lady and all the good company, in a quaigh of whiskey or a tumbler of wine, according to his fancy (vi. 195). Whatever might happen on the other evenings of the week, Scott always dined at home on Sunday; and with old friends: never, unless inevitably, receiving any person with whom he stood on ceremony (v. 335). He came into the room rubbing his hands like a boy arriving at home for the holidays, his Peppers and Mustards gambolling about him, 'and even the stately Maida grinning and wagging his tail with sympathy.' For the usquebaugh of the less honoured week-days, at the Sunday board he circulated the champagne briskly during dinner, and considered a pint of claret each man's fair share afterwards (v. 339). In the evening, music being to the Scottish worldly mind indecorous, he read aloud some favourite author, for the amusement or edification of his little circle. Shakespeare it might be, or Dryden,--Johnson, or Joanna Baillie,--Crabbe, or Wordsworth. But in those days 'Byron was pouring out his spirit fresh and full, and if a new piece from _his_ hand had appeared, it was _sure to be read by Scott the Sunday evening afterwards_; and that with such delighted emphasis as showed how completely the elder bard had kept up his enthusiasm for poetry at pitch of youth, and all his admiration of genius, free, pure, and unstained by the least drop of literary jealousy' (v. 341). With such necessary and easily imaginable varieties as chanced in having Dandy Dinmont or Captain Brown for guests at Abbotsford, or Colonel Mannering, Counsellor Pleydell, and Dr. Robertson in Castle Street, such was Scott's habitual Sabbath: a day, we perceive, of eating the fat, (_dinner_, presumably not cold, being a work of necessity and mercy--thou also, even thou, Saint Thomas of Trumbull, hast thine!) and drinking the sweet, abundant in the manner of Mr. Southey's cataract of Lodore,--'Here it comes, sparkling.' A day bestrewn with coronatiöns and sops in wine; deep in libations to good hope and fond memory; a day of rest to beast, and mirth to man, (as also to sympathetic beasts that can be merry,) and concluding itself in an Orphic hour of delight, signifying peace on Tweedside, and goodwill to men, there or far away;--always excepting the French, and Boney. 'Yes, and see what it all came to in the end.' Not so, dark-virulent Minos-Mucklewrath; the end came of quite other things: of _these_, came such length of days and peace as Scott had in his Fatherland, and such immortality as he has in all lands. Nathless, firm, though deeply courteous, rebuke, for his sometimes overmuch light-mindedness, was administered to him by the more grave and thoughtful Byron. For the Lord Abbot of Newstead knew his Bible by heart as well as Scott, though it had never been given him by his mother as her dearest possession. Knew it, and, what was more, had thought of it, and sought in it what Scott had never cared to think, nor been fain to seek. And loving Scott well, and always doing him every possible pleasure in the way he sees to be most agreeable to him--as, for instance, remembering with precision, and writing down the very next morning, every blessed word that the Prince Regent had been pleased to say of him before courtly audience,--he yet conceived that such cheap ryming as his own _Bride of Abydos_, for instance, which he had written from beginning to end in four days, or even the travelling reflections of Harold and Juan on men and women, were scarcely steady enough Sunday afternoon's reading for a patriarch-Merlin like Scott. So he dedicates to him a work of a truly religious tendency, on which for his own part he has done his best,--the drama of _Cain_. Of which dedication the virtual significance to Sir Walter might be translated thus. Dearest and last of Border soothsayers, thou hast indeed told us of Black Dwarfs, and of White Maidens, also of Grey Friars, and Green Fairies; also of sacred hollies by the well, and haunted crooks in the glen. But of the bushes that the black dogs rend in the woods of Phlegethon; and of the crooks in the glen, and the bickerings of the burnie where ghosts meet the mightiest of us; and of the black misanthrope, who is by no means yet a dwarfed one, and concerning whom wiser creatures than Hobbie Elliot may tremblingly ask 'Gude guide us, what's yon?' hast thou yet known, seeing that thou hast yet told, _nothing_. Scott may perhaps have his answer. We shall in good time hear. JOHN RUSKIN FOOTNOTES: [154] Nell, in the _Old Curiosity Shop_, was simply killed for the market, as a butcher kills a lamb (see Forster's _Life_), and Paul was written under the same conditions of illness which affected Scott--a part of the ominous palsies, grasping alike author and subject, both in _Dombey_ and _Little Dorrit_. [155] Chourineur' not striking with dagger-point, but ripping with knife-edge. Yet I do him, and La Louve, injustice in classing them with the two others; they are put together only as parts in the same phantasm. Compare with La Louve, the strength of wild virtue in the 'Louvécienne' (Lucienne) of Gaboriau--she, province-born and bred; and opposed to Parisian civilisation in the character of her sempstress friend. 'De ce Paris, où elle était née, elle savait tout--elle connaissait tout. Rien ne l'étonnait, nul ne l'intimidait. Sa science des détails matériels de l'existence était inconcevable. Impossible de la duper!--Eh bien! cette fille si laborieuse et si économe n'avait même pas la plus vague notion des sentiments qui sont l'honneur de la femme. Je n'avais pas idée d'une si complète absence de sens moral; d'une si inconsciente dépravation, d'une impudence si effrontément naïve.'--_L'Argent des autres_, vol. i. p. 358. [156] The reader who cares to seek it may easily find medical evidence of the physical effects of certain states of brain disease in producing especially images of truncated and Hermes-like deformity, complicated with grossness. Horace, in the _Epodes_, scoffs at it, but not without horror. Luca Signorelli and Raphael in their arabesques are deeply struck by it: Durer, defying and playing with it alternately, is almost beaten down again and again in the distorted faces, hewing halberts, and suspended satyrs of his arabesques round the polyglot Lord's Prayer; it takes entire possession of Balzac in the _Contes Drolatiques_; it struck Scott in the earliest days of his childish 'visions' intensified by the axe-stroke murder of his grand aunt; L. i. 142, and see close of this note. It chose for him the subject of the _Heart of Midlothian_, and produced afterwards all the recurrent ideas of executions, tainting _Nigel_, almost spoiling _Quentin Durward_--utterly the _Fair Maid of Perth_: and culminating in _Bizarro_, L. x. 149. It suggested all the deaths by falling, or sinking, as in delirious sleep--Kennedy, Eveline Neville (nearly repeated in Clara Mowbray), Amy Robsart, the Master of Ravenswood in the quicksand, Morris, and Corporal Grace-be-here--compare the dream of Gride, in _Nicholas Nickleby_, and Dickens's own last words, _on the ground_, (so also, in my own inflammation of the brain, two years ago, I dreamed that I fell through the earth and came out on the other side). In its grotesque and distorting power, it produced all the figures of the Lay Goblin, Pacolet, Flibbertigibbet, Cockledemoy, Geoffrey Hudson, Fenella, and Nectabanus; in Dickens it in like manner gives Quilp, Krook, Smike, Smallweed, Miss Mowcher, and the dwarfs and wax-work of Nell's caravan; and runs entirely wild in _Barnaby Rudge_, where, with a _corps de drame_ composed of one idiot, two madmen, a gentleman fool who is also a villain, a shop-boy fool who is also a blackguard, a hangman, a shrivelled virago, and a doll in ribands--carrying this company through riot and fire, till he hangs the hangman, one of the madmen, his mother, and the idiot, runs the gentleman-fool through in a bloody duel, and burns and crushes the shop-boy fool into shapelessness, he cannot yet be content without shooting the spare lover's leg off, and marrying him to the doll in a wooden one; the shapeless shop-boy being finally also married in _two_ wooden ones. It is this mutilation, observe, which is the very sign manual of the plague; joined, in the artistic forms of it, with a love of thorniness--(in their mystic root, the truncation of the limbless serpent and the spines of the dragon's wing. Compare _Modern Painters_, vol. iv., 'Chapter on the Mountain Gloom,' s. 19); and in _all_ forms of it, with petrifaction or loss of power by cold in the blood, whence the last Darwinian process of the witches' charm--'cool it with a baboon's _blood_, _then_ the charm is firm and good.' The two frescoes in the colossal handbills which have lately decorated the streets of London (the baboon with the mirror, and the Maskelyne and Cooke decapitation) are the final English forms of Raphael's arabesque under this influence; and it is well worth while to get the number for the week ending April 3, 1880, of _Young Folks_--'A magazine of instructive and entertaining literature for boys and girls of all ages,' containing 'A Sequel to Desdichado' (the modern development of Ivanhoe), in which a quite monumental example of the kind of art in question will be found as a leading illustration of this characteristic sentence, "See, good Cerberus," said Sir Rupert, "_my hand has been struck off. You must make me a hand of iron, one with springs in it, so that I can make it grasp a dagger._" The text is also, as it professes to be, instructive; being the ultimate degeneration of what I have above called the 'folly' of _Ivanhoe_; for folly begets folly down, and down; and whatever Scott and Turner did wrong has thousands of imitators--their wisdom none will so much as hear, how much less follow! In both of the Masters, it is always to be remembered that the evil and good are alike conditions of literal _vision_: and therefore also, inseparably connected with the state of the health. I believe the first elements of all Scott's errors were in the milk of his consumptive nurse, which all but killed him as an infant, L. i. 19--and was without doubt the cause of the teething fever that ended in his lameness (L. i. 20). Then came (if the reader cares to know what I mean by Fors, let him read the page carefully) the fearful accidents to his only sister, and her death, L. i. 17; then the madness of his nurse, who planned his own murder (21), then the stories continually told him of the executions at Carlisle (24), his aunt's husband having seen them; issuing, he himself scarcely knows how, in the unaccountable terror that came upon him at the sight of statuary, 31--especially Jacob's ladder; then the murder of Mrs. Swinton, and finally the nearly fatal bursting of the blood vessel at Kelso, with the succeeding nervous illness, 65-67--solaced, while he was being 'bled and blistered till he had scarcely a pulse left,' by that history of the Knights of Malta--fondly dwelt on and realised by actual modelling of their fortress, which returned to his mind for the theme of its last effort in passing away. [157] 'Se dit par dénigrement, d'un chrétien qui ne croit pas les dogmes de sa religion.'--Fleming, vol. ii. p. 659. [158] 'A son nom,' properly. The sentence is one of Victor Cherbuliez's, in _Prosper Randoce_, which is full of other valuable ones. See the old nurse's 'ici bas les choses vont de travers, comme un chien qui va à vêpres, p. 93; and compare Prosper's treasures, 'la petite Vénus, et le petit Christ d'ivoire,' p. 121; also Madame Brehanne's request for the divertissement of 'quelque belle batterie à coups de couteau' with Didier's answer. 'Hélas! madame, vous jouez de malheur, ici dans la Drôme, l'on se massacre aussi peu que possible,' p. 33. [159] Edgeworth's _Tales_ (Hunter, 1827), 'Harrington and Ormond,' vol. iii. p. 260. [160] Alice of Salisbury, Alice Lee, Alice Bridgnorth. [161] Scott's father was habitually ascetic. 'I have heard his son tell that it was common with him, if any one observed that the soup was good, to taste it again, and say, "Yes--it is too good, bairns," and dash a tumbler of cold water into his plate.'--Lockhart's _Life_ (Black, Edinburgh, 1869), vol. i. p. 312. In other places I refer to this book in the simple form of 'L.' [162] A young lady sang to me, just before I copied out this page for press, a Miss Somebody's 'great song,' 'Live, and Love, and Die.' Had it been written for nothing better than silkworms, it should at least have added--Spin. [163] See passage of introduction to _Ivanhoe_, wisely quoted in L. vi. 106. [164] See below, note, p. 25, on the conclusion of _Woodstock_. [165] L. iv. 177. [166] L. vi. 67. [167] 'One other such novel, and there's an end; but who can last for ever? who ever lasted so long?'--Sydney Smith (of the _Pirate_) to Jeffrey, December 30, 1821. (_Letters_, vol. ii. p. 223.) [168] L. vi. p. 188. Compare the description of Fairy Dean, vii. 192. [169] All, alas! were now in a great measure so written. _Ivanhoe_, _The Monastery_, _The Abbot_ and _Kenilworth_ were all published between December 1819 and January 1821, Constable & Co. giving five thousand guineas for the remaining copyright of them, Scott clearing ten thousand before the bargain was completed; and before the _Fortunes of Nigel_ issued from the press Scott had exchanged instruments and received his bookseller's bills for no less than four 'works of fiction,' not one of them otherwise described in the deeds of agreement, to be produced in unbroken succession, _each of them to fill up at least three volumes, but with proper saving clauses as to increase of copy money in case any of them should run to four_; and within two years all this anticipation had been wiped off by _Peveril of the Peak_, _Quentin Durward_, _St. Ronan's Well_, and _Redgauntlet_. [170] _Woodstock_ was finished 26th March 1826. He knew then of his ruin; and wrote in bitterness, but not in weakness. The closing pages are the most beautiful of the book. But a month afterwards Lady Scott died; and he never wrote glad word more. [171] Compare Mr. Spurgeon's not unfrequent orations on the same subject. [172] There are three definite and intentional portraits of himself, in the novels, each giving a separate part of himself: Mr. Oldbuck, Frank Osbaldistone, and Alan Fairford. [173] Andrew knows Latin, and might have coined the word in his conceit; but, writing to a kind friend in Glasgow, I find the brook was called 'Molyndona' even before the building of the Sub-dean Mill in 1446. See also account of the locality in Mr. George's admirable volume, _Old Glasgow_, pp. 129, 149, &c. The Protestantism of Glasgow, since throwing that powder of saints into her brook Kidron, has presented it with other pious offerings; and my friend goes on to say that the brook, once famed for the purity of its waters (much used for bleaching), 'has for nearly a hundred years been a crawling stream of loathsomeness. It is now bricked over, and a carriage way made on the top of it; underneath the foul mess still passes through the heart of the city, till it falls into the Clyde close to the harbour.' [174] The following fragments out of the letters in my own possession, written by Scott to the builder of Abbotsford, as the outer decorations of the house were in process of completion, will show how accurately Scott had pictured himself in Monkbarns. 'Abbotsford: April 21, 1817. 'Dear Sir,--Nothing can be more obliging than your attention to the old stones. You have been as true as the sundial itself.' [The sundial had just been erected.] 'Of the two I would prefer the larger one, as it is to be in front of a parapet quite in the old taste. But in case of accidents it will be safest in your custody till I come to town again on the 12th of May. Your former favours (which were weighty as acceptable) have come safely out here, and will be disposed of with great effect.' 'Abbotsford: July 30. 'I fancy the Tolbooth still keeps its feet, but, as it must soon descend, I hope you will remember me. I have an important use for the niche above the door; and though many a man has got a niche _in_ the Tolbooth by building, I believe I am the first that ever got a niche out of it on such an occasion. For which I have to thank your kindness, and to remain very much your obliged humble servant, 'WALTER SCOTT.' 'August 16. 'My dear Sir,--I trouble you with this [_sic_] few lines to thank you for the very accurate drawings and measurements of the Tolbooth door, and for your kind promise to attend to my interest and that of Abbotsford in the matter of the Thistle and Fleur de Lis. Most of our scutcheons are now mounted, and look very well, as the house is something after the model of an old hall (not a castle), where such things are well in character.' [Alas--Sir Walter, Sir Walter!] 'I intend the old lion to predominate over a well which the children have christened the Fountain of the Lions. His present den, however, continues to be the hall at Castle Street.' 'September 5. 'Dear Sir,--I am greatly obliged to you for securing the stone. I am not sure that I will put up the gate quite in the old form, but I would like to secure the means of doing so. The ornamental stones are now put up, and have a very happy effect. If you will have the kindness to let me know when the Tolbooth door comes down, I will send in my carts for the stones; I have an admirable situation for it. I suppose the door itself' [he means, the wooden one] 'will be kept for the new jail; if not, and not otherwise wanted, I would esteem it curious to possess it. Certainly I hope so many sore hearts will not pass through the celebrated door when in my possession as heretofore.' * * * * * 'September 8. 'I should esteem it very fortunate if I could have the door also, though I suppose it is modern, having been burned down at the time of Porteous-mob. 'I am very much obliged to the gentlemen who thought these remains of the Heart of Midlothian are not ill bestowed on their intended possessor.' [175] Henceforward, not in affectation, but for the reader's better convenience, I shall continue to spell 'Ryme' without our wrongly added _h_. [176] L. ii. 278. [177] 'Che nella mente mia _ragiona_.' Love--you observe, the highest _Reasonableness_, instead of French _ivresse_, or even Shakespearian 'mere folly'; and Beatrice as the Goddess of Wisdom in this third song of the _Convito_, to be compared with the Revolutionary Goddess of Reason; remembering of the whole poem chiefly the line:-- 'Costei penso chi che mosso l'universo.' (See Lyell's _Canzoniere_, p. 104.) [178] [Greek: hôran tês terpsios]--Plato, _Laws_, ii., Steph. 669. 'Hour' having here nearly the power of 'Fate' with added sense of being a daughter of Themis. [179] 'Gunpowder is one of the greatest inventions of modern times, _and what has given such a superiority to civilised nations over barbarous_'! (_Evenings at Home_--fifth evening.) No man can owe more than I both to Mrs. Barbauld and Miss Edgeworth; and I only wish that in the substance of what they wisely said, they had been more listened to. Nevertheless, the germs of all modern conceit and error respecting manufacture and industry, as rivals to Art and to Genius, are concentrated in '_Evenings at Home_' and '_Harry and Lucy_'--being all the while themselves works of real genius, and prophetic of things that have yet to be learned and fulfilled. See for instance the paper, 'Things by their Right Names,' following the one from which I have just quoted (The Ship), and closing the first volume of the old edition of the _Evenings_. [180] Carlyle, _French Revolution_ (Chapman, 1869), vol. ii. p. 70; conf. p. 25, and the _Ça ira_ at Arras, vol. iii. p. 276. [181] _Ibid._ iii. 26. [182] Carlyle, _French Revolution_, iii. 106, the last sentence altered in a word or two. [183] I have been greatly disappointed, in taking soundings of our most majestic mountain pools, to find them, in no case, verge on the unfathomable. [184] 'It must be put by the original, stanza for stanza, and verse for verse; and you will see what was permitted in a Catholic country and a bigoted age to Churchmen, on the score of Religion--and so tell those buffoons who accuse me of attacking the Liturgy. 'I write in the greatest haste, it being the hour of the Corso, and I must go and buffoon with the rest. My daughter Allegra is just gone with the Countess G. in Count G.'s coach and six. Our old Cardinal is dead, and the new one not appointed yet--but the masquing goes on the same.' (Letter to Murray, 355th in Moore, dated Ravenna, Feb. 7, 1828.) 'A dreadfully moral place, for you must not look at anybody's wife, except your neighbour's.' [185] See quoted _infra_ the mock, by Byron, of himself and all other modern poets, _Juan_, canto iii. stanza 86, and compare canto xiv. stanza 8. In reference of future quotations the first numeral will stand always for canto; the second for stanza; the third, if necessary, for line. [186] _Island_, ii. 16, where see context. [187] _Juan_, viii. 5; but, by your Lordship's quotation, Wordsworth says 'instrument'--not 'daughter.' Your Lordship had better have said 'Infant' and taken the Woolwich authorities to witness: only Infant would not have rymed. [188] _Juan_, viii. 3; compare 14 and 63, with all its lovely context 61--68: then 82, and afterwards slowly and with thorough attention, the Devil's speech, beginning, 'Yes, Sir, you forget' in scene 2 of _The Deformed Transformed_: then Sardanapalus's, act i. scene 2, beginning 'he is gone, and on his finger bears my signet,' and finally, the _Vision of Judgment_, stanzas 3 to 5. [189] _Island_, iii. 3, and compare, of shore surf, the 'slings its high flakes, shivered into sleet' of stanza 7. [190] A modern editor--of whom I will not use the expressions which occur to me--finding the 'we' a redundant syllable in the iambic line, prints 'we're.' It is a little thing--but I do not recollect, in the forty years of my literary experience, any piece of editor's retouch quite so base. But I don't read the new editions much; that must be allowed for. [191] _Island_, ii. 5. I was going to say, 'Look to the context.' but am fain to give it here; for the stanza, learned by heart, ought to be our school-introduction to the literature of the world. 'Such was this ditty of Tradition's days, Which to the dead a lingering fame conveys In song, where fame as yet hath left no sign Beyond the sound whose charm is half divine; Which leaves no record to the sceptic eye, But yields young history all to harmony; A boy Achilles, with the centaur's lyre In hand, to teach him to surpass his sire. For one long-cherish'd ballad's simple stave Rung from the rock, or mingled with the wave, Or from the bubbling streamlet's grassy side, Or gathering mountain echoes as they glide, Hath greater power o'er each true heart and ear, Than all the columns Conquest's minions rear; Invites, when hieroglyphics are a theme For sages' labours or the student's dream; Attracts, when History's volumes are a toil-- The first, the freshest bud of Feeling's soil. Such was this rude rhyme--rhyme is of the rude, But such inspired the Norseman's solitude, Who came and conquer'd; such, wherever rise Lands which no foes destroy or civilise, Exist; and what can our accomplish'd art Of verse do more than reach the a waken'd heart?' [192] _Shepherd's Calendar._ 'Coronatiön,' loyal-pastoral for Carnation; 'sops in wine,' jolly-pastoral for double pink; 'paunce,' thoughtless pastoral for pansy; 'chevisaunce' I don't know, (not in Gerarde); 'flowre-delice'--pronounce dellice--half made up of 'delicate' and 'delicious.' [193] Herrick, _Dirge for Jephthah's Daughter_. [194] _Passionate Pilgrim._ [195] In this point, compare the _Curse of Minerva_ with the _Tears of the Muses_. [196] 'He,'--Lucifer; (_Vision of Judgment_, 24). It is precisely because Byron was _not_ his servant, that he could see the gloom. To the Devil's true servants, their Master's presence brings both cheerfulness and prosperity;--with a delightful sense of their own wisdom and virtue; and of the 'progress' of things in general:--in smooth sea and fair weather,--and with no need either of helm touch, or oar toil: as when once one is well within the edge of Maelstrom. [197] _Island_, ii. 4; perfectly orthodox theology, you observe; no denial of the fall,--nor substitution of Bacterian birth for it. Nay, nearly Evangelical theology, in contempt for the human heart; but with deeper than Evangelical humility, acknowledging also what is sordid in its civilisation. THE ELEMENTS OF DRAWING IN THREE LETTERS TO BEGINNERS WITH ILLUSTRATIONS DRAWN BY THE AUTHOR PREFACE. It may perhaps be thought, that in prefacing a Manual of Drawing, I ought to expatiate on the reasons why drawing should be learned; but those reasons appear to me so many and so weighty, that I cannot quickly state or enforce them. With the reader's permission, as this volume is too large already, I will waive all discussion respecting the importance of the subject, and touch only on those points which may appear questionable in the method of its treatment. In the first place, the book is not calculated for the use of children under the age of twelve or fourteen. I do not think it advisable to engage a child in any but the most voluntary practice of art. If it has talent for drawing, it will be continually scrawling on what paper it can get; and should be allowed to scrawl at its own free will, due praise being given for every appearance of care, or truth, in its efforts. It should be allowed to amuse itself with cheap colours almost as soon as it has sense enough to wish for them. If it merely daubs the paper with shapeless stains, the colour-box may be taken away till it knows better: but as soon as it begins painting red coats on soldiers, striped flags to ships, etc., it should have colours at command; and, without restraining its choice of subject in that imaginative and historical art, of a military tendency, which children delight in, (generally quite as valuable, by the way, as any historical art delighted in by their elders,) it should be gently led by the parents to try to draw, in such childish fashion as may be, the things it can see and likes,--birds, or butterflies, or flowers, or fruit. In later years, the indulgence of using the colour should only be granted as a reward, after it has shown care and progress in its drawings with pencil. A limited number of good and amusing prints should always be within a boy's reach: in these days of cheap illustration he can hardly possess a volume of nursery tales without good woodcuts in it, and should be encouraged to copy what he likes best of this kind; but should be firmly restricted to a _few_ prints and to a few books. If a child has many toys, it will get tired of them and break them; if a boy has many prints he will merely dawdle and scrawl over them; it is by the limitation of the number of his possessions that his pleasure in them is perfected, and his attention concentrated. The parents need give themselves no trouble in instructing him, as far as drawing is concerned, beyond insisting upon economical and neat habits with his colours and paper, showing him the best way of holding pencil and rule, and, so far as they take notice of his work, pointing out where a line is too short or too long, or too crooked, when compared with the copy; _accuracy_ being the first and last thing they look for. If the child shows talent for inventing or grouping figures, the parents should neither check, nor praise it. They may laugh with it frankly, or show pleasure in what it has done, just as they show pleasure in seeing it well, or cheerful; but they must not praise it for being clever, any more than they would praise it for being stout. They should praise it only for what costs it self-denial, namely attention and hard work; otherwise they will make it work for vanity's sake, and always badly. The best books to put into its hands are those illustrated by George Cruikshank or by Richter. (See Appendix.) At about the age of twelve or fourteen, it is quite time enough to set youth or girl to serious work; and then this book will, I think, be useful to them; and I have good hope it may be so, likewise, to persons of more advanced age wishing to know something of the first principles of art. Yet observe, that the method of study recommended is not brought forward as absolutely the best, but only as the best which I can at present devise for an isolated student. It is very likely that farther experience in teaching may enable me to modify it with advantage in several important respects; but I am sure the main principles of it are sound, and most of the exercises as useful as they can be rendered without a master's superintendence. The method differs, however, so materially from that generally adopted by drawing-masters, that a word or two of explanation may be needed to justify what might otherwise be thought wilful eccentricity. The manuals at present published on the subject of drawing are all directed, as far as I know, to one or other of two objects. Either they propose to give the student a power of dexterous sketching with pencil or water-colour, so as to emulate (at considerable distance) the slighter work of our second-rate artists; or they propose to give him such accurate command of mathematical forms as may afterwards enable him to design rapidly and cheaply for manufactures. When drawing is taught as an accomplishment, the first is the aim usually proposed; while the second is the object kept chiefly in view at Marlborough House, and in the branch Government Schools of Design. Of the fitness of the modes of study adopted in those schools, to the end specially intended, judgment is hardly yet possible; only, it seems to me, that we are all too much in the habit of confusing art as _applied_ to manufacture, with manufacture itself. For instance, the skill by which an inventive workman designs and moulds a beautiful cup, is skill of true art; but the skill by which that cup is copied and afterwards multiplied a thousandfold, is skill of manufacture: and the faculties which enable one workman to design and elaborate his original piece, are not to be developed by the same system of instruction as those which enable another to produce a maximum number of approximate copies of it in a given time. Farther: it is surely inexpedient that any reference to purposes of manufacture should interfere with the education of the artist himself. Try first to manufacture a Raphael; then let Raphael direct your manufacture. He will design you a plate, or cup, or a house, or a palace, whenever you want it, and design them in the most convenient and rational way; but do not let your anxiety to reach the platter and the cup interfere with your education of the Raphael. Obtain first the best work you can, and the ablest hands, irrespective of any consideration of economy or facility of production. Then leave your trained artist to determine how far art can be popularised, or manufacture ennobled. Now, I believe that (irrespective of differences in individual temper and character) the excellence of an artist, as such, depends wholly on refinement of perception, and that it is this, mainly, which a master or a school can teach; so that while powers of invention distinguish man from man, powers of perception distinguish school from school. All great schools enforce delicacy of drawing and subtlety of sight: and the only rule which I have, as yet, found to be without exception respecting art, is that all great art is delicate. Therefore, the chief aim and bent of the following system is to obtain, first, a perfectly patient, and, to the utmost of the pupil's power, a delicate method of work, such as may ensure his seeing truly. For I am nearly convinced, that when once we see keenly enough, there is very little difficulty in drawing what we see; but, even supposing that this difficulty be still great, I believe that the sight is a more important thing than the drawing; and I would rather teach drawing that my pupils may learn to love Nature, than teach the looking at Nature that they may learn to draw. It is surely also a more important thing for young people and unprofessional students, to know how to appreciate the art of others, than to gain much power in art themselves. Now the modes of sketching ordinarily taught are inconsistent with this power of judgment. No person trained to the superficial execution of modern water-colour painting, can understand the work of Titian or Leonardo; they must for ever remain blind to the refinement of such men's pencilling, and the precision of their thinking. But, however slight a degree of manipulative power the student may reach by pursuing the mode recommended to him in these letters, I will answer for it that he cannot go once through the advised exercises without beginning to understand what masterly work means; and, by the time he has gained some proficiency in them, he will have a pleasure in looking at the painting of the great schools, and a new perception of the exquisiteness of natural scenery, such as would repay him for much more labour than I have asked him to undergo. That labour is, nevertheless, sufficiently irksome, nor is it possible that it should be otherwise, so long as the pupil works unassisted by a master. For the smooth and straight road which admits unembarrassed progress must, I fear, be dull as well as smooth; and the hedges need to be close and trim when there is no guide to warn or bring back the erring traveller. The system followed in this work will, therefore, at first, surprise somewhat sorrowfully those who are familiar with the practice of our class at the Working Men's College; for there, the pupil, having the master at his side to extricate him from such embarrassments as his first efforts may lead into, is _at once_ set to draw from a solid object, and soon finds entertainment in his efforts and interest in his difficulties. Of course the simplest object which it is possible to set before the eye is a sphere; and practically, I find a child's toy, a white leather ball, better than anything else; as the gradations on balls of plaster of Paris, which I use sometimes to try the strength of pupils who have had previous practice, are a little too delicate for a beginner to perceive. It has been objected that a circle, or the outline of a sphere, is one of the most difficult of all lines to draw. It is so; but I do not want it to be drawn. All that his study of the ball is to teach the pupil, is the way in which shade gives the appearance of projection. This he learns most satisfactorily from a sphere; because any solid form, terminated by straight lines or flat surfaces, owes some of its appearance of projection to its perspective; but in the sphere, what, without shade, was a flat circle, becomes, merely by the added shade, the image of a solid ball; and this fact is just as striking to the learner, whether his circular outline be true or false. He is, therefore, never allowed to trouble himself about it; if he makes the ball look as oval as an egg, the degree of error is simply pointed out to him, and he does better next time, and better still the next. But his mind is always fixed on the gradation of shade, and the outline left to take, in due time, care of itself. I call it outline, for the sake of immediate intelligibility,--strictly speaking, it is merely the edge of the shade; no pupil in my class being ever allowed to draw an outline, in the ordinary sense. It is pointed out to him, from the first, that Nature relieves one mass, or one tint, against another; but outlines none. The outline exercise, the second suggested in this letter, is recommended, not to enable the pupil to draw outlines, but as the only means by which, unassisted, he can test his accuracy of eye, and discipline his hand. When the master is by, errors in the form and extent of shadows can be pointed out as easily as in outline, and the handling can be gradually corrected in details of the work. But the solitary student can only find out his own mistakes by help of the traced limit, and can only test the firmness of his hand by an exercise in which nothing but firmness is required; and during which all other considerations (as of softness, complexity, &c.) are entirely excluded. Both the system adopted at the Working Men's College, and that recommended here, agree, however, in one principle, which I consider the most important and special of all that are involved in my teaching: namely, the attaching its full importance, from the first, to local colour. I believe that the endeavour to separate, in the course of instruction, the observation of light and shade from that of local colour, has always been, and must always be, destructive of the student's power of accurate sight, and that it corrupts his taste as much as it retards his progress. I will not occupy the reader's time by any discussion of the principle here, but I wish him to note it as the only distinctive one in my system, so far as it is a system. For the recommendation to the pupil to copy faithfully, and without alteration, whatever natural object he chooses to study, is serviceable, among other reasons, just because it gets rid of systematic rules altogether, and teaches people to draw, as country lads learn to ride, without saddle or stirrups; my main object being, at first, not to get my pupils to hold their reins prettily, but to "sit like a jackanapes, never off." In these written instructions, therefore, it has always been with regret that I have seen myself forced to advise anything like monotonous or formal discipline. But, to the unassisted student, such formalities are indispensable, and I am not without hope that the sense of secure advancement, and the pleasure of independent effort, may render the following out of even the more tedious exercises here proposed, possible to the solitary learner, without weariness. But if it should be otherwise, and he finds the first steps painfully irksome, I can only desire him to consider whether the acquirement of so great a power as that of pictorial expression of thought be not worth some toil; or whether it is likely, in the natural order of matters in this working world, that so great a gift should be attainable by those who will give no price for it. One task, however, of some difficulty, the student will find I have not imposed upon him: namely, learning the laws of perspective. It would be worth while to learn them, if he could do so easily; but without a master's help, and in the way perspective is at present explained in treatises, the difficulty is greater than the gain. For perspective is not of the slightest use, except in rudimentary work. You can draw the rounding line of a table in perspective, but you cannot draw the sweep of a sea bay; you can foreshorten a log of wood by it, but you cannot foreshorten an arm. Its laws are too gross and few to be applied to any subtle form; therefore, as you must learn to draw the subtle forms by the eye, certainly you may draw the simple ones. No great painters ever trouble themselves about perspective, and very few of them know its laws; they draw everything by the eye, and, naturally enough, disdain in the easy parts of their work rules which cannot help them in difficult ones. It would take about a month's labour to draw imperfectly, by laws of perspective, what any great Venetian will draw perfectly in five minutes, when he is throwing a wreath of leaves round a head, or bending the curves of a pattern in and out among the folds of drapery. It is true that when perspective was first discovered, everybody amused themselves with it; and all the great painters put fine saloons and arcades behind their madonnas, merely to show that they could draw in perspective: but even this was generally done by them only to catch the public eye, and they disdained the perspective so much, that though they took the greatest pains with the circlet of a crown, or the rim of a crystal cup, in the heart of their picture, they would twist their capitals of columns and towers of churches about in the background in the most wanton way, wherever they liked the lines to go, provided only they left just perspective enough to please the public. In modern days, I doubt if any artist among us, except David Roberts, knows so much perspective as would enable him to draw a Gothic arch to scale, at a given angle and distance. Turner, though he was professor of perspective to the Royal Academy, did not know what he professed, and never, as far as I remember, drew a single building in true perspective in his life; he drew them only with as much perspective as suited him. Prout also knew nothing of perspective, and twisted his buildings, as Turner did, into whatever shapes he liked. I do not justify this; and would recommend the student at least to treat perspective with common civility, but to pay no court to it. The best way he can learn it, by himself, is by taking a pane of glass, fixed in a frame, so that it can be set upright before the eye, at the distance at which the proposed sketch is intended to be seen. Let the eye be placed at some fixed point, opposite the middle of the pane of glass, but as high or as low as the student likes; then with a brush at the end of a stick, and a little body-colour that will adhere to the glass, the lines of the landscape may be traced on the glass, as you see them through it. When so traced they are all in true perspective. If the glass be sloped in any direction, the lines are still in true perspective, only it is perspective calculated for a sloping plane, while common perspective always supposes the plane of the picture to be vertical. It is good, in early practice, to accustom yourself to enclose your subject, before sketching it, with a light frame of wood held upright before you; it will show you what you may legitimately take into your picture, and what choice there is between a narrow foreground near you, and a wide one farther off; also, what height of tree or building you can properly take in, &c.[198] Of figure drawing, nothing is said in the following pages, because I do not think figures, as chief subjects, can be drawn to any good purpose by an amateur. As accessaries in landscape, they are just to be drawn on the same principles as anything else. Lastly: If any of the directions given subsequently to the student should be found obscure by him, or if at any stage of the recommended practice he finds himself in difficulties which I have not provided enough against, he may apply by letter to Mr. Ward, who is my under drawing-master at the Working Men's College (45 Great Ormond Street), and who will give any required assistance, on the lowest terms that can remunerate him for the occupation of his time. I have not leisure myself in general to answer letters of inquiry, however much I may desire to do so; but Mr. Ward has always the power of referring any question to me when he thinks it necessary. I have good hope, however, that enough guidance is given in this work to prevent the occurrence of any serious embarrassment; and I believe that the student who obeys its directions will find, on the whole, that the best answer of questions is perseverance; and the best drawing-masters are the woods and hills. FOOTNOTES: [198] If the student is fond of architecture, and wishes to know more of perspective than he can learn in this rough way, Mr. Runciman (of 40 Accacia Road, St. John's Wood), who was my first drawing-master, and to whom I owe many happy hours, can teach it him quickly, easily, and rightly. THE ELEMENTS OF DRAWING. LETTER I. ON FIRST PRACTICE. MY DEAR READER: Whether this book is to be of use to you or not, depends wholly on your reason for wishing to learn to draw. If you desire only to possess a graceful accomplishment, to be able to converse in a fluent manner about drawing, or to amuse yourself listlessly in listless hours, I cannot help you: but if you wish to learn drawing that you may be able to set down clearly, and usefully, records of such things as cannot be described in words, either to assist your own memory of them, or to convey distinct ideas of them to other people; if you wish to obtain quicker perceptions of the beauty of the natural world, and to preserve something like a true image of beautiful things that pass away, or which you must yourself leave; if, also, you wish to understand the minds of great painters, and to be able to appreciate their work sincerely, seeing it for yourself, and loving it, not merely taking up the thoughts of other people about it; then I _can_ help you, or, which is better, show you how to help yourself. Only you must understand, first of all, that these powers which indeed are noble and desirable, cannot be got without work. It is much easier to learn to draw well, than it is to learn to play well on any musical instrument; but you know that it takes three or four years of practice, giving three or four hours a day, to acquire even ordinary command over the keys of a piano; and you must not think that a masterly command of your pencil, and the knowledge of what may be done with it, can be acquired without painstaking, or in a very short time. The kind of drawing which is taught, or supposed to be taught, in our schools, in a term or two, perhaps at the rate of an hour's practice a week, is not drawing at all. It is only the performance of a few dexterous (not always even that) evolutions on paper with a black-lead pencil; profitless alike to performer and beholder, unless as a matter of vanity, and that the smallest possible vanity. If any young person, after being taught what is, in polite circles, called "drawing," will try to copy the commonest piece of real _work_--suppose a lithograph on the title-page of a new opera air, or a woodcut in the cheapest illustrated newspaper of the day--they will find themselves entirely beaten. And yet that common lithograph was drawn with coarse chalk, much more difficult to manage than the pencil of which an accomplished young lady is supposed to have command; and that woodcut was drawn in urgent haste, and half spoiled in the cutting afterwards; and both were done by people whom nobody thinks of as artists, or praises for their power; both were done for daily bread, with no more artist's pride than any simple handicraftsmen feel in the work they live by. Do not, therefore, think that you can learn drawing, any more than a new language, without some hard and disagreeable labour. But do not, on the other hand, if you are ready and willing to pay this price, fear that you may be unable to get on for want of special talent. It is indeed true that the persons who have peculiar talent for art, draw instinctively and get on almost without teaching; though never without toil. It is true, also, that of inferior talent for drawing there are many degrees; it will take one person a much longer time than another to attain the same results, and the results thus painfully attained are never quite so satisfactory as those got with greater ease when the faculties are naturally adapted to the study. But I have never yet, in the experiments I have made, met with a person who could not learn to draw at all; and, in general, there is a satisfactory and available power in every one to learn drawing if he wishes, just as nearly all persons have the power of learning French, Latin, or arithmetic, in a decent and useful degree, if their lot in life requires them to possess such knowledge. Supposing then that you are ready to take a certain amount of pains, and to bear a little irksomeness and a few disappointments bravely, I can promise you that an hour's practice a day for six months, or an hour's practice every other day for twelve months, or, disposed in whatever way you find convenient, some hundred and fifty hours' practice, will give you sufficient power of drawing faithfully whatever you want to draw, and a good judgment, up to a certain point, of other people's work: of which hours, if you have one to spare at present, we may as well begin at once. EXERCISE I. Everything that you can see, in the world around you, presents itself to your eyes only as an arrangement of patches of different colours variously shaded.[199] Some of these patches of colour have an appearance of lines or texture within them, as a piece of cloth or silk has of threads, or an animal's skin shows texture of hairs; but whether this be the case or not, the first broad aspect of the thing is that of a patch of some definite colour; and the first thing to be learned is, how to produce extents of smooth colour, without texture. This can only be done properly with a brush; but a brush, being soft at the point, causes so much uncertainty in the touch of an unpractised hand, that it is hardly possible to learn to draw first with it, and it is better to take, in early practice, some instrument with a hard and fine point, both that we may give some support to the hand, and that by working over the subject with so delicate a point, the attention may be properly directed to all the most minute parts of it. Even the best artists need occasionally to study subjects with a pointed instrument, in order thus to discipline their attention: and a beginner must be content to do so for a considerable period. Also, observe that before we trouble ourselves about differences of colour, we must be able to lay on _one_ colour properly, in whatever gradations of depth and whatever shapes we want. We will try, therefore, first to lay on tints or patches of _grey_, of whatever depth we want, with a pointed instrument. Take any finely-pointed steel pen (one of Gillott's lithographic crow-quills is best), and a piece of quite smooth, but not shining, note-paper, cream-laid, and get some ink that has stood already some time in the inkstand, so as to be quite black, and as thick as it can be without clogging the pen. Take a rule, and draw four straight lines, so as to enclose a square or nearly a square, about as large as _a_, Fig. 1. I say nearly a square, because it does not in the least matter whether it is quite square or not, the object being merely to get a space enclosed by straight lines. [Illustration: FIG. 1.] Now, try to fill in that square space with crossed lines, so completely and evenly that it shall look like a square patch of grey silk or cloth, cut out and laid on the white paper, as at _b_. Cover it quickly, first with straightish lines, in any direction you like, not troubling yourself to draw them much closer or neater than those in the square _a_. Let them quite dry before retouching them. (If you draw three or four squares side by side, you may always be going on with one while the others are drying). Then cover these lines with others in a different direction, and let those dry; then in another direction still, and let those dry. Always wait long enough to run no risk of blotting, and then draw the lines as quickly as you can. Each ought to be laid on as swiftly as the dash of the pen of a good writer; but if you try to reach this great speed at first you will go over the edge of the square, which is a fault in this exercise. Yet it is better to do so now and then than to draw the lines very slowly; for if you do, the pen leaves a little dot of ink at the end of each line, and these dots spoil your work. So draw each line quickly, stopping always as nearly as you can at the edge of the square. The ends of lines which go over the edge are afterwards to be removed with the penknife, but not till you have done the whole work, otherwise you roughen the paper, and the next line that goes over the edge makes a blot. When you have gone over the whole three or four times, you will find some parts of the square look darker than other parts. Now try to make the lighter parts as dark as the rest, so that the whole may be of equal depth or darkness. You will find, on examining the work, that where it looks darkest the lines are closest, or there are some much darker lines, than elsewhere; therefore you must put in other lines, or little scratches and dots, _between_ the lines in the paler parts; and where there are very conspicuous dark lines, scratch them out lightly with the penknife, for the eye must not be attracted by any line in particular. The more carefully and delicately you fill in the little gaps and holes the better; you will get on faster by doing two or three squares perfectly than a great many badly. As the tint gets closer and begins to look even, work with very little ink in your pen, so as hardly to make any mark on the paper; and at last, where it is too dark, use the edge of your penknife very lightly, and for some time, to wear it softly into an even tone. You will find that the greatest difficulty consists in getting evenness: one bit will always look darker than another bit of your square; or there will be a granulated and sandy look over the whole. When you find your paper quite rough and in a mess, give it up and begin another square, but do not rest satisfied till you have done your best with every square. The tint at last ought _at least_ to be as close and even as that in _b_, Fig. 1. You will find, however, that it is very difficult to get a _pale_ tint; because, naturally, the ink lines necessary to produce a close tint at all, blacken the paper more than you want. You must get over this difficulty not so much by leaving the lines wide apart as by trying to draw them excessively fine, lightly and swiftly; being very cautious in filling in; and, at last, passing the penknife over the whole. By keeping several squares in progress at one time, and reserving your pen for the light one just when the ink is nearly exhausted, you may get on better. The paper ought, at last, to look lightly and evenly toned all over, with no lines distinctly visible. EXERCISE II. As this exercise in shading is very tiresome, it will be well to vary it by proceeding with another at the same time. The power of shading rightly depends mainly on _lightness_ of hand and _keenness_ of sight; but there are other qualities required in drawing, dependent not merely on lightness, but steadiness of hand; and the eye, to be perfect in its power, must be made _accurate_ as well as keen, and not only see shrewdly, but measure justly. Possess yourself, therefore, of any cheap work on botany containing _outline_ plates of leaves and flowers, it does not matter whether bad or good: "Baxter's British Flowering Plants" is quite good enough. Copy any of the simplest outlines, first with a soft pencil, following it, by the eye, as nearly as you can; if it does not look right in proportions, rub out and correct it, always by the eye, till you think it is right: when you have got it to your mind, lay tracing-paper on the book, on this paper trace the outline you have been copying, and apply it to your own; and having thus ascertained the faults, correct them all patiently, till you have got it as nearly accurate as may be. Work with a very soft pencil, and do not rub out so hard[200] as to spoil the surface of your paper; never mind how _dirty_ the paper gets, but do not roughen it; and let the false outlines alone where they do not really interfere with the true one. It is a good thing to accustom yourself to hew and shape your drawing out of a dirty piece of paper. When you have got it as right as you can, take a quill pen, not very fine at the point; rest your hand on a book about an inch and a half thick, so as to hold the pen long; and go over your pencil outline with ink, raising your pen point as seldom as possible, and never leaning more heavily on one part of the line than on another. In most outline drawings of the present day, parts of the curves are thickened to give an effect of shade; all such outlines are bad, but they will serve well enough for your exercises, provided you do not imitate this character: it is better, however, if you can, to choose a book of pure outlines. It does not in the least matter whether your pen outline be thin or thick; but it matters greatly that it should be _equal_, not heavier in one place than in another. The power to be obtained is that of drawing an even line slowly and in any direction; all _dashing_ lines, or approximations to penmanship, are bad. The pen should, as it were, walk slowly over the ground, and you should be able at any moment to stop it, or to turn it in any other direction, like a well-managed horse. As soon as you can copy every curve _slowly_ and accurately, you have made satisfactory progress; but you will find the difficulty is in the _slowness_. It is easy to draw what appears to be a good line with a sweep of the hand, or with what is called freedom;[201] the real difficulty and masterliness is in never letting the hand _be_ free, but keeping it under entire control at every part of the line. EXERCISE III. Meantime, you are always to be going on with your shaded squares, and chiefly with these, the outline exercises being taken up only for rest. [Illustration: FIG. 2.] As soon as you find you have some command of the pen as a shading instrument, and can lay a pale or dark tint as you choose, try to produce gradated spaces like Fig. 2., the dark tint passing gradually into the lighter ones. Nearly _all_ expression of form, in drawing, depends on your power of gradating delicately; and the gradation is always most skilful which passes from one tint into another _very little_ paler. Draw, therefore, two parallel lines for limits to your work, as in Fig. 2., and try to gradate the shade evenly from white to black, passing over the greatest possible distance, yet so that every part of the band may have visible change in it. The perception of gradation is very deficient in all beginners (not to say, in many artists), and you will probably, for some time, think your gradation skilful enough when it is quite patchy and imperfect. By getting a piece of grey shaded riband, and comparing it with your drawing, you may arrive, in early stages of your work, at a wholesome dissatisfaction with it. Widen your band little by little as you get more skilful, so as to give the gradation more lateral space, and accustom yourself at the same time to look for gradated spaces in Nature. The sky is the largest and the most beautiful; watch it at twilight, after the sun is down, and try to consider each pane of glass in the window you look through as a piece of paper coloured blue, or grey, or purple, as it happens to be, and observe how quietly and continuously the gradation extends over the space in the window, of one or two feet square. Observe the shades on the outside and inside of a common white cup or bowl, which make it look round and hollow;[202] and then on folds of white drapery; and thus gradually you will be led to observe the more subtle transitions of the light as it increases or declines on flat surfaces. At last, when your eye gets keen and true, you will see gradation on everything in Nature. But it will not be in your power yet awhile to draw from any objects in which the gradations are varied and complicated; nor will it be a bad omen for your future progress, and for the use that art is to be made of by you, if the first thing at which you aim should be a little bit of sky. So take any narrow space of evening sky, that you can usually see, between the boughs of a tree, or between two chimneys, or through the corner of a pane in the window you like best to sit at, and try to gradate a little space of white paper as evenly as that is gradated--as _tenderly_ you cannot gradate it without colour, no, nor with colour either; but you may do it as evenly; or, if you get impatient with your spots and lines of ink, when you look at the beauty of the sky, the sense you will have gained of that beauty is something to be thankful for. But you ought not to be impatient with your pen and ink; for all great painters, however delicate their perception of colour, are fond of the peculiar effect of light which may be got in a pen-and-ink sketch, and in a woodcut, by the gleaming of the white paper between the black lines; and if you cannot gradate well with pure black lines, you will never gradate well with pale ones. By looking at any common woodcuts, in the cheap publications of the day, you may see how gradation is given to the sky by leaving the lines farther and farther apart; but you must make your lines as _fine_ as you can, as well as far apart, towards the light; and do not try to make them long or straight, but let them cross irregularly in any direction easy to your hand, depending on nothing but their gradation for your effect. On this point of direction of lines, however, I shall have to tell you more presently; in the meantime, do not trouble yourself about it. EXERCISE IV. As soon as you find you can gradate tolerably with the pen, take an H. or HH. pencil, using its point to produce shade, from the darkest possible to the palest, in exactly the same manner as the pen, lightening, however, now with India-rubber instead of the penknife. You will find that all _pale_ tints of shade are thus easily producible with great precision and tenderness, but that you cannot get the same dark power as with the pen and ink, and that the surface of the shade is apt to become glossy and metallic, or dirty-looking, or sandy. Persevere, however, in trying to bring it to evenness with the fine point, removing any single speck or line that may be too black, with the _point_ of the knife: you must not scratch the whole with the knife as you do the ink. If you find the texture very speckled-looking, lighten it all over with India-rubber, and recover it again with sharp, and excessively fine touches of the pencil point, bringing the parts that are too pale to perfect evenness with the darker spots. You cannot use the point too delicately or cunningly in doing this; work with it as if you were drawing the down on a butterfly's wing. At this stage of your progress, if not before, you may be assured that some clever friend will come in, and hold up his hands in mocking amazement, and ask you who could set you to that "niggling;" and if you persevere in it, you will have to sustain considerable persecution from your artistical acquaintances generally, who will tell you that all good drawing depends on "boldness." But never mind them. You do not hear them tell a child, beginning music, to lay its little hand with a crash among the keys, in imitation of the great masters; yet they might, as reasonably as they may tell you to be bold in the present state of your knowledge. Bold, in the sense of being undaunted, yes; but bold in the sense of being careless, confident, or exhibitory,--no,--no, and a thousand times no; for, even if you were not a beginner, it would be bad advice that made you bold. Mischief may easily be done quickly, but good and beautiful work is generally done slowly; you will find no boldness in the way a flower or a bird's wing is painted; and if Nature is not bold at _her_ work, do you think you ought to be at _yours_? So never mind what people say, but work with your pencil point very patiently; and if you can trust me in anything, trust me when I tell you, that though there are all kinds and ways of art,--large work for large places, small work for narrow places, slow work for people who can wait, and quick work for people who cannot,--there is one quality, and, I think, only one, in which all great and good art agrees;--it is all _delicate_ art. Coarse art is always bad art. You cannot understand this at present, because you do not know yet how much tender thought, and subtle care, the great painters put into touches that at first look coarse; but, believe me, it is true, and you will find it is so in due time. You will be perhaps also troubled, in these first essays at pencil drawing, by noticing that more delicate gradations are got in an instant by a chance touch of the India-rubber, than by an hour's labour with the point; and you may wonder why I tell you to produce tints so painfully, which might, it appears, be obtained with ease. But there are two reasons: the first, that when you come to draw forms, you must be able to gradate with absolute precision, in whatever place and direction you wish; not in any wise vaguely, as the India-rubber does it; and, secondly, that all natural shadows are more or less mingled with gleams of light. In the darkness of ground there is the light of the little pebbles or dust; in the darkness of foliage, the glitter of the leaves; in the darkness of flesh, transparency; in that of a stone, granulation: in every case there is some mingling of light, which cannot be represented by the leaden tone which you get by rubbing, or by an instrument known to artists as the "stump." When you can manage the point properly, you will indeed be able to do much also with this instrument, or with your fingers; but then you will have to retouch the flat tints afterwards, so as to put life and light into them, and that can only be done with the point. Labour on, therefore, courageously, with that only. EXERCISE V. [Illustration: FIG. 3.] When you can manage to tint and gradate tenderly with the pencil point, get a good large alphabet, and try to _tint_ the letters into shape with the pencil point. Do not outline them first, but measure their height and extreme breadth with the compasses, as _a b_, _a c_, Fig. 3., and then scratch in their shapes gradually; the letter A, enclosed within the lines, being in what Turner would have called a "state of forwardness." Then, when you are satisfied with the shape of the letter, draw pen and ink lines firmly round the tint, as at _d_, and remove any touches outside the limit, first with the India-rubber, and then with the penknife, so that all may look clear and right. If you rub out any of the pencil inside the outline of the letter, retouch it, closing it up to the inked line. The straight lines of the outline are all to be _ruled_,[203] but the curved lines are to be drawn by the eye and hand; and you will soon find what good practice there is in getting the curved letters, such as Bs, Cs, &c., to stand quite straight, and come into accurate form. All these exercises are very irksome, and they are not to be persisted in alone; neither is it necessary to acquire perfect power in any of them. An entire master of the pencil or brush ought, indeed, to be able to draw any form at once, as Giotto his circle; but such skill as this is only to be expected of the consummate master, having pencil in hand all his life, and all day long, hence the force of Giotto's proof of his skill; and it is quite possible to draw very beautifully, without attaining even an approximation to such a power; the main point being, not that every line should be precisely what we intend or wish, but that the line which we intended or wished to draw should be right. If we always see rightly and mean rightly, we shall get on, though the hand may stagger a little; but if we mean wrongly, or mean nothing, it does not matter how firm the hand is. Do not, therefore, torment yourself because you cannot do as well as you would like; but work patiently, sure that every square and letter will give you a certain increase of power; and as soon as you can draw your letters pretty well, here is a more amusing exercise for you. EXERCISE VI. Choose any tree that you think pretty, which is nearly bare of leaves, and which you can see against the sky, or against a pale wall, or other light ground: it must not be against strong light, or you will find the looking at it hurts your eyes; nor must it be in sunshine, or you will be puzzled by the lights on the boughs. But the tree must be in shade; and the sky blue, or grey, or dull white. A wholly grey or rainy day is the best for this practice. You will see that _all_ the boughs of the tree are _dark_ against the sky. Consider them as so many dark rivers, to be laid down in a map with absolute accuracy; and, without the least thought about the _roundness_ of the stems, map them all out in flat shade, scrawling them in with pencil, just as you did the limbs of your letters; then correct and alter them, rubbing out and out again, never minding how much your paper is dirtied (only not destroying its surface), until every bough is exactly, or as near as your utmost power can bring it, right in curvature and in thickness. Look at the white interstices between them with as much scrupulousness as if they were little estates which you had to survey, and draw maps of, for some important lawsuit, involving heavy penalties if you cut the least bit of a corner off any of them, or gave the hedge anywhere too deep a curve; and try continually to fancy the whole tree nothing but a flat ramification on a white ground. Do not take any trouble about the little twigs, which look like a confused network or mist; leave them all out,[204] drawing only the main branches as far as you can see them distinctly, your object at present being not to draw a tree, but to _learn how_ to do so. When you have got the thing as nearly right as you can--and it is better to make one good study than twenty left unnecessarily inaccurate--take your pen, and put a fine outline to all the boughs, as you did to your letter, taking care, as far as possible, to put the outline within the edge of the shade, so as not to make the boughs thicker: the main use of the outline is to _affirm_ the whole more clearly; to do away with little accidental roughnesses and excrescences, and especially to mark where boughs cross, or come in front of each other, as at such points their arrangement in this kind of sketch is unintelligible without the outline. It may perfectly well happen that in Nature it should be less distinct than your outline will make it; but it is better in this kind of sketch to mark the facts clearly. The temptation is always to be slovenly and careless, and the outline is like a bridle, and forces our indolence into attention and precision. The outline should be about the thickness of that in Fig. 4, which represents the ramification of a small stone pine, only I have not endeavoured to represent the pencil shading within the outline, as I could not easily express it in a woodcut; and you have nothing to do at present with the indication of the foliage above, of which in another place. You may also draw your trees as much larger than this figure as you like; only, however large they may be, keep the outline as delicate, and draw the branches far enough into their outer sprays to give quite as slender ramification as you have in this figure, otherwise you do not get good enough practice out of them. [Illustration: FIG. 4.] You cannot do too many studies of this kind: every one will give you some new notion about trees: but when you are tired of tree boughs, take any forms whatever which are drawn in flat colour, one upon another; as patterns on any kind of cloth, or flat china (tiles, for instance), executed in two colours only; and practice drawing them of the right shape and size by the eye, and filling them in with shade of the depth required. In doing this, you will first have to meet the difficulty of representing depth of colour by depth of shade. Thus a pattern of ultramarine blue will have to be represented by a darker tint of grey than a pattern of yellow. And now it is both time for you to begin to learn the mechanical use of the brush, and necessary for you to do so in order to provide yourself with the gradated scale of colour which you will want. If you can, by any means, get acquainted with any ordinarily skilful water-colour painter, and prevail on him to show you how to lay on tints with a brush, by all means do so; not that you are yet, nor for a long while yet, to begin to colour, but because the brush is often more convenient than the pencil for laying on masses or tints of shade, and the sooner you know how to manage it as an instrument the better. If, however, you have no opportunity of seeing how water-colour is laid on by a workman of any kind, the following directions will help you:-- EXERCISE VII. Get a shilling cake of Prussian blue. Dip the end of it in water so as to take up a drop, and rub it in a white saucer till you cannot rub much more, and the colour gets dark, thick, and oily-looking. Put two teaspoonfuls of water to the colour you have rubbed down, and mix it well up with a camel's-hair brush about three quarters of an inch long. Then take a piece of smooth, but not glossy, Bristol board or pasteboard; divide it, with your pencil and rule, into squares as large as those of the very largest chess-board: they need not be perfect squares, only as nearly so as you can quickly guess. Rest the pasteboard on something sloping as much as an ordinary desk; then, dipping your brush into the colour you have mixed, and taking up as much of the liquid as it will carry, begin at the top of one of the squares, and lay a pond or runlet of colour along the top edge. Lead this pond of colour gradually downwards, not faster at one place than another, but as if you were adding a row of bricks to a building, all along (only building down instead of up), dipping the brush frequently so as to keep the colour as full in that, and in as great quantity on the paper, as you can, so only that it does not run down anywhere in a little stream. But if it should, never mind; go on quietly with your square till you have covered it all in. When you get to the bottom, the colour will lodge there in a great wave. Have ready a piece of blotting-paper; dry your brush on it, and with the dry brush take up the superfluous colour as you would with a sponge, till it all looks even. In leading the colour down, you will find your brush continually go over the edge of the square, or leave little gaps within it. Do not endeavour to retouch these, nor take much care about them; the great thing is to get the colour to lie smoothly where it reaches, not in alternate blots and pale patches; try, therefore, to lead it over the square as fast as possible, with such attention to your limit as you are able to give. The use of the exercise is, indeed, to enable you finally to strike the colour up to the limit with perfect accuracy; but the first thing is to get it even, the power of rightly striking the edge comes only by time and practice; even the greatest artists rarely can do this quite perfectly. When you have done one square, proceed to do another which does not communicate with it. When you have thus done all the alternate squares, as on a chess-board, turn the pasteboard upside down, begin again with the first, and put another coat over it, and so on over all the others. The use of turning the paper upside down is to neutralise the increase of darkness towards the bottom of the squares, which would otherwise take place from the ponding of the colour. Be resolved to use blotting-paper, or a piece of rag, instead of your lips, to dry the brush. The habit of doing so, once acquired, will save you from much partial poisoning. Take care, however, always to draw the brush from root to point, otherwise you will spoil it. You may even wipe it as you would a pen when you want it very dry, without doing harm, provided you do not crush it upwards. Get a good brush at first, and cherish it; it will serve you longer and better than many bad ones. When you have done the squares all over again, do them a third time, always trying to keep your edges as neat as possible. When your colour is exhausted, mix more in the same proportions, two teaspoonfuls to as much as you can grind with a drop; and when you have done the alternate squares three times over, as the paper will be getting very damp, and dry more slowly, begin on the white squares, and bring them up to the same tint in the same way. The amount of jagged dark line which then will mark the limits of the squares will be the exact measure of your unskilfulness. As soon as you tire of squares draw circles (with compasses); and then draw straight lines irregularly across circles, and fill up the spaces so produced between the straight line and the circumference; and then draw any simple shapes of leaves, according to the exercise No. 2., and fill up those, until you can lay on colour quite evenly in any shape you want. You will find in the course of this practice, as you cannot always put exactly the same quantity of water to the colour, that the darker the colour is, the more difficult it becomes to lay it on evenly. Therefore, when you have gained some definite degree of power, try to fill in the forms required with a full brush, and a dark tint, at once, instead of laying several coats one over another; always taking care that the tint, however dark, be quite liquid; and that, after being laid on, so much of it is absorbed as to prevent its forming a black line at the edge as it dries. A little experience will teach you how apt the colour is to do this, and how to prevent it; not that it needs always to be prevented, for a great master in water-colours will sometimes draw a firm outline, when he _wants_ one, simply by letting the colour dry in this way at the edge. When, however, you begin to cover complicated forms with the darker colour, no rapidity will prevent the tint from drying irregularly as it is led on from part to part. You will then find the following method useful. Lay in the colour very pale and liquid; so pale, indeed, that you can only just see where it is on the paper. Lead it up to all the outlines, and make it precise in form, keeping it thoroughly wet everywhere. Then, when it is all in shape, take the darker colour, and lay some of it _into_ the middle of the liquid colour. It will spread gradually in a branchy kind of way, and you may now lead it up to the outlines already determined, and play it with the brush till it fills its place well; then let it dry, and it will be as flat and pure as a single dash, yet defining all the complicated forms accurately. Having thus obtained the power of laying on a tolerably flat tint, you must try to lay on a gradated one. Prepare the colour with three or four teaspoonfuls of water; then, when it is mixed, pour away about two-thirds of it, keeping a teaspoonful of pale colour. Sloping your paper as before, draw two pencil lines all the way down, leaving a space between them of the width of a square on your chess-board. Begin at the top of your paper, between the lines; and having struck on the first brushful of colour, and led it down a little, dip your brush deep in water, and mix up the colour on the plate quickly with as much more water as the brush takes up at that one dip: then, with this paler colour, lead the tint farther down. Dip in water again, mix the colour again, and thus lead down the tint, always dipping in water once between each replenishing of the brush, and stirring the colour on the plate well, but as quickly as you can. Go on until the colour has become so pale that you cannot see it; then wash your brush thoroughly in water, and carry the wave down a little farther with that, and then absorb it with the dry brush, and leave it to dry. If you get to the bottom of your paper before your colour gets pale, you may either take longer paper, or begin, with the tint as it was when you left off, on another sheet; but be sure to exhaust it to pure whiteness at last. When all is quite dry, recommence at the top with another similar mixture of colour, and go down in the same way. Then again, and then again, and so continually until the colour at the top of the paper is as dark as your cake of Prussian blue, and passes down into pure white paper at the end of your column, with a perfectly smooth gradation from one into the other. You will find at first that the paper gets mottled or wavy, instead of evenly gradated; this is because at some places you have taken up more water in your brush than at others, or not mixed it thoroughly on the plate, or led one tint too far before replenishing with the next. Practice only will enable you to do it well; the best artists cannot always get gradations of this kind quite to their minds; nor do they ever leave them on their pictures without after touching. As you get more power, and can strike the colour more quickly down, you will be able to gradate in less compass;[205] beginning with a small quantity of colour, and adding a drop of water, instead of a brushful; with finer brushes, also, you may gradate to a less scale. But slight skill will enable you to test the relations of colour to shade as far as is necessary for your immediate progress, which is to be done thus:-- Take cakes of lake, of gamboge, of sepia, of blue-black, of cobalt, and vermilion; and prepare gradated columns (exactly as you have done with the Prussian blue) of the lake and blue-black.[206] Cut a narrow slip all the way down, of each gradated colour, and set the three slips side by side; fasten them down, and rule lines at equal distances across all the three, so as to divide them into fifty degrees, and number the degrees of each, from light to dark, 1, 2, 3, &c. If you have gradated them rightly, the darkest part either of the red or blue will be nearly equal in power to the darkest part of the blue-black, and any degree of the black slip will also, accurately enough for our purpose, balance in weight the degree similarly numbered in the red or the blue slip. Then, when you are drawing from objects of a crimson or blue colour, if you can match their colour by any compartment of the crimson or blue in your scales, the grey in the compartment of the grey scale marked with the same number is the grey which must represent that crimson or blue in your light and shade drawing. Next, prepare scales with gamboge, cobalt, and vermilion. You will find that you cannot darken these beyond a certain point;[207] for yellow and scarlet, so long as they remain yellow and scarlet, cannot approach to black; we cannot have, properly speaking, a dark yellow or dark scarlet. Make your scales of full yellow, blue, and scarlet, half-way down; passing _then_ gradually to white. Afterwards use lake to darken the upper half of the vermilion and gamboge; and Prussian blue to darken the cobalt. You will thus have three more scales, passing from white nearly to black, through yellow and orange, through sky-blue, and through scarlet. By mixing the gamboge and Prussian blue you may make another with green; mixing the cobalt and lake, another with violet; the sepia alone will make a forcible brown one; and so on, until you have as many scales as you like, passing from black to white through different colours. Then, supposing your scales properly gradated and equally divided, the compartment or degree No. 1. of the grey will represent in chiaroscuro the No. 1. of all the other colours; No. 2. of grey the No. 2. of the other colours, and so on. It is only necessary, however, in this matter that you should understand the principle; for it would never be possible for you to gradate your scales so truly as to make them practically accurate and serviceable; and even if you could, unless you had about ten thousand scales, and were able to change them faster than ever juggler changed cards, you could not in a day measure the tints on so much as one side of a frost-bitten apple: but when once you fully understand the principle, and see how all colours contain as it were a certain quantity of darkness, or power of dark relief from white--some more, some less; and how this pitch or power of each may be represented by equivalent values of grey, you will soon be able to arrive shrewdly at an approximation by a glance of the eye, without any measuring scale at all. You must now go on, again with the pen, drawing patterns, and any shapes of shade that you think pretty, as veinings in marble, or tortoise-shell, spots in surfaces of shells, &c., as tenderly as you can, in the darknesses that correspond to their colours; and when you find you can do this successfully, it is time to begin rounding. EXERCISE VIII. Go out into your garden, or into the road, and pick up the first round or oval stone you can find, not very white, nor very dark; and the smoother it is the better, only it must not _shine_. Draw your table near the window, and put the stone, which I will suppose is about the size of _a_ in Fig. 5. (it had better not be much larger), on a piece of not very white paper, on the table in front of you. Sit so that the light may come from your left, else the shadow of the pencil point interferes with your sight of your work. You must not let the _sun_ fall on the stone, but only ordinary light: therefore choose a window which the sun does not come in at. If you can shut the shutters of the other windows in the room it will be all the better; but this is not of much consequence. Now, if you can draw that stone, you can draw anything: I mean, anything that is drawable. Many things (sea foam, for instance) cannot be drawn at all, only the idea of them more or less suggested; but if you can draw the stone _rightly_, every thing within reach of art is also within yours. For all drawing depends, primarily, on your power of representing _Roundness_. If you can once do that, all the rest is easy and straightforward; if you cannot do that, nothing else that you may be able to do will be of any use. For Nature is all made up of roundnesses; not the roundness of perfect globes, but of variously curved surfaces. Boughs are rounded, leaves are rounded, stones are rounded, clouds are rounded, cheeks are rounded, and curls are rounded: there is no more flatness in the natural world than there is vacancy. The world itself is round, and so is all that is in it, more or less, except human work, which is often very flat indeed. Therefore, set yourself steadily to conquer that round stone, and you have won the battle. Look your stone antagonist boldly in the face. You will see that the side of it next the window is lighter than most of the paper: that the side of it farthest from the window is darker than the paper; and that the light passes into the dark gradually, while a shadow is thrown to the right _on_ the paper itself by the stone: the general appearance of things being more or less as in _a_, Fig. 5., the spots on the stone excepted, of which more presently. Now, remember always what was stated in the outset, that every thing you can see in Nature is seen only so far as it is lighter or darker than the things about it, or of a different colour from them. It is either seen as a patch of one colour on a ground of another; or as a pale thing relieved from a dark thing, or a dark thing from a pale thing. And if you can put on patches of colour or shade of exactly the same size, shape, and gradations as those on the object and its ground, you will produce the appearance of the object and its ground. The best draughtsman--Titian and Paul Veronese themselves--could do no more than this; and you will soon be able to get some power of doing it in an inferior way, if you once understand the exceeding simplicity of what is to be done. Suppose you have a brown book on a white sheet of paper, on a red tablecloth. You have nothing to do but to put on spaces of red, white, and brown, in the same shape, and gradated from dark to light in the same degrees, and your drawing is done. If you will not look at what you see, if you try to put on brighter or duller colours than are there, if you try to put them on with a dash or a blot, or to cover your paper with "vigorous" lines, or to produce anything, in fact, but the plain, unaffected, and finished tranquillity of the thing before you, you need not hope to get on. Nature will show you nothing if you set yourself up for her master. But forget yourself, and try to obey _her_, and you will find obedience easier and happier than you think. The real difficulties are to get the _refinement_ of the forms and the _evenness_ of the gradations. You may depend upon it, when you are dissatisfied with your work, it is always too coarse or too uneven. It may not be wrong--in all probability is not wrong, in any (so-called) _great_ point. But its edges are not true enough in outline; and its shades are in blotches, or scratches, or full of white holes. Get it more tender and more true, and you will find it is more powerful. [Illustration: FIG. 5.] Do not, therefore, think your drawing must be weak because you have a finely pointed pen in your hand. Till you can draw with that, you can draw with nothing; when you can draw with that, you can draw with a log of wood charred at the end. True boldness and power are only to be gained by care. Even in fencing and dancing, all ultimate ease depends on early precision in the commencement; much more in singing or drawing. Now, I do not want you to copy Fig. 5., but to copy the stone before you in the way that Fig. 5. is done. To which end, first measure the extreme length of the stone with compasses, and mark that length on your paper; then, between the points marked, leave something like the form of the stone in light, scrawling the paper all over, round it, as at _b_, Fig. 5. You cannot rightly see what the form of the stone really is till you begin finishing, so sketch it in quite rudely; only rather leave too _much_ room for the high light, than too little: and then more cautiously fill in the shade, shutting the light gradually up, and putting in the dark cautiously on the dark side. You need not plague yourself about accuracy of shape, because, till you have practised a great deal, it is impossible for you to draw that shape quite truly, and you must gradually gain correctness by means of these various exercises: what you have mainly to do at present is, to get the stone to look solid and round, not much minding what its exact contour is--only draw it as nearly right as you can without vexation; and you will get it _more_ right by thus feeling your way to it in shade, than if you tried to draw the outline at first. For you can _see_ no outline; what you see is only a certain space of gradated shade, with other such spaces about it; and those pieces of shade you are to imitate as nearly as you can, by scrawling the paper over till you get them to the right shape, with the same gradations which they have in Nature. And this is really more likely to be done well, if you have to fight your way through a little confusion in the sketch, than if you have an accurately traced outline. For instance, I was going to draw, beside _a_, another effect on the stone; reflected light bringing its dark side out from the background: but when I had laid on the first few touches, I thought it would be better to stop, and let you see how I had begun it, at _b_. In which beginning it will be observed that nothing is so determined but that I can more or less modify, and add to or diminish the contour as I work on, the lines which suggest the outline being blended with the others if I do not want them; and the having to fill up the vacancies and conquer the irregularities of such a sketch, will probably secure a higher completion at last, than if half an hour had been spent in getting a true outline before beginning. In doing this, however, take care not to get the drawing too dark. In order to ascertain what the shades of it really are, cut a round hole, about half the size of a pea, in a piece of white paper, the colour of that you use to draw on. Hold this bit of paper, with the hole in it, between you and your stone; and pass the paper backwards and forwards, so as to see the different portions of the stone (or other subject) through the hole. You will find that, thus, the circular hole looks like one of the patches of colour you have been accustomed to match, only changing in depth as it lets different pieces of the stone be seen through it. You will be able thus actually to _match_ the colour of the stone, at any part of it, by tinting the paper beside the circular opening. And you will find that this opening never looks quite _black_, but that all the roundings of the stone are given by subdued greys.[208] You will probably find, also, that some parts of the stone, or of the paper it lies on, look luminous through the opening, so that the little circle then tells as a light spot instead of a dark spot. When this is so, you cannot imitate it, for you have no means of getting light brighter than white paper: but by holding the paper more sloped towards the light, you will find that many parts of the stone, which before looked light through the hole, then look dark through it; and if you can place the paper in such a position that every part of the stone looks slightly dark, the little hole will tell always as a spot of shade, and if your drawing is put in the same light, you can imitate or match every gradation. You will be amazed to find, under these circumstances, how slight the differences of tint are, by which, through infinite delicacy of gradation, Nature can express form. If any part of your subject will obstinately show itself as a light through the hole, that part you need not hope to imitate. Leave it white, you can do no more. When you have done the best you can to get the general form, proceed to finish, by imitating the texture and all the cracks and stains of the stone as closely as you can; and note, in doing this, that cracks or fissures of any kind, whether between stones in walls, or in the grain of timber or rocks, or in any of the thousand other conditions they present, are never expressible by single black lines, or lines of simple shadow. A crack must always have its complete system of light and shade, however small its scale. It is in reality a little _ravine_, with a dark or shady side, and light or sunny side, and, usually, shadow in the bottom. This is one of the instances in which it may be as well to understand the reason of the appearance; it is not often so in drawing, for the aspects of things are so subtle and confused that they cannot in general be explained; and in the endeavour to explain some, we are sure to lose sight of others, while the natural overestimate of the importance of those on which the attention is fixed, causes us to exaggerate them, so that merely _scientific_ draughtsmen caricature a third part of Nature, and miss two-thirds. The best scholar is he whose eye is so keen as to see at once how the thing looks, and who need not, therefore, trouble himself with any reasons why it looks so: but few people have this acuteness of perception; and to those who are destitute of it, a little pointing out of rule and reason will be a help, especially when a master is not near them. I never allow my own pupils to ask the reason of anything, because, as I watch their work, I can always show them how the thing is, and what appearance they are missing in it; but when a master is not by to direct the sight, science may, here and there, be allowed to do so in his stead. Generally, then, every solid illumined object--for instance, the stone you are drawing--has a light side turned towards the light, a dark side turned away from the light, and a shadow, which is cast on something else (as by the stone on the paper it is set upon). You may sometimes be placed so as to see only the light side and shadow, and sometimes only the dark side and shadow, and sometimes both, or either, without the shadow; but in most positions solid objects will show all the three, as the stone does here. Hold up your hand with the edge of it towards you, as you sit now with your side to the window, so that the flat of your hand is turned to the window. You will see one side of your hand distinctly lighted, the other distinctly in shade. Here are light side and dark side, with no seen shadow; the shadow being detached, perhaps on the table, perhaps on the other side of the room; you need not look for it at present. Take a sheet of note-paper, and holding it edgeways, as you hold your hand, wave it up and down past the side of your hand which is turned from the light, the paper being, of course, farther from the window. You will see, as it passes a strong gleam of light strike on your hand, and light it considerably on its dark side. This light is _reflected_ light. It is thrown back from the paper (on which it strikes first in coming from the window) to the surface of your hand, just as a ball would be if somebody threw it through the window at the wall and you caught it at the rebound. Next, instead of the note-paper, take a red book, or a piece of scarlet cloth. You will see that the gleam of light falling on your hand, as you wave the book is now reddened. Take a blue book, and you will find the gleam is blue. Thus every object will cast some of its own colour back in the light that it reflects. Now it is not only these books or papers that reflect light to your hand: every object in the room, on that side of it, reflects some, but more feebly, and the colours mixing all together form a neutral[209] light, which lets the colour of your hand itself be more distinctly seen than that of any object which reflects light to it; but if there were no reflected light, that side of your hand would look as black as a coal. Objects are seen, therefore in general, partly by direct light, and partly by light reflected from the objects around them, or from the atmosphere and clouds. The colour of their light sides depends much on that of the direct light, and that of the dark sides on the colours of the objects near them. It is therefore impossible to say beforehand what colour an object will have at any point of its surface, that colour depending partly on its own tint, and partly on infinite combinations of rays reflected from other things. The only certain fact about dark sides is, that their colour will be changeful, and that a picture which gives them merely darker shades of the colour of the light sides must assuredly be bad. Now, lay your hand flat on the white paper you are drawing on. You will see one side of each finger lighted, one side dark, and the shadow of your hand on the paper. Here, therefore, are the three divisions of shade seen at once. And although the paper is white, and your hand of a rosy colour somewhat darker than white, yet you will see that the shadow all along, just under the finger which casts it, is darker than the flesh, and is of a very deep grey. The reason of this is, that much light is reflected from the paper to the dark side of your finger, but very little is reflected from other things to the paper itself in that chink under your finger. In general, for this reason, a shadow, or, at any rate, the part of the shadow nearest the object, is darker than the dark side of the object. I say in general, because a thousand accidents may interfere to prevent its being so. Take a little bit of glass, as a wine-glass, or the ink-bottle, and play it about a little on the side of your hand farthest from the window; you will presently find you are throwing gleams of light all over the dark side of your hand, and in some positions of the glass the reflection from it will annihilate the shadow altogether, and you will see your hand dark on the white paper. Now a stupid painter would represent, for instance, a drinking-glass beside the hand of one of his figures, and because he had been taught by rule that "shadow was darker than the dark side," he would never think of the reflection from the glass, but paint a dark grey under the hand, just as if no glass were there. But a great painter would be sure to think of the true effect, and paint it; and then comes the stupid critic, and wonders why the hand is so light on its dark side. Thus it is always dangerous to assert anything as a _rule_ in matters of art; yet it is useful for you to remember that, in a general way, a shadow is darker than the dark side of the thing that casts it, supposing the colours otherwise the same; that is to say, when a white object casts a shadow on a white surface, or a dark object on a dark surface: the rule will not hold if the colours are different, the shadow of a black object on a white surface being, of course, not so dark, usually, as the black thing casting it. The only way to ascertain the ultimate truth in such matters is to _look_ for it; but, in the meantime, you will be helped by noticing that the cracks in the stone are little ravines, on one side of which the light strikes sharply, while the other is in shade. This dark side usually casts a little darker shadow at the bottom of the crack; and the general tone of the stone surface is not so bright as the light bank of the ravine. And, therefore, if you get the surface of the object of a uniform tint, more or less indicative of shade, and then scratch out a white spot or streak in it of any shape; by putting a dark touch beside this white one, you may turn it, as you choose, into either a ridge or an incision, into either a boss or a cavity. If you put the dark touch on the side of it nearest the sun, or rather, nearest the place that the light comes from, you will make it a cut or cavity; if you put it on the opposite side, you will make it a ridge or mound: and the complete success of the effect depends less on depth of shade than on the rightness of the drawing; that is to say, on the evident correspondence of the form of the shadow with the form that casts it. In drawing rocks, or wood, or anything irregularly shaped, you will gain far more by a little patience in following the forms carefully, though with slight touches, than by laboured finishing of textures of surface and transparencies of shadow. When you have got the whole well into shape, proceed to lay on the stains and spots with great care, quite as much as you gave to the forms. Very often, spots or bars of local colour do more to express form than even the light and shade, and they are always interesting as the means by which Nature carries light into her shadows, and shade into her lights, an art of which we shall have more to say hereafter, in speaking of composition. Fig. 5. is a rough sketch of a fossil sea-urchin, in which the projections of the shell are of black flint, coming through a chalky surface. These projections form dark spots in the light; and their sides, rising out of the shadow, form smaller whitish spots in the dark. You may take such scattered lights as these out with the penknife, provided you are just as careful to place them rightly, as if you got them by a more laborious process. When you have once got the feeling of the way in which gradation expresses roundness and projection, you may try your strength on anything natural or artificial that happens to take your fancy, provided it be not too complicated in form. I have asked you to draw a stone first, because any irregularities and failures in your shading will be less offensive to you, as being partly characteristic of the rough stone surface, than they would be in a more delicate subject; and you may as well go on drawing rounded stones of different shapes for a little while, till you find you can really shade delicately. You may then take up folds of thick white drapery, a napkin or towel thrown carelessly on the table is as good as anything, and try to express them in the same way; only now you will find that your shades must be wrought with perfect unity and tenderness, or you will lose the flow of the folds. Always remember that a little bit perfected is worth more than many scrawls; whenever you feel yourself inclined to scrawl, give up work resolutely, and do not go back to it till next day. Of course your towel or napkin must be put on something that may be locked up, so that its folds shall not be disturbed till you have finished. If you find that the folds will not look right, get a photograph of a piece of drapery (there are plenty now to be bought, taken from the sculpture of the cathedrals of Rheims, Amiens, and Chartres, which will at once educate your hand and your taste), and copy some piece of that; you will then ascertain what it is that is wanting in your studies from nature, whether more gradation, or greater watchfulness of the disposition of the folds. Probably for some time you will find yourself failing painfully in both, for drapery is very difficult to follow in its sweeps; but do not lose courage, for the greater the difficulty, the greater the gain in the effort. If your eye is more just in measurement of form than delicate in perception of tint, a pattern on the folded surface will help you. Try whether it does or not; and if the patterned drapery confuses you, keep for a time to the simple white one; but if it helps you, continue to choose patterned stuffs (tartans, and simple chequered designs are better at first than flowered ones), and even though it should confuse you, begin pretty soon to use a pattern occasionally, copying all the distortions and perspective modifications of it among the folds with scrupulous care. Neither must you suppose yourself condescending in doing this. The greatest masters are always fond of drawing patterns; and the greater they are, the more pains they take to do it truly.[210] Nor can there be better practice at any time, as introductory to the nobler complication of natural detail. For when you can draw the spots which follow the folds of a printed stuff, you will have some chance of following the spots which fall into the folds of the skin of a leopard as he leaps; but if you cannot draw the manufacture, assuredly you will never be able to draw the creature. So the cloudings on a piece of wood, carefully drawn, will be the best introduction to the drawing of the clouds of the sky, or the waves of the sea; and the dead leaf-patterns on a damask drapery, well rendered, will enable you to disentangle masterfully the living leaf-patterns of a thorn thicket, or a violet bank. Observe, however, in drawing any stuffs, or bindings of books, or other finely textured substances, do not trouble yourself, as yet, much about the woolliness or gauziness of the thing; but get it right in shade and fold, and true in pattern. We shall see, in the course of after-practice, how the penned lines may be made indicative of texture; but at present attend only to the light, and shade, and pattern. You will be puzzled at first by _lustrous_ surfaces, but a little attention will show you that the expression of these depends merely on the right drawing of their light, and shade, and reflections. Put a small black japanned tray on the table in front of some books; and you will see it reflects the objects beyond it as in a little black rippled pond; its own colour mingling always with that of the reflected objects. Draw these reflections of the books properly, making them dark and distorted, as you will see that they are, and you will find that this gives the lustre to your tray. It is not well, however, to draw polished objects in general practice; only you should do one or two in order to understand the aspect of any lustrous portion of other things, such as you cannot avoid; the gold, for instance, on the edges of books, or the shining of silk and damask, in which lies a great part of the expression of their folds. Observe, also, that there are very few things which are totally without lustre: you will frequently find a light which puzzles you, on some apparently dull surface, to be the dim image of another object. And now, as soon as you can conscientiously assure me that with the point of the pen or pencil you can lay on any form and shade you like, I give you leave to use the brush with one colour,--sepia, or blue-black, or mixed cobalt and blue-black, or neutral tint; and this will much facilitate your study, and refresh you. But, preliminarily, you must do one or two more exercises in tinting. EXERCISE IX. Prepare your colour as before directed. Take a brush full of it, and strike it on the paper in any irregular shape; as the brush gets dry sweep the surface of the paper with it as if you were dusting the paper very lightly; every such sweep of the brush will leave a number of more or less minute interstices in the colour. The lighter and faster every dash the better. Then leave the whole to dry, and as soon as it is dry, with little colour in your brush, so that you can bring it to a fine point, fill up all the little interstices one by one, so as to make the whole as even as you can, and fill in the larger gaps with more colour, always trying to let the edges of the first and of the newly applied colour exactly meet, and not lap over each other. When your new colour dries, you will find it in places a little paler than the first. Retouch it, therefore, trying to get the whole to look quite one piece. A very small bit of colour thus filled up with your very best care, and brought to look as if it had been quite even from the first, will give you better practice and more skill than a great deal filled in carelessly; so do it with your best patience, not leaving the most minute spot of white; and do not fill in the large pieces first and then go to the small, but quietly and steadily cover in the whole up to a marked limit; then advance a little farther, and so on; thus always seeing distinctly what is done and what undone. EXERCISE X. Lay a coat of the blue, prepared as usual, over a whole square of paper. Let it dry. Then another coat over four-fifths of the square, or thereabouts, leaving the edge rather irregular than straight, and let it dry. Then another coat over three-fifths; another over two-fifths; and the last over one-fifth; so that the square may present the appearance of gradual increase in darkness in five bands, each darker than the one beyond it. Then, with the brush rather dry (as in the former exercise, when filling up the interstices), try, with small touches, like those used in the pen etching, only a little broader, to add shade delicately beyond each edge, so as to lead the darker tints into the paler ones imperceptibly. By touching the paper very lightly, and putting a multitude of little touches, crossing and recrossing in every direction, you will gradually be able to work up to the darker tints, outside of each, so as quite to efface their edges, and unite them tenderly with the next tint. The whole square, when done, should look evenly shaded from dark to pale, with no bars; only a crossing texture of touches, something like chopped straw, over the whole.[211] Next, take your rounded pebble; arrange it in any light and shade you like; outline it very loosely with the pencil. Put on a wash of colour, prepared _very_ pale, quite flat over all of it, except the highest light, leaving the edge of your colour quite sharp. Then another wash, extending only over the darker parts, leaving the edge of that sharp also, as in tinting the square. Then another wash over the still darker parts, and another over the darkest, leaving each edge to dry sharp. Then, with the small touches, efface the edges, reinforce the darks, and work the whole delicately together, as you would with the pen, till you have got it to the likeness of the true light and shade. You will find that the tint underneath is a great help, and that you can now get effects much more subtle and complete than with the pen merely. The use of leaving the edges always sharp is that you may not trouble or vex the colour, but let it lie as it falls suddenly on the paper; colour looks much more lovely when it has been laid on with a dash of the brush, and left to dry in its own way, than when it has been dragged about and disturbed; so that it is always better to let the edges and forms be a _little_ wrong, even if one cannot correct them afterwards, than to lose this fresh quality of the tint. Very great masters in water-colour can lay on the true forms at once with a dash, and _bad_ masters in water-colour lay on grossly false forms with a dash, and leave them false; for people in general, not knowing false from true, are as much pleased with the appearance of power in the irregular blot as with the presence of power in the determined one; but _we_, in our beginnings, must do as much as we can with the broad dash, and then correct with the point, till we are quite right. We must take care to be right, at whatever cost of pains; and then gradually we shall find we can be right with freedom. I have hitherto limited you to colour mixed with two or three teaspoonfuls of water; but in finishing your light and shade from the stone, you may, as you efface the edge of the palest coat towards the light, use the colour for the small touches with more and more water, till it is so pale as not to be perceptible. Thus you may obtain a _perfect_ gradation to the light. And in reinforcing the darks, when they are very dark, you may use less and less water. If you take the colour tolerably dark on your brush, only always liquid (not pasty), and dash away the superfluous colour on blotting-paper, you will find that, touching the paper very lightly with the dry brush, you can, by repeated touches, produce a dusty kind of bloom, very valuable in giving depth to shadow; but it requires great patience and delicacy of hand to do this properly. You will find much of this kind of work in the grounds and shadows of William Hunt's drawings.[212] As you get used to the brush and colour, you will gradually find out their ways for yourself, and get the management of them. Nothing but practice will do this perfectly; but you will often save yourself much discouragement by remembering what I have so often asserted,--that if anything goes wrong, it is nearly sure to be refinement that is wanting, not force; and connexion, not alteration. If you dislike the state your drawing is in, do not lose patience with it, nor dash at it, nor alter its plan, nor rub it desperately out, at the place you think wrong; but look if there are no shadows you can gradate more perfectly; no little gaps and rents you can fill; no forms you can more delicately define: and do not _rush_ at any of the errors or incompletions thus discerned, but efface or supply slowly, and you will soon find your drawing take another look. A very useful expedient in producing some effects, is to wet the paper, and then lay the colour on it, more or less wet, according to the effect you want. You will soon see how prettily it gradates itself as it dries; when dry, you can reinforce it with delicate stippling when you want it darker. Also, while the colour is still damp on the paper, by drying your brush thoroughly, and touching the colour with the brush so dried, you may take out soft lights with great tenderness and precision. Try all sorts of experiments of this kind, noticing how the colour behaves; but remembering always that your final results must be obtained, and can only be obtained, by pure work with the point, as much as in the pen drawing. You will find also, as you deal with more and more complicated subjects, that Nature's resources in light and shade are so much richer than yours, that you cannot possibly get all, or anything _like_ all, the gradations of shadow in any given group. When this is the case, determine first to keep the broad masses of things distinct: if, for instance, there is a green book, and a white piece of paper, and a black inkstand in the group, be sure to keep the white paper as a light mass, the green book as a middle tint mass, the black inkstand as a dark mass; and do not shade the folds in the paper, or corners of the book, so as to equal in depth the darkness of the inkstand. The great difference between the masters of light and shade, and imperfect artists, is the power of the former to draw so delicately as to express form in a dark-coloured object with little light, and in a light-coloured object with little darkness; and it is better even to leave the forms here and there unsatisfactorily rendered than to lose the general relations of the great masses. And this observe, not because masses are grand or desirable things in your composition (for with composition at present you have nothing whatever to do), but because it is a _fact_ that things do so present themselves to the eyes of men, and that we see paper, book, and inkstand as three separate things, before we see the wrinkles, or chinks, or corners of any of the three. Understand, therefore, at once, that no detail can be as strongly expressed in drawing as it is in the reality; and strive to keep all your shadows and marks and minor markings on the masses, lighter than they appear to be in Nature, you are sure otherwise to get them too dark. You will in doing this find that you cannot get the _projection_ of things sufficiently shown; but never mind that; there is no need that they should appear to project, but great need that their relations of shade to each other should be preserved. All deceptive projection is obtained by partial exaggeration of shadow; and whenever you see it, you may be sure the drawing is more or less bad; a thoroughly fine drawing or painting will always show a slight tendency towards _flatness_. Observe, on the other hand, that however white an object may be, there is always some small point of it whiter than the rest. You must therefore have a slight tone of grey over everything in your picture except on the extreme high lights; even the piece of white paper, in your subject, must be toned slightly down, unless (and there are a thousand chances to one against its being so) it should all be turned so as fully to front the light. By examining the treatment of the white objects in any pictures accessible to you by Paul Veronese or Titian, you will soon understand this.[213] As soon as you feel yourself capable of expressing with the brush the undulations of surfaces and the relations of masses, you may proceed to draw more complicated and beautiful things.[214] And first, the boughs of trees, now not in mere dark relief, but in full rounding. Take the first bit of branch or stump that comes to hand, with a fork in it; cut off the ends of the forking branches, so as to leave the whole only about a foot in length; get a piece of paper the same size, fix your bit of branch in some place where its position will not be altered, and draw it thoroughly, in all its light and shade, full size; striving, above all things, to get an accurate expression of its structure at the fork of the branch. When once you have mastered the tree at its _armpits_, you will have little more trouble with it. Always draw whatever the background happens to be, exactly as you see it. Wherever you have fastened the bough, you must draw whatever is behind it, ugly or not, else you will never know whether the light and shade are right; they may appear quite wrong to you, only for want of the background. And this general law is to be observed in all your studies: whatever you draw, draw completely and unalteringly, else you never know if what you have done is right, or whether you _could_ have done it rightly had you tried. There is nothing _visible_ out of which you may not get useful practice. Next, to put the leaves on your boughs. Gather a small twig with four or five leaves on it, put it into water, put a sheet of light-coloured or white paper behind it, so that all the leaves may be relieved in dark from the white field; then sketch in their dark shape carefully with pencil as you did the complicated boughs, in order to be sure that all their masses and interstices are right in shape before you begin shading, and complete as far as you can with pen and ink, in the manner of Fig. 6., which is a young shoot of lilac. [Illustration: FIG. 6.] You will probably, in spite of all your pattern drawings, be at first puzzled by leaf foreshortening; especially because the look of retirement or projection depends not so much on the perspective of the leaves themselves as on the double sight of the two eyes. Now there are certain artifices by which good painters can partly conquer this difficulty; as slight exaggerations of force or colour in the nearer parts, and of obscurity in the more distant ones; but you must not attempt anything of this kind. When you are first sketching the leaves, shut one of your eyes, fix a point in the background, to bring the point of one of the leaves against, and so sketch the whole bough as you see it in a fixed position, looking with one eye only. Your drawing never can be made to look like the object itself, as you see that object with _both_ eyes,[215] but it can be made perfectly like the object seen with one, and you must be content when you have got a resemblance on these terms. In order to get clearly at the notion of the thing to be done, take a single long leaf, hold it with its point towards you, and as flat as you can, so as to see nothing of it but its thinness, as if you wanted to know how thin it was; outline it so. Then slope it down gradually towards you, and watch it as it lengthens out to its full length, held perpendicularly down before you. Draw it in three or four different positions between these extremes, with its ribs as they appear in each position, and you will soon find out how it must be. Draw first only two or three of the leaves; then larger clusters; and practise, in this way, more and more complicated pieces of bough and leafage, till you find you can master the most difficult arrangements, not consisting of more than ten or twelve leaves. You will find as you do this, if you have an opportunity of visiting any gallery of pictures, that you take a much more lively interest than before in the work of the great masters; you will see that very often their best backgrounds are composed of little more than a few sprays of leafage, carefully studied, brought against the distant sky; and that another wreath or two form the chief interest of their foregrounds. If you live in London you may test your progress _accurately_ by the degree of admiration you feel for the leaves of vine round the head of the Bacchus, in Titian's Bacchus and Ariadne. All this, however, will not enable you to draw a mass of foliage. You will find, on looking at any rich piece of vegetation, that it is only one or two of the nearer clusters that you can by any possibility draw in this complete manner. The mass is too vast, and too intricate, to be thus dealt with. [Illustration: FIG. 7. a b c] You must now therefore have recourse to some confused mode of execution, capable of expressing the confusion of Nature. And, first, you must understand what the character of that confusion is. If you look carefully at the outer sprays of any tree at twenty or thirty yards' distance, you will see them defined against the sky in masses, which, at first, look quite definite; but if you examine them, you will see, mingled with the real shapes of leaves, many indistinct lines, which are, some of them, stalks of leaves, and some, leaves seen with the edge turned towards you, and coming into sight in a broken way; for, supposing the real leaf shape to be as at _a_, Fig. 7., this, when removed some yards from the eye, will appear dark against the sky, as at _b_; then, when removed some yards farther still, the stalk and point disappear altogether, the middle of the leaf becomes little more than a line; and the result is the condition at _c_, only with this farther subtlety in the look of it, inexpressible in the woodcut, that the stalk and point of the leaf, though they have disappeared to the eye, have yet some influence in _checking the light_ at the places where they exist, and cause a slight dimness about the part of the leaf which remains visible, so that its perfect effect could only be rendered by two layers of colour, one subduing the sky tone a little, the next drawing the broken portions of the leaf, as at _c_, and carefully indicating the greater darkness of the spot in the middle, where the under side of the leaf is. This is the perfect theory of the matter. In practice we cannot reach such accuracy; but we shall be able to render the general look of the foliage satisfactorily by the following mode of practice. Gather a spray of any tree, about a foot or eighteen inches long. Fix it firmly by the stem in anything that will support it steadily; put it about eight feet away from you, or ten if you are far-sighted. Put a sheet of not very white paper behind it, as usual. Then draw very carefully, first placing them with pencil, and then filling them up with ink, every leaf, mass and stalk of it in simple black profile, as you see them against the paper: Fig. 8. is a bough of Phillyrea so drawn. Do not be afraid of running the leaves into a black mass when they come together; this exercise is only to teach you what the actual shapes of such masses are when seen against the sky. [Illustration: FIG. 8.] Make two careful studies of this kind of one bough of every common tree--oak, ash, elm, birch, beech, &c.; in fact, if you are good, and industrious, you will make one such study carefully at least three times a week, until you have examples of every sort of tree and shrub you can get branches of. You are to make two studies of each bough, for this reason--all masses of foliage have an upper and under surface, and the side view of them, or profile, shows a wholly different organisation of branches from that seen in the view from above. They are generally seen more or less in profile, as you look at the whole tree, and Nature puts her best composition into the profile arrangement. But the view from above or below occurs not unfrequently, also, and it is quite necessary you should draw it if you wish to understand the anatomy of the tree. The difference between the two views is often far greater than you could easily conceive. For instance, in Fig. 9., _a_ is the upper view, and _b_ the profile, of a single spray of Phillyrea. Fig. 8. is an intermediate view of a larger bough; seen from beneath, but at some lateral distance also. [Illustration: FIG. 9.] When you have done a few branches in this manner, take one of the _drawings_, and put it first a yard away from you, then a yard and a half, then two yards; observe how the thinner stalks and leaves gradually disappear, leaving only a vague and slight darkness where they were, and make another study of the effect at each distance, taking care to draw nothing more than you really see, for in this consists all the difference between what would be merely a _miniature_ drawing of the leaves seen _near_, and a _full-size_ drawing of the same leaves at a distance. By full size, I mean the size which they would really appear of if their outline were traced through a pane of glass held at the same distance from the eye at which you mean to hold your drawing. You can always ascertain this full size of any object by holding your paper upright before you, at the distance from your eye at which you wish your drawing to be seen. Bring its edge across the object you have to draw, and mark upon this edge the points where the outline of the object crosses, or goes behind, the edge of the paper. You will always find it, thus measured, smaller than you supposed. When you have made a few careful experiments of this kind on your own drawings, (which are better for practice, at first, than the real trees, because the black profile in the drawing is quite stable, and does not shake, and is not confused by sparkles of lustre on the leaves,) you may try the extremities of the real trees, only not doing much at a time, for the brightness of the sky will dazzle and perplex your sight. And this brightness causes, I believe, some loss of the outline itself; at least the chemical action of the light in a photograph extends much within the edges of the leaves, and, as it were, eats them away so that no tree extremity, stand it ever so still, nor any other form coming against bright sky, is truly drawn by a photograph; and if you once succeed in drawing a few sprays rightly, you will find the result much more lovely and interesting than any photograph can be. All this difficulty, however, attaches to the rendering merely the dark form of the sprays as they come against the sky. Within those sprays, and in the heart of the tree, there is a complexity of a much more embarrassing kind; for nearly all leaves have some lustre, and _all_ are more or less translucent (letting light through them); therefore, in any given leaf, besides the intricacies of its own proper shadows and foreshortenings, there are three series of circumstances which alter or hide its forms. First, shadows cast on it by other leaves--often very forcibly. Secondly, light reflected from its lustrous surface, sometimes the blue of the sky, sometimes the white of clouds, or the sun itself flashing like a star. Thirdly, forms and shadows of other leaves, seen as darkness _through_ the translucent parts of the leaf; a most important element of foliage effect, but wholly neglected by landscape artists in general. The consequence of all this is, that except now and then by chance, the form of a complete leaf is never seen; but a marvellous and quaint confusion, very definite, indeed, in its evidence of direction of growth, and unity of action, but wholly indefinable and inextricable, part by part, by any amount of patience. You cannot possibly work it out in fac simile, though you took a twelvemonth's time to a tree; and you must therefore try to discover some mode of execution which will more or less imitate, by its own variety and mystery, the variety and mystery of Nature, without absolute delineation of detail. Now I have led you to this conclusion by observation of tree form only, because in that the thing to be proved is clearest. But no natural object exists which does not involve in some part or parts of it this inimitableness, this mystery of quantity, which needs peculiarity of handling and trick of touch to express it completely. If leaves are intricate, so is moss, so is foam, so is rock cleavage, so are fur and hair, and texture of drapery, and of clouds. And although methods and dexterities of handling are wholly useless if you have not gained first the thorough knowledge of the form of the thing; so that if you cannot draw a branch perfectly, then much less a tree; and if not a wreath of mist perfectly, much less a flock of clouds; and if not a single grass blade perfectly, much less a grass bank; yet having once got this power over decisive form, you may safely--and must, in order to perfection of work--carry out your knowledge by every aid of method and dexterity of hand. But, in order to find out what method can do, you must now look at Art as well as at Nature, and see what means painters and engravers have actually employed for the expression of these subtleties. Whereupon arises the question, what opportunity have you to obtain engravings? You ought, if it is at all in your power, to possess yourself of a certain number of good examples of Turner's engraved works: if this be not in your power, you must just make the best use you can of the shop windows, or of any plates of which you can obtain a loan. Very possibly, the difficulty of getting sight of them may stimulate you to put them to better use. But, supposing your means admit of your doing so, possess yourself, first, of the illustrated edition either of Rogers's Italy or Rogers's Poems, and then of about a dozen of the plates named in the annexed lists. The prefixed letters indicate the particular points deserving your study in each engraving.[216] Be sure, therefore, that your selection includes, at all events, one plate marked with each letter--of course the plates marked with two or three letters are, for the most part, the best. Do not get more than twelve of these plates, nor even all the twelve at first. For the more engravings you have, the less attention you will pay to them. It is a general truth, that the enjoyment derivable from art cannot be increased in quantity, beyond a certain point, by quantity of possession; it is only spread, as it were, over a larger surface, and very often dulled by finding ideas repeated in different works. Now, for a beginner, it is always better that his attention should be concentrated on one or two good things, and all his enjoyment founded on them, than that he should look at many, with divided thoughts. He has much to discover; and his best way of discovering it is to think long over few things, and watch them earnestly. It is one of the worst errors of this age to try to know and to see too much: the men who seem to know everything, never in reality know anything rightly. Beware of _hand-book_ knowledge. These engravings are, in general, more for you to look at than to copy; and they will be of more use to you when we come to talk of composition, than they are at present; still, it will do you a great deal of good, sometimes to try how far you can get their delicate texture, or gradations of tone; as your pen-and-ink drawing will be apt to incline too much to a scratchy and broken kind of shade. For instance, the texture of the white convent wall, and the drawing of its tiled roof, in the vignette at p. 227. of Rogers's Poems, is as exquisite as work can possibly be; and it will be a great and profitable achievement if you can at all approach it. In like manner, if you can at all imitate the dark distant country at p. 7., or the sky at p. 80., of the same volume, or the foliage at pp. 12. and 144., it will be good gain; and if you can once draw the rolling clouds and running river at p. 9. of the "Italy," or the city in the vignette of Aosta at p. 25., or the moonlight at p. 223., you will find that even Nature herself cannot afterwards very terribly puzzle you with her torrents, or towers, or moonlight. You need not copy touch for touch, but try to get the same effect. And if you feel discouraged by the delicacy required, and begin to think that engraving is not drawing, and that copying it cannot help you to draw, remember that it differs from common drawing only by the difficulties it has to encounter. You perhaps have got into a careless habit of thinking that engraving is a mere _business_, easy enough when one has got into the knack of it. On the contrary, it is a form of drawing more difficult than common drawing, by exactly so much as it is more difficult to cut steel than to move the pencil over paper. It is true that there are certain mechanical aids and methods which reduce it at certain stages either to pure machine work, or to more or less a habit of hand and arm; but this is not so in the foliage you are trying to copy, of which the best and prettiest parts are always etched--that is, drawn with a fine steel point and free hand: only the line made is white instead of black, which renders it much more difficult to judge of what you are about. And the trying to copy these plates will be good for you, because it will awaken you to the real labour and skill of the engraver, and make you understand a little how people must work, in this world, who have really to _do_ anything in it. Do not, however, suppose that I give you the engraving as a model--far from it; but it is necessary you should be able to do as well[217] before you think of doing better, and you will find many little helps and hints in the various work of it. Only remember that _all_ engravers' foregrounds are bad; whenever you see the peculiar wriggling parallel lines of modern engravings become distinct, you must not copy; nor admire: it is only the softer masses, and distances; and portions of the foliage in the plates marked _f_, which you may copy. The best for this purpose, if you can get it, is the "Chain bridge over the Tees," of the England series; the thicket on the right is very beautiful and instructive, and very like Turner. The foliage in the "Ludlow" and "Powis" is also remarkably good. Besides these line engravings, and to protect you from what harm there is in their influence, you are to provide yourself, if possible, with a Rembrandt etching, or a photograph of one (of figures, not landscape). It does not matter of what subject, or whether a sketchy or finished one, but the sketchy ones are generally cheapest, and will teach you most. Copy it as well as you can, noticing especially that Rembrandt's most rapid lines have steady purpose; and that they are laid with almost inconceivable precision when the object becomes at all interesting. The "Prodigal Son," "Death of the Virgin," "Abraham and Isaac," and such others, containing incident and character rather than chiaroscuro, will be the most instructive. You can buy one; copy it well; then exchange it, at little loss, for another; and so, gradually, obtain a good knowledge of his system. Whenever you have an opportunity of examining his work at museums, &c., do so with the greatest care, not looking at _many_ things, but a long time at each. You must also provide yourself, if possible, with an engraving of Albert Durer's. This you will not be able to copy; but you must keep it beside you, and refer to it as a standard of precision in line. If you can get one with a _wing_ in it, it will be best. The crest with the cock, that with the skull and satyr, and the "Melancholy," are the best you could have, but any will do. Perfection in chiaroscuro drawing lies between these two masters, Rembrandt and Durer. Rembrandt is often too loose and vague; and Durer has little or no effect of mist or uncertainty. If you can see anywhere a drawing by Leonardo, you will find it balanced between the two characters; but there are no engravings which present this perfection, and your style will be best formed, therefore, by alternate study of Rembrandt and Durer. Lean rather to Durer; it is better for amateurs to err on the side of precision than on that of vagueness: and though, as I have just said, you cannot copy a Durer, yet try every now and then a quarter of an inch square or so, and see how much nearer you can come; you cannot possibly try to draw the leafly crown of the "Melancholia" too often. If you cannot get either a Rembrandt or a Durer, you may still learn much by carefully studying any of George Cruikshank's etchings, or Leech's woodcuts in Punch, on the free side; with Alfred Rethel's and Richter's[218] on the severe side. But in so doing you will need to notice the following points: When either the material (as the copper or wood) or the time of an artist, does not permit him to make a perfect drawing,--that is to say, one in which no lines shall be prominently visible,--and he is reduced to show the black lines, either drawn by the pen, or on the wood, it is better to make these lines help, as far as may be, the expression of texture and form. You will thus find many textures, as of cloth or grass or flesh, and many subtle effects of light, expressed by Leech with zigzag or crossed or curiously broken lines; and you will see that Alfred Rethel and Richter constantly express the direction and rounding of surfaces by the direction of the lines which shade them. All these various means of expression will be useful to you, as far as you can learn them, provided you remember that they are merely a kind of shorthand; telling certain facts, not in quite the _right_ way, but in the only possible way under the conditions: and provided in any after use of such means, you never try to show your own dexterity; but only to get as much record of the object as you can in a given time; and that you continually make efforts to go beyond shorthand, and draw portions of the objects rightly. And touching this question of _direction_ of lines as indicating that of surface, observe these few points: [Illustration: FIG. 10.] If lines are to be distinctly shown, it is better that, so far as they _can_ indicate any thing by their direction, they should explain rather than oppose the general character of the object. Thus, in the piece of woodcut from Titian, Fig. 10., the lines are serviceable by expressing, not only the shade of the trunk, but partly also its roundness, and the flow of its grain. And Albert Durer, whose work was chiefly engraving, sets himself always thus to make his lines as _valuable_ as possible; telling much by them, both of shade and direction of surface: and if you were always to be limited to engraving on copper (and did not want to express effects of mist or darkness, as well as delicate forms), Albert Durer's way of work would be the best example for you. But, inasmuch as the perfect way of drawing is by shade without lines, and the great painters always conceive their subject as complete, even when they are sketching it most rapidly, you will find that, when they are not limited in means, they do not much trust to direction of line, but will often scratch in the shade of a rounded surface with nearly straight lines, that is to say, with the easiest and quickest lines possible to themselves. When the hand is free, the easiest line for it to draw is one inclining from the left upward to the right, or _vice versâ_, from the right downwards to the left; and when done very quickly, the line is hooked a little at the end by the effort at return to the next. Hence, you will always find the pencil, chalk, or pen sketch of a _very_ great master full of these kind of lines; and even if he draws carefully, you will find him using simple straight lines from left to right, when an inferior master will have used curved ones. Fig. 11. is a fair facsimile of part of a sketch of Raphael's, which exhibits these characters very distinctly. Even the careful drawings of Leonardo da Vinci are shaded most commonly with straight lines; and you may always assume it as a point increasing the probability of a drawing being by a great master if you find rounded surfaces, such as those of cheeks or lips, shaded with straight lines. [Illustration: FIG. 11.] But you will also now understand how easy it must be for dishonest dealers to forge or imitate scrawled sketches like Figure 11., and pass them for the work of great masters; and how the power of determining the genuineness of a drawing depends entirely on your knowing the _facts_ of the object drawn, and perceiving whether the hasty handling is _all_ conducive to the expression of those truths. In a great man's work, at its fastest, no line is thrown away, and it is not by the rapidity, but the _economy_ of the execution that you know him to be great. Now to judge of this economy, you must know exactly what he meant to do, otherwise you cannot of course discern how far he has done it; that is, you must know the beauty and nature of the thing he was drawing. All judgment of art thus finally founds itself on knowledge of Nature. But farther observe, that this scrawled, or economic, or impetuous execution is never _affectedly_ impetuous. If a great man is not in a hurry, he never pretends to be; if he has no eagerness in his heart, he puts none into his hand; if he thinks his effect would be better got with _two_ lines, he never, to show his dexterity, tries to do it with one. Be assured, therefore (and this is a matter of great importance), that you will never produce a great drawing by imitating the _execution_ of a great master. Acquire his knowledge and share his feelings, and the easy execution will fall from your hand as it did from his; but if you merely scrawl because he scrawled, or blot because he blotted, you will not only never advance in power, but every able draughtsman, and every judge whose opinion is worth having, will know you for a cheat, and despise you accordingly. Again, observe respecting the use of outline: All merely outlined drawings are bad, for the simple reason, that an artist of any power can always do more, and tell more, by quitting his outlines occasionally, and scratching in a few lines for shade, than he can by restricting himself to outline only. Hence the fact of his so restricting himself, whatever may be the occasion, shows him to be a bad draughtsman, and not to know how to apply his power economically. This hard law, however, bears only on drawings meant to remain in the state in which you see them; not on those which were meant to be proceeded with, or for some mechanical use. It is sometimes necessary to draw pure outlines, as an incipient arrangement of a composition, to be filled up afterwards with colour, or to be pricked through and used as patterns or tracings; but if, with no such ultimate object, making the drawing wholly for its own sake, and meaning it to remain in the state he leaves it, an artist restricts himself to outline, he is a bad draughtsman, and his work is bad. There is no exception to this law. A good artist habitually sees masses, not edges, and can in every case make his drawing more expressive (with any given quantity of work) by rapid shade than by contours; so that all good work whatever is more or less touched with shade, and more or less interrupted as outline. [Illustration: FIG. 12.] Hence, the published works of Retsch, and all the English imitations of them, and all outline engravings from pictures, are bad work, and only serve to corrupt the public taste, and of such outlines, the worst are those which are darkened in some part of their course by way of expressing the dark side, as Flaxman's from Dante, and such others; because an outline can only be true so long as it accurately represents the form of the given object with _one_ of its edges. Thus, the outline _a_ and the outline _b_, Fig. 12., are both _true_ outlines of a ball; because, however thick the line may be, whether we take the interior or exterior edge of it, that edge of it always draws a true circle. But _c_ is a false outline of a ball, because either the inner or outer edge of the black line must be an untrue circle, else the line could not be thicker in one place than another. Hence all "force," as it is called, is gained by falsification of the contours; so that no artist whose eye is true and fine could endure to look at it. It does indeed often happen that a painter, sketching rapidly, and trying again and again for some line which he cannot quite strike, blackens or loads the first line by setting others beside and across it; and then a careless observer supposes it has been thickened on purpose; or, sometimes also, at a place where shade is afterwards to enclose the form, the painter will strike a broad dash of this shade beside his outline at once, looking as if he meant to thicken the outline; whereas this broad line is only the first instalment of the future shadow, and the outline is really drawn with its inner edge. And thus, far from good draughtsmen darkening the lines which turn away from the light, the _tendency_ with them is rather to darken them towards the light, for it is there in general that shade will ultimately enclose them. The best example of this treatment that I know is Raphael's sketch, in the Louvre, of the head of the angel pursuing Heliodorus, the one that shows part of the left eye; where the dark strong lines which terminate the nose and forehead towards the light are opposed to tender and light ones behind the ear, and in other places towards the shade. You will see in Fig. 11. the same principle variously exemplified; the principal dark lines, in the head and drapery of the arms, being on the side turned to the light. All these refinements and ultimate principles, however, do not affect your drawing for the present. You must try to make your outlines as _equal_ as possible; and employ pure outline only for the two following purposes: either (1.) to steady your hand, as in Exercise II., for if you cannot draw the line itself, you will never be able to terminate your shadow in the precise shape required, when the line is absent; or (2.) to give you shorthand memoranda of forms, when you are pressed for time. Thus the forms of distant trees in groups are defined, for the most part, by the light edge of the rounded mass of the nearer one being shown against the darker part of the rounded mass of a more distant one; and to draw this properly, nearly as much work is required to round each tree as to round the stone in Fig. 5. Of course you cannot often get time to do this; but if you mark the terminal line of each tree as is done by Durer in Fig. 13., you will get a most useful memorandum of their arrangement, and a very interesting drawing. Only observe in doing this, you must not, because the procedure is a quick one, hurry that procedure itself. You will find, on copying that bit of Durer, that every one of his lines is firm, deliberate, and accurately descriptive as far as it goes. It means a bush of such a size and such a shape, definitely observed and set down; it contains a true "signalement" of every nut-tree, and apple-tree, and higher bit of hedge, all round that village. If you have not time to draw thus carefully, do not draw at all--you are merely wasting your work and spoiling your taste. When you have had four or five years' practice you may be able to make useful memoranda at a rapid rate, but not yet; except sometimes of light and shade, in a way of which I will tell you presently. And this use of outline, note farther, is wholly confined to objects which have _edges_ or _limits_. You can outline line a tree or a stone, when it rises against another tree or stone; but you cannot outline folds in drapery, or waves in water; if these are to be expressed at all it must be by some sort of shade, and therefore the rule that no good drawing can consist throughout of pure outline remains absolute. You see, in that woodcut of Durer's, his reason for even limiting himself so much to outline as he has, in those distant woods and plains, is that he may leave them in bright light, to be thrown out still more by the dark sky and the dark village spire; and the scene becomes real and sunny only by the addition of these shades. [Illustration: FIG. 13.] Understanding, then, thus much of the use of outline, we will go back to our question about tree drawing left unanswered at page 60. [Illustration: FIG. 14.] [Illustration: FIG. 15.] We were, you remember, in pursuit of mystery among the leaves. Now, it is quite easy to obtain mystery and disorder, to any extent; but the difficulty is to keep organisation in the midst of mystery. And you will never succeed in doing this unless you lean always to the definite side, and allow yourself rarely to become quite vague, at least through all your early practice. So, after your single groups of leaves, your first step must be to conditions like Figs. 14. and 15., which are careful facsimiles of two portions of a beautiful woodcut of Durer's, the Flight into Egypt. Copy these carefully,--never mind how little at a time, but thoroughly; then trace the Durer, and apply it to your drawing, and do not be content till the one fits the other, else your eye is not true enough to carry you safely through meshes of real leaves. And in the course of doing this, you will find that not a line nor dot of Durer's can be displaced without harm; that all add to the effect, and either express something, or illumine something, or relieve something. If, afterwards, you copy any of the pieces of modern tree drawing, of which so many rich examples are given constantly in our cheap illustrated periodicals (any of the Christmas numbers of last year's _Illustrated News_ or _Times_ are full of them), you will see that, though good and forcible general effect is produced, the lines are thrown in by thousands without special intention, and might just as well go one way as another, so only that there be enough of them to produce all together a well-shaped effect of intricacy: and you will find that a little careless scratching about with your pen will bring you very near the same result without an effort; but that no scratching of pen, nor any fortunate chance, nor anything but downright skill and thought, will imitate so much as one leaf of Durer's. Yet there is considerable intricacy and glittering confusion in the interstices of those vine leaves of his, as well as of the grass. [Illustration: FIG. 16.] When you have got familiarised to this firm manner, you may draw from Nature as much as you like in the same way, and when you are tired of the intense care required for this, you may fall into a little more easy massing of the leaves, as in Fig. 10. p. 66. This is facsimiled from an engraving after Titian, but an engraving not quite first-rate in manner, the leaves being a little too formal; still, it is a good enough model for your times of rest; and when you cannot carry the thing even so far as this, you may sketch the forms of the masses, as in Fig. 16.,[219] taking care always to have thorough command over your hand; that is, not to let the mass take a free shape because your hand ran glibly over the paper, but because in nature it has actually a free and noble shape, and you have faithfully followed the same. And now that we have come to questions of _noble_ shape, as well as true shape, and that we are going to draw from nature at our pleasure, other considerations enter into the business, which are by no means confined to _first_ practice, but extend to all practice; these (as this letter is long enough, I should think, to satisfy even the most exacting of correspondents) I will arrange in a second letter; praying you only to excuse the tiresomeness of this first one--tiresomeness inseparable from directions touching the beginning of any art,--and to believe me, even though I am trying to set you to dull and hard work. Very faithfully yours, J. RUSKIN. FOOTNOTES: [199] (N. B. This note is only for the satisfaction of incredulous or curious readers. You may miss it if you are in a hurry, or are willing to take the statement in the text on trust.) The perception of solid Form is entirely a matter of experience. We _see_ nothing but flat colours; and it is only by a series of experiments that we find out that a stain of black or grey indicates the dark side of a solid substance, or that a faint hue indicates that the object in which it appears is far away. The whole technical power of painting depends on our recovery of what may be called the _innocence of the eye_; that is to say, a sort of childish perception of these flat stains of colour, merely as such, without consciousness of what they signify, as a blind man would see them if suddenly gifted with sight. For instance; when grass is lighted strongly by the sun in certain directions, it is turned from green into a peculiar and somewhat dusty-looking yellow. If we had been born blind, and were suddenly endowed with sight on a piece of grass thus lighted in some parts by the sun, it would appear to us that part of the grass was green, and part a dusty yellow (very nearly of the colour of primroses); and, if there were primroses near, we should think that the sunlighted grass was another mass of plants of the same sulphur-yellow colour. We should try to gather some of them, and then find that the colour went away from the grass when we stood between it and the sun, but not from the primroses; and by a series of experiments we should find out that the sun was really the cause of the colour in the one,--not in the other. We go through such processes of experiment unconsciously in childhood; and having once come to conclusions touching the signification of certain colours, we always suppose that we _see_ what we only know, and have hardly any consciousness of the real aspect of the signs we have learned to interpret. Very few people have any idea that sunlighted grass is yellow. Now, a highly accomplished artist has always reduced himself as nearly as possible to this condition of infantine sight. He sees the colours of nature exactly as they are, and therefore perceives at once in the sunlighted grass the precise relation between the two colours that form its shade and light. To him it does not seem shade and light, but bluish green barred with gold. Strive, therefore, first of all, to convince yourself of this great fact about sight. This, in your hand, which you know by experience and touch to be a book, is to your eye nothing but a patch of white, variously gradated and spotted; this other thing near you, which by experience you know to be a table, is to your eye only a patch of brown, variously darkened and veined; and so on: and the whole art of Painting consists merely in perceiving the shape and depth of these patches of colour, and putting patches of the same size, depth, and shape on canvas. The only obstacle to the success of painting is, that many of the real colours are brighter and paler than it is possible to put on canvas: we must put darker ones to represent them. [200] Stale crumb of bread is better, if you are making a delicate drawing, than India-rubber, for it disturbs the surface of the paper less: but it crumbles about the room and makes a mess; and, besides, you waste the good bread, which is wrong; and your drawing will not for a long while be worth the crumbs. So use India-rubber very lightly; or, if heavily pressing it only, not passing it over the paper, and leave what pencil marks that will not come away so, without minding them. In a finished drawing the uneffaced penciling is often serviceable, helping the general tone, and enabling you to take out little bright lights. [201] What is usually so much sought after under the term "freedom" is the character of the drawing of a great master in a hurry, whose hand is so thoroughly disciplined, that when pressed for time he can let it fly as it will, and it will not go far wrong. But the hand of a great master at real _work_ is _never_ free: its swiftest dash is under perfect government. Paul Veronese or Tintoret could pause within a hair's breadth of any appointed mark, in their fastest touches; and follow, within a hair's breadth, the previously intended curve. You must never, therefore, aim at freedom. It is not required of your drawing that it should be free, but that it should be _right_: in time you will be able to do right easily, and then your work will be free in the best sense; but there is no merit in doing _wrong_ easily. These remarks, however, do not apply to the lines used in shading, which, it will be remembered, are to be made as _quickly_ as possible. The reason of this is, that the quicker a line is drawn, the lighter it is at the ends, and therefore the more easily joined with other lines, and concealed by them; the object in perfect shading being to conceal the lines as much as possible. And observe, in this exercise, the object is more to get firmness of hand than accuracy of eye for outline; for there are no outlines in Nature, and the ordinary student is sure to draw them falsely if he draws them at all. Do not, therefore, be discouraged if you find mistakes continue to occur in your outlines; be content at present if you find your hand gaining command over the curves. [202] If you can get any pieces of _dead_ white porcelain, not glazed, they will be useful models. [203] Artists who glance at this book may be surprised at this permission. My chief reason is, that I think it more necessary that the pupil's eye should be trained to accurate perception of the relations of curve and right lines, by having the latter absolutely true, than that he should practice drawing straight lines. But also, I believe, though I am not quite sure of this, that he never _ought_ to be able to draw a straight line. I do not believe a perfectly trained hand ever can draw a line without some curvature in it, or some variety of direction. Prout could draw a straight line, but I do not believe Raphael could, nor Tintoret. A great draughtsman can, as far as I have observed, draw every line _but_ a straight one. [204] Or, if you feel able to do so, scratch them in with confused quick touches, indicating the general shape of the cloud or mist of twigs round the main branches; but do not take much trouble about them. [205] It is more difficult, at first, to get, in colour, a narrow gradation than an extended one; but the ultimate difficulty is, as with the pen, to make the gradation go _far_. [206] Of course, all the columns of colour are to be of equal length. [207] The degree of darkness you can reach with the given colour is always indicated by the colour of the solid cake in the box. [208] The figure _a_, Fig. 5., is very dark, but this is to give an example of all kinds of depth of tint, without repeated figures. [209] Nearly neutral in ordinary circumstances, but yet with quite different tones in its neutrality, according to the colours of the various reflected rays that compose it. [210] If we had any business with the reasons of this, I might, perhaps, be able to show you some metaphysical ones for the enjoyment, by truly artistical minds, of the changes wrought by light, and shade, and perspective in patterned surfaces; but this is at present not to the point; and all that you need to know is that the drawing of such things is good exercise, and moreover a kind of exercise which Titian, Veronese, Tintoret, Giorgione, and Turner, all enjoyed, and strove to excel in. [211] The use of acquiring this habit of execution is that you may be able, when you begin to colour, to let one hue be seen in minute portions, gleaming between the touches of another. [212] William Hunt, of the Old Water-colour Society. [213] At Marlborough House, among the four principal examples of Turner's later water-colour drawing, perhaps the most neglected is that of fishing-boats and fish at sunset. It is one of his most wonderful works, though unfinished. If you examine the larger white fishing-boat sail, you will find it has a little spark of pure white in its right-hand upper corner, about as large as a minute pin's head, and that all the surface of the sail is gradated to that focus. Try to copy this sail once or twice, and you will begin to understand Turner's work. Similarly, the wing of the Cupid in Correggio's large picture in the National Gallery is focussed to two little grains of white at the top of it. The points of light on the white flower in the wreath round the head of the dancing child-faun, in Titian's Bacchus and Ariadne, exemplify the same thing. [214] I shall not henceforward _number_ the exercises recommended; as they are distinguished only by increasing difficulty of subject, not by difference of method. [215] If you understand the principle of the stereoscope you will know why; if not, it does not matter; trust me for the truth of the statement, as I cannot explain the principle without diagrams and much loss of time. [216] If you can, get first the plates marked with a star. The letters mean as follows:-- _a_ stands for architecture, including distant grouping of towns, cottages, &c. _c_ clouds, including mist and aërial effects. _f_ foliage. _g_ ground, including low hills, when not rocky. _l_ effects of light. _m_ mountains, or bold rocky ground. _p_ power of general arrangement and effect. _q_ quiet water. _r_ running or rough water; or rivers, even if calm, when their line of flow is beautifully marked. _From the England Series._ _a c f r._ Arundel. _a f l._ Ashby de la Zouche. _a l q r._ Barnard Castle.* _f m r._ Bolton Abbey. _f g r._ Buckfastleigh.* _a l p._ Caernarvon. _c l q._ Castle Upnor. _a f l._ Colchester. _l q._ Cowes. _c f p._ Dartmouth Cove. _c l q._ Flint Castle.* _a f g l._ Knaresborough.* _m r._ High Force of Tees.* _a f q._ Trematon. _a f p._ Lancaster. _c l m r._ Lancaster Sands.* _a g f._ Launceston. _c f l r._ Leicester Abbey. _f r._ Ludlow. _a f l._ Margate. _a l q._ Orford. _c p._ Plymouth. _f._ Powis Castle. _l m q._ Prudhoe Castle. _f l m r._ Chain Bridge over Tees.* _m q._ Ulleswater. _f m._ Valle Crucis. _From the Keepsake._ _m p q._ Arona. _m._ Drachenfells. _f l._ Marley.* _p._ St. Germain en Laye. _l p q._ Florence. _l m._ Ballyburgh Ness.* _From the Bible Series._ _f m._ Mount Lebanon. _m._ Rock of Moses at Sinai. _a l m._ Jericho. _a c g._ Joppa. _c l p q._ Solomon's Pools.* _a l._ Santa Saba. _a l._ Pool of Bethesda. _From Scott's Works._ _p r._ Melrose. _f r._ Dryburgh.* _c m._ Glencoe. _c m._ Loch Coriskin. _a l._ Caerlaverock. _From the "Rivers of France."_ _a q._ Château of Amboise, with large bridge on right. _l p r._ Rouen, looking down the river, poplars on right.* _a l p._ Rouen, with cathedral and rainbow, avenue on the left. _a p._ Rouen Cathedral. _f p._ Pont de l'Arche. _f l p._ View on the Seine, with avenue. _a c p._ Bridge of Meulan. _c g p r._ Caudebec.* [217] As _well_;--not as minutely: the diamond cuts finer lines on the steel than you can draw on paper with your pen; but you must be able to get tones as even, and touches as firm. [218] See, for account of these plates, the Appendix on "Works to be studied." [219] This sketch is not of a tree standing on its head, though it looks like it. You will find it explained presently. LETTER II. SKETCHING FROM NATURE. MY DEAR READER:-- The work we have already gone through together has, I hope, enabled you to draw with fair success, either rounded and simple masses, like stones, or complicated arrangements of form, like those of leaves; provided only these masses or complexities will stay quiet for you to copy, and do not extend into quantity so great as to baffle your patience. But if we are now to go out to the fields, and to draw anything like a complete landscape, neither of these conditions will any more be observed for us. The clouds will not wait while we copy their heaps or clefts; the shadows will escape from us as we try to shape them, each, in its stealthy minute march, still leaving light where its tremulous edge had rested the moment before, and involving in eclipse objects that had seemed safe from its influence; and instead of the small clusters of leaves which we could reckon point by point, embarrassing enough even though numerable, we have now leaves as little to be counted as the sands of the sea, and restless, perhaps, as its foam. In all that we have to do now, therefore, direct imitation becomes more or less impossible. It is always to be aimed at so far as it _is_ possible; and when you have time and opportunity, some portions of a landscape may, as you gain greater skill, be rendered with an approximation almost to mirrored portraiture. Still, whatever skill you may reach, there will always be need of judgment to choose, and of speed to seize, certain things that are principal or fugitive; and you must give more and more effort daily to the observance of characteristic points, and the attainment of concise methods. I have directed your attention early to foliage for two reasons. First, that it is always accessible as a study; and secondly, that its modes of growth present simple examples of the importance of leading or governing lines. It is by seizing these leading lines, when we cannot seize _all_, that likeness and expression are given to a portrait, and grace and a kind of _vital_ truth to the rendering of every natural form. I call it _vital_ truth, because these chief lines are always expressive of the past history and present action of the thing. They show in a mountain, first, how it was built or heaped up; and secondly, how it is now being worn away, and from what quarter the wildest storms strike it. In a tree, they show what kind of fortune it has had to endure from its childhood; how troublesome trees have come in its way, and pushed it aside, and tried to strangle or starve it; where and when kind trees have sheltered it, and grown up lovingly together with it, bending as it bent; what winds torment it most; what boughs of it behave best, and bear most fruit; and so on. In a wave or cloud, these leading lines show the run of the tide and of the wind, and the sort of change which the water or vapour is at any moment enduring in its form, as it meets shore, or counterwave, or melting sunshine. Now remember, nothing distinguishes great men from inferior men more than their always, whether in life or in art, _knowing the way things are going_. Your dunce thinks they are standing still, and draws them all fixed; your wise man sees the change or changing in them, and draws them so--the animal in its motion, the tree in its growth, the cloud in its course, the mountain in its wearing away. Try always, whenever you look at a form, to see the lines in it which have had power over its past fate, and will have power over its futurity. Those are its _awful_ lines; see that you seize on those, whatever else you miss. Thus, the leafage in Fig. 16. (p. 291.) grew round the root of a stone pine, on the brow of a crag at Sestri, near Genoa, and all the sprays of it are thrust away in their first budding by the great rude root, and spring out in every direction round it, as water splashes when a heavy stone is thrown into it. Then, when they have got clear of the root, they begin to bend up again; some of them, being little stone pines themselves, have a great notion of growing upright, if they can; and this struggle of theirs to recover their straight road towards the sky, after being obliged to grow sideways in their early years, is the effort that will mainly influence their future destiny, and determine if they are to be crabbed, forky pines, striking from that rock of Sestri, whose clefts nourish them, with bared red lightning of angry arms towards the sea; or if they are to be goodly and solemn pines, with trunks like pillars of temples, and the purple burning of their branches sheathed in deep globes of cloudy green. Those, then, are their fateful lines; see that you give that spring and resilience, whatever you leave ungiven: depend upon it, their chief beauty is in these. [Illustration: FIG. 17.] [Illustration: FIG. 18.] [Illustration: FIG. 19.] So in trees in general and bushes, large or small, you will notice that, though the boughs spring irregularly and at various angles, there is a tendency in all to stoop less and less as they near the top of the tree. This structure, typified in the simplest possible terms at _c_, Fig. 17., is common to all trees, that I know of, and it gives them a certain plumy character, and aspect of unity in the hearts of their branches, which are essential to their beauty. The stem does not merely send off a wild branch here and there to take its own way, but all the branches share in one great fountain-like impulse; each has a curve and a path to take which fills a definite place, and each terminates all its minor branches at its outer extremity, so as to form a great outer curve, whose character and proportion are peculiar for each species; that is to say, the general type or idea of a tree is not as _a_, Fig. 17., but as _b_, in which, observe, the boughs all carry their minor divisions right out to the bounding curve; not but that smaller branches, by thousands, terminate in the heart of the tree, but the idea and main purpose in every branch are to carry all its child branches well out to the air and light, and let each of them, however small, take its part in filling the united flow of the bounding curve, so that the type of each separate bough is again not _a_ but _b_, Fig. 18.; approximating, that is to say, so far to the structure of a plant of broccoli as to throw the great mass of spray and leafage out to a rounded surface; therefore, beware of getting into a careless habit of drawing boughs with successive sweeps of the pen or brush, one hanging to the other, as in Fig. 19. If you look at the tree-boughs in any painting of Wilson's, you will see this structure, and nearly every other that is to be avoided, in their intensest types. You will also notice that Wilson never conceives a tree as a round mass, but flat, as if it had been pressed and dried. Most people, in drawing pines, seem to fancy, in the same way, that the boughs come out only on two sides of the trunk, instead of all round it; always, therefore, take more pains in trying to draw the boughs of trees that grow _towards_ you, than those that go off to the sides; anybody can draw the latter, but the foreshortened ones are not so easy. It will help you in drawing them to observe that in most trees the ramification of each branch, though not of the tree itself, is more or less flattened, and approximates, in its position, to the look of a hand held out to receive something, or shelter something. If you take a looking-glass, and hold your hand before it slightly hollowed, with the palm upwards, and the fingers open, as if you were going to support the base of some great bowl, larger than you could easily hold, and sketch your hand as you see it in the glass, with the points of the fingers towards you, it will materially help you in understanding the way trees generally hold out their hands; and if then you will turn yours with its palm downwards, as if you were going to try to hide something, but with the fingers expanded, you will get a good type of the action of the lower boughs in cedars and such other spreading trees. [Illustration: FIG. 20.] Fig. 20. will give you a good idea of the simplest way in which these and other such facts can be rapidly expressed; if you copy it carefully, you will be surprised to find how the touches all group together, in expressing the plumy toss of the tree branches, and the springing of the bushes out of the bank, and the undulation of the ground: note the careful drawing of the footsteps made by the climbers of the little mound on the left.[220] It is facsimiled from an etching of Turner's, and is as good an example as you can have of the use of pure and firm lines; it will also show you how the particular action in foliage, or anything else to which you wish to direct attention, may be intensified by the adjuncts. The tall and upright trees are made to look more tall and upright still, because their line is continued below by the figure of the farmer with his stick; and the rounded bushes on the bank are made to look more rounded because their line is continued in one broad sweep by the black dog and the boy climbing the wall. These figures are placed entirely with this object, as we shall see more fully hereafter when we come to talk about composition; but, if you please, we will not talk about that yet awhile. What I have been telling you about the beautiful lines and action of foliage has nothing to do with composition, but only with fact, and the brief and expressive representation of fact. But there will be no harm in your looking forward, if you like to do so, to the account, in Letter III. of the "Law of Radiation," and reading what it said there about tree growth: indeed it would in some respects have been better to have said it here than there, only it would have broken up the account of the principles of composition somewhat awkwardly. Now, although the lines indicative of action are not always quite so manifest in other things as in trees, a little attention will soon enable you to see that there _are_ such lines in everything. In an old house roof, a bad observer and bad draughtsman will only see and draw the spotty irregularity of tiles or slates all over; but a good draughtsman will see all the bends of the under timbers, where they are weakest and the weight is telling on them most, and the tracks of the run of the water in time of rain, where it runs off fastest, and where it lies long and feeds the moss; and he will be careful, however few slates he draws, to mark the way they bend together towards those hollows (which have the future fate of the roof in them), and crowd gradually together at the top of the gable, partly diminishing in perspective, partly, perhaps, diminished on purpose (they are so in most English old houses) by the slate-layer. So in ground, there is always the direction of the run of the water to be noticed, which rounds the earth and cuts it into hollows; and, generally, in any bank, or height worth drawing, a trace of bedded or other internal structure besides. The figure 20. will give you some idea of the way in which such facts may be expressed by a few lines. Do you not feel the depression in the ground all down the hill where the footsteps are, and how the people always turn to the left at the top, losing breath a little, and then how the water runs down in that other hollow towards the valley, behind the roots of the trees? Now, I want you in your first sketches from nature to aim exclusively at understanding and representing these vital facts of form; using the pen--not now the steel, but the quill--firmly and steadily, never scrawling with it, but saying to yourself before you lay on a single touch,--"_That_ leaf is the main one, _that_ bough is the guiding one, and this touch, _so_ long, _so_ broad, means that part of it,"--point or side or knot, as the case may be. Resolve always, as you look at the thing, what you will take, and what miss of it, and never let your hand run away with you, or get into any habit or method of touch. If you want a continuous line, your hand should pass calmly from one end of it to the other, without a tremor; if you want a shaking and broken line, your hand should shake, or break off, as easily as a musician's finger shakes or stops on a note: only remember this, that there is no general way of doing _any_ thing; no recipe can be given you for so much as the drawing of a cluster of grass. The grass may be ragged and stiff, or tender and flowing; sunburnt and sheep-bitten, or rank and languid; fresh or dry; lustrous or dull: look at it, and try to draw it as it is, and don't think how somebody "told you to _do_ grass." So a stone may be round and angular, polished or rough, cracked all over like an ill-glazed teacup, or as united and broad as the breast of Hercules. It may be as flaky as a wafer, as powdery as a field puff-ball; it may be knotted like a ship's hawser, or kneaded like hammered iron, or knit like a Damascus sabre, or fused like a glass bottle, or crystallised like a hoar-frost, or veined like a forest leaf: look at it, and don't try to remember how anybody told you to "do a stone." As soon as you find that your hand obeys you thoroughly and that you can render any form with a firmness and truth approaching that of Turner's and Durer's work,[221] you must add a simple but equally careful light and shade to your pen drawing, so as to make each study as complete as possible: for which you must prepare yourself thus. Get, if you have the means, a good impression of one plate of Turner's Liber Studiorum; if possible, one of the subjects named in the note below.[222] If you cannot obtain, or even borrow for a little while, any of these engravings, you must use a photograph instead (how, I will tell you presently); but, if you can get the Turner, it will be best. You will see that it is composed of a firm etching in line, with mezzotint shadow laid over it. You must first copy the etched part of it accurately; to which end put the print against the window, and trace slowly with the _greatest_ care every black line; retrace this on smooth drawing-paper; and, finally, go over the whole with your pen, looking at the original plate always, so that if you err at all, it may be on the right side, not making a line which is too curved or too straight already in the tracing, _more_ curved or _more_ straight, as you go over it. And in doing this, never work after you are tired, nor to "get the thing done," for if it is badly done, it will be of no use to you. The true zeal and patience of a quarter of an hour are better than the sulky and inattentive labour of a whole day. If you have not made the touches right at the first going over with the pen, retouch them delicately, with little ink in your pen, thickening or reinforcing them as they need: you cannot give too much care to the facsimile. Then keep this etched outline by you, in order to study at your ease the way in which Turner uses his line as preparatory for the subsequent shadow;[223] it is only in getting the two separate that you will be able to reason on this. Next, copy once more, though for the fourth time, any part of this etching which you like, and put on the light and shade with the brush, and any brown colour that matches that of the plate;[224] working it with the point of the brush as delicately as if you were drawing with pencil, and dotting and cross-hatching as lightly as you can touch the paper, till you get the gradations of Turner's engraving. In this exercise, as in the former one, a quarter of an inch worked to close resemblance of the copy is worth more than the whole subject carelessly done. Not that in drawing afterwards from nature, you are to be obliged to finish every gradation in this way, but that, once having fully accomplished the drawing _something_ rightly, you will thenceforward feel and aim at a higher perfection than you could otherwise have conceived, and the brush will obey you, and bring out quickly and clearly the loveliest results, with a submissiveness which it would have wholly refused if you had not put it to severest work. Nothing is more strange in art than the way that chance and materials seem to favour you, when once you have thoroughly conquered them. Make yourself quite independent of chance, get your result in spite of it, and from that day forward all things will somehow fall as you would have them. Show the camel's-hair, and the colour in it, that no bending nor blotting are of any use to escape your will; that the touch and the shade _shall_ finally be right, if it cost you a year's toil; and from that hour of corrective conviction, said camel's-hair will bend itself to all your wishes, and no blot will dare to transgress its appointed border. If you cannot obtain a print from the Liber Studiorum, get a photograph[225] of some general landscape subject, with high hills and a village, or picturesque town, in the middle distance, and some calm water of varied character (a stream with stones in it, if possible), and copy any part of it you like, in this same brown colour, working, as I have just directed you to do from the Liber, a great deal with the point of the brush. You are under a twofold disadvantage here, however; first, there are portions in every photograph too delicately done for you at present to be at all able to copy; and secondly, there are portions always more obscure or dark than there would be in the real scene, and involved in a mystery which you will not be able, as yet, to decipher. Both these characters will be advantageous to you for future study, after you have gained experience, but they are a little against you in early attempts at tinting; still you must fight through the difficulty, and get the power of producing delicate gradations with brown or grey, like those of the photograph. Now observe; the perfection of work would be tinted shadow, like photography, _without_ any obscurity or exaggerated darkness; and as long as your effect depends in anywise on visible _lines_, your art is not perfect, though it may be first-rate of its kind. But to get complete results in tints merely, requires both long time and consummate skill; and you will find that a few well-put pen lines, with a tint dashed over or under them, get more expression of facts than you could reach in any other way, by the same expenditure of time. The use of the Liber Studiorum print to you is chiefly as an example of the simplest shorthand of this kind, a shorthand which is yet capable of dealing with the most subtle natural effects; for the firm etching gets at the expression of complicated details, as leaves, masonry, textures of ground, &c., while the overlaid tint enables you to express the most tender distances of sky, and forms of playing light, mist or cloud. Most of the best drawings by the old masters are executed on this principle, the touches of the pen being useful also to give a look of transparency to shadows, which could not otherwise be attained but by great finish of tinting; and if you have access to any ordinarily good public gallery, or can make friends of any print-sellers who have folios of old drawings, or facsimiles of them, you will not be at a loss to find some example of this unity of pen with tinting. Multitudes of photographs also are now taken from the best drawings by the old masters, and I hope that our Mechanics' Institutes, and other societies organized with a view to public instruction, will not fail to possess themselves of examples of these, and to make them accessible to students of drawing in the vicinity; a single print from Turner's Liber, to show the unison of tint with pen etching, and the "St. Catherine," lately photographed by Thurston Thompson, from Raphael's drawing in the Louvre, to show the unity of the soft tinting of the stump with chalk, would be all that is necessary, and would, I believe, be in many cases more serviceable than a larger collection, and certainly than a whole gallery of second-rate prints. Two such examples are peculiarly desirable, because all other modes of drawing, with pen separately, or chalk separately, or colour separately, may be seen by the poorest student in any cheap illustrated book, or in shop windows. But this unity of tinting with line he cannot generally see but by some especial enquiry, and in some out of the way places he could not find a single example of it. Supposing that this should be so in your own case, and that you cannot meet with any example of this kind, try to make the matter out alone, thus: Take a small and simple photograph; allow yourself half an hour to express its subjects with the pen only, using some permanent liquid colour instead of ink, outlining its buildings or trees firmly, and laying in the deeper shadows, as you have been accustomed to do in your bolder pen drawings; then, when this etching is dry, take your sepia or grey, and tint it over, getting now the finer gradations of the photograph; and finally, taking out the higher lights with penknife or blotting-paper. You will soon find what can be done in this way; and by a series of experiments you may ascertain for yourself how far the pen may be made serviceable to reinforce shadows, mark characters of texture, outline unintelligible masses, and so on. The more time you have, the more delicate you may make the pen drawing, blending it with the tint; the less you have, the more distinct you must keep the two. Practice in this way from one photograph, allowing yourself sometimes only a quarter of an hour for the whole thing, sometimes an hour, sometimes two or three hours; in each case drawing the whole subject in full depth of light and shade, but with such degree of finish in the parts as is possible in the given time. And this exercise, observe, you will do well to repeat frequently whether you can get prints and drawings as well as photographs, or not. And now at last, when you can copy a piece of Liber Studiorum, or its photographic substitute, faithfully, you have the complete means in your power of working from nature on all subjects that interest you, which you should do in four different ways. First. When you have full time, and your subject is one that will stay quiet for you, make perfect light and shade studies, or as nearly perfect as you can, with grey or brown colour of any kind, reinforced and defined with the pen. Secondly. When your time is short, or the subject is so rich in detail that you feel you cannot complete it intelligibly in light and shade, make a hasty study of the effect, and give the rest of the time to a Dureresque expression of the details. If the subject seems to you interesting, and there are points about it which you cannot understand, try to get five spare minutes to go close up to it, and make a nearer memorandum; not that you are ever to bring the details of this nearer sketch into the farther one, but that you may thus perfect your experience of the aspect of things, and know that such and such a look of a tower or cottage at five hundred yards off means _that_ sort of tower or cottage near; while, also, this nearer sketch will be useful to prevent any future misinterpretation of your own work. If you have time, however far your light and shade study in the distance may have been carried, it is always well, for these reasons, to make also your Dureresque and your near memoranda; for if your light and shade drawing be good, much of the interesting detail must be lost in it, or disguised. Your hasty study of effect may be made most easily and quickly with a soft pencil, dashed over when done with one tolerably deep tone of grey, which will fix the pencil. While this fixing colour is wet, take out the higher lights with the dry brush; and, when it is quite dry, scratch out the highest lights with the penknife. Five minutes, carefully applied, will do much by these means. Of course the paper is to be white. I do not like studies on grey paper so well; for you can get more gradation by the taking off your wet tint, and laying it on cunningly a little darker here and there, than you can with body-colour white, unless you are consummately skilful. There is no objection to your making your Dureresque memoranda on grey or yellow paper, and touching or relieving them with white; only, do not depend much on your white touches, nor make the sketch for their sake. Thirdly. When you have neither time for careful study nor for Dureresque detail, sketch the outline with pencil, then dash in the shadows with the brush boldly, trying to do as much as you possibly can at once, and to get a habit of expedition and decision; laying more colour again and again into the tints as they dry, using every expedient which your practice has suggested to you of carrying out your chiaroscuro in the manageable and moist material, taking the colour off here with the dry brush, scratching out lights in it there with the wooden handle of the brush, rubbing it in with your fingers, drying it off with your sponge, &c. Then, when the colour is in, take your pen and mark the outline characters vigorously, in the manner of the Liber Studiorum. This kind of study is very convenient for carrying away pieces of effect which depend not so much on refinement as on complexity, strange shapes of involved shadows, sudden effects of sky, &c.; and it is most useful as a safeguard against any too servile or slow habits which the minute copying may induce in you; for although the endeavour to obtain velocity merely for velocity's sake, and dash for display's sake, is as baneful as it is despicable; there _are_ a velocity and a dash which not only are compatible with perfect drawing, but obtain certain results which cannot be had otherwise. And it is perfectly safe for you to study occasionally for speed and decision, while your continual course of practice is such as to ensure your retaining an accurate judgment and a tender touch. Speed, under such circumstances, is rather fatiguing than tempting; and you will find yourself always beguiled rather into elaboration than negligence. [Illustration: FIG. 21.] Fourthly. You will find it of great use, whatever kind of landscape scenery you are passing through, to get into the habit of making memoranda of the shapes of shadows. You will find that many objects of no essential interest in themselves, and neither deserving a finished study, nor a Dureresque one, may yet become of singular value in consequence of the fantastic shapes of their shadows; for it happens often, in distant effect, that the shadow is by much a more important element than the substance. Thus, in the Alpine bridge, Fig. 21., seen within a few yards of it, as in the figure, the arrangement of timbers to which the shadows are owing is perceptible; but at half a mile's distance, in bright sunlight, the timbers would not be seen; and a good painter's expression of the bridge would be merely the large spot, and the crossed bars, of pure grey; wholly without indication of their cause, as in Fig. 22. _a_; and if we saw it at still greater distances, it would appear, as in Fig. 22. _b_ and _c_, diminishing at last to a strange, unintelligible, spider-like spot of grey on the light hill-side. A perfectly great painter, throughout his distances, continually reduces his objects to these shadow abstracts; and the singular, and to many persons unaccountable, effect of the confused touches in Turner's distances, is owing chiefly to this thorough accuracy and intense meaning of the shadow abstracts. [Illustration: FIG. 22.] Studies of this kind are easily made when you are in haste, with an F. or HB. pencil: it requires some hardness of the point to ensure your drawing delicately enough when the forms of the shadows are very subtle; they are sure to be so somewhere, and are generally so everywhere. The pencil is indeed a very precious instrument after you are master of the pen and brush, for the pencil, cunningly used, is both, and will draw a line with the precision of the one and the gradation of the other; nevertheless, it is so unsatisfactory to see the sharp touches, on which the best of the detail depends, getting gradually deadened by time, or to find the places where force was wanted look shiny, and like a fire-grate, that I should recommend rather the steady use of the pen, or brush, and colour, whenever time admits of it; keeping only a small memorandum-book in the breast-pocket, with its well-cut, sheathed pencil, ready for notes on passing opportunities: but never being without this. Thus much, then, respecting the _manner_ in which you are at first to draw from nature. But it may perhaps be serviceable to you, if I also note one or two points respecting your _choice_ of subjects for study, and the best special methods of treating some of them; for one of by no means the least difficulties which you have at first to encounter is a peculiar instinct, common, as far as I have noticed, to all beginners, to fix on exactly the most unmanageable feature in the given scene. There are many things in every landscape which can be drawn, if at all, only by the most accomplished artists; and I have noticed that it is nearly always these which a beginner will dash at; or, if not these, it will be something which, though pleasing to him in itself, is unfit for a picture, and in which, when he has drawn it, he will have little pleasure. As some slight protection against this evil genius of beginners, the following general warnings may be useful: 1. Do not draw things that you love, on account of their associations; or at least do not draw them because you love them; but merely when you cannot get anything else to draw. If you try to draw places that you love, you are sure to be always entangled amongst neat brick walls, iron railings, gravel walks, greenhouses, and quickset hedges; besides that you will be continually led into some endeavour to make your drawing pretty, or complete, which will be fatal to your progress. You need never hope to get on, if you are the least anxious that the drawing you are actually at work upon should look nice when it is done. All you have to care about is to make it _right_, and to learn as much in doing it as possible. So then, though when you are sitting in your friend's parlour, or in your own, and have nothing else to do, you may draw any thing that is there, for practice; even the fire-irons or the pattern on the carpet: be sure that it _is_ for practice, and not because it is a beloved carpet, nor a friendly poker and tongs, nor because you wish to please your friend by drawing her room. Also, never make presents of your drawings. Of course I am addressing you as a _beginner_--a time may come when your work will be precious to everybody; but be resolute not to give it away till you know that it is worth something (as soon as it is worth anything you will know that it is so). If any one asks you for a present of a drawing, send them a couple of cakes of colour and a piece of Bristol board: those materials are, for the present, of more value in that form than if you had spread the one over the other. The main reason for this rule is, however, that its observance will much protect you from the great danger of trying to make your drawings pretty. 2. Never, by choice, draw anything polished; especially if complicated in form. Avoid all brass rods and curtain ornaments, chandeliers, plate, glass, and fine steel. A shining knob of a piece of furniture does not matter if it comes in your way; but do not fret yourself if it will not look right, and choose only things that do not shine. 3. Avoid all very neat things. They are exceedingly difficult to draw, and very ugly when drawn. Choose rough, worn, and clumsy-looking things as much as possible; for instance, you cannot have a more difficult or profitless study than a newly-painted Thames wherry, nor a better study than an old empty coal-barge, lying ashore at low-tide: in general, everything that you think very ugly will be good for you to draw. 4. Avoid, as much as possible, studies in which one thing is seen _through_ another. You will constantly find a thin tree standing before your chosen cottage, or between you and the turn of the river; its near branches all entangled with the distance. It is intensely difficult to represent this; and though, when the tree _is_ there, you must not imaginarily cut it down, but do it as well as you can, yet always look for subjects that fall into definite masses, not into network; that is, rather for a cottage with a dark tree _beside_ it, than for one with a thin tree in front of it; rather for a mass of wood, soft, blue, and rounded, than for a ragged copse, or confusion of intricate stems. 5. Avoid, as far as possible, country divided by hedges. Perhaps nothing in the whole compass of landscape is so utterly unpicturesque and unmanageable as the ordinary English patchwork of field and hedge, with trees dotted over it in independent spots, gnawed straight at the cattle line. Still, do not be discouraged if you find you have chosen ill, and that the subject overmasters you. It is much better that it should, than that you should think you had entirely mastered _it_. But at first, and even for some time, you must be prepared for very discomfortable failure; which, nevertheless, will not be without some wholesome result. As, however, I have told you what most definitely to avoid, I may, perhaps, help you a little by saying what to seek. In general, all _banks_ are beautiful things, and will reward work better than large landscapes. If you live in a lowland country, you must look for places where the ground is broken to the river's edges, with decayed posts, or roots of trees; or, if by great good luck there should be such things within your reach, for remnants of stone quays or steps, mossy mill-dams, &c. Nearly every other mile of road in chalk country will present beautiful bits of broken bank at its sides; better in form and colour than high chalk cliffs. In woods, one or two trunks, with the flowery ground below, are at once the richest and easiest kind of study: a not very thick trunk, say nine inches or a foot in diameter, with ivy running up it sparingly, is an easy, and always a rewarding subject. Large nests of buildings in the middle distance are always beautiful, when drawn carefully, provided they are not modern rows of pattern cottages; or villas with Ionic and Doric porticos. Any old English village, or cluster of farm-houses, drawn with all its ins and outs, and haystacks, and palings, is sure to be lovely; much more a French one. French landscape is generally as much superior to English as Swiss landscape is to French; in some respects, the French is incomparable. Such scenes as that avenue on the Seine, which I have recommended you to buy the engraving of, admit no rivalship in their expression of graceful rusticity and cheerful peace, and in the beauty of component lines. In drawing villages, take great pains with the gardens; a rustic garden is in every way beautiful. If you have time, draw all the rows of cabbages, and hollyhocks, and broken fences, and wandering eglantines, and bossy roses: you cannot have better practice, nor be kept by anything in purer thoughts. Make intimate friends of all the brooks in your neighbourhood, and study them ripple by ripple. Village churches in England are not often good subjects; there is a peculiar meanness about most of them, and awkwardness of line. Old manor-houses are often pretty. Ruins are usually, with us, too prim, and cathedrals too orderly. I do not think there is a single cathedral in England from which it is possible to obtain _one_ subject for an impressive drawing. There is always some discordant civility, or jarring vergerism about them. If you live in a mountain or hill country, your only danger is redundance of subject. Be resolved, in the first place, to draw a piece of rounded rock, with its variegated lichens, quite rightly, getting its complete roundings, and all the patterns of the lichen in true local colour. Till you can do this, it is of no use your thinking of sketching among hills; but when once you have done this, the forms of distant hills will be comparatively easy. When you have practised for a little time from such of these subjects as may be accessible to you, you will certainly find difficulties arising which will make you wish more than ever for a master's help: these difficulties will vary according to the character of your own mind (one question occurring to one person, and one to another), so that it is impossible to anticipate them all; and it would make this too large a book if I answered all that I _can_ anticipate; you must be content to work on, in good hope that nature will, in her own time, interpret to you much for herself; that farther experience on your own part will make some difficulties disappear; and that others will be removed by the occasional observation of such artists' work as may come in your way. Nevertheless, I will not close this letter without a few general remarks, such as may be useful to you after you are somewhat advanced in power; and these remarks may, I think, be conveniently arranged under three heads, having reference to the drawing of vegetation, water, and skies. And, first, of vegetation. You may think, perhaps, we have said enough about trees already; yet if you have done as you were bid, and tried to draw them frequently enough, and carefully enough, you will be ready by this time to hear a little more of them. You will also recollect that we left our question, respecting the mode of expressing intricacy of leafage, partly unsettled in the first letter. I left it so because I wanted you to learn the real structure of leaves, by drawing them for yourself, before I troubled you with the most subtle considerations as to _method_ in drawing them. And by this time, I imagine, you must have found out two principal things, universal facts, about leaves; namely, that they always, in the main tendencies of their lines, indicate a beautiful divergence of growth, according to the law of radiation, already referred to;[226] and the second, that this divergence is never formal, but carried out with endless variety of individual line. I must now press both these facts on your attention a little farther. You may perhaps have been surprised that I have not yet spoken of the works of J. D. Harding, especially if you happen to have met with the passages referring to them in "Modern Painters," in which they are highly praised. They are deservedly praised, for they are the only works by a modern draughtsman which express in any wise the energy of trees, and the laws of growth, of which we have been speaking. There are no lithographic sketches which, for truth of general character, obtained with little cost of time, at all rival Harding's. Calame, Robert, and the other lithographic landscape sketchers are altogether inferior in power, though sometimes a little deeper in meaning. But you must not take even Harding for a model, though you may use his works for occasional reference; and if you can afford to buy his "Lessons on Trees,"[227] it will be serviceable to you in various ways, and will at present help me to explain the point under consideration. And it is well that I should illustrate this point by reference to Harding's works, because their great influence on young students renders it desirable that their real character should be thoroughly understood. You will find, first, in the title-page of the "Lessons on Trees," a pretty woodcut, in which the tree stems are drawn with great truth, and in a very interesting arrangement of lines. Plate 1. is not quite worthy of Mr. Harding, tending too much to make his pupil, at starting, think everything depends on black dots; still the main lines are good, and very characteristic of tree growth. Then, in Plate 2., we come to the point at issue. The first examples in that plate are given to the pupil that he may practise from them till his hand gets into the habit of arranging lines freely in a similar manner; and they are stated by Mr. Harding to be universal in application; "all outlines expressive of foliage," he says, "are but modifications of them." They consist of groups of lines, more or less resembling our Fig. 23.; and the characters especially insisted upon are, that they "tend at their inner ends to a common centre;" that "their ends terminate in [are enclosed by] ovoid curves;" and that "the outer ends are most emphatic." [Illustration: FIG. 23.] Now, as thus expressive of the great laws of radiation and enclosure, the main principle of this method of execution confirms, in a very interesting way, our conclusions respecting foliage composition. The reason of the last rule, that the outer end of the line is to be most emphatic, does not indeed at first appear; for the line at one end of a natural leaf is not more emphatic than the line at the other: but ultimately, in Harding's method, this darker part of the touch stands more or less for the shade at the outer extremity of the leaf mass; and, as Harding uses these touches, they express as much of tree character as any mere habit of touch _can_ express. But, unfortunately, there is another law of tree growth, quite as fixed as the law of radiation, which this and all other conventional modes of execution wholly lose sight of. This second law is, that the radiating tendency shall be carried out only as a ruling spirit in reconcilement with perpetual individual caprice on the part of the separate leaves. So that the moment a touch is monotonous, it must be also false, the liberty of the leaf individually being just as essential a truth, as its unity of growth with its companions in the radiating group. [Illustration: FIG. 24.] It does not matter how small or apparently symmetrical the cluster may be, nor how large or vague. You can hardly have a more formal one than _b_ in Fig. 9. p. 276., nor a less formal one than this shoot of Spanish chestnut, shedding its leaves, Fig. 24.; but in either of them, even the general reader, unpractised in any of the previously recommended exercises, must see that there are wandering lines mixed with the radiating ones, and radiating lines with the wild ones: and if he takes the pen and tries to copy either of these examples, he will find that neither play of hand to left nor to right, neither a free touch nor a firm touch, nor any learnable or describable touch whatsoever, will enable him to produce, currently, a resemblance of it; but that he must either draw it slowly, or give it up. And (which makes the matter worse still) though gathering the bough, and putting it close to you, or seeing a piece of near foliage against the sky, you may draw the entire outline of the leaves, yet if the spray has light upon it, and is ever so little a way off, you will miss, as we have seen, a point of a leaf here, and an edge there; some of the surfaces will be confused by glitter, and some spotted with shade; and if you look carefully through this confusion for the edges or dark stems which you really _can see_, and put only those down, the result will be neither like Fig. 9. nor Fig. 24., but such an interrupted and puzzling piece of work as Fig. 25.[228] Now, it is in the perfect acknowledgment and expression of these _three_ laws that all good drawing of landscape consists. There is, first, the organic unity; the law, whether of radiation, or parallelism, or concurrent action, which rules the masses of herbs and trees, of rocks, and clouds, and waves; secondly, the individual liberty of the members subjected to these laws of unity; and, lastly, the mystery under which the separate character of each is more or less concealed. I say, first, there must be observance of the ruling organic law. This is the first distinction between good artists and bad artists. Your common sketcher or bad painter puts his leaves on the trees as if they were moss tied to sticks; he cannot see the lines of action or growth; he scatters the shapeless clouds over his sky, not perceiving the sweeps of associated curves which the real clouds are following as they fly; and he breaks his mountain side into rugged fragments, wholly unconscious of the lines of force with which the real rocks have risen, or of the lines of couch in which they repose. On the contrary, it is the main delight of the great draughtsman to trace these laws of government; and his tendency to error is always in the exaggeration of their authority rather than in its denial. [Illustration: FIG. 25.] Secondly, I say, we have to show the individual character and liberty of the separate leaves, clouds, or rocks. And herein the great masters separate themselves finally from the inferior ones; for if the men of inferior genius ever express law at all, it is by the sacrifice of individuality. Thus, Salvator Rosa has great perception of the sweep of foliage and rolling of clouds, but never draws a single leaflet or mist wreath accurately. Similarly, Gainsborough, in his landscape, has great feeling for masses of form and harmony of colour; but in the detail gives nothing but meaningless touches; not even so much as the species of tree, much less the variety of its leafage, being ever discernable. Now, although both these expressions of government and individuality are essential to masterly work, the individuality is the _more_ essential, and the more difficult of attainment; and, therefore, that attainment separates the great masters _finally_ from the inferior ones. It is the more essential, because, in these matters of beautiful arrangement in visible things, the same rules hold that hold in moral things. It is a lamentable and unnatural thing to see a number of men subject to no government, actuated by no ruling principle, and associated by no common affection: but it would be a more lamentable thing still, were it possible to see a number of men so oppressed into assimilation as to have no more any individual hope or character, no differences in aim, no dissimilarities of passion, no irregularities of judgment; a society in which no man could help another, since none would be feebler than himself; no man admire another, since none would be stronger than himself; no man be grateful to another, since by none he could be relieved; no man reverence another, since by none he could be instructed; a society in which every soul would be as the syllable of a stammerer instead of the word of a speaker, in which every man would walk as in a frightful dream, seeing spectres of himself, in everlasting multiplication, gliding helplessly around him in a speechless darkness. Therefore it is that perpetual difference, play, and change in groups of form are more essential to them even than their being subdued by some great gathering law: the law is needful to them for their perfection and their power, but the difference is needful to them for their _life_. And here it may be noted in passing, that if you enjoy the pursuit of analogies and types, and have any ingenuity of judgment in discerning them, you may always accurately ascertain what are the noble characters in a piece of painting, by merely considering what are the noble characters of man in his association with his fellows. What grace of manner and refinement of habit are in society, grace of line and refinement of form are in the association of visible objects. What advantage or harm there may be in sharpness, ruggedness, or quaintness in the dealings or conversations of men; precisely that relative degree of advantage or harm there is in them as elements of pictorial composition. What power is in liberty or relaxation to strengthen or relieve human souls; that power, precisely in the same relative degree, play and laxity of line have to strengthen or refresh the expression of a picture. And what goodness or greatness we can conceive to arise in companies of men, from chastity of thought, regularity of life, simplicity of custom, and balance of authority; precisely that kind of goodness and greatness may be given to a picture by the purity of its colour, the severity of its forms, and the symmetry of its masses. You need not be in the least afraid of pushing these analogies too far. They cannot be pushed too far; they are so precise and complete, that the farther you pursue them, the clearer, the more certain, the more useful you will find them. They will not fail you in one particular, or in any direction of enquiry. There is no moral vice, no moral virtue, which has not its _precise_ prototype in the art of painting; so that you may at your will illustrate the moral habit by the art, or the art by the moral habit. Affection and discord, fretfulness and quietness, feebleness and firmness, luxury and purity, pride and modesty, and all other such habits, and every conceivable modification and mingling of them, may be illustrated, with mathematical exactness, by conditions of line and colour; and not merely these definable vices and virtues, but also every conceivable shade of human character and passion, from the righteous or unrighteous majesty of the king, to the innocent or faultful simplicity of the shepherd boy. The pursuit of this subject belongs properly, however, to the investigation of the higher branches of composition, matters which it would be quite useless to treat of in this book; and I only allude to them here, in order that you may understand how the utmost nobleness of art are concerned in this minute work, to which I have set you in your beginning of it. For it is only by the closest attention, and the most noble execution, that it is possible to express these varieties of individual character, on which all excellence of portraiture depends, whether of masses of mankind, or of groups of leaves. Now you will be able to understand, among other matters, wherein consists the excellence, and wherein the shortcoming, of the tree-drawing of Harding. It is excellent in so far as it fondly observes, with more truth than any other work of the kind, the great laws of growth and action in trees: it fails--and observe, not in a minor, but in a principal point--because it cannot rightly render any one individual detail or incident of foliage. And in this it fails, not from mere carelessness or incompletion, but of necessity; the true drawing of detail being for evermore _impossible_ to a hand which has contracted a _habit_ of execution. The noble draughtsman draws a leaf, and stops, and says calmly--That leaf is of such and such a character; I will give him a friend who will entirely suit him: then he considers what his friend ought to be, and having determined, he draws his friend. This process may be as quick as lightning when the master is great--one of the sons of the giants; or it may be slow and timid: but the process is always gone through, no touch or form is ever added to another by a good painter without a mental determination and affirmation. But when the hand has got into a habit, leaf No. 1. necessitates leaf No. 2.; you cannot stop, your hand is as a horse with the bit in its teeth; or rather is, for the time, a machine, throwing out leaves to order and pattern, all alike. You must stop that hand of yours, however painfully; make it understand that it is not to have its own way any more, that it shall never more slip from, one touch to another without orders; otherwise it is not you who are the master, but your fingers. You may therefore study Harding's drawing, and take pleasure in it;[229] and you may properly admire the dexterity which applies the habit of the hand so well, and produces results on the whole so satisfactory: but you must never copy it, otherwise your progress will be at once arrested. The utmost you can ever hope to do, would be a sketch in Harding's manner, but of far inferior dexterity; for he has given his life's toil to gain his dexterity, and you, I suppose, have other things to work at besides drawing. You would also incapacitate yourself from ever understanding what truly great work was, or what Nature was; but by the earnest and complete study of facts, you will gradually come to understand the one and love the other more and more, whether you can draw well yourself or not. I have yet to say a few words respecting the third law above stated, that of mystery; the law, namely, that nothing is ever seen perfectly, but only by fragments, and under various conditions of obscurity.[230] This last fact renders the visible objects of Nature complete as a type of the human nature. We have, observe, first, Subordination; secondly, Individuality; lastly, and this not the least essential character, Incomprehensibility; a perpetual lesson in every serrated point and shining vein which escape or deceive our sight among the forest leaves, how little we may hope to discern clearly, or judge justly, the rents and veins of the human heart; how much of all that is round us, in men's actions or spirits, which we at first think we understand, a closer and more loving watchfulness would show to be full of mystery, never to be either fathomed or withdrawn. [Illustration: FIG. 26.] [Illustration: FIG. 27.] The expression of this final character in landscape has never been completely reached by any except Turner; nor can you hope to reach it at all until you have given much time to the practice of art. Only try always when you are sketching any object with a view to completion in light and shade, to draw only those parts of it which you really see definitely; _preparing_ for the after development of the forms by chiaroscuro. It is this preparation by isolated touches for a future arrangement of superimposed light and shade which renders the etchings of the Liber Studiorum so inestimable as examples and so peculiar. The character exists more or less in them exactly in proportion to the pains that Turner has taken. Thus the Æsacus and Hespérie was wrought out with the greatest possible care; and the principal branch on the near tree is etched as in Fig. 26. The work looks at first like a scholar's instead of a master's; but when the light and shade are added, every touch falls into its place, and a perfect expression of grace and complexity results. Nay even before the light and shade are added, you ought to be able to see that these irregular and broken lines, especially where the expression is given of the way the stem loses itself in the leaves, are more true than the monotonous though graceful leaf-drawing which, before Turner's time, had been employed, even by the best masters, in their distant masses. Fig. 27. is sufficiently characteristic of the manner of the old woodcuts after Titian; in which, you see, the leaves are too much of one shape, like bunches of fruit; and the boughs too completely seen, besides being somewhat soft and leathery in aspect, owing to the want of angles in their outline. By great men like Titian, this somewhat conventional structure was only given in haste to distant masses; and their exquisite delineation of the foreground, kept their conventionalism from degeneracy: but in the drawing of the Caracci and other derivative masters, the conventionalism prevails everywhere, and sinks gradually into scrawled work, like Fig. 28., about the worst which it is possible to get into the habit of using, though an ignorant person might perhaps suppose it more "free," and therefore better than Fig. 26. Note, also, that in noble outline drawing, it does not follow that a bough is wrongly drawn, because it looks contracted unnaturally somewhere, as in Fig. 26., just above the foliage. Very often the muscular action which is to be expressed by the line, runs into the _middle_ of the branch, and the actual outline of the branch at that place may be dimly seen, or not at all; and it is then only by the future shade that its actual shape, or the cause of its disappearance, will be indicated. [Illustration: FIG. 28.] One point more remains to be noted about trees, and I have done. In the minds of our ordinary water-colour artists, a distant tree seems only to be conceived as a flat green blot, grouping pleasantly with other masses, and giving cool colour to the landscape, but differing nowise, in _texture_, from the blots of other shapes, which these painters use to express stones, or water, or figures. But as soon as you have drawn trees carefully a little while, you will be impressed, and impressed more strongly the better you draw them, with the idea of their _softness_ of surface. A distant tree is not a flat and even piece of colour, but a more or less globular mass of a downy or bloomy texture, partly passing into a misty vagueness. I find, practically, this lovely softness of far-away trees the most difficult of all characters to reach, because it cannot be got by mere scratching or roughening the surface, but is always associated with such delicate expressions of form and growth as are only imitable by very careful drawing. The penknife passed lightly _over_ this careful drawing, will do a good deal; but you must accustom yourself, from the beginning, to aim much at this softness in the lines of the drawing itself, by crossing them delicately, and more or less effacing and confusing the edges. You must invent, according to the character of tree, various modes of execution adapted to express its texture; but always keep this character of softness in your mind and in your scope of aim; for in most landscapes it is the intention of nature that the tenderness and transparent infinitude of her foliage should be felt, even at the far distance, in the most distinct opposition to the solid masses and flat surfaces of rocks or buildings. * * * * * II. We were, in the second place, to consider a little the modes of representing water, of which important feature of landscape I have hardly said anything yet. Water is expressed, in common drawings, by conventional lines, whose horizontality is supposed to convey the idea of its surface. In paintings, white dashes or bars of light are used for the same purpose. But these and all other such expedients are vain and absurd. A piece of calm water always contains a picture in itself, an exquisite reflection of the objects above it. If you give the time necessary to draw these reflections, disturbing them here and there as you see the breeze or current disturb them, you will get the effect of the water; but if you have not patience to draw the reflections, no expedient will give you a true effect. The picture in the pool needs nearly as much delicate drawing as the picture above the pool; except only that if there be the least motion on the water, the horizontal lines of the images will be diffused and broken, while the vertical ones will remain decisive, and the oblique ones decisive in proportion to their steepness. A few close studies will soon teach you this: the only thing you need to be told is to watch carefully the lines of _disturbance_ on the surface, as when a bird swims across it, or a fish rises, or the current plays round a stone, reed, or other obstacle. Take the greatest pains to get the _curves_ of these lines true; the whole value of your careful drawing of the reflections may be lost by your admitting a single false curve of ripple from a wild duck's breast. And (as in other subjects) if you are dissatisfied with your result, always try for more unity and delicacy: if your reflections are only soft and gradated enough, they are nearly sure to give you a pleasant effect. When you are taking pains, work the softer reflections, where they are drawn out by motion in the water, with touches as nearly horizontal as may be; but when you are in a hurry, indicate the place and play of the images with vertical lines. The actual _construction_ of a calm elongated reflection is with horizontal lines: but it is often impossible to draw the descending shades delicately enough with a horizontal touch; and it is best always when you are in a hurry, and sometimes when you are not, to use the vertical touch. When the ripples are large, the reflections become shaken, and must be drawn with bold undulatory descending lines. I need not, I should think, tell you that it is of the greatest possible importance to draw the curves of the shore rightly. Their perspective is, if not more subtle, at least more stringent than that of any other lines in Nature. It will not be detected by the general observer, if you miss the curve of a branch, or the sweep of a cloud, or the perspective of a building;[231] but every intelligent spectator will feel the difference between a rightly drawn bend of shore or shingle, and a false one. _Absolutely_ right, in difficult river perspectives seen from heights, I believe no one but Turner ever has been yet; and observe, there is NO rule for them. To develope the curve mathematically would require a knowledge of the exact quantity of water in the river, the shape of its bed, and the hardness of the rock or shore; and even with these data, the problem would be one which no mathematician could solve but approximatively. The instinct of the eye can do it; nothing else. If, after a little study from Nature, you get puzzled by the great differences between the aspect of the reflected image and that of the object casting it; and if you wish to know the law of reflection, it is simply this: Suppose all the objects above the water _actually_ reversed (not in appearance, but in fact) beneath the water, and precisely the same in form and in relative position, only all topsy-turvy. Then, whatever you can see, from the place in which you stand, of the solid objects so reversed under the water, you will see in the reflection, always in the true perspective of the solid objects so reversed. If you cannot quite understand this in looking at water, take a mirror, lay it horizontally on the table, put some books and papers upon it, and draw them and their reflections; moving them about, and watching how their reflections alter, and chiefly how their reflected colours and shades differ from their own colours and shades, by being brought into other oppositions. This difference in chiaroscuro is a more important character in water painting than mere difference in form. When you are drawing shallow or muddy water, you will see shadows on the bottom, or on the surface, continually modifying the reflections; and in a clear mountain stream, the most wonderful complications of effect resulting from the shadows and reflections of the stones in it, mingling with the aspect of the stones themselves seen through the water. Do not be frightened at the complexity; but, on the other hand, do not hope to render it hastily. Look at it well, making out everything that you see, and distinguishing each component part of the effect. There will be, first, the stones seen through the water, distorted always by refraction, so that if the general structure of the stone shows straight parallel lines above the water, you may be sure they will be bent where they enter it; then the reflection of the part of the stone above the water crosses and interferes with the part that is seen through it, so that you can hardly tell which is which; and wherever the reflection is darkest, you will see through the water best, and _vice versâ_. Then the real shadow of the stone crosses both these images, and where that shadow falls, it makes the water more reflective, and where the sunshine falls, you will see more of the surface of the water, and of any dust or motes that may be floating on it: but whether you are to see, at the same spot, most of the bottom of the water, or of the reflection of the objects above, depends on the position of the eye. The more you look down into the water, the better you see objects through it; the more you look along it, the eye being low, the more you see the reflection of objects above it. Hence the colour of a given space of surface in a stream will entirely change while you stand still in the same spot, merely as you stoop or raise your head; and thus the colours with which water is painted are an indication of the position of the spectator, and connected inseparably with the perspective of the shores. The most beautiful of all results that I know in mountain streams is when the water is shallow, and the stones at the bottom are rich reddish-orange and black, and the water is seen at an angle which exactly divides the visible colours between those of the stones and that of the sky, and the sky is of clear, full blue. The resulting purple obtained by the blending of the blue and the orange-red, broken by the play of innumerable gradations in the stones, is indescribably lovely. All this seems complicated enough already; but if there be a strong colour in the clear water itself, as of green or blue in the Swiss lakes, all these phenomena are doubly involved; for the darker reflections now become of the colour of the water. The reflection of a black gondola, for instance, at Venice, is never black, but pure dark green. And, farther, the colour of the water itself is of three kinds: one, seen on the surface, is a kind of milky bloom; the next is seen where the waves let light through them, at their edges; and the third, shown as a change of colour on the objects seen through the water. Thus, the same wave that makes a white object look of a clear blue, when seen through it, will take a red or violet-coloured bloom on its surface, and will be made pure emerald green by transmitted sunshine through its edges. With all this, however, you are not much concerned at present, but I tell it you partly as a preparation for what we have afterwards to say about colour, and partly that you may approach lakes and streams with reverence, and study them as carefully as other things, not hoping to express them by a few horizontal dashes of white, or a few tremulous blots.[232] Not but that much may be done by tremulous blots, when you know precisely what you mean by them, as you will see by many of the Turner sketches, which are now framed at the National Gallery; but you must have painted water many and many a day--yes, and all day long--before you can hope to do anything like those. * * * * * III. Lastly. You may perhaps wonder why, before passing to the clouds, I say nothing special about _ground_.[233] But there is too much to be said about that to admit of my saying it here. You will find the principal laws of its structure examined at length in the fourth volume of "Modern Painters;" and if you can get that volume, and copy carefully Plate 21., which I have etched after Turner with great pains, it will give you as much help as you need in the linear expression of ground-surface. Strive to get the retirement and succession of masses in irregular ground: much may be done in this way by careful watching of the perspective diminutions of its herbage, as well as by contour; and much also by shadows. If you draw the shadows of leaves and tree trunks on any undulating ground with entire carefulness, you will be surprised to find how much they explain of the form and distance of the earth on which they fall. Passing then to skies, note that there is this great peculiarity about sky subject, as distinguished from earth subject;--that the clouds, not being much liable to man's interference, are always beautifully arranged. You cannot be sure of this in any other features of landscape. The rock on which the effect of a mountain scene especially depends is always precisely that which the roadmaker blasts or the landlord quarries; and the spot of green which Nature left with a special purpose by her dark forest sides, and finished with her most delicate grasses, is always that which the farmer ploughs or builds upon. But the clouds, though we can hide them with smoke, and mix them with poison, cannot be quarried nor built over, and they are always therefore gloriously arranged; so gloriously, that unless you have notable powers of memory you need not hope to approach the effect of any sky that interests you. For both its grace and its glow depend upon the united influence of every cloud within its compass: they all move and burn together in a marvellous harmony; not a cloud of them is out of its appointed place, or fails of its part in the choir: and if you are not able to recollect (which in the case of a complicated sky it is impossible you should) precisely the form and position of all the clouds at a given moment, you cannot draw the sky at all; for the clouds will not fit if you draw one part of them three or four minutes before another. You must try therefore to help what memory you have, by sketching at the utmost possible speed the whole range of the clouds; marking, by any shorthand or symbolic work you can hit upon, the peculiar character of each, as transparent, or fleecy, or linear, or undulatory; giving afterwards such completion to the parts as your recollection will enable you to do. This, however, only when the sky is interesting from its general aspect; at other times, do not try to draw all the sky, but a single cloud: sometimes a round cumulus will stay five or six minutes quite steady enough to let you mark out his principal masses: and one or two white or crimson lines which cross the sunrise will often stay without serious change for as long. And in order to be the readier in drawing them, practise occasionally drawing lumps of cotton, which will teach you better than any other stable thing the kind of softness there is in clouds. For you will find when you have made a few genuine studies of sky, and then look at any ancient or modern painting, that ordinary artists have always fallen into one of two faults: either, in rounding the clouds, they make them as solid and hard-edged as a heap of stones tied up in a sack, or they represent them not as rounded at all, but as vague wreaths of mist or flat lights in the sky; and think they have done enough in leaving a little white paper between dashes of blue, or in taking an irregular space out with the sponge. Now clouds are not as solid as flour-sacks; but, on the other hand, they are neither spongy nor flat. They are definite and very beautiful forms of sculptured mist; sculptured is a perfectly accurate word; they are not more _drifted_ into form than they are _carved_ into form, the warm air around them cutting them into shape by absorbing the visible vapour beyond certain limits; hence their angular and fantastic outlines, as different from a swollen, spherical, or globular formation, on the one hand, as from that of flat films or shapeless mists on the other. And the worst of all is, that while these forms are difficult enough to draw on any terms, especially considering that they never stay quiet, they must be drawn also at greater disadvantage of light and shade than any others, the force of light in clouds being wholly unattainable by art; so that if we put shade enough to express their form as positively as it is expressed in reality, we must make them painfully too dark on the dark sides. Nevertheless, they are so beautiful, if you in the least succeed with them, that you will hardly, I think, lose courage. Outline them often with the pen, as you can catch them here and there; one of the chief uses of doing this will be, not so much the memorandum so obtained as the lesson you will get respecting the softness of the cloud-outlines. You will always find yourself at a loss to see where the outline really is; and when drawn it will always look hard and false, and will assuredly be either too round or too square, however often you alter it, merely passing from the one fault to the other and back again, the real cloud striking an inexpressible mean between roundness and squareness in all its coils or battlements. I speak at present, of course, only of the cumulus cloud: the lighter wreaths and flakes of the upper sky cannot be outlined--they can only be sketched, like locks of hair, by many lines of the pen. Firmly developed bars of cloud on the horizon are in general easy enough, and may be drawn with decision. When you have thus accustomed yourself a little to the placing and action of clouds, try to work out their light and shade, just as carefully as you do that of other things, looking _exclusively_ for examples of treatment to the vignettes in Rogers's Italy and Poems, and to the Liber Studiorum, unless you have access to some examples of Turner's own work. No other artist ever yet drew the sky: even Titian's clouds, and Tintoret's, are conventional. The clouds in the "Ben Arthur," "Source of Arveron," and "Calais Pier," are among the best of Turner's storm studies; and of the upper clouds, the vignettes to Rogers's Poems furnish as many examples as you need. And now, as our first lesson was taken from the sky, so, for the present, let our last be. I do not advise you to be in any haste to master the contents of my next letter. If you have any real talent for drawing, you will take delight in the discoveries of natural loveliness, which the studies I have already proposed will lead you into, among the fields and hills; and be assured that the more quietly and single-heartedly you take each step in the art, the quicker, on the whole, will your progress be. I would rather, indeed, have discussed the subjects of the following letter at greater length, and in a separate work addressed to more advanced students; but as there are one or two things to be said on composition which may set the young artist's mind somewhat more at rest, or furnish him with defence from the urgency of ill-advisers, I will glance over the main heads of the matter here; trusting that my doing so may not beguile you, my dear reader, from your serious work, or lead you to think me, in occupying part of this book with talk not altogether relevant to it, less entirely or Faithfully yours, J. RUSKIN. FOOTNOTES: [220] It is meant, I believe, for "Salt Hill." [221] I do not mean that you can approach Turner or Durer in their strength, that is to say, in their imagination or power of design. But you may approach them, by perseverance, in truth of manner. [222] The following are the most desirable plates: Grande Chartreuse. Æsacus and Hespérie. Cephalus and Procris. Source of Arveron. Ben Arthur. Watermill. Hindhead Hill. Hedging and Ditching. Dumblane Abbey. Morpeth. Calais Pier. Pembury Mill. Little Devil's Bridge. River Wye (_not_ Wye and Severn). Holy Island. Clyde. Lauffenbourg. Blair Athol. Alps from Grenoble. Raglan. (Subject with quiet brook, trees, and castle on the right.) If you cannot get one of these, any of the others will be serviceable, except only the twelve following, which are quite useless:-- 1. Scene in Italy, with goats on a walled road, and trees above. 2. Interior of church. 3. Scene with bridge, and trees above; figures on left, one playing a pipe. 4. Scene with figure playing on tambourine. 5. Scene on Thames with high trees, and a square tower of a church seen through them. 6. Fifth Plague of Egypt. 7. Tenth Plague of Egypt. 8. Rivaulx Abbey. 9. Wye and Severn. 10. Scene with castle in centre, cows under trees on the left. 11. Martello Towers. 12. Calm. It is very unlikely that you should meet with one of the original etchings; if you should, it will be a drawing-master in itself alone, for it is not only equivalent to a pen-and-ink drawing by Turner, but to a very careful one: only observe, the Source of Arveron, Raglan, and Dumblane were not etched by Turner; and the etchings of those three are not good for separate study, though it is deeply interesting to see how Turner, apparently provoked at the failure of the beginnings in the Arveron and Raglan, took the plates up himself, and either conquered or brought into use the bad etching by his marvellous engraving. The Dumblane was, however, well etched by Mr. Lupton, and beautifully engraved by him. The finest Turner etching is of an aqueduct with a stork standing in a mountain stream, not in the published series; and next to it, are the unpublished etchings of the Via Mala and Crowhurst. Turner seems to have been so fond of these plates that he kept retouching and finishing them, and never made up his mind to let them go. The Via Mala is certainly, in the state in which Turner left it, the finest of the whole series: its etching is, as I said, the best after that of the aqueduct. Figure 20., above, is part of another fine unpublished etching, "Windsor, from Salt Hill." Of the published etchings, the finest are the Ben Arthur, Æsacus, Cephalus, and Stone Pines, with the Girl washing at a Cistern; the three latter are the more generally instructive. Hindhead Hill, Isis, Jason, and Morpeth, are also very desirable. [223] You will find more notice of this point in the account of Harding's tree-drawing, a little farther on. [224] The impressions vary so much in colour that no brown can be specified. [225] You had better get such a photograph, even if you have a Liber print as well. [226] See the closing letter in this volume. [227] Bogue, Fleet Street. If you are not acquainted with Harding's works (an unlikely supposition, considering their popularity), and cannot meet with the one in question, the diagrams given here will enable you to understand all that is needful for our purposes. [228] I draw this figure (a young shoot of oak) in outline only, it being impossible to express the refinements of shade in distant foliage in a woodcut. [229] His lithographic sketches, those, for instance, in the Park and the Forest, and his various lessons on foliage, possess greater merit than the more ambitious engravings in his "Principles and Practice of Art." There are many useful remarks, however, dispersed through this latter work. [230] On this law you will do well, if you can get access to it, to look at the fourth chapter of the fourth volume of "Modern Painters." [231] The student may hardly at first believe that the perspective of buildings is of little consequence: but he will find it so ultimately. See the remarks on this point in the Preface. [232] It is a useful piece of study to dissolve some Prussian blue in water, so as to make the liquid definitely blue: fill a large white basin with the solution, and put anything you like to float on it, or lie in it; walnut shells, bits of wood, leaves of flowers, &c. Then study the effects of the reflections, and of the stems of the flowers or submerged portions of the floating objects, as they appear through the blue liquid; noting especially how, as you lower your head and look along the surface, you see the reflections clearly; and how, as you raise your head, you lose the reflections, and see the submerged stems clearly. [233] Respecting Architectural Drawing, see the notice of the works of Prout in the Appendix. LETTER III. ON COLOUR AND COMPOSITION. MY DEAR READER:-- If you have been obedient, and have hitherto done all that I have told you, I trust it has not been without much subdued remonstrance, and some serious vexation. For I should be sorry if, when you were led by the course of your study to observe closely such things as are beautiful in colour, you had not longed to paint them, and felt considerable difficulty in complying with your restriction to the use of black, or blue, or grey. You _ought_ to love colour, and to think nothing quite beautiful or perfect without it; and if you really do love it, for its own sake, and are not merely desirous to colour because you think painting a finer thing than drawing, there is some chance you may colour well. Nevertheless, you need not hope ever to produce anything more than pleasant helps to memory, or useful and suggestive sketches in colour, unless you mean to be wholly an artist. You may, in the time which other vocations leave at your disposal, produce finished, beautiful, and masterly drawings in light and shade. But to colour well, requires your life. It cannot be done cheaper. The difficulty of doing right is increased--not twofold nor threefold, but a thousandfold, and more--by the addition of colour to your work. For the chances are more than a thousand to one against your being right both in form and colour with a given touch: it is difficult enough to be right in form, if you attend to that only; but when you have to attend, at the same moment, to a much more subtle thing than the form, the difficulty is strangely increased--and multiplied almost to infinity by this great fact, that, while form is absolute, so that you can say at the moment you draw any line that it is either right or wrong, colour is wholly _relative_. Every hue throughout your work is altered by every touch that you add in other places; so that what was warm a minute ago, becomes cold when you have put a hotter colour in another place, and what was in harmony when you left it, becomes discordant as you set other colours beside it; so that every touch must be laid, not with a view to its effect at the time, but with a view to its effect in futurity, the result upon it of all that is afterwards to be done being previously considered. You may easily understand that, this being so, nothing but the devotion of life, and great genius besides, can make a colourist. But though you cannot produce finished coloured drawings of any value, you may give yourself much pleasure, and be of great use to other people, by occasionally sketching with a view to colour only; and preserving distinct statements of certain colour facts--as that the harvest-moon at rising was of such and such a red, and surrounded by clouds of such and such a rosy grey; that the mountains at evening were in truth so deep in purple; and the waves by the boat's side were indeed of that incredible green. This only, observe, if you have an eye for colour; but you may presume that you have this, if you enjoy colour. And, though of course you should always give as much form to your subject as your attention to its colour will admit of, remember that the whole value of what you are about depends, in a coloured sketch, on the colour _merely_. If the colour is wrong, everything is wrong: just as, if you are singing, and sing false notes, it does not matter how true the words are. If you sing at all, you must sing sweetly; and if you colour at all, you must colour rightly. Give up _all_ the form, rather than the slightest part of the colour: just as, if you felt yourself in danger of a false note, you would give up the word, and sing a meaningless sound, if you felt that so you could save the note. Never mind though your houses are all tumbling down--though your clouds are mere blots, and your trees mere knobs, and your sun and moon like crooked sixpences--so only that trees, clouds, houses, and sun or moon, are of the right colours. Of course, the discipline you have gone through will enable you to hint something of form, even in the fastest sweep of the brush; but do not let the thought of form hamper you in the least, when you begin to make coloured memoranda. If you want the form of the subject, draw it in black and white. If you want its colour, take its colour, and be sure you _have_ it, and not a spurious, treacherous, half-measured piece of mutual concession, with the colours all wrong, and the forms still anything but right. It is best to get into the habit of considering the coloured work merely as supplementary to your other studies; making your careful drawings of the subject first, and then a coloured memorandum separately, as shapeless as you like, but faithful in hue, and entirely minding its own business. This principle, however, bears chiefly on large and distant subjects; in foregrounds and near studies, the colour cannot be had without a good deal of definition of form. For if you do not map the mosses on the stones accurately, you will not have the right quantity of colour in each bit of moss pattern, and then none of the colours will look right; but it always simplifies the work much if you are clear as to your point of aim, and satisfied, when necessary, to fail of all but that. Now, of course, if I were to enter into detail respecting colouring, which is the beginning and end of a painter's craft, I should need to make this a work in three volumes instead of three letters, and to illustrate it in the costliest way. I only hope at present to set you pleasantly and profitably to work, leaving you, within the tethering of certain leading-strings, to gather what advantages you can from the works of art of which every year brings a greater number within your reach;--and from the instruction which, every year, our rising artists will be more ready to give kindly, and better able to give wisely. And, first, of materials. Use hard cake colours, not moist colours: grind a sufficient quantity of each on your palette every morning, keeping a separate plate, large and deep, for colours to be used in broad washes, and wash both plate and palette every evening, so as to be able always to get good and pure colour when you need it; and force yourself into cleanly and orderly habits about your colours. The two best colourists of modern times, Turner and Rossetti,[234] afford us, I am sorry to say, no confirmation of this precept by their practice. Turner was, and Rossetti is, as slovenly in all their procedures as men can well be; but the result of this was, with Turner, that the colours have altered in all his pictures, and in many of his drawings; and the result of it with Rossetti is, that, though his colours are safe, he has sometimes to throw aside work that was half done, and begin over again. William Hunt, of the Old Water-colour, is very neat in his practice; so, I believe, is Mulready; so is John Lewis; and so are the leading Pre-Raphaelites, Rossetti only excepted. And there can be no doubt about the goodness of the advice, if it were only for this reason, that the more particular you are about your colours the more you will get into a deliberate and methodical habit in using them, and all true _speed_ in colouring comes of this deliberation. Use Chinese white, well ground, to mix with your colours in order to pale them, instead of a quantity of water. You will thus be able to shape your masses more quietly, and play the colours about with more ease; they will not damp your paper so much, and you will be able to go on continually, and lay forms of passing cloud and other fugitive or delicately shaped lights, otherwise unattainable except by time. This mixing of white with the pigments, so as to render them opaque, constitutes _body_-colour drawing as opposed to _transparent_-colour drawing and you will, perhaps, have it often said to you that this body-colour is "illegitimate." It is just as legitimate as oil-painting, being, so far as handling is concerned, the same process, only without its uncleanliness, its unwholesomeness, or its inconvenience; for oil will not dry quickly, nor carry safely, nor give the same effects of atmosphere without tenfold labour. And if you hear it said that the body-colour looks chalky or opaque, and, as is very likely, think so yourself, be yet assured of this, that though certain effects of glow and transparencies of gloom are not to be reached without transparent colour, those glows and glooms are _not_ the noblest aim of art. After many years' study of the various results of fresco and oil painting in Italy, and of body-colour and transparent colour in England, I am now entirely convinced that the greatest things that are to be done in art must be done in dead colour. The habit of depending on varnish or on lucid tints transparency, makes the painter comparatively lose sight of the nobler translucence which is obtained by breaking various colours amidst each other: and even when, as by Correggio, exquisite play of hue is joined with exquisite transparency, the delight in the depth almost always leads the painter into mean and false chiaroscuro; it leads him to like dark backgrounds instead of luminous ones,[235] and to enjoy, in general, quality of colour more than grandeur of composition, and confined light rather than open sunshine: so that the really greatest thoughts of the greatest men have always, so far as I remember, been reached in dead colour, and the noblest oil pictures of Tintoret and Veronese are those which are likest frescos. Besides all this, the fact is, that though sometimes a little chalky and coarse-looking, body-colour is, in a sketch, infinitely liker nature than transparent colour: the bloom and mist of distance are accurately and instantly represented by the film of opaque blue (_quite_ accurately, I think, by _nothing_ else); and for ground, rocks, and buildings, the earthy and solid surface is, of course, always truer than the most finished and carefully wrought work in transparent tints can ever be. Against one thing, however, I must steadily caution you. All kinds of colour are equally illegitimate, if you think they will allow you to alter at your pleasure, or blunder at your ease. There is _no_ vehicle or method of colour which admits of alteration or repentance; you must be right at once, or never; and you might as well hope to catch a rifle bullet in your hand, and put it straight, when it was going wrong, as to recover a tint once spoiled. The secret of all good colour in oil, water, or anything else, lies primarily in that sentence spoken to me by Mulready: "Know what you have to do." The process may be a long one, perhaps: you may have to ground with one colour; to touch it with fragments of a second; to crumble a third into the interstices; a fourth into the interstices of the third; to glaze the whole with a fifth; and to reinforce in points with a sixth: but whether you have one, or ten, or twenty processes to go through, you must go _straight_ through them, knowingly and foreseeingly all the way; and if you get the thing once wrong, there is no hope for you but in washing or scraping boldly down to the white ground, and beginning again. The drawing in body-colour will tend to teach you all this, more than any other method, and above all it will prevent you from falling into the pestilent habit of sponging to get texture; a trick which has nearly ruined our modern water-colour school of art. There are sometimes places in which a skilful artist will roughen his paper a little to get certain conditions of dusty colour with more ease than he could otherwise; and sometimes a skilfully rased piece of paper will, in the midst of transparent tints, answer nearly the purpose of chalky body-colour in representing the surfaces of rocks or buildings. But artifices of this kind are always treacherous in a tyro's hands, tempting him to trust in them; and you had better always work on white or grey paper as smooth as silk;[236] and never disturb the surface of your colour or paper, except finally to scratch out the very highest lights if you are using transparent colours. I have said above that body-colour drawing will teach you the use of colour better than working with merely transparent tints; but this is not because the process is an easier one, but because it is a more _complete_ one, and also because it involves _some_ working with transparent tints in the best way. You are not to think that because you use body-colour you may make any kind of mess that you like, and yet get out of it. But you are to avail yourself of the characters of your material, which enable you most nearly to imitate the processes of Nature. Thus, suppose you have a red rocky cliff to sketch, with blue clouds floating over it. You paint your cliff first firmly, then take your blue, mixing it to such a tint (and here is a great part of the skill needed), that when it is laid over the red, in the thickness required for the effect of the mist, the warm rock-colour showing through the blue cloud-colour, may bring it to exactly the hue you want; (your upper tint, therefore, must be mixed colder than you want it;) then you lay it on, varying it as you strike it, getting the forms of the mist at once, and, if it be rightly done, with exquisite quality of colour, from the warm tint's showing through and between the particles of the other. When it is dry, you may add a little colour to retouch the edges where they want shape, or heighten the lights where they want roundness, or put another tone over the whole; but you can take none away. If you touch or disturb the surface, or by any untoward accident mix the under and upper colours together, all is lost irrecoverably. Begin your drawing from the ground again if you like, or throw it into the fire if you like. But do not waste time in trying to mend it.[237] This discussion of the relative merits of transparent and opaque colour has, however, led us a little beyond the point where we should have begun; we must go back to our palette, if you please. Get a cake of each of the hard colours named in the note below[238] and try experiments on their simple combinations, by mixing each colour with every other. If you like to do it in an orderly way, you may prepare a squared piece of pasteboard, and put the pure colours in columns at the top and side; the mixed tints being given at the intersections, thus (the letters standing for colours): b c d e f &c. a ab ac ad ae af b -- bc bd be bf c -- -- cd ce cf d -- -- -- de df e -- -- -- -- ef &c. This will give you some general notion of the characters of mixed tints of two colours only, and it is better in practice to confine yourself as much as possible to these, and to get more complicated colours, either by putting a third _over_ the first blended tint, or by putting the third into its interstices. Nothing but watchful practice will teach you the effects that colours have on each other when thus put over, or beside, each other. [Illustration: FIG. 29.] When you have got a little used to the principal combinations, place yourself at a window which the sun does not shine in at, commanding some simple piece of landscape; outline this landscape roughly; then take a piece of white cardboard, cut out a hole in it about the size of a large pea; and supposing _R_ is the room, _a d_ the window, and you are sitting at _a_, Fig. 29., hold this cardboard a little outside of the window, upright, and in the direction _b d_, parallel a little turned to the side of the window, or so as to catch more light, as at _a d_, never turned as at _c d_, or the paper will be dark. Then you will see the landscape, bit by bit, through the circular hole. Match the colours of each important bit as nearly as you can, mixing your tints with white, beside the aperture. When matched, put a touch of the same tint at the top of your paper, writing under it: "dark tree colour," "hill colour," "field colour," as the case may be. Then wash the tint away from beside the opening, and the cardboard will be ready to match another piece of the landscape.[239] When you have got the colours of the principal masses thus indicated, lay on a piece of each in your sketch in its right place, and then proceed to complete the sketch in harmony with them, by your eye. In the course of your early experiments, you will be much struck by two things: the first, the inimitable brilliancy of light in sky and in sunlighted things: and the second, that among the tints which you can imitate, those which you thought the darkest will continually turn out to be in reality the lightest. Darkness of objects is estimated by us, under ordinary circumstances, much more by _knowledge_ than by sight; thus, a cedar or Scotch fir, at 200 yards off, will be thought of darker green than an elm or oak near us; because we know by experience that the peculiar colour they exhibit, at that distance, is the _sign_ of darkness of foliage. But when we try them through the cardboard, the near oak will be found, indeed, rather dark green, and the distant cedar, perhaps, pale gray-purple. The quantity of purple and grey in Nature is, by the way, another somewhat surprising subject of discovery. Well, having ascertained thus your principal tints, you may proceed to fill up your sketch; in doing which observe these following particulars: 1. Many portions of your subject appeared through the aperture in the paper brighter than the paper, as sky, sunlighted grass, &c. Leave these portions, for the present, white; and proceed with the parts of which you can match the tints. 2. As you tried your subject with the cardboard, you must have observed how many changes of hue took place over small spaces. In filling up your work, try to educate your eye to perceive these differences of hue without the help of the cardboard, and lay them deliberately, like a mosaic-worker, as separate colours, preparing each carefully on your palatte, and laying it as if it were a patch of coloured cloth, cut out, to be fitted neatly by its edge to the next patch; so that the _fault_ of your work may be, not a slurred or misty look, but a patched bed-cover look, as if it had all been cut out with scissors. For instance, in drawing the trunk of a birch tree, there will be probably white high lights, then a pale rosy grey round them on the light side, then a (probably greenish) deeper grey on the dark side, varied by reflected colours, and over all, rich black strips of bark and brown spots of moss. Lay first the rosy grey, leaving white for the high lights _and for the spots of moss_, and not touching the dark side. Then lay the grey for the dark side, fitting it well up to the rosy grey of the light, leaving also in this darker grey the white paper in the places for the black and brown moss; then prepare the moss colours separately for each spot, and lay each in the white place left for it. Not one grain of white, except that purposely left for the high lights, must be visible when the work is done, even through a magnifying-glass, so cunningly must you fit the edges to each other. Finally, take your background colours, and put them on each side of the tree-trunk, fitting them carefully to its edge. Fine work you would make of this, wouldn't you, if you had not learned to draw first, and could not now draw a good outline for the stem, much less terminate a colour mass in the outline you wanted? Your work will look very odd for some time, when you first begin to paint in this way, and before you can modify it, as I shall tell you presently how; but never mind; it is of the greatest possible importance that you should practice this separate laying on of the hues, for all good colouring finally depends on it. It is, indeed, often necessary, and sometimes desirable, to lay one colour and form boldly over another: thus, in laying leaves on blue sky, it is impossible always in large pictures, or when pressed for time, to fill in the blue through the interstices of the leaves; and the great Venetians constantly lay their blue ground first, and then, having let it dry, strike the golden brown over it in the form of the leaf, leaving the under blue to shine through the gold, and subdue it to the olive green they want. But in the most precious and perfect work each leaf is inlaid, and the blue worked round it: and, whether you use one or other mode of getting your result, it is equally necessary to be absolute and decisive in your laying the colour. Either your ground must be laid firmly first, and then your upper colour struck upon it in perfect form, for ever, thenceforward, unalterable; or else the two colours must be individually put in their places, and led up to each other till they meet at their appointed border, equally, thenceforward, unchangeable. Either process, you see, involves _absolute_ decision. If you once begin to slur, or change, or sketch, or try this way and that with your colour, it is all over with it and with you. You will continually see bad copyists trying to imitate the Venetians, by daubing their colours about, and retouching, and finishing, and softening: when every touch and every added hue only lead them farther into chaos. There is a dog between two children in a Veronese in the Louvre, which gives the copyist much employment. He has a dark ground behind him, which Veronese has painted first, and then when it was dry, or nearly so, struck the locks of the dog's white hair over it with some half-dozen curling sweeps of his brush, right at once, and forever. Had one line or hair of them gone wrong, it would have been wrong forever; no retouching could have mended it. The poor copyists daub in first some background, and then some dog's hair; then retouch the background, then the hair, work for hours at it, expecting it always to come right to-morrow--"when it is finished." They _may_ work for centuries at it, and they will never do it. If they can do it with Veronese's allowance of work, half a dozen sweeps of the hand over the dark background, well; if not, they may ask the dog himself whether it will ever come right, and get true answer from him--on Launce's conditions: "If he say 'ay,' it will; if he say 'no,' it will; if he shake his tail and say nothing, it will." Whenever you lay on a mass of colour, be sure that however large it may be, or however small, it shall be gradated. No colour exists in Nature under ordinary circumstances without gradation. If you do not see this, it is the fault of your inexperience; you _will_ see it in due time, if you practise enough. But in general you may see it at once. In the birch trunk, for instance, the rosy grey _must_ be gradated by the roundness of the stem till it meets the shaded side; similarly the shaded side is gradated by reflected, light. Accordingly, whether by adding water, or white paint, or by unequal force of touch (this you will do at pleasure, according to the texture you wish to produce), you must, in every tint you lay on, make it a little paler at one part than another, and get an even gradation between the two depths. This is very like laying down a formal law or recipe for you; but you will find it is merely the assertion of a natural fact. It is not indeed physically impossible to meet with an ungradated piece of colour, but it is so supremely improbable, that you had better get into the habit of asking yourself invariably, when you are going to copy a tint,--not "_Is_ that gradated?" but "_Which way_ is it gradated?" and at least in ninety-nine out of a hundred instances, you will be able to answer decisively after a careful glance, though the gradation may have been so subtle that you did not see it at first. And it does not matter how small the touch of colour may be, though not larger than the smallest pin's head, if one part of it is not darker than the rest, it is a bad touch; for it is not merely because the natural fact is so, that your colour should be gradated; the preciousness and pleasantness of the colour itself depends more on this than on any other of its qualities, for gradation is to colours just what curvature is to lines, both being felt to be beautiful by the pure instinct of every human mind, and both, considered as types, expressing the law of gradual change and progress in the human soul itself. What the difference is in mere beauty between a gradated and ungradated colour, may be seen easily by laying an even tint of rose-colour on paper, and putting a rose leaf beside it. The victorious beauty of the rose as compared with other flowers, depends wholly on the delicacy and quantity of its colour gradations, all other flowers being either less rich in gradation, not having so many folds of leaf; or less tender, being patched and veined instead of flushed. 4. But observe, it is not enough in general that colour should be gradated by being made merely paler or darker at one place than another. Generally colour _changes_ as it _diminishes_, and is not merely _darker_ at one spot, but also _purer_ at one spot than anywhere else. It does not in the least follow that the darkest spot should be the purest; still less so that the lightest should be the purest. Very often the two gradations more or less cross each other, one passing in one direction from paleness to darkness, another in another direction from purity to dullness, but there will almost always be both of them, however reconciled; and you must never be satisfied with a piece of colour until you have got both: that is to say, every piece of blue that you lay on must be _quite_ blue only at some given spot, nor that a large spot; and must be gradated from that into less pure blue--greyish blue, or greenish blue, or purplish blue, over all the rest of the space it occupies. And this you must do in one of three ways: either, while the colour is wet, mix it with the colour which is to subdue it, adding gradually a little more and a little more; or else, when the colour is quite dry, strike a gradated touch of another colour over it, leaving only a point of the first tint visible: or else, lay the subduing tints on in small touches, as in the exercise of tinting the chess-board. Of each of these methods I have something to tell you separately: but that is distinct from the subject of gradation, which I must not quit without once more pressing upon you the preëminent necessity of introducing it everywhere. I have profound dislike of anything like _habit_ of hand, and yet, in this one instance, I feel almost tempted to encourage you to get into a habit of never touching paper with colour, without securing a gradation. You will not in Turner's largest oil pictures, perhaps six or seven feet long by four or five high, find one spot of colour as large as a grain of wheat ungradated: and you will find in practice, that brilliancy of hue, and vigour of light, and even the aspect of transparency in shade, are essentially dependent on this character alone; hardness, coldness, and opacity resulting far more from _equality_ of colour than from nature of colour. Give me some mud off a city crossing, some ochre out of a gravel pit, a little whitening, and some coal-dust, and I will paint you a luminous picture, if you give me time to gradate my mud, and subdue my dust: but though you had the red of the ruby, the blue of the gentian, snow for the light, and amber for the gold, you cannot paint a luminous picture, if you keep the masses of those colours unbroken in purity, and unvarying in depth. 5. Next note the three processes by which gradation and other characters are to be obtained: A. Mixing while the colour is wet. You may be confused by my first telling you to lay on the hues in separate patches, and then telling you to mix hues together as you lay them on: but the separate masses are to be laid, when colours distinctly oppose each other at a given limit; the hues to be mixed, when they palpitate one through the other, or fade one into the other. It is better to err a little on the distinct side. Thus I told you to paint the dark and light sides of the birch trunk separately, though in reality, the two tints change, as the trunk turns away from the light, gradually one into the other: and, after being laid separately on, will need some farther touching to harmonize them: but they do so in a very narrow space, marked distinctly all the way up the trunk; and it is easier and safer, therefore, to keep them separate at first. Whereas it often happens that the whole beauty of two colours will depend on the one being continued well through the other, and playing in the midst of it: blue and green often do so in water: blue and grey, or purple and scarlet, in sky; in hundreds of such instances the most beautiful and truthful results may be obtained by laying one colour into the other while wet; judging wisely how far it will spread, or blending it with the brush in somewhat thicker consistence of wet body-colour; only observe, never mix in this way two _mixtures_; let the colour you lay into the other be always a simple, not a compound tint. B. Laying one colour over another. If you lay on a solid touch of vermilion, and, after it is quite dry, strike a little very wet carmine quickly over it, you will obtain a much more brilliant red than by mixing the carmine and vermilion. Similarly, if you lay a dark colour first, and strike a little blue or white body-colour lightly over it, you will get a more beautiful grey than by mixing the colour and the blue or white. In very perfect painting, artifices of this kind are continually used; but I would not have you trust much to them; they are apt to make you think too much of quality of colour. I should like you to depend on little more than the dead colours, simply laid on, only observe always this, that the _less_ colour you do the work with, the better it will always be:[240] so that if you have laid a red colour, and you want a purple one above, do not mix the purple on your palette and lay it on so thick as to overpower the red, but take a little thin blue from your palette, and lay it lightly over the red, so as to let the red be seen through, and thus produce the required purple; and if you want a green hue over a blue one, do not lay a quantity of green on the blue, but a _little_ yellow, and so on, always bringing the under colour into service as far as you possibly can. If, however, the colour beneath is wholly opposed to the one you have to lay on, as, suppose, if green is to be laid over scarlet, you must either remove the required parts of the under colour daintily first with your knife, or with water; or else, lay solid white over it massively, and leave that to dry, and then glaze the white with the upper colour. This is better, in general, than laying the upper colour itself so thick as to conquer the ground, which, in fact, if it be a transparent colour, you cannot do. Thus, if you have to strike warm boughs and leaves of trees over blue sky, and they are too intricate to have their places left for them in laying the blue, it is better to lay them first in solid white, and then glaze with sienna and ochre, than to mix the sienna and white; though, of course, the process is longer and more troublesome. Nevertheless, if the forms of touches required are very delicate, the after glazing is impossible. You must then mix the warm colour thick at once, and so use it: and this is often necessary for delicate grasses, and such other fine threads of light in foreground work. C. Breaking one colour in small points through or over another. This is the most important of all processes in good modern[241] oil and water-colour painting, but you need not hope to attain very great skill in it. To do it well is very laborious, and requires such skill and delicacy of hand as can only be acquired by unceasing practice. But you will find advantage in noting the following points: (_a._) In distant effects of rich subjects, wood, or rippled water, or broken clouds, much may be done by touches or crumbling dashes of rather dry colour, with other colours afterwards put cunningly into the interstices. The more you practise this, when the subject evidently calls for it, the more your eye will enjoy the higher qualities of colour. The process is, in fact, the carrying out of the principle of separate colours to the utmost possible refinement; using atoms of colour in juxtaposition, instead of large spaces. And note, in filling up minute interstices of this kind, that if you want the colour you fill them with to show brightly, it is better to put a rather positive point of it, with a little white left beside or round it in the interstice, than to put a pale tint of the colour over the whole interstice. Yellow or orange will hardly show, if pale, in small spaces; but they show brightly in firm touches, however small, with white beside them. (_b._) If a colour is to be darkened by superimposed portions of another, it is, in many cases, better to lay the uppermost colour in rather vigorous small touches, like finely chopped straw, over the under one, than to lay it on as a tint, for two reasons: the first, that the play of the two colours together is pleasant to the eye; the second, that much expression of form may be got by wise administration of the upper dark touches. In distant mountains they may be made pines of, or broken crags, or villages, or stones, or whatever you choose; in clouds they may indicate the direction of the rain, the roll and outline of the cloud masses; and in water, the minor waves. All noble effects of dark atmosphere are got in good water-colour drawing by these two expedients, interlacing the colours, or retouching the lower one with fine darker drawing in an upper. Sponging and washing for dark atmospheric effect is barbarous, and mere tyro's work, though it is often useful for passages of delicate atmospheric light. (_c._) When you have time, practice the production of mixed tints by interlaced touches of the pure colours out of which they are formed, and use the process at the parts of your sketches where you wish to get rich and luscious effects. Study the works of William Hunt, of the Old Water-colour Society, in this respect, continually, and make frequent memoranda of the variegations in flowers; not painting the flower completely, but laying the ground colour of one petal, and painting the spots on it with studious precision: a series of single petals of lilies, geraniums, tulips, &c., numbered with proper reference to their position in the flower, will be interesting to you on many grounds besides those of art. Be careful to get the _gradated_ distribution of the spots well followed in the calceolarias, foxgloves, and the like; and work out the odd, indefinite hues of the spots themselves with minute grains of pure interlaced colour, otherwise you will never get their richness of bloom. You will be surprised to find, as you do this, first the universality of the law of gradation we have so much insisted upon; secondly, that Nature is just as economical of _her_ fine colours as I have told you to be of yours. You would think, by the way she paints, that her colours cost her something enormous: she will only give you a single pure touch just where the petal turns into light; but down in the bell all is subdued, and under the petal all is subdued, even in the showiest flower. What you thought was bright blue is, when you look close, only dusty grey, or green, or purple, or every colour in the world at once, only a single gleam or streak of pure blue in the centre of it. And so with all her colours. Sometimes I have really thought her miserliness intolerable: in a gentian, for instance, the way she economises her ultramarine down in the bell is a little too bad. Next, respecting general tone. I said, just now, that, for the sake of students, my tax should not be laid on black or on white pigments; but if you mean to be a colourist, you must lay a tax on them yourselves when you begin to use true colour; that is to say, you must use them little and make of them much. There is no better test of your colour tones being good, than your having made the white in your picture precious, and the black conspicuous. I say, first, the white precious. I do not mean merely glittering or brilliant; it is easy to scratch white seagulls out of black clouds and dot clumsy foliage with chalky dew; but, when white is well managed, it ought to be strangely delicious--tender as well as bright--like inlaid mother of pearl, or white roses washed in milk. The eye ought to seek it for rest, brilliant though it may be; and to feel it as a space of strange, heavenly paleness in the midst of the flushing of the colours. This effect you can only reach by general depth of middle tint, by absolutely refusing to allow any white to exist except where you need it, and by keeping the white itself subdued by grey, except at a few points of chief lustre. Secondly, you must make the black conspicuous. However small a point of black may be, it ought to catch the eye, otherwise your work is too heavy in the shadow. All the ordinary shadows should be of some _colour_--never black, nor approaching black, they should be evidently and always of a luminous nature, and the black should look strange among them; never occurring except in a black object, or in small points indicative of intense shade in the very centre of masses of shadow. Shadows of absolutely negative grey, however, may be beautifully used with white, or with gold; but still though the black thus, in subdued strength, becomes _spacious_, it should always be _conspicuous_; the spectator should notice this grey neutrality with some wonder, and enjoy, all the more intensely on account of it, the gold colour and the white which it relieves. Of all the great colourists Velasquez is the greatest master of the black chords. His black is more precious than most other people's crimson. It is not, however, only white and black which you must make valuable; you must give rare worth to every colour you use; but the white and black ought to separate themselves quaintly from the rest, while the other colours should be continually passing one into the other, being all evidently companions in the same gay world; while the white, black, and neutral grey should stand monkishly aloof in the midst of them. You may melt your crimson into purple, your purple into blue and your blue into green, but you must not melt any of them into black. You should, however, try, as I said, to give _preciousness_ to all your colours; and this especially by never using a grain more than will just do the work, and giving each hue the highest value by opposition. All fine colouring, like fine drawing, is _delicate_; and so delicate that if, at last, you _see_ the colour you are putting on, you are putting on too much. You ought to feel a change wrought in the general tone, by touches of colour which individually are too pale to be seen; and if there is one atom of any colour in the whole picture which is unnecessary to it, that atom hurts it. Notice also, that nearly all good compound colours are _odd_ colours. You shall look at a hue in a good painter's work ten minutes before you know what to call it. You thought it was brown, presently, you feel that it is red; next that there is, somehow, yellow in it; presently afterwards that there is blue in it. If you try to copy it you will always find your colour too warm or too cold--no colour in the box will seem to have any affinity with it; and yet it will be as pure as if it were laid at a single touch with a single colour. As to the choice and harmony of colours in general, if you cannot choose and harmonize them by instinct, you will never do it at all. If you need examples of utterly harsh and horrible colour, you may find plenty given in treatises upon colouring, to illustrate the laws of harmony; and if you want to colour beautifully, colour as best pleases yourself at _quiet times_, not so as to catch the eye, nor to look as if it were clever or difficult to colour in that way, but so that the colour may be pleasant to you when you are happy, or thoughtful. Look much at the morning and evening sky, and much at simple flowers--dog-roses, wood hyacinths, violets, poppies, thistles, heather, and such like--as Nature arranges them in the woods and fields. If ever any scientific person tells you that two colours are "discordant," make a note of the two colours, and put them together whenever you can. I have actually heard people say that blue and green were discordant; the two colours which Nature seems to intend never to be separated and never to be felt, either of them, in its full beauty without the other!--a peacock's neck, or a blue sky through green leaves, or a blue wave with green lights though it, being precisely the loveliest things, next to clouds at sunrise, in this coloured world of ours. If you have a good eye for colours, you will soon find out how constantly Nature puts purple and green together, purple and scarlet, green and blue, yellow and neutral grey, and the like; and how she strikes these colour-concords for general tones, and then works into them with innumerable subordinate ones; and you will gradually come to like what she does, and find out new and beautiful chords of colour in her work every day. If you _enjoy_ them, depend upon it you will paint them to a certain point right: or, at least, if you do not enjoy them, you are certain to paint them wrong. If colour does not give you _intense_ pleasure, let it alone; depend upon it, you are only tormenting the eyes and senses of people who feel colour, whenever you touch it; and that is unkind and improper. You will find, also, your power of colouring depend much on your state of health and right balance of mind; when you are fatigued or ill you will not see colours well, and when you are ill-tempered you will not choose them well: thus, though not infallibly a test of character in individuals, colour power is a great sign of mental health in nations; when they are in a state of intellectual decline, their colouring always gets dull.[242] You must also take great care not to be misled by affected talk about colour from people who have not the gift of it: numbers are eager and voluble about it who probably never in all their lives received one genuine colour-sensation. The modern religionists of the school of Overbeck are just like people who eat slate-pencil and chalk, and assure everybody that they are nicer and purer than strawberries and plums. Take care also never to be misled into any idea that colour can help or display _form_; colour[243] always disguises form, and is meant to do so. It is a favourite dogma among modern writers on colour that "warm colours" (reds and yellows) "approach" or express nearness, and "cold colours" (blue and grey) "retire" or express distance. So far is this from being the case, that no expression of distance in the world is so great as that of the gold and orange in twilight sky. Colours, as such, are ABSOLUTELY inexpressive respecting distance. It is their _quality_ (as depth, delicacy, &c.) which expresses distance, not their tint. A blue bandbox set on the same shelf with a yellow one will not look an inch farther off, but a red or orange cloud, in the upper sky, will always appear to be beyond a blue cloud close to us, as it is in reality. It is quite true that in certain objects, blue is a _sign_ of distance; but that is not because blue is a retiring colour, but because the mist in the air is blue, and therefore any warm colour which has not strength of light enough to pierce the mist is lost or subdued in its blue: but blue is no more, on this account, a "retiring colour," than brown is a retiring colour, because, when stones are seen through brown water, the deeper they lie the browner they look; or than yellow is a retiring colour, because when objects are seen through a London fog, the farther off they are the yellower they look. Neither blue, nor yellow, nor red, can have, as such, the _smallest_ power of expressing either nearness or distance: they express them only under the peculiar circumstances which render them at the moment, or in that place, _signs_ of nearness or distance. Thus, vivid orange in an orange is a sign of nearness, for if you put the orange a great way off, its colour will not look so bright; but vivid orange in sky is a sign of distance, because you cannot get the colour of orange in a cloud near you. So purple in a violet or a hyacinth is a sign of nearness, because the closer you look at them the more purple you see. But purple in a mountain is a sign of distance, because a mountain close to you is not purple, but green or grey. It may, indeed, be generally assumed that a tender or pale colour will more or less express distance, and a powerful or dark colour nearness; but even this is not always so. Heathery hills will usually give a pale and tender purple near, and an intense and dark purple far away; the rose colour of sunset on snow is pale on the snow at your feet, deep and full on the snow in the distance; and the green of a Swiss lake is pale in the clear waves on the beach, but intense as an emerald in the sunstreak, six miles from shore. And in any case, when the foreground is in strong light, with much water about it, or white surface, casting intense reflections, all its colours may be perfectly delicate, pale, and faint; while the distance, when it is in shadow, may relieve the whole foreground with intense darks of purple, blue green, or ultramarine blue. So that, on the whole, it is quite hopeless and absurd to expect any help from laws of "aërial perspective." Look for the natural effects, and set them down as fully as you can, and as faithfully, and _never_ alter a colour because it won't look in its right place. Put the colour strong, if it be strong, though far off; faint, if it be faint, though close to you. Why should you suppose that Nature always means you to know exactly how far one thing is from another? She certainly intends you always to enjoy her colouring, but she does not wish you always to measure her space. You would be hard put to it, every time you painted the sun setting, if you had to express his 95,000,000 miles of distance in "aërial perspective." There is, however, I think, one law about distance, which has some claims to be considered a constant one: namely, that dullness and heaviness of colour are more or less indicative of nearness. All distant colour is _pure_ colour: it may not be bright, but it is clear and lovely, not opaque nor soiled; for the air and light coming between us and any earthy or imperfect colour, purify or harmonise it; hence a bad colourist is peculiarly incapable of expressing distance. I do not of course mean that you are to use bad colours in your foreground by way of making it come forward; but only that a failure in colour, there, will not put it out of its place; while a failure in colour in the distance will at once do away with its remoteness: your dull-coloured foreground will still be a foreground, though ill-painted; but your ill-painted distance will not be merely a dull distance,--it will be no distance at all. I have only one thing more to advise you, namely, never to colour petulantly or hurriedly. You will not, indeed, be able, if you attend properly to your colouring, to get anything like the quantity of form you could in a chiaroscuro sketch; nevertheless, if you do not dash or rush at your work, nor do it lazily, you may always get enough form to be satisfactory. An extra quarter of an hour, distributed in quietness over the course of the whole study, may just make the difference between a quite intelligible drawing, and a slovenly and obscure one. If you determine well beforehand what outline each piece of colour is to have; and, when it is on the paper, guide it without nervousness, as far as you can, into the form required; and then, after it is dry, consider thoroughly what touches are needed to complete it, before laying one of them on; you will be surprised to find how masterly the work will soon look, as compared with a hurried or ill-considered sketch. In no process that I know of--least of all in sketching--can time be really gained by precipitation. It is gained only by caution; and gained in all sorts of ways: for not only truth of form, but force of light, is always added by an intelligent and shapely laying of the shadow colours. You may often make a simple flat tint, rightly gradated and edged, express a complicated piece of subject without a single retouch. The two Swiss cottages, for instance, with their balconies, and glittering windows, and general character of shingly eaves, are expressed in Fig. 30., with one tint of grey, and a few dispersed spots and lines of it; all of which you ought to be able to lay on without more than thrice dipping your brush, and without a single touch after the tint is dry. [Illustration: FIG. 30.] Here, then, for I cannot without coloured illustrations tell you more, I must leave you to follow out the subject for yourself, with such help as you may receive from the water-colour drawings accessible to you; or from any of the little treatises on their art which have been published lately by our water-colour painters.[244] But do not trust much to works of this kind. You may get valuable hints from them as to mixture of colours; and here and there you will find a useful artifice or process explained; but nearly all such books are written only to help idle amateurs to a meretricious skill, and they are full of precepts and principles which may, for the most part, be interpreted by their _precise_ negatives, and then acted upon, with advantage. Most of them praise boldness, when the only safe attendant spirit of a beginner is caution;--advise velocity, when the first condition of success is deliberation;--and plead for generalisation, when all the foundations of power must be laid in knowledge of specialty. And now, in the last place, I have a few things to tell you respecting that dangerous nobleness of consummate art,--COMPOSITION. For though it is quite unnecessary for you yet awhile to attempt it, and it _may_ be inexpedient for you to attempt it at all, you ought to know what it means, and to look for and enjoy it in the art of others. Composition means, literally and simply, putting several things together, so as to make _one_ thing out of them; the nature and goodness of which they all have a share in producing. Thus a musician composes an air, by putting notes together in certain relations; a poet composes a poem; by putting thoughts and words in pleasant order; and a painter a picture, by putting thoughts, forms, and colours in pleasant order. In all these cases, observe, an intended unity must be the result of composition. A paviour cannot be said to compose the heap of stones which he empties from his cart, nor the sower the handful of seed which he scatters from his hand. It is the essence of composition that everything should be in a determined place, perform an intended part, and act, in that part, advantageously for everything that is connected with it. Composition, understood in this pure sense, is the type, in the arts of mankind, of the Providential government of the world.[245] It is an exhibition, in the order given to notes, or colours, or forms, of the advantage of perfect fellowship, discipline, and contentment. In a well-composed air, no note, however short or low, can be spared, but the least is as necessary as the greatest: no note, however prolonged, is tedious; but the others prepare for, and are benefited by, its duration; no note, however high, is tyrannous; the others prepare for and are benefited by, its exaltation: no note, however low, is overpowered, the others prepare for, and sympathise with, its humility: and the result is, that each and every note has a value in the position assigned to it, which by itself, it never possessed, and of which by separation from the others, it would instantly be deprived. Similarly, in a good poem, each word and thought enhances the value of those which precede and follow it; and every syllable has a loveliness which depends not so much on its abstract sound as on its position. Look at the same word in a dictionary, and you will hardly recognise it. Much more in a great picture; every line and colour is so arranged as to advantage the rest. None are inessential, however slight; and none are independent, however forcible. It is not enough that they truly represent natural objects; but they must fit into certain places, and gather into certain harmonious groups: so that, for instance, the red chimney of a cottage is not merely set in its place as a chimney, but that it may affect, in a certain way pleasurable to the eye, the pieces of green or blue in other parts of the picture; and we ought to see that the work is masterly, merely by the positions and quantities of these patches of green, red, and blue, even at a distance which renders it perfectly impossible to determine what the colours represent: or to see whether the red is a chimney, or an old woman's cloak; and whether the blue is smoke, sky, or water. It seems to be appointed, in order to remind us, in all we do, of the great laws of Divine government and human polity, that composition in the arts should strongly affect every order of mind, however unlearned or thoughtless. Hence the popular delight in rhythm and metre, and in simple musical melodies. But it is also appointed that _power_ of composition in the fine arts should be an exclusive attribute of great intellect All men can more or less copy what they see, and, more or less, remember it: powers of reflection and investigation are also common to us all, so that the decision of inferiority in these rests only on questions of _degree_. A. has a better memory than B., and C. reflects more profoundly than D. But the gift of composition is not given _at all_ to more than one man in a thousand; in its highest range, it does not occur above three or four times in a century. It follows, from these general truths, that it is impossible to give rules which will enable you to compose. You might much more easily receive rules to enable you to be witty. If it were possible to be witty by rule, wit would cease to be either admirable or amusing: if it were possible to compose melody by rule, Mozart and Cimarosa need not have been born: if it were possible to compose pictures by rule, Titian and Veronese would be ordinary men. The essence of composition lies precisely in the fact of its being unteachable, in its being the operation of an individual mind of range and power exalted above others. But though no one can _invent_ by rule, there are some simple laws of arrangement which it is well for you to know, because, though they will not enable you to produce a good picture, they will often assist you to set forth what goodness may be in your work in a more telling way than you could have done otherwise; and by tracing them in the work of good composers, you may better understand the grasp of their imagination, and the power it possesses over their materials I shall briefly state the chief of these laws. 1. THE LAW OF PRINCIPALITY. The great object of composition being always to secure unity; that is, to make out of many things one whole; the first mode in which this can be effected is, by determining that _one_ feature shall be more important than all the rest, and that the others shall group with it in subordinate positions. This is the simplest law of ordinary ornamentation. Thus the group of two leaves, _a_, Fig. 31., is unsatisfactory, because it has no leading leaf; but that at _b_ _is_ prettier, because it has a head or master leaf; and _c_ more satisfactory still, because the subordination of the other members to this head leaf is made more manifest by their gradual loss of size as they fall back from it. Hence part of the pleasure we have in the Greek honeysuckle ornament, and such others. [Illustration: FIG. 31.] Thus, also, good pictures have always one light larger or brighter than the other lights, or one figure more prominent than the other figures, or one mass of colour dominant over all the other masses; and in general you will find it much benefit your sketch if you manage that there shall be one light on the cottage wall, or one blue cloud in the sky, which may attract the eye as leading light, or leading gloom, above all others. But the observance of the rule is often so cunningly concealed by the great composers, that its force is hardly at first traceable; and you will generally find that they are vulgar pictures in which the law is _strikingly_ manifest. This may be simply illustrated by musical melody; for instance, in such phrases as this: [Illustration] one note (here the upper G) rules the whole passage, and has the full energy of it concentrated in itself. Such passages, corresponding to completely subordinated compositions in painting, are apt to be wearisome if often repeated. But in such a phrase as this: [Illustration] it is very difficult to say, which is the principal note. The A in the last bar is lightly dominant, but there is a very equal current of power running through the whole; and such passages rarely weary. And this principle holds through vast scales of arrangement; so that in the grandest compositions, such as Paul Veronese's Marriage in Cana, or Raphael's Disputa, it is not easy to fix at once on the principal figure; and very commonly the figure which is really chief does not catch the eye at first, but is gradually felt to be more and more conspicuous as we gaze. Thus in Titian's grand composition of the Cornaro Family, the figure meant to be principal is a youth of fifteen or sixteen, whose portrait it was evidently the painter's object to make as interesting as possible. But a grand Madonna, and a St. George with a drifting banner, and many figures more, occupy the centre of the picture, and first catch the eye; little by little we are led away from them to a gleam of pearly light in the lower corner, and find that, from the head which it shines upon, we can turn our eyes no more. As, in every good picture, nearly all laws of design are more or less exemplified, it will, on the whole, be an easier way of explaining them to analyse one composition thoroughly, than to give instances from various works. I shall therefore take one of Turner's simplest; which will allow us, so to speak, easily to decompose it, and illustrate each law by it as we proceed. Figure 32. is a rude sketch of the arrangement of the whole subject; the old bridge over the Moselle at Coblentz, the town of Coblentz on the right, Ehrenbreitstein on the left. The leading or master feature is, of course the tower on the bridge. It is kept from being _too_ principal by an important group on each side of it; the boats, on the right, and Ehrenbreitstein beyond. The boats are large in mass, and more forcible in colour, but they are broken into small divisions, while the tower is simple, and therefore it still leads. Ehrenbreitstein is noble in its mass, but so reduced by aërial perspective of colour that it cannot contend with the tower, which therefore holds the eye, and becomes the key of the picture. We shall see presently how the very objects which seem at first to contend with it for the mastery are made, occultly to increase its preëminence. [Illustration: FIG. 32.] 2. THE LAW OF REPETITION. Another important means of expressing unity is to mark some kind of sympathy among the different objects, and perhaps the pleasantest, because most surprising, kind of sympathy, is when one group imitates or repeats another; not in the way of balance or symmetry, but subordinately, like a far-away and broken echo of it. Prout has insisted much on this law in all his writings on composition; and I think it is even more authoritatively present in the minds of most great composers than the law of principality. It is quite curious to see the pains that Turner sometimes takes to echo an important passage of colour; in the Pembroke Castle for instance, there are two fishing-boats, one with a red, and another with a white sail. In a line with them, on the beach, are two fish in precisely the same relative positions; one red and one white. It is observable that he uses the artifice chiefly in pictures where he wishes to obtain an expression of repose: in my notice of the plate of Scarborough, in the series of the "Harbours of England," I have already had occasion to dwell on this point, and I extract in the note[246] one or two sentences which explain the principle. In the composition I have chosen for our illustration, this reduplication is employed to a singular extent. The tower, or leading feature, is first repeated by the low echo of it to the left; put your finger over this lower tower, and see how the picture is spoiled. Then the spires of Coblentz are all arranged in couples (how they are arranged in reality does not matter; when we are composing a great picture, we must play the towers about till they come right, as fearlessly as if they were chessmen instead of cathedrals). The dual arrangement of these towers would have been too easily seen, were it not for a little one which pretends to make a triad of the last group on the right, but is so faint as hardly to be discernible: it just takes off the attention from the artifice, helped in doing so by the mast at the head of the boat, which, however, has instantly its own duplicate put at the stern.[247] Then there is the large boat near, and its echo beyond it. That echo is divided into two again, and each of those two smaller boats has two figures in it; while two figures are also sitting together on the great rudder that lies half in the water, and half aground. Then, finally, the great mass of Ehrenbreitstein, which appears at first to have no answering form, has almost its _facsimile_ in the bank on which the girl is sitting; this bank is as absolutely essential to the completion of the picture as any object in the whole series. All this is done to deepen the effect of repose. Symmetry or the balance of parts or masses in nearly equal opposition, is one of the conditions of treatment under the law of Repetition. For the opposition, in a symmetrical object, is of like things reflecting each other; it is not the balance of contrary natures (like that of day and night) but of like natures or like forms; one side of a leaf being set like the reflection of the other in water. Symmetry in Nature is, however, never formal nor accurate. She takes the greatest care to secure some difference between the corresponding things or parts of things; and an approximation to accurate symmetry is only permitted in animals because their motions secure perpetual difference between the balancing parts. Stand before a mirror; hold your arms in precisely the same position at each side, your head upright your body straight; divide your hair exactly in the middle, and get it as nearly as you can into exactly the same shape over each ear, and you will see the effect of accurate symmetry; you will see, no less, how all grace and power in the human form result from the interference of motion and life with symmetry, and from the reconciliation of its balance with its changefulness. Your position, as seen in the mirror, is the highest type of symmetry as understood by modern architects. In many sacred compositions, living symmetry, the balance of harmonious opposites, is one of the profoundest sources of their power: almost any works of the early painters, Angelico, Perugino, Giotto, &c., will furnish you with notable instances of it. The Madonna of Perugino in the National Gallery, with the angel Michael on one side and Raphael on the other, is as beautiful an example as you can have. In landscape, the principle of balance is more or less carried out in proportion to the wish of the painter to express disciplined calmness. In bad compositions as in bad architecture, it is formal, a tree on one side answering a tree on the other; but in good compositions, as in graceful statues, it is always easy, and sometimes hardly traceable. In the Coblentz, however, you cannot have much difficulty in seeing how the boats on one side of the tower and the figures on the other are set in nearly equal balance; the tower, as a central mass uniting both. 3. THE LAW OF CONTINUITY. Another important and pleasurable way of expressing unity is by giving some orderly succession to a number of objects more or less similar. And this succession is most interesting when it is connected with some gradual change in the aspect or character of the objects. Thus the succession of the pillars of a cathedral aisle is most interesting when they retire in perspective, becoming more and more obscure in distance; so the succession of mountain promontories one behind another, on the flanks of a valley; so the succession of clouds, fading farther and farther towards the horizon; each promontory and each cloud being of different shape, yet all evidently following in a calm and appointed order. If there be no change at all in the shape or size of the objects, there is no continuity; there is only repetition--monotony. It is the change in shape which suggests the idea of their being individually free, and able to escape, if they liked, from the law that rules them, and yet submitting to it. I will leave our chosen illustrative composition for a moment to take up another, still more expressive of this law. It is one of Turner's most tender studies, a sketch on Calais Sands at sunset; so delicate in the expression of wave and cloud, that it is of no use for me to try to reach it with any kind of outline in a woodcut; but the rough sketch, Fig. 33., is enough to give an idea of its arrangement. The aim of the painter has been to give the intensest expression of repose, together with the enchanted lulling, monotonous motion of cloud and wave. All the clouds are moving in innumerable ranks after the sun, meeting towards the point in the horizon where he has set; and the tidal waves gain in winding currents upon the sand, with that stealthy haste in which they cross each other so quietly, at their edges: just folding one over another as they meet, like a little piece of ruffled silk, and leaping up a little as two children kiss and clap their hands, and then going on again, each in its silent hurry, drawing pointed arches on the sand as their thin edges intersect in parting; but all this would not have been enough expressed without the line of the old pier-timbers, black with weeds, strained and bent by the storm waves, and now seeming to stoop in following one another, like dark ghosts escaping slowly from the cruelty of the pursuing sea. I need not, I hope, point out to the reader the illustration of this law of continuance in the subject chosen for our general illustration. It was simply that gradual succession of the retiring arches of the bridge which induced Turner to paint the subject at all; and it was this same principle which led him always to seize on subjects including long bridges where-ever he could find them; but especially, observe, unequal bridges, having the highest arch at one side rather than at the centre. There is a reason for this, irrespective of general laws of composition, and connected with the nature of rivers, which I may as well stop a minute to tell you about, and let you rest from the study of composition. [Illustration: FIG. 33.] All rivers, small or large, agree in one character, they like to lean a little on one side: they cannot bear to have their channels deepest in the middle, but will always, if they can, have one bank to sun themselves upon, and another to get cool under; one shingly shore to play over, where they may be shallow, and foolish, and childlike, and another steep shore, under which they can pause, and purify themselves, and get their strength of waves fully together for due occasion. Rivers in this way are just like wise men, who keep one side of their life for play, and another for work; and can be brilliant, and chattering, and transparent, when they are at ease, and yet take deep counsel on the other side when they set themselves to their main purpose. And rivers are just in this divided, also, like wicked and good men: the good rivers have serviceable deep places all along their banks, that ships can sail in; but the wicked rivers go scoopingly irregularly under their banks until they get full of strangling eddies, which no boat can row over without being twisted against the rocks; and pools like wells, which no one can get out of but the water-kelpie that lives at the bottom;--but, wicked or good, the rivers all agree in having two kinds of sides. Now the natural way in which a village stonemason therefore throws a bridge over a strong stream is, of course, to build a great door to let the cat through, and little doors to let the kittens through; a great arch for the great current, to give it room in flood time, and little arches for the little currents along the shallow shore. This, even without any prudential respect for the floods of the great current, he would do in simple economy of work and stone; for the smaller your arches are, the less material you want on their flanks. Two arches over the same span of river, supposing the butments are at the same depth, are cheaper than one, and that by a great deal; so that, where the current is shallow, the village mason makes his arches many and low; as the water gets deeper, and it becomes troublesome to build his piers up from the bottom, he throws his arches wider; at last he comes to the deep stream, and, as he cannot build at the bottom of that, he throws his largest arch over it with a leap, and with another little one or so gains the opposite shore. Of course as arches are wider they must be higher, or they will not stand; so the roadway must rise as the arches widen. And thus we have the general type of bridge, with its highest and widest arch towards one side, and a train of minor arches running over the flat shore on the other; usually a steep bank at the river-side next the large arch; always, of course, a flat shore on the side of the small ones; and the bend of the river assuredly concave towards this flat, cutting round, with a sweep into the steep bank; or, if there is no steep bank, still assuredly cutting into the shore at the steep end of the bridge. Now this kind of bridge, sympathising, as it does, with the spirit of the river, and marking the nature of the thing it has to deal with and conquer, is the ideal of a bridge; and all endeavours to do the thing in a grand engineer's manner, with a level roadway and equal arches, are barbarous; not only because all monotonous forms are ugly in themselves, but because the mind perceives at once that there has been cost uselessly thrown away for the sake of formality.[248] Well, to return to our continuity. We see that the Turnerian bridge in Fig. 32. is of the absolutely perfect type, and is still farther interesting by having its main arch crowned by a watch-tower. But as I want you to note especially what perhaps was not the case in the real bridge, but is entirely Turner's doing, you will find that though the arches diminish gradually, not one is _regularly_ diminished--they are all of different shapes and sizes: you cannot see this clearly in 32., but in the larger diagram, Fig. 34., opposite, you will with ease. This is indeed also part of the ideal of a bridge, because the lateral currents near the shore are of course irregular in size, and a simple builder would naturally vary his arches accordingly; and also, if the bottom was rocky, build his piers where the rocks came. But it is not as a part of bridge ideal, but as a necessity of all noble composition, that this irregularity is introduced by Turner. It at once raises the object thus treated from the lower or vulgar unity of rigid law to the greater unity of clouds, and waves, and trees, and human souls, each different, each obedient, and each in harmonious service. 4. THE LAW OF CURVATURE. There is, however, another point to be noticed in this bridge of Turner's. Not only does it slope away unequally at its sides, but it slopes in a gradual though very subtle curve. And if you substitute a straight line for this curve (drawing one with a rule from the base of the tower on each side to the ends of the bridge, in Fig. 34., and effacing the curve), you will instantly see that the design has suffered grievously. You may ascertain, by experiment, that all beautiful objects whatsoever are thus terminated by delicately curved lines, except where the straight line is indispensable to their use or stability: and that when a complete system of straight lines, throughout the form, is necessary to that stability, as in crystals, the beauty, if any exists, is in colour and transparency, not in form. Cut out the shape of any crystal you like, in white wax or wood, and put it beside a white lily, and you will feel the force of the curvature in its purity, irrespective of added colour, or other interfering elements of beauty. [Illustration: FIG. 34.] Well, as curves are more beautiful than straight lines, it is necessary to a good composition that its continuities of object, mass, or colour should be, if possible, in curves, rather than straight lines or angular ones. Perhaps one of the simplest and prettiest examples of a graceful continuity of this kind is in the line traced at any moment by the corks of a net as it is being drawn: nearly every person is more or less attracted by the beauty of the dotted line. Now it is almost always possible, not only to secure such a continuity in the arrangement or boundaries of objects which, like these bridge arches or the corks of the net, are actually connected with each other, but--and this is a still more noble and interesting kind of continuity--among features which appear at first entirely separate. Thus the towers of Ehrenbreitstein, on the left, in Fig. 32., appear at first independent of each other; but when I give their profile, on a larger scale, Fig. 35., the reader may easily perceive that there is a subtle cadence and harmony among them. The reason of this is, that they are all bounded by one grand curve, traced by the dotted line; out of the seven towers, four precisely touch this curve, the others only falling back from it here and there to keep the eye from discovering it too easily. [Illustration: FIG. 35.] And it is not only always _possible_ to obtain continuities of this kind: it is, in drawing large forest or mountain forms essential to truth. The towers of Ehrenbreitstein might or might not in reality fall into such a curve, but assuredly the basalt rock on which they stand did; for all mountain forms not cloven into absolute precipice, nor covered by straight slopes of shales, are more or less governed by these great curves, it being one of the aims of Nature in all her work to produce them. The reader must already know this, if he has been able to sketch at all among the mountains; if not, let him merely draw for himself, carefully, the outlines of any low hills accessible to him, where they are tolerably steep, or of the woods which grow on them. The steeper shore of the Thames at Maidenhead, or any of the downs at Brighton or Dover, or, even nearer, about Croydon (as Addington Hills), are easily accessible to a Londoner; and he will soon find not only how constant, but how graceful the curvature is. Graceful curvature is distinguished from ungraceful by two characters: first, its moderation, that is to say, its close approach to straightness in some parts of its course;[249] and, secondly, by its variation, that is to say, its never remaining equal in degree at different parts of its course. This variation is itself twofold in all good curves. [Illustration: FIG. 36.] A. There is, first, a steady change through the whole line from less to more curvature, or more to less, so that _no_ part of the line is a segment of a circle, or can be drawn by compasses in any way whatever. Thus, in Fig. 36., _a_ is a bad curve, because it is part of a circle, and is therefore monotonous throughout; but _b_ is a good curve, because it continually changes its direction as it proceeds. [Illustration: FIG. 37.] The _first_ difference between good and bad drawing of tree boughs consists in observance of this fact. Thus, when I put leaves on the line _b_, as in Fig. 37., you can immediately feel the springiness of character dependent on the changefulness of the curve. You may put leaves on the other line for yourself, but you will find you cannot make a right tree spray of it. For _all_ tree boughs, large or small, as well as all noble natural lines whatsoever, agree in this character; and it is a point of primal necessity that your eye should always seize and your hand trace it. Here are two more portions of good curves, with leaves put on them at the extremities instead of the flanks, Fig. 38.; and two showing the arrangement of masses of foliage seen a little farther off, Fig. 39., which you may in like manner amuse yourself by turning into segments of circles--you will see with what result. I hope, however, you have beside you by this time, many good studies of tree boughs carefully made, in which you may study variations of curvature in their most complicated and lovely forms.[250] [Illustration: FIG. 38.] [Illustration: FIG. 39.] B. Not only does every good curve vary in general tendency, but it is modulated, as it proceeds, by myriads of subordinate curves. Thus the outlines of a tree trunk are never as at _a_, Fig. 40, but as at _b_. So also in waves, clouds, and all other nobly formed masses. Thus another essential difference between good and bad drawing, or good and bad sculpture, depends on the quantity and refinement of minor curvatures carried, by good work, into the great lines. Strictly speaking, however, this is not variation in large curves, but composition of large curves out of small ones; it is an increase in the quantity of the beautiful element, _but not a change in its nature_. 5. THE LAW OF RADIATION. [Illustration: FIG. 40.] We have hitherto been concerned only with the binding of our various objects into beautiful lines or processions. The next point we have to consider is, how we may unite these lines or processions themselves, so as to make groups of _them_. Now, there are two kinds of harmonies of lines. One in which, moving more or less side by side, they variously, but evidently with consent, retire from or approach each other, intersect or oppose each other: currents of melody in music, for different voices, thus approach and cross, fall and rise, in harmony; so the waves of the sea, as they approach the shore, flow into one another or cross, but with a great unity through all; and so various lines of composition often flow harmoniously through and across each other in a picture. But the most simple and perfect connexion of lines is by radiation; that is, by their all springing from one point, or closing towards it: and this harmony is often, in Nature almost always, united with the other; as the boughs of trees, though they intersect and play amongst each other irregularly, indicate by their general tendency their origin from one root. An essential part of the beauty of all vegetable form is in this radiation: it is seen most simply in a single flower or leaf, as in a convolvulus bell, or chestnut leaf; but more beautifully in the complicated arrangements of the large boughs and sprays. For a leaf is only a flat piece of radiation; but the tree throws its branches on all sides, and even in every profile view of it, which presents a radiation more or less correspondent to that of its leaves, it is more beautiful, because varied by the freedom of the separate branches. I believe it has been ascertained that, in all trees, the angle at which, in their leaves, the lateral ribs are set on their central rib is approximately the same at which the branches leave the great stem; and thus each section of the tree would present a kind of magnified view of its own leaf, were it not for the interfering force of gravity on the masses of foliage. This force in proportion to their age, and the lateral leverage upon them, bears them downwards at the extremities, so that, as before noticed, the lower the bough grows on the stem, the more it droops (Fig. 17, p. 295.); besides this, nearly all beautiful trees have a tendency to divide into two or more principal masses, which give a prettier and more complicated symmetry than if one stem ran all the way up the centre. Fig. 41. may thus be considered the simplest type of tree radiation, as opposed to leaf radiation. In this figure, however, all secondary ramification is unrepresented, for the sake of simplicity; but if we take one half of such a tree, and merely give two secondary branches to each main branch (as represented in the general branch structure shown at _b_, Fig. 18., p. 296), we shall have the form, Fig. 42. This I consider the perfect general type of tree structure; and it is curiously connected with certain forms of Greek, Byzantine, and Gothic ornamentation, into the discussion of which, however, we must not enter here. It will be observed, that both in Figs. 41. and 42. all the branches so spring from the main stem as very nearly to suggest their united radiation from the root R. This is by no means universally the case; but if the branches do not bend towards a point in the root, they at least converge to some point or other. In the examples in Fig. 43., the mathematical centre of curvature, _a_, is thus, in one case, on the ground at some distance from the root, and in the other, near the top of the tree. Half, only, of each tree is given, for the sake of clearness: Fig. 44. gives both sides of another example, in which the origins of curvature are below the root. As the positions of such points may be varied without end, and as the arrangement of the lines is also farther complicated by the fact of the boughs springing for the most part in a spiral order round the tree, and at proportionate distances, the systems of curvature which regulate the form of vegetation are quite infinite. Infinite is a word easily said, and easily written, and people do not always mean it when they say it; in this case I _do_ mean it; the number of systems is incalculable, and even to furnish any thing like a representative number of types, I should have to give several hundreds of figures such as Fig. 44.[251] [Illustration: FIG. 41.] [Illustration: FIG. 42.] [Illustration: FIG. 43.] [Illustration: FIG. 44.] Thus far, however, we have only been speaking of the great relations of stem and branches. The forms of the branches themselves are regulated by still more subtle laws, for they occupy an intermediate position between the form of the tree and of the leaf. The leaf has a flat ramification; the tree a completely rounded one; the bough is neither rounded nor flat, but has a structure exactly balanced between the two, in a half-flattened, half-rounded flake, closely resembling in shape one of the thick leaves of an artichoke or the flake of a fir cone; by combination forming the solid mass of the tree, as the leaves compose the artichoke head. I have before pointed out to you the general resemblance of these branch flakes to an extended hand; but they may be more accurately represented by the ribs of a boat. If you can imagine a very broad-headed and flattened boat applied by its keel to the end of a main branch,[252] as in Fig. 45., the lines which its ribs will take, and the general contour of it, as seen in different directions, from above and below; and from one side and another, will give you the closest approximation to the perspectives and foreshortenings of a well-grown branch-flake. Fig. 25. above, page 316., is an unharmed and unrestrained shoot of healthy young oak; and if you compare it with Fig. 45., you will understand at once the action of the lines of leafage; the boat only failing as a type in that its ribs are too nearly parallel to each other at the sides, while the bough sends all its ramification well forwards, rounding to the head, that it may accomplish its part in the outer form of the whole tree, yet always securing the compliance with the great universal law that the branches nearest the root bend most back; and, of course, throwing _some_ always back as well as forwards; the appearance of reversed action being much increased, and rendered more striking and beautiful, by perspective. Figure 25. shows the perspective of such a bough as it is seen from below; Fig. 46. gives rudely the look it would have from above. [Illustration: FIG. 45.] [Illustration: FIG. 46.] You may suppose, if you have not already discovered, what subtleties of perspective and light and shade are involved in the drawing of these branch-flakes, as you see them in different directions and actions; now raised, now depressed; touched on the edges by the wind, or lifted up and bent back so as to show all the white under surfaces of the leaves shivering in light, as the bottom of a boat rises white with spray at the surge-crest; or drooping in quietness towards the dew of the grass beneath them in windless mornings, or bowed down under oppressive grace of deep-charged snow. Snow time, by the way, is one of the best for practice in the placing of tree masses; but you will only be able to understand them thoroughly by beginning with a single bough and a few leaves placed tolerably even, as in Fig. 38. page 372. First one with three leaves, a central and two lateral ones, as at _a_; then with five, as at _b_, and so on; directing your whole attention to the expression, both by contour and light and shade, of the boat-like arrangements, which in your earlier studies, will have been a good deal confused, partly owing to your inexperience, and partly to the depth of shade, or absolute blackness of mass required in those studies. One thing more remains to be noted, and I will let you out of the wood. You see that in every generally representative figure I have surrounded the radiating branches with a dotted line: such lines do indeed terminate every vegetable form; and you see that they are themselves beautiful curves, which, according to their flow, and the width or narrowness of the spaces they enclose, characterize the species of tree or leaf, and express its free or formal action, its grace of youth or weight of age. So that, throughout all the freedom of her wildest foliage, Nature is resolved on expressing an encompassing limit; and marking a unity in the whole tree, caused not only by the rising of its branches from a common root, but by their joining in one work, and being bound by a common law. And having ascertained this, let us turn back for a moment to a point in leaf structure which, I doubt not, you must already have observed in your earlier studies, but which it is well to state here, as connected with the unity of the branches in the great trees. You must have noticed, I should think, that whenever a leaf is compound,--that is to say, divided into other leaflets which in any way repeat or imitate the form of the whole leaf,--those leaflets are not symmetrical as the whole leaf is, but always smaller on the side towards the point of the great leaf, so as to express their subordination to it, and show, even when they are pulled off, that they are not small independent leaves, but members of one large leaf. [Illustration: FIG. 47.] Fig. 47., which is a block-plan of a leaf of columbine, without its minor divisions on the edges, will illustrate the principle clearly. It is composed of a central large mass, A, and two lateral ones, of which the one on the right only is lettered, B. Each of these masses is again composed of three others, a central and two lateral ones; but observe, the minor one, _a_ of A, is balanced equally by its opposite; but the minor _b_1 of B is larger than its opposite _b_2. Again, each of these minor masses is divided into three; but while the central mass, A of A, is symmetrically divided, the B of B is unsymmetrical, its largest side-lobe being lowest. Again _b_2, the lobe _c_1 (its lowest lobe in relation to B) is larger than _c_2; and so also in _b_1. So that universally one lobe of a lateral leaf is always larger than the other, and the smaller lobe is that which is nearer the central mass; the lower leaf, as it were by courtesy, subduing some of its own dignity or power, in the immediate presence of the greater or captain leaf; and always expressing, therefore, its own subordination and secondary character. This law is carried out even in single leaves. As far as I know, the upper half, towards the point of the spray, is always the smaller; and a slightly different curve, more convex at the springing, is used for the lower side, giving an exquisite variety to the form of the whole leaf; so that one of the chief elements in the beauty of every subordinate leaf throughout the tree, is made to depend on its confession of its own lowliness and subjection. And now, if we bring together in one view the principles we have ascertained in trees, we shall find they may be summed under four great laws; and that all perfect[253] vegetable form is appointed to express these four laws in noble balance of authority. 1. Support from one living root. 2. Radiation, or tendency of force from some one given point, either in the root, or in some stated connexion with it. 3. Liberty of each bough to seek its own livelihood and happiness according to its needs, by irregularities of action both in its play and its work, either stretching out to get its required nourishment from light and rain, by finding some sufficient breathing-place among the other branches, or knotting and gathering itself up to get strength for any load which its fruitful blossoms may lay upon it, and for any stress of its storm-tossed luxuriance of leaves; or playing hither and thither as the fitful sunshine may tempt its young shoots, in their undecided states of mind about their future life. 4. Imperative requirement of each bough to stop within certain limits, expressive of its kindly fellowship and fraternity with the boughs in its neighborhood; and to work with them according to its power, magnitude, and state of health, to bring out the general perfectness of the great curve, and circumferent stateliness of the whole tree. I think I may leave you, unhelped, to work out the moral analogies of these laws; you may, perhaps, however, be a little puzzled to see the meeting of the second one. It typically expresses that healthy human actions should spring radiantly (like rays) from some single heart motive; the most beautiful systems of action taking place when this motive lies at the root of the whole life, and the action is clearly seen to proceed from it; while also many beautiful secondary systems of action taking place from motives not so deep or central, but in some beautiful subordinate connexion with the central or life motive. The other laws, if you think over them, you will find equally significative; and as you draw trees more and more in their various states of health and hardship, you will be every day more struck by the beauty of the types they present of the truths most essential for mankind to know;[254] and you will see what this vegetation of the earth, which is necessary to our life, first, as purifying the air for us and then as food, and just as necessary to our joy in all places of the earth,--what these trees and leaves, I say, are meant to teach us as we contemplate them, and read or hear their lovely language, written or spoken for us, not in frightful black letters, nor in dull sentences, but in fair green and shadowy shapes of waving words, and blossomed brightness of odoriferous wit, and sweet whispers of unintrusive wisdom, and playful morality. Well, I am sorry myself to leave the wood, whatever my reader may be; but leave it we must, or we shall compose no more pictures to-day. This law of radiation, then, enforcing unison of action in arising from, or proceeding to, some given point, is perhaps, of all principles of composition, the most influential in producing the beauty of groups of form. Other laws make them forcible or interesting, but this generally is chief in rendering them beautiful. In the arrangement of masses in pictures, it is constantly obeyed by the great composers; but, like the law of principality, with careful concealment of its imperativeness, the point to which the lines of main curvature are directed being very often far away out of the picture. Sometimes, however, a system of curves will be employed definitely to exalt, by their concurrence, the value of some leading object, and then the law becomes traceable enough. In the instance before us, the principal object being, as we have seen, the tower on the bridge, Turner has determined that his system of curvature should have its origin in the top of this tower. The diagram Fig. 34. page 369, compared with Fig. 32. page 361, will show how this is done. One curve joins the two towers, and is continued by the back of the figure sitting on the bank into the piece of bent timber. This is a limiting curve of great importance, and Turner has drawn a considerable part of it with the edge of the timber very carefully, and then led the eye up to the sitting girl by some white spots and indications of a ledge in the bank; then the passage to the tops of the towers cannot be missed. The next curve is begun and drawn carefully for half an inch of its course by the rudder; it is then taken up by the basket and the heads of the figures, and leads accurately to the tower angle. The gunwales of both the boats begin the next two curves, which meet in the same point; and all are centralised by the long reflection which continues the vertical lines. Subordinated to this first system of curves there is another, begun by the small crossing bar of wood inserted in the angle behind the rudder; continued by the bottom of the bank on which the figure sits, interrupted forcibly beyond it,[255] but taken up again by the water-line leading to the bridge foot, and passing on in delicate shadows under the arches, not easily shown in so rude a diagram, towards the other extremity of the bridge. This is a most important curve, indicating that the force and sweep of the river have indeed been in old times under the large arches; while the antiquity of the bridge is told us by the long tongue of land, either of carted rubbish, or washed down by some minor stream, which has interrupted this curve, and is now used as a landing-place for the boats, and for embarkation of merchandise, of which some bales and bundles are laid in a heap, immediately beneath the great tower. A common composer would have put these bales to one side or the other, but Turner knows better; he uses them as a foundation for his tower, adding to its importance precisely as the sculptured base adorns a pillar; and he farther increases the aspect of its height by throwing the reflection of it far down in the nearer water. All the great composers have this same feeling about sustaining their vertical masses: you will constantly find Prout using the artifice most dexterously (see, for instance, the figure with the wheelbarrow under the great tower, in the sketch of St. Nicolas, at Prague, and the white group of figures under the tower in the sketch of Augsburg[256]); and Veronese, Titian, and Tintoret continually put their principal figures at bases of pillars. Turner found out their secret very early, the most prominent instance of his composition on this principle being the drawing of Turin from the Superga, in Hakewell's Italy. I chose Fig. 20., already given to illustrate foliage drawing, chiefly because, being another instance of precisely the same arrangement, it will serve to convince you of its being intentional. There, the vertical, formed by the larger tree, is continued by the figure of the farmer, and that of one of the smaller trees by his stick. The lines of the interior mass of the bushes radiate, under the law of radiation, from a point behind the farmer's head; but their outline curves are carried on and repeated, under the law of continuity, by the curves of the dog and boy--by the way, note the remarkable instance in these of the use of darkest lines towards the light;--all more or less guiding the eye up to the right, in order to bring it finally to the Keep of Windsor, which is the central object of the picture, as the bridge tower is in the Coblentz. The wall on which the boy climbs answers the purpose of contrasting, both in direction and character, with these greater curves; thus corresponding as nearly as possible to the minor tongue of land in the Coblentz. This, however, introduces us to another law, which we must consider separately. 6. THE LAW OF CONTRAST. Of course the character of everything is best manifested by Contrast. Rest can only be enjoyed after labour; sound, to be heard clearly, must rise out of silence; light is exhibited by darkness, darkness by light; and so on in all things. Now in art every colour has an opponent colour, which, if brought near it, will relieve it more completely than any other; so, also, every form and line may be made more striking to the eye by an opponent form or line near them; a curved line is set off by a straight one, a massy form by a slight one, and so on; and in all good work nearly double the value, which any given colour or form would have uncombined, is given to each by contrast.[257] In this case again, however, a too manifest use of the artifice vulgarises a picture. Great painters do not commonly, or very visibly, admit violent contrast. They introduce it by stealth and with intermediate links of tender change; allowing, indeed, the opposition to tell upon the mind as a surprise, but not as a shock.[258] Thus in the rock of Ehrenbreitstein, Fig. 35., the main current of the lines being downwards, in a convex swell, they are suddenly stopped at the lowest tower by a counter series of beds, directed nearly straight across them. This adverse force sets off and relieves the great curvature, but it is reconciled to it by a series of radiating lines below, which at first sympathize with the oblique bar, then gradually get steeper, till they meet and join in the fall of the great curve. No passage, however intentionally monotonous, is ever introduced by a good artist without _some_ slight counter current of this kind; so much, indeed, do the great composers feel the necessity of it, that they will even do things purposely ill or unsatisfactorily, in order to give greater value to their well-doing in other places. In a skilful poet's versification the so-called bad or inferior lines are not inferior because he could not do them better, but because he feels that if all were equally weighty, there would be no real sense of weight anywhere; if all were equally melodious, the melody itself would be fatiguing; and he purposely introduces the labouring or discordant verse, that the full ring may be felt in his main sentence, and the finished sweetness in his chosen rhythm.[259] And continually in painting, inferior artists destroy their work by giving too much of all that they think is good, while the great painter gives just enough to be enjoyed, and passes to an opposite kind of enjoyment, or to an inferior state of enjoyment: he gives a passage of rich, involved, exquisitely wrought colour, then passes away into slight, and pale and simple colour; he paints for a minute or two with intense decision, then suddenly becomes, as the spectator thinks, slovenly; but he is not slovenly: you could not have _taken_ any more decision from him just then; you have had as much as is good for you; he paints over a great space of his picture forms of the most rounded and melting tenderness, and suddenly, as you think by a freak, gives you a bit as jagged and sharp as a leafless blackthorn. Perhaps the most exquisite piece of subtle contrast in the world of painting is the arrow point, laid sharp against the white side and among the flowing hair of Correggio's Antiope. It is quite singular how very little contrast will sometimes serve to make an entire group of forms interesting which would otherwise have been valueless. There is a good deal of picturesque material, for instance, in this top of an old tower, Fig. 48., tiles and stones and sloping roof not disagreeably mingled; but all would have been unsatisfactory if there had not happened to be that iron ring on the inner wall, which by its vigorous black _circular_ line precisely opposes all the square and angular characters of the battlements and roof. Draw the tower without the ring, and see what a difference it will make. [Illustration: FIG. 48.] One of the most important applications of the law of contrast is in association with the law of continuity, causing an unexpected but gentle break in a continuous series. This artifice is perpetual in music, and perpetual also in good illumination; the way in which little surprises of change are prepared in any current borders, or chains of ornamental design, being one of the most subtle characteristics of the work of the good periods. We take, for instance, a bar of ornament between two written columns of an early 14th Century MS., and at the first glance we suppose it to be quite monotonous all the way up, composed of a winding tendril, with alternately a blue leaf and a scarlet bud. Presently, however, we see that, in order to observe the law of principality there is one large scarlet leaf instead of a bud, nearly half-way up, which forms a centre to the whole rod; and when we begin to examine the order of the leaves, we find it varied carefully. Let A stand for scarlet bud, _b_ for blue leaf, _c_ for two blue leaves on one stalk, _s_ for a stalk without a leaf, and R for the large red leaf. Then counting from the ground, the order begins as follows: _b_, _b_, A; _b_, _s_, _b_, A; _b_, _b_, A; _b_, _b_, A; and we think we shall have two _b_'s and an A all the way, when suddenly it becomes _b_, A; _b_, R; _b_, A; _b_, A; _b_, A; and we think we are going to have _b_, A continued; but no: here it becomes _b_, _s_; _b_, _s_; _b_, A; _b_, _s_; _b_, _s_; _c_, _s_; _b_, _s_; _b_, _s_; and we think we are surely going to have _b_, _s_ continued, but behold it runs away to the end with a quick _b_, _b_, A; _b_, _b_, _b_, _b_![260] Very often, however, the designer is satisfied with _one_ surprise, but I never saw a good illuminated border without one at least; and no series of any kind is ever introduced by a great composer in a painting without a snap somewhere. There is a pretty one in Turner's drawing of Rome, with the large balustrade for a foreground in the Hakewell's Italy series: the single baluster struck out of the line, and showing the street below through the gap, simply makes the whole composition right, when otherwise, it would have been stiff and absurd. If you look back to Fig. 48. you will see, in the arrangement of the battlements, a simple instance of the use of such variation. The whole top of the tower, though actually three sides of a square, strikes the eye as a continuous series of five masses. The first two, on the left, somewhat square and blank; then the next two higher and richer, the tiles being seen on their slopes. Both these groups being couples, there is enough monotony in the series to make a change pleasant; and the last battlement, therefore, is a little higher than the first two,--a little lower than the second two,--and different in shape from either. Hide it with your finger, and see how ugly and formal the other four battlements look. There are in this figure several other simple illustrations of the laws we have been tracing. Thus the whole shape of the wall's mass being square, it is well, still for the sake of contrast, to oppose it not only by the element of curvature, in the ring, and lines of the roof below, but by that of sharpness; hence the pleasure which the eye takes in the projecting point of the roof. Also because the walls are thick and sturdy, it is well to contrast their strength with weakness; therefore we enjoy the evident decrepitude of this roof as it sinks between them. The whole mass being nearly white, we want a contrasting shadow somewhere; and get it, under our piece of decrepitude. This shade, with the tiles of the wall below, forms another pointed mass, necessary to the first by the law of repetition. Hide this inferior angle with your finger, and see how ugly the other looks. A sense of the law of symmetry, though you might hardly suppose it, has some share in the feeling with which you look at the battlements; there is a certain pleasure in the opposed slopes of their top, on one side down to the left, on the other to the right. Still less would you think the law of radiation had anything to do with the matter: but if you take the extreme point of the black shadow on the left for a centre and follow first the low curve of the eaves of the wall, it will lead you, if you continue it, to the point of the tower cornice; follow the second curve, the top of the tiles of the wall, and it will strike the top of the right-hand battlement; then draw a curve from the highest point of the angle battlement on the left, through the points of the roof and its dark echo; and you will see how the whole top of the tower radiates from this lowest dark point. There are other curvatures crossing these main ones, to keep them from being too conspicuous. Follow the curve of the upper roof, it will take you to the top of the highest battlement; and the stones indicated at the right-hand side of the tower are more extended at the bottom, in order to get some less direct expression of sympathy, such as irregular stones may be capable of, with the general flow of the curves from left to right. You may not readily believe, at first, that all these laws are indeed involved in so trifling a piece of composition. But as you study longer, you will discover that these laws, and many more, are obeyed by the powerful composers in every _touch_: that literally, there is never a dash of their pencil which is not carrying out appointed purposes of this kind in twenty various ways at once; and that there is as much difference, in way of intention and authority, between one of the great composers ruling his colours, and a common painter confused by them, as there is between a general directing the march of an army, and an old lady carried off her feet by a mob. 7. THE LAW OF INTERCHANGE. Closely connected with the law of contrast is a law which enforces the unity of opposite things, by giving to each a portion of the character of the other. If, for instance, you divide a shield into two masses of colour, all the way down--suppose blue and white, and put a bar, or figure of an animal, partly on one division, partly on the other, you will find it pleasant to the eye if you make the part of the animal blue which comes upon the white half, and white which comes upon the blue half. This is done in heraldry, partly for the sake of perfect intelligibility, but yet more for the sake of delight in interchange of colour, since, in all ornamentation whatever, the practice is continual, in the ages of good design. Sometimes this alternation is merely a reversal of contrasts; as that, after red has been for some time on one side, and blue on the other, red shall pass to blue's side and blue to red's. This kind of alternation takes place simply in four-quartered shields; in more subtle pieces of treatment, a little bit only of each colour is carried into the other, and they are as it were dovetailed together. One of the most curious facts which will impress itself upon you, when you have drawn some time carefully from Nature in light and shade, is the appearance of intentional artifice with which contrasts of this alternate kind are produced by her; the artistry with which she will darken a tree trunk as long as it comes against light sky, and throw sunlight on it precisely at the spot where it comes against a dark hill, and similarly treat all her masses of shade and colour, is so great, that if you only follow her closely, every one who looks at your drawing with attention will think that you have been inventing the most artifically and unnaturally delightful interchanges of shadow that could possibly be devised by human wit. You will find this law of interchange insisted upon at length by Prout in his "Lessons on Light and Shade:" it seems, of all his principles of composition, to be the one he is most conscious of; many others he obeys by instinct, but this he formally accepts and forcibly declares. The typical purpose of the law of interchange is, of course, to teach us how opposite natures may be helped and strengthened by receiving each, as far as they can, some impress or imparted power, from the other. 8. THE LAW OF CONSISTENCY. It is to be remembered, in the next place, that while contrast exhibits the _characters_ of things, it very often neutralises or paralyses their _power_. A number of white things may be shown to be clearly white by opposition of a black thing, but if you want the full power of their gathered light, the black thing may be seriously in our way. Thus, while contrast displays things, it is unity and sympathy which employ them, concentrating the power of several into a mass. And, not in art merely, but in all the affairs of life, the wisdom of man is continually called upon to reconcile these opposite methods of exhibiting, or using, the materials in his power. By change he gives them pleasantness, and by consistency value; by change he is refreshed, and by perseverence strengthened. Hence many compositions address themselves to the spectator by aggregate force of colour or line, more than by contrasts of either; many noble pictures are painted almost exclusively in various tones of red, or grey, or gold, so as to be instantly striking by their breadth of flush, or glow, or tender coldness, these qualities being exhibited only by slight and subtle use of contrast. Similarly as to form; some compositions associate massive and rugged forms, others slight and graceful ones, each with few interruptions by lines of contrary character. And, in general, such compositions possess higher sublimity than those which are more mingled in their elements. They tell a special tale, and summon a definite state of feeling, while the grand compositions merely please the eye. This unity or breadth of character generally attaches most to the works of the greatest men; their separate pictures have all separate aims. We have not, in each, grey colour set against sombre, and sharp forms against soft, and loud passages against low; but we have the bright picture, with its delicate sadness; the sombre picture, with its single ray of relief; the stern picture, with only one tender group of lines; the soft and calm picture, with only one rock angle at its flank; and so on. Hence the variety of their work, as well as its impressiveness. The principal bearing of this law, however, is on the separate masses or divisions of a picture: the character of the whole composition may be broken or various, if we please, but there must certainly be a tendency to consistent assemblage in its divisions. As an army may act on several points at once, but can only act effectually by having somewhere formed and regular masses, and not wholly by skirmishers; so a picture may be various in its tendencies, but must be somewhere united and coherent in its masses. Good composers are always associating their colours in great groups; binding their forms together by encompassing lines, and securing, by various dexterities of expedient, what they themselves call "breadth:" that is to say, a large gathering of each kind of thing into one place; light being gathered to light, darkness to darkness, and colour to colour. If, however, this be done by introducing false lights or false colours, it is absurd and monstrous; the skill of a painter consists in obtaining breadth by rational arrangement of his objects, not by forced or wanton treatment of them. It is an easy matter to paint one thing all white, and another all black or brown; but not an easy matter to assemble all the circumstances which will naturally produce white in one place, and brown in another. Generally speaking, however, breadth will result in sufficient degree from fidelity of study: Nature is always broad; and if you paint her colours in true relations, you will paint them in majestic masses. If you find your work look broken and scattered, it is, in all probability, not only ill composed, but untrue. The opposite quality to breadth, that of division or scattering of light and colour, has a certain contrasting charm, and is occasionally introduced with exquisite effect by good composers.[261] Still, it is never the mere scattering, but the order discernible through this scattering, which is the real source of pleasure; not the mere multitude, but the constellation of multitude. The broken lights in the work of a good painter wander like flocks upon the hills, not unshepherded; speaking of life and peace: the broken lights of a bad painter fall like hailstones, and are capable only of mischief, leaving it to be wished they were also of dissolution. 9. THE LAW OF HARMONY. This last law is not, strictly speaking, so much one of composition as of truth, but it must guide composition, and is properly, therefore, to be stated in this place. Good drawing is, as we have seen, an _abstract_ of natural facts; you cannot represent all that you would, but must continually be falling short, whether you will or no, of the force, or quantity, of Nature. Now, suppose that your means and time do not admit of your giving the depth of colour in the scene, and that you are obliged to paint it paler. If you paint all the colours proportionately paler, as if an equal quantity of tint had been washed away from each of them, you still obtain a harmonious, though not an equally forcible statement of natural fact. But if you take away the colours unequally, and leave some tints nearly as deep as they are in Nature, while others are much subdued, you have no longer a true statement. You cannot say to the observer, "Fancy all those colours a little deeper, and you will have the actual fact." However he adds in imagination, or takes away, something is sure to be still wrong. The picture is out of harmony. It will happen, however, much more frequently, that you have to darken the whole system of colours, than to make them paler. You remember, in your first studies of colour from Nature, you were to leave the passages of light which were too bright to be imitated, as white paper. But, in completing the picture, it becomes necessary to put colour into them; and then the other colours must be made darker, in some fixed relation to them. If you deepen all proportionately, though the whole scene is darker than reality, it is only as if you were looking at the reality in a lower light: but if, while you darken some of the tints, you leave others undarkened, the picture is out of harmony, and will not give the impression of truth. It is not, indeed, possible to deepen _all_ the colours so much as to relieve the lights in their natural degree; you would merely sink most of your colours, if you tried to do so, into a broad mass of blackness: but it is quite possible to lower them harmoniously, and yet more in some parts of the picture than in others, so as to allow you to show the light you want in a visible relief. In well-harmonised pictures this is done by gradually deepening the tone of the picture towards the lighter parts of it, without materially lowering it in the very dark parts; the tendency in such pictures being, of course, to include large masses of middle tints. But the principal point to be observed in doing this, is to deepen the individual tints without dirtying or obscuring them. It is easy to lower the tone of the picture by washing it over with grey or brown; and easy to see the effect of the landscape, when its colours are thus universally polluted with black, by using the black convex mirror, one of the most pestilent inventions for falsifying nature and degrading art which ever was put into an artist's hand.[262] For the thing required is not to darken pale yellow by mixing grey with it, but to deepen the pure yellow; not to darken crimson by mixing black with it, but by making it deeper and richer crimson: and thus the required effect could only be seen in Nature, if you had pieces of glass of the colour of every object in your landscape, and of every minor hue that made up those colours, and then could see the real landscape through this deep gorgeousness of the varied glass. You cannot do this with glass, but you can do it for yourself as you work; that is to say, you can put deep blue for pale blue, deep gold for pale gold, and so on, in the proportion you need; and then you may paint as forcibly as you choose, but your work will still be in the manner of Titian, not of Caravaggio or Spagnoletto, or any other of the black slaves of painting.[263] Supposing those scales of colour, which I told you to prepare in order to show you the relations of colour to grey, were quite accurately made, and numerous enough, you would have nothing more to do, in order to obtain a deeper tone in any given mass of colour, than to substitute for each of its hues the hue as many degrees deeper in the scale as you wanted, that is to say, if you want to deepen the whole two degrees, substituting for the yellow No. 5. the yellow No. 7., and for the red No. 9. the red No. 11., and so on; but the hues of any object in Nature are far too numerous, and their degrees too subtle, to admit of so mechanical a process. Still, you may see the principle of the whole matter clearly by taking a group of colours out of your scale, arranging them prettily, and then washing them all over with grey: that represents the treatment of Nature by the black mirror. Then arrange the same group of colours, with the tints five or six degrees deeper in the scale; and that will represent the treatment of Nature by Titian. You can only, however, feel your way fully to the right of the thing by working from Nature. The best subject on which to begin a piece of study of this kind is a good thick tree trunk, seen against blue sky with some white clouds in it. Paint the clouds in true and tenderly gradated white; then give the sky a bold full blue, bringing them well out; then paint the trunk and leaves grandly dark against all, but in such glowing dark green and brown as you see they will bear. Afterwards proceed to more complicated studies, matching the colours carefully first by your old method; then deepening each colour with its own tint, and being careful, above all things, to keep truth of equal change when the colours are connected with each other, as in dark and light sides of the same object. Much more aspect and sense of harmony are gained by the precision with which you observe the relation of colours in dark sides and light sides, and the influence of modifying reflections, than by mere accuracy of added depth in independent colours. This harmony of tone, as it is generally called, is the most important of those which the artist has to regard. But there are all kinds of harmonies in a picture, according to its mode of production. There is even a harmony of _touch_. If you paint one part of it very rapidly and forcibly, and another part slowly and delicately, each division of the picture may be right separately, but they will not agree together: the whole will be effectless and valueless, out of harmony. Similarly, if you paint one part of it by a yellow light in a warm day, and another by a grey light in a cold day, though both may have been sunlight, and both may be well toned, and have their relative shadows truly cast, neither will look like light: they will destroy each other's power, by being out of harmony. These are only broad and definable instances of discordance; but there is an extent of harmony in all good work much too subtle for definition; depending on the draughtsman's carrying everything he draws up to just the balancing and harmonious point, in finish, and colour, and depth of tone, and intensity of moral feeling, and style of touch, all considered at once; and never allowing himself to lean too emphatically on detached parts, or exalt one thing at the expense of another, or feel acutely in one place and coldly in another. If you have got some of Cruikshank's etchings, you will be able, I think, to feel the nature of harmonious treatment in a simple kind, by comparing them with any of Richter's illustrations to the numerous German story-books lately published at Christmas, with all the German stories spoiled. Cruikshank's work is often incomplete in character and poor in incident, but, as drawing, it is _perfect_ in harmony. The pure and simple effects of daylight which he gets by his thorough mastery of treatment in this respect, are quite unrivalled, as far as I know, by any other work executed with so few touches. His vignettes to Grimm's German stories, already recommended, are the most remarkable in this quality. Richter's illustrations, on the contrary, are of a very high stamp as respects understanding of human character, with infinite playfulness and tenderness of fancy; but, as drawings, they are almost unendurably out of harmony, violent blacks in one place being continually opposed to trenchant white in another; and, as is almost sure to be the case with bad harmonists, the local colour hardly felt anywhere. All German work is apt to be out of harmony, in consequence of its too frequent conditions of affectation, and its wilful refusals of fact; as well as by reason of a feverish kind of excitement, which dwells violently on particular points, and makes all the lines of thought in the picture to stand on end, as it were, like a cat's fur electrified; while good work is always as quiet as a couchant leopard, and as strong. I have now stated to you all the laws of composition which occur to me as capable of being illustrated or defined; but there are multitudes of others which, in the present state of my knowledge, I cannot define, and others which I never hope to define; and these the most important, and connected with the deepest powers of the art. Among those which I hope to be able to explain when I have thought of them more, are the laws which relate to nobleness and ignobleness; that ignobleness especially which we commonly call "vulgarity," and which, in its essence, is one of the most curious subjects of inquiry connected with human feeling. Among those which I never hope to explain, are chiefly laws of expression, and others bearing simply on simple matters; but, for that very reason, more influential than any others. These are, from the first, as inexplicable as our bodily sensations are; it being just as impossible, I think, to explain why one succession of musical notes[264] shall be noble and pathetic, and such as might have been sung by Casella to Dante, and why another succession is base and ridiculous, and would be fit only for the reasonably good ear of Bottom, as to explain why we like sweetness, and dislike bitterness. The best part of every great work is always inexplicable: it is good because it is good; and innocently gracious, opening as the green of the earth, or falling as the dew of heaven. But though you cannot explain them, you may always render yourself more and more sensitive to these higher qualities by the discipline which you generally give to your character, and this especially with regard to the choice of incidents; a kind of composition in some sort easier than the artistical arrangements of lines and colours, but in every sort nobler, because addressed to deeper feelings. For instance, in the "Datur Hora Quieti," the last vignette to Roger's Poems, the plough in the foreground has three purposes. The first purpose is to meet the stream of sunlight on the river, and make it brighter by opposition; but any dark object whatever would have done this. Its second purpose is by its two arms, to repeat the cadence of the group of the two ships, and thus give a greater expression of repose; but two sitting figures would have done this. Its third and chief, or pathetic, purpose is, as it lies abandoned in the furrow (the vessels also being moored, and having their sails down), to be a type of human labour closed with the close of day. The parts of it on which the hand leans are brought most clearly into sight; and they are the chief dark of the picture, because the tillage of the ground is required of man as a punishment; but they make the soft light of the setting sun brighter, because rest is sweetest after toil. These thoughts may never occur to us as we glance carelessly at the design; and yet their under current assuredly affects the feelings, and increases, as the painter meant it should, the impression of melancholy, and of peace. Again, in the "Lancaster Sands," which is one of the plates I have marked as most desirable for your possession; the stream of light which falls from the setting sun on the advancing tide stands similarly in need of some force of near object to relieve its brightness. But the incident which Turner has here adopted is the swoop of an angry seagull at a dog, who yelps at it, drawing back as the wave rises over his feet, and the bird shrieks within a foot of his face. Its unexpected boldness is a type of the anger of its ocean element, and warns us of the sea's advance just as surely as the abandoned plough told us of the ceased labour of the day. It is not, however, so much in the selection of single incidents of this kind as in the feeling which regulates the arrangement of the whole subject that the mind of a great composer is known. A single incident may be suggested by a felicitous chance, as a pretty motto might be for the heading of a chapter. But the great composers so arrange _all_ their designs that one incident illustrates another, just as one colour relieves another. Perhaps the "Heysham," of the Yorkshire series which, as to its locality, may be considered a companion to the last drawing we have spoken of, the "Lancaster Sands," presents as interesting an example as we could find of Turner's feeling in this respect. The subject is a simple north-country village, on the shore of Morecambe Bay; not in the common sense, a picturesque village: there are no pretty bow-windows, or red roofs, or rocky steps of entrance to the rustic doors, or quaint gables; nothing but a single street of thatched and chiefly clay-built cottages, ranged in a somewhat monotonous line, the roofs so green with moss that at first we hardly discern the houses from the fields and trees. The village street is closed at the end by a wooden gate, indicating the little traffic there is on the road through it, and giving it something the look of a large farmstead, in which a right of way lies through the yard. The road which leads to this gate is full of ruts, and winds down a bad bit of hill between two broken banks of moor ground, succeeding immediately to the few enclosures which surround the village; they can hardly be called gardens; but a decayed fragment or two of fencing fill the gaps in the bank; and a clothes-line, with some clothes on it, striped blue and red, and a smock-frock, is stretched between the trunks of some stunted willows; a _very_ small haystack and pigstye being seen at the back of the cottage beyond. An empty, two-wheeled, lumbering cart, drawn by a pair of horses with huge wooden collars, the driver sitting lazily in the sun, sideways on the leader, is going slowly home along the rough road, it being about country dinner-time. At the end of the village there is a better house, with three chimneys and a dormer window in its roof, and the roof is of stone shingle instead of thatch, but very rough. This house is no doubt the clergyman's; there is some smoke from one of its chimneys, none from any other in the village; this smoke is from the lowest chimney at the back, evidently that of the kitchen, and it is rather thick, the fire not having been long lighted. A few hundred yards from the clergyman's house, nearer the shore, is the church, discernible from the cottage only by its low-arched belfry, a little neater than one would expect in such a village; perhaps lately built by the Puseyite incumbent;[265] and beyond the church, close to the sea, are two fragments of a border war-tower, standing on their circular mound, worn on its brow deep into edges and furrows by the feet of the village children. On the bank of moor, which forms the foreground, are a few cows, the carter's dog barking at a vixenish one: the milkmaid is feeding another, a gentle white one, which turns its head to her, expectant of a handful of fresh hay, which she has brought for it in her blue apron, fastened up round her waist; she stands with her pail on her head, evidently the village coquette, for she has a neat bodice, and pretty striped petticoat under the blue apron, and red stockings. Nearer us, the cowherd, barefooted, stands on a piece of the limestone rock (for the ground is thistly and not pleasurable to bare feet);--whether boy or girl we are not sure; it may be a boy, with a girl's worn-out bonnet on, or a girl with a pair of ragged trowsers on; probably the first, as the old bonnet is evidently useful to keep the sun out of our eyes when we are looking for strayed cows among the moorland hollows, and helps us at present to watch (holding the bonnet's edge down) the quarrel of the vixenish cow with the dog, which, leaning on our long stick, we allow to proceed without any interference. A little to the right the hay is being got in, of which the milkmaid has just taken her apronful to the white cow; but the hay is very thin, and cannot well be raked up because of the rocks; we must glean it like corn, hence the smallness of our stack behind the willows, and a woman is pressing a bundle of it hard together, kneeling against the rock's edge, to carry it safely to the hay-cart without dropping any. Beyond the village is a rocky hill, deep set with brushwood, a square crag or two of limestone emerging here and there, with pleasant turf on their brows, heaved in russet and mossy mounds against the sky, which, clear and calm, and as golden as the moss, stretches down behind it towards the sea. A single cottage just shows its roof over the edge of the hill, looking seaward; perhaps one of the village shepherds is a sea captain now, and may have built it there, that his mother may first see the sails of his ship whenever it runs into the bay. Then under the hill, and beyond the border tower, is the blue sea itself, the waves flowing in over the sand in long curved lines, slowly; shadows of cloud and gleams of shallow water on white sand alternating--miles away; but no sail is visible, not one fisherboat on the beach, not one dark speck on the quiet horizon. Beyond all are the Cumberland mountains, clear in the sun, with rosy light on all their crags. I should think the reader cannot but feel the kind of harmony there is in this composition; the entire purpose of the painter to give us the impression of wild, yet gentle, country life, monotonous as the succession of the noiseless waves, patient and enduring as the rocks; but peaceful, and full of health and quiet hope, and sanctified by the pure mountain air and baptismal dew of heaven, falling softly between days of toil and nights of innocence. All noble composition of this kind can be reached only by instinct: you cannot set yourself to arrange such a subject; you may see it, and seize it, at all times, but never laboriously invent it. And your power of discerning what is best in expression, among natural subjects, depends wholly on the temper in which you keep your own mind; above all, on your living so much alone as to allow it to become acutely sensitive in its own stillness. The noisy life of modern days is wholly incompatible with any true perception of natural beauty. If you go down into Cumberland by the railroad, live in some frequented hotel, and explore the hills with merry companions, however much you may enjoy your tour or their conversation, depend upon it you will never choose so much as one pictorial subject rightly; you will not see into the depth of any. But take knapsack and stick, walk towards the hills by short day's journeys--ten or twelve miles a day--taking a week from some starting-place sixty or seventy miles away: sleep at the pretty little wayside inns, or the rough village ones; then take the hills as they tempt you, following glen or shore as your eye glances or your heart guides, wholly scornful of local fame or fashion, and of everything which it is the ordinary traveller's duty to see or pride to do. Never force yourself to admire anything when you are not in the humour; but never force yourself away from what you feel to be lovely, in search of anything better: and gradually the deeper scenes of the natural world will unfold themselves to you in still increasing fulness of passionate power; and your difficulty will be no more to seek or to compose subjects, but only to choose one from among the multitude of melodious thoughts with which you will be haunted, thoughts which will of course be noble or original in proportion to your own depth of character and general power of mind: for it is not so much by the consideration you give to any single drawing, as by the previous discipline of your powers of thought, that the character of your composition will be determined. Simplicity of life will make you sensitive to the refinement and modesty of scenery, just as inordinate excitement and pomp of daily life will make you enjoy coarse colours and affected forms. Habits of patient comparison and accurate judgment will make your art precious, as they will make your actions wise; and every increase of noble enthusiasm in your living spirit will be measured by the reflection of its light upon the works of your hands. Faithfully yours, J. RUSKIN. FOOTNOTES: [234] I give Rossetti this preëminence, because, though the leading Pre-Raphaelites have all about equal power over colour in the abstract, Rossetti and Holman Hunt are distinguished above the rest for rendering colour under effects of light; and of these two, Rossetti composes with richer fancy and with a deeper sense of beauty, Hunt's stern realism leading him continually into harshness. Rossetti's carelessness, to do him justice, is only in water-colour, never in oil. [235] All the degradation of art which was brought about, after the rise of the Dutch school, by asphaltum, yellow varnish, and brown trees, would have been prevented, if only painters had been forced to work in dead colour. Any colour will do for some people, if it is browned and shining; but fallacy in dead colour is detected on the instant. I even believe that whenever a painter begins to _wish_ that he could touch any portion of his work with gum, he is going wrong. It is necessary, however, in this matter, carefully to distinguish between translucency and lustre. Translucency, though, as I have said above, a dangerous temptation, is, in its place, beautiful; but lustre, or _shininess_, is always, in painting, a defect. Nay, one of my best painter-friends (the "best" being understood to attach to both divisions of that awkward compound word), tried the other day to persuade me thatlustre was an ignobleness in _anything_; and it was only the fear of treason to ladies' eyes, and to mountain streams, and to morning dew, which kept me from yielding the point to him. One is apt always to generalise too quickly in such matters; but there can be no question that lustre is destructive of loveliness in colour, as it is of intelligibility in form. Whatever may be the pride of a young beauty in the knowledge that her eyes shine (though perhaps even eyes are most beautiful in dimness), she would be sorry if her cheeks did; and which of us would wish to polish a rose? [236] But not shiny or greasy. Bristol board, or hot-pressed imperial, or grey paper that feels slightly adhesive to the hand, is best. Coarse, gritty, and sandy papers are fit only for blotters and blunderers; no good draughtsman would lay a line on them. Turner worked much on a thin tough paper, dead in surface; rolling up his sketches in tight bundles that would go deep into his pockets. [237] I insist upon this unalterability of colour the more because I address you as a beginner, or an amateur; a great artist can sometimes get out of a difficulty with credit, or repent without confession. Yet even Titian's alterations usually show as stains on his work. [238] It is, I think, a piece of affectation to try to work with few colours; it saves time to have enough tints prepared without mixing, and you may at once allow yourself these twenty-four. If you arrange them in your colour-box in the order I have set them down, you will always easily put your finger on the one you want. Cobalt. Smalt. Antwerp blue. Prussian blue. Black. Gamboge. Emerald green. Hooker's green. Lemon yellow. Cadmium yellow. Yellow ochre. Roman ochre. Raw sienna. Burnt sienna. Light red. Indian red. Mars orange. Ext't of vermilion. Carmine. Violet carmine. Brown madder. Burnt umber. Vandyke brown. Sepia. Antwerp blue and Prussian blue are not very permanent colours, but you need not care much about permanence in your own work as yet, and they are both beautiful; while Indigo is marked by Field as more fugitive still, and is very ugly. Hooker's green is a mixed colour, put in the box merely to save you loss of time in mixing gamboge and Prussian blue. No. 1. is the best tint of it. Violet carmine is a noble colour for laying broken shadows with, to be worked into afterwards with other colours. If you wish to take up colouring seriously, you had better get Field's "Chromatography" at once; only do not attend to anything it says about principles or harmonies of colour; but only to its statements of practical serviceableness in pigments, and of their operations on each other when mixed, &c. [239] A more methodical, though, under general circumstances, uselessly prolix way, is to cut a square hole, some half an inch wide, in the sheet of cardboard, and a series of small circular holes in a slip of cardboard an inch wide. Pass the slip over the square opening, and match each colour beside one of the circular openings. You will thus have no occasion to wash any of the colours away. But the first rough method is generally all you want, as after a little practice, you only need to _look_ at the hue through the opening in order to be able to transfer it to your drawing at once. [240] If colours were twenty times as costly as they are, we should have many more good painters. If I were Chancellor of the Exchequer I would lay a tax of twenty shillings a cake on all colours except black, Prussian blue, Vandyke brown, and Chinese white, which I would leave for students. I don't say this jestingly; I believe such a tax would do more to advance real art than a great many schools of design. [241] I say _modern_, because Titian's quiet way of blending colours, which is the perfectly right one, is not understood now by any artist. The best colour we reach is got by stippling; but this not quite right. [242] The worst general character that colour can possibly have is a prevalent tendency to a dirty yellowish green, like that of a decaying heap of vegetables; this colour is _accurately_ indicative of decline or paralysis in missal-painting. [243] That is to say, local colour inherent in the object. The gradations of colour in the various shadows belonging to various lights exhibit form, and therefore no one but a colourist can ever draw _forms_ perfectly (see "Modern Painters," vol. iv. chap. iii. at the end); but all notions of explaining form by superimposed colour, as in architectural mouldings, are absurd. Colour adorns form, but does not interpret it. An apple is prettier, because it is striped, but it does not look a bit rounder; and a cheek is prettier because it is flushed, but you would see the form of the cheek bone better if it were not. Colour may, indeed, detach one shape from another, as in grounding a bas-relief, but it always diminishes the appearance of projection, and whether you put blue, purple, red, yellow, or green, for your ground, the bas-relief will be just as clearly or just as imperfectly relieved, as long as the colours are of equal depth. The blue ground will not retire the hundredth part of an inch more than the red one. [244] See, however, at the close of this letter, the notice of one more point connected with the management of colour, under the head "Law of Harmony." [245] See farther, on this subject, "Modern Painters," vol. iv. chap. viii § 6. [246] "In general, throughout Nature, reflection and repetition are peaceful things, associated with the idea of quiet succession in events, that one day should be like another day, or one history the repetition of another history, being more or less results of quietness, while dissimilarity and non-succession are results of interference and disquietude. Thus, though an echo actually increases the quantity of sound heard, its repetition of the note or syllable gives an idea of calmness attainable in no other way; hence also the feeling of calm given to a landscape by the voice of a cuckoo." [247] This is obscure in the rude woodcut, the masts being so delicate that they are confused among the lines of reflection. In the original they have orange light upon them, relieved against purple behind. [248] The cost of art in getting a bridge level is _always_ lost, for you must get up to the height of the central arch at any rate, and you only can make the whole bridge level by putting the hill farther back, and pretending to have got rid of it when you have not, but have only wasted money in building an unnecessary embankment. Of course, the bridge should not be difficultly or dangerously steep, but the necessary slope, whatever it may be, should be in the bridge itself, as far as the bridge can take it, and not pushed aside into the approach, as in our Waterloo road; the only rational excuse for doing which is that when the slope must be long it is inconvenient to put on a drag at the top of the bridge, and that any restiveness of the horse is more dangerous on the bridge than on the embankment. To this I answer: first, it is not more dangerous in reality, though it looks so, for the bridge is always guarded by an effective parapet, but the embankment is sure to have no parapet, or only a useless rail; and secondly, that it is better to have the slope on the bridge, and make the roadway wide in proportion, so as to be quite safe, because a little waste of space on the river is no loss, but your wide embankment at the side loses good ground; and so my picturesque bridges are right as well as beautiful, and I hope to see them built again some day, instead of the frightful straight-backed things which we fancy are fine, and accept from the pontifical rigidities of the engineering mind. [249] I cannot waste space here by reprinting what I have said in other books: but the reader ought, if possible, to refer to the notices of this part of our subject in "Modern Painters," vol. iv. chap. xviii., and "Stones of Venice," vol. iii. chap. i. § 8. [250] If you happen to be reading at this part of the book, without having gone through any previous practice, turn back to the sketch of the ramification of stone pine, Fig. 4. page 30., and examine the curves of its boughs one by one, trying them by the conditions here stated under the heads A. and B. [251] The reader, I hope, observes always that every line in these figures is itself one of varying curvature, and cannot be drawn by compasses. [252] I hope the reader understands that these woodcuts are merely facsimiles of the sketches I make at the side of my paper to illustrate my meaning as I write--often sadly scrawled if I want to get on to something else. This one is really a little too careless; but it would take more time and trouble to make a proper drawing of so odd a boat than the matter is worth. It will answer the purpose well enough as it is. [253] Imperfect vegetable form I consider that which is in its nature dependent, as in runners and climbers; or which is susceptible of continual injury without materially losing the power of giving pleasure by its aspect, as in the case of the smaller grasses. I have not, of course, space here to explain these minor distinctions, but the laws above stated apply to all the more important trees and shrubs likely to be familiar to the student. [254] There is a very tender lesson of this kind in the shadows of leaves upon the ground; shadows which are the most likely of all to attract attention, by their pretty play and change. If you examine them, you will find that the shadows do not take the forms of the leaves, but that, through each interstice, the light falls, at a little distance, in the form of a round or oval spot; that is to say, it produces the image of the sun itself, cast either vertically or obliquely, in circle or ellipse according to the slope of the ground. Of course the sun's rays produce the same effect, when they fall through any small aperture: but the openings between leaves are the only ones likely to show it to an ordinary observer, or to attract his attention to it by its frequency, and lead him to think what this type may signify respecting the greater Sun; and how it may show us that, even when the opening through which the earth receives light is too small to let us see the Sun himself, the ray of light that enters, if it comes straight from Him, will still bear with it His image. [255] In the smaller figure (32.), it will be seen that this interruption is caused by a cart coming down to the water's edge; and this object is serviceable as beginning another system of curves leading out of the picture on the right, but so obscurely drawn as not to be easily represented in outline. As it is unnecessary to the explanation of our point here, it has been omitted in the larger diagram, the direction of the curve it begins being indicated by the dashes only. [256] Both in the Sketches in Flanders and Germany. [257] If you happen to meet with the plate of Durer's representing a coat of arms with a skull in the shield, note the value given to the concave curves and sharp point of the helmet by the convex leafage carried round it in front; and the use of the blank white part of the shield in opposing the rich folds of the dress. [258] Turner hardly ever, as far as I remember, allows a strong light to oppose a full dark, without some intervening tint. His suns never set behind dark mountains without a film of cloud above the mountain's edge. [259] "A prudent chief not always must display His powers in equal ranks and fair array, But with the occasion and the place comply, Conceal his force; nay, seem sometimes to fly. Those oft are stratagems which errors seem, Nor is it Homer nods, but we that dream." _Essay on Criticism._ [260] I am describing from a MS., _circa_ 1300, of Gregory's "Decretalia" in my own possession. [261] One of the most wonderful compositions of Tintoret in Venice, is little more than a field of subdued crimson, spotted with flakes of scattered gold. The upper clouds in the most beautiful skies owe great part of their power to infinitude of division; order being marked through this division. [262] I fully believe that the strange grey gloom, accompanied by considerable power of effect, which prevails in modern French art must be owing to the use of this mischievous instrument; the French landscape always gives me the idea of Nature seen carelessly in the dark mirror, and painted coarsely, but scientifically, through the veil of its perversion. [263] Various other parts of this subject are entered into, especially in their bearing on the ideal of painting, in "Modern Painters," vol. iv. chap. iii. [264] In all the best arrangements of colour, the delight occasioned by their mode of succession is entirely inexplicable, nor can it be reasoned about; we like it just as we like an air in music, but cannot reason any refractory person into liking it, if they do not: and yet there is distinctly a right and a wrong in it, and a good taste and bad taste respecting it, as also in music. [265] "Puseyism" was unknown in the days when this drawing was made; but the kindly and helpful influences of what may be called ecclesiastical sentiment, which, in a morbidly exaggerated condition, forms one of the principal elements of "Puseyism,"--I use this word regretfully, no other existing which will serve for it,--had been known and felt in our wild northern districts long before. APPENDIX. THINGS TO BE STUDIED. The worst danger by far, to which a solitary student is exposed, is that of liking things that he should not. It is not so much his difficulties, as his tastes, which he must set himself to conquer; and although, under the guidance of a master, many works of art may be made instructive, which are only of partial excellence (the good and bad of them being duly distinguished), his safeguard, as long as he studies alone, will be in allowing himself to possess only things, in their way, so free from faults, that nothing he copies in them can seriously mislead him, and to contemplate only those works of art which he knows to be either perfect or noble in their errors. I will therefore set down in clear order, the names of the masters whom you may safely admire, and a few of the books which you may safely possess. In these days of cheap illustration, the danger is always rather of your possessing too much than too little. It may admit of some question, how far the looking at bad art may set off and illustrate the characters of the good; but, on the whole, I believe it is best to live always on quite wholesome food, and that our taste of it will not be made more acute by feeding, however temporarily, on ashes. Of course the works of the great masters can only be serviceable to the student after he has made considerable progress himself. It only wastes the time and dulls the feelings of young persons, to drag them through picture galleries; at least, unless they themselves wish to look at particular pictures. Generally, young people only care to enter a picture gallery when there is a chance of getting leave to run a race to the other end of it; and they had better do that in the garden below. If, however, they have any real enjoyment of pictures, and want to look at this one or that, the principal point is never to disturb them in looking at what interests them, and never to make them look at what does not. Nothing is of the least use to young people (nor, by the way, of much use to old ones), but what interests them; and therefore, though it is of great importance to put nothing but good art into their possession, yet when they are passing through great houses or galleries, they should be allowed to look precisely at what pleases them: if it is not useful to them as art, it will be in some other way: and the healthiest way in which art can interest them is when they look at it, not as art, but because it represents something they like in nature. If a boy has had his heart filled by the life of some great man, and goes up thirstily to a Vandyck portrait of him, to see what he was like, that is the wholesomest way in which he can begin the study of portraiture; if he love mountains, and dwell on a Turner drawing because he sees in it a likeness to a Yorkshire scar, or an Alpine pass, that is the wholesomest way in which he can begin the study of landscape; and if a girl's mind is filled with dreams of angels and saints, and she pauses before an Angelico because she thinks it must surely be indeed like heaven, that is the wholesomest way for her to begin the study of religious art. When, however, the student has made some definite progress, and every picture becomes really a guide to him, false or true, in his own work, it is of great importance that he should never so much as look at bad art; and then, if the reader is willing to trust me in the matter, the following advice will be useful to him. In which, with his permission, I will quit the indirect and return to the epistolary address, as being the more convenient. First, in Galleries of Pictures: 1. You may look, with trust in their being always right, at Titian, Veronese, Tintoret, Giorgione, John Bellini, and Velasquez; the authenticity of the picture being of course established for you by proper authority. 2. You may look with admiration, admitting, however question of right and wrong,[266] at Van Eyck, Holbein, Perugino, Francia, Angelico, Leonardo da Vinci, Correggio, Vandyck, Rembrandt, Reynolds, Gainsborough, Turner, and the modern Pre-Raphaelites.[267] You had better look at no other painters than these, for you run a chance, otherwise, of being led far off the road, or into grievous faults, by some of the other great ones, as Michael Angelo, Raphael, and Rubens; and of being, besides, corrupted in taste by the base ones, as Murillo, Salvator, Claude, Gasper Poussin, Teniers, and such others. You may look, however, for examples of evil, with safe universality of reprobation, being sure that everything you see is bad, at Domenichino, the Caracci, Bronzino, and the figure pieces of Salvator. Among those named for study under question, you cannot look too much at, nor grow too enthusiastically fond of, Angelico, Correggio, Reynolds, Turner, and the Pre-Raphaelites; but, if you find yourself getting especially fond of any of the others, leave off looking at them, for you must be going wrong some way or other. If, for instance, you begin to like Rembrandt or Leonardo especially, you are losing your feeling for colour; if you like Van Eyck or Perugino especially, you must be getting too fond of rigid detail; and if you like Vandyck or Gainsborough especially, you must be too much attracted by gentlemanly flimsiness. Secondly, of published, or otherwise multiplied, art, such as you may be able to get yourself, or to see at private houses or in shops, the works of the following masters are the most desirable, after the Turners, Rembrandts, and Durers, which I have asked you to get first: 1. Samuel Prout. All his published lithographic sketches are of the greatest value, wholly unrivalled in power of composition, and in love and feeling of architectural subject. His somewhat mannered linear execution, though not to be imitated in your own sketches from Nature, may be occasionally copied, for discipline's sake, with great advantage; it will give you a peculiar steadiness of hand, not quickly attainable in any other way; and there is no fear of your getting into any faultful mannerism as long as you carry out the different modes of more delicate study above recommended. If you are interested in architecture, and wish to make it your chief study, you should draw much from photographs of it; and then from the architecture itself, with the same completion of detail and gradation, only keeping the shadows of due paleness, in photographs they are always about four times as dark as they ought to be; and treat buildings with as much care and love as artists do their rock foregrounds, drawing all the moss and weeds, and stains upon them. But if, without caring to understand architecture, you merely want the picturesque character of it, and to be able to sketch it fast, you cannot do better than take Prout for your _exclusive_ master; only do not think that you are copying Prout by drawing straight lines with dots at the end of them. Get first his "Rhine," and draw the subjects that have most hills, and least architecture in them, with chalk on smooth paper, till you can lay on his broad flat tints, and get his gradations of light, which are very wonderful; then take up the architectural subjects in the "Rhine," and draw again and again the groups of figures, &c., in his "Microcosm," and "Lessons on Light and Shadow." After that, proceed to copy the grand subjects in the sketches in "Flanders and Germany;" or in "Switzerland and Italy," if you cannot get the Flanders; but the Switzerland is very far inferior. Then work from Nature, not trying to Proutise Nature, by breaking smooth buildings into rough ones, but only drawing _what you see_, with Prout's simple method and firm lines. Don't copy his coloured works. They are good, but not at all equal to his chalk and pencil drawings, and you will become a mere imitator, and a very feeble imitator, if you use colour at all in Prout's method. I have not space to explain why this is so, it would take a long piece of reasoning; trust me for the statement. 2. John Lewis. His sketches in Spain, lithographed by himself, are very valuable. Get them, if you can, and also some engravings (about eight or ten, I think, altogether) of wild beasts, executed by his own hand a long time ago; they are very precious in every way. The series of the "Alhambra" is rather slight, and few of the subjects are lithographed by himself; still it is well worth having. But let _no_ lithographic work come into the house, if you can help it, nor even look at any, except Prout's, and those sketches of Lewis's. 3. George Cruikshank. If you ever happen to meet with the two volumes of "Grimm's German Stories," which were illustrated by him long ago, pounce upon them instantly; the etchings in them are the finest things, next to Rembrandt's, that, as far as I know, have been done since etching was invented. You cannot look at them too much, nor copy them too often. All his works are very valuable, though disagreeable when they touch on the worst vulgarities of modern life; and often much spoiled by a curiously mistaken type of face, divided so as to give too much to the mouth and eyes, and leave too little for forehead, the eyes being set about two thirds up, instead of at half the height of the head. But his manner of work is always right; and his tragic power, though rarely developed, and warped by habits of caricature, is, in reality, as great as his grotesque power. There is no fear of his hurting your taste, as long as your principal work lies among art of so totally different a character as most of that which I have recommended to you; and you may, therefore, get great good by copying almost anything of his that may come in your way; except only his illustrations lately published to "Cinderella," and "Jack and the Beanstalk," and "Tom Thumb," which are much over-laboured, and confused in line. You should get them, but do not copy them. 4. Alfred Rethel. I only know two publications by him; one, the "Dance of Death," with text by Reinick, published in Leipsic, but to be had now of any London bookseller for the sum, I believe, of eighteen pence, and containing six plates full of instructive character; the other, of two plates only, "Death the Avenger," and "Death the Friend." These two are far superior to the "Todtentanz," and, if you can get them, will be enough in themselves, to show all that Rethel can teach you. If you dislike ghastly subjects, get "Death the Friend" only. 5. Bewick. The execution of the plumage in Bewick's birds is the most masterly thing ever yet done in wood-cutting; it is just worked as Paul Veronese would have worked in wood, had he taken to it. His vignettes, though too coarse in execution, and vulgar in types of form, to be good copies, show, nevertheless, intellectual power of the highest order; and there are pieces of sentiment in them, either pathetic or satirical, which have never since been equalled in illustrations of this simple kind; the bitter intensity of the feeling being just like that which characterises some of the leading Pre-Raphaelites. Bewick is the Burns of painting. 6. Blake. The "Book of Job," engraved by himself, is of the highest rank in certain characters of imagination and expression; in the mode of obtaining certain effects of light it will also be a very useful example to you. In expressing conditions of glaring and flickering light, Blake is greater than Rembrandt. 7. Richter. I have already told you what to guard against in looking at his works. I am a little doubtful whether I have done well in including them in this catalogue at all; but the fancies in them are so pretty and numberless, that I must risk, for their sake, the chance of hurting you a little in judgment of style. If you want to make presents of story-books to children, his are the best you can now get. 8. Rossetti. An edition of Tennyson, lately published, contains woodcuts from drawings by Rossetti and other chief Pre-Raphaelite masters. They are terribly spoiled in the cutting, and generally the best part, the expression of feature, _entirely_ lost;[268] still they are full of instruction, and cannot be studied too closely. But observe, respecting these woodcuts, that if you have been in the habit of looking at much spurious work, in which sentiment, action, and style are borrowed or artificial, you will assuredly be offended at first by all genuine work, which is intense in feeling. Genuine art, which is merely art, such as Veronese's or Titian's, may not offend you, though the chances are that you will not care about it: but genuine works of feeling, such as Maude and Aurora Leigh in poetry, or the grand Pre-Raphaelite designs in painting, are sure to offend you; and if you cease to work hard, and persist in looking at vicious and false art, they will continue to offend you. It will be well, therefore, to have one type of entirely false art, in order to know what to guard against. Flaxman's outlines to Dante contain, I think, examples of almost every kind of falsehood and feebleness which it is possible for a trained artist, not base in thought, to commit or admit, both in design and execution. Base or degraded choice of subject, such as you will constantly find in Teniers and others of the Dutch painters, I need not, I hope, warn you against; you will simply turn away from it in disgust; while mere bad or feeble drawing, which makes mistakes in every direction at once, cannot teach you the particular sort of educated fallacy in question. But, in these designs of Flaxman's, you have gentlemanly feeling, and fair knowledge of anatomy, and firm setting down of lines, all applied in the foolishest and worst possible way; you cannot have a more finished example of learned error, amiable want of meaning, and bad drawing with a steady hand.[269] Retsch's outlines have more real material in them than Flaxman's, occasionally showing true fancy and power; in artistic principle they are nearly as bad, and in taste worse. All outlines from statuary, as given in works on classical art, will be very hurtful to you if you in the least like them; and _nearly_ all finished line engravings. Some particular prints I could name which possess instructive qualities, but it would take too long to distinguish them, and the best way is to avoid line engravings of figures altogether. If you happen to be a rich person, possessing quantities of them, and if you are fond of the large finished prints from Raphael, Correggio, &c., it is wholly impossible that you can make any progress in knowledge of real art till you have sold them all--or burnt them, which would be a greater benefit to the world. I hope that some day, true and noble engravings will be made from the few pictures of the great schools, which the restorations undertaken by the modern managers of foreign galleries may leave us; but the existing engravings have nothing whatever in common with the good in the works they profess to represent, and if you like them, you like in the originals of them hardly anything but their errors. Finally, your judgment will be, of course, much affected by your taste in literature. Indeed, I know many persons who have the purest taste in literature, and yet false taste in art, and it is a phenomenon which puzzles me not a little: but I have never known any one with false taste in books, and true taste in pictures. It is also of the greatest importance to you, not only for art's sake, but for all kinds of sake, in these days of book deluge, to keep out of the salt swamps of literature, and live on a rocky island of your own, with a spring and a lake in it, pure and good. I cannot, of course, suggest the choice of your library to you, every several mind needs different books; but there are some books which we all need, and assuredly, if you read Homer,[270] Plato, Æschylus, Herodotus, Dante,[271] Shakspeare, and Spenser, as much as you ought, you will not require wide enlargement of shelves to right and left of them for purposes of perpetual study. Among modern books, avoid generally magazine and review literature. Sometimes it may contain a useful abridgement or a wholesome piece of criticism; but the chances are ten to one it will either waste your time or mislead you. If you want to understand any subject whatever, read the best book upon it you can hear of; not a review of the book. If you don't like the first book you try, seek for another; but do not hope ever to understand the subject without pains, by a reviewer's help. Avoid especially that class of literature which has a knowing tone; it is the most poisonous of all. Every good book, or piece of book, is full of admiration and awe; it may contain firm assertion or stern satire, but it never sneers coldly, nor asserts haughtily, and it always leads you to reverence or love something with your whole heart. It is not always easy to distinguish the satire of the venomous race of books from the satire of the noble and pure ones; but in general you may notice that the cold-blooded Crustacean and Batrachian books will sneer at sentiment; and the warm-blooded, human books, at sin. Then, in general, the more you can restrain your serious reading to reflective or lyric poetry, history, and natural history, avoiding fiction and the drama, the healthier your mind will become. Of modern poetry keep to Scott, Wordsworth, Keats, Crabbe, Tennyson, the two Brownings, Lowell, Longfellow, and Coventry Patmore, whose "Angel in the House" is a most finished piece of writing, and the sweetest analysis we possess of quiet modern domestic feeling; while Mrs. Browning's "Aurora Leigh" is, as far as I know, the greatest poem which the century has produced in any language. Cast Coleridge at once aside, as sickly and useless; and Shelley as shallow and verbose; Byron, until your taste is fully formed, and you are able to discern the magnificence in him from the wrong. Never read bad or common poetry, nor write any poetry yourself; there is, perhaps, rather too much than too little in the world already. Of reflective prose, read chiefly Bacon, Johnson, and Helps. Carlyle is hardly to be named as a writer for "beginners," because his teaching, though to some of us vitally necessary, may to others be hurtful. If you understand and like him, read him; if he offends you, you are not yet ready for him, and perhaps may never be so; at all events, give him up, as you would sea-bathing if you found it hurt you, till you are stronger. Of fiction, read Sir Charles Grandison, Scott's novels, Miss Edgeworth's, and, if you are a young lady, Madame de Genlis', the French Miss Edgeworth; making these, I mean, your constant companions. Of course you must, or will read other books for amusement, once or twice; but you will find that these have an element of perpetuity in them, existing in nothing else of their kind: while their peculiar quietness and repose of manner will also be of the greatest value in teaching you to feel the same characters in art. Read little at a time, trying to feel interest in little things, and reading not so much for the sake of the story as to get acquainted with the pleasant people into whose company these writers bring you. A common book will often give you much amusement, but it is only a noble book which will give you dear friends. Remember also that it is of less importance to you in your earlier years, that the books you read should be clever, than that they should be right. I do not mean oppressively or repulsively instructive; but that the thoughts they express should be just, and the feelings they excite generous. It is not necessary for you to read the wittiest or the most suggestive books: it is better, in general, to hear what is already known, and may be simply said. Much of the literature of the present day, though good to be read by persons of ripe age, has a tendency to agitate rather than confirm, and leaves its readers too frequently in a helpless or hopeless indignation, the worst possible state into which the mind of youth can be thrown. It may, indeed, become necessary for you, as you advance in life, to set your hand to things that need to be altered in the world, or apply your heart chiefly to what must be pitied in it, or condemned; but, for a young person, the safest temper is one of reverence, and the safest place one of obscurity. Certainly at present, and perhaps through all your life, your teachers are wisest when they make you content in quiet virtue, and that literature and art are best for you which point out, in common life and familiar things, the objects for hopeful labour, and for humble love. FOOTNOTES: [266] I do not mean necessarily to imply inferiority of rank, in saying that this second class of painters have questionable qualities. The greatest men have often many faults, and sometimes their faults are a part of their greatness; but such men are not, of course, to be looked upon by the student with absolute implicitness of faith. [267] Including under this term, John Lewis, and William Hunt of the Old Water-colour, who, take him all in all, is the best painter of still life, I believe, that ever existed. [268] This is especially the case in the St. Cecily, Rossetti's first illustration to the "palace of art," which would have been the best in the book had it been well engraved. The whole work should be taken up again, and done by line engraving, perfectly; and wholly from Pre-Raphaelite designs, with which no other modern work can bear the least comparison. [269] The praise I have given incidentally to Flaxman's sculpture in the "Seven Lamps," and elsewhere, refers wholly to his studies from Nature, and simple groups in marble, which were always good and interesting. Still, I have overrated him, even in this respect; and it is generally to be remembered that, in speaking of artists whose works I cannot be supposed to have specially studied, the errors I fall into will always be on the side of praise. For, of course, praise is most likely to be given when the thing praised is above one's knowledge; and, therefore, as our knowledge increases, such things may be found less praiseworthy than we thought. But blame can only be justly given when the thing blamed is below one's level of sight; and, practically, I never do blame anything until I have got well past it, and am certain that there is demonstrable falsehood in it. I believe, therefore, all my blame to be wholly trustworthy, having never yet had occasion to repent of one depreciatory word that I have ever written, while I have often found that, with respect to things I had not time to study closely, I was led too far by sudden admiration, helped, perhaps, by peculiar associations, or other deceptive accidents; and this the more, because I never care to check an expression of delight, thinking the chances are, that, even if mistaken, it will do more good than harm; but I weigh every word of blame with scrupulous caution. I have sometimes erased a strong passage of blame from second editions of my books; but this was only when I found it offended the reader without convincing him, never because I repented of it myself. [270] Chapman's, if not the original. [271] Carey's or Cayley's, if not the original. I do not know which are the best translations of Plato. Herodotus and Æschylus can only be read in the original. It may seem strange that I name books like these for "beginners:" but all the greatest books contain food for all ages; and an intelligent and rightly bred youth or girl ought to enjoy much, even in Plato, by the time they are fifteen or sixteen. 
38194	----	scanned images of public domain material from the Google Print project.) HARVARD COLLEGE LIBRARY AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS. BY ADAM SMITH LL.D. F.R.S. WITH A LIFE OF THE AUTHOR. ALSO, A VIEW OF THE DOCTRINE OF SMITH, COMPARED WITH THAT OF THE FRENCH ECONOMISTS; WITH A METHOD OF FACILITATING THE STUDY OF HIS WORKS; FROM THE FRENCH OF M. GARNIER. COMPLETE IN ONE VOLUME London: T. NELSON AND SONS, PATERNOSTER ROW; AND EDINBURGH. MDCCCLII. CONTENTS _Page_ Life of the Author i Short View of the Doctrine of Smith, compared with that of the French Economists xvii Introduction 1 BOOK I. OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE POWERS OF LABOUR, AND OF THE ORDER ACCORDING TO WHICH ITS PRODUCE IS NATURALLY DISTRIBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE. CHAP. I. Of the Division of Labour 2 CHAP. II. Of the Principle which gives occasion to the Division of Labour 6 CHAP. III. That the Division of Labour is limited by the Extent of the Market 8 CHAP. IV. Of the Origin and Use of Money 9 CHAP. V. Of the real and nominal Price of Commodities, or of their Price in Labour, and their Price in Money 12 CHAP. VI. Of the Component Parts of the Price of Commodities 20 CHAP. VII. Of the Natural and Market Price of Commodities 23 CHAP. VIII. Of the Wages of Labour 27 CHAP. IX. Of the Profits of Stock 36 CHAP. X. Of Wages and Profit in the different Employments of Labour and Stock 41 PART I. Inequalities arising from the Nature of the Employments themselves ib. PART II. Inequalities occasioned by the Policy of Europe 50 CHAP. XI. Of the Rent of Land 60 PART I. Of the Produce of Land which always affords Rent 61 PART II. Of the Produce of Land which sometimes does, and sometimes does not, afford Rent 68 PART III. Of the Variations in the Proportion between the respective Values of that sort of Produce which always affords Rent, and of that which sometimes does, and sometimes does not, afford Rent 74 Digression concerning the Variations in the Value of Silver during the course of the four last centuries ib. First Period ib. Second Period 81 Third Period ib. Variations in the Proportion between the respective Values of Gold and Silver 89 Grounds of the Suspicion that the Value of Silver still continues to decrease 91 Different Effects of the Progress of Improvement upon the real Price of three different sorts of rude Produce ib. First Sort 92 Second Sort ib. Third Sort 97 Conclusion of the Digression concerning the Variations in the Value of Silver 101 Effects of the Progress of Improvement upon the real Price of Manufactures 103 Conclusion of the Chapter 105 BOOK II. OF THE NATURE, ACCUMULATION, AND EMPLOYMENT OF STOCK. Introduction 111 CHAP. I. Of the Division of Stock 112 CHAP. II. Of Money considered as a particular Branch of the general Stock of the Society, or of the Expense of maintaining the National Capital 115 CHAP. III. Of the Accumulation of Capital, or of productive and unproductive Labour 135 CHAP. IV. Of Stock lent at Interest 144 CHAP. V. Of the different Employment of Capitals 147 BOOK III. OF THE DIFFERENT PROGRESS OF OPULENCE IN DIFFERENT NATIONS. CHAP. I. Of the Natural Progress of Opulence 155 CHAP. II. Of the Discouragement of Agriculture in the ancient States of Europe, after the fall of the Roman Empire 157 CHAP. III. Of the Rise and Progress of Cities and Towns, after the fall of the Roman Empire 162 CHAP. IV. How the Commerce of the Towns contributed to the Improvement of the Country 167 BOOK IV. OF THE SYSTEMS OF POLITICAL ECONOMY. Introduction 173 CHAP. I. Of the Principle of the Commercial or Mercantile system ib. CHAP. II. Of Restraints upon the Importation from Foreign Countries, of such Goods as can be produced at Home 183 CHAP. III. Of the extraordinary Restraints upon the Importation of Goods of almost all kinds, from those Countries with which the Balance is supposed to be disadvantageous 192 PART I. Of the Unreasonableness of those Restraints, even upon the Principles of the Commercial System ib. Digression concerning Banks of Deposit, particularly concerning that of Amsterdam 194 PART II. Of the Unreasonableness of these extraordinary Restraints, upon other Principles 199 CHAP. IV. Of Drawbacks 203 CHAP. V. Of Bounties 205 Digression concerning the Corn Trade and Corn Laws 213 CHAP. VI. Of Treaties of Commerce 222 CHAP. VII. Of Colonies 227 PART I. Of the Motives for establishing new Colonies ib. PART II. Causes of the Prosperity of new Colonies 231 PART III. Of the Advantages which Europe has derived from the Discovery of America, and from that of a Passage to the East Indies by the Cape of Good Hope 243 CHAP. VIII. Conclusion of the Mercantile System 266 CHAP. IX. Of the Agricultural Systems, or of those Systems of Political Economy which represent the Produce of Land as either the sole or the principal Source of the Revenue and Wealth of every Country 275 APPENDIX. Account of Herring Busses fitted out in Scotland, the Amount of the Cargoes and the Bounties on them 287 Account of Foreign Salt imported into Scotland, and of Scotch Salt delivered duty free, for the Herring Fishery 288 BOOK V. OF THE REVENUE OF THE SOVEREIGN OR COMMONWEALTH. CHAP. I. Of the Expenses of the Sovereign or Commonwealth 289 PART I. Of the Expense of Defence ib. PART II. Of the Expense of Justice 297 PART III. Of the Expense of Public Works and Public Institutions 302 ART. I. Of the Public Works and Institutions for facilitating the Commerce of Society.--1st, For facilitating the general Commerce of the Society.-- 2d, For facilitating particular Branches of Commerce 303 ART. II. Of the Expense of the Institutions for the Education of Youth 318 ART. III. Of the Expense of the Institutions for the Instruction of People of all Ages 330 PART IV. Of the Expense of supporting the Dignity of the Sovereign 342 Conclusion of the Chapter ib. CHAP. II. Of the Sources of the general or Public Revenue of the Society 343 PART I. Of the Funds or Sources of Revenue which may particularly belong to the Sovereign or Commonwealth ib. PART II. Of Taxes 347 ART. I. Taxes upon rent; Taxes upon the Rent of Land 348 Taxes which are proportioned, not to the Rent, but to the Produce of Land 352 Taxes upon the Rent of Houses 354 ART. II. Taxes upon Profit, or upon the Revenue arising from Stock 357 Taxes upon the Profit of particular Employments 359 APPENDIX to Articles I. and II.--Taxes upon the Capital Value of Lands, Houses, and Stock 362 ART. III. Taxes upon the Wages of Labour 365 ART. IV. Taxes which, it is intended, should fall indifferently upon every different Species of Revenue 366 Capitation Taxes 367 Taxes upon consumable Commodities 368 CHAP. III. Of Public Debts 385 SHORT ACCOUNT OF THE LIFE AND WRITINGS OF DR. ADAM SMITH Adam Smith, the celebrated author of 'An Inquiry into the Nature and Causes of the Wealth of Nations,' was born in the town of Kirkaldy, on the 5th of June 1723. His father, at an early period of life, practised as a writer to the signet in Edinburgh, and officiated as private secretary to the Earl of Loudon, during the time his Lordship was principal secretary of state in Scotland, and keeper of the great seal; but afterwards settled at Kirkaldy, where, for some time before his death, he held the office of comptroller of the customs. He died a few months before the birth of his son. The constitution of young Smith, during infancy, was so sickly as to require all the care and solicitude of his surviving parent, whose only child he was. The duty which thus devolved on his mother, it is allowed, she discharged in the most ample manner; and, indeed, carried her indulgence so far as to have drawn on herself, it has been said, some degree of blame. But it certainly does not appear that any bad consequences resulted, on this occasion, from unbounded parental fondness; nor can it be said, that any permanent disadvantage was felt by the retirement, and even seclusion, which long-continued weakness rendered necessary. To the inability of young Smith to engage in the active sports of his early companions, we ought, perhaps, to trace the foundation of those habits, and love of retirement, which distinguished him, in a peculiar manner, during a long life[1]. We are informed that Smith received the rudiments of education at the grammar-school of Kirkaldy; and, at that time, attracted some notice by his passion for books, and by the extraordinary powers of his memory. He was also observed, even at this early period of life, to have contracted those habits of absence in company, and of talking to himself, for which he was afterwards so remarkable. In 1737, he was sent to the university of Glasgow, where, it is said, he evinced an uncommon partiality for the study of mathematics and natural philosophy. Being designed for the English church, he left that place in about three years, and entered, in 1740, an exhibitioner on Snell's foundation, at Baliol college, Oxford. But to this celebrated seminary he acknowledged very slender obligations. He had, however, attained a solid foundation of knowledge, and also the precious habits of attention, and the most industrious application. Here he diligently pursued his favourite speculations in private, interrupted only by the regular calls of scholastic discipline. He cultivated, with the greatest assiduity and success, the study of the languages, both ancient and modern; and formed an intimate acquaintance with the works of the poets of his own country, as well as with those of Greece and Rome, France and Italy. Of the turns and delicacies of the English tongue, it has been observed, he then gained such a critical knowledge, as was scarcely to be expected from his northern education. With the view of improving his style, he employed himself in frequent translations, particularly from the French; a practice which he used to recommend to all who cultivate the art of writing. His modest deportment, and his secret studies, however, provoked, it has been said, the jealousy or the suspicion of his superiors. It has been mentioned, that the heads of the college having thought proper to visit his chamber, found him engaged in perusing Hume's Treatise of Human Nature, then recently published. This the reverend inquisitors seized, while they severely reprimanded the young philosopher. After a residence of seven years at Oxford, he returned, against the wishes of his friends, to Kirkaldy, the place of his nativity, where he lived for some time with his mother, without determining on any fixed plan of life; Mr. Smith having thus chosen to forego every prospect of church preferment, rather than do violence to his conscience by preaching a particular system of tenets. In 1748, being then in the twenty-fifth year of his age, he took up his residence in the capital of Scotland, when he first entered into public life, by delivering lectures, under the patronage of Lord Kames, on rhetoric and the belles lettres, which he continued for two years. These lectures were never published; but the substance of them appears to have been afterwards communicated to Dr. Blair, as he acknowledges, in his Lectures, to have been indebted to Dr. Smith for a manuscript treatise, from which he had taken several ideas in the eighteenth lecture, on the general characters of style, particularly the plain and the simple; and also the characters of those English authors belonging to the several classes in that and the following lecture. In 1751, he was chosen professor of logic in the university of Glasgow. Of the manner in which he discharged the duties of this important situation, it would be difficult now to present a more satisfactory account than that which has been given by one of his own pupils 'In the professorship of logic,' it is observed, 'Mr. Smith soon saw the necessity of departing widely from the plan that had been followed by his predecessors, and of directing the attention of his pupils to studies of a more interesting and useful nature than the logic and metaphysics of the schools. Accordingly, after exhibiting a general view of the powers of the mind, and explaining so much of the ancient logic as was requisite to gratify curiosity, with respect to an artificial mode of reasoning, which had once occupied the universal attention of the learned, he dedicated all the rest of his time to the delivery of a system of rhetoric and belles lettres.' During the following year, he was nominated professor of moral philosophy in the same university. By this appointment he was peculiarly gratified, and the duties of it he was well fitted to discharge, as it embraced the study of his favourite science, political economy, many of the doctrines of which, even then, had been familiarised to his mind. After entering on the duties of his new situation, he appears to have turned his attention to the division of the science of morals, which he was induced to divide into four parts. The _first_ contained Natural Theology, in which he considered the proofs of the being and attributes of God, and those principles of the human mind upon which religion is founded. The _second_ comprehended Ethics, strictly so called. In the _third_, he treated, at more length, of that branch of morality which relates to Justice, and which, being susceptible of precise and accurate rules, is capable of a more systematic demonstration. In the _fourth_, he examined these political regulations which are founded upon Expediency, and which are calculated to increase the riches, the power, and the prosperity of a state. His lectures on these subjects were always distinguished by a luminous division of the subject, and by fulness and variety of illustration; and as they were delivered in a plain unaffected manner, they were well calculated to afford pleasure as well as instruction. They, accordingly, excited a degree of interest, and gave rise to a spirit of inquiry in the great commercial city of Glasgow, from which the most favourable consequences resulted. His reputation extended so widely, that, on his account alone, a considerable number of students, from different parts of the country, were attracted to the university of that city; and the science which he taught became so popular, that even the trifling peculiarities in his pronunciation and manner of speaking, were often objects of imitation. During the time Mr. Smith was thus successfully engaged in his academical labours, he was gradually laying the foundation of a more extensive reputation. In the year 1759, he published his 'Theory of Moral Sentiments, or An Essay towards an Analysis of the Principles by which Men naturally judge concerning the Conduct and Character, first of their Neighbours, and afterwards of Themselves.' This work was founded on the second division of his lectures, and was divided into six parts:--The propriety of action: Merit and demerit, or the objects of reward and punishment: The foundation of our judgments concerning our own sentiments and conduct, and of the sense of duty: The effect of utility upon the sentiment of approbation: The influence of custom and fashion upon the sentiments of moral approbation and disapprobation: And, lastly, The character of virtue. To these were added, a brief view of the different systems of ancient and modern philosophy, which is universally acknowledged to be the most candid and luminous that has yet appeared. This Essay soon attracted a great share of the public attention, by the ingenuity of the reasonings, and the perspicuity with which they were displayed. The principle on which it is founded may be said to be, That the primary objects of our moral perceptions are the actions of other men; and that our moral judgments, with respect to our own conduct, are only applications to ourselves of decisions which we have already passed on the conduct of others. With this doctrine the author thinks all the most celebrated theories of morality coincide in part, and from some partial view of it he apprehends they are all derived. To the same work was subjoined a short treatise on the first formation of language, and considerations on the different genius of those which were original and compounded. The Theory of Moral Sentiments, immediately on its publication, procured a splendid reputation to the author, and led to a change in his situation in life, that was to him no less pleasing in itself, than gratifying from the means by which it was brought about. But the following lively letter to him, at that time, from his friend Mr. Hume, dated London, 12th April, 1759, will best show the manner in which this work was received, and the influence which it had in deciding on the future life of its author:-- 'I give you thanks for the agreeable present of your Theory. Wedderburn and I made presents of our copies to such of our acquaintances as we thought good judges, and proper to spread the reputation of the book. I sent one to the Duke of Argyll, to Lord Lyttleton, Horace Walpole, Soame Jenyns, and Burke, an Irish gentleman, who wrote lately a very pretty treatise on the sublime, Millar desired my permission to send one, in your name, to Dr. Warburton. I have delayed writing to you till I could tell you something of the success of the book, and could prognosticate, with some probability, whether it should be finally damned to oblivion, or should be registered in the temple of immortality. Though it has been published only a few weeks, I think there appear already such strong symptoms, that I can almost venture to foretel its fate. It is, in short, this----But I have been interrupted in my letter, by a foolish, impertinent visit of one who has lately come from Scotland. He tells me, that the university of Glasgow intend to declare Rouet's office vacant, upon his going abroad with Lord Hope. I question not but you will have our friend Fergusson in your eye, in case another project for procuring him a place in the university of Edinburgh should fail. Fergusson has very much polished and improved his treatise on Refinement, and with some amendments, it will make an admirable book, and discovers an elegant and a singular genius. The Epigoniad, I hope, will do; but it is somewhat up-hill work. As I doubt not but you consult the reviewers sometimes at present, you will see in the Critical Review a letter upon that poem, and I desire you to employ your conjectures in finding out the author. Let me see a sample of your skill in knowing hands, by your guessing at the person. I am afraid of Lord Kames's Law Tracts. A man might as well think of making a fine sauce by a mixture of wormwood and aloes, as an agreeable composition by joining metaphysics and Scotch law. However, the book, I believe, has merit, though few people will take the pains of diving into it. But to return to your book and its success in this town, I must tell you----A plague of interruptions! I ordered myself to be denied; and yet here is one that has broke in upon me again. He is a man of letters, and we have had a good deal of literary conversation. You told me that you was curious of literary anecdotes, and therefore I shall inform you of a few that have come to my knowledge. I believe I have mentioned to you already Helvetius's book _De l'Esprit_. It is worth your reading, not for its philosophy, which I do not highly value, but for its agreeable composition. I had a letter from him a few days ago, wherein he tells me that my name was much oftener in the manuscript, but that the censor of books at Paris obliged him to strike it out. Voltaire has lately published a small work, called _Candide, ou l'Optimisme_ I shall give a detail of it----But what is all this to my book? say you.----My dear Mr. Smith, have patience; compose yourself to tranquillity; show yourself a philosopher in practice as well as profession; think on the emptiness, and rashness, and futility of the common judgments of men; how little they are regulated by reason in any subject, much more in philosophical subjects, which so far exceed the comprehension of the vulgar. ----Non si quid turbida Roma Elevat, accedas; examenve improbum in illa Castiges trutina; nec te quæsiveris extra. A wise man's kingdom is his own breast, or if he ever looks farther, it will only be to the judgment of a select few, who are free from prejudices, and capable of examining his work. Nothing, indeed, can be a stronger presumption of falsehood than the approbation of the multitude; and Phocion, you know, always suspected himself of some blunder when he was attended with the applauses of the populace. 'Supposing, therefore, that you have duly prepared yourself for the worst, by all these reflections, I proceed to tell you the melancholy news,--that your book has been very unfortunate; for the public seem disposed to applaud it extremely. It was looked for by the foolish people with some impatience and the mob of literati are beginning already to be very loud in its praises. Three bishops called yesterday at Millar's shop, in order to buy copies, and to ask questions about the author. The bishop of Peterborough said he had passed the evening in a company where he heard it extolled above all books in the world. The Duke of Argyll is more decisive than he uses to be in its favour I suppose he either considers it as an exotic, or thinks the author will be serviceable to him in the Glasgow elections. Lord Lyttleton says, that Robertson, and Smith, and Bower, are the glories of English literature. Oswald protests, he does not know whether he has reaped more instruction or entertainment from it. But you may easily judge what reliance can be put on his judgment, who has been engaged all his life in public business, and who never sees any faults in his friends. Millar exults, and brags that two thirds of the edition are already sold, and that he is now sure of success. You see what a son of the earth that is, to value books only by the profit they bring him. In that view, I believe, it may prove a very good book. 'Charles Townsend, who passes for the cleverest fellow in England, is so taken with the performance, that he said to Oswald, he would put the Duke or Buccleugh under the author's care, and would make it worth his while to accept of that charge. As soon as I heard this, I called on him twice with a view of talking with him about the matter, and of convincing him of the propriety of sending that young nobleman to Glasgow; for I could not hope, that he could offer you any terms which would tempt you to renounce your professorship. But I missed him. Mr. Townsend passes for being a little uncertain in his resolutions; so, perhaps, you need not build much on this sally. 'In recompense for so many mortifying things, which nothing but truth could have extorted from me, and which I could easily have multiplied to a greater number, I doubt not but you are so good a christian as to return good for evil, and to flatter my vanity, by telling me, that all the godly in Scotland abuse me for my account of John Knox and the reformation.' Mr. Smith having completed, and given to the world his system of ethics, that subject afterwards occupied but a small part of his lectures. His attention was now chiefly directed to the illustration of those other branches of science which he taught; and, accordingly, he seems to have taken up the resolution, even at that early period, of publishing an investigation into the principles of what he considered to be the only other branch of Moral Philosophy,--Jurisprudence, the subject of which formed the third division of his lectures. At the conclusion of the Theory of Moral Sentiments, after treating of the importance of a system of Natural Jurisprudence, and remarking that Grotius was the first, and perhaps the only writer, who had given any thing like a system of those principles which ought to run through, and be the foundation of the law of nations, Mr. Smith promised, in another discourse, to give an account of the general principles of law and government, and of the different revolutions they have undergone in the different ages and periods of society, not only in what concerns justice, but in what concerns police, revenue, and arms, and whatever else is the object of law. Four years after the publication of this work, and after a residence of thirteen years in Glasgow, Mr. Smith, in 1763, was induced to relinquish his professorship, by an invitation from the Hon. Mr. Townsend, who had married the Duchess of Buccleugh, to accompany the young Duke, her son, in his travels. Being indebted for this invitation to his own talents alone, it must have appeared peculiarly flattering to him. Such an appointment was, besides, the more acceptable, as it afforded him a better opportunity of becoming acquainted with the internal policy of other states, and of completing that system of political economy, the principles of which he had previously delivered in his lectures, and which it was then the leading object of his studies to perfect. Mr. Smith did not, however, resign his professorship till the day after his arrival in Paris, in February 1764. He then addressed the following letter to the Right Honourable Thomas Millar, lord advocate of Scotland, and then rector of the college of Glasgow:-- 'MY LORD,--I take this first opportunity after my arrival in this place, which was not till yesterday, to resign my office into the hands of your lordship, of the dean of faculty, of the principal of the college, and of all my other most respectable and worthy colleagues. Into your and their hands, therefore, I do resign my office of professor of moral philosophy in the university of Glasgow, and in the college thereof, with all the emoluments, privileges, and advantages, which belong to it. I reserve, however, my right to the salary for the current half-year, which commenced at the 10th of October, for one part of my salary, and at Martinmas last for another; and I desire that this salary may be paid to the gentleman who does that part of my duty which I was obliged to leave undone, in the manner agreed on between my very worthy colleagues before we parted. I never was more anxious for the good of the college than at this moment; and I sincerely wish, that whoever is my successor, he may not only do credit to the office by his abilities, but be a comfort to the very excellent men with whom he is likely to spend his life, by the probity of his heart and the goodness of his temper.' His lordship having transmitted the above to the professors, a meeting was held; on which occasion the following honourable testimony of the sense they entertained of the worth of their former colleague was entered in their minutes:-- 'The meeting accept of Dr. Smith's resignation in terms of the above letter; and the office of professor of moral philosophy in this university is therefore hereby declared to be vacant. The university at the same time, cannot help expressing their sincere regret at the removal of Dr. Smith, whose distinguished probity and amiable qualities procured him the esteem and affection of his colleagues; whose uncommon genius, great abilities, and extensive learning, did so much honour to this society. His elegant and ingenious Theory of Moral Sentiments having recommended him to the esteem of men of taste and literature throughout Europe, his happy talents in illustrating abstracted subjects, and faithful assiduity in communicating useful knowledge, distinguished him as a professor, and at once afforded the greatest pleasure, and the most important instruction, to the youth under his care.' In the first visit that Mr. Smith and his noble pupil made to Paris, they only remained ten or twelve days; after which, they proceeded to Thoulouse, where, during a residence of eighteen months, Mr. Smith had an opportunity of extending his information concerning the internal policy of France, by the intimacy in which he lived with some of the members of the parliament. After visiting several other places in the south of France, and residing two months at Geneva, they returned about Christmas to Paris. Here Mr. Smith ranked among his friends many of the highest literary characters, among whom were several of the most distinguished of those political philosophers who were denominated Economists. Before Mr. Smith left Paris, he received a flattering letter from the unfortunate Duke of Rochefoucault, with a copy of a new edition of the Maxims of his grandfather. Notwithstanding the unfavourable manner in which the opinions of the author of that work were mentioned in the Theory of Moral Sentiments, the Duke informed Mr. Smith, on this occasion, that he had been prevented only from finishing a translation, which he had begun, of his estimable system of morals, into French, by the knowledge of having been anticipated in the design. He also observed, that some apology might be made for his ancestor, when it was considered, that he formed his opinions of mankind in two of the worst situations of life,--a court and a camp. The last communication Mr. Smith had with this nobleman was in 1789, when he gave him to understand, that he would no longer rank the name of Rochefoncault with that of the author of the Fable of the Bees; and, accordingly, in the first edition that was afterwards published of the Theory of Moral Sentiments, this promised alteration was made. The next ten years of his life, after his arrival from the continent, Mr. Smith passed with his mother at Kirkaldy, though he occasionally, during that time, visited London and Edinburgh. Mr. Hume, who considered a town as the proper scene for a man of letters, made many attempts to prevail on him to leave his retirement. At length, in the beginning of the year 1776, Mr. Smith accounted to the world for his long retreat, by the publication of his 'Inquiry into the Nature and Causes of the Wealth of Nations.' This work chiefly comprehended the subject of the fourth and last division of his lectures, namely, those political regulations that have their origin in expediency. For about twenty years of his life, his attention had been chiefly devoted to the study of subjects connected with the science of political economy. His long residence in the mercantile city of Glasgow afforded him opportunities of deriving information, in many particulars, from the best sources; his travels on the continent contributed to extend his knowledge, and correct many of those misapprehensions of life and manners which the best descriptions of them are found to convey; and the intimacy in which he lived with some of the leaders of the sect of economists, and other writers on the subject of political economy, could not fail to assist him in methodizing his speculations, and of adding to the soundness of his conclusions.--After his arrival in this country, he wanted nothing more than leisure, to arrange his materials, and prepare them for publication: and for this purpose he passed in retirement the subsequent ten years. The great aim of Mr. Smith's Inquiry, the fruit of so much research, and the work of so many years, is, as Professor Stewart observes, to direct the policy of nations with respect to one most important class of its laws,--those which form its system of political economy: 'and he has unquestionably,' the same eloquent writer adds, 'had the merit of presenting to the world the most comprehensive and perfect work that has yet appeared on the general principles of any branch of legislation.' 'A great and leading object of Mr. Smith's speculations,' as Mr. Stewart also observes, 'is to demonstrate, that the most effectual plan for advancing a people to greatness, is to maintain that order of things which nature has pointed out, by allowing every man, as long as he observes the rules of justice, to pursue his own interest in his own way, and to bring both his industry and his capital into the freest competition with these of his fellow citizens.' Several authors, in this country, had before written on commercial affairs, but Mr. Smith was the first who reduced to a regular form and order the information that was to be obtained on that subject, and deduced from it the policy which an enlightened commercial nation ought to adopt. The successful manner in which he has treated this unlimited freedom of trade, as well as some others, and his able exposure of the errors of the commercial system, have rendered the science of which he treats highly interesting to the great body of the people; and a spirit of inquiry, on every branch of political economy, has, in consequence, been excited, which promises now, more than ever, to be attended with the most beneficial effects. This intricate science, the most important to the interests of mankind though long neglected, Dr. Smith has had the merit of advancing so far, as to lay a foundation, on which, it may safely be said, investigation may for a long time proceed. It has frequently been alleged, that Dr. Smith was indebted for a large portion of the reasonings in his Inquiry to the French economists, and that the coincidence between some branches of his doctrine and theirs, particularly those which relate to freedom of trade and the powers of labour, is more than casual. But Professor Stewart has ably vindicated him from this charge, and established his right to the general principles of his doctrine, which, he thinks, were altogether original, and the result of his own reflections. That he, however, derived some advantage from his intimacy with Turgot, and those great men who were at the head of the sect of economists, and, perhaps, adopted some of their illustrations, it would be as unnecessary to deny, as it would he far from discreditable to his talents to acknowledge. There is also a similar, or perhaps a greater coincidence between many parts of his doctrine and the opinions of Sir James Stewart, as detailed in his 'Inquiry into the Principles of Political Economy.' This congruity of opinion is chiefly apparent in their respective conclusions concerning the effects of competition,--the principles of exchangeable value,--the relation between the interest of money and the profit of stock,--the functions of coin,--the rise and progress of credit,--and the sources and limits of taxation. As this author had published his Inquiry many years before Dr. Smith's work appeared, and had, besides, lived in great intimacy with him, there was some reason to believe, what has been often asserted, that he possessed a just claim to some of the doctrines contained in that work, though Dr. Smith never once mentioned his name in any part of his work. But the present Sir James Stewart, who has recently published a full edition of the writings of his father, relinquishes, on his part, all such pretensions. With the partiality of a friend, in ranking his father with Dr. Smith, he gives it as his opinion, however, that both had, with original powers of equal strength, drawn their knowledge from the same source, the French economists. Dr. Mandeville has also, of late, got the credit of being the author of those Principles of Political Economy, which have interested the world for the last fifty years, and to him alone, it is said, not only the English, but also the French writers, are indebted for their doctrines in that science. In the work of this eccentric writer, there seems, indeed, a similarity of opinion on some of the more obvious sources of wealth, particularly in the division of labour, which Dr. Smith investigates so fully; and in the erroneous doctrine of productive and non-productive labour; and also, perhaps, on some other points: but it would be difficult to show, that he ought, on this account, to be considered the author of all, or even the chief part of what has been written on the subject. On this, as well as on all questions of a similar nature, a great diversity of opinions will subsist. But it may be a matter of curiosity to those who are unacquainted with his work, the Fable of the Bees, not only to trace the connection of that author's sentiments with what is advanced by subsequent writers on this important subject, but also to learn his peculiar notions of morality, that attracted, at one time, so much attention. These last, Dr. Smith says, though described by a lively and humorous, yet coarse and rustic eloquence, which throws an air of truth and probability on them, are, almost in every respect, erroneous. Soon after the publication of the Wealth of Nations, Mr. Smith received the following congratulatory letter from Mr. Hume, six months before his death, dated Edinburgh, 1st April 1776. '_Euge! Belle!_ Dear Mr. Smith--I am much pleased with your performance, and the perusal of it has taken me from a state of great anxiety. It was a work of so much expectation, by yourself, by your friends, and by the public, that I trembled for its appearance; but am now much relieved; not but that the reading of it necessarily requires so much attention, and the public is disposed to give so little, that I shall still doubt for some time of its being at first very popular. But it has depth, and solidity, and acuteness, and is so much illustrated by curious facts, that it must at last take the public attention. It is probably much improved by your last abode in London. If you were here at my fireside, I should dispute some of your principles. But these, and a hundred other points, are fit, only to be discussed in conversation. I hope it will be soon, for I am in a very bad state of health, and cannot afford a long delay.' The publication of this great work drew praise to its author, indeed, from many different quarters.--Dr. Barnard, in a political epistle, addressed to Sir Joshua Reynolds, where the characteristic qualities of some eminent literary men of that time are brought forward, spoke of Smith as one who would teach him how to think. Gibbon made honourable mention of him in his Roman history; and Mr. Fox contributed, in no small degree, to extend his reputation, by observing in the House of Commons, that 'the way, as my learned friend Dr. Adam Smith says, for a nation, as well as an individual, to be rich, is for both to live within their income.' The opinion which Dr. Johnson delivered, at that time, on its being alleged by Sir John Pringle, that a person who, like Dr. Smith, was not practically acquainted with trade, could not be qualified to write on that subject, may also be mentioned here, though somewhat erroneous, as far as it respects the received doctrines of Political Economy:--'He is mistaken,' said Johnson. 'A man who has never been engaged in trade himself, may undoubtedly write well on trade; and there is nothing which requires more to be illustrated by philosophy than trade does. As to mere wealth, that is to say, money, it is clear that one nation, or one individual, cannot increase its store but by making another poorer; but trade procures what is more valuable, the reciprocation of the peculiar advantages of different countries. A merchant seldom thinks of any but his own trade. To write a good book upon it, a man must have extensive views. It is not necessary to have practised, to write well upon a subject.'[2] On the Inquiry into the Causes of the Wealth of Nations, it only remains farther to be observed, that its success has been every way commensurate to its merits. It has, however, been often regretted, that the author did not live to favour the world with his reasonings on those important events which have taken place since 1784, when he put the last hand to his invaluable work. That another, with competent talents, and a mind disposed to the task, should soon appear, to treat of these occurrences, and give a satisfactory view of the progress of the science from that time to the present, is not to be expected. But as the honour to be gained from a successful execution of such an undertaking is very considerable, it is not to be wondered at that an attempt of this kind should be made. Accordingly, Mr Playfair of London has had the boldness to follow Smith, by endeavouring to supply, in part, this desideratum, by adding supplementary chapters and notes to the Treatise on the Wealth of Nations. But it is greatly to be feared, that there are few persons who have read this improved edition, as it is called, of Dr. Smith's Inquiry, but will still look forward to the accomplishment of the wishes they must previously have formed, for a continuation, and probably an illustration, of the discussions contained in that work. Leaving, therefore, the supplementary chapters and elucidations of Mr Playfair, it must be observed, that Dr. Smith has, on this occasion, been equally unfortunate in a biographer. The detail of his peaceful life is almost lost among dissertations on the wickedness of atheism and the horrors of a revolution. But these dissertations, strangely misplaced as they appear to be, would certainly not alone have been sufficient to attract observation here, whatever latitude the author might have allowed to himself on such subjects. When he goes on, however, to apologise for Dr. Smith's acquaintance with some individuals among the economists, and to connect the whole of that sect with those philosophers to whom he ascribes the evils which have so long afflicted France, his opinions become still more insupportable. It will, perhaps, be said, and with some reason, that, in this instance, at least, the writer has followed those alarmists, who, on any men of learning belonging to that country being mentioned, immediately ally them to the revolutionists without regard to difference of opinion, or distance of time. The reputation, however, of the economists is too well established to be affected, either by the clamours of the ignorant, or the mad intemperance of political alarmists. The doctrine of the great men who formed the school of the economists, was, that the produce of the land is the sole or principal source of the revenue and wealth of every country; and this doctrine, with the manner of deriving from it the greatest possible advantage, it is almost universally acknowledged, engaged entirely their attention. Dr. Smith, who lived in great intimacy with many of the founders of that sect, does ample justice, on every occasion, to the purity of their views; and indeed they, as well as himself, it has always been said, by the impartial and well informed, were ever animated by a zeal for the best interests of society. M. Quesnai, the first of that sect, and the author of the Economical Table, a work of the greatest profoundness and originality, was, in particular, represented by Mr. Smith as a man of the greatest modesty and simplicity; and his system he pronounced, with all its imperfections, to be the nearest approximation to the truth, of any that had then been published on the principles of political science. His veneration for this worthy man was even so great, that had he lived, it was his intention to have inscribed to him the Inquiry into the Causes of the Wealth of Nations. Nor will the memory of those illustrious men be soon forgotten, notwithstanding the calumnies with which it has been charged. It may safely be predicted, in the words of a highly respectable periodical publication, that 'Those prospects of political improvements which flattered the benevolent anticipations of the economists, will soon be recognised as sound conclusions of science; and it will at length be acknowledged that Turgot, Mirabeau, and Quesnai, were the friends of mankind, and that their genius and their labours were devoted to the refinement of social happiness and the consolidation of the political fabric.'[3] The life of Mr. Smith, after the publication of his Inquiry, might be said to draw towards a close. The following particulars of the last years, are mostly extracted from Professor Stewart's Life of this incomparable writer. After residing some time in London, he was appointed one of the commissioners of customs in Scotland, in 1778, when he removed to Edinburgh. He was accompanied by his mother, who, though in extreme old age, possessed a considerable share of good health; and his cousin, Miss Douglass, who had long resided with him at Glasgow, undertook to superintend his domestic economy. The Duke of Buccleugh had continued to allow Mr. Smith L.300 a-year, and the accession which he now received to his income enabled him to live, not only with comfort and independence, but to indulge the benevolence of his heart, in making numerous private benefactions. During the remaining period of his life, he appears to have done little more than to discharge, with peculiar exactness, the duties of his office, which, though they required no great exertion, were sufficient to divert his attention from his studies. He very early felt the infirmities of old age, but his health and strength were not greatly affected till he was left alone, by the death of his mother, in 1784, and of his cousin four years after. They had been the objects of his affection for more than sixty years; and in their society he had enjoyed, from his infancy, all that he ever knew of the endearments of a family. In return for the anxious and watchful solicitude of his mother during infancy, he had the singular good fortune of being able to show his gratitude to her during a very long life; and it was often observed, that the nearest avenue to his heart was through his mother. He now gradually declined till the period of his death, which happened in 1790. His last illness, which arose from a chronic obstruction in the bowels, was lingering and painful; but he had every consolation to soothe it which he could desire, from the tenderest sympathy of his friends, and from the completest resignation of his own mind. His friends had been in use to sup with him every Sunday. The last time he received them, which was a few days before his death, there was a pretty numerous meeting; but not being able to sit up as usual, he retired to bed before supper. On going away, he took leave of the company, by saying, 'I believe we must adjourn this meeting to some other place.' In a letter addressed, in the year 1787, to the principal of the university of Glasgow, in consequence of his being elected rector of that learned body, a pleasing memorial remains of the satisfaction with which he always recollected that period of his literary career, which had been more peculiarly consecrated to his academical studies. On that occasion he writes:-- 'No preferment could have given me so much real satisfaction. No man can owe greater obligations to a society than I do to the university of Glasgow. They educated me; they sent me to Oxford. Soon after my return to Scotland, they elected me one of their own members, and afterwards preferred me to another office, to which the abilities and virtues of the never-to-be-forgotten Dr. Hutcheson had given a superior degree of illustration. The period of thirteen years, which I spent as a member of that society, I remember as by far the most useful, and therefore, as by far the happiest and most honourable period of my life; and now, after three-and-twenty years absence, to be remembered in so very agreeable a manner by my old friends and protectors, gives me a heart-felt joy which I cannot easily express to you.' Not long before the death of Smith, finding his end approach rapidly, he gave orders to destroy all his manuscripts, excepting some detached essays, which he entrusted to the care of his executors. With the exception of these essays, all his papers were committed to the flames. What were the particular contents of these papers was not known, even to his most intimate friends. The additions to the Theory of Moral Sentiments, most of which were composed under severe illness, had fortunately been sent to the press in the beginning of the preceding winter; and the author lived to see the publication of this new edition.[4] Some time before his last illness, when he had occasion to go to London, he enjoined his friends, to whom he had entrusted the disposal of his manuscripts, to destroy, in the event of his death, all the volumes of his lectures, doing with the rest what they pleased. When he had become weak, and saw the last period of his life approach, he spoke to his friends again upon the same subject. They entreated him to make his mind easy, as he might depend upon their fulfilling his desire. Though he then seemed to be satisfied, he, some days afterwards, begged that the volume might be immediately destroyed; which was accordingly done. Mr. Riddell, an intimate friend of Mr. Smith, mentions, that on one of these occasions he regretted he had done so little; 'but I meant,' he added, 'to have done more; and there are materials in my papers of which I could make a great deal.--But that is now out of the question.' That the idea of destroying such unfinished works as might be in his possession at the time of his death, was not the effect of any sudden or hasty resolution, appears from the following letter to Mr. Hume, written in 1773, at the time when he was preparing for a journey to London, with the prospect of a pretty long absence from Scotland. 'My dear friend,--As I have left the care of all my literary papers to you, I must tell you, that except those which I carry along with me, there are none worth the publication, but a fragment of a great work, which contains a history of the astronomical systems that were successively in fashion down to the time of Descartes. Whether that might not be published as a fragment of an intended juvenile work, I leave entirely to your judgment, though I begin to suspect myself, that there is more refinement than solidity in some parts of it. This little work you will find in a thin folio paper book in my back-room. All the other loose papers which you will find in that desk, or within the glass folding-doors of a bureau, which stands in my bed-room, together with about eighteen thin paper folio books, which you will likewise find within the same glass folding doors, I desire may be destroyed without any examination. Unless I die very suddenly, I shall take care that the papers I carry with me shall he carefully sent to you.' But he himself long survived his friend Mr. Hume. The persons entrusted with his remaining papers were Dr. Black and Dr. Hutton, his executors, with whom he had long lived in habits of the closest friendship. These gentlemen afterwards collected into a volume, such of the writings of Dr. Smith as were fitted for publication: and they appeared in 1795, under the title of _Essays on Philosophical Subjects_. These essays had been composed early in life, and were designed to illustrate the principles of the human mind, by a theoretical deduction of the progress of the sciences and the liberal arts. The most considerable piece in this volume is, on the principles which lead and direct philosophical inquiries, illustrated by the history of astronomy, ancient physics, and ancient logic and metaphysics. The others, with the exception of an essay on the external senses, relate to the imitative and liberal arts. The contents of this volume, Mr. Smith's executors observe, appear to be parts of a plan he once had formed for giving a connected history of the liberal sciences and elegant arts; but which he had been obliged to abandon, as being far too extensive; and these parts lay beside him neglected till after his death. In them, however, will be found that happy connection, that full and accurate expression, and the same copiousness and facility of illustration, which are conspicuous in the rest of his writings. As a writer, the character of Mr. Smith is so well known, that any observation on his merits, must appear almost unnecessary. His literary fame is circumscribed by no ordinary limits. To the voice of his own country, is added the testimony of Europe, and, indeed, of the civilized world. And had even only one volume of his inestimable writings appeared, his name would have been carried down to posterity in the first rank of those illustrious characters that adorn the last century. In the words of Professor Stewart, it may be said, that,--of the intellectual gifts and attainments by which he was so eminently distinguished;--of the originality and comprehensiveness of his views; the extent, the variety, and the correctness of his information; the inexhaustible fertility of his invention; and the ornaments which his rich and beautiful imagination had borrowed from classical culture;--he has left behind him lasting monuments. One observation more may he added to what is now said on his writings, that, whatever be the nature of his subject, he seldom misses an opportunity of indulging his curiosity, in tracing, from the principles of human nature, or from the circumstances of society, the origin of the opinions and the institutions which he describes. With regard to the private character of this amiable and enlightened philosopher, it fortunately happens, that the most certain of all testimonies to his private worth may be found in the confidence, respect, and attachment which followed him through all the various relations of life. There were many peculiarities, indeed, both in his manners and in his intellectual habits; but to those who knew him, these peculiarities, so far from detracting from the respect which his abilities commanded, added an irresistible charm to his conversation, and strongly displayed the artless simplicity of his heart. The comprehensive speculations with which he had always been occupied, and the variety of materials which his own invention continually supplied to his thoughts, rendered him habitually inattentive to familiar objects, and to common occurrences. On this account, he was remarkable, throughout the whole of life, for speaking to himself when alone, and for being so absent in company, as, on some occasions, to exceed almost what the fancy of a Bruyere could imagine. In company, he was apt to be engrossed by his studies; and appeared, at times, by the motion of his lips, as well as by his looks and gestures, to be in the fervour of composition. It was observed, that he rarely started a topic himself, or even fell in easily with the common dialogue of conversation. When he did speak, however, he was somewhat apt to convey his ideas in the form of a lecture; but this never proceeded from a wish to engross the discourse, or to gratify his vanity. His own inclination disposed him so strongly to enjoy, in silence, the gaiety of those around him, that his friends were often led to concert little schemes, in order to bring on the subjects most likely to interest him. SHORT VIEW OF THE DOCTRINE OF SMITH, COMPARED WITH THAT OF THE FRENCH ECONOMISTS. TRANSLATED FROM THE FRENCH OF M. GARNIER. The ancient philosophers were little accustomed to employ themselves in the observation of those laws which regulate the distribution of riches among the different orders of society in a nation, or in the search after the sources of the increase of its wealth. In fact, political economy is a science of very modern origin; for although, towards the end of the seventeenth century, several writers, both of France and England, had begun to discuss the comparative advantages of agriculture and commerce, yet it was not till the middle of the eighteenth, that any thing like a complete system appeared upon the growth and distribution of national wealth. At this period, the philosophical Quesnai directed his attention to this very abstract subject, and became the founder of a celebrated school, which may boast among its adherents many distinguished men of talents and extensive knowledge. All philosophical sects owe their first origin and foundation to the discovery of some great truth; and it is the madness inspiring their members, to deduce every thing from this new discovery, that contributes most to their downfal. Thus it was with the economists. They saw that the original source of all wealth was the soil, and that the labour of its cultivation produced not only the means of subsisting the labourer, but also a neat surplus, which went to the increase of the existing stock: while, on the other hand, the labour applied to the productions of the earth, the labour of manufactures and commerce, can only add to the material a value exactly equal to that expended during the execution of the work; by which means, in the end, this species of labour operates no real change on the total sum of national riches. They perceived that the landed proprietors are the first receivers of the whole wealth of the community; and that, whatever is consumed by those who are not possessed of land, must come, directly or indirectly, from the former; and hence, that these receive wages from the proprietors, and that the circulation of national wealth, is, in fact, only a succession of exchanges between these two classes of men, the proprietors furnishing their wealth, and the non-proprietors giving as an equivalent their labour and industry. They perceived that a tax, being a portion of the national wealth applied to public use, in every instance, however levied, bears finally upon the landed proprietors, inasmuch as they are the distributors of that wealth, either by retrenching their luxuries, or by loading them with an additional expense; and that, therefore, every tax which is not levied directly on the rude produce of the earth, falls in the end on the landed proprietors, with a surplus produce, from which the amount of the revenue receives no addition. These assertions are almost all incontestible, and capable of a rigorous demonstration; and those who have attempted to shew their falsity, have, in general, opposed them only with idle sophistry. Why, then, has this doctrine met with so little success, and why does every day diminish its reputation? because it agrees in no one point with the moral condition, either of societies or of individuals; because it is continually contradicted by experience, and by the infallible instinct of self-interest; because it does not possess that indispensible sanction of all truths, utility. In fact, of what consequence is it, that the labour of agriculture produces not only what covers its own expenses, but new beings which would never have existed without it, and that it has this advantage over the labour of manufactures and commerce? Does it by any means follow from this, that the former kind of labour is more profitable to the community than the latter? The real essence of all wealth, and that which determines its value, is the necessity under which the consumer lies to purchase it; for, in truth, there is no such thing as wealth properly so called, nor absolute value; but the words wealth and value are really nothing more than the co-relatives of consumption and demand. Even the necessaries of life, in a country which is inhabited, but incapable of commercial intercourse, will not form wealth; and to whatever degree of civilization that country may have reached, still the same principle will hold without alteration. If the sum of national wealth shall in any case have exceeded the sum of demands, then a part of the former sum will cease to bear the name of wealth, and will again be without value. In vain, then, will agriculture multiply her produce; for the instant that it exceeds the bounds of actual consumption, a part will lose its value; and self-interest, that prime director of all labour and industry, seeing herself thus deceived in her expectations, will not fail to turn her activity and efforts to another quarter. In almost every instance, it is an idle refinement to distinguish between the labour of those employed in agriculture, and of those employed in manufactures and commerce; for wealth is necessarily the result of both descriptions of labour, and consumption can no more take place independently of the one, than it can independently of the other. It is by their simultaneous concurrence that any thing becomes consumable, and, of course, that it comes to constitute wealth. How then are we entitled to compare their respective products, since it is impossible to distinguish these in the joint product, and thus appreciate the separate value of each? The value of growing wheat results as much from the industry of the reaper who gathers it in, of the thrasher who separates it from the chaff and straw, of the miller and baker who convert it successively into flour and bread, as it does from that of the ploughman and of the sower. Without the labour of the weaver, the raw material of flax would lose all its value, and be regarded as no way superior to the most useless weed that grows. What then can we gain by any attempts to determine which of these two species of labour conduces most to the advancement of national wealth; or, are they not as idle, as if we busied ourselves in inquiring, whether the right or the left foot is the most useful in walking? It is true, indeed, that in every species of manufacture, the workman adds to the value of the raw material a value exactly equal to that which was expended during the process of manufacture; and what is the conclusion we are to draw this? It is merely, that a certain exchange has taken place and that the food consumed by the manufacturer is now represented by the increase of value resulting from his manual labour. Thus wool, when converted into cloth, has gained a value precisely equal to that expended by the manufacturer during the conversion. But, if it is shown that, without this exchange, the wool would have remained without value, while, on the other hand, the food of the manufacturer would have been without a consumer; it will then appear, that this exchange has, in fact, done what is equivalent to creating these two values, and that it has proved to the society an operation infinitely more useful, than if an equal quantity of labour had been spent in the increase of that rude produce, which already existed in overabundance. The first description of labour has been truly productive; while the last would have been altogether unproductive, since it would not have created any value. 'The soil,' say the economists, 'is the source of all wealth.' But, to prevent this assertion from leading us into erroneous conclusions, it will be necessary to explain it. The materials of all wealth originate primarily in the bosom of the earth; but it is only by the aid of labour that they can ever truly constitute wealth. The earth furnishes the means of wealth; but wealth itself cannot possibly have any existence, unless through that industry and labour which modifies, divides, connects, and combines the various productions of the soil, so as to render them fit for consumption. Commerce, indeed, regards those rude productions as real wealth; but it is only from the consideration, that the proprietor has it always in his power to convert them, at will, into consumable goods, by submitting them to the necessary operations of manufacture. They possess, as yet, merely the virtual value of a promissory-note, which passes current, because the bearer is assured that he can, at pleasure, convert it into cash. Many gold mines, which are well known, are not worked, because their whole produce would not cover the incidental expenses; but the gold which they contain is, in reality, the same with that of our coin; and yet no one would be foolish enough to call it wealth, for there is no probability it will ever be extracted from the mine, or purified; and, of course, it possesses no value. The wild fowl becomes wealth the moment it is in the possession of the sportsman; while those of the very same species, that have escaped his attempts, remain without any title to the term. It is further, without question, true, that all who do not possess property in land must draw their subsistence from wages received, directly or indirectly, from the proprietors, unless they violate all rights, and become robbers. In this respect, every service is alike; the most honourable and the most disgraceful receives each its wages. It is certain, too, that if the circumstances determining the rate of the various kinds of wages remain the same, that is if the offers of service, and the demand, preserve the same proportion to each other, after as well as before the imposition of a tax; then, of course, the wages will continue at the same rate, and thus the tax, however imposed, will uniformly, in the end, fall on that class in the community who furnish the wages; so that they must suffer, either an addition to their former expenses, or a retrenchment of those luxuries they enjoyed. And according as the tax is less directly levied, the greater will be the burden they are subjected to; for besides indemnifying all the other classes who have advanced the tax-money, a further expense must be incurred, in the additional number of persons now necessary to collect it. The natural conclusion we must draw from the theory is, that a tax, directly levied on the neat revenue of the land proprietors, is that which agrees best with reason and justice, and that which bears lightest on the contributors. If, however, this theory should be found to throw entirely out of consideration a multitude of circumstances, which possess a powerful influence over the facility of collecting a tax, as well an over its consequences; and if the general result of this influence be of far more importance than the single advantage of a less burden; then the theory, inasmuch as it neglects a part of those particulars which have their weight in the practice, is contradicted by this last. And this is exactly what happens in the question respecting the comparative advantages and inconveniencies of the two modes of levying taxes. The habit which men have acquired, of viewing money as the representation of every thing which contributes to the support or comfort of life, makes them naturally very unwilling to part with what portion of it they possess, unless it be to procure some necessary or enjoyment. We spend money with pleasure, but it requires an effort to pay a debt, and particularly so when the value received in exchange is not very obvious to the generality, as in the case of a tax. But by levying the tax on some object of consumption, by thus confounding it with the price of the latter, and by making the payment of the duty and of the price of enjoyment become one and the same act, we render the consumer desirous to pay the impost. It is amid the profusion of entertainments, that the duties on wine, salt, &c. are paid; the public treasury thus finding a source of gain in the excitements to expense produced by the extravagance and gaiety of feasts. Another advantage of the same nature, possessed by the indirect mode of taxation, is its extreme divisibility into minute parts, and the facility which it affords to the individual, of paying it off day by day, or even minute by minute. Thus the mechanic, who sups on a portion of his day's wages, will sometimes in one quarter of an hour, pay part of four or five different duties. In the plan of direct taxation, the impost appears without any disguise; it comes upon us unexpectedly, from the imprudence so common to the bulk of mankind, and never fails to carry with it constraint and discouragement. All these considerations are overlooked by the friends of direct taxation; and yet their importance must be well known to all who have ever attended to the art of governing men. But, perhaps, this is not all. An indirect tax, by increasing from time to time the price of the objects of general consumption, when the members of the community have contracted the habit of this consumption, renders these objects a little more costly, and thus gives birth to that increase of labour and industry which is now required to obtain them. But if this tax be so proportioned as not to discourage the consumption, will it not then operate as a universal stimulus upon the active and industrious part of the community? Will it not incite that part to redoubled efforts, by which it may still enjoy those luxuries which, by habit, have become almost necessaries, and, of course, produce a further developement of the productive powers of labour, and of the resources of industry? Are we not, in such a case, to conclude, that after the imposition of a tax, there will exist not only the quantity of labour and industry which was formerly requisite to procure the necessaries and habitual enjoyments of the active class of mankind, but also such an addition to this, as will suffice for the payment of the tax? And will not this tax, or increase of produce required for the tax--as it is spent by the government that receives it--will it not serve to support a new class of consumers, requiring a variety of commodities which the impost enables them to pay? If these conjectures are well founded, it will follow, that indirect taxation, far from having any hurtful influence on wealth and population, must, when wisely regulated, tend to increase and strengthen these two great foundations of national prosperity and power. And it will tend to do this, inasmuch as it bears immediately on the body of the people, and operates on the working and industrious class, which forms the active part of the community; while, on the other hand, direct taxation operates solely on the idle class of landed proprietors--which furnishes us with the characteristic difference existing between these two modes of taxation.[5] These hints, which seem to afford an explanation of that most extraordinary phenomenon in political economy, viz. the rapid and prodigious increase of wealth in those nations which are most loaded with indirect taxes, deserve to be discussed at greater length than our limits will allow. Enough, however, has been said to shew, that no rigorous and purely mathematical calculation will ever enable us to appreciate the real influence of taxes upon the prosperity of a nation. Thus, some of the truths perceived by the economists are of little use in practice; while others are found to be contradicted in their application, by those accessory circumstances which were overlooked in the calculations of the theory. While this sect of philosophers filled all Europe with their speculations, an observer of more depth and ability directed his researches to the same subject, and laboured to establish, on a true and lasting foundation, the doctrines of political economy. Dr. Smith succeeded in discovering a great truth,--the most fruitful in consequences, the most useful in practice, the origin of all the principles of the science, and one which unveiled to him all the mysteries of the growth and distribution of wealth. This great man perceived, that the universal agent in the creation of wealth is labour; and was thence led to analyse the powers of this agent, and to search after the causes to which they owe their origin and increase. The great difference between the doctrine of Smith and of the economists, lies in the point from which they set out, in the reduction of their consequences. The latter go back to the soil as the primary source of all wealth; while the former regards labour as the universal agent which, in every case, produces it. It will appear, at first sight, how very superior the school of the Scotch professor is to that of the French philosophers, with regard to the practical utility, as well as to the application of its precepts. Labour is a power of which man is the machine; and, of course, the increase of this power can only be limited by the indefinite bounds of human intelligence and industry; and it possesses, like these faculties, a susceptibility of being directed by design, and perfected by the aid of study. The earth, on the contrary, if we set aside the influence which labour has over the nature and quantity of its productions, is totally out of our power, in every respect which can render it more or less useful--in its extent, in its situation, and in its physical properties. Thus the science of political economy, considered according to the view of the French economists, must be classed with the natural sciences, which are purely speculative, and can have no other end than the knowledge of the laws which regulate the object of their researches; while, viewed according to the doctrine of Smith, political economy becomes connected with the other moral sciences, which tend to ameliorate the condition of their object, and to carry it to the highest perfection of which it is susceptible. A few words will suffice to explain the grounds of the doctrine of Smith. The power by which a nation creates its wealth is its labour; and the quantity of wealth created will increase in direct proportion as the power increases. But the increase of this last may take place in two ways--in energy, and in extent. Labour increases in energy, when the same quantity of labour furnishes a more abundant product; and the two great means of effecting the increase, or of perfecting the productive powers of labour, are the division of labour, and the invention of such machines as shorten and facilitate the manual operations of industry. Labour increases in extent, when the number of those engaged in it augments in proportion to the increasing number of the consumers, which can take place only in consequence of an increase of capitals, and of those branches of business in which they are employed. Now, to accomplish the increase of labour in both these ways, and to conduct it gradually to the utmost pitch of energy and extent to which it can reach in any nation, considering the situation, the nature, and the peculiarities of its territories, what are the exertions to be made by its government? The subdivision of labour, and the invention and perfecting of machines. These two great means of augmenting the energy of labour, advance in proportion to the extent of the market, or, in other words, in proportion to the number of exchanges which can be made, and to the ease and readiness with which these can take place. Let the government, then, direct all its attention to the enlargement of the market, by forming safe and convenient roads, by the circulation of sterling coin, and by securing the faithful fulfilment of contracts; all of which are indispensible measures, at the same time that, when put in practice, they will never fail to attain the desired end. And the nearer a government approaches to perfection in each of these three points, the more certainly will it produce every possible increase of the national market. The first of the three means is, without doubt, the most essential, as no other expedient whatever can possibly supply its place. The gradual accumulation of capitals is a necessary consequence of the increased productive powers of labour, and it becomes also a cause of still farther increase in these powers; but, in proportion as this accumulation becomes greater and greater, it serves to increase the extent of labour, inasmuch as it multiplies the number of labourers, or the sum of national industry. This increase, however, of the number of hands in the nation employed, will always be regulated by the nature of the business to which the capitals are dedicated. Under this second head of the increase of the products of labour, the exertions of government are much more easy. In fact, it has only to refrain from doing harm. It is only required of it, that it shall protect the natural liberty of industry; that it shall leave open every channel into which, by its own tendencies, industry may be carried; that government shall abandon it to its own direction, and shall not attempt to point its efforts one way more than another; for private interest, that infallible instinct which guides the exertions of all industry, is infinitely better suited than any legislator to judge of the direction which it will with most advantage follow. Let government, then, renounce alike the system of prohibitions and of bounties; let it no longer attempt to impede the efforts of industry by regulations, or to accelerate her progress by rewards; let it leave in the most perfect freedom the exertions of labour and the employment of capital; let its protecting influence extend only to the removal of such obstacles as avarice or ignorance have raised up to the unlimited liberty of industry and commerce;--then capitals will naturally develope themselves, by their own movement, in those directions which are at once most agreeable to the private interest of the capitalist, and most favourable to the increase of the national wealth. METHOD OF FACILITATING THE STUDY OF DR. SMITH'S WORK. Such are the results of the doctrine of Smith, and the fruits we are to reap from his immortal work. The proofs of the principle upon which his opinions are grounded, and the natural and easy manner in which his deductions flow from it, give it an air of simplicity and truth, which render it no less admirable than convincing. This simplicity, however, to be fully perceived, requires much study and consideration; for it cannot be denied that the 'Wealth of Nations' exhibits a striking instance of that defect for which English authors have so often been blamed, viz. a want of method, and a neglect, in their scientific works, of those divisions and arrangements which serve to assist the memory of the reader, and to guide his understanding. The author seems to have seized the pen at the moment when he was most elevated with the importance of his subject, and with the extent of his discoveries. He begins, by displaying before the eyes of his reader the innumerable wonders effected by the division of labour; and with this magnificent and impressive picture, he opens his course of instructions. He then goes back, to consider those circumstances which give rise to or limit this division; and is led by his subject to the definition of values--to the laws which regulate them, to the analysis of their several elements, and to the relations subsisting between those of different natures and origin; all of which are preliminary ideas, which ought naturally to have been explained to the reader before exhibiting to him the complicated instrument of the multiplication of wealth, or unveiling the prodigies of the most powerful of its resources. On the other hand, he has often introduced long digressions, which interrupt the thread of his discussion, and, in many cases, completely destroy the connection of its several parts. Of this description is the digression On the variations in the value of the precious metals during the four last centuries, with a critical examination of the opinions that their value is decreasing--book 1, chap. xi. Upon banks of circulation and paper money--book 2, chap. ii. Upon banks of deposit, and particularly that of Amsterdam--book 4, chap. iii. Upon the advantage of seignorage in the coining of money--book 4, chap. vi. Upon the commerce of grain, and the laws regarding this trade--book 4, chap. v. These different treatises, although they are unquestionably the best that have ever been written on the subjects to which they relate, are, however, so introduced, as to distract the reader's attention--to make him lose sight of the principal object of the work--and to lessen the general effect of it as a whole. To remedy, as far as I am able, these inconveniencies, and to facilitate to beginners the study of the doctrine of Smith, I have thought proper to point out the order which appears to me most agreeable to the natural progress of ideas, and, on this account, best calculated for the purpose of instruction. I would begin by remarking, that the whole doctrine of Smith, upon the origin, multiplication, and distribution of wealth, is contained in his two first books; and that the three others may be read separately, as so many detached treatises, which, no doubt, confirm and develope his opinions, but do not by any means add to them. The third book is an historical and political discussion on the progress which wealth would make in a country where labour and industry were left free; and upon the different causes which have tended, in all the countries of Europe, to reverse this progress. In the fourth book, the author has endeavoured to combat the various systems of political economy which were popular previous to his time; and, in a particular manner, that which is denominated the mercantile system, which has exercised so strong an influence over the financial regulations of the European governments, and particularly over those of England. In the fifth and last book, he considers the expenses of government; the most equitable and convenient modes of providing for these expenses; and lastly, public debts, and the influence they have over national prosperity. The three last books may be read and studied in the same order and arrangement in which they were written, without any difficulty, by one who is completely master of the general doctrine contained in the two first. I regard, then, the two first books, as a complete work, which I would divide into three parts. The 1st relates to values in particular. It contains their definition; the laws which regulate them; the analysis of the elements which constitute a value, or enter into its composition; and the relations which values of different origin bear to each other. The 2d part treats of the general mass of national wealth, which is here divided into separate classes, according to its destination or employment. The 3d and last part explains the manner in which the growth and distribution of national wealth takes place. PART FIRST.--OF VALUES IN PARTICULAR. The essential quality which constitutes wealth, and without which it would not be entitled to the name, is its _exchangeable value_. Exchangeable value differs from the value of utility--book 1, end of chap. iv. The relation existing between two exchangeable values, when expressed by a value generally agreed upon, is denominated _price_. The value generally agreed on among civilized nations, is that of metals. Motives to this preference. Origin of money--book 1, chap. iv. Relation between money and the metal in the state of bullion--book 1, chap. v. The price in money, or _nominal_ price of a thing, differs from its _real_ price, which is its valuation by the quantity of labour expended upon it, or which it represents--ibid. Laws, according to which the price of wealth is naturally fixed; and those accidental circumstances which occasion the actual to differ from the natural price, and which gave rise to a distinction between the _natural_ and the _market price_--book 1, chap. vii. The price of a thing, in most cases, consists of three distinct elements--the wages of the labour, the profit of the master who directs the labour, and the rent of the ground that furnishes the materials on which it is erected. There are, however, some descriptions of merchandize in which the rent forms no part of the price; and others, in which the profit forms no part of it; but none, in which it is not formed principally by the wages--book 1, chap. vi. Of _wages_. Laws, according to which the natural rate of wages is fixed; accidental circumstances which cause them to vary, during a short period, from that natural rate--book 1, chap. viii. Of the _profit_ of capitals. Laws, by which the natural right of profit is fixed; accidental circumstances which, for a long while, increase or diminish it beyond that rate--book 1, chap. ix. Labour and capitals tend naturally to diffuse themselves through every species of employment; and, as certain employments are, by their nature, accompanied with inconveniencies and difficulties which do not occur in others, while these, on the contrary, offer some real or imaginary advantages which are peculiar to themselves; wages and profits should rise and fall in proportion to these advantages and disadvantages; thus forming a complete equilibrium between the various kinds of employment. The arbitrary and oppressive policy of Europe, in many instances, opposes the establishment of this equilibrium, which is conformable to the order of nature--book 1, chap. x. Of the _rent_ of the ground. The nature of rent: the manner in which it enters into the price of wealth; and according to what principles it in some cases forms an integral part of that price, while in others it does not--book 1, chap. xi. Division of the rude produce of the earth into two great classes: 1. That produce which is always necessarily disposed of in such a way as to bring a rent to the landed proprietor. 2. That which, according to circumstances, may be disposed of so as to bring, or so as not to bring, a rent. The produce of the first description is derived from the ground appropriated to furnishing subsistence for man, or for those animals which he uses as food. The value of the produce of the ground cultivated for the support of man, determines the value of the produce of all other ground proper for this species of culture. This general rule allows of some exceptions. Causes of these exceptions. The produce of the second class consists of the materials of clothing, lodging, fuel, and the ornaments of dress and furniture. The value of this species of produce depends on that of the first description. Some circumstances render it possible that the produce of the second kind may be disposed of in such a way as to furnish a rent to the landed proprietor. Principles which regulate the proportion of the price of these products, which is formed by the rent--book 1, chap. xi. Relation between the respective values of the produce of the first class, and those of the produce of the second. Variations which may take place in this relation, and the causes of such variations--ibid. Relation existing between the values of the two descriptions of rude produce above mentioned, and the values of the produce of manufacture. Variations which may occur in this relation--ibid. Certain kinds of rude produce, procured from very different sources, are, however, intended for the same kind of consumption; and hence it happens, the value of one determines and limits that of another--ibid. The relations between values of different natures vary according to the state of society. This state is _improving_, _declining_, or _stationary_; that is to say, society is either increasing in wealth, or falling into poverty, or remaining in the same unchanged state of opulence. Of the effects of these different states of society, Upon the price of wages--book 1, chap. viii. Upon the rate of profit--book 1, chap. ix. Upon the value of the rude produce of the earth, and on that of the produce of manufacture--book 1, chap. xi. Difference, in this respect, between the various kinds of rude produce, viz. 1. Those which the industry of man cannot multiply: 2. Those which his industry can always multiply in proportion to the demand: 3. Those over which human exertions have only an uncertain or limited influence--ibid. PART SECOND.--OF STOCK AND ITS EMPLOYMENT. Wealth, accumulated in the possession of an individual, is of two descriptions, according to its destination or employment: 1. That reserved for immediate consumption. 2. That employed as capital, for the production of a revenue--book 2, chap. i. Capital is also of two kinds: 1. Fixed capital, which produces a revenue and still remains in the same hands 2. Circulating capital, which yields no revenue unless it be employed in trade--book 2 chap. i. The whole accumulated wealth of any community may be divided into three parts: 1. The fund appropriated to the immediate consumption of the proprietors of wealth. 2. The fixed capital of the community. 3. Its circulating capital. The _fixed capital_ of the society consists, 1. Of all machines and instruments of labour; 2. Of all buildings and edifices erected for the purposes of industry; 3. Of every kind of agricultural improvement which can tend to render the soil more productive; 4. Of the talents and skill which certain members of the community have acquired by time and expense. The _circulating capital_ of a community consists, 1. In the money in circulation; 2. In the stock of provisions in the hands both of the producers and of the merchants, and from the sale of which they expect to derive a profit; 3. In the materials of lodging, clothing, dress, and ornament, more or less manufactured, which are in the hands of those who are employed in rendering them fit for use and consumption; 4. In the goods more completely fit for consumption, and preserved in warehouses and shops, by merchants who propose to sell them with a profit--book 2, chap. i. Of the relation existing between the employment of these two kinds of capital--ibid. Of the mode in which the capital withdrawn from circulation is disposed of--ibid. The sources which continually renew the circulating capital, as soon as it enters into the fixed capital, or the stock for immediate consumption, are, 1. Lands; 2. Mines and quarries; 3. Fisheries--ibid. Of the purposes accomplished by circulating coin--book 2, chap. ii; and the expedients which may be resorted to, in order to attain these with less expense, and fewer of those inconveniencies to which money is subjected--ibid. Of the stock lent at interest; and of those things which regulate the proportion that this kind of stock bears to the whole existing stock of the community. The quantity of stock which may be lent depends in no degree upon the quantity of money in circulation--book 2, chap. iv. Of the principles which determine the rate of interest--ibid. There exists a necessary relation between this and the price of land--ibid. PART THIRD--OF THE MANNER IN WHICH THE MULTIPLICATION AND DISTRIBUTION OF WEALTH TAKES PLACE. Wealth uniformly increases in proportion to the augmentation which the power producing it receives, whether that be in _energy_ or in _extent_--book I. introduction. Labour, in which this power increases in _energy_, 1. By the division of the parts of the same work; 2. By the invention of such machines as abridge and facilitate labour--book I, chap. i. The division of labour adds to its energy, 1. By the skill which the workman in this way acquires; 2. By the saving of time--ibid. The invention of machines is itself an effect of the division of labour--ibid. The natural disposition of mankind to exchange with each other the different productions of their respective labours and talents, is the principle which has given birth to the division of labour--book I, chap. ii. The division of labour must of course be limited by the extent of the market; therefore, whatever tends to widen the market, facilitates the progress of a nation towards opulence--book I, chap. iii. Labour gains in _extent_, 1. In proportion to the accumulation of capital; 2. In proportion to the manner in which these are employed--book I, introduction. The accumulation of capitals is hastened by the increase of the proportion existing between the productive and unproductive consumers--book 2, chap. iii. The proportion between these two classes of consumers is determined by the proportion existing between that part of the annual produce destined to the replacement of capital, and that destined for the purpose of revenue--ibid. The proportion between that part of the annual produce which goes to form capital, and that which goes to form revenue, is great in a rich country, and small in a poor one--ibid. In a wealthy country, the rent of land, taken absolutely, is much greater than in a poor country; but, taken in relation to the capital employed, it is much less--book 2, chap. iii. In a wealthy country, the whole profits of its capital are infinitely greater than in one that is poor; although a given quantity of capital will, in a country of the latter description, produce profits much greater than in an opulent one--ibid. It is industry that furnishes the produce; but it is economy that places in the capital that part of it which would otherwise have become revenue--ibid. The economy of individuals arises from a principle which is universally diffused, and one that is continually in action; the desire of ameliorating their condition. This principle supports the existence and increase of national wealth, in spite of the prodigality of some individuals; and even triumphs over the profusion and errors of governments--ibid. Of the different modes of spending money, some are more favourable than others to the increase of national wealth--ibid. Those branches of employment which require a capital, never fail to call forth more or less labour; and thus contribute, in a greater or less degree, to increase the extent of national labour. Capital can be employed only in four ways: 1. In cultivating and improving the earth, or, in other words, multiplying its rude produce; 2. In supporting manufactures; 3. In buying by the gross, to sell in the same manner; 4. In buying by the gross, to sell by retail. These four modes of employing capital are equally necessary to, and serve mutually to support, each other. The first supports, beyond all comparison, the greatest number of productive hands; the second occupies more than the two remaining; and the fourth the fewest of any. Capital may be employed, according to the third mode, in three different ways; each contributing in a very different degree to the support and encouragement of national industry. When capital is employed in exchanging one description of the produce of national industry for another, it then supports as great a portion of industry as can be done by any capital employed in commerce. When it is employed in exchanging the produce of national for that of foreign industry, for the purposes of home consumption, half of it goes to the support of foreign industry; by which means, it is only of half that service to the industry of the nation which it would have been had it been employed another way. Lastly, when it is employed in exchanging one description of the produce of foreign industry for another, or in what is termed the _carrying trade_, it then serves wholly for the support and encouragement of the industry of the two foreign nations, and adds only to the annual produce of the country the profits of the merchant--book 2, chap. v. Self-interest, when left uncontrouled, will necessarily lead the proprietors of capitals to prefer that species of employment which is most favourable to national industry, because it is, at the same time, most profitable for themselves--ibid. For, when capitals have been employed in a way different from that suggested by the infallible instinct of self-interest, it has always been in consequence of the peculiar circumstances of the European governments, and of that influence which the vulgar prejudices of merchants have had over the system of administration which these governments have adopted. The account of these circumstances, with the discussion of the errors of this system, form the matter of the third and fourth books. * * * * * Political Economy is, of all sciences, that which affords most room for prejudices, and in which they are most liable to become deeply rooted. The desire of improving our condition, that universal principle, which continually acts upon every member of the community, is ever directing the thoughts of each individual to the means of increasing his private fortune. But should this individual ever chance to raise his views to the management of the public money, he would naturally be led to reason from analogy, and apply to the general interest of his country those principles which reflection and experience have led him to regard as the best guides in the conduct of his own private affairs. Thus, from attending to the fact, that money constitutes a part of the productive stock in the fortune of an individual, and that his fortune increases in proportion to the increase of this article, there arises that erroneous opinion so generally received, that money is a constituent part of national wealth, and that a country becomes rich, in proportion as it receives money from those countries with which it has commercial connections. Merchants who have been accustomed to retire each night to their desks, to count, with eagerness, the quantity of currency, or of good debts, which their day's sale has produced, calculating their profits only by this result, and confident that such a calculation has never deceived them, are naturally led to think that the affairs of the nation must follow the same rule; and they have been strengthened in this opinion by that unshaken confidence which a long and never-failing experience, that has been the source of wealth and prosperity, inspires. Hence those extravagant opinions respecting the advantages and profits of foreign commerce, and the importance of money; hence those absurd calculations that have been made regarding what is termed the balance of trade, the thermometer of public prosperity; hence those systems of regulations, and those oppressive monopolies, which are resorted to for the purpose of making one side of the balance preponderate; hence, too, those bloody and destructive wars, which have raged in both hemispheres, from the period in which the road to the Indies, and to the new world, became familiar to European nations. When we observe, that the many bloody wars that have been waged in the different parts of the world for these two last centuries, and even the present war, in many points of view, have had, as their principal end, the maintenance of some monopoly, contrary even to the interest of the nation armed to protect it; we shall feel the full importance of those benefits which the illustrious author of the 'Wealth of Nations' has endeavoured to confer upon mankind, by victoriously combating such strong and baneful prejudices. But we cannot help deeply lamenting, to see how slowly, and with what difficulty, reason in all its strength, and truth in all its clearness, regain the possession of these territories which error and passion have so rapidly overrun. The prejudices so successfully attacked by Dr. Smith, appear again and again, with undiminished assurance, in the tribunals of legislature, in the councils of administration, in the cabinets of ministry, and in the writings of politicians. They still talk of the importance of foreign and colonial commerce; they still attempt to determine the balance of trade; they renew all the reveries of political arithmetic, as if these questions had not been determined by Smith, in a way which renders them no longer capable of controversy. It was in the midst of a country, the most deeply imbued with mercantile prejudices; the most completely subjected to its prohibitory policy, that Dr. Smith sapped the foundations of this absurd and tyrannical system; it was at the very moment when England, in alarm, saw, with terror, the possibility of a separation from her American colonies: it was then that he derided the universal fear, and proudly prophesied the success of the colonists, and their approaching independence; and that he confidently announced, what experience has since completely affirmed, the happy consequences which this separation and this independence, so much dreaded, would produce upon the prosperity, both of Great Britain and her colonies--book 4, chap. vii. part 3. The wealth of communities is so intimately connected with their civil and political existence, that the author has been drawn by his subject into numerous other discussions, which seem more or less removed from it; and in which we discover the same sagacity of observation, the same depth of research, and the same force of reasoning. The advantages of a complete and permanent freedom in the corn trade have never been better shown; and they have been proved by Dr. Smith, to arise from that fruitful source of wealth, the division of labour--book 4, chap. v. The national defence and public education, two objects of very high importance, have also been discussed at length by our author. He proves, that, in conformity to that desire to better our condition, by which all men are directed, and upon which the author has founded his whole doctrine, the teacher, whose wages are a fixed salary, will have no other end than to spare himself every trouble, and dedicate as little attention as possible to his pupils; while he that is paid in proportion to his labour, will naturally endeavour, by every means in his power, to increase his success, at the same time that he confers a great advantage on his scholars and on society. He confirms his theoretical opinions by incontestible examples---book 5, chap. i. part 3. The superiority of regular troops over national militia is proved in theory, by the division of labour; and in practice, by the most remarkable facts in history--book 5, chap. i, part 1. AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS. INTRODUCTION AND PLAN OF THE WORK. The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniencies of life which it annually consumes, and which consist always either in the immediate produce of that labour, or in what is purchased with that produce from other nations. According, therefore, as this produce, or what is purchased with it, bears a greater or smaller proportion to the number of those who are to consume it, the nation will be better or worse supplied with all the necessaries and conveniencies for which it has occasion. But this proportion must in every nation be regulated by two different circumstances: first, by the skill, dexterity, and judgment with which its labour is generally applied; and, secondly, by the proportion between the number of those who are employed in useful labour, and that of those who are not so employed. Whatever be the soil, climate, or extent of territory of any particular nation, the abundance or scantiness of its annual supply must, in that particular situation, depend upon those two circumstances. The abundance or scantiness of this supply, too, seems to depend more upon the former of those two circumstances than upon the latter. Among the savage nations of hunters and fishers, every individual who is able to work is more or less employed in useful labour, and endeavours to provide, as well as he can, the necessaries and conveniencies of life, for himself, and such of his family or tribe as are either too old, or too young, or too infirm, to go a-hunting and fishing. Such nations, however, are so miserably poor, that, from mere want, they are frequently reduced, or at least think themselves reduced, to the necessity sometimes of directly destroying, and sometimes of abandoning their infants, their old people, and those afflicted with lingering diseases, to perish with hunger, or to be devoured by wild beasts. Among civilized and thriving nations, on the contrary, though a great number of people do not labour at all, many of whom consume the produce of ten times, frequently of a hundred times, more labour than the greater part of those who work; yet the produce of the whole labour of the society is so great, that all are often abundantly supplied; and a workman, even of the lowest and poorest order, if he is frugal and industrious, may enjoy a greater share of the necessaries and conveniencies of life than it is possible for any savage to acquire. The causes of this improvement in the productive powers of labour, and the order according to which its produce is naturally distributed among the different ranks and conditions of men in the society, make the subject of the first book of this Inquiry. Whatever be the actual state of the skill, dexterity, and judgment, with which labour is applied in any nation, the abundance or scantiness of its annual supply must depend, during the continuance of that state, upon the proportion between the number of those who are annually employed in useful labour, and that of those who are not so employed. The number of useful and productive labourers, it will hereafter appear, is everywhere in proportion to the quantity of capital stock which is employed in setting them to work, and to the particular way in which it is so employed. The second book, therefore, treats of the nature of capital stock, of the manner in which it is gradually accumulated, and of the different quantities of labour which it puts into motion, according to the different ways in which it is employed. Nations tolerably well advanced as to skill, dexterity, and judgment, in the application of labour, have followed very different plans in the general conduct or direction of it; and those plans have not all been equally favourable to the greatness of its produce. The policy of some nations has given extraordinary encouragement to the industry of the country; that of others to the industry of towns. Scarce any nation has dealt equally and impartially with every sort of industry. Since the downfall of the Roman empire, the policy of Europe has been more favourable to arts, manufactures, and commerce, the industry of towns, than to agriculture, the industry of the country. The circumstances which seem to have introduced and established this policy are explained in the third book. Though those different plans were, perhaps, first introduced by the private interests and prejudices of particular orders of men, without any regard to, or foresight of, their consequences upon the general welfare of the society; yet they have given occasion to very different theories of political economy; of which some magnify the importance of that industry which is carried on in towns, others of that which is carried on in the country. Those theories have had a considerable influence, not only upon the opinions of men of learning, but upon the public conduct of princes and sovereign states. I have endeavoured, in the fourth book, to explain as fully and distinctly as I can those different theories, and the principal effects which they have produced in different ages and nations. To explain in what has consisted the revenue of the great body of the people, or what has been the nature of those funds, which, in different ages and nations, have supplied their annual consumption, is the object of these four first books. The fifth and last book treats of the revenue of the sovereign, or commonwealth. In this book I have endeavoured to shew, first, what are the necessary expenses of the sovereign, or commonwealth; which of those expenses ought to be defrayed by the general contribution of the whole society, and which of them, by that of some particular part only, or of some particular members of it: secondly, what are the different methods in which the whole society may be made to contribute towards defraying the expenses incumbent on the whole society, and what are the principal advantages and inconveniencies of each of those methods; and, thirdly and lastly, what are the reasons and causes which have induced almost all modern governments to mortgage some part of this revenue, or to contract debts; and what have been the effects of those debts upon the real wealth, the annual produce of the land and labour of the society. BOOK I. OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE POWERS OF LABOUR, AND OF THE ORDER ACCORDING TO WHICH ITS PRODUCE IS NATURALLY DISTRIBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE. CHAP. I. OF THE DIVISION OF LABOUR. The greatest improvements in the productive powers of labour, and the greater part of the skill, dexterity, and judgment, with which it is anywhere directed, or applied, seem to have been the effects of the division of labour. The effects of the division of labour, in the general business of society, will be more easily understood, by considering in what manner it operates in some particular manufactures. It is commonly supposed to be carried furthest in some very trifling ones; not perhaps that it really is carried further in them than in others of more importance: but in those trifling manufactures which are destined to supply the small wants of but a small number of people, the whole number of workmen must necessarily be small; and those employed in every different branch of the work can often be collected into the same workhouse, and placed at once under the view of the spectator. In those great manufactures, on the contrary, which are destined to supply the great wants of the great body of the people, every different branch of the work employs so great a number of workmen, that it is impossible to collect them all into the same workhouse. We can seldom see more, at one time, than those employed in one single branch. Though in such manufactures, therefore, the work may really be divided into a much greater number of parts, than in those of a more trifling nature, the division is not near so obvious, and has accordingly been much less observed. To take an example, therefore, from a very trifling manufacture, but one in which the division of labour has been very often taken notice of, the trade of a pin-maker: a workman not educated to this business (which the division of labour has rendered a distinct trade), nor acquainted with the use of the machinery employed in it (to the invention of which the same division of labour has probably given occasion), could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire; another straights it; a third cuts it; a fourth points it; a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on is a peculiar business; to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them. I have seen a small manufactory of this kind, where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly, not the two hundred and fortieth, perhaps not the four thousand eight hundredth, part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations. In every other art and manufacture, the effects of the division of labour are similar to what they are in this very trifling one, though, in many of them, the labour can neither be so much subdivided, nor reduced to so great a simplicity of operation. The division of labour, however, so far as it can be introduced, occasions, in every art, a proportionable increase of the productive powers of labour. The separation of different trades and employments from one another, seems to have taken place in consequence of this advantage. This separation, too, is generally carried furthest in those countries which enjoy the highest degree of industry and improvement; what is the work of one man, in a rude state of society, being generally that of several in an improved one. In every improved society, the farmer is generally nothing but a farmer; the manufacturer, nothing but a manufacturer. The labour, too, which is necessary to produce any one complete manufacture, is almost always divided among a great number of hands. How many different trades are employed in each branch of the linen and woollen manufactures, from the growers of the flax and the wool, to the bleachers and smoothers of the linen, or to the dyers and dressers of the cloth! The nature of agriculture, indeed, does not admit of so many subdivisions of labour, nor of so complete a separation of one business from another, as manufactures. It is impossible to separate so entirely the business of the grazier from that of the corn-farmer, as the trade of the carpenter is commonly separated from that of the smith. The spinner is almost always a distinct person from the weaver; but the ploughman, the harrower, the sower of the seed, and the reaper of the corn, are often the same. The occasions for those different sorts of labour returning with the different seasons of the year, it is impossible that one man should be constantly employed in any one of them. This impossibility of making so complete and entire a separation of all the different branches of labour employed in agriculture, is perhaps the reason why the improvement of the productive powers of labour, in this art, does not always keep pace with their improvement in manufactures. The most opulent nations, indeed, generally excel all their neighbours in agriculture as well as in manufactures; but they are commonly more distinguished by their superiority in the latter than in the former. Their lands are in general better cultivated, and having more labour and expense bestowed upon them, produce more in proportion to the extent and natural fertility of the ground. But this superiority of produce is seldom much more than in proportion to the superiority of labour and expense. In agriculture, the labour of the rich country is not always much more productive than that of the poor; or, at least, it is never so much more productive, as it commonly is in manufactures. The corn of the rich country, therefore, will not always, in the same degree of goodness, come cheaper to market than that of the poor. The corn of Poland, in the same degree of goodness, is as cheap as that of France, notwithstanding the superior opulence and improvement of the latter country. The corn of France is, in the corn-provinces, fully as good, and in most years nearly about the same price with the corn of England, though, in opulence and improvement, France in perhaps inferior to England. The corn-lands of England, however, are better cultivated than those of France, and the corn-lands of France are said to be much better cultivated than those of Poland. But though the poor country, notwithstanding the inferiority of its cultivation, can, in some measure, rival the rich in the cheapness and goodness of its corn, it can pretend to no such competition in its manufactures, at least if those manufactures suit the soil, climate, and situation, of the rich country. The silks of France are better and cheaper than those of England, because the silk manufacture, at least under the present high duties upon the importation of raw silk, does not so well suit the climate of England as that of France. But the hardware and the coarse woollens of England are beyond all comparison superior to those of France, and much cheaper, too, in the same degree of goodness. In Poland there are said to be scarce any manufactures of any kind, a few of those coarser household manufactures excepted, without which no country can well subsist. This great increase in the quantity of work, which, in consequence of the division of labour, the same number of people are capable of performing, is owing to three different circumstances; first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and, lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many. First, the improvement of the dexterity of the workmen, necessarily increases the quantity of the work he can perform; and the division of labour, by reducing every man's business to some one simple operation, and by making this operation the sole employment of his life, necessarily increases very much the dexterity of the workman. A common smith, who, though accustomed to handle the hammer, has never been used to make nails, if, upon some particular occasion, he is obliged to attempt it, will scarce, I am assured, be able to make above two or three hundred nails in a day, and those, too, very bad ones. A smith who has been accustomed to make nails, but whose sole or principal business has not been that of a nailer, can seldom, with his utmost diligence, make more than eight hundred or a thousand nails in a day. I have seen several boys, under twenty years of age, who had never exercised any other trade but that of making nails, and who, when they exerted themselves, could make, each of them, upwards of two thousand three hundred nails in a day. The making of a nail, however, is by no means one of the simplest operations. The same person blows the bellows, stirs or mends the fire as there is occasion, heats the iron, and forges every part of the nail: in forging the head, too, he in obliged to change his tools. The different operations into which the making of a pin, or of a metal button, is subdivided, are all of them much more simple, and the dexterity of the person, of whose life it has been the sole business to perform them, is usually much greater. The rapidity with which some of the operations of those manufactures are performed, exceeds what the human hand could, by those who had never seen them, be supposed capable of acquiring. Secondly, The advantage which is gained by saving the time commonly lost in passing from one sort of work to another, is much greater than we should at first view be apt to imagine it. It is impossible to pass very quickly from one kind of work to another, that is carried on in a different place, and with quite different tools. A country weaver, who cultivates a small farm, must loose a good deal of time in passing from his loom to the field, and from the field to his loom. When the two trades can be carried on in the same workhouse, the loss of time is, no doubt, much less. It is, even in this case, however, very considerable. A man commonly saunters a little in turning his hand from one sort of employment to another. When he first begins the new work, he is seldom very keen and hearty; his mind, as they say, does not go to it, and for some time he rather trifles than applies to good purpose. The habit of sauntering, and of indolent careless application, which is naturally, or rather necessarily, acquired by every country workman who is obliged to change his work and his tools every half hour, and to apply his hand in twenty different ways almost every day of his life, renders him almost always slothful and lazy, and incapable of any vigorous application, even on the most pressing occasions. Independent, therefore, of his deficiency in point of dexterity, this cause alone must always reduce considerably the quantity of work which he is capable of performing. Thirdly, and lastly, everybody must be sensible how much labour is facilitated and abridged by the application of proper machinery. It is unnecessary to give any example. I shall only observe, therefore, that the invention of all those machines by which labour is to much facilitated and abridged, seems to have been originally owing to the division of labour. Men are much more likely to discover easier and readier methods of attaining any object, when the whole attention of their minds is directed towards that single object, than when it is dissipated among a great variety of things. But, in consequence of the division of labour, the whole of every man's attention comes naturally to be directed towards some one very simple object. It is naturally to be expected, therefore, that some one or other of those who are employed in each particular branch of labour should soon find out easier and readier methods of performing their own particular work, wherever the nature of it admits of such improvement. A great part of the machines made use of in those manufactures in which labour is most subdivided, were originally the inventions of common workmen, who, being each of them employed in some very simple operation, naturally turned their thoughts towards finding out easier and readier methods of performing it. Whoever has been much accustomed to visit such manufactures, must frequently have been shewn very pretty machines, which were the inventions of such workmen, in order to facilitate and quicken their own particular part of the work. In the first fire engines, a boy was constantly employed to open and shut alternately the communication between the boiler and the cylinder, according as the piston either ascended or descended. One of those boys, who loved to play with his companions, observed that, by tying a string from the handle of the valve which opened this communication to another part of the machine, the valve would open and shut without his assistance, and leave him at liberty to divert himself with his play-fellows. One of the greatest improvements that has been made upon this machine, since it was first invented, was in this manner the discovery of a boy who wanted to save his own labour. All the improvements in machinery, however, have by no means been the inventions of those who had occasion to use the machines. Many improvements have been made by the ingenuity of the makers of the machines, when to make them became the business of a peculiar trade; and some by that of those who are called philosophers, or men of speculation, whose trade it is not to do any thing, but to observe every thing, and who, upon that account, are often capable of combining together the powers of the most distant and dissimilar objects. In the progress of society, philosophy or speculation becomes, like every other employment, the principal or sole trade and occupation of a particular class of citizens. Like every other employment, too, it is subdivided into a great number of different branches, each of which affords occupation to a peculiar tribe or class of philosophers; and this subdivision of employment in philosophy, as well as in every other business, improves dexterity, and saves time. Each individual becomes more expert in his own peculiar branch, more work is done upon the whole, and the quantity of science is considerably increased by it. It is the great multiplication of the productions of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people. Every workman has a great quantity of his own work to dispose of beyond what he himself has occasion for; and every other workman being exactly in the same situation, he is enabled to exchange a great quantity of his own goods for a great quantity or, what comes to the same thing, for the price of a great quantity of theirs. He supplies them abundantly with what they have occasion for, and they accommodate him as amply with what he has occasion for, and a general plenty diffuses itself through all the different ranks of the society. Observe the accommodation of the most common artificer or day-labourer in a civilized and thriving country, and you will perceive that the number of people, of whose industry a part, though but a small part, has been employed in procuring him this accommodation, exceeds all computation. The woollen coat, for example, which covers the day-labourer, as coarse and rough as it may appear, is the produce of the joint labour of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production. How many merchants and carriers, besides, must have been employed in transporting the materials from some of those workmen to others who often live in a very distant part of the country? How much commerce and navigation in particular, how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring together the different drugs made use of by the dyer, which often come from the remotest corners of the world? What a variety of labour, too, is necessary in order to produce the tools of the meanest of those workmen! To say nothing of such complicated machines as the ship of the sailor, the mill of the fuller, or even the loom of the weaver, let us consider only what a variety of labour is requisite in order to form that very simple machine, the shears with which the shepherd clips the wool. The miner, the builder of the furnace for smelting the ore, the feller of the timber, the burner of the charcoal to be made use of in the smelting-house, the brickmaker, the bricklayer, the workmen who attend the furnace, the millwright, the forger, the smith, must all of them join their different arts in order to produce them. Were we to examine, in the same manner, all the different parts of his dress and household furniture, the coarse linen shirt which he wears next his skin, the shoes which cover his feet, the bed which he lies on, and all the different parts which compose it, the kitchen-grate at which he prepares his victuals, the coals which he makes use of for that purpose, dug from the bowels of the earth, and brought to him, perhaps, by a long sea and a long land-carriage, all the other utensils of his kitchen, all the furniture of his table, the knives and forks, the earthen or pewter plates upon which he serves up and divides his victuals, the different hands employed in preparing his bread and his beer, the glass window which lets in the heat and the light, and keeps out the wind and the rain, with all the knowledge and art requisite for preparing that beautiful and happy invention, without which these northern parts of the world could scarce have afforded a very comfortable habitation, together with the tools of all the different workmen employed in producing those different conveniencies; if we examine, I say, all these things, and consider what a variety of labour is employed about each of them, we shall be sensible that, without the assistance and co-operation of many thousands, the very meanest person in a civilized country could not be provided, even according to, what we very falsely imagine, the easy and simple manner in which he is commonly accommodated. Compared, indeed, with the more extravagant luxury of the great, his accommodation must no doubt appear extremely simple and easy; and yet it may be true, perhaps, that the accommodation of an European prince does not always so much exceed that of an industrious and frugal peasant, as the accommodation of the latter exceeds that of many an African king, the absolute masters of the lives and liberties of ten thousand naked savages. CHAP. II. OF THE PRINCIPLE WHICH GIVES OCCASION TO THE DIVISION OF LABOUR. This division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual, consequence of a certain propensity in human nature, which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another. Whether this propensity be one of these original principles in human nature, of which no further account can be given, or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech, it belongs not to our present subject to inquire. It is common to all men, and to be found in no other race of animals, which seem to know neither this nor any other species of contracts. Two greyhounds, in running down the same hare, have sometimes the appearance of acting in some sort of concert. Each turns her towards his companion, or endeavours to intercept her when his companion turns her towards himself. This, however, is not the effect of any contract, but of the accidental concurrence of their passions in the same object at that particular time. Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. Nobody ever saw one animal, by its gestures and natural cries signify to another, this is mine, that yours; I am willing to give this for that. When an animal wants to obtain something either of a man, or of another animal, it has no other means of persuasion, but to gain the favour of those whose service it requires. A puppy fawns upon its dam, and a spaniel endeavours, by a thousand attractions, to engage the attention of its master who is at dinner, when it wants to be fed by him. Man sometimes uses the same arts with his brethren, and when he has no other means of engaging them to act according to his inclinations, endeavours by every servile and fawning attention to obtain their good will. He has not time, however, to do this upon every occasion. In civilized society he stands at all times in need of the co-operation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons. In almost every other race of animals, each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens. Even a beggar does not depend upon it entirely. The charity of well-disposed people, indeed, supplies him with the whole fund of his subsistence. But though this principle ultimately provides him with all the necessaries of life which he has occasion for, it neither does nor can provide him with them as he has occasion for them. The greater part of his occasional wants are supplied in the same manner as those of other people, by treaty, by barter, and by purchase. With the money which one man gives him he purchases food. The old clothes which another bestows upon him he exchanges for other clothes which suit him better, or for lodging, or for food, or for money, with which he can buy either food, clothes, or lodging, as he has occasion. As it is by treaty, by barter, and by purchase, that we obtain from one another the greater part of those mutual good offices which we stand in need of, so it is this same trucking disposition which originally gives occasion to the division of labour. In a tribe of hunters or shepherds, a particular person makes bows and arrows, for example, with more readiness and dexterity than any other. He frequently exchanges them for cattle or for venison, with his companions; and he finds at last that he can, in this manner, get more cattle and venison, than if he himself went to the field to catch them. From a regard to his own interest, therefore, the making of bows and arrows grows to be his chief business, and he becomes a sort of armourer. Another excels in making the frames and covers of their little huts or moveable houses. He is accustomed to be of use in this way to his neighbours, who reward him in the same manner with cattle and with venison, till at last he finds it his interest to dedicate himself entirely to this employment, and to become a sort of house-carpenter. In the same manner a third becomes a smith or a brazier; a fourth, a tanner or dresser of hides or skins, the principal part of the clothing of savages. And thus the certainty of being able to exchange all that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men's labour as he may have occasion for, encourages every man to apply himself to a particular occupation, and to cultivate and bring to perfection whatever talent of genius he may possess for that particular species of business. The difference of natural talents in different men, is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men of different professions, when grown up to maturity, is not upon many occasions so much the cause, as the effect of the division of labour. The difference between the most dissimilar characters, between a philosopher and a common street porter, for example, seems to arise not so much from nature, as from habit, custom, and education. When they came into the world, and for the first six or eight years of their existence, they were, perhaps, very much alike, and neither their parents nor playfellows could perceive any remarkable difference. About that age, or soon after, they come to be employed in very different occupations. The difference of talents comes then to be taken notice of, and widens by degrees, till at last the vanity of the philosopher is willing to acknowledge scarce any resemblance. But without the disposition to truck, barter, and exchange, every man must have procured to himself every necessary and conveniency of life which he wanted. All must have had the same duties to perform, and the same work to do, and there could have been no such difference of employment as could alone give occasion to any great difference of talents. As it is this disposition which forms that difference of talents, so remarkable among men of different professions, so it is this same disposition which renders that difference useful. Many tribes of animals, acknowledged to be all of the same species, derive from nature a much more remarkable distinction of genius, than what, antecedent to custom and education, appears to take place among men. By nature a philosopher is not in genius and disposition half so different from a street porter, as a mastiff is from a grey-hound, or a grey-hound from a spaniel, or this last from a shepherd's dog. Those different tribes of animals, however, though all of the same species, are of scarce any use to one another. The strength of the mastiff is not in the least supported either by the swiftness of the grey-hound, or by the sagacity of the spaniel, or by the docility of the shepherd's dog. The effects of those different geniuses and talents, for want of the power or disposition to barter and exchange, cannot be brought into a common stock, and do not in the least contribute to the better accommodation and conveniency of the species. Each animal is still obliged to support and defend itself, separately and independently, and derives no sort of advantage from that variety of talents with which nature has distinguished its fellows. Among men, on the contrary, the most dissimilar geniuses are of use to one another; the different produces of their respective talents, by the general disposition to truck, barter, and exchange, being brought, as it were, into a common stock, where every man may purchase whatever part of the produce of other men's talents he has occasion for. CHAP. III. THAT THE DIVISION OF LABOUR IS LIMITED BY THE EXTENT OF THE MARKET. As it is the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market. When the market is very small, no person can have any encouragement to dedicate himself entirely to one employment, for want of the power to exchange all that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men's labour as he has occasion for. There are some sorts of industry, even of the lowest kind, which can be carried on nowhere but in a great town. A porter, for example, can find employment and subsistence in no other place. A village is by much too narrow a sphere for him; even an ordinary market-town is scarce large enough to afford him constant occupation. In the lone houses and very small villages which are scattered about in so desert a country as the highlands of Scotland, every farmer must be butcher, baker, and brewer, for his own family. In such situations we can scarce expect to find even a smith, a carpenter, or a mason, within less than twenty miles of another of the same trade. The scattered families that live at eight or ten miles distance from the nearest of them, must learn to perform themselves a great number of little pieces of work, for which, in more populous countries, they would call in the assistance of these workmen. Country workmen are almost everywhere obliged to apply themselves to all the different branches of industry that have so much affinity to one another as to be employed about the same sort of materials. A country carpenter deals in every sort of work that is made of wood; a country smith in every sort of work that is made of iron. The former is not only a carpenter, but a joiner, a cabinet-maker, and even a carver in wood, as well as a wheel-wright, a plough-wright, a cart and waggon-maker. The employments of the latter are still more various. It is impossible there should be such a trade as even that of a nailer in the remote and inland parts of the highlands of Scotland. Such a workman at the rate of a thousand nails a-day, and three hundred working days in the year, will make three hundred thousand nails in the year. But in such a situation it would be impossible to dispose of one thousand, that is, of one day's work in the year. As by means of water-carriage, a more extensive market is opened to every sort of industry than what land-carriage alone can afford it, so it is upon the sea-coast, and along the banks of navigable rivers, that industry of every kind naturally begins to subdivide and improve itself, and it is frequently not till a long time after that those improvements extend themselves to the inland parts of the country. A broad-wheeled waggon, attended by two men, and drawn by eight horses, in about six weeks time, carries and brings back between London and Edinburgh near four ton weight of goods. In about the same time a ship navigated by six or eight men, and sailing between the ports of London and Leith, frequently carries and brings back two hundred ton weight of goods. Six or eight men, therefore, by the help of water-carriage, can carry and bring back, in the same time, the same quantity of goods between London and Edinburgh as fifty broad-wheeled waggons, attended by a hundred men, and drawn by four hundred horses. Upon two hundred tons of goods, therefore, carried by the cheapest land-carriage from London to Edinburgh, there must be charged the maintenance of a hundred men for three weeks, and both the maintenance and what is nearly equal to maintenance the wear and tear of four hundred horses, as well as of fifty great waggons. Whereas, upon the same quantity of goods carried by water, there is to be charged only the maintenance of six or eight men, and the wear and tear of a ship of two hundred tons burthen, together with the value of the superior risk, or the difference of the insurance between land and water-carriage. Were there no other communication between those two places, therefore, but by land-carriage, as no goods could be transported from the one to other, except such whose price was very considerable in proportion to their weight, they could carry on but a small part of that commerce which at present subsists between them, and consequently could give but a small part of that encouragement which they at present mutually afford to each other's industry. There could be little or no commerce of any kind between the distant parts of the world. What goods could bear the expense of land-carriage between London and Calcutta? Or if there were any so precious as to be able to support this expense, with what safety could they be transported through the territories of so many barbarous nations? Those two cities, however, at present carry on a very considerable commerce with each other, and by mutually affording a market, give a good deal of encouragement to each other's industry. Since such, therefore, are the advantages of water-carriage, it is natural that the first improvements of art and industry should be made where this conveniency opens the whole world for a market to the produce of every sort of labour, and that they should always be much later in extending themselves into the inland parts of the country. The inland parts of the country can for a long time have no other market for the greater part of their goods, but the country which lies round about them, and separates them from the sea-coast, and the great navigable rivers. The extent of the market, therefore, must for a long time be in proportion to the riches and populousness of that country, and consequently their improvement must always be posterior to the improvement of that country. In our North American colonies, the plantations have constantly followed either the sea-coast or the banks of the navigable rivers, and have scarce anywhere extended themselves to any considerable distance from both. The nations that, according to the best authenticated history, appear to have been first civilized, were those that dwelt round the coast of the Mediterranean sea. That sea, by far the greatest inlet that is known in the world, having no tides, nor consequently any waves, except such as are caused by the wind only, was, by the smoothness of its surface, as well as by the multitude of its islands, and the proximity of its neighbouring shores, extremely favourable to the infant navigation of the world; when, from their ignorance of the compass, men were afraid to quit the view of the coast, and from the imperfection of the art of ship-building, to abandon themselves to the boisterous waves of the ocean. To pass beyond the pillars of Hercules, that is, to sail out of the straits of Gibraltar, was, in the ancient world, long considered as a most wonderful and dangerous exploit of navigation. It was late before even the Phoenicians and Carthaginians, the most skilful navigators and ship-builders of those old times, attempted it; and they were, for a long time, the only nations that did attempt it. Of all the countries on the coast of the Mediterranean sea, Egypt seems to have been the first in which either agriculture or manufactures were cultivated and improved to any considerable degree. Upper Egypt extends itself nowhere above a few miles from the Nile; and in Lower Egypt, that great river breaks itself into many different canals, which, with the assistance of a little art, seem to have afforded a communication by water-carriage, not only between all the great towns, but between all the considerable villages, and even to many farm-houses in the country, nearly in the same manner as the Rhine and the Maese do in Holland at present. The extent and easiness of this inland navigation was probably one of the principal causes of the early improvement of Egypt. The improvements in agriculture and manufactures seem likewise to have been of very great antiquity in the provinces of Bengal in the East Indies, and in some of the eastern provinces of China, though the great extent of this antiquity is not authenticated by any histories of whose authority we, in this part of the world, are well assured. In Bengal, the Ganges, and several other great rivers, form a great number of navigable canals, in the same manner as the Nile does in Egypt. In the eastern provinces of China, too, several great rivers form, by their different branches, a multitude of canals, and, by communicating with one another, afford an inland navigation much more extensive than that either of the Nile or the Ganges, or, perhaps, than both of them put together. It is remarkable, that neither the ancient Egyptians, nor the Indians, nor the Chinese, encouraged foreign commerce, but seem all to have derived their great opulence from this inland navigation. All the inland parts of Africa, and all that part of Asia which lies any considerable way north of the Euxine and Caspian seas, the ancient Scythia, the modern Tartary and Siberia, seem, in all ages of the world, to have been in the same barbarous and uncivilized state in which we find them at present. The sea of Tartary is the frozen ocean, which admits of no navigation; and though some of the greatest rivers in the world run through that country, they are at too great a distance from one another to carry commerce and communication through the greater part of it. There are in Africa none of those great inlets, such as the Baltic and Adriatic seas in Europe, the Mediterranean and Euxine seas in both Europe and Asia, and the gulfs of Arabia, Persia, India, Bengal, and Siam, in Asia, to carry maritime commerce into the interior parts of that great continent; and the great rivers of Africa are at too great a distance from one another to give occasion to any considerable inland navigation. The commerce, besides, which any nation can carry on by means of a river which does not break itself into any great number of branches or canals, and which runs into another territory before it reaches the sea, can never be very considerable, because it is always in the power of the nations who possess that other territory to obstruct the communication between the upper country and the sea. The navigation of the Danube is of very little use to the different states of Bavaria, Austria, and Hungary, in comparison of what it would be, if any of them possessed the whole of its course, till it falls into the Black sea. CHAP. IV. OF THE ORIGIN AND USE OF MONEY. When the division of labor has been once thoroughly established, it is but a very small part of a man's wants which the produce of his own labour can supply. He supplies the far greater part of them by exchanging that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men's labour as he has occasion for. Every man thus lives by exchanging, or becomes, in some measure, a merchant, and the society itself grows to be what is properly a commercial society. But when the division of labour first began to take place, this power of exchanging must frequently have been very much clogged and embarrassed in in operations. One man, we shall suppose, has more of a certain commodity than he himself has occasion for, while another has less. The former, consequently, would be glad to dispose of, and the latter to purchase, a part of this superfluity. But if this latter should chance to have nothing that the former stands in need of, no exchange can be made between them. The butcher has more meat in his shop than he himself can consume, and the brewer and the baker would each of them be willing to purchase a part of it. But they have nothing to offer in exchange, except the different productions of their respective trades, and the butcher is already provided with all the bread and beer which he has immediate occasion for. No exchange can, in this case, be made between them. He cannot be their merchant, nor they his customers; and they are all of them thus mutually less serviceable to one another. In order to avoid the inconveniency of such situations, every prudent man in every period of society, after the first establishment of the division of labour, must naturally have endeavoured to manage his affairs in such a manner, as to have at all times by him, besides the peculiar produce of his own industry, a certain quantity of some one commodity or other, such as he imagined few people would be likely to refuse in exchange for the produce of their industry. Many different commodities, it is probable, were successively both thought of and employed for this purpose. In the rude ages of society, cattle are said to have been the common instrument of commerce; and, though they must have been a most inconvenient one, yet, in old times, we find things were frequently valued according to the number of cattle which had been given in exchange for them. The armour of Diomede, says Homer, cost only nine oxen; but that of Glaucus cost a hundred oxen. Salt is said to be the common instrument of commerce and exchanges in Abyssinia; a species of shells in some parts of the coast of India; dried cod at Newfoundland; tobacco in Virginia; sugar in some of our West India colonies; hides or dressed leather in some other countries; and there is at this day a village in Scotland, where it is not uncommon, I am told, for a workman to carry nails instead of money to the baker's shop or the ale-house. In all countries, however, men seem at last to have been determined by irresistible reasons to give the preference, for this employment, to metals above every other commodity. Metals can not only be kept with as little loss as any other commodity, scarce any thing being less perishable than they are, but they can likewise, without any loss, be divided into any number of parts, as by fusion those parts can easily be re-united again; a quality which no other equally durable commodities possess, and which, more than any other quality, renders them fit to be the instruments of commerce and circulation. The man who wanted to buy salt, for example, and had nothing but cattle to give in exchange for it, must have been obliged to buy salt to the value of a whole ox, or a whole sheep, at a time. He could seldom buy less than this, because what he was to give for it could seldom be divided without loss; and if he had a mind to buy more, he must, for the same reasons, have been obliged to buy double or triple the quantity, the value, to wit, of two or three oxen, or of two or three sheep. If, on the contrary, instead of sheep or oxen, he had metals to give in exchange for it, he could easily proportion the quantity of the metal to the precise quantity of the commodity which he had immediate occasion for. Different metals have been made use of by different nations for this purpose. Iron was the common instrument of commerce among the ancient Spartans, copper among the ancient Romans, and gold and silver among all rich and commercial nations. Those metals seem originally to have been made use of for this purpose in rude bars, without any stamp or coinage. Thus we are told by Pliny[6], upon the authority of Timæus, an ancient historian, that, till the time of Servius Tullius, the Romans had no coined money, but made use of unstamped bars of copper, to purchase whatever they had occasion for. These rude bars, therefore, performed at this time the function of money. The use of metals in this rude state was attended with two very considerable inconveniences; first, with the trouble of weighing, and secondly, with that of assaying them. In the precious metals, where a small difference in the quantity makes a great difference in the value, even the business of weighing, with proper exactness, requires at least very accurate weights and scales. The weighing of gold, in particular, is an operation of some nicety. In the coarser metals, indeed, where a small error would be of little consequence, less accuracy would, no doubt, be necessary. Yet we should find it excessively troublesome if every time a poor man had occasion either to buy or sell a farthing's worth of goods, he was obliged to weigh the farthing. The operation of assaying is still more difficult, still more tedious; and, unless part of the metal is fairly melted in the crucible, with proper dissolvents, any conclusion that can be drawn from it is extremely uncertain. Before the institution of coined money, however, unless they went through this tedious and difficult operation, people must always have been liable to the grossest frauds and impositions; and instead of a pound weight of pure silver, or pure copper, might receive, in exchange for their goods, an adulterated composition of the coarsest and cheapest materials, which had, however, in their outward appearance, been made to resemble these metals. To prevent such abuses, to facilitate exchanges, and thereby to encourage all sorts of industry and commerce, it has been found necessary, in all countries that have made any considerable advances towards improvement, to affix a public stamp upon certain quantities of such particular metals, as were in those countries commonly made use of to purchase goods. Hence the origin of coined money, and of those public offices called mints; institutions exactly of the same nature with these of the aulnagers and stamp-masters of woollen and linen cloth. All of them are equally meant to ascertain, by means of a public stamp, the quantity and uniform goodness of those different commodities when brought to market. The first public stamps of this kind that were affixed to the current metals, seem in many cases to have been intended to ascertain, what it was both most difficult and most important to ascertain, the goodness or fineness of the metal, and to have resembled the sterling mark which is at present affixed to plate and bars of silver, or the Spanish mark which is sometimes affixed to ingots of gold, and which, being struck only upon one side of the piece, and not covering the whole surface, ascertains the fineness, but not the weight of the metal. Abraham weighs to Ephron the four hundred shekels of silver which he had agreed to pay for the field of Machpelah. They are said, however, to be the current money of the merchant, and yet are received by weight, and not by tale, in the same manner as ingots of gold and bars of silver are at present. The revenues of the ancient Saxon kings of England are said to have been paid, not in money, but in kind, that is, in victuals and provisions of all sorts. William the Conqueror introduced the custom of paying them in money. This money, however, was for a long time, received at the exchequer, by weight, and not by tale. The inconveniency and difficulty of weighing those metals with exactness, gave occasion to the institution of coins, of which the stamp, covering entirely both sides of the piece, and sometimes the edges too, was supposed to ascertain not only the fineness, but the weight of the metal. Such coins, therefore, were received by tale, as at present, without the trouble of weighing. The denominations of those coins seem originally to have expressed the weight or quantity of metal contained in them. In the time of Servius Tullius, who first coined money at Rome, the Roman as or pondo contained a Roman pound of good copper. It was divided, in the same manner as our Troyes pound, into twelve ounces, each of which contained a real ounce of good copper. The English pound sterling, in the time of Edward I. contained a pound, Tower weight, of silver of a known fineness. The Tower pound seems to have been something more than the Roman pound, and something less than the Troyes pound. This last was not introduced into the mint of England till the 18th of Henry the VIII. The French livre contained, in the time of Charlemagne, a pound, Troyes weight, of silver of a known fineness. The fair of Troyes in Champaign was at that time frequented by all the nations of Europe, and the weights and measures of so famous a market were generally know and esteemed. The Scots money pound contained, from the time of Alexander the First to that of Robert Bruce, a pound of silver of the same weight and fineness with the English pound sterling. English, French, and Scots pennies, too, contained all of them originally a real penny-weight of silver, the twentieth part of an ounce, and the two hundred-and-fortieth part of a pound. The shilling, too, seems originally to have been the denomination of a weight. _When wheat is at twelve shillings the quarter_, says an ancient statute of Henry III. _then wastel bread of a farthing shall weigh eleven shillings and fourpence_. The proportion, however, between the shilling, and either the penny on the one hand, or the pound on the other, seems not to have been so constant and uniform as that between the penny and the pound. During the first race of the kings of France, the French sou or shilling appears upon different occasions to have contained five, twelve, twenty, and forty pennies. Among the ancient Saxons, a shilling appears at one time to have contained only five pennies, and it is not improbable that it may have been as variable among them as among their neighbours, the ancient Franks. From the time of Charlemagne among the French, and from that of William the Conqueror among the English, the proportion between the pound, the shilling, and the penny, seems to have been uniformly the same as at present, though the value of each has been very different; for in every country of the world, I believe, the avarice and injustice of princes and sovereign states, abusing the confidence of their subjects, have by degrees diminished the real quantity of metal, which had been originally contained in their coins. The Roman as, in the latter ages of the republic, was reduced to the twenty-fourth part of its original value, and, instead of weighing a pound, came to weigh only half an ounce. The English pound and penny contain at present about a third only; the Scots pound and penny about a thirty-sixth; and the French pound and penny about a sixty-sixth part of their original value. By means of those operations, the princes and sovereign states which performed them were enabled, in appearance, to pay their debts and fulfil their engagements with a smaller quantity of silver than would otherwise have been requisite. It was indeed in appearance only; for their creditors were really defrauded of a part of what was due to them. All other debtors in the state were allowed the same privilege, and might pay with the same nominal sum of the new and debased coin whatever they had borrowed in the old. Such operations, therefore, have always proved favourable to the debtor, and ruinous to the creditor, and have sometimes produced a greater and more universal revolution in the fortunes of private persons, than could have been occasioned by a very great public calamity. It is in this manner that money has become, in all civilized nations, the universal instrument of commerce, by the intervention of which goods of all kinds are bought and sold, or exchanged for one another. What are the rules which men naturally observe, in exchanging them either for money, or for one another, I shall now proceed to examine. These rules determine what may be called the relative or exchangeable value of goods. The word VALUE, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called 'value in use;' the other, 'value in exchange.' The things which have the greatest value in use have frequently little or no value in exchange; and, on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water; but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it. In order to investigate the principles which regulate the exchangeable value of commodities, I shall endeavour to shew, First, what is the real measure of this exchangeable value; or wherein consists the real price of all commodities. Secondly, what are the different parts of which this real price is composed or made up. And, lastly, what are the different circumstances which sometimes raise some or all of these different parts of price above, and sometimes sink them below, their natural or ordinary rate; or, what are the causes which sometimes hinder the market price, that is, the actual price of commodities, from coinciding exactly with what may be called their natural price. I shall endeavour to explain, as fully and distinctly as I can, those three subjects in the three following chapters, for which I must very earnestly entreat both the patience and attention of the reader: his patience, in order to examine a detail which may, perhaps, in some places, appear unnecessarily tedious; and his attention, in order to understand what may perhaps, after the fullest explication which I am capable of giving it, appear still in some degree obscure. I am always willing to run some hazard of being tedious, in order to be sure that I am perspicuous; and, after taking the utmost pains that I can to be perspicuous, some obscurity may still appear to remain upon a subject, in its own nature extremely abstracted. CHAP. V. OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY. Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniencies, and amusements of human life. But after the division of labour has once thoroughly taken place, it is but a very small part of these with which a man's own labour can supply him. The far greater part of them he must derive from the labour of other people, and he must be rich or poor according to the quantity of that labour which he can command, or which he can afford to purchase. The value of any commodity, therefore, to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour therefore, is the real measure of the exchangeable value of all commodities. The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it and who wants to dispose of it, or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. What is bought with money, or with goods, is purchased by labour, as much as what we acquire by the toil of our own body. That money, or those goods, indeed, save us this toil. They contain the value of a certain quantity of labour, which we exchange for what is supposed at the time to contain the value of an equal quantity. Labour was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased; and its value, to those who possess it, and who want to exchange it for some new productions, is precisely equal to the quantity of labour which it can enable them to purchase or command. Wealth, as Mr Hobbes says, is power. But the person who either acquires, or succeeds to a great fortune, does not necessarily acquire or succeed to any political power, either civil or military. His fortune may, perhaps, afford him the means of acquiring both; but the mere possession of that fortune does not necessarily convey to him either. The power which that possession immediately and directly conveys to him, is the power of purchasing a certain command over all the labour, or over all the produce of labour which is then in the market. His fortune is greater or less, precisely in proportion to the extent of this power, or to the quantity either of other men's labour, or, what is the same thing, of the produce of other men's labour, which it enables him to purchase or command. The exchangeable value of every thing must always be precisely equal to the extent of this power which it conveys to its owner. But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated. It is often difficult to ascertain the proportion between two different quantities of labour. The time spent in two different sorts of work will not always alone determine this proportion. The different degrees of hardship endured, and of ingenuity exercised, must likewise be taken into account. There may be more labour in an hour's hard work, than in two hours easy business; or in an hour's application to a trade which it cost ten years labour to learn, than in a month's industry, at an ordinary and obvious employment. But it is not easy to find any accurate measure either of hardship or ingenuity. In exchanging, indeed, the different productions of different sorts of labour for one another, some allowance is commonly made for both. It is adjusted, however, not by any accurate measure, but by the higgling and bargaining of the market, according to that sort of rough equality which, though not exact, is sufficient for carrying on the business of common life. Every commodity, besides, is more frequently exchanged for, and thereby compared with, other commodities, than with labour. It is more natural, therefore, to estimate its exchangeable value by the quantity of some other commodity, than by that of the labour which it can produce. The greater part of people, too, understand better what is meant by a quantity of a particular commodity, than by a quantity of labour. The one is a plain palpable object; the other an abstract notion, which, though it can be made sufficiently intelligible, is not altogether so natural and obvious. But when barter ceases, and money has become the common instrument of commerce, every particular commodity is more frequently exchanged for money than for any other commodity. The butcher seldom carries his beef or his mutton to the baker or the brewer, in order to exchange them for bread or for beer; but he carries them to the market, where he exchanges them for money, and afterwards exchanges that money for bread and for beer. The quantity of money which he gets for them regulates, too, the quantity of bread and beer which he can afterwards purchase. It is more natural and obvious to him, therefore, to estimate their value by the quantity of money, the commodity for which he immediately exchanges them, than by that of bread and beer, the commodities for which he can exchange them only by the intervention of another commodity; and rather to say that his butcher's meat is worth threepence or fourpence a-pound, than that it is worth three or four pounds of bread, or three or four quarts of small beer. Hence it comes to pass, that the exchangeable value of every commodity is more frequently estimated by the quantity of money, than by the quantity either of labour or of any other commodity which can be had in exchange for it. Gold and silver, however, like every other commodity, vary in their value; are sometimes cheaper and sometimes dearer, sometimes of easier and sometimes of more difficult purchase. The quantity of labour which any particular quantity of them can purchase or command, or the quantity of other goods which it will exchange for, depends always upon the fertility or barrenness of the mines which happen to be known about the time when such exchanges are made. The discovery of the abundant mines of America, reduced, in the sixteenth century, the value of gold and silver in Europe to about a third of what it had been before. As it cost less labour to bring those metals from the mine to the market, so, when they were brought thither, they could purchase or command less labour; and this revolution in their value, though perhaps the greatest, is by no means the only one of which history gives some account. But as a measure of quantity, such as the natural foot, fathom, or handful, which is continually varying in its own quantity, can never be an accurate measure of the quantity of other things; so a commodity which is itself continually varying in its own value, can never be an accurate measure of the value of other commodities. Equal quantities of labour, at all times and places, may be said to be of equal value to the labourer. In his ordinary state of health, strength, and spirits; in the ordinary degree of his skill and dexterity, he must always lay down the same portion of his ease, his liberty, and his happiness. The price which he pays must always be the same, whatever may be the quantity of goods which he receives in return for it. Of these, indeed, it may sometimes purchase a greater and sometimes a smaller quantity; but it is their value which varies, not that of the labour which purchases them. At all times and places, that is dear which it is difficult to come at, or which it costs much labour to acquire; and that cheap which is to be had easily, or with very little labour. Labour alone, therefore, never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. It is their real price; money is their nominal price only. But though equal quantities of labour are always of equal value to the labourer, yet to the person who employs him they appear sometimes to be of greater, and sometimes of smaller value. He purchases them sometimes with a greater, and sometimes with a smaller quantity of goods, and to him the price of labour seems to vary like that of all other things. It appears to him dear in the one case, and cheap in the other. In reality, however, it is the goods which are cheap in the one case, and dear in the other. In this popular sense, therefore, labour, like commodities, may be said to have a real and a nominal price. Its real price may be said to consist in the quantity of the necessaries and conveniencies of life which are given for it; its nominal price, in the quantity of money. The labourer is rich or poor, is well or ill rewarded, in proportion to the real, not to the nominal price of his labour. The distinction between the real and the nominal price of commodities and labour is not a matter of mere speculation, but may sometimes be of considerable use in practice. The same real price is always of the same value; but on account of the variations in the value of gold and silver, the same nominal price is sometimes of very different values. When a landed estate, therefore, is sold with a reservation of a perpetual rent, if it is intended that this rent should always be of the same value, it is of importance to the family in whose favour it is reserved, that it should not consist in a particular sum of money. Its value would in this case be liable to variations of two different kinds: first, to those which arise from the different quantities of gold and silver which are contained at different times in coin of the same denomination; and, secondly, to those which arise from the different values of equal quantities of gold and silver at different times. Princes and sovereign states have frequently fancied that they had a temporary interest to diminish the quantity of pure metal contained in their coins; but they seldom have fancied that they had any to augment it. The quantity of metal contained in the coins, I believe of all nations, has accordingly been almost continually diminishing, and hardly ever augmenting. Such variations, therefore, tend almost always to diminish the value of a money rent. The discovery of the mines of America diminished the value of gold and silver in Europe. This diminution, it is commonly supposed, though I apprehend without any certain proof, is still going on gradually, and is likely to continue to do so for a long time. Upon this supposition, therefore, such variations are more likely to diminish than to augment the value of a money rent, even though it should be stipulated to be paid, not in such a quantity of coined money of such a denomination (in so many pounds sterling, for example), but in so many ounces, either of pure silver, or of silver of a certain standard. The rents which have been reserved in corn, have preserved their value much better than those which have been reserved in money, even where the denomination of the coin has not been altered. By the 18th of Elizabeth, it was enacted, that a third of the rent of all college leases should be reserved in corn, to be paid either in kind, or according to the current prices at the nearest public market. The money arising from this corn rent, though originally but a third of the whole, is, in the present times, according to Dr. Blackstone, commonly near double of what arises from the other two-thirds. The old money rents of colleges must, according to this account, have sunk almost to a fourth part of their ancient value, or are worth little more than a fourth part of the corn which they were formerly worth. But since the reign of Philip and Mary, the denomination of the English coin has undergone little or no alteration, and the same number of pounds, shillings, and pence, have contained very nearly the same quantity of pure silver. This degradation, therefore, in the value of the money rents of colleges, has arisen altogether from the degradation in the price of silver. When the degradation in the value of silver is combined with the diminution of the quantity of it contained in the coin of the same denomination, the loss is frequently still greater. In Scotland, where the denomination of the coin has undergone much greater alterations than it ever did in England, and in France, where it has undergone still greater than it ever did in Scotland, some ancient rents, originally of considerable value, have, in this manner, been reduced almost to nothing. Equal quantities of labour will, at distant times, be purchased more nearly with equal quantities of corn, the subsistence of the labourer, than with equal quantities of gold and silver, or, perhaps, of any other commodity. Equal quantities of corn, therefore, will, at distant times, be more nearly of the same real value, or enable the possessor to purchase or command more nearly the same quantity of the labour of other people. They will do this, I say, more nearly than equal quantities of almost any other commodity; for even equal quantities of corn will not do it exactly. The subsistence of the labourer, or the real price of labour, as I shall endeavour to shew hereafter, is very different upon different occasions; more liberal in a society advancing to opulence, than in one that is standing still, and in one that is standing still, than in one that is going backwards. Every other commodity, however, will, at any particular time, purchase a greater or smaller quantity of labour, in proportion to the quantity of subsistence which it can purchase at that time. A rent, therefore, reserved in corn, is liable only to the variations in the quantity of labour which a certain quantity of corn can purchase. But a rent reserved in any other commodity is liable, not only to the variations in the quantity of labour which any particular quantity of corn can purchase, but to the variations in the quantity of corn which can be purchased by any particular quantity of that commodity. Though the real value of a corn rent, it is to be observed, however, varies much less from century to century than that of a money rent, it varies much more from year to year. The money price of labour, as I shall endeavour to shew hereafter, does not fluctuate from year to year with the money price of corn, but seems to be everywhere accommodated, not to the temporary or occasional, but to the average or ordinary price of that necessary of life. The average or ordinary price of corn, again is regulated, as I shall likewise endeavour to shew hereafter, by the value of silver, by the richness or barrenness of the mines which supply the market with that metal, or by the quantity of labour which must be employed, and consequently of corn which must be consumed, in order to bring any particular quantity of silver from the mine to the market. But the value of silver, though it sometimes varies greatly from century to century, seldom varies much from year to year, but frequently continues the same, or very nearly the same, for half a century or a century together. The ordinary or average money price of corn, therefore, may, during so long a period, continue the same, or very nearly the same, too, and along with it the money price of labour, provided, at least, the society continues, in other respects, in the same, or nearly in the same, condition. In the mean time, the temporary and occasional price of corn may frequently be double one year of what it had been the year before, or fluctuate, for example, from five-and-twenty to fifty shillings the quarter. But when corn is at the latter price, not only the nominal, but the real value of a corn rent, will be double of what it is when at the former, or will command double the quantity either of labour, or of the greater part of other commodities; the money price of labour, and along with it that of most other things, continuing the same during all these fluctuations. Labour, therefore, it appears evidently, is the only universal, as well as the only accurate, measure of value, or the only standard by which we can compare the values of different commodities, at all times, and at all places. We cannot estimate, it is allowed, the real value of different commodities from century to century by the quantities of silver which were given for them. We cannot estimate it from year to year by the quantities of corn. By the quantities of labour, we can, with the greatest accuracy, estimate it, both from century to century, and from year to year. From century to century, corn is a better measure than silver, because, from century to century, equal quantities of corn will command the same quantity of labour more nearly than equal quantities of silver. From year to year, on the contrary, silver is a better measure than corn, because equal quantities of it will more nearly command the same quantity of labour. But though, in establishing perpetual rents, or even in letting very long leases, it may be of use to distinguish between real and nominal price; it is of none in buying and selling, the more common and ordinary transactions of human life. At the same time and place, the real and the nominal price of all commodities are exactly in proportion to one another. The more or less money you get for any commodity, in the London market, for example, the more or less labour it will at that time and place enable you to purchase or command. At the same time and place, therefore, money is the exact measure of the real exchangeable value of all commodities. It is so, however, at the same time and place only. Though at distant places there is no regular proportion between the real and the money price of commodities, yet the merchant who carries goods from the one to the other, has nothing to consider but the money price, or the difference between the quantity of silver for which he buys them, and that for which he is likely to sell them. Half an ounce of silver at Canton in China may command a greater quantity both of labour and of the necessaries and conveniencies of life, than an ounce at London. A commodity, therefore, which sells for half an ounce of silver at Canton, may there be really dearer, of more real importance to the man who possesses it there, than a commodity which sells for an ounce at London is to the man who possesses it at London. If a London merchant, however, can buy at Canton, for half an ounce of silver, a commodity which he can afterwards sell at London for an ounce, he gains a hundred per cent. by the bargain, just as much as if an ounce of silver was at London exactly of the same value as at Canton. It is of no importance to him that half an ounce of silver at Canton would have given him the command of more labour, and of a greater quantity of the necessaries and conveniencies of life than an ounce can do at London. An ounce at London will always give him the command of double the quantity of all these, which half an ounce could have done there, and this is precisely what he wants. As it is the nominal or money price of goods, therefore, which finally determines the prudence or imprudence of all purchases and sales, and thereby regulates almost the whole business of common life in which price is concerned, we cannot wonder that it should have been so much more attended to than the real price. In such a work as this, however, it may sometimes be of use to compare the different real values of a particular commodity at different times and places, or the different degrees of power over the labour of other people which it may, upon different occasions, have given to those who possessed it. We must in this case compare, not so much the different quantities of silver for which it was commonly sold, as the different quantities of labour which those different quantities of silver could have purchased. But the current prices of labour, at distant times and places, can scarce ever be known with any degree of exactness. Those of corn, though they have in few places been regularly recorded, are in general better known, and have been more frequently taken notice of by historians and other writers. We must generally, therefore, content ourselves with them, not as being always exactly in the same proportion as the current prices of labour, but as being the nearest approximation which can commonly be had to that proportion. I shall hereafter have occasion to make several comparisons of this kind. In the progress of industry, commercial nations have found it convenient to coin several different metals into money; gold for larger payments, silver for purchases of moderate value, and copper, or some other coarse metal, for those of still smaller consideration. They have always, however, considered one of those metals as more peculiarly the measure of value than any of the other two; and this preference seems generally to have been given to the metal which they happen first to make use of as the instrument of commerce. Having once begun to use it as their standard, which they must have done when they had no other money, they have generally continued to do so even when the necessity was not the same. The Romans are said to have had nothing but copper money till within five years before the first Punic war[7], when they first began to coin silver. Copper, therefore, appears to have continued always the measure of value in that republic. At Rome all accounts appear to have been kept, and the value of all estates to have been computed, either in _asses_ or in _sestertii_. The _as_ was always the denomination of a copper coin. The word _sestertius_ signifies two _asses_ and a half. Though the _sestertius_, therefore, was originally a silver coin, its value was estimated in copper. At Rome, one who owed a great deal of money was said to have a great deal of other people's copper. The northern nations who established themselves upon the ruins of the Roman empire, seem to have had silver money from the first beginning of their settlements, and not to have known either gold or copper coins for several ages thereafter. There were silver coins in England in the time of the Saxons; but there was little gold coined till the time of of Edward III. nor any copper till that of James I. of Great Britain. In England, therefore, and for the same reason, I believe, in all other modern nations of Europe, all accounts are kept, and the value of all goods and of all estates is generally computed, in silver: and when we mean to express the amount of a person's fortune, we seldom mention the number of guineas, but the number of pounds sterling which we suppose would be given for it. Originally, in all countries, I believe, a legal tender of payment could be made only in the coin of that metal which was peculiarly considered as the standard or measure of value. In England, gold was not considered as a legal tender for a long time after it was coined into money. The proportion between the values of gold and silver money was not fixed by any public law or proclamation, but was left to be settled by the market. If a debtor offered payment in gold, the creditor might either reject such payment altogether, or accept of it at such a valuation of the gold as he and his debtor could agree upon. Copper is not at present a legal tender, except in the change of the smaller silver coins. In this state of things, the distinction between the metal which was the standard, and that which was not the standard, was something more than a nominal distinction. In process of time, and as people became gradually more familiar with the use of the different metals in coin, and consequently better acquainted with the proportion between their respective values, it has, in most countries, I believe, been found convenient to ascertain this proportion, and to declare by a public law, that a guinea, for example, of such a weight and fineness, should exchange for one-and-twenty shillings, or be a legal tender for a debt of that amount. In this state of things, and during the continuance of any one regulated proportion of this kind, the distinction between the metal, which is the standard, and that which is not the standard, becomes little more than a nominal distinction. In consequence of any change, however, in this regulated proportion, this distinction becomes, or at least seems to become, something more than nominal again. If the regulated value of a guinea, for example, was either reduced to twenty, or raised to two-and-twenty shillings, all accounts being kept, and almost all obligations for debt being expressed, in silver money, the greater part of payments could in either case be made with the same quantity of silver money as before; but would require very different quantities of gold money; a greater in the one case, and a smaller in the other. Silver would appear to be more invariable in its value than gold. Silver would appear to measure the value of gold, and gold would not appear to measure the value of silver. The value of gold would seem to depend upon the quantity of silver which it would exchange for, and the value of silver would not seem to depend upon the quantity of gold which it would exchange for. This difference, however, would be altogether owing to the custom of keeping accounts, and of expressing the amount of all great and small sums rather in silver than in gold money. One of Mr Drummond's notes for five-and-twenty or fifty guineas would, after an alteration of this kind, be still payable with five-and-twenty or fifty guineas, in the same manner as before. It would, after such an alteration, be payable with the same quantity of gold as before, but with very different quantities of silver. In the payment of such a note, gold would appear to be more invariable in its value than silver. Gold would appear to measure the value of silver, and silver would not appear to measure the value of gold. If the custom of keeping accounts, and of expressing promissory-notes and other obligations for money, in this manner should ever become general, gold, and not silver, would be considered as the metal which was peculiarly the standard or measure of value. In reality, during the continuance of any one regulated proportion between the respective values of the different metals in coin, the value of the most precious metal regulates the value of the whole coin. Twelve copper pence contain half a pound avoirdupois of copper, of not the best quality, which, before it is coined, is seldom worth sevenpence in silver. But as, by the regulation, twelve such pence are ordered to exchange for a shilling, they are in the market considered as worth a shilling, and a shilling can at any time be had for them. Even before the late reformation of the gold coin of Great Britain, the gold, that part of it at least which circulated in London and its neighbourhood, was in general less degraded below its standard weight than the greater part of the silver. One-and-twenty worn and defaced shillings, however, were considered as equivalent to a guinea, which, perhaps, indeed, was worn and defaced too, but seldom so much so. The late regulations have brought the gold coin as near, perhaps, to its standard weight as it is possible to bring the current coin of any nation; and the order to receive no gold at the public offices but by weight, is likely to preserve it so, as long as that order is enforced. The silver coin still continues in the same worn and degraded state as before the reformation of the gold coin. In the market, however, one-and-twenty shillings of this degraded silver coin are still considered as worth a guinea of this excellent gold coin. The reformation of the gold coin has evidently raised the value of the silver coin which can be exchanged for it. In the English mint, a pound weight of gold is coined into forty-four guineas and a half, which at one-and-twenty shillings the guinea, is equal to forty-six pounds fourteen shillings and sixpence. An ounce of such gold coin, therefore, is worth L.3 : 17 : 10-1/2 in silver. In England, no duty or seignorage is paid upon the coinage, and he who carries a pound weight or an ounce weight of standard gold bullion to the mint, gets back a pound weight or an ounce weight of gold in coin, without any deduction. Three pounds seventeen shillings and tenpence halfpenny an ounce, therefore, is said to be the mint price of gold in England, or the quantity of gold coin which the mint gives in return for standard gold bullion. Before the reformation of the gold coin, the price of standard gold bullion in the market had, for many years, been upwards of L.3 : 18s. sometimes L.3 : 19s. and very frequently L.4 an ounce; that sum, it is probable, in the worn and degraded gold coin, seldom containing more than an ounce of standard gold. Since the reformation of the gold coin, the market price of standard gold bullion seldom exceeds L.3 : 17 : 7 an ounce. Before the reformation of the gold coin, the market price was always more or less above the mint price. Since that reformation, the market price has been constantly below the mint price. But that market price is the same whether it is paid in gold or in silver coin. The late reformation of the gold coin, therefore, has raised not only the value of the gold coin, but likewise that of the silver coin in proportion to gold bullion, and probably, too, in proportion to all other commodities; though the price of the greater part of other commodities being influenced by so many other causes, the rise in the value of either gold or silver coin in proportion to them may not be so distinct and sensible. In the English mint, a pound weight of standard silver bullion is coined into sixty-two shillings, containing, in the same manner, a pound weight of standard silver. Five shillings and twopence an ounce, therefore, is said to be the mint price of silver in England, or the quantity of silver coin which the mint gives in return for standard silver bullion. Before the reformation of the gold coin, the market price of standard silver bullion was, upon different occasions, five shillings and fourpence, five shillings and fivepence, five shillings and sixpence, five shillings and sevenpence, and very often five shillings and eightpence an ounce. Five shillings and sevenpence, however, seems to have been the most common price. Since the reformation of the gold coin, the market price of standard silver bullion has fallen occasionally to five shillings and threepence, five shillings and fourpence, and five shillings and fivepence an ounce, which last price it has scarce ever exceeded. Though the market price of silver bullion has fallen considerably since the reformation of the gold coin, it has not fallen so low as the mint price. In the proportion between the different metals in the English coin, as copper is rated very much above its real value, so silver is rated somewhat below it. In the market of Europe, in the French coin and in the Dutch coin, an ounce of fine gold exchanges for about fourteen ounces of fine silver. In the English coin, it exchanges for about fifteen ounces, that is, for more silver than it is worth, according to the common estimation of Europe. But as the price of copper in bars is not, even in England, raised by the high price of copper in English coin, so the price of silver in bullion is not sunk by the low rate of silver in English coin. Silver in bullion still preserves its proper proportion to gold, for the same reason that copper in bars preserves its proper proportion to silver. Upon the reformation of the silver coin, in the reign of William III., the price of silver bullion still continued to be somewhat above the mint price. Mr Locke imputed this high price to the permission of exporting silver bullion, and to the prohibition of exporting silver coin. This permission of exporting, he said, rendered the demand for silver bullion greater than the demand for silver coin. But the number of people who want silver coin for the common uses of buying and selling at home, is surely much greater than that of those who want silver bullion either for the use of exportation or for any other use. There subsists at present a like permission of exporting gold bullion, and a like prohibition of exporting gold coin; and yet the price of gold bullion has fallen below the mint price. But in the English coin, silver was then, in the same manner as now, under-rated in proportion to gold; and the gold coin (which at that time, too, was not supposed to require any reformation) regulated then, as well as now, the real value of the whole coin. As the reformation of the silver coin did not then reduce the price of silver bullion to the mint price, it is not very probable that a like reformation will do so now. Were the silver coin brought back as near to its standard weight as the gold, a guinea, it is probable, would, according to the present proportion, exchange for more silver in coin than it would purchase in bullion. The silver coin containing its full standard weight, there would in this case, be a profit in melting it down, in order, first to sell the bullion for gold coin, and afterwards to exchange this gold coin for silver coin, to be melted down in the same manner. Some alteration in the present proportion seems to be the only method of preventing this inconveniency. The inconveniency, perhaps, would be less, if silver was rated in the coin as much above its proper proportion to gold as it is at present rated below it, provided it was at the same time enacted, that silver should not be a legal tender for more than the change of a guinea, in the same manner as copper is not a legal tender for more than the change of a shilling. No creditor could, in this case, be cheated in consequence of the high valuation of silver in coin; as no creditor can at present be cheated in consequence of the high valuation of copper. The bankers only would suffer by this regulation. When a run comes upon them, they sometimes endeavour to gain time, by paying in sixpences, and they would be precluded by this regulation from this discreditable method of evading immediate payment. They would be obliged, in consequence, to keep at all times in their coffers a greater quantity of cash than at present; and though this might, no doubt, be a considerable inconveniency to them, it would, at the same time, be a considerable security to their creditors. Three pounds seventeen shillings and tenpence halfpenny (the mint price of gold) certainly does not contain, even in our present excellent gold coin, more than an ounce of standard gold, and it may be thought, therefore, should not purchase more standard bullion. But gold in coin is more convenient than gold in bullion; and though, in England, the coinage is free, yet the gold which is carried in bullion to the mint, can seldom be returned in coin to the owner till after a delay of several weeks. In the present hurry of the mint, it could not be returned till after a delay of several months. This delay is equivalent to a small duty, and renders gold in coin somewhat more valuable than an equal quantity of gold in bullion. If, in the English coin, silver was rated according to its proper proportion to gold, the price of silver bullion would probably fall below the mint price, even without any reformation of the silver coin; the value even of the present worn and defaced silver coin being regulated by the value of the excellent gold coin for which it can be changed. A small seignorage or duty upon the coinage of both gold and silver, would probably increase still more the superiority of those metals in coin above an equal quantity of either of them in bullion. The coinage would, in this case, increase the value of the metal coined in proportion to the extent of this small duty, for the same reason that the fashion increases the value of plate in proportion to the price of that fashion. The superiority of coin above bullion would prevent the melting down of the coin, and would discourage its exportation. If, upon any public exigency, it should become necessary to export the coin, the greater part of it would soon return again, of its own accord. Abroad, it would sell only for its weight in bullion. At home, it would buy more than that weight. There would be a profit, therefore, in bringing it home again. In France, a seignorage of about eight per cent. is imposed upon the coinage, and the French coin, when exported, is said to return home again, of its own accord. The occasional fluctuations in the market price of gold and silver bullion arise from the same causes as the like fluctuations in that of all other commodities. The frequent loss of those metals from various accidents by sea and land, the continual waste of them in gilding and plating, in lace and embroidery, in the wear and tear of coin, and in that of plate, require, in all countries which possess no mines of their own, a continual importation, in order to repair this lose and this waste. The merchant importers, like all other merchants, we may believe, endeavour, as well as they can, to suit their occasional importations to what they judge is likely to be the immediate demand. With all their attention, however, they sometimes overdo the business, and sometimes underdo it. When they import more bullion than is wanted, rather than incur the risk and trouble of exporting it again, they are sometimes willing to sell a part of it for something less than the ordinary or average price. When, on the other hand, they import less than is wanted, they get something more than this price. But when, under all those occasional fluctuations, the market price either of gold or silver bullion continues for several years together steadily and constantly, either more or less above, or more or less below the mint price, we may be assured that this steady and constant, either superiority or inferiority of price, is the effect of something in the state of the coin, which, at that time, renders a certain quantity of coin either of more value or of less value than precise quantity of bullion which it ought to contain. The constancy and steadiness of the effect supposes a proportionable constancy and steadiness in the cause. The money of any particular country is, at any particular time and place, more or less an accurate measure or value, according as the current coin is more or less exactly agreeable to its standard, or contains more or less exactly the precise quantity of pure gold or silver which it ought to contain. If in England, for example, forty-four guineas and a half contained exactly a pound weight of standard gold, or eleven ounces of fine gold, and one ounce of alloy, the gold coin of England would be as accurate a measure of the actual goods at any particular time and place as the nature of the thing would admit. But if, by rubbing and wearing, forty-four guineas and a half generally contain less than a pound weight of standard gold, the diminution, however, being greater in some pieces than in others, the measure of value comes to be liable to the same sort of uncertainty to which all other weights and measures are commonly exposed. As it rarely happens that these are exactly agreeable to their standard, the merchant adjusts the price of his goods as well as he can, not to what those weights and measures ought to be, but to what, upon an average, he finds, by experience, they actually are. In consequence of a like disorder in the coin, the price of goods comes, in the same manner, to be adjusted, not to the quantity of pure gold or silver which the coin ought to contain, but to that which, upon an average, it is found, by experience, it actually does contain. By the money price of goods, it is to be observed, I understand always the quantity of pure gold or silver for which they are sold, without any regard to the denomination of the coin. Six shillings and eight pence, for example, in the time of Edward I., I consider as the same money price with a pound sterling in the present times, because it contained, as nearly as we can judge, the same quantity of pure silver. CHAP. VI. OF THE COMPONENT PART OF THE PRICE OF COMMODITIES. In that early and rude state of society which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labour necessary for acquiring different objects, seems to be the only circumstance which can afford any rule for exchanging them for one another. If among a nation of hunters, for example, it usually costs twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer. It is natural that what is usually the produce of two days or two hours labour, should be worth double of what is usually the produce of one day's or one hour's labour. If the one species of labour should be more severe than the other, some allowance will naturally be made for this superior hardship; and the produce of one hour's labour in the one way may frequently exchange for that of two hour's labour in the other. Or if the one species of labour requires an uncommon degree of dexterity and ingenuity, the esteem which men have for such talents, will naturally give a value to their produce, superior to what would be due to the time employed about it. Such talents can seldom be acquired but in consequence of long application, and the superior value of their produce may frequently be no more than a reasonable compensation for the time and labour which must be spent in acquiring them. In the advanced state of society, allowances of this kind, for superior hardship and superior skill, are commonly made in the wages of labour; and something of the same kind must probably have taken place in its earliest and rudest period. In this state of things, the whole produce of labour belongs to the labourer; and the quantity of labour commonly employed in acquiring or producing any commodity, is the only circumstance which can regulate the quantity of labour which it ought commonly to purchase, command, or exchange for. As soon as stock has accumulated in the hands of particular persons, some of them will naturally employ it in setting to work industrious people, whom they will supply with materials and subsistence, in order to make a profit by the sale of their work, or by what their labour adds to the value of the materials. In exchanging the complete manufacture either for money, for labour, or for other goods, over and above what may be sufficient to pay the price of the materials, and the wages of the workmen, something must be given for the profits of the undertaker of the work, who hazards his stock in this adventure. The value which the workmen add to the materials, therefore, resolves itself in this case into two parts of which the one pays their wages, the other the profits of their employer upon the whole stock of materials and wages which he advanced. He could have no interest to employ them, unless he expected from the sale of their work something more than what was sufficient to replace his stock to him; and he could have no interest to employ a great stock rather than a small one, unless his profits were to bear some proportion to the extent of his stock. The profits of stock, it may perhaps be thought, are only a different name for the wages of a particular sort of labour, the labour of inspection and direction. They are, however, altogether different, are regulated by quite different principles, and bear no proportion to the quantity, the hardship, or the ingenuity of this supposed labour of inspection and direction. They are regulated altogether by the value of the stock employed, and are greater or smaller in proportion to the extent of this stock. Let us suppose, for example, that in some particular place, where the common annual profits of manufacturing stock are ten per cent. there are two different manufactures, in each of which twenty workmen are employed, at the rate of fifteen pounds a year each, or at the expense of three hundred a-year in each manufactory. Let us suppose, too, that the coarse materials annually wrought up in the one cost only seven hundred pounds, while the finer materials in the other cost seven thousand. The capital annually employed in the one will, in this case, amount only to one thousand pounds; whereas that employed in the other will amount to seven thousand three hundred pounds. At the rate of ten per cent. therefore, the undertaker of the one will expect a yearly profit of about one hundred pounds only; while that of the other will expect about seven hundred and thirty pounds. But though their profits are so very different, their labour of inspection and direction may be either altogether or very nearly the same. In many great works, almost the whole labour of this kind is committed to some principal clerk. His wages properly express the value of this labour of inspection and direction. Though in settling them some regard is had commonly, not only to his labour and skill, but to the trust which is reposed in him, yet they never bear any regular proportion to the capital of which he oversees the management; and the owner of this capital, though he is thus discharged of almost all labour, still expects that his profit should bear a regular proportion to his capital. In the price of commodities, therefore, the profits of stock constitute a component part altogether different from the wages of labour, and regulated by quite different principles. In this state of things, the whole produce of labour does not always belong to the labourer. He must in most cases share it with the owner of the stock which employs him. Neither is the quantity of labour commonly employed in acquiring or producing any commodity, the only circumstance which can regulate the quantity which it ought commonly to purchase, command or exchange for. An additional quantity, it is evident, must be due for the profits of the stock which advanced the wages and furnished the materials of that labour. As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce. The wood of the forest, the grass of the field, and all the natural fruits of the earth, which, when land was in common, cost the labourer only the trouble of gathering them, come, even to him, to have an additional price fixed upon them. He must then pay for the licence to gather them, and must give up to the landlord a portion of what his labour either collects or produces. This portion, or, what comes to the same thing, the price of this portion, constitutes the rent of land, and in the price of the greater part of commodities, makes a third component part. The real value of all the different component parts of price, it must be observed, is measured by the quantity of labour which they can, each of them, purchase or command. Labour measures the value, not only of that part of price which resolves itself into labour, but of that which resolves itself into rent, and of that which resolves itself into profit. In every society, the price of every commodity finally resolves itself into some one or other, or all of those three parts; and in every improved society, all the three enter, more or less, as component parts, into the price of the far greater part of commodities. In the price of corn, for example, one part pays the rent of the landlord, another pays the wages or maintenance of the labourers and labouring cattle employed in producing it, and the third pays the profit of the farmer. These three parts seem either immediately or ultimately to make up the whole price of corn. A fourth part, it may perhaps be thought is necessary for replacing the stock of the farmer, or for compensating the wear and tear of his labouring cattle, and other instruments of husbandry. But it must be considered, that the price of any instrument of husbandry, such as a labouring horse, is itself made up of the same three parts; the rent of the land upon which he is reared, the labour of tending and rearing him, and the profits of the farmer, who advances both the rent of this land, and the wages of this labour. Though the price of the corn, therefore, may pay the price as well as the maintenance of the horse, the whole price still resolves itself, either immediately or ultimately, into the same three parts of rent, labour, and profit. In the price of flour or meal, we must add to the price of the corn, the profits of the miller, and the wages of his servants; in the price of bread, the profits of the baker, and the wages of his servants; and in the price of both, the labour of transporting the corn from the house of the farmer to that of the miller, and from that of the miller to that of the baker, together with the profits of those who advance the wages of that labour. The price of flax resolves itself into the same three parts as that of corn. In the price of linen we must add to this price the wages of the flax-dresser, of the spinner, of the weaver, of the bleacher, &c. together with the profits of their respective employers. As any particular commodity comes to be more manufactured, that part of the price which resolves itself into wages and profit, comes to be greater in proportion to that which resolves itself into rent. In the progress of the manufacture, not only the number of profits increase, but every subsequent profit is greater than the foregoing; because the capital from which it is derived must always be greater. The capital which employs the weavers, for example, must be greater than that which employs the spinners; because it not only replaces that capital with its profits, but pays, besides, the wages of the weavers: and the profits must always bear some proportion to the capital. In the most improved societies, however, there are always a few commodities of which the price resolves itself into two parts only, the wages of labour, and the profits of stock; and a still smaller number, in which it consists altogether in the wages of labour. In the price of sea-fish, for example, one part pays the labour of the fisherman, and the other the profits of the capital employed in the fishery. Rent very seldom makes any part of it, though it does sometimes, as I shall shew hereafter. It is otherwise, at least through the greater part of Europe, in river fisheries. A salmon fishery pays a rent; and rent, though it cannot well be called the rent of land, makes a part of the price of a salmon, as well as wages and profit. In some parts of Scotland, a few poor people make a trade of gathering, along the sea-shore, those little variegated stones commonly known by the name of Scotch pebbles. The price which is paid to them by the stone-cutter, is altogether the wages of their labour; neither rent nor profit makes any part of it. But the whole price of any commodity must still finally resolve itself into some one or other or all of those three parts; as whatever part of it remains after paying the rent of the land, and the price of the whole labour employed in raising, manufacturing, and bringing it to market, must necessarily be profit to somebody. As the price or exchangeable value of every particular commodity, taken separately, resolves itself into some one or other, or all of those three parts; so that of all the commodities which compose the whole annual produce of the labour of every country, taken complexly, must resolve itself into the same three parts, and be parcelled out among different inhabitants of the country, either as the wages of their labour, the profits of their stock, or the rent of their land. The whole of what is annually either collected or produced by the labour of every society, or, what comes to the same thing, the whole price of it, is in this manner originally distributed among some of its different members. Wages, profit, and rent, are the three original sources of all revenue, as well as of all exchangeable value. All other revenue is ultimately derived from some one or other of these. Whoever derives his revenue from a fund which is his own, must draw it either from his labour, from his stock, or from his land. The revenue derived from labour is called wages; that derived from stock, by the person who manages or employs it, is called profit; that derived from it by the person who does not employ it himself, but lends it to another, is called the interest or the use of money. It is the compensation which the borrower pays to the lender, for the profit which he has an opportunity of making by the use of the money. Part of that profit naturally belongs to the borrower, who runs the risk and takes the trouble of employing it, and part to the lender, who affords him the opportunity of making this profit. The interest of money is always a derivative revenue, which, if it is not paid from the profit which is made by the use of the money, must be paid from some other source of revenue, unless perhaps the borrower is a spendthrift, who contracts a second debt in order to pay the interest of the first. The revenue which proceeds altogether from land, is called rent, and belongs to the landlord. The revenue of the farmer is derived partly from his labour, and partly from his stock. To him, land is only the instrument which enables him to earn the wages of this labour, and to make the profits of this stock. All taxes, and all the revenue which is founded upon them, all salaries, pensions, and annuities of every kind, are ultimately derived from some one or other of those three original sources of revenue, and are paid either immediately or mediately from the wages of labour, the profits of stock, or the rent of land. When those three different sorts of revenue belong to different persons, they are readily distinguished; but when they belong to the same, they are sometimes confounded with one another, at least in common language. A gentleman who farms a part of his own estate, after paying the expense of cultivation, should gain both the rent of the landlord and the profit of the farmer. He is apt to denominate, however, his whole gain, profit, and thus confounds rent with profit, at least in common language. The greater part of our North American and West Indian planters are in this situation. They farm, the greater part of them, their own estates; and accordingly we seldom hear of the rent of a plantation, but frequently of its profit. Common farmers seldom employ any overseer to direct the general operations of the farm. They generally, too, work a good deal with their own hands, as ploughmen, harrowers, &c. What remains of the crop, after paying the rent, therefore, should not only replace to them their stock employed in cultivation, together with its ordinary profits, but pay them the wages which are due to them, both as labourers and overseers. Whatever remains, however, after paying the rent and keeping up the stock, is called profit. But wages evidently make a part of it. The farmer, by saving these wages, must necessarily gain them. Wages, therefore, are in this case confounded with profit. An independent manufacturer, who has stock enough both to purchase materials, and to maintain himself till he can carry his work to market, should gain both the wages of a journeyman who works under a master, and the profit which that master makes by the sale of that journeyman's work. His whole gains, however, are commonly called profit, and wages are, in this case, too, confounded with profit. A gardener who cultivates his own garden with his own hands, unites in his own person the three different characters, of landlord, farmer, and labourer. His produce, therefore, should pay him the rent of the first, the profit of the second, and the wages of the third. The whole, however, is commonly considered as the earnings of his labour. Both rent and profit are, in this case, confounded with wages. As in a civilized country there are but few commodities of which the exchangeable value arises from labour only, rent and profit contributing largely to that of the far greater part of them, so the annual produce of its labour will always be sufficient to purchase or command a much greater quantity of labour than what was employed in raising, preparing, and bringing that produce to market. If the society were annually to employ all the labour which it can annually purchase, as the quantity of labour would increase greatly every year, so the produce of every succeeding year would be of vastly greater value than that of the foregoing. But there is no country in which the whole annual produce is employed in maintaining the industrious. The idle everywhere consume a great part of it; and, according to the different proportions in which it is annually divided between these two different orders of people, its ordinary or average value must either annually increase or diminish, or continue the same from one year to another. CHAP. VII. OF THE NATURAL AND MARKET PRICE OF COMMODITIES. There is in every society or neighbourhood an ordinary or average rate, both of wages and profit, in every different employment of labour and stock. This rate is naturally regulated, as I shall show hereafter, partly by the general circumstances of the society, their riches or poverty, their advancing, stationary, or declining condition, and partly by the particular nature of each employment. There is likewise in every society or neighbourhood an ordinary or average rate of rent, which is regulated, too, as I shall shew hereafter, partly by the general circumstances of the society or neighbourhood in which the land is situated, and partly by the natural improved fertility of the land. These ordinary or average rates may be called the natural rates of wages, profit and rent, at the time and place in which they commonly prevail. When the price of any commodity is neither more nor less than what is sufficient to pay the rent of the land, the wages of the labour, and the profits of the stock employed in raising, preparing, and bringing it to market, according to their natural rates, the commodity is then sold for what may be called its natural price. The commodity is then sold precisely for what it is worth, or for what it really costs the person who brings it to market; for though, in common language, what is called the prime cost of any commodity does not comprehend the profit of the person who is sell it again, yet, if he sells it at a price which does not allow him the ordinary rate of profit in his neighbourhood, he is evidently a loser by the trade; since, by employing his stock in some other way, he might have made that profit. His profit, besides, is his revenue, the proper fund of his subsistence. As, while he is preparing and bringing the goods to market, he advances to his workmen their wages, or their subsistence, so he advances to himself, in the same manner, his own subsistence, which is generally suitable to the profit which he may reasonably expect from the sale of his goods. Unless they yield him this profit, therefore, they do not repay him what they may very properly be said to have really cost him. Though the price, therefore, which leaves him this profit, is not always the lowest at which a dealer may sometimes sell his goods, it is the lowest at which he is likely to sell them for any considerable time; at least where there is perfect liberty, or where he may change his trade as often as he pleases. The actual price at which any commodity is commonly sold, is called its market price. It may either be above, or below, or exactly the same with its natural price. The market price of every particular commodity is regulated by the proportion between the quantity which is actually brought to market, and the demand of those who are willing to pay the natural price of the commodity, or the whole value of the rent, labour, and profit, which must be paid in order to bring it thither, Such people may be called the effectual demanders, and their demand the effectual demand; since it may be sufficient to effectuate the bringing of the commodity to market. It is different from the absolute demand. A very poor man may be said, in some sense, to have a demand for a coach and six; he might like to have it; but his demand is not an effectual demand, as the commodity can never he brought to market in order to satisfy it. When the quantity of any commodity which is brought to market falls short of the effectual demand, all those who are willing to pay the whole value of the rent, wages, and profit, which must he paid in order to bring it thither, cannot be supplied with the quantity which they want. Rather than want it altogether, some of them will be willing to give more. A competition will immediately begin among them, and the market price will rise more or less above the natural price, according as either the greatness of the deficiency, or the wealth and wanton luxury of the competitors, happen to animate more or less the eagerness of the competition. Among competitors of equal wealth and luxury, the same deficiency will generally occasion a more or less eager competition, according as the acquisition of the commodity happens to be of more or less importance to them. Hence the exorbitant price of the necessaries of life during the blockade of a town, or in a famine. When the quantity brought to market exceeds the effectual demand, it cannot be all sold to those who are willing to pay the whole value of the rent, wages, and profit, which must be paid in order to bring it thither. Some part must be sold to those who are willing to pay less, and the low price which they give for it must reduce the price of the whole. The market price will sink more or less below the natural price, according as the greatness of the excess increases more or less the competition of the sellers, or according as it happens to be more or less important to them to get immediately rid of the commodity. The same excess in the importation of perishable, will occasion a much greater competition than in that of durable commodities; in the importation of oranges, for example, than in that of old iron. When the quantity brought to market is just sufficient to supply the effectual demand, and no more, the market price naturally comes to be either exactly, or as nearly as can be judged of, the same with the natural price. The whole quantity upon hand can be disposed of for this price, and cannot be disposed of for more. The competition of the different dealers obliges them all to accept of this price, but does not oblige them to accept of less. The quantity of every commodity brought to market naturally suits itself to the effectual demand. It is the interest of all those who employ their land, labour, or stock, in bringing any commodity to market, that the quantity never should exceed the effectual demand; and it is the interest of all other people that it never should fall short of that demand. If at any time it exceeds the effectual demand, some of the component parts of its price must be paid below their natural rate. If it is rent, the interest of the landlords will immediately prompt them to withdraw a part of their land; and if it is wages or profit, the interest of the labourers in the one case, and of their employers in the other, will prompt them to withdraw a part of their labour or stock, from this employment. The quantity brought to market will soon be no more than sufficient to supply the effectual demand. All the different parts of its price will rise to their natural rate, and the whole price to its natural price. If, on the contrary, the quantity brought to market should at any time fall short of the effectual demand, some of the component parts of its price must rise above their natural rate. If it is rent, the interest of all other landlords will naturally prompt them to prepare more land for the raising of this commodity; if it is wages or profit, the interest of all other labourers and dealers will soon prompt them to employ more labour and stock in preparing and bringing it to market. The quantity brought thither will soon be sufficient to supply the effectual demand. All the different parts of its price will soon sink to their natural rate, and the whole price to its natural price. The natural price, therefore, is, as it were, the central price, to which the prices of all commodities are continually gravitating. Different accidents may sometimes keep them suspended a good deal above it, and sometimes force them down even somewhat below it. But whatever may be the obstacles which hinder them from settling in this centre of repose and continuance, they are constantly tending towards it. The whole quantity of industry annually employed in order to bring any commodity to market, naturally suits itself in this manner to the effectual demand. It naturally aims at bringing always that precise quantity thither which may be sufficient to supply, and no more than supply, that demand. But, in some employments, the same quantity of industry will, in different years, produce very different quantities of commodities; while, in others, it will produce always the same, or very nearly the same. The same number of labourers in husbandry will, in different years, produce very different quantities of corn, wine, oil, hops, &c. But the same number of spinners or weavers will every year produce the same, or very nearly the same, quantity of linen and woollen cloth. It is only the average produce of the one species of industry which can be suited, in any respect, to the effectual demand; and as its actual produce is frequently much greater, and frequently much less, than its average produce, the quantity of the commodities brought to market will sometimes exceed a good deal, and sometimes fall short a good deal, of the effectual demand. Even though that demand, therefore, should continue always the same, their market price will be liable to great fluctuations, will sometimes fall a good deal below, and sometimes rise a good deal above, their natural price. In the other species of industry, the produce of equal quantities of labour being always the same, or very nearly the same, it can be more exactly suited to the effectual demand. While that demand continues the same, therefore, the market price of the commodities is likely to do so too, and to be either altogether, or as nearly as can be judged of, the same with the natural price. That the price of linen and woollen cloth is liable neither to such frequent, nor to such great variations, as the price of corn, every man's experience will inform him. The price of the one species of commodities varies only with the variations in the demand; that of the other varies not only with the variations in the demand, but with the much greater, and more frequent, variations in the quantity of what is brought to market, in order to supply that demand. The occasional and temporary fluctuations in the market price of any commodity fall chiefly upon those parts of its price which resolve themselves into wages and profit. That part which resolves itself into rent is less affected by them. A rent certain in money is not in the least affected by them, either in its rate or in its value. A rent which consists either in a certain proportion, or in a certain quantity, of the rude produce, is no doubt affected in its yearly value by all the occasional and temporary fluctuations in the market price of that rude produce; but it is seldom affected by them in its yearly rate. In settling the terms of the lease, the landlord and farmer endeavour, according to their best judgment, to adjust that rate, not to the temporary and occasional, but to the average and ordinary price of the produce. Such fluctuations affect both the value and the rate, either of wages or of profit, according as the market happens to be either overstocked or understocked with commodities or with labour, with work done, or with work to be done. A public mourning raises the price of black cloth (with which the market is almost always understocked upon such occasions), and augments the profits of the merchants who possess any considerable quantity of it. It has no effect upon the wages of the weavers. The market is understocked with commodities, not with labour, with work done, not with work to be done. It raises the wages of journeymen tailors. The market is here understocked with labour. There is an effectual demand for more labour, for more work to be done, than can be had. It sinks the price of coloured silks and cloths, and thereby reduces the profits of the merchants who have any considerable quantity of them upon hand. It sinks, too, the wages of the workmen employed in preparing such commodities, for which all demand is stopped for six months, perhaps for a twelvemonth. The market is here overstocked both with commodities and with labour. But though the market price of every particular commodity is in this manner continually gravitating, if one may say so, towards the natural price; yet sometimes particular accidents, sometimes natural causes, and sometimes particular regulations of police, may, in many commodities, keep up the market price, for a long time together, a good deal above the natural price. When, by an increase in the effectual demand, the market price of some particular commodity happens to rise a good deal above the natural price, those who employ their stocks in supplying that market, are generally careful to conceal this change. If it was commonly known, their great profit would tempt so many new rivals to employ their stocks in the same way, that, the effectual demand being fully supplied, the market price would soon be reduced to the natural price, and, perhaps, for some time even below it. If the market is at a great distance from the residence of those who supply it, they may sometimes be able to keep the secret for several years together, and may so long enjoy their extraordinary profits without any new rivals. Secrets of this kind, however, it must be acknowledged, can seldom be long kept; and the extraordinary profit can last very little longer than they are kept. Secrets in manufactures are capable of being longer kept than secrets in trade. A dyer who has found the means of producing a particular colour with materials which cost only half the price of those commonly made use of, may, with good management, enjoy the advantage of his discovery as long as he lives, and even leave it as a legacy to his posterity. His extraordinary gains arise from the high price which is paid for his private labour. They properly consist in the high wages of that labour. But as they are repeated upon every part of his stock, and as their whole amount bears, upon that account, a regular proportion to it, they are commonly considered as extraordinary profits of stock. Such enhancements of the market price are evidently the effects of particular accidents, of which, however, the operation may sometimes last for many years together. Some natural productions require such a singularity of soil and situation, that all the land in a great country, which is fit for producing them, may not be sufficient to supply the effectual demand. The whole quantity brought to market, therefore, may be disposed of to those who are willing to give more than what is sufficient to pay the rent of the land which produced them, together with the wages of the labour and the profits of the stock which were employed in preparing and bringing them to market, according to their natural rates. Such commodities may continue for whole centuries together to be sold at this high price; and that part of it which resolves itself into the rent of land, is in this case the part which is generally paid above its natural rate. The rent of the land which affords such singular and esteemed productions, like the rent of some vineyards in France of a peculiarly happy soil and situation, bears no regular proportion to the rent of other equally fertile and equally well cultivated land in its neighbourhood. The wages of the labour, and the profits of the stock employed in bringing such commodities to market, on the contrary, are seldom out of their natural proportion to those of the other employments of labour and stock in their neighbourhood. Such enhancements of the market price are evidently the effect of natural causes, which may hinder the effectual demand from ever being fully supplied, and which may continue, therefore, to operate for ever. A monopoly granted either to an individual or to a trading company, has the same effect as a secret in trade or manufactures. The monopolists, by keeping the market constantly understocked by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate. The price of monopoly is upon every occasion the highest which can be got. The natural price, or the price of free competition, on the contrary, is the lowest which can be taken, not upon every occasion indeed, but for any considerable time together. The one is upon every occasion the highest which can be squeezed out of the buyers, or which it is supposed they will consent to give; the other is the lowest which the sellers can commonly afford to take, and at the same time continue their business. The exclusive privileges of corporations, statutes of apprenticeship, and all those laws which restrain in particular employments, the competition to a smaller number than might otherwise go into them, have the same tendency, though in a less degree. They are a sort of enlarged monopolies, and may frequently, for ages together, and in whole classes of employments, keep up the market price of particular commodities above the natural price, and maintain both wages of the labour and the profits of the stock employed about them somewhat above their natural rate. Such enhancements of the market price may last as long as the regulations of police which give occasion to them. The market price of any particular commodity, though it may continue long above, can seldom continue long below, its natural price. Whatever part of it was paid below the natural rate, the persons whose interest is affected would immediately feel the loss, and would immediately withdraw either so much land or so much labour, or so much stock, from being employed about it, that the quantity brought to market would soon be no more than sufficient to supply the effectual demand. Its market price, therefore, would soon rise to the natural price; this at least would be the case where there was perfect liberty. The same statutes of apprenticeship and other corporation laws, indeed, which, when a manufacture is in prosperity, enable the workman to raise his wages a good deal above their natural rate, sometimes oblige him, when it decays, to let them down a good deal below it. As in the one case they exclude many people from his employment, so in the other they exclude him from many employments. The effect of such regulations, however, is not near so durable in sinking the workman's wages below, as in raising them above their natural rate. Their operation in the one way may endure for many centuries, but in the other it can last no longer than the lives of some of the workmen who were bred to the business in the time of prosperity. When they are gone, the number of those who are afterwards educated to the trade will naturally suit itself to the effectual demand. The police must be as violent as that of Indostan or ancient Egypt (where every man was bound by a principle of religion to follow the occupation of his father, and was supposed to commit the most horrid sacrilege if he changed it for another), which can in any particular employment, and for several generations together, sink either the wages of labour or the profits of stock below their natural rate. This is all that I think necessary to be observed at present concerning the deviations, whether occasional or permanent, of the market price of commodities from the natural price. The natural price itself varies with the natural rate of each of its component parts, or wages, profit, and rent; and in every society this rate varies according to their circumstances, according to their riches and poverty, their advancing, stationary, or declining condition. I shall, in the four following chapters, endeavour to explain, as fully and distinctly as I can, the causes of those different variations. First, I shall endeavour to explain what are the circumstances which naturally determine the rate of wages, and in what manner those circumstances are affected by the riches or poverty, by the advancing, stationary, or declining state of the society. Secondly, I shall endeavour to shew what are the circumstances which naturally determine the rate of profit; and in what manner, too, those circumstances are affected by the like variations in the state of the society. Though pecuniary wages and profit are very different in the different employments of labour and stock; yet a certain proportion seems commonly to take place between both the pecuniary wages in all the different employments of labour, and the pecuniary profits in all the different employments of stock. This proportion, it will appear hereafter, depends partly upon the nature of the different employments, and partly upon the different laws and policy of the society in which they are carried on. But though in many respects dependent upon the laws and policy, this proportion seems to be little affected by the riches or poverty of that society, by its advancing, stationary, or declining condition, but to remain the same, or very nearly the same, in all those different states. I shall, in the third place, endeavour to explain all the different circumstances which regulate this proportion. In the fourth and last place, I shall endeavour to shew what are the circumstances which regulate the rent of land, and which either raise or lower the price of all the different substances which it produces. CHAP. VIII. OF THE WAGES OF LABOUR. The produce of labour constitutes the natural recompence or wages of labour. In that original state of things which precedes both the appropriation of land and the accumulation of stock, the whole produce of labour belongs to the labourer. He has neither landlord nor master to share with him. Had this state continued, the wages of labour would have augmented with all those improvements in its productive powers, to which the division of labour gives occasion. All things would gradually have become cheaper. They would have been produced by a smaller quantity of labour; and as the commodities produced by equal quantities of labour would naturally in this state of things be exchanged for one another, they would have been purchased likewise with the produce of a smaller quantity. But though all things would have become cheaper in reality, in appearance many things might have become dearer, than before, or have been exchanged for a greater quantity of other goods. Let us suppose, for example, that in the greater part of employments the productive powers of labour had been improved to tenfold, or that a day's labour could produce ten times the quantity of work which it had done originally; but that in a particular employment they had been improved only to double, or that a day's labour could produce only twice the quantity of work which it had done before. In exchanging the produce of a day's labour in the greater part of employments for that of a day's labour in this particular one, ten times the original quantity of work in them would purchase only twice the original quantity of it. Any particular quantity in it, therefore, a pound weight, for example, would appear to be five times dearer than before. In reality, however, it would be twice as cheap. Though it required five times the quantity of other goods to purchase it, it would require only half the quantity of labour either to purchase or to produce it. The acquisition, therefore, would be twice as easy as before. But this original state of things, in which the labourer enjoyed the whole produce of his own labour, could not last beyond the first introduction of the appropriation of land and the accumulation of stock. It was at an end, therefore, long before the most considerable improvements were made in the productive powers of labour; and it would be to no purpose to trace further what might have been its effects upon the recompence or wages of labour. As soon as land becomes private property, the landlord demands a share of almost all the produce which the labourer can either raise or collect from it. His rent makes the first deduction from the produce of the labour which is employed upon land. It seldom happens that the person who tills the ground has wherewithal to maintain himself till he reaps the harvest. His maintenance is generally advanced to him from the stock of a master, the farmer who employs him, and who would have no interest to employ him, unless he was to share in the produce of his labour, or unless his stock was to be replaced to him with a profit. This profit makes a second deduction from the produce of the labour which is employed upon land. The produce of almost all other labour is liable to the like deduction of profit. In all arts and manufactures, the greater part of the workmen stand in need of a master, to advance them the materials of their work, and their wages and maintenance, till it be completed. He shares in the produce of their labour, or in the value which it adds to the materials upon which it is bestowed; and in this share consists his profit. It sometimes happens, indeed, that a single independent workman has stock sufficient both to purchase the materials of his work, and to maintain himself till it be completed. He is both master and workman, and enjoys the whole produce of his own labour, or the whole value which it adds to the materials upon which it is bestowed. It includes what are usually two distinct revenues, belonging to two distinct persons, the profits of stock, and the wages of labour. Such cases, however, are not very frequent; and in every part of Europe twenty workmen serve under a master for one that is independent, and the wages of labour are everywhere understood to be, what they usually are, when the labourer is one person, and the owner of the stock which employs him another. What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little, as possible. The former are disposed to combine in order to raise, the latter in order to lower, the wages of labour. It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily: and the law, besides, authorises, or at least does not prohibit, their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work, but many against combining to raise it. In all such disputes, the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks, which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year, without employment. In the long run, the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate. We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform, combination, not to raise the wages of labour above their actual rate. To violate this combination is everywhere a most unpopular action, and a sort of reproach to a master among his neighbors and equals. We seldom, indeed, hear of this combination, because it is the usual, and, one may say, the natural state of things, which nobody ever hears of. Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy till the moment of execution; and when the workmen yield, as they sometimes do without resistance, though severely felt by them, they are never heard of by other people. Such combinations, however, are frequently resisted by a contrary defensive combination of the workmen, who sometimes, too, without any provocation of this kind, combine, of their own accord, to raise the price of their labour. Their usual pretences are, sometimes the high price of provisions, sometimes the great profit which their masters make by their work. But whether their combinations be offensive or defensive, they are always abundantly heard of. In order to bring the point to a speedy decision, they have always recourse to the loudest clamour, and sometimes to the most shocking violence and outrage. They are desperate, and act with the folly and extravagance of desperate men, who must either starve, or frighten their masters into an immediate compliance with their demands. The masters, upon these occasions, are just as clamorous upon the other side, and never cease to call aloud for the assistance of the civil magistrate, and the rigorous execution of those laws which have been enacted with so much severity against the combination of servants, labourers, and journeymen. The workmen, accordingly, very seldom derive any advantage from the violence of those tumultuous combinations, which, partly from the interposition of the civil magistrate, partly from the superior steadiness of the masters, partly from the necessity which the greater part of the workmen are under of submitting for the sake of present subsistence, generally end in nothing but the punishment or ruin of the ringleaders. But though, in disputes with their workmen, masters must generally have the advantage, there is, however, a certain rate, below which it seems impossible to reduce, for any considerable time, the ordinary wages even of the lowest species of labour. A man must always live by his work, and his wages must at least be sufficient to maintain him. They must even upon most occasions be somewhat more, otherwise it would be impossible for him to bring up a family, and the race of such workmen could not last beyond the first generation. Mr. Cantillon seems, upon this account, to suppose that the lowest species of common labourers must everywhere earn at least double their own maintenance, in order that, one with another, they may be enabled to bring up two children; the labour of the wife, on account of her necessary attendance on the children, being supposed no more than sufficient to provide for herself. But one half the children born, it is computed, die before the age of manhood. The poorest labourers, therefore, according to this account, must, one with another, attempt to rear at least four children, in order that two may have an equal chance of living to that age. But the necessary maintenance of four children, it is supposed, may be nearly equal to that of one man. The labour of an able-bodied slave, the same author adds, is computed to be worth double his maintenance; and that of the meanest labourer, he thinks, cannot be worth less than that of an able-bodied slave. Thus far at least seems certain, that, in order to bring up a family, the labour of the husband and wife together must, even in the lowest species of common labour, be able to earn something more than what in precisely necessary for their own maintenance; but in what proportion, whether in that above-mentioned, or in any other, I shall not take upon me to determine. There are certain circumstances, however, which sometimes give the labourers an advantage, and enable them to raise their wages considerably above this rate, evidently the lowest which is consistent with common humanity. When in any country the demand for those who live by wages, labourers, journeymen, servants of every kind, is continually increasing; when every year furnishes employment for a greater number than had been employed the year before, the workmen have no occasion to combine in order to raise their wages. The scarcity of hands occasions a competition among masters, who bid against one another in order to get workmen, and thus voluntarily break through the natural combination of master not to raise wages. The demand for those who live by wages, it is evident, cannot increase but in proportion to the increase of the funds which are destined to the payment of wages. These funds are of two kinds; first, the revenue which is over and above what is necessary for the maintenance; and, secondly, the stock which is over and above what is necessary for the employment of their masters. When the landlord, annuitant, or monied man, has a greater revenue than what he judges sufficient to maintain his own family, he employs either the whole or a part of the surplus in maintaining one or more menial servants. Increase this surplus, and he will naturally increase the number of those servants. When an independent workman, such as a weaver or shoemaker, has got more stock than what is sufficient to purchase the materials of his own work, and to maintain himself till he can dispose of it, he naturally employs one or more journeymen with the surplus, in order to make a profit by their work. Increase this surplus, and he will naturally increase the number of his journeymen. The demand for those who live by wages, therefore, necessarily increases with the increase of the revenue and stock of every country, and cannot possibly increase without it. The increase of revenue and stock is the increase of national wealth. The demand for those who live by wages, therefore, naturally increases with the increase of national wealth, and cannot possibly increase without it. It is not the actual greatness of national wealth, but its continual increase, which occasions a rise in the wages of labour. It is not, accordingly, in the richest countries, in the most thriving, or in those which are growing rich the fastest, that the wages of labour are highest. England is certainly, in the present times, a much richer country than any part of North America. The wages of labour, however, are much higher in North America than in any part of England. In the province of New York, common labourers earn[8] three shillings and sixpence currency, equal to two shillings sterling, a-day; ship-carpenters, ten shillings and sixpence currency, with a pint of rum, worth sixpence sterling, equal in all to six shillings and sixpence sterling; house-carpenters and bricklayers, eight shillings currency, equal to four shillings and sixpence sterling; journeymen tailors, five shillings currency, equal to about two shillings and tenpence sterling. These prices are all above the London price; and wages are said to be as high in the other colonies as in New York. The price of provisions is everywhere in North America much lower than in England. A dearth has never been known there. In the worst seasons they have always had a sufficiency for themselves, though less for exportation. If the money price of labour, therefore, be higher than it is anywhere in the mother-country, its real price, the real command of the necessaries and conveniencies of life which it conveys to the labourer, must be higher in a still greater proportion. But though North America is not yet so rich as England, it is much more thriving, and advancing with much greater rapidity to the further acquisition of riches. The most decisive mark of the prosperity of any country is the increase of the number of its inhabitants. In Great Britain, and most other European countries, they are not supposed to double in less than five hundred years. In the British colonies in North America, it has been found that they double in twenty or five-and-twenty years. Nor in the present times is this increase principally owing to the continual importation of new inhabitants, but to the great multiplication of the species. Those who live to old age, it is said, frequently see there from fifty to a hundred, and sometimes many more, descendants from their own body. Labour is there so well rewarded, that a numerous family of children, instead of being a burden, is a source of opulence and prosperity to the parents. The labour of each child, before it can leave their house, is computed to be worth a hundred pounds clear gain to them. A young widow with four or five young children, who, among the middling or inferior ranks of people in Europe, would have so little chance for a second husband, is there frequently courted as a sort of fortune. The value of children is the greatest of all encouragements to marriage. We cannot, therefore, wonder that the people in North America should generally marry very young. Notwithstanding the great increase occasioned by such early marriages, there is a continual complaint of the scarcity of hands in North America. The demand for labourers, the funds destined for maintaining them increase, it seems, still faster than they can find labourers to employ. Though the wealth of a country should be very great, yet if it has been long stationary, we must not expect to find the wages of labour very high in it. The funds destined for the payment of wages, the revenue and stock of its inhabitants, may be of the greatest extent; but if they have continued for several centuries of the same, or very nearly of the same extent, the number of labourers employed every year could easily supply, and even more than supply, the number wanted the following year. There could seldom be any scarcity of hands, nor could the masters be obliged to bid against one another in order to get them. The hands, on the contrary, would, in this case, naturally multiply beyond their employment. There would be a constant scarcity of employment, and the labourers would be obliged to bid against one another in order to get it. If in such a country the wages of labour had ever been more than sufficient to maintain the labourer, and to enable him to bring up a family, the competition of the labourers and the interest of the masters would soon reduce them to the lowest rate which is consistent with common humanity. China has been long one of the richest, that is, one of the most fertile, best cultivated, most industrious, and most populous, countries in the world. It seems, however, to have been long stationary. Marco Polo, who visited it more than five hundred years ago, describes its cultivation, industry, and populousness, almost in the same terms in which they are described by travellers in the present times. It had, perhaps, even long before his time, acquired that full complement of riches which the nature of its laws and institutions permits it to acquire. The accounts of all travellers, inconsistent in many other respects, agree in the low wages of labour, and in the difficulty which a labourer finds in bringing up a family in China. If by digging the ground a whole day he can get what will purchase a small quantity of rice in the evening, he is contented. The condition of artificers is, if possible, still worse. Instead of waiting indolently in their work-houses for the calls of their customers, as in Europe, they are continually running about the streets with the tools of their respective trades, offering their services, and, as it were, begging employment. The poverty of the lower ranks of people in China far surpasses that of the most beggarly nations in Europe. In the neighborhood of Canton, many hundred, it is commonly said, many thousand families have no habitation on the land, but live constantly in little fishing-boats upon the rivers and canals. The subsistence which they find there is so scanty, that they are eager to fish up the nastiest garbage thrown overboard from any European ship. Any carrion, the carcase of a dead dog or cat, for example, though half putrid and stinking, is as welcome to them as the most wholesome food to the people of other countries. Marriage is encouraged in China, not by the profitableness of children, but by the liberty of destroying them. In all great towns, several are every night exposed in the street, or drowned like puppies in the water. The performance of this horrid office is even said to be the avowed business by which some people earn their subsistence. China, however, though it may, perhaps, stand still, does not seem to go backwards. Its towns are nowhere deserted by their inhabitants. The lands which had once been cultivated, are nowhere neglected. The same, or very nearly the same, annual labour, must, therefore, continue to be performed, and the funds destined for maintaining it must not, consequently, be sensibly diminished. The lowest class of labourers, therefore, notwithstanding their scanty subsistence, must some way or other make shift to continue their race so far as to keep up their usual numbers. But it would be otherwise in a country where the funds destined for the maintenance of labour were sensibly decaying. Every year the demand for servants and labourers would, in all the different classes of employments, be less than it had been the year before. Many who had been bred in the superior classes, not being able to find employment in their own business, would be glad to seek it in the lowest. The lowest class being not only overstocked with its own workmen, but with the overflowings of all the other classes, the competition for employment would be so great in it, as to reduce the wages of labour to the most miserable and scanty subsistence of the labourer. Many would not be able to find employment even upon these hard terms, but would either starve, or be driven to seek a subsistence, either by begging, or by the perpetration, perhaps, of the greatest enormities. Want, famine, and mortality, would immediately prevail in that class, and from thence extend themselves to all the superior classes, till the number of inhabitants in the country was reduced to what could easily be maintained by the revenue and stock which remained in it, and which had escaped either the tyranny or calamity which had destroyed the rest. This, perhaps, is nearly the present state of Bengal, and of some other of the English settlements in the East Indies. In a fertile country, which had before been much depopulated, where subsistence, consequently, should not be very difficult, and where, notwithstanding, three or four hundred thousand people die of hunger in one year, we may be assured that the funds destined for the maintenance of the labouring poor are fast decaying. The difference between the genius of the British constitution, which protects and governs North America, and that of the mercantile company which oppresses and domineers in the East Indies, cannot, perhaps, be better illustrated than by the different state of those countries. The liberal reward of labour, therefore, as it is the necessary effect, so it is the natural symptom of increasing national wealth. The scanty maintenance of the labouring poor, on the other hand, is the natural symptom that things are at a stand, and their starving condition, that they are going fast backwards. In Great Britain, the wages of labour seem, in the present times, to be evidently more than what is precisely necessary to enable the labourer to bring up a family. In order to satisfy ourselves upon this point, it will not be necessary to enter into any tedious or doubtful calculation of what may be the lowest sum upon which it is possible to do this. There are many plain symptoms, that the wages of labour are nowhere in this country regulated by this lowest rate, which is consistent with common humanity. First, in almost every part of Great Britain there is a distinction, even in the lowest species of labour, between summer and winter wages. Summer wages are always highest. But, on account of the extraordinary expense of fuel, the maintenance of a family is most expensive in winter. Wages, therefore, being highest when this expense is lowest, it seems evident that they are not regulated by what is necessary for this expense, but by the quantity and supposed value of the work. A labourer, it may be said, indeed, ought to save part of his summer wages, in order to defray his winter expense; and that, through the whole year, they do not exceed what is necessary to maintain his family through the whole year. A slave, however, or one absolutely dependent on us for immediate subsistence, would not be treated in this manner. His daily subsistence would be proportioned to his daily necessities. Secondly, the wages of labour do not, in Great Britain, fluctuate with the price of provisions. These vary everywhere from year to year, frequently from month to month. But in many places, the money price of labour remains uniformly the same, sometimes for half a century together. If, in these places, therefore, the labouring poor can maintain their families in dear years, they must be at their ease in times of moderate plenty, and in affluence in those of extraordinary cheapness. The high price of provisions during these ten years past, has not, in many parts of the kingdom, been accompanied with any sensible rise in the money price of labour. It has, indeed, in some; owing, probably, more to the increase of the demand for labour, than to that of the price of provisions. Thirdly, as the price of provisions varies more from year to year than the wages of labour, so, on the other hand, the wages of labour vary more from place to place than the price of provisions. The prices of bread and butchers' meat are generally the same, or very nearly the same, through the greater part of the united kingdom. These, and most other things which are sold by retail, the way in which the labouring poor buy all things, are generally fully as cheap, or cheaper, in great towns than in the remoter parts of the country, for reasons which I shall have occasion to explain hereafter. But the wages of labour in a great town and its neighbourhood, are frequently a fourth or a fifth part, twenty or five-and-twenty per cent. higher than at a few miles distance. Eighteen pence a day may be reckoned the common price of labour in London and its neighborhood. At a few miles distance, it falls to fourteen and fifteen pence. Tenpence may be reckoned its price in Edinburgh and its neighbourhood. At a few miles distance, it falls to eightpence, the usual price of common labour through the greater part of the low country of Scotland, where it varies a good deal less than in England. Such a difference of prices, which, it seems, is not always sufficient to transport a man from one parish to another, would necessarily occasion so great a transportation of the most bulky commodities, not only from one parish to another, but from one end of the kingdom, almost from one end of the world to the other, as would soon reduce them more nearly to a level. After all that has been said of the levity and inconstancy of human nature, it appears evidently from experience, that man is, of all sorts of luggage, the most difficult to be transported. If the labouring poor, therefore, can maintain their families in those parts of the kingdom where the price of labour is lowest, they must be in affluence where it is highest. Fourthly, the variations in the price of labour not only do not correspond, either in place or time, with those in the price of provisions, but they are frequently quite opposite. Grain, the food of the common people, is dearer in Scotland than in England, whence Scotland receives almost every year very large supplies. But English corn must be sold dearer in Scotland, the country to which it is brought, than in England, the country from which it comes; and it proportion to its quality it cannot be sold dearer in Scotland than the Scotch corn that comes to the same market in competition with it. The quality of grain depends chiefly upon the quantity of flour or meal which it yields at the mill; and, in this respect, English grain is so much superior to the Scotch, that though often dearer in appearance, or in proportion to the measure of its bulk, it is generally cheaper in reality, or in proportion to its quality, or even to the measure of its weight. The price of labour, on the contrary, is dearer in England than in Scotland. If the labouring poor, therefore, can maintain their families in the one part of the united kingdom, they must be in affluence in the other. Oatmeal, indeed, supplies the common people in Scotland with the greatest and the best part of their food, which is, in general, much inferior to that of their neighbours of the same rank in England. This difference, however, in the mode of their subsistence, is not the cause, but the effect, of the difference in their wages; though, by a strange misapprehension, I have frequently heard it represented as the cause. It is not because one man keeps a coach, while his neighbour walks a-foot, that one is rich, and the other poor; but because the one is rich, he keeps a coach, and because the other is poor, he walks a-foot. During the course of the last century, taking one year with another, grain was dearer in both parts of the united kingdom than during that of the present. This is a matter of fact which cannot now admit of any reasonable doubt; and the proof of it is, if possible, still more decisive with regard to Scotland than with regard to England. It is in Scotland supported by the evidence of the public fiars, annual valuations made upon oath, according to the actual state of the markets, of all the different sorts of grain in every different county of Scotland. If such direct proof could require any collateral evidence to confirm it, I would observe, that this has likewise been the case in France, and probably in most other parts of Europe. With regard to France, there is the clearest proof. But though it is certain, that in both parts of the united kingdom grain was somewhat dearer in the last century than in the present, it is equally certain that labour was much cheaper. If the labouring poor, therefore, could bring up their families then, they must be much more at their ease now. In the last century, the most usual day-wages of common labour through the greater part of Scotland were sixpence in summer, and fivepence in winter. Three shillings a-week, the same price, very nearly still continues to be paid in some parts of the Highlands and Western islands. Through the greater part of the Low country, the most usual wages of common labour are now eightpence a-day; tenpence, sometimes a shilling, about Edinburgh, in the counties which border upon England, probably on account of that neighbourhood, and in a few other places where there has lately been a considerable rise in the demand for labour, about Glasgow, Carron, Ayrshire, &c. In England, the improvements of agriculture, manufactures, and commerce, began much earlier than in Scotland. The demand for labour, and consequently its price, must necessarily have increased with those improvements. In the last century, accordingly, as well as in the present, the wages of labour were higher in England than in Scotland. They have risen, too, considerably since that time, though, on account of the greater variety of wages paid there in different places, it is more difficult to ascertain how much. In 1614, the pay of a foot soldier was the same as in the present times, eightpence a-day. When it was first established, it would naturally be regulated by the usual wages of common labourers, the rank of people from which foot soldiers are commonly drawn. Lord-chief-justice Hales, who wrote in the time of Charles II. computes the necessary expense of a labourer's family, consisting of six persons, the father and mother, two children able to do something, and two not able, at ten shillings a-week, or twenty-six pounds a-year. If they cannot earn this by their labour, they must make it up, he supposes, either by begging or stealing. He appears to have enquired very carefully into this subject[9]. In 1688, Mr Gregory King, whose skill in political arithmetic is so much extolled by Dr Davenant, computed the ordinary income of labourers and out-servants to be fifteen pounds a-year to a family, which he supposed to consist, one with another, of three and a half persons. His calculation, therefore, though different in appearance, corresponds very nearly at bottom with that of Judge Hales. Both suppose the weekly expense of such families to be about twenty-pence a-head. Both the pecuniary income and expense of such families have increased considerably since that time through the greater part of the kingdom, in some places more, and in some less, though perhaps scarce anywhere so much as some exaggerated accounts of the present wages of labour have lately represented them to the public. The price of labour, it must be observed, cannot be ascertained very accurately anywhere, different prices being often paid at the same place and for the same sort of labour, not only according to the different abilities of the workman, but according to the easiness or hardness of the masters. Where wages are not regulated by law, all that we can pretend to determine is, what are the most usual; and experience seems to shew that law can never regulate them properly, though it has often pretended to do so. The real recompence of labour, the real quantity of the necessaries and conveniencies of life which it can procure to the labourer, has, during the course of the present century, increased perhaps in a still greater proportion than its money price. Not only grain has become somewhat cheaper, but many other things, from which the industrious poor derive an agreeable and wholesome variety of food, have become a great deal cheaper. Potatoes, for example, do not at present, through the greater part of the kingdom, cost half the price which they used to do thirty or forty years ago. The same thing may be said of turnips, carrots, cabbages; things which were formerly never raised but by the spade, but which are now commonly raised by the plough. All sort of garden stuff, too, has become cheaper. The greater part of the apples, and even of the onions, consumed in Great Britain, were, in the last century, imported from Flanders. The great improvements in the coarser manufactories of both linen and woollen cloth furnish the labourers with cheaper and better clothing; and those in the manufactories of the coarser metals, with cheaper and better instruments of trade, as well as with many agreeable and convenient pieces of household furniture. Soap, salt, candles, leather, and fermented liquors, have, indeed, become a good deal dearer, chiefly from the taxes which have been laid upon them. The quantity of these, however, which the labouring poor are under any necessity of consuming, is so very small, that the increase in their price does not compensate the diminution in that of so many other things. The common complaint, that luxury extends itself even to the lowest ranks of the people, and that the labouring poor will not now be contented with the same food, clothing, and lodging, which satisfied them in former times, may convince us that it is not the money price of labour only, but its real recompence, which has augmented. Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage, or as an inconveniency, to the society? The answer seems at first abundantly plain. Servants, labourers, and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part, can never be regarded as any inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed, and lodged. Poverty, though it no doubt discourages, does not always prevent, marriage. It seems even to be favourable to generation. A half-starved Highland woman frequently bears more than twenty children, while a pampered fine lady is often incapable of bearing any, and is generally exhausted by two or three. Barrenness, so frequent among women of fashion, is very rare among those of inferior station. Luxury, in the fair sex, while it inflames, perhaps, the passion for enjoyment, seems always to weaken, and frequently to destroy altogether, the powers of generation. But poverty, though it does not prevent the generation, is extremely unfavourable to the rearing of children. The tender plant is produced; but in so cold a soil, and so severe a climate, soon withers and dies. It is not uncommon, I have been frequently told, in the Highlands of Scotland, for a mother who has born twenty children not to have two alive. Several officers of great experience have assured me, that, so far from recruiting their regiment, they have never been able to supply it with drums and fifes, from all the soldiers' children that were born in it. A greater number of fine children, however, is seldom seen anywhere than about a barrack of soldiers. Very few of them, it seems, arrive at the age of thirteen or fourteen. In some places, one half the children die before they are four years of age, in many places before they are seven, and in almost all places before they are nine or ten. This great mortality, however will everywhere be found chiefly among the children of the common people, who cannot afford to tend them with the same care as those of better station. Though their marriages are generally more fruitful than those of people of fashion, a smaller proportion of their children arrive at maturity. In foundling hospitals, and among the children brought up by parish charities, the mortality is still greater than among those of the common people. Every species of animals naturally multiplies in proportion to the means of their subsistence, and no species can ever multiply beyond it. But in civilized society, it is only among the inferior ranks of people that the scantiness of subsistence can set limits to the further multiplication of the human species; and it can do so in no other way than by destroying a great part of the children which their fruitful marriages produce. The liberal reward of labour, by enabling them to provide better for their children, and consequently to bring up a greater number, naturally tends to widen and extend those limits. It deserves to be remarked, too, that it necessarily does this as nearly as possible in the proportion which the demand for labour requires. If this demand is continually increasing, the reward of labour must necessarily encourage in such a manner the marriage and multiplication of labourers, as may enable them to supply that continually increasing demand by a continually increasing population. If the reward should at any time be less than what was requisite for this purpose, the deficiency of hands would soon raise it; and if it should at any time be more, their excessive multiplication would soon lower it to this necessary rate. The market would be so much understocked with labour in the one case, and so much overstocked in the other, as would soon force back its price to that proper rate which the circumstances of the society required. It is in this manner that the demand for men, like that for any other commodity, necessarily regulates the production of men, quickens it when it goes on too slowly, and stops it when it advances too fast. It is this demand which regulates and determines the state of propagation in all the different countries of the world; in North America, in Europe, and in China; which renders it rapidly progressive in the first, slow and gradual in the second, and altogether stationary in the last. The wear and tear of a slave, it has been said, is at the expense of his master; but that of a free servant is at his own expense. The wear and tear of the latter, however, is, in reality, as much at the expense of his master as that of the former. The wages paid to journeymen and servants of every kind must be such as may enable them, one with another to continue the race of journeymen and servants, according as the increasing, diminishing, or stationary demand of the society, may happen to require. But though the wear and tear of a free servant be equally at the expense of his master, it generally costs him much less than that of a slave. The fund destined for replacing or repairing, if I may say so, the wear and tear of the slave, is commonly managed by a negligent master or careless overseer. That destined for performing the same office with regard to the freeman is managed by the freeman himself. The disorders which generally prevail in the economy of the rich, naturally introduce themselves into the management of the former; the strict frugality and parsimonious attention of the poor as naturally establish themselves in that of the latter. Under such different management, the same purpose must require very different degrees of expense to execute it. It appears, accordingly, from the experience of all ages and nations, I believe, that the work done by freemen comes cheaper in the end than that performed by slaves. It is found to do so even at Boston, New-York, and Philadelphia, where the wages of common labour are so very high. The liberal reward of labour, therefore, as it is the effect of increasing wealth, so it is the cause of increasing population. To complain of it, is to lament over the necessary cause and effect of the greatest public prosperity. It deserves to be remarked, perhaps, that it is in the progressive state, while the society is advancing to the further acquisition, rather than when it has acquired its full complement of riches, that the condition of the labouring poor, of the great body of the people, seems to be the happiest and the most comfortable. It is hard in the stationary, and miserable in the declining state. The progressive state is, in reality, the cheerful and the hearty state to all the different orders of the society; the stationary is dull; the declining melancholy. The liberal reward of labour, as it encourages the propagation, so it increases the industry of the common people. The wages of labour are the encouragement of industry, which, like every other human quality, improves in proportion to the encouragement it receives. A plentiful subsistence increases the bodily strength of the labourer, and the comfortable hope of bettering his condition, and of ending his days, perhaps, in ease and plenty, animates him to exert that strength to the utmost. Where wages are high, accordingly, we shall always find the workmen more active, diligent, and expeditious, than where they are low; in England, for example, than in Scotland; in the neighbourhood of great towns, than in remote country places. Some workmen, indeed, when they can earn in four days what will maintain them through the week, will be idle the other three. This, however, is by no means the case with the greater part. Workmen, on the contrary, when they are liberally paid by the piece, are very apt to overwork themselves, and to ruin their health and constitution in a few years. A carpenter in London, and in some other places, is not supposed to last in his utmost vigour above eight years. Something of the same kind happens in many other trades, in which the workmen are paid by the piece; as they generally are in manufactures, and even in country labour, wherever wages are higher than ordinary. Almost every class of artificers is subject to some peculiar infirmity occasioned by excessive application to their peculiar species of work. Ramuzzini, an eminent Italian physician, has written a particular book concerning such diseases. We do not reckon our soldiers the most industrious set of people among us; yet when soldiers have been employed in some particular sorts of work, and liberally paid by the piece, their officers have frequently been obliged to stipulate with the undertaker, that they should not be allowed to earn above a certain sum every day, according to the rate at which they were paid. Till this stipulation was made, mutual emulation, and the desire of greater gain, frequently prompted them to overwork themselves, and to hurt their health by excessive labour. Excessive application, during four days of the week, is frequently the real cause of the idleness of the other three, so much and so loudly complained of. Great labour, either of mind or body, continued for several days together is, in most men, naturally followed by a great desire of relaxation, which, if not restrained by force, or by some strong necessity, is almost irresistible. It is the call of nature, which requires to be relieved by some indulgence, sometimes of ease only, but sometimes too of dissipation and diversion. If it is not complied with, the consequences are often dangerous and sometimes fatal, and such as almost always, sooner or later, bring on the peculiar infirmity of the trade. If masters would always listen to the dictates of reason and humanity, they have frequently occasion rather to moderate, than to animate the application of many of their workmen. It will be found, I believe, in every sort of trade, that the man who works so moderately, as to be able to work constantly, not only preserves his health the longest, but, in the course of the year, executes the greatest quantity of work. In cheap years it is pretended, workmen are generally more idle, and in dear times more industrious than ordinary. A plentiful subsistence, therefore, it has been concluded, relaxes, and a scanty one quickens their industry. That a little more plenty than ordinary may render some workmen idle, cannot be well doubted; but that it should have this effect upon the greater part, or that men in general should work better when they are ill fed, than when they are well fed, when they are disheartened than when they are in good spirits, when they are frequently sick than when they are generally in good health, seems not very probable. Years of dearth, it is to be observed, are generally among the common people years of sickness and mortality, which cannot fail to diminish the produce of their industry. In years of plenty, servants frequently leave their masters, and trust their subsistence to what they can make by their own industry. But the same cheapness of provisions, by increasing the fund which is destined for the maintenance of servants, encourages masters, farmers especially, to employ a greater number. Farmers, upon such occasions, expect more profit from their corn by maintaining a few more labouring servants, than by selling it at a low price in the market. The demand for servants increases, while the number of those who offer to supply that demand diminishes. The price of labour, therefore, frequently rises in cheap years. In years of scarcity, the difficulty and uncertainty of subsistence make all such people eager to return to service. But the high price of provisions, by diminishing the funds destined for the maintenance of servants, disposes masters rather to diminish than to increase the number of those they have. In dear years, too, poor independent workmen frequently consume the little stock with which they had used to supply themselves with the materials of their work, and are obliged to become journeymen for subsistence. More people want employment than easily get it; many are willing to take it upon lower terms than ordinary; and the wages of both servants and journeymen frequently sink in dear years. Masters of all sorts, therefore, frequently make better bargains with their servants in dear than in cheap years, and find them more humble and dependent in the former than in the latter. They naturally, therefore, commend the former as more favourable to industry. Landlords and farmers, besides, two of the largest classes of masters, have another reason for being pleased with dear years. The rents of the one, and the profits of the other, depend very much upon the price of provisions. Nothing can be more absurd, however, than to imagine that men in general should work less when they work for themselves, than when they work for other people. A poor independent workman will generally be more industrious than even a journeyman who works by the piece. The one enjoys the whole produce of his own industry, the other shares it with his master. The one, in his separate independent state, is less liable to the temptations of bad company, which, in large manufactories, so frequently ruin the morals of the other. The superiority of the independent workman over those servants who are hired by the month or by the year, and whose wages and maintenance are the same, whether they do much or do little, is likely to be still greater. Cheap years tend to increase the proportion of independent workmen to journeymen and servants of all kinds, and dear years to diminish it. A French author of great knowledge and ingenuity, Mr Messance, receiver of the tallies in the election of St Etienne, endeavours to shew that the poor do more work in cheap than in dear years, by comparing the quantity and value of the goods made upon those different occasions in three different manufactures; one of coarse woollens, carried on at Elbeuf; one of linen, and another of silk, both which extend through the whole generality of Rouen. It appears from his account, which is copied from the registers of the public offices, that the quantity and value of the goods made in all those three manufactories has generally been greater in cheap than in dear years, and that it has always been greatest in the cheapest, and least in the dearest years. All the three seem to be stationary manufactures, or which, though their produce may vary somewhat from year to year, are, upon the whole, neither going backwards nor forwards. The manufacture of linen in Scotland, and that of coarse woollens in the West Riding of Yorkshire, are growing manufactures, of which the produce is generally, though with some variations, increasing both in quantity and value. Upon examining, however, the accounts which have been published of their annual produce, I have not been able to observe that its variations have had any sensible connection with the dearness or cheapness of the seasons. In 1740, a year of great scarcity, both manufactures, indeed, appear to have declined very considerably. But in 1756, another year of great scarcity, the Scotch manufactures made more than ordinary advances. The Yorkshire manufacture, indeed, declined, and its produce did not rise to what it had been in 1755, till 1766, after the repeal of the American stamp act. In that and the following year, it greatly exceeded what it had ever been before, and it has continued to advance ever since. The produce of all great manufactures for distant sale must necessarily depend, not so much upon the dearness or cheapness of the seasons in the countries where they are carried on, as upon the circumstances which affect the demand in the countries where they are consumed; upon peace or war, upon the prosperity or declension of other rival manufactures, and upon the good or bad humour of their principal customers. A great part of the extraordinary work, besides, which is probably done in cheap years, never enters the public registers of manufactures. The men-servants, who leave their masters, become independent labourers. The women return to their parents, and commonly spin, in order to make clothes for themselves and their families. Even the independent workmen do not always work for public sale, but are employed by some of their neighbours in manufactures for family use. The produce of their labour, therefore, frequently makes no figure in those public registers, of which the records are sometimes published with so much parade, and from which our merchants and manufacturers would often vainly pretend to announce the prosperity or declension of the greatest empires. Though the variations in the price of labour not only do not always correspond with those in the price of provisions, but are frequently quite opposite, we must not, upon this account, imagine that the price of provisions has no influence upon that of labour. The money price of labour is necessarily regulated by two circumstances; the demand for labour, and the price of the necessaries and conveniencies of life. The demand for labour, according as it happens to be increasing, stationary, or declining, or to require an increasing, stationary, or declining population, determines the quantities of the necessaries and conveniencies of life which must be given to the labourer; and the money price of labour is determined by what is requisite for purchasing this quantity. Though the money price of labour, therefore, is sometimes high where the price of provisions is low, it would be still higher, the demand continuing the same, if the price of provisions was high. It is because the demand for labour increases in years of sudden and extraordinary plenty, and diminishes in those of sudden and extraordinary scarcity, that the money price of labour sometimes rises in the one, and sinks in the other. In a year of sudden and extraordinary plenty, there are funds in the hands of many of the employers of industry, sufficient to maintain and employ a greater number of industrious people than had been employed the year before; and this extraordinary number cannot always be had. Those masters, therefore, who want more workmen, bid against one another, in order to get them, which sometimes raises both the real and the money price of their labour. The contrary of this happens in a year of sudden and extraordinary scarcity. The funds destined for employing industry are less than they had been the year before. A considerable number of people are thrown out of employment, who bid one against another, in order to get it, which sometimes lowers both the real and the money price of labour. In 1740, a year of extraordinary scarcity, many people were willing to work for bare subsistence. In the succeeding years of plenty, it was more difficult to get labourers and servants. The scarcity of a dear year, by diminishing the demand for labour, tends to lower its price, as the high price of provisions tends to raise it. The plenty of a cheap year, on the contrary, by increasing the demand, tends to raise the price of labour, as the cheapness of provisions tends to lower it. In the ordinary variations of the prices of provisions, those two opposite causes seem to counterbalance one another, which is probably, in part, the reason why the wages of labour are everywhere so much more steady and permanent than the price of provisions. The increase in the wages of labour necessarily increases the price of many commodities, by increasing that part of it which resolves itself into wages, and so far tends to diminish their consumption, both at home and abroad. The same cause, however, which raises the wages of labour, the increase of stock, tends to increase its productive powers, and to make a smaller quantity of labour produce a greater quantity of work. The owner of the stock which employs a great number of labourers necessarily endeavours, for his own advantage, to make such a proper division and distribution of employment, that they may be enabled to produce the greatest quantity of work possible. For the same reason, he endeavours to supply them with the best machinery which either he or they can think of. What takes place among the labourers in a particular workhouse, takes place, for the same reason, among those of a great society. The greater their number, the more they naturally divide themselves into different classes and subdivisions of employments. More heads are occupied in inventing the most proper machinery for executing the work of each, and it is, therefore, more likely to be invented. There are many commodities, therefore, which, in consequence of these improvements, come to be produced by so much less labour than before, that the increase of its price is more than compensated by the diminution of its quantity. CHAP. IX. OF THE PROFITS OF STOCK. The rise and fall in the profits of stock depend upon the same causes with the rise and fall in the wages of labour, the increasing or declining state of the wealth of the society; but those causes affect the one and the other very differently. The increase of stock, which raises wages, tends to lower profit. When the stocks of many rich merchants are turned into the same trade, their mutual competition naturally tends to lower its profit; and when there is a like increase of stock in all the different trades carried on in the same society, the same competition must produce the same effect in them all. It is not easy, it has already been observed, to ascertain what are the average wages of labour, even in a particular place, and at a particular time. We can, even in this case, seldom determine more than what are the most usual wages. But even this can seldom be done with regard to the profits of stock. Profit is so very fluctuating, that the person who carries on a particular trade, cannot always tell you himself what is the average of his annual profit. It is affected, not only by every variation of price in the commodities which he deals in, but by the good or bad fortune both of his rivals and of his customers, and by a thousand other accidents, to which goods, when carried either by sea or by land, or even when stored in a warehouse, are liable. It varies, therefore, not only from year to year, but from day to day, and almost from hour to hour. To ascertain what is the average profit of all the different trades carried on in a great kingdom, must be much more difficult; and to judge of what it may have been formerly, or in remote periods of time, with any degree of precision, must be altogether impossible. But though it may be impossible to determine, with any degree of precision, what are or were the average profits of stock, either in the present or in ancient times, some notion may be formed of them from the interest of money. It may be laid down as a maxim, that wherever a great deal can be made by the use of money, a great deal will commonly be given for the use of it; and that, wherever little can be made by it, less will commonly be given for it. Accordingly, therefore, as the usual market rate of interest varies in any country, we may be assured that the ordinary profits of stock must vary with it, must sink as it sinks, and rise as it rises. The progress of interest, therefore, may lead us to form some notion of the progress of profit. By the 37th of Henry VIII. all interest above ten per cent. was declared unlawful. More, it seems, had sometimes been taken before that. In the reign of Edward VI. religious zeal prohibited all interest. This prohibition, however, like all others of the same kind, is said to have produced no effect, and probably rather increased than diminished the evil of usury. The statute of Henry VIII. was revived by the 13th of Elizabeth, cap. 8. and ten per cent. continued to be the legal rate of interest till the 21st of James I. when it was restricted to eight per cent. It was reduced to six per cent. soon after the Restoration, and by the 12th of Queen Anne, to five per cent. All these different statutory regulations seem to have been made with great propriety. They seem to have followed, and not to have gone before, the market rate of interest, or the rate at which people of good credit usually borrowed. Since the time of Queen Anne, five per cent. seems to have been rather above than below the market rate. Before the late war, the government borrowed at three per cent.; and people of good credit in the capital, and in many other parts of the kingdom, at three and a-half, four, and four and a-half per cent. Since the time of Henry VIII. the wealth and revenue of the country have been continually advancing, and in the course of their progress, their pace seems rather to have been gradually accelerated than retarded. They seem not only to have been going on, but to have been going on faster and faster. The wages of labour have been continually increasing during the same period, and, in the greater part of the different branches of trade and manufactures, the profits of stock have been diminishing. It generally requires a greater stock to carry on any sort of trade in a great town than in a country village. The great stock employed in every branch of trade, and the number of rich competitors, generally reduce the rate of profit in the former below what it is in the latter. But the wages of labour are generally higher in a great town than in a country village. In a thriving town, the people who have great stocks to employ, frequently cannot get the number of workmen they want, and therefore bid against one another, in order to get as many as they can, which raises the wages of labour, and lowers the profits of stock. In the remote parts of the country, there is frequently not stock sufficient to employ all the people, who therefore bid against one another, in order to get employment, which lowers the wages of labour, and raises the profits of stock. In Scotland, though the legal rate of interest is the same as in England, the market rate is rather higher. People of the best credit there seldom borrow under five per cent. Even private bankers in Edinburgh give four per cent. upon their promissory-notes, of which payment, either in whole or in part may be demanded at pleasure. Private bankers in London give no interest for the money which is deposited with them. There are few trades which cannot be carried on with a smaller stock in Scotland than in England. The common rate of profit, therefore, must be somewhat greater. The wages of labour, it has already been observed, are lower in Scotland than in England. The country, too, is not only much poorer, but the steps by which it advances to a better condition, for it is evidently advancing, seem to be much slower and more tardy. The legal rate of interest in France has not, during the course of the present century, been always regulated by the market rate[10]. In 1720, interest was reduced from the twentieth to the fiftieth penny, or from five to two per cent. In 1724, it was raised to the thirtieth penny, or to three and a third per cent. In 1725, it was again raised to the twentieth penny, or to five per cent. In 1766, during the administration of Mr Laverdy, it was reduced to the twenty-fifth penny, or to four per cent. The Abbé Terray raised it afterwards to the old rate of five per cent. The supposed purpose of many of those violent reductions of interest was to prepare the way for reducing that of the public debts; a purpose which has sometimes been executed. France is, perhaps, in the present times, not so rich a country as England; and though the legal rate of interest has in France frequently been lower than in England, the market rate has generally been higher; for there, as in other countries, they have several very safe and easy methods of evading the law. The profits of trade, I have been assured by British merchants who had traded in both countries, are higher in France than in England; and it is no doubt upon this account, that many British subjects chuse rather to employ their capitals in a country where trade is in disgrace, than in one where it is highly respected. The wages of labour are lower in France than in England. When you go from Scotland to England, the difference which you may remark between the dress and countenance of the common people in the one country and in the other, sufficiently indicates the difference in their condition. The contrast is still greater when you return from France. France, though no doubt a richer country than Scotland, seems not to be going forward so fast. It is a common and even a popular opinion in the country, that it is going backwards; an opinion which I apprehend, is ill-founded, even with regard to France, but which nobody can possibly entertain with regard to Scotland, who sees the country now, and who saw it twenty or thirty years ago. The province of Holland, on the other hand, in proportion to the extent of its territory and the number of its people, is a richer country than England. The government there borrow at two per cent. and private people of good credit at three. The wages of labour are said to be higher in Holland than in England, and the Dutch, it is well known, trade upon lower profits than any people in Europe. The trade of Holland, it has been pretended by some people, is decaying, and it may perhaps be true that some particular branches of it are so; but these symptoms seem to indicate sufficiently that there is no general decay. When profit diminishes, merchants are very apt to complain that trade decays, though the diminution of profit is the natural effect of its prosperity, or of a greater stock being employed in it than before. During the late war, the Dutch gained the whole carrying trade of France, of which they still retain a very large share. The great property which they possess both in French and English funds, about forty millions, it is said in the latter (in which, I suspect, however, there is a considerable exaggeration), the great sums which they lend to private people, in countries where the rate of interest is higher than in their own, are circumstances which no doubt demonstrate the redundancy of their stock, or that it has increased beyond what they can employ with tolerable profit in the proper business of their own country; but they do not demonstrate that that business has decreased. As the capital of a private man, though acquired by a particular trade, may increase beyond what he can employ in it, and yet that trade continue to increase too, so may likewise the capital of a great nation. In our North American and West Indian colonies, not only the wages of labour, but the interest of money, and consequently the profits of stock, are higher than in England. In the different colonies, both the legal and the market rate of interest run from six to eight per cent. High wages of labour and high profits of stock, however, are things, perhaps, which scarce ever go together, except in the peculiar circumstances of new colonies. A new colony must always, for some time, be more understocked in proportion to the extent of its territory, and more underpeopled in proportion to the extent of its stock, than the greater part of other countries. They have more land than they have stock to cultivate. What they have, therefore, is applied to the cultivation only of what is most fertile and most favourably situated, the land near the sea-shore and along the banks of navigable rivers. Such land, too, is frequently purchased at a price below the value even of its natural produce. Stock employed in the purchase and improvement of such lands, must yield a very large profit, and, consequently, afford to pay a very large interest. Its rapid accumulation in so profitable an employment enables the planter to increase the number of his hands faster than he can find them in a new settlement. Those whom he can find, therefore, are very liberally rewarded. As the colony increases, the profits of stock gradually diminish. When the most fertile and best situated lands have been all occupied, less profit can be made by the cultivation of what is inferior both in soil and situation, and less interest can be afforded for the stock which is so employed. In the greater part of our colonies, accordingly, both the legal and the market rate of interest have been considerably reduced during the course of the present century. As riches, improvement, and population, have increased, interest has declined. The wages of labour do not sink with the profits of stock. The demand for labour increases with the increase of stock, whatever be its profits; and after these are diminished, stock may not only continue to increase, but to increase much faster than before. It is with industrious nations, who are advancing in the acquisition of riches, as with industrious individuals. A great stock, though with small profits, generally increases faster than a small stock with great profits. Money, says the proverb, makes money. When you have got a little, it is often easy to get more. The great difficulty is to get that little. The connection between the increase of stock and that of industry, or of the demand for useful labour, has partly been explained already, but will be explained more fully hereafter, in treating of the accumulation of stock. The acquisition of new territory, or of new branches of trade, may sometimes raise the profits of stock, and with them the interest of money, even in a country which is fast advancing in the acquisition of riches. The stock of the country, not being sufficient for the whole accession of business which such acquisitions present to the different people among whom it is divided, is applied to those particular branches only which afford the greatest profit. Part of what had before been employed in other trades, is necessarily withdrawn from them, and turned into some of the new and more profitable ones. In all those old trades, therefore, the competition comes to be less than before. The market comes to be less fully supplied with many different sorts of goods. Their price necessarily rises more or less, and yields a greater profit to those who deal in them, who can, therefore, afford to borrow at a higher interest. For some time after the conclusion of the late war, not only private people of the best credit, but some of the greatest companies in London, commonly borrowed at five per cent. who, before that, had not been used to pay more than four, and four and a half per cent. The great accession both of territory and trade by our acquisitions in North America and the West Indies, will sufficiently account for this, without supposing any diminution in the capital stock of the society. So great an accession of new business to be carried on by the old stock, must necessarily have diminished the quantity employed in a great number of particular branches, in which the competition being less, the profits must have been greater. I shall hereafter have occasion to mention the reasons which dispose me to believe that the capital stock of Great Britain was not diminished, even by the enormous expense of the late war. The diminution of the capital stock of the society, or of the funds destined for the maintenance of industry, however, as it lowers the wages of labour, so it raises the profits of stock, and consequently the interest of money. By the wages of labour being lowered, the owners of what stock remains in the society can bring their goods at less expense to market than before; and less stock being employed in supplying the market than before, they can sell them dearer. Their goods cost them less, and they get more for them. Their profits, therefore, being augmented at both ends, can well afford a large interest. The great fortunes so suddenly and so easily acquired in Bengal and the other British settlements in the East Indies, may satisfy us, that as the wages of labour are very low, so the profits of stock are very high in those ruined countries. The interest of money is proportionably so. In Bengal, money is frequently lent to the farmers at forty, fifty, and sixty per cent. and the succeeding crop is mortgaged for the payment. As the profits which can afford such an interest must eat up almost the whole rent of the landlord, so such enormous usury must in its turn eat up the greater part of those profits. Before the fall of the Roman republic, a usury of the same kind seems to have been common in the provinces, under the ruinous administration of their proconsuls. The virtuous Brutus lent money in Cyprus at eight-and-forty per cent. as we learn from the letters of Cicero. In a country which had acquired that full complement of riches which the nature of its soil and climate, and its situation with respect to other countries, allowed it to acquire, which could, therefore, advance no further, and which was not going backwards, both the wages of labour and the profits of stock would probably be very low. In a country fully peopled in proportion to what either its territory could maintain, or its stock employ, the competition for employment would necessarily be so great as to reduce the wages of labour to what was barely sufficient to keep up the number of labourers, and the country being already fully peopled, that number could never be augmented. In a country fully stocked in proportion to all the business it had to transact, as great a quantity of stock would be employed in every particular branch as the nature and extent of the trade would admit. The competition, therefore, would everywhere be as great, and, consequently, the ordinary profit as low as possible. But, perhaps, no country has ever yet arrived at this degree of opulence. China seems to have been long stationary, and had, probably, long ago acquired that full complement of riches which is consistent with the nature of its laws and institutions. But this complement may be much inferior to what, with other laws and institutions, the nature of its soil, climate, and situation, might admit of. A country which neglects or despises foreign commerce, and which admits the vessels of foreign nations into one or two of its ports only, cannot transact the same quantity of business which it might do with different laws and institutions. In a country, too, where, though the rich, or the owners of large capitals, enjoy a good deal of security, the poor, or the owners of small capitals, enjoy scarce any, but are liable, under the pretence of justice, to be pillaged and plundered at any time by the inferior mandarins, the quantity of stock employed in all the different branches of business transacted within it, can never be equal to what the nature and extent of that business might admit. In every different branch, the oppression of the poor must establish the monopoly of the rich, who, by engrossing the whole trade to themselves, will be able to make very large profits. Twelve per cent. accordingly, is said to be the common interest of money in China, and the ordinary profits of stock must be sufficient to afford this large interest. A defect in the law may sometimes raise the rate of interest considerably above what the condition of the country, as to wealth or poverty, would require. When the law does not enforce the performance of contracts, it puts all borrowers nearly upon the same footing with bankrupts, or people of doubtful credit, in better regulated countries. The uncertainty of recovering his money makes the lender exact the same usurious interest which is usually required from bankrupts. Among the barbarous nations who overran the western provinces of the Roman empire, the performance of contracts was left for many ages to the faith of the contracting parties. The courts of justice of their kings seldom intermeddled in it. The high rate of interest which took place in those ancient times, may perhaps, be partly accounted for from this cause. When the law prohibits interest altogether, it does not prevent it. Many people must borrow, and nobody will lend without such a consideration for the use of their money as is suitable, not only to what can be made by the use of it, but to the difficulty and danger of evading the law. The high rate of interest among all Mahometan nations is accounted for by M. Montesquieu, not from their poverty, but partly from this, and partly from the difficulty of recovering the money. The lowest ordinary rate of profit must always be something more than what is sufficient to compensate the occasional losses to which every employment of stock is exposed. It is this surplus only which is neat or clear profit. What is called gross profit, comprehends frequently not only this surplus, but what is retained for compensating such extraordinary losses. The interest which the borrower can afford to pay is in proportion to the clear profit only. The lowest ordinary rate of interest must, in the same manner, be something more than sufficient to compensate the occasional losses to which lending, even with tolerable prudence, is exposed. Were it not, mere charity or friendship could be the only motives for lending. In a country which had acquired its full complement of riches, where, in every particular branch of business, there was the greatest quantity of stock that could be employed in it, as the ordinary rate of clear profit would be very small, so the usual market rate of interest which could be afforded out of it would be so low as to render it impossible for any but the very wealthiest people to live upon the interest of their money. All people of small or middling fortunes would be obliged to superintend themselves the employment of their own stocks. It would be necessary that almost every man should be a man of business, or engage in some sort of trade. The province of Holland seems to be approaching near to this state. It is there unfashionable not to be a man of business. Necessity makes it usual for almost every man to be so, and custom everywhere regulates fashion. As it is ridiculous not to dress, so is it, in some measure, not to be employed like other people. As a man of a civil profession seems awkward in camp or a garrison, and is even in some danger of being despised there, so does an idle man among men of business. The highest ordinary rate of profit may be such as, in the price of the greater part of commodities, eats up the whole of what should go to the rent of the land, and leaves only what is sufficient to pay the labour of preparing and bringing them to market, according to the lowest rate at which labour can anywhere be paid, the bare subsistence of the labourer. The workman must always have been fed in some way or other while he was about the work, but the landlord may not always have been paid. The profits of the trade which the servants of the East India Company carry on in Bengal may not, perhaps, be very far from this rate. The proportion which the usual market rate of interest ought to bear to the ordinary rate of clear profit, necessarily varies as profit rises or falls. Double interest is in Great Britain reckoned what the merchants call a good, moderate, reasonable profit; terms which, I apprehend, mean no more than a common and usual profit. In a country where the ordinary rate of clear profit is eight or ten per cent. it may be reasonable that one half of it should go to interest, wherever business is carried on with borrowed money. The stock is at the risk of the borrower, who, as it were, insures it to the lender; and four or five per cent. may, in the greater part of trades, be both a sufficient profit upon the risk of this insurance, and a sufficient recompence for the trouble of employing the stock. But the proportion between interest and clear profit might not be the same in countries where the ordinary rate of profit was either a good deal lower, or a good deal higher. If it were a good deal lower, one half of it, perhaps, could not be afforded for interest; and more might be afforded if it were a good deal higher. In countries which are fast advancing to riches, the low rate of profit may, in the price of many commodities, compensate the high wages of labour, and enable those countries to sell as cheap as their less thriving neighbours, among whom the wages of labour may be lower. In reality, high profits tend much more to raise the price of work than high wages. If, in the linen manufacture, for example, the wages of the different working people, the flax-dressers, the spinners, the weavers, &c. should all of them be advanced twopence a-day, it would be necessary to heighten the price of a piece of linen only by a number of twopences equal to the number of people that had been employed about it, multiplied by the number of days during which they had been so employed. That part of the price of the commodity which resolved itself into the wages, would, through all the different stages of the manufacture, rise only in arithmetical proportion to this rise of wages. But if the profits of all the different employers of those working people should be raised five per cent. that part of the price of the commodity which resolved itself into profit would, through all the different stages of the manufacture, rise in geometrical proportion to this rise of profit. The employer of the flax-dressers would, in selling his flax, require an additional five per cent. upon the whole value of the materials and wages which he advanced to his workmen. The employer of the spinners would require an additional five per cent. both upon the advanced price of the flax, and upon the wages of the spinners. And the employer of the weavers would require a like five per cent. both upon the advanced price of the linen-yarn, and upon the wages of the weavers. In raising the price of commodities, the rise of wages operates in the same manner as simple interest does in the accumulation of debt. The rise of profit operates like compound interest. Our merchants and master manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods, both at home and abroad. They say nothing concerning the bad effects of high profits; they are silent with regard to the pernicious effects of their own gains; they complain only of those of other people. CHAP. X. OF WAGES AND PROFIT IN THE DIFFERENT EMPLOYMENTS OF LABOUR AND STOCK. The whole of the advantages and disadvantages of the different employments of labour and stock, must, in the same neighbourhood, be either perfectly equal, or continually tending to equality. If, in the same neighbourhood, there was any employment evidently either more or less advantageous than the rest, so many people would crowd into it in the one case, and so many would desert it in the other, that its advantages would soon return to the level of other employments. This, at least, would be the case in a society where things were left to follow their natural course, where there was perfect liberty, and where every man was perfectly free both to choose what occupation he thought proper, and to change it as often as he thought proper. Every man's interest would prompt him to seek the advantageous, and to shun the disadvantageous employment. Pecuniary wages and profit, indeed, are everywhere in Europe extremely different, according to the different employments of labour and stock. But this difference arises, partly from certain circumstances in the employments themselves, which, either really, or at least in the imagination of men, make up for a small pecuniary gain in some, and counterbalance a great one in others, and partly from the policy of Europe, which nowhere leaves things at perfect liberty. The particular consideration of those circumstances, and of that policy, will divide this Chapter into two parts. PART I.--_Inequalities arising from the nature of the employments themselves._ The five following are the principal circumstances which, so far as I have been able to observe, make up for a small pecuniary gain in some employments, and counterbalance a great one in others. First, the agreeableness or disagreeableness of the employments themselves; secondly, the easiness and cheapness, or the difficulty and expense of learning them; thirdly, the constancy or inconstancy of employment in them; fourthly, the small or great trust which must be reposed in those who exercise them; and, fifthly, the probability or improbability of success in them. First, the wages of labour vary with the ease or hardship, the cleanliness or dirtiness, the honourableness or dishonourableness, of the employment. Thus in most places, take the year round, a journeyman tailor earns less than a journeyman weaver. His work is much easier. A journeyman weaver earns less than a journeyman smith. His work is not always easier, but it is much cleanlier. A journeyman blacksmith, though an artificer, seldom earns so much in twelve hours, as a collier, who is only a labourer, does in eight. His work is not quite so dirty, is less dangerous, and is carried on in day-light, and above ground. Honour makes a great part of the reward of all honourable professions. In point of pecuniary gain, all things considered, they are generally under-recompensed, as I shall endeavour to shew by and by. Disgrace has the contrary effect. The trade of a butcher is a brutal and an odious business; but it is in most places more profitable than the greater part of common trades. The most detestable of all employments, that of public executioner, is, in proportion to the quantity of work done, better paid than any common trade whatever. Hunting and fishing, the most important employments of mankind in the rude state of society, become, in its advanced state, their most agreeable amusements, and they pursue for pleasure what they once followed from necessity. In the advanced state of society, therefore, they are all very poor people who follow as a trade, what other people pursue as a pastime. Fishermen have been so since the time of Theocritus[11]. A poacher is everywhere a very poor man in Great Britain. In countries where the rigour of the law suffers no poachers, the licensed hunter is not in a much better condition. The natural taste for those employments makes more people follow them, than can live comfortably by them; and the produce of their labour, in proportion to its quantity, comes always too cheap to market, to afford any thing but the most scanty subsistence to the labourers. Disagreeableness and disgrace affect the profits of stock in the same manner as the wages of labour. The keeper of an inn or tavern, who is never master of his own house, and who is exposed to the brutality of every drunkard, exercises neither a very agreeable nor a very creditable business. But there is scarce any common trade in which a small stock yields so great a profit. Secondly, the wages of labour vary with the easiness and cheapness, or the difficulty and expense, of learning the business. When any expensive machine is erected, the extraordinary work to be performed by it before it is worn out, it must be expected, will replace the capital laid out upon it, with at least the ordinary profits. A man educated at the expense of much labour and time to any of those employments which require extraordinary dexterity and skill, may be compared to one of those expensive machines. The work which he learns to perform, it must be expected, over and above the usual wages of common labour, will replace to him the whole expense of his education, with at least the ordinary profits of an equally valuable capital. It must do this too in a reasonable time, regard being had to the very uncertain duration of human life, in the same manner as to the more certain duration of the machine. The difference between the wages of skilled labour and those of common labour, is founded upon this principle. The policy of Europe considers the labour of all mechanics, artificers, and manufacturers, as skilled labour; and that of all country labourers as common labour. It seems to suppose that of the former to be of a more nice and delicate nature than that of the latter. It is so perhaps in some cases; but in the greater part it is quite otherwise, as I shall endeavour to shew by and by. The laws and customs of Europe, therefore, in order to qualify any person for exercising the one species of labour, impose the necessity of an apprenticeship, though with different degrees of rigour in different places. They leave the other free and open to every body. During the continuance of the apprenticeship, the whole labour of the apprentice belongs to the master. In the meantime he must, in many cases, be maintained by his parents or relations, and, in almost all cases, must be clothed by them. Some money, too, is commonly given to the master for teaching him his trade. They who cannot give money, give time, or become bound for more than the usual number of years; a consideration which, though it is not always advantageous to the master, on account of the usual idleness of apprentices, is always disadvantageous to the apprentice. In country labour, on the contrary, the labourer, while he is employed about the easier, learns the more difficult parts of his business, and his own labour maintains him through all the different stages of his employment. It is reasonable, therefore, that in Europe the wages of mechanics, artificers, and manufacturers, should be somewhat higher than those of common labourers. They are so accordingly, and their superior gains make them, in most places, be considered as a superior rank of people. This superiority, however, is generally very small: the daily or weekly earnings of journeymen in the more common sorts of manufactures, such as those of plain linen and woollen cloth, computed at an average, are, in most places, very little more than the day-wages of common labourers. Their employment, indeed, is more steady and uniform, and the superiority of their earnings, taking the whole year together, may be somewhat greater. It seems evidently, however, to be no greater than what is sufficient to compensate the superior expense of their education. Education in the ingenious arts, and in the liberal professions, is still more tedious and expensive. The pecuniary recompence, therefore, of painters and sculptors, of lawyers and physicians, ought to be much more liberal; and it is so accordingly. The profits of stock seem to be very little affected by the easiness or difficulty of learning the trade in which it is employed. All the different ways in which stock is commonly employed in great towns seem, in reality, to be almost equally easy and equally difficult to learn. One branch, either of foreign or domestic trade, cannot well be a much more intricate business than another. Thirdly, the wages of labour in different occupations vary with the constancy or inconstancy of employment. Employment is much more constant in some trades than in others. In the greater part of manufactures, a journeyman may be pretty sure of employment almost every day in the year that he is able to work. A mason or bricklayer, on the contrary, can work neither in hard frost nor in foul weather, and his employment at all other times depends upon the occasional calls of his customers. He is liable, in consequence, to be frequently without any. What he earns, therefore, while he is employed, must not only maintain him while he is idle, but make him some compensation for those anxious and desponding moments which the thought of so precarious a situation must sometimes occasion. Where the computed earnings of the greater part of manufacturers, accordingly, are nearly upon a level with the day-wages of common labourers, those of masons and bricklayers are generally from one-half more to double those wages. Where common labourers earn four of five shillings a week, masons and bricklayers frequently earn seven and eight; where the former earn six, the latter often earn nine and ten; and where the former earn nine and ten, as in London, the latter commonly earn fifteen and eighteen. No species of skilled labour, however, seems more easy to learn than that of masons and bricklayers. Chairmen in London, during the summer season, are said sometimes to be employed as bricklayers. The high wages of those workmen, therefore, are not so much the recompence of their skill, as the compensation for the inconstancy of their employment. A house-carpenter seems to exercise rather a nicer and a more ingenious trade than a mason. In most places, however, for it is not universally so, his day-wages are somewhat lower. His employment, though it depends much, does not depend so entirely upon the occasional calls of his customers; and it is not liable to be interrupted by the weather. When the trades which generally afford constant employment, happen in a particular place not to do so, the wages of the workmen always rise a good deal above their ordinary proportion to those of common labour. In London, almost all journeymen artificers are liable to be called upon and dismissed by their masters from day to day, and from week to week, in the same manner as day-labourers in other places. The lowest order of artificers, journeymen tailors, accordingly, earn their half-a-crown a-day, though eighteen pence may be reckoned the wages of common labour. In small towns and country villages, the wages of journeymen tailors frequently scarce equal those of common labour; but in London they are often many weeks without employment, particularly during the summer. When the inconstancy of employment is combined with the hardship, disagreeableness, and dirtiness of the work, it sometimes raises the wages of the most common labour above those of the most skilful artificers. A collier working by the piece is supposed, at Newcastle, to earn commonly about double, and, in many parts of Scotland, about three times, the wages of common labour. His high wages arise altogether from the hardship, disagreeableness, and dirtiness of his work. His employment may, upon most occasions, be as constant as he pleases. The coal-heavers in London exercise a trade which, in hardship, dirtiness, and disagreeableness, almost equals that of colliers; and, from the unavoidable irregularity in the arrivals of coal-ships, the employment of the greater part of them is necessarily very inconstant. If colliers, therefore, commonly earn double and triple the wages of common labour, it ought not to seem unreasonable that coal-heavers should sometimes earn four and five times those wages. In the inquiry made into their condition a few years ago, it was found that, at the rate at which they were paid, they could earn from six to ten shillings a-day. Six shillings are about four times the wages of common labour in London; and, in every particular trade, the lowest common earnings may always be considered as those of the far greater number. How extravagant soever those earnings may appear, if they were more than sufficient to compensate all the disagreeable circumstances of the business, there would soon be so great a number of competitors, as, in a a trade which has no exclusive privilege, would quickly reduce them to a lower rate. The constancy or inconstancy of employment cannot affect the ordinary profits of stock in any particular trade. Whether the stock is or is not constantly employed, depends, not upon the trade, but the trader. Fourthly, the wages of labour vary according to the small or great trust which must be reposed in the workmen. The wages of goldsmiths and jewellers are everywhere superior to those of many other workmen, not only of equal, but of much superior ingenuity, on account of the precious materials with which they are entrusted. We trust our health to the physician, our fortune, and sometimes our life and reputation, to the lawyer and attorney. Such confidence could not safely be reposed in people of a very mean or low condition. Their reward must be such, therefore, as may give them that rank in the society which so important a trust requires. The long time and the great expense which must be laid out in their education, when combined with this circumstance, necessarily enhance still further the price of their labour. When a person employs only his own stock in trade, there is no trust; and the credit which he may get from other people, depends, not upon the nature of the trade, but upon their opinion of his fortune, probity and prudence. The different rates of profit, therefore, in the different branches of trade, cannot arise from the different degrees of trust reposed in the traders. Fifthly, the wages of labour in different employments vary according to the probability or improbability of success in them. The probability that any particular person shall ever be qualified for the employments to which he is educated, is very different in different occupations. In the greatest part of mechanic trades, success is almost certain; but very uncertain in the liberal professions. Put your son apprentice to a shoemaker, there is little doubt of his learning to make a pair of shoes; but send him to study the law, it as at least twenty to one if he ever makes such proficiency as will enable him to live by the business. In a perfectly fair lottery, those who draw the prizes ought to gain all that is lost by those who draw the blanks. In a profession, where twenty fail for one that succeeds, that one ought to gain all that should have been gained by the unsuccessful twenty. The counsellor at law, who, perhaps, at near forty years of age, begins to make something by his profession, ought to receive the retribution, not only of his own so tedious and expensive education, but of that of more than twenty others, who are never likely to make any thing by it. How extravagant soever the fees of counsellors at law may sometimes appear, their real retribution is never equal to this. Compute, in any particular place, what is likely to be annually gained, and what is likely to be annually spent, by all the different workmen in any common trade, such as that of shoemakers or weavers, and you will find that the former sum will generally exceed the latter. But make the same computation with regard to all the counsellors and students of law, in all the different Inns of court, and you will find that their annual gains bear but a very small proportion to their annual expense, even though you rate the former as high, and the latter as low, as can well be done. The lottery of the law, therefore, is very far from being a perfectly fair lottery; and that, as well as many other liberal and honourable professions, is, in point of pecuniary gain, evidently under-recompensed. Those professions keep their level, however, with other occupations; and, notwithstanding these discouragements, all the most generous and liberal spirits are eager to crowd into them. Two different causes contribute to recommend them. First, the desire of the reputation which attends upon superior excellence in any of them; and, secondly, the natural confidence which every man has, more or less, not only in his own abilities, but in his own good fortune. To excel in any profession, in which but few arrive at mediocrity, it is the most decisive mark of what is called genius, or superior talents. The public admiration which attends upon such distinguished abilities makes always a part of their reward; a greater of smaller, in proportion as it is higher or lower in degree. It makes a considerable part of that reward in the profession of physic; a still greater, perhaps, in that of law; in poetry and philosophy it makes almost the whole. There are some very agreeable and beautiful talents, of which the possession commands a certain sort of admiration, but of which the exercise, for the sake of gain, is considered, whether from reason or prejudice, as a sort of public prostitution. The pecuniary recompence, therefore, of those who exercise them in this manner, must be sufficient, not only to pay for the time, labour, and expense for acquiring the talents, but for the discredit which attends the employment of them as the means of subsistence. The exorbitant rewards of players, opera-singers, opera-dancers, &c. are founded upon those two principles; the rarity and beauty of the talent, and the discredit of employing them in this manner. It seems absurd at first sight, that we should despise their persons, and yet reward their talents with the most profuse liberality. While we do the one, however, we must of necessity do the other. Should the public opinion of prejudice ever alter with regard to such occupations, their pecuniary recompence would quickly diminish. More people would apply to them, and the competition would quickly reduce the price of their labour. Such talents, though far from being common, are by no means so rare as imagined. Many people possess them in great perfection, who disdain to make this use of them; and many more are capable of acquiring them, if any thing could be made honourably by them. The over-weening conceit which the great part of men have of their own abilities, is an ancient evil remarked by the philosophers and moralists of all ages. Their absurd presumption in their own good fortune has been less taken notice of. It is, however, if possible, still more universal. There is no man living, who, when in tolerable health and spirits, has not some share of it. The chance of gain is by every man more or less over-valued, and the chance of loss is by most men under-valued, and by scarce any man, who is in tolerable health and spirits, valued more than it is worth. That the chance of gain is naturally over-valued, we may learn from the universal success of lotteries. The world neither ever saw, nor ever will see, a perfectly fair lottery, or one in which the whole gain compensated the whole loss; because the undertaker could make nothing by it. In the state lotteries, the tickets are really not worth the price which is paid by the original subscribers, and yet commonly sell in the market for twenty, thirty, and sometimes forty per cent. advance. The vain hopes of gaining some of the great prizes is the sole cause of this demand. The soberest people scarce look upon it as a folly to pay a small sum for the chance of gaining ten or twenty thousand pounds, though they know that even that small sum is perhaps twenty or thirty per cent. more than the chance is worth. In a lottery in which no prize exceeded twenty pounds, though in other respects it approached much nearer to a perfectly fair one than the common state lotteries, there would not be the same demand for tickets. In order to have a better chance for some of the great prizes, some people purchase several tickets; and others, small shares in a still greater number. There is not, however, a more certain proposition in mathematics, than that the more tickets you adventure upon, the more likely you are to be a loser. Adventure upon all the tickets in the lottery, and you lose for certain; and the greater the number of your tickets, the nearer your approach to this certainty. That the chance of loss is frequently under-valued, and scarce ever valued more than it is worth, we may learn from the very moderate profit of insurers. In order to make insurance, either from fire or sea-risk, a trade at all, the common premium must be sufficient to compensate the common losses, to pay the expense of management, and to afford such a profit as might have been drawn from an equal capital employed in any common trade. The person who pays no more than this, evidently pays no more than the real value of the risk, or the lowest price at which he can reasonably expect to insure it. But though many people have made a little money by insurance, very few have made a great fortune; and, from this consideration alone, it seems evident enough that the ordinary balance of profit and loss is not more advantageous in this than in other common trades, by which so many people make fortunes. Moderate, however, as the premium of insurance commonly is, many people despise the risk too much to care to pay it. Taking the whole kingdom at an average, nineteen houses in twenty, or rather, perhaps, ninety-nine in a hundred, are not insured from fire. Sea-risk is more alarming to the greater part of people; and the proportion of ships insured to those not insured is much greater. Many sail, however, at all seasons, and even in time of war, without any insurance. This may sometimes, perhaps, be done without any imprudence. When a great company, or even a great merchant, has twenty or thirty ships at sea, they may, as it were, insure one another. The premium saved up on them all may more than compensate such losses as they are likely to meet with in the common course of chances. The neglect of insurance upon shipping, however, in the same manner as upon houses, is, in most cases, the effect of no such nice calculation, but of mere thoughtless rashness, and presumptuous contempt of the risk. The contempt of risk, and the presumptuous hope of success, are in no period of life more active than at the age at which young people choose their professions. How little the fear of misfortune is then capable of balancing the hope of good luck, appears still more evidently in the readiness of the common people to enlist as soldiers, or to go to sea, than in the eagerness of those of better fashion to enter into what are called the liberal professions. What a common soldier may lose is obvious enough. Without regarding the danger, however, young volunteers never enlist so readily as at the beginning of a new war; and though they have scarce any chance of preferment, they figure to themselves, in their youthful fancies, a thousand occasions of acquiring honour and distinction which never occur. These romantic hopes make the whole price of their blood. Their pay is less than that of common labourers, and, in actual service, their fatigues are much greater. The lottery of the sea is not altogether so disadvantageous as that of the army. The son of a creditable labourer or artificer may frequently go to sea with his father's consent; but if he enlists as a soldier, it is always without it. Other people see some chance of his making something by the one trade; nobody but himself sees any of his making any thing by the other. The great admiral is less the object of public admiration than the great general; and the highest success in the sea service promises a less brilliant fortune and reputation than equal success in the land. The same difference runs through all the inferior degrees of preferment in both. By the rules of precedency, a captain in the navy ranks with a colonel in the army; but he does not rank with him in the common estimation. As the great prizes in the lottery are less, the smaller ones must be more numerous. Common sailors, therefore, more frequently get some fortune and preferment than common soldiers; and the hope of those prizes is what principally recommends the trade. Though their skill and dexterity are much superior to that of almost any artificers: and though their whole life is one continual scene of hardship and danger; yet for all this dexterity and skill, for all those hardships and dangers, while they remain in the condition of common sailors, they receive scarce any other recompence but the pleasure of exercising the one and of surmounting the other. Their wages are not greater than those of common labourers at the port which regulates the rate of seamen's wages. As they are continually going from port to port, the monthly pay of those who sail from all the different ports of Great Britain, is more nearly upon a level than that of any other workmen in those different places; and the rate of the port to and from which the greatest number sail, that is, the port of London, regulates that of all the rest. At London, the wages of the greater part of the different classes of workmen are about double those of the same classes at Edinburgh. But the sailors who sail from the port of London, seldom earn above three or four shillings a-month more than those who sail from the port of Leith, and the difference is frequently not so great. In time of peace, and in the merchant-service, the London price is from a guinea to about seven-and-twenty shillings the calendar month. A common labourer in London, at the rate of nine or ten shillings a-week, may earn in the calendar month from forty to five-and-forty shillings. The sailor, indeed, over and above his pay, is supplied with provisions. Their value, however, may not perhaps always exceed the difference between his pay and that of the common labourer; and though it sometimes should, the excess will not be clear gain to the sailor, because he cannot share it with his wife and family, whom he must maintain out of his wages at home. The dangers and hair-breadth escapes of a life of adventures, instead of disheartening young people, seem frequently to recommend a trade to them. A tender mother, among the inferior ranks of people, is often afraid to send her son to school at a sea-port town, lest the sight of the ships, and the conversation and adventures of the sailors, should entice him to go to sea. The distant prospect of hazards, from which we can hope to extricate ourselves by courage and address, is not disagreeable to us, and does not raise the wages of labour in any employment. It is otherwise with those in which courage and address can be of no avail. In trades which are known to be very unwholesome, the wages of labour are always remarkably high. Unwholesomeness is a species of disagreeableness, and its effects upon the wages of labour are to be ranked under that general head. In all the different employments of stock, the ordinary rate of profit varies more or less with the certainty or uncertainty of the returns. These are, in general, less uncertain in the inland than in the foreign trade, and in some branches of foreign trade than in others; in the trade to North America, for example, than in that to Jamaica. The ordinary rate of profit always rises more or less with the risk. It does not, however, seem to rise in proportion to it, or so as to compensate it completely. Bankruptcies are most frequent in the most hazardous trades. The most hazardous of all trades, that of a smuggler, though, when the adventure succeeds, it is likewise the most profitable, is the infallible road to bankruptcy. The presumptuous hope of success seems to act here as upon all other occasions, and to entice so many adventurers into those hazardous trades, that their competition reduces the profit below what is sufficient to compensate the risk. To compensate it completely, the common returns ought, over and above the ordinary profits of stock, not only to make up for all occasional losses, but to afford a surplus profit to the adventurers, of the same nature with the profit of insurers. But if the common returns were sufficient for all this, bankruptcies would not be more frequent in these than in other trades. Of the five circumstances, therefore, which vary the wages of labour, two only affect the profits of stock; the agreeableness or disagreeableness of the business, and the risk or security with which it is attended. In point of agreeableness or disagreeableness, there is little or no difference in the far greater part of the different employments of stock, but a great deal in those of labour; and the ordinary profit of stock, though it rises with the risk, does not always seem to rise in proportion to it. It should follow from all this, that, in the same society or neighbourhood, the average and ordinary rates of profit in the different employments of stock should be more nearly upon a level than the pecuniary wages of the different sorts of labour. They are so accordingly. The difference between the earnings of a common labourer and those of a well employed lawyer or physician, is evidently much greater than that between the ordinary profits in any two different branches of trade. The apparent difference, besides, in the profits of different trades, is generally a deception arising from our not always distinguishing what ought to be considered as wages, from what ought to be considered as profit. Apothecaries' profit is become a bye-word, denoting something uncommonly extravagant. This great apparent profit, however, is frequently no more than the reasonable wages of labour. The skill of an apothecary is a much nicer and more delicate matter than that of any artificer whatever; and the trust which is reposed in him is of much greater importance. He is the physician of the poor in all cases, and of the rich when the distress or danger is not very great. His reward, therefore, ought to be suitable to his skill and his trust; and it arises generally from the price at which he sells his drugs. But the whole drugs which the best employed apothecary in a large market-town, will sell in a year, may not perhaps cost him above thirty or forty pounds. Though he should sell them, therefore, for three or four hundred, or at a thousand per cent, profit, this may frequently be no more than the reasonable wages of his labour, charged, in the only way in which he can charge them, upon the price of his drugs. The greater part of the apparent profit is real wages disguised in the garb of profit. In a small sea-port town, a little grocer will make forty or fifty per cent. upon a stock of a single hundred pounds, while a considerable wholesale merchant in the same place will scarce make eight or ten per cent. upon a stock of ten thousand. The trade of the grocer may be necessary for the conveniency of the inhabitants, and the narrowness of the market may not admit the employment of a larger capital in the business. The man, however, must not only live by his trade, but live by it suitably to the qualifications which it requires. Besides possessing a little capital, he must be able to read, write, and account, and must be a tolerable judge, too, of perhaps fifty or sixty different sorts of goods, their prices, qualities, and the markets where they are to be had cheapest. He must have all the knowledge, in short, that is necessary for a great merchant, which nothing hinders him from becoming but the want of a sufficient capital. Thirty or forty pounds a-year cannot be considered as too great a recompence for the labour of a person so accomplished. Deduct this from the seemingly great profits of his capital, and little more will remain, perhaps, than the ordinary profits of stock. The greater part of the apparent profit is, in this case too, real wages. The difference between the apparent profit of the retail and that of the wholesale trade, is much less in the capital than in small towns and country villages. Where ten thousand pounds can be employed in the grocery trade, the wages of the grocer's labour must be a very trifling addition to the real profits of so great a stock. The apparent profits of the wealthy retailer, therefore, are there more nearly upon a level with these of the wholesale merchant. It is upon this account that goods sold by retail are generally and frequently much cheaper, in the capital than in small towns and country villages. Grocery goods, for example, are generally much cheaper; bread and butchers' meat frequently as cheap. It costs no more to bring grocery goods to the great town than to the country village; but it costs a great deal more to bring corn and cattle, as the greater part of them must be brought from a much greater distance. The prime cost of grocery goods, therefore, being the same in both places, they are cheapest where the least profit is charged upon them. The prime cost of bread and butchers' meat is greater in the great town than in the country village; and though the profit is less, therefore they are not always cheaper there, but often equally cheap. In such articles as bread and butchers' meat, the the same cause which diminishes apparent profit, increases prime cost. The extent of the market, by giving employment to greater stocks, diminishes apparent profit; but by requiring supplies from a greater distance, it increases prime cost. This diminution of the one and increase of the other, seem, in most cases, nearly to counterbalance one another, which is probably the reason that, though the prices of corn and cattle are commonly very different in different parts of the kingdom, those of bread and butchers' meat are generally very nearly the same through the greater part of it. Though the profits of stock, both in the wholesale and retail trade, are generally less in the capital than in small towns and country villages, yet great fortunes are frequently acquired from small beginnings in the former, and scarce ever in the latter. In small towns and country villages, on account of the narrowness of the market, trade cannot always be extended as stock extends. In such places, therefore, though the rate of a particular person's profits may be very high, the sum or amount of them can never be very great, nor consequently that of his annual accumulation. In great towns, on the contrary, trade can be extended as stock increases, and the credit of a frugal and thriving man increases much faster than his stock. His trade is extended in proportion to the amount of both; and the sum or amount of his profits is in proportion to the extent of his trade, and his annual accumulation in proportion to the amount of his profits. It seldom happens, however, that great fortunes are made, even in great towns, by any one regular, established, and well-known branch of business, but in consequence of a long life of industry, frugality, and attention. Sudden fortunes, indeed, are sometimes made in such places, by what is called the trade of speculation. The speculative merchant exercises no one regular, established, or well-known branch of business. He is a corn merchant this year, and a wine merchant the next, and a sugar, tobacco, or tea merchant the year after. He enters into every trade, when he foresees that it is likely to be more than commonly profitable, and he quits it when he foresees that its profits are likely to return to the level of other trades. His profits and losses, therefore, can bear no regular proportion to those of any one established and well-known branch of business. A bold adventurer may sometimes acquire a considerable fortune by two or three successful speculations, but is just as likely to lose one by two or three unsuccessful ones. This trade can be carried on nowhere but in great towns. It is only in places of the most extensive commerce and correspondence that the intelligence requisite for it can he had. The five circumstances above mentioned, though they occasion considerable inequalities in the wages of labour and profits of stock, occasion none in the whole of the advantages and disadvantages, real or imaginary, of the different employments of either. The nature of those circumstances is such, that they make up for a small pecuniary gain in some, and counterbalance a great one in others. In order, however, that this equality may take place in the whole of their advantages or disadvantages, three things are requisite, even where there is the most perfect freedom. First, the employments must be well known and long established in the neighbourhood; secondly, they must be in their ordinary, or what may be called their natural state; and, thirdly, they must be the sole or principal employments of those who occupy them. First, This equality can lake place only in those employments which are well known, and have been long established in the neighbourhood. Where all other circumstances are equal, wages are generally higher in new than in old trades. When a projector attempts to establish a new manufacture, he must at first entice his workmen from other employments, by higher wages than they can either earn in their own trades, or than the nature of his work would otherwise require; and a considerable time must pass away before he can venture to reduce them to the common level. Manufactures for which the demand arises altogether from fashion and fancy, are continually changing, and seldom last long enough to be considered as old established manufactures. Those, on the contrary, for which the demand arises chiefly from use or necessity, are less liable to change, and the same form of fabric may continue in demand for whole centuries together. The wages of labour, therefore, are likely to be higher in manufactures of the former, than in those of the latter kind. Birmingham deals chiefly in manufactures of the former kind; Sheffield in those of the latter; and the wages of labour in those two different places are said to be suitable to this difference in the nature of their manufactures. The establishment of any new manufacture, of any new branch of commerce, or of any new practice in agriculture, is always a speculation from which the projector promises himself extraordinary profits. These profits sometimes are very great, and sometimes, more frequently, perhaps, they are quite otherwise; but, in general, they bear no regular proportion to those of other old trades in the neighbourhood. If the project succeeds, they are commonly at first very high. When the trade or practice becomes thoroughly established and well known, the competition reduces them to the level of other trades. Secondly, this equality in the whole of the advantages and disadvantages of the different employments of labour and stock, can take place only in the ordinary, or what may be called the natural state of those employments. The demand for almost every different species of labour is sometimes greater, and sometimes less than usual. In the one case, the advantages of the employment rise above, in the other they fall below the common level. The demand for country labour is greater at hay-time and harvest than during the greater part of the year; and wages rise with the demand. In time of war, when forty or fifty thousand sailors are forced from the merchant service into that of the king, the demand for sailors to merchant ships necessarily rises with their scarcity; and their wages, upon such occasions, commonly rise from a guinea and seven-and-twenty shillings to forty shillings and three pounds a-month. In a decaying manufacture, on the contrary, many workmen, rather than quit their own trade, are contented with smaller wages than would be suitable to the nature of their employment. The profits of stock vary with the price of the commodities in which it is employed. As the price of any commodity rises above the ordinary or average rate, the profits of at least some part of the stock that is employed in bringing it to market, rise above their proper level, and as it falls they sink below it. All commodities are more or less liable to variations of price, but some are much more so than others. In all commodities which are produced by human industry, the quantity of industry annually employed is necessarily regulated by the annual demand, in such a manner that the average annual produce may, as nearly as possible, be equal to the average annual consumption. In some employments, it has already been observed, the same quantity of industry will always produce the same, or very nearly the same quantity of commodities. In the linen or woollen manufactures, for example, the same number of hands will annually work up very nearly the same quantity of linen and woollen cloth. The variations in the market price of such commodities, therefore, can arise only from some accidental variation in the demand. A public mourning raises the price of black cloth. But as the demand for most sorts of plain linen and woollen cloth is pretty uniform, so is likewise the price. But there are other employments in which the same quantity of industry will not always produce the same quantity of commodities. The same quantity of industry, for example, will, in different years, produce very different quantities of corn, wine, hops, sugar, tobacco, &c. The price of such commodities, therefore, varies not only with the variations of demand, but with the much greater and more frequent variations of quantity, and is consequently extremely fluctuating; but the profit of some of the dealers must necessarily fluctuate with the price of the commodities. The operations of the speculative merchant are principally employed about such commodities. He endeavours to buy them up when he foresees that their price is likely to rise, and to sell them when it is likely to fall. Thirdly, this equality in the whole of the advantages and disadvantages of the different employments of labour and stock, can take place only in such as are the sole or principal employments of those who occupy them. When a person derives his subsistence from one employment, which does not occupy the greater part of his time, in the intervals of his leisure he is often willing to work at another for less wages than would otherwise suit the nature of the employment. There still subsists, in many parts of Scotland, a set of people called _cottars_ or _cottagers_, though they were more frequent some years ago than they are now. They are a sort of out-servants of the landlords and farmers. The usual reward which they receive from their master is a house, a small garden for pot-herbs, as much grass as will feed a cow, and, perhaps, an acre or two of bad arable land. When their master has occasion for their labour, he gives them, besides, two pecks of oatmeal a-week, worth about sixteen pence sterling. During a great part of the year, he has little or no occasion for their labour, and the cultivation of their own little possession is not sufficient to occupy the time which is left at their own disposal. When such occupiers were more numerous than they are at present, they are said to have been willing to give their spare time for a very small recompence to any body, and to have wrought for less wages than other labourers. In ancient times, they seem to have been common all over Europe. In countries ill cultivated, and worse inhabited, the greater part of landlords and farmers could not otherwise provide themselves with the extraordinary number of hands which country labour requires at certain seasons. The daily or weekly recompence which such labourers occasionally received from their masters, was evidently not the whole price of their labour. Their small tenement made a considerable part of it. This daily or weekly recompence, however, seems to have been considered as the whole of it, by many writers who have collected the prices of labour and provisions in ancient times, and who have taken pleasure in representing both as wonderfully low. The produce of such labour comes frequently cheaper to market than would otherwise be suitable to its nature. Stockings, in many parts of Scotland, are knit much cheaper than they can anywhere be wrought upon the loom. They are the work of servants and labourers, who derive the principal part of their subsistence from some other employment. More than a thousand pair of Shetland stockings are annually imported into Leith, of which the price is from fivepence to sevenpence a pair. At Lerwick, the small capital of the Shetland islands, tenpence a-day, I have been assured, is a common price of common labour. In the same islands, they knit worsted stockings to the value of a guinea a pair and upwards. The spinning of linen yarn is carried on in Scotland nearly in the same way as the knitting of stockings, by servants, who are chiefly hired for other purposes. They earn but a very scanty subsistence, who endeavour to get their livelihood by either of those trades. In most parts of Scotland, she is a good spinner who can earn twentypence a-week. In opulent countries, the market is generally so extensive, that any one trade is sufficient to employ the whole labour and stock of those who occupy it. Instances of people living by one employment, and, at the same time, deriving some little advantage from another, occur chiefly in poor countries. The following instance, however, of something of the same kind, is to be found in the capital of a very rich one. There is no city in Europe, I believe, in which house-rent is dearer than in London, and yet I know no capital in which a furnished apartment can be hired so cheap. Lodging is not only much cheaper in London than in Paris; it is much cheaper than in Edinburgh, of the same degree of goodness; and, what may seem extraordinary, the dearness of house-rent is the cause of the cheapness of lodging. The dearness of house-rent in London arises, not only from those causes which render it dear in all great capitals, the dearness of labour, the dearness of all the materials of building, which must generally be brought from a great distance, and, above all, the dearness of ground-rent, every landlord acting the part of a monopolist, and frequently exacting a higher rent for a single acre of bad land in a town, than can be had for a hundred of the best in the country, but it arises in part from the peculiar manners and customs of the people, which oblige every master of a family to hire a whole house from top to bottom. A dwelling-house in England means every thing that is contained under the same roof. In France, Scotland, and many other parts of Europe, it frequently means no more than a single storey. A tradesman in London is obliged to hire a whole house in that part of the town where his customers live. His shop is upon the ground floor, and he and his family sleep in the garret; and he endeavours to pay a part of his house-rent by letting the two middle storeys to lodgers. He expects to maintain his family by his trade, and not by his lodgers. Whereas at Paris and Edinburgh, people who let lodgings have commonly no other means of subsistence; and the price of the lodging must pay, not only the rent of the house, but the whole expense of the family. PART II.--_Inequalities occasioned by the Policy of Europe._ Such are the inequalities in the whole of the advantages and disadvantages of the different employments of labour and stock, which the defect of any of the three requisites above mentioned must occasion, even where there is the most perfect liberty. But the policy of Europe, by not leaving things at perfect liberty, occasions other inequalities of much greater importance. It does this chiefly in the three following ways. First, by restraining the competition in some employments to a smaller number than would otherwise be disposed to enter into them; secondly, by increasing it in others beyond what it naturally would be; and, thirdly, by obstructing the free circulation of labour and stock, both from employment to employment, and from place to place. First, The policy of Europe occasions a very important inequality in the whole of the advantages and disadvantages of the different employments of labour and stock, by restraining the competition in some employments to a smaller number than might otherwise be disposed to enter into them. The exclusive privileges of corporations are the principal means it makes use of for this purpose. The exclusive privilege of an incorporated trade necessarily restrains the competition, in the town where it is established, to those who are free of the trade. To have served an apprenticeship in the town, under a master properly qualified, is commonly the necessary requisite for obtaining this freedom. The bye-laws of the corporation regulate sometimes the number of apprentices which any master is allowed to have, and almost always the number of years which each apprentice is obliged to serve. The intention of both regulations is to restrain the competition to a much smaller number than might otherwise be disposed to enter into the trade. The limitation of the number of apprentices restrains it directly. A long term of apprenticeship restrains it more indirectly, but as effectually, by increasing the expense of education. In Sheffield, no master cutler can have more than one apprentice at a time, by a bye-law of the corporation. In Norfolk and Norwich, no master weaver can have more than two apprentices, under pain of forfeiting five pounds a-month to the king. No master hatter can have more than two apprentices anywhere in England, or in the English plantations, under pain of forfeiting five pounds a-month, half to the king, and half to him who shall sue in any court of record. Both these regulations, though they have been confirmed by a public law of the kingdom, are evidently dictated by the same corporation-spirit which enacted the bye-law of Sheffield. The silk-weavers in London had scarce been incorporated a year, when they enacted a bye-law, restraining any master from having more than two apprentices at a time. It required a particular act of parliament to rescind this bye-law. Seven years seem anciently to have been, all over Europe, the usual term established for the duration of apprenticeships in the greater part of incorporated trades. All such incorporations were anciently called universities, which, indeed, is the proper Latin name for any incorporation whatever. The university of smiths, the university of tailors, &c. are expressions which we commonly meet with in the old charters of ancient towns. When those particular incorporations, which are now peculiarly called universities, were first established, the term of years which it was necessary to study, in order to obtain the degree of master of arts, appears evidently to have been copied from the term of apprenticeship in common trades, of which the incorporations were much more ancient. As to have wrought seven years under a master properly qualified, was necessary, in order to entitle any person to become a master, and to have himself apprentices in a common trade; so to have studied seven years under a master properly qualified, was necessary to entitle him to become a master, teacher, or doctor (words anciently synonymous), in the liberal arts, and to have scholars or apprentices (words likewise originally synonymous) to study under him. By the 5th of Elizabeth, commonly called the Statute of Apprenticeship, it was enacted, that no person should, for the future, exercise any trade, craft, or mystery, at that time exercised in England, unless he had previously served to it an apprenticeship of seven years at least; and what before had been the bye-law of many particular corporations, became in England the general and public law of all trades carried on in market towns. For though the words of the statute are very general, and seem plainly to include the whole kingdom, by interpretation its operation has been limited to market towns; it having been held that, in country villages, a person may exercise several different trades, though he has not served a seven years apprenticeship to each, they being necessary for the conveniency of the inhabitants, and the number of people frequently not being sufficient to supply each with a particular set of hands. By a strict interpretation of the words, too, the operation of this statute has been limited to those trades which were established in England before the 5th of Elizabeth, and has never been extended to such as have been introduced since that time. This limitation has given occasion to several distinctions, which, considered as rules of police, appear as foolish as can well be imagined. It has been adjudged, for example, that a coachmaker can neither himself make nor employ journeymen to make his coach-wheels, but must buy them of a master wheel-wright; this latter trade having been exercised in England before the 5th of Elizabeth. But a wheel-wright, though he has never served an apprenticeship to a coachmaker, may either himself make or employ journeymen to make coaches; the trade of a coachmaker not being within the statute, because not exercised in England at the time when it was made. The manufactures of Manchester, Birmingham, and Wolverhampton, are many of them, upon this account, not within the statute, not having been exercised in England before the 5th of Elizabeth. In France, the duration of apprenticeships is different in different towns and in different trades. In Paris, five years is the term required in a great number; but, before any person can be qualified to exercise the trade as a master, he must, in many of them, serve five years more as a journeyman. During this latter term, he is called the companion of his master, and the term itself is called his companionship. In Scotland, there is no general law which regulates universally the duration of apprenticeships. The term is different in different corporations. Where it is long, a part of it may generally be redeemed by paying a small fine. In most towns, too, a very small fine is sufficient to purchase the freedom of any corporation. The weavers of linen and hempen cloth, the principal manufactures of the country, as well as all other artificers subservient to them, wheel-makers, reel-makers, &c. may exercise their trades in any town-corporate, without paying any fine. In all towns-corporate, all persons are free to sell butchers' meat upon any lawful day of the week. Three years is, in Scotland, a common term of apprenticeship, even in some very nice trades; and, in general, I know of no country in Europe, in which corporation laws are so little oppressive. The property which every man has in his own labour, as it is the original foundation of all other property, so it is the most sacred and inviolable. The patrimony of a poor man lies in the strength and dexterity of his hands; and to hinder him from employing this strength and dexterity in what manner he thinks proper, without injury to his neighbour, is a plain violation of this most sacred property. It is a manifest encroachment upon the just liberty, both of the workman, and of those who might be disposed to employ him. As it hinders the one from working at what he thinks proper, so it hinders the others from employing whom they think proper. To judge whether he is fit to be employed, may surely be trusted to the discretion of the employers, whose interest it so much concerns. The affected anxiety of the lawgiver, lest they should employ an improper person, is evidently as impertinent as it is oppressive. The institution of long apprenticeships can give no security that insufficient workmanship shall not frequently be exposed to public sale. When this is done, it is generally the effect of fraud, and not of inability; and the longest apprenticeship can give no security against fraud. Quite different regulations are necessary to prevent this abuse. The sterling mark upon plate, and the stamps upon linen and woollen cloth, give the purchaser much greater security than any statute of apprenticeship. He generally looks at these, but never thinks it worth while to enquire whether the workman had served a seven years apprenticeship. The institution of long apprenticeships has no tendency to form young people to industry. A journeyman who works by the piece is likely to be industrious, because he derives a benefit from every exertion of his industry. An apprentice is likely to be idle, and almost always is so, because he has no immediate interest to be otherwise. In the inferior employments, the sweets of labour consist altogether in the recompence of labour. They who are soonest in a condition to enjoy the sweets of it, are likely soonest to conceive a relish for it, and to acquire the early habit of industry. A young man naturally conceives an aversion to labour, when for a long time he receives no benefit from it. The boys who are put out apprentices from public charities are generally bound for more than the usual number of years, and they generally turn out very idle and worthless. Apprenticeships were altogether unknown to the ancients. The reciprocal duties of master and apprentice make a considerable article in every modern code. The Roman law is perfectly silent with regard to them. I know no Greek or Latin word (I might venture, I believe, to assert that there is none) which expresses the idea we now annex to the word apprentice, a servant bound to work at a particular trade for the benefit of a master, during a term of years, upon condition that the master shall teach him that trade. Long apprenticeships are altogether unnecessary. The arts, which are much superior to common trades, such as those of making clocks and watches, contain no such mystery as to require a long course of instruction. The first invention of such beautiful machines, indeed, and even that of some of the instruments employed in making them, must no no doubt have been the work of deep thought and long time, and may justly be considered as among the happiest efforts of human ingenuity. But when both have been fairly invented, and are well understood, to explain to any young man, in the completest manner, how to apply the instruments, and how to construct the machines, cannot well require more than the lessons of a few weeks; perhaps those of a few days might be sufficient. In the common mechanic trades, those of a few days might certainly be sufficient. The dexterity of hand, indeed, even in common trades, cannot be acquired without much practice and experience. But a young man would practice with much more diligence and attention, if from the beginning he wrought as a journeyman, being paid in proportion to the little work which he could execute, and paying in his turn for the materials which he might sometimes spoil through awkwardness and inexperience. His education would generally in this way be more effectual, and always less tedious and expensive. The master, indeed, would be a loser. He would lose all the wages of the apprentice, which he now saves, for seven years together. In the end, perhaps, the apprentice himself would be a loser. In a trade so easily learnt he would have more competitors, and his wages, when he came to be a complete workman, would be much less than at present. The same increase of competition would reduce the profits of the masters, as well as the wages of workmen. The trades, the crafts, the mysteries, would all be losers. But the public would be a gainer, the work of all artificers coming in this way much cheaper to market. It is to prevent this reduction of price, and consequently of wages and profit, by restraining that free competition which would most certainly occasion it, that all corporations, and the greater part of corporation laws, have been established. In order to erect a corporation, no other authority in ancient times was requisite, in many parts of Europe, but that of the town-corporate in which it was established. In England, indeed, a charter from the king was likewise necessary. But this prerogative of the crown seems to have been reserved rather for extorting money from the subject, than for the defence of the common liberty against such oppressive monopolies. Upon paying a fine to the king, the charter seems generally to have been readily granted; and when any particular class of artificers or traders thought proper to act as a corporation, without a charter, such adulterine guilds, as they were called, were not always disfranchised upon that account, but obliged to fine annually to the king, for permission to exercise their usurped privileges[12]. The immediate inspection of all corporations, and of the bye-laws which they might think proper to enact for their own government, belonged to the town-corporate in which they were established; and whatever discipline was exercised over them, proceeded commonly, not from the king, but from that greater incorporation of which those subordinate ones were only parts or members. The government of towns-corporate was altogether in the hands of traders and artificers, and it was the manifest interest of every particular class of them, to prevent the market from being overstocked, as they commonly express it, with their own particular species of industry; which is in reality to keep it always understocked. Each class was eager to establish regulations proper for this purpose, and, provided it was allowed to do so, was willing to consent that every other class should do the same. In consequence of such regulations, indeed, each class was obliged to buy the goods they had occasion for from every other within the town, somewhat dearer than they otherwise might have done. But, in recompence, they were enabled to sell their own just as much dearer; so that, so far it was as broad as long, as they say; and in the dealings of the different classes within the town with one another, none of them were losers by these regulations. But in their dealings with the country they were all great gainers; and in these latter dealings consist the whole trade which supports and enriches every town. Every town draws its whole subsistence, and all the materials of its industry, from the country. It pays for these chiefly in two ways. First, by sending back to the country a part of those materials wrought up and manufactured; in which case, their price is augmented by the wages of the workmen, and the profits of their masters or immediate employers; secondly, by sending to it a part both of the rude and manufactured produce, either of other countries, or of distant parts of the same country, imported into the town; in which case, too, the original price of those goods is augmented by the wages of the carriers or sailors, and by the profits of the merchants who employ them. In what is gained upon the first of those branches of commerce, consists the advantage which the town makes by its manufactures; in what is gained upon the second, the advantage of its inland and foreign trade. The wages of the workmen, and the profits of their different employers, make up the whole of what is gained upon both. Whatever regulations, therefore, tend to increase those wages and profits beyond what they otherwise would be, tend to enable the town to purchase, with a smaller quantity of its labour, the produce of a greater quantity of the labour of the country. They give the traders and artificers in the town an advantage over the landlords, farmers, and labourers, in the country, and break down that natural equality which would otherwise take place in the commerce which is carried on between them. The whole annual produce of the labour of the society is annually divided between these two different sets of people. By means of those regulations, a greater share of it is given to the inhabitants of the town than would otherwise fall to them, and a less to those of the country. The price which the town really pays for the provisions and materials annually imported into it, is the quantity of manufactures and other goods annually exported from it. The dearer the latter are sold, the cheaper the former are bought. The industry of the town becomes more, and that of the country less advantageous. That the industry which is carried on in towns is, everywhere in Europe, more advantageous than that which is carried on in the country, without entering into any very nice computations, we may satisfy ourselves by one very simple and obvious observation. In every country of Europe, we find at least a hundred people who have acquired great fortunes, from small beginnings, by trade and manufactures, the industry which properly belongs to towns, for one who has done so by that which properly belongs to the country, the raising of rude produce by the improvement and cultivation of land. Industry, therefore, must be better rewarded, the wages of labour and the profits of stock must evidently be greater, in the one situation than in the other. But stock and labour naturally seek the most advantageous employment. They naturally, therefore, resort as much as they can to the town, and desert the country. The inhabitants of a town being collected into one place, can easily combine together. The most insignificant trades carried on in towns have, accordingly, in some place or other, been incorporated; and even where they have never been incorporated, yet the corporation-spirit, the jealousy of strangers, the aversion to take apprentices, or to communicate the secret of their trade, generally prevail in them, and often teach them, by voluntary associations and agreements, to prevent that free competition which they cannot prohibit by bye-laws. The trades which employ but a small number of hands, run most easily into such combinations. Half-a-dozen wool-combers, perhaps, are necessary to keep a thousand spinners and weavers at work. By combining not to take apprentices, they can not only engross the employment, but reduce the whole manufacture into a sort of slavery to themselves, and raise the price of their labour much above what is due to the nature of their work. The inhabitants of the country, dispersed in distant places, cannot easily combine together. They have not only never been incorporated, but the incorporation spirit never has prevailed among them. No apprenticeship has ever been thought necessary to qualify for husbandry, the great trade of the country. After what are called the fine arts, and the liberal professions, however, there is perhaps no trade which requires so great a variety of knowledge and experience. The innumerable volumes which have been written upon it in all languages, may satisfy us, that among the wisest and most learned nations, it has never been regarded as a matter very easily understood. And from all those volumes we shall in vain attempt to collect that knowledge of its various and complicated operations which is commonly possessed even by the common farmer; how contemptuously soever the very contemptible authors of some of them may sometimes affect to speak of him. There is scarce any common mechanic trade, on the contrary, of which all the operations may not be as completely and distinctly explained in a pamphlet of a very few pages, as it is possible for words illustrated by figures to explain them. In the history of the arts, now publishing by the French Academy of Sciences, several of them are actually explained in this manner. The direction of operations, besides, which must be varied with every change of the weather, as well as with many other accidents, requires much more judgment and discretion, than that of those which are always the same, or very nearly the same. Not only the art of the farmer, the general direction of the operations of husbandry, but many inferior branches of country labour require much more skill and experience than the greater part of mechanic trades. The man who works upon brass and iron, works with instruments, and upon materials of which the temper is always the same, or very nearly the same. But the man who ploughs the ground with a team of horses or oxen, works with instruments of which the health, strength, and temper, are very different upon different occasions. The condition of the materials which he works upon, too, is as variable as that of the instruments which he works with, and both require to be managed with much judgment and discretion. The common ploughman, though generally regarded as the pattern of stupidity and ignorance, is seldom defective in this judgment and discretion. He is less accustomed, indeed, to social intercourse, than the mechanic who lives in a town. His voice and language are more uncouth, and more difficult to be understood by those who are not used to them. His understanding, however, being accustomed to consider a greater variety of objects, is generally much superior to that of the other, whose whole attention, from morning till night is commonly occupied in performing one or two very simple operations. How much the lower ranks of people in the country are really superior to those of the town, is well known to every man whom either business or curiosity has led to converse much with both. In China and Indostan, accordingly, both the rank and the wages of country labourers are said to be superior to those of the greater part of artificers and manufacturers. They would probably be so everywhere, if corporation laws and the corporation spirit did not prevent it. The superiority which the industry of the towns has everywhere in Europe over that of the country, is not altogether owing to corporations and corporation laws. It is supported by many other regulations. The high duties upon foreign manufactures, and upon all goods imported by alien merchants, all tend to the same purpose. Corporation laws enable the inhabitants of towns to raise their prices, without fearing to be undersold by the free competition of their own countrymen. Those other regulations secure them equally against that of foreigners. The enhancement of price occasioned by both is everywhere finally paid by the landlords, farmers, and labourers, of the country, who have seldom opposed the establishment of such monopolies. They have commonly neither inclination nor fitness to enter into combinations; and the clamour and sophistry of merchants and manufacturers easily persuade them, that the private interest of a part, and of a subordinate part, of the society, is the general interest of the whole. In Great Britain, the superiority of the industry of the towns over that of the country seems to have been greater formerly than in the present times. The wages of country labour approach nearer to those of manufacturing labour, and the profits of stock employed in agriculture to those of trading and manufacturing stock, than they are said to have done in the last century, or in the beginning of the present. This change may be regarded as the necessary, though very late consequence of the extraordinary encouragement given to the industry of the towns. The stocks accumulated in them come in time to be so great, that it can no longer be employed with the ancient profit in that species of industry which in peculiar to them. That industry has its limits like every other; and the increase of stock, by increasing the competition, necessarily reduces the profit. The lowering of profit in the town forces out stock to the country, where, by creating a new demand for country labour, it necessarily raises its wages. It then spreads itself, if I may say so, over the face of the land, and, by being employed in agriculture, is in part restored to the country, at the expense of which, in a great measure, it had originally been accumulated in the town. That everywhere in Europe the greatest improvements of the country have been owing to such overflowings of the stock originally accumulated in the towns, I shall endeavour to shew hereafter, and at the same time to demonstrate, that though some countries have, by this course, attained to a considerable degree of opulence, it is in itself necessarily slow, uncertain, liable to be disturbed and interrupted by innumerable accidents, and, in every respect, contrary to the order of nature and reason. The interests, prejudices, laws, and customs, which have given occasion to it, I shall endeavour to explain as fully and distinctly as I can in the third and fourth books of this Inquiry. People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible, indeed, to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary. A regulation which obliges all those of the same trade in a particular town to enter their names and places of abode in a public register, facilitates such assemblies. It connects individuals who might never otherwise be known to one another, and gives every man of the trade a direction where to find every other man of it. A regulation which enables those of the same trade to tax themselves, in order to provide for their poor, their sick, their widows and orphans, by giving them a common interest to manage, renders such assemblies necessary. An incorporation not only renders them necessary, but make the act of the majority binding upon the whole. In a free trade, an effectual combination cannot be established but by the unanimous consent of every single trader, and it cannot last longer than every single trader continues of the same mind. The majority of a corporation can enact a bye-law, with proper penalties, which will limit the competition more effectually and more durably than any voluntary combination whatever. The pretence that corporations are necessary for the better government of the trade, is without any foundation. The real and effectual discipline which is exercised over a workman, is not that of his corporation, but that of his customers. It is the fear of losing their employment which restrains his frauds and corrects his negligence. An exclusive corporation necessarily weakens the force of this discipline. A particular set of workmen must then be employed, let them behave well or ill. It is upon this account that, in many large incorporated towns, no tolerable workmen are to be found, even in some of the most necessary trades. If you would have your work tolerably executed, it must be done in the suburbs, where the workmen, having no exclusive privilege, have nothing but their character to depend upon, and you must then smuggle it into the town as well as you can. It is in this manner that the policy of Europe, by restraining the competition in some employments to a smaller number than would otherwise be disposed to enter into them, occasions a very important inequality in the whole of the advantages and disadvantages of the different employments of labour and stock. Secondly, The policy of Europe, by increasing the competition in some employments beyond what it naturally would be, occasions another inequality, of an opposite kind, in the whole of the advantages and disadvantages of the different employments of labour and stock. It has been considered as of so much importance that a proper number of young people should be educated for certain professions, that sometimes the public, and sometimes the piety of private founders, have established many pensions, scholarships, exhibitions, bursaries, &c. for this purpose, which draw many more people into those trades than could otherwise pretend to follow them. In all Christian countries, I believe, the education of the greater part of churchmen is paid for in this manner. Very few of them are educated altogether at their own expense. The long, tedious, and expensive education, therefore, of those who are, will not always procure them a suitable reward, the church being crowded with people, who, in order to get employment, are willing to accept of a much smaller recompence than what such an education would otherwise have entitled them to; and in this manner the competition of the poor takes away the reward of the rich. It would be indecent, no doubt, to compare either a curate or a chaplain with a journeyman in any common trade. The pay of a curate or chaplain, however, may very properly be considered as of the same nature with the wages of a journeyman. They are all three paid for their work according to the contract which they may happen to make with their respective superiors. Till after the middle of the fourteenth century, five merks, containing about as much silver as ten pounds of our present money, was in England the usual pay of a curate or a stipendiary parish priest, as we find it regulated by the decrees of several different national councils. At the same period, fourpence a-day, containing the same quantity of silver as a shilling of our present money, was declared to be the pay of a master mason; and threepence a-day, equal to ninepence of our present money, that of a journeyman mason[13]. The wages of both these labourers, therefore, supposing them to have been constantly employed, were much superior to those of the curate. The wages of the master mason, supposing him to have been without employment one-third of the year, would have fully equalled them. By the 12th of Queen Anne, c. 12. it is declared, 'That whereas, for want of sufficient maintenance and encouragement to curates, the cures have, in several places, been meanly supplied, the bishop is, therefore, empowered to appoint, by writing under his hand and seal, a sufficient certain stipend or allowance, not exceeding fifty, and not less than twenty pounds a-year.' Forty pounds a-year is reckoned at present very good pay for a curate; and, notwithstanding this act of parliament, there are many curacies under twenty pounds a-year. There are journeymen shoemakers in London who earn forty pounds a-year, and there is scarce an industrious workman of any kind in that metropolis who does not earn more than twenty. This last sum, indeed, does not exceed what is frequently earned by common labourers in many country parishes. Whenever the law has attempted to regulate the wages of workmen, it has always been rather to lower them than to raise them. But the law has, upon many occasions, attempted to raise the wages of curates, and, for the dignity of the church, to oblige the rectors of parishes to give them more than the wretched maintenance which they themselves might be willing to accept of. And, in both cases, the law seems to have been equally ineffectual, and has never either been able to raise the wages of curates, or to sink those of labourers to the degree that was intended; because it has never been able to hinder either the one from being willing to accept of less than the legal allowance, on account of the indigence of their situation and the multitude of their competitors, or the other from receiving more, on account of the contrary competition of those who expected to derive either profit or pleasure from employing them. The great benefices and other ecclesiastical dignities support the honour of the church, notwithstanding the mean circumstances of some of its inferior members. The respect paid to the profession, too, makes some compensation even to them for the meanness of their pecuniary recompence. In England, and in all Roman catholic countries, the lottery of the church is in reality much more advantageous than is necessary. The example of the churches of Scotland, of Geneva, and of several other protestant churches, may satisfy us, that in so creditable a profession, in which education is so easily procured, the hopes of much more moderate benefices will draw a sufficient number of learned, decent, and respectable men into holy orders. In professions in which there are no benefices, such as law and physic, if an equal proportion of people were educated at the public expense, the competition would soon be so great as to sink very much their pecuniary reward. It might then not be worth any man's while to educate his son to either of those professions at his own expense. They would be entirely abandoned to such as had been educated by those public charities, whose numbers and necessities would oblige them in general to content themselves with a very miserable recompence, to the entire degradation of the now respectable professions of law and physic. That unprosperous race of men, commonly called men of letters, are pretty much in the situation which lawyers and physicians probably would be in, upon the foregoing supposition. In every part of Europe, the greater part of them have been educated for the church, but have been hindered by different reasons from entering into holy orders. They have generally, therefore, been educated at the public expense; and their numbers are everywhere so great, as commonly to reduce the price of their labour to a very paltry recompence. Before the invention of the art of printing, the only employment by which a man of letters could make any thing by his talents, was that of a public or private teacher, or by communicating to other people the curious and useful knowledge which he had acquired himself; and this is still surely a more honourable, a more useful, and, in general, even a more profitable employment than that other of writing for a bookseller, to which the art of printing has given occasion. The time and study, the genius, knowledge, and application requisite to qualify an eminent teacher of the sciences, are at least equal to what is necessary for the greatest practitioners in law and physic. But the usual reward of the eminent teacher bears no proportion to that of the lawyer or physician, because the trade of the one is crowded with indigent people, who have been brought up to it at the public expense; whereas those of the other two are encumbered with very few who have not been educated at their own. The usual recompence, however, of public and private teachers, small as it may appear, would undoubtedly be less than it is, if the competition of those yet more indigent men of letters, who write for bread, was not taken out of the market. Before the invention of the art of printing, a scholar and a beggar seem to have been terms very nearly synonymous. The different governors of the universities, before that time, appear to have often granted licences to their scholars to beg. In ancient times, before any charities of this kind had been established for the education of indigent people to the learned professions, the rewards of eminent teachers appear to have been much more considerable. Isocrates, in what is called his discourse against the sophists, reproaches the teachers of his own times with inconsistency. "They make the most magnificent promises to their scholars," says he, "and undertake to teach them to be wise, to be happy, and to be just; and, in return for so important a service, they stipulate the paltry reward of four or five minæ." "They who teach wisdom," continues he, "ought certainly to be wise themselves; but if any man were to sell such a bargain for such a price, he would be convicted of the most evident folly." He certainly does not mean here to exaggerate the reward, and we may be assured that it was not less than he represents it. Four minæ were equal to thirteen pounds six shillings and eightpence; five minæ to sixteen pounds thirteen shillings and fourpence.--Something not less than the largest of those two sums, therefore, must at that time have been usually paid to the most eminent teachers at Athens. Isocrates himself demanded ten minæ, or L.33 : 6 : 8 from each scholar. When he taught at Athens, he is said to have had a hundred scholars. I understand this to be the number whom he taught at one time, or who attended what we would call one course of lectures; a number which will not appear extraordinary from so great a city to so famous a teacher, who taught, too, what was at that time the most fashionable of all sciences, rhetoric. He must have made, therefore, by each course of lectures, a thousand minæ, or L.3333 : 6 : 8. A thousand minæ, accordingly, is said by Plutarch, in another place, to have been his didactron, or usual price of teaching. Many other eminent teachers in those times appear to have acquired great fortunes. Georgias made a present to the temple of Delphi of his own statue in solid gold. We must not, I presume, suppose that it was as large as the life. His way of living, as well as that of Hippias and Protagoras, two other eminent teachers of those times, is represented by Plato as splendid, even to ostentation. Plato himself is said to have lived with a good deal of magnificence. Aristotle, after having been tutor to Alexander, and most munificently rewarded, as it is universally agreed, both by him and his father, Philip, thought it worth while, notwithstanding, to return to Athens, in order to resume the teaching of his school. Teachers of the sciences were probably in those times less common than they came to be in an age or two afterwards, when the competition had probably somewhat reduced both the price of their labour and the admiration for their persons. The most eminent of them, however, appear always to have enjoyed a degree of consideration much superior to any of the like profession in the present times. The Athenians sent Carneades the academic, and Diogenes the stoic, upon a solemn embassy to Rome; and though their city had then declined from its former grandeur, it was still an independent and considerable republic. Carneades, too, was a Babylonian by birth; and as there never was a people more jealous of admitting foreigners to public offices than the Athenians, their consideration for him must have been very great. This inequality is, upon the whole, perhaps rather advantageous than hurtful to the public. It may somewhat degrade the profession of a public teacher; but the cheapness of literary education is surely an advantage which greatly overbalances this trifling inconveniency. The public, too, might derive still greater benefit from it, if the constitution of those schools and colleges, in which education is carried on, was more reasonable than it is at present through the greater part of Europe. Thirdly, the policy of Europe, by obstructing the free circulation of labour and stock, both from employment to employment, and from place to place, occasions, in some cases, a very inconvenient inequality in the whole of the advantages and disadvantages of their different employments. The statute of apprenticeship obstructs the free circulation of labour from one employment to another, even in the same place. The exclusive privileges of corporations obstruct it from one place to another, even in the same employment. It frequently happens, that while high wages are given to the workmen in one manufacture, those in another are obliged to content themselves with bare subsistence. The one is in an advancing state, and has therefore a continual demand for new hands; the other is in a declining state, and the superabundance of hands is continually increasing. Those two manufactures may sometimes be in the same town, and sometimes in the same neighbourhood, without being able to lend the least assistance to one another. The statute of apprenticeship may oppose it in the one case, and both that and an exclusive corporation in the other. In many different manufactures, however, the operations are so much alike, that the workmen could easily change trades with one another, if those absurd laws did not hinder them. The arts of weaving plain linen and plain silk, for example, are almost entirely the same. That of weaving plain woollen is somewhat different; but the difference is so insignificant, that either a linen or a silk weaver might become a tolerable workman in a very few days. If any of those three capital manufactures, therefore, were decaying, the workmen might find a resource in one of the other two which was in a more prosperous condition; and their wages would neither rise too high in the thriving, nor sink too low in the decaying manufacture. The linen manufacture, indeed, is in England, by a particular statute, open to every body; but as it is not much cultivated through the greater part of the country, it can afford no general resource to the workmen of other decaying manufactures, who, wherever the statute of apprenticeship takes place, have no other choice, but either to come upon the parish, or to work as common labourers; for which, by their habits, they are much worse qualified than for any sort of manufacture that bears any resemblance to their own. They generally, therefore, chuse to come upon the parish. Whatever obstructs the free circulation of labour from one employment to another, obstructs that of stock likewise; the quantity of stock which can be employed in any branch of business depending very much upon that of the labour which can be employed in it. Corporation laws, however, give less obstruction to the free circulation of stock from one place to another, than to that of labour. It is everywhere much easier for a wealthy merchant to obtain the privilege of trading in a town-corporate, than for a poor artificer to obtain that of working in it. The obstruction which corporation laws give to the free circulation of labour is common, I believe, to every part of Europe. That which is given to it by the poor laws is, so far as I know, peculiar to England. It consists in the difficulty which a poor man finds in obtaining a settlement, or even in being allowed to exercise his industry in any parish but that to which he belongs. It is the labour of artificers and manufacturers only of which the free circulation is obstructed by corporation laws. The difficulty of obtaining settlements obstructs even that of common labour. It may be worth while to give some account of the rise, progress, and present state of this disorder, the greatest, perhaps, of any in the police of England. When, by the destruction of monasteries, the poor had been deprived of the charity of those religious houses, after some other ineffectual attempts for their relief, it was enacted, by the 43d of Elizabeth, c. 2. that every parish should be bound to provide for its own poor, and that overseers of the poor should be annually appointed, who, with the church-wardens, should raise, by a parish rate, competent sums for this purpose. By this statute, the necessity of providing for their own poor was indispensably imposed upon every parish. Who were to be considered as the poor of each parish became, therefore, a question of some importance. This question, after some variation, was at last determined by the 13th and 14th of Charles II. when it was enacted, that forty days undisturbed residence should gain any person a settlement in any parish; but that within that time it should be lawful for two justices of the peace, upon complaint made by the church-wardens or overseers of the poor, to remove any new inhabitant to the parish where he was last legally settled; unless he either rented a tenement of ten pounds a-year, or could give such security for the discharge of the parish where he was then living, as those justices should judge sufficient. Some frauds, it is said, were committed in consequence of this statute; parish officers sometimes bribing their own poor to go clandestinely to another parish, and, by keeping themselves concealed for forty days, to gain a settlement there, to the discharge of that to which they properly belonged. It was enacted, therefore, by the 1st of James II. that the forty days undisturbed residence of any person necessary to gain a settlement, should be accounted only from the time of his delivering notice, in writing, of the place of his abode and the number of his family, to one of the church-wardens or overseers of the parish where he came to dwell. But parish officers, it seems, were not always more honest with regard to their own than they had been with regard to other parishes, and sometimes connived at such intrusions, receiving the notice, and taking no proper steps in consequence of it. As every person in a parish, therefore, was supposed to have an interest to prevent as much as possible their being burdened by such intruders, it was further enacted by the 3d of William III. that the forty days residence should be accounted only from the publication of such notice in writing on Sunday in the church, immediately after divine service. "After all," says Doctor Burn, "this kind of settlement, by continuing forty days after publication of notice in writing, is very seldom obtained; and the design of the acts is not so much for gaining of settlements, as for the avoiding of them by persons coming into a parish clandestinely, for the giving of notice is only putting a force upon the parish to remove. But if a person's situation is such, that it is doubtful whether he is actually removable or not, he shall, by giving of notice, compel the parish either to allow him a settlement uncontested, by suffering him to continue forty days, or by removing him to try the right." This statute, therefore, rendered it almost impracticable for a poor man to gain a new settlement in the old way, by forty days inhabitancy. But that it might not appear to preclude altogether the common people of one parish from ever establishing themselves with security in another, it appointed four other ways by which a settlement might be gained without any notice delivered or published. The first was, by being taxed to parish rates and paying them; the second, by being elected into an annual parish office, and serving in it a year; the third, by serving an apprenticeship in the parish; the fourth, by being hired into service there for a year, and continuing in the same service during the whole of it. Nobody can gain a settlement by either of the first two ways, but by the public deed of the whole parish, who are too well aware of the consequences to adopt any new-comer, who has nothing but his labour to support him, either by taxing him to parish rates, or by electing him into a parish office. No married man can well gain any settlement in either of the two last ways. An apprentice is scarce ever married; and it is expressly enacted, that no married servant shall gain any settlement by being hired for a year. The principal effect of introducing settlement by service, has been to put out in a great measure the old fashion of hiring for a year; which before had been so customary in England, that even at this day, if no particular term is agreed upon, the law intends that every servant is hired for a year. But masters are not always willing to give their servants a settlement by hiring them in this manner; and servants are not always willing to be so hired, because, as every last settlement discharges all the foregoing, they might thereby lose their original settlement in the places of their nativity, the habitation of their parents and relations. No independent workman, it is evident, whether labourer or artificer, is likely to gain any new settlement, either by apprenticeship or by service. When such a person, therefore, carried his industry to a new parish, he was liable to be removed, how healthy and industrious soever, at the caprice of any church-warden or overseer, unless he either rented a tenement of ten pounds a-year, a thing impossible for one who has nothing but his labour to live by, or could give such security for the discharge of the parish as two justices of the peace should judge sufficient. What security they shall require, indeed, is left altogether to their discretion; but they cannot well require less than thirty pounds, it having been enacted, that the purchase even of a freehold estate of less than thirty pounds value, shall not gain any person a settlement, as not being sufficient for the discharge of the parish. But this is a security which scarce any man who lives by labour can give; and much greater security is frequently demanded. In order to restore, in some measure, that free circulation of labour which those different statutes had almost entirely taken away, the invention of certificates was fallen upon. By the 8th and 9th of William III. it was enacted that if any person should bring a certificate from the parish where he was last legally settled, subscribed by the church-wardens and overseers of the poor, and allowed by two justices of the peace, that every other parish should be obliged to receive him; that he should not be removable merely upon account of his being likely to become chargeable, but only upon his becoming actually chargeable; and that then the parish which granted the certificate should be obliged to pay the expense both of his maintenance, and of his removal. And in order to give the most perfect security to the parish where such certificated man should come to reside, it was further enacted by the same statute, that he should gain no settlement there by any means whatever, except either by renting a tenement of ten pounds a-year, or by serving upon his account in an annual parish office for one whole year; and consequently neither by notice nor by service, nor by apprenticeship, nor by paying parish rates. By the 12th of Queen Anne, too, stat. 1, c. 18, it was further enacted, that neither the servants nor apprentices of such certificated man should gain any settlement in the parish where he resided under such certificate. How far this invention has restored that free circulation of labour, which the preceding statutes had almost entirely taken away, we may learn from the following very judicious observation of Doctor Burn. "It is obvious," says he, "that there are divers good reasons for requiring certificates with persons coming to settle in any place; namely, that persons residing under them can gain no settlement, neither by apprenticeship, nor by service, nor by giving notice, nor by paying parish rates; that they can settle neither apprentices nor servants; that if they become chargeable, it is certainly known whither to remove them, and the parish shall be paid for the removal, and for their maintenance in the mean time; and that, if they fall sick, and cannot be removed, the parish which gave the certificate must maintain them, none of all which can be without a certificate. Which reasons will hold proportionably for parishes not granting certificates in ordinary cases; for it is far more than an equal chance, but that they will have the certificated persons again, and in a worse condition." The moral of this observation seems to be, that certificates ought always to be required by the parish where any poor man comes to reside, and that they ought very seldom to be granted by that which he purposes to leave. "There is somewhat of hardship in this matter of certificates," says the same very intelligent author, in his History of the Poor Laws, "by putting it in the power of a parish officer to imprison a man as it were for life, however inconvenient it may be for him to continue at that place where he has had the misfortune to acquire what is called a settlement, or whatever advantage he may propose to himself by living elsewhere." Though a certificate carries along with it no testimonial of good behaviour, and certifies nothing but that the person belongs to the parish to which he really does belong, it is altogether discretionary in the parish officers either to grant or to refuse it. A mandamus was once moved for, says Doctor Burn, to compel the church-wardens and overseers to sign a certificate; but the Court of King's Bench rejected the motion as a very strange attempt. The very unequal price of labour which we frequently find in England, in places at no great distance from one another, is probably owing to the obstruction which the law of settlements gives to a poor man who would carry his industry from one parish to another without a certificate. A single man, indeed, who is healthy and industrious, may sometimes reside by sufferance without one, but a man with a wife and family who should attempt to do so, would, in most parishes, be sure of being removed; and, if the single man should afterwards marry, he would generally be removed likewise. The scarcity of hands in one parish, therefore, cannot always be relieved by their superabundance in another, as it is constantly in Scotland, and, I believe, in all other countries where there is no difficulty of settlement. In such countries, though wages may sometimes rise a little in the neighbourhood of a great town, or wherever else there is an extraordinary demand for labour, and sink gradually as the distance from such places increases, till they fall back to the common rate of the country; yet we never meet with those sudden and unaccountable differences in the wages of neighbouring places which we sometimes find in England, where it is often more difficult for a poor man to pass the artificial boundary of a parish, than an arm of the sea, or a ridge of high mountains, natural boundaries which sometimes separate very distinctly different rates of wages in other countries. To remove a man who has committed no misdemeanour, from the parish where he chooses to reside, is an evident violation of natural liberty and justice. The common people of England, however, so jealous of their liberty, but like the common people of most other countries, never rightly understanding wherein it consists, have now, for more than a century together, suffered themselves to be exposed to this oppression without a remedy. Though men of reflection, too, have sometimes complained of the law of settlements as a public grievance; yet it has never been the object of any general popular clamour, such as that against general warrants, an abusive practice undoubtedly, but such a one as was not likely to occasion any general oppression. There is scarce a poor man in England, of forty years of age, I will venture to say, who has not, in some part of his life, felt himself most cruelly oppressed by this ill-contrived law of settlements. I shall conclude this long chapter with observing, that though anciently it was usual to rate wages, first by general laws extending over the whole kingdom, and afterwards by particular orders of the justices of peace in every particular county, both these practices have now gone entirely into disuse "By the experience of above four hundred years," says Doctor Burn, "it seems time to lay aside all endeavours to bring under strict regulations, what in its own nature seems incapable of minute limitation; for if all persons in the same kind of work were to receive equal wages, there would be no emulation, and no room left for industry or ingenuity." Particular acts of parliament, however, still attempt sometimes to regulate wages in particular trades, and in particular places. Thus the 8th of George III. prohibits, under heavy penalties, all master tailors in London, and five miles round it, from giving, and their workmen from accepting, more than two shillings and sevenpence halfpenny a-day, except in the case of a general mourning. Whenever the legislature attempts to regulate the differences between masters and their workmen, its counsellors are always the masters. When the regulation, therefore, is in favour of the workmen, it is always just and equitable; but it is sometimes otherwise when in favour of the masters. Thus the law which obliges the masters in several different trades to pay their workmen in money, and not in goods, is quite just and equitable. It imposes no real hardship upon the masters. It only obliges them to pay that value in money, which they pretended to pay, but did not always really pay, in goods. This law is in favour of the workmen; but the 8th of George III. is in favour of the masters. When masters combine together, in order to reduce the wages of their workmen, they commonly enter into a private bond or agreement, not to give more than a certain wage, under a certain penalty. Were the workmen to enter into a contrary combination of the same kind, not to accept of a certain wage, under a certain penalty, the law would punish them very severely, and, if it dealt impartially, it would treat the masters in the same manner. But the 8th of George III. enforces by law that very regulation which masters sometimes attempt to establish by such combinations. The complaint of the workmen, that it puts the ablest and most industrious upon the same footing with an ordinary workman, seems perfectly well founded. In ancient times, too, it was usual to attempt to regulate the profits of merchants and other dealers, by regulating the price of provisions and other goods. The assize of bread is, so far as I know, the only remnant of this ancient usage. Where there is an exclusive corporation, it may, perhaps, he proper to regulate the price of the first necessary of life; but, where there is none, the competition will regulate it much better than any assize. The method of fixing the assize of bread, established by the 81st of George II. could not be put in practice in Scotland, on account of a defect in the law, its execution depending upon the office of clerk of the market, which does not exist there. This defect was not remedied till the third of George III. The want of an assize occasioned no sensible inconveniency; and the establishment of one in the few places where it has yet taken place has produced no sensible advantage. In the greater part of the towns in Scotland, however, there is an incorporation of bakers, who claim exclusive privileges, though they are not very strictly guarded. The proportion between the different rates, both of wages and profit, in the different employments of labour and stock, seems not to be much affected, as has already been observed, by the riches or poverty, the advancing, stationary, or declining state of the society. Such revolutions in the public welfare, though they affect the general rates both of wages and profit, must, in the end, affect them equally in all different employments. The proportion between them, therefore, must remain the same, and cannot well be altered, as least for any considerable time, by any such revolutions. CHAP. XI. OF THE RENT OF LAND. Rent, considered as the price paid for the use of land, is naturally the highest which the tenant can afford to pay in the actual circumstances of the land. In adjusting the terms of the lease, the landlord endeavours to leave him no greater share of the produce than what is sufficient to keep up the stock from which he furnishes the seed, pays the labour, and purchases and maintains the cattle and other instruments of husbandry, together with the ordinary profits of farming stock in the neighbourhood. This is evidently the smallest share with which the tenant can content himself, without being a loser, and the landlord seldom means to leave him any more. Whatever part of the produce, or, what is the same thing, whatever part of its price, is over and above this share, he naturally endeavours to reserve to himself as the rent of his land, which is evidently the highest the tenant can afford to pay in the actual circumstances of the land. Sometimes, indeed, the liberality, more frequently the ignorance, of the landlord, makes him accept of somewhat less than this portion; and sometimes, too, though more rarely, the ignorance of the tenant makes him undertake to pay somewhat more, or to content himself with somewhat less, than the ordinary profits of farming stock in the neighbourhood. This portion, however, may still be considered as the natural rent of land, or the rent at which it is naturally meant that land should, for the most part, be let. The rent of land, it may be thought, is frequently no more than a reasonable profit or interest for the stock laid out by the landlord upon its improvement. This, no doubt, may be partly the case upon some occasions; for it can scarce ever be more than partly the case. The landlord demands a rent even for unimproved land, and the supposed interest or profit upon the expense of improvement is generally an addition to this original rent. Those improvements, besides, are not always made by the stock of the landlord, but sometimes by that of the tenant. When the lease comes to be renewed, however, the landlord commonly demands the same augmentation of rent as if they had been all made by his own. He sometimes demands rent for what is altogether incapable of human improvements. Kelp is a species of sea-weed, which, when burnt, yields an alkaline salt, useful for making glass, soup, and for several other purposes. It grows in several parts of Great Britain, particularly in Scotland, upon such rocks only as lie within the high-water mark, which are twice every day covered with the sea, and of which the produce, therefore, was never augmented by human industry. The landlord, however, whose estate is bounded by a kelp shore of this kind, demands a rent for it as much as for his corn-fields. The sea in the neighbourhood of the islands of Shetland is more than commonly abundant in fish, which makes a great part of the subsistence of their inhabitants. But, in order to profit by the produce of the water, they must have a habitation upon the neighbouring land. The rent of the landlord is in proportion, not to what the farmer can make by the land, but to what he can make both by the land and the water. It is partly paid in sea-fish; and one of the very few instances in which rent makes a part of the price of that commodity, is to be found in that country. The rent of land, therefore, considered as the price paid for the use of the land, is naturally a monopoly price. It is not at all proportioned to what the landlord may have laid out upon the improvement of the land, or to what he can afford to take, but to what the farmer can afford to give. Such parts only of the produce of land can commonly be brought to market, of which the ordinary price is sufficient to replace the stock which must be employed in bringing them thither, together with its ordinary profits. If the ordinary price is more than this, the surplus part of it will naturally go to the rent of the land. If it is not more, though the commodity may be brought to market, it can afford no rent to the landlord. Whether the price is, or is not more, depends upon the demand. There are some parts of the produce of land, for which the demand must always be such as to afford a greater price than what is sufficient to bring them to market, and there are others for which it either may or may not be such as to afford this greater price. The former must always afford a rent to the landlord. The latter sometimes may and sometimes may not, according to different circumstances. Rent, it is to be observed, therefore, enters into the composition of the price of commodities in a different way from wages and profit. High or low wages and profit are the causes of high or low price; high or low rent is the effect of it. It is because high or low wages and profit must be paid, in order to bring a particular commodity to market, that its price is high or low. But it is because its price is high or low, a great deal more, or very little more, or no more, than what is sufficient to pay those wages and profit, that it affords a high rent, or a low rent, or no rent at all. The particular consideration, first, of those parts of the produce of land which always afford some rent; secondly, of those which sometimes may and sometimes may not afford rent; and, thirdly, of the variations which, in the different periods of improvement, naturally take place in the relative value of those two different sorts of rude produce, when compared both with one another and with manufactured commodities, will divide this chapter into three parts. PART I.--_Of the Produce of Land which always affords Rent._ As men, like all other animals, naturally multiply in proportion to the means of their subsistence, food is always more or less in demand. It can always purchase or command a greater or smaller quantity of labour, and somebody can always be found who is willing to do something in order to obtain it. The quantity of labour, indeed, which it can purchase, is not always equal to what it could maintain, if managed in the most economical manner, on account of the high wages which are sometimes given to labour; but it can always purchase such a quantity of labour as it can maintain, according to the rate at which that sort of labour is commonly maintained in the neighbourhood. But land, in almost any situation, produces a greater quantity of food than what is sufficient to maintain all the labour necessary for bringing it to market, in the most liberal way in which that labour is ever maintained. The surplus, too, is always more than sufficient to replace the stock which employed that labour, together with its profit. Something, therefore, always remains for a rent to the landlord. The most desert moors in Norway and Scotland produce some sort of pasture for cattle, of which the milk and the increase are always more than sufficient, not only to maintain all the labour necessary for tending them, and to pay the ordinary profit to the farmer or the owner of the herd or flock, but to afford some small rent to the landlord. The rent increases in proportion to the goodness of the pasture. The same extent of ground not only maintains a greater number of cattle, but as they are brought within a smaller compass, less labour becomes requisite to tend them, and to collect their produce. The landlord gains both ways; by the increase of the produce, and by the diminution of the labour which must be maintained out of it. The rent of land not only varies with its fertility, whatever be its produce, but with its situation, whatever be its fertility. Land in the neighbourhood of a town gives a greater rent than land equally fertile in a distant part of the country. Though it may cost no more labour to cultivate the one than the other, it must always cost more to bring the produce of the distant land to market. A greater quantity of labour, therefore, must be maintained out of it; and the surplus, from which are drawn both the profit of the farmer and the rent of the landlord, must be diminished. But in remote parts of the country, the rate of profit, as has already been shewn, is generally higher than in the neighbourhood of a large town. A smaller proportion of this diminished surplus, therefore, must belong to the landlord. Good roads, canals, and navigable rivers, by diminishing the expense of carriage, put the remote parts of the country more nearly upon a level with those in the neighbourhood of the town. They are upon that account the greatest of all improvements. They encourage the cultivation of the remote, which must always be the most extensive circle of the country. They are advantageous to the town by breaking down the monopoly of the country in its neighbourhood. They are advantageous even to that part of the country. Though they introduce some rival commodities into the old market, they open many new markets to its produce. Monopoly, besides, is a great enemy to good management, which can never be universally established, but in consequence of that free and universal competition which forces every body to have recourse to it for the sake of self-defence. It is not more than fifty years ago, that some of the counties in the neighbourhood of London petitioned the parliament against the extension of the turnpike roads into the remoter counties. Those remoter counties, they pretended, from the cheapness of labour, would be able to sell their grass and corn cheaper in the London market than themselves, and would thereby reduce their rents, and ruin their cultivation. Their rents, however, have risen, and their cultivation has been improved since that time. A corn field of moderate fertility produces a much greater quantity of food for man, than the best pasture of equal extent. Though its cultivation requires much more labour, yet the surplus which remains after replacing the seed and maintaining all that labour, is likewise much greater. If a pound of butcher's meat, therefore, was never supposed to be worth more than a pound of bread, this greater surplus would everywhere be of greater value and constitute a greater fund, both for the profit of the farmer and the rent of the landlord. It seems to have done so universally in the rude beginnings of agriculture. But the relative values of those two different species of food, bread and butcher's meat, are very different in the different periods of agriculture. In its rude beginnings, the unimproved wilds, which then occupy the far greater part of the country, are all abandoned to cattle. There is more butcher's meat than bread; and bread, therefore, is the food for which there is the greatest competition, and and which consequently brings the greatest price. At Buenos Ayres, we are told by Ulloa, four reals, one-and-twenty pence halfpenny sterling, was, forty or fifty years ago, the ordinary price of an ox, chosen from a herd of two or three hundred. He says nothing of the price of bread, probably because he found nothing remarkable about it. An ox there, he says, costs little more than the labour of catching him. But corn can nowhere be raised without a great deal of labour; and in a country which lies upon the river Plate, at that time the direct road from Europe to the silver mines of Potosi, the money-price of labour could be very cheap. It is otherwise when cultivation is extended over the greater part of the country. There is then more bread than butcher's meat. The competition changes its direction, and the price of butcher's meat becomes greater than the price of bread. By the extension, besides, of cultivation, the unimproved wilds become insufficient to supply the demand for butcher's meat. A great part of the cultivated lands must be employed in rearing and fattening cattle; of which the price, therefore, must be sufficient to pay, not only the labour necessary for tending them, but the rent, which the landlord, and the profit which the farmer, could have drawn from such land employed in tillage. The cattle bred upon the most uncultivated moors, when brought to the same market, are, in proportion to their weight or goodness, sold at the same price as these which are reared upon the most improved land. The proprietors of those moors profit by it, and raise the rent of their land in proportion to the price of their cattle. It is not more than a century ago, that in many parts of the Highlands of Scotland, butcher's meat was as cheap or cheaper than even bread made of oatmeal. The Union opened the market of England to the Highland cattle. Their ordinary price, at present, is about three times greater than at the beginning of the century, and the rents of many Highland estates have been tripled and quadrupled in the same time. In almost every part of Great Britain, a pound of the best butcher's meat is, in the present times generally worth more than two pounds of the best white bread; and in plentiful years it is sometimes worth three or four pounds. It is thus that, in the progress of improvement, the rent and profit of unimproved pasture come to be regulated in some measure by the rent and profit of what is improved, and these again by the rent and profit of corn. Corn is an annual crop; butcher's meat, a crop which requires four or five years to grow. As an acre of land, therefore, will produce a much smaller quantity of the one species of food than of the other, the inferiority of the quantity must be compensated by the superiority of the price. If it was more than compensated, more corn-land would be turned into pasture; and if it was not compensated, part of what was in pasture would be brought back into corn. This equality, however, between the rent and profit of grass and those of corn; of the land of which the immediate produce is food for cattle, and of that of which the immediate produce is food for men, must be understood to take place only through the greater part of the improved lands of a great country. In some particular local situations it is quite otherwise, and the rent and profit of grass are much superior to what can be made by corn. Thus, in the neighbourhood of a great town, the demand for milk, and for forage to horses, frequently contribute, together with the high price of butcher's meat, to raise the value of grass above what may be called its natural proportion to that of corn. This local advantage, it is evident, cannot be communicated to the lands at a distance. Particular circumstances have sometimes rendered some countries so populous, that the whole territory, like the lands in the neighbourhood of a great town, has not been sufficient to produce both the grass and the corn necessary for the subsistence of their inhabitants. Their lands, therefore, have been principally employed in the production of grass, the more bulky commodity, and which cannot be so easily brought from a great distance; and corn, the food of the great body of the people, has been chiefly imported from foreign countries. Holland is at present in this situation; and a considerable part of ancient Italy seems to have been so during the prosperity of the Romans. To feed well, old Cato said, as we are told by Cicero, was the first and most profitable thing in the management of a private estate; to feed tolerably well, the second; and to feed ill, the third. To plough, he ranked only in the fourth place of profit and advantage. Tillage, indeed, in that part of ancient Italy which lay in the neighbourhood of Rome, must have been very much discouraged by the distributions of corn which were frequently made to the people, either gratuitously, or at a very low price. This corn was brought from the conquered provinces, of which several, instead of taxes, were obliged to furnish a tenth part of their produce at a stated price, about sixpence a-peck, to the republic. The low price at which this corn was distributed to the people, must necessarily have sunk the price of what could be brought to the Roman market from Latium, or the ancient territory of Rome, and must have discouraged its cultivation in that country. In an open country, too, of which the principal produce is corn, a well-inclosed piece of grass will frequently rent higher than any corn field in its neighbourhood. It is convenient for the maintenance of the cattle employed in the cultivation of the corn; and its high rent is, in this case, not so properly paid from the value of its own produce, as from that of the corn lands which are cultivated by means of it. It is likely to fall, if ever the neighbouring lands are completely inclosed. The present high rent of inclosed land in Scotland seems owing to the scarcity of inclosure, and will probably last no longer than that scarcity. The advantage of inclosure is greater for pasture than for corn. It saves the labour of guarding the cattle, which feed better, too, when they are not liable to be disturbed by their keeper or his dog. But where these is no local advantage of this kind, the rent and profit of corn, or whatever else is the common vegetable food of the people, must naturally regulate upon the land which is fit for producing it, the rent and profit of pasture. The use of the artificial grasses, of turnips, carrots, cabbages, and the other expedients which have been fallen upon to make an equal quantity of land feed a greater number of cattle than when in natural grass, should somewhat reduce, it might be expected, the superiority which, in an improved country, the price of butcher's meat naturally has over that of bread. It seems accordingly to have done so, and there is some reason for believing that, at least in the London market, the price of butcher's meat, in proportion to the price of bread, is a good deal lower in the present times than it was in the beginning of the last century. In the Appendix to the life of Prince Henry, Doctor Birch has given us an account of the prices of butcher's meat as commonly paid by that prince. It is there said, that the four quarters of an ox, weighing six hundred pounds, usually cost him nine pounds ten shillings, or thereabouts; that is thirty-one shillings and eight-pence per hundred pounds weight. Prince Henry died on the 6th of November 1612, in the nineteenth year of his age. In March 1764, there was a parliamentary inquiry into the causes of the high price of provisions at that time. It was then, among other proof to the same purpose, given in evidence by a Virginia merchant, that in March 1763, he had victualled his ships for twenty-four or twenty-five shillings the hundred weight of beef, which he considered as the ordinary price; whereas, in that dear year, he had paid twenty-seven shillings for the same weight and sort. This high price in 1764 is, however, four shillings and eight-pence cheaper than the ordinary price paid by Prince Henry; and it is the best beef only, it must be observed, which is fit to be salted for those distant voyages. The price paid by Prince Henry amounts to 3d. 4-5ths per pound weight of the whole carcase, coarse and choice pieces taken together; and at that rate the choice pieces could not have been sold by retail for less than 4-1/2d. or 5d. the pound. In the parliamentary inquiry in 1764, the witnesses stated the price of the choice pieces of the best beef to be to the consumer 4d. and 4-1/2d. the pound; and the coarse pieces in general to be from seven farthings to 2-1/2d. and 2-3/4d.; and this, they said, was in general one halfpenny dearer than the same sort of pieces had usually been sold in the month of March. But even this high price is still a good deal cheaper than what we can well suppose the ordinary retail price to have been in the time of Prince Henry. During the first twelve years of the last century, the average price of the best wheat at the Windsor market was L.1 : 18 : 3-1/2d. the quarter of nine Winchester bushels. But in the twelve years preceding 1764, including that year, the average price of the same measure of the best wheat at the same market was L.2 : 1 : 9-1/2d. In the first twelve years of the last century, therefore, wheat appears to have been a good deal cheaper, and butcher's meat a good deal dearer, than in the twelve years preceding 1764, including that year. In all great countries, the greater part of the cultivated lands are employed in producing either food for men or food for cattle. The rent and profit of these regulate the rent and profit of all other cultivated land. If any particular produce afforded less, the land would soon be turned into corn or pasture; and if any afforded more, some part of the lands in corn or pasture would soon be turned to that produce. Those productions, indeed, which require either a greater original expense of improvement, or a greater annual expense of cultivation in order to fit the land for them, appear commonly to afford, the one a greater rent, the other a greater profit, than corn pasture. This superiority, however, will seldom be found to amount to more than a reasonable interest or compensation for this superior expense. In a hop garden, a fruit garden, a kitchen garden, both the rent of the landlord, and the profit of the farmer, are generally greater than in a corn or grass field. But to bring the ground into this condition requires more expense. Hence a greater rent becomes due to the landlord. It requires, too, a more attentive and skilful management. Hence a greater profit becomes due to the farmer. The crop, too, at least in the hop and fruit garden, is more precarious. Its price, therefore, besides compensating all occasional losses, must afford something like the profit of insurance. The circumstances of gardeners, generally mean, and always moderate, may satisfy us that their great ingenuity is not commonly over-recompensed. Their delightful art is practised by so many rich people for amusement, that little advantage is to be made by these who practise it for profit; because the persons who should naturally be their best customers, supply themselves with all their most precious productions. The advantage which the landlord derives from such improvements, seems at no time to have been greater than what was sufficient to compensate the original expense of making them. In the ancient husbandry, after the vineyard, a well-watered kitchen garden seems to have been the part of the farm which was supposed to yield the most valuable produce. But Democritus, who wrote upon husbandry about two thousand years ago, and who was regarded by the ancients as one of the fathers the of the art, thought they did not act wisely who inclosed a kitchen garden. The profit, he said, would not compensate the expense of a stone-wall: and bricks (he meant, I suppose, bricks baked in the sun) mouldered with the rain and the winter-storm, and required continual repairs. Columella, who reports this judgment of Democritus, does not controvert it, but proposes a very frugal method of inclosing with a hedge of brambles and briars, which he says he had found by experience to be both a lasting and an impenetrable fence; but which, it seems, was not commonly known in the time of Democritus. Palladius adopts the opinion of Columella, which had before been recommended by Varro. In the judgment of these ancient improvers, the produce of a kitchen garden had, it seems, been little more than sufficient to pay the extraordinary culture and the expense of watering; for in countries so near the sun, it was thought proper, in those times as in the present, to have the command of a stream of water, which could be conducted to every bed in the garden. Through the greater part of Europe, a kitchen garden is not at present supposed to deserve a better inclosure than that recommended by Columella. In Great Britain, and some other northern countries, the finer fruits cannot be brought to perfection but by the assistance of a wall. Their price, therefore, in such countries, must be sufficient to pay the expense of building and maintaining what they cannot be had without. The fruit-wall frequently surrounds the kitchen garden, which thus enjoys the benefit of an inclosure which its own produce could seldom pay for. That the vineyard, when properly planted and brought to perfection, was the most valuable part of the farm, seems to have been an undoubted maxim in the ancient agriculture, as it is in the modern, through all the wine countries. But whether it was advantageous to plant a new vineyard, was a matter of dispute among the ancient Italian husbandmen, as we learn from Columella. He decides, like a true lover of all curious cultivation, in favour of the vineyard; and endeavours to shew, by a comparison of the profit and expense, that it was a most advantageous improvement. Such comparisons, however, between the profit and expense of new projects are commonly very fallacious; and in nothing more so than in agriculture. Had the gain actually made by such plantations been commonly as great as he imagined it might have been, there could have been no dispute about it. The same point is frequently at this day a matter of controversy in the wine countries. Their writers on agriculture, indeed, the lovers and promoters of high cultivation, seem generally disposed to decide with Columella in favour of the vineyard. In France, the anxiety of the proprietors of the old vineyards to prevent the planting of any new ones, seems to favour their opinion, and to indicate a consciousness in those who must have the experience, that this species of cultivation is at present in that country more profitable than any other. It seems, at the same time, however, to indicate another opinion, that this superior profit can last no longer than the laws which at present restrain the free cultivation of the vine. In 1731, they obtained an order of council, prohibiting both the planting of new vineyards, and the renewal of these old ones, of which the cultivation had been interrupted for two years, without a particular permission from the king, to be granted only in consequence of an information from the intendant of the province, certifying that he had examined the land, and that it was incapable of any other culture. The pretence of this order was the scarcity of corn and pasture, and the superabundance of wine. But had this superabundance been real, it would, without any order of council, have effectually prevented the plantation of new vineyards, by reducing the profits of this species of cultivation below their natural proportion to those of corn and pasture. With regard to the supposed scarcity of corn occasioned by the multiplication of vineyards, corn is nowhere in France more carefully cultivated than in the wine provinces, where the land is fit for producing it: as in Burgundy, Guienne, and the Upper Languedoc. The numerous hands employed in the one species of cultivation necessarily encourage the other, by affording a ready market for its produce. To diminish the number of those who are capable of paying it, is surely a most unpromising expedient for encouraging the cultivation of corn. It is like the policy which would promote agriculture, by discouraging manufactures. The rent and profit of those productions, therefore, which require either a greater original expense of improvement in order to fit the land for them, or a greater annual expense of cultivation, though often much superior to those of corn and pasture, yet when they do no more than compensate such extraordinary expense, are in reality regulated by the rent and profit of those common crops. It sometimes happens, indeed, that the quantity of land which can be fitted for some particular produce, is too small to supply the effectual demand. The whole produce can be disposed of to those who are willing to give somewhat more than what is sufficient to pay the whole rent, wages, and profit, necessary for raising and bringing it to market, according to their natural rates, or according to the rates at which they are paid in the greater part of other cultivated land. The surplus part of the price which remains after defraying the whole expense of improvement and cultivation, may commonly, in this case, and in this case only, bear no regular proportion to the like surplus in corn or pasture, but may exceed it in almost any degree; and the greater part of this excess naturally goes to the rent of the landlord. The usual and natural proportion, for example, between the rent and profit of wine, and those of corn and pasture, must be understood to take place only with regard to those vineyards which produce nothing but good common wine, such as can be raised almost anywhere, upon any light, gravelly, or sandy soil, and which has nothing to recommend it but its strength and wholesomeness. It is with such vineyards only, that the common land of the country can be brought into competition; for with those of a peculiar quality it is evident that it cannot. The vine is more affected by the difference of soils than any other fruit-tree. From some it derives a flavour which no culture or management can equal, it is supposed, upon any other. This flavour, real or imaginary, is sometimes peculiar to the produce of a few vineyards; sometimes it extends through the greater part of a small district, and sometimes through a considerable part of a large province. The whole quantity of such wines that is brought to market falls short of the effectual demand, or the demand of those who would be willing to pay the whole rent, profit, and wages, necessary for preparing and bringing them thither, according to the ordinary rate, or according to the rate at which they are paid in common vineyards. The whole quantity, therefore, can be disposed of to those who are willing to pay more, which necessarily raises their price above that of common wine. The difference is greater or less, according as the fashionableness and scarcity of the wine render the competition of the buyers more or less eager. Whatever it be, the greater part of it goes to the rent of the landlord. For though such vineyards are in general more carefully cultivated than most others, the high price of the wine seems to be, not so much the effect, as the cause of this careful cultivation. In so valuable a produce, the loss occasioned by negligence is so great, as to force even the most careless to attention. A small part of this high price, therefore, is sufficient to pay the wages of the extraordinary labour bestowed upon their cultivation, and the profits of the extraordinary stock which puts that labour into motion. The sugar colonies possessed by the European nations in the West Indies may be compared to those precious vineyards. Their whole produce falls short of the effectual demand of Europe, and can be disposed of to those who are willing to give more than what is sufficient to pay the whole rent, profit, and wages, necessary for preparing and bringing it to market, according to the rate at which they are commonly paid by any other produce. In Cochin China, the finest white sugar generally sells for three piastres the quintal, about thirteen shillings and sixpence of our money, as we are told by Mr Poivre[14], a very careful observer of the agriculture of that country. What is there called the quintal, weighs from a hundred and fifty to two hundred Paris pounds, or a hundred and seventy-five Paris pounds at a medium, which reduces the price of the hundred weight English to about eight shillings sterling; not a fourth part of what is commonly paid for the brown or muscovada sugars imported from our colonies, and not a sixth part of what is paid for the finest white sugar. The greater part of the cultivated lands in Cochin China are employed in producing corn and rice, the food of the great body of the people. The respective prices of corn, rice, and sugar, are there probably in the natural proportion, or in that which naturally takes place in the different crops of the greater part of cultivated land, and which recompenses the landlord and farmer, as nearly as can be computed, according to what is usually the original expense of improvement, and the annual expense of cultivation. But in our sugar colonies, the price of sugar bears no such proportion to that of the produce of a rice or corn field either in Europe or America. It is commonly said that a sugar planter expects that the rum and the molasses should defray the whole expense of his cultivation, and that his sugar should be all clear profit. If this be true, for I pretend not to affirm it, it is as if a corn farmer expected to defray the expense of his cultivation with the chaff and the straw, and that the grain should be all clear profit. We see frequently societies of merchants in London, and other trading towns, purchase waste lands in our sugar colonies, which they expect to improve and cultivate with profit, by means of factors and agents, notwithstanding the great distance and the uncertain returns, from the defective administration of justice in those countries. Nobody will attempt to improve and cultivate in the same manner the most fertile lands of Scotland, Ireland, or the corn provinces of North America, though, from the more exact administration of justice in these countries, more regular returns might be expected. In Virginia and Maryland, the cultivation of tobacco is preferred, as most profitable, to that of corn. Tobacco might be cultivated with advantage through the greater part of Europe; but, in almost every part of Europe, it has become a principal subject of taxation; and to collect a tax from every different farm in the country where this plant might happen to be cultivated, would be more difficult, it has been supposed, than to levy one upon its importation at the custom-house. The cultivation of tobacco has, upon this account, been most absurdly prohibited through the greater part of Europe, which necessarily gives a sort of monopoly to the countries where it is allowed; and as Virginia and Maryland produce the greatest quantity of it, they share largely, though with some competitors, in the advantage of this monopoly. The cultivation of tobacco, however, seems not to be so advantageous as that of sugar. I have never even heard of any tobacco plantation that was improved and cultivated by the capital of merchants who resided in Great Britain; and our tobacco colonies send us home no such wealthy planters as we see frequently arrive from our sugar islands. Though, from the preference given in those colonies to the cultivation of tobacco above that of corn, it would appear that the effectual demand of Europe for tobacco is not completely supplied, it probably is more nearly so than that for sugar; and though the present price of tobacco is probably more than sufficient to pay the whole rent, wages, and profit, necessary for preparing and bringing it to market, according to the rate at which they are commonly paid in corn land, it must not be so much more as the present price of sugar. Our tobacco planters, accordingly, have shewn the same fear of the superabundance of tobacco, which the proprietors of the old vineyards in France have of the superabundance of wine. By act of assembly, they have restrained its cultivation to six thousand plants, supposed to yield a thousand weight of tobacco, for every negro between sixteen and sixty years of age. Such a negro, over and above this quantity of tobacco, can manage, they reckon, four acres of Indian corn. To prevent the market from being overstocked, too, they have sometimes, in plentiful years, we are told by Dr Douglas[15] (I suspect he has been ill informed), burnt a certain quantity of tobacco for every negro, in the same manner as the Dutch are said to do of spices. If such violent methods are necessary to keep up the present price of tobacco, the superior advantage of its culture over that of corn, if it still has any, will not probably be of long continuance. It is in this manner that the rent of the cultivated land, of which the produce is human food, regulates the rent of the greater part of other cultivated land. No particular produce can long afford less, because the land would immediately be turned to another use; and if any particular produce commonly affords more, it is because the quantity of land which can be fitted for it is too small to supply the effectual demand. In Europe, corn is the principal produce of land, which serves immediately for human food. Except in particular situations, therefore, the rent of corn land regulates in Europe that of all other cultivated land. Britain need envy neither the vineyards of France, nor the olive plantations of Italy. Except in particular situations, the value of these is regulated by that of corn, in which the fertility of Britain is not much inferior to that of either of those two countries. If, in any country, the common and favourite vegetable food of the people should be drawn from a plant, of which the most common land, with the same, or nearly the same culture, produced a much greater quantity than the most fertile does of corn; the rent of the landlord, or the surplus quantity of food which would remain to him, after paying the labour, and replacing the stock of the farmer, together with its ordinary profits, would necessarily be much greater. Whatever was the rate at which labour was commonly maintained in that country, this greater surplus could always maintain a greater quantity of it, and, consequently, enable the landlord to purchase or command a greater quantity of it. The real value of his rent, his real power and authority, his command of the necessaries and conveniencies of life with which the labour of other people could supply him, would necessarily be much greater. A rice field produces a much greater quantity of food than the most fertile corn field. Two crops in the year, from thirty to sixty bushels each, are said to be the ordinary produce of an acre. Though its cultivation, therefore, requires more labour, a much greater surplus remains after maintaining all that labour. In those rice countries, therefore, where rice is the common and favourite vegetable food of the people, and where the cultivators are chiefly maintained with it, a greater share of this greater surplus should belong to the landlord than in corn countries. In Carolina, where the planters, as in other British colonies, are generally both farmers and landlords, and where rent, consequently, is confounded with profit, the cultivation of rice is found to be more profitable than that of corn, though their fields produce only one crop in the year, and though, from the prevalence of the customs of Europe, rice is not there the common and favourite vegetable food of the people. A good rice field is a bog at all seasons, and at one season a bog covered with water. It is unfit either for corn, or pasture, or vineyard, or, indeed, for any other vegetable produce that is very useful to men; and the lands which are fit for those purposes are not fit for rice. Even in the rice countries, therefore, the rent of rice lands cannot regulate the rent of the other cultivated land which can never be turned to that produce. The food produced by a field of potatoes is not inferior in quantity to that produced by a field of rice, and much superior to what is produced by a field of wheat. Twelve thousand weight of potatoes from an acre of land is not a greater produce than two thousand weight of wheat. The food or solid nourishment, indeed, which can be drawn from each of those two plants, is not altogether in proportion to their weight, on account of the watery nature of potatoes. Allowing, however, half the weight of this root to go to water, a very large allowance, such an acre of potatoes will still produce six thousand weight of solid nourishment, three times the quantity produced by the acre of wheat. An acre of potatoes is cultivated with less expense than an acre of wheat; the fallow, which generally precedes the sowing of wheat, more than compensating the hoeing and other extraordinary culture which is always given to potatoes. Should this root ever become in any part of Europe, like rice in some rice countries, the common and favourite vegetable food of the people, so as to occupy the same proportion of the lands in tillage, which wheat and other sorts of grain for human food do at present, the same quantity of cultivated land would maintain a much greater number of people; and the labourers being generally fed with potatoes, a greater surplus would remain after replacing all the stock, and maintaining all the labour employed in cultivation. A greater share of this surplus, too, would belong to the landlord. Population would increase, and rents would rise much beyond what they are at present. The land which is fit for potatoes, is fit for almost every other useful vegetable. If they occupied the same proportion of cultivated land which corn does at present, they would regulate, in the same manner, the rent of the greater part of other cultivated land. In some parts of Lancashire, it is pretended, I have been told, that bread of oatmeal is a heartier food for labouring people than wheaten bread, and I have frequently heard the same doctrine held in Scotland. I am, however, somewhat doubtful of the truth of it. The common people in Scotland, who are fed with oatmeal, are in general neither so strong nor so handsome as the same rank of people in England, who are fed with wheaten bread. They neither work so well, nor look so well; and as there is not the same difference between the people of fashion in the two countries, experience would seem to shew, that the food of the common people in Scotland is not so suitable to the human constitution as that of their neighbours of the same rank in England. But it seems to be otherwise with potatoes. The chairmen, porters, and coal-heavers in London, and those unfortunate women who live by prostitution, the strongest men and the most beautiful women perhaps in the British dominions, are said to be, the greater part of them, from the lowest rank of people in Ireland, who are generally fed with this root. No food can afford a more decisive proof of its nourishing quality, or of its being peculiarly suitable to the health of the human constitution. It is difficult to preserve potatoes through the year, and impossible to store them like corn, for two or three years together. The fear of not being able to sell them before they rot, discourages their cultivation, and is, perhaps, the chief obstacle to their ever becoming in any great country, like bread, the principal vegetable food of all the different ranks of the people. PART II.--_Of the Produce of Land, which sometimes does, and sometimes does not, afford Rent._ Human food seems to be the only produce of land, which always and necessarily affords some rent to the landlord. Other sorts of produce sometimes may, and sometimes may not, according to different circumstances. After food, clothing and lodging are the two great wants of mankind. Land, in its original rude state, can afford the materials of clothing and lodging to a much greater number of people than it can feed. In its improved state, it can sometimes feed a greater number of people than it can supply with those materials; at least in the way in which they require them, and are willing to pay for them. In the one state, therefore, there is always a superabundance of those materials, which are frequently, upon that account, of little or no value. In the other, there is often a scarcity, which necessarily augments their value. In the one state, a great part of them is thrown away as useless; and the price of what is used is considered as equal only to the labour and expense of fitting it for use, and can, therefore, afford no rent to the landlord. In the other, they are all made use of, and there is frequently a demand for more than can be had. Somebody is always willing to give more for every part of them, than what is sufficient to pay the expense of bringing them to market. Their price, therefore, can always afford some rent to the landlord. The skins of the larger animals were the original materials of clothing. Among nations of hunters and shepherds, therefore, whose food consists chiefly in the flesh of those animals, every man, by providing himself with food, provides himself with the materials of more clothing than he can wear. If there was no foreign commerce, the greater part of them would be thrown away as things of no value. This was probably the case among the hunting nations of North America, before their country was discovered by the Europeans, with whom they now exchange their surplus peltry, for blankets, fire-arms, and brandy, which gives it some value. In the present commercial state of the known world, the most barbarous nations, I believe, among whom land property is established, have some foreign commerce of this kind, and find among their wealthier neighbours such a demand for all the materials of clothing, which their land produces, and which can neither be wrought up nor consumed at home, as raises their price above what it costs to send them to those wealthier neighbors. It affords, therefore, some rent to the landlord. When the greater part of the Highland cattle were consumed on their own hills, the exportation of their hides made the most considerable article of the commerce of that country, and what they were exchanged for afforded some addition to the rent of the Highland estates. The wool of England, which in old times, could neither be consumed nor wrought up at home, found a market in the then wealthier and more industrious country of Flanders, and its price afforded something to the rent of the land which produced it. In countries not better cultivated than England was then, or than the Highlands of Scotland are now, and which had no foreign commerce, the materials of clothing would evidently be so superabundant, that a great part of them would be thrown away as useless, and no part could afford any rent to the landlord. The materials of lodging cannot always be transported to so great a distance as those of clothing, and do not so readily become an object of foreign commerce. When they are superabundant in the country which produces them, it frequently happens, even in the present commercial state of the world, that they are of no value to the landlord. A good stone quarry in the neighbourhood of London would afford a considerable rent. In many parts of Scotland and Wales it affords none. Barren timber for building is of great value in a populous and well-cultivated country, and the land which produces it affords a considerable rent. But in many parts of North America, the landlord would be much obliged to any body who would carry away the greater part of his large trees. In some parts of the Highlands of Scotland, the bark is the only part of the wood which, for want of roads and water-carriage, can be sent to market; the timber is left to rot upon the ground. When the materials of lodging are so superabundant, the part made use of is worth only the labour and expense of fitting it for that use. It affords no rent to the landlord, who generally grants the use of it to whoever takes the trouble of asking it. The demand of wealthier nations, however, sometimes enables him to get a rent for it. The paving of the streets of London has enabled the owners of some barren rocks on the coast of Scotland to draw a rent from what never afforded any before. The woods of Norway, and of the coasts of the Baltic, find a market in many parts of Great Britain, which they could not find at home, and thereby afford some rent to their proprietors. Countries are populous, not in proportion to the number of people whom their produce can clothe and lodge, but in proportion to that of those whom it can feed. When food is provided, it is easy to find the necessary clothing and lodging. But though these are at hand, it may often be difficult to find food. In some parts of the British dominions, what is called a house may be built by one day's labour of one man. The simplest species of clothing, the skins of animals, require somewhat more labour to dress and prepare them for use. They do not, however, require a great deal. Among savage or barbarous nations, a hundredth, or little more than a hundredth part of the labour of the whole year, will be sufficient to provide them with such clothing and lodging as satisfy the greater part of the people. All the other ninety-nine parts are frequently no more than enough to provide them with food. But when, by the improvement and cultivation of land, the labour of one family can provide food for two, the labour of half the society becomes sufficient to provide food for the whole. The other half, therefore, or at least the greater part of them, can be employed in providing other things, or in satisfying the other wants and fancies of mankind. Clothing and lodging, household furniture, and what is called equipage, are the principal objects of the greater part of those wants and fancies. The rich man consumes no more food than his poor neighbour. In quality it may be very different, and to select and prepare it may require more labour and art; but in quantity it is very nearly the same. But compare the spacious palace and great wardrobe of the one, with the hovel and the few rags of the other, and you will be sensible that the difference between their clothing, lodging, and household furniture, is almost as great in quantity as it is in quality. The desire of food is limited in every man by the narrow capacity of the human stomach; but the desire of the conveniencies and ornaments of building, dress, equipage, and household furniture, seems to have no limit or certain boundary. Those, therefore, who have the command of more food than they themselves can consume, are always willing to exchange the surplus, or, what is the same thing, the price of it, for gratifications of this other kind. What is over and above satisfying the limited desire, is given for the amusement of those desires which cannot be satisfied, but seem to be altogether endless. The poor, in order to obtain food, exert themselves to gratify those fancies of the rich; and to obtain it more certainly, they vie with one another in the cheapness and perfection of their work. The number of workmen increases with the increasing quantity of food, or with the growing improvement and cultivation of the lands; and as the nature of their business admits of the utmost subdivisions of labour, the quantity of materials which they can work up, increases in a much greater proportion than their numbers. Hence arises a demand for every sort of material which human invention can employ, either usefully or ornamentally, in building, dress, equipage, or household furniture; for the fossils and minerals contained in the bowels of the earth, the precious metals, and the precious stones. Food is, in this manner, not only the original source of rent, but every other part of the produce of land which afterwards affords rent, derives that part of its value from the improvement of the powers of labour in producing food, by means of the improvement and cultivation of land. Those other parts of the produce of land, however, which afterwards afford rent, do not afford it always. Even in improved and cultivated countries, the demand for them is not always such as to afford a greater price than what is sufficient to pay the labour, and replace, together with its ordinary profits, the stock which must be employed in bringing them to market. Whether it is or is not such, depends upon different circumstances. Whether a coal mine, for example, can afford any rent, depends partly upon its fertility, and partly upon its situation. A mine of any kind may be said to be either fertile or barren, according as the quantity of mineral which can be brought from it by a certain quantity of labour, as greater or less than what can be brought by an equal quantity from the greater part of other mines of the same kind. Some coal mines, advantageously situated, cannot be wrought on account of their barrenness. The produce does not pay the expense. They can afford neither profit nor rent. There are some, of which the produce is barely sufficient to pay the labour, and replace, together with its ordinary profits, the stock employed in working them. They afford some profit to the undertaker of the work, but no rent to the landlord. They can be wrought advantageously by nobody but the landlord, who, being himself the undertaker of the work, gets the ordinary profit of the capital which he employs in it. Many coal mines in Scotland are wrought in this manner, and can be wrought in no other. The landlord will allow nobody else to work them without paying some rent, and nobody can afford to pay any. Other coal mines in the same country, sufficiently fertile, cannot be wrought on account of their situation. A quantity of mineral, sufficient to defray the expense of working, could be brought from the mine by the ordinary, or even less than the ordinary quantity of labour: but in an inland country, thinly inhabited, and without either good roads or water-carriage, this quantity could not be sold. Coals are a less agreeable fuel than wood: they are said too to be less wholesome. The expense of coals, therefore, at the place where they are consumed, must generally be somewhat less than that of wood. The price of wood, again, varies with the state of agriculture, nearly in the same manner, and exactly for the same reason, as the price of cattle. In its rude beginnings, the greater part of every country is covered with wood, which is then a mere incumbrance, of no value to the landlord, who would gladly give it to any body for the cutting. As agriculture advances, the woods are partly cleared by the progress of tillage, and partly go to decay in consequence of the increased number of cattle. These, though they do not increase in the same proportion as corn, which is altogether the acquisition of human industry, yet multiply under the care and protection of men, who store up in the season of plenty what may maintain them in that of scarcity; who, through the whole year, furnish them with a greater quantity of food than uncultivated nature provides for them; and who, by destroying and extirpating their enemies, secure them in the free enjoyment of all that she provides. Numerous herds of cattle, when allowed to wander through the woods, though they do not destroy the old trees, hinder any young ones from coming up; so that, in the course of a century or two, the whole forest goes to ruin. The scarcity of wood then raises its price. It affords a good rent; and the landlord sometimes finds that he can scarce employ his best lands more advantageously than in growing barren timber, of which the greatness of the profit often compensates the lateness of the returns. This seems, in the present times, to be nearly the state of things in several parts of Great Britain, where the profit of planting is found to be equal to that of either corn or pasture. The advantage which the landlord derives from planting can nowhere exceed, at least for any considerable time, the rent which these could afford him; and in an inland country, which is highly cultivated, it will frequently not fall much short of this rent. Upon the sea-coast of a well-improved country, indeed, if coals can conveniently be had for fuel, it may sometimes be cheaper to bring barren timber for building from less cultivated foreign countries than to raise it at home. In the new town of Edinburgh, built within these few years, there is not, perhaps, a single stick of Scotch timber. Whatever may be the price of wood, if that of coals is such that the expense of a coal fire is nearly equal to that of a wood one, we may be assured, that at that place, and in these circumstances, the price of coals is as high as it can be. It seems to be so in some of the inland parts of England, particularly in Oxfordshire, where it is usual, even in the fires of the common people, to mix coals and wood together, and where the difference in the expense of those two sorts of fuel cannot, therefore, be very great. Coals, in the coal countries, are everywhere much below this highest price. If they were not, they could not bear the expense of a distant carriage, either by land or by water. A small quantity only could be sold; and the coal masters and the coal proprietors find it more for their interest to sell a great quantity at a price somewhat above the lowest, than a small quantity at the highest. The most fertile coal mine, too, regulates the price of coals at all the other mines in its neighbourhood. Both the proprietor and the undertaker of the work find, the one that he can get a greater rent, the other that he can get a greater profit, by somewhat underselling all their neighbours. Their neighbours are soon obliged to sell at the same price, though they cannot so well afford it, and though it always diminishes, and sometimes takes away altogether, both their rent and their profit. Some works are abandoned altogether; others can afford no rent, and can be wrought only by the proprietor. The lowest price at which coals can be sold for any considerable time, is, like that of all other commodities, the price which is barely sufficient to replace, together with its ordinary profits, the stock which must be employed in bringing them to market. At a coal mine for which the landlord can get no rent, but which he must either work himself or let it alone altogether, the price of coals must generally be nearly about this price. Rent, even where coals afford one, has generally a smaller share in their price than in that of most other parts of the rude produce of land. The rent of an estate above ground, commonly amounts to what is supposed to be a third of the gross produce; and it is generally a rent certain and independent of the occasional variations in the crop. In coal mines, a fifth of the gross produce is a very great rent, a tenth the common rent; and it is seldom a rent certain, but depends upon the occasional variations in the produce. These are so great, that in a country where thirty years purchase is considered as a moderate price for the property of a landed estate, ten years purchase is regarded as a good price for that of a coal mine. The value of a coal mine to the proprietor, frequently depends as much upon its situation as upon its fertility. That of a metallic mine depends more upon its fertility, and less upon its situation. The coarse, and still more the precious metals, when separated from the ore, are so valuable, that they can generally bear the expense of a very long land, and of the most distant sea carriage. Their market is not confined to the countries in the neighbourhood of the mine, but extends to the whole world. The copper of Japan makes an article of commerce in Europe; the iron of Spain in that of Chili and Peru. The silver of Peru finds its way, not only to Europe, but from Europe to China. The price of coals in Westmoreland or Shropshire can have little effect on their price at Newcastle; and their price in the Lionnois can have none at all. The productions of such distant coal mines can never be brought into competition with one another. But the productions of the most distant metallic mines frequently may, and in fact commonly are. The price, therefore, of the coarse, and still more that of the precious metals, at the most fertile mines in the world, must necessarily more or less affect their price at every other in it. The price of copper in Japan must have some influence upon its price at the copper mines in Europe. The price of silver in Peru, or the quantity either of labour or of other goods which it will purchase there, must have some influence on its price, not only at the silver mines of Europe, but at those of China. After the discovery of the mines of Peru, the silver mines of Europe were, the greater part of them, abandoned. The value of silver was so much reduced, that their produce could no longer pay the expense of working them, or replace, with a profit, the food, clothes, lodging, and other necessaries which were consumed in that operation. This was the case, too, with the mines of Cuba and St. Domingo, and even with the ancient mines of Peru, after the discovery of those of Potosi. The price of every metal, at every mine, therefore, being regulated in some measure by its price at the most fertile mine in the world that is actually wrought, it can, at the greater part of mines, do very little more than pay the expense of working, and can seldom afford a very high rent to the landlord. Rent accordingly, seems at the greater part of mines to have but a small share in the price of the coarse, and a still smaller in that of the precious metals. Labour and profit make up the greater part of both. A sixth part of the gross produce may be reckoned the average rent of the tin mines of Cornwall, the most fertile that are known in the world, as we are told by the Rev. Mr. Borlace, vice-warden of the stannaries. Some, he says, afford more, and some do not afford so much. A sixth part of the gross produce is the rent, too, of several very fertile lead mines in Scotland. In the silver mines of Peru, we are told by Frezier and Ulloa, the proprietor frequently exacts no other acknowledgment from the undertaker of the mine, but that he will grind the ore at his mill, paying him the ordinary multure or price of grinding. Till 1736, indeed, the tax of the king of Spain amounted to one fifth of the standard silver, which till then might be considered as the real rent of the greater part of the silver mines of Peru, the richest which have been known in the world. If there had been no tax, this fifth would naturally have belonged to the landlord, and many mines might have been wrought which could not then be wrought, because they could not afford this tax. The tax of the duke of Cornwall upon tin is supposed to amount to more than five per cent. or one twentieth part of the value; and whatever may be his proportion, it would naturally, too, belong to the proprietor of the mine, if tin was duty free. But if you add one twentieth to one sixth, you will find that the whole average rent of the tin mines of Cornwall, was to the whole average rent of the silver mines of Peru, as thirteen to twelve. But the silver mines of Peru are not now able to pay even this low rent; and the tax upon silver was, in 1736, reduced from one fifth to one tenth. Even this tax upon silver, too, gives more temptation to smuggling than the tax of one twentieth upon tin; and smuggling must be much easier in the precious than in the bulky commodity. The tax of the king of Spain, accordingly, is said to be very ill paid, and that of the duke of Cornwall very well. Rent, therefore, it is probable, makes a greater part of the price of tin at the must fertile tin mines than it does of silver at the most fertile silver mines in the world. After replacing the stock employed in working those different mines, together with its ordinary profits, the residue which remains to the proprietor is greater, it seems, in the coarse, than in the precious metal. Neither are the profits of the undertakers of silver mines commonly very great in Peru. The same most respectable and well-informed authors acquaint us, that when any person undertakes to work a new mine in Peru, he is universally looked upon as a man destined to bankruptcy and ruin, and is upon that account shunned and avoided by every body.--Mining, it seems, is considered there in the same light as here, as a lottery, in which the prizes do not compensate the blanks, though the greatness of some tempts many adventurers to throw away their fortunes in such unprosperous projects. As the sovereign, however, derives a considerable part of his revenue from the produce of silver mines, the law in Peru gives every possible encouragement to the discovery and working of new ones. Whoever discovers a new mine, is entitled to measure off two hundred and forty-six feet in length, according to what he supposes to be the direction of the vein, and half as much in breadth. He becomes proprietor of this portion of the mine, and can work it without paying any acknowledgment to the landlord. The interest of the duke of Cornwall has given occasion to a regulation nearly of the same kind in that ancient dutchy. In waste and uninclosed lands, any person who discovers a tin mine may mark out its limits to a certain extent, which is called bounding a mine. The bounder becomes the real proprietor of the mine, and may either work it himself, or give it in lease to another, without the consent of the owner of the land, to whom, however, a very small acknowledgment must be paid upon working it. In both regulations, the sacred rights of private property are sacrificed to the supposed interests of public revenue. The same encouragement is given in Peru to the discovery and working of new gold mines; and in gold the king's tax amounts only to a twentieth part of the standard rental. It was once a fifth, and afterwards a tenth, as in silver; but it was found that the work could not bear even the lowest of these two taxes. If it is rare, however, say the same authors, Frezier and Ulloa, to find a person who has made his fortune by a silver, it is still much rarer to find one who has done so by a gold mine. This twentieth part seems to be the whole rent which is paid by the greater part of the gold mines of Chili and Peru. Gold, too, is much more liable to be smuggled than even silver; not only on account of the superior value of the metal in proportion to its bulk, but on account of the peculiar way in which nature produces it. Silver is very seldom found virgin, but, like most other metals, is generally mineralized with some other body, from which it is impossible to separate it in such quantities as will pay for the expense, but by a very laborious and tedious operation, which cannot well be carried on but in work-houses erected for the purpose, and, therefore, exposed to the inspection of the king's officers. Gold, on the contrary, is almost always found virgin. It is sometimes found in pieces of some bulk; and, even when mixed, in small and almost insensible particles, with sand, earth, and other extraneous bodies, it can be separated from them by a very short and simple operation, which can be carried on in any private house by any body who is possessed of a small quantity of mercury. If the king's tax, therefore, is but ill paid upon silver, it is likely to be much worse paid upon gold; and rent must make a much smaller part of the price of gold than that of silver. The lowest price at which the precious metals can be sold, or the smallest quantity of other goods for which they can be exchanged, during any considerable time, is regulated by the same principles which fix the lowest ordinary price of all other goods. The stock which must commonly be employed, the food, clothes, and lodging, which must commonly be consumed in bringing them from the mine to the market, determine it. It must at least be sufficient to replace that stock, with the ordinary profits. Their highest price, however, seems not to be necessarily determined by any thing but the actual scarcity or plenty of these metals themselves. It is not determined by that of any other commodity, in the same manner as the price of coals is by that of wood, beyond which no scarcity can ever raise it. Increase the scarcity of gold to a certain degree, and the smallest bit of it may become more precious than a diamond, and exchange for a greater quantity of other goods. The demand for those metals arises partly from their utility, and partly from their beauty. If you except iron, they are more useful than, perhaps, any other metal. As they are less liable to rust and impurity, they can more easily be kept clean; and the utensils, either of the table or the kitchen, are often, upon that account, more agreeable when made of them. A silver boiler is more cleanly than a lead, copper, or tin one; and the same quality would render a gold boiler still better than a silver one. Their principal merit, however, arises from their beauty, which renders them peculiarly fit for the ornaments of dress and furniture. No paint or dye can give so splendid a colour as gilding. The merit of their beauty is greatly enhanced by their scarcity. With the greater part of rich people, the chief enjoyment of riches consists in the parade of riches; which, in their eye, is never so complete as when they appear to possess those decisive marks of opulence which nobody can possess but themselves. In their eyes, the merit of an object, which is in any degree either useful or beautiful, is greatly enhanced by its scarcity, or by the great labour which it requires to collect any considerable quantity of it; a labour which nobody can afford to pay but themselves. Such objects they are willing to purchase at a higher price than things much more beautiful and useful, but more common. These qualities of utility, beauty, and scarcity, are the original foundation of the high price of those metals, or of the great quantity of other goods for which they can everywhere be exchanged. This value was antecedent to, and independent of their being employed as coin, and was the quality which fitted them for that employment. That employment, however, by occasioning a new demand, and by diminishing the quantity which could be employed in any other way, may have afterwards contributed to keep up or increase their value. The demand for the precious stones arises altogether from their beauty. They are of no use but as ornaments; and the merit of their beauty is greatly enhanced by their scarcity, or by the difficulty and expense of getting them from the mine. Wages and profit accordingly make up, upon most occasions, almost the whole of the high price. Rent comes in but for a very small share, frequently for no share; and the most fertile mines only afford any considerable rent. When Tavernier, a jeweller, visited the diamond mines of Golconda and Visiapour, he was informed that the sovereign of the country, for whose benefit they were wrought, had ordered all of them to be shut up except those which yielded the largest and finest stones. The other, it seems, were to the proprietor not worth the working. As the prices, both of the precious metals and of the precious stones, is regulated all over the world by their price at the most fertile mine in it, the rent which a mine of either can afford to its proprietor is in proportion, not to its absolute, but to what may be called its relative fertility, or to its superiority over other mines of the same kind. If new mines were discovered, as much superior to those of Potosi, as they were superior to those of Europe, the value of silver might be so much degraded as to render even the mines of Potosi not worth the working. Before the discovery of the Spanish West Indies, the most fertile mines in Europe may have afforded as great a rent to their proprietors as the richest mines in Peru do at present. Though the quantity of silver was much less, it might have exchanged for an equal quantity of other goods, and the proprietor's share might have enabled him to purchase or command an equal quantity either of labour or of commodities. The value, both of the product and of the rent, the real revenue which they afforded, both to the public and to the proprietor, might have been the same. The most abundant mines, either of the precious metals, or of the precious stones, could add little to the wealth of the world. A produce, of which the value is principally derived from its scarcity, is necessarily degraded by its abundance. A service of plate, and the other frivolous ornaments of dress and furniture, could be purchased for a smaller quantity of labour, or for a smaller quantity of commodities; and in this would consist the sole advantage which the world could derive from that abundance. It is otherwise in estates above ground. The value, both of their produce and of their rent, is in proportion to their absolute, and not to their relative fertility. The land which produces certain quantity of food, clothes, and lodging, can always feed, clothe, and lodge, a certain number of people; and whatever may be the proportion of the landlord, it will always give him a proportionable command of the labour of those people, and of the commodities with which that labour can supply him. The value of the most barren land is not diminished by the neighbourhood of the most fertile. On the contrary, it is generally increased by it. The great number of people maintained by the fertile lands afford a market to many parts of the produce of the barren, which they could never have found among those whom their own produce could maintain. Whatever increases the fertility of land in producing food, increases not only the value of the lands upon which the improvement is bestowed, but contributes likewise to increase that or many other lands, by creating a new demand for their produce. That abundance of food, of which, in consequence of the improvement of land, many people have the disposal beyond what they themselves can consume, is the great cause of the demand, both for the precious metals and the precious stones, as well as for every other conveniency and ornament of dress, lodging, household furniture, and equipage. Food not only constitutes the principal part of the riches of the world, but it is the abundance of food which gives the principal part of their value to many other sorts of riches. The poor inhabitants of Cuba and St. Domingo, when they were first discovered by the Spaniards, used to wear little bits of gold as ornaments in their hair and other parts of their dress. They seemed to value them as we would do any little pebbles of somewhat more than ordinary beauty, and to consider them as just worth the picking up, but not worth the refusing to any body who asked them. They gave them to their new guests at the first request, without seeming to think that they had made them any very valuable present. They were astonished to observe the rage of the Spaniards to obtain them; and had no notion that there could anywhere be a country in which many people had the disposal of so great a superfluity of food; so scanty always among themselves, that, for a very small quantity of those glittering baubles, they would willingly give as much as might maintain a whole family for many years. Could they have been made to understand this, the passion of the Spaniards would not have surprised them. PART III.--_Of the variations in the Proportion between the respective Values of that sort of Produce which always affords Rent, and of that which sometimes does, and sometimes does not, afford Rent._ The increasing abundance of food, in consequence of the increasing improvement and cultivation, must necessarily increase the demand for every part of the produce of land which is not food, and which can be applied either to use or to ornament. In the whole progress of improvement, it might, therefore, be expected there should be only one variation in the comparative values of those two different sorts of produce. The value of that sort which sometimes does, and sometimes does not afford rent, should constantly rise in proportion to that which always affords some rent. As art and industry advance, the materials of clothing and lodging, the useful fossils and materials of the earth, the precious metals and the precious stones, should gradually come to be more and more in demand, should gradually exchange for a greater and a greater quantity of food; or, in other words, should gradually become dearer and dearer. This, accordingly, has been the case with most of these things upon most occasions, and would have been the case with all of them upon all occasions, if particular accidents had not, upon some occasions, increased the supply of some of them in a still greater proportion than the demand. The value of a free-stone quarry, for example, will necessarily increase with the increasing improvement and population of the country round about it, especially if it should be the only one in the neighbourhood. But the value of a silver mine, even though there should not be another within a thousand miles of it, will not necessarily increase with the improvement of the country in which it is situated. The market for the produce of a free-stone quarry can seldom extend more than a few miles round about it, and the demand must generally be in proportion to the improvement and population of that small district; but the market for the produce of a silver mine may extend over the whole known world. Unless the world in general, therefore, be advancing in improvement and population, the demand for silver might not be at all increased by the improvement even of a large country in the neighbourhood of the mine. Even though the world in general were improving, yet if, in the course of its improvements, new mines should be discovered, much more fertile than any which had been known before, though the demand for silver would necessarily increase, yet the supply might increase in so much a greater proportion, that the real price of that metal might gradually fall; that is, any given quantity, a pound weight of it, for example, might gradually purchase or command a smaller and a smaller quantity of labour, or exchange for a smaller and a smaller quantity of corn, the principal part of the subsistence of the labourer. The great market for silver is the commercial and civilized part of the world. If, by the general progress of improvement, the demand of this market should increase, while, at the same time, the supply did not increase in the same proportion, the value of silver would gradually rise in proportion to that of corn. Any given quantity of silver would exchange for a greater and a greater quantity of corn; or, in other words, the average money price of corn would gradually become cheaper and cheaper. If, on the contrary, the supply, by some accident, should increase, for many years together, in a greater proportion than the demand, that metal would gradually become cheaper and cheaper; or, in other words, the average money price of corn would, in spite of all improvements, gradually become dearer and dearer. But if, on the other hand, the supply of that metal should increase nearly in the same proportion as the demand, it would continue to purchase or exchange for nearly the same quantity of corn; and the average money price of corn would, in spite of all improvements, continue very nearly the same. These three seem to exhaust all the possible combinations of events which can happen in the progress of improvement; and during the course of the four centuries preceding the present, if we may judge by what has happened both in France and Great Britain, each of those three different combinations seems to have taken place in the European market, and nearly in the same order, too, in which I have here set them down. _Digression concerning the Variations in the value of Silver during the Course of the Four last Centuries._ _First Period._--In 1350, and for some time before, the average price of the quarter of wheat in England seems not to have been estimated lower than four ounces of silver, Tower weight, equal to about twenty shillings of our present money. From this price it seems to have fallen gradually to two ounces of silver, equal to about ten shillings of our present money, the price at which we find it estimated in the beginning of the sixteenth century, and at which it seems to have continued to be estimated till about 1570. In 1350, being the 25th of Edward III. was enacted what is called the Statute of Labourers. In the preamble, it complains much of the insolence of servants, who endeavoured to raise their wages upon their masters. It therefore ordains, that all servants and labourers should, for the future, be contented with the same wages and liveries (liveries in those times signified not only clothes, but provisions) which they had been accustomed to receive in the 20th year of the king, and the four preceding years; that, upon this account, their livery-wheat should nowhere be estimated higher than tenpence a-bushel, and that it should always be in the option of the master to deliver them either the wheat or the money. Tenpence a-bushel, therefore, had, in the 25th of Edward III. been reckoned a very moderate price of wheat, since it required a particular statute to oblige servants to accept of it in exchange for their usual livery of provisions; and it had been reckoned a reasonable price ten years before that, or in the 16th year of the king, the term to which the statute refers. But in the 16th year of Edward III. tenpence contained about half an ounce of silver, Tower weight, and was nearly equal to half-a-crown of our present money. Four ounces of silver, Tower weight, therefore, equal to six shillings and eightpence of the money of those times, and to near twenty shillings of that of the present, must have been reckoned a moderate price for the quarter of eight bushels. This statute is surely a better evidence of what was reckoned, in those times, a moderate price of grain, than the prices of some particular years, which have generally been recorded by historians and other writers, on account of their extraordinary dearness or cheapness, and from which, therefore, it is difficult to form any judgment concerning what may have been the ordinary price. There are, besides, other reasons for believing that, in the beginning of the fourteenth century, and for some time before, the common price of wheat was not less than four ounces of silver the quarter, and that of other grain in proportion. In 1309, Ralph de Born, prior of St. Augustine's, Canterbury, gave a feast upon his installation-day, of which William Thorn has preserved, not only the bill of fare, but the prices of many particulars. In that feast were consumed, 1st, fifty-three quarters of wheat, which cost nineteen pounds, or seven shillings and twopence a-quarter, equal to about one-and-twenty shillings and sixpence of our present money; 2dly, fifty-eight quarters of malt, which cost seventeen pounds ten shillings, or six shillings a-quarter, equal to about eighteen shillings of our present money; 3dly, twenty quarters of oats, which cost four pounds, or four shillings a-quarter, equal to about twelve shillings of our present money. The prices of malt and oats seem here to be higher than their ordinary proportion to the price of wheat. These prices are not recorded, on account of their extraordinary dearness or cheapness, but are mentioned accidentally, as the prices actually paid for large quantities of grain consumed at a feast, which was famous for its magnificence. In 1262, being the 51st of Henry III. was revived an ancient statute, called _the assize of bread and ale_, which, the king says in the preamble, had been made in the times of his progenitors, some time kings of England. It is probably, therefore, as old at least as the time of his grandfather, Henry II. and may have been as old as the Conquest. It regulates the price of bread according as the prices of wheat may happen to be, from one shilling to twenty shillings the quarter of the money of those times. But statutes of this kind are generally presumed to provide with equal care for all deviations from the middle price, for those below it, as well as for those above it. Ten shillings, therefore, containing six ounces of silver, Tower weight, and equal to about thirty shillings of our present money, must, upon this supposition, have been reckoned the middle price of the quarter of wheat when this statute was first enacted, and must have continued to be so in the 51st of Henry III. We cannot, therefore, be very wrong in supposing that the middle price was not less than one-third of the highest price at which this statute regulates the price of bread, or than six shillings and eightpence of the money of those times, containing four ounces of silver, Tower weight. From these different facts, therefore, we seem to have some reason to conclude that, about the middle of the fourteenth century, and for a considerable time before, the average or ordinary price of the quarter of wheat was not supposed to be less than four ounces of silver, Tower weight. From about the middle of the fourteenth to the beginning of the sixteenth century, what was reckoned the reasonable and moderate, that is, the ordinary or average price of wheat, seems to have sunk gradually to about one half of this price; so as at last to have fallen to about two ounces of silver, Tower weight, equal to about ten shillings of our present money. It continued to be estimated at this price till about 1570. In the household book of Henry, the fifth earl of Northumberland, drawn up in 1512, there are two different estimations of wheat. In one of them it is computed at six shillings and eightpence the quarter, in the other at five shillings and eightpence only. In 1512, six shillings and eightpence contained only two ounces of silver, Tower weight, and were equal to about ten shillings of our present money. From the 25th of Edward III. to the beginning of the reign of Elizabeth, during the space of more than two hundred years, six shillings and eightpence, it appears from several different statutes, had continued to be considered as what is called the moderate and reasonable, that is, the ordinary or average price of wheat. The quantity of silver, however, contained in that nominal sum was, during the course of this period, continually diminishing, in consequence of some alterations which were made in the coin. But the increase of the value of silver had, it seems, so far compensated the diminution of the quantity of it contained in the same nominal sum, that the legislature did not think it worth while to attend to this circumstance. Thus, in 1436, it was enacted, that wheat might be exported without a licence when the price was so low as six shillings and eightpence: and in 1463, it was enacted, that no wheat should be imported if the price was not above six shillings and eightpence the quarter. The legislature had imagined, that when the price was so low, there could be no inconveniency in exportation, but that when it rose higher, it became prudent to allow of importation. Six shillings and eightpence, therefore, containing about the same quantity of silver as thirteen shillings and fourpence of our present money (one-third part less than the same nominal sum contained in the time of Edward III.), had, in those times, been considered as what is called the moderate and reasonable price of wheat. In 1554, by the 1st and 2d of Philip and Mary, and in 1558, by the 1st of Elizabeth, the exportation of wheat was in the same manner prohibited, whenever the price of the quarter should exceed six shillings and eightpence, which did not then contain two penny worth more silver than the same nominal sum does at present. But it had soon been found, that to restrain the exportation of wheat till the price was so very low, was, in reality, to prohibit it altogether. In 1562, therefore, by the 5th of Elizabeth, the exportation of wheat was allowed from certain ports, whenever the price of the quarter should not exceed ten shillings, containing nearly the same quantity of silver as the like nominal sum does at present. This price had at this time, therefore, been considered as what is called the moderate and reasonable price of wheat. It agrees nearly with the estimation of the Northumberland book in 1512. That in France the average price of grain was, in the same manner, much lower in the end of the fifteenth and beginning of the sixteenth century, than in the two centuries preceding, has been observed both by Mr Dupré de St Maur, and by the elegant author of the Essay on the Policy of Grain. Its price, during the same period, had probably sunk in the same manner through the greater part of Europe. This rise in the value of silver, in proportion to that of corn, may either have been owing altogether to the increase of the demand for that metal, in consequence of increasing improvement and cultivation, the supply, in the mean time, continuing the same as before; or, the demand continuing the same as before, it may have been owing altogether to the gradual diminution of the supply: the greater part of the mines which were then known in the world being much exhausted, and, consequently, the expense of working them much increased; or it may have been owing partly to the one, and partly to the other of those two circumstances. In the end of the fifteenth and beginning of the sixteenth centuries, the greater part of Europe was approaching towards a more settled form of government than it had enjoyed for several ages before. The increase of security would naturally increase industry and improvement; and the demand for the precious metals, as well as for every other luxury and ornament, would naturally increase with the increase of riches. A greater annual produce would require a greater quantity of coin to circulate it; and a greater number of rich people would require a greater quantity of plate and other ornaments of silver. It is natural to suppose, too, that the greater part of the mines which then supplied the European market with silver might be a good deal exhausted, and have become more expensive in the working. They had been wrought, many of them, from the time of the Romans. It has been the opinion, however, of the greater part of those who have written upon the prices of commodities in ancient times, that, from the Conquest, perhaps from the invasion of Julius Cæsar, till the discovery of the mines of America, the value of silver was continually diminishing. This opinion they seem to have been led into, partly by the observations which they had occasion to make upon the prices both of corn and of some other parts of the rude produce of land, and partly by the popular notion, that as the quantity of silver naturally increases in every country with the increase of wealth, so its value diminishes as its quantity increases. In their observations upon the prices of corn, three different circumstances seem frequently to have misled them. First, in ancient times, almost all rents were paid in kind; in a certain quantity of corn, cattle, poultry, &c. It sometimes happened, however, that the landlord would stipulate, that he should be at liberty to demand of the tenant, either the annual payment in kind or a certain sum of money instead of it. The price at which the payment in kind was in this manner exchanged for a certain sum of money, is in Scotland called the conversion price. As the option is always in the landlord to take either the substance or the price, it is necessary, for the safety of the tenant, that the conversion price should rather be below than above the average market price. In many places, accordingly, it is not much above one half of this price. Through the greater part of Scotland this custom still continues with regard to poultry, and in some places with regard to cattle. It might probably have continued to take place, too, with regard to corn, had not the institution of the public fiars put an end to it. These are annual valuations, according to the judgment of an assize, of the average price of all the different sorts of grain, and of all the different qualities of each, according to the actual market price in every different county. This institution rendered it sufficiently safe for the tenant, and much more convenient for the landlord, to convert, as they call it, the corn rent, rather at what should happen to be the price of the fiars of each year, than at any certain fixed price. But the writers who have collected the prices of corn in ancient times seem frequently to have mistaken what is called in Scotland the conversion price for the actual market price. Fleetwood acknowledges, upon one occasion, that he had made this mistake. As he wrote his book, however, for a particular purpose, he does not think proper to make this acknowledgment till after transcribing this conversion price fifteen times. The price is eight shillings the quarter of wheat. This sum in 1423, the year at which he begins with it, contained the same quantity of silver as sixteen shillings of our present money. But in 1562, the year at which he ends with it, it contained no more than the same nominal sum does at present. Secondly, they have been misled by the slovenly manner in which some ancient statutes of assize had been sometimes transcribed by lazy copiers, and sometimes, perhaps, actually composed by the legislature. The ancient statutes of assize seem to have begun always with determining what ought to be the price of bread and ale when the price of wheat and barley were at the lowest; and to have proceeded gradually to determine what it ought to be, according as the prices of those two sorts of grain should gradually rise above this lowest price. But the transcribers of those statutes seem frequently to have thought it sufficient to copy the regulation as far as the three or four first and lowest prices; saving in this manner their own labour, and judging, I suppose, that this was enough to show what proportion ought to be observed in all higher prices. Thus, in the assize of bread and ale, of the 51st of Henry III. the price of bread was regulated according to the different prices of wheat, from one shilling to twenty shillings the quarter of the money of those times. But in the manuscripts from which all the different editions of the statutes, preceding that of Mr Ruffhead, were printed, the copiers had never transcribed this regulation beyond the price of twelve shillings. Several writers, therefore, being misled by this faulty transcription, very naturally conclude that the middle price, or six shillings the quarter, equal to about eighteen shillings of our present money, was the ordinary or average price of wheat at that time. In the statute of Tumbrel and Pillory, enacted nearly about the same time, the price of ale is regulated according to every sixpence rise in the price of barley, from two shillings, to four shillings the quarter. That four shillings, however, was not considered as the highest price to which barley might frequently rise in those times and that these prices were only given as an example of the proportion which ought to be observed in all other prices, whether higher or lower, we may infer from the last words of the statute: "_Et sic deinceps crescetur vel diminuetur per sex denarios._" The expression is very slovenly, but the meaning is plain enough, "that the price of ale is in this manner to be increased or diminished according to every sixpence rise or fall in the price of barley." In the composition of this statute, the legislature itself seems to have been as negligent as the copiers were in the transcription of the other. In an ancient manuscript of the Regiam Majestatem, an old Scotch law book, there is a statute of assize, in which the price of bread is regulated according to all the different prices of wheat, from tenpence to three shillings the Scotch boll, equal to about half an English quarter. Three shillings Scotch, at the time when this assize is supposed to have been enacted, were equal to about nine shillings sterling of our present money. Mr Ruddiman seems[16] to conclude from this, that three shillings was the highest price to which wheat ever rose in those times, and that tenpence, a shilling, or at most two shillings, were the ordinary prices. Upon consulting the manuscript, however, it appears evidently, that all these prices are only set down as examples of the proportion which ought to be observed between the respective prices of wheat and bread. The last words of the statute are "_reliqua judicabis secundum præscripta, habendo respectum ad pretium bladi_."--"You shall judge of the remaining cases, according to what is above written, having respect to the price of corn." Thirdly, they seem to have been misled too, by the very low price at which wheat was sometimes sold in very ancient times; and to have imagined, that as its lowest price was then much lower than in later times its ordinary price must likewise have been much lower. They might have found, however, that in those ancient times its highest price was fully as much above, as its lowest price was below any thing that had ever been known in later times. Thus, in 1270, Fleetwood gives us two prices of the quarter of wheat. The one is four pounds sixteen shillings of the money of those times, equal to fourteen pounds eight shillings of that of the present; the other is six pounds eight shillings, equal to nineteen pounds four shillings of our present money. No price can be found in the end of the fifteenth, or beginning of the sixteenth century, which approaches to the extravagance of these. The price of corn, though at all times liable to variation, varies most in those turbulent and disorderly societies, in which the interruption of all commerce and communication hinders the plenty of one part of the country from relieving the scarcity of another. In the disorderly state of England under the Plantagenets, who governed it from about the middle of the twelfth till towards the end of the fifteenth century, one district might be in plenty, while another, at no great distance, by having its crop destroyed, either by some accident of the seasons, or by the incursion of some neighbouring baron, might be suffering all the horrors of a famine; and yet if the lands of some hostile lord were interposed between them, the one might not be able to give the least assistance to the other. Under the vigorous administration of the Tudors, who governed England during the latter part of the fifteenth, and through the whole of the sixteenth century, no baron was powerful enough to dare to disturb the public security. The reader will find at the end of this chapter all the prices of wheat which have been collected by Fleetwood, from 1202 to 1597, both inclusive, reduced to the money of the present times, and digested, according to the order of time, into seven divisions of twelve years each. At the end of each division, too, he will find the average price of the twelve years of which it consists. In that long period of time, Fleetwood has been able to collect the prices of no more than eighty years; so that four years are wanting to make out the last twelve years. I have added, therefore, from the accounts of Eton college, the prices of 1598, 1599, 1600, and 1601. It is the only addition which I have made. The reader will see, that from the beginning of the thirteenth till after the middle of the sixteenth century, the average price of each twelve years grows gradually lower and lower; and that towards the and of the sixteenth century it begins to rise again. The prices, indeed, which Fleetwood has been able to collect, seem to have been those chiefly which were remarkable for extraordinary dearness or cheapness; and I do not pretend that any very certain conclusion can be drawn from them. So far, however, as they prove any thing at all, they confirm the account which I have been endeavouring to give. Fleetwood himself, however, seems, with most other writers, to have believed, that, during all this period, the value of silver, in consequence of its increasing abundance, was continually diminishing. The prices of corn, which he himself has collected, certainly do not agree with this opinion. They agree perfectly with that of Mr Dupré de St Maur, and with that which I have been endeavouring to explain. Bishop Fleetwood and Mr Dupré de St Maur are the two authors who seem to have collected, with the greatest diligence and fidelity, the prices of things in ancient times. It is somewhat curious that, though their opinions are so very different, their facts, so far as they relate to the price of corn at least, should coincide so very exactly. It is not, however, so much from the low price of corn, as from that of some other parts of the rude produce of land, that the most judicious writers have inferred the great value of silver in those very ancient times. Corn, it has been said, being a sort of manufacture, was, in those rude ages, much dearer in proportion than the greater part of other commodities; it is meant, I suppose, than the greater part of unmanufactured commodities, such as cattle, poultry, game of all kinds, &c. That in those times of poverty and barbarism these were proportionably much cheaper than corn, is undoubtedly true. But this cheapness was not the effect of the high value of silver, but of the low value of those commodities. It was not because silver would in such time purchase or represent a greater quantity of labour, but because such commodities would purchase or represent a much smaller quantity than in times of more opulence and improvement. Silver must certainly be cheaper in Spanish America than in Europe; in the country where it is produced, than in the country to which it is brought, at the expense of a long carriage both by land and by sea, of a freight, and an insurance. One-and-twenty pence halfpenny sterling, however, we are told by Ulloa, was, not many years ago, at Buenos Ayres, the price of an ox chosen from a herd of three or four hundred. Sixteen shillings sterling, we are told by Mr Byron, was the price of a good horse in the capital of Chili. In a country naturally fertile, but of which the far greater part is altogether uncultivated, cattle, poultry, game of all kinds, &c. as they can be acquired with a very small quantity of labour, so they will purchase or command but a very small quantity. The low money price for which they may be sold, is no proof that the real value of silver is there very high, but that the real value of those commodities is very low. Labour, it must always be remembered, and not any particular commodity, or set of commodities, is the real measure of the value both of silver and of all other commodities. But in countries almost waste, or but thinly inhabited, cattle, poultry, game of all kinds, &c. as they are the spontaneous productions of Nature, so she frequently produces them in much greater quantities than the consumption of the inhabitants requires. In such a state of things, the supply commonly exceeds the demand. In different states of society, in different states of improvement, therefore, such commodities will represent, or be equivalent, to very different quantities of labour. In every state of society, in every stage of improvement, corn is the production of human industry. But the average produce of every sort of industry is always suited, more or less exactly, to the average consumption; the average supply to the average demand. In every different stage of improvement, besides, the raising of equal quantities of corn in the same soil and climate, will, at an average, require nearly equal quantities of labour; or, what comes to the same thing, the price of nearly equal quantities; the continual increase of the productive powers of labour, in an improved state of cultivation, being more or less counterbalanced by the continual increasing price of cattle, the principal instruments of agriculture. Upon all these accounts, therefore, we may rest assured, that equal quantities of corn will, in every state of society, in every stage of improvement, more nearly represent, or be equivalent to, equal quantities of labour, than equal quantities of any other part of the rude produce of land. Corn, accordingly, it has already been observed, is, in all the different stages of wealth and improvement, a more accurate measure of value than any other commodity or set of commodities. In all those different stages, therefore, we can judge better of the real value of silver, by comparing it with corn, than by comparing it with any other commodity or set of commodities. Corn, besides, or whatever else is the common and favourite vegetable food of the people, constitutes, in every civilized country, the principal part of the subsistence of the labourer. In consequence of the extension of agriculture, the land of every country produces a much greater quantity of vegetable than of animal food, and the labourer everywhere lives chiefly upon the wholesome food that is cheapest and most abundant. Butcher's meat, except in the most thriving countries, or where labour is most highly rewarded, makes but an insignificant part of his subsistence; poultry makes a still smaller part of it, and game no part of it. In France, and even in Scotland, where labour is somewhat better rewarded than in France, the labouring poor seldom eat butcher's meat, except upon holidays, and other extraordinary occasions. The money price of labour, therefore, depends much more upon the average money price of corn, the subsistence of the labourer, than upon that of butcher's meat, or of any other part of the rude produce of land. The real value of gold and silver, therefore, the real quantity of labour which they can purchase or command, depends much more upon the quantity of corn which they can purchase or command, than upon that of butcher's meat, or any other part of the rude produce of land. Such slight observations, however, upon the prices either of corn or of other commodities, would not probably have misled so many intelligent authors, had they not been influenced at the same time by the popular notion, that as the quantity of silver naturally increases in every country with the increase of wealth, so its value diminishes as its quantity increases. This notion, however, seems to be altogether groundless. The quantity of the precious metals may increase in any country from two different causes; either, first, from the increased abundance of the mines which supply it; or, secondly, from the increased wealth of the people, from the increased produce of their annual labour. The first of these causes is no doubt necessarily connected with the diminution of the value of the precious metals; but the second is not. When more abundant mines are discovered, a greater quantity of the precious metals is brought to market; and the quantity of the necessaries and conveniencies of life for which they must be exchanged being the same as before, equal quantities of the metals must be exchanged for smaller quantities of commodities. So far, therefore, as the increase of the quantity of the precious metals in any country arises from the increased abundance of the mines, it is necessarily connected with some diminution of their value. When, on the contrary, the wealth of any country increases, when the annual produce of its labour becomes gradually greater and greater, a greater quantity of coin becomes necessary in order to circulate a greater quantity of commodities: and the people, as they can afford it, as they have more commodities to give for it, will naturally purchase a greater and a greater quantity of plate. The quantity of their coin will increase from necessity; the quantity of their plate from vanity and ostentation, or from the same reason that the quantity of fine statues, pictures, and of every other luxury and curiosity, is likely to increase among them. But as statuaries and painters are not likely to be worse rewarded in times of wealth and prosperity, than in times of poverty and depression, so gold and silver are not likely to be worse paid for. The price of gold and silver, when the accidental discovery of more abundant mines does not keep it down, as it naturally rises with the wealth of every country; so, whatever be the state of the mines, it is at all times naturally higher in a rich than in a poor country. Gold and silver, like all other commodities, naturally seek the market where the best price is given for them, and the best price is commonly given for every thing in the country which can best afford it. Labour, it must be remembered, is the ultimate price which is paid for every thing; and in countries where labour is equally well rewarded, the money price of labour will be in proportion to that of the subsistence of the labourer. But gold and silver will naturally exchange for a greater quantity of subsistence in a rich than in a poor country; in a country which abounds with subsistence, than in one which is but indifferently supplied with it. If the two countries are at a great distance, the difference may be very great; because, though the metals naturally fly from the worse to the better market, yet it may be difficult to transport them in such quantities as to bring their price nearly to a level in both. If the countries are near, the difference will be smaller, and may sometimes be scarce perceptible; because in this case the transportation will be easy. China is a much richer country than any part of Europe, and the difference between the price of subsistence in China and in Europe is very great. Rice in China is much cheaper than wheat is anywhere in Europe. England is a much richer country than Scotland, but the difference between the money price of corn in those two countries is much smaller, and is but just perceptible. In proportion to the quantity or measure, Scotch corn generally appears to be a good deal cheaper than English; but, in proportion to its quality, it is certainly somewhat dearer. Scotland receives almost every year very large supplies from England, and every commodity must commonly be somewhat dearer in the country to which it is brought than in that from which it comes. English corn, therefore, must be dearer in Scotland than in England; and yet in proportion to its quality, or to the quantity and goodness of the flour or meal which can be made from it, it cannot commonly be sold higher there than the Scotch corn which comes to market in competition with it. The difference between the money price of labour in China and in Europe, is still greater than that between the money price of subsistence; because the real recompence of labour is higher in Europe than in China, the greater part of Europe being in an improving state, while China seems to be standing still. The money price of labour is lower in Scotland than in England, because the real recompence of labour is much lower: Scotland, though advancing to greater wealth, advances much more slowly than England. The frequency of emigration from Scotland, and the rarity of it from England, sufficiently prove that the demand for labour is very different in the two countries. The proportion between the real recompence of labour in different countries, it must be remembered, is naturally regulated, not by their actual wealth or poverty, but by their advancing, stationary, or declining condition. Gold and silver, as they are naturally of the greatest value among the richest, so they are naturally of the least value among the poorest nations. Among savages, the poorest of all nations, they are scarce of any value. In great towns, corn is always dearer than in remote parts of the country. This, however, is the effect, not of the real cheapness of silver, but of the real dearness of corn. It does not cost less labour to bring silver to the great town than to the remote parts of the country; but it costs a great deal more to bring corn. In some very rich and commercial countries, such as Holland and the territory of Genoa, corn is dear for the same reason that it is dear in great towns. They do not produce enough to maintain their inhabitants. They are rich in the industry and skill of their artificers and manufacturers, in every sort of machinery which can facilitate and abridge labour; in shipping, and in all the other instruments and means of carriage and commerce: but they are poor in corn, which, as it must be brought to them from distant countries, must, by an addition to its price, pay for the carriage from these countries. It does not cost less labour to bring silver to Amsterdam than to Dantzic; but it costs a great deal more to bring corn. The real cast of silver must be nearly the same in both places; but that of corn must be very different. Diminish the real opulence either of Holland or of the territory of Genoa, while the number of their inhabitants remains the same; diminish their power of supplying themselves from distant countries; and the price of corn, instead of sinking with that diminution in the quantity of their silver, which must necessarily accompany this declension, either as its cause or as its effect, will rise to the price of a famine. When we are in want of necessaries, we must part with all superfluities, of which the value, as it rises in times of opulence and prosperity, so it sinks in times of poverty and distress. It is otherwise with necessaries. Their real price, the quantity of labour which they can purchase or command, rises in times of poverty and distress, and sinks in times of opulence and prosperity, which are always times of great abundance; for they could not otherwise be times of opulence and prosperity Corn is a necessary, silver is only a superfluity. Whatever, therefore, may have been the increase in the quantity of the precious metals, which, during the period between the middle of the fourteenth and that of the sixteenth century, arose from the increase of wealth and improvement, it could have no tendency to diminish their value, either in Great Britain, or in any other part of Europe. If those who have collected the prices of things in ancient times, therefore, had, during this period, no reason to infer the diminution of the value of silver from any observations which they had made upon the prices either of corn, or of other commodities, they had still less reason to infer it from any supposed increase of wealth and improvement. _Second Period._--But how various soever may have been the opinions of the learned concerning the progress of the value of silver during the first period, they are unanimous concerning it during the second. From about 1570 to about 1640, during a period of about seventy years, the variation in the proportion between the value of silver and that of corn held a quite opposite course. Silver sunk in its real value, or would exchange for a smaller quantity of labour than before; and corn rose in its nominal price, and, instead of being commonly sold for about two ounces of silver the quarter, or about ten shillings of our present money, came to be sold for six and eight ounces of silver the quarter, or about thirty and forty shillings of our present money. The discovery of the abundant mines of America seems to have been the sole cause of this diminution in the value of silver, in proportion to that of corn. It is accounted for, accordingly, in the same manner by every body; and there never has been any dispute, either about the fact, or about the cause of it. The greater part of Europe was, during this period, advancing in industry and improvement, and the demand for silver must consequently have been increasing; but the increase of the supply had, it seems, so far exceeded that of the demand, that the value of that metal sunk considerably. The discovery of the mines of America, it is to be observed, does not seem to have had any very sensible effect upon the prices of things in England, till after 1570; even though the mines of Potosi had been discovered more than twenty years before. From 1595 to 1620, both inclusive, the average price of the quarter of nine bushels of the best wheat, at Windsor market, appears, from the accounts of Eton college, to have been L.2 : 1 : 6-9/13. From which sum, neglecting the fraction, and deducting a ninth, or 4s. 7-1/3d., the price of the quarter of eight bushels comes out to have been L.1 : 16 : 10-2/3. And from this sum, neglecting likewise the fraction, and deducting a ninth, or 4s. 1-1/9d., for the difference between the price of the best wheat and that of the middle wheat, the price of the middle wheat comes out to have been about L.1 : 12 : 8-8/9, or about six ounces and one-third of an ounce of silver. From 1621 to 1636, both inclusive, the average price of the same measure of the best wheat, at the same market, appears, from the same accounts, to have been L.2 : 10s.; from which, making the like deductions as in the foregoing case, the average price of the quarter of eight bushels of middle wheat comes out to have been L.1 : 19 : 6, or about seven ounces and two-thirds of an ounce of silver. _Third Period._--Between 1630 and 1640, or about 1636, the effect of the discovery of the mines of America, is reducing the value of silver, appears to have been completed, and the value of that metal seems never to have sunk lower in proportion to that of corn than it was about that time. It seems to have risen somewhat in the course of the present century, and it had probably begun to do so, even some time before the end of the last. From 1637 to 1700, both inclusive, being the sixty-four last years of the last century, the average price of the quarter of nine bushels of the best wheat, at Windsor market, appears, from the same accounts, to have been L.2 : 11 : 0-1/3, which is only 1s. 0-1/3d. dearer than it had been during the sixteen years before. But, in the course of these sixty-four years, there happened two events, which must have produced a much greater scarcity of corn than what the course of the seasons would otherwise have occasioned, and which, therefore, without supposing any further reduction in the value of silver, will much more than account for this very small enhancement of price. The first of these events was the civil war, which, by discouraging tillage and interrupting commerce, must have raised the price of corn much above what the course of the seasons would otherwise have occasioned. It must have had this effect, more or less, at all the different markets in the kingdom, but particularly at those in the neighborhood of London, which require to be supplied from the greatest distance. In 1648, accordingly, the price of the best wheat, at Windsor market, appears, from the same accounts, to have been L.4 : 5s., and, in 1649, to have been L.4, the quarter of nine bushels. The excess of those two years above L.2 10s. (the average price of the sixteen years preceding 1637) is L.3 5s., which, divided among the sixty-four last years of the last century, will alone very nearly account for that small enhancement of price which seems to have taken place in them. These, however, though the highest, are by no means the only high prices which seem to have been occasioned by the civil wars. The second event was the bounty upon the exportation of corn, granted in 1688. The bounty, it has been thought by many people, by encouraging tillage, may, in a long course of years, have occasioned a greater abundance, and, consequently, a greater cheapness of corn in the home market, than what would otherwise have taken place there. How far the bounty could produce this effect at any time I shall examine hereafter: I shall only observe at present, that between 1688 and 1700, it had not time to produce any such effect. During this short period, its only effect must have been, by encouraging the exportation of the surplus produce of every year, and thereby hindering the abundance of one year from compensating the scarcity of another, to raise the price in the home market. The scarcity which prevailed in England, from 1693 to 1699, both inclusive, though no doubt principally owing to the badness of the seasons, and, therefore, extending through a considerable part of Europe, must have been somewhat enhanced by the bounty. In 1699, accordingly, the further exportation of corn was prohibited for nine months. There was a third event which occurred in the course of the same period, and which, though it could not occasion any scarcity of corn, nor, perhaps, any augmentation in the real quantity of silver which was usually paid for it, must necessarily have occasioned some augmentation in the nominal sum. This event was the great debasement of the silver coin, by clipping and wearing. This evil had begun in the reign of Charles II. and had gone on continually increasing till 1695; at which time, as we may learn from Mr Lowndes, the current silver coin was, at an average, near five-and-twenty per cent. below its standard value. But the nominal sum which constitutes the market price of every commodity is necessarily regulated, not so much by the quantity of silver, which, according to the standard, ought to be contained in it, as by that which, it is found by experience, actually is contained in it. This nominal sum, therefore, is necessarily higher when the coin is much debased by clipping and wearing, than when near to its standard value. In the course of the present century, the silver coin has not at any time been more below its standard weight than it is at present. But though very much defaced, its value has been kept up by that of the gold coin, for which it is exchanged. For though, before the late recoinage, the gold coin was a good deal defaced too, it was less so than the silver. In 1695, on the contrary, the value of the silver coin was not kept up by the gold coin; a guinea then commonly exchanging for thirty shillings of the worn and clipt silver. Before the late recoinage of the gold, the price of silver bullion was seldom higher than five shillings and sevenpence an ounce, which is but fivepence above the mint price. But in 1695, the common price of silver bullion was six shillings and fivepence an ounce,[17] which is fifteen pence above the mint price. Even before the late recoinage of the gold, therefore, the coin, gold and silver together, when compared with silver bullion, was not supposed to be more than eight per cent below its standard value. In 1695, on the contrary, it had been supposed to be near five-and-twenty per cent. below that value. But in the beginning of the present century, that is, immediately after the great recoinage in King William's time, the greater part of the current silver coin must have been still nearer to its standard weight than it is at present. In the course of the present century, too, there has been no great public calamity, such as a civil war, which could rather discourage, or interrupt the interior commerce of the country. And though the bounty which has taken place through the greater part of this century, must always raise the price of corn somewhat higher than it otherwise would be in the actual state of tillage; yet, as in the course of this century, the bounty has had full time to produce all the good effects commonly imputed to it to encourage tillage, and thereby to increase the quantity of corn in the home market, it may, open the principles of a system which I shall explain and examine hereafter, be supposed to have done something to lower the price of that commodity the one way, as well as to raise it the other. It is by many people supposed to have done more. In the sixty-four years of the present century, accordingly, the average price of the quarter of nine bushels of the best wheat, at Windsor market, appears, by the accounts of Eton college, to have been L.2 : 0 : 6-10/32, which is about ten shillings and sixpence, or more than five-and-twenty per cent. cheaper than it had been during the sixty-four last years of the last century; and about nine shillings and sixpence cheaper than is had been during the sixteen years preceding 1636, when the discovery of the abundant mines of America may be supposed to have produced its full effect; and about one shilling cheaper than it had been in the twenty-six years preceding 1620, before that discovery can well be supposed to have produced its full effect. According to this account, the average price of middle wheat, during these sixty-four first years of the present century, comes out to have been about thirty-two shillings the quarter of eight bushels. The value of silver, therefore, seems to have risen somewhat in proportion to that of corn during the course of the present century, and it had probably begun to do so even some time before the end of the last. In 1687, the price of the quarter of nine bushels of the best wheat, at Windsor market, was L.1 : 5 : 2, the lowest price at which it had ever been from 1595. In 1688, Mr Gregory King, a man famous for his knowledge in matters of this kind, estimated the average price of wheat, in years of moderate plenty, to be to the grower 3s. 6d. the bushel, or eight-and-twenty shillings the quarter. The grower's price I understand to be the same with what is sometimes called the contract price, or the price at which a farmer contracts for a certain number of years to deliver a certain quantity of corn to a dealer. As a contract of this kind saves the farmer the expense and trouble of marketing, the contract price is generally lower than what is supposed to be the average market price. Mr King had judged eight-and-twenty shillings the quarter to be at that time the ordinary contract price in years of moderate plenty. Before the scarcity occasioned by the late extraordinary course of bad seasons, it was, I have been assured, the ordinary contract price in all common years. In 1688 was granted the parliamentary bounty upon the exportation of corn. The country gentlemen, who then composed a still greater proportion of the legislature than they do at present, had felt that the money price of corn was falling. The bounty was an expedient to raise it artificially to the high price at which it had frequently been sold in times of Charles I. and II. It was to take place, therefore, till wheat was so high as forty-eight shillings the quarter; that is, twenty shillings, or 5-7ths dearer than Mr King had, in that very year, estimated the grower's price to be in times of moderate plenty. If his calculations deserve any part of the reputation which they have obtained very universally, eight-and-forty shillings the quarter was a price which, without some such expedient as the bounty, could not at that time be expected, except in years of extraordinary scarcity. But the government of King William was not then fully settled. It was in no condition to refuse any thing to the country gentlemen, from whom it was, at that very time, soliciting the first establishment of the annual land-tax. The value of silver, therefore, in proportion to that of corn, had probably risen somewhat before the end of the last century, and it seems to have continued to do so during the course of the greater part of the present, though the necessary operation of the bounty must have hindered that time from being so sensible as it otherwise would have been in the actual state of tillage. In plentiful years, the bounty, by occasioning an extraordinary exportation, necessarily raises the price of corn above what it otherwise would be in those years. To encourage tillage, by keeping up the price of corn, even in the most plentiful years, was the avowed end of the institution. In years of great scarcity, indeed, the bounty has generally been suspended. It must, however, have had some effect upon the prices of many of these years. By the extraordinary exportation which it occasions in years of plenty, it must frequently hinder the plenty of one year from compensating the scarcity of another. Both in years of plenty and in years of scarcity, therefore, the bounty raises the price of corn above what it naturally would be in the actual state of tillage. If during the sixty-four first years of the present century, therefore, the average price has been lower than during the sixty-four last years of the last century, it must, in the same state of tillage, have been much more so, had it not been for this operation of the bounty. But, without the bounty, it maybe said the state of tillage would not have been the same. What may have been the effects of this institution upon the agriculture of the country, I shall endeavour to explain hereafter, when I come to treat particularly of bounties. I shall only observe at present, that this rise in the value of silver, in proportion to that of corn, has not been peculiar to England. It has been observed to have taken place in France during the same period, and nearly in the same proportion, too, by three very faithful, diligent, and laborious collectors of the prices of corn, Mr Dupré de St Maur, Mr Messance, and the author of the Essay on the Police of Grain. But in France, till 1764, the exportation of grain was by law prohibited; and it is somewhat difficult to suppose, that nearly the same diminution of price which took place in one country, notwithstanding this prohibition, should, in another, be owing to the extraordinary encouragement given to exportation. It would be more proper, perhaps, to consider this variation in the average money price of corn as the effect rather of some gradual rise in the real value of silver in the European market, than of any fall in the real average value of corn. Corn, it has already been observed, is, at distant periods of time, a more accurate measure of value than either silver or, perhaps, any other commodity. When, after the discovery of the abundant mines of America, corn rose to three and four times its former money price, this change was universally ascribed, not to any rise in the real value of corn, but to a fall in the real value of silver. If, during the sixty-four first years of the present century, therefore, the average money price of corn has fallen somewhat below what it had been during the greater part of the last century, we should, in the same manner, impute this change, not to any fall in the real value of corn, but to some rise in the real value of silver in the European market. The high price of corn during these ten or twelve years past, indeed, has occasioned a suspicion that the real value of silver still continues to fall in the European market. This high price of corn, however, seems evidently to have been the effect of the extraordinary unfavourableness of the seasons, and ought, therefore, to be regarded, not as a permanent, but as a transitory and occasional event. The seasons, for these ten or twelve years past, have been unfavourable through the greater part of Europe; and the disorders of Poland have very much increased the scarcity in all those countries, which, in dear years, used to be supplied from that market. So long a course of bad seasons, though not a very common event, is by no means a singular one; and whoever has inquired much into the history of the prices of corn in former times, will be at no loss to recollect several other examples of the same kind. Ten years of extraordinary scarcity, besides, are not more wonderful than ten years of extraordinary plenty. The low price of corn, from 1741 to 1750, both inclusive, may very well be set in opposition to its high price during these last eight or ten years. From 1741 to 1750, the average price of the quarter of nine bushels of the best wheat, at Windsor market, it appears from the accounts of Eton College, was only L.1 : 13 : 9-4/5, which is nearly 6s. 3d. below the average price of the sixty-four first years of the present century. The average price of the quarter of eight bushels of middle wheat comes out, according to this account, to have been, during these ten years, only L.1 : 6 : 8. Between 1741 and 1750, however, the bounty must have hindered the price of corn from falling so low in the home market as it naturally would have done. During these ten years, the quantity of all sorts of grain exported, it appears from the custom-house books, amounted to no less than 8,029,156 quarters, one bushel. The bounty paid for this amounted to L.1,514,962 : 17 : 4-1/2. In 1749, accordingly, Mr Pelham, at that time prime minister, observed to the house of commons, that, for the three years preceding, a very extraordinary sum had been paid as bounty for the exportation of corn. He had good reason to make this observation, and in the following year he might have had still better. In that single year, the bounty paid amounted to no less than L.324,176 : 10 : 6.[18] It is unnecessary to observe how much this forced exportation must have raised the price of corn above what it otherwise would have been in the home market. At the end of the accounts annexed to this chapter the reader will find the particular account of those ten years separated from the rest. He will find there, too, the particular account of the preceding ten years, of which the average is likewise below, though not so much below, the general average of the sixty-four first years of the century. The year 1740, however, was a year of extraordinary scarcity. These twenty years preceding 1750 may very well be set in opposition to the twenty preceding 1770. As the former were a good deal below the general average of the century, notwithstanding the intervention of one or two dear years; so the latter have been a good deal above it, notwithstanding the intervention of one or two cheap ones, of 1759, for example. If the former have not been as much below the general average as the latter have been above it, we ought probably to impute it to the bounty. The change has evidently been too sudden to be ascribed to any change in the value of silver, which is always slow and gradual. The suddenness of the effect can be accounted for only by a cause which can operate suddenly, the accidental variations of the seasons. The money price of labour in Great Britain has, indeed, risen during the course of the present century. This, however, seems to be the effect, not so much of any diminution in the value of silver in the European market, as of an increase in the demand for labour in Great Britain, arising from the great, and almost universal prosperity of the country. In France, a country not altogether so prosperous, the money price of labour has, since the middle of the last century, been observed to sink gradually with the average money price of corn. Both in the last century and in the present, the day wages of common labour are there said to have been pretty uniformly about the twentieth part of the average price of the septier of wheat; a measure which contains a little more than four Winchester bushels. In Great Britain, the real recompence of labour, it has already been shewn, the real quantities of the necessaries and conveniencies of life which are given to the labourer, has increased considerably during the course of the present century. The rise in its money price seems to have been the effect, not of any diminution of the value of silver in the general market of Europe, but of a rise in the real price of labour, in the particular market of Great Britain, owing to the peculiarly happy circumstances of the country. For some time after the first discovery of America, silver would continue to sell at its former, or not much below its former price. The profits of mining would for some time be very great, and much above their natural rate. Those who imported that metal into Europe, however, would soon find that the whole annual importation could not be disposed of at this high price. Silver would gradually exchange for a smaller and a smaller quantity of goods. Its price would sink gradually lower and lower, till it fell to its natural price; or to what was just sufficient to pay, according to their natural rates, the wages of the labour, the profits of the stock, and the rent of the land, which must be paid in order to bring it from the mine to the market. In the greater part of the silver mines of Peru, the tax of the king of Spain, amounting to a tenth of the gross produce, eats up, it has already been observed, the whole rent of the land. This tax was originally a half; it soon afterwards fell to a third, then to a fifth, and at last to a tenth, at which rate it still continues. In the greater part of the silver mines of Peru, this, it seems, is all that remains, after replacing the stock of the undertaker of the work, together with its ordinary profits; and it seems to be universally acknowledged that these profits, which were once very high, are now as low as they can well be, consistently with carrying on the works. The tax of the king of Spain was reduced to a fifth of the registered silver in 1504[19], one-and-forty years before 1545, the date of the the discovery of the mines of Potosi. In the course of ninety years, or before 1636, these mines, the most fertile in all America, had time sufficient to produce their full effect, or to reduce the value of silver in the European market as low as it could well fall, while it continued to pay this tax to the king of Spain. Ninety years is time sufficient to reduce any commodity, of which there is no monopoly, to its natural price, or to the lowest price at which, while it pays a particular tax, it can continue to be sold for any considerable time together. The price of silver in the European market might, perhaps, have fallen still lower, and it might have become necessary either to reduce the tax upon it, not only to one-tenth, as in 1736, but to one twentieth, in the same manner as that upon gold, or to give up working the greater part of the American mines which are now wrought. The gradual increase of the demand for silver, or the gradual enlargement of the market for the produce of the silver mines of America, is probably the cause which has prevented this from happening, and which has not only kept up the value of silver in the European market, but has perhaps even raised it somewhat higher than it was about the middle of the last century. Since the first discovery of America, the market for the produce of its silver mines has been growing gradually more and more extensive. First, the market of Europe has become gradually more and more extensive. Since the discovery of America, the greater part of Europe has been much improved. England, Holland, France, and Germany; even Sweden, Denmark, and Russia, have all advanced considerably, both in agriculture and in manufactures. Italy seems not to have gone backwards. The fall of Italy preceded the conquest of Peru. Since that time it seems rather to have recovered a little. Spain and Portugal, indeed, are supposed to have gone backwards. Portugal, however, is but a very small part of Europe, and the declension of Spain is not, perhaps, so great as is commonly imagined. In the beginning of the sixteenth century, Spain was a very poor country, even in comparison with France, which has been so much improved since that time. It was the well known remark of the emperor Charles V. who had travelled so frequently through both countries, that every thing abounded in France, but that every thing was wanting in Spain. The increasing produce of the agriculture and manufactures of Europe must necessarily have required a gradual increase in the quantity of silver coin to circulate it; and the increasing number of wealthy individuals must have required the like increase in the quantity of their plate and other ornaments of silver. Secondly, America is itself a new market, for the produce of its own silver mines; and as its advances in agriculture, industry, and population, are much more rapid than those of the most thriving countries in Europe, its demand must increase much more rapidly. The English colonies are altogether a new market, which, partly for coin, and partly for plate, requires a continual augmenting supply of silver through a great continent where there never was any demand before. The greater part, too, of the Spanish and Portuguese colonies, are altogether new markets. New Granada, the Yucatan, Paraguay, and the Brazils, were, before discovered by the Europeans, inhabited by savage nations, who had neither arts nor agriculture. A considerable degree of both has now been introduced into all of them. Even Mexico and Peru, though they cannot be considered as altogether new markets, are certainly much more extensive ones than they ever were before. After all the wonderful tales which have been published concerning the splendid state of those countries in ancient times, whoever reads, with any degree of sober judgment, the history of their first discovery and conquest, will evidently discern that, in arts, agriculture, and commerce, their inhabitants were much more ignorant than the Tartars of the Ukraine are at present. Even the Peruvians, the more civilized nation of the two, though they made use of gold and silver as ornaments, had no coined money of any kind. Their whole commerce was carried on by barter, and there was accordingly scarce any division of labour among them. Those who cultivated the ground, were obliged to build their own houses, to make their own household furniture, their own clothes, shoes, and instruments of agriculture. The few artificers among them are said to have been all maintained by the sovereign, the nobles, and the priests, and were probably their servants or slaves. All the ancient arts of Mexico and Peru have never furnished one single manufacture to Europe. The Spanish armies, though they scarce ever exceeded five hundred men, and frequently did not amount to half that number, found almost everywhere great difficulty in procuring subsistence. The famines which they are said to have occasioned almost wherever they went, in countries, too, which at the same time are represented as very populous and well cultivated, sufficiently demonstrate that the story of this populousness and high cultivation is in a great measure fabulous. The Spanish colonies are under a government in many respects less favourable to agriculture, improvement, and population, than that of the English colonies. They seem, however, to be advancing in all those much more rapidly than any country in Europe. In a fertile soil and happy climate, the great abundance and cheapness of land, a circumstance common to all new colonies, is, it seems, so great an advantage, as to compensate many defects in civil government. Frezier, who visited Peru in 1713, represents Lima as containing between twenty-five and twenty-eight thousand inhabitants. Ulloa, who resided in the same country between 1740 and 1746, represents it as containing more than fifty thousand. The difference in their accounts of the populousness of several other principal towns of Chili and Peru is nearly the same; and as there seems to be no reason to doubt of the good information of either, it marks an increase which is scarce inferior to that of the English colonies. America, therefore, is a new market for the produce of its own silver mines, of which the demand must increase much more rapidly than that of the most thriving country in Europe. Thirdly, the East Indies is another market for the produce of the silver mines of America, and a market which, from the time of the first discovery of those mines, has been continually taking off a greater and a greater quantity of silver. Since that time, the direct trade between America and the East Indies, which is carried on by means of the Acapulco ships, has been continually augmenting, and the indirect intercourse by the way of Europe has been augmenting in a still greater proportion. During the sixteenth century, the Portuguese were the only European nation who carried on any regular trade to the East Indies. In the last years of that century, the Dutch began to encroach upon this monopoly, and in a few years expelled them from their principal settlements in India. During the greater part of the last century, those two nations divided the most considerable part of the East India trade between them; the trade of the Dutch continually augmenting in a still greater proportion than that of the Portuguese declined. The English and French carried on some trade with India in the last century, but it has been greatly augmented in the course of the present. The East India trade of the Swedes and Danes began in the course of the present century. Even the Muscovites now trade regularly with China, by a sort of caravans which go over land through Siberia and Tartary to Pekin. The East India trade of all these nations, if we except that of the French, which the last war had well nigh annihilated, has been almost continually augmenting. The increasing consumptions of East India goods in Europe is, it seems, so great, as to afford a gradual increase of employment to them all. Tea, for example, was a drug very little used in Europe, before the middle of the last century. At present, the value of the tea annually imported by the English East India company, for the use of their own countrymen, amounts to more than a million and a half a year; and even this is not enough; a great deal more being constantly smuggled into the country from the ports of Holland, from Gottenburgh in Sweden, and from the coast of France, too, as long as the French East India company was in prosperity. The consumption of the porcelain of China, of the spiceries of the Moluccas, of the piece goods of Bengal, and of innumerable other articles, has increased very nearly in a like proportion. The tonnage, accordingly, of all the European shipping employed in the East India trade, at any one time during the last century, was not, perhaps, much greater than that of the English East India company before the late reduction of their shipping. But in the East Indies, particularly in China and Indostan, the value of the precious metals, when the Europeans first began to trade to those countries, was much higher than in Europe; and it still continues to be so. In rice countries, which generally yield two, sometimes three crops in the year, each of them more plentiful than any common crop of corn, the abundance of food must be much greater than in any corn country of equal extent. Such countries are accordingly much more populous. In them, too, the rich, having a greater superabundance of food to dispose of beyond what they themselves can consume, have the means of purchasing a much greater quantity of the labour of other people. The retinue of a grandee in China or Indostan accordingly is, by all accounts, much more numerous and splendid than that of the richest subjects in Europe. The same superabundance of food, of which they have the disposal, enables them to give a greater quantity of it for all those singular and rare productions which nature furnishes but in very small quantities; such as the precious metals and the precious stones, the great objects of the competition of the rich. Though the mines, therefore, which supplied the Indian market, had been as abundant as those which supplied the European, such commodities would naturally exchange for a greater quantity of food in India than in Europe. But the mines which supplied the Indian market with the precious metals seem to have been a good deal less abundant, and those which supplied it with the precious stones a good deal more so, than the mines which supplied the European. The precious metals, therefore, would naturally exchange in India for a somewhat greater quantity of the precious stones, and for a much greater quantity of food than in Europe. The money price of diamonds, the greatest of all superfluities, would be somewhat lower, and that of food, the first of all necessaries, a great deal lower in the one country than in the other. But the real price of labour, the real quantity of the necessaries of life which is given to the labourer, it has already been observed, is lower both in China and Indostan, the two great markets of India, than it is through the greater part of Europe. The wages of the labourer will there purchase a smaller quantity of food: and as the money price of food is much lower in India than in Europe, the money price of labour is there lower upon a double account; upon account both of the small quantity of food which it will purchase, and of the low price of that food. But in countries of equal art and industry, the money price of the greater part of manufactures will be in proportion to the money price of labour; and in manufacturing art and industry, China and Indostan, though inferior, seem not to be much inferior to any part of Europe. The money price of the the greater part of manufactures, therefore, will naturally be much lower in those great empires than it is anywhere in Europe. Through the greater part of Europe, too, the expense of land-carriage increases very much both the and real and nominal price of most manufactures. It costs more labour, and therefore more money, to bring first the materials, and afterwards the complete manufacture to market. In China and Indostan, the extent and variety of inland navigations save the greater part of this labour, and consequently of this money, and thereby reduce still lower both the real and the nominal price of the greater part of their manufactures. Upon all these accounts, the precious metals are a commodity which it always has been, and still continues to be, extremely advantageous to carry from Europe to India. There is scarce any commodity which brings a better price there; or which, in proportion to the quantity of labour and commodities which it costs in Europe, will purchase or command a greater quantity of labour and commodities in India. It is more advantageous, too, to carry silver thither than gold; because in China, and the greater part of the other markets of India, the proportion between fine silver and fine gold is but as ten, or at most as twelve to one; whereas in Europe it is as fourteen or fifteen to one. In China, and the greater part of the other markets of India, ten, or at most twelve ounces of silver, will purchase an ounce of gold; in Europe, it requires from fourteen to fifteen ounces. In the cargoes, therefore, of the greater part of European ships which sail to India, silver has generally been one of the most valuable articles. It is the most valuable article in the Acapulco ships which sail to Manilla. The silver of the new continent seems, in this manner, to be one of the principal commodities by which the commerce between the two extremities of the old one is carried on; and it is by means of it, in a great measure, that those distant parts of the world are connected with one another. In order to supply so very widely extended a market, the quantity of silver annually brought from the mines must not only be sufficient to support that continued increase, both of coin and of plate, which is required in all thriving countries; but to repair that continual waste and consumption of silver which takes place in all countries where that metal is used. The continual consumption of the precious metals in coin by wearing, and in plate both by wearing and cleaning, is very sensible; and in commodities of which the use is so very widely extended, would alone require a very great annual supply. The consumption of those metals in some particular manufactures, though it may not perhaps be greater upon the whole than this gradual consumption, is, however, much more sensible, as it is much more rapid. In the manufactures of Birmingham alone, the quantity of gold and silver annually employed in gilding and plating, and thereby disqualified from ever afterwards appearing in the shape of those metals, is said to amount to more than fifty thousand pounds sterling. We may from thence form some notion how great must be the annual consumption in all the different parts of the world, either in manufactures of the same kind with those of Birmingham, or in laces, embroideries, gold and silver stuffs, the gilding of books, furniture, &c. A considerable quantity, too, must be annually lost in transporting those metals from one place to another both by sea and by land. In the greater part of the governments of Asia, besides, the almost universal custom of concealing treasures in the bowels of the earth, of which the knowledge frequently dies with the person who makes the concealment, must occasion the loss of a still greater quantity. The quantity of gold and silver imported at both Cadiz and Lisbon (including not only what comes under register, but what may be supposed to be smuggled) amounts, according to the best accounts, to about six millions sterling a-year. According to Mr Meggens[20], the annual importation of the precious metals into Spain, at an average of six years, viz. from 1748 to 1753, both inclusive, and into Portugal, at an average of seven years, viz. from 1747 to 1753, both inclusive, amounted in silver to 1,101,107 pounds weight, and in gold to 49,940 pounds weight. The silver, at sixty-two shillings the pound troy, amounts to L.3,413,431 : 10s. sterling. The gold, at forty-four guineas and a half the pound troy, amounts to L.2,333,446 : 14s. sterling. Both together amount to L.5,746,878 : 4s. sterling. The account of what was imported under register, he assures us, is exact. He gives us the detail of the particular places from which the gold and silver were brought, and of the particular quantity of each metal, which, according to the register, each of them afforded. He makes an allowance, too, for the quantity of each metal which, he supposes, may have been smuggled. The great experience of this judicious merchant renders his opinion of considerable weight. According to the eloquent, and sometimes well-informed, author of the Philosophical and Political History of the Establishment of the Europeans in the two Indies, the annual importation of registered gold and silver into Spain, at an average of eleven years, viz. from 1754 to 1764, both inclusive, amounted to 13,984,185-3/5 piastres of ten reals. On account of what may have been smuggled, however, the whole annual importation, he supposes, may have amounted to seventeen millions of piastres, which, at 4s. 6d. the piastre, is equal to L.3,825,000 sterling. He gives the detail, too, of the particular places from which the gold and silver were brought, and of the particular quantities of each metal, which according to the register, each of them afforded. He informs us, too, that if we were to judge of the quantity of gold annually imported from the Brazils to Lisbon, by the amount of the tax paid to the king of Portugal, which it seems, is one-fifth of the standard metal, we might value it at eighteen millions of cruzadoes, or forty-five millions of French livres, equal to about twenty millions sterling. On account of what may have been smuggled, however, we may safely, he says, add to this sum an eighth more, or L.250,000 sterling, so that the whole will amount to L.2,250,000 sterling. According to this account, therefore, the whole annual importation of the precious metals into both Spain and Portugal, amounts to about L.6,075,000 sterling. Several other very well authenticated, though manuscript accounts, I have been assured, agree in making this whole annual importation amount, at an average, to about six millions sterling; sometimes a little more, sometimes a little less. The annual importation of the precious metals into Cadiz and Lisbon, indeed, is not equal to the whole annual produce of the mines of America. Some part is sent annually by the Acapulco ships to Manilla; some part is employed in a contraband trade, which the Spanish colonies carry on with those of other European nations; and some part, no doubt, remains in the country. The mines of America, besides, are by no means the only gold and silver mines in the world. They, are, however, by far the most abundant. The produce of all the other mines which are known is insignificant, it is acknowledged, in comparison with their's; and the far greater part of their produce, it is likewise acknowledged, is annually imported into Cadiz and Lisbon. But the consumption of Birmingham alone, at the rate of fifty thousand pounds a-year, is equal to the hundred-and-twentieth part of this annual importation, at the rate of six millions a-year. The whole annual consumption of gold and silver, therefore, in all the different countries of the world where those metals are used, may, perhaps, be nearly equal to the whole annual produce. The remainder may be no more than sufficient to supply the increasing demand of all thriving countries. It may even have fallen so far short of this demand, as somewhat to raise the price of those metals in the European market. The quantity of brass and iron annually brought from the mine to the market, is out of all proportion greater than that of gold and silver. We do not, however, upon this account, imagine that those coarse metals are likely to multiply beyond the demand, or to become gradually cheaper and cheaper. Why should we imagine that the precious metals are likely to do so? The course metals, indeed, though harder, are put to much harder uses, and, as they are of less value, less care is employed in their preservation. The precious metals, however, are not necessarily immortal any more than they, but are liable, too, to be lost, wasted, and consumed, in a great variety of ways. The price of all metals, though liable to slow and gradual variations, varies less from year to year than that of almost any other part of the rude produce of land: and the price of the precious metals is even less liable to sudden variations than that of the coarse ones. The durableness of metals is the foundation of this extraordinary steadiness of price. The corn which was brought to market last year will be all, or almost all, consumed, long before the end of this year. But some part of the iron which was brought from the mine two or three hundred years ago, may be still in use, and, perhaps, some part of the gold which was brought from it two or three thousand years ago. The different masses of corn, which, in different years, must supply the consumption of the world, will always be nearly in proportion to the respective produce of those different years. But the proportion between the different masses of iron which may be in use in two different years, will be very little affected by any accidental difference in the produce of the iron mines of those two years; and the proportion between the masses of gold will be still less affected by any such difference in the produce of the gold mines. Though the produce of the greater part of metallic mines, therefore, varies, perhaps, still more from year to year than that of the greater part of corn fields, these variations have not the same effect upon the price of the species of commodities as upon that of the other. _Variations in the Proportion between the respective Values of Gold and Silver._ Before the discovery of the mines of America, the value of fine gold to fine silver was regulated in the different mines of Europe, between the proportions of one to ten and one to twelve; that is, an ounce of fine gold was supposed to be worth from ten to twelve ounces of fine silver. About the middle of the last century, it came to be regulated, between the proportions of one to fourteen and one to fifteen; that is, an ounce of fine gold came to be supposed worth between fourteen and fifteen ounces of fine silver. Gold rose in its nominal value, or in the quantity of silver which was given for it. Both metals sunk in their real value, or in the quantity of labour which they could purchase; but silver sunk more than gold. Though both the gold and silver mines of America exceeded in fertility all those which had ever been known before, the fertility of the silver mines had, it seems, been proportionally still greater than that of the gold ones. The great quantities of silver carried annually from Europe to India, have, in some of of the English settlements, gradually reduced the value of that metal in proportion to gold. In the mint of Calcutta, an ounce of fine gold is supposed to be worth fifteen ounces of fine silver, in the same manner as in Europe. It is in the mint, perhaps, rated too high for the value which it bears in the market of Bengal. In China, the proportion of gold to silver still continues as one to ten, or one to twelve. In Japan, it is said to be as one to eight. The proportion between the quantities of gold and silver annually imported into Europe, according to Mr Meggens' account, is as one to twenty-two nearly; that is, for one ounce of gold there are imported a little more than twenty-two ounces of silver. The great quantity of silver sent annually to the East Indies reduces, he supposes, the quantities of those metals which remain in Europe to the proportion of one to fourteen or fifteen, the proportion of their values. The proportion between their values, he seems to think, must necessarily be the same as that between their quantities, and would therefore be as one to twenty-two, were it not for this greater exportation of silver. But the ordinary proportion between the respective values of two commodities is not necessarily the same as that between the quantities of them which are commonly in the market. The price of an ox, reckoned at ten guineas, is about three score times the price of a lamb, reckoned at 3s. 6d. It would be absurd, however, to infer from thence, that there are commonly in the market three score lambs for one ox; and it would be just as absurd to infer, because an ounce of gold will commonly purchase from fourteen or fifteen ounces of silver, that there are commonly in the market only fourteen or fifteen ounces of silver for one ounce of gold. The quantity of silver commonly in the market, it is probable, is much greater in proportion to that of gold, than the value of a certain quantity of gold is to that of an equal quantity of silver. The whole quantity of a cheap commodity brought to market is commonly not only greater, but of greater value, than the whole quantity of a dear one. The whole quantity of bread annually brought to market, is not only greater, but of greater value, than the whole quantity of butcher's meat; the whole quantity of butcher's meat, than the whole quantity of poultry; and the whole quantity of poultry, than the whole quantity of wild fowl. There are so many more purchasers for the cheap than for the dear commodity, that, not only a greater quantity of it, but a greater value can commonly be disposed of. The whole quantity, therefore, of the cheap commodity, must commonly be greater in proportion to the whole quantity of the dear one, than the value of a certain quantity of the dear one, is to the value of an equal quantity of the cheap one. When we compare the precious metals with one another, silver is a cheap, and gold a dear commodity. We ought naturally to expect, therefore, that there should always be in the market, not only a greater quantity, but a greater value of silver than of gold. Let any man, who has a little of both, compare his own silver with his gold plate, and he will probably find, that not only the quantity, but the value of the former, greatly exceeds that of the latter. Many people, besides, have a good deal of silver who have no gold plate, which, even with those who have it, is generally confined to watch-cases, snuff-boxes, and such like trinkets, of which the whole amount is seldom of great value. In the British coin, indeed, the value of the gold preponderates greatly, but it is not so in that of all countries. In the coin of some countries, the value of the two metals is nearly equal. In the Scotch coin, before the union with England, the gold preponderated very little, though it did somewhat[21], as it appears by the accounts of the mint. In the coin of many countries the silver preponderates. In France, the largest sums are commonly paid in that metal, and it in there difficult to get more gold than what is necessary to carry about in your pocket. The superior value, however, of the silver plate above that of the gold, which takes place in all countries, will much more than compensate the preponderancy of the gold coin above the silver, which takes place only in some countries. Though, in one sense of the word, silver always has been, and probably always will be, much cheaper than gold; yet, in another sense, gold may perhaps, in the present state of the Spanish market, be said to be somewhat cheaper than silver. A commodity may be said to be dear or cheap not only according to the absolute greatness or smallness of its usual price, but according as that price is more or less above the lowest for which it is possible to bring it to market for any considerable time together. This lowest price is that which barely replaces, with a moderate profit, the stock which must be employed in bringing of the commodity thither. It is the price which affords nothing to the landlord, of which rent makes not any component part, but which resolves itself altogether into wages and profit. But, in the present state of the Spanish market, gold is certainly somewhat nearer to this lowest price than silver. The tax of the king of Spain upon gold is only one-twentieth part of the standard metal, or five per cent.; whereas his tax upon silver amounts to one-tenth part of it, or to ten per cent. In these taxes, too, it has already been observed, consists the whole rent of the greater part of the gold and silver mines of Spanish America; and that upon gold is still worse paid than that upon silver. The profits of the undertakers of gold mines, too, as they more rarely make a fortune, must, in general, be still more moderate than those of the undertakers of silver mines. The price of Spanish gold, therefore, as it affords both less rent and less profit, must, in the Spanish market, be somewhat nearer to the lowest price for which it is possible to bring it thither, than the price of Spanish silver. When all expenses are computed, the whole quantity of the one metal, it would seem, cannot, in the Spanish market, be disposed of so advantageously as the whole quantity of the other. The tax, indeed, of the king of Portugal upon the gold of the Brazils, is the same with the ancient tax of the king of Spain upon the silver of Mexico and Peru; or one-fifth part of the standard metal. It may therefore be uncertain, whether, to the general market of Europe, the whole mass of American gold comes at a price nearer to the lowest for which it is possible to bring it thither, than the whole mass of American silver. The price of diamonds and other precious stones may, perhaps, be still nearer to the lowest price at which it is possible to bring them to market, than even the price of gold. Though it is not very probable that any part of a tax, which is not only imposed upon one of the most proper subjects of taxation, a mere luxury and superfluity, but which affords so very important a revenue as the tax upon silver, will ever be given up us long as it is possible to pay it; yet the same impossibility of paying it, which, in 1736, made it necessary to reduce it from one-fifth to one-tenth, may in time make it necessary to reduce it still further; in the same manner as it made it necessary to reduce the tax upon gold to one-twentieth. That the silver mines of Spanish America, like all other mines, become gradually more expensive in the working, on account of the greater depths at which it is necessary to carry on the works, and of the greater expense of drawing out the water, and of supplying them with fresh air at those depths, is acknowledged by every body who has inquired into the state of those mines. These causes, which are equivalent to a growing scarcity of silver (for a commodity may be said to grow scarcer when it becomes more difficult and expensive to collect a certain quantity of it), must, in time, produce one or other of the three following events: The increase of the expense must either, first, be compensated altogether by a proportionable increase in the price of the metal; or, secondly, it must be compensated altogether by a proportionable diminution of the tax upon silver; or thirdly, it must be compensated partly by the one and partly by the other of those two expedients. This third event is very possible. As gold rose in its price in proportion to silver, notwithstanding a great diminution of the tax upon gold, so silver might rise in its price in proportion to labour and commodities, notwithstanding an equal diminution of the tax upon silver. Such successive reductions of the tax, however, though they may not prevent altogether, must certainly retard, more or less, the rise of the value of silver in the European market. In consequence of such reductions, many mines may be wrought which could not be wrought before, because they could not afford to pay the old tax; and the quantity of silver annually brought to market, must always be somewhat greater, and, therefore, the value of any given quantity somewhat less, than it otherwise would have been. In consequence of the reduction in 1736, the value of silver in the European market, though it may not at this day be lower than before that reduction, is, probably, at least ten per cent. lower than it would have been, had the court of Spain continued to exact the old tax. That, notwithstanding this reduction, the value of silver has, during the course of the present century, begun to rise somewhat in the European market, the facts and arguments which have been alleged above, dispose me to believe, or more properly to suspect and conjecture; for the best opinion which I can form upon this subject, scarce, perhaps, deserves the name of belief. The rise, indeed, supposing there has been any, has hitherto been so very small, that after all that has been said, it may, perhaps, appear to many people uncertain, not only whether this event has actually taken place, but whether the contrary may not have taken place, or whether the value of silver may not still continue to fall in the European market. It must be observed, however, that whatever may be the supposed annual importation of gold and silver, there must be a certain period at which the annual consumption of those metals will be equal to that annual importation. Their consumption must increase as their mass increases, or rather in a much greater proportion. As their mass increases, their value diminishes. They are more used, and less cared for, and their consumption consequently increases in a greater proportion than their mass. After a certain period, therefore, the annual consumption of these metals must, in this manner, become equal to their annual importation, provided that importation is not continually increasing; which, in the present times, is not supposed to be the case. If, when the annual consumption has become equal to the annual importation, the annual importation should gradually diminish, the annual consumption may, for some time, exceed the annual importation. The mass of those metals may gradually and insensibly diminish, and their value gradually and insensibly rise, till the annual importation becoming again stationary, the annual consumption will gradually and insensibly accommodate itself to what that annual importation can maintain. _Grounds of the suspicion that the Value of Silver still continues to decrease._ The increase of the wealth of Europe, and the popular action, that as the quantity of the precious metals naturally increases with the increase of wealth, so their value diminishes as their quantity increases, may, perhaps, dispose many people to believe that their value still continues to fall in the European market; and the still gradually increasing price of many parts of the rude produce of land may confirm them still farther in this opinion. That that increase in the quantity of the precious metals, which arises in any country from the increase of wealth, has no tendency to diminish their value, I have endeavoured to shew already. Gold and silver naturally resort to a rich country, for the same reason that all sorts of luxuries and curiosities resort to it; not because they are cheaper there than in poorer countries, but because they are dearer, or because a better price is given for them. It is the superiority of price which attracts them; and as soon as that superiority ceases, they necessarily cease to go thither. If you except corn, and such other vegetables as are raised altogether by human industry, that all other sorts of rude produce, cattle, poultry, game of all kinds, the useful fossils and minerals of the earth, &c. naturally grow dearer, as the society advances in wealth and improvement, I have endeavoured to shew already. Though such commodities, therefore, come to exchange for a greater quantity of silver than before, it will not from thence follow that silver has become really cheaper, or will purchase less labour than before; but that such commodities have become really dearer, or will purchase more labour than before. It is not their nominal price only, but their real price, which rises in the progress of improvement. The rise of their nominal price is the effect, not of any degradation of the value of silver, but of the rise in their real price. _Different Effects of the Progress of Improvement upon three different sorts of rude Produce._ These different sorts of rude produce may be divided into three classes. The first comprehends those which it is scarce in the power of human industry to multiply at all. The second, those which it can multiply in proportion to the demand. The third, those in which the efficacy of industry is either limited or uncertain. In the progress of wealth and improvement, the rent price of the first may rise to any degree of extravagance, and seems not to be limited by any certain boundary. That of the second, though it may rise greatly, has, however, a certain boundary, beyond which it cannot well pass for any considerable time together. That of the third, though its natural tendency is to rise in the progress of improvement, yet in the same degree of improvement it may sometimes happen even to fall, some times to continue the same, and sometimes to rise more or less, according as different accidents render the efforts of human industry, in multiplying this sort of rude produce, more or less successful. _First Sort._--The first sort of rude produce, of which the price rises in the progress of improvement, is that which it is scarce in the power of human industry to multiply at all. It consists in those things which nature produces only in certain quantities, and which being of a very perishable nature, it is impossible to accumulate together the produce of many different seasons. Such are the greater part of rare and singular birds and fishes, many different sorts of game, almost all wild-fowl, all birds of passage in particular, as well as many other things. When wealth, and the luxury which accompanies it, increase, the demand for these is likely to increase with them, and no effort of human industry may be able to increase the supply much beyond what it was before this increase of the demand. The quantity of such commodities, therefore, remaining the same, or nearly the same, while the competition to purchase them is continually increasing, their price may rise to any degree of extravagance, and seems not to be limited by any certain boundary. If woodcocks should become so fashionable as to sell for twenty guineas a-piece, no effort of human industry could increase the number of those brought to market, much beyond what it is at present. The high price paid by the Romans, in the time of their greatest grandeur, for rare birds and fishes, may in this manner easily be accounted for. These prices were not the effects of the low value of silver in those times, but of the high value of such rarities and curiosities as human industry could not multiply at pleasure. The real value of silver was higher at Rome, for some time before, and after the fall of the republic, than it is through the greater part of Europe at present. Three sestertii equal to about sixpence sterling, was the price which the republic paid for the modius or peck of the tithe wheat of Sicily. This price, however, was probably below the average market price, the obligation to deliver their wheat at this rate being considered as a tax upon the Sicilian farmers. When the Romans, therefore, had occasion to order more corn than the tithe of wheat amounted to, they were bound by capitulation to pay for the surplus at the rate of four sestertii, or eightpence sterling the peck; and this had probably been reckoned the moderate and reasonable, that is, the ordinary or average contract price of those times; it is equal to about one-and-twenty shillings the quarter. Eight-and-twenty shillings the quarter was, before the late years of scarcity, the ordinary contract price of English wheat, which in quality is inferior to the Sicilian, and generally sells for a lower price in the European market. The value of silver, therefore, in those ancient times, must have been to its value in the present, as three to four inversely; that is, three ounces of silver would then have purchased the same quantity of labour and commodities which four ounces will do at present. When we read in Pliny, therefore, that Seius[22] bought a white nightingale, as a present for the empress Agrippina, at the price of six thousand sestertii, equal to about fifty pounds of our present money; and that Asinius Celer[23] purchased a surmullet at the price of eight thousand sestertii, equal to about sixty-six pounds thirteen shillings and fourpence of our present money; the extravagance of those prices, how much soever it may surprise us, is apt, notwithstanding, to appear to us about one third less than it really was. Their real price, the quantity of labour and subsistence which was given away for them, was about one-third more than their nominal price is apt to express to us in the present times. Seius gave for the nightingale the command of a quantity or labour and subsistence, equal to what L.66 : 13 : 4d. would purchase in the present times; and Asinius Celer gave for a surmullet the command of a quantity equal to what L.88 : 17 : 9d. would purchase. What occasioned the extravagance of those high prices was, not so much the abundance of silver, as the abundance of labour and subsistence, of which those Romans had the disposal, beyond what was necessary for their own use. The quantity of silver, of which they had the disposal, was a good deal less than what the command of the same quantity of labour and subsistence would have procured to them in the present times. _Second sort._--The second sort of rude produce, of which the price rises in the progress of improvement, is that which human industry can multiply in proportion to the demand. It consists in those useful plants and animals, which, in uncultivated countries, nature produces with such profuse abundance, that they are of little or no value, and which, as cultivation advances, are therefore forced to give place to some more profitable produce. During a long period in the progress of improvement, the quantity of these is continually diminishing, while, at the same time, the demand for them is continually increasing. Their real value, therefore, the real quantity of labour which they will purchase or command, gradually rises, till at last it gets so high as to render them as profitable a produce as any thing else which human industry can raise upon the most fertile and best cultivated land. When it has got so high, it cannot well go higher. If it did, more land and more industry would soon be employed to increase their quantity. When the price of cattle, for example, rises so high, that it is as profitable to cultivate land in order to raise food for them as in order to raise food for man, it cannot well go higher. If it did, more corn land would soon be turned into pasture. The extension of tillage, by diminishing the quantity of wild pasture, diminishes the quantity of butcher's meat, which the country naturally produces without labour or cultivation; and, by increasing the number of those who have either corn, or, what comes to the same thing, the price of corn, to give in exchange for it, increases the demand. The price of butcher's meat, therefore, and, consequently, of cattle, must gradually rise, till it gets so high, that it becomes as profitable to employ the most fertile and best cultivated lands in raising food for them as in raising corn. But it must always be late in the progress of improvement before tillage can be so far extended as to raise the price of cattle to this height; and, till it has got to this height, if the country is advancing at all, their price must be continually rising. There are, perhaps, some parts of Europe in which the price of cattle has not yet got to this height. It had not got to this height in any part of Scotland before the Union. Had the Scotch cattle been always confined to the market of Scotland, in a country in which the quantity of land, which can be applied to no other purpose but the feeding of cattle, is so great in proportion to what can be applied to other purposes, it is scarce possible, perhaps, that their price could ever have risen so high as to render it profitable to cultivate land for the sake of feeding them. In England, the price of cattle, it has already been observed, seems, in the neighbourhood of London, to have got to this height about the beginning of the last century; but it was much later, probably, before it got through the greater part of the remoter counties, in some of which, perhaps, it may scarce yet have got to it. Of all the different substances, however, which compose this second sort of rude produce, cattle is, perhaps, that of which the price, in the progress of improvement, rises first to this height. Till the price of cattle, indeed, has got to this height, it seems scarce possible that the greater part, even of those lands which are capable of the highest cultivation, can be completely cultivated. In all farms too distant from any town to carry manure from it, that is, in the far greater part of those of every extensive country, the quantity of well cultivated land must be in proportion to the quantity of manure which the farm itself produces; and this, again, must be in proportion to the stock of cattle which are maintained upon it. The land is manured, either by pasturing the cattle upon it, or by feeding them in the stable, and from thence carrying out their dung to it. But unless the price of the cattle be sufficient to pay both the rent and profit of cultivated land, the farmer cannot afford to pasture them upon it; and he can still less afford to feed them in the stable. It is with the produce of improved and cultivated land only that cattle can be fed in the stable; because, to collect the scanty and scattered produce of waste and unimproved lands, would require too much labour, and be too expensive. If the price of the cattle, therefore, is not sufficient to pay for the produce of improved and cultivated land, when they are allowed to pasture it, that price will be still less sufficient to pay for that produce, when it must be collected with a good deal of additional labour, and brought into the stable to them. In these circumstances, therefore, no more cattle can with profit be fed in the stable than what are necessary for tillage. But these can never afford manure enough for keeping constantly in good condition all the lands which they are capable of cultivating. What they afford, being insufficient for the whole farm, will naturally be reserved for the lands to which it can be most advantageously or conveniently applied; the most fertile, or those, perhaps, in the neighbourhood of the farm-yard. These, therefore, will be kept constantly in good condition, and fit for tillage. The rest will, the greater part of them, be allowed to lie waste, producing scarce any thing but some miserable pasture, just sufficient to keep alive a few straggling, half-starved cattle; the farm, though much overstocked in proportion to what would be necessary for its complete cultivation, being very frequently overstocked in proportion to its actual produce. A portion of this waste land, however, after having been pastured in this wretched manner for six or seven years together, may be ploughed up, when it will yield, perhaps, a poor crop or two of bad oats, or of some other coarse grain; and then, being entirely exhausted, it must be rested and pastured again as before, and another portion ploughed up, to be in the same manner exhausted and rested again in its turn. Such, accordingly, was the general system of management all over the low country of Scotland before the Union. The lands which were kept constantly well manured and in good condition seldom exceeded a third or fourth part of the whole farm, and sometimes did not amount to a fifth or a sixth part of it. The rest were never manured, but a certain portion of them was in its turn, notwithstanding, regularly cultivated and exhausted. Under this system of management, it is evident, even that part of the lands of Scotland which is capable of good cultivation, could produce but little in comparison of what it may be capable of producing. But how disadvantageous soever this system may appear, yet, before the Union, the low price of cattle seems to have rendered it almost unavoidable. If, notwithstanding a great rise in the price, it still continues to prevail through a considerable part of the country, it is owing in many places, no doubt, to ignorance and attachment to old customs, but, in most places, to the unavoidable obstructions which the natural course of things opposes to the immediate or speedy establishment of a better system: first, to the poverty of the tenants, to their not having yet had time to acquire a stock of cattle sufficient to cultivate their lands more completely, the same rise of price, which would render it advantageous for them to maintain a greater stock, rendering it more difficult for them to acquire it; and, secondly, to their not having yet had time to put their lands in condition to maintain this greater stock properly, supposing they were capable of acquiring it. The increase of stock and the improvement of land are two events which must go hand in hand, and of which the one can nowhere much outrun the other. Without some increase of stock, there can be scarce any improvement of land, but there can be no considerable increase of stock, but in consequence of a considerable improvement of land; because otherwise the land could not maintain it. These natural obstructions to the establishment of a better system, cannot be removed but by a long course of frugality and industry; and half a century or a century more, perhaps, must pass away before the old system, which is wearing out gradually, can be completely abolished through all the different parts of the country. Of all the commercial advantages, however, which Scotland has derived from the Union with England, this rise in the price of cattle is, perhaps, the greatest. It has not only raised the value of all highland estates, but it has, perhaps, been the principal cause of the improvement of the low country. In all new colonies, the great quantity of waste land, which can for many years be applied to no other purpose but the feeding of cattle, soon renders them extremely abundant; and in every thing great cheapness is the necessary consequence of great abundance. Though all the cattle of the European colonies in America were originally carried from Europe, they soon multiplied so much there, and became of so little value, that even horses were allowed to run wild in the woods, without any owner thinking it worth while to claim them. It must be a long time after the first establishment of such colonies, before it can become profitable to feed cattle upon the produce of cultivated land. The same causes, therefore, the want of manure, and the disproportion between the stock employed in cultivation and the land which it is destined to cultivate, are likely to introduce there a system of husbandry, not unlike that which still continues to take place in so many parts of Scotland. Mr Kalm, the Swedish traveller, when he gives an account of the husbandry of some of the English colonies in North America, as he found it in 1749, observes, accordingly, that he can with difficulty discover there the character of the English nation, so well skilled in all the different branches of agriculture. They make scarce any manure for their corn fields, he says; but when one piece of ground has been exhausted by continual cropping, they clear and cultivate another piece of fresh land; and when that is exhausted, proceed to a third. Their cattle are allowed to wander through the woods and other uncultivated grounds, where they are half-starved; having long ago extirpated almost all the annual grasses, by cropping them too early in the spring, before they had time to form their flowers, or to shed their seeds.[24] The annual grasses were, it seems, the best natural grasses in that part of North America; and when the Europeans first settled there, they used to grow very thick, and to rise three or four feet high. A piece of ground which, when he wrote, could not maintain one cow, would in former times, he was assured, have maintained four, each of which would have given four times the quantity of milk which that one was capable of giving. The poorness of the pasture had, in his opinion, occasioned the degradation of their cattle, which degenerated sensibly from one generation to another. They were probably not unlike that stunted breed which was common all over Scotland thirty or forty years ago, and which is now so much mended through the greater part of the low country, not so much by a change of the breed, though that expedient has been employed in some places, as by a more plentiful method of feeding them. Though it is late, therefore, in the progress of improvement, before cattle can bring such a price as to render it profitable to cultivate land for the sake of feeding them; yet of all the different parts which compose this second sort of rude produce, they are perhaps the first which bring this price; because, till they bring it, it seems impossible that improvement can be brought near even to that degree of perfection to which it has arrived in many parts of Europe. As cattle are among the first, so perhaps venison is among the last parts of this sort of rude produce which bring this price. The price of venison in Great Britain, how extravagant soever it may appear, is not near sufficient to compensate the expense of a deer park, as is well known to all those who have had any experience in the feeding of deer. If it was otherwise, the feeding of deer would soon become an article of common farming, in the same manner as the feeding of those small birds, called turdi, was among the ancient Romans. Varro and Columella assure us, that it was a most profitable article. The fattening of ortolans, birds of passage which arrive lean in the country, is said to be so in some parts of France. If venison continues in fashion, and the wealth and luxury of Great Britain increase as they have done for some time past, its price may very probably rise still higher than it is at present. Between that period in the progress of improvement, which brings to its height the price of so necessary an article as cattle, and that which brings to it the price of such a superfluity as venison, there is a very long interval, in the course of which many other sorts of rude produce gradually arrive at their highest price, some sooner and some later, according to different circumstances. Thus, in every farm, the offals of the barn and stable will maintain a certain number of poultry. These, as they are fed with what would otherwise be lost, are a mere save-all; and as they cost the farmer scarce any thing, so he can afford to sell them for very little. Almost all that he gets is pure gain, and their price can scarce be so low as to discourage him from feeding this number. But in countries ill cultivated, and therefore but thinly inhabited, the poultry, which are thus raised without expense, are often fully sufficient to supply the whole demand. In this state of things, therefore, they are often as cheap as butcher's meat, or any other sort of animal food. But the whole quantity of poultry which the farm in this manner produces without expense, must always be much smaller than the whole quantity of butcher's meat which is reared upon it; and in times of wealth and luxury, what is rare, with only nearly equal merit, is always preferred to what is common. As wealth and luxury increase, therefore, in consequence of improvement and cultivation, the price of poultry gradually rises above that of butcher's meat, till at last it gets so high, that it becomes profitable to cultivate land for the sake of feeding them. When it has got to this height, it cannot well go higher. If it did, more land would soon be turned to this purpose. In several provinces of France, the feeding of poultry is considered as a very important article in rural economy, and sufficiently profitable to encourage the farmer to raise a considerable quantity of Indian corn and buckwheat for this purpose. A middling farmer will there sometimes have four hundred fowls in his yard. The feeding of poultry seems scarce yet to be generally considered as a matter of so much importance in England. They are certainly, however, dearer in England than in France, as England receives considerable supplies from France. In the progress of improvements, the period at which every particular sort of animal food in dearest, must naturally be that which immediately precedes the general practice of cultivating land for the sake of raising it. For some time before this practice becomes general, the scarcity must necessarily raise the price. After it has become general, new methods of feeding are commonly fallen upon, which enable the farmer to raise upon the same quantity of ground a much greater quantity of that particular sort of animal food. The plenty not only obliges him to sell cheaper, but, in consequence of these improvements, he can afford to sell cheaper; for if he could not afford it, the plenty would not be of long continuance. It has been probably in this manner that the introduction of clover, turnips, carrots, cabbages, &c. has contributed to sink the common price of butcher's meat in the London market, somewhat below what it was about the beginning of the last century. The hog, that finds his food among ordure, and greedily devours many things rejected by every other useful animal, is, like poultry, originally kept as a save-all. As long as the number of such animals, which can thus be reared at little or no expense, is fully sufficient to supply the demand, this sort of butcher's meat comes to market at a much lower price than any other. But when the demand rises beyond what this quantity can supply, when it becomes necessary to raise food on purpose for feeding and fattening hogs, in the same manner as for feeding and fattening other cattle, the price necessarily rises, and becomes proportionably either higher or lower than that of other butcher's meat, according as the nature of the country, and the state of its agriculture, happen to render the feeding of hogs more or less expensive than that of other cattle. In France, according to Mr Buffon, the price of pork is nearly equal to that of beef. In most parts of Great Britain it is at present somewhat higher. The great rise in the price both of hogs and poultry, has, in Great Britain, been frequently imputed to the diminution of the number of cottagers and other small occupiers of land; an event which has in every part of Europe been the immediate forerunner of improvement and better cultivation, but which at the same time may have contributed to raise the price of those articles, both somewhat sooner and somewhat faster than it would otherwise have risen. As the poorest family can often maintain a cat or a dog without any expense, so the poorest occupiers of land can commonly maintain a few poultry, or a sow and a few pigs, at very little. The little offals of their own table, their whey, skimmed milk, and butter milk, supply those animals with a part of their food, and they find the rest in the neighbouring fields, without doing any sensible damage to any body. By diminishing the number of those small occupiers, therefore, the quantity of this sort of provisions, which is thus produced at little or no expense, must certainly have been a good deal diminished, and their price must consequently have been raised both sooner and faster than it would otherwise have risen. Sooner or later, however, in the progress of improvement, it must at any rate have risen to the utmost height to which it is capable of rising; or to the price which pays the labour and expense of cultivating the land which furnishes them with food, as well as these are paid upon the greater part of other cultivated land. The business of the dairy, like the feeding of hogs and poultry, is originally carried on as a save-all. The cattle necessarily kept upon the farm produce more milk than either the rearing of their own young, or the consumption of the farmer's family requires; and they produce most at one particular season. But of all the productions of land, milk is perhaps the most perishable. In the warm season, when it is most abundant, it will scarce keep four-and-twenty hours. The farmer, by making it into fresh butter, stores a small part of it for a week; by making it into salt butter, for a year; and by making it into cheese, he stores a much greater part of it for several years. Part of all these is reserved for the use of his own family, the rest goes to market, in order to find the best price which is to be had, and which can scarce be so low as to discourage him from sending thither whatever is over and above the use of his own family. If it is very low indeed, he will be likely to manage his dairy in a very slovenly and dirty manner, and will scarce, perhaps, think it worth while to have a particular room or building on purpose for it, but will suffer the business to be carried on amidst the smoke, filth, and nastiness of his own kitchen, as was the case of almost all the farmers' dairies in Scotland thirty or forty years ago, and as is the case of many of them still. The same causes which gradually raise the price of butcher's meat, the increase of the demand, and, in consequence of the improvement of the country, the diminution of the quantity which can be fed at little or no expense, raise, in the same manner, that of the produce of the dairy, of which the price naturally connects with that of butcher's meat, or with the expense of feeding cattle. The increase of price pays for more labour, care, and cleanliness. The dairy becomes more worthy of the farmer's attention, and the quality of its produce gradually improves. The price at last gets so high, that it become worth while to employ some of the most fertile and best cultivated lands in feeding cattle merely for the purpose of the dairy; and when it has got to this height, it cannot well go higher. If it did, more land would soon be turned to this purpose. It seems to have got to this height through the greater part of England, where much good land is commonly employed in this manner. If you except the neighbourhood of a few considerable towns, it seems not yet to have got to this height anywhere in Scotland, where common farmers seldom employ much good land in raising food for cattle, merely for the purpose of the dairy. The price of the produce, though it has risen very considerably within these few years, is probably still too low to admit of it. The inferiority of the quality, indeed, compared with that of the produce of English dairies, is fully equal to that of the price. But this inferiority of quality is, perhaps, rather the effect of this lowness of price, than the cause of it. Though the quality was much better, the greater part of what is brought to market could not, I apprehend, in the present circumstances of the country, be disposed of at a much better price; and the present price, it is probable, would not pay the expense of the land and labour necessary for producing a much better quality. Through the greater part of England, notwithstanding the superiority of price, the dairy is not reckoned a more profitable employment of land than the raising of corn, or the fattening of cattle, the two great objects of agriculture. Through the greater part of Scotland, therefore, it cannot yet be even so profitable. The lands of no country, it is evident, can ever be completely cultivated and improved, till once the price of every produce, which human industry in obliged to raise upon them, has got so high as to pay for the expense of complete improvement and cultivation. In order to do this, the price of each particular produce must be sufficient, first, to pay the rent of good corn land, as it is that which regulates the rent of the greater part of other cultivated land; and, secondly, to pay the labour and expense of the farmer, as well as they are commonly paid upon good corn land; or, in other words, to replace with the ordinary profits the stock which he employs about it. This rise in the price of each particular produce, must evidently be previous to the improvement and cultivation of the land which is destined for raising it. Gain is the end of all improvement; and nothing could deserve that name, of which loss was to be the necessary consequence. But loss must be the necessary consequence of improving land for the sake of a produce of which the price could never bring back the expense. If the complete improvement and cultivation of the country be, as it most certainly is, the greatest of all public advantages, this rise in the price of all those different sorts of rude produce, instead of being considered as a public calamity, ought to be regarded as the necessary forerunner and attendant of the greatest of all public advantages. This rise, too, in the nominal or money price of all these different sorts of rude produce, has been the effect, not of any degradation in the value of silver, but of a rise in their real price. They have become worth, not only a greater quantity of silver, but a greater quantity of labour and subsistence than before. As it costs a greater quantity of labour and subsistence to bring them to market, so, when they are brought thither they represent, or are equivalent to a greater quantity. _Third Sort._--The third and last sort of rude produce, of which the price naturally rises in the progress of improvement, is that in which the efficacy of human industry, in augmenting the quantity, is either limited or uncertain. Though the real price of this sort of rude produce, therefore, naturally tends to rise in the progress of improvement, yet, according as different accidents happen to render the efforts of human industry more or less successful in augmenting the quantity, it may happen sometimes even to fall, sometimes to continue the same, in very different periods of improvement, and sometimes to rise more or less in the same period. There are some sorts of rude produce which nature has rendered a kind of appendages to other sorts; so that the quantity of the one which any country can afford, is necessarily limited by that of the other. The quantity of wool or of raw hides, for example, which any country can afford, is necessarily limited by the number of great and small cattle that are kept in it. The state of its improvement, and the nature of its agriculture, again necessarily determine this number. The same causes which, in the progress of improvement, gradually raise the price of butcher's meat, should have the same effect, it may be thought, upon the prices of wool and raw hides, and raise them, too, nearly in the same proportion. It probably would be so, if, in the rude beginnings of improvement, the market for the latter commodities was confined within as narrow bounds as that for the former. But the extent of their respective markets is commonly extremely different. The market for butcher's meat is almost everywhere confined to the country which produces it. Ireland, and some part of British America, indeed, carry on a considerable trade in salt provisions; but they are, I believe, the only countries in the commercial world which do so, or which export to other countries any considerable part of their butcher's meat. The market for wool and raw hides, on the contrary, is, in the rude beginnings of improvement, very seldom confined to the country which produces them. They can easily be transported to distant countries; wool without any preparation, and raw hides with very little; and as they are the materials of many manufactures, the industry of other countries may occasion a demand for them, though that of the country which produces them might not occasion any. In countries ill cultivated, and therefore but thinly inhabited, the price of the wool and the hide bears always a much greater proportion to that of the whole beast, than in countries where, improvement and population being further advanced, there is more demand for butcher's meat. Mr Hume observes, that in the Saxon times, the fleece was estimated at two-fifths of the value of the whole sheep, and that this was much above the proportion of its present estimation. In some provinces of Spain, I have been assured, the sheep is frequently killed merely for the sake of the fleece and the tallow. The carcase is often left to rot upon the ground, or to be devoured by beasts and birds of prey. If this sometimes happens even in Spain, it happens almost constantly in Chili, at Buenos Ayres, and in many other parts of Spanish America, where the horned cattle are almost constantly killed merely for the sake of the hide and the tallow. This, too, used to happen almost constantly in Hispaniola, while it was infested by the buccaneers, and before the settlement, improvement, and populousness of the French plantations (which now extend round the coast of almost the whole western half of the island) had given some value to the cattle of the Spaniards, who still continue to possess, not only the eastern part of the coast, but the whole inland mountainous part of the country. Though, in the progress of improvement and population, the price of the whole beast necessarily rises, yet the price of the carcase is likely to be much more affected by this rise than that of the wool and the hide. The market for the carcase being in the rude state of society confined always to the country which produces it, must necessarily be extended in proportion to the improvement and population of that country. But the market for the wool and the hides, even of a barbarous country, often extending to the whole commercial world, it can very seldom be enlarged in the same proportion. The state of the whole commercial world can seldom be much affected by the improvement of any particular country; and the market for such commodities may remain the same, or very nearly the same, after such improvements, as before. It should, however, in the natural course of things, rather, upon the whole, be somewhat extended in consequence of them. If the manufactures, especially, of which those commodities are the materials, should ever come to flourish in the country, the market, though it might not be much enlarged, would at least be brought much nearer to the place of growth than before; and the price of those materials might at least be increased by what had usually been the expense of transporting them to distant countries. Though it might not rise, therefore, in the same proportion as that of butcher's meat, it ought naturally to rise somewhat, and it ought certainly not to fall. In England, however, notwithstanding the flourishing state of its woollen manufacture, the price of English wool has fallen very considerably since the time of Edward III. There are many authentic records which demonstrate that, during the reign of that prince (towards the middle of the fourteenth century, or about 1339), what was reckoned the moderate and reasonable price of the tod, or twenty-eight pounds of English wool, was not less than ten shillings of the money of those times[25], containing, at the rate of twenty-pence the ounce, six ounces of silver, Tower weight, equal to about thirty shillings of our present money. In the present times, one-and-twenty shillings the tod may be reckoned a good price for very good English wool. The money price of wool, therefore, in the time of Edward III. was to its money price in the present times as ten to seven. The superiority of its real price was still greater. At the rate of six shillings and eightpence the quarter, ten shillings was in those ancient times the price of twelve bushels of wheat. At the rate of twenty-eight shillings the quarter, one-and-twenty shillings is in the present times the price of six bushels only. The proportion between the real price of ancient and modern times, therefore, is as twelve to six, or as two to one. In those ancient times, a tod of wool would have purchased twice the quantity of subsistence which it will purchase at present, and consequently twice the quantity of labour, if the real recompence of labour had been the same in both periods. This degradation, both in the real and nominal value of wool, could never have happened in consequence of the natural course of things. It has accordingly been the effect of violence and artifice. First, of the absolute prohibition of exporting wool from England: secondly, of the permission of importing it from Spain, duty free: thirdly, of the prohibition of exporting it from Ireland to any other country but England. In consequence of these regulations, the market for English wool, instead of being somewhat extended, in consequence of the improvement of England, has been confined to the home market, where the wool of several other countries is allowed to come into competition with it, and where that of Ireland is forced into competition with it. As the woollen manufactures, too, of Ireland, are fully as much discouraged as is consistent with justice and fair dealing, the Irish can work up but a smaller part of their own wool at home, and are therefore obliged to send a greater proportion of it to Great Britain, the only market they are allowed. I have not been able to find any such authentic records concerning the price of raw hides in ancient times. Wool was commonly paid as a subsidy to the king, and its valuation in that subsidy ascertains, at least in some degree, what was its ordinary price. But this seems not to have been the case with raw hides. Fleetwood, however, from an account in 1425, between the prior of Burcester Oxford and one of his canons, gives us their price, at least as it was stated upon that particular ocassion, viz. five ox hides at twelve shillings; five cow hides at seven shillings and threepence; thirty-six sheep skins of two years old at nine shillings; sixteen calf skins at two shillings. In 1425, twelve shillings contained about the same quantity of silver as four-and-twenty shillings of our present money. An ox hide, therefore, was in this account valued at the same quantity of silver as 4s. 4/5ths of our present money. Its nominal price was a good deal lower than at present. But at the rate of six shillings and eightpence the quarter, twelve shillings would in those times have purchased fourteen bushels and four-fifths of a bushel of wheat, which, at three and sixpence the bushel, would in the present times cost 51s. 4d. An ox hide, therefore, would in those times have purchased as much corn as ten shillings and threepence would purchase at present. Its real value was equal to ten shillings and threepence of our present money. In those ancient times, when the cattle were half starved during the greater part of the winter, we cannot suppose that they were of a very large size. An ox hide which weighs four stone of sixteen pounds of avoirdupois, is not in the present times reckoned a bad one; and in those ancient times would probably have been reckoned a very good one. But at half-a-crown the stone, which at this moment (February 1773) I understand to be the common price, such a hide would at present cost only ten shillings.--Though its nominal price, therefore, is higher in the present than it was in those ancient times, its real price, the real quantity of subsistence which it will purchase or command, is rather somewhat lower. The price of cow hides, as stated in the above account, is nearly in the common proportion to that of ox hides. That of sheep skins is a good deal above it. They had probably been sold with the wool. That of calves skins, on the contrary, is greatly below it. In countries where the price of cattle is very low, the calves, which are not intended to be reared in order to keep up the stock, are generally killed very young, as was the case in Scotland twenty or thirty years ago. It saves the milk, which their price would not pay for. Their skins, therefore, are commonly good for little. The price of raw hides is a good deal lower at present than it was a few years ago; owing probably to the taking off the duty upon seal skins, and to the allowing, for a limited time, the importation of raw hides from Ireland, and from the plantations, duty free, which was done in 1769. Take the whole of the present century at an average, their real price has probably been somewhat higher than it was in those ancient times. The nature of the commodity renders it not quite so proper for being transported to distant markets as wool. It suffers more by keeping. A salted hide is reckoned inferior to a fresh one, and sells for a lower price. This circumstance must necessarily have some tendency to sink the price of raw hides produced in a country which does not manufacture them, but is obliged to export them, and comparatively to raise that of those produced in a country which does manufacture them. It must have some tendency to sink their price in a barbarous, and to raise it in an improved and manufacturing country. It must have had some tendency, therefore, to sink it in ancient, and to raise it in modern times. Our tanners, besides, have not been quite so successful as our clothiers, in convincing the wisdom of the nation, that the safety of the commonwealth depends upon the prosperity of their particular manufacture. They have accordingly been much less favoured. The exportation of raw hides has, indeed, been prohibited, and declared a nuisance; but their importation from foreign countries has been subjected to a duty; and though this duty has been taken off from those of Ireland and the plantations (for the limited time of five years only), yet Ireland has not been confined to the market of Great Britain for the sale of its surplus hides, or of these which are not manufactured at home. The hides of common cattle have, but within these few years, been put among the enumerated commodities which the plantations can send nowhere but to the mother country; neither has the commerce of Ireland been in this case oppressed hitherto, in order to support the manufactures of Great Britain. Whatever regulations tend to sink the price, either of wool or of raw hides, below what it naturally would be, must, in an improved and cultivated country, have some tendency to raise the price of butcher's meat. The price both of the great and small cattle, which are fed on improved and cultivated land, must be sufficient to pay the rent which the landlord, and the profit which the farmer, has reason to expect from improved and cultivated land. If it is not, they will soon cease to feed them. Whatever part of this price, therefore, is not paid by the wool and the hide, must be paid by the carcase. The less there is paid for the one, the more must be paid for the other. In what manner this price is to be divided upon the different parts of the beast, is indifferent to the landlords and farmers, provided it is all paid to them. In an improved and more cultivated country, therefore, their interest as landlords and farmers cannot be much affected by such regulations, though their interest as consumers may, by the rise in the price of provisions. It would be quite otherwise, however, in an unimproved and uncultivated country, where the greater part of the lands could be applied to no other purpose but the feeding of cattle, and where the wool and the hide made the principal part of the value of those cattle. Their interest as landlords and farmers would in this case be very deeply affected by such regulations, and their interest as consumers very little. The fall in the price of the wool and the hide would not in this case raise the price of the carcase; because the greater part of the lands of the country being applicable to no other purpose but the feeding of cattle, the same number would still continue to be fed. The same quantity of butcher's meat would still come to market. The demand for it would be no greater than before. Its price, therefore, would be the same as before. The whole price of cattle would fall, and along with it both the rent and the profit of all those lands of which cattle was the principal produce, that is, of the greater part of the lands of the country. The perpetual prohibition of the exportation of wool, which is commonly, but very falsely, ascribed to Edward III., would, in the then circumstances of the country, have been the most destructive regulation which could well have been thought of. It would not only have reduced the actual value of the greater part of the lands in the kingdom, but by reducing the price of the most important species of small cattle, it would have retarded very much its subsequent improvement. The wool of Scotland fell very considerably in its price in consequence of the union with England, by which it was excluded from the great market of Europe, and confined to the narrow one of Great Britain. The value of the greater part of the lands in the southern counties of Scotland, which are chiefly a sheep country, would have been very deeply affected by this event, had not the rise in the price of butcher's meat fully compensated the fall in the price of wool. As the efficacy of human industry, in increasing the quantity either of wool or of raw hides, is limited, so far as it depends upon the produce of the country where it is exerted; so it is uncertain so far as it depends upon the produce of other countries. It so far depends not so much upon the quantity which they produce, as upon that which they do not manufacture; and upon the restraints which they may or may not think proper to impose upon the exportation of this sort of rude produce. These circumstances, as they are altogether independent of domestic industry, so they necessarily render the efficiency of its efforts more or less uncertain. In multiplying this sort of rude produce, therefore, the efficacy of human industry is not only limited, but uncertain. In multiplying another very important sort of rude produce, the quantity of fish that is brought to market, it is likewise both limited and uncertain. It is limited by the local situation of the country, by the proximity or distance of its different provinces from the sea, by the number of its lakes and rivers, and by what may be called the fertility or barrenness of those seas, lakes, and rivers, as to this sort of rude produce. As population increases, as the annual produce of the land and labour of the country grows greater and greater, there come to be more buyers of fish; and those buyers, too, have a greater quantity and variety of other goods, or, what is the same thing, the price of a greater quantity and variety of other goods, to buy with. But it will generally be impossible to supply the great and extended market, without employing a quantity of labour greater than in proportion to what had been requisite for supplying the narrow and confined one. A market which, from requiring only one thousand, comes to require annually ten thousand ton of fish, can seldom be supplied, without employing more than ten times the quantity of labour which had before been sufficient to supply it. The fish must generally be sought for at a greater distance, larger vessels must be employed, and more expensive machinery of every kind made use of. The real price of this commodity, therefore, naturally rises in the progress of improvement. It has accordingly done so, I believe, more or less in every country. Though the success of a particular day's fishing may be a very uncertain matter, yet the local situation of the country being supposed, the general efficacy of industry in bringing a certain quantity of fish to market, taking the course of a year, or of several years together, it may, perhaps, be thought is certain enough; and it, no doubt, is so. As it depends more, however, upon the local situation of the country, than upon the state of its wealth and industry; as upon this account it may in different countries be the same in very different periods of improvement, and very different in the same period; its connection with the state of improvement is uncertain; and it is of this sort of uncertainty that I am here speaking. In increasing the quantity of the different minerals and metals which are drawn from the bowels of the earth, that of the more precious ones particularly, the efficacy of human industry seems not to be limited, but to be altogether uncertain. The quantity of the precious metals which is to be found in any country, is not limited by any thing in its local situation, such as the fertility or barrenness of its own mines. Those metals frequently abound in countries which possess no mines. Their quantity, in every particular country, seems to depend upon two different circumstances; first, upon its power of purchasing, upon the state of its industry, upon the annual produce of its land and labour, in consequence of which it can afford to employ a greater or a smaller quantity of labour and subsistence, in bringing or purchasing such superfluities as gold and silver, either from its own mines, or from those of other countries; and, secondly, upon the fertility or barrenness of the mines which may happen at any particular time to supply the commercial world with those metals. The quantity of those metals in the countries most remote from the mines, must be more or less affected by this fertility or barrenness, on account of the easy and cheap transportation of those metals, of their small bulk and great value. Their quantity in China and Indostan must have been more or less affected by the abundance of the mines of America. So far as their quantity in any particular country depends upon the former of those two circumstances (the power of purchasing), their real price, like that of all other luxuries and superfluities, is likely to rise with the wealth and improvement of the country, and to fall with its poverty and depression. Countries which have a great quantity of labour and subsistence to spare, can afford to purchase any particular quantity of those metals at the expense of a greater quantity of labour and subsistence, than countries which have less to spare. So far as their quantity in any particular country depends upon the latter of those two circumstances (the fertility or barrenness of the mines which happen to supply the commercial world), their real price, the real quantity of labour and subsistence which they will purchase or exchange for, will, no doubt, sink more or less in proportion to the fertility, and rise in proportion to the barrenness of those mines. The fertility or barrenness of the mines, however, which may happen at any particular time to supply the commercial world, is a circumstance which, it is evident, may have no sort of connection with the state of industry in a particular country. It seems even to have no very necessary connection with that of the world in general. As arts and commerce, indeed, gradually spread themselves over a greater and a greater part of the earth, the search for new mines, being extended over a wider surface, may have somewhat a better chance for being successful than when confined within narrower bounds. The discovery of new mines, however, as the old ones come to be gradually exhausted, is a matter of the greatest uncertainty, and such as no human skill or industry can insure. All indications, it is acknowledged, are doubtful; and the actual discovery and successful working of a new mine can alone ascertain the reality of its value, or even of its existence. In this search there seem to be no certain limits, either to the possible success, or to the possible disappointment of human industry. In the course of a century or two, it is possible that new mines may be discovered, more fertile than any that have ever yet been known, and it is just equally possible, that the most fertile mine then known may be more barren than any that was wrought before the discovery of the mines of America. Whether the one or the other of those two events may happen to take place, is of very little importance to the real wealth and prosperity of the world, to the real value of the annual produce of the land and labour of mankind. Its nominal value, the quantity of gold and silver by which this annual produce could be expressed or represented, would, no doubt, be very different; but its real value, the real quantity of labour which it could purchase or command, would be precisely the same. A shilling might, in the one case, represent no more labour than a penny does at present; and a penny, in the other, might represent as much as a shilling does now. But in the one case, he who had a shilling in his pocket would be no richer than he who has a penny at present; and in the other, he who had a penny would be just as rich as he who has a shilling now. The cheapness and abundance of gold and silver plate would be the sole advantage which the world could derive from the one event; and the dearness and scarcity of those trifling superfluities, the only inconveniency it could suffer from the other. _Conclusion of the Digression concerning the Variations in the Value of Silver._ The greater part of the writers who have collected the money price of things in ancient times, seem to have considered the low money price of corn, and of goods in general, or, in other words, the high value of gold and silver, as a proof, not only of the scarcity of those metals, but of the poverty and barbarism of the country at the time when it took place. This notion is connected with the system of political economy, which represents national wealth as consisting in the abundance and national poverty in the scarcity, of gold and silver; a system which I shall endeavour to explain and examine at great length in the fourth book of this Inquiry. I shall only observe at present, that the high value of the precious metals can be no proof of the poverty or barbarism of any particular country at the time when it took place. It is a proof only of the barrenness of the mines which happened at that time to supply the commercial world. A poor country, as it cannot afford to buy more, so it can as little afford to pay dearer for gold and silver than a rich one; and the value of those metals, therefore, is not likely to be higher in the former than in the latter. In China, a country much richer than any part of Europe, the value of the precious metals is much higher than in any part of Europe. As the wealth of Europe, indeed, has increased greatly since the discovery of the mines of America, so the value of gold and silver has gradually diminished. This diminution of their value, however, has not been owing to the increase of the real wealth of Europe, of the annual produce of its land and labour, but to the accidental discovery of more abundant mines than any that were known before. The increase of the quantity of gold and silver in Europe, and the increase of its manufactures and agriculture, are two events which, though they have happened nearly about the same time, yet have arisen from very different causes, and have scarce any natural connection with one another. The one has arisen from a mere accident, in which neither prudence nor policy either had or could have any share; the other, from the fall of the feudal system, and from the establishment of a government which afforded to industry the only encouragement which it requires, some tolerable security that it shall enjoy the fruits of its own labour. Poland, where the feudal system still continues to take place, is at this day as beggarly a country as it was before the discovery of America. The money price of corn, however, has risen; the real value of the precious metals has fallen in Poland, in the same manner as in other parts of Europe. Their quantity, therefore, must have increased there as in other places, and nearly in the same proportion to the annual produce of its land and labour. This increase of the quantity of those metals, however, has not, it seems, increased that annual produce, has neither improved the manufactures and agriculture of the country, nor mended the circumstances of its inhabitants. Spain and Portugal, the countries which possess the mines, are, after Poland, perhaps the two most beggarly countries in Europe. The value of the precious metals, however, must be lower in Spain and Portugal than in any other part of Europe, as they come from those countries to all other parts of Europe, loaded, not only with a freight and an insurance, but with the expense of smuggling, their exportation being either prohibited or subjected to a duty. In proportion to the annual produce of the land and labour, therefore, their quantity must be greater in those countries than in any other part of Europe; those countries, however, are poorer than the greater part of Europe. Though the feudal system has been abolished in Spain and Portugal, it has not been succeeded by a much better. As the low value of gold and silver, therefore, is no proof of the wealth and flourishing state of the country where it takes place; so neither is their high value, or the low money price either of goods in general, or of corn in particular, any proof of its poverty and barbarism. But though the low money price, either of goods in general, or of corn in particular, be no proof of the poverty or barbarism of the times, the low money price, of some particular sorts of goods, such as cattle, poultry game of all kinds, &c. in proportion to that of corn, is a most decisive one. It clearly demonstrates, first, their great abundance in proportion to that of corn, and, consequently, the great extent of the land which they occupied in proportion to what was occupied by corn; and, secondly, the low value of this land in proportion to that of corn land, and, consequently, the uncultivated and unimproved state of the far greater part of the lands of the country. It clearly demonstrates, that the stock and population of the country did not bear the same proportion to the extent of its territory, which they commonly do in civilized countries; and that society was at that time, and in that country, but in its infancy. From the high or low money price, either of goods in general, or of corn in particular, we can infer only, that the mines, which at that time happened to supply the commercial world with gold and silver, were fertile or barren, not that the country was rich or poor. But from the high or low money price of some sorts of goods in proportion to that of others, we infer, with a degree of probability that approaches almost to certainty, that it was rich or poor, that the greater part of its lands were improved or unimproved, and that it was either in a more or less barbarous state, or in a more or less civilised one. Any rise in the money price of goods which proceeded altogether from the degradation of the value of silver, would affect all sorts of goods equally, and raise their price universally, a third, or a fourth, or a fifth part higher, according as silver happened to lose a third, or a fourth, or a fifth part of its former value. But the rise in the price of provisions, which has been the subject of so much reasoning and conversation, does not affect all sorts of provisions equally. Taking the course of the present century at an average, the price of corn, it is acknowledged, even by those who account for this rise by the degradation of the value of silver, has risen much less than that of some other sorts of provisions. The rise in the price of those other sorts of provisions, therefore, cannot be owing altogether to the degradation of the value of silver. Some other causes must be taken into the account; and those which have been above assigned, will, perhaps, without having recourse to the supposed degradation of the value of silver, sufficiently explain this rise in those particular sorts of provisions, of which the price has actually risen in proportion to that of corn. As to the price of corn itself, it has, during the sixty-four first years of the present century, and before the late extraordinary course of bad seasons, been somewhat lower than was during the sixty-four last years of the preceding century. This fact is attested, not only by the accounts of Windsor market, but by the public fiars of all the different counties of Scotland, and by the accounts of several different markets in France, which have been collected with great diligence and fidelity by Mr Messance, and by Mr Dupré de St Maur. The evidence is more complete than could well have been expected in a matter which is naturally so very difficult to be ascertained. As to the high price of corn during these last ten or twelve years, it can be sufficiently accounted for from the badness of the seasons, without supposing any degradation in the value of silver. The opinion, therefore, that silver is continually sinking in its value, seems not to be founded upon any good observations, either upon the prices of corn, or upon those of other provisions. The same quantity of silver, it may perhaps be said, will, in the present times, even according to the account which has been here given, purchase a much smaller quantity of several sorts of provisions than it would have done during some part of the last century; and to ascertain whether this change be owing to a rise in the value of those goods, or to a fall in the value of silver, is only to establish a vain and useless distinction, which can be of no sort of service to the man who has only a certain quantity of silver to go to market with, or a certain fixed revenue in money. I certainly do not pretend that the knowledge of this distinction will enable him to buy cheaper. It may not, however, upon that account be altogether useless. It may be of some use to the public, by affording an easy proof of the prosperous condition of the country. If the rise in the price of some sorts of provisions be owing altogether to a fall in the value of silver, it is owing to a circumstance, from which nothing can be inferred but the fertility of the American mines. The real wealth of the country, the annual produce of its land and labour, may, notwithstanding this circumstance, be either gradually declining, as in Portugal and Poland; or gradually advancing, as in most other parts of Europe. But if this rise in the price of some sorts of provisions be owing to a rise in the real value of the land which produces them, to its increased fertility, or, in consequence of more extended improvement and good cultivation, to its having been rendered fit for producing corn; it is owing to a circumstance which indicates, in the clearest manner, the prosperous and advancing state of the country. The land constitutes by far the greatest, the most important, and the most durable part of the wealth of every extensive country. It may surely be of some use, or, at least, it may give some satisfaction to the public, to have so decisive a proof of the increasing value of by far the greatest, the most important, and the most durable part of its wealth. It may, too, be of some use to the public, in regulating the pecuniary reward of some of its inferior servants. If this rise in the price of some sorts of provisions be owing to a fall in the value of silver, their pecuniary reward, provided it was not too large before, ought certainly to be augmented in proportion to the extent of this fall. If it is not augmented, their real recompence will evidently be so much diminished. But if this rise of price is owing in the increased value, in consequence of the improved fertility of the land which produces such provisions, it becomes a much nicer matter to judge, either in what proportion any pecuniary reward ought to be augmented, or whether it ought to be augmented at all. The extension of improvement and cultivation, as it necessarily raises more or less, in proportion to the price of corn, that of every sort of animal food, so it as necessarily lowers that of, I believe, every sort of vegetable food. It raises the price of animal food; because a great part of the land which produces it, being rendered fit for producing corn, must afford to the landlord and farmer the rent and profit of corn land. It lowers the price of vegetable food; because, by increasing the fertility of the land, it increases its abundance. The improvements of agriculture, too, introduce many sorts of vegetable food, which requiring less land, and not more labour than corn, come much cheaper to market. Such are potatoes and maize, or what is called Indian corn, the two most important improvements which the agriculture of Europe, perhaps, which Europe itself, has received from the great extension of its commerce and navigation. Many sorts of vegetable food, besides, which in the rude state of agriculture are confined to the kitchen-garden, and raised only by the spade, come, in its improved state, to be introduced into common fields, and to be raised by the plough; such as turnips, carrots, cabbages, &c. If, in the progress of improvement, therefore, the real price of one species of food necessarily rises, that of another as necessarily falls; and it becomes a matter of more nicety to judge how far the rise in the one may be compensated by the fall in the other. When the real price of butcher's meat has once got to its height (which, with regard to every sort, except perhaps that of hogs flesh, it seems to have done through a great part of England more than a century ago), any rise which can afterwards happen in that of any other sort of animal food, cannot much affect the circumstances of the inferior ranks of people. The circumstances of the poor, through a great part of England, cannot surely be so much distressed by any rise in the price of poultry, fish, wild-fowl, or venison, as they must he relieved by the fall in that of potatoes. In the present season of scarcity, the high price of corn no doubt distresses the poor. But in times of moderate plenty, when corn is at its ordinary or average price, the natural rise in the price of any other sort of rude produce cannot much affect them. They suffer more, perhaps, by the artificial rise which has been occasioned by taxes in the price of some manufactured commodities, as of salt, soap, leather, candles, malt, beer, ale, &c. _Effects of the Progress of Improvement upon the real Price of Manufactures._ It is the natural effect of improvement, however, to diminish gradually the real price of almost all manufactures. That of the manufacturing workmanship diminishes, perhaps, in all of them without exception. In consequence of better machinery, of greater dexterity, and of a more proper division and distribution of work, all of which are the natural effects of improvement, a much smaller quantity of labour becomes requisite for executing any particular piece of work; and though, in consequence of the flourishing circumstances of the society, the real price of labour should rise very considerably, yet the great diminution of the quantity will generally much more than compensate the greatest rise which can happen in the price. There are, indeed, a few manufactures, in which the necessary rise in the real price of the rude materials will more than compensate all the advantages which improvement can introduce into the execution of the work. In carpenters' and joiners' work, and in the coarser sort of cabinet work, the necessary rise in the real price of barren timber, in consequence of the improvement of land, will more than compensate all the advantages which can be derived from the best machinery, the greatest dexterity, and the most proper division and distribution of work. But in all cases in which the real price of the rude material either does not rise at all, or does not rise very much, that of the manufactured commodity sinks very considerably. This diminution of price has, in the course of the present and preceding century, been most remarkable in these manufactures of which the materials are the coarser metals. A better movement of a watch, than about the middle of the last century could have been bought for twenty pounds, may now perhaps be had for twenty shillings. In the work of cutlers and locksmiths, in all the toys which are made of the coarser metals, and in all those goods which are commonly known by the name of Birmingham and Sheffield ware, there has been, during the same period, a very great reduction of price, though not altogether so great as in watch-work. It has, however, been sufficient to astonish the workmen of every other part of Europe, who in many cases acknowledge that they can produce no work of equal goodness for double or even for triple the price. There are perhaps no manufactures, in which the division of labour can be carried further, or in which the machinery employed admits of a greater variety of improvements, than those of which the materials are the coarser metals. In the clothing manufacture there has, during the same period, been no such sensible reduction of price. The price of superfine cloth, I have been assured, on the contrary, has, within these five-and-twenty or thirty years, risen somewhat in proportion to its quality, owing, it was said, to a considerable rise in the price of the material, which consists altogether of Spanish wool. That of the Yorkshire cloth, which is made altogether of English wool, is said, indeed, during the course of the present century, to have fallen a good deal in proportion to its quality. Quality, however, is so very disputable a matter, that I look upon all information of this kind as somewhat uncertain. In the clothing manufacture, the division of labour is nearly the same now as it was a century ago, and the machinery employed is not very different. There may, however, have been some small improvements in both, which may have occasioned some reduction of price. But the reduction will appear much more sensible and undeniable, if we compare the price of this manufacture in the present times with what it was in a much remoter period, towards the end of the fifteenth century, when the labour was probably much less subdivided, and the machinery employed much more imperfect, than it is at present. In 1487, being the 4th of Henry VII., it was enacted, that "whosoever shall sell by retail a broad yard of the finest scarlet grained, or of other grained cloth of the finest making, above sixteen shillings, shall forfeit forty shillings for every yard so sold." Sixteen shillings, therefore, containing about the same quantity of silver as four-and-twenty shillings of our present money, was, at that time, reckoned not an unreasonable price for a yard of the finest cloth; and as this is a sumptuary law, such cloth, it is probable, had usually been sold somewhat dearer. A guinea may be reckoned the highest price in the present times. Even though the quality of the cloths, therefore, should be supposed equal, and that of the present times is most probably much superior, yet, even upon this supposition, the money price of the finest cloth appears to have been considerably reduced since the end of the fifteenth century. But its real price has been much more reduced. Six shillings and eightpence was then, and long afterwards, reckoned the average price of a quarter of wheat. Sixteen shillings, therefore, was the price of two quarters and more than three bushels of wheat. Valuing a quarter of wheat in the present times at eight-and-twenty shillings, the real price of a yard of fine cloth must, in those times, have been equal to at least three pounds six shillings and sixpence of our present money. The man who bought it must have parted with the command of a quantity of labour and subsistence equal to what that sum would purchase in the present times. The reduction in the real price of the coarse manufacture, though considerable, has not been so great as in that of the fine. In 1463, being the 3d of Edward IV. it was enacted, that "no servant in husbandry nor common labourer, nor servant to any artificer inhabiting out of a city or burgh, shall use or wear in their clothing any cloth above two shillings the broad yard." In the 3d of Edward IV., two shillings contained very nearly the same quantity of silver as four of our present money. But the Yorkshire cloth which is now sold at four shillings the yard, is probably much superior to any that was then made for the wearing of the very poorest order of common servants. Even the money price of their clothing, therefore, may, in proportion to the quality, be somewhat cheaper in the present than it was in those ancient times. The real price is certainly a good deal cheaper. Tenpence was then reckoned what is called the moderate and reasonable price of a bushel of wheat. Two shillings, therefore, was the price of two bushels and near two pecks of wheat, which in the present times, at three shillings and sixpence the bushel, would be worth eight shillings and ninepence. For a yard of this cloth the poor servant must have parted with the power of purchasing a quantity of subsistence equal to what eight shillings and ninepence would purchase in the present times. This is a sumptuary law, too, restraining the luxury and extravagance of the poor. Their clothing, therefore, had commonly been much more expensive. The same order of people are, by the same law, prohibited from wearing hose, of which the price should exceed fourteen-pence the pair, equal to about eight-and-twenty pence of our present money. But fourteen-pence was in those times the price of a bushel and near two pecks of wheat; which in the present times, at three and sixpence the bushel, would cost five shillings and threepence. We should in the present times consider this a very high price for a pair of stockings to a servant of the poorest and lowest order. He must, however, in these times, have paid what was really equivalent to this price for them. In the time of Edward IV. the art of knitting stockings was probably not known in any part of Europe. Their hose were made of common cloth, which may have been one of the causes of their dearness. The first person that wore stockings in England is said to have been Queen Elizabeth. She received them as a present from the Spanish ambassador. Both in the coarse and in the fine woollen manufacture, the machinery employed was much more imperfect in those ancient, than it is in the present times. It has since received three very capital improvements, besides, probably, many smaller ones, of which it may be difficult to ascertain either the number or the importance. The three capital improvements are, first, the exchange of the rock and spindle for the spinning-wheel, which, with the same quantity of labour, will perform more than double the quantity of work. Secondly, the use of several very ingenious machines, which facilitate and abridge, in a still greater proportion, the winding of the worsted and woollen yarn, or the proper arrangement of the warp and woof before they are put into the loom, an operation which, previous to the invention of those machines, must have been extremely tedious and troublesome.--Thirdly, the employment of the fulling-mill for thickening the cloth, instead of treading it in water. Neither wind nor water mills of any kind were known in England so early as the beginning of the sixteenth century, nor, so far as I know, in any other part of Europe north of the Alps. They had been introduced into Italy some time before. The consideration of these circumstances may, perhaps, in some measure, explain to us why the real price both of the course and of the fine manufacture was so much higher in those ancient than it is in the present times. It cost a greater quantity of labour to bring the goods to market. When they were brought thither, therefore, they must have purchased, or exchanged for the price of, a greater quantity. The coarse manufacture probably was, in these ancient times, carried on in England in the same manner as it always has been in countries where arts and manufactures are in their infancy. It was probably a household manufacture, in which every different part of the work was occasionally performed by all the different members of almost every private family, but so as to be their work only when they had nothing else to do, and not to be the principal business from which any of them derived the greater part of their subsistence. The work which is performed in this manner, it has already been observed, comes always much cheaper to market than that which is the principal or sole fund of the workman's subsistence. The fine manufacture, on the other hand, was not, in those times, carried on in England, but in the rich and commercial country of Flanders; and it was probably conducted then, in the same manner as now, by people who derived the whole, or the principal part of their subsistence from it. It was, besides, a foreign manufacture, and must have paid some duty, the ancient custom of tonnage and poundage at least, to the king. This duty, indeed, would not probably be very great. It was not then the policy of Europe to restrain, by high duties, the importation of foreign manufactures, but rather to encourage it, in order that merchants might be enabled to supply, at as easy a rate as possible, the great men with the conveniencies and luxuries which they wanted, and which the industry of their own country could not afford them. The consideration of these circumstances may, perhaps, in some measure explain to us why, in those ancient times, the real price of the coarse manufacture was, in proportion to that of the fine, so much lower than in the present times. _Conclusion of the Chapter._ I shall conclude this very long chapter with observing, that every improvement in the circumstances of the society tends, either directly or indirectly, to raise the real rent of land, to increase the real wealth of the landlord, his power of purchasing the labour, or the produce of the labour of other people. The extension of improvement and cultivations tends to raise it directly. The landlord's share of the produce necessarily increases with the increase of the produce. That rise in the real price of these parts of the rude produce of land, which is first the effect of the extended improvement and cultivation, and afterwards the cause of their being still further extended, the rise in the price of cattle, for example, tends, too, to raise the rent of land directly, and in a still greater proportion. The real value of the landlord's share, his real command of the labour of other people, not only rises with the real value of the produce, but the proportion of his share to the whole produce rises with it. That produce, after the rise in its real price, requires no more labour to collect it than before. A smaller proportion of it will, therefore, be sufficient to replace, with the ordinary profit, the stock which employs that labour. A greater proportion of it must consequently belong to the landlord. All those improvements in the productive powers of labour, which tend directly to reduce the rent price of manufactures, tend indirectly to raise the real rent of land. The landlord exchanges that part of his rude produce, which is over and above his own consumption, or, what comes to the same thing, the price of that part of it, for manufactured produce. Whatever reduces the real price of the latter, raises that of the former. An equal quantity of the former becomes thereby equivalent to a greater quantity of the latter; and the landlord is enabled to purchase a greater quantity of the conveniencies, ornaments, or luxuries which he has occasion for. Every increase in the real wealth of the society, every increase in the quantity of useful labour employed within it, tends indirectly to raise the real rent of land. A certain proportion of this labour naturally goes to the land. A greater number of men and cattle are employed in its cultivation, the produce increases with the increase of the stock which is thus employed in raising it, and the rent increases with the produce. The contrary circumstances, the neglect of cultivation and improvement, the fall in the real price of any part of the rude produce of land, the rise in the real price of manufactures from the decay of manufacturing art and industry, the declension of the real wealth of the society, all tend, on the other hand, to lower the real rent of land, to reduce the real wealth of the landlord, to diminish his power of purchasing either the labour, or the produce of the labour, of other people. The whole annual produce of the land and labour of every country, or, what comes to the same thing, the whole price of that annual produce, naturally divides itself, it has already been observed, into three parts; the rent of land, the wages of labour, and the profits of stock; and constitutes a revenue to three different orders of people; to those who live by rent, to these who live by wages, and to those who live by profit. These are the three great, original, and constituent, orders of every civilized society, from whose revenue that of every other order is ultimately derived. The interest of the first of those three great orders, it appears from what has been just now said, is strictly and inseparably connected with the general interest of the society. Whatever either promotes or obstructs the one, necessarily promotes or obstructs the other. When the public deliberates concerning any regulation of commerce or police, the proprietors of land never can mislead it, with a view to promote the interest of their own particular order; at least, if they have any tolerable knowledge of that interest. They are, indeed, too often defective in this tolerable knowledge. They are the only one of the three orders whose revenue costs them neither labour nor care, but comes to them, as it were, of its own accord, and independent of any plan or project of their own. That indolence which is the natural effect of the ease and security of their situation, renders them too often, not only ignorant, but incapable of that application of mind, which is necessary in order to foresee and understand the consequence of any public regulation. The interest of the second order, that of those who live by wages, is as strictly connected with the interest of the society as that of the first. The wages of the labourer, it has already been shewn, are never so high as when the demand for labour is continually rising, or when the quantity employed is every year increasing considerably. When this real wealth of the society becomes stationary, his wages are soon reduced to what is barely enough to enable him to bring up a family, or to continue the race of labourers. When the society declines, they fall even below this. The order of proprietors may perhaps gain more by the prosperity of the society than that of labourers; but there is no order that suffers so cruelly from its decline. But though the interest of the labourer is strictly connected with that of the society, he is incapable either of comprehending that interest, or of understanding its connexion with his own. His condition leaves him no time to receive the necessary information, and his education and habits are commonly such as to render him unfit to judge, even though he was fully informed. In the public deliberations, therefore, his voice is little heard, and less regarded; except upon particular occasions, when his clamour is animated, set on, and supported by his employers, not for him, but their own particular purposes. His employers constitute the third order, that of those who live by profit. It is the stock that is employed for the sake of profit, which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operations of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin. The interest of this third order, therefore, has not the same connexion with the general interest of the society, as that of the other two. Merchants and master manufacturers are, in this order, the two classes of people who commonly employ the largest capitals, and who by their wealth draw to themselves the greatest share of the public consideration. As during their whole lives they are engaged in plans and projects, they have frequently more acuteness of understanding than the greater part of country gentlemen. As their thoughts, however, are commonly exercised rather about the interest of their own particular branch of business than about that of the society, their judgment, even when given with the greatest candour (which it has not been upon every occasion), is much more to be depended upon with regard to the former of those two objects, than with regard to the latter. Their superiority over the country gentleman is, not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up both his own interest and that of the public, from a very simple but honest conviction, that their interest, and not his, was the interest of the public. The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market, and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can only serve to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it. PRICES OF WHEAT. ===================================================================== | Price of the | Average of | The Average Years | Quarter of | the different | Price of each XII. | Wheat each | Prices of the | Year in Money | Year. | same Year. | of the present | | | times. -----------+-------------------+-------------------+----------------- | L. s. d. | L. s. d. | L. s. d. 1202 | 0 12 0 | - - - | 1 16 0 | | | | {0 12 0} | | 1205 | {0 13 4} | 0 13 5 | 2 0 3 | {0 15 0} | | | | | 1223 | 0 12 0 | - - - | 1 16 0 1237 | 0 3 4 | - - - | 0 10 0 1243 | 0 2 0 | - - - | 0 6 0 1244 | 0 2 0 | - - - | 0 6 0 1246 | 0 16 0 | - - - | 2 8 0 1247 | 0 13 5 | - - - | 2 0 0 1257 | 1 4 0 | - - - | 3 12 0 | | | | {1 0 0} | | 1258 | {0 15 0} | 0 17 0 | 2 11 0 | {0 16 0} | | | | | | {4 16 0} | | 1270 | {6 8 0} | 5 12 0 | 16 16 0 | | | 1286 | {0 2 8} | 0 9 4 | 1 8 0 | {0 16 0} | | | | | | | +----------------- | | Total, 35 9 3 | | ----------------- | | Average price, 2 19 1-1/4 ===================================================================== | | | 1287 | 0 3 4 | - - - | 0 10 0 | | | | {0 0 8} | | | {0 1 0} | | | {0 1 4} | | 1288 | {0 1 6} | 0 3 0-1/4 | 0 9 1-3/4 | {0 1 8} | | | {0 2 0} | | | {0 3 4} | | | {0 9 4} | | | | | | {0 12 0} | | | {0 6 0} | | 1289 | {0 2 0} | 0 10 1-1/2 | 1 10 4-1/2 | {0 10 8} | | | {1 0 0} | | | | | 1290 | 0 16 0 | - - - | 2 8 0 1294 | 0 16 0 | - - - | 2 8 0 1302 | 0 4 0 | - - - | 0 12 0 1309 | 0 7 2 | - - - | 1 1 6 1315 | 1 0 0 | - - - | 3 0 0 | | | | {1 0 0} | | | {1 10 0} | | 1316 | {1 12 0} | 1 10 6 | 4 11 6 | {2 0 0} | | | | | | {2 4 0} | | | {0 14 0} | | 1317 | {2 13 0} | 1 19 6 | 5 18 6 | {4 0 0} | | | {0 6 8} | | | | | 1336 | 0 2 0 | - - - | 0 6 0 1338 | 0 3 4 | - - - | 0 10 0 | | +----------------- | | Total, 23 4 11-1/4 | | ----------------- | | Average price, 1 18 8 ===================================================================== | | | 1339 | 0 9 0 | - - - | 1 7 0 1349 | 0 2 0 | - - - | 0 5 2 1359 | 1 6 8 | - - - | 3 2 2 1361 | 0 2 0 | - - - | 0 4 8 1363 | 0 15 0 | - - - | 1 15 0 | | | 1369 | {1 0 0} | 1 2 0 | 2 9 4 | {1 4 0} | | | | | 1379 | 0 4 0 | - - - | 0 9 4 1387 | 0 2 0 | - - - | 0 4 8 | | | | {0 13 4} | | 1390 | {0 14 0} | 0 14 5 | 1 13 7 | {0 16 0} | | | | | 1401 | 0 16 0 | - - - | 1 17 6 | | | | {0 4 4-3/4}| | 1407 | {0 3 4 }| 0 3 10 | 0 8 11 | | | 1416 | 0 16 0 | - - - | 1 12 0 | | +----------------- | | Total, 15 9 4 | | ----------------- | | Aver. price, 1 5 9-1/2 ===================================================================== | | | 1423 | 0 8 0 | - - - | 0 16 0 1425 | 0 4 0 | - - - | 0 8 0 1434 | 1 6 8 | - - - | 2 13 4 1435 | 0 5 4 | - - - | 0 10 8 | | | | {1 0 0} | 1 3 4 | 2 6 8 1439 | {1 6 8} | | | | | 1440 | 1 4 0 | - - - | 2 8 0 | | | | {0 4 4} | - - - | 2 8 0 1444 | {0 4 0} | 0 4 2 | 0 8 4 | | | 1445 | 0 4 6 | - - - | 0 9 0 1447 | 0 8 0 | - - - | 0 16 0 1448 | 0 6 8 | - - - | 0 13 4 1449 | 0 5 0 | - - - | 0 10 0 1451 | 0 8 0 | - - - | 0 16 0 | | +----------------- | | Total, 12 15 4 | | ----------------- | | Aver. price, 1 1 3-1/3 ===================================================================== | | | 1453 | 0 5 4 | - - - | 0 10 8 1455 | 0 1 2 | - - - | 0 2 4 1457 | 0 7 8 | - - - | 0 15 4 1459 | 0 5 0 | - - - | 0 10 0 1460 | 0 8 0 | - - - | 0 16 0 | | | | {0 2 0} | | 1463 | {0 1 8} | 0 1 10 | 0 3 8 | | | 1464 | 0 6 8 | - - - | 0 10 0 1486 | 1 4 0 | - - - | 1 17 0 1491 | 0 14 8 | - - - | 1 2 0 1494 | 0 4 0 | - - - | 0 6 0 1495 | 0 3 4 | - - - | 0 5 0 1497 | 1 0 0 | - - - | 1 11 0 | | +----------------- | | Total, 8 9 0 | | ----------------- | | Aver. price, 0 14 1 ===================================================================== | | | 1499 | 0 4 0 | - - - | 0 6 0 1504 | 0 5 8 | - - - | 0 8 6 1521 | 1 0 0 | - - - | 1 10 0 1551 | 0 8 0 | - - - | 0 8 0 1553 | 0 8 0 | - - - | 0 8 0 1554 | 0 8 0 | - - - | 0 8 0 1555 | 0 8 0 | - - - | 0 8 0 1556 | 0 8 0 | - - - | 0 8 0 | | | | {0 4 0} | | 1957 | {0 5 0} | 0 17 8-1/2 | 0 17 8-1/2 | {0 8 0} | | | {2 13 4} | | | | | 1558 | 0 8 0 | - - - | 0 8 0 1559 | 0 8 0 | - - - | 0 8 0 1560 | 0 8 0 | - - - | 0 8 0 | | +----------------- | | Total, 6 0 2-1/2 | | ----------------- | | Average price, 0 10 0-5/12 ===================================================================== | | | 1561 | 0 8 0 | - - - | 0 8 0 1562 | 0 8 0 | - - - | 0 8 0 | | | 1574 | {2 16 0} | 2 0 0 | 2 0 0 | {1 4 0} | | | | | 1587 | 3 4 0 | - - - | 3 4 0 1594 | 2 16 0 | - - - | 2 16 0 1595 | 2 13 0 | - - - | 2 13 0 1596 | 4 0 0 | - - - | 4 0 0 | | | 1597 | {5 4 0} | 4 12 0 | 4 12 0 | {4 0 0} | | | | | 1598 | 2 16 8 | - - - | 2 16 8 1599 | 1 19 2 | - - - | 1 19 2 1600 | 1 17 8 | - - - | 1 17 8 1601 | 1 14 10 | - - - | 1 14 10 | | +----------------- | | Total, 28 9 4 | | ----------------- | | Average price, 2 7 5-1/3 ===================================================================== PRICES OF THE QUARTER OF NINE BUSHELS OF THE BEST OR HIGHEST PRICED WHEAT AT WINDSOR MARKET, ON LADY-DAY AND MICHAELMAS, FROM 1595 TO 1764, BOTH INCLUSIVE; THE PRICE OF EACH YEAR BEING THE MEDIUM BETWEEN THE HIGHEST PRICES OF THOSE TWO MARKET-DAYS. Wheat per Quarter. Years. L. s. d. 1595 2 0 0 1596 2 8 0 1597 3 9 6 1598 2 16 8 1599 1 19 2 1600 1 17 8 1601 1 14 10 1602 1 9 4 1603 1 15 4 1604 1 10 8 1605 1 15 10 1606 1 13 0 1607 1 16 8 1608 2 16 8 1609 2 10 0 1610 1 15 10 1611 1 18 8 1612 2 2 4 1613 2 8 8 1614 2 1 8-1/2 1615 1 18 8 1616 2 0 4 1617 2 8 8 1618 2 6 8 1619 1 15 4 1620 1 10 4 ----------- 26)54 0 6-1/2 ----------- 2 1 6-9/13 Wheat per Quarter. Years. L. s. d. 1621 1 10 4 1622 2 18 8 1623 2 12 0 1624 2 8 0 1625 2 12 0 1626 2 9 4 1627 1 16 0 1628 1 8 0 1629 2 2 0 1630 2 15 8 1631 3 8 0 1632 2 13 4 1633 2 18 0 1634 2 16 0 1635 2 16 0 1636 2 16 8 ----------- 16)40 0 0 ----------- 2 10 0 Wheat per Quarter. Years. L. s. d. 1637 2 13 0 1638 2 17 4 1639 2 4 10 1640 2 4 8 1641 2 8 0 1642[26] 0 0 0 1643[26] 0 0 0 1644[26] 0 0 0 1645[26] 0 0 0 1646 2 8 0 1647 3 13 0 1648 4 5 0 1649 4 0 0 1650 3 16 8 1651 3 13 4 1652 2 9 6 1653 1 15 6 1654 1 6 0 1655 1 13 4 1656 2 3 0 1657 2 6 8 1658 3 5 0 1659 3 6 0 1660 2 16 6 1661 3 10 0 1662 3 14 0 1663 2 17 0 1664 2 0 6 1665 2 9 4 1666 1 16 0 1667 1 16 0 1668 2 0 0 1669 2 4 4 1670 2 1 8 1671 2 2 0 1672 2 1 0 1673 2 6 8 1674 3 8 8 1675 3 4 8 1676 1 18 0 1677 2 2 0 1678 2 19 0 1679 3 0 0 1680 2 5 0 1681 2 6 8 1682 2 4 0 1683 2 0 0 1684 2 4 0 1685 2 6 8 1686 1 14 0 1687 1 5 2 1688 2 6 0 1689 1 10 0 1690 1 14 8 1691 1 14 0 1692 2 6 8 1693 3 7 8 1694 3 4 0 1695 2 13 0 1696 3 11 0 1697 3 0 0 1698 3 8 4 1699 3 4 0 1700 2 0 0 ------------ 60)153 1 8 ------------ 2 11 0-1/2 Wheat per Quarter. Years. L. s. d. 1701 1 17 8 1702 1 9 6 1703 1 16 0 1704 2 6 6 1705 1 10 0 1706 1 6 0 1707 1 8 6 1708 2 1 6 1709 3 18 6 1710 3 18 0 1711 2 14 0 1712 2 6 4 1713 2 11 0 1714 2 10 4 1715 2 3 0 1716 2 8 0 1717 2 5 8 1718 1 18 10 1719 1 15 0 1720 1 17 0 1721 1 17 6 1722 1 16 0 1723 1 14 8 1724 1 17 0 1725 2 8 6 1726 2 6 0 1727 2 2 0 1728 2 14 6 1729 2 6 10 1730 1 16 6 1731 1 12 10 1732 1 6 8 1733 1 8 4 1734 1 18 10 1735 2 3 0 1736 2 0 4 1737 1 18 0 1738 1 15 6 1739 1 18 6 1740 2 10 8 1741 2 6 8 1742 1 14 0 1743 1 4 10 1744 1 4 10 1745 1 7 6 1746 1 19 0 1747 1 14 10 1748 1 17 0 1749 1 17 0 1750 1 12 6 1751 1 18 6 1752 2 1 10 1753 2 4 8 1754 1 14 8 1755 1 13 10 1756 2 5 3 1757 3 0 0 1758 2 10 0 1759 1 19 10 1760 1 16 6 1761 1 10 3 1762 1 19 0 1763 2 0 9 1764 2 6 9 ------------ 64)129 13 6 ------------ 2 0 6-18/64 Wheat per Quarter. Years. L. s. d. 1731 1 12 10 1732 1 6 8 1733 1 8 4 1734 1 18 10 1735 2 3 0 1736 2 0 4 1737 1 18 0 1738 1 15 6 1739 1 18 6 1740 2 10 8 ----------- 10)18 12 8 ----------- 1 17 3-1/5 Wheat per Quarter. Years. L. s. d. 1741 2 6 8 1742 1 14 0 1743 1 4 10 1744 1 4 10 1745 1 7 6 1746 1 19 0 1747 1 14 10 1748 1 17 0 1749 1 17 0 1750 1 12 6 ----------- 10)16 18 2 ----------- 1 13 9-4/5 BOOK II. OF THE NATURE, ACCUMULATION, AND EMPLOYMENT OF STOCK. INTRODUCTION. In that rude state of society, in which there is no division of labour, in which exchanges are seldom made, and in which every man provides every thing for himself, it is not necessary that any stock should be accumulated, or stored up before-hand, in order to carry on the business of the society. Every man endeavours to supply, by his own industry, his own occasional wants, as they occur. When he is hungry, he goes to the forest to hunt; when his coat is worn out, he clothes himself with the skin of the first large animal he kills; and when his hut begins to go to ruin, he repairs it, as well as he can, with the trees and the turf that are nearest it. But when the division of labour has once been thoroughly introduced, the produce of a man's own labour can supply but a very small part of his occasional wants. The far greater part of them are supplied by the produce of other men's labour, which he purchases with the produce, or, what is the same thing, with the price of the produce, of his own. But this purchase cannot be made till such time as the produce of his own labour has not only been completed, but sold. A stock of goods of different kinds, therefore, must be stored up somewhere, sufficient to maintain him, and to supply him with the materials and tools of his work, till such time at least as both these events can be brought about. A weaver cannot apply himself entirely to his peculiar business, unless there is before-hand stored up somewhere, either in his own possession, or in that of some other person, a stock sufficient to maintain him, and to supply him with the materials and tools of his work, till he has not only completed, but sold his web. This accumulation must evidently be previous to his applying his industry for so long a time to such a peculiar business. As the accumulation of stock must, in the nature of things, be previous to the division of labour, so labour can be more and more subdivided in proportion only as stock is previously more and more accumulated. The quantity of materials which the same number of people can work up, increases in a great proportion as labour comes to be more and more subdivided; and as the operations of each workman are gradually reduced to a greater degree of simplicity, a variety of new machines come to be invented for facilitating and abridging these operations. As the division of labour advances, therefore, in order to give constant employment to an equal number of workman, an equal stock of provisions, and a greater stock of materials and tools than what would have been necessary in a ruder state of things, must be accumulated before-hand. But the number of workmen in every branch of business generally increases with the division of labour in that branch; or rather it is the increase of their number which enables them to class and subdivide themselves in this manner. As the accumulation of stock is previously necessary for carrying on this great improvement in the productive powers of labour, so that accumulation naturally leads to this improvement. The person who employs his stock in maintaining labour, necessarily wishes to employ it in such a manner as to produce as great a quantity of work as possible. He endeavours, therefore, both to make among his workmen the most proper distribution of employment, and to furnish them with the best machines which he can either invent or afford to purchase. His abilities, in both these respects, are generally in proportion to the extent of his stock, or to the number of people whom it can employ. The quantity of industry, therefore, not only increases in every country with the increase of the stock which employs it, but, in consequence of that increase, the same quantity of industry produces a much greater quantity of work. Such are in general the effects of the increase of stock upon industry and its productive powers. In the following book, I have endeavoured to explain the nature of stock, the effects of its accumulation into capital of different kinds, and the effects of the different employments of those capitals. This book is divided into five chapters. In the first chapter, I have endeavoured to shew what are the different parts or branches into which the stock, either of an individual, or of a great society, naturally divides itself. In the second, I have endeavoured to explain the nature and operation of money, considered as a particular branch of the general stock of the society. The stock which is accumulated into a capital, may either be employed by the person to whom it belongs, or it may be lent to some other person. In the third and fourth chapters, I have endeavoured to examine the manner in which it operates in both these situations. The fifth and last chapter treats of the different effects which the different employments of capital immediately produce upon the quantity, both of national industry, and of the annual produce of land and labour. CHAP. I. OF THE DIVISION OF STOCK. When the stock which a man possesses is no more than sufficient to maintain him for a few days or a few weeks, he seldom thinks of deriving any revenue from it. He consumes it as sparingly as he can, and endeavours, by his labour, to acquire something which may supply its place before it be consumed altogether. His revenue is, in this case, derived from his labour only. This is the state of the greater part of the labouring poor in all countries. But when he possesses stock sufficient to maintain him for months or years, he naturally endeavours to derive a revenue from the greater part of it, reserving only so much for his immediate consumption as may maintain him till this revenue begins to come in. His whole stock, therefore, is distinguished into two parts. That part which he expects is to afford him this revenue is called his capital. The other is that which supplies his immediate consumption, and which consists either, first, in that portion of his whole stock which was originally reserved for this purpose; or, secondly, in his revenue, from whatever source derived, as it gradually comes in; or, thirdly, in such things as had been purchased by either of these in former years, and which are not yet entirely consumed, such as a stock of clothes, household furniture, and the like. In one or other, or all of these three articles, consists the stock which men commonly reserve for their own immediate consumption. There are two different ways in which a capital may be employed so as to yield a revenue or profit to its employer. First, it may be employed in raising, manufacturing, or purchasing goods, and selling them again with a profit. The capital employed in this manner yields no revenue or profit to its employer, while it either remains in his possession, or continues in the same shape. The goods of the merchant yield him no revenue or profit till he sells them for money, and the money yields him as little till it is again exchanged for goods. His capital is continually going from him in one shape, and returning to him in another; and it is only by means of such circulation, or successive changes, that it can yield him any profit. Such capitals, therefore, may very properly be called circulating capitals. Secondly, it may be employed in the improvement of land, in the purchase of useful machines and instruments of trade, or in such like things as yield a revenue or profit without changing masters, or circulating any further. Such capitals, therefore, may very properly be called fixed capitals. Different occupations require very different proportions between the fixed and circulating capitals employed in them. The capital of a merchant, for example, is altogether a circulating capital. He has occasion for no machines or instruments of trade, unless his shop or warehouse be considered as such. Some part of the capital of every master artificer or manufacturer must be fixed in the instruments of his trade. This part, however, is very small in some, and very great in others. A master tailor requires no other instruments of trade but a parcel of needles. Those of the master shoemaker are a little, though but a very little, more expensive. Those of the weaver rise a good deal above those of the shoemaker. The far greater part of the capital of all such master artificers, however, is circulated either in the wages of their workmen, or in the price of their materials, and repaid, with a profit, by the price of the work. In other works a much greater fixed capital is required. In a great iron-work, for example, the furnace for melting the ore, the forge, the slit-mill, are instruments of trade which cannot be erected without a very great expense. In coal works, and mines of every kind, the machinery necessary, both for drawing out the water, and for other purposes, is frequently still more expensive. That part of the capital of the farmer which is employed in the instruments of agriculture is a fixed, that which is employed in the wages and maintenance of his labouring servants is a circulating capital. He makes a profit of the one by keeping it in his own possession, and of the other by parting with it. The price or value of his labouring cattle is a fixed capital, in the same manner as that of the instruments of husbandry; their maintenance is a circulating capital, in the same manner as that of the labouring servants. The farmer makes his profit by keeping the labouring cattle, and by parting with their maintenance. Both the price and the maintenance of the cattle which are bought in and fattened, not for labour, but for sale, are a circulating capital. The farmer makes his profit by parting with them. A flock of sheep or a herd of cattle, that, in a breeding country, is brought in neither for labour nor for sale, but in order to make a profit by their wool, by their milk, and by their increase, is a fixed capital. The profit is made by keeping them. Their maintenance is a circulating capital. The profit is made by parting with it; and it comes back with both its own profit and the profit upon the whole price of the cattle, in the price of the wool, the milk, and the increase. The whole value of the seed, too, is properly a fixed capital. Though it goes backwards and forwards between the ground and the granary, it never changes masters, and therefore does not properly circulate. The farmer makes his profit, not by its sale, but by its increase. The general stock of any country or society is the same with that of all its inhabitants or members; and, therefore, naturally divides itself into the same three portions, each of which has a distinct function or office. The first is that portion which is reserved for immediate consumption, and of which the characteristic is, that it affords no revenue or profit. It consists in the stock of food, clothes, household furniture, &c. which have been purchased by their proper consumers, but which are not yet entirely consumed. The whole stock of mere dwelling-houses, too, subsisting at any one time in the country, make a part of this first portion. The stock that is laid out in a house, if it is to be the dwelling-house of the proprietor, ceases from that moment to serve in the function of a capital, or to afford any revenue to its owner. A dwelling-house, as such, contributes nothing to the revenue of its inhabitant; and though it is, no doubt, extremely useful to him, it is as his clothes and household furniture are useful to him, which, however, make a part of his expense, and not of his revenue. If it is to be let to a tenant for rent, as the house itself can produce nothing, the tenant must always pay the rent out of some other revenue, which he derives, either from labour, or stock, or land. Though a house, therefore, may yield a revenue to its proprietor, and thereby serve in the function of a capital to him, it cannot yield any to the public, nor serve in the function of a capital to it, and the revenue of the whole body of the people can never be in the smallest degree increased by it. Clothes and household furniture, in the same manner, sometimes yield a revenue, and thereby serve in the function of a capital to particular persons. In countries where masquerades are common, it is a trade to let out masquerade dresses for a night. Upholsterers frequently let furniture by the month or by the year. Undertakers let the furniture of funerals by the day and by the week. Many people let furnished houses, and get a rent, not only for the use of the house, but for that of the furniture. The revenue, however, which is derived from such things, must always be ultimately drawn from some other source of revenue. Of all parts of the stock, either of an individual or of a society, reserved for immediate consumption, what is laid out in houses is most slowly consumed. A stock of clothes may last several years; a stock of furniture half a century or a century; but a stock of houses, well built and properly taken care of, may last many centuries. Though the period of their total consumption, however, is more distant, they are still as really a stock reserved for immediate consumption as either clothes or household furniture. The second of the three portions into which the general stock of the society divides itself, is the fixed capital; of which the characteristic is, that it affords a revenue or profit without circulating or changing masters. It consists chiefly of the four following articles. First, of all useful machines and instruments of trade, which facilitate and abridge labour. Secondly, of all those profitable buildings which are the means of procuring a revenue, not only to the proprietor who lets them for a rent, but to the person who possesses them, and pays that rent for them; such as shops, warehouses, workhouses, farm-houses, with all their necessary buildings, stables, granaries, &c. These are very different from mere dwelling-houses. They are a sort of instruments of trade, and may be considered in the same light. Thirdly, of the improvements of land, of what has been profitably laid out in clearing, draining, inclosing, manuring, and reducing it into the condition most proper for tillage and culture. An improved farm may very justly be regarded in the same light as those useful machines which facilitate and abridge labour, and by means of which an equal circulating capital can afford a much greater revenue to its employer. An improved farm is equally advantageous and more durable than any of those machines, frequently requiring no other repairs than the most profitable application of the farmer's capital employed in cultivating it. Fourthly, of the acquired and useful abilities of all the inhabitants and members of the society. The acquisition of such talents, by the maintenance of the acquirer during his education, study, or apprenticeship, always costs a real expense, which is a capital fixed and realised, as it were, in his person. Those talents, as they make a part of his fortune, so do they likewise that of the society to which he belongs. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labour, and which, though it costs a certain expense, repays that expense with a profit. The third and last of the three portions into which the general stock of the society naturally divides itself, is the circulating capital, of which the characteristic is, that it affords a revenue only by circulating or changing masters. It is composed likewise of four parts. First, of the money, by means of which all the other three are circulated and distributed to their proper consumers. Secondly, of the stock of provisions which are in the possession of the butcher, the grazier, the farmer, the corn-merchant, the brewer, &c. and from the sale of which they expect to derive a profit. Thirdly, of the materials, whether altogether rude, or more or less manufactured, of clothes, furniture, and building which are not yet made up into any of those three shapes, but which remain in the hands of the growers, the manufacturers, the mercers, and drapers, the timber-merchants, the carpenters and joiners, the brick-makers, &c. Fourthly, and lastly, of the work which is made up and completed, but which is still in the hands of the merchant and manufacturer, and not yet disposed of or distributed to the proper consumers; such as the finished work which we frequently find ready made in the shops of the smith, the cabinet-maker, the goldsmith, the jeweller, the china-merchant, &c. The circulating capital consists, in this manner, of the provisions, materials, and finished work of all kinds that are in the hands of their respective dealers, and of the money that is necessary for circulating and distributing them to those who are finally to use or to consume them. Of these four parts, three--provisions, materials, and finished work, are either annually or in a longer or shorter period, regularly withdrawn from it, and placed either in the fixed capital, or in the stock reserved for immediate consumption. Every fixed capital is both originally derived from, and requires to be continually supported by, a circulating capital. All useful machines and instruments of trade are originally derived from a circulating capital, which furnishes the materials of which they are made, and the maintenance of the workmen who make them. They require, too, a capital of the same kind to keep them in constant repair. No fixed capital can yield any revenue but by means of a circulating capital. The most useful machines and instruments of trade will produce nothing, without the circulating capital, which affords the materials they are employed upon, and the maintenance of the workmen who employ them. Land, however improved, will yield no revenue without a circulating capital, which maintains the labourers who cultivate and collect its produce. To maintain and augment the stock which may be reserved for immediate consumption, is the sole end and purpose both of the fixed and circulating capitals. It is this stock which feeds, clothes, and lodges the people. Their riches or poverty depend upon the abundant or sparing supplies which those two capitals can afford to the stock reserved for immediate consumption. So great a part of the circulating capital being continually withdrawn from it, in order to be placed in the other two branches of the general stock of the society, it must in its turn require continual supplies without which it would soon cease to exist. These supplies are principally drawn from three sources; the produce of land, of mines, and of fisheries. These afford continual supplies of provisions and materials, of which part is afterwards wrought up into finished work and by which are replaced the provisions, materials, and finished work, continually withdrawn from the circulating capital. From mines, too, is drawn what is necessary for maintaining and augmenting that part of it which consists in money. For though, in the ordinary course of business, this part is not, like the other three, necessarily withdrawn from it, in order to be placed in the other two branches of the stock of the society, it must, however, like all other things, be wasted and worn out at last, and sometimes, too, be either lost or sent abroad, and must, therefore, require continual, though no doubt much smaller, supplies. Lands, mines, and fisheries, require all both a fixed and circulating capital to cultivate them; and their produce replaces, with a profit not only those capitals, but all the others in the society. Thus the farmer annually replaces to the manufacturer the provisions which he had consumed, and the materials which he had wrought up the year before; and the manufacturer replaces to the farmer the finished work which he had wasted and worn out in the same time. This is the real exchange that is annually made between those two orders of people, though it seldom happens that the rude produce of the one, and the manufactured produce of the other, are directly bartered for one another; because it seldom happens that the farmer sells his corn and his cattle, his flax and his wool, to the very same person of whom he chuses to purchase the clothes, furniture, and instruments of trade, which he wants. He sells, therefore, his rude produce for money, with which he can purchase, wherever it is to be had, the manufactured produce he has occasion for. Land even replaces, in part at least, the capitals with which fisheries and mines are cultivated. It is the produce of land which draws the fish from the waters; and it is the produce of the surface of the earth which extracts the minerals from its bowels. The produce of land, mines, and fisheries, when their natural fertility is equal, is in proportion to the extent and proper application of the capitals employed about them. When the capitals are equal, and equally well applied, it is in proportion to their natural fertility. In all countries where there is a tolerable security, every man of common understanding will endeavour to employ whatever stock he can command, in procuring either present enjoyment or future profit. If it is employed in procuring present enjoyment, it is a stock reserved for immediate consumption. If it is employed in procuring future profit, it must procure this profit either by staying with him, or by going from him. In the one case it is a fixed, in the other it is a circulating capital. A man must be perfectly crazy, who, where there is a tolerable security, does not employ all the stock which he commands, whether it be his own, or borrowed of other people, in some one or other of those three ways. In those unfortunate countries, indeed, where men are continually afraid of the violence of their superiors, they frequently bury or conceal a great part of their stock, in order to have it always at hand to carry with them to some place of safety, in case of their being threatened with any of those disasters to which they consider themselves at all times exposed. This is said to be a common practice in Turkey, in Indostan, and, I believe, in most other governments of Asia. It seems to have been a common practice among our ancestors during the violence of the feudal government. Treasure-trove was, in these times, considered as no contemptible part of the revenue of the greatest sovereigns in Europe. It consisted in such treasure as was found concealed in the earth, and to which no particular person could prove any right. This was regarded, in those times, as so important an object, that it was always considered as belonging to the sovereign, and neither to the finder nor to the proprietor of the land, unless the right to it had been conveyed to the latter by an express clause in his charter. It was put upon the same footing with gold and silver mines, which, without a special clause in the charter, were never supposed to be comprehended in the general grant of the lands, though mines of lead, copper, tin, and coal were, as things of smaller consequence. CHAP II. OF MONEY, CONSIDERED AS A PARTICULAR BRANCH OF THE GENERAL STOCK OF THE SOCIETY, OR OF THE EXPENSE OF MAINTAINING THE NATIONAL CAPITAL. It has been shown in the First Book, that the price of the greater part of commodities resolves itself into three parts, of which one pays the wages of the labour, another the profits of the stock, and a third the rent of the land which had been employed in producing and bringing them to market: that there are, indeed, some commodities of which the price is made up of two of those parts only, the wages of labour, and the profits of stock; and a very few in which it consists altogether in one, the wages of labour; but that the price of every commodity necessarily resolves itself into some one or other, or all, of those three parts; every part of it which goes neither to rent nor to wages, being necessarily profit to somebody. Since this is the case, it has been observed, with regard to every particular commodity, taken separately, it must be so with regard to all the commodities which compose the whole annual produce of the land and labour of every country, taken complexly. The whole price or exchangeable value of that annual produce must resolve itself into the same three parts, and be parcelled out among the different inhabitants of the country, either as the wages of their labour, the profits of their their stock, or the rent of their land. But though the whole value of the annual produce of the land and labour of every country, is thus divided among, and constitutes a revenue to, its different inhabitants; yet, as in the rent of a private estate, we distinguish between the gross rent and the neat rent, so may we likewise in the revenue of all the inhabitants of a great country. The gross rent of a private estate comprehends whatever is paid by the farmer; the neat rent, what remains free to the landlord, after deducting the expense of management, of repairs, and all other necessary charges; or what, without hurting his estate, he can afford to place in his stock reserved for immediate consumption, or to spend upon his table, equipage, the ornaments of his house and furniture, his private enjoyments and amusements. His real wealth is in proportion, not to his gross, but to his neat rent. The gross revenue of all the inhabitants of a great country comprehends the whole annual produce of their land and labour; the neat revenue, what remains free to them, after deducting the expense of maintaining, first, their fixed, and, secondly, their circulating capital, or what, without encroaching upon their capital, they can place in their stock reserved for immediate consumption, or spend upon their subsistence, conveniencies, and amusements. Their real wealth, too, is in proportion, not to their gross, but to their neat revenue. The whole expense of maintaining the fixed capital must evidently be excluded from the neat revenue of the society. Neither the materials necessary for supporting their useful machines and instruments of trade, their profitable buildings, &c. nor the produce of the labour necessary for fashioning those materials into the proper form, can ever make any part of it. The price of that labour may indeed make a part of it; as the workmen so employed may place the whole value of their wages in their stock reserved for immediate consumption. But in other sorts of labour, both the price and the produce go to this stock; the price to that of the workmen, the produce to that of other people, whose subsistence, conveniencies, and amusements, are augmented by the labour of those workmen. The intention of the fixed capital is to increase the productive powers of labour, or to enable the same number of labourers to perform a much greater quantity of work. In a farm where all the necessary buildings, fences, drains, communications, &c. are in the most perfect good order, the same number of labourers and labouring cattle will raise a much greater produce, than in one of equal extent and equally good ground, but not furnished with equal conveniencies. In manufactures, the same number of hands, assisted with the best machinery, will work up a much greater quantity of goods than with more imperfect instruments of trade. The expense which is properly laid out upon a fixed capital of any kind, is always repaid with great profit, and increases the annual produce by a much greater value than that of the support which such improvements require. This support, however, still requires a certain portion of that produce. A certain quantity of materials, and the labour of a certain number of workmen, both of which might have been immediately employed to augment the food, clothing, and lodging, the subsistence and conveniencies of the society, are thus diverted to another employment, highly advantageous indeed, but still different from this one. It is upon this account that all such improvements in mechanics, as enable the same number of workmen to perform an equal quantity of work with cheaper and simpler machinery than had been usual before, are always regarded as advantageous to every society. A certain quantity of materials, and the labour of a certain number of workmen, which had before been employed in supporting a more complex and expensive machinery, can afterwards be applied to augment the quantity of work which that or any other machinery is useful only for performing. The undertaker of some great manufactory, who employs a thousand a-year in the maintenance of his machinery, if he can reduce this expense to five hundred, will naturally employ the other five hundred in purchasing an additional quantity of materials, to be wrought up by an additional number of workmen. The quantity of that work, therefore, which his machinery was useful only for performing, will naturally be augmented, and with it all the advantage and conveniency which the society can derive from that work. The expense of maintaining the fixed capital in a great country, may very properly be compared to that of repairs in a private estate. The expense of repairs may frequently be necessary for supporting the produce of the estate, and consequently both the gross and the neat rent of the landlord. When by a more proper direction, however, it can be diminished without occasioning any diminution of produce, the gross rent remains at least the same as before, and the neat rent is necessarily augmented. But though the whole expense of maintaining the fixed capital is thus necessarily excluded from the neat revenue of the society, it is not the same case with that of maintaining the circulating capital. Of the four parts of which this latter capital is composed, money, provisions, materials, and finished work, the three last, it has already been observed, are regularly withdrawn from it, and placed either in the fixed capital of the society, or in their stock reserved for immediate consumption. Whatever portion of those consumable goods is not employed in maintaining the former, goes all to the latter, and makes a part of the neat revenue of the society. The maintenance of those three parts of the circulating capital, therefore, withdraws no portion of the annual produce from the neat revenue of the society, besides what is necessary for maintaining the fixed capital. The circulating capital of a society is in this respect different from that of an individual. That of an individual is totally excluded from making any part of his neat revenue, which must consist altogether in his profits. But though the circulating capital of every individual makes a part of that of the society to which he belongs, it is not upon that account totally excluded from making a part likewise of their neat revenue. Though the whole goods in a merchant's shop must by no means be placed in his own stock reserved for immediate consumption, they may in that of other people, who, from a revenue derived from other funds, may regularly replace their value to him, together with its profits, without occasioning any diminution either of his capital or of theirs. Money, therefore, is the only part of the circulating capital of a society, of which the maintenance can occasion any diminution in their neat revenue. The fixed capital, and that part of the circulating capital which consists in money, so far as they affect the revenue of the society, bear a very great resemblance to one another. First, as those machines and instruments of trade, &c. require a certain expense, first to erect them, and afterwards to support them, both which expenses, though they make a part of the gross, are deductions from the neat revenue of the society; so the stock of money which circulates in any country must require a certain expense, first to collect it, and afterwards to support it; both which expenses, though they make a part of the gross, are, in the same manner, deductions from the neat revenue of the society. A certain quantity of very valuable materials, gold and silver, and of very curious labour, instead of augmenting the stock reserved for immediate consumption, the subsistence, conveniencies, and amusements of individuals, is employed in supporting that great but expensive instrument of commerce, by means of which every individual in the society has his subsistence, conveniencies, and amusements, regularly distributed to him in their proper proportions. Secondly, as the machines and instruments of trade, &c. which compose the fixed capital either of an individual or of a society, make no part either of the gross or of the neat revenue of either; so money, by means of which the whole revenue of the society is regularly distributed among all its different members, makes itself no part of that revenue. The great wheel of circulation is altogether different from the goods which are circulated by means of it. The revenue of the society consists altogether in those goods, and not in the wheel which circulates them. In computing either the gross or the neat revenue of any society, we must always, from the whole annual circulation of money and goods, deduct the whole value of the money, of which not a single farthing can ever make any part of either. It is the ambiguity of language only which can make this proposition appear either doubtful or paradoxical. When properly explained and understood, it is almost self-evident. When we talk of any particular sum of money, we sometimes mean nothing but the metal pieces of which it is composed, and sometimes we include in our meaning some obscure reference to the goods which can be had in exchange for it, or to the power of purchasing which the possession of it conveys. Thus, when we say that the circulating money of England has been computed at eighteen millions, we mean only to express the amount of the metal pieces, which some writers have computed, or rather have supposed, to circulate in that country. But when we say that a man is worth fifty or a hundred pounds a-year, we mean commonly to express, not only the amount of the metal pieces which are annually paid to him, but the value of the goods which he can annually purchase or consume; we mean commonly to assertain what is or ought to be his way of living, or the quantity and quality of the necessaries and conveniencies of life in which he can with propriety indulge himself. When, by any particular sum of money, we mean not only to express the amount of the metal pieces of which it is composed, but to include in its signification some obscure reference to the goods which can be had in exchange for them, the wealth or revenue which it in this case denotes, is equal only to one of the two values which are thus intimated somewhat ambiguously by the same word, and to the latter more properly than to the former, to the money's worth more properly than to the money. Thus, if a guinea be the weekly pension of a particular person, he can in the course of the week purchase with it a certain quantity of subsistence, conveniencies, and amusements. In proportion as this quantity is great or small, so are his real riches, his real weekly revenue. His weekly revenue is certainly not equal both to the guinea and to what can be purchased with it, but only to one or other of those two equal values, and to the latter more properly than to the former, to the guinea's worth rather than to the guinea. If the pension of such a person was paid to him, not in gold, but in a weekly bill for a guinea, his revenue surely would not so properly consist in the piece of paper, as in what he could get for it. A guinea may be considered as a bill for a certain quantity of necessaries and conveniencies upon all the tradesmen in the neighbourhood. The revenue of the person to whom it is paid, does not so properly consist in the piece of gold, as in what he can get for it, or in what he can exchange it for. If it could be exchanged for nothing, it would, like a bill upon a bankrupt, be of no more value than the most useless piece of paper. Though the weekly or yearly revenue of all the different inhabitants of any country, in the same manner, may be, and in reality frequently is, paid to them in money, their real riches, however, the real weekly or yearly revenue of all of them taken together, must always be great or small, in proportion to the quantity of consumable goods which they can all of them purchase with this money. The whole revenue of all of them taken together is evidently not equal to both the money and the consumable goods, but only to one or other of those two values, and to the latter more properly than to the former. Though we frequently, therefore, express a person's revenue by the metal pieces which are annually paid to him, it is because the amount of those pieces regulates the extent of his power of purchasing, or the value of the goods which he can annually afford to consume. We still consider his revenue as consisting in this power of purchasing or consuming, and not in the pieces which convey it. But if this is sufficiently evident, even with regard to an individual, it is still more so with regard to a society. The amount of the metal pieces which are annually paid to an individual, is often precisely equal to his revenue, and is upon that account the shortest and best expression of its value. But the amount of the metal pieces which circulate in a society, can never be equal to the revenue of all its members. As the same guinea which pays the weekly pension of one man to-day, may pay that of another to-morrow, and that of a third the day thereafter, the amount of the metal pieces which annually circulate in any country, must always be of much less value than the whole money pensions annually paid with them. But the power of purchasing, or the goods which can successively be bought with the whole of those money pensions, as they are successively paid, must always be precisely of the same value with those pensions; as must likewise be the revenue of the different persons to whom they are paid. That revenue, therefore, cannot consist in those metal pieces, of which the amount is so much inferior to its value, but in the power of purchasing, in the goods which can successively be bought with them as they circulate from hand to hand. Money, therefore, the great wheel of circulation, the great instrument of commerce, like all other instruments of trade, though it makes a part, and a very valuable part, of the capital, makes no part of the revenue of the society to which it belongs; and though the metal pieces of which it is composed, in the course of their annual circulation, distribute to every man the revenue which properly belongs to him, they make themselves no part of that revenue. Thirdly, and lastly, the machines and instruments of trade, &c. which compose the fixed capital, bear this further resemblance to that part of the circulating capital which consists in money; that as every saving in the expense of erecting and supporting those machines, which does not diminish the introductive powers of labour, is an improvement of the neat revenue of the society; so every saving in the expense of collecting and supporting that part of the circulating capital which consists in money is an improvement of exactly the same kind. It is sufficiently obvious, and it has partly, too, been explained already, in what manner every saving in the expense of supporting the fixed capital is an improvement of the neat revenue of the society. The whole capital of the undertaker of every work is necessarily divided between his fixed and his circulating capital. While his whole capital remains the same, the smaller the one part, the greater must necessarily be the other. It is the circulating capital which furnishes the materials and wages of labour, and puts industry into motion. Every saving, therefore, in the expense of maintaining the fixed capital, which does not diminish the productive powers of labour, must increase the fund which puts industry into motion, and consequently the annual produce of land and labour, the real revenue of every society. The substitution of paper in the room of gold and silver money, replaces a very expensive instrument of commerce with one much less costly, and sometimes equally convenient. Circulation comes to be carried on by a new wheel, which it costs less both to erect and to maintain than the old one. But in what manner this operation is performed, and in what manner it tends to increase either the gross or the neat revenue of the society, is not altogether so obvious, and may therefore require some further explication. There are several different sorts of paper money; but the circulating notes of banks and bankers are the species which is best known, and which seems best adapted for this purpose. When the people of any particular country have such confidence in the fortune, probity and prudence of a particular banker, as to believe that he is always ready to pay upon demand such of his promissory notes as are likely to be at any time presented to him, those notes come to have the same currency as gold and silver money, from the confidence that such money can at any time be had for them. A particular banker lends among his customers his own promissory notes, to the extent, we shall suppose, of a hundred thousand pounds. As those notes serve all the purposes of money, his debtors pay him the same interest as if he had lent them so much money. This interest is the source of his gain. Though some of those notes are continually coming back upon him for payment, part of them continue to circulate for months and years together. Though he has generally in circulation, therefore, notes to the extent of a hundred thousand pounds, twenty thousand pounds in gold and silver may, frequently, be a sufficient provision for answering occasional demands. By this operation, therefore, twenty thousand pounds in gold and silver perform all the functions which a hundred thousand could otherwise have performed. The same exchanges may be made, the same quantity of consumable goods may be circulated and distributed to their proper consumers, by means of his promissory notes, to the value of a hundred thousand pounds, as by an equal value of gold and silver money. Eighty thousand pounds of gold and silver, therefore, can in this manner be spared from the circulation of the country; and if different operations of the same kind should, at the same time, be carried on by many different banks and bankers, the whole circulation may thus be conducted with a fifth part only of the gold and silver which would otherwise have been requisite. Let us suppose, for example, that the whole circulating money of some particular country amounted, at a particular time, to one million sterling, that sum being then sufficient for circulating the whole annual produce of their land and labour; let us suppose, too, that some time thereafter, different banks and bankers issued promissory notes payable to the bearer, to the extent of one million, reserving in their different coffers two hundred thousand pounds for answering occasional demands; there would remain, therefore, in circulation, eight hundred thousand pounds in gold and silver, and a million of bank notes, or eighteen hundred thousand pounds of paper and money together. But the annual produce of the land and labour of the country had before required only one million to circulate and distribute it to its proper consumers, and that annual produce cannot be immediately augmented by those operations of banking. One million, therefore, will be sufficient to circulate it after them. The goods to be bought and sold being precisely the same as before, the same quantity of money will be sufficient for buying and selling them. The channel of circulation, if I may be allowed such an expression, will remain precisely the same as before. One million we have supposed sufficient to fill that channel. Whatever, therefore, is poured into it beyond this sum, cannot run into it, but must overflow. One million eight hundred thousand pounds are poured into it. Eight hundred thousand pounds, therefore, must overflow, that sum being over and above what can be employed in the circulation of the country. But though this sum cannot be employed at home, it is too valuable to be allowed to lie idle. It will, therefore, be sent abroad, in order to seek that profitable employment which it cannot find at home. But the paper cannot go abroad; because at a distance from the banks which issue it, and from the country in which payment of it can be exacted by law, it will not be received in common payments. Gold and silver, therefore, to the amount of eight hundred thousand pounds, will be sent abroad, and the channel of home circulation will remain filled with a million of paper instead of a million of those metals which filled it before. But though so great a quantity of gold and silver is thus sent abroad, we must not imagine that it is sent abroad for nothing, or that its proprietors make a present of it to foreign nations. They will exchange it for foreign goods of some kind or another, in order to supply the consumption either of some other foreign country, or of their own. If they employ it in purchasing goods in one foreign country, in order to supply the consumption of another, or in what is called the carrying trade, whatever profit they make will be in addition to the neat revenue of their own country. It is like a new fund, created for carrying on a new trade; domestic business being now transacted by paper, and the gold and silver being converted into a fund for this new trade. If they employ it in purchasing foreign goods for home consumption, they may either, first, purchase such goods as are likely to be consumed by idle people, who produce nothing, such as foreign wines, foreign silks, &c.; or, secondly, they may purchase an additional stock of materials, tools, and provisions, in order to maintain and employ an additional number of industrious people, who reproduce, with a profit, the value of their annual consumption. So far as it is employed in the first way, is promotes prodigality, increases expense and consumption, without increasing production, or establishing any permanent fund for supporting that expense, and is in every respect hurtful to the society. So far as it is employed in the second way, it promotes industry; and though it increases the consumption of the society, it provides a permanent fund for supporting that consumption; the people who consume reproducing, with a profit, the whole value of their annual consumption. The gross revenue of the society, the annual produce of their land and labour, is increased by the whole value which the labour of these workmen adds to the materials upon which they are employed, and their neat revenue by what remains of this value, after deducting what is necessary for supporting the tools and instruments of their trade. That the greater part of the gold and silver which being forced abroad by those operations of banking, is employed in purchasing foreign goods for home consumption, is, and must be, employed in purchasing those of this second kind, seems not only probable, but almost unavoidable. Though some particular men may sometimes increase their expense very considerably, though their revenue does not increase at all, we may be assured that no class or order of men ever does so; because, though the principles of common prudence do not always govern the conduct of every individual, they always influence that of the majority of every class or order. But the revenue of idle people, considered as a class or order, cannot, in the smallest degree, be increased by those operations of banking. Their expense in general, therefore, cannot be much increased by them, though that of a few individuals among them may, and in reality sometimes is. The demand of idle people, therefore, for foreign goods, being the same, or very nearly the same as before, a very small part of the money which, being forced abroad by those operations of banking, is employed in purchasing foreign goods for home consumption, is likely to be employed in purchasing those for their use. The greater part of it will naturally be destined for the employment of industry, and not for the maintenance of idleness. When we compute the quantity of industry which the circulating capital of any society can employ, we must always have regard to those parts of it only which consist in provisions, materials, and finished work; the other, which consists in money, and which serves only to circulate those three, must always be deducted. In order to put industry into motion, three things are requisite; materials to work upon, tools to work with, and the wages or recompence for the sake of which the work is done. Money is neither a material to work upon, nor a tool to work with; and though the wages of the workman are commonly paid to him in money, his real revenue, like that of all other men, consists, not in the money, but in the money's worth; not in the metal pieces, but in what can be got for them. The quantity of industry which any capital can employ, must evidently be equal to the number of workmen whom it can supply with materials, tools, and a maintenance suitable to the nature of the work. Money may be requisite for purchasing the materials and tools of the work, as well as the maintenance of the workmen; but the quantity of industry which the whole capital can employ, is certainly not equal both to the money which purchases, and to the materials, tools, and maintenance, which are purchased with it, but only to one or other of those two values, and to the latter more properly than to the former. When paper is substituted in the room of gold and silver money, the quantity of the materials, tools, and maintenance, which the whole circulating capital can supply, may be increased by the whole value of gold and silver which used to be employed in purchasing them. The whole value of the great wheel of circulation and distribution is added to the goods which are circulated and distributed by means of it. The operation, in some measure, resembles that of the undertaker of some great work, who, in consequence of some improvement in mechanics, takes down his old machinery, and adds the difference between its price and that of the new to his circulating capital, to the fund from which he furnishes materials and wages to his workmen. What is the proportion which the circulating money of any country bears to the whole value of the annual produce circulated by means of it, it is perhaps impossible to determine. It has been computed by different authors at a fifth, at a tenth, at a twentieth, and at a thirtieth, part of that value. But how small soever the proportion which the circulating money may bear to the whole value of the annual produce, as but a part, and frequently but a small part, of that produce, is ever destined for the maintenance of industry, it must always bear a very considerable proportion to that part. When, therefore, by the substitution of paper, the gold and silver necessary for circulation is reduced to, perhaps, a fifth part of the former quantity, if the value of only the greater part of the other four-fifths be added to the funds which are destined for the maintenance of industry, it must make a very considerable addition to the quantity of that industry, and, consequently, to the value of the annual produce of land and labour. An operation of this kind has, within these five-and-twenty or thirty years, been performed in Scotland, by the erection of new banking companies in almost every considerable town, and even in some country villages. The effects of it have been precisely those above described. The business of the country is almost entirely carried on by means of the paper of those different banking companies, with which purchases and payments of all kinds are commonly made. Silver very seldom appears, except in the change of a twenty shilling bank note, and gold still seldomer. But though the conduct of all those different companies has not been unexceptionable, and has accordingly required an act of parliament to regulate it, the country, notwithstanding, has evidently derived great benefit from their trade. I have heard it asserted, that the trade of the city of Glasgow doubled in about fifteen years after the first erection of the banks there; and that the trade of Scotland has more than quadrupled since the first erection of the two public banks at Edinburgh; of which the one, called the Bank of Scotland, was established by act of parliament in 1695, and the other, called the Royal Bank, by royal charter in 1727. Whether the trade, either of Scotland in general, or of the city of Glasgow in particular, has really increased in so great a proportion, during so short a period, I do not pretend to know. If either of them has increased in this proportion, it seems to be an effect too great to be accounted for by the sole operation of this cause. That the trade and industry of Scotland, however, have increased very considerably during this period, and that the banks have contributed a good deal to this increase, cannot be doubted. The value of the silver money which circulated in Scotland before the Union in 1707, and which, immediately after it, was brought into the Bank of Scotland, in order to be recoined, amounted to £411,117 : 10 : 9 sterling. No account has been got of the gold coin; but it appears from the ancient accounts of the mint of Scotland, that the value of the gold annually coined somewhat exceeded that of the silver[27]. There were a good many people, too, upon this occasion, who, from a diffidence of repayment, did not bring their silver into the Bank of Scotland; and there was, besides, some English coin, which was not called in. The whole value of the gold and silver, therefore, which circulated in Scotland before the Union, cannot be estimated at less than a million sterling. It seems to have constituted almost the whole circulation of that country; for though the circulation of the Bank of Scotland, which had then no rival, was considerable, it seems to have made but a very small part of the whole. In the present times, the whole circulation of Scotland cannot be estimated at less than two millions, of which that part which consists in gold and silver, most probably, does not amount to half a million. But though the circulating gold and silver of Scotland have suffered so great a diminution during this period, its real riches and prosperity do not appear to have suffered any. Its agriculture, manufactures, and trade, on the contrary, the annual produce of its land and labour, have evidently been augmented. It is chiefly by discounting bills of exchange, that is, by advancing money upon them before they are due, that the greater part of banks and bankers issue their promissory notes. They deduct always, upon whatever sum they advance, the legal interest till the bill shall become due. The payment of the bill, when it becomes due, replaces to the bank the value of what had been advanced, together with a clear profit of the interest. The banker, who advances to the merchant whose bill he discounts, not gold and silver, but his own promissory notes, has the advantage of being able to discount to a greater amount by the whole value of his promissory notes, which he finds, by experience, are commonly in circulation. He is thereby enabled to make his clear gain of interest on so much a larger sum. The commerce of Scotland, which at present is not very great, was still more inconsiderable when the two first banking companies were established; and those companies would have had but little trade, had they confined their business to the discounting of bills of exchange. They invented, therefore, another method of issuing their promissory notes; by granting what they called cash accounts, that is, by giving credit, to the extent of a certain sum (two or three thousand pounds for example), to any individual who could procure two persons of undoubted credit and good landed estate to become surety for him, that whatever money should be advanced to him, within the sum for which the credit had been given, should be repaid upon demand, together with the legal interest. Credits of this kind are, I believe, commonly granted by banks and bankers in all different parts of the world. But the easy terms upon which the Scotch banking companies accept of repayment are, so far as I know, peculiar to them, and have, perhaps, been the principal cause, both of the great trade of those companies, and of the benefit which the country has received from it. Whoever has a credit of this kind with one of those companies, and borrows a thousand pounds upon it, for example, may repay this sum piece-meal, by twenty and thirty pounds at a time, the company discounting a proportionable part of the interest of the great sum, from the day on which each of those small sums is paid in, till the whole be in this manner repaid. All merchants, therefore, and almost all men of business, find it convenient to keep such cash accounts with them, and are thereby interested to promote the trade of those companies, by readily receiving their notes in all payments, and by encouraging all those with whom they have any influence to do the same. The banks, when their customers apply to them for money, generally advance it to them in their own promissory notes. These the merchants pay away to the manufacturers for goods, the manufacturers to the farmers for materials and provisions, the farmers to their landlords for rent; the landlords repay them to the merchants for the conveniencies and luxuries with which they supply them, and the merchants again return them to the banks in order to balance their cash accounts, or to replace what they may have borrowed of them; and thus almost the whole money business of the country is transacted by means of them. Hence the great trade of those companies. By means of those cash accounts, every merchant can, without imprudence, carry on a greater trade than he otherwise could do. If there are two merchants, one in London and the other in Edinburgh, who employ equal stocks in the same branch of trade, the Edinburgh merchant can, without imprudence, carry on a greater trade, and give employment to a greater number of people, than the London merchant. The London merchant must always keep by him a considerable sum of money, either in his own coffers, or in those of his banker, who gives him no interest for it, in order to answer the demands continually coming upon him for payment of the goods which he purchases upon credit. Let the ordinary amount of this sum be supposed five hundred pounds; the value of the goods in his warehouse must always be less, by five hundred pounds, than it would have been, had he not been obliged to keep such a sum unemployed. Let us suppose that he generally disposes of his whole stock upon hand, or of goods to the value of his whole stock upon hand, once in the year. By being obliged to keep so great a sum unemployed, he must sell in a year five hundred pounds worth less goods than he might otherwise have done. His annual profits must be less by all that he could have made by the sale of five hundred pounds worth more goods; and the number of people employed in preparing his goods for the market must be less by all those that five hundred pounds more stock could have employed. The merchant in Edinburgh, on the other hand, keeps no money unemployed for answering such occasional demands. When they actually come upon him, he satisfies them from his cash account with the bank, and gradually replaces the sum borrowed with the money or paper which comes in from the occasional sales of his goods. With the same stock, therefore, he can, without imprudence, have at all times in his warehouse a larger quantity of goods than the London merchant; and can thereby both make a greater profit himself, and give constant employment to a greater number of industrious people who prepare those goods for the market. Hence the great benefit which the country has derived from this trade. The facility of discounting bills of exchange, it may be thought, indeed, gives the English merchants a conveniency equivalent to the cash accounts of the Scotch merchants. But the Scotch merchants, it must be remembered, can discount their bills of exchange as easily as the English merchants; and have, besides, the additional conveniency of their cash accounts. The whole paper money of every kind which can easily circulate in any country, never can exceed the value of the gold and silver, of which it supplies the place, or which (the commerce being supposed the same) would circulate there, if there was no paper money. If twenty shilling notes, for example, are the lowest paper money current in Scotland, the whole of that currency which can easily circulate there, cannot exceed the sum of gold and silver which would be necessary for transacting the annual exchanges of twenty shillings value and upwards usually transacted within that country. Should the circulating paper at any time exceed that sum, as the excess could neither be sent abroad nor be employed in the circulation of the country, it must immediately return upon the banks, to be exchanged for gold and silver. Many people would immediately perceive that they had more of this paper than was necessary for transacting their business at home; and as they could not send it abroad, they would immediately demand payment for it from the banks. When this superfluous paper was converted into gold and silver, they could easily find a use for it, by sending it abroad; but they could find none while it remained in the shape of paper. There would immediately, therefore, be a run upon the banks to the whole extent of this superfluous paper, and if they showed any difficulty or backwardness in payment, to a much greater extent; the alarm which this would occasion necessarily increasing the run. Over and above the expenses which are common to every branch of trade, such as the expense of house-rent, the wages of servants, clerks, accountants, &c. the expenses peculiar to a bank consist chiefly in two articles: first, in the expense of keeping at all times in its coffers, for answering the occasional demands of the holders of its notes, a large sum of money, of which it loses the interest; and, secondly, in the expense of replenishing those coffers as fast as they are emptied by answering such occasional demands. A banking company which issues more paper than can be employed in the circulation of the country, and of which the excess is continually returning upon them for payment, ought to increase the quantity of gold and silver which they keep at all times in their coffers, not only in proportion to this excessive increase of their circulation, but in a much greater proportion; their notes returning upon them much faster than in proportion to the excess of their quantity. Such a company, therefore, ought to increase the first article of their expense, not only in proportion to this forced increase of their business, but in a much greater proportion. The coffers of such a company, too, though they ought to be filled much fuller, yet must empty themselves much faster than if their business was confined within more reasonable bounds, and must require not only a more violent, but a more constant and uninterrupted exertion of expense, in order to replenish them. The coin, too, which is thus continually drawn in such large quantities from their coffers, cannot be employed in the circulation of the country. It comes in place of a paper which is over and above what can be employed in that circulation, and is, therefore, over and above what can be employed in it too. But as that coin will not be allowed to lie idle, it must, in one shape or another, be sent abroad, in order to find that profitable employment which it cannot find at home; and this continual exportation of gold and silver, by enhancing the difficulty, must necessarily enhance still farther the expense of the bank, in finding new gold and silver in order to replenish those coffers, which empty themselves so very rapidly. Such a company, therefore, must in proportion to this forced increase of their business, increase the second article of their expense still more than the first. Let us suppose that all the paper of a particular bank, which the circulation of the country can easily absorb and employ, amounts exactly to forty thousand pounds, and that, for answering occasional demands, this bank is obliged to keep at all times in its coffers ten thousand pounds in gold and silver. Should this bank attempt to circulate forty-four thousand pounds, the four thousand pounds which are over and above what the circulation can easily absorb and employ, will return upon it almost as fast as they are issued. For answering occasional demands, therefore, this bank ought to keep at all times in its coffers, not eleven thousand pounds only, but fourteen thousand pounds. It will thus gain nothing by the interest of the four thousand pounds excessive circulation; and it will lose the whole expense of continually collecting four thousand pounds in gold and silver, which will be continually going out of its coffers as fast as they are brought into them. Had every particular banking company always understood and attended to its own particular interest, the circulation never could have been overstocked with paper money. But every particular banking company has not always understood or attended to its own particular interest, and the circulation has frequently been overstocked with paper money. By issuing too great a quantity of paper, of which the excess was continually returning, in order to be exchanged for gold and silver, the Bank of England was for many years together obliged to coin gold to the extent of between eight hundred thousand pounds and a million a-year; or, at an average, about eight hundred and fifty thousand pounds. For this great coinage, the bank (in consequence of the worn and degraded state into which the gold coin had fallen a few years ago) was frequently obliged to purchase gold bullion at the high price of four pounds an ounce, which it soon after issued in coin at L.3 : 17 : 10-1/2 an ounce, losing in this manner between two and a half and three per cent. upon the coinage of so very large a sum. Though the bank, therefore, paid no seignorage, though the government was properly at the expense of this coinage, this liberality of government did not prevent altogether the expense of the bank. The Scotch banks, in consequence of an excess of the same kind, were all obliged to employ constantly agents at London to collect money for them, at an expense which was seldom below one and a half or two per cent. This money was sent down by the waggon, and insured by the carriers at an additional expense of three quarters per cent. or fifteen shillings on the hundred pounds. Those agents were not always able to replenish the coffers of their employers so fast as they were emptied. In this case, the resource of the banks was, to draw upon their correspondents in London bills of exchange, to the extent of the sum which they wanted. When those correspondents afterwards drew upon them for the payment of this sum, together with the interest and commission, some of those banks, from the distress into which their excessive circulation had thrown them, had sometimes no other means of satisfying this draught, but by drawing a second set of bills, either upon the same, or upon some other correspondents in London; and the same sum, or rather bills for the same sum, would in this manner make sometimes more than two or three journeys; the debtor bank paying always the interest and commission upon the whole accumulated sum. Even those Scotch banks which never distinguished themselves by their extreme imprudence, were sometimes obliged to employ this ruinous resource. The gold coin which was paid out, either by the Bank of England or by the Scotch banks, in exchange for that part of their paper which was over and above what could be employed in the circulation of the country, being likewise over and above what could be employed in that circulation, was sometimes sent abroad in the shape of coin, sometimes melted down and sent abroad in the shape of bullion, and sometimes melted down and sold to the Bank of England at the high price of four pounds an ounce. It was the newest, the heaviest, and the best pieces only, which were carefully picked out of the whole coin, and either sent abroad or melted down. At home, and while they remained in the shape of coin, these heavy pieces were of no more value than the light; but they were of more value abroad, or when melted down into bullion at home. The Bank of England, notwithstanding their great annual coinage, found, to their astonishment, that there was every year the same scarcity of coin as there had been the year before; and that, notwithstanding the great quantity of good and new coin which was every year issued from the bank, the state of the coin, instead of growing better and better, became every year worse and worse. Every year they found themselves under the necessity of coining nearly the same quantity of gold as they had coined the year before; and from the continual rise in the price of gold bullion, in consequence of the continual wearing and clipping of the coin, the expense of this great annual coinage became, every year, greater and greater. The Bank of England, it is to be observed, by supplying its own coffers with coin, is indirectly obliged to supply the whole kingdom, into which coin is continually flowing from those coffers in a great variety of ways. Whatever coin, therefore, was wanted to support this excessive circulation both of Scotch and English paper money, whatever vacuities this excessive circulation occasioned in the necessary coin of the kingdom, the Bank of England was obliged to supply them. The Scotch banks, no doubt, paid all of them very dearly for their own imprudence and inattention: but the Bank of England paid very dearly, not only for its own imprudence, but for the much greater imprudence of almost all the Scotch banks. The over-trading of some bold projectors in both parts of the united kingdom, was the original cause of this excessive circulation of paper money. What a bank can with propriety advance to a merchant or undertaker of any kind, is not either the whole capital with which he trades, or even any considerable part of that capital; but that part of it only which he would otherwise be obliged to keep by him unemployed and in ready money, for answering occasional demands. If the paper money which the bank advances never exceeds this value, it can never exceed the value of the gold and silver which would necessarily circulate in the country if there was no paper money; it can never exceed the quantity which the circulation of the country can easily absorb and employ. When a bank discounts to a merchant a real bill of exchange, drawn by a real creditor upon a real debtor, and which, as soon as it becomes due, is really paid by that debtor; it only advances to him a part of the value which he would otherwise be obliged to keep by him unemployed and in ready money, for answering occasional demands. The payment of the bill, when it becomes due, replaces to the bank the value of what it had advanced, together with the interest. The coffers of the bank, so far as its dealings are confined to such customers, resemble a water-pond, from which, though a stream is continually running out, yet another is continually running in, fully equal to that which runs out; so that, without any further care or attention, the pond keeps always equally, or very near equally full. Little or no expense can ever be necessary for replenishing the coffers of such a bank. A merchant, without over-trading, may frequently have occasion for a sum of ready money, even when he has no bills to discount. When a bank, besides discounting his bills, advances him likewise, upon such occasions, such sums upon his cash account, and accepts of a piece-meal repayment, as the money comes in from the occasional sale of his goods, upon the easy terms of the banking companies of Scotland; it dispenses him entirely from the necessity of keeping any part of his stock by him unemployed and in ready money for answering occasional demands. When such demands actually come upon him, he can answer them sufficiently from his cash account. The bank, however, in dealing with such customers, ought to observe with great attention, whether, in the course of some short period (of four, five, six, or eight months, for example), the sum of the repayments which it commonly receives from them, is, or is not, fully equal to that of the advances which it commonly makes to them. If, within the course of such short periods, the sum of the repayments from certain customers is, upon most occasions, fully equal to that of the advances, it may safely continue to deal with such customers. Though the stream which is in this case continually running out from its coffers may be very large, that which is continually running into them must be at least equally large: so that, without any further care or attention, those coffers are likely to be always equally or very near equally full, and scarce ever to require any extraordinary expense to replenish them. If, on the contrary, the sum of the repayments from certain other customers, falls commonly very much short of the advances which it makes to them, it cannot with any safety continue to deal with such customers, at least if they continue to deal with it in this manner. The stream which is in this case continually running out from its coffers, is necessarily much larger than that which is continually running in; so that, unless they are replenished by some great and continual effort of expense, those coffers must soon be exhausted altogether. The banking companies of Scotland, accordingly, were for a long time very careful to require frequent and regular repayments from all their customers, and did not care to deal with any person, whatever might be his fortune or credit, who did not make, what they called, frequent and regular operations with them. By this attention, besides saving almost entirely the extraordinary expense of replenishing their coffers, they gained two other very considerable advantages. First, by this attention they were enabled to make some tolerable judgment concerning the thriving or declining circumstances of their debtors, without being obliged to look out for any other evidence besides what their own books afforded them; men being, for the most part, either regular or irregular in their repayments, according as their circumstances are either thriving or declining. A private man who lends out his money to perhaps half a dozen or a dozen of debtors, may, either by himself or his agents, observe and inquire both constantly and carefully into the conduct and situation of each of them. But a banking company, which lends money to perhaps five hundred different people, and of which the attention is continually occupied by objects of a very different kind, can have no regular information concerning the conduct and circumstances of the greater part of its debtors, beyond what its own books afford it. In requiring frequent and regular repayments from all their customers, the banking companies of Scotland had probably this advantage in view. Secondly, by this attention they secured themselves from the possibility of issuing more paper money than what the circulation of the country could easily absorb and employ. When they observed, that within moderate periods of time, the repayments of a particular customer were, upon most occasions, fully equal to the advances which they had made to him, they might he assured that the paper money which they had advanced to him had not, at any time, exceeded the quantity of gold and silver which he would otherwise have been obliged to keep by him for answering occasional demands; and that, consequently, the paper money, which they had circulated by his means, had not at any time exceeded the quantity of gold and silver which would have circulated in the country, had there been no paper money. The frequency, regularity, and amount of his repayments, would sufficiently demonstrate that the amount of their advances had at no time exceeded that part of his capital which he would otherwise have been obliged to keep by him unemployed, and in ready money, for answering occasional demands; that is, for the purpose of keeping the rest of his capital in constant employment. It is this part of his capital only which, within moderate periods of time, is continually returning in every dealer in the shape of money, whether paper or coin, and continually going from him in the same shape. If the advances of the bank had commonly exceeded this part of his capital, the ordinary amount of his repayments could not, within moderate periods of time, have equalled the ordinary amount of its advances. The stream which, by means of his dealings, was continually running into the coffers of the bank, could not have been equal to the stream which, by means of the same dealings was continually running out. The advances of the bank paper, by exceeding the quantity of gold and silver which, had there been no such advances, he would have been obliged to keep by him for answering occasional demands, might soon come to exceed the whole quantity of gold and silver which (the commerce being supposed the same) would have circulated in the country, had there been no paper money; and, consequently, to exceed the quantity which the circulation of the country could easily absorb and employ; and the excess of this paper money would immediately have returned upon the bank, in order to be exchanged for gold and silver. This second advantage, though equally real, was not, perhaps, so well understood by all the different banking companies in Scotland as the first. When, partly by the conveniency of discounting bills, and partly by that of cash accounts, the creditable traders of any country can be dispensed from the necessity of keeping any part of their stock by them unemployed, and in ready money, for answering occasional demands, they can reasonably expect no farther assistance from banks and bankers, who, when they have gone thus far, cannot, consistently with their own interest and safety, go farther. A bank cannot, consistently with its own interest, advance to a trader the whole, or even the greater part of the circulating capital with which he trades; because, though that capital is continually returning to him in the shape of money, and going from him in the same shape, yet the whole of the returns is too distant from the whole of the outgoings, and the sum of his the repayments could not equal the sum of his advances within much moderate periods of time as suit the conveniency of a bank. Still less could a bank afford to advance him any considerable part of his fixed capital; of the capital which the undertaker of an iron forge, for example, employs in erecting his forge and smelting-houses, his work-houses, and warehouses, the dwelling-houses of his workmen, &c.; of the capital which the undertaker of a mine employs in sinking his shafts, in erecting engines for drawing out the water, in making roads and waggon-ways, &c.; of the capital which the person who undertakes to improve land employs in clearing, draining, inclosing, manuring, and ploughing waste and uncultivated fields; in building farm-houses, with all their necessary appendages of stables, granaries, &c. The returns of the fixed capital are, in almost all cases, much slower than those of the circulating capital: and such expenses, even when laid out with the greatest prudence and judgment, mean very seldom return to the undertaker till after period of many years, a period by far too distant to suit the conveniency of a bank. Traders and other undertakers may, no doubt with great propriety, carry on a very considerable part of their projects with borrowed money. In justice to their creditors, however, their own capital ought in this case to be sufficient to insure, if I may say so, the capital of those creditors; or to render it extremely improbable that those creditors should incur any loss, even though the success of the project should fall very much short of the expectation of the projectors. Even with this precaution, too, the money which is borrowed, and which it is meant should not be repaid till after a period of several years, ought not to be borrowed of a bank, but ought to be borrowed upon bond or mortgage, of such private people as propose to live upon the interest of their money, without taking the trouble themselves to employ the capital, and who are, upon that account, willing to lend that capital to such people of good credit as are likely lo keep it for several years. A bank, indeed, which lends its money without the expense of stamped paper, or of attorneys' fees for drawing bonds and mortgages, and which accepts of repayment upon the easy terms of the banking companies of Scotland, would, no doubt, be a very convenient creditor to such traders and undertakers. But such traders and undertakers would surely be most inconvenient debtors to such a bank. It is now more than five and twenty years since the paper money issued by the different banking companies of Scotland was fully equal, or rather was somewhat more than fully equal, to what the circulation of the country could easily absorb and employ. Those companies, therefore, had so long ago given all the assistance to the traders and other undertakers of Scotland which it is possible for banks and bankers, consistently with their own interest, to give. They had even done somewhat more. They had over-traded a little, and had brought upon themselves that loss, or at least that diminution of profit, which, in this particular business, never fails to attend the smallest degree of over-trading. Those traders and other undertakers, having got so much assistance from banks and bankers, wished to get still more. The banks, they seem to have thought, could extend their credits to whatever sum might be wanted, without incurring any other expense besides that of a few reams of paper. They complained of the contracted views and dastardly spirit of the directors of those banks, which did not, they said, extend their credits in proportion to the extension of the trade of the country; meaning, no doubt, by the extension of that trade, the extension of their own projects beyond what they could carry on either with their own capital, or with what they had credit to borrow of private people in the usual way of bond or mortgage. The banks, they seem to have thought, were in honour bound to supply the deficiency, and to provide them with all the capital which they wanted to trade with. The banks, however, were of a different opinion and upon their refusing to extend their credits, some of those traders had recourse to an expedient which, for a time, served their purpose, though at a much greater expense, yet as effectually as the utmost extension of bank credits could have done. This expedient was no other than the well known shift of drawing and redrawing; the shift to which unfortunate traders have sometimes recourse, when they are upon the brink of bankruptcy. The practice of raising money in this manner had been long known in England; and, during the course of the late war, when the high profits of trade afforded a great temptation to over-trading, is said to have been carried on to a very great extent. From England it was brought into Scotland, where, in proportion to the very limited commerce, and to the very moderate capital of the country, it was soon carried on to a much greater extent than it ever had been in England. The practice of drawing and redrawing is so well known to all men of business, that it may, perhaps, be thought unnecessary to give any account of it. But as this book may come into the hands of many people who are not men of business, and as the effects of this practice upon the banking trade are not, perhaps, generally understood, even by men of business themselves, I shall endeavour to explain it as distinctly as I can. The customs of merchants, which were established when the barbarous laws of Europe did not enforce the performance of their contracts, and which, during the course of the two last centuries, have been adopted into the laws of all European nations, have given such extraordinary privileges to bills of exchange, that money is more readily advanced upon them than upon any other species of obligation; especially when they are made payable within so short a period as two or three months after their date. If, when the bill becomes due, the acceptor does not pay it as soon as it is presented, he becomes from that moment a bankrupt. The bill is protested, and returns upon the drawer, who, if he does not immediately pay it, becomes likewise a bankrupt. If, before it came to the person who presents it to the acceptor for payment, it had passed through the hands of several other persons, who had successively advanced to one another the contents of it, either in money or goods, and who, to express that each of them had in his turn received those contents, had all of them in their order indorsed, that is, written their names upon the back of the bill; each indorser becomes in his turn liable to the owner of the bill for those contents, and, if he fails to pay, he becomes too, from that moment, a bankrupt. Though the drawer, acceptor, and indorsers of the bill, should all of them be persons of doubtful credit; yet, still the shortness of the date gives some security to the owner of the bill. Though all of them may be very likely to become bankrupts, it is a chance if they all become so in so short a time. The house is crazy, says a weary traveller to himself, and will not stand very long; but it is a chance if it falls to-night, and I will venture, therefore, to sleep in it to-night. The trader A in Edinburgh, we shall suppose, draws a bill upon B in London, payable two months after date. In reality B in London owes nothing to A in Edinburgh; but he agrees to accept of A's bill, upon condition, that before the term of payment he shall redraw upon A in Edinburgh for the same sum, together with the interest and a commission, another bill, payable likewise two months after date. B accordingly, before the expiration of the first two months, redraws this bill upon A in Edinburgh; who, again before the expiration of the second two months, draws a second bill upon B in London, payable likewise two months after date; and before the expiration of the third two months, B in London redraws upon A in Edinburgh another bill payable also two months after date. This practice has sometimes gone on, not only for several months, but for several years together, the bill always returning upon A in Edinburgh with the accumulated interest and commission of all the former bills. The interest was five per cent. in the year, and the commission was never less than one half per cent. on each draught. This commission being repeated more than six times in the year, whatever money A might raise by this expedient might necessarily have cost him something more than eight per cent in the year and sometimes a great deal more, when either the price of the commission happened to rise, or when he was obliged to pay compound interest upon the interest and commission of former bills. This practice was called raising money by circulation. In a country where the ordinary profits of stock, in the greater part of mercantile projects, are supposed to run between six and ten per cent. it must have been a very fortunate speculation, of which the returns could not only repay the enormous expense at which the money was thus borrowed for carrying it on, but afford, besides, a good surplus profit to the projector. Many vast and extensive projects, however, were undertaken, and for several years carried on, without any other fund to support them besides what was raised at this enormous expense. The projectors, no doubt, had in their golden dreams the most distinct vision of this great profit. Upon their awakening, however, either at the end of their projects, or when they were no longer able to carry them on, they very seldom, I believe, had the good fortune to find it.[28] The bills which A in Edinburgh drew upon B in London, he regularly discounted two months before they were due, with some bank or banker in Edinburgh; and the bills which B in London redrew upon A in Edinburgh, he as regularly discounted, either with the Bank of England, or with some other banker in London. Whatever was advanced upon such circulating bills was in Edinburgh advanced in the paper of the Scotch banks; and in London, when they were discounted at the Bank of England in the paper of that bank. Though the bills upon which this paper had been advanced were all of them repaid in their turn as soon as they became due, yet the value which had been really advanced upon the last bill was never really returned to the banks which advanced it, because, before each bill became due, another bill was always drawn to somewhat a greater amount than the bill which was soon to be paid: and the discounting of this other bill was essentially necessary towards the payment of that which was soon to be due. This payment, therefore, was altogether fictitious. The stream which, by means of those circulating bills of exchange, had once been made to run out from the coffers of the banks, was never replaced by any stream which really run into them. The paper which was issued upon those circulating bills of exchange amounted, upon many occasions, to the whole fund destined for carrying on some vast and extensive project of agriculture, commerce, or manufactures; and not merely to that part of it which, had there been no paper money, the projector would have been obliged to keep by him unemployed, and in ready money, for answering occasional demands. The greater part of this paper was, consequently, over and above the value of the gold and silver which would have circulated in the country, had there been no paper money. It was over and above, therefore, what the circulation of the country could easily absorb and employ, and upon that account, immediately returned upon the banks, in order to be exchanged for gold and silver, which they were to find as they could. It was a capital which those projectors had very artfully contrived to draw from those banks, not only without their knowledge or deliberate consent, but for some time, perhaps, without their having the most distant suspicion that they had really advanced it. When two people, who are continually drawing and redrawing upon one another, discount their bills always with the same banker, he must immediately discover what they are about, and see clearly that they are trading, not with any capital of their own, but with the capital which he advances to them. But this discovery is not altogether so easy when they discount their bills sometimes with one banker, and sometimes with another, and when the two same persons do not constantly draw and redraw upon one another, but occasionally run the round of a great circle of projectors, who find it for their interest to assist one another in this method of raising money and to render it, upon that account, as difficult as possible to distinguish between a real and a fictitious bill of exchange, between a bill drawn by a real creditor upon a real debtor, and a bill for which there was properly no real creditor but the bank which discounted it, nor any real debtor but the projector who made use of the money. When a banker had even made this discovery, he might sometimes make it too late, and might find that he had already discounted the bills of those projectors to so great an extent, that, by refusing to discount any more, he would necessarily make them all bankrupts; and thus by ruining them, might perhaps ruin himself. For his own interest and safety, therefore, he might find it necessary, in this very perilous situation, to go on for some time, endeavouring, however, to withdraw gradually, and, upon that account, making every day greater and greater difficulties about discounting, in order to force these projectors by degrees to have recourse, either to other bankers, or to other methods of raising money: so as that he himself might, as soon as possible, get out of the circle. The difficulties, accordingly, which the Bank of England, which the principal bankers in London, and which even the more prudent Scotch banks began, after a certain time, and when all of them had already gone too far, to make about discounting, not only alarmed, but enraged, in the highest degree, those projectors. Their own distress, of which this prudent and necessary reserve of the banks was, no doubt, the immediate occasion, they called the distress of the country; and this distress of the country, they said, was altogether owing to the ignorance, pusillanimity, and bad conduct of the banks, which did not give a sufficiently-liberal aid to the spirited undertakings of those who exerted themselves in order to beautify, improve, and enrich the country. It was the duty of the banks, they seemed to think, to lend for as long a time, and to as great an extent, as they might wish to borrow. The banks, however, by refusing in this manner to give more credit to those to whom they had already given a great deal too much, took the only method by which it was now possible to save either their own credit, or the public credit of the country. In the midst of this clamour and distress, a new bank was established in Scotland, for the express purpose of relieving the distress of the country. The design was generous; but the execution was imprudent, and the nature and causes of the distress which it meant to relieve, were not, perhaps, well understood. This bank was more liberal then any other had ever been, both in granting cash-accounts, and in discounting bills of exchange. With regard to the latter, it seems to have made scarce any distinction between real and circulating bills, but to have discounted all equally. It was the avowed principle of this bank to advance upon any reasonable security, the whole capita, which was to be employed in those improvements of which the returns are the most slow and distant, such as the improvements of land. To promote such improvements was even said to be the chief or the public-spirited purposes for which it was instituted. By its liberality in granting cash-accounts, and in discounting bills of exchange, it, no doubt, issued great quantities of its bank notes. But those bank notes being, the greater part of them, over and above what the circulation of the country could easily absorb and employ, returned upon it, in order to be exchanged for gold and silver, as fast as they were issued. Its coffers were never well filled. The capital which had been subscribed to this bank, at two different subscriptions, amounted to one hundred and sixty thousand pounds, of which eighty per cent. only was paid up. This sum ought to have been paid in at several different instalments. A great part of the proprietors, when they paid in their first instalment, opened a cash-account with the bank; and the directors, thinking themselves obliged to treat their own proprietors with the same liberality with which they treated all other man, allowed many of them to borrow upon this cash-account what they paid in upon all their subsequent instalments. Such payments, therefore, only put into one coffer what had the moment before been taken out of another. But had the coffers of this bank been filled ever so well, its excessive circulation must have emptied them faster than they could have been replenished by any other expedient but the ruinous one of drawing upon London; and when the bill became due, paying it, together with interest and commission, by another draught upon the same place. Its coffers having been filled so very ill, it is said to have been driven to this resource within a very few months after it began to do business. The estates of the proprietors of this bank were worth several millions, and, by their subscription to the original bond or contract of the bank, were really pledged for answering all its engagements. By means of the great credit which so great a pledge necessarily gave it, it was, notwithstanding its too liberal conduct, enabled to entry on business for more than two years. When it was obliged to stop, it had in the circulation about two hundred thousand pounds in bank notes. In order to support the circulation of those notes, which were continually returning upon it as fast as they were issued, it had been constantly in the practice of drawing bills of exchange upon London, of which the number and value were continually increasing, and, when it stopt, amounted to upwards of six hundred thousand pounds. This bank, therefore, had, in little more than the course of two years, advanced to different people upwards of eight hundred thousand pounds at five per cent. Upon the two hundred thousand pounds which it circulated in bank notes, this five per cent. might perhaps be considered as a clear gain, without any other deduction besides the expense of management. But upon upwards of six hundred thousand pounds, for which it was continually drawing bills of exchange upon London, it was paying, in the way of interest and commission, upwards of eight per cent. and was consequently losing more than three per cent. upon more than three-fourths of all its dealings. The operations of this bank seem to have produced effects quite opposite to those which were intended by the particular persons who planned and directed it. They seem to have intended to support the spirited undertakings, for as such they considered them, which were at that time carrying on in different parts of the country; and, at the some time, by drawing the whole banking business to themselves, to supplant all the other Scotch banks, particularly those established at Edinburgh, whose backwardness in discounting bills of exchange had given some offence. This bank, no doubt, gave some temporary relief to those projectors, and enabled them to carry on their projects for about two years longer than they could otherwise have done. But it thereby only enabled them to get so much deeper into debt; so that, when rain came, it fell so much the heavier both upon them and upon their their creditors. The operations of this bank, therefore, instead of relieving, in reality aggravated in the long-run the distress which those projectors had brought both upon themselves and upon their country. It would have been much better for themselves, their creditors, and their country, had the greater part of them been obliged to stop two years sooner than they actually did. The temporary relief, however, which this bank afforded to those projectors, proved a real and permanent relief to the other Scotch banks. All the dealers in circulating bills of exchange, which those other banks had become so backward in discounting, had recourse to this new bank, where they were received with open arms. Those other banks, therefore, were enabled to get very easily out of that fatal circle, from which they could not otherwise have disengaged themselves without incurring a considerable loss, and perhaps, too, even some degree of discredit. In the long-run, therefore, the operations of this bank increased the real distress of the country, which it meant to relieve; and effectually relieved, from a very great distress, those rivals whom it meant to supplant. At the first setting out of this bank, it was the opinion of some people, that how fast soever its coffers might be emptied, it might easily replenish them, by raising money upon the securities of those to whom it had advanced its paper. Experience, I believe, soon convinced them that this method of raising money was by much too slow to answer their purpose; and that coffers which originally were so ill filled, and which emptied themselves so very fast, could be replenished by no other expedient but the ruinous one of drawing bills upon London, and when they became due, paying them by other draughts on the same place, with accumulated interest and commission. But though they had been able by this method to raise money as fast as they wanted it, yet, instead of making a profit, they must have suffered a loss of every such operation; so that in the long-run they must have ruined themselves as a mercantile company, though perhaps not so soon as by the more expensive practice of drawing and redrawing. They could still have made nothing by the interest of the paper, which, being over and above what the circulation of the country could absorb and employ, returned upon them in order to be exchanged for gold and silver, as fast as they issued it; and for the payment of which they were themselves continually obliged to borrow money. On the contrary, the whole expense of this borrowing, of employing agents to look out for people who had money to lend, of negotiating with those people, and of drawing the proper bond or assignment, must have fallen upon them, and have been so much clear loss upon the balance of their accounts. The project of replenishing their coffers in this manner may be compared to that of a man who had a water-pond from which a stream was continually running out, and into which no stream was continually running, but who proposed to keep it always equally full, by employing a number of people to go continually with buckets to a well at some miles distance, in order to bring water to replenish it. But though this operation had proved not only practicable, but profitable to the bank, as a mercantile company; yet the country could have derived no benefit from it, but, on the contrary, must have suffered a very considerable loss by it. This operation could not augment, in the smallest degree, the quantity of money to be lent. It could only have erected this bank into a sort of general loan office for the whole country. Those who wanted to borrow must have applied to this bank, instead of applying to the private persons who had lent it their money. But a bank which lends money, perhaps to five hundred different people, the greater part of whom its directors can know very little about, is not likely to be more judicious in the choice of its debtors than a private person who lends out his money among a few people whom he knows, and in whose sober and frugal conduct he thinks he has good reason to confide. The debtors of such a bank as that whose conduct I have been giving some account of were likely, the greater part of them, to be chimerical projectors, the drawers and redrawers of circulating bills of exchange, who would employ the money in extravagant undertakings, which, with all the assistance that could be given them, they would probably never be able to complete, and which, if they should be completed, would never repay the expense which they had really cost, would never afford a fund capable of maintaining a quantity of labour equal to that which had been employed about them. The sober and frugal debtors of private persons, on the contrary, would be more likely to employ the money borrowed in sober undertakings which were proportioned to their capitals, and which, though they might have less of the grand and the marvellous, would have more of the solid and the profitable; which would repay with a large profit whatever had been laid out upon them, and which would thus afford a fund capable of maintaining a much greater quantity of labour than that which had been employed about them. The success of this operation, therefore, without increasing in the smallest degree the capital of the country, would only have transferred a great part of it from prudent and profitable to imprudent and unprofitable undertakings. That the industry of Scotland languished for want of money to employ it, was the opinion of the famous Mr Law. By establishing a bank of a particular kind, which he seems to have imagined might issue paper to the amount of the whole value of all the lands in the country, he proposed to remedy this want of money. The parliament of Scotland, when he first proposed his project, did not think proper to adopt it. It was afterwards adopted, with some variations, by the Duke of Orleans, at that time regent of France. The idea of the possibility of multiplying paper money to almost any extent was the real foundation of what is called the Mississippi scheme, the most extravagant project, both of banking and stock-jobbing, that perhaps the world ever saw. The different operations of this scheme are explained so fully, so clearly, and with so much order and distinctness, by Mr Du Verney, in his Examination of the Political Reflections upon commerce and finances of Mr Du Tot, that I shall not give any account of them. The principles upon which it was founded are explained by Mr Law himself, in a discourse concerning money and trade, which he published in Scotland when he first proposed his project. The splendid but visionary ideas which are set forth in that and some other works upon the same principles, still continue to make an impression upon many people, and have, perhaps, in part, contributed to that excess of banking, which has of late been complained of, both in Scotland and in other places. The Bank of England is the greatest bank of circulation in Europe. It was incorporated, in pursuance of an act of parliament, by a charter under the great seal, dated the 27th of July 1694. It at that time advanced to government the sum of L.1,200,000 for an annuity of L.100,000, or for L.96,000 a-year, interest at the rate of eight per cent. and L.4,000 a-year for the expense of management. The credit of the new government, established by the Revolution, we may believe, must have been very low, when it was obliged to borrow at so high an interest. In 1697, the bank was allowed to enlarge its capital stock, by an ingraftment of L.1,001,171 : 10s. Its whole capital stock, therefore, amounted at this time to L.2,201,171 : 10s. This ingraftment is said to have been for the support of public credit. In 1696, tallies had been at forty, and fifty, and sixty per cent. discount, and bank notes at twenty per cent.[29] During the great re-coinage of the silver, which was going on at this time, the bank had thought proper to discontinue the payment of its notes, which necessarily occasioned their discredit. In pursuance of the 7th Anne, c. 7, the bank advanced and paid into the exchequer the sum of L.400,000; making in all the sum of L.1,600,000, which it had advanced upon its original annuity of L.96,000 interest, and L.4,000 for expense of management. In 1708, therefore, the credit of government was as good as that of private persons, since it could borrow at six per cent. interest, the common legal and market rate of those times. In pursuance of the same act, the bank cancelled exchequer bills to the amount of L.1,775,027 17s. 10-1/2d. at six per cent. interest, and was at the same time allowed to take in subscriptions for doubling its capital. In 1708, therefore, the capital of the bank amounted to L.4,402,343; and it had advanced to government the sum of L.3,375,027 : 17 : 10-1/2. By a call of fifteen per cent. in 1709, there was paid in, and made stock, L.656,204 : 1 : 9d.; and by another of ten per cent. in 1710, L.501,448 : 12 : 11. In consequence of those two calls, therefore, the bank capital amounted to L.5,559,995 : 14 : 8. In pursuance of the 3d George I. c. 8, the bank delivered up two millions of exchequer bills to be cancelled. It had at this time, therefore, advanced to government L.5,375,027 : 17 : 10d. In pursuance of the 8th George I. c. 21, the bank purchased of the South-sea company, stock to the amount of L.4,000,000; and in 1722, in consequence of the subscriptions which it had taken in for enabling it to make this purchase, its capital stock was increased by L.3,400,000. At this time, therefore, the bank had advanced to the public L.9,375,027 17s. 10-1/2d.; and its capital stock amounted only to L.8,959,995 : 14 : 8. It was upon this occasion that the sum which the bank had advanced to the public, and for which it received interest, began first to exceed its capital stock, or the sum for which it paid a dividend to the proprietors of bank stock; or, in other words, that the bank began to have an undivided capital, over and above its divided one. It has continued to have an undivided capital of the same kind ever since. In 1746, the bank had, upon different occasions, advanced to the public L.11,686,800, and its divided capital had been raised by different calls and subscriptions to L.10,780,000. The state of those two sums has continued to be the same ever since. In pursuance of the 4th of George III. c. 25, the bank agreed to pay to government for the renewal of its charter L.110,000, without interest or re-payment. This sum, therefore did not increase either of these two other sums. The dividend of the bank has varied according to the variations in the rate of the interest which it has, at different times, received for the money it had advanced to the public, as well as according to other circumstances. This rate of interest has gradually been reduced from eight to three per cent. For some years past, the bank dividend has been at five and a half per cent. The stability of the bank of England is equal to that of the British government. All that it has advanced to the public must be lost before its creditors can sustain any loss. No other banking company in England can be established by act of parliament, or can consist of more than six members. It acts, not only as an ordinary bank, but as a great engine of state. It receives and pays the greater part of the annuities which are due to the creditors of the public; it circulates exchequer bills; and it advances to government the annual amount of the land and malt taxes, which are frequently not paid up till some years thereafter. In these different operations, its duty to the public may sometimes have obliged it, without any fault of its directors, to overstock the circulation with paper money. It likewise discounts merchants' bills, and has upon several different occasions, supported the credit of the principal houses, not only of England, but of Hamburgh and Holland. Upon one occasion, in 1768, it is said to have advanced for this purpose, in one week, about L.1,600,000, a great part of it in bullion. I do not, however, pretend to warrant either the greatness of the sum, or the shortness of the time. Upon other occasions, this great company has been reduced to the necessity of paying in sixpences. It is not by augmenting the capital of the country, but by rendering a greater part of that capital active and productive than would otherwise be so, that the must judicious operations of banking can increase the industry of the country. That part of his capital which a dealer is obliged to keep by him unemployed and in ready money, for answering occasional demands, is so much dead stock, which, so long as it remains in this situation, produces nothing, either to him or to his country. The judicious operations of banking enable him to convert this dead stock into active and productive stock; into materials to work upon; into tools to work with and into provisions and subsistence to work for; into stock which produces something both to himself and to his country. The gold and silver money which circulates in any country, and by means of which, the produce of its land and labour is annually circulated and distributed to the proper consumers, is, in the same manner as the ready money of the dealer, all dead stock. It is a very valuable part of the capital of the country, which produces nothing to the country. The judicious operations of banking, by substituting paper in the room of a great part of this gold and silver, enable the country to convert a great part of this dead stock into active and productive stock; into stock which produces something to the country. The gold and silver money which circulates in any country may very properly be compared to a highway, which, while it circulates and carries to market all the grass and corn of the country, produces itself not a single pile of either. The judicious operations of banking, by providing, if I may be allowed so violent a metaphor, a sort of waggon-way through the air, enable the country to convert, as it were, a great part of its highways into good pastures, and corn fields, and thereby to increase, very considerably, the annual produce of its land and labour. The commerce and industry of the country, however, it must be acknowledged, though they may be somewhat augmented, cannot be altogether so secure, when they are thus, as it were, suspended upon the Dædalian wings of paper money, as when they travel about upon the solid ground of gold and silver. Over and above the accidents to which they are exposed from the unskilfulness of the conductors of this paper money, they are liable to several others, from which no prudence or skill of those conductors can guard them. An unsuccessful war, for example, in which the enemy got possession of the capital, and consequently of that treasure which supported the credit of the paper money, would occasion much greater confusion in a country where the whole circulation was carried on by paper, than in one where the greater part of it was carried on by gold and silver. The usual instrument of commerce having lost its value, no exchanges could be made but either by barter or upon credit. All taxes having been usually paid in paper money, the prince would not have wherewithal either to pay his troops, or to furnish his magazines; and the state of the country would be much more irretrievable than if the greater part of its circulation had consisted in gold and silver. A prince, anxious to maintain his dominions at all times in the state in which he can most easily defend them, ought upon this account to guard not only against that excessive multiplication of paper money which ruins the very banks which issue it, but even against that multiplication of it which enables them to fill the greater part of the circulation of the country with it. The circulation of every country may be considered as divided into two different branches; the circulation of the dealers with one another, and the circulation between the dealers and the consumers. Though the same pieces of money, whether paper or metal, may be employed sometimes in the one circulation and sometimes in the other; yet as both are constantly going on at the same time, each requires a certain stock of money, of one kind or another, to carry it on. The value of the goods circulated between the different dealers never can exceed the value of those circulated between the dealers and the consumers; whatever is bought by the dealers being ultimately destined to be sold to the consumers. The circulation between the dealers, as it is carried on by wholesale, requires generally a pretty large sum for every particular transaction. That between the dealers and the consumers, on the contrary, as it is generally carried on by retail, frequently requires but very small ones, a shilling, or even a halfpenny, being often sufficient. But small sums circulate much faster than large ones. A shilling changes masters more frequently than a guinea, and a halfpenny more frequently than a shilling. Though the annual purchases of all the consumers, therefore, are at least equal in value to those of all the dealers, they can generally be transacted with a much smaller quantity of money; the same pieces, by a more rapid circulation, serving as the instrument of many more purchases of the one kind than of the other. Paper money may be so regulated as either to confine itself very much to the circulation between the different dealers, or to extend itself likewise to a great part of that between the dealers and the consumers. Where no bank notes are circulated under £10 value, as in London, paper money confines itself very much to the circulation between the dealers. When a ten pound bank note comes into the hands of a consumer, he is generally obliged to change it at the first shop where he has occasion to purchase five shillings worth of goods; so that it often returns into the hands of a dealer before the consumer has spent the fortieth part of the money. Where bank notes are issued for so small sums as 20s. as in Scotland, paper money extends itself to considerable part of the circulation between dealers and consumers. Before the act of parliament which put a stop to the circulation of ten and five shilling notes, it filled a still greater part of that circulation. In the currencies of North America, paper was commonly issued for so small a sum as a shilling, and filled almost the whole of that circulation. In some paper currencies of Yorkshire, it was issued even for so small a sum as a sixpence. Where the issuing of bank notes for such very small sums is allowed, and commonly practised, many mean people are both enabled and encouraged to become bankers. A person whose promissory note for £5, or even for 20s. would be rejected by everybody, will get it to be received without scruple when it is issued for so small a sum as a sixpence. But the frequent bankruptcies to which such beggarly bankers must be liable, may occasion a very considerable inconveniency, and sometimes even a very great calamity, to many poor people who had received their notes in payment. It were better, perhaps, that no bank notes were issued in any part of the kingdom for a smaller sum than £5. Paper money would then, probably, confine itself, in every part of the kingdom, to the circulation between the different dealers, as much as it does at present in London, where no bank notes are issued under L.10 value; L.5 being, in most part of the kingdom, a sum which, though it will purchase, perhaps, little more than half the quantity of goods, is as much considered, and is as seldom spent all at once, as L.10 are amidst the profuse expense of London. Where paper money, it is to be observed, is pretty much confined to the circulation between dealers and dealers, as at London, there is always plenty of gold and silver. Where it extends itself to a considerable part of the circulation between dealers and consumers, as in Scotland, and still more in North America, it banishes gold and silver almost entirely from the country; almost all the ordinary transactions of its interior commerce being thus carried on by paper. The suppression of ten and five shilling bank notes, somewhat relieved the scarcity of gold and silver in Scotland; and the suppression of twenty shilling notes will probably relieve it still more. Those metals are said to have become more abundant in America, since the suppression or some of their paper currencies. They are said, likewise, to have been more abundant before the institution of those currencies. Though paper money should be pretty much confined to the circulation between dealers and dealers, yet banks and bankers might still be able to give nearly the same assistance to the industry and commerce of the country, as they had done when paper money filled almost the whole circulation. The ready money which a dealer is obliged to keep by him, for answering occasional demands, is destined altogether for the circulation between himself and other dealers of whom he buys goods. He has no occasion to keep any by him for the circulation between himself and the consumers, who are his customers, and who bring ready money to him, instead of taking any from him. Though no paper money, therefore, was allowed to be issued, but for such sums as would confine it pretty much to the circulation between dealers and dealers; yet partly by discounting real bills of exchange, and partly by lending upon cash-accounts, banks and bankers might still be able to relieve the greater part of those dealers from the necessity of keeping any considerable part of their stock by them unemployed, and in ready money, for answering occasional demands. They might still be able to give the utmost assistance which banks and bankers can with propriety give to traders of every kind. To restrain private people, it may be said, from receiving in payment the promissory notes of a banker for any sum, whether great or small, when they themselves are willing to receive them; or, to restrain a banker from issuing such notes, when all his neighbours are willing to accept of them, is a manifest violation of that natural liberty, which it is the proper business of law not to infringe, but to support. Such regulations may, no doubt, be considered as in some respect a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments; of the most free, as well as of the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty, exactly of the same kind with the regulations of the banking trade which are here proposed. A paper money, consisting in bank notes, issued by people of undoubted credit, payable upon demand, without any condition, and, in fact, always readily paid as soon as presented, is, in every respect, equal in value to gold and silver money, since gold and silver money can at any time be had for it. Whatever is either bought or sold for such paper, must necessarily be bought or sold as cheap as it could have been for gold and silver. The increase of paper money, it has been said, by augmenting the quantity, and consequently diminishing the value, of the whole currency, necessarily augments the money price of commodities. But as the quantity of gold and silver, which is taken from the currency, is always equal to the quantity of paper which is added to it, paper money does not necessarily increase the quantity of the whole currency. From the beginning of the last century to the present time, provisions never were cheaper in Scotland than in 1759, though, from the circulation of ten and five shilling bank notes, there was then more paper money in the country than at present. The proportion between the price of provisions in Scotland and that in England is the same now as before the great multiplication of banking companies in Scotland. Corn is, upon most occasions, fully as cheap in England as in France, though there is a great deal of paper money in England, and scarce any in France. In 1751 and 1752, when Mr Hume published his Political Discourses, and soon after the great multiplication of paper money in Scotland, there was a very sensible rise in the price of provisions, owing, probably, to the badness of the seasons, and not to the multiplication of paper money. It would be otherwise, indeed, with a paper money, consisting in promissory notes, of which the immediate payment depended, in any respect, either upon the good will of those who issued them, or upon a condition which the holder of the notes might not always have it in his power to fulfil, or of which the payment was not exigible till after a certain number of years, and which, in the meantime, bore no interest. Such a paper money would, no doubt, fall more or less below the value of gold and silver, according as the difficulty or uncertainty of obtaining immediate payment was supposed to be greater or less, or according to the greater or less distance of time at which payment was exigible. Some years ago the different banking companies of Scotland were in the practice of inserting into their bank notes, what they called an optional clause; by which they promised payment to the bearer, either as soon as the note should be presented, or, in the option of the directors, six months after such presentment, together with the legal interest for the said six months. The directors of some of those banks sometimes took advantage of this optional clause, and sometimes threatened those who demanded gold and silver in exchange for a considerable number of their notes, that they would take advantage of it, unless such demanders would content themselves with a part of what they demanded. The promissory notes of those banking companies constituted, at that time, the far greater part of the currency of Scotland, which this uncertainty of payment necessarily degraded below the value of gold and silver money. During the continuance of this abuse (which prevailed chiefly in 1762, 1763, and 1764), while the exchange between London and Carlisle was at par, that between London and Dumfries would sometimes be four per cent. against Dumfries, though this town is not thirty miles distant from Carlisle. But at Carlisle, bills were paid in gold and silver; whereas at Dumfries they were paid in Scotch bank notes; and the uncertainty of getting those bank notes exchanged for gold and silver coin, had thus degraded them four per cent. below the value of that coin. The same act of parliament which suppressed ten and five shilling bank notes, suppressed likewise this optional clause, and thereby restored the exchange between England and Scotland to its natural rate, or to what the course of trade and remittances might happen to make it. In the paper currencies of Yorkshire, the payment of so small a sum as 6d. sometimes depended upon the condition, that the holder of the note should bring the change of a guinea to the person who issued it; a condition which the holders of such notes might frequently find it very difficult to fulfil, and which must have degraded this currency below the value of gold and silver money. An act of parliament, accordingly, declared all such clauses unlawful, and suppressed, in the same manner as in Scotland, all promissory notes, payable to the bearer, under 20s. value. The paper currencies of North America consisted, not in bank notes payable to the bearer on demand, but in a government paper, of which the payment was not exigible till several years after it was issued; and though the colony governments paid no interest to the holders of this paper, they declared it to be, and in fact rendered it, a legal tender of payment for the full value for which it was issued. But allowing the colony security to be perfectly good, L.100, payable fifteen years hence, for example, in a country where interest is at six per cent., is worth little more than L.40 ready money. To oblige a creditor, therefore, to accept of this as full payment for a debt of L.100, actually paid down in ready money, was an act of such violent injustice, as has scarce, perhaps, been attempted by the government of any other country which pretended to be free. It bears the evident marks of having originally been, what the honest and downright Doctor Douglas assures us it was, a scheme of fraudulent debtors to cheat their creditors. The government of Pennsylvania, indeed, pretended, upon their first emission of paper money, in 1722, to render their paper of equal value with gold and silver, by enacting penalties against all those who made any difference in the price of their goods when they sold them for a colony paper, and when they sold them for gold and silver; a regulation equally tyrannical, but much less effectual, than that which it was meant to support. A positive law may render a shilling a legal tender for a guinea, because it may direct the courts of justice to discharge the debtor who has made that tender; but no positive law can oblige a person who sells goods, and who is at liberty to sell or not to sell as he pleases, to accept of a shilling as equivalent to a guinea in the price of them. Notwithstanding any regulation of this kind, it appeared, by the course of exchange with Great Britain, that L.100 sterling was occasionally considered an equivalent, in some of the colonies, to L.130, and in others to so great a sum as L.1100 currency; this difference in the value arising from the difference in the quantity of paper emitted in the different colonies, and in the distance and probability of the term of its final discharge and redemption. No law, therefore, could be more equitable than the act of parliament, so unjustly complained of in the colonies, which declared, that no paper currency to be emitted there in time coming, should be a legal tender of payment. Pennsylvania was always more moderate in its emissions of paper money than any other of our colonies. Its paper currency, accordingly, is said never to have sunk below the value of the gold and silver which was current in the colony before the first emission of its paper money. Before that emission, the colony had raised the denomination of its coin, and had, by act of assembly, ordered 5s. sterling to pass in the colonies for 6s. 3d., and afterwards for 6s. 8d. A pound, colony currency, therefore, even when that currency was gold and silver, was more than thirty per cent. below the value of L.1 sterling; and when that currency was turned into paper, it was seldom much more than thirty per cent. below that value. The pretence for raising the denomination of the coin was to prevent the exportation of gold and silver, by making equal quantities of those metals pass for greater sums in the colony than they did in the mother country. It was found, however, that the price of all goods from the mother country rose exactly in proportion as they raised the denomination of their coin, so that their gold and silver were exported as fast as ever. The paper of each colony being received in the payment of the provincial taxes, for the full value for which it had been issued, it necessarily derived from this use some additional value, over and above what it would have had, from the real or supposed distance of the term of its final discharge and redemption. This additional value was greater or less, according as the quantity of paper issued was more or less above what could be employed in the payment of the taxes of the particular colony which issued it. It was in all the colonies very much above what could be employed in this manner. A prince, who should enact that a certain proportion of his taxes should be paid in a paper money of a certain kind, might thereby give a certain value to this paper money, even though the term of its final discharge and redemption should depend altogether upon the will of the prince. If the bank which issued this paper was careful to keep the quantity of it always somewhat below what could easily be employed in this manner, the demand for it might be such as to make it even bear a premium, or sell for somewhat more in the market than the quantity of gold or silver currency for which it was issued. Some people account in this manner for what is called the agio of the bank of Amsterdam, or for the superiority of bank money over current money, though this bank money, as they pretend, cannot be taken out of the bank at the will of the owner. The greater part of foreign bills of exchange must be paid in bank money, that is, by a transfer in the books of the bank, and the directors of the bank, they allege, are careful to keep the whole quantity of bank money always below what this use occasions a demand for. It is upon this account, they say, the bank money sells for a premium, or bears an agio of four or five per cent. above the same nominal sum of the gold and silver currency of the country. This account of the bank of Amsterdam, however, it will appear hereafter, is in a great measure chimerical. A paper currency which falls below the value of gold and silver coin, does not thereby sink the value of those metals, or occasion equal quantities of them to exchange for a smaller quantity of goods of any other kind. The proportion between the value of gold and silver and that of goods of any other kind, depends in all cases, not upon the nature and quantity of any particular paper money, which may be current in any particular country, but upon the richness or poverty of the mines, which happen at any particular time to supply the great market of the commercial world with those metals. It depends upon the proportion between the quantity of labour which is necessary in order to bring a certain quantity of gold and silver to market, and that which is necessary in order to bring thither a certain quantity of any other sort of goods. If bankers are restrained from issuing any circulating bank notes, or notes payable to the bearer, for less than a certain sum; and if they are subjected to the obligation of an immediate and unconditional payment of such bank notes as soon as presented, their trade may, with safety to the public, be rendered in all other respects perfectly free. The late multiplication of banking companies in both parts of the united kingdom, an event by which many people have been much alarmed, instead of diminishing, increases the security of the public. It obliges all of them to be more circumspect in their conduct, and, by not extending their currency beyond its due proportion to their cash, to guard themselves against those malicious runs, which the rivalship of so many competitors is always ready to bring upon them. It restrains the circulation of each particular company within a narrower circle, and reduces their circulating notes to a smaller number. By dividing the whole circulation into a greater number of parts, the failure of any one company, an accident which, in the course of things, must sometimes happen, becomes of less consequence to the public. This free competition, too, obliges all bankers to be more liberal in their dealings with their customers, lest their rivals should carry them away. In general, if any branch of trade, or any division of labour, be advantageous to the public, the freer and more general the competition, it will always be the more so. CHAP. III. OF THE ACCUMULATION OF CAPITAL, OR OF PRODUCTIVE AND UNPRODUCTIVE LABOUR. There is one sort of labour which adds to the value of the subject upon which it is bestowed; there is another which has no such effect. The former as it produces a value, may be called productive, the latter, unproductive[30] labour. Thus the labour of a manufacturer adds generally to the value of the materials which he works upon, that of his own maintenance, and of his master's profit. The labour of a menial servant, on the contrary, adds to the value of nothing. Though the manufacturer has his wages advanced to him by his master, he in reality costs him no expense, the value of those wages being generally restored, together with a profit, in the improved value of the subject upon which his labour is bestowed. But the maintenance of a menial servant never is restored. A man grows rich by employing a multitude of manufacturers; he grows poor by maintaining a multitude of menial servants. The labour of the latter, however, has its value, and deserves its reward as well as that of the former. But the labour of the manufacturer fixes and realizes itself in some particular subject or vendible commodity, which lasts for some time at least after that labour is past. It is, as it were, a certain quantity of labour stocked and stored up, to be employed, if necessary, upon some other occasion. That subject, or, what is the same thing, the price of that subject, can afterwards, if necessary, put into motion a quantity of labour equal to that which had originally produced it. The labour of the menial servant, on the contrary, does not fix or realize itself in any particular subject or vendible commodity. His services generally perish in the very instant of their performance, and seldom leave any trace of value behind them, for which an equal quantity of service could afterwards be procured. The labour of some of the most respectable orders in the society is, like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject, or vendible commodity, which endures after that labour is past, and for which an equal quantity of labour could afterwards be procured. The sovereign, for example, with all the officers both of justice and war who serve under him, the whole army and navy, are unproductive labourers. They are the servants of the public, and are maintained by a part of the annual produce of the industry of other people. Their service, how honourable, how useful, or how necessary soever, produces nothing for which an equal quantity of service can afterwards be procured. The protection, security, and defence, of the commonwealth, the effect of their labour this year, will not purchase its protection, security, and defence, for the year to come. In the same class must be ranked, some both of the gravest and most important, and some of the most frivolous professions; churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers, opera-dancers, &c. The labour of the meanest of these has a certain value, regulated by the very same principles which regulate that of every other sort of labour; and that of the noblest and most useful produces nothing which could afterwards purchase or procure an equal quantity of labour. Like the declamation of the actor, the harangue of the orator, or the tune of the musician, the work of all of them perishes in the very instant of its production. Both productive and unproductive labourers, and those who do not labour at all, are all equally maintained by the annual produce of the land and labour of the country. This produce, how great soever, can never be infinite, but must have certain limits. According, therefore, as a smaller or greater proportion of it is in any one year employed in maintaining unproductive hands, the more in the one case, and the less in the other, will remain for the productive, and the next year's produce will be greater or smaller accordingly; the whole annual produce, if we except the spontaneous productions of the earth, being the effect of productive labour. Though the whole annual produce of the land and labour of every country is no doubt ultimately destined for supplying the consumption of its inhabitants, and for procuring a revenue to them; yet when it first comes either from the ground, or from the hands of the productive labourers, it naturally divides itself into two parts. One of them, and frequently the largest, is, in the first place, destined for replacing a capital, or for renewing the provisions, materials, and finished work, which had been withdrawn from a capital; the other for constituting a revenue either to the owner of this capital, as the profit of his stock, or to some other person, as the rent of his land. Thus, of the produce of land, one part replaces the capital of the farmer; the other pays his profit and the rent of the landlord; and thus constitutes a revenue both to the owner of this capital, as the profits of his stock, and to some other person as the rent of his land. Of the produce of a great manufactory, in the same manner, one part, and that always the largest, replaces the capital of the undertaker of the work; the other pays his profit, and thus constitutes a revenue to the owner of this capital. That part of the annual produce of the land and labour of any country which replaces a capital, never is immediately employed to maintain any but productive hands. It pays the wages of productive labour only. That which is immediately destined for constituting a revenue, either as profit or as rent, may maintain indifferently either productive or unproductive hands. Whatever part of his stock a man employs as a capital, he always expects it to be replaced to him with a profit. He employs it, therefore, in maintaining productive hands only; and after having served in the function of a capital to him, it constitutes a revenue to them. Whenever he employs any part of it in maintaining unproductive hands of any kind, that part is from that moment withdrawn from his capital, and placed in his stock reserved for immediate consumption. Unproductive labourers, and those who do not labour at all, are all maintained by revenue; either, first, by that part of the annual produce which is originally destined for constituting a revenue to some particular persons, either as the rent of land, or as the profits of stock; or, secondly, by that part which, though originally destined for replacing a capital, and for maintaining productive labourers only, yet when it comes into their hands, whatever part of it is over and above their necessary subsistence, may be employed in maintaining indifferently either productive or unproductive hands. Thus, not only the great landlord or the rich merchant, but even the common workman, if his wages are considerable, may maintain a menial servant; or he may sometimes go to a play or a puppet-show, and so contribute his share towards maintaining one set of unproductive labourers; or he may pay some taxes, and thus help to maintain another set, more honourable and useful, indeed, but equally unproductive. No part of the annual produce, however, which had been originally destined to replace a capital, is ever directed towards maintaining unproductive hands, till after it has put into motion its full complement of productive labour, or all that it could put into motion in the way in which it was employed. The workman must have earned his wages by work done, before he can employ any part of them in this manner. That part, too, is generally but a small one. It is his spare revenue only, of which productive labourers have seldom a great deal. They generally have some, however; and in the payment of taxes, the greatness of their number may compensate, in some measure, the smallness of their contribution. The rent of land and the profits of stock are everywhere, therefore, the principal sources from which unproductive hands derive their subsistence. These are the two sorts of revenue of which the owners have generally most to spare. They might both maintain indifferently, either productive or unproductive hands. They seem, however, to have some predilection for the latter. The expense of a great lord feeds generally more idle than industrious people. The rich merchant, though with his capital he maintains industrious people only, yet by his expense, that is, by the employment of his revenue, he feeds commonly the very same sort as the great lord. The proportion, therefore, between the productive and unproductive hands, depends very much in every country upon the proportion between that part of the annual produce, which, as soon as it comes either from the ground, or from the hands of the productive labourers, is destined for replacing a capital, and that which is destined for constituting a revenue, either as rent or as profit. This proportion is very different in rich from what it is in poor countries. Thus, at present, in the opulent countries of Europe, every large, frequently the largest, portion of the produce of the land, is destined for replacing the capital of the rich and independent farmer; the other for paying his profits, and the rent of the landlord. But anciently, during the prevalency of the feudal government, a very small portion of the produce was sufficient to replace the capital employed in cultivation. It consisted commonly in a few wretched cattle, maintained altogether by the spontaneous produce of uncultivated land, and which might, therefore, be considered as a part of that spontaneous produce. It generally, too, belonged to the landlord, and was by him advanced to the occupiers of the land. All the rest of the produce properly belonged to him too, either as rent for his land, or as profit upon this paltry capital. The occupiers of land were generally bondmen, whose persons and effects were equally his property. Those who were not bondmen were tenants at will; and though the rent which they paid was often nominally little more than a quit-rent, it really amounted to the whole produce of the land. Their lord could at all times command their labour in peace and their service in war. Though they lived at a distance from his house, they were equally dependent upon him as his retainers who lived in it. But the whole produce of the land undoubtedly belongs to him, who can dispose of the labour and service of all those whom it maintains. In the present state of Europe, the share of the landlord seldom exceeds a third, sometimes not a fourth part of the whole produce of the land. The rent of land, however, in all the improved parts of the country, has been tripled and quadrupled since those ancient times; and this third or fourth part of the annual produce is, it seems, three or four times greater than the whole had been before. In the progress of improvement, rent, though it increases in proportion to the extent, diminishes in proportion to the produce of the land. In the opulent countries of Europe, great capitals are at present employed in trade and manufactures. In the ancient state, the little trade that was stirring, and the few homely and coarse manufactures that were carried on, required but very small capitals. These, however, must have yielded very large profits. The rate of interest was nowhere less than ten per cent. and their profits must have been sufficient to afford this great interest. At present, the rate of interest, in the improved parts of Europe, is nowhere higher than six per cent.; and in some of the most improved, it is so low as four, three, and two per cent. Though that part of the revenue of the inhabitants which is derived from the profits of stock, is always much greater in rich than in poor countries, it is because the stock is much greater; in proportion to the stock, the profits are generally much less. That part of the annual produce, therefore, which, as soon as it comes either from the ground, or from the hands of the productive labourers, is destined for replacing a capital, is not only much greater in rich than in poor countries, but bears a much greater proportion to that which is immediately destined for constituting a revenue either as rent or as profit. The funds destined for the maintenance of productive labour are not only much greater in the former than in the latter, but bear a much greater proportion to those which, though they may be employed to maintain either productive or unproductive hands, have generally a predilection for the latter. The proportion between those different funds necessarily determines in every country the general character of the inhabitants as to industry or idleness. We are more industrious than our forefathers, because, in the present times, the funds destined for the maintenance of industry are much greater in proportion to those which are likely to be employed in the maintenance of idleness, than they were two or three centuries ago. Our ancestors were idle for want of a sufficient encouragement to industry. It is better, says the proverb, to play for nothing, than to work for nothing. In mercantile and manufacturing towns, where the inferior ranks of people are chiefly maintained by the employment of capital, they are in general industrious, sober, and thriving; as in many English, and in most Dutch towns. In those towns which are principally supported by the constant or occasional residence of a court, and in which the inferior ranks of people are chiefly maintained by the spending of revenue, they are in general idle, dissolute, and poor; as at Rome, Versailles, Compeigne, and Fontainbleau. If you except Rouen and Bourdeaux, there is little trade or industry in any of the parliament towns of France; and the inferior ranks of people, being chiefly maintained by the expense of the members of the courts of justice, and of those who come to plead before them, are in general idle and poor. The great trade of Rouen and Bourdeaux seems to be altogether the effect of their situation. Rouen is necessarily the entrepot of almost all the goods which are brought either from foreign countries, or from the maritime provinces of France, for the consumption of the great city of Paris. Bourdeaux is, in the same manner, the entrepot of the wines which grow upon the banks of the Garronne, and of the rivers which run into it, one of the richest wine countries in the world, and which seems to produce the wine fittest for exportation, or best suited to the taste of foreign nations. Such advantageous situations necessarily attract a great capital by the great employment which they afford it; and the employment of this capital is the cause of the industry of those two cities. In the other parliament towns of France, very little more capital seems to be employed than what is necessary for supplying their own consumption; that is, little more than the smallest capital which can be employed in them. The same thing may be said of Paris, Madrid, and Vienna. Of those three cities, Paris is by far the most industrious, but Paris itself is the principal market of all the manufactures established at Paris, and its own consumption is the principal object of all the trade which it carries on. London, Lisbon, and Copenhagen, are, perhaps, the only three cities in Europe, which are both the constant residence of a court, and can at the same time be considered as trading cities, or as cities which trade not only for their own consumption, but for that of other cities and countries. The situation of all the three is extremely advantageous, and naturally fits them to be the entrepots of a great part of the goods destined for the consumption of distant places. In a city where a great revenue is spent, to employ with advantage a capital for any other purpose than for supplying the consumption of that city, is probably more difficult than in one in which the inferior ranks of people have no other maintenance but what they derive from the employment of such a capital. The idleness of the greater part of the people who are maintained by the expense of revenue, corrupts, it is probable, the industry of those who ought to be maintained by the employment of capital, and renders it less advantageous to employ a capital there than in other places. There was little trade or industry in Edinburgh before the Union. When the Scotch parliament was no longer to be assembled in it, when it ceased to be the necessary residence of the principal nobility and gentry of Scotland, it became a city of some trade and industry. It still continues, however, to be the residence of the principal courts of justice in Scotland, of the boards of customs and excise, &c. A considerable revenue, therefore, still continues to be spent in it. In trade and industry, it is much inferior to Glasgow, of which the inhabitants are chiefly maintained by the employment of capital. The inhabitants of a large village, it has sometimes been observed, after having made considerable progress in manufactures, have become idle and poor, in consequence of a great lord's having taken up his residence in their neighbourhood. The proportion between capital and revenue, therefore, seems everywhere to regulate the proportion between industry and idleness. Wherever capital predominates, industry prevails; wherever revenue, idleness. Every increase or diminution of capital, therefore, naturally tends to increase or diminish the real quantity of industry, the number of productive hands, and consequently the exchangeable value of the annual produce of the land and labour of the country, the real wealth and revenue of all its inhabitants. Capitals are increased by parsimony, and diminished by prodigality and misconduct. Whatever a person saves from his revenue he adds to his capital, and either employs it himself in maintaining an additional number of productive hands, or enables some other person to do so, by lending it to him for an interest, that is, for a share of the profits. As the capital of an individual can be increased only by what he saves from his annual revenue or his annual gains, so the capital of a society, which is the same with that of all the individuals who compose it, can be increased only in the same manner. Parsimony, and not industry, is the immediate cause of the increase of capital. Industry, indeed, provides the subject which parsimony accumulates; but whatever industry might acquire, if parsimony did not save and store up, the capital would never be the greater. Parsimony, by increasing the fund which is destined for the maintenance of productive hands, tends to increase the number of those hands whose labour adds to the value of the subject upon which it is bestowed. It tends, therefore, to increase the exchangeable value of the annual produce of the land and labour of the country. It puts into motion an additional quantity of industry, which gives an additional value to the annual produce. What is annually saved, is as regularly consumed as what is annually spent, and nearly in the same time too; but it is consumed by a different set of people. That portion of his revenue which a rich man annually spends, is, in most cases, consumed by idle guests and menial servants, who leave nothing behind them in return for their consumption. That portion which he annually saves, as, for the sake of the profit, it is immediately employed as a capital, is consumed in the same manner, and nearly in the same time too, but by a different set of people: by labourers, manufacturers, and artificers, who re-produce, with a profit, the value of their annual consumption. His revenue, we shall suppose, is paid him in money. Had he spent the whole, the food, clothing, and lodging, which the whole could have purchased, would have been distributed among the former set of people. By saving a part of it, as that part is, for the sake of the profit, immediately employed as a capital, either by himself or by some other person, the food, clothing, and lodging, which may be purchased with it, are necessarily reserved for the latter. The consumption is the same, but the consumers are different. By what a frugal man annually saves, he not only affords maintenance to an additional number of productive hands, for that of the ensuing year, but like the founder of a public work-house he establishes, as it were, a perpetual fund for the maintenance of an equal number in all times to come. The perpetual allotment and destination of this fund, indeed, is not always guarded by any positive law, by any trust-right or deed of mortmain. It is always guarded, however, by a very powerful principle, the plain and evident interest of every individual to whom any share of it shall ever belong. No part of it can ever afterwards be employed to maintain any but productive hands, without an evident loss to the person who thus perverts it from its proper destination. The prodigal perverts it in this manner: By not confining his expense within his income, he encroaches upon his capital. Like him who perverts the revenues of some pious foundation to profane purposes, he pays the wages of idleness with those funds which the frugality of his forefathers had, as it were, consecrated to the maintenance of industry. By diminishing the funds destined for the employment of productive labour, he necessarily diminishes, so far as it depends upon him, the quantity of that labour which adds a value to the subject upon which it is bestowed, and, consequently, the value of the annual produce of the land and labour of the whole country, the real wealth and revenue of its inhabitants. If the prodigality of some was not compensated by the frugality of others, the conduct of every prodigal, by feeding the idle with the bread of the industrious, tends not only to beggar himself, but to impoverish his country. Though the expense of the prodigal should be altogether in home made, and no part of it in foreign commodities, its effect upon the productive funds of the society would still be the same. Every year there would still be a certain quantity of food and clothing, which ought to have maintained productive, employed in maintaining unproductive hands. Every year, therefore, there would still be some diminution in what would otherwise have been the value of the annual produce of the land and labour of the country. This expense, it may be said, indeed, not being in foreign goods, and not occasioning any exportation of gold and silver, the same quantity of money would remain in the country as before. But if the quantity of food and clothing, which were thus consumed by unproductive, had been distributed among productive hands, they would have reproduced, together with a profit, the full value of their consumption. The same quantity of money would, in this case, equally have remained in the country, and there would, besides, have been a reproduction of an equal value of consumable goods. There would have been two values instead of one. The same quantity of money, besides, cannot long remain in any country in which the value of the annual produce diminishes. The sole use of money is to circulate consumable goods. By means of it, provisions, materials, and finished work, are bought and sold, and distributed to their proper consumers. The quantity of money, therefore, which can be annually employed in any country, must be determined by the value of the consumable goods annually circulated within it. These must consist, either in the immediate produce of the land and labour of the country itself, or in something which had been purchased with some part of that produce. Their value, therefore, must diminish as the value of that produce diminishes, and along with it the quantity of money which can be employed in circulating them. But the money which, by this annual diminution of produce, is annually thrown out of domestic circulation, will not be allowed to lie idle. The interest of whoever possesses it requires that it should be employed; but having no employment at home, it will, in spite of all laws and prohibitions, be sent abroad, and employed in purchasing consumable goods, which may be of some use at home. Its annual exportation will, in this manner, continue for some time to add something to the annual consumption of the country beyond the value of its own annual produce. What in the days of its prosperity had been saved from that annual produce, and employed in purchasing gold and silver will contribute, for some little time, to support its consumption in adversity. The exportation of gold and silver is, in this case, not the cause, but the effect of its declension, and may even, for some little time, alleviate the misery of that declension. The quantity of money, on the contrary, must in every country naturally increase as the value of the annual produce increases. The value of the consumable goods annually circulated within the society being greater, will require a greater quantity of money to circulate them. A part of the increased produce, therefore, will naturally be employed in purchasing, wherever it is to be had, the additional quantity of gold and silver necessary for circulating the rest. The increase of those metals will, in this case, be the effect, not the cause, of the public prosperity. Gold and silver are purchased everywhere in the same manner. The food, clothing, and lodging, the revenue and maintenance, of all those whose labour or stock is employed in bringing them from the mine to the market, is the price paid for them in Peru as well as in England. The country which has this price to pay, will never be long without the quantity of those metals which it has occasion for; and no country will ever long retain a quantity which it has no occasion for. Whatever, therefore, we may imagine the real wealth and revenue of a country to consist in, whether in the value of the annual produce of its land and labour, as plain reason seems to dictate, or in the quantity of the precious metals which circulate within it, as vulgar prejudices suppose; in either view of the matter, every prodigal appears to be a public enemy, and every frugal man a public benefactor. The effects of misconduct are often the same as those of prodigality. Every injudicious and unsuccessful project in agriculture, mines, fisheries, trade, or manufactures, tends in the same manner to diminish the funds destined for the maintenance of productive labour. In every such project, though the capital is consumed by productive hands only, yet as, by the injudicious manner in which they are employed, they do not reproduce the full value of their consumption, there must always be some diminution in what would otherwise have been the productive funds of the society. It can seldom happen, indeed, that the circumstances of a great nation can be much affected either by the prodigality or misconduct of individuals; the profusion or imprudence of some being always more than compensated by the frugality and good conduct of others. With regard to profusion, the principle which prompts to expense is the passion for present enjoyment; which, though sometimes violent and very difficult to be restrained, is in general only momentary occasional. But the principle which prompts to save, is the desire of bettering our condition; a desire which, though generally calm and dispassionate, comes with us from the womb, and never leaves us till we go into the grave. In the whole interval which separates those two moments, there is scarce, perhaps, a single instance, in which any man is so perfectly and completely satisfied with his situation, as to be without any wish of alteration or improvement of any kind. An augmentation of fortune is the means by which the greater part of men propose and wish to better their condition. It is the means the most vulgar and the most obvious; and the most likely way of augmenting their fortune, is to save and accumulate some part of what they acquire, either regularly and annually, or upon some extraordinary occasion. Though the principle of expense, therefore, prevails in almost all men upon some occasions, and in some men upon almost all occasions; yet in the greater part of men, taking the whole course of their life at an average, the principle of frugality seems not only to predominate, but to predominate very greatly. With regard to misconduct, the number of prudent and successful undertakings is everywhere much greater than that of injudicious and unsuccessful ones. After all our complaints of the frequency of bankruptcies, the unhappy men who fall into this misfortune, make but a very small part of the whole number engaged in trade, and all other sorts of business; not much more, perhaps, than one in a thousand. Bankruptcy is, perhaps, the greatest and most humiliating calamity which can befal an innocent man. The greater part of men, therefore, are sufficiently careful to avoid it. Some, indeed, do not avoid it; as some do not avoid the gallows. Great nations are never impoverished by private, though they sometimes are by public prodigality and misconduct. The whole, or almost the whole public revenue is, in most countries, employed in maintaining unproductive hands. Such are the people who compose a numerous and splendid court, a great ecclesiastical establishment, great fleets and armies, who in time of peace produce nothing, and in time of war acquire nothing which can compensate the expense of maintaining them, even while the war lasts. Such people, as they themselves produce nothing, are all maintained by the produce of other men's labour. When multiplied, therefore, to an unnecessary number, they may in a particular year consume so great a share of this produce, as not to leave a sufficiency for maintaining the productive labourers, who should reproduce it next year. The next year's produce, therefore, will be less than that of the foregoing; and if the same disorder should continue, that of the third year will be still less than that of the second. Those unproductive hands who should be maintained by a part only of the spare revenue of the people, may consume so great a share of their whole revenue, and thereby oblige so great a number to encroach upon their capitals, upon the funds destined for the maintenance of productive labour, that all the frugality and good conduct of individuals may not be able to compensate the waste and degradation of produce occasioned by this violent and forced encroachment. This frugality and good conduct, however, is upon most occasions, it appears from experience, sufficient to compensate, not only the private prodigality and misconduct of individuals, but the public extravagance of government. The uniform, constant, and uninterrupted effort of every man to better his condition, the principle from which public and national, as well as private opulence is originally derived, is frequently powerful enough to maintain the natural progress of things towards improvement, in spite both of the extravagance of government, and of the greatest errors of administration. Like the unknown principle of animal life, it frequently restores health and vigour to the constitution, in spite not only of the disease, but of the absurd prescriptions of the doctor. The annual produce of the land and labour of any nation can be increasing in its value by no other means, but by increasing either the number of its productive labourers, or the productive powers of those labourers who had before been employed. The number of its productive labourers, it is evident, can never be much increased, but in consequence of an increase of capital, or of the funds destined for maintaining them. The productive powers of the same number of labourers cannot be increased, but in consequence either of some addition and improvement to those machines and instruments which facilitate and abridge labour, or of more proper division and distribution of employment. In either case, an additional capital is almost always required. It is by means of an additional capital only, that the undertaker of any work can either provide his workmen with better machinery, or make a more proper distribution of employment among them. When the work to be done consists of a number of parts, to keep every man constantly employed in one way, requires a much greater capital than where every man is occasionally employed in every different part of the work. When we compare, therefore, the state of a nation at two different periods, and find that the annual produce of its land and labour is evidently greater at the latter than at the former, that its lands are better cultivated, its manufactures more numerous and more flourishing, and its trade more extensive; we may be assured that its capital must have increased during the interval between those two periods, and that more must have been added to it by the good conduct of some, than had been taken from it either by the private misconduct of others, or by the public extravagance of government. But we shall find this to have been the case of almost all nations, in all tolerably quiet and peaceable times, even of those who have not enjoyed the most prudent and parsimonious governments. To form a right judgment of it, indeed, we must compare the state of the country at periods somewhat distant from one another. The progress is frequently so gradual, that, at near periods, the improvement is not only not sensible, but, from the declension either of certain branches of industry, or of certain districts of the country, things which sometimes happen, though the country in general is in great prosperity, there frequently arises a suspicion, that the riches and industry of the whole are decaying. The annual produce of the land and labour of England, for example, is certainly much greater than it was a little more than a century ago, at the restoration of Charles II. Though at present few people, I believe, doubt of this, yet during this period five years have seldom passed away, in which some book or pamphlet has not been published, written, too, with such abilities as to gain some authority with the public, and pretending to demonstrate that the wealth of the nation was fast declining; that the country was depopulated, agriculture neglected, manufactures decaying, and trade undone. Nor have these publications been all party pamphlets, the wretched offspring of falsehood and venality. Many of them have been written by very candid and very intelligent people, who wrote nothing but what they believed, and for no other reason but because they believed it. The annual produce of the land and labour of England, again, was certainly much greater at the Restoration than we can suppose it to have been about a hundred years before, at the accession of Elizabeth. At this period, too, we have all reason to believe, the country was much more advanced in improvement, than it had been about a century before, towards the close of the dissensions between the houses of York and Lancaster. Even then it was, probably, in a better condition than it had been at the Norman conquest: and at the Norman conquest, than during the confusion of the Saxon heptarchy. Even at this early period, it was certainly a more improved country than at the invasion of Julius Cæsar, when its inhabitants were nearly in the same state with the savages in North America. In each of those periods, however, there was not only much private and public profusion, many expensive and unnecessary wars, great perversion of the annual produce from maintaining productive to maintain unproductive hands; but sometimes, in the confusion of civil discord, such absolute waste and destruction of stock, as might he supposed, not only to retard, as it certainly did, the natural accumulation of riches, but to have left the country, at the end of the period, poorer than at the beginning, Thus, in the happiest and most fortunate period of them all, that which has passed since the Restoration, how many disorders and misfortunes have occurred, which, could they have been foreseen, not only the impoverishment, but the total ruin of the country would have been expected from them? The fire and the plague of London, the two Dutch wars, the disorders of the revolution, the war in Ireland, the four expensive French wars of 1688, 1701, 1742, and 1756, together with the two rebellions of 1715 and 1745. In the course of the four French wars, the nation has contracted more than L.145,000,000 of debt, over and above all the other extraordinary annual expense which they occasioned; so that the whole cannot be computed at less than L.200,000,000. So great a share of the annual produce of the land and labour of the country, has, since the Revolution, been employed upon different occasions, in maintaining an extraordinary number of unproductive hands. But had not those wars given this particular direction to so large a capital, the greater part of it would naturally have been employed in maintaining productive hands, whose labour would have replaced, with a profit, the whole value of their consumption. The value of the annual produce of the land and labour of the country would have been considerably increased by it every year, and every year's increase would have augmented still more that of the following year. More houses would have been built, more lands would have been improved, and those which had been improved before would have been better cultivated; more manufactures would have been established, and those which had been established before would have been more extended; and to what height the real wealth and revenue of the country might by this time have been raised, it is not perhaps very easy even to imagine. But though the profusion of government must undoubtedly have retarded the natural progress of England towards wealth and improvement, it has not been able to stop it. The annual produce of its land and labour is undoubtedly much greater at present than it was either at the Restoration or at the Revolution. The capital, therefore, annually employed in cultivating this land, and in maintaining this labour, must likewise be much greater. In the midst of all the exactions of government, this capital has been silently and gradually accumulated by the private frugality and good conduct of individuals, by their universal, continual, and uninterrupted effort to better their own condition. It is this effort, protected by law, and allowed by liberty to exert itself in the manner that is most advantageous, which has maintained the progress of England towards opulence and improvement in almost all former times, and which, it is to be hoped, will do so in all future times. England, however, as it has never been blessed with a very parsimonious government, so parsimony has at no time been the characteristic virtue of its inhabitants. It is the highest impertinence and presumption, therefore, in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense, either by sumptuary laws, or by prohibiting the importation of foreign luxuries. They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of the subject never will. As frugality increases, and prodigality diminishes, the public capital, so the conduct of those whose expense just equals their revenue, without either accumulating or encroaching, neither increases nor diminishes it. Some modes of expense, however, seem to contribute more to the growth of public opulence than others. The revenue of an individual may be spent, either in things which are consumed immediately, and in which one day's expense can neither alleviate nor support that of another; or it may be spent in things more durable, which can therefore be accumulated, and in which every every day's expense may, as he chooses, either alleviate, or support and heighten, the effect of that of the following day. A man of fortune, for example, may either spend his revenue in a profuse and sumptuous table, and in maintaining a great number of menial servants, and a multitude of dogs and horses; or, contenting himself with a frugal table, and few attendants, he may lay out the greater part of it in adorning his house or his country villa, in useful or ornamental buildings, in useful or ornamental furniture, in collecting books, statues, pictures; or in things more frivolous, jewels, baubles, ingenious trinkets of different kinds; or, what is must trifling of all, in amassing a great wardrobe of fine clothes, like the favourite and minister of a great prince who died a few years ago. Were two men of equal fortune to spend their revenue, the one chiefly in the one way, the other in the other, the magnificence of the person whose expense had been chiefly in durable commodities, would be continually increasing, every day's expense contributing something to support and heighten the effect of that of the following day; that of the other, on the contrary, would be no greater at the end of the period than at the beginning. The former too would, at the end of the period, be the richer man of the two. He would have a stock of goods of some kind or other, which, though it might not be worth all that it cost, would always be worth something. No trace or vestige of the expense of the latter would remain, and the effects of ten or twenty years' profusion would be as completely annihilated as if they had never existed. As the one mode of expense is more favourable than the other to the opulence of an individual, so is it likewise to that of a nation. The houses, the furniture, the clothing of the rich, in a little time, become useful to the inferior and middling ranks of people. They are able to purchase them when their superiors grow weary of them; and the general accommodation of the whole people is thus gradually improved, when this mode of expense becomes universal among men of fortune. In countries which have long been rich, you will frequently find the inferior ranks of people in possession both of houses and furniture perfectly good and entire, but of which neither the one could have been built, nor the other have been made for their use. What was formerly a seat of the family of Seymour, is now an inn upon the Bath road. The marriage-bed of James I. of Great Britain, which his queen brought with her from Denmark, as a present fit for a sovereign to make to a sovereign, was, a few years ago, the ornament of an alehouse at Dunfermline. In some ancient cities, which either have been long stationary, or have gone somewhat to decay, you will sometimes scarce find a single house which could have been built for its present inhabitants. If you go into those houses, too, you will frequently find many excellent, though antiquated pieces of furniture, which are still very fit for use, and which could as little have been made for them. Noble palaces, magnificent villas, great collections of books, statues, pictures, and other curiosities, are frequently both an ornament and an honour, not only to the neighbourhood, but to the whole country to which they belong. Versailles is an ornament and an honour to France, Stowe and Wilton to England. Italy still continues to command some sort of veneration, by the number of monuments of this kind which it possesses, though the wealth which produced them has decayed, and though the genius which planned them seems to be extinguished, perhaps from not having the same employment. The expense, too, which is laid out in durable commodities, is favourable not only to accumulation, but to frugality. If a person should at any time exceed in it, he can easily reform without exposing himself to the censure of the public. To reduce very much the number of his servants, to reform his table from great profusion to great frugality, to lay down his equipage after he has once set it up, are changes which cannot escape the observation of his neighbours, and which are supposed to imply some acknowledgment of preceding bad conduct. Few, therefore, of those who have once been so unfortunate as to launch out too far into this sort of expense, have afterwards the courage to reform, till ruin and bankruptcy oblige them. But if a person has, at any time, been at too great an expense in building, in furniture, in books, or pictures, no imprudence can be inferred from his changing his conduct. These are things in which further expense is frequently rendered unnecessary by former expense; and when a person stops short, he appears to do so, not because he has exceeded his fortune, but because he has satisfied his fancy. The expense, besides, that is laid out in durable commodities, gives maintenance, commonly, to a greater number of people than that which is employed in the most profuse hospitality. Of two or three hundred weight of provisions, which may sometimes be served up at a great festival, one half, perhaps, is thrown to the dunghill, and there is always a great deal wasted and abused. But if the expense of this entertainment had been employed in setting to work masons, carpenters, upholsterers, mechanics, &c. a quantity of provisions of equal value would have been distributed among a still greater number of people, who would have bought them in pennyworths and pound weights, and not have lost or thrown away a single ounce of them. In the one way, besides, this expense maintains productive, in the other unproductive hands. In the one way, therefore, it increases, in the other it does not increase the exchangeable value of the annual produce of the land and labour of the country. I would not, however, by all this, be understood to mean, that the one species of expense always betokens a more liberal or generous spirit than the other. When a man of fortune spends his revenue chiefly in hospitality, he shares the greater part of it with his friends and companions; but when he employs it in purchasing such durable commodities, he often spends the whole upon his own person, and gives nothing to any body without an equivalent. The latter species of expense, therefore, especially when directed towards frivolous objects, the little ornaments of dress and furniture, jewels, trinkets, gewgaws, frequently indicates, not only a trifling, but a base and selfish disposition. All that I mean is, that the one sort of expense, as it always occasions some accumulation of valuable commodities, as it is more favourable to private frugality, and, consequently, to the increase of the public capital, and as it maintains productive rather than unproductive hands, conduces more than the other to the growth of public opulence. CHAP. IV. OF STOCK LENT AT INTEREST. The stock which is lent at interest is always considered as a capital by the lender. He expects that in due time it is to be restored to him, and that, in the mean time, the borrower is to pay him a certain annual rent for the use of it. The borrower may use it either as a capital, or as a stock reserved for immediate consumption. If he uses it as a capital, he employs it in the maintenance of productive labourers, who reproduce the value, with a profit. He can, in this case, both restore the capital, and pay the interest, without alienating or encroaching upon any other source of revenue. If he uses it as a stock reserved for immediate consumption, he acts the part of a prodigal, and dissipates, in the maintenance of the idle, what was destined for the support of the industrious. He can, in this case, neither restore the capital nor pay the interest, without either alienating or encroaching upon some other source of revenues such as the property or the rent of land. The stock which is lent at interest is, no doubt, occasionally employed in both these ways, but in the former much more frequently than in the latter. The man who borrows in order to spend will soon be ruined, and he who lends to him will generally have occasion to repent of his folly. To borrow or to lend for such a purpose, therefore, is, in all cases, where gross usury is out of the question, contrary to the interest of both parties; and though it no doubt happens sometimes, that people do both the one and the other, yet, from the regard that all men have for their own interest, we may be assured, that it cannot happen so very frequently as we are sometimes apt to imagine. Ask any rich man of common prudence, to which of the two sorts of people he has lent the greater part of his stock, to those who he thinks will employ it profitably, or to those who will spend it idly, and he will laugh at you for proposing the question. Even among borrowers, therefore, not the people in the world most famous for frugality, the number of the frugal and industrious surpasses considerably that of the prodigal and idle. The only people to whom stock is commonly lent, without their being expected to make any very profitable use of it, are country gentlemen, who borrow upon mortgage. Even they scarce ever borrow merely to spend. What they borrow, one may say, is commonly spent before they borrow it. They have generally consumed so great a quantity of goods, advanced to them upon credit by shop-keepers and tradesmen, that they find it necessary to borrow at interest, in order to pay the debt. The capital borrowed replaces the capitals of those shop-keepers and tradesmen which the country gentlemen could not have replaced from the rents of their estates. It is not properly borrowed in order to be spent, but in order to replace a capital which had been spent before. Almost all loans at interest are made in money, either of paper, or of gold and silver; but what the borrower really wants, and what the lender readily supplies him with, is not the money, but the money's worth, or the goods which it can purchase. If he wants it as a stock for immediate consumption, it is those goods only which he can place in that stock. If he wants it as a capital for employing industry, it is from those goods only that the industrious can be furnished with the tools, materials, and maintenance necessary for carrying on their work. By means of the loan, the lender, as it were, assigns to the borrower his right to a certain portion of the annual produce of the land and labour of the country, to be employed as the borrower pleases. The quantity of stock, therefore, or, as it is commonly expressed, of money, which can be lent at interest in any country, is not regulated by the value of the money, whether paper or coin, which serves as the instrument of the different loans made in that country, but by the value of that part of the annual produce, which, as soon as it comes either from the ground, or from the hands of the productive labourers, is destined, not only for replacing a capital, but such a capital as the owner does not care to be at the trouble of employing himself. As such capitals are commonly lent out and paid back in money, they constitute what is called the monied interest. It is distinct, not only from the landed, but from the trading and manufacturing interests, as in these last the owners themselves employ their own capitals. Even in the monied interest, however, the money is, as it were, but the deed or assignment, which conveys from one hand to another those capitals which the owners do not care to employ themselves. Those capitals may be greater, in almost any proportion, than the amount of the money which serves as the instrument of their conveyance; the same pieces of money successively serving for many different loans, as well as for many different purchases. A, for example, lends to W L.1000, with which W immediately purchases of B L.1000 worth of goods. B having no occasion for the money himself, lends the identical pieces to X, with which X immediately purchases of C another L.1000 worth of goods. C, in the same manner, and for the same reason, lends them to Y, who again purchases goods with them of D. In this manner, the same pieces, either of coin or of paper, may, in the course of a few days, serve as the instrument of three different loans, and of three different purchases, each of which is, in value, equal to the whole amount of those pieces. What the three monied men, A, B, and C, assigned to the three borrowers, W, X, and Y, is the power of making those purchases. In this power consist both the value and the use of the loans. The stock lent by the three monied men is equal to the value of the goods which can be purchased with it, and is three times greater than that of the money with which the purchases are made. Those loans, however, may be all perfectly well secured, the goods purchased by the different debtors being so employed as, in due time, to bring back, with a profit, an equal value either of coin or of paper. And as the same pieces of money can thus serve as the instrument of different loans to three, or, for the same reason, to thirty times their value, so they may likewise successively serve as the instrument of repayment. A capital lent at interest may, in this manner, be considered as an assignment, from the lender to the borrower, of a certain considerable portion of the annual produce, upon condition that the borrower in return shall, during the continuation of the loan, annually assign to the lender a small portion, called the interest; and, at the end of it, a portion equally considerable with that which had originally been assigned to him, called the repayment. Though money, either coin or paper, serves generally as the deed of assignment, both to the smaller and to the more considerable portion, it is itself altogether different from what is assigned by it. In proportion as that share of the annual produce which, as soon as it comes either from the ground, or from the hands of the productive labourers, is destined for replacing a capital, increases in any country, what is called the monied interest naturally increases with it. The increase of those particular capitals from which the owners wish to derive a revenue, without being at the trouble of employing them themselves, naturally accompanies the general increase of capitals; or, in other words, as stock increases, the quantity of stock to be lent at interest grows gradually greater and greater. As the quantity of stock to be lent at interest increases, the interest, or the price which must be paid for the use of that stock, necessarily diminishes, not only from those general causes which make the market price of things commonly diminish as their quantity increases, but from other causes which are peculiar to this particular case. As capitals increase in any country, the profits which can be made by employing them necessarily diminish. It becomes gradually more and more difficult to find within the country a profitable method of employing any new capital. There arises, in consequence, a competition between different capitals, the owner of one endeavouring to get possession of that employment which is occupied by another; but, upon most occasions, he can hope to justle that other out of this employment by no other means but by dealing upon more reasonable terms. He must not only sell what he deals in somewhat cheaper, but, in order to get it to sell, he must sometimes, too, buy it dearer. The demand for productive labour, by the increase of the funds which are destined for maintaining it, grows every day greater and greater. Labourers easily find employment; but the owners of capitals find it difficult to get labourers to employ. Their competition raises the wages of labour, and sinks the profits of stock. But when the profits which can be made by the use of a capital are in this manner diminished, as it were, at both ends, the price which can be paid for the use of it, that is, the rate of interest, must necessarily be diminished with them. Mr Locke, Mr Lawe, and Mr Montesquieu, as well as many other writers, seem to have imagined that the increase of the quantity of gold and silver, in consequence of the discovery of the Spanish West Indies, was the real cause of the lowering of the rate of interest through the greater part of Europe. Those metals, they say, having become of less value themselves, the use of any particular portion of them necessarily became of less value too, and, consequently, the price which could be paid for it. This notion, which at first sight seems so plausible, has been so fully exposed by Mr Hume, that it is, perhaps, unnecessary to say any thing more about it. The following very short and plain argument, however, may serve to explain more distinctly the fallacy which seems to have misled those gentlemen. Before the discovery of the Spanish West Indies, ten per cent. seems to have been the common rate of interest through the greater part of Europe. It has since that time, in different countries, sunk to six, five, four, and three per cent. Let us suppose, that in every particular country the value of silver has sunk precisely in the same proportion as the rate of interest; and that in those countries, for example, where interest has been reduced from ten to five per cent. the same quantity of silver can now purchase just half the quantity of goods which it could have purchased before. This supposition will not, I believe, be found anywhere agreeable to the truth; but it is the most favourable to the opinion which we are going to examine; and, even upon this supposition, it is utterly impossible that the lowering of the value of silver could have the smallest tendency to lower the rate of interest. If £100 are in those countries now of no more value than £50 were then, £10 must now be of no more value than £5 were then. Whatever were the causes which lowered the value of the capital, the same must necessarily have lowered that of the interest, and exactly in the same proportion. The proportion between the value of the capital and that of the interest must have remained the same, though the rate had never been altered. By altering the rate, on the contrary, the proportion between those two values is necessarily altered. If L.100 now are worth no more than L.50 were then, L.5 now can be worth no more than L.2, 10s. were then. By reducing the rate of interest, therefore, from ten to five per cent. we give for the use of a capital, which is supposed to be equal to one half of its former value, an interest which is equal to one fourth only of the value of the former interest. An increase in the quantity of silver, while that of the commodities circulated by means of it remained the same, could have no other effect than to diminish the value of that metal. The nominal value of all sorts of goods would be greater, but their real value would be precisely the same as before. They would be exchanged for a greater number of pieces of silver; but the quantity of labour which they could command, the number of people whom they could maintain and employ, would be precisely the same. The capital of the country would be the same, though a greater number of pieces might be requisite for conveying any equal portion of it from one hand to another. The deeds of assignment, like the conveyances of a verbose attorney, would be more cumbersome; but the thing assigned would be precisely the same as before, and could produce only the same effects. The funds for maintaining productive labour being the same, the demand for it would be the same. Its price or wages, therefore, though nominally greater, would really be the same. They would be paid in a greater number of pieces of silver, but they would purchase only the same quantity of goods. The profits of stock would be the same, both nominally and really. The wages of labour are commonly computed by the quantity of silver which is paid to the labourer. When that is increased, therefore, his wages appear to be increased, though they may sometimes be no greater than before. But the profits of stock are not computed by the number of pieces of silver with which they are paid, but by the proportion which those pieces bear to the whole capital employed. Thus, in a particular country, 5s. a-week are said to be the common wages of labour, and ten per cent. the common profits of stock; but the whole capital of the country being the same as before, the competition between the different capitals of individuals into which it was divided would likewise be the same. They would all trade with the same advantages and disadvantages. The common proportion between capital and profit, therefore, would be the same, and consequently the common interest of money; what can commonly be given for the use of money being necessarily regulated by what can commonly be made by the use of it. Any increase in the quantity of commodities annually circulated within the country, while that of the money which circulated them remained the same, would, on the contrary, produce many other important effects, besides that of raising the value of the money. The capital of the country, though it might nominally be the same, would really be augmented. It might continue to be expressed by the same quantity of money, but it would command a greater quantity of labour. The quantity of productive labour which it could maintain and employ would be increased, and consequently the demand for that labour. Its wages would naturally rise with the demand, and yet might appear to sink. They might be paid with a smaller quantity of money, but that smaller quantity might purchase a greater quantity of goods than a greater had done before. The profits of stock would be diminished, both really and in appearance. The whole capital of the country being augmented, the competition between the different capitals of which it was composed would naturally be augmented along with it. The owners of those particular capitals would be obliged to content themselves with a smaller proportion of the produce of that labour which their respective capitals employed. The interest of money, keeping pace always with the profits of stock, might, in this manner, be greatly diminished, though the value of money, or the quantity of goods which any particular sum could purchase, was greatly augmented. In some countries the interest of money has been prohibited by law. But as something can everywhere be made by the use of money, something ought everywhere to be paid for the use of it. This regulation, instead of preventing, has been found from experience to increase the evil of usury. The debtor being obliged to pay, not only for the use of the money, but for the risk which his creditor runs by accepting a compensation for that use, he is obliged, if one may say so, to insure his creditor from the penalties of usury. In countries where interest is permitted, the law in order to prevent the extortion of usury, generally fixes the highest rate which can be taken without incurring a penalty. This rate ought always to be somewhat above the lowest market price, or the price which is commonly paid for the use of money by those who can give the most undoubted security. If this legal rate should be fixed below the lowest market rate, the effects of this fixation must be nearly the same as those of a total prohibition of interest. The creditor will not lend his money for less than the use of it is worth, and the debtor must pay him for the risk which he runs by accepting the full value of that use. If it is fixed precisely at the lowest market price, it ruins, with honest people who respect the laws of their country, the credit of all those who cannot give the very best security, and obliges them to have recourse to exorbitant usurers. In a country such as Great Britain, where money is lent to government at three per cent. and to private people, upon good security, at four and four and a-half, the present legal rate, five per cent. is perhaps as proper as any. The legal rate, it is to be observed, though it ought to be somewhat above, ought not to be much above the lowest market rate. If the legal rate of interest in Great Britain, for example, was fixed so high as eight or ten per cent. the greater part of the money which was to be lent, would be lent to prodigals and projectors, who alone would be willing to give this high interest. Sober people, who will give for the use of money no more than a part of what they are likely to make by the use of it, would not venture into the competition. A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into those which were most likely to waste and destroy it. Where the legal rate of interest, on the contrary, is fixed but a very little above the lowest market rate, sober people are universally preferred, as borrowers, to prodigals and projectors. The person who lends money gets nearly as much interest from the former as he dares to take from the latter, and his money is much safer in the hands of the one set of people than in those of the other. A great part of the capital of the country is thus thrown into the hands in which it is most likely to be employed with advantage. No law can reduce the common rate of interest below the lowest ordinary market rate at the time when that law is made. Notwithstanding the edict of 1766, by which the French king attempted to reduce the rate of interest from five to four per cent. money continued to be lent in France at five per cent. the law being evaded in several different ways. The ordinary market price of land, it is to be observed, depends everywhere upon the ordinary market rate of interest. The person who has a capital from which he wishes to derive a revenue, without taking the trouble to employ it himself, deliberates whether he should buy land with it, or lend it out at interest. The superior security of land, together with some other advantages which almost everywhere attend upon this species of property, will generally dispose him to content himself with a smaller revenue from land, than what he might have by lending out his money at interest. These advantages are sufficient to compensate a certain difference of revenue; but they will compensate a certain difference only; and if the rent of land should fall short of the interest of money by a greater difference, nobody would buy land, which would soon reduce its ordinary price. On the contrary, if the advantages should much more than compensate the difference, everybody would buy land, which again would soon raise its ordinary price. When interest was at ten per cent. land was commonly sold for ten or twelve years purchase. As interest sunk to six, five, and four per cent. the price of land rose to twenty, five-and-twenty, and thirty years purchase. The market rate of interest is higher in France than in England, and the common price of land is lower. In England it commonly sells at thirty, in France at twenty years purchase. CHAP. V. OF THE DIFFERENT EMPLOYMENTS OF CAPITALS. Though all capitals are destined for the maintenance of productive labour only, yet the quantity of that labour which equal capitals are capable of putting into motion, varies extremely according to the diversity of their employment; as does likewise the value which that employment adds to the annual produce of the land and labour of the country. A capital may be employed in four different ways; either, first, in procuring the rude produce annually required for the use and consumption of the society; or, secondly, in manufacturing and preparing that rude produce for immediate use and consumption; or, thirdly in transporting either the rude or manufactured produce from the places where they abound to those where they are wanted; or, lastly, in dividing particular portions of either into such small parcels as suit the occasional demands of those who want them. In the first way are employed the capitals of all those who undertake improvement or cultivation of lands, mines, or fisheries; in the second, those of all master manufacturers; in the third, those of all wholesale merchants; and in the fourth, those of all retailers. It is difficult to conceive that a capital should be employed in any way which may not be classed under some one or other of these four. Each of those four methods of employing a capital is essentially necessary, either to the existence or extension of the other three, or to the general conveniency of the society. Unless a capital was employed in furnishing rude produce to a certain degree of abundance, neither manufactures nor trade of any kind could exist. Unless a capital was employed in manufacturing that part of the rude produce which requires a good deal of preparation before it can be fit for use and consumption, it either would never he produced, because there could be no demand for it; or if it was produced spontaneously, it would be of no value in exchange, and could add nothing to the wealth of the society. Unless a capital was employed in transporting either the rude or manufactured produce from the places where it abounds to those where it is wanted, no more of either could be produced than was necessary for the consumption of the neighbourhood. The capital of the merchant exchanges the surplus produce of one place for that of another, and thus encourages the industry, and increases the enjoyments of both. Unless a capital was employed in breaking and dividing certain portions either of the rude or manufactured produce into such small parcels as suit the occasional demands of those who want them, every man would be obliged to purchase a greater quantity of the goods he wanted than his immediate occasions required. If there was no such trade as a butcher, for example, every man would be obliged to purchase a whole ox or a whole sheep at a time. This would generally be inconvenient to the rich, and much more so to the poor. If a poor workman was obliged to purchase a month's or six months' provisions at a time, a great part of the stock which he employs as a capital in the instruments of his trade, or in the furniture of his shop, and which yields him a revenue, he would be forced to place in that part of his stock which is reserved for immediate consumption, and which yields him no revenue. Nothing can be more convenient for such a person than to be able to purchase his subsistence from day to day, or even from hour to hour, as he wants it. He is thereby enabled to employ almost his whole stock as a capital. He is thus enabled to furnish work to a greater value; and the profit which he makes by it in this way much more than compensates the additional price which the profit of the retailer imposes upon the goods. The prejudices of some political writers against shopkeepers and tradesmen are altogether without foundation. So far is it from being necessary either to tax them, or to restrict their numbers, that they can never be multiplied so as to hurt the public, though they may so as to hurt one another. The quantity of grocery goods, for example, which can be sold in a particular town, is limited by the demand of that town and its neighbourhood. The capital, therefore, which can be employed in the grocery trade, cannot exceed what is sufficient to purchase that quantity. If this capital is divided between two different grocers, their competition will tend to make both of them sell cheaper than if it were in the hands of one only; and if it were divided among twenty, their competition would be just so much the greater, and the chance of their combining together, in order to raise the price, just so much the less. Their competition might, perhaps, ruin some of themselves; but to take care of this, is the business of the parties concerned, and it may safely be trusted to their discretion. It can never hurt either the consumer or the producer; on the contrary, it must tend to make the retailers both sell cheaper and buy dearer, than if the whole trade was monopolized by one or two persons. Some of them, perhaps, may sometimes decoy a weak customer to buy what he has no occasion for. This evil, however, is of too little importance to deserve the public attention, nor would it necessarily be prevented by restricting their numbers. It is not the multitude of alehouses, to give the most suspicious example, that occasions a general disposition to drunkenness among the common people; but that disposition, arising from other causes, necessarily gives employment to a multitude of alehouses. The persons whose capitals are employed in any of those four ways, are themselves productive labourers. Their labour, when properly directed, fixes and realizes itself in the subject or vendible commodity upon which it is bestowed, and generally adds to its price the value at least of their own maintenance and consumption. The profits of the farmer, of the manufacturer, of the merchant, and retailer, are all drawn from the price of the goods which the two first produce, and the two last buy and sell. Equal capitals, however, employed in each of those four different ways, will immediately put into motion very different quantities of productive labour; and augment, too, in very different proportions, the value of the annual produce of the land and labour of the society to which they belong. The capital of the retailer replaces, together with its profits, that of the merchant of whom he purchases goods, and thereby enables him to continue his business. The retailer himself is the only productive labourer whom it immediately employs. In his profit consists the whole value which its employment adds to the annual produce of the land and labour of the society. The capital of the wholesale merchant replaces, together with their profits, the capitals of the farmers and manufacturers of whom he purchases the rude and manufactured produce which he deals in, and thereby enables them to continue their respective trades. It is by this service chiefly that he contributes indirectly to support the productive labour of the society, and to increase the value of its annual produce. His capital employs, too, the sailors and carriers who transport his goods from one place to another; and it augments the price of those goods by the value, not only of his profits, but of their wages. This is all the productive labour which it immediately puts into motion, and all the value which it immediately adds to the annual produce. Its operation in both these respects is a good deal superior to that of the capital of the retailer. Part of the capital of the master manufacturer is employed as a fixed capital in the instruments of his trade, and replaces, together with its profits, that of some other artificer of whom he purchases them. Part of his circulating capital is employed in purchasing materials, and replaces, with their profits, the capitals of the farmers and miners of whom he purchases them. But a great part of it is always, either annually, or in a much shorter period, distributed among the different workmen whom he employs. It augments the value of these materials by their wages, and by their masters' profits upon the whole stock of wages, materials, and instruments of trade employed in the business. It puts immediately into motion, therefore, a much greater quantity of productive labour, and adds a much greater value to the annual produce of the land and labour of the society, than an equal capital in the hands of any wholesale merchant. No equal capital puts into motion a greater quantity of productive labour than that of the farmer. Not only his labouring servants, but his labouring cattle, are productive labourers. In agriculture, too, Nature labours along with man; and though her labour cost no expense, its produce has its value, as well as that of the must expensive workmen. The most important operations of agriculture seem intended, not so much to increase, though they do that too, as to direct the fertility of Nature towards the production of the plants must profitable to man. A field overgrown with briars and brambles, may frequently produce as great a quantity of vegetables as the best cultivated vineyard or corn field. Planting and tillage frequently regulate more than they animate the active fertility of Nature; and after all their labour, a great part of the work always remains to be done by her. The labourers and labouring cattle, therefore, employed in agriculture, not only occasion, like the workmen in manufactures, the reproduction of a value equal to their own consumption, or to the capital which employs them, together with its owner's profits, but of a much greater value. Over and above the capital of the farmer, and all its profits, they regularly occasion the reproduction of the rent of the landlord. This rent may be considered as the produce of those powers of Nature, the use of which the landlord lends to the farmer. It is greater or smaller, according to the supposed extent of those powers, or, in other words, according to the supposed natural or improved fertility of the land. It is the work of Nature which remains, after deducting or compensating every thing which can be regarded as the work of man. It is seldom less than a fourth, and frequently more than a third, of the whole produce. No equal quantity of productive labour employed in manufactures, can ever occasion so great reproduction. In them Nature does nothing; man does all; and the reproduction must always be in proportion to the strength of the agents that occasion it. The capital employed in agriculture, therefore, not only puts into motion a greater quantity of productive labour than any equal capital employed in manufactures; but in proportion, too, to the quantity of productive labour which it employs, it adds a much greater value to the annual produce of the land and labour of the country, to the real wealth and revenue of its inhabitants. Of all the ways in which a capital can be employed, it is by far the most advantageous to society. The capitals employed in the agriculture and in the retail trade of any society, must always reside within that society. Their employment is confined almost to a precise spot, to the farm, and to the shop of the retailer. They must generally, too, though there are some exceptions to this, belong to resident members of the society. The capital of a wholesale merchant, on the contrary, seems to have no fixed or necessary residence anywhere, but may wander about from place to place, according as it can either buy cheap or sell dear. The capital of the manufacturer must, no doubt, reside where the manufacture is carried on; but where this shall be, is not always necessarily determined. It may frequently be at a great distance, both from the place where the materials grow, and from that where the complete manufacture is consumed. Lyons is very distant, both from the places which afford the materials of its manufactures, and from those which consume them. The people of fashion in Sicily are clothed in silks made in other countries, from the materials which their own produces. Part of the wool of Spain is manufactured in Great Britain, and some part of that cloth is afterwards sent back to Spain. Whether the merchant whose capital exports the surplus produce of any society, be a native or a foreigner, is of very little importance. If he is a foreigner, the number of their productive labourers is necessarily less than if he had been a native, by one man only; and the value of their annual produce, by the profits of that one man. The sailors or carriers whom he employs, may still belong indifferently either to his country, or to their country, or to some third country, in the same manner as if he had been a native. The capital of a foreigner gives a value to their surplus produce equally with that of a native, by exchanging it for something for which there is a demand at home. It as effectually replaces the capital of the person who produces that surplus, and as effectually enables him to continue his business, the service by which the capital of a wholesale merchant chiefly contributes to support the productive labour, and to augment the value of the annual produce of the society to which he belongs. It is of more consequence that the capital of the manufacturer should reside within the country. It necessarily puts into motion a greater quantity of productive labour, and adds a greater value to the annual produce of the land and labour of the society. It may, however, be very useful to the country, though it should not reside within it. The capitals of the British manufacturers who work up the flax and hemp annually imported from the coasts of the Baltic, are surely very useful to the countries which produce them. Those materials are a part of the surplus produce of those countries, which, unless it was annually exchanged for something which is in demand there, would be of no value, and would soon cease to be produced. The merchants who export it, replace the capitals of the people who produce it, and thereby encourage them to continue the production; and the British manufacturers replace the capitals of those merchants. A particular country, in the same manner as a particular person, may frequently not have capital sufficient both to improve cultivate all its lands, to manufacture and prepare their whole rude produce for immediate use and consumption, and to transport the surplus part either of the rude or manufactured produce to those distant markets, where it can be exchanged for something for which there is a demand at home. The inhabitants of many different parts of Great Britain have not capital sufficient to improve and cultivate all their lands. The wool of the southern counties of Scotland is, a great part of it, after a long land carriage through very bad roads, manufactured in Yorkshire, for want of a capital to manufacture it at home. There are many little manufacturing towns in Great Britain, of which the inhabitants have not capital sufficient to transport the produce of their own industry to those distant markets where there is demand and consumption for it. If there are any merchants among them, they are, properly, only the agents of wealthier merchants who reside in some of the great commercial cities. When the capital of any country is not sufficient for all those three purposes, in proportion as a greater share of it is employed in agriculture, the greater will be the quantity of productive labour which it puts into motion within the country; as will likewise be the value which its employment adds to the annual produce of the land and labour of the society. After agriculture, the capital employed in manufactures puts into motion the greatest quantity of productive labour, and adds the greatest value to the annual produce. That which is employed in the trade of exportation has the least effect of any of the three. The country, indeed, which has not capital sufficient for all those three purposes, has not arrived at that degree of opulence for which it seems naturally destined. To attempt, however, prematurely, and with an insufficient capital, to do all the three, is certainly not the shortest way for a society, no more than it would be for an individual, to acquire a sufficient one. The capital of all the individuals of a nation has its limits, in the same manner as that of a single individual, and is capable of executing only certain purposes. The capital of all the individuals of a nation is increased in the same manner as that of a single individual, by their continually accumulating and adding to it whatever they save out of their revenue. It is likely to increase the fastest, therefore, when it is employed in the way that affords the greatest revenue to all the inhabitants of the country, as they will thus be enabled to make the greatest savings. But the revenue of all the inhabitants of the country is necessarily in proportion to the value of the annual produce of their land and labour. It has been the principal cause of the rapid progress of our American colonies towards wealth and greatness, that almost their whole capitals have hitherto been employed in agriculture. They have no manufactures, those household and coarser manufactures excepted, which necessarily accompany the progress of agriculture, and which are the work of the women and children in every private family. The greater part, both of the exportation and coasting trade of America, is carried on by the capitals of merchants who reside in Great Britain. Even the stores and warehouses from which goods are retailed in some provinces, particularly in Virginia and Maryland, belong many of them to merchants who reside in the mother country, and afford one of the few instances of the retail trade of a society being carried on by the capitals of those who are not resident members of it. Were the Americans, either by combination, or by any other sort of violence, to stop the importation of European manufactures, and, by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they would retard, instead of accelerating, the further increase in the value of their annual produce, and would obstruct, instead of promoting, the progress of their country towards real wealth and greatness. This would be still more the case, were they to attempt, in the same manner, to monopolize to themselves their whole exportation trade. The course of human prosperity, indeed, seems scarce ever to have been of so long continuance as to enable any great country to acquire capital sufficient for all those three purposes; unless, perhaps, we give credit to the wonderful accounts of the wealth and cultivation of China, of those of ancient Egypt, and of the ancient state of Indostan. Even those three countries, the wealthiest, according to all accounts, that ever were in the world, are chiefly renowned for their superiority in agriculture and manufactures. They do not appear to have been eminent for foreign trade. The ancient Egyptians had a superstitious antipathy to the sea; a superstition nearly of the same kind prevails among the Indians; and the Chinese have never excelled in foreign commerce. The greater part of the surplus produce of all those three countries seems to have been always exported by foreigners, who gave in exchange for it something else, for which they found a demand there, frequently gold and silver. It is thus that the same capital will in any country put into motion a greater or smaller quantity of productive labour, and add a greater or smaller value to the annual produce of its land and labour, according to the different proportions in which it is employed in agriculture, manufactures, and wholesale trade. The difference, too, is very great, according to the different sorts of wholesale trade in which any part of it is employed. All wholesale trade, all buying in order to sell again by wholesale, may be reduced to three different sorts: the home trade, the foreign trade of consumption, and the carrying trade. The home trade is employed in purchasing in one part of the same country, and selling in another, the produce of the industry of that country. It comprehends both the inland and the coasting trade. The foreign trade of consumption is employed in purchasing foreign goods for home consumption. The carrying trade is employed in transacting the commerce of foreign countries, or in carrying the surplus produce of one to another. The capital which is employed in purchasing in one part of the country, in order to sell in another, the produce of the industry of that country, generally replaces, by every such operation, two distinct capitals, that had both been employed in the agriculture or manufactures of that country, and thereby enables them to continue that employment. When it sends out from the residence of the merchant a certain value of commodities, it generally brings back in return at least an equal value of other commodities. When both are the produce of domestic industry, it necessarily replaces, by every such operation, two distinct capitals, which had both been employed in supporting productive labour, and thereby enables them to continue that support. The capital which sends Scotch manufactures to London, and brings back English corn and manufactures to Edinburgh, necessarily replaces, by every such operation, two British capitals, which had both been employed in the agriculture or manufactures of Great Britain. The capital employed in purchasing foreign goods for home consumption, when this purchase is made with the produce of domestic industry, replaces, too, by every such operation, two distinct capitals; but one of them only is employed in supporting domestic industry. The capital which sends British goods to Portugal, and brings back Portuguese goods to Great Britain, replaces, by every such operation, only one British capital. The other is a Portuguese one. Though the returns, therefore, of the foreign trade of consumption, should be as quick as those of the home trade, the capital employed in it will give but one half the encouragement to the industry or productive labour of the country. But the returns of the foreign trade of consumption are very seldom so quick as those of the home trade. The returns of the home trade generally come in before the end of the year, and sometimes three or four times in the year. The returns of the foreign trade of consumption seldom come in before the end of the year, and sometimes not till after two or three years. A capital, therefore, employed in the home trade, will sometimes make twelve operations, or be sent out and returned twelve times, before a capital employed in the foreign trade of consumption has made one. If the capitals are equal, therefore, the one will give four-and-twenty times more encouragement and support to the industry of the country than the other. The foreign goods for home consumption may sometimes be purchased, not with the produce of domestic industry, but with some other foreign goods. These last, however, must have been purchased, either immediately with the produce of domestic industry, or with something else that had been purchased with it; for, the case of war and conquest excepted, foreign goods can never be acquired, but in exchange for something that had been produced at home, either immediately, or after two or more different exchanges. The effects, therefore, of a capital employed in such a round-about foreign trade of consumption, are, in every respect, the same as those of one employed in the most direct trade of the same kind, except that the final returns are likely to be still more distant, as they must depend upon the returns of two or three distinct foreign trades. If the hemp and flax of Riga are purchased with the tobacco of Virginia, which had been purchased with British manufactures, the merchant must wait for the returns of two distinct foreign trades, before he can employ the same capital in repurchasing a like quantity of British manufactures. If the tobacco of Virginia had been purchased, not with British manufactures, but with the sugar and rum of Jamaica, which had been purchased with those manufactures, he must wait for the returns of three. If those two or three distinct foreign trades should happen to be carried on by two or three distinct merchants, of whom the second buys the goods imported by the first, and the third buys those imported by the second, in order to export them again, each merchant, indeed, will, in this case, receive the returns of his own capital more quickly; but the final returns of the whole capital employed in the trade will be just as slow as ever. Whether the whole capital employed in such a round-about trade belong to one merchant or to three, can make no difference with regard to the country, though it may with regard to the particular merchants. Three times a greater capital must in both cases be employed, in order to exchange a certain value of British manufactures for a certain quantity of flax and hemp, than would have been necessary, had the manufactures and the flax and hemp been directly exchanged for one another. The whole capital employed, therefore, in such a round-about foreign trade of consumption, will generally give less encouragement and support to the productive labour of the country, than an equal capital employed in a more direct trade of the same kind. Whatever be the foreign commodity with which the foreign goods for home consumption are purchased, it can occasion no essential difference, either in the nature of the trade, or in the encouragement and support which it can give to the productive labour of the country from which it is carried on. If they are purchased with the gold of Brazil, for example, or with the silver of Peru, this gold and silver, like the tobacco of Virginia, must have been purchased with something that either was the produce of the industry of the country, or that had been purchased with something else that was so. So far, therefore, as the productive labour of the country is concerned, the foreign trade of consumption, which is carried on by means of gold and silver, has all the advantages and all the inconveniences of any other equally round-about foreign trade of consumption; and will replace, just as fast, or just as slow, the capital which is immediately employed in supporting that productive labour. It seems even to have one advantage over any other equally round-about foreign trade. The transportation of those metals from one place to another, on account of their small bulk and great value, is less expensive than that of almost any other foreign goods of equal value. Their freight is much less, and their insurance not greater; and no goods, besides, are less liable to suffer by the carriage. An equal quantity of foreign goods, therefore, may frequently be purchased with a smaller quantity of the produce of domestic industry, by the intervention of gold and silver, than by that of any other foreign goods. The demand of the country may frequently, in this manner, be supplied more completely, and at a smaller expense, than in any other. Whether, by the continual exportation of those metals, a trade of this kind is likely to impoverish the country from which it is carried on in any other way, I shall have occasion to examine at great length hereafter. That part of the capital of any country which is employed in the carrying trade, is altogether withdrawn from supporting the productive labour of that particular country, to support that of some foreign countries. Though it may replace, by every operation, two distinct capitals, yet neither of them belongs to that particular country. The capital of the Dutch merchant, which carries the corn of Poland to Portugal, and brings back the fruits and wines of Portugal to Poland, replaces by every such operation two capitals, neither of which had been employed in supporting the productive labour of Holland; but one of them in supporting that of Poland, and the other that of Portugal. The profits only return regularly to Holland, and constitute the whole addition which this trade necessarily makes to the annual produce of the land and labour of that country. When, indeed, the carrying trade of any particular country is carried on with the ships and sailors of that country, that part of the capital employed in it which pays the freight is distributed among, and puts into motion, a certain number of productive labourers of that country. Almost all nations that have had any considerable share of the carrying trade have, in fact, carried it on in this manner. The trade itself has probably derived its name from it, the people of such countries being the carriers to other countries. It does not, however, seem essential to the nature of the trade that it should be so. A Dutch merchant may, for example, employ his capital in transacting the commerce of Poland and Portugal, by carrying part of the surplus produce of the one to the other, not in Dutch, but in British bottoms. It may be presumed, that he actually does so upon some particular occasions. It is upon this account, however, that the carrying trade has been supposed peculiarly advantageous to such a country as Great Britain, of which the defence and security depend upon the number of its sailors and shipping. But the same capital may employ as many sailors and shipping, either in the foreign trade of consumption, or even in the home trade, when carried on by coasting vessels, as it could in the carrying trade. The number of sailors and shipping which any particular capital can employ, does not depend upon the nature of the trade, but partly upon the bulk of the goods, in proportion to their value, and partly upon the distance of the ports between which they are to be carried; chiefly upon the former of those two circumstances. The coal trade from Newcastle to London, for example, employs more shipping than all the carrying trade of England, though the ports are at no great distance. To force, therefore, by extraordinary encouragements, a larger share of the capital of any country into the carrying trade, than what would naturally go to it, will not always necessarily increase the shipping of that country. The capital, therefore, employed in the home trade of any country, will generally give encouragement and support to a greater quantity of productive labour in that country, and increase the value of its annual produce, more than an equal capital employed in the foreign trade of consumption; and the capital employed in this latter trade has, in both these respects, a still greater advantage over an equal capital employed in the carrying trade. The riches, and so far as power depends upon riches, the power of every country must always be in proportion to the value of its annual produce, the fund from which all taxes must ultimately be paid. But the great object of the political economy of every country, is to increase the riches and power of that country. It ought, therefore, to give no preference nor superior encouragement to the foreign trade of consumption above the home trade, nor to the carrying trade above either of the other two. It ought neither to force nor to allure into either of those two channels a greater share of the capital of the country, than what would naturally flow into them of its own accord. Each of those different branches of trade, however, is not only advantageous, but necessary and unavoidable, when the course of things, without any constraint or violence, naturally introduces it. When the produce of any particular branch of industry exceeds what the demand of the country requires, the surplus must be sent abroad, and exchanged for something for which there is a demand at home. Without such exportation, a part of the productive labour of the country must cease, and the value of its annual produce diminish. The land and labour of Great Britain produce generally more corn, woollens, and hardware, than the demand of the home market requires. The surplus part of them, therefore, must be sent abroad, and exchanged for something for which there is a demand at home. It is only by means of such exportation, that this surplus can acquire a value sufficient to compensate the labour and expense of producing it. The neighbourhood of the sea-coast, and the banks of all navigable rivers, are advantageous situations for industry, only because they facilitate the exportation and exchange of such surplus produce for something else which is more in demand there. When the foreign goods which are thus purchased with the surplus produce of domestic industry exceed the demand of the home market, the surplus part of them must be sent abroad again, and exchanged for something more in demand at home. About 96,000 hogsheads of tobacco are annually purchased in Virginia and Maryland with a part of the surplus produce of British industry. But the demand of Great Britain does not require, perhaps, more than 14,000. If the remaining 82,000, therefore, could not be sent abroad, and exchanged for something more in demand at home, the importation of them must cease immediately, and with it the productive labour of all those inhabitants of Great Britain who are at present employed in preparing the goods with which these 82,000 hogsheads are annually purchased. Those goods, which are part of the produce of the land and labour of Great Britain, having no market at home, and being deprived of that which they had abroad, must cease to be produced. The most round-about foreign trade of consumption, therefore, may, upon some occasions, be as necessary for supporting the productive labour of the country, and the value of its annual produce, as the most direct. When the capital stock of any country is increased to such a degree that it cannot be all employed in supplying the consumption, and supporting the productive labour of that particular country, the surplus part of it naturally disgorges itself into the carrying trade, and is employed in performing the same offices to other countries. The carrying trade is the natural effect and symptom of great national wealth; but it does not seem to be the natural cause of it. Those statesmen who have been disposed to favour it with particular encouragement, seem to have mistaken the effect and symptom for the cause. Holland, in proportion to the extent of the land and the number of its inhabitants, by far the richest country in Europe, has accordingly the greatest share of the carrying trade of Europe. England, perhaps the second richest country of Europe, is likewise supposed to have a considerable share in it; though what commonly passes for the carrying trade of England will frequently, perhaps, be found to be no more than a round-about foreign trade of consumption. Such are, in a great measure, the trades which carry the goods of the East and West Indies and of America to the different European markets. Those goods are generally purchased, either immediately with the produce of British industry, or with something else which had been purchased with that produce, and the final returns of those trades are generally used or consumed in Great Britain. The trade which is carried on in British bottoms between the different ports of the Mediterranean, and some trade of the same kind carried on by British merchants between the different parts of India, make, perhaps, the principal branches of what is properly the carrying trade of Great Britain. The extent of the home trade, and of the capital which can be employed in it, is necessarily limited by the value of the surplus produce of all those distant places within the country which have occasion to exchange their respective productions with one another; that of the foreign trade of consumption, by the value of the surplus produce of the whole country, and of what can be purchased with it; that of the carrying trade, by the value of the surplus produce of all the different countries in the world. Its possible extent, therefore, is in a manner infinite in comparison of that of the other two, and is capable of absorbing the greatest capitals. The consideration of his own private profit is the sole motive which determines the owner of any capital to employ it either in agriculture, in manufactures, or in some particular branch of the wholesale or retail trade. The different quantities of productive labour which it may put into motion, and the different values which it may add to the annual produce of the land and labour of the society, according as it is employed in one or other of those different ways, never enter into his thoughts. In countries, therefore, where agriculture is the most profitable of all employments, and farming and improving the most direct roads to a splendid fortune, the capitals of individuals will naturally be employed in the manner most advantageous to the whole society. The profits of agriculture, however, seem to have no superiority over those of other employments in any part of Europe. Projectors, indeed, in every corner of it, have, within these few years, amused the public with most magnificent accounts of the profits to be made by the cultivation and improvement of land. Without entering into any particular discussion of their calculations, a very simple observation may satisfy us that the result of them must be false. We see, every day, the most splendid fortunes, that have been acquired in the course of a single life, by trade and manufactures, frequently from a very small capital, sometimes from no capital. A single instance of such a fortune, acquired by agriculture in the same time, and from such a capital, has not, perhaps, occurred in Europe, during the course of the present century. In all the great countries of Europe, however, much good land still remains uncultivated; and the greater part of what is cultivated, is far from being improved to the degree of which it is capable. Agriculture, therefore, is almost everywhere capable of absorbing a much greater capital than has ever yet been employed in it. What circumstances in the policy of Europe have given the trades which are carried on in towns so great an advantage over that which is carried on in the country, that private persons frequently find it more for their advantage to employ their capitals in the most distant carrying trades of Asia and America, than in the improvement and cultivation of the most fertile fields in their own neighbourhood, I shall endeavour to explain at full length in the two following books. BOOK III. OF THE DIFFERENT PROGRESS OF OPULENCE IN DIFFERENT NATIONS CHAP. I. OF THE NATURAL PROGRESS OF OPULENCE. The great commerce of every civilized society is that carried on between the inhabitants of the town and those of the country. It consists in the exchange of rude for manufactured produce, either immediately, or by the intervention of money, or of some sort of paper which represents money. The country supplies the town with the means of subsistence and the materials of manufacture. The town repays this supply, by sending back a part of the manufactured produce to the inhabitants of the country. The town, in which there neither is nor can be any reproduction of substances, may very properly be said to gain its whole wealth and subsistence from the country. We must not, however, upon this account, imagine that the gain of the town is the loss of the country. The gains of both are mutual and reciprocal, and the division of labour is in this, as in all other cases, advantageous to all the different persons employed in the various occupations into which it is subdivided. The inhabitants of the country purchase of the town a greater quantity of manufactured goods with the produce of a much smaller quantity of their own labour, than they must have employed had they attempted to prepare them themselves. The town affords a market for the surplus produce of the country, or what is over and above the maintenance of the cultivators; and it is there that the inhabitants of the country exchange it for something else which is in demand among them. The greater the number and revenue of the inhabitants of the town, the more extensive is the market which it affords to those of the country; and the more extensive that market, it is always the more advantageous to a great number. The corn which grows within a mile of the town, sells there for the same price with that which comes from twenty miles distance. But the price of the latter must, generally, not only pay the expense of raising it and bringing it to market, but afford, too, the ordinary profits of agriculture to the farmer. The proprietors and cultivators of the country, therefore, which lies in the neighbourhood of the town, over and above the ordinary profits of agriculture, gain, in the price of what they sell, the whole value of the carriage of the like produce that is brought from more distant parts; and they save, besides, the whole value of this carriage in the price of what they buy. Compare the cultivation of the lands in the neighbourhood of any considerable town, with that of those which lie at some distance from it, and you will easily satisfy yourself how much the country is benefited by the commerce of the town. Among all the absurd speculations that have been propagated concerning the balance of trade, it has never been pretended that either the country loses by its commerce with the town, or the town by that with the country which maintains it. As subsistence is, in the nature of things, prior to conveniency and luxury, so the industry which procures the former, must necessarily be prior to that which ministers to the latter. The cultivation and improvement of the country, therefore, which affords subsistence, must, necessarily, be prior to the increase of the town, which furnishes only the means of conveniency and luxury. It is the surplus produce of the country only, or what is over and above the maintenance of the cultivators, that constitutes the subsistence of the town, which can therefore increase only with the increase of the surplus produce. The town, indeed, may not always derive its whole subsistence from the country in its neighbourhood, or even from the territory to which it belongs, but from very distant countries; and this, though it forms no exception from the general rule, has occasioned considerable variations in the progress of opulence in different ages and nations. That order of things which necessity imposes, in general, though not in every particular country, is in every particular country promoted by the natural inclinations of man. If human institutions had never thwarted those natural inclinations, the towns could nowhere have increased beyond what the improvement and cultivation of the territory in which they were situated could support; till such time, at least, as the whole of that territory was completely cultivated and improved. Upon equal, or nearly equal profits, most men will choose to employ their capitals, rather in the improvement and cultivation of land, than either in manufactures or in foreign trade. The man who employs his capital in land, has it more under his view and command; and his fortune is much less liable to accidents than that of the trader, who is obliged frequently to commit it, not only to the winds and the waves, but to the more uncertain elements of human folly and injustice, by giving great credits, in distant countries, to men with whose character and situation he can seldom be thoroughly acquainted. The capital of the landlord, on the contrary, which is fixed in the improvement of his land, seems to be as well secured as the nature of human affairs can admit of. The beauty of the country, besides, the pleasure of a country life, the tranquillity of mind which it promises, and, wherever the injustice of human laws does not disturb it, the independency which it really affords, have charms that, more or less, attract everybody; and as to cultivate the ground was the original destination of man, so, in every stage of his existence, he seems to retain a predilection for this primitive employment. Without the assistance of some artificers, indeed, the cultivation of land cannot be carried on, but with great inconveniency and continual interruption. Smiths, carpenters, wheelwrights and ploughwrights, masons and bricklayers, tanners, shoemakers, and tailors, are people whose service the farmer has frequent occasion for. Such artificers, too, stand occasionally in need of the assistance of one another; and as their residence is not, like that of the farmer, necessarily tied down to a precise spot, they naturally settle in the neighbourhood of one another, and thus form a small town or village. The butcher, the brewer, and the baker, soon join them, together with many other artificers and retailers, necessary or useful for supplying their occasional wants, and who contribute still further to augment the town. The inhabitants of the town, and those of the country, are mutually the servants of one another. The town is a continual fair or market, to which the inhabitants of the country resort, in order to exchange their rude for manufactured produce. It is this commerce which supplies the inhabitants of the town, both with the materials of their work, and the means of their subsistence. The quantity of the finished work which they sell to the inhabitants of the country, necessarily regulates the quantity of the materials and provisions which they buy. Neither their employment nor subsistence, therefore, can augment, but in proportion to the augmentation of the demand from the country for finished work; and this demand can augment only in proportion to the extension of improvement and cultivation. Had human institutions, therefore, never disturbed the natural course of things, the progressive wealth and increase of the towns would, in every political society, be consequential, and in proportion to the improvement and cultivation of the territory or country. In our North American colonies, where uncultivated land is still to be had upon easy terms, no manufactures for distant sale have ever yet been established in any of their towns. When an artificer has acquired a little more stock than is necessary for carrying on his own business in supplying the neighbouring country, he does not, in North America, attempt to establish with it a manufacture for more distant sale, but employs it in the purchase and improvement of uncultivated land. From artificer he becomes planter; and neither the large wages nor the easy subsistence which that country affords to artificers, can bribe him rather to work for other people than for himself. He feels that an artificer is the servant of his customers, from whom he derives his subsistence; but that a planter who cultivates his own land, and derives his necessary subsistence from the labour of his own family, is really a master, and independent of all the world. In countries, on the contrary, where there is either no uncultivated land, or none that can be had upon easy terms, every artificer who has acquired more stock than he can employ in the occasional jobs of the neighbourhood, endeavours to prepare work for more distant sale. The smith erects some sort of iron, the weaver some sort of linen or woollen manufactory. Those different manufactures come, in process of time, to be gradually subdivided, and thereby improved and refined in a great variety of ways, which may easily be conceived, and which it is therefore unnecessary to explain any further. In seeking for employment to a capital, manufactures are, upon equal or nearly equal profits, naturally preferred to foreign commerce, for the same reason that agriculture is naturally preferred to manufactures. As the capital of the landlord or farmer is more secure than that of the manufacturer, so the capital of the manufacturer, being at all times more within his view and command, is more secure than that of the foreign merchant. In every period, indeed, of every society, the surplus part both of the rude and manufactured produce, or that for which there is no demand at home, must be sent abroad, in order to be exchanged for something for which there is some demand at home. But whether the capital which carries this surplus produce abroad be a foreign or a domestic one, is of very little importance. If the society has not acquired sufficient capital, both to cultivate all its lands, and to manufacture in the completest manner the whole of its rude produce, there is even a considerable advantage that the rude produce should be exported by a foreign capital, in order that the whole stock of the society may be employed in more useful purposes. The wealth of ancient Egypt, that of China and Indostan, sufficiently demonstrate that a nation may attain a very high degree of opulence, though the greater part of its exportation trade be carried on by foreigners. The progress of our North American and West Indian colonies, would have been much less rapid, had no capital but what belonged to themselves been employed in exporting their surplus produce. According to the natural course of things, therefore, the greater part of the capital of every growing society is, first, directed to agriculture, afterwards to manufactures, and, last of all, to foreign commerce. This order of things is so very natural, that in every society that had any territory, it has always, I believe, been in some degree observed. Some of their lands must have been cultivated before any considerable towns could be established, and some sort of coarse industry of the manufacturing kind must have been carried on in those towns, before they could well think of employing themselves in foreign commerce. But though this natural order of things must have taken place in some degree in every such society, it has, in all the modern states of Europe, been in many respects entirely inverted. The foreign commerce of some of their cities has introduced all their finer manufactures, or such as were fit for distant sale; and manufactures and foreign commerce together have given birth to the principal improvements of agriculture. The manners and customs which the nature of their original government introduced, and which remained after that government was greatly altered, necessarily forced them into this unnatural and retrograde order. CHAP. II. OF THE DISCOURAGEMENT OF AGRICULTURE IN THE ANCIENT STATE OF EUROPE, AFTER THE FALL OF THE ROMAN EMPIRE. When the German and Scythian nations overran the western provinces of the Roman empire, the confusions which followed so great a revolution lasted for several centuries. The rapine and violence which the barbarians exercised against the ancient inhabitants, interrupted the commerce between the towns and the country. The towns were deserted, and the country was left uncultivated; and the western provinces of Europe, which had enjoyed a considerable degree of opulence under the Roman empire, sunk into the lowest state of poverty and barbarism. During the continuance of those confusions, the chiefs and principal leaders of those nations acquired, or usurped to themselves, the greater part of the lands of those countries. A great part of them was uncultivated; but no part of them, whether cultivated or uncultivated, was left without a proprietor. All of them were engrossed, and the greater part by a few great proprietors. This original engrossing of uncultivated lands, though a great, might have been but a transitory evil. They might soon have been divided again, and broke into small parcels, either by succession or by alienation. The law of primogeniture hindered them from being divided by succession; the introduction of entails prevented their being broke into small parcels by alienation. When land, like moveables, is considered as the means only of subsistence and enjoyment, the natural law of succession divides it, like them, among all the children of the family; of all of whom the subsistence and enjoyment may be supposed equally dear to the father. This natural law of succession, accordingly, took place among the Romans, who made no more distinction between elder and younger, between male and female, in the inheritance of lands, than we do in the distribution of moveables. But when land was considered as the means, not of subsistence merely, but of power and protection, it was thought better that it should descend undivided to one. In those disorderly times, every great landlord was a sort of petty prince. His tenants were his subjects. He was their judge, and in some respects their legislator in peace and their leader in war. He made war according to his own discretion, frequently against his neighbours, and sometimes against his sovereign. The security of a landed estate, therefore, the protection which its owner could afford to those who dwelt on it, depended upon its greatness. To divide it was to ruin it, and to expose every part of it to be oppressed and swallowed up by the incursions of its neighbours. The law of primogeniture, therefore, came to take place, not immediately indeed, but in process of time, in the succession of landed estates, for the same reason that it has generally taken place in that of monarchies, though not always at their first institution. That the power, and consequently the security of the monarchy, may not be weakened by division, it must descend entire to one of the children. To which of them so important a preference shall be given, must be determined by some general rule, founded not upon the doubtful distinctions of personal merit, but upon some plain and evident difference which can admit of no dispute. Among the children of the same family there can be no indisputable differences but that of sex, and that of age. The male sex is universally preferred to the female; and when all other things are equal, the elder everywhere takes place of the younger. Hence the origin of the right of primogeniture, and of what is called lineal succession. Laws frequently continue in force long after the circumstances which first gave occasion to them, and which could alone render them reasonable, are no more. In the present state of Europe, the proprietor of a single acre of land is as perfectly secure in his possession as the proprietor of 100,000. The right of primogeniture, however, still continues to be respected; and as of all institutions it is the fittest to support the pride of family distinctions, it is still likely to endure for many centuries. In every other respect, nothing can be more contrary to the real interest of a numerous family, than a right which, in order to enrich one, beggars all the rest of the children. Entails are the natural consequences of the law of primogeniture. They were introduced to preserve a certain lineal succession, of which the law of primogeniture first gave the idea, and to hinder any part of the original estate from being carried out of the proposed line, either by gift, or device, or alienation; either by the folly, or by the misfortune of any of its successive owners. They were altogether unknown to the Romans. Neither their substitutions, nor fidei-commisses, bear any resemblance to entails, though some French lawyers have thought proper to dress the modern institution in the language and garb of those ancient ones. When great landed estates were a sort of principalities, entails might not be unreasonable. Like what are called the fundamental laws of some monarchies, they might frequently hinder the security of thousands from being endangered by the caprice or extravagance of one man. But in the present state of Europe, when small as well as great estates derive their security from the laws of their country, nothing can be more completely absurd. They are founded upon the most absurd of all suppositions, the supposition that every successive generation of men have not an equal right to the earth, and to all that it possesses; but that the property of the present generation should be restrained and regulated according to the the fancy of those who died, perhaps five hundred years ago. Entails, however, are still respected, through the greater part of Europe; in those countries, particularly, in which noble birth is a necessary qualification for the enjoyment either of civil or military honours. Entails are thought necessary for maintaining this exclusive privilege of the nobility to the great offices and honours of their country; and that order having usurped one unjust advantage over the rest of their fellow-citizens, lest their poverty should render it ridiculous, it is thought reasonable that they should have another. The common law of England, indeed, is said to abhor perpetuities, and they are accordingly more restricted there than in any other European monarchy; though even England is not altogether without them. In Scotland, more than one fifth, perhaps more one third part of the whole lands in the country, are at present supposed to be under strict entail. Great tracts of uncultivated land were in this manner not only engrossed by particular families, but the possibility of their being divided again was as much as possible precluded for ever. It seldom happens, however, that a great proprietor is a great improver. In the disorderly times which gave birth to those barbarous institutions, the great proprietor was sufficiently employed in defending his own territories, or in extending his jurisdiction and authority over those of his neighbours. He had no leisure to attend to the cultivation and improvement of land. When the establishment of law and order afforded this leisure, he often wanted the inclination, and almost always the requisite abilities. If the expense of his house and person either equalled or exceeded his revenue, as it did very frequently, he had no stock to employ in this manner. If he was an economist, he generally found it more profitable to employ his annual savings in new purchases than in the improvement of his old estate. To improve land with profit, like all other commercial projects, requires an exact attention to small savings and small gains, of which a man born to a great fortune, even though naturally frugal, is very seldom capable. The situation of such a person naturally disposes him to attend rather to ornament, which pleases his fancy, than to profit, for which he has so little occasion. The elegance of his dress, of his equipage, of his house and household furniture, are objects which, from his infancy, he has been accustomed to have some anxiety about. The turn of mind which this habit naturally forms, follows him when he comes to think of the improvement of land. He embellishes, perhaps, four or five hundred acres in the neighbourhood of his house, at ten times the expense which the land is worth after all his improvements; and finds, that if he was to improve his whole estate in the same manner, and he has little taste for any other, he would be a bankrupt before he had finished the tenth part of it. There still remain, in both parts of the united kingdom, some great estates which have continued, without interruption, in the hands of the same family since the times of feudal anarchy. Compare the present condition of those estates with the possessions of the small proprietors in their neighbourhood, and you will require no other argument to convince you how unfavourable such extensive property is to improvement. If little improvement was to be expected from such great proprietors, still less was to be hoped for from those who occupied the land under them. In the ancient state of Europe, the occupiers of land were all tenants at will. They were all, or almost all, slaves, but their slavery was of a milder kind than that known among the ancient Greeks and Romans, or even in our West Indian colonies. They were supposed to belong more directly to the land than to their master. They could, therefore, be sold with it, but not separately. They could marry, provided it was with the consent of their master; and he could not afterwards dissolve the marriage by selling the man and wife to different persons. If he maimed or murdered any of them, he was liable to some penalty, though generally but to a small one. They were not, however, capable of acquiring property. Whatever they acquired was acquired to their master, and he could take it from them at pleasure. Whatever cultivation and improvement could be carried on by means of such slaves, was properly carried on by their master. It was at his expense. The seed, the cattle, and the instruments of husbandry, were all his. It was for his benefit. Such slaves could acquire nothing but their daily maintenance. It was properly the proprietor himself, therefore, that in this case occupied his own lands, and cultivated them by his own bondmen. This species of slavery still subsists in Russia, Poland, Hungary, Bohemia, Moravia, and other parts of Germany. It is only in the western and south-western provinces of Europe that it has gradually been abolished altogether. But if great improvements are seldom to be expected from great proprietors, they are least of all to be expected when they employ slaves for their workmen. The experience of all ages and nations, I believe, demonstrates that the work done by slaves, though it appears to cost only their maintenance, is in the end the dearest of any. A person who can acquire no property can have no other interest but to eat as much and to labour as little as possible. Whatever work he does beyond what is sufficient to purchase his own maintenance, can be squeezed out of him by violence only, and not by any interest of his own. In ancient Italy, how much the cultivation of corn degenerated, how unprofitable it became to the master, when is fell under the management of slaves, is remarked both by Pliny and Columella. In the time of Aristotle, it had not been much better in ancient Greece. Speaking of the ideal republic described in the laws of Plato, to maintain 5000 idle men (the number of warriors supposed necessary for its defence), together with their women and servants, would require, he says, a territory of boundless extent and fertility, like the plains of Babylon. The pride of man makes him love to domineer, and nothing mortifies him to much as to be obliged to condescend to persuade his inferiors. Wherever the law allows it, and the nature of the work can afford it, therefore, he will generally prefer the service of slaves to that of freemen. The planting of sugar and tobacco can afford the expense of slave cultivation. The raising of corn, it seems, in the present times, cannot. In the English colonies, of which the principal produce is corn, the far greater part of the work is done by freemen. The late resolution of the Quakers in Pennsylvania, to set at liberty all their negro slaves, may satisfy us that their number cannot be very great. Had they made any considerable part of their property, such a resolution could never have been agreed to. In our sugar colonies, on the contrary, the whole work is done by slaves, and in our tobacco colonies a very great part of it. The profits of a sugar plantation in any of our West Indian colonies, are generally much greater than those of any other cultivation that is known either in Europe or America; and the profits of a tobacco plantation, though inferior to those of sugar, are superior to those of corn, as has already been observed. Both can afford the expense of slave cultivation, but sugar can afford it still better than tobacco. The number of negroes, accordingly, is much greater, in proportion to that of whites, in our sugar than in our tobacco colonies. To the slave cultivators of ancient times, gradually succeeded a species of farmers, known at present in France by the name of metayers. They are called in Latin _Coloni Partiarii_. They have been so long in disuse in England, that at present I know no English name for them. The proprietor furnished them with the seed, cattle, and instruments of husbandry, the whole stock, in short, necessary for cultivating the farm. The produce was divided equally between the proprietor and the farmer, after setting aside what was judged necessary for keeping up the stock, which was restored to the proprietor, when the farmer either quitted or was turned out of the farm. Land occupied by such tenants is properly cultivated at the expense of the proprietors, as much as that occupied by slaves. There is, however, one very essential difference between them. Such tenants being freemen, are capable of acquiring property; and having a certain proportion of the produce of the land, they have a plain interest that the whole produce should be as great as possible, in order that their own proportion may be so. A slave, on the contrary, who can acquire nothing but his maintenance, consults his own ease, by making the land produce as little as possible over and above that maintenance. It is probable that it was partly upon account of this advantage, and partly upon account of the encroachments which the sovereigns, always jealous of the great lords, gradually encouraged their villains to make upon their authority, and which seem, at least, to have been such as rendered this species of servitude altogether inconvenient, that tenure in villanage gradually wore out through the greater part of Europe. The time and manner, however, in which so important a revolution was brought about, is one of the most obscure points in modern history. The church of Rome claims great merit in it; and it is certain, that so early as the twelfth century, Alexander III. published a bull for the general emancipation of slaves. It seems, however, to have been rather a pious exhortation, than a law to which exact obedience was required from the faithful. Slavery continued to take place almost universally for several centuries afterwards, till it was gradually abolished by the joint operation of the two interests above mentioned; that of the proprietor on the one hand, and that of the sovereign on the other. A villain, enfranchised, and at the same time allowed to continue in possession of the land, having no stock of his own, could cultivate it only by means of what the landlord advanced to him, and must therefore have been what the French call a metayer. It could never, however, be the interest even of this last species of cultivators, to lay out, in the further improvement of the land, any part of the little stock which they might save from their own share of the produce; because the landlord, who laid out nothing, was to get one half of whatever it produced. The tithe, which is but a tenth of the produce, is found to be a very great hindrance to improvement. A tax, therefore, which amounted to one half, must have been an effectual bar to it. It might be the interest of a metayer to make the land produce as much as could be brought out of it by means of the stock furnished by the proprietor; but it could never be his interest to mix any part of his own with it. In France, where five parts out of six of the whole kingdom are said to be still occupied by this species of cultivators, the proprietors complain, that their metayers take every opportunity of employing their master's cattle rather in carriage than in cultivation; because, in the one case, they get the whole profits to themselves, in the other they share them with their landlord. This species of tenants still subsists in some parts of Scotland. They are called steel-bow tenants. Those ancient English tenants, who are said by Chief-Baron Gilbert and Dr Blackstone to have been rather bailiffs of the landlord than farmers, properly so called, were probably of the same kind. To this species of tenantry succeeded, though by very slow degrees, farmers, properly so called, who cultivated the land with their own stock, paying a rent certain to the landlord. When such farmers have a lease for a term of years, they may sometimes find it for their interest to lay out part of their capital in the further improvement of the farm; because they may sometimes expect to recover it, with a large profit, before the expiration of the lease. The possession, even of such farmers, however, was long extremely precarious, and still is so in many parts of Europe. They could, before the expiration of their term, be legally ousted of their leases by a new purchaser; in England, even, by the fictitious action of a common recovery. If they were turned out illegally by the violence of their master, the action by which they obtained redress was extremely imperfect. It did not always reinstate them in the possession of the land, but gave them damages, which never amounted to a real loss. Even in England, the country, perhaps of Europe, where the yeomanry has always been most respected, it was not till about the 14th of Henry VII. that the action of ejectment was invented, by which the tenant recovers, not damages only, but possession, and in which his claim is not necessarily concluded by the uncertain decision of a single assize. This action has been found so effectual a remedy, that, in the modern practice, when the landlord has occasion to sue for the possession of the land, he seldom makes use of the actions which properly belong to him as a landlord, the writ of right or the writ of entry, but sues in the name of his tenant, by the writ of ejectment. In England, therefore the security of the tenant is equal to that of the proprietor. In England, besides, a lease for life of forty shillings a-year value is a freehold, and entitles the lessee to a vote for a member of parliament; and as a great part of the yeomanry have freeholds of this kind, the whole order becomes respectable to their landlords, on account of the political consideration which this gives them. There is, I believe, nowhere in Europe, except in England, any instance of the tenant building upon the land of which he had no lease, and trusting that the honour of his landlord would take no advantage of so important an improvement. Those laws and customs, so favourable to the yeomanry, have perhaps contributed more to the present grandeur of England, than all their boasted regulations of commerce taken together. The law which secures the longest leases against successors of every kind, is, so far as I know, peculiar to Great Britain. It was introduced into Scotland so early as 1449, by a law of James II. Its beneficial influence, however, has been much obstructed by entails; the heirs of entail being generally restrained from letting leases for any long term of years, frequently for more than one year. A late act of parliament has, in this respect, somewhat slackened their fetters, though they are still by much too strait. In Scotland, besides, as no leasehold gives a vote for a member of parliament, the yeomanry are upon this account less respectable to their landlords than in England. In other parts of Europe, after it was found convenient to secure tenants both against heirs and purchasers, the term of their security was still limited to a very short period; in France, for example, to nine years from the commencement of the lease. It has in that country, indeed, been lately extended to twenty-seven, a period still too short to encourage the tenant to make the most important improvements. The proprietors of land were anciently the legislators of every part of Europe. The laws relating to land, therefore, were all calculated for what they supposed the interest of the proprietor. It was for his interest, they had imagined, that no lease granted by any of his predecessors should hinder him from enjoying, during a long term of years, the full value of his land. Avarice and injustice are always short-sighted, and they did not foresee how much this regulation must obstruct improvement, and thereby hurt, in the long-run, the real interest of the landlord. The farmers, too, besides paying the rent, were anciently, it was supposed, bound to perform a great number of services to the landlord, which were seldom either specified in the lease, or regulated by any precise rule, but by the use and wont of the manor or barony. These services, therefore, being almost entirely arbitrary, subjected the tenant to many vexations. In Scotland the abolition of all services not precisely stipulated in the lease, has, in the course of a few years, very much altered for the better the condition of the yeomanry of that country. The public services to which the yeomanry were bound, were not less arbitrary than the private ones. To make and maintain the high roads, a servitude which still subsists, I believe, everywhere, though with different degrees of oppression in different countries, was not the only one. When the king's troops, when his household, or his officers of any kind, passed through any part of the country, the yeomanry were bound to provide them with horses, carriages, and provisions, at a price regulated by the purveyor. Great Britain is, I believe, the only monarchy in Europe where the oppression of purveyance has been entirely abolished. It still subsists in France and Germany. The public taxes, to which they were subject, were as irregular and oppressive as the services. The ancient lords, though extremely unwilling to grant, themselves, any pecuniary aid to their sovereign, easily allowed him to tallage, as they called it, their tenants, and had not knowledge enough to foresee how much this must, in the end, affect their own revenue. The taille, as it still subsists in France, may serve as an example of those ancient tallages. It is a tax upon the supposed profits of the farmer, which they estimate by the stock that he has upon the farm. It is his interest, therefore, to appear to have as little as possible, and consequently to employ as little as possible in its cultivation, and none in its improvement. Should any stock happen to accumulate in the hands of a French farmer, the taille is almost equal to a prohibition of its ever being employed upon the land. This tax, besides, is supposed to dishonour whoever is subject to it, and to degrade him below, not only the rank of a gentleman, but that of a burgher; and whoever rents the lands of another becomes subject to it. No gentleman, nor even any burgher, who has stock, will submit to this degradation. This tax, therefore, not only hinders the stock which accumulates upon the land from being employed in its improvement, but drives away all other stock from it. The ancient tenths and fifteenths, so usual in England in former times, seem, so far as they affected the land, to have been taxes of the same nature with the taille. Under all these discouragements, little improvement could be expected from the occupiers of land. That order of people, with all the liberty and security which law can give, must always improve under great disadvantage. The farmer, compared with the proprietor, is as a merchant who trades with borrowed money, compared with one who trades with his own. The stock of both may improve; but that of the one, with only equal good conduct, must always improve more slowly than that of the other, on account of the large share of the profits which is consumed by the interest of the loan. The lands cultivated by the farmer must, in the same manner, with only equal good conduct, be improved more slowly than those cultivated by the proprietor, on account of the large share of the produce which is consumed in the rent, and which, had the farmer been proprietor, he might have employed in the further improvement of the land. The station of a farmer, besides, is, from the nature of things, inferior to that of a proprietor. Through the greater part of Europe, the yeomanry are regarded as an inferior rank of people, even to the better sort of tradesmen and mechanics, and in all parts of Europe to the great merchants and master manufacturers. It can seldom happen, therefore, that a man of any considerable stock should quit the superior, in order to place himself in an inferior station. Even in the present state of Europe, therefore, little stock is likely to go from any other profession to the improvement of land in the way of farming. More does, perhaps, in Great Britain than in any other country, though even there the great stocks which are in some places employed in farming, have generally been acquired by farming, the trade, perhaps, in which, of all others, stock is commonly acquired most slowly. After small proprietors, however, rich and great farmers are in every country the principal improvers. There are more such, perhaps, in England than in any other European monarchy. In the republican governments of Holland, and of Berne in Switzerland, the farmers are said to be not inferior to those of England. The ancient policy of Europe was, over and above all this, unfavourable to the improvement and cultivation of land, whether carried on by the proprietor or by the farmer; first, by the general prohibition of the exportation of corn, without a special licence, which seems to have been a very universal regulation; and, secondly, by the restraints which were laid upon the inland commerce, not only of corn, but of almost every other part of the produce of the farm, by the absurd laws against engrossers, regraters, and forestallers, and by the privileges of fairs and markets. It has already been observed in what manner the prohibition of the exportation of corn, together with some encouragement given to the importation of foreign corn, obstructed the cultivation of ancient Italy, naturally the most fertile country in Europe, and at that time the seat of the greatest empire in the world. To what degree such restraints upon the inland commerce of this commodity, joined to the general prohibition of exportation, must have discouraged the cultivation of countries less fertile, and less favourably circumstanced, it is not, perhaps, very easy to imagine. CHAP. III. OF THE RISE AND PROGRESS OF CITIES AND TOWNS, AFTER THE FALL OF THE ROMAN EMPIRE. The inhabitants of cities and towns were, after the fall of the Roman empire, not more favoured than those of the country. They consisted, indeed, of a very different order of people from the first inhabitants of the ancient republics of Greece and Italy. These last were composed chiefly of the proprietors of lands, among whom the public territory was originally divided, and who found it convenient to build their houses in the neighbourhood of one another, and to surround them with a wall, for the sake of common defence. After the fall of the Roman empire, on the contrary, the proprietors of land seem generally to have lived in fortified castles on their own estates, and in the midst of their own tenants and dependents. The towns were chiefly inhabited by tradesmen and mechanics, who seem, in those days, to have been of servile, or very nearly of servile condition. The privileges which we find granted by ancient charters to the inhabitants of some of the principal towns in Europe, sufficiently show what they were before those grants. The people to whom it is granted as a privilege, that they might give away their own daughters in marriage without the consent of their lord, that upon their death their own children, and not their lord, should succeed to their goods, and that they might dispose of their own effects by will, must, before those grants, have been either altogether, or very nearly, in the same state of villanage with the occupiers of land in the country. They seem, indeed, to have been a very poor, mean set of people, who seemed to travel about with their goods from place to place and from fair to fair, like the hawkers and pedlars of the present times. In all the different countries of Europe then, in the same manner as in several of the Tartar governments of Asia at present, taxes used to be levied upon the persons and goods of travellers, when they passed through certain manors, when they went over certain bridges, when they carried about their goods from place to place in a fair, when they erected in it a booth or stall to sell them in. These different taxes were known in England by the names of passage, pontage, lastage, and stallage. Sometimes the king, sometimes a great lord, who had, it seems, upon some occasions, authority to do this, would grant to particular traders, to such particularly as lived in their own demesnes, a general exemption from such taxes. Such traders, though in other respects of servile, or very nearly of servile condition, were upon this account called free traders. They, in return, usually paid to their protector a sort of annual poll-tax. In those days protection was seldom granted without a valuable consideration, and this tax might perhaps be considered as compensation for what their patrons might lose by their exemption from other taxes. At first, both those poll-taxes and those exemptions seem to have been altogether personal, and to have affected only particular individuals, during either their lives, or the pleasure of their protectors. In the very imperfect accounts which have been published from Doomsday-book, of several of the towns of England, mention is frequently made, sometimes of the tax which particular burghers paid, each of them, either to the king, or to some other great lord, for this sort of protection, and sometimes of the general amount only of all those taxes.[31] But how servile soever may have been originally the condition of the inhabitants of the towns, it appears evidently, that they arrived at liberty and independency much earlier than the occupiers of land in the country. That part of the king's revenue which arose from such poll-taxes in any particular town, used commonly to be let in farm, during a term of years, for a rent certain, sometimes to the sheriff of the county, and sometimes to other persons. The burghers themselves frequently got credit enough to be admitted to farm the revenues of this sort which arose out of their own town, they becoming jointly and severally answerable for the whole rent.[32] To let a farm in this manner, was quite agreeable to the usual economy of, I believe, the sovereigns of all the different countries of Europe, who used frequently to let whole manors to all the tenants of those manors, they becoming jointly and severally answerable for the whole rent; but in return being allowed to collect it in their own way, and to pay it into the king's exchequer by the hands of their own bailiff, and being thus altogether freed from the insolence of the king's officers; a circumstance in those days regarded as of the greatest importance. At first, the farm of the town was probably let to the burghers, in the same manner as it had been to other farmers, for a term of years only. In process of time, however, it seems to have become the general practice to grant it to them in fee, that is for ever, reserving a rent certain, never afterwards to be augmented. The payment having thus became perpetual, the exemptions, in return, for which it was made, naturally became perpetual too. Those exemptions, therefore, ceased to be personal, and could not afterwards be considered as belonging to individuals, as individuals, but as burghers of a particular burgh, which, upon this account, was called a free burgh, for the same reason that they had been called free burghers or free traders. Along with this grant, the important privileges, above mentioned, that they might give away their own daughters in marriage, that their children should succeed to them, and that they might dispose of their own effects by will, were generally bestowed upon the burghers of the town to whom it was given. Whether such privileges had before been usually granted, along with the freedom of trade, to particular burghers, as individuals, I know not. I reckon it not improbable that they were, though I cannot produce any direct evidence of it. But however this may have been, the principal attributes of villanage and slavery being thus taken away from them, they now at least became really free, in our present sense of the word freedom. Nor was this all. They were generally at the same time erected into a commonalty or corporation, with the privilege of having magistrates and a town-council of their own, of making bye-laws for their own government, of building walls for their own defence, and of reducing all their inhabitants under a sort of military discipline, by obliging them to watch and ward; that is, as anciently understood, to guard and defend those walls against all attacks and surprises, by night as well as by day. In England they were generally exempted from suit to the hundred and county courts; and all such pleas as should arise among them, the pleas of the crown excepted, were left to the decision of their own magistrates. In other countries, much greater and more extensive jurisdictions were frequently granted to them.[33] It might, probably, be necessary to grant to such towns as were admitted to farm their own revenues, some sort of compulsive jurisdiction to oblige their own citizens to make payment. In those disorderly times, it might have been extremely inconvenient to have left them to seek this sort of justice from any other tribunal. But it must seem extraordinary, that the sovereigns of all the different countries of Europe should have exchanged in this manner for a rent certain, never more to be augmented, that branch of their revenue, which was, perhaps, of all others, the most likely to be improved by the natural course of things, without either expense or attention of their own; and that they should, besides, have in this manner voluntarily erected a sort of independent republics in the heart of their own dominions. In order to understand this, it must be remembered, that, in those days, the sovereign of perhaps no country in Europe was able to protect, through the whole extent of his dominions, the weaker part of his subjects from the oppression of the great lords. Those whom the law could not protect, and who were not strong enough to defend themselves, were obliged either to have recourse to the protection of some great lord, and in order to obtain it, to become either his slaves or vassals; or to enter into a league of mutual defence for the common protection of one another. The inhabitants of cities and burghs, considered as single individuals, had no power to defend themselves; but by entering into a league of mutual defence with their neighbours, they were capable of making no contemptible resistance. The lords despised the burghers, whom they considered not only as a different order, but as a parcel of emancipated slaves, almost of a different species from themselves. The wealth of the burghers never failed to provoke their envy and indignation, and they plundered them upon every occasion without mercy or remorse. The burghers naturally hated and feared the lords. The king hated and feared them too; but though, perhaps, he might despise, he had no reason either to hate or fear the burghers. Mutual interest, therefore, disposed them to support the king, and the king to support them against the lords. They were the enemies of his enemies, and it was his interest to render them as secure and independent of those enemies as he could. By granting them magistrates of their own, the privilege of making bye-laws for their own government, that of building walls for their own defence, and that of reducing all their inhabitants under a sort of military discipline, he gave them all the means of security and independency of the barons which it was in his power to bestow. Without the establishment of some regular government of this kind, without some authority to compel their inhabitants to act according to some certain plan or system, no voluntary league of mutual defence could either have afforded them any permanent security, or have enabled them to give the king any considerable support. By granting them the farm of their own town in fee, he took away from those whom he wished to have for his friends, and, if one may say so, for his allies, all ground of jealousy and suspicion, that he was ever afterwards to oppress them, either by raising the farm-rent of their town, or by granting it to some other farmer. The princes who lived upon the worst terms with their barons, seem accordingly to have been the most liberal in grants of this kind to their burghs. King John of England, for example, appears to have been a most munificent benefactor to his towns.[34] Philip I. of France lost all authority over his barons. Towards the end of his reign, his son Lewis, known afterwards by the name of Lewis the Fat, consulted, according to Father Daniel, with the bishops of the royal demesnes, concerning the most proper means of restraining the violence of the great lords. Their advice consisted of two different proposals. One was to erect a new order of jurisdiction, by establishing magistrates and a town-council in every considerable town of his demesnes. The other was to form a new militia, by making the inhabitants of those towns, under the command of their own magistrates, march out upon proper occasions to the assistance of the king. It is from this period, according to the French antiquarians, that we are to date the institution of the magistrates and councils of cities in France. It was during the unprosperous reigns of the princes of the house of Suabia, that the greater part of the free towns of Germany received the first grants of their privileges, and that the famous Hanseatic league first became formidable.[35] The militia of the cities seems, in those times, not to have been inferior to that of the country; and as they could be more readily assembled upon any sudden occasion, they frequently had the advantage in their disputes with the neighbouring lords. In countries such as Italy or Switzerland, in which, on account either of their distance from the principal seat of government, of the natural strength of the country itself, or of some other reason, the sovereign came to lose the whole of his authority; the cities generally became independent republics, and conquered all the nobility in their neighbourhood; obliging them to pull down their castles in the country, and to live, like other peaceable inhabitants, in the city. This is the short history of the republic of Berne, as well as of several other cities in Switzerland. If you except Venice, for of that city the history is somewhat different, it is the history of all the considerable Italian republics, of which so great a number arose and perished between the end of the twelfth and the beginning of the sixteenth century. In countries such as France and England, where the authority of the sovereign, though frequently very low, never was destroyed altogether, the cities had no opportunity of becoming entirely independent. They became, however, so considerable, that the sovereign could impose no tax upon them, besides the stated farm-rent of the town, without their own consent. They were, therefore, called upon to send deputies to the general assembly of the states of the kingdom, where they might join with the clergy and the barons in granting, upon urgent occasions, some extraordinary aid to the king. Being generally, too, more favourable to his power, their deputies seem sometimes to have been employed by him as a counterbalance in these assemblies to the authority of the great lords. Hence the origin of the representation of burghs in the states-general of all great monarchies in Europe. Order and good government, and along with them the liberty and security of individuals, were in this manner established in cities, at a time when the occupiers of land in the country, were exposed to every sort of violence. But men in this defenceless state naturally content themselves with their necessary subsistence; because, to acquire more, might only tempt the injustice of their oppressors. On the contrary, when they are secure of enjoying the fruits of their industry, they naturally exert it to better their condition, and to acquire not only the necessaries, but the conveniencies and elegancies of life. That industry, therefore, which aims at something more than necessary subsistence, was established in cities long before it was commonly practised by the occupiers of land in the country. If, in the hands of a poor cultivator, oppressed with the servitude of villanage, some little stock should accumulate, he would naturally conceal it with great care from his master, to whom it would otherwise have belonged, and take the first opportunity of running away to a town. The law was at that time so indulgent to the inhabitants of towns, and so desirous of diminishing the authority of the lords over those of the country, that if he could conceal himself there from the pursuit of his lord for a year, he was free for ever. Whatever stock, therefore, accumulated in the hands of the industrious part of the inhabitants of the country, naturally took refuge in cities, as the only sanctuaries in which it could be secure to the person that acquired it. The inhabitants of a city, it is true, must always ultimately derive their subsistence, and the whole materials and means of their industry, from the country. But those of a city, situated near either the sea-coast or the banks of a navigable river, are not necessarily confined to derive them from the country in their neighbourhood. They have a much wider range, and may draw them from the most remote corners of the world, either in exchange for the manufactured produce of their own industry, or by performing the office of carriers between distant countries, and exchanging the produce of one for that of another. A city might, in this manner, grow up to great wealth and splendour, while not only the country in its neighbourhood, but all those to which it traded, were in poverty and wretchedness. Each of those countries, perhaps, taken singly, could afford it but a small part, either of its subsistence or of its employment; but all of them taken together, could afford it both a great subsistence and a great employment. There were, however, within the narrow circle of the commerce of those times, some countries that were opulent and industrious. Such was the Greek empire as long as it subsisted, and that of the Saracens during the reigns of the Abassides. Such, too, was Egypt till it was conquered by the Turks, some part of the coast of Barbary, and all those provinces of Spain which were under the government of the Moors. The cities of Italy seem to have been the first in Europe which were raised by commerce to any considerable degree of opulence. Italy lay in the centre of what was at that time the improved and civilized part of the world. The crusades, too, though, by the great waste of stock and destruction of inhabitants which they occasioned, they must necessarily have retarded the progress of the greater part of Europe, were extremely favourable to that of some Italian cities. The great armies which marched from all parts to the conquest of the Holy Land, gave extraordinary encouragement to the shipping of Venice, Genoa, and Pisa, sometimes in transporting them thither, and always in supplying them with provisions. They were the commissaries, if one may say so, of those armies; and the most destructive frenzy that ever befel the European nations, was a source of opulence to those republics. The inhabitants of trading cities, by importing the improved manufactures and expensive luxuries of richer countries, afforded some food to the vanity of the great proprietors, who eagerly purchased them with great quantities of the rude produce of their own lands. The commerce of a great part of Europe in those times, accordingly, consisted chiefly in the exchange of their own rude, for the manufactured produce of more civilized nations. Thus the wool of England used to be exchanged for the wines of France, and the fine cloths of Flanders, in the same manner as the corn in Poland is at this day, exchanged for the wines and brandies of France, and for the silks and velvets of France and Italy. A taste for the finer and more improved manufactures was, in this manner, introduced by foreign commerce into countries where no such works were carried on. But when this taste became so general as to occasion a considerable demand, the merchants, in order to save the expense of carriage, naturally endeavoured to establish some manufactures of the same kind in their own country. Hence the origin of the first manufactures for distant sale, that seem to have been established in the western provinces of Europe, after the fall of the Roman empire. No large country, it must be observed, ever did or could subsist without some sort of manufactures being carried on in it; and when it is said of any such country that it has no manufactures, it must always be understood of the finer and more improved, or of such as are fit for distant sale. In every large country, both the clothing and household furniture of the far greater part of the people, are the produce of their own industry. This is even more universally the case in those poor countries which are commonly said to have no manufactures, than in those rich ones that are said to abound in them. In the latter you will generally find, both in the clothes and household furniture of the lowest rank of people, a much greater proportion of foreign productions than in the former. Those manufactures which are fit for distant sale, seem to have been introduced into different countries in two different ways. Sometimes they have been introduced in the manner above mentioned, by the violent operation, if one may say so, of the stocks of particular merchants and undertakers, who established them in imitation of some foreign manufactures of the same kind. Such manufactures, therefore, are the offspring of foreign commerce; and such seem to have been the ancient manufactures of silks, velvets, and brocades, which flourished in Lucca during the thirteenth century. They were banished from thence by the tyranny of one of Machiavel's heroes, Castruccio Castracani. In 1810, nine hundred families were driven out of Lucca, of whom thirty-one retired to Venice, and offered to introduce there the silk manufacture.[36] Their offer was accepted, many privileges were conferred upon them, and they began the manufacture with three hundred workmen. Such, too, seem to have been the manufactures of fine cloths that anciently flourished in Flanders, and which were introduced into England in the beginning of the reign of Elizabeth, and such are the present silk manufactures of Lyons and Spitalfields. Manufactures introduced in this manner are generally employed upon foreign materials, being imitations of foreign manufactures. When the Venetian manufacture was first established, the materials were all brought from Sicily and the Levant. The more ancient manufacture of Lucca was likewise carried on with foreign materials. The cultivation of mulberry trees, and the breeding of silk-worms, seem not to have been common in the northern parts of Italy before the sixteenth century. Those arts were not introduced into France till the reign of Charles IX. The manufactures of Flanders were carried on chiefly with Spanish and English wool. Spanish wool was the material, not of the first woollen manufacture of England, but of the first that was fit for distant sale. More than one half the materials of the Lyons manufacture is at this day foreign silk; when it was first established, the whole, or very nearly the whole, was so. No part of the materials of the Spitalfields manufacture is ever likely to be the produce of England. The seat of such manufactures, as they are generally introduced by the scheme and project of a few individuals, is sometimes established in a maritime city, and sometimes in an inland town, according as their interest, judgment, or caprice, happen to determine. At other times, manufactures for distant sale grow up naturally, and as it were of their own accord, by the gradual refinement of those household and coarser manufactures which must at all times be carried on even in the poorest and rudest countries. Such manufactures are generally employed upon the materials which the country produces, and they seem frequently to have been first refined and improved in such inland countries as were not, indeed, at a very great, but at a considerable distance from the sea-coast, and sometimes even from all water carriage. An inland country, naturally fertile and easily cultivated, produces a great surplus of provisions beyond what is necessary for maintaining the cultivators; and on account of the expense of land carriage, and inconveniency of river navigation, it may frequently be difficult to send this surplus abroad. Abundance, therefore, renders provisions cheap, and encourages a great number of workmen to settle in the neighbourhood, who find that their industry can there procure them more of the necessaries and conveniences of life than in other places. They work up the materials of manufacture which the land produces, and exchange their finished work, or, what is the same thing, the price of it, for more materials and provisions. They give a new value to the surplus part of the rude produce, by saving the expense of carrying it to the water-side, or to some distant market; and they furnish the cultivators with something in exchange for it, that is either useful or agreeable to them, upon easier terms than they could have obtained it before. The cultivators get a better price for their surplus produce, and can purchase cheaper other conveniences which they have occasion for. They are thus both encouraged and enabled to increase this surplus produce by a further improvement and better cultivation of the land; and as the fertility of the land had given birth to the manufacture, so the progress of the manufacture re-acts upon the land, and increases still further its fertility. The manufacturers first supply the neighbourhood, and afterwards, as their work improves and refines, more distant markets. For though neither the rude produce, nor even the coarse manufacture, could, without the greatest difficulty, support the expense of a considerable land-carriage, the refined and improved manufacture easily may. In a small bulk it frequently contains the price of a great quantity of rude produce. A piece of fine cloth, for example which weighs only eighty pounds, contains in it the price, not only of eighty pounds weight of wool, but sometimes of several thousand weight of corn, the maintenance of the different working people, and of their immediate employers. The corn which could with difficulty have been carried abroad in its own shape, is in this manner virtually exported in that of the complete manufacture, and may easily be sent to the remotest corners of the world. In this manner have grown up naturally, and, as it were, of their own accord, the manufactures of Leeds, Halifax, Sheffield, Birmingham, and Wolverhampton. Such manufactures are the offspring of agriculture. In the modern history of Europe, their extension and improvement have generally been posterior to those which were the offspring of foreign commerce. England was noted for the manufacture of fine cloths made of Spanish wool, more than a century before any of those which now flourish in the places above mentioned were fit for foreign sale. The extension and improvement of these last could not take place but in consequence of the extension and improvement of agriculture, the last and greatest effect of foreign commerce, and of the manufactures immediately introduced by it, and which I shall now proceed to explain. CHAP. IV. HOW THE COMMERCE OF TOWNS CONTRIBUTED TO THE IMPROVEMENT OF THE COUNTRY. The increase and riches of commercial and manufacturing towns contributed to the improvement and cultivation of the countries to which they belonged, in three different ways: First, by affording a great and ready market for the rude produce of the country, they gave encouragement to its cultivation and further improvement. This benefit was not even confined to the countries in which they were situated, but extended more or less to all those with which they had any dealings. To all of them they afforded a market for some part either of their rude or manufactured produce, and, consequently, gave some encouragement to the industry and improvement of all. Their own country, however, on account of its neighbourhood, necessarily derived the greatest benefit from this market. Its rude produce being charged with less carriage, the traders could pay the growers a better price for it, and yet afford it as cheap to the consumers as that of more distant countries. Secondly, the wealth acquired by the inhabitants of cities was frequently employed in purchasing such lands as were to be sold, of which a great part would frequently be uncultivated. Merchants are commonly ambitious of becoming country gentlemen, and, when they do, they are generally the best of all improvers. A merchant is accustomed to employ his money chiefly in profitable projects; whereas a mere country gentleman is accustomed to employ it chiefly in expense. The one often sees his money go from him, and return to him again with a profit; the other, when once he parts with it, very seldom expects to see any more of it. Those different habits naturally affect their temper and disposition in every sort of business. The merchant is commonly a bold, a country gentleman a timid undertaker. The one is not afraid to lay out at once a large capital upon the improvement of his land, when he has a probable prospect of raising the value of it in proportion to the expense; the other, if he has any capital, which is not always the case, seldom ventures to employ it in this manner. If he improves at all, it is commonly not with a capital, but with what he can save out of his annual revenue. Whoever has had the fortune to live in a mercantile town, situated in an unimproved country, must have frequently observed how much more spirited the operations of merchants were in this way, than those of mere country gentlemen. The habits, besides, of order, economy, and attention, to which mercantile business naturally forms a merchant, render him much fitter to execute, with profit and success, any project of improvement. Thirdly, and lastly, commerce and manufactures gradually introduced order and good government, and with them the liberty and security of individuals, among the inhabitants of the country, who had before lived almost in a continual state of war with their neighbours, and of servile dependency upon their superiors. This, though it has been the least observed, is by far the most important of all their effects. Mr Hume is the only writer who, so far as I know, has hitherto taken notice of it. In a country which has neither foreign commerce nor any of the finer manufactures, a great proprietor, having nothing for which he can exchange the greater part of the produce of his lands which is over and above the maintenance of the cultivators, consumes the whole in rustic hospitality at home. If this surplus produce is sufficient to maintain a hundred or a thousand men, he can make use of it in no other way than by maintaining a hundred or a thousand men. He is at all times, therefore, surrounded with a multitude of retainers and dependents, who, having no equivalent to give in return for their maintenance, but being fed entirely by his bounty, must obey him, for the same reason that soldiers obey the prince who pays them. Before the extension of commerce and manufactures in Europe, the hospitality of the rich and the great, from the sovereign down to the smallest baron, exceeded every thing which, in the present times, we can easily form a notion of. Westminster-hall was the dining-room of William Rufus, and might frequently, perhaps, not be too large for his company. It was reckoned a piece of magnificence in Thomas Becket, that he strewed the floor of his hall with clean hay or rushes in the season, in order that the knights and squires, who could not get seats, might not spoil their fine clothes when they sat down on the floor to eat their dinner. The great Earl of Warwick is said to have entertained every day, at his different manors, 30,000 people; and though the number here may have been exaggerated, it must, however, have been very great to admit of such exaggeration. A hospitality nearly of the same kind was exercised not many years ago in many different parts of the Highlands of Scotland. It seems to be common in all nations to whom commerce and manufactures are little known. I have seen, says Doctor Pocock, an Arabian chief dine in the streets of a town where he had come to sell his cattle, and invited all passengers, even common beggars, to sit down with him and partake of his banquet. The occupiers of land were in every respect as dependent upon the great proprietor as his retainers. Even such of them as were not in a state of villanage, were tenants at will, who paid a rent in no respect equivalent to the subsistence which the land afforded them. A crown, half a crown, a sheep, a lamb, was some years ago, in the Highlands of Scotland, a common rent for lands which maintained a family. In some places it is so at this day; nor will money at present purchase a greater quantity of commodities there than in other places. In a country where the surplus produce of a large estate must be consumed upon the estate itself, it will frequently be more convenient for the proprietor, that part of it be consumed at a distance from his own house, provided they who consume it are as dependent upon him as either his retainers or his menial servants. He in thereby saved from the embarrassment of either too large a company, or too large a family. A tenant at will, who possesses land sufficient to maintain his family for little more than a quit-rent, is as dependent upon the proprietor as any servant or retainer whatever, and must obey him with as little reserve. Such a proprietor, as he feeds his servants and retainers at his own house, so he feeds his tenants at their houses. The subsistence of both is derived from his bounty, and its continuance depends upon his good pleasure. Upon the authority which the great proprietors necessarily had, in such a state of things, over their tenants and retainers, was founded the power of the ancient barons. They necessarily became the judges in peace, and the leaders in war, of all who dwelt upon their estates. They could maintain order, and execute the law, within their respective demesnes, because each of them could there turn the whole force of all the inhabitants against the injustice of any one. No other person had sufficient authority to do this. The king, in particular, had not. In those ancient times, he was little more than the greatest proprietor in his dominions, to whom, for the sake of common defence against their common enemies, the other great proprietors paid certain respects. To have enforced payment of a small debt within the lands of a great proprietor, where all the inhabitants were armed, and accustomed to stand by one another, would have cost the king, had he attempted it by his own authority, almost the same effort as to extinguish a civil war. He was, therefore, obliged to abandon the administration of justice, through the greater part of the country, to those who were capable of administering it; and, for the same reason, to leave the command of the country militia to those whom that militia would obey. It is a mistake to imagine that those territorial jurisdictions took their origin from the feudal law. Not only the highest jurisdictions, both civil and criminal, but the power of levying troops, of coining money, and even that of making bye-laws for the government of their own people, were all rights possessed allodially by the great proprietors of land, several centuries before even the name of the feudal law was known in Europe. The authority and jurisdiction of the Saxon lords in England appear to have been as great before the Conquest as that of any of the Norman lords after it. But the feudal law is not supposed to have become the common law of England till after the Conquest. That the most extensive authority and jurisdictions were possessed by the great lords in France allodially, long before the feudal law was introduced into that country, is a matter of fact that admits of no doubt. That authority, and those jurisdictions, all necessarily flowed from the state of property and manners just now described. Without remounting to the remote antiquities of either the French or English monarchies, we may find, in much later times, many proofs that such effects must always flow from such causes. It is not thirty years ago since Mr Cameron of Lochiel, a gentleman of Lochaber in Scotland, without any legal warrant whatever, not being what was then called a lord of regality, nor even a tenant in chief, but a vassal of the Duke of Argyll, and without being so much as a justice of peace, used, notwithstanding, to exercise the highest criminal jurisdictions over his own people. He is said to have done so with great equity, though without any of the formalities of justice; and it is not improbable that the state of that part of the country at that time made it necessary for him to assume this authority, in order to maintain the public peace. That gentleman, whose rent never exceeded L.500 a-year, carried, in 1745, 800 of his own people into the rebellion with him. The introduction of the feudal law, so far from extending, may be regarded as an attempt to moderate, the authority of the great allodial lords. It established a regular subordination, accompanied with a long train of services and duties, from the king down to the smallest proprietor. During the minority of the proprietor, the rent, together with the management of his lands, fell into the hands of his immediate superior; and, consequently, those of all great proprietors into the hands of the king, who was charged with the maintenance and education of the pupil, and who, from his authority as guardian, was supposed to have a right of disposing of him in marriage, provided it was in a manner not unsuitable to his rank. But though this institution necessarily tended to strengthen the authority of the king, and to weaken that of the great proprietors, it could not do either sufficiently for establishing order and good government among the inhabitants of the country; because it could not alter sufficiently that state of property and manners from which the disorders arose. The authority of government still continued to be, as before, too weak in the head, and too strong in the inferior members; and the excessive strength of the inferior members was the cause of the weakness of the head. After the institution of feudal subordination, the king was as incapable of restraining the violence of the great lords as before. They still continued to make war according to their own discretion, almost continually upon one another, and very frequently upon the king; and the open country still continued to be a scene of violence, rapine, and disorder. But what all the violence of the feudal institutions could never have effected, the silent and insensible operation of foreign commerce and manufactures gradually brought about. These gradually furnished the great proprietors with something for which they could exchange the whole surplus produce of their lands, and which they could consume themselves, without sharing it either with tenants or retainers. All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind. As soon, therefore, as they could find a method of consuming the whole value of their rents themselves, they had no disposition to share them with any other persons. For a pair of diamond buckles, perhaps, or for something as frivolous and useless, they exchanged the maintenance, or, what in the same thing, the price of the maintenance of 1000 men for a year, and with it the whole weight and authority which it could give them. The buckles, however, were to be all their own, and no other human creature was to have any share of them; whereas, in the more ancient method of expense, they must have shared with at least 1000 people. With the judges that were to determine the preference, this difference was perfectly decisive; and thus, for the gratification of the most childish, the meanest, and the most sordid of all vanities they gradually bartered their whole power and authority. In a country where there is no foreign commerce, nor any of the finer manufactures, a man of L.10,000 a-year cannot well employ his revenue in any other way than in maintaining, perhaps, 1000 families, who are all of them necessarily at his command. In the present state of Europe, a man of L.10,000 a-year can spend his whole revenue, and he generally does so, without directly maintaining twenty people, or being able to command more than ten footmen, not worth the commanding. Indirectly, perhaps, he maintains as great, or even a greater number of people, than he could have done by the ancient method of expense. For though the quantity of precious productions for which he exchanges his whole revenue be very small, the number of workmen employed in collecting and preparing it must necessarily have been very great. Its great price generally arises from the wages of their labour, and the profits of all their immediate employers. By paying that price, he indirectly pays all those wages and profits, and thus indirectly contributes to the maintenance of all the workmen and their employers. He generally contributes, however, but a very small proportion to that of each; to a very few, perhaps, not a tenth, to many not a hundredth, and to some not a thousandth, or even a ten thousandth part of their whole annual maintenance. Though he contributes, therefore, to the maintenance of them all, they are all more or less independent of him, because generally they can all be maintained without him. When the great proprietors of land spend their rents in maintaining their tenants and retainers, each of them maintains entirely all his own tenants and all his own retainers. But when they spend them in maintaining tradesmen and artificers, they may, all of them taken together, perhaps maintain as great, or, on account of the waste which attends rustic hospitality, a greater number of people than before. Each of them, however, taken singly, contributes often but a very small share to the maintenance of any individual of this greater number. Each tradesman or artificer derives his subsistence from the employment, not of one, but of a hundred or a thousand different customers. Though in some measure obliged to them all, therefore, he is not absolutely dependent upon any one of them. The personal expense of the great proprietors having in this manner gradually increased, it was impossible that the number of their retainers should not as gradually diminish, till they were at last dismissed altogether. The same cause gradually led them to dismiss the unnecessary part of their tenants. Farms were enlarged, and the occupiers of land, notwithstanding the complaints of depopulation, reduced to the number necessary for cultivating it, according to the imperfect state of cultivation and improvement in those times. By the removal of the unnecessary mouths, and by exacting from the farmer the full value of the farm, a greater surplus, or, what is the same thing, the price of a greater surplus, was obtained for the proprietor, which the merchants and manufacturers soon furnished him with a method of spending upon his own person, in the same manner as he had done the rest. The cause continuing to operate, he was desirous to raise his rents above what his lands, in the actual state of their improvement, could afford. His tenants could agree to this upon one condition only, that they should be secured in their possession for such a term of years as might give them time to recover, with profit, whatever they should lay out in the further improvement of the land. The expensive vanity of the landlord made him willing to accept of this condition; and hence the origin of long leases. Even a tenant at will, who pays the full value of the land, is not altogether dependent upon the landlord. The pecuniary advantages which they receive from one another are mutual and equal, and such a tenant will expose neither his life nor his fortune in the service of the proprietor. But if he has a lease for a long term of years, he is altogether independent; and his landlord must not expect from him even the most trifling service, beyond what is either expressly stipulated in the lease, or imposed upon him by the common and known law of the country. The tenants having in this manner become independent, and the retainers being dismissed, the great proprietors were no longer capable of interrupting the regular execution of justice, or of disturbing the peace of the country. Having sold their birth-right, not like Esau, for a mess of pottage in time of hunger and necessity, but, in the wantonness of plenty, for trinkets and baubles, fitter to be the playthings of children than the serious pursuits of men, they became as insignificant as any substantial burgher or tradesmen in a city. A regular government was established in the country as well as in the city, nobody having sufficient power to disturb its operations in the one, any more than in the other. It does not, perhaps, relate to the present subject, but I cannot help remarking it, that very old families, such as have possessed some considerable estate from father to son for many successive generations, are very rare in commercial countries. In countries which have little commerce, on the contrary, such as Wales, or the Highlands of Scotland, they are very common. The Arabian histories seem to be all full of genealogies; and there is a history written by a Tartar Khan, which has been translated into several European languages, and which contains scarce any thing else; a proof that ancient families are very common among those nations. In countries where a rich man can spend his revenue in no other way than by maintaining as many people as it can maintain, he is apt to run out, and his benevolence, it seems, is seldom so violent as to attempt to maintain more than he can afford. But where he can spend the greatest revenue upon his own person, he frequently has no bounds to his expense, because he frequently has no bounds to his vanity, or to his affection for his own person. In commercial countries, therefore, riches, in spite of the most violent regulations of law to prevent their dissipation, very seldom remain long in the same family. Among simple nations, on the contrary, they frequently do, without any regulations of law; for among nations of shepherds, such as the Tartars and Arabs, the consumable nature of their property necessarily renders all such regulations impossible. A revolution of the greatest importance to the public happiness, was in this manner brought about by two different orders of people, who had not the least intention to serve the public. To gratify the most childish vanity was the sole motive of the great proprietors. The merchants and artificers, much less ridiculous, acted merely from a view to their own interest, and in pursuit of their own pedlar principle of turning a penny wherever a penny was to be got. Neither of them had either knowledge or foresight of that great revolution which the folly of the one, and the industry of the other, was gradually bringing about. It was thus, that, through the greater part of Europe, the commerce and manufactures of cities, instead of being the effect, have been the cause and occasion of the improvement and cultivation of the country. This order, however, being contrary to the natural course of things, is necessarily both slow and uncertain. Compare the slow progress of those European countries of which the wealth depends very much upon their commerce and manufactures, with the rapid advances of our North American colonies, of which the wealth is founded altogether in agriculture. Through the greater part of Europe, the number of inhabitants is not supposed to double in less than five hundred years. In several of our North American colonies, it is found to double in twenty or five-and-twenty years. In Europe, the law of primogeniture, and perpetuities of different kinds, prevent the division of great estates, and thereby hinder the multiplication of small proprietors. A small proprietor, however, who knows every part of his little territory, views it with all the affection which property, especially small property, naturally inspires, and who upon that account takes pleasure, not only in cultivating, but in adorning it, is generally of all improvers the most industrious, the most intelligent, and the most successful. The same regulations, besides, keep so much land out of the market, that there are always more capitals to buy than there is land to sell, so that what is sold always sells at a monopoly price. The rent never pays the interest of the purchase money, and is, besides, burdened with repairs and other occasional charges, to which the interest of money is not liable. To purchase land, is, everywhere in Europe, a most unprofitable employment of a small capital. For the sake of the superior security, indeed, a man of moderate circumstances, when he retires from business, will sometimes choose to lay out his little capital in land. A man of profession, too, whose revenue is derived from another source, often loves to secure his savings in the same way. But a young man, who, instead of applying to trade or to some profession, should employ a capital of two or three thousand pounds in the purchase and cultivation of a small piece of land, might indeed expect to live very happily and very independently, but must bid adieu for ever to all hope of either great fortune or great illustration, which, by a different employment of his stock, he might have had the same chance of acquiring with other people. Such a person, too, though he cannot aspire at being a proprietor, will often disdain to be a farmer. The small quantity of land, therefore, which is brought to market, and the high price of what is brought thither, prevents a great number of capitals from being employed in its cultivation and improvement, which would otherwise have taken that direction. In North America, on the contrary, fifty or sixty pounds is often found a sufficient stock to begin a plantation with. The purchase and improvement of uncultivated land is there the most profitable employment of the smallest as well as of the greatest capitals, and the most direct road to all the fortune and illustration which can be acquired in that country. Such land, indeed, is in North America to be had almost for nothing, or at a price much below the value of the natural produce; a thing impossible in Europe, or indeed in any country where all lands have long been private property. If landed estates, however, were divided equally among all the children, upon the death of any proprietor who left a numerous family, the estate would generally be sold. So much land would come to market, that it could no longer sell at a monopoly price. The free rent of the land would go no nearer to pay the interest of the purchase-money, and a small capital might be employed in purchasing land as profitable as in any other way. England, on account of the natural fertility of the soil, of the great extent of the sea-coast in proportion to that of the whole country, and of the many navigable rivers which run through it, and afford the conveniency of water carriage to some of the most inland parts of it, is perhaps as well fitted by nature as any large country in Europe to be the seat of foreign commerce, of manufactures for distant sale, and of all the improvements which these can occasion. From the beginning of the reign of Elizabeth, too, the English legislature has been peculiarly attentive to the interest of commerce and manufactures, and in reality there is no country in Europe, Holland itself not excepted, of which the law is, upon the whole, more favourable to this sort of industry. Commerce and manufactures have accordingly been continually advancing during all this period. The cultivation and improvement of the country has, no doubt, been gradually advancing too; but it seems to have followed slowly, and at a distance, the more rapid progress of commerce and manufactures. The greater part of the country must probably have been cultivated before the reign of Elizabeth; and a very great part of it still remains uncultivated, and the cultivation of the far greater part much inferior to what it might be. The law of England, however, favours agriculture, not only indirectly, by the protection of commerce, but by several direct encouragements. Except in times of scarcity, the exportation of corn is not only free, but encouraged by a bounty. In times of moderate plenty, the importation of foreign corn is loaded with duties that amount to a prohibition. The importation of live cattle, except from Ireland, is prohibited at all times; and it is but of late that it was permitted from thence. Those who cultivate the land, therefore, have a monopoly against their countrymen for the two greatest and most important articles of land produce, bread and butcher's meat. These encouragements, though at bottom, perhaps, as I shall endeavour to show hereafter, altogether illusory, sufficiently demonstrate at least the good intention of the legislature to favour agriculture. But what is of much more importance than all of them, the yeomanry of England are rendered as secure, as independent, and as respectable, as law can make them. No country, therefore, in which the right of primogeniture takes place, which pays tithes, and where perpetuities, though contrary to the spirit of the law, are admitted in some cases, can give more encouragement to agriculture than England. Such, however, notwithstanding, is the state of its cultivation. What would it have been, had the law given no direct encouragement to agriculture besides what arises indirectly from the progress of commerce, and had left the yeomanry in the same condition as in most other countries of Europe? It is now more than two hundred years since the beginning of the reign of Elizabeth, a period as long as the course of human prosperity usually endures. France seems to have had a considerable share of foreign commerce, near a century before England was distinguished as a commercial country. The marine of France was considerable, according to the notions of the times, before the expedition of Charles VIII. to Naples. The cultivation and improvement of France, however, is, upon the whole, inferior to that of England. The law of the country has never given the same direct encouragement to agriculture. The foreign commerce of Spain and Portugal to the other parts of Europe, though chiefly carried on in foreign ships, is very considerable. That to their colonies is carried on in their own, and is much greater, on account of the great riches and extent of those colonies. But it has never introduced any considerable manufactures for distant sale into either of those countries, and the greater part of both still remains uncultivated. The foreign commerce of Portugal is of older standing than that of any great country in Europe, except Italy. Italy is the only great country of Europe which seems to have been cultivated and improved in every part, by means of foreign commerce and manufactures for distant sale. Before the invasion of Charles VIII., Italy, according to Guicciardini, was cultivated not less in the most mountainous and barren parts of the country, than in the plainest and most fertile. The advantageous situation of the country, and the great number of independent states which at that time subsisted in it, probably contributed not a little to this general cultivation. It is not impossible, too, notwithstanding this general expression of one of the most judicious and reserved of modern historians, that Italy was not at that time better cultivated than England is at present. The capital, however, that is acquired to any country by commerce and manufactures, is always a very precarious and uncertain possession, till some part of it has been secured and realized in the cultivation and improvement of its lands. A merchant, it has been said very properly, is not necessarily the citizen of any particular country. It is in a great measure indifferent to him from what place he carries on his trade; and a very trifling disgust will make him remove his capital, and, together with it, all the industry which it supports, from one country to another. No part of it can be said to belong to any particular country, till it has been spread, as it were, over the face of that country, either in buildings, or in the lasting improvement of lands. No vestige now remains of the great wealth said to have been possessed by the greater part of the Hanse Towns, except in the obscure histories of the thirteenth and fourteenth centuries. It is even uncertain where some of them were situated, or to what towns in Europe the Latin names given to some of them belong. But though the misfortunes of Italy, in the end of the fifteenth and beginning of the sixteenth centuries, greatly diminished the commerce and manufactures of the cities of Lombardy and Tuscany, those countries still continue to be among the most populous and best cultivated in Europe. The civil wars of Flanders, and the Spanish government which succeeded them, chased away the great commerce of Antwerp, Ghent, and Bruges. But Flanders still continues to be one of the richest, best cultivated, and most populous provinces of Europe. The ordinary revolutions of war and government easily dry up the sources of that wealth which arises from commerce only. That which arises from the more solid improvements of agriculture is much more durable, and cannot be destroyed but by those more violent convulsions occasioned by the depredations of hostile and barbarous nations continued for a century or two together; such as those that happened for some time before and after the fall of the Roman empire in the western provinces of Europe. BOOK IV. OF SYSTEMS OF POLITICAL ECONOMY. INTRODUCTION. Political economy, considered as a branch of the science of a statesman or legislator, proposes two distinct objects; first, to provide a plentiful revenue or subsistence for the people, or, more properly, to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services. It proposes to enrich both the people and the sovereign. The different progress of opulence in different ages and nations, has given occasion to two different systems of political economy, with regard to enriching the people. The one may be called the system of commerce, the other that of agriculture. I shall endeavour to explain both as fully and distinctly as I can, and shall begin with the system of commerce. It is the modern system, and is best understood in our own country and in our own times. CHAP. I. OF THE PRINCIPLE OF THE COMMERCIAL OR MERCANTILE SYSTEM. That wealth consists in money, or in gold and silver, is a popular notion which naturally arises from the double function of money, as the instrument of commerce, and as the measure of value. In consequence of its being the instrument of commerce, when we have money we can more readily obtain whatever else we have occasion for, than by means of any other commodity. The great affair, we always find, is to get money. When that is obtained, there is no difficulty in making any subsequent purchase. In consequence of its being the measure of value, we estimate that of all other commodities by the quantity of money which they will exchange for. We say of a rich man, that he is worth a great deal, and of a poor man, that he is worth very little money. A frugal man, or a man eager to be rich, is said to love money; and a careless, a generous, or a profuse man, is said to be indifferent about it. To grow rich is to get money; and wealth and money, in short, are, in common language, considered as in every respect synonymous. A rich country, in the same manner as a rich man, is supposed to be a country abounding in money; and to heap up gold and silver in any country is supposed to be the readiest way to enrich it. For some time after the discovery of America, the first inquiry of the Spaniards, when they arrived upon any unknown coast, used to be, if there was any gold or silver to be found in the neighbourhood? By the information which they received, they judged whether it was worth while to make a settlement there, or if the country was worth the conquering. Plano Carpino, a monk sent ambassador from the king of France to one of the sons of the famous Gengis Khan, says, that the Tartars used frequently to ask him, if there was plenty of sheep and oxen in the kingdom of France? Their inquiry had the same object with that of the Spaniards. They wanted to know if the country was rich enough to be worth the conquering. Among the Tartars, as among all other nations of shepherds, who are generally ignorant of the use of money, cattle are the instruments of commerce and the measures of value. Wealth, therefore, according to them, consisted in cattle, as, according to the Spaniards, it consisted in gold and silver. Of the two, the Tartar notion, perhaps, was the nearest to the truth. Mr Locke remarks a distinction between money and other moveable goods. All other moveable goods, he says, are of so consumable a nature, that the wealth which consists in them cannot be much depended on; and a nation which abounds in them one year may, without any exportation, but merely by their own waste and extravagance, be in great want of them the next. Money, on the contrary, is a steady friend, which, though it may travel about from hand to hand, yet if it can be kept from going out of the country, is not very liable to be wasted and consumed. Gold and silver, therefore, are, according to him, the most solid and substantial part of the moveable wealth of a nation; and to multiply those metals ought, he thinks, upon that account, to be the great object of its political economy. Others admit, that if a nation could be separated from all the world, it would be of no consequence how much or how little money circulated in it. The consumable goods, which were circulated by means of this money, would only be exchanged for a greater or a smaller number of pieces; but the real wealth or poverty of the country, they allow, would depend altogether upon the abundance or scarcity of those consumable goods. But it is otherwise, they think, with countries which have connections with foreign nations, and which are obliged to carry on foreign wars, and to maintain fleets and armies in distant countries. This, they say, cannot be done, but by sending abroad money to pay them with; and a nation cannot send much money abroad, unless it has a good deal at home. Every such nation, therefore, must endeavour, in time of peace, to accumulate gold and silver, that when occasion requires, it may have wherewithal to carry on foreign wars. In consequence of these popular notions, all the different nations of Europe have studied, though to little purpose, every possible means of accumulating gold and silver in their respective countries. Spain and Portugal, the proprietors of the principal mines which supply Europe with those metals, have either prohibited their exportation under the severest penalties, or subjected it to a considerable duty. The like prohibition seems anciently to have made a part of the policy of most other European nations. It is even to be found, where we should least of all expect to find it, in some old Scotch acts of Parliament, which forbid, under heavy penalties, the carrying gold or silver _forth of the kingdom_. The like policy anciently took place both in France and England. When those countries became commercial, the merchants found this prohibition, upon many occasions, extremely inconvenient. They could frequently buy more advantageously with gold and silver, than with any other commodity, the foreign goods which they wanted, either to import into their own, or to carry to some other foreign country. They remonstrated, therefore, against this prohibition as hurtful to trade. They represented, first, that the exportation of gold and silver, in order to purchase foreign goods, did not always diminish the quantity of those metals in the kingdom; that, on the contrary, it might frequently increase the quantity; because, if the consumption of foreign goods was not thereby increased in the country, those goods might be re-exported to foreign countries, and being there sold for a large profit, might bring back much more treasure than was originally sent out to purchase them. Mr Mun compares this operation of foreign trade to the seed-time and harvest of agriculture. 'If we only behold,' says he, 'the actions of the husbandman in the seed-time, when he casteth away much good corn into the ground, we shall account him rather a madman than a husbandman. But when we consider his labours in the harvest, which is the end of his endeavours, we shall find the worth and plentiful increase of his actions.' They represented, secondly, that this prohibition could not hinder the exportation of gold and silver, which, on account of the smallness of their bulk in proportion to their value, could easily be smuggled abroad. That this exportation could only be prevented by a proper attention to what they called the balance of trade. That when the country exported to a greater value than it imported, a balance became due to it from foreign nations, which was necessarily paid to it in gold and silver, and thereby increased the quantity of those metals in the kingdom. But that when it imported to a greater value than it exported, a contrary balance became due to foreign nations, which was necessarily paid to them in the same manner, and thereby diminished that quantity: that in this case, to prohibit the exportation of those metals, could not prevent it, but only, by making it more dangerous, render it more expensive: that the exchange was thereby turned more against the country which owed the balance, than it otherwise might have been; the merchant who purchased a bill upon the foreign country being obliged to pay the banker who sold it, not only for the natural risk, trouble, and expense of sending the money thither, but for the extraordinary risk arising from the prohibition; but that the more the exchange was against any country, the more the balance of trade became necessarily against it; the money of that country becoming necessarily of so much less value, in comparison with that of the country to which the balance was due. That if the exchange between England and Holland, for example, was five per cent. against England, it would require 105 ounces of silver in England to purchase a bill for 100 ounces of silver in Holland: that 105 ounces of silver in England, therefore, would be worth only 100 ounces of silver in Holland, and would purchase only a proportionable quantity of Dutch goods; but that 100 ounces of silver in Holland, on the contrary, would be worth 105 ounces in England, and would purchase a proportionable quantity of English goods; that the English goods which were sold to Holland would be sold so much cheaper, and the Dutch goods which were sold to England so much dearer, by the difference of the exchange: that the one would draw so much less Dutch money to England, and the other so much more English money to Holland, as this difference amounted to: and that the balance of trade, therefore, would necessarily be so much more against England, and would require a greater balance of gold and silver be exported to Holland. Those arguments were partly solid and some partly sophistical. They were solid, so far as they asserted that the exportation of gold and silver in trade might frequently be advantageous to the country. They were solid, too, in asserting that no prohibition could prevent their exportation, when private people found any advantage in exporting them. But they were sophistical, in supposing, that either to preserve or to augment the quantity of those metals required more the attention of government, than to preserve or to augment the quantity of any other useful commodities, which the freedom of trade, without any such attention, never fails to supply in the proper quantity. They were sophistical, too, perhaps, in asserting that the high price of exchange necessarily increased what they called the unfavourable balance of trade, or occasioned the exportation of a greater quantity of gold and silver. That high price, indeed, was extremely disadvantageous to the merchants who had any money to pay in foreign countries. They paid so much dearer for the bills which their bankers granted them upon those countries. But though the risk arising from the prohibition might occasion some extraordinary expense to the bankers, it would not necessarily carry any more money out of the country. This expense would generally be all laid out in the country, in smuggling the money out of it, and could seldom occasion the exportation of a single sixpence beyond the precise sum drawn for. The high price of exchange, too, would naturally dispose the merchants to endeavour to make their exports nearly balance their imports, in order that they might have this high exchange to pay upon as small a sum as possible. The high price of exchange, besides, must necessarily have operated as a tax, in raising the price of foreign goods, and thereby diminishing their consumption. It would tend, therefore, not to increase, but to diminish, what they called the unfavourable balance of trade, and consequently the exportation of gold and silver. Such as they were, however, those arguments convinced the people to whom they were addressed. They were addressed by merchants to parliaments and to the councils of princes, to nobles, and to country gentlemen; by those who were supposed to understand trade, to those who were conscious to themselves that they knew nothing about the matter. That foreign trade enriched the country, experience demonstrated to the nobles and country gentlemen, as well as to the merchants; but how, or in what manner, none of them well knew. The merchants knew perfectly in what manner it enriched themselves, it was their business to know it. But to know in what manner it enriched the country, was no part of their business. The subject never came into their consideration, but when they had occasion to apply to their country for some change in the laws relating to foreign trade. It then became necessary to say something about the beneficial effects of foreign trade, and the manner in which those effects were obstructed by the laws as they then stood. To the judges who were to decide the business, it appeared a most satisfactory account of the matter, when they were told that foreign trade brought money into the country, but that the laws in question hindered it from bringing so much as it otherwise would do. Those arguments, therefore, produced the wished-for effect. The prohibition of exporting gold and silver was, in France and England, confined to the coin of those respective countries. The exportation of foreign coin and of bullion was made free. In Holland, and in some other places, this liberty was extended even to the coin of the country. The attention of government was turned away from guarding against the exportation of gold and silver, to watch over the balance of trade, as the only cause which could occasion any augmentation or diminution of these metals. From one fruitless care, it was turned away to another care much more intricate, much more embarrassing, and just equally fruitless. The title of Mun's book, England's Treasure in Foreign Trade, became a fundamental maxim in the political economy, not of England only, but of all other commercial countries. The inland or home trade, the most important of all, the trade in which an equal capital affords the greatest revenue, and creates the greatest employment to the people of the country, was considered as subsidiary only to foreign trade. It neither brought money into the country, it was said, nor carried any out of it. The country, therefore, could never become either richer or poorer by means of it, except so far as its prosperity or decay might indirectly influence the state of foreign trade. A country that has no mines of its own, must undoubtedly draw its gold and silver from foreign countries, in the same manner as one that has no vineyards of its own must draw its wines. It does not seem necessary, however, that the attention of government should be more turned towards the one than towards the other object. A country that has wherewithal to buy wine, will always get the wine which it has occasion for; and a country that has wherewithal to buy gold and silver, will never be in want of those metals. They are to be bought for a certain price, like all commodities; and as they are the price of all other commodities, so all other commodities are the price of those metals. We trust, with perfect security, that the freedom of trade, without any attention of government, will always supply us with the wine which we have occasion for; and we may trust, with equal security, that it will always supply us with all the gold and silver which we can afford to purchase or to employ, either in circulating our commodities or in other uses. The quantity of every commodity which human industry can either purchase or produce, naturally regulates itself in every country according to the effectual demand, or according to the demand of those who are willing to pay the whole rent, labour, and profits, which must be paid in order to prepare and bring it to market. But no commodities regulate themselves more easily or more exactly, according to this effectual demand, than gold and silver; because, on account of the small bulk and great value of those metals, no commodities can be more easily transported from one place to another; from the places where they are cheap, to those where they are dear; from the places where they exceed, to those where they fall short of this effectual demand. If there were in England, for example, an effectual demand for an additional quantity of gold, a packet-boat could bring from Lisbon, or from wherever else it was to be had, fifty tons of gold, which could be coined into more than five millions of guineas. But if there were an effectual demand for grain to the same value, to import it would require, at five guineas a-ton, a million of tons of shipping, or a thousand ships of a thousand tons each. The navy of England would not be sufficient. When the quantity of gold and silver imported into any country exceeds the effectual demand, no vigilance of government can prevent their exportation. All the sanguinary laws of Spain and Portugal are not able to keep their gold and silver at home. The continual importations from Peru and Brazil exceed the effectual demand of those countries, and sink the price of those metals there below that in the neighbouring countries. If, on the contrary, in any particular country, their quantity fell short of the effectual demand, so as to raise their price above that of the neighbouring countries, the government would have no occasion to take any pains to import them. If it were even to take pains to prevent their importation, it would not be able to effectuate it. Those metals, when the Spartans had got wherewithal to purchase them, broke through all the barriers which the laws of Lycurgus opposed to their entrance into Lacedæmon. All the sanguinary laws of the customs are not able to prevent the importation of the teas of the Dutch and Gottenburg East India companies; because somewhat cheaper than those of the British company. A pound of tea, however, is about a hundred times the bulk of one of the highest prices, sixteen shillings, that is commonly paid for it in silver, and more than two thousand times the bulk of the same price in gold, and, consequently, just so many times more difficult to smuggle. It is partly owing to the easy transportation of gold and silver, from the places where they abound to those where they are wanted, that the price of those metals does not fluctuate continually, like that of the greater part of other commodities, which are hindered by their bulk from shifting their situation, when the market happens to be either over or understocked with them. The price of those metals, indeed, is not altogether exempted from variation; but the changes to which it is liable are generally slow, gradual, and uniform. In Europe, for example, it is supposed, without much foundation, perhaps, that during the course of the present and preceding century, they have been constantly, but gradually, sinking in their value, on account of the continual importations from the Spanish West Indies. But to make any sudden change in the price of gold and silver, so as to raise or lower at once, sensibly and remarkably, the money price of all other commodities, requires such a revolution in commerce as that occasioned by the discovery of America. If, notwithstanding all this, gold and silver should at any time fall short in a country which has wherewithal to purchase them, there are more expedients for supplying their place, than that of almost any other commodity. If the materials of manufacture are wanted, industry must stop. If provisions are wanted, the people must starve. But if money is wanted, barter will supply its place, though with a good deal of inconveniency. Buying and selling upon credit, and the different dealers compensating their credits with one another, once a-month, or once a-year, will supply it with less inconveniency. A well-regulated paper-money will supply it not only without any inconveniency, but, in some cases, with some advantage. Upon every account, therefore, the attention of government never was so unnecessarily employed, as when directed to watch over the preservation or increase of the quantity of money in any country. No complaint, however, is more common than that of a scarcity of money. Money, like wine, must always be scarce with those who have neither wherewithal to buy it, nor credit to borrow it. Those who have either, will seldom be in want either of the money, or of the wine which they have occasion for. This complaint, however, of the scarcity of money, is not always confined to improvident spendthrifts. It is sometimes general through a whole mercantile town and the country in its neighbourhood. Over-trading is the common cause of it. Sober men, whose projects have been disproportioned to their capitals, are as likely to have neither wherewithal to buy money, nor credit to borrow it, as prodigals, whose expense has been disproportioned to their revenue. Before their projects can be brought to bear, their stock is gone, and credit with it. They run about everywhere to borrow money, and everybody tells them that they have none to lend. Even such general complaints of the scarcity of money do not always prove that the usual number of gold and silver pieces are not circulating in the country, but that many people want those pieces who have nothing to give for them. When the profits of trade happen to be greater than ordinary over-trading becomes a general error, both among great and small dealers. They do not always send more money abroad than usual, but they buy upon credit, both at home and abroad, an unusual quantity of goods, which they send to some distant market, in hopes that the returns will come in before the demand for payment. The demand comes before the returns, and they have nothing at hand with which they can either purchase money or give solid security for borrowing. It is not any scarcity of gold and silver, but the difficulty which such people find in borrowing, and which their creditor find in getting payment, that occasions the general complaint of the scarcity of money. It would be too ridiculous to go about seriously to prove, that wealth does not consist in money, or in gold and silver; but in what money purchases, and is valuable only for purchasing. Money, no doubt, makes always a part of the national capital; but it has already been shown that it generally makes but a small part, and always the most unprofitable part of it. It is not because wealth consists more essentially in money than in goods, that the merchant finds it generally more easy to buy goods with money, than to buy money with goods; but because money is the known and established instrument of commerce, for which every thing is readily given in exchange, but which is not always with equal readiness to be got in exchange for every thing. The greater part of goods, besides, are more perishable than money, and he may frequently sustain a much greater loss by keeping them. When his goods are upon hand, too, he is more liable to such demands for money as he may not be able to answer, than when he has got their price in his coffers. Over and above all this, his profit arises more directly from selling than from buying; and he is, upon all these accounts, generally much more anxious to exchange his goods for money than his money for goods. But though a particular merchant, with abundance of goods in his warehouse, may sometimes be ruined by not being able to sell them in time, a nation or country is not liable to the same accident. The whole capital of a merchant frequently consists in perishable goods destined for purchasing money. But it is but a very small part of the annual produce of the land and labour of a country, which can ever be destined for purchasing gold and silver from their neighbours. The far greater part is circulated and consumed among themselves; and even of the surplus which is sent abroad, the greater part is generally destined for the purchase of other foreign goods. Though gold and silver, therefore, could not be had in exchange for the goods destined to purchase them, the nation would not be ruined. It might, indeed, suffer some loss and inconveniency, and be forced upon some of those expedients which are necessary for supplying the place of money. The annual produce of its land and labour, however, would be the same, or very nearly the same as usual; because the same, or very nearly the same consumable capital would be employed in maintaining it. And though goods do not always draw money so readily as money draws goods, in the long-run they draw it more necessarily than even it draws them. Goods can serve many other purposes besides purchasing money, but money can serve no other purpose besides purchasing goods. Money, therefore, necessarily runs after goods, but goods do not always necessarily run after money. The man who buys, does not always mean to sell again, but frequently to use or to consume; whereas he who sells always means to buy again. The one may frequently have done the whole, but the other can never have done more than the one half of his business. It is not for its own sake that men desire money, but for the sake of what they can purchase with it. Consumable commodities, it is said, are soon destroyed; whereas gold and silver are of a the more durable nature, and were it not for this continual exportation, might be accumulated for ages together, to the incredible augmentation of the real wealth of the country. Nothing, therefore, it is pretended, can be more disadvantageous to any country, than the trade which consists in the exchange of such lasting for such perishable commodities. We do not, however, reckon that trade disadvantageous, which consists in the exchange of the hardware of England for the wines of France, and yet hardware is a very durable commodity, and were it not for this continual exportation, might too be accumulated for ages together, to the incredible augmentation of the pots and pans of the country. But it readily occurs, that the number of such utensils is in every country necessarily limited by the use which there is for them; that it would be absurd to have more pots and pans than were necessary for cooking the victuals usually consumed there; and that, if the quantity of victuals were to increase, the number of pots and pans would readily increase along with it; a part of the increased quantity of victuals being employed in purchasing them, or in maintaining an additional number of workmen whose business it was to make them. It should as readily occur, that the quantity of gold and silver is in every country limited by the use which there is for those metals; that their use consists in circulating commodities, as coin, and in affording a species of household furniture, as plate; that the quantity of coin in every country is regulated by the value of the commodities which are to be circulated by it; increase that value, and immediately a part of it will be sent abroad to purchase, wherever it is to be had, the additional quantity of coin requisite for circulating them: that the quantity of plate is regulated by the number and wealth of those private families who choose to indulge themselves in that sort of magnificence; increase the number and wealth of such families, and a part of this increased wealth will most probably be employed in purchasing, wherever it is to be found, an additional quantity of plate; that to attempt to increase the wealth of any country, either by introducing or by detaining in it an unnecessary quantity of gold and silver, is as absurd as it would be to attempt to increase the good cheer of private families, by obliging them to keep an unnecessary number of kitchen utensils. As the expense of purchasing those unnecessary utensils would diminish, instead of increasing, either the quantity or goodness of the family provisions; so the expense of purchasing an unnecessary quantity of gold and silver must, in every country, as necessarily diminish the wealth which feeds, clothes, and lodges, which maintains and employs the people. Gold and silver, whether in the shape of coin or of plate, are utensils, it must be remembered, as much as the furniture of the kitchen. Increase the use of them, increase the consumable commodities which are to be circulated, managed, and prepared by means of them, and you will infallibly increase the quantity; but if you attempt by extraordinary means to increase the quantity, you will as infallibly diminish the use, and even the quantity too, which in these metals can never he greater than what the use requires. Were they ever to be accumulated beyond this quantity, their transportation is so easy, and the loss which attends their lying idle and unemployed so great, that no law could prevent their being immediately sent out of the country. It is not always necessary to accumulate gold and silver, in order to enable a country to carry on foreign wars, and to maintain fleets and armies in distant countries. Fleets and armies are maintained, not with gold and silver, but with consumable goods. The nation which, from the annual produce of its domestic industry, from the annual revenue arising out of its lands, and labour, and consumable stock, has wherewithal to purchase those consumable goods in distant countries, can maintain foreign wars there. A nation may purchase the pay and provisions of an army in a distant country three different ways; by sending abroad either, first, some part of its accumulated gold and silver; or, secondly, some part of the annual produce of its manufactures; or, last of all, some part of its annual rude produce. The gold and silver which can properly be considered as accumulated, or stored up in any country, may be distinguished into three parts; first, the circulating money; secondly, the plate of private families; and, last of all, the money which may have been collected by many years parsimony, and laid up in the treasury of the prince. It can seldom happen that much can be spared from the circulating money of the country; because in that there can seldom be much redundancy. The value of goods annually bought and sold in any country requires a certain quantity of money to circulate and distribute them to their proper consumers, and can give employment to no more. The channel of circulation necessarily draws to itself a sum sufficient to fill it, and never admits any more. Something, however, is generally withdrawn from this channel in the case of foreign war. By the great number of people who are maintained abroad, fewer are maintained at home. Fewer goods are circulated there, and less money becomes necessary to circulate them. An extraordinary quantity of paper money of some sort or other, too, such as exchequer notes, navy bills, and bank bills, in England, is generally issued upon such occasions, and, by supplying the place of circulating gold and silver, gives an opportunity of sending a greater quantity of it abroad. All this, however, could afford but a poor resource for maintaining a foreign war, of great expense, and several years duration. The melting down of the plate of private families has, upon every occasion, been found a still more insignificant one. The French, in the beginning of the last war, did not derive so much advantage from this expedient as to compensate the loss of the fashion. The accumulated treasures of the prince have in former times afforded a much greater and more lasting resource. In the present times, if you except the king of Prussia, to accumulate treasure seems to be no part of the policy of European princes. The funds which maintained the foreign wars of the present century, the most expensive perhaps which history records, seem to have had little dependency upon the exportation either of the circulating money, or of the plate of private families, or of the treasure of the prince. The last French war cost Great Britain upwards of £90,000,000, including not only the £75,000,000 of new debt that was contracted, but the additional 2s. in the pound land-tax, and what was annually borrowed of the sinking fund. More than two-thirds of this expense were laid out in distant countries; in Germany, Portugal, America, in the ports of the Mediterranean, in the East and West Indies. The kings of England had no accumulated treasure. We never heard of any extraordinary quantity of plate being melted down. The circulating gold and silver of the country had not been supposed to exceed L.18,000,000. Since the late recoinage of the gold, however, it is believed to have been a good deal under-rated. Let us suppose, therefore, according to the most exaggerated computation which I remember to have either seen or heard of, that, gold and silver together, it amounted to L.30,000,000. Had the war been carried on by means of our money, the whole of it must, even according to this computation, have been sent out and returned again, at least twice in a period of between six and seven years. Should this be supposed, it would afford the most decisive argument, to demonstrate how unnecessary it is for government to watch over the preservation of money, since, upon this supposition, the whole money of the country must have gone from it, and returned to it again, two different times in so short a period, without any body's knowing any thing of the matter. The channel of circulation, however, never appeared more empty than usual during any part of this period. Few people wanted money who had wherewithal to pay for it. The profits of foreign trade, indeed, were greater than usual during the whole war, but especially towards the end of it. This occasioned, what it always occasions, a general over-trading in all the ports of Great Britain; and this again occasioned the usual complaint of the scarcity of money, which always follows over-trading. Many people wanted it, who had neither wherewithal to buy it, nor credit to borrow it; and because the debtors found it difficult to borrow, the creditors found it difficult to get payment. Gold and silver, however, were generally to be had for their value, by those who had that value to give for them. The enormous expense of the late war, therefore, must have been chiefly defrayed, not by the exportation of gold and silver, but by that of British commodities of some kind or other. When the government, or those who acted under them, contracted with a merchant for a remittance to some foreign country, he would naturally endeavour to pay his foreign correspondent, upon whom he granted a bill, by sending abroad rather commodities than gold and silver. If the commodities of Great Britain were not in demand in that country, he would endeavour to send them to some other country in which he could purchase a bill upon that country. The transportation of commodities, when properly suited to the market, is always attended with a considerable profit; whereas that of gold and silver is scarce ever attended with any. When those metals are sent abroad in order to purchase foreign commodities, the merchant's profit arises, not from the purchase, but from the sale of the returns. But when they are sent abroad merely to pay a debt, he gets no returns, and consequently no profit. He naturally, therefore, exerts his invention to find out a way of paying his foreign debts, rather by the exportation of commodities, than by that of gold and silver. The great quantity of British goods, exported during the course of the late war, without bringing back any returns, is accordingly remarked by the author of the Present State of the Nation. Besides the three sorts of gold and silver above mentioned, there is in all great commercial countries a good deal of bullion alternately imported and exported, for the purposes of foreign trade. This bullion, as it circulates among different commercial countries, in the same manner as the national coin circulates in every country, may be considered as the money of the great mercantile republic. The national coin receives its movement and direction from the commodities circulated within the precincts of each particular country; the money in the mercantile republic, from those circulated between different countries. Both are employed in facilitating exchanges, the one between different individuals of the same, the other between those of different nations. Part of this money of the great mercantile republic may have been, and probably was, employed in carrying on the late war. In time of a general war, it is natural to suppose that a movement and direction should be impressed upon it, different from what it usually follows in profound peace, that it should circulate more about the seat of the war, and be more employed in purchasing there, and in the neighbouring countries, the pay and provisions of the different armies. But whatever part of this money of the mercantile republic Great Britain may have annually employed in this manner, it must have been annually purchased, either with British commodities, or with something else that had been purchased with them; which still brings us back to commodities, to the annual produce of the land and labour of the country, as the ultimate resources which enabled us to carry on the war. It is natural, indeed, to suppose, that so great an annual expense must have been defrayed from a great annual produce. The expense of 1761, for example, amounted to more than £19,000,000. No accumulation could have supported so great an annual profusion. There is no annual produce, even of gold and silver, which could have supported it. The whole gold and silver annually imported into both Spain and Portugal, according to the best accounts, does not commonly much exceed £6,000,000 sterling, which, in some years, would scarce have paid four months expense of the late war. The commodities most proper for being transported to distant countries, in order to purchase there either the pay and provisions of an army, or some part of the money of the mercantile republic to be employed in purchasing them, seem to be the finer and more improved manufactures; such as contain a great value in a small bulk, and can therefore be exported to a great distance at little expense. A country whose industry produces a great annual surplus of such manufactures, which are usually exported to foreign countries, may carry on for many years a very expensive foreign war, without either exporting any considerable quantity of gold and silver, or even having any such quantity to export. A considerable part of the annual surplus of its manufactures must, indeed, in this case, be exported without bringing back any returns to the country, though it does to the merchant; the government purchasing of the merchant his bills upon foreign countries, in order to purchase there the pay and provisions of an army. Some part of this surplus, however, may still continue to bring back a return. The manufacturers during the war will have a double demand upon them, and be called upon first to work up goods to be sent abroad, for paying the bills drawn upon foreign countries for the pay and provisions of the army; and, secondly, to work up such as are necessary for purchasing the common returns that had usually been consumed in the country. In the midst of the most destructive foreign war, therefore, the greater part of manufactures may frequently flourish greatly; and, on the contrary, they may decline on the return of peace. They may flourish amidst the ruin of their country, and begin to decay upon the return of its prosperity. The different state of many different branches of the British manufactures during the late war, and for some time after the peace, may serve as an illustration of what has been just now said. No foreign war, of great expense or duration, could conveniently be carried on by the exportation of the rude produce of the soil. The expense of sending such a quantity of it into a foreign country as might purchase the pay and provisions of an army would be too great. Few countries, too, produce much more rude produce than what is sufficient for the subsistence of their own inhabitants. To send abroad any great quantity of it, therefore, would be to send abroad a part of the necessary subsistence of the people. It is otherwise with the exportation of manufactures. The maintenance of the people employed in them is kept at home, and only the surplus part of their work is exported. Mr Hume frequently takes notice of the inability of the ancient kings of England to carry on, without interruption, any foreign war of long duration. The English in those days had nothing wherewithal to purchase the pay and provisions of their armies in foreign countries, but either the rude produce of the soil, of which no considerable part could be spared from the home consumption, or a few manufactures of the coarsest kind, of which, as well as of the rude produce, the transportation was too expensive. This inability did not arise from the want of money, but of the finer and more improved manufactures. Buying and selling was transacted by means of money in England then as well as now. The quantity of circulating money must have borne the same proportion to the number and value of purchases and sales usually transacted at that time, which it does to those transacted at present; or, rather, it must have borne a greater proportion, because there was then no paper, which now occupies a great part of the employment of gold and silver. Among nations to whom commerce and manufactures are little known, the sovereign, upon extraordinary occasions, can seldom draw any considerable aid from his subjects, for reasons which shall be explained hereafter. It is in such countries, therefore, that he generally endeavours to accumulate a treasure, as the only resource against such emergencies. Independent of this necessity, he is, in such a situation, naturally disposed to the parsimony requisite for accumulation. In that simple state, the expense even of a sovereign is not directed by the vanity which delights in the gaudy finery of a court, but is employed in bounty to his tenants, and hospitality to his retainers. But bounty and hospitality very seldom lead to extravagance; though vanity almost always does. Every Tartar chief, accordingly, has a treasure. The treasures of Mazepa, chief of the Cossacks in the Ukraine, the famous ally of Charles XII., are said to have been very great. The French kings of the Merovingian race had all treasures. When they divided their kingdom among their different children, they divided their treasure too. The Saxon princes, and the first kings after the Conquest, seem likewise to have accumulated treasures. The first exploit of every new reign was commonly to seize the treasure of the preceding king, as the most essential measure for securing the succession. The sovereigns of improved and commercial countries are not under the same necessity of accumulating treasures, because they can generally draw from their subjects extraordinary aids upon extraordinary occasions. They are likewise less disposed to do so. They naturally, perhaps necessarily, follow the mode of the times; and their expense comes to be regulated by the same extravagant vanity which directs that of all the other great proprietors in their dominions. The insignificant pageantry of their court becomes every day more brilliant; and the expense of it not only prevents accumulation, but frequently encroaches upon the funds destined for more necessary expenses. What Dercyllidas said of the court of Persia, may be applied to that of several European princes, that he saw there much splendour, but little strength, and many servants, but few soldiers. The importation of gold and silver is not the principal, much less the sole benefit, which a nation derives from its foreign trade. Between whatever places foreign trade is carried on, they all of them derive two distinct benefits from it. It carries out that surplus part of the produce of their land and labour for which there is no demand among them, and brings back in return for it something else for which there is a demand. It gives a value to their superfluities, by exchanging them for something else, which may satisfy a part of their wants and increase their enjoyments. By means of it, the narrowness of the home market does not hinder the division of labour in any particular branch of art or manufacture from being carried to the highest perfection. By opening a more extensive market for whatever part of the produce of their labour may exceed the home consumption, it encourages them to improve its productive power, and to augment its annual produce to the utmost, and thereby to increase the real revenue and wealth of the society. These great and important services foreign trade is continually occupied in performing to all the different countries between which it is carried on. They all derive great benefit from it, though that in which the merchant resides generally derives the greatest, as he is generally more employed in supplying the wants, and carrying out the superfluities of his own, than of any other particular country. To import the gold and silver which may be wanted into the countries which have no mines, is, no doubt, a part of the business of foreign commerce. It is, however, a most insignificant part of it. A country which carried on foreign trade merely upon this account, could scarce have occasion to freight a ship in a century. It is not by the importation of gold and silver that the discovery of America has enriched Europe. By the abundance of the American mines, those metals have become cheaper. A service of plate can now be purchased for about a third part of the corn, or a third part of the labour, which it would have cost in the fifteenth century. With the same annual expense of labour and commodities, Europe can annually purchase about three times the quantity of plate which it could have purchased at that time. But when a commodity comes to be sold for a third part of what had been its usual price, not only those who purchased it before can purchase three times their former quantity, but it is brought down to the level of a much greater number of purchasers, perhaps to more than ten, perhaps to more than twenty times the former number. So that there may be in Europe at present, not only more than three times, but more than twenty or thirty times the quantity of plate which would have been in it, even in its present state of improvement, had the discovery of the American mines never been made. So far Europe has, no doubt, gained a real conveniency, though surely a very trifling one. The cheapness of gold and silver renders those metals rather less fit for the purposes of money than they were before. In order to make the same purchases, we must load ourselves with a greater quantity of them, and carry about a shilling in our pocket, where a groat would have done before. It is difficult to say which is most trifling, this inconveniency, or the opposite conveniency. Neither the one nor the other could have made any very essential change in the state of Europe. The discovery of America, however, certainly made a most essential one. By opening a new and inexhaustible market to all the commodities of Europe, it gave occasion to new divisions of labour and improvements of art, which in the narrow circle of the ancient commerce could never have taken place, for want of a market to take off the greater part of their produce. The productive powers of labour were improved, and its produce increased in all the different countries of Europe, and together with it the real revenue and wealth of the inhabitants. The commodities of Europe were almost all new to America, and many of those of America were new to Europe. A new set of exchanges, therefore, began to take place, which had never been thought of before, and which should naturally have proved as advantageous to the new, as it certainly did to the old continent. The savage injustice of the Europeans rendered an event, which ought to have been beneficial to all, ruinous and destructive to several of those unfortunate countries. The discovery of a passage to the East Indies by the Cape of Good Hope, which happened much about the same time, opened perhaps a still more extensive range to foreign commerce, than even that of America, notwithstanding the greater distance. There were but two nations in America, in any respect, superior to the savages, and these were destroyed almost as soon as discovered. The rest were mere savages. But the empires of China, Indostan, Japan, as well as several others in the East Indies, without having richer mines of gold or silver, were, in every other respect, much richer, better cultivated, and more advanced in all arts and manufactures, than either Mexico or Peru, even though we should credit, what plainly deserves no credit, the exaggerated accounts of the Spanish writers concerning the ancient state of those empires. But rich and civilized nations can always exchange to a much greater value with one another, than with savages and barbarians. Europe, however, has hitherto derived much less advantage from its commerce with the East Indies, than from that with America. The Portuguese monopolized the East India trade to themselves for about a century; and it was only indirectly, and through them, that the other nations of Europe could either send out or receive any goods from that country. When the Dutch, in the beginning of the last century, began to encroach upon them, they vested their whole East India commerce in an exclusive company. The English, French, Swedes, and Danes, have all followed their example; so that no great nation of Europe has ever yet had the benefit of a free commerce to the East Indies. No other reason need be assigned why it has never been so advantageous as the trade to America, which, between almost every nation of Europe and its own colonies, is free to all its subjects. The exclusive privileges of those East India companies, their great riches, the great favour and protection which these have procured them from their respective governments, have excited much envy against them. This envy has frequently represented their trade as altogether pernicious, on account of the great quantities of silver which it every year exports from the countries from which it is carried on. The parties concerned have replied, that their trade by this continual exportation of silver, might indeed tend to impoverish Europe in general, but not the particular country from which it was carried on; because, by the exportation of a part of the returns to other European countries, it annually brought home a much greater quantity of that metal than it carried out. Both the objection and the reply are founded in the popular notion which I have been just now examining. It is therefore unnecessary to say any thing further about either. By the annual exportation of silver to the East Indies, plate is probably somewhat dearer in Europe than it otherwise might have been; and coined silver probably purchases a larger quantity both of labour and commodities. The former of these two effects is a very small loss, the latter a very small advantage; both too insignificant to deserve any part of the public attention. The trade to the East Indies, by opening a market to the commodities of Europe, or, what comes nearly to the same thing, to the gold and silver which is purchased with those commodities, must necessarily tend to increase the annual production of European commodities, and consequently the real wealth and revenue of Europe. That it has hitherto increased them so little, is probably owing to the restraints which it everywhere labours under. I thought it necessary, though at the hazard of being tedious, to examine at full length this popular notion, that wealth consists in money or in gold and silver. Money, in common language, as I have already observed, frequently signifies wealth; and this ambiguity of expression has rendered this popular notion so familiar to us, that even they who are convinced of its absurdity, are very apt to forget their own principles, and, in the course of their reasonings, to take it for granted as a certain and undeniable truth. Some of the best English writers upon commerce set out with observing, that the wealth of a country consists, not in its gold and silver only, but in its lands, houses, and consumable goods of all different kinds. In the course of their reasonings, however, the lands, houses, and consumable goods, seem to slip out of their memory; and the strain of their argument frequently supposes that all wealth consists in gold and silver, and that to multiply those metals is the great object of national industry and commerce. The two principles being established, however, that wealth consisted in gold and silver, and that those metals could be brought into a country which had no mines, only by the balance of trade, or by exporting to a greater value than it imported; it necessarily became the great object of political economy to diminish as much as possible the importation of foreign goods for home consumption, and to increase as much as possible the exportation of the produce of domestic industry. Its two great engines for enriching the country, therefore, were restraints upon importation, and encouragement to exportation. The restraints upon importation were of two kinds. First, restraints upon the importation of such foreign goods for home consumption as could be produced at home, from whatever country they were imported. Secondly, restraints upon the importation of goods of almost all kinds, from those particular countries with which the balance of trade was supposed to be disadvantageous. Those different restraints consisted sometimes in high duties, and sometimes in absolute prohibitions. Exportation was encouraged sometimes by drawbacks, sometimes by bounties, sometimes by advantageous treaties of commerce with foreign states, and sometimes by the establishment of colonies in distant countries. Drawbacks were given upon two different occasions. When the home manufactures were subject to any duty or excise, either the whole or a part of it was frequently drawn back upon their exportation; and when foreign goods liable to a duty were imported, in order to be exported again, either the whole or a part of this duty was sometimes given back upon such exportation. Bounties were given for the encouragement, either of some beginning manufactures, or of such sorts of industry of other kinds as were supposed to deserve particular favour. By advantageous treaties of commerce, particular privileges were procured in some foreign state for the goods and merchants of the country, beyond what were granted to those of other countries. By the establishment of colonies in distant countries, not only particular privileges, but a monopoly was frequently procured for the goods and merchants of the country which established them. The two sorts of restraints upon importation above mentioned, together with these four encouragements to exportation, constitute the six principal means by which the commercial system proposes to increase the quantity of gold and silver in any country, by turning the balance of trade in its favour. I shall consider each of them in a particular chapter, and, without taking much farther notice of their supposed tendency to bring money into the country, I shall examine chiefly what are likely to be the effects of each of them upon the annual produce of its industry. According as they tend either to increase or diminish the value of this annual produce, they must evidently tend either to increase or diminish the real wealth and revenue of the country. CHAP. II. OF RESTRAINTS UPON IMPORTATION FROM FOREIGN COUNTRIES OF SUCH GOODS AS CAN BE PRODUCED AT HOME. By restraining, either by high duties, or by absolute prohibitions, the importation of such goods from foreign countries as can be produced at home, the monopoly of the home market is more or less secured to the domestic industry employed in producing them. Thus the prohibition of importing either live cattle or salt provisions from foreign countries, secures to the graziers of Great Britain the monopoly of the home market for butcher's meat. The high duties upon the importation of corn, which, in times of moderate plenty, amount to a prohibition, give a like advantage to the growers of that commodity. The prohibition of the importation of foreign woollens is equally favourable to the woollen manufacturers. The silk manufacture, though altogether employed upon foreign materials, has lately obtained the same advantage. The linen manufacture has not yet obtained it, but is making great strides towards it. Many other sorts of manufactures have, in the same manner obtained in Great Britain, either altogether, or very nearly, a monopoly against their countrymen. The variety of goods, of which the importation into Great Britain is prohibited, either absolutely, or under certain circumstances, greatly exceeds what can easily be suspected by those who are not well acquainted with the laws of the customs. That this monopoly of the home market frequently gives great encouragement to that particular species of industry which enjoys it, and frequently turns towards that employment a greater share of both the labour and stock of the society than would otherwise have gone to it, cannot be doubted. But whether it tends either to increase the general industry of the society, or to give it the most advantageous direction, is not, perhaps, altogether so evident. The general industry of the society can never exceed what the capital of the society can employ. As the number of workmen that can be kept in employment by any particular person must bear a certain proportion to his capital, so the number of those that can be continually employed by all the members of a great society must bear a certain proportion to the whole capital of the society, and never can exceed that proportion. No regulation of commerce can increase the quantity of industry in any society beyond what its capital can maintain. It can only divert a part of it into a direction into which it might not otherwise have gone; and it is by no means certain that this artificial direction is likely to be more advantageous to the society, than that into which it would have gone of its own accord. Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society. First, every individual endeavours to employ his capital as near home as he can, and consequently as much as he can in the support of domestic industry, provided always that he can thereby obtain the ordinary, or not a great deal less than the ordinary profits of stock. Thus, upon equal, or nearly equal profits, every wholesale merchant naturally prefers the home trade to the foreign trade of consumption, and the foreign trade of consumption to the carrying trade. In the home trade, his capital is never so long out of his sight as it frequently is in the foreign trade of consumption. He can know better the character and situation of the persons whom he trusts; and if he should happen to be deceived, he knows better the laws of the country from which he must seek redress. In the carrying trade, the capital of the merchant is, as it were, divided between two foreign countries, and no part of it is ever necessarily brought home, or placed under his own immediate view and command. The capital which an Amsterdam merchant employs in carrying corn from Koningsberg to Lisbon, and fruit and wine from Lisbon to Koningsberg, must generally be the one half of it at Koningsberg, and the other half at Lisbon. No part of it need ever come to Amsterdam. The natural residence of such a merchant should either be at Koningsberg or Lisbon; and it can only be some very particular circumstances which can make him prefer the residence of Amsterdam. The uneasiness, however, which he feels at being separated so far from his capital, generally determines him to bring part both of the Koningsberg goods which he destines for the market of Lisbon, and of the Lisbon goods which he destines for that of Koningsberg, to Amsterdam; and though this necessarily subjects him to a double charge of loading and unloading as well as to the payment of some duties and customs, yet, for the sake of having some part of his capital always under his own view and command, he willingly submits to this extraordinary charge; and it is in this manner that every country which has any considerable share of the carrying trade, becomes always the emporium, or general market, for the goods of all the different countries whose trade it carries on. The merchant, in order to save a second loading and unloading, endeavours always to sell in the home market, as much of the goods of all those different countries as he can; and thus, so far as he can, to convert his carrying trade into a foreign trade of consumption. A merchant, in the same manner, who is engaged in the foreign trade of consumption, when he collects goods for foreign markets, will always be glad, upon equal or nearly equal profits, to sell as great a part of them at home as he can. He saves himself the risk and trouble of exportation, when, so far as he can, he thus converts his foreign trade of consumption into a home trade. Home is in this manner the centre, if I may say so, round which the capitals of the inhabitants of every country are continually circulating, and towards which they are always tending, though, by particular causes, they may sometimes be driven off and repelled from it towards more distant employments. But a capital employed in the home trade, it has already been shown, necessarily puts into motion a greater quantity of domestic industry, and gives revenue and employment to a greater number of the inhabitants of the country, than an equal capital employed in the foreign trade of consumption; and one employed in the foreign trade of consumption has the same advantage over an equal capital employed in the carrying trade. Upon equal, or only nearly equal profits, therefore, every individual naturally inclines to employ his capital in the manner in which it is likely to afford the greatest support to domestic industry, and to give revenue and employment to the greatest number of people of his own country. Secondly, every individual who employs his capital in the support of domestic industry, necessarily endeavours so to direct that industry, that its produce may be of the greatest possible value. The produce of industry is what it adds to the subject or materials upon which it is employed. In proportion as the value of this produce is great or small, so will likewise be the profits of the employer. But it is only for the sake of profit that any man employs a capital in the support of industry; and he will always, therefore, endeavour to employ it in the support of that industry of which the produce is likely to be of the greatest value, or to exchange for the greatest quantity either of money or of other goods. But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can, both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it. What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can in his local situation judge much better than any statesman or lawgiver can do for him. The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be as dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. To give the monopoly of the home market to the produce of domestic industry, in any particular art or manufacture, is in some measure to direct private people in what manner they ought to employ their capitals, and must in almost all cases be either a useless or a hurtful regulation. If the produce of domestic can be brought there as cheap as that of foreign industry, the regulation is evidently useless. If it cannot, it must generally be hurtful. It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor. The farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbours, and to purchase with a part of its produce, or, what is the same thing, with the price of a part of it, whatever else they have occasion for. What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage. The general industry of the country being always in proportion to the capital which employs it, will not thereby be diminished, no more than that of the above-mentioned artificers; but only left to find out the way in which it can be employed with the greatest advantage. It is certainly not employed to the greatest advantage, when it is thus directed towards an object which it can buy cheaper than it can make. The value of its annual produce is certainly more or less diminished, when it is thus turned away from producing commodities evidently of more value than the commodity which it is directed to produce. According to the supposition, that commodity could be purchased from foreign countries cheaper than it can be made at home; it could therefore have been purchased with a part only of the commodities, or, what is the same thing, with a part only of the price of the commodities, which the industry employed by an equal capital would have produced at home, had it been left to follow its natural course. The industry of the country, therefore, is thus turned away from a more to a less advantageous employment; and the exchangeable value of its annual produce, instead of being increased, according to the intention of the lawgiver, must necessarily be diminished by every such regulation. By means of such regulations, indeed, a particular manufacture may sometimes be acquired sooner than it could have been otherwise, and after a certain time may be made at home as cheap, or cheaper, than in the foreign country. But though the industry of the society may be thus carried with advantage into a particular channel sooner than it could have been otherwise, it will by no means follow that the sum-total, either of its industry, or of its revenue, can ever be augmented by any such regulation. The industry of the society can augment only in proportion as its capital augments, and its capital can augment only in proportion to what can be gradually saved out of its revenue. But the immediate effect of every such regulation is to diminish its revenue; and what diminishes its revenue is certainly not very likely to augment its capital faster than it would have augmented of its own accord, had both capital and industry been left to find out their natural employments. Though, for want of such regulations, the society should never acquire the proposed manufacture, it would not upon that account necessarily be the poorer in any one period of its duration. In every period of its duration its whole capital and industry might still have been employed, though upon different objects, in the manner that was most advantageous at the time. In every period its revenue might have been the greatest which its capital could afford, and both capital and revenue might have been augmented with the greatest possible rapidity. The natural advantages which one country has over another, in producing particular commodities, are sometimes so great, that it is acknowledged by all the world to be in vain to struggle with them. By means of glasses, hot-beds, and hot-walls, very good grapes can be raised in Scotland, and very good wine, too, be made of them, at about thirty times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of claret and Burgundy in Scotland? But if there would be a manifest absurdity in turning towards any employment thirty times more of the capital and industry of the country than would be necessary to purchase from foreign countries an equal quantity of the commodities wanted, there must be an absurdity, though not altogether so glaring, yet exactly of the same kind, in turning towards any such employment a thirtieth, or even a three hundredth part more of either. Whether the advantages which one country has over another be natural or acquired, is in this respect of no consequence. As long as the one country has those advantages, and the other wants them, it will always be more advantageous for the latter rather to buy of the former than to make. It is an acquired advantage only, which one artificer has over his neighbour, who exercises another trade; and yet they both find it more advantageous to buy of one another, than to make what does not belong to their particular trades. Merchants and manufacturers are the people who derive the greatest advantage from this monopoly of the home market. The prohibition of the importation of foreign cattle and of salt provisions, together with the high duties upon foreign corn, which in times of moderate plenty amount to a prohibition, are not near so advantageous to the graziers and farmers of Great Britain, as other regulations of the same kind are to its merchants and manufacturers. Manufactures, those of the finer kind especially, are more easily transported from one country to another than corn or cattle. It is in the fetching and carrying manufactures, accordingly, that foreign trade is chiefly employed. In manufactures, a very small advantage will enable foreigners to undersell our own workmen, even in the home market. It will require a very great one to enable them to do so in the rude produce of the soil. If the free importation of foreign manufactures were permitted, several of the home manufactures would probably suffer, and some of them perhaps go to ruin altogether, and a considerable part of the stock and industry at present employed in them, would be forced to find out some other employment. But the freest importation of the rude produce of the soil could have no such effect upon the agriculture of the country. If the importation of foreign cattle, for example, were made ever so free, so few could be imported, that the grazing trade of Great Britain could be little affected by it. Live cattle are, perhaps, the only commodity of which the transportation is more expensive by sea than by land. By land they carry themselves to market. By sea, not only the cattle, but their food and their water too, must be carried at no small expense and inconveniency. The short sea between Ireland and Great Britain, indeed, renders the importation of Irish cattle more easy. But though the free importation of them, which was lately permitted only for a limited time, were rendered perpetual, it could have no considerable effect upon the interest of the graziers of Great Britain. Those parts of Great Britain which border upon the Irish sea are all grazing countries. Irish cattle could never be imported for their use, but must be drove through those very extensive countries, at no small expense and inconveniency, before they could arrive at their proper market. Fat cattle could not be drove so far. Lean cattle, therefore, could only be imported; and such importation could interfere not with the interest of the feeding or fattening countries, to which, by reducing the price of lean cattle it would rather be advantageous, but with that of the breeding countries only. The small number of Irish cattle imported since their importation was permitted, together with the good price at which lean cattle still continue to sell, seem to demonstrate, that even the breeding countries of Great Britain are never likely to be much affected by the free importation of Irish cattle. The common people of Ireland, indeed, are said to have sometimes opposed with violence the exportation of their cattle. But if the exporters had found any great advantage in continuing the trade, they could easily, when the law was on their side, have conquered this mobbish opposition. Feeding and fattening countries, besides, must always be highly improved, whereas breeding countries are generally uncultivated. The high price of lean cattle, by augmenting the value of uncultivated land, is like a bounty against improvement. To any country which was highly improved throughout, it would be more advantageous to import its lean cattle than to breed them. The province of Holland, accordingly, is said to follow this maxim at present. The mountains of Scotland, Wales, and Northumberland, indeed, are countries not capable of much improvement, and seem destined by nature to be the breeding countries of Great Britain. The freest importation of foreign cattle could have no other effect than to hinder those breeding countries from taking advantage of the increasing population and improvement of the rest of the kingdom, from raising their price to an exorbitant height, and from laying a real tax upon all the more improved and cultivated parts of the country. The freest importation of salt provisions, in the same manner, could have as little effect upon the interest of the graziers of Great Britain as that of live cattle. Salt provisions are not only a very bulky commodity, but when compared with fresh meat they are a commodity both of worse quality, and, as they cost more labour and expense, of higher price. They could never, therefore, come into competition with the fresh meat, though they might with the salt provisions of the country. They might be used for victualling ships for distant voyages, and such like uses, but could never make any considerable part of the food of the people. The small quantity of salt provisions imported from Ireland since their importation was rendered free, is an experimental proof that our graziers have nothing to apprehend from it. It does not appear that the price of butcher's meat has ever been sensibly affected by it. Even the free importation of foreign corn could very little affect the interest of the farmers of Great Britain. Corn is a much more bulky commodity than butcher's meat. A pound of wheat at a penny is as dear as a pound of butcher's meat at fourpence. The small quantity of foreign corn imported even in times of the greatest scarcity, may satisfy our farmers that they can have nothing to fear from the freest importation. The average quantity imported, one year with another, amounts only, according to the very well informed author of the Tracts upon the Corn Trade, to 23,728 quarters of all sorts of grain, and does not exceed the five hundredth and seventy-one part of the annual consumption. But as the bounty upon corn occasions a greater exportation in years of plenty, so it must, of consequence, occasion a greater importation in years of scarcity, than in the actual state of tillage would otherwise take place. By means of it, the plenty of one year does not compensate the scarcity of another; and as the average quantity exported is necessarily augmented by it, so must likewise, in the actual state of tillage, the average quantity imported. If there were no bounty, as less corn would be exported, so it is probable that, one year with another, less would be imported than at present. The corn-merchants, the fetchers and carriers of corn between Great Britain and foreign countries, would have much less employment, and might suffer considerably; but the country gentlemen and farmers could suffer very little. It is in the corn-merchants, accordingly, rather than the country gentlemen and farmers, that I have observed the greatest anxiety for the renewal and continuation of the bounty. Country gentlemen and farmers are, to their great honour, of all people, the least subject to the wretched spirit of monopoly. The undertaker of a great manufactory is sometimes alarmed if another work of the same kind is established within twenty miles of him; the Dutch undertaker of the woollen manufacture at Abbeville, stipulated that no work of the same kind should be established within thirty leagues of that city. Farmers and country gentlemen, on the contrary, are generally disposed rather to promote, than to obstruct, the cultivation and improvement of their neighbours farms and estates. They have no secrets, such as those of the greater part of manufacturers, but are generally rather fond of communicating to their neighbours, and of extending as far as possible any new practice which they may have found to be advantageous. _Pius quæstus_, says old Cato, _stabilissimusque, minimeque invidiosus; minimeque male cogitantes sunt, qui in eo studio occupati sunt._ Country gentlemen and farmers, dispersed in different parts of the country, cannot so easily combine as merchants and manufacturers, who being collected into towns, and accustomed to that exclusive corporation spirit which prevails in them, naturally endeavour to obtain, against all their countrymen, the same exclusive privilege which they generally possess against the inhabitants of their respective towns. They accordingly seem to have been the original inventors of those restraints upon the importation of foreign goods, which secure to them the monopoly of the home market. It was probably in imitation of them, and to put themselves upon a level with those who, they found, were disposed to oppress them, that the country gentlemen and farmers of Great Britain so far forgot the generosity which is natural to their station, as to demand the exclusive privilege of supplying their countrymen with corn and butcher's meat. They did not, perhaps, take time to consider how much less their interest could be affected by the freedom of trade, than that of the people whose example they followed. To prohibit, by a perpetual law, the importation of foreign corn and cattle, is in reality to enact, that the population and industry of the country shall, at no time, exceed what the rude produce of its own soil can maintain. There seem, however, to be two cases, in which it will generally be advantageous to lay some burden upon foreign, for the encouragement of domestic industry. The first is, when some particular sort of industry is necessary for the defence of the country. The defence of Great Britain, for example, depends very much upon the number of its sailors and shipping. The act of navigation, therefore, very properly endeavours to give the sailors and shipping of Great Britain the monopoly of the trade of their own country, in some cases, by absolute prohibitions, and in others, by heavy burdens upon the shipping of foreign countries. The following are the principal dispositions of this act. First, All ships, of which the owners, masters, and three-fourths of the mariners, are not British subjects, are prohibited, upon pain of forfeiting ship and cargo, from trading to the British settlements and plantations, or from being employed in the coasting trade of Great Britain. Secondly, A great variety of the most bulky articles of importation can be brought into Great Britain only, either in such ships as are above described, or in ships of the country where those goods are produced, and of which the owners, masters, and three-fourths of the mariners, are of that particular country; and when imported even in ships of this latter kind, they are subject to double aliens duty. If imported in ships of any other country, the penalty is forfeiture of ship and goods. When this act was made, the Dutch were, what they still are, the great carriers of Europe; and by this regulation they were entirely excluded from being the carriers to Great Britain, or from importing to us the goods of any other European country. Thirdly, A great variety of the most bulky articles of importation are prohibited from being imported, even in British ships, from any country but that in which they are produced, under pain of forfeiting ship and cargo. This regulation, too, was probably intended against the Dutch. Holland was then, as now, the great emporium for all European goods; and by this regulation, British ships were hindered from loading in Holland the goods of any other European country. Fourthly, Salt fish of all kinds, whale-fins, whalebone, oil, and blubber, not caught by and cured on board British vessels, when imported into Great Britain, are subject to double aliens duty. The Dutch, as they are still the principal, were then the only fishers in Europe that attempted to supply foreign nations with fish. By this regulation, a very heavy burden was laid upon their supplying Great Britain. When the act of navigation was made, though England and Holland were not actually at war, the most violent animosity subsisted between the two nations. It had begun during the government of the long parliament, which first framed this act, and it broke out soon after in the Dutch wars, during that of the Protector and of Charles II. It is not impossible, therefore, that some of the regulations of this famous act may have proceeded from national animosity. They are as wise, however, as if they had all been dictated by the most deliberate wisdom. National animosity, at that particular time, aimed at the very same object which the most deliberate wisdom would have recommended, the diminution of the naval power of Holland, the only naval power which could endanger the security of England. The act of navigation is not favourable to foreign commerce, or to the growth of that opulence which can arise from it. The interest of a nation, in its commercial relations to foreign nations, is, like that of a merchant with regard to the different people with whom he deals, to buy as cheap, and to sell as dear as possible. But it will be most likely to buy cheap, when, by the most perfect freedom of trade, it encourages all nations to bring to it the goods which it has occasion to purchase; and, for the same reason, it will be most likely to sell dear, when its markets are thus filled with the greatest number of buyers. The act of navigation, it is true, lays no burden upon foreign ships that come to export the produce of British industry. Even the ancient aliens duty, which used to be paid upon all goods, exported as well as imported, has, by several subsequent acts, been taken off from the greater part of the articles of exportation. But if foreigners, either by prohibitions or high duties, are hindered from coming to sell, they cannot always afford to come to buy; because, coming without a cargo, they must lose the freight from their own country to Great Britain. By diminishing the number of sellers, therefore, we necessarily diminish that of buyers, and are thus likely not only to buy foreign goods dearer, but to sell our own cheaper, than if there was a more perfect freedom of trade. As defence, however, is of much more importance than opulence, the act of navigation is, perhaps, the wisest of all the commercial regulations of England. The second case, in which it will generally be advantageous to lay some burden upon foreign for the encouragement of domestic industry, is when some tax is imposed at home upon the produce of the latter. In this case, it seems reasonable that an equal tax should be imposed upon the like produce of the former. This would not give the monopoly of the home market to domestic industry, nor turn towards a particular employment a greater share of the stock and labour of the country, than what would naturally go to it. It would only hinder any part of what would naturally go to it from being turned away by the tax into a less natural direction, and would leave the competition between foreign and domestic industry, after the tax, as nearly as possible upon the same footing as before it. In Great Britain, when any such tax is laid upon the produce of domestic industry, it is usual, at the same time, in order to stop the clamorous complaints of our merchants and manufacturers, that they will be undersold at home, to lay a much heavier duty upon the importation of all foreign goods of the same kind. This second limitation of the freedom of trade, according to some people, should, upon most occasions, be extended much farther than to the precise foreign commodities which could come into competition with those which had been taxed at home. When the necessaries of life have been taxed in any country, it becomes proper, they pretend, to tax not only the like necessaries of life imported from other countries, but all sorts of foreign goods which can come into competition with any thing that is the produce of domestic industry. Subsistence, they say, becomes necessarily dearer in consequence of such taxes; and the price of labour must always rise with the price of the labourer's subsistence. Every commodity, therefore, which is the produce of domestic industry, though not immediately taxed itself, becomes dearer in consequence of such taxes, because the labour which produces it becomes so. Such taxes, therefore, are really equivalent, they say, to a tax upon every particular commodity produced at home. In order to put domestic upon the same footing with foreign industry, therefore, it becomes necessary, they think, to lay some duty upon every foreign commodity, equal to this enhancement of the price of the home commodities with which it can come into competition. Whether taxes upon the necessaries of life, such as those in Great Britain upon soap, salt, leather, candles, &c. necessarily raise the price of labour, and consequently that of all other commodities, I shall consider hereafter, when I come to treat of taxes. Supposing, however, in the mean time, that they have this effect, and they have it undoubtedly, this general enhancement of the price of all commodities, in consequence of that labour, is a case which differs in the two following respects from that of a particular commodity, of which the price was enhanced by a particular tax immediately imposed upon it. _First_, It might always be known with great exactness, how far the price of such a commodity could be enhanced by such a tax, but how far the general enhancement of the price of labour might affect that of every different commodity about which labour was employed, could never be known with any tolerable exactness. It would be impossible, therefore, to proportion, with any tolerable exactness, the tax of every foreign, to the enhancement of the price of every home commodity. _Secondly_, Taxes upon the necessaries of life have nearly the same effect upon the circumstances of the people as a poor soil and a bad climate. Provisions are thereby rendered dearer, in the same manner as if it required extraordinary labour and expense to raise them. As, in the natural scarcity arising from soil and climate, it would be absurd to direct the people in what manner they ought to employ their capitals and industry, so is it likewise in the artificial scarcity arising from such taxes. To be left to accommodate, as well as they could, their industry to their situation, and to find out those employments in which, notwithstanding their unfavourable circumstances, they might have some advantage either in the home or in the foreign market, is what, in both cases, would evidently be most for their advantage. To lay a new tax upon them, because they are already overburdened with taxes, and because they already pay too dear for the necessaries of life, to make them likewise pay too dear for the greater part of other commodities, is certainly a most absurd way of making amends. Such taxes, when they have grown up to a certain height, are a curse equal to the barrenness of the earth, and the inclemency of the heavens, and yet it is in the richest and most industrious countries that they have been most generally imposed. No other countries could support so great a disorder. As the strongest bodies only can live and enjoy health under an unwholesome regimen, so the nations only, that in every sort of industry have the greatest natural and acquired advantages, can subsist and prosper under such taxes. Holland is the country in Europe in which they abound most, and which, from peculiar circumstances, continues to prosper, not by means of them, as has been most absurdly supposed, but in spite of them. As there are two cases in which it will generally be advantageous to lay some burden upon foreign for the encouragement of domestic industry, so there are two others in which it may sometimes be a matter of deliberation, in the one, how far it is proper to continue the free importation of certain foreign goods; and, in the other, how far, or in what manner, it may be proper to restore that free importation, after it has been for some time interrupted. The case in which it may sometimes be a matter of deliberation how far it is proper to continue the free importation of certain foreign goods, is when some foreign nation restrains, by high duties or prohibitions, the importation of some of our manufactures into their country. Revenge, in this case, naturally dictates retaliation, and that we should impose the like duties and prohibitions upon the importation of some or all of their manufactures into ours. Nations, accordingly, seldom fail to retaliate in this manner. The French have been particularly forward to favour their own manufactures, by restraining the importation of such foreign goods as could come into competition with them. In this consisted a great part of the policy of Mr. Colbert, who, notwithstanding his great abilities, seems in this case to have been imposed upon by the sophistry of merchants and manufacturers, who are always demanding a monopoly against their countrymen. It is at present the opinion of the most intelligent men in France, that his operations of this kind have not been beneficial to his country. That minister, by the tariff of 1667, imposed very high duties upon a great number of foreign manufactures. Upon his refusing to moderate them in favour of the Dutch, they, in 1671, prohibited the importation of the wines, brandies, and manufactures of France. The war of 1672 seems to have been in part occasioned by this commercial dispute. The peace of Nimeguen put an end to it in 1678, by moderating some of those duties in favour of the Dutch, who in consequence took off their prohibition. It was about the same time that the French and English began mutually to oppress each other's industry, by the like duties and prohibitions, of which the French, however, seem to have set the first example. The spirit of hostility which has subsisted between the two nations ever since, has hitherto hindered them from being moderated on either side. In 1697, the English prohibited the importation of bone lace, the manufacture of Flanders. The government of that country, at that time under the domination of Spain, prohibited, in return, the importation of English woollens. In 1700, the prohibition of importing bone lace into England was taken off, upon condition that the importation of English woollens into Flanders should be put on the same footing as before. There may be good policy in retaliations of this kind, when there is a probability that they will procure the repeal of the high duties or prohibitions complained of. The recovery of a great foreign market will generally more than compensate the transitory inconveniency of paying dearer during a short time for some sorts of goods. To judge whether such retaliations are likely to produce such an effect, does not, perhaps, belong so much to the science of a legislator, whose deliberations ought to be governed by general principles, which are always the same, as to the skill of that insidious and crafty animal vulgarly called a statesman or politician, whose councils are directed by the momentary fluctuations of affairs. When there is no probability that any such repeal can be procured, it seems a bad method of compensating the injury done to certain classes of our people, to do another injury ourselves, not only to those classes, but to almost all the other classes of them. When our neighbours prohibit some manufacture of ours, we generally prohibit, not only the same, for that alone would seldom affect them considerably, but some other manufacture of theirs. This may, no doubt, give encouragement to some particular class of workmen among ourselves, and, by excluding some of their rivals, may enable them to raise their price in the home market. Those workmen however, who suffered by our neighbours prohibition, will not be benefited by ours. On the contrary, they, and almost all the other classes of our citizens, will thereby be obliged to pay dearer than before for certain goods. Every such law, therefore, imposes a real tax upon the whole country, not in favour of that particular class of workmen who were injured by our neighbours prohibitions, but of some other class. The case in which it may sometimes be a matter of deliberation, how far, or in what manner, it is proper to restore the free importation of foreign goods, after it has been for some time interrupted, is when particular manufactures, by means of high duties or prohibitions upon all foreign goods which can come into competition with them, have been so far extended as to employ a great multitude of hands. Humanity may in this case require that the freedom of trade should be restored only by slow gradations, and with a good deal of reserve and circumspection. Were those high duties and prohibitions taken away all at once, cheaper foreign goods of the same kind might be poured so fast into the home market, as to deprive all at once many thousands of our people of their ordinary employment and means of subsistence. The disorder which this would occasion might no doubt be very considerable. It would in all probability, however, be much less than is commonly imagined, for the two following reasons. _First_, All those manufactures of which any part is commonly exported to other European countries without a bounty, could be very little affected by the freest importation of foreign goods. Such manufactures must be sold as cheap abroad as any other foreign goods of the same quality and kind, and consequently must be sold cheaper at home. They would still, therefore, keep possession of the home market; and though a capricious man of fashion might sometimes prefer foreign wares, merely because they were foreign, to cheaper and better goods of the same kind that were made at home, this folly could, from the nature of things, extend to so few, that it could make no sensible impression upon the general employment of the people. But a great part of all the different branches of our woollen manufacture, of our tanned leather, and of our hardware, are annually exported to other European countries without any bounty, and these are the manufactures which employ the greatest number of hands. The silk, perhaps, is the manufacture which would suffer the most by this freedom of trade, and after it the linen, though the latter much less than the former. _Secondly_, Though a great number of people should, by thus restoring the freedom of trade, be thrown all at once out of their ordinary employment and common method of subsistence, it would by no means follow that they would thereby be deprived either of employment or subsistence. By the reduction of the army and navy at the end of the late war, more than 100,000 soldiers and seamen, a number equal to what is employed in the greatest manufactures, were all at once thrown out of their ordinary employment: but though they no doubt suffered some inconveniency, they were not thereby deprived of all employment and subsistence. The greater part of the seamen, it is probable, gradually betook themselves to the merchant service as they could find occasion, and in the mean time both they and the soldiers were absorbed in the great mass of the people, and employed in a great variety of occupations. Not only no great convulsion, but no sensible disorder, arose from so great a change in the situation of more than 100,000 men, all accustomed to the use of arms, and many of them to rapine and plunder. The number of vagrants was scarce anywhere sensibly increased by it; even the wages of labour were not reduced by it in any occupation, so far as I have been able to learn, except in that of seamen in the merchant service. But if we compare together the habits of a soldier and of any sort of manufacturer, we shall find that those of the latter do not tend so much to disqualify him from being employed in a new trade, as those of the former from being employed in any. The manufacturer has always been accustomed to look for his subsistence from his labour only; the soldier to expect it from his pay. Application and industry have been familiar to the one; idleness and dissipation to the other. But it is surely much easier to change the direction of industry from one sort of labour to another, than to turn idleness and dissipation to any. To the greater part of manufactures, besides, it has already been observed, there are other collateral manufactures of so similar a nature, that a workman can easily transfer his industry from one of them to another. The greater part of such workmen, too, are occasionally employed in country labour. The stock which employed them in a particular manufacture before, will still remain in the country, to employ an equal number of people in some other way. The capital of the country remaining the same, the demand for labour will likewise be the same, or very nearly the same, though it may be exerted in different places, and for different occupations. Soldiers and seamen, indeed, when discharged from the king's service, are at liberty to exercise any trade within any town or place of Great Britain or Ireland. Let the same natural liberty of exercising what species of industry they please, be restored to all his Majesty's subjects, in the same manner as to soldiers and seamen; that is, break down the exclusive privileges of corporations, and repeal the statute of apprenticeship, both which are really encroachments upon natural liberty, and add to those the repeal of the law of settlements, so that a poor workman, when thrown out of employment, either in one trade or in one place, may seek for it in another trade or in another place, without the fear either of a prosecution or of a removal; and neither the public nor the individuals will suffer much more from the occasional disbanding some particular classes of manufacturers, than from that of the soldiers. Our manufacturers have no doubt great merit with their country, but they cannot have more than those who defend it with their blood, nor deserve to be treated with more delicacy. To expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain, is as absurd as to expect that an Oceana or Utopia should ever be established in it. Not only the prejudices of the public, but, what is much more unconquerable, the private interests of many individuals, irresistibly oppose it. Were the officers of the army to oppose, with the same zeal and unanimity, any reduction in the number of forces, with which master manufacturers set themselves against every law that is likely to increase the number of their rivals in the home market; were the former to animate their soldiers, in the same manner as the latter inflame their workmen, to attack with violence and outrage the proposers of any such regulation; to attempt to reduce the army would be as dangerous as it has now become to attempt to diminish, in any respect, the monopoly which our manufacturers have obtained against us. This monopoly has so much increased the number of some particular tribes of them, that, like an overgrown standing army, they have become formidable to the government, and, upon many occasions, intimidate the legislature. The member of parliament who supports every proposal for strengthening this monopoly, is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more, if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services, can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists. The undertaker of a great manufacture, who, by the home markets being suddenly laid open to the competition of foreigners, should be obliged to abandon his trade, would no doubt suffer very considerably. That part of his capital which had usually been employed in purchasing materials, and in paying his workmen, might, without much difficulty, perhaps, find another employment; but that part of it which was fixed in workhouses, and in the instruments of trade, could scarce be disposed of without considerable loss. The equitable regard, therefore, to his interest, requires that changes of this kind should never be introduced suddenly, but slowly, gradually, and after a very long warning. The legislature, were it possible that its deliberations could be always directed, not by the clamorous importunity of partial interests, but by an extensive view of the general good, ought, upon this very account, perhaps, to be particularly careful, neither to establish any new monopolies of this kind, nor to extend further those which are already established. Every such regulation introduces some degree of real disorder into the constitution of the state, which it will be difficult afterwards to cure without occasioning another disorder. How far it may be proper to impose taxes upon the importation of foreign goods, in order not to prevent their importation, but to raise a revenue for government, I shall consider hereafter when I come to treat of taxes. Taxes imposed with a view to prevent, or even to diminish importation, are evidently as destructive of the revenue of the customs as of the freedom of trade. CHAP. III. OF THE EXTRAORDINARY RESTRAINTS UPON THE IMPORTATION OF GOODS OF ALMOST ALL KINDS, FROM THOSE COUNTRIES WITH WHICH THE BALANCE IS SUPPOSED TO BE DISADVANTAGEOUS. PART I.--_Of the Unreasonableness of those Restraints, even upon the Principles of the Commercial System._ To lay extraordinary restraints upon the importation of goods of almost all kinds, from these particular countries with which the balance of trade is supposed to be disadvantageous, is the second expedient by which the commercial system proposes to increase the quantity of gold and silver. Thus, in Great Britain, Silesia lawns may be imported for home consumption, upon paying certain duties; but French cambrics and lawns are prohibited to be imported, except into the port of London, there to be warehoused for exportation. Higher duties are imposed upon the wines of France than upon those of Portugal, or indeed of any other country. By what is called the impost 1692, a duty of five-and-twenty per cent. of the rate or value, was laid upon all French goods; while the goods of other nations were, the greater part of them, subjected to much lighter duties, seldom exceeding five per cent. The wine, brandy, salt, and vinegar of France, were indeed excepted; these commodities being subjected to other heavy duties, either by other laws, or by particular clauses of the same law. In 1696, a second duty of twenty-five per cent. the first not having been thought a sufficient discouragement, was imposed upon all French goods, except brandy; together with a new duty of five-and-twenty pounds upon the ton of French wine, and another of fifteen pounds upon the ton of French vinegar. French goods have never been omitted in any of those general subsidies or duties of five per cent. which have been imposed upon all, or the greater part, of the goods enumerated in the book of rates. If we count the one-third and two-third subsidies as making a complete subsidy between them, there have been five of these general subsidies; so that, before the commencement of the present war, seventy-five per cent. may be considered as the lowest duty to which the greater part of the goods of the growth, produce, or manufacture of France, were liable. But upon the greater part of goods, those duties are equivalent to a prohibition. The French, in their turn, have, I believe, treated our goods and manufactures just as hardly; though I am not so well acquainted with the particular hardships which they have imposed upon them. Those mutual restraints have put an end to almost all fair commerce between the two nations; and smugglers are now the principal importers, either of British goods into France, or of French goods into Great Britain. The principles which I have been examining, in the foregoing chapter, took their origin from private interest and the spirit of monopoly; those which I am going to examine in this, from national prejudice and animosity. They are, accordingly, as might well be expected, still more unreasonable. They are so, even upon the principles of the commercial system. _First_, Though it were certain that in the case of a free trade between France and England, for example, the balance would be in favour of France, it would by no means follow that such a trade would be disadvantageous to England, or that the general balance of its whole trade would thereby be turned more against it. If the wines of France are better and cheaper than these of Portugal, or its linens than those of Germany, it would be more advantageous for Great Britain to purchase both the wine and the foreign linen which it had occasion for of France, than of Portugal and Germany. Though the value of the annual importations from France would thereby be greatly augmented, the value of the whole annual importations would be diminished, in proportion as the French goods of the same quality were cheaper than those of the other two countries. This would be the case, even upon the supposition that the whole French goods imported were to be consumed in Great Britain. But, _Secondly_, A great part of them might be re-exported to other countries, where, being sold with profit, they might bring back a return, equal in value, perhaps, to the prime cost of the whole French goods imported. What has frequently been said of the East India trade, might possibly be true of the French; that though the greater part of East India goods were bought with gold and silver, the re-exportation of a part of them to other countries brought back more gold and silver to that which carried on the trade, than the prime cost of the whole amounted to. One of the most important branches of the Dutch trade at present, consists in the carriage of French goods to other European countries. Some part even of the French wine drank in Great Britain, is clandestinely imported from Holland and Zealand. If there was either a free trade between France and England, or if French goods could be imported upon paying only the same duties as those of other European nations, to be drawn back upon exportation, England might have some share of a trade which is found so advantageous to Holland. _Thirdly_, and _lastly_, There is no certain criterion by which we can determine on which side what is called the balance between any two countries lies, or which of them exports to the greatest value. National prejudice and animosity, prompted always by the private interest of particular traders, are the principles which generally direct our judgment upon all questions concerning it. There are two criterions, however, which have frequently been appealed to upon such occasions, the custom-house books and the course of exchange. The custom-house books, I think, it is now generally acknowledged, are a very uncertain criterion, on account of the inaccuracy of the valuation at which the greater part of goods are rated in them. The course of exchange is, perhaps, almost equally so. When the exchange between two places, such as London and Paris, is at par, it is said to be a sign that the debts due from London to Paris are compensated by those due from Paris to London. On the contrary, when a premium is paid at London for a bill upon Paris, it is said to be a sign that the debts due from London to Paris are not compensated by those due from Paris to London, but that a balance in money must be sent out from the latter place; for the risk, trouble, and expense, of exporting which, the premium is both demanded and given. But the ordinary state of debt and credit between those two cities must necessarily be regulated, it is said, by the ordinary course of their dealings with one another. When neither of them imports from the other to a greater amount than it exports to that other, the debts and credits of each may compensate one another. But when one of them imports from the other to a greater value than it exports to that other, the former necessarily becomes indebted to the latter in a greater sum than the latter becomes indebted to it: the debts and credits of each do not compensate one another, and money must be sent out from that place of which the debts overbalance the credits. The ordinary course of exchange, therefore, being an indication of the ordinary state of debt and credit between two places, must likewise be an indication of the ordinary course of their exports and imports, as these necessarily regulate that state. But though the ordinary course of exchange shall be allowed to be a sufficient indication of the ordinary state of debt and credit between any two places, it would not from thence follow, that the balance of trade was in favour of that place which had the ordinary state of debt and credit in its favour. The ordinary state of debt and credit between any two places is not always entirely regulated by the ordinary course of their dealings with one another, but is often influenced by that of the dealings of either with many other places. If it is usual, for example, for the merchants of England to pay for the goods which they buy of Hamburg, Dantzic, Riga, &c. by bills upon Holland, the ordinary state of debt and credit between England and Holland will not be regulated entirely by the ordinary course of the dealings of those two countries with one another, but will be influenced by that of the dealings in England with those other places. England may he obliged to send out every year money to Holland, though its annual exports to that country may exceed very much the annual value of its imports from thence, and though what is called the balance of trade may be very much in favour of England. In the way, besides, in which the par of exchange has hitherto been computed, the ordinary course of exchange can afford no sufficient indication that the ordinary state of debt and credit is in favour of that country which seems to have, or which is supposed to have, the ordinary course of exchange in its favour; or, in other words, the real exchange may be, and in fact often is, so very different from the computed one, that, from the course of the latter, no certain conclusion can, upon many occasions, be drawn concerning that of the former. When for a sum of money paid in England, containing, according to the standard of the English mint, a certain number of ounces of pure silver, you receive a bill for a sum of money to be paid in France, containing, according to the standard of the French mint, an equal number of ounces of pure silver, exchange is said to be at par between England and France. When you pay more, you are supposed to given premium, and exchange is said to be against England, and in favour of France. When you pay less, you are supposed to get a premium, and exchange is said to be against France, and in favour of England. But, _first_, We cannot always judge of the value of the current money of different countries by the standard of their respective mints. In some it is more, in others it in less worn, clipt, and otherwise degenerated from that standard. But the value of the current coin of every country, compared with that of any other country, is in proportion, not to the quantity of pure silver which it ought to contain, but to that which it actually does contain. Before the reformation of the silver coin in King William's time, exchange between England and Holland, computed in the usual manner, according to the standard of their respective mints, was five-and-twenty per cent. against England. But the value of the current coin of England, as we learn from Mr Lowndes, was at that time rather more than five-and-twenty per cent. below its standard value. The real exchange, therefore, may even at that time have been in favour of England, notwithstanding the computed exchange so much against it; a smaller number of ounces of pure silver, actually paid in England, may have purchased a bill for a greater number of ounces of pure silver to be paid in Holland, and the man who was supposed to give, may in reality have got the premium. The French coin was, before the late reformation of the English gold coin, much less wore than the English, and was perhaps two or three per cent. nearer its standard. If the computed exchange with France, therefore, was not more than two or three per cent. against England, the real exchange might have been in its favour. Since the reformation of the gold coin, the exchange has been constantly in favour of England, and against France. _Secondly_, In some countries the expense of coinage is defrayed by the government; in others, it is defrayed by the private people, who carry their bullion to the mint, and the government even derives some revenue from the coinage. In England it is defrayed by the government; and if you carry a pound weight of standard silver to the mint, you get back sixty-two shillings, containing a pound weight of the like standard silver. In France a duty of eight per cent. is deducted for the coinage, which not only defrays the expense of it, but affords a small revenue to the government. In England, as the coinage costs nothing, the current coin can never be much more valuable than the quantity of bullion which it actually contains. In France, the workmanship, as you pay for it, adds to the value, in the same manner as to that of wrought plate. A sum of French money, therefore, containing an equal weight of pure silver, is more valuable than a sum of English money containing an equal weight of pure silver, and must require more bullion, or other commodities, to purchase it. Though the current coin of the two countries, therefore, were equally near the standards of their respective mints, a sum of English money could not well purchase a sum of French money containing an equal number of ounces of pure silver, nor consequently, a bill upon France for such a sum. If, for such a bill, no more additional money was paid than what was sufficient to compensate the expense of the French coinage, the real exchange might be at par between the two countries; their debts and credits might mutually compensate one another, while the computed exchange was considerably in favour of France. If less than this was paid, the real exchange might be in favour of England, while the computed was in favour of France. _Thirdly_, and _lastly_, In some places, as at Amsterdam, Hamburg, Venice, &c. foreign bills of exchange are paid in what they call bank money; while in others, as at London, Lisbon, Antwerp, Leghorn, &c. they are paid in the common currency of the country. What is called bank money, is always of more value than the same nominal sum of common currency. A thousand guilders in the bank of Amsterdam, for example, are of more value than a thousand guilders of Amsterdam currency. The difference between them is called the agio of the bank, which at Amsterdam is generally about five per cent. Supposing the current money of the two countries equally near to the standard of their respective mints, and that the one pays foreign bills in this common currency, while the other pays them in bank money, it is evident that the computed exchange may be in favour of that which pays in bank money, though the real exchange should be in favour of that which pays in current money; for the same reason that the computed exchange may be in favour of that which pays in better money, or in money nearer to its own standard, though the real exchange should be in favour of that which pays in worse. The computed exchange, before the late reformation of the gold coin, was generally against London with Amsterdam, Hamburg, Venice, and, I believe, with all other places which pay in what is called bank money. It will by no means follow, however, that the real exchange was against it. Since the reformation of the gold coin, it has been in favour of London, even with those places. The computed exchange has generally been in favour of London with Lisbon, Antwerp, Leghorn, and, if you except France, I believe with most other parts of Europe that pay in common currency; and it is not improbable that the real exchange was so too. _Digression concerning Banks of Deposit, particularly concerning that of Amsterdam._ The currency of a great state, such as France or England, generally consists almost entirely of its own coin. Should this currency, therefore, be at any time worn, clipt, or otherwise degraded below its standard value, the state, by a reformation of its coin, can effectually re-establish its currency. But the currency of a small state, such as Genoa or Hamburg, can seldom consist altogether in its own coin, but must be made up, in a great measure, of the coins of all the neighbouring states with which its inhabitants have a continual intercourse. Such a state, therefore, by reforming its coin, will not always be able to reform its currency. If foreign bills of exchange are paid in this currency, the uncertain value of any sum, of what is in its own nature so uncertain, must render the exchange always very much against such a state, its currency being in all foreign states necessarily valued even below what it is worth. In order to remedy the inconvenience to which this disadvantageous exchange must have subjected their merchants, such small states, when they began to attend to the interest of trade, have frequently enacted, that foreign bills of exchange of a certain value should be paid, not in common currency, but by an order upon, or by a transfer in the books of a certain bank, established upon the credit, and under the protection of the state, this bank being always obliged to pay, in good and true money, exactly according to the standard of the state. The banks of Venice, Genoa, Amsterdam, Hamburg, and Nuremberg, seem to have been all originally established with this view, though some of them may have afterwards been made subservient to other purposes. The money of such banks, being better than the common currency of the country, necessarily bore an agio, which was greater or smaller, according as the currency was supposed to be more or less degraded below the standard of the state. The agio of the bank of Hamburg, for example, which is said to be commonly about fourteen per cent. is the supposed difference between the good standard money of the state, and the clipt, worn, and diminished currency, poured into it from all the neighbouring states. Before 1609, the great quantity of clipt and worn foreign coin which the extensive trade of Amsterdam brought from all parts of Europe, reduced the value of its currency about nine per cent. below that of good money fresh from the mint. Such money no sooner appeared, than it was melted down or carried away, as it always is in such circumstances. The merchants, with plenty of currency, could not always find a sufficient quantity of good money to pay their bills of exchange; and the value of those bills, in spite of several regulations which were made to prevent it, became in a great measure uncertain. In order to remedy these inconveniences, a bank was established in 1609, under the guarantee of the city. This bank received both foreign coin, and the light and worn coin of the country, at its real intrinsic value in the good standard money of the country, deducting only so much as was necessary for defraying the expense of coinage and the other necessary expense of management. For the value which remained after this small deduction was made, it gave a credit in its books. This credit was called bank money, which, as it represented money exactly according to the standard of the mint, was always of the same real value, and intrinsically worth more than current money. It was at the same time enacted, that all bills drawn upon or negociated at Amsterdam, of the value of 600 guilders and upwards, should be paid in bank money, which at once took away all uncertainty in the value of those bills. Every merchant, in consequence of this regulation, was obliged to keep an account with the bank, in order to pay his foreign bills of exchange, which necessarily occasioned a certain demand for bank money. Bank money, over and above both its intrinsic superiority to currency, and the additional value which this demand necessarily gives it, has likewise some other advantages. It is secure from fire, robbery, and other accidents; the city of Amsterdam is bound for it; it can be paid away by a simple transfer, without the trouble of counting, or the risk of transporting it from one place to another. In consequence of those different advantages, it seems from the beginning to have borne an agio; and it is generally believed that all the money originally deposited in the bank, was allowed to remain there, nobody caring to demand payment of a debt which he could sell for a premium in the market. By demanding payment of the bank, the owner of a bank credit would lose this premium. As a shilling fresh from the mint will buy no more goods in the market than one of our common worn shillings, so the good and true money which might be brought from the coffers of the bank into those of a private person, being mixed and confounded with the common currency of the country, would be of no more value than that currency, from which it could no longer be readily distinguished. While it remained in the coffers of the bank, its superiority was known and ascertained. When it had come into those of a private person, its superiority could not well be ascertained without more trouble than perhaps the difference was worth. By being brought from the coffers of the bank, besides, it lost all the other advantages of bank money; its security, its easy and safe transferability, its use in paying foreign bills of exchange. Over and above all this, it could not be brought from those coffers, as will appear by and by, without previously paying for the keeping. Those deposits of coin, or those deposits which the bank was bound to restore in coin, constituted the original capital of the bank, or the whole value of what was represented by what is called bank money. At present they are supposed to constitute but a very small part of it. In order to facilitate the trade in bullion, the bank has been for these many years in the practice of giving credit in its books, upon deposits of gold and silver bullion. This credit is generally about five per cent. below the mint price of such bullion. The bank grants at the same time what is called a recipice or receipt, entitling the person who makes the deposit, or the bearer, to take out the bullion again at any time within six months, upon transferring to the bank a quantity of bank money equal to that for which credit had been given in its books when the deposit was made, and upon paying one-fourth per cent. for the keeping, if the deposit was in silver; and one-half per cent. if it was in gold; but at the same time declaring, that in default of such payment, and upon the expiration of this term, the deposit should belong to the bank, at the price at which it had been received, or for which credit had been given in the transfer books. What is thus paid for the keeping of the deposit may be considered as a sort of warehouse rent; and why this warehouse rent should be so much dearer for gold than for silver, several different reasons have been assigned. The fineness of gold, it has been said, is more difficult to be ascertained than that of silver. Frauds are more easily practised, and occasion a greater loss in the most precious metal. Silver, besides, being the standard metal, the state, it has been said, wishes to encourage more the making of deposits of silver than those of gold. Deposits of bullion are most commonly made when the price is somewhat lower than ordinary, and they are taken out again when it happens to rise. In Holland the market price of bullion is generally above the mint price, for the same reason that it was so in England before the late reformation of the gold coin. The difference is said to be commonly from about six to sixteen stivers upon the mark, or eight ounces of silver, of eleven parts of fine and one part alloy. The bank price, or the credit which the bank gives for the deposits of such silver (when made in foreign coin, of which the fineness is well known and ascertained, such as Mexico dollars), is twenty-two guilders the mark; the mint price is about twenty-three guilders, and the market price is from twenty-three guilders six, to twenty-three guilders sixteen stivers, or from two to three per cent. above the mint price.[37] The proportions between the bank price, the mint price, and the market price of gold bullion, are nearly the same. A person can generally sell his receipt for the difference between the mint price of bullion and the market price. A receipt for bullion is almost always worth something, and it very seldom happens, therefore, that anybody suffers his receipts to expire, or allows his bullion to fall to the bank at the price at which it had been received, either by not taking it out before the end of the six months, or by neglecting to pay one fourth or one half per cent. in order to obtain a new receipt for another six months. This, however, though it happens seldom, is said to happen sometimes, and more frequently with regard to gold than with regard to silver, on account of the higher warehouse rent which is paid for the keeping of the more precious metal. The person who, by making a deposit of bullion, obtains both a bank credit and a receipt, pays his bills of exchange as they become due, with his bank credit; and either sells or keeps his receipt, according as he judges that the price of bullion is likely to rise or to fall. The receipt and the bank credit seldom keep long together, and there is no occasion that they should. The person who has a receipt, and who wants to take out bullion, finds always plenty of bank credits, or bank money, to buy at the ordinary price, and the person who has bank money, and wants to take out bullion, finds receipts always in equal abundance. The owners of bank credits, and the holders of receipts, constitute two different sorts of creditors against the bank. The holder of a receipt cannot draw out the bullion for which it is granted, without re-assigning to the bank a sum of bank money equal to the price at which the bullion had been received. If he has no bank money of his own, he must purchase it of those who have it. The owner of bank money cannot draw out bullion, without producing to the bank receipts for the quantity which he wants. If he has none of his own, he must buy them of those who have them. The holder of a receipt, when he purchases bank money, purchases the power of taking out a quantity of bullion, of which the mint price is five per cent. above the bank price. The agio of five per cent. therefore, which he commonly pays for it, is paid, not for an imaginary, but for a real value. The owner of bank money, when he purchases a receipt, purchases the power of taking out a quantity of bullion, of which the market price is commonly from two to three per cent. above the mint price. The price which he pays for it, therefore, is paid likewise for a real value. The price of the receipt, and the price of the bank money, compound or make up between them the full value or price of the bullion. Upon deposits of the coin current in the country, the bank grant receipts likewise, as well as bank credits; but those receipts are frequently of no value and will bring no price in the market. Upon ducatoons, for example, which in the currency pass for three guilders three stivers each, the bank gives a credit of three guilders only, or five per cent. below their current value. It grants a receipt likewise, entitling the bearer to take out a number of ducatoons deposited at any time within six months, upon paying one fourth per cent. for the keeping. This receipt will frequently bring no price in the market. Three guilders, bank money, generally sell in the market for three guilders three stivers, the full value of the ducatoons, if they were taken out of the bank; and before they can be taken out, one-fourth per cent. must be paid for the keeping, which would be mere loss to the holder of the receipt. If the agio of the bank, however, should at any time fall to three per cent. such receipts might bring some price in the market, and might sell for one and three-fourths per cent. But the agio of the bank being now generally about five per cent. such receipts are frequently allowed to expire, or, as they express it, to fall to the bank. The receipts which are given for deposits of gold ducats fall to it yet more frequently, because a higher warehouse rent, or one half per cent. must be paid for the keeping of them, before they can be taken out again. The five per cent. which the bank gains, when deposits either of coin or bullion are allowed to fall to it, may be considered as the warehouse rent for the perpetual keeping of such deposits. The sum of bank money, for which the receipts are expired, must be very considerable. It must comprehend the whole original capital of the bank, which, it is generally supposed, has been allowed to remain there from the time it was first deposited, nobody caring either to renew his receipt, or to take out his deposit, as, for the reasons already assigned, neither the one nor the other could be done without loss. But whatever may be the amount of this sum, the proportion which it bears to the whole mass of bank money is supposed to be very small. The bank of Amsterdam has, for these many years past, been the great warehouse of Europe for bullion, for which the receipts are very seldom allowed to expire, or, as they express it, to fall to the bank. The far greater part of the bank money, or of the credits upon the books of the bank, is supposed to have been created, for these many years past, by such deposits, which the dealers in bullion are continually both making and withdrawing. No demand can be made upon the bank, but by means of a recipice or receipt. The smaller mass of bank money, for which the receipts are expired, is mixed and confounded with the much greater mass for which they are still in force; so that, though there may be a considerable sum of bank money, for which there are no receipts, there is no specific sum or portion of it which may not at any time be demanded by one. The bank cannot be debtor to two persons for the same thing; and the owner of bank money who has no receipt, cannot demand payment of the bank till he buys one. In ordinary and quiet times, he can find no difficulty in getting one to buy at the market price, which generally corresponds with the price at which he can sell the coin or bullion it entitles him to take out of the bank. It might be otherwise during a public calamity; an invasion, for example, such as that of the French in 1672. The owners of bank money being then all eager to draw it out of the bank, in order to have it in their own keeping, the demand for receipts might raise their price to an exorbitant height. The holders of them might form extravagant expectations, and, instead of two or three per cent. demand half the bank money for which credit had been given upon the deposits that the receipts had respectively been granted for. The enemy, informed of the constitution of the bank, might even buy them up, in order to prevent the carrying away of the treasure. In such emergencies, the bank, it is supposed, would break through its ordinary rule of making payment only to the holders of receipts. The holders of receipts, who had no bank money, must have received within two or three per cent. of the value of the deposit for which their respective receipts had been granted. The bank, therefore, it is said, would in this case make no scruple of paying, either with money or bullion, the full value of what the owners of bank money, who could get no receipts, were credited for in its books; paying, at the same time, two or three per cent. to such holders of receipts as had no bank money, that being the whole value which, in this state of things, could justly be supposed due to them. Even in ordinary and quiet times, it is the interest of the holders of receipts to depress the agio, in order either to buy bank money (and consequently the bullion which their receipts would then enable them to take out of the bank) so much cheaper, or to sell their receipts to these who have bank money, and who want to take out bullion, so much dearer; the price of a receipt being generally equal to the difference between the market price of bank money and that of the coin or bullion for which the receipt had been granted. It is the interest of the owners of bank money, on the contrary, to raise the agio, in order either to sell their bank money so much dearer, or to buy a receipt so much cheaper. To prevent the stock-jobbing tricks which those opposite interests might sometimes occasion, the bank has of late years come to the resolution, to sell at all times bank money for currency at five per cent. agio, and to buy it in again at four per cent. agio. In consequence of this resolution, the agio can never either rise above five, or sink below four per cent.; and the proportion between the market price of bank and that of current money is kept at all times very near the proportion between their intrinsic values. Before this resolution was taken, the market price of bank money used sometimes to rise so high as nine per cent. agio, and sometimes to sink so low as par, according as opposite interests happened to influence the market. The bank of Amsterdam professes to lend out no part of what is deposited with it, but, for every guilder for which it gives credit in its books, to keep in its repositories the value of a guilder either in money or bullion. That it keeps in its repositories all the money or bullion for which there are receipts in force, for which it is at all times liable to be called upon, and which in reality is continually going from it, and returning to it again, cannot well be doubted. But whether it does so likewise with regard to that part of its capital for which the receipts are long ago expired, for which, in ordinary and quiet times, it cannot be called upon, and which, in reality, is very likely to remain with it for ever, or as long as the states of the United Provinces subsist, may perhaps appear more uncertain. At Amsterdam, however, no point of faith is better established than that, for every guilder circulated as bank money, there is a correspondent guilder in gold or silver to be found in the treasures of the bank. The city is guarantee that it should be so. The bank is under the direction of the four reigning burgomasters, who are changed every year. Each new set of burgomasters visits the treasure, compares it with the books, receives it upon oath, and delivers it over, with the same awful solemnity, to the set which succeeds; and in that sober and religious country, oaths are not yet disregarded. A rotation of this kind seems alone a sufficient security against any practices which cannot be avowed. Amidst all the revolutions which faction has ever occasioned in the government of Amsterdam, the prevailing party has at no time accused their predecessors of infidelity in the administration of the bank. No accusation could have affected more deeply the reputation and fortune of the disgraced party; and if such an accusation could have been supported, we may be assured that it would have been brought. In 1672, when the French king was at Utrecht, the bank of Amsterdam paid so readily, as left no doubt of the fidelity with which it had observed its engagements. Some of the pieces which were then brought from its repositories, appeared to have been scorched with the fire which happened in the town-house soon after the bank was established. Those pieces, therefore, must have lain there from that time. What may be the amount of the treasure in the bank, is a question which has long employed the speculations of the curious. Nothing but conjecture can be offered concerning it. It is generally reckoned, that there are about 2000 people who keep accounts with the bank; and allowing them to have, one with another, the value of L.1500 sterling lying upon their respective accounts (a very large allowance), the whole quantity of bank money, and consequently of treasure in the bank, will amount to about L.3,000,000 sterling, or, at eleven guilders the pound sterling, 33,000,000 of guilders; a great sum, and sufficient to carry on a very extensive circulation, but vastly below the extravagant ideas which some people have formed of this treasure. The city of Amsterdam derives a considerable revenue from the bank. Besides what may be called the warehouse rent above mentioned, each person, upon first opening an account with the bank, pays a fee of ten guilders; and for every new account, three guilders three stivers; for every transfer, two stivers; and if the transfer is for less than 300 guilders, six stivers, in order to discourage the multiplicity of small transactions. The person who neglects to balance his account twice in the year, forfeits twenty-five guilders. The person who orders a transfer for more than is upon his account, is obliged to pay three per cent. for the sum overdrawn, and his order is set aside into the bargain. The bank is supposed, too, to make a considerable profit by the sale of the foreign coin or bullion which sometimes falls to it by the expiring of receipts, and which is always kept till it can be sold with advantage. It makes a profit, likewise, by selling bank money at five per cent. agio, and buying it in at four. These different emoluments amount to a good deal more than what is necessary for paying the salaries of officers, and defraying the expense of management. What is paid for the keeping of bullion upon receipts, is alone supposed to amount to a neat annual revenue of between 150,000 and 200,000 guilders. Public utility, however, and not revenue, was the original object of this institution. Its object was to relieve the merchants from the inconvenience of a disadvantageous exchange. The revenue which has arisen from it was unforeseen, and may be considered as accidental. But it is now time to return from this long digression, into which I have been insensibly led, in endeavouring to explain the reasons why the exchange between the countries which pay in what is called bank money, and those which pay in common currency, should generally appear to be in favour of the former, and against the latter. The former pay in a species of money, of which the intrinsic value is always the same, and exactly agreeable to the standard of their respective mints; the latter is a species of money, of which the intrinsic value is continually varying, and is almost always more or less below that standard. PART II.--_Of the Unreasonableness of those extraordinary Restraints, upon other Principles._ In the foregoing part of this chapter, I have endeavoured to show, even upon the principles of the commercial system, how unnecessary it is to lay extraordinary restraints upon the importation of goods from those countries with which the balance of trade is supposed to be disadvantageous. Nothing, however, can be more absurd than this whole doctrine of the balance of trade, upon which, not only these restraints, but almost all the other regulations of commerce, are founded. When two places trade with one another, this doctrine supposes that, if the balance be even, neither of them either loses or gains; but if it leans in any degree to one side, that one of them loses, and the other gains, in proportion to its declension from the exact equilibrium. Both suppositions are false. A trade, which is forced by means of bounties and monopolies, may be, and commonly is, disadvantageous to the country in whose favour it is meant to be established, as I shall endeavour to show hereafter. But that trade which, without force or constraint, is naturally and regularly carried on between any two places, is always advantageous, though not always equally so, to both. By advantage or gain, I understand, not the increase of the quantity of gold or silver, but that of the exchangeable value of the annual produce of the land and labour of the country, or the increase of the annual revenue of its inhabitants. If the balance be even, and if the trade between the two places consist altogether in the exchange of their native commodities, they will, upon most occasions, not only both gain, but they will gain equally, or very nearly equally; each will, in this case, afford a market for a part of the surplus produce of the other; each will replace a capital which had been employed in raising and preparing for the market this part of the surplus produce of the other, and which had been distributed among, and given revenue and maintenance to, a certain number of its inhabitants. Some part of the inhabitants of each, therefore, will directly derive their revenue and maintenance from the other. As the commodities exchanged, too, are supposed to be of equal value, so the two capitals employed in the trade will, upon most occasions, be equal or very nearly equal; and both being employed in raising the native commodities of the two countries, the revenue and maintenance which their distribution will afford to the inhabitants of each will be equal, or very nearly equal. This revenue and maintenance, this mutually afforded, will be greater or smaller, in proportion to the extent of their dealings. If these should annually amount to L.100,000, for example, or to L.1,000,000, on each side, each of them will afford an annual revenue, in the one case, of L.100,000, and, in the other, of L.1,000,000, to the inhabitants of the other. If their trade should be of such a nature, that one of them exported to the other nothing but native commodities, while the returns of that other consisted altogether in foreign goods; the balance, in this case, would still be supposed even, commodities being paid for with commodities. They would, in this case too, both gain, but they would not gain equally; and the inhabitants of the country which exported nothing but native commodities, would derive the greatest revenue from the trade. If England, for example, should import from France nothing but the native commodities of that country, and not having such commodities of its own as were in demand there, should annually repay them by sending thither a large quantity of foreign goods, tobacco, we shall suppose, and East India goods; this trade, though it would give some revenue to the inhabitants of both countries, would give more to those of France than to those of England. The whole French capital annually employed in it would annually be distributed among the people of France; but that part of the English capital only, which was employed in producing the English commodities with which those foreign goods were purchased, would be annually distributed among the people of England. The greater part of it would replace the capitals which had been employed in Virginia, Indostan, and China, and which had given revenue and maintenance to the inhabitants of those distant countries. If the capitals were equal, or nearly equal, therefore, this employment of the French capital would augment much more the revenue of the people of France, than that of the English capital would the revenue of the people of England. France would, in this case, carry on a direct foreign trade of consumption with England; whereas England would carry on a round-about trade of the same kind with France. The different effects of a capital employed in the direct, and of one employed in the round-about foreign trade of consumption, have already been fully explained. There is not, probably, between any two countries, a trade which consists altogether in the exchange, either of native commodities on both sides, or of native commodities on one side, and of foreign goods on the other. Almost all countries exchange with one another, partly native and partly foreign goods. That country, however, in whose cargoes there is the greatest proportion of native, and the least of foreign goods, will always be the principal gainer. If it was not with tobacco and East India goods, but with gold and silver, that England paid for the commodities annually imported from France, the balance, in this case, would be supposed uneven, commodities not being paid for with commodities, but with gold and silver. The trade, however, would in this case, as in the foregoing, give some revenue to the inhabitants of both countries, but more to those of France than to those of England. It would give some revenue to those of England. The capital which had been employed in producing the English goods that purchased this gold and silver, the capital which had been distributed among, and given revenue to, certain inhabitants of England, would thereby be replaced, and enabled to continue that employment. The whole capital of England would no more be diminished by this exportation of gold and silver, than by the exportation of an equal value of any other goods. On the contrary, it would, in most cases, be augmented. No goods are sent abroad but those for which the demand is supposed to be greater abroad than at home, and of which the returns, consequently, it is expected, will be of more value at home than the commodities exported. If the tobacco which in England is worth only L.100,000, when sent to France, will purchase wine which is in England worth L.110,000, the exchange will equally augment the capital of England by L.10,000. If L.100,000 of English gold, in the same manner, purchase French wine, which in England is worth L.110,000, this exchange will equally augment the capital of England by L.10,000. As a merchant, who has L.110,000 worth of wine in his cellar, is a richer man than he who has only L.100,000 worth of tobacco in his warehouse, so is he likewise a richer man than he who has only L.100,000 worth of gold in his coffers. He can put into motion a greater quantity of industry, and give revenue, maintenance, and employment, to a greater number of people, than either of the other two. But the capital of the country is equal to the capital of all its different inhabitants; and the quantity of industry which can be annually maintained in it is equal to what all those different capitals can maintain. Both the capital of the country, therefore, and the quantity of industry which can be annually maintained in it, must generally be augmented by this exchange. It would, indeed, be more advantageous for England that it could purchase the wines of France with its own hardware and broad cloth, than with either the tobacco of Virginia, or the gold and silver of Brazil and Peru. A direct foreign trade of consumption is always more advantageous than a round-about one. But a round-about foreign trade of consumption, which is carried on with gold and silver, does not seem to be less advantageous than any other equally round-about one. Neither is a country which has no mines, more likely to be exhausted of gold and silver by this annual exportation of those metals, than one which does not grow tobacco by the like annual exportation of that plant. As a country which has wherewithal to buy tobacco will never be long in want of it, so neither will one be long in want of gold and silver which has wherewithal to purchase those metals. It is a losing trade, it is said, which a workman carries on with the alehouse; and the trade which a manufacturing nation would naturally carry on with a wine country, may be considered as a trade of the same nature. I answer, that the trade with the alehouse is not necessarily a losing trade. In its own nature it is just as advantageous as any other, though, perhaps, somewhat more liable to be abused. The employment of a brewer, and even that of a retailer of fermented liquors, are as necessary divisions of labour as any other. It will generally be more advantageous for a workman to buy of the brewer the quantity he has occasion for, than to brew it himself; and if he is a poor workman, it will generally be more advantageous for him to buy it by little and little of the retailer, than a large quantity of the brewer. He may no doubt buy too much of either, as he may of any other dealers in his neighbourhood; of the butcher, if he is a glutton; or of the draper, if he affects to be a beau among his companions. It is advantageous to the great body of workmen, notwithstanding, that all these trades should be free, though this freedom may be abused in all of them, and is more likely to be so, perhaps, in some than in others. Though individuals, besides, may sometimes ruin their fortunes by an excessive consumption of fermented liquors, there seems to be no risk that a nation should do so. Though in every country there are many people who spend upon such liquors more than they can afford, there are always many more who spend less. It deserves to be remarked, too, that if we consult experience, the cheapness of wine seems to be a cause, not of drunkenness, but of sobriety. The inhabitants of the wine countries are in general the soberest people of Europe; witness the Spaniards, the Italians, and the inhabitants of the southern provinces of France. People are seldom guilty of excess in what is their daily fare. Nobody affects the character of liberality and good fellowship, by being profuse of a liquor which is as cheap as small beer. On the contrary, in the countries which, either from excessive heat or cold, produce no grapes, and where wine consequently is dear and a rarity, drunkenness is a common vice, as among the northern nations, and all those who live between the tropics, the negroes, for example, on the coast of Guinea. When a French regiment comes from some of the northern provinces of France, where wine is somewhat dear, to be quartered in the southern, where it is very cheap, the soldiers, I have frequently heard it observed, are at first debauched by the cheapness and novelty of good wine; but after a few months residence, the greater part of them become as sober as the rest of the inhabitants. Were the duties upon foreign wines, and the excises upon malt, beer, and ale, to be taken away all at once, it might, in the same manner, occasion in Great Britain a pretty general and temporary drunkenness among the middling and inferior ranks of people, which would probably be soon followed by a permanent and almost universal sobriety. At present, drunkenness is by no means the vice of people of fashion, or of those who can easily afford the most expensive liquors. A gentleman drunk with ale has scarce ever been seen among us. The restraints upon the wine trade in Great Britain, besides, do not so much seem calculated to hinder the people from going, if I may say so, to the alehouse, as from going where they can buy the best and cheapest liquor. They favour the wine trade of Portugal, and discourage that of France. The Portuguese, it is said, indeed, are better customers for our manufactures than the French, and should therefore be encouraged in preference to them. As they give us their custom, it is pretended we should give them ours. The sneaking arts of underling tradesman are thus erected into political maxims for the conduct of a great empire; for it is the most underling tradesmen only who make it a rule to employ chiefly their own customers. A great trader purchases his goods always where they are cheapest and best, without regard to any little interest of this kind. By such maxims as these, however, nations have been taught that their interest consisted in beggaring all their neighbours. Each nation has been made to look with an invidious eye upon the prosperity of all the nations with which it trades, and to consider their gain as its own loss. Commerce, which ought naturally to be, among nations as among individuals, a bond of union and friendship, has become the most fertile source of discord and animosity. The capricious ambition of kings and ministers has not, during the present and the preceding century, been more fatal to the repose of Europe, than the impertinent jealousy of merchants and manufacturers. The violence and injustice of the rulers of mankind is an ancient evil, for which, I am afraid, the nature of human affairs can scarce admit of a remedy: but the mean rapacity, the monopolizing spirit, of merchants and manufacturers, who neither are, nor ought to be, the rulers of mankind, though it cannot, perhaps, be corrected, may very easily be prevented from disturbing the tranquillity of anybody but themselves. That it was the spirit of monopoly which originally both invented and propagated this doctrine, cannot be doubted: and they who first taught it, were by no means such fools as they who believed it. In every country it always is, and must be, the interest of the great body of the people, to buy whatever they want of those who sell it cheapest. The proposition is so very manifest, that it seems ridiculous to take any pains to prove it; nor could it ever have been called in question, had not the interested sophistry of merchants and manufacturers confounded the common sense of mankind. Their interest is, in this respect, directly opposite to that of the great body of the people. As it is the interest of the freemen of a corporation to hinder the rest of the inhabitants from employing any workmen but themselves; so it is the interest of the merchants and manufacturers of every country to secure to themselves the monopoly of the home market. Hence, in Great Britain, and in most other European countries, the extraordinary duties upon almost all goods imported by alien merchants. Hence the high duties and prohibitions upon all those foreign manufactures which can come into competition with our own. Hence, too, the extraordinary restraints upon the importation of almost all sorts of goods from those countries with which the balance of trade is supposed to be disadvantageous; that is, from those against whom national animosity happens to be most violently inflamed. The wealth of neighbouring nations, however, though dangerous in war and politics, is certainly advantageous in trade. In a state of hostility, it may enable our enemies to maintain fleets and armies superior to our own; but in a state of peace and commerce, it must likewise enable them to exchange with us to a greater value, and to afford a better market, either for the immediate produce of our own industry, or for whatever is purchased with that produce. As a rich man is likely to be a better customer to the industrious people in his neighbourhood, than a poor, so is likewise a rich nation. A rich man, indeed, who is himself a manufacturer, is a very dangerous neighbour to all those who deal in the same way. All the rest of the neighbourhood, however, by far the greatest number, profit by the good market which his expense affords them. They even profit by his underselling the poorer workmen who deal in the same way with him. The manufacturers of a rich nation, in the same manner, may no doubt be very dangerous rivals to those of their neighbours. This very competition, however, is advantageous to the great body of the people, who profit greatly, besides, by the good market which the great expense of such a nation affords them in every other way. Private people, who want to make a fortune, never think of retiring to the remote and poor provinces of the country, but resort either to the capital, or to some of the great commercial towns. They know, that where little wealth circulates, there is little to be got; but that where a great deal is in motion, some share of it may fall to them. The same maxim which would in this manner direct the common sense of one, or ten, or twenty individuals, should regulate the judgment of one, or ten, or twenty millions, and should make a whole nation regard the riches of its neighbours, as a probable cause and occasion for itself to acquire riches. A nation that would enrich itself by foreign trade, is certainly most likely to do so, when its neighbours are all rich, industrious and commercial nations. A great nation, surrounded on all sides by wandering savages and poor barbarians, might, no doubt, acquire riches by the cultivation of its own lands, and by its own interior commerce, but not by foreign trade. It seems to have been in this manner that the ancient Egyptians and the modern Chinese acquired their great wealth. The ancient Egyptians, it is said, neglected foreign commerce, and the modern Chinese, it is known, hold it in the utmost contempt, and scarce deign to afford it the decent protection of the laws. The modern maxims of foreign commerce, by aiming at the impoverishment of all our neighbours, so far as they are capable of producing their intended effect, tend to render that very commerce insignificant and contemptible. It is in consequence of these maxims, that the commerce between France and England has, in both countries, been subjected to so many discouragements and restraints. If those two countries, however, were to consider their real interest, without either mercantile jealousy or national animosity, the commerce of France might be more advantageous to Great Britain than that of any other country, and, for the same reason, that of Great Britain to France. France is the nearest neighbour to Great Britain. In the trade between the southern coast of England and the northern and north-western coast of France, the returns might be expected, in the same manner as in the inland trade, four, five, or six times in the year. The capital, therefore, employed in this trade could, in each of the two countries, keep in motion four, five, or six times the quantity of industry, and afford employment and subsistence to four, five, or six times the number of people, which an equal capital could do in the greater part of the other branches of foreign trade. Between the parts of France and Great Britain most remote from one another, the returns might be expected, at least, once in the year; and even this trade would so far be at least equally advantageous, as the greater part of the other branches of our foreign European trade. It would be, at least, three times more advantageous than the boasted trade with our North American colonies, in which the returns were seldom made in less than three years, frequently not in less than four or five years. France, besides, is supposed to contain 24,000,000 of inhabitants. Our North American colonies were never supposed to contain more than 3,000,000; and France is a much richer country than North America; though, on account of the more unequal distribution of riches, there is much more poverty and beggary in the one country than in the other. France, therefore, could afford a market at least eight times more extensive, and, on account of the superior frequency of the returns, four-and-twenty times more advantageous than that which our North American colonies ever afforded. The trade of Great Britain would be just as advantageous to France, and, in proportion to the wealth, population, and proximity of the respective countries, would have the same superiority over that which France carries on with her own colonies. Such is the very great difference between that trade which the wisdom of both nations has thought proper to discourage, and that which it has favoured the most. But the very same circumstances which would have rendered an open and free commerce between the two countries so advantageous to both, have occasioned the principal obstructions to that commerce. Being neighbours, they are necessarily enemies, and the wealth and power of each becomes, upon that account, more formidable to the other; and what would increase the advantage of national friendship, serves only to inflame the violence of national animosity. They are both rich and industrious nations; and the merchants and manufacturers of each dread the competition of the skill and activity of those of the other. Mercantile jealousy is excited, and both inflames, and is itself inflamed, by the violence of national animosity, and the traders of both countries have announced, with all the passionate confidence of interested falsehood, the certain ruin of each, in consequence of that unfavourable balance of trade, which, they pretend, would be the infallible effect of an unrestrained commerce with the other. There is no commercial country in Europe, of which the approaching ruin has not frequently been foretold by the pretended doctors of this system, from an unfavourable balance of trade. After all the anxiety, however, which they have excited about this, after all the vain attempts of almost all trading nations to turn that balance in their own favour, and against their neighbours, it does not appear that any one nation in Europe has been, in any respect, impoverished by this cause. Every town and country, on the contrary, in proportion as they have opened their ports to all nations, instead of being ruined by this free trade, as the principles of the commercial system would lead us to expect, have been enriched by it. Though there are in Europe, indeed, a few towns which, in some respects, deserve the name of free ports, there is no country which does so. Holland, perhaps, approaches the nearest to this character of any, though still very remote from it; and Holland, it is acknowledged, not only derives its whole wealth, but a great part of its necessary subsistence, from foreign trade. There is another balance, indeed, which has already been explained, very different from the balance of trade, and which, according as it happens to be either favourable or unfavourable, necessarily occasions the prosperity or decay of every nation. This is the balance of the annual produce and consumption. If the exchangeable value of the annual produce, it has already been observed, exceeds that of the annual consumption, the capital of the society must annually increase in proportion to this excess. The society in this case lives within its revenue; and what is annually saved out of its revenue, is naturally added to its capital, and employed so as to increase still further the annual produce. If the exchangeable value of the annual produce, on the contrary, fall short of the annual consumption, the capital of the society must annually decay in proportion to this deficiency. The expense of the society, in this case, exceeds its revenue, and necessarily encroaches upon its capital. Its capital, therefore, must necessarily decay, and, together with it, the exchangeable value of the annual produce of its industry. This balance of produce and consumption is entirely different from what is called the balance of trade. It might take place in a nation which had no foreign trade, but which was entirely separated from all the world. It may take place in the whole globe of the earth, of which the wealth, population, and improvement, may be either gradually increasing or gradually decaying. The balance of produce and consumption may be constantly in favour of a nation, though what is called the balance of trade be generally against it. A nation may import to a greater value than it exports for half a century, perhaps, together; the gold and silver which comes into it during all this time, may be all immediately sent out of it; its circulating coin may gradually decay, different sorts of paper money being substituted in its place, and even the debts, too, which it contracts in the principal nations with whom it deals, may be gradually increasing; and yet its real wealth, the exchangeable value of the annual produce of its lands and labour, may, during the same period, have been increasing in a much greater proportion. The state of our North American colonies, and of the trade which they carried on with Great Britain, before the commencement of the present disturbances,[38] may serve as a proof that this is by no means an impossible supposition. CHAP. IV. OF DRAWBACKS. Merchants and manufacturers are not contented with the monopoly of the home market, but desire likewise the most extensive foreign sale for their goods. Their country has no jurisdiction in foreign nations, and therefore can seldom procure them any monopoly there. They are generally obliged, therefore, to content themselves with petitioning for certain encouragements to exportation. Of these encouragements, what are called drawbacks seem to be the most reasonable. To allow the merchant to draw back upon exportation, either the whole, or a part of whatever excise or inland duty is imposed upon domestic industry, can never occasion the exportation of a greater quantity of goods than what would have been exported had no duty been imposed. Such encouragements do not tend to turn towards any particular employment a greater share of the capital of the country, than what would go to that employment of its own accord, but only to hinder the duty from driving away any part of that share to other employments. They tend not to overturn that balance which naturally establishes itself among all the various employments of the society, but to hinder it from being overturned by the duty. They tend not to destroy, but to preserve, what it is in most cases advantageous to preserve, the natural division and distribution of labour in the society. The same thing may be said of the drawbacks upon the re-exportation of foreign goods imported, which, in Great Britain, generally amount to by much the largest part of the duty upon importation. By the second of the rules, annexed to the act of parliament, which imposed what is now called the old subsidy, every merchant, whether English or alien, was allowed to draw back half that duty upon exportation; the English merchant, provided the exportation took place within twelve months; the alien, provided it took place within nine months. Wines, currants, and wrought silks, were the only goods which did not fall within this rule, having other and more advantageous allowances. The duties imposed by this act of parliament were, at that time, the only duties upon the importation of foreign goods. The term within which this, and all other drawbacks could be claimed, was afterwards (by 7 Geo. I. chap. 21. sect. 10.) extended to three years. The duties which have been imposed since the old subsidy, are, the greater part of them, wholly drawn back upon exportation. This general rule, however, is liable to a great number of exceptions; and the doctrine of drawbacks has become a much less simple matter than it was at their first institution. Upon the exportation of some foreign goods, of which it was expected that the importation would greatly exceed what was necessary for the home consumption, the whole duties are drawn back, without retaining even half the old subsidy. Before the revolt of our North American colonies, we had the monopoly of the tobacco of Maryland and Virginia. We imported about ninety-six thousand hogsheads, and the home consumption was not supposed to extend fourteen thousand. To facilitate the great exportation which was necessary, in order to rid us of the rest, the whole duties were drawn back, provided the exportation took place within three years. We still have, though not altogether, yet very nearly, the monopoly of the sugars of our West Indian islands. If sugars are exported within a year, therefore, all the duties, upon importation are drawn back; and if exported within three years, all the duties, except half the old subsidy, which still continues to be retained upon the exportation of the greater part of goods. Though the importation of sugar exceeds a good deal what is necessary for the home consumption, the excess is inconsiderable, in comparison of what it used to be in tobacco. Some goods, the particular objects of the jealousy of our own manufacturers, are prohibited to be imported for home consumption. They may, however, upon paying certain duties, be imported and warehoused for exportation. But upon such exportation no part of these duties is drawn back. Our manufacturers are unwilling, it seems, that even this restricted importation should be encouraged, and are afraid lest some part of these goods should be stolen out of the warehouse, and thus came into competition with their own. It is under these regulations only that we can import wrought silks, French cambrics and lawns, calicoes, painted, printed, stained, or dyed, &c. We are unwilling even to be the carriers of French goods, and choose rather to forego a profit to ourselves than to suffer those whom we consider as our enemies to make any profit by our means. Not only half the old subsidy, but the second twenty-five per cent. is retained upon the exportation of all French goods. By the fourth of the rules annexed to the old subsidy, the drawback allowed upon the exportation of all wines amounted to a great deal more than half the duties which were at that time paid upon their importation; and it seems at that time to have been the object of the legislature to give somewhat more than ordinary encouragement to the carrying trade in wine. Several of the other duties, too, which were imposed either at the same time or subsequent to the old subsidy, what is called the additional duty, the new subsidy, the one-third and two-thirds subsidies, the impost 1692, the tonnage on wine, were allowed to be wholly drawn back upon exportation. All those duties, however, except the additional duty and impost 1692, being paid down in ready money upon importation, the interest of so large a sum occasioned an expense, which made it unreasonable to expect any profitable carrying trade in this article. Only a part, therefore of the duty called the impost on wine, and no part of the twenty-five pounds the ton upon French wines, or of the duties imposed in 1745, in 1763, and in 1778, were allowed to be drawn back upon exportation. The two imposts of five per cent. imposed in 1779 and 1781, upon all the former duties of customs, being allowed to be wholly drawn back upon the exportation of all other goods, were likewise allowed to be drawn back upon that of wine. The last duty that has been particularly imposed upon wine, that of 1780, is allowed to be wholly drawn back; an indulgence which, when so many heavy duties are retained, most probably could never occasion the exportation of a single ton of wine. These rules took place with regard to all places of lawful exportation, except the British colonies in America. The 15th Charles II, chap. 7, called an act for the encouragement of trade, had given Great Britain the monopoly of supplying the colonies with all the commodities of the growth or manufacture of Europe, and consequently with wines. In a country of so extensive a coast as our North American and West Indian colonies, where our authority was always so very slender, and where the inhabitants were allowed to carry out in their own ships their non-enumerated commodities, at first to all parts of Europe, and afterwards to all parts of Europe south of Cape Finisterre, it is not very probable that this monopoly could ever be much respected; and they probably at all times found means of bringing back some cargo from the countries to which they were allowed to carry out one. They seem, however, to have found some difficulty in importing European wines from the places of their growth; and they could not well import them from Great Britain, where they were loaded with many heavy duties, of which a considerable part was not drawn back upon exportation. Madeira wine, not being an European commodity, could be imported directly into America and the West Indies, countries which, in all their non-enumerated commodities, enjoyed a free trade to the island of Madeira. These circumstances had probably introduced that general taste for Madeira wine, which our officers found established in all our colonies at the commencement of the war which began in 1755, and which they brought back with them to the mother country, where that wine had not been much in fashion before. Upon the conclusion of that war, in 1763 (by the 4th Geo. III, chap. 15, sect. 12), all the duties except L.3, 10s. were allowed to be drawn back upon the exportation to the colonies of all wines, except French wines, to the commerce and consumption of which national prejudice would allow no sort of encouragement. The period between the granting of this indulgence and the revolt of our North American colonies, was probably too short to admit of any considerable change in the customs of those countries. The same act which, in the drawbacks upon all wines, except French wines, thus favoured the colonies so much more than other countries, in those upon the greater part of other commodities, favoured them much less. Upon the exportation of the greater part of commodities to other countries, half the old subsidy was drawn back. But this law enacted, that no part of that duty should be drawn back upon the exportation to the colonies of any commodities of the growth or manufacture either of Europe or the East Indies, except wines, white calicoes, and muslins. Drawbacks were, perhaps, originally granted for the encouragement of the carrying trade, which, as the freight of the ship is frequently paid by foreigners in money, was supposed to be peculiarly fitted for bringing gold and silver into the country. But though the carrying trade certainly deserves no peculiar encouragement, though the motive of the institution was, perhaps, abundantly foolish, the institution itself seems reasonable enough. Such drawbacks cannot force into this trade a greater share of the capital of the country than what would have gone to it of its own accord, had there been no duties upon importation; they only prevent its being excluded altogether by those duties. The carrying trade, though it deserves no preference, ought not to be precluded, but to be left free, like all other trades. It is a necessary resource to those capitals which cannot find employment, either in the agriculture or in the manufactures of the country, either in its home trade, or in its foreign trade of consumption. The revenue of the customs, instead of suffering, profits from such drawbacks, by that part of the duty which is retained. If the whole duties had been retained, the foreign goods upon which they are paid could seldom have been exported, nor consequently imported, for want of a market. The duties, therefore, of which a part is retained, would never have been paid. These reasons seem sufficiently to justify drawbacks, and would justify them, though the whole duties, whether upon the produce of domestic industry or upon foreign goods, were always drawn back upon exportation. The revenue of excise would, in this case indeed, suffer a little, and that of the customs a good deal more; but the natural balance of industry, the natural division and distribution of labour, which is always more or less disturbed by such duties, would be more nearly re-established by such a regulation. These reasons, however, will justify drawbacks only upon exporting goods to those countries which are altogether foreign and independent, not to those in which our merchants and manufacturers enjoy a monopoly. A drawback, for example, upon the exportation of European goods to our American colonies, will not always occasion a greater exportation than what would have taken place without it. By means of the monopoly which our merchants and manufacturers enjoy there, the same quantity might frequently, perhaps, be sent thither, though the whole duties were retained. The drawback, therefore, may frequently be pure loss to the revenue of excise and customs, without altering the state of the trade, or rendering it in any respect more extensive. How far such drawbacks can be justified as a proper encouragement to the industry of our colonies, or how far it is advantageous to the mother country that they should be exempted from taxes which are paid by all the rest of their fellow-subjects, will appear hereafter, when I come to treat of colonies. Drawbacks, however, it must always be understood, are useful only in those cases in which the goods, for the exportation of which they are given, are really exported to some foreign country, and not clandestinely re-imported into our own. That some drawbacks, particularly those upon tobacco, have frequently been abused in this manner, and have given occasion to many frauds, equally hurtful both to the revenue and to the fair trader, is well known. CHAP. V. OF BOUNTIES. Bounties upon exportation are, in Great Britain, frequently petitioned for, and sometimes granted, to the produce of particular branches of domestic industry. By means of them, our merchants and manufacturers, it is pretended, will be enabled to sell their goods as cheap or cheaper than their rivals in the foreign market. A greater quantity, it is said, will thus be exported, and the balance of trade consequently turned more in favour of our own country. We cannot give our workmen a monopoly in the foreign, as we have done in the home market. We cannot force foreigners to buy their goods as we have done our own countrymen. The next best expedient, it has been thought, therefore, is to pay them for buying. It is in this manner that the mercantile system proposes to enrich the whole country, and to put money into all our pockets by means of the balance of trade. Bounties, it is allowed, ought to be given to those branches of trade only which cannot be carried on without them. But every branch of trade in which the merchant can sell his goods for a price which replaces to him, with the ordinary profits of stock, the whole capital employed in preparing and sending them to market, can be carried on without a bounty. Every such branch is evidently upon a level with all the other branches of trade which are carried on without bounties, and cannot, therefore, require one more than they. Those trades only require bounties in which the merchant is obliged to sell his goods for a price which does not replace to him his capital, together with the ordinary profit, or in which he is obliged to sell them for less than it really costs him to send them to market. The bounty is given in order to make up this loss, and to encourage him to continue, or, perhaps, to begin a trade, of which the expense is supposed to be greater than the returns, of which every operation eats up a part of the capital employed in it, and which is of such a nature, that if all other trades resembled it, there would soon be no capital left in the country. The trades, it is to be observed, which are carried on by means of bounties, are the only ones which can be carried on between two nations for any considerable time together, in such a manner as that one of them shall always and regularly lose, or sell its goods for less than it really costs to send them to market. But if the bounty did not repay to the merchant what he would otherwise lose upon the price of his goods, his own interest would soon oblige him to employ his stock in another way, or to find out a trade in which the price of the goods would replace to him, with the ordinary profit, the capital employment in sending them to market. The effect of bounties, like that of all the other expedients of the mercantile system, can only be to force the trade of a country into a channel much less advantageous than that in which it would naturally run of its own accord. The ingenious and well-informed author of the Tracts upon the Corn Trade has shown very clearly, that since the bounty upon the exportation of corn was first established, the price of the corn exported, valued moderately enough, has exceeded that of the corn imported, valued very high, by a much greater sum than the amount of the whole bounties which have been paid during that period. This, he imagines, upon the true principles of the mercantile system, is a clear proof that this forced corn trade is beneficial to the nation, the value of the exportation exceeding that of the importation by a much greater sum than the whole extraordinary expense which the public has been at in order to get it exported. He does not consider that this extraordinary expense, or the bounty, is the smallest part of the expense which the exportation of corn really costs the society. The capital which the farmer employed in raising it must likewise be taken into the account. Unless the price of the corn, when sold in the foreign markets replaces, not only the bounty, but this capital, together with the ordinary profits of stock, the society is a loser by the difference, or the national stock is so much diminished. But the very reason for which it has been thought necessary to grant a bounty, is the supposed insufficiency of the price to do this. The average price of corn, it has been said, has fallen considerably since the establishment of the bounty. That the average price of corn began to fall somewhat towards the end of the last century, and has continued to do so during the course of the sixty-four first years of the present, I have already endeavoured to show. But this event, supposing it to be real, as I believe it to be, must have happened in spite of the bounty, and cannot possibly have happened in consequence of it. It has happened in France, as well as in England, though in France there was not only no bounty, but, till 1764, the exportation of corn was subjected to a general prohibition. This gradual fall in the average price of grain, it is probable, therefore, is ultimately owing neither to the one regulation nor to the other, but to that gradual and insensible rise in the real value of silver, which, in the first book of this discourse, I have endeavoured to show, has taken place in the general market of Europe during the course of the present century. It seems to be altogether impossible that the bounty could ever contribute to lower the price of grain. In years of plenty, it has already been observed, the bounty, by occasioning an extraordinary exportation, necessarily keeps up the price of corn in the home market above what it would naturally fall to. To do so was the avowed purpose of the institution. In years of scarcity, though the bounty is frequently suspended, yet the great exportation which it occasions in years of plenty, must frequently hinder, more or less, the plenty of one year from relieving the scarcity of another. Both in years of plenty and in years of scarcity, therefore, the bounty necessarily tends to raise the money price of corn somewhat higher than it otherwise would be in the home market. That, in the actual state of tillage, the bounty must necessarily have this tendency, will not I apprehend, be disputed by any reasonable person. But it has been thought by many people, that it tends to encourage tillage, and that in two different ways; first, by opening a more extensive foreign market to the corn of the farmer, it tends, they imagine, to increase the demand for, and consequently the production of, that commodity; and, secondly, by securing to him a better price than he could otherwise expect in the actual state of tillage, it tends, they suppose, to encourage tillage. This double encouragement must, they imagine, in a long period of years, occasion such an increase in the production of corn, as may lower its price in the home market, much more than the bounty can raise it, in the actual state which tillage may, at the end of that period, happen to be in. I answer, that whatever extension of the foreign market can be occasioned by the bounty must, in every particular year, be altogether at the expense of the home market; as every bushel of corn, which is exported by means of the bounty, and which would not have been exported without the bounty, would have remained in the home market to increase the consumption, and to lower the price of that commodity. The corn bounty, it is to be observed, as well as every other bounty upon exportation, imposes two different taxes upon the people; first, the tax which they are obliged to contribute, in order to pay the bounty; and, secondly, the tax which arises from the advanced price of the commodity in the home market, and which, as the whole body of the people are purchasers of corn, must, in this particular commodity, be paid by the whole body of the people. In this particular commodity, therefore, this second tax is by much the heaviest of the two. Let us suppose that, taking one year with another, the bounty of 5s. upon the exportation of the quarter of wheat raises the price of that commodity in the home market only 6d. the bushel, or 4s. the quarter higher than it otherwise would have been in the actual state of the crop. Even upon this very moderate supposition, the great body of the people, over and above contributing the tax which pays the bounty of 5s. upon every quarter of wheat exported, must pay another of 4s. upon every quarter which they themselves consume. But according to the very well informed author of the Tracts upon the Corn Trade, the average proportion of the corn exported to that consumed at home, is not more than that of one to thirty-one. For every 5s. therefore, which they contribute to the payment of the first tax, they must contribute L.6, 4s. to the payment of the second. So very heavy a tax upon the first necessary of life must either reduce the subsistence of the labouring poor, or it must occasion some augmentation in their pecuniary wages, proportionable to that in the pecuniary price of their subsistence. So far as it operates in the one way, it must reduce the ability of the labouring poor to educate and bring up their children, and must, so far, tend to restrain the population of the country. So far as it operates in the other, it must reduce the ability of the employers of the poor, to employ so great a number as they otherwise might do, and must so far tend to restrain the industry of the country. The extraordinary exportation of corn, therefore, occasioned by the bounty, not only in every particular year diminishes the home, just as much as it extends the foreign market and consumption, but, by restraining the population and industry of the country, its final tendency is to stint and restrain the gradual extension of the home market; and thereby, in the long-run, rather to diminish than to augment the whole market and consumption of corn. This enhancement of the money price of corn, however, it has been thought, by rendering that commodity more profitable to the farmer, must necessarily encourage its production. I answer, that this might be the case, if the effect of the bounty was to raise the real price of corn, or to enable the farmer, with an equal quantity of it, to maintain a greater number of labourers in the same manner, whether liberal, moderate, or scanty, than other labourers are commonly maintained in his neighbourhood. But neither the bounty, it is evident, nor any other human institution, can have any such effect. It is not the real, but the nominal price of corn, which can in any considerable degree be affected by the bounty. And though the tax, which that institution imposes upon the whole body of the people, may be very burdensome to those who pay it, it is of very little advantage to those who receive it. The real effect of the bounty is not so much to raise the real value of corn, as to degrade the real value of silver; or to make an equal quantity of it exchange for a smaller quantity, not only of corn, but of all other home made commodities; for the money price of corn regulates that of all other home made commodities. It regulates the money price of labour, which must always be such as to enable the labourer to purchase a quantity of corn sufficient to maintain him and his family, either in the liberal, moderate, or scanty manner, in which the advancing, stationary, or declining circumstances of the society, oblige his employers to maintain him. It regulates the money price of all the other parts of the rude produce of land, which, in every period of improvement, must bear a certain proportion to that of corn, though this proportion is different in different periods. It regulates, for example, the money price of grass and hay, of butcher's meat, of horses, and the maintenance of horses, of land carriage consequently, or of the greater part of the inland commerce of the country. By regulating the money price of all the other parts of the rude produce of land, it regulates that of the materials of almost all manufactures; by regulating the money price of labour, it regulates that of manufacturing art and industry; and by regulating both, it regulates that of the complete manufacture. The money price of labour, and of every thing that is the produce, either of land or labour, must necessarily either rise or fall in proportion to the money price of corn. Though in consequence of the bounty, therefore, the farmer should be enabled to sell his corn for 4s. the bushel, instead of 3s 6d. and to pay his landlord a money rent proportionable to this rise in the money price of his produce; yet if, in consequence of this rise in the price of corn, 4s. will purchase no more home made goods of any other kind than 3s. 6d. would have done before, neither the circumstances of the farmer, nor those of the landlord, will be much mended by this change. The farmer will not be able to cultivate much better; the landlord will not be able to live much better. In the purchase of foreign commodities, this enhancement in the price of corn may give them some little advantage. In that of home made commodities, it can give them none at all. And almost the whole expense of the farmer, and the far greater part even of that of the landlord, is in home made commodities. That degradation in the value of silver, which is the effect of the fertility of the mines, and which operates equally, or very nearly equally, through the greater part of the commercial world, is a matter of very little consequence to any particular country. The consequent rise of all money prices, though it does not make those who receive them really richer, does not make them really poorer. A service of plate becomes really cheaper, and every thing else remains precisely of the same real value as before. But that degradation in the value of silver, which, being the effect either of the peculiar situation or of the political institutions of a particular country, takes place only in that country, is a matter of very great consequence, which, far from tending to make any body really richer, tends to make every body really poorer. The rise in the money price of all commodities, which is in this case peculiar to that country, tends to discourage more or less every sort of industry which is carried on within it, and to enable foreign nations, by furnishing almost all sorts of goods for a smaller quantity of silver than its own workmen can afford to do, to undersell them, not only in the foreign, but even in the home market. It is the peculiar situation of Spain and Portugal, as proprietors of the mines, to be the distributers of gold and silver to all the other countries of Europe. Those metals ought naturally, therefore, to be somewhat cheaper in Spain and Portugal than in any other part of Europe. The difference, however, should be no more than the amount of the freight and insurance; and, on account of the great value and small bulk of those metals, their freight is no great matter, and their insurance is the same as that of any other goods of equal value. Spain and Portugal, therefore, could suffer very little from their peculiar situation, if they did not aggravate its disadvantages by their political institutions. Spain by taxing, and Portugal by prohibiting, the exportation of gold and silver, load that exportation with the expense of smuggling, and raise the value of those metals in other countries so much more above what it is in their own, by the whole amount of this expense. When you dam up a stream of water, as soon as the dam is full, as much water must run over the dam-head as if there was no dam at all. The prohibition of exportation cannot detain a greater quantity of gold and silver in Spain and Portugal, than what they can afford to employ, than what the annual produce of their land and labour will allow them to employ, in coin, plate, gilding, and other ornaments of gold and silver. When they have got this quantity, the dam is full, and the whole stream which flows in afterwards must run over. The annual exportation of gold and silver from Spain and Portugal, accordingly, is, by all accounts, notwithstanding these restraints, very near equal to the whole annual importation. As the water, however, must always be deeper behind the dam-head than before it, so the quantity of gold and silver which these restraints detain in Spain and Portugal, must, in proportion to the annual produce of their land and labour, be greater than what is to be found in other countries. The higher and stronger the dam-head, the greater must be the difference in the depth of water behind and before it. The higher the tax, the higher the penalties with which the prohibition is guarded, the more vigilant and severe the police which looks after the execution of the law, the greater must be the difference in the proportion of gold and silver to the annual produce of the land and labour of Spain and Portugal, and to that of other countries. It is said, accordingly, to be very considerable, and that you frequently find there a profusion of plate in houses, where there is nothing else which would in other countries be thought suitable or correspondent to this sort of magnificence. The cheapness of gold and silver, or, what is the same thing, the dearness of all commodities, which is the necessary effect of this redundancy of the precious metals, discourages both the agriculture and manufactures of Spain and Portugal, and enables foreign nations to supply them with many sorts of rude, and with almost all sorts of manufactured produce, for a smaller quantity of gold and silver than what they themselves can either raise or make them for at home. The tax and prohibition operate in two different ways. They not only lower very much the value of the precious metals in Spain and Portugal, but by detaining there a certain quantity of those metals which would otherwise flow over other countries, they keep up their value in those other countries somewhat above what it otherwise would be, and thereby give those countries a double advantage in their commerce with Spain and Portugal. Open the flood-gates, and there will presently be less water above, and more below the dam-head, and it will soon come to a level in both places. Remove the tax and the prohibition, and as the quantity of gold and silver will diminish considerably in Spain and Portugal, so it will increase somewhat in other countries; and the value of those metals, their proportion to the annual produce of land and labour, will soon come to a level, or very near to a level, in all. The loss which Spain and Portugal could sustain by this exportation of their gold and silver, would be altogether nominal and imaginary. The nominal value of their goods, and of the annual produce of their land and labour, would fall, and would be expressed or represented by a smaller quantity of silver than before; but their real value would be the same as before, and would be sufficient to maintain, command, and employ the same quantity of labour. As the nominal value of their goods would fall, the real value of what remained of their gold and silver would rise, and a smaller quantity of those metals would answer all the same purposes of commerce and circulation which had employed a greater quantity before. The gold and silver which would go abroad would not go abroad for nothing, but would bring back an equal value of goods of some kind or other. Those goods, too, would not be all matters of mere luxury and expense, to be consumed by idle people, who produce nothing in return for their consumption. As the real wealth and revenue of idle people would not be augmented by this extraordinary exportation of gold and silver, so neither would their consumption be much augmented by it. Those goods would probably, the greater part of them, and certainly some part of them, consist in materials, tools, and provisions, for the employment and maintenance of industrious people, who would reproduce, with a profit, the full value of their consumption. A part of the dead stock of the society would thus be turned into active stock, and would put into motion a greater quantity of industry than had been employed before. The annual produce of their land and labour would immediately be augmented a little, and in a few years would probably be augmented a great deal; their industry being thus relieved from one of the most oppressive burdens which it at present labours under. The bounty upon the exportation of corn necessarily operates exactly in the same way as this absurd policy of Spain and Portugal. Whatever be the actual state of tillage, it renders our corn somewhat dearer in the home market than it otherwise would be in that state, and somewhat cheaper in the foreign; and as the average money price of corn regulates, more or less, that of all other commodities, it lowers the value of silver considerably in the one, and tends to raise it a little in the other. It enables foreigners, the Dutch in particular, not only to eat our corn cheaper than they otherwise could do, but sometimes to eat it cheaper than even our own people can do upon the same occasions; as we are assured by an excellent authority, that of Sir Matthew Decker. It hinders our own workmen from furnishing their goods for so small a quantity of silver as they otherwise might do, and enables the Dutch to furnish theirs for a smaller. It tends to render our manufactures somewhat dearer in every market, and theirs somewhat cheaper, than they otherwise would be, and consequently to give their industry a double advantage over our own. The bounty, as it raises in the home market, not so much the real, as the nominal price of our corn; as it augments, not the quantity of labour which a certain quantity of corn can maintain and employ, but only the quantity of silver which it will exchange for; it discourages our manufactures, without rendering any considerable service, either to our farmers or country gentlemen. It puts, indeed, a little more money into the pockets of both, and it will perhaps be somewhat difficult to persuade the greater part of them that this is not rendering them a very considerable service. But if this money sinks in its value, in the quantity of labour, provisions, and home-made commodities of all different kinds which it is capable of purchasing, as much as it rises in its quantity, the service will be little more than nominal and imaginary. There is, perhaps, but one set of men in the whole commonwealth to whom the bounty either was or could be essentially serviceable. These were the corn merchants, the exporters and importers of corn. In years of plenty, the bounty necessarily occasioned a greater exportation than would otherwise have taken place; and by hindering the plenty of the one year from relieving the scarcity of another, it occasioned in years of scarcity a greater importation than would otherwise have been necessary. It increased the business of the corn merchant in both; and in the years of scarcity, it not only enabled him to import a greater quantity, but to sell it for a better price, and consequently with a greater profit, than he could otherwise have made, if the plenty of one year had not been more or less hindered from relieving the scarcity of another. It is in this set of men, accordingly, that I have observed the greatest zeal for the continuance or renewal of the bounty. Our country gentlemen, when they imposed the high duties upon the exportation of corn, which in times of moderate plenty amount to a prohibition, and when they established the bounty, seem to have imitated the conduct of our manufacturers. By the one institution, they secured to themselves the monopoly of the home market, and by the other they endeavoured to prevent that market from ever being overstocked with their commodity. By both they endeavoured to raise its real value, in the same manner as our manufacturers had, by the like institutions, raised the real value of many different sorts of manufactured goods. They did not, perhaps, attend to the great and essential difference which nature has established between corn and almost every other sort of goods. When, either by the monopoly of the home market, or by a bounty upon exportation, you enable our woollen or linen manufacturers to sell their goods for somewhat a better price than they otherwise could get for them, you raise, not only the nominal, but the real price of those goods; you render them equivalent to a greater quantity of labour and subsistence; you increase not only the nominal, but the real profit, the real wealth and revenue of these manufacturers; and you enable them, either to live better themselves, or to employ a greater quantity of labour in those particular manufactures. You really encourage those manufactures, and direct towards them a greater quantity of the industry of the country than what would properly go to them of its own accord. But when, by the like institutions, you raise the nominal or money price of corn, you do not raise its real value; you do not increase the real wealth, the real revenue, either of our farmers or country gentlemen; you do not encourage the growth of corn, because you do not enable them to maintain and employ more labourers in raising it. The nature of things has stamped upon corn a real value, which cannot be altered by merely altering its money price. No bounty upon exportation, no monopoly of the home market, can raise that value. The freest competition cannot lower it. Through the world in general, that value is equal to the quantity of labour which it can maintain, and in every particular place it is equal to the quantity of labour which it can maintain in the way, whether liberal, moderate, or scanty, in which labour is commonly maintained in that place. Woollen or linen cloth are not the regulating commodities by which the real value of all other commodities must be finally measured and determined; corn is. The real value of every other commodity is finally measured and determined by the proportion which its average money price bears to the average money price of corn. The real value of corn does not vary with those variations in its average money price, which sometimes occur from one century to another; it is the real value of silver which varies with them. Bounties upon the exportation of any home-made commodity are liable, first, to that general objection which may be made to all the different expedients of the mercantile system; the objection of forcing some part of the industry of the country into a channel less advantageous than that in which it would run of its own accord; and, secondly, to the particular objection of forcing it not only into a channel that is less advantageous, but into one that is actually disadvantageous; the trade which cannot be carried on but by means of a bounty being necessarily a losing trade. The bounty upon the exportation of corn is liable to this further objection, that it can in no respect promote the raising of that particular commodity of which it was meant to encourage the production. When our country gentlemen, therefore, demanded the establishment of the bounty, though they acted in imitation of our merchants and manufacturers, they did not act with that complete comprehension of their own interest, which commonly directs the conduct of those two other orders of people. They loaded the public revenue with a very considerable expense: they imposed a very heavy tax upon the whole body of the people; but they did not, in any sensible degree, increase the real value of their own commodity; and by lowering somewhat the real value of silver, they discouraged, in some degree, the general industry of the country, and, instead of advancing, retarded more or less the improvement of their own lands, which necessarily depend upon the general industry of the country. To encourage the production of any commodity, a bounty upon production, one should imagine, would have a more direct operation than one upon exportation. It would, besides, impose only one tax upon the people, that which they must contribute in order to pay the bounty. Instead of raising, it would tend to lower the price of the commodity in the home market; and thereby, instead of imposing a second tax upon the people, it might, at least in part, repay them for what they had contributed to the first. Bounties upon production, however, have been very rarely granted. The prejudices established by the commercial system have taught us to believe, that national wealth arises more immediately from exportation than from production. It has been more favoured, accordingly, as the more immediate means of bringing money into the country. Bounties upon production, it has been said too, have been found by experience more liable to frauds than those upon exportation. How far this is true, I know not. That bounties upon exportation have been abused, to many fraudulent purposes, is very well known. But it is not the interest of merchants and manufacturers, the great inventors of all these expedients, that the home market should be overstocked with their goods; an event which a bounty upon production might sometimes occasion. A bounty upon exportation, by enabling them to send abroad their surplus part, and to keep up the price of what remains in the home market, effectually prevents this. Of all the expedients of the mercantile system, accordingly, it is the one of which they are the fondest. I have known the different undertakers of some particular works agree privately among themselves to give a bounty out of their own pockets upon the exportation of a certain proportion of goods which they dealt in. This expedient succeeded so well, that it more than doubled the price of their goods in the home market, notwithstanding a very considerable increase in the produce. The operation of the bounty upon corn must have been wonderfully different, if it has lowered the money price of that commodity. Something like a bounty upon production, however, has been granted upon some particular occasions. The tonnage bounties given to the white herring and whale fisheries may, perhaps, be considered as somewhat of this nature. They tend directly, it may be supposed, to render the goods cheaper in the home market than they otherwise would be. In other respects, their effects, it must be acknowledged, are the same as those of bounties upon exportation. By means of them, a part of the capital of the country is employed in bringing goods to market, of which the price does not repay the cost, together with the ordinary profits of stock. But though the tonnage bounties to those fisheries do not contribute to the opulence of the nation, it may, perhaps, be thought that they contribute to its defence, by augmenting the number of its sailors and shipping. This, it may be alleged, may sometimes be done by means of such bounties, at a much smaller expense than by keeping up a great standing navy, if I may use such an expression, in the same way as a standing army. Notwithstanding these favourable allegations, however, the following considerations dispose me to believe, that in granting at least one of these bounties, the legislature has been very grossly imposed upon: _First._ The herring-buss bounty seems too large. From the commencement of the winter fishing 1771, to the end of the winter fishing 1781, the tonnage bounty upon the herring-buss fishery has been at thirty shillings the ton. During these eleven years, the whole number of barrels caught by the herring-buss fishery of Scotland amounted to 378,347. The herrings caught and cured at sea are called sea-sticks. In order to render them what are called merchantable herrings, it is necessary to repack them with an additional quantity of salt; and in this case, it is reckoned, that three barrels of sea-sticks are usually repacked into two barrels of merchantable herrings. The number of barrels of merchantable herrings, therefore, caught during these eleven years, will amount only, according to this account, to 252,231-1/4. During these eleven years, the tonnage bounties paid amounted to L.155,463 : 11s. or 8s. 2-1/4d. upon every barrel of sea-sticks, and to 12s. 3-3/4d. upon every barrel of merchantable herrings. The salt with which these herrings are cured is sometimes Scotch, and sometimes foreign salt; both which are delivered, free of all excise duty, to the fish-curers. The excise duty upon Scotch salt is at present 1s. 6d., that upon foreign salt 10s. the bushel. A barrel of herrings is supposed to require about one bushel and one-fourth of a bushel foreign salt. Two bushels are the supposed average of Scotch salt. If the herrings are entered for exportation, no part of this duty is paid up; if entered for home consumption, whether the herrings were cured with foreign or with Scotch salt, only one shilling the barrel is paid up. It was the old Scotch duty upon a bushel of salt, the quantity which, at a low estimation, had been supposed necessary for curing a barrel of herrings. In Scotland, foreign salt is very little used for any other purpose but the curing of fish. But from the 5th April 1771 to the 5th April 1782, the quantity of foreign salt imported amounted to 936,974 bushels, at eighty-four pounds the bushel; the quantity of Scotch salt delivered from the works to the fish-curers, to no more than 168,226, at fifty-six pounds the bushel only. It would appear, therefore, that it is principally foreign salt that is used in the fisheries. Upon every barrel of herrings exported, there is, besides, a bounty of 2s. 8d. and more than two-thirds of the buss-caught herrings are exported. Put all these things together, and you will find that, during these eleven years, every barrel of buss-caught herrings, cured with Scotch salt, when exported, has cost government 17s. 11-3/4d.; and, when entered for home consumption, 14s. 3-3/4d.; and that every barrel cured with foreign salt, when exported, has cost government L.1 : 7 : 5-3/4d.; and, when entered for home consumption, L.1 : 3 : 9-3/4d. The price of a barrel of good merchantable herrings runs from seventeen and eighteen to four and five-and-twenty shillings; about a guinea at an average.[39] _Secondly_, The bounty to the white-herring fishery is a tonnage bounty, and is proportioned to the burden of the ship, not to her diligence or success in the fishery; and it has, I am afraid, been too common for the vessels to fit out for the sole purpose of catching, not the fish, but the bounty. In the year 1759, when the bounty was at fifty shillings the ton, the whole buss fishery of Scotland brought in only four barrels of sea-sticks. In that year, each barrel of sea-sticks cost government, in bounties alone, L.113 : 15s.; each barrel of merchantable herrings L.159 : 7 : 6. _Thirdly_, The mode of fishing, for which this tonnage bounty in the white herring fishery has been given (by busses or decked vessels from twenty to eighty tons burden), seems not so well adapted to the situation of Scotland, as to that of Holland, from the practice of which country it appears to have been borrowed. Holland lies at a great distance from the seas to which herrings are known principally to resort, and can, therefore, carry on that fishery only in decked vessels, which can carry water and provisions sufficient for a voyage to a distant sea; but the Hebrides, or Western Islands, the islands of Shetland, and the northern and north-western coasts of Scotland, the countries in whose neighborhood the herring fishery is principally carried on, are everywhere intersected by arms of the sea, which run up a considerable way into the land, and which, in the language of the country, are called sea-lochs. It is to these sea-lochs that the herrings principally resort during the seasons in which they visit those seas; for the visits of this, and, I am assured, of many other sorts of fish, are not quite regular and constant. A boat-fishery, therefore, seems to be the mode of fishing best adapted to the peculiar situation of Scotland, the fishers carrying the herrings on shore as fast as they are taken, to be either cured or consumed fresh. But the great encouragement which a bounty of 30s. the ton gives to the buss-fishery, is necessarily a discouragement to the boat-fishery, which, having no such bounty, cannot bring its cured fish to market upon the same terms as the buss-fishery. The boat-fishery, accordingly, which, before the establishment of the buss-bounty, was very considerable, and is said to have employed a number of seamen, not inferior to what the buss-fishery employs at present, is now gone almost entirely to decay. Of the former extent, however, of this now ruined and abandoned fishery, I must acknowledge that I cannot pretend to speak with much precision. As no bounty was paid upon the outfit of the boat-fishery, no account was taken of it by the officers of the customs or salt duties. _Fourthly_, In many parts of Scotland, during certain seasons of the year, herrings make no inconsiderable part of the food of the common people. A bounty which tended to lower their price in the home market, might contribute a good deal to the relief of a great number of our fellow-subjects, whose circumstances are by no means affluent. But the herring-buss bounty contributes to no such good purpose. It has ruined the boat-fishery, which is by far the best adapted for the supply of the home market; and the additional bounty of 2s. 8d. the barrel upon exportation, carries the greater part, more than two-thirds, of the produce of the buss-fishery abroad. Between thirty and forty years ago, before the establishment of the buss-bounty, 16s. the barrel, I have been assured, was the common price of white herrings. Between ten and fifteen years ago, before the boat-fishery was entirely ruined, the price was said to have run from seventeen to twenty shillings the barrel. For these last five years, it has, at an average, been at twenty-five shillings the barrel. This high price, however, may have been owing to the real scarcity of the herrings upon the coast of Scotland. I must observe, too, that the cask or barrel, which is usually sold with the herrings, and of which the price is included in all the foregoing prices, has, since the commencement of the American war, risen to about double its former price, or from about 3s. to about 6s. I must likewise observe, that the accounts I have received of the prices of former times, have been by no means quite uniform and consistent, and an old man of great accuracy and experience has assured me, that, more than fifty years ago, a guinea was the usual price of a barrel of good merchantable herrings; and this, I imagine, may still be looked upon as the average price. All accounts, however, I think, agree that the price has not been lowered in the home market in consequence of the buss-bounty. When the undertakers of fisheries, after such liberal bounties have been bestowed upon them, continue to sell their commodity at the same, or even at a higher price than they were accustomed to do before, it might be expected that their profits should be very great; and it is not improbable that those of some individuals may have been so. In general, however, I have every reason to believe they have been quite otherwise. The usual effect of such bounties is, to encourage rash undertakers to adventure in a business which they do not understand; and what they lose by their own negligence and ignorance, more than compensates all that they can gain by the utmost liberality of government. In 1750, by the same act which first gave the bounty of 30s. the ton for the encouragement of the white herring fishery (the 23d Geo. II. chap. 24), a joint stock company was erected, with a capital of L.500,000, to which the subscribers (over and above all other encouragements, the tonnage bounty just now mentioned, the the exportation bounty of 2s. 8d. the barrel, the delivery of both British and foreign salt duty free) were, during the space of fourteen years, for every hundred pounds which they subscribed and paid into the stock of the society, entitled to three pounds a-year, to be paid by the receiver-general of the customs in equal half-yearly payments. Besides this great company, the residence of whose governor and directors was to be in London, it was declared lawful to erect different fishing chambers in all the different out-ports of the kingdom, provided a sum not less than L.10,000 was subscribed into the capital of each, to be managed at its own risk, and for its own profit and loss. The same annuity, and the same encouragements of all kinds, were given to the trade of those inferior chambers as to that of the great company. The subscription of the great company was soon filled up, and several different fishing chambers were erected in the different out-ports of the kingdom. In spite of all these encouragements, almost all those different companies, both great and small, lost either the whole or the greater part of their capitals; scarce a vestige now remains of any of them, and the white-herring fishery is now entirely, or almost entirely, carried on by private adventurers. If any particular manufacture was necessary, indeed, for the defence of the society, it might not always be prudent to depend upon our neighbours for the supply; and if such manufacture could not otherwise be supported at home, it might not be unreasonable that all the other branches of industry should be taxed in order to support it. The bounties upon the exportation of British made sail-cloth, and British made gunpowder, may, perhaps, both be vindicated upon this principle. But though it can very seldom be reasonable to tax the industry of the great body of the people, in order to support that of some particular class of manufacturers; yet, in the wantonness of great prosperity, when the public enjoys a greater revenue than it knows well what to do with, to give such bounties to favourite manufactures, may, perhaps, be as natural as to incur any other idle expense. In public, as well as in private expenses, great wealth, may, perhaps, frequently be admitted as an apology for great folly. But there must surely be something more than ordinary absurdity in continuing such profusion in times of general difficulty and distress. What is called a bounty, is sometimes no more than a drawback, and, consequently, is not liable to the same objections as what is properly a bounty. The bounty, for example, upon refined sugar exported, may be considered as a drawback of the duties upon the brown and Muscovado sugars, from which it is made; the bounty upon wrought silk exported, a drawback of the duties upon raw and thrown silk imported; the bounty upon gunpowder exported, a drawback of the duties upon brimstone and saltpetre imported. In the language of the customs, those allowances only are called drawbacks which are given upon goods exported in the same form in which they are imported. When that form has been so altered by manufacture of any kind as to come under a new denomination, they are called bounties. Premiums given by the public to artists and manufacturers, who excel in their particular occupations, are not liable to the same objections as bounties. By encouraging extraordinary dexterity and ingenuity, they serve to keep up the emulation of the workmen actually employed in those respective occupations, and are not considerable enough to turn towards any one of them a greater share of the capital of the country than what would go to it of its own accord. Their tendency is not to overturn the natural balance of employments, but to render the work which is done in each as perfect and complete as possible. The expense of premiums, besides, is very trifling, that of bounties very great. The bounty upon corn alone has sometimes cost the public, in one year, more than L.300,000. Bounties are sometimes called premiums, as drawbacks are sometimes called bounties. But we must, in all cases, attend to the nature of the thing, without paying any regard to the word. _Digression concerning the Corn Trade and Corn Laws._ I cannot conclude this chapter concerning bounties, without observing, that the praises which have been bestowed upon the law which establishes the bounty upon the exportation of corn, and upon that system of regulations which is connected with it, are altogether unmerited. A particular examination of the nature of the corn trade, and of the principal British laws which relate to it, will sufficiently demonstrate the truth of this assertion. The great importance of this subject must justify the length of the digression. The trade of the corn merchant is composed of four different branches, which, though they may sometimes be all carried on by the same person, are, in their own nature, four separate and distinct trades. These are, first, the trade of the inland dealer; secondly, that of the merchant-importer for home consumption; thirdly, that of the merchant-exporter of home produce for foreign consumption; and, fourthly, that of the merchant-carrier, or of the importer of corn, in order to export it again. I. The interest of the inland dealer, and that of the great body of the people, how opposite soever they may at first appear, are, even in years of the greatest scarcity, exactly the same. It is his interest to raise the price of his corn as high as the real scarcity of the season requires, and it can never be his interest to raise it higher. By raising the price, he discourages the consumption, and puts every body more or less, but particularly the inferior ranks of people, upon thrift and good management. If, by raising it too high, he discourages the consumption so much that the supply of the season is likely to go beyond the consumption of the season, and to last for some time after the next crop begins to come in, he runs the hazard, not only of losing a considerable part of his corn by natural causes, but of being obliged to sell what remains of it for much less than what he might have had for it several months before. If, by not raising the price high enough, he discourages the consumption so little, that the supply of the season is likely to fall short of the consumption of the season, he not only loses a part of the profit which he might otherwise have made, but he exposes the people to suffer before the end of the season, instead of the hardships of a dearth, the dreadful horrors of a famine. It is the interest of the people that their daily, weekly, and monthly consumption should be proportioned as exactly as possible to the supply of the season. The interest of the inland corn dealer is the same. By supplying them, as nearly as he can judge, in this proportion, he is likely to sell all his corn for the highest price, and with the greatest profit; and his knowledge of the state of the crop, and of his daily, weekly, and monthly sales, enables him to judge, with more or less accuracy, how far they really are supplied in this manner. Without intending the interest of the people, he is necessarily led, by a regard to his own interest, to treat them, even in years of scarcity, pretty much in the same manner as the prudent master of a vessel is sometimes obliged to treat his crew. When he foresees that provisions are likely to run short, he puts them upon short allowance. Though from excess of caution he should sometimes do this without any real necessity, yet all the inconveniencies which his crew can thereby suffer are inconsiderable, in comparison of the danger, misery, and ruin, to which they might sometimes be exposed by a less provident conduct. Though, from excess of avarice, in the same manner, the inland corn merchant should sometimes raise the price of his corn somewhat higher than the scarcity of the season requires, yet all the inconveniencies which the people can suffer from this conduct, which effectually secures them from a famine in the end of the season, are inconsiderable, in comparison of what they might have been exposed to by a more liberal way of dealing in the beginning of it. The corn merchant himself is likely to suffer the most by this excess of avarice; not only from the indignation which it generally excites against him, but, though he should escape the effects of this indignation, from the quantity of corn which it necessarily leaves upon his hands in the end of the season, and which, if the next season happens to prove favourable, he must always sell for a much lower price than he might otherwise have had. Were it possible, indeed, for one great company of merchants to possess themselves of the whole crop of an extensive country, it might perhaps be their interest to deal with it, as the Dutch are said to do with the spiceries of the Moluccas, to destroy or throw away a considerable part of it, in order to keep up the price of the rest. But it is scarce possible, even by the violence of law, to establish such an extensive monopoly with regard to corn; and wherever the law leaves the trade free, it is of all commodities the least liable to be engrossed or monopolized by the force of a few large capitals, which buy up the greater part of it. Not only its value far exceeds what the capitals of a few private men are capable of purchasing; but, supposing they were capable of purchasing it, the manner in which it is produced renders this purchase altogether impracticable. As, in every civilized country, it is the commodity of which the annual consumption is the greatest; so a greater quantity of industry is annually employed in producing corn than in producing any other commodity. When it first comes from the ground, too, it is necessarily divided among a greater number of owners than any other commodity; and these owners can never be collected into one place, like a number of independent manufacturers, but are necessarily scattered through all the different corners of the country. These first owners either immediately supply the consumers in their own neighbourhood, or they supply other inland dealers, who supply those consumers. The inland dealers in corn, therefore, including both the farmer and the baker, are necessarily more numerous than the dealers in any other commodity; and their dispersed situation renders it altogether impossible for them to enter into any general combination. If, in a year of scarcity, therefore, any of them should find that he had a good deal more corn upon hand than, at the current price, he could hope to dispose of before the end of the season, he would never think of keeping up this price to his own loss, and to the sole benefit of his rivals and competitors, but would immediately lower it, in order to get rid of his corn before the new crop began to come in. The same motives, the same interests, which would thus regulate the conduct of any one dealer, would regulate that of every other, and oblige them all in general to sell their corn at the price which, according to the best of their judgment, was most suitable to the scarcity or plenty of the season. Whoever examines, with attention, the history of the dearths and famines which have afflicted any part of Europe during either the course of the present or that of the two preceding centuries, of several of which we have pretty exact accounts, will find, I believe, that a dearth never has arisen from any combination among the inland dealers in corn, nor from any other cause but a real scarcity, occasioned sometimes, perhaps, and in some particular places, by the waste of war, but in by far the greatest number of cases by the fault of the seasons; and that a famine has never arisen from any other cause but the violence of government attempting, by improper means, to remedy the inconveniencies of a dearth. In an extensive corn country, between all the different parts of which there is a free commerce and communication, the scarcity occasioned by the most unfavourable seasons can never be so great as to produce a famine; and the scantiest crop, if managed with frugality and economy, will maintain, through the year, the same number of people that are commonly fed in a more affluent manner by one of moderate plenty. The seasons most unfavourable to the crop are those of excessive drought or excessive rain. But as corn grows equally upon high and low lands, upon grounds that are disposed to be too wet, and upon those that are disposed to be too dry, either the drought or the rain, which is hurtful to one part of the country, is favourable to another; and though, both in the wet and in the dry season, the crop is a good deal less than in one more properly tempered; yet, in both, what is lost in one part of the country is in some measure compensated by what is gained in the other. In rice countries, where the crop not only requires a very moist soil, but where, in a certain period of its growing, it must be laid under water, the effects of a drought are much more dismal. Even in such countries, however, the drought is, perhaps, scarce ever so universal as necessarily to occasion a famine, if the government would allow a free trade. The drought in Bengal, a few years ago, might probably have occasioned a very great dearth. Some improper regulations, some injudicious restraints, imposed by the servants of the East India Company upon the rice trade, contributed, perhaps, to turn that dearth into a famine. When the government, in order to remedy the inconveniencies of a dearth, orders all the dealers to sell their corn at what it supposes a reasonable price, it either hinders them from bringing it to market, which may sometimes produce a famine even in the beginning of the season; or, if they bring it thither, it enables the people, and thereby encourages them to consume it so fast as must necessarily produce a famine before the end of the season. The unlimited, unrestrained freedom of the corn trade, as it is the only effectual preventive of the miseries of a famine, so it is the best palliative of the inconveniencies of a dearth; for the inconveniencies of a real scarcity cannot be remedied; they can only be palliated. No trade deserves more the full protection of the law, and no trade requires it so much; because no trade is so much exposed to popular odium. In years of scarcity, the inferior ranks of people impute their distress to the avarice of the corn merchant, who becomes the object of their hatred and indignation. Instead of making profit upon such occasions, therefore, he is often in danger of being utterly ruined, and of having his magazines plundered and destroyed by their violence. It is in years of scarcity, however, when prices are high, that the corn merchant expects to make his principal profit. He is generally in contract with some farmers to furnish him, for a certain number of years, with a certain quantity of corn, at a certain price. This contract price is settled according to what is supposed to be the moderate and reasonable, that is, the ordinary or average price, which, before the late years of scarcity, was commonly about 28s. for the quarter of wheat, and for that of other grain in proportion. In years of scarcity, therefore, the corn merchant buys a great part of his corn for the ordinary price, and sells it for a much higher. That this extraordinary profit, however, is no more them sufficient to put his trade upon a fair level with other trades, and to compensate the many losses which be sustains upon other occasions, both from the perishable nature of the commodity itself, and from the frequent and unforeseen fluctuations of its price, seems evident enough, from this single circumstance, that great fortunes are as seldom made in this as in any other trade. The popular odium, however, which attends it in years of scarcity, the only years in which it can be very profitable, renders people of character and fortune averse to enter into it. It is abandoned to an inferior set of dealers; and millers, bakers, meal-men, and meal-factors, together with a number of wretched hucksters, arr almost the only middle people that, in the home market, come between the grower and the consumer. The ancient policy of Europe, instead of discountenancing this popular odium against a trade so beneficial to the public, seems, on the contrary, to have authorised and encouraged it. By the 5th and 6th of Edward VI. cap. 14, it was enacted, that whoever should buy any corn or grain, with intent to sell it again, should be reputed an unlawful engrosser, and should, for the first fault, suffer two months imprisonment, and forfeit the value of the corn; for the second, suffer six months imprisonment, and forfeit double the value; and, for the third, be set in the pillory, suffer imprisonment during the king's pleasure, and forfeit all his goods and chattels. The ancient policy of most other parts of Europe was no better than that of England. Our ancestors seem to have imagined, that the people would buy their corn cheaper of the farmer than of the corn merchant, who, they were afraid, would require, over and above, the price which he paid to the farmer, an exorbitant profit to himself. They endeavoured, therefore, to annihilate his trade altogether. They even endeavoured to hinder, as much as possible, any middle man of any kind from coming in between the grower and the consumer; and this was the meaning of the many restraints which they imposed upon the trade of those whom they called kidders, or carriers of corn; a trade which nobody was allowed to exercise without a licence, ascertaining his qualifications as a man of probity and fair dealing. The authority of three justices of the peace was, by the statute of Edward VI. necessary in order to grant this licence. But even this restraint was afterwards thought insufficient, and, by a statute of Elizabeth, the privilege of granting it was confined to the quarter-sessions. The ancient policy of Europe endeavoured, in this manner, to regulate agriculture, the great trade of the country, by maxims quite different from those which it established with regard to manufactures, the great trade of the towns. By leaving a farmer no other customers but either the consumers or their immediate factors, the kidders and carriers of corn, it endeavoured to force him to exercise the trade, not only of a farmer, but of a corn merchant, or corn retailer. On the contrary, it, in many cases, prohibited the manufacturer from exercising the trade of a shopkeeper, or from selling his own goods by retail. It meant, by the one law, to promote the general interest of the country, or to render corn cheap, without, perhaps, its being well understood how this was to be done. By the other, it meant to promote that of a particular order of men, the shopkeepers, who would be so much undersold by the manufacturer, it was supposed, that their trade would be ruined, if he was allowed to retail at all. The manufacturer, however, though he had been allowed to keep a shop, and to sell his own goods by retail, could not have undersold the common shopkeeper. Whatever part of his capital he might have placed in his shop, he must have withdrawn it from his manufacture. In order to carry on his business on a level with that of other people, as he must have had the profit of a manufacturer on the one part, so he must have had that of a shopkeeper upon the other. Let us suppose, for example, that in the particular town where he lived, ten per cent. was the ordinary profit both of manufacturing and shopkeeping stock; he must in this case have charged upon every piece of his own goods, which he sold in his shop, a profit of twenty per cent. When he carried them from his workhouse to his shop, he must have valued them at the price for which he could have sold them to a dealer or shopkeeper, who would have bought them by wholesale. If he valued them lower, he lost a part of the profit of his manufacturing capital. When, again, he sold them from his shop, unless he got the same price at which a shopkeeper would have sold them, he lost a part of the profit of his shopkeeping capital. Though he might appear, therefore, to make a double profit upon the same piece of goods, yet, as these goods made successively a part of two distinct capitals, he made but a single profit upon the whole capital employed about them; and if he made less than his profit, he was a loser, and did not employ his whole capital with the same advantage as the greater of part of his neighbours. What the manufacturer was prohibited to do, the farmer was in some measure enjoined to do; to divide his capital between two different employments; to keep one part of it in his granaries and stack-yard, for supplying the occasional demands of the market, and to employ the other in the cultivation of his land. But as he could not afford to employ the latter for less than the ordinary profits of farming stock, so he could as little afford to employ the former for less than the ordinary profits of mercantile stock. Whether the stock which really carried on the business of a corn merchant belonged to the person who was called a farmer, or to the person who was called a corn merchant, an equal profit was in both cases requisite, in order to indemnify its owner for employing it in this manner, in order to put his business on a level with other trades, and in order to hinder him from having an interest to change it as soon as possible for some other. The farmer, therefore, who was thus forced to exercise the trade of a corn merchant, could not afford to sell his corn cheaper than any other corn merchant would have been obliged to do in the case a free competition. The dealer who can employ his whole stock in one single branch of business, has an advantage of the same kind with the workman who can employ his whole labour in one single operation. As the latter acquires a dexterity which enables him, with the same two hands, to perform a much greater quantity of work, so the former acquires so easy and ready a method of transacting his business, of buying and disposing of his goods, that, with the same capital he can transact a much greater quantity of business. As the one can commonly afford his work a good deal cheaper, so the other can commonly afford his goods somewhat cheaper, than if his stock and attention were both employed about a greater variety of objects. The greater part of manufacturers could not afford to retail their own goods so cheap as a vigilant and active shopkeeper, whose sole business it was to buy them by wholesale and to retail them again. The greater part of farmers could still less afford to retail their own corn, to supply the inhabitants of a town, at perhaps four or five miles distance from the greater part of them, so cheap as a vigilant and active corn merchant, whose sole business it was to purchase corn by wholesale, to collect it into a great magazine, and to retail it again. The law which prohibited the manufacturer from exercising the trade of a shopkeeper, endeavoured to force this division in the employment of stock to go on faster than it might otherwise have done. The law which obliged the farmer to exercise the trade of a corn merchant, endeavoured to hinder it from going on so fast. Both laws were evident violations of natural liberty, and therefore unjust; and they were both, too, as impolitic as they were unjust. It is the interest of every society, that things of this kind should never either be forced or obstructed. The man who employs either his labour or his stock in a greater variety of ways than his situation renders necessary, can never hurt his neighbour by underselling him. He may hurt himself, and he generally does so. Jack-of-all-trades will never be rich, says the proverb. But the law ought always to trust people with the care of their own interest, as in their local situations they must generally be able to judge better of it than the legislature can do. The law, however, which obliged the farmer to exercise the trade of a corn merchant was by far the most pernicious of the two. It obstructed not only that division in the employment of stock which is so advantageous to every society, but it obstructed likewise the improvement and cultivation of the land. By obliging the farmer to carry on two trades instead of one, it forced him to divide his capital into two parts, of which one only could be employed in cultivation. But if he had been at liberty to sell his whole crop to a corn merchant as fast as he could thresh it out, his whole capital might have returned immediately to the land, and have been employed in buying more cattle, and hiring more servants, in order to improve and cultivate it better. But by being obliged to sell his corn by retail, he was obliged to keep a great part of his capital in his granaries and stack-yard through the year, and could not therefore cultivate so well as with the same capital he might otherwise have done. This law, therefore, necessarily obstructed the improvement of the land, and, instead of tending to render corn cheaper, must have tended to render it scarcer, and therefore dearer, than it would otherwise have been. After the business of the farmer, that of the corn merchant is in reality the trade which, if properly protected and encouraged, would contribute the most to the raising of corn. It would support the trade of the farmer, in the same manner as the trade of the wholesale dealer supports that of the manufacturer. The wholesale dealer, by affording a ready market to the manufacturer, by taking his goods off his hand as fast as he can make them, and by sometimes even advancing their price to him before he has made them, enables him to keep his whole capital, and sometimes even more than his whole capital, constantly employed in manufacturing, and consequently to manufacture a much greater quantity of goods than if he was obliged to dispose of them himself to the immediate consumers, or even to the retailers. As the capital of the wholesale merchant, too, is generally sufficient to replace that of many manufacturers, this intercourse between him and them interests the owner of a large capital to support the owners of a great number of small ones, and to assist them in those losses and misfortunes which might otherwise prove ruinous to them. An intercourse of the same kind universally established between the farmers and the corn merchants, would be attended with effects equally beneficial to the farmers. They would be enabled to keep their whole capitals, and even more than their whole capitals constantly employed in cultivation. In case of any of those accidents to which no trade is more liable than theirs, they would find in their ordinary customer, the wealthy corn merchant, a person who had both an interest to support them, and the ability to do it; and they would not, as at present, be entirely dependent upon the forbearance of their landlord, or the mercy of his steward. Were it possible, as perhaps it is not, to establish this intercourse universally, and all at once; were it possible to turn all at once the whole farming stock of the kingdom to its proper business, the cultivation of land, withdrawing it from every other employment into which any part of it may be at present diverted; and were it possible, in order to support and assist, upon occasion, the operations of this great stock, to provide all at once another stock almost equally great; it is not, perhaps, very easy to imagine how great, how extensive, and how sudden, would be the improvement which this change of circumstances would alone produce upon the whole face of the country. The statute of Edward VI. therefore, by prohibiting as much as possible any middle man from coming in between the grower and the consumer, endeavoured to annihilate a trade, of which the free exercise is not only the best palliative of the inconveniencies of a dearth, but the best preventive of that calamity; after the trade of the farmer, no trade contributing so much to the growing of corn as that of the corn merchant. The rigour of this law was afterwards softened by several subsequent statutes, which successively permitted the engrossing of corn when the prices of wheat should not exceed 20s. and 24s. 32s. and 40s. the quarter. At last, by the 15th of Charles II. c. 7, the engrossing or buying of corn, in order to sell it again, as long as the price of wheat did not exceed 48s. the quarter, and that of other grain in proportion, was declared lawful to all persons not being forestallers, that is, not selling again in the same market within three months. All the freedom which the trade of the inland corn dealer has ever yet enjoyed was bestowed upon it by this statute. The statute of the twelfth of the present king, which repeals almost all the other ancient laws against engrossers and forestallers, does not repeal the restrictions of this particular statute, which therefore still continue in force. This statute, however, authorises in some measure two very absurd popular prejudices. _First_, It supposes, that when the price of wheat has risen so high as 48s. the quarter, and that of other grain in proportion, corn is likely to be so engrossed as to hurt the people. But, from what has been already said, it seems evident enough, that corn can at no price be so engrossed by the inland dealers as to hurt the people; and 48s. the quarter, besides, though it may be considered as a very high price, yet, in years of scarcity, it is a price which frequently takes place immediately after harvest, when scarce any part of the new crop can be sold off, and when it is impossible even for ignorance to suppose that any part of it can be so engrossed as to hurt the people. _Secondly_, It supposes that there is a certain price at which corn is likely to be forestalled, that is, bought up in order to be sold again soon after in the same market, so as to hurt the people. But if a merchant ever buys up corn, either going to a particular market, or in a particular market, in order to sell it again soon after in the same market, it must be because he judges that the market cannot be so liberally supplied through the whole season as upon that particular occasion, and that the price, therefore, must rise. If he judges wrong in this, and if the price does not rise, he not only loses the whole profit of the stock which he employs in this manner, but a part of the stock itself, by the expense and loss which necessarily attend the storing and keeping of corn. He hurts himself, therefore, much more essentially than he can hurt even the particular people whom he may hinder from supplying themselves upon that particular market day, because they may afterwards supply themselves just as cheap upon any other market day. If he judges right, instead of hurting the great body of the people, he renders them a most important service. By making them feel the inconveniencies of a dearth somewhat earlier than they otherwise might do, he prevents their feeling them afterwards so severely as they certainly would do, if the cheapness of price encouraged them to consume faster than suited the real scarcity of the season. When the scarcity is real, the best thing that can be done for people is, to divide the inconvenience of it as equally as possible, through all the different months and weeks and days of the year. The interest of the corn merchant makes him study to do this as exactly as he can; and as no other person can have either the same interest, or the same knowledge, or the same abilities, to do it so exactly as he, this most important operation of commerce ought to be trusted entirely to him; or, in other words, the corn trade, so far at least as concerns the supply of the home market, ought to be left perfectly free. The popular fear of engrossing and forestalling may be compared to the popular terrors and suspicions of witchcraft. The unfortunate wretches accused of this latter crime were not more innocent of the misfortunes imputed to them, than those who have been accused of the former. The law which put an end to all prosecutions against witchcraft, which put it out of any man's power to gratify his own malice by accusing his neighbour of that imaginary crime, seems effectually to have put an end to those fears and suspicions, by taking away the great cause which encouraged and supported them. The law which would restore entire freedom to the inland trade of corn, would probably prove as effectual to put an end to the popular fears of engrossing and forestalling. The 15th of Charles II. c. 7, however, with all its imperfections, has, perhaps, contributed more, both to the plentiful supply of the home market, and to the increase of tillage, than any other law in the statute book. It is from this law that the inland corn trade has derived all the liberty and protection which it has ever yet enjoyed; and both the supply of the home market and the interest of tillage are much more effectually promoted by the inland, than either by the importation or exportation trade. The proportion of the average quantity of all sorts of grain imported into Great Britain to that of all sorts of grain consumed, it has been computed by the author of the Tracts upon the Corn Trade, does not exceed that of one to five hundred and seventy. For supplying the home market, therefore, the importance of the inland trade must be to that of the importation trade as five hundred and seventy to one. The average quantity of all sorts of grain exported from Great Britain does not, according to the same author, exceed the one-and-thirtieth part of the annual produce. For the encouragement of tillage, therefore, by providing a market for the home produce, the importance of the inland trade must be to that of the exportation trade as thirty to one. I have no great faith in political arithmetic, and I mean not to warrant the exactness of either of these computations. I mention them only in order to show of how much less consequence, in the opinion of the most judicious and experienced persons, the foreign trade of corn is than the home trade. The great cheapness of corn in the years immediately preceding the establishment of the bounty may, perhaps with reason, be ascribed in some measure to the operation of this statute of Charles II. which had been enacted about five-and-twenty years before, and which had, therefore, full time to produce its effect. A very few words will sufficiently explain all that I have to say concerning the other three branches of the corn trade. II. The trade of the merchant-importer of foreign corn for home consumption, evidently contributes to the immediate supply of the home market, and must so far be immediately beneficial to the great body of the people. It tends, indeed, to lower somewhat the average money price of corn, but not to diminish its real value, or the quantity of labour which it is capable of maintaining. If importation was at all times free, our farmers and country gentlemen would probably, one year with another, get less money for their corn than they do at present, when importation is at most times in effect prohibited; but the money which they got would be of more value, would buy more goods of all other kinds, and would employ more labour. Their real wealth, their real revenue, therefore, would be the same as at present, though it might be expressed by a smaller quantity of silver, and they would neither be disabled nor discouraged from cultivating corn as much as they do at present. On the contrary, as the rise in the real value of silver, in consequence of lowering the money price of corn, lowers somewhat the money price of all other commodities, it gives the industry of the country where it takes place some advantage in all foreign markets, and thereby tends to encourage and increase that industry. But the extent of the home market for corn must be in proportion to the general industry of the country where it grows, or to the number of those who produce something else, and, therefore, have something else, or, what comes to the same thing, the price of something else, to give in exchange for corn. But in every country, the home market, as it is the nearest and most convenient, so is it likewise the greatest and most important market for corn. That rise in the real value of silver, therefore, which is the effect of lowering the average money price of corn, tends to enlarge the greatest and most important market for corn, and thereby to encourage, instead of discouraging its growth. By the 22nd of Charles II. c. 13, the importation of wheat, whenever the price in the home market did not exceed 53s. 4d. the quarter, was subjected to a duty of 16s. the quarter; and to a duty of 8s. whenever the price did not exceed L.4. The former of these two prices has, for more than a century past, taken place only in times of very great scarcity; and the latter has, so far as I know, not taken place at all. Yet, till wheat had risen above this latter price, it was, by this statute, subjected to a very high duty; and, till it had risen above the former, to a duty which amounted to a prohibition. The importation of other sorts of grain was restrained at rates and by duties, in proportion to the value of the grain, almost equally high.[40] Subsequent laws still further increased those duties. The distress which, in years of scarcity, the strict execution of those laws might have brought upon the people, would probably have been very great; but, upon such occasions, its execution was generally suspended by temporary statutes, which permitted, for a limited time, the importation of foreign corn. The necessity of these temporary statutes sufficiently demonstrates the impropriety of this general one. These restraints upon importation, though prior to the establishment of the bounty, were dictated by the same spirit, by the same principles, which afterwards enacted that regulation. How hurtful soever in themselves, these, or some other restraints upon importation, became necessary in consequence of that regulation. If, when wheat was either below 48s. the quarter, or not much above it, foreign corn could have been imported, either duty free, or upon paying only a small duty, it might have been exported again, with the benefit of the bounty, to the great loss of the public revenue, and to the entire perversion of the institution, of which the object was to extend the market for the home growth, not that for the growth of foreign countries. III. The trade of the merchant-exporter of corn for foreign consumption, certainly does not contribute directly to the plentiful supply of the home market. It does so, however, indirectly. From whatever source this supply may be usually drawn, whether from home growth, or from foreign importation, unless more corn is either usually grown, or usually imported into the country, than what is usually consumed in it, the supply of the home market can never be very plentiful. But unless the surplus can, in all ordinary cases, be exported, the growers will be careful never to grow more, and the importers never to import more, than what the bare consumption of the home market requires. That market will very seldom be overstocked; but it will generally be understocked; the people, whose business it is to supply it, being generally afraid lest their goods should be left upon their hands. The prohibition of exportation limits the improvement and cultivation of the country to what the supply of its own inhabitants require. The freedom of exportation enables it to extend cultivation for the supply of foreign nations. By the 12th of Charles II. c. 4, the exportation of corn was permitted whenever the price of wheat did not exceed 40s. the quarter, and that of other grain in proportion. By the 15th of the same prince, this liberty was extended till the price of wheat exceeded 48s. the quarter, and by the 22d, to all higher prices. A poundage, indeed, was to be paid to the king upon such exportation; but all grain was rated so low in the book of rates, that this poundage amounted only, upon wheat to 1s. upon oats to 4d. and upon all other grain to 6d. the quarter. By the 1st of William and Mary, the act which established this bounty, this small duty was virtually taken off whenever the price of wheat did not exceed 48s. the quarter; and by the 11th and 12th of William III. c. 20, it was expressly taken off at all higher prices. The trade of the merchant-exporter was, in this manner, not only encouraged by a bounty, but rendered much more free than that of the inland dealer. By the last of these statutes, corn could be engrossed at any price for exportation; but it could not be engrossed for inland sale, except when the price did not exceed 48s. the quarter. The interest of the inland dealer, however, it has already been shown, can never be opposite to that of the great body of the people. That of the merchant-exporter may, and in fact sometimes is. If, while his own country labours under a dearth, a neighbouring country should be afflicted with a famine, it might be his interest to carry corn to the latter country, in such quantities as might very much aggravate the calamities of the dearth. The plentiful supply of the home market was not the direct object of those statutes; but, under the pretence of encouraging agriculture, to raise the money price of corn as high as possible, and thereby to occasion, as much as possible, a constant dearth in the home market. By the discouragement of importation, the supply of that market, even in times of great scarcity, was confined to the home growth; and by the encouragement of exportation, when the price was so high as 48s. the quarter, that market was not, even in times of considerable scarcity, allowed to enjoy the whole of that growth. The temporary laws, prohibiting, for a limited time, the exportation of corn, and taking off, for a limited time, the duties upon its importation, expedients to which Great Britain has been obliged so frequently to have recourse, sufficiently demonstrate the impropriety of her general system. Had that system been good, she would not so frequently have been reduced to the necessity of departing from it. Were all nations to follow the liberal system of free exportation and free importation, the different states into which a great continent was divided, would so far resemble the different provinces of a great empire. As among the different provinces of a great empire, the freedom of the inland trade appears, both from reason and experience, not only the best palliative of a dearth, but the most effectual preventive of a famine; so would the freedom of the exportation and importation trade be among the different states into which a great continent was divided. The larger the continent, the easier the communication through all the different parts of it, both by land and by water, the less would any one particular part of it ever he exposed to either of these calamities, the scarcity of any one country being more likely to be relieved by the plenty of some other. But very few countries have entirely adopted this liberal system. The freedom of the corn trade is almost everywhere more or less restrained, and in many countries is confined by such absurd regulations, as frequently aggravate the unavoidable misfortune of a dearth into the dreadful calamity of a famine. The demand of such countries for corn may frequently become so great and so urgent, that a small state in their neighbourhood, which happened at the same time to be labouring under some degree of dearth, could not venture to supply them without exposing itself to the like dreadful calamity. The very bad policy of one country may thus render it, in some measure, dangerous and imprudent to establish what would otherwise be the best policy in another. The unlimited freedom of exportation, however, would be much less dangerous in great states, in which the growth being much greater, the supply could seldom be much affected by any quantity of corn that was likely to be exported. In a Swiss canton, or in some of the little states in Italy, it may, perhaps, sometimes be necessary to restrain the exportation of corn. In such great countries as France or England, it scarce ever can. To hinder, besides, the farmer from sending his goods at all times to the best market, is evidently to sacrifice the ordinary laws of justice to an idea of public utility, to a sort of reasons of state; an act of legislative authority which ought to be exercised only, which can be pardoned only, in cases of the most urgent necessity. The price at which exportation of corn is prohibited, if it is ever to be prohibited, ought always to be a very high price. The laws concerning corn may everywhere be compared to the laws concerning religion. The people feel themselves so much interested in what relates either to their subsistence in this life, or to their happiness in a life to come, that government must yield to their prejudices, and, in order to preserve the public tranquillity, establish that system which they approve of. It is upon this account, perhaps, that we so seldom find a reasonable system established with regard to either of those two capital objects. IV. The trade of the merchant-carrier, or of the importer of foreign corn, in order to export it again, contributes to the plentiful supply of the home market. It is not, indeed, the direct purpose of his trade to sell his corn there; but he will generally be willing to do so, and even for a good deal less money than he might expect in a foreign market; because he saves in this manner the expense of loading and unloading, of freight and insurance. The inhabitants of the country which, by means of the carrying trade, becomes the magazine and storehouse for the supply of other countries, can very seldom be in want themselves. Though the carrying trade must thus contribute to reduce the average money price of corn in the home market, it would not thereby lower its real value; it would only raise somewhat the real value of silver. The carrying trade was in effect prohibited in Great Britain, upon all ordinary occasions, by the high duties upon the importation of foreign corn, of the greater part of which there was no drawback; and upon extraordinary occasions, when a scarcity made it necessary to suspend those duties by temporary statutes, exportation was always prohibited. By this system of laws, therefore, the carrying trade was in effect prohibited. That system of laws, therefore, which is connected with the establishment of the bounty, seems to deserve no part of the praise which has been bestowed upon it. The improvement and prosperity of Great Britain, which has been so often ascribed to those laws, may very easily be accounted for by other causes. That security which the laws in Great Britain give to every man, that he shall enjoy the fruits of his own labour, is alone sufficient to make any country flourish, notwithstanding these and twenty other absurd regulations of commerce; and this security was perfected by the Revolution, much about the same time that the bounty was established. The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security, is so powerful a principle, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions, with which the folly of human laws too often encumbers its operations: though the effect of those obstructions is always, more or less, either to encroach upon its freedom, or to diminish its security. In Great Britain industry is perfectly secure; and though it is far from being perfectly free, it is as free or freer than in any other part of Europe. Though the period of the greatest prosperity and improvement of Great Britain has been posterior to that system of laws which is connected with the bounty, we must not upon that account, impute it to those laws. It has been posterior likewise to the national debt; but the national debt has most assuredly not been the cause of it. Though the system of laws which is connected with the bounty, has exactly the same tendency with the practice of Spain and Portugal, to lower somewhat the value of the precious metals in the country where it takes place; yet Great Britain is certainly one of the richest countries in Europe, while Spain and Portugal are perhaps amongst the most beggarly. This difference of situation, however, may easily be accounted for from two different causes. First, the tax in Spain, the prohibition in Portugal of exporting gold and silver, and the vigilant police which watches over the execution of those laws, must, in two very poor countries, which between them import annually upwards of six millions sterling, operate not only more directly, but much more forcibly, in reducing the value of those metals there, than the corn laws can do in Great Britain. And, secondly, this bad policy is not in these countries counterbalanced by the general liberty and security of the people. Industry is there neither free nor secure; and the civil and ecclesiastical governments of both Spain and Portugal are such as would alone be sufficient to perpetuate their present state of poverty, even though their regulations of commerce were as wise as the greatest part of them are absurd and foolish. The 13th of the present king, c. 43, seems to have established a new system with regard to the corn laws, in many respects better than the ancient one, but in one or two respects perhaps not quite so good. By this statute, the high duties upon importation for home consumption are taken off, so soon as the price of middling wheat rises to 48s. the quarter; that of middling rye, pease, or beans, to 32s.; that of barley to 24s.; and that of oats to 16s.; and instead of them, a small duty is imposed of only 6d. upon the quarter of wheat, and upon that of other grain in proportion. With regard to all those different sorts of grain, but particularly with regard to wheat, the home market is thus opened to foreign supplies, at prices considerably lower than before. By the same statute, the old bounty of 5s. upon the exportation of wheat, ceases so soon as the price rises to 44s. the quarter, instead of 48s. the price at which it ceased before; that of 2s. 6d. upon the exportation of barley, ceases so soon as the price rises to 22s. instead of 24s. the price at which it ceased before; that of 2s. 6d. upon the exportation of oatmeal, ceases so soon as the price rises to 14s. instead of 15s. the price at which it ceased before. The bounty upon rye is reduced from 3s. 6d. to 3s. and it ceases so soon as the price rises to 28s. instead of 32s. the price at which it ceased before. If bounties are as improper as I have endeavoured to prove them to be, the sooner they cease, and the lower they are, so much the better. The same statute permits, at the lowest prices, the importation of corn in order to be exported again, duty free, provided it is in the mean time lodged in a warehouse under the joint locks of the king and the importer. This liberty, indeed, extends to no more than twenty-five of the different parts of Great Britain. They are, however, the principal ones; and there may not, perhaps, be warehouses proper for this purpose in the greater part of the others. So far this law seems evidently an improvement upon the ancient system. But by the same law, a bounty of 2s. the quarter is given for the exportation of oats, whenever the price does not exceed fourteen shillings. No bounty had ever been given before for the exportation of this grain, no more than for that of pease or beans. By the same law, too, the exportation of wheat is prohibited so soon as the price rises to forty-four shillings the quarter; that of rye so soon as it rises to twenty-eight shillings; that of barley so soon as it rises to twenty-two shillings; and that of oats so soon as they rise to fourteen shillings. Those several prices seem all of them a good deal too low; and there seems to be an impropriety, besides, in prohibiting exportation altogether at those precise prices at which that bounty, which was given in order to force it, is withdrawn. The bounty ought certainly either to have been withdrawn at a much lower price, or exportation ought to have been allowed at a much higher. So far, therefore, this law seems to be inferior to the ancient system. With all its imperfections, however, we may perhaps say of it what was said of the laws of Solon, that though not the best in itself, it is the best which the interest, prejudices, and temper of the times, would admit of. It may perhaps in due time prepare the way for a better. CHAP. VI. OF TREATIES OF COMMERCE. When a nation binds itself by treaty, either to permit the entry of certain goods from one foreign country which it prohibits from all others, or to exempt the goods of one country from duties to which it subjects those of all others, the country, or at least the merchants and manufacturers of the country, whose commerce is so favoured, must necessarily derive great advantage from the treaty. Those merchants and manufacturers enjoy a sort of monopoly in the country which is so indulgent to them. That country becomes a market, both more extensive and more advantageous for their goods: more extensive, because the goods of other nations being either excluded or subjected to heavier duties, it takes off a greater quantity of theirs; more advantageous, because the merchants of the favoured country, enjoying a sort of monopoly there, will often sell their goods for a better price than if exposed to the free competition of all other nations. Such treaties, however, though they may be advantageous to the merchants and manufacturers of the favoured, are necessarily disadvantageous to those of the favouring country. A monopoly is thus granted against them to a foreign nation; and they must frequently buy the foreign goods they have occasion for, dearer than if the free competition of other nations was admitted. That part of its own produce with which such a nation purchases foreign goods, must consequently be sold cheaper; because, when two things are exchanged for one another, the cheapness of the one is a necessary consequence, or rather is the same thing, with the dearness of the other. The exchangeable value of its annual produce, therefore, is likely to be diminished by every such treaty. This diminution, however, can scarce amount to any positive loss, but only to a lessening of the gain which it might otherwise make. Though it sells its goods cheaper than it otherwise might do, it will not probably sell them for less than they cost; nor, as in the case of bounties, for a price which will not replace the capital employed in bringing them to market, together with the ordinary profits of stock. The trade could not go on long if it did. Even the favouring country, therefore, may still gain by the trade, though less than if there was a free competition. Some treaties of commerce, however, have been supposed advantageous, upon principles very different from these; and a commercial country has sometimes granted a monopoly of this kind, against itself, to certain goods of a foreign nation, because it expected, that in the whole commerce between them, it would annually sell more than it would buy, and that a balance in gold and silver would be annually returned to it. It is upon this principle that the treaty of commerce between England and Portugal, concluded in 1703 by Mr Methuen, has been so much commended. The following is a literal translation of that treaty, which consists of three articles only. ART. I. His sacred royal majesty of Portugal promises, both in his own name and that of his successors, to admit for ever hereafter, into Portugal, the woollen cloths, and the rest of the woollen manufactures of the British, as was accustomed, till they were prohibited by the law; nevertheless upon this condition: ART. II. That is to say, that her sacred royal majesty of Great Britain shall, in her own name, and that of her successors, be obliged, for ever hereafter, to admit the wines of the growth of Portugal into Britain; so that at no time, whether there shall be peace or war between the kingdoms of Britain and France, any thing more shall be demanded for these wines by the name of custom or duty, or by whatsoever other title, directly or indirectly, whether they shall be imported into Great Britain in pipes or hogsheads, or other casks, than what shall be demanded for the like quantity or measure of French wine, deducting or abating a third part of the custom or duty. But if, at any time, this deduction or abatement of customs, which is to be made as aforesaid, shall in any manner be attempted and prejudiced, it shall be just and lawful for his sacred royal majesty of Portugal, again to prohibit the woollen cloths, and the rest of the British woollen manufactures. ART. III. The most excellent lords the plenipotentiaries promise and take upon themselves, that their above named masters shall ratify this treaty; and within the space of two months the ratification shall be exchanged. By this treaty, the crown of Portugal becomes bound to admit the English woollens upon the same footing as before the prohibition; that is, not to raise the duties which had been paid before that time. But it does not become bound to admit them upon any better terms than those of any other nation, of France or Holland, for example. The crown of Great Britain, on the contrary, becomes bound to admit the wines of Portugal, upon paying only two-thirds of the duty which is paid for those of France, the wines most likely to come into competition with them. So far this treaty, therefore, is evidently advantageous to Portugal, and disadvantageous to Great Britain. It has been celebrated, however, as a masterpiece of the commercial policy of England. Portugal receives annually from the Brazils a greater quantity of gold than can be employed in its domestic commerce, whether in the shape of coin or of plate. The surplus is too valuable to be allowed to lie idle and locked up in coffers; and as it can find no advantageous market at home, it must, notwithstanding any prohibition, be sent abroad, and exchanged for something for which there is a more advantageous market at home. A large share of it comes annually to England, in return either for English goods, or for those of other European nations that receive their returns through England. Mr Barretti was informed, that the weekly packet-boat from Lisbon brings, one week with another, more than L.50,000 in gold to England. The sum had probably been exaggerated. It would amount to more than L.2,600,000 a-year, which is more than the Brazils are supposed to afford. Our merchants were, some years ago, out of humour with the crown of Portugal. Some privileges which had been granted them, not by treaty, but by the free grace of that crown, at the solicitation, indeed, it is probable, and in return for much greater favours, defence and protection from the crown of Great Britain, had been either infringed or revoked. The people, therefore, usually most interested in celebrating the Portugal trade, were then rather disposed to represent it as less advantageous than it had commonly been imagined. The far greater part, almost the whole, they pretended, of this annual importation of gold, was not on account of Great Britain, but of other European nations; the fruits and wines of Portugal annually imported into Great Britain nearly compensating the value of the British goods sent thither. Let us suppose, however, that the whole was on account of Great Britain, and that it amounted to a still greater sum than Mr Barretti seems to imagine; this trade would not, upon that account, be more advantageous than any other, in which, for the same value sent out, we received an equal value of consumable goods in return. It is but a very small part of this importation which, it can be supposed, is employed as an annual addition, either to the plate or to the coin of the kingdom. The rest must all be sent abroad, and exchanged for consumable goods of some kind or other. But if those consumable goods were purchased directly with the produce of English industry, it would be more for the advantage of England, than first to purchase with that produce the gold of Portugal, and afterwards to purchase with that gold those consumable goods. A direct foreign trade of consumption is always more advantageous than a round-about one; and to bring the same value of foreign goods to the home market, requires a much smaller capital in the one way than in the other. If a smaller share of its industry, therefore, had been employed in producing goods fit for the Portugal market, and a greater in producing those fit for the other markets, where those consumable goods for which there is a demand in Great Britain are to be had, it would have been more for the advantage of England. To procure both the gold which it wants for its own use, and the consumable goods, would, in this way, employ a much smaller capital than at present. There would be a spare capital, therefore, to be employed for other purposes, in exciting an additional quantity of industry, and in raising a greater annual produce. Though Britain were entirely excluded from the Portugal trade, it could find very little difficulty in procuring all the annual supplies of gold which it wants, either for the purposes of plate, or of coin, or of foreign trade. Gold, like every other commodity, is always somewhere or another to be got for its value by those who have that value to give for it. The annual surplus of gold in Portugal, besides, would still be sent abroad, and though not carried away by Great Britain, would be carried away by some other nation, which would be glad to sell it again for its price, in the same manner as Great Britain does at present. In buying gold of Portugal, indeed, we buy it at the first hand; whereas, in buying it of any other nation, except Spain, we should buy it at the second, and might pay somewhat dearer. This difference, however, would surely be too insignificant to deserve the public attention. Almost all our gold, it is said, comes from Portugal. With other nations, the balance of trade is either against us, or not much in our favour. But we should remember, that the more gold we import from one country, the less we must necessarily import from all others. The effectual demand for gold, like that for every other commodity, is in every country limited to a certain quantity. If nine-tenths of this quantity are imported from one country, there remains a tenth only to be imported from all others. The more gold, besides, that is annually imported from some particular countries, over and above what is requisite for plate and for coin, the more must necessarily be exported to some others: and the more that most insignificant object of modern policy, the balance of trade, appears to be in our favour with some particular countries, the more it must necessarily appear to be against us with many others. It was upon this silly notion, however, that England could not subsist without the Portugal trade, that, towards the end of the late war, France and Spain, without pretending either offence or provocation, required the king of Portugal to exclude all British ships from his ports, and, for the security of this exclusion, to receive into them French or Spanish garrisons. Had the king of Portugal submitted to those ignominious terms which his brother-in-law the king of Spain proposed to him, Britain would have been freed from a much greater inconveniency than the loss of the Portugal trade, the burden of supporting a very weak ally, so unprovided of every thing for his own defence, that the whole power of England, had it been directed to that single purpose, could scarce, perhaps, have defended him for another campaign. The loss of the Portugal trade would, no doubt, have occasioned a considerable embarrassment to the merchants at that time engaged in it, who might not, perhaps, have found out, for a year or two, any other equally advantageous method of employing their capitals; and in this would probably have consisted all the inconveniency which England could have suffered from this notable piece of commercial policy. The great annual importation of gold and silver is neither for the purpose of plate nor of coin, but of foreign trade. A round-about foreign trade of consumption can be carried on more advantageously by means of these metals than of almost any other goods. As they are the universal instruments of commerce, they are more readily received in return for all commodities than any other goods; and, on account of their small bulk and great value, it costs less to transport them backward and forward from one place to another than almost any other sort of merchandize, and they lose less of their value by being so transported. Of all the commodities, therefore, which are bought in one foreign country, for no other purpose but to be sold or exchanged again for some other goods in another, there are none so convenient as gold and silver. In facilitating all the different round-about foreign trades of consumption which are carried on in Great Britain, consists the principal advantage of the Portugal trade; and though it is not a capital advantage, it is, no doubt, a considerable one. That any annual addition which, it can reasonably be supposed, is made either to the plate or to the coin of the kingdom, could require but a very small annual importation of gold and silver, seems evident enough; and though we had no direct trade with Portugal, this small quantity could always, somewhere or another, be very easily got. Though the goldsmiths trade be very considerable in Great Britain, the far greater part of the new plate which they annually sell, is made from other old plate melted down; so that the addition annually made to the whole plate of the kingdom cannot be very great, and could require but a very small annual importation. It is the same case with the coin. Nobody imagines, I believe, that even the greater part of the annual coinage, amounting, for ten years together, before the late reformation of the gold coin, to upwards of L.800,000 a-year in gold, was an annual addition to the money before current in the kingdom. In a country where the expense of the coinage is defrayed by the government, the value of the coin, even when it contains its full standard weight of gold and silver, can never be much greater than that of an equal quantity of those metals uncoined, because it requires only the trouble of going to the mint, and the delay, perhaps, of a few weeks, to procure for any quantity of uncoined gold and silver an equal quantity of those metals in coin; but in every country the greater part of the current coin is almost always more or less worn, or otherwise degenerated from its standard. In Great Britain it was, before the late reformation, a good deal so, the gold being more than two per cent., and the silver more than eight per cent. below its standard weight. But if forty-four guineas and a-half, containing their full standard weight, a pound weight of gold, could purchase very little more than a pound weight of uncoined gold; forty-four guineas and a-half, wanting a part of their weight, could not purchase a pound weight, and something was to be added, in order to make up the deficiency. The current price of gold bullion at market, therefore, instead of being the same with the mint price, or L.46 : 14 : 6, was then about L.47 : 14s., and sometimes about L.48. When the greater part of the coin, however, was in this degenerate condition, forty-four guineas and a-half, fresh from the mint, would purchase no more goods in the market than any other ordinary guineas; because, when they came into the coffers of the merchant, being confounded with other money, they could not afterwards be distinguished without more trouble than the difference was worth. Like other guineas, they were worth no more than L.46 : 14 : 6. If thrown into the melting pot, however, they produced, without any sensible loss, a pound weight of standard gold, which could be sold at any time for between L.47 : 14s. and L.48, either in gold or silver, as fit for all the purposes of coin as that which had been melted down. There was an evident profit, therefore, in melting down new-coined money; and it was done so instantaneously, that no precaution of government could prevent it. The operations of the mint were, upon this account, somewhat like the web of Penelopé; the work that was done in the day was undone in the night. The mint was employed, not so much in making daily additions to the coin, as in replacing the very best part of it, which was daily melted down. Were the private people who carry their gold and silver to the mint to pay themselves for the coinage, it would add to the value of those metals, in the same manner as the fashion does to that of plate. Coined gold and silver would be more valuable than uncoined. The seignorage, if it was not exorbitant, would add to the bullion the whole value of the duty; because, the government having everywhere the exclusive privilege of coining, no coin can come to market cheaper than they think proper to afford it. If the duty was exorbitant, indeed, that is, if it was very much above the real value of the labour and expense requisite for coinage, false coiners, both at home and abroad, might be encouraged, by the great difference between the value of bullion and that of coin, to pour in so great a quantity of counterfeit money as might reduce the value of the government money. In France, however, though the seignorage is eight per cent., no sensible inconveniency of this kind is found to arise from it. The dangers to which a false coiner is everywhere exposed, if he lives in the country of which he counterfeits the coin, and to which his agents or correspondents are exposed, if he lives in a foreign country, are by far too great to be incurred for the sake of a profit of six or seven per cent. The seignorage in France raises the value of the coin higher than in proportion to the quantity of pure gold which it contains. Thus, by the edict of January 1726, the[41] mint price of fine gold of twenty-four carats was fixed at seven hundred and forty livres nine sous and one denier one-eleventh the mark of eight Paris ounces. The gold coin of France, making an allowance for the remedy of the mint, contains twenty-one carats and three-fourths of fine gold, and two carats one-fourth of alloy. The mark of standard gold, therefore, is worth no more than about six hundred and seventy-one livres ten deniers. But in France this mark of standard gold is coined into thirty louis d'ors of twenty-four livres each, or into seven hundred and twenty livres. The coinage, therefore, increases the value of a mark of standard gold bullion, by the difference between six hundred and seventy-one livres ten deniers and seven hundred and twenty livres, or by forty-eight livres nineteen sous and two deniers. A seignorage will, in many cases, take away altogether, and will in all cases diminish, the profit of melting down the new coin. This profit always arises from the difference between the quantity of bullion which the common currency ought to contain and that which it actually does contain. If this difference is less than the seignorage, there will be loss instead of profit. If it is equal to the seignorage, there will be neither profit nor loss. If it is greater than the seignorage, there will, indeed, be some profit, but less than if there was no seignorage. If, before the late reformation of the gold coin, for example, there had been a seignorage of five per cent. upon the coinage, there would have been a loss of three per cent. upon the melting down of the gold coin. If the seignorage had been two per cent, there would have been neither profit nor loss. If the seignorage had been one per cent., there would have been a profit but of one per cent. only, instead of two per cent. Wherever money is received by tale, therefore, and not by weight, a seignorage is the most effectual preventive of the melting down of the coin, and, for the same reason, of its exportation. It is the best and heaviest pieces that are commonly either melted down or exported, because it is upon such that the largest profits are made. The law for the encouragement of the coinage, by rendering it duty-free, was first enacted during the reign of Charles II. for a limited time, and afterwards continued, by different prolongations, till 1769, when it was rendered perpetual. The bank of England, in order to replenish their coffers with money, are frequently obliged to carry bullion to the mint; and it was more for their interest, they probably imagined, that the coinage should be at the expense of the government than at their own. It was probably out of complaisance to this great company, that the government agreed to render this law perpetual. Should the custom of weighing gold, however, come to be disused, as it is very likely to be on account of its inconveniency; should the gold coin of England come to be received by tale, as it was before the late recoinage, this great company may, perhaps, find that they have, upon this, as upon some other occasions, mistaken their own interest not a little. Before the late recoinage, when the gold currency of England was two per cent. below its standard weight, as there was no seignorage, it was two per cent. below the value of that quantity of standard gold bullion which it ought to have contained. When this great company, therefore, bought gold bullion in order to have it coined, they were obliged to pay for it two per cent. more than it was worth after the coinage. But if there had been a seignorage of two per cent upon the coinage, the common gold currency, though two per cent. below its standard weight, would, notwithstanding, have been equal in value to the quantity of standard gold which it ought to have contained; the value of the fashion compensating in this case the diminuation of the weight. They would, indeed, have had the seignorage to pay, which being two per cent., their loss upon the whole transaction would have been two per cent., exactly the same, but no greater than it actually was. If the seignorage had been five per cent., and the gold currency only two per cent. below its standard weight, the bank would, in this case, have gained three per cent. upon the price of the bullion; but as they would have had a seignorage of five per cent. to pay upon the coinage, their loss upon the whole transaction would, in the same manner, have been exactly two per cent. If the seignorage had been only one per cent., and the gold currency two per cent. below its standard weight, the bank would, in this case, have lost only one per cent. upon the price of the bullion; but as they would likewise have had a seignorage of one per cent. to pay, their loss upon the whole transaction would have been exactly two per cent., in the same manner as in all other cases. If there was a reasonable seignorage, while at the same time the coin contained its full standard weight, as it has done very nearly since the late recoinage, whatever the bank might lose by the seignorage, they would gain upon the price of the bullion; and whatever they might gain upon the price of the bullion, they would lose by the seignorage. They would neither lose nor gain, therefore, upon the whole transaction, and they would, in this, as in all the foregoing cases, be exactly in the same situation as if there was no seignorage. When the tax upon a commodity is so moderate as not to encourage smuggling, the merchant who deals in it, though he advances, does not properly pay the tax, as he gets it back in the price of the commodity. The tax is finally paid by the last purchaser or consumer. But money is a commodity, with regard to which every man is a merchant. Nobody buys it but in order to sell it again; and with regard to it there is, in ordinary cases, no last purchaser or consumer. When the tax upon coinage, therefore, is so moderate as not to encourage false coining, though every body advances the tax, nobody finally pays it; because every body gets it back in the advanced value of the coin. A moderate seignorage, therefore, would not, in any case, augment the expense of the bank, or of any other private persons who carry their bullion to the mint in order to be coined; and the want of a moderate seignorage does not in any case diminish it. Whether there is or is not a seignorage, if the currency contains its full standard weight, the coinage costs nothing to any body; and if it is short of that weight, the coinage must always cost the difference between the quantity of bullion which ought to be contained in it, and that which actually is contained in it. The government, therefore, when it defrays the expense of coinage, not only incurs some small expense, but loses some small revenue which it might get by a proper duty; and neither the bank, nor any other private persons, are in the smallest degree benefited by this useless piece of public generosity. The directors of the bank, however, would probably be unwilling to agree to the imposition of a seignorage upon the authority of a speculation which promises them no gain, but only pretends to insure them from any loss. In the present state of the gold coin, and as long as it continues to be received by weight, they certainly would gain nothing by such a change. But if the custom of weighing the gold coin should ever go into disuse, as it is very likely to do, and if the gold coin should ever fall into the same state of degradation in which it was before the late recoinage, the gain, or more properly the savings, of the bank, in consequence of the imposition of a seignorage, would probably be very considerable. The bank of England is the only company which sends any considerable quantity of bullion to the mint, and the burden of the annual coinage falls entirely, or almost entirely, upon it. If this annual coinage had nothing to do but to repair the unavoidable losses and necessary wear and tear of the coin, it could seldom exceed fifty thousand, or at most a hundred thousand pounds. But when the coin is degraded below its standard weight, the annual coinage must, besides this, fill up the large vacuities which exportation and the melting pot are continually making in the current coin. It was upon this account, that during the ten or twelve years immediately preceding the late reformation of the gold coin, the annual coinage amounted, at an average, to more than L.850,000. But if there had been a seignorage of four or five per cent. upon the gold coin, it would probably, even in the state in which things then were, have put an effectual stop to the business both of exportation and of the melting pot. The bank, instead of losing every year about two and a half per cent. upon the bullion which was to be coined into more than eight hundred and fifty thousand pounds, or incurring an annual loss of more than twenty-one thousand two hundred and fifty pounds, would not probably have incurred the tenth part of that loss. The revenue allotted by parliament for defraying the expense of the coinage is but fourteen thousand pounds a-year; and the real expense which it costs the government, or the fees of the officers of the mint, do not, upon ordinary occasions, I am assured, exceed the half of that sum. The saving of so very small a sum, or even the gaining of another, which could not well be much larger, are objects too inconsiderable, it may be thought, to deserve the serious attention of government. But the saving of eighteen or twenty thousand pounds a-year, in case of an event which is not improbable, which has frequently happened before, and which in very likely to happen again, is surely an object which well deserves the serious attention, even of so great a company as the bank of England. Some of the foregoing reasonings and observations might, perhaps, have been more properly placed in those chapters of the first book which treat of the origin and use of money, and of the difference between the real and the nominal price of commodities. But as the law for the encouragement of coinage derives its origin from these vulgar prejudices which have been introduced by the mercantile system, I judged it more proper to reserve them for this chapter. Nothing could be more agreeable to the spirit of that system than a sort of bounty upon the production of money, the very thing which, it supposes, constitutes the wealth of every nation. It is one of its many admirable expedients for enriching the country. CHAP. VII. OF COLONIES. PART I. _Of the Motives for Establishing New Colonies._ The interest which occasioned the first settlement of the different European colonies in America and the West Indies, was not altogether so plain and distinct as that which directed the establishment of those of ancient Greece and Rome. All the different states of ancient Greece possessed, each of them, but a very small territory; and when the people in any one of them multiplied beyond what that territory could easily maintain, a part of them were sent in quest of a new habitation, in some remote and distant part of the world; the war-like neighbours who surrounded them on all sides, rendering it difficult for any of them to enlarge very much its territory at home. The colonies of the Dorians resorted chiefly to Italy and Sicily, which, in the times preceding the foundation of Rome, were inhabited by barbarous and uncivilized nations; those of the Ionians and �olians, the two other great tribes of the Greeks, to Asia Minor and the islands of the �gean sea, of which the inhabitants seem at that time to have been pretty much in the same state as those of Sicily and Italy. The mother city, though she considered the colony as a child, at all times entitled to great favour and assistance, and owing in return much gratitude and respect, yet considered it as an emancipated child, over whom she pretended to claim no direct authority or jurisdiction. The colony settled its own form of government, enacted its own laws, elected its own magistrates, and made peace or war with its neighbours, as an independent state, which had no occasion to wait for the approbation or consent of the mother city. Nothing can be more plain and distinct than the interest which directed every such establishment. Rome, like most of the other ancient republics, was originally founded upon an agrarian law, which divided the public territory, in a certain proportion, among the different citizens who composed the state. The course of human affairs, by marriage, by succession, and by alienation, necessarily deranged this original division, and frequently threw the lands which had been allotted for the maintenance of many different families, into the possession of a single person. To remedy this disorder, for such it was supposed to be, a law was made, restricting the quantity of land which any citizen could possess to five hundred _jugera_, about 350 English acres. This law, however, though we read of its having been executed upon one or two occasions, was either neglected or evaded, and the inequality of fortunes went on continually increasing. The greater part of the citizens had no land; and without it the manners and customs of those times rendered it difficult for a freeman to maintain his independency. In the present times, though a poor man has no land of his own, if he has a little stock, he may either farm the lands of another, or he may carry on some little retail trade; and if he has no stock, he may find employment either as a country labourer, or as an artificer. But among the ancient Romans, the lands of the rich were all cultivated by slaves, who wrought under an overseer, who was likewise a slave; so that a poor freeman had little chance of being employed either as a farmer or as a labourer. All trades and manufactures, too, even the retail trade, were carried on by the slaves of the rich for the benefit of their masters, whose wealth, authority, and protection, made it difficult for a poor freeman to maintain the competition against them. The citizens, therefore, who had no land, had scarce any other means of subsistence but the bounties of the candidates at the annual elections. The tribunes, when they had a mind to animate the people against the rich and the great, put them in mind of the ancient divisions of lands, and represented that law which restricted this sort of private property as the fundamental law of the republic. The people became clamorous to get land, and the rich and the great, we may believe, were perfectly determined not to give them any part of theirs. To satisfy them in some measure, therefore, they frequently proposed to send out a new colony. But conquering Rome was, even upon such occasions, under no necessity of turning out her citizens to seek their fortune, if one may so, through the wide world, without knowing where they were to settle. She assigned them lands generally in the conquered provinces of Italy, where, being within the dominions of the republic, they could never form any independent state, but were at best but a sort of corporation, which, though it had the power of enacting bye-laws for its own government, was at all times subject to the correction, jurisdiction, and legislative authority of the mother city. The sending out a colony of this kind not only gave some satisfaction to the people, but often established a sort of garrison, too, in a newly conquered province, of which the obedience might otherwise have been doubtful. A Roman colony, therefore, whether we consider the nature of the establishment itself, or the motives for making it, was altogether different from a Greek one. The words, accordingly, which in the original languages denote those different establishments, have very different meanings. The Latin word (_colonia_) signifies simply a plantation. The Greek word ([Greek: apoikia]), on the contrary, signifies a separation of dwelling, a departure from home, a going out of the house. But though the Roman colonies were, in many respects, different from the Greek ones, the interest which prompted to establish them was equally plain and distinct. Both institutions derived their origin, either from irresistible necessity, or from clear and evident utility. The establishment of the European colonies in America and the West Indies arose from no necessity; and though the utility which has resulted from them has been very great, it is not altogether so clear and evident. It was not understood at their first establishment, and was not the motive, either of that establishment, or of the discoveries which gave occasion to it; and the nature, extent, and limits of that utility, are not, perhaps, well understood at this day. The Venetians, during the fourteenth and fifteenth centuries, carried on a very advantageous commerce in spiceries and other East India goods, which they distributed among the other nations of Europe. They purchased them chiefly in Egypt, at that time under the dominion of the Mamelukes, the enemies of the Turks, of whom the Venetians were the enemies: and this union of interest, assisted by the money of Venice, formed such a connexion as gave the Venetians almost a monopoly of the trade. The great profits of the Venetians tempted the avidity of the Portuguese. They had been endeavouring, during the course of the fifteenth century, to find out by sea a way to the countries from which the Moors brought them ivory and gold dust across the desert. They discovered the Madeiras, the Canaries, the Azores, the Cape de Verd islands, the coast of Guinea, that of Loango, Congo, Angola, and Benguela, and, finally, the Cape of Good Hope. They had long wished to share in the profitable traffic of the Venetians, and this last discovery opened to them a probable prospect of doing so. In 1497, Vasco de Gamo sailed from the port of Lisbon with a fleet of four ships, and, after a navigation of eleven months, arrived upon the coast of Indostan; and thus completed a course of discoveries which had been pursued with great steadiness, and with very little interruption, for near a century together. Some years before this, while the expectations of Europe were in suspense about the projects of the Portuguese, of which the success appeared yet to be doubtful, a Genoese pilot formed the yet more daring project of sailing to the East Indies by the west. The situation of those countries was at that time very imperfectly known in Europe. The few European travellers who had been there, had magnified the distance, perhaps through simplicity and ignorance; what was really very great, appearing almost infinite to those who could not measure it; or, perhaps, in order to increase somewhat more the marvellous of their own adventures in visiting regions so immensely remote from Europe. The longer the way was by the east, Columbus very justly concluded, the shorter it would be by the west. He proposed, therefore, to take that way, as both the shortest and the surest, and he had the good fortune to convince Isabella of Castile of the probability of his project. He sailed from the port of Palos in August 1492, near five years before the expedition of Vasco de Gamo set out from Portugal; and, after a voyage of between two and three months, discovered first some of the small Bahama or Lucyan islands, and afterwards the great island of St. Domingo. But the countries which Columbus discovered, either in this or in any of his subsequent voyages, had no resemblance to those which he had gone in quest of. Instead of the wealth, cultivation, and populousness of China and Indostan, he found, in St. Domingo, and in all the other parts of the new world which he ever visited, nothing but a country quite covered with wood, uncultivated, and inhabited only by some tribes of naked and miserable savages. He was not very willing, however, to believe that they were not the same with some of the countries described by Marco Polo, the first European who had visited, or at least had left behind him any description of China or the East Indies; and a very slight resemblance, such as that which he found between the name of Cibao, a mountain in St. Domingo, and that of Cipange, mentioned by Marco Polo, was frequently sufficient to make him return to this favourite prepossession, though contrary to the clearest evidence. In his letters to Ferdinand and Isabella, he called the countries which he had discovered the Indies. He entertained no doubt but that they were the extremity of those which had been described by Marco Polo, and that they were not very distant from the Ganges, or from the countries which had been conquered by Alexander. Even when at last convinced that they were different, he still flattered himself that those rich countries were at no great distance; and in a subsequent voyage, accordingly, went in quest of them along the coast of Terra Firma, and towards the Isthmus of Darien. In consequence of this mistake of Columbus, the name of the Indies has stuck to those unfortunate countries ever since; and when it was at last clearly discovered that the new were altogether different from the old Indies, the former were called the West, in contradistinction to the latter, which were called the East Indies. It was of importance to Columbus, however, that the countries which he had discovered, whatever they were, should be represented to the court of Spain as of very great consequence; and, in what constitutes the real riches of every country, the animal and vegetable productions of the soil, there was at that time nothing which could well justify such a representation of them. The cori, something between a rat and a rabbit, and supposed by Mr Buffon to be the same with the aperea of Brazil, was the largest viviparous quadruped in St. Domingo. This species seems never to have been very numerous; and the dogs and cats of the Spaniards are said to have long ago almost entirely extirpated it, as well as some other tribes of a still smaller size. These, however, together with a pretty large lizard, called the ivana or iguana, constituted the principal part of the animal food which the land afforded. The vegetable food of the inhabitants, though, from their want of industry, not very abundant, was not altogether so scanty. It consisted in Indian corn, yams, potatoes, bananas, &c., plants which were then altogether unknown in Europe, and which have never since been very much esteemed in it, or supposed to yield a sustenance equal to what is drawn from the common sorts of grain and pulse, which have been cultivated in this part of the world time out of mind. The cotton plant, indeed, afforded the material of a very important manufacture, and was at that time, to Europeans, undoubtedly the most valuable of all the vegetable productions of those islands. But though, in the end of the fifteenth century, the muslins and other cotton goods of the East Indies were much esteemed in every part of Europe, the cotton manufacture itself was not cultivated in any part of it. Even this production, therefore, could not at that time appear in the eyes of Europeans to be of very great consequence. Finding nothing, either in the animals or vegetables of the newly discovered countries which could justify a very advantageous representation of them, Columbus turned his view towards their minerals; and in the richness of their productions of this third kingdom, he flattered himself he had found a full compensation for the insignificancy of those of the other two. The little bits of gold with which the inhabitants ornamented their dress, and which, he was informed, they frequently found in the rivulets and torrents which fell from the mountains, were sufficient to satisfy him that those mountains abounded with the richest gold mines. St. Domingo, therefore, was represented as a country abounding with gold, and upon that account (according to the prejudices not only of the present times, but of those times), an inexhaustible source of real wealth to the crown and kingdom of Spain. When Columbus, upon his return from his first voyage, was introduced with a sort of triumphal honours to the sovereigns of Castile and Arragon, the principal productions of the countries which he had discovered were carried in solemn procession before him. The only valuable part of them consisted in some little fillets, bracelets, and other ornaments of gold, and in some bales of cotton. The rest were mere objects of vulgar wonder and curiosity; some reeds of an extraordinary size, some birds of a very beautiful plumage, and some stuffed skins of the huge alligator and manati; all of which were preceded by six or seven of the wretched natives, whose singular colour and appearance added greatly to the novelty of the show. In consequence of the representations of Columbus, the council of Castile determined to take possession of the countries of which the inhabitants were plainly incapable of defending themselves. The pious purpose of converting them to Christianity sanctified the injustice of the project. But the hope of finding treasures of gold there was the sole motive which prompted to undertake it; and to give this motive the greater weight, it was proposed by Columbus, that the half of all the gold and silver that should be found there, should belong to the crown. This proposal was approved of by the council. As long as the whole, or the greater part of the gold which the first adventurers imported into Europe was got by so very easy a method as the plundering of the defenceless natives, it was not perhaps very difficult to pay even this heavy tax; but when the natives were once fairly stript of all that they had, which, in St. Domingo, and in all the other countries discovered by Columbus, was done completely in six or eight years, and when, in order to find more, it had become necessary to dig for it in the mines, there was no longer any possibility of paying this tax. The rigorous exaction of it, accordingly, first occasioned, it is said, the total abandoning of the mines of St. Domingo, which have never been wrought since. It was soon reduced, therefore, to a third; then to a fifth; afterwards to a tenth; and at last to a twentieth part of the gross produce of the gold mines. The tax upon silver continued for a long time to be a fifth of the gross produce. It was reduced to a tenth only in the course of the present century. But the first adventurers do not appear to have been much interested about silver. Nothing less precious than gold seemed worthy of their attention. All the other enterprizes of the Spaniards in the New World, subsequent to those of Columbus, seem to have been prompted by the same motive. It was the sacred thirst of gold that carried Ovieda, Nicuessa, and Vasco Nugnes de Balboa, to the Isthmus of Darien; that carried Cortes to Mexico, Almagro and Pizarro to Chili and Peru. When those adventurers arrived upon any unknown coast, their first inquiry was always if there was any gold to be found there; and according to the information which they received concerning this particular, they determined either to quit the country or to settle in it. Of all those expensive and uncertain projects, however, which bring bankruptcy up on the greater part of the people who engage in them, there is none, perhaps, more perfectly ruinous than the search after new silver and gold mines. It is, perhaps, the most disadvantageous lottery in the world, or the one in which the gain of those who draw the prizes bears the least proportion to the loss of those who draw the blanks; for though the prizes are few, and the blanks many, the common price of a ticket is the whole fortune of a very rich man. Projects of mining, instead of replacing the capital employed in them, together with the ordinary profits of stock, commonly absorb both capital and profit. They are the projects, therefore, to which, of all others, a prudent lawgiver, who desired to increase the capital of his nation, would least choose to give any extraordinary encouragement, or to turn towards them a greater share of that capital than what would go to them of its own accord. Such, in reality, is the absurd confidence which almost all men have in their own good fortune, that wherever there is the least probability of success, too great a share of it is apt to go to them of its own accord. But though the judgment of sober reason and experience concerning such projects has always been extremely unfavourable, that of human avidity has commonly been quite otherwise. The same passion which has suggested to so many people the absurd idea of the philosopher's stone, has suggested to others the equally absurd one of immense rich mines of gold and silver. They did not consider that the value of those metals has, in all ages and nations, arisen chiefly from their scarcity, and that their scarcity has arisen from the very small quantities of them which nature has anywhere deposited in one place, from the hard and intractable substances with which she has almost everywhere surrounded those small quantities, and consequently from the labour and expense which are everywhere necessary in order to penetrate, and get at them. They flattered themselves that veins of those metals might in many places be found, as large and as abundant as those which are commonly found of lead, or copper, or tin, or iron. The dream of Sir Walter Raleigh, concerning the golden city and country of El Dorado, may satisfy us, that even wise men are not always exempt from such strange delusions. More than a hundred years after the death of that great man, the Jesuit Gumila was still convinced of the reality of that wonderful country, and expressed, with great warmth, and, I dare say, with great sincerity, how happy he should be to carry the light of the gospel to a people who could so well reward the pious labours of their missionary. In the countries first discovered by the Spaniards, no gold or silver mines are at present known which are supposed to be worth the working. The quantities of those metals which the first adventurers are said to have found there, had probably been very much magnified, as well as the fertility of the mines which were wrought immediately after the first discovery. What those adventurers were reported to have found, however, was sufficient to inflame the avidity of all their countrymen. Every Spaniard who sailed to America expected to find an El Dorado. Fortune, too, did upon this what she has done upon very few other occasions. She realized in some measure the extravagant hopes of her votaries; and in the discovery and conquest of Mexico and Peru (of which the one happened about thirty, and the other about forty, years after the first expedition of Columbus), she presented them with something not very unlike that profusion of the precious metals which they sought for. A project of commerce to the East Indies, therefore, gave occasion to the first discovery of the West. A project of conquest gave occasion to all the establishments of the Spaniards in those newly discovered countries. The motive which excited them to this conquest was a project of gold and silver mines; and a course of accidents which no human wisdom could foresee, rendered this project much more successful than the undertakers had any reasonable grounds for expecting. The first adventurers of all the other nations of Europe who attempted to make settlements in America, were animated by the like chimerical views; but they were not equally successful. It was more than a hundred years after the first settlement of the Brazils, before any silver, gold, or diamond mines, were discovered there. In the English, French, Dutch, and Danish colonies, none have ever yet been discovered, at least none that are at present supposed to be worth the working. The first English settlers in North America, however, offered a fifth of all the gold and silver which should be found there to the king, as a motive for granting them their patents. In the patents of Sir Walter Raleigh, to the London and Plymouth companies, to the council of Plymouth, &c. this fifth was accordingly reserved to the crown. To the expectation of finding gold and silver mines, those first settlers, too, joined that of discovering a north-west passage to the East Indies. They have hitherto been disappointed in both. PART II. _Causes of the Prosperity of New Colonies._ The colony of a civilized nation which takes possession either of a waste country, or of one so thinly inhabited that the natives easily give place to the new settlers, advances more rapidly to wealth and greatness than any other human society. The colonies carry out with them a knowledge of agriculture and of other useful arts, superior to what can grow up of its own accord, in the course of many centuries, among savage and barbarous nations. They carry out with them, too, the habit of subordination, some notion of the regular government which takes place in their own country, of the system of laws which support it, and of a regular administration of justice; and they naturally establish something of the same kind in the new settlement. But among savage and barbarous nations, the natural progress of law and government is still slower than the natural progress of arts, after law and government have been so far established as is necessary for their protection. Every colonist gets more land than he can possibly cultivate. He has no rent, and scarce any taxes, to pay. No landlord shares with him in its produce, and, the share of the sovereign is commonly but a trifle. He has every motive to render as great as possible a produce which is thus to be almost entirely his own. But his land is commonly so extensive, that, with all his own industry, and with all the industry of other people whom he can get to employ, he can seldom make it produce the tenth part of what it is capable of producing. He is eager, therefore, to collect labourers from all quarters, and to reward them with the most liberal wages. But those liberal wages, joined to the plenty and cheapness of land, soon make those labourers leave him, in order to become landlords themselves, and to reward with equal liberality other labourers, who soon leave them for the same reason that they left their first master. The liberal reward of labour encourages marriage. The children, during the tender years of infancy, are well fed and properly taken care of; and when they are grown up, the value of their labour greatly overpays their maintenance. When arrived at maturity, the high price of labour, and the low price of land, enable them to establish themselves in the same manner as their fathers did before them. In other countries, rent and profit eat up wages, and the two superior orders of people oppress the inferior one; but in new colonies, the interest of the two superior orders obliges them to treat the inferior one with more generosity and humanity, at least where that inferior one is not in a state of slavery. Waste lands, of the greatest natural fertility, are to be had for a trifle. The increase of revenue which the proprietor, who is always the undertaker, expects from their improvement, constitutes his profit, which, in these circumstances, is commonly very great; but this great profit cannot be made, without employing the labour of other people in clearing and cultivating the land; and the disproportion between the great extent of the land and the small number of the people, which commonly takes place in new colonies, makes it difficult for him to get this labour. He does not, therefore, dispute about wages, but is willing to employ labour at any price. The high wages of labour encourage population. The cheapness and plenty of good land encourage improvement, and enable the proprietor to pay those high wages. In those wages consists almost the whole price of the land; and though they are high, considered as the wages of labour, they are low, considered as the price of what is so very valuable. What encourages the progress of population and improvement, encourages that of real wealth and greatness. The progress of many of the ancient Greek colonies towards wealth and greatness seems accordingly to have been very rapid. In the course of a century or two, several of them appear to have rivalled, and even to have surpassed, their mother cities. Syracuse and Agrigentum in Sicily, Tarentum and Locri in Italy, Ephesus and Miletus in Lesser Asia, appear, by all accounts, to have been at least equal to any of the cities of ancient Greece. Though posterior in their establishment, yet all the arts of refinement, philosophy, poetry, and eloquence, seem to have been cultivated as early, and to have been improved as highly in them as in any part of the mother country. The schools of the two oldest Greek philosophers, those of Thales and Pythagoras, were established, it is remarkable, not in ancient Greece, but the one in an Asiatic, the other in an Italian colony. All those colonies had established themselves in countries inhabited by savage and barbarous nations, who easily gave place to the new settlers. They had plenty of good land; and as they were altogether independent of the mother city, they were at liberty to manage their own affairs in the way that they judged was most suitable to their own interest. The history of the Roman colonies is by no means so brilliant. Some of them, indeed, such as Florence, have, in the course of many ages, and after the fall of the mother city, grown up to be considerable states. But the progress of no one of them seems ever to have been very rapid. They were all established in conquered provinces, which in most cases had been fully inhabited before. The quantity of land assigned to each colonist was seldom very considerable, and, as the colony was not independent, they were not always at liberty to manage their own affairs in the way that they judged was most suitable to their own interest. In the plenty of good land, the European colonies established in America and the West Indies resemble, and even greatly surpass, those of ancient Greece. In their dependency upon the mother state, they resemble those of ancient Rome; but their great distance from Europe has in all of them alleviated more or less the effects of this dependency. Their situation has placed them less in the view, and less in the power of their mother country. In pursuing their interest their own way, their conduct has upon many occasions been overlooked, either because not known or not understood in Europe; and upon some occasions it has been fairly suffered and submitted to, because their distance rendered it difficult to restrain it. Even the violent and arbitrary government of Spain has, upon many occasion, been obliged to recall or soften the orders which had been given for the government of her colonies, for fear of a general insurrection. The progress of all the European colonies in wealth, population, and improvement, has accordingly been very great. The crown of Spain, by its share of the gold and silver, derived some revenue from its colonies from the moment of their first establishment. It was a revenue, too, of a nature to excite in human avidity the most extravagant expectation of still greater riches. The Spanish colonies, therefore, from the moment of their first establishment, attracted very much the attention of their mother country; while those of the other European nations were for a long time in a great measure neglected. The former did not, perhaps, thrive the better in consequence of this attention, nor the latter the worse in consequence of this neglect. In proportion to the extent of the country which they in some measure possess, the Spanish colonies are considered as less populous and thriving than those of almost any other European nation. The progress even of the Spanish colonies, however, in population and improvement, has certainly been very rapid and very great. The city of Lima, founded since the conquest, is represented by Ulloa as containing fifty thousand inhabitants near thirty years ago. Quito, which had been but a miserable hamlet of Indians, is represented by the same author as in his time equally populous. Gemel i Carreri, a pretended traveller, it is said, indeed, but who seems everywhere to have written upon extreme good information, represents the city of Mexico as containing a hundred thousand inhabitants; a number which, in spite of all the exaggerations of the Spanish writers, is probably more than five times greater than what it contained in the time of Montezuma. These numbers exceed greatly these of Boston, New York, and Philadelphia, the three greatest cities of the English colonies. Before the conquest of the Spaniards, there were no cattle fit for draught, either in Mexico or Peru. The lama was their only beast of burden, and its strength seems to have been a good deal inferior to that of a common ass. The plough was unknown among them. They were ignorant of the use of iron. They had no coined money, nor any established instrument of commerce of any kind. Their commerce was carried on by barter. A sort of wooden spade was their principal instrument of agriculture. Sharp stones served them for knives and hatchets to cut with; fish bones, and the hard sinews of certain animals, served them with needles to sew with; and these seem to have been their principal instruments of trade. In this state of things, it seems impossible that either of those empires could have been so much improved or so well cultivated as at present, when they are plentifully furnished with all sorts of European cattle, and when the use of iron, of the plough, and of many of the arts of Europe, have been introduced among them. But the populousness of every country must be in proportion to the degree of its improvement and cultivation. In spite of the cruel destruction of the natives which followed the conquest, these two great empires are probably more populous now than they ever were before; and the people are surely very different; for we must acknowledge, I apprehend, that the Spanish creoles are in many respects superior to the ancient Indians. After the settlements of the Spaniards, that of the Portuguese in Brazil is the oldest of any European nation in America. But as for a long time after the first discovery neither gold nor silver mines were found in it, and as it afforded upon that account little or no revenue to the crown, it was for a long time in a great measure neglected; and during this state of neglect, it grew up to be a great and powerful colony. While Portugal was under the dominion of Spain, Brazil was attacked by the Dutch, who got possession of seven of the fourteen provinces into which it is divided. They expected soon to conquer the other seven, when Portugal recovered its independency by the elevation of the family of Braganza to the throne. The Dutch, then, as enemies to the Spaniards, became friends to the Portuguese, who were likewise the enemies of the Spaniards. They agreed, therefore, to leave that part of Brazil which they had not conquered to the king of Portugal, who agreed to leave that part which they had conquered to them, as a matter not worth disputing about, with such good allies. But the Dutch government soon began to oppress the Portuguese colonists, who, instead of amusing themselves with complaints, took arms against their new masters, and by their own valour and resolution, with the connivance, indeed, but without any avowed assistance from the mother country, drove them out of Brazil. The Dutch, therefore, finding it impossible to keep any part of the country to themselves, were contented that it should be entirely restored to the crown of Portugal. In this colony there are said to be more than six hundred thousand people, either Portuguese or descended from Portuguese, creoles, mulattoes, and a mixed race between Portuguese and Brazilians. No one colony in America is supposed to contain so great a number of people of European extraction. Towards the end of the fifteenth, and during the greater part of the sixteenth century, Spain and Portugal were the two great naval powers upon the ocean; for though the commerce of Venice extended to every part of Europe, its fleet had scarce ever sailed beyond the Mediterranean. The Spaniards, in virtue of the first discovery, claimed all America as their own; and though they could not hinder so great a naval power as that of Portugal from settling in Brazil, such was at that time the terror of their name, that the greater part of the other nations of Europe were afraid to establish themselves in any other part of that great continent. The French, who attempted to settle in Florida, were all murdered by the Spaniards. But the declension of the naval power of this latter nation, in consequence of the defeat or miscarriage of what they called their invincible armada, which happened towards the end of the sixteenth century, put it out of their power to obstruct any longer the settlements of the other European nations. In the course of the seventeenth century, therefore, the English, French, Dutch, Danes, and Swedes, all the great nations who had any ports upon the ocean, attempted to make some settlements in the new world. The Swedes established themselves in New Jersey; and the number of Swedish families still to be found there sufficiently demonstrates, that this colony was very likely to prosper, had it been protected by the mother country. But being neglected by Sweden, it was soon swallowed up by the Dutch colony of New York, which again, in 1674, fell under the dominion of the English. The small islands of St. Thomas and Santa Cruz, are the only countries in the new world that have been possessed by the Danes. These little settlements, too, were under the government of an exclusive company, which had the sole right, both of purchasing the surplus produce of the colonies, and of supplying them with such goods of other countries as they wanted, and which, therefore, both in its purchases and sales, had not only the power of oppressing them, but the greatest temptation to do so. The government of an exclusive company of merchants is, perhaps, the worst of all governments for any country whatever. It was not, however, able to stop altogether the progress of these colonies, though it rendered it more slow and languid. The late king of Denmark dissolved this company, and since that time the prosperity of these colonies has been very great. The Dutch settlements in the West, as well as those in the East Indies, were originally put under the government of an exclusive company. The progress of some of them, therefore, though it has been considerable in comparison with that of almost any country that has been long peopled and established, has been languid and slow in comparison with that of the greater part of new colonies. The colony of Surinam, though very considerable, is still inferior to the greater part of the sugar colonies of the other European nations. The colony of Nova Belgia, now divided into the two provinces of New York and New Jersey, would probably have soon become considerable too, even though it had remained under the government of the Dutch. The plenty and cheapness of good land are such powerful causes of prosperity, that the very worst government is scarce capable of checking altogether the efficacy of their operation. The great distance, too, from the mother country, would enable the colonists to evade more or less, by smuggling, the monopoly which the company enjoyed against them. At present, the company allows all Dutch ships to trade to Surinam, upon paying two and a-half per cent. upon the value of their cargo for a license; and only reserves to itself exclusively, the direct trade from Africa to America, which consists almost entirely in the slave trade. This relaxation in the exclusive privileges of the company, is probably the principal cause of that degree of prosperity which that colony at present enjoys. Curaçoa and Eustatia, the two principal islands belonging to the Dutch, are free ports, open to the ships of all nations; and this freedom, in the midst of better colonies, whose ports are open to those of one nation only, has been the great cause of the prosperity of those two barren islands. The French colony of Canada was, during the greater part of the last century, and some part of the present, under the government of an exclusive company. Under so unfavourable administration, its progress was necessarily very slow, in comparison with that of other new colonies; but it became much more rapid when this company was dissolved, after the fall of what is called the Mississippi scheme. When the English got possession of this country, they found in it near double the number of inhabitants which father Charlevoix had assigned to it between twenty and thirty years before. That jesuit had travelled over the whole country, and had no inclination to represent it as less inconsiderable than it really was. The French colony of St. Domingo was established by pirates and freebooters, who, for a long time, neither required the protection, nor acknowledged the authority of France; and when that race of banditti became so far citizens as to acknowledge this authority, it was for a long time necessary to exercise it with very great gentleness. During this period, the population and improvement of this colony increased very fast. Even the oppression of the exclusive company, to which it was for some time subjected with all the other colonies of France, though it no doubt retarded, had not been able to stop its progress altogether. The course of its prosperity returned as soon as it was relieved from that oppression. It is now the most important of the sugar colonies of the West Indies, and its produce is said to be greater than that of all the English sugar colonies put together. The other sugar colonies of France are in general all very thriving. But there are no colonies of which the progress has been more rapid than that of the English in North America. Plenty of good land, and liberty to manage their own affairs their own way, seem to be the two great causes of the prosperity of all new colonies. In the plenty of good land, the English colonies of North America, though no doubt very abundantly provided, are, however, inferior to those of the Spaniards and Portuguese, and not superior to some of those possessed by the French before the last war. But the political institutions of the English colonies have been more favourable to the improvement and cultivation of this land, than those of the other three nations. _First_, The engrossing of uncultivated land, though it has by no means been prevented altogether, has been more restrained in the English colonies than in any other. The colony law, which imposes upon every proprietor the obligation of improving and cultivating, within a limited time, a certain proportion of his lands, and which, in case of failure, declares those neglected lands grantable to any other person; though it has not perhaps been very strictly executed, has, however, had some effect. _Secondly_, In Pennsylvania there is no right of primogeniture, and lands, like moveables, are divided equally among all the children of the family. In three of the provinces of New England, the oldest has only a double share, as in the Mosaical law. Though in those provinces, therefore, too great a quantity of land should sometimes be engrossed by a particular individual, it is likely, in the course of a generation or two, to be sufficiently divided again. In the other English colonies, indeed, the right of primogeniture takes place, as in the law of England: But in all the English colonies, the tenure of the lands, which are all held by free soccage, facilitates alienation; and the grantee of an extensive tract of land generally finds it for his interest to alienate, as fast as he can, the greater part of it, reserving only a small quit-rent. In the Spanish and Portuguese colonies, what is called the right of majorazzo takes place in the succession of all those great estates to which any title of honour is annexed. Such estates go all to one person, and are in effect entailed and unalienable. The French colonies, indeed, are subject to the custom of Paris, which, in the inheritance of land, is much more favourable to the younger children than the law of England. But, in the French colonies, if any part of an estate, held by the noble tenure of chivalry and homage, is alienated, it is, for a limited time, subject to the right of redemption, either by the heir of the superior, or by the heir of the family; and all the largest estates of the country are held by such noble tenures, which necessarily embarrass alienation. But, in a new colony, a great uncultivated estate is likely to be much more speedily divided by alienation than by succession. The plenty and cheapness of good land, it has already been observed, are the principal causes of the rapid prosperity of new colonies. The engrossing of land, in effect, destroys this plenty and cheapness. The engrossing of uncultivated land, besides, is the greatest obstruction to its improvement; but the labour that is employed in the improvement and cultivation of land affords the greatest and most valuable produce to the society. The produce of labour, in this case, pays not only its own wages and the profit of the stock which employs it, but the rent of the land too upon which it is employed. The labour of the English colonies, therefore, being more employed in the improvement and cultivation of land, is likely to afford a greater and more valuable produce than that of any of the other three nations, which, by the engrossing of land, is more or less diverted towards other employments. _Thirdly_, The labour of the English colonists is not only likely to afford a greater and more valuable produce, but, in consequence of the moderation of their taxes, a greater proportion of this produce belongs to themselves, which they may store up and employ in putting into motion a still greater quantity of labour. The English colonists have never yet contributed any thing towards the defence of the mother country, or towards the support of its civil government. They themselves, on the contrary, have hitherto been defended almost entirely at the expense of the mother country; but the expense of fleets and armies is out of all proportion greater than the necessary expense of civil government. The expense of their own civil government has always been very moderate. It has generally been confined to what was necessary for paying competent salaries to the governor, to the judges, and to some other officers of police, and for maintaining a few of the must useful public works. The expense of the civil establishment of Massachusetts Bay, before the commencement of the present disturbances, used to be but about L.18,000 a-year; that of New Hampshire and Rhode Island, L.3500 each; that of Connecticut, L.4000; that of New York and Pennsylvania, L.4500 each; that of New Jersey, L.1200; that of Virginia and South Carolina, L.8000 each. The civil establishments of Nova Scotia and Georgia are partly supported by an annual grant of parliament; but Nova Scotia pays, besides, about L.7000 a-year towards the public expenses of the colony, and Georgia about L.2500 a-year. All the different civil establishments in North America, in short, exclusive of those of Maryland and North Carolina, of which no exact account has been got, did not, before the commencement of the present disturbances, cost the inhabitants above L.64,700 a-year; an ever memorable example, at how small an expense three millions of people may not only be governed but well governed. The must important part of the expense of government, indeed, that of defence and protection, has constantly fallen upon the mother country. The ceremonial, too, of the civil government in the colonies, upon the reception of a new governor, upon the opening of a new assembly, &c. though sufficiently decent, is not accompanied with any expensive pomp or parade. Their ecclesiastical government is conducted upon a plan equally frugal. Tithes are unknown among them; and their clergy, who are far from being numerous, are maintained either by moderate stipends, or by the voluntary contributions of the people. The power of Spain and Portugal, on the contrary, derives some support from the taxes levied upon their colonies. France, indeed, has never drawn any considerable revenue from its colonies, the taxes which it levies upon them being generally spent among them. But the colony government of all these three nations is conducted upon a much more extensive plan, and is accompanied with a much more expensive ceremonial. The sums spent upon the reception of a new viceroy of Peru, for example, have frequently been enormous. Such ceremonials are not only real taxes paid by the rich colonists upon those particular occasions, but they serve to introduce among them the habit of vanity and expense upon all other occasions. They are not only very grievous occasional taxes, but they contribute to establish perpetual taxes, of the same kind, still more grievous; the ruinous taxes of private luxury and extravagance. In the colonies of all those three nations, too, the ecclesiastical government is extremely oppressive. Tithes take place in all of them, and are levied with the utmost rigour in those of Spain and Portugal. All of them, besides, are oppressed with numerous race of mendicant friars, whose beggary being not only licensed but consecrated by religion, is a most grievous tax upon the poor people, who are most carefully taught that it is a duty to give, and a very great sin to refuse them their charity. Over and above all this, the clergy are, in all of them, the greatest engrossers of land. _Fourthly_, In the disposal of their surplus produce, or of what is over and above their own consumption, the English colonies have been more favoured, and have been allowed a more extensive market, than those of any other European nation. Every European nation has endeavoured, more or less, to monopolize to itself the commerce of its colonies, and, upon that account, has prohibited the ships of foreign nations from trading to them, and has prohibited them from importing European goods from any foreign nation. But the manner in which this monopoly has been exercised in different nations, has been very different. Some nations have given up the whole commerce of their colonies to an exclusive company, of whom the colonists were obliged to buy all such European goods as they wanted, and to whom they were obliged to sell the whole of their surplus produce. It was the interest of the company, therefore, not only to sell the former as dear, and to buy the latter as cheap as possible, but to buy no more of the latter, even at this low price, than what they could dispose of for a very high price in Europe. It was their interest not only to degrade in all cases the value of the surplus produce of the colony, but in many cases to discourage and keep down the natural increase of its quantity. Of all the expedients that can well be contrived to stunt the natural growth of a new colony, that of an exclusive company is undoubtedly the most effectual. This, however, has been the policy of Holland, though their company, in the course of the present century, has given up in many respects the exertion of their exclusive privilege. This, too, was the policy of Denmark, till the reign of the late king. It has occasionally been the policy of France; and of late, since 1755, after it had been abandoned by all other nations on account of its absurdity, it has become the policy of Portugal, with regard at least to two of the principal provinces of Brazil, Pernambucco, and Marannon. Other nations, without establishing an exclusive company, have confined the whole commerce of their colonies to a particular port of the mother country, from whence no ship was allowed to sail, but either in a fleet and at a particular season, or, if single, in consequence of a particular license, which in most cases was very well paid for. This policy opened, indeed, the trade of the colonies to all the natives of the mother country, provided they traded from the proper port, at the proper season, and in the proper vessels. But as all the different merchants, who joined their stocks in order to fit out those licensed vessels, would find it for their interest to act in concert, the trade which was carried on in this manner would necessarily be conducted very nearly upon the same principles as that of an exclusive company. The profit of those merchants would be almost equally exorbitant and oppressive. The colonies would be ill supplied, and would be obliged both to buy very dear, and to sell very cheap. This, however, till within these few years, had always been the policy of Spain; and the price of all European goods, accordingly, is said to have been enormous in the Spanish West Indies. At Quito, we are told by Ulloa, a pound of iron sold for about 4s. 6d., and a pound of steel for about 6s. 9d. sterling. But it is chiefly in order to purchase European goods that the colonies part with their own produce. The more, therefore, they pay for the one, the less they really get for the other, and the dearness of the one is the same thing with the cheapness of the other. The policy of Portugal is, in this respect, the same as the ancient policy of Spain, with regard to all its colonies, except Pernambucco and Marannon; and with regard to these it has lately adopted a still worse. Other nations leave the trade of their colonies free to all their subjects, who may carry it on from all the different ports of the mother country, and who have occasion for no other license than the common despatches of the custom-house. In this case the number and dispersed situation of the different traders renders it impossible for them to enter into any general combination, and their competition is sufficient to hinder them from making very exorbitant profits. Under so liberal a policy, the colonies are enabled both to sell their own produce, and to buy the goods of Europe at a reasonable price; but since the dissolution of the Plymouth company, when our colonies were but in their infancy, this has always been the policy of England. It has generally, too, been that of France, and has been uniformly so since the dissolution of what in England is commonly called their Mississippi company. The profits of the trade, therefore, which France and England carry on with their colonies, though no doubt somewhat higher than if the competition were free to all other nations, are, however, by no means exorbitant; and the price of European goods, accordingly, is not extravagantly high in the greater part of the colonies of either of those nations. In the exportation of their own surplus produce, too, it is only with regard to certain commodities that the colonies of Great Britain are confined to the market of the mother country. These commodities having been enumerated in the act of navigation, and in some other subsequent acts, have upon that account been called _enumerated commodities_. The rest are called _non-enumerated_, and may be exported directly to other countries, provided it is in British or plantation ships, of which the owners and three fourths of the mariners are British subjects. Among the non-enumerated commodities are some of the most important productions of America and the West Indies, grain of all sorts, lumber, salt provisions, fish, sugar, and rum. Grain is naturally the first and principal object of the culture of all new colonies. By allowing them a very extensive market for it, the law encourages them to extend this culture much beyond the consumption of a thinly inhabited country, and thus to provide beforehand an ample subsistence for a continually increasing population. In a country quite covered with wood, where timber consequently is of little or no value, the expense of clearing the ground is the principal obstacle to improvement. By allowing the colonies a very extensive market for their lumber, the law endeavours to facilitate improvement by raising the price of a commodity which would otherwise be of little value, and thereby enabling them to make some profit of what would otherwise be mere expense. In a country neither half peopled nor half cultivated, cattle naturally multiply beyond the consumption of the inhabitants, and are often, upon that account, of little or no value. But it is necessary, it has already been shown, that the price of cattle should bear a certain proportion to that of corn, before the greater part of the lands of any country can be improved. By allowing to American cattle, in all shapes, dead and alive, a very extensive market, the law endeavours to raise the value of a commodity, of which the high price is so very essential to improvement. The good effects of this liberty, however, must be somewhat diminished by the 4th of Geo. III. c. 15, which puts hides and skins among the enumerated commodities and thereby tends to reduce the value of American cattle. To increase the shipping and naval power of Great Britain by the extension of the fisheries of our colonies, is an object which the legislature seems to have had almost constantly in view. Those fisheries, upon this account, have had all the encouragement which freedom can give them, and they have flourished accordingly. The New England fishery, in particular, was, before the late disturbances, one of the most important, perhaps, in the world. The whale fishery which, notwithstanding an extravagant bounty, is in Great Britain carried on to so little purpose, that in the opinion of many people (which I do not, however, pretend to warrant), the whole produce does not much exceed the value of the bounties which are annually paid for it, is in New England carried on, without any bounty, to a very great extent. Fish is one of the principal articles with which the North Americans trade to Spain, Portugal, and the Mediterranean. Sugar was originally an enumerated commodity, which could only be exported to Great Britain; but in 1731, upon a representation of the sugar-planters, its exportation was permitted to all parts of the world. The restrictions, however, with which this liberty was granted, joined to the high price of sugar in Great Britain, have rendered it in a great measure ineffectual. Great Britain and her colonies still continue to be almost the sole market for all sugar produced in the British plantations. Their consumption increases so fast, that, though in consequence of the increasing improvement of Jamaica, as well as of the ceded islands, the importation of sugar has increased very greatly within these twenty years, the exportation to foreign countries is said to be not much greater than before. Rum is a very important article in the trade which the Americans carry on to the coast of Africa, from which they bring back negro slaves in return. If the whole surplus produce of America, in grain of all sorts, in salt provisions, and in fish, had been put into the enumeration, and thereby forced into the market of Great Britain, it would have interfered too much with the produce of the industry of our own people. It was probably not so much from any regard to the interest of America, as from a jealousy of this interference, that those important commodities have not only been kept out of the enumeration, but that the importation into Great Britain of all grain, except rice, and of all salt provisions, has, in the ordinary state of the law, been prohibited. The non-enumerated commodities could originally be exported to all parts of the world. Lumber and rice having been once put into the enumeration, when they were afterwards taken out of it, were confined, as to the European market, to the countries that lie south of Cape Finisterre. By the 6th of George III. c. 52, all non-enumerated commodities were subjected to the like restriction. The parts of Europe which lie south of Cape Finisterre are not manufacturing countries, and we are less jealous of the colony ships carrying home from them any manufactures which could interfere with our own. The enumerated commodities are of two sorts; first, such as are either the peculiar produce of America, or as cannot be produced, or at least are not produced in the mother country. Of this kind are molasses, coffee, cocoa-nuts, tobacco, pimento, ginger, whale-fins, raw silk, cotton, wool, beaver, and other peltry of America, indigo, fustick, and other dyeing woods; secondly, such as are not the peculiar produce of America, but which are, and may be produced in the mother country, though not in such quantities as to supply the greater part of her demand, which is principally supplied from foreign countries. Of this kind are all naval stores, masts, yards, and bowsprits, tar, pitch, and turpentine, pig and bar iron, copper ore, hides and skins, pot and pearl ashes. The largest importation of commodities of the first kind could not discourage the growth, or interfere with the sale, of any part of the produce of the mother country. By confining them to the home market, our merchants, it was expected, would not only be enabled to buy them cheaper in the plantations, and consequently to sell them with a better profit at home, but to establish between the plantations and foreign countries an advantageous carrying trade, of which Great Britain was necessarily to be the centre or emporium, as the European country into which those commodities were first to be imported. The importation of commodities of the second kind might be so managed too, it was supposed, as to interfere, not with the sale of those of the same kind which were produced at home, but with that of those which were imported from foreign countries; because, by means of proper duties, they might be rendered always somewhat dearer than the former, and yet a good deal cheaper than the latter. By confining such commodities to the home market, therefore, it was proposed to discourage the produce, not of Great Britain, but of some foreign countries with which the balance of trade was believed to be unfavourable to Great Britain. The prohibition of exporting from the colonies to any other country but Great Britain, masts, yards, and bowsprits, tar, pitch, and turpentine, naturally tended to lower the price of timber in the colonies, and consequently to increase the expense of clearing their lands, the principal obstacle to their improvement. But about the beginning of the present century, in 1703, the pitch and tar company of Sweden endeavoured to raise the price of their commodities to Great Britain, by prohibiting their exportation, except in their own ships, at their own price, and in such quantities as they thought proper. In order to counteract this notable piece of mercantile policy, and to render herself as much as possible independent, not only of Sweden, but of all the other northern powers, Great Britain gave a bounty upon the importation of naval stores from America; and the effect of this bounty was to raise the price of timber in America much more than the confinement to the home market could lower it; and as both regulations were enacted at the same time, their joint effect was rather to encourage than to discourage the clearing of land in America. Though pig and bar iron, too, have been put among the enumerated commodities, yet as, when imported from America, they are exempted from considerable duties to which they are subject when imported from any other country, the one part of the regulation contributes more to encourage the erection of furnaces in America than the other to discourage it. There is no manufacture which occasions so great a consumption of wood as a furnace, or which can contribute so much to the clearing of a country overgrown with it. The tendency of some of these regulations to raise the value of timber in America, and thereby to facilitate the clearing of the land, was neither, perhaps, intended nor understood by the legislature. Though their beneficial effects, however, have been in this respect accidental, they have not upon that account been less real. The most perfect freedom of trade is permitted between the British colonies of America and the West Indies, both in the enumerated and in the non-enumerated commodities. Those colonies are now become so populous and thriving, that each of them finds in some of the others a great and extensive market for every part of its produce. All of them taken together, they make a great internal market for the produce of one another. The liberality of England, however, towards the trade of her colonies, has been confined chiefly to what concerns the market for their produce, either in its rude state, or in what may be called the very first stage of manufacture. The more advanced or more refined manufactures, even of the colony produce, the merchants and manufacturers of Great Britain chuse to reserve to themselves, and have prevailed upon the legislature to prevent their establishment in the colonies, sometimes by high duties, and sometimes by absolute prohibitions. While, for example, Muscovado sugars from the British plantations pay, upon importation, only 6s. 4d. the hundred weight, white sugars pay L.1 : 1 : 1; and refined, either double or single, in loaves, L.4 : 2 : 5-8/20ths. When those high duties were imposed, Great Britain was the sole, and she still continues to be, the principal market, to which the sugars of the British colonies could be exported. They amounted, therefore, to a prohibition, at first of claying or refining sugar for any foreign market, and at present of claying or refining it for the market which takes off, perhaps, more than nine-tenths of the whole produce. The manufacture of claying or refining sugar, accordingly, though it has flourished in all the sugar colonies of France, has been little cultivated in any of those of England, except for the market of the colonies themselves. While Grenada was in the hands of the French, there was a refinery of sugar, by claying, at least upon almost every plantation. Since it fell into those of the English, almost all works of this kind have been given up; and there are at present (October 1773), I am assured, not above two or three remaining in the island. At present, however, by an indulgence of the custom-house, clayed or refined sugar, if reduced from loaves into powder, is commonly imported as Muscovado. While Great Britain encourages in America the manufacturing of pig and bar iron, by exempting them from duties to which the like commodities are subject when imported from any other country, she imposes an absolute prohibition upon the erection of steel furnaces and slit-mills in any of her American plantations. She will not suffer her colonies to work in those more refined manufactures, even for their own consumption; but insists upon their purchasing of her merchants and manufacturers all goods of this kind which they have occasion for. She prohibits the exportation from one province to another by water, and even the carriage by land upon horseback, or in a cart, of hats, of wools, and woollen goods, of the produce of America; a regulation which effectually prevents the establishment of any manufacture of such commodities for distant sale, and confines the industry of her colonists in this way to such coarse and household manufactures as a private family commonly makes for its own use, or for that of some of its neighbours in the same province. To prohibit a great people, however, from making all that they can of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind. Unjust, however, as such prohibitions may be, they have not hitherto been very hurtful to the colonies. Land is still so cheap, and, consequently, labour so dear among them, that they can import from the mother country almost all the more refined or more advanced manufactures cheaper than they could make them for themselves. Though they had not, therefore, been prohibited from establishing such manufactures, yet, in their present state of improvement, a regard to their own interest would probably have prevented them from doing so. In their present state of improvement, those prohibitions, perhaps, without cramping their industry, or restraining it from any employment to which it would have gone of its own accord, are only impertinent badges of slavery imposed upon them, without any sufficient reason, by the groundless jealousy of the merchants and manufacturers of the mother country. In a more advanced state, they might be really oppressive and insupportable. Great Britain, too, as she confines to her own market some of the most important productions of the colonies, so, in compensation, she gives to some of them an advantage in that market, sometimes by imposing higher duties upon the like productions when imported from other countries, and sometimes by giving bounties upon their importation from the colonies. In the first way, she gives an advantage in the home market to the sugar, tobacco, and iron of her own colonies; and, in the second, to their raw silk, to their hemp and flax, to their indigo, to their naval stores, and to their building timber. This second way of encouraging the colony produce, by bounties upon importation, is, so far as I have been able to learn, peculiar to Great Britain: the first is not. Portugal does not content herself with imposing higher duties upon the importation of tobacco from any other country, but prohibits it under the severest penalties. With regard to the importation of goods from Europe, England has likewise dealt more liberally with her colonies than any other nation. Great Britain allows a part, almost always the half, generally a larger portion, and sometimes the whole, of the duty which is paid upon the importation of foreign goods, to be drawn back upon their exportation to any foreign country. No independent foreign country, it was easy to foresee, would receive them, if they came to it loaded with the heavy duties to which almost all foreign goods are subjected on their importation into Great Britain. Unless, therefore, some part of those duties was drawn back upon exportation, there was an end of the carrying trade; a trade so much favoured by the mercantile system. Our colonies, however, are by no means independent foreign countries; and Great Britain having assumed to herself the exclusive right of supplying them with all goods from Europe, might have forced them (in the same manner as other countries have done their colonies) to receive such goods loaded with all the same duties which they paid in the mother country. But, on the contrary, till 1763, the same drawbacks were paid upon the exportation of the greater part of foreign goods to our colonies, as to any independent foreign country. In 1763, indeed, by the 4th of Geo. III. c. 15, this indulgence was a good deal abated, and it was enacted, "That no part of the duty called the old subsidy should be drawn back for any goods of the growth, production, or manufacture of Europe or the East Indies, which should be exported from this kingdom to any British colony or plantation in America; wines, white calicoes, and muslins, excepted." Before this law, many different sorts of foreign goods might have been bought cheaper in the plantations than in the mother country, and some may still. Of the greater part of the regulations concerning the colony trade, the merchants who carry it on, it must be observed, have been the principal advisers. We must not wonder, therefore, if, in a great part of them, their interest has been more considered than either that of the colonies or that of the mother country. In their exclusive privilege of supplying the colonies with all the goods which they wanted from Europe, and of purchasing all such parts of their surplus produce as could not interfere with any of the trades which they themselves carried on at home, the interest of the colonies was sacrificed to the interest of those merchants. In allowing the same drawbacks upon the re-exportation of the greater part of European and East India goods to the colonies, as upon their re-exportation to any independent country, the interest of the mother country was sacrificed to it, even according to the mercantile ideas of that interest. It was for the interest of the merchants to pay as little as possible for the foreign goods which they sent to the colonies, and, consequently, to get back as much as possible of the duties which they advanced upon their importation into Great Britain. They might thereby be enabled to sell in the colonies, either the some quantity of goods with a greater profit, or a greater quantity with the same profit, and, consequently, to gain something either in the one way or the other. It was likewise for the interest of the colonies to get all such goods as cheap, and in as great abundance as possible. But this might not always be for the interest of the mother country. She might frequently suffer, both in her revenue, by giving back a great part of the duties which had been paid upon the importation of such goods; and in her manufactures, by being undersold in the colony market in consequence of the easy terms upon which foreign manufactures could be carried thither by means of those drawbacks. The progress of the linen manufacture of Great Britain, it is commonly said, has been a good deal retarded by the drawbacks upon the re-exportation of German linen to the American colonies. But though the policy of Great Britain, with regard to the trade of her colonies, has been dictated by the same mercantile spirit as that of other nations, it has, however, upon the whole, been less illiberal and oppressive than that of any of them. In every thing except their foreign trade, the liberty of the English colonists to manage their own affairs their own way, is complete. It is in every respect equal to that of their fellow-citizens at home, and is secured in the same manner, by an assembly of the representatives of the people, who claim the sole right of imposing taxes for the support of the colony government. The authority of this assembly overawes the executive power; and neither the meanest nor the most obnoxious colonist, as long as he obeys the law, has any thing to fear from the resentment, either of the governor, or of any other civil or military officer in the province. The colony assemblies, though, like the house of commons in England, they are not always a very equal representation of the people, yet they approach more nearly to that character; and as the executive power either has not the means to corrupt them, or, on account of the support which it receives from the mother country, is not under the necessity of doing so, they are, perhaps, in general more influenced by the inclinations of their constituents. The councils, which, in the colony legislatures, correspond to the house of lords in Great Britain, are not composed of a hereditary nobility. In some of the colonies, as in three of the governments of New England, those councils are not appointed by the king, but chosen by the representatives of the people. In none of the English colonies is there any hereditary nobility. In all of them, indeed, as in all other free countries, the descendant of an old colony family is more respected than an upstart of equal merit and fortune; but he is only more respected, and he has no privileges by which he can be troublesome to his neighbours. Before the commencement of the present disturbances, the colony assemblies had not only the legislative, but a part of the executive power. In Connecticut and Rhode Island, they elected the governor. In the other colonies, they appointed the revenue officers, who collected the taxes imposed by those respective assemblies, to whom those officers were immediately responsible. There is more equality, therefore, among the English colonists than among the inhabitants of the mother country. Their manners are more republican; and their governments, those of three of the provinces of New England in particular, have hitherto been more republican too. The absolute governments of Spain, Portugal, and France, on the contrary, take place in their colonies; and the discretionary powers which such governments commonly delegate to all their inferior officers are, on account of the great distance, naturally exercised there with more than ordinary violence. Under all absolute governments, there is more liberty in the capital than in any other part of the country. The sovereign himself can never have either interest or inclination to pervert the order of justice, or to oppress the great body of the people. In the capital, his presence overawes, more or less, all his inferior officers, who, in the remoter provinces, from whence the complaints of the people are less likely to reach him, can exercise their tyranny with much more safety. But the European colonies in America are more remote than the most distant provinces of the greatest empires which had ever been known before. The government of the English colonies is, perhaps, the only one which, since the world began, could give perfect security to the inhabitants of so very distant a province. The administration of the French colonies, however, has always been conducted with much more gentleness and moderation than that of the Spanish and Portuguese. This superiority of conduct is suitable both to the character of the French nation, and to what forms the character of every nation, the nature of their government, which, though arbitrary and violent in comparison with that of Great Britain, is legal and free in comparison with those of Spain and Portugal. It is in the progress of the North American colonies, however, that the superiority of the English policy chiefly appears. The progress of the sugar colonies of France has been at least equal, perhaps superior, to that of the greater part of those of England; and yet the sugar colonies of England enjoy a free government, nearly of the same kind with that which takes place in her colonies of North America. But the sugar colonies of France are not discouraged, like those of England, from refining their own sugar; and what is still of greater importance, the genius of their government naturally introduces a better management of their negro slaves. In all European colonies, the culture of the sugar-cane is carried on by negro slaves. The constitution of those who have been born in the temperate climate of Europe could not, it is supposed, support the labour of digging the ground under the burning sun of the West Indies; and the culture of the sugar-cane, as it is managed at present, is all hand labour; though, in the opinion of many, the drill plough might be introduced into it with great advantage. But, as the profit and success of the cultivation which is carried on by means of cattle, depend very much upon the good management of those cattle; so the profit and success of that which is carried on by slaves must depend equally upon the good management of those slaves; and in the good management of their slaves the French planters, I think it is generally allowed, are superior to the English. The law, so far as it gives some weak protection to the slave against the violence of his master, is likely to be better executed in a colony where the government is in a great measure arbitrary, than in one where it is altogether free. In every country where the unfortunate law of slavery is established, the magistrate, when he protects the slave, intermeddles in some measure in the management of the private property of the master; and, in a free country, where the master is, perhaps, either a member of the colony assembly, or an elector of such a member, he dares not do this but with the greatest caution and circumspection. The respect which he is obliged to pay to the master, renders it more difficult for him to protect the slave. But in a country where the government is in a great measure arbitrary, where it is usual for the magistrate to intermeddle even in the management of the private property of individuals, and to send them, perhaps, a lettre de cachet, if they do not manage it according to his liking, it is much easier for him to give some protection to the slave; and common humanity naturally disposes him to do so. The protection of the magistrate renders the slave less contemptible in the eyes of his master, who is thereby induced to consider him with more regard, and to treat him with more gentleness. Gentle usage renders the slave not only more faithful, but more intelligent, and, therefore, upon a double account, more useful. He approaches more to the condition of a free servant, and may possess some degree of integrity and attachment to his master's interest; virtues which frequently belong to free servants, but which never can belong to a slave, who is treated as slaves commonly are in countries where the master is perfectly free and secure. That the condition of a slave is better under an arbitrary than under a free government, is, I believe, supported by the history of all ages and nations. In the Roman history, the first time we read of the magistrate interposing to protect the slave from the violence of his master, is under the emperors. When Vidius Pollio, in the presence of Augustus, ordered one of his slaves, who had committed a slight fault, to be cut into pieces and thrown into his fish-pond, in order to feed his fishes, the emperor commanded him, with indignation, to emancipate immediately, not only that slave, but all the others that belonged to him. Under the republic no magistrate could have had authority enough to protect the slave, much less to punish the master. The stock, it is to be observed, which has improved the sugar colonies of France, particularly the great colony of St Domingo, has been raised almost entirely from the gradual improvement and cultivation of those colonies. It has been almost altogether the produce of the soil and of the industry of the colonists, or, what comes to the same thing, the price of that produce, gradually accumulated by good management, and employed in raising a still greater produce. But the stock which has improved and cultivated the sugar colonies of England, has, a great part of it, been sent out from England, and has by no means been altogether the produce of the soil and industry of the colonists. The prosperity of the English sugar colonies has been in a great measure owing to the great riches of England, of which a part has overflowed, if one may say so, upon these colonies. But the prosperity of the sugar colonies of France has been entirely owing to the good conduct of the colonists, which must therefore have had some superiority over that of the English; and this superiority has been remarked in nothing so much as in the good management of their slaves. Such have been the general outlines of the policy of the different European nations with regard to their colonies. The policy of Europe, therefore, has very little to boast of, either in the original establishment, or, so far as concerns their internal government, in the subsequent prosperity of the colonies of America. Folly and injustice seem to have been the principles which presided over and directed the first project of establishing those colonies; the folly of hunting after gold and silver mines, and the injustice of coveting the possession of a country whose harmless natives, far from having ever injured the people of Europe, had received the first adventurers with every mark of kindness and hospitality. The adventurers, indeed, who formed some of the latter establishments, joined to the chimerical project of finding gold and silver mines, other motives more reasonable and more laudable; but even these motives do very little honour to the policy of Europe. The English puritans, restrained at home, fled for freedom to America, and established there the four governments of New England. The English catholics, treated with much greater injustice, established that of Maryland; the quakers, that of Pennsylvania. The Portuguese Jews, persecuted by the inquisition, stript of their fortunes, and banished to Brazil, introduced, by their example, some sort of order and industry among the transported felons and strumpets by whom that colony was originally peopled, and taught them the culture of the sugar-cane. Upon all these different occasions, it was not the wisdom and policy, but the disorder and injustice of the European governments, which peopled and cultivated America. In effectuating some of the most important of these establishments, the different governments of Europe had as little merit as in projecting them. The conquest of Mexico was the project, not of the council of Spain, but of a governor of Cuba; and it was effectuated by the spirit of the bold adventurer to whom it was entrusted, in spite of every thing which that governor, who soon repented of having trusted such a person, could do to thwart it. The conquerors of Chili and Peru, and of almost all the other Spanish settlements upon the continent of America, carried out with them no other public encouragement, but a general permission to make settlements and conquests in the name of the king of Spain. Those adventures were all at the private risk and expense of the adventurers. The government of Spain contributed scarce any thing to any of them. That of England contributed as little towards effectuating the establishment of some of its most important colonies in North America. When those establishments were effectuated, and had become so considerable as to attract the attention of the mother country, the first regulations which she made with regard to them, had always in view to secure to herself the monopoly of their commerce; to confine their market, and to enlarge her own at their expense, and, consequently, rather to damp and discourage, than to quicken and forward the course of their prosperity. In the different ways in which this monopoly has been exercised, consists one of the most essential differences in the policy of the different European nations with regard to their colonies. The best of them all, that of England, is only somewhat less illiberal and oppressive than that of any of the rest. In what way, therefore, has the policy of Europe contributed either to the first establishment, or to the present grandeur of the colonies of America? In one way, and in one way only, it has contributed a good deal. _Magna virûm mater!_ It bred and formed the men who were capable of achieving such great actions, and of laying the foundation of so great an empire; and there is no other quarter of the world, of which the policy is capable of forming, or has ever actually, and in fact, formed such men. The colonies owe to the policy of Europe the education and great views of their active and enterprising founders; and some of the greatest and most important of them, so far as concerns their internal government, owe to it scarce any thing else. PART III. _Of the Advantages which Europe has derived from the Discovery of America, and from that of a Passage to the East Indies by the Cape of Good Hope._ Such are the advantages which the colonies of America have derived from the policy of Europe. What are these which Europe has derived from the discovery and colonization of America? Those advantages may be divided, first, into the general advantages which Europe, considered as one great country, has derived from those great events; and, secondly, into the particular advantages which each colonizing country has derived from the colonies which particularly belong to it, in consequence of the authority or dominion which it exercises over them. The general advantages which Europe, considered as one great country, has derived from the discovery and colonization of America, consist, first, in the increase of its enjoyments; and, secondly, in the augmentation of its industry. The surplus produce of America imported into Europe, furnishes the inhabitants of this great continent with a variety of commodities which they could not otherwise have possessed; some for conveniency and use, some for pleasure, and some for ornament; and thereby contributes to increase their enjoyments. The discovery and colonization of America, it will readily be allowed, have contributed to augment the industry, first, of all the countries which trade to it directly, such as Spain, Portugal, France, and England; and, secondly, of all those which, without trading to it directly, send, through the medium of other countries, goods to it of their own produce, such as Austrian Flanders, and some provinces of Germany, which, through the medium of the countries before mentioned, send to it a considerable quantity of linen and other goods. All such countries have evidently gained a more extensive market for their surplus produce, and must consequently have been encouraged to increase its quantity. But that those great events should likewise have contributed to encourage the industry of countries such as Hungary and Poland, which may never, perhaps, have sent a single commodity of their own produce to America, is not, perhaps, altogether so evident. That those events have done so, however, cannot be doubted. Some part of the produce of America is consumed in Hungary and Poland, and there in some demand there for the sugar, chocolate, and tobacco, of that new quarter of the world. But those commodities must be purchased with something which is either the produce of the industry of Hungary and Poland, or with something which had been purchased with some part of that produce. Those commodities of America are new values, new equivalents, introduced into Hungary and Poland, to be exchanged there for the surplus produce of these countries. By being carried thither, they create a new and more extensive market for that surplus produce. They raise its value, and thereby contribute to encourage its increase. Though no part of it may ever be carried to America, it may be carried to other countries, which purchase it with a part of their share of the surplus produce of America, and it may find a market by means of the circulation of that trade which was originally put into motion by the surplus produce of America. Those great events may even have contributed to increase the enjoyments, and to augment the industry, of countries which not only never sent any commodities to America, but never received any from it. Even such countries may have received a greater abundance of other commodities from countries, of which the surplus produce had been augmented by means of the American trade. This greater abundance, as it must necessarily have increased their enjoyments, so it must likewise have augmented their industry. A greater number of new equivalents, of some kind or other, must have been presented to them to be exchanged for the surplus produce of that industry. A more extensive market must have been created for that surplus produce, so as to raise its value, and thereby encourage its increase. The mass of commodities annually thrown into the great circle of European commerce, and by its various revolutions annually distributed among all the different nations comprehended within it, must have been augmented by the whole surplus produce of America. A greater share of this greater mass, therefore, is likely to have fallen to each of those nations, to have increased their enjoyments, and augmented their industry. The exclusive trade of the mother countries tends to diminish, or at least to keep down below what they would otherwise rise to, both the enjoyments and industry of all those nations in general, and of the American colonies in particular. It is a dead weight upon the action of one of the great springs which puts into motion a great part of the business of mankind. By rendering the colony produce dearer in all other countries, it lessens its consumption, and thereby cramps the industry of the colonies, and both the enjoyments and the industry or all other countries, which both enjoy less when they pay more for what they enjoy, and produce less when they get less for what they produce. By rendering the produce of all other countries dearer in the colonies, it cramps in the same manner the industry of all other colonies, and both the enjoyments and the industry of the colonies. It is a clog which, for the supposed benefit of some particular countries, embarrasses the pleasures and encumbers the industry of all other countries, but of the colonies more than of any other. It not only excludes as much as possible all other countries from one particular market, but it confines as much as possible the colonies to one particular market; and the difference is very great between being excluded from one particular market when all others are open, and being confined to one particular market when all others are shut up. The surplus produce of the colonies, however, is the original source of all that increase of enjoyments and industry which Europe derives from the discovery and colonization of America, and the exclusive trade of the mother countries tends to render this source much less abundant than it otherwise would be. The particular advantages which each colonizing country derives from the colonies which particularly belong to it, are of two different kinds; first, those common advantages which every empire derives from the provinces subject to its dominion; and, secondly, those peculiar advantages which are supposed to result from provinces of so very peculiar a nature as the European colonies of America. The common advantages which every empire derives from the provinces subject to its dominion consist, first, in the military force which they furnish for its defence; and, secondly, in the revenue which they furnish for the support of its civil government. The Roman colonies furnished occasionally both the one and the other. The Greek colonies sometimes furnished a military force, but seldom any revenue. They seldom acknowledged themselves subject to the dominion of the mother city. They were generally her allies in war, but very seldom her subjects in peace. The European colonies of America have never yet furnished any military force for the defence of the mother country. The military force has never yet been sufficient for their own defence; and in the different wars in which the mother countries have been engaged, the defence of their colonies has generally occasioned a very considerable distraction of the military force of those countries. In this respect, therefore, all the European colonies have, without exception, been a cause rather of weakness than of strength to their respective mother countries. The colonies of Spain and Portugal only have contributed any revenue towards the defence of the mother country, or the support of her civil government. The taxes which have been levied upon those of other European nations, upon those of England in particular, have seldom been equal to the expense laid out upon them in time of peace, and never sufficient to defray that which they occasioned in time of war. Such colonies, therefore, have been a source of expense, and not of revenue, to their respective mother countries. The advantages of such colonies to their respective mother countries, consist altogether in those peculiar advantages which are supposed to result from provinces of so very peculiar a nature as the European colonies of America; and the exclusive trade, it is acknowledged, is the sole source of all those peculiar advantages. In consequence of this exclusive trade, all that part of the surplus produce of the English colonies, for example, which consists in what are called enumerated commodities, can be sent to no other country but England. Other countries must afterwards buy it of her. It must be cheaper, therefore, in England than it can be in any other country, and must contribute more to increase the enjoyments of England than those of any other country. It must likewise contribute more to encourage her industry. For all those parts of her own surplus produce which England exchanges for those enumerated commodities, she must get a better price than any other countries can get for the like parts of theirs, when they exchange them for the same commodities. The manufactures of England, for example, will purchase a greater quantity of the sugar and tobacco of her own colonies than the like manufactures of other countries can purchase of that sugar and tobacco. So far, therefore, as the manufactures of England and those of other countries are both to be exchanged for the sugar and tobacco of the English colonies, this superiority of price gives an encouragement to the former beyond what the latter can, in these circumstances, enjoy. The exclusive trade of the colonies, therefore, as it diminishes, or at least keeps down below what they would otherwise rise to, both the enjoyments and the industry of the countries which do not possess it, so it gives an evident advantage to the countries which do possess it over those other countries. This advantage, however, will, perhaps, be found to be rather what may be called a relative than an absolute advantage, and to give a superiority to the country which enjoys it, rather by depressing the industry and produce of other countries, than by raising those of that particular country above what they would naturally rise to in the case of a free trade. The tobacco of Maryland and Virginia, for example, by means of the monopoly which England enjoys of it, certainly comes cheaper to England than it can do to France, to whom England commonly sells a considerable part of it. But had France and all other European countries been at all times allowed a free trade to Maryland and Virginia, the tobacco of those colonies might by this time have come cheaper than it actually does, not only to all those other countries, but likewise to England. The produce of tobacco, in consequence of a market so much more extensive than any which it has hitherto enjoyed, might, and probably would, by this time have been so much increased as to reduce the profits of a tobacco plantation to their natural level with those of a corn plantation, which it is supposed they are still somewhat above. The price of tobacco might, and probably would, by this time have fallen somewhat lower than it is at present. An equal quantity of the commodities, either of England or of those other countries, might have purchased in Maryland and Virginia a greater quantity of tobacco than it can do at present, and consequently have been sold there for so much a better price. So far as that weed, therefore, can, by its cheapness and abundance, increase the enjoyments, or augment the industry, either of England or of any other country, it would probably, in the case of a free trade, have produced both these effects in somewhat a greater degree than it can do at present. England, indeed, would not, in this case, have had any advantage over other countries. She might have bought the tobacco of her colonies somewhat cheaper, and consequently have sold some of her own commodities somewhat dearer, than she actually does; but she could neither have bought the one cheaper, nor sold the other dearer, than any other country might have done. She might, perhaps, have gained an absolute, but she would certainly have lost a relative advantage. In order, however, to obtain this relative advantage in the colony trade, in order to execute the invidious and malignant project of excluding, as much as possible, other nations from any share in it, England, there are very probable reasons for believing, has not only sacrificed a part of the absolute advantage which she, as well as every other nation, might have derived from that trade, but has subjected herself both to an absolute and to a relative disadvantage in almost every other branch of trade. When, by the act of navigation, England assumed to herself the monopoly of the colony trade, the foreign capitals which had before been employed in it, were necessarily withdrawn from it. The English capital, which had before carried on but a part of it, was now to carry on the whole. The capital which had before supplied the colonies with but a part of the goods which they wanted from Europe, was now all that was employed to supply them with the whole. But it could not supply them with the whole; and the goods with which it did supply them were necessarily sold very dear. The capital which had before bought but a part of the surplus produce of the colonies, was now all that was employed to buy the whole. But it could not buy the whole at anything near the old price; and therefore, whatever it did buy, it necessarily bought very cheap. But in an employment of capital, in which the merchant sold very dear, and bought very cheap, the profit must have been very great, and much above the ordinary level of profit in other branches of trade. This superiority of profit in the colony trade could not fail to draw from other branches of trade a part of the capital which had before been employed in them. But this revulsion of capital, as it must have gradually increased the competition of capitals in the colony trade, so it must have gradually diminished that competition in all those other branches of trade; as it must have gradually lowered the profits of the one, so it must have gradually raised those of the other, till the profits of all came to a new level, different from, and somewhat higher, than that at which they had been before. This double effect of drawing capital from all other trades, and of raising the rate of profit somewhat higher than it otherwise would have been in all trades, was not only produced by this monopoly upon its first establishment, but has continued to be produced by it ever since. _First_, This monopoly has been continually drawing capital from all other trades, to be employed in that of the colonies. Though the wealth of Great Britain has increased very much since the establishment of the act of navigation, it certainly has not increased in the same proportion as that of the colonies. But the foreign trade of every country naturally increases in proportion to its wealth, its surplus produce in proportion to its whole produce; and Great Britain having engrossed to herself almost the whole of what may be called the foreign trade of the colonies, and her capital not having increased in the same proportion as the extent of that trade, she could not carry it on without continually withdrawing from other branches of trade some part of the capital which had before been employed in them, as well as withholding from them a great deal more which would otherwise have gone to them. Since the establishment of the act of navigation, accordingly, the colony trade has been continually increasing, while many other branches of foreign trade, particularly of that to other parts of Europe, have been continually decaying. Our manufactures for foreign sale, instead of being suited, as before the act of navigation, to the neighbouring market of Europe, or to the more distant one of the countries which lie round the Mediterranean sea, have, the greater part of them, been accommodated to the still more distant one of the colonies; to the market in which they have the monopoly, rather than to that in which they have many competitors. The causes of decay in other branches of foreign trade, which, by Sir Matthew Decker and other writers, have been sought for in the excess and improper made of taxation, in the high price of labour, in the increase of luxury, &c. may all be found in the overgrowth of the colony trade. The mercantile capital of Great Britain, though very great, yet not being infinite, and though greatly increased since the act of navigation, yet not being increased in the same proportion as the colony trade, that trade could not possibly be carried on without withdrawing some part of that capital from other branches of trade, nor consequently without some decay of those other branches. England, it must be observed, was a great trading country, her mercantile capital was very great, and likely to become still greater and greater every day, not only before the act of navigation had established the monopoly of the corn trade, but before that trade was very considerable. In the Dutch war, during the government of Cromwell, her navy was superior to that of Holland; and in that which broke out in the beginning of the reign of Charles II., it was at least equal, perhaps superior to the united navies of France and Holland. Its superiority, perhaps, would scarce appear greater in the present times, at least if the Dutch navy were to bear the same proportion to the Dutch commerce now which it did then. But this great naval power could not, in either of those wars, be owing to the act of navigation. During the first of them, the plan of that act had been but just formed; and though, before the breaking out of the second, it had been fully enacted by legal authority, yet no part of it could have had time to produce any considerable effect, and least of all that part which established the exclusive trade to the colonies. Both the colonies and their trade were inconsiderable then, in comparison of what they are now. The island of Jamaica was an unwholesome desert, little inhabited, and less cultivated. New York and New Jersey were in the possession of the Dutch, the half of St. Christopher's in that of the French. The island of Antigua, the two Carolinas, Pennsylvania, Georgia, and Nova Scotia, were not planted. Virginia, Maryland, and New England were planted; and though they were very thriving colonies, yet there was not perhaps at that time, either in Europe or America, a single person who foresaw, or even suspected, the rapid progress which they have since made in wealth, population, and improvement. The island of Barbadoes, in short, was the only British colony of any consequence, of which the condition at that time bore any resemblance to what it is at present. The trade of the colonies, of which England, even for some time after the act of navigation, enjoyed but a part (for the act of navigation was not very strictly executed till several years after it was enacted), could not at that time be the cause of the great trade of England, nor of the great naval power which was supported by that trade. The trade which at that time supported that great naval power was the trade of Europe, and of the countries which lie round the Mediterranean sea. But the share which Great Britain at present enjoys of that trade could not support any such great naval power. Had the growing trade of the colonies been left free to all nations, whatever share of it might have fallen to Great Britain, and a very considerable share would probably have fallen to her, must have been all an addition to this great trade of which she was before in possession. In consequence of the monopoly, the increase of the colony trade has not so much occasioned an addition to the trade which Great Britain had before, as a total change in its direction. _Secondly_, This monopoly has necessarily contributed to keep up the rate of profit, in all the different branches of British trade, higher than it naturally would have been, had all nations been allowed a free trade to the British colonies. The monopoly of the colony trade, as it necessarily drew towards that trade a greater proportion of the capital of Great Britain than what would have gone to it of its own accord, so, by the expulsion of all foreign capitals, it necessarily reduced the whole quantity of capital employed in that trade below what it naturally would have been in the case of a free trade. But, by lessening the competition of capitals in that branch of trade, it necessarily raised the rate of profit in that branch. By lessening, too, the competition of British capitals in all other branches of trade, it necessarily raised the rate of British profit in all those other branches. Whatever may have been, at any particular period since the establishment of the act of navigation, the state or extent of the mercantile capital of Great Britain, the monopoly of the colony trade must, during the continuance of that state, have raised the ordinary rate of British profit higher than it otherwise would have been, both in that and in all the other branches of British trade. If, since the establishment of the act of navigation, the ordinary rate of British profit has fallen considerably, as it certainly has, it must have fallen still lower, had not the monopoly established by that act contributed to keep it up. But whatever raises, in any country, the ordinary rate of profit higher than it otherwise would be, necessarily subjects that country both to an absolute, and to a relative disadvantage in every branch of trade of which she has not the monopoly. It subjects her to an absolute disadvantage; because, in such branches of trade, her merchants cannot get this greater profit without selling dearer than they otherwise would do, both the goods of foreign countries which they import into their own, and the goods of their own country which they export to foreign countries. Their own country must both buy dearer and sell dearer; must both buy less, and sell less; must both enjoy less and produce less, than she otherwise would do. It subjects her to a relative disadvantage; because, in such branches of trade, it sets other countries, which are not subject to the same absolute disadvantage, either more above her or less below her, than they otherwise would be. It enables them both to enjoy more and to produce more, in proportion to what she enjoys and produces. It renders their superiority greater, or their inferiority less, than it otherwise would be. By raising the price of her produce above what it otherwise would be, it enables the merchants of other countries to undersell her in foreign markets, and thereby to justle her out of almost all those branches of trade, of which she has not the monopoly. Our merchants frequently complain of the high wages of British labour, as the cause of their manufactures being undersold in foreign markets; but they are silent about the high profits of stock. They complain of the extravagant gain of other people; but they say nothing of their own. The high profits of British stock, however, may contribute towards raising the price of British manufactures, in many cases, as much, and in some perhaps more, than the high wages of British labour. It is in this manner that the capital of Great Britain, one may justly say, has partly been drawn and partly been driven from the greater part of the different branches of trade of which she has not the monopoly; from the trade of Europe, in particular, and from that of the countries which lie round the Mediterranean sea. It has partly been drawn from those branches of trade, by the attraction of superior profit in the colony trade, in consequence of the continual increase of that trade, and of the continual insufficiency of the capital which had carried it on one year to carry it on the next. It has partly been driven from them, by the advantage which the high rate of profit established in Great Britain gives to other countries, in all the different branches of trade of which Great Britain has not the monopoly. As the monopoly of the colony trade has drawn from those other branches a part of the British capital, which would otherwise have been employed in them, so it has forced into them many foreign capitals which would never have gone to them, had they not been expelled from the colony trade. In those other branches of trade, it has diminished the competition of British capitals, and thereby raised the rate of British profit higher than it otherwise would have been. On the contrary, it has increased the competition of foreign capitals, and thereby sunk the rate of foreign profit lower than it otherwise would have been. Both in the one way and in the other, it must evidently have subjected Great Britain to a relative disadvantage in all those other branches of trade. The colony trade, however, it may perhaps be said, is more advantageous to Great Britain than any other; and the monopoly, by forcing into that trade a greater proportion of the capital of Great Britain than what would otherwise have gone to it, has turned that capital into an employment, more advantageous to the country than any other which it could have found. The most advantageous employment of any capital to the country to which it belongs, is that which maintains there the greatest quantity of productive labour, and increases the most the annual produce of the land and labour of that country. But the quantity of productive labour which any capital employed in the foreign trade of consumption can maintain, is exactly in proportion, it has been shown in the second book, to the frequency of its returns. A capital of a thousand pounds, for example, employed in a foreign trade of consumption, of which the returns are made regularly once in the year, can keep in constant employment, in the country to which it belongs, a quantity of productive labour, equal to what a thousand pounds can maintain there for a year. If the returns are made twice or thrice in the year, it can keep in constant employment a quantity of productive labour, equal to what two or three thousand pounds can maintain there for a year. A foreign trade of consumption carried on with a neighbouring, is, upon that account, in general, more advantageous than one carried on with a distant country; and, for the same reason, a direct foreign trade of consumption, as it has likewise been shown in the second book, is in general more advantageous than a round-about one. But the monopoly of the colony trade, so far as it has operated upon the employment of the capital of Great Britain, has, in all cases, forced some part of it from a foreign trade of consumption carried on with a neighbouring, to one carried on with a more distant country, and in many cases from a direct foreign trade of consumption to a round-about one. _First_, The monopoly of the colony trade has, in all cases, forced some part of the capital of Great Britain from a foreign trade of consumption carried on with a neighbouring, to one carried on with a more distant country. It has, in all cases, forced some part of that capital from the trade with Europe, and with the countries which lie round the Mediterranean sea, to that with the more distant regions of America and the West Indies; from which the returns are necessarily less frequent, not only on account of the greater distance, but on account of the peculiar circumstances of those countries. New colonies, it has already been observed, are always understocked. Their capital in always much less than what they could employ with great profit and advantage in the improvement and cultivation of their land. They have a constant demand, therefore, for more capital than they have of their own; and, in order to supply the deficiency of their own, they endeavour to borrow as much as they can of the mother country, to whom they are, therefore, always in debt. The most common way in which the colonies contract this debt, is not by borrowing upon bond of the rich people of the mother country, though they sometimes do this too, but by running as much in arrear to their correspondents, who supply them with goods from Europe, as those correspondents will allow them. Their annual returns frequently do not amount to more than a third, and sometimes not to so great a proportion of what they owe. The whole capital, therefore, which their correspondents advance to them, is seldom returned to Britain in less than three, and sometimes not in less than four or five years. But a British capital of a thousand pounds, for example, which is returned to Great Britain only once in five years, can keep in constant employment only one-fifth part of the British industry which it could maintain, if the whole was returned once in the year; and, instead of the quantity of industry which a thousand pounds could maintain for a year, can keep in constant employment the quantity only which two hundred pounds can maintain for a year. The planter, no doubt, by the high price which he pays for the goods from Europe, by the interest upon the bills which he grants at distant dates, and by the commission upon the renewal of those which he grants at near dates, makes up, and probably more than makes up, all the loss which his correspondent can sustain by this delay. But, though he make up the loss of his correspondent, he cannot make up that of Great Britain. In a trade of which the returns are very distant, the profit of the merchant may be as great or greater than in one in which they are very frequent and near; but the advantage of the country in which he resides, the quantity of productive labour constantly maintained there, the annual produce of the land and labour, must always be much less. That the returns of the trade to America, and still more those of that to the West Indies, are, in general, not only more distant, but more irregular and more uncertain, too, than those of the trade to any part of Europe, or even of the countries which lie round the Mediterranean sea, will readily be allowed, I imagine, by every body who has any experience of these different branches of trade. _Secondly_, The monopoly of the colony trade, has, in many cases, forced some part of the capital of Great Britain from a direct foreign trade of consumption, into a round-about one. Among the enumerated commodities which can be sent to no other market but Great Britain, there are several of which the quantity exceeds very much the consumption of Great Britain, and of which, a part, therefore, must be exported to other countries. But this cannot be done without forcing some part of the capital of Great Britain into a round-about foreign trade of consumption. Maryland, and Virginia, for example, send annually to Great Britain upwards of ninety-six thousand hogsheads of tobacco, and the consumption of Great Britain is said not to exceed fourteen thousand. Upwards of eighty-two thousand hogsheads, therefore, must be exported to other countries, to France, to Holland, and, to the countries which lie round the Baltic and Mediterranean seas. But that part of the capital of Great Britain which brings those eighty-two thousand hogsheads to Great Britain, which re-exports them from thence to those other countries, and which brings back from those countries to Great Britain either goods or money in return, is employed in a round-about foreign trade of consumption; and is necessarily forced into this employment, in order to dispose of this great surplus. If we would compute in how many years the whole of this capital is likely to come back to Great Britain, we must add to the distance of the American returns that of the returns from those other countries. If, in the direct foreign trade of consumption which we carry on with America, the whole capital employed frequently does not come back in less than three or four years, the whole capital employed in this round-about one is not likely to come back in less than four or five. If the one can keep in constant employment but a third or a fourth part of the domestic industry which could be maintained by a capital returned once in the year, the other can keep in constant employment but a fourth or a fifth part of that industry. At some of the out-ports a credit is commonly given to those foreign correspondents to whom they export their tobacco. At the port of London, indeed, it is commonly sold for ready money: the rule is Weigh and pay. At the port of London, therefore, the final returns of the whole round-about trade are more distant than the returns from America, by the time only which the goods may lie unsold in the warehouse; where, however, they may sometimes lie long enough. But, had not the colonies been confined to the market of Great Britain for the sale of their tobacco, very little more of it would probably have come to us than what was necessary for the home consumption. The goods which Great Britain purchases at present for her own consumption with the great surplus of tobacco which she exports to other countries, she would, in this case, probably have purchased with the immediate produce of her own industry, or with some part of her own manufactures. That produce, those manufactures, instead of being almost entirely suited to one great market, as at present, would probably have been fitted to a great number of smaller markets. Instead of one great round-about foreign trade of consumption, Great Britain would probably have carried on a great number of small direct foreign trades of the same kind. On account of the frequency of the returns, a part, and probably but a small part, perhaps not above a third or a fourth of the capital which at present carries on this great round-about trade, might have been sufficient to carry on all those small direct ones; might have kept in constant employment an equal quantity of British industry; and have equally supported the annual produce of the land and labour of Great Britain. All the purposes of this trade being, in this manner, answered by a much smaller capital, there would have been a large spare capital to apply to other purposes; to improve the lands, to increase the manufactures, and to extend the commerce of Great Britain; to come into competition at least with the other British capitals employed in all those different ways, to reduce the rate of profit in them all, and thereby to give to Great Britain, in all of them, a superiority over other countries, still greater than what she at present enjoys. The monopoly of the colony trade, too, has forced some part of the capital of Great Britain from all foreign trade of consumption to a carrying trade; and, consequently from supporting more or less the industry of Great Britain, to be employed altogether in supporting partly that of the colonies, and partly that of some other countries. The goods, for example, which are annually purchased with the great surplus of eighty-two thousand hogsheads of tobacco annually re-exported from Great Britain, are not all consumed in Great Britain. Part of them, linen from Germany and Holland, for example, is returned to the colonies for their particular consumption. But that part of the capital of Great Britain which buys the tobacco with which this linen is afterwards bought, is necessarily withdrawn from supporting the industry of Great Britain, to be employed altogether in supporting, partly that of the colonies, and partly that of the particular countries who pay for this tobacco with the produce of their own industry. The monopoly of the colony trade, besides, by forcing towards it a much greater proportion of the capital of Great Britain than what would naturally have gone to it, seems to have broken altogether that natural balance which would otherwise have taken place among all the different branches of British industry. The industry of Great Britain, instead of being accommodated to a great number of small markets, has been principally suited to one great market. Her commerce, instead of running in a great number of small channels, has been taught to run principally in one great channel. But the whole system of her industry and commerce has thereby been rendered less secure; the whole state of her body politic less healthful than it otherwise would have been. In her present condition, Great Britain resembles one of those unwholesome bodies in which some of the vital parts are overgrown, and which, upon that account, are liable to many dangerous disorders, scarce incident to those in which all the parts are more properly proportioned. A small stop in that great blood-vessel, which has been artificially swelled beyond its natural dimensions, and through which an unnatural proportion of the industry and commerce of the country has been forced to circulate, is very likely to bring on the most dangerous disorders upon the whole body politic. The expectation of a rupture with the colonies, accordingly, has struck the people of Great Britain with more terror than they ever felt for a Spanish armada, or a French invasion. It was this terror, whether well or ill grounded, which rendered the repeal of the stamp act, among the merchants at least, a popular measure. In the total exclusion from the colony market, was it to last only for a few years, the greater part of our merchants used to fancy that they foresaw an entire stop to their trade; the greater part of our master manufacturers, the entire ruin of their business; and the greater part of our workmen, an end of their employment. A rupture with any of our neighbours upon the continent, though likely, too, to occasion some stop or interruption in the employments of some of all these different orders of people, is foreseen, however, without any such general emotion. The blood, of which the circulation is stopt in some of the smaller vessels, easily disgorges itself into the greater, without occasioning any dangerous disorder; but, when it is stopt in any of the greater vessels, convulsions, apoplexy, or death, are the immediate and unavoidable consequences. If but one of those overgrown manufactures, which, by means either of bounties or of the monopoly of the home and colony markets, have been artificially raised up to any unnatural height, finds some small stop or interruption in its employment, it frequently occasions a mutiny and disorder alarming to government, and embarrassing even to the deliberations of the legislature. How great, therefore, would be the disorder and confusion, it was thought, which must necessarily be occasioned by a sudden and entire stop in the employment of so great a proportion of our principal manufacturers? Some moderate and gradual relaxation of the laws which give to Great Britain the exclusive trade to the colonies, till it is rendered in a great measure free, seems to be the only expedient which can, in all future times, deliver her from this danger; which can enable her, or even force her, to withdraw some part of her capital from this overgrown employment, and to turn it, though with less profit, towards other employments; and which, by gradually diminishing one branch of her industry, and gradually increasing all the rest, can, by degrees, restore all the different branches of it to that natural, healthful, and proper proportion, which perfect liberty necessarily establishes, and which perfect liberty can alone preserve. To open the colony trade all at once to all nations, might not only occasion some transitory inconveniency, but a great permanent loss, to the greater part of those whose industry or capital is at present engaged in it. The sudden loss of the employment, even of the ships which import the eighty-two thousand hogsheads of tobacco, which are over and above the consumption of Great Britain, might alone be felt very sensibly. Such are the unfortunate effects of all the regulations of the mercantile system. They not only introduce very dangerous disorders into the state of the body politic, but disorders which it is often difficult to remedy, without occasioning, for a time at least, still greater disorders. In what manner, therefore, the colony trade ought gradually to be opened; what are the restraints which ought first, and what are those which ought last, to be taken away; or in what manner the natural system of perfect liberty and justice ought gradually to be restored, we must leave to the wisdom of future statesmen and legislators to determine. Five different events, unforeseen and unthought of, have very fortunately concurred to hinder Great Britain from feeling, so sensibly as it was generally expected she would, the total exclusion which has now taken place for more than a year (from the first of December 1774) from a very important branch of the colony trade, that of the twelve associated provinces of North America. First, those colonies, in preparing themselves for their non-importation agreement, drained Great Britain completely of all the commodities which were fit for their market; secondly, the extraordinary demand of the Spanish flota has, this year, drained Germany and the north of many commodities, linen in particular, which used to come into competition, even in the British market, with the manufactures of Great Britain; thirdly, the peace between Russia and Turkey has occasioned an extraordinary demand from the Turkey market, which, during the distress of the country, and while a Russian fleet was cruising in the Archipelago, had been very poorly supplied; fourthly, the demand of the north of Europe for the manufactures of Great Britain has been increasing from year to year, for some time past; and, fifthly, the late partition, and consequential pacification of Poland, by opening the market of that great country, have, this year, added an extraordinary demand from thence to the increasing demand of the north. These events are all, except the fourth, in their nature transitory and accidental; and the exclusion from so important a branch of the colony trade, if unfortunately it should continue much longer, may still occasion some degree of distress. This distress, however, as it will come on gradually, will be felt much less severely than if it had come on all at once; and, in the mean time, the industry and capital of the country may find a new employment and direction, so as to prevent this distress from ever rising to any considerable height. The monopoly of the colony trade, therefore, so far as it has turned towards that trade a greater proportion of the capital of Great Britain than what would otherwise have gone to it, has in all cases turned it, from a foreign trade of consumption with a neighbouring, into one with a more distant country; in many cases from a direct foreign trade of consumption into a round-about one; and, in some cases, from all foreign trade of consumption into a carrying trade. It has, in all cases, therefore, turned it from a direction in which it would have maintained a greater quantity of productive labour, into one in which it can maintain a much smaller quantity. By suiting, besides, to one particular market only, so great a part of the industry and commerce of Great Britain, it has rendered the whole state of that industry and commerce more precarious and less secure, than if their produce had been accommodated to a greater variety of markets. We must carefully distinguish between the effects of the colony trade and those of the monopoly of that trade. The former are always and necessarily beneficial; the latter always and necessarily hurtful. But the former are so beneficial, that the colony trade, though subject to a monopoly, and, notwithstanding the hurtful effects of that monopoly, is still, upon the whole, beneficial, and greatly beneficial, though a good deal less so than it otherwise would be. The effect of the colony trade, in its natural and free state, is to open a great though distant market, for such parts of the produce of British industry as may exceed the demand of the markets nearer home, of those of Europe, and of the countries which lie round the Mediterranean sea. In its natural and free state, the colony trade, without drawing from those markets any part of the produce which had ever been sent to them, encourages Great Britain to increase the surplus continually, by continually presenting new equivalents to be exchanged for it. In its natural and free state, the colony trade tends to increase the quantity of productive labour in Great Britain, but without altering in any respect the direction of that which had been employed there before. In the natural and free state of the colony trade, the competition of all other nations would hinder the rate of profit from rising above the common level, either in the new market, or in the new employment. The new market, without drawing any thing from the old one, would create, if one may say so, a new produce for its own supply; and that new produce would constitute a new capital for carrying on the new employment, which, in the same manner, would draw nothing from the old one. The monopoly of the colony trade, on the contrary, by excluding the competition of other nations, and thereby raising the rate of profit, both in the new market and in the new employment, draws produce from the old market, and capital from the old employment. To augment our share of the colony trade beyond what it otherwise would be, is the avowed purpose of the monopoly. If our share of that trade were to be no greater with, than it would have been without the monopoly, there could have been no reason for establishing the monopoly. But whatever forces into a branch of trade, of which the returns are slower and more distant than those of the greater part of other trades, a greater proportion of the capital of any country, than what of its own accord would go to that branch, necessarily renders the whole quantity of productive labour annually maintained there, the whole annual produce of the land and labour of that country, less than they otherwise would be. It keeps down the revenue of the inhabitants of that country below what it would naturally rise to, and thereby diminishes their power of accumulation. It not only hinders, at all times, their capital from maintaining so great a quantity of productive labour as it would otherwise maintain, but it hinders it from increasing so fast as it would otherwise increase, and, consequently, from maintaining a still greater quantity of productive labour. The natural good effects of the colony trade, however, more than counterbalance to Great Britain the bad effects of the monopoly; so that, monopoly and altogether, that trade, even as it is carried on at present, is not only advantageous, but greatly advantageous. The new market and the new employment which are opened by the colony trade, are of much greater extent than that portion of the old market and of the old employment which is lost by the monopoly. The new produce and the new capital which has been created, if one may say so, by the colony trade, maintain in Great Britain a greater quantity of productive labour than what can have been thrown out of employment by the revulsion of capital from other trades of which the returns are more frequent. If the colony trade, however, even as it is carried on at present, is advantageous to Great Britain, it is not by means of the monopoly, but in spite of the monopoly. It is rather for the manufactured than for the rude produce of Europe, that the colony trade opens a new market. Agriculture is the proper business of all new colonies; a business which the cheapness of land renders more advantageous than any other. They abound, therefore, in the rude produce of land; and instead of importing it from other countries, they have generally a large surplus to export. In new colonies, agriculture either draws hands from all other employments, or keeps them from going to any other employment. There are few hands to spare for the necessary, and none for the ornamental manufactures. The greater part of the manufactures of both kinds they find it cheaper to purchase of other countries than to make for themselves. It is chiefly by encouraging the manufactures of Europe, that the colony trade indirectly encourages its agriculture. The manufacturers of Europe, to whom that trade gives employment, constitute a new market for the produce of the land, and the most advantageous of all markets; the home market for the corn and cattle, for the bread and butcher's meat of Europe, is thus greatly extended by means of the trade to America. But that the monopoly of the trade of populous and thriving colonies is not alone sufficient to establish, or even to maintain, manufactures in any country, the examples of Spain and Portugal sufficiently demonstrate. Spain and Portugal were manufacturing countries before they had any considerable colonies. Since they had the richest and most fertile in the world, they have both ceased to be so. In Spain and Portugal, the bad effects of the monopoly, aggravated by other causes, have, perhaps, nearly overbalanced the natural good effects of the colony trade. These causes seem to be other monopolies of different kinds: the degradation of the value of gold and silver below what it is in most other countries; the exclusion from foreign markets by improper taxes upon exportation, and the narrowing of the home market, by still more improper taxes upon the transportation of goods from one part of the country to another; but above all, that irregular and partial administration of justice which often protects the rich and powerful debtor from the pursuit of his injured creditor, and which makes the industrious part of the nation afraid to prepare goods for the consumption of those haughty and great men, to whom they dare not refuse to sell upon credit, and from whom they are altogether uncertain of repayment. In England, on the contrary, the natural good effects of the colony trade, assisted by other causes, have in a great measure conquered the bad effects of the monopoly. These causes seem to be, the general liberty of trade, which, notwithstanding some restraints, is at least equal, perhaps superior, to what it is in any other country; the liberty of exporting, duty free, almost all sorts of goods which are the produce of domestic industry, to almost any foreign country; and what, perhaps, is of still greater importance, the unbounded liberty of transporting them from one part of our own country to any other, without being obliged to give any account to any public office, without being liable to question or examination of any kind; but, above all, that equal and impartial administration of justice, which renders the rights of the meanest British subject respectable to the greatest, and which, by securing to every man the fruits of his own industry, gives the greatest and most effectual encouragement to every sort of industry. If the manufactures of Great Britain, however, have been advanced, as they certainly have, by the colony trade, it has not been by means of the monopoly of that trade, but in spite of the monopoly. The effect of the monopoly has been, not to augment the quantity, but to alter the quality and shape of a part of the manufactures of Great Britain, and to accommodate to a market, from which the returns are slow and distant, what would otherwise have been accommodated to one from which the returns are frequent and near. Its effect has consequently been, to turn a part of the capital of Great Britain from an employment in which it would have maintained a greater quantity of manufacturing industry, to one in which it maintains a much smaller, and thereby to diminish, instead of increasing, the whole quantity of manufacturing industry maintained in Great Britain. The monopoly of the colony trade, therefore, like all the other mean and malignant expedients of the mercantile system, depresses the industry of all other countries, but chiefly that of the colonies, without in the least increasing, but on the contrary diminishing, that of the country in whose favour it is established. The monopoly hinders the capital of that country, whatever may, at any particular time, be the extent of that capital, from maintaining so great a quantity of productive labour as it would otherwise maintain, and from affording so great a revenue to the industrious inhabitants as it would otherwise afford. But as capital can be increased only by savings from revenue, the monopoly, by hindering it from affording so great a revenue as it would otherwise afford, necessarily hinders it from increasing so fast as it would otherwise increase, and consequently from maintaining a still greater quantity of productive labour, and affording a still greater revenue to the industrious inhabitants of that country. One great original source of revenue, therefore, the wages of labour, the monopoly must necessarily have rendered, at all times, less abundant than it otherwise would have been. By raising the rate of mercantile profit, the monopoly discourages the improvement of land. The profit of improvement depends upon the difference between what the land actually produces, and what, by the application of a certain capital, it can be made to produce. If this difference affords a greater profit than what can be drawn from an equal capital in any mercantile employment, the improvement of land will draw capital from all mercantile employments. If the profit in less, mercantile employments will draw capital from the improvement of land. Whatever, therefore, raises the rate of mercantile profit, either lessens the superiority, or increases the inferiority of the profit of improvement: and, in the one case, hinders capital from going to improvement, and in the other draws capital from it; but by discouraging improvement, the monopoly necessarily retards the natural increase of another great original source of revenue, the rent of land. By raising the rate of profit, too, the monopoly necessarily keeps up the market rate of interest higher than it otherwise would be. But the price of land, in proportion to the rent which it affords, the number of years purchase which is commonly paid for it, necessarily falls as the rate of interest rises, and rises as the rate of interest falls. The monopoly, therefore, hurts the interest of the landlord two different ways, by retarding the natural increase, first, of his rent, and, secondly, of the price which he would get for his land, in proportion to the rent which it affords. The monopoly, indeed, raises the rate of mercantile profit, and thereby augments somewhat the gain of our merchants. But as it obstructs the natural increase of capital, it tends rather to diminish than to increase the sum total of the revenue which the inhabitants of the country derive from the profits of stock; a small profit upon a great capital generally affording a greater revenue than a great profit upon a small one. The monopoly raises the rate of profit, but it hinders the sum of profit from rising so high as it otherwise would do. All the original sources of revenue, the wages of labour, the rent of land, and the profits of stock, the monopoly renders much less abundant than they otherwise would be. To promote the little interest of one little order of men in one country, it hurts the interest of all other orders of men in that country, and of all the men in all other countries. It is solely by raising the ordinary rate of profit, that the monopoly either has proved, or could prove, advantageous to any one particular order of men. But besides all the bad effects to the country in general, which have already been mentioned as necessarily resulting from a higher rate of profit, there is one more fatal, perhaps, than all these put together, but which, if we may judge from experience, is inseparably connected with it. The high rate of profit seems everywhere to destroy that parsimony which, in other circumstances, is natural to the character of the merchant. When profits are high, that sober virtue seems to be superfluous, and expensive luxury to suit better the affluence of his situation. But the owners of the great mercantile capitals are necessarily the leaders and conductors of the whole industry of every nation; and their example has a much greater influence upon the manners of the whole industrious part of it than that of any other order of men. If his employer is attentive and parsimonious, the workman is very likely to be so too; but if the master in dissolute and disorderly, the servant, who shapes his work according to the pattern which his master prescribes to him, will shape his life, too, according to the example which he sets him. Accumulation is thus prevented in the hands of all those who are naturally the most disposed to accumulate; and the funds destined for the maintenance of productive labour, receive no augmentation from the revenue of those who ought naturally to augment them the most. The capital of the country, instead of increasing, gradually dwindles away, and the quantity of productive labour maintained in it grows every day less and less. Have the exorbitant profits of the merchants of Cadiz and Lisbon augmented the capital of Spain and Portugal? Have they alleviated the poverty, have they promoted the industry, of those two beggarly countries? Such has been the tone of mercantile expense in those two trading cities, that those exorbitant profits, far from augmenting the general capital of the country, seem scarce to have been sufficient to keep up the capitals upon which they were made. Foreign capitals are every day intruding themselves, if I may say so, more and more into the trade of Cadiz and Lisbon. It is to expel those foreign capitals from a trade which their own grows every day more and more insufficient for carrying on, that the Spaniards and Portuguese endeavour every day to straiten more and more the galling bands of their absurd monopoly. Compare the mercantile manners of Cadiz and Lisbon with those of Amsterdam, and you will be sensible how differently the conduct and character of merchants are affected by the high and by the low profits of stock. The merchants of London, indeed, have not yet generally become such magnificent lords as those of Cadiz and Lisbon; but neither are they in general such attentive and parsimonious burghers as those of Amsterdam. They are supposed, however, many of them, to be a good deal richer than the greater part of the former, and not quite so rich as many of the latter: but the rate of their profit is commonly much lower than that of the former, and a good deal higher than that of the latter. Light come, light go, says the proverb; and the ordinary tone of expense seems everywhere to be regulated, not so much according to the real ability of spending, as to the supposed facility of getting money to spend. It is thus that the single advantage which the monopoly procures to a single order of men, is in many different ways hurtful to the general interest of the country. To found a great empire for the sole purpose of raising up a people of customers, may at first sight, appear a project fit only for a nation of shopkeepers. It is, however, a project altogether unfit for a nation of shopkeepers, but extremely fit for a nation whose government is influenced by shopkeepers. Such statesmen, and such statesmen only, are capable of fancying that they will find some advantage in employing the blood and treasure of their fellow-citizens, to found and maintain such an empire. Say to a shopkeeper, Buy me a good estate, and I shall always buy my clothes at your shop, even though I should pay somewhat dearer than what I can have them for at other shops; and you will not find him very forward to embrace your proposal. But should any other person buy you such an estate, the shopkeeper will be much obliged to your benefactor if he would enjoin you to buy all your clothes at his shop. England purchased for some of her subjects, who found themselves uneasy at home, a great estate in a distant country. The price, indeed, was very small, and instead of thirty years purchase, the ordinary price of land in the present times, it amounted to little more than the expense of the different equipments which made the first discovery, reconoitered the coast, and took a fictitious possession of the country. The land was good, and of great extent; and the cultivators having plenty of good ground to work upon, and being for some time at liberty to sell their produce where they pleased, became, in the course of little more than thirty or forty years (between 1620 and 1660), so numerous and thriving a people, that the shopkeepers and other traders of England wished to secure to themselves the monopoly of their custom. Without pretending, therefore, that they had paid any part, either of the original purchase money, or of the subsequent expense of improvement, they petitioned the parliament, that the cultivators of America might for the future be confined to their shop; first, for buying all the goods which they wanted from Europe; and, secondly, for selling all such parts of their own produce as these traders might find it convenient to buy. For they did not find it convenient to buy every part of it. Some parts of it imported into England, might have interfered with some of the trades which they themselves carried on at home. Those particular parts of it, therefore, they were willing that the colonists should sell where they could; the farther off the better; and upon that account proposed that their market should be confined to the countries south of Cape Finisterre. A clause in the famous act of navigation established this truly shopkeeper proposal into a law. The maintenance of this monopoly has hitherto been the principal, or more properly, perhaps, the sole end and purpose of the dominion which Great Britain assumes over her colonies. In the exclusive trade, it is supposed, consists the great advantage of provinces, which have never yet afforded either revenue or military force for the support of the civil government, or the defence of the mother country. The monopoly is the principal badge of their dependency, and it is the sole fruit which has hitherto been gathered from that dependency. Whatever expense Great Britain has hitherto laid out in maintaining this dependency, has really been laid out in order to support this monopoly. The expense of the ordinary peace establishment of the colonies amounted, before the commencement of the present disturbances to the pay of twenty regiments of foot; to the expense of the artillery, stores, and extraordinary provisions, with which it was necessary to supply them; and to the expense of a very considerable naval force, which was constantly kept up, in order to guard from the smuggling vessels of other nations, the immense coast of North America, and that of our West Indian islands. The whole expense of this peace establishment was a charge upon the revenue of Great Britain, and was, at the same time, the smallest part of what the dominion of the colonies has cost the mother country. If we would know the amount of the whole, we must add to the annual expense of this peace establishment, the interest of the sums which, in consequence of their considering her colonies as provinces subject to her dominion, Great Britain has, upon different occasions, laid out upon their defence. We must add to it, in particular, the whole expense of the late war, and a great part of that of the war which preceded it. The late war was altogether a colony quarrel; and the whole expense of it, in whatever part of the world it might have been laid out, whether in Germany or the East Indies, ought justly to be stated to the account of the colonies. It amounted to more than ninety millions sterling, including not only the new debt which was contracted, but the two shillings in the pound additional land tax, and the sums which were every year borrowed from the sinking fund. The Spanish war which began in 1739 was principally a colony quarrel. Its principal object was to prevent the search of the colony ships, which carried on a contraband trade with the Spanish Main. This whole expense is, in reality, a bounty which has been given in order to support a monopoly. The pretended purpose of it was to encourage the manufactures, and to increase the commerce of Great Britain. But its real effect has been to raise the rate of mercantile profit, and to enable our merchants to turn into a branch of trade, of which the returns are more slow and distant than those of the greater part of other trades, a greater proportion of their capital than they otherwise would have done; two events which, if a bounty could have prevented, it might perhaps have been very well worth while to give such a bounty. Under the present system of management, therefore, Great Britain derives nothing but loss from the dominion which she assumes over her colonies. To propose that Great Britain should voluntarily give up all authority over her colonies, and leave them to elect their own magistrates, to enact their own laws, and to make peace and war, as they might think proper, would be to propose such a measure as never was, and never will be, adopted by any nation in the world. No nation ever voluntarily gave up the dominion of any province, how troublesome soever it might be to govern it, and how small soever the revenue which it afforded might be in proportion to the expense which it occasioned. Such sacrifices, though they might frequently be agreeable to the interest, are always mortifying to the pride of every nation; and, what is perhaps of still greater consequence, they are always contrary to the private interest of the governing part of it, who would thereby be deprived of the disposal of many places of trust and profit, of many opportunities of acquiring wealth and distinction, which the possession of the most turbulent, and, to the great body of the people, the most unprofitable province, seldom fails to afford. The most visionary enthusiasts would scarce be capable of proposing such a measure, with any serious hopes at least of its ever being adopted. If it was adopted, however, Great Britain would not only be immediately freed from the whole annual expense of the peace establishment of the colonies, but might settle with them such a treaty of commerce as would effectually secure to her a free trade, more advantageous to the great body of the people, though less so to the merchants, than the monopoly which she at present enjoys. By thus parting good friends, the natural affection of the colonies to the mother country, which, perhaps our late dissensions have well nigh extinguished, would quickly revive. It might dispose them not only to respect, for whole centuries together, that treaty of commerce which they had concluded with us at parting, but to favour us in war as in trade, and instead of turbulent and factious subjects, to become our most faithful, affectionate, and generous allies; and the same sort of parental affection on the one side, and filial respect on the other, might revive between Great Britain and her colonies, which used to subsist between those of ancient Greece and the mother city from which they descended. In order to render any province advantageous to the empire to which it belongs, it ought to afford, in time of peace, a revenue to the public, sufficient not only for defraying the whole expense of its own peace establishment, but for contributing its proportion to the support of the general government of the empire. Every province necessarily contributes, more or less, to increase the expense of that general government. If any particular province, therefore, does not contribute its share towards defraying this expense, an unequal burden must be thrown upon some other part of the empire. The extraordinary revenue, too, which every province affords to the public in time of war, ought, from parity of reason, to bear the same proportion to the extraordinary revenue of the whole empire, which its ordinary revenue does in time of peace. That neither the ordinary nor extraordinary revenue which Great Britain derives from her colonies, bears this proportion to the whole revenue of the British empire, will readily be allowed. The monopoly, it has been supposed, indeed, by increasing the private revenue of the people of Great Britain, and thereby enabling them to pay greater taxes, compensates the deficiency of the public revenue of the colonies. But this monopoly, I have endeavoured to show, though a very grievous tax upon the colonies, and though it may increase the revenue of a particular order of men in Great Britain, diminishes, instead of increasing, that of the great body of the people, and consequently diminishes, instead of increasing, the ability of the great body of the people to pay taxes. The men, too, whose revenue the monopoly increases, constitute a particular order, which it is both absolutely impossible to tax beyond the proportion of other orders, and extremely impolitic even to attempt to tax beyond that proportion, as I shall endeavour to show in the following book. No particular resource, therefore, can be drawn from this particular order. The colonies may be taxed either by their own assemblies, or by the parliament of Great Britain. That the colony assemblies can never be so managed as to levy upon their constituents a public revenue, sufficient, not only to maintain at all times their own civil and military establishment, but to pay their proper proportion of the expense of the general government of the British empire, seems not very probable. It was a long time before even the parliament of England, though placed immediately under the eye of the sovereign, could be brought under such a system of management, or could be rendered sufficiently liberal in their grants for supporting the civil and military establishments even of their own country. It was only by distributing among the particular members of parliament a great part either of the offices, or of the disposal of the offices arising from this civil and military establishment, that such a system of management could be established, even with regard to the parliament of England. But the distance of the colony assemblies from the eye of the sovereign, their number, their dispersed situation, and their various constitutions, would render it very difficult to manage them in the same manner, even though the sovereign had the same means of doing it; and those means are wanting. It would be absolutely impossible to distribute among all the leading members of all the colony assemblies such a share, either of the offices, or of the disposal of the offices, arising from the general government of the British empire, as to dispose them to give up their popularity at home, and to tax their constituents for the support of that general government, of which almost the whole emoluments were to be divided among people who were strangers to them. The unavoidable ignorance of administration, besides, concerning the relative importance of the different members of those different assemblies, the offences which must frequently be given, the blunders which must constantly be committed, in attempting to manage them in this manner, seems to render such a system of management altogether impracticable with regard to them. The colony assemblies, besides, cannot be supposed the proper judges of what is necessary for the defence and support of the whole empire. The care of that defence and support is not entrusted to them. It is not their business, and they have no regular means of information concerning it. The assembly of a province, like the vestry of a parish, may judge very properly concerning the affairs of its own particular district, but can have no proper means of judging concerning those of the whole empire. It cannot even judge properly concerning the proportion which its own province bears to the whole empire, or concerning the relative degree of its wealth and importance, compared with the other provinces; because those other provinces are not under the inspection and superintendency of the assembly of a particular province. What is necessary for the defence and support of the whole empire, and in what proportion each part ought to contribute, can be judged of only by that assembly which inspects and superintends the affairs of the whole empire. It has been proposed, accordingly, that the colonies should be taxed by requisition, the parliament of Great Britain determining the sum which each colony ought to pay, and the provincial assembly assessing and levying it in the way that suited best the circumstances of the province. What concerned the whole empire would in this way be determined by the assembly which inspects and superintends the affairs of the whole empire; and the provincial affairs of each colony might still be regulated by its own assembly. Though the colonies should, in this case, have no representatives in the British parliament, yet, if we may judge by experience, there is no probability that the parliamentary requisition would be unreasonable. The parliament of England has not, upon any occasion, shewn the smallest disposition to overburden those parts of the empire which are not represented in parliament. The islands of Guernsey and Jersey, without any means of resisting the authority of parliament, are more lightly taxed than any part of Great Britain. Parliament, in attempting to exercise its supposed right, whether well or ill grounded, of taxing the colonies, has never hitherto demanded of them any thing which even approached to a just proportion to what was paid by their fellow-subjects at home. If the contribution of the colonies, besides, was to rise or fall in proportion to the rise or fall of the land-tax, parliament could not tax them without taxing, at the same time, its own constituents, and the colonies might, in this case, be considered as virtually represented in parliament. Examples are not wanting of empires in which all the different provinces are not taxed, if I may be allowed the expression, in one mass; but in which the sovereign regulates the sum which each province ought to pay, and in some provinces assesses and levies it as he thinks proper; while in others he leaves it to be assessed and levied as the respective states of each province shall determine. In some provinces of France, the king not only imposes what taxes he thinks proper, but assesses and levies them in the way he thinks proper. From others he demands a certain sum, but leaves it to the states of each province to assess and levy that sum as they think proper. According to the scheme of taxing by requisition, the parliament of Great Britain would stand nearly in the same situation towards the colony assemblies, as the king of France does towards the states of those provinces which still enjoy the privilege of having states of their own, the provinces of France which are supposed to be the best governed. But though, according to this scheme, the colonies could have no just reason to fear that their share of the public burdens should ever exceed the proper proportion to that of their fellow-citizens at home, Great Britain might have just reason to fear that it never would amount to that proper proportion. The parliament of Great Britain has not, for some time past, had the same established authority in the colonies, which the French king has in those provinces of France which still enjoy the privilege of having states of their own. The colony assemblies, if they were not very favourably disposed (and unless more skilfully managed than they ever have been hitherto, they are not very likely to be so), might still find many pretences for evading or rejecting the most reasonable requisitions of parliament. A French war breaks out, we shall suppose; ten millions must immediately be raised, in order to defend the seat of the empire. This sum must be borrowed upon the credit of some parliamentary fund mortgaged for paying the interest. Part of this fund parliament proposes to raise by a tax to be levied in Great Britain, and part of it by a requisition to all the different colony assemblies of America and the West Indies. Would people readily advance their money upon the credit of a fund which partly depended upon the good humour of all these assemblies, far distant from the seat of the war, and sometimes, perhaps, thinking themselves not much concerned in the event of it? Upon such a fund, no more money would probably be advanced than what the tax to be levied in Great Britain might be supposed to answer for. The whole burden of the debt contracted on account of the war would in this manner fall, as it always has done hitherto, upon Great Britain; upon a part of the empire, and not upon the whole empire. Great Britain is, perhaps, since the world began, the only state which, as it has extended its empire, has only increased its expense, without once augmenting its resources. Other states have generally disburdened themselves, upon their subject and subordinate provinces, of the most considerable part of the expense of defending the empire. Great Britain has hitherto suffered her subject and subordinate provinces to disburden themselves upon her of almost this whole expense. In order to put Great Britain upon a footing of equality with her own colonies, which the law has hitherto supposed to be subject and subordinate, it seems necessary, upon the scheme of taxing them by parliamentary requisition, that parliament should have some means of rendering its requisitions immediately effectual, in case the colony assemblies should attempt to evade or reject them; and what those means are, it is not very easy to conceive, and it has not yet been explained. Should the parliament of Great Britain, at the same time, be ever fully established in the right of taxing the colonies, even independent of the consent of their own assemblies, the importance of those assemblies would, from that moment, be at an end, and with it, that of all the leading men of British America. Men desire to have some share in the management of public affairs, chiefly on account of the importance which it gives them. Upon the power which the greater part of the leading men, the natural aristocracy of every country, have of preserving or defending their respective importance, depends the stability and duration of every system of free government. In the attacks which those leading men are continually making upon the importance of one another, and in the defence of their own, consists the whole play of domestic faction and ambition. The leading men of America, like those of all other countries, desire to preserve their own importance. They feel, or imagine, that if their assemblies, which they are fond of calling parliaments, and of considering as equal in authority to the parliament of Great Britain, should be so far degraded as to become the humble ministers and executive officers of that parliament, the greater part of their own importance would be at an end. They have rejected, therefore, the proposal of being taxed by parliamentary requisition, and, like other ambitious and high-spirited men, have rather chosen to draw the sword in defence of their own importance. Towards the declension of the Roman republic, the allies of Rome, who had borne the principal burden of defending the state and extending the empire, demanded to be admitted to all the privileges of Roman citizens. Upon being refused, the social war broke out. During the course of that war, Rome granted those privileges to the greater part of them, one by one, and in proportion as they detached themselves from the general confederacy. The parliament of Great Britain insists upon taxing the colonies; and they refuse to be taxed by a parliament in which they are not represented. If to each colony which should detach itself from the general confederacy, Great Britain should allow such a number of representatives as suited the proportion of what it contributed to the public revenue of the empire, in consequence of its being subjected to the same taxes, and in compensation admitted to the same freedom of trade with its fellow-subjects at home; the number of its representatives to be augmented as the proportion of its contribution might afterwards augment; a new method of acquiring importance, a new and more dazzling object of ambition, would be presented to the leading men of each colony. Instead of piddling for the little prizes which are to be found in what may be called the paltry raffle of colony faction, they might then hope, from the presumption which men naturally have in their own ability and good fortune, to draw some of the great prizes which sometimes come from the wheel of the great state lottery of British politics. Unless this or some other method is fallen upon, and there seems to be none more obvious than this, of preserving the importance and of gratifying the ambition of the leading men of America, it is not very probable that they will ever voluntarily submit to us; and we ought to consider, that the blood which must be shed in forcing them to do so, is, every drop of it, the blood either of those who are, or of those whom we wish to have for our fellow-citizens. They are very weak who flatter themselves that, in the state to which things have come, our colonies will be easily conquered by force alone. The persons who now govern the resolutions of what they call their continental congress, feel in themselves at this moment a degree of importance which, perhaps, the greatest subjects in Europe scarce feel. From shopkeepers, tradesmen, and attorneys, they are become statesmen and legislators, and are employed in contriving a new form of government for an extensive empire, which, they flatter themselves, will become, and which, indeed, seems very likely to become, one of the greatest and most formidable that ever was in the world. Five hundred different people, perhaps, who, in different ways, act immediately under the continental congress, and five hundred thousand, perhaps, who act under those five hundred, all feel, in the same manner, a proportionable rise in their own importance. Almost every individual of the governing party in America fills, at present, in his own fancy, a station superior, not only to what he had ever filled before, but to what he had ever expected to fill; and unless some new object of ambition is presented either to him or to his leaders, if he has the ordinary spirit of a man, he will die in defence of that station. It is a remark of the President Heynaut, that we now read with pleasure the account of many little transactions of the Ligue, which, when they happened, were not, perhaps, considered as very important pieces of news. But every man then, says he, fancied himself of some importance; and the innumerable memoirs which have come down to us from those times, were the greater part of them written by people who took pleasure in recording and magnifying events, in which they flattered themselves they had been considerable actors. How obstinately the city of Paris, upon that occasion, defended itself, what a dreadful famine it supported, rather than submit to the best, and afterwards the most beloved of all the French kings, is well known. The greater part of the citizens, or those who governed the greater part of them, fought in defence of their own importance, which, they foresaw, was to be at an end whenever the ancient government should be re-established. Our colonies, unless they can be induced to consent to a union, are very likely to defend themselves, against the best of all mother countries, as obstinately as the city of Paris did against one of the best of kings. The idea of representation was unknown in ancient times. When the people of one state were admitted to the right of citizenship in another, they had no other means of exercising that right, but by coming in a body to vote and deliberate with the people of that other state. The admission of the greater part of the inhabitants of Italy to the privileges of Roman citizens, completely ruined the Roman republic. It was no longer possible to distinguish between who was, and who was not, a Roman citizen. No tribe could know its own members. A rabble of any kind could be introduced into the assemblies of the people, could drive out the real citizens, and decide upon the affairs of the republic, as if they themselves had been such. But though America were to send fifty or sixty new representatives to parliament, the door-keeper of the house of commons could not find any great difficulty in distinguishing between who was and who was not a member. Though the Roman constitution, therefore, was necessarily ruined by the union of Rome with the allied states of Italy, there is not the least probability that the British constitution would be hurt by the union of Great Britain with her colonies. That constitution, on the contrary, would be completed by it, and seems to be imperfect without it. The assembly which deliberates and decides concerning the affairs of every part of the empire, in order to be properly informed, ought certainly to have representatives from every part of it. That this union, however, could be easily effectuated, or that difficulties, and great difficulties, might not occur in the execution, I do not pretend. I have yet heard of none, however, which appear insurmountable. The principal, perhaps, arise, not from the nature of things, but from the prejudices and opinions of the people, both on this and on the other side of the Atlantic. We on this side of the water are afraid lest the multitude of American representatives should overturn the balance of the constitution, and increase too much either the influence of the crown on the one hand, or the force of the democracy on the other. But if the number of American representatives were to be in proportion to the produce of American taxation, the number of people to be managed would increase exactly in proportion to the means of managing them, and the means of managing to the number of people to be managed. The monarchical and democratical parts of the constitution would, after the union, stand exactly in the same degree of relative force with regard to one another as they had done before. The people on the other side of the water are afraid lest their distance from the seat of government might expose them to many oppressions; but their representatives in parliament, of which the number ought from the first to be considerable, would easily be able to protect them from all oppression. The distance could not much weaken the dependency of the representative upon the constituent, and the former would still feel that he owed his seat in parliament, and all the consequence which he derived from it, to the good-will of the latter. It would be the interest of the former, therefore, to cultivate that good-will, by complaining, with all the authority of a member of the legislature, of every outrage which any civil or military officer might be guilty of in those remote parts of the empire. The distance of America from the seat of government, besides, the natives of that country might flatter themselves, with some appearance of reason too, would not be of very long continuance. Such has hitherto been the rapid progress of that country in wealth, population, and improvement, that in the course of little more than a century, perhaps, the produce of the American might exceed that of the British taxation. The seat of the empire would then naturally remove itself to that part of the empire which contributed most to the general defence and support of the whole. The discovery of America, and that of a passage to the East Indies by the Cape of Good Hope, are the two greatest and most important events recorded in the history of mankind. Their consequences have already been great; but, in the short period of between two and three centuries which has elapsed since these discoveries were made, it is impossible that the whole extent of their consequences can have been seen. What benefits or what misfortunes to mankind may hereafter result from those great events, no human wisdom can foresee. By uniting in some measure the most distant parts of the world, by enabling them to relieve one another's wants, to increase one another's enjoyments, and to encourage one another's industry, their general tendency would seem to be beneficial. To the natives, however, both of the East and West Indies, all the commercial benefits which can have resulted from those events have been sunk and lost in the dreadful misfortunes which they have occasioned. These misfortunes, however, seem to have arisen rather from accident than from any thing in the nature of those events themselves. At the particular time when these discoveries were made, the superiority of force happened to be so great on the side of the Europeans, that they were enabled to commit with impunity every sort of injustice in those remote countries. Hereafter, perhaps, the natives of those countries may grow stronger, or those of Europe may grow weaker; and the inhabitants of all the different quarters of the world may arrive at that equality of courage and force which, by inspiring mutual fear, can alone overawe the injustice of independent nations into some sort of respect for the rights of one another. But nothing seems more likely to establish this equality of force, than that mutual communication of knowledge, and of all sorts of improvements, which an extensive commerce from all countries to all countries naturally, or rather necessarily, carries along with it. In the mean time, one of the principal effects of those discoveries has been, to raise the mercantile system to a degree of splendour and glory which it could never otherwise have attained to. It is the object of that system to enrich a great nation, rather by trade and manufactures than by the improvement and cultivation of land, rather by the industry of the towns than by that of the country. But in consequence of those discoveries, the commercial towns of Europe, instead of being the manufacturers and carriers for but a very small part of the world (that part of Europe which is washed by the Atlantic ocean, and the countries which lie round the Baltic and Mediterranean seas), have now become the manufacturers for the numerous and thriving cultivators of America, and the carriers, and in some respects the manufacturers too, for almost all the different nations of Asia, Africa, and America. Two new worlds have been opened to their industry, each of them much greater and more extensive than the old one, and the market of one of them growing still greater and greater every day. The countries which possess the colonies of America, and which trade directly to the East Indies, enjoy indeed the whole show and splendour of this great commerce. Other countries, however, notwithstanding all the invidious restraints by which it is meant to exclude them, frequently enjoy a greater share of the real benefit of it. The colonies of Spain and Portugal, for example, give more real encouragement to the industry of other countries than to that of Spain and Portugal. In the single article of linen alone, the consumption of those colonies amounts, it is said (but I do not pretend to warrant the quantity), to more than three millions sterling a-year. But this great consumption is almost entirely supplied by France, Flanders, Holland, and Germany. Spain and Portugal furnish but a small part of it. The capital which supplies the colonies with this great quantity of linen, is annually distributed among, and furnishes a revenue to, the inhabitants of those other countries. The profits of it only are spent in Spain and Portugal, where they help to support the sumptuous profusion of the merchants of Cadiz and Lisbon. Even the regulations by which each nation endeavours to secure to itself the exclusive trade of its own colonies, are frequently more hurtful to the countries in favour of which they are established, than to those against which they are established. The unjust oppression of the industry of other countries falls back, if I may say so, upon the heads of the oppressors, and crushes their industry more than it does that of those other countries. By those regulations, for example, the merchant of Hamburg must send the linen which he destines for the American market to London, and he must bring back from thence the tobacco which he destines for the German market; because he can neither send the one directly to America, nor bring the other directly from thence. By this restraint he is probably obliged to sell the one somewhat cheaper, and to buy the other somewhat dearer, than he otherwise might have done; and his profits are probably somewhat abridged by means of it. In this trade, however, between Hamburg and London, he certainly receives the returns of his capital much more quickly than he could possibly have done in the direct trade to America, even though we should suppose, what is by no means the case, that the payments of America were as punctual as those of London. In the trade, therefore, to which those regulations confine the merchant of Hamburg, his capital can keep in constant employment a much greater quantity of German industry than he possibly could have done in the trade from which he is excluded. Though the one employment, therefore, may to him perhaps be less profitable than the other, it cannot be less advantageous to his country. It is quite otherwise with the employment into which the monopoly naturally attracts, if I may say so, the capital of the London merchant. That employment may, perhaps, be more profitable to him than the greater part of other employments; but on account of the slowness of the returns, it cannot be more advantageous to his country. After all the unjust attempts, therefore, of every country in Europe to engross to itself the whole advantage of the trade of its own colonies, no country has yet been able to engross to itself any thing but the expense of supporting in time of peace, and of defending in time of war, the oppressive authority which it assumes over them. The inconveniencies resulting from the possession of its colonies, every country has engrossed to itself completely. The advantages resulting from their trade, it has been obliged to share with many other countries. At first sight, no doubt, the monopoly of the great commerce of America naturally seems to be an acquisition of the highest value. To the undiscerning eye of giddy ambition it naturally presents itself, amidst the confused scramble of politics and war, as a very dazzling object to fight for. The dazzling splendour of the object, however, the immense greatness of the commerce, is the very quality which renders the monopoly of it hurtful, or which makes one employment, in its own nature necessarily less advantageous to the country than the greater part of other employments, absorb a much greater proportion of the capital of the country than what would otherwise have gone to it. The mercantile stock of every country, it has been shown in the second book, naturally seeks, if one may say so, the employment most advantageous to that country. If it is employed in the carrying trade, the country to which it belongs becomes the emporium of the goods of all the countries whose trade that stock carries on. But the owner of that stock necessarily wishes to dispose of as great a part of those goods as he can at home. He thereby saves himself the trouble, risk, and expense of exportation; and he will upon that account be glad to sell them at home, not only for a much smaller price, but with somewhat a smaller profit, than he might expect to make by sending them abroad. He naturally, therefore, endeavours as much as he can to turn his carrying trade into a foreign trade of consumption. If his stock, again, is employed in a foreign trade of consumption, he will, for the same reason, be glad to dispose of, at home, as great a part as he can of the home goods which he collects in order to export to some foreign market, and he will thus endeavour, as much as he can, to turn his foreign trade of consumption into a home trade. The mercantile stock of every country naturally courts in this manner the near, and shuns the distant employment; naturally courts the employment in which the returns are frequent, and shuns that in which they are distant and slow; naturally courts the employment in which it can maintain the greatest quantity of productive labour in the country to which it belongs, or in which its owner resides, and shuns that in which it can maintain there the smallest quantity. It naturally courts the employment which in ordinary cases is most advantageous, and shuns that which in ordinary cases is least advantageous to that country. But if, in any one of these distant employments, which in ordinary cases are less advantageous to the country, the profit should happen to rise somewhat higher than what is sufficient to balance the natural preference which is given to nearer employments, this superiority of profit will draw stock from those nearer employments, till the profits of all return to their proper level. This superiority of profit, however, is a proof that, in the actual circumstances of the society, those distant employments are somewhat understocked in proportion to other employments, and that the stock of the society is not distributed in the properest manner among all the different employments carried on in it. It is a proof that something is either bought cheaper or sold dearer than it ought to be, and that some particular class of citizens is more or less oppressed, either by paying more, or by getting less than what is suitable to that equality which ought to take place, and which naturally does take place, among all the different classes of them. Though the same capital never will maintain the same quantity of productive labour in a distant as in a near employment, yet a distant employment may be as necessary for the welfare of the society as a near one; the goods which the distant employment deals in being necessary, perhaps, for carrying on many of the nearer employments. But if the profits of those who deal in such goods are above their proper level, those goods will be sold dearer than they ought to be, or somewhat above their natural price, and all those engaged in the nearer employments will be more or less oppressed by this high price. Their interest, therefore, in this case, requires, that some stock should be withdrawn from those nearer employments, and turned towards that distant one, in order to reduce its profits to their proper level, and the price of the goods which it deals in to their natural price. In this extraordinary case, the public interest requires that some stock should be withdrawn from those employments which, in ordinary cases, are more advantageous, and turned towards one which, in ordinary cases, is less advantageous to the public; and, in this extraordinary case, the natural interests and inclinations of men coincide as exactly with the public interests as in all other ordinary cases, and lead them to withdraw stock from the near, and to turn it towards the distant employments. It is thus that the private interests and passions of individuals naturally dispose them to turn their stock towards the employments which in ordinary cases, are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them, and the rise of it in all others, immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it, as nearly as possible in the proportion which is most agreeable to the interest of the whole society. All the different regulations of the mercantile system necessarily derange more or less this natural and most advantageous distribution of stock. But those which concern the trade to America and the East Indies derange it, perhaps, more than any other; because the trade to those two great continents absorbs a greater quantity of stock than any two other branches of trade. The regulations, however, by which this derangement is effected in those two different branches of trade, are not altogether the same. Monopoly is the great engine of both; but it is a different sort of monopoly. Monopoly of one kind or another, indeed, seems to be the sole engine of the mercantile system. In the trade to America, every nation endeavours to engross as much as possible the whole market of its own colonies, by fairly excluding all other nations from any direct trade to them. During the greater part of the sixteenth century, the Portuguese endeavoured to manage the trade to the East Indies in the same manner, by claiming the sole right of sailing in the Indian seas, on account of the merit of having first found out the road to them. The Dutch still continue to exclude all other European nations from any direct trade to their spice islands. Monopolies of this kind are evidently established against all other European nations, who are thereby not only excluded from a trade to which it might be convenient for them to turn some part of their stock, but are obliged to buy the goods which that trade deals in, somewhat dearer than if they could import them themselves directly from the countries which produced them. But since the fall of the power of Portugal, no European nation has claimed the exclusive right of sailing in the Indian seas, of which the principal ports are now open to the ships of all European nations. Except in Portugal, however, and within these few years in France, the trade to the East Indies has, in every European country, been subjected to an exclusive company. Monopolies of this kind are properly established against the very nation which erects them. The greater part of that nation are thereby not only excluded from a trade to which it might be convenient for them to turn some part of their stock, but are obliged to buy the goods which that trade deals in somewhat dearer than if it was open and free to all their countrymen. Since the establishment of the English East India company, for example, the other inhabitants of England, over and above being excluded from the trade, must have paid, in the price of the East India goods which they have consumed, not only for all the extraordinary profits which the company may have made upon those goods in consequence of their monopoly, but for all the extraordinary waste which the fraud and abuse inseparable from the management of the affairs of so great a company must necessarily have occasioned. The absurdity of this second kind of monopoly, therefore, is much more manifest than that of the first. Both these kinds of monopolies derange more or less the natural distribution of the stock of the society; but they do not always derange it in the same way. Monopolies of the first kind always attract to the particular trade in which they are established a greater proportion of the stock of the society than what would go to that trade of its own accord. Monopolies of the second kind may sometimes attract stock towards the particular trade in which they are established, and sometimes repel it from that trade, according to different circumstances. In poor countries, they naturally attract towards the trade more stock than would otherwise go to it. In rich countries, they naturally repel from it a good deal of stock which would otherwise go to it. Such poor countries as Sweden and Denmark, for example, would probably have never sent a single ship to the East Indies, had not the trade been subjected to an exclusive company. The establishment of such a company necessarily encourages adventurers. Their monopoly secures them against all competitors in the home market, and they have the same chance for foreign markets with the traders of other nations. Their monopoly shows them the certainty of a great profit upon a considerable quantity of goods, and the chance of a considerable profit upon a great quantity. Without such extraordinary encouragement, the poor traders of such poor countries would probably never have thought of hazarding their small capitals in so very distant and uncertain an adventure as the trade to the East Indies must naturally have appeared to them. Such a rich country as Holland, on the contrary, would probably, in the case of a free trade, send many more ships to the East Indies than it actually does. The limited stock of the Dutch East India company probably repels from that trade many great mercantile capitals which would otherwise go to it. The mercantile capital of Holland is so great, that it is, as it were, continually overflowing, sometimes into the public funds of foreign countries, sometimes into loans to private traders and adventurers of foreign countries, sometimes into the most round-about foreign trades consumption, and sometimes into the carrying trade. All near employments being completely filled up, all the capital which can be placed in them with any tolerable profit being already placed in them, the capital of Holland necessarily flows towards the most distant employments. The trade to the East Indies, if it were altogether free, would probably absorb the greater part of this redundant capital. The East Indies offer a market both for the manufactures of Europe, and for the gold and silver, as well as for the several other productions of America, greater and more extensive than both Europe and America put together. Every derangement of the natural distribution of stock is necessarily hurtful to the society in which it takes place; whether it be by repelling from a particular trade the stock which would otherwise go to it, or by attracting towards a particular trade that which would not otherwise come to it. If, without any exclusive company, the trade of Holland to the East Indies would be greater than it actually is, that country must suffer a considerable loss, by part of its capital being excluded from the employment most convenient for that port. And, in the same manner, if, without an exclusive company, the trade of Sweden and Denmark to the East Indies would be less than it actually is, or, what perhaps is more probable, would not exist at all, those two countries must likewise suffer a considerable loss, by part of their capital being drawn into an employment which must be more or less unsuitable to their present circumstances. Better for them, perhaps, in the present circumstances, to buy East India goods of other nations, even though they should pay somewhat dearer, than to turn so great a part of their small capital to so very distant a trade, in which the returns are so very slow, in which that capital can maintain so small a quantity of productive labour at home, where productive labour is so much wanted, where so little is done, and where so much is to do. Though without an exclusive company, therefore, a particular country should not be able to carry on any direct trade to the East Indies, it will not from thence follow, that such a company ought to be established there, but only that such a country ought not, in these circumstances, to trade directly to the East Indies. That such companies are not in general necessary for carrying on the East India trade, is sufficiently demonstrated by the experience of the Portuguese, who enjoyed almost the whole of it for more than a century together, without any exclusive company. No private merchant, it has been said, could well have capital sufficient to maintain factors and agents in the different ports of the East Indies, in order to provide goods for the ships which he might occasionally send thither; and yet, unless he was able to do this, the difficulty of finding a cargo might frequently make his ships lose the season for returning; and the expense of so long a delay would not only eat up the whole profit of the adventure, but frequently occasion a very considerable loss. This argument, however, if it proved any thing at all, would prove that no one great branch of trade could be carried on without an exclusive company, which is contrary to the experience of all nations. There is no great branch of trade, in which the capital of any one private merchant is sufficient for carrying on all the subordinate branches which must be carried on, in order to carry on the principal one. But when a nation is ripe for any great branch of trade, some merchants naturally turn their capitals towards some principal, and some towards the subordinate branches of it; and though all the different branches of it are in this manner carried on, yet it very seldom happens that they are all carried on by the capital of one private merchant. If a nation, therefore, is ripe for the East India trade, a certain portion of its capital will naturally divide itself among all the different branches of that trade. Some of its merchants will find it for their interest to reside in the East Indies, and to employ their capitals there in providing goods for the ships which are to be sent out by other merchants who reside in Europe. The settlements which different European nations have obtained in the East Indies, if they were taken from the exclusive companies to which they at present belong, and put under the immediate protection of the sovereign, would render this residence both safe and easy, at least to the merchants of the particular nations to whom those settlements belong. If, at any particular time, that part of the capital of any country which of its own accord tended and inclined, if I may say so, towards the East India trade, was not sufficient for carrying on all those different branches of it, it would be a proof that, at that particular time, that country was not ripe for that trade, and that it would do better to buy for some time, even at a higher price, from other European nations, the East India goods it had occasion for, than to import them itself directly from the East Indies. What it might lose by the high price of those goods, could seldom be equal to the loss which it would sustain by the distraction of a large portion of its capital from other employments more necessary, or more useful, or more suitable to its circumstances and situation, than a direct trade to the East Indies. Though the Europeans possess many considerable settlements both upon the coast of Africa and in the East Indies, they have not yet established, in either of those countries, such numerous and thriving colonies as those in the islands and continent of America. Africa, however, as well as several of the countries comprehended under the general name of the East Indies, is inhabited by barbarous nations. But those nations were by no means so weak and defenceless as the miserable and helpless Americans; and in proportion to the natural fertility of the countries which they inhabited, they were, besides, much more populous. The most barbarous nations, either of Africa or of the East Indies, were shepherds; even the Hottentots were so. But the natives of every part of America, except Mexico and Peru, were only hunters; and the difference is very great between the number of shepherds and that of hunters, whom the same extent of equally fertile territory can maintain. In Africa and the East Indies, therefore, it was more difficult to displace the natives, and to extend the European plantations over the greater part of the lands of the original inhabitants. The genius of exclusive companies, besides, is unfavourable, it has already been observed, to the growth of new colonies, and has probably been the principal cause of the little progress which they have made in the East Indies. The Portuguese carried on the trade both to Africa and the East Indies, without any exclusive companies; and their settlements at Congo, Angola, and Benguela, on the coast of Africa, and at Goa in the East Indies, though much depressed by superstition and every sort of bad government, yet bear some resemblance to the colonies of America, and are partly inhabited by Portuguese who have been established there for several generations. The Dutch settlements at the Cape of Good Hope and at Batavia, are at present the most considerable colonies which the Europeans have established, either in Africa or in the East Indies; and both those settlements are peculiarly fortunate in their situation. The Cape of Good Hope was inhabited by a race of people almost as barbarous, and quite as incapable of defending themselves, as the natives of America. It is, besides, the half-way house, if one may say so, between Europe and the East Indies, at which almost every European ship makes some stay, both in going and returning. The supplying of those ships with every sort of fresh provisions, with fruit, and sometimes with wine, affords alone a very extensive market for the surplus produce of the colonies. What the Cape of Good Hope is between Europe and every part of the East Indies, Batavia is between the principal countries of the East Indies. It lies upon the most frequented road from Indostan to China and Japan, and is nearly about mid-way upon that road. Almost all the ships too, that sail between Europe and China, touch at Batavia; and it is, over and above all this, the centre and principal mart of what is called the country trade of the East Indies; not only of that part of it which is carried on by Europeans, but of that which is carried on by the native Indians; and vessels navigated by the inhabitants of China and Japan, of Tonquin, Malacca, Cochin-China, and the island of Celebes, are frequently to be seen in its port. Such advantageous situations have enabled those two colonies to surmount all the obstacles which the oppressive genius of an exclusive company may have occasionally opposed to their growth. They have enabled Batavia to surmount the additional disadvantage of perhaps the most unwholesome climate in the world. The English and Dutch companies, though they have established no considerable colonies, except the two above mentioned, have both made considerable conquests in the East Indies. But in the manner in which they both govern their new subjects, the natural genius of an exclusive company has shewn itself most distinctly. In the spice islands, the Dutch are said to burn all the spiceries which a fertile season produces, beyond what they expect to dispose of in Europe with such a profit as they think sufficient. In the islands where they have no settlements, they give a premium to those who collect the young blossoms and green leaves of the clove and nutmeg trees, which naturally grow there, but which this savage policy has now, it is said, almost completely extirpated. Even in the islands where they have settlements, they have very much reduced, it is said, the number of those trees. If the produce even of their own islands was much greater than what suited their market, the natives, they suspect, might find means to convey some part of it to other nations; and the best way, they imagine, to secure their own monopoly, is to take care that no more shall grow than what they themselves carry to market. By different arts of oppression, they have reduced the population of several of the Moluccas nearly to the number which is sufficient to supply with fresh provisions, and other necessaries of life, their own insignificant garrisons, and such of their ships as occasionally come there for a cargo of spices. Under the government even of the Portuguese, however, those islands are said to have been tolerably well inhabited. The English company have not yet had time to establish in Bengal so perfectly destructive a system. The plan of their government, however, has had exactly the same tendency. It has not been uncommon, I am well assured, for the chief, that is, the first clerk of a factory, to order a peasant to plough up a rich field of poppies, and sow it with rice, or some other grain. The pretence was, to prevent a scarcity of provisions; but the real reason, to give the chief an opportunity of selling at a better price a large quantity of opium which he happened then to have upon hand. Upon other occasions, the order has been reversed; and a rich field of rice or other grain has been ploughed up, in order to make room for a plantation of poppies, when the chief foresaw that extraordinary profit was likely to be made by opium. The servants of the company have, upon several occasions, attempted to establish in their own favour the monopoly of some of the most important branches, not only of the foreign, but of the inland trade of the country. Had they been allowed to go on, it is impossible that they should not, at some time or another, have attempted to restrain the production of the particular articles of which they had thus usurped the monopoly, not only to the quantity which they themselves could purchase, but to that which they could expect to sell with such a profit as they might think sufficient. In the course of a century or two, the policy of the English company would, in this manner, have probably proved as completely destructive as that of the Dutch. Nothing, however, can be more directly contrary to the real interest of those companies, considered as the sovereigns of the countries which they have conquered, than this destructive plan. In almost all countries, the revenue of the sovereign is drawn from that of the people. The greater the revenue of the people, therefore, the greater the annual produce of their land and labour, the more they can afford to the sovereign. It is his interest, therefore, to increase as much as possible that annual produce. But if this is the interest of every sovereign, it is peculiarly so of one whose revenue, like that of the sovereign of Bengal, arises chiefly from a land-rent. That rent must necessarily be in proportion to the quantity and value of the produce; and both the one and the other must depend upon the extent of the market. The quantity will always be suited, with more or less exactness, to the consumption of those who can afford to pay for it; and the price which they will pay will always be in proportion to the eagerness of their competition. It is the interest of such a sovereign, therefore, to open the most extensive market for the produce of his country, to allow the most perfect freedom of commerce, in order to increase as much as possible the number and competition of buyers; and upon this account to abolish, not only all monopolies, but all restraints upon the transportation of the home produce from one part of the country to another, upon its exportation to foreign countries, or upon the importation of goods of any kind for which it can be exchanged. He is in this manner most likely to increase both the quantity and value of that produce, and consequently of his own share of it, or of his own revenue. But a company of merchants, are, it seems, incapable of considering themselves as sovereigns, even after they have become such. Trade, or buying in order to sell again, they still consider as their principal business, and by a strange absurdity, regard the character of the sovereign as but an appendix to that of the merchant; as something which ought to be made subservient to it, or by means of which they may be enabled to buy cheaper in India, and thereby to sell with a better profit in Europe. They endeavour, for this purpose, to keep out as much as possible all competitors from the market of the countries which are subject to their government, and consequently to reduce, at least, some part of the surplus produce of those countries to what is barely sufficient for supplying their own demand, or to what they can expect to sell in Europe, with such a profit as they may think reasonable. Their mercantile habits draw them in this manner, almost necessarily, though perhaps insensibly, to prefer, upon all ordinary occasions, the little and transitory profit of the monopolist to the great and permanent revenue of the sovereign; and would gradually lead them to treat the countries subject to their government nearly as the Dutch treat the Moluccas. It is the interest of the East India company, considered as sovereigns, that the European goods which are carried to their Indian dominions should be sold there as cheap as possible; and that the Indian goods which are brought from thence should bring there as good a price, or should be sold there as dear as possible. But the reverse of this is their interest as merchants. As sovereigns, their interest is exactly the same with that of the country which they govern. As merchants, their interest is directly opposite to that interest. But if the genius of such a government, even as to what concerns its direction in Europe, is in this manner essentially, and perhaps incurably faulty, that of its administration in India is still more so. That administration is necessarily composed of a council of merchants, a profession no doubt extremely respectable, but which in no country in the world carries along with it that sort of authority which naturally overawes the people, and without force commands their willing obedience. Such a council can command obedience only by the military force with which they are accompanied; and their government is, therefore, necessarily military and despotical. Their proper business, however, is that of merchants. It is to sell, upon their master's account, the European goods consigned to them, and to buy, in return, Indian goods for the European market. It is to sell the one as dear, and to buy the other as cheap as possible, and consequently to exclude, as much as possible, all rivals from the particular market where they keep their shop. The genius of the administration, therefore, so far as concerns the trade of the company, is the same as that of the direction. It tends to make government subservient to the interest of monopoly, and consequently to stunt the natural growth of some parts, at least, of the surplus produce of the country, to what is barely sufficient for answering the demand of the company. All the members of the administration, besides, trade more or less upon their own account; and it is in vain to prohibit them from doing so. Nothing can be more completely foolish than to expect that the clerks of a great counting-house, at ten thousand miles distance, and consequently almost quite out of sight, should, upon a simple order from their master, give up at once doing any sort of business upon their own account; abandon for ever all hopes of making a fortune, of which they have the means in their hands; and content themselves with the moderate salaries which those masters allow them, and which, moderate as they are, can seldom be augmented, being commonly as large as the real profits of the company trade can afford. In such circumstances, to prohibit the servants of the company from trading upon their own account, can have scarce any other effect than to enable its superior servants, under pretence of executing their master's order, to oppress such of the inferior ones as have had the misfortune to fall under their displeasure. The servants naturally endeavour to establish the same monopoly in favour of their own private trade as of the public trade of the company. If they are suffered to act as they could wish, they will establish this monopoly openly and directly, by fairly prohibiting all other people from trading in the articles in which they choose to deal; and this, perhaps, is the best and least oppressive way of establishing it. But if, by an order from Europe, they are prohibited from doing this, they will, notwithstanding, endeavour to establish a monopoly of the same kind secretly and indirectly, in a way that is much more destructive to the country. They will employ the whole authority of government, and pervert the administration of justice, in order to harass and ruin those who interfere with them in any branch of commerce, which by means of agents, either concealed, or at least not publicly avowed, they may choose to carry on. But the private trade of the servants will naturally extend to a much greater variety of articles than the public trade of the company. The public trade of the company extends no further than the trade with Europe, and comprehends a part only of the foreign trade of the country. But the private trade of the servants may extend to all the different branches both of its inland and foreign trade. The monopoly of the company can tend only to stunt the natural growth of that part of the surplus produce which, in the case of a free trade, would be exported to Europe. That of the servants tends to stunt the natural growth of every part of the produce in which they choose to deal; of what is destined for home consumption, as well as of what is destined for exportation; and consequently to degrade the cultivation of the whole country, and to reduce the number of its inhabitants. It tends to reduce the quantity of every sort of produce, even that of the necessaries of life, whenever the servants of the country choose to deal in them, to what those servants can both afford to buy and expect to sell with such a profit as pleases them. From the nature of their situation, too, the servants must be more disposed to support with rigourous severity their own interest, against that of the country which they govern, than their masters can be to support theirs. The country belongs to their masters, who cannot avoid having some regard for the interest of what belongs to them; but it does not belong to the servants. The real interest of their masters, if they were capable of understanding it, is the same with that of the country;[42] and it is from ignorance chiefly, and the meanness of mercantile prejudice, that they ever oppress it. But the real interest of the servants is by no means the same with that of the country, and the most perfect information would not necessarily put an end to their oppressions. The regulations, accordingly, which have been sent out from Europe, though they have been frequently weak, have upon most occasions been well meaning. More intelligence, and perhaps less good meaning, has sometimes appeared in those established by the servants in India. It is a very singular government in which every member of the administration wishes to get out of the country, and consequently to have done with the government, as soon as he can, and to whose interest, the day after he has left it, and carried his whole fortune with him, it is perfectly indifferent though the whole country was swallowed up by an earthquake. I mean not, however, by any thing which I have here said, to throw any odious imputation upon the general character of the servants of the East India company, and much less upon that of any particular persons. It is the system of government, the situation in which they are placed, that I mean to censure, not the character of those who have acted in it. They acted as their situation naturally directed, and they who have clamoured the loudest against them would probably not have acted better themselves. In war and negotiation, the councils of Madras and Calcutta, have upon several occasions, conducted themselves with a resolution and decisive wisdom, which would have done honour to the senate of Rome in the best days of that republic. The members of those councils, however, had been bred to professions very different from war and politics. But their situation alone, without education, experience, or even example, seems to have formed in them all at once the great qualities which it required, and to have inspired them both with abilities and virtues which they themselves could not well know that they possessed. If upon some occasions, therefore, it has animated them to actions of magnanimity which could not well have been expected from them, we should not wonder if, upon others, it has prompted them to exploits of somewhat a different nature. Such exclusive companies, therefore, are nuisances in every respect; always more or less inconvenient to the countries in which they are established, and destructive to those which have the misfortune to fall under their government. CHAP. VIII. CONCLUSION OF THE MERCANTILE SYSTEM. Though the encouragement of exportation, and the discouragement of importation, are the two great engines by which the mercantile system proposes to enrich every country, yet, with regard to some particular commodities, it seems to follow an opposite plan: to discourage exportation, and to encourage importation. Its ultimate object, however, it pretends, is always the same, to enrich the country by an advantageous balance of trade. It discourages the exportation of the materials of manufacture, and of the instruments of trade, in order to give our own workmen an advantage, and to enable them to undersell those of other nations in all foreign markets; and by restraining, in this manner, the exportation of a few commodities, of no great price, it proposes to occasion a much greater and more valuable exportation of others. It encourages the importation of the materials of manufacture, in order that our own people may be enabled to work them up more cheaply, and thereby prevent a greater and more valuable importation of the manufactured commodities. I do not observe, at least in our statute book, any encouragement given to the importation of the instruments of trade. When manufactures have advanced to a certain pitch of greatness, the fabrication of the instruments of trade becomes itself the object of a great number of very important manufactures. To give any particular encouragement to the importation of such instruments, would interfere too much with the interest of those manufactures. Such importation, therefore, instead of being encouraged, has frequently been prohibited. Thus the importation of wool cards, except from Ireland, or when brought in as wreck or prize goods, was prohibited by the 3d of Edward IV.; which prohibition was renewed by the 39th of Elizabeth, and has been continued and rendered perpetual by subsequent laws. The importation of the materials of manufacture has sometimes been encouraged by an exemption from the duties to which other goods are subject, and sometimes by bounties. The importation of sheep's wool from several different countries, of cotton wool from all countries, of undressed flax, of the greater part of dyeing drugs, of the greater part of undressed hides from Ireland, or the British colonies, of seal skins from the British Greenland fishery, of pig and bar iron from the British colonies, as well as of several other materials of manufacture, has been encouraged by an exemption from all duties, if properly entered at the custom-house. The private interest of our merchants and manufacturers may, perhaps, have extorted from the legislature these exemptions, as well as the greater part of our other commercial regulations. They are, however, perfectly just and reasonable; and if, consistently with the necessities of the state, they could be extended to all the other materials of manufacture, the public would certainly be a gainer. The avidity of our great manufacturers, however, has in some cases extended these exemptions a good deal beyond what can justly be considered as the rude materials of their work. By the 24th Geo. II. chap. 46, a small duty of only 1d. the pound was imposed upon the importation of foreign brown linen yarn, instead of much higher duties, to which it had been subjected before, viz. of 6d. the pound upon sail yarn, of 1s. the pound upon all French and Dutch yarn, and of L.2 : 13 : 4 upon the hundred weight of all spruce or Muscovia yarn. But our manufacturers were not long satisfied with this reduction: by the 29th of the same king, chap. 15, the same law which gave a bounty upon the exportation of British and Irish linen, of which the price did not exceed 18d. the yard, even this small duty upon the importation of brown linen yarn was taken away. In the different operations, however, which are necessary for the preparation of linen yarn, a good deal more industry is employed, than in the subsequent operation of preparing linen cloth from linen yarn. To say nothing of the industry of the flax-growers and flax-dressers, three or four spinners at least are necessary in order to keep one weaver in constant employment; and more than four-fifths of the whole quantity of labour necessary for the preparation of linen cloth, is employed in that of linen yarn; but our spinners are poor people; women commonly scattered about in all different parts of the country, without support or protection. It is not by the sale of their work, but by that of the complete work of the weavers, that our great master manufactures make their profits. As it is their interest to sell the complete manufacture as dear, so it is to buy the materials as cheap as possible. By extorting from the legislature bounties upon the exportation of their own linen, high duties upon the importation of all foreign linen, and a total prohibition of the home consumption of some sorts of French linen, they endeavour to sell their own goods as dear as possible. By encouraging the importation of foreign linen yarn, and thereby bringing it into competition with that which is made by our own people, they endeavour to buy the work of the poor spinners as cheap as possible. They are as intent to keep down the wages of their own weavers, as the earnings of the poor spinners; and it is by no means for the benefit of the workmen that they endeavour either to raise the price of the complete work, or to lower that of the rude materials. It is the industry which is carried on for the benefit of the rich and the powerful, that is principally encouraged by our mercantile system. That which is carried on for the benefit of the poor and the indigent is too often either neglected or oppressed. Both the bounty upon the exportation of linen, and the exemption from the duty upon the importation of foreign yarn, which were granted only for fifteen years, but continued by two different prolongations, expire with the end of the session of parliament which shall immediately follow the 24th of June 1786. The encouragement given to the importation of the materials of manufacture by bounties, has been principally confined to such as were imported from our American plantations. The first bounties of this kind were those granted about the beginning of the present century, upon the importation of naval stores from America. Under this denomination were comprehended timber fit for masts, yards, and bowsprits; hemp, tar, pitch, and turpentine. The bounty, however, of L.1 the ton upon masting-timber, and that of L.6 the ton upon hemp, were extended to such as should be imported into England from Scotland. Both these bounties continued, without any variation, at the same rate, till they were severally allowed to expire; that upon hemp on the 1st of January 1741, and that upon masting-timber at the end of the session of parliament immediately following the 24th June 1781. The bounties upon the importation of tar, pitch, and turpentine, underwent, during their continuance, several alterations. Originally, that upon tar was L.4 the ton; that upon pitch the same; and that upon turpentine L.3 the ton. The bounty of L.4 the ton upon tar was afterwards confined to such as had been prepared in a particular manner; this upon other good, clean, and merchantable tar was reduced to L.2, 4s. the ton. The bounty upon pitch was likewise reduced to L.1, and that upon turpentine to L.1 : 10s. the ton. The second bounty upon the importation of any of the materials of manufacture, according to the order of time, was that granted by the 21st Geo. II. chap. 30, upon the importation of indigo from the British plantations. When the plantation indigo was worth three-fourths of the price of the best French indigo, it was, by this act, entitled to a bounty of 6d. the pound. This bounty, which, like most others was granted only for a limited time, was continued by several prolongations, but was reduced to 4d. the pound. It was allowed to expire with the end of the session of parliament which followed the 25th March 1781. The third bounty of this kind was that granted (much about the time that we were beginning sometimes to court, and sometimes to quarrel with our American colonies), by the 4th Geo. III. chap. 26, upon the importation of hemp, or undressed flax, from the British plantations. This bounty was granted for twenty-one years, from the 24th June 1764 to the 24th June 1785. For the first seven years, it was to be at the rate of L.8 the ton; for the second at L.6; and for the third at L.4. It was not extended to Scotland, of which the climate (although hemp is sometimes times raised there in small quantities, and of an inferior quality) is not very fit for that produce. Such a bounty upon the importation of Scotch flax in England would have been too great a discouragement to the native produce of the southern part of the united kingdom. The fourth bounty of this kind was that granted by the 5th Geo. III. chap. 45, upon the importation of wood from America. It was granted for nine years from the 1st January 1766 to the 1st January 1775. During the first three years, it was to be for every hundred-and-twenty good deals, at the rate of L.1, and for every load containing fifty cubic feet of other square timber, at the rate of 12s. For the second three years, it was for deals, to be at the rate of 15s., and for other squared timber at the rate of 8s.; and for the third three years, it was for deals, to be at the rate of 10s.; and for every other squared timber at the rate of 5s. The fifth bounty of this kind was that granted by the 9th Geo. III. chap. 38, upon the importation of raw silk from the British plantations. It was granted for twenty-one years, from the 1st January 1770, to the 1st January 1791. For the first seven years, it was to be at the rate of L.25 for every hundred pounds value; for the second, at L.20; and for the third, at L.15. The management of the silk-worm, and the preparation of silk, requires so much hand-labour, and labour is so very dear in America, that even this great bounty, I have been informed, was not likely to produce any considerable effect. The sixth bounty of this kind was that granted by 11th Geo. III. chap. 50, for the importation of pipe, hogshead, and barrel-staves and heading from the British plantations. It was granted for nine years, from 1st January 1772 to the 1st January 1781. For the first three years, it was, for a certain quantity of each, to be at the rate of L.6; for the second three years at L.4; and for the third three years at L.2. The seventh and last bounty of this kind was that granted by the 19th Geo. III. chap. 37, upon the importation of hemp from Ireland. It was granted in the same manner as that for the importation of hemp and undressed flax from America, for twenty-one years, from the 24th June 1779 to the 24th June 1800. The term is divided likewise into three periods, of seven years each; and in each of those periods, the rate of the Irish bounty is the same with that of the American. It does not, however, like the American bounty, extend to the importation of undressed flax. It would have been too great a discouragement to the cultivation of that plant in Great Britain. When this last bounty was granted, the British and Irish legislatures were not in much better humour with one another, than the British and American had been before. But this boon to Ireland, it is to be hoped, has been granted under more fortunate auspices than all those to America. The same commodities, upon which we thus gave bounties, when imported from America, were subjected to considerable duties when imported from any other country. The interest of our American colonies was regarded as the same with that of the mother country. Their wealth was considered as our wealth. Whatever money was sent out to them, it was said, came all back to us by the balance of trade, and we could never become a farthing the poorer by any expense which we could lay out upon them. They were our own in every respect, and it was an expense laid out upon the improvement of our own property, and for the profitable employment of our own people. It is unnecessary, I apprehend, at present to any any thing further, in order to expose the folly of a system which fatal experience has now sufficiently exposed. Had our American colonies really been a part of Great Britain, those bounties might have been considered as bounties upon production, and would still have been liable to all the objections to which such bounties are liable, but to no other. The exportation of the materials of manufacture is sometimes discouraged by absolute prohibitions, and sometimes by high duties. Our woollen manufacturers have been more successful than any other class of workmen, in persuading the legislature that the prosperity of the nation depended upon the success and extension of their particular business. They have not only obtained a monopoly against the consumers, by an absolute prohibition of importing woollen cloths from any foreign country; but they have likewise obtained another monopoly against the sheep farmers and growers of wool, by a similar prohibition of the exportation of live sheep and wool. The severity of many of the laws which have been enacted for the security of the revenue is very justly complained of, as imposing heavy penalties upon actions which, antecedent to the statutes that declared them to be crimes, had always been understood to be innocent. But the cruellest of our revenue laws, I will venture to affirm, are mild and gentle, in comparison to some of those which the clamour of our merchants and manufacturers has extorted from the legislature, for the support of their own absurd and oppressive monopolies. Like the laws of Draco, these laws may be said to be all written in blood. By the 8th of Elizabeth, chap. 3, the exporter of sheep, lambs, or rams, was for the first offence, to forfeit all his goods for ever, to suffer a year's imprisonment, and then to have his left hand cut off on a market town, upon a market day, to be there nailed up; and for the second offence, to be adjudged a felon, and to suffer death accordingly. To prevent the breed of our sheep from being propagated in foreign countries, seems to have been the object of this law. By the 13th and 14th of Charles II. chap. 18, the exportation of wool was made felony, and the exporter subjected to the same penalties and forfeitures as a felon. For the honour of the national humanity, it is to be hoped that neither of these statutes was ever executed. The first of them, however, so far as I know, has never been directly repealed, and serjeant Hawkins seems to consider it as still in force. It may, however, perhaps be considered as virtually repealed by the 12th of Charles II. chap. 32, sect. 3, which, without expressly taking away the penalties imposed by former statutes, imposes a new penalty, viz. that of 20s. for every sheep exported, or attempted to be exported, together with the forfeiture of the sheep, and of the owner's share of the sheep. The second of them was expressly repealed by the 7th and 8th of William III. chap. 28, sect. 4, by which it is declared that 'Whereas the statute of the 13th and 14th of king Charles II. made against the exportation of wool, among other things in the said act mentioned, doth enact the same to be deemed felony, by the severity of which penalty the prosecution of offenders hath not been so effectually put in execution; be it therefore enacted, by the authority aforesaid, that so much of the said act, which relates to the making the said offence felony, be repealed and made void.' The penalties, however, which are either imposed by this milder statute, or which, though imposed by former statutes, are not repealed by this one, are still sufficiently severe. Besides the forfeiture of the goods, the exporter incurs the penalty of 3s. for every pound weight of wool, either exported or attempted to be exported, that is, about four or five times the value. Any merchant, or other person convicted of this offence, is disabled from requiring any debt or account belonging to him from any factor or other person. Let his fortune be what it will, whether he is or is not able to pay those heavy penalties, the law means to ruin him completely. But, as the morals of the great body of people are not yet so corrupt as those of the contrivers of this statute, I have not heard that any advantage has ever been taken of this clause. If the person convicted of this offence is not able to pay the penalties within three months after judgment, he is to be transported for seven years; and if he returns before the expiration of that time, he is liable to the pains of felony, without benefit of clergy. The owner of the ship, knowing this offence, forfeits all his interest in the ship and furniture. The master and mariners knowing this offence, forfeit all their goods and chattels, and suffer three months imprisonment. By a subsequent statute, the master suffers six months imprisonment. In order to prevent exportation, the whole inland commerce of wool is laid under very burdensome and oppressive restrictions. It cannot be packed in any box, barrel, cask, case, chest, or any other package, but only in packs of leather or pack-cloth, on which must be marked on the outside the words WOOL or YARN, in large letters, not less than three inches long, on pain of forfeiting the same and the package, and 3s. for every pound weight, to be paid by the owner or packer. It cannot be loaden on any horse or cart, or carried by land within five miles of the coast, but between sun-rising, and sun-setting, on pain of forfeiting the same, the horses and carriages. The hundred next adjoining to the sea coast, out of, or through which the wool is carried or exported, forfeits L.20, if the wool is under the value of L.10; and if of greater value, then treble that value, together with treble costs, to be sued for within the year. The execution to be against any two of the inhabitants, whom the sessions must reimburse, by an assessment on the other inhabitants, as in the cases of robbery. And if any person compounds with the hundred for less than this penalty, he is to be imprisoned for five years, and any other person may prosecute. These regulations take place through the whole kingdom. But in the particular counties of Kent and Sussex, the restrictions are still more troublesome. Every owner of wool within ten miles of the sea coast must give an account in writing, three days after shearing, to the next officer of the customs, of the number of his fleeces, and of the places where they are lodged. And before he removes any part of them, he must give the like notice of the number and weight of the fleeces, and of the name and abode of the person to whom they are sold, and of the place to which it is intended they should be carried. No person within fifteen miles of the sea, in the said counties, can buy any wool, before he enters into bond to the king, that no part of the wool which he shall so buy shall be sold by him to any other person within fifteen miles of the sea. If any wool is found carrying towards the sea side in the said counties, unless it has been entered and security given as aforesaid, it is forfeited, and the offender also forfeits 3s. for every pound weight. If any person lay any wool, not entered as aforesaid, within fifteen miles of the sea, it must be seized and forfeited; and if, after such seizure, any person shall claim the same, he must give security to the exchequer, that if he is cast upon trial he shall pay treble costs, besides all other penalties. When such restrictions are imposed upon the inland trade, the coasting trade, we may believe, cannot be left very free. Every owner of wool, who carrieth, or causeth to be carried, any wool to any part or place on the sea coast, in order to be from thence transported by sea to any other place or port on the coast, must first cause an entry thereof to be made at the port from whence it is intended to be conveyed, containing the weight, marks, and number, of the packages, before he brings the same within five miles of that part, on pain of forfeiting the same, and also the horses, carts, and other carriages; and also of suffering and forfeiting, as by the other laws in force against the exportation of wool. This law, however (1st of William III. chap. 32), is so very indulgent as to declare, that 'this shall not hinder any person from carrying his wool home from the place of shearing, though it be within five miles of the sea, provided that in ten days after shearing, and before he remove the wool, he do under his hand certify to the next officer of the customs the true number of fleeces, and where it is housed; and do not remove the same, without certifying to such officer, under his hand, his intention so to do, three days before.' Bond must be given that the wool to be carried coast-ways is to be landed at the particular port for which it is entered outwards; and if any part of it is landed without the presence of an officer, not only the forfeiture of the wool is incurred, as in other goods, but the usual additional penalty of 3s. for every pound weight is likewise incurred. Our woollen manufacturers, in order to justify their demand of such extraordinary restrictions and regulations, confidently asserted, that English wool was of a peculiar quality, superior to that of any other country; that the wool of other countries could not, without some mixture of it, be wrought up into any tolerable manufacture; that fine cloth could not be made without it; that England, therefore, if the exportation of it could be totally prevented, could monopolize to herself almost the whole woollen trade of the world; and thus, having no rivals, could sell at what price she pleased, and in a short time acquire the most incredible degree of wealth by the most advantageous balance of trade. This doctrine, like most other doctrines which are confidently asserted by any considerable number of people, was, and still continues to be, most implicitly believed by a much greater number: by almost all those who are either unacquainted with the woollen trade, or who have not made particular inquiries. It is, however, so perfectly false, that English wool is in any respect necessary for the making of fine cloth, that it is altogether unfit for it. Fine cloth is made altogether of Spanish wool. English wool, cannot be even so mixed with Spanish wool, as to enter into the composition without spoiling and degrading, in some degree, the fabric of the cloth. It has been shown in the foregoing part of this work, that the effect of these regulations has been to depress the price of English wool, not only below what it naturally would be in the present times, but very much below what it actually was in the time of Edward III. The price of Scotch wool, when, in consequence of the Union, it became subject to the same regulations, is said to have fallen about one half. It is observed by the very accurate and intelligent author of the Memoirs of Wool, the Reverend Mr. John Smith, that the price of the best English wool in England, is generally below what wool of a very inferior quality commonly sells for in the market of Amsterdam. To depress the price of this commodity below what may be called its natural and proper price, was the avowed purpose of those regulations; and there seems to be no doubt of their having produced the effect that was expected from them. This reduction of price, it may perhaps be thought, by discouraging the growing of wool, must have reduced very much the annual produce of that commodity, though not below what it formerly was, yet below what, in the present state of things, it would probably have been, had it, in consequence of an open and free market, been allowed to rise to the natural and proper price. I am, however, disposed to believe, that the quantity of the annual produce cannot have been much, though it may, perhaps, have been a little affected by these regulations. The growing of wool is not the chief purpose for which the sheep farmer employs his industry and stock. He expects his profit, not so much from the price of the fleece, as from that of the carcase; and the average or ordinary price of the latter must even, in many cases, make up to him whatever deficiency there may be in the average or ordinary price of the former. It has been observed, in the foregoing part of this work, that 'whatever regulations tend to sink the price, either of wool or of raw hides, below what it naturally would be, must, in an improved and cultivated country, have some tendency to raise the price of butcher's meat. The price, both of the great and small cattle which are fed on improved and cultivated land, must be sufficient to pay the rent which the landlord, and the profit which the farmer, has reason to expect from improved and cultivated land. If it is not, they will soon cease to feed them. Whatever part of this price, therefore, is not paid by the wool and the hide, must be paid by the carcase. The less there is paid for the one, the more must be paid for the other. In what manner this price is to be divided upon the different parts of the beast, is indifferent to the landlords and farmers, provided it is all paid to them. In an improved and cultivated country, therefore, their interest as landlords and farmers cannot be much affected by such regulations, though their interest as consumers may, by the rise in the price of provisions.' According to this reasoning, therefore, this degradation in the price of wool is not likely, in an improved and cultivated country, to occasion any diminution in the annual produce of that commodity; except so far as, by raising the price of mutton, it may somewhat diminish the demand for, and consequently the production of, that particular species of butcher's meat. Its effect, however, even in this way, it is probable, is not very considerable. But though its effect upon the quantity of the annual produce may not have been very considerable, its effect upon the quality, it may perhaps be thought, must necessarily have been very great. The degradation in the quality of English wool, if not below what it was in former times, yet below what it naturally would have been in the present state of improvement and cultivation, must have been, it may perhaps be supposed, very nearly in proportion to the degradation of price. As the quality depends upon the breed, upon the pasture, and upon the management and cleanliness of the sheep, during the whole progress of the growth of the fleece, the attention to these circumstances, it may naturally enough be imagined, can never be greater than in proportion to the recompence which the price of the fleece is likely to make for the labour and expense which that attention requires. It happens, however, that the goodness of the fleece depends, in great measure, upon the health, growth, and bulk of the animal: the same attention which is necessary for the improvement of the carcase is, in some respect, sufficient for that of the fleece. Notwithstanding the degradation of price, English wool is said to have been improved considerably during the course even of the present century. The improvement, might, perhaps, have been greater if the price had been better; but the lowness of price, though it may have obstructed, yet certainly it has not altogether prevented that improvement. The violence of these regulations, therefore, seems to have affected neither the quantity nor the quality of the annual produce of wool, so much as it might have been expected to do (though I think it probable that it may have affected the latter a good deal more than the former); and the interest of the growers of wool, though it must have been hurt in some degree, seems upon the whole, to have been much less hurt than could well have been imagined. These considerations, however, will not justify the absolute prohibition of the exportation of wool; but they will fully justify the imposition of a considerable tax upon that exportation. To hurt, in any degree, the interest of any one order of citizens, for no other purpose but to promote that of some other, is evidently contrary to that justice and equality of treatment which the sovereign owes to all the different orders of his subjects. But the prohibition certainly hurts, in some degree, the interest of the growers of wool, for no other purpose but to promote that of the manufacturers. Every different order of citizens is bound to contribute to the support of the sovereign or commonwealth. A tax of five, or even of ten shillings, upon the exportation of every tod of wool, would produce a very considerable revenue to the sovereign. It would hurt the interest of the growers somewhat less than the prohibition, because it would not probably lower the price of wool quite so much. It would afford a sufficient advantage to the manufacturer, because, though he might not buy his wool altogether so cheap as under the prohibition, he would still buy it at least five or ten shillings cheaper than any foreign manufacturer could buy it, besides saving the freight and insurance which the other would be obliged to pay. It is scarce possible to devise a tax which could produce any considerable revenue to the sovereign, and at the same time occasion so little inconveniency to any body. The prohibition, notwithstanding all the penalties which guard it, does not prevent the exportation of wool. It is exported, it is well known, in great quantities. The great difference between the price in the home and that in the foreign market, presents such a temptation to smuggling, that all the rigour of the law cannot prevent it. This illegal exportation is advantageous to nobody but the smuggler. A legal exportation, subject to a tax, by affording a revenue to the sovereign, and thereby saving the imposition of some other, perhaps more burdensome and inconvenient taxes, might prove advantageous to all the different subjects of the state. The exportation of fuller's earth, or fuller's clay, supposed to be necessary for preparing and cleansing the woollen manufactures, has been subjected to nearly the same penalties as the exportation of wool. Even tobacco-pipe clay, though acknowledged to be different from fuller's clay, yet, on account of their resemblance, and because fuller's clay might sometimes be exported as tobacco-pipe clay, has been laid under the same prohibitions and penalties. By the 13th and 14th of Charles II. chap. 7, the exportation, not only of raw hides, but of tanned leather, except in the shape of boots, shoes, or slippers, was prohibited; and the law gave a monopoly to our boot-makers and shoe-makers, not only against our graziers, but against our tanners. By subsequent statutes, our tanners have got themselves exempted from this monopoly, upon paying a small tax of only one shilling on the hundred weight of tanned leather, weighing one hundred and twelve pounds. They have obtained likewise the drawback of two-thirds of the excise duties imposed upon their commodity, even when exported without further manufacture. All manufactures of leather may be exported duty free; and the exporter is besides entitled to the drawback of the whole duties of excise. Our graziers still continue subject to the old monopoly. Graziers, separated from one another, and dispersed through all the different corners of the country, cannot, without great difficulty, combine together for the purpose either of imposing monopolies upon their fellow-citizens, or of exempting themselves from such as may have been imposed upon them by other people. Manufacturers of all kinds, collected together in numerous bodies in all great cities, easily can. Even the horns of cattle are prohibited to be exported; and the two insignificant trades of the horner and comb-maker enjoy, in this respect, a monopoly against the graziers. Restraints, either by prohibitions, or by taxes, upon the exportation of goods which are partially, but not completely manufactured, are not peculiar to the manufacture of leather. As long as any thing remains to be done, in order to fit any commodity for immediate use and consumption, our manufacturers think that they themselves ought to the doing of it. Woollen yarn and worsted are prohibited to be exported, under the same penalties as wool. Even white cloths are subject to a duty upon exportation; and our dyers have so far obtained a monopoly against our clothiers. Our clothiers would probably have been able to defend themselves against it; but it happens that the greater part of our principal clothiers are themselves likewise dyers. Watch-cases, clock-cases, and dial-plates for clocks and watches, have been prohibited to be exported. Our clock-makers and watch-makers are, it seems, unwilling that the price of this sort of workmanship should be raised upon them by the competition of foreigners. By some old statutes of Edward III. Henry VIII. and Edward VI. the exportation of all metals was prohibited. Lead and tin were alone excepted, probably on account of the great abundance of those metals; in the exportation of which a considerable part of the trade of the kingdom in those days consisted. For the encouragement of the mining trade, the 5th of William and Mary, chap. 17, exempted from this prohibition iron, copper, and mundic metal made from British ore. The exportation of all sorts of copper bars, foreign as well as British, was afterwards permitted by the 9th and 10th of William III. chap 26. The exportation of unmanufactured brass, of what is called gun-metal, bell-metal, and shroff-metal, still continues to be prohibited. Brass manufactures of all sorts may be exported duty free. The exportation of the materials of manufacture, where it is not altogether prohibited, is, in many cases, subjected to considerable duties. By the 8th Geo. I. chap. 15, the exportation of all goods, the produce or manufacture of Great Britain, upon which any duties had been imposed by former statutes, was rendered duty free. The following goods, however, were excepted: alum, lead, lead-ore, tin, tanned leather, copperas, coals, wool, cards, white woolen cloths, lapis calaminaris, skins of all sorts, glue, coney hair or wool, hares wool, hair of all sorts, horses, and litharge of lead. If you expect horses, all these are either materials of manufacture, or incomplete manufactures (which may be considered as materials for still further manufacture), or instruments of trade. This statute leaves them subject to all the old duties which had ever been imposed upon them, the old subsidy, and one per cent. outwards. By the same statute, a great number of foreign drugs for dyers use are exempted from all duties upon importation. Each of them, however, is afterwards subjected to a certain duty, not indeed a very heavy one, upon exportation. Our dyers, it seems, while they thought it for their interest to encourage the importation of those drugs, by an exemption from all duties, thought it likewise for their own interest to throw some small discouragement upon their exportation. The avidity, however, which suggested this notable piece of mercantile ingenuity, most probably disappointed itself of its object. It necessarily taught the importers to be more careful than they might otherwise have been, that their importation should not exceed what was necessary for the supply of the home market. The home market was at all times likely to be more scantily supplied; the commodities were at all times likely to be somewhat dearer there than they would have been, had the exportation been rendered as free as the importation. By the above-mentioned statute, gum senega, or gum arabic, being among the enumerated dyeing drugs, might be imported duty free. They were subjected, indeed, to a small poundage duty, amounting only to threepence in the hundred weight, upon their re-exportation. France enjoyed, at that time, an exclusive trade to the country most productive of those drugs, that which lies in the neighbourhood of the Senegal; and the British market could not easily be supplied by the immediate importation of them from the place of growth. By the 25th Geo. II. therefore, gum senega was allowed to be imported (contrary to the general dispositions of the act of navigation) from any part of Europe. As the law, however, did not mean to encourage this species of trade, so contrary to the general principles of the mercantile policy of England, it imposed a duty of ten shillings the hundred weight upon such importation, and no part of this duty was to be afterwards drawn back upon its exportation. The successful war which began in 1755 gave Great Britain the same exclusive trade to those countries which France had enjoyed before. Our manufactures, as soon as the peace was made, endeavoured to avail themselves of this advantage, and to establish a monopoly in their own favour both against the growers and against the importers of this commodity. By the 5th Geo. III. therefore, chap. 37, the exportation of gum senega, from his majesty's dominions in Africa, was confined to Great Britain, and was subjected to all the same restrictions, regulations, forfeitures, and penalties, as that of the enumerated commodities of the British colonies in America and the West Indies. Its importation, indeed, was subjected to a small duty of sixpence the hundred weight, but its re-exportation was subjected to the enormous duty of one pound ten shillings the hundred weight. It was the intention of our manufacturers, that the whole produce of those countries should be imported into Great Britain; and in order that they themselves might be enabled to buy it at their own price, that no part of it should be exported again, but at such an expense as would sufficiently discourage that exportation. Their avidity, however, upon this, as well as upon many other occasions, disappointed itself of its object. This enormous duty presented such a temptation to smuggling, that great quantities of this commodity were clandestinely exported, probably to all the manufacturing countries of Europe, but particularly to Holland, not only from Great Britain, but from Africa. Upon this account, by the 14th Geo. III. chap. 10, this duty upon exportation was reduced to five shillings the hundred weight. In the book of rates, according to which the old subsidy was levied, beaver skins were estimated at six shillings and eight pence a-piece; and the different subsidies and imposts which, before the year 1722, had been laid upon their importation, amounted to one-fifth part of the rate, or to sixteen pence upon each skin; all of which, except half the old subsidy, amounting only to twopence, was drawn back upon exportation. This duty, upon the importation of so important a material of manufacture, had been thought too high; and, in the year 1722, the rate was reduced to two shillings and sixpence, which reduced the duty upon importation to sixpence, and of this only one-half was to be drawn back upon exportation. The same successful war put the country most productive of beaver under the dominion of Great Britain; and beaver skins being among the enumerated commodities, the exportation from America was consequently confined to the market of Great Britain. Our manufacturers soon bethought themselves of the advantage which they might make of this circumstance; and in the year 1764, the duty upon the importation of beaver skin was reduced to one penny, but the duty upon exportation was raised to sevenpence each skin, without any drawback of the duty upon importation. By the same law, a duty of eighteen pence the pound was imposed upon the exportation of beaver wool or woumbs, without making any alteration in the duty upon the importation of that commodity, which, when imported by British, and in British shipping, amounted at that time to between fourpence and fivepence the piece. Coals may be considered both as a material of manufacture, and as an instrument of trade. Heavy duties, accordingly, have been imposed upon their exportation, amounting at present (1783) to more than five shillings the ton, or more than fifteen shillings the chaldron, Newcastle measure; which is, in most cases, more than the original value of the commodity at the coal-pit, or even at the shipping port for exportation. The exportation, however, of the instruments of trade, properly so called, is commonly restrained, not by high duties, but by absolute prohibitions. Thus, by the 7th and 8th of William III. chap. 20, sect. 8, the exportation of frames or engines for knitting gloves or stockings, is prohibited, under the penalty, not only of the forfeiture of such frames or engines, so exported, or attempted to be exported, but of forty pounds, one half to the king, the other to the person who shall inform or sue for the same. In the same manner, by the 14th Geo. III. chap. 71, the exportation to foreign parts, of any utensils made use of in the cotton, linen, woollen, and silk manufacturers, is prohibited under the penalty, not only of the forfeiture of such utensils, but of two hundred pounds, to be paid by the person who shall offend in this manner; and likewise of two hundred pounds, to be paid by the master of the ship, who shall knowingly suffer such utensils to be loaded on board his ship. When such heavy penalties were imposed upon the exportation of the dead instruments of trade, it could not well be expected that the living instrument, the artificer, should be allowed to go free. Accordingly, by the 5th Geo. I. chap. 27, the person who shall be convicted of enticing any artificer, of or in any of the manufactures of Great Britain, to go into any foreign parts, in order to practise or teach his trade, is liable, for the first offence, to be fined in any sum not exceeding one hundred pounds, and to three months imprisonment, and until the fine shall be paid; and for the second offence, to be fined in any sum, at the discretion of the court, and to imprisonment for twelve months, and until the fine shall be paid. By the 23d Geo. II. chap. 13, this penalty is increased, for the first offence, to five hundred pounds for every artificer so enticed, and to twelve months imprisonment, and until the fine shall be paid; and for the second offence, to one thousand pounds, and to two years imprisonment, and until the fine shall be paid. By the former of these two statutes, upon proof that any person has been enticing any artificer, or that any artificer has promised or contracted to go into foreign parts, for the purposes aforesaid, such artificer may be obliged to give security, at the discretion of the court, that he shall not go beyond the seas, and may be committed to prison until he give such security. If any artificer has gone beyond the seas, and is exercising or teaching his trade in any foreign country, upon warning being given to him by any of his majesty's ministers or consuls abroad, or by one of his majesty's secretaries of state, for the time being, if he does not, within six months after such warning, return into this realm, and from henceforth abide and inhabit continually within the same, he is from thenceforth declared incapable of taking any legacy devised to him within this kingdom, or of being executor or administrator to any person, or of taking any lands within this kingdom, by descent, devise, or purchase. He likewise forfeits to the king all his lands, goods, and chattels; is declared an alien in every respect; and is put out of the king's protection. It is unnecessary, I imagine, to observe how contrary such regulations are to the boasted liberty of the subject, of which we affect to be so very jealous; but which, in this case, is so plainly sacrificed to the futile interests of our merchants and manufacturers. The laudable motive of all these regulations, is to extend our own manufactures, not by their own improvement, but by the depression of those of all our neighbours, and by putting an end, as much as possible, to the troublesome competition of such odious and disagreeable rivals. Our master manufacturers think it reasonable that they themselves should have the monopoly of the ingenuity of all their countrymen. Though by restraining, in some trades, the number of apprentices which can be employed at one time, and by imposing the necessity of a long apprenticeship in all trades, they endeavour, all of them, to confine the knowledge of their respective employments to as small a number as possible; they are unwilling, however, that any part of this small number should go abroad to instruct foreigners. Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident, that it would be absurd to attempt to prove it. But in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce. In the restraints upon the importation of all foreign commodities which can come into competition with those of our own growth or manufacture, the interest of the home consumer is evidently sacrificed to that of the producer. It is altogether for the benefit of the latter, that the former is obliged to pay that enhancement of price which this monopoly almost always occasions. It is altogether for the benefit of the producer, that bounties are granted upon the exportation of some of his productions. The home consumer is obliged to pay, first, the tax which is necessary for paying the bounty; and, secondly, the still greater tax which necessarily arises from the enhancement of the price of the commodity in the home market. By the famous treaty of commerce with Portugal, the consumer is prevented by high duties from purchasing of a neighbouring country, a commodity which our own climate does not produce; but is obliged to purchase it of a distant country, though it is acknowledged, that the commodity of the distant country is of a worse quality than that of the near one. The home consumer is obliged to submit to this inconvenience, in order that the producer may import into the distant country some of his productions, upon more advantageous terms than he otherwise would have been allowed to do. The consumer, too, is obliged to pay whatever enhancement in the price of those very productions this forced exportation may occasion in the home market. But in the system of laws which has been established for the management of our American and West Indies colonies, the interest of the home consumer has been sacrificed to that of the producer, which a more extravagant profusion than in all our other commercial regulations. A great empire has been established for the sole purpose of raising up a nation of customers, who should be obliged to buy, from the shops of our different producers, all the goods with which these could supply them. For the sake of that little enhancement of price which this monopoly might afford our producers, the home consumers have been burdened with the whole expense of maintaining and defending that empire. For this purpose, and for this purpose only, in the last two wars, more than two hundred millions have been spent, and a new debt of more than a hundred and seventy millions has been contracted, over and above all that had been expended for the same purpose in former wars. The interest of this debt alone is not only greater than the whole extraordinary profit which, it never could be pretended, was made by the monopoly of the colony trade, but than the whole value of that trade, or than the whole value of the goods which, at an average, have been annually exported to the colonies. It cannot be very difficult to determine who have been the contrivers of this whole mercantile system; not the consumers, we may believe, whose interest has been entirely neglected; but the producers, whose interest has been so carefully attended to; and among this latter class, our merchants and manufacturers have been by far the principal architects. In the mercantile regulations, which have been taken notice of in this chapter, the interest of our manufacturers has been most peculiarly attended to; and the interest, not so much of the consumers, as that of some other sets of producers, has been sacrificed to it. CHAP. IX. OF THE AGRICULTURAL SYSTEMS, OR OF THOSE SYSTEMS OF POLITICAL ECONOMY WHICH REPRESENT THE PRODUCE OF LAND, AS EITHER THE SOLE OR THE PRINCIPAL SOURCE OF THE REVENUE AND WEALTH OF EVERY COUNTRY. The agricultural systems of political economy will not require so long an explanation as that which I have thought it necessary to bestow upon the mercantile or commercial system. That system which represents the produce of land as the sole source of the revenue and wealth of every country, has, so far as I know, never been adopted by any nation, and it at present exists only in the speculations of a few men of great learning and ingenuity in France. It would not, surely, be worth while to examine at great length the errors of a system which never has done, and probably never will do, any harm in any part of the world. I shall endeavour to explain, however, as distinctly as I can, the great outlines of this very ingenious system. Mr. Colbert, the famous minister of Lewis XIV. was a man of probity, of great industry, and knowledge of detail; of great experience and acuteness in the examination of public accounts; and of abilities, in short, every way fitted for introducing method and good order into the collection and expenditure of the public revenue. That minister had unfortunately embraced all the prejudices of the mercantile system, in its nature and essence a system of restraint and regulation, and such as could scarce fail to be agreeable to a laborious and plodding man of business, who had been accustomed to regulate the different departments of public offices, and to establish the necessary checks and controuls for confining each to its proper sphere. The industry and commerce of a great country, he endeavoured to regulate upon the same model as the departments of a public office; and instead of allowing every man to pursue his own interest his own way, upon the liberal plan of equality, liberty, and justice, he bestowed upon certain branches of industry extraordinary privileges, while he laid others under as extraordinary restraints. He was not only disposed, like other European ministers, to encourage more the industry of the towns than that of the country; but, in order to support the industry of the towns, he was willing even to depress and keep down that of the country. In order to render provisions cheap to the inhabitants of the towns, and thereby to encourage manufactures and foreign commerce, he prohibited altogether the exportation of corn, and thus excluded the inhabitants of the country from every foreign market, for by far the most important part of the produce of their industry. This prohibition, joined to the restraints imposed by the ancient provincial laws of France upon the transportation of corn from one province to another, and to the arbitrary and degrading taxes which are levied upon the cultivators in almost all the provinces, discouraged and kept down the agriculture of that country very much below the state to which it would naturally have risen in so very fertile a soil, and so very happy a climate. This state of discouragement and depression was felt more or less in every different part of the country, and many different inquiries were set on foot concerning the causes of it. One of those causes appeared to be the preference given, by the institutions of Mr. Colbert, to the industry of the towns above that of the country. If the rod be bent too much one way, says the proverb, in order to make it straight, you must bend it as much the other. The French philosophers, who have proposed the system which represents agriculture as the sole source of the revenue and wealth of every country, seem to have adopted this proverbial maxim; and, as in the plan of Mr. Colbert, the industry of the towns was certainly overvalued in comparison with that of the country, so in their system it seems to be as certainly under-valued. The different orders of people, who have ever been supposed to contribute in any respect towards the annual produce of the land and labour of the country, they divide into three classes. The first is the class of the proprietors of land. The second is the class of the cultivators, of farmers and country labourers, whom they honour with the peculiar appellation of the productive class. The third is the class of artificers, manufacturers, and merchants, whom they endeavour to degrade by the humiliating appellation of the barren or unproductive class. The class of proprietors contributes to the annual produce, by the expense which they may occasionally lay out upon the improvement of the land, upon the buildings, drains, inclosures, and other ameliorations, which they may either make or maintain upon it, and by means of which the cultivators are enabled, with the same capital, to raise a greater produce, and consequently to pay a greater rent. This advanced rent may be considered as the interest or profit due to the proprietor, upon the expense or capital which he thus employs in the improvement of his land. Such expenses are in this system called ground expenses (_depenses foncieres_). The cultivators or farmers contribute to the annual produce, by what are in this system called the original and annual expenses (_depenses primitives, et depenses annuelles_), which they lay out upon the cultivation of the land. The original expenses consist in the instruments of husbandry, in the stock of cattle, in the seed, and in the maintenance of the farmer's family, servants, and cattle, during at least a great part of the first year of his occupancy, or till he can receive some return from the land. The annual expenses consist in the seed, in the wear and tear of instruments of husbandry, and in the annual maintenance of the farmer's servants and cattle, and of his family too, so far as any part of them can be considered as servants employed in cultivation. That part of the produce of the land which remains to him after paying the rent, ought to be sufficient, first, to replace to him, within a reasonable time, at least during the term of his occupancy, the whole of his original expenses, together with the ordinary profits of stock; and, secondly, to replace to him annually the whole of his annual expenses, together likewise with the ordinary profits of stock. Those two sorts of expenses are two capitals which the farmer employs in cultivation; and unless they are regularly restored to him, together with a reasonable profit, he cannot carry on his employment upon a level with other employments; but, from a regard to his own interest, must desert it as soon as possible, and see some other. That part of the produce of the land which is thus necessary for enabling the farmer to continue his business, ought to be considered as a fund sacred to cultivation, which, if the landlord violates, he necessarily reduces the produce of his own land, and, in a few years, not only disables the farmer from paying this racked rent, but from paying the reasonable rent which he might otherwise have got for his land. The rent which properly belongs to the landlord, is no more than the neat produce which remains after paying, in the completest manner, all the necessary expenses which must be previously laid out, in order to raise the gross or the whole produce. It is because the labour of the cultivators, over and above paying completely all those necessary expenses, affords a neat produce of this kind, that this class of people are in this system peculiarly distinguished by the honourable appellation of the productive class. Their original and annual expenses are for the same reason called, in this system, productive expenses, because, over and above replacing their own value, they occasion the annual reproduction of this neat produce. The ground expenses, as they are called, or what the landlord lays out upon the improvement of his land, are, in this system, too, honoured with the appellation of productive expenses. Till the whole of those expenses, together with the ordinary profits of stock, have been completely repaid to him by the advanced rent which he gets from his land, that advanced rent ought to be regarded as sacred and inviolable, both by the church and by the king; ought to be subject neither to tithe nor to taxation. If it is otherwise, by discouraging the improvement of land, the church discourages the future increase of her own tithes, and the king the future increase of his own taxes. As in a well ordered state of things, therefore, those ground expenses, over and above reproducing in the completest manner their own value, occasion likewise, after a certain time, a reproduction of neat produce, they are in this system considered as productive expenses. The ground expenses of the landlord, however, together with the original and the annual expenses of the farmer, are the only three sorts of expenses which in this system are considered as productive. All other expenses, and all other orders of people, even those who, in the common apprehensions of men, are regarded as the most productive, are, in this account of things, represented as altogether barren and unproductive. Artificers and manufacturers, in particular, whose industry, in the common apprehensions of men, increases so much the value of the rude produce of land, are in this system represented as a class of people altogether barren and unproductive. Their labour, it is said, replaces only the stock which employs them, together with its ordinary profits. That stock consists in the materials, tools, and wages, advanced to them by their employer; and is the fund destined for their employment and maintenance. Its profits are the fund destined for the maintenance of their employer. Their employer, as he advances to them the stock of materials, tools, and wages, necessary for their employment, so he advances to himself what is necessary for his own maintenance; and this maintenance he generally proportions to the profit which he expects to make by the price of their work. Unless its price repays to him the maintenance which he advances to himself, as well as the materials, tools, and wages, which he advances to his workmen, it evidently does not repay to him the whole expense which he lays out upon it. The profits of manufacturing stock, therefore, are not, like the rent of land, a neat produce which remains after completely repaying the whole expense which must be laid out in order to obtain them. The stock of the farmer yields him a profit, as well as that of the master manufacturer; and it yields a rent likewise to another person, which that of the master manufacturer does not. The expense, therefore, laid out in employing and maintaining artificers and manufacturers, does no more than continue, if one may say so, the existence of its own value, and does not produce any new value. It is, therefore, altogether a barren and unproductive expense. The expense, on the contrary, laid out in employing farmers and country labourers, over and above continuing the existence of its own value, produces a new value the rent of the landlord. It is, therefore, a productive expense. Mercantile stock is equally barren and unproductive with manufacturing stock. It only continues the existence of its own value, without producing any new value. Its profits are only the repayment of the maintenance which its employer advances to himself during the time that he employs it, or till he receives the returns of it. They are only the repayment of a part of the expense which must be laid out in employing it. The labour of artificers and manufacturers never adds any thing to the value of the whole annual amount of the rude produce of the land. It adds, indeed, greatly to the value of some particular parts of it. But the consumption which, in the mean time, it occasions of other parts, is precisely equal to the value which it adds to those parts; so that the value of the whole amount is not, at any one moment of time, in the least augmented by it. The person who works the lace of a pair of fine ruffles for example, will sometimes raise the value of, perhaps, a pennyworth of flax to L.30 sterling. But though, at first sight, he appears thereby to multiply the value of a part of the rude produce about seven thousand and two hundred times, he in reality adds nothing to the value of the whole annual amount of the rude produce. The working of that lace costs him, perhaps, two years labour. The L.30 which he gets for it when it is finished, is no more than the repayment of the subsistence which he advances to himself during the two years that he is employed about it. The value which, by every day's, month's, or year's labour, he adds to the flax, does no more than replace the value of his own consumption during that day, month, or year. At no moment of time, therefore, does he add any thing to the value of the whole annual amount of the rude produce of the land: the portion of that produce which he is continually consuming, being always equal to the value which he is continually producing. The extreme poverty of the greater part of the persons employed in this expensive, though trifling manufacture, may satisfy us that the price of their work does not, in ordinary cases, exceed the value of their subsistence. It is otherwise with the work of farmers and country labourers. The rent of the landlord is a value which, in ordinary cases, it is continually producing over and above replacing, in the most complete manner, the whole consumption, the whole expense laid out upon the employment and maintenance both of the workmen and of their employer. Artificers, manufacturers, and merchants, can augment the revenue and wealth of their society by parsimony only; or, as it is expressed in this system, by privation, that is, by depriving themselves of a part of the funds destined for their own subsistence. They annually reproduce nothing but those funds. Unless, therefore, they annually save some part of them, unless they annually deprive themselves of the enjoyment of some part of them, the revenue and wealth of their society can never be, in the smallest degree, augmented by means of their industry. Farmers and country labourers, on the contrary, may enjoy completely the whole funds destined for their own subsistence, and yet augment, at the same time, the revenue and wealth of their society. Over and above what is destined for their own subsistence, their industry annually affords a neat produce, of which the augmentation necessarily augments the revenue and wealth of their society. Nations, therefore, which like France or England, consist in a great measure, of proprietors and cultivators, can be enriched by industry and enjoyment. Nations, on the contrary which, like Holland and Hamburgh, are composed chiefly of merchants, artificers, and manufacturers, can grow rich only through parsimony and privation. As the interest of nations so differently circumstanced is very different, so is likewise the common character of the people. In those of the former kind, liberality, frankness, and good fellowship, naturally make a part of their common character; in the latter, narrowness, meanness, and a selfish disposition, averse to all social pleasure and enjoyment. The unproductive class, that of merchants, artificers, and manufacturers, is maintained and employed altogether at the expense of the two other classes, of that of proprietors, and of that of cultivators. They furnish it both with the materials of its work, and with the fund of its subsistence, with the corn and cattle which it consumes while it is employed about that work. The proprietors and cultivators finally pay both the wages of all the workmen of the unproductive class, and the profits of all their employers. Those workmen and their employers are properly the servants of the proprietors and cultivators. They are only servants who work without doors, as menial servants work within. Both the one and the other, however, are equally maintained at the expense of the same masters. The labour of both is equally unproductive. It adds nothing to the value of the sum total of the rude produce of the land. Instead of increasing the value of that sum total, it is a charge and expense which must be paid out of it. The unproductive class, however, is not only useful, but greatly useful, to the other two classes. By means of the industry of merchants, artificers, and manufacturers, the proprietors and cultivators can purchase both the foreign goods and the manufactured produce of their own country, which they have occasion for, with the produce of a much smaller quantity of their own labour, than what they would be obliged to employ, if they were to attempt, in an awkward and unskilful manner, either to import the one, or to make the other, for their own use. By means of the unproductive class, the cultivators are delivered from many cares, which would otherwise distract their attention from the cultivation of land. The superiority of produce, which in consequence of this undivided attention, they are enabled to raise, is fully sufficient to pay the whole expense which the maintenance and employment of the unproductive class costs either the proprietors or themselves. The industry of merchants, artificers, and manufacturers, though in its own nature altogether unproductive, yet contributes in this manner indirectly to increase the produce of the land. It increases the productive powers of productive labour, by leaving it at liberty to confine itself to its proper employment, the cultivation of land; and the plough goes frequently the easier and the better, by means of the labour of the man whose business is most remote from the plough. It can never be the interest of the proprietors and cultivators, to restrain or to discourage, in any respect, the industry of merchants, artificers, and manufacturers. The greater the liberty which this unproductive class enjoys, the greater will be the competition in all the different trades which compose it, and the cheaper will the other two classes be supplied, both with foreign goods and with the manufactured produce of their own country. It can never be the interest of the unproductive class to oppress the other two classes. It is the surplus produce of the land, or what remains after deducting the maintenance, first of the cultivators, and afterwards of the proprietors, that maintains and employs the unproductive class. The greater this surplus, the greater must likewise be the maintenance and employment of that class. The establishment of perfect justice, of perfect liberty, and of perfect equality, is the very simple secret which most effectually secures the highest degree of prosperity to all the three classes. The merchants, artificers, and manufacturers of those mercantile states, which, like Holland and Hamburgh, consist chiefly of this unproductive class, are in the same manner maintained and employed altogether at the expense of the proprietors and cultivators of land. The only difference is, that those proprietors and cultivators are, the greater part of them, placed at a most inconvenient distance from the merchants, artificers, and manufacturers, whom they supply with the materials of their work and the fund of their subsistence; are the inhabitants of other countries, and the subjects of other governments. Such mercantile states, however, are not only useful, but greatly useful, to the inhabitants of these other countries. They fill up, in some measure, a very important void; and supply the place of the merchants, artificers, and manufacturers, whom the inhabitants of those countries ought to find at home, but whom, from some defect in their policy, they do not find at home. It can never be the interest of those landed nations, if I may call them so, to discourage or distress the industry of such mercantile states, by imposing high duties upon their trade, or upon the commodities which they furnish. Such duties, by rendering those commodities dearer, could serve only to sink the real value of the surplus produce of their own land, with which, or, what comes to the same thing, with the price of which those commodities are purchased. Such duties could only serve to discourage the increase of that surplus produce, and consequently the improvement and cultivation of their own land. The most effectual expedient, on the contrary, for raising the value of that surplus produce, for encouraging its increase, and consequently the improvement and cultivation of their own land, would be to allow the most perfect freedom to the trade of all such mercantile nations. This perfect freedom of trade would even be the most effectual expedient for supplying them, in due time, with all the artificers, manufacturers, and merchants, whom they wanted at home; and for filling up, in the properest and most advantageous manner, that very important void which they felt there. The continual increase of the surplus produce of their land would, in due time, create a greater capital than what would be employed with the ordinary rate of profit in the improvement and cultivation of land; and the surplus part of it would naturally turn itself to the employment of artificers and manufacturers, at home. But these artificers and manufacturers, finding at home both the materials of their work and the fund of their subsistence, might immediately, even with much less art and skill be able to work as cheap as the little artificers and manufacturers of such mercantile states, who had both to bring from a greater distance. Even though, from want of art and skill, they might not for some time be able to work as cheap, yet, finding a market at home, they might be able to sell their work there as cheap as that of the artificers and manufacturers of such mercantile states, which could not be brought to that market but from so great a distance; and as their art and skill improved, they would soon be able to sell it cheaper. The artificers and manufacturers of such mercantile states, therefore, would immediately be rivalled in the market of those landed nations, and soon after undersold and justled out of it altogether. The cheapness of the manufactures of those landed nations, in consequence of the gradual improvements of art and skill, would, in due time, extend their sale beyond the home market, and carry them to many foreign markets, from which they would, in the same manner, gradually justle out many of the manufacturers of such mercantile nations. This continual increase, both of the rude and manufactured produce of those landed nations, would, in due time, create a greater capital than could, with the ordinary rate of profit, be employed either in agriculture or in manufactures. The surplus of this capital would naturally turn itself to foreign trade, and be employed in exporting, to foreign countries, such parts of the rude and manufactured produce of its own country, as exceeded the demand of the home market. In the exportation of the produce of their own country, the merchants of a landed nation would have an advantage of the same kind over those of mercantile nations, which its artificers and manufacturers had over the artificers and manufacturers of such nations; the advantage of finding at home that cargo, and those stores and provisions, which the others were obliged to seek for at a distance. With inferior art and skill in navigation, therefore, they would be able to sell that cargo as cheap in foreign markets as the merchants of such mercantile nations; and with equal art and skill they would be able to sell it cheaper. They would soon, therefore, rival those mercantile nations in this branch of foreign trade, and, in due time, would justle them out of it altogether. According to this liberal and generous system, therefore, the most advantageous method in which a landed nation can raise up artificers, manufacturers, and merchants of its own, is to grant the most perfect freedom of trade to the artificers, manufacturers, and merchants of all other nations. It thereby raises the value of the surplus produce of its own land, of which the continual increase gradually establishes a fund, which, in due time, necessarily raises up all the artificers, manufacturers, and merchants, whom it has occasion for. When a landed nation on the contrary, oppresses, either by high duties or by prohibitions, the trade of foreign nations, it necessarily hurts its own interest in two different ways. First, by raising the price of all foreign goods, and of all sorts of manufactures, it necessarily sinks the real value of the surplus produce of its own land, with which, or, what comes to the same thing, with the price of which, it purchases those foreign goods and manufactures. Secondly, by giving a sort of monopoly of the home market to its own merchants, artificers, and manufacturers, it raises the rate of mercantile and manufacturing profit, in proportion to that of agricultural profit; and, consequently, either draws from agriculture a part of the capital which had before been employed in it, or hinders from going to it a part of what would otherwise have gone to it. This policy, therefore, discourages agriculture in two different ways; first, by sinking the real value of its produce, and thereby lowering the rate of its profits; and, secondly, by raising the rate of profit in all other employments. Agriculture is rendered less advantageous, and trade and manufactures more advantageous, than they otherwise would be; and every man is tempted by his own interest to turn, as much as he can, both his capital and his industry from the former to the latter employments. Though, by this oppressive policy, a landed nation should be able to raise up artificers, manufacturers, and merchants of its own, somewhat sooner than it could do by the freedom of trade; a matter, however, which is not a little doubtful; yet it would raise them up, if one may say so, prematurely, and before it was perfectly ripe for them. By raising up too hastily one species of industry, it would depress another more valuable species of industry. By raising up too hastily a species of industry which only replaces the stock which employs it, together with the ordinary profit, it would depress a species of industry which, over and above replacing that stock, with its profit, affords likewise a neat produce, a free rent to the landlord. It would depress productive labour, by encouraging too hastily that labour which is altogether barren and unproductive. In what manner, according to this system, the sum total of the annual produce of the land is distributed among the three classes above mentioned, and in what manner the labour of the unproductive class does no more than replace the value of its own consumption, without increasing in any respect the value of that sum total, is represented by Mr Quesnai, the very ingenious and profound author of this system, in some arithmetical formularies. The first of these formularies, which, by way of eminence, he peculiarly distinguishes by the name of the Economical Table, represents the manner in which he supposes this distribution takes place, in a state of the most perfect liberty, and, therefore, of the highest prosperity; in a state where the annual produce is such as to afford the greatest possible neat produce, and where each class enjoys its proper share of the whole annual produce. Some subsequent formularies represent the manner in which he supposes this distribution is made in different states of restraint and regulation; in which, either the class of proprietors, or the barren and unproductive class, is more favoured than the class of cultivators; and in which either the one or the other encroaches, more or less, upon the share which ought properly to belong to this productive class. Every such encroachment, every violation of that natural distribution, which the most perfect liberty would establish, must, according to this system, necessarily degrade, more or less, from one year to another, the value and sum total of the annual produce, and must necessarily occasion a gradual declension in the real wealth and revenue of the society; a declension, of which the progress must be quicker or slower, according to the degree of this encroachment, according as that natural distribution, which the most perfect liberty would establish, is more or less violated. Those subsequent formularies represent the different degrees of declension which, according to this system, correspond to the different degrees in which this natural distribution of things is violated. Some speculative physicians seem to have imagined that the health of the human body could be preserved only by a certain precise regimen of diet and exercise, of which every, the smallest violation, necessarily occasioned some degree of disease or disorder proportionate to the degree of the violation. Experience, however, would seem to shew, that the human body frequently preserves, to all appearance at least, the most perfect state of health under a vast variety of different regimens; even under some which are generally believed to be very far from being perfectly wholesome. But the healthful state of the human body, it would seem, contains in itself some unknown principle of preservation, capable either of preventing or of correcting, in many respects, the bad effects even of a very faulty regimen. Mr Quesnai, who was himself a physician, and a very speculative physician, seems to have entertained a notion of the same kind concerning the political body, and to have imagined that it would thrive and prosper only under a certain precise regimen, the exact regimen of perfect liberty and perfect justice. He seems not to have considered, that in the political body, the natural effort which every man is continually making to better his own condition, is a principle of preservation capable of preventing and correcting, in many respects, the bad effects of a political economy, in some degree both partial and oppressive. Such a political economy, though it no doubt retards more or less, is not always capable of stopping altogether, the natural progress of a nation towards wealth and prosperity, and still less of making it go backwards. If a nation could not prosper without the enjoyment of perfect liberty and perfect justice, there is not in the world a nation which could ever have prospered. In the political body, however, the wisdom of nature has fortunately made ample provision for remedying many of the bad effects of the folly and injustice of man; in the same manner as it has done in the natural body, for remedying those of his sloth and intemperance. The capital error of this system, however, seems to lie in its representing the class of artificers, manufacturers, and merchants, as altogether barren and unproductive. The following observations may serve to shew the impropriety of this representation:-- First, this class, it is acknowledged, reproduces annually the value of its own annual consumption, and continues, at least, the existence of the stock or capital which maintains and employs it. But, upon this account alone, the denomination of barren or unproductive should seem to be very improperly applied to it. We should not call a marriage barren or unproductive, though it produced only a son and a daughter, to replace the father and mother, and though it did not increase the number of the human species, but only continued it as it was before. Farmers and country labourers, indeed, over and above the stock which maintains and employs them, reproduce annually a neat produce, a free rent to the landlord. As a marriage which affords three children is certainly more productive than one which affords only two, so the labour of farmers and country labourers is certainly more productive than that of merchants, artificers, and manufacturers. The superior produce of the one class, however, does not, render the other barren or unproductive. Secondly, it seems, on this account, altogether improper to consider artificers, manufacturers, and merchants, in the same light as menial servants. The labour of menial servants does not continue the existence of the fund which maintains and employs them. Their maintenance and employment is altogether at the expense of their masters, and the work which they perform is not of a nature to repay that expense. That work consists in services which perish generally in the very instant of their performance, and does not fix or realize itself in any vendible commodity, which can replace the value of their wages and maintenance. The labour, on the contrary, of artificers, manufacturers, and merchants, naturally does fix and realize itself in some such vendible commodity. It is upon this account that, in the chapter in which I treat of productive and unproductive labour, I have classed artificers, manufacturers, and merchants among the productive labourers, and menial servants among the barren or unproductive. Thirdly, it seems, upon every supposition, improper to say, that the labour of artificers, manufacturers, and merchants, does not increase the real revenue of the society. Though we should suppose, for example, as it seems to be supposed in this system, that the value of the daily, monthly, and yearly consumption of this class was exactly equal to that of its daily, monthly, and yearly production; yet it would not from thence follow, that its labour added nothing to the real revenue, to the real value of the annual produce of the land and labour of the society. An artificer, for example, who, in the first six months after harvest, executes ten pounds worth of work, though he should, in the same time, consume ten pounds worth of corn and other necessaries, yet really adds the value of ten pounds to the annual produce of the land and labour of the society. While he has been consuming a half-yearly revenue of ten pounds worth of corn and other necessaries, he has produced an equal value of work, capable of purchasing, either to himself, or to some other person, an equal half-yearly revenue. The value, therefore, of what has been consumed and produced during these six months, is equal, not to ten, but to twenty pounds. It is possible, indeed, that no more than ten pounds worth of this value may ever have existed at any one moment of time. But if the ten pounds worth of corn and other necessaries which were consumed by the artificer, had been consumed by a soldier, or by a menial servant, the value of that part of the annual produce which existed at the end of the six months, would have been ten pounds less than it actually is in consequence of the labour of the artificer. Though the value of what the artificer produces, therefore, should not, at any one moment of time, be supposed greater than the value he consumes, yet, at every moment of time, the actually existing value of goods in the market is, in consequence of what he produces, greater than it otherwise would be. When the patrons of this system assert, that the consumption of artificers, manufacturers, and merchants, is equal to the value of what they produce, they probably mean no more than that their revenue, or the fund destined for their consumption, is equal to it. But if they had expressed themselves more accurately, and only asserted, that the revenue of this class was equal to the value of what they produced, it might readily have occurred to the reader, that what would naturally be saved out of this revenue, must necessarily increase more or less the real wealth of the society. In order, therefore, to make out something like an argument, it was necessary that they should express themselves as they have done; and this argument, even supposing things actually were as it seems to presume them to be, turns out to be a very inconclusive one. Fourthly, farmers and country labourers can no more augment, without parsimony, the real revenue, the annual produce of the land and labour of their society, than artificers, manufacturers, and merchants. The annual produce of the land and labour of any society can be augmented only in two ways; either, first, by some improvement in the productive powers of the useful labour actually maintained within it; or, secondly, by some increase in the quantity of that labour. The improvement in the productive powers of useful labour depends, first, upon the improvement in the ability of the workman; and, secondly, upon that of the machinery with which he works. But the labour of artificers and manufacturers, as it is capable of being more subdivided, and the labour of each workman reduced to a greater simplicity of operation, than that of farmers and country labourers; so it is likewise capable of both these sorts of improvement in a much higher degree.[43] In this respect, therefore, the class of cultivators can have no sort of advantage over that of artificers and manufacturers. The increase in the quantity of useful labour actually employed within any society must depend altogether upon the increase of the capital which employs it; and the increase of that capital, again, must be exactly equal to the amount of the savings from the revenue, either of the particular persons who manage and direct the employment of that capital, or of some other persons, who lend it to them. If merchants, artificers, and manufacturers are, as this system seems to suppose, naturally more inclined to parsimony and saving than proprietors and cultivators, they are, so far, more likely to augment the quantity of useful labour employed within their society, and consequently to increase its real revenue, the annual produce of its land and labour. Fifthly and lastly, though the revenue of the inhabitants of every country was supposed to consist altogether, as this system seems to suppose, in the quantity of subsistence which their industry could procure to them; yet, even upon this supposition, the revenue of a trading and manufacturing country must, other things being equal, always be much greater than that of one without trade or manufactures. By means of trade and manufactures, a greater quantity of subsistence can be annually imported into a particular country, than what its own lands, in the actual state of their cultivation, could afford. The inhabitants of a town, though they frequently possess no lands of their own, yet draw to themselves, by their industry, such a quantity of the rude produce of the lands of other people, as supplies them, not only with the materials of their work, but with the fund of their subsistence. What a town always is with regard to the country in its neighbourhood, one independent state or country may frequently be with regard to other independent states or countries. It is thus that Holland draws a great part of its subsistence from other countries; live cattle from Holstein and Jutland, and corn from almost all the different countries of Europe. A small quantity of manufactured produce, purchases a great quantity of rude produce. A trading and manufacturing country, therefore, naturally purchases, with a small part of its manufactured produce, a great part of the rude produce of other countries; while, on the contrary, a country without trade and manufactures is generally obliged to purchase, at the expense of a great part of its rude produce, a very small part of the manufactured produce of other countries. The one exports what can subsist and accommodate but a very few, and imports the subsistence and accommodation of a great number. The other exports the accommodation and subsistence of a great number, and imports that of a very few only. The inhabitants of the one must always enjoy a much greater quantity of subsistence than what their own lands, in the actual state of their cultivation, could afford. The inhabitants of the other most always enjoy a much smaller quantity. This system, however, with all its imperfections, is perhaps the nearest approximation to the truth that has yet been published upon the subject of political economy; and is upon that account, well worth the consideration of every man who wishes to examine with attention the principles of that very important science. Though in representing the labour which is employed upon land as the only productive labour, the notions which it inculcates are, perhaps, too narrow and confined; yet in representing the wealth of nations as consisting, not in the unconsumable riches of money, but in the consumable goods annually reproduced by the labour of the society, and in representing perfect liberty as the only effectual expedient for rendering this annual reproduction the greatest possible, its doctrine seems to be in every respect as just as it is generous and liberal. Its followers are very numerous; and as men are fond of paradoxes, and of appearing to understand what surpasses the comprehensions of ordinary people, the paradox which it maintains, concerning the unproductive nature of manufacturing labour, has not, perhaps, contributed a little to increase the number of its admirers. They have for some years past made a pretty considerable sect, distinguished in the French republic of letters by the name of the Economists. Their works have certainly been of some service to their country; not only by bringing into general discussion, many subjects which had never been well examined before, but by influencing, in some measure, the public administration in favour of agriculture. It has been in consequence of their representations, accordingly, that the agriculture of France has been delivered from several of the oppressions which it before laboured under. The term, during which such a lease can be granted, as will be valid against every future purchaser or proprietor of the land, has been prolonged from nine to twenty-seven years. The ancient provincial restraints upon the transportation of corn from one province of the kingdom to another, have been entirely taken away; and the liberty of exporting it to all foreign countries, has been established as the common law of the kingdom in all ordinary cases. This sect, in their works, which are very numerous, and which treat not only of what is properly called Political Economy, or of the nature and causes of the wealth of nations, but of every other branch of the system of civil government, all follow implicitly, and without any sensible variation, the doctrine of Mr. Quesnai. There is, upon this account, little variety in the greater part of their works. The most distinct and best connected account of this doctrine is to be found in a little book written by Mr. Mercier de la Riviere, some time intendant of Martinico, entitled, The natural and essential Order of Political Societies. The admiration of this whole sect for their master, who was himself a man of the greatest modesty and simplicity, is not inferior to that of any of the ancient philosophers for the founders of their respective systems. 'There have been since the world began,' says a very diligent and respectable author, the Marquis de Mirabeau, 'three great inventions which have principally given stability to political societies, independent of many other inventions which have enriched and adorned them. The first is the invention of writing, which alone gives human nature the power of transmitting, without alteration, its laws, its contracts, its annals, and its discoveries. The second is the invention of money, which binds together all the relations between civilized societies. The third is the economical table, the result of the other two, which completes them both by perfecting their object; the great discovery of our age, but of which our posterity will reap the benefit.' As the political economy of the nations of modern Europe has been more favourable to manufactures and foreign trade, the industry of the towns, than to agriculture, the industry of the country; so that of other nations has followed a different plan, and has been more favourable to agriculture than to manufactures and foreign trade. The policy of China favours agriculture more than all other employments. In China, the condition of a labourer is said to be as much superior to that of an artificer, as in most parts of Europe that of an artificer is to that of a labourer. In China, the great ambition of every man is to get possession of a little bit of land, either in property or in lease; and leases are there said to be granted upon very moderate terms, and to be sufficiently secured to the lessees. The Chinese have little respect for foreign trade. Your beggarly commerce! was the language in which the mandarins of Pekin used to talk to Mr. De Lange, the Russian envoy, concerning it[44]. Except with Japan, the Chinese carry on, themselves, and in their own bottoms, little or no foreign trade; and it is only into one or two ports of their kingdom that they even admit the ships of foreign nations. Foreign trade, therefore, is, in China, every way confined within a much narrower circle than that to which it would naturally extend itself, if more freedom was allowed to it, either in their own ships, or in those of foreign nations. Manufactures, as in a small bulk they frequently contain a great value, and can upon that account be transported at less expense from one country to another than most parts of rude produce, are, in almost all countries, the principal support of foreign trade. In countries, besides, less extensive, and less favourably circumstanced for inferior commerce than China, they generally require the support of foreign trade. Without an extensive foreign market, they could not well flourish, either in countries so moderately extensive as to afford but a narrow home market, or in countries where the communication between one province and another was so difficult, as to render it impossible for the goods of any particular place to enjoy the whole of that home market which the country could afford. The perfection of manufacturing industry, it must be remembered, depends altogether upon the division of labour; and the degree to which the division of labour can be introduced into any manufacture, is necessarily regulated, it has already been shewn, by the extent of the market. But the great extent of the empire of China, the vast multitude of its inhabitants, the variety of climate, and consequently of productions in its different provinces, and the easy communication by means of water-carriage between the greater part of them, render the home market of that country of so great extent, as to be alone sufficient to support very great manufactures, and to admit of very considerable subdivisions of labour. The home market of China is, perhaps, in extent, not much inferior to the market of all the different countries of Europe put together. A more extensive foreign trade, however, which to this great home market added the foreign market of all the rest of the world, especially if any considerable part of this trade was carried on in Chinese ships, could scarce fail to increase very much the manufactures of China, and to improve very much the productive powers of its manufacturing industry. By a more extensive navigation, the Chinese would naturally learn the art of using and constructing, themselves, all the different machines made use of in other countries, as well as the other improvements of art and industry which are practised in all the different parts of the world. Upon their present plan, they have little opportunity of improving themselves by the example of any other nation, except that of the Japanese. The policy of ancient Egypt, too, and that of the Gentoo government of Indostan, seem to have favoured agriculture more than all other employments. Both in ancient Egypt and Indostan, the whole body of the people was divided into different casts or tribes each of which was confined, from father to son, to a particular employment, or class of employments. The son of a priest was necessarily a priest; the son of a soldier, a soldier; the son of a labourer, a labourer; the son of a weaver, a weaver; the son of a tailor, a tailor, &c. In both countries, the cast of the priests holds the highest rank, and that of the soldiers the next; and in both countries the cast of the farmers and labourers was superior to the casts of merchants and manufacturers. The government of both countries was particularly attentive to the interest of agriculture. The works constructed by the ancient sovereigns of Egypt, for the proper distribution of the waters of the Nile, were famous in antiquity, and the ruined remains of some of them are still the admiration of travellers. Those of the same kind which were constructed by the ancient sovereigns of Indostan, for the proper distribution of the waters of the Ganges, as well as of many other rivers, though they have been less celebrated, seem to have been equally great. Both countries accordingly, though subject occasionally to dearths, have been famous for their great fertility. Though both were extremely populous, yet, in years of moderate plenty, they were both able to export great quantities of grain to their neighbours. The ancient Egyptians had a superstitious aversion to the sea; and as the Gentoo religion does not permit its followers to light a fire, nor consequently to dress any victuals, upon the water, it, in effect, prohibits them from all distant sea voyages. Both the Egyptians and Indians must have depended almost altogether upon the navigation of other nations for the exportation of their surplus produce; and this dependency, as it must have confined the market, so it must have discouraged the increase of this surplus produce. It must have discouraged, too, the increase of the manufactured produce, more than that of the rude produce. Manufactures require a much more extensive market than the most important parts of the rude produce of the land. A single shoemaker will make more than 300 pairs of shoes in the year; and his own family will not, perhaps, wear out six pairs. Unless, therefore, he has the custom of, at least, 50 such families as his own, he cannot dispose of the whole produce of his own labour. The most numerous class of artificers will seldom, in a large country, make more than one in 50, or one in a 100, of the whole number of families contained in it. But in such large countries, as France and England, the number of people employed in agriculture has, by some authors, been computed at a half, by others at a third, and by no author that I know of, at less than a fifth of the whole inhabitants of the country. But as the produce of the agriculture of both France and England is, the far greater part of it, consumed at home, each person employed in it must, according to these computations, require little more than the custom of one, two, or, at most, of four such families as his own, in order in dispose of the whole produce of his own labour. Agriculture, therefore, can support itself under the discouragement of a confined market much better than manufactures. In both ancient Egypt and Indostan, indeed, the confinement of the foreign market was in some measure compensated by the conveniency of many inland navigations, which opened, in the most advantageous manner, the whole extent of the home market to every part of the produce of every different district of those countries. The great extent of Indostan, too, rendered the home market of that country very great, and sufficient to support a great variety of manufactures. But the small extent of ancient Egypt, which was never equal to England, must at all times, have rendered the home market of that country too narrow for supporting any great variety of manufactures. Bengal accordingly, the province of Indostan which commonly exports the greatest quantity of rice, has always been more remarkable for the exportation of a great variety of manufactures, than for that of its grain. Ancient Egypt, on the contrary, though it exported some manufactures, fine linen in particular, as well as some other goods, was always most distinguished for its great exportation of grain. It was long the granary of the Roman empire. The sovereigns of China, of ancient Egypt, and of the different kingdoms into which Indostan has, at different times, been divided, have always derived the whole, or by far the most considerable part, of their revenue, from some sort of land tax or land rent. This land tax, or land rent, like the tithe in Europe, consisted in a certain proportion, a fifth it is said, of the produce of the land, which was either delivered in kind, or paid in money, according to a certain valuation, and which, therefore, varied from year to year, according to all the variations of the produce. It was natural, therefore, that the sovereigns of those countries should be particularly attentive to the interests of agriculture, upon the prosperity or declension of which immediately depended the yearly increase or diminution of their own revenue. The policy of the ancient republics of Greece, and that of Rome, though it honoured agriculture more than manufactures or foreign trade, yet seems rather to have discouraged the latter employments, than to have given any direct or intentional encouragement to the former. In several of the ancient states of Greece, foreign trade was prohibited altogether; and in several others the employments of artificers and manufacturers were considered as hurtful to the strength and agility of the human body, as rendering it incapable of those habits which their military and gymnastic exercises endeavoured to form in it, and as thereby disqualifying it, more or less, for undergoing the fatigues and encountering the dangers of war. Such occupations were considered as fit only for slaves, and the free citizens of the states were prohibited from exercising them. Even in those states where no such prohibition took place, as in Rome and Athens, the great body of the people were in effect excluded from all the trades which are now commonly exercised by the lower sort of the inhabitants of towns. Such trades were, at Athens and Rome, all occupied by the slaves of the rich, who exercised them for the benefit of their masters, whose wealth, power, and protection, made it almost impossible for a poor freeman to find a market for his work, when it came into competition with that of the slaves of the rich. Slaves, however, are very seldom inventive; and all the most important improvements, either in machinery, or in the arrangement and distribution of work, which facilitate and abridge labour have been the discoveries of freemen. Should a slave propose any improvement of this kind, his master would be very apt to consider the proposal as the suggestion of laziness, and of a desire to save his own labour at the master's expense. The poor slave, instead of reward would probably meet with much abuse, perhaps with some punishment. In the manufactures carried on by slaves, therefore, more labour must generally have been employed to exercise the same quantity of work, than in those carried on by freemen. The work of the former must, upon that account, generally have been dearer than that of the latter. The Hungarian mines, it is remarked by Mr. Montesquieu, though not richer, have always been wrought with less expense, and therefore with more profit, than the Turkish mines in their neighbourhood. The Turkish mines are wrought by slaves; and the arms of those slaves are the only machines which the Turks have ever thought of employing. The Hungarian mines are wrought by freemen, who employ a great deal of machinery, by which they facilitate and abridge their own labour. From the very little that is known about the price of manufactures in the times of the Greeks and Romans, it would appear that those of the finer sort were excessively dear. Silk sold for its weight in gold. It was not, indeed, in those times an European manufacture; and as it was all brought from the East Indies, the distance of the carriage may in some measure account for the greatness of the price. The price, however, which a lady, it is said, would sometimes pay for a piece of very fine linen, seems to have been equally extravagant; and as linen was always either an European, or at farthest, an Egyptian manufacture, this high price can be accounted for only by the great expense of the labour which must have been employed about it, and the expense of this labour again could arise from nothing but the awkwardness of the machinery which is made use of. The price of fine woollens, too, though not quite so extravagant, seems, however, to have been much above that of the present times. Some cloths, we are told by Pliny[45], dyed in a particular manner, cost a hundred denarii, or L.3 6s. 8d. the pound weight. Others, dyed in another manner, cost a thousand denarii the pound weight, or L.33 6s. 8d. The Roman pound, it must be remembered, contained only twelve of our avoirdupois ounces. This high price, indeed, seems to have been principally owing to the dye. But had not the cloths themselves been much dearer than any which are made in the present times, so very expensive a dye would not probably have been bestowed upon them. The disproportion would have been too great between the value of the accessory and that of the principal. The price mentioned by the same author[46], of some triclinaria, a sort of woollen pillows or cushions made use of to lean upon as they reclined upon their couches at table, passes all credibility; some of them being said to have cost more than L.30,000, others more than L.300,000. This high price, too, is not said to have arisen from the dye. In the dress of the people of fashion of both sexes, there seems to have been much less variety, it is observed by Dr. Arbuthnot, in ancient than in modern times; and the very little variety which we find in that of the ancient statues, confirms his observation. He infers from this, that their dress must, upon the whole, have been cheaper than ours; but the conclusion does not seem to follow. When the expense of fashionable dress is very great, the variety must be very small. But when, by the improvements in the productive powers of manufacturing art and industry, the expense of any one dress comes to be very moderate, the variety will naturally be very great. The rich, not being able to distinguish themselves by the expense of any one dress, will naturally endeavour to do so by the multitude and variety of their dresses. The greatest and most important branch of the commerce of every nation, it has already been observed, is that which is carried on between the inhabitants of the town and those of the country. The inhabitants of the town draw from the country the rude produce, which constitutes both the materials of their work and the fund of their subsistence; and they pay for this rude produce, by sending back to the country a certain portion of it manufactured and prepared for immediate use. The trade which is carried on between these two different sets of people, consists ultimately in a certain quantity of rude produce exchanged for a certain quantity of manufactured produce. The dearer the latter, therefore, the cheaper the former; and whatever tends in any country to raise the price of manufactured produce, tends to lower that of the rude produce of the land, and thereby to discourage agriculture. The smaller the quantity of manufactured produce, which any given quantity of rude produce, or, what comes to the same thing, which the price of any given quantity of rude produce, is capable of purchasing, the smaller the exchangeable value of that given quantity of rude produce; the smaller the encouragement which either the landlord has to increase its quantity by improving, or the farmer by cultivating the land. Whatever, besides, tends to diminish in any country the number of artificers and manufacturers, tends to diminish the home market, the most important of all markets, for the rude produce of the land, and thereby still further to discourage agriculture. Those systems, therefore, which preferring agriculture to all other employments, in order to promote it, impose restraints upon manufactures and foreign trade, act contrary to the very end which they propose, and indirectly discourage that very species of industry which they mean to promote. They are so far, perhaps, more inconsistent than even the mercantile system. That system, by encouraging manufactures and foreign trade more than agriculture, turns a certain portion of the capital of the society, from supporting a more advantageous, to support a less advantageous species of industry. But still it really, and in the end, encourages that species of industry which it means to promote. Those agricultural systems, on the contrary, really, and in the end, discourage their own favourite species of industry. It is thus that every system which endeavours, either, by extraordinary encouragements to draw towards a particular species of industry a greater share of the capital of the society than what would naturally go to it, or, by extraordinary restraints, to force from a particular species of industry some share of the capital which would otherwise be employed in it, is, in reality subversive of the great purpose which it means to promote. It retards, instead of accelerating, the progress of the society towards real wealth and greatness; and diminishes, instead of increasing, the real value of the annual produce of its land and labour. All systems, either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which, no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society. According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works, and certain public institutions, which it can never be for the interest of any individual, or small number of individuals to erect and maintain; because the profit could never repay the expense to any individual, or small number of individuals, though it may frequently do much more than repay it to a great society. The proper performance of those several duties of the sovereign necessarily supposes a certain expense; and this expense again necessarily requires a certain revenue to support it. In the following book, therefore, I shall endeavour to explain, first, what are the necessary expenses of the sovereign or commonwealth; and which of those expenses ought to be defrayed by the general contribution of the whole society; and which of them, by that of some particular part only, or of some particular members of the society; secondly, what are the different methods in which the whole society may be made to contribute towards defraying the expenses incumbent on the whole society; and what are the principal advantages and inconveniences of each of those methods; and thirdly, what are the reasons and causes which have induced almost all modern governments to mortgage some part of this revenue, or to contract debts; and what have been the effects of those debts upon the real wealth, the annual produce of the land and labour of the society. The following book, therefore, will naturally be divided into three chapters. INDEX. The two following accounts are subjoined, in order to illustrate and confirm what is said in the fifth chapter of the fourth book, concerning the Tonnage Bounty to the White-herring Fishery. The reader, I believe, may depend upon the accuracy of both accounts. _An Account of Busses fitted out in Scotland for eleven Years, with the Number of empty Barrels carried out, and the Number of Barrels of Herrings caught; also the Bounty, at a Medium, on each Barrel of Sea-sticks, and on each Barrel when fully packed._ +-------------------------------------------------------------------+ |Years.|Number of|Empty Barrels| Barrels of | Bounty paid on | | | Busses. |carried out. |Herrings caught.| the Busses. | +------+---------+-------------+----------------+-------------------+ | | | | | L. s. d.| | 1771 | 29 | 5,948 | 2,832 | 2,885 0 0 | | 1772 | 168 | 41,316 | 22,237 | 11,055 7 6 | | 1773 | 190 | 42,333 | 42,055 | 12,510 8 6 | | 1774 | 240 | 59,303 | 56,365 | 26,952 2 6 | | 1775 | 275 | 69,144 | 52,879 | 19,315 15 0 | | 1776 | 294 | 76,329 | 51,863 | 21,290 7 6 | | 1777 | 240 | 62,679 | 45,313 | 17,592 2 6 | | 1778 | 220 | 56,390 | 40,958 | 16,316 2 6 | | 1779 | 206 | 55,194 | 29,367 | 15,287 0 0 | | 1780 | 181 | 48,315 | 19,885 | 13,445 12 6 | | 1781 | 135 | 33,992 | 16,593 | 9,613 15 6 | +------+---------+-------------+----------------+-------------------+ | Total, 2,186 | 550,943 | 378,347 |L.165,463 14 0 | +----------------+-------------+----------------+-------------------+ Sea-sticks, 378,347 1-3d deducted, 126,115-2/3 ----------- Barrels fully packed, 252,231-1/3 Bounty, at a medium, for each barrel of sea-sticks, L.0 8 2-1/4 But a barrel of sea-sticks being only reckoned two thirds of a barrel fully packed, one third is to be deducted, which brings the bounty to L.0 12 3-3/4 And if the herrings are exported, there is besides, a premium of L.0 2 8 -------------- So that the bounty paid by government in money, for each barrel, is L.0 14 11-3/4 But if to this, the duty of the salt usually taken credit for as expended in curing each barrel, which, at a medium, is, of foreign, one bushel and one-fourth of a bushel, at 10s. a-bushel, be added. viz. 0 12 6 -------------- the bounty on each barrel would amount to L.1 7 5-3/4 -------------- If the herrings are cured with British salt, it will stand thus, viz. Bounty, as before L.0 14 11-3/4 But if to this bounty, the duty on two bushels of Scotch salt, at 1s. 6d. per bushel, supposed to be the quantity, at a medium, used in curing each barrel, is added, viz. 0 3 0 -------------- the bounty on each barrel will amount to L.0 17 11-3/4 -------------- And when buss herrings are entered for home consumption in Scotland, and pay the shilling a-barrel of duty, the bounty stands thus, to wit, as before L.0 12 3 From which the 1s. a-barrel is to be deducted 0 1 0 -------------- L.0 11 3-3/4 But to that there is to be added again, the duty of the foreign salt used in curing a barrel of herrings, viz. 0 12 6 -------------- So that the premium allowed for each barrel of herrings entered for home consumption is L.1 3 9-3/4 -------------- If the herrings are cured with British salt, it will stand as follows, viz. Bounty on each barrel brought in by the busses, as above L.0 12 3-3/4 From which deduct the 1s. a-barrel, paid at the time they are entered for home consumption 0 1 0 -------------- L.0 11 3-3/4 But if to the bounty, the duty on two bushels of Scotch salt, at 1s. 6d. per bushel, supposed to be the quantity, at a medium, used in curing each barrel, is added, viz. 0 3 0 -------------- the premium for each barrel entered for home consumption will be L.0 14 3-3/4 Though the loss of duties upon herrings exported cannot, perhaps, properly be considered as bounty, that upon herrings entered for home consumption certainly may. _An Account of the Quantity of Foreign Salt imported into Scotland, and of Scotch Salt delivered Duty-free from the Works there, for the Fishery, from the 5th of April 1771 to the 5th of April 1782, with the Medium of both for one Year._ +-----------------------------------+-------------+----------------+ | | | Scotch Salt | | | Foreign Salt| delivered from | | PERIOD. | imported. | the Works. | | +-------------+----------------+ | | Bushels | Bushels | +-----------------------------------+-------------+----------------+ |From the 5th of April 1771 to the }| | | | 5th April 1782. }| 936,974 | 168,226 | | +-------------+----------------+ |Medium for one year | 85,179-5/11 | 15,293-3/11 | +-----------------------------------+-------------+----------------+ It is to be observed, that the bushel of foreign salt weighs 48lb. that of British salt, 56lb. only. BOOK V. OF THE REVENUE OF THE SOVEREIGN OR COMMONWEALTH. CHAP. I. OF THE EXPENSES OF THE SOVEREIGN OR COMMONWEALTH. PART I. _Of the Expense of Defence._ The first duty of the sovereign, that of protecting the society from the violence and invasion of other independent societies, can be performed only by means of a military force. But the expense both of preparing this military force in time of peace, and of employing it in time of war, is very different in the different states of society, in the different periods of improvement. Among nations of hunters, the lowest and rudest state of society, such as we find it among the native tribes of North America, every man is a warrior, as well as a hunter. When he goes to war, either to defend his society, or to revenge the injuries which have been done to it by other societies, he maintains himself by his own labour, in the same manner as when he lives at home. His society (for in this state of things there is properly neither sovereign nor commonwealth) is at no sort of expense, either to prepare him for the field, or to maintain him while he is in it. Among nations of shepherds, a more advanced state of society, such as we find it among the Tartar and Arabs, every man is, in the same manner a warrior. Such nations have commonly no fixed habitation, but live either in tents, or in a sort of covered wagons, which are easily transported from place to place. The whole tribe, or nation, changes its situation according to the different seasons of the year, as well as according to other accidents. When its herds and flocks have consumed the forage of one part of the country, it removes to another, and from that to a third. In the dry season, it comes down to the banks of the rivers; in the wet season, it retires to the upper country. When such a nation goes to war, the warriors will not trust their herds and flocks to the feeble defence of their old men, their women and children; and their old men, their women and children, will not be left behind without defence, and without subsistence. The whole nation, besides, being accustomed to a wandering life, even in time of peace, easily takes the field in time of war. Whether it marches as an army, or moves about as a company of herdsmen, the way of life is nearly the same, though the object proposed by it be very different. They all go to war together, therefore, and every one does as well as he can. Among the Tartars, even the women have been frequently known to engage in battle. If they conquer, whatever belongs to the hostile tribe is the recompence of the victory; but if they are vanquished, all is lost; and not only their herds and flocks, but their women and children, become the booty of the conqueror. Even the greater part of those who survive the action are obliged to submit to him for the sake of immediate subsistence. The rest are commonly dissipated and dispersed in the desert. The ordinary life, the ordinary exercise of a Tartar or Arab, prepare him sufficiently for war. Running, wrestling, cudgel-playing, throwing the javelin, drawing the bow, &c. are the common pastimes of those who live in the open air, and are all of them the images of war. When a Tartar or Arab actually goes to war, he is maintained by his own herds and flocks, which he carries with him, in the same manner as in peace. His chief or sovereign (for those nations have all chiefs or sovereigns) is at no sort of expense in preparing him for the field; and when he is in it, the chance of plunder is the only pay which he either expects or requires. An army of hunters can seldom exceed two or three hundred men. The precarious subsistence which the chace affords, could seldom allow a greater number to keep together for any considerable time. An army of shepherds, on the contrary, may sometimes amount to two or three hundred thousand. As long as nothing stops their progress, as long as they can go on from one district, of which they have consumed the forage, to another, which is yet entire; there seems to be scarce any limit to the number who can march on together. A nation of hunters can never be formidable to the civilized nations in their neighbourhood; a nation of shepherds may. Nothing can be more contemptible than an Indian war in North America; nothing, on the contrary, can be more dreadful than a Tartar invasion has frequently been in Asia. The judgement of Thucydides, that both Europe and Asia could not resist the Scythians united, has been verified by the experience of all ages. The inhabitants of the extensive, but defenceles plains of Scythia or Tartary, have been frequently united under the dominion of the chief of some conquering horde or clan; and the havock and devastation of Asia have always signalized their union. The inhabitants of the inhospitable deserts of Arabia, the other great nation of shepherds, have never been united but once, under Mahomet and his immediate successors. Their union, which was more the effect of religious enthusiasm than of conquest, was signalized in the same manner. If the hunting nations of America should ever become shepherds, their neighbourhood would be much more dangerous to the European colonies than it is at present. In a yet more advanced state of society, among those nations of husbandmen who have little foreign commerce, and no other manufactures but those coarse and household ones, which almost every private family prepares for its own use, every man, in the same manner, either is a warrior, or easily becomes such. Those who live by agriculture generally pass the whole day in the open air, exposed to all the inclemencies of the seasons. The hardiness of their ordinary life prepares them for the fatigues of war, to some of which their necessary occupations bear a great analogy. The necessary occupation of a ditcher prepares him to work in the trenches, and to fortify a camp, as well as to inclose a field. The ordinary pastimes of such husbandmen are the same as those of shepherds, and are in the same manner the images of war. But as husbandmen have less leisure than shepherds, they are not so frequently employed in those pastimes. They are soldiers, but soldiers not quite so much masters of their exercise. Such as they are, however, it seldom costs the sovereign or commonwealth any expense to prepare them for the field. Agriculture, even in its rudest and lowest state, supposes a settlement, some sort of fixed habitation, which cannot be abandoned without great loss. When a nation of mere husbandmen, therefore, goes to war, the whole people cannot take the field together. The old men, the women and children, at least, must remain at home, to take care of the habitation. All the men of the military age, however, may take the field, and in small nations of this kind, have frequently done so. In every nation, the men of the military age are supposed to amount to about a fourth or a fifth part of the whole body of the people. If the campaign, too, should begin after seed-time, and end before harvest, both the husbandman and his principal labourers can be spared from the farm without much loss. He trusts that the work which must be done in the mean time, can be well enough executed by the old men, the women, and the children. He is not unwilling, therefore, to serve without pay during a short campaign; and it frequently costs the sovereign or commonwealth as little to maintain him in the field as to prepare him for it. The citizens of all the different states of ancient Greece seem to have served in this manner till after the second Persian war; and the people of Peloponnesus till after the Peloponnesian war. The Peloponnesians, Thucydides observes, generally left the field in the summer, and returned home to reap the harvest. The Roman people, under their kings, and during the first ages of the republic, served in the same manner. It was not till the siege of Veii, that they who staid at home began to contribute something towards maintaining those who went to war. In the European monarchies, which were founded upon the ruins of the Roman empire, both before, and for some time after, the establishment of what is properly called the feudal law, the great lords, with all their immediate dependents, used to serve the crown at their own expense. In the field, in the same manner as at home, they maintained themselves by their own revenue, and not by any stipend or pay which they received from the king upon that particular occasion. In a more advanced state of society, two different causes contribute to render it altogether impossible that they who take the field should maintain themselves at their own expense. Those two causes are, the progress of manufactures, and the improvement in the art of war. Though a husbandman should be employed in an expedition, provided it begins after seed-time, and ends before harvest, the interruption of his business will not always occasion any considerable diminution of his revenue. Without the intervention of his labour, Nature does herself the greater part of the work which remains to be done. But the moment that an artificer, a smith, a carpenter, or a weaver, for example, quits his workhouse, the sole source of his revenue is completely dried up. Nature does nothing for him; he does all for himself. When he takes the field, therefore, in defence of the public, as he has no revenue to maintain himself, he must necessarily be maintained by the public. But in a country, of which a great part of the inhabitants are artificers and manufacturers, a great part the people who go to war must be drawn from those classes, and must, therefore, be maintained by the public as long as they are employed in its service. When the art of war, too, has gradually grown up to be a very intricate and complicated science; when the event of war ceases to be determined, as in the first ages of society, by a single irregular skirmish or battle; but when the contest is generally spun out through several different campaigns, each of which lasts during the greater part of the year; it becomes universally necessary that the public should maintain those who serve the public in war, at least while they are employed in that service. Whatever, in time of peace, might be the ordinary occupation of those who go to war, so very tedious and expensive a service would otherwise be by far too heavy a burden upon them. After the second Persian war, accordingly, the armies of Athens seem to have been generally composed of mercenary troops, consisting, indeed, partly of citizens, but partly, too, of foreigners; and all of them equally hired and paid at the expense of the state. From the time of the siege of Veii, the armies of Rome received pay for their service during the time which they remained in the field. Under the feudal governments, the military service, both of the great lords, and of their immediate dependents, was, after a certain period, universally exchanged for a payment in money, which was employed to maintain those who served in their stead. The number of those who can go to war, in proportion to the whole number of the people, is necessarily much smaller in a civilized than in a rude state of society. In a civilized society, as the soldiers are maintained altogether by the labour of those who are not soldiers, the number of the former can never exceed what the latter can maintain, over and above maintaining, in a manner suitable to their respective stations, both themselves and the other officers of government and law, whom they are obliged to maintain. In the little agrarian states of ancient Greece, a fourth or a fifth part of the whole body of the people considered themselves as soldiers, and would sometimes, it is said, take the field. Among the civilized nations of modern Europe, it is commonly computed, that not more than the one hundredth part of the inhabitants of any country can be employed as soldiers, without ruin to the country which pays the expense of their service. The expense of preparing the army for the field seems not to have become considerable in any nation, till long after that of maintaining it in the field had devolved entirely upon the sovereign or commonwealth. In all the different republics of ancient Greece, to learn his military exercises, was a necessary part of education imposed by the state upon every free citizen. In every city there seems to have been a public field, in which, under the protection of the public magistrate, the young people were taught their different exercises by different masters. In this very simple institution consisted the whole expense which any Grecian state seems ever to have been at, in preparing its citizens for war. In ancient Rome, the exercises of the Campus Martius answered the same purpose with those of the Gymnasium in ancient Greece. Under the feudal governments, the many public ordinances, that the citizens of every district should practise archery, as well as several other military exercises, were intended for promoting the same purpose, but do not seem to have promoted it so well. Either from want of interest in the officers entrusted with the execution of those ordinances, or from some other cause, they appear to have been universally neglected; and in the progress of all those governments, military exercises seem to have gone gradually into disuse among the great body of the people. In the republic of ancient Greece and Rome, during the whole period of their existence, and under the feudal governments, for a considerable time after their first establishment, the trade of a soldier was not a separate, distinct trade, which constituted the sole or principal occupation of a particular class of citizens; every subject of the state, whatever might be the ordinary trade or occupation by which he gained his livelihood, considered himself, upon all ordinary occasions, as fit likewise to exercise the trade of a soldier, and, upon many extraordinary occasions, as bound to exercise it. The art of war, however, as it is certainly the noblest of all arts, so, in the progress of improvement, it necessarily becomes one of most complicated among them. The state of the mechanical, as well as some other arts, with which it is necessarily connected, determines the degree of perfection to which it is capable of being carried at any particular time. But in order to carry it to this degree of perfection, it is necessary that it should become the sole or principal occupation of a particular class of citizens; and the division of labour is as necessary for the improvement of this, as of every other art. Into other arts, the division of labour is naturally introduced by the prudence of individuals, who find that they promote their private interest better by confining themselves to a particular trade, than by exercising a great number. But it is the wisdom of the state only, which can render the trade of a soldier a particular trade, separate and distinct from all others. A private citizen, who, in time of profound peace, and without any particular encouragement from the public, should spend the greater part of his time in military exercises, might, no doubt, both improve himself very much in them, and amuse himself very well; but he certainly would not promote his own interest. It is the wisdom of the state only, which can render it for his interest to give up the greater part of his time to this peculiar occupation; and states have not always had this wisdom, even when their circumstances had become such, that the preservation of their existence required that they should have it. A shepherd has a great deal of leisure; a husbandman, in the rude state of husbandry, has some; an artificer or manufacturer has none at all. The first may, without any loss, employ a great deal of his time in martial exercises; the second may employ some part of it; but the last cannot employ a single hour in them without some loss, and his attention to his own interest naturally leads him to neglect them altogether. Those improvements in husbandry, too, which the progress of arts and manufacturers necessarily introduces, leave the husbandman as little leisure as the artificer. Military exercises come to be as much neglected by the inhabitants of the country as by those of the town, and the great body of the people becomes altogether unwarlike. That wealth, at the same time, which always follows the improvements of agriculture and manufactures, and which, in reality, is no more than the accumulated produce of those improvements, provokes the invasion of all their neighbours. An industrious, and, upon that account, a wealthy nation, is of all nations the most likely to be attacked; and unless the states takes some new measure for the public defence, the natural habits of the people render them altogether incapable of defending themselves. In these circumstances, there seem to be but two methods by which the state can make any tolerable provision for the public defence. If may either, first, by means of a very rigorous police, and in spite of the whole bent of the interest, genius, and inclinations of the people, enforce the practice of military exercises, and oblige either all the citizens of the military age, or a certain number of them, to join in some measure the trade of a soldier to whatever other trade or profession they may happen to carry on. Or, secondly, by maintaining and employing a certain number of citizens in the constant practice of military exercises, it may render the trade of a soldier a particular trade, separate and distinct from all others. If the state has recourse to the first of those two expedients, its military force is said to consist in a militia; if to the second, it is said to consist in a standing army. The practice of military exercises is the sole or principal occupation of the soldiers of a standing army, and the maintenance or pay which the state affords them is the principal and ordinary fund of their subsistence. The practice of military exercises is only the occasional occupation of the soldiers of a militia, and they derive the principal and ordinary fund of their subsistence from some other occupation. In a militia, the character of the labourer, artificer, or tradesman, predominates over that of the soldier; in a standing army, that of the soldier predominates over every other character; and in this distinction seems to consist the essential difference between those two different species of military force. Militias have been of several different kinds. In some countries, the citizens destined for defending the state seem to have been exercised only, without being, if I may say so, regimented; that is, without being divided into separate and distinct bodies of troops, each of which performed its exercises under its own proper and permanent officers. In the republics of ancient Greece and Rome, each citizen, as long as he remained at home, seems to have practiced his exercises, either separately and independently, or with such of his equals as he liked best; and not to have been attached to any particular body of troops, till he was actually called upon to take the field. In other countries, the militia has not only been exercised, but regimented. In England, in Switzerland, and, I believe, in every other country of modern Europe, where any imperfect military force of this kind has been established, every militiaman is, even in time of peace, attached to a particular body of troops, which performs its exercises under its own proper and permanent officers. Before the invention of fire-arms, that army was superior in which the soldiers had, each individually, the greatest skill and dexterity in the use of their arms. Strength and agility of body were of the highest consequence, and commonly determined the fate of battles. But this skill and dexterity in the use of their arms could be acquired only, in the same manner as fencing is at present, by practising, not in great bodies, but each man separately, in a particular school, under a particular master, or with his own particular equals and companions. Since the invention of fire-arms, strength and agility of body, or even extraordinary dexterity and skill in the use of arms, though they are far from being of no consequence, are, however, of less consequence. The nature of the weapon, though it by no means puts the awkward upon a level with the skilful, puts him more nearly so than he ever was before. All the dexterity and skill, it is supposed, which are necessary for using it, can be well enough acquired by practising in great bodies. Regularity, order, and prompt obedience to command, are qualities which, in modern armies, are of more importance towards determining the fate of battles, than the dexterity and skill of the soldiers in the use of their arms. But the noise of fire-arms, the smoke, and the invisible death to which every man feels himself every moment exposed, as soon as he comes within cannon-shot, and frequently a long time before the battle can be well said to be engaged, must render it very difficult to maintain any considerable degree of this regularity, order, and prompt obedience, even in the beginning of a modern battle. In an ancient battle, there was no noise but what arose from the human voice; there was no smoke, there was no invisible cause of wounds or death. Every man, till some mortal weapon actually did approach him, saw clearly that no such weapon was near him. In these circumstances, and among troops who had some confidence in their own skill and dexterity in the use of their arms, it must have been a good deal less difficult to preserve some degree of regularity and order, not only in the beginning, but through the whole progress of an ancient battle, and till one of the two armies was fairly defeated. But the habits of regularity, order, and prompt obedience to command, can be acquired only by troops which are exercised in great bodies. A militia, however, in whatever manner it may be either disciplined or exercised, must always be much inferior to a well disciplined and well exercised standing army. The soldiers who are exercised only once a-week, or once a-month, can never be so expert in the use of their arms, as those who are exercised every day, or every other day; and though this circumstance may not be of so much consequence in modern, as it was in ancient times, yet the acknowledged superiority of the Prussian troops, owing, it is said, very much to their superior expertness in their exercise, may satisfy us that it is, even at this day, of very considerable consequence. The soldiers, who are bound to obey their officer only once a-week, or once a-month, and who are at all other times at liberty to manage their own affairs their own way, without being, in any respect, accountable to him, can never be under the same awe in his presence, can never have the same disposition to ready obedience, with those whose whole life and conduct are every day directed by him, and who every day even rise and go to bed, or at least retire to their quarters, according to his orders. In what is called discipline, or in the habit of ready obedience, a militia must always be still more inferior to a standing army, than it may sometimes be in what is called the manual exercise, or in the management and use of its arms. But, in modern war, the habit of ready and instant obedience is of much greater consequence than a considerable superiority in the management of arms. Those militias which, like the Tartar or Arab militia, go to war under the same chieftains whom they are accustomed to obey in peace, are by far the best. In respect for their officers, in the habit of ready obedience, they approach nearest to standing armies. The Highland militia, when it served under its own chieftains, had some advantage of the same kind. As the Highlanders, however, were not wandering, but stationary shepherds, as they had all a fixed habitation, and were not, in peaceable times, accustomed to follow their chieftain from place to place; so, in time of war, they were less willing to follow him to any considerable distance, or to continue for any long time in the field. When they had acquired any booty, they were eager to return home, and his authority was seldom sufficient to detain them. In point of obedience, they were always much inferior to what is reported of the Tartars and Arabs. As the Highlanders, too, from their stationary life, spend less of their time in the open air, they were always less accustomed to military exercises, and were less expert in the use of their arms than the Tartars and Arabs are said to be. A militia of any kind, it must be observed, however, which has served for several successive campaigns in the field, becomes in every respect a standing army. The soldiers are every day exercised in the use of their arms, and, being constantly under the command of their officers, are habituated to the same prompt obedience which takes place in standing armies. What they were before they took the field, is of little importance. They necessarily become in every respect a standing army, after they have passed a few campaigns in it. Should the war in America drag out through another campaign, the American militia may become, in every respect, a match for that standing army, of which the valour appeared, in the last war at least, not inferior to that of the hardiest veterans of France and Spain. This distinction being well understood, the history of all ages, it will be found, bears testimony to the irresistible superiority which a well regulated standing army has over a militia. One of the first standing armies, of which we have any distinct account in any well authenticated history, is that of Philip of Macedon. His frequent wars with the Thracians, Illyrians, Thessalians, and some of the Greek cities in the neighbourhood of Macedon, gradually formed his troops, which in the beginning were probably militia, to the exact discipline of a standing army. When he was at peace, which he was very seldom, and never for any long time together, he was careful not to disband that army. It vanquished and subdued, after a long and violent struggle, indeed, the gallant and well exercised militias of the principal republics of ancient Greece; and afterwards, with very little struggle, the effeminate and ill exercised militia of the great Persian empire. The fall of the Greek republics, and of the Persian empire was the effect of the irresistible superiority which a standing army has over every other sort of militia. It is the first great revolution in the affairs of mankind of which history has preserved any distinct and circumstantial account. The fall of Carthage, and the consequent elevation of Rome, is the second. All the varieties in the fortune of those two famous republics may very well be accounted for from the same cause. From the end of the first to the beginning of the second Carthaginian war, the armies of Carthage were continually in the field, and employed under three great generals, who succeeded one another in the command; Amilcar, his son-in-law Asdrubal, and his son Annibal: first in chastising their own rebellious slaves, afterwards in subduing the revolted nations of Africa; and lastly, in conquering the great kingdom of Spain. The army which Annibal led from Spain into Italy must necessarily, in those different wars, have been gradually formed to the exact discipline of standing army. The Romans, in the meantime, though they had not been altogether at peace, yet they had not, during this period, been engaged in any war of very great consequence; and their military discipline, it is generally said, was a good deal relaxed. The Roman armies which Annibal encountered at Trebi, Thrasymenus, and Cannæ, were militia opposed to a standing army. This circumstance, it is probable, contributed more than any other to determine the fate of those battles. The standing army which Annibal left behind him in Spain had the like superiority over the militia which the Romans sent to oppose it; and, in a few years, under the command of his brother, the younger Asdrubal, expelled them almost entirely from that country. Annibal was ill supplied from home. The Roman militia, being continually in the field, became, in the progress of the war, a well disciplined and well exercised standing army; and the superiority of Annibal grew every day less and less. Asdrubal judged it necessary to lead the whole, or almost the whole, of the standing army which he commanded in Spain, to the assistance of his brother in Italy. In this march, he is said to have been misled by his guides; and in a country which he did not know, was surprised and attacked, by another standing army, in every respect equal or superior to his own, and was entirely defeated. When Asdrubal had left Spain, the great Scipio found nothing to oppose him but a militia inferior to his own. He conquered and subdued that militia, and, in the course of the war, his own militia necessarily became a well disciplined and well exercised standing army. That standing army was afterwards carried to Africa, where it found nothing but a militia to oppose it. In order to defend Carthage, it became necessary to recal the standing army of Annibal. The disheartened and frequently defeated African militia joined it, and, at the battle of Zama, composed the greater part of the troops of Annibal. The event of that day determined the fate of the two rival republics. From the end of the second Carthaginian war till the fall of the Roman republic, the armies of Rome were in every respect standing armies. The standing army of Macedon made some resistance to their arms. In the height of their grandeur, it cost them two great wars, and three great battles, to subdue that little kingdom, of which the conquest would probably have been still more difficult, had it not been for the cowardice of its last king. The militias of all the civilized nations of the ancient word, of Greece, of Syria, and of Egypt, made but a feeble resistance to the standing armies of Rome. The militias of some barbarous nations defended themselves much better. The Scythian or Tartar militia, which Mithridates drew from the countries north of the Euxine and Caspian seas, were the most formidable enemies whom the Romans had to encounter after the second Carthaginian war. The Parthian and German militias, too, were always respectable, and upon several occasions, gained very considerable advantages over the Roman armies. In general, however, and when the Roman armies were well commanded, they appear to have been very much superior; and if the Romans did not pursue the final conquest either of Parthia or Germany, it was probably because they judged that it was not worth while to add those two barbarous countries to an empire which was already too large. The ancient Parthians appear to have been a nation of Scythian or Tartar extraction, and to have always retained a good deal of the manners of their ancestors. The ancient Germans were, like the Scythians or Tartars, a nation of wandering shepherds, who went to war under the same chiefs whom they were accustomed to follow in peace. Their militia was exactly of the same kind with that of the Scythians or Tartars, from whom, too, they were probably descended. Many different causes contributed to relax the discipline of the Roman armies. Its extreme severity was, perhaps, one of those causes. In the days of their grandeur, when no enemy appeared capable of opposing them, their heavy armour was laid aside as unnecessarily burdensome, their laborious exercises were neglected, as unnecessarily toilsome. Under the Roman emperors, besides, the standing armies of Rome, those particularly which guarded the German and Pannonian frontiers, became dangerous to their masters, against whom they used frequently to set up their own generals. In order to render them less formidable, according to some authors, Dioclesian, according to others, Constantine, first withdrew them from the frontier, where they had always before been encamped in great bodies, generally of two or three legions each, and dispersed them in small bodies through the different provincial towns, from whence they were scarce ever removed, but when it became necessary to repel an invasion. Small bodies of soldiers, quartered in trading and manufacturing towns, and seldom removed from those quarters, became themselves tradesmen, artificers, and manufacturers. The civil came to predominate over the military character; and the standing armies of Rome gradually degenerated into a corrupt, neglected, and undisciplined militia, incapable of resisting the attack of the German and Scythian militias, which soon afterwards invaded the western empire. It was only by hiring the militia of some of those nations to oppose to that of others, that the emperors were for some time able to defend themselves. The fall of the western empire is the third great revolution in the affairs of mankind, of which ancient history has preserved any distinct or circumstantial account. It was brought about by the irresistible superiority which the militia of a barbarous has over that of a civilized nation; which the militia of a nation of shepherds has over that of a nation of husbandmen, artificers, and manufacturers. The victories which have been gained by militias have generally been, not over standing armies, but over other militias, in exercise and discipline inferior to themselves. Such were the victories which the Greek militia gained over that of the Persian empire; and such, too, were those which, in later times, the Swiss militia gained over that of the Austrians and Burgundians. The military force of the German and Scythian nations, who established themselves upon the ruins of the western empire, continued for some time to be of the same kind in their new settlements, as it had been in their original country. It was a militia of shepherds and husbandmen, which, in time of war, took the field under the command of the same chieftains whom it was accustomed to obey in peace. It was, therefore, tolerably well exercised, and tolerably well disciplined. As arts and industry advanced, however, the authority of the chieftains gradually decayed, and the great body of the people had less time to spare for military exercises. Both the discipline and the exercise of the feudal militia, therefore, went gradually to ruin, and standing armies were gradually introduced to supply the place of it. When the expedient of a standing army, besides, had once been adopted by one civilized nation, it became necessary that all its neighbors should follow the example. They soon found that their safety depended upon their doing so, and that their own militia was altogether incapable of resisting the attack of such an army. The soldiers of a standing army, though they may never have seen an enemy, yet have frequently appeared to possess all the courage of veteran troops, and, the very moment that they took the field, to have been fit to face the hardiest and most experienced veterans. In 1756, when the Russian army marched into Poland, the valour of the Russian soldiers did not appear inferior to that of the Prussians, at that time supposed to be the hardiest and most experienced veterans in Europe. The Russian empire, however, had enjoyed a profound peace for near twenty years before, and could at that time have very few soldiers who had ever seen an enemy. When the Spanish war broke out in 1739, England had enjoyed a profound peace for about eight-and-twenty years. The valour of her soldiers, however, far from being corrupted by that long peace, was never more distinguished than in the attempt upon Carthagena, the first unfortunate exploit of that unfortunate war. In a long peace, the generals, perhaps, may sometimes forget their skill; but where a well regulated standing army has been kept up, the soldiers seem never to forget their valour. When a civilized nation depends for its defence upon a militia, it is at all times exposed to be conquered by any barbarous nation which happens to be in its neighbourhood. The frequent conquests of all the civilized countries in Asia by the Tartars, sufficiently demonstrates the natural superiority which the militia of a barbarous has over that of a civilized nation. A well regulated standing army is superior to every militia. Such an army, as it can best be maintained by an opulent and civilized nation, so it can alone defend such a nation against the invasion of a poor and barbarous neighbour. It is only by means of a standing army, therefore, that the civilization of any country can be perpetuated, or even preserved, for any considerable time. As it is only by means of a well regulated standing army, that a civilized country can be defended, so it is only by means of it that a barbarous country can be suddenly and tolerably civilised. A standing army establishes, with an irresistible force, the law of the sovereign through the remotest provinces of the empire, and maintains some degree of regular government in countries which could not otherwise admit of any. Whoever examines with attention, the improvements which Peter the Great introduced into the Russian empire, will find that they almost all resolve themselves into the establishment of a well regulated standing army. It is the instrument which executes and maintains all his other regulations. That degree of order and internal peace, which that empire has ever since enjoyed, is altogether owing to the influence of that army. Men of republican principles have been jealous of a standing army, as dangerous to liberty. It certainly is so, wherever the interest of the general, and that of the principal officers, are not necessarily connected with the support of the constitution of the state. The standing army of Cæsar destroyed the Roman republic. The standing army of Cromwell turned the long parliament out of doors. But where the sovereign is himself the general, and the principal nobility and gentry of the country the chief officers of the army; where the military force is placed under the command of those who have the greatest interest in the support of the civil authority, because they have themselves the greatest share of that authority, a standing army can never be dangerous to liberty. On the contrary, it may, in some cases, be favourable to liberty. The security which it gives to the sovereign renders unnecessary that troublesome jealousy, which, in some modern republics, seems to watch over the minutest actions, and to be at all times ready to disturb the peace of every citizen. Where the security of the magistrate, though supported by the principal people of the country, is endangered by every popular discontent; where a small tumult is capable of bringing about in a few hours a great revolution, the whole authority of government must be employed to suppress and punish every murmur and complaint against it. To a sovereign, on the contrary, who feels himself supported, not only by the natural aristocracy of the country, but by a well regulated standing army, the rudest, the most groundless, and the must licentious remonstrances, can give little disturbance. He can safely pardon or neglect them, and his consciousness of his own superiority naturally disposes him to do so. That degree of liberty which approaches to licentiousness, can be tolerated only in countries where the sovereign is secured by a well regulated standing army. It is in such countries only, that the public safety does not require that the sovereign should be trusted with any discretionary power, for suppressing even the impertinent wantonness of this licentious liberty. The first duty of the sovereign, therefore, that of defending the society from the violence and injustice of other independent societies, grows gradually more and more expensive, as the society advances in civilization. The military force of the society, which originally cost the sovereign no expense, either in time of peace, or in time of war, must, in the progress of improvement, first be maintained by him in time of war, and afterwards even in time of peace. The great change introduced into the art of war by the invention of fire-arms, has enhanced still further both the expense of exercising and disciplining any particular number of soldiers in time of peace, and that of employing them in time of war. Both their arms and their ammunition are become more expensive. A musket is a more expensive machine than a javelin or a bow and arrows; a cannon or a mortar, than a balista or a catapulta. The powder which is spent in a modern review is lost irrecoverably, and occasions a very considerable expense. The javelins and arrows which were thrown or shot in an ancient one, could easily be picked up again, and were, besides, of very little value. The cannon and the mortar are not only much dearer, but much heavier machines than the balista or catapulta; and require a greater expense, not only to prepare them for the field, but to carry them to it. As the superiority of the modern artillery, too, over that of the ancients, is very grant; it has become much more difficult, and consequently much more expensive, to fortify a town, so as to resist, even for a few weeks, the attack of that superior artillery. In modern times, many different causes contribute to render the defence of the society more expensive. The unavoidable effects of the natural progress of improvement have, in this respect, been a good deal enhanced by a great revolution in the the art of war, to which a mere accident, the invention of gunpowder, seems to have given occasion. In modern war, the great expense of fire-arms gives an evident advantage to the nation which can best afford that expense; and consequently, to an opulent and civilized, over a poor and barbarous nation. In ancient times, the opulent and civilized found it difficult to defend themselves against the poor and barbarous nations. In modern times, the poor and barbarous find it difficult to defend themselves against the opulent and civilized. The invention of fire-arms, an invention which at first sight appears to be so pernicious, is certainly favourable, both to the permanency and to the extension of civilisation. PART II. _Of the Expense of Justice._ The second duty of the sovereign, that of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice, requires two very different degrees of expense in the different periods of society. Among nations of hunters, as there is scarce any property, or at least none that exceeds the value of two or three days labour; so there is seldom any established magistrate, or any regular administration of justice. Men who have no property, can injure one another only in their persons or reputations. But when one man kills, wounds, beats, or defames another, though he to whom the injury is done suffers, he who does it receives no benefit. It is otherwise with the injuries to property. The benefit of the person who does the injury is often equal to the loss of him who suffers it. Envy, malice, or resentment, are the only passions which can prompt one man to injure another in his person or reputation. But the greater part of men are not very frequently under the influence of those passions; and the very worst men are so only occasionally. As their gratification, too, how agreeable soever it may be to certain characters, is not attended with any real or permanent advantage, it is, in the greater part of men, commonly restrained by prudential considerations. Men may live together in society with some tolerable degree of security, though there is no civil magistrate to protect them from the injustice of those passions. But avarice and ambition in the rich, in the poor the hatred of labour and the love of present ease and enjoyment, are the passions which prompt to invade property; passions much more steady in their operation, and much more universal in their influence. Wherever there is a great property, there is great inequality. For one very rich man, there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many. The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy to invade his possessions. It is only under the shelter of the civil magistrate, that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security. He is at all times surrounded by unknown enemies, whom, though he never provoked, he can never appease, and from whose injustice he can be protected only by the powerful arm of the civil magistrate, continually held up to chastise it. The requisition of valuable and extensive property, therefore, necessarily requires the establishment of civil government. Where there is no property, or at least none that exceeds the value of two or three days labour, civil government is not so necessary. Civil government supposes a certain subordination. But as the necessity of civil government gradually grows up with the acquisition of valuable property, so the principal causes, which naturally introduce subordination, gradually grow up with the growth of that valuable property. The causes or circumstances which naturally introduce subordination, or which naturally and antecedent to any civil institution, give some men some superiority over the greater part of their brethren, seem to be four in number. The first of those causes or circumstances, is the superiority of personal qualifications, of strength, beauty, and agility of body; of wisdom and virtue of prudence, justice, fortitude, and moderation of mind. The qualifications of the body, unless supported by those of the mind, can give little authority in any period of society. He is a very strong man, who, by mere strength of body, can force two weak ones to obey him. The qualifications of the mind can alone give very great authority. They are however, invisible qualities; always disputable, and generally disputed. No society, whether barbarous or civilized, has ever found it convenient to settle the rules of precedency of rank and subordination, according to those invisible qualities; but according to something that is more plain and palpable. The second of those causes or circumstances is the superiority of age. An old man, provided his age is not so far advanced as to give suspicion of dotage, is everywhere more respected than a young man of equal rank, fortune, and abilities. Among nations of hunters, such as the native tribes of North America, age is the sole foundation of rank and precedency. Among them, father is the appellation of a superior; brother, of an equal; and son, of an inferior. In the most opulent and civilized nations, age regulates rank among those who are in every other respect equal; and among whom, therefore, there is nothing else to regulate it. Among brothers and among sisters, the eldest always takes place; and in the succession of the paternal estate, every thing which cannot be divided, but must go entire to one person, such as a title of honour, is in most cases given to the eldest. Age is a plain and palpable quality, which admits of no dispute. The third of those causes or circumstances, is the superiority of fortune. The authority of riches, however, though great in every age of society, is, perhaps, greatest in the rudest ages of society, which admits of any considerable inequality of fortune. A Tartar chief, the increase of whose flocks and herds is sufficient to maintain a thousand men, cannot well employ that increase in any other way than in maintaining a thousand men. The rude state of his society does not afford him any manufactured produce; any trinkets or baubles of any kind, for which he can exchange that part of his rude produce which is over and above his own consumption. The thousand men whom he thus maintains, depending entirely upon him for their subsistence, must both obey his orders in war, and submit to his jurisdiction in peace. He is necessarily both their general and their judge, and his chieftainship is the necessary effect of the superiority of his fortune. In an opulent and civilized society, a man may possess a much greater fortune, and yet not be able to command a dozen of people. Though the produce of his estate may be sufficient to maintain, and may, perhaps, actually maintain, more than a thousand people, yet, as those people pay for every thing which they get from him, as he gives scarce any thing to any body but in exchange for an equivalent, there is scarce any body who considers himself as entirely dependent upon him, and his authority extends only over a few menial servants. The authority of fortune, however, is very great, even in an opulent and civilized society. That it is much greater than that either of age or of personal qualities, has been the constant complaint of every period of society which admitted of any considerable inequality of fortune. The first period of society, that of hunters, admits of no such inequality. Universal poverty establishes their universal equality; and the superiority, either of age or of personal qualities, are the feeble, but the sole foundations of authority and subordination. There is, therefore, little or no authority or subordination in this period of society. The second period of society, that of shepherds, admits of very great inequalities of fortune, and there is no period in which the superiority of fortune gives so great authority to those who possess it. There is no period, accordingly, in which authority and subordination are more perfectly established. The authority of an Arabian scherif is very great; that of a Tartar khan altogether despotical. The fourth of those causes or circumstances, is the superiority of birth. Superiority of birth supposes an ancient superiority of fortune in the family of the person who claims it. All families are equally ancient; and the ancestors of the prince, though they may be better known, cannot well be more numerous than those of the beggar. Antiquity of family means everywhere the antiquity either of wealth, or of that greatness which is commonly either founded upon wealth, or accompanied with it. Upstart greatness is everywhere less respected than ancient greatness. The hatred of usurpers, the love of the family of an ancient monarch, are in a great measure founded open the contempt which men naturally have for the former, and upon their veneration for the latter. As a military officer submits, without reluctance, to the authority of a superior by whom he has always been commanded, but cannot bear that his inferior should be set over his head; so men easily submit to a family to whom they and their ancestors have always submitted; but are fired with indignation when another family, in whom they had never acknowledged any such superiority, assumes a dominion over them. The distinction of birth, being subsequent to the inequality of fortune, can have no place in nations of hunters, among whom all men, being equal in fortune, must likewise be very nearly equal in birth. The son of a wise and brave man may, indeed, even among them, be somewhat more respected than a man of equal merit, who has the misfortune to be the son of a fool or a coward. The difference, however, will not be very great; and there never was, I believe, a great family in the world, whose illustration was entirely derived from the inheritance of wisdom and virtue. The distinction of birth not only may, but always does, take place among nations of shepherds. Such nations are always strangers to every sort of luxury, and great wealth can scarce ever be dissipated among them by improvident profusion. There are no nations, accordingly, who abound more in families revered and honoured on account of their descent from a long race of great and illustrious ancestors; because there are no nations among whom wealth is likely to continue longer in the same families. Birth and fortune are evidently the two circumstances which principally set one man above another. They are the two great sources of personal distinction, and are, therefore, the principal causes which naturally establish authority and subordination among men. Among nations of shepherds, both those causes operate with their full force. The great shepherd or herdsman, respected on account of his great wealth, and of the great number of those who depend upon him for subsistence, and revered on account of the nobleness of his birth, and of the immemorial antiquity of his illustrious family, has a natural authority over all the inferior shepherds or herdsmen of his horde or clan. He can command the united force of a greater number of people than any of them. His military power is greater than that of any of them. In time of war, they are all of them naturally disposed to muster themselves under his banner, rather than under that of any other person; and his birth and fortune thus naturally procure to him some sort of executive power. By commanding, too, the united force of a greater number of people than any of them, he is best able to compel any one of them, who may have injured another, to compensate the wrong. He is the person, therefore, to whom all those who are too weak to defend themselves naturally look up for protection. It is to him that they naturally complain of the injuries which they imagine have been done to them; and his interposition, in such cases, is more easily submitted to, even by the person complained of, than that of any other person would be. His birth and fortune thus naturally procure him some sort of judicial authority. It is in the age of shepherds, in the second period of society, that the inequality of fortune first begins to take place, and introduces among men a degree of authority and subordination, which could not possibly exist before. It thereby introduces some degree of that civil government which is indispensably necessary for its own preservation; and it seems to do this naturally, and even independent of the consideration of that necessity. The consideration of that necessity comes, no doubt, afterwards, to contribute very much to maintain and secure that authority and subordination. The rich, in particular, are necessarily interested to support that order of things, which can alone secure them in the possession of their own advantages. Men of inferior wealth combine to defend those of superior wealth in the possession of their property, in order that men of superior wealth may combine to defend them in the possession of theirs. All the inferior shepherds and herdsmen feel, that the security of their own herds and flocks depends upon the security of those of the great shepherd or herdsman; that the maintenance of their lesser authority depends upon that of his greater authority; and that upon their subordination to him depends his power of keeping their inferiors in subordination to them. They constitute a sort of little nobility, who feel themselves interested to defend the property, and to support the authority, of their own little sovereign, in order that he may be able to defend their property, and to support their authority. Civil government, so far as it is instituted for the security of property, is, in reality, instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all. The judicial authority of such a sovereign, however, far from being a cause of expense, was, for a long time, a source of revenue to him. The persons who applied to him for justice were always willing to pay for it, and a present never failed to accompany a petition. After the authority of the sovereign, too, was thoroughly established, the person found guilty, over and above the satisfaction which he was obliged to make to the party, was likewise forced to pay an amercement to the sovereign. He had given trouble, he had disturbed, he had broke the peace of his lord the king, and for those offences an amercement was thought due. In the Tartar governments of Asia, in the governments of Europe which were founded by the German and Scythian nations who overturned the Roman empire, the administration of justice was a considerable source of revenue, both to the sovereign, and to all the lesser chiefs or lords who exercised under him any particular jurisdiction, either over some particular tribe or clan, or over some particular territory or district. Originally, both the sovereign and the inferior chiefs used in exercise this jurisdiction in their own persons. Afterwards, they universally found it convenient to delegate it to some substitute, bailiff, or judge. This substitute, however, was still obliged to account to his principal or constituent for the profits of the jurisdiction. Whoever reads the instructions[47] which were given to the judges of the circuit in the time of Henry II. will see clearly that those judges were a sort of itinerant factors, sent round the country for the purpose of levying certain branches of the king's revenue. In those days, the administration of justice not only afforded a certain revenue to the sovereign, but, to procure this revenue, seems to have been one of the principal advantages which he proposed to obtain by the administration of justice. This scheme of making the administration of justice subservient to the purposes of revenue, could scarce fail to be productive of several very gross abuses. The person who applied for justice with a large present in his hand, was likely to get something more than justice; while he who applied for it with a small one was likely to get something less. Justice, too, might frequently be delayed, in order that this present might be repeated. The amercement, besides, of the person complained of, might frequently suggest a very strong reason for finding him in the wrong, even when he had not really been so. That such abuses were far from being uncommon, the ancient history of every country in Europe bears witness. When the sovereign or chief exercises his judicial authority in his own person, how much soever he might abuse it, it must have been scarce possible to get any redress; because there could seldom be any body powerful enough to call him to account. When he exercised it by a bailiff, indeed, redress might sometimes be had. If it was for his own benefit only, that the bailiff had been guilty of an act of injustice, the sovereign himself might not always be unwilling to punish him, or to oblige him to repair the wrong. But if it was for the benefit of his sovereign; if it was in order to make court to the person who appointed him, and who might prefer him, that he had committed any act of oppression; redress would, upon most occasions be as impossible as if the sovereign had committed it himself. In all barbarous governments, accordingly, in all those ancient governments of Europe in particular, which were founded upon the ruins of the Roman empire, the administration of justice appears for a long time to have been extremely corrupt; far from being quite equal and impartial, even under the best monarchs, and altogether profligate under the worst. Among nations of shepherds, where the sovereign or chief is only the greatest shepherd or herdsman of the horde or clan, he is maintained in the same manner as any of his vassals or subjects, by the increase of his own herds or flocks. Among those nations of husbandmen, who are but just come out of the shepherd state, and who are not much advanced beyond that state, such as the Greek tribes appear to have been about the time of the Trojan war, and our German and Scythian ancestors, when they first settled upon the ruins of the western empire; the sovereign or chief is, in the same manner, only the greatest landlord of the country, and is maintained in the same manner as any other landlord, by a revenue derived from his own private estate, or from what, in modern Europe, was called the demesne of the crown. His subjects, upon ordinary occasions, contribute nothing to his support, except when, in order to protect them from the oppression of some of their fellow-subjects, they stand in need of his authority. The presents which they make him upon such occasions constitute the whole ordinary revenue, the whole of the emoluments which, except, perhaps, upon some very extraordinary emergencies, he derives from his dominion over them. When Agamemnon, in Homer, offers to Achilles, for his friendship, the sovereignty of seven Greek cities, the sole advantage which he mentions as likely to be derived from it was, that the people would honour him with presents. As long as such presents, as long as the emoluments of justice, or what may be called the fees of court, constituted, in this manner, the whole ordinary revenue which the sovereign derived from his sovereignty, it could not well be expected, it could not even decently be proposed, that he should give them up altogether. It might, and it frequently was proposed, that he should regulate and ascertain then. But after they had been so regulated and ascertained, how to hinder a person who was all-powerful from extending them beyond those regulations, was still very difficult, not to say impossible. During the continuance of this state of things, therefore, the corruption of justice, naturally resulting from the arbitrary and uncertain nature of those presents, scarce admitted of any effectual remedy. But when, from different causes, chiefly from the continually increasing expense of defending the nation against the invasion of other nations, the private estate of the sovereign had become altogether insufficient for defraying the expense of the sovereignty; and when it had become necessary that the people should, for their own security, contribute towards this expense by taxes of different kinds; it seems to have been very commonly stipulated, that no present for the administration of justice should, under any pretence, be accepted either by the sovereign, or by his bailiffs and substitutes, the judges. Those presents, it seems to have been supposed, could more easily be abolished altogether, than effectually regulated and ascertained. Fixed salaries were appointed to the judges, which were supposed to compensate to them the loss of whatever might have been their share of the ancient emoluments of justice; as the taxes more than compensated to the sovereign the loss of his. Justice was then said to be administered gratis. Justice, however, never was in reality administered gratis in any country. Lawyers and attorneys, at least, must always be paid by the parties; and if they were not, they would perform their duty still worse than they actually perform it. The fees annually paid to lawyers and attorneys, amount, in every court, to a much greater sum than the salaries of the judges. The circumstance of those salaries being paid by the crown, can nowhere much diminish the necessary expense of a law-suit. But it was not so much to diminish the expense, as to prevent the corruption of justice, that the judges were prohibited from receiving any present or fee from the parties. The office of judge is in itself so very honourable, that men are willing to accept of it, though accompanied with very small emoluments. The inferior office of justice of peace, though attended with a good deal of trouble, and in most cases with no emoluments at all, is an object of ambition to the greater part of our country gentlemen. The salaries of all the different judges, high and low, together with the whole expense of the administration and execution of justice, even where it is not managed with very good economy, makes, in any civilized country, but a very inconsiderable part of the whole expense of government. The whole expense of justice, too, might easily be defrayed by the fees of court; and, without exposing the administration of justice to any real hazard of corruption, the public revenue might thus be entirely discharged from a certain, though perhaps but a small incumbrance. It is difficult to regulate the fees of court effectually, where a person so powerful as the sovereign is to share in them, and to derive any considerable part of his revenue from them. It is very easy, where the judge is the principal person who can reap any benefit from them. The law can very easily oblige the judge to respect the regulation, though it might not always be able to make the sovereign respect it. Where the fees of court are precisely regulated and ascertained; where they are paid all at once, at a certain period of every process, into the hands of a cashier or receiver, to be by him distributed in certain known proportions among the different judges after the process is decided, and not till it is decided; there seems to be no more danger of corruption than where such fees are prohibited altogether. Those fees, without occasioning any considerable increase in the expense of a law-suit, might be rendered fully sufficient for defraying the whole expense of justice. But not being paid to the judges till the process was determined, they might be some incitement to the diligence of the court in examining and deciding it. In courts which consisted of a considerable number of judges, by proportioning the share of each judge to the number of hours and days which he had employed in examining the process, either in the court, or in a committee, by order of the court, those fees might give some encouragement to the diligence of each particular judge. Public services are never better performed, than when their reward comes only in consequence of their being performed, and is proportioned to the diligence employed in performing them. In the different parliaments of France, the fees of court (called epices and vacations) constitute the far greater part of the emoluments of the judges. After all deductions are made, the neat salary paid by the crown to a counsellor or judge in the parliament of Thoulouse, in rank and dignity the second parliament of the kingdom, amounts only to 150 livres, about L.6. 11s. sterling a-year. About seven years ago, that sum was in the same place the ordinary yearly wages of a common footman. The distribution of these epices, too, is according to the diligence of the judges. A diligent judge gains a comfortable, though moderate revenue, by his office; an idle one gets little more than his salary. Those parliaments are, perhaps, in many respects, not very convenient courts of justice, but they have never been accused; they seem never even to have been suspected of corruption. The fees of court seem originally to have been the principal support of the different courts of justice in England. Each court endeavoured to draw to itself as much business as it could, and was, upon that account, willing to take cognizance of many suits which were not originally intended to fall under its jurisdiction. The court of king's bench, instituted for the trial of criminal causes only, took cognizance of civil suits; the plaintiff pretending that the defendant, in not doing him justice, had been guilty of some trespass or misdemeanour. The court of exchequer, instituted for the levying of the king's revenue, and for enforcing the payment of such debts only as were due to the king, took cognizance of all other contract debts; the plaintiff alleging that he could not pay the king, because the defendant would not pay him. In consequence of such fictions, it came, in many cases, to depend altogether upon the parties, before what court they would choose to have their cause tried, and each court endeavoured, by superior dispatch and impartiality, to draw to itself as many causes as it could. The present admirable constitution of the courts of justice in England was, perhaps, originally, in a great measure, formed by this emulation, which anciently took place between their respective judges; each judge endeavouring to give, in his own court, the speediest and most effectual remedy which the law would admit, for every sort of injustice. Originally, the courts of law gave damages only for breach of contract. The court of chancery, as a court of conscience, first took upon it to enforce the specific performance of agreements. When the breach of contract consisted in the non-payment of money, the damage sustained could be compensated in no other way than by ordering payment, which was equivalent to a specific performance of the agreement. In such cases, therefore, the remedy of the courts of law was sufficient. It was not so in others. When the tenant sued his lord for having unjustly outed him of his lease, the damages which he recovered were by no means equivalent to the possession of the land. Such causes, therefore, for some time, went all to the court of chancery, to the no small loss of the courts of law. It was to draw back such causes to themselves, that the courts of law are said to have invented the artificial and fictitious writ of ejectment, the most effectual remedy for an unjust outer or dispossession of land. A stamp-duty upon the law proceedings by each particular court, to be levied by that court, and applied towards the maintenance of the judges, and other officers belonging to it, might in the same manner, afford a revenue sufficient for defraying the expense of the administration of justice, without bringing any burden upon the general revenue of the society. The judges, indeed, might in this case, be under the temptation of multiplying unnecessarily the proceedings upon every cause, in order to increase, as much as possible, the produce of such a stamp-duty. It has been the custom in modern Europe to regulate, upon most occasions, the payment of the attorneys and clerks of court according to the number of pages which they had occasion to write; the court, however, requiring that each page should contain so many lines, and each line so many words. In order to increase their payment, the attorneys and clerks have contrived to multiply words beyond all necessity, to the corruption of the law language of, I believe, every court of justice in Europe. A like temptation might, perhaps, occasion a like corruption in the form of law proceedings. But whether the administration of justice be so contrived as to defray its own expense, or whether the judges be maintained by fixed salaries paid to them from some other fund, it does not seem necessary that the person or persons entrusted with the executive power should be charged with the management of that fund, or with the payment of those salaries. That fund might arise from the rent of landed estates, the management of each estate being entrusted to the particular court which was to be maintained by it. That fund might arise even from the interest of a sum of money, the lending out of which might, in the same manner, be entrusted to the court which was to be maintained by it. A part, though indeed but a small part of the salary of the judges of the court of session in Scotland, arises from the interest of a sum of money. The necessary instability of such a fund seems, however, to render it an improper one for the maintenance of an institution which ought to last for ever. The separation of the judicial from the executive power, seems originally to have arisen from the increasing business of the society, in consequence of its increasing improvement. The administration of justice became so laborious and so complicated a duty, as to require the undivided attention of the person to whom it was entrusted. The person entrusted with the executive power, not having leisure to attend to the decision of private causes himself, a deputy was appointed to decide them in his stead. In the progress of the Roman greatness, the consul was too much occupied with the political affairs of the state, to attend to the administration of justice. A prætor, therefore, was appointed to administer it in his stead. In the progress of the European monarchies, which were founded upon the ruins of the Roman empire, the sovereigns and the great lords came universally to consider the administration of justice as an office both too laborious and too ignoble for them to execute in their own persons. They universally, therefore, discharged themselves of it, by appointing a deputy, bailiff, or judge. When the judicial is united to the executive power, it is scarce possible that justice should not frequently be sacrificed to what is vulgarly called politics. The persons entrusted with the great interests of the state may even without any corrupt views, sometimes imagine it necessary to sacrifice to those interests the rights of a private man. But upon the impartial administration of justice depends the liberty of every individual, the sense which he has of his own security. In order to make every individual feel himself perfectly secure in the possession of every right which belongs to him, it is not only necessary that the judicial should be separated from the executive power, but that it should be rendered as much as possible independent of that power. The judge should not be liable to be removed from his office according to the caprice of that power. The regular payment of his salary should not depend upon the good will, or even upon the good economy of that power. PART III. _Of the Expense of public Works and public Institutions._ The third and last duty of the sovereign or commonwealth, is that of erecting and maintaining those public institutions and those public works, which though they may be in the highest degree advantageous to a great society, are, however, of such a nature, that the profit could never repay the expense to any individual, or small number of individuals; and which it, therefore, cannot be expected that any individual, or small number of individuals, should erect or maintain. The performance of this duty requires, too, very different degrees of expense in the different periods of society. After the public institutions and public works necessary for the defence of the society, and for the administration of justice, both of which have already been mentioned, the other works and institutions of this kind are chiefly for facilitating the commerce of the society, and those for promoting the instruction of the people. The institutions for instruction are of two kinds: those for the education of the youth, and those for the instruction of people of all ages. The consideration of the manner in which the expense of those different sorts of public works and institutions may be most properly defrayed will divide this third part of the present chapter into three different articles. ART. I.--_Of the public Works and Institutions for facilitating the Commerce of the Society._ _And, first, of those which are necessary for facilitating Commerce in general._ That the erections and maintenance of the public works which facilitate the commerce of any country, such as good roads, bridges, navigable canals, harbours, &c. must require very different degrees of expense in the different periods of society, is evident without any proof. The expense of making and maintaining the public roads of any country must evidently increase with the annual produce of the land and labour of that country, or with the quantity and weight of the goods which it becomes necessary to fetch and carry upon those roads. The strength of a bridge must be suited to the number and weight of the carriages which are likely to pass over it. The depth and the supply of water for a navigable canal must be proportional to the number and tonnage of the lighters which are likely to carry goods upon it; the extent of a harbour, to the number of the shipping which are likely to take shelter in it. It does not seem necessary that the expense of those public works should be defrayed from that public revenue, as it is commonly called, of which the collection and application are in most countries, assigned to the executive power. The greater part of such public works may easily be so managed, as to afford a particular revenue, sufficient for defraying their own expense, without bringing any burden upon the general revenue of the society. A highway, a bridge, a navigable canal, for example, may, in most cases, be both made and maintained by a small toll upon the carriages which make use of them; a harbour, by a moderate port-duty upon the tonnage of the shipping which load or unload in it. The coinage, another institution for facilitating commerce, in many countries, not only defrays its own expense, but affords a small revenue or a seignorage to the sovereign. The post-office, another institution for the same purpose, over and above defraying its own expense, affords, in almost all countries, a very considerable revenue to the sovereign. When the carriages which pass over a highway or a bridge, and the lighters which sail upon a navigable canal, pay toll in proportion to their weight or their tonnage, they pay for the maintenance of these public works exactly in proportion to the wear and tear which they occasion of them. It seems scarce possible to invent a more equitable way of maintaining such works. This tax or toll, too, though it is advanced by the carrier, is finally paid by the consumer, to whom it must always be charged in the price of the goods. As the expense of carriage, however, is very much reduced by means of such public works, the goods, notwithstanding the toll, come cheaper to the consumer than they could otherwise have done, their price not being so much raised by the toll, as it is lowered by the cheapness of the carriage. The person who finally pays this tax, therefore, gains by the application more than he loses by the payment of it. His payment is exactly in proportion to his gain. It is, in reality, no more than a part of that gain which he is obliged to give up, in order to get the rest. It seems impossible to imagine a more equitable method of raising a tax. When the toll upon carriages of luxury, upon coaches, post-chaises, &c. is made somewhat higher in proportion to their weight, than upon carriages of necessary use, such as carts, waggons, &c. the indolence and vanity of the rich is made to contribute, in a very easy manner, to the relief of the poor, by rendering cheaper the transportation of heavy goods to all the different parts of the country. When high-roads, bridges, canals, &c. are in this manner made and supported by the commerce which is carried on by means of them, they can be made only where that commerce requires them, and, consequently, where it is proper to make them, Their expense, too, their grandeur and magnificence, must be suited to what that commerce can afford to pay. They must be made, consequently, as it is proper to make them. A magnificent high-road cannot be made through a desert country, where there is little or no commerce, or merely because it happens to lead to the country villa of the intendant of the province, or to that of some great lord, to whom the intendant finds it convenient to make his court. A great bridge cannot be thrown over a river at a place where nobody passes, or merely to embellish the view from the windows of a neighbouring palace; things which sometimes happen in countries, where works of this kind are carried on by any other revenue than that which they themselves are capable of affording. In several different parts of Europe, the toll or lock-duty upon a canal is the property of private persons, whose private interest obliges them to keep up the canal. If it is not kept in tolerable order, the navigation necessarily ceases altogether, and, along with it, the whole profit which they can make by the tolls. If those tolls were put under the the management of commissioners, who had themselves no interest in them, they might be less attentive to the maintenance of the works which produced them. The canal of Languedoc cost the king of France and the province upwards of thirteen millions of livres, which (at twenty-eight livres the mark of silver, the value of French money in the end of the last century) amounted to upwards of nine hundred thousand pounds sterling. When that great work was finished, the most likely method, it was found, of keeping it in constant repair, was to make a present of the tolls to Riquet, the engineer who planned and conducted the work. Those tolls constitute, at present, a very large estate to the different branches of the family of that gentleman, who have, therefore, a great interest to keep the work in constant repair. But had those tolls been put under the management of commissioners, who had no such interest, they might perhaps, have been dissipated in ornamental and unnecessary expenses, while the most essential parts of the works were allowed to go to ruin. The tolls for the maintenance of a high-road cannot, with any safety, be made the property of private persons. A high-road, though entirely neglected, does not become altogether impassable, though a canal does. The proprietors of the tolls upon a high-road, therefore, might neglect altogether the repair of the road, and yet continue to levy very nearly the same tolls. It is proper, therefore, that the tolls for the maintenance of such a work should be put under the management of commissioners or trustees. In Great Britain, the abuses which the very trustees have committed in the management of those tolls, have, in many cases, been very justly complained of. At many turnpikes, it has been said, the money levied is more than double of what is necessary for executing, in the completest manner, the work, which is often executed in a very slovenly manner, and sometimes not executed at all. The system of repairing the high-roads by tolls of this kind, it must be observed, is not of very long standing. We should not wonder, therefore, if it has not yet been brought that degree of perfection of which it seems capable. If mean and improper persons are frequently appointed trustees; and if proper courts of inspection and account have not yet been established for controlling their conduct, and for reducing the tolls to what is barely sufficient for executing the work to be done by them; the recency of the institution both accounts and apologizes for those defects, of which, by the wisdom of parliament, the greater part may, in due time, be gradually remedied. The money levied at the different turnpikes in Great Britain, is supposed to exceed so much what is necessary for repairing the roads, that the savings which, with proper economy, might be made from it, have been considered, even by some ministers, as a very great resource, which might, at some time or another, be applied to the exigencies of the state. Government, it has been said, by taking the management of the turnpikes into its own hands, and by employing the soldiers, who would work for a very small addition to their pay, could keep the roads in good order, at a much less expense than it can be done by trustees, who have no other workmen to employ, but such as derive their whole subsistence from their wages. A great revenue, half a million, perhaps[48], it has been pretended, might in this manner be gained, without laying any new burden upon the people; and the turnpike roads might be made to contribute to the general expense of the state, in the same manner as the post-office does at present. That a considerable revenue might be gained in this manner, I have no doubt, though probably not near so much as the projectors of this plan have supposed. The plan itself, however, seems liable to several very important objections. First, If the tolls which are levied at the turnpikes should ever be considered as one of the resources for supplying the exigencies of the state, they would certainly be augmented as those exigencies were supposed to require. According to the policy of Great Britain, therefore, they would probably be augmented very fast. The facility with which a great revenue could be drawn from them, would probably encourage administration to recur very frequently to this resource. Though it may, perhaps, be more than doubtful, whether half a million could by any economy be saved out of the present tolls, it can scarcely be doubted, but that a million might be saved out of them, if they were doubled; and perhaps two millions, if they were tripled[49]. This great revenue, too, might be levied without the appointment of a single new officer to collect and receive it. But the turnpike tolls, being continually augmented in this manner, instead of facilitating the inland commerce of the country, as at present, would soon become a very great incumbrance upon it. The expense of transporting all heavy goods from one part of the country to another, would soon be so much increased, the market for all such goods, consequently, would soon be so much narrowed, that their production would be in a great measure discouraged, and the most important branches of the domestic industry of the country annihilated altogether. Secondly, A tax upon carriages, in proportion to their weight, though a very equal tax when applied to the sole purpose of repairing the roads, is a very unequal one when applied to any other purpose, or to supply the common exigencies of the state. When it is applied to the sole purpose above mentioned, each carriage is supposed to pay exactly for the wear and tear which that carriage occasions of the roads. But when it is applied to any other purpose, each carriage is supposed to pay for more than that wear and tear, and contributes to the supply of some other exigency of the state. But as the turnpike toll raises the price of goods in proportion to their weight and not to their value, it is chiefly paid by the consumers of coarse and bulky, not by those of precious and light commodities. Whatever exigency of the state, therefore, this tax might be intended to supply, that exigency would be chiefly supplied at the expense of the poor, not of the rich; at the expense of those who are least able to supply it, not of those who are most able. Thirdly, If government should at any time neglect the reparation of the high-roads, it would be still more difficult, than it is at present, to compel the proper application of any part of the turnpike tolls. A large revenue might thus be levied upon the people, without any part of it being applied to the only purpose to which a revenue levied in this manner ought ever to be applied. If the meanness and poverty of the trustees of turnpike roads render it sometimes difficult, at present, to oblige them to repair their wrong; their wealth and greatness would render it ten times more so in the case which is here supposed. In France, the funds destined for the reparation of the high-roads are under the immediate direction of the executive power. Those funds consist, partly in a certain number of days labour, which the country people are in most parts of Europe obliged to give to the reparation of the highways; and partly in such a portion of the general revenue of the state as the king chooses to spare from his other expenses. By the ancient law of France, as well as by that of most other parts of Europe, the labour of the country people was under the direction of a local or provincial magistracy, which had no immediate dependency upon the king's council. But, by the present practice, both the labour of the country people, and whatever other fund the king may choose to assign for the reparation of the high-roads in any particular province or generality, are entirely under the management of the intendant; an officer who is appointed and removed by the king's council who receives his orders from it, and is in constant correspondence with it. In the progress of despotism, the authority of the executive power gradually absorbs that of every other power in the state, and assumes to itself the management of every branch of revenue which is destined for any public purpose. In France, however, the great post-roads, the roads which make the communication between the principal towns of the kingdom, are in general kept in good order; and, in some provinces, are even a good deal superior to the greater part of the turnpike roads of England. But what we call the cross roads, that is, the far greater part of the roads in the country, are entirely neglected, and are in many places absolutely impassable for any heavy carriage. In some places it is even dangerous to travel on horseback, and mules are the only conveyance which can safely be trusted. The proud minister of an ostentatious court, may frequently take pleasure in executing a work of splendour and magnificence, such as a great highway, which is frequently seen by the principal nobility, whose applauses not only flatter his vanity, but even contribute to support his interest at court. But to execute a great number of little works, in which nothing that can be done can make any great appearance, or excite the smallest degree of admiration in any traveller, and which, in short, have nothing to recommend them but their extreme utility, is a business which appears, in every respect, too mean and paltry to merit the attention of so great a magistrate. Under such an administration, therefore, such works are almost always entirely neglected. In China, and in several other governments of Asia, the executive power charges itself both with the reparation of the high-roads, and with the maintenance of the navigable canals. In the instructions which are given to the governor of each province, those objects, it is said, are constantly recommended to him, and the judgment which the court forms of his conduct is very much regulated by the attention which he appears to have paid to this part of his instructions. This branch of public police, accordingly, is said to be very much attended to in all those countries, but particularly in China, where the high-roads, and still more the navigable canals, it is pretended, exceed very much every thing of the same kind which is known in Europe. The accounts of those works, however, which have been transmitted to Europe, have generally been drawn up by weak and wondering travellers; frequently by stupid and lying missionaries. If they had been examined by more intelligent eyes, and if the accounts of them had been reported by more faithful witnesses, they would not, perhaps, appear to be so wonderful. The account which Bernier gives of some works of this kind in Indostan, falls very short of what had been reported of them by other travellers, more disposed to the marvellous than he was. It may too, perhaps, be in those countries, as it is in France, where the great roads, the great communications, which are likely to be the subjects of conversation at the court and in the capital, are attended to, and all the rest neglected. In China, besides, in Indostan, and in several other governments of Asia, the revenue of the sovereign arises almost altogether from a land tax or land rent, which rises or falls with the rise and fall of the annual produce of the land. The great interest of the sovereign, therefore, his revenue, is in such countries necessarily and immediately connected with the cultivation of the land, with the greatness of its produce, and with the value of its produce. But in order to render that produce both as great and as valuable as possible, it is necessary to procure to it as extensive a market as possible, and consequently to establish the freest, the easiest, and the least expensive communication between all the different parts of the country; which can be done only by means of the best roads and the best navigable canals. But the revenue of the sovereign does not, in any part of Europe, arise chiefly from a land tax or land rent. In all the great kingdoms of Europe, perhaps, the greater part of it may ultimately depend upon the produce of the land: but that dependency is neither so immediate nor so evident. In Europe, therefore, the sovereign does not feel himself so directly called upon to promote the increase, both in quantity and value of the produce of the land, or, by maintaining good roads and canals, to provide the most extensive market for that produce. Though it should be true, therefore, what I apprehend is not a little doubtful, that in some parts of Asia this department of the public police is very properly managed by the executive power, there is not the least probability that, during the present state of things, it could be tolerably managed by that power in any part of Europe. Even those public works, which are of such a nature that they cannot afford any revenue for maintaining themselves, but of which the conveniency is nearly confined to some particular place or district, are always better maintained by a local or provincial revenue, under the management of a local and provincial administration, than by the general revenue of the state, of which the executive power must always have the management. Were the streets of London to be lighted and paved at the expense of the treasury, is there any probability that they would be so well lighted and paved as they are at present, or even at so small an expense? The expense, besides, instead of being raised by a local tax upon the inhabitants of each particular street, parish, or district in London, would, in this case, be defrayed out of the general revenue of the state, and would consequently be raised by a tax upon all the inhabitants of the kingdom, of whom the greater part derive no sort of benefit from the lighting and paving of the streets of London. The abuses which sometimes creep into the local and provincial administration of a local and provincial revenue, how enormous soever they may appear, are in reality, however, almost always very trifling in comparison of those which commonly take place in the administration and expenditure of the revenue of a great empire. They are, besides, much more easily corrected. Under the local or provincial administration of the justices of the peace in Great Britain, the six days labour which the country people are obliged to give to the reparation of the highways, is not always, perhaps, very judiciously applied, but it is scarce ever exacted with any circumstance of cruelty or oppression. In France, under the administration of the intendants, the application is not always more judicious, and the exaction is frequently the most cruel and oppressive. Such corvees, as they are called, make one of the principal instruments of tyranny by which these officers chastise any parish or communeaute, which has had the misfortune to fall under their displeasure. _Of the public Works and Institutions which are necessary for facilitating particular Branches of Commerce._ The object of the public works and institutions above mentioned, is to facilitate commerce in general. But in order to facilitate some particular branches of it, particular institutions are necessary, which again require a particular and extraordinary expense. Some particular branches of commerce which are carried on with barbarous and uncivilized nations, require extraordinary protection. An ordinary store or counting-house could give little security to the goods of the merchants who trade to the western coast of Africa. To defend them from the barbarous natives, it is necessary that the place where they are deposited should be in same measure fortified. The disorders in the government of Indostan have been supposed to render a like precaution necessary, even among that mild and gentle people; and it was under pretence of securing their persons and property from violence, that both the English and French East India companies were allowed to erect the first forts which they possessed in that country. Among other nations, whose vigorous government will suffer no strangers to possess any fortified place within their territory, it may be necessary to maintain some ambassador, minister, or consul, who may both decide, according to their own customs, the differences arising among his own countrymen; and, in their disputes with the natives, may by means of his public character, interfere with more authority and afford them a more powerful protection than they could expect from any private man. The interests of commerce have frequently made it necessary to maintain ministers in foreign countries, where the purposes either of war or alliance would not have required any. The commerce of the Turkey company first occasioned the establishment of an ordinary ambassador at Constantinople. The first English embassies to Russia arose altogether from commercial interests. The constant interference with those interests, necessarily occasioned between the subjects of the different states of Europe, has probably introduced the custom of keeping, in all neighbouring countries, ambassadors or ministers constantly resident, even in the time of peace. This custom, unknown to ancient times, seems not to be older than the end of the fifteenth, or beginning of the sixteenth century; that is, than the time when commerce first began to extend itself to the greater part of the nations of Europe, and when they first began to attend to its interests. It seems not unreasonable, that the extraordinary expense which the protection of any particular branch of commerce may occasion, should be defrayed by a moderate tax upon that particular branch; by a moderate fine, for example, to be paid by the traders when they first enter into it; or, what is more equal, by a particular duty of so much per cent. upon the goods which they either import into, or export out of, the particular countries with which it is carried on. The protection of trade, in general, from pirates and freebooters, is said to have given occasion to the first institution of the duties of customs. But, if it was thought reasonable to lay a general tax upon trade, in order to defray the expense of protecting trade in general, it should seem equally reasonable to lay a particular tax upon a particular branch of trade, in order to defray the extraordinary expense of protecting that branch. The protection of trade, in general, has always been considered as essential to the defence of the commonwealth, and, upon that account, a necessary part of the duty of the executive power. The collection and application of the general duties of customs, therefore, have always been left to that power. But the protection of any particular branch of trade is a part of the general protection of trade; a part, therefore, of the duty of that power; and if nations always acted consistently, the particular duties levied for the purposes of such particular protection, should always have been left equally to its disposal. But in this respect, as well as in many others, nations have not always acted consistently; and in the greater part of the commercial states of Europe, particular companies of merchants have had the address to persuade the legislature to entrust to them the performance of this part of the duty of the sovereign, together with all the powers which are necessarily connected with it. These companies, though they may, perhaps, have been useful for the first introduction of some branches of commerce, by making, at their own expense, an experiment which the state might not think it prudent to make, have in the long-run proved, universally, either burdensome or useless, and have either mismanaged or confined the trade. When those companies do not trade upon a joint stock, but are obliged to admit any person, properly qualified, upon paying a certain fine, and agreeing to submit to the regulations of the company, each member trading upon his own stock, and at his own risk, they are called regulated companies. When they trade upon a joint stock, each member sharing in the common profit or loss, in proportion to his share in this stock, they are called joint-stock companies. Such companies, whether regulated or joint-stock, sometimes have, and sometimes have not, exclusive privileges. Regulated companies resemble, in every respect, the corporation of trades, so common in the cities and towns of all the different countries of Europe; and are a sort of enlarged monopolies of the same kind. As no inhabitant of a town can exercise an incorporated trade, without first obtaining his freedom in the incorporation, so, in most cases, no subject of the state can lawfully carry on any branch of foreign trade, for which a regulated company is established, without first becoming a member of that company. The monopoly is more or less strict, according as the terms of admission are more or less difficult, and according as the directors of the company have more or less authority, or have it more or less in their power to manage in such a manner as to confine the greater part of the trade to themselves and their particular friends. In the most ancient regulated companies, the privileges of apprenticeship were the same as in other corporations, and entitled the person who had served his time to a member of the company, to become himself a member, either without paying any fine, or upon paying a much smaller one than what was exacted of other people. The usual corporation spirit, wherever the law does not restrain it, prevails in all regulated companies. When they have been allowed to act according to their natural genius, they have always, in order to confine the competition to as small a number of persons as possible, endeavoured to subject the trade to many burdensome regulations. When the law has restrained them from doing this, they have become altogether useless and insignificant. The regulated companies for foreign commerce which at present subsist in Great Britain, are the ancient merchant-adventurers company, now commonly called the Hamburgh company, the Russia company, the Eastland company, the Turkey company, and the African company. The terms of admission into the Hamburgh company are now said to be quite easy; and the directors either have it not in their power to subject the trade to any troublesome restraint or regulations, or, at least, have not of late exercised that power. It has not always been so. About the middle of the last century, the fine for admission was fifty, and at one time one hundred pounds, and the conduct of the company was said to be extremely oppressive. In 1643, in 1645, and in 1661, the clothiers and free traders of the west of England complained of them to parliament, as of monopolists, who confined the trade, and oppressed the manufactures of the country. Though those complaints produced no act of parliament, they had probably intimidated the company so far, as to oblige them to reform their conduct. Since that time, at least, there have been no complaints against them. By the 10th and 11th of William III. c. 6, the fine for admission into the Russia company was reduced to five pounds; and by the 25th of Charles II. c. 7, that for admission into the Eastland company to forty shillings; while, at the same time, Sweden, Denmark, and Norway, all the countries on the north side of the Baltic, were exempted from their exclusive charter. The conduct of those companies had probably given occasion to those two acts of parliament. Before that time, Sir Josiah Child had represented both these and the Hamburgh company as extremely oppressive, and imputed to their bad management the low state of the trade, which we at that time carried on to the countries comprehended within their respective charters. But though such companies may not, in the present times, be very oppressive, they are certainly altogether useless. To be merely useless, indeed, is perhaps, the highest eulogy which can ever justly be bestowed upon a regulated company; and all the three companies above mentioned seem, in their present state, to deserve this eulogy. The fine for admission into the Turkey company was formerly twenty-five pounds for all persons under twenty-six years of age, and fifty pounds for all persons above that age. Nobody but mere merchants could be admitted; a restriction which excluded all shop-keepers and retailers. By a bye-law, no British manufactures could be exported to Turkey but in the general ships of the company; and as those ships sailed always from the port of London, this restriction confined the trade to that expensive port, and the traders in those who lived in London and in its neighbourhood. By another bye-law, no person living within twenty miles of London, and not free of the city could be admitted a member; another restriction which, joined to the foregoing, necessarily excluded all but the freemen of London. As the time for the loading and sailing of those general ships depended altogether upon the directors, they could easily fill them with their own goods, and those of their particular friends, to the exclusion of others, who, they might pretend, had made their proposals too late. In this state of things, therefore, this company was, in every respect, a strict and oppressive monopoly. Those abuses gave occasion to the act of the 26th of George II. c. 18, reducing the fine for admission to twenty pounds for all persons, without any distinction of ages, or any restriction, either to mere merchants, or to the freemen of London; and granting to all such persons the liberty of exporting, from all the ports of Great Britain, to any port in Turkey, all British goods, of which the exportation was not prohibited, upon paying both the general duties of customs, and the particular duties assessed for defraying the necessary expenses of the company; and submitting, at the same time, to the lawful authority of the British ambassador and consuls resident in Turkey, and to the bye-laws of the company duly enacted. To prevent any oppression by those bye-laws, it was by the same act ordained, that if any seven members of the company conceived themselves aggrieved by any bye-law which should be enacted after the passing of this act, they might appeal to the board of trade and plantations (to the authority of which a committee of the privy council has now succeeded), provided such appeal was brought within twelve months after the bye-law was enacted; and that, if any seven members conceived themselves aggrieved by any bye-law which had been enacted before the passing of this act, they might bring a like appeal, provided it was within twelve months after the day on which this act was to take place. The experience of one year, however, may not always be sufficient to discover to all the members of a great company the pernicious tendency of a particular bye-law; and if several of them should afterwards discover it, neither the board of trade, nor the committee of council, can afford them any redress. The object, besides, of the greater part of the bye-laws of all regulated companies, as well as of all other corporations, is not so much to oppress those who are already members, as to discourage others from becoming so; which may be done, not only by a high fine, but by many other contrivances. The constant view of such companies is always to raise the rate of their own profit as high as they can; to keep the market, both for the goods which they export, and for those which they import, as much understocked as they can; which can be done only by restraining the competition, or by discouraging new adventurers from entering into the trade. A fine, even of twenty pounds, besides, though it may not, perhaps, be sufficient to discourage any man from entering into the Turkey trade, with an intention to continue in it, may be enough to discourage a speculative merchant from hazarding a single adventure in it. In all trades, the regular established traders, even though not incorporated, naturally combine to raise profits, which are noway so likely to be kept, at all times, down to their proper level, as by the occasional competition of speculative adventurers. The Turkey trade, though in some measure laid open by this act of parliament, is still considered by many people as very far from being altogether free. The Turkey company contribute to maintain an ambassador and two or three consuls, who, like other public ministers, ought to be maintained altogether by the state, and the trade laid open to all his majesty's subjects. The different taxes levied by the company, for this and other corporation purposes, might afford a revenue much more than sufficient to enable a state to maintain such ministers. Regulated companies, it was observed by Sir Josiah Child, though they had frequently supported public ministers, had never maintained any forts or garrisons in the countries to which they traded; whereas joint-stock companies frequently had. And, in reality, the former seem to be much more unfit for this sort of service than the latter. First, the directors of a regulated company have no particular interest in the prosperity of the general trade of the company, for the sake of which such forts and garrisons are maintained. The decay of that general trade may even frequently contribute to the advantage of their own private trade; as, by diminishing the number of their competitors, it may enable them both to buy cheaper, and to sell dearer. The directors of a joint-stock company, on the contrary, having only their share in the profits which are made upon the common stock committed to their management, have no private trade of their own, of which the interest can be separated from that of the general trade of the company. Their private interest is connected with the prosperity of the general trade of the company, and with the maintenance of the forts and garrisons which are necessary for its defence. They are more likely, therefore, to have that continual and careful attention which that maintenance necessarily requires. Secondly, The directors of a joint-stock company have always the management of a large capital, the joint stock of the company, a part of which they may frequently employ, with propriety, in building, repairing, and maintaining such necessary forts and garrisons. But the directors of a regulated company, having the management of no common capital, have no other fund to employ in this way, but the casual revenue arising from the admission fines, and from the corporation duties imposed upon the trade of the company. Though they had the same interest, therefore, to attend to the maintenance of such forts and garrisons, they can seldom have the same ability to render that attention effectual. The maintenance of a public minister, requiring scarce any attention, and but a moderate and limited expense, is a business much more suitable both to the temper and abilities of a regulated company. Long after the time of Sir Josiah Child, however, in 1750, a regulated company was established, the present company of merchants trading to Africa; which was expressly charged at first with the maintenance of all the British forts and garrisons that lie between Cape Blanc and the Cape of Good Hope, and afterwards with that of those only which lie between Cape Rouge and the Cape of Good Hope. The act which establishes this company (the 23d of George II. c. 31), seems to have had two distinct objects in view; first, to restrain effectually the oppressive and monopolizing spirit which is natural to the directors of a regulated company; and, secondly, to force them, as much as possible, to give an attention, which is not natural to them, towards the maintenance of forts and garrisons. For the first of these purposes, the fine for admission is limited to forty shillings. The company is prohibited from trading in their corporate capacity, or upon a joint stock; from borrowing money upon common seal, or from laying any restraints upon the trade, which may be carried on freely from all places, and by all persons being British subjects, and paying the fine. The government is in a committee of nine persons, who meet at London, but who are chosen annually by the freemen of the company at London, Bristol, and Liverpool; three from each place. No committee-man can be continued in office for more than three years together. Any committee-man might be removed by the board of trade and plantations, now by a committee of council, after being heard in his own defence. The committee are forbid to export negroes from Africa, or to import any African goods into Great Britain. But as they are charged with the maintenance of forts and garrisons, they may, for that purpose export from Great Britain to Africa goods and stores of different kinds. Out of the moneys which they shall receive from the company, they are allowed a sum, not exceeding eight hundred pounds, for the salaries of their clerks and agents at London, Bristol, and Liverpool, the house-rent of their offices at London, and all other expenses of management, commission, and agency, in England. What remains of this sum, after defraying these different expenses, they may divide among themselves, as compensation for their trouble, in what manner they think proper. By this constitution, it might have been expected, that the spirit of monopoly would have been effectually restrained, and the first of these purposes sufficiently answered. It would seem, however, that it had not. Though by the 4th of George III. c. 20, the fort of Senegal, with all its dependencies, had been invested in the company of merchants trading to Africa, yet, in the year following (by the 5th of George III. c. 44), not only Senegal and its dependencies, but the whole coast, from the port of Sallee, in South Barbary, to Cape Rouge, was exempted from the jurisdiction of that company, was vested in the crown, and the trade to it declared free to all his majesty's subjects. The company had been suspected of restraining the trade and of establishing some sort of improper monopoly. It is not, however, very easy to conceive how, under the regulations of the 23d George II. they could do so. In the printed debates of the house of commons, not always the most authentic records of truth, I observe, however, that they have been accused of this. The members of the committee of nine being all merchants, and the governors and factors in their different forts and settlements being all dependent upon them, it is not unlikely that the latter might have given peculiar attention to the consignments and commissions of the former, which would establish a real monopoly. For the second of these purposes, the maintenance of the forts and garrisons, an annual sum has been allotted to them by parliament, generally about L.13,000. For the proper application of this sum, the committee is obliged to account annually to the cursitor baron of exchequer; which account is afterwards to be laid before parliament. But parliament, which gives so little attention to the application of millions, is not likely to give much to that of L.13,000 a-year; and the cursitor baron of exchequer, from his profession and education, is not likely to be profoundly skilled in the proper expense of forts and garrisons. The captains of his majesty's navy, indeed, or any other commissioned officers, appointed by the board of admiralty, may inquire into the condition of the forts and garrisons, and report their observations to that board. But that board seems to have no direct jurisdiction over the committee, nor any authority to correct those whose conduct it may thus inquire into; and the captains of his majesty's navy, besides, are not supposed to be always deeply learned in the science of fortification. Removal from an office, which can be enjoyed only for the term of three years, and of which the lawful emoluments, even during that term, are so very small, seems to be the utmost punishment to which any committee-man is liable, for any fault, except direct malversation, or embezzlement, either of the public money, or of that of the company; and the fear of the punishment can never be a motive of sufficient weight to force a continual and careful attention to a business to which he has no other interest to attend. The committee are accused of having sent out bricks and stones from England for the reparation of Cape Coast Castle, on the coast of Guinea; a business for which parliament had several times granted an extraordinary sum of money. These bricks and stones, too, which had thus been sent upon so long a voyage, were said to have been of so bad a quality, that it was necessary to rebuild, from the foundation, the walls which had been repaired with them. The forts and garrisons which lie north of Cape Rouge, are not only maintained at the expense of the state, but are under the immediate government of the executive power; and why those which lie south of that cape, and which, too, are, in part at least, maintained at the expense of the state, should be under a different government, it seems not very easy even to imagine a good reason. The protection of the Mediterranean trade was the original purpose or pretence of the garrisons of Gibraltar and Minorca; and the maintenance and government of those garrisons have always been, very properly, committed, not to the Turkey company, but to the executive power. In the extent of its dominion consists, in a great measure, the pride and dignity of that power; and it is not very likely to fail in attention to what is necessary for the defence of that dominion. The garrisons at Gibraltar and Minorca, accordingly, have never been neglected. Though Minorca has been twice taken, and is now probably lost for ever, that disaster has never been imputed to any neglect in the executive power. I would not, however, be understood to insinuate, that either of those expensive garrisons was ever, even in the smallest degree, necessary for the purpose for which they were originally dismembered from the Spanish monarchy. That dismemberment, perhaps, never served any other real purpose than to alienate from England her natural ally the king of Spain, and to unite the two principal branches of the house of Bourbon in a much stricter and more permanent alliance than the ties of blood could ever have united them. Joint-stock companies, established either by royal charter, or by act of parliament, are different in several respects, not only from regulated companies, but from private copartneries. First, In a private copartnery, no partner without the consent of the company, can transfer his share to another person, or introduce a new member into the company. Each member, however, may, upon proper warning, withdraw from the copartnery, and demand payment from them of his share of the common stock. In a joint-stock company, on the contrary, no member can demand payment of his share from the company; but each member can, without their consent, transfer his share to another person, and thereby introduce a new member. The value of a share in a joint stock is always the price which it will bring in the market; and this may be either greater or less in any proportion, than the sum which its owner stands credited for in the stock of the company. Secondly, In a private copartnery, each partner is bound for the debts contracted by the company, to the whole extent of his fortune. In a joint-stock company, on the contrary, each partner is bound only to the extent of his share. The trade of a joint-stock company is always managed by a court of directors. This court, indeed, is frequently subject, in many respects, to the control of a general court of proprietors. But the greater part of these proprietors seldom pretend to understand any thing of the business of the company; and when the spirit of faction happens not to prevail among them, give themselves no trouble about it, but receive contentedly such half-yearly or yearly dividend as the directors think proper to make to them. This total exemption from trouble and from risk, beyond a limited sum, encourages many people to become adventurers in joint-stock companies, who would, upon no account, hazard their fortunes in any private copartnery. Such companies, therefore, commonly draw to themselves much greater stocks, than any private copartnery can boast of. The trading stock of the South Sea company at one time amounted to upwards of thirty-three millions eight hundred thousand pounds. The divided capital of the Bank of England amounts, at present, to ten millions seven hundred and eighty thousand pounds. The directors of such companies, however, being the managers rather of other people's money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master's honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company. It is upon this account, that joint-stock companies for foreign trade have seldom been able to maintain the competition against private adventurers. They have, accordingly, very seldom succeeded without an exclusive privilege; and frequently have not succeeded with one. Without an exclusive privilege, they have commonly mismanaged the trade. With an exclusive privilege, they have both mismanaged and confined it. The Royal African company, the predecessors of the present African company, had an exclusive privilege by charter; but as that charter had not been confirmed by act of parliament, the trade, in consequence of the declaration of rights, was, soon after the Revolution, laid open to all his majesty's subjects. The Hudson's Bay company are, as to their legal rights, in the same situation as the Royal African company. Their exclusive charter has not been confirmed by act of parliament. The South Sea company, as long as they continued to be a trading company, had an exclusive privilege confirmed by act of parliament; as have likewise the present united company of merchants trading to the East Indies. The Royal African company soon found that they could not maintain the competition against private adventurers, whom, notwithstanding the declaration of rights, they continued for some time to call interlopers, and to persecute as such. In 1698, however, the private adventurers were subjected to a duty of ten per cent. upon almost all the different branches of their trade, to be employed by the company in the maintenance of their forts and garrisons. But, notwithstanding this heavy tax, the company were still unable to maintain the competition. Their stock and credit gradually declined. In 1712, their debts had become so great, that a particular act of parliament was thought necessary, both for their security and for that of their creditors. It was enacted, that the resolution of two-thirds of these creditors in number and value should bind the rest, both with regard to the time which should be allowed to the company for the payment of their debts, and with regard to any other agreement which it might be thought proper to make with them concerning those debts. In 1730, their affairs were in so great disorder, that they were altogether incapable of maintaining their forts and garrisons, the sole purpose and pretext of their institution. From that year till their final dissolution, the parliament judged it necessary to allow the annual sum of ten thousand pounds for that purpose. In 1732, after having been for many years losers by the trade of carrying negroes to the West Indies, they at last resolved to give it up altogether; to sell to the private traders to America the negroes which they purchased upon the coast; and to employ their servants in a trade to the inland parts of Africa for gold dust, elephants teeth, dyeing drugs, &c. But their success in this more confined trade was not greater than in their former extensive one. Their affairs continued to go gradually to decline, till at last, being in every respect a bankrupt company, they were dissolved by act of parliament, and their forts and garrisons vested in the present regulated company of merchants trading to Africa. Before the erection of the Royal African company, there had been three other joint-stock companies successively established, one after another, for the African trade. They were all equally unsuccessful. They all, however, had exclusive charters, which, though not confirmed by act of parliament, were in those days supposed to convey a real exclusive privilege. The Hudson's Bay company, before their misfortunes in the late war, had been much more fortunate than the Royal African company. Their necessary expense is much smaller. The whole number of people whom they maintain in their different settlements and habitations, which they have honoured with the name of forts, is said not to exceed a hundred and twenty persons. This number, however, is sufficient to prepare beforehand the cargo of furs and other goods necessary for loading their ships, which, on account of the ice, can seldom remain above six or eight weeks in those seas. This advantage of having a cargo ready prepared, could not, for several years, be acquired by private adventurers; and without it there seems to be no possibility of trading to Hudson's Bay. The moderate capital of the company, which, it is said, does not exceed one hundred and ten thousand pounds, may, besides, be sufficient to enable them to engross the whole, or almost the whole trade and surplus produce, of the miserable though extensive country comprehended within their charter. No private adventurers, accordingly, have ever attempted to trade to that country in competition with them. This company, therefore, have always enjoyed an exclusive trade, in fact, though they may have no right to it in law. Over and above all this, the moderate capital of this company is said to be divided among a very small number of proprietors. But a joint-stock company, consisting of a small number of proprietors, with a moderate capital, approaches very nearly to the nature of a private copartnery, and may be capable of nearly the same degree of vigilance and attention. It is not to be wondered at, therefore, if, in consequence of these different advantages, the Hudson's Bay company had, before the late war, been able to carry on their trade with a considerable degree of success. It does not seem probable, however, that their profits ever approached to what the late Mr Dobbs imagined them. A much more sober and judicious writer, Mr Anderson, author of the Historical and Chronological Deduction of Commerce, very justly observes, that upon examining the accounts which Mr Dobbs himself has given for several years together, of their exports and imports, and upon making proper allowances for their extraordinary risk and expense, it does not appear that their profits deserve to be envied, or that they can much, if at all, exceed the ordinary profits of trade. The South Sea company never had any forts or garrisons to maintain, and therefore were entirely exempted from one great expense, to which other joint-stock companies for foreign trade are subject; but they had an immense capital divided among an immense number of proprietors. It was naturally to be expected, therefore, that folly, negligence, and profusion, should prevail in the whole management of their affairs. The knavery and extravagance of their stock-jobbing projects are sufficiently known, and the explication of them would be foreign to the present subject. Their mercantile projects were not much better conducted. The first trade which they engaged in, was that of supplying the Spanish West Indies with negroes, of which (in consequence of what was called the Assiento Contract granted them by the treaty of Utrecht) they had the exclusive privilege. But as it was not expected that much profit could be made by this trade, both the Portuguese and French companies, who had enjoyed it upon the same terms before them, having been ruined by it, they were allowed, as compensation, to send annually a ship of a certain burden, to trade directly to the Spanish West Indies. Of the ten voyages which this annual ship was allowed to make, they are said to have gained considerably by one, that of the Royal Caroline, in 1731; and to have been losers, more or less, by almost all the rest. Their ill success was imputed, by their factors and agents, to the extortion and oppression of the Spanish government; but was, perhaps, principally owing to the profusion and depredations of those very factors and agents; some of whom are said to have acquired great fortunes, even in one year. In 1734, the company petitioned the king, that they might be allowed to dispose of the trade and tonnage of their annual ship, on account of the little profit which they made by it, and to accept of such equivalent as they could obtain from the king of Spain. In 1724, this company had undertaken the whale fishery. Of this, indeed, they had no monopoly; but as long as they carried it on, no other British subjects appear to have engaged in it. Of the eight voyages which their ships made to Greenland, they were gainers by one, and losers by all the rest. After their eighth and last voyage, when they had sold their ships, stores, and utensils, they found that their whole loss upon this branch, capital and interest included, amounted to upwards of two hundred and thirty-seven thousand pounds. In 1722, this company petitioned the parliament to be allowed to divide their immense capital of more than thirty-three millions eight hundred thousand pounds, the whole of which been lent to government, into two equal parts; the one half, or upwards of sixteen millions nine hundred thousand pounds, to be put upon the same footing with other government annuities, and not to be subject to the debts contracted, or losses incurred, by the directors of the company, in the prosecution of their mercantile projects; the other half to remain as before, a trading stock, and to be subject to those debts and losses. The petition was too reasonable not to be granted. In 1733, they again petitioned the parliament, that three-fourths of their trading stock might be turned into annuity stock, and only one-fourth remain as trading stock, or exposed to the hazards arising from the bad management of their directors. Both their annuity and trading stocks had, by this time, been reduced more than two millions each, by several different payments from government; so that this fourth amounted only to L.3,662,784 : 8 : 6. In 1748, all the demands of the company upon the king of Spain, in consequence of the assiento contract, were, by the treaty of Aix-la-Chapelle, given up for what was supposed an equivalent. An end was put to their trade with the Spanish West Indies; the remainder of their trading stock was turned into an annuity stock; and the company ceased, in every respect, to be a trading company. It ought to be observed, that in the trade which the South Sea company carried on by means of their annual ship, the only trade by which it ever was expected that they could make any considerable profit, they were not without competitors, either in the foreign or in the home market. At Carthagena, Porto Bello, and La Vera Cruz, they had to encounter the competition of the Spanish merchants, who brought from Cadiz to those markets European goods, of the same kind with the outward cargo of their ship; and in England they had to encounter that of the English merchants, who imported from Cadiz goods of the Spanish West Indies, of the same kind with the inward cargo. The goods, both of the Spanish and English merchants, indeed, were, perhaps, subject to higher duties. But the loss occasioned by the negligence, profusion, and malversation of the servants of the company, had probably been a tax much heavier than all those duties. That a joint-stock company should be able to carry on successfully any branch of foreign trade, when private adventurers can come into any sort of open and fair competition with them, seems contrary to all experience. The old English East India company was established in 1600, by a charter from Queen Elizabeth. In the first twelve voyages which they fitted out for India, they appear to have traded as a regulated company, with separate stocks, though only in the general ships of the company. In 1612, they united into a joint stock. Their charter was exclusive, and, though not confirmed by act of parliament, was in those days supposed to convey a real exclusive privilege. For many years, therefore, they were not much disturbed by interlopers. Their capital, which never exceeded seven hundred and fourty-four thousand pounds, and of which fifty pounds was a share, was not so exorbitant, nor their dealings so extensive, as to afford either a pretext for gross negligence and profusion, or a cover to gross malversation. Notwithstanding some extraordinary losses, occasioned partly by the malice of the Dutch East India company, and partly by other accidents, they carried on for many years a successful trade. But in process of time, when the principles of liberty were better understood, it became every day more and more doubtful, how far a royal charter, not confirmed by act of parliament, could convey an exclusive privilege. Upon this question the decisions of the courts of justice were not uniform, but varied with the authority of government, and the humours of the times. Interlopers multiplied upon them; and towards the end of the reign of Charles II., through the whole of that of James II., and during a part of that of William III., reduced them to great distress. In 1698, a proposal was made to parliament, of advancing two millions to government, at eight per cent. provided the subscribers were erected into a new East India company, with exclusive privileges. The old East India company offered seven hundred thousand pounds, nearly the amount of their capital, at four per cent. upon the same conditions. But such was at that time the state of public credit, that it was more convenient for government to borrow two millions at eight per cent. than seven hundred thousand pounds at four. The proposal of the new subscribers was accepted, and a new East India company established in consequence. The old East India company, however, had a right to continue their trade till 1701. They had, at the same time, in the name of their treasurer, subscribed very artfully three hundred and fifteen thousand pounds into the stock of the new. By a negligence in the expression of the act of parliament, which vested the East India trade in the subscribers to this loan of two millions, it did not appear evident that they were all obliged to unite into a joint stock. A few private traders, whose subscriptions amounted only to seven thousand two hundred pounds, insisted upon the privilege of trading separately upon their own stocks, and at their own risks. The old East India company had a right to a separate trade upon their own stock till 1701; and they had likewise, both before and after that period, a right, like that of other private traders, to a separate trade upon the three hundred and fifteen thousand pounds, which they had subscribed into the stock of the new company. The competition of the two companies with the private traders, and with one another, is said to have well nigh ruined both. Upon a subsequent occasion, in 1730, when a proposal was made to parliament for putting the trade under the management of a regulated company, and thereby laying it in some measure open, the East India company, in opposition to this proposal, represented, in very strong terms, what had been, at this time, the miserable effects, as they thought them, of this competition. In India, they said, it raised the price of goods so high, that they were not worth the buying; and in England, by overstocking the market, it sunk their price so low, that no profit could be made by them. That by a more plentiful supply, to the great advantage and conveniency of the public, it must have reduced very much the price of India goods in the English market, cannot well be doubted; but that it should have raised very much their price in the Indian market, seems not very probable, as all the extraordinary demand which that competition could occasion must have been but as a drop of water in the immense ocean of Indian commerce. The increase of demand, besides, though in the beginning it may sometimes raise the price of goods, never fails to lower it in the long-run. It encourages production, and thereby increases the competition of the producers, who, in order to undersell one another, have recourse to new divisions of labour and new improvements of art, which might never otherwise have been thought of. The miserable effects of which the company complained, were the cheapness of consumption, and the encouragement given to production; precisely the two effects which it is the great business of political economy to promote. The competition, however, of which they gave this doleful account, had not been allowed to be of long continuance. In 1702, the two companies were, in some measure, united by an indenture tripartite, to which the queen was the third party; and in 1708, they were by act of parliament, perfectly consolidated into one company, by their present name of the United Company of Merchants trading to the East Indies. Into this act it was thought worth while to insert a clause, allowing the separate traders to continue their trade till Michaelmas 1711; but at the same time empowering the directors, upon three years notice, to redeem their little capital of seven thousand two hundred pounds, and thereby to convert the whole stock of the company into a joint stock. By the same act, the capital of the company, in consequence of a new loan to government, was augmented from two millions to three millions two hundred thousand pounds. In 1743, the company advanced another million to government. But this million being raised, not by a call upon the proprietors, but by selling annuities and contracting bond-debts, it did not augment the stock upon which the proprietors could claim a dividend. It augmented, however, their trading stock, it being equally liable with the other three millions two hundred thousand pounds, to the losses sustained, and debts contracted by the company in prosecution of their mercantile projects. From 1708, or at least from 1711, this company, being delivered from all competitors, and fully established in the monopoly of the English commerce to the East Indies, carried on a successful trade, and from their profits, made annually a moderate dividend to their proprietors. During the French war, which began in 1741, the ambition of Mr. Dupleix, the French governor of Pondicherry, involved them in the wars of the Carnatic, and in the politics of the Indian princes. After many signal successes, and equally signal losses, they at last lost Madras, at that time their principal settlement in India. It was restored to them by the treaty of Aix-la-Chapelle; and, about this time the spirit of war and conquest seems to have taken possession of their servants in India, and never since to have left them. During the French war, which began in 1755, their arms partook of the general good fortune of those of Great Britain. They defended Madras, took Pondicherry, recovered Calcutta, and acquired the revenues of a rich and extensive territory, amounting, it was then said, to upwards of three millions a-year. They remained for several years in quiet possession of this revenue; but in 1767, administration laid claim to their territorial acquisitions, and the revenue arising from them, as of right belonging to the crown; and the company, in compensation for this claim, agreed to pay to government four hundred thousand pounds a-year. They had, before this, gradually augmented their dividend from about six to ten per cent.; that is, upon their capital of three millions two hundred thousand pounds, they had increased it by a hundred and twenty-eight thousand pounds, or had raised it from one hundred and ninety-two thousand to three hundred and twenty thousand pounds a-year. They were attempting about this time to raise it still further, to twelve and a-half per cent., which would have made their annual payments to their proprietors equal to what they had agreed to pay annually to government, or to four hundred thousand pounds a-year. But during the two years in which their agreement with government was to take place, they were restrained from any further increase of dividend by two successive acts of parliament, of which the object was to enable them to make a speedier progress in the payment of their debts, which were at this time estimated at upwards of six or seven millions sterling. In 1769, they renewed their agreement with government for five years more, and stipulated, that during the course of that period, they should be allowed gradually to increase their dividend to twelve and a-half per cent; never increasing it, however, more than one per cent. in one year. This increase of dividend, therefore, when it had risen to its utmost height, could augment their annual payments, to their proprietors and government together, but by six hundred and eight thousand pounds, beyond what they had been before their late territorial acquisitions. What the gross revenue of those territorial acquisitions was supposed to amount to, has already been mentioned; and by an account brought by the Cruttenden East Indiaman in 1769, the neat revenue, clear of all deductions and military charges, was stated at two millions forty-eight thousand seven hundred and forty-seven pounds. They were said, at the same time, to possess another revenue, arising partly from lands, but chiefly from the customs established at their different settlements, amounting to four hundred and thirty-nine thousand pounds. The profits of their trade, too, according to the evidence of their chairman before the house of commons, amounted, at this time, to at least four hundred thousand pounds a-year; according to that of their accountant, to at least five hundred thousand; according to the lowest account, at least equal to the highest dividend that was to be paid to their proprietors. So great a revenue might certainly have afforded augmentation of six hundred and eight thousand pounds in their annual payments; and, at the same time, have left a large sinking fund, sufficient for the speedy reduction of their debt. In 1773, however, their debts, instead of being reduced, were augmented by an arrear to the treasury in the payment of the four hundred thousand pounds; by another to the custom-house for duties unpaid; by a large debt to the bank, for money borrowed; and by a fourth, for bills drawn upon them from India, and wantonly accepted, to the amount of upwards of twelve hundred thousand pounds. The distress which these accumulated claims brought upon them, obliged them not only to reduce all at once their dividend to six per cent. but to throw themselves upon the mercy of government, and to supplicate, first, a release from the further payment of the stipulated four hundred thousand pounds a-year; and, secondly, a loan of fourteen hundred thousand, to save them from immediate bankruptcy. The great increase of their fortune had, it seems, only served to furnish their servants with a pretext for greater profusion, and a cover for greater malversation, than in proportion even to that increase of fortune. The conduct of their servants in India, and the general state of their affairs both in India and in Europe, became the subject of a parliamentary inquiry: in consequence of which, several very important alterations were made in the constitution of their government, both at home and abroad. In India, their principal settlements of Madras, Bombay, and Calcutta, which had before been altogether independent of one another, were subjected to a governor-general, assisted by a council of four assessors, parliament assuming to itself the first nomination of this governor and council, who were to reside at Calcutta; that city having now become, what Madras was before, the most important of the English settlements in India. The court of the Mayor of Calcutta, originally instituted for the trial of mercantile causes, which arose in the city and neighbourhood, had gradually extended its jurisdiction with the extension of the empire. It was now reduced and confined to the original purpose of its institution. Instead of it, a new supreme court of judicature was established, consisting of a chief justice and three judges, to be appointed by the crown. In Europe, the qualification necessary to entitle a proprietor to vote at their general courts was raised, from five hundred pounds, the original price of a share in the stock of the company, to a thousand pounds. In order to vote upon this qualification, too, it was declared necessary, that he should have possessed it, if acquired by his own purchase, and not by inheritance, for at least one year, instead of six months, the term requisite before. The court of twenty-four directors had before been chosen annually; but it was now enacted, that each director should, for the future, be chosen for four years; six of them, however, to go out of office by rotation every year, and not be capable of being re-chosen at the election of the six new directors for the ensuing year. In consequence of these alterations, the courts, both of the proprietors and directors, it was expected, would be likely to act with more dignity and steadiness than they had usually done before. But it seems impossible, by any alterations, to render those courts, in any respect, fit to govern, or even to share in the government of a great empire; because the greater part of their members must always have too little interest in the prosperity of that empire, to give any serious attention to what may promote it. Frequently a man of great, sometimes even a man of small fortune, is willing to purchase a thousand pounds share in India stock, merely for the influence which he expects to acquire by a vote in the court of proprietors. It gives him a share, though not in the plunder, yet in the appointment of the plunderers of India; the court of directors, though they make that appointment, being necessarily more or less under the influence of the proprietors, who not only elect those directors, but sometimes over-rule the appointments of their servants in India. Provided he can enjoy this influence for a few years, and thereby provide for a certain number of his friends, he frequently cares little about the dividend, or even about the value of the stock upon which his vote in founded. About the prosperity of the great empire, in the government of which that vote gives him a share, he seldom cares at all. No other sovereigns ever were, or, from the nature of things, ever could be, so perfectly indifferent about the happiness or misery of their subjects, the improvement or waste of their dominions, the glory or disgrace of their administration, as, from irresistible moral causes, the greater part of the proprietors of such a mercantile company are, and necessarily must be. This indifference, too, was more likely to be increased than diminished by some of the new regulations which were made in consequence of the parliamentary inquiry. By a resolution of the house of commons, for example, it was declared, that when the L.1,400,000 lent to the company by government, should be paid, and their bond-debts be reduced to L.1,500,000, they might then, and not till then, divide eight per cent. upon their capital; and that whatever remained of their revenues and neat profits at home should be divided into four parts; three of them to be paid into the exchequer for the use of the public, and the fourth to be reserved as a fund, either for the further reduction of their bond-debts, or for the discharge of other contingent exigencies which the company might labour under. But if the company were bad stewards and bad sovereigns, when the whole of their neat revenue and profits belonged to themselves, and were at their own disposal, they were surely not likely to be better when three-fourths of them were to belong to other people, and the other fourth, though to be laid out for the benefit of the company, yet to be so under the inspection and with the approbation of other people. It might be more agreeable to the company, that their own servants and dependants should have either the pleasure of wasting, or the profit of embezzling, whatever surplus might remain, after paying the proposed dividend of eight per cent. than that it should come into the hands of a set of people with whom those resolutions could scarce fail to set them in some measure at variance. The interest of those servants and dependants might so far predominate in the court of proprietors, as sometimes to dispose it to support the authors of depredations which had been committed in direct violation of its own authority. With the majority of proprietors, the support even of the authority of their own court might sometimes be a matter of less consequence than the support of those who had set that authority at defiance. The regulations of 1773, accordingly, did not put an end to the disorder of the company's government in India. Notwithstanding that, during a momentary fit of good conduct, they had at one time collected into the treasury of Calcutta more than L.3,000,000 sterling; notwithstanding that they had afterwards extended either their dominion or their depredations over a vast accession of some of the richest and most fertile countries in India, all was wasted and destroyed. They found themselves altogether unprepared to stop or resist the incursion of Hyder Ali; and in consequence of those disorders, the company is now (1784) in greater distress than ever; and, in order to prevent immediate bankruptcy, is once more reduced to supplicate the assistance of government. Different plans have been proposed by the different parties in parliament for the better management of its affairs; and all those plans seem to agree in supposing, what was indeed always abundantly evident, that it is altogether unfit to govern its territorial possessions. Even the company itself seems to be convinced of its own incapacity so far, and seems, upon that account willing to give them up to government. With the right of possessing forts and garrisons in distant and barbarous countries, is necessarily connected the right of making peace and war in those countries. The joint-stock companies, which have had the one right, have constantly exercised the other, and have frequently had it expressly conferred upon them. How unjustly, how capriciously, how cruelly, they have commonly exercised it, is too well known from recent experience. When a company of merchants undertake, at their own risk and expense, to establish a new trade with some remote and barbarous nation, it may not be unreasonable to incorporate them into a joint-stock company, and to grant them, in case of their success, a monopoly of the trade for a certain number of years. It is the easiest and most natural way in which the state can recompense them for hazarding a dangerous and expensive experiment, of which the public is afterwards to reap the benefit. A temporary monopoly of this kind may be vindicated, upon the same principles upon which a like monopoly of a new machine is granted to its inventor, and that of a new book to its author. But upon the expiration of the term, the monopoly ought certainly to determine; the forts and garrisons, if it was found necessary to establish any, to be taken into the hands of government, their value to be paid to the company, and the trade to be laid open to all the subjects of the state. By a perpetual monopoly, all the other subjects of the state are taxed very absurdly in two different ways: first, by the high price of goods, which, in the case of a free trade, they could buy much cheaper; and, secondly, by their total exclusion from a branch of business which it might be both convenient and profitable for many of them to carry on. It is for the most worthless of all purposes, too, that they are taxed in this manner. It is merely to enable the company to support the negligence, profusion, and malversation of their own servants, whose disorderly conduct seldom allows the dividend of the company to exceed the ordinary rate of profit in trades which are altogether free, and very frequently makes it fall even a good deal short of that rate. Without a monopoly, however, a joint-stock company, it would appear from experience, cannot long carry on any branch of foreign trade. To buy in one market, in order to sell with profit in another, when there are many competitors in both; to watch over, not only the occasional variations in the demand, but the much greater and more frequent variations in the competition, or in the supply which that demand is likely to get from other people; and to suit with dexterity and judgment both the quantity and quality of each assortment of goods to all these circumstances, is a species of warfare, of which the operations are continually changing, and which can scarce ever be conducted successfully, without such an unremitting exertion of vigilance and attention as cannot long be expected from the directors of a joint-stock company. The East India company, upon the redemption of their funds, and the expiration of their exclusive privilege, have a right, by act of parliament, to continue a corporation with a joint stock, and to trade in their corporate capacity to the East Indies, in common with the rest of their fellow subjects. But in this situation, the superior vigilance and attention of a private adventurer would, in all probability, soon make them weary of the trade. An eminent French author, of great knowledge in matters of political economy, the Abbé Morellet, gives a list of fifty-five joint-stock companies for foreign trade, which have been established in different parts of Europe since the year 1600, and which, according to him, have all failed from mismanagement, notwithstanding they had exclusive privileges. He has been misinformed with regard to the history of two or three of them, which were not joint-stock companies and have not failed. But, in compensation, there have been several joint-stock companies which have failed, and which he has omitted. The only trades which it seems possible for a joint-stock company to carry on successfully, without an exclusive privilege, are those, of which all the operations are capable of bring reduced to what is called a routine, or to such a uniformity of method as admits of little or no variation. Of this kind is, first, the banking trade; secondly, the trade of insurance from fire and from sea risk, and capture in time of war; thirdly, the trade of making and maintaining a navigable cut or canal; and, fourthly, the similar trade of bringing water for the supply of a great city. Though the principles of the banking trade may appear somewhat abstruse, the practice is capable of being reduced to strict rules. To depart upon any occasion from those rules, in consequence of some flattering speculation of extraordinary gain, is almost always extremely dangerous and frequently fatal to the banking company which attempts it. But the constitution of joint-stock companies renders them in general, more tenacious of established rules than any private copartnery. Such companies, therefore, seem extremely well fitted for this trade. The principal banking companies in Europe, accordingly, are joint-stock companies, many of which manage their trade very successfully without any exclusive privilege. The bank of England has no other exclusive privilege, except that no other banking company in England shall consist of more than six persons. The two banks of Edinburgh are joint-stock companies, without any exclusive privilege. The value of the risk, either from fire, or from loss by sea, or by capture, though it cannot, perhaps, be calculated very exactly, admits, however, of such a gross estimation, as renders it, in some degree, reducible to strict rule and method. The trade of insurance, therefore, may be carried on successfully by a joint-stock company, without any exclusive privilege. Neither the London Assurance, nor the Royal Exchange Assurance companies, have any such privilege. When a navigable cut or canal has been once made, the management of it becomes quite simple and easy, and it is reducible to strict rule and method. Even the making of it is so, as it may be contracted for with undertakers, at so much a mile, and so much a lock. The same thing may be said of a canal, an aqueduct, or a great pipe for bringing water to supply a great city. Such undertakings, therefore, may be, and accordingly frequently are, very successfully managed by joint-stock companies, without any exclusive privilege. To establish a joint-stock company, however, for any undertaking, merely because such a company might be capable of managing it successfully; or, to exempt a particular set of dealers from some of the general laws which take place with regard to all their neighbours, merely because they might be capable of thriving, if they had such an exemption, would certainly not be reasonable. To render such an establishment perfectly reasonable, with the circumstance of being reducible to strict rule and method, two other circumstances ought to concur. First, it ought to appear with the clearest evidence, that the undertaking is of greater and more general utility than the greater part of common trades; and, secondly, that it requires a greater capital than can easily be collected into a private copartnery. If a moderate capital were sufficient, the great utility of the undertaking would not be a sufficient reason for establishing a joint-stock company; because, in this case, the demand for what it was to produce, would readily and easily be supplied by private adventurers. In the four trades above mentioned, both those circumstances concur. The great and general utility of the banking trade, when prudently managed, has been fully explained in the second book of this Inquiry. But a public bank, which is to support public credit, and, upon particular emergencies, to advance to government the whole produce of a tax, to the amount, perhaps, of several millions, a year or two before it comes in, requires a greater capital than can easily be collected into any private copartnery. The trade of insurance gives great security to the fortunes of private people, and, by dividing among a great many that loss which would ruin an individual, makes it fall light and easy upon the whole society. In order to give this security, however, it is necessary that the insurers should have a very large capital. Before the establishment of the two joint-stock companies for insurance in London, a list, it is said, was laid before the attorney-general, of one hundred and fifty private insurers, who had failed in the course of a few years. That navigable cuts and canals, and the works which are sometimes necessary for supplying a great city with water, are of great and general utility, while, at the same time, they frequently require a greater expense than suits the fortunes of private people, is sufficiently obvious. Except the four trades above mentioned, I have not been able to recollect any other, in which all the three circumstances requisite for rendering reasonable the establishment of a joint-stock company concur. The English copper company of London, the lead-smelting company, the glass-grinding company, have not even the pretext of any great or singular utility in the object which they pursue; nor does the pursuit of that object seem to require any expense unsuitable to the fortunes of many private men. Whether the trade which those companies carry on, is reducible to such strict rule and method as to render it fit for the management of a joint-stock company, or whether they have any reason to boast of their extraordinary profits, I do not pretend to know. The mine-adventurers company has been long ago bankrupt. A share in the stock of the British Linen company of Edinburgh sells, at present, very much below par, though less so than it did some years ago. The joint-stock companies, which are established for the public-spirited purpose of promoting some particular manufacture, over and above managing their own affairs ill, to the diminution of the general stock of the society, can, in other respects, scarce ever fail to do more harm than good. Notwithstanding the most upright intentions, the unavoidable partiality of their directors to particular branches of the manufacture, of which the undertakers mislead and impose upon them, is a real discouragement to the rest, and necessarily breaks, more or less, that natural proportion which would otherwise establish itself between judicious industry and profit, and which, to the general industry of the country, is of all encouragements the greatest and the most effectual. ART. II.--_Of the Expense of the Institution for the Education of Youth._ The institutions for the education of the youth may, in the same manner, furnish a revenue sufficient for defraying their own expense. The fee or honorary, which the scholar pays to the master, naturally constitutes a revenue of this kind. Even where the reward of the master does not arise altogether from this natural revenue, it still is not necessary that it should be derived from that general revenue of the society, of which the collection and application are, in most countries, assigned to the executive power. Through the greater part of Europe, accordingly, the endowment of schools and colleges makes either no charge upon that general revenue, or but a very small one. It everywhere arises chiefly from some local or provincial revenue, from the rent of some landed estate, or from the interest of some sum of money, allotted and put under the management of trustees for this particular purpose, sometimes by the sovereign himself, and sometimes by some private donor. Have those public endowments contributed in general, to promote the end of their institution? Have they contributed to encourage the diligence, and to improve the abilities, of the teachers? Have they directed the course of education towards objects more useful, both to the individual and to the public, than those to which it would naturally have gone of its own accord? It should not seem very difficult to give at least a probable answer to each of those questions. In every profession, the exertion of the greater part of those who exercise it, is always in proportion to the necessity they are under of making that exertion. This necessity is greatest with those to whom the emoluments of their profession are the only source from which they expect their fortune, or even their ordinary revenue and subsistence. In order to acquire this fortune, or even to get this subsistence, they must, in the course of a year, execute a certain quantity of work of a known value; and, where the competition is free, the rivalship of competitors, who are all endeavouring to justle one another out of employment, obliges every man to endeavour to execute his work with a certain degree of exactness. The greatness of the objects which are to be acquired by success in some particular professions may, no doubt, sometimes animate the exertion of a few men of extraordinary spirit and ambition. Great objects, however, are evidently not necessary, in order to occasion the greatest exertions. Rivalship and emulation render excellency, even in mean professions, an object of ambition, and frequently occasion the very greatest exertions. Great objects, on the contrary, alone and unsupported by the necessity of application, have seldom been sufficient to occasion any considerable exertion. In England, success in the profession of the law leads to some very great objects of ambition; and yet how few men, born to easy fortunes, have ever in this country been eminent in that profession? The endowments of schools and colleges have necessarily diminished, more or less, the necessity of application in the teachers. Their subsistence, so far as it arises from their salaries, is evidently derived from a fund, altogether independent of their success and reputation in their particular professions. In some universities, the salary makes but a part, and frequently but a small part, of the emoluments of the teacher, of which the greater part arises from the honoraries or fees of his pupils. The necessity of application, though always more or less diminished, is not, in this case, entirely taken away. Reputation in his profession is still of some importance to him, and he still has some dependency upon the affection, gratitude, and favourable report of those who have attended upon his instructions; and these favourable sentiments he is likely to gain in no way so well as by deserving them, that is, by the abilities and diligence with which he discharges every part of his duty. In other universities, the teacher is prohibited from receiving any honorary or fee from his pupils, and his salary constitutes the whole of the revenue which he derives from his office. His interest is, in this case, set as directly in opposition to his duty as it is possible to set it. It is the interest of every man to live as much at his ease as he can; and if his emoluments are to be precisely the same, whether he does or does not perform some very laborious duty, it is certainly his interest, at least as interest is vulgarly understood, either to neglect it altogether, or, if he is subject to some authority which will not suffer him to do this, to perform it in as careless and slovenly a manner as that authority will permit. If he is naturally active and a lover of labour, it is his interest to employ that activity in any way from which he can derive some advantage, rather than in the performance of his duty, from which he can derive none. If the authority to which he is subject resides in the body corporate, the college, or university, of which he himself is a member, and in which the greater part of the other members are, like himself, persons who either are, or ought to be teachers, they are likely to make a common cause, to be all very indulgent to one another, and every man to consent that his neighbour may neglect his duty, provided he himself is allowed to neglect his own. In the university of Oxford, the greater part of the public professors have, for these many years, given up altogether even the pretence of teaching. If the authority to which he is subject resides, not so much in the body corporate, of which he is a member, as in some other extraneous persons, in the bishop of the diocese, for example, in the governor of the province, or, perhaps, in some minister of state, it is not, indeed, in this case, very likely that he will be suffered to neglect his duty altogether. All that such superiors, however, can force him to do, is to attend upon his pupils a certain number of hours, that is, to give a certain number of lectures in the week, or in the year. What those lectures shall be, must still depend upon the diligence of the teacher; and that diligence is likely to be proportioned to the motives which he has for exerting it. An extraneous jurisdiction of this kind, besides, is liable to be exercised both ignorantly and capriciously. In its nature, it is arbitrary and discretionary; and the persons who exercise it, neither attending upon the lectures of the teacher themselves, nor perhaps understanding the sciences which it is his business to teach, are seldom capable of exercising it with judgment. From the insolence of office, too, they are frequently indifferent how they exercise it, and are very apt to censure or deprive him of his office wantonly and without any just cause. The person subject to such jurisdiction is necessarily degraded by it, and, instead of being one of the most respectable, is rendered one of the meanest and most contemptible persons in the society. It is by powerful protection only, that he can effectually guard himself against the bad usage to which he is at all times exposed; and this protection he is most likely to gain, not by ability or diligence in his profession, but by obsequiousness to the will of his superiors, and by being ready, at all times, to sacrifice to that will the rights, the interest, and the honour of the body corporate, of which he is a member. Whoever has attended for any considerable time to the administration of a French university, must have had occasion to remark the effects which naturally result from an arbitrary and extraneous jurisdiction of this kind. Whatever forces a certain number of students to any college or university, independent of the merit or reputation of the teachers, tends more or less to diminish the necessity of that merit or reputation. The privileges of graduates in arts, in law, physic, and divinity, when they can be obtained only by residing a certain number of years in certain universities, necessarily force a certain number of students to such universities, independent of the merit or reputation of the teachers. The privileges of graduates are a sort of statutes of apprenticeship, which have contributed to the improvement of education, just as the other statutes of apprenticeship have to that of arts and manufactures. The charitable foundations of scholarships, exhibitions, bursaries, &c. necessarily attach a certain number of students to certain colleges, independent altogether of the merit of those particular colleges. Were the students upon such charitable foundations left free to choose what college they liked best, such liberty might perhaps contribute to excite some emulation among different colleges. A regulation, on the contrary, which prohibited even the independent members of every particular college from leaving it, and going to any other, without leave first asked and obtained of that which they meant to abandon, would tend very much to extinguish that emulation. If in each college, the tutor or teacher, who was to instruct each student in all arts and sciences, should not be voluntarily chosen by the student, but appointed by the head of the college; and if, in case of neglect, inability, or bad usage, the student should not be allowed to change him for another, without leave first asked and obtained; such a regulation would not only tend very much to extinguish all emulation among the different tutors of the same college, but to diminish very much, in all of them, the necessity of diligence and of attention to their respective pupils. Such teachers, though very well paid by their students, might be as much disposed to neglect them, as those who are not paid by them at all or who have no other recompense but their salary. If the teacher happens to be a man of sense, it must be an unpleasant thing to him to be conscious, while he is lecturing to his students, that he is either speaking or reading nonsense, or what is very little better than nonsense. It must, too, be unpleasant to him to observe, that the greater part of his students desert his lectures; or perhaps, attend upon them with plain enough marks of neglect, contempt, and derision. If he is obliged, therefore, to give a certain number of lectures, these motives alone, without any other interest, might dispose him to take some pains to give tolerably good ones. Several different expedients, however, may be fallen upon, which will effectually blunt the edge of all those incitements to diligence. The teacher, instead of explaining to his pupils himself the science in which he proposes to instruct them, may read some book upon it; and if this book is written in a foreign and dead language, by interpreting it to them into their own, or, what would give him still less trouble, by making them interpret it to him, and by now and then making an occasional remark upon it, he may flatter himself that he is giving a lecture. The slightest degree of knowledge and application will enable him to do this, without exposing himself to contempt or derision, by saying any thing that is really foolish, absurd, or ridiculous. The discipline of the college, at the same time, may enable him to force all his pupils to the most regular attendance upon his sham lecture, and to maintain the most decent and respectful behaviour during the whole time of the performance. The discipline of colleges and universities is in general contrived, not for the benefit of the students, but for the interest, or, more properly speaking, for the ease of the masters. Its object is, in all cases, to maintain the authority of the master, and, whether he neglects or performs his duty, to oblige the students in all cases to behave to him as if he performed it with the greatest diligence and ability. It seems to presume perfect wisdom and virtue in the one order, and the greatest weakness and folly in the other. Where the masters, however, really perform their duty, there are no examples, I believe, that the greater part of the students ever neglect theirs. No discipline is ever requisite to force attendance upon lectures which are really worth the attending, as is well known wherever any such lectures are given. Force and restraint may, no doubt, be in some degree requisite, in order to oblige children, or very young boys, to attend to those parts of education, which it is thought necessary for them to acquire during that early period of life; but after twelve or thirteen years of age, provided the master does his duty, force or restraint can scarce ever be necessary to carry on any part of education. Such is the generosity of the greater part of young men, that so far from being disposed to neglect or despise the instructions of their master, provided he shews some serious intention of being of use to them, they are generally inclined to pardon a great deal of incorrectness in the performance of his duty, and sometimes even to conceal from the public a good deal of gross negligence. Those parts of education, it is to be observed, for the teaching of which there are no public institutions, are generally the best taught. When a young man goes to a fencing or a dancing school, he does not, indeed, always learn to fence or to dance very well; but he seldom fails of learning to fence or to dance. The good effects of the riding school are not commonly so evident. The expense of a riding school is so great, that in most places it is a public institution. The three most essential parts of literary education, to read, write, and account, it still continues to be more common to acquire in private than in public schools; and it very seldom happens, that anybody fails of acquiring them to the degree in which it is necessary to acquire them. In England, the public schools are much less corrupted than the universities. In the schools, the youth are taught, or at least may be taught, Greek and Latin; that is, every thing which the masters pretend to teach, or which it is expected they should teach. In the universities, the youth neither are taught, nor always can find any proper means of being taught the sciences, which it is the business of those incorporated bodies to teach. The reward of the schoolmaster, in most cases, depends principally, in some cases almost entirely, upon the fees or honoraries of his scholars. Schools have no exclusive privileges. In order to obtain the honours of graduation, it is not necessary that a person should bring a certificate of his having studied a certain number of years at a public school. If, upon examination, he appears to understand what is taught there, no questions are asked about the place where he learnt it. The parts of education which are commonly taught in universities, it may perhaps be said, are not very well taught. But had it not been for those institutions, they would not have been commonly taught at all; and both the individual and the public would have suffered a good deal from the want of those important parts of education. The present universities of Europe were originally, the greater part of them, ecclesiastical corporations, instituted for the education of churchmen. They were founded by the authority of the pope; and were so entirely under his immediate protection, that their members, whether masters or students, had all of them what was then called the benefit of clergy, that is, were exempted from the civil jurisdiction of the countries in which their respective universities were situated, and were amenable only to the ecclesiastical tribunals. What was taught in the greater part of those universities was suitable to the end of their institution, either theology, or something that was merely preparatory to theology. When Christianity was first established by law, a corrupted Latin had become the common language of all the western parts of Europe. The service of the church, accordingly, and the translation of the Bible which were read in churches, were both in that corrupted Latin; that is, in the common language of the country. After the irruption of the barbarous nations who overturned the Roman empire, Latin gradually ceased to be the language of any part of Europe. But the reverence of the people naturally preserves the established forms and ceremonies of religion long after the circumstances which first introduced and rendered them reasonable, are no more. Though Latin, therefore, was no longer understood anywhere by the great body of the people, the whole service of the church still continued to be performed in that language. Two different languages were thus established in Europe, in the same manner as in ancient Egypt: a language of the priests, and a language of the people; a sacred and a profane, a learned and an unlearned language. But it was necessary that the priests should understand something of that sacred and learned language in which they were to officiate; and the study of the Latin language therefore made, from the beginning, an essential part of university education. It was not so with that either of the Greek or of the Hebrew language. The infallible decrees of the church had pronounced the Latin translation of the Bible, commonly called the Latin Vulgate, to have been equally dictated by divine inspiration, and therefore of equal authority with the Greek and Hebrew originals. The knowledge of those two languages, therefore, not being indispensably requisite to a churchman, the study of them did not for a long time make a necessary part of the common course of university education. There are some Spanish universities, I am assured, in which the study of the Greek language has never yet made any part of that course. The first reformers found the Greek text of the New Testament, and even the Hebrew text of the Old, more favourable to their opinions than the vulgate translation, which, as might naturally be supposed, had been gradually accommodated to support the doctrines of the Catholic Church. They set themselves, therefore, to expose the many errors of that translation, which the Roman catholic clergy were thus put under the necessity of defending or explaining. But this could not well be done without some knowledge of the original languages, of which the study was therefore gradually introduced into the greater part of universities; both of those which embraced, and of those which rejected, the doctrines of the reformation. The Greek language was connected with every part of that classical learning, which, though at first principally cultivated by catholics and Italians, happened to come into fashion much about the same time that the doctrines of the reformation were set on foot. In the greater part of universities, therefore, that language was taught previous to the study of philosophy, and as soon as the student had made some progress in the Latin. The Hebrew language having no connection with classical learning, and, except the Holy Scriptures, being the language of not a single book in any esteem the study of it did not commonly commence till after that of philosophy, and when the student had entered upon the study of theology. Originally, the first rudiments, both of the Greek and Latin languages, were taught in universities; and in some universities they still continue to be so. In others, it is expected that the student should have previously acquired, at least, the rudiments of one or both of those languages, of which the study continues to make everywhere a very considerable part of university education. The ancient Greek philosophy was divided into three great branches; physics, or natural philosophy; ethics, or moral philosophy; and logic. This general division seems perfectly agreeable to the nature of things. The great phenomenon of nature, the revolutions of the heavenly bodies, eclipses, comets; thunder and lightning, and other extraordinary meteors; the generation, the life, growth, and dissolution of plants and animals; are objects which, as they necessarily excite the wonder, so they naturally call forth the curiosity of mankind to inquire into their causes. Superstition first attempted to satisfy this curiosity, by referring all those wonderful appearances to the immediate agency of the gods. Philosophy afterwards endeavoured to account for them from more familiar causes, or from such as mankind were better acquainted with, than the agency of the gods. As those great phenomena are the first objects of human curiosity, so the science which pretends to explain them must naturally have been the first branch of philosophy that was cultivated. The first philosophers, accordingly, of whom history has preserved any account, appears to have been natural philosophers. In every age and country of the world, men must have attended to the characters, designs, and actions of one another; and many reputable rules and maxims for the conduct of human life must have been laid down and approved of by common consent. As soon as writing came into fashion, wise men, or those who fancied themselves such, would naturally endeavour to increase the number of those established and respected maxims, and to express their own sense of what was either proper or improper conduct, sometimes in the more artificial form of apologues, like what are called the fables of �sop; and sometimes in the more simple one of apophthegms or wise sayings, like the proverbs of Solomon, the verses of Theognis and Phocyllides, and some part of the works of Hesiod. They might continue in this manner, for a long time, merely to multiply the number of those maxims of prudence and morality, without even attempting to arrange them in any very distinct or methodical order, much less to connect them together by one or more general principles, from which they were all deducible, like effects from their natural causes. The beauty of a systematical arrangement of different observations, connected by a few common principles, was first seen in the rude essays of those ancient times towards a system of natural philosophy. Something of the same kind was afterwards attempted in morals. The maxims of common life were arranged in some methodical order, and connected together by a few common principles, in the same manner as they had attempted to arrange and connect the phenomena of nature. The science which pretends to investigate and explain those connecting principles, is what is properly called Moral Philosophy. Different authors gave different systems, both of natural and moral philosophy. But the arguments by which they supported those different systems, far from being always demonstrations, were frequently at best but very slender probabilities, and sometimes mere sophisms, which had no other foundation but the inaccuracy and ambiguity of common language. Speculative systems, have, in all ages of the world, been adopted for reasons too frivolous to have determined the judgment of any man of common sense, in a matter of the smallest pecuniary interest. Gross sophistry has scarce ever had any influence upon the opinions of mankind, except in matters of philosophy and speculation; and in these it has frequently had the greatest. The patrons of each system of natural and moral philosophy, naturally endeavoured to expose the weakness of the arguments adduced to support the systems which were opposite to their own. In examining those arguments, they were necessarily led to consider the difference between a probable and a demonstrative argument, between a fallacious and a conclusive one; and logic, or the science of the general principles of good and bad reasoning, necessarily arose out of the observations which a scrutiny of this kind gave occasion to; though, in its origin, posterior both to physics and to ethics, it was commonly taught, not indeed in all, but in the greater part of the ancient schools of philosophy, previously to either of those sciences. The student, it seems to have been thought, ought to understand well the difference between good and bad reasoning, before he was led to reason upon subjects of so great importance. This ancient division of philosophy into three parts was, in the greater part of the universities of Europe, changed for another into five. In the ancient philosophy, whatever was taught concerning the nature either of the human mind or of the Deity, made a part of the system of physics. Those beings, in whatever their essence might be supposed to consist, were parts of the great system of the universe, and parts, too, productive of the most important effects. Whatever human reason could either conclude or conjecture concerning them, made, as it were, two chapters, though no doubt two very important ones, of the science which pretended to give an account of the origin and revolutions of the great system of the universe. But in the universities of Europe, where philosophy was taught only as subservient to theology, it was natural to dwell longer upon these two chapters than upon any other of the science. They were gradually more and more extended, and were divided into many inferior chapters; till at last the doctrine of spirits, of which so little can be known, came to take up as much room in the system of philosophy as the doctrine of bodies, of which so much can be known. The doctrines concerning those two subjects were considered as making two distinct sciences. What are called metaphysics, or pneumatics, were set in opposition to physics, and were cultivated not only as the more sublime, but, for the purposes of a particular profession, as the more useful science of the two. The proper subject of experiment and observation, a subject in which a careful attention is capable of making so many useful discoveries, was almost entirely neglected. The subject in which, after a very few simple and almost obvious truths, the most careful attention can discover nothing but obscurity and uncertainty, and can consequently produce nothing but subtleties and sophisms, was greatly cultivated. When these two sciences had thus been set in opposition to one another, the comparison between them naturally gave birth to a third, to what was called ontology, or the science which treated of the qualities and attributes which were common to both the subjects of the other two sciences. But if subtleties and sophisms composed the greater part of the metaphysics or pneumatics of the schools, they composed the whole of this cobweb science of ontology, which was likewise sometimes called metaphysics. Wherein consisted the happiness and perfection of a man, considered not only as an individual, but as the member of a family, of a state, and of the great society of mankind, was the object which the ancient moral philosophy proposed to investigate. In that philosophy, the duties of human life were treated of as subservient to the happiness and perfection of human life. But when moral, as well as natural philosophy, came to be taught only as subservient to theology, the duties of human life were treated of as chiefly subservient to the happiness of a life to come. In the ancient philosophy, the perfection of virtue was represented as necessarily productive, to the person who possessed it, of the most perfect happiness in this life. In the modern philosophy, it was frequently represented as generally, or rather as almost always, inconsistent with any degree of happiness in this life; and heaven was to be earned only by penance and mortification, by the austerities and abasement of a monk, not by the liberal, generous, and spirited conduct of a man. Casuistry, and an ascetic morality, made up, in most cases, the greater part of the moral philosophy of the schools. By far the most important of all the different branches of philosophy became in this manner by far the most corrupted. Such, therefore, was the common course of philosophical education in the greater part of the universities in Europe. Logic was taught first; ontology came in the second place; pneumatology, comprehending the doctrine concerning the nature of the human soul and of the Deity, in the third; in the fourth followed a debased system of moral philosophy, which was considered as immediately connected with the doctrines of pneumatology, with the immortality of the human soul, and with the rewards and punishments which, from the justice of the Deity, were to be expected in a life to come: a short and superficial system of physics usually concluded the course. The alterations which the universities of Europe thus introduced into the ancient course of philosophy were all meant for the education of ecclesiastics, and to render it a more proper introduction to the study of theology. But the additional quantity of subtlety and sophistry, the casuistry and ascetic morality which those alterations introduced into it, certainly did not render it more for the education of gentlemen or men of the world, or more likely either to improve the understanding or to mend the heart. This course of philosophy is what still continues to be taught in the greater part of the universities of Europe, with more or less diligence, according as the constitution of each particular university happens to render diligence more or less necessary to the teachers. In some of the richest and best endowed universities, the tutors content themselves with teaching a few unconnected shreds and parcels of this corrupted course; and even these they commonly teach very negligently and superficially. The improvements which, in modern times, have been made in several different branches of philosophy, have not, the greater part of them, been made in universities, though some, no doubt, have. The greater part of universities have not even been very forward to adopt those improvements after they were made; and several of those learned societies have chosen to remain, for a long time, the sanctuaries in which exploded systems and obsolete prejudices found shelter and protection, after they had been hunted out of every other corner of the world. In general, the richest and best endowed universities have been slowest in adopting those improvements, and the most averse to permit any considerable change in the established plan of education. Those improvements were more easily introduced into some of the poorer universities, in which the teachers, depending upon their reputation for the greater part of their subsistence, were obliged to pay more attention to the current opinions of the world. But though the public schools and universities of Europe were originally intended only for the education of a particular profession, that of churchmen; and though they were not always very diligent in instructing their pupils, even in the sciences which were supposed necessary for that profession; yet they gradually drew to themselves the education of almost all other people, particularly of almost all gentlemen and men of fortune. No better method, it seems, could be fallen upon, of spending, with any advantage, the long interval between infancy and that period of life at which men begin to apply in good earnest to the real business of the world, the business which is to employ them during the remainder of their days. The greater part of what is taught in schools and universities, however, does not seem to be the most proper preparation for that business. In England, it becomes every day more and more the custom to send young people to travel in foreign countries immediately upon their leaving school, and without sending them to any university. Our young people, it is said, generally return home much improved by their travels. A young man, who goes abroad at seventeen or eighteen, and returns home at one-and-twenty, returns three or four years older than he was when he went abroad; and at that age it is very difficult not to improve a good deal in three or four years. In the course of his travels, he generally acquires some knowledge of one or two foreign languages; a knowledge, however, which is seldom sufficient to enable him either to speak or write them with propriety. In other respects, he commonly returns home more conceited, more unprincipled, more dissipated, and more incapable of any serious application, either to study or to business, than he could well have become in so short a time had he lived at home. By travelling so very young, by spending in the must frivolous dissipation the most precious years of his life, at a distance from the inspection and controul of his parents and relations, every useful habit, which the earlier parts of his education might have had some tendency to form in him, instead of being riveted and confirmed, is almost necessarily either weakened or effaced. Nothing but the discredit into which the universities are allowing themselves to fall, could ever have brought into repute so very absurd a practice as that of travelling at this early period of life. By sending his son abroad, a father delivers himself, at least for some time, from so disagreeable an object as that of a son unemployed, neglected, and going to ruin before his eyes. Such have been the effects of some of the modern institutions for education. Different plans and different institutions for education seem to have taken place in other ages and nations. In the republics of ancient Greece, every free citizen was instructed, under the direction of the public magistrate, in gymnastic exercises and in music. By gymnastic exercises, it was intended to harden his body, to sharpen his courage, and to prepare him for the fatigues and dangers of war; and as the Greek militia was, by all accounts, one of the best that ever was in the world, this part of their public education must have answered completely the purpose for which it was intended. By the other part, music, it was proposed, at least by the philosophers and historians, who have given us an account of those institutions, to humanize the mind, to soften the temper, and to dispose it for performing all the social and moral duties of public and private life. In ancient Rome, the exercises of the Campus Martius answered the same purpose as those of the Gymnasium in ancient Greece, and they seem to have answered it equally well. But among the Romans there was nothing which corresponded to the musical education of the Greeks. The morals of the Romans, however, both in private and public life, seem to have been, not only equal, but, upon the whole, a good deal superior to those of the Greeks. That they were superior in private life, we have the express testimony of Polybius, and of Dionysius of Halicarnassus, two authors well acquainted with both nations; and the whole tenor of the Greek and Roman history bears witness to the superiority of the public morals of the Romans. The good temper and moderation of contending factions seem to be the most essential circumstances in the public morals of a free people. But the factions of the Greeks were almost always violent and sanguinary; whereas, till the time of the Gracchi, no blood had ever been shed in any Roman faction; and from the time of the Gracchi, the Roman republic may be considered as in reality dissolved. Notwithstanding, therefore, the very respectable authority of Plato, Aristotle, and Polybius, and notwithstanding the very ingenious reasons by which Mr. Montesquieu endeavours to support that authority, it seems probable that the musical education of the Greeks had no great effect in mending their morals, since, without any such education, those of the Romans were, upon the whole, superior. The respect of those ancient sages for the institutions of their ancestors had probably disposed them to find much political wisdom in what was, perhaps, merely an ancient custom, continued, without interruption, from the earliest period of those societies, to the times in which they had arrived at a considerable degree of refinement. Music and dancing are the great amusements of almost all barbarous nations, and the great accomplishments which are supposed to fit any man for entertaining his society. It is so at this day among the negroes on the coast of Africa. It was so among the ancient Celtes, among the ancient Scandinavians, and, as we may learn from Homer, among the ancient Greeks, in the times preceding the Trojan war. When the Greek tribes had formed themselves into little republics, it was natural that the study of those accomplishments should for a long time make a part of the public and common education of the people. The masters who instructed the young people, either in music or in military exercises, do not seem to have been paid, or even appointed by the state, either in Rome or even at Athens, the Greek republic of whose laws and customs we are the best informed. The state required that every free citizen should fit himself for defending it in war, and should upon that account, learn his military exercises. But it left him to learn them of such masters as he could find; and it seems to have advanced nothing for this purpose, but a public field or place of exercise, in which he should practise and perform them. In the early ages, both of the Greek and Roman republics, the other parts of education seem to have consisted in learning to read, write, and account, according to the arithmetic of the times. These accomplishments the richer citizens seem frequently to have acquired at home, by the assistance of some domestic pedagogue, who was, generally, either a slave or a freedman; and the poorer citizens in the schools of such masters as made a trade of teaching for hire. Such parts of education, however, were abandoned altogether to the care of the parents or guardians of each individual. It does not appear that the state ever assumed any inspection or direction of them. By a law of Solon, indeed, the children were acquitted from maintaining those parents who had neglected to instruct them in some profitable trade or business. In the progress of refinement, when philosophy and rhetoric came into fashion, the better sort of people used to send their children to the schools of philosophers and rhetoricians, in order to be instructed in these fashionable sciences. But those schools were not supported by the public. They were, for a long time, barely tolerated by it. The demand for philosophy and rhetoric was, for a long time, so small, that the first professed teachers of either could not find constant employment in any one city, but were obliged to travel about from place to place. In this manner lived Zeno of Elea, Protagoras, Gorgias, Hippias, and many others. As the demand increased, the schools, both of philosophy and rhetoric, became stationary, first in Athens, and afterwards in several other cities. The state, however, seems never to have encouraged them further, than by assigning to some of them a particular place to teach in, which was sometimes done, too, by private donors. The state seems to have assigned the Academy to Plato, the Lyceum to Aristotle, and the Portico to Zeno of Citta, the founder of the Stoics. But Epicurus bequeathed his gardens to his own school. Till about the time of Marcus Antoninus, however, no teacher appears to have had any salary from the public, or to have had any other emoluments, but what arose from the honoraries or fees of his scholars. The bounty which that philosophical emperor, as we learn from Lucian, bestowed upon one of the teachers of philosophy, probably lasted no longer than his own life. There was nothing equivalent to the privileges of graduation; and to have attended any of those schools was not necessary, in order to be permitted to practise any particular trade or profession. If the opinion of their own utility could not draw scholars to them, the law neither forced anybody to go to them, nor rewarded anybody for having gone to them. The teachers had no jurisdiction over their pupils, nor any other authority besides that natural authority which superior virtue and abilities never fail to procure from young people towards those who are entrusted with any part of their education. At Rome, the study of the civil law made a part of the education, not of the greater part of the citizens, but of some particular families. The young people, however, who wished to acquire knowledge in the law, had no public school to go to, and had no other method of studying it, than by frequenting the company of such of their relations and friends as were supposed to understand it. It is, perhaps, worth while to remark, that though the laws of the twelve tables were many of them copied from those of some ancient Greek republics, yet law never seems to have grown up to be a science in any republic of ancient Greece. In Rome it became a science very early, and gave a considerable degree of illustration to those citizens who had the reputation of understanding it. In the republics of ancient Greece, particularly in Athens, the ordinary courts of justice consisted of numerous, and therefore disorderly, bodies of people, who frequently decided almost at random, or as clamour, faction, and party-spirit, happened to determine. The ignominy of an unjust decision, when it was to be divided among five hundred, a thousand, or fifteen hundred people (for some of their courts were so very numerous), could not fall very heavy upon any individual. At Rome, on the contrary, the principal courts of justice consisted either of a single judge, or of a small number of judges, whose characters, especially as they deliberated always in public, could not fail to be very much affected by any rash or unjust decision. In doubtful cases such courts, from their anxiety to avoid blame, would naturally endeavour to shelter themselves under the example or precedent of the judges who had sat before them, either in the same or in some other court. This attention to practice and precedent, necessarily formed the Roman law into that regular and orderly system in which it has been delivered down to us; and the like attention has had the like effects upon the laws of every other country where such attention has taken place. The superiority of character in the Romans over that of the Greeks, so much remarked by Polybius and Dionysius of Halicarnassus, was probably more owing to the better constitution of their courts of justice, than to any of the circumstances to which those authors ascribe it. The Romans are said to have been particularly distinguished for their superior respect to an oath. But the people who were accustomed to make oath only before some diligent and well informed court of justice, would naturally be much more attentive to what they swore, than they who were accustomed to do the same thing before mobbish and disorderly assemblies. The abilities, both civil and military, of the Greeks and Romans, will readily be allowed to have been at least equal to those of any modern nation. Our prejudice is perhaps rather to overrate them. But except in what related to military exercises, the state seems to have been at no pains to form those great abilities; for I cannot be induced to believe that the musical education of the Greeks could be of much consequence in forming them. Masters, however, had been found, it seems, for instructing the better sort of people among those nations, in every art and science in which the circumstances of their society rendered it necessary or convenient for them to be instructed. The demand for such instruction produced, what it always produces, the talent for giving it; and the emulation which an unrestrained competition never fails to excite, appears to have brought that talent to a very high degree of perfection. In the attention which the ancient philosophers excited, in the empire which they acquired over the opinions and principles of their auditors, in the faculty which they possessed of giving a certain tone and character to the conduct and conversation of those auditors, they appear to have been much superior to any modern teachers. In modern times, the diligence of public teachers is more or less corrupted by the circumstances which render them more or less independent of their success and reputation in their particular professions. Their salaries, too, put the private teacher, who would pretend to come into competition with them, in the same state with a merchant who attempts to trade without a bounty, in competition with those who trade with a considerable one. If he sells his goods at nearly the same price, he cannot have the same profit; and poverty and beggary at least, if not bankruptcy and ruin, will infallibly be his lot. If he attempts to sell them much dearer, he is likely to have so few customers, that his circumstances will not be much mended. The privileges of graduation, besides, are in many countries necessary, or at least extremely convenient, to most men of learned professions, that is, to the far greater part of those who have occasion for a learned education. But those privileges can be obtained only by attending the lectures of the public teachers. The most careful attendance upon the ablest instructions of any private teacher cannot always give any title to demand them. It is from these different causes that the private teacher of any of the sciences, which are commonly taught in universities, is, in modern times, generally considered as in the very lowest order of men of letters. A man of real abilities can scarce find out a more humiliating or a more unprofitable employment to turn them to. The endowments of schools and colleges have in this manner not only corrupted the diligence of public teachers, but have rendered it almost impossible to have any good private ones. Were there no public institutions for education, no system, no science, would be taught, for which there was not some demand, or which the circumstances of the times did not render it either necessary or convenient, or at least fashionable to learn. A private teacher could never find his account in teaching either an exploded and antiquated system of a science acknowledged to be useful, or a science universally believed to be a mere useless and pedantic heap of sophistry and nonsense. Such systems, such sciences, can subsist nowhere but in those incorporated societies for education, whose prosperity and revenue are in a great measure independent of their industry. Were there no public institutions for education, a gentleman, after going through, with application and abilities, the most complete course of education which the circumstances of the times were supposed to afford, could not come into the world completely ignorant of every thing which is the common subject of conversation among gentlemen and men of the world. There are no public institutions for the education of women, and there is accordingly nothing useless, absurd, or fantastical, in the common course of their education. They are taught what their parents or guardians judge it necessary or useful for them to learn, and they are taught nothing else. Every part of their education tends evidently to some useful purpose; either to improve the natural attractions of their person, or to form their mind to reserve, to modesty, to chastity, and to economy; to render them both likely to become the mistresses of a family, and to behave properly when they have become such. In every part of her life, a woman feels some conveniency or advantage from every part of her education. It seldom happens that a man, in any part of his life, derives any conveniency or advantage from some of the most laborious and troublesome parts of his education. Ought the public, therefore, to give no attention, it may be asked, to the education of the people? Or, if it ought to give any, what are the different parts of education which it ought to attend to in the different orders of the people? and in what manner ought it to attend to them? In some cases, the state of society necessarily places the greater part of individuals in such situations as naturally form in them, without any attention of government, almost all the abilities and virtues which that state requires, or perhaps can admit of. In other cases, the state of the society does not place the greater part of individuals in such situations; and some attention of government is necessary, in order to prevent the almost entire corruption and degeneracy of the great body of the people. In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations; frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects, too, are perhaps always the same, or very nearly the same, has no occasion to exert his understanding, or to exercise his invention, in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging; and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. The uniformity of his stationary life naturally corrupts the courage of his mind, and makes him regard, with abhorrence, the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and perseverance in any other employment, than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his intellectual, social, and martial virtues. But in every improved and civilized society, this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it. It is otherwise in the barbarous societies, as they are commonly called, of hunters, of shepherds, and even of husbandmen in that rude state of husbandry which precedes the improvement of manufactures, and the extension of foreign commerce. In such societies, the varied occupations of every man oblige every man to exert his capacity, and to invent expedients for removing difficulties which are continually occurring. Invention is kept alive, and the mind is not suffered to fall into that drowsy stupidity, which, in a civilized society, seems to benumb the understanding of almost all the inferior ranks of people. In those barbarous societies, as they are called, every man, it has already been observed, is a warrior. Every man, too, is in some measure a statesman, and can form a tolerable judgment concerning the interest of the society, and the conduct of those who govern it. How far their chiefs are good judges in peace, or good leaders in war, is obvious to the observation of almost every single man among them. In such a society, indeed, no man can well acquire that improved and refined understanding which a few men sometimes possess in a more civilized state. Though in a rude society there is a good deal of variety in the occupations of every individual, there is not a great deal in those of the whole society. Every man does, or is capable of doing, almost every thing which any other man does, or is capable of doing. Every man has a considerable degree of knowledge, ingenuity, and invention; but scarce any man has a great degree. The degree, however, which is commonly possessed, is generally sufficient for conducting the whole simple business of the society. In a civilized state, on the contrary, though there is little variety in the occupations of the greater part of individuals, there is an almost infinite variety in those of the whole society. These varied occupations present an almost infinite variety of objects to the contemplation of those few, who, being attached to no particular occupation themselves, have leisure and inclination to examine the occupations of other people. The contemplation of so great a variety of objects necessarily exercises their minds in endless comparisons end combinations, and renders their understandings, in an extraordinary degree, both acute and comprehensive. Unless those few, however, happen to be placed in some very particular situations, their great abilities, though honourable to themselves, may contribute very little to the good government or happiness of their society. Notwithstanding the great abilities of those few, all the nobler parts of the human character may be, in a great measure, obliterated end extinguished in the great body of the people. The education of the common people requires, perhaps, in a civilized and commercial society, the attention of the public, more than that of people of some rank and fortune. People of some rank and fortune are generally eighteen or nineteen years of age, before they enter upon that particular business, profession, or trade, by which they propose to distinguish themselves in the world. They have, before that, full time to acquire, or at least to fit themselves for afterwards acquiring, every accomplishment which can recommend them to the public esteem, or render them worthy of it. Their parents or guardians are generally sufficiently anxious that they should be so accomplished, and are, in most cases, willing enough to lay out the expense which is necessary for that purpose. If they are not always properly educated, it is seldom from the want of expense laid out upon their education, but from the improper application of that expense. It is seldom from the want of masters, but from the negligence and incapacity of the masters who are to be had, and from the difficulty, or rather from the impossibility, which there is, in the present state of things, of finding any better. The employments, too, in which people of some rank or fortune spend the greater part of their lives, are not, like those of the common people, simple and uniform. They are almost all of them extremely complicated, and such as exercise the head more than the hands. The understandings of those who are engaged in such employments, can seldom grow torpid for want of exercise. The employments of people of some rank and fortune, besides, are seldom such as harass them from morning to night. They generally have a good deal of leisure, during which they may perfect themselves in every branch, either of useful or ornamental knowledge, of which they may have laid the foundation, or for which they may have acquired some taste in the earlier part of life. It is otherwise with the common people. They have little time to spare for education. Their parents can scarce afford to maintain them, even in infancy. As soon as they are able to work, they must apply to some trade, by which they can earn their subsistence. That trade, too, is generally so simple and uniform, as to give little exercise to the understanding; while, at the same time, their labour is both so constant and so severe, that it leaves them little leisure and less inclination to apply to, or even to think of any thing else. But though the common people cannot, in any civilized society, be so well instructed as people of some rank and fortune; the most essential parts of education, however, to read, write, and account, can be acquired at so early a period of life, that the greater part, even of those who are to be bred to the lowest occupations, have time to acquire them before they can be employed in those occupations. For a very small expense, the public can facilitate, can encourage, and can even impose upon almost the whole body of the people, the necessity of acquiring those most essential parts of education. The public can facilitate this acquisition, by establishing in every parish or district a little school, where children may be taught for a reward so moderate, that even a common labourer may afford it; the master being partly, but not wholly, paid by the public; because, if he was wholly, or even principally, paid by it, he would soon learn to neglect his business. In Scotland, the establishment of such parish schools has taught almost the whole common people to read, and a very great proportion of them to write and account. In England, the establishment of charity schools has had an effect of the same kind, though not so universally, because the establishment is not so universal. If, in those little schools, the books by which the children are taught to read, were a little more instructive than they commonly are; and if, instead of a little smattering in Latin, which the children of the common people are sometimes taught there, and which can scarce ever be of any use to them, they were instructed in the elementary parts of geometry and mechanics; the literary education of this rank of people would, perhaps, be as complete as can be. There is scarce a common trade, which does not afford some opportunities of applying to it the principles of geometry and mechanics, and which would not, therefore, gradually exercise and improve the common people in those principles, the necessary introduction to the most sublime, as well as to the most useful sciences. The public can encourage the acquisition of those most essential parts of education, by giving small premiums, and little badges of distinction, to the children of the common people who excel in them. The public can impose upon almost the whole body of the people the necessity of acquiring the most essential parts of education, by obliging every man to undergo an examination or probation in them, before he can obtain the freedom in any corporation, or be allowed to set up any trade, either in a village or town corporate. It was in this manner, by facilitating the acquisition of their military and gymnastic exercises, by encouraging it, and even by imposing upon the whole body of the people the necessity of learning those exercises, that the Greek and Roman republics maintained the martial spirit of their respective citizens. They facilitated the acquisition of those exercises, by appointing a certain place for learning and practising them, and by granting to certain masters the privilege of teaching in that place. Those masters do not appear to have had either salaries or exclusive privileges of any kind. Their reward consisted altogether in what they got from their scholars; and a citizen, who had learnt his exercises in the public gymnasia, had no sort of legal advantage over one who had learnt them privately, provided the latter had learned them equally well. Those republics encouraged the acquisition of those exercises, by bestowing little premiums and badges of distinction upon those who excelled in them. To have gained a prize in the Olympic, Isthmian, or Nemæan games, gave illustration, not only to the person who gained it, but to his whole family and kindred. The obligation which every citizen was under, to serve a certain number of years, if called upon, in the armies of the republic, sufficient imposed the necessity of learning those exercises, without which he could not be fit for that service. That in the progress of improvement, the practice of military exercises, unless government takes proper pains to support it, goes gradually to decay, and, together with it, the martial spirit of the great body of the people, the example of modern Europe sufficiently demonstrates. But the security of every society must always depend, more or less, upon the martial spirit of the great body of the people. In the present times, indeed, that martial spirit alone, and unsupported by a well-disciplined standing army, would not, perhaps, be sufficient for the defence and security of any society. But where every citizen had the spirit of a soldier, a smaller standing army would surely be requisite. That spirit, besides, would necessarily diminish very much the dangers to liberty, whether real or imaginary, which are commonly apprehended from a standing army. As it would very much facilitate the operations of that army against a foreign invader; so it would obstruct them as much, if unfortunately they should ever be directed against the constitution of the state. The ancient institutions of Greece and Rome seem to have been much more effectual for maintaining the martial spirit of the great body of the people, than the establishment of what are called the militias of modern times. They were much more simple. When they were once established, they executed themselves, and it required little or no attention from government to maintain them in the most perfect vigour. Whereas to maintain, even in tolerable execution, the complex regulations of any modern militia, requires the continual and painful attention of government, without which they are constantly falling into total neglect and disuse. The influence, besides, of the ancient institutions, was much more universal. By means of them, the whole body of the people was completely instructed in the use of arms; whereas it is but a very small part of them who can ever be so instructed by the regulations of any modern militia, except, perhaps, that of Switzerland. But a coward, a man incapable either of defending or of revenging himself, evidently wants one of the most essential parts of the character of a man. He is as much mutilated and deformed in his mind as another is in his body, who is either deprived of some of its most essential members, or has lost the use of them. He is evidently the more wretched and miserable of the two; because happiness and misery, which reside altogether in the mind, must necessarily depend more upon the healthful or unhealthful, the mutilated or entire state of the mind, than upon that of the body. Even though the martial spirit of the people were of no use towards the defence of the society, yet, to prevent that sort of mental mutilation, deformity, and wretchedness, which cowardice necessarily involves in it, from spreading themselves through the great body of the people, would still deserve the most serious attention of government; in the same manner as it would deserve its most serious attention to prevent a leprosy, or any other loathsome and offensive disease, though neither mortal nor dangerous, from spreading itself among them; though, perhaps, no other public good might result from such attention, besides the prevention of so great a public evil. The same thing may be said of the gross ignorance and stupidity which, in a civilized society, seem so frequently to benumb the understandings of all the inferior ranks of people. A man without the proper use of the intellectual faculties of a man, is, if possible, more contemptible than even a coward, and seems to be mutilated and deformed in a still more essential part of the character of human nature. Though the state was to derive no advantage from the instruction of the inferior ranks of people, it would still deserve its attention that they should not be altogether uninstructed. The state, however, derives no inconsiderable advantage from their instruction. The more they are instructed, the less liable they are to the delusions of enthusiasm and superstition, which, among ignorant nations frequently occasion the most dreadful disorders. An instructed and intelligent people, besides, are always more decent and orderly than an ignorant and stupid one. They feel themselves, each individually, more respectable, and more likely to obtain the respect of their lawful superiors, and they are, therefore, more disposed to respect those superiors. They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition; and they are, upon that account, less apt to be misled into any wanton or unnecessary opposition to the measures of government. In free countries, where the safety of government depends very much upon the favourable judgment which the people may form of its conduct, it must surely be of the highest importance, that they should not be disposed to judge rashly or capriciously concerning it. ART. III.--_Of the Expense of the Institutions for the Instruction of People of all Ages._ The institutions for the instruction of people of all ages, are chiefly those for religious instruction. This is a species of instruction, which the object is not so much to render the people good citizens in this world, as to prepare them for another and a better world in the life to come. The teachers of the doctrine which contains this instruction, in the same manner as other teachers, may either depend altogether for their subsistence upon the voluntary contributions of their hearers; or they may derive it from some other fund, to which the law of their country may entitle them; such as a landed estate, a tythe or land tax, an established salary or stipend. Their exertion, their zeal and industry, are likely to be much greater in the former situation than in the latter. In this respect, the teachers of a new religion have always had a considerable advantage in attacking these ancient and established systems, of which the clergy, reposing themselves upon their benefices, had neglected to keep up the fervour of faith and devotion in the great body of the people; and having given themselves up to indolence, were become altogether incapable of making any vigorous exertion in defence even of their own establishment. The clergy of an established and well endowed religion frequently become men of learning and elegance, who possess all the virtues of gentlemen, or which can recommend them to the esteem of gentlemen; but they are apt gradually to lose the qualities, both good and bad, which gave them authority and influence with the inferior ranks of people, and which had perhaps been the original causes of the success and establishment of their religion. Such a clergy, when attacked by a set of popular and bold, though perhaps stupid and ignorant enthusiasts, feel themselves as perfectly defenceless as the indolent, effeminate, and full fed nations of the southern parts of Asia, when they were invaded by the active, hardy, and hungry Tartars of the north. Such a clergy, upon such an emergency, have commonly no other resource than to call upon the civil magistrate to persecute, destroy, or drive out their adversaries, as disturbers of the public peace. It was thus that the Roman catholic clergy called upon the civil magistrate to persecute the protestants, and the church of England to persecute the dissenters; and that in general every religious sect, when it has once enjoyed, for a century or two, the security of a legal establishment, has found itself incapable of making any vigorous defence against any new sect which chose to attack its doctrine or discipline. Upon such occasions, the advantage, in point of learning and good writing, may sometimes be on the side of the established church. But the arts of popularity, all the arts of gaining proselytes, are constantly on the side of its adversaries. In England, those arts have been long neglected by the well endowed clergy of the established church, and are at present chiefly cultivated by the dissenters and by the methodists. The independent provisions, however, which in many places have been made for dissenting teachers, by means of voluntary subscriptions, of trust rights, and other evasions of the law, seem very much to have abated the zeal and activity of those teachers. They have many of them become very learned, ingenious, and respectable men; but they have in general ceased to be very popular preachers. The methodists, without half the learning of the dissenters, are much more in vogue. In the church of Rome the industry and zeal of the inferior clergy are kept more alive by the powerful motive of self-interest, than perhaps in any established protestant church. The parochial clergy derive many of them, a very considerable part of their subsistence from the voluntary oblations of the people; a source of revenue, which confession gives them many opportunities of improving. The mendicant orders derive their whole subsistence from such oblations. It is with them as with the hussars and light infantry of some armies; no plunder, no pay. The parochial clergy are like those teachers whose reward depends partly upon their salary, and partly upon the fees or honoraries which they get from their pupils; and these must always depend, more or less, upon their industry and reputation. The mendicant orders are like those teachers whose subsistence depends altogether upon their industry. They are obliged, therefore, to use every art which can animate the devotion of the common people. The establishment of the two great mendicant orders of St. Dominic and St. Francis, it is observed by Machiavel, revived, in the thirteenth and fourteenth centuries, the languishing faith and devotion of the catholic church. In Roman catholic countries, the spirit of devotion is supported altogether by the monks, and by the poorer parochial clergy. The great dignitaries of the church, with all the accomplishments of gentlemen and men of the world, and sometimes with those of men of learning, are careful to maintain the necessary discipline over their inferiors, but seldom give themselves any trouble about the instruction of the people. "Most of the arts and professions in a state," says by far the most illustrious philosopher and historian of the present age, "are of such a nature, that, while they promote the interests of the society, they are also useful or agreeable to some individuals; and, in that case, the constant rule of the magistrate, except, perhaps, on the first introduction of any art, is, to leave the profession to itself, and trust its encouragement to the individuals who reap the benefit of it. The artisans, finding their profits to rise by the favour of their customers, increase, as much as possible, their skill and industry; and as matters are not disturbed by any injudicious tampering, the commodity is always sure to be at all times nearly proportioned to the demand." "But there are also some callings which, though useful and even necessary in a state, bring no advantage or pleasure to any individual; and the supreme power is obliged to alter its conduct with regard to the retainers of those professions. It must give them public encouragement in order to their subsistence; and it must provide against that negligence to which they will naturally be subject, either by annexing particular honours to profession, by establishing a long subordination of ranks, and a strict dependence, or by some other expedient. The persons employed in the finances, fleets, and magistracy, are instances of this order of men. "It may naturally be thought, at first sight, that the ecclesiastics belong to the first class, and that their encouragement, as well as that of lawyers and physicians, may safely be entrusted to the liberality of individuals, who are attached to their doctrines, and who find benefit or consolation from their spiritual ministry and assistance. Their industry and vigilance will, no doubt, be whetted by such an additional motive; and their skill in the profession, as well as their address in governing the minds of the people, must receive daily increase, from their increasing practice, study, and attention. "But if we consider the matter more closely, we shall find that this interested diligence of the clergy is what every wise legislator will study to prevent; because, in every religion except the true, it is highly pernicious, and it has even a natural tendency to pervert the truth, by infusing into it a strong mixture of superstition, folly, and delusion. Each ghostly practitioner, in order to render himself more precious and sacred in the eyes of his retainers, will inspire them with the most violent abhorrence of all other sects, and continually endeavour, by some novelty, to excite the languid devotion of his audience. No regard will be paid to truth, morals, or decency, in the doctrines inculcated. Every tenet will be adopted that best suits the disorderly affections of the human frame. Customers will be drawn in each conventicle by new industry and address, in practising on the passions and credulity of the populace. And, in the end, the civil magistrate will find that he has dearly paid for his intended frugality, in saving a fixed establishment for the priests; and that, in reality, the most decent and advantageous composition, which he can make with the spiritual guides, is to bribe their indolence, by assigning stated salaries to their profession, and rendering it superfluous for them to be farther active, than merely to prevent their flock from straying in quest of new pastors. And in this manner ecclesiastical establishments, though commonly they arose at first from religious views, prove in the end advantageous to the political interests of society." But whatever may have been the good or bad effects of the independent provision of the clergy, it has, perhaps, been very seldom bestowed upon them from any view to those effects. Times of violent religious controversy have generally been times of equally violent political faction. Upon such occasions, each political party has either found it, or imagined it, for his interest, to league itself with some one or other of the contending religious sects. But this could be done only by adopting, or, at least, by favouring the tenets of that particular sect. The sect which had the good fortune to be leagued with the conquering party necessarily shared in the victory of its ally, by whose favour and protection it was soon enabled, in some degree, to silence and subdue all its adversaries. Those adversaries had generally leagued themselves with the enemies of the conquering party, and were, therefore the enemies of that party. The clergy of this particular sect having thus become complete masters of the field, and their influence and authority with the great body of the people being in its highest vigour, they were powerful enough to overawe the chiefs and leaders of their own party, and to oblige the civil magistrate to respect their opinions and inclinations. Their first demand was generally that he should silence and subdue all their adversaries; and their second, that he should bestow an independent provision on themselves. As they had generally contributed a good deal to the victory, it seemed not unreasonable that they should have some share in the spoil. They were weary, besides, of humouring the people, and of depending upon their caprice for a subsistence. In making this demand, therefore, they consulted their own ease and comfort, without troubling themselves about the effect which it might have, in future times, upon the influence and authority of their order. The civil magistrate, who could comply with their demand only by giving them something which he would have chosen much rather to take, or to keep to himself, was seldom very forward to grant it. Necessity, however, always forced him to submit at last, though frequently not till after many delays, evasions, and affected excuses. But if politics had never called in the aid of religion, had the conquering party never adopted the tenets of one sect more than those of another, when it had gained the victory, it would probably have dealt equally and impartially with all the different sects, and have allowed every man to choose his own priest, and his own religion, as he thought proper. There would, and, in this case, no doubt, have been, a great multitude of religious sects. Almost every different congregation might probably have had a little sect by itself, or have entertained some peculiar tenets of its own. Each teacher, would, no doubt, have felt himself under the necessity of making the utmost exertion, and of using every art, both to preserve and to increase the number of his disciples. But as every other teacher would have felt himself under the same necessity, the success of no one teacher, or sect of teachers, could have been very great. The interested and active zeal of religious teachers can be dangerous and troublesome only where there is either but one sect tolerated in the society, or where the whole of a large society is divided into two or three great sects; the teachers of each acting by concert, and under a regular discipline and subordination. But that zeal must be altogether innocent, where the society is divided into two or three hundred, or, perhaps, into as many thousand small sects, of which no one could be considerable enough to disturb the public tranquillity. The teachers of each sect, seeing themselves surrounded on all sides with more adversaries than friends, would be obliged to learn that candour and moderation which are so seldom to be found among the teachers of those great sects, whose tenets, being supported by the civil magistrate, are held in veneration by almost all the inhabitants of extensive kingdoms and empires, and who, therefore, see nothing round them but followers, disciples, and humble admirers. The teachers of each little sect, finding themselves almost alone, would be obliged to respect those of almost every other sect; and the concessions which they would mutually find in both convenient and agreeable to make one to another, might in time, probably reduce the doctrine of the greater part of them to that pure and rational religion, free from every mixture of absurdity, imposture, or fanaticism, such as wise men have, in all ages of the world, wished to see established; but such as positive law has, perhaps, never yet established, and probably never will establish in any country; because, with regard to religion, positive law always has been, and probably always will be, more or less influenced by popular superstition and enthusiasm. This plan of ecclesiastical government, or, more properly, of no ecclesiastical government, was what the sect called Independents (a sect, no doubt, of very wild enthusiasts), proposed to establish in England towards the end of the civil war. If it had been established, though of a very unphilosophical origin, it would probably, by this time, have been productive of the most philosophical good temper and moderation with regard to every sort of religious principle. It has been established in Pennsylvania, where, though the quakers happen to be the most numerous, the law, in reality, favours no one sect more than another; and it is there said to have been productive of this philosophical good temper and moderation. But though this equality of treatment should not be productive of this good temper and moderation in all, or even in the greater part of the religious sects of a particular country; yet, provided those sects were sufficiently numerous, and each of them consequently too small to disturb the public tranquillity, the excessive zeal of each for its particular tenets could not well be productive of any very hurtful effects, but, on the contrary, of several good ones; and if the government was perfectly decided, both to let them all alone, and to oblige them all to let alone one another, there is little danger that they would not of their own accord, subdivide themselves fast enough, so as soon to become sufficiently numerous. In every civilized society, in every society where the distinction of ranks has once been completely established, there have been always two different schemes or systems of morality current at the same time; of which the one may be called the strict or austere; the other the liberal, or, if you will, the loose system. The former is generally admired and revered by the common people; the latter is commonly more esteemed and adopted by what are called the people of fashion. The degree of disapprobation with which we ought to mark the vices of levity, the vices which are apt to arise from great prosperity, and from the excess of gaiety and good humour, seems to constitute the principal distinction between those two opposite schemes or systems. In the liberal or loose system, luxury, wanton, and even disorderly mirth, the pursuit of pleasure to some degree of intemperance, the breach of chastity, at least in one of the two sexes, &c. provided they are not accompanied with gross indecency, and do not lead to falsehood and injustice, are generally treated with a good deal of indulgence, and are easily either excused or pardoned altogether. In the austere system, on the contrary, those excesses are regarded with the utmost abhorrence and detestation. The vices of levity are always ruinous to the common people, and a single week's thoughtlessness and dissipation is often sufficient to undo a poor workman for ever, and to drive him, through despair, upon committing the most enormous crimes. The wiser and better sort of the common people, therefore, have always the utmost abhorrence and detestation of such excesses, which their experience tells them are so immediately fatal to people of their condition. The disorder and extravagance of several years, on the contrary, will not always ruin a man of fashion; and people of that rank are very apt to consider the power of indulging in some degree of excess, as one of the advantages of their fortune; and the liberty of doing so without censure or reproach, as one of the privileges which belong to their station. In people of their own station, therefore, they regard such excesses with but a small degree of disapprobation, and censure them either very slightly or not at all. Almost all religious sects have begun among the common people, from whom they have generally drawn their earliest, as well as their most numerous proselytes. The austere system of morality has, accordingly, been adopted by those sects almost constantly, or with very few exceptions; for there have been some. It was the system by which they could best recommend themselves to that order of people, to whom they first proposed their plan of reformation upon what had been before established. Many of them, perhaps the greater part of them, have even endeavoured to gain credit by refining upon this austere system, and by carrying it to some degree of folly and extravagance; and this excessive rigour has frequently recommended them, more than any thing else, to the respect and veneration of the common people. A man of rank and fortune is, by his station, the distinguished member of a great society, who attend to every part of his conduct, and who thereby oblige him to attend to every part of it himself. His authority and consideration depend very much upon the respect which this society bears to him. He dares not do any thing which would disgrace or discredit him in it; and he is obliged to a very strict observation of that species of morals, whether liberal or austere, which the general consent of this society prescribes to persons of his rank and fortune. A man of low condition, on the contrary, is far from being a distinguished member of any great society. While he remains in a country village, his conduct may be attended to, and he may be obliged to attend to it himself. In this situation, and in this situation only, he may have what is called a character to lose. But as soon as he comes into a great city, he is sunk in obscurity and darkness. His conduct is observed and attended to by nobody; and he is, therefore, very likely to neglect it himself, and to abandon himself to every sort of low profligacy and vice. He never emerges so effectually from this obscurity, his conduct never excites so much the attention of any respectable society, as by his becoming the member of a small religious sect. He from that moment acquires a degree of consideration which he never had before. All his brother sectaries are, for the credit of the sect, interested to observe his conduct; and, if he gives occasion to any scandal, if he deviates very much from those austere morals which they almost always require of one another, to punish him by what is always a very severe punishment, even where no evil effects attend it, expulsion or excommunication from the sect. In little religious sects, accordingly, the morals of the common people have been almost always remarkably regular and orderly; generally much more so than in the established church. The morals of those little sects, indeed, have frequently been rather disagreeably rigorous and unsocial. There are two very easy and effectual remedies, however, by whose joint operation the state might, without violence, correct whatever was unsocial or disagreeably rigorous in the morals of all the little sects into which the country was divided. The first of those remedies is the study of science and philosophy, which the state might render almost universal among all people of middling or more than middling rank and fortune; not by giving salaries to teachers in order to make them negligent and idle, but by instituting some sort of probation, even in the higher and more difficult sciences, to be undergone by every person before he was permitted to exercise any liberal profession, or before he could be received as a candidate for any honourable office, of trust or profit. If the state imposed upon this order of men the necessity of learning, it would have no occasion to give itself any trouble about providing them with proper teachers. They would soon find better teachers for themselves, than any whom the state could provide for them. Science is the great antidote to the poison of enthusiasm and superstition; and where all the superior ranks of people were secured from it, the inferior ranks could not be much exposed to it. The second of those remedies is the frequency and gaiety of public diversions. The state, by encouraging, that is, by giving entire liberty to all those who, from their own interest, would attempt, without scandal or indecency, to amuse and divert the people by painting, poetry, music, dancing; by all sorts of dramatic representations and exhibitions; would easily dissipate, in the greater part of them, that melancholy and gloomy humour which is almost always the nurse of popular superstition and enthusiasm. Public diversions have always been the objects of dread and hatred to all the fanatical promoters of those popular frenzies. The gaiety and good humour which those diversions inspire, were altogether inconsistent with that temper of mind which was fittest for their purpose, or which they could best work upon. Dramatic representations, besides, frequently exposing their artifices to public ridicule, and sometimes even to public execration, were, upon that account, more than all other diversions, the objects of their peculiar abhorrence. In a country where the law favoured the teachers of no one religion more than those of another, it would not be necessary that any of them should have any particular or immediate dependency upon the sovereign or executive power; or that he should have any thing to do either in appointing or in dismissing them from their offices. In such a situation, he would have no occasion to give himself any concern about them, further than to keep the peace among them, in the same manner as among the rest of his subjects, that is, to hinder them from persecuting, abusing, or oppressing one another. But it is quite otherwise in countries where there is an established or governing religion. The sovereign can in this case never be secure, unless he has the means of influencing in a considerable degree the greater part of the teachers of that religion. The clergy of every established church constitute a great incorporation. They can act in concert, and pursue their interest upon one plan, and with one spirit as much as if they were under the direction of one man; and they are frequently, too, under such direction. Their interest as an incorporated body is never the same with that of the sovereign, and is sometimes directly opposite to it. Their great interest is to maintain their authority with the people, and this authority depends upon the supposed certainty and importance of the whole doctrine which they inculcate, and upon the supposed necessity of adopting every part of it with the most implicit faith, in order to avoid eternal misery. Should the sovereign have the imprudence to appear either to deride, or doubt himself of the most trifling part of their doctrine, or from humanity, attempt to protect those who did either the one or the other, the punctilious honour of a clergy, who have no sort of dependency upon him, is immediately provoked to proscribe him as a profane person, and to employ all the terrors of religion, in order to oblige the people to transfer their allegiance to some more orthodox and obedient prince. Should he oppose any of their pretensions or usurpations, the danger is equally great. The princes who have dared in this manner to rebel against the church, over and above this crime of rebellion, have generally been charged, too, with the additional crime of heresy, notwithstanding their solemn protestations of their faith, and humble submission to every tenet which she thought proper to prescribe to them. But the authority of religion is superior to every other authority. The fears which it suggests conquer all other fears. When the authorized teachers of religion propagate through the great body of the people, doctrines subversive of the authority of the sovereign, it is by violence only, or by the force of a standing army, that he can maintain his authority. Even a standing army cannot in this case give him any lasting security; because if the soldiers are not foreigners, which can seldom be the case, but drawn from the great body of the people, which must almost always be the case, they are likely to be soon corrupted by those very doctrines. The revolutions which the turbulence of the Greek clergy was continually occasioning at Constantinople, as long as the eastern empire subsisted; the convulsions which, during the course of several centuries, the turbulence of the Roman clergy was continually occasioning in every part of Europe, sufficiently demonstrate how precarious and insecure must always be the situation of the sovereign, who has no proper means of influencing the clergy of the established and governing religion of his country. Articles of faith, as well as all other spiritual matters, it is evident enough, are not within the proper department of a temporal sovereign, who, though he may be very well qualified for protecting, is seldom supposed to be so for instructing the people. With regard to such matters, therefore, his authority can seldom be sufficient to counterbalance the united authority of the clergy of the established church. The public tranquillity, however, and his own security, may frequently depend upon the doctrines which they may think proper to propagate concerning such matters. As he can seldom directly oppose their decision, therefore, with proper weight and authority, it is necessary that he should be able to influence it; and he can influence it only by the fears and expectations which he may excite in the greater part of the individuals of the order. Those fears and expectations may consist in the fear of deprivation or other punishment, and in the expectation of further preferment. In all Christian churches, the benefices of the clergy are a sort of freeholds, which they enjoy, not during pleasure, but during life or good behaviour. If they held them by a more precarious tenure, and were liable to be turned out upon every slight disobligation either of the sovereign or of his ministers, it would perhaps be impossible for them to maintain their authority with the people, who would then consider them as mercenary dependents upon the court, in the sincerity of whose instructions they could no longer have any confidence. But should the sovereign attempt irregularly, and by violence, to deprive any number of clergymen of their freeholds, on account, perhaps, of their having propagated, with more than ordinary zeal, some factious or seditious doctrine, he would only render, by such persecution, both them and their doctrine ten times more popular, and therefore ten times more troublesome and dangerous, than they had been before. Fear is in almost all cases a wretched instrument of government, and ought in particular never to be employed against any order of men who have the smallest pretensions to independency. To attempt to terrify them, serves only to irritate their bad humour, and to confirm them in an opposition, which more gentle usage, perhaps, might easily induce them either to soften, or to lay aside altogether. The violence which the French government usually employed in order to oblige all their parliaments, or sovereign courts of justice, to enregister any unpopular edict, very seldom succeeded. The means commonly employed, however, the imprisonment of all the refractory members, one would think, were forcible enough. The princes of the house of Stuart sometimes employed the like means in order to influence some of the members of the parliament of England, and they generally found them equally intractable. The parliament of England is now managed in another manner; and a very small experiment, which the duke of Choiseul made, about twelve years ago, upon the parliament of Paris, demonstrated sufficiently that all the parliaments of France might have been managed still more easily in the same manner. That experiment was not pursued. For though management and persuasion are always the easiest and safest instruments of government as force and violence are the worst and the most dangerous; yet such, it seems, is the natural insolence of man, that he almost always disdains to use the good instrument, except when he cannot or dare not use the bad one. The French government could and durst use force, and therefore disdained to use management and persuasion. But there is no order of men, it appears I believe, from the experience of all ages, upon whom it is so dangerous or rather so perfectly ruinous, to employ force and violence, as upon the respected clergy of an established church. The rights, the privileges, the personal liberty of every individual ecclesiastic, who is upon good terms with his own order, are, even in the most despotic governments, more respected than those of any other person of nearly equal rank and fortune. It is so in every gradation of despotism, from that of the gentle and mild government of Paris, to that of the violent and furious government of Constantinople. But though this order of men can scarce ever be forced, they may be managed as easily as any other; and the security of the sovereign, as well as the public tranquillity, seems to depend very much upon the means which he has of managing them; and those means seem to consist altogether in the preferment which he has to bestow upon them. In the ancient constitution of the Christian church, the bishop of each diocese was elected by the joint votes of the clergy and of the people of the episcopal city. The people did not long retain their right of election; and while they did retain it, they almost always acted under the influence of the clergy, who, in such spiritual matters, appeared to be their natural guides. The clergy, however, soon grew weary of the trouble of managing them, and found it easier to elect their own bishops themselves. The abbot, in the same manner, was elected by the monks of the monastery, at least in the greater part of abbacies. All the inferior ecclesiastical benefices comprehended within the diocese were collated by the bishop, who bestowed them upon such ecclesiastics as he thought proper. All church preferments were in this manner in the disposal of the church. The sovereign, though he might have some indirect influence in those elections, and though it was sometimes usual to ask both his consent to elect, and his approbation of the election, yet had no direct or sufficient means of managing the clergy. The ambition of every clergyman naturally led him to pay court, not so much to his sovereign as to his own order, from which only he could expect preferment. Through the greater part of Europe, the pope gradually drew to himself, first the collation of almost all bishoprics and abbacies, or of what were called consistorial benefices, and afterwards, by various machinations and pretences, of the greater part of inferior benefices comprehended within each diocese, little more being left to the bishop than what was barely necessary to give him a decent authority with his own clergy. By this arrangement the condition of the sovereign was still worse than it bad been before. The clergy of all the different countries of Europe were thus formed into a sort of spiritual army, dispersed in different quarters, indeed, but of which all the movements and operations could now be directed by one head, and conducted upon one uniform plan. The clergy of each particular country might be considered as a particular detachment of that army, of which the operations could easily be supported and seconded by all the other detachments quartered in the different countries round about. Each detachment was not only independent of the sovereign of the country in which it was quartered, and by which it was maintained, but dependent upon a foreign sovereign, who could at any time turn its arms against the sovereign of that particular country, and support them by the arms of all the other detachments. Those arms were the most formidable that can well be imagined. In the ancient state of Europe, before the establishment of arts and manufactures, the wealth of the clergy gave them the same sort of influence over the common people which that of the great barons gave them over their respective vassals, tenants, and retainers. In the great landed estates, which the mistaken piety both of princes and private persons had bestowed upon the church, jurisdictions were established, of the same kind with those of the great barons, and for the same reason. In those great landed estates, the clergy, or their bailiffs, could easily keep the peace, without the support or assistance either of the king or of any other person; and neither the king nor any other person could keep the peace there without the support and assistance of the clergy. The jurisdictions of the clergy, therefore, in their particular baronies or manors, were equally independent, and equally exclusive of the authority of the king's courts, as those of the great temporal lords. The tenants of the clergy were, like those of the great barons, almost all tenants at will, entirely dependent upon their immediate lords, and, therefore, liable to be called out at pleasure, in order to fight in any quarrel in which the clergy might think proper to engage them. Over and above the rents of those estates, the clergy possessed in the tithes a very large portion of the rents of all the other estates in every kingdom of Europe. The revenues arising from both those species of rents were, the greater part of them, paid in kind, in corn, wine, cattle, poultry, &c. The quantity exceeded greatly what the clergy could themselves consume; and there were neither arts nor manufactures, for the produce of which they could exchange the surplus. The clergy could derive advantage from this immense surplus in no other way than by employing it, as the great barons employed the like surplus of their revenues, in the most profuse hospitality, and in the most extensive charity. Both the hospitality and the charity of the ancient clergy, accordingly, are said to have been very great. They not only maintained almost the whole poor of every kingdom, but many knights and gentlemen had frequently no other means of subsistence than by travelling about from monastery to monastery, under pretence of devotion, but in reality to enjoy the hospitality of the clergy. The retainers of some particular prelates were often as numerous as those of the greatest lay-lords; and the retainers of all the clergy taken together were, perhaps, more numerous than those of all the lay-lords. There was always much more union among the clergy than among the lay-lords. The former were under a regular discipline and subordination to the papal authority. The latter were under no regular discipline or subordination, but almost always equally jealous of one another, and of the king. Though the tenants and retainers of the clergy, therefore, had both together been less numerous than those of the great lay-lords, and their tenants were probably much less numerous, yet their union would have rendered them more formidable. The hospitality and charity of the clergy, too, not only gave them the command of a great temporal force, but increased very much the weight of their spiritual weapons. Those virtues procured them the highest respect and veneration among all the inferior ranks of people, of whom many were constantly, and almost all occasionally, fed by them. Every thing belonging or related to so popular an order, its possessions, its privileges, its doctrines, necessarily appeared sacred in the eyes of the common people; and every violation of them, whether real or pretended, the highest act of sacrilegious wickedness and profaneness. In this state of things, if the sovereign frequently found it difficult to resist the confederacy of a few of the great nobility, we cannot wonder that he should find it still more so to resist the united force of the clergy of his own dominions, supported by that of the clergy of all the neighbouring dominions. In such circumstances, the wonder is, not that he was sometimes obliged to yield, but that he ever was able to resist. The privileges of the clergy in those ancient times (which to us, who live in the present times, appear the most absurd), their total exemption from the secular jurisdiction, for example, or what in England was called the benefit of clergy, were the natural, or rather the necessary, consequences of this state of things. How dangerous must it have been for the sovereign to attempt to punish a clergyman for any crime whatever, if his order were disposed to protect him, and to represent either the proof as insufficient for convicting so holy a man, or the punishment as too severe to be inflicted upon one whose person had been rendered sacred by religion? The sovereign could, in such circumstances, do no better than leave him to be tried by the ecclesiastical courts, who, for the honour of their own order, were interested to restrain, as much as possible, every member of it from committing enormous crimes, or even from giving occasion to such gross scandal as might disgust the minds of the people. In the state in which things were, through the greater part of Europe, during the tenth, eleventh, twelfth, and thirteenth centuries, and for some time both before and after that period, the constitution of the church of Rome may be considered as the must formidable combination that ever was formed against the authority and security of civil government, as well as against the liberty, reason, and happiness of mankind, which can flourish only where civil government is able to protect them. In that constitution, the grossest delusions of superstition were supported in such a manner by the private interests of so great a number of people, as put them out of all danger from any assault of human reason; because, though human reason might, perhaps, have been able to unveil, even to the eyes of the common people, some of the delusions of superstition, it could never have dissolved the ties of private interest. Had this constitution been attacked by no other enemies but the feeble efforts of human reason, it must have endured for ever. But that immense and well-built fabric, which all the wisdom and virtue of man could never have shaken, much less have overturned, was, by the natural course of things, first weakened, and afterwards in part destroyed; and is now likely, in the course of a few centuries more, perhaps, to crumble into ruins altogether. The gradual improvements of arts, manufactures, and commerce, the same causes which destroyed the power of the grant barons, destroyed, in the same manner, through the greater part of Europe, the whole temporal power of the clergy. In the produce of arts, manufactures, and commerce, the clergy, like the great barons, found something for which they could exchange their rude produce, and thereby discovered the means of spending their whole revenues upon their own persons, without giving any considerable share of them to other people. Their charity became gradually less extensive, their hospitality less liberal, or less profuse. Their retainers became consequently less numerous, and, by degrees, dwindled away altogether. The clergy, too, like the great barons, wished to get a better rent from their landed estates, in order to spend it, in the same manner, upon the gratification of their own private vanity and folly. But this increase of rent could be got only by granting leases to their tenants, who thereby became, in a great measure, independent of them. The ties of interest, which bound the inferior ranks of people to the clergy, were in this manner gradually broken and dissolved. They were even broken and dissolved sooner than those which bound the same ranks of people to the great barons; because the benefices of the church being, the greater part of them, much smaller than the estates of the great barons, the possessor of each benefice was much sooner able to spend the whole of its revenue upon his own person. During the greater part of the fourteenth and fifteenth centuries, the power of the great barons was, through the greater part of Europe, in full vigour. But the temporal power of the clergy, the absolute command which they had once had over the great body of the people was very much decayed. The power of the church was, by that time, very nearly reduced, through the greater part of Europe, to what arose from their spiritual authority; and even that spiritual authority was much weakened, when it ceased to be supported by the charity and hospitality of the clergy. The inferior ranks of people no longer looked upon that order as they had done before; as the comforters of their distress, and the relievers of their indigence. On the contrary, they were provoked and disgusted by the vanity, luxury, and expense of the richer clergy, who appeared to spend upon their own pleasures what had always before been regarded as the patrimony of the poor. In this situation of things, the sovereigns in the different states of Europe endeavoured to recover the influence which they had once had in the disposal of the great benefices of the church; by procuring to the deans and chapters of each diocese the restoration of their ancient right of electing the bishop; and to the monks of each abbacy that of electing the abbot. The reestablishing this ancient order was the object of several statutes enacted in England during the course of the fourteenth century, particularly of what is called the statute of provisors; and of the pragmatic sanction, established in France in the fifteenth century. In order to render the election valid, it was necessary that the sovereign should both consent to it before hand, and afterwards approve of the person elected; and though the election was still supposed to be free, he had, however all the indirect means which his situation necessarily afforded him, of influencing the clergy in his own dominions. Other regulations, of a similar tendency, were established in other parts of Europe. But the power of the pope, in the collation of the great benefices of the church, seems, before the reformation, to have been nowhere so effectually and so universally restrained as in France and England. The concordat afterwards, in the sixteenth century, gave to the kings of France the absolute right of presenting to all the great, or what are called the consistorial, benefices of the Gallican church. Since the establishment of the pragmatic sanction and of the concordat, the clergy of France have, in general shewn less respect to the decrees of the papal court, than the clergy of any other catholic country. In all the disputes which their sovereign has had with the pope, they have almost constantly taken part with the former. This independency of the clergy of France upon the court of Rome seems to be principally founded upon the pragmatic sanction and the concordat. In the earlier periods of the monarchy, the clergy of France appear to have been as much devoted to the pope as those of any other country. When Robert, the second prince of the Capetian race, was most unjustly excommunicated by the court of Rome, his own servants, it is said, threw the victuals which came from his table to the dogs, and refused to taste any thing themselves which had been polluted by the contact of a person in his situation. They were taught to do so, it may very safely be presumed, by the clergy of his own dominions. The claim of collating to the great benefices of the church, a claim in defence of which the court of Rome had frequently shaken, and sometimes overturned, the thrones of some of the greatest sovereigns in Christendom, was in this manner either restrained or modified, or given up altogether, in many different parts of Europe, even before the time of the reformation. As the clergy had now less influence over the people, so the state had more influence over the clergy. The clergy, therefore, had both less power, and less inclination, to disturb the state. The authority of the church of Rome was in this state of declension, when the disputes which gave birth to the reformation began in Germany, and soon spread themselves through every part of Europe. The new doctrines were everywhere received with a high degree of popular favour. They were propagated with all that enthusiastic zeal which commonly animates the spirit of party, when it attacks established authority. The teachers of those doctrines, though perhaps, in other respects, not more learned than many of the divines who defended the established church, seem in general to have been better acquainted with ecclesiastical history, and with the origin and progress of that system of opinions upon which the authority of the church was established; and they had thereby the advantage in almost every dispute. The austerity of their manners gave them authority with the common people, who contrasted the strict regularity of their conduct with the disorderly lives of the greater part of their own clergy. They possessed, too, in a much higher degree than their adversaries, all the arts of popularity and of gaining proselytes; arts which the lofty and dignified sons of the church had long neglected, as being to them in a great measure useless. The reason of the new doctrines recommended them to some, their novelty to many; the hatred and contempt of the established clergy to a still greater number: but the zealous, passionate, and fanatical, though frequently coarse and rustic eloquence, with which they were almost everywhere inculcated, recommended them to by far the greatest number. The success of the new doctrines was almost everywhere so great, that the princes, who at that time happened to be on bad terms with the court of Rome, were, by means of them, easily enabled, in their own dominions, to overturn the church, which having lost the respect and veneration of the inferior ranks of people, could make scarce any resistance. The court of Rome had disobliged some of the smaller princes in the northern parts of Germany, whom it had probably considered as too insignificant to be worth the managing. They universally, therefore, established the reformation in their own dominions. The tyranny of Christiern II., and of Troll archbishop of Upsal, enabled Gustavus Vasa to expel them both from Sweden. The pope favoured the tyrant and the archbishop, and Gustavus Vasa found no difficulty in establishing the reformation in Sweden. Christiern II. was afterwards deposed from the throne of Denmark, where his conduct had rendered him as odious as in Sweden. The pope, however, was still disposed to favour him; and Frederic of Holstein, who had mounted the throne in his stead, revenged himself, by following the example of Gustavus Vasa. The magistrates of Berne and Zurich, who had no particular quarrel with the pope, established with great ease the reformation in their respective cantons, where just before some of the clergy had, by an imposture somewhat grosser than ordinary, rendered the whole order both odious and contemptible. In this critical situation of its affairs the papal court was at sufficient pains to cultivate the friendship of the powerful sovereigns of France and Spain, of whom the latter was at that time emperor of Germany. With their assistance, it was enabled, though not without great difficulty, and much bloodshed, either to suppress altogether, or obstruct very much, the progress of the reformation in their dominions. It was well enough inclined, too, to be complaisant to the king of England. But from the circumstances of the times, it could not be so without giving offense to a still greater sovereign, Charles V., king of Spain and emperor of Germany. Henry VIII., accordingly, though he did not embrace himself the greater part of the doctrines of the reformation was yet enabled, by their general prevalence, to suppress all the monasteries, and to abolish the authority of the church of Rome in his dominions. That he should go so far, though he went no further, gave some satisfaction to the patrons of the reformation, who, having got possession of the government in the reign of his son and successor, completed, without any difficulty, the work which Henry VIII. had begun. In some countries, as in Scotland, where the government was weak, unpopular, and not very firmly established, the reformation was strong enough to overturn, not only the church, but the state likewise, for attempting to support the church. Among the followers of the reformation, dispersed in all the different countries of Europe, there was no general tribunal, which, like that of the court of Rome, or an oecumenical council, could settle all disputes among them, and, with irresistible authority, prescribe to all of them the precise limits of orthodoxy. When the followers of the reformation in one country, therefore, happened to differ from their brethren in another, as they had no common judge to appeal to, the dispute could never be decided; and many such disputes arose among them. Those concerning the government of the church, and the right of conferring ecclesiastical benefices, were perhaps the most interesting to the peace and welfare of civil society. They gave birth, accordingly, to the two principal parties or sects among the followers of the reformation, the Lutheran and Calvinistic sects, the only sects among them, of which the doctrine and discipline have ever yet been established by law in any part of Europe. The followers of Luther, together with what is called the church of England, preserved more or less of the episcopal government, established subordination among the clergy, gave the sovereign the disposal of all the bishoprics, and other consistorial benefices within his dominions, and thereby rendered him the real head of the church; and without depriving the bishop of the right of collating to the smaller benefices within his diocese, they, even to those benefices, not only admitted, but favoured the right of presentation, both in the sovereign and in all other lay patrons. This system of church government was, from the beginning, favourable to peace and good order, and to submission to the civil sovereign. It has never, accordingly, been the occasion of any tumult or civil commotion in any country in which it has once been established. The church of England, in particular, has always valued herself, with great reason, upon the unexceptionable loyalty of her principles. Under such a government, the clergy naturally endeavour to recommend themselves to the sovereign, to the court, and to the nobility and gentry of the country, by whose influence they chiefly expect to obtain preferment. They pay court to those patrons, sometimes, no doubt, by the vilest flattery and assentation; but frequently, too, by cultivating all those arts which best deserve, and which are therefore most likely to gain them, the esteem of people of rank and fortune; by their knowledge in all the different branches of useful and ornamental learning, by the decent liberality of their manners, by the social good humour of their conversation, and by their avowed contempt of those absurd and hypocritical austerities which fanatics inculcate and pretend to practise, in order to draw upon themselves the veneration, and upon the greater part of men of rank and fortune, who avow that they do not practise them, the abhorrence of the common people. Such a clergy, however, while they pay their court in this manner to the higher ranks of life, are very apt to neglect altogether the means of maintaining their influence and authority with the lower. They are listened to, esteemed, and respected by their superiors; but before their inferiors they are frequently incapable of defending, effectually, and to the conviction of such hearers, their own sober and moderate doctrines, against the most ignorant enthusiast who chooses to attack them. The followers of Zuinglius, or more properly those of Calvin, on the contrary, bestowed upon the people of each parish, whenever the church became vacant, the right of electing their own pastor; and established, at the same time, the most perfect equality among the clergy. The former part of this institution, as long as it remained in vigour, seems to have been productive of nothing but disorder and confusion, and to have tended equally to corrupt the morals both of the clergy and of the people. The latter part seems never to have had any effects but what were perfectly agreeable. As long as the people of each parish preserved the right of electing their own pastors, they acted almost always under the influence of the clergy, and generally of the most factious and fanatical of the order. The clergy, in order to preserve their influence in those popular elections, became, or affected to become, many of them, fanatics themselves, encouraged fanaticism among the people, and gave the preference almost always to the most fanatical candidate. So small a matter as the appointment of a parish priest, occasioned almost always a violent contest, not only in one parish, but in all the neighbouring parishes who seldom failed to take part in the quarrel. When the parish happened to be situated in a great city, it divided all the inhabitants into two parties; and when that city happened, either to constitute itself a little republic, or to be the head and capital of a little republic, as in the case with many of the considerable cities in Switzerland and Holland, every paltry dispute of this kind, over and above exasperating the animosity of all their other factions, threatened to leave behind it, both a new schism in the church, and a new faction in the state. In those small republics, therefore, the magistrate very soon found it necessary, for the sake of preserving the public peace, to assume to himself the right of presenting to all vacant benefices. In Scotland, the most extensive country in which this presbyterian form of church government has ever been established, the rights of patronage were in effect abolished by the act which established presbytery in the beginning of the reign of William III. That act, at least, put in the power of certain classes of people in each parish to purchase, for a very small price, the right of electing their own pastor. The constitution which this act established, was allowed to subsist for about two-and-twenty years, but was abolished by the 10th of queen Anne, ch. 12, on account of the confusions and disorders which this more popular mode of election had almost everywhere occasioned. In so extensive a country as Scotland, however, a tumult in a remote parish was not so likely to give disturbance to government as in a smaller state. The 10th of queen Anne restored the rights of patronage. But though, in Scotland, the law gives the benefice, without any exception to the person presented by the patron; yet the church requires sometimes (for she has not in this respect been very uniform in her decisions) a certain concurrence of the people, before she will confer upon the presentee what is called the cure of souls, or the ecclesiastical jurisdiction in the parish. She sometimes, at least, from an affected concern for the peace of the parish, delays the settlement till this concurrence can be procured. The private tampering of some of the neighbouring clergy, sometimes to procure, but more frequently to prevent this concurrence, and the popular arts which they cultivate, in order to enable them upon such occasions to tamper more effectually, are perhaps the causes which principally keep up whatever remains of the old fanatical spirit, either in the clergy or in the people of Scotland. The equality which the presbyterian form of church government establishes among the clergy, consists, first, in the equality of authority or ecclesiastical jurisdiction; and, secondly, in the equality of benefice. In all presbyterian churches, the equality of authority is perfect; that of benefice is not so. The difference, however, between one benefice and another, is seldom so considerable, as commonly to tempt the possessor even of the small one to pay court to his patron, by the vile arts of flattery and assentation, in order to get a better. In all the presbyterian churches, where the rights of patronage are thoroughly established, it is by nobler and better arts, that the established clergy in general endeavour to gain the favour of their superiors; by their learning, by the irreproachable regularity of their life, and by the faithful and diligent discharge of their duty. Their patrons even frequently complain of the independency of their spirit, which they are apt to construe into ingratitude for past favours, but which, at worst, perhaps, is seldom any more than that indifference which naturally arises from the consciousness that no further favours of the kind are ever to be expected. There is scarce, perhaps, to be found anywhere in Europe, a more learned, decent, independent, and respectable set of men, than the greater part of the presbyterian clergy of Holland, Geneva, Switzerland, and Scotland. Where the church benefices are all nearly equal, none of them can be very great; and this mediocrity of benefice, though it may be, no doubt, carried too far, has, however, some very agreeable effects. Nothing but exemplary morals can give dignity to a man of small fortune. The vices of levity and vanity necessarily render him ridiculous, and are, besides, almost as ruinous to him as they are to the common people. In his own conduct, therefore, he is obliged to follow that system of morals which the common people respect the most. He gains their esteem and affection, by that plan of life which his own interest and situation would lead him to follow. The common people look upon him with that kindness with which we naturally regard one who approaches somewhat to our own condition, but who, we think, ought to be in a higher. Their kindness naturally provokes his kindness. He becomes careful to instruct them, and attentive to assist and relieve them. He does not even despise the prejudices of people who are disposed to be so favourable to him, and never treats them with those contemptuous and arrogant airs, which we so often meet with in the proud dignitaries of opulent and well endowed churches. The presbyterian clergy, accordingly, have more influence over the minds of the common people, than perhaps the clergy of any other established church. It is, accordingly, in presbyterian countries only, that we ever find the common people converted, without persecution completely, and almost to a man, to the established church. In countries where church benefices are, the greater part of them, very moderate, a chair in a university is generally a better establishment than a church benefice. The universities have, in this case, the picking and chusing of their members from all the churchmen of the country, who, in every country, constitute by far the most numerous class of men of letters. Where church benefices, on the contrary, are many of them very considerable, the church naturally draws from the universities the greater part of their eminent men of letters; who generally find some patron, who does himself honour by procuring them church preferment. In the former situation, we are likely to find the universities filled with the most eminent men of letters that are to be found in the country. In the latter, we are likely to find few eminent men among them, and those few among the youngest members of the society, who are likely, too, to be drained away from it, before they can have acquired experience and knowledge enough to be of much use to it. It is observed by Mr. de Voltaire, that father Porée, a jesuit of no great eminence in the republic of letters, was the only professor they had ever had in France, whose works were worth the reading. In a country which has produced so many eminent men of letters, it must appear somewhat singular, that scarce one of them should have been a professor in a university. The famous Cassendi was, in the beginning of his life, a professor in the university of Aix. Upon the first dawning of his genius, it was represented to him, that by going into the church he could easily find a much more quiet and comfortable subsistence, as well as a better situation for pursuing his studies; and he immediately followed the advice. The observation of Mr. de Voltaire may be applied, I believe, not only to France, but to all other Roman Catholic countries. We very rarely find in any of them an eminent man of letters, who is a professor in a university, except, perhaps, in the professions of law and physic; professions from which the church is not so likely to draw them. After the church of Rome, that of England is by far the richest and best endowed church in Christendom. In England, accordingly, the church is continually draining the universities of all their best and ablest members; and an old college tutor who is known and distinguished in Europe as an eminent man of letters, is as rarely to be found there as in any Roman catholic country. In Geneva, on the contrary, in the protestant cantons of Switzerland, in the protestant countries of Germany, in Holland, in Scotland, in Sweden, and Denmark, the most eminent men of letters whom those countries have produced, have, not all indeed, but the far greater part of them, been professors in universities. In those countries, the universities are continually draining the church of all its most eminent men of letters. It may, perhaps, be worth while to remark, that, if we except the poets, a few orators, and a few historians, the far greater part of the other eminent men of letters, both of Greece and Rome, appear to have been either public or private teachers; generally either of philosophy or of rhetoric. This remark will be found to hold true, from the days of Lysias and Isocrates, of Plato and Aristotle, down to those of Plutarch and Epictetus, Suetonius, and Quintilian. To impose upon any man the necessity of teaching, year after year, in any particular branch of science seems in reality to be the most effectual method for rendering him completely master of it himself. By being obliged to go every year over the same ground, if he is good for any thing, he necessarily becomes, in a few years, well acquainted with every part of it: and if, upon any particular point, he should form too hasty an opinion one year, when he comes, in the course of his lectures to reconsider the same subject the year thereafter, he is very likely to correct it. As to be a teacher of science is certainly the natural employment of a mere man of letters; so is it likewise, perhaps, the education which is most likely to render him a man of solid learning and knowledge. The mediocrity of church benefices naturally tends to draw the greater part of men of letters in the country where it takes place, to the employment in which they can be the most useful to the public, and at the same time to give them the best education, perhaps, they are capable of receiving. It tends to render their learning both as solid as possible, and as useful as possible. The revenue of every established church, such parts of it excepted as may arise from particular lands or manors, is a branch, it ought to be observed, of the general revenue of the state, which is thus diverted to a purpose very different from the defence of the state. The tithe, for example, is a real land-tax, which puts it out of the power of the proprietors of land to contribute so largely towards the defence of the state as they otherwise might be able to do. The rent of land, however, is, according to some, the sole fund; and, according to others, the principal fund, from which, in all great monarchies, the exigencies of the state must be ultimately supplied. The more of this fund that is given to the church, the less, it is evident, can be spared to the state. It may be laid down as a certain maxim, that all other things being supposed equal, the richer the church, the poorer must necessarily be, either the sovereign on the one hand, or the people on the other; and, in all cases, the less able must the state be to defend itself. In several protestant countries, particularly in all the protestant cantons of Switzerland, the revenue which anciently belonged to the Roman catholic church, the tithes and church lands, has been found a fund sufficient, not only to afford competent salaries to the established clergy, but to defray, with little or no addition, all the other expenses of the state. The magistrates of the powerful canton of Berne, in particular, have accumulated, out of the savings from this fund, a very large sum, supposed to amount to several millions; part of which is deposited in a public treasure, and part is placed at interest in what are called the public funds of the different indebted nations of Europe; chiefly in those of France and Great Britain. What may be the amount of the whole expense which the church, either of Berne, or of any other protestant canton, costs the state, I do not pretend to know. By a very exact account it appears, that, in 1755, the whole revenue of the clergy of the church of Scotland, including their glebe or church lands, and the rent of their manses or dwelling-houses, estimated according to a reasonable valuation, amounted only to L.68,514, 1s. 5-1/12d. This very moderate revenue affords a decent subsistence to nine hundred and forty-four ministers. The whole expense of the church, including what is occasionally laid out for the building and reparation of churches, and of the manses of ministers, cannot well be supposed to exceed eighty or eighty-five thousand pounds a-year. The most opulent church in Christendom does not maintain better the uniformity of faith, the fervour of devotion, the spirit of order, regularity, and austere morals, in the great body of the people, than this very poorly endowed church of Scotland. All the good effects, both civil and religious, which an established church can be supposed to produce, are produced by it as completely as by any other. The greater part of the protestant churches of Switzerland, which, in general, are not better endowed than the church of Scotland, produce those effects in a still higher degree. In the greater part of the protestant cantons, there is not a single person to be found, who does not profess himself to be of the established church. If he professes himself to be of any other, indeed, the law obliges him to leave the canton. But so severe, or, rather, indeed, so oppressive a law, could never have been executed in such free countries, had not the diligence of the clergy beforehand converted to the established church the whole body of the people, with the exception of, perhaps, a few individuals only. In some parts of Switzerland, accordingly, where, from the accidental union of a protestant and Roman catholic country, the conversion has not been so complete, both religions are not only tolerated, but established by law. The proper performance of every service seems to require, that its pay or recompence should be, as exactly as possible, proportioned to the nature of the service. If any service is very much underpaid, it is very apt to suffer by the meanness and incapacity of the greater part of those who are employed in it. If it is very much overpaid, it is apt to suffer, perhaps still more, by their negligence and idleness. A man of a large revenue, whatever may be his profession, thinks he ought to live like other men of large revenues; and to spend a great part of his time in festivity, in vanity, and in dissipation. But in a clergyman, this train of life not only consumes the time which ought to be employed in the duties of his function, but in the eyes of the common people, destroys almost entirely that sanctity of character, which can alone enable him to perform these duties with proper weight and authority. PART IV. _Of the Expense of supporting the Dignity of the Sovereign._ Over and above the expenses necessary for enabling the sovereign to perform his several duties, a certain expense is requisite for the support of his dignity. This expense varies, both with the different periods of improvement, and with the different forms of government. In an opulent and improved society, where all the different orders of people are growing every day more expensive in their houses, in their furniture, in their tables, in their dress, and in their equipage; it cannot well be expected that the sovereign should alone hold out against the fashion. He naturally, therefore, or rather necessarily, becomes more expensive in all those different articles too. His dignity even seems to require that he should become so. As, in point of dignity, a monarch is more raised above his subjects than the chief magistrate of any republic is ever supposed to be above his fellow-citizens; so a greater expense is necessary for supporting that higher dignity. We naturally expect more splendour in the court of a king, than in the mansion-house of a doge or burgo-master. CONCLUSION. The expense of defending the society, and that of supporting the dignity of the chief magistrate, are both laid out for the general benefit of the whole society. It is reasonable, therefore, that they should be defrayed by the general contribution of the whole society; all the different members contributing, as nearly as possible, in proportion to their respective abilities. The expense of the administration of justice, too, may no doubt be considered as laid out for the benefit of the whole society. There is no impropriety, therefore, in its being defrayed by the general contribution of the whole society. The persons, however, who give occasion to this expense, are those who, by their injustice in one way or another, make it necessary to seek redress or protection from the courts of justice. The persons, again, most immediately benefited by this expense, are those whom the courts of justice either restore to their rights, or maintain in their rights. The expense of the administration of justice, therefore, may very properly be defrayed by the particular contribution of one or other, or both, of those two different sets of persons, according as different occasions may require, that is, by the fees of court. It cannot be necessary to have recourse to the general contribution of the whole society, except for the conviction of those criminals who have not themselves any estate or fund sufficient for paying those fees. Those local or provincial expenses, of which the benefit is local or provincial (what is laid out, for example, upon the police of a particular town or district), ought to be defrayed by a local or provincial revenue, and ought to be no burden upon the general revenue of the society. It is unjust that the whole society should contribute towards an expense, of which the benefit is confined to a part of the society. The expense of maintaining good roads and communications is, no doubt, beneficial to the whole society, and may, therefore, without any injustice, be defrayed by the general contributions of the whole society. This expense, however, is most immediately and directly beneficial to those who travel or carry goods from one place to another, and to those who consume such goods. The turnpike tolls in England, and the duties called peages in other countries, lay it altogether upon those two different sets of people, and thereby discharge the general revenue of the society from a very considerable burden. The expense of the institutions for education and religious instruction, is likewise, no doubt, beneficial to the whole society, and may, therefore, without injustice, be defrayed by the general contribution of the whole society. This expense, however, might, perhaps, with equal propriety, and even with some advantage, be defrayed altogether by those who receive the immediate benefit of such education and instruction, or by the voluntary contribution of those who think they have occasion for either the one or the other. When the institutions, or public works, which are beneficial to the whole society, either cannot be maintained altogether, or are not maintained altogether, by the contribution of such particular members of the society as are most immediately benefited by them; the deficiency must, in most cases, be made up by the general contribution of the whole society. The general revenue of the society, over and above defraying the expense of defending the society, and of supporting the dignity of the chief magistrate, must make up for the deficiency of many particular branches of revenue. The sources of this general or public revenue, I shall endeavour to explain in the following chapter. CHAP. II. OF THE SOURCES OF THE GENERAL OR PUBLIC REVENUE OF THE SOCIETY. The revenue which must defray, not only the expense of defending the society and of supporting the dignity of the chief magistrate, but all the other necessary expenses of government, for which the constitution of the state has not provided any particular revenue may be drawn, either, first, from some fund which peculiarly belongs to the sovereign or commonwealth, and which is independent of the revenue of the people; or, secondly, from the revenue of the people. PART I. _Of the Funds, or Sources, of Revenue, which may peculiarly belong to the Sovereign or Commonwealth._ The funds, or sources, of revenue, which may peculiarly belong to the sovereign or commonwealth, must consist, either in stock, or in land. The sovereign, like any other owner of stock, may derive a revenue from it, either by employing it himself, or by lending it. His revenue is, in the one case, profit, in the other interest. The revenue of a Tartar or Arabian chief consists in profit. It arises principally from the milk and increase of his own herds and flocks, of which he himself superintends the management, and is the principal shepherd or herdsman of his own horde or tribe. It is, however, in this earliest and rudest state of civil government only, that profit has ever made the principal part of the public revenue of a monarchical state. Small republics have sometimes derived a considerable revenue from the profit of mercantile projects. The republic of Hamburgh is said to do so from the profits of a public wine-cellar and apothecary's shop.[50] That state cannot be very great, of which the sovereign has leisure to carry on the trade of a wine-merchant or an apothecary. The profit of a public bank has been a source of revenue to more considerable states. It has been so, not only to Hamburgh, but to Venice and Amsterdam. A revenue of this kind has even by some people been thought not below the attention of so great an empire as that of Great Britain. Reckoning the ordinary dividend of the bank of England at five and a-half per cent., and its capital at ten millions seven hundred and eighty thousand pounds, the net annual profit, after paying the expense of management, must amount, it is said, to five hundred and ninety-two thousand nine hundred pounds. Government, it is pretended, could borrow this capital at three per cent. interest, and, by taking the management of the bank into its own hands, might make a clear profit of two hundred and sixty-nine thousand five hundred pounds a-year. The orderly, vigilant, and parsimonious administration of such aristocracies as those of Venice and Amsterdam, is extremely proper, it appears from experience, for the management of a mercantile project of this kind. But whether such a government as that of England, which, whatever may be its virtues, has never been famous for good economy; which, in time of peace, has generally conducted itself with the slothful and negligent profusion that is, perhaps, natural to monarchies; and, in time of war, has constantly acted with all the thoughtless extravagance that democracies are apt to fall into, could be safely trusted with the management of such a project, must at least be good deal more doubtful. The post-office is properly a mercantile project. The government advances the expense of establishing the different offices, and of buying or hiring the necessary horses or carriages, and is repaid, with a large profit, by the duties upon what is carried. It is, perhaps, the only mercantile project which has been successfully managed by, I believe, every sort of government. The capital to be advanced is not very considerable. There is no mystery in the business. The returns are not only certain, but immediate. Princes, however, have frequently engaged in many other mercantile projects, and have been willing, like private persons, to mend their fortunes, by becoming adventurers in the common branches of trade. They have scarce ever succeeded. The profusion with which the affairs of princes are always managed, renders it almost impossible that they should. The agents of a prince regard the wealth of their master as inexhaustible; are careless at what price they buy, are careless at what price they sell, are careless at what expense they transport his goods from one place to another. Those agents frequently live with the profusion of princes; and sometimes, too, in spite of that profusion, and by a proper method of making up their accounts, acquire the fortunes of princes. It was thus, as we are told by Machiavel, that the agents of Lorenzo of Medicis, not a prince of mean abilities, carried on his trade. The republic of Florence was several times obliged to pay the debt into which their extravagance had involved him. He found it convenient, accordingly to give up the business of merchant, the business to which his family had originally owed their fortune, and, in the latter part of his life, to employ both what remained of that fortune, and the revenue of the state, of which he had the disposal, in projects and expenses more suitable to his station. No two characters seem more inconsistent than those of trader and sovereign. If the trading spirit of the English East India company renders them very bad sovereigns, the spirit of sovereignty seems to have rendered them equally bad traders. While they were traders only, they managed their trade successfully, and were able to pay from their profits a moderate dividend to the proprietors of their stock. Since they became sovereigns, with a revenue which, it is said, was originally more than three millions sterling, they have been obliged to beg the ordinary assistance of government, in order to avoid immediate bankruptcy. In their former situation, their servants in India considered themselves as the clerks of merchants; in their present situation, those servants consider themselves as the ministers of sovereigns. A state may sometimes derive some part of its public revenue from the interest of money, as well as from the profits of stock. If it has amassed a treasure, it may lend a part of that treasure, either to foreign states, or to its own subjects. The canton of Berne derives a considerable revenue by lending a part of its treasure to foreign states, that is, by placing it in the public funds of the different indebted nations of Europe, chiefly in those of France and England. The security of this revenue must depend, first, upon the security of the funds in which it is placed, or upon the good faith of the government which has the management of them; and, secondly, upon the certainty or probability of the continuance of peace with the debtor nation. In the case of a war, the very first act of hostility on the part of the debtor nation might be the forfeiture of the funds of its creditor. This policy of lending money to foreign states is, so far as I know peculiar to the canton of Berne. The city of Hamburgh[51] has established a sort of public pawn-shop, which lends money to the subjects of the state, upon pledges, at six per cent. interest. This pawn-shop, or lombard, as it is called, affords a revenue, it is pretended, to the state, of a hundred and fifty thousand crowns, which, at four and sixpence the crown, amounts to L.33,750 sterling. The government of Pennsylvania, without amassing any treasure, invented a method of lending, not money, indeed, but what is equivalent to money, to its subjects. By advancing to private people, at interest, and upon land security to double the value, paper bills of credit, to be redeemed fifteen years after their date; and, in the mean time, made transferable from hand to hand, like banknotes, and declared by act of assembly to be a legal tender in all payments from one inhabitant of the province to another, it raised a moderate revenue, which went a considerable way towards defraying an annual expense of about L.4500, the whole ordinary expense of that frugal and orderly government. The success of an expedient of this kind must have depended upon three different circumstances: first, upon the demand for some other instrument of commerce, besides gold and silver money, or upon the demand for such a quantity of consumable stock as could not be had without sending abroad the greater part of their gold and silver money, in order to purchase it; secondly, upon the good credit of the government which made use of this expedient; and, thirdly, upon the moderation with which it was used, the whole value of the paper bills of credit never exceeding that of the gold and silver money which would have been necessary for carrying on their circulation, had there been no paper bills of credit. The same expedient was, upon different occasions, adopted by several other American colonies; but, from want of this moderation, it produced, in the greater part of them, much more disorder than conveniency. The unstable and perishable nature of stock and credit, however, renders them unfit to be trusted to as the principal funds of that sure, steady, and permanent revenue, which can alone give security and dignity to government. The government of no great nation, that was advanced beyond the shepherd state, seems ever to have derived the greater part of its public revenue from such sources. Land is a fund of more stable and permanent nature; and the rent of public lands, accordingly, has been the principal source of the public revenue of many a great nation that was much advanced beyond the shepherd state. From the produce or rent of the public lands, the ancient republics of Greece and Italy derived for a long time the greater part of that revenue which defrayed the necessary expenses of the commonwealth. The rent of the crown lands constituted for a long time the greater part of the revenue of the ancient sovereigns of Europe. War, and the preparation for war, are the two circumstances which, in modern times, occasion the greater part of the necessary expense of all great states. But in the ancient republics of Greece and Italy, every citizen was a soldier, and both served, and prepared himself for service, at his own expense. Neither of those two circumstances, therefore, could occasion any very considerable expense to the state. The rent of a very moderate landed estate might be fully sufficient for defraying all the other necessary expenses of government. In the ancient monarchies of Europe, the manners and customs of the times sufficiently prepared the great body of the people for war; and when they took the field, they were, by the condition of their feudal tenures, to be maintained either at their own expense, or at that of their immediate lords, without bringing any new charge upon the sovereign. The other expenses of government were, the greater part of them, very moderate. The administration of justice, it has been shewn, instead of being a cause of expense was a source of revenue. The labour of the country people, for three days before, and for three days after, harvest, was thought a fund sufficient for making and maintaining all the bridges, highways, and other public works, which the commerce of the country was supposed to require. In those days the principal expense of the sovereign seems to have consisted in the maintenance of his own family and household. The officers of his household, accordingly, were then the great officers of state. The lord treasurer received his rents. The lord steward and lord chamberlain looked after the expense of his family. The care of his stables was committed to the lord constable and the lord marshal. His houses were all built in the form of castles, and seem to have been the principal fortresses which he possessed. The keepers of those houses or castles might be considered as a sort of military governors. They seem to have been the only military officers whom it was necessary to maintain in time of peace. In these circumstances, the rent of a great landed estate might, upon ordinary occasions, very well defray all the necessary expenses of government. In the present state of the greater part of the civilized monarchies of Europe, the rent of all the lands in the country, managed as they probably would be, if they all belonged to one proprietor, would scarce, perhaps, amount to the ordinary revenue which they levy upon the people even in peaceable times. The ordinary revenue of Great Britain, for example, including not only what is necessary for defraying the current expense of the year, but for paying the interest of the public debts, and for sinking a part of the capital of those debts, amounts to upwards of ten millions a-year. But the land tax, at four shillings in the pound, falls short of two millions a-year. This land tax, as it is called, however, is supposed to be one-fifth, not only of the rent of all the land, but of that of all the houses, and of the interest of all the capital stock of Great Britain, that part of it only excepted which is either lent to the public, or employed as farming stock in the cultivation of land. A very considerable part of the produce of this tax arises from the rent of houses and the interest of capital stock. The land tax of the city of London, for example, at four shillings in the pound, amounts to L.123,399 : 6 : 7; that of the city of Westminster to L.63,092 : 1 : 5; that of the palaces of Whitehall and St. James's to L.30,754 : 6 : 3. A certain proportion of the land tax is, in the same manner, assessed upon all the other cities and towns corporate in the kingdom; and arises almost altogether, either from the rent of houses, or from what is supposed to be the interest of trading and capital stock. According to the estimation, therefore, by which Great Britain is rated to the land tax, the whole mass of revenue arising from the rent of all the lands, from that of all the houses, and from the interest of all the capital stock, that part of it only excepted which is either lent to the public, or employed in the cultivation of land, does not exceed ten millions sterling a-year, the ordinary revenue which government levies upon the people even in peaceable times. The estimation by which Great Britain is rated to the land tax is, no doubt, taking the whole kingdom at an average, very much below the real value; though in several particular counties and districts it is said to be nearly equal to that value. The rent of the lands alone, exclusive of that of houses and of the interest of stock, has by many people been estimated at twenty millions; an estimation made in a great measure at random, and which, I apprehend, is as likely to be above as below the truth. But if the lands of Great Britain, in the present state of their cultivation, do not afford a rent of more than twenty millions a-year, they could not well afford the half, most probably not the fourth part of that rent, if they all belonged to a single proprietor, and were put under the negligent, expensive, and oppressive management of his factors and agents. The crown lands of Great Britain do not at present afford the fourth part of the rent which could probably be drawn from them if they were the property of private persons. If the crown lands were more extensive, it is probable, they would be still worse managed. The revenue which the great body of the people derives from land is, in proportion, not to the rent, but to the produce of the land. The whole annual produce of the land of every country, if we except what is reserved for seed, is either annually consumed by the great body of the people, or exchanged for something else that is consumed by them. Whatever keeps down the produce of the land below what it would otherwise rise to, keeps down the revenue of the great body of the people, still more than it does that of the proprietors of land. The rent of land, that portion of the produce which belongs to the proprietors, is scarce anywhere in Great Britain supposed to be more than a third part of the whole produce. If the land which, in one state of cultivation, affords a revenue of ten millions sterling a-year, would in another afford a rent of twenty millions; the rent being, in both cases, supposed a third part of the produce, the revenue of the proprietors would be less than it otherwise might be, by ten millions a-year only; but the revenue of the great body of the people would be less than it otherwise might be, by thirty millions a-year, deducting only what would be necessary for seed. The population of the country would be less by the number of people which thirty millions a-year, deducting always the seed, could maintain, according to the particular mode of living, and expense which might take place in the different ranks of men, among whom the remainder was distributed. Though there is not at present in Europe, any civilized state of any kind which derives the greater part of its public revenue from the rent of lands which are the property of the state; yet, in all the great monarchies of Europe, there are still many large tracts of land which belong to the crown. They are generally forest, and sometimes forests where, after travelling several miles, you will scarce find a single tree; a mere waste and loss of country, in respect both of produce and population. In every great monarchy of Europe, the sale of the crown lands would produce a very large sum of money, which, if applied to the payment of the public debts, would deliver from mortgage a much greater revenue than any which those lands have ever afforded to the crown. In countries where lands, improved and cultivated very highly, and yielding, at the time of sale, as great a rent as can easily be got from them, commonly sell at thirty years purchase; the unimproved, uncultivated, and low-rented crown lands, might well be expected to sell at forty, fifty, or sixty years purchase. The crown might immediately enjoy the revenue which this great price would redeem from mortgage. In the course of a few years, it would probably enjoy another revenue. When the crown lands had become private property, they would, in the course of a few years, become well improved and well cultivated. The increase of their produce would increase the population of the country, by augmenting the revenue and consumption of the people. But the revenue which the crown derives from the duties of custom and excise, would necessarily increase with the revenue and consumption of the people. The revenue which, in any civilized monarchy, the crown derives from the crown lands, though it appears to cost nothing to individuals, in reality costs more to the society than perhaps any other equal revenue which the crown enjoys. It would, in all cases, be for the interest of the society, to replace this revenue to the crown by some other equal revenue, and to divide the lands among the people, which could not well be done better, perhaps, than by exposing them to public sale. Lands, for the purposes of pleasure and magnificence, parks, gardens, public walks, &c. possessions which are everywhere considered as causes of expense, not as sources of revenue, seem to be the only lands which, in a great and civilized monarchy, ought to belong to the crown. Public stock and public lands, therefore, the two sources of revenue which may peculiarly belong to the sovereign or commonwealth, being both improper and insufficient funds for defraying the necessary expense of any great and civilized state; it remains that this expense must, the greater part of it, be defrayed by taxes of one kind or another; the people contributing a part of their own private revenue, in order to make up a public revenue to the sovereign or commonwealth. PART II. _Of Taxes._ The private revenue of individuals, it has been shown in the first book of this Inquiry, arises, ultimately from the three different sources; rent, profit, and wages. Every tax must finally be paid from some one or other of those three different sources of revenue, or from all of them indifferently. I shall endeavour to give the best account I can, first, of those taxes which, it is intended should fall upon rent; secondly, of those which, it is intended should fall upon profit; thirdly, of those which, it is intended should fall upon wages; and fourthly, of those which, it is intended should fall indifferently upon all those three different sources of private revenue. The particular consideration of each of these four different sources of taxes will divide the second part of the present chapter into four articles, three of which will require several other subdivisions. Many of these taxes, it will appear from the following review, are not finally paid from the fund, or source of revenue, upon which it is intended they should fall. Before I enter upon the examination of particular taxes, it is necessary to premise the four following maxims with regard to taxes in general. 1. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. The expense of government to the individuals of a great nation, is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim, consists what is called the equality or inequality of taxation. Every tax, it must be observed once for all, which falls finally upon one only of the three sorts of revenue above mentioned, is necessarily unequal, in so far as it does not affect the other two. In the following examination of different taxes, I shall seldom take much farther notice of this sort of inequality; but shall, in most cases, confine my observations to that inequality which is occasioned by a particular tax falling unequally upon that particular sort of private revenue which is affected by it. 2. The tax which each individual is bound to pay, ought to be certain and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-getherer, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror of such aggravation, some present or perquisite to himself. The uncertainty of taxation encourages the insolence, and favours the corruption, of an order of men who are naturally unpopular, even where they are neither insolent nor corrupt. The certainty of what each individual ought to pay is, in taxation, a matter of so great importance, that a very considerable degree of inequality, it appears, I believe, from the experience of all nations, is not near so great an evil as a very small degree of uncertainty. 3. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it. A tax upon the rent of land or of houses, payable at the same term at which such rents are usually paid, is levied at the time when it is most likely to be convenient for the contributor to pay; or when he is most likely to have wherewithal to pay. Taxes upon such consumable goods as are articles of luxury, are all finally paid by the consumer, and generally in a manner that is very convenient for him. He pays them by little and little, as he has occasion to buy the goods. As he is at liberty too, either to buy or not to buy, as he pleases, it must be his own fault if he ever suffers any considerable inconveniency from such taxes. 4. Every tax ought to be so contrived, as both to take out and to keep out of the pockets of the people as little as possible, over and above what it brings into the public treasury of the state. A tax may either take out or keep out of the pockets of the people a great deal more than it brings into the public treasury, in the four following ways. First, the levying of it may require a great number of officers, whose salaries may eat up the greater part of the produce of the tax, and whose perquisites may impose another additional tax upon the people. Secondly, it may obstruct the industry of the people, and discourage them from applying to certain branches of business which might give maintenance and employment to great multitudes. While it obliges the people to pay, it may thus diminish, or perhaps destroy, some of the funds which might enable them more easily to do so. Thirdly, by the forfeitures and other penalties which those unfortunate individuals incur, who attempt unsuccessfully to evade the tax, it may frequently ruin them, and thereby put an end to the benefit which the community might have received from the employment of their capitals. An injudicious tax offers a great temptation to smuggling. But the penalties of smuggling must arise in proportion to the temptation. The law, contrary to all the ordinary principles of justice, first creates the temptation, and then punishes those who yield to it; and it commonly enhances the punishment, too, in proportion to the very circumstance which ought certainly to alleviate it, the temptation to commit the crime.[52] Fourthly, by subjecting the people to the frequent visits and the odious examination of the tax-gatherers, it may expose them to much unnecessary trouble, vexation, and oppression; and though vexation is not, strictly speaking, expense, it is certainly equivalent to the expense at which every man would be willing to redeem himself from it. It is in some one or other of these four different ways, that taxes are frequently so much more burdensome to the people than they are beneficial to the sovereign. The evident justice and utility of the foregoing maxims have recommended them, more or less, to the attention of all nations. All nations have endeavoured, to the best of their judgment, to render their taxes as equal as they could contrive; as certain, as convenient to the contributor, both the time and the mode of payment, and in proportion to the revenue which they brought to the prince, as little burdensome to the people. The following short review of some of the principal taxes which have taken place in different ages and countries, will show, that the endeavours of all nations have not in this respect been equally successful. ART. I.--_Taxes upon Rent--Taxes upon the Rent of Land._ A tax upon the rent of land may either be imposed according to a certain canon, every district being valued at a certain rent, which valuation is not afterwards to be altered; or it may be imposed in such a manner, as to vary with every variation in the real rent of the land, and to rise or fall with the improvement or declaration of its cultivation. A land tax which, like that of Great Britain, is assessed upon each district according to a certain invariable canon, though it should be equal at the time of its first establishment, necessarily becomes unequal in process of time, according to the unequal degrees of improvement or neglect in the cultivation of the different parts of the country. In England, the valuation, according to which the different counties and parishes were assessed to the land tax by the 4th of William and Mary, was very unequal even at its first establishment. This tax, therefore, so far offends against the first of the four maxims above mentioned. It is perfectly agreeable to the other three. It is perfectly certain. The time of payment for the tax, being the same as that for the rent, is as convenient as it can be to the contributor. Though the landlord is, in all cases, the real contributor, the tax is commonly advanced by the tenant, to whom the landlord is obliged to allow it in the payment of the rent. This tax is levied by a much smaller number of officers than any other which affords nearly the same revenue. As the tax upon each district does not rise with the rise of the rent, the sovereign does not share in the profits of the landlord's improvements. Those improvements sometimes contribute, indeed, to the discharge of the other landlords of the district. But the aggravation of the tax, which this may sometimes occasion upon a particular estate, is always so very small, that it never can discourage those improvements, nor keep down the produce of the land below what it would otherwise rise to. As it has no tendency to diminish the quantity, it can have none to raise the price of that produce. It does not obstruct the industry of the people; it subjects the landlord to no other inconveniency besides the unavoidable one of paying the tax. The advantage, however, which the landlord has derived from the invariable constancy of the valuation, by which all the lands of Great Britain are rated to the land-tax, has been principally owing to some circumstances altogether extraneous to the nature of the tax. It has been owing in part, to the great prosperity of almost every part of the country, the rents of almost all the estates of Great Britain having, since the time when this valuation was first established, been continually rising, and scarce any of them having fallen. The landlords, therefore, have almost all gained the difference between the tax which they would have paid, according to the present rent of their estates, and that which they actually pay according to the ancient valuation. Had the state of the country been different, had rents been gradually falling in consequence of the declension of cultivation, the landlords would almost all have lost this difference. In the state of things which has happened to take place since the revolution, the constancy of the valuation has been advantageous to the landlord and hurtful to the sovereign. In a different state of things it might have been advantageous to the sovereign and hurtful to the landlord. As the tax is made payable in money, so the valuation of the land is expressed in money. Since the establishment of this valuation, the value of silver has been pretty uniform, and there has been no alteration in the standard of the coin, either as to weight or fineness. Had silver risen considerably in its value, as it seems to have done in the course of the two centuries which preceded the discovery of the mines of America, the constancy of the valuation might have proved very oppressive to the landlord. Had silver fallen considerably in its value, as it certainly did for about a century at least after the discovery of those mines, the same constancy of valuation would have reduced very much this branch of the revenue of the sovereign. Had any considerable alteration been made in the standard of the money, either by sinking the same quantity of silver to a lower denomination, or by raising it to a higher; had an ounce of silver, for example, instead of being coined into five shillings and two pence, been coined either into pieces which bore so low a denomination as two shillings and seven pence, or into pieces which bore so high a one as ten shillings and four pence, it would, in the one case, have hurt the revenue of the proprietor, in the other that of the sovereign. In circumstances, therefore, somewhat different from those which have actually taken place, this constancy of valuation might have been a very great inconveniency, either to the contributors or to the commonwealth. In the course of ages, such circumstances, however, must at some time or other happen. But though empires, like all the other works of men, have all hitherto proved mortal, yet every empire aims at immortality. Every constitution, therefore, which it is meant should be as permanent as the empire itself, ought to be convenient, not in certain circumstances only, but in all circumstances; or ought to be suited, not to those circumstances which are transitory, occasional, or accidental, but to those which are necessary, and therefore always the same. A tax upon the rent of land, which varies with every variation of the rent, or which rises and falls according to the improvement or neglect of cultivation, is recommended by that sect of men of letters in France, who call themselves the economists, as the most equitable of all taxes. All taxes, they pretend, fall ultimately upon the rent of land, and ought, therefore, to be imposed equally upon the fund which must finally pay them. That all taxes ought to fall as equally as possible upon the fund which must finally pay them, is certainly true. But without entering into the disagreeable discussion of the metaphysical arguments by which they support their very ingenious theory, it will sufficiently appear, from the following review, what are the taxes which fall finally upon the rent of the land, and what are those which fall finally upon some other fund. In the Venetian territory, all the arable lands which are given in lease to farmers are taxed at a tenth of the rent.[53] The leases are recorded in a public register, which is kept by the officers of revenue in each province or district. When the proprietor cultivates his own lands, they are valued according to an equitable estimation, and he is allowed a deduction of one-fifth of the tax; so that for such land he pays only eight instead of ten per cent. of the supposed rent. A land-tax of this kind is certainly more equal than the land-tax of England. It might not, perhaps, be altogether so certain, and the assessment of the tax might frequently occasion a good deal more trouble to the landlord. It might, too, be a good deal more expensive in the levying. Such a system of administration, however, might, perhaps, be contrived, as would in a great measure both prevent this uncertainty, and moderate this expense. The landlord and tenant, for example, might jointly be obliged to record their lease in a public register. Proper penalties might be enacted against concealing or misrepresenting any of the conditions; and if part of those penalties were to be paid to either of the two parties who informed against and convicted the other of such concealment or misrepresentation, it would effectually deter them from combining together in order to defraud the public revenue. All the conditions of the lease might be sufficiently known from such a record. Some landlords, instead of raising the rent, take a fine for the renewal of the lease. This practice is, in most cases, the expedient of a spendthrift, who, for a sum of ready money sells a future revenue of much greater value. It is, in most cases, therefore, hurtful to the landlord; it is frequently hurtful to the tenant; and it is always hurtful to the community. It frequently takes from the tenant so great a part of his capital, and thereby diminishes so much his ability to cultivate the land, that he finds it more difficult to pay a small rent than it would otherwise have been to pay a great one. Whatever diminishes his ability to cultivate, necessarily keeps down, below what it would otherwise have been, the most important part of the revenue of the community. By rendering the tax upon such fines a good deal heavier than upon the ordinary rent, this hurtful practice might be discouraged, to the no small advantage of all the different parties concerned, of the landlord, of the tenant, of the sovereign, and of the whole community. Some leases prescribe to the tenant a certain mode of cultivation, and a certain succession of crops, during the whole continuance of the lease. This condition, which is generally the effect of the landlord's conceit of his own superior knowledge (a conceit in most cases very ill-founded), ought always to be considered as an additional rent, as a rent in service, instead of a rent in money. In order to discourage the practice, which is generally a foolish one, this species of rent might be valued rather high, and consequently taxed somewhat higher than common money-rents. Some landlords, instead of a rent in money, require a rent in kind, in corn, cattle, poultry, wine, oil, &c.; others, again, require a rent in service. Such rents are always more hurtful to the tenant than beneficial to the landlord. They either take more, or keep more out of the pocket of the former, than they put into that of the latter. In every country where they take place, the tenants are poor and beggarly, pretty much according to the degree in which they take place. By valuing, in the same manner, such rents rather high, and consequently taxing them somewhat higher than common money-rents, a practice which is hurtful to the whole community, might, perhaps, be sufficiently discouraged. When the landlord chose to occupy himself a part of his own lands, the rent might be valued according to an equitable arbitration of the farmers and landlords in the neighbourhood, and a moderate abatement of the tax might be granted to him, in the same manner as in the Venetian territory, provided the rent of the lands which he occupied did not exceed a certain sum. It is of importance that the landlord should be encouraged to cultivate a part of his own land. His capital is generally greater than that of the tenant, and, with less skill, he can frequently raise a greater produce. The landlord can afford to try experiments, and in generally disposed to do so. His unsuccessful experiments occasion only a moderate loss to himself. His successful ones contribute to the improvement and better cultivation of the whole country. It might be of importance, however, that the abatement of the tax should encourage him to cultivate to a certain extent only. If the landlords should, the greater part of them, be tempted to farm the whole of their own lands, the country (instead of sober and industrious tenants, who are bound by their own interest to cultivate as well as their capital and skill will allow them) would be filled with idle and profligate bailiffs, whose abusive management would soon degrade the cultivation, and reduce the annual produce of the land, to the diminution, not only of the revenue of their masters, but of the most important part of that of the whole society. Such a system of administration might, perhaps, free a tax of this kind from any degree of uncertainty, which could occasion either oppression or inconveniency to the contributor; and might, at the same time, serve to introduce into the common management of land such a plan of policy as might contribute a good deal to the general improvement and good cultivation of the country. The expense of levying a land-tax, which varied with every variation of the rent, would, no doubt, be somewhat greater than that of levying one which was always rated according to a fixed valuation. Some additional expense would necessarily be incurred, both by the different register-offices which it would be proper to establish in the different districts of the country, and by the different valuations which might occasionally be made of the lands which the proprietor chose to occupy himself. The expense of all this, however, might be very moderate, and much below what is incurred in the levying of many other taxes, which afford a very inconsiderable revenue in comparison of what might easily be drawn from a tax of this kind. The discouragement which a variable land-tax of this kind might give to the improvement of land, seems to be the most important objection which can be made to it. The landlord would certainly be less disposed to improve, when the sovereign, who contributed nothing to the expense, was to share in the profit of the improvement. Even this objection might, perhaps, be obviated, by allowing the landlord, before he began his improvement, to ascertain, in conjunction with the officers of revenue, the actual value of his lands, according to the equitable arbitration of a certain number of landlords and farmers in the neighbourhood, equally chosen by both parties: and by rating him, according to this valuation, for such a number of years as might be fully sufficient for his complete indemnification. To draw the attention of the sovereign towards the improvement of the land, from a regard to the increase of his own revenue, is one of the principal advantages proposed by this species of land-tax. The term, therefore, allowed, for the indemnification of the landlord, ought not to be a great deal longer than what was necessary for that purpose, lest the remoteness of the interest should discourage too much this attention. It had better, however, be somewhat too long, than in any respect too short. No incitement to the attention of the sovereign can ever counterbalance the smallest discouragement to that of the landlord. The attention of the sovereign can be, at best, but a very general and vague consideration of what is likely to contribute to the better cultivation of the greater part of his dominions. The attention of the landlord is a particular and minute consideration of what is likely to be the most advantageous application of every inch of ground upon his estate. The principal attention of the sovereign ought to be, to encourage, by every means in his power, the attention both of the landlord and of the farmer, by allowing both to pursue their own interest in their own way, and according to their own judgment; by giving to both the most perfect security that they shall enjoy the full recompence of their own industry; and by procuring to both the most extensive market for every part of their produce, in consequence of establishing the easiest and safest communications, both by land and by water, through every part of his own dominions, as well as the most unbounded freedom of exportation to the dominions of all other princes. If, by such a system of administration, a tax of this kind could be so managed as to give, not only no discouragement, but, on the contrary, some encouragement to the improvement of land, it does not appear likely to occasion any other inconveniency to the landlord, except always the unavoidable one of being obliged to pay the tax. In all the variations of the state of the society, in the improvement and in the declension of agriculture; in all the variations in the value of silver, and in all those in the standard of the coin, a tax of this kind would, of its own accord, and without any attention of government, readily suit itself to the actual situation of things, and would be equally just and equitable in all those different changes. It would, therefore, be much more proper to be established as a perpetual and unalterable regulation, or as what is called a fundamental law of the commonwealth, than any tax which was always to be levied according to a certain valuation. Some states, instead of the simple and obvious expedient of a register of leases, have had recourse to the laborious and expensive one of an actual survey and valuation of all the lands in the country. They have suspected, probably, that the lessor and lessee, in order to defraud the public revenue, might combine to conceal the real terms of the lease. Doomsday-book seems to have been the result of a very accurate survey of this kind. In the ancient dominions of the king of Prussia, the land-tax is assessed according to an actual survey and valuation, which is reviewed and altered from time to time.[54] According to that valuation, the lay proprietors pay from twenty to twenty-five per cent. of their revenue; ecclesiastics from forty to forty-five per cent. The survey and valuation of Silesia was made by order of the present king, it is said, with great accuracy. According to that valuation, the lands belonging to the bishop of Breslaw are taxed at twenty-five per cent. of their rent. The other revenues of the ecclesiastics of both religions at fifty per cent. The commanderies of the Teutonic order, and of that of Malta, at forty per cent. Lands held by a noble tenure, at thirty-eight and one-third per cent. Lands held by a base tenure, at thirty-five and one-third per cent. The survey and valuation of Bohemia is said to have been the work of more than a hundred years. It was not perfected till after the peace of 1748, by the orders of the present empress queen.[55] The survey of the duchy of Milan, which was begun in the time of Charles VI., was not perfected till after 1760. It is esteemed one of the most accurate that has ever been made. The survey of Savoy and Piedmont was executed under the orders of the late king of Sardinia.[56] In the dominions of the king of Prussia, the revenue of the church is taxed much higher than that of lay proprietors. The revenue of the church is, the greater part of it, a burden upon the rent of land. It seldom happens that any part of it is applied towards the improvement of land; or is so employed as to contribute, in any respect, towards increasing the revenue of the great body of the people. His Prussian majesty had probably, upon that account, thought it reasonable that it should contribute a good deal more towards relieving the exigencies of the state. In some countries, the lands of the church are exempted from all taxes. In others, they are taxed more lightly than other lands. In the duchy of Milan, the lands which the church possessed before 1575, are rated to the tax at a third only of their value. In Silesia, lands held by a noble tenure are taxed three per cent. higher than those held by a base tenure. The honours and privileges of different kinds annexed to the former, his Prussian majesty had probably imagined, would sufficiently compensate to the proprietor a small aggravation of the tax; while, at the same time, the humiliating inferiority of the latter would be in some measure alleviated, by being taxed somewhat more lightly. In other countries, the system of taxation, instead of alleviating, aggravates this inequality. In the dominions of the king of Sardinia, and in those provinces of France which are subject to what is called the real or predial taille, the tax falls altogether upon the lands held by a base tenure. Those held by a noble one are exempted. A land tax assessed according to a general survey and valuation, how equal soever it may be at first, must, in the course of a very moderate period of time, become unequal. To prevent its becoming so would require the continual and painful attention of government to all the variations in the state and produce of every different farm in the country. The governments of Prussia, of Bohemia, of Sardinia, and of the duchy of Milan, actually exert an attention of this kind; an attention so unsuitable to the nature of government, that it is not likely to be of long continuance, and which, if it is continued, will probably, in the long-run, occasion much more trouble and vexation then it can possibly bring relief to the contributors. In 1666, the generality of Montauban was assessed to the real or predial taille, according, it is said, to a very exact survey and valuation.[57] By 1727, this assessment had become altogether unequal. In order to remedy this inconveniency, government has found no better expedient, than to impose upon the whole generality an additional tax of a hundred and twenty thousand livres. This additional tax is rated upon all the different districts subject to the taille according to the old assessment. But it is levied only upon those which, in the actual state of things, are by that assessment under-taxed; and it is applied to the relief of those which, by the same assessment, are over-taxed. Two districts, for example, one of which ought, in the actual state of things, to be taxed at nine hundred, the other at eleven hundred livres, are, by the old assessment, both taxed at a thousand livres. Both these districts are, by the additional tax, rated at eleven hundred livres each. But this additional tax is levied only upon the district under-charged, and it is applied altogether to the relief of that overcharged, which consequently pays only nine hundred livres. The government neither gains nor loses by the additional tax, which is applied altogether to remedy the inequalities arising from the old assessment. The application is pretty much regulated according to the discretion of the intendant of the generality, and must, therefore, be in a great measure arbitrary. _Taxes which are proportioned, not to the Rent, but to the Produce of Land._ Taxes upon the produce of land are, in reality, taxes upon the rent; and though they may be originally advanced by the farmer, are finally paid by the landlord. When a certain portion of the produce is to be paid away for a tax, the farmer computes as well as he can, what the value of this portion is, one year with another, likely to amount to, and he makes a proportionable abatement in the rent which he agrees to pay to the landlord. There is no farmer who does not compute before hand what the church tythe, which is a land tax of this kind, is, one year with another, likely to amount to. The tythe, and every other land tax of this kind, under the appearance of perfect equality, are very unequal taxes; a certain portion of the produce being in different situations, equivalent to a very different portion of the rent. In some very rich lands, the produce is so great, that the one half of it is fully sufficient to replace to the farmer his capital employed in cultivation, together with the ordinary profits of farming stock in the neighbourhood. The other half, or, what comes to the same thing, the value of the other half, he could afford to pay as rent to the landlord, if there was no tythe. But if a tenth of the produce is taken from him in the way of tythe, he must require an abatement of the fifth part of his rent, otherwise he cannot get back his capital with the ordinary profit. In this case, the rent of the landlord, instead of amounting to a half, or five-tenths of the whole produce, will amount only to four-tenths of it. In poorer lands, on the contrary, the produce is sometimes so small, and the expense of cultivation so great, that it requires four-fifths of the whole produce, to replace to the farmer his capital with the ordinary profit. In this case, though there was no tythe, the rent of the landlord could amount to no more than one-fifth or two-tenths of the whole produce. But if the farmer pays one-tenth of the produce in the way of tythe, he must require an equal abatement of the rent of the landlord, which will thus be reduced to one-tenth only of the whole produce. Upon the rent of rich lands the tythe may sometimes be a tax of no more than one-fifth part, or four shillings in the pound; whereas upon that of poorer lands, it may sometimes be a tax of one half, or of ten shillings in the pound. The tythe, as it is frequently a very unequal tax upon the rent, so it is always a great discouragement, both to the improvements of the landlord, and to the cultivation of the farmer. The one cannot venture to make the most important, which are generally the most expensive improvements; nor the other to raise the most valuable, which are generally, too, the most expensive crops; when the church, which lays out no part of the expense, is to share so very largely in the profit. The cultivation of madder was, for a long time, confined by the tythe to the United Provinces, which, being presbyterian countries, and upon that account exempted from this destructive tax, enjoyed a sort of monopoly of that useful dyeing drug against the rest of Europe. The late attempts to introduce the culture of this plant into England, have been made only in consequence of the statute, which enacted that five shillings an acre should be received in lieu of all manner of tythe upon madder. As through the greater part of Europe, the church, so in many different countries of Asia, the state, is principally supported by a land tax, proportioned not to the rent, but to the produce of the land. In China, the principal revenue of the sovereign consists in a tenth part of the produce of all the lands of the empire. This tenth part, however, is estimated so very moderately, that, in many provinces, it is said not to exceed a thirtieth part of the ordinary produce. The land tax or land rent which used to be paid to the Mahometan government of Bengal, before that country fell into the hands of the English East India company, is said to have amounted to about a fifth part of the produce. The land tax of ancient Egypt is said likewise to have amounted to a fifth part. In Asia, this sort of land tax is said to interest the sovereign in the improvement and cultivation of land. The sovereigns of China, those of Bengal while under the Mahometan government, and those of ancient Egypt, are said, accordingly, to have been extremely attentive to the making and maintaining of good roads and navigable canals, in order to increase, as much as possible, both the quantity and value of every part of the produce of the land, by procuring to every part of it the most extensive market which their own dominions could afford. The tythe of the church is divided into such small portions that no one of its proprietors can have any interest of this kind. The parson of a parish could never find his account in making a road or canal to a distant part of the country, in order to extend the market for the produce of his own particular parish. Such taxes, when destined for the maintenance of the state, have some advantages, which may serve in some measure to balance their inconveniency. When destined for the maintenance of the church, they are attended with nothing but inconveniency. Taxes upon the produce of land may be levied, either in kind, or, according to a certain valuation in money. The person of a parish, or a gentleman of small fortune who lives upon his estate, may sometimes, perhaps find some advantage in receiving, the one his tythe, and the other his rent, in kind. The quantity to be collected, and the district within which it is to be collected, are so small, that they both can oversee, with their own eyes, the collection and disposal of every part of what is due to them. A gentleman of great fortune, who lived in the capital, would be in danger of suffering much by the neglect, and more by the fraud, of his factors and agents, if the rents of an estate in a distant province were to be paid to him in this manner. The loss of the sovereign, from the abuse and depredation of his tax-gatherers, would necessarily be much greater. The servants of the most careless private person are, perhaps, more under the eye of their master than those of the most careful prince; and a public revenue, which was paid in kind, would suffer so much from the mismanagement of the collectors, that a very small part of what was levied upon the people would ever arrive at the treasury of the prince. Some part of the public revenue of China, however, is said to be paid in this manner. The mandarins and other tax-gatherers will, no doubt, find their advantage in continuing the practice of a payment, which is so much more liable to abuse than any payment in money. A tax upon the produce of land, which is levied in money, may be levied, either according to a valuation, which varies with all the variations of the market price; or according to a fixed valuation, a bushel of wheat, for example, being always valued at one and the same money price, whatever may be the state of the market. The produce of a tax levied in the former way will vary only according to the variations in the real produce of the land, according to the improvement or neglect of cultivation. The produce of a tax levied in the latter way will vary, not only according to the variations in the produce of the land, but according both to those in the value of the precious metals, and those in the quantity of those metals, which is at different times contained in coin of the same denomination. The produce of the former will always bear the same proportion to the value of the real produce of the land. The produce of the latter may, at different times, bear very different proportions to that value. When, instead either of a certain portion of the produce of land, or of the price of a certain portion, a certain sum of money is to be paid in full compensation for all tax or tythe; the tax becomes, in this case, exactly of the same nature with the land tax of England. It neither rises nor falls with the rent of the land. It neither encourages nor discourages improvement. The tythe in the greater part of those parishes which pay what is called a modus, in lieu of all other tythe, is a tax of this kind. During the Mahometan government of Bengal, instead of the payment in kind of the fifth part of the produce, a modus, and, it is said, a very moderate one, was established in the greater part of the districts or zemindaries of the country. Some of the servants of the East India company, under pretence of restoring the public revenue to its proper value, have, in some provinces, exchanged this modus for a payment in kind. Under their management, this change is likely both to discourage cultivation, and to give new opportunities for abuse in the collection of the public revenue, which has fallen very much below what it was said to have been when it first fell under the management of the company. The servants of the company may, perhaps, have profited by the change, but at the expense, it is probable, both of their masters and of the country. _Taxes upon the Rent of Houses._ The rent of a house may be distinguished into two parts, of which the one may very properly be called the building-rent; the other is commonly called the ground-rent. The building-rent is the interest or profit of the capital expended in building the house. In order to put the trade of a builder upon a level with other trades, it is necessary that this rent should be sufficient, first, to pay him the same interest which he would have got for his capital, if he had lent it upon good security; and, secondly, to keep the house in constant repair, or, what comes to the same thing, to replace, within a certain term of years, the capital which had been employed in building it. The building-rent, or the ordinary profit of building, is, therefore, everywhere regulated by the ordinary interest of money. Where the market rate of interest is four per cent. the rent of a house, which, over and above paying the ground-rent, affords six or six and a-half per cent. upon the whole expense of building, may, perhaps, afford a sufficient profit to the builder. Where the market rate of interest is five per cent. it may perhaps require seven or seven and a-half per cent. If, in proportion to the interest of money, the trade of the builders affords at any time much greater profit than this, it will soon draw so much capital from other trades as will reduce the profit to its proper level. If it affords at any time much less than this, other trades will soon draw so much capital from it as will again raise that profit. Whatever part of the whole rent of a house is over and above what is sufficient for affording this reasonable profit, naturally goes to the ground-rent; and, where the owner of the ground and the owner of the building are two different persons, is, in most cases, completely paid to the former. This surplus rent is the price which the inhabitant of the house pays for some real or supposed advantage of the situation. In country houses, at a distance from any great town, where there is plenty of ground to chuse upon, the ground-rent is scarce any thing, or no more than what the ground which the house stands upon would pay, if employed in agriculture. In country villas, in the neighbourhood of some great town, it is sometimes a good deal higher; and the peculiar conveniency or beauty of situation is there frequently very well paid for. Ground-rents are generally highest in the capital, and in those particular parts of it where there happens to be the greatest demand for houses, whatever be the reason of that demand, whether for trade and business, for pleasure and society, or for mere vanity and fashion. A tax upon house-rent, payable by the tenant, and proportioned to the whole rent of each house, could not, for any considerable time at least, affect the building-rent. If the builder did not get his reasonable profit, he would be obliged to quit the trade; which, by raising the demand for building, would, in a short time, bring back his profit to its proper level with that of other trades. Neither would such a tax fall altogether upon the ground-rent; but it would divide itself in such a manner, as to fall partly upon the inhabitant of the house, and partly upon the owner of the ground. Let us suppose, for example, that a particular person judges that he can afford for house-rent an expense of sixty pounds a-year; and let us suppose, too, that a tax of four shillings in the pound, or of one-fifth, payable by the inhabitant, is laid upon house-rent. A house of sixty pounds rent will, in that case, cost him seventy-two pounds a-year, which is twelve pounds more than he thinks he can afford. He will, therefore, content himself with a worse house, or a house of fifty pounds rent, which, with the additional ten pounds that he must pay for the tax, will make up the sum of sixty pounds a-year, the expense which he judges he can afford, and, in order to pay the tax, he will give up a part of the additional conveniency which he might have had from a house of ten pounds a-year more rent. He will give up, I say, a part of this additional conveniency; for he will seldom be obliged to give up the whole, but will, in consequence of the tax, get a better house for fifty pounds a-year, than he could have got if there had been no tax. For as a tax of this kind, by taking away this particular competitor, must diminish the competition for houses of sixty pounds rent, so it must likewise diminish it for those of fifty pounds rent, and in the same manner for those of all other rents, except the lowest rent, for which it would for some time increase the competition. But the rents of every class of houses for which the competition was diminished, would necessarily be more or less reduced. As no part of this reduction, however, could for any considerable time at least, affect the building-rent, the whole of it must, in the long-run, necessarily fall upon the ground-rent. The final payment of this tax, therefore, would fall partly upon the inhabitant of the house, who, in order to pay his share, would be obliged to give up part of his conveniency; and partly upon the owner of the ground, who, in order to pay his share, would be obliged to give up a part of his revenue. In what proportion this final payment would be divided between them, it is not, perhaps, very easy to ascertain. The division would probably be very different in different circumstances, and a tax of this kind might, according to those different circumstances, affect very unequally, both the inhabitant of the house and the owner of the ground. The inequality with which a tax of this kind might fall upon the owners of different ground-rents, would arise altogether from the accidental inequality of this division. But the inequality with which it might fall upon the inhabitants of different houses, would arise, not only from this, but from another cause. The proportion of the expense of house-rent to the whole expense of living, is different in the different degrees of fortune. It is, perhaps, highest in the highest degree, and it diminishes gradually through the inferior degrees, so as in general to be lowest in the lowest degree. The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich; and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be any thing very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion. The rent of houses, though it in some respects resembles the rent of land, is in one respect essentially different from it. The rent of land is paid for the use of a productive subject. The land which pays it produces it. The rent of houses is paid for the use of an unproductive subject. Neither the house, nor the ground which it stands upon, produce any thing. The person who pays the rent, therefore, must draw it from some other source of revenue, distinct from and independent of this subject. A tax upon the rent of houses, so far as it falls upon the inhabitants, must be drawn from the same source as the rent itself, and must be paid from their revenue, whether derived from the wages of labour, the profits of stock, or the rent of land. So far as it falls upon the inhabitants, it is one of those taxes which fall, not upon one only, but indifferently upon all the three different sources of revenue; and is, in every respect, of the same nature as a tax upon any any other sort of consumable commodities. In general, there is not perhaps, any one article of expense or consumption by which the liberality or narrowness of a man's whole expense can be better judged of than by his house-rent. A proportional tax upon this particular article of expense might, perhaps, produce a more considerable revenue than any which has hitherto been drawn from it in any part of Europe. If the tax, indeed, was very high, the greater part of people would endeavour to evade it as much as they could, by contenting themselves with smaller houses, and by turning the greater part of their expense into some other channel. The rent of houses might easily be ascertained with sufficient accuracy, by a policy of the same kind with that which would be necessary for ascertaining the ordinary rent of land. Houses not inhabited ought to pay no tax. A tax upon them would fall altogether upon the proprietor, who would thus be taxed for a subject which afforded him neither conveniency nor revenue. Houses inhabited by the proprietor ought to be rated, not according to the expense which they might have cost in building, but according to the rent which an equitable arbitration might judge them likely to bring if leased to a tenant. If rated according to the expense which they might have cost in building, a tax of three or four shillings in the pound, joined with other taxes, would ruin almost all the rich and great families of this, and, I believe, of every other civilized country. Whoever will examine with attention the different town and country houses of some of the richest and greatest families in this country, will find that, at the rate of only six and a-half, or seven per cent. upon the original expense of building, their house-rent is nearly equal to the whole neat rent of their estates. It is the accumulated expense of several successive generations, laid out upon objects of great beauty and magnificence, indeed, but, in proportion to what they cost, of very small exchangeable value.[58] Ground-rents are a still more proper subject of taxation than the rent of houses. A tax upon ground-rents would not raise the rent of houses; it would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground. More or less can be got for it, according as the competitors happen to be richer or poorer, or can afford to gratify their fancy for a particular spot of ground at a greater or smaller expense. In every country, the greatest number of rich competitors is in the capital, and it is there accordingly that the highest ground-rents are always to be found. As the wealth of those competitors would in no respect be increased by a tax upon ground-rents, they would not probably be disposed to pay more for the use of the ground. Whether the tax was to be advanced by the inhabitant or by the owner of the ground, would be of little importance. The more the inhabitant was obliged to pay for the tax, the less he would incline to pay for the ground; so that the final payment of the tax would fall altogether upon the owner of the ground-rent. The ground-rents of uninhabited houses ought to pay no tax. Both ground-rents, and the ordinary rent of land, are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expenses of the state, no discouragement will thereby be given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents, and the ordinary rent of land, are therefore, perhaps, the species of revenue which can best bear to have a peculiar tax imposed upon them. Ground-rents seem, in this respect, a more proper subject of peculiar taxation, than even the ordinary rent of land. The ordinary rent of land is, in many cases, owing partly, at least, to the attention and good management of the landlord. A very heavy tax might discourage, too much, this attention and good management. Ground-rents, so far as they exceed the ordinary rent of land, are altogether owing to the good government of the sovereign, which, by protecting the industry either of the whole people or of the inhabitants of some particular place, enables them to pay so much more than its real value for the ground which they build their houses upon; or to make to its owner so much more than compensation for the loss which he might sustain by this use of it. Nothing can be more reasonable, than that a fund, which owes its existence to the good government of the state, should be taxed peculiarly, or should contribute something more than the greater part of other funds, towards the support of that government. Though, in many different countries of Europe, taxes have been imposed upon the rent of houses, I do not know of any in which ground-rents have been considered as a separate subject of taxation. The contrivers of taxes have, probably, found some difficulty in ascertaining what part of the rent ought to be considered as ground-rent, and what part ought to be considered as building-rent. It should not, however, seem very difficult to distinguish those two parts of the rent from one another. In Great Britain the rent of houses is supposed to be taxed in the same proportion as the rent of land, by what is called the annual land tax. The valuation, according to which each different parish and district is assessed to this tax, is always the same. It was originally extremely unequal, and it still continues to be so. Through the greater part of the kingdom this tax falls still more lightly upon the rent of houses than upon that of land. In some few districts only, which were originally rated high, and in which the rents of houses have fallen considerably, the land tax of three or four shillings in the pound is said to amount to an equal proportion of the real rent of houses. Untenanted houses, though by law subject to the tax, are, in most districts, exempted from it by the favour of assessors; and this exemption sometimes occasions some little variation in the rate of particular houses, though that of the district is always the same. Improvements of rent, by new buildings, repairs, &c. go to the discharge of the district, which occasions still further variations in the rate of particular houses. In the province of Holland,[59] every house is taxed at two and a-half per cent. of its value, without any regard, either to the rent which it actually pays, or to the circumstance of its being tenanted or untenanted. There seems to be a hardship in obliging the proprietor to pay a tax for an untenanted house, from which he can derive no revenue, especially so very heavy a tax. In Holland, where the market rate of interest does not exceed three per cent., two and a-half per cent. upon the whole value of the house must, in most cases, amount to more than a third of the building-rent, perhaps of the whole rent. The valuation, indeed, according to which the houses are rated, though very unequal, in said to be always below the real value. When a house is rebuilt, improved, or enlarged, there is a new valuation, and the tax is rated accordingly. The contrivers of the several taxes which in England have, at different times, been imposed upon houses, seem to have imagined that there was some great difficulty in ascertaining, with tolerable exactness, what was the real rent of every house. They have regulated their taxes, therefore, according to some more obvious circumstance, such as they had probably imagined would, in most cases, bear some proportion to the rent. The first tax of this kind was hearth-money; or a tax of two shillings upon every hearth. In order to ascertain how many hearths were in the house, it was necessary that the tax-gatherer should enter every room in it. This odious visit rendered the tax odious. Soon after the Revolution, therefore, it was abolished as a badge of slavery. The next tax of this kind was a tax of two shillings upon every dwelling-house inhabited. A house with ten windows to pay four shillings more. A house with twenty windows and upwards to pay eight shillings. This tax was afterwards so far altered, that houses with twenty windows, and with less than thirty, were ordered to pay ten shillings, and those with thirty windows and upwards to pay twenty shillings. The number of windows can, in most cases, be counted from the outside, and, in all cases, without entering every room in the house. The visit of the tax-gatherer, therefore, was less offensive in this tax than in the hearth-money. This tax was afterwards repealed, and in the room of it was established the window-tax, which has undergone two several alterations and augmentations. The window tax, as it stands at present (January 1775), over and above the duty of three shillings upon every house in England, and of one shilling upon every house in Scotland, lays a duty upon every window, which in England augments gradually from twopence, the lowest rate upon houses with not more than seven windows, to two shillings, the highest rate upon houses with twenty-five windows and upwards. The principal objection to all such taxes is their inequality; an inequality of the worst kind, as they must frequently fall much heavier upon the poor than upon the rich. A house of ten pounds rent in a country town, may sometimes have more windows than a house of five hundred pounds rent in London; and though the inhabitant of the former in likely to be a much poorer man than that of the latter, yet, so far as his contribution is regulated by the window tax, he must contribute more to the support of the state. Such taxes are, therefore, directly contrary to the first of the four maxims above mentioned. They do not seem to offend much against any of the other three. The natural tendency of the window tax, and of all other taxes upon houses, is to lower rents. The more a man pays for the tax, the less, it is evident, he can afford to pay for the rent. Since the imposition of the window tax, however, the rents of houses have, upon the whole, risen more or less, in almost every town and village of Great Britain, with which I am acquainted. Such has been, almost everywhere, the increase of the demand for houses, that it has raised the rents more than the window tax could sink them; one of the many proofs of the great prosperity of the country, and of the increasing revenue of its inhabitants. Had it not been for the tax, rents would probably have risen still higher. ART. II.--_Taxes upon Profit, or upon the Revenue arising from Stock._ The revenue or profit arising from stock naturally divides itself into two parts; that which pays the interest, and which belongs to the owner of the stock; and that surplus part which is over and above what is necessary for paying the interest. This latter part of profit is evidently a subject not taxable directly. It is the compensation, and, in most cases, it is no more than a very moderate compensation for the risk and trouble of employing the stock. The employer must have this compensation, otherwise he cannot, consistently with his own interest, continue the employment. If he was taxed directly, therefore, in proportion to the whole profit, he would be obliged either to raise the rate of his profit, or to charge the tax upon the interest of money; that is, to pay less interest. If he raised the rate of his profit in proportion to the tax, the whole tax, though it might be advanced by him, would be finally paid by one or other of two different sets of people, according to the different ways in which he might employ the stock of which he had the management. If he employed it as a farming stock, in the cultivation of land, he could raise the rate of his profit only by retaining a greater portion, or, what comes to the same thing, the price of a greater portion, of the produce of the land; and as this could be done only by a reduction of rent, the final payment of the tax would fall upon the landlord. If he employed it as a mercantile or manufacturing stock, he could raise the rate of his profit only by raising the price of his goods; in which case, the final payment of the tax would fall altogether upon the consumers of those goods. If he did not raise the rate of his profit, he would be obliged to charge the whole tax upon that part of it which was allotted for the interest of money. He could afford less interest for whatever stock he borrowed, and the whole weight of the tax would, in this case, fall ultimately upon the interest of money. So far as he could not relieve himself from the tax in the one way, he would be obliged to relieve himself in the other. The interest of money seems, at first sight, a subject equally capable of being taxed directly as the rent of land. Like the rent of land, it is a neat produce, which remains, after completely compensating the whole risk and trouble of employing the stock. As a tax upon the rent of land cannot raise rents, because the neat produce which remains, after replacing the stock of the farmer, together with his reasonable profit, cannot be greater after the tax than before it, so, for the same reason, a tax upon the interest of money could not raise the rate of interest; the quantity of stock or money in the country, like the quantity of land, being supposed to remain the same after the tax as before it. The ordinary rate of profit, it has been shewn, in the first book, is everywhere regulated by the quantity of stock to be employed, in proportion to the quantity of the employment, or of the business which must be done by it. But the quantity of the employment, or of the business to be done by stock, could neither be increased nor diminished by any tax upon the interest of money. If the quantity of the stock to be employed, therefore, was neither increased nor diminished by it, the ordinary rate of profit would necessarily remain the same. But the portion of this profit, necessary for compensating the risk and trouble of the employer, would likewise remain the same; that risk and trouble being in no respect altered. The residue, therefore, that portion which belongs to the owner of the stock, and which pays the interest of money, would necessarily remain the same too. At first sight, therefore, the interest of money seems to be a subject as fit to be taxed directly as the rent of land. There are, however, two different circumstances, which render the interest of money a much less proper subject of direct taxation than the rent of land. First, the quantity and value of the land which any man possesses, can never be a secret, and can always be ascertained with great exactness. But the whole amount of the capital stock which he possesses is almost always a secret, and can scarce ever be ascertained with tolerable exactness. It is liable, besides, to almost continual variations. A year seldom passes away, frequently not a month, sometimes scarce a single day, in which it does not rise or fall more or less. An inquisition into every man's private circumstances, and an inquisition which, in order to accommodate the tax to them, watched over all the fluctuations of his fortune, would be a source of such continual and endless vexation as no person could support. Secondly, land is a subject which cannot be removed; whereas stock easily may. The proprietor of land is necessarily a citizen of the particular country in which his estate lies. The proprietor of stock is properly a citizen of the world, and is not necessarily attached to any particular country. He would be apt to abandon the country in which he was exposed to a vexatious inquisition, in order to be assessed to a burdensome tax; and would remove his stock to some other country, where he could either carry on his business, or enjoy his fortune more at his ease. By removing his stock, he would put an end to all the industry which it had maintained in the country which he left. Stock cultivates land; stock employs labour. A tax which tended to drive away stock from any particular country, would so far tend to dry up every source of revenue, both to the sovereign and to the society. Not only the profits of stock, but the rent of land, and the wages of labour, would necessarily be more or less diminished by its removal. The nations, accordingly, who have attempted to tax the revenue arising from stock, instead of any severe inquisition of this kind, have been obliged to content themselves with some very loose, and, therefore, more or less arbitrary estimation. The extreme inequality and uncertainty of a tax assessed in this manner, can be compensated only by its extreme moderation; in consequence of which, every man finds himself rated so very much below his real revenue, that he gives himself little disturbance though his neighbour should be rated somewhat lower. By what is called the land tax in England, it was intended that the stock should be taxed in the same proportion as land. When the tax upon land was at four shillings in the pound, or at one-fifth of the supposed rent, it was intended that stock should be taxed at one-fifth of the supposed interest. When the present annual land tax was first imposed, the legal rate of interest was six per cent. Every hundred pounds stock, accordingly, was supposed to be taxed at twenty-four shillings, the fifth part of six pounds. Since the legal rate of interest has been reduced to five per cent. every hundred pounds stock is supposed to be taxed at twenty shillings only. The sum to be raised, by what is called the land tax, was divided between the country and the principal towns. The greater part of it was laid upon the country; and of what was laid upon the towns, the greater part was assessed upon the houses. What remained to be assessed upon the stock or trade of the towns (for the stock upon the land was not meant to be taxed) was very much below the real value of that stock or trade. Whatever inequalities, therefore, there might be in the original assessment, gave little disturbance. Every parish and district still continues to be rated for its land, its houses, and its stock, according to the original assessment; and the almost universal prosperity of the country, which, in most places, has raised very much the value of all these, has rendered those inequalities of still less importance now. The rate, too, upon each district, continuing always the same, the uncertainty of this tax, so far as it might be assessed upon the stock of any individual, has been very much diminished, as well as rendered of much less consequence. If the greater part of the lands of England are not rated to the land tax at half their actual value, the greater part of the stock of England is, perhaps, scarce rated at the fiftieth part of its actual value. In some towns, the whole land tax is assessed upon houses; as in Westminster, where stock and trade are free. It is otherwise in London. In all countries, a severe inquisition into the circumstances of private persons has been carefully avoided. At Hamburg,[60] every inhabitant is obliged to pay to the state one fourth per cent. of all that he possesses; and as the wealth of the people of Hamburg consists principally in stock, this tax may be considered as a tax upon stock. Every man assesses himself, and, in the presence of the magistrate, puts annually into the public coffer a certain sum of money, which he declares upon oath, to be one fourth per cent. of all that he possesses, but without declaring what it amounts to, or being liable to any examination upon that subject. This tax is generally supposed to be paid with great fidelity. In a small republic, where the people have entire confidence in their magistrates, are convinced of the necessity of the tax for the support of the state, and believe that it will be faithfully applied to that purpose, such conscientious and voluntary payment may sometimes be expected. It is not peculiar to the people of Hamburg. The canton of Underwald, in Switzerland, is frequently ravaged by storms and inundations, and it is thereby exposed to extraordinary expenses. Upon such occasions the people assemble, and every one is said to declare with the greatest frankness what he is worth, in order to be taxed accordingly. At Zurich, the law orders, that in cases of necessity, every one should be taxed in proportion to his revenue; the amount of which he is obliged to declare upon oath. They have no suspicion, it is said, that any of their fellow-citizens will deceive them. At Basil, the principal revenue of the state arises from a small custom upon goods exported. All the citizens make oath, that they will pay every three months all the taxes imposed by law. All merchants, and even all inn-keepers, are trusted with keeping themselves the account of the goods which they sell, either within or without the territory. At the end of every three months, they send this account to the treasurer, with the amount of the tax computed at the bottom of it. It is not suspected that the revenue suffers by this confidence.[61] To oblige every citizen to declare publicly upon oath, the amount of his fortune, must not, it seems, in those Swiss cantons, be reckoned a hardship. At Hamburg it would be reckoned the greatest. Merchants engaged in the hazardous projects of trade, all tremble at the thoughts of being obliged, at all times, to expose the real state of their circumstances. The ruin of their credit, and the miscarriage of their projects, they foresee, would too often be the consequence. A sober and parsimonious people, who are strangers to all such projects, do not feel that they have occasion for any such concealment. In Holland, soon after the exaltation of the late prince of Orange to the stadtholdership, a tax of two per cent. or the fiftieth penny, as it was called, was imposed upon the whole substance of every citizen. Every citizen assessed himself, and paid his tax, in the same manner as at Hamburg, and it was in general supposed to have been paid with great fidelity. The people had at that time the greatest affection for their new government, which they had just established by a general insurrection. The tax was to be paid but once, in order to relieve the state in a particular exigency. It was, indeed, too heavy to be permanent. In a country where the market rate of interest seldom exceeds three per cent., a tax of two per cent. amounts to thirteen shillings and four pence in the pound, upon the highest neat revenue which is commonly drawn from stock. It is a tax which very few people could pay, without encroaching more or less upon their capitals. In a particular exigency, the people may, from great public zeal, make a great effort, and give up even a part of their capital, in order to relieve the state. But it is impossible that they should continue to do so for any considerable time; and if they did, the tax would soon ruin them so completely, as to render them altogether incapable of supporting the state. The tax upon stock, imposed by the land tax bill in England, though it is proportioned to the capital, is not intended to diminish or take away any part of that capital. It is meant only to be a tax upon the interest of money, proportioned to that upon the rent of land; so that when the latter is at four shillings in the pound, the former may be at four shillings in the pound too. The tax at Hamburg, and the still more moderate taxes of Underwald and Zurich, are meant, in the same manner, to be taxes, not upon the capital, but upon the interest or neat revenue of stock. That of Holland was meant to be a tax upon the capital. _Taxes upon the Profit of particular Employments._ In some countries, extraordinary taxes are imposed upon the profits of stock; sometimes when employed in particular branches of trade, and sometimes when employed in agriculture. Of the former kind, are in England, the tax upon hawkers and pedlars, that upon hackney-coaches and chairs, and that which the keepers of ale-houses pay for a licence to retail ale and spiritous liquors. During the late war, another tax of the same kind was proposed upon shops. The war having been undertaken, it was said, in defence of the trade of the country, the merchants, who were to profit by it, ought to contribute towards the support of it. A tax, however, upon the profits of stock employed in any particular branch of trade, can never fall finally upon the dealers (who must in all ordinary cases have their reasonable profit, and, where the competition is free, can seldom have more than that profit), but always upon the consumers, who must be obliged to pay in the price of the goods the tax which the dealer advances; and generally with some overcharge. A tax of this kind, when it is proportioned to the trade of the dealer, is finally paid by the consumer, and occasions no oppression to the dealer. When it is not so proportioned, but is the same upon all dealers, though in this case, too, it is finally paid by the consumer, yet it favours the great, and occasions some oppression to the small dealer. The tax of five shillings a-week upon every hackney coach, and that of ten shillings a-year upon every hackney chair, so far as it is advanced by the different keepers of such coaches and chairs, is exactly enough proportioned to the extent of their respective dealings. It neither favours the great, nor oppresses the smaller dealer. The tax of twenty shillings a-year for a licence to sell ale; of forty shillings for a licence to sell spiritous liquors; and of forty shillings more for a licence to sell wine, being the same upon all retailers, must necessarily give some advantage to the great, and occasion some oppression to the small dealers. The former must find it more easy to get back the tax in the price of their goods than the latter. The moderation of the tax, however, renders this inequality of less importance; and it may to many people appear not improper to give some discouragement to the multiplication of little ale-houses. The tax upon shops, it was intended, should be the same upon all shops. It could not well have been otherwise. It would have been impossible to proportion, with tolerable exactness, the tax upon a shop to the extent of the trade carried on in it, without such an inquisition as would have been altogether insupportable in a free country. If the tax had been considerable, it would have oppressed the small, and forced almost the whole retail trade into the hands of the great dealers. The competition of the former being taken away, the latter would have enjoyed a monopoly of the trade; and, like all other monopolists, would soon have combined to raise their profits much beyond what was necessary for the payment of the tax. The final payment, instead of falling upon the shop-keeper, would have fallen upon the consumer, with a considerable overcharge to the profit of the shop-keeper. For these reasons, the project of a tax upon shops was laid aside, and in the room of it was substituted the subsidy, 1759. What in France is called the personal taille, is perhaps, the most important tax upon the profits of stock employed in agriculture, that is levied in any part of Europe. In the disorderly state of Europe, during the prevalence of the feudal government, the sovereign was obliged to content himself with taxing those who were too weak to refuse to pay taxes. The great lords, though willing to assist him upon particular emergencies, refused to subject themselves to any constant tax, and he was not strong enough to force them. The occupiers of land all over Europe were, the greater part of them, originally bond-men. Through the greater part of Europe, they were gradually emancipated. Some of them acquired the property of landed estates, which they held by some base or ignoble tenure, sometimes under the king, and sometimes under some other great lord, like the ancient copy-holders of England. Others, without acquiring the property, obtained leases for terms of years, of the lands which they occupied under their lord, and thus became less dependent upon him. The great lords seem to have beheld the degree of prosperity and independency, which this inferior order of men had thus come to enjoy, with a malignant and contemptuous indignation, and willingly consented that the sovereign should tax them. In some countries, this tax was confined to the lands which were held in property by an ignoble tenure; and, in this case, the taille was said to be real. The land tax established by the late king of Sardinia, and the taille in the provinces of Languedoc, Provence, Dauphine, and Brittany; in the generality of Montauban, and in the elections of Agen and Condom, as well as in some other districts of France; are taxes upon lands held in property by an ignoble tenure. In other countries, the tax was laid upon the supposed profits of all those who held, in farm or lease, lands belonging to other people, whatever might be the tenure by which the proprietor held them; and in this case, the taille was said to be personal. In the greater part of those provinces of France, which are called the countries of elections, the taille is of this kind. The real taille, as it is imposed only upon a part of the lands of the country, is necessarily an unequal, but it is not always an arbitrary tax, though it is so upon some occasions. The personal taille, as it is intended to be proportioned to the profits of a certain class of people, which can only be guessed at, is necessarily both arbitrary and unequal. In France, the personal taille at present (1775) annually imposed upon the twenty generalities, called the countries of elections, amounts to 40,107,239 livres, 16 sous.[62] The proportion in which this sum is assessed upon those different provinces, varies from year to year, according to the reports which are made to the king's council concerning the goodness or badness of the crops, as well as other circumstances, which may either increase or diminish their respective abilities to pay. Each generality is divided into a certain number of elections; and the proportion in which the sum imposed upon the whole generality is divided among those different elections, varies likewise from year to year, according to the reports made to the council concerning their respective abilities. It seems impossible, that the council, with the best intentions, can ever proportion, with tolerable exactness, either of these two assessments to the real abilities of the province or district upon which they are respectively laid. Ignorance and misinformation must always, more or less, mislead the most upright council. The proportion which each parish ought to support of what is assessed upon the whole election, and that which each individual ought to support of what is assessed upon his particular parish, are both in the same manner varied from year to year, according as circumstances are supposed to require. These circumstances are judged of, in the one case, by the officers of the election, in the other, by those of the parish; and both the one and the other are, more or less, under the direction and influence of the intendant. Not only ignorance and misinformation, but friendship, party animosity, and private resentment, are said frequently to mislead such assessors. No man subject to such a tax, it is evident, can ever be certain, before he is assessed, of what he is to pay. He cannot even be certain after he is assessed. If any person has been taxed who ought to have been exempted, or if any person has been taxed beyond his proportion, though both must pay in the mean time, yet if they complain, and make good their complaints, the whole parish is reimposed next year, in order to reimburse them. If any of the contributors become bankrupt or insolvent, the collector is obliged to advance his tax; and the whole parish is reimposed next year, in order to reimburse the collector. If the collector himself should become bankrupt, the parish which elects him must answer for his conduct to the receiver-general of the election. But, as it might be troublesome for the receiver to prosecute the whole parish, he takes at his choice five or six of the richest contributors, and obliges them to make good what had been lost by the insolvency of the collector. The parish is afterwards reimposed, in order to reimburse those five or six. Such reimpositions are always over and above the taille of the particular year in which they are laid on. When a tax is imposed upon the profits of stock in a particular branch of trade, the traders are all careful to bring no more goods to market than what they can sell at a price sufficient to reimburse them from advancing the tax. Some of them withdraw a part of their stocks from the trade, and the market is more sparingly supplied than before. The price of the goods rises, and the final payment of the tax falls upon the consumer. But when a tax is imposed upon the profits of stock employed in agriculture, it is not the interest of the farmers to withdraw any part of their stock from that employment. Each farmer occupies a certain quantity of land, for which he pays rent. For the proper cultivation of this land, a certain quantity of stock is necessary; and by withdrawing any part of this necessary quantity, the farmer is not likely to be more able to pay either the rent or the tax. In order to pay the tax, it can never be his interest to diminish the quantity of his produce, nor consequently to supply the market more sparingly than before. The tax, therefore, will never enable him to raise the price of his produce, so as to reimburse himself, by throwing the final payment upon the consumer. The farmer, however, must have his reasonable profit as well as every other dealer, otherwise he must give up the trade. After the imposition of a tax of this kind, he can get this reasonable profit only by paying less rent to the landlord. The more he is obliged to pay in the way of tax, the less he can afford to pay in the way of rent. A tax of this kind, imposed during the currency of a lease, may, no doubt, distress or ruin the farmer. Upon the renewal of the lease, it must always fall upon the landlord. In the countries where the personal taille takes place, the farmer is commonly assessed in proportion to the stock which he appears to employ in cultivation. He is, upon this account, frequently afraid to have a good team of horses or oxen, but endeavours to cultivate with the meanest and most wretched instruments of husbandry that he can. Such is his distrust in the justice of his assessors, that he counterfeits poverty, and wishes to appear scarce able to pay any thing, for fear of being obliged to pay too much. By this miserable policy, he does not, perhaps, always consult his own interest in the most effectual manner; and he probably loses more by the diminution of his produce, than he saves by that of his tax. Though, in consequence of this wretched cultivation, the market is, no doubt, somewhat worse supplied; yet, the small rise of price which this may occasion, as it is not likely even to indemnify the farmer for the diminution of his produce, it is still less likely to enable him to pay more rent to the landlord. The public, the farmer, the landlord, all suffer more or less by this degraded cultivation. That the personal taille tends, in many different ways, to discourage cultivation, and consequently to dry up the principal source of the wealth of every great country, I have already had occasion to observe in the third book of this Inquiry. What are called poll-taxes in the southern provinces of North America, and the West India islands, annual taxes of so much a-head upon every negro, are properly taxes upon the profits of a certain species of stock employed in agriculture. As the planters, are the greater part of them, both farmers and landlords, the final payment of the tax falls upon them in their quality of landlords, without any retribution. Taxes of so much a head upon the bondmen employed in cultivation, seem anciently to have been common all over Europe. There subsists at present a tax of this kind in the empire of Russia. It is probably upon this account that poll-taxes of all kinds have often been represented as badges of slavery. Every tax, however, is to the person who pays it, a badge, not of slavery, but of liberty. It denotes that he is subject to government, indeed; but that, as he has some property, he cannot himself be the property of a master. A poll-tax upon slaves is altogether different from a poll-tax upon freemen. The latter is paid by the persons upon whom it is imposed; the former, by a different set of persons. The latter is either altogether arbitrary, or altogether unequal, and, in most cases, is both the one and the other; the former, though in some respects unequal, different slaves being of different values, is in no respect arbitrary. Every master, who knows the number of his own slaves, knows exactly what he has to pay. Those different taxes, however, being called by the same name, have been considered as of the same nature. The taxes which in Holland are imposed upon men and maid servants, are taxes, not upon stock, but upon expense; and so far resemble the taxes upon consumable commodities. The tax of a guinea a-head for every man-servant, which has lately been imposed in Great Britain, is of the same kind. It falls heaviest upon the middling rank. A man of two hundred a-year may keep a single man-servant. A man of ten thousand a-year will not keep fifty. It does not affect the poor. Taxes upon the profits of stock, in particular employments, can never affect the interest of money. Nobody will lend his money for less interest to those who exercise the taxed, than to those who exercise the untaxed employments. Taxes upon the revenue arising from stock in all employments, where the government attempts to levy them with any degree of exactness, will, in many cases, fall upon the interest of money. The vingtieme, or twentieth penny, in France, is a tax of the same kind with what is called the land tax in England, and is assessed, in the same manner, upon the revenue arising upon land, houses, and stock. So far as it affects stock, it is assessed, though not with great rigour, yet with much more exactness than that part of the land tax in England which is imposed upon the same fund. It, in many cases, falls altogether upon the interest of money. Money is frequently sunk in France, upon what are called contracts for the constitution of a rent; that is, perpetual annuities, redeemable at any time by the debtor, upon payment of the sum originally advanced, but of which this redemption is not exigible by the creditor except in particular cases. The vingtieme seems not to have raised the rate of those annuities, though it is exactly levied upon them all. APPENDIX TO ARTICLES I. AND II.--_Taxes upon the Capital Value of Lands, Houses, and Stock._ While property remains in the possession of the same person, whatever permanent taxes may have been imposed upon it, they have never been intended to diminish or take away any part of its capital value, but only some part of the revenue arising from it. But when property changes hands, when it is transmitted either from the dead to the living, or from the living to the living, such taxes have frequently been imposed upon it as necessarily take away some part of its capital value. The transference of all sorts of property from the dead to the living, and that of immoveable property of land and houses from the living to the living, are transactions which are in their nature either public and notorious, or such as cannot be long concealed. Such transactions, therefore, may be taxed directly. The transference of stock or moveable property, from the living to the living, by the lending of money, is frequently a secret transaction, and may always be made so. It cannot easily, therefore, be taxed directly. It has been taxed indirectly in two different ways; first, by requiring that the deed, containing the obligation to repay, should be written upon paper or parchment which had paid a certain stamp duty, otherwise not to be valid; secondly, by requiring, under the like penalty of invalidity, that it should be recorded either in a public or secret register, and by imposing certain duties upon such registration. Stamp duties, and duties of registration, have frequently been imposed likewise upon the deeds transferring property of all kinds from the dead to the living, and upon those transferring immoveable property from the living to the living; transactions which might easily have been taxed directly. The vicesima hereditatum, or the twentieth penny of inheritances, imposed by Augustus upon the ancient Romans, was a tax upon the transference of property from the dead to the living. Dion Cassius,[63] the author who writes concerning it the least indistinctly, says, that it was imposed upon all successions, legacies and donations, in case of death, except upon those to the nearest relations, and to the poor. Of the same kind is the Dutch tax upon successions.[64] Collateral successions are taxed according to the degree of relation, from five to thirty per cent. upon the whole value of the succession. Testamentary donations, or legacies to collaterals, are subject to the like duties. Those from husband to wife, or from wife to husband, to the fiftieth penny. The luctuosa hereditas, the mournful succession of ascendants to descendants, to the twentieth penny only. Direct successions, or those of descendants to ascendants, pay no tax. The death of a father, to such of his children as live in the same house with him, is seldom attended with any increase, and frequently with a considerable diminution of revenue; by the loss of his industry, of his office, or of some life-rent estate, of which he may have been in possession. That tax would be cruel and oppressive, which aggravated their loss, by taking from them any part of his succession. It may, however, sometimes be otherwise with those children, who, in the language of the Roman law, are said to be emancipated; in that of the Scotch law, to be foris-familiated; that is, who have received their portion, have got families of their own, and are supported by funds separate and independent of those of their father. Whatever part of his succession might come to such children, would be a real addition to their fortune, and might, therefore, perhaps, without more inconveniency than what attends all duties of this kind, be liable to some tax. The casualties of the feudal law were taxes upon the transference of land, both from the dead to the living, and from the living to the living. In ancient times, they constituted, in every part of Europe, one of the principal branches of the revenue of the crown. The heir of every immediate vassal of the crown paid a certain duty, generally a year's rent, upon receiving the investiture of the estate. If the heir was a minor, the whole rents of the estate, during the continuance of the minority, devolved to the superior, without any other charge besides the maintenance of the minor, and the payment of the widow's dower, when there happened to be a dowage upon the land. When the minor came to be of age, another tax, called relief, was still due to the superior, which generally amounted likewise to a year's rent. A long minority, which, in the present times, so frequently disburdens a great estate of all its incumbrances, and restores the family to their ancient splendour, could in those times have no such effect. The waste, and not the disincumbrance of the estate, was the common effect of a long minority. By a feudal law, the vassal could not alienate without the consent of his superior, who generally extorted a fine or composition on granting it. This fine, which was at first arbitrary, came, in many countries, to be regulated at a certain portion of the price of the land. In some countries, where the greater part of the other feudal customs have gone into disuse, this tax upon the alienation of land still continues to make a very considerable branch of the revenue of the sovereign. In the canton of Berne it is so high as a sixth part of the price of all noble fiefs, and a tenth part of that of all ignoble ones.[65] In the canton of Lucern, the tax upon the sale of land is not universal, and takes place only in certain districts. But if any person sells his land in order to remove out of the territory, he pays ten per cent. upon the whole price of the sale.[66] Taxes of the same kind, upon the sale either of all lands, or of lands held by certain tenures, take place in many other countries, and make a more or less considerable branch of the revenue of the sovereign. Such transactions may be taxed indirectly, by means either of stamp duties, or of duties upon registration; and those duties either may, or may not, be proportioned to the value of the subject which is transferred. In Great Britain, the stamp duties are higher or lower, not so much according to the value of the property transferred (an eighteen-penny or half-crown stamp being sufficient upon a bond for the largest sum of money), as according to the nature of the deed. The highest do not exceed six pounds upon every sheet of paper, or skin of parchment; and these high duties fall chiefly upon grants from the crown, and upon certain law proceedings, without any regard to the value of the subject. There are, in Great Britain, no duties on the registration of deeds or writings, except the fees of the officers who keep the register; and these are seldom more than a reasonable recompense for their labour. The crown derives no revenue from them. In Holland[67] there are both stamp duties and duties upon registration; which in some cases are, and in some are not, proportioned to the value of the property transferred. All testaments must be written upon stamped paper, of which the price is proportioned to the property disposed of; so that there are stamps which cost from three pence or three stivers a-sheet, to three hundred florins, equal to about twenty-seven pounds ten shillings of our money. If the stamp is of an inferior price to what the testator ought to have made use of, his succession is confiscated. This is over and above all their other taxes on succession. Except bills of exchange, and some other mercantile bills, all other deeds, bonds, and contracts, are subject to a stamp duty. This duty, however, does not rise in proportion to the value of the subject. All sales of land and of houses, and all mortgages upon either, must be registered, and, upon registration, pay a duty to the state of two and a-half per cent. upon the amount of the price or of the mortgage. This duty is extended to the sale of all ships and vessels of more than two tons burden, whether decked or undecked. These, it seems, are considered as a sort of houses upon the water. The sale of moveables, when it is ordered by a court of justice, is subject to the like duty of two and a-half per cent. In France, there are both stamp duties and duties upon registration. The former are considered as a branch of the aids of excise, and, in the provinces where those duties take place, are levied by the excise officers. The latter are considered as a branch of the domain of the crown, and are levied by a different set of officers. Those modes of taxation by stamp duties and by duties upon registration, are of very modern invention. In the course of little more than a century, however, stamp duties have, in Europe, become almost universal, and duties upon registration extremely common. There is no art which one government sooner learns of another, than that of draining money from the pockets of the people. Taxes upon the transference of property from the dead to the living, fall finally, as well as immediately, upon the persons to whom the property is transferred. Taxes upon the sale of land fall altogether upon the seller. The seller is almost always under the necessity of selling, and must, therefore, take such a price as he can get. The buyer is scarce ever under the necessity of buying, and will, therefore, only give such a price as he likes. He considers what the land will cost him, in tax and price together. The more he is obliged to pay in the way of tax, the less he will be disposed to give in the way of price. Such taxes, therefore, fall almost always upon a necessitous person, and must, therefore, be frequently very cruel and oppressive. Taxes upon the sale of new-built houses, where the building is sold without the ground, fall generally upon the buyer, because the builder must generally have his profit; otherwise he must give up the trade. If he advances the tax, therefore, the buyer must generally repay it to him. Taxes upon the sale of old houses, for the same reason as those upon the sale of land, fall generally upon the seller; whom, in most cases, either conveniency or necessity obliges to sell. The number of new-built houses that are annually brought to market, is more or less regulated by the demand. Unless the demand is such as to afford the builder his profit, after paying all expenses, he will build no more houses. The number of old houses which happen at any time to come to market, is regulated by accidents, of which the greater part have no relation to the demand. Two or three great bankruptcies in a mercantile town, will bring many houses to sale, which must be sold for what can be got for them. Taxes upon the sale of ground-rents fall altogether upon the seller, for the same reason as those upon the sale of lands. Stamp duties, and duties upon the registration of bonds and contracts for borrowed money, fall altogether upon the borrower, and, in fact, are always paid by him. Duties of the same kind upon law proceedings fall upon the suitors. They reduce to both the capital value of the subject in dispute. The more it costs to acquire any property, the less must be the neat value of it when acquired. All taxes upon the transference of property of every kind, so far as they diminish the capital value of that property, tend to diminish the funds destined for the maintenance of productive labour. They are all more or less unthrifty taxes that increase the revenue of the sovereign, which seldom maintains any but unproductive labourers, at the expense of the capital of the people, which maintains none but productive. Such taxes, even when they are proportioned to the value of the property transferred, are still unequal; the frequency of transference not being always equal in property of equal value. When they are not proportioned to this value, which is the case with the greater part of the stamp duties and duties of registration, they are still more so. They are in no respect arbitrary, but are, or may be, in all cases, perfectly clear and certain. Though they sometimes fall upon the person who is not very able to pay, the time of payment is, in most cases, sufficiently convenient for him. When the payment becomes due, he must, in most cases, have the money to pay. They are levied at very little expense, and in general subject the contributors to no other inconveniency, besides always the unavoidable one of paying the tax. In France, the stamp duties are not much complained of. Those of registration, which they call the Controle, are. They give occasion, it is pretended, to much extortion in the officers of the farmers-general who collect the tax, which is in a great measure arbitrary and uncertain. In the greater part of the libels which have been written against the present system of finances in France, the abuses of the controle make a principal article. Uncertainty, however, does not seem to be necessarily inherent in the nature of such taxes. If the popular complaints are well founded, the abuse must arise, not so much from the nature of the tax as from the want of precision and distinctness in the words of the edicts or laws which impose it. The registration of mortgages, and in general of all rights upon immoveable property, as it gives great security both to creditors and purchasers, is extremely advantageous to the public. That of the greater part of deeds of other kinds, is frequently inconvenient and even dangerous to individuals, without any advantage to the public. All registers which, it is acknowledged, ought to be kept secret, ought certainly never to exist. The credit of individuals ought certainly never to depend upon so very slender a security, as the probity and religion of the inferior officers of revenue. But where the fees of registration have been made a source of revenue to the sovereign, register-offices have commonly been multiplied without end, both for the deeds which ought to be registered, and for those which ought not. In France there are several different sorts of secret registers. This abuse, though not perhaps a necessary, it must be acknowledged, is a very natural effect of such taxes. Such stamp duties as those in England upon cards and dice, upon newspapers and periodical pamphlets, &c. are properly taxes upon consumption; the final payment falls upon the persons who use or consume such commodities. Such stamp duties as those upon licences to retail ale, wine, and spiritous liquors, though intended, perhaps, to fall upon the profits of the retailers, are likewise finally paid by the consumers of those liquors. Such taxes, though called by the same name, and levied by the same officers, and in the same manner with the stamp duties above mentioned upon the transference of property, are, however, of a quite different nature, and fall upon quite different funds. ART. III.--_Taxes upon the Wages of Labour._ The wages of the inferior classes of workmen, I have endeavoured to show in the first book are everywhere necessarily regulated by two different circumstances; the demand for labour, and the ordinary or average price of provisions. The demand for labour, according as it happens to be either increasing, stationary or declining; or to require an increasing, stationary, or declining population; regulates the subsistence of the labourer, and determines in what degree it shall be either liberal, moderate, or scanty. The ordinary average price of provisions determines the quantity of money which must be paid to the workman, in order to enable him, one year with another, to purchase this liberal, moderate, or scanty subsistence. While the demand for the labour and the price of provisions, therefore, remain the same, a direct tax upon the wages of labour can have no other effect, than to raise them somewhat higher than the tax. Let us suppose, for example, that, in particular place, the demand for labour and the price of provisions were such as to render ten shillings a-week the ordinary wages of labour; and that a tax of one-fifth, or four shillings in the pound, was imposed upon wages. If the demand for labour and the price of provisions remained the same, it would still be necessary that the labourer should, in that place, earn such a subsistence as could be bought only for ten shillings a-week; or that, after paying the tax, he should have ten shillings a-week free wages. But, in order to leave him such free wages, after paying such a tax, the price of labour must, in that place, soon rise, not to twelve shillings a-week only, but to twelve and sixpence; that is, in order to enable him to pay a tax of one-fifth, his wages must necessarily soon rise, not one-fifth part only, but one-fourth. Whatever was the proportion of the tax, the wages of labour must, in all cases rise, not only in that proportion, but in a higher proportion. If the tax for example, was one-tenth, the wages of labour must necessarily soon rise, not one-tenth part only, but one-eighth. A direct tax upon the wages of labour, therefore, though the labourer might, perhaps, pay it out of his hand, could not properly be said to be even advanced by him; at least if the demand for labour and the average price of provisions remained the same after the tax as before it. In all such cases, not only the tax, but something more than the tax, would in reality be advanced by the person who immediately employed him. The final payment would, in different cases, fall upon different persons. The rise which such a tax might occasion in the wages of manufacturing labour would be advanced by the master manufacturer, who would both be entitled and obliged to charge it, with a profit, upon the price of his goods. The final payment of this rise of wages, therefore, together with the additional profit of the master manufacturer, would fall upon the consumer. The rise which such a tax might occasion in the wages of country labour would be advanced by the farmer, who, in order to maintain the name number of labourers as before, would he obliged to employ a greater capital. In order to get back this greater capital, together with the ordinary profits of stock, it would be necessary that he should retain a larger portion, or, what comes to the same thing, the price of a larger portion, of the produce of the land, and, consequently, that he should pay less rent to the landlord. The final payment of this rise of wages, therefore, would, in this case, fall upon the landlord, together with the additional profit of the farmer who had advanced it. In all cases, a direct tax upon the wages of labour must, in the long-run, occasion both a greater reduction in the rent of land, and a greater rise in the price of manufactured goods than would have followed from the proper assessment of a sum equal to the produce of the tax, partly upon the rent of land, and partly upon consumable commodities. If direct taxes upon the wages of labour have not always occasioned a proportionable rise in those wages, it is because they have generally occasioned a considerable fall in the demand of labour. The declension of industry, the decrease of employment for the poor, the diminution of the annual produce of the land and labour of the country, have generally been the effects of such taxes. In consequence of them, however, the price of labor must always be higher than it otherwise would have been in the actual state of the demand; and this enhancement of price, together with the profit of those who advance it, must always be finally paid by the landlords and consumers. A tax upon the wages of country labour does not raise the price of the rude produce of land in proportion to the tax; for the same reason that a tax upon the farmer's profit does not raise that price in that proportion. Absurd and destructive as such taxes are, however, they take place in many countries. In France, that part of the taille which is charged upon the industry of workmen and day-labourers in country villages, is properly a tax of this kind. Their wages are computed according to the common rate of the district in which they reside; and, that they may be as little liable as possible to any overcharge, their yearly gains are estimated at no more than two hundred working days in the year.[68] The tax of each individual is varied from year to year, according to different circumstances, of which the collector or the commissary, whom the intendant appoints to assist him, are the judges. In Bohemia, in consequence of the alteration in the system of finances which was begun in 1748, a very heavy tax is imposed upon the industry of artificers. They are divided into four classes. The highest class pay a hundred florins a-year, which, at two-and-twenty pence half penny a-florin, amounts to L.9 : 7 : 6. The second class are taxed at seventy; the third at fifty; and the fourth, comprehending artificers in villages, and the lowest class of those in towns, at twenty-five florins.[69] The recompence of ingenious artists, and of men of liberal professions, I have endeavoured to show in the first book, necessarily keeps a certain proportion to the emoluments of inferior trades. A tax upon this recompence, therefore, could have no other effect than to raise it somewhat higher than in proportion to the tax. If it did not rise in this manner, the ingenious arts and the liberal professions, being no longer upon a level with other trades, would be so much deserted, that they would soon return to that level. The emoluments of offices are not, like those of trades and professions, regulated by the free competition of the market, and do not, therefore, always bear a just proportion to what the nature of the employment requires. They are, perhaps, in most countries, higher than it requires; the persons who have the administration of government being generally disposed to regard both themselves and their immediate dependents, rather more than enough. The emoluments offices, therefore, can, in most cases, very well bear to be taxed. The persons, besides, who enjoy public offices, especially the more lucrative, are, in all countries, the objects of general envy; and a tax upon their emoluments, even though it should be somewhat higher than upon any other sort of revenue, is always a very popular tax. In England, for example, when, by the land-tax, every other sort of revenue was supposed to be assessed at four shillings in the pound, it was very popular to lay a real tax of five shillings and sixpence in the pound upon the salaries of offices which exceeded a hundred pounds a-year; the pensions of the younger branches of the royal family, the pay of the officers of the army and navy, and a few others less obnoxious to envy, excepted. There are in England no other direct taxes upon the wages of labour. ART. IV.--_Taxes which it is intended should fall indifferently upon every different Species of Revenue._ The taxes which it is intended should fall indifferently upon every different species of revenue, are capitation taxes, and taxes upon consumable commodities. These must be paid indifferently, from whatever revenue the contributors may possess; from the rent of their land, from the profits of their stock, or from the wages of their labour. _Capitation Taxes._ Capitation taxes, if it is attempted to proportion them to the fortune or revenue of each contributor, become altogether arbitrary. The state of a man's fortune varies from day to day; and, without an inquisition, more intolerable than any tax, and renewed at least once every year, can only be guessed at. His assessment, therefore, must, in most cases, depend upon the good or bad humour of his assessors, and must, therefore, be altogether arbitrary and uncertain. Capitation taxes, if they are proportioned, not to the supposed fortune, but to the rank of each contributor, become altogether unequal; the degrees of fortune being frequently unequal in the same degree of rank. Such taxes, therefore, if it is attempted to render them equal, become altogether arbitrary and uncertain; and if it is attempted to render them certain and not arbitrary, become altogether unequal. Let the tax be light or heavy, uncertainty is always a great grievance. In a light tax, a considerable degree of inequality may be supported; in a heavy one, it is altogether intolerable. In the different poll-taxes which took place in England during the reign of William III. the contributors were, the greater part of them, assessed according to the degree of their rank; as dukes, marquises, earls, viscounts, barons, esquires, gentlemen, the eldest and youngest sons of peers, &c. All shop-keepers and tradesmen worth more than three hundred pounds, that is, the better sort of them, were subject to the same assessment, how great soever might be the difference in their fortunes. Their rank was more considered than their fortune. Several of those who, in the first poll-tax, were rated according to their supposed fortune, were afterwards rated according to their rank. Serjeants, attorneys, and proctors at law, who, in the first poll-tax, were assessed at three shillings in the pound of their supposed income, were afterwards assessed as gentlemen. In the assessment of a tax which was not very heavy, a considerable degree of inequality had been found less insupportable than any degree of uncertainty. In the capitation which has been levied in France, without any interruption, since the beginning of the present century, the highest orders of people are rated according to their rank, by an invariable tariff; the lower orders of people, according to what is supposed to be their fortune, by an assessment which varies from year to year. The officers of the king's court, the judges, and other officers in the superior courts of justice, the officers of the troops, &c. are assessed in the first manner. The inferior ranks of people in the provinces are assessed in the second. In France, the great easily submit to a considerable degree of inequality in a tax which, so far as it affects them, is not a very heavy one; but could not brook the arbitrary assessment of an intendant. The inferior ranks of people must, in that country, suffer patiently the usage which their superiors think proper to give them. In England, the different poll-taxes never produced the sum which had been expected from them, or which it was supposed they might have produced, had they been exactly levied. In France, the capitation always produces the sum expected from it. The mild government of England, when it assessed the different ranks of people to the poll-tax, contented itself with what that assessment happened to produce, and required no compensation for the loss which the state might sustain, either by those who could not pay, or by those who would not pay (for there were many such), and who, by the indulgent execution of the law, were not forced to pay. The more severe government of France assesses upon each generality a certain sum, which the intendant must find as he can. If any province complains of being assessed too high, it may, in the assessment of next year, obtain an abatement proportioned to the overcharge of the year before; but it must pay in the mean time. The intendant, in order to be sure of finding the sum assessed upon his generality, was empowered to assess it in a larger sum, that the failure or inability of some of the contributors might be compensated by the overcharge of the rest; and till 1765, the fixation of this surplus assessment was left altogether to his discretion. In that year, indeed, the council assumed this power to itself. In the capitation of the provinces, it is observed by the perfectly well informed author of the Memoirs upon the Impositions in France, the proportion which falls upon the nobility, and upon those whose privileges exempt them from the taille, is the least considerable. The largest falls upon those subject to the taille, who are assessed to the capitation at so much a-pound of what they pay to that other tax. Capitation taxes, so far as they are levied upon the lower ranks of people, are direct taxes upon the wages of labour, and are attended with all the inconveniencies of such taxes. Capitation taxes are levied at little expense; and, where they are rigorously exacted, afford a very sure revenue to the state. It is upon this account that, in countries where the ease, comfort, and security of the inferior ranks of people are little attended to, capitation taxes are very common. It is in general, however, but a small part of the public revenue, which, in a great empire, has ever been drawn from such taxes; and the greatest sum which they have ever afforded, might always have been found in some other way much more convenient to the people. _Taxes upon Consumable Commodities._ The impossibility of taxing the people, in proportion to their revenue, by any capitation, seems to have given occasion to the invention of taxes upon consumable commodities. The state not knowing how to tax, directly and proportionably, the revenue of its subjects, endeavours to tax it indirectly by taxing their expense, which, it is supposed, will, in most cases, be nearly in proportion to their revenue. Their expense is taxed, by taxing the consumable commodities upon which it is laid out. Consumable commodities are either necessaries or luxuries. By necessaries I understand, not only the commodities which are indispensibly necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably, though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty, which, it is presumed, nobody can well fall into without extreme bad conduct. Custom, in the same manner, has rendered leather shoes a necessary of life in England. The poorest creditable person, of either sex, would be ashamed to appear in public without them. In Scotland, custom has rendered them a necessary of life to the lowest order of men; but not to the same order of women, who may, without any discredit, walk about barefooted. In France, they are necessaries neither to men nor to women; the lowest rank of both sexes appearing there publicly, without any discredit, sometimes in wooden shoes, and sometimes barefooted. Under necessaries, therefore, I comprehend, not only those things which nature, but those things which the established rules of decency have rendered necessary to the lowest rank of people. All other things I call luxuries, without meaning, by this appellation, to throw the smallest degree of reproach upon the temperate use of them. Beer and ale, for example, in Great Britain, and wine, even in the wine countries, I call luxuries. A man of any rank may, without any reproach, abstain totally from tasting such liquors. Nature does not render them necessary for the support of life; and custom nowhere renders it indecent to live without them. As the wages of labour are everywhere regulated, partly by the demand for it, and partly by the average price of the necessary articles of subsistence; whatever raises this average price must necessarily raise those wages; so that the labourer may still be able to purchase that quantity of those necessary articles which the state of the demand for labour, whether increasing, stationary, or declining, requires that he should have.[70] A tax upon those articles necessarily raises their price somewhat higher than the amount of the tax, because the dealer, who advances the tax, must generally get it back, with a profit. Such a tax must, therefore, occasion a rise in the wages of labour, proportionable to this rise of price. It is thus that a tax upon the necessaries of life operates exactly in the same manner as a direct tax upon the wages of labour. The labourer, though he may pay it out of his hand, cannot, for any considerable time at least, be properly said even to advance it. It must always, in the long-run, be advanced to him by his immediate employer, in the advanced state of wages. His employer, if he is a manufacturer, will charge upon the price of his goods the rise of wages, together with a profit, so that the final payment of the tax, together with this overcharge, will fall upon the consumer. If his employer is a farmer, the final payment, together with a like overcharge, will fall upon the rent of the landlord. It is otherwise with taxes upon what I call luxuries, even upon those of the poor. The rise in the price of the taxed commodities, will not necessarily occasion any rise in the wages of labour. A tax upon tobacco, for example, though a luxury of the poor, as well as of the rich, will not raise wages. Though it is taxed in England at three times, and in France at fifteen times its original price, those high duties seem to have no effect upon the wages of labour. The same thing may be said of the taxes upon tea and sugar, which, in England and Holland, have become luxuries of the lowest ranks of people; and of those upon chocolate, which, in Spain, is said to have become so. The different taxes which, in Great Britain, have, in the course of the present century, been imposed upon spiritous liquors, are not supposed to have had any effect upon the wages of labour. The rise in the price of porter, occasioned by an additional tax of three shillings upon the barrel of strong beer, has not raised the wages of common labour in London. These were about eighteen pence or twenty pence a-day before the tax, and they are not more now. The high price of such commodities does not necessarily diminish the ability of the inferior ranks of people to bring up families. Upon the sober and industrious poor, taxes upon such commodities act as sumptuary laws, and dispose them either to moderate, or to refrain altogether from the use of superfluities which they can no longer easily afford. Their ability to bring up families, in consequence of this forced frugality, instead of being diminished, is frequently, perhaps, increased by the tax. It is the sober and industrious poor who generally bring up the most numerous families, and who principally supply the demand for useful labour. All the poor, indeed, are not sober and industrious; and the dissolute and disorderly might continue to indulge themselves in the use of such commodities, after this rise of price, in the same manner as before, without regarding the distress which this indulgence might bring upon their families. Such disorderly persons, however, seldom rear up numerous families, their children generally perishing from neglect, mismanagement, and the scantiness or unwholesomeness of their food. If, by the strength of their constitution, they survive the hardships to which the bad conduct of their parents exposes them, yet the example of that bad conduct commonly corrupts their morals; so that, instead of being useful to society by their industry, they become public nuisances by their vices and disorders. Though the advanced price of the luxuries of the poor, therefore, might increase somewhat the distress of such disorderly families, and thereby diminish somewhat their ability to bring up children, it would not probably diminish much the useful population of the country. Any rise in the average price of necessaries, unless it be compensated by a proportionable rise in the wages of labour, must necessarily diminish, more or less, the ability of the poor to bring up numerous families, and, consequently, to supply the demand for useful labour; whatever may be the state of that demand, whether increasing, stationary, or declining; or such as requires an increasing, stationary, or declining population. Taxes upon luxuries have no tendency to raise the price of any other commodities, except that of the commodities taxed. Taxes upon necessaries, by raising the wages of labour, necessarily tend to raise the price of all manufactures, and consequently to diminish the extent of their sale and consumption. Taxes upon luxuries are finally paid by the consumers of the commodities taxed, without any retribution. They fall indifferently upon every species of revenue, the wages of labour, the profits of stock, and the rent of land. Taxes upon necessaries, so far as they affect the labouring poor, are finally paid, partly by landlords, in the diminished rent of their lands, and partly by rich consumers, whether landlords or others, in the advanced price of manufactured goods; and always with a considerable overcharge. The advanced price of such manufactures as are real necessaries of life, and are destined for the consumption of the poor, of coarse woollens, for example, must be compensated to the poor by a farther advancement of their wages. The middling and superior ranks of people, if they understood their own interest, ought always to oppose all taxes upon the necessaries of life, as well as all taxes upon the wages of labour. The final payment of both the one and the other falls altogether upon themselves, and always with a considerable overcharge. They fall heaviest upon the landlords, who always pay in a double capacity; in that of landlords, by the reduction, of their rent; and in that of rich consumers, by the increase of their expense. The observation of Sir Matthew Decker, that certain taxes are, in the price of certain goods, sometimes repeated and accumulated four or five times, is perfectly just with regard to taxes upon the necessaries of life. In the price of leather, for example, you must pay not only for the tax upon the leather of your own shoes, but for a part of that upon those of the shoemaker and the tanner. You must pay, too, for the tax upon the salt, upon the soap, and upon the candles which those workmen consume while employed in your service; and for the tax upon the leather, which the salt-maker, the soap-maker, and the candle-maker consume, while employed in their service. In Great Britain, the principal taxes upon the necessaries of life, are those upon the four commodities just now mentioned, salt, leather, soap, and candles. Salt is a very ancient and a very universal subject of taxation. It was taxed among the Romans, and it is so at present in, I believe, every part of Europe. The quantity annually consumed by any individual is so small, and may be purchased so gradually, that nobody, it seems to have been thought, could feel very sensibly even a pretty heavy tax upon it. It is in England taxed at three shillings and fourpence a bushel; about three times the original price of the commodity. In some other countries, the tax is still higher. Leather is a real necessary of life. The use of linen renders soap such. In countries where the winter nights are long, candles are a necessary instrument of trade. Leather and soap are in Great Britain taxed at three halfpence a-pound; candles at a penny; taxes which, upon the original price of leather, may amount to about eight or ten per cent.; upon that of soap, to about twenty or five-and-twenty per cent.; and upon that of candles to about fourteen or fifteen per cent.; taxes which, though lighter than that upon salt, are still very heavy. As all those four commodities are real necessaries of life, such heavy taxes upon them must increase some what the expense of the sober and industrious poor, and must consequently raise more or less the wages of their labour. In a country where the winters are so cold as in Great Britain, fuel is, during that season, in the strictest sense of the word, a necessary of life, not only for the purpose of dressing victuals, but for the comfortable subsistence of many different sorts of workmen who work within doors; and coals are the cheapest of all fuel. The price of fuel has so important an influence upon that of labour, that all over Great Britain, manufactures have confined themselves principally to the coal countries; other parts of the country, on account of the high price of this necessary article, not being able to work so cheap. In some manufactures, besides, coal is a necessary instrument of trade; as in those of glass, iron, and all other metals. If a bounty could in any case be reasonable, it might perhaps be so upon the transportation of coals from those parts of the country in which they abound, to those in which they are wanted. But the legislature, instead of a bounty, has imposed a tax of three shillings and threepence a-ton upon coals carried coastways; which, upon most sorts of coal, is more than sixty per cent. of the original price at the coal pit. Coals carried, either by land or by inland navigation, pay no duty. Where they are naturally cheap, they are consumed duty free; where they are naturally dear, they are loaded with a heavy duty. Such taxes, though they raise the price of subsistence, and consequently the wages of labour, yet they afford a considerable revenue to government, which it might not be easy to find in any other way. There may, therefore, be good reasons for continuing them. The bounty upon the exportation of corn, so far as it tends, in the actual state of tillage, to raise the price of that necessary article, produces all the like bad effects; and instead of affording any revenue, frequently occasions a very great expense to government. The high duties upon the importation of foreign corn, which, in years of moderate plenty, amount to a prohibition; and the absolute prohibition of the importation, either of live cattle, or of salt provisions, which takes place in the ordinary state of the law, and which, on account of the scarcity, is at present suspended for a limited time with regard to Ireland and the British plantations, have all had the bad effects of taxes upon the necessaries of life, and produce no revenue to government. Nothing seems necessary for the repeal of such regulations, but to convince the public of the futility of that system in consequence of which they have been established. Taxes upon the necessaries of life are much higher in many other countries than in Great Britain. Duties upon flour and meal when ground at the mill, and upon bread when baked at the oven, take place in many countries. In Holland the money-price of the bread consumed in towns is supposed to be doubled by means of such taxes. In lieu of a part of them, the people who live in the country, pay every year so much a-head, according to the sort of bread they are supposed to consume. Those who consume wheaten bread pay three guilders fifteen stivers; about six shillings and ninepence halfpenny. These, and some other taxes of the same kind, by raising the price of labour, are said to have ruined the greater part of the manufactures of Holland[71]. Similar taxes, though not quite so heavy, take place in the Milanese, in the states of Genoa, in the duchy of Modena, in the duchies of Parma, Placentia, and Guastalla, and the Ecclesiastical state. A French author[72] of some note, has proposed to reform the finances of his country, by substituting in the room of the greater part of other taxes, this most ruinous of all taxes. There is nothing so absurd, says Cicero, which has not sometimes been asserted by some philosophers. Taxes upon butcher's meat are still more common than those upon bread. It may indeed be doubted, whether butcher's meat is any where a necessary of life. Grain and other vegetables, with the help of milk, cheese, and butter, or oil, where butter is not to be had, it is known from experience, can, without any butcher's meat, afford the most plentiful, the most wholesome, the most nourishing, and the most invigorating diet. Decency nowhere requires that any man should eat butcher's meat, as it in most places requires that he should wear a linen shirt or a pair of leather shoes. Consumable commodities, whether necessaries or luxuries, may be taxed in two different ways. The consumer may either pay an annual sum on account of his using or consuming goods of a certain kind; or the goods may be taxed while they remain in the hands of the dealer, and before they are delivered to the consumer. The consumable goods which last a considerable time before they are consumed altogether, are most properly taxed in the one way; those of which the consumption is either immediate or more speedy, in the other. The coach-tax and plate-tax are examples of the former method of imposing; the greater part of the other duties of excise and customs, of the latter. A coach may, with good management, last ten or twelve years. It might be taxed, once for all, before it comes out of the hands of the coach-maker. But it is certainly more convenient for the buyer to pay four pounds a-year for the privilege of keeping a coach, than to pay all at once forty or forty-eight pounds additional price to the coach-maker; or a sum equivalent to what the tax is likely to cost him during the time he uses the same coach. A service of plate in the same manner, may last more than a century. It is certainly easier for the consumer to pay five shillings a-year for every hundred ounces of plate, near one per cent. of the value, than to redeem this long annuity at five-and-twenty of thirty years purchase, which would enhance the price at least five-and-twenty or thirty per cent. The different taxes which affect houses, are certainly more conveniently paid by moderate annual payments, than by a heavy tax of equal value upon the first building or sale of the house. It was the well-known proposal of Sir Matthew Decker, that all commodities, even those of which the consumption is either immediate or speedy, should be taxed in this manner; the dealer advancing nothing, but the consumer paying a certain annual sum for the licence to consume certain goods. The object of his scheme was to promote all the different branches of foreign trade, particularly the carrying trade, by taking away all duties upon importation and exportation, and thereby enabling the merchant to employ his whole capital and credit in the purchase of goods and the freight of ships, no part of either being diverted towards the advancing of taxes. The project, however, of taxing, in this manner, goods of immediate or speedy consumption, seems liable to the four following very important objections. First, the tax would be more unequal, or not so well proportioned to the expense and consumption of the different contributors, as in the way in which it is commonly imposed. The taxes upon ale, wine, and spiritous liquors, which are advanced by the dealers, are finally paid by the different consumers, exactly in proportion to their respective consumption. But if the tax were to be paid by purchasing a licence to drink those liquors, the sober would, in proportion to his consumption, be taxed much more heavily than the drunken consumer. A family which exercised great hospitality, would be taxed much more lightly than one who entertained fewer guests. Secondly, this mode of taxation, by paying for an annual, half-yearly, or quarterly licence to consume certain goods, would diminish very much one of the principal conveniences of taxes upon goods of speedy consumption; the piece-meal payment. In the price of threepence halfpenny, which is at present paid for a pot of porter, the different taxes upon malt, hops, and beer, together with the extraordinary profit which the brewer charges for having advanced them, may perhaps amount to about three halfpence. If a workman can conveniently spare those three halfpence, he buys a pot of porter. If he cannot, he contents himself with a pint; and, as a penny saved is a penny got, he thus gains a farthing by his temperance. He pays the tax piece-meal, as he can afford to pay it, and when he can afford to pay it, and every act of payment is perfectly voluntary, and what he can avoid if he chuses to do so. Thirdly, such taxes would operate less as sumptuary laws. When the licence was once purchased, whether the purchaser drunk much or drunk little, his tax would he the same. Fourthly, if a workman were to pay all at once, by yearly, half-yearly, or quarterly payments, a tax equal to what he at present pays, with little or no inconveniency, upon all the different pots and pints of porter which he drinks in any such period of time, the sum might frequently distress him very much. This mode of taxation, therefore, it seems evident, could never, without the most grievous oppression, produce a revenue nearly equal to what is derived from the present mode without any oppression. In several countries, however, commodities of an immediate or very speedy consumption are taxed in this manner. In Holland, people pay so much a-head for a licence to drink tea. I have already mentioned a tax upon bread, which, so far as it is consumed in farm houses and country villages, is there levied in the same manner. The duties of excise are imposed chiefly upon goods of home produce, destined for home consumption. They are imposed only upon a few sorts of goods of the most general use. There can never be any doubt, either concerning the goods which are subject to those duties, or concerning the particular duty which each species of goods is subject to. They fall almost altogether upon what I call luxuries, excepting always the four duties above mentioned, upon salt, soap, leather, candles, and perhaps that upon green glass. The duties of customs are much more ancient than those of excise. They seem to have been called customs, as denoting customary payments, which had been in use for time immemorial. They appear to have been originally considered as taxes upon the profits of merchants. During the barbarous times of feudal anarchy, merchants, like all the other inhabitants of burghs, were considered as little better than emancipated bondmen, whose persons were despised, and whose gains were envied. The great nobility, who had consented that the king should tallage the profits of their own tenants, were not unwilling that he should tallage likewise those of an order of men whom it was much less their interest to protect. In those ignorant times, it was not understood, that the profits of merchants are a subject not taxable directly; or that the final payment of all such taxes must fall, with a considerable overcharge, upon the consumers. The gains of alien merchants were looked upon more unfavourably than those of English merchants. It was natural, therefore, that those of the former should be taxed more heavily than those of the latter. This distinction between the duties upon aliens and those upon English merchants, which was begun from ignorance, has been continued from the spirit of monopoly, or in order to give our own merchants an advantage, both in the home and in the foreign market. With this distinction, the ancient duties of customs were imposed equally upon all sorts of goods, necessaries as well as luxuries, goods exported as well as goods imported. Why should the dealers in one sort of goods, it seems to have been thought, be more favoured than those in another? or why should the merchant exporter be more favoured than the merchant importer? The ancient customs were divided into three branches. The first, and, perhaps, the most ancient of all those duties, was that upon wool and leather. It seems to have been chiefly or altogether an exportation duty. When the woollen manufacture came to be established in England, lest the king should lose any part of his customs upon wool by the exportation of woollen cloths, a like duty was imposed upon them. The other two branches were, first, a duty upon wine, which being imposed at so much a-ton, was called a tonnage; and, secondly, a duty upon all other goods, which being imposed at so much a-pound of their supposed value, was called a poundage. In the forty-seventh year of Edward III., a duty of sixpence in the pound was imposed upon all goods exported and imported, except wools, wool-felts, leather, and wines which were subject to particular duties. In the fourteenth of Richard II., this duty was raised to one shilling in the pound; but, three years afterwards, it was again reduced to sixpence. It was raised to eightpence in the second year of Henry IV.; and, in the fourth of the same prince, to one shilling. From this time to the ninth year of William III., this duty continued at one shilling in the pound. The duties of tonnage and poundage were generally granted to the king by one and the same act of parliament, and were called the subsidy of tonnage and poundage. The subsidy of poundage having continued for so long a time at one shilling in the pound, or at five per cent., a subsidy came, in the language of the customs, to denote a general duty of this kind of five per cent. This subsidy, which is now called the old subsidy, still continues to be levied, according to the book of rates established by the twelfth of Charles II. The method of ascertaining, by a book of rates, the value of goods subject to this duty, is said to be older than the time of James I. The new subsidy, imposed by the ninth and tenth of William III., was an additional five per cent. upon the greater part of goods. The one-third and the two-third subsidy made up between them another five per cent. of which they were proportionable parts. The subsidy of 1747 made a fourth five per cent. upon the greater part of goods; and that of 1759, a fifth upon some particular sorts of goods. Besides those five subsidies, a great variety of other duties have occasionally been imposed upon particular sorts of goods in order sometimes to relieve the exigencies of the state, and sometimes to regulate the trade of the country, according to the principles of the mercantile system. That system has come gradually more and more into fashion. The old subsidy was imposed indifferently upon exportation, as well as importation. The four subsequent subsidies, as well as the other duties which have since been occasionally imposed upon particular sorts of goods, have, with a few exceptions, been laid altogether upon importation. The greater part of the ancient duties which had been imposed upon the exportation of the goods of home produce and manufacture, have either been lightened or taken away altogether. In most cases, they have been taken away. Bounties have even been given upon the exportation of some of them. Drawbacks, too, sometimes of the whole, and, in most cases, or a part of the duties which are paid upon the importation of foreign goods, have been granted upon their exportation. Only half the duties imposed by the old subsidy upon importation, are drawn back upon exportation; but the whole of those imposed by the latter subsidies and other imports are, upon the greater parts of the goods, drawn back in the same manner. This growing favour of exportation, and discouragement of importation, have suffered only a few exceptions, which chiefly concern the materials of some manufactures. These our merchants and manufacturers are willing should come as cheap as possible to themselves, and as dear as possible to their rivals and competitors in other countries. Foreign materials are, upon this account, sometimes allowed to be imported duty-free; Spanish wool, for example, flax, and raw linen yarn. The exportation of the materials of home produce, and of those which are the particular produce of our colonies, has sometimes been prohibited, and sometimes subjected to higher duties. The exportation of English wool has been prohibited. That of beaver skins, of beaver wool, and of gum-senega, has been subjected to higher duties; Great Britain, by the conquests of Canada and Senegal, having got almost the monopoly of those commodities. That the mercantile system has not been very favourable to the revenue of the great body of the people, to the annual produce of the land and labour of the country, I have endeavoured to show in the fourth book of this Inquiry. It seems not to have been more favourable to the revenue of the sovereign; so far, at least, as that revenue depends upon the duties of customs. In consequence of that system, the importation of several sorts of goods has been prohibited altogether. This prohibition has, in some cases, entirely prevented, and in others has very much diminished, the importation of those commodities, by reducing the importers to the necessity of smuggling. It has entirely prevented the importation of foreign wollens; and it has very much diminished that of foreign silks and velvets. In both cases, it has entirely annihilated the revenue of customs which might have been levied upon such importation. The high duties which have been imposed upon the importation of many different sorts of foreign goods in order to discourage their consumption in Great Britain, have, in many cases, served only to encourage smuggling, and, in all cases, have reduced the revenues of the customs below what more moderate duties would have afforded. The saying of Dr. Swift, that in the arithmetic of the customs, two and two, instead of making four, make sometimes only one, holds perfectly true with regard to such heavy duties, which never could have been imposed, had not the mercantile system taught us, in many cases, to employ taxation as an instrument, not of revenue, but of monopoly. The bounties which are sometimes given upon the exportation of home produce and manufactures, and the drawbacks which are paid upon the re-exportation of the greater part of foreign goods, have given occasion to many frauds, and to a species of smuggling, more destructive of the public revenue than any other. In order to obtain the bounty or drawback, the goods, it is well known, are sometimes shipped, and sent to sea, but soon afterwards clandestinely re-landed in some other part of the country. The defalcation of the revenue of customs occasioned by bounties and drawbacks, of which a great part are obtained fraudulently, is very great. The gross produce of the customs, in the year which ended on the 5th of January 1755, amounted to L.5,068,000. The bounties which were paid out of this revenue, though in that year there was no bounty upon corn, amounted to L.167,800. The drawbacks which were paid upon debentures and certificates, to L.2,156,800. Bounties and drawbacks together amounted to L.2,324,600. In consequence of these deductions, the revenue of the customs amounted only to L.2,743,400; from which deducting L.287,900 for the expense of management, in salaries and other incidents, the neat revenue of the customs for that year comes out to be L.2,455,500. The expense of management, amounts, in this manner, to between five and six per cent. upon the gross revenue of the customs; and to something more than ten per cent. upon what remains of that revenue, after deducting what is paid away in bounties and drawbacks. Heavy duties being imposed upon almost all goods imported, our merchant importers smuggle as much, and make entry of as little as they can. Our merchant exporters, on the contrary, make entry of more than they export; sometimes out of vanity, and to pass for great dealers in goods which pay no duty and sometimes to gain a bounty or a drawback. Our exports, in consequence of these different frauds, appear upon the custom-house books greatly to overbalance our imports, to the unspeakable comfort of those politicians, who measure the national prosperity by what they call the balance of trade. All goods imported, unless particularly exempted, and such exemptions are not very numerous, are liable to some duties of customs. If any goods are imported, not mentioned in the book of rates, they are taxed at 4s. 9-9/20d. for every twenty shillings value, according to the oath of the importer, that is, nearly at five subsidies, or five poundage duties. The book of rates is extremely comprehensive, and enumerates a great variety of articles, many of them little used, and, therefore, not well known. It is, upon this account, frequently uncertain under what article a particular sort of goods ought to be classed, and, consequently what duty they ought to pay. Mistakes with regard to this sometimes ruin the custom-house officer, and frequently occasion much trouble, expense, and vexation to the importer. In point of perspicuity, precision, and distinctness, therefore, the duties of customs are much more inferior to those of excise. In order that the greater part of the members of any society should contribute to the public revenue, in proportion to their respective expense, it does not seem necessary that every single article of that expense should be taxed. The revenue which is levied by the duties of excise is supposed to fall as equally upon the contributors as that which is levied by the duties of customs; and the duties of excise are imposed upon a few articles only of the most general use and consumption. It has been the opinion of many people, that, by proper management, the duties of customs might likewise, without any loss to the public revenue, and with great advantage to foreign trade, be confined to a few articles only. The foreign articles, of the most general use and consumption in Great Britain, seem at present to consist chiefly in foreign wines and brandies; in some of the productions of America and the West Indies, sugar, rum, tobacco, cocoa-nuts, &c. and in some of those of the East Indies, tea, coffee, china-ware, spiceries of all kinds, several sorts of piece-goods, &c. These different articles afford, perhaps, at present, the greater part of the revenue which is drawn from the duties of customs. The taxes which at present subsist upon foreign manufactures, if you except those upon the few contained in the foregoing enumeration, have, the greater part of them, been imposed for the purpose, not of revenue, but of monopoly, or to give our own merchants an advantage in the home market. By removing all prohibitions, and by subjecting all foreign manufactures to such moderate taxes, as it was found from experience, afforded upon each article the greatest revenue to the public, our own workmen might still have a considerable advantage in the home market; and many articles, some of which at present afford no revenue to government, and others a very inconsiderable one, might afford a very great one. High taxes, sometimes by diminishing the consumption of the taxed commodities, and sometimes by encouraging smuggling, frequently afford a smaller revenue to government than what might be drawn from more moderate taxes. When the diminution of revenue is the effect of the diminution of consumption, there can be but one remedy, and that is the lowering of the tax. When the diminution of revenue is the effect of the encouragement given to smuggling, it may, perhaps, be remedied in two ways; either by diminishing the temptation to smuggle, or by increasing the difficulty of smuggling. The temptation to smuggle can be be diminished only by the lowering of the tax; and the difficulty of smuggling can be increased only by establishing that system of administration which is most proper for preventing it. The excise laws, it appears, I believe, from experience, obstruct and embarrass the operations of the smuggler much more effectually than those of the customs. By introducing into the customs a system of administration as similar to that of the excise as the nature of the different duties will admit, the difficulty of smuggling might be very much increased. This alteration, it has been supposed by many people, might very easily be brought about. The importer of commodities liable to any duties of customs, it has been said, might, at his option, he allowed either to carry them to his own private warehouse; or to lodge them in a warehouse, provided either at his own expense or at that of the public, but under the key of the custom-house officer, and never to be opened but in his presence. If the merchant carried them to his own private warehouse, the duties to be immediately paid, and never afterwards to be drawn back; and that warehouse to be at all times subject to the visit and examination of the custom-house officer, in order to ascertain how far the quantity contained in it corresponded with that for which the duty had been paid. If he carried them to the public warehouse, no duty to be paid till they were taken out for home consumption. If taken out for exportation, to be duty-free; proper security being always given that they should be so exported. The dealers in those particular commodities, either by wholesale or retail, to be at all times subject to the visit and examination of the custom-house officer; and to be obliged to justify, by proper certificates, the payment of the duty upon the whole quantity contained in their shops or warehouses. What are called the excise duties upon rum imported, are at present levied in this manner; and the same system of administration might, perhaps, be extended to all duties upon goods imported; provided always that those duties were, like the duties of excise, confined to a few sorts of goods of the most general use and consumption. If they were extended to almost all sorts of goods, as at present, public warehouses of sufficient extent could not easily be provided; and goods of a very delicate nature, or of which the preservation required much care and attention, could not safely be trusted by the merchant in any warehouse but his own. If, by such a system of administration, smuggling to any considerable extent could be prevented, even under pretty high duties; if every duty was occasionally either heightened or lowered according as it was likely, either the one way or the other, to afford the greatest revenue to the state; taxation being always employed as an instrument of revenue, and never of monopoly; it seems not improbable that a revenue, at least equal to the present neat revenue of the customs, might be drawn from duties upon the importation of only a few sorts of goods of the most general use and consumption; and that the duties of customs might thus be brought to the same degree of simplicity, certainty, and precision, as those of excise. What the revenue at present loses by drawbacks upon the re-exportation of foreign goods, which are afterwards re-landed and consumed at home, would, under this system, be saved altogether. If to this saving, which would alone be very considerable, were added the abolition of all bounties upon the exportation of home produce; in all cases in which those bounties were not in reality drawbacks of some duties of excise which had before been advanced; it cannot well be doubted, but that the neat revenue of customs might, after an alteration of this kind, be fully equal to what it had ever been before. If, by such a change of system, the public revenue suffered no loss, the trade and manufactures of the country would certainly gain a very considerable advantage. The trade in the commodities not taxed, by far the greatest number would be perfectly free, and might be carried on to and from all parts of the world with every possible advantage. Among those commodities would be comprehended all the necessaries of life, and all the materials of manufacture. So far as the free importation of the necessaries of life reduced their average money price in the home market, it would reduce the money price of labour, but without reducing in any respect its real recompense. The value of money is in proportion to the quantity of the necessaries of life which it will purchase. That of the necessaries of life is altogether independent of the quantity of money which can be had for them. The reduction in the money price of labour would necessarily be attended with a proportionable one in that of all home manufactures, which would thereby gain some advantage in all foreign markets. The price of some manufactures would be reduced, in a still greater proportion, by the free importation of the raw materials. If raw silk could be imported from China and Indostan, duty-free, the silk manufacturers in England could greatly undersell those of both France and Italy. There would be no occasion to prohibit the importation of foreign silks and velvets. The cheapness of their goods would secure to our own workmen, not only the possession of a home, but a very great command of the foreign market. Even the trade in the commodities taxed, would be carried on with much more advantage than at present. If those commodities were delivered out of the public warehouse for foreign exportation, being in this case exempted from all taxes, the trade in them would be perfectly free. The carrying trade, in all sorts of goods, would, under this system, enjoy every possible advantage. If these commodities were delivered out for home consumption, the importer not being obliged to advance the tax till he had an opportunity of selling his goods, either to some dealer, or to some consumer, he could always afford to sell them cheaper than if he had been obliged to advance it at the moment of importation. Under the same taxes, the foreign trade of consumption, even in the taxed commodities, might in this manner be carried on with much more advantage than it is at present. It was the object of the famous excise scheme of Sir Robert Walpole, to establish, with regard to wine and tobacco, a system not very unlike that which is here proposed. But though the bill which was then brought into Parliament, comprehended those two commodities only, it was generally supposed to be meant as an introduction to a more extensive scheme of the same kind. Faction, combined with the interest of smuggling merchants, raised so violent, though so unjust a clamour, against that bill, that the minister thought proper to drop it; and, from a dread of exciting a clamour of the same kind, none of his successors have dared to resume the project. The duties upon foreign luxuries, imported for home consumption, though they sometimes fall upon the poor, fall principally upon people of middling or more than middling fortune. Such are, for example, the duties upon foreign wines, upon coffee, chocolate, tea, sugar, &c. The duties upon the cheaper luxuries of home produce, destined for home consumption, fall pretty equally upon people of all ranks, in proportion to their respective expense. The poor pay the duties upon malt, hops, beer, and ale, upon their own consumption; the rich, upon both their own consumption and that of their servants. The whole consumption of the inferior ranks of people, or of those below the middling rank, it must be observed, is, in every country, much greater, not only in quantity, but in value, than that of the middling, and of those above the middling rank. The whole expense of the inferior is much greater than that of the superior ranks. In the first place, almost the whole capital of every country is annually distributed among the inferior ranks of people, as the wages of productive labour. Secondly, a great part of the revenue, arising from both the rent of land and the profits of stock, is annually distributed among the same rank, in the wages and maintenance of menial servants, and other unproductive labourers. Thirdly, some part of the profits of stock belongs to the same rank, as a revenue arising from the employment of their small capitals. The amount of the profits annually made by small shopkeepers, tradesmen, and retailers of all kinds, is everywhere very considerable, and makes a very considerable portion of the annual produce. Fourthly and lastly, some part even of the rent of land belongs to the same rank; a considerable part to those who are somewhat below the middling rank, and a small part even to the lowest rank; common labourers sometimes possessing in property an acre or two of land. Though the expense of those inferior ranks of people, therefore, taking them individually, is very small, yet the whole mass of it, taking them collectively, amounts always to by much the largest portion of the whole expense of the society; what remains of the annual produce of the land and labour of the country, for the consumption of the superior ranks, being always much less, not only in quantity, but in value. The taxes upon expense, therefore, which fall chiefly upon that of the superior ranks of people, upon the smaller portion of the annual produce, are likely to be much less productive than either those which fall indifferently upon the expense of all ranks, or even those which fall chiefly upon that of the inferior ranks, than either those which fall indifferently upon the whole annual produce, or those which fall chiefly upon the larger portion of it. The excise upon the materials and manufacture of home-made fermented and spiritous liquors, is, accordingly, of all the different taxes upon expense, by far the most productive; and this branch of the excise falls very much, perhaps principally, upon the expense of the common people. In the year which ended on the 5th of July 1775, the gross produce of this branch of the excise amounted to L.3,341,837 : 9 : 9. It must always be remembered, however, that it is the luxuries, and not the necessary expense of the inferior ranks of people, that ought ever to be taxed. The final payment of any tax upon their necessary expense, would fall altogether upon the superior ranks of people; upon the smaller portion of the annual produce, and not upon the greater. Such a tax must, in all cases, either raise the wages of labour, or lessen the demand for it. It could not raise the wages of labour, without throwing the final payment of the tax upon the superior ranks of people. It could not lessen the demand for labour, without lessening the annual produce of the land and labour of the country, the fund upon which all taxes must be finally paid. Whatever might be the state to which a tax of this kind reduced the demand for labour, it must always raise wages higher than they otherwise would be in that state; and the final payment of this enhancement of wages must, in all cases, fall upon the superior ranks of people. Fermented liquors brewed, and spiritous liquors distilled, not for sale, but for private use, are not in Great Britain liable to any duties of excise. This exemption, of which the object is to save private families from the odious visit and examination of the tax-gatherer, occasions the burden of those duties to fall frequently much lighter upon the rich than upon the poor. It is not, indeed, very common to distil for private use, though it is done sometimes. But in the country, many middling, and almost all rich and great families, brew their own beer. Their strong beer, therefore, costs them eight shillings a-barrel less than it costs the common brewer, who must have his profit upon the tax, as well as upon all the other expense which he advances. Such families, therefore, must drink their beer at least nine or ten shillings a-barrel cheaper than any liquor of the same quality can be drank by the common people, to whom it is everywhere more convenient to buy their beer, by little and little, from the brewery or the alehouse. Malt, in the same manner, that is made for the use of a private family, is not liable to the visit or examination of the tax-gatherer; but, in this case the family must compound at seven shillings and sixpence a-head for the tax. Seven shillings and sixpence are equal to the excise upon ten bushels of malt; a quantity fully equal to what all the different members of any sober family, men, women, and children, are, at an average, likely to consume. But in rich and great families, where country hospitality is much practised, the malt liquors consumed by the members of the family make but a small part of the consumption of the house. Either on account of this composition, however, or for other reasons, it is not near so common to malt as to brew for private use. It is difficult to imagine any equitable reason, why those who either brew or distil for private use should not be subject to a composition of the same kind. A greater revenue than what is at present drawn from all the heavy taxes upon malt, beer, and ale, might be raised, it has frequently been said, by a much lighter tax upon malt; the opportunities of defrauding the revenue being much greater in a brewery than in a malt-house; and those who brew for private use being exempted from all duties or composition for duties, which is not the case with those who malt for private use. In the porter brewery of London, a quarter of malt is commonly brewed into more than two barrels and a-half, sometimes into three barrels of porter. The different taxes upon malt amount to six shillings a-quarter; those upon strong ale and beer to eight shillings a-barrel. In the porter brewery, therefore, the different taxes upon malt, beer, and ale, amount to between twenty-six and thirty shillings upon the produce of a quarter of malt. In the country brewery for common country sale, a quarter of malt is seldom brewed into less than two barrels of strong, and one barrel of small beer; frequently into two barrels and a-half of strong beer. The different taxes upon small beer amount to one shilling and fourpence a-barrel. In the country brewery, therefore, the different taxes upon malt, beer, and ale, seldom amount to less than twenty-three shillings and fourpence, frequently to twenty-six shillings, upon the produce of a quarter of malt. Taking the whole kingdom at an average, therefore, the whole amount of the duties upon malt, beer, and ale, cannot be estimated at less than twenty-four or twenty-five shillings upon the produce of a quarter of malt. But by taking off all the different duties upon beer and ale, and by trebling the malt tax, or by raising it from six to eighteen shillings upon the quarter of malt, a greater revenue, it is said, might be raised by this single tax, than what is at present drawn from all those heavier taxes. L. s. d. In 1772, the old malt tax produced 722,023 11 11 The additional 356,776 7 9-3/4 In 1773, the old tax produced 561,627 3 7-1/2 The additional 278,650 15 3-3/4 In 1774, the old tax produced 624,614 17 5-3/4 The additional 310,745 2 8-1/2 In 1775, the old tax produced 657,357 0 8-1/4 The additional 323,785 12 6-1/4 ____________________________ 4)3,835,580 12 0-3/4 ____________________________ Average of these four years 958,895 3 0-3/16 ____________________________ In 1772, the country excise produced 1,243,120 5 3 The London brewery 408,260 7 2-3/4 In 1773, the country excise 1,245,808 3 3 The London brewery 405,406 17 10-1/2 In 1774, the country excise 1,246,373 14 5-1/2 The London brewery 320,601 18 0-1/4 In 1775, the country excise 1,214,583 6 1-1/4 The London brewery 463,670 7 0-1/4 ____________________________ 4)6,547,832 19 2-1/4 ____________________________ Average of these four years 1,636,958 4 9-1/2 To which adding the average malt-tax, or 958,895 3 0-3/16 ____________________________ The whole amount of those different taxes comes out to be 2,595,853 7 9-11/16 ____________________________ But, by trebling the malt tax, or by raising it from six to eighteen shillings upon the quarter of malt, that single tax would produce 2,876,685 9 0-9/16 A sum which exceeds the foregoing by 280,832 1 2-14/16 Under the old malt tax, indeed, is comprehended a tax of four shillings upon the hogshead of cyder, and another of ten shillings upon the barrel of mum. In 1774, the tax upon cyder produced only L.3083 : 6 : 8. It probably fell somewhat short of its usual amount; all the different taxes upon cyder, having, that year, produced less than ordinary. The tax upon mum, though much heavier, is still less productive, on account of the smaller consumption of that liquor. But to balance whatever may be the ordinary amount of those two taxes, there is comprehended under what is called the country excise, first, the old excise of six shillings and eightpence upon the hogshead of cyder; secondly, a like tax of six shillings and eightpence upon the hogshead of verjuice; thirdly, another of eight shillings and ninepence upon the hogshead of vinegar; and, lastly, a fourth tax of elevenpence upon the gallon of mead or metheglin. The produce of those different taxes will probably much more than counterbalance that of the duties imposed, by what is called the annual malt tax, upon cyder and mum. Malt is consumed, not only in the brewery of beer and ale, but in the manufacture of low wines and spirits. If the malt tax were to be raised to eighteen shillings upon the quarter, it might be necessary to make some abatement in the different excises which are imposed upon those particular sorts of low wines and spirits, of which malt makes any part of the materials. In what are called malt spirits, it makes commonly but a third part of the materials; the other two-thirds being either raw barley, or one-third barley and one-third wheat. In the distillery of malt spirits, both the opportunity and the temptation to smuggle are much greater than either in a brewery or in a malt-house; the opportunity, on account of the smaller bulk and greater value of the commodity, and the temptation, on account of the superior height of the duties, which amounted to 3s. 10-2/3d.[73] upon the gallon of spirits. By increasing the duties upon malt, and reducing those upon the distillery, both the opportunities and the temptation to smuggle would be diminished, which might occasion a still further augmentation of revenue. It has for some time past been the policy of Great Britain to discourage the consumption of spirituous liquors, on account of their supposed tendency to ruin the health and to corrupt the morals of the common people. According to this policy, the abatement of the taxes upon the distillery ought not to be so great as to reduce, in any respect, the price of those liquors. Spirituous liquors might remain as dear as ever; while, at the same time, the wholesome and invigorating liquors of beer and ale might be considerably reduced in their price. The people might thus be in part relieved from one of the burdens of which they at present complain the most; while, at the same time, the revenue might be considerably augmented. The objections of Dr. Davenant to this alteration in the present system of excise duties, seem to be without foundation. Those objections are, that the tax, instead of dividing itself, as at present, pretty equally upon the profit of the maltster, upon that of the brewer, and upon that of the retailer, would so far as it affected profit, fall altogether upon that of the maltster; that the maltster could not so easily get back the amount of the tax in the advanced price of his malt, as the brewer and retailer in the advanced price of their liquor; and that so heavy a tax upon malt might reduce the rent and profit of barley land. No tax can ever reduce, for any considerable time, the rate of profit in any particular trade, which must always keep its level with other trades in the neighbourhood. The present duties upon malt, beer, and ale, do not affect the profits of the dealers in those commodities, who all get back the tax with an additional profit, in the enhanced price of their goods. A tax, indeed, may render the goods upon which it is imposed so dear, as to diminish the consumption of them. But the consumption of malt is in malt liquors; and a tax of eighteen shillings upon the quarter of malt could not well render those liquors dearer than the different taxes, amounting to twenty-four or twenty-five shillings, do at present. Those liquors, on the contrary, would probably become cheaper, and the consumption of them would be more likely to increase than to diminish. It is not very easy to understand why it should be more difficult for the maltster to get back eighteen shillings in the advanced price of his malt, than it is at present for the brewer to get back twenty-four or twenty-five, sometimes thirty shillings, in that of his liquor. The maltster, indeed, instead of a tax of six shillings, would be obliged to advance one of eighteen shillings upon every quarter of malt. But the brewer is at present obliged to advance a tax of twenty-four or twenty-five, sometimes thirty shillings, upon every quarter of malt which he brews. It could not be more inconvenient for the maltster to advance a lighter tax, than it is at present for the brewer to advance a heavier one. The maltster does not always keep in his granaries a stock of malt, which it will require a longer time to dispose of than the stock of beer and ale which the brewer frequently keeps in his cellars. The former, therefore, may frequently get the returns of his money as soon as the latter. But whatever inconveniency might arise to the maltster from being obliged to advance a heavier tax, it could easily be remedied, by granting him a few months longer credit than is at present commonly given to the brewer. Nothing could reduce the rent and profit of barley land, which did not reduce the demand for barley. But a change of system, which reduced the duties upon a quarter of malt brewed into beer and ale, from twenty-four and twenty-five shillings to eighteen shillings, would be more likely to increase than diminish that demand. The rent and profit of barley land, besides, must always be nearly equal to those of other equally fertile and equally well cultivated land. If they were less, some part of the barley land would soon be turned to some other purpose; and if they were greater, more land would soon be turned to the raising of barley. When the ordinary price of any particular produce of land is at what may be called a monopoly price, a tax upon it necessarily reduces the rent and profit of the land which grows it. A tax upon the produce of those precious vineyards, of which the wine falls so much short of the effectual demand, that its price is always above the natural proportion to that of the produce of other equally fertile and equally well cultivated land, would necessarily reduce the rent and profit of those vineyards. The price of the wines being already the highest that could be got for the quantity commonly sent to market, it could not be raised higher without diminishing that quantity; and the quantity could not be diminished without still greater loss, because the lands could not be turned to any other equally valuable produce. The whole weight of the tax, therefore, would fall upon the rent and profit; properly upon the rent of the vineyard. When it has been proposed to lay any new tax upon sugar, our sugar planters have frequently complained that the whole weight of such taxes fell not upon the consumer, but upon the producer; they never having been able to raise the price of their sugar after the tax higher than it was before. The price had, it seems, before the tax, been a monopoly price; and the arguments adduced to show that sugar was an improper subject of taxation, demonstrated perhaps that it was a proper one; the gains of monopolists, whenever they can be come at, being certainly of all subjects the most proper. But the ordinary price of barley has never been a monopoly price; and the rent and profit of barley land have never been above their natural proportion to those of other equally fertile and equally well cultivated land. The different taxes which have been imposed upon malt, beer, and ale, have never lowered the price of barley; have never reduced the rent and profit of barley land. The price of malt to the brewer has constantly risen in proportion to the taxes imposed upon it; and those taxes, together with the different duties upon beer and ale, have constantly either raised the price, or, what comes to the same thing, reduced the quality of those commodities to the consumer. The final payment of those taxes has fallen constantly upon the consumer, and not upon the producer. The only people likely to suffer by the change of system here proposed, are those who brew for their own private use. But the exemption, which this superior rank of people at present enjoy, from very heavy taxes which are paid by the poor labourer and artificer, is surely most unjust and unequal, and ought to be taken away, even though this change was never to take place. It has probably been the interest of this superior order of people, however, which has hitherto prevented a change of system that could not well fail both to increase the revenue and to relieve the people. Besides such duties as those of customs and excise above mentioned, there are several others which affect the price of goods more unequally and more indirectly. Of this kind are the duties, which, in French, are called peages, which in old Saxon times were called the duties of passage, and which seem to have been originally established for the same purpose as our turnpike tolls, or the tolls upon our canals and navigable rivers, for the maintenance of the road or of the navigation. Those duties, when applied to such purposes, are most properly imposed according to the bulk or weight of the goods. As they were originally local and provincial duties, applicable to local and provincial purposes, the administration of them was, in most cases, entrusted to the particular town, parish, or lordship, in which they were levied; such communities being, in some way or other, supposed to be accountable for the application. The sovereign, who is altogether unaccountable, has in many countries assumed to himself the administration of those duties; and though he has in most cases enhanced very much the duty, he has in many entirely neglected the application. If the turnpike tolls of Great Britain should ever become one of the resources of government, we may learn, by the example of many other nations, what would probably be the consequence. Such tolls, no doubt, are finally paid by the consumer; but the consumer is not taxed in proportion to his expense, when he pays, not according to the value, but according to the bulk or weight of what he consumes. When such duties are imposed, not according to the bulk or weight, but according to the supposed value of the goods, they become properly a sort of inland customs or excise, which obstruct very much the most important of all branches of commerce, the interior commerce of the country. In some small states, duties similar to those passage duties are imposed upon goods carried across the territory, either by land or by water, from one foreign country to another. These are in some countries called transit-duties. Some of the little Italian states which are situated upon the Po, and the rivers which run into it, derive some revenue from duties of this kind, which are paid altogether by foreigners, and which, perhaps, are the only duties that one state can impose upon the subjects of another, without obstructing, in any respect, the industry or commerce of its own. The most important transit-duty in the world, is that levied by the king of Denmark upon all merchant ships which pass through the Sound. Such taxes upon luxuries, as the greater part of the duties of customs and excise, though they all fall indifferently upon every different species of revenue, and are paid finally, or without any retribution, by whoever consumes the commodities upon which they are imposed, yet they do not always fall equally or proportionally upon the revenue of every individual. As every man's humour regulates the degree of his consumption, every man contributes rather according to his humour, than in proportion to his revenue: the profuse contribute more, the parsimonious less, than their proper proportion. During the minority of a man of great fortune, he contributes commonly very little, by his consumption, towards the support of that state from whose protection he derives a great revenue. Those who live in another country, contribute nothing by their consumption towards the support of the government of that country, in which is situated the source of their revenue. If in this latter country there should be no land tax, nor any considerable duty upon the transference either of moveable or immoveable property, as is the case in Ireland, such absentees may derive a great revenue from the protection of a government, to the support of which they do not contribute a single shilling. This inequality is likely to be greatest in a country of which the government is, in some respects, subordinate and dependant upon that of some other. The people who possess the most extensive property in the dependant, will, in this case, generally chuse to live in the governing country. Ireland is precisely in this situation; and we cannot therefore wonder, that the proposal of a tax upon absentees should be so very popular in that country. It might, perhaps, be a little difficult to ascertain either what sort, or what degree of absence, would subject a man to be taxed as an absentee, or at what precise time the tax should either begin or end. If you except, however, this very peculiar situation, any inequality in the contribution of individuals which can arise from such taxes, is much more than compensated by the very circumstance which occasions that inequality; the circumstance that every man's contribution is altogether voluntary; it being altogether in his power, either to consume, or not to consume, the commodity taxed. Where such taxes, therefore, are properly assessed, and upon proper commodities, they are paid with less grumbling than any other. When they are advanced by the merchant or manufacturer, the consumer, who finally pays them, soon comes to confound them with the price of the commodities, and almost forgets that he pays any tax. Such taxes are, or may be, perfectly certain; or may be assessed, so as to leave no doubt concerning either what ought to be paid, or when it ought to be paid; concerning either the quantity or the time of payment. Whatever uncertainty there may sometimes be, either in the duties of customs in Great Britain, or in other duties of the same kind in other countries, it cannot arise from the nature of those duties, but from the inaccurate or unskilful manner in which the law that imposes them is expressed. Taxes upon luxuries generally are, and always may be, paid piece-meal, or in proportion as the contributors have occasion to purchase the goods upon which they are imposed. In the time and mode of payment, they are, or may be, of all taxes the most convenient. Upon the whole, such taxes, therefore, are perhaps as agreeable to the three first of the four general maxims concerning taxation, as any other. They offend in every respect against the fourth. Such taxes, in proportion to what they bring into the public treasury of the state, always take out, or keep out, of the pockets of the people, more than almost any other taxes. They seem to do this in all the four different ways in which it is possible to do it. First, the levying of such taxes, even when imposed in the most judicious manner, requires a great number of custom-house and excise officers, whose salaries and perquisites are a real tax upon the people, which brings nothing into the treasury of the state. This expense, however, it must be acknowledged, is more moderate in Great Britain than in most other countries. In the year which ended on the 5th of July, 1775, the gross produce of the different duties, under the management of the commissioners of excise in England, amounted to L.5,507,308 : 18 : 8-1/4, which was levied at an expense of little more than five and a-half per cent. From this gross produce, however, there must be deducted what was paid away in bounties and drawbacks upon the exportation of exciseable goods, which will reduce the neat produce below five millions.[74] The levying of the salt duty, and excise duty, but under a different management, is much more expensive. The neat revenue of the customs does not amount to two millions and a-half, which is levied at an expense of more than ten per cent., in the salaries of officers and other incidents. But the perquisites of custom-house officers are everywhere much greater than their salaries; at some ports more than double or triple those salaries. If the salaries of officers, and other incidents, therefore, amount to more than ten per cent. upon the neat revenue of the customs, the whole expense of levying that revenue may amount, in salaries and perquisites together, to more than twenty or thirty per cent. The officers of excise receive few or no perquisites; and the administration of that branch of the revenue being of more recent establishment, is in general less corrupted than that of the customs, into which length of time has introduced and authorized many abuses. By charging upon malt the whole revenue which is at present levied by the different duties upon malt and malt liquors, a saving, it is supposed, of more than L.50,000, might be made in the annual expense of the excise. By confining the duties of customs to a few sorts of goods, and by levying those duties according to the excise laws, a much greater saving might probably be made in the annual expense of the customs. Secondly, such taxes necessarily occasion some obstruction or discouragement to certain branches of industry. As they always raise the price of the commodity taxed, they so far discourage its consumption, and consequently its production. If it is a commodity of home growth or manufacture, less labour comes to be employed in raising and producing it. If it is a foreign commodity of which the tax increases in this manner the price, the commodities of the same kind which are made at home may thereby, indeed, gain some advantage in the home market, and a greater quantity of domestic industry may thereby be turned toward preparing them. But though this rise of price in a foreign commodity, may encourage domestic industry in one particular branch, it necessarily discourages that industry in almost every other. The dearer the Birmingham manufacturer buys his foreign wine, the cheaper he necessarily sells that part of his hardware with which, or, what comes to the same thing, with the price of which, he buys it. That part of his hardware, therefore, becomes of less value to him, and he has less encouragement to work at it. The dearer the consumers in one country pay for the surplus produce of another, the cheaper they necessarily sell that part of their own surplus produce with which, or, what comes to the same thing, with the price of which, they buy it. That part of their own surplus produce becomes of less value to them, and they have less encouragement to increase its quantity. All taxes upon consumable commodities, therefore, tend to reduce the quantity of productive labour below what it otherwise would be, either in preparing the commodities taxed, if they are home commodities, or in preparing these with which they are purchased, if they are foreign commodities. Such taxes, too, always alter, more or less, the natural direction of national industry, and turn it into a channel always different from, and generally less advantageous, than that in which is would have run of its own accord. Thirdly, the hope of evading such taxes by smuggling, gives frequent occasion to forfeitures and other penalties, which entirely ruin the smuggler; a person who, though no doubt highly blameable for violating the laws of his country, is frequently incapable of violating those of natural justice, and would have been, in every respect, an excellent citizen, had not the laws of his country made that a crime which nature never meant to be so. In those corrupted governments, where there is at least a general suspicion of much unnecessary expense, and great misapplication of the public revenue, the laws which guard it are little respected. Not many people are scrupulous about smuggling, when, without perjury, they can find an easy and safe opportunity of doing so. To pretend to have any scruple about buying smuggled goods, though a manifest encouragement to the violation of the revenue laws, and to the perjury which almost always attends it, would, in most countries, be regarded as one of those pedantic pieces of hypocrisy which, instead of gaining credit with anybody, serve only to expose the person who affects to practise them to the suspicion of being a greater knave than most of his neighbours. By this indulgence of the public, the smuggler is often encouraged to continue a trade, which he is thus taught to consider as in some measure innocent; and when the severity of the revenue laws is ready to fall upon him, he is frequently disposed to defend with violence, what he has been accustomed to regard as his just property. From being at first, perhaps, rather imprudent than criminal, he at last too often becomes one of the hardiest and most determined violators of the laws of society. By the ruin of the smuggler, his capital, which had before been employed in maintaining productive labour, is absorbed either in the revenue of the state, or in that of the revenue officer; and is employed in maintaining unproductive, to the diminution of the general capital of the society, and of the useful industry which it might otherwise have maintained. Fourthly, such taxes, by subjecting at least the dealers in the taxed commodities, to the frequent visits and odious examination of the tax-gatherers, expose them sometimes, no doubt, to some degree of oppression, and always to much trouble and vexation; and though vexation, as has already been said, is not strictly speaking expense, it is certainly equivalent to the expense at which every man would be willing to redeem himself from it. The laws of excise, though more effectual for the purpose for which they were instituted, are, in this respect, more vexatious than those of the customs. When a merchant has imparted goods subject to certain duties of customs; when he has paid those duties, and lodged the goods in his warehouse; he is not, in most cases, liable to any further trouble or vexation from the custom-house officer. It is otherwise with goods subject to duties of excise. The dealers have no respite from the continual visits and examination of the excise officers. The duties of excise are, upon this account, more unpopular than those of the customs; and so are the officers who levy them. Those officers, it is pretended, though in general, perhaps, they do their duty fully as well as those of the customs; yet, as that duty obliges them to be frequently very troublesome to some of their neighbours, commonly contract a certain hardness of character, which the others frequently have not. This observation, however, may very probably be the mere suggestion of fraudulent dealers, whose smuggling is either prevented or detected by their diligence. The inconveniencies, however, which are, perhaps, in some degree inseparable from taxes upon consumable commodities, fall as light upon the people of Great Britain as upon those of any other country of which the government is nearly as expensive. Our state is not perfect, and might be mended; but it is as good, or better, than that of most of our neighbours. In consequence of the notion, that duties upon consumable goods were taxes upon the profits of merchants, those duties have, in some countries, been repeated upon every successive sale of the goods. If the profits of the merchant-importer or merchant-manufacturer were taxed, equality seemed to require that those of all the middle buyers, who intervened between either of them and the consumer, should likewise be taxed. The famous alcavala of Spain seems to have been established upon this principle. It was at first a tax of ten per cent, afterwards of fourteen per cent. and it is at present only six per cent. upon the sale of every sort of property, whether moveable or immoveable; and it is repeated every time the property is sold.[75] The levying of this tax requires a multitude of revenue officers, sufficient to guard the transportation of goods, not only from one province to another, but from one shop to another. It subjects, not only the dealers in some sorts of goods, but those in all sorts, every farmer, every manufacturer, every merchant and shopkeeper, to the continual visit and examination of the tax-gatherers. Through the greater part of the country in which a tax of this kind is established, nothing can be produced for distant sale. The produce of every part of the country must be proportioned to the consumption of the neighbourhood. It is to the alcavala, accordingly, that Ustaritz imputes the ruin of the manufactures of Spain. He might have imputed to it, likewise, the declension of agriculture, it being imposed not only upon manufactures, but upon the rude produce of the land. In the kingdom of Naples, there is a similar tax of three per cent. upon the value of all contracts, and consequently upon that of all contracts of sale. It is both lighter than the Spanish tax, and the greater part of towns and parishes are allowed to pay a composition in lieu of it. They levy this composition in what manner they please, generally in a way that gives no interruption to the interior commerce of the place. The Neapolitan tax, therefore, is not near so ruinous as the Spanish one. The uniform system of taxation, which, with a few exceptions of no great consequence, takes place in all the different parts of the united kingdom of Great Britain, leaves the interior commerce of the country, the inland and coasting trade, almost entirely free. The inland trade is almost perfectly free; and the greater part of goods may be carried from one end of the kingdom to the other, without requiring any permit or let-pass, without being subject to question, visit or examination, from the revenue officers. There are a few exceptions, but they are such as can give no interruption to any important branch of inland commerce of the country. Goods carried coastwise, indeed, require certificates or coast-cockets. If you except coals, however, the rest are almost all duty-free. This freedom of interior commerce, the effect of the uniformity of the system of taxation, is perhaps one of the principal causes of the prosperity of Great Britain; every great country being necessarily the best and most extensive market for the greater part of the productions of its own industry. If the same freedom in consequence of the same uniformity, could be extended to Ireland and the plantations, both the grandeur of the state, and the prosperity of every part of the empire, would probably be still greater than at present. In France, the different revenue laws which take place in the different provinces, require a multitude of revenue officers to surround, not only the frontiers of the kingdom, but those of almost each particular province, in order either to prevent the importation of certain goods, or to subject it to the payment of certain duties, to the no small interruption of the interior commerce of the country. Some provinces are allowed to compound for the gabelle, or salt tax; others are exempted from it altogether. Some provinces are exempted from the exclusive sale of tobacco, which the farmers-general enjoy through the greater part of the kingdom. The aides, which correspond to the excise in England, are very different in different provinces. Some provinces are exempted from them, and pay a composition or equivalent. In those in which they take place, and are in farm, there are many local duties which do not extend beyond a particular town or district. The traites, which correspond to our customs, divide the kingdom into three great parts; first, the provinces subject to the tariff of 1664, which are called the provinces of the five great farms, and under which are comprehended Picardy, Normandy, and the greater part of the interior provinces of the kingdom; secondly, the provinces subject to the tariff of 1667, which are called the provinces reckoned foreign, and under which are comprehended the greater part of the frontier provinces; and, thirdly, those provinces which are said to be treated as foreign, or which, because they are allowed a free commerce with foreign countries, are, in their commerce with the other provinces of France, subjected to the same duties as other foreign countries. These are Alsace, the three bishoprics of Mentz, Toul, and Verdun, and the three cities of Dunkirk, Bayonne, and Marseilles. Both in the provinces of the five great farms (called so on account of an ancient division of the duties of customs into five great branches, each of which was originally the subject of a particular farm, though they are now all united into one), and in those which are said to be reckoned foreign, there are many local duties which do not extend beyond a particular town or district. There are some such even in the provinces which are said to be treated as foreign, particularly in the city of Marseilles. It is unnecessary to observe how much both the restraints upon the interior commerce of the country, and the number of the revenue officers, must be multiplied, in order to guard the frontiers of those different provinces and districts which are subject to such different systems of taxation. Over and above the general restraints arising from this complicated system of revenue laws, the commerce of wine (after corn, perhaps, the most important production of France) is, in the greater part of the provinces, subject to particular restraints arising from the favour which has been shown to the vineyards of particular provinces and districts above those of others. The provinces most famous for their wines, it will be found, I believe, are those in which the trade in that article is subject to the fewest restraints of this kind. The extensive market which such provinces enjoy, encourages good management both in the cultivation of their vineyards, and in the subsequent preparation of their wines. Such various and complicated revenue laws are not peculiar to France. The little duchy of Milan is divided into six provinces, in each of which there is a different system of taxation, with regard to several different sorts of consumable goods. The still smaller territories of the duke of Parma are divided into three or four, each of which has, in the same manner, a system of its own. Under such absurd management, nothing but the great fertility of the soil, and happiness of the climate, could preserve such countries from soon relapsing into the lowest state of poverty and barbarism. Taxes upon consumable commodities may either be levied by an administration, of which the officers are appointed by government, and immediately accountable to government, of which the revenue must, in this case, vary from year to year, according to the occasional variations in the produce of the tax; or they may be let in farm for a rent certain, the farmer being allowed to appoint his own officers, who, though obliged to levy the tax in the manner directed by the law, are under his immediate inspection, and are immediately accountable to him. The best and most frugal way of levying a tax can never be by farm. Over and above what is necessary for paying the stipulated rent, the salaries of the officers, and the whole expense of administration, the farmer must always draw from the produce of the tax a certain profit, proportioned at least to the advance which he makes, to the risk which he runs, to the trouble which he is at, and to the knowledge and skill which it requires to manage so very complicated a concern. Government, by establishing an administration under their own immediate inspection, of the same kind with that which the farmer establishes, might at least save this profit, which is almost always exorbitant. To farm any considerable branch of the public revenue requires either a great capital, or a great credit; circumstances which would alone restrain the competition for such an undertaking to a very small number of people. Of the few who have this capital or credit, a still smaller number have the necessary knowledge or experience; another circumstance which restrains the competition still further. The very few who are in condition to become competitors, find it more for their interest to combine together; to become copartners, instead of competitors; and, when the farm is set up to auction, to offer no rent but what is much below the rent value. In countries where the public revenues are in farm, the farmers are generally the most opulent people. Their wealth would alone excite the public indignation; and the vanity which almost always accompanies such upstart fortunes, the foolish ostentation with which they commonly display that wealth, excite that indignation still more. The farmers of the public revenue never find the laws too severe, which punish any attempt to evade the payment of a tax. They have no bowels for the contributors, who are not their subjects, and whose universal bankruptcy, if it should happen the day after the farm is expired, would not much affect their interest. In the greatest exigencies of the state, when the anxiety of the sovereign for the exact payment of his revenue is necessarily the greatest, they seldom fail to complain, that without laws more rigorous than those which actually took place, it will be impossible for them to pay even the usual rent. In those moments of public distress, their commands cannot be disputed. The revenue laws, therefore, become gradually more and more severe. The most sanguinary are always to be found in countries where the greater part of the public revenue is in farm; the mildest, in countries where it is levied under the immediate inspection of the sovereign. Even a bad sovereign feels more compassion for his people than can ever be expected from the farmers of his revenue. He knows that the permanent grandeur of his family depends upon the prosperity of his people, and he will never knowingly ruin that prosperity for the sake of any momentary interest of his own. It is otherwise with the farmers of his revenue, whose grandeur may frequently be the effect of the ruin, and not of the prosperity, of his people. A tax is sometimes not only farmed for a certain rent, but the farmer has, besides, the monopoly of the commodity taxed. In France, the duties upon tobacco and salt are levied in this manner. In such cases, the farmer, instead of one, levies two exorbitant profits upon the people; the profit of the farmer, and the still more exorbitant one of the monopolist. Tobacco being a luxury, every man is allowed to buy or not to buy as he chuses; but salt being a necessary, every man is obligated to buy of the farmer a certain quantity of it; because, if he did not buy this quantity of the farmer, he would, it is presumed, buy it of some smuggler. The taxes upon both commodities are exorbitant. The temptation to smuggle, consequently, is to many people irresistible; while, at the same time, the rigour of the law, and the vigilance of the farmer's officers, render the yielding to the temptation almost certainly ruinous. The smuggling of salt and tobacco sends every year several hundred people to the galleys, besides a very considerable number whom it sends to the gibbet. Those taxes, levied in this manner, yield a very considerable revenue to government. In 1767, the farm of tobacco was let for twenty-two millions five hundred and forty-one thousand two hundred and seventy-eight livres a-year; that of salt for thirty-six millions four hundred and ninety-two thousand four hundred and four livres. The farm, in both cases, was to commence in 1768, and to last for six years. These who consider the blood of the people as nothing, in comparison with the revenue of the prince, may, perhaps, approve of this method of levying taxes. Similar taxes and monopolies of salt and tobacco have been established in many other countries, particularly in the Austrian and Prussian dominions, and in the greater part of the states of Italy. In France, the greater part of the actual revenue of the crown is derived from eight different sources; the taille, the capitation, the two vingtiemes, the gabelles, the aides, the traites, the domaine, and the farm of tobacco. The five last are, in the greater part of the provinces, under farm. The three first are everywhere levied by an administration, under the immediate inspection and direction of government; and it is universally acknowledged, that in proportion to what they take out of the pockets of the people, they bring more into the treasury of the prince than the other five, of which the administration is much more wasteful and expensive. The finances of France seem, in their present state, to admit of three very obvious reformations. First, by abolishing the taille and the capitation, and by increasing the number of the vingtiemes, so as to produce an additional revenue equal to the amount of those other taxes, the revenue of the crown might be preserved; the expense of collection might be much diminished; the vexation of the inferior ranks of people, which the taille and capitation occasion, might be entirely prevented; and the superior ranks might not be more burdened than the greater part of them are at present. The vingtieme, I have already observed, is a tax very nearly of the same kind with what is called the land tax of England. The burden of the taille, it is acknowledged, falls finally upon the proprietors of land; and as the greater part of the capitation is assessed upon those who are subject to the taille, at so much a-pound of that other tax, the final payment of the greater part of it must likewise fall upon the same order of people. Though the number of the vingtiemes, therefore, was increased, so as to produce an additional revenue equal to the amount of both those taxes, the superior ranks of people might not be more burdened than they are at present; many individuals, no doubt, would, on account of the great inequalities with which the taille is commonly assessed upon the estates and tenants of different individuals. The interest and opposition of such favoured subjects, are the obstacles most likely to prevent this, or any other reformation of the same kind. Secondly, by rendering the gabelle, the aides, the traites, the taxes upon tobacco, all the different customs and excises, uniform in all the different parts of the kingdom, those taxes might be levied at much less expense, and the interior commerce of the kingdom might be rendered as free as that of England. Thirdly, and lastly, by subjecting all those taxes to an administration under the immediate inspection and direction of government, the exorbitant profits of the farmers-general might be added to the revenue of the state. The opposition arising from the private interest of individuals, is likely to be as effectual for preventing the two last as the first-mentioned scheme of reformation. The French system of taxation seems, in every respect, inferior to the British. In Great Britain, ten millions sterling are annually levied upon less than eight millions of people, without its being possible to say that any particular order is oppressed. From the Collections of the Abbé Expilly, and the observations of the author of the Essay upon the Legislation and Commerce of Corn, it appears probable that France, including the provinces of Lorraine and Bar, contains about twenty-three or twenty-four millions of people; three times the number, perhaps, contained in Great Britain. The soil and climate of France are better than those of Great Britain. The country has been much longer in a state of improvement and cultivation, and is, upon that account, better stocked with all those things which it requires a long time to raise up and accumulate; such as great towns, and convenient and well-built houses, both in town and country. With these advantages, it might be expected, that in France a revenue of thirty millions might be levied for the support of the state, with as little inconvenience as a revenue of ten millions is in Great Britain. In 1765 and 1766, the whole revenue paid into the treasury of France, according to the best, though, I acknowledge, very imperfect accounts which I could get of it, usually run between 308 and 325 millions of livres; that is, it did not amount to fifteen millions sterling; not the half of what might have been expected, had the people contributed in the same proportion to their numbers as the people of Great Britain. The people of France, however, it is generally acknowledged, are much more oppressed by taxes than the people of Great Britain. France, however, is certainly the great empire in Europe, which, after that of Great Britain, enjoys the mildest and most indulgent government. In Holland, the heavy taxes upon the necessaries of life have ruined, it is said, their principal manufacturers, and are likely to discourage, gradually, even their fisheries and their trade in ship-building. The taxes upon the necessaries of life are inconsiderable in Great Britain, and no manufacture has hitherto been ruined by them. The British taxes which bear hardest on manufactures, are some duties upon the importation of raw materials, particularly upon that of raw silk. The revenue of the States-General and of the different cities, however, is said to amount to more than five millions two hundred and fifty thousand pounds sterling; and as the inhabitants of the United Provinces cannot well be supposed to amount to more than a third part of those of Great Britain, they must, in proportion to their number, be much more heavily taxed. After all the proper subjects of taxation have been exhausted, if the exigencies of the state still continue to require new taxes, they must be imposed upon improper ones. The taxes upon the necessaries of life, therefore, may be no impeachment of the wisdom of that republic, which, in order to acquire and to maintain its independency, has, in spite of its great frugality, been involved in such expensive wars as have obliged it to contract great debts. The singular countries of Holland and Zealand, besides, require a considerable expense even to preserve their existence, or to prevent their being swallowed up by the sea, which must have contributed to increase considerably the load of taxes in those two provinces. The republican form of government seems to be the principal support of the present grandeur of Holland. The owners of great capitals, the great mercantile families, have generally either some direct share, or some indirect influence, in the administration of that government. For the sake of the respect and authority which they derive from this situation, they are willing to live in a country where their capital, if they employ it themselves, will bring them less profit, and if they lend it to another, less interest; and where the very moderate revenue which they can draw from it will purchase less of the necessaries and conveniencies of life than in any other part of Europe. The residence of such wealthy people necessarily keeps alive, in spite of all disadvantages, a certain degree of industry in the country. Any public calamity which should destroy the republican form of government, which should throw the whole administration into the hands of nobles and of soldiers, which should annihilate altogether the importance of those wealthy merchants, would soon render it disagreeable to them to live in a country where they were no longer likely to be much respected. They would remove both their residence and their capital to some other country, and the industry and commerce of Holland would soon follow the capitals which supported them. CHAP. III. OF PUBLIC DEBTS. In that rude state of society which precedes the extension of commerce and the improvement of manufactures; when those expensive luxuries, which commerce and manufactures can alone introduce, are altogether unknown; the person who possesses a large revenue, I have endeavoured to show in the third book of this Inquiry, can spend or enjoy that revenue in no other way than by maintaining nearly as many people as it can maintain. A large revenue may at all times be said to consist in the command of a large quantity of the necessaries of life. In that rude state of things, it is commonly paid in a large quantity of those necessaries, in the materials of plain food and coarse clothing, in corn and cattle, in wool and raw hides. When neither commerce nor manufactures furnish any thing for which the owner can exchange the greater part of those materials which are over and above his own consumption, he can do nothing with the surplus, but feed and clothe nearly as many people as it will feed and clothe. A hospitality in which there is no luxury, and a liberality in which there is no ostentation, occasion, in this situation of things, the principal expenses of the rich and the great. But these I have likewise endeavoured to show, in the same book, are expenses by which people are not very apt to ruin themselves. There is not, perhaps, any selfish pleasure so frivolous, of which the pursuit has not sometimes ruined even sensible men. A passion for cock-fighting has ruined many. But the instances, I believe, are not very numerous, of people who have been ruined by a hospitality or liberality of this kind; though the hospitality of luxury, and the liberality of ostentation have ruined many. Among our feudal ancestors, the long time during which estates used to continue in the same family, sufficiently demonstrates the general disposition of people to live within their income. Though the rustic hospitality, constantly exercised by the great landholders, may not, to us in the present times, seem consistent with that order which we are apt to consider as inseparably connected with good economy; yet we must certainly allow them to have been at least so far frugal, as not commonly to have spent their whole income. A part of their wool and raw hides, they had generally an opportunity of selling for money. Some part of this money, perhaps, they spent in purchasing the few objects of vanity and luxury, with which the circumstances of the times could furnish them; but some part of it they seem commonly to have hoarded. They could not well, indeed, do any thing else but hoard whatever money they saved. To trade, was disgraceful to a gentleman; and to lend money at interest, which at that time was considered as usury, and prohibited by law, would have been still more so. In those times of violence and disorder, besides, it was convenient to have a hoard of money at hand, that in case they should be driven from their own home, they might have something of known value to carry with them to some place of safety. The same violence which made it convenient to hoard, made it equally convenient to conceal the hoard. The frequency of treasure-trove, or of treasure found, of which no owner was known, sufficiently demonstrates the frequency, in those times, both of hoarding and of concealing the hoard. Treasure-trove was then considered as an important branch of the revenue of the sovereign. All the treasure-trove of the kingdom would scarce, perhaps, in the present times, make an important branch of the revenue of a private gentleman of a good estate. The same disposition, to save and to hoard, prevailed in the sovereign, as well as in the subjects. Among nations, to whom commerce and manufactures are little known, the sovereign, it has already been observed in the fourth book, is in a situation which naturally disposes him to the parsimony requisite for accumulation. In that situation, the expense, even of a sovereign, cannot be directed by that vanity which delights in the gaudy finery of a court. The ignorance of the times affords but few of the trinkets in which that finery consists. Standing armies are not then necessary; so that the expense, even of a sovereign, like that of any other great lord, can be employed in scarce any thing but bounty to his tenants, and hospitality to his retainers. But bounty and hospitality very seldom lead to extravagance; though vanity almost always does. All the ancient sovereigns of Europe, accordingly, it has already been observed, had treasures. Every Tartar chief, in the present times, is said to have one. In a commercial country, abounding with every sort of expensive luxury, the sovereign, in the same manner as almost all the great proprietors in his dominions, naturally spends a great part of his revenue in purchasing those luxuries. His own and the neighbouring countries supply him abundantly with all the costly trinkets which compose the splendid, but insignificant, pageantry of a court. For the sake of an inferior pageantry of the same kind, his nobles dismiss their retainers, make their tenants independent, and become gradually themselves as insignificant as the greater part of the wealthy burghers in his dominions. The same frivolous passions, which influence their conduct, influence his. How can it be supposed that he should be the only rich man in his dominions who is insensible to pleasures of this kind? If he does not, what he is very likely to do, spend upon those pleasures so great a part of his revenue as to debilitate very much the defensive power of the state, it cannot well be expected that he should not spend upon them all that part of it which is over and above what is necessary for supporting that defensive power. His ordinary expense becomes equal to his ordinary revenue, and it is well if it does not frequently exceed it. The amassing of treasure can no longer be expected; and when extraordinary exigencies require extraordinary expenses, he must necessarily call upon his subjects for an extraordinary aid. The present and the late king of Prussia are the only great princes of Europe, who, since the death of Henry IV. of France, in 1610, are supposed to have amassed any considerable treasure. The parsimony which leads to accumulation has become almost as rare in republican as in monarchical governments. The Italian republics, the United Provinces of the Netherlands, are all in debt. The canton of Berne is the single republic in Europe which has amassed any considerable treasure. The other Swiss republics have not. The taste for some sort of pageantry, for splendid buildings, at least, and other public ornaments, frequently prevails as much in the apparently sober senate-house of a little republic, as in the dissipated court of the greatest king. The want of parsimony, in time of peace, imposes the necessity of contracting debt in time of war. When war comes, there is no money in the treasury, but what is necessary for carrying on the ordinary expense of the peace establishment. In war, an establishment of three or four times that expense becomes necessary for the defence of the state; and consequently, a revenue three or four times greater than the peace revenue. Supposing that the sovereign should have, what he scarce ever has, the immediate means of augmenting his revenue in proportion to the augmentation of his expense; yet still the produce of the taxes, from which this increase of revenue must be drawn, will not begin to come into the treasury, till perhaps ten or twelve months after they are imposed. But the moment in which war begins, or rather the moment in which it appears likely to begin, the army must be augmented, the fleet must be fitted out, the garrisoned towns must be put into a posture of defence; that army, that fleet, those garrisoned towns, must be furnished with arms, ammunition, and provisions. An immediate and great expense must be incurred in that moment of immediate danger, which will not wait for the gradual and slow returns of the new taxes. In this exigency, government can have no other resource but in borrowing. The same commercial state of society which, by the operation of moral causes, brings government in this manner into the necessity of borrowing, produces in the subjects both an ability and an inclination to lend. If it commonly brings along with it the necessity of borrowing, it likewise brings with it the facility of doing so. A country abounding with merchants and manufacturers, necessarily abounds with a set of people through whose hands, not only their own capitals, but the capitals of all those who either lend them money, or trust them with goods, pass as frequently, or more frequently, than the revenue of a private man, who, without trade or business, lives upon his income, passes through his hands. The revenue of such a man can regularly pass through his hands only once in a year. But the whole amount of the capital and credit of a merchant, who deals in a trade of which the returns are very quick, may sometimes pass through his hands two, three, or four times in a year. A country abounding with merchants and manufacturers, therefore, necessarily abounds with a set of people, who have it at all times in their power to advance, if they chuse to do so, a very large sum of money to government. Hence the ability in the subjects of a commercial state to lend. Commerce and manufactures can seldom flourish long in any state which does not enjoy a regular administration of justice; in which the people do not feel themselves secure in the possession of their property; in which the faith of contracts is not supported by law; and in which the authority of the state is not supposed to be regularly employed in enforcing the payment of debts from all those who are able to pay. Commerce and manufactures, in short, can seldom flourish in any state, in which there is not a certain degree of confidence in the justice of government. The same confidence which disposes great merchants and manufacturers upon ordinary occasions, to trust their property to the protection of a particular government, disposes them, upon extraordinary occasions, to trust that government with the use of their property. By lending money to government, they do not even for a moment diminish their ability to carry on their trade and manufactures; on the contrary, they commonly augment it. The necessities of the state render government, upon most occasions willing to borrow upon terms extremely advantageous to the lender. The security which it grants to the original creditor, is made transferable to any other creditor; and from the universal confidence in the justice of the state, generally sells in the market for more than was originally paid for it. The merchant or monied man makes money by lending money to government, and instead of diminishing, increases his trading capital. He generally considers it as a favour, therefore, when the administration admits him to a share in the first subscription for a new loan. Hence the inclination or willingness in the subjects of a commercial state to lend. The government of such a state is very apt to repose itself upon this ability and willingness of its subjects to lend it their money on extraordinary occasions. It foresees the facility of borrowing, and therefore dispenses itself from the duty of saving. In a rude state of society, there are no great mercantile or manufacturing capitals. The individuals, who hoard whatever money they can save, and who conceal their hoard, do so from a distrust of the justice of government; from a fear, that if it was known that they had a hoard, and where that hoard was to be found, they would quickly be plundered. In such a state of things, few people would be able, and nobody would be willing to lend their money to government on extraordinary exigencies. The sovereign feels that he must provide for such exigencies by saving, because he foresees the absolute impossibility of borrowing. This foresight increases still further his natural disposition to save. The progress of the enormous debts which at present oppress, and will in the long-run probably ruin, all the great nations of Europe, has been pretty uniform. Nations, like private men, have generally begun to borrow upon what may be called personal credit, without assigning or mortgaging any particular fund for the payment of the debt; and when this resource has failed them, they have gone on to borrow upon assignments or mortgages of particular funds. What is called the unfunded debt of Great Britain, is contracted in the former of those two ways. It consists partly in a debt which bears, or is supposed to bear, no interest, and which resembles the debts that a private man contracts upon account; and partly in a debt which bears interest, and which resembles what a private man contracts upon his bill or promissory-note. The debts which are due, either for extraordinary services, or for services either not provided for, or not paid at the time when they are performed; part of the extraordinaries of the army, navy, and ordnance, the arrears of subsidies to foreign princes, those of seamen's wages, &c. usually constitute a debt of the first kind. Navy and exchequer bills, which are issued sometimes in payment of a part of such debts, and sometimes for other purposes, constitutes a debt of the second kind; exchequer bills bearing interest from the day on which they are issued, and navy bills six months after they are issued. The bank of England, either by voluntarily discounting those bills at their current value, or by agreeing with government for certain considerations to circulate exchequer bills, that is, to receive them at par, paying the interest which happens to be due upon them, keeps up the value, and facilitates their circulation, and thereby frequently enables government to contract a very large debt of this kind. In France, where there is no bank, the state bills (billets d'etat[76]) have sometimes sold at sixty and seventy per cent. discount. During the great recoinage in king William's time, when the bank of England thought proper to put a stop to its usual transactions, exchequer bills and tallies are said to have sold from twenty-five to sixty per cent. discount; owing partly, no doubt, to the supposed instability of the new government established by the Revolution, but partly, too, to the want of the support of the bank of England. When this resource is exhausted, and it becomes necessary, in order to raise money, to assign or mortgage some particular branch of the public revenue for the payment of the debt, government has, upon different occasions, done this in two different ways. Sometimes it has made this assignment or mortgage for a short period of time only, a year, or a few years, for example; and sometimes for perpetuity. In the one case, the fund was supposed sufficient to pay, within the limited time, both principal and interest of the money borrowed. In the other, it was supposed sufficient to pay the interest only, or a perpetual annuity equivalent to the interest, government being at liberty to redeem, at any time, this annuity, upon paying back the principal sum borrowed. When money was raised in the one way, it was said to be raised by anticipation; when in the other, by perpetual funding, or, more shortly, by funding. In Great Britain, the annual land and malt taxes are regularly anticipated every year, by virtue of a borrowing clause constantly inserted into the acts which impose them. The bank of England generally advances at an interest, which, since the Revolution, has varied from eight to three per cent., the sums of which those taxes are granted, and receives payment as their produce gradually comes in. If there is a deficiency, which there always is, it is provided for in the supplies of the ensuing year. The only considerable branch of the public revenue which yet remains unmortgaged, is thus regularly spent before it comes in. Like an improvident spendthrift, whose pressing occasions will not allow him to wait for the regular payment of his revenue, the state is in the constant practice of borrowing of its own factors and agents, and of paying interest for the use of its own money. In the reign of king William, and during a great part of that of queen Anne, before we had become so familiar as we are now with the practice of perpetual funding, the greater part of the new taxes were imposed but for a short period of time (for four, five, six, or seven years only), and a great part of the grants of every year consisted in loans upon anticipations of the produce of those taxes. The produce being frequently insufficient for paying, within the limited term, the principal and interest of the money borrowed, deficiencies arose; to make good which, it became necessary to prolong the term. In 1697, by the 8th of William III., c. 20, the deficiencies of several taxes were charged upon what was then called the first general mortgage or fund, consisting of a prolongation to the first of August 1706, of several different taxes, which would have expired within a shorter term, and of which the produce was accumulated into one general fund. The deficiencies charged upon this prolonged term amounted to L.5,160,459 : 14 : 9-1/2. In 1701, those duties, with some others, were still further prolonged, for the like purposes, till the first of August 1710, and were called the second general mortgage or fund. The deficiencies charged upon it amounted to L.2,055,999 : 7 : 11-1/2. In 1707, those duties were still further prolonged, as a fund for new loans, to the first of August 1712, and were called the third general mortgage or fund. The sum borrowed upon it was L.983,254 : 11 : 9-1/4. In 1708, those duties were all (except the old subsidy of tonnage and poundage, of which one moiety only was made a part of this fund, and a duty upon the importation of Scotch linen, which had been taken off by the articles of union) still further continued, as a fund for new loans, to the first of August 1714, and were called the fourth general mortgage or fund. The sum borrowed upon it was L.925,176 : 9 : 2-1/4. In 1709, those duties were all (except the old subsidy of tonnage and poundage, which was now left out of this fund altogether) still further continued, for the same purpose, to the first of August 1716, and were called the fifth general mortgage or fund. The sum borrowed upon it was L.922,029 : 6s. In 1710, those duties were again prolonged to the first of August 1720, and were called the sixth general mortgage or fund. The sum borrowed upon it was L.1,296,552 : 9 : 11-3/4. In 1711, the same duties (which at this time were thus subject to four different anticipations), together with several others, were continued for ever, and made a fund for paying the interest of the capital of the South-sea company, which had that year advanced to government, for paying debts, and making good deficiencies, the sum of L.9,177,967 : 15 : 4, the greatest loan which at that time had ever been made. Before this period, the principal, so far as I have been able to observe, the only taxes, which, in order to pay the interest of a debt, had been imposed for perpetuity, were these for paying the interest of the money which had been advanced to government by the bank and East-India company, and of what it was expected would be advanced, but which was never advanced, by a projected land bank. The bank fund at this time amounted to L.3,375,027 : 17 : 10-1/2, for which was paid an annuity or interest of L.206,501 : 13 : 5. The East-India fund amounted to L.3,200,000, for which was paid an annuity or interest of L.160,000; the bank fund being at six per cent., the East-India fund at five per cent. interest. In 1715, by the first of George I., c. 12, the different taxes which had been mortgaged for paying the bank annuity, together with several others, which, by this act, were likewise rendered perpetual, were accumulated into one common fund, called the aggregate fund, which was charged not only with the payment of the bank annuity, but with several other annuities and burdens of different kinds. This fund was afterwards augmented by the third of George I., c. 8., and by the fifth of George I., c. 3, and the different duties which were then added to it were likewise rendered perpetual. In 1717, by the third of George I., c. 7, several other taxes were rendered perpetual, and accumulated into another common fund, called the general fund, for the payment of certain annuities, amounting in the whole to L.724,849 : 6 : 10-1/2. In consequence of those different acts, the greater part of the taxes, which before had been anticipated only for a short term of years were rendered perpetual, as a fund for paying, not the capital, but the interest only, of the money which had been borrowed upon them by different successive anticipations. Had money never been raised but by anticipation, the course of a few years would have liberated the public revenue, without any other attention of government besides that of not overloading the fund, by charging it with more debt than it could pay within the limited term, and not of anticipating a second time before the expiration of the first anticipation. But the greater part of European governments have been incapable of those attentions. They have frequently overloaded the fund, even upon the first anticipation; and when this happened not to be the case, they have generally taken care to overload it, by anticipating a second and a third time, before the expiration of the first anticipation. The fund becoming in this manner altogether insufficient for paying both principal and interest of the money borrowed upon it, it became necessary to charge it with the interest only, or a perpetual annuity equal to the interest; and such improvident anticipations necessarily gave birth to the more ruinous practice of perpetual funding. But though this practice necessarily puts off the liberation of the public revenue from a fixed period, to one so indefinite that it is not very likely ever to arrive; yet, as a greater sum can, in all cases, be raised by this new practice than by the old one of anticipation, the former, when men have once become familiar with it, has, in the great exigencies of the state, been universally preferred to the latter. To relieve the present exigency, is always the object which principally interests those immediately concerned in the administration of public affairs. The future liberation of the public revenue they leave to the care of posterity. During the reign of queen Anne, the market rate of interest had fallen from six to five per cent.; and, in the twelfth year of her reign, five per cent. was declared to be the highest rate which could lawfully be taken for money borrowed upon private security. Soon after the greater part of the temporary taxes of Great Britain had been rendered perpetual, and distributed into the aggregate, South-sea, and general funds, the creditors of the public, like those of private persons, were induced to accept of five per cent. for the interest of their money, which occasioned a saving of one per cent. upon the capital of the greater part of the debts which had been thus funded for perpetuity, or of one-sixth of the greater part of the annuities which were paid out of the three great funds above mentioned. This saving left a considerable surplus in the produce of the different taxes which had been accumulated into those funds, over and above what was necessary for paying the annuities which were now charged upon them, and laid the foundation of what has since been called the sinking fund. In 1717, it amounted to L.323,434 : 7 : 7-1/2. In 1727, the interest of the greater part of the public debts was still further reduced to four per cent.; and, in 1753 and 1757, to three and a-half, and three per cent., which reductions still further augmented the sinking fund. A sinking fund, though instituted for the payment of old, facilitates very much the contracting of new debts. It is a subsidiary fund, always at hand, to be mortgaged in aid of any other doubtful fund, upon which money is proposed to be raised in any exigency of the state. Whether the sinking fund of Great Britain has been more frequently applied to the one or to other of those two purposes, will sufficiently appear by and by. Besides these two methods of borrowing, by anticipations and by a perpetual funding, there are two other methods, which hold a sort of middle place between them; these are, that of borrowing upon annuities for terms of years, and that of borrowing upon annuities for lives. During the reigns of king William and queen Anne, large sums were frequently borrowed upon annuities for terms of years, which were sometimes longer and sometimes shorter. In 1693, an act was passed for borrowing one million upon an annuity of fourteen per cent., or L.140,000 a-year, for sixteen years. In 1691, an act was passed for borrowing a million upon annuities for lives, upon terms which, in the present times, would appear very advantageous; but the subscription was not filled up. In the following year, the deficiency was made good, by borrowing upon annuities for lives, at fourteen per cent. or a little more than seven years purchase. In 1695, the persons who had purchased those annuities were allowed to exchange them for others of ninety-six years, upon paying into the exchequer sixty-three pounds in the hundred; that is, the difference between fourteen per cent. for life, and fourteen per cent. for ninety-six years, was sold for sixty-three pounds, or for four and a-half years purchase. Such was the supposed instability of government, that even these terms procured few purchasers. In the reign of queen Anne, money was, upon different occasions, borrowed both upon annuities for lives, and upon annuities for terms of thirty-two, of eighty-nine, of ninety-eight, and of ninety-nine years. In 1719, the proprietors of the annuities for thirty-two years were induced to accept, in lieu of them, South-sea stock to the amount of eleven and a-half years purchase of the annuities, together with an additional quantity of stock, equal to the arrears which happened then to be due upon them. In 1720, the greater part of the other annuities for terms of years, both long and short, were subscribed into the same fund. The long annuities, at that time, amounted to L.666,821 : 8 : 3-1/2 a-year. On the 5th of January 1775, the remainder of them, or what was not subscribed at that time, amounted only to L.136,453 : 12 : 8. During the two wars which began in 1739 and in 1755, little money was borrowed, either upon annuities for terms of years, or upon those for lives. An annuity for ninety-eight or ninety-nine years, however, is worth nearly as much as a perpetuity, and should therefore, one might think, be a fund for borrowing nearly as much. But those who, in order to make family settlements, and to provide for remote futurity, buy into the public stocks, would not care to purchase into one of which the value was continually diminishing; and such people make a very considerable proportion, both of the proprietors and purchasers of stock. An annuity for a long term of years, therefore, though its intrinsic value may be very nearly the same with that of a perpetual annuity, will not find nearly the same number of purchasers. The subscribers to a new loan, who mean generally to sell their subscription as soon as possible, prefer greatly a perpetual annuity, redeemable by parliament, to an irredeemable annuity, for a long term of years, of only equal amount. The value of the former may be supposed always the same, or very nearly the same; and it makes, therefore, a more convenient transferable stock than the latter. During the two last-mentioned wars, annuities, either for terms of years or for lives, were seldom granted, but as premiums to the subscribers of a new loan, over and above the redeemable annuity or interest, upon the credit of which the loan was supposed to be made. They were granted, not as the proper fund upon which the money was borrowed, but as an additional encouragement to the lender. Annuities for lives have occasionally been granted in two different ways; either upon separate lives, or upon lots of lives, which, in French, are called tontines, from the name of their inventor. When annuities are granted upon separate lives, the death of every individual annuitant disburdens the public revenue, so far as it was affected by his annuity. When annuities are granted upon tontines, the liberation of the public revenue does not commence till the death of all the annuitants comprehended in one lot, which may, sometimes consist of twenty or thirty persons, of whom the survivors succeed to the annuities of all those who die before them; the last survivor succeeding to the annuities of the whole lot. Upon the same revenue, more money can always be raised by tontines than by annuities for separate lives. An annuity, with a right of survivorship, is really worth more than an equal annuity for a separate life; and, from the confidence which every man naturally has in his own good fortune, the principle upon which is founded the success of all lotteries, such an annuity generally sells for something more than it is worth. In countries where it is usual for government to raise money by granting annuities, tontines are, upon this account, generally preferred to annuities for separate lives. The expedient which will raise most money, is almost always preferred to that which is likely to bring about, in the speediest manner, the liberation of the public revenue. In France, a much greater proportion of the public debts consists in annuities for lives than in England. According to a memoir presented by the parliament of Bourdeaux to the king, in 1764, the whole public debt of France is estimated at twenty-four hundred millions of livres; of which the capital, for which annuities for lives had been granted, is supposed to amount to three hundred millions, the eighth part of the whole public debt. The annuities themselves are computed to amount to thirty millions a-year, the fourth part of one hundred and twenty millions, the supposed interest of that whole debt. These estimations, I know very well, are not exact; but having been presented by so very respectable a body as approximations to the truth, they may, I apprehend, be considered as such. It is not the different degrees of anxiety in the two governments of France and England for the liberation of the public revenue, which occasions this difference in their respective modes of borrowing; it arises altogether from the different views and interests of the lenders. In England, the seat of government being in the greatest mercantile city in the world, the merchants are generally the people who advance money to government. By advancing it, they do not mean to diminish, but, on the contrary, to increase their mercantile capitals; and unless they expected to sell, with some profit, their share in the subscription for a new loan, they never would subscribe. But if, by advancing their money, they were to purchase, instead of perpetual annuities, annuities for lives only, whether their own or those of other people, they would not always be so likely to sell them with a profit. Annuities upon their own lives they would always sell with loss; because no man will give for an annuity upon the life of another, whose age and state of health are nearly the same with his own, the same price which he would give for one upon his own. An annuity upon the life of a third person, indeed, is, no doubt, of equal value to the buyer and the seller; but its real value begins to diminish from the moment it is granted, and continues to do so, more and more, as long as it subsists. It can never, therefore, make so convenient a transferable stock as a perpetual annuity, of which the real value may be supposed always the same, or very nearly the same. In France, the seat of government not being in a great mercantile city, merchants do not make so great a proportion of the people who advance money to government. The people concerned in the finances, the farmers-general, the receivers of the taxes which are not in farm, the court-bankers, &c. make the greater part of those who advance their money in all public exigencies. Such people are commonly men of mean birth, but of great wealth, and frequently of great pride. They are too proud to marry their equals, and women of quality disdain to marry them. They frequently resolve, therefore, to live bachelors; and having neither any families of their own, nor much regard for those of their relations, whom they are not always very fond of acknowledging, they desire only to live in splendour during their own time, and are not unwilling that their fortune should end with themselves. The number of rich people, besides, who are either averse to marry, or whose condition of life renders it either improper or inconvenient for them to do so, is much greater in France than in England. To such people, who have little or no care for posterity, nothing can be more convenient than to exchange their capital for a revenue, which is to last just as long, and no longer, than they wish it to do. The ordinary expense of the greater part of modern governments, in time of peace, being equal, or nearly equal, to their ordinary revenue, when war comes, they are both unwilling and unable to increase their revenue in proportion to the increase of their expense. They are unwilling, for fear of offending the people, who, by so great and so sudden an increase of taxes, would soon be disgusted with the war; and they are unable, from not well knowing what taxes would be sufficient to produce the revenue wanted. The facility of borrowing delivers them from the embarrassment which this fear and inability would otherwise occasion. By means of borrowing, they are enabled, with a very moderate increase of taxes, to raise, from year to year, money sufficient for carrying on the war; and by the practice of perpetual funding, they are enabled, with the smallest possible increase of taxes, to raise annually the largest possible sum of money. In great empires, the people who live in the capital, and in the provinces remote from the scene of action, feel, many of them, scarce any inconveniency from the war, but enjoy, at their ease, the amusement of reading in the newspapers the exploits of their own fleets and armies. To them this amusement compensates the small difference between the taxes which they pay on account of the war, and those which they had been accustomed to pay in time of peace. They are commonly dissatisfied with the return of peace, which puts an end to their amusement, and to a thousand visionary hopes of conquest and national glory, from a longer continuance of the war. The return of peace, indeed, seldom relieves them from the greater part of the taxes imposed during the war. These are mortgaged for the interest of the debt contracted, in order to carry it on. If, over and above paying the interest of this debt, and defraying the ordinary expense of government, the old revenue, together with the new taxes, produce some surplus revenue, it may, perhaps, be converted into a sinking fund for paying off the debt. But, in the first place, this sinking fund, even supposing it should be applied to no other purpose, is generally altogether inadequate for paying, in the course of any period during which it can reasonably be expected that peace should continue, the whole debt contracted during the war; and, in the second place, this fund is almost always applied to other purposes. The new taxes were imposed for the sole purpose of paying the interest of the money borrowed upon them. If they produce more, it is generally something which was neither intended nor expected, and is, therefore, seldom very considerable. Sinking funds have generally arisen, not so much from any surplus of the taxes which was over and above what was necessary for paying the interest or annuity originally charged upon them, as from a subsequent reduction of that interest; that of Holland in 1655, and that of the ecclesiastical state in 1685, were both formed in this manner. Hence the usual insufficiency of such funds. During the most profound peace, various events occur, which require an extraordinary expense; and government finds it always more convenient to defray this expense by misapplying the sinking fund, than by imposing a new tax. Every new tax is immediately felt more or less by the people. It occasions always some murmur, and meets with some opposition. The more taxes may have been multiplied, the higher they may have been raised upon every different subject of taxation; the more loudly the people complain of every new tax, the more difficult it becomes, too, either to find out new subjects of taxation, or to raise much higher the taxes already imposed upon the old. A momentary suspension of the payment of debt is not immediately felt by the people, and occasions neither murmur nor complaint. To borrow of the sinking fund is always an obvious and easy expedient for getting out of the present difficulty. The more the public debts may have been accumulated, the more necessary it may have become to study to reduce them; the more dangerous, the more ruinous it may be to missapply any part of the sinking fund; the less likely is the public debt to be reduced to any considerable degree, the more likely, the more certainly, is the sinking fund to be misapplied towards defraying all the extraordinary expenses which occur in time of peace. When a nation is already overburdened with taxes, nothing but the necessities of a new war, nothing but either the animosity of national vengeance, or the anxiety for national security, can induce the people to submit, with tolerable patience, to a new tax. Hence the usual misapplication of the sinking fund. In Great Britain, from the time that we had first recourse to the ruinous expedient of perpetual funding, the reduction of the public debt, in time of peace, has never borne any proportion to its accumulation in time of war. It was in the war which began in 1668, and was concluded by the treaty of Ryswick, in 1697, that the foundation of the present enormous debt of Great Britain was first laid. On the 31st of December 1697, the public debts of Great Britain, funded and unfunded, amounted to L.21,515,742 : 13 : 8-1/2. A great part of those debts had been contracted upon short anticipations, and some part upon annuities for lives; so that, before the 31st of December 1701, in less than four years, there had partly been paid off, and partly reverted to the public, the sum of L.5,121,041 : 12 : 0-3/4; a greater reduction of the public debt than has ever since been brought about in so short a period of time. The remaining debt, therefore, amounted only to L.16,394,701 : 1 : 7-1/4. In the war which began in 1702, and which was concluded by the treaty of Utrecht, the public debts were still more accumulated. On the 31st of December 1714, they amounted to L.53,681,076 : 5 : 6-1/12. The subscription into the South-sea fund, of the short and long annuities, increased the capital of the public debt; so that, on the 31st of December 1722, it amounted to L.55,282,978 : 1 : 3-5/6. The reduction of the debt began in 1723, and went on so slowly, that, on the 31st of December 1739, during seventeen years of profound peace, the whole sum paid off was no more than L.8,328,354 : 17 : 11-3/12, the capital of the public debt, at that time, amounting to L.46,954,623 : 3 : 4-7/12. The Spanish war, which began in 1739, and the French war which soon followed it, occasioned a further increase of the debt, which, on the 31st of December 1748, after the war had been concluded by the treaty of Aix-la-Chapelle, amounted to L.78,293,313 : 1 : 10-3/4. The most profound peace of 17 years continuance, had taken no more than L.8,328,354 : 17 : 11-1/4 from it. A war, of less than nine years continuance, added L.31,338,689 : 18 : 6-1/6 to it.[77] During the administration of Mr. Pelham, the interest of the public debt was reduced, or at least measures were taken for reducing it, from four to three per cent.; the sinking fund was increased, and some part of the public debt was paid off. In 1755, before the breaking out of the late war, the funded debt of Great Britain amounted to L.72,289,673. On the 5th of January 1763, at the conclusion of the peace, the funded debt amounted to L.122,603,336 : 8 : 2-1/4. The unfunded debt has been stated at L.13,927,589 : 2 : 2. But the expense occasioned by the war did not end with the conclusion of the peace; so that, though on the 5th of January 1764, the funded debt was increased (partly by a new loan, and partly by funding a part of the unfunded debt) to L.129,586,789 : 10 : 1-3/4, there still remained (according to the very well informed author of Considerations on the Trade and Finances of Great Britain) an unfunded debt, which was brought to account in that and the following year, of L.9,975,017, 12s. 2-15/44d. In 1764, therefore, the public debt of Great Britain, funded and unfunded together, amounted, according to this author, to L.139,561,807 : 2 : 4. The annuities for lives, too, which had been granted as premiums to the subscribers to the new loans in 1757, estimated at fourteen-years purchase, were valued at L.472,500; and the annuities for long terms of years, granted as premiums likewise, in 1761 and 1762, estimated at twenty-seven years and a-half purchase, were valued at L.6,826,875. During a peace of about seven years continuance, the prudent and truly patriotic administration of Mr. Pelham was not able to pay off an old debt of six millions. During a war of nearly the same continuance, a new debt of more than seventy-five millions was contracted. On the 5th of January 1775, the funded debt of Great Britain amounted to L.124,996,086, 1s. 6-1/4d. The unfunded, exclusive of a large civil-list debt, to L.4,150,236 : 3 : 11-7/8. Both together, to L.129,146,322 : 5 : 6. According to this account, the whole debt paid off, during eleven years of profound peace, amounted only to L.10,415,476 : 16 : 9-7/8. Even this small reduction of debt, however, has not been all made from the savings out of the ordinary revenue of the state. Several extraneous sums, altogether independent of that ordinary revenue, have contributed towards it. Amongst these we may reckon an additional shilling in the pound land tax, for three years; the two millions received from the East-India company, as indemnification for their territorial acquisitions; and the one hundred and ten thousand pounds received from the bank for the renewal of their charter. To these must be added several other sums, which, as they arose out of the late war, ought perhaps to be considered as deductions from the expenses of it. The principal are, The produce of French prizes L.690,449 18 9 Composition for French prisoners 670,000 0 0 What has been received from the sale of the ceded 95,500 0 0 islands ______________ Total, L.1,455,949 18 9 If we add to this sum the balance of the earl of Chatham's and Mr. Calcraft's accounts, and other army savings of the same kind, together with what has been received from the bank, the East-India company, and the additional shilling in the pound land tax, the whole must be a good deal more than five millions. The debt, therefore, which, since the peace, has been paid out of the savings from the ordinary revenue of the state, has not, one year with another, amounted to half a million a-year. The sinking fund has, no doubt, been considerably augmented since the peace, by the debt which had been paid off, by the reduction of the redeemable four per cents to three per cents, and by the annuities for lives which have fallen in; and, if peace were to continue, a million, perhaps, might now be annually spared out of it towards the discharge of the debt. Another million, accordingly, was paid in the course of last year; but at the same time, a large civil-list debt was left unpaid, and we are now involved in a new war, which, in its progress, may prove as expensive as any of our former wars.[78] The new debt which will probably be contracted before the end of the next campaign, may, perhaps, be nearly equal to all the old debt which has been paid off from the savings out of the ordinary revenue of the state. It would be altogether chimerical, therefore, to expect that the public debt should ever be completely discharged, by any savings which are likely to be made from that ordinary revenue as it stands at present. The public funds of the different indebted nations of Europe, particularly those of England, have, by one author, been represented as the accumulation of a great capital, superadded to the other capital of the country, by means of which its trade is extended, its manufactures are multiplied, and its lands cultivated and improved, much beyond what they could have been by means of that other capital only. He does not consider that the capital which the first creditors of the public advanced to government, was, from the moment in which he advanced it, a certain portion of the annual produce, turned away from serving in the function of a capital, to serve in that of a revenue; from maintaining productive labourers, to maintain unproductive ones, and to be spent and wasted, generally in the course of the year, without even the hope of any future reproduction. In return for the capital which they advanced, they obtained, indeed, an annuity of the public funds, in most cases, of more than equal value. This annuity, no doubt, replaced to them their capital, and enabled them to carry on their trade and business to the same, or, perhaps, to a greater extent than before; that is, they were enabled, either to borrow of other people a new capital, upon the credit of this annuity or, by selling it, to get from other people a new capital of their own, equal, or superior, to that which they had advanced to government. This new capital, however, which they in this manner either bought or borrowed of other people, must have existed in the country before, and must have been employed, as all capitals are, in maintaining productive labour. When it came into the hands of those who had advanced their money to government, though it was, in some respects, a new capital to them, it was not so to the country, but was only a capital withdrawn from certain employments, in order to be turned towards others. Though it replaced to them what they had advanced to government, it did not replace it to the country. Had they not advanced this capital to government, there would have been in the country two capitals, two portions of the annual produce, instead of one, employed in maintaining productive labour. When, for defraying the expense of government, a revenue is raised within the year, from the produce of free or unmortgaged taxes, a certain portion of the revenue of private people is only turned away from maintaining one species of unproductive labour, towards maintaining another. Some part of what they pay in those taxes, might, no doubt, have been accumulated into capital, and consequently employed in maintaining productive labour; but the greater part would probably have been spent, and consequently employed in maintaining unproductive labour. The public expense, however, when defrayed in this manner, no doubt hinders, more or less, the further accumulation of new capital; but it does not necessarily occasion the destruction of any actually-existing capital. When the public expense is defrayed by funding, it is defrayed by the annual destruction of some capital which had before existed in the country; by the perversion of some portion of the annual produce which had before been destined for the maintenance of productive labour, towards that of unproductive labour. As in this case, however, the taxes are lighter than they would have been, had a revenue sufficient for defraying the same expense been raised within the year; the private revenue of individuals is necessarily less burdened, and consequently their ability to save and accumulate some part of that revenue into capital, is a good deal less impaired. If the method of funding destroys more old capital, it, at the same time, hinders less the accumulation or acquisition of new capital, than that of defraying the public expense by a revenue raised within the year. Under the system of funding, the frugality and industry of private people can more easily repair the breaches which the waste and extravagance of government may occasionally make in the general capital of the society. It is only during the continuance of war, however, that the system of funding has this advantage over the other system. Were the expense of war to be defrayed always by a revenue raised within the year, the taxes from which that extraordinary revenue was drawn would last no longer than the war. The ability of private people to accumulate, though less during the war, would have been greater during the peace, than under the system of funding. War would not necessarily have occasioned the destruction of any old capitals, and peace would have occasioned the accumulation of many more new. Wars would, in general, be more speedily concluded, and less wantonly undertaken. The people feeling, during continuance of war, the complete burden of it, would soon grow weary of it; and government, in order to humour them, would not be under the necessity of carrying it on longer than it was necessary to do so. The foresight of the heavy and unavoidable burdens of war would hinder the people from wantonly calling for it when there was no real or solid interest to fight for. The seasons during which the ability of private people to accumulate was somewhat impaired, would occur more rarely, and be of shorter continuance. Those, on the contrary, during which that ability was in the highest vigour, would be of much longer duration than they can well be under the system of funding. When funding, besides, has made a certain progress, the multiplication of taxes which it brings along with it, sometimes impairs as much the ability of private people to accumulate, even in time of peace, as the other system would in time of war. The peace revenue of Great Britain amounts at present to more than ten millions a year. If free and unmortgaged, it might be sufficient, with proper management, and without contracting a shilling of new debt, to carry on the most vigorous war. The private revenue of the inhabitants of Great Britain is at present as much incumbered in time of peace, their ability to accumulate is as much impaired, as it would have been in the time of the most expensive war, had the pernicious system of funding never been adopted. In the payment of the interest of the public debt, it has been said, it is the right hand which pays the left. The money does not go out of the country. It is only a part of the revenue of one set of the inhabitants which is transferred to another; and the nation is not a farthing the poorer. This apology is founded altogether in the sophistry of the mercantile system; and, after the long examinatior, which I have already bestowed upon that system, it may, perhaps, be unnecessary to say any thing further about it. It supposes, besides, that the whole public debt is owing to the inhabitants of the country, which happens not to be true; the Dutch, as well as several other foreign nations, having a very considerable share in our public funds. But though the whole debt were owing to the inhabitants of the country, it would not, upon that account, be less pernicious. Land and capital stock are the two original sources of all revenue, both private and public. Capital stock pays the wages of productive labour, whether employed in agriculture, manufactures, or commerce. The management of those two original sources of revenue belongs to two different sets of people; the proprietors of land, and the owners or employers of capital stock. The proprietor of land is interested, for the sake of his own revenue, to keep his estate in as good condition as he can, by building and repairing his tenants houses, by making and maintaining the necessary drains and inclosures, and all those other expensive improvements which it properly belongs to the landlord to make and maintain. But, by different land taxes, the revenue of the landlord may be so much diminished, and, by different duties upon the necessaries and conveniencies of life, that diminished revenue maybe rendered of so little real value, that he may find himself altogether unable to make or maintain those expensive improvements. When the landlord, however, ceases to do his part, it is altogether impossible that the tenant should continue to do his. As the distress of the landlord increases, the agriculture of the country must necessarily decline. When, by different taxes upon the necessaries and conveniencies of life, the owners and employers of capital stock find, that whatever revenue they derive from it, will not, in a particular country, purchase the same quantity of those necessaries and conveniencies which an equal revenue would in almost any other, they will be disposed to remove to some other. And when, in order to raise those taxes, all or the greater part of merchants and manufacturers, that is, all or the greater part of the employers of great capitals, come to be continually exposed to the mortifying and vexatious visits of the tax-gatherers, this disposition to remove will soon be changed into an actual removing. The industry of the country will necessarily fall with the removal of the capital which supported it, and the ruin of trade and manufactures will follow the declension of agriculture. To transfer from the owners of those two great sources of revenue, land, and capital stock, from the persons immediately interested in the good condition of every particular portion of land, and in the good management of every particular portion of capital stock, to another set of persons (the creditors of the public, who have no such particular interest), the greater part of the revenue arising from either, must, in the long-run, occasion both the neglect of land, and the waste or removal of capital stock. A creditor of the public has, no doubt, a general interest in the prosperity of the agriculture, manufactures, and commerce of the country; and consequently in the good condition of its land, and in the good management of its capital stock. Should there be any general failure or declension in any of these things, the produce of the different taxes might no longer be sufficient to pay him the annuity or interest which is due to him. But a creditor of the public, considered merely as such, has no interest in the good condition of any particular portion of land, or in the good management of any particular portion of capital stock. As a creditor of the public, he has no knowledge of any such particular portion. He has no inspection of it. He can have no care about it. Its ruin may in some cases be unknown to him, and cannot directly affect him. The practice of funding has gradually enfeebled every state which has adopted it. The Italian republics seem to have begun it. Genoa and Venice, the only two remaining which can pretend to an independent existence, have both been enfeebled by it. Spain seems to have learned the practice from the Italian republics, and (its taxes being probably less judicious than theirs) it has, in proportion to its natural strength, been still more enfeebled. The debts of Spain are of very old standing. It was deeply in debt before the end of the sixteenth century, about a hundred years before England owed a shilling. France, notwithstanding all its natural resources, languishes under an oppressive load of the same kind. The republic of the United Provinces is as much enfeebled by its debts as either Genoa or Venice. Is it likely that, in Great Britain alone, a practice, which has brought either weakness or dissolution into every other country, should prove altogether innocent? The system of taxation established in those different countries, it may be said, is inferior to that of England. I believe it is so. But it ought to be remembered, that when the wisest government has exhausted all the proper subjects of taxation, it must, in cases of urgent necessity, have recourse to improper ones. The wise republic of Holland has, upon some occasions, been obliged to have recourse to taxes as inconvenient as the greater part of those of Spain. Another war, begun before any considerable liberation of the public revenue had been brought about, and growing in its progress as expensive as the last war, may, from irresistible necessity, render the British system of taxation as oppressive as that of Holland, or even as that of Spain. To the honour of our present system of taxation, indeed, it has hitherto given so little embarrassment to industry, that, during the course even of the most expensive wars, the frugality and good conduct of individuals seem to have been able, by saving and accumulation, to repair all the breaches which the waste and extravagance of government had made in the general capital of the society. At the conclusion of the late war, the most expensive that Great Britain ever waged, her agriculture was as flourishing, her manufacturers as numerous and as fully employed, and her commerce as extensive, as they had ever been before. The capital, therefore, which supported all those different branches of industry, must have been equal to what it had ever been before. Since the peace, agriculture has been still further improved; the rents of houses have risen in every town and village of the country, a proof of the increasing wealth and revenue of the people; and the annual amount of the greater part of the old taxes, of the principal branches of the excise and customs, in particular, has been continually increasing, an equally clear proof of an increasing consumption, and consequently of an increasing produce, which could alone support that consumption. Great Britain seems to support with ease, a burden which, half a century ago, nobody believed her capable of supporting. Let us not, however, upon this account, rashly conclude that she is capable of supporting any burden; not even be too confident that she could support, without great distress, a burden a little greater than what has already been laid upon her. When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid. The liberation of the public revenue, if it has ever been brought about at all, has always been brought about by a bankruptcy; sometimes by an avowed one, though frequently by a pretended payment. The raising of the denomination of the coin has been the most usual expedient by which a real public bankruptcy has been disguised under the appearance of a pretended payment. If a sixpence, for example, should, either by act of parliament or royal proclamation, be raised to the denomination of a shilling, and twenty sixpences to that of a pound sterling; the person who, under the old denomination, had borrowed twenty shillings, or near four ounces of silver, would, under the new, pay with twenty sixpences, or with something less than two ounces. A national debt of about a hundred and twenty-eight millions, near the capital of the funded and unfunded debt of Great Britain, might, in this manner, be paid with about sixty-four millions of our present money. It would, indeed, be a pretended payment only, and the creditors of the public would really be defrauded of ten shillings in the pound of what was due to them. The calamity, too, would extend much further than to the creditors of the public, and those of every private person would suffer a proportionable loss; and this without any advantage, but in most cases with a great additional loss, to the creditors of the public. If the creditors of the public, indeed, were generally much in debt to other people, they might in some measure compensate their loss by paying their creditors in the same coin in which the public had paid them. But in most countries, the creditors of the public are, the greater part of them, wealthy people, who stand more in the relation of creditors than in that of debtors, towards the rest of their fellow-citizens. A pretended payment of this kind, therefore, instead of alleviating, aggravates, in most cases, the loss of the creditors of the public; and, without any advantage to the public, extends the calamity to a great number of other innocent people. It occasions a general and most pernicious subversion of the fortunes of private people; enriching, in most cases, the idle and profuse debtor, at the expense of the industrious and frugal creditor; and transporting a great part of the national capital from the hands which were likely to increase and improve it, to those who are likely to dissipate and destroy it. When it becomes necessary for a state to declare itself bankrupt, in the same manner as when it becomes necessary for an individual to do so, a fair, open, and avowed bankruptcy, is always the measure which is both least dishonourable to the debtor, and least hurtful to the creditor. The honour of a state is surely very poorly provided for, when, in order to cover the disgrace of a real bankruptcy, it has recourse to a juggling trick of this kind, so easily seen through, and at the same time so extremely pernicious. Almost all states, however, ancient as well as modern, when reduced to this necessity, have, upon some occasions, played this very juggling trick. The Romans, at the end of the first Punic war, reduced the As, the coin or denomination by which they computed the value of all their other coins, from containing twelve ounces of copper, to contain only two ounces; that is, they raised two ounces of copper to a denomination which had always before expressed the value of twelve ounces. The republic was, in this manner, enabled to pay the great debts which it had contracted with the sixth part of what it really owed. So sudden and so great a bankruptcy, we should in the present times be apt to imagine, must have occasioned a very violent popular clamour. It does not appear to have occasioned any. The law which enacted it was, like all other laws relating to the coin, introduced and carried through the assembly of the people by a tribune, and was probably a very popular law. In Rome, as in all other ancient republics, the poor people were constantly in debt to the rich and the great, who, in order to secure their votes at the annual elections, used to lend them money at exorbitant interest, which, being never paid, soon accumulated into a sum too great for the debtor to pay, or for any body else to pay for him. The debtor, for fear of a very severe execution, was obliged, without any further gratuity, to vote for the candidate whom the creditor recommended. In spite of all the laws against bribery and corruption, the bounty of the candidates, together with the occasional distributions of coin which were ordered by the senate, were the principal funds from which, during the latter times of the Roman republic, the poorer citizens derived their subsistence. To deliver themselves from this subjection to their creditors, the poorer citizens were continually calling out, either for an entire abolition of debts, or for what they called new tables; that is, for a law which should entitle them to a complete acquittance, upon paying only a certain proportion of their accumulated debts. The law which reduced the coin of all denominations to a sixth part of its former value, as it enabled them to pay their debts with a sixth part of what they really owed, was equivalent to the most advantageous new tables. In order to satisfy the people, the rich and the great were, upon several different occasions, obliged to consent to laws, both for abolishing debts, and for introducing new tables; and they probably were induced to consent to this law, partly for the same reason, and partly that, by liberating the public revenue, they might restore vigour to that government, of which they themselves had the principal direction. An operation of this kind would at once reduce a debt of L.128,000,000 to L.21,333,333 : 6 : 8. In the course of the second Punic war, the As was still further reduced, first, from two ounces of copper to one ounce, and afterwards from one ounce to half an ounce; that is, to the twenty-fourth part of its original value. By combining the three Roman operations into one, a debt of a hundred and twenty-eight millions of our present money, might in this manner be reduced all at once to a debt of L.5,333,333 : 6 : 8. Even the enormous debt of Great Britain might in this manner soon be paid. By means of such expedients, the coin of, I believe, all nations, has been gradually reduced more and more below its original value, and the same nominal sum has been gradually brought to contain a smaller and a smaller quantity of silver. Nations have sometimes, for the same purpose, adulterated the standard of their coin; that is, have mixed a greater quantity of alloy in it. If in the pound weight of our silver coin, for example, instead of eighteen penny-weight, according to the present standard, there were mixed eight ounces of alloy; a pound sterling, or twenty shillings of such coin, would be worth little more than six shillings and eightpence of our present money. The quantity of silver contained in six shillings and eightpence of our present money, would thus be raised very nearly to the denomination of a pound sterling. The adulteration of the standard has exactly the same effect with what the French call an augmentation, or a direct raising of the denomination of the coin. An augmentation, or a direct raising of the denomination of the coin, always is, and from its nature must be, an open and avowed operation. By means of it, pieces of a smaller weight and bulk are called by the same name, which had before been given to pieces of a greater weight and bulk. The adulteration of the standard, on the contrary, has generally been a concealed operation. By means of it, pieces are issued from the mint, of the same denomination, and, as nearly as could be contrived, of the same weight, bulk, and appearance, with pieces which had been current before of much greater value. When king John of France,[79] in order to pay his debts, adulterated his coin, all the officers of his mint were sworn to secrecy. Both operations are unjust. But a simple augmentation is an injustice of open violence; whereas an adulteration is an injustice of treacherous fraud. This latter operation, therefore, as soon as it has been discovered, and it could never be concealed very long, has always excited much greater indignation than the former. The coin, after any considerable augmentation, has very seldom been brought back to its former weight; but after the greatest adulterations, it has almost always been brought back to its former fineness. It has scarce ever happened, that the fury and indignation of the people could otherwise be appeased. In the end of the reign of Henry VIII., and in the beginning of that of Edward VI., the English coin was not only raised in its denomination, but adulterated in its standard. The like frauds were practised in Scotland during the minority of James VI. They have occasionally been practised in most other countries. That the public revenue of Great Britain can never be completely liberated, or even that any considerable progress can ever be made towards that liberation, while the surplus of that revenue, or what is over and above defraying the annual expense of the peace establishment, is so very small, it seems altogether in vain to expect. That liberation, it is evident, can never be brought about, without either some very considerable augmentation of the public revenue, or some equally considerable reduction of the public expense. A more equal land tax, a more equal tax upon the rent of houses, and such alterations in the present system of customs and excise as those which have been mentioned in the foregoing chapter, might, perhaps, without increasing the burden of the greater part of the people, but only distributing the weight of it more equally upon the whole, produce a considerable augmentation of revenue. The most sanguine projector, however, could scarce flatter himself, that any augmentation of this kind would be such as could give any reasonable hopes, either of liberating the public revenue altogether, or even of making such progress towards that liberation in time of peace, as either to prevent or to compensate the further accumulation of the public debt in the next war. By extending the British system of taxation to all the different provinces of the empire, inhabited by people either of British or European extraction, a much greater augmentation of revenue might be expected. This, however, could scarce, perhaps, be done, consistently with the principles of the British constitution, without admitting into the British parliament, or, if you will, into the states-general of the British empire, a fair and equal representation of all those different provinces; that of each province bearing the same proportion to the produce of its taxes, as the representation of Great Britain might bear to the produce of the taxes levied upon Great Britain. The private interest of many powerful individuals, the confirmed prejudices of great bodies of people, seem, indeed, at present, to oppose to so great a change, such obstacles as it may be very difficult, perhaps altogether impossible, to surmount. Without, however, pretending to determine whether such a union be practicable or impracticable, it may not, perhaps, be improper, in a speculative work of this kind, to consider how far the British system of taxation might be applicable to all the different provinces of the empire; what revenue might be expected from it, if so applied; and in what manner a general union of this kind might be likely to affect the happiness and prosperity of the different provinces comprehended within it. Such a speculation, can, at worst, be regarded but as a new Utopia, less amusing, certainly, but no more useless and chimerical than the old one. The land tax, the stamp duties, and the different duties of customs and excise, constitute the four principal branches of the British taxes. Ireland is certainly as able, and our American and West India plantations more able, to pay a land tax, than Great Britain. Where the landlord is subject neither to tythe nor poor's rate, he must certainly be more able to pay such a tax, than where he is subject to both those other burdens. The tythe, where there is no modus, and where it is levied in kind, diminishes more what would otherwise be the rent of the landlord, than a land tax which really amounted to five shillings in the pound. Such a tythe will be found, in most cases, to amount to more than a fourth part of the real rent of the land, or of what remains after replacing completely the capital of the farmer, together with his reasonable profit. If all moduses and all impropriations were taken away, the complete church tythe of Great Britain and Ireland could not well be estimated at less than six or seven millions. If there was no tythe either in Great Britain or Ireland, the landlords could afford to pay six or seven millions additional land tax, without being more burdened than a very great part of them are at present. America pays no tythe, and could, therefore, very well afford to pay a land tax. The lands in America and the West Indies, indeed, are, in general, not tenanted nor leased out to farmers. They could not, therefore, be assessed according to any rent roll. But neither were the lands of Great Britain, in the 4th of William and Mary, assessed according to any rent roll, but according to a very loose and inaccurate estimation. The lands in America might be assessed either in the same manner, or in according to an equitable valuation, in consequence of an accurate survey, like that which was lately made in the Milanese, and in the dominions of Austria, Prussia, and Sardinia. Stamp duties, it is evident, might be levied without any variation, in all countries where the forms of law process, and the deeds by which property, both real and personal, is transferred, are the same, or nearly the same. The extension of the custom-house laws of Great Britain to Ireland and the plantations, provided it was accompanied, as in justice it ought to be, with an extension of the freedom of trade, would be in the highest degree advantageous to both. All the invidious restraints which at present oppress the trade of Ireland, the distinction between the enumerated and non-enumerated commodities of America, would be entirely at an end. The countries north of Cape Finisterre would be as open to every part of the produce of America, as those south of that cape are to some parts of that produce at present. The trade between all the different parts of the British empire would, in consequence of this uniformity in the customs-house laws, be as free as the coasting trade of Great Britain is at present. The British empire would thus afford, within itself, an immense internal market for every part of the produce of all its different provinces. So great an extension of market would soon compensate, both to Ireland and the plantations, all that they could suffer from the increase of the duties of customs. The excise is the only part of the British system of taxation, which would require to be varied in any respect, according as it was applied to the different provinces of the empire. It might be applied to Ireland without any variation; the produce and consumption of that kingdom being exactly of the same nature with those of Great Britain. In its application to America and the West Indies, of which the produce and consumption are so very different from those of Great Britain, some modification might be necessary, in the same manner as in its application to the cyder and beer counties of England. A fermented liquor, for example, which is called beer, but which, as it is made of molasses, bears very little resemblance to our beer, makes a considerable part of the common drink of the people in America. This liquor, as it can be kept only for a few days, cannot, like our beer, be prepared and stored up for sale in great breweries, but every private family must brew it for their own use, in the same manner as they cook their victuals. But to subject every private family to the odious visits and examination of the tax-gatherers, in the same manner as we subject the keepers of alehouses and the brewers for public sale, would be altogether inconsistent with liberty. If, for the sake of equality, it was thought necessary to lay a tax upon this liquor, it might be taxed by taxing the material of which it is made, either at the place of manufacture, or, if the circumstances of the trade rendered such an excise improper, by laying a duty upon its importation into the colony in which it was to be consumed. Besides the duty of one penny a-gallon imposed by the British parliament upon the importation of molasses into America, there is a provincial tax of this kind upon their importation into Massachusetts Bay, in ships belonging to any other colony, of eightpence the hogshead; and another upon their importation from the northern colonies into South Carolina, of fivepence the gallon. Or, if neither of these methods was found convenient, each family might compound for its consumption of this liquor, either according to the number of persons of which it consisted, in the same manner as private families compound for the malt tax in England; or according to the different ages and sexes of those persons, in the same manner as several different taxes are levied in Holland; or, nearly as Sir Matthew Decker proposes, that all taxes upon consumable commodities should be levied in England. This mode of taxation, it has already been observed, when applied to objects of a speedy consumption, is not a very convenient one. It might be adopted, however, in cases where no better could be done. Sugar, rum, and tobacco, are commodities which are nowhere necessaries of life, which are become objects of almost universal consumption, and which are, therefore, extremely proper subjects of taxation. If a union with the colonies were to take place, those commodities might be taxed, either before they go out of the hands of the manufacturer or grower; or, if this mode of taxation did not suit the circumstances of those persons, they might be deposited in public warehouses, both at the place of manufacture, and at all the different ports of the empire, to which they might afterwards be transported, to remain there, under the joint custody of the owner and the revenue officer, till such time as they should be delivered out, either to the consumer, to the merchant-retailer for home consumption, or to the merchant-exporter; the tax not to be advanced till such delivery. When delivered out for exportation, to go duty-free, upon proper security being given, that they should really be exported out of the empire. These are, perhaps, the principal commodities, with regard to which the union with the colonies might require some considerable change in the present system of British taxation. What might be the amount of the revenue which this system of taxation, extended to all the different provinces of the empire, might produce, it must, no doubt, be altogether impossible to ascertain with tolerable exactness. By means of this system, there is annually levied in Great Britain, upon less than eight millions of people, more than ten millions of revenue. Ireland contains more than two millions of people, and, according to the accounts laid before the congress, the twelve associated provinces of America contain more than three. Those accounts, however, may have been exaggerated, in order, perhaps, either to encourage their own people, or to intimidate those of this country; and we shall suppose, therefore, that our North American and West Indian colonies, taken together, contain no more than three millions; or that the whole British empire, in Europe and America, contains no more than thirteen millions of inhabitants. If, upon less than eight millions of inhabitants, this system of taxation raises a revenue of more than ten millions sterling; it ought, upon thirteen millions of inhabitants, to raise a revenue of more than sixteen millions two hundred and fifty thousand pounds sterling. From this revenue, supposing that this system could produce it, must be deducted the revenue usually raised in Ireland and the plantations, for defraying the expense of the respective civil governments. The expense of the civil and military establishment of Ireland, together with the interest of the public debt, amounts, at a medium of the two years which ended March 1775, to something less than seven hundred and fifty thousand pounds a-year. By a very exact account of the revenue of the principal colonies of America and the West Indies, it amounted, before the commencement of the present disturbances, to a hundred and forty-one thousand eight hundred pounds. In this account, however, the revenue of Maryland, of North Carolina, and of all our late acquisitions, both upon the continent, and in the islands, is omitted; which may, perhaps, make a difference of thirty or forty thousand pounds. For the sake of even numbers, therefore, let us suppose that the revenue necessary for supporting the civil government of Ireland and the plantations may amount to a million. There would remain, consequently, a revenue of fifteen millions two hundred and fifty thousand pounds, to be applied towards defraying the general expense of the empire, and towards paying the public debt. But if, from the present revenue of Great Britain, a million could, in peaceable times, be spared towards the payment of that debt, six millions two hundred and fifty thousand pounds could very well be spared from this improved revenue. This great sinking fund, too, might be augmented every year by the interest of the debt which had been discharged the year before; and might, in this manner, increase so very rapidly, as to be sufficient in a few years to discharge the whole debt, and thus to restore completely the at-present debilitated and languishing vigour of the empire. In the mean time, the people might be relieved from some of the most burdensome taxes; from those which are imposed either upon the necessaries of life, or upon the materials of manufacture. The labouring poor would thus be enabled to live better, to work cheaper, and to send their goods cheaper to market. The cheapness of their goods would increase the demand for them, and consequently for the labour of those who produced them. This increase in the demand for labour would both increase the numbers, and improve the circumstances of the labouring poor. Their consumption would increase, and, together with it, the revenue arising from all those articles of their consumption upon which the taxes might be allowed to remain. The revenue arising from this system of taxation, however, might not immediately increase in proportion to the number of people who were subjected to it. Great indulgence would for some time be due to those provinces of the empire which were thus subjected to burdens to which they had not before been accustomed; and even when the same taxes came to be levied everywhere as exactly as possible, they would not everywhere produce a revenue proportioned to the numbers of the people. In a poor country, the consumption of the principal commodities subject to the duties of customs and excise, is very small; and in a thinly inhabited country, the opportunities of smuggling are very great. The consumption of malt liquors among the inferior ranks of people in Scotland is very small; and the excise upon malt, beer, and ale, produces less there than in England, in proportion to the numbers of the people and the rate of the duties, which upon malt is different, on account of a supposed difference of quality. In these particular branches of the excise, there is not, I apprehend, much more smuggling in the one country than in the other. The duties upon the distillery, and the greater part of the duties of customs, in proportion to the numbers of people in the respective countries, produce less in Scotland than in England, not only on account of the smaller consumption of the taxed commodities, but of the much greater facility of smuggling. In Ireland, the inferior ranks of people are still poorer than in Scotland, and many parts of the country are almost as thinly inhabited. In Ireland, therefore, the consumption of the taxed commodities might, in proportion to the number of the people, be still less than in Scotland, and the facility of smuggling nearly the same. In America and the West Indies, the white people, even of the lowest rank, are in much better circumstances than those of the same rank in England; and their consumption of all the luxuries in which they usually indulge themselves, is probably much greater. The blacks, indeed, who make the greater part of the inhabitants, both of the southern colonies upon the continent and of the West India islands, as they are in a state of slavery, are, no doubt, in a worse condition than the poorest people either in Scotland or Ireland. We must not, however, upon that account, imagine that they are worse fed, or that their consumption of articles which might be subjected to moderate duties, is less than that even of the lower ranks of people in England. In order that they may work well, it is the interest of their master that they should be fed well, and kept in good heart, in the same manner as it is his interest that his working cattle should be so. The blacks, accordingly, have almost everywhere their allowance of rum, and of molasses or spruce-beer, in the same manner as the white servants; and this allowance would not probably be withdrawn, though those articles should be subjected to moderate duties. The consumption of the taxed commodities, therefore, in proportion to the number of inhabitants, would probably be as great in America and the West Indies as in any part of the British empire. The opportunities of smuggling, indeed, would be much greater; America, in proportion to the extent of the country, being much more thinly inhabited than either Scotland or Ireland. If the revenue, however, which is at present raised by the different duties upon malt and malt liquors, were to be levied by a single duty upon malt, the opportunity of smuggling in the most important branch of the excise would be almost entirely taken away; and if the duties of customs, instead of being imposed upon almost all the different articles of importation, were confined to a few of the most general use and consumption, and if the levying of those duties were subjected to the excise laws, the opportunity of smuggling, though not so entirely taken away, would be very much diminished. In consequence of those two apparently very simple and easy alterations, the duties of customs and excise might probably produce a revenue as great, in proportion to the consumption of the most thinly inhabited province, as they do at present, in proportion to that of the most populous. The Americans, it has been said, indeed, have no gold or silver money, the interior commerce of the country being carried on by a paper currency; and the gold and silver, which occasionally come among them, being all sent to Great Britain, in return for the commodities which they receive from us. But without gold and silver, it is added, there is no possibility of paying taxes. We already get all the gold and silver which they have. How is it possible to draw from them what they have not? The present scarcity of gold and silver money in America, is not the effect of the poverty of that country, or of the inability of the people there to purchase those metals. In a country where the wages of labour are so much higher, and the price of provisions so much lower than in England, the greater part of the people must surely have wherewithal to purchase a greater quantity, if it were either necessary or convenient for them to do so. The scarcity of those metals, therefore, must be the effect of choice, and not of necessity. It is for transacting either domestic or foreign business, that gold or silver money is either necessary or convenient. The domestic business of every country, it has been shewn in the second book of this Inquiry, may, at least in peaceable times, be transacted by means of a paper currency, with nearly the same degree of conveniency as by gold and silver money. It is convenient for the Americans, who could always employ with profit, in the improvement of their lands, a greater stock than they can easily get, to save as much as possible the expense of so costly an instrument of commerce as gold and silver; and rather to employ that part of their surplus produce which would be necessary for purchasing those metals, in purchasing the instruments of trade, the materials of clothing, several parts of household furniture, and the iron work necessary for building and extending their settlements and plantations; in purchasing not dead stock, but active and productive stock. The colony governments find it for their interest to supply the people with such a quantity of paper money as is fully sufficient, and generally more than sufficient, for transacting their domestic business. Some of those governments, that of Pennsylvania, particularly, derive a revenue from lending this paper money to their subjects, at an interest of so much per cent. Others, like that of Massachusetts Bay, advance, upon extraordinary emergencies, a paper money of this kind for defraying the public expense; and afterwards, when it suits the conveniency of the colony, redeem it at the depreciated value to which it gradually falls. In 1747,[80] that colony paid in this manner the greater part of its public debts, with the tenth part of the money for which its bills had been granted. It suits the conveniency of the planters, to save the expense of employing gold and silver money in their domestic transactions; and it suits the conveniency of the colony governments, to supply them with a medium, which, though attended with some very considerable disadvantages, enables them to save that expense. The redundancy of paper money necessarily banishes gold and silver from the domestic transactions of the colonies, for the same reason that it has banished those metals from the greater part of the domestic transactions in Scotland; and in both countries, it is not the poverty, but the enterprizing and projecting spirit of the people, their desire of employing all the stock which they can get, as active and productive stock, which has occasioned this redundancy of paper money. In the exterior commerce which the different colonies carry on with Great Britain, gold and silver are more or less employed, exactly in proportion as they are more or less necessary. Where those metals are not necessary, they seldom appear. Where they are necessary, they are generally found. In the commerce between Great Britain and the tobacco colonies, the British goods are generally advanced to the colonists at a pretty long credit, and are afterwards paid for in tobacco, rated at a certain price. It is more convenient for the colonists to pay in tobacco than in gold and silver. It would be more convenient for any merchant to pay for the goods which his correspondents had sold to him, in some other sort of goods which he might happen to deal in, than in money. Such a merchant would have no occasion to keep any part of his stock by him unemployed, and in ready money, for answering occasional demands. He could have, at all times, a larger quantity of goods in his shop or warehouse, and he could deal to a greater extent. But it seldom happens to be convenient for all the correspondents of a merchant to receive payment for the goods which they sell to him, in goods of some other kind which he happens to deal in. The British merchants who trade to Virginia and Maryland, happen to be a particular set of correspondents, to whom it is more convenient to receive payment for the goods which they sell to those colonies in tobacco, than in gold and silver. They expect to make a profit by the sale of the tobacco; they could make none by that of the gold and silver. Gold and silver, therefore, very seldom appear in the commerce between Great Britain and the tobacco colonies. Maryland and Virginia have as little occasion for those metals in their foreign, as in their domestic commerce. They are said, accordingly, to have less gold and silver money than any other colonies in America. They are reckoned, however, as thriving, and consequently as rich, as any of their neighbours. In the northern colonies, Pennsylvania, New York, New Jersey, the four governments of New England, &c. the value of their own produce which they export to Great Britain is not equal to that of the manufactures which they import for their own use, and for that of some of the other colonies, to which they are the carriers. A balance, therefore, must be paid to the mother-country in gold and silver, and this balance they generally find. In the sugar colonies, the value of the produce annually exported to Great Britain is much greater than that of all the goods imported from thence. If the sugar and rum annually sent to the mother-country were paid for in those colonies, Great Britain would be obliged to send out, every year, a very large balance in money; and the trade to the West Indies would, by a certain species of politicians, be considered as extremely disadvantageous. But it so happens, that many of the principal proprietors of the sugar plantations reside in Great Britain. Their rents are remitted to them in sugar and rum, the produce of their estates. The sugar and rum which the West India merchants purchase in those colonies upon their own account, are not equal in value to the goods which they annually sell there. A balance, therefore, must necessarily he paid to them in gold and silver, and this balance, too, is generally found. The difficulty and irregularity of payment from the different colonies to Great Britain, have not been at all in proportion to the greatness or smallness of the balances which were respectively due from them. Payments have, in general, been more regular from the northern than from the tobacco colonies, though the former have generally paid a pretty large balance in money, while the latter have either paid no balance, or a much smaller one. The difficulty of getting payment from our different sugar colonies has been greater or less in proportion, not so much to the extent of the balances respectively due from them, as to the quantity of uncultivated land which they contained; that is, to the greater or smaller temptation which the planters have been under of over-trading, or of undertaking the settlement and plantation of greater quantities of waste land than suited the extent of their capitals. The returns from the great island of Jamaica, where there is still much uncultivated land, have, upon this account, been, in general, more irregular and uncertain than those from the smaller islands of Barbadoes, Antigua, and St. Christopher's, which have, for these many years, been completely cultivated, and have, upon that account, afforded less field for the speculations of the planter. The new acquisitions of Grenada, Tobago, St. Vincent's, and Dominica, have opened a new field for speculations of this kind; and the returns from those islands have of late been as irregular and uncertain as those from the great island of Jamaica. It is not, therefore, the poverty of the colonies which occasions, in the greater part of them, the present scarcity of gold and silver money. Their great demand for active and productive stock makes it convenient for them to have as little dead stock as possible, and disposes them, upon that account, to content themselves with a cheaper, though less commodious instrument of commerce, than gold and silver. They are thereby enabled to convert the value of that gold and silver into the instruments of trade, into the materials of clothing, into household furniture, and into the iron work necessary for building and extending their settlements and plantations. In those branches of business which cannot be transacted without gold and silver money, it appears, that they can always find the necessary quantity of those metals; and if they frequently do not find it, their failure is generally the effect, not of their necessary poverty, but of their unnecessary and excessive enterprise. It is not because they are poor that their payments are irregular and uncertain, but because they are too eager to become excessively rich. Though all that part of the produce of the colony taxes, which was over and above what was necessary for defraying the expense of their own civil and military establishments, were to be remitted to Great Britain in gold and silver, the colonies have abundantly wherewithal to purchase the requisite quantity of those metals. They would in this case be obliged, indeed, to exchange a part of their surplus produce, with which they now purchase active and productive stock, for dead stock. In transacting their domestic business, they would be obliged to employ a costly, instead of a cheap instrument of commerce; and the expense of purchasing this costly instrument might damp somewhat the vivacity and ardour of their excessive enterprise in the improvement of land. It might not, however, be necessary to remit any part of the American revenue in gold and silver. It might be remitted in bills drawn upon, and accepted by, particular merchants or companies in Great Britain, to whom a part of the surplus produce of America had been consigned, who would pay into the treasury the American revenue in money, after having themselves received the value of it in goods; and the whole business might frequently be transacted without exporting a single ounce of gold or silver from America. It is not contrary to justice, that both Ireland and America should contribute towards the discharge of the public debt of Great Britain. That debt has been contracted in support of the government established by the Revolution; a government to which the protestants of Ireland owe, not only the whole authority which they at present enjoy in their own country, but every security which they possess for their liberty, their property, and their religion; a government to which several of the colonies of America owe their present charters, and consequently their present constitution; and to which all the colonies of America owe the liberty, security, and property, which they have ever since enjoyed. That public debt has been contracted in the defence, not of Great Britain alone, but of all the different provinces of the empire. The immense debt contracted in the late war in particular, and a great part of that contracted in the war before, were both properly contracted in defence of America. By a union with Great Britain, Ireland would gain, besides the freedom of trade, other advantages much more important, and which would much more than compensate any increase of taxes that might accompany that union. By the union with England, the middling and inferior ranks of people in Scotland gained a complete deliverance from the power of an aristocracy, which had always before oppressed them. By a union with Great Britain, the greater part of people of all ranks in Ireland would gain an equally complete deliverance from a much more oppressive aristocracy; an aristocracy not founded, like that of Scotland, in the natural and respectable distinctions of birth and fortune, but in the most odious of all distinctions, those of religious and political prejudices; distinctions which, more than any other, animate both the insolence of the oppressors, and the hatred and indignation of the oppressed, and which commonly render the inhabitants of the same country more hostile to one another than those of different countries ever are. Without a union with Great Britain, the inhabitants of Ireland are not likely, for many ages, to consider themselves as one people. No oppressive aristocracy has ever prevailed in the colonies. Even they, however, would, in point of happiness and tranquillity, gain considerably by a union with Great Britain. It would, at least, deliver them from those rancourous and virulent factions which are inseparable from small democracies, and which have so frequently divided the affections of their people, and disturbed the tranquillity of their governments, in their form so nearly democratical. In the case of a total separation from Great Britain, which, unless prevented by a union of this kind, seems very likely to take place, those factions would be ten times more virulent than ever. Before the commencement of the present disturbances, the coercive power of the mother-country had always been able to restrain those factions from breaking out into any thing worse than gross brutality and insult. If that coercive power were entirely taken away, they would probably soon break out into open violence and bloodshed. In all great countries which are united under one uniform government, the spirit of party commonly prevails less in the remote provinces than in the centre of the empire. The distance of those provinces from the capital, from the principal seat of the great scramble of faction and ambition, makes them enter less into the views of any of the contending parties, and renders them more indifferent and impartial spectators of the conduct of all. The spirit of party prevails less in Scotland than in England. In the case of a union, it would probably prevail less in Ireland than in Scotland; and the colonies would probably soon enjoy a degree of concord and unanimity, at present unknown in any part of the British empire. Both Ireland and the colonies, indeed, would be subjected to heavier taxes than any which they at present pay. In consequence, however, of a diligent and faithful application of the public revenue towards the discharge of the national debt, the greater part of those taxes might not be of long continuance, and the public revenue of Great Britain might soon be reduced to what was necessary for maintaining a moderate peace-establishment. The territorial acquisitions of the East-India Company, the undoubted right of the Crown, that is, of the state and people of Great Britain, might be rendered another source of revenue, more abundant, perhaps, than all those already mentioned. Those countries are represented as more fertile, more extensive, and, in proportion to their extent, much richer and more populous than Great Britain. In order to draw a great revenue from them, it would not probably be necessary to introduce any new system of taxation into countries which are already sufficiently, and more than sufficiently, taxed. It might, perhaps, be more proper to lighten than to aggravate the burden of those unfortunate countries, and to endeavour to draw a revenue from them, not by imposing new taxes, but by preventing the embezzlement and misapplication of the greater part of those which they already pay. If it should be found impracticable for Great Britain to draw any considerable augmentation of revenue from any of the resources above mentioned, the only resource which can remain to her, is a diminution of her expense. In the mode of collecting and in that of expending the public revenue, though in both there may be still room for improvement, Great Britain seems to be at least as economical as any of her neighbours. The military establishment which she maintains for her own defence in time of peace, is more moderate than that of any European state, which can pretend to rival her either in wealth or in power. None of those articles, therefore, seem to admit of any considerable reduction of expense. The expense of the peace-establishment of the colonies was, before the commencement of the present disturbances, very considerable, and is an expense which may, and, if no revenue can be drawn from them, ought certainly to be saved altogether. This constant expense in time of peace, though very great, is insignificant in comparison with what the defence of the colonies has cost us in time of war. The last war, which was undertaken altogether on account of the colonies, cost Great Britain, it has already been observed, upwards of ninety millions. The Spanish war of 1739 was principally undertaken on their account; in which, and in the French war that was the consequence of it, Great Britain, spent upwards of forty millions; a great part of which ought justly to be charged to the colonies. In those two wars, the colonies cost Great Britain much more than double the sum which the national debt amounted to before the commencement of the first of them. Had it not been for those wars, that debt might, and probably would by this time, have been completely paid; and had it not been for the colonies, the former of those wars might not, and the latter certainly would not, have been undertaken. It was because the colonies were supposed to be provinces of the British Empire, that this expense was laid out upon them. But countries which contribute neither revenue nor military force towards the support of the empire, cannot be considered as provinces. They may, perhaps, be considered as appendages, as a sort of splendid and shewy equipage of the empire. But if the empire can no longer support the expense of keeping up this equipage, it ought certainly to lay it down; and if it cannot raise its revenue in proportion to its expense, it ought at least to accommodate its expense to its revenue. If the colonies, notwithstanding their refusal to submit to British taxes, are still to be considered as provinces of the British empire, their defence, in some future war, may cost Great Britain as great an expense as it ever has done in any former war. The rulers of Great Britain have, for more than a century past, amused the people with the imagination that they possessed a great empire on the west side of the Atlantic. This empire, however, has hitherto existed in imagination only. It has hitherto been, not an empire, but the project of an empire; not a gold mine, but the project of a gold mine; a project which has cost, which continues to cost, and which, if pursued in the same way as it has been hitherto, is likely to cost, immense expense, without being likely to bring any profit; for the effects of the monopoly of the colony trade, it has been shewn, are to the great body of the people, mere loss instead of profit. It is surely now time that our rulers should either realize this golden dream, in which they have been indulging themselves, perhaps, as well as the people; or that they should awake from it themselves, and endeavour to awaken the people. If the project cannot be completed, it ought to be given up. If any of the provinces of the British empire cannot be made to contribute towards the support of the whole empire, it is surely time that Great Britain should free herself from the expense of defending those provinces in time of war, and of supporting any part of their civil or military establishments in time of peace; and endeavour to accommodate her future views and designs to the real mediocrity of her circumstances. FOOTNOTES: [1] It is mentioned, that when about three years old, he was stolen from the door of his uncle, Mr. Douglas, in Strathenry, where his mother had been on a visit, by some tinkers, or gypsies. He was rescued in Leslie wood by his uncle, who was thus the happy instrument, Mr. Stewart observes, of preserving to the world, a genius, which was destined, not only to extend the boundaries of science, but to enlighten and reform the commercial policy of Europe. [2] Boswell's Life of Johnson, vol. iv. p. 17 [3] Edinburgh Review, vol. i. p. 432. [4] It may not be uninteresting to mention what has been said of the manner in which the writings of Mr. Smith were composed.--'Mr. Smith observed to me, not long before his death,' says Mr. Stewart, 'that after all his practice in writing, he composed as slowly, and with as great difficulty as at first.' He added, at the same time, that Mr. Hume had acquired so great a facility in this respect, that the last volume of his History was printed from the original copy, with a few marginal corrections. Mr. Smith, when be was employed in composition, generally walked up and down his apartment, dictating to a secretary. All Mr. Hume's works, it has been said, were written with his own hand. [5] This observation, as may easily be perceived, cannot apply in certain indirect imposts, such as those for the support of the roads; which, as they cannot be confounded with the price of any consumable commodity, combine all the inconveniencies of indirect, with those of direct imposts. [6] Plin. Hist. Nat. lib. 33, cap. 3. [7] Pliny, lib. xxxiii. cap. 3. [8] This was written in 1773, before the commencement of the late disturbances. [9] See his scheme for the maintenance of the poor, in Burn's History of the Poor Laws. [10] See Denisart, Article Taux des Interests, tom. iii, p. 18. [11] See Idyllium xxi. [12] See Madox Firma Burgi p. 26 &c. [13] See the Statute of Labourers, 25, Ed. III. [14] Voyages d'un Philosophe. [15] Douglas's Summary, vol. ii, p. 372, 373. [16] See his Preface to Anderson's Diplomata Scotiæ. [17] Lowndes's Essay on the Silver Coin, 68. [18] See Tracts on the Corn Trade, Tract 3. [19] Solorzano, vol. ii. [20] Postscript to the Universal Merchant, p. 15 and 16. This postscript was not printed till 1756, three years after the publication of the book, which has never had a second edition. The postscript is, therefore, to be found in few copies; it corrects several error in the book. [21] See Ruddiman's Preface to Anderson's Diplomata, &c. Scotiæ. [22] Lib. x, c. 29. [23] Lib. ix, c. 17. [24] Kalm's Travels, vol. i, p. 343, 344. [25] See Smith's Memoirs of Wool, vol. i. c. 5, 6, 7. also vol. ii. [26] Wanting in the account. The year 1646 supplied by Bishop Fleetwood. [27] See Ruddiman's Preface to Anderson's Diplomata, &c. Scotiæ. [28] The method described in the text was by no means either the must common or the most expensive one in which those adventurers sometimes raised money by circulation. It frequently happened, that A in Edinburgh would enable B in London to pay the first bill of exchange, by drawing, a few days before it became due, a second bill at three months date upon the same B in London. This bill, being payable to his own order, A sold in Edinburgh at par; and with its contents purchased bills upon London, payable at sight to the order of B, to whom he sent them by the post. Towards the end of the late war, the exchange between Edinburgh and London was frequently three per cent. against Edinburgh, and those bills at sight must frequently have cost A that premium. This transaction, therefore, being repeated at least four times in the year, and being loaded with a commission of at least one half per cent, upon each repetition, must at that period have cost A, at least, fourteen per cent. in the year. At other times A would enable B to discharge the first bill of exchange, by drawing, a few days before it became due, a second bill at two months date, not upon B, but upon some third person, C, for example, in London. This other bill was made payable to the order of B, who, upon its being accepted by C, discounted it with some banker in London; and A enabled C to discharge it, by drawing, a few days before it became due, a third bill likewise at two months date, sometimes upon his first correspondent B and sometimes upon some fourth or fifth person, D or E, for example. This third bill was made payable to the order of C, who, as soon as it was accepted, discounted it in the same manner with some banker in London. Such operations being repeated at least six times in the year, and being loaded with a commission of at least one half per cent. upon each repetition, together with legal interest of five per cent. this method of raising money, in the same manner as described in the text, must have cost A something more than eight per cent. By saving, however, the exchange between Edinburgh and London, it was less expensive than that mentioned in the foregoing part of this note; but then it required an established credit with more houses than one in London, an advantage which many of these adventurers could not always find it easy to procure. [29] James Postlethwaite's History of the Public Revenue, p. 301 [30] Some French authors of great learning and ingenuity have used those words in a different sense. In the last chapter of the fourth book, I shall endeavour to shew that their sense is an improper one. [31] See Brady's Historical Treatise of Cities and Boroughs, p. 3. &c. [32] See Madox, Firma Burgi, p. 18; also History of the Exchequer, chap. 10, sect. v, p. 223, first edition. [33] See Madox, Firma Burgi. See also Pfeffel in the Remarkable events under Frederick II. and his Successors of the House of Suabia. [34] See Madox [35] See Pfeffel [36] See Sandi Istoria civile de Vinezia, part 2, vol. i, page 247 and 256. [37] The following are the prices at which the bank of Amsterdam at present (September 1775) receives bullion and coin of different kinds: SILVER. Mexico dollars } Guilders. French crowns } B--22 per mark. English silver coin } Mexico dollars, new coin 21 10 Ducatoons 3 0 Rix-dollars 2 8 Bar silver, containing 11-12ths fine silver, 21 per mark, and in this proportion down to 1-4th fine, on which 5 guilders are given. Fine bars, 28 per mark. GOLD. Portugal coin } Guineas } B--310 per mark. Louis d'ors, new } Ditto old 300 New ducats 4 19 8 per ducat. Bar or ingot gold is received in proportion to its fineness, compared with the above foreign gold coin. Upon fine bars the bank gives 340 per mark. In general, however, something more is given upon coin of a known fineness, than upon gold and silver bars, of which the fineness cannot be ascertained but by a process of melting and assaying. [38] This paragraph was written in the year 1775. [39] See the accounts at the end of this Book. [40] Before the 13th of the present king, the following were the duties payable upon the importation of the different sorts of grain: _Grain._ _Duties._ _Duties._ _Duties._ Beans to 28s. per qr. 19s. 10d. after till 40s. 16s. 8d. then 12d. Barley to 28s. 19s. 10d. 32s. 16s. 12d. Malt is prohibited by the annual malt-tax bill. Oats to 16s. 5s. 10d. after 9-1/2d. Pease to 40s. 16s. 0d. after 9-3/4d. Rye to 36s. 19s. 10d. till 40s. 16s. 8d. then 12d. Wheat to 44s. 21s. 9d. till 53s. 4d. 17s. then 8s. till L 4, and after that about 1s. 4d. Buck-wheat to 32s. per qr. to pay 16s. These different duties were imposed, partly by the 22d of Charles II. in place of the old subsidy, partly by the new subsidy, by the one-third and two-thirds subsidy, and by the subsidy 1747. [41] See Dictionnaire des Monnoies, tom. ii. article Seigneurage, p. 489, par M. Abbot de Baringhen, Conseiller-Commissaire en la Cour des Monnoies à Paris. [42] The interest of every proprietor of India stock, however, is by no means the same with that of the country in the government of which his vote gives him some influence.--See book v, chap. i, part ii. [43] See book I chap. I [44] See the Journal of Mr. De Lange, in Bell's Travels, vol. ii. p. 258, 276, 293. [45] Plin. 1. ix. c. 30. [46] Plin. 1. viii. c. 48. [47] They are to be found in Tyrol's History of England. [48] Since publishing the first two editions of this book, I have got good reasons to believe that all the turnpike tolls levied in Great Britain do not produce a neat revenue that amounts to half a million; a sum which, under the management of government, would not be sufficient to keep in repair five of the principal roads in the kingdom. [49] I have now good reason to believe that all those conjectural sums are by much too large. [50] See Memoires concernant les Droits et Impositions en Europe, tome i. page 73. This work was compiled by the order of the court, for the use of a commission employed for some years past in considering the proper means for reforming the finances of France. The account of the French taxes, which takes up three volumes in quarto, may be regarded as perfectly authentic. That of those of other European nations was compiled from such information as the French ministers at the different courts could procure. It is much shorter, and probably not quite so exact as that of the French taxes. [51] See Memoires concernant les Droits et Impositions en Europe tome i. p. 73. [52] See Sketches of the History of Man page 474, and Seq. [53] Memoires concernant les Droits, p. 240, 241. [54] Memoires concernant les Droits, &c. tom. i. p. 114, 115, 116, &c. [55] Id. tom. i. p. 83, 84. [56] Id. p. 280, &c.; also p. 287, &c. to 316. [57] Memoires concernant les Droits, &c. tom. ii. p. 139, &c. [58] Since the first publication of this book, a tax nearly upon the above-mentioned principles has been imposed. [59] Memoires concernant les Droits, &c. p. 223. [60] Memoires concernant les Droits, tom. i, p. 74. [61] Memoires concernant les Droits, tom. i, p. 163, 167, 171. [62] Memoires concernant les Droits, &c. tom. ii. p. 17. [63] Lib. 55. See also Burman, de Vectigalibus Pop. Rom. cap. xi. and Bouchaud de l'impot du vingtieme sur les successions. [64] See Memoires concernant les Droits, &c. tom. i. p. 225. [65] Memoires concernant les Droits, &c. tom. i. p. 154. [66] Id. p. 157. [67] Memoires concernant les Droits, &c. tom. i. p. 223, 224, 225. [68] Memoires concernant les Droits, &c. tom. ii. p. 108. [69] Memoires concernant les Droits, &c. tom. iii. p. 87. [70] See book i. chap. 8. [71] Memoires concernant les Droits, &c., p. 210, 211. [72] Le Reformateur [73] Though the duties directly imposed upon proof spirits amount only to 2s. 6d. per gallon, these, added to the duties upon the low wines, from which they are distilled, amount to 3s. 10-2/3d. Both low wines and proof spirits are, to prevent frauds, now rated according to what they gauge in the wash. [74] The neat production of that year, after deducting all expenses and allowances, amounted to L.4,975,652 : 19 : 6. [75] Memoires concernant les Droits, &c. tom. 1, p. 45 [76] See Examen des Reflections Politiques sut les Finances. [77] See James Postlethwaite's History of the Public Revenue. [78] It has proved more expensive than any one of our former wars, and has involved us in an additional debt of more than one hundred millions. During a profound peace of eleven years, little more than ten millions of debt was paid; during a war of seven years, more than one hundred millions was contracted. [79] See Du Cange Glossary, voce Moneta; the Benedictine Edition. [80] See Hutchinson's History of Massachusetts Bay vol. ii, page 436, et seq. INDEX. A _Absentee_ tax, the propriety of, considered with reference to Ireland, 379. _Accounts_ of money, in modern Europe, all kept, and the value of goods computed, in silver, 16. _Actors_, public, paid for the contempt attending their profession, 44. _Africa_, cause assigned for the barbarous state of the interior parts of that continent, 9. _African company_, establishment and constitution of, 309. Receive an annual allowance from parliament for forts and garrisons, 310. The company not under sufficient controul, ib. History of the Royal African company, 311. Decline of, ib. Rise of the present company, ib. _Age_, the foundation of rank and precedency in rude as well as civilized societies, 297. _Aggregate fund_, in the British finances, explained, 388. _Agio_ of the bank of Amsterdam explained, 194. Of the bank of Hamburgh, 195. The agio at Amsterdam, how kept at a medium rate, 197. _Agriculture_, the labour of, does not admit of such subdivisions as manufactures, 3. This impossibility of separation prevents agriculture from improving equally with manufactures, ib. Natural state of, in a new colony, 38. Requires more knowledge and experience than most mechanical professions, and yet is carried on without any restrictions, 53. The terms of rent, how adjusted between landlord and tenant, 60. Is extended by good roads and navigable canals, 62. Under what circumstances pasture land is more valuable than arable, 63. Gardening not a very gainful employment, 64. Vines the most profitable article of culture, 65. Estimates of profit from projects very fallacious, ib. Cattle and tillage mutually improve each other, 93. Remarks on that of Scotland, ib. On that of North America, 94. Poultry, a profitable article in husbandry, ib. Hogs, 95. Dairy, 96. Evidences of land being completely improved, ib. The extension of cultivation, as it raises the price of animal food, reduces that of vegetables, 103. By whom and how practised under feudal government, 137. Its operations not so much intended to increase, as to direct the fertility of nature, 149. Has been the cause of the prosperity of the British colonies in America, 150. The profits of, exaggerated by projectors, 154. On equal terms, is naturally preferred to trade, 156. Artificers necessary to the carrying it on, ib. Was not attended to by the northern destroyers of the Roman empire, 157. The ancient policy of Europe unfavourable to, 162. Was promoted by the commerce and manufactures of towns, 170. The wealth arising from, more solid and durable than that which proceeds from commerce, 172. Is not encouraged by the bounty on the exportation of corn, 207. Why the proper business of new companies, 251. The present agricultural system of political economy adopted in France, described, 275. Is discouraged by restrictions and prohibitions in trade, 279. Is favoured beyond manufactures in China, 282. And in Indostan, 283. Does not require so extensive a market as manufactures, 284. To check manufactures in order to promote agriculture, false policy, 285. Landlords ought to be encouraged to cultivate part of their own land, 350. _Alcavala_, the tax in Spain so called, explained and considered, 381. The ruin of the Spanish manufactures attributed to this tax, ib. _Alehouses_, the number of, not the efficient cause of drunkenness, 148, 200. _Allodial rights_, mistaken for feudal rights, 168. The introduction of the feudal law tended to moderate the authority of the allodial lords, ib. _Ambassadors_, the first motive of their appointment, 307. _America_, why labour is dearer in North America than in England, 29. Great increase of population there, ib. Common rate of interest there, 38. Is a new market for the produce of its own silver mines, 85. The first accounts of the two empires of Peru and Mexico greatly exaggerated, ib. Improving state of the Spanish colonies there, 86. Account of the paper currency of the British colonies, 134. Cause of the rapid prosperity of the British colonies there, 150. Why manufactures for distant sale have never been established there, 156. Its speedy improvement owing to assistance from foreign capitals, 157. The purchase and improvement of uncultivated land the most profitable employment of capitals, 171. Commercial alterations produced by the discovery of, 181. But two civilized nations found on the whole continent, ib. The wealth of the North American colonies increased, though the balance of trade continued against them, 203. Madeira wine, how introduced there, 204. Historical review of the European settlements in, 229. Of Spain, 232, 233. Of Holland, 234. Of France, ib. Of Britain, ib. Ecclesiastical government in the several European colonies, 235. Fish a principal article of trade from North America to Spain, Portugal, and the Mediterranean, 237. Naval stores to Britain, 238. Little credit due to the policy of Europe from the success of the colonies, 242. The discovery and colonization of, how far advantageous to Europe, 243. And to America, ib. The colonies in, governed by a spirit of monopoly, 261. The interest of the consumer in Britain sacrificed to that of the producer, by the system of colonization, 274. Plan for extending the British system of taxation, over all the provinces of, 397, 398. The question, how the Americans could pay taxes without specie, considered, 402. Ought in justice to contribute to discharge the public debt in Britain, 402. Expediency of their union with Britain, 403. The British empire there a mere project, 404. _Amsterdam_, agio of the bank of, explained, 194. Occasion of its establishment, 195. Advantages attending payments there, ib. Rate demanded for keeping money there, ib. Prices at which bullion and coin are received, 196, _note_. This bank the great warehouse of Europe for bullion, 197. Demands upon, how made and answered, ib. The agio, how kept at a medium rate, ib. The treasure of, whether all preserved in its repositories, 198. The amount of its treasure only to be conjectured, ib. Fees paid to the bank for transacting business, ib. _Annuities_, for terms of years, and for lives, in the British finances, historical account of, 389. _Apothecaries_, the profit on their drugs, unjustly stigmatized as exorbitant, 46. _Apprenticeship_, the nature and intention of this bond of servitude, explained, 42. The limitations imposed on various trades as to the number of apprentices, 50. The statute of apprenticeship in England, ib. Apprenticeships in France and Scotland, 51. General remarks on the tendency and operation of long apprenticeships, ib. The statute of, ought to be repealed, 191. _Arabs_, their manner of supporting war, 289. _Army_, three different ways by which a nation may maintain one in a distant country, 178. Standing, distinction between and a militia, 292. Historical review of, 294. The Macedonian army, ib. Carthaginian army, ib. Roman army, ib. Is alone able to perpetuate the civilization of a country, 296. Is the speediest engine for civilizing a barbarous country, ib. Under what circumstances dangerous to, and under what favourable to liberty, ib. _Artificers_ prohibited by law from going to foreign countries, 273. Residing abroad, and not returning on notice, exposed to outlawry, ib. See _Manufactures_. _Asdrubal_, his army greatly improved by discipline, 294. How defeated, ib. _Assembly_, houses of, in the British colonies, the constitutional freedom of, shewn, 240. _Assiento Contract_, 312. _Assize_ of bread and ale, remarks on that statute, 75, 77. _Augustus_, emperor, emancipates the slaves of Vedius Pollio for his cruelty, 241. B _Balance_ of annual produce and consumption explained, 203. May be in favour of a nation, when the balance of trade is against it, ib. _Balance_ of trade, no certain criterion to determine on which side it turns between two countries, 192. The current doctrine of, on which most regulations of trade are founded, absurd, 199. If even, by the exchange of their native commodities, both sides may be gainers, ib. How the balance would stand if native commodities on one side were paid with foreign commodities on the other, ib. How the balance stands when commodities are purchased with gold and silver, ib., 200. The ruin of countries often predicted from the doctrine of an unfavourable balance of trade, 202. _Banks_, great increase of trade in Scotland since the establishment of them in the principal towns, 120. Their usual course of business, 121. Consequences of their issuing too much paper, 122. Necessary caution for some time observed by them with regard to giving credit to their customers, 124. Limits of the advances they may imprudently make to traders, 125. How injured by the practice of drawing and redrawing bills, 126, 127. History of the Ayr bank, 128. History of the bank of England, 130. The nature and public advantage of banks considered, 131. Bankers might carry on their business with less paper, 132. Effects of the optional clauses in the Scotch notes, 133. Origin of their establishment, 194. Bank money explained, 195. Bank of England, the conduct of, in regard to the coinage, 226. Joint stock companies, why well adapted to the trade of banking, 317, 318. A doubtful question, whether the government of Great Britain is equal to the management of the bank to profit, 344. _Bankers_, the credit of their notes how established, 118. The nature of the banking business explained, ib., 121. The multiplication and competition of bankers, under proper regulations of service to public credit, 135. _Baretti_, Mr. his account of the quantity of Portugal gold sent weekly to England, 225. _Barons_, feudal, their power contracted by the grant of municipal privileges, 163. Their extensive authority, 168. How they lost their authority over their vassals, 169. And the power to disturb their country, 170. _Barter_, the exchange of one commodity for another, the propensity to, of extensive operation, and peculiar to man, 6. Is not sufficient to carry on the mutual intercourse of mankind, 10. See _Commerce_. _Batavia_, causes of the prosperity of the Dutch settlement there, 263. _Beaver skins_, review of the policy used in the trade for, 273. _Beef_, cheaper now in London than in the reign of James I., 63. Compared with the prices of wheat at the corresponding times, 64. _Benefices_, ecclesiastical, the tenure of, why rendered secure, 335. The power of collating to, how taken from the pope, in England and France, 338. General equality of, among the presbyterians, 340. Good effects of this equality, ib. _Bengal_, to what circumstances its early improvement in agriculture and manufactures was owing, 9. Present miserable state of the country, 30. Remarks on the high rates of interest there, 39. Oppressive conduct of the English there, to suit their trade in opium, 263. Why more remarkable for the exportation of manufactures than of grain, 284. _Berne_, brief history of the republic of, 164. Establishment of the reformation there, 338. Application of the revenue of the catholic clergy, 341. Derives a revenue from the interest of its treasure, 344. _Bills of Exchange_, punctuality in the payment of, how secured, 126. The pernicious practice of drawing and redrawing explained, ib. The arts made use of to disguise this mutual traffic in bills, 127. _Birth_, superiority of, how it confers respect and authority, 298. _Bishops_, the ancient mode of electing them, and how altered, 335, 337. _Body_, natural and political, analogy between, 280. _Bohemia_, account of the tax there on the industry of artificers, 366. _Bounty_, on the exportation of corn, the tendency of this measure examined, 81. _Bounties_, why given in commerce, 183. On exportation, the policy of granting them considered, 205. On the exportation of corn, 206. This bounty imposes two taxes on the people, 207. Evil tendency of this bounty, 209. The bounty only beneficial to the exporter and importer, ib. Motives of the country gentlemen in granting the bounty, 210. A trade which requires a bounty, necessarily a losing trade, ib. Tonnage bounties to the fisheries considered, 211. Account of the white-herring fishery, 212. Remarks on other bounties, 213. A review of the principles on which they are generally granted, 267. Those granted on American produce founded on mistaken policy, 268. How they affect the consumer, 274. _Bourdeaux_, why a town of great trade, 138. _Brazil_ grew to be a powerful colony under neglect, 233. The Dutch invaders expelled by the Portuguese colonists, ib. Computed number of inhabitants there, ib. The trade of the principal provinces oppressed by the Portuguese, 236. _Bread_, its relative value with butcher's meat compared, 62, 63. _Brewery_, reasons for transferring the taxes on to the malt, 376. _Bridges_, how to be erected and maintained, 303. _Britain_, Great, evidences that labour is sufficiently paid for there, 30. The price of provisions nearly the same in most places, 31. Great variations in the price of labour, ib. Vegetables imported from Flanders in the last century, 32. Historical account of the alterations interest of money has undergone, 37. Double interest deemed a reasonable mercantile profit, 40. In what respects the carrying trade is advantageous to, 152, 153. Appears to enjoy more of the carrying trade of Europe than it really has, 153. It is the only country of Europe in which the obligation of purveyance is abolished, 161. Its funds for the support of foreign wars inquired into, 178, 179. Why never likely to be much affected by the free importation of Irish cattle, 186. Nor salt provisions, ib. Could be little affected by the importation of foreign corn, 187. The policy of the commercial restraints on the trade with France examined, 192. The trade with France might be more advantageous to each country than that with any other, 202. Why one of the richest countries in Europe, while Spain and Portugal are among the poorest, 221. Review of her American colonies, 234. The trade of her colonies, how regulated, 236. Distinction between enumerated and non-enumerated commodities explained, 237. Restrains manufactures in America, 238, 239. Indulgences granted to the colonists, 239. Constitutional freedom of her colony government, 240. The sugar colonies of, worse governed than those of France, 241. Disadvantages resulting from retaining the exclusive trade of tobacco with Maryland and Virginia, 244, 245. The navigation act has increased the colony trade, at the expense of many other branches of foreign trade, 245. The advantage of the colony trade estimated, 247. A gradual relaxation of the exclusive trade recommended, 250. Events which have concurred to prevent the ill effects of the loss of the colony trade, ib. The natural good effects of the colony trade more than counterbalance the bad effects of the monopoly, 251. To maintain a monopoly, the principal end of the dominion assumed over the colonies, 254. Has derived nothing but loss from this dominion, ib. Is perhaps the only state which has only increased its expenses by extending its empire, 256. The constitution of, would have been completed by admitting of American representation, 258. Review of the administration of the East India Company, 264, 265. The interest of the consumer sacrificed to that of the producer in raising an empire in America, 274. The annual revenue of, compared with its annual rents and interest of capital stock, 345, 346. The land-tax of, considered, 348. Tithes, 352. Window-tax, 357. Stamp-duties, 363, 365. Poll-taxes in the reign of William III., 367. The uniformity of taxation in, favourable to internal trade, 382. The system of taxation in, compared with that in France, 384. Account of the unfunded debt of, 387. Funded debt, 388. Aggregate and general funds, ib. Sinking fund, 389. Annuities for terms of years and for lives, ib. Perpetual annuities the best transferable stock, 391. The reduction of the public debts during peace bears no proportion to their accumulation during war, 392. The trade with the tobacco colonies, how carried on, without the intervention of specie, 401. The trade with the sugar colonies explained, ib. Ireland and America ought in justice to contribute towards the discharge of her public debts, 402. How the territorial acquisitions of the East India Company might be rendered a source of revenue, 403. If no such assistance can be obtained, her only resource pointed out, ib. _Bullion_, the money of the great mercantile republic, 179. See _Gold_ and _Silver_. _Burghs_, free, the origin of, 163. To what circumstances they owed their corporate jurisdictions, ib. Why admitted to send representatives to parliament, 164. Are allowed to protect refugees from the country, 165. _Burn_, Dr. his observation on the laws relating to the settlements of the poor, 58, 59. _Butcher's meat_, nowhere a necessary of life, 370. C _Calvinists_, origin of that sect, 339. Their principles of church government, ib. _Cameron_, Mr. of Lochiel, exercised, within thirty years since, a criminal jurisdiction over his own tenants, 168. _Canada_, the French colony there, long under the government of an exclusive company, 234. But improved speedily after the dissolution of the company, ib. _Canals_, navigable, the advantages of, 62. How to be made and maintained, 303. That of Languedoc, the support of, how secured, ib. May be successfully managed by joint stock companies, 317. _Cantillon_, Mr. remarks on his account of the earnings of the labouring poor, 28. _Cape of Good Hope_, causes of the prosperity of the Dutch settlement there, 263. _Capital_, in trade, explained, and how employed, 112. Distinguished into circulating and, fixed capitals, ib. Characteristic of fixed capitals, 113. The several kinds of fixed capitals specified, ib. Characteristic of circulating capitals, and the several kinds of, 114. Fixed capitals supported by those which are circulating, ib. Circulating capitals how supported, ib. Intention of a fixed capital, 116. The expense of maintaining the fixed and circulating capitals illustrated, ib. Money, as an article of circulating capital, considered, ib. Money no measure of capital, 118. What quantity of industry any capital can employ, 120. Capitals, how far they may be extended by paper credit, 125. Must always be replaced with profit by the annual produce of land and labour, 136. The proportion between capital and revenue regulates the proportion between industry and idleness, 138. How it is increased or diminished, ib. National evidences of the increase of, 141. In what instances private expenses contribute to enlarge the national capital, 142. The increase of, reduces profits by competition, 145. The different ways of employing a capital, 147. How replaced to the different classes of traders, 148. That employed in agriculture puts into motion a greater quantity of productive labour than any equal capital employed in manufacturers, 149. That of a manufacturer should reside within the country, 150. The operation of capitals employed in agriculture, manufactures, and foreign trade compared, ib. The prosperity of a country depends on the due proportion of its capital applied to these three grand objects, 151. Different returns of capitals employed in foreign trade, 152. Is rather employed in agriculture than in trade and manufactures, on equal terms, 155, 156. Is rather employed in manufactures than in foreign trade, 156. The natural progress of the employment of, 157. Acquired by trade, is very precarious, until realized by the cultivation and improvement of land, 172. The employment of, in the different species of trade, how determined, 183. _Capitation taxes_, the nature of, considered, 367. In England, ib. In France, ib. _Carriage_, land and water, compared, 8. Water carriage contributes to improve arts and industry in all countries where it can be used, 9, 62, 87. Land, how facilitated and reduced in price by public works, 303. _Carrying trade_, the nature and operation of, examined, 152. Is the symptom, but not the cause of national wealth, and hence points out the two richest countries in Europe, 153. Trades may appear to be carrying trades which are not so, ib. The disadvantages of, to individuals, 183. The Dutch, how excluded from being the carriers to Great Britain, 187, 188. Drawbacks of duties originally granted for the encouragement of, 205. _Carthaginian army_, its superiority over the Roman army accounted for, 294. _Cattle_ and _Corn_, their value compared, in the different stages of agriculture, 62. The price of, reduced by artificial grasses, 63. To what height the price of cattle may rise in an improving country, 92, 93. The raising a stock of, necessary for the supply of manure to farms, 93. Cattle must bear a good price to be well fed, ib. The price of, rises in Scotland in consequence of the union with England ib. Great multiplication of European cattle in America, 94. Are killed in some countries merely for the sake of the hides and tallow, 97. The market for these articles more extensive than for the carcase, ib. This market sometimes brought nearer home by the establishment of manufactures, ib. How the extension of cultivation raises the price of animal food, 103. Is perhaps the only commodity more expensive to transport by sea than by land, 186. Great Britain never likely to be much affected by the free importation of Irish cattle, ib. _Certificates_, parish, the laws relating to, with observations on them, 58. _Child_, Sir Josiah, his observation on trading companies, 309. _Children_, riches unfavourable to the production, and extreme poverty to the raising, of them, 33. The mortality still greater among those maintained by charity, ib. _China_, to what the early improvement in arts and industry there was owing, 9. Concurrent testimonies of the misery of the lower ranks of the Chinese, 30. Is not, however, a declining country, ib. High rate of interest of money there, 40. Great state assumed by the grandees, 86. The price of labour there lower than in the greater mpart of Europe, 87. Silver the most profitable article to send thither, ib. The proportional value of gold to silver, how rated there, 89. The value of gold and silver much higher there than in any part of Europe, 101. Agriculture favoured there beyond manufactures, 282. Foreign trade not favoured there, 283. Extension of the home market, ib. Great attention paid to the roads there, 305, 306. In what the principal revenue of the sovereign consists, 353. The revenue of, partly raised in kind, ib. _Church_, the richer the church the poorer the state, 341. Amount of the revenue of church of Scotland, 342. The revenue of the church heavier taxed in Prussia than lay proprietors, 351. The nature and effect of tithes considered, 352. _Circulation_, the dangerous practice of raising money by, explained, 127. In traffic, the two different branches of, considered, 132. _Cities_, circumstances which contributed to their opulence, 165. Those of Italy the first that rose to consequence, ib. The commerce and manufactures of, have occasioned the improvement and cultivation of the country, 170. _Clergy_, a supply of, provided for, by public and private foundations for their education, 55. Curates worse paid than many mechanics, ib. Of an established religion, why unsuccessful against the teachers of a new religion, 330. Why they persecute their adversaries, ib. The zeal of the inferior clergy of the church of Rome, how kept alive, ib. Utility of ecclesiastical establishments, 331. How connected with the civil magistrate, ib., 332. Unsafe for the civil magistrate to differ with them, 334. Must be managed without violence, ib., 335. Of the church of Rome, one great army cantoned over Europe, ib., 336. Their power similar to that of the temporal barons during the feudal monkish ages, ib. How the power of the Romish clergy declined, 337. Evils attending allowing parishes to elect their own ministers, 339. _Clothing_, more plentiful than food in uncultivated countries, 68. The materials for, the first articles rude nations have to offer, ib. _Coal_ must generally be cheaper than wood to gain the preference for fuel, 70. The price of, how reduced, ib. The exportation of, subjected to a duty higher than the prime cost of, at the pit, 273. The cheapest of all fuel, 370. The tax on absurdly regulated, ib. _Coal mines_, their different degrees of fertility, 70. When fertile, are sometimes unprofitable by situation, ib. The proportion of rent generally paid for, ib., 71. The machinery necessary to, expensive, 112. _Coal trade_ from Newcastle to London employs more shipping than all the other carrying trade of England, 153. _Cochin China_, remarks on the principal article of cultivation there, 66. _Coin_, stamped, the origin and peculiar advantages of, in commerce, 11. The different species of, in different ages and countries, ib. Causes of the alterations in the value of, ib., 12, 13, 14. How the standard coin of different nations came to be of different metals, 16. A reform in the English coinage suggested, 19. Silver, consequences attending the debasement of, 82. Coinage of France and Britain examined, 193. Why coin is privately melted down, 225. The mint chiefly employed to keep up the quantity thus diminished, ib. A duty to pay the coinage would preserve money from being melted or counterfeited, ib. Standard of the gold coin in France, ib. How a seignorage on coin would operate, 226. A tax upon coinage is advanced by every body, and finally paid by nobody, ib. A revenue lost by government defraying the expense of coinage, 227. Amount of the annual coinage before the late reformation of the gold coin, ib. The law for the encouragement of, founded on prejudice, ib. Consequences of raising the denomination as an expedient to facilitate the payment of public debts, 395. Adulteration of, 397. _Colbert_, M., the policy of his commercial regulations disputed, 189, 275. His character, 275. _Colleges_, cause of the depreciation of their money rents inquired into, 14. The endowments of, from whence they generally arise, 318. Whether they have in general answered the purposes of their institution, ib. These endowments have diminished the necessity of application in the teachers, 319. The privileges of graduates by residence, and charitable foundation of scholarships, injurious to collegiate education, 320. Discipline of, ib. _Colliers_ and _Coal-heavers_, their high earnings accounted for, 43. _Colonies_, new, the natural progress of, 38. Modern, the commercial advantages derived from them, 183. Ancient, on what principles founded, 227, 228. Ancient Grecian colonies not retained under subjection to the parent states, ib. Distinction between the Roman and Greek colonies, 228. Circumstances that led to the establishment of European colonies in the East Indies and America, ib. The East Indies discovered by Vasco de Gama, 229. The West, Indies discovered by Columbus, ib. Gold the object of the first Spanish enterprises there, 230. And of all those of all other European nations, 231. Causes of the prosperity of new colonies, ib. Rapid progress of the ancient Greek colonies, 232. The Roman colonies slow in improvement, ib. The remoteness of America and the West Indies greatly in favour of the European colonies there, ib. Review of the British American colonies, 234. Expense of the civil establishments in British America, 235. Ecclesiastical government, ib. General view of the restraints laid upon the trade of the European colonies, 236. The trade of the British colonies, how regulated, ib. The different kinds of non-enumerated commodities specified, 237. Enumerated commodities, 238. Restraints upon their manufactures, ib. Indulgences granted them by Britain, 239. Were free in every other respect except as to their foreign trade, 240. Little credit due to the policy of Europe from the success of the colonies, 242. Throve by the disorder and injustice of the European governments, ib. Have contributed to augment the industry of all the countries of Europe, 243. Exclusive privileges of trade a dead weight upon all these exertions both in Europe and America, ib. Have in general been a source of expense instead of revenue to their mother countries, 244. Have only benefited their mother countries by the exclusive trade carried on with them, ib. Consequences of the navigation act, 245. The advantage of the colony trade to Britain estimated, 247. A gradual relaxation of the exclusive commerce recommended, 250. Events which have prevented Britain from sensibly feeling the loss of the colony trade, ib. The effects of the colony trade, and the monopoly of that trade, distinguished, ib. To maintain a monopoly, the principal end of the dominion Great Britain assumes over the colonies, 254. Amount of the ordinary peace establishment of, ib. The two late wars Britain sustained, colony wars, to support a monopoly, ib. Two modes by which they might be taxed, 255. Their assemblies not likely to tax them, ib. Taxes by parliamentary requisition as little likely to be raised, 256. Representatives of, might he seated into the British parliament with good effect, 257. Answer to objections against American representation, 258. The interest of the consumer in Britain sacrificed to that of the producer in raising an empire in America, 274. _Columbus_, the motive that led to his discovery of Americas, 229. Why he gave the name of Indies to the islands he discovered, ib. His triumphal exhibition of their productions, 230. _Columella_, his instructions for fencing a kitchen garden, 64. Advises the planting of vineyards, 65. _Commerce_, the different common standards or mediums made use of to facilitate the exchange of commodities in the early stages of, 10. Origin of money, ib. Definition of the term value, 12. Treaties of, though advantageous to the merchants and manufacturers of the favoured countries, necessarily, disadvantageous to those of the favouring country, 222. Translation of the commercial treaty between England and Portugal, concluded in 1703, by Mr. Methuen, 223. Restraints laid upon the European colonies in America, 236. The present splendour of the mercantile system owing to the discovery and colonization of America, 259. Review of the plan by which it proposes to enrich a country, 266. The interest of the consumer constantly sacrificed to that of the producer, 274. See _Agriculture_, _Banks_, _Capital_, _Manufactures_, _Merchant_, _Money_, _Stock_, _Trade_, &c. _Commodities_, the barter of, insufficient for the mutual supply of the wants of mankind, 10. Metals found to be the best medium to facilitate the exchange of, ib. Labour an invariable standard for the value of, 14. Real and nominal prices of, distinguished, ib. Component parts of the prices of, explained and illustrated, 21. Natural and market prices of, distinguished and how regulated, 23. The ordinary proportion between the value of two commodities, not necessarily the same as between the quantities of them commonly in the market, 89. The price of rude produce, how affected by the advance of wealth and improvement, 91, 92. Foreign are primarily purchased with the produce of domestic industry, 151. When advantageously exported in a rude state, even by a foreign capital, 156. The quantity of, in every country, naturally regulated by the demand, 176. Wealth in goods, and in money, compared, 177. Exportation of, to a proper market, always attended with more profit than that of gold and silver, 179. The natural advantages of countries in particular productions sometimes not possible to struggle against, 185. _Company_, mercantile, incapable of consulting their true interests when they become sovereigns, 264. An exclusive company a public nuisance, 265. Trading, how first formed, 307. Regulated and joint-stock companies distinguished, ib. Regulated companies in Great Britain specified, ib., 308. Are useless, 308. Constant view of such companies, ib. Forts and garrisons, why never maintained by regulated companies, 309. The nature of joint-stock companies explained, 310, 311, 316. A monopoly necessary to enable a joint-stock company to carry on a foreign trade, 317. What kind of joint-stock companies need no exclusive privileges, ib. Joint-stock companies, why well adapted to the trade of banking, ib. The trade of insurance may be carried on successfully by a joint-stock company, ib. Also, inland navigations, and the supply of water to a great city, ib. Ill success of joint-stock companies in other undertakings, 318. _Competition_, the effect of, in the purchase of commodities, 23. Among the venders, ib., 37. _Concordat_ in France, its object, 337. _Congress_, American, its strength owing to the important characters it confers on the members of it, 257. _Conversion price_, in the payment of rents in Scotland, explained, 76, 77. _Copper_, the standard measure of value among the ancient Romans, 16. Is no legal tender in England, ib. _Cori_, the largest quadruped on the island of St. Domingo, described, 229. _Corn_, the raising of, in different countries, not subject to the same degree of rivalship, as manufactures, 3, 4. Is the best standard for reserved rents, 14. The price of, how regulated, 15. The price of, the best standard for comparing the different values of particular commodities at different times and places, 16. The three component parts in the price of, 21. Is dearer in Scotland than in England, 31. Its value compared with that of butcher's meat, in the different periods of agriculture, 62. Compared with silver, 75. Circumstances in a historical view of the prices of corn that have misled writers in treating of the value of silver at different periods, 76. Is always a more accurate measure of value than any other commodity, 79. Why dearer in great towns than in the country, 80. Why dearer in some rich commercial countries, as Holland and Genoa, ib. Rose in its nominal price on the discovery of the American mines, 81. And in consequence of the civil war under king Charles I., ib. And in consequence of the bounty on the exportation of, 82. Tendency of the bounty examined, 83. Chronological table of the prices of, 108. The least profitable article of growth in the British West Indian colonies, 159. The restraints formerly laid upon the trade of, unfavourable to the cultivation of land, 162. The free importation of, could little affect the farmers of Great Britain, 187. The policy of the bounty on the exportation of, examined, 206. The reduction in the price of, not produced by the bounty, ib. Tillage not encouraged by the bounty, ib. The money price of, regulates that of all other home-made commodities, 207. Illustration, 208. Ill effects of the bounty, ib. Motives of the country gentlemen in granting the bounty, 209. The natural value of not to be altered by altering the money price, 210. The four several branches of the corn trade specified, 213. The inland dealer, for his own interest, will not raise the price of, higher than the scarcity of the season requires, ib. Corn a commodity the least liable to be monopolised, 214. The inland dealers too numerous and dispersed to form a general combination, ib. Dearths, never artificial, but when government interferes improperly to prevent them, ib. The freedom of the corn trade the best security against a famine, 215. Old English statute to prohibit the corn trade, ib. Consequences of farmers being forced to become corn dealers, ib. The use of corn dealers to the farmers, 216. The prohibitory statute against the corn trade softened, 217. But still under the influence of popular prejudices, ib., 218. The average quantity imported and exported compared with the consumption and annual produce, ib. Tendency of a free importation of, 219. The home-market the most important one for corn, ib. Impropriety of the statute 22 Car. II. for regulating the importation of wheat, confessed by the suspension of its execution by temporary statutes, ib. Duties payable on the importation of grain before 13 Geo. III. ib. _note_, ib. The home-market indirectly supplied by the exportation of corn, ib. How a liberal system of free exportation and importation and among all nations would operate, 220. The laws concerning corn, similar to those relating to religion, 221. The home-market supplied by the carrying trade, ib. The system of laws connected with the establishment of the bounty, undeserving of praise, ib. Remarks on the statute 13 Geo. III. ib. _Corporations_, tendency of the exclusive privileges of, on trade, 26. By what authority erected, 50, 52. The advantages they derive from the surrounding country, ib. Check the operations of competition, 54. Their internal regulations combinations against the public, ib. Are injurious even to the members of them, ib. The laws of, obstruct the free circulation of labour from one employment to another, 57. Origin of, 163. Are exempted by their privileges from the power of the feudal barons, 164. The European East India companies disadvantageous to the eastern commerce, 181, 182. The exclusive privileges of corporations ought to be destroyed, 191. _Cottagers_, in Scotland, their situation described, 49. Are cheap manufacturers of stockings, ib. The diminution of, in England, considered, 95. _Coward_, character of, 329. _Credit_. See _Paper Money_. _Crusades_, to the Holy land, favourable to the revival of commerce, 165. _Currency of states_, remarks on, 194. _Customs_, the motives and tendency of drawbacks from the duties of, 203. The revenue of the customs increased by drawbacks, 205. Occasion of first imposing the duties of, 307. Origin of those duties, 371. Three ancient branches of, 372. Drawbacks of, ib. Are regulated according to the mercantile system, ib., 373. Frauds practised to obtain drawbacks and bounties, ib. The duties of, in many instances uncertain, ib. Improvement of, suggested, 374. Computation of the expense of collecting them, 380. D _Dairy_, the business of, generally carried on as a save-all, 96. Circumstances which impede or promote the attention to it, ib. English and Scotch dairies, ib. _Danube_, the navigation of that river, why of little use to the interior parts of the country from whence it flows, 9. _Davenant_, Dr. his objections to the transferring the duties on beer to the malt considered, 377. _Dearths_, never caused by combinations among the dealers in corn, but by some general calamity, 214. The free exercise of the corn trade the best palliative against the inconveniencies of a dearth, 217. Corn dealers the best friends to the people at such seasons, 218. _Debts_, public, the origin of, traced, 386. Are accelerated by the expenses attending war, ib. Account of the unfunded debt of Great Britain, 387. The funded debt, 388. Aggregate and general funds, 389. Sinking fund, ib. Annuities for terms of years and for lives, ib. The reduction of, during peace, bears no proportion to its accumulation during war, 391. The plea of the interest being no burden to the nation considered, 394. Are seldom fairly paid when accumulated to a certain degree, 396. Might easily be discharged, by extending the British system of taxation over all the provinces of the empire, 397. Ireland and America ought to contribute to discharge the public debts of Britain, 402. _Decker_, Sir Matthew, his observations on the accumulation of taxes, 369. His proposal for transferring all taxes to the consumer, by annual payments, considered, 371. _Demand_, though the increase of, may at first raise the price of goods, it never fails to reduce it afterwards, 314. _Denmark_, account of the settlements of, in the West Indies, 234. _Diamonds_, the mines of, not always worth working for, 73. _Discipline_, the great importance of, in war, 293. Instances of, ib. _Diversions_, public, their political use, 334. _Domingo_, St. mistaken by Columbus for a part of the East Indies, 229. Its principal productions, ib. The natives soon stripped of all their gold, 230. Historical view of the French colony there, 234. _Doomsday-book_, the intention of that compilation, 351. _Dorians_, ancient, where the colonies of, settled, 227. _Dramatic exhibitions_, the political use of, 334. _Drawbacks_, in commerce, explained, 182. The motives to, and tendency of, explained, 203. On wines, currants, and wrought silks, ib. On tobacco and sugar, 204. On wines, particularly considered, ib. Were originally granted to encourage the carrying trade, 205. The revenue of the customs increased by them, ib. Drawbacks allowed in favour of the colonies, 213. _Drugs_, regulations of their importation and exportation, 272. _Drunkenness_, the motive to this vice inquired into, 200. _Dutch_, their settlements in America slow in in improvement, because under the government of an exclusive company, 234. Their East India trade checked by monopoly, 261. Measures taken by, to secure the monopoly of the spice trade. See _Holland_. E _East Indies_, representation of the miserable state of the provinces of, under the English government there, 30. Historical view of the European trade with those countries, 86. Rice countries more populous and rich than corn countries, ib. The real price of labour lower in China and Indostan than in the greater part of Europe, 87. Gold and silver the most profitable commodities to carry thither, ib. The proportional value of gold to silver, how rated there, 89. Great extension of foreign commerce by the discovery of a passage to, round the Cape of Good Hope, 181. Historical review of the intercourse with, ib., 182. Effect of the annual exportation of silver to, from Europe, ib. The trade with, chiefly carried on by exclusive companies, 261. Tendency of their monopolies, ib. _East India company_, a monopoly against the very nation in which it is erected, 261. The operation of such a company in a poor and in a rich country compared, ib. That country whose capital is not large enough to extend to such a distant trade ought not to engage in it, 262. The mercantile habits of trading companies render them incapable of consulting their true interests when they become sovereigns, 264. The genius of the administration of the English company, ib. Subordinate practices of their agents and clerks, 265. The bad conduct of agents in India owing to their situation, ib. Such an exclusive company a nuisance in every respect, 266. Brief review of their history, 313. Their privileges invaded, ib. A rival company formed, ib. The two companies united, 314. Are infected by the spirit of war and conquest, ib. Agreements between the company and government, ib. Interference of government in their territorial administration, 315. And in the direction at home, ib. Why unfit to govern a great empire, ib. Their sovereign and commercial characters incompatible, 344. How the territorial acquisitions of, might be rendered a source of revenue, 403. _Economists_, sect of, in France, their political tenets, 275. _Edinburgh_, its present share of trade owing to the removal of the court and parliament, 138. _Education_, the principal cause of the various talents observable in different men, 7. Those parts of, for which there are no public institutions, generally the best taught, 320. In universities, a view of, 323. Of travelling for, 324. Course of, in the republics of ancient Greece, ib. In ancient Rome, ib. The ancient teachers superior to those in modern times, 326. Public institutions injurious to good education, ib. Inquiry how far the public ought to attend to the education of the people, 327. The different opportunities of education in the different ranks of the people, 328. The advantages of proper attention in the state to the education of the people, 329. _Egypt_, the first country in which agriculture and manufactures appear to have been cultivated, 9. Agriculture was greatly favoured there, 283. Was long the granary of the Roman empire, 284. _Ejectment_, action of, in England, when invented, and its operation, 160. _Employments_, the advantages and disadvantages of the different kinds of, in the same neighbourhood, continually tend to equality, 41. The differences or inequalities among, specified, ib. The constancy or precariousness of, influences the rate of wages, 43. _England_, the dates of its several species of coinage, silver, gold, and copper, 16. Why labour is cheaper there than in North America, 29. The rate of population in both countries compared, ib. The produce and labour of, have gradually increased from the earliest accounts in history, while writers are representing the country as rapidly declining, 141. Enumeration of obstructions and calamities which the prosperity of the country has surmounted, ib. Circumstances that favour commerce and manufactures, 171. Laws in favour of agriculture, ib. Why formerly unable to carry on foreign wars of long duration, 180. Why the commerce with France has been subjected to so many discouragements, 202. Foundation of the enmity between these countries, ib. Translation of the commercial treaty concluded in 1703 with Portugal, 223. Inquiry into the value of the trade with Portugal, ib., 224. Might procure gold without the Portugal trade, ib. Consequences of securing the colony trade by the navigation act, 245. _Engrossing_. See _Forstalling_. _Entails_, the law of, prevents the division of land by alienation, 157. Intention of, 158. _Europe_, general review of the several nations of, as to their improvement since the discovery of America, 85. The two richest countries in, enjoy the greatest shares of the carrying trade, 153. Inquiry into the advantages derived by, from the discovery and colonization of America, 243. The particular advantages derived by each colonizing country, 244. And by others which have no colonies, 259. _Exchange_, the operation of, in the commercial intercourse of different countries, 174. The course of, an uncertain criterion of the balance of trade between two countries, 192, 193. Is generally in favour of those countries which pay in bank money, against those which pay in common currency, 198. _Excise_, the principal objects of, 371. The duties of, more clear and distinct than the customs, 373. Affects only a few articles of the most general consumption, ib. The scheme of Sir Robert Walpole defended, 375. The excise upon home-made fermented and spiritous liquors the most productive, 376. Expense of levying excise duties computed, 380. The laws of, more vexatious than those of the customs, 381. _Exercise_, military, alteration in, produced by the invention of fire-arms, 292. _Expenses_, private, how they influence the national capital, 33. Advantage of bestowing them on durable commodities, ib. _Export trade_, the principles of, explained, 153. When rude produce may be advantageously exported, even by a foreign capital, 156, 157. Why encouraged by European nations, 182, 183. By what means promoted, ib. The motives to, and tendency of, drawbacks of duties, 203. The grants of bounties on, considered, 205. Exportation of the materials of manufactures, review of the restraints and prohibitions of, 268. F _Faith_, articles of, how regulated by the civil magistrate, 354. _Families_ seldom remain on large estates many generations in commercial countries, 170. _Famine_. See _Dearth_. _Farmers of land_, the several articles that compose their gain distinguished, 22. Require more knowledge and experience than the generality of manufacturers, 53. In what their capitals consist, 112. The great quantity of productive labour put into motion by their capitals, 149. Artificers necessary to them, 156. Their situation better in England than in any other part of Europe, 160. Labour under great disadvantages everywhere, 161. Origin of long leases of farms, 170. Are a class of men least subject to the wretched spirit of monopoly, 187. Were forced by old statutes to become the only dealers in corn, 215. Could not sell corn cheaper than any other corn merchant, 216. Could seldom sell it so cheap, ib. The culture of land obstructed by this division of their capitals, 217. The use of corn-dealers to the farmers, ib. How they contribute to the annual production of the land, according to the French agricultural system of political economy, 275. _Farmers_ of the public revenue, their character, 383, 391. _Feudal government_, miserable state of the occupiers of land under, 137. Trade and interest of money under, ib. Chiefs, their power, 157. Slaves, their situation, 159. Tenures of land, ib. Taxation, 161. Original poverty and servile state of the tradesmen in towns, 162. Immunities seldom granted but for valuable considerations, 163. Origin of free burghs, ib. The power of the barons reduced by municipal privileges, ib. The cause and effect of ancient hospitality, 167. Extensive power of the ancient barons, 168. Was not established in England until the Norman conquest, ib. Was silently subverted by manufactures and commerce, 169. _Feudal wars_, how supported, 290. Military exercises not well attended to, under, 291. Standing armies gradually introduced to supply the place of the feudal militia, 295. Account of the casualties or taxes under, 363. Revenues under, how enjoyed by the great landholders, 385. _Fairs_, public, in Scotland, the nature of the institution, explained, 76, 77. _Fines_ for the renewal of leases, the motive for exacting them, and their tendency, 349. _Fire-arms_, alteration in the art of war effected by the invention of, 292, 295. The invention of, favourable to the extension of civilisation, 296. _Fish_, the component parts of the price of, explained, 21. The multiplication of, at market, by human industry, both limited and uncertain, 99. How an increase of demand raises the price of fish, 100. _Fisheries_, observations on the tonnage bounties granted to, 211. To the herring fishery ib. The boat fishery ruined by this bounty, 212. _Flanders_, the ancient commercial prosperity of, perpetuated by the solid improvements of agriculture, 172. _Flax_, the component parts of the price of, explained, 21. _Fleetwood_, Bishop, remarks on his Chronicon Pretiosum, 77, 78. _Flour_, the component parts of the price of, explained, 21. _Food_, will always purchase as much labor as it can maintain on the spot, 61. Bread and butcher's meat compared, 62, 63. Is the original source of every other production, 69. The abundance of, constitutes the principal part of the riches of the world, and gives the principal value to many other kinds of riches, 73. _Forestalling_ and _engrossing_, the popular fear of, like the suspicions of witchcraft, 218. _Forts_, when necessary for the protection of commerce, 306. _France_, fluctuations in the legal rate of interest for money there during the course of the present century, 37, 38. Remarks on the trade and riches of, ib. The nature of apprenticeships there, 51. The propriety of restraining the planting of vineyards examined, 65. Variations in the price of grain there, 73. The money price of labour has sunk gradually with the money price of corn, 84. Foundation of the Mississippi scheme, 130. Little trade or industry to be found in the parliament towns of, 138. Description of the class of farmers called metayers, 159. Laws relating to the tenure of land, 161. Services formerly exacted besides rent, ib. The taille, what, and in operation in checking the cultivation of land, ib. Origin of the magistrates and councils of cities, 164. No direct legal encouragement given to agriculture, 171. Ill policy of M. Colbert's commercial regulations, 189. French goods heavily taxed in Great Britain, 192. The commercial intercourse between France and England, now chiefly carried on by smugglers, ib. The policy of the commercial restraints between France and Britain considered, ib. State of the coinage there, 194. Why the commerce with England has been subjected to discouragement, 202. Foundation of the enmity between these countries, ib. Remarks concerning the seignorage on coin, 225. Standard of the gold coin there, ib. The trade of the French colonies, how regulated, 237. The government of the colonies conducted with moderation, 241. The sugar colonies of, better governed than those of Britain, ib. The kingdom of, how taxed, 256. The members of the league fought more in defence of their own importance than for any other cause, 258. The present agricultural system of political economy adopted by philosophers there described, 275. Under what direction the funds for the repair of the roads are placed, 305. General state of the roads, ib. The universities badly governed, 319. Remarks on the management of the parliaments of, 335. Measures taken in, to reduce the power of the clergy, 337. Account of the mode of rectifying the inequalities of the predial taille in the generality of Montauban, 352. The personal taille explained, 360. The inequalities in, how remedied, 361. How the personal taille discourages cultivation, ib. The vingtieme, 362. Stamp duties and the controle, 364, 365. The capitation tax, how rated, 367. Restraints upon the interior trade of the country by the local variety of the revenue laws, 382. The duties on tobacco and salt, how levied, 383. The different sources of revenue in, 384. How the finances of, might be reformed, ib. The French system of taxation compared with that in Britain, ib. The nature of tontines explained, 390. Estimate of the whole national debt of, ib. _Frugality_, generally a predominating principle in human nature, 140. _Fuller's earth_, the exportation of why prohibited, 271. _Funds_, British, brief historical view of, 387. Operation of, politically considered, 393. The practice of funding has gradually enfeebled every state that has adopted it, 395. _Fur trade_, the first principles of, 68. G _Gama_, Vasco de, the first European who discovered a naval track to the East Indies, 229. _Gardening_, the gains from, distinguished into the component parts, 22. Not a profitable employment, 64. _Gems_, See _Stones_. _General_ fund in the British finances explained, 389. _Genoa_, why corn is dear in the territory of, 80. _Glasgow_, the trade of, doubled in fifteen years, by erecting banks there, 120. Why a city of greater trade than Edinburgh, 138. _Gold_, not the standard value in England, 16. Its value measured by silver, 17. Reformation of the gold coin, ib. Mint price of gold in England, ib. The working the mines of, in Peru, very unprofitable, 71. Qualities for which this metal is valued, 72. The proportionate value of, to silver, how rated before and after the discovery of the American mines, 89. Is cheaper in the Spanish market than silver, 90. Great quantities of, remitted annually from Portugal to England, 223. Why little of it remains in England, ib. Is always to be had for its value, 224. _Gold_ and _Silver_, the prices of, how affected by the increase of the quantity of the metals, 79. Are commodities that naturally seek the best market, 80. Are metals of the least value among the poorest nations, ib. The increase in the quantity of, by means of wealth and improvement, has no tendency to diminish their value, 81. The annual consumption of those metals very considerable, 87. Annual importation of, into Spain and Portugal, 88. Are not likely to multiply beyond the demand, ib. The durability of, the cause of the steadiness of their price, ib. On what circumstances the quantity of, in every particular country, depends, 100. The low value of these metals in a country no evidence of its wealth, nor their high value of its poverty, 101. If not employed at home, will be sent abroad notwithstanding all prohibitions, 139. The reason why European nations have studied to accumulate these metals, 174. Commercial arguments in favour of their exportation, ib. These and all other commodities are mutually the prices of each other, 175. The quantity of, in every country, regulated by the effectual demand, 176. Why the prices of these metals do not fluctuate so much as those of other commodities, ib. To preserve a due quantity of, in a country, no proper object of attention for the government, 176. The accumulated gold and silver in a country distinguished into three parts, 178. A great quantity of bullion alternately exported and imported for the purposes of foreign trade, 179. Annual amount of these metals imported into Spain and Portugal, 180. The importation of, not the principal benefit derived from foreign trade, 181. The value of, how affected by the discovery of the American mines, ib. And by the passage round the Cape of Good Hope to the East Indies, ib. Effect of the annual exportation of silver to the East Indies, 182. The commercial means pursued to increase the quantity of these metals in a country, ib., 192. Bullion, how received and paid at the bank of Amsterdam, 195. At what prices, 196, _note_. A trading country without mines not likely to be exhausted by an annual exportation of these metals, 200. The value of, in Spain and Portugal, depreciated by restraining the exportation of them, 208. Are not imported for the purposes of plate or coin, but for foreign trade, 224. The search after mines of, the most ruinous of all projects, 230. Are valuable because scarce and difficult to be procured, 231. _Gorgias_, evidence of the wealth he acquired by teaching, 56. _Government_, civil, indispensibly necessary for the security of private property, 297. Subordination in society, by what means introduced, ib. Inequality of fortune introduces civil government for its preservation, 299. The administration of justice a source of revenue in early times, ib. Why government ought not to have the management of turnpikes, 304. Nor of other public works, 306. Want of parsimony during peace imposes a necessity of contracting debts, to carry on a war, 386. Must support a regular administration of justice to cause manufactures and commerce to flourish, 387. Origin of a national debt, ib. Progression of public debts, ib. War, why generally agreeable to the people, 391. _Governors_, political, the greatest spendthrifts in society, 142. _Grasses_, artificial, tend to reduce the price of butcher's meat, 63. _Graziers_, subject to monopolies obtained by manufactures to their prejudice, 271. _Greece_, foreign trade promoted in several of the ancient states of, 284. Military exercises a part of general education, 291. Soldiers not a distinct profession in, ib. Course of education in the republics of, 324. The morals of the Greeks inferior to those of the Romans, ib. Schools of the philosophers and rhetoricians, 325. Law no science among the Greeks, ib. Courts, of justice, ib. The martial spirit of the people, how supported, 329. _Greek colonies_, how distinguished from Roman colonies, 227, 228. Rapid progress of these colonies, 232. _Greek language_, how introduced as a part of university education, 322. Philosophy, the three great branches of, ib. _Ground rents_, great variations of, according to situation, 354. Are a more proper subject of taxation, than houses, 355. _Gum senega_, review of the regulations imposed on the trade for, 272. _Gunpowder_, great revolution effected in the art of war by the invention of, 292, 296. This invention favourable to the extension of civilization, 296. _Gustavus Vasa_, how enabled to establish the Reformation in Sweden, 338. H _Hanseatic league_, causes that rendered it formidable, 164. Why no vestige remains of the wealth of the Hans towns, 172. _Hamburgh_, agio of the bank of, explained, 195. Sources of the revenue of that city, 343, 344. The inhabitants of, how taxed to the state, 359. _Hamburgh company_, some account of, 308. _Hearth money_, why abolished in England, 356, 357. _Henry VIII._ of England, prepares the way for the Reformation, by shutting out the authority of the pope, 338. _Herring buss bounty_, remarks on, 211. Fraudulent claims of the bounty, ib. The boat fishery the most natural and profitable, 212. Account of the British white herring fishery, ib. Account of the busses fitted out in Scotland, the amount of their cargoes, and the bounties on them, 287, _Append._ _Hides_, the produce of rude countries commonly carried to a distant market, 97. Price of, in England three centuries ago, 98. Salted hides inferior to fresh ones, 98, 99. The price of, how affected by circumstances in cultivated and in uncultivated countries, ib. _Highlands of Scotland_, interesting remarks on the population of, 33. Military character of the Highlanders, 293. _Hobbes_, Mr. remarks on his definition of wealth, 13. _Hogs_, circumstances which render their flesh cheap or dear, 95. _Holland_, observations on the riches, and trade of the republic of, 38. Not to follow some business unfashionable there, 40. Cause of the dearness of corn there, 80. Enjoys the greatest share in the carrying trade of Europe, 153. How the Dutch were excluded from being the carriers to Great Britain, 188. Is a country that prospers under the heaviest taxation, 189. Account of the bank of Amsterdam, 194, 195. This republic derives even its subsistence from foreign trade, 202, 203. Tax paid on houses there, 356. Account of the tax upon successions, 363. Stamp duties, 364. High amount of the taxes in, 370, 384. Its prosperity depends on the republican form of government, 385. _Honoraries_, from pupils to teachers in colleges tendency of, to quicken their diligence, 319. _Hose_, in the time of Edward IV., how made, 104. _Hospitality_, ancient, the cause and effect of, 169, 385. _House_, different acceptations of the term in England, and some other countries, 49. Houses considered as part of the national stock, 113. Houses produce no revenue, ib. The rent of, distinguished into two parts, 354. Operation of a tax upon house rent, payable by the tenant, ib. House rent, the best test of the tenant's circumstances, 355. Proper regulation of a tax on, ib. How taxed in Holland, 356. Hearth money, ib. Window tax, 357. _Hudson's Bay company_, the nature of their establishment and trade, 312. Their profits not so high as has been reported, ib. _Hunters_, war, how supported by a nation of, 289. Cannot be very numerous, 290. No established administration of justice needful among them, 297. Age the sole foundation of rank and precedency among, ib. No considerable inequality of fortune or subordination to be found among them, 298. No hereditary honours in such a society, ib. _Husbandmen_, war, how supported by a nation of, 290. _Husbandry._ See _Agriculture_. I, J _Jamaica_, the returns of trade from that island, why irregular, 402. _Idleness_ unfashionable in Holland, 40. _Jewels._ See _Stones_. _Importation_, why restraints have been imposed on, with the two kinds of, 182. How restrained to secure a monopoly of the home market to domestic industry, 183. The true policy of these restraints doubtful, ib. The free importation of foreign manufactures more dangerous than that of raw materials, 186. How far it may be proper to continue the free importation of certain foreign goods, 189. How far it may be proper to restore the free importation of goods, after it has been interrupted, ib. Of the materials of manufacture, review of the legal encouragements given to, 266. _Independents_, the principles of that sect, explained, 332. _Indies._ See _East_ and _West_. _Indostan_, the several classes of people there kept distinct, 283. The natives of, how prevented from undertaking long sea voyages, ib. _Industry_, the different kinds of, seldom dealt impartially with by any nation, 1, 2. The species of, frequently local, 8. Naturally suited to the demand, 24. Is increased by the liberal reward of labour, 34. How affected by seasons of plenty and scarcity, ib., 35. Is more advantageously exerted in towns than in the country, 53. The average produce of, always suited to the average consumption, 79. Is promoted by the circulation of paper money, 119. Three requisites to putting industry in motion, 120. How the general character of nations is estimated by, 137. And idleness, the proportion between, how regulated, ib. Is employed for subsistence before it extends to conveniencies and luxury, 155. Whether the general industry of a society is promoted by commercial restraints on importation, 183. Private interest naturally points to that employment most advantageous to the society, ib. But without intending or knowing it, 184. Legal regulations of private industry dangerous assumptions of power, 185. Domestic industry ought not to be employed on what can be purchased cheaper from abroad, ib. Of the society, can augment only in proportion as its capital augments, ib. When it may be necessary to impose some burden upon foreign industry to favour that at home, 187. The free exercise of industry ought to be allowed to all, 191. The natural effort of every individual to better his condition, will, if unrestrained, result in the prosperity of the society, 221. _Insurance_, from fire and sea risks, the nature and profits of examined, 45. The trade of insurance may be successfully carried on by a joint-stock company, 317, 318. _Interest_, landed, monied, and trading, distinguished, 144. _Interest_ for the use of money, the foundation of that allowance explained, 22. Historical view of the alterations of, in England, and other countries, 37. Remarks on the high rates of, in Bengal, 39. And in China, 40. May be raised by defective laws, independent on the influence of wealth or poverty, ib. The lowest ordinary rate of, must somewhat more than compensate occasional losses, ib. The common relative proportion between interest and mercantile profits inquired into, ib. Was not lowered, in consequence of the discovery of the American mines, 145. How the legal rate of, ought to be fixed, 146. Consequences of its being fixed too high or too low, ib., 147. The market rate of, regulates the price of land, ib. Whether a proper object of taxation, 357. _Ireland_, why never likely to furnish cattle to the prejudice of Great Britain, 186. The proposed absentee tax there considered, 379. Ought in justice to contribute towards the discharge of the public debt of Great Britain, 402. Expediency of an union with Great Britain, ib. _Isocrates_, the handsome income he made by teaching, 56. _Italy_, the only great country in Europe which has been cultivated and improved in every part by means of its foreign commerce, 172. Was originally colonized by the Dorians, 227. _Jurisdictions_, territorial, did not originate in the feudal law, 168. _Justice_, the administration of, a duty of the sovereign, 297. In early times a source of revenue to him, 299. The making justice subservient to the revenue a source of great abuses, ib. Is never administered gratis, 300. The whole administration of, but an inconsiderable part of the expense of government, ib. How the whole expense of justice might be defrayed from the fees of court, ib. The interference of the jurisdictions of the several English courts of law accounted for, 301. Law language, how corrupted, 302. The judicial and executive power, why divided, ib. By whom the expense of administration of, ought to be borne, 342. K _Kalm_, the Swedish traveller, his account of the husbandry of the British colonies in North America, 94. _Kelp_, a rent demanded for the rocks on which it grows, 61. _King_, Mr. his account of the average price of wheat, 83. _King_, under feudal institutions, no more than the greatest baron in the nation, 168. Was unable to restrain the violence of his barons, 169. Treasure-trove an important branch of revenue to, 385, 386. His situation, how favourable for the accumulating treasure, ib. In a commercial country, naturally spends his revenue in luxuries, ib. Is hence driven to call upon his subjects for extraordinary aids, ib. _Kings_ and their ministers the greatest spendthrifts in a country, 149. L _Labour_, the fund which originally supplies every nation with its annual consumption, 1. How the proportion between labour and consumption in regulated, ib. The different kinds of industry seldom dealt impartially with by any nation, 2. The division of labour considered, ib., 3. This division increases the quantity of work, 4. Instances in illustration, 5. From what principle the division of labour originates, 6. The divisibility of governed by the market, 8. Labour the real measure of the exchangeable value of commodities, 12. Different kinds of, not easily estimated by immediate comparison, 13. Is compared by the intermediate standard of money, ib. In an invariable standard for the value of commodities, 14. Has a real and a nominal price, ib. The quantity of labour employed on different objects, the only rule for exchanging them in the rude stages of society, 20. Difference between the wages of labour and profits on stock in manufactures, ib. The whole labour of a country never exerted, 22. Is in every instance suited to the demand, 24. The effect of extraordinary calls for, 25. The deductions made from the produce of labour employed upon land, 27. Why dearer in North America than in England, 29. Is cheap in countries that are stationary, ib. The demand for, would continually decrease, in a declining country, 30. The province of Bengal cited as an instance, ib. Is not badly paid for in Great Britain, ib., 31. An increasing demand for, favourable to population, 33. That of freemen cheaper to the employers than that of slaves, ib. The money price of, how regulated, 36. Is liberally rewarded in new colonies, 38. Common labour and skilful labour distinguished, 42. The free circulation of, from one employment to another, obstructed by corporation laws, 57. The unequal prices of, in different places, probably owing to the law of settlements, 59. Can always procure subsistence on the spot, where it is purchased, 61. The money price of, in different countries, how governed, 80. Is set into motion by stock employed for profit, 106. The division of, depends on the accumulation of stock, 111. Machines to facilitate labour advantageous to society, 116. Productive and unproductive distinguished, 135. Various orders of men specified whose labour in unproductive, 136. Unproductive labourers all maintained by revenue, ib. The price of, how raised by the increase of the national capital, 145. Its price, though nominally raised, may continue the same, 146. Is liberally rewarded in new colonies, 231. Of artificers and manufacturers, never adds any value to the whole amount of the rude produce of the land, according to the French agricultural system of political economy, 277. This doctrine shewn to be erroneous, 281. The productive powers of labour, how to be improved, ib. _Labourers_, useful and productive, everywhere proportioned to the capital stock on which they are employed, 1, 2. Share the produce of their labour, in most cases, with the owners of the stock on which they are employed, 20. Their wages a continued subject of contest between them and their masters, 28. Are seldom successful in their outrageous combinations, ib. The sufficiency of their earnings a point not easily determined, ib. Their wages sometimes raised by increase of work, ib. Their demands limited by the funds destined for payment, 29. Are continually wanted in North America, ib. Miserable condition of those in China, ib., 30. Are not ill paid in Great Britain, ib., 31. If able to maintain their families in dear years, they must be at their ease in plentiful seasons, ib. A proof furnished in the complaints of their luxury, 33. Why worse paid than artificers, 42. Their interests, strictly connected with the interests of the society, 106. Labour the only source of their revenue, 112. Effects of a life of labour on the understandings of the poor, 327. _Land_, the demand of rent for, how founded, 21. The rent paid enters into the greater part of all commodities, ib. Generally produces more food than will maintain the labour necessary to bring it to market, 61. Good roads and navigable canals equalize difference of situation, 62. That employed in raising food for men and cattle regulates the rent of all other cultivated land, 64, 67. Can clothe and lodge more than it can feed while uncultivated, and the contrary when improved, 68. The culture of land producing food creates a demand for the produce of other lands, 73. Produces by agriculture a much greater quantity of vegetable than of animal food, 79. The full improvement of, requires a stock of cattle to supply manure, 93. Cause and effect of the diminution of cottagers, 95. Signs of the land being completely improved, 96. The whole annual produce, or the price of it, naturally divides itself into rent, wages, and profit of stock, 106. The usual price of, depends on the common rate of interest for money, 147. The profits of cultivation exaggerated by projectors, 154. The cultivation of, naturally preferred to trade and manufactures, on equal terms, 155. Artificers necessary to the cultivation of, 156. Was all appropriated, though not cultivated, by the northern destroyers of the Roman empire, 157. Origin of the law of primogeniture under the feudal government, ib. Entails, 158. Obstacles to the improvement of land under feudal proprietors, ib. Feudal tenures, 159, 160. Feudal taxation, 161. The improvement of land checked in France, by the taille, ib. Occupiers of, labour under great disadvantages, ib. Origin of long leases of, 169. Small proprietors the best improvers of, 170. Small purchasers of, cannot hope to raise fortunes by cultivation, ib., 171. Tenures of, in the British American colonies, 235. Is the most permanent source of revenue, 345. The rent of a whole country not equal to the ordinary levy upon the people, ib. The revenue from, proportioned not to the rent, but to the produce, 346. Reasons for selling the crown lands, ib. The land tax of Great Britain considered, 348. An improved land-tax suggested, 349. A land-tax, however equally rated by a general survey, will soon become unequal, 352. Tithes a very unequal tax, ib. Tithes discourage improvement, ib. _Landholders_, why frequently inattentive to their own particular interests, 106. How they contribute to the annual production of the land, according to the French agricultural system of political economy, 275. Should be encouraged to cultivate a part of their own land, 350. _Latin language_, how it became an essential part of university education, 321. _Law_, the language of, how corrupted, 302. Did not improve into a science in ancient Greece, 325. Remarks on the courts of justice in Greece and Rome, ib., 326. _Law_, Mr. account of his banking scheme for the improvement of Scotland, 130. _Lawyers_, why amply rewarded for their labour, 44. Great amount of their fees, 300. _Leases_, the various usual conditions of, 349, 350. _Leather_, restrictions on the exportation of unmanufactured, 271. _Lectures_ in universities frequently improper for instruction, 320. _Levity_, the vices of, ruinous to the common people, and therefore severely censured by them, 332, 333. _Liberty_, three duties only necessary for a sovereign to attend to for supporting a system of, 286. _Lima_, computed number of inhabitants in that city, 233. _Linen manufacture_, narrow policy of the master manufacturers in, 266. _Literature_, the rewards of, reduced by competition, 56. Was more profitable in ancient Greece, ib. The cheapness of literary education an advantage to the public, 57. _Loans of money_, the nature of, analysed, 144. The extensive operation of, ib. _Locke_, Mr. remarks on his opinion of the difference between the market and mint prices of silver bullion, 18. His account of the cause of lowering the rates of interest for money, examined, 145. His distinction between money and moveable goods, 173. _Lodgings_, cheaper in London than in any other capital city in Europe, 49. _Logic_, the origin and employment of, 322. _Lotteries_, the true nature of, and the causes of their success, explained, 45. _Luck_, instances of the universal reliance mankind have on it, 45. _Lutherans_, origin and principles of that sect, 339. _Luxuries_, distinguished from necessaries, 368. Operation of taxes on, ib. The good and bad properties of taxes on, 380. M _Macedon_, Philip of, the superiority that discipline gave his army over that of his enemies, 294. _Machines_ for facilitating mechanical operations, how invented and improved, 4, 5. Are advantageous to every society, 116. _Madder_, the cultivation of, long confined to Holland by English tithes, 353. _Madeira wines_, how introduced into North America and Britain, 204. _Malt_, reasons for transferring the duties on brewing to, 378. Distillery, how to prevent smuggling, 377. _Manufactures_, the great advantages resulting from a division of labour in, 3. Instances in illustration, 5. Why profits increase in the higher stages of, 21. Of what parts the gain consists, 22. The private advantages of secrets in, 25. Peculiar advantages of soil and situation, ib. Monopolies, ib. Corporation privileges, 26. The deductions made from labour employed on manufactures, 27. Inquiry how far they are affected by seasons of plenty and scarcity, 35. Are not no materially affected by circumstances in the country where they are carried on, as in the places where they are consumed, ib. New manufactures generally give higher wages than old ones, 48. Are more profitably carried on in towns than in the open country, 53. By what means the prices of, are reduced while the society continues improving, 103. Instances in hardware, ib. Instances in the woollen manufacture, 104. What fixed capitals are required to carry on particular manufactures, 112. Manufactures for distant sale, why not established in North America, 156. Why preferred to foreign trade for the employment of a capital, ib. Motives to the establishment of manufactures for distant sale, 165. How shifted from one country to another, ib., 166. Natural circumstances which contribute to the establishment of them, ib. Their effect on the government and manners of a country, 167. The independence of artisans explained, 169. May flourish amidst the ruin of a country, and begin to decay on the return of its prosperity, 180. Inquiry how far manufactures might be affected by a freedom of trade, 190. British restraints on manufactures in North America, 238, 239. The exportation of instruments in, prohibited, 273. By the principal support of foreign trade, 283. Require a more extensive market than rude produce of the land, ib. Were exercised by slaves in ancient Greece, 284. High prices of, in Greece and at Rome, 285. False policy to check manufactures in order to promote agriculture, ib. In Great Britain, why principally fixed in the coal countries, 370. _Manufacturers_, those thrown out of one business can transfer their industry to colateral employments, 190. A spirit of combination among them to support monopolies, 191. Manufacturers prohibited by old statutes from keeping a shop, or selling their own goods by retail, 215, 216. The use of wholesale dealers to manufacturers, 217. An unproductive class of the people, according to the French agricultural system of political economy, 276. The error of this doctrine shewn, 280. How manufacturers augment the revenue of a country, 281. _Manure_, the supply of, in most places depends on the stock of cattle raised, 93. _Maritime countries_, why the first that are civilized and improved, 9. _Martial spirit_, how supported in the ancient republics of Greece and Rome, 329. The want of it now supplied by standing armies, ib. The establishment of a militia little able to support it, ib. _Mediterranean sea_, peculiarly favourable for the first attempts in navigation, 9. _Meggens_, Mr. his account of the annual importation of gold and silver into Spain and Portugal, 88. His relative proportion of each, 89. _Mercantile system_ explained, 372. _Mercenary troops_, origin and reason of, 291. The numbers of, how limited, ib. _Merchants_, their judgments more to be depended on respecting the interest of their particular branches of trade, than with regard to the public interest, 106, 107. Their capitals altogether circulating, 112. Their dealings extended by the aid of bankers notes, 121, 124. Customs of, first established to supply the want of laws, and afterwards admitted as laws, 126. The manner of negociating bills of exchange, explained, ib. The pernicious tendency of drawing and redrawing, ib., 127. In what method their capitals are employed, 147. Their capitals, dispersed and unfixed, 149. The principles of foreign trade examined, 153. Are the best of improvers when they turn country gentlemen, 167. Their preference among the different species of trade, how determined, 183. Are actuated by a narrow spirit of monopoly, 201. The several branches of the corn trade specified and considered, 215. The government of a company of, the worst a country can be under, 234. Of London, not good economists, 253. An unproductive class of men, according to the present agricultural system of political economy in France, 277. The quick return of mercantile capitals enables merchants to advance money to government, 386, 387. Their capitals increased by lending money to the state, 387. _Mercier_, de la Riviere, M. character of his natural and essential order of political societies, 282. _Metals_, why the best medium of commerce, 10. Origin of stamped coins, 11. Why different metals became the standard of value among different nations, 16. The durability of, the cause of the steadiness of their price, 88. On what the quantity of precious metals in every particular country depends, 100. Restraints upon the exportation of, 272. _Metaphysics_, the science of, explained, 323. _Metayers_, description of the class of farmers so called in France, 159. _Methodists_, the teachers among, why popular preachers, 330. _Methuen_, Mr. translation of the commercial treaty concluded by him between England and Portugal, 223. _Mexico_, was a less civilized country than Peru, when first visited by the Spaniards, 85. Present populousness of the capital city, 233. Low state of arts at the first discovery of that empire, ib. _Militia_, why allowed to be formed in cities, and its formidable nature, 164. The origin and nature of, explained, 292. How distinguished from a regular standing army, ib. Must always be inferior to a standing army, 293. A few campaigns of service may make a militia equal to a standing army, ib. Instances, 294. _Milk_, a most perishable commodity, how manufactured for store, 96. _Mills_, wind and water, their late introduction into England, 105. _Mines_, distinguished by their fertility or barrenness, 70. Comparison between those of coal and those of metals, 71. The competition between, extends to all parts of the world, ib. The working of, a lottery, 72. Diamond mines not always worth working, 73. Tax paid to the king of Spain from the Peruvian mines, 85. The discovery of mines not dependent on human skill or industry, 100. In Hungary, why worked at less expense than the neighbouring ones in Turkey, 284. _Mining_, projects of, uncertain and ruinous, and unfit for legal encouragement, 230. _Mirabeau_, Marquis de, his character of the economical table, 282. _Mississippi_ scheme in France, the real foundation of, 130. _Modus_ for tithe, a relief to the farmer, 353. _Money_, the origin of, traced, 10. Is the representative of labour, 13. The value of, greatly depreciated by the discovery of the American mines, 14. How different metals became the standard money of different nations, 16. The only part of the circulating capital of a society, of which the maintenance can diminish their neat revenue, 116. Makes no part of the revenue of a society, 117. The term money, in common acceptation, of ambiguous meaning, ib. The circulating money, in society, no measure of its revenue, 118. Paper money, ib. Effect of paper on the circulation of cash, ib., 119. Inquiry into the proportion the circulating money of any country bears to the annual produce circulated by it, 120. Paper can never exceed the value of the cash, of which it supplies the place, in any country, 122. The pernicious practice of raising money by circulation, explained, 126. The true cause of its exportation, 139. Loans of, the principles of, analysed, 144. Monied interest distinguished from the landed and trading interest, ib. Inquiry into the real causes of the reduction of interest, 145. Money and wealth synonymous terms in popular language, 173. And moveable goods compared, ib. The accumulation of, studied by the European nations, 174. The mercantile arguments for liberty to export gold and silver, ib. The validity of these arguments examined, 175. Money and goods mutually the price of each other, ib. Over-trading causes complaints of the scarcity of money, 176. Why more easy to buy goods with money, than to buy money with goods, 177. Inquiry into the circulating quantity of, in Great Britain, 178. Effect of the discovery of the American mines on the value of, 181. Money and wealth different things, 182. Bank money explained, 195. See _Coins_, _Gold_, and _Silver_. _Monopolies_ in trade or manufactures, the tendency of, 25. Are enemies to good management, 62. Tendency of making a monopoly, of colony trade, 251. Countries which have colonies obliged to share their advantages with many other countries, 260. The chief engine in the mercantile system, 261. How monopolies derange the natural distribution of the stock of the society, ib. Are supported by unjust and cruel laws, 268. Of a temporary nature, how far justifiable, 316. Perpetual monopolies injurious to the people at large, ib. _Montauban_, the inequalities in the predial taille in that generality, how rectified, 352. _Montesquieu_, reasons given by him for the high rates of interest among all Mahometan nations, 40. Examination of his idea of the cause of lowering the rate of interest of money, 145. _Morality_, two different systems of, in every civilized society, 332. The principal points of distinction between them, 333. The ties of obligation in each system, ib. Why the morals of the common people are more regular in sectaries than under the established church, ib. The excesses of, how to be corrected, ib. _Morellet_, M. his account of joint-stock companies, defective, 317. _Mun_, Mr. his illustration of the operation of money exported for commercial purposes, 174. _Music_, why a part of the ancient Grecian education, 324. And dancing, great amusement among barbarous nations, ib. N _Nations_, sometimes driven to inhuman customs, by poverty, 1. The number of useful and productive labourers in, always proportioned to the capital stock on which they are employed, 1, 2. The several sorts of industry seldom dealt impartially by, 2. Maritime nations, why the first improved, 8. How ruined by a neglect of public economy, 140. Evidences of the increase of a national capital, 141. How the expenses of individuals may increase the national capital, 142. _Navigation_, inland, a great means of improving a country in arts and industry, 9. The advantages of, 62. May be successfully managed by joint-stock companies, 317. _Navigation act of England_, the principal dispositions of, 187. Motives that dictated, this law, 188. Its political and commercial tendency, ib. Its consequences, so far as it affected the colony trade with England, 245. Diminished the foreign trade with Europe, 246. Has kept up high profits in the British trade, ib. Subjects Britain to a disadvantage in every branch of trade of which she has not the monopoly, ib., 247. _Necessaries_ distinguished from luxuries, 368. Operation of taxes on, ib. Principal necessaries taxed, 369. _Negro slaves_, why not much employed in raising corn in the English colonies, 159. Why more numerous on sugar than on tobacco plantations, ib. _Nile_, river, the cause of the early improvement of agriculture and manufactures in Egypt, 9. O _Oats_, bread made of, not so suitable to the human constitution as that made of wheat, 68. _Ontology_, the science of, explained, 323. _Oxford_, the professorships there, sinecures, 319. P _Paper money_, the credit of, how established, 118. Its operation explained, ib. Its effect on the circulation of cash, ib., 119. Promotes industry, ib. Operation of the several banking companies established in Scotland, 120. Can never exceed the value of the gold and silver, of which it supplies the place in any country, 122. Consequences of too much paper being issued, ib. The practice of drawing and redrawing explained, with its pernicious effects, 126. The advantages and disadvantages of paper credit, stated, 131. Ill effects of notes issued for small sums, 132. Suppressing small notes renders money more plentiful, ib. The currency of, does not affect the prices of goods, 133. Account of the paper currency in North America, 134. Expedient of the government of Pennsylvania to raise money, 345. Why convenient for the domestic purposes of the North Americans, 400. _Paris_ enjoys a little more trade than is necessary for the consumption of its inhabitants, 138. _Parish ministers_, evils attending vesting the election of, in the people, 339. _Parsimony_ is the immediate cause of the increase of capitals, 138. Promotes industry, ib. Frugal men public benefactors, 140. Is the only means by which artificers and manufacturers can add to the revenue and wealth of society, according to the French agricultural system of political economy, 277. _Pasture land_, under what circumstances more profitable than arable land, 62, 63. Why it ought to be inclosed, 63. _Patronage_, the right of, why established in Scotland, 340. _Pay_, military, origin and reason of, 291. _Pennsylvania_, account of the paper currency there, 134. Good consequences of the government there having no religious establishment, 332. Derive a revenue from their paper currency, 401. _People_, how divided into productive and unproductive classes according to the present French system of agricultural political economy, 275. The unproductive class greatly useful to the others, 277. The great body of, how rendered unwarlike, 292. The different opportunities of education in the different ranks of, 328. The inferior ranks of, the greatest consumers, 375. The luxurious expenses of these ranks ought only to be taxed, 376. _Persecution_ for religious opinions, the true cause of, 330. _Peru_, the discovery of the silver mines in, occasioned those in Europe to be in a great measure abandoned, 71. These mines yield but small profit to the proprietors, ib. Tax paid to the king of Spain from these mines, 85. The early accounts of the splendour and state of arts, in this country greatly exaggerated, 85, 86. Present state of, under the Spanish government, 86. The working of the mines there becomes gradually more expensive, 90. Low state of arts there when first discovered, 233. Is probably more populous now than at any former period, ib. _Philosophy_, natural, the origin and objects of, 322. Moral, the nature of, explained, ib. Logic, the origin and employment of, ib. _Physicians_, why amply rewarded for their labour, 43, 44. _Physics_, the ancient system of, explained, 322. _Pin-making_, the extraordinary advantage of a division of labour in this art, 3. _Plate_ of private families, the melting it down to supply state exigencies, an insignificant resource, 178. New plate is chiefly made from old, 225. _Ploughmen_, their knowledge more extensive than the generality of mechanics, 53. _Pneumatics_, the science of, explained, 323. _Poivre_, M. his account of the agriculture of Chochin-China, 66. _Poland_, a country still kept in poverty by the feudal system of its government, 101. _Political economy_, the two distinct objects and two different systems of, 173. The present agricultural system of, adopted by French philosophers, described, 275. Classes of the people who contribute to the annual produce of the land, ib. How proprietors contribute, ib. How cultivators contribute, ib. Artificers and manufacturers unproductive, 276. The unproductive classes maintained by the others, 277. Bad tendency of restrictions and prohibitions in trade, 279. How this system is delineated by M. Quesnai. The bad effects of an injudicious political economy, how corrected, 280. The capital error in this system pointed out, ib. _Poll-taxes_, origin of, under the feudal government, 162, 163. Why esteemed badges of slavery, 362. The nature of, considered, 367. _Poor_, history of the laws made for the provision of, in England, 57. _Pope of Rome_, the great power formerly assumed by, 335. His power how reduced, 337. Rapid progress of the Reformation, 338. _Population_, riches and extreme poverty equally unfavourable to, 33. Is limited by the means of subsistence, ib., 69. _Porter_, the proportion of malt used in the brewing of, 376. _Portugal_, the cultivation of the country not advanced by its commerce, 171, 172. The value of gold and silver there depreciated by prohibiting their exportation, 208. Translation of the commercial treaty concluded in 1703 with England, 223. A large share of the Portugal gold sent annually to England, ib. Motives that led to the discovery of a passage to the East round the Cape of Good Hope, 229. Lost its manufactures by acquiring rich and fertile colonies, 251. _Post-office_, a mercantile project, well calculated for being managed by a government, 344. _Potatoes_, remarks on, as an article of food, 67. Culture and great produce of, ib. The difficulty of preserving them the great obstacle to cultivating them for general diet, 68. _Poverty_, sometimes urges nations to inhuman customs, 1. Is no check to the production of children, 33. But very unfavourable to raising them, ib. _Poultry_, the cause of their cheapness, 95. Is a more important article of rural economy in France than in England, ib. _Pragmatic sanction in France_, the object of, 337. Is followed by the concordat, ib. _Preferments_, ecclesiastical, the means by which a national clergy ought to be managed by the civil magistrate, 335. Alterations in the mode of electing to them, ib., 337. _Presbyterian church government_, the nature of, described, 340. Character of the clergy of, ib., 341. _Prices_, real and nominal, of commodities, distinguished, 14. Money price of goods explained, 19. Rent for land enters into the price of the greater part of all commodities, 21. The component parts of the price of goods explained, ib. Natural and market prices distinguished, and how governed, 23, 36. Though raised at first by an increase of demand, always reduced by it in the result, 314. _Primogeniture_, origin and motive of the law of succession by, under the feudal government, 157. In contrary to the real interest of families, 158. _Princes_, why not well calculated to manage mercantile projects for the sake of a revenue, 344. _Prodigality_, the natural tendency of, both to the individual and to the public, 138. Prodigal men enemies to their country, 140. _Produce_ of land and labour the source of all revenue, 136. The value of, how to be increased, 141. _Professors in Universities_, circumstances which determine their merit, 340, 341. _Profit_, the various articles of gain that pass under the common idea of, 22. An average rate of, in all countries, 23. Averages of, extremely difficult to ascertain, 37. Interest of money the best standard of, ib. The diminution of, a natural consequence of prosperity, 38. Clear and gross profit distinguished, 40. The nature of the highest ordinary rate of, defined, ib. Double interest deemed in Great Britain a reasonable mercantile profit, ib. In thriving countries low profit may compensate the high wages of labour, 41. The operation of high profits and high wages compared, ib. Compensates inconvenience and disgrace, 42. Of stock, how affected, 46. Large profits must be made from small capitals, 47. Why goods are cheaper in the metropolis than in country villages, ib. Great fortunes more frequently made by trade in large towns than in small ones, ib. Is naturally low in rich, and high in poor countries, 106. How that of the different classes of traders is raised, 148. Private, the sole motive of employing capitals in any branch of business, 154. When raised by monopolies, encourage luxury, 253. _Projects_, unsuccessful in arts, injurious to a country, 140. _Property_, passions which prompt mankind to the invasion of, 297. Civil government necessary for the production of, ib. Wealth a source of authority, 298. _Provisions_, how far the variations in the price of, affect labour and industry, 30, 34, 36. Whether cheaper in the metropolis or in country villages, 47. The prices of, better regulated by competition than by law, 60. A rise in the prices of, must be uniform, to shew that it proceeds from a depreciation of the value of silver, 102. _Provisers_, object of the statute of, in England, 337. _Prussia_, mode of assessing the land-tax there, 351. _Public works_ and _institutions_, how to be maintained, 302. Equity of tolls for passage over roads, bridges and canals, 303. Why government ought not to have the management of turnpikes, 304. Nor of other public works, 306. _Purveyance_, a service still exacted in most parts of Europe, 161. Q _Quakers of Pennsylvania_, inference from their resolution to emancipate all their negro slaves, 159. _Quesnai_, M. view of his agricultural system of political economy, 279. His doctrine generally subscribed to, 282. _Quito_, populousness of that city, 233. R _Reformation_, rapid progress of the doctrines of, in Germany, 338. In Sweden and Switzerland, ib. In England and Scotland, ib. 339. Origin of the Lutheran and the Calvinistic sects, ib. _Regulated companies_. See _Companies_. _Religion_, the object of instruction in, 330. Advantage the teachers of a new religion enjoy over those of one that is established, ib. Origin of persecutions for heretical opinions, ib. How the zeal of the inferior clergy of the church of Rome is kept alive, ib. Utility of ecclesiastical establishments, 331. How united with the civil power, ib., 332. _Rent_, reserved, ought not to consist of money, 14. But of corn, ib. Of land, constitutes a third part of the price of most kinds of goods, 21. An average rate of, in all countries, and how regulated, 23. Makes the first deduction from the produce of labour employed upon land, 27. The terms of, how adjusted between landlord and tenant, 60, 61. Is sometimes demanded for what is altogether incapable of human improvement, 61. Is paid for, and produced, by land in almost all situations, ib. The general proportion paid for coal mines, 71. And metal mines, ib. Mines of precious stones frequently yield no rent, 73. How paid in ancient times, 76. Is raised, either directly or indirectly, by every improvement in the circumstances of society, 105. Gross and neat rent distinguished, 115. How raised and paid under feudal governments, 137. Present average proportion of, compared with the produce of the land, ib. Of houses distinguished into two parts, 354. Difference between rent of house and rent of land, 355. Rent of a house the best estimate of a tenants circumstances, ib. _Retainers_, under the feudal system of government described, 167. How the connection between them and their lords was broken, 169. _Revenue_, the original source of, pointed out, 22. Of a country, of what it consists, 115. The neat revenue of a society diminished by supporting a circulating stock of money, 116. Money no part of revenue, 117. Is not to be computed in money, but in what money will purchase, ib. How produced, and how appropriated, in the first instance. 136. Produce of land, ib. Produce of manufactures, ib. Must always replace capital, ib. The proportion between revenue and capital regulates the proportion between idleness and industry, 138. Both the savings and the spendings of, annually, consumed, ib. Of every society, equal to the exchangeable value of the whole produce of its industry, 184. Of the customs, increase by drawbacks, 205. Why government ought not to take the management of turnpikes, to derive a revenue from them, 304. Public works of a local nature always better maintained by provincial revenues than by the general revenue of the state, 306. The abuses in provincial revenues trifling, when compared with those in the revenue of a great empire, ib. The greater the revenue of the church, the smaller must be that of the state, 341. The revenue of the state ought to be raised proportionably from the whole society, 342. Local expenses ought to be defrayed by a local revenue, 343. Inquiry into the sources of public revenue, ib. Of the republic of Hamburgh, ib., 344. Whether the government of Britain could undertake the management of the bank, to derive a revenue from it, ib. The post office, a mercantile project, well calculated for being managed by government, ib. Princes not well qualified to improve their fortunes by trade, ib. The English East India Company good traders before they became sovereigns, but each character now spoils the other, ib. Expedient of the government of Pennsylvania to raise money, 345. Rent of land the most permanent fund, ib. Feudal revenues, ib. Of Great Britain, ib. Revenue from land proportioned not to the rent but to the produce, 346. Reasons for selling the crown lands, ib., 347. An improved land-tax suggested, 349. The nature and effect of tithes explained, 352. Why a revenue cannot be raised in kind, 353. When raised in money, how affected by different modes of valuation, ib. A proportionable tax on houses the best source of revenue, 355. Remedies for the diminution of, according to their causes, 374. Bad effects of farming out public revenues, 381. The different sources of revenue in France, 384. How expended in the rude state of society, 385. _Rice_, a very productive article of cultivation, 67. Requires a soil unfit for raising any other kind of food, ib. Rice countries more populous than corn countries, 86. _Riches_, the chief enjoyment of, consists in the parade of, 72, 73. _Risk_, instances of the inattention mankind pay to it, 45. _Roads_, good, the public advantages of, 62. How to be made and maintained, 303. The maintenance of, why improper to be trusted to private interest, 304. General state of, in France, 305. In China, ib. _Romans_, why copper became the standard of value among them, 16. The extravagant prices paid by them for certain luxuries for the table accounted for, 92. The value of silver higher among them than at the present time, ib. The republic of, founded on a division of land among the citizens, 228. The Agrarian law only executed upon one or two occasions, ib. How the citizens who had no land subsisted, ib. Distinction between the Roman and Greek colonies, ib. The improvement of the former slower than that of the latter, 232. Origin of the social war, 257. The republic ruined by extending the privilege of Roman citizens to the greater part of the inhabitants of Italy, 258. When contributions were first raised to maintain those who went to the wars, 290. Soldiers not a distinct profession there, 291. Improvement of the Roman armies by discipline, 294. How that discipline was lost, 295. The fall of the western empire, how effected, ib. Remarks on the education of the ancient Romans, 324. Their morals superior to those of the Greeks, ib. State of law, and forms of justice, 325. The martial spirit of the people, how supported, 329. Great reductions of the coin practised by, at particular exigencies, 396. _Rome_, modern, how the zeal of the inferior clergy of, is kept alive, 330. The clergy of, one great spiritual army dispersed in different quarters over Europe, 335. Their power during the feudal monkish ages similar to that of the temporal barons, 336. Their power, how reduced, 337. _Rouen_, why a town of great trade, 138. _Ruddiman_, Mr. remarks on his account of the ancient price of wheat in Scotland, 77. _Russia_, was civilized under Peter the Great by a standing army, 296. S _Sailors_, why no sensible inconvenience felt by the great numbers disbanded at the close of a war, 190. _Salt_, account of foreign salt imported into Scotland, and of Scotch salt delivered duty free for the fishery, 288, _Append_. Is an object of heavy taxation everywhere, 369. The collection of the duty on, expensive, 380. _Sardinia_, the land-tax how assessed there, 352. _Saxon lords_, their authority and jurisdiction as great before the Conquest as those of the Normans were afterwards, 168. _Schools_, parochial, observations on, 328. _Science_ is the great antidote to the poison of enthusiasm and superstition, 333. _Scipio_, his Spanish militia rendered superior to the Carthaginian militia by discipline and service, 294. _Scotland_, compared with England as to the prices of labour and provisions, 31. Remarks on the population of the Highlands, 33. The market rate of interest higher than the legal rate, 37. The situation of cottagers there described, 49. Apprenticeships and corporations, 51. The common people of, why neither so strong nor so handsome as the same class in England, 68. Cause of the frequent emigrations from, 80. Progress of agriculture there before the union with England, 93. Present obstructions to better husbandry, ib., 94. The price of wool reduced by the Union, 99. Operation of the several banking companies established there, 120. Amount of the circulating money there before the Union, ib. Amount of the present circulating cash, 121. Course of dealings in the Scotch banks ib. Difficulties occasioned by these banks issuing too much paper, 123. Necessary caution for some time observed by the banks in giving credit to their customers, with the good effects of it, 124. The scheme of drawing and redrawing adopted by traders, 126. Its pernicious tendency explained, ib., 127. History of the Ayr bank. 128. Mr. Law's scheme to improve the country, 130. The prices of goods in, not altered by paper currency, 133. Effect of the optional clauses in their notes, ib. Cause of the speedy establishment of the Reformation there, 339. The disorders attending popular elections of the clergy there, occasioned the right of patronage to be established, ib. Amount of the whole revenue of the clergy, 342. _Sea service_ and military service by land, compared, 45. _Sects in religion_, the more numerous, the better for society, 332. Why they generally profess the austere system of morality, 333. _Self-love_ the governing principle in the intercourse of human society, 6. _Servants_, menial, distinguished from hired workmen, 135. The various orders of men who rank in the former class in reference to their labour, 136. Their labour unproductive, 280. _Settlements_ of the poor, brief review of the English laws relating to, 57. The removals of the poor a violation of natural liberty, 59. The law of, ought to be repealed, 191. _Sheep_, frequently killed in Spain for the sake of the fleece and the tallow, 97. Severe laws against the exportation of them and their wool, 268. _Shepherds_, war, how supported by a nation of, 289. Inequality of fortune among, the source of great authority, 298. Birth and family highly honoured in nations of shepherds, ib. Inequality of fortune first began to take place in the age of shepherds, 299. And introduced civil government, ib. _Shetland_, how rents are estimated and paid there, 61. _Silk manufacture_, how transferred from Lucca to Venice, 166. _Silver_, the first standard coinage of the northern subverters of the Roman empires, 16. Its proportional value to gold regulated by law, 17. Is the measure of the value of gold, ib. Mint price of silver in England, ib. Inquiry into the difference between the mint and market price of bullion, ib., 18. How to preserve the silver coin from being melted down for profit, 18. The mines of, in Europe, why generally abandoned, 71. Evidences of the small profit they yield to the proprietors in Peru, ib. Qualities for which this metal is valued, 72. The most abundant mines of, would add little to the wealth of the world, 73. But the increase in the quantity of, would depreciate its own value, 74. Circumstances that might counteract this effect, ib. Historical view of the variations in the value of, during the four last centuries, ib., 75. Remarks on its rise in value compared with corn, 76. Circumstances that might have misled writers in reviewing the value of silver, ib. Corn the best standard for judging of the real value of silver, 79. The price of, how affected by the increase of quantity, ib. The value of, sunk by the discovery of the American mines, 81. When the reduction of its value from this cause appears to have been completed, ib. Tax paid from the Peruvian mines to the king of Spain, 85. The value of silver kept up by an extension of the market, ib. Is the most profitable commodity that can be sent to China, 86. The value of, how proportioned to that of gold before and after the discovery of the American mines, 89. The quantity commonly in the market in proportion to that of gold probably greater than their relative values indicate, ib. The value of, probably rising, and why, 90, 91. The opinion of a depreciation of its value not well founded, 100. The real value of, degraded by the bounty on the exportation of corn, 207. _Sinking fund_ in the British finances explained, 389. Is inadequate to the discharge of former debts, and almost wholly applied to other purposes, 391. Motives to the misapplication of it, ib., 392. _Slaves_, the labour of, dearer to the masters than that of freemen, 53. Under feudal lords, circumstances of their situation, 159. Countries where this order of men still remains, ib. Why the service of slave is preferred to that of freemen, ib. Their labour why unprofitable, ib. Causes of the abolishing of slavery throughout the greater part of Europe, 160. Receive more protection from the magistrate in an arbitrary government than in one that is free, 241. Why employed in manufactures by the ancient Grecians, 284. Why no improvements are to be expected from them, ib. _Smuggling_, a tempting, but generally a ruinous employment, 46. Encouraged by high duties, 373. Remedies against, 374. The crime of, morally considered, 381. _Society_, human, the first principles of, 6. _Soldiers_, remarks on their motives for engaging in the military line, 45. Comparison between the land and sea service, ib. Why no sensible inconvenience felt by the disbanding of great numbers after a war is over, 190. Reason of their first serving for pay, 291. How they became a distinct class of the people, 292. How distinguished from the militia, ib. Alteration in their exercise produced by the invention of fire-arms, ib. _South Sea company_, amazing capital once enjoyed by, 311. Mercantile and stock-jobbing projects of, 312. Assiento contract, ib. Whale fishery, ib. The capital of, turned into annuity stock, ib., 388. _Sovereign_ and _trader_, inconsistent characters, 344. _Sovereign_, three duties only necessary for him to attend to for supporting a system of natural liberty, 286. How he is to protect the society from external violence, 289, 296. And the members of it from the injustice and oppression of each other, 297. And to maintain public works and institutions, 302. _Spain_, One of the poorest countries in Europe, notwithstanding its rich mines, 101. Its commerce has produced no considerable manufactures for distant sale, and the greater part of the country remains uncultivated, 171, 172. Spanish mode of estimating their American discoveries, 173. The value of gold, and silver there depreciated by laying a tax on the exportation of them, 208. Agriculture and manufactures there discouraged by the redundancy of gold and silver, ib., 209. Natural consequences that would result from taking away this tax, ib. The real and pretended motives of the court of Castile for taking possession of the countries discovered by Columbus, 230. The tax on gold and silver, how reduced, ib. Gold the object of all the enterprises to the new world, ib. The colonies of, less populous than those of any other European nation, 232, 233. Asserted an exclusive claim to all America, until the miscarriage of their invincible armada, ib. Policy of the trade with the colonies, 236. The American establishments of, effected by private adventurers, who received little beyond permission from the government, 242. Lost its manufactures by acquiring rich and fertile colonies, 251. The alcavala tax there explained, 381. The ruin of the Spanish manufactures attributed to it, ib. _Speculation_, a distinct employment in improved society, 5. Speculative merchants described, 47. _Stage_, public performers on, paid for the contempt attending their profession, 44. The political use of dramatic representations, 334. _Stamp duties_ in England and Holland, remarks on, 363, 364, 365. _Steel-bow_ tenants in Scotland, what, 160. _Stock_, the profits raised on, in manufactures, explained, 20. In trade, an increase of, raises wages, and diminishes profit, 36. Must be larger in a great town than in a country village, 37. Natural consequences of a deficiency of stock in new colonies, 38. The profits on, little affected by the easiness or difficulty of learning a trade, 43. But by the risk or disagreeableness of the business, 46. Stock employed for profit sets into motion the greater part of useful labour, 106. No accumulation of, necessary in the rude state of society, 111. The accumulation of, necessary to the division of labour, ib. Stock distinguished into two parts, 112. The general stock of a country or society explained, 113. Houses, ib. Improved land, ib. Personal abilities, ib. Money and provisions, 114. Raw materials and manufactured goods, ib. Stock of individuals, how employed, 115. Is frequently buried or concealed in arbitrary countries, ib. The profits on, decrease in proportion as the quantity increases, 137. On what principles stock is lent and borrowed at interest, 144. That of every society divided among different employments, in the proportion most agreeable to the public interest, by the private views of individuals, 260. The natural distribution of, deranged by monopolizing systems, 261. Every derangement of, injurious to the society, 262. Mercantile, is barren and unproductive, according to the French agricultural system of political economy, 277. How far the revenue from, is an object of taxation, 357. A tax on, intended under the land-tax, 358. _Stockings_, why cheaply manufactured in Scotland, 49. When first introduced into England, 104. _Stone quarries_, their value depends on situation, 69, 74. _Stones_, precious, of no use but for ornament, and how the price of, is regulated, 73. The most abundant mines, would add little to the wealth of the world, ib. _Subordination_, how introduced into society, 297. Personal qualifications, ib. Age and fortune, ib. Birth, 298. Birth and fortune two great sources of personal distinction, ib. _Subsidy_, old, in the English customs, the drawbacks upon, 203. Origin and import of the term, 372. _Sugar_, a very profitable article of cultivation, 66, 159. Drawbacks on the importation of, from England, 204. Might be cultivated by the drill-plough, instead of all hand-labour by slaves, 241. A proper subject for taxation, as an article sold at monopoly price, 378. _Sumptuary laws_, superfluous restraints on the common people, 142. _Surinam_, present state of the Dutch colony there, 234. _Switzerland_, establishment of the Reformation in Berne and Zurich, 338. The clergy there zealous and industrious, 342. Taxes how paid there, 359, 363. T _Taille_, in France, the nature of that tax, and its operation, explained, 161. _Talents_, natural, not so various in different men as is supposed, 7. _Tartars_, their manner of conducting war, 289. Their invasions dreadful, ib. _Tavernier_, his account of the diamond mines of Golconda and Visiapour, 73. _Taxes_, the origin of, under the feudal government, 162. The sources from whence they must arise, 347. Unequal taxes, ib. Ought to be clear and certain, ib. Ought to be levied at the times most convenient for payment, ib. Ought to take as little as possible out of the pockets of the people more than is brought into the public treasury, 348. How they may be made more burdensome to the people than beneficial to the sovereign, ib. The land-tax of Great Britain, ib. Land-tax of Venice, 349. Improvements suggested for a land-tax, ib. Mode of assessing the land-tax in Prussia, 351. Tithes a very unequal tax, and a discouragement to improvement, 352. Operation of tax on house rent, payable by the tenant, 354. A proportionable tax on houses the best source of revenue, 355. How far the revenue from stock is a proper object of taxation, 357. Whether interest of money is proper for taxation, ib. How taxes are paid at Hamburgh, 339. In Switzerland, ib. Taxes upon particular employments, ib. Poll-taxes, 362. Taxes badges of liberty, ib. Taxes upon the transfer of property, 362. Stamp duties, 363. On whom the several kinds of taxes principally fall, 364. Taxes upon the wages of labour, 365. Capitation taxes, 367. Taxes upon consumable commodities, 368. Upon necessaries, ib. Upon luxuries, ib. Principal necessaries taxed, 369. Absurdities in taxation, 370. Different parts of Europe very highly taxed, ib. Two different methods of taxing consumable commodities, ib. Sir Matthew Decker's scheme of taxation considered, 371. Excise and customs, ib. Taxation sometimes not an instrument of revenue, but of monopoly, 373. Improvements of the customs suggested, 374. Taxes paid in the price of a commodity little adverted to, 379, 380. On luxuries, the good and bad properties of, ib. Bad effects of farming them out, 383. How the finances of France might be reformed, 384. French and English taxations compared, ib. New taxes always generate discontent, 391, 392. How far the British system of taxation might be applicable to all the different provinces of the empire, 397. Such a plan might speedily discharge the national debt, 399. _Tea_, great importation and consumption of that drug in Britain, 86. _Teachers in Universities_, tendency of endowments to diminish their application, 319. The jurisdictions to which they are subject little calculated to quicken their diligence, ib. Are frequently obliged to gain protection by servility, ib. Defects in their establishments, ib., 320. Teachers among the ancient Greeks and Romans superior to those of modern times, 326. Circumstances which draw good ones to, or drain them from, the universities, 340. Their employment naturally renders them eminent in letters, 341. _Tenures_, feudal, general observations on, 137. Described, 157. _Theology_, monkish, the complexion of, 323. _Thoulouse_, salary paid to counsellor or judge in the parliament of, 301. _Tin_, average rent of the mines of in Cornwall, 71. Yield a greater profit to the proprietors than the silver mines of Peru, ib., 72. Regulations under which tin mines are worked, ib. _Tobacco_, the culture of, why restrained in Europe, 66. Not so profitable an article of cultivation in the West Indies as sugar, ib. The amount and course of the British trade with, explained, 153. The whole duty upon, drawn back on exportation, 204. Consequences of the exclusive trade Britain enjoys with Maryland and Virginia in this article, 244. _Tolls_, for passage over roads, bridges, and navigable canals, the equity of, shewn, 303. Upon carriages of luxury, ought to be higher than upon carriages of utility, ib. The management of turnpikes often an object of just complaint, 304. Why government ought not to have the management of turnpikes, ib., 379. _Tonnage_ and _poundage_, origin of those duties, 372. _Tontine_ in the French finances, what, with the derivation of the name, 390. _Towns_, the places where industry is most profitably exerted, 53. The spirit of combination prevalent among manufacturers, ib., 54. According to what circumstances the general character of the inhabitants as to industry is formed, 137. The reciprocal nature of the trade between them and the country explained, 155. Subsist on the surplus produce of the country, ib. How first formed, 156. Are continual fairs, ib. The original poverty and servile state of the inhabitants of, 162. Their early exemptions and privileges, how obtained, ib. The inhabitants of, obtained liberty much earlier than the occupiers of land in the country, 163. Origin of free burghs, ib. Origin of corporations, ib. Why allowed to form militia, 164. How the increase and riches of commercial towns contributed to the improvement of the countries to which they belonged, 167. _Trade_, double interest deemed a reasonable mercantile profit in, 40. Four general classes of, equally necessary to, and dependent on, each other, 147. Wholesale, three different sorts of, 151. The different returns of home and foreign trade, ib. The nature and operation of the carrying trade examined, 152. The principles of foreign trade examined, 153. The trade between town and country explained, 155. Original poverty and servile state of the inhabitants of towns under feudal government, 162. Exemptions and privileges granted to them, ib. Extension of commerce by rude nations selling their own raw produce for the manufactures of more civilised countries, 165. Its salutary effects on the government and manners of a country, 167. Subverted the feudal authority, 168. The independence of tradesmen and artizans explained, 169. The capitals acquired by, very precarious, until some part has been realised by the cultivation and improvement of land, 172. Over-trading, the cause of complaints of the scarcity of money, 176. The importation of gold and silver not the principal benefit derived from foreign trade, 181. Effect produced in trade and manufactures by the discovery of America, ib. And by the discovery of a passage to the East Indies round the Cape of Good Hope, ib. Error of commercial writers in estimating national wealth by gold and silver, 182. Inquiry into the cause and effect of restraints upon trade, ib. Individuals, by pursuing their own interest, unknowingly promote that of the public, 184. Legal regulations, of trade unsafe, ib. Retaliatory regulations between nations, 189. Measures for laying trade open ought to be carried into execution slowly, 191. Policy of the restraints on trade between France and Britain considered, 192. No certain criterion to determine on which side the balance of trade between two countries turns, ib. Most of the regulations of, founded on a mistaken doctrine of the balance of trade, 199. Is generally founded on narrow principles of policy, 201. Drawbacks of duties, 203. The dealer who employs his whole stock on one single branch of business has an advantage of the same kind with the workman who employs his whole labour on a single operation, 216. Consequences of drawing it from a number of small channels into one great channel, 249. Colony trade, and the monopoly of that trade distinguished, 250. The interest of the consumer constantly sacrificed to that of the producer, 274. Advantages attending a perfect freedom of, to landed nations, according to the present agricultural system of political economy in France, 278. Origin of foreign trade, 279. Consequences of high duties and prohibitions in landed nations, ib. How trade augments the revenue of a country, 281. Nature of the trading intercourse between the inhabitants of towns and those of the country, 285. _Trades_, cause and effect of the separation of, 3. Origin of, 7. _Transit duties_ explained, 379. _Travelling_ for education, summary view of the effects of, 324. _Treasures_, why formerly accumulated by princes, 180. _Treasure-trove_, the term explained, 115. Why an important branch of revenue under the ancient feudal governments, 385. _Turkey company_, short historical view of, 308. _Turnpikes_. See _Tolls_. _Tithes_, why an unequal tax, 352. The levying of, a great discouragement to improvements, ib. The fixing a modus for, a relief to the farmer, 353. V _Value_, the term defined, 12. _Vedius Pollio_, his cruelty to his slaves checked by the Roman emperor Augustus, which could not have been done under the republican form of government, 241. _Venice_, origin of the silk manufacture in that city, 166. Traded in East India goods before the sea track round the Cape of Good Hope was discovered, 228, 229. Nature of the land-tax in that republic, 349. _Venison_, the price of, in Britain, does not compensate the expense of a deer park, 94. _Vicesima hereditatum_ among the ancient Romans, the nature of, explained, 363. _Villages_, how first formed, 156. _Villenage_, probable cause of the wearing out of that tenure in Europe, 160, 161. _Vineyard_, the most profitable part of agriculture, both among the ancients and moderns, 65. Great advantages derived from peculiarities of soil in, ib. _Universities_, the emoluments of the teachers in, how far calculated to promote their diligence, 319. The professors at Oxford have mostly given up teaching, ib. Those in France subject to incompetent jurisdictions, ib. The privileges of graduates improperly obtained, 320. Abuse of lectureships, ib. The discipline of, seldom calculated for the benefit of the students, ib. Are in England more corrupted than the public schools, 321. Original foundation of, ib. How Latin became an essential article in academical education, ib. How the study of the Greek language was introduced, ib., 322. The three great branches of the Greek philosophy, ib. Are now divided into five branches, ib. The monkish course of education in, 323. Have not been very ready to adopt improvements, ib. Are not well calculated to prepare men for the world, 324. How filled with good professors or drained of them, 340. Where the worst and best professors are generally to be met with, ib., 341.--See _Colleges_ and _Teachers_. W _Wages_ of labour, how settled between masters and workmen, 27. The workmen generally obliged to comply with the terms of their employers, ib. The opposition of workmen outrageous, and seldom successful, 28. Circumstances which operate to raise wages, ib. The extent of wages limited by the funds from which they arise, ib. Why higher in North America than in England, ib. Are low in countries that are stationary, ib. Not oppressively low in Great Britain, 30. A distinction made here between the wages in summer and in winter, 31. If sufficient in dear years, they must be ample in seasons of plenty, ib. Different rates of, in different places, ib. Liberal wages encourage industry and propagation, 33. An advance of, necessarily raises the price of many commodities, 36. An average of, not easily ascertained, 37. The operation of high wages and high profits compared, 41. Causes of the variations of, in different employments, ib. Are generally higher in new, than in old trades, 48, 57. Legal regulations of, destroy industry and ingenuity, 59, 60. Natural effect of a direct tax upon, 365. _Walpole_, Sir Robert, his excise scheme defended, 375. _Wants_ of mankind, how supplied through the operation of labour, 9, 10. How extended, in proportion to their supply, 69. The far greater part of them supplied from the produce of other men's labour, 111. _Wars_, foreign, the funds for the maintenance of, in the present century, have little dependence on the quantity of gold and silver in a nation, 178, 179. How supported by a nation of hunters, 289. By a nation of shepherds, ib. By a nation of husbandmen, 290. Men of military age, what proportion they bear to the whole society, ib. Feudal wars, how supported, ib. Causes which, in the advanced state of society, rendered it impossible for those who took the field, to maintain themselves, ib. How the art of war became a distinct profession, 291. Distinction between the militia and regular forces, 292. Alteration in the art of war produced by the invention of fire-arms, ib., 296. Importance of discipline, 293. Macedonian army, 294. Carthaginian army, ib. Roman army, ib. Feudal armies, 295. A well regulated standing army, the only defence of a civilized country, and the only means for speedily civilizing a barbarous country, 296. The want of parsimony during peace, imposes on states the necessity of contracting debts to carry on war, 386, 391. Why war is agreeable to those who live secure from the immediate calamities of it, 391. Advantages of raising the supplies for, within the year, 394. _Watch_ movements, great reduction in the prices of, owing to mechanical improvements, 103. _Wealth_ and money, synonymous terms, in popular language, 173, 182. Spanish and Tartarian estimate of, compared, 173. The great authority conferred by the possession of, 298. _Weavers_, the profits of, why necessarily greater than those of spinners, 21. _West Indies_, discovered by Columbus, 229. How they obtained this name, ib. The original native productions of, ib. The thirst of gold the object of all the Spanish enterprises there, 230. And of those of every other European nation, 231. The remoteness of, greatly in favour of the European colonies there, 232. The sugar colonies of France better governed than those of Britain, 241. _Wheat_. See _Corn_. _Window-tax_ in Britain, how rated, 357. Tends to reduce house rent, ib. _Windsor_ market, chronological table of the prices of corn at, 109. _Wine_, the cheapness of, would be a cause of sobriety, 200. The carrying trade in, encouraged by English statutes, 204. _Wood_, the price of, rises in proportion as a country is cultivated, 70. The growth of young trees prevented by cattle, ib. When the planting of trees becomes a profitable employment, ib. _Wool_, the produce of rude countries, commonly carried to a distant market, 97. The price of, in England, has fallen considerably since the time of Edward III., ib. Causes of this diminution in price, 98. The price of, considerably reduced in Scotland, by the Union with England, 99. Severity of the laws against the exportation of, 268. Restraints upon the inland commerce of, 269. Restraints upon the coasting trade of, ib. Pleas on which these restraints are founded, ib. The price of wool depressed by these regulations, 270. The exportation of, ought to be allowed, subject to a duty, 271. _Woollen_ cloth, the present prices of, compared with those at the close of the fifteenth century, 104. Three mechanical improvements introduced in the manufacture of, ib., 105. THE END. STEREOTYPED. _Edinburgh_:--_DUNCAN STEVENSON_, Printer to the University. TRANSCRIBER'S NOTES: 1. Passages in italics are surrounded by _underscores_. 2. Footnotes have been renumbered moved to the end of this text version. 3. The original text includes one Greek word, the letters of which have been replaced with transliterations. 4. A couple of words use oe ligature in the original. 5. The mixed fractions are represnted using hyphen and forward slash in this text version. For example, 10-1/2 indicates ten and a half. 6. Obvious errors in punctuation have been silently corrected. 7. Missing letters/words in improperly scanned images have been silently added. 8. The following misprints have been corrected: Pg xiv, "ralate" changed to "relate" (relate to the imitative) Pg xviii, "uxuries" changed to "luxuries" (their luxuries,) Pg xx, "induustry" changed to "industry" (resources of industry?) Pg xxiii, "exhibting" changed to "exhibiting" (exhibiting to him) Pg xxx, "beeen" changed to "been" (never been better shown;) Pg 17, "cold" changed to "gold" (of the gold coin. In the market,) Pg 30, "poplousness" changed to "populousness" (and populousness,) Pg 35, "taillies" changed to "tallies" (tallies in the election) Pg 101, "barrennes" changed to "barrenness" (only of the barrenness) Pg 112, "requirs" changed to "requires" (master tailor requires) Pg 118, "the the" changed to "the" (different operations of the) Pg 147, "univesally" changed to "universally" (are universally) Pg 153, "natrually" changed to "naturally" (violence, naturally) Pg 176, "god" changed to "good" (though with a good deal) Pg 210, "wich" changed to "which" (value of silver which varies) Pg 237, "interferred" changed to "interfered" (interfered too much) Pg 246, "fallan" changed to "fallen" (British profit has fallen) Pg 259, "restrain" changed to "restraint" (By this restraint) Pg 281, "manufacterers" changed to "manufacturers" (over that of artificers and manufacturers.) Pg 288, "85,159-5/11" changed to "85,179-5/11" Pg 290, "seige" changed to "siege" (till the siege of Veii,) Pg 342, "re-respective" changed to "respective" (to their respective abilities.) Pg 353, "pruduce" changed to "produce" (fifth part of the produce.) Pg 364, "more" changed to "money" (have the money to pay.) Pg 406, "dicovery" changed to "discovery" (The discovery and colonization of,) Pg 415, "evidince" changed to "evidence" (evidence of its wealth,) Pg 415, "of of" changed to "of" (restraining the exportation of) Pg 415, "for for" changed to "for" (but for foreign trade,) 9. Other than the corrections listed above, printer's inconsistencies in spelling and hyphenation have been retained.